Orange City Council
April 12, 2022

DISPOSITION AND DEVELOPMENT AGREEMENT
(Katella Terrace Apartments
1249 E. Katella Avenue)

by and between

THE CITY OF ORANGE,
City,

and

KATELLA TERRACE, L.P.,

Developer

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TABLE OF CONTENTS

Page
Article I. SUBJECT OF AGREEMENT ................................................................................ 1 Section 1.01 Purpose of the Agreement ........................................................................... 1 Section 1.02 Definitions................................................................................................... 1 Section 1.03 The Property................................................................................................ 9 Section 1.04 City ............................................................................................................ 10 Section 1.05 Developer .................................................................................................. 10 Section 1.06 Assignments and Transfers ....................................................................... 10 Article II. lease of property to developer ............................................................................... 11 Section 2.01 Condition of the Property.......................................................................... 11 Section 2.02 Form of Ground Lease; Term ................................................................... 12 Article III. financing ............................................................................................................... 12 Section 3.01 Method of Financing ................................................................................. 12 Section 3.02 City Assistance.......................................................................................... 12 Section 3.03 Evidence of Financing .............................................................................. 13 Article IV. development of the property ................................................................................. 14 Section 4.01 Land Use Approvals ................................................................................. 14 Section 4.02 Hazardous Materials ................................................................................. 14 Section 4.03 Scope of Development .............................................................................. 15 Section 4.04 Construction Drawings and Related Documents ...................................... 15 Section 4.05 City Approval of Plans, Drawings and Related Documents ..................... 15 Section 4.06 Cost of Construction ................................................................................. 16 Section 4.07 Schedule of Performance .......................................................................... 16 Section 4.08 Local, State and Federal Laws .................................................................. 17 Section 4.09 Nondiscrimination During Construction................................................... 17 Section 4.10 Indemnification and Insurance .................................................................. 18 Section 4.11 Disclaimer of City Responsibility ............................................................. 21 Section 4.12 Permits ...................................................................................................... 22 Section 4.13 Rights of Access ....................................................................................... 22 Section 4.14 Taxes, Assessments, Encumbrances and Liens ........................................ 22 Section 4.15 Rights to Plans .......................................................................................... 22 Section 4.16 Release of Construction Covenants .......................................................... 23 Article V. use of the property ................................................................................................ 24 Section 5.01 Use As Affordable Housing ...................................................................... 24 Section 5.02 Management Plan; Annual Project Budget; Quarterly Report ................. 25 Section 5.03 Property Maintenance ............................................................................... 26 Section 5.04 Obligation to Refrain from Discrimination............................................... 27 Section 5.05 Effect and Duration of Covenants ............................................................. 28

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Section 5.06 Enforcement of Covenants ........................................................................ 28 Section 5.07 Monitoring ................................................................................................ 29 Section 5.08 Regulatory Agreement .............................................................................. 29 Article VI. defaults and remedies ............................................................................................ 29 Section 6.01 Defaults - General ..................................................................................... 29 Section 6.02 Institution of Legal Actions ...................................................................... 30 Section 6.03 Applicable Law ......................................................................................... 31 Section 6.04 Acceptance of Service of Process ............................................................. 31 Section 6.05 Rights and Remedies are Cumulative ....................................................... 31 Section 6.06 Damages .................................................................................................... 31 Section 6.07 Specific Performance ................................................................................ 31 Section 6.08 Termination by Either Party...................................................................... 31 Section 6.09 Termination by Developer ........................................................................ 32 Section 6.10 Termination by City .................................................................................. 32 Article VII. general provisions ................................................................................................. 33 Section 7.01 Notices ...................................................................................................... 33 Section 7.02 Conflicts of Interest................................................................................... 33 Section 7.03 Nonliability of City Officials and Employees .......................................... 34 Section 7.04 Force Majeure ........................................................................................... 34 Section 7.05 Inspection of Books and Records ............................................................. 34 Section 7.06 Approvals .................................................................................................. 34 Section 7.07 Real Estate Commissions .......................................................................... 35 Section 7.08 No Third Party Beneficiaries .................................................................... 35 Section 7.09 Authority to Sign....................................................................................... 35 Section 7.10 No Partnership .......................................................................................... 35 Section 7.11 Compliance with Law ............................................................................... 35 Section 7.12 Binding Effect ........................................................................................... 35 Section 7.13 Incorporation by Reference....................................................................... 35 Section 7.14 Counterparts .............................................................................................. 36 Section 7.15 Construction and Interpretation of Agreement ......................................... 36 Section 7.16 Entire Agreement, Waivers and Amendments .......................................... 36 Section 7.17 Time for Acceptance of Agreement by City ............................................. 37

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ATTACHMENTS

ATTACHMENT NO. 1 - SITE MAP
ATTACHMENT NO. 2 - LEGAL DESCRIPTION
ATTACHMENT NO. 3 - METHOD OF FINANCING
ATTACHMENT NO. 4 - SCOPE OF DEVELOPMENT
ATTACHMENT NO. 5 - SCHEDULE OF PERFORMANCE
ATTACHMENT NO. 6 - [INTENTIONALLY DELETED]
ATTACHMENT NO. 7 - GROUND LEASE
ATTACHMENT NO. 8 - MEMORANDUM OF LEASE
ATTACHMENT NO. 9 - [INTENTIONALLY DELETED]
ATTACHMENT NO. 10 - REGULATORY AGREEMENT
ATTACHMENT NO. 11 - CITY GROUND RENT LOAN NOTE
ATTACHMENT NO. 12 - CITY GROUND RENT LOAN DEED OF TRUST ATTACHMENT NO. 13 - [INTENTIONALLY DELETED]
ATTACHMENT NO. 14 - ASSIGNMENT OF AGREEMENTS
ATTACHMENT NO. 15 - ENVIRONMENTAL INDEMNITY

1249 E. Katella Avenue – Katella Terrace
Disposition and Development Agreement

DISPOSITION AND DEVELOPMENT AGREEMENT
(Katella Terrace Apartments
1249 E. Katella Avenue)
THIS DISPOSITION AND AGREEMENT (the “Agreement”), dated as of __________________________, 2022, is entered into by and between THE CITY OF ORANGE, a municipal corporation (“City”) and KATELLA TERRACE , L.P. , a California limited partnership (“Developer”). City and Developer agree as follows:

ARTICLE I. SUBJECT OF AGREEMENT
Section 1.01 Purpose of the Agreement
The purpose of this Agreement is to provide for City’s ground lease to Developer of the hereinafter defined Property and City’s assistance in financing the acquisition of the Property and facilitating the development, construction and operation by Developer of seventy-four (74) affordable rental housing units to be exclusively rented, except for one unit that is set aside for the property manager in residence, to Senior Lower Income and Very Low Income Household Eligible Tenants at Affordable Rent. The development and use of the Property pursuant to this Agreement, and the fulfillment generally of this Agreement, are in the vital and best interests of the City of Orange and the health, safety, morals, and welfare of its residents, and in accord with the public purposes and provisions of applicable federal, state, and local laws and requirements. Pursuant to and conditioned upon the terms of this Agreement, City will ground lease the Property to Developer and assist Developer in paying the cost of acquiring a leasehold interest in the Property (through a loan) and the Developer will develop, construct and operate the Improvements on the Property.

Section 1.02 Definitions
For purposes of this Agreement, the following capitalized terms will have the following meanings:
“Acquisition and Development Costs ” means the total cost of acquiring the leasehold interest in the Property and developing and constructing the Improvements thereon, as set forth in the Method of Financing.
“Administrative General Partner” means Horizon-ELOM Holdings, LLC, a California limited liability company, and its successors and assigns permitted under the terms of this Agreement.
“Affiliate” means any Person directly or indirectly controlling, controlled by or under common control with another Person. The term “control” as used in the immediately preceding sentence, means the power to direct the management or the power to control election of the board

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of directors. It will be a presumption that control with respect to a limited partnership or limited liability company is the right to exercise or control, directly or indirectly, more than fifty percent (50%) of the voting rights attributable to the controlled limited partnership or limited liability company, and, with respect to any individual, partnership, trust, other entity or association, control is the possession, indirectly or directly, of the power to direct or cause the direction of the management or policies of the controlled entity. For purposes of this definition, each general partner will be considered an “Affiliate” of Developer. “Affordable Rent” has the meaning set forth in California Health and Safety Code Section 50053. Rents for the Units will not exceed the respective amounts set forth in this Agreement and the Regulatory Agreement.
“Anti-Terrorism Laws ” means all laws relating to terrorism or money laundering, including, without limitation, the Currency and Foreign Transactions Reporting Act of 1970, Pub.

L. No. 91-508, 84 Stat. 1305 (1970), as amended from time to time. “Annual Project Budget” has the meaning given in paragraph b of Section 5.02. “Approved Title Conditions ” means title that is subject to current property taxes and assessments, Senior Loans, and easements and other encumbrances specifically approved by City Manager.
“Assignment of Agreements” means a document substantially in the form attached to this Agreement as Attachment No. 14, which is incorporated herein by this reference. “City” means the City of Orange, California, a municipal corporation, and any assignee of or successor to its rights, powers and responsibilities. “City Ground Rent Loan” means the loan made by the City to the Developer to assist the Developer in acquiring the leasehold interest in the Property through the prepayment of rent under the Ground Lease, as described in the Method of Financing. “City Ground Rent Loan Deed of Trust ” means the leasehold Deed of Trust with Assignment of Rents, in which Developer is the Trustor and City is the Beneficiary, which secures the City Ground Rent Loan Note, substantially in the form attached to this Agreement as Attachment No. 12.
“City Ground Rent Loan Note” means the promissory note evidencing the City Ground Rent Loan, substantially in the form attached to this Agreement as Attachment No. 11. “City Loan Documents ” means the instr uments described as such in the Method of Financing.
“Completion” means the point in time when all of the following will have occurred:
(1) issuance of a permanent certificate of occupancy by the City of Orange; (2) recordation of a

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Notice of Completion by Developer or its contractor; (3) certification by the project architect that construction of the Improvements (with the exception of minor “punchlist” items) has been completed in a good and workmanlike manner and substantially in accordance with the approved plans and specifications; (4) payment, settlement or other extinguishment, discharge, release, waiver, bonding or insuring against any mechanic’s liens that have been recorded or stop notices that have been delivered; and (5) the time for Developer’s contractor, suppliers and subcontractors to file a claim pursuant to Civil Code Sections 3115-3117 has expired. “Conditions” means, with re spect to the Property, the condition of the soil, geology, the presence of known or unknown faults or defects, or Hazardous Substances, the suitability of the Property for its intended uses, or the condition of any related public improvements. “Construction Financing Event ” means the point in time when (i) all conditions precedent to the Construction Financing Event as set forth in the Method of Financing (Attachment No. 3) have been satisfied; (ii) the Lease is executed and delivered, and the Memorandum of Lease is recorded; and (iii) the Construction Loan Deed of Trust and other Construction Loan documents, City Ground Rent Loan Deed of Trust and other City Loan Documents are recorded. “Construction Financing Event Date ” means the date on whi ch the Construction Financing Event is scheduled to take place.
“Construction Loan” means the Construction Period loan to be made to Developer by an institutional lender acceptable to City (“Construction Lender”) at the time of the Construction Financing Event, secured by the Construction Loan Deed of Trust. “Construction Loan Deed of Trust ” means the first priority leasehold deed of trust securing the Construction Loan.
“Construction Period ” means the period of time commencing upo n the Construction Financing Event and ending at Conversion.
“Conversion” means the point in time when the Permanent Loan has been funded, the additional Limited Partner Capital Contribution has been funded, and the Construction Loan has been repaid in full.
“Density Bonus Agreement” means that certain Density Bonus Housing Agreement concerning the Property dated January 20, 2020 and recorded in the Official Records, Orange County Clerk-Recorder, on March 2, 2020 as Document No. 2020000090418. “Developer Equity” means funds provided by Developer for payment of Acquisition and Development Costs and does not include the Construction Loan, the City Ground Rent Loan or any other borrowed funds, and includes the Deferred Developer Fee, the Limited Partner Capital Contribution and other funds of the Developer.

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“Environmental Indemnity” means an instrument substantially in the form attached to this Agreement as Attachment No. 15.
“Escrow Agent” means an escrow agent mutually acceptable to City and Developer. “Force Majeure” or “Force Majeure Event” means the following events, provided that they actually delay and interfere with the timely performance of the matter to which it would apply and despite the exercise of diligence and good business practices are or would be beyond the reasonable control of the party claiming such interference: War; insurrection; strikes; lock -outs; riots; floods; earthquakes; fires; casualties; acts of God; acts of the public enemy; acts of terrorism, epidemics; pandemics; quarantine restrictions; freight embargoes; lack of tran sportation; governmental restrictions or priority; litigation including litigation challenging the validity of this transaction or any element thereof; unusually severe weather; inability to secure necessary labor, materials or tools; delays of any contractor, subcontractor, or suppliers; acts of the other party; acts or failure to act of any Governmental Authority (except acts or failure to act of City will not excuse performance by City); the imposition of any applicable moratorium by a Governmental Authority; or any other causes which despite the exercise of diligence and good business practices are or would be beyond the reasonable control of the party claiming such delay and interference.

Notwithstanding the foregoing, none of the foregoing events will constitute a Force Majeure Event unless and until the party claiming such delay and interference delivers to the other party written notice describing the event, its cause, when and how such party obtained knowledge, the date the event commenced, and the estimated delay resulting therefrom. Any party claiming a Force Majeure Delay will deliver such written notice within fifteen (15) days after it obtains actual knowledge of the event.
“Force Majeure Delay” means any delay in taking any action required by this Agreement, proximately caused by the occurrence of any Force Majeure Event. “Governmental Approvals” means and includes any and all general plan amendments, zoning approvals or changes, required approvals and certifications under the California Environmental Quality Act, tentative and final tract maps, variances, conditional use permits, demolition permits, excavation/foundation permits, grading permits, building permits, inspection reports and approvals, certificates of occupancy, and other approvals , permits, certificates, authorizations, consents, orders, entitlements, filings or registrations, and actions of any nature whatsoever required from any Governmental Authority in order to commence and complete the construction of the Project.
“Governmental Authority” means the United States, the State of California, the County of Orange, the City of Orange or any other political subdivision in which the Property is located, and any court or political subdivision, authority or instrumentality having jurisdiction over the Property.
“Ground Lease” means the lease of the Property from City to Developer for the purpose of developing, constructing and operating the Project, substantially in the form of the Ground Lease attached hereto as Attachment No. 7.

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“Hazardous Substances” has the meaning set forth in the Environmental Indemnity. “Improvements” means the residential development to be constructed on the Property, consisting of 74 housing units and ancillary improvements and facilities, as described in the Scope of Development and provided for in the Plans.
“Investor Limited Partner” means any Person who will be an investor limited partner in Developer’s limited partnership and who will purchase the Low Income Housing Tax Credits and own collectively with all Investor Limited Partner(s) a 99.99% interest in the Developer. “Lease Prepayment ” me ans Developer’s prepayment of the capitalized annual lease payments over the term of the Ground Lease, which prepayment will be financed by the City Ground Rent Loan.
“Leasehold Interest” means the leasehold interest in the Property that is created by th e Ground Lease between City and the Developer.
“Legal Description ” means the legal description of the Property attached to this Agreement as Attachment No. 2, which is incorporated herein by this reference. “Limited Partner Capital Contribution” means the Developer Equity provided from the sale of the Low Income Housing Tax Credits as set forth in the Method of Financing. “Limited Partnership” means the single purpose entity referred to herein as “Developer”, formed for the syndication of the Low Income Housing Tax Credits. “Limited Partnership Agreement ” means the agreement governing the Limited Partnership and includes the Limited Partnership Agreement as amended and restated on the admission of the Investor Limited Partner(s).
“Low Income ” means the maximum income given to “lower income” households in California Health and Safety Code Section 50079.5.
“Low Income Housing Tax Credits” means tax credits authorized by the Tax Reform Act of 1986 and governed by Section 42 of the Internal Revenue Code. “Maintenance Program” has the meaning given in Section 5.03. “Management Plan” has the meaning given in paragraph a of Section 5.02. “Managing General Partner ” means OSH Katella Terrace, LLC , a California limited liability company, and its successors and assigns permitted under the terms of this Agreement. “Memorandum of Lease ” means a document substantially in the form of the Memorandum of Lease attached to this Agreement as Attachment No. 8.

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“Method of Financing” means the Method of Financing attached as Attachment No. 3 to this Agreement, which is incorporated herein by this reference. “Permanent Loan” means the permanent loan to be made to Developer by an institutional lender reasonably acceptable to City Manager (“Permanent Lender ”) following Completion, secured by the Permanent Loan Deed of Trust.
“Permanent Loan Deed of Trust” means the first priority leasehold deed of trust securing the Permanent Loan.
“Permanent Period” means the period of time commencing at Conversion. “Permitted Transfer ” means any of the following , provided (except for subsection f. below) Developer or a general partner of Developer, or an Affiliate of such general partner, retains day-to-day control over management and operations of the Property and the Improvements and further provided that such transfer is not to a Prohibited Person or would otherwise violate Anti - Terrorism Laws:
a. An assignment of this Agreement and Developer’s interests in the Property to an Affiliate or a conveyance back from the Affiliate to Developer; b. A conveyance of a security interest in the Property or any portion thereof or interest therein, in connection with a Senior Loan approved by City; c. The inclusion of equity participation in the Project by addition of limited partners to Borrower’s partnership or similar mechanism , and any transfers of limited partnership interests in Developer’s partnership;
d. The lease for occupancy of all or any part of the Improvements on the Property in accordance with this Agreement;
e. The granting of easements or permits to facilitate the development of the Property in accordance with this Agreement;
f. The withdrawal, removal and/or replacement of a general partner of Developer’s partnership pursuant to the terms of Developer’s partnership agreement , or a conveyance of Developer’s interest in the Property and the Improvements and a transfer of limited partnership interests to a general partner pursuant to the option provided to that partner in Developer’s partnership agreement, will not constitute a default under this Agreement or any of City Loan Documents, nor will such actions accelerate the maturity of City Ground Rent Loan, provided that any required substitute general partner is reasonably acceptable to City, based on a review by City of the relevant experience and financial capability of such substitute general partner, as evidenced by City’s written consent, and is selecte d with reasonable promptness; and

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g. Any transfer first approved in writing by City Manager or designee, at his or her sole discretion.

Transfers described in clauses a, b, or c will be subject to the reasonable approval of City Manager or designee; provided that City approves the transfer of limited partner interests in Developer’s partnership, so long as such transfer is not a result of a resyndication of the Low Income Housing Tax Credits and does not otherwise result in increased equity participation in Developer , and further provided that such transfer is not to a Prohibited Person or would otherwise violate Anti - Terrorism Laws.
“Person” means an individual, partnership, limited partnership, trust, estate, association, corporation, limited liability company, or other entity, domestic or foreign. “Plans” means the architectural and construction plans and drawings prepared by Developer and approved by the City for Developer’s development, construction and use of the Project in accordance with this Agreement and its attachments. “Prohibited Person” means any of the following:
a. a Person that is listed in or is otherwise subject to the prohibitions of, any Executive Order relating to money laundering or anti-terrorism;
b. a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in or is otherwise subject to the prohibitions of, any Executive Order relating to money laundering or anti-terrorism;
c. a Person or entity with whom Developer or Investor Limited Partner is prohibited from dealing or otherwise engaging in any transaction by Anti-Terrorism Laws; d. a Person that is named as a “specially designated national and blocked person” on the most current list published by the Office of Foreign Asset Control of the U.S.

Treasury Department.
“Project” means the financing, planning, development, construction and use of the Property and the Improvements as provided in this Agreement. “Project Budget” means the schedule of sources and uses to be prepared by Developer, subject to the approval of City, as required by the Method of Financing and within the time required by the Schedule of Performance.
“Property” means the real property described in the l egal description attached to this Agreement as Attachment No. 2.
“Quarterly Report” has the meaning given in paragraph c of Section 5.02.

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“Regulatory Agreement” means the document attached to this Agreement as Attachment No. 10.
“Release of Construction Covenants ” means the certificate to be issued by City in accordance with Section 4.16 of this Agreement.
“Restricted Period ” means the period commencing at recordation of the Regulatory Agreement and continuing until the date that is sixty (60) years after Conversion. “Schedule of Performance ” means the document attached to this Agreement as Attachment No. 5.
“Scope of Development” means the document attached to this Agreement as Attachment No. 4.
“Senior Citizen Household ” means a household where at least one person in residence qualifies for occ upancy under the California Tax Credit Allocation Committee’s regulations applicable to the Project and intends to reside in the unit as his or her primary residence on a permanent basis , and where any other person residing in the unit is a “qualified permanent resident” or a “permitted health care resident” as provided in the Unruh Civil Rights Act, California Civil Code Section 51 et seq., or the Federal Fair Housing Act 42 USC Section 3 607, and such household’s occupancy is in compliance with all applicable federal, state and local laws and regulations governing the use and occupancy of the Project. “Senior Lender” means the maker of a Senior Loan, and an approved construction lender, credit enhancer or construction period guaranty facility. “Senior Loan” means, during the Construction Period, the Construction Loan, and during the Permanent Period, the Permanent Loan.
“Senior Loan Documents” means, as applicable, the Construction Loan D eed of Trust, the Permanent Loan Deed of Trust, loan agreements, promissory notes, financing statements, guaranties, security agreements, assignments, and similar documents and instruments to be executed by Developer in connection with a Senior Loan. “Site Map” means the document attached to this Agreement as Attachment No. 1. “Subordination Agreement” means an instrument in a form agreed to by City Manager or designee and Senior Lender, which subordinates the City Ground Rent Loan and any interests of the City in the plans and agreements for the Project , but not the Regulatory Agreement, to a Senior Loan.
“Title Company” means a title insurance company mutually acceptable to City and Developer.

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Disposition and Development Agreement

“Title Insurance Policies ” means and include the following ALTA extended coverage policies of title insurance issued by the Title Company, subject to the Approved Title Conditions:
a. A lender’s policy of leasehold title insurance in favor of the Construction Lender, together with such endorsements as the Construction Lender may reasonably require, insuring the lien of the Construction Loan, in the amount of the Construction Loan (the “Construction Lender’s Title Policy”); and b. A lender’s policy or policies of title insurance in favor of City, together with such endorsements as City may reasonably require, insuring the lien of City Ground Rent Loan Deed of Trust in the amount of City Ground Rent Loan (the “City’s Title Policy”).
“Transfer” means:
a. The sale, agreement to sell, transfer or conveyance of the Property, the Project, or any portion thereof or interest therein (including, without limitation, a beneficial interest), whether voluntary, involuntary, by operation of law or otherwise, the execution of any installment sale contract or similar instrument affecting all or a portion of the Property or Project, or the lease of all or substantially all of the Property or Project.
b. “Transfer” also includes the transfer, assignment, hypothecation or conveya nce of legal or beneficial ownership of an interest in Developer, or a conversion of Developer to an entity form other than that of Developer at the time of execution of this Agreement, except that, a cumulative change in ownership interest of a general partner of the Developer of forty -nine percent (49%) or less will not be deemed a “Transfer” for purposes of this Agreement.
“UCC-1” means a UCC-1 Financing Agreement naming City as creditor and Developer as debtor.
“Units” means the housing units to be developed on the Property by the Developer pursuant to this Agreement.
“Very Low Income” means household income that does not exceed the maximum income set forth in California Health and Safety Code Section 50105.

Section 1.03 The Property
The “Property” is that property in the City of Orange as illustrated on the “Site Map ” (attached hereto as Attachment No. 1) and as described in the “Legal Description of the Property” (attached hereto as Attachment No. 2).

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Section 1.04 City
a. City is a municipal corporation of the State of California. b. The address of City for purposes of receiving notices pursuant to this Agreement will be 300 E. Chapman Avenue, Orange, California 92866, Attn: City Manager.

Section 1.05 Developer
a. Developer is Katella Terrace, L.P., a California limited partnership, with Horizon- ELOM Holdings, LLC as the Administrative General Partner of Developer with an interest in the Developer entity of 0.005%, OSH Katella Terrace LLC as the Managing General Partner of Developer with a non -controlling interest in the Developer ent ity of 0.005%, and the Investor Limited Partners of Developer having an interest in the Developer entity of 99.99%. b. The address of Developer is as follows: Katella Terrace, L. P., c/o Orange Senior Housing, Inc., Attn: President, 555 S. Shaffer Street, Orange, CA 92866; with a copy to Horizon ELOM Holdings, LLC, 26565 West Agoura Road, Suite 200, Calabasas, California 91302, Attn:

Keith Stanley.
c. Whenever the term “Developer” is used herein, such term means and includes: (1) the Developer as of the date hereof; and (2) any assignee of or successor to its rights, powers and responsibilities approved by City or permitted by this Agreement.

Section 1.06 Assignments and Transfers
a. The qualifications and identity of the Developer are of particular concern to City.

It is because of those qualifications and identity that City has entered into this Agreement with the Developer. No voluntary or involuntary successor in interest of the Developer will acquire any rights or powers under this Agreement except as expressly set forth herein. b. The Developer will not assign all or any part of this Agreement without the prior written approval of City. City agrees to reasonably give such approval if , in the re asonable determination of City, the proposed assignee is comparable in all material respects (including experience, character and financial capability) to the Developer. Any such change (or assignment of this Agreement in connection therewith) will be by instruments satisfactory to the City Manager (or designee), and be subject to the approval by the City Manager (or designee) of evidence of the proposed assignee’s qualifications to meet the obligations of the Developer under this Agreement. c. For th e reasons cited above, except for any Permitted Transfer as set forth in subsection f. in the definition of “Permitted Transfer” above, Developer represents and agrees for itself and any successor in interest that without the prior written approval of City, which will not be unreasonably withheld, there will be no cumulative change in ownership interest of any general partner of greater than 49%, by any method or means.

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d. Developer will promptly notify City of any and all changes whatsoever in the identity of the parties in control of Developer or the degree thereof, of which it or any of its officers have been notified or otherwise have knowledge or information. This Agreement may be terminated by City, and City may exercise its remedies pursuant to City Loan Documents, if there is any significant change (voluntary or involuntary) in membership, management or control of Developer (other than such changes occasioned by the death or incapacity of any individua l) or a Permitted Transfer.
e. The Developer will not, except for Permitted Transfers or as permitted by this Agreement, make or attempt to make a Transfer, without prior written approval of City, except as expressly permitted by this Agreement and the other City Loan Documents. Consent to one such transaction will not be deemed to be a waiver of the right to require consent to future or successive transactions. Proposed transferee s must have the qualifications and financial responsibility necessary and adequate as may be reasonably determined b y City, to fulfill Developer’s obligations undertaken in this Agreement. A proposed transferee, by instrument in writing satisfactory to City and in form recordable among the land records, for itself and its successors and assigns, and for the benefit of City must expressly assume all of Developer’s obligations under this Agreement and agree to be subject to all conditions and restrictions applicable to the Developer in this Agreement. There must be submitted to City for review all instruments and other legal documents proposed to affect any such transfer; and if approved by City its approval will be indicated to Developer in writing.
f. In the absence of specific written agreement by City, no Transfer, or approval thereof by City, will be deemed to relieve Developer or any other party from any obligations under this Agreement.
g. Notwithstanding this Section 1.06, Developer will have the right to execute deeds of trust and other instruments granting a security interest in the Developer’s leasehold interest in the Property to a Senior Lender for the purposes of financing the Acquisition and Development Costs, as described in Article III of this Agreement and the Method of Financing attached hereto as Attachment No. 3.

ARTICLE II. LEASE OF PROPERTY TO DEVELOPER
Section 2.01 Condition of the Property
a. No person acting on behalf of City is authorized to make, and by execution of this Agreement, Developer acknowledges that neither City nor any person acting on behalf of City has made any representation, agreement, statement, warranty, guarantee or promise regarding the zoning, construction, physical condition or other status of the Property, except as otherwi se expressly provided in this Agreement.
b. Developer acknowledges and agrees that, except as expressly set forth in this Agreement, City makes no representations and warranties, express or implied, as to the Property.

It is understood and agreed that with respect to the physical condition of the Property, it is being

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leased on an “as is,” “where is” and “with all faults” basis and is subj ect to any condition which may exist. Other than the representations and warranties set forth in this Agreement, Developer hereby expressly acknowledges and agrees that it is relying solely upon its inspections, examination, and evaluation of the Property in leasing the Property on an “as is,” “where is” and “with all faults” basis.
c. It will be the sole responsibility of Developer, at Developer’s expense, to investigate and determine all conditions of the Property and its suitability for the uses to which the Property is to be put in accordance with this Agreement. If the conditions of the Property are not in all respects entirely suitable for the use or uses to which the Property will be put, then it is the responsibility and obligation of Developer, without cost to City, to take such action or cause such action to be taken, as may be necessary to place the Property in all respects in a condition entirely suitable for its development and use in accordance with this Agreement.

Section 2.02 Form of Ground Lease; Term
The Ground Lease for the Property will be in the form of Attachment No. 7. The term of the Ground Lease will commence at the Construction Financing Event and will continue thereafter until the sixtieth (60) anniversary of the Conversion date, unless earlier terminated in accordance with its terms.

ARTICLE III. FINANCING
Section 3.01 Method of Financing
The Acquisition and Development Costs will be financed with a combination of sources of financing as provided in the Method of Financing, attached to this Agreement as Attachment No.

3. Section 3.02 City Assistance
a. City Ground Rent Loan. In accordance with and subject to the terms and conditions of this Agreement, including the Method of Financing, City agrees to lend to the Developer, and the Developer agrees to borrow from City, the City Ground Rent Loan, as described in the Method of Financing attached hereto as Attachment No. 3. The exact dollar amount of the capitalized rent and the amount of the City Ground Rent Loan to be used for the final executed Ground Lease and City Ground Rent L oan Note and Deed of Trust at the Construction Financing Event, shall be based on the fair market land value appraisal approved by City and Developer for use in connection with the Construction Financing Event. At or prior to the Construction Financing Event, City and Developer will execute and deliver such instruments and documents as may be necessary to evidence and secure the City Ground Rent Loan, including without limitation the City Ground Rent Loan Note (Attachment No. 11) and the City Ground Rent Loan Deed of Trust (Attachment No. 12), consistent with the terms of this Agreement and the Method of Financing, and each in a form that is acceptable to City Manager or designee. Developer hereby warrants and agrees that

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Developer will use the City Ground Rent Loan solely for the purpose of prepaying the rent payable under the Ground Lease
b. Senior Loans and Tax Credits. City agrees that the lien of City Ground Rent Loan Deed of Trust will be subordinate to the lien of the Construction Loan Deed of Trust and th e Permanent Loan Deed of Trust. City agrees to execute such estoppel certificates as may reasonably be requested by the Construction Lender, the Permanent Lender and the Investor Limited Partners, provided that such certificates are consistent wit h the terms of this Agreement and do not materially adversely affect the receipt of any material benefit by City or the interests of the City hereunder. City Manager will execute such subordination agreements regarding the City Ground Rent Loan, but not the Regulatory Agreement, as may reasonably be requested by the Construction Lender and Permanent Lender, provided that such subordination agreements will provide City with all rights under California Civil Code Section 2924b and 2924c and Health and Safety Code Section 33334.14(a)(4).

Section 3.03 Evidence of Financing
a. Not later than thirty (30) days prior to the scheduled Construction Financing Event Date, Developer will submit to City evidence satisfactory to City that Developer has obtained the financing necessary for the development of the Property in accordance with this Agreement. Such evidence of financing will include the following:

1. A copy of all loan documents relating to the Constr uction Loan, including a final project budget approved by the Construction Lender, certified by the Developer to be a true and correct copy or copies thereof;

2. Documentation acceptable to City Manager or designee of sources of capital sufficient to demonstrate that the Developer has adequate equity funds committed to provide the amount of Developer Equity required by the Method of Financing;

3. A copy of the Permanent Loan commitment; and

4. A copy of the contract between the Developer and the general contractor and contracts with major subcontractors for the removal of the existing improvements and the construction of the Improvements, certified by the Developer to be a true and correct copy thereof.
b. City will approve or disapprove such evidence of financing within the time established in the Schedule of Performance. Such approval will not be unreasonably withheld or delayed. If City will disapprove any such evidence of financing, City will do so by written notice to the Developer stating the reason(s) for such disapproval.

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Disposition and Development Agreement

ARTICLE IV. DEVELOPMENT OF THE PROPERTY
Section 4.01 Land Use Approvals
a. It is the responsibility of the Developer, without cost to City, to ensure that zoning of the Property and all applicable City land use requirements will be such as to permit development of the Property and construction of the Improvements and the use, operation and maintenance of such Improvements in accordance with the provisions of this Agreement. b. The following will be conditions of the Construction Financing Event : (A) Developer will submit and City will have approved one hundred percent (100%) complete Construction Drawings; and (B) Developer will obtain all entitlements, approvals, variances and permits necessary for the construction of the Improvements , which must be consistent with the Density Bonus Agreement.
c. Nothing contained herein will be deemed to entitle Developer to any City of Orange permit or other Ci ty approval necessary for the development of the Property, or waive any applicable City requirements relating thereto. This Agreement does not (a) grant any land use entitlement to Developer; (b) supersede, nullify or amend any condition which may be imposed by the City of Orange in connection with approval of the development described herein ; (c) guarantee to Developer or any other party any profits from the development of the Property; or (d) amend any City laws, codes, rules or regulations. This is not a Development Agreement under Government Code Section 65864 . The parties acknowledge and agree that the City approved certain entitlements for the Project described in the Scope of Develop ment, subject to and in accordance with all applicable City ordinances and regulations. d. City and Developer shall cooperate to provide timely information regarding the Project to the plaintiff pursuant to the settlement of certain previously pending and now settled litigation concerning the Project.

Section 4.02 Hazardous Materials
Prior to the Construction Financing Event, Developer will deliver to City a true and complete copy of any environmental assessments Developer has made of the Property. Developer agrees to per form, or cause to be performed, the clean-up of any Hazardous Substances on, in, under or within the Property, without cost or expense to City. Developer will defend, indemnify and hold harmless City and its officers, agents, employees, contractors and attorneys from any claims, liability, injury, damages, costs and expenses (including, without limiting the generality of the foregoing, the cost of any required cleanup of hazardous substances, and the cost of reasonable attorneys’ fees) which may be sustained as the result of Hazardous Materials relating to the Property. As a condition precedent to the Construction Financing Event, Developer will execute and deliver to City the Environmental Indemnity (Attachment No. 15).

1249 E. Katella Avenue – Katella Terrace
Disposition and Development Agreement

Section 4.03 Scope of Development
The Property will be developed in accordance with and within the limitations established in the Scope of Development attached to this Agreement as Attachment No. 4, the Plans approved and permits issued by City for the Project . It is anticipated that Developer will contract for performance of specific activities, including but not limited to activities such as site inspections and management of the Units. Such contracts will not in any way diminish or waive Developer’s obligations under this Agreement. The identity and qualifications of the general contractor must be approved by City. Developer must also submit to City for approval copies of the proposed contract with the general contrac tor and copies of any proposed subcontracts for mechanical, electrical, plumbing, framing and other trades requested in writing by City, which approval will not be unreasonably withheld or delayed.

Section 4.04 Construction Drawings and Related Documents a. Developer will prepare and submit construction drawings and related documents for the development of the Property to City for review (including, but not limited to, architectural review) and written approval at the times established in the Schedule of Performance. Final drawings, plans, and specifications are hereby defined as those in sufficient detail to obtain a building permit.
b. In the event of the disapproval by City of any plans submitted by Developer, City will promptly communicate in writing to Developer all reas ons for such disapproval and requirements for subsequent approval of revised plans.
c. During the preparation of all drawings and plans, City staff and Developer will hold regular progress meetings to coordinate the preparation of, submissio n to, and review of construction plans and related documents by City. City staff and Developer will communicate and consult informally as frequently as is necessary to insure that the formal submittal of any documents to City can receive prompt consideration.
d. If any revisions or corrections of plans approved by City will be required by a governmental official, authority, department or bureau having jurisdiction over the development of the Property, Developer and City will cooperate in efforts to obtain waiver of such requirements or to develop a mutually acceptable alternative.

Section 4.05 City Approval of Plans, Drawings and Related Documents As provided in Section 4.04, City will have the right of review (including, but not limited to, architectural review) and approval of all plans, drawings and related documents for the development of the Property, includ ing any proposed changes therein. City will approve or disapprove such plans, drawings, and related documents referred to in this Agreement (and any proposed changes therein), in writing, within the times established in the Schedule of Performance.

Any disapproval will state, in writing, the reasons for disapp roval. Developer, upon receipt of City’s disapproval will revise such portions of the plans, drawings or related documents in a

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manner that satisfies the reasons for disapproval and resubmit such revised portions to City as soon as possible after receipt of the notice of disapproval. City will approve or disapprove such revised portions in the same manner and within the same times as provided in this Section 4.05 for approval or disapproval of plans, drawings, and related documents initially submitted to City.

Section 4.06 Cost of Construction
a. The cost of leasing the Property and developing and constructing the Improvements thereon will be the responsibility of the Developer, as provided in the Method of Financing. The Acquisition and Development Costs are set forth in the Method of Financing (Attachment No. 3), which will be subject to change from time -to-time as provided in the Method of Financing.

Developer will establish procurement procedures to ensure that materials and services are obtained in a cost-effective manner.
b. Within the time required by the Schedule of Performance and as described in the Method of Financing, Developer shall propose , subject to City approval , t he Project Budget .

Developer acknowledges that City is relying on Developer’s experience and expertise in establishing the Acquisition and Development Costs for the Project and Developer represents and warrants that the Project Budget is based on Developer ’s best, good faith estimate of the costs to be incurred.

Section 4.07 Schedule of Performance
a. Developer and City will perform all acts respectively required of such party in this Agreement within the times provided in the Schedule of Performance. The Schedule of Performance is subject to revision from time to time as mutually agreed upon in writing by Developer and City Manager.
b. After the Construction Financing Event, Developer will promptly begin and thereafter diligently prosecute to completion the construction of the Improvements as provided in the Scope of Development. Developer will begin and complete all construction and development within the times specified in the Schedule of Performance, with such reasonable extensions of said times as may be granted by City, including any Force Majeure Delays . The Schedule of Performance is subject to revision from time to time as mutually agreed upon in writing by Owner and City, and such revision approval may be denied by either party in its sole discretion. c. During periods of construction , Developer will submit to City a written report of the progress of the construct ion when and as requested by City. The report will be in such form and detail as may be reasonably required by City and will include a reasonable number of construction photographs (if requested) taken since the last report by Developer. Developer will meet with City as requested during construction to discuss the resolution of any concerns City might have. Representatives of City will have the right to parti cipate in weekly construction meetings and will have the right to approve proposed finishes, colors, fixtures, and like matters.

1249 E. Katella Avenue – Katella Terrace
Disposition and Development Agreement

Section 4.08 Local, State and Federal Laws
a. Developer will carry out development, construction (as defined by applicable law) and operation of the Improvements on the Property, including, without limitation, any and all public works (as defined by applicable law), in conformity with all applicable local, state and federal laws, including, without limitation, all applicable federal and stat e labor laws (including, without limitation, any requirement to pay state or federal prevailing wages, if applicable). b. Developer hereby expressly acknowledges and agrees that the City of Orange has not ever previously affirmatively represented to the Developer or its contractor(s) for the Improvements in writing or otherwise, in a call for bids or otherwise, that the work to be covered by the bid or contract is not a “public work, ” as defined in S ection 1720 of the Labor Code.

Developer hereby agrees that Developer will have the obligation to provide any and all disclosures or identifications required by Labor Code Section 1781, as the same may be enacted, adopted or amended from time to time, or any oth er similar law , if applicable . Developer will indemnify, protect, defend and hold harmless City, the City and their respective officers, employees, contractors and agents, with counsel reasonably acceptable to City and City, from and against any and all loss, liability, damage, claim, cost, expense, and/or “increased costs” (including reasonable attorneys’ fees, court and litigation costs, and fees of expert witnesses) (collectively, the “Claims”) which, in connection with the development, construction (as defined by applicable law) and/or operation of the Improvements, including, without limitation, any and all public works (as defined by applicable law), results or arises in any way from any of the following: (1) the noncompliance by Developer of any applicable local, state and/or federal law, including, without limitation, any applicable federal and/or state labor laws (including, without limitation, the requirement to pay state prevailing wages, if applicable); (2) the implementation of Section 1781 of the Labor Code, as the same may be enacted, adopted or amended from time to time, or any other similar law , if applicable; and/or (3) failure by Developer to provide any required disclosure or identification as required by Labor Code Section 1781, as the same may be enacted, adopted or amended from time to time, or any other similar law.
c. It is agreed by the parties that, in connection with the development, construction (as defined by applicable law) and operation of the Improvements, including, without limitation, any and all public works (as defined by applicable law), Developer will bear all risks of payment or non-payment of state prevailing wages and/or Labor Code Section 1781, as the same may be enacted, adopted or amended from time to time, and/or any other similar law. “Increased costs” as used in this Section 4.08 will have the meaning ascribed to it in Labor Code Section 1781, as the same may be enacted, adopted or amended from time to time. d. The foregoing indemnity will survive termination of th is Agreement and will continue after Completion.

Section 4.09 Nondiscrimination During Construction
Developer, for itself and its successors and assigns, agrees that during the construction of the Improvements provided for in the Agreement, Developer will not discriminate on the basis of

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Disposition and Development Agreement

race, gender, religion, national origin, ethnicity, sexual orientation, age or disability in the solicitation, selection, hiring or treatment of any employees, contractors or consultants. Developer understands and agrees that violation of this clause will be considered a material breach of this Agreement and may result in termination, debarment or other sanctions. This language must be incorporated into all contracts between Developer and any contractor or consultant, and all contracts with any subcontractor, sub-consultant, vendor or supplier.

Section 4.10 Indemnification and Insurance
a. Developer agrees to and will, to the fullest extent permitted by law, defend, indemnify and hold the City of Orange and its officers, employees, contractors and agents harmless from and against all claims, liability, loss, damage, costs or expenses (including reasonable attorneys’ fees and court costs) arising from or as a result of , in whole or in part, any of the following: (1) any act or omission of Developer or its architect, engineer, contractors, suppliers, or vendors, of any contracting tier, or anyone directly or indirectly employed by any of them, or anyone for whose acts Developer may be liable, in connection with the performance or nonperformance of this Agreement, including but not limited to the development, construction, rehabilitation , marketing or use of the Property in any way, and any plans or designs for improvements prepared by or on behalf of Developer, including without limitation any errors or omissions with respect to such plans or designs; (2) the breach of any obligations of Developer hereunder; and (3) the use of any products, material or equipment furnished by Developer or its contractors, suppliers, or vendors, of any contracting tier. Such obligation to indemnify will not be construed to negate, abridge, or otherwise reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Section 4.10. The foregoing indemnification will apply to the extent of the violation of a legal duty, including but not limited to active or passive negligence, strict liability, breach of contract, or intentional or willful misconduct, by Developer or its architect, contractors, suppliers, or vendors, of any contracting tier, or anyone directly or indirectly employed by any of them, or anyone for whose acts Developer may be liable. Indemnitees will be entitled to recovery of attorneys’ fees incurred as a result of Developer’s failure to provide the defense and indemnity required by this Section 4.10. This Section 410 will survive the expiration or termination of this Agreement.
b. Prior to the lease of the Property from City to Developer under this Agreement, Developer will furnish or cause to be furnished to City evidence of the following policies of insurance, naming Developer as insured and City as additional insured . The insurance requirements set forth in this Subsection b. are subject to change after the Construction Financing Event, as needed to satisfy the requirements of the Construction Financing Event, but without any decrease or diminution of any kind in insurance coverage benefitting the City. Evidence of insurance must include additional insured endorsements naming the City as additional insureds and including a primary insurance and waiver of contribution clause, a separation of insureds clause and a cancellation notice clause, in the form provided by City.

1. Fire Policies: Developer will maintain or cause to be maintained a policy or policies of insurance against loss or damage to the Property or the

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Disposition and Development Agreement

Improvements and all property of an insurable nature located upon the Property, resulting from fire, lightning, vandalism, malicious mischief, riot and civil commotion, and such other perils ordinarily included in extended coverage fire insurance policies. Such insurance will be maintained in an amount not less than one hundred percent (100%) of the full insurable value of the Improvements, as defined herein in paragraph d.

2. Rental Income Insurance: Developer will upon Completion maintain or cause to be maintained use and occupancy or business interruption or rental income insurance against the perils of fire, lightning, vandalism, malicious mischief, riot and civil commotion, and such other perils ordinarily included in extended coverage fire insurance policies, in an amount that is acceptable to Developer and City.

3. Liability Insurance : Developer will maintain or cause to b e maintained public liability insurance, to protect against loss from liability imposed by law for damages on account of personal injury, including death therefrom, suffered or alleged to be suffered by any person or persons whomsoever on or about the Property and the business of the Developer on the Property, or in connection with the development, construction and/or operation thereof, resulting directly or indirectly from any acts or activities of Developer or its contractors, subcontractors, guests, inv itees and sublessees, or any person acting for Developer, or under its respective control or direction, and also to protect against loss from liability imposed by law for damages to any property of any person occurring on or about the Property, or in connection with the development, construction and/or operation thereof, caused directly or indirectly by or from acts or activities of Developer or its contractors, subcontractors, guests, invitees and tenants, or any person acting for Developer, or under its control or direction. Such property damage and personal injury insurance will also provide for and protect City against incurring any legal cost in defend ing claims for alleged loss. Such personal injury and pro perty damage insurance will be maintained in fu ll force and effect during the term of City Ground Rent Loan in the following amounts: commercial general liability in a general aggregate amount of not less than Two Million Dollars ($2,000,000); and not less than One Million Five Hundred Thousand Dollars ($1,500,000) of bodily injury and property damage insurance. It is the mutual intent of the parties that the levels of insurance coverage described herein will be and remain comparable to the level of insura nce coverage that is customary with comparable operations in Orange County. At any time during the term of City Ground Rent Loan, and from time to time, either party may provide notice to the other party that the level of insurance being maintained by Developer is no longer comparable to the level of insurance coverage that is customary with comparable operations in Orange County, and request that the minimum

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limit hereinabove designated will be changed (either increased or decreased) accordingly. The par ty receiving such request will not unreasonably withhold its consent to such change. Developer agrees that provisions of this paragraph as to maintenance of insurance will not be construed as limiting in any way the extent to which Developer may be held responsible for the indemnification of City or the payment of damages to persons or property resulting from Developer’s activities, activi ties of its tenants or the activities of any other person or persons for which Developer is otherwise responsible. Developer will require its insurer to waive its subrogation rights against City and the City and will provide endorsements evidencing same.

4. Workers’ Compensation Insurance: Developer will maintain or cause to be maintained workers’ compensation insurance issued by a responsible carrier authorized under the laws of the State of California to insure employers against liability for compensation under the workers ’ compensation laws now in force in California, or any laws hereafter enacted as an amendment or supplement thereto or in lieu thereof. Such work ers’ compensation insurance will cover all persons employed by Developer in connection with the Property and will cover liability within statutory limits for compensation under any such act aforesaid, based upon death or bodily injury claims made by, for or on behalf of any person incurring or suffering injury or death in connection with the Property or the operation thereof by Developer.

Developer will furnish City with a certificate of waiver of subrogation under the terms of the Workers’ Compensation Insurance. Developer will require its general contractor to waive subrogation and will require that its subcontractors waive subrogation to th e extent that such a waiver is commercially available.
c. All policies hereunder will not be subject to cancellation, reduction in coverage, or non-renewal except after notice in writing will have been sent by registered mail addressed to City not less than 30 days in advance of the effective date, except for cancellation for nonpayment of premium, in which event notice will be given not less than ten days in advance of the effective date. All policies will name City, Developer and/or any general contractor as insureds, additional insureds, and/or loss payable parties as their interests may appear. d. The term “full insurable value ” as used in this Section 4.10 means the actual replacement cost (excluding the cost of excavation, foundation and footings below the lowest floor and without deduction for depreciation) of the Improvements on the Property immediately before such casualty or other loss, including the cost of construction, architectural and engineering fees, and inspection and supervi sion. To ascer tain the amount of coverage required, Developer will cause the full insurable value to be determined from time to time by appraisal by the insurer, by the insurer’s automatic inflationary measure if acceptable to the Developer and City, by agreement

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between Developer and City or by an appraiser mutually acceptable to City and Developer, not less often than once every three years.
e. All insurance provided under this Section 4.10 will be for the benefit of Developer and City. Developer agrees to timely pay all premiums for such insurance and, at its sole cost and expense, to comply and secure compliance with all insurance require ments necessary for the maintenance of such insurance. Developer agrees to submit policies of all insurance required by this Section 4.10, or certificates and endorsements evidencing the existence thereof, to City within 30 days prior to the Construction Financing Event, indicating full coverage of the contractual liability imposed hereby. Within thirty (30) days, if practicable, but in any event prior to expiration of any such policy, copies of renewal policies, or certificates evidencing the existence thereof, will be submitted to City. All insurance herein provided for under this Section 4.10 will be effected under policies issued by insurers of recognized responsibility, licensed or permitted to do business in the State of California reasonably approved by City. f. Developer must cause all contractors and subcontractors performing work relating to the Project to maintain , at a minimum, the liability insurance and workers compensation insurance described in this Section 4.10. Developer must also cause its architects and engineers to maintain Architects and Engineers Professional Liability (Errors and Omissions) insurance on a “claims made basis” in an amount of not less $1,000,000. When coverage is provided on a “claims made basis”, Developer must cause all contractors and subcontractors to continue to renew the insurance for a period of five (5) years after the end of the Construction Period. Such insurance must have the same coverage and limits as the policy that was in effect during the Constructio n Period, and cover Developer for all claims made by City arising out of any acts or omissions of Developer, or its officers, employees or agents during the Construction Period. Subject to the prior written approval of City given in the sole and absolute discretion of City, Developer may propose the use of a “wrap” policy that reasonably replaces one or more of the tiers of coverage described herein by a master policy administered by Developer, so long as this does not diminish or adversely affect the protections to be provided to the City by the insurance otherwise required by this Section

4.10. g. If Developer fails or refuses to procure or maintain insurance as required by this Agreement, City will have the right, at City’s election, and upon ten (10) days prior notice to Developer, to procure and maintain such insurance. The premiums paid by City will be treated as a loan, due from Developer, to be paid on the first day of the month following the date on which the premiums were paid. City will give prompt notice of the payment of such premiums, stating the amounts paid and the name of the insured(s).

Section 4.11 Disclaimer of City Responsibility
Except as provided in this Agreement, City neither undertakes nor assumes nor will have any responsibility or duty to Developer or to any third party to review, inspect, supervise, pass judgment upon or inform Developer or any third party of any matter in connection with the Property, whether with respect to the quality, adequacy or suitability of the plans, any labor,

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service, equipment or material furnished to the Project, any person furnishing the same or otherwise. Developer and all third parties will rely upon its or their own judgment regarding such matters, and any review, inspection, supervision, exercise of judgment or information supplied to Developer or to any third party by City in connection with such matter is for the public purpose of providing affordable housing, and neither Developer (except for the purposes set forth in this Agreement) nor any third party is entitled to rely thereon. Neither Developer nor any third party may assert such review, inspection, supervision, exercise of judgment or information supplied to Developer or to any third party as a defense to the indemnification obligation set forth in Section

4.10.a of this Agreement.

Section 4.12 Permits
Before commencement of construction or development of any buildings, structures or other work of improvement upon any portion of the Property, Developer will, at its own expense, secure or cause to be secured, any and all permits which may be required by the City or any other governmental City having jurisdiction over such construction, development or work.

Section 4.13 Rights of Access
Commencing upon the Construction Financing Event, representatives of City will have the reasonable right of access to the Property, upon two (2) business days’ written notice to Developer (except in the case of an emergency, in which case City will provide such notice, if any, as may be practical under the circumstances), without charges or fees, at normal construction hours during the period o f construction for the purposes of this Agreement, including, but not limited to, the inspection of the work being performed in constructing the improvements. Such representatives of City will be those who are so identified in writing by the City Manager.

Section 4.14 Taxes, Assessments, Encumbrances and Liens Commencing upon the Construction Financing Event , Developer will pay prior to delinquency all real estate taxes and assessments assessed and levied on or against the Property.

Prior to Completion, Developer will not place, or allow to be placed, on title to the Property or any portion thereof, any mortgage, trust deed, encumbrance or lien not authorized by this Agreement.

In addition, Developer will remove, or will have removed, any levy or attachment made on title to the Property (or any portion thereof), or will assure the satisfaction thereof within a reasonable time but in any event prior to a sale thereunder. Nothing herein contained will be deemed to prohibit the Developer from contesting the validity or amount of any tax assessment, encumbrance or lien, or to limit the remedies available to the Developer in respect thereto.

Section 4.15 Rights to Plans
a. Subject to the rights of the beneficiary of the Construction Loan Deed of Trust, all work product prepared pursuant to this Agreement, including (but not limited to), all Plans, construction documents, soils tests and similar reports, Permits and other e ntitlements are hereby assigned to City as security for Developer’s obligations hereunder. In the event that this Agreement

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is terminated by City, Developer will, within ten (10) business days of such termination, transmit all such work product to City.
b. To effectuate the assignment described in paragraph a., concurrently with executing a contract with the project architect, Developer will execute and deliver to City an Assignment of Agreements (the “Assignment”), substantially in the form attached to this Agreement as Attachment No. 14 in a form that is acceptable to City Manager, granting to City all of Developer’s rights to: (1) the Plans prepared pursuant to this Agreement; (2) the contract between Developer and its architect; (3) all Permits relating to the Project; and similar rights and property interests.

Section 4.16 Release of Construction Covenants
a. Promptly after Completion of the Improvements, as generally and specific ally required by this Agreement, the Scope of Development and Plans for the Project approved by the City, City will furnish Developer with a Release of Construction Covenants upon written request therefor by Developer. City will not unreasonably withhold such Release of Construction Covenants and such Release of Construction Covenants will be issued so long Developer has Completed the Project in accordance with this Agreement and substantially in accordance with the Plans approved by City pursuant hereto. Such Release of Construction Covenants will be, and will so state, conclusive determination of satisfactory Completion of all of the construction required by this Agreement.
b. The Release of Construction Covenants will be in such form as to permit it to be recorded in the official records of Orange County. No Release of Construction Covenants will be recorded for less than the completed Improvements and development of the entire Property. c. If City refuses or fails to furnish a Release of Construction Covenants for the Property after written request from Developer, City will, within thirty (30) days of the written request, provide Developer with a written statement of the reasons City refused or failed to furnish a Release of Construction Covenants. The statement will also contain City’s opinion of the action Developer must take to obtain a Release of Construction Covenants. If the reason for such refusal is confined to the immediate availability of specific items or materials for landscaping, and/or minor items, City will issue its Release of Construction Covenants upon the posting with City of a bond in form, substance and amount reasonably acceptable to City by Developer in an amount representing the cost to Developer of the construction of the work not yet completed. d. The Release of Construction Covenants will not constitute evidence of compliance with or satisfaction of any obligation of Developer to the beneficiary of the Construction Loan Deed of Trust or any other P erson. The Release of Construction Covenants is not a notice of completion as referred to in Section 3093 of the California Civil Code.

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ARTICLE V. USE OF THE PROPERTY
Section 5.01 Use As Affordable Housing
a. Developer covenants and agrees (for itself, its successors, its assigns, and every successor in interest to the Property or any part thereof or any interest therein) that Developer, its successors and assigns will use the Property exclusively , except for one unit that is set aside for the property manager in residence, for a 74 dwelling u nit development to provide affordable housing at Affordable Rent for Very Low Income and Lower Income Senior Citizen Households, in compliance with the Bonus Density Agreement, this Agreement and the Regulatory Agreement.

No change in the use of the Property will be permitted without the prior written approval of City. b. Without limiting the foregoing, t he use of the Property shall also conform to the following criteria set forth in California Government Code Section 37364 so that the lease of the Property to the Developer by City pursuant to this Agreement shall be a transfer of “exempt surplus land” transferred for development of affordable housing with restrictions, as provided by California Government Code Sections 37364 and 54221 and Surplus Land Act Guidelines adopted by the California Department of Housing and Community Development:

1. Not less than 80 percent of the Property shall be used for housing.

2. Not less than 40 percent of the total number of housing units developed on the Property shall be rented at A ffordable Rent to households whose incomes are equal to, or less than, 75 percent of the maximum income of lower income households, and at least half of which shall be rented at Affordable Rent to very low income households.

3. The housing units developed on the Property shall be restricted by the Regulatory Agreement to remain continually affordable to and occupied by the households required to occupy the housing units by Section 5.01.b of this Agreement for the longest feasible time, but not less than 60 years, as provided in the Ground Lease and the Regulatory Agreement. The requirements of this Section 5.01 shall be covenants running with the land and shall be enforceable against any owner of the Property who violates any such covenant and each successor in interest who continues the violation by any of the entities described in subdivisions (a) to (f), inclusive, of Section 54222.5 of the California Government Code. The Regulatory Agreement contains a provision making the covenants and conditions of the Regulatory Agreement binding upon the Developer and the successors in interest of the Developer, and shall be recorded in the office of the county recorder of the County of Orange. The Regulatory Agreement shall be recorded in the grantor-grantee index in the manner required by said Section 37364.

4. The definitions of “persons and families of low and moderate income,” “lower income households,” and “very low income households” set forth in

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Sections 50079, 50079.5, 50093, and 50105 of the California Health and Safety Code shall apply to this Section 5.01.
c. City and its successors and assigns will have the right to monitor and enforce the covenants contained in this Section 5.01 . Developer covena nts that it will comply with the monitoring program established by City to enforce said covenants. In complying with such monitoring program, Developer or its agent will prepare and submit to City an annual occupancy report, financial information and income verification documents for each tenant and all supporting documentation, on forms provided by City, setting forth the required information for the preceding year. On an annual basis, Developer or its agent will additionally submit to City evidence of each tenant’s continuing eligibility to occupy the unit. City will review such reports for certification of continuing affordability of Units and eligibility of tenants.

Section 5.02 Management Plan; Annual Project Budget; Quarterly Report a. Prior to the Construction Financing Event, Developer will submit to City Manager a Management Plan reasonably acceptable to City Manager, describing the proposed plan for managing and operating the Property, including policies and procedures to assure accessibility to persons with disabilities . Approval of the Management Plan and Developer’s proposed Management Agreement by City Manager or designee will be a condition precedent to the Construction Financing Event. Developer will manage and operate the Property in accordance with the approved Management Plan, including such amendments as may be approved in writing from time to time by the Developer and City Manager or designee, for the entire Restricted Period. b. In addition, the Developer will submit on or before the first day of each fiscal year of the Restricted Period an estimated annual budget for management of the Property (the “Annual Project Budget”) in accordance with the Management Plan. The Annual Project Budget will include all nece ssary operating expenses, current maintenance charges, expenses of reasonable upkeep and repairs, taxes and special assessment levies, prorated amount required for insurance and all other expenses incident to the operation of the Project; and will show the expected revenues to pay such expenses, including annual debt service requirements and reserve fund deposits and balances. The Annual Project Budget, including any amendments proposed by the Developer, will be subject to the approval of City Manager, which approval will not be unreasonably withheld or delayed.
c. Beginning on the date of first occupancy, for each fiscal year of the Restricted Period, Developer will also submit on a quarterly basis a quarterly report for the management of the Property (the “Quarterly Report”) in a form that is reasonably acceptable to City Manager.

The Quarterly Report will include a profit and loss statement, budget to date figures, and occupancy report. Developer’s failure to timely submit the Quarterly Reports will cause t he imposition of a monetary penalty of $500 to be paid to City. City Manager, in his sole discretion may waive the requirement of the Quarterly Report for one or more quarterly reporting periods.

However, such waiver will not operate to waive any subsequent requirement of the Quarterly Report for the Restricted Period upon written notice to Developer by City Manager.

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d. The Ground Lease and the Regulatory Agreement will contain appropriate provisions implementing this Section 5.02.

Section 5.03 Property Maintenance
a. Prior to the Construction Financing Event, the Developer will prepare and submit to City Manager or designee for review and approval a program (the “Maintenance Program”) for the exterior and interior maintenance of the Property and the Improvements. b. The Maintenance Program will describe in reasonable detail the standards to be followed in maintaining the interior and exterior of the Improvements, including a schedule indicating the proposed frequency of each element of maintenance, and will include, at a minimum, the following: periodic cleaning of the interior and exterior of the Improvements, including windows; removing graffiti; removing debris and waste materials and otherwise maintaining indoor and outdoor areas of the Property; maintaining any lawns, plants, shrubs and trees or other landscaping planted on the Property; performing inspections of all exterior features to determine whether repairs are required; conducting periodic protective treatments such as rust removal and caulking; conducting r epairs to facades, roof, doors, windows and other exterior features; maintaining fencing and other security devices and systems; periodic repainting of the exterior; periodic repainting of the interior units and common areas; periodic replacing of the inte rior unit carpets; checking building systems, including, but not limited to the heating and cooling systems, smoke alarms and water heaters; checking interior unit appliances; and monitoring interior unit bathrooms for mold/mildew. The Maintenance Program, including any amendments proposed by the Developer, will be subject to the reasonable approval of City Manager. c. At all times during the Restricted Period, the Developer will maintain the Property and the Improvements in accordance with the approved Maintenance Program. To implement this requirement, Developer agrees to budget sufficient funds to pay for all reasonably anticipated costs (as indicated in the Annual Project Budget). In the event the Developer fails to maintain the Property and the Improvements in accordance with the approved Maintenance Program, and does not cure such failure within thirty (30) days following notice from City, with such additional time as may be reasonably necessary to cure su ch default provided that Developer has commenced to cure within such thirty (30) day period and is diligently prosecuting the cure to completion , City will have the right, but not the obligation, to enter the Property, correct any violation, and hold the Developer responsible for the cost thereof, and such cost, until paid, will constitute a lien on the Property. Prior to undertaking any work to correct any such maintenance deficiency, City will provide written notice that the Developer must correct the def iciency within a reasonable time.

The Developer will have a reasonable time in which to comply following such notice from City. d. The Ground Lease and the Regulatory Agreement will contain appropriate provisions implementing this Section 5.03.

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Section 5.04 Obligation to Refrain from Discrimination
a. Developer covenants and agrees for itself, its successors and its assigns in interest to the Property or any part thereof, that there will be no discrimination against or segregation of any person, or group of persons, on account of race, color, creed, religion, sex, sexual orientation, marital status, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, nor will Developer itself or any person claiming under or through it establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the Property.
b. All deeds, leases or contracts will 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 will 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 will 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 will run with the land.”
Notwithstanding the preceding paragraph, the provisions relating to discrimination on the basis of familial status will not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code nor be construed to affect Sections 51.2, 51.3, 51.4,

51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code will also apply to the preceding paragraph.

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 will 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

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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 will 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.” Notwithstanding the preceding paragraph, the provi sions relating to discrimination on the basis of familial status will not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code nor be construed to affect Sections 51.2, 51.3, 51.4,

51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code will also apply to the preceding paragraph.

3. In contracts: There will 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, subdivisi on (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 land, nor will the transferee itself 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 of the land.”
Section 5.05 Effect and Duration of Covenants
The covenants established in this Agreement will run with the land, without regard to technical classification and designation, and will be for the benefit and in favor of City, its successors and assigns, and the City. The coven ants described in this Article V will commence upon the Construction Financing Event and will be set forth in the Ground Lease and the Regulatory Agreement and will remain in effect for the respective periods specified therein.

Section 5.06 Enforcement of Covenants
City is deemed beneficiary of the terms and provisions of this Agreement and the covenants herein, both for a nd in its own right and for the purposes of protecting the interests of the community and other parties, public or private, for whose benefit this Agreement and the covenants running with the land have been provided. City will have the right if the covenants

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contained in this Agreement are breached and such breach is not cured within the time periods set forth in Section 6.01, to exercise all rights and remedies, and to maintain any actions or suits at law or in equity or other proper proceedings , including but not limited to an action for specific performance, to enforce the curing of such breaches to which it or any other beneficiaries of this Agreement and covenants are entitled.

Section 5.07 Monitoring
The parties acknowledge and agree that this Agreement is subject to the provisions of Health and Safety Code section 33418, which provides in pertinent part for the City to:
“… monitor, on an ongoing basis, any housing affordable to persons and families of low or moderate income developed or otherwise made available pursuant to any provisions of this part. As part of this monitoring, [City] will require Developers or managers of the housing to submit an annual report to [City]. The annual reports will include for each rental unit the rental rate and the income and family size of the occupants... The income information required by this section will be supplied by the tenant in a certified statement of a form provided by [City].”
Developer will submit to City on an annual basis the report required by Section 33418. The annual report will include for each residential unit the rental rate and the income and family size of the occupants. The income information will be supplied by the tenant in a certified statement on a form provided by City. Developer will provide for the submission of such information in its lease or occupancy agreement with tenants.

Section 5.08 Regulatory Agreement
Concurrently with the Construction Financing Event, Developer and City will execute and deposit with the Escrow Agent the Regulatory Agreement substantially in the form attached to this Agreement as Attachment No. 10.

ARTICLE VI. DEFAULTS AND REMEDIES
Section 6.01 Defaults - General
a. Subject to the Force Majeure Delay, as provided in Section 7.04 and the cure periods provided herein, failure or delay by either party to perform a ny term or provision of this Agreement constitutes a default under this Agreement. The party who fails or delays must immediately commence to cure, correct or remedy such failure or delay and will complete such cure, correction or remedy with reasonable diligence.
b. The injured party will give written notice of default to the party in default, specifying the default complained of by the injured party. Failure or delay in giving such notice will not constitute a waiver of any default, nor will it change th e time of default. Except as otherwise expressly provided in this Agreement, any failures or delays by either party in asserting

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any of its rights and remedies as to any default will not operate as a waiver of any default or of any such rights or remedies. Delays by either party in asserting any of its rights and remedies will not deprive either party of its right to institute and maintain any actions or proceedings which i t may deem necessary to protect, assert or enforce any such rights or remedies. c. If a monetary event of default occurs, prior to exercising any remedies hereunder, the injured party will give the party in default written notice of such default. The party in default will have a period of ten (10) days after such notice is given within which to cure the default prior to exercise of remedies by the injured party.
d. If a non -monetary event of default occurs, prior to exercising any remedies hereunder, the injured party will give the party in default notice of such default. If the default is reasonably capable of being cured within thirty (30) days, the party in default will have such period to effect a cure prior to exercise of remedies by the injured party. If the default is such that it is not reasonably capable of being cured within thirty (30) days, and the party in default (i) initiates corrective action within said period, and (ii) diligently, continually, and in good faith works to effect a cure as soon as possible, th en the party in default will have such additional time as is reasonably necessary to cure the default prior to exercise of any remedies by the injured party, but not to exceed a cure period of ninety (90) days.
e. If Developer fails to take corrective actio n or cure the default within a reasonable time, City will give the Senior Lender and, as provided in paragraph f., below, the Investor Limited Partner notice thereof. City agrees to accept cures tendered by any Senior Lender or Investor Limited Partner within the cure periods provided herein. Additionally, in the event the Senior Lender or Investor Limited Partner is precluded from curing a non -monetary default due to a bankruptcy, injunction, or similar proceeding by or against Developer or the general par tner of Developer, City agrees to forbear from completing a foreclosure (judicial or nonjudicial) during the period during which the Senior Lender or Investor Limited Partner is so precluded from acting, not to exceed ninety (90) days, provided such Investor Limited Partner and Senior Lender are otherwise in compliance with the foregoing provisions. In no event will City be precluded from exercising remedies if its rights become or are about to become materially jeopardized by any failure to cure a default or the default is not cured within one hundred eighty (180) days after the first notice of default is given.
f. City will send to the Investor Limited Partner a copy of all notices of default and all other notices that City sends to Developer, at the address for t he Investor Limited Partner provided in the Construction Financing Event documents.

Section 6.02 Institution of Legal Actions
Subject to the notice and cure provisions of Section 6.01, in addition to any other rights or remedies (and except as otherwise provided in this Agreement), either party may institute legal action to cure, correct or remedy any default, to recover damages for any default, or to obtain any other remedy consistent with the purpose of this Agreement. Such legal actions must be instituted

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in the Superior Court of the County of Orange, State of California, in any other appropriate court of that county, or in the United States District Court for the Central District of California.

Section 6.03 Applicable Law
The laws of the State of California will govern the interpretation and enforcement of this Agreement.

Section 6.04 Acceptance of Service of Process
a. If legal action is commenced by the Developer against City, service of process on City will be made by personal service upon the City Manager of City, or in such other manner as may be provided by law.
b. If legal action is commenced by City against the Developer, service of process on the Developer will be made by personal service upon the Developer (or upon a general partner, managing member or officer of the Developer) and will be valid whether made within or without the State of California, or in such manner as may be provided by law.

Section 6.05 Rights and Remedies are Cumulative
The rights and remedies of the parties under this Agreement are cumulative, and the exercise by either party of one or more of such rights or remedies will 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.

Section 6.06 Damages
If either party defaults with regard to any of the provisions of this Agreement, subject to the notice and cure provisions of Section 6.01 , the defaulting party will be liable to the non - defaulting party for any damages caused by such default, and the non -defaulting party may, after such notice and opportunity to cure (but not before) commence an action for damages against the defaulting party with respect to such default.

Section 6.07 Specific Performance
If either party defaults with regard to any of the provisions of this Agreement, subject to the notice and cure provisions of Section 6.01, the non-defaulting party, at its option, may, after such notice and opportunity to cure (but not before) commence an action for specific performance of the terms of this Agreement pertaining to such default.

Section 6.08 Termination by Either Party
Prior to the Construction Financing Event, either party will have the right to terminate this Agreement in the event (i) the other party is in default of any material term or provision of this

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Agreement, and, following notice, fails to cure such default within the time provided in Section

6.01; (ii) the parties mutually determine in writing that, despite using good faith commercially reasonable efforts, Developer will be unable to obtain the necessary financing for the Project; or (iii) City does not, within one hundred and twenty (120) days of the Effective Date of this Agreement, receive evidence satisfactory to City that HCD has clarified in writing that the Property should be declared exempt surplus land rather than surplus land for lease to Developer pursuant to this Agreement.

Section 6.09 Termination by Developer
Prior to the Construction Financing Event, subject to the notice and cure provisions of Section 6.01, Developer will have the right to terminate this Agreement, by providing written notice to City, in the event of a default by City pursuant to this Agreement.

Section 6.10 Termination by City
a. Subject to the notice and cure provisions of Section 6.01, City will have the right to terminate this Agreement, by providing written notice to Developer, in the event of a default by Developer and failure by Developer to timely cure any such default, or failure of any condition precedent to the occurrence of the Construction Financing Event which is in the control of Developer, including but not limited to the following:

1. Developer fails to submit to City evidence of financing or fails to satisfy any other condition precedent to the occurrence of the Construction Financing Event as provided in the Method of Financing within the time established therefor in the Schedule of Performance; or

2. Developer (or any successor in interest) assigns or attempts to assign any of Developer’s rights in and to the Property or any portion thereof or interest therein, or this Agreement or any portion hereof, except as permitted by this Agreement; or

3. Except for a Permitted Transfer, there is substantial change in the ownership of the Developer, or with respect to the identity of the parties in control of Developer, or the degree thereof contrary to the provisions of Section 1.06 of this Agreement; or

4. Developer fails to submit any of the reports, plans, drawings and related documents required by this Agreement by the respective dates provided in this Agreement.
b. After the Construction Financing Event, but before Completion, City will have the additional right to terminate this Agreement in the event any of the following defaults will occur:

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1. Developer fails to commence construction of the Improvements as required by this Agreement and such breach is not cured within the time provided in Section 6.01 of this Agreement; or

2. Developer abandons or substantially suspends construction of the improvements and such breach is not cured within the time provided in Section 6.01 of this Agreement; or

3. Developer assigns or attempts to assign this Agreement, or any rights herein, or transfer, or suffer any involuntary transfer of the Property, or any part thereof, in violation of this Agreement, and such breach is not cured within the time provided in Section 6.01 of this Agreement; or

4. Developer otherwise materially breaches this Agreement, and such breach is not cured within the time provided in Section 6.01 of this Agreement.

ARTICLE VII. GENERAL PROVISIONS
Section 7.01 Notices
Formal notices, demands and communications between City and the Developer and Investor Limited Partner will be sufficiently given if dispatched by registered or certified mail, postage prepaid, return receipt requested, to the principal offices of City and the Developer, as designated in Section 1.04 and Section 1.05 hereof, and to the Investor Limited Partner at the address given in the Construction Financing Event closing documents . 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 by mail as provided in this Section 7.01. Any notice that is personally delivered (including by means of professional messenger service, courier service such as United Parcel Service or Federal Express, or by U.S. P ostal Service), will be deemed received on the documented date of receipt by the recipient; and any notice that is sent by registered or certified mail, postage prepaid, return receipt required will be deemed received on the date of receipt thereof.

Section 7.02 Conflicts of Interest
a. No member, official or employee of City will have any personal interest, direct or indirect, in this Agreement nor will any such member, official or employee participate in any decision relating to the Agreement which affects his personal interest s or the interests of any corporation, partnership or association in which he is, directly or indirectly, interested. b. 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.

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Section 7.03 Nonliability of City Officials and Employees No member, official, employee or consultant of City will be personally liable to the Developer, or any successor in interest, in the event of any default or breach by City or for any amount which may become due to the Developer or to its successor, or on any obligations under the terms of this Agreement.

Section 7.04 Force Majeure
In addition to specific provisions of this Agreement, performance by either party hereunder will not be deemed to be in default where delays or defaults are due to Force Majeure Events.

Section 7.05 Inspection of Books and Records
a. Developer will maintain complete, accurate, and current records pertaining to the Property for a period of five (5) years after the creation of such records, and shall permit any duly authorized representative of City to inspect and copy records, during regular business hours upon reasonable advance notice. Records must be kept accurate and current. b. City reserves the right to inspect, monitor , and observe work and serv ices performed by Developer at any and all reasonable times. c. City reserves the right to audit the records of Developer any time during the performance of this Agreement and for a period of five years after final payment is made under this Agreement.
d. Access will be immediately granted to City, or any of its duly authorized representatives to any books, documents, papers, and records of Developer or its contractors for the purpose of performing audits and examinations or making copies and transcriptions. This requirement must be included in all contracts and subcontracts.

Section 7.06 Approvals
a. Except as otherwise expressly provided in this Agreement, approvals required of City or Developer in this Agreement, including the attachments hereto, will not be unreasonably withheld or delayed. All approvals will be in writing. Except as otherwise expressly provided in this Agreement, failure by either party to approve a matter within the time provided for approval of the matter will not be deemed a disapproval, and failure by either party to disapprove a matter within the time provided for approval of the matter will not be deemed an approval. b. Except as otherwise expressly provided in this Agreement, approvals required of City will be deemed granted upon the written approv al of City Manager or designee.

Notwithstanding the foregoing, the City Manager or designee may, in his or her sole discretion, refer to the governing body of City any item requiring City approval; otherwise, “City approval” means and refer to approval by the City Manager or designee.

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Section 7.07 Real Estate Commissions
Neither City nor the Developer will be liable for any real estate commis sions, brokerage fees or finder fees which may arise from this transaction. City and the Developer each represent to the other that it has employed no broker, agent, or finder in connection with this transaction.

Section 7.08 No Third Party Beneficiaries
This Agreement is made solely and specifically between City and Developer and their respective successors and assigns; and, except as expressly provided otherwise in this Agreement, no other person will have any rights, interest or claims under this Agreement or be entitled to any benefits under or on account of this Agreement as a third party beneficiary or otherwise.

Section 7.09 Authority to Sign
Developer hereby represents that each person execut ing this Agreement on behalf of Developer has full authority to do so and to bind Developer to perform pursuant to the terms and conditions of this Agreement.

Section 7.10 No Partnership
Nothing contained in this Agreement will be deemed or construed to create a partnership, joint venture, or any other similar relationship between the parties hereto or cause City to be responsible in any way for the debts or obligations of Developer or any other Person.

Section 7.11 Compliance with Law
Developer agrees to comply with all the requirements now in force, or which may hereafter be in force, of all municipal, county, state and federal authorities, pertaining to the development and use of the Property and the Improvements, as well as operations con ducted thereon. The judgment of any court of competent jurisdic tion, or the admission of Developer in any action or proceeding, whether City be a party thereto or not, that Developer has violated any such ordinance or statute in the development and use of the Property will be conclusive of that fact as between City and Developer.

Section 7.12 Binding Effect
This Agreement, and the terms, provisions, promises, covenants and conditions hereof, will be binding upon and will inure to the benefit of the parties hereto and t heir respective heirs, legal representatives, successors and assigns.

Section 7.13 Incorporation by Reference
Each of the attachments and exhibits attached hereto is incorporated herein by this reference.

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Section 7.14 Counterparts
This Agreement may be executed by each party on a separate signature page, and when the executed signature pages are combined, will constitute one single instrument.

Section 7.15 Construction and Interpretation of Agreement a. The language in all parts of this Agreement will in all cases be construed simply, as a whole and in accordance with its fair meaning and not strictly for or against any party. The parties hereto acknowledge and agree that this Agreement has been prepared jointly by the parties and has been the subject of arm’s length and careful negotiation over a considerable period of time, that each party has been given the opportunity to independently review this Agreement with legal counsel, and that each party has the requisite experience and sophistication to understand, interpret, and agree to the particular language of the provisions hereof. Accordingly, in the event of an ambiguity in or dispute regarding the interpretation of this Agreement, this Agreement will not be interpreted or construed against the party preparing it, and instead other rules of interpretation and construction will be utilized.
b. If any term or provision of this Agreement, the deletion of which would not adversely affect the receipt of any material benefit by any party hereunder, will be held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement will not be affected thereby and each other term and provision of this Agreement will be valid and enforceable to the fullest extent permitted by law.
c. The captions of the articles, sections and subsections herein are inserted solely for convenience and under no circumstances are they or any of them to be treated or construed as part of this instrument.
d. References in this instrument to this “Agreement” mean, refer to and include this instrument as well as any riders, exhibits, addenda and attachments hereto (which are hereby incorporated herein by this reference) or other documents expressly incorporated by reference in this instrument. Any references to any coven ant, condition, obligation, and/or undertaking “herein,” “hereunder,” or “pursuant hereto ” (or language of like import) means, refer to, and include the covenants, obligations, and undertakings existing pursuant to this instrument and any riders, exhibits, addenda, and attachments or other documents affixed to or expressly incorporated by reference in this instrument.
e. As used in this Agreement, and as the context may require, the singular includes the plural and vice versa, and the masculine gender includes the feminine and vice versa.

Section 7.16 Entire Agreement, Waivers and Amendments
a. This Agreement will be executed in three duplicate originals each of which is deemed to be an original. This Agreement will constitute the entire understanding and agreement of the parties.

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b. This Agreement integrates all of the terms and conditions mentioned herein or incidental hereto, and supersedes all negotiations or previous agreements between the parties with respect to all or any part of the Property.
c. All waivers of the provisions of this Agreement must be in writing and signed by the appropriate authorities of City or the Developer, and all amendments hereto must be in writing and signed by the appropriate authorities of City and the Developer. This A greement and any provisions hereof may be amended by mutual written agreement by the Developer and City.

Section 7.17 Time for Acceptance of Agreement by City
This Agreement, when executed by Developer and delivered to City, must be authorized, executed and delivered by City within thirty (30) days after date of signature by Developer or this Agreement may be terminated by Developer upon written notice to City. The effective date of this Agreement will be the date when this Agreement has been executed by City (the “Effective Date”).

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURES ON FOLLOWING PAGES]

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Page S-1
IN WITNESS WHEREOF, City and Developer have signed this Agreement as of the dates set opposite their signatures.
“CITY”

Dated: _________________, 2022 By: _____________________________ Mark A. Murphy, Mayor

ATTEST:

Pamela Coleman, City Clerk

APPROVED AS TO FORM:

By: ______________________________
Gary A. Sheatz, City Attorney

APPROVED AS TO FORM:

KANE, BALLMER & BERKMAN
Special Counsel to the City

By: ___________________________

[SIGNATURES CONTINUE ON FOLLOWING PAGE]

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Page S-2

KATELLA TERRACE, L.P., a California limited
partnership

By: HORIZON-ELOM HOLDINGS, LLC., a
California limited liability company, Developer’s
Administrative General Partner

Dated: ______________, 2022 By: _______________________________ Name: Keith Stanley
Its: Manager

By: ORANGE SENIOR HOUSING, INC ., a
California non-profit public benefit corporation ,
Developer’s Managing General Partner

Dated: ______________, 2022 By: _______________________________ Name: Paul Abbondante
Its: President

Dated: ______________, 2022 By: _______________________________ Name: Katherine Connaghan
Its: Vice President

Katella Terrace
Attachment No. 3 - Method of Financing

ATTACHMENT NO. 3

METHOD OF FINANCING
This is the Method of Financing attached to the Disposition and Development Agreement (“DDA”) between the City of Orange (the “City”) and Katella Terrace, L.P., a California limited partnership (“Developer”), relating to Developer’s construction of a 74-unit (including one manager’s unit) residential project, to be rented at Affordable Rents to Very Low and Lower Income Senior Citizen households. Any capitalized term not otherwise defined herein will have the meaning ascribed to such term in the DDA.

The Project will be financed by a combination of construction and permanent loans, the City Ground Rent Loan (which is a carry back loan based on the appraised fair market value of the Site at the time of commencement of the Ground Lease, which finances the prepayment of the capitalized annual lease payments over the term of the Ground Lease ), other affordable housing funds and Developer Equity derived in part from the syndication of tax credits.

1. Definitions. Unless otherwise defined herein, capitalized terms will have the meanings ascribed to them in the DDA.

2. Acquisition and Development Costs and Project Budget. All Acquisition and Development Costs will be as set forth in the Project Budget prepared by Developer and submitted to and approved by the City prior to the Construction Financing Event. The Project Budget will be subject to change from time-to-time, subject to the prior written approval of the City Manager or designee (which approval will not be unreasonably withheld), upon which approval, the Project Budget will be replaced by the approved revised Project Budget. Within the respective times provided therefor in the Schedule of Performance, the Developer will obtain all approvals needed for the Construction Loan and demonstrate, to the satisfaction of the City Manager , that all Developer Equity will be available for payment or refinancing of Development Costs when and as required by this Method of Financing.

Developer will be responsible during the Construction Period to provide funds if and as needed to pay for cost overruns and contingencies not otherwise funded by the sources of funds as described herein.

3. Evidence of Financing. Prior to the Construction Financing Event, Developer will submit for City review and approval evidence of Project financing, including: (a) copies of all documents required by the Construction Lender to obtain construction financing; (b) a firm commitment for the Permanent Loan and copies of all documents that will be required by Permanent Lender to obtain the Permanent Loan; (c) the amended and restated limited partnership agreement upon inclusion of the Investor Limited Partner, including all exhibits thereto, and other documentation evidencing the availability of the Limited Pa rtner Capital Contribution, and such other documentation as may be appropriate to evidence other Developer Equity. The City will not unreasonably withhold its approval.

Katella Terrace
Attachment No. 3 - Method of Financing

4. City Ground Rent Loan.
a. In accordance with and subject to the terms and conditions of the DDA and this Method of Financing, the City agrees to make the City Ground Rent Loan to Developer and Developer agrees to accept the City Ground Rent Loan for the exclusive purpose of financing the prepayment of the capitalized rent due to be paid from Developer to City under the Ground Lease. b. If at any time Developer obtains additional financial assistance beyond that contemplated at the Construction Financing Event, Developer must promptly notify the City. The City will determine if such additional assistance would result in an over-subsidy of the Project, in which case, the City and Developer will mutually agree upon appropriate procedures for reducing the City Ground Rent Loan to eliminate the over-subsidy. c. At the Construction Financing Event, the City and Developer will execute and deliver such instruments and documents as may be necessary to evidence and secure the City Ground Rent Loan, consistent with the terms of the DDA and this Method of Financing, and each in a form that is acceptable to the City Manager or designee, including the following documents, as applicable, which are referred to as the “City Loan Documents”:

1. Regulatory Agreement;

2. City Ground Rent Loan Note evidencing the City Ground Rent Loan;

3. City Ground Rent Loan Deed of Trust and Assignment of Rents securing the City Ground Rent Loan and the City Ground Rent Loan Note;

4. Assignment of Agreements;

5. Environmental Indemnity; and

6. UCC-1 Financing Statement.

5. Subordination.
a. The lien of the City Ground Rent Loan Deed of Trust, but not the Regulatory Agreement, will be subordinate to the lien created by the Construction Loan Deed of Trust and the Permanent Loan Deed of Trust, and any other of the Senior Loan Documents and all of the terms and conditions contained in the Senior Loan Documents.
b. Prior to the Construction Financing Event, the City Manager or designee will execute a Subordination Ag reement that is consistent with applicable laws and regulations and is mutually acceptable to the City Manager or designee, the Construction Lender and Developer. The Subordination Agreement will subordinate the City Ground Rent Loan Deed of Trust, but not the Regulatory Agreement, to the Construction Loan Deed of Trust and other Senior

Katella Terrace
Attachment No. 3 - Method of Financing

Loan Documents. The subordination agreement must provide the City with all rights under California Civil Code Section 2924b and 2924c and must contain written commitments reasonably designed to protect the City’s investment in the event of a default. Such written commitments will provide for, but not necessarily be limited to: (i) a right to cure a default on the Senior Loan deed of trust; (ii) a right to negotiate with S enior Lender after notice of default and prior to Senior Lender commencing foreclosure proceedings; (iii) a right to purchase Developer’s leasehold interest in the Property at any time after a default on the Senior Loan; and (iv) an agreement that if prior to foreclosure of the Senior Loan, the City takes title to the Developer’s leasehold interest in the Property and cures the default on the Senior Loan, the Senior Lender will not exercise any right it may have to accelerate the Senior Loan by reason of the transfer of title to the City.

6. Recordation. Upon the Construction Financing Event, the Title Company will record the recordable City Loan Documents in accordance with instructions provided by the City, and will be prepared to issue to the City an ALTA policy of title insurance, insuring the City Ground Rent Loan Deed of Trust as a second priority lien on the Property, in amounts and wit h endorsements as the City may determine is appropriate.

7. Repayment Terms. The repayment terms of the City Ground Rent Loan will be as set forth in the City Ground Rent Loan Note and the City Ground Rent Loan Note attached to the DDA as Attachments No. 11 and 12, respectively.

8. Conditions Precedent to Construction Financing Event The Construction Financing Event is conditioned upon each of the following occurring to the satisfaction of , and in a form approved by, the City Manager prior to the time for the Construction Financing Event set forth in the Schedule of Performance:

1. Developer submits evidence that the final working drawings have been approved by the City;

2. Developer submits a copy of the general construction contract between the Developer and a licensed general contractor approved by the City Manager or designee , covering all construction required by the DDA and the approved final working drawings;

3. Developer submits for City approval copies of the mechanical, electrical, plumbing, and framing subcontracts and subcontracts for other trades identified by the City;

4. Developer submits for City approval copies of contracts with the architect, the property manager (which must contain a provision allowing Developer’s termination of the management agreement without cause, upon thirty (30) days prior written notice) , and other consultants and service providers identified by the City;

Katella Terrace
Attachment No. 3 - Method of Financing

5. Developer submits a final Project Budget, current as of the Construction Financing Event date, demonstrating to the satisfaction of the City Manager or designee the availability of sufficient funds to pay all Acquisition and Development Costs;

6. Developer submits evidence satisfactory to th e City Manager or designee that the Developer has financing commitments sufficient to pay all Acquisition and Development Costs in accordance with the DDA, including the Construction Loan, Permanent Loan , City Ground Rent Loan, and Developer’s Equity (including the Limited Partner Capital Contribution) in the respective amounts set forth in the City-approved Project Budget;

7. Developer submits copies of final Construction Loan Documents;

8. Developer submits copies of Amended and Restated Limited Partnership Agreement (admitting Investor Limited Partner) or other final limited partnership agreement and related documents;

9. Developer submits the evidence of insurance policies required by the DDA;

10. Developer submits evidence satisfactory to the City Manager or designee that Developer has satisfied all conditions pr ecedent to the issuance of all permits necessary for the construction of the Improvements, other than payment of fees (for which funds have been budgeted in the Project Budget) and conveyance of title;

11. Developer submits the Maintenance Program, including the Maintenance Budget, as required by the DDA;

12. Developer submits the Management Plan, as required by the DDA;

13. Developer and Construction Lender and City agree on a Disbursement Agreement providing for dis bursement of the Developer Equity, Construction Loan, and other affordable housing funds and/or loan proceeds included in the City-approved Project Budget;

14. Developer, Senior Lender and City agree on Subordination Agreements;

15. Title Insurance Company is pre pared to issue the title insurance policies required by the DDA;

16. Developer duly executes and delivers to the City or into escrow the Ground Lease, the Memorandum of Lease, and the City Loan Documents; and

17. City Manager determines that Developer is not in default of its obligations to the City under the DDA.

Katella Terrace
Attachment No. 3 - Method of Financing

Notwithstanding the foregoing, the City, in the sole discretion of the City Manager, may waive in writing any of the foregoing conditions precedent to the Construction Financing Event. A waiver of any of the foregoing conditions will not operate in any way as a waiver, or estoppel with respect to, any subsequent or other failure to comply with such condition, or any other condition contained in the DDA, this Method of Financing, or any of the other City Loan Documents.

Katella Terrace Apartments
Attachment No. 4
Scope of Development

ATTACHMENT NO. 4

SCOPE OF DEVELOPMENT

The project site is located at 1249 E. Katella Avenue in the City of Orange and is identified as the Property on the Site Map attached to this Disposition and Development Agreement as Attachment No. 1 and legally described on the Legal Description attached to this Disposition and Development Agreement as Attachment No. 2.

The Katella Terrace Apartments Project will consist of the development of seventy-four (74) rental housing units to be exclusively rented (except for one property manager unit) to Senior Lower Income and Very Low Income households. The project shall be developed in accordance with the following entitlements, granted by the City Council of the City of Orange on September 10, 2019:

• Conditional Use Permit No. 3083-19 approving senior affordable apartments • Major Site Plan Review No. 0970 -19 approving demolition of existing structure and site improvements
• Design Review No. 4970-19 approving site and structure design • Two development standard concessions (building height and number of stories) • Two development standard waivers (fence height and landscaping)

A Density Bonus Housing Agreement was approved by the City on January 20, 2020, and the development and operation of the Project shall comply with the requirements of the Density Bonus Housing Agreement.

Katella Terrace
Attachment No. 5 - Schedule of Performance

ATTACHMENT NO. 5

SCHEDULE OF PERFORMANCE

1. Submittal - Management Plan and Maintenance
Program. Developer will submit to the City for
approval the Management Plan (including a
Tenant Selection and Eligibility Plan) and the
Maintenance Program.

No later than thirty (30) days
prior to the scheduled date for
the Construction Financing
Event (“Construction
Financing Event Date”).

2. 4

Approval - Management Plan and Maintenance
Program. City shall approve or disapprove the
Management Plan and the Maintenance Program
submitted by Developer.

Within 30 days of submittal by
Developer.

3. Submittal – Project Budget . Developer will
prepare and submit to the City for approval the
Project Budget.

No later than sixty (60) days
prior to the Construction
Financing Event Date.

4. 5

Approval - Project Budget. City shall approve or
disapprove the Project Budget submitted by
Developer.

Within thirty ( 30) days of
submittal by Developer.

5. Submittal - Basic Concept/Schematic Drawings .

Developer will submit to the City for approval the
Basic Concept/Schematic Drawings and related
documents (site plans, elevations and preliminary
floor plans).

Achieved by the submittal of
zoning entitlement drawings
in 2019.

6. 3

Approval - Basic Concept/Schematic Drawings .

The City will approve or disapprove the Basic
Concept/Schematic Drawings and related
documents.

Achieved by Planning
Commission approval on July
29, 2019.

7. 9 Submittal - Final Construction Drawings and
Specifications. Developer will prepare and
submit to the City for approval the Final
Construction Drawings and Specifications.

No later than June 1, 2023.

Katella Terrace
Attachment No. 5 - Schedule of Performance

8. Approval - Final Construction Drawings and
Specifications. The City will approve or disap -
prove the Final Construction Drawings and
Specifications.

Within the times provided by
applicable provisions of the
City’s Municipal Code.

9. Submittal – Environmental Assessments .

Developer will deliver to the City copies of the
environmental assessments for the Property.

Within twenty (2 0) days after
receipt of final assessment.
.

10. 6 Submittal - Evidence of Financing.

Developer will submit to the City substantially
final Construction Loan documents ,
documentation of Developer Equity, and all other
components of the Evidence of Financing as
described in the DDA and the Method of
Financing.

Twenty (20) days prior to the
Construction Financing Event
Date.

11. 7 Approval of Financing. The City will approve or disapprove the evidence of financing.

Within ten (10) days after
receipt of each such submittal
of evidence of financing to the
City.

12. 8 Construction Financing Event Date. All
conditions precedent to the Construction
Financing Event will have been satisfied on or
before this scheduled date.

No later than December 31 ,
2023.

13. 1

Submittal - Tenant Lease. Developer will prepare
and submit to the City for approval the form of
tenant lease consistent with and containing the
lease provisions described in the DDA and
attachments and the City approved Management
Plan and Maintenance Program.

Prior to the ini tial lease-up of
the Project.

14. Approval –Tenant Lease. The City will approve or
disapprove Developer’s proposed form of Tenant
Lease.

Within thirty (30) days of
submittal by Developer.

15. 1 Commencement of Construction. Developer will
commence construction of the I mprovements on
the Property.

Within sixty (60) days after the
Construction Financing Event.

Katella Terrace
Attachment No. 5 - Schedule of Performance

16. 1 Completion of Construction . Developer will
complete construction of the Improvements on the
Property.

The earlier of eighteen (18 )
months after the Construction
Financing Event and any date
required for completion of
construction by the Senior
Lender or any governmental
body providing funds for the
construction of the Project.

17. Submittal – Rent Schedule. Developer will submit
its proposed rent schedule and utility allowance to
the City for approval.

Thirty (30) days prior to initial
rental of the units and on an
annual basis thereafter.

Note: The City Manager may approve in writing extensions of time for the performance of any item required of Developer in this Schedule of Performance provided the City Manager is re asonably satisfied that Developer is diligently proceeding in good faith to perform the actions required, and further provided that the time for the occurrence of the Construction Financing Event Date shall not be extended for more than an aggregate total period of six (6) months. Nothing herein is intended to alter or modify any extension(s) of time that may occur as a result of a Force Majeure Event allowed under the DDA.

ATTACHMENT NO. 7

GROUND LEASE

By and Between CITY OF ORANGE,
"Landlord"
and
KATELLA TERRACE, L.P.,

"Tenant"

Dated as of ____________, 202_

2 GROUND LEASE

THIS GROUND LEASE (the "Lease"), dated, for identification purposes only, as of ____________, 2022 is entered into by and between the City of Orange, a municipal corporation ("Landlord"), and Katella Terrace, L.P., a California limited partnership ("Tenant").

RECITALS

A. WHEREAS, Tenant is controlled by an experienced owner, developer and manager of affordable housing for lower income seniors; and

B. WHEREAS, Landlord is the owner of certain real property situated in the City of Orange, County of Orange, State of California, and legally described in Exhibit "A" attached hereto and incorporated herein by this reference (the "Property").

NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and conditions herein contained, Landlord and Tenant agree as follows:

ARTICLE 1. LEASE OF THE PROPERTY

1.1 Lease of the Property. Landlord leases to Tenant, and Tenant leases from Landlord, the Property on the terms and conditions as set forth in this Lease. The lease of the Property to Tenant pursuant to this Ground Lease is subject to (i) that certain Density Bonus Housing Agreement concerning the Property dated January 20, 2020 and recorded in the Official Records, Orange County Clerk -Recorder, on March 2, 2020 as Document No . 2020000090418 (the “Density Bonus Agreement”); (ii) that certain Dispos ition and Development Agreement entered into by and between Landlord and Tenant dated _________, 2022 (the “DDA”); and (iii) the Regulatory Agreement dated _________, 20__ entered into by and between Landlord and Tenant dated of even date herewith and recorded in the Official Records, Orange County Clerk - Recorder, on _____ as Document No. _________ (the “Regulatory Agreement”). Tenant for itself and its successors and assigns to the leasehold interest conveyed by this Ground Lease or any portion thereof or any interest therein covenants and agrees to be bound by the provisions of this Ground Lease, the Density Bonus Agreement, the DDA and the Regulatory Agreement.

1.2 Purpose of Lease. The purpose of this Lease is to provide for the construction, development, maintenance, management and operation of a 74-unit senior housing project and associated uses in accordance with (i ) the Density Bonus Agreement ; and (ii) the DDA; and (iii) the Regulatory Agreement. Tenant will not occupy or use the Property, nor permit the Property to be occupied or used, nor do or permit anyth ing to be done in or on the Property, in whole or in part, for any other purpose , and the use and occupancy of the Property shall at all times be consistent with the requirements of the Density Bonus Agreement, the DDA and the Regulatory Agreement.

1.3 Recorded E ncumbrances. This Lease, the interests of Landlord and Tenant hereunder, and the Property, are in all respects subject to and bound by all of the covenants, conditions, restrictions, reservations, rights, rights-of-way and easements of record.

3 1.4 Memorandum of Lease. A short form Memorandum of Lease referring to this Lease is being executed by Landlord and Tenant concurrently herewith, and recorded in the Official Records of the County of Orange, California.

ARTICLE 2. DEFINITIONS

All capitalized terms used herein may be defined where first used in this Lease and/or as set forth in this Article 2.

"Award" means any compensation or payment made or paid for the Total, Partial or Temporary Taking of all of any part of or interest in the Property and/or the Impr ovements, whether pursuant to judgment, agreement or otherwise.

"Capital Improvements" means all work and improvements with respect to the Property for which costs and expenses may be capitalized in accordance with generally accepted accounting principles.

"City" means the City of Orange, a California municipal corporation. "Commencement Date" has the meaning set forth in Article 3.

“Civil Code” means the California Civil Code.

"Event of Default" has the meaning set forth in Article 19.

“Government Code” means the California Government Code.

"Hazardous Materials" means any chemical, substance, object, condition, material, waste, or controlled substance which is or may be hazardous to human health or safety or to the environment, due to its radioactivity, ignitability, corrosiveness, explosivity, flammability, reactivity, toxicity, infectiousness, or other harmful or potentially harmful properties or effects, including, without limitation, all chemicals, substances, ma terials, or wastes that are now or hereafter may be listed, defined, or regulated in any manner by any federal, state , or local government agency or entity, or under any federal, state, or local law, regulation, ordinance, rule, policy or procedure due to such properties or effects. Notwithstanding the foregoing, "Hazardous Materials" shall not include any substances typically used in the construction, rehabilitation, operation, maintenance or repair of an apartment complex provided that such substances are used in accordance with all applicable laws.

"Impositions" means all taxes (including, without limitation, sales and use taxes); assessments (including, without limitation, all assessments for public improvements or benefits whether or not commenced or completed prior to the Commencement Date and whether or not to be completed within the Term); water, sewer or other rents, rates and charges ; excises; levies; license fees; permit fees; inspection fees and other authorization fees and other charges; in eac h case whether general or special, ordinary or extraordinary, foreseen or unforeseen, of every character (including all interests and penalties thereon), which are attributable or applicable to any portion of the Term and may be assessed, levied, confirmed or imposed on or in respect of, or be

4 a lien upon (a) the Property or the Improvements, or any part thereof, or any estate, right or interest therein, (b) any occupancy, use or possession of or activity conducted on the Property or the Improvements, or any part thereof, or (c) this Lease . The term "Impositions" shall also include any and all increases in the foregoing, whether foreseen or unforeseen, ordinary or extraordinary, including, without limitation, any increase in real property taxes resulting fr om a sale of the Property by Landlord.

"Improvements" means all buildings, structures and other improvements, including the building fixtures thereon, now located on the Property or hereafter constructed on the Property; all landscaping, fencing, walls, paving, curbing, drainage facilities, lighting, parking areas, roadways and similar site improvements now located or hereafter placed upon the Property.

"Insurance Requirements" means all terms of any insurance policy covering or applicable to the Property or the Improvements, or any part thereof, all requirements imposed by the issuer of a ny such policy, and all orders, rules, regulations and other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) applicable to or affecting the Property or the Improvements, or any part thereof, or any u se or condition of the Property or the Improvements, or any part thereof.

"Legal Requirements" means all laws, statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations, directions and requirements of and agreements with all governments, departments, commissions, boards, courts, authorities, agents, officials and officers, foreseen or unforeseen, ordinary or extraordinary, which now or at any time hereafter may be applicable to the Property or the Improvements, or any part thereof, or to any of the adjoining sidewalks, streets or ways, or to any use or condition of the Property or the Improvements, or any part thereof.

"Memorandum of Lease" refers to the me morandum of lease which has been recorded as described in Section 1.4.

"Mortgage" has the meaning set forth in Section 16.1.1.

"Mortgagee" has the meaning set forth in Section 16.1.1.

"Notice of Intended Taking" means any notice or notification on which a reasonably prudent person would rely and which said person would interpret as expressing an existing intention of Taking as distinguished from a mere preliminary inquiry or proposal . It includes, without limitation, the service of a condemnation summons and complaint on a party to this Lease.

The notice is considered to have been received when a party to this Lease receives from the condemning agency or entity a notice of intent to take, in writing, containing a description or map of the taking which reasonably defines the extent of the taking.

"Partial Taking" means any taking of the fee title of the Property and/or the Improvements that is not either a Total, Substantial or Temporary Taking.

5 "Potential Default" means any condition or event which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default.

"Project" refers to the Property and the Improvements constructed and maintained thereon.

"Property" has the meaning set forth in Recital "B," above.

“Substantial Taking" means the Taking of so much of the Property and/or the Improvements that the portion of the Property and/or the Improvements not taken cannot be repaired or reconstructed, taking into consider ation the amount of the Award available for repair or reconstruction, so as to constitute a complete, rentable structure, capable of producing a proportionately fair and reasonable net annual income, and all other charges payable under this Lease, and after performance of all covenants and conditions required by Tenant by law and under this Lease.

"Taking" means a taking or damaging, including severance damage, by eminent domain or by inverse condemnation or for any public or quasi -public use under any sta tute. The taking may occur as a result of a transfer pursuant to the recording of a final order in condemnation, a voluntary transfer or conveyance to the taking authority under threat of condemnation, or a transfer while condemnation proceedings are pend ing. Unless otherwise provided, the taking shall be deemed to occur as of the earlier of (a) the date actual physical possession is taken by the condemner, or (b) the date on which the right to compensation and damages accrues under the law applicable to the Property and/or the Improvements . A taking as used in this Lease does not include the voluntary dedication of any portion of the Property necessary to obtain building permits or to comply with any other applicable governmental rule, regulation or statute; nor does it include the enactment of any law, ordinance or regulation which may affect the use or value of the Property but which does not involve an actual taking of any portion thereof. Eminent domain actions filed by Landlord against owners of portions of the Property and pending as of the Commencement Date shall not be deemed, construed or interpreted as a Taking under this Lease.

"Temporary Taking" means a Taking of all or any part of the Property and/or the Improvements for a term certain which term is specified at the time of Taking. Temporary Taking does not include a taking which is to last for an indefinite period or a taking which will termina te only upon the happening of a specified event unless it can be determined at the time of the taking substantially when such event will occur . If a Taking for an indefinite term should take place, it shall be treated as a Total, Substantial or Partial Taking in accordance with the definitions set forth herein.

"Term" has the meaning set forth in Article 3.

"Total Taking" means the taking of the fee title to all of the Property.

6 ARTICLE 3. TERM

The Term of this Lease shall commence on the date first written above, herein referred to as the "Commencement Date". The Landlord shall record the Memorandum of Lease upon the Commencement Date, and Tenant shall be entitled to possession of the Property upon recordation of the Memorandum of Lease. The Term of this Lease shall commence upon the Commencement Date and shall end 60 years from that date (the "Term").

ARTICLE 4. RENTAL

4.1 Rent. Landlord is entering into this Lease with Tenant in consideration of Tenant’s obligations and covenants contained herein. Landlord will lease the Property to Tenant for a fully capitalized rent equal to _______________________Dollars ($_________), which i s equivalent to the fair market value of the Property at the Commencement Date of this Lease (“Capitalized Rent”). Landlord hereby acknowledges that Tenant prepaid the Capitalized Rent in full upon the Construction Financing Event, using proceeds of the City Ground Rent Loan. In addition to the Capitalized Rent, Tenant shall pay to Landlord an Annual Administrative Fee of Five Thousand Dollars ($5,000.00). The Capitalized Rent and the Annual Administrative Fee are collectively referred to in this Lease as the “Rent”.

4.2 Utilities. Tenant shall be responsible for the payment of all water, gas , electricity and other utilities used in connection with the Project and the Property throughout the Term of this Lease.

4.3 Taxes and Assessments.

4.3.1 Payment of Taxes. Subject to any applicable exemptions, Tenant shall pay real property taxes applicable to the Property during the Term of this Lease . All such payments shall be made prior to the delinquency date of such payment . If any such taxes paid by Tenant shall cover any period of time prior to or after the expiration of the Term, Tenant's share of such taxes shall be equitably prorated to cover only the period of time within the tax fiscal year during which this Lease shall be in effect, and Landlord shall reimburse Tenant to the extent required.

4.3.2 Personal Property. Tenant shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property of Tenant contained in the Property or elsewhere. When possible, Tenant shall cause said trade fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Landlord.

ARTICLE 5. POSSESSION OF PROPERTY

5.1 Acceptance of Premises. Tenant hereby accepts the Property.

5.2 Ownership of Improvements . During the term of this Lease, (a) fee title to the Property is and shall be vested in Landlord; and (b) fee title to all Improvements, now existing or later made, on the Property are and shall be vested in Tenant.

7 5.3 Surrender of Property.

5.3.1 Upon Expiration or Termination . Tenant agrees that on expiration or earlier termination of the Term, which in the case of an early termination due to the occurrence of an Event of Default is not timely cured by Tenant in accordance with the provisions of this Lease, the leasehold estate hereby granted to Tenant shall be terminated and shall revert to Landlord, and all Improvements on the Property shall become the property of Landlord free and clear from any liens or claims whatsoever (other than non -monetary liens previously approved or otherwis e accepted in writing by Landlord), in good condition , reasonable wear and tear excepted without any further compensation therefor from Landlord to Tenant or any other person.

5.3.2 Condition. On expiration or termination of the Term, Tenant shall peaceably and quietly leave and surrender the Property and the Improvements to Landlord in good order, condition and repair, reasonable wear and tear and obsolescence excepted . Tenant shall leave in place and in good order, condition and repair, all fixtures and machinery; except (if Tenant is not then in default under this Lease) Tenant shall have the right to remove only Tenant -owned appliances, other unattached equipment, furniture and merchandise that Tenant shall have installed, which removal must be done without material damage to the Property or Improvements.

Landlord shall have the right to have the Property and the Improvements inspected at Tenant's cost to determine whether the Property and the Improvements have been property maintained, repaired and restored in accordance with the terms of this Lease. That notwithstanding, and subject to the exception of the environmental indemnities that shall survive any termination in perpetuity, Tenant shall not be responsible for the interior physical condi tion of individual occupied apartments on the termination or expiration of this Lease.

5.3.3 Delivery of Documents. Contemporaneous with the expiration or termination of the Term, upon request of Landlord Tenant shall deliver to Landlord the following:

(a) Such documents, instruments and conveyances as Landlord may reasonably request to enable Landlord's ownership of the Property and the Improvements to be reflected of record, including, without limitation, a quitclaim deed in recordable form to the Property and the Improvements.

(b) All construction plans, surveys, permits, existing contracts for services, maintenance, operation, and other documents relating to use, operation, management, and maintenance of the Improvements as may be in effect and in the possession of Tenant at the time.

(c) All documents and instruments required to be delivered by Tenant to Landlord pursuant to this Section shall be complete, legible, originals or true copies, and shall otherwise be in a form reasonably satisfactory to Landlord.

ARTICLE 6. REPRESENTATIONS AND WARRANTIES

6.1 Landlord's Representations. Landlord represents and warrants to Tenant that it owns the Property in fee simple, free and clear of all monetary encumbrances and has the power

8 and authority to enter into this Lease and perform all obligations and agreements incidental or pertinent to this Lease. Landlord covenants not to voluntarily encumber its fee interest with any monetary encumbrances without the prior written consent of Tenant.

6.2 Tenant’s Representations.

6.2.1 Tenant represents and warrants to Landlord that it has examined the Property and acknowledges that it hereby accepts possession of the Property in its "AS IS" condition, with all faults and defects, including, without limitation, infestation of or damage to the Property caused by wood-destroying pests or organisms.

6.2.2 Tenant is not in default under any law or regulation or under any order of any federal, state or local court, board, commission or agency whatsoever, and there are no claims, actions, suits or proceedings pending or, to the knowledge of Tenant, threatened against or affecting Tenant or the Property, at law or in equity, before or by any federal, state or local court, board, commission or agency whatsoever that might, if determined adversely to Tenant, materially affect Tenant's ability to perform its obligations hereunder.

6.2.3 All information provided by Tenant to the California Debt Limit Allocation Committee ("CDLAC") and the California Tax Credit Allocation Committee ( “TCAC”) shall be true and correct in all material respects as of the date of the applications are submitted . Tenant acknowledges it has an obligation to provide CDLAC, TCAC and Landlord updated information as pertinent.

6.2.4 All documents, materials and information provided by Tenant to Landlord relating to Tenant's qualifications, financial strength, and ability to perform its obligations under this Lease are true, correct and compl ete in all material respects as of their respective dates, and no material adverse change has occurred, or is reasonably likely to occur, that would make any such documents, materials or information incorrect, incomplete, or misleading in any material respect.

ARTICLE 7. DEVELOPMENT OF THE PROPERTY

7.1 Construction. All Improvements on the Property shall be constructed in a good and workmanlike manner, and shall comply with the Scope of Development attached hereto as Exhibit D and with all applicable governmental permits, laws, ordinances and regulations. Tenant shall comply with the Schedule of Performance attached hereto as Exhibit C. Tenant will construct or cause to be constructed on the Property the Improvements in accordance with this Lease and the DDA, including the Scope of Development . Tenant will carry out the development, construction (as defined by applicable law) and operation of the Project on the Property, including, without limitation, any and all public works (as defined by applicable law), if any, in conformity with all applicable local, state and federal laws, including, without limitation, all applicable federal and state labor la ws (including, without limitation, any applicable requirement to pay prevailing wages).

9 7.2 Site Conditions. All portions of the Property, and any improvements thereon, which are leased to Tenant by Landlord will be leased in an “as is” condition, with no wa rranty, express or implied, by Landlord as to the condition of the soil, its geology, or the presence of known or unknown faults or the presence of any Hazardous Materials, and it will be the sole responsibility of Tenant, at Tenant’s expense, to investiga te and determine the soil conditions of the Property and the suitability of the Property for the development of the Project. If the soil conditions of the Property, or any part thereof, are not in all respects entirely suitable for the use or uses to which the Property will be put, then it is the sole responsibility and obligation of Tenant to take such action as may be necessary to place the Property and the soil conditions thereof in all respects in a condition entirely suitable for the development o f the Property as described in the DDA and the Scope of Development, which may include demolition, clearing, or moving buildings, structures, or other improvements, and removal of Hazardous Materials. Tenant hereby releases Landlord and its respective officers, employees, agents and consultants from any and all claims, liabilities, losses, damages, judgments, costs or expenses arising from or connected to any and all matters or statements of fact affecting the Property concerning or related to the physical condition of the Property.

7.3 Governmental Approvals. If requested by Landlord in writing, Tenant covenants and agrees to deliver to Landlord conformed copies of all governmental approvals and permits obtained by Tenant for the construction, alteration or reconstruction of any Improvements upon the Property. In no event shall Tenant commence construction of any Improvements pursuant to the provisions of this Article 7 until Tenant shall have obtained all necessary governmental approvals and permits to so construct such Improvements. Landlord and Tenant shall cooperate to provide timely information regarding the Project to the plaintiff pursuant to the settlement of certain previously pending and now settled litigation concerning the Project.

7.4 Notice of Non -Responsibility. Landlord shall have the right to record and post appropriate notices of non-responsibility on the Property as may be provided by applicable law.

7.5 Notice of Completion. On completion of construction of the Improvements, Tenant shall file or cause to be filed a notice of completion.

7.6 Subsequent Alterations. Tenant may from time to time, at its sole expense, make improvements and other alterations to the Property which Tenant reasonably determines to be beneficial. Tenant shall timely pay any obligation incurred by Tenant with respect to any such alterations or improvements that could become a lien against the Property.

7.7 Indemnification. Tenant hereby agrees, to the fullest extent of the law, to defend, indemnify and hold harmless Landlord and its members, officers, agents, employees and consultants (hereinafter collectively referred to as “ Indemnitees”) from and against any and all loss, damage, cost, expense, liability, claims, demands, suits, reasonable attorneys’ fees and judgments arising directly or indirectly from or in any manner connected to Tenant’s possession, occupancy or use of the Property or arising from or in any manner connected to Tenant’s construction of the Improvements, business, activities, operations, services or work conducted in, on or about the Property regardless of any active or passive negligence by any or all Indemnitees, except as otherwise stated herein.

10 Tenant further agrees to indemnify, defend and hold harmless Indemnitees from and against all loss, damage, cos ts, expense, liability, claims, demands, suits, reasonable attorneys’ fees and judgments arising from or in any manner connected to the furnishing or supplying of any work, services, materials, equipment or supplies to Tenant or on Tenant’s behalf by any p ersons, firms, corporations or other entities in, on or about the Property.

Indemnitees will be entitled to recovery of attorneys’ fees incurred as a result of Tenant’s failure to provide the defense and indemnity required by this Section 7.7. This Section will survive the expiration or termination of this Lease.

ARTICLE 8. USE OF THE PROPERTY, HAZARDOUS MATERIALS, AND

NONDISCRIMINATION

8.1 No Use of Hazardous Materials on the Property. Tenant covenants and agrees that it shall not use, store, dispose , release, handle or otherwise manage Hazardous Materials on the Property except in connection with any construction, rehabilitation, operation, maintenance or repair of the Improvements or in the ordinary course of its business, and that such conduct shall be done in compliance with all applicable federal, state and local laws.

8.2 Notice and Remediation by Tenant . Tenant shall promptly give the Landlord written notice of any release of any Hazardous Materials, and/or any notices, demands, claims or orders received by Tenant from any governmental agency pertaining to Hazardous Materials which may affect the Property.

8.3 Sub-Tenants. No action by any Sub-Tenant in violation of its sublease shall constitute a cause to terminate th is Lease provided that Tenant pursues its available remedies against such Sub-Tenant.

8.4 Nondiscrimination. Tenant covenants by and for itself, its successors and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in Government Code Section 12955(a) and (d), as those bases are defined in Sections 12926, 12926.1, 12955(m) and (p)(1), and 12955.2, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, nor shall Tenant, or any person claiming under or through Tenant, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of Tenants, Sub-Tenants, or vendees in the Property. Notwithstanding the foregoing, with respect to familia l status, the foregoing shall not be construed to apply to housing for older persons, as defined in Government Code Section 12955.9 . With respect to familial status, nothing herein shall be construed to affect Civil Code Sections 51.2, 51.3, 51.4,

51.10, 51.11 and 799.5, relating to housing for senior citizens. Civil Code Section 51(d) and 1360, and Government Code Section 12955 (n), (o) and (p) shall apply to this Section 8.4.

8.5 Form of Nondiscrimination and Nonsegregation Clauses. All leases and contracts made or entered into by Tenant, its successors or assigns, as to any portion of the Property shall contain the following language:

11 8.5.1 In leases: “(1) Tenant herein covenants by and for itself, its successors and assigns, and all persons claiming under or through them that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in Government Code Section 12955(a) and (d), as those bases are defined in Sections 12926, 12926.1, 12955(m) and (p)(1), and 12955.2, in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the premises herein leased nor shall the Tenant or a ny person claiming under or through the Tenant, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location , number, use or occupancy of Tenants , Sub- Tenants, or vendees in the premises herein leased. (2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in Government Code Section 12955 .9. With respect to familial status, nothing in paragraph (1) shall be construed to affect Civil Code Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5, relating to housing for senior citizens. Civil Code Section 51(d) and 1360, and Government Code Section 12955(n), (o), and (p) shall apply to paragraph (1).”

8.5.2 In contracts: “(1) There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in Government Code Section 12955(a) and (d), as those bases are defined in Sections 12926, 12926.1, 12955(m) and (p)(1), and 12955.2, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property nor shall the transferee, or any person claiming under or through the transferee, establish or permit any such practice or practices of discrimination or segreg ation with reference to the selection, location, number, use or occupancy of Tenants, Sub-Tenants, or vendees in the premises herein leased. (2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in Government Code Section 12955.9. With respect to familial status, nothing in paragraph (1) shall be construed to affect Civil Code Sections 51.2, 51.3, 51.4, 51 .10, 51.11, and 799.5, relating to housing for senior citizens .

Civil Code Section 51(d) and 1360, and Government Code Section 12955 (n), (o), and (p) shall apply to paragraph (1).”

8.6 Effect and Duration of Covenants . The covenants established in this Article shall, without regard to technical classification and designation, be binding on Tenant and any successor in interest to the Property, or Tenant's leasehold interest therein, or any part thereof, for the benefit and in favor of the Landlord, until the expiration of the Term, except to the extent said covenant expressly provides that it shall survive the expiration of the Term.

8.7 Use of the Property. Tenant will use the Property solely for the construction of the Project, in accordance with this Lease and the DDA, including the Scope of Development, and for the maintenance and operation of the Project in accordance with this Lease, the Density Bonus Agreement and the Regulatory Agreement. Accordingly, the rental, use, occupancy, eligibility of tenants, affordable rent, and allocation of units shall all be in accordance with the Density Bonus Agreement and the Regulatory Agreement.

ARTICLE 9. INSURANCE

9.1 Tenant's Insurance. Without limiting Landlord's right to indemnification, Tenant shall secure and maintain insurance coverage as set forth in this Article.

12 9.2 Commercial General and Automobile Liabili ty Worker's Com pensation.

Commencing on the Commencement Date and continuing througho ut the Term of this Lease, Tenant shall procure and maintain, at its sole cost and expense, in a form and content satisfactory to the Landlord and City, the following policies of insurance:

9.2.1 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 Ten Million Dollars ($10,000,000); (ii) products -completed operations aggregate limit of Three Million Dollars ($3,000,000); (iii) personal and advertising injury limit of One Million Dollars ($1,000,000); and (iv) each occurrence limit of One Million Dollars ($1,000,000). Said policy shall include the following coverages: (I) blanket contractual liability (specifically covering the indemnification clause contained in Section 9.8, 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.

9.2.2 A policy of worker 's compensation insurance in such amount as will fully comply with the laws of the State of Californ ia and which shall indemnify, insure, and provide legal defense for Landlord and Tenant against any loss, claim, or damage arising from any injuries or occupational diseases occurring to any worker employed by or any persons retained by Tenant in the cours e of carrying out the work or services contemplated in this Lease, 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.

9.2.3 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.

9.3 Property; Business Interruption; Boiler and Machinery Insurance .

Commencing on the date Landlord issues a Release of Construction Covenants for the Project and continuing throughout the term of this Lease, Tenant shall procure and maintain, at its sole cost and expense, in a form and content satisfactory to the Landlord, the following insurance:

9.3.1 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 Orange 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 Ora nge and Los Angeles. Landlord shall be a loss payee under such policy or policies and such insurance shall contain a replacement cost endorsement.

9.3.2 Business interruption and extra expense insurance to protect Tenant and Landlord 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,

13 or destruction of, any part of the insurable real property structures or equipment a s 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.

9.3.3 Boiler and machinery insurance in the aggregate amount of the full replacement value of the equipment typically covered by such insurance.

9.4 Contractor Insurance Requirements. Tenant 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 Article.

9.5 Additional Requirements. The following additional requirements shall apply to all of the above policies of insurance:

9.5.1 All of the above policies of insurance shall be primary insurance and, except the Worker's Compensation, Employer Liability insurance, and automobile liabil ity insurance, shall name Landlord and its respective officers, officials, members, employees, agents, and representatives (collectively , "Landlord 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 Landlord 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 Landlord. In the event any of said policies of insurance are cancelled, Tenant shall, prior to the cancellation date, submit new evidence of insurance in conformance with this Section to the Landlord. Not later than the Commencement Date, Tenant shall provide the Landlord 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 Landlord.

9.5.2 The policies of insurance required by this Lease shall be satisfactory only if issued by companies of recognized good standing authorized to do busines s 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 Landlord due to unique circumstances.

9.5.3 Tenant agrees that the provisions of this Section shall not be construed as limiting in any way Landlord's right to indemnification or the extent to which Tenant may be held responsible for the payment of damages to any pe rsons or property resulting from Tenant's activities or the activities of any person or persons for which Tenant is otherwise responsible.

9.5.4 Subject to the prior written approval of Landlord given in the sole and absolute discretion of Landlord, Tenant may propose the use of a “wrap” policy that reasonably replaces one or more of the tiers of coverage described herein by a master policy administered by Tenant, so long as this does not diminis h or adversely affect the protections to be provided to the Landlord by the insurance otherwise required by this Article 9.

14 9.6 Remedies for Defaults Regarding Insurance. In addition to any other remedies Landlord may have if Tenant fails to provide or maintain any insurance polic ies or policy endorsements to the extent and within the time herein required, Landlord may, at its sole option, after thirty (30) days’ Notice to Tenant:

9.6.1 Obtain such insurance and charge Tenant the amount of the premium for such insurance, in which event Tenant shall promptly remit such sum to Landlord;

9.6.2 Withhold any payment(s) which become due to Tenant hereunder until Tenant demonstrates compliance with the requirements hereof; and

9.6.3 Declare Tenant in Default and exercise its rights and remedies under this Lease.

Exercise of any of the above remedies, however, is an alternative to other remedies Landlord may have and is not the exclusive remedy for T enant's failure to maintain insurance or secure appropriate endorsements.

Nothing herein contained shall be construed as limiting in any way the extent to which Tenant may be held responsible for payment of damages to persons or property resulting from Tenant's contractors or any subcontractor's performance under this Lease.

ARTICLE 10. MAINTENANCE; REPAIRS; ALTERATIONS; RECONSTRUCTION

Throughout the Term, Tenant shall, at Tenant's sole cost and expense, maintain the Property and the Improvements in good condition and repair, ordinary wear and tear excepted, and in accordance with all applicable federal, state and local laws, ordinances and regulations of governmental agencies having jurisdiction.

ARTICLE 11. OWNERSHIP OF AND RESPONSIBILITY FOR IMPROVEMENTS

11.1 Ownership During Term.

11.1.1 Improvements. All Improvements on the Property as permitted or required by this Lease shall, during the Term, be and remain the property of Tenant in fee title, and Landlord shall not have title thereto.

11.1.2 Personal P roperty. All personal property, furnishings, fixtures and equipment, including, without limitation, Tenant -owned appliances, which are not so affixed to the Property or the buildings thereon as to require substantial damage to the buildings upon removal thereof shall constitute personal property including, but not limited to: (a) functional items related to the everyday operations of the Property; (b) personal property furnishings, fixtures and equipment of the nature or type deemed by law as permanently resting upon or attached to the buildings or land by any means, including, without limitation, cement, plaster, nails, bolts or screws, or essential to the ordinary and convenient use of the Property and the Improvements. At any time during the Term and at termination thereof, Tenant shal l have the right to remove any

15 and all such personal property, furnishings, fixtures and equipment; provided that Tenant repairs any damage to the Property or the Improvements caused by such removal.

11.1.3 Basic Building Systems. For purposes of this Lease, the personal property, furnishings, fixtures and equipment described in this Section 11.1 shall not include those major building components or fixtures necessary for operation of the basic building systems such as, but not limited to, the elevators, plumbing, sanitary fixtures, heating and central air-cooling system.

11.2 Ownership at Expiration or Termination.

11.2.1 Property of Landlord. At the expiration or earlier termination of the Term, except as provided in Section 11.2.2, all Improvements which constitute or are a part of the Property shall become the property of Landlord.

11.2.2 Removal by Tenant. Tenant shall not be required or permitted to remove the Improvements, or any of them, at the expiration or sooner termination of the Term; provided, however, that subject to the provisions of Section 5.3.2, within thirty (30) days following the expiration or earlier termination of the Term, Tenant may remove all personal property, furniture and equipment.

11.2.3 Unremoved Property. Any personal property, furnishings or equipment not removed by Tenant within thirty (30) days after the expiration or sooner termination of the Term, shall, without compensation to Tenant, become Landlord's property, free and clear of all claims to or against them by Tenant or any third person, firm or entity arising by, through or under Tenant.

11.2.4 Maintenance and Repair of Improvements. Subject to the provisions of this Lease concerning condemnation, alterations and damage and destruction, Tenant agrees to assume full responsibility for the operation and maintenance of the Property and the Improvements and all fixtures and furnishings thereon or therein throughout the Term of the Lease without expense to Landlord, and to maintain and preserve the Property and Improvements in a decent, safe and sanitary condition consistent with all applicable laws. Tenant agrees that Landlord shall not be required to pe rform any maintenance, repairs or services, or to assume any expense not specifically assumed herein in connection with the Property and Improvements unless specifically required under the terms of this Lease.

11.3 Waste. Subject to the alteration rights of Tenant and damage and destruction or condemnation of the Property or any part thereof, Tenant shall not commit or suffer to be committed any waste of the Property or the Improvements, or any part thereof . Tenant agrees to keep the Property and the Improvements clean and clear of refuse and obstructions, and to dispose properly of all garbage, trash and rubbish.

ARTICLE 12. DAMAGE OR DESTRUCTION OF PROPERTY OR IMPROVEMENTS

12.1 Tenant's Repair Obligation.

16 12.1.1 In case of damage to or destruction of the Property or the Improvements, or any part thereof, by fire or other cause at any time during the Term of this Lease, Tenant, if and to the extent sufficient insurance proceeds and reserves are available to restore the Property and each Mortgagee approves t he application of such proceeds to payment of costs of restoration of the Property to the extent such approval is required under such Mortgagee's loan documents, shall restore the same as nearly as possible to condition and character immediately prior to such damage or destruction. Such restoration shall be commenced with due diligence and in good faith, and prosecuted with due diligence and in good faith, unavoidable delays excepted. If, in case of damage to or destruction of the Property or the Improvements and with consent and approval of each Mortgagee, Tenant elects to terminate this Lease, Tenant shall provide Landlord with written notice of such election within ninety (90) days of the date such damage or destruction occurs, Tenant shall clear the Property of the damaged Improvements and any debris, and this Lease shall immediately terminate concurrently with Landlord's receipt of such election.

12.2 Tenant's Restoration of Premises.

12.2.1 If, during the Term, the Improvements are damaged or destroyed, Tenant shall make the loss adjustment with the insurance company insuring the loss . The proceeds shall be paid directly to the Mortgagee, if any, whose Mortgage is first in priority of lien for application in accordance with the provisions of s uch Mortgage (notwithstanding anything else in this Lease to the contrary), and if there is not a Mortgagee, to Tenant for the purpose of making the restoration of the Improvements in accordance with this Article.

12.2.2 Both parties shall promptly execute all d ocuments and perform all acts reasonably required by the Insurance Trustee to perform its obligations under this Section 12.2.

12.3 Procedure for Restoring Improvements.

12.3.1 The restoration shall be accomplished as follows:

(a) Tenant shall complete the restoration within twenty -four (24) months after final plans and specifications and working drawings have been approved by the appropriate government bodies and all required permits have been obtained.

(b) Tenant shall retain a licensed contractor that is bendable. During the construction period, the contractor shall be required to carry public liability and property damage insurance, builders risk insurance, standard fire and extended coverage insurance, with vandalism and malicious mischief endorsements in accordance with Article 9.

(c) Tenant shall notify Landlord of the date of commencement of the restoration not later than ten (10) days prior to commencement of restoration to enable Landlord to post and record notices of non-responsibility.

(d) Tenant shall accomplish the restoration in a manner that will cause the least inconvenience, annoyance, and disruption to the Property and the Improvements.

(e) On completion of the restoration, Tenant shall immediately record a notice of completion.

17 12.4 Mortgagee P rotection. The following provisions are for the protection of a Mortgagee and shall, notwithstanding anything contained in this Lease to the contrary, control; provided, however, in the event of any conflict between the terms of this Section and the terms of any Mortgage, the terms of such Mortgage shall prevail:

12.4.1 Insurance. Any insurance proceeds payable from any policy of insurance (other than liability insurance) required by this Lease shall be paid to the Mortgagee, if any, to the extent required by the Mortgage. The Mortgagee, if any, shall have the right to participate in all adjustments, settlements, negotiations or actions with the insurance company regarding the amount and allocation of any such insurance proceeds . Any insurance policies permitted or required by this Lease shall name the Mortgagee, if any, as an additional insured or loss payee, as appropriate, if required by such Mortgage.

12.4.2 Restoration. Tenant shall have no obligation to restore or repair the Improvements following the occurrence of any casualty for which insurance is not required under this Lease. Tenant shall have no obligation to restore or repair damage to the Improvements that cost in excess of available insurance proceeds . In addition, Tenant shall have no obligation to restore or repair damage to the Improvements if the casualty occurs during the last five (5) years of this Lease term . In the event such a loss occurs in the last five years, then, at the election of Tenant, with the prior written consent of the Mortgagee, if any, insurance proceeds shall be used, first, to reduce or pay in full the Mortgage, and, second, to clear the Property of the damaged Improvements and any debris, with any excess being payable as provided in this Lease.

ARTICLE 13. EMINENT DOMAIN

13.1 Notice. The party receiving any notice of the kind specified in this Section 13.1 shall promptly give the other party and each Mortgagee, if any, notice of the receipt, contents and date of the notice received. For purposes of this Article, the term "Notice" shall include:

13.1.1 Notice of Intended Taking;

13.1.2 Service of any legal process relating to condemnation of the Property or the Improvements;

13.1.3 Notice in connection with any proceedings or negotiations with respect to such condemnation; or

13.1.4 Notice of intent or willingness to make or negotiate a private purchase, sale or transfer in lieu of condemnation.

13.2 Representation in Proceedings or Negotiations. Landlord and Tenant shall each have the right to represent their respective interests in each proceeding or negotiation with respect to a Taking or intended Taking and to make full proof of their claims. No agreements or settlement with or sale or transfer to the condemning authority shall be made without the consent of Tenant.

18 Landlord and Tenant each agree to execute and deliver to the other any instruments which may be required to effectuate or facilitate the provisions of this Lease relating to condemnation.

13.3 Total Taking.

13.3.1 In the event of a Total Taking, this Lease shall terminate as of the date of the Taking.

13.3.2 If this Lease is terminated pursuant to this Section 13.3, the Award for such Taking shall be apportioned and distributed as follows:

(a) First, to the Mortgagee, if any, whose Mortgage is first in priority of lien to the extent of such Mortgage and then to other Mortgagees in the order of priority of lien of their respective Mortgages;

(b) Second, to Landlord, a sum equal to the fair market va lue of Landlord's fee interest in the Property (subject to the remaining Term and the rent reserved) on the date immediately preceding the Taking or threat of condemnation, as determined by the appraisal method set forth in Article 14;

(c) Third, to Tenant, a sum equal to the fair market value of the Improvements made by Tenant on the date immediately preceding the Taking as determined by the appraisal method set forth in Article 14 and determined as if there were no Taking, nor threat of condemnation; plus the residual value of the Term, subject to the rent reserved; plus any part of the Award attributable to the Tax Credits; and

(d) Fourth, to Landlord, the remainder, if any.

13.4 Substantial Taking.

13.4.1 In the event of a Taking which, in Tenant's and Landlord's mutually agreeable judgment is substantial, Tenant may, with the consent and subject to the rights of each Mortgagee, if any, terminate this Lease . For purposes hereof, a Taking shall be deemed "substantial" if it renders the Property economica lly infeasible for Tenant's intended purpose . If Tenant elects to terminate this Lease under this provision, Tenant shall give written notice of its election to do so to Landlord within forty -five (45) days after receipt of a copy of a Notice of Intended Taking. In the event Landlord disputes the right of Tenant to terminate this Lease under this provision, Landlord shall give Tenant notice of this fact within forty -five (45 days) after receiving the notice of Tenant's election to terminate, and the parties shall either raise this issue in the eminent domain proceeding, if any, as an issue with respect to the apportionment of the Award between Landlord and Tenant or, if there is no eminent domain proceeding, pursue other remedies a permitted by Section 19. 2. In the event it is determined that Tenant does not have the right to terminate this Lease, the apportionment of the Award for such Taking and the obligations of Tenant to restore shall be governed by the terms of Section 13.6 or Section 13.7, whichever is applicable.

19 13.4.2 In the event Tenant terminates this Lease in accordance with this Section

13.4, such termination shall be as of the time when the Taking entity takes possession of the portion of the Property and the Improvements taken. In such event, the Award for such Substantial Taking (including any award for severance, consequential or other damages which will accrue to the portion of the Property and/or the Improvements not taken) shall be apportioned and distributed as follows:

(a) First, to the Mortgagee, if any, whose Mortgage is first in priority of lien to the extent of such Mortgage and then to other Mortgagees in the order of priority of lien of their respective Mortgages to the extent of such Mortgages;

(b) Second, to Landlord, a sum equal to the fair market value of Landlord's fee interest in the Property taken (subject to the remaining Term and Rent reserved) on the date immediately preceding the Taking as determined by the appraisal process provided for in Section 14.9 commenced as provided in Section 13.3.2;

(c) Third, to Landlord, a sum equal to the portion of the Award for severance, consequential or other damages which accrued to the portion of Landlord's fee interest in the Property not taken;

(d) Fourth, to Tenant a sum equal to the fair market value of the Improvements made by Tenant taken preceding the date of the Taking as determined by the appraisal process provided for in Article 14, commenced as provided in Section 13.3.2, and as modified by Section 13.6.3; plus the residual value of the Term, subject to the rent reserved; plus any part of the Award attributable to the Tax Credits; and

(e) Fifth, to Landlord, the remainder, if any.

13.5 Tenant's Right to Revoke Notice of Termination. Notwithstanding anything to the contrary contained in Section 13.4, if Tenant has elected to terminate this Lease, and the taking authority abandons or revises the Taking, Tenant shall have forty -five (45) days from receipt of written notice of such abandonment or revision to revoke its notice of termination of this Lease.

13.6 Partial Taking.

13.6.1 In the event of a Partial Taking, this Lease shall continue in full force and effect and there shall be no abatement in or reduction of any of Tenant's obligations hereunder.

13.6.2 The Award for such Partial Taking shall be apportioned and distributed first to the Mortgagee, if any, whose Mortgage is first in priority of lien to the extent of such Mortgage and then to other Mortgagees in the order of priority of lien of their respective Mortgages to th e extent of such Mortgages, then to Landlord and Tenant in proportion to the fair market value of their respective interests in the Property and Improvements, as such interests existed immediately prior to such Partial Taking. Notwithstanding anything contained herein to the contrary, any part of the Award attributable to the Low Income Housing Tax Credit shall belong to Tenant.

20 13.6.3 The fair market value of the parties' respective interests in the Property and the Improvements shall be determined by the appraisal process provided in Article 14, except that the assumptions listed in such Article shall not apply . Rather, the appraisal shall be based on the value of the Property as improved and encumbered by this Lease and on the value of the Improvements as they stand, but without regard to any Taking or threat of condemnation.

13.6.4 Any Award for severance, consequential or other damages which accrues by reason of the Partial Taking to the portion of the Property or the Improvements not taken shall be distributed first to the Mortgagee, if any, to the extent of the Mortgage, then shall be apportioned between Landlord and Tenant in accordance with the diminution in value of their respective interests.

13.7 Obligation to Repair on Partial Taking: Promptly after any Partial Taking, and regardless of the amount of the Award for such Taking, Tenant shall, to the extent of the Award received by Tenant, and in the manner specified in the provisions of this Lease, repair, alter, modify or reconstruct the Improvements and/or other improvements on the Property so as to make them usable for the designated purpose and capable of producing a fair and reasonable net income.

13.8 Temporary Taking.

13.8.1 In the event of a Temporary Taking of the whole or any part of the Property and/or Improvements, the Term shall not be reduced or affected in any way and Tenant shall continue to pay in full any sum or sums of money and charges herein reserved and provided to be paid by Tenant, and, subject to the other provisions of this Section, Tenant shall be entitled to any Award or payment for the temporary use of the Property and/or Improvements prior to the termination of this Lease, and Landlord shall be entitled to any Award or payment for s uch use after the termination of this Lease.

13.8.2 If, after the occurrence of a Temporary Taking, possession of the Property and/or Improvements shall revert to Tenant prior to the expiration of the Term of the Lease, Tenant shall, to the extent of the amount of any award or payment, unless at such time there remains less than five (5) years in the Term, restore the Property and/or Improvements, and in all other respects indemnify and hold Landlord harmless from the effects of such Taking so that the Property and/or Improvements in every respect shall upon completion of such restoration be in the same condition as they were prior to the Taking thereof.

13.8.3 Any Award or payment for damages or cost of restoration made on or after the termination of this Lease shall be paid first to the Mortgagee, if any, to the extent of the Mortgage, then to Landlord absolutely, together with the remaining balance of any other funds paid to Tenant for such damages or cost of restoration . Tenant shall thereupon be excused from any obligation to restore the Property and/or Improvements upon the termination of such Taking except that any obligation that may have accrued for Tenant to restore the Property and/or Improvements prior to the commencement of said Taking shall continue to be the obligation of Tenant.

21 ARTICLE 14. APPRAISAL

Whenever an appraisal of the Property is called for under the terms of this Lease, the parties shall use the following procedure:

14.1 Appointment of Appraiser. Within ten (10) days after notice from Landlord to Tenant or Tenant to Landlord, as the case may be, and in each case with a copy to each Mortgagee, if any, Landlord and Tenant shall each appoint an MAI appraiser to participate in the appraisal process provided for in this Article and shall give written notice thereof to the other party and each Mortgagee, if any. Upon the failure of either party so to appoint, the non­defaulting party shall have the right to apply to the Superior Court of Orange County, California, to appoint an appraiser to represent the defaulting party . Within ten (10) days of the parties' appointment, the two (2) appraisers shall jointly appoint a third MAI appraiser and give written notice thereof to Landlord and Tenant, with a copy to each Mortgagee, if any, or if within ten (10) days of the appointment of said appraisers the two (2) appraisers shall fail to appoint a third, then either party hereto shall have the right to make application to said Superior Court to appoint such third appraiser.

14.2 Determination of Fair Market Value.

14.2.1 Within thirty (30) days after the appointment of the third appraiser, the appraisers shall determine the fair market value of the Property and the Improvements in accordance with the provisions hereof, and shall execute and acknowledge their determination of fair market value in writing and cause a copy thereof to be delivered to each of the parties hereto.

14.2.2 The appraisers shall determine the fair market value of the Property and the Improvements as of the date of Landlord 's notice referred to in Section 14.1, based on sales of comparable property in the area in which the Property is located. If, however, in the judgment of a majority of the appraisers , no such comparable sales are available, then the appraisal shall be based on the following assu mptions: (i) that the Property is free and clear of this Lease, and all easements and encumbrances; and (ii) that the Property is available for immediate sale and development for the purposes and at the density and intensity of development permitted under the zoning, subdivision and land use planning ordinances and regulations applicable to the Property in effect on the Commencement Date of this Lease, and any changes or amendments thereto or modification or variance from the provisions thereof or condition al use permits which could reasonably be anticipated to have been granted or approved as of the date of this Lease .

Notwithstanding anything contained herein to the contrary, if the appraisal, for the particular purposes for which it is being done, should reasonably reflect the rent restrictions imposed on the Property pursuant to the Regulatory Agreement attached hereto as Exhibit E and/or the Tax Credit Program, then such rent restrictions shall be taken into consideration by the appraisers.

14.2.3 If a majority of the appraisers are unable to agree on fair market value within thirty (30) days of the appointment of the third appraiser, the three (3) appraisals shall be added together and their total divided by three (3). The resulting quotient shall be the fair market value of the Property and the Improvements . If, however, the low appraisal and/or high appraisal is or are more than ten percent (10%) lower and/or higher than the middle appraisal, the low and/or high

22 appraisal shall be rounded up/down to ten percent (10%) lower or higher than the middle appraisal and the three appraisals shall thereafter be divided by three (3).

14.3 Payment of Fees . Each of the parties hereto shall (a) pay for the services of its appointee, (b) pay one-half (1/2) of the fee charged by the appraiser selected by their appointees, and (c) pay one-half (1/2) of all other proper costs of the appraisal.

ARTICLE 15. ASSIGNMENT

15.1 Prohibition Against Transfer During the Term. Because of the importance that Landlord places on Tenant's qualification, expertise and identity, and the reliance Landlord makes upon Tenant's ability to construct and operate the Project, during the Term except for Permitted Transfers and otherwise as provided pursuant to Article 16, Tenant shall not assign or attempt to assign this Lease or any right herein. For purposes hereof, the following transfers shall be deemed to be "Permitted Transfers" for purposes of the Lease:

15.1.1 A conveyance of a security interest in Tenant's leasehold estate in the Property in connection with any Mortgage and any subsequent transfer of title to such leasehold estate by foreclosure, deed or other conveyance in lieu of foreclosure in connection therewith to a Mortgagee or an affiliate of a Mortgagee, and thereafter the first transfer to an unaffiliated person;

15.1.2 The removal of the one or more of the general partners of the Tenant for cause in accordance with Tenant's partnership agreement and replacement of said within 90 days from the date the general partner is removed, which replacement shall be subject to the prior written consent of the Landlord, which consent shall not be unreasonably withheld, delayed, or conditioned;

15.1.3 The sale and/or assignment of the Tenant's limited partner, the "Equity Partner's" limited partnership interest in Tenant;

15.1.4 Subject to the restrictions imposed by the Regulatory Agreement attached hereto as Exhibit E, the rental or lease for occupancy of each of the apartment units in the Project to income qualified households at the defined affordable rents;

15.1.5 The granting of easements or permits to facilitate development of the Property in accordance with this Agreement;

15.1.6 In addition, the withdrawal, removal and/or replacement of any managing member of Tenant's limited liability company or general partne r of Tenant's partnership, as the case may be, pursuant to the terms of the Tenant's partnership agreement, as the case may be, shall not constitute a default hereunder, provided that any required substitute member or general partner, as the case may be, i s reasonably acceptable to Landlord and is selected with reasonable promptness;

15.1.7 Any transfer approved in writing by the Landlord; and

23 15.1.8 The transfer by Tenant of the leasehold estate in the Property to a limited liability company or limited p artnership established for the purpose of owning, developing and operating the Property, in which Tenant is a general partner or member and the Equity Partner is the investor limited partner or investor member.

15.2 Other Rights of Mortgagees. Landlord agrees that nothing in this Lease shall be construed to limit or abrogate the rights of a Mortgagee to (a) seek the appointment of a receiver, or (b) delegate or assign its rights under this Lease to any third party in connection with the exercise of said Mortgagee's rights and remedies under its Mortgage.

ARTICLE 16. MORTGAGES

16.1 Leasehold Mortgages.

16.1.1 General Provisions. At all times during the Term, Tenant shall have the right to mortgage, pledge, deed in trust, assign rents, issues and profits and/or collaterally (or absolutely for purposes of security if required by any Mortgagee) assign its interest in this Lease (but in no event Landlord's fee interest in the Property), or otherwise encumber this Lease, and/or the interest of Tenant hereunder, in whole or in part, and any interests or rights appurtenant to this Lease, and to assign or pledge the same as security for any debt (the holder of any such mortgage, pledge or other encumbrance, and the beneficiary of any such deed of trust being hereafter referred to as "Mortgagee" and the mortgage, pledge, deed of trust or other instrument hereafter referred to as "Mortgage"), upon and subject to each and all of the following terms and conditions:

(a) Any permitted Mortgages entered into by Tenant are to be originated only by lenders approved in writing by Landlord, which approval will not be unreasonably withheld. Landlord shall state the reasons for any such disapproval. Notwithstanding the forgoing, Landlord shall be deemed to have automatically approved (i) a commercial or savings bank, a trust company, an insurance company, a savings and loan association, a building and loan association, an educational institution, or a pension, retirement or welfare fund; or (ii) any governmental agency or quasi-governmental agency, including, without limitation, the City of Orange, the County of Orange, or the State of California. Tenant may change the existing financing on this Property, by paying off any existing permitted Mortgage with the proceeds of a new Mortgage o r adding one or more mortgages to the existing Mortgage without the consent of Landlord . Notwithstanding the foregoing, if at any time after the Commencement Date, Tenant wishes to refinance the Project using the proceeds generated by the sale of Low Inco me Housing Tax Credits, Landlord reserves the right to approve the terms of any such refinancing.

(b) All rights acquired by said Mortgagee shall be subject to each and all of the covenants, conditions and restrictions set forth in this Lease, and to all rights of Landlord thereunder, none of which covenants, conditions and restrictions is or shall be waived by Landlord by reason of the giving of such Mortgage.

(c) If Tenant encum bers its leasehold estate by way of a Mortgage as permitted herein, and if Landlord is advised in writing of the name and address of the Mortgagee, then this Lease shall not be terminated or canceled on account of any Event of Default by Tenant

24 in the performance of the terms, covenants or conditions hereof, nor shall Landlord be entitled to exercise any other remedies under Section 19.2, until Landlord shall have complied with the provisions of Section 16.2 as to the Mortgagee's rights to cure and to obtain a New Lease.

16.1.2 Consent of Mortgagee Required. No cancellation, surrender, termination, or modification of this Lease shall be effective without the written consent of the holder of any Mortgage.

16.2 Rights and Obligations of Leasehold Mortgagees. If Tenant or Tenant's successors or assigns shall mortgage the leasehold interest herein demised, then, as long as any such Mortgage shall remain unsatisfied of record, the following provisions shall apply:

16.2.1 No Cancellation. Landlord will not cancel, accept a surrender of, terminate or modify this Lease without the prior consent in writing of the Mortgagee.

16.2.2 Notice of Defaults. Landlord agrees to give Mortgagee immediate notice of all defaults by Tenant under this Lease, and to simultaneously give to Mortgagee a written copy of all notices and demands that Landlord gives to Tenant. No notice or demand under this Lease shall be effective until after notice is received by Mortgagee . Any notices of default given by Landlord under this Lease shall describe the default(s) with reasonable detail . Mortgagee shall have the right to cure any breach or default within the time periods given below.

16.2.3 Mortgagee's Cure Rights.

(a) Notice and Cure . After receipt by Tenant of a notice of default under this Lease and the expiration of any applicable period of cure given to Tenant under this Lease, Landlord shall deliver an additional notice ("Mortgagee's Notice") to Mortgagee specifying the default and stating that Tenant's period of cure has expired . Mortgagee shall thereupon have the additional periods of time to cure any uncured default, as set forth below, without payment of default charges, fees, late charges or interest that might otherwise be payable by Tenant. Landlord shall not terminate this Lease or exercise its other remedies under this Lease if:

(i) Within 90 days after Mortgagee's receipt of the Mortgagee's Notice, Mortgagee (i) cures the default, or (ii) if the default reasonably requires more than 90 days to cure, commences to cure said default a nd diligently prosecutes the same to completion, but in no event later than 180 days after Mortgagee’s receipt of the Mortgagee’s Notice; or

(ii) Where the default cannot be cured by payment or
expenditure of money or without possession of the Property or othe rwise, Mortgagee initiates foreclosure or other appropriate proceedings within 90 days after receipt of the Mortgagee's Notice, cures all other defaults, complies with all other covenants and conditions of this Lease, and continues to pay all rents, real property taxes and assessments, and insurance premiums to be paid by Tenant under this Lease. Mortgagee shall then have 120 days following the later to occur of (i) the date of execution and delivery of a new lease of the Property pursuant to Section 16.2. 4 (a "New Lease"), or (ii) the date on which Mortgagee or its nominee is able to occupy the Property following eviction of or vacating by Tenant under this Lease, to cure such default; provided, however, that if any such default, by its nature, is such tha t it cannot practicably be cured within

25 120 days, then Mortgagee shall have such time as shall be reasonably necessary to cure the default provided that Mortgagee commences such cure within such 120 -day period and thereafter diligently prosecutes the cure to completion, but in no event later than one (1) year following such occupancy.

(b) Landlord agrees to accept performance by Mortgagee of all cures, conditions and covenants as though performed by Tenant, and agrees to permit Mortgagee access to the Property to take all such actions as may be necessary or useful to perform any condition or covenants of this Lease or to cure any default of Tenant.

(c) If Mortgagee elects any of the above-mentioned options, then upon Mortgagee's acquisition of this Lease by foreclosure, whether by power of sale or otherwise or by deed or assignment in lieu of foreclosure, or if a receiver be appointed, this Lease shall continue in full force and effect, provided that, if Mortgagee elects the option provided in Section

16.2.3(a)(ii), then upon Mortgagee's acquisition of this Lease, Mortgagee shall cure all prior defaults of Tenant under this Lease within the time set forth in said Section, and Landlord shall treat Mortgagee as Tenant under this Lease . If Mortgagee comme nces an action as set forth in Section 16.2 .3(a)(ii), and thereafter Tenant cures such defaults (which cure Landlord shall be obligated to accept) and Mortgagee then terminates all proceedings under the option in said Section, then this Lease shall remain in full force and effect between Landlord and Tenant.

16.2.4 New Lease. In the event this Lease is terminated for any reason prior to the end of this Lease Term, Landlord shall enter into a new lease ("New Lease") with Mortgagee or Mortgagee's nominee covering the Property, provided that Mortgagee (a) requests such New Lease by written notice to Landlord within ninety (90) days after written notice by Landlord of termination of this Lease, and (b) cures all prior defaults of Tenant that are reasonably capable of being cured by Mortgagee. The New Lease shall be for the remainder of this Lease Term, effective at the date of such termination, and shall include all the rents and all the covenants, agreements, conditions, provisions, restrictions and limitations contained in this Lease. In connection with a New Lease, Landlord shall assign to Mortgagee or its nominee all of Landlord's interest in all existing subleases of all or any part of the Property and all attornment given by the Sub-Tenants.

Landlord shall not terminate or agree to terminate any sublease or enter into any new lease or sublease for all or any portion of the Property without Mortgagee's prior written consent, unless Mortgagee fails to timely deliver its request for a New Leas e under this Section . In connection with any such New Lease, Landlord shall, by grant deed, convey to Mortgagee or its nominee title to the Improvements, if any , which become vested in Landlord as a result of termination of this Lease. Landlord shall allow to the Tenant under the New Lease a credit against rent equal to the net income derived by Landlord from the Property during the period from the date of termination of this Lease until the date of execution of the New Lease under this Section.

16.2.5 Security Deposits. Mortgagee or any other purchaser at a foreclosure sale of the Mortgage (or Mortgagee or its nominee if one of them enters into a New Lease with Landlord) shall succeed to all the interest of Tenant in any security or other deposits or other impound payments paid by Tenant to Landlord.

16.2.6 Permitted Delays. So long as Mortgagee is prevented by any process or injunction issued by any court or by any statutory stay, or by reason of any action by any court having jurisdiction of any bankruptcy or insolvency proceeding involving Tenant , from

26 commencing or prosecuting foreclosure or other appropriate proceedings in the nature thereo f, Mortgagee shall not be deemed for that reason to have failed to commence such proceedings or to have failed to diligently prosecute such proceedings, provided that Mortgagee uses reasonable efforts to contest and appeal the issuance or continuance of any such process, stay or injunction.

16.2.7 Defaults Deemed Cured. On transfer of this Lease at any foreclosure sale under the Mortgage or by deed or assignment in lieu of foreclosure, or upon creation of a New Lease, any or all of the following defaults relating to the prior owner of this Lease shall be deemed cured:

(a) Attachment, execution or other judicial levy upon this Lease;

(b) Assignment of this Lease for the direct or indirect benefit of creditors of the prior Tenant;

(c) Judicial appointment of a receiver or similar officer to take possession of this Lease;

(d) Filing any petition by, for or against Tenant under any chapter of the federal Bankruptcy Act or any federal or state debtor relief statute, as amended;

(e) Any failure by Tenant to make a disclosure of a hazardous substance release as required by the California Health and Safety Code, this Lease or otherwise; and

(f) Any other defaults personal to Tenant and/or not otherwise reasonably curable by Mortgagee.

16.2.8 Anything herein contained to the contrary notwithstanding , the provisions of this Section shall inure only to the benefit of the holders of Mortgages . If the holders of more than one such Mortgage shall make written requests upon Landlord in accordance with this Lease, the new lease (as provided for in Section 16.2.4) shall be entered into pursuant to the request of the holder whose Mortgage shall be prior in lien thereto and thereupon the written requests for a new lease of each holder of a Mortgage junior in lien shall be and be deemed to be void and of no force or effect.

16.3 Landlord's Forbearance and Right to Cure Defaults on Leasehold Mortgages.

16.3.1 Notice. Landlord will give to any Mortgagee, at such address as is specified by the Mortgagee in accordance with Section 23.1, a copy of each notice or other communication with respect to any claim that a default exists or is about to exist from Landlord to Tenant hereunder at the time of giving such notice or communication to Tenant , and Landlord will give to the Mortgagee a copy of each notice of any rejection of this Lease by any trustee in bankruptcy of Tenant; provided, however, that a failure by Landlord to provide any such notice to Mortgagee shall not excuse a default by Tenant or extend Tenant's time to perfo rm its obligations hereunder or effectuate a cure of said default. Each such notice to a Mortgagee shall be given by U.S. certified mail, postage prepaid, return receipt requested, and shall be effective upon receipt.

27 16.3.2 Mortgagee's Transferees, Etc. In the event the leasehold estate hereunder shall be acquired by foreclosure, trustee's sale or deed or assignment in lieu of foreclosure of a Mortgage, the purchaser at such sale or the transferee by such assignment and its successors as holders of the leasehold estate hereunder shall not be liable for any rent, if any, or other obligations accruing after its or their subsequent sale or transfer of such leasehold estate and such purchaser or transferee and its successors shall be entitled to transfer such estate or interest without consent or approval of Landlord; provided that, the purchaser or transferee or successor as holder of the leasehold estate hereunder shall be liable for the payment of all rent, if any, becoming due with respect to the period during which such purchaser, transferee or other successor is the holder of the leasehold estate hereunder . This Section shall also apply to the rights of a Mortgagee in connection with the entry into a New Lease under Section 16 .2.4 and to the appointment of a receiver on behalf of a Mortgagee.

16.4 No Liability of Mortgagee for Prior Indemnified A cts. A Mortgagee shall not be obligated to assume the liability of Tenant for any indemnities arising for a period prior to Mortgagee's acquiring the right to possession of the Property under this Lease.

16.5 Landlord Cooperation. Landlord covenants and agrees that it will act and fully cooperate with Tenant in connection with Tenant's right to grant leasehold mortgages as hereinabove provided. At the request of Tenant or any proposed or existing Mortgagee, Landlord shall promptly execute and deliver (i) any documents or instruments reasonably requested to evidence, acknowledge and/or perfect the rights of Mortgagees as herein provided; and (ii) an estoppel certificate certifying the status of this Lease and Tenant's interest herein and such matters as are reasonably requested by Tenant or such Mortgagees. Such estoppel certificate shall include, but not be limited to, certification by Landlord that (a) this Lease is unmodified and in full force and effect (or, if modified, state the nature of such modification and certify that this Lease , as so modified, is in full force and effect), (b) all rents currently due under this Lease have been paid, (c) there are not, to Landlord's knowledge, any uncured Events of Default on the part of Tenant under this Lease or facts, acts or omissions which with the giving of notice or passing of time, or both, would constitute an Event of Default . Any such estoppel certif icate may be conclusively relied upon by any proposed or existing leasehold Mortgagee or assignee of Tenant's interest in this Lease.

16.6 Landlord Mortgages. Landlord's fee interest in the Property shall be senior to, and not be subordinated to, any financin g obtained by Tenant in connection with the Property .

Landlord shall not encumber, pledge or otherwise convey as security its fee estate in the Property unless all holders of any such encumbrance, pledge or other security expressly agree to be subject to and bound by the terms of this Lease and that no foreclosure or other enforcement of such encumbrance, pledge or other security will disturb or effect this Lease or the rights of any Mortgagee hereunder.

16.7 Claims. Landlord and Tenant shall deliver to Mortgagee notice of any litigation or arbitration proceedings between the parties or involving the Property or this Lease . Mortgagee shall have the right, at its option, to intervene and become a party to any such proceedings . If Mortgagee elects not to intervene or become a party, Landlord shall deliver to Mortgagee prompt

28 notice of and a copy of any award, decision or settlement agreement made in connection with any such proceeding.

16.8 Further Amendments. Landlord shall, subject to the covenants, terms and conditions of this Lease and its attachments, reasonably consider including in this Lease by suitable amendment from time to time any provision which may be reasonably requested by any proposed Mortgagee for the purpose of implementing the mortgagee protection provisions contained in this Lease and allowing that Mortgagee reasonable means to protect or preserve the lien of its Mortgage upon the occurrence of a default under the terms of this Lease. Landlord and Tenant each agree to execute and deliver (and to acknowledge for recording purposes, if necessary) any agreement required to effect any such amendment.

16.9 Bankruptcy of Landlord. In the event that Landlord shall become subject to any bankruptcy or insolvency proceeding, any rights, elections, or actions available to Tenant therein shall be subject to the rights of each Mortgagee, if any, under the Mortgage to consent to, or to exercise on behalf of Tenant, such rights, elections, or actions. Without limiting the foregoing, no consent or acquiescence by Tenant to any rejection of this Lease by Landlord or any successor or trustee in such proceeding shall be binding or effective without the prior, written consent thereto by each Mortgagee, if any, and the rights, liens, and claims of each Mortgagee shall extend to, encumber, and include all rights to damages for any such rejection and all rights to continued possession of the Property.

16.10 Transfer Rights. Foreclosure of any permitted Mortgage, or any sale thereunder, whether by judicial proceedings or by virtue of any power contained in the Mortgage, or any conveyance of the leasehold estate hereunder from Tenant to any Mortgagee or an aff iliate of Mortgagee or entity controlled by Mortgagee, through, or in lieu of, foreclosure or other appropriate proceedings in the nature thereof, shall not require the consent of Landlord or constitute a breach of any provision of or a default under this Lease, and upon such foreclosure, sale or conveyance, Landlord shall recognize the purchaser or other transferee in connection therewith as Tenant hereunder . Any further assignments shall require the approval of Landlord, which shall not unreasonably be withheld, conditioned, or delayed.

ARTICLE 17. SUBLEASING

17.1 Subleasing of Property . All subleases ("Subleases") made by Tenant shall be subject to the following provisions and restrictions:

17.1.1 Tenant may sublease individual apartment units to any tenant or household who qualifies, and any commercial or office space to a Sub-Tenant, without the consent of Landlord.

17.1.2 On any termination of this Lease prior to the expiration of the Term, all of Tenant's interest as Sub-Landlord under any and all existing valid and enforceable Subleases shall be deemed automatically assigned, transferred and conveyed to Landlord . Landlord shall thereafter be bound on such Subleases to the same extent Tenant, as Sub-Landlord, was bound

29 thereunder for all liabilities arising from and after the date of such assignment and Landlord shall have all the rights under such Subleases that Tenant, as Sub-Landlord, had under such Subleases.

17.1.3 Any Sub-Tenant qualifying shall, upon written request, receive a non - disturbance agreement from Landlord.

17.2 Nondisturbance A greements. Upon request, Landlord shall execute nondisturbance agreements with any Sub-Tenant, which nondisturbance agreement shall provide that so long as such Sub-Tenant has not defaulted under the terms of the Sublease, such Sub- Tenant's rights will not be terminated by Landlord on Landlord's exercise of Landlord's right to terminate this Lease for Tenant's breach.

ARTICLE 18. PERFORMANCE OF TENANT'S COVENANTS

18.1 Right of Performance. If Tenant shall at any time fail to pay any Imposition or other charge in accordance with Article 4 within the time period therein permitted, then Landlord, after thirty (30) days' written notice to Tenant and without waiving or releasing Tenant from any obligation of Tenant hereunder, may (but shall not be required to) pay such Imposition or other charge payable by Tenant pursuant to the provisions of Article 4.

18.2 Reimbursement and Damages . All sums so paid by Landlord shall constitute additional rent payable by Tenant under this Lease and shall be paid by Tenant to Landlord on demand.

ARTICLE 19. EVENTS OF DEFAULT; REMEDIES

19.1 Events of Default. Any one or all of the following events shall constitute an Event of Default hereunder:

19.1.1 If Tenant shall default in the payment of any Rent or other liquidated sums payable hereunder when and as the same becomes due and payable and such default shall continue for more than ten (10) days after Landlord shall have given written notice thereof to Tenant; or

19.1.2 The abandonment or vacation of the Property by Tenant for a period of thirty (30) consecutive days; or

19.1.3 The entry of any decree or order for relief by any court with r espect to Tenant, or any assignee or transferee of Tenant (hereinafter "Assignee"), in any involuntary case under the Federal Bankruptcy Code or any other applicable federal or state insolvency law; or the appointment of or taking possession by any receive r, liquidator, assignee, trustee, sequestrator or other similar official of Tenant or any Assignee (unless such appointment is in connection with a Mortgagee's exercise of its remedies under its Mortgage), or of any substantial part of the property of Tenant or such Assignee, or the ordering or winding up or liquidating of the affairs of Tenant or any Assignee and the continuance of such decree or order unstayed and in effect for a period of ninety (90) days or more; or the commencement by Tenant or any suc h Assignee of a voluntary proceeding under the Federal Bankruptcy Code or any other applicable state or federal law or

30 consent by Tenant or any such Assignee to the entry of any order for relief in an involuntary case under any such law, or consent by Tenant or any such Assignee to the appointment of or taking of possession by a receiver, liquidator, assignee, trustee, sequestrator or other similar official of Tenant or any such Assignee, or of any substantial property of any of the foregoing, or the making by Tenant or any such Assignee of any general assignment for the benefit of creditors ; or Tenant or any such Assignee takes any other voluntary action related to the business of Tenant or any such Assignee or the winding up of the affairs of any of the foregoing.

19.1.4 If Tenant shall default in the performance of or compliance with any other term, covenant or condition of this Lease (other than as set forth in Section 19.1.1) and such default shall continue for more than thirty (30) days after Landlord shall have given written notice thereof to Tenant, provided, however, if cure of such default reasonably requires more than thirty (30) days, then, provided that Tenant commences to cure within such thirty (30) day period and thereafter diligently and continuously prosecutes the cure to completion (within no more than one hundred eighty (180) days following Landlord's written notice to Tenant), Tenant shall not be in default.

19.1.5 Notwithstanding anything to the contrary contained in this Lease, prior to declaring any default or taking any remedy permitted under this Lease or applicable law based upon an alleged default, Landlord shall give written notice of such default to the Equity Partner.

19.2 Remedies.

19.2.1 If an Event of Default shall occur and continue as aforesaid, Landlord shall have cumulatively, or in the alternative, all rights and remedies available at law or in equity and, in addition, Landlord shall have the immediate option to terminate this Lease (subject to Section

19.2.7), bring suit against Tenant, pursue the remedy described in this Section and/or recover as an award in such suit or arbitration proceeding the following:

(a) The worth at the time of award of the unpaid rent and all other sums due hereunder which had been earned at the time of termination;

(b) The worth at the time of award of the amount by which the unpaid rent and all other sums due hereunder which would have bee n earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided;

(c) The worth at the time of award of the amount by which the unpaid rent and all other sums due hereunder for the balance of the Term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided;

(d) Any other amount necessary to compensate Landlord for all the detriment proximately caused by the Tenant's failure to perform its obligations under this Lease or which in the ordinary course of things could be likely to result therefrom ; and

31 (e) Such amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable California law.

19.2.2 The "worth at the time of award" of the amount referred to in subparagraph

19.2.1(c) above shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).

19.2.3 Without termi nating this Lease, so long as Landlord does not deprive Tenant of legal possession of the Property and allows Tenant to assign or sublet, Landlord may continue this Lease in effect and bring suit from time to time for any sums due, and for any subsequent Event of Default of the same or other covenants and agreements herein.

19.2.4 If an Event of Default occurs, Landlord shall also have the right, with or without terminating this Lease, but subject to any nondisturbance agreements entered into with Sub-Tenants, to reenter the Property and remove all persons and property from the Property; such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of Tenant.

19.2.5 If an Event of Default occurs, Landlord shall also have the right, with or without terminating this Lease, to relet the Property . If Landlord so elects to exercise its right to relet the Property but without terminating this Lease, then rentals received by Landlord from such reletting shall be applied: first, to the payment of any indebtedness other than Rent due hereunder from Tenant to Landlord; second, to the payment of any cost of such reletting; third, to the payment of the cost of any alterations and repairs to the Property; fourth, to the payment of rent due and unpaid hereunder; and fifth, the residue, if any, shall be held by Landlord and applied in payment of future rent as the same may become due and payable hereunder . Should the amount of rental received from such reletting during any month which is applied to the payment of rent hereunder be less than that agreed to be paid during that month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord immediately upon demand therefor by Landlord . Such deficiency shall be calculated and paid monthly. Tenant shall also pay to Landlord, as soon as ascertained, any costs and expenses incurred by Landlord in such reletting or in making alterations and repairs not covered by the rentals received from such reletting.

19.2.6 No reentry or taking p ossession of the Property by Landlord pursuant to Paragraphs 19.2.3 or 19 .2.4 shall be construed as an election to terminate this Lease unless a written notice of such intention is given to Tenant or unless the termination thereof is decreed by a court of competent jurisdiction.

19.2.7 Notwithstanding anything to the contrary in this Lease (except for Section

13.3.1), in no event shall Landlord have the right to terminate this Lease as a result of the occurrence and continuance of an Event of Default or otherwise until the expiration of the initial fifteen (15) year tax credit compliance period as described in Section 42(i)(1) of the Internal Revenue Code of 1986, as amended.

19.3 No Waiver of Default. No acceptance by Landlord of a lesser sum than the rents or any other charges then due shall be deemed to be other than on account of the earliest installment

32 of the rents or other charges due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment of rent or charges due be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such installment or pursue any other remedy provided in this Lease. The receipt by Landlord of any rent or any other sum of money or any other consideration paid by Tenant after the termination of this Lease, or after giving by Landlord of any notice hereunder to effect such termination, shall not, except as otherwise expressly set forth in this Lease, reinstate, continue, or extend the term of this Lease, or destroy, or in any manner impair the efficacy of any such notice of termination as may have been given hereunder by Landlord to Tenant prior to the receipt of any such sum of money or other consideration, unless so agreed to in writing and signed by Landlord.

ARTICLE 20. PERMITTED CONTESTS

Tenant, at no cost or expense to Landlord, may contest (after prior written notice to Landlord) by appropriate legal proceedings conducted with due diligence, the amount or validity or application, in whole or in part, of any Imposition or lien or any Legal Requirement or Insurance Requirement, provided that (a) in the case of liens of mechanics, materi almen, suppliers or vendors, or Impositions or liens therefor, such proceedings shall suspend the collection thereof from Landlord, and shall suspend a foreclosure against the Property and/or the Improvements, or any interest therein, or any rent, if any, (b) neither the Property or the Improvements, nor any part thereof or interest therein, or the rent, if any, or any portion thereof, would be in any danger of being sold, forfeited or lost by reason of such proceedings, (c) in the case of a Legal Requirement, Landlord would not be in any danger of any criminal liability or, unless Tenant shall have furnished a bond or other security therefor satisfactory to Landlord, any additional civil liability for failure to comply therewith and the Property and the Improvements would not be subject to the imposition of any lien as a result of such failure, and (d) Tenant shall have furnished to Landlord, if requested, a bond or other security, satisfactory to Landlord. If Tenant shall fail to contest any such matters, or to give Landlord security as hereinabove provided, Landlord may, but shall not be obligated to, contest the matter or settle or compromise the same without inquiring into the validity or the reasonableness thereof. Landlord, at the sole cost and expens e of Tenant, will cooperate with Tenant and execute any documents or pleadings legally required for any such contest.

ARTICLE 21. [INTENTIONALLY DELETED]

ARTICLE 22. FORCE MAJEURE

22.1 Subject to Paragraph 22.2 below, any prevention, delay , nonperformance or stoppage by Tenant due to any of the following causes shall be excused: any regulation, order, act, restriction or requirement or limitation imposed by any federal, state, municipal or foreign government or any department or agency thereo f, or civil or military authority ; acts of God; acts or omissions of Landlord or its agents or employees; fire, explosion or floods; strikes, walkouts or inability to obtain materials; war, riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Tenant.

22.2 No prevention, delay, or stoppage of performance shall be excused unless:

33 22.2.1 Tenant notifies Landlord within thirty (30) days of such prevention, delay or stoppage that it is claiming excuse of its obligations under this Article; and

22.2.2 Tenant diligently proceeds within thirty (30) days of the conclusion of such prevention, delay or stoppage to cure the condition causing the prevention, delay or stoppage; and

22.2.3 Tenant effects such cure within a reasonable time.

ARTICLE 23. GENERAL PROVISIONS

23.1 Notices. All notices or demands shall be in writing and shall be served personally, by overnight courier, or by express or certified mail. Service shall be deemed conclusively made at the time of service if personally served; the next business day if sent by overnight courier and receipt is confirmed by the signature of an agent or employee of the party served; the next business day after deposit in the United States mail, properly addressed and postage prepaid, return receipt requested, if served by express mail; and three (3) days after deposit thereof in the United States mail, properly addressed and postage prepaid, return receipt requested, if served by certified mail.

23.1.1 Any notice to Landlord shall be given to:

City of Orange
300 East Chapman Avenue
P.O. Box 449 Orange, CA 92866
Attention: City Attorney

23.1.2 Any notice to Tenant shall be given to:

Katella Terrace, L.P.
c/o Orange Senior Housing, Inc.
555 S. Shaffer Street
Orange, CA 92866
Attention: President

With a copy to:

Horizon Elom Holdings

Calabasas, CA _____
Attention: Keith Stanley

Any party may, by virtue of written notice in compliance with this Section, alter or change the address or the identity of the person to whom any notice, or copy thereof, is to be sent.

23.2 Certificates. Landlord or Tenant, as the case may be, shall execute, acknowledge and deliver to the other, promptly upon request, a certificate of Landlord or Tenant, as the case may be, certifying (a) that thi s Lease is unmodified and in full force and effect (or, if there have been modifications, that this Lease is in full force and effect, as modified, and stating the date of each instrument so modifying this Lease), (b) the date, if any, through which the rent, if any, has

34 been paid, (c) whether there are then existing any offsets or defenses against the enforcement of any term hereof on the part of Tenant to be performed or complied with (and, if so, specifying the same), and (d) whether any default exists hereunder and, if any such default exists, specifying the nature and period of existence thereof and what action Landlord or Tenant, as the case may be, is taking or proposes to take with respect thereto and whether notice thereof has been given to the party in default . Any certificate may be relied upon by any prospective purchaser, transferee, mortgagee or trustee under a deed of trust of the fee or leasehold estate in the Property or any part thereof or of Landlord's or Tenant's interest under this Lease. Tenant will also deliver to Landlord, promptly upon request, such information with respect to the Property or any part thereof as from time to time may reasonably be requested.

23.3 No Merger of Title. There shall be no merger of this Lease or the leasehold estate created by this Lease with any other estate in the Property or any part thereof by reason of the fact that the same person, firm, corporation or other entity may acquire or own or hold, directly or indirectly: (a) this Lease or the leasehold estate created by this Lease or any interest in this Lease or in any such leasehold estate, and (b) any other estate in the Property and the Improvements or any part thereof or any interest in such estate, and no such merger shall occur unless and until all persons, corporations, firms and other entities, including any leasehold Mortgagee or leasehold Mortgagees, having any interest (including a security interest) in (i) this Lease or the leasehold estate created by this Lease, and (ii) any other estate in the Property or the Improvements or any part thereof shall join in a written instrument effecting such merger and shall duly record the same.

23.4 Quiet Enjoyment . Tenant, upon paying the rent and any other charges herein provided for and upon performing a nd complying with all covenants, agreements, terms and conditions of this Lease to be permed or complied with by it, shall lawfully and quietly hold, occupy and enjoy the Property during the term of this Lease without hindrance or molestation by Landlord, or any person or persons claiming through Landlord.

23.5 No Claims Against L andlord. Nothing contained in this Lease shall constitute any consent or request by Landlord, express or implied , for the performance of any labor or services or the furnishing of any materials or other property with respect to the Property or any part thereof, nor as giving Tenant any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or othe r property in such fashion as would permit the making any claim against Landlord or its interest in the Property in respect thereof.

23.6 Inspection. Landlord and its authorized representatives may enter the Property or any part thereof at all reasonable times for the purpose of inspecting, servicing or posting notices, protecting the Property or the Improvements, or for any other lawful purposes . Notwithstanding the immediately preceding sentence, except in the event of an emergency, Landlord may only enter the apartment units after giving the Tenant three (3) days’ written notice.

23.7 No Waiver by Landlord. To the extent permitted by applicable law, no failure by Landlord to insist upon the strict performance of any term hereof or to exercise any right , power or remedy consequent upon a default under this Lease, and no acceptance or rent during the continuance of such default, shall constitute a waiver of any such default or of any such term. No

35 waiver of any default shall affect or alter this Lease, which shall continue in full force and effect, or the rights of Landlord with respect to any other then existing or subsequent default.

23.8 Holding Over. In the event Tenant shall hold over or remain in possession of the Property or the Improvements with the consent of Landlord after the expiration of the Term, such holding over or continued possession shall create a tenancy for month to month only , upon the same terms and conditions as are herein set forth so far as the same are applicable.

23.9 Attorneys’ Fees. In the event of a dispute between the parties arising out of or in connection with this Lease, which results in arbitration or litigation, the prevailing party shall be entitled to have and recover from the losing party reasonable attorneys' fees and costs of suit incurred by the prevailing party.

23.10 No Partnership . Anything contained herein to the contrary notwithstanding, Landlord does not in any way or for any purpose become a partner of Tenant in the conduct of its business, or otherwise, or a joint venturer or member of a joint enterprise with Tenant hereunder.

23.11 Remedies Cumulative . The various rights, options, elections and remedies of Landlord and Tenant, respectively, contained in this Lease shall be cumulative and no one of them shall be construed as exclusive of any other, or of any right, priority or remedy allowed or provided by law and not expressly waived in this Lease.

23.12 Time is of the Essence. Time is of the essence of this Lease and all of the terms, provisions, covenants and conditions hereof.

23.13 Survival of Representations, Warranties and Covenants . The respective representations, warranties and covenants contained herein shall remain in place throughout the Term of the Lease.

23.14 Construction of Agreement. This Lease shall be construed in accordance with the substantive laws of the State of California, without regard to the choice of law rules thereof . The rule of construction that a document be construed strictly against its drafter shall have no application to this Lease.

23.15 Severability. If one or more of the provisions of this Lease shall be held to be illegal or otherwise void or invalid, the remainder of this Lease shall not be affected thereby and shall remain in full force and effect to the maximum extent permitted under applicable laws and regulations.

23.16 Entire Agreement; Modification. This Lease contains the entire agreement of the parties with respect to the matters discussed herein . This Lease may be amended only by an agreement in writing signed by bo th parties, with the prior written consent of each Mortgagee, if any. Any amendment to this Lease made without the prior written consent of a Mortgagee may be void at the option of such Mortgagee.

36 23.17 Binding Effect and Benefits. This Lease shall inure to the benefit of and be binding on the parties hereto and their respective successors and assigns. Except as otherwise set forth herein, nothing in this Lease, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Lease.

23.18 Further Assurances. Each party hereto will promptly execute and deliver without further consideration such additional agreement, assignments, endorsements and other documents as the other party hereto may reasonably request to carry out the purposes of this Lease.

23.19 Counterparts. This Lease may be executed simultaneously in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Lease.

23.20 Number and Gender . Whenever the singular number is used in this Lease and required by the context, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders.

23.21 Incorporation by Reference. Every Exhibit attached to this Lease and referred to herein is hereby incorporated by reference.

Exhibit A: Legal Description Exhibit B: Memorandum of Lease Exhibit C: Schedule of Performance Exhibit D: Scope of Development Exhibit E: Regulatory Agreement

[Remainder of page intentionally left blank; signatures on next page]

37 IN WITNESS WHEREOF, the undersigned have executed this Lease as of the date first above written.
"Tenant"

KATELLA TERRACE, L.P., a California limited partnership

By: HORIZON-ELOM HOLDINGS, LLC., a California limited liability company, Tenant’s Administrative General Partner

By: _______________________________
Name: Keith Stanley
Its: Manager

By: ORANGE SENIOR HOUSING, INC., a California non-profit public benefit corporation, Tenant’s Managing General Partner

By: _______________________________
Name: Paul Abbondante
Its: President

By: _______________________________
Name: Katherine Connaghan
Its: Vice President

"Landlord"

CITY OF ORANGE, a municipal corporation

By:_______________________
Mark A. Murphy, Mayor

APPROVED AS TO FORM:

By:_______________________
Gary A. Sheatz, City Attorney

ATTEST:

By:_______________________
Pamela Coleman, City Clerk

EXHIBIT "A"

LEGAL DESCRIPTION OF THE PROPERTY

THAT CERTAIN LAND SITUATED IN THE CITY OF ORANGE, COUNTY OF ORANGE, STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS:

APN:

B-1

EXHIBIT B

Exempt From Recording Fee Pursuant to Government Code Sections 6103 and 27383

MEMORANDUM OF UNRECORDED LEASE

This MEMORANDUM OF UNRECORDED LEASE ("Memorandum") is hereby entered into as of by and between City of Orange, a municipal corporation ("Landlord"), and Katella Terrace, L.P., a California limited partnership (''Tenant").

RECITALS

A. Landlord and Tenant have entered into a "Lease" dated concurrently herewith for that certain real property owned by Landlord (the "Property"), which provides for the construction, maintenance, management and operation of a 74-unit affordable senior apartme nt project, to be made available long term at an affordable housing cost (the "Project").The Property is legally described in Exhibit "A," which is attached hereto and incorporated herein by this reference. A copy of the Lease is available for public inspection at the office of the Landlord.

8. The term of the Lease commences on the date of recordation of this Memorandum of Unrecorded Lease in the Official Records of Orange County (the "Commencement Date") and, subject to the provisions set forth in the Lease and applicable law that may result in an earlier termination of the Lease, continues until the sixtieth (60th) anniversary of the Commencement Date.

C. The Lease provides that a short form Memorandum of Lease shall be executed and recorded in the Official Records of Orange County, California.

NOW, THEREFORE, the parties hereto certify as follows:

Landlord, pursuant to the Lease, hereby leases the Property to Tenant upon the terms and conditions provided for therein. This Memorandum is not a complete summary of the Lease, and shall not be used to interpret the provisions of the Lease.

RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:

B-2

"Tenant"

KATELLA TERRACE, L.P., a California limited partnership

By: HORIZON-ELOM HOLDINGS, LLC., a California limited liability company, Tenant’s Administrative General Partner

By: _______________________________
Name: Keith Stanley
Its: Manager

By: ORANGE SENIOR HOUSING, INC., a California non-profit public benefit corporation, Tenant’s Managing General Partner

By: _______________________________
Name: Paul Abbondante
Its: President

By: _______________________________
Name: Katherine Connaghan
Its: Vice President

"Landlord"

CITY OF ORANGE, a municipal corporation

By:_______________________
Mark A. Murphy, Mayor

APPROVED AS TO FORM:

By:_______________________
Gary A. Sheatz, City Attorney

ATTEST:

By:_______________________
Pamela Coleman, City Clerk

EXHIBIT C

Schedule of Performance

[Behind this page]

SCHEDULE OF PERFORMANCE

1. Submittal - Management Plan and Maintenance
Program. Developer will submit to the City for
approval the Management Plan (including a
Tenant Selection and Eligibility Plan) and the
Maintenance Program.

No later than thirty (30) days
prior to the scheduled date for
the Construction Financing
Event (“Construction
Financing Event Date”).

2. Approval - Management Plan and Maintenance
Program. City shall approve or disapprove the
Management Plan and the Maintenance Program
submitted by Developer.

Within 30 days of submittal by
Developer.

3. Submittal – Project Budget . Developer will
prepare and submit to the City for approval the
Project Budget.

No later than sixty (60) days
prior to the Construction
Financing Event Date.

4. Approval - Project Budget. City shall approve or
disapprove the Project Budget submitted by
Developer.

Within thirty ( 30) days of
submittal by Developer.

5. Submittal - Basic Concept/Schematic Drawings .

Developer will submit to the City for approval the
Basic Concept/Schematic Drawings and related
documents (site plans, elevations and preliminary
floor plans).

Achieved by the submittal of
zoning entitlement drawings
in 2019.

6. Approval - Basic Concept/Schematic Drawings .

The City will approve or disapprove the Basic
Concept/Schematic Drawings and related
documents.

Achieved by Planning
Commission approval on July
29, 2019.

7. Submittal - Final Construction Drawings and
Specifications. Developer will prepare and
submit to the City for approval the Final
Construction Drawings and Specifications.

No later than June 1, 2023.

8. Approval - Final Construction Drawings and
Specifications. The City will approve or disap -
prove the Final Construction Drawings and
Specifications.

Within the times provided by
applicable provisions of the
City’s Municipal Code.

9. Submittal – Environmental Assessments .

Developer will deliver to the City copies of the
environmental assessments for the Property.

Within twenty (2 0) days after
receipt of final assessment.
.

10. Submittal - Evidence of Financing.

Developer will submit to the City substantially
final Construction Loan documents ,
documentation of Developer Equity, and all other
components of the Evidence of Financing as
described in the DDA and the Method of
Financing.

Twenty (20) days prior to the
Construction Financing Event
Date.

11. Approval of Financing. The City will approve or
disapprove the evidence of financing.

Within ten (10) days after
receipt of each such submittal
of evidence of financing to the
City.

12. Construction Financing Event Date. All
conditions precedent to the Construction
Financing Event will have been satisfied on or
before this scheduled date.

No later than December 31 ,
2023.

13. Submittal - Tenant Lease. Developer will prepare
and submit to the City for approval the form of
tenant lease consistent with and containing the
lease provisions described in the DDA and
attachments and the City approved Management
Plan and Maintenance Program.

Prior to the ini tial lease-up of
the Project.

14. Approval –Tenant Lease. The City will approve or
disapprove Developer’s proposed form of Tenant
Lease.

Within thirty (30) days of
submittal by Developer.

15. Commencement of Construction. Developer will
commence construction of the I mprovements on
the Property.

Within sixty (60) days after the
Construction Financing Event.

16. Completion of Construction . Developer will
complete construction of the Improvements on the
Property.

The earlier of eighteen (18 )
months after the Construction
Financing Event and any date
required for completion of
construction by the Senior
Lender or any governmental
body providing funds for the
construction of the Project.

17. Submittal – Rent Schedule. Developer will submit
its proposed rent schedule and utility allowance to
the City for approval.

Thirty (30) days prior to initial
rental of the units and on an
annual basis thereafter.

Note: The City Manager may approve in writing extensions of time for the performance of any item required of Developer in this Schedule of Performance provided the City Manager is re asonably satisfied that Developer is diligently proceeding in good faith to perform the actions required, and further provided that the time for the occurrence of the Construction Financing Event Date shall not be extended for more than an aggregate total period of six (6) months. Nothing herein is intended to alter or modify any extension(s) of time that may occur as a result of a Force Majeure Event allowed under the DDA.

EXHIBIT D

Scope of Development

[Behind this page]

Katella Terrace Apartments
Scope of Development

SCOPE OF DEVELOPMENT

The project site is located at 1249 E. Katella Avenue in the City of Orange and is identified as the Property on the Site Map attached to this Disposition and Development Agreement as Attachment No. 1 and legally described on the Legal Description attached to this Disposition and Development Agreement as Attachment No. 2.

The Katella Terrace Apartments Project will consist of the development of seventy-four (74) rental housing units to be exclusively rented (except for one property manager unit) to Senior Lower Income and Very Low Income households. The project shall be developed in accordance with the following entitlements, granted by the City Council of the City of Orange on September 10, 2019:

• Conditional Use Permit No. 3083-19 approving senior affordable apartments • Major Site Plan Review No. 0970 -19 approving demolition of existing structure and site improvements
• Design Review No. 4970-19 approving site and structure design • Two development standard concessions (building height and number of stories) • Two development standard waivers (fence height and landscaping)

A Density Bonus Housing Agreement was approved by the City on January 20, 2020, and the development and operation of the Project shall comply with the requirements of the Density Bonus Housing Agreement.

ATTACHMENT NO. 8

MEMORANDUM OF LEASE

[The form of the Memorandum of Lease shall be that attached to the Ground Lease (Attachment No. 7 to the DDA]

REGULATORY AGREEMENT
PAGE 1

ATTACHMENT NO. 10 - FORM OF REGULATORY AGREEMENT

FREE RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:

THE CITY OF ORANGE
300 E. Chapman Avenue
Orange, CA 92866
Attn:

(Space Above This Line for Recorder’s Office Use Only)
(Exempt from Recording Fee per Gov. Code § 6103 & 27383) APNs:

REGULATORY AGREEMENT

THIS REGULATORY AGREEMENT (“ Agreement”) is made and entered into this _______ day of ______________, 202_, by THE CITY OF ORANGE, a municipal corporation of the State of California (“City”) and KATELLA TERRACE, L.P., a California limited partnership (“Owner”).

RECITALS:

A. City and Owner (“Developer” therein) have entered into that certain Disposition and Development Agreement, dated as of February 8 , 2022 (the “DDA”), concerning Owner’s lease from City of that certain real property , more particularly described in Exhibit A attached hereto and incorporated by reference herein (the “Property”). The DDA describes the “Project”, which generally consists of Owner’s construction and development of a 74 dwelling unit development on the Property (which constructed dwelling units are referred to in this Agreement as the “Units”) and Owner’s subsequent management thereof which requires the Owner to Lease the Units, except for one unit that is set aside for the property manager in residence, exclusively to Very Low Income and Lower Income Senior Citizen Households, for a rental rate which will not exceed an Affordable Rent. The DDA is incorporated herein by this reference as though fully set forth herein. Any capitalized terms not defined herein shall have the meanings ascribed to such terms in the DDA.

B. Owner has executed that certain promissory note (the “ City Ground Rent Loan Note”) dated on or about the date hereof, evidencing the City Ground Rent Loan pursuant to which City has accepted a purchase money note in payment for the purchase price of the Property, which note will be repaid by Developer pursuant to the terms set forth therein (“City Ground Rent

REGULATORY AGREEMENT
PAGE 2

Loan”). The City Ground Rent Loan Note is secured by a Deed of Trust dated on or about the date of the Note, naming City as beneficiary (“City Ground Rent Loan Deed of Trust”).

C. City and Owner now desire to place restrictions upon the use and operation of the Project, in order to ensure that the Project shall be operated continuously as an affordable housing project available for rental exclusively to Lower Income and Very Low Income Occupants in accordance with the terms set forth below for the term of this Agreement.

AGREEMENT:

NOW, THEREFORE, the Owner and City declare, covenant and agree, by and for themselves, their heirs, executors, administrators and assigns, and all persons claiming under or through them, that the Property, for the term of this agreement, shall be held transferred, encumbered, used, sold, conveyed, leased and occupied, subject to the covenants and restrictions hereinafter set forth:

1. DEFINITIONS.

1.1 Affordable Rent. As used in this Agreement, the term “Affordable Rent” has the meaning set forth in California Health and Safety Code Section 50053. Rents for the Affordable Units will not exceed the respective amounts set forth in this Agreement.

1.2 Affordable Lower Income Unit . As used in this Agreement, the term “Affordable Lower Income Unit” shall mean those units designated in the Manage ment Plan approved by the City pursuant to this Agreement and the DDA which shall be r estricted to occupancy by Lower Income Households at Affordable Rent.

1.3 Affordable Units. As used in this Agreement, the term Affordable Units shall mean the Affordable Lower Income Units and the Affordable Very Low Income Units, and shall exclude the one unit that is set aside for the property manager in residence.

1.4 Affordable Very Low Income Unit. As used in this Agreement, the term “Affordable Very Low Income Unit” shall mean those units designated in the Management Plan approved by the City pursuant to this Agreement and the DDA which shall be r estricted to occupancy by Very Low Income Households at Affordable Rent.

1.5 Area Median Income or Orange County Median Income . For purposes of this Agreement, the terms “Area Median Income” and “Orange County Median Income” shall mean the median income of the Los Angeles-Long Beach-Anaheim CA HUD Metro FMR Area, adjusted for household size by the United States Department of Housing and Urban Development or similar data if the referenced data ceases to be available.

REGULATORY AGREEMENT
PAGE 3

1.6 Eligible Tenant. As used in this Agreement, the term “ Eligible Tenant” shall mean any person living in a Senior Citizen Household entitled to rent an Affordable Lower Income Unit or an Affordable Very Low Income Unit as set forth in this Agreement.

1.7 Lower Income. As used in this Agreement, the term “Lower Income” shall mean the maximum income given to “lower income” households in California Health and Safety Code Section 50079.5.

1.8 Lower Income Household . As used in this Agreement, the term “ Lower Income Household” shall mean any person or persons residing as a single family unit with a total household income not exceeding the Lower Income threshold.

1.9 Rent. For purposes of this Agreement, the term “Rent” shall have the meaning set forth in Title 25 California Code of Regulations Section 6918.

1.10 Restricted Period . As used in this Agreement, the term “Restricted Period” shall mean the period commencing at recordation of this Regulatory Agreement and continuing for a period of sixty (60) years thereafter.

1.11 Senior Citizen Household . As used in this Agreement, th e term “Senior Citizen Household” shall mean a household where at least one person in residence qualifies for occupancy under the California Tax Credit Allocation Committee’s regulations applicable to the Project and intends to reside in the unit as his or her primary residence on a permanent basis, and where any other person residing in the unit is a “qualified permanent resident” or a “permitted health care resident” as provided in the Unruh Civil Rights Act, California Civil Code Section 51 et seq., or the Federal Fair Housing Act 42 USC Section 3607, and such household’s occupancy is in compliance with all applicable federal, state and local laws and regulations governing the use and occupancy of the Project.

1.12 Very Low Income . As used in this Agreement, the term “ Very Low Income” shall mean a household income that does not exceed fifty percent (50%) of the Area Median Income, adjusted for family size appropriate for the Unit.

1.13 Very Low Income Household. As used in this Agreement, the term “Very Low Income Household” shall mean any person or persons residing as a single family unit with a total household income not exceeding the Very Low Income threshold.

2. TERM OF AGREEMENT; PRIORITY OF AGREEMENT; USE OF PROPERTY.

This Agreement shall commence upon its execution and shall remain in effect for the Restricted Period . This Agreement shall remain in effect throughout the Restricted Period , notwithstanding the payment in full of the City Ground Rent Loan. This Agreement is secured by the City Ground Rent Loan Deed of Trust and Owner shall not b e entitled to a reconveyance of the City Ground Rent Loan Deed of Trust prior to the expiration of the Restricted Period. This

REGULATORY AGREEMENT
PAGE 4

Agreement shall unconditionally be and remain at all times prior and sup erior to the lien created by any deed of t rust and any other lien or encumbrance or transfer for security purposes made against or with respect to the Property and all of the terms and conditions contained in any such deed of trust or security instrument and to the lien of any mortgage debt. Owner hereby agrees that the Project is to be owned, managed, and operated as a project for Eligible Tenants for the Restricted Period. To that end, and for the entirety of the Restricted Period, this Agreement, the Owner hereby represents, covenants, warrants and agrees as follows:

2.1 Compliance w ith DDA and Ground Lease . Owner, its successor and assigns, covenant and agree that the Affordable Very Low Income Units and the Affordable Lower Income Units shall at all times during the term of this Agreement comply with applicable requirements set forth in the DDA, the Ground Lease and this Agreement.

2.2 Purpose. The Property is being acquired and the Project developed for the purposes of providing Eligible Tenants housing at an Affordable Rent.

2.3 Schedule. The Project activities shall be accomplished within the time provided in the Schedule of Performance, which is attached to the DDA.

2.4 Construction Covenant. Owner hereby covenants and agrees on behalf of itself and its successors and assigns in the Property or any portion thereof or any improvements thereon or any interest therein that Owner and such successors and assigns shall construct the Units in accord ance with the DDA (including but not limited to the Scope of Development), this Agreement, and plans approved by the City of Orange.

2.5 Facilities. All of the Units in the Project shall contain facilities adequate for living, sleeping, eating, cooking and sanitation in accordance with all applicable federal, state and local laws and codes. The development and maintenance of the Units shall comply with the City’s building code , the Maintenance Standards and all other applicable local codes, development standards, ordinances and zoning ordinances in effect, and the Units shall be decent, safe and sanitary and shall conform to the building, electrical, plumbing, mechanical and energy codes that have been adopted by the City of Orange.

2.6 Residential Use. None of the Units in the Project will at any time be utilized on a transient basis or will ever be used as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, nursing home, hospital, sanitarium, or trailer court or park, or any other use that is inconsistent or incompatible with this Agreement.

2.7 Conversion of Units. No part of the Project will at any time be owned by a cooperative housing corporation nor shall the Owner take any steps in connection with the conversion to such ownership or uses to condominiums, or to any other form of ownership without prior written approval by City.

REGULATORY AGREEMENT
PAGE 5

2.8 Tenant Preference. All of the Affordable Units will be made available to Eligible Tenants for rental in accordance with the terms of this Agreement, and the Owner shall not give preference to any particular class or group in renting the Affordable Units, except to the extent that the Affordable Units are required to be leased or rented to Eligible Tenants and except as provided in Section 3.8 below.

2. OCCUPANCY OF PROJECT BY ELIGIBLE TENANTS.

Owner hereby represents, warrants, and covenants as follows:

3.1 Affordability Covenant. Owner covenants and agrees (for itself, its successors, its assigns, and every successor in interest to the Property or any part thereof or any interest therein) that Developer, its successors and assigns will use the Property exclusively, except for one unit that is set aside for the property manager in residenc e, for a 74 dwelling unit development to provide affordable housing at Affordable Rent for Very Low Income and Lower Income Senior Citizen Households, in compliance with this Agreement. No change in the use of the Property will be permitted without the prior written approval of City.

3.2 Exempt Surplus Land Covenants . Without limiting the obligations of Owner under Section 3.1 above, the use of the Property shall also conform to the following criteria set forth in California Government Code Section 373 64 so that the lease of the Property to the Owner by City pursuant to the DDA shall be a transfer of “exempt surplus land” transferred for development of affordable housing with restrictions, as provided by California Government Code Sections 37364 and 54221 and Surplus Land Act Guidelines adopted by the California Department of Housing and Community Development:

a. Not less than 80 percent of the Property shall be used for housing.

b. Not less than 40 percent of the Units developed on the Property shall be rented at Affordable Rent to households whose incomes are equal to, or less than, 75 percent of the maximum income of Lower Income H ouseholds, and at least half of which shall b e rented at Affordable Rent to Very Low Income Households. Consistent with this requirement, not less than 40% of the Affordable Units shall be rented at Affordable Rent to households whose incomes are equal to, or less than, 50 percent of the area median income adjusted for family size, and all other Affordable Units shall be rented at Affordable Rent to households whose incomes are equal to, or less than, 60 percent of the area median income adjusted for family size.

c. The Affordable Units developed on the Pro perty shall be restricted by this Agreement to remain continually affordable to and occupied by the Eligible Households required to occupy the Affordable Units by this Agreement for the longest feasible time, but not less than the Restricted Period. The requirements of this Agreement, including without limitation this Section 3.2, shall be covenants running with the land and shall be enforceable against any owner of the Property who violates any such covenant and each successor in interest who continues the violation by any of the entities described in subdivisions (a) to (f), inclusive, of Section 54222.5

REGULATORY AGREEMENT
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of the California Government Code. This Agreement makes the covenants and conditions set forth herein binding upon the Owner and the successors in interest of the Owner, and shall be recorded in the office of the county recorder of the County of Orange. This Agreement shall be recorded in the grantor-grantee index in the manner required by said Section 37364.

d. The definitions of “persons and families of low and moderate income,” “lower income households,” and “very low income households” set forth in Sections 50079, 50079.5, 50093, and 50105 of the California Health and Safety Code shall apply to this Section 3.2.

3.3 Income Restrictions. Except as expressly provided herein, th roughout the term of this Agreement, the Affordable Units shall be rented only to, and occupied only by, Eligible Tenants.

3.4 Rental Rates. Owner shall rent the Affordable Units to Eligible Tenants at no more than the allowable Affordable Rent for a househo ld size appropriate to the unit as designated in the approved Management Plan. The rental rates for the Affordable Units shall be adjusted annually based upon annual updates of the applicable income and rent sta ndards, including but not limited to updates published by the California Housing and Community Development Department and the United States Department of Housing and Urban Development.

In no event shall any of the Affordable Units be rented at a rate gr eater than the applicable Affordable Rent. Failure to comply with the affordability requirements of this Agreement is an event of default under the terms of the City Ground Rent Loan. Subject to the right to cure, the City Ground Rent Loan will be due and payable immediately if the Units are used, operated or managed in a manner which does not meet the requirements of this Agreement.

3.5 Occupancy By Eligible Tenant . An Affordable Very Low Income Unit initially occupied by an Eligible Tenant shall be deemed occupied by an Eligible Tenant until such Affordable Unit is vacated , even if the tenant’s household income subsequently increases to an amount that exceeds the maximum allowable income level for a Very Low Income Household, so long as satisfactory actions are taken to ensure that all vacancies are filled in accordance with this Agreement until the noncompliance is corrected . An Affordable Lower Income Unit initially occupied by an Eligible Tenant shall be dee med occupied by an Eligible Tenant until such Affordable Unit is vacated, even if the tenant’s household income subsequently increases to an amount that exceeds the maximum allowable income level for a Lower Income Household, so long as satisfactory action s are taken to ensure that all vacancies are filled in accordance with this Agreement until the noncompliance is corrected.

3.6 Maximum Occupancy. The maximum number of persons residing in a Unit may not exceed the applicable limit pursuant to the Management Plan prepared for the Project by the Owner and approved by the City.

3.7 Income Computation . Immediately prior to a prospective tenant’s occupancy of an Affordable Unit, Owner shall obtain and maintain on file an income computation

REGULATORY AGREEMENT
PAGE 7

and certification form from such prospective tenant dated immediately prior to the date of initial occupancy of an Affordable Unit by such prospective tenant. Owner shall verify that the income information provided by an applicant is accurate by taking one or more of the following steps as a part of the verification process: (i) obtain two (2) pay stubs from the most recent pay periods; (ii) obtain a written verification of income and employment from applicant’s current employer; (iii) obtain an income verificat ion form from the Social Security Administration and/or California Department of Social Services if the applicant receives assistance from either agency; (iv) if an applicant is unemployed or did not file a tax return for the previous calendar year, obtain other verification of such applicant’s income as is reasonably satisfactory; or (v) obtain such other information as may be reasonably required. Owner shall update the foregoing records annually and shall provide copies of updated tenant eligibility reco rds and monthly rental records to City for review. Upon review of such records, City may at its option perform an independent audit of the tenant eligibility records in order to verify compliance with the income and affordability requirements set forth he rein. Costs for such an audit performed by the City shall be deemed a Project Operating Expense, deductible from the Project’s Revenue (as such term is defined in the City Ground Rent Loan Note). Owner shall retain the records described in this Section for a period of five (5) years after the date the respective records were created.

3.8 Rental Priority. Subject to Owner’s policies and procedures for screening potential tenants, the Affordable Units shall be rented according to the following priorities:

a. When an Affordable Unit becomes available as a result of a tenant vacation, Owner shall give first priority in renting the Affordable Unit to an Eligible Tenant who has been displaced by activities of the City pursuant to California Health & Safety Code Section 33411.3.

b. Owner shall give second priority in renting the Affordable Unit to an Eligible Tenant who resides, works, attends school, or has family residing in the City of Orange.

Except as otherwise set forth above, Affordable Units shall be rented to Eligible Tenants on a first- come, first -served basis; provided, however, that Owner shall maintain an “interest list” or “eligibility list” of potential tenants.

3.9 Maintenance of Records . Owner shall maintain complete and accurate records pertaining to the Units, and shall permit any duly authorized representative of the City to inspect the books and records of Owner pertaining to the Project including, but not limited to, those records pertaining to tenant eligibility and occupancy of the Units. Records pertaining to the Project and Units shall be retained in electronic form for a period of five (5) years after the termination of this Agreement; and such records relating to individual tenant occupancy shall be maintained in their original form for a period of fifteen (15) years after the end of each such tenant occupancy.

Owner shall retain all books and records relevant to this Agreement for a minimum of five years after the project completion date, or , for those records related to any actual audit or

REGULATORY AGREEMENT
PAGE 8

litigation relevant to this Agreement, until the conclusion or resolution of any and all such audits or litigation, whichever is later. Th e City and any of its representatives, shall have the right of access to any pertinent books, documents, papers or other records of the Owner, in order to make audits, examinations, excerpts and transcripts.

3.10 Reliance on Tenant Representations . Each tenant lease shall contain a provision to the effect that Owner has relied on the income certification and supporting information supplied by the tenant in determining qualification for occupancy of a n Affordable Unit, and that any material misstateme nt in such certification (whether or not intentional) will be cause for immediate termination of such lease.

4. MAINTENANCE AND MANAGEMENT

4.1 Maintenance Covenant.
a. Prior to the time required by the DDA, the Owner will prepare and submit to City Manager or his designee for review and approval a program (the “ Maintenance Program”) for the exterior and interior maintenance of the Property and the Improvements. b. The Maintenance Program will describe in reasonable detail the standards to be followed in maintaining the interior and exterior of the Improvements, including a schedule indicating the proposed frequency of each element of maintenance, and will include, at a minimum, the following: periodic cleaning of the interior and exterior of the Improvemen ts, including windows; removing graffiti; removing debris and waste materials and otherwise maintaining indoor and outdoor areas of the Property; maintaining any lawns, plants, shrubs and trees or other landscaping planted on the Property; performing inspe ctions of all exterior features to determine whether repairs are required; conducting periodic protective treatments such as rust removal and caulking; conducting repairs to facades, roof, doors, windows and other exterior features; maintaining fencing and other security devices and systems; periodic repainting of the exterior; periodic repainting of the interior units and common areas; periodic replacing of the interior unit carpets; checking building systems, including, but not limited to the heating and cooling systems, smoke alarms and water heaters; checking interior unit appliances; and monitoring interior unit bathrooms for mold/mildew. The Maintenance Program, including any amendments proposed by the Owner, will be subject to the reasonable approval of City Manager.

At all times during the Restricted Period, the Owner will maintain the Property and the Improvements in accordance with the approved Maintenance Program. To implement this requirement, Owner agrees to budget sufficient funds to pay for a ll reasonably anticipated costs (as indicated in the Annual Project Budget). In the event the Owner fails to maintain the Property and the Improvements in accordance with the approved Maintenance Program, and does not cure such failure within thirty (30) days following notice from City, with such additional time as may be reasonably necessary to cure such default provided that Owner has commenced to cure within such thirty (30) day period and is diligently prosecuting the cure to completion, City will have the right, but not the obligation, to enter the Property, correct any

REGULATORY AGREEMENT
PAGE 9

violation, and hold the Owner responsible for the cost ther eof, and such cost, until paid, will constitute a lien on Tenant’s leasehold interest in the Property and on the Improvements. Prior to undertaking any work to correct any such maintenance deficiency, City will provide written notice that the Owner must correct the deficiency within a reasonable time. The Owner will have a reasonable time in which to comply following such notice from City.

c. The Project shall comply with all applicable lead-based paint standards and requirements.

4.2 City Rights. City shall have the right to enter upon the Property to inspect the Property and both the interiors and exteriors of the Units, upon seventy-two (72) hours notice to Owner.

4.3 Annual Report s. Owner covenants and agrees to submit to the City an annual report (the “ Annual Report”), which shall include for each Unit the rental rate and the income and family size of the occupants, and shall also include the records described in Section

3.7 herein. The income information shall be supplied by the tenant in a certified statement on a form approved by the City. The Owner shall submit the Annual Report on or before April 30 of the year following the year covered by the Annual Report. The Owner shall provide for the submission of household information and certification in its leases with tenants. The Annual Report shall include a profit and loss statement and budget to date figures and shall clearly show project revenues, operating expenses, deposits to and withdrawals from the Project’s Capital Reserve Account, and cash flow available for residual receipts payments. The Annual Report shall be in a form that is reasonably acceptable to the City Manager or designee.

4.4 Management Plan. Within the time set forth in the Schedule of Performance attached to the DDA, Owner shall prepare and submit to City for approval a management plan in accordance with the following (“Management Plan”):

a. The Management Plan, including such amendments as may be approved in writing by the City, shall remain in effect for the Restricted Period. Owner shall not amend the Management Plan or any of its components without the prior written consent of the City. The components of the Management Plan shall include:

(1) Management Agent . The name and qualifications of the proposed management agent . The City shall approve or disapprove the proposed management agent, in writing based on the experience and qualifications of the management agent. The management agent shall have demonstrated experience in operating affordable housing comparable to the Project.

(2) Management Program . A description of the proposed management, maintenance, unit affordability level, tenant selection and occupancy policies and procedures for the Affordable Units consistent with the requirements of this Agreement.

REGULATORY AGREEMENT
PAGE 10

(3) Management Agreement . A copy of the proposed
management agreement specifying the amount of the management fee and the relationship and division of responsibilities between Owner and management agent.

(4) Tenant Lease or Rental Agreement. A copy of the proposed tenant lease or rental agreement to be used in renting the Affordable Units.

(5) Annual Operating Budget. Within the time set forth in the Schedule of Performance attached to the DDA and annually thereafter not later than fifteen (15) days prior to the beginning of the next fiscal or calendar year of the Project, Owner shall submit a projected operating budget to the City for review and approval. After Owner’s initial projected operating budget submittal, Owner shall annually reconcile each previous year’s projected budget with actual operating results for the Proj ect (“Budget Reconciliation ”). In each Budget Reconciliation, Owner shall set forth an explanation for any major discrepancies between projected and actual budgets. For purposes of this Agreement, a “major discrepancy” shall mean a line item difference between projected and actual budgets of 20% or more.

The City shall not unreasonably withhold, condition or delay its approval of any matter for which its approval is required hereunder. Any express disapproval shall be in writing and contain the City’s reasons for disapproval.

b. Owner hereby covenants and agrees the City shall have the right, at any time and from time to time, to give notice to Owner if the City determines that the Project is not being managed or maintained in accordance with the Management Plan. The City may require the Owner to change management practices or to terminate the management agent and retain a different management agent, approved by the City. The City agrees that prior to requiring the Owner to change its management agent or the management practices the City shall informally consult with Owner, in an attempt to resolve the dispute. If the City determines that such an attempt at informal resolution has been unsuccessful, it shall give the Owner thirty (30) days written notice to change the management agent or practice, as the case may be. If Owner fails to do as requested by the City in the written notice, the City may then require the immediate change of the management practice or agent, as the case may be. The management agreement shall provide that it is subject to termination by the Owner without penalty, upon thirty (30) days prior written notice. Within ten (10) business days following a direction of the City to replace the management agent, the Owner shall select another management agent or make other arrangements satisfactory to the City for continuing management of the Project. The Owner shall notify the City upon learning that there is a voluntary change in the management or control of the management agent, and, if the change is unsatisfactory to the City, the City shall be entitled to require the Owner to change the management agent in accordance with the terms of this paragraph.

REGULATORY AGREEMENT
PAGE 11

5. MONITORING AND ENFORCEMENT.

The City and Owner acknowledge and agree that this Agreement is subject to the provisions of Health and Safety Code section 33418, which provides in pertinent part for the City to:
“… monitor, on an ongoing basis, any housing affordable to persons and families of low or moderate income developed or otherwise made available pursuant to any provisions of this part. As part of this monitoring, [City] will require Developers or managers of the housing to submit an annual report to [City]. The annual reports will include for each rental unit the rental rate and the income and family size of the occupants... The income information required by this section will be supplied by the tenant in a certified statement of a form provided by [City].”

Owner will submit to City on an annual basis the report required by Section 33418. The annual report will include for each Affordable Unit the rental rate and the income and family size of the occupants. The income information will be supplied by the tenant in a certified statement on a form provided by City. Owner will provide for the submission of such information in its lease or occupancy agreement with tenants.

In the event Owner defaults in the performance or observance of any covenant, agreement or obligation of Owner pursuant to this Agreement, and if such default remains uncured for a period of thirty (30) days after written notice thereof (or such longer period as may apply to the specific alleged default) shall have been given by City, or, in the event said default cannot be cured within said time period, Owner has failed to commence to cure such default within said thirty (30) days and diligently prosecute said cure to completion, then City shall declare an “Event of Default” to have occurred hereunder, and, at its option, may take one or more of the following steps:

(a) By mandamus or other suit, action or proceeding at law or in equity, require Owner to perform its obligations and covenants hereunder or enjoin any acts or things which may be unlawful or in violation of this Agreement; or

(b) Take such other action at law or in equity as may appear necessary or desirable to enforce the obligations, covenants and agreements of Owner hereunder, including foreclosure of the City Ground Rent Loan Deed of Trust.

(c) The City may seek enforcement of this Agreement by an action or proceeding in the Super ior Court of the State of California for Orange County or in the Federal District Court for the Southern District of California. Owner consents and agrees that said courts shall have personal jurisdiction over it in any such action or proceeding and that e ither of said courts is a convenient forum for the litigation of any such action or proceeding.

Except as otherwise expressly stated in this Agreement, the rights and remedies of the parties are cumulative, and the exercise by any party of one or more o f its rights or remedies

REGULATORY AGREEMENT
PAGE 12

shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the same default or any other default by another party.

6. NONDISCRIMINATION.

There shall be no discrimination against or segregation of any person, or group of persons, on account of race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, national origin, ancestry or any other basis prohibited by applicable law in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, or any part thereof, or in the awarding of contracts for the Project, nor shall Owner, or any person claiming under or through it, establish or permit any such practice or practices of discrim ination 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, or in the awarding of contracts for the Project (except as permitted by this Agreement).

Owner shall comply with all applicable federal, state and local nondiscrimination, fair housing, and equal opportunity requirements.

6.1 Form of Nondiscrimination and Nonsegregation Clauses . Owner shall refrain from restricting the rental, sale or lease of the property on the basis of race, color, creed, age, class, income, religion, sex, sexual orientation, marital status, national origin, ancestry or any other basis prohibited by applicable law . All such deeds, leases or cont racts 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 p ersons 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 defi ned 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, s ublessees, 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,

REGULATORY AGREEMENT
PAGE 13

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 Co de, 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 land, nor shall the transferee itself 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 of the land.”

7. COVENANTS TO RUN WITH THE LAND.

Owner hereby subjects Owner’s leasehold interest in the Property to the covenants, reservations, and restrictions set forth in this Agreement. City and Owner hereby declare their express intent that all such covenants, reservations, and restrictions shall be deemed covenants running with the land and shall pass to and be binding upon the Owner’s successors in title to Owner’s leasehold interest in the Property; provided, however, that on the termination of this Agreement said covenants, reservations and restrictions shall expire, except the nondiscrimination covenants contained in Section 6 and Section 6.1 shall remain in perpetuity. All covenants without regard to technical classification or designation shall be binding for the benefit of the City, and such covenants shall run in favor of the City for the entire Restricted Period, without regard to whether the City is or remains an owner of any land or interest therein to which such covenants relate.

8. ATTORNEYS’ FEES.

Except as otherwise expressly provided in this Regulatory Agreement, in the event that any action, suit or other proceeding is brought by City to enforce the obligations of Owner under this Regulatory Agreement, Owner hereby agrees to pay all costs and expenses of suit, including attorneys’ fees, expert witness fees, and all costs incurred by City in each and every such action, suit or other proceeding, including any and all appeals or petitions therefrom.

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PAGE 14

9. AMENDMENTS.

This Agreement shall be amended only by a written instrument executed by the parties hereto or their successors in title, and duly r ecorded in the real property records of the County of Orange.

10. NOTICE.

Any notice required to be given hereunder shall be made in writing and shall be given by (i) personal delivery, (ii) courier service that provides a receipt showing date and time of delivery, or (iii) certified or registered mail, postage prepaid, return receipt requested, at the addresses specified below, or at such other addresses as may be specified in writing by the parties hereto:

City: City of Orange
300 East Chapman Avenue
Orange, California 92866
Attn: City Manager

With a copy to: City Attorney’s Office
City of Orange
300 East Chapman Avenue
Orange, California 92866

Owner: Katella Terrace, L.P.
c/o Orange Senior Housing, Inc.
555 S. Shaffer Street
Orange, CA 92866
Attn: President

With a copy to: Horizon ELOM Holdings, LLC
26565 West Agoura Road, Suite 200
Calabasas, California 91302
Attn: Keith Stanley

Notices personally delivered or delivered by courier shall be effective upon receipt. Mailed notices shall be effective on the earlier of receipt or Noon on the second business day following deposit in the United States mail. Notices, requests and submittals that are required to be given to the City shall be deemed given if such notices, requests and submittals are given to the City and, with regard to notices and requests, a copy is provided to the City Attorney’s Office.

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PAGE 15

11. SEVERABILITY/WAIVER/INTEGRATION.

11.1 Severability. If any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions hereof shall not in any way be affected or impaired thereby.

11.2 Waiver. A waiver by either party of the performance of any covenant or condition herein shall not invalidate this Agreement nor shall it be considered a waiver of any other covenants or conditions, nor shall the delay or forbearance by either party in exercising any remedy or right be considered a waiver of, or an estoppel against, the later exercise of such remedy or right.

11.3 Integration. This Agreement contains the entire Agreement between the parties except for the documents expressly mentioned herein and neit her party relies on any warranty or representation not contained in this Agreement.

12. GOVERNING LAW.

This Agreement shall be governed by the internal laws of the State of California.

13. COUNTERPARTS.

This Agreement may be executed in any number of counterparts, each of which shall constitute one original and all of which shall be one and the same instrument. This Agreement may be executed by each party on a separate signature page, and when the executed signature pages are combined, shall constitute one single instrument.

IN WITNESS WHEREOF , the City and Owner have executed this Regulatory Agreement by duly authorized representatives on the date first written hereinabove.

[SIGNATURES APPEAR ON NEXT PAGE]

REGULATORY AGREEMENT
PAGE 16

“OWNER”
KATELLA TERRACE, L.P.
a California limited partnership

By: HORIZON-ELOM HOLDINGS, LLC., a
California limited liability company, Owner’s
Administrative General Partner

By: _______________________________
Name: Keith Stanley
Its: Manager

By: ORANGE SENIOR HOUSING, INC., a
California non-profit public benefit corporation,
Owner’s Managing General Partner

By: _______________________________
Name: Paul Abbondante
Its: President

By: _______________________________
Name: Katherine Connaghan
Its: Vice President

“CITY”
CITY OF ORANGE, a
municipal corporation of the
State of California

By: ___________________
Mark A. Murphy, Mayor

ATTEST:

_______________________
Pamela Coleman, City Clerk

APPROVED AS TO
FORM:

By:____________________
___________
Gary A. Sheatz,
City Attorney

EXHIBIT A

LEGAL DESCRIPTION OF PROPERTY

The land referred to herein is situated in the City of Orange, County of Orange, State of California, and described as follows:

ATTACHMENT NO. 11

CITY GROUND RENT LOAN NOTE
PAGE 1

ATTACHMENT NO. 11

FORM OF RESIDUAL RECEIPTS PROMISSORY NOTE

CITY GROUND RENT LOAN NOTE

SECURED BY DEED OF TRUST

TO THE CITY OF ORANGE

3.00% Interest Orange, California
$_________ ______________, 20__

FOR VALUE RECEIVED, KATELLA TERRACE, L.P., a California limited partnership (“Borrower”), hereby promises to pay to the CITY OF ORANGE, a municipal corporation (“City”), or order, a principal amount of ____________________________ Dollars ($_________) plus interest accrued and payable pursuant to the provisions of this City Ground Rent Loan Note.

This City Ground Rent Loan Note has been accepted by the City as prepayment by Borrower of the Capitalized Rent for the lease of the Property by Borrower from City pursuant to the Ground Lease entered into between Borrower (“Tenant” therein) and City dated , 202_ (the “GROUND LEASE”) and the Disposition and Development Agreement entered into between Borrower (“Developer” therein) and City dated , 2022 (the “ DDA”). The DDA is a public record on file in the offices of the City. A Memorandum of Lease was recorded of even date with the Ground Lease in the Official Records of the County Recorder of the County of Orange as Document No. ____________.

1. Definitions. Any capitalized term not otherwise defined herein shall have the meaning ascribed to such term in the DDA. In addition, the follo wing terms shall have the following meanings:

The term “City Ground Rent Loan” shall mean a mortgage loan to the Developer from City in the amount of the Capitalized Rent for the lease of the Property.

The term “City Ground Rent Loan Deed of Trust” shall mean the deed of trust o n the Property which secures this City Ground Rent Loan Note, recorded of even date herewith, in which Borrower is the Trustor and the City is the Beneficiary.

The term “ City” shall mean the City of Orange, a municipal corporation of the State of California.

The term “Governmental Agency” means the United States, the State of California, the County of Orange, the City of Orange or any other political subdivision in which the Property is located, and any court or political subdivision, agency or instrumentality having jurisdiction over the Property.

ATTACHMENT NO. 11

CITY GROUND RENT LOAN NOTE
PAGE 2

The term “Method of Financing” shall mean Developer’s proposed method of obtaining financing, through grants, equity, pledged contributions, the sale of tax credits, donated labor and materials and/or third -party construction financing, which Method of Financing contains such information as may be required by Attachment No. 3 to the DDA and which has been approved by the City in accordance with the DDA.

The term “Regulatory Agreement” shall mean that certain Regulatory Agreement entered into by the City and the Borrower , dated on or about the date hereof and recorded against the Property.

The term “Residual Receipts” shall mean, in each calendar year, the amount by which Gross Revenue (as defined below) exceeds Annual Operating Expenses (as defined below), as determined by an audit to be completed not later than one hundred twenty (120) days after the end of each calendar year by an independent certified public accountant first approved in wr iting by the City, using generally accepted accounting principles and based on t he accrual method (the “Audit”).

(i) “Gross Revenue ,” with respect to each calendar year, shall mean all revenue, income, receipts, and other consideration actually received from operation or leasing of the Project. “Gross Revenue” shall include, but not be limited to: all rents, fees and charges paid by tenants, Section 8 payme nts or other rental subsidy payments received for the dwelling units, deposits forfeited by tenants, all cancellation fees, price index adjustments and any other rental adjustments to leases or rental agreements; proceeds from vending and laundry room mach ines; the proceeds of business interruption or similar insurance; the proceeds of casualty insurance to the extent not utilized to repair or rebuild the Project; and condemnation awards for a taking o f part or all of the Project for a temporary period. “Gross Revenue” shall also include the fair market value of any goods or services provided in consideration for the leasing or other use of any portion of the Project . “Gross Revenue” shall not include tenants’ security deposits, proceeds from any construction loan permitted under the DDA , the City Ground Rent Loan , Developer funds expended to develop or operate the Project, including capital contributions or similar advances, or interest that is earned on and allocated to reserve accounts.

(ii) “Annual Operating Expenses,” with respect to each calendar year shall mean the following costs reasonably and actually incurred for operation and maintenance of the Project to the extent that they are consistent with the Audit : property and other taxes and assessments imposed on the Project; premiums for property damage and liability insurance; utility services not paid for directly or reimbursed by tenants, including but not limited to water, sewer, trash collection, gas and electricity; maintenance and repair includin g but not limited to pest control, landscaping and grounds maintenance, painting and decorating, cleaning, common systems repairs, general repairs, janitorial, supplies, and similar customary utility services; any

ATTACHMENT NO. 11

CITY GROUND RENT LOAN NOTE
PAGE 3

license or certificate of occupancy fees required for operation of the Project; general administrative expenses including but not limited to advertising and marketing, security services and systems, professional fees for legal, audit, accounting and tax returns for the limited partnership, and similar customary administrative expenses; property management fees, expenses and costs, not to exceed eight percent (8%) of Gross Revenue, and pursuant to a management contract approved by the City; cash deposited into a replacement reserve in the amount of $___ per unit per year, subject to annual increases not to exceed three percent (3%) or such greater amount as may be required by any permitted construction lender ; cash deposited into an operating reserve i n such reasonable amounts as is approved by the City; and fixed debt service payments (excluding debt service contingent upon the availability of residual receipts or surplus cash of the Project) on loans associated with the Project and app roved by the City. “Annual Operating Expenses” shall no t include the following: depreciation, amortization, depletion or other non -cash expenses or any amount expended from a reserve account. Annual Operating Expenses shall be subject to the reasonable approval of the City.

2. This City Ground Rent Loan Note evidences the obligation of the Borrower to repay the City Ground Rent Loan to the City . Borrower may prepay the principal balance of this City Ground Rent Loan Note at any time without penalty. However, even if Borrower prepays the entire balance of this City Ground Rent Loan Note including all accrued interest, costs and penalties, the covenants, conditions and restrictions imposed on the Property by the Ground Lease and the Regulatory Agreement shall remain in full force and effect for the full 60-year term as specified therein.

3. This City Ground Rent Loan Note is payable at the principal offi ce of City, 300 East Chapman Avenue, Orange, California 92866, or at such other place as the holder hereof may inform the Borrower in writing, in lawful money of the United States.

4. This City Ground Rent Loan Note is secured by the City Ground Rent Loan Deed of Trust.

5. This City Ground Rent Loan Note shall accrue simple interest at the rate of three percent (3.00%) per annum on the principal amount outstanding. Interest on the City Ground Rent Loan shall accrue from date of the Commencement Date of lease of the Property to Borrower under the Ground Lease. However, if any event occurs giving the City the right to accelerate repayment of this City Ground Rent Loan Note, the entire unpaid and unforgiven principal balance owing hereunder shall, as of the date of such default, commence to accrue interest at a rate equal to two percentage points above the reference rate published by Bank of America N.A., or the maximum non-usurious interest rate permitted by law, whichever is less (the “Default Rate”). Further, in the event Borrower fails to reimburse the City for any amount which is due hereunder or under the City Ground Rent Loan Deed of Trust within ten (10) days after written notice of such advance is made by the City to Borrower, then such unreimbursed amount shall thereafter bear interest at the Default Rate until paid.

ATTACHMENT NO. 11

CITY GROUND RENT LOAN NOTE
PAGE 4

6. The unpaid principal balance of this City Ground Rent Loan Note and all accrued but unpaid interest shall be due and payable on t he earliest to occur of the following (which shall be referred to herein as the “Maturity Date”):

(a) the sixtieth (60th) anniversary of the Commencement Date under the Ground Lease;

(b) the date the Property or the improvements thereon or any portion thereof or interest therein is sold, transferred, assigned or refinanced, without the prior written approval of the City, except as permitted by the DDA or the Ground Lease; or

(d) the date on which there is a Default by the Borrower under the terms of this City Ground Rent Loan Note, the DDA, the City Ground Rent Loan Deed of Trust, the Regulatory Agreement, the Ground Lease or any deed of trust or other instrument encumbering the Property, which is not cured or waived within the respective time period provided herein and therein.

7. Prior to the Maturity Date, Borrower shall be obligated to repay the City Loan as follows:

(a) Borrower shall utilize twenty-five percent (25%) of Residual Receipts with respect to each calendar year to repay the City Ground Rent Loan. Payments hereunder must be made no later than one hundred twenty (120) days following the end of the applicable calendar year.

(b) In the event Borrower refinances any loan encumbering the Property other than the City Ground Rent Loan or transfers or sells the Property at any time prior to the Maturity Date, one hundred percent (100%) of the net proceeds received by or for the benefit of Borrower from such refinancing, transfer or resale shall be allocated and paid to the City as a repayment of the then outstanding principal and accrued and unpaid interest of this City Ground Rent Loan Note.

(c) In the e vent Borrower receives any unscheduled project reserves and/or unscheduled capital contributions related to the Project, one hundred percent (100%) of any such funds received by or for the benefit of Borrower shall be allocated and paid to the City as a repayment of the then outstanding principal and accrued and unpaid interest of this City Ground Rent Loan Note.

8. Without limiting any other provision of this City Ground Rent Loan Note relating to default or breach, a ny breach by Borrower of the provisions of the DDA and/or the Ground Lease concerning transfers of the Property shall constitute a default under this City Ground Rent Loan Note. The cure periods under the Ground Lease and this City Ground Rent Loan Note in connection with such a default shall run concurrently.

ATTACHMENT NO. 11

CITY GROUND RENT LOAN NOTE
PAGE 5

9. Borrower waives presentment for payment, demand, protest, and notices of dishonor and of protest; the benefits of all waivable exemptions; and all defenses and pleas on the ground of any extension or extensions of the time of payment or of any due date und er this City Ground Rent Loan Note, in whole or in part, whether before or after the M aturity Date and with or without notice. Borrower hereby agrees to pay all costs and expenses , including reasonable attorney’s fees, which may be incurred by the holder hereof, in the enforcement of this City Ground Rent Loan Note, the City Ground Rent Loan Deed of Trust or any term or provision of either.

10. Upon the failure of Borrower to perform or observe any term or provision of this City Ground Rent Loan Note, or upon the occurrence of any event of default under the terms of the DDA, the City Ground Rent Loan Deed of Trust , the Ground Lease , or the Regulatory Agreement, the holder may exercise its rights or remedies hereunder or thereunder. All such rights and remedies shall be cumulative. Upon the event of a default that is not cured or waived wi thin the time provided therefor , the whole of the unpaid pr incipal and interest owing on this City Ground Rent Loan Note shall, at the option of City and without notice, become immediately due and payable. This option may be exercised at any time after any such event and the acceptance of one or more payments fro m any person thereafter shall not constitute a waiver of City’s option.

City’s failure to exercise said option in connection with any particular event or series of events shall not be construed as a waiver of the provisions hereof as regards that event or any subsequent event.

11. (a) Failure or delay by Borrower to perform any material term or provision of this City Ground Rent Loan Note, the DDA, the City Ground Rent Loan Deed of Trust, the Ground Lease, or the Regulatory Agreement constitutes a default under this Note.

(b) City shall give written notice of default to Borrower, specifying the default complained of by the City. Delay in giving such notice shall not constitute a waiver of any default nor shall it change the time of default.

(c) Any failures or delays by City in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies. Delays by City in asserting any of its rights and remedies shall not deprive City 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.

(d) If a monetary event of default occurs, prior to exercising any remedies hereunder, the City shall give the Borrower written notice of such default. The Borrower shall have a period of ten (10) days after such notice is given within which to cure the default prior to exercise of remedies by the City.

(e) If a non-monetary event of default occurs, prior to exercising any remedies

ATTACHMENT NO. 11

CITY GROUND RENT LOAN NOTE
PAGE 6

hereunder, City shall give Borrower notice of such default. If the default is reasonably capable of being cured within thirty (30) days, Borrower shall have such period to effect a cure prior to exercise of remedies by City. If the default is such that it is not reasonably capable of being cured within thirty (30) days, and Borrower (i) initiates corrective action within said period, and (ii) diligently, continually, and in good faith works to effect a cure as soon as possible, then Borrower shall have such additional time as is reasonably necessary to cure the default prior to exercise of any remedies by City. In no event shall City be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default or the default is not cured within ninety (90) days after the first notice of default is given.

(f) Any notice of default shall be deemed given only if either (i) dispatched by first class mail, registered or certified, postage prepaid, return rec eipt requested, to the address specified for the Borrower in Section 16 of this City Ground Rent Loan Note, or (ii) by electronic facsimile transmission to the facsimile number specified for the Borrower in Section 16 of this City Ground Rent Loan Note, followed by delivery by the method described in clause (i), or (iii) by personal delivery (including by means of professional messenger or courier service such as United Parcel Service or Federal Express) to the address specified for the Borrower in Section 16 of this City Ground Rent Loan Note. Receipt shall be deemed to have occurred on the earlier of (i) the date of successfully completed electronic facsimile transmission or (ii) the date m arked on a written postal service or messenger or courier service receipt as the date of delivery or refusal of delivery (or attempted delivery if undeliverable). If either party gives notice of a change of address in the manner specified in this paragraph , all notices, demands and communications originated after receipt of the change of address (or the effective date specified in the notice of change of address, if later) shall be transmitted, delivered or sent to the new address.

12. Every provision of this City Ground Rent Loan Note is intended to be severable.

In the event any term or provision hereof is declared by a court of competent jurisdiction to be illegal, invalid or unenforceable for any reason whatsoever, such illegality, invalidity or unenforceability shall not affect the balance of the terms and provisions hereof, which terms and provisions shall remain binding and enforceable, and this City Ground Rent Loan Note shall be construed as if such illegal, invalid or unenforce able term or provision had not been contained herein, and if the rights created by this City Ground Rent Loan Note shall be held by a court of competent jurisdiction to be invalid or unenforceable as to any part of the obligations described herein, the remaining obligations must be completely performed and paid.

13. The obligation to repay the City Ground Rent Loan is a nonrecourse obligation of the Borrower. The Borrower shall not have any personal liability for repayment of the loan. The sole recourse of the City with respect to repayment of the City Ground Rent Loan shall be the exercise of its rights against the Property and the improvements thereon and any related security for the City Ground Rent Loan. Notwithstanding the foregoing, the City

ATTACHMENT NO. 11

CITY GROUND RENT LOAN NOTE
PAGE 7

(a) may obtain a judgment or order (including, without limitation, an injunction) requiring Borrower or any other party to perform (or refrain from) specified acts other than repayment of the City Ground Rent Loan; and

(b) may recover directly from Borrower or any other party:

(i) any damages, costs and expenses incurred by City as a result of fraud or any criminal act or acts of Borrower or any partner, shareholder, officer, d irector or employee of Borrower or of any general partner of Borrower;

(ii) any damages, costs and expenses incurred by City as a result of any misappropriation of funds provided for the Project as described in the DDA, rents and revenues from the operation of the Project, or proceeds of insurance policies or condemnation proceeds;

(iii) any and all amounts owing by Borrower pursuant to Borrower's indemnification regarding Hazardous Substances; and

(iv) all court costs and attorneys’ fees reasonably incurred in enforcing or collecting upon any of the foregoing exceptions.

16. The address of Borrower for purposes of receiving notices pursuant to this City Ground Rent Loan Note is as follows: Katella Terrace, L. P., c/o Orange Senior Housing, Inc., Attn: President, 555 S. Shaffer Street, Orange, CA 92866; with a copy to Horizon ELOM Holdings, LLC, 26565 West Agoura Road, Suite 200, Calabasas, California 91302, Attn: Keith Stanley.

17. In addition to the other t erms of this City Ground Rent Loan Note, the Borrower hereby agrees and acknowledges that, notwithstanding any internal accounting procedures or provision pertaining to the use of receipts, payments, reserves and distributions contained in its organizational document, the terms of this City Ground Rent Loan Note, the Ground Lease and the DDA shall control as to the DDA, the Ground Lease, the City Ground Rent Loan , this City Ground Rent Loan Note and all operating income from the Project.

18. Neither this City Ground Rent Loan Note nor any term hereof may be waived, amended, discharged, modified, changed or terminated orally; nor shall any waiver of any provision hereof be effective except by an instrument in writing signed by City and Borrower.

19. Notwithstanding any provision in this City Ground Rent Loan Note, the City Ground Rent Loan Deed of Trust or other document securing same, the total liability for payment in the nature of interest shall not exceed the limit now imposed by applicable laws of the State of California.

20. This City Ground Rent Loan Note has been executed and delivered by Borrower in

ATTACHMENT NO. 11

CITY GROUND RENT LOAN NOTE
PAGE 8

the State of California and is to be governed and construed in accordance with the internal laws thereof.

21. Time is of the essence in the performance of each provision hereof.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

ATTACHMENT NO. 11

CITY GROUND RENT LOAN NOTE
PAGE 9

IN WITNESS WHEREOF Borrower has executed this City Ground Rent Loan Note as of the day and year set forth above.

BORROWER:

KATELLA TERRACE, L.P., a California limited
partnership

By: HORIZON-ELOM HOLDINGS, LLC., a
California limited liability company, Developer’s
Administrative General Partner

By: _______________________________
Name: Keith Stanley
Its: Manager

By: ORANGE SENIOR HOUSING, INC ., a
California non -profit public benefit corporation,
Developer’s Managing General Partner

By: _______________________________
Name: Paul Abbondante
Its: President

By: _______________________________
Name: Katherine Connaghan
Its: Vice President

ATTACHMENT NO. 12

FORM OF CITY GROUND RENT LOAN DEED OF TRUST

FREE RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:

THE CITY OF ORANGE
300 E. Chapman Avenue
Orange, CA 92866
Attn:

______________________________________________________________________________ SPACE ABOVE THIS LINE FOR RECORDER’S USE

OFFICIAL BUSINESS
APNs: Document entitled to free
recording per Government Code
Section 27383

CITY GROUND RENT LOAN DEED OF TRUST

AND ASSIGNMENT OF RENTS

This CITY GROUND RENT LOAN DEED OF TRUST AND ASSIGNMENT OF RENTS (“Deed of Trust”), dated as of this ______ day of _________, 20__, is made by KATELLA TERRACE, L.P., a California limited partnership whose address is c/o Orange Senior Housing, Inc., 555 S. Shaffer Street, Orange, CA 92866 , Attn: President (“Trustor”), in favor of _____________ Title Company, a California corporation (“Trustee”), and the CITY OF ORANGE, CALIFORNIA, a municipal corporation, whose address is 300 E. Chapman Avenue, Orange, California 92866 , Attn: City Manager (“Beneficiary”), and is executed to secure that certain City Ground Rent Loan Note dated about the date hereof in a principal amount of ________________________________ DOLLARS executed by Trustor in favor of Beneficiary (such City Ground Rent Loan Note, as it may from time to time be supplemented, amended, extended, renewed or otherwise modified from time to time being referred to in this Deed of Trust as the “Promissory Note ”), the provisions of which are incorporated in this Deed of Trust by reference. Trustor holds a leasehold interest in the Land under a Ground Lease entered into between Trustor (“Tenant” therein) and Beneficiary (“Landlord” therein) of even date herewith (the “Ground Lease”). A Memorandum of Lease was recorded of even date with the Ground Lease in the Official Records of the County Recorder of the County of Orange as Document No. ____________.

1. Grant in Trust and Security Agreement . For valuable c onsideration, Trustor irrevocably grants, transfers and assigns to Trustee, in trust, with power of sale, for the benefit of Beneficiary, the following property (the “Trust Estate”):

(a) the leasehold interest held by Trustor under the Ground Lease in t he real property described in Exhibit “A” attached to this Deed of Trust and incorporated in this Deed of Trust by reference (the “Land”); and

(b) all buildings, structures and other improvements now or in the future located or constructed on the Land (the “Improvements”); and

(c) all tenements, hereditaments, appurtenances, privileges and other rights and interests now or in the future benefitting or otherwise relating to the Land or the Improvements, including easements, rights -of-way, development rights, mineral rights, water rights and water stock (the “Appurtenances,” together with the Land and the Improvements, the “Property”).

2. Obligations Secured. This Deed of Trust is given for the purpose of securing payment and performance of the following (the “Secured Obligations”): (a) all present and future indebtedness evidenced by the Promissory Note, including principal and all other amounts pa yable under the terms of the Promissory Note ), the provisions of which are incorporated in this Deed of Trust by reference; (b) all present and future obligations of Trustor to Beneficiary under this Deed of Trust; and (c ) all additional present and futur e obligations of Trustor to Beneficiary under any other agreement or instrument (whether exist ing now or in the future) which states that it is, or such obligations are, secured by this Deed of Trust; in each case as such indebtedness and other obligations may from time to time be supplemented, modified, amended, renewed and extended, whether evidenced by new or additional documents or otherwise.

3. Trustor’s Covenants . To protect the security of this Deed of Trust, Trustor agrees as follows:

(a) Payment and Performance of Secured Obligations . Trustor will pay and perform all Secured Obligations in accordance with the respective terms of such Secured Obligations, whether evidenced by or arising under this Deed of Trust or the Promissory Note.

(b) Liens and Taxes. Trustor will pay, prior to delinquency, all taxes, if any, which are or may become a lien affecting any part of the Trust Estate and Trustor will pay and perform when due all other obligations secured by or constituting a lien affecting any part of the Trust Estate, provided that Trustor will not be in violation of this provision if Trustor is protesting or contesting such taxes in good faith and by legal means.

4. Obligations With Respect to Trust Estate . Neither Beneficiary nor Truste e will be under any obligation to preserve, maintain or protect the Trust Estate or any of Trustor’s rights or interests in the Trust Estate, or make or give any presentments, demands for performance, protests, notices

of nonperformance, protest or dishonor or other notices of any kind in connection with any rights, or take any other action with respect to any other matters relating to the Trust Estate. Beneficiary and Trustee do not assume and shall have no liability for, and will not be obligated to perform, any of Trustor’s obligations with respect to any rights or any other matters relating to the Trust Estate, and nothing contained in this Deed of Trust will release Trustor from any such obligations.

5. Assignment of Rents and Profits . Trustor irrevo cably grants, transfers and assigns to Beneficiary, during the continuance of this Deed of Trust, all of Trustor ’s right, title and interest in and to the rents, issues, income, revenues, royalties and profits from any lease of the Property (“Rents”). Notwithstanding such assignment, so long as no Event of Default has occurred and is continuing, Trustor will have the right to collect, receive, hold and dispose of the Rents as the same become due and payable, provided that unless Beneficiary otherwise consents in writing: (a) any such Rents paid more than 30 days in advance of the date when due will be delivered to Beneficiary and held by Beneficiary in a cash collateral account (over which Beneficiary will have sole and executive control and right of withdrawal), to be released and applied on the date when due (or, if an Event of Default has occurred and is continuing, at such other time or times and in such manner as Beneficiary may determine), and (b) if an Event of Default has occurred and is continuing , Trustor’s right to collect and receive the Rents will cease and Beneficiary will have the sole right, with or without taking possession of the Property, to collect all Rents, including those past due and unpaid. Any such collection of Rents by Beneficiary will not cure or waive any Event of Default or notice of default or invalidate a ny act done pursuant to such notice. Failure or discontinuance of Beneficiary at any time, or from time to time, to collect the Rents will not in any manner affect the subsequent enforcement by Beneficiary of the right to collect the same. Nothing contai ned in this Deed of Trust, nor the exercise of the right by Beneficiary to collect the Rents, will be deemed to make Beneficiary a “mortgagee in possession” or will be, or be construed to be, an affirmation by Beneficiary of, or an assumption of liability by Beneficiary under, or a subordination of the lien of this Deed of Trust to any tenancy, lease or option.

6. Remedies Upon Event of Default. Upon the occurrence of any Event of Defa ult (defined in Section 7 below): (a) Trustor will be in default under this Deed of Trust, and upon acceleration of the payment of any Secured Obligations in accordance with the terms of the Promissory Note, all Secured Obligations will immediately become due and payable without further notice to Trustor; (b) upon demand by Beneficiary, Trustor will pay to Beneficiary, in addition to all other payments specifically required under the Promissory Note, at the times and in the amounts required by Beneficiary from time to time, sums which when cumulated will be sufficient to pay one month prior to the time the same become delinquent, all taxes which are or may become a lien affecting the Trust Estate and the premiums for any policies of insurance to be obtained hereunder (all such payments to be held in a cash collateral account as additional security for the Secured Obligations over which Beneficiary will have sole and exclusive control and right of withdrawal); and (c) Beneficiary may, without notice to or demand upon Trustor, which are expressly waived by Trustor (except for not ices or demands otherwise required by applicable laws to the extent not effectively waived by Trustor and any notices or demands specified below), and without releasing Trustor from any of its Secured Obligations, exercise any one or more of the following remedies as Beneficiary may determine.

Beneficiary may, either directly or through an agent or court -appointed receiver, and without regard to the adequacy of any security for the Secured Obligations:

(i) enter, take possession of, manage, operate, protect, preserve and maintain, and exercise any other rights of an owner of the Trust Estate, and use any other properties or facilities of Trustor relating to the Trust Estate, all without payment of rent or other compensation to Trustor;

(ii) enter into such contracts and take such other action as Beneficiary deems appropriate to complete all or any part of any construction which may have commenced on the Land, subject to such modifications and other changes in the plan of development as Benefi ciary may deem appropriate;

(iii) make, cancel, enforce or modify leases, obtain and evict tenants, fix or modify rents and, in its own name or in the name of Trustor, otherwise conduct any business of Trustor in relation to the Trust Estate and deal with Trustor’s creditors, debtors, tenants, agents and employees and any other persons having any relationship with Trustor in relation to the Trust Estate, and amend any contracts between them, in any manner Beneficiary may determine;

(iv) endorse, in the na me of Trustor, all checks, drafts and other evidences of payment relating to the Trust Estate, and receive, open and dispose of all mail addressed to Trustor and notify the postal authorities to change the address for delivery of such mail to such address as Beneficiary may designate; and

(iv) take such other action as Beneficiary deems appropriate to protect the security of this Deed of Trust.

Beneficiary’s agent or court -appointed receiver will hold all monies and proceeds, including, without limitation, proceeds from the sale of the Property or any portion thereof, for the benefit of the Trustor and will not disburse the monies or proceeds for the satisfaction of the Secured Obligations without the prior written consent of Beneficiary. The Beneficiary ’s agent or court-appointed receiver may, but without any obligation to do so and without notice to or demand upon Trustor and without releasing Trustor from any Secured Obligations under this Deed of Trust, and at the expense of Trustor, follow the written instruction of Beneficiary under this Section 6.

Beneficiary may execute and deliver to Trustee written declaration of default and demand for sale and written notice of default and of election to cause all or any part of the Trust Estate to be sold, which notice Trustee will cause to be filed for record; and after the lapse of such time as may then be required by law following the recordation of such notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, will sell such Property at the time and place fixed by it in such notice of sale, either as a whole or in separate parcels and in such order as Beneficiary may direct (Trustor waiving any right to direct the order of sale), at public auction to the highest bidder for cash in lawful money of the United States (or

cash equivalents acceptable to Trustee to the extent permitted by applicable law), payable at the time of sale. Trustee may postpone the sale of all or any part of the Trust Estate by p ublic announcement at such time and place of sale, and from time to time after any such postponement may postpone such sale by public announcement at the time fixed by the preceding postponement.

Trustee will deliver to the purchaser at such sale its deed conveying the property so sold, but without any covenant or warranty, express or implied, and the recitals in such deed of any matters or facts will be conclusive proof of the truthfulness thereof. Any person, including Trustee or Beneficiary, may purchase at such sale, and any bid by Beneficiary may be, in whole or in part, in the form of cancellation of all or any part of the Secured Obligations. Any such sale will be free and clear of any interest of Trustor and any lease, encumbrance or other matter affecting the property so sold which is subject or subordinate to this Deed of Trust, except that any such sale will not result in the termination of any such lease (i) if and to the extent otherwise provided in any estoppel or other agreement executed by the tenant and Beneficiary (or executed by the tenant in favor of, and accepted by, Beneficiary), or (ii) if the purchaser at such sale gives written notice to the tenant, within 30 days after date of sale, that the lease will continue in effect.

Beneficiary may proceed to protect, exercise and enforce any and all other remedies provided under the Agreement, Regulatory Agreement, Promissory Note, this Deed of Trust or by applicable laws.

All proceeds of collection, sale or other liquidation of the Trust Estate will be applied first to all costs, fees, expenses and other amounts payable by Trustor under this Deed of Trust and to all other Secured Obligations not otherwise repaid in such order and manner as Beneficiary may determine, and the remainder, if any, to the person or persons legally entitled thereto.

Each of the remedies provided in this Deed of Trust is cumulative and not exclusive of, and will not prejudice, any other remedy provided in this Deed of Trust or by applicable laws. Each remedy may be exercised from time to time as often as deemed necessary by Trustee and Beneficiary, and in such order and manner as Beneficiary may determine. This Deed of Trust is independent of any other security for the Secured Obligations, and upon the occurrence of an Event of Default, Trustee or Beneficiary may proceed in the enforcement of this Deed of Trust independently of any other remedy that Trustee or Beneficiary may at any time hold with respect to the Trust Estate or the Secured Obligations or any other security. Trustor, for itself and for any other person claiming by or through Trustor, waives, to the fullest extent permitted by applicable laws, all rights to require a marshaling of assets by Trustee or Beneficiary or to require Trustee or Beneficiary to first resort to any particular portion of the Trust Estate or any other security (whether such portion shall have been retained or conveyed by Trustor) before resorting to any other portion, and all rights of redemption, stay and appraisal.

7. Event of Default. An “Event of Default” will be deemed to occur if:

(a) Trustor is in default of any provision of the DDA or the Regulatory Agreement and fails to cure such default subject to the notice and cure provisions thereof; or

(b) Trustor is in default of any provision of the Promissory Note or this Deed of Trust and fails to cure such default within the times set forth in the notice and cure provisions of Section 11 of the Promissory Note.

8. Costs, Fees and Expenses . Trustor will pay, on dema nd, all reasonable costs, fees, expenses, advances, charges, losses and liabilities of Trustee and Beneficiary under or in connection with this Deed of Trust or the enforcement of, or the exercise of, any remedy or any other action taken by Trustee or Bene ficiary under this Deed of Trust or the collection of the Secured Obligations, in each case including, without limitation, (a) reconveyance and foreclosure fees of Trustee, (b) costs and expenses of Beneficiary or Trustee or any receiver appointed under this Deed of Trust in connection with the operation, maintenance, management, protection, preservation, collection, sale or other liquidation of the Trust Estate or foreclosure of this Deed of Trust, (c) advances made by Beneficiary to complete or partially construct all or any part of any construction which may have commenced on the Land or otherwise to protect the security of this Deed of Trust, (d) cost of evidence of title, and (e) the reasonable fees and disbursements of Trustee’s and Beneficiary ’s legal counsel and other out -of-pocket expenses, and the reasonable charges of Beneficiary’s legal counsel.

9. Late Payments. By accepting payment of any part of the Secured Obligations after its due date, Beneficiary does not waive its right either to require prompt payment when due of all other Secured Obligations or to declare a default for failure to so pay.

10. Action by Trustee. At any time and from time to time upon written request of Beneficiary and presentation of this Deed of Trust for endorsement, and without affecting the personal liability of any person for payment of the Secured Obligations or the security of this Deed of Trust for the full amount of the Secured Obligations on all Property remaining subject to this Deed of Trust, Trustee may, without notice and without liability for such action, and notwithstanding the absence of any payment on the Secured Obligations or any other consideration: (a) reconvey all or any part of the Trust Estate, (b) consent to the making and recording, or either, of any map or plat of the Land, (c) join in granting any easement affecting the Land, or (d) join in or consent to any extension agreement or any agreement subordinating the lien of this Deed of Trust. Trustee is not obligated to notify Trustor or Benefic iary of any pending sale under any other deed of trust or of any action or other proceeding in which Trustor, Beneficiary or Trustee is a party unless brought by Trustee.

11. Reconveyance. Upon written request of Beneficiary and surrender of this Deed of Trust and the Promissory Note to Trustee for cancellation or endorsement, and upon payment of its fees and charges, Trustee will reconvey, without warranty, all or any part of the Property then subject to this Deed of Trust. Any reconveyance, whether ful l or partial, may be made in terms to “the person or persons legally entitled thereto,” and the recitals in such reconveyance of any matters or facts will be conclusive proof of the truthfulness thereof. Beneficiary will not be required to cause any Property to be released from this Deed of Trust until final payment and performance in full of all Secured Obligations and termination of all obligations of Beneficiary under or in connection with the Promissory Note or until the Secured Obligations are forgiven.

12. Substitution of Trustee . Beneficiary may from time to time, by instrument in writing, substitute a successor or successors to any Trustee named in or acting under this Deed of Trust, which instrument, when executed by Beneficiary and duly acknowledged and recorded in the office of the recorder of the county or counties where the Land is situated, will be conclusive proof of proper substitution of such successor Trustee or Trustees who will, without conveyance from the predecessor Trustee, succeed to all of its title, estate, rights, powers and duties. Such instrument must contain the name of the original Trustor, Trustee and Beneficiary, the book and page where this Deed of Trust is recorded (or the date of recording and instrument number) and the name and address of the new Trustee.

13. Successors and Assigns. This Deed of Trust applies to and will be binding on and inure to the benefit of all parties to this Deed of Trust and their respective successors and permitted assigns.

14. Acceptance. Notice of acceptance of this Deed of Trust by Beneficiary or Trustee is waived by Trustor. Trustee accepts this Deed of Trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law.

15. Beneficiary’s Statements . For any statement regarding the Secured Obligations, Beneficiary may charge the maximum amount permitted by law at the time of the request for such statement.

16. Governing Law. This Deed of Trust will be governed by, and construed and enforced in accordance with, the Laws of California.

17. Recording. The Trustee will record this Deed of Trust in the official records of Los Angeles County, California.

[Remainder of Page Intentionally Blank]

[Signatures on Following Page]

TRUSTOR

EXHIBIT A TO DEED OF TRUST

LEGAL DESCRIPTION

(to be inserted)
Katella Terrace
Assignment of Agreements