Document:

Exhibit
10.30

 

REQUESTED
BY

AND
WHEN RECORDED MAIL TO:

 

Thomas
A. Hauser, Esq.

Ballard
Spahr, LLP

300
East Lombard Street, 18th Floor

Baltimore,
Maryland 21202

 

MULTIFAMILY DEED OF TRUST,

ASSIGNMENT OF RENTS,

SECURITY AGREEMENT AND FIXTURE
FILING

(CALIFORNIA)

 

ATTENTION COUNTY RECORDER:  THIS
INSTRUMENT IS INTENDED TO BE EFFECTIVE AS A FINANCING STATEMENT FILED AS A
FIXTURE FILING PURSUANT TO SECTION 9502 OF THE CALIFORNIA COMMERCIAL CODE.  PORTIONS OF THE GOODS COMPRISING A PART OF
THE MORTGAGED PROPERTY ARE OR ARE TO BECOME FIXTURES RELATED TO THE LAND
DESCRIBED IN EXHIBIT A HERETO.  THIS
INSTRUMENT IS TO BE FILED FOR RECORD IN THE RECORDS OF THE COUNTY WHERE DEEDS
OF TRUST ON REAL PROPERTY ARE RECORDED AND SHOULD BE INDEXED AS BOTH A DEED OF
TRUST AND AS A FINANCING STATEMENT COVERING FIXTURES.  THE ADDRESSES OF BORROWER (DEBTOR) AND LENDER
(SECURED PARTY) ARE SPECIFIED IN THE FIRST PARAGRAPH ON PAGE 1 OF THIS
INSTRUMENT.

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS

  	
  2

  
	
   

  	
   

  	
   

  
	
  2.

  	
  UNIFORM
  COMMERCIAL CODE SECURITY AGREEMENT

  	
  7

  
	
   

  	
   

  	
   

  
	
  3.

  	
  ASSIGNMENT
  OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION

  	
  8

  
	
   

  	
   

  	
   

  
	
  4.

  	
  ASSIGNMENT
  OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY

  	
  10

  
	
   

  	
   

  	
   

  
	
  5.

  	
  PAYMENT
  OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM

  	
  12

  
	
   

  	
   

  	
   

  
	
  6.

  	
  EXCULPATION

  	
  12

  
	
   

  	
   

  	
   

  
	
  7.

  	
  DEPOSITS
  FOR TAXES, INSURANCE AND OTHER CHARGES

  	
  13

  
	
   

  	
   

  	
   

  
	
  8.

  	
  COLLATERAL
  AGREEMENTS

  	
  14

  
	
   

  	
   

  	
   

  
	
  9.

  	
  APPLICATION
  OF PAYMENTS

  	
  14

  
	
   

  	
   

  	
   

  
	
  10.

  	
  COMPLIANCE
  WITH LAWS

  	
  14

  
	
   

  	
   

  	
   

  
	
  11.

  	
  USE
  OF PROPERTY

  	
  15

  
	
   

  	
   

  	
   

  
	
  12.

  	
  PROTECTION
  OF LENDER’S SECURITY

  	
  15

  
	
   

  	
   

  	
   

  
	
  13.

  	
  INSPECTION

  	
  16

  
	
   

  	
   

  	
   

  
	
  14.

  	
  BOOKS
  AND RECORDS; FINANCIAL REPORTING

  	
  16

  
	
   

  	
   

  	
   

  
	
  15.

  	
  TAXES;
  OPERATING EXPENSES

  	
  18

  
	
   

  	
   

  	
   

  
	
  16.

  	
  LIENS;
  ENCUMBRANCES

  	
  19

  
	
   

  	
   

  	
   

  
	
  17.

  	
  PRESERVATION,
  MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY

  	
  19

  
	
   

  	
   

  	
   

  
	
  18.

  	
  ENVIRONMENTAL HAZARDS

  	
  20

  

 

i

 

	
  19.

  	
  PROPERTY
  AND LIABILITY INSURANCE

  	
  25

  
	
   

  	
   

  	
   

  
	
  20.

  	
  CONDEMNATION

  	
  27

  
	
   

  	
   

  	
   

  
	
  21.

  	
  TRANSFERS
  OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER

  	
  28

  
	
   

  	
   

  	
   

  
	
  22.

  	
  EVENTS
  OF DEFAULT

  	
  33

  
	
   

  	
   

  	
   

  
	
  23.

  	
  REMEDIES
  CUMULATIVE

  	
  34

  
	
   

  	
   

  	
   

  
	
  24.

  	
  FORBEARANCE

  	
  34

  
	
   

  	
   

  	
   

  
	
  25.

  	
  LOAN
  CHARGES

  	
  35

  
	
   

  	
   

  	
   

  
	
  26.

  	
  WAIVER
  OF STATUTE OF LIMITATIONS

  	
  35

  
	
   

  	
   

  	
   

  
	
  27.

  	
  WAIVER
  OF MARSHALLING

  	
  35

  
	
   

  	
   

  	
   

  
	
  28.

  	
  FURTHER
  ASSURANCES

  	
  36

  
	
   

  	
   

  	
   

  
	
  29.

  	
  ESTOPPEL
  CERTIFICATE

  	
  36

  
	
   

  	
   

  	
   

  
	
  30.

  	
  GOVERNING
  LAW; CONSENT TO JURISDICTION AND VENUE

  	
  36

  
	
   

  	
   

  	
   

  
	
  31.

  	
  NOTICE

  	
  37

  
	
   

  	
   

  	
   

  
	
  32.

  	
  SALE
  OF NOTE; CHANGE IN SERVICER

  	
  37

  
	
   

  	
   

  	
   

  
	
  33.

  	
  SINGLE
  ASSET BORROWER

  	
  37

  
	
   

  	
   

  	
   

  
	
  34.

  	
  SUCCESSORS
  AND ASSIGNS BOUND

  	
  38

  
	
   

  	
   

  	
   

  
	
  35.

  	
  JOINT
  AND SEVERAL LIABILITY

  	
  38

  
	
   

  	
   

  	
   

  
	
  36.

  	
  RELATIONSHIP
  OF PARTIES; NO THIRD PARTY BENEFICIARY

  	
  38

  
	
   

  	
   

  	
   

  
	
  37.

  	
  SEVERABILITY;
  AMENDMENTS

  	
  38

  
	
   

  	
   

  	
   

  
	
  38.

  	
  CONSTRUCTION

  	
  38

  
	
   

  	
   

  	
   

  
	
  39.

  	
  LOAN
  SERVICING

  	
  39

  
	
   

  	
   

  	
   

  
	
  40.

  	
  DISCLOSURE OF
  INFORMATION

  	
  39

  

 

ii

 

	
  41.

  	
  NO
  CHANGE IN FACTS OR CIRCUMSTANCES

  	
  39

  
	
   

  	
   

  	
   

  
	
  42.

  	
  SUBROGATION

  	
  39

  
	
   

  	
   

  	
   

  
	
  43.

  	
  ACCELERATION;
  REMEDIES

  	
  40

  
	
   

  	
   

  	
   

  
	
  44.

  	
  RECONVEYANCE

  	
  41

  
	
   

  	
   

  	
   

  
	
  45.

  	
  SUBSTITUTE
  TRUSTEE

  	
  41

  
	
   

  	
   

  	
   

  
	
  46.

  	
  STATEMENT
  OF OBLIGATION

  	
  41

  
	
   

  	
   

  	
   

  
	
  47.

  	
  SPOUSE’S
  SEPARATE PROPERTY

  	
  41

  
	
   

  	
   

  	
   

  
	
  48.

  	
  FIXTURE
  FILING

  	
  42

  
	
   

  	
   

  	
   

  
	
  49.

  	
  ADDITIONAL
  PROVISION REGARDING APPLICATION OF PAYMENTS

  	
  42

  
	
   

  	
   

  	
   

  
	
  50.

  	
  WAIVER
  OF MARSHALLING; OTHER WAIVERS

  	
  42

  
	
   

  	
   

  	
   

  
	
  51.

  	
  ADDITIONAL
  PROVISIONS CONCERNING ENVIRONMENTAL HAZARDS

  	
  42

  
	
   

  	
   

  	
   

  
	
  52.

  	
  ADDITIONAL
  PROVISION REGARDING INSURANCE

  	
  44

  
	
   

  	
   

  	
   

  
	
  53.

  	
  WAIVER OF TRIAL BY JURY

  	
  44

  

 

iii

 

MULTIFAMILY DEED OF TRUST,

ASSIGNMENT OF RENTS,

SECURITY AGREEMENT AND

FIXTURE FILING

 

THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT
AND FIXTURE FILING (the “Instrument”) is
dated as of the 28th day of October, 2009, by BEHRINGER HARVARD NOHO, LLC, a
limited liability company organized and existing under the laws of Delaware,
whose address is 15601 Dallas Parkway, Suite 600, Addison, Texas 75001, as
trustor (“Borrower”), to Chicago Title Company,
whose address is 700 S. Flower Street, Suite 800, Los Angeles, CA 90017, as
trustee (“Trustee”), for the benefit of Red
Mortgage Capital, Inc., a corporation organized and existing under the laws of
Ohio, whose address is Two Miranova Place, 12th Floor,
Columbus, Ohio 43215, as beneficiary (“Lender”).

 

Borrower, in consideration of the Indebtedness and the trust created by
this Instrument, irrevocably grants, conveys and assigns to Trustee, in trust,
with power of sale, the Mortgaged Property, including the Land located in Los
Angeles County, State of California and described in Exhibit A attached to this
Instrument.

 

TO SECURE TO LENDER the repayment of the Indebtedness evidenced by
Borrower’s Multifamily Note payable to Lender, dated as of the date of this
Instrument, and maturing on November 1, 2016, in the principal amount of
$51,300,000.00, and all renewals, extensions and modifications of the
Indebtedness, the payment of all sums advanced by or on behalf of Lender to
protect the security of this Instrument under Section 12, and the performance
of the covenants and agreements of Borrower contained in the Loan Documents.

 

Borrower represents and warrants that Borrower is lawfully seized of
the Mortgaged Property and has the right, power and authority to grant, convey
and assign the Mortgaged Property, and that the Mortgaged Property is
unencumbered.  Borrower covenants that
Borrower will warrant and defend generally the title to the Mortgaged Property
against all claims and demands, subject to any easements and restrictions
listed in a schedule of exceptions to coverage in any title insurance policy
issued to Lender contemporaneously with the execution and recordation of this
Instrument and insuring Lender’s interest in the Mortgaged Property.

 

Covenants.  Borrower and
Lender covenant and agree as follows:

 

1

 

1.             DEFINITIONS.

 

The
following terms, when used in this Instrument (including when used in the above
recitals), shall have the following meanings:

 

(a)           “Borrower” means all persons or entities identified as “Borrower”
in the first paragraph of this Instrument, together with their successors and
assigns.

 

(b)           “Collateral Agreement” means any separate agreement between
Borrower and Lender for the purpose of establishing replacement reserves for
the Mortgaged Property, establishing a fund to assure completion of repairs or
improvements specified in that agreement, or assuring reduction of the
outstanding principal balance of the Indebtedness if the occupancy of or income
from the Mortgaged Property does not increase to a level specified in that
agreement, or any other agreement or agreements between Borrower and Lender
which provide for the establishment of any other fund, reserve or account.

 

(c)           “Environmental Permit” means any permit, license, or other
authorization issued under any Hazardous Materials Law with respect to any
activities or businesses conducted on or in relation to the Mortgaged Property.

 

(d)           “Event of Default” means the occurrence of any event listed
in Section 22.

 

(e)           “Fixtures” means all property which is so attached to the
Land or the Improvements as to constitute a fixture under applicable law,
including: machinery, equipment, engines, boilers, incinerators, installed
building materials; systems and equipment for the purpose of supplying or
distributing heating, cooling, electricity, gas, water, air, or light;
antennas, cable, wiring and conduits used in connection with radio, television,
security, fire prevention, or fire detection or otherwise used to carry
electronic signals; telephone systems and equipment; elevators and related
machinery and equipment; fire detection, prevention and extinguishing systems
and apparatus; security and access control systems and apparatus; plumbing
systems; water heaters, ranges, stoves, microwave ovens, refrigerators,
dishwashers, garbage disposers, washers, dryers and other appliances; light
fixtures, awnings, storm windows and storm doors; pictures, screens, blinds,
shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor
and wall coverings; fences, trees and plants; swimming pools; and exercise
equipment.

 

(f)            “Governmental Authority” means any board, commission,
department or body of any municipal, county, state or federal governmental
unit, or any subdivision of any of them, that has or acquires jurisdiction over
the Mortgaged Property or the use, operation or improvement of the Mortgaged
Property.

 

2

 

(g)           “Hazardous Materials” means petroleum and petroleum products
and compounds containing them, including gasoline, diesel fuel and oil;
explosives; flammable materials; radioactive materials; polychlorinated
biphenyls (“PCBs”) and compounds containing them; lead and lead-based paint;
asbestos or asbestos-containing materials in any form that is or could become
friable; underground or above-ground storage tanks, whether empty or containing
any substance; any substance the presence of which on the Mortgaged Property is
prohibited by any federal, state or local authority; any substance that
requires special handling; and any other material or substance now or in the
future defined as a “hazardous substance,” “hazardous material,” “hazardous
waste,” “toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant”
within the meaning of any Hazardous Materials Law.

 

(h)           “Hazardous Materials Laws” means all federal, state, and
local laws, ordinances and regulations and standards, rules, policies and other
governmental requirements, administrative rulings and court judgments and
decrees in effect now or in the future and including all amendments, that
relate to Hazardous Materials and apply to Borrower or to the Mortgaged
Property. Hazardous Materials Laws include, but are not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq.,
the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq.,
the Clean Water Act, 33 U.S.C. Section 1251, et seq.,
and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, et seq., and their state analogs.

 

(i)            “Impositions” and “Imposition Deposits”
are defined in Section 7(a).

 

(j)            “Improvements” means the buildings, structures, improvements,
and alterations now constructed or at any time in the future constructed or
placed upon the Land, including any future replacements and additions.

 

(k)           “Indebtedness” means the principal of, interest on, and all
other amounts due at any time under, the Note, this Instrument or any other
Loan Document, including prepayment premiums, late charges, default interest,
and advances as provided in Section 12 to protect the security of this
Instrument.

 

(l)            [Intentionally
omitted]

 

(m)          “Key Principal” means (A) the natural person(s) or entity
identified as such at the foot of this Instrument; (B) the natural person or
entity who signed either the Acknowledgement and Agreement of Key Principal to
Personal Liability for Exceptions to Non-Recourse Liability or the Exceptions
to Non-Recourse Guaranty (or is otherwise a guarantor on the Indebtedness); and
(C) any person or entity who becomes a Key Principal after the date of this
Instrument and is identified as such in an assumption agreement, or another
amendment or supplement to this Instrument or who otherwise signs either the
Acknowledgement and Agreement of Key Principal to Personal Liability

 

3

 

for
Exceptions to Non-Recourse Liability or Exceptions to Non-Recourse Guaranty (or
any other guaranty of the Indebtedness).

 

(n)           “Land” means the land described in Exhibit A.

 

(o)           “Leases” means all present and future leases, subleases,
licenses, concessions or grants or other possessory interests now or hereafter
in force, whether oral or written, covering or affecting the Mortgaged
Property, or any portion of the Mortgaged Property (including proprietary
leases or occupancy agreements if Borrower is a cooperative housing
corporation), and all modifications, extensions or renewals.

 

(p)           “Lender” means the entity identified as “Lender” in the first
paragraph of this Instrument and its successors and assigns, or any subsequent
holder of the Note.

 

(q)           “Loan Documents” means the Note, this Instrument, all
guaranties, all indemnity agreements, all Collateral Agreements, O&M
Programs, and any other documents now or in the future executed by Borrower,
Key Principal, any guarantor or any other person in connection with the loan
evidenced by the Note, as such documents may be amended from time to time.

 

(r)            “Loan Servicer” means the entity that from time to time is
designated by Lender to collect payments and deposits and receive notices under
the Note, this Instrument and any other Loan Document, and otherwise to service
the loan evidenced by the Note for the benefit of Lender.  Unless Borrower receives notice to the
contrary, the Loan Servicer is the entity identified as “Lender” in the first
paragraph of this Instrument.

 

(s)           “Mortgaged Property” means all of Borrower’s present and future
right, title and interest in and to all of the following:

 

(1)           the Land;

 

(2)           the
Improvements;

 

(3)           the Fixtures;

 

(4)           the Personalty;

 

(5)           all current and future
rights, including air rights, development rights, zoning rights and other
similar rights or interests, easements, tenements, rights-of-way, strips and
gores of land, streets, alleys, roads, sewer rights, waters, watercourses, and
appurtenances related to or benefitting the Land or the Improvements, or both,
and all rights-of-way, streets, alleys and roads which may have been or may in
the future be vacated;

 

4

 

(6)           all proceeds paid or to be
paid by any insurer of the Land, the Improvements, the Fixtures, the Personalty
or any other part of the Mortgaged Property, whether or not Borrower obtained
the insurance pursuant to Lender’s requirement;

 

(7)           all awards, payments and
other compensation made or to be made by any municipal, state or federal
authority with respect to the Land, the Improvements, the Fixtures, the
Personalty or any other part of the Mortgaged Property, including any awards or
settlements resulting from condemnation proceedings or the total or partial
taking of the Land, the Improvements, the Fixtures, the Personalty or any other
part of the Mortgaged Property under the power of eminent domain or otherwise
and including any conveyance in lieu thereof;

 

(8)           all contracts, options and
other agreements for the sale of the Land, the Improvements, the Fixtures, the
Personalty or any other part of the Mortgaged Property entered into by Borrower
now or in the future, including cash or securities deposited to secure
performance by parties of their obligations;

 

(9)           all proceeds from the
conversion, voluntary or involuntary, of any of the above into cash or
liquidated claims, and the right to collect such proceeds;

 

(10)         all Rents and Leases;

 

(11)         all earnings, royalties,
accounts receivable, issues and profits from the Land, the Improvements or any
other part of the Mortgaged Property, and all undisbursed proceeds of the loan
secured by this Instrument and, if Borrower is a cooperative housing
corporation, maintenance charges or assessments payable by shareholders or
residents;

 

(12)         all Imposition Deposits;

 

(13)         all refunds or rebates of Impositions
by any municipal, state or federal authority or insurance company (other than
refunds applicable to periods before the real property tax year in which this
Instrument is dated);

 

(14)         all tenant security deposits
which have not been forfeited by any tenant under any Lease; and

 

5

 

(15)         all names under or by which
any of the above Mortgaged Property may be operated or known, and all
trademarks, trade names, and goodwill relating to any of the Mortgaged
Property.

 

(t)            “Note” means the Multifamily Note described on page 1 of this
Instrument, including the Acknowledgment and Agreement of Key Principal to
Personal Liability for Exceptions to Non-Recourse Liability (if any), and all
schedules, riders, allonges and addenda, as such Multifamily Note may be
amended from time to time.

 

(u)           “O&M Program” is defined in Section 18(a).

 

(v)           “Personalty”
means all equipment, inventory, general intangibles which are used now or in
the future in connection with the ownership, management or operation of the
Land or the Improvements or are located on the Land or in the Improvements,
including furniture, furnishings, machinery, building materials, appliances,
goods, supplies, tools, books, records (whether in written or electronic form),
computer equipment (hardware and software) and other tangible personal property
(other than Fixtures) which are used now or in the future in connection with
the ownership, management or operation of the Land or the Improvements or are
located on the Land or in the Improvements, and any operating agreements
relating to the Land or the Improvements, and any surveys, plans and
specifications and contracts for architectural, engineering and construction
services relating to the Land or the Improvements and all other intangible
property and rights relating to the operation of, or used in connection with,
the Land or the Improvements, including all governmental permits relating to
any activities on the Land.

 

(w)          “Property Jurisdiction” is defined in Section 30(a).

 

(x)            “Rents” means all rents (whether from residential or
non-residential space), revenues and other income of the Land or the
Improvements, including subsidy payments received from any sources (including,
but not limited to payments under any Housing Assistance Payments Contract),
parking fees, laundry and vending machine income and fees and charges for food,
health care and other services provided at the Mortgaged Property, whether now
due, past due, or to become due, and deposits forfeited by tenants.

 

(y)           “Taxes” means all taxes, assessments, vault rentals and other
charges, if any, general, special or otherwise, including all assessments for
schools, public betterments and general or local improvements, which are
levied, assessed or imposed by any public authority or quasi-public authority,
and which, if not paid, will become a lien, on the Land or the Improvements.

 

(z)            “Transfer” means (A) a sale, assignment, transfer, or other
disposition (whether voluntary, involuntary or by operation of law); (B) the
grant, creation, or attachment of a lien, encumbrance, or security interest
(whether voluntary, involuntary or by operation of law); (C) the

 

6

 

issuance
or other creation of a direct or indirect ownership interest; or (D) the
withdrawal, retirement, removal or involuntary resignation of any owner or
manager of a legal entity.

 

(aa)         “Bankruptcy Event” means any one or more of the following: (i) the
commencement of a voluntary case under one or more of the Insolvency Laws by
the Borrower; (ii) the acknowledgment in writing by the Borrower that it is
unable to pay its debts generally as they mature; (iii) the making of a general
assignment for the benefit of creditors by the Borrower; (iv) an involuntary
case under one or more Insolvency Laws against the Borrower; (v) the
appointment of a receiver, liquidator, custodian, sequestrator, trustee or
other similar officer who exercises control over the Borrower or any
substantial part of the assets of the Borrower provided that any proceeding or
case under (iv) or (v) above is not dismissed within 90 days after filing.

 

(bb)         “Borrower
Affiliate” means, as to either Borrower or Key Principal, (i) any
entity that directly or indirectly owns, controls, or holds with power to vote,
20 percent or more of the outstanding voting securities of Borrower or of Key
Principal, (ii) any corporation 20 percent or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held with power to
vote by Borrower or by Key Principal, (iii) any partner, shareholder or, if a
limited liability company, member of Borrower or Key Principal, or (iv) any
other entity that is related (to the third degree of consanguinity) by blood or
marriage to Borrower or Key Principal.

 

(cc)         “Insolvency Laws” means the United States Bankruptcy Code, 11
U.S.C. § 101, et seq., together
with any other federal or state law affecting debtor and creditor rights or
relating to the bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding, as
amended from time to time, to the extent applicable to the Borrower.

 

2.             UNIFORM
COMMERCIAL CODE SECURITY AGREEMENT.

 

This Instrument is also a security agreement under the Uniform
Commercial Code for any of the Mortgaged Property which, under applicable law,
may be subject to a security interest under the Uniform Commercial Code,
whether acquired now or in the future, and all products and cash and non-cash
proceeds thereof (collectively, “UCC Collateral”),
and Borrower hereby grants to Lender a security interest in the UCC
Collateral.  Borrower hereby authorizes
Lender to file financing statements, continuation statements and financing
statement amendments in such form as Lender may require to perfect or continue
the perfection of this security interest and Borrower agrees, if Lender so
requests, to execute and deliver to Lender such financing statements,
continuation statements and amendments. 
Borrower shall pay all filing costs and all costs and expenses of any
record searches for financing statements that Lender may require.  Without the prior written consent of Lender,
Borrower shall not create or permit to exist any other lien or security
interest in any of

 

7

 

the
UCC Collateral.  If an Event of Default
has occurred and is continuing, Lender shall have the remedies of a secured
party under the Uniform Commercial Code, in addition to all remedies provided
by this Instrument or existing under applicable law.  In exercising any remedies, Lender may
exercise its remedies against the UCC Collateral separately or together, and in
any order, without in any way affecting the availability of Lender’s other
remedies.  This Instrument constitutes a
financing statement with respect to any part of the Mortgaged Property which is
or may become a Fixture.

 

3.             ASSIGNMENT
OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

 

(a)           As part of the
consideration for the Indebtedness, Borrower absolutely and unconditionally
assigns and transfers to Lender all Rents. It is the intention of Borrower to
establish a present, absolute and irrevocable transfer and assignment to Lender
of all Rents and to authorize and empower Lender to collect and receive all
Rents without the necessity of further action on the part of Borrower.  Promptly upon request by Lender, Borrower
agrees to execute and deliver such further assignments as Lender may from time
to time require.  Borrower and Lender
intend this assignment of Rents to be immediately effective and to constitute
an absolute present assignment and not an assignment for additional security
only.  For purposes of giving effect to
this absolute assignment of Rents, and for no other purpose, Rents shall not be
deemed to be a part of the “Mortgaged Property,” as that term is defined in Section
1(s).  However, if this present, absolute
and unconditional assignment of Rents is not enforceable by its terms under the
laws of the Property Jurisdiction, then the Rents shall be included as a part
of the Mortgaged Property and it is the intention of the Borrower that in this
circumstance this Instrument create and perfect a lien on Rents in favor of
Lender, which lien shall be effective as of the date of this Instrument.

 

(b)           After the
occurrence of an Event of Default, Borrower authorizes Lender to collect, sue
for and compromise Rents and directs each tenant of the Mortgaged Property to
pay all Rents to, or as directed by, Lender, and Borrower shall, upon Borrower’s
receipt of any Rents from any sources (including, but not limited to subsidy
payments under any Housing Assistance Payments Contract), pay the total amount
of such receipts to the Lender.  However,
until the occurrence of an Event of Default, Lender hereby grants to Borrower a
revocable license to collect and receive all Rents, to hold all Rents in trust
for the benefit of Lender and to apply all Rents to pay the installments of
interest and principal then due and payable under the Note and the other amounts
then due and payable under the other Loan Documents, including Imposition
Deposits, and to pay the current costs and expenses of managing, operating and
maintaining the Mortgaged Property, including utilities, Taxes and insurance
premiums (to the extent not included in Imposition Deposits), tenant
improvements and other capital expenditures. 
So long as no Event of Default has occurred and is continuing, the Rents
remaining after application pursuant to the preceding sentence may be retained
by Borrower free and clear of, and released from, Lender’s rights with respect
to

 

8

 

Rents
under this Instrument.  From and after
the occurrence of an Event of Default, and without the necessity of Lender
entering upon and taking and maintaining control of the Mortgaged Property
directly, or by a receiver, Borrower’s license to collect Rents shall
automatically terminate and Lender shall without notice be entitled to all
Rents as they become due and payable, including Rents then due and unpaid.  Borrower shall pay to Lender upon demand all
Rents to which Lender is entitled.  At
any time after the occurrence of an Event of Default, Lender may give, and
Borrower hereby irrevocably authorizes Lender to give, notice to all tenants of
the Mortgaged Property instructing them to pay all Rents to Lender; provided,
however, that the giving of any such notice by Lender shall not affect, in any
way, Lender’s entitlement to the Rents as of the date on which the Event of
Default occurs.  No tenant shall be
obligated to inquire further as to the occurrence or continuance of an Event of
Default, and no tenant shall be obligated to pay to Borrower any amounts which
are actually paid to Lender in response to such a notice.  Any such notice by Lender shall be delivered
to each tenant personally, by mail or by delivering such demand to each rental
unit.  Borrower shall not interfere with
and shall cooperate with Lender’s collection of such Rents.

 

(c)           Borrower
represents and warrants to Lender that Borrower has not executed any prior
assignment of Rents (other than an assignment of Rents securing indebtedness
that will be paid off and discharged with the proceeds of the loan evidenced by
the Note), that Borrower has not performed, and Borrower covenants and agrees
that it will not perform, any acts and has not executed, and shall not execute,
any instrument which would prevent Lender from exercising its rights under this
Section 3, and that at the time of execution of this Instrument there has been
no anticipation or prepayment of any Rents for more than two months prior to
the due dates of such Rents.  Borrower
shall not collect or accept payment of any Rents more than two months prior to
the due dates of such Rents.

 

(d)           If an Event of
Default has occurred and is continuing, Lender may, regardless of the adequacy
of Lender’s security or the solvency of Borrower and even in the absence of
waste, enter upon and take and maintain full control of the Mortgaged Property
in order to perform all acts that Lender in its discretion determines to be
necessary or desirable for the operation and maintenance of the Mortgaged
Property, including the execution, cancellation or modification of Leases, the
collection of all Rents, the making of repairs to the Mortgaged Property and
the execution or termination of contracts providing for the management,
operation or maintenance of the Mortgaged Property, for the purposes of
enforcing the assignment of Rents pursuant to Section 3(a), protecting the
Mortgaged Property or the security of this Instrument, or for such other
purposes as Lender in its discretion may deem necessary or desirable.  Alternatively, if an Event of Default has
occurred and is continuing, regardless of the adequacy of Lender’s security,
without regard to Borrower’s solvency and without the necessity of giving prior
notice (oral or written) to Borrower, Lender may apply to any court having
jurisdiction for the appointment of a receiver for the Mortgaged Property to
take any or all of the actions set forth in the preceding sentence.  If Lender elects to seek the appointment of a
receiver for the Mortgaged Property at any time after an Event of Default has
occurred and is continuing, Borrower, by its execution of this Instrument,
expressly consents to the appointment of such receiver, including the
appointment of a receiver ex parte if
permitted by applicable law.  Lender or
the receiver, as the

 

9

 

case
may be, shall be entitled to receive a reasonable fee for managing the
Mortgaged Property.  Immediately upon
appointment of a receiver or immediately upon the Lender’s entering upon and
taking possession and control of the Mortgaged Property, Borrower shall
surrender possession of the Mortgaged Property to Lender or the receiver, as
the case may be, and shall deliver to Lender or the receiver, as the case may
be, all documents, records (including records on electronic or magnetic media),
accounts, surveys, plans, and specifications relating to the Mortgaged Property
and all security deposits and prepaid Rents. 
In the event Lender takes possession and control of the Mortgaged
Property, Lender may exclude Borrower and its representatives from the
Mortgaged Property.  Borrower
acknowledges and agrees that the exercise by Lender of any of the rights
conferred under this Section 3 shall not be construed to make Lender a
mortgagee-in-possession of the Mortgaged Property so long as Lender has not
itself entered into actual possession of the Land and Improvements.

 

(e)           If Lender
enters the Mortgaged Property, Lender shall be liable to account only to
Borrower and only for those Rents actually received.  Lender shall not be liable to Borrower,
anyone claiming under or through Borrower or anyone having an interest in the
Mortgaged Property, by reason of any act or omission of Lender under this Section
3, and Borrower hereby releases and discharges Lender from any such liability
to the fullest extent permitted by law.

 

(f)            If the Rents
are not sufficient to meet the costs of taking control of and managing the
Mortgaged Property and collecting the Rents, any funds expended by Lender for
such purposes shall become an additional part of the Indebtedness as provided
in Section 12.

 

(g)           Any entering
upon and taking of control of the Mortgaged Property by Lender or the receiver,
as the case may be, and any application of Rents as provided in this Instrument
shall not cure or waive any Event of Default or invalidate any other right or
remedy of Lender under applicable law or provided for in this Instrument.

 

4.             ASSIGNMENT
OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

 

(a)           As part of the
consideration for the Indebtedness, Borrower absolutely and unconditionally
assigns and transfers to Lender all of Borrower’s right, title and interest in,
to and under the Leases, including Borrower’s right, power and authority to
modify the terms of any such Lease, or extend or terminate any such Lease.   It is the intention of Borrower to establish
a present, absolute and irrevocable transfer and assignment to Lender of all of
Borrower’s right, title and interest in, to and under the Leases.  Borrower and Lender intend this assignment of
the Leases to be immediately effective and to constitute an absolute present
assignment and not an assignment for additional security only.  For purposes of giving effect to this
absolute assignment of the Leases, and for no other purpose, the Leases shall
not be deemed to be a part of the “Mortgaged Property,” as that term is defined
in Section 1(s).  However, if this
present,

 

10

 

absolute
and unconditional assignment of the Leases is not enforceable by its terms
under the laws of the Property Jurisdiction, then the Leases shall be included
as a part of the Mortgaged Property and it is the intention of the Borrower
that in this circumstance this Instrument create and perfect a lien on the
Leases in favor of Lender, which lien shall be effective as of the date of this
Instrument.

 

(b)           Until the
occurrence of an Event of Default, Borrower shall have all rights, power and
authority granted to Borrower under any Lease (except as otherwise limited by
this Section or any other provision of this Instrument), including the right,
power and authority to modify the terms of any Lease or extend or terminate any
Lease.  Upon the occurrence of an Event
of Default, the permission given to Borrower pursuant to the preceding sentence
to exercise all rights, power and authority under Leases shall automatically
terminate.  Borrower shall comply with
and observe Borrower’s obligations under all Leases, including Borrower’s
obligations pertaining to the maintenance and disposition of tenant security
deposits.

 

(c)           Borrower
acknowledges and agrees that the exercise by Lender, either directly or by a
receiver, of any of the rights conferred under this Section 4 shall not be
construed to make Lender a mortgagee-in-possession of the Mortgaged Property so
long as Lender has not itself entered into actual possession of the Land and
the Improvements.  The acceptance by
Lender of the assignment of the Leases pursuant to Section 4(a) shall not at
any time or in any event obligate Lender to take any action under this
Instrument or to expend any money or to incur any expenses.  Lender shall not be liable in any way for any
injury or damage to person or property sustained by any person or persons, firm
or corporation in or about the Mortgaged Property.  Prior to Lender’s actual entry into and
taking possession of the Mortgaged Property, Lender shall not (i) be obligated
to perform any of the terms, covenants and conditions contained in any Lease
(or otherwise have any obligation with respect to any Lease); (ii) be obligated
to appear in or defend any action or proceeding relating to the Lease or the Mortgaged
Property; or (iii) be responsible for the operation, control, care, management
or repair of the Mortgaged Property or any portion of the Mortgaged
Property.  The execution of this
Instrument by Borrower shall constitute conclusive evidence that all
responsibility for the operation, control, care, management and repair of the
Mortgaged Property is and shall be that of Borrower, prior to such actual entry
and taking of possession.

 

(d)           From and after
the occurrence of an Event of Default, and without the necessity of Lender
entering upon and taking and maintaining control of the Mortgaged Property
directly, by a receiver, or by any other manner or proceeding permitted by the
laws of the Property Jurisdiction, Lender immediately shall have all rights,
powers and authority granted to Borrower under any Lease, including the right,
power and authority to modify the terms of any such Lease, or extend or
terminate any such Lease.

 

(e)           Borrower shall,
promptly upon Lender’s request, deliver to Lender an executed copy of each
residential Lease then in effect. All Leases for residential dwelling units
shall be on forms approved by Lender, shall be for initial terms of at least
six months and not more than two

 

11

 

years,
and shall not include options to purchase. 
If customary in the applicable market, residential Leases with terms of
less than six months may be permitted with Lender’s prior written consent.

 

(f)            Borrower shall
not lease any portion of the Mortgaged Property for non-residential use except
with the prior written consent of Lender and Lender’s prior written approval of
the Lease agreement.  Borrower shall not
modify the terms of, or extend or terminate, any Lease for non-residential use
(including any Lease in existence on the date of this Instrument) without the
prior written consent of Lender. 
Borrower shall, without request by Lender, deliver an executed copy of
each non-residential Lease to Lender promptly after such Lease is signed.   All non-residential Leases, including
renewals or extensions of existing Leases, shall specifically provide that (1) such
Leases are subordinate to the lien of this Instrument (unless waived in writing
by Lender); (2) the tenant shall attorn to Lender and any purchaser at a
foreclosure sale, such attornment to be self-executing and effective upon
acquisition of title to the Mortgaged Property by any purchaser at a
foreclosure sale or by Lender in any manner; (3) the tenant agrees to execute
such further evidences of attornment as Lender or any purchaser at a
foreclosure sale may from time to time request; (4) the Lease shall not be
terminated by foreclosure or any other transfer of the Mortgaged Property; (5) after
a foreclosure sale of the Mortgaged Property, Lender or any other purchaser at
such foreclosure sale may, at Lender’s or such purchaser’s option, accept or
terminate such Lease; and (6) the tenant shall, upon receipt after the
occurrence of an Event of Default of a written request from Lender, pay all
Rents payable under the Lease to Lender.

 

(g)           Borrower shall
not receive or accept Rent under any Lease (whether residential or
non-residential) for more than two months in advance.

 

5.             PAYMENT
OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM.

 

Borrower shall pay the Indebtedness when due in accordance with the
terms of the Note and the other Loan Documents and shall perform, observe and
comply with all other provisions of the Note and the other Loan Documents.  Borrower shall pay a prepayment premium in
connection with certain prepayments of the Indebtedness, including a payment
made after Lender’s exercise of any right of acceleration of the Indebtedness,
as provided in the Note.

 

6.             EXCULPATION.

 

Borrower’s personal liability for payment of the Indebtedness and for
performance of the other obligations to be performed by it under this
Instrument is limited in the manner, and to the extent, provided in the Note.

 

12

 

7.                                      DEPOSITS
FOR TAXES, INSURANCE AND OTHER CHARGES.

 

(a)                                  Borrower shall
deposit with Lender on the day monthly installments of principal or interest,
or both, are due under the Note (or on another day designated in writing by
Lender), until the Indebtedness is paid in full, an additional amount
sufficient to accumulate with Lender the entire sum required to pay, when due (1) any
water and sewer charges which, if not paid, may result in a lien on all or any
part of the Mortgaged Property, (2) the premiums for fire and other hazard
insurance, rent loss insurance and such other insurance as Lender may require
under Section 19, (3) Taxes, and (4) amounts for other charges
and expenses which Lender at any time reasonably deems necessary to protect the
Mortgaged Property, to prevent the imposition of liens on the Mortgaged
Property, or otherwise to protect Lender’s interests, all as reasonably
estimated from time to time by Lender. 
The amounts deposited under the preceding sentence are collectively
referred to in this Instrument as the “Imposition Deposits”.  The obligations of Borrower for which the
Imposition Deposits are required are collectively referred to in this
Instrument as “Impositions”.  The amount of the Imposition Deposits shall
be sufficient to enable Lender to pay each Imposition before the last date upon
which such payment may be made without any penalty or interest charge being
added.  Lender shall maintain records
indicating how much of the monthly Imposition Deposits and how much of the
aggregate Imposition Deposits held by Lender are held for the purpose of paying
Taxes, insurance premiums and each other obligation of Borrower for which
Imposition Deposits are required.  Any
waiver by Lender of the requirement that Borrower remit Imposition Deposits to
Lender may be revoked by Lender, in Lender’s discretion, at any time upon
notice to Borrower.

 

(b)                                 Imposition
Deposits shall be held in an institution (which may be Lender, if Lender is
such an institution) whose deposits or accounts are insured or guaranteed by a
federal agency.  Lender shall not be
obligated to open additional accounts or deposit Imposition Deposits in
additional institutions when the amount of the Imposition Deposits exceeds the
maximum amount of the federal deposit insurance or guaranty.  Lender shall apply the Imposition Deposits to
pay Impositions so long as no Event of Default has occurred and is
continuing.  Unless applicable law
requires, Lender shall not be required to pay Borrower any interest, earnings
or profits on the Imposition Deposits. 
Borrower hereby pledges and grants to Lender a security interest in the
Imposition Deposits as additional security for all of Borrower’s obligations
under this Instrument and the other Loan Documents.  Any amounts deposited with Lender under this Section 7
shall not be trust funds, nor shall they operate to reduce the Indebtedness,
unless applied by Lender for that purpose under Section 7(e).

 

(c)                                  If Lender
receives a bill or invoice for an Imposition, Lender shall pay the Imposition
from the Imposition Deposits held by Lender. 
Lender shall have no obligation to pay any Imposition to the extent it
exceeds Imposition Deposits then held by Lender.  Lender may pay an Imposition according to any
bill, statement or estimate from the appropriate public office

 

13

 

or
insurance company without inquiring into the accuracy of the bill, statement or
estimate or into the validity of the Imposition.

 

(d)                                 If at any time
the amount of the Imposition Deposits held by Lender for payment of a specific
Imposition exceeds the amount reasonably deemed necessary by Lender, the excess
shall be credited against future installments of Imposition Deposits.  If at any time the amount of the Imposition
Deposits held by Lender for payment of a specific Imposition is less than the
amount reasonably estimated by Lender to be necessary, Borrower shall pay to
Lender the amount of the deficiency within 15 days after notice from Lender.

 

(e)                                  If an Event of
Default has occurred and is continuing, Lender may apply any Imposition
Deposits, in any amounts and in any order as Lender determines, in Lender’s
discretion, to pay any Impositions or as a credit against the Indebtedness.
Upon payment in full of the Indebtedness, Lender shall refund to Borrower any
Imposition Deposits held by Lender.

 

8.                                      COLLATERAL
AGREEMENTS.

 

Borrower shall deposit with Lender such amounts as may be required by
any Collateral Agreement and shall perform all other obligations of Borrower
under each Collateral Agreement.

 

9.                                      APPLICATION
OF PAYMENTS.

 

If at any time Lender receives, from Borrower or otherwise, any amount
applicable to the Indebtedness which is less than all amounts due and payable
at such time, then Lender may apply that payment to amounts then due and
payable in any manner and in any order determined by Lender, in Lender’s
discretion.  Neither Lender’s acceptance
of an amount which is less than all amounts then due and payable nor Lender’s
application of such payment in the manner authorized shall constitute or be
deemed to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.  Notwithstanding the
application of any such amount to the Indebtedness,  Borrower’s obligations under this Instrument
and the Note shall remain unchanged.

 

10.                               COMPLIANCE
WITH LAWS.

 

Borrower shall comply with all laws, ordinances, regulations and
requirements of any Governmental Authority and all recorded lawful covenants
and agreements relating to or affecting the Mortgaged Property, including all
laws, ordinances, regulations, requirements and covenants pertaining to health
and safety, construction of improvements on the Mortgaged

 

14

 

Property,
fair housing, zoning and land use, and Leases. 
Borrower also shall comply with all applicable laws that pertain to the
maintenance and disposition of tenant security deposits.  Borrower shall at all times maintain records
sufficient to demonstrate compliance with the provisions of this Section 10.  Borrower shall take appropriate measures to
prevent, and shall not engage in or knowingly permit, any illegal activities at
the Mortgaged Property that could endanger tenants or visitors, result in
damage to the Mortgaged Property, result in forfeiture of the Mortgaged
Property, or otherwise materially impair the lien created by this Instrument or
Lender’s interest in the Mortgaged Property. 
Borrower represents and warrants to Lender that no portion of the
Mortgaged Property has been or will be purchased with the proceeds of any
illegal activity.

 

11.                               USE OF
PROPERTY.

 

Unless required by applicable law, Borrower shall not (a) except
for any change in use approved by Lender, allow changes in the use for which
all or any part of the Mortgaged Property is being used at the time this
Instrument was executed, (b) convert any individual dwelling units or
common areas to commercial use, (c) initiate or acquiesce in a change in
the zoning classification of the Mortgaged Property, or (d) establish any
condominium or cooperative regime with respect to the Mortgaged Property.

 

12.                               PROTECTION
OF LENDER’S SECURITY.

 

(a)                                  If Borrower
fails to perform any of its obligations under this Instrument or any other Loan
Document, or if any action or proceeding (including a Bankruptcy Event) is
commenced which purports to affect the Mortgaged Property, Lender’s security or
Lender’s rights under this Instrument, including eminent domain, insolvency,
code enforcement, civil or criminal forfeiture, enforcement of Hazardous
Materials Laws, fraudulent conveyance or reorganizations or proceedings
involving a bankrupt or decedent, then Lender at Lender’s option may make such
appearances, disburse such sums and take such actions as Lender reasonably
deems necessary to perform such obligations of Borrower and to protect Lender’s
interest, including (1) payment of fees and out-of-pocket expenses of
attorneys, accountants, inspectors and consultants, (2) entry upon the
Mortgaged Property to make repairs or secure the Mortgaged Property, (3) procurement
of the insurance required by Section 19, and (4) payment of amounts
which Borrower has failed to pay under Sections 15 and 17.

 

(b)                                 Any amounts
disbursed by Lender under this Section 12, or under any other provision of
this Instrument that treats such disbursement as being made under this Section 12,
shall be added to, and become part of, the principal component of the
Indebtedness, shall be immediately

 

15

 

due
and payable and shall bear interest from the date of disbursement until paid at
the “Default Rate”, as defined in the Note.

 

(c)                                  Nothing in this
Section 12 shall require Lender to incur any expense or take any action.

 

13.                               INSPECTION.

 

Lender, its agents, representatives, and designees may make or cause to
be made entries upon and inspections of the Mortgaged Property (including
environmental inspections and tests) during normal business hours, or at any
other reasonable time.

 

14.                               BOOKS
AND RECORDS; FINANCIAL REPORTING.

 

(a)                                  Borrower shall
keep and maintain at all times at the Mortgaged Property or the management
agent’s offices, and upon Lender’s request shall make available at the
Mortgaged Property, complete and accurate books of account and records
(including copies of supporting bills and invoices) adequate to reflect
correctly the operation of the Mortgaged Property, and copies of all written
contracts, Leases, and other instruments which affect the Mortgaged
Property.  The books, records, contracts,
Leases and other instruments shall be subject to examination and inspection at
any reasonable time by Lender.

 

(b)                                 Borrower shall
furnish to Lender:

 

(1)                                  (i) except
as provided in clause (ii) below, within 45 days after the end of each
fiscal quarter of Borrower, a statement of income and expenses for Borrower’s
operation of the Mortgaged Property on a year-to-date basis as of the end of
each fiscal quarter, (ii) within 120 days after the end of each fiscal
year of Borrower, (A) a statement of income and expenses for Borrower’s
operation of the Mortgaged Property for such fiscal year, (B) a statement
of changes in financial position of Borrower relating to the Mortgaged Property
for such fiscal year, and (C) when requested by Lender, a balance sheet
showing all assets and liabilities of Borrower relating to the Mortgaged
Property as of the end of such fiscal year; and (iii) any of the foregoing
at any other time upon Lender’s request;

 

(2)                                  (i) except
as provided in clause (ii) below, within 45 days after the end of each
fiscal quarter of Borrower, and (ii) within 120 days after the end of each
fiscal year of Borrower, and at any other time upon Lender’s request, a rent
schedule for the Mortgaged Property showing the name of each tenant, and

 

16

 

for each tenant, the space occupied, the lease expiration date, the
rent payable for the current month, the date through which rent has been paid,
and any related information requested by Lender;

 

(3)                                  within 120 days
after the end of each fiscal year of Borrower, and at any other time upon
Lender’s request, an accounting of all security deposits held pursuant to all
Leases, including the name of the institution (if any) and the names and
identification numbers of the accounts (if any) in which such security deposits
are held and the name of the person to contact at such financial institution,
along with any authority or release necessary for Lender to access information
regarding such accounts;

 

(4)                                  within 120 days
after the end of each fiscal year of Borrower, and at any other time upon
Lender’s request, a statement that identifies all owners of any interest in
Borrower and the interest held by each, if Borrower is a corporation, all
officers and directors of Borrower, and if Borrower is a limited liability
company, all managers who are not members;

 

(5)                                  upon Lender’s
request, a monthly property management report for the Mortgaged Property,
showing the number of inquiries made and rental applications received from
tenants or prospective tenants and deposits received from tenants and any other
information requested by Lender;

 

(6)                                  upon Lender’s
request, a balance sheet, a statement of income and expenses for Borrower and a
statement of changes in financial position of Borrower for Borrower’s most
recent fiscal year; and

 

(7)                                  if required by
Lender, within 30 days of the end of each calendar month, a monthly statement
of income and expenses for such calendar month on a year-to-date basis for
Borrower’s operation of the Mortgaged Property.

 

(c)                                  Each of the
statements, schedules and reports required by Section 14(b) shall be
certified to be complete and accurate by an individual having authority to bind
Borrower, and shall be in such form and contain such detail as Lender may
reasonably require.  Lender also may
require that any statements, schedules or reports be audited at Borrower’s
expense by independent certified public accountants acceptable to Lender.

 

(d)                                 If Borrower
fails to provide in a timely manner the statements, schedules and reports
required by Section 14(b), Lender shall have the right to have Borrower’s
books and records audited, at Borrower’s expense, by independent certified
public accountants selected by Lender in order to obtain such statements,
schedules and reports, and all related costs and expenses of Lender shall
become immediately due and payable and shall become an additional part of the
Indebtedness as provided in Section 12.

 

17

 

(e)                                  If an Event of
Default has occurred and is continuing, Borrower shall deliver to Lender upon
written demand all books and records relating to the Mortgaged Property or its
operation.

 

(f)                                    Borrower
authorizes Lender to obtain a credit report on Borrower at any time.

 

15.                               TAXES;
OPERATING EXPENSES.

 

(a)                                  Subject to the
provisions of Section 15(c) and Section 15(d), Borrower shall
pay, or cause to be paid, all Taxes when due and before the addition of any
interest, fine, penalty or cost for nonpayment.

 

(b)                                 Subject to the
provisions of Section 15(c), Borrower shall pay the expenses of operating,
managing, maintaining and repairing the Mortgaged Property (including insurance
premiums, utilities, repairs and replacements) before the last date upon which
each such payment may be made without any penalty or interest charge being added.

 

(c)                                  As long as no
Event of Default exists and Borrower has timely delivered to Lender any bills
or premium notices that it has received, Borrower shall not be obligated to pay
Taxes, insurance premiums or any other individual Imposition to the extent that
sufficient Imposition Deposits are held by Lender for the purpose of paying
that specific Imposition.  If an Event of
Default exists, Lender may exercise any rights Lender may have with respect to
Imposition Deposits without regard to whether Impositions are then due and
payable.  Lender shall have no liability
to Borrower for failing to pay any Impositions to the extent that any Event of
Default has occurred and is continuing, insufficient Imposition Deposits are held
by Lender at the time an Imposition becomes due and payable or Borrower has
failed to provide Lender with bills and premium notices as provided above.

 

(d)                                 Borrower, at
its own expense, may contest by appropriate legal proceedings, conducted
diligently and in good faith, the amount or validity of any Imposition other
than insurance premiums, if (1) Borrower notifies Lender of the
commencement or expected commencement of such proceedings, (2) the
Mortgaged Property is not in danger of being sold or forfeited, (3) Borrower
deposits with Lender reserves sufficient to pay the contested Imposition, if
requested by Lender, and (4) Borrower furnishes whatever additional
security is required in the proceedings or is reasonably requested by Lender,
which may include the delivery to Lender of the reserves established by
Borrower to pay the contested Imposition.

 

(e)                                  Borrower shall
promptly deliver to Lender a copy of all notices of, and invoices for,
Impositions, and if Borrower pays any Imposition directly, Borrower shall
promptly furnish to Lender receipts evidencing such payments.

 

18

 

16.                               LIENS;
ENCUMBRANCES.

 

Borrower acknowledges that, to the extent provided in Section 21,
the grant, creation or existence of any mortgage, deed of trust, deed to secure
debt, security interest or other lien or encumbrance (a “Lien”)
on the Mortgaged Property (other than the lien of this Instrument) or on
certain ownership interests in Borrower, whether voluntary, involuntary or by
operation of law, and whether or not such Lien has priority over the lien of
this Instrument, is a “Transfer” which
constitutes an Event of Default.

 

17.                               PRESERVATION,
MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.

 

(a)  Borrower (1) shall not commit waste or permit impairment
or deterioration of the Mortgaged Property, (2) shall not abandon the
Mortgaged Property, (3) shall restore or repair promptly, in a good and
workmanlike manner, any damaged part of the Mortgaged Property to the
equivalent of its original condition, or such other condition as Lender may
approve in writing, whether or not insurance proceeds or condemnation awards
are available to cover any costs of such restoration or repair, (4) shall
keep the Mortgaged Property in good repair, including the replacement of
Personalty and Fixtures with items of equal or better function and quality, (5) shall
provide for professional management of the Mortgaged Property by a residential
rental property manager satisfactory to Lender under a contract approved by
Lender in writing, and (6) shall give notice to Lender of and, unless
otherwise directed in writing by Lender, shall appear in and defend any action
or proceeding purporting to affect the Mortgaged Property, Lender’s security or
Lender’s rights under this Instrument. 
Borrower shall not (and shall not permit any tenant or other person to)
remove, demolish or alter the Mortgaged Property or any part of the Mortgaged
Property except in connection with the replacement of tangible Personalty.

 

(b)  If, in connection with the making of the loan evidenced by
the Note or at any later date, Lender waives in writing the requirement of Section 17(a)(5) above
that Borrower enter into a written contract for management of the Mortgaged
Property and if, after the date of this Instrument, Borrower intends to change
the management of the Mortgaged Property, Lender shall have the right to
approve such new property manager and the written contract for the management
of the Mortgaged Property and require that Borrower and such new property
manager enter into an Assignment of Management Agreement on a form approved by
Lender.  If required by Lender (whether
before or after an Event of Default), Borrower will cause any Affiliate of
Borrower to whom fees are payable for the management of the Mortgaged Property
to enter into an agreement with Lender, in a form approved by Lender, providing
for subordination of those fees and such other provisions as Lender may
require.  “Affiliate of

 

19

 

Borrower”
means any corporation, partnership, joint venture, limited liability company,
limited liability partnership, trust or individual controlled by, under common
control with, or which controls Borrower (the term “control” for these purposes
shall mean the ability, whether by the ownership of shares or other equity
interests, by contract or otherwise, to elect a majority of the directors of a
corporation, to make management decisions on behalf of, or independently to
select the managing partner of, a partnership, or otherwise to have the power
independently to remove and then select a majority of those individuals
exercising managerial authority over an entity, and control shall be
conclusively presumed in the case of the ownership of 50% or more of the equity
interests).

 

18.                               ENVIRONMENTAL
HAZARDS.

 

(a)                                  Except for
matters covered by a written program of operations and maintenance approved in
writing by Lender (an “O&M Program”)
or matters described in Section 18(b), Borrower shall not cause or permit
any of the following:

 

(1)                                  the presence,
use, generation, release, treatment, processing, storage (including storage in
above ground and underground storage tanks), handling, or disposal of any
Hazardous Materials on or under the Mortgaged Property or any other property of
Borrower that is adjacent to the Mortgaged Property;

 

(2)                                  the
transportation of any Hazardous Materials to, from, or across the Mortgaged
Property;

 

(3)                                  any occurrence
or condition on the Mortgaged Property or any other property of Borrower that
is adjacent to the Mortgaged Property, which occurrence or condition is or may
be in violation of Hazardous Materials Laws; or

 

(4)                                  any violation
of or noncompliance with the terms of any Environmental Permit with respect to
the Mortgaged Property or any property of Borrower that is adjacent to the
Mortgaged Property.

 

The matters described in clauses (1) through (4) above are
referred to collectively in this Section 18 as “Prohibited
Activities or Conditions”.

 

(b)                                 Prohibited
Activities and Conditions shall not include the safe and lawful use and storage
of quantities of (1) pre-packaged supplies, cleaning materials and
petroleum products customarily used in the operation and maintenance of
comparable multifamily properties, (2) cleaning materials, personal
grooming items and other items sold in pre-packaged containers for

 

20

 

consumer
use and used by tenants and occupants of residential dwelling units in the
Mortgaged Property; and (3) petroleum products used in the operation and maintenance
of motor vehicles from time to time located on the Mortgaged Property’s parking
areas, so long as all of the foregoing are used, stored, handled, transported
and disposed of in compliance with Hazardous Materials Laws.

 

(c)                                  Borrower shall
take all commercially reasonable actions (including the inclusion of
appropriate provisions in any Leases executed after the date of this
Instrument) to prevent its employees, agents, and contractors, and all tenants
and other occupants from causing or permitting any Prohibited Activities or
Conditions.  Borrower shall not lease or
allow the sublease or use of all or any portion of the Mortgaged Property to
any tenant or subtenant for nonresidential use by any user that, in the
ordinary course of its business, would cause or permit any Prohibited Activity
or Condition.

 

(d)                                 If an O&M
Program has been established with respect to Hazardous Materials, Borrower
shall comply in a timely manner with, and cause all employees, agents, and
contractors of Borrower and any other persons present on the Mortgaged Property
to comply with the O&M Program.  All
costs of performance of Borrower’s obligations under any O&M Program shall
be paid by Borrower, and Lender’s out-of-pocket costs incurred in connection
with the monitoring and review of the O&M Program and Borrower’s
performance shall be paid by Borrower upon demand by Lender.  Any such out-of-pocket costs of Lender which
Borrower fails to pay promptly shall become an additional part of the
Indebtedness as provided in Section 12.

 

(e)                                  Borrower
represents and warrants to Lender that, except as previously disclosed by
Borrower to Lender in writing:

 

(1)                                  Borrower has
not at any time engaged in, caused or permitted any Prohibited Activities or
Conditions;

 

(2)                                  to the best of
Borrower’s knowledge after reasonable and diligent inquiry, no Prohibited
Activities or Conditions exist or have existed;

 

(3)                                  except to the
extent previously disclosed by Borrower to Lender in writing, the Mortgaged
Property does not now contain any underground storage tanks, and, to the best
of Borrower’s knowledge after reasonable and diligent inquiry, the Mortgaged
Property has not contained any underground storage tanks in the past.  If there is an underground storage tank
located on the Property which has been previously disclosed by Borrower to
Lender in writing, that tank complies with all requirements of Hazardous
Materials Laws;

 

(4)                                  Borrower has
complied with all Hazardous Materials Laws, including all requirements for
notification regarding releases of Hazardous Materials.

 

21

 

Without limiting the generality of the foregoing, Borrower has obtained
all Environmental Permits required for the operation of the Mortgaged Property
in accordance with Hazardous Materials Laws now in effect and all such
Environmental Permits are in full force and effect;

 

(5)                                  no event has
occurred with respect to the Mortgaged Property that constitutes, or with the
passing of time or the giving of notice would constitute, noncompliance with
the terms of any Environmental Permit;

 

(6)                                  there are no
actions, suits, claims or proceedings pending or, to the best of Borrower’s
knowledge after reasonable and diligent inquiry, threatened that involve the
Mortgaged Property and allege, arise out of, or relate to any Prohibited
Activity or Condition; and

 

(7)                                  Borrower has
not received any complaint, order, notice of violation or other communication
from any Governmental Authority with regard to air emissions, water discharges,
noise emissions or Hazardous Materials, or any other environmental, health or
safety matters affecting the Mortgaged Property or any other property of
Borrower that is adjacent to the Mortgaged Property.

 

The representations and warranties in this Section 18 shall be continuing
representations and warranties that shall be deemed to be made by Borrower
throughout the term of the loan evidenced by the Note, until the Indebtedness
has been paid in full.

 

(f)                                    Borrower shall
promptly notify Lender in writing upon the occurrence of any of the following
events:

 

(1)                                  Borrower’s
discovery of any Prohibited Activity or Condition;

 

(2)                                  Borrower’s
receipt of or knowledge of any complaint, order, notice of violation or other
communication from any Governmental Authority or other person with regard to
present or future alleged Prohibited Activities or Conditions or any other
environmental, health or safety matters affecting the Mortgaged Property or any
other property of Borrower that is adjacent to the Mortgaged Property; and

 

(3)                                  any
representation or warranty in this Section 18 becomes untrue after the
date of this Agreement.

 

Any such notice given by Borrower shall not relieve Borrower of, or
result in a waiver of, any obligation under this Instrument, the Note, or any
other Loan Document.

 

22

 

(g)                                 Borrower shall
pay promptly the costs of any environmental inspections, tests or audits (“Environmental Inspections”) required by Lender in connection
with any foreclosure or deed in lieu of foreclosure, or as a condition of
Lender’s consent to any Transfer under Section 21, or required by Lender
following a reasonable determination by Lender that Prohibited Activities or
Conditions may exist.  Any such costs
incurred by Lender (including the fees and out-of-pocket costs of attorneys and
technical consultants whether incurred in connection with any judicial or
administrative process or otherwise) which Borrower fails to pay promptly shall
become an additional part of the Indebtedness as provided in Section 12.  The results of all Environmental Inspections
made by Lender shall at all times remain the property of Lender and Lender
shall have no obligation to disclose or otherwise make available to Borrower or
any other party such results or any other information obtained by Lender in
connection with its Environmental Inspections. 
Lender hereby reserves the right, and Borrower hereby expressly
authorizes Lender, to make available to any party, including any prospective
bidder at a foreclosure sale of the Mortgaged Property, the results of any
Environmental Inspections made by Lender with respect to the Mortgaged
Property.  Borrower consents to Lender
notifying any party (either as part of a notice of sale or otherwise) of the
results of any of Lender’s Environmental Inspections.  Borrower acknowledges that Lender cannot
control or otherwise assure the truthfulness or accuracy of the results of any
of its Environmental Inspections and that the release of such results to
prospective bidders at a foreclosure sale of the Mortgaged Property may have a
material and adverse effect upon the amount which a party may bid at such
sale.  Borrower agrees that Lender shall
have no liability whatsoever as a result of delivering the results of any of
its Environmental Inspections to any third party, and Borrower hereby releases
and forever discharges Lender from any and all claims, damages, or causes of
action, arising out of, connected with or incidental to the results of, the
delivery of any of Lender’s Environmental Inspections.

 

(h)                                 If any
investigation, site monitoring, containment, clean-up, restoration or other
remedial work (“Remedial Work”) is necessary to
comply with any Hazardous Materials Law or order of any Governmental Authority
that has or acquires jurisdiction over the Mortgaged Property or the use,
operation or improvement of the Mortgaged Property under any Hazardous
Materials Law, Borrower shall, by the earlier of (1) the applicable
deadline required by Hazardous Materials Law or (2) 30 days after notice
from Lender demanding such action, begin performing the Remedial Work, and
thereafter diligently prosecute it to completion, and shall in any event
complete the work by the time required by applicable Hazardous Materials
Law.  If Borrower fails to begin on a
timely basis or diligently prosecute any required Remedial Work, Lender may, at
its option, cause the Remedial Work to be completed, in which case Borrower
shall reimburse Lender on demand for the cost of doing so.  Any reimbursement due from Borrower to Lender
shall become part of the Indebtedness as provided in Section 12.

 

(i)                                     Borrower shall
cooperate with any inquiry by any Governmental Authority and shall comply with
any governmental or judicial order which arises from any alleged Prohibited
Activity or Condition.

 

23

 

(j)                                     Borrower shall
indemnify, hold harmless and defend (i) Lender, (ii) any prior owner
or holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan
Servicer, (v) the officers, directors, shareholders, partners, employees
and trustees of any of the foregoing, and (vi) the heirs, legal
representatives, successors and assigns of each of the foregoing (collectively,
the “Indemnitees”) from and against all
proceedings, claims, damages, penalties and costs (whether initiated or sought
by Governmental Authorities or private parties), including fees and
out-of-pocket expenses of attorneys and expert witnesses, investigatory fees,
and remediation costs, whether incurred in connection with any judicial or
administrative process or otherwise, arising directly or indirectly from any of
the following:

 

(1)                                 any breach of
any representation or warranty of Borrower in this Section 18;

 

(2)                                 any failure by
Borrower to perform any of its obligations under this Section 18;

 

(3)                                 the existence
or alleged existence of any Prohibited Activity or Condition;

 

(4)                                     the presence or
alleged presence of Hazardous Materials on or under the Mortgaged Property or
any property of Borrower that is adjacent to the Mortgaged Property; and

 

(5)                                 the actual or
alleged violation of any Hazardous Materials Law.

 

(k)                                  Counsel
selected by Borrower to defend Indemnitees shall be subject to the approval of
those Indemnitees.  However, any
Indemnitee may elect to defend any claim or legal or administrative proceeding
at the Borrower’s expense.

 

(l)                                     Borrower shall
not, without the prior written consent of those Indemnitees who are named as
parties to a claim or legal or administrative proceeding (a “Claim”), settle or compromise the Claim if the settlement (1) results
in the entry of any judgment that does not include as an unconditional term the
delivery by the claimant or plaintiff to Lender of a written release of those
Indemnitees, satisfactory in form and substance to Lender; or (2) may
materially and adversely affect Lender, as determined by Lender in its
discretion.

 

(m)                               Lender agrees
that the indemnity under this Section 18 shall be limited to the assets of
Borrower and Lender shall not seek to recover any deficiency from any natural
persons who are general partners of Borrower.

 

(n)                                 Borrower shall,
at its own cost and expense, do all of the following:

 

(1)                                  pay or satisfy
any judgment or decree that may be entered against any Indemnitee or
Indemnitees in any legal or administrative proceeding

 

24

 

incident to any matters against which Indemnitees are entitled to be
indemnified under this Section 18;

 

(2)                                  reimburse
Indemnitees for any expenses paid or incurred in connection with any matters
against which Indemnitees are entitled to be indemnified under this Section 18;
and

 

(3)                                  reimburse
Indemnitees for any and all expenses, including fees and out-of-pocket expenses
of attorneys and expert witnesses, paid or incurred in connection with the
enforcement by Indemnitees of their rights under this Section 18, or in
monitoring and participating in any legal or administrative proceeding.

 

(o)                                 In any
circumstances in which the indemnity under this Section 18 applies, Lender
may employ its own legal counsel and consultants to prosecute, defend or negotiate
any claim or legal or administrative proceeding and Lender, with the prior
written consent of Borrower (which shall not be unreasonably withheld, delayed
or conditioned), may settle or compromise any action or legal or administrative
proceeding.  Borrower shall reimburse
Lender upon demand for all costs and expenses incurred by Lender, including all
costs of settlements entered into in good faith, and the fees and out-of-pocket
expenses of such attorneys and consultants.

 

(p)                                 The provisions
of this Section 18 shall be in addition to any and all other obligations
and liabilities that Borrower may have under applicable law or under other Loan
Documents, and each Indemnitee shall be entitled to indemnification under this Section 18
without regard to whether Lender or that Indemnitee has exercised any rights
against the Mortgaged Property or any other security, pursued any rights
against any guarantor, or pursued any other rights available under the Loan
Documents or applicable law. If Borrower consists of more than one person or
entity, the obligation of those persons or entities to indemnify the
Indemnitees under this Section 18 shall be joint and several. The
obligation of Borrower to indemnify the Indemnitees under this Section 18
shall survive any repayment or discharge of the Indebtedness, any foreclosure
proceeding, any foreclosure sale, any delivery of any deed in lieu of
foreclosure, and any release of record of the lien of this Instrument.

 

19.                               PROPERTY
AND LIABILITY INSURANCE.

 

(a)                                  Borrower shall
keep the Improvements insured at all times against such hazards as Lender may
from time to time require, which insurance shall include but not be limited to
coverage against loss by fire and allied perils, general boiler and machinery
coverage, and business income coverage. 
Lender’s insurance requirements may change from time to time throughout
the term of the Indebtedness.  If Lender
so requires, such insurance shall also include sinkhole insurance, mine

 

25

 

subsidence
insurance, earthquake insurance, and, if the Mortgaged Property does not
conform to applicable zoning or land use laws, building ordinance or law
coverage.  If any of the Improvements is
located in an area identified by the Federal Emergency Management Agency (or
any successor to that agency) as an area having special flood hazards, and if
flood insurance is available in that area, Borrower shall insure such
Improvements against loss by flood.

 

(b)                                 All premiums on
insurance policies required under Section 19(a) shall be paid in the
manner provided in Section 7, unless Lender has designated in writing
another method of payment.  All such
policies shall also be in a form approved by Lender.  All policies of property damage insurance shall
include a non-contributing, non-reporting mortgage clause in favor of, and in a
form approved by, Lender.  Lender shall
have the right to hold the original policies or duplicate original policies of
all insurance required by Section 19(a). 
Borrower shall promptly deliver to Lender a copy of all renewal and
other notices received by Borrower with respect to the policies and all
receipts for paid premiums.  At least 30
days prior to the expiration date of a policy, Borrower shall deliver to Lender
the original (or a duplicate original) of a renewal policy in form satisfactory
to Lender.

 

(c)                                  Borrower shall
maintain at all times commercial general liability insurance, workers’
compensation insurance and such other liability, errors and omissions and
fidelity insurance coverages as Lender may from time to time require.

 

(d)                                 All insurance
policies and renewals of insurance policies required by this Section 19
shall be in such amounts and for such periods as Lender may from time to time
require, and shall be issued by insurance companies satisfactory to Lender.

 

(e)                                  Borrower shall
comply with all insurance requirements and shall not permit any condition to
exist on the Mortgaged Property that would invalidate any part of any insurance
coverage that this Instrument requires Borrower to maintain.

 

(f)                                    In the event of
loss, Borrower shall give immediate written notice to the insurance carrier and
to Lender.  Borrower hereby authorizes
and appoints Lender as attorney-in-fact for Borrower to make proof of loss, to
adjust and compromise any claims under policies of property damage insurance,
to appear in and prosecute any action arising from such property damage
insurance policies, to collect and receive the proceeds of property damage
insurance, and to deduct from such proceeds Lender’s expenses incurred in the
collection of such proceeds.  This power
of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 19
shall require Lender to incur any expense or take any action.  Lender may, at Lender’s option, (1) hold
the balance of such proceeds to be used to reimburse Borrower for the cost of
restoring and repairing the Mortgaged Property to the equivalent of its
original condition or to a condition approved by Lender (the “Restoration”), or (2) apply the balance of such
proceeds to the payment of the Indebtedness, whether or not then due. To the
extent Lender determines to apply insurance proceeds to Restoration, Lender
shall do so in accordance with Lender’s then-current policies relating to the
restoration of casualty damage on similar multifamily properties.

 

26

 

(g)                                 Lender shall
not exercise its option to apply insurance proceeds to the payment of the
Indebtedness if all of the following conditions are met:  (1) no Event of Default (or any event
which, with the giving of notice or the passage of time, or both, would
constitute an Event of Default) has occurred and is continuing; (2) Lender
determines, in its discretion, that there will be sufficient funds to complete
the Restoration; (3) Lender determines, in its discretion, that the net
operating income generated by the Mortgaged Property after completion of the
Restoration will be sufficient to support a debt service coverage ratio not
less than the greater of (A) the debt service coverage ratio as of the
date of this Instrument (based on the final underwriting of the Mortgaged
Property) or (B) the debt service coverage ratio immediately prior to the
loss (in each case, Lender’s determination shall include all operating costs
and other expenses, Imposition Deposits, deposits to reserves and loan
repayment obligations relating to the Mortgaged Property); (4) Lender
determines, in its discretion, that the Restoration will be completed before
the earlier of (A) one year before the maturity date of the Note or (B) one
year after the date of the loss or casualty; and (5) upon Lender’s
request, Borrower provides Lender evidence of the availability during and after
the Restoration of the insurance required to be maintained by Borrower pursuant
to this Section 19.

 

(h)                                 If the
Mortgaged Property is sold at a foreclosure sale or Lender acquires title to
the Mortgaged Property, Lender shall automatically succeed to all rights of
Borrower in and to any insurance policies and unearned insurance premiums and
in and to the proceeds resulting from any damage to the Mortgaged Property
prior to such sale or acquisition.

 

20.                               CONDEMNATION.

 

(a)                                  Borrower shall
promptly notify Lender of any action or proceeding relating to any condemnation
or other taking, or conveyance in lieu thereof, of all or any part of the
Mortgaged Property, whether direct or indirect (a “Condemnation”).  Borrower shall appear in and prosecute or
defend any action or proceeding relating to any Condemnation unless otherwise
directed by Lender in writing.  Borrower
authorizes and appoints Lender as attorney-in-fact for Borrower to commence,
appear in and prosecute, in Lender’s or Borrower’s name, any action or
proceeding relating to any Condemnation and to settle or compromise any claim
in connection with any Condemnation. 
This power of attorney is coupled with an interest and therefore is
irrevocable.  However, nothing contained
in this Section 20 shall require Lender to incur any expense or take any
action.  Borrower hereby transfers and
assigns to Lender all right, title and interest of Borrower in and to any award
or payment with respect to (i) any Condemnation, or any conveyance in lieu
of Condemnation, and (ii) any damage to the Mortgaged Property caused by
governmental action that does not result in a Condemnation.

 

(b)                                 Lender may
apply such awards or proceeds, after the deduction of Lender’s expenses
incurred in the collection of such amounts, at Lender’s option, to the restoration
or repair of the Mortgaged Property or to the payment of the Indebtedness, with
the balance, if any,

 

27

 

to
Borrower.  Unless Lender otherwise agrees
in writing, any application of any awards or proceeds to the Indebtedness shall
not extend or postpone the due date of any monthly installments referred to in
the Note, Section 7 of this Instrument or any Collateral Agreement, or
change the amount of such installments. 
Borrower agrees to execute such further evidence of assignment of any
awards or proceeds as Lender may require.

 

21.                               TRANSFERS
OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

 

(a)                                  The occurrence
of any of the following events shall constitute an Event of Default under this
Instrument:

 

(1)                                  a Transfer of
all or any part of the Mortgaged Property or any interest in the Mortgaged
Property;

 

(2)                                  a Transfer of a
Controlling Interest in Borrower;

 

(3)                                  a Transfer of a
Controlling Interest in any entity which owns, directly or indirectly through one
or more intermediate entities, a Controlling Interest in Borrower;

 

(4)                                  a Transfer of
all or any part of a Key Principal’s ownership interests in Borrower, or in any
other entity which owns, directly or indirectly through one or more
intermediate entities, an ownership interest in Borrower (other than a Transfer
of an aggregate beneficial ownership interest in the Borrower of 49% or less of
such Key Principal’s original ownership interest in the Borrower and which does
not otherwise result in a Transfer of the Key Principal’s Controlling Interest
in such intermediate entities or in the Borrower);

 

(5)                                  if Key
Principal is an entity, (A) a Transfer of a Controlling Interest in Key
Principal, or (B) a Transfer of a Controlling Interest in any entity which
owns, directly or indirectly through one or more intermediate entities, a
Controlling Interest in Key Principal;

 

(6)                                  if Borrower or
Key Principal is a trust, the termination or revocation of such trust; unless
the trust is terminated as a result of the death of an individual trustor, in
which event Lender must be notified and such Borrower or Key Principal must be
replaced with an individual or entity acceptable to Lender, in accordance with
the provisions of Section 21(c) hereof, within 90 days of such death
(provided however that no property inspection shall be required and a 1%
transfer fee will not be charged);

 

(7)                                  if Key
Principal is a natural person, the death of such individual; unless the Lender
is notified and such individual is replaced with an individual or entity
acceptable to

 

28

 

Lender, in accordance with the provisions of Section 21(c) hereof,
within 90 days of such death (provided however that no property inspection
shall be required and a 1% transfer fee will not be charged);

 

(8)                                  the merger,
dissolution, liquidation, or consolidation of (i) Borrower, (ii) any
Key Principal that is a legal entity, or (iii) any legal entity holding,
directly or indirectly, a Controlling Interest in the Borrower or in any Key
Principal that is an entity;

 

(9)          a conversion of Borrower
from one type of legal entity into another type of legal entity (including the
conversion of a general partnership into a limited partnership and the
conversion of a limited partnership into a limited liability company), whether
or not there is a Transfer; if such conversion results in a change in any
assets, liabilities, legal rights or obligations of Borrower (or of Key
Principal, guarantor, or any general partner of Borrower, as applicable), by
operation of law or otherwise; and

 

(10)                            a Transfer of
the economic benefits or right to cash flows attributable to the ownership
interests in Borrower and/or, if Key Principal is an entity, Key Principal,
separate from the Transfer of the underlying ownership interests, unless the
Transfer of the underlying ownership interests would otherwise not be
prohibited by this Agreement

 

Lender shall not be required to demonstrate any actual impairment of
its security or any increased risk of default in order to exercise any of its
remedies with respect to an Event of Default under this Section 21.

 

(b)                                 The occurrence
of any of the following events shall not constitute an Event of Default under
this Instrument, notwithstanding any provision of Section 21(a) to
the contrary:

 

(1)                                  a Transfer to
which Lender has consented;

 

(2)                                  except as
provided in Section 21(a)(6) and (7), a Transfer that occurs by
devise, descent, pursuant to the provisions of a trust, or by operation of law
upon the death of a natural person;

 

(3)                                  the grant of a
leasehold interest in an individual dwelling unit for a term of two years or
less not containing an option to purchase;

 

(4)                                  a Transfer of
obsolete or worn out Personalty or Fixtures that are contemporaneously replaced
by items of equal or better function and quality, which are free of liens,
encumbrances and security interests other than those created by the Loan
Documents or consented to by Lender;

 

(5)                                  the grant of an
easement, servitude, or restrictive covenant if, before the grant, Lender
determines that the easement, servitude, or restrictive covenant will not

 

29

 

materially affect the operation or value of the Mortgaged Property or
Lender’s interest in the Mortgaged Property, and Borrower pays to Lender, upon
demand, all costs and expenses incurred by Lender in connection with reviewing
Borrower’s request;

 

(6)                                  the creation of
a tax lien or a mechanic’s, materialman’s, or judgment lien against the
Mortgaged Property which is bonded off, released of record, or otherwise
remedied to Lender’s satisfaction within 45 days after Borrower has actual or
constructive notice of the existence of such lien; and

 

(7)                                  the conveyance
of the Mortgaged Property at a judicial or non-judicial foreclosure sale under
this Instrument.

 

(c)                                  Lender shall
consent to a Transfer that would otherwise violate this Section 21 if,
prior to the Transfer, Borrower has satisfied each of the following
requirements:

 

(1)                                  the submission
to Lender of all information required by Lender to make the determination
required by this Section 21(c);

 

(2)                                  the absence of
any Event of Default;

 

(3)                                  the transferee
meets all of the eligibility, credit, management, and other standards
(including any standards with respect to previous relationships between Lender
and the transferee and the organization of the transferee) customarily applied
by Lender at the time of the proposed Transfer to the approval of borrowers in
connection with the origination or purchase of similar mortgage finance
structures on similar multifamily properties, unless partially waived by Lender
in exchange for such additional conditions as Lender may require;

 

(4)                                  the Mortgaged
Property, at the time of the proposed Transfer, meets all standards as to its
physical condition that are customarily applied by Lender at the time of the
proposed Transfer to the approval of properties in connection with the
origination or purchase of similar mortgage finance structures on similar
multifamily properties, unless partially waived by Lender in exchange for such
additional conditions as Lender may require;

 

(5)                                  if transferor
or any other person has obligations under any Loan Document, the execution by
the transferee or one or more individuals or entities acceptable to Lender of
an assumption agreement (including, if applicable, an Acknowledgement and
Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse
Liability) that is acceptable to Lender and that, among other things, requires
the transferee to perform all obligations of transferor or such person set
forth in such Loan Document, and may require

 

30

 

that the transferee comply with any provisions of this Instrument or
any other Loan Document which previously may have been waived by Lender;

 

(6)                                  if a guaranty
has been executed and delivered in connection with the Note, this Instrument or
any of the other Loan Documents, the Borrower causes one or more individuals or
entities acceptable to Lender to execute and deliver to Lender a substitute
guaranty in a form acceptable to Lender;

 

(7)                                  Lender’s
receipt of all of the following:

 

(A)                              a
non-refundable review fee in the amount of $3,000 and a transfer fee equal to 1
percent of the outstanding Indebtedness immediately prior to the Transfer; and

 

(B)        Borrower’s reimbursement of
all of Lender’s out-of-pocket costs (including reasonable attorneys’ fees)
incurred in reviewing the Transfer request, to the extent such expenses exceed
$3,000; and

 

(8)                                  Borrower has
agreed to Lender’s conditions to approve such Transfer, which may include, but
are not limited to (A) providing additional collateral, guaranties, or
other credit support to mitigate any risks concerning the proposed transferee
or the performance or condition of the Mortgaged Property, and (B) amending
the Loan Documents to (i) delete any specially negotiated terms or
provisions previously granted for the exclusive benefit of transferor and (ii) restore
to original provisions of the standard Fannie Mae form multifamily loan
documents, to the extent such provisions were previously modified.

 

(d)                                 For purposes of
this Section, the following terms shall have the meanings set forth below:

 

(1)                                  “Initial
Owners” means, with respect to Borrower or any other entity, the persons or
entities who on the date of the Note, directly or indirectly, own in the
aggregate 100% of the ownership interests in Borrower or that entity.

 

(2)                                  A Transfer of a “Controlling Interest” shall mean:

 

(A)                              with respect to
any entity, the following:

 

(i)                                     if such entity
is a general partnership or a joint venture, a Transfer of any general
partnership interest or joint venture interest which would cause the Initial
Owners to own less than 51% of all general partnership or joint venture
interests in such entity;

 

31

 

(ii)                                  if such entity
is a limited partnership, (A) a Transfer of any general partnership
interest, or (B) a Transfer of any partnership interests which would cause
the Initial Owners to own less than 51% of all limited partnership interests in
such entity;

 

(iii)                               if such entity
is a limited liability company or a limited liability partnership, (A) a
Transfer of any membership or other ownership interest which would cause the
Initial Owners to own less than 51% of all membership or other ownership
interests in such entity, (B) a Transfer of any membership, or other
interest of a manager, in such entity that results in a change of manager, or (C) a
change of the non-member manager;

 

(iv)                              if such entity
is a corporation (other than a Publicly-Held Corporation) with only one class
of voting stock, a Transfer of any voting stock which would cause the Initial
Owners to own less than 51% of voting stock in such corporation;

 

(v)                                 if such entity
is a corporation (other than a Publicly-Held Corporation) with more than one
class of voting stock, a Transfer of any voting stock which would cause the
Initial Owners to own less than a sufficient number of shares of voting stock
having the power to elect the majority of directors of such corporation; and

 

(vi)                              if such entity
is a trust (other than a Publicly-Held Trust), the removal, appointment or
substitution of a trustee of such trust other than (A) in the case of a
land trust, or (B) if the trustee of such trust after such removal,
appointment, or substitution is a trustee identified in the trust agreement
approved by Lender; and/or

 

(B)                                any agreement
(including provisions contained in the organizational and/or governing
documents of Borrower or Key Principal) or Transfer not specified in clause
(A), the effect of which, either immediately or after the passage of time or
occurrence of a specified event or condition, including the failure of a
specified event or condition to occur or be satisfied, would (i) cause a
change in or replacement of the Person that controls the management and
operations of the Borrower or Key Principal or (ii) limit or otherwise
modify the extent of such Person’s control over the management and operations
of Borrower or Key Principal.

 

(3)                                  “Publicly-Held
Corporation” shall mean a corporation the outstanding voting
stock of which is registered under Section 12(b) or 12(g) of the
Securities and Exchange Act of 1934, as amended.

 

32

 

(4)           “Publicly-Held Trust” shall mean a real estate investment trust the
outstanding voting shares or beneficial interests of which are registered under
Section 12 (b) or 12 (g) of the Securities Exchange Act of 1934,
as amended.

 

(e)           Lender shall be
provided with written notice of all Transfers under this Section 21,
whether or not such Transfers are permitted under Section 21(b) or
approved by Lender under Section 21(c), no later than 10 days prior to the
date of the Transfer.”

 

22.          EVENTS OF DEFAULT.

 

The occurrence of any one or more of the following shall constitute an
Event of Default under this Instrument:

 

(a)           any failure by
Borrower to pay or deposit when due any amount required by the Note, this
Instrument or any other Loan Document;

 

(b)           any failure by
Borrower to maintain the insurance coverage required by Section 19;

 

(c)           any failure by
Borrower to comply with the provisions of Section 33;

 

(d)           fraud or material
misrepresentation or material omission by Borrower, or any of its officers,
directors, trustees, general partners or managers, Key Principal or any
guarantor in connection with (A) the application for or creation of the
Indebtedness, (B) any financial statement, rent roll, or other report or
information provided to Lender during the term of the Indebtedness, or (C) any
request for Lender’s consent to any proposed action, including a request for
disbursement of funds under any Collateral Agreement;

 

(e)           any (i) Event
of Default under Section 21 and/or (ii) occurrence of a Bankruptcy
Event;

 

(f)            the commencement of
a forfeiture action or proceeding, whether civil or criminal, which, in Lender’s
reasonable judgment, could result in a forfeiture of the Mortgaged Property or
otherwise materially impair the lien created by this Instrument or Lender’s
interest in the Mortgaged Property;

 

(g)           any failure by
Borrower to perform any of its obligations under this Instrument (other than
those specified in Sections 22(a) through (f)), as and when required,
which continues for a period of 30 days after notice of such failure by Lender
to Borrower, but no such notice or grace period shall apply in the case of any
such failure which could, in Lender’s judgment, absent immediate exercise by
Lender of a right or remedy under this Instrument, result in harm to Lender,

 

33

 

impairment
of the Note or this Instrument or any other security given under any other Loan
Document;

 

(h)           any failure by
Borrower to perform any of its obligations as and when required under any Loan
Document other than this Instrument which continues beyond the applicable cure
period, if any, specified in that Loan Document; and

 

(i)            any exercise by the
holder of any other debt instrument secured by a mortgage, deed of trust or
deed to secure debt on the Mortgaged Property of a right to declare all amounts
due under that debt instrument immediately due and payable.

 

23.          REMEDIES CUMULATIVE.

 

Each right and remedy provided in this Instrument is distinct from all
other rights or remedies under this Instrument or any other Loan Document or
afforded by applicable law, and each shall be cumulative and may be exercised
concurrently, independently, or successively, in any order.

 

24.          FORBEARANCE.

 

(a)           Lender may (but
shall not be obligated to) agree with Borrower, from time to time, and without
giving notice to, or obtaining the consent of, or having any effect upon the
obligations of, any guarantor or other third party obligor, to take any of the
following actions:  extend the time for
payment of all or any part of the Indebtedness; reduce the payments due under
this Instrument, the Note, or any other Loan Document; release anyone liable
for the payment of any amounts under this Instrument, the Note, or any other
Loan Document; accept a renewal of the Note; modify the terms and time of
payment of the Indebtedness; join in any extension or subordination agreement;
release any Mortgaged Property; take or release other or additional security;
modify the rate of interest or period of amortization of the Note or change the
amount of the monthly installments payable under the Note; and otherwise modify
this Instrument, the Note, or any other Loan Document.

 

(b)           Any forbearance by
Lender in exercising any right or remedy under the Note, this Instrument, or
any other Loan Document or otherwise afforded by applicable law, shall not be a
waiver of or preclude the exercise of any other right or remedy.  The acceptance by Lender of payment of all or
any part of the Indebtedness after the due date of such payment, or in an
amount which is less than the required payment, shall not be a waiver of Lender’s
right to require prompt payment when due of all other payments on account of
the Indebtedness or to exercise any remedies for any failure to make prompt
payment. Enforcement by Lender of any security for the Indebtedness shall not
constitute an election by Lender of remedies so as to preclude the

 

34

 

exercise
of any other right available to Lender. 
Lender’s receipt of any awards or proceeds under Sections 19 and 20
shall not operate to cure or waive any Event of Default.

 

25.          LOAN CHARGES.

 

If any applicable law limiting the amount of interest or other charges
permitted to be collected from Borrower is interpreted so that any charge
provided for in any Loan Document, whether considered separately or together
with other charges levied in connection with any other Loan Document, violates
that law, and Borrower is entitled to the benefit of that law, that charge is
hereby reduced to the extent necessary to eliminate that violation.  The amounts, if any, previously paid to
Lender in excess of the permitted amounts shall be applied by Lender to reduce
the principal of the Indebtedness.  For
the purpose of determining whether any applicable law limiting the amount of
interest or other charges permitted to be collected from Borrower has been
violated, all Indebtedness which constitutes interest, as well as all other
charges levied in connection with the Indebtedness which constitute interest,
shall be deemed to be allocated and spread over the stated term of the
Note.  Unless otherwise required by
applicable law, such allocation and spreading shall be effected in such a
manner that the rate of interest so computed is uniform throughout the stated
term of the Note.

 

26.          WAIVER OF STATUTE OF
LIMITATIONS.

 

Borrower hereby waives the right to assert any statute of limitations
as a bar to the enforcement of the lien of this Instrument or to any action
brought to enforce any Loan Document.

 

27.          WAIVER OF
MARSHALLING.

 

Notwithstanding the existence of any other security interests in the
Mortgaged Property held by Lender or by any other party, Lender shall have the
right to determine the order in which any or all of the Mortgaged Property shall
be subjected to the remedies provided in this Instrument, the Note, any other
Loan Document or applicable law.  Lender
shall have the right to determine the order in which any or all portions of the
Indebtedness are satisfied from the proceeds realized upon the exercise of such
remedies.  Borrower and any party who now
or in the future acquires a security interest in the Mortgaged Property and who
has actual or constructive notice of this Instrument waives any and all right
to require the marshalling of assets or to require that any of the Mortgaged
Property be sold in the inverse order of alienation or that any of the
Mortgaged Property be sold in parcels or as an entirety in connection with the
exercise of any of the remedies permitted by applicable law or provided in this
Instrument.

 

35

 

28.          FURTHER ASSURANCES.

 

Borrower shall execute, acknowledge, and deliver, at its sole cost and
expense, all further acts, deeds, conveyances, assignments, estoppel certificates,
financing statements, transfers and assurances as Lender may require from time
to time in order to better assure, grant, and convey to Lender the rights
intended to be granted, now or in the future, to Lender under this Instrument
and the Loan Documents.

 

29.          ESTOPPEL CERTIFICATE.

 

Within 10 days after a request from Lender, Borrower shall deliver to
Lender a written statement, signed and acknowledged by Borrower, certifying to
Lender or any person designated by Lender, as of the date of such statement, (i) that
the Loan Documents are unmodified and in full force and effect (or, if there
have been modifications, that the Loan Documents are in full force and effect
as modified and setting forth such modifications); (ii) the unpaid
principal balance of the Note; (iii) the date to which interest under the
Note has been paid; (iv) that Borrower is not in default in paying the
Indebtedness or in performing or observing any of the covenants or agreements
contained in this Instrument or any of the other Loan Documents (or, if the
Borrower is in default, describing such default in reasonable detail); (v) whether
or not there are then existing any setoffs or defenses known to Borrower
against the enforcement of any right or remedy of Lender under the Loan Documents;
and (vi) any additional facts requested by Lender.

 

30.          GOVERNING LAW;
CONSENT TO JURISDICTION AND VENUE.

 

(a)           This Instrument, and
any Loan Document which does not itself expressly identify the law that is to
apply to it, shall be governed by the laws of the jurisdiction in which the
Land is located (the “Property Jurisdiction”).

 

(b)           Borrower agrees that
any controversy arising under or in relation to the Note, this Instrument, or
any other Loan Document shall be litigated exclusively in the Property
Jurisdiction.  The state and federal
courts and authorities with jurisdiction in the Property Jurisdiction shall
have exclusive jurisdiction over all controversies which shall arise under or
in relation to the Note, any security for the Indebtedness, or any other Loan
Document.  Borrower irrevocably consents
to service, jurisdiction, and venue of such courts for any such litigation and
waives any other venue to which it might be entitled by virtue of domicile,
habitual residence or otherwise.

 

36

 

31.          NOTICE.

 

(a)           All notices, demands
and other communications (“notice”) under
or concerning this Instrument shall be in writing.  Each notice shall be addressed to the
intended recipient at its address set forth in this Instrument, and shall be
deemed given on the earliest to occur of (1) the date when the notice is
received by the addressee; (2) the first Business Day after the notice is
delivered to a recognized overnight courier service, with arrangements made for
payment of charges for next Business Day delivery; or (3) the third
Business Day after the notice is deposited in the United States mail with
postage prepaid, certified mail, return receipt requested.  As used in this Section 31, the term “Business
Day” means any day other than a Saturday, a Sunday or any other day on which
Lender is not open for business.

 

(b)           Any party to this
Instrument may change the address to which notices intended for it are to be
directed by means of notice given to the other party in accordance with this Section 31.  Each party agrees that it will not refuse or
reject delivery of any notice given in accordance with this Section 31,
that it will acknowledge, in writing, the receipt of any notice upon request by
the other party and that any notice rejected or refused by it shall be deemed
for purposes of this Section 31 to have been received by the rejecting
party on the date so refused or rejected, as conclusively established by the
records of the U.S. Postal Service or the courier service.

 

(c)           Any notice under the
Note and any other Loan Document which does not specify how notices are to be
given shall be given in accordance with this Section 31.

 

32.          SALE OF NOTE; CHANGE
IN SERVICER.

 

The Note or a partial interest in the Note (together with this
Instrument and the other Loan Documents) may be sold one or more times without
prior notice to Borrower.  A sale may
result in a change of the Loan Servicer. 
There also may be one or more changes of the Loan Servicer unrelated to
a sale of the Note.  If there is a change
of the Loan Servicer, Borrower will be given notice of the change.

 

33.          SINGLE ASSET
BORROWER.

 

Until the Indebtedness is paid in full, Borrower (a) shall not
acquire any real or personal property other than the Mortgaged Property and
personal property related to the operation and maintenance of the Mortgaged
Property;  (b) shall not operate any
business other than the management and operation of the Mortgaged Property; and
(c) shall not maintain its assets in a way difficult to segregate and
identify.

 

37

 

34.          SUCCESSORS AND
ASSIGNS BOUND.

 

This Instrument shall bind, and the rights granted by this Instrument
shall inure to, the respective successors and assigns of Lender and
Borrower.  However, a Transfer not
permitted by Section 21 shall be an Event of Default.

 

35.          JOINT AND SEVERAL
LIABILITY.

 

If more than one person or entity signs this Instrument as Borrower,
the obligations of such persons and entities shall be joint and several.

 

36.          RELATIONSHIP OF
PARTIES; NO THIRD PARTY BENEFICIARY.

 

(a)           The relationship
between Lender and Borrower shall be solely that of creditor and debtor,
respectively, and nothing contained in this Instrument shall create any other
relationship between Lender and Borrower.

 

(b)           No creditor of any
party to this Instrument and no other person shall be a third party beneficiary
of this Instrument or any other Loan Document. 
Without limiting the generality of the preceding sentence, (1) any
arrangement (a “Servicing Arrangement”) between
the Lender and any Loan Servicer for loss sharing or interim advancement of
funds shall constitute a contractual obligation of such Loan Servicer that is
independent of the obligation of Borrower for the payment of the Indebtedness, (2) Borrower
shall not be a third party beneficiary of any Servicing Arrangement, and (3) no
payment by the Loan Servicer under any Servicing Arrangement will reduce the
amount of the Indebtedness.

 

37.          SEVERABILITY;
AMENDMENTS.

 

The invalidity or unenforceability of any provision of this Instrument
shall not affect the validity or enforceability of any other provision, and all
other provisions shall remain in full force and effect.  This Instrument contains the entire agreement
among the parties as to the rights granted and the obligations assumed in this
Instrument.  This Instrument may not be
amended or modified except by a writing signed by the party against whom
enforcement is sought.

 

38.          CONSTRUCTION.

 

The captions and headings of the sections of this Instrument are for
convenience only and shall be disregarded in construing this Instrument.  Any reference in this Instrument to an

 

 

38

 

“Exhibit”
or a “Section” shall, unless otherwise explicitly provided, be construed as
referring, respectively, to an Exhibit attached to this Instrument or to a
Section of this Instrument.  All
Exhibits attached to or referred to in this Instrument are incorporated by
reference into this Instrument.  Any
reference in this Instrument to a statute or regulation shall be construed as
referring to that statute or regulation as amended from time to time.  Use of the singular in this Agreement
includes the plural and use of the plural includes the singular.  As used in this Instrument, the term “including”
means “including, but not limited to.”

 

39.          LOAN SERVICING.

 

All actions regarding the servicing of the loan evidenced by the Note,
including the collection of payments, the giving and receipt of notice, inspections
of the Property, inspections of books and records, and the granting of consents
and approvals, may be taken by the Loan Servicer unless Borrower receives
notice to the contrary.  If Borrower
receives conflicting notices regarding the identity of the Loan Servicer or any
other subject, any such notice from Lender shall govern.

 

40.          DISCLOSURE OF
INFORMATION.

 

Lender may furnish information regarding Borrower or the Mortgaged
Property to third parties with an existing or prospective interest in the servicing,
enforcement, evaluation, performance, purchase or securitization of the
Indebtedness, including trustees, master servicers, special servicers, rating
agencies, and organizations maintaining databases on the underwriting and
performance of multifamily mortgage loans. 
Borrower irrevocably waives any and all rights it may have under
applicable law to prohibit such disclosure, including any right of privacy.

 

41.          NO CHANGE IN FACTS OR
CIRCUMSTANCES.

 

All information in the application for the loan submitted to Lender
(the “Loan Application”) and in all financial
statements, rent rolls, reports, certificates and other documents submitted in
connection with the Loan Application are complete and accurate in all material
respects.  There has been no material
adverse change in any fact or circumstance that would make any such information
incomplete or inaccurate.

 

42.          SUBROGATION.

 

If, and to the extent that, the proceeds of the loan evidenced by the
Note are used to pay, satisfy or discharge any obligation of Borrower for the
payment of money that is secured by a

 

39

 

pre-existing
mortgage, deed of trust or other lien encumbering the Mortgaged Property (a “Prior Lien”), such loan proceeds shall be deemed to have
been advanced by Lender at Borrower’s request, and Lender shall automatically,
and without further action on its part, be subrogated to the rights, including
lien priority, of the owner or holder of the obligation secured by the Prior
Lien, whether or not the Prior Lien is released.

 

43.          ACCELERATION;
REMEDIES.

 

If an Event of Default has occurred and is continuing,  Lender, at Lender’s option, may declare the
Indebtedness to be immediately due and payable without further demand, and may
invoke the power of sale and any other remedies permitted by California law or
provided in this Instrument or in any other Loan Document.  Borrower acknowledges that the power of sale
granted in this Instrument may be exercised by Lender without prior judicial
hearing.  Lender shall be entitled to
collect all costs and expenses incurred in pursuing such remedies, including
attorneys’ fees, costs of documentary evidence, abstracts and title reports.

 

If the power of sale is invoked, Lender shall execute a written notice
of the occurrence of an Event of Default and of Lender’s election to cause the
Mortgaged Property to be sold and shall cause the notice to be recorded in each
county in which the Mortgaged Property or some part of the Mortgaged Property
is located.  Trustee shall give notice of
default and notice of sale and shall sell the Mortgaged Property according to
California law.  Trustee may sell the
Mortgaged Property at the time and place and under the terms designated in the
notice of sale in one or more parcels and in such order as Trustee may
determine.  Trustee may postpone the sale
of all or any part of the Mortgaged Property by public announcement at the time
and place of any previously scheduled sale. 
Lender or Lender’s designee may purchase the Mortgaged Property at any
sale.

 

At the sale, Lender shall be entitled to credit bid, or to instruct
Trustee, on behalf of Lender to credit bid, up to and including the entire
amount of the Indebtedness plus Trustee’s fees and expenses.  Trustee shall deliver to the purchaser at the
sale, within a reasonable time, but in any event within 10 calendar days, after
the sale, a deed conveying the Mortgaged Property so sold without any express
or implied covenant or warranty.  The
recitals in Trustee’s deed shall be prima facie evidence of the truth of the
statements made in those recitals. 
Trustee shall apply the proceeds of the sale in the following
order:  (a) to all costs and
expenses of exercising the power of sale, including the payment of Trustee’s
fees and attorneys’ fees and costs of title evidence; (b) to the
Indebtedness in such order as Lender, in Lender’s discretion, directs; and (c) the
excess, if any, to the person or persons legally entitled to the excess.

 

40

 

44.          RECONVEYANCE.

 

Upon
payment of the Indebtedness, Lender shall request Trustee to reconvey the
Mortgaged Property and shall surrender this Instrument and the Note to
Trustee.  Trustee shall reconvey the
Mortgaged Property without warranty to the person or persons legally entitled
to the Mortgaged Property.  Such person
or persons shall pay Trustee’s reasonable costs incurred in so reconveying the
Mortgaged Property.

 

45.          SUBSTITUTE TRUSTEE.

 

Lender, at Lender’s option, may from time to time, by a written instrument,
appoint a successor trustee, which instrument, when executed and acknowledged
by Lender and recorded in the office of the Recorder of the county or counties
where the Mortgaged Property is situated, shall be conclusive proof of proper
substitution of the successor trustee. 
The successor trustee shall, without conveyance of the Mortgaged
Property, succeed to all the title, authority, powers and duties conferred upon
the Trustee in this Instrument and by California law.  The instrument of substitution shall contain
the name of the original Lender, Trustee and Borrower under this Instrument,
the book and page where this Instrument is recorded, and the name and
address of the successor trustee.  If
notice of default has been recorded, this power of substitution cannot be
exercised until after the costs, fees and expenses of the then acting Trustee
have been paid to such Trustee, who shall endorse receipt of those costs, fees
and expenses upon the instrument of substitution.  The procedure provided for substitution of
trustee in this Instrument shall govern to the exclusion of all other
provisions for substitution, statutory or otherwise.

 

46.          STATEMENT OF
OBLIGATION.

 

Lender may collect a fee not to exceed the maximum allowed by
applicable law for furnishing the statement of obligation as provided in Section 2943
of the Civil Code of California.

 

47.          SPOUSE’S SEPARATE
PROPERTY.

 

Each Borrower who is a married person expressly agrees that recourse
may be had against his or her community property and separate property.

 

41

 

48.          FIXTURE FILING.

 

This
Instrument is also a fixture filing under the Uniform Commercial Code of
California.

 

49.          ADDITIONAL PROVISION
REGARDING APPLICATION OF PAYMENTS.

 

In addition to the provisions of Section 9, Borrower further
agrees that, if Lender accepts a guaranty of only a portion of the
Indebtedness, Borrower waives its right under California Civil Code Section 2822(a),
to designate the portion of the Indebtedness which shall be satisfied by a
guarantor’s partial payment.

 

50.          WAIVER OF MARSHALLING;
OTHER WAIVERS.

 

To the extent permitted by law, Borrower waives (i) the benefit of
all present or future laws providing for any appraisement before sale of any
portion of the Mortgaged Property, (ii) all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of the Indebtedness and marshalling in the event of
foreclosure of the lien created by this Instrument, (iii) all rights and
remedies which Borrower may have or be able to assert by reason of the laws of
the State of California pertaining to the rights and remedies of sureties, (iv) the
right to assert any statute of limitations as a bar to the enforcement of the
lien of this Instrument or to any action brought to enforce the Note or any
other obligation secured by this Instrument, and (v) any rights, legal or
equitable, to require marshalling of assets or to require upon foreclosure
sales in a particular order, including any rights under California Civil Code
Sections 2899 and 3433.  Lender shall
have the right to determine the order in which any or all of the Mortgaged
Property shall be subjected to the remedies provided by this Instrument.  Lender shall have the right to determine the
order in which any or all portions of the Indebtedness are satisfied from the
proceeds realized upon the exercise of the remedies provided by this
Instrument.  By signing this Instrument,
Borrower does not waive its rights under Section 2924c of the California
Civil Code.

 

51.          ADDITIONAL PROVISIONS
CONCERNING ENVIRONMENTAL HAZARDS.

 

In addition to the provisions of Section 18:

 

(a)           Except for matters
covered by an O&M Program or matters described in Section 18(b),
Borrower shall not cause or permit any lien (whether or not such lien has
priority over the

 

42

 

lien
created by this Instrument) upon the Mortgaged Property imposed pursuant to any
Hazardous Materials Laws.  Any such lien
shall be considered a Prohibited Activity or Condition.

 

(b)           Borrower represents
and warrants to Lender that, except as previously disclosed by Borrower to
Lender in writing:

 

(1)                                  at the time of
acquiring the Mortgaged Property, Borrower undertook all appropriate inquiry
into the previous ownership and uses of the Mortgaged Property consistent with
good commercial or customary practice and no evidence or indication came to
light which would suggest that the Mortgaged Property has been or is now being
used for any Prohibited Activities or Conditions; and

 

(2)                                  the Mortgaged
Property has not been designated as “hazardous waste property” or “border zone
property” pursuant to Section 25220, et seq., of the
California Health and Safety Code.

 

The representations and warranties in this Section 51(b) shall
be continuing representations and warranties that shall be deemed to be made by
Borrower throughout the term of the loan evidenced by the Note, until the
Indebtedness has been paid in full.

 

(c)           Without limiting any
of the remedies provided in this Instrument, Borrower acknowledges and agrees
that each of the provisions in Section 18 and in this Section 51 is
an environmental provision (as defined in Section 736(f)(2) of the
California Code of Civil Procedure) made by Borrower relating to the real
property security (the “Environmental Provisions”),
and that Borrower’s failure to comply with any of the Environmental Provisions
will be a breach of contract that will entitle Lender to pursue the remedies
provided by Section 736 of the California Code of Civil Procedure (“Section 736”) for the recovery of damages and for the
enforcement of the Environmental Provisions. 
Pursuant to Section 736, Lender’s action for recovery of damages or
enforcement of the Environmental Provisions shall not constitute an action
within the meaning of Section 726(a) of the California Code of Civil
Procedure or constitute a money judgment for a deficiency or a deficiency
judgment within the meaning of Sections 580a, 580b, 580d, or 726(b) of the
California Code of Civil Procedure.

 

(d)           Any reference in
this Instrument or in any other Loan Document to Section 18 of this
Instrument shall be construed as referring together to Section 18 and this
Section 51.

 

43

 

52.          ADDITIONAL PROVISION REGARDING
INSURANCE.

 

In
addition to the provisions of Section 19, Borrower further agrees that to
the extent that Borrower obtains any form of property damage insurance for the
Mortgaged Property or any portion thereof that insures perils not required to
be insured against by Lender, such policy of property damage insurance shall
include a standard mortgagee clause and shall name Lender as loss payee and,
within 10 days following Borrower’s purchase of such additional insurance,
Borrower shall cause to be delivered to Lender a duplicate original policy of
insurance with respect to such policy. 
Any insurance proceeds payable to Borrower under such policy shall be
additional security for the Indebtedness and Lender shall have the same rights
to such policy and proceeds as it has with respect to insurance policies
required by Lender pursuant to Section 19 (except that Lender shall not
require that the premium for such additional insurance be included among the
Imposition Deposits).

 

53.          WAIVER OF TRIAL BY
JURY.

 

BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A
TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE
RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF
RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO
SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF
COMPETENT LEGAL COUNSEL.

 

44

 

ATTACHED EXHIBITS.  The following Exhibits are attached to this
Instrument:

 

x Exhibit A   Description
of the Land (Required).

 

x Exhibit B   Modifications
to Instrument (Borrower Requested).

 

45

 

IN WITNESS WHEREOF, Borrower has signed and
delivered this Instrument or has caused this Instrument to be signed and
delivered by its duly authorized representative.

 

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  BEHRINGER
  HARVARD NOHO, LLC,

  
	
   

  	
  a
  Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Name:

  	
  Gerald
  J. Reihsen, III

  
	
   

  	
   

  	
  Title:

  	
  Executive
  Vice President

  

 

Fannie Mae Commitment Number: 860574

 

46

 

STATE OF TEXAS

 

COUNTY OF DALLAS

 

This instrument was acknowledged before me on October 21,
2009 by Gerald J. Reihsen, III of BEHRINGER HARVARD NOHO, LLC, a Delaware
limited liability company, on behalf of said limited liability company.

 

 

	
   

  	
  /s/ Catherine E. Mea

  	
  (SEAL

  
	
   

  	
  Signature of Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Notary Public

  	
  (SEAL

  
	
   

  	
  Title of Officer

  	
   

  

 

My
Commission Expires: July 26, 2012

 

47

 

KEY PRINCIPAL

 

Key Principal

 

	
  Name:

  	
   

  	
  BEHRINGER HARVARD
  MULTIFAMILY REIT I, INC.

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  15601 Dallas Parkway,
  Suite 600

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Addison, Texas 75001

  

 

48

 

EXHIBIT B

 

MODIFICATIONS
TO INSTRUMENT

(Borrower
Requested)

 

The following modifications are made to the
text of the Instrument that precedes this Exhibit:

 

1.                                       Section 19(f) is modified by adding
the following at the end of the Section:

 

“Notwithstanding any provision to the
contrary in this Section 19(f), as long as no Event of Default, or any
event which, with the giving of Notice or the passage of time, or both, would
constitute an Event of Default, has occurred and is continuing, in the event of
a casualty resulting in damage to the Mortgaged Property which will cost
$50,000 or less to repair, the Borrower shall have the sole right to make proof
of loss, adjust and compromise the claim and collect and receive any proceeds
directly without the approval or prior consent of the Lender so long as the
insurance proceeds are used solely for the Restoration of the Mortgaged
Property.”

 

2.                                       Section 20(a) is modified by adding
the following at the end of the Section:

 

“Notwithstanding any provision to the
contrary in this Section 20(a), as long as no Event of Default, or any
event which, with the giving of Notice or the passage of time, or both, would
constitute an Event of Default, has occurred and is continuing, in the event of
a Condemnation resulting in damage to the Mortgaged Property which will cost
$50,000 or less to repair, the Borrower shall have the sole right to appear in
and prosecute or defend any action or proceeding relating to any Condemnation,
and to settle or compromise any claim, collect and receive any proceeds in
connection with any Condemnation directly without the approval or prior consent
of the Lender so long as the Condemnation proceeds are used solely for the
Restoration of the Mortgaged Property (provided; however, that this provision
shall not apply if such Condemnation in any way affects access to the Mortgaged
Property).”

 

3.                                       Section 21
is modified to add new Section 21(f) as follows:

 

“(f)                              The
requirement to pay a 1% transfer fee as provided in Section 21(c)(7)(A) shall
not apply to Transfers of the Mortgaged Property or of ownership interests held
by any person or entity to (i) one or more Key Principals or (ii) any
entity or entities in which a Key Principal has a direct or indirect
Controlling Interest (“Affiliated Entities”), including but not limited to the
following Affiliated Entities:  Behringer
Harvard Multifamily OP I LP.  However,
such Transfers to Affiliated Entities shall be subject to all other requirements
of Section 21(c) herein.”

 

4.                                       Section 21(b) is
modified to delete the period at the end of Section 21(b)(7) and
substitute “; and” therefor and to add a new Section 21(b)(8):

 

“(8)                            a
Transfer of the Mortgaged Property to an entity or entities in which the Key
Principal has a direct or indirect Controlling Interest; provided, however,
that such Transfer of ownership interests will not cause a change in the
management and control of Borrower (or other intermediate entity), and after
which Transfer, 

 

B-1

 

the transferor Key Principal shall maintain the same right and ability
to manage and control Borrower (or other intermediate entity) as existed prior
to the Transfer; and”

 

5.                                       Section 21(b) is
modified to add new Section 21(b)(9) as follows:

 

“(9)                            a
Transfer of (i) a Controlling Interest in any entity which owns, directly
or indirectly through one or more intermediate entities, a Controlling Interest
in Borrower, or (ii) all or any part of the Key Principal’s ownership
interest in Borrower, or in any other entity which owns, directly or indirectly
through one of more intermediate entities, an ownership interest in Borrower;
provided however, that following such Transfer, Key Principal will hold a
Controlling Interest, either directly or indirectly, in Borrower.”

 

6.                                       Section 21(b) is
modified to add new Section 21(b)(9) as follows:

 

“(10)                      a Transfer of any stock in any
Publicly-Held Corporation.”

 

7.                                       All capitalized
terms used in this Exhibit not specifically defined herein shall have the
meanings set forth in the text of the Instrument that precedes this Exhibit.

 

[BORROWER INITIALS ON THE FOLLOWING PAGE]

 

B-2

 

	
   

  	
  Borrower’s Initials:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ GJR

  

 

B-3Exhibit 10.31

 

 

OWNER
PARTICIPATION AGREEMENT

 

by and
between

 

 

THE
COMMUNITY REDEVELOPMENT AGENCY

OF THE CITY OF LOS ANGELES

 

“Agency”

 

 

and

 

 

SL NO HO,
LLC

 

“Developer”

 

 

December,
2001

 

North
Hollywood Redevelopment Project

 

 

TABLE OF
CONTENTS

 

	
  RECITALS

  	
   

  	
   

  	
  1

  
	
  ARTICLE
  1.

  	
   

  	
  SUBJECT
  OF THE AGREEMENT

  	
  2

  
	
  Section 101

  	
   

  	
  PURPOSE
  OF THE AGREEMENT

  	
  2

  
	
  Section 102

  	
   

  	
  THE
  DEVELOPMENT SITE

  	
  3

  
	
  Section 103

  	
   

  	
  PROJECT
  DESCRIPTION AND PHASING

  	
  4

  
	
  §
  103.1

  	
   

  	
  Project
  Description

  	
  4

  
	
  §
  103.2

  	
   

  	
  Project
  Phasing

  	
  7

  
	
  Section 104

  	
   

  	
  THE
  REDEVELOPMENT PLAN

  	
  8

  
	
  Section 105

  	
   

  	
  THE
  PROJECT AREA

  	
  8

  
	
  Section 106

  	
   

  	
  PARTIES
  TO THE AGREEMENT

  	
  9

  
	
  §
  106.1

  	
   

  	
  The
  Agency

  	
  9

  
	
  §
  106.2

  	
   

  	
  The
  Developer

  	
  9

  
	
  Section 107

  	
   

  	
  PROHIBITION
  AGAINST TRANSFERS OR CHANGES IN OWNERSHIP

  	
  9

  
	
  Section 108

  	
   

  	
  PAYMENT
  OF COSTS AND GOOD FAITH DEPOSIT

  	
  9

  
	
  §
  108.1

  	
   

  	
  Developer
  Payment of Agency Costs

  	
  9

  
	
  §
  108.2

  	
   

  	
  Good
  Faith Deposit

  	
  10

  
	
  Section 109

  	
   

  	
  EVIDENCE
  OF FINANCING

  	
  11

  
	
  §
  109.1

  	
   

  	
  Reimbursement
  of Agency’s Costs

  	
  13

  
	
  ARTICLE
  2.

  	
   

  	
  DEFINITIONS

  	
  13

  
	
  ARTICLE
  3.

  	
   

  	
  DESIGN
  AND DEVELOPMENT

  	
  19

  
	
  Section 301

  	
   

  	
  SCOPE
  OF DEVELOPMENT

  	
  19

  
	
  Section 302

  	
   

  	
  MITIGATION
  MONITORING PROGRAM

  	
  19

  
	
  Section 303

  	
   

  	
  DRAWINGS
  AND PLANS

  	
  19

  
	
  §
  303.1

  	
   

  	
  Concept
  Plan

  	
  20

  
	
  §
  303.2

  	
   

  	
  Master
  Plan

  	
  20

  
	
  §
  303.3

  	
   

  	
  Schematic
  Design Drawings

  	
  20

  
	
  §
  303.4

  	
   

  	
  Design
  Development Drawings

  	
  21

  
	
  §
  303.5

  	
   

  	
  Fifty
  Percent Complete Construction Documents

  	
  21

  
	
  §
  303.6

  	
   

  	
  Final
  Construction Documents

  	
  21

  
	
  Section 304

  	
   

  	
  PHASING
  OF DEVELOPMENT

  	
  21

  
	
  Section 305

  	
   

  	
  PERMITS
  AND OTHER ENTITLEMENTS

  	
  22

  
	
  Section 306

  	
   

  	
  AGENCY
  APPROVAL OF PLANS, DRAWINGS, AND RELATED DOCUMENTS

  	
  22

  
	
  §
  306.1

  	
   

  	
  Substantially
  Consistent

  	
  22

  
	
  §
  306.2

  	
   

  	
  Approval
  Process

  	
  23

  
	
  §
  306.3

  	
   

  	
  Changes
  to Approved Plans

  	
  23

  
	
  §
  306.4

  	
   

  	
  Governmental
  Requirements

  	
  23

  
	
  §
  306.5

  	
   

  	
  No
  Reliance

  	
  23

  
	
  Section 307

  	
   

  	
  AGENCY
  APPROVAL OF ARCHITECT AND CONTRACTOR

  	
  24

  
	
  Section 308

  	
   

  	
  ENVIRONMENTAL
  REPRESENTATIONS AND COVENANTS

  	
  24

  
	
  §
  308.1

  	
   

  	
  Developer’s
  Environmental Representations and Covenants

  	
  24

  
	
  §
  308.2

  	
   

  	
  Agency’s
  Environmental Representations and Covenants

  	
  26

  
	
  Section 309

  	
   

  	
  DEMOLITION
  AND CLEARANCE

  	
  26

  
	
  Section 310

  	
   

  	
  PUBLIC
  IMPROVEMENTS

  	
  27

  
	
  §
  310.1

  	
   

  	
  Dedication
  of Property

  	
  27

  

 

i

 

	
  §
  310.2

  	
   

  	
  Construction
  Bonds

  	
  27

  
	
   

  	
   

  	
  §
  310.2.1 Requirements

  	
  27

  
	
   

  	
   

  	
  §
  310.2.2 Schedule for Delivery

  	
  28

  
	
  Section 311

  	
   

  	
  INTENTIONALLY
  OMITTED

  	
  28

  
	
  Section 312

  	
   

  	
  COSTS
  OF CONSTRUCTION

  	
  28

  
	
  Section 313

  	
   

  	
  SCHEDULE
  OF PERFORMANCE

  	
  28

  
	
  Section 314

  	
   

  	
  PROJECT
  DEVELOPMENT PROGRESS REPORTS

  	
  29

  
	
  Section 315

  	
   

  	
  AGENCY’S
  RIGHTS OF ACCESS

  	
  29

  
	
  Section 316

  	
   

  	
  INDEMNIFICATION
  AND INSURANCE

  	
  29

  
	
  §
  316.1

  	
   

  	
  Developer’s
  Indemnity

  	
  29

  
	
  §
  316.2

  	
   

  	
  Insurance
  Requirements

  	
  29

  
	
   

  	
   

  	
  §
  316.2.1 Policy Requirements

  	
  30

  
	
   

  	
   

  	
  §
  316.2.2 General

  	
  30

  
	
  §
  316.3

  	
   

  	
  Restoration

  	
  32

  
	
  §
  316.4

  	
   

  	
  Rights
  of Mortgagees

  	
  33

  
	
  Section 317

  	
   

  	
  CONSTRUCTION
  SIGNS

  	
  33

  
	
  Section 318

  	
   

  	
  COMPLIANCE
  WITH LAWS AND POLICIES; COMMUNITY BENEFITS PACKAGE

  	
  33

  
	
  §
  318.1

  	
   

  	
  Non-Discrimination
  During Construction: Equal Opportunity

  	
  34

  
	
  §
  318.2

  	
   

  	
  Employment
  and Contracting Procedures

  	
  34

  
	
   

  	
   

  	
  §
  318.2.1 Utilization of Minority and Women Businesses (M/WBE)

  	
  34

  
	
   

  	
   

  	
  §
  318.2.2 Utilization of Project Area Residents

  	
  35

  
	
   

  	
   

  	
  §
  318.2.3 One Stop Employment Center

  	
  35

  
	
   

  	
   

  	
  §
  318.2.4 Information and Documentation

  	
  36

  
	
  §
  318.3

  	
   

  	
  Prevailing
  Wages

  	
  36

  
	
  §
  318.4

  	
   

  	
  Public
  Art Policy

  	
  38

  
	
  §
  318.5

  	
   

  	
  Living
  Wage

  	
  38

  
	
  Section 319

  	
   

  	
  RELEASE
  OF CONSTRUCTION COVENANTS (CERTIFICATE OF COMPLETION)

  	
  38

  
	
  ARTICLE
  4.

  	
   

  	
  SITE
  ASSEMBLY

  	
  40

  
	
  Section 401

  	
   

  	
  DEVELOPER
  PARCELS

  	
  40

  
	
  §
  401.1

  	
   

  	
  Obtaining
  Title

  	
  40

  
	
  §
  401.2

  	
   

  	
  Condition
  of Title

  	
  40

  
	
  §
  401.3

  	
   

  	
  Retention
  and Development

  	
  40

  
	
  §
  401.4

  	
   

  	
  Relocation
  Obligations

  	
  41

  
	
   

  	
   

  	
  §
  401.4.1 Indemnification for Relocation Claims

  	
  41

  
	
  Section 402

  	
   

  	
  AGENCY
  ACQUISITION OF PROPERTY

  	
  42

  
	
  §
  402.1

  	
   

  	
  Acquisition
  Funds

  	
  42

  
	
   

  	
   

  	
  §
  402.1.1 HUD Loan

  	
  42

  
	
   

  	
   

  	
  §
  402.1.2 Agency Bond Funds

  	
  43

  
	
   

  	
   

  	
  §
  402.1.3 Community Development Block Grant Funds

  	
  43

  
	
   

  	
   

  	
  §
  402.1.4 Additional Public Funds

  	
  44

  
	
  §
  402.2

  	
   

  	
  Acquisition
  and Relocation Estimates

  	
  44

  
	
  §
  402.3

  	
   

  	
  Appraisals
  and Appraisal Advance

  	
  44

  
	
  §
  402.4

  	
   

  	
  Environmental
  Due Diligence

  	
  44

  
	
  §
  402.5

  	
   

  	
  Acquisition
  and Relocation Budgets

  	
  44

  
	
  §
  402.6

  	
   

  	
  Developer
  Advance of Costs

  	
  45

  
	
   

  	
   

  	
  §
  402.6.1 Original Letter of Credit

  	
  45

  
	
   

  	
   

  	
  §
  402.6.2 Cost Overruns

  	
  45

  
	
  §
  402.7

  	
   

  	
  Precondition
  to Agency’s Right to Make Draws Under the Letter of Credit

  	
  46

  

 

ii

 

	
  §
  402.8

  	
   

  	
  Security
  for Developer Advance

  	
  46

  
	
  Section 403

  	
   

  	
  ACQUISITION
  PARCELS

  	
  47

  
	
  §
  403.1

  	
   

  	
  Developer’s
  Efforts to Acquire

  	
  47

  
	
  §
  403.2

  	
   

  	
  Agency
  Acquisition of Acquisition Parcels

  	
  47

  
	
  §
  403.3

  	
   

  	
  Agency
  Offers to Purchase

  	
  47

  
	
  §
  403.4

  	
   

  	
  Eminent
  Domain Actions; Orders for Possession

  	
  48

  
	
  §
  403.5

  	
   

  	
  Settlement
  of Eminent Domain Actions

  	
  48

  
	
  Section 404

  	
   

  	
  SUBAREA
  D PARCELS

  	
  48

  
	
  Section 405

  	
   

  	
  LADOT
  PARCEL

  	
  49

  
	
  Section 406

  	
   

  	
  MTA
  PROPERTY

  	
  49

  
	
  §
  406.1

  	
   

  	
  MTA
  Parcel

  	
  49

  
	
  §
  406.2

  	
   

  	
  MTA
  Right of Way

  	
  49

  
	
  ARTICLE
  5.

  	
   

  	
  CONVEYANCE
  OF AGENCY ACQUIRED PROPERTY

  	
  50

  
	
  Section 501

  	
   

  	
  AGREEMENT
  TO SELL AND PURCHASE; REDEVELOPMENT PURPOSE

  	
  50

  
	
  Section 502

  	
   

  	
  PERMITTED
  ENCUMBRANCES

  	
  50

  
	
  Section 503

  	
   

  	
  CONSIDERATION

  	
  51

  
	
  §
  503.1

  	
   

  	
  Agency
  Parcels, Acquisition Parcels, the MTA Parcel, and the LADOT Parcel

  	
  51

  
	
  Section 504

  	
   

  	
  CONVEYANCE
  ESCROW

  	
  51

  
	
  Section 505

  	
   

  	
  CONDITION
  OF TITLE AND TITLE INSURANCE

  	
  53

  
	
  Section 506

  	
   

  	
  CONVEYANCE
  OF TITLE AND DELIVERY OF POSSESSION

  	
  54

  
	
  §
  506.1

  	
   

  	
  Conditions
  Precedent and Closing Obligations

  	
  54

  
	
   

  	
   

  	
  §
  506.1.1 Additional Condition Precedent to Conveyance of Any Portion of
  Subareas A and B

  	
  56

  
	
   

  	
   

  	
  §
  506.1.2 Additional Condition Precedent to Conveyance of Any Portion of
  Subareas B and C

  	
  56

  
	
  §
  506.2

  	
   

  	
  Conditions
  Precedent to Developer’s Closing Obligations

  	
  56

  
	
  Section 507

  	
   

  	
  ORDERS
  OF POSSESSION

  	
  57

  
	
  Section 508

  	
   

  	
  SUITABILITY
  OF THE SITE

  	
  58

  
	
  §
  508.1

  	
   

  	
  Zoning
  of the Site

  	
  58

  
	
  Section 509

  	
   

  	
  REPRESENTATIONS
  AND WARRANTIES AND INDEMNIFICATION

  	
  59

  
	
  Section 510

  	
   

  	
  PRELIMINARY
  WORK BY DEVELOPER AND RIGHT OF ENTRY

  	
  60

  
	
  ARTICLE
  6.

  	
   

  	
  PROJECT
  FINANCING

  	
  60

  
	
  Section 601

  	
   

  	
  PROJECT
  COSTS

  	
  60

  
	
  §
  601.1

  	
   

  	
  Project
  Cost Budget

  	
  60

  
	
  §
  601.2

  	
   

  	
  Definition
  of Project Costs

  	
  61

  
	
  Section 602

  	
   

  	
  DEVELOPER’S
  OBLIGATIONS

  	
  63

  
	
  Section 603

  	
   

  	
  AGENCY’S
  OBLIGATIONS

  	
  63

  
	
  §
  603.1

  	
   

  	
  Agency’s
  Obligation Limited

  	
  64

  
	
  Section 604

  	
   

  	
  AGENCY
  ASSISTANCE IN OBTAINING OTHER FUNDING

  	
  64

  
	
  §
  604.1

  	
   

  	
  EDA
  Grant

  	
  64

  
	
  §
  604.2

  	
   

  	
  EDI
  Grant

  	
  64

  
	
  Section 605

  	
   

  	
  AGENCY
  PARTICIPATION rN PROJECT

  	
  64

  
	
  §
  605.1

  	
   

  	
  Intent

  	
  64

  
	
  §
  605.2

  	
   

  	
  Form of
  Participation

  	
  66

  
	
  §
  605.3

  	
   

  	
  Effect
  of Sale or Refinance

  	
  66

  
	
   

  	
   

  	
  §
  605.3.1 Sale

  	
  66

  
	
   

  	
   

  	
  §
  605.3.2 Refinance

  	
  67

  
	
  §
  605.4

  	
   

  	
  Buyout
  Provisions

  	
  67

  

 

iii

 

	
  ARTICLE
  7.

  	
   

  	
  LIMITATIONS
  ON TRANSFER AND ENCUMBRANCE

  	
  68

  
	
  Section 701

  	
   

  	
  RECOGNITION
  OF REDEVELOPMENT PURPOSE

  	
  68

  
	
  Section 702

  	
   

  	
  CONDITIONS
  FOR TRANSFER

  	
  68

  
	
  §
  702.1

  	
   

  	
  Agency
  Approval; Documentation; Agency’s Cost to Review

  	
  68

  
	
  §
  702.2

  	
   

  	
  Transferee’s
  Assumption of Agreement

  	
  69

  
	
  §
  702.3

  	
   

  	
  Transfers
  Null and Void

  	
  69

  
	
  §
  702.4

  	
   

  	
  Intentionally
  Omitted

  	
  69

  
	
  §
  702.5

  	
   

  	
  Security
  Interests

  	
  69

  
	
  §
  702.6

  	
   

  	
  Leasing
  of Space

  	
  70

  
	
  §
  702.7

  	
   

  	
  Sale
  or Lease Following the Issuance of Release of Construction Covenants

  	
  70

  
	
  Section 703

  	
   

  	
  NO
  ENCUMBRANCES EXCEPT TO FINANCE DEVELOPMENT

  	
  70

  
	
  §
  703.1

  	
   

  	
  Advance
  Notice to Agency; Agency Approval

  	
  70

  
	
  §
  703.2

  	
   

  	
  Unapproved
  Encumbrances

  	
  71

  
	
  §
  703.3

  	
   

  	
  Holder
  Not Obligated to Construct; Holder’s Right to Cure

  	
  71

  
	
  §
  703.4

  	
   

  	
  Holder’s
  Failure to Complete Improvements

  	
  71

  
	
  §
  703.5

  	
   

  	
  Agency
  Notice of Default; Agency’s Right to Cure

  	
  72

  
	
  ARTICLE
  8.

  	
   

  	
  CONTINUING
  OBLIGATIONS

  	
  72

  
	
  Section 801

  	
   

  	
  USE
  OF THE SITE

  	
  72

  
	
  §
  801.1

  	
   

  	
  Uses,
  Operation, And Maintenance

  	
  72

  
	
  §
  801.2

  	
   

  	
  Management
  Of The Site And Improvements

  	
  74

  
	
  Section 802

  	
   

  	
  COMPLIANCE
  WITH FEDERAL, STATE, AND LOCAL LAW

  	
  75

  
	
  Section 803

  	
   

  	
  OBLIGATION
  TO REFRAIN FROM DISCRIMINATION

  	
  75

  
	
  §
  803.1

  	
   

  	
  No
  Discrimination or Segregation

  	
  75

  
	
  §
  803.2

  	
   

  	
  Form of
  Nondiscrimination and Nonsegregation Clauses

  	
  76

  
	
  Section 804

  	
   

  	
  AGREEMENT
  CONTAINING COVENANTS AFFECTING REAL PROPERTY

  	
  77

  
	
  §
  804.1

  	
   

  	
  Recordation

  	
  77

  
	
  §
  804.2

  	
   

  	
  Effect,
  Duration, and Release of Covenants

  	
  77

  
	
  ARTICLE
  9.

  	
   

  	
  RECIPROCAL
  EASEMENT AGREEMENTS

  	
  77

  
	
  ARTICLE
  10.

  	
   

  	
  DEFAULTS,
  REMEDIES, AND TERMINATION

  	
  78

  
	
  Section 1001

  	
   

  	
  DEFAULT

  	
  78

  
	
  §
  1001.1

  	
   

  	
  Event
  of Default

  	
  78

  
	
  §
  1001.2

  	
   

  	
  Default
  Notice

  	
  78

  
	
  Section 1002

  	
   

  	
  RIGHTS
  AND REMEDIES

  	
  79

  
	
  §
  1002.1

  	
   

  	
  Institution
  of Legal Actions

  	
  79

  
	
  §
  1002.2

  	
   

  	
  Acceptance
  of Service of Process

  	
  79

  
	
  §
  1002.3

  	
   

  	
  Right
  of Reverter

  	
  79

  
	
  Section 1003

  	
   

  	
  TERMINATION
  BEFORE CONVEYANCE

  	
  81

  
	
  §
  1003.1

  	
   

  	
  Termination
  by Agency on Developer’s Default

  	
  81

  
	
  §
  1003.2

  	
   

  	
  Termination
  by Developer

  	
  81

  
	
  §
  1003.3

  	
   

  	
  Termination
  by Agency or Developer

  	
  82

  
	
  Section 1004

  	
   

  	
  AGENCY’S
  OPTION TO ACQUIRE

  	
  82

  
	
  §
  1004.1

  	
   

  	
  Term
  of Option

  	
  82

  
	
  §
  1004.2

  	
   

  	
  Option
  Price

  	
  83

  
	
  §
  1004.3

  	
   

  	
  Form of
  Title and Title Insurance

  	
  83

  
	
  §
  1004.4

  	
   

  	
  Exercise
  of Option

  	
  83

  
	
  Section 1005

  	
   

  	
  ASSIGNMENT
  OF CONTRACTS AND PLANS

  	
  84

  
	
  ARTICLE
  11.

  	
   

  	
  GENERAL
  PROVISIONS

  	
  84

  

 

iv

 

	
  Section 1101

  	
   

  	
  NON-MERGER

  	
  84

  
	
  Section 1102

  	
   

  	
  NOTICES,
  DEMANDS AND COMMUNICATIONS BETWEEN THE PARTIES

  	
  84

  
	
  Section 1103

  	
   

  	
  CONFLICT
  OF INTEREST

  	
  85

  
	
  Section 1104

  	
   

  	
  NON-LIABILITY
  OF CITY AND AGENCY OFFICIALS AND EMPLOYEES

  	
  85

  
	
  Section 1105

  	
   

  	
  ENFORCED
  DELAY IN PERFORMANCE; FORCE MAJEURE

  	
  85

  
	
  Section 1106

  	
   

  	
  INSPECTION
  OF BOOKS AND RECORDS

  	
  86

  
	
  Section 1107

  	
   

  	
  APPROVALS

  	
  86

  
	
  Section 1108

  	
   

  	
  AGENCY’S
  AUTHORIZED REPRESENTATIVE

  	
  86

  
	
  Section 1109

  	
   

  	
  REAL
  ESTATE COMMISSIONS; FINDER’S FEES

  	
  86

  
	
  Section 1110

  	
   

  	
  DEVELOPER’S
  REPRESENTATIONS AND WARRANTIES

  	
  87

  
	
  Section 1111

  	
   

  	
  RELATIONSHIP
  OF THE PARTIES

  	
  87

  
	
  Section 1112

  	
   

  	
  BINDING
  UPON SUCCESSORS AND ASSIGNS

  	
  87

  
	
  Section 1113

  	
   

  	
  INTERPRETATION
  OF AGREEMENT; TERMINOLOGY; APPLICATION OF LAW

  	
  88

  
	
  Section 1114

  	
   

  	
  WAIVERS

  	
  88

  
	
  Section 1115

  	
   

  	
  TIME
  OF THE ESSENCE

  	
  88

  
	
  Section 1116

  	
   

  	
  ATTORNEYS’
  FEES AND COSTS

  	
  88

  
	
  Section 1117

  	
   

  	
  SEVERABILITY

  	
  88

  
	
  Section 1118

  	
   

  	
  NON-EXCLUSIVITY

  	
  88

  
	
  Section 1119

  	
   

  	
  ENTIRE
  UNDERSTANDING OF THE PARTIES

  	
  88

  
	
  Section 1120

  	
   

  	
  AMENDMENTS
  TO THIS AGREEMENT

  	
  89

  
	
  Section 1121

  	
   

  	
  NO
  THIRD PARTY BENEFICIARIES

  	
  89

  
	
  Section 1122

  	
   

  	
  AUTHORITY
  TO SIGN

  	
  89

  
	
  Section 1123

  	
   

  	
  INCORPORATION
  BY REFERENCE

  	
  89

  
	
  Section 1124

  	
   

  	
  ESTOPPEL
  CERTIFICATES

  	
  89

  
	
  Section 1125

  	
   

  	
  COMPOSITION
  OF AGREEMENT

  	
  89

  
	
  Section 1126

  	
   

  	
  FURTHER
  ASSURANCES

  	
  89

  
	
  Section 1127

  	
   

  	
  TIME
  FOR ACCEPTANCE

  	
  89

  

 

v

 

LIST OF ATTACHMENTS

 

	
  ATTACHMENT
  NO. 1

  	
   

  	
  SCOPE
  OF DEVELOPMENT

  
	
  ATTACHMENT
  NO. 2

  	
   

  	
  SITE
  MAP

  
	
  ATTACHMENT
  NO. 3

  	
   

  	
  HOUSING
  MANAGEMENT PLAN REQUIREMENTS

  
	
  ATTACHMENT
  NO. 4

  	
   

  	
  FORM OF
  AFFORDABILITY COVENANTS

  
	
  ATTACHMENT
  NO. 5

  	
   

  	
  CONCEPT
  PLAN

  
	
  ATTACHMENT
  NO. 6

  	
   

  	
  PARCEL
  OWNERSHIP

  
	
  ATTACHMENT
  NO. 7

  	
   

  	
  SCHEDULE
  OF PERFORMANCE

  
	
  ATTACHMENT
  NO. 8

  	
   

  	
  PUBLIC-PRIVATE
  FEASIBILITY AGREEMENT

  
	
  ATTACHMENT
  NO. 9

  	
   

  	
  PUBLIC
  ART POLICY

  
	
  ATTACHMENT
  NO. 10

  	
   

  	
  COMMUNITY
  BENEFITS PACKAGE

  
	
  ATTACHMENT
  NO. 11

  	
   

  	
  FORM OF
  RELEASE OF CONSTRUCTION COVENANTS

  
	
  ATTACHMENT
  NO. 12-A

  	
   

  	
  FORM OF
  PRE-CONVEYANCE TERMINATION NOTE

  
	
  ATTACHMENT
  NO. 12-B

  	
   

  	
  FORM OF
  PRE-CONVEYANCE TERMINATION DEED OF TRUST

  
	
  ATTACHMENT
  NO. 13

  	
   

  	
  FORM OF
  GRANT DEED

  
	
  ATTACHMENT
  NO. 14

  	
   

  	
  FORM OF
  AGREEMENT CONTAINING COVENANTS AFFECTING REAL PROPERTY

  
	
  ATTACHMENT
  NO. 15

  	
   

  	
  FORM OF
  MEMORANDUM OF AGENCY OPTION

  
	
  ATTACHMENT
  NO. 16

  	
   

  	
  FORM OF
  ASSIGNMENT OF CONTRACTS AND PLANS

  
	
  ATTACHMENT
  NO. 17

  	
   

  	
  LIST
  OF ENVIRONMENTAL REPORTS

  

 

vi

 

OWNER
PARTICIPATION AGREEMENT

 

This OWNER PARTICIPATION AGREEMENT (this “Agreement”) is entered into
as of December, 2001, by and between the COMMUNITY
REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, a public body,
corporate and politic (the “Agency”),
and SL NO HO, LLC, a California Limited liability company (the “Developer”). The Agency and the Developer
are sometimes referred to herein individually as a “Party” and collectively as the “Parties,”

 

RECITALS

 

The following Recitals are a substantive part of this Agreement. The
capitalized terms used in this Agreement, not otherwise defined in the text,
are defined in Article 2 herein.

 

A.        The Agency is authorized
and empowered under the Community Redevelopment Law, California Health and
Safety Code Sections 33000, et seq., to
assist in the redevelopment of real property within the North Hollywood
Redevelopment Project in conformity with the Redevelopment Plan. Specifically,
the Agency is authorized and empowered to enter into agreements to improve the
economic conditions of the North Hollywood Redevelopment Project, to acquire
and dispose of property, to prepare or cause the preparation of building sites
for construction, to receive consideration for the provision by the Agency of
redevelopment assistance, to make and execute contracts and other instruments
necessary or convenient to the exercise of its powers, and to incur
indebtedness to finance or refinance redevelopment projects.

 

B.        On June 23,1999,
JAR No Ho Project LLC, a California Limited Liability Company (“JAR No Ho”) executed an Offer to Negotiate
Exclusively for the retention, acquisition, and development of a portion of the
North Hollywood Redevelopment Project Area described in the Offer as the Site,
and the Offer to Negotiate Exclusively was accepted by the Agency on July 13,
1999, in accordance with the terms and conditions set forth therein. An Amended
and Restated Exclusive Right to Negotiate (“ERN”)
that extended the exclusive negotiation period until January 31, 2001 was
approved by the Agency’s Governing Board on July 20, 2000 and was approved
by the City Council of the City of Los Angeles on August 15, 2000. The
Agency and the Developer entered into the ERN on August 23, 2000.

 

C.        On February 5,
2001, JAR No Ho and the Developer entered into an Acquisition and Contribution
Agreement and on December, 2001 entered into an Amended and Restated Operating
Agreement for SL No Ho, LLC (collectively, the “JV Agreement”), in
which JAR No Ho agreed to convey all of its right, title and interest in the
Site and the Project to the Developer upon the execution of this Agreement.

 

D.        The Agency, by entering
into this Agreement with the Developer, has satisfied its obligations to JAR No
Ho regarding JAR No Ho’s rights as a property owner in the Project Area, as
such rights are set forth in the Agency’s “Rules Governing

 

1

 

Participation
and Preferences by Owners, Operators of Businesses, and Tenants in the North
Hollywood Redevelopment Project.”

 

E.         The Developer proposes
to design, finance, and develop on the Site a phased multi-use development
including an office, residential and retail development, community-serving
uses, and associated parking, (the “Project”)  as more fully set forth in Section 103
of this Agreement and in the Scope of Development, attached hereto as
Attachment 1 (“Scope of Development”).
To induce the Developer to cause construction and Completion of the Project,
and in light of the local revenues, including sales and property tax revenues that
are expected to be generated by the redevelopment of the Site and operation of
the Project thereon, the Agency and the Developer desire to enter into this
Agreement in order to provide assistance subject to certain conditions
precedent and in accordance with the terms of this Agreement.

 

F.         In accordance with the
goals of the Community Redevelopment Law and the Redevelopment Plan for the
North Hollywood Redevelopment Project, the Agency desires to provide such
assistance to induce the redevelopment of the Site and the construction and
operation of the Project because such actions will help to eliminate blight in
the North Hollywood Redevelopment Project, increase the employment
opportunities within the North Hollywood Redevelopment Project, and generate
additional sales and property taxes and other local revenues for the community.
The Developer’s acquisition of the Site, the redevelopment thereof, and
operation of the Project thereon pursuant to the terms of this Agreement are in
the vital and best interests of the City of Los Angeles (the “City”)  and
the health, safety, and welfare of its residents and are in accord with the
public purposes and provisions of applicable state and local laws and
requirements under which the redevelopment of the North Hollywood Redevelopment
Project has been undertaken.

 

G.        The Redevelopment Plan
for the North Hollywood Redevelopment Project was approved and adopted on February 21,1979,
prior to which an Environmental Impact Report was certified, and subsequent
Environmental Impact Reports have been certified for various amendments to the
Redevelopment Plan. On January 31, 2001 by Resolution No. 5969, the
Agency (as the lead agency pursuant to the California Environmental Quality
Act, Section 21000 et  seq. of the California Public
Resources Code, and the CEQA Guidelines, 14 California Code of Regulations
Sections 15000 et  seq. (“CEOA”))
certified the completion of a Supplemental Environmental Impact Report (“SEIR”) for the Project to be implemented
in furtherance of the Redevelopment Plan for the North Hollywood Redevelopment
Project. Immediately following approval of this Agreement, the Agency filed a
Notice of Determination pursuant to CEQA.

 

NOW, THEREFORE, the Agency and the Developer agree as follows:

 

ARTICLE 1
SUBJECT OF THE AGREEMENT

 

SECTION 101         PURPOSE
OF THE AGREEMENT

 

The purpose of this Agreement is to effectuate the public purposes of
the Agency by providing for the assemblage of the Site through the Agency’s
acquisition and conveyance to the Developer of those portions of the Site that
are not included in the

 

2

 

Developer
Parcels, and the phased development and operation by the Developer on the Site
of the improvements described in the Scope of Development.

 

SECTION 102         THE
DEVELOPMENT SITE

 

(a) Subject to the provisions of paragraphs (b) and (c) immediately
following, the “Site” is that
certain real property generally bounded by Cumpston Street on the north,
Vineland Avenue and Blakeslee Avenue on the east, the Academy Entertainment and
Business Complex on the south, and Lankershim Boulevard on the west in Los
Angeles, California, illustrated on the “Site
Map” (which is attached hereto and incorporated herein as Attachment
No. 2} and more particularly described in “Parcel Ownership” (which is attached hereto and incorporated
herein as Attachment No. 6). The Site consists of a “Subarea A”, a “Subarea B”, a “Subarea C”, and
a “Subarea D”, each of which is
illustrated and designated as such on the Site Map. A “Subarea” as used in this Agreement, shall
mean Subarea A, Subarea B, Subarea C, and/or Subarea D, as the context
requires. At such time as the final tract map, if any, is recorded for a
Subarea, the legal descriptions from such tract map shall govern without the need
for an amendment of this Agreement.

 

(b)       The Agency and Developer
may by mutual written agreement exclude from the Site all or any portion of the
Site which has not theretofore been conveyed to Developer. In the event any
portion is excluded from the Site pursuant to this paragraph (b), the following
shall apply:

 

(i)  Developer and the Agency shall cooperate in signing
implementation agreements and/or other documents necessary or appropriate to
effectuate the intent of this paragraph (b), including without limitation and
to the extent applicable, a reconveyance of the Pre-Conveyance Termination Deed
of Trust.

 

(ii)  If and to the extent required by the reduction in size of
the Site, Developer shall submit for approval by the Agency, and the Agency’s
Governing Board if required and subject to completion of any review required by
the California Environmental Quality Act, Site Modifications (as defined in Article 2)
reflecting such reduced Site.

 

(c)       It is contemplated by
the Parties that the Los Angeles Unified School District (“LAUSD”)  will
acquire Subarea D or a portion thereof for construction of a high school, in
which case the Agency may exclude the applicable portion of Subarea D from the
Site. If the LAUSD decides not to acquire Subarea D or any portion thereof, or
acquires Subarea D or any portion thereof and thereafter decides to dispose of
Subarea D or any portion thereof, Subarea D or the applicable portion thereof
shall be included in the Site. The Agency hereby grants the Developer an
exclusive right to negotiate Site Modifications for the development of that
portion of Subarea D that is included in the Site. It is the Parties’ intent
that, to the fullest extent practicable, the Site Modifications for the portion
of Subarea D included in the Site shall provide for the construction of retail,
office and/or residential improvements of a scale and density consistent with
the proposed project analyzed in the certified SEIR for the Project. This
exclusive right to negotiate shall terminate on a date that is three (3) years after the Date of
Agreement. Developer understands that the Agency may refuse to extend this
exclusive negotiation period beyond the termination date and may at that time
begin negotiations with other development entities without further
solicitation. The Developer agrees that, if the

 

3

 

Agency
determines that the parties are not making appropriate progress or the
negotiations are not proceeding in a diligent manner during the exclusive negotiation
period, the Agency may at its option terminate the negotiations and begin
negotiations with other development entities without further solicitation;
provided, that the Agency shall first provide written notice to the Developer,
stating the facts on which the Agency is basing its contention that the parties
are not making appropriate progress or the negotiations are not proceeding in a
diligent manner, and providing a reasonable time, but not less than ten (10) days,
to correct the matter.

 

SECTION 103         PROJECT
DESCRIPTION AND PHASING

 

§103.1        Project Description

 

The Project shall include the following improvements, as more fully set
forth in, and in conformance with, the Scope of Development. All of the
improvements on the Site shall be developed in accordance with plans and land
use entitlements approved by the City. The assemblage of the Site and the
phased development and operation of the improvements on the Site, and the
fulfillment generally of this Agreement are in the vital and best interests of
the City 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.

 

Retail and commercial products and services offered by tenants shall be
consistent with a first class retail/office development. Retail tenant
selection shall be consistent with and enhance the entertainment/retail
character of the Project and the NoHo Arts and Entertainment District. Because
the Project is an integral part of the NoHo Arts and Entertainment District,
retail tenant selection shall acknowledge, reinforce, and complement the
District, the North Hollywood Commercial Core and the Academy Complex and its
plaza. Every reasonable effort shall be used to attract and lease to first
class specialty retail and entertainment tenants. Flea markets, thrift stores
or liquidation outlets, swap shows or “outlet stores” selling merchandise that
is used, damaged or discontinued shall be prohibited. Any off-price and value
oriented tenants shall be limited to stores such as Nordstrom Rack, Ann Taylor
Loft, or other stores of similar quality. If a supermarket is included in the
Project, it shall be a first class full service supermarket or a first class
specialty supermarket. Except for the single 60,000 square foot retail space in
Subarea B, retail tenant spaces shall generally be limited to 20,000 square
feet in size, except for tenants such as Barnes & Noble, Border’s, or
similar non-discount quality retailers.

 

The Agency shall have the right to approve each tenant proposed by the
Developer as being in conformance with this Section 103.1. The Developer
must notify the Agency of each proposed tenant in sufficient time for the
Agency to approve or disapprove as provided herein. Within twenty (20) days of
the date the Developer notifies the Agency of a proposed tenant, the Agency
shall advise the Developer in writing that the tenant is in conformance with
the parameters set forth in this Section 103,1 or give specific reasons
why the Agency believes the proposed tenant is not in conformance with the
parameters of this Section 103.1. If the Agency fails to respond within
such twenty (20) day period, the proposed tenant shall be deemed to be in
conformance with the parameters set forth in this Section 103.1 without
any further approval rights from the Agency.

 

4

 

(a)  “Subarea A Improvements”.

 

The Developer shall construct a residential complex containing
approximately 550 units and associated parking. In the alternative, the
Developer may construct either (i) approximately 600,000 square feet of
office space, or (ii) approximately 277 residential units and
approximately 300,000 square feet of office space. These alternative
development scenarios are more fully set forth in the Scope of Development and
the Concept Plan. Within the time set forth in the Schedule of Performance, the
Developer shall inform the Agency as to which development scenario it will
construct on Subarea A

 

(b)  “Subarea B Improvements”.

 

The Developer shall construct a retail and residential complex
including approximately 247 residential units, approximately 186,000 square
feet of retail and restaurant space and a parking structure providing
sufficient parking to comply with City code requirements.

 

(c)  “Subarea C Improvements”.

 

The Developer shall construct approximately 42,000 square feet of
retail and restaurant space, approximately 200,000 square feet of office space,
a parking structure providing sufficient parking to comply with City code
requirements, approximately nine residential units and the Community
Improvements described in this paragraph. The Developer shall construct a raw,
shell facility of approximately 20,000 square feet for the Valley Community Clinic
within or adjacent to the parking structure in Subarea C (the “Community Improvements”). Upon completion,
the Developer shall offer to lease the Community Improvements to the Valley
Community Clinic for the base rent sum of one dollar ($1) per year plus triple
net charges, including without limitation, pro rata share of common area
expenses and property taxes, for a twenty (20) year term. If, within ninety
(90) days from the date the Developer offers to lease the space as provided
herein, the Valley Community Clinic fails to enter into a lease for the
Community Improvements or, for any reason, subsequently fails to occupy or
vacates the space, then the Developer’s obligation to lease to Valley Community
Clinic shall terminate and the Developer shall use the Community Improvements
in a manner consistent with the Scope of Development and Agency-approved plans;
provided that, the Agency has the right to designate another public use of the
Community Improvements, mutually agreeable between Developer and Agency, at the
lease terms set forth herein within thirty (30) days after the termination of
the Developer’s obligation to lease to Valley Community Clinic. The Developer
shall provide up to 500 square feet of office space sufficient to accommodate
the One-Stop Employment Center required by § 318.2.3 of this Agreement, to be
operated by an entity designated by the Agency.

 

(d)  “Subarea D Improvements”.

 

(1) If the Developer acquires the Subarea D Parcels or any portion
thereof, the Developer shall, subject to completion of the review required by
the California Environmental Quality Act, construct the improvements in the
Site Modifications agreed to pursuant to Section 102(c) hereof.

 

5

 

(e)  Affordable Housing; Conversion
to Sale Units; Day Care

 

(1) Affordable Housing
Requirements. At least twenty percent (20%) of the residential
units, not including live-work units, developed on Subarea A and Subarea B
shall be available to Very Low Income, Low Income, and Moderate Income
households, at Affordable Rent, including a reasonable utility allowance (“Restricted Units”). Of those Restricted
Units, seventeen percent (17%) shall be available to Very Low Income
households, fifty percent (50%) shall be available to Low Income households,
and thirty three percent (33%) shall be available to Moderate Income
households. The Restricted Units shall be distributed across the apartments and
residential lofts as follows. No less than five percent (5%) and no more than
ten percent (10%) of the residential lofts shall be required to be Restricted
Units, which shall be available to Very Low Income, Low Income, and Moderate
Income households, in the same proportion as required for the total Restricted
Units in the Project. The balance of the Restricted Units shall be evenly
distributed across one-bedroom and two-bedroom apartments, with each unit type
(i.e., one-bedroom or two-bedroom) available to Very Low Income, Low Income and
Moderate Income households in the same proportion as required for the total
Restricted Units in the Project. Within the time period established in the
Schedule of Performance, the Developer shall submit to the Agency for its
approval a proposed management plan for the rental units that meets the
requirements set forth in the “Housing
Management Plan Requirements” attached
hereto as Attachment No. 3 and incorporated by this reference. As a
condition precedent to the Agency’s obligation to convey any portion of Subarea
A or Subarea B to the Developer, the Developer shall execute and deliver to the
Escrow Agent for recording in the Official Records of Los Angeles County the “Affordability Covenants” appended to this
Agreement as Attachment No. 4 and incorporated by this reference. The
Affordability Covenants shall be recorded with reference to the residential
units developed on Subarea A and Subarea B. The Affordability Covenants shall
provide that the income-restricted units must remain available at Affordable
Rent for the longest feasible period, but not less than forty (40) years from
Completion. The Restricted Units shall be made available on a first preference
basis to any Very Low Income, Low Income, or Moderate Income persons who are
displaced from the Site, on a second preference basis to any Very Low Income, Low
Income, or Moderate Income persons who are displaced from the North Hollywood
Redevelopment Project as a result of Agency actions, and on a third preference
basis to any Very Low Income, Low Income, or Moderate Income persons who are
displaced as a result of Agency actions elsewhere. In addition, market rate
residential units shall be made available on a first preference basis to
persons who are displaced from the Site but do not qualify for the
income-restricted units, on a second preference basis to persons who are
displaced from the North Hollywood Redevelopment Project as a result of Agency
actions but do not qualify for the income-restricted units, and on a third
preference basis to persons who are displaced as a result of Agency actions
elsewhere. Upon the Agency’s request and at the Agency’s expense, the Developer
shall hold vacant residential units for a period of not more than 30 days for
the relocation of persons displaced as a result of Agency actions, as more
fully set forth in the Management Plan Requirements (Attachment No. 3).

 

Developer’s obligations with respect to the provision of Restricted
Units set forth herein shall be excused to the extent and only to the extent
that the Agency fails to provide the Affordable Housing Subsidy set forth in
the Public-Private Feasibility Agreement (Attachment No. 8).

 

6

 

For purposes of this § 103.1(e)(1), the following definitions shall
apply.

 

“Affordable Rent”

means (a) for Very Low Income, 30% of 50% of Area Median Income
adjusted for family size appropriate for the unit; (b) for Low Income, 30%
of 60% of Area Median Income adjusted for family size appropriate for the unit,
provided that for Low Income whose incomes exceed 60% of Area Median Income,
Affordable Rent shall not exceed 30% of the actual gross income of the
household; and (c) for Moderate Income, 30% of 110% of area median income
adjusted for family size appropriate for the unit.

 

“Area Median Income”

means the median income for Los Angeles County as determined by HUD and
published from time to time by the California Department of Housing and
Community Development.

 

“Very Low Income”

means persons or families whose income, adjusted for family size, is
not more than 50% of the Area Median Income.

 

“Low Income”

means persons or families whose income, adjusted for family size, is
above 50% of Area Median Income, but does not exceed 80% of Area Median Income.

 

“Moderate Income”

means persons or families whose income, adjusted for family size, is
above 80% of median income but does not exceed 120% of area median income.

 

(2) Conversion to Sale Units.
In order to further the Agency’s goal of promoting home ownership in the
Project Area, the Developer agrees to include in its entitlement application
package for the residential lofts and the live-work units to be developed on
Subareas B and C those actions, such as air rights subdivision, that will be
needed for future conversion to sale units, which conversion shall be at
Developer’s sole discretion. Prior to any such conversion, the Agency and the
Developer shall enter into an implementation agreement that will preserve the
affordability of those sale units to Very Low Income, Low Income, and Moderate
Income households, consistent with the requirements of § 103.1(e)(1).

 

(3) Day Care Requirements.
The Developer shall use commercially reasonable efforts to include a “Day Care Center” to serve the community
and particularly the tenants of the office improvements. The construction and
operation of the Day Care Center shall occur at the earliest commercially
practicable time and shall conform to state and local laws and regulations
governing day care centers. The Developer shall provide day care services at
rates that are affordable to low- and moderate-income persons in conformance
with the requirements of the “Community
Benefits Package”, appended as Attachment No. 10 and
incorporated by this reference.

 

§103.2        Project Phasing

 

Development of the Site is anticipated to occur in the phases described
below, as more fully set forth in the Schedule of Performance.

 

7

 

In “Phase 1”, the
Developer shall develop on Subarea A the Subarea A Improvements conforming to
plans approved by the Agency and the City.

 

In “Phase 2”, the
Developer shall develop on Subarea B the Subarea B Improvements conforming to
plans approved by the Agency and the City.

 

In “Phase 3”, the
Developer shall develop on Subarea C the Subarea C Improvements conforming to
plans approved by the Agency and the City.

 

In “Phase 4”, to
the extent required by § 103.1(d), the Developer shall develop on Subarea D the
Subarea D Improvements conforming to plans approved by the Agency and the City.

 

The Agency may, in its discretion and at the request of the Developer
setting forth in reasonable detail the basis for the request, modify the
phasing of improvements to reflect market factors or other changed conditions
that make the phasing as set forth herein commercially unreasonable,
impracticable or unfeasible. The Agency and the Developer may agree to advance
or delay or otherwise modify the phasing set forth in the Schedule of
Performance. The Parties’ agreement to such modifications shall not be
unreasonably withheld.

 

SECTION 104         THE
REDEVELOPMENT PLAN

 

This Agreement is made in accordance with, in implementation of, and
subject to the redevelopment plan for the North Hollywood Redevelopment
Project, which was approved and adopted on February 21, 1979 by Ordinance No. 152,030
of the City Council of the City of Los Angeles and most recently amended on October 2,
1997 by Ordinance No. 171,745. That Amended Redevelopment Plan for the
North Hollywood Redevelopment Project (“Redevelopment
Plan”)  is incorporated
herein by reference and made a part hereof as though fully set forth herein.

 

Any amendments hereafter to the Redevelopment Plan which change the
uses or development permitted on the Site as described in this Agreement, or
otherwise change the restrictions or controls that apply to the Site, or
adversely affect or impair any of the rights or obligations of the Developer or
the holder or beneficiary of any Mortgage obtained in accordance with Section .109
and Section 703 of this Agreement (a “Mortgagee”)  shall not apply to the Developer or the
Site without the prior written consent of the Developer and such Mortgagee,
which may be withheld in their discretion. No other amendments to the
Redevelopment Plan shall require the consent of the Developer or such
Mortgagee.

 

SECTION 105         THE
PROJECT AREA

 

The “Project Area” is
located in the City of Los Angeles, California. The exact boundaries of the
Project Area are specifically and legally described in the Redevelopment Plan.

 

8

 

SECTION 106         PARTIES
TO THE AGREEMENT

 

§106.1        The Agency

 

The Agency is a public body, corporate and politic, exercising
governmental functions and powers and organized and existing under Part 1
of Division 24 of the California Health and Safety Code (Section 33000, et
seq.). The principal office of the Agency is located at 354 South Spring
Street, Los Angeles, California 90013 or such other location of which notice is
given pursuant to Section 1102 of this Agreement. “Agency” as used in this Agreement includes
the Community Redevelopment Agency of the City of Los Angeles and any assignee
of or successor to its rights, powers and responsibilities.

 

§106.2        The Developer

 

The Developer is a California limited liability company. The Developer
agrees that it shall make full and continuing disclosure to the Agency of the
legal entities constituting the Developer and their respective roles, economic
interests, financial commitments, and responsibilities in the planning,
development and operation and maintenance of the Project. The principal office
of the Developer is located at 5757 Wilshire Boulevard, Penthouse 30, Los
Angeles, California 90036 or such other location of which notice is given
pursuant to Section 1102 of this Agreement. “Developer” as used in this Agreement includes any permitted
assignee or successor in interest of SL No Ho, LLC, as herein provided.

 

SECTION 107         PROHIBITION
AGAINST TRANSFERS OR CHANGES IN OWNERSHIP

 

The Developer represents and agrees that the Developer’s undertakings
pursuant to this Agreement are, and will be used for, the purpose of
redevelopment of the Site and not for speculation in landholding. The Developer
recognizes and acknowledges that (i) the redevelopment of the Site is
important to the general welfare of the community; (ii) the public aids
set forth in this Agreement have been made available by law and by the Agency
and the City on the conditions stated herein, for the purpose of making such
redevelopment possible; and (iii) the Developer’s qualifications and
identity are of particular concern to the community and to the Agency. The
Developer further recognizes that it is because of the Developer’s
qualifications and identity that the Agency is entering into this Agreement
with the Developer. Accordingly, the Developer shall comply with the provisions
of Article 7 of this Agreement, relating to limitations on transfer and
encumbrance.

 

SECTION 108         PAYMENT
OF COSTS AND GOOD FAITH DEPOSIT

 

§108.1        Developer Payment of Agency Costs

 

The Developer acknowledges that the Agency has incurred and will
continue to incur substantial costs relating to this Agreement and the Project.
Therefore, the Developer agrees that, within the times set forth in the
Schedule of Performance, it will deliver to the Agency the amount of THREE
HUNDRED AND FIFTY THOUSAND DOLLARS ($350,000) in two (2) installments of
One Hundred and Seventy Five Thousand Dollars ($175,000) as partial
reimbursement of those costs. These payments will be nonrefundable to the
Developer except only in the event of the termination of this Agreement by the
Developer in accordance with Section 1003.2 (iii) of this Agreement,

 

9

 

and
must be in the [Illegible] of (i) cash or (ii) a cashier’s or
[Illegible] check issued by a national or state bank first approved in writing
by the Agency.

 

§108.2        Good Faith Deposit

 

(a)  No later than eighty (80) days after the execution by the
Developer of this Agreement, the Developer shall deliver to the Agency a
security deposit (the “Good Faith Deposit”) in the amount of FIVE HUNDRED
THOUSAND DOLLARS ($500,000), of which $75,000 has already been deposited by the
Developer. The Agency and the Developer agree that such $75,000 shall be
retained by the Agency as part of the Good Faith Deposit required by this
Agreement. The Agency shall be under no obligation to pay or earn interest on
the Good Faith Deposit. Notwithstanding the foregoing, if the Good Faith
Deposit is in the form of immediately available funds, the Agency agrees that
the Good Faith Deposit shall be placed in an interest bearing account with a
financial institution reasonably acceptable to the Agency and Developer.

 

(b)  If, prior to the Developer’s delivery to the Agency of the
HUD Loan Letter of Credit or Guarantee (in the event of the availability of the
HUD Loan) and the Original Letter of Credit in accordance with the provisions
of this Agreement, the Agency terminates this Agreement pursuant to § 1003.1
(relating to Developer’s default), the Agency shall be entitled to retain the
Good Faith Deposit (plus interest accrued thereon, if any) as liquidated
damages. If this Agreement terminates for any other reason, including without
limitation, pursuant to § 1003.2 or § 1003.3, the Good Faith Deposit (plus
interest accrued thereon, if any) shall be returned to the Developer.

 

(c)  The Developer and the Agency acknowledge and agree that it
would be extremely difficult to quantify the loss or damage to the Agency in
the event of a termination pursuant to § 1003.1 (relating to Developer’s
default) prior to the Developer’s delivery to the Agency of both the HUD Loan
Letter of Credit or Guarantee (in the event of the availability of the HUD
Loan) and the Original Letter of Credit in accordance with the provisions of
this Agreement and that FIVE HUNDRED THOUSAND DOLLARS ($500,000) is a reasonable
estimate of such loss or damage as of the Date of Agreement and the Agency
shall be entitled to retain the Good Faith Deposit (plus interest accrued
thereon, if any), without any deduction, offset or recoupment (or any right
thereof) whatsoever and the Agency shall be entitled to those liquidated
damages in addition to performance pursuant to any Payment and Performance
Bonds theretofore delivered to the Agency; provided that, nothing in this §
108.2 shall preclude, limit or interfere with the Agency’s exercise of its
purchase option rights pursuant to Section 1004 of this Agreement.

 

(d)  The Good Faith Deposit shall be in the form, reasonably
acceptable to the Agency, of (i) cash; or (ii) cashier’s or certified
check issued by a national or state bank first approved in writing by the
Agency; or (iii) an irrevocable and unconditional letter of credit first
approved by the Agency as to form, content and issuer, or (iv) the
ownership by the Agency pursuant to documentation approved by the Agency’s
legal counsel of a beneficial interest in funds contained in an account of a
national or state bank first approved in writing by the Agency. If the Good
Faith Deposit is in the form of a letter of credit, the term thereof shall be
at least one (1) year and shall be automatically renewable. Subject to the
terms and conditions of this paragraph, the Developer shall have the right,
from time to time, to substitute one form of the Good Faith Deposit for any
other form in which the Good Faith Deposit was previously delivered to the
Agency.

 

10

 

(e)  If this Agreement has not been terminated and the Good Faith
Deposit has not been previously disposed of as set forth in this Agreement, the
Good Faith Deposit (plus, if the Good Faith Deposit was made in cash and
invested, interest accrued thereon, if any, as provided in paragraph (a),
above) shall be returned to the Developer upon the timely posting by Developer
of both the HUD Loan Letter of Credit or Guarantee (in the event of the
availability of the HUD Loan) in the amount and form required by the
Public-Private Feasibility Agreement (Attachment No. 8) and the Original
Letter of Credit in the amount and form required by § 402.6 of this Agreement.
Upon such return of the Good Faith Deposit to Developer, the liquidated damages
provisions of this § 108.2 shall no longer be in effect, and the rights and
remedies of the parties hereto with respect to damages shall be as referred to
in Section 1002 herein below.

 

BY SIGNING THEIR INITIALS IN THE SPACE BELOW, THE DEVELOPER
AND THE AGENCY ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND ALL OF THE
PROVISIONS OF THIS SECTION 108.2 AND HAVE VOLUNTARILY AGREED TO ALL OF ITS
PROVISIONS.

 

	
  Developer

  	
  /s/
  Authorized Signatory

  	
   

  	
  Agency

  	
  /s/
  Authorized Signatory

  	
   

  

 

SECTION 109         EVIDENCE
OF FINANCING

 

Within the times established in the Schedule of Performance for each
Subarea, the Developer shall submit to the Agency evidence reasonably
satisfactory to the Agency that the Developer has obtained sufficient equity
capital and commitments for the financing necessary for the assemblage, and
development of such Subarea in accordance with this Agreement (“Evidence of Financing”).  The commitments for financing shall be in
such form and content acceptable to the Agency as reasonably evidences a
legally binding, firm and enforceable commitment; provided however, that such
commitments may be subject to standard and customary conditions (including but
not limited to conditions regarding the status of title, receipt of all
required consents, licenses and permits and approvals of plans, specifications
and studies). The Agency shall approve or disapprove such Evidence of Financing
within the times established in the Schedule of Performance. Such approval
shall not be unreasonably withheld. If the Agency shall disapprove the Evidence
of Financing, the Agency shall do so by written notice to the Developer
specifying the reasons for its disapproval. The Developer shall promptly obtain
and submit to the Agency new Evidence of Financing. The Agency shall approve or
disapprove the new Evidence of Financing in the same manner and within the same
times established in this Section 109 for the approval or disapproval of
the Evidence of Financing initially submitted to the Agency.

 

The Evidence of Financing shall consist of the following:

 

1.  Project Cost Budget. A
current budget of all anticipated costs for the acquisition of the applicable
Subarea and the development and construction of the improvements thereon as set
forth in the Scope of Development and Concept Plan and provided for in this
Agreement, in addition to the mitigation measures required pursuant to the
Environmental Impact Report for the Project, together with a sources and uses
statement. In addition, the Project Cost Budget shall be prepared in
conformance with the requirements of Section 601 hereof.

 

11

 

2.  General Contract. A
copy of the contract, in a type [Illegible] form acceptable to the Agency,
between the Developer and the general contractor for site preparation of the
applicable Subarea and the construction of the improvements thereon, consistent
with the Project Cost Budget and certified by the Developer to be a true and
correct copy thereof.

 

3.  Construction Loan. If
the Developer intends to obtain some or all of the financing from a
construction lender, a copy of all construction loan documents (e.g., notes,
trust deeds, indentures, loan agreements, etc.) and permanent loan documents if
a condition of the construction loan, necessary to assure closing of the
construction loan and complete funding for the development and construction of
the improvements on the applicable Subarea as set forth in the Scope of
Development and Concept Plan and provided for in this Agreement.

 

4.  Full Equity Financing.
If the Developer intends to self finance the full cost of construction of the
improvements on any Subarea, without a construction loan, evidence satisfactory
to the Agency that the Developer has, at the time such evidence of financing is
required to be demonstrated, sufficient equity capital, in sufficiently liquid
form, not otherwise encumbered by any pledge or grant of a security interest to
a third party, to assure complete funding for the development and construction
of the improvements on such Subarea as set forth in the Scope of Development
and Concept Plan and provided for in this Agreement. The Developer shall have
the right to use any funds or assets available to the Developer for actual
payment of costs, notwithstanding that said funds or assets may be different
from the sources of equity capital utilized to demonstrate the evidence of
equity financing required by this Agreement. The Developer’s evidence of equity
financing shall be satisfied by evidence of any combination of the following:

 

(a) Cash, on deposit in a construction account, checking account,
money market account, escrow or other immediately available form of deposit,
held in the name of the Developer, over which the Developer retains the right
to direct investments;

 

(b) An irrevocable direct pay letter of credit, in favor of the
Developer, drawn on a bank or other financial institution first approved in
writing by the Agency, with a term that is consistent with the anticipated need
for funds during the construction period, the terms of which are consistent with
this Agreement;

 

(c) An available line of credit with a bank or other financial
institution reasonably approved in writing by the Agency’s Administrator or
designee, the terms of which are consistent with this Agreement, provided that
the collateral or assets pledged by the Developer for such line of credit shall
not otherwise be utilized to demonstrate the evidence of equity financing
required by this Agreement, unless the Developer has the right to substitute
such collateral or assets with other collateral or assets which other
collateral or assets are not otherwise utilized to demonstrate the evidence of
equity financing required by this Agreement and which may or may not be liquid;
or

 

(d) Evidence of any other comparable form of assets that the
Agency’s Administrator or designee reasonably determines is sufficiently liquid
to assure that it will be available to the Developer when needed to pay project
expenses.

 

5.  Partial Equity Financing.
If the construction loan is insufficient to pay all construction costs with
respect to any Subarea, evidence reasonably satisfactory to the Agency of
sources of capital sufficient to demonstrate that the Developer has, at the
time such evidence of financing is required to be demonstrated, sufficient
equity capital, in sufficiently liquid form, not otherwise encumbered by any
pledge or grant of a security

 

12

 

interest
to a third party to cover the excess, if any, of the [Illegible] construction
over the financing authorized by mortgage loans. The Agency shall approve a
financial statement as evidence of sources of equity capital if such is
approved by the lender making the mortgage loan and the Agency approves such
mortgage lender.

 

At
any time prior to the times provided in this Agreement for submission of
Evidence of Financing, the Developer may submit to the Agency’s Administrator
or designee for review, comment and, if deemed appropriate by the Agency’s
Administrator or designee, approval, any loan applications to be made by the
Developer or pro forma loan documentation provided by the proposed lender;
provided that review, comments and approval, if any, by the Agency’s
Administrator or designee shall be for the sole purpose of determining and
advising the Developer whether such loan applications or pro forma loan
documents are consistent with the requirements of this Agreement. All comments
and approvals, if any, shall be in writing and shall be made promptly. Any
items so submitted and approved by the Agency’s Administrator or designee shall
not be subject to subsequent disapproval.

 

§109.1        Reimbursement of Agency’s Costs

 

The Agency shall provide appropriate assistance to the Developer as
reasonably necessary to close the Developer’s construction and permanent
loan(s), such as providing estoppel certificates, legal opinions, etc.,
provided however that all contracted costs for consulting or legal services
incurred by the Agency to provide such assistance shall be paid by the
Developer. With respect to each loan closing, the Developer shall deliver a
retainer to Agency in the sum of FIVE THOUSAND DOLLARS ($5,000), concurrently
with the submission of Evidence of Financing, to be applied to the payment of
Agency’s costs. The internal administrative costs of Agency shall be charged at
the actual and reasonable cost thereof and shall not exceed a total cost of TWO
THOUSAND DOLLARS ($2,000) for each loan closing. The Agency’s costs for
consultants or legal services required for providing such assistance shall be
the actual sums billed to the Agency for such consulting or legal services,
pursuant to Board-approved professional services contracts. All Agency costs in
excess of $5,000 shall be paid within ten (10) days after written request
therefor by the Agency. If costs incurred by the Agency (including
administrative costs) for a loan closing equal less than $5,000, the balance
shall be refunded promptly following the closing. Notwithstanding any other
provision in this Agreement, the Developer’s obligation to pay such Agency costs
shall survive the termination of this Agreement.

 

ARTICLE 2
DEFINITIONS

 

Each capitalized term used but not otherwise defined in the text of
this Agreement is defined as follows.

 

13

 

“Acquisition Costs”

 

means the costs of acquiring any portion of the Site incurred by the
Agency by negotiation or eminent domain including, but not limited to, the
purchase price, just compensation for the taking or threatened taking of
property interests (land, building, fixtures, equipment, loss of goodwill, and
improvements); costs for payment of goodwill as provided in California law for
eminent domain actions; fees and actual expenses of acquisition agents; escrow
fees; costs of drawing the deeds for each property acquired; recording fees;
notary fees, premiums for title insurance policies and litigation guarantees;
any state, county or city documentary stamps or transfer tax, court costs,
witness fees, expert witness fees; prorated taxes; appraisal fees; reasonable
attorney fees; deposits to obtain an order of prejudgment possession; amounts
to satisfy judgments of condemnation; costs necessary to permit early
acquisition of property interests where delays would create a hardship for the
owner; abandonment costs and/or damages that the Agency may be ordered to pay
in any eminent domain proceeding; and any additional costs incurred to settle
or pay claims of inverse condemnation, or judgments in inverse condemnation.

 

“Acquisition Funds”

 

means the proceeds of various loans, grants, bonds, and other public
funding sources set forth in § 402.1 of this Agreement that are provided for
the payment of Acquisition Costs for any portion of the Site acquired by the
Agency.

 

“Acquisition Parcels”

 

means those parcels within the Site to which fee title is held by third
parties as of the Date of Agreement, except for the LADOT Parcel and the MTA
Parcel. The Acquisition Parcels are identified on Attachment 6 (“Parcel Ownership”),  incorporated herein by this reference.

 

“Agency”

 

means the Community Redevelopment Agency of the City of Los Angeles,
and any assignee of or successor to its rights, powers and responsibilities.

 

“Agency Parcels”

 

means those parcels within the Site to which the Agency holds fee title
as of the Date of Agreement. The Agency Parcels are identified on the Parcel
Ownership attached hereto as Attachment 6, incorporated herein by this
reference.

 

“Agreement”

 

means this Owner Participation Agreement between the Agency and the
Developer.

 

“City”

 

means the City of Los Angeles, a California municipal corporation.

 

14

 

“Complete” or “Completion”

 

means, with respect to the improvements to be constructed on the Site
or on any Subarea, the point in time when all of the following shall have
occurred: (1) to the extent a certificate of occupancy is required,
issuance of a permanent certificate of occupancy by the City for the
improvements, and to the extent a certificate of occupancy is not required by
the City, the issuance of a certificate of completion from the City; provided
that, the Agency shall accept a temporary certificate of occupancy if it is
reasonably satisfied that all conditions referenced therein will be met and a
permanent certificate of occupancy will be issued within a time period that is
reasonably acceptable to the Agency; (2) expiration of the time for filing
a claim pursuant to Civil Code Sections 3115-3117, after recordation of a
Notice of Completion by the Developer or its contractor; (3) certification
by the project architect that such improvements (with the exception of “punchlist”
items) have been completed in a good and workmanlike manner and substantially
in accordance with the approved plans and specifications; and (4) any
mechanic’s liens that have been recorded or stop notices that have been
delivered have been paid, settled or otherwise extinguished, discharged,
released, waived, bonded around or insured against. Anything herein to the
contrary notwithstanding, (a) Completion of the residential improvements
to be constructed on Subarea A shall not be deemed to have occurred until the
Agency has approved a proposed management plan for the rental units pursuant to
§ 103.1 (e) of this Agreement; and (b) Completion of the retail
improvements on any Subarea shall not be deemed to have occurred until the
Agency has each tenant proposed by Developer in accordance with the procedures
set forth in Section 103.1 of this Agreement and to the extent required by
Section 319 below.

 

“Concept Plan”

 

means a master concept plan for the Site that is a functional and
aesthetic resolution of urban design issues for the development of the Site,
consistent with the Scope of Development, including: a plan showing the
location and physical interrelationship of the improvements to be developed on
the Site; a delineation of Subarea and parcel boundaries for the Project
improvements and phasing, on- and off-site improvements, and easements; and
preliminary site and landscape design (site plan, ground level building plans,
landscape scheme, vehicular and pedestrian access and circulation, and
parking). The Concept Plan is attached hereto as Attachment No. 5 and is
incorporated herein by this reference, as the same may be amended from time to
time in accordance with this Agreement.

 

“Conditions Precedent”

 

has the meaning given to it in § 506.1 hereof.

 

“Date of Agreement”

 

means the date this Agreement was executed by the Agency and shall be
the effective date of this Agreement, as set forth in the first paragraph
hereof.

 

“Date of Approval”

 

means the date this Agreement was approved by the Board of
Commissioners of the Agency.

 

15

 

“Day”

 

means a calendar day, unless otherwise specified.

 

“Developer”

 

means SL No Ho, LLC and any permitted assignee of or successor to its
rights, powers and responsibilities.

 

“Developer Advance”

 

means, for any portion of the Site to be acquired by the Agency
pursuant to this Agreement, the amount of the Agency’s Acquisition Costs plus
the Agency’s cost of complying with Relocation Laws. The Developer Advance
shall be calculated based on the budgets prepared by the Agency and reviewed by
the Developer pursuant to § 402.5 of this Agreement.

 

“Developer Parcels”

 

means those parcels within the Site to which the Developer holds fee
title as of the Date of Agreement or for which the Developer has entered into a
binding purchase agreement as of the Date of Agreement (including those parcels
to be conveyed to the Developer from Jar No Ho pursuant to the JV Agreement),
and those portions of the Site, if any, to which the Developer obtains fee
title from, or enters into a binding purchase agreement with, persons or
entities other than the Agency prior to termination of this Agreement.
Notwithstanding the foregoing, if any parcels subject to a binding purchase
agreement (including those parcels to be conveyed to the Developer from Jar No
Ho pursuant to the JV Agreement) are not conveyed to Developer in accordance
therewith, other than due to a default on the part of Developer, such parcels
shall be deemed Acquisition Parcels for purposes of this Agreement. The
Developer Parcels as of the Date of Agreement are identified on Attachment 6 (“Parcel
Ownership”) incorporated herein by this reference.

 

“Event of Default”

 

has the meaning given to it in Section 1001.1 herein.

 

“Governmental Requirements “

 

means all laws, ordinances, statutes, codes, rules, regulations, orders
and decrees of the United States, the State of California, the County of Los
Angeles, the City of Los Angeles, or any other political subdivision in which
the Site is located, and of any other political subdivision, agency or
instrumentality exercising jurisdiction over the Agency, the Developer, the
improvements on the Site, or the Site or any portion thereof.

 

“Hazardous Materials”

 

as used in this Agreement means any substance, material or waste which
is or becomes regulated by the United States government, the State of
California, or any local or other governmental authority, which is (i) defined
as a “hazardous waste,” “acutely hazardous waste,” “restricted hazardous waste,”
or “extremely hazardous waste” under Sections 25115, 25117 or 25122.7, or
listed pursuant to Section 25140, of the California Health and Safety
Code; (ii) defined as a “hazardous substance” under Section 25316 of
the California Health and Safety Code; (iii) defined as a “hazardous
material,” “hazardous

 

16

 

substance,”
or “hazardous waste” under Section 25501 of the California Health and
Safety Code; (iv) defined as a “hazardous substance” under Section 25281
of the California Health and Safety Code; (v) petroleum; (vi) asbestos;
(vii) a polychlorinated biphenyl; (viii) listed under Article 9
or defined as “hazardous” or “extremely hazardous” pursuant to Article 11
of Title 22 of the California Code of Regulations, Chapter 20; (ix) designated
as a “hazardous substance” pursuant to Section 311 of the Clean Water Act
(33 U.S.C. Section 1317); (x) defined as a “hazardous waste” pursuant
to Section 1004 of the Resource Conservation and Recovery Act (42 U.S.C. Section 6903);
(xi) defined as a “hazardous substance” pursuant to Section 101 of the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601); or (xii) any other substance, whether in the form of a
solid, liquid, gas or any other form whatsoever, which by any governmental
requirements is defined as “hazardous” or harmful to the environment.

 

“LADOT Parcel”

 

means that parcel within the Site to which fee title is held by the Los
Angeles Department of Transportation (“LADOT”)  as of the Date of Agreement. The LADOT
Parcel is identified on Attachment 6 (“Parcel Ownership”), incorporated herein
by this reference.

 

“MTA Parcel”

 

means that parcel within the Site to which fee title is held by the Los
Angeles County Metropolitan Transit Authority (“MTA”) as of the Date of Agreement. The MTA Parcel is
identified on Attachment 6 (“Parcel Ownership”), incorporated herein by this
reference.

 

“MTA Right of Way”

 

means that certain right of way within the Site to which title is held
by the MTA as of the Date of Agreement. The MTA Right of Way is identified on
Attachment 6 (“Parcel Ownership”), incorporated herein by this reference.

 

“Payment and Performance Bonds”

 

means bonds issued by a surety company admitted in the State of
California and regulated by the State of California Department of Insurance,
Best’s Rated “A” or otherwise acceptable to the Agency Administrator, in which
the City or Agency is the obligee, as their interests may appear, guaranteeing
payment for and faithful performance and Completion (within the respective
times provided in this Agreement) of the improvements on the Site in accordance
with drawings or plans, as appropriate, that specifically describe the work to
be performed in sufficient detail for the issuance of such Payment and
Performance Bonds.

 

“Project Costs”

 

means the total actual cost to the Developer of acquiring, planning,
designing, permitting, financing, and causing the construction of, and
constructing, the improvements on the Site, as set forth in Section 601
herein.

 

17

 

“Relocation Laws”

 

means all applicable state and local relocation laws, including,
without limitation, the California Relocation Assistance Law, Government Code Section 7260,
et, seq, and the implementing regulations thereto in the
California Code of Regulations, Title 24, Section 6000, et. seq.
and the local implementing regulations thereto, and all applicable federal
relocation laws, including, without limitation, the Uniform Relocation
Assistance and Real Property Acquisition Policies Act of 1970, 42 U.S.C.
4201-4655, and 49 CFR Part 24, the acquisitions and eminent domain laws in
Government Code Section 7267, et. seq. and Code of Civil
Procedure Section 1240.000, et. seq. and any other
applicable federal, state or local enactment, regulation or practice providing
for relocation assistance and benefits, acquisition and/or compensation of
property interests (including, without limitation, goodwill and furnishings,
fixtures and equipment, leasehold bonus value, and moving expenses).

 

“Schedule of Performance”

 

means the Schedule of Performance attached hereto as Attachment No. 7
(“Schedule of Performance”)  and incorporated herein by this reference,
setting forth the dates and/or time periods by which certain obligations set
forth in this Agreement must be accomplished. The Schedule of Performance is
subject to revision from time to time as mutually agreed upon in writing
between the Developer and the Agency, and the Agency’s Administrator or
designee is authorized to make such revisions on behalf of the Agency as he or
she deems reasonably necessary.

 

“Scope of Development”

 

is attached hereto as No. 1 (“Scope
of Development”)  and
incorporated herein by this reference, as the same may be amended from time to
time in accordance with this Agreement. The Scope of Development describes the
urban design objectives and standards and development criteria for the Project,
including the scale and quality of the improvements to be constructed by the
Developer pursuant to the terms and conditions of this Agreement.

 

“Site Modifications”

 

means modification of the Scope of Development, the Concept Plan, the
Schedule of Performance, and previously approved plans and drawings, which
shall, to the maximum extent feasible and consistent with sound planning
principles, conform to the existing Scope of Development, Concept Plan, and
previously approved plans and drawings, and shall include necessary
modifications to the Mitigation Monitoring Program for the Project to address
the impact of the proposed revisions to the Scope of Development and Concept
Plan. Site Modifications shall be subject to the completion of the review
required by the California Environmental Quality Act and to the approval of the
Agency’s Governing Board and the City Council, to the extent and in the manner
required by law or Agency procedures.

 

18

 

“Subarea D Parcels”

 

means those parcels within the Site identified as the “Subarea D
Parcels” on the Parcel Ownership attached hereto as Attachment 6 and further
identified as Acquisition Parcels for purposes of this Agreement.

 

ARTICLE 3.
DESIGN AND DEVELOPMENT

 

SECTION 301         SCOPE
OF DEVELOPMENT

 

Subsequent to and conditioned upon the conveyance of a Subarea (to the
extent not already acquired by the Developer), as set forth in the Schedule of
Performance, the Developer shall develop, or cause to be developed, that
Subarea in accordance with and within the limitations established in the Scope
of Development (Attachment No. 1). The Developer shall prepare plans for
the Project and obtain approval for those plans in accordance with the
provisions of this Article 3. In the event of any inconsistency, caused by
the City’s approval process, between the narrative description of the
development of the Project set forth in the Scope of Development on the one
hand, and in the plans and permits approved by the City for development of the
Site on the other hand, the City-approved plans and permits shall govern
without the necessity for an amendment to this Agreement. The Developer shall
construct and complete the improvements on the Site in a high quality and
workmanlike manner, free from material defects and in accordance with this
Agreement, the Scope of Development, the Concept Plan, Schematic Drawings,
Design Development Drawings, Construction Drawings, and the City-approved
plans, drawings, and related documents.

 

SECTION 302         MITIGATION
MONITORING PROGRAM

 

The Developer shall comply with the CEQA Mitigation Monitoring Program
adopted by the Agency concurrently with its approval of this Agreement, as that
program may from time to time be amended to reflect the Scope of Development,
consistent with its original intent. The Developer shall also submit to the
Agency and to LADOT for their approval a Traffic Mitigation Phasing Plan for
the Project that is consistent with the proposed phasing of the Project set
forth in this Agreement.

 

SECTION 303         DRAWINGS
AND PLANS

 

The Developer shall prepare and submit construction drawings and
related documents for the development of the Project on the Site to the Agency
for review (including, but not limited to, architectural review) and written
approval as and at the times established in the Schedule of Performance
(Attachment No. 7). The construction drawings and related documents shall
be consistent with the Scope of Development and Concept Plan and shall include,
without limitation, such drawings as may reasonably be required to show the
location, orientation, visual and functional connections, bulk and massing,
height, plazas and other pedestrian areas, finish materials and other principal
features of the Project, including signage, in the context of the Site and its
environs. In connection with its submittal to the Agency for the approvals
required by this Agreement, the Developer shall provide to the Agency such
elevations, sections, plot plans, specifications, diagrams and other design
documents at each of the stages described herein as may reasonably be required
by the Agency for its review. The construction

 

19

 

drawings
and related documents shall incorporate the [Illegible] mitigation measures
adopted by the Agency in conjunction with its approval of the Final EIR and any
conditions imposed by the City entitlements. The construction drawings and
related documents shall be submitted in five stages: Schematic Design Drawings,
Final Design Drawings, Design Development Drawings, Fifty Percent Construction
Documents, and Final Construction Documents. Any items so submitted and
approved in writing by the Agency shall not be subject to subsequent
disapproval.

 

During the preparation of all drawings and plans, the Agency staff and
the Developer shall hold progress meetings as needed to coordinate the
preparation of, submission to, and review of construction plans and related
documents by the Agency. The Agency staff and the Developer shall communicate
and consult informally as frequently as is necessary to insure that the formal
submittal of any documents to the Agency can receive prompt and speedy
consideration.

 

§303.1        Concept Plan

 

The Concept Plan for the Project is attached hereto as Attachment No. 5
(“Concept Plan”),  incorporated herein by this reference. In
designing and constructing the Project as specified in the Concept Plan, the
Developer shall cause all subsequent design documents to be consistent with the
Scope of Development, the Concept Plan, and the signage criteria for the
Project approved by the Agency and more fully described in the REAs (as defined
in Article 9 hereof). The Scope of Development and the Concept Plan
establish the baseline design standards from which the Developer shall prepare
all subsequent Project documents.

 

§303.2        Master Plan

 

The Developer shall prepare and submit a Master Plan to provide a
framework for the phased development of the Project. The Master Plan shall
reflect and flow from the Scope of Development and the Concept Plan and provide
a landmark development for North Hollywood. The Master Plan shall be a complete
and detailed elaboration of the Scope of Development and Concept Plan, subject
to any modifications and/or conditions imposed by the Agency’s Governing Board
in conjunction with its approval of the Agreement. The Master Plan shall
address all components of the Project including site planning, building layout,
major building elevation treatments, major landscape and plaza elements, vehicular
and pedestrian circulation scheme, parking, and the functional and visual
relationship of the Project with neighboring uses.

 

§303.3        Schematic Design Drawings

 

The Developer shall prepare and submit Schematic Design Drawings, along
with outline specifications, which generally describe the project design for
the Site and which are more specific and detailed than the Concept Plan and the
Master Plan. The submittal shall illustrate how the Project addresses and
resolves the urban design and development objectives, criteria and issues
related to the development of the Site consistent with the Scope of
Development, the Concept Plan and the Master Plan. The submittal shall include
the phasing plan and the refined delineation of parcel boundaries for the Project
improvements and phasing, on- and off-site improvements, any easements, and
schematic architectural and landscape design drawings (site plan, ground level
building plans, floor and roof plans, building elevations and sections,
signage, landscape/hardscape scheme, pedestrian plazas and other elements,
vehicular and pedestrian access and circulation,

 

20

 

parking, site lighting
and site perimeter treatment) showing among other details as pertinent, the
location, type, size and quality of materials, design treatments and features.
A schematic Art Plan shall be included which shall indicate the design,
location and artist of all components of the submittal. The Schematic Design
Drawing submittal shall include sufficient detail and all related documents
required to obtain land use entitlements for the Project from the City as well
as any other related documents reasonably required by the Agency.

 

§303.4        Design Development Drawings

 

The Design Development Drawings shall be based on and reflect a natural
design and development progression from the approved Schematic Design Drawings.
The Design Development Drawings shall indicate estimated wall thickness,
structural dimensions, and delineation of site features and elevations, the
building cores, materials and colors, fine art, landscaping, a refined exterior
signage plan and other features. The drawings shall Fix and describe all design
features, as well as the size, character, and quality of the Project as to
architectural, structural, and mechanical systems. Key details shall be
provided in preliminary form. Samples of key materials to be used shall
accompany the Design Development Drawings submittal along with a Final Art Plan
and progressively more detailed specifications.

 

§303.5        Fifty Percent Complete Construction
Documents

 

The Developer shall prepare and submit 50% Complete Construction
Documents, including 50% Working Drawings, which shall be in sufficient detail
to obtain an excavation and foundation permit. This submittal is to show
further design and development of the Site and natural progression from the
approved Design Development Drawings. The submittal shall include the
landscaping and fine arts aspects as well at the 50% Working Drawing stage
along with a draft of final specifications and material samples.

 

§303.6        Final Construction Documents

 

The Developer shall prepare and submit to the Agency and the City Final
Construction Documents for the development of each Subarea in sufficient detail
to obtain a building permit for processing as required for City approval within
the times established in the Schedule of Performance. Pursuant to § 103.2
hereof, the Developer may construct the Project in Phases. Final Construction
Documents for each Phase are to be a continuation of approved 50% Complete
Construction Documents. The Final Construction Documents for each Phase must
provide all the detailed information necessary to obtain building permits for
that Phase. The Final Construction Documents shall include, without limitation
complete building (floor plans, roof plans, elevations and sections), site,
landscape/hardscape, lighting, exterior signage and graphics and fine art plans
and construction details, elevations of major public spaces requirements,
standards, specifications and schedules and tabulation of areas and uses. The
Developer shall provide additional material samples upon the reasonable request
of the Agency.

 

SECTION 304         PHASING OF DEVELOPMENT

 

Construction of the improvements on the applicable Subarea for each
Phase, as described in § 103.2 of this Agreement, shall commence within the
time specified in the Schedule of Performance and only after receipt of all
necessary permits for the work to be

 

21

 

undertaken
in that [Illegible]. The Developer shall diligently [Illegible] to Completion
the construction of each Phase of the Project within the time specified in the
Schedule of Performance using all commercially reasonable efforts to complete
the Project within the time specified. The Agency agrees to cooperate in good
faith with the Developer and to use all reasonable efforts to implement this
Agreement in a way that will permit phased development of the Project.

 

SECTION 305         PERMITS
AND OTHER ENTITLEMENTS

 

The Developer shall prepare and submit to the City all applications
required for entitlements for the Project, which shall, among other things,
depict and describe building locations, densities, subdivision lot lines,
landscaping and circulation, for review and written approval or disapproval by
the City within the times established in the Schedule of Performance.

 

The Site shall be developed as generally established in the required
entitlements, as such entitlements may be amended from time to time with the
City’s approval in the manner required by law. Any such changes shall be within
the limitations of the Scope of Development.

 

Before commencing construction or development of any building,
structure or other work of improvement upon each Subarea, the Developer shall
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 agency having
jurisdiction over such construction, development or work. The Agency shall
provide all proper assistance to the Developer in securing permits from other
governmental agencies. This Agreement shall not be construed to limit in any
manner (i) the right or the authority of the City of Los Angeles, or any
other governmental agency having jurisdiction, to require public improvements,
dedications, exactions or other conditions of approval in connection with the
development of the Site or any portion thereof; or (ii) the Developer’s
responsibility to pay for the cost of . complying therewith.

 

SECTION 306         AGENCY
APPROVAL OF PLANS, DRAWINGS, AND RELATED DOCUMENTS

 

Within the time established in the Schedule of Performance, the
Developer shall submit to the Agency for approval the required plans, drawings,
and related documents for each Subarea. For purposes of this Section 306, “approval”
means approval by the Agency Administrator or designee. Any items submitted by
the Developer and approved in writing by the Agency shall not be subject to
subsequent disapproval or failure to certify. Approval of progressively more
detailed drawings and specifications will be promptly granted by the Agency if
they are substantially consistent with, the Scope of Development and the
Concept Plan and the plans and drawings earlier approved by the Agency. The
sole purpose of the Agency’s review of the plans, drawings and related
documents is to ensure consistency with the Redevelopment Plan, the Design for
Development for the Commercial Core, and this Agreement.

 

§306.1        Substantially Consistent

 

In determining whether the Developer’s submittals are substantially
consistent with previously approved submittals, the Agency shall take into
account such factors as industry standards, architectural and engineering
design and local construction practices,

 

22

 

code
requirements, applicable plan check and permit condition [Illegible] technology
standards, and timely availability of building materials.

 

§306.2        Approval Process

 

The Agency shall approve or disapprove the Developer’s submittals within
the times established in the Schedule of Performance. The Agency’s failure to
either approve or disapprove the Developer’s submittals within the times
established in the Schedule of Performance shall be deemed an approval;
provided however, that no submittal shall be deemed approved unless the request
for approval contains the following provision, in capital letters and bold
print, setting forth the appropriate number of days as provided for the
approval of such submittal in the Schedule of Performance:

 

NOTICE IS HEREBY GIVEN THAT FAILURE TO APPROVE OR DISAPPROVE
THE REQUESTED MATTER WITHIN DAYS SHALL BE DEEMED AN APPROVAL PURSUANT TO §
306.2 OF THE OWNER PARTICIPATION AGREEMENT.

 

To be effective, any disapproval shall state in writing the reasons for
disapproval and the changes requested by the Agency. Such reasons and changes
shall be substantially consistent with the Scope of Development and Concept
Plan and any items previously approved or deemed approved by the Agency
hereunder. The Developer shall revise any disapproved submittal and resubmit to
the Agency promptly after receipt of the notice of disapproval.

 

§306.3        Changes to Approved Plans

 

If after the Agency’s approval of a submittal, the Developer wishes to
make a change to that submittal, the Developer shall submit the proposed change
to the Agency for its approval or disapproval. If the modified submittal
conforms to the requirements of this Agreement and the approvals previously
granted by the Agency under this Section 306, the change shall not be
deemed to be a material change and shall be approved by the Agency. If the
Agency reasonably determines that the modified submittal is not substantially
consistent with prior approvals or is not substantially consistent with the
Redevelopment Plan or this Agreement, including the Scope of Development and
the Concept Plan, the Agency shall disapprove the modified submittal and shall
set forth in writing the reasons for its disapproval. The Agency shall approve
or disapprove the modified submittal in the same manner and within the same
times as provided in § 306.2 for approval or disapproval of initial submittals
to the Agency.

 

§306.4        Governmental Requirements

 

If any governmental official, agency, department or bureau having
jurisdiction over the Project or the Site requires material revisions of
Agency-approved plans, drawings, or related documents, the Developer and the
Agency shall cooperate to attempt to obtain a waiver of that requirement or to
develop a mutually acceptable revision of those plans, drawings, or related
documents.

 

§306.5        No Reliance

 

The Agency neither undertakes nor assumes nor will have any
responsibility or duty to the Developer or to any Transferee or to any other
third party to review, inspect, supervise, pass judgment upon or inform the
Developer, Transferee or any third party of

 

23

 

any
matter in connection with the development or construction or rehabilitation of
improvements to be constructed on the Site, whether regarding the quality,
adequacy or suitability of the plans, any labor, service, equipment or material
furnished to the Site, any person furnishing the same, or otherwise. The
Developer, any Transferee and all third parties shall rely upon its or their
own judgment regarding such matters, and any review, inspection, supervision,
exercise of judgment or information supplied to the Developer, Transferee or to
any third party by the Agency in connection with such matter is for the public
purpose of redeveloping the Site, and neither the Developer nor any Transferee
(except for the purposes set forth in this Agreement) nor any third party is
entitled to rely thereon. The Agency shall not be responsible for any of the
work of construction, rehabilitation, improvement or development of the Site.

 

SECTION 307         AGENCY
APPROVAL OF ARCHITECT AND CONTRACTOR

 

Within the time established in the Schedule of Performance, the
Developer shall submit to the Agency for approval the name and qualifications
of its architect, landscape architect, art consultant, civil engineer, and
general contractor for the Project. Such approvals shall not be unreasonably
withheld. To be effective, any disapproval shall state in writing the reasons
for disapproval.

 

SECTION 308         ENVIRONMENTAL
REPRESENTATIONS AND COVENANTS

 

§308.1        Developer’s Environmental
Representations and Covenants

 

The Developer shall promptly deliver to the Agency copies of all “Phase
1” and/or “Phase 2” investigations, soils reports, geotechnical data, and other
information regarding the physical condition of the Developer Parcels that is
in the possession or control of the Developer (“Developer Environmental Reports”). The Agency acknowledges
its prior receipt of the Developer Environmental Reports described in the List
of Environmental Reports (Attachment No. 17).

 

Except as provided in the contents of the reports delivered to the
Agency by the Developer pursuant to the immediately preceding paragraph, as of
the Date of Agreement the Developer hereby represents and warrants to the Agency
that it has no actual knowledge of, and has not received any notice or
communication from any governmental agency having jurisdiction over the
Developer Parcels, notifying the Developer of the uncured presence of Hazardous
Materials beyond non-reportable background levels in, on, or under the
Developer Parcels or any portion thereof. “Actual knowledge” as used herein
shall not impose a duty of investigation and shall be limited to the actual
knowledge of the Developer and its principals, employees and agents who have
participated in the preparation of this Agreement or the operation, management,
or ownership of the Developer Parcels, and information in the possession or
control of Developer as of the Date of Agreement.

 

The Developer shall immediately advise the Agency in writing if the
Developer obtains actual knowledge of any of the following: (a) any
pending or threatened environmental claim against the Developer, any Developer
Parcel or any other parcel conveyed to Developer pursuant to this Agreement, (b) any
condition or occurrence on any Developer Parcel or any other parcel conveyed to
Developer pursuant to this Agreement that (i) results in material
noncompliance by the Developer with any

 

24

 

applicable Government
Requirement, (ii) could reasonably [Illegible] [Illegible] to cause any
Developer Parcel or any other parcel conveyed to Developer pursuant to this
Agreement to be subject to any restrictions on the ownership, occupancy, use or
transferability of any Developer Parcel, or any other parcel conveyed to
Developer pursuant to this Agreement under any Governmental Requirement, or (iii) could
reasonably be anticipated to form the basis of an environmental claim against
the Developer, any Developer Parcel, or any other parcel conveyed to Developer
pursuant to this Agreement.

 

The Developer
shall take every reasonable precaution to prevent the release of any Hazardous
Materials located in, on or under any Developer Parcel, or any other parcel
conveyed to Developer pursuant to this Agreement, or any portion thereof. Such
precautions shall include compliance with all Governmental Requirements with
respect to Hazardous Materials; provided, however, the Developer shall have the
right in good faith to contest or challenge any asserted non-compliance. In
addition, the Developer shall install and utilize such equipment and implement
and adhere to such procedures as are consistent with commercially reasonable
standards as respects the disclosure, storage, use, removal and disposal of
Hazardous Materials.

 

The Developer
shall be solely responsible, at its own expense, for the disposal and
remediation of any Hazardous Materials discovered during construction of the
improvements on the Site and for the costs of complying with all Governmental
Requirements with respect to such Hazardous Materials. Notwithstanding the
immediately preceding sentence, if the Developer discovers during construction
of the improvements on a Subarea, that an Acquisition Parcel contains Hazardous
Materials that require remediation, and the Agency and the Developer mutually
determine that the uninsured costs of remediating those Hazardous Materials
would impose a substantial cost or delay in the Completion of those
improvements, the following provisions will apply. The Agency and the Developer
must use every reasonable effort to agree to commercially reasonable Site
Modifications that would, to the greatest extent feasible, reduce the required
remediation of that Acquisition Parcel. The Agency will establish a cap on the
Developer’s uninsured remediation costs for that Acquisition Parcel equal to
fifty percent (50%) of those uninsured remediation costs (the “Remediation Cap”). Any reasonably
necessary uninsured remediation costs incurred by the Developer that exceed the
Remediation Cap will be reimbursed by the Agency, using that portion of the
Available Site Generated Property Tax Increment that is not otherwise
designated for repayment of the Agency Obligation pursuant to the
Public-Private Feasibility Agreement (Attachment No. 8). For the purposes
of this paragraph, the term “uninsured remediation costs” shall mean the
Developer’s remediation costs less any deductible under any insurance
maintained under this § 308.1 and less any offset for Hazardous Materials that
was incorporated into the purchase price or condemnation award paid to the
previous owner by the Agency pursuant to this Agreement. As a condition
precedent to the Agency’s reimbursement obligation, the Developer must have,
prior to beginning construction of any improvements on the applicable
Acquisition Parcel, obtained environmental insurance on that parcel that
provides coverage for the remediation of the Hazardous Materials disclosed
through a Phase 2 Environmental Assessment, to the extent such insurance is
generally available at commercially reasonable rates. Further, the Developer
must have consulted with the Agency regarding the results of the Phase 2
Environmental Assessment and the environmental insurance to be obtained by the
Developer, prior to obtaining such insurance. If the Agency incurs a
reimbursement obligation to the Developer pursuant to this paragraph, the
Developer must seek

 

25

 

contribution from
[Illegible] responsible parties, if the [Illegible] recovery exceeds the
estimated litigation costs, including reasonable attorneys’ fees. Any such
recovery, whether by settlement judgment, or otherwise, after deduction of the
Developer’s litigation costs, including reasonable attorneys’ fees, must be
distributed between the Agency and the Developer in proportion to the uninsured
remediation costs borne by each.

 

The Agency agrees
that, in acquiring any portion of the Site for conveyance to the Developer, it
will use every reasonable effort to assure that the seller of such property is
not released from its existing liability for the Developer’s cost of
remediating Hazardous Materials.

 

§308.2           Agency’s Environmental
Representations and Covenants

 

The Agency shall
promptly give the Developer copies of all “Phase 1” and/or “Phase 2” investigations, soils reports,
geotechnical data, and other information regarding the physical condition of
the Agency Parcels that is in the possession or control of the Agency (“Agency Environmental Reports”). The
Developer hereby acknowledges its prior receipt of the Agency Environmental
Reports described in the List of Environmental Reports (Attachment No. 17).

 

Except as provided
in the contents of the reports delivered to the Developer by the Agency pursuant
to the immediately preceding paragraph, as of the Date of Agreement the Agency
hereby represents and warrants to the Developer that it has no actual knowledge
of, and has not received any notice or communication from any governmental
agency having jurisdiction over the Agency Parcels, notifying the Agency of the
uncured presence of Hazardous Materials beyond non-reportable background levels
in, on, or under the Agency Parcels or any portion thereof. “Actual knowledge”
as used herein shall not impose a duty of investigation and shall be limited to
the actual knowledge of the Agency and its officers, employees and agents, who
have participated in the preparation of this Agreement or the operation,
management, or ownership of the Agency Parcels, and information in the
possession or control of the Agency as of the Date of Agreement,

 

The Agency shall
immediately advise the Developer in writing if the Agency obtains actual
knowledge of any of the following: (a) any pending or threatened
environmental claim against the Agency or any Agency Parcel, or any other
parcel acquired by the Agency pursuant to this Agreement, (b) any
condition or occurrence on any Agency Parcel or any other parcel acquired by
the Agency pursuant to this Agreement that (i) results in material
noncompliance by the Agency with any applicable Governmental Requirement, (ii) could
reasonably be anticipated to cause any Agency Parcel or any other parcel
acquired by the Agency pursuant to this Agreement to be subject to any
restrictions on the ownership, occupancy, use or transferability of any Agency
Parcel, or any other parcel acquired by the Agency pursuant to this Agreement
under any Governmental Requirement, or (iii) could reasonably be
anticipated to form the basis of an environmental claim against the Agency, any
Agency Parcel, or any other parcel acquired by the Agency pursuant to this
Agreement.

 

SECTION 309         DEMOLITION AND CLEARANCE

 

Upon conveyance of
any portion of the Site to the Developer, the Developer shall be responsible,
at its expense, for the demolition, disposal and clearance of all above- and
below-ground structures and improvements, underground storage tanks, debris,

 

26

 

contaminated soil
[Illegible] [Illegible] structures and obstructions on, [Illegible] [Illegible]
in those portions of the Site (“Site
Clearance”). Within the time specified in the Schedule of
Performance, the Developer shall propose to the Agency the means and methods
and prepare and submit plans and specifications in accordance with all
applicable State and Federal regulations and guidelines for the Site Clearance,
including removal of asbestos and lead-based paint (the “Site Clearance Plans”). The Agency shall
have thirty (30) days from receipt of the Site Clearance Plans to approve or
disapprove the proposed Site Clearance Plans, which approval shall not be
unreasonably withheld, and, if denied, shall include the reasons therefore, or
it shall be deemed approved.

 

Upon the Agency’s
conveyance to the Developer of any portion of the Site, the Developer shall
commence and complete the Site Clearance as to such portion of the Site in
accordance with the Site Clearance Plans. The Developer shall carry out the
Site Clearance in conformity with all applicable laws and Governmental
Requirements, including all applicable federal and state labor laws and
requirements.

 

Prior to
commencement of any Site Clearance, the Developer agrees to procure, or cause
its contractor to procure, Payment and Performance Bonds covering the Site
Clearance in accordance with the Site Clearance Plans.

 

SECTION 310 PUBLIC
IMPROVEMENTS

 

§310.1           Dedication of Property

 

Conditioned upon
the Developer’s acquisition of fee title, the Developer shall dedicate to the
City those portions of the Site that are reasonably required for the Lankershim
Boulevard and Chandler Boulevard street improvements and for construction of
other public improvements required by the City as a condition of its approval
of any final tract map or other entitlement for the Site. To the extent
approved by the City, the Developer shall be entitled to utilize the dedication
of said portions of the Site for any applicable fees, credits, conditions,
mitigations, mitigation measures or other City requirements otherwise allowed by
law.

 

§310.2           Construction Bonds

 

§310.2.1        Requirements

 

The Developer
shall obtain Payment and Performance Bonds, naming the City or the Agency as
obligee, as their interests may appear, covering labor, materials and faithful
performance of the construction of all public improvements to be constructed on
each Subarea in accordance with the plans and drawings approved by the Agency.
For the purpose of this Section 310, the term “public improvements” shall
mean those public improvements required to be constructed as a condition of
approval of any entitlement or final tract map for a Subarea. Each such bond
shall be in the amount equal to one hundred percent (100%) of the construction
price in an Agency-approved construction contract between the Developer and its
contractor. The Agency shall agree to accept the bonds required by the City.
The Developer shall deliver to the Agency a certificate or certificates from
the bonding company(s) issuing such bonds.

 

27

 

§310.2.2        Schedule for Delivery

 

The Developer
shall provide to the Agency or the City, as their interests may appear, Payment
and Performance Bonds for all public improvements to be constructed on the
Subarea, to be provided upon the earlier of the recordation of any final tract
map or the submittal to the Agency pursuant to the Schedule of Performance of a
Preliminary Subdivision (Redevelopment) Map along with a metes and bounds
description for that Subarea and, in any event, prior to commencing construction
of the improvements to be developed on that Subarea.

 

SECTION 311         INTENTIONALLY OMITTED

 

SECTION 312         COSTS OF CONSTRUCTION

 

The cost of
assembling the Site and constructing all improvements thereon or in connection
therewith (including, without limitation, all work described in the Scope of
Development and all conditions of approval, infrastructure, dedications and
mitigation measures related to approval of entitlements, and all demolition,
grading, excavation and site improvement and remediation, and all items
referred to in the definition of Project Costs set forth in § 601.2 below)
shall be borne solely by the Developer, except as follows:

 

1.         The Agency shall comply with the
Public-Private Feasibility Agreement attached hereto as Attachment No. 8.

 

2.         The Agency shall at no cost to the
Developer, perform all required affordable housing obligations arising under
the Community Redevelopment Law, including, without limitation, the provision
of replacement housing, inclusionary housing and the expenditure of a
percentage of tax increment revenue on low- and moderate-income housing. To
effectuate the foregoing, the Agency shall, to the extent required to offset
the reduction in revenue resulting from the inclusion of those affordable
housing units required to be constructed on Subareas A and B pursuant to §
103.1, provide the Affordable Housing Assistance described in the
Public-Private Feasibility Agreement (Attachment No. 8).

 

The Developer
shall use all commercially reasonable efforts to have the Agency and the City
named as obligees on any payment and performance bonds that the Developer is
required to provide to its lender(s).

 

SECTION 313         SCHEDULE OF PERFORMANCE

 

Following the
Agency’s conveyance or delivery of possession of each Subarea (to the extent not
already acquired by the Developer), the Developer shall promptly begin and
thereafter diligently prosecute to Completion the construction of the
improvements thereon and the development thereof as provided in the Scope of
Development, the Concept Plan, Master Plans, Schematic Drawings, Design
Development Drawings, Construction Drawings, and the City-approved plans and
permits.

 

The Developer
shall begin and complete all construction and development on each Subarea or
portion thereof within the times specified in the Schedule of Performance
(Attachment No. 7), subject to events of force majeur. The Schedule of
Performance is

 

28

 

subject to revision from
time to time as mutually agreed [Illegible] [Illegible] writing between the
Developer and the Agency.

 

SECTION 314         PROJECT DEVELOPMENT PROGRESS REPORTS

 

During periods of
construction, the Developer shall submit to the Agency written reports of the
progress of the construction when and as requested by the Agency, but not more
frequently than monthly. The reports shall include information relating to the
Developer’s compliance with applicable federal, state, and local law (including
but not limited to the payment of prevailing wages), Agency policies, and the
Community Benefits Package, to the extent applicable, and shall be in such form
and detail as may be reasonably required by the Agency and shall include a
reasonable number of construction photographs (if requested) taken since the
last report by the Developer.

 

SECTION 315         AGENCY’S RIGHTS OF ACCESS

 

Representatives of
the Agency shall have a reasonable right of access to the Site or any portion
thereof, without charges or fees, at normal construction hours during the
period of construction for the purposes of this Agreement, including, but not
limited to, the inspection of the work being performed in constructing the
improvements on the Site. Representatives of the Agency shall be those who are
so identified in writing by the Agency’s Administrator. The Agency’s
representatives shall not interfere with any work being done at the Site during
such access. The Developer shall have the right to accompany the Agency
representatives during such Site access.

 

SECTION 316         INDEMNIFICATION OF INSURANCE

 

§316.1           Developer’s Indemnity

 

The Developer
shall defend, indemnify, assume all responsibility for, and hold the
Indemnitees harmless from and against any and all Loss arising from any acts or
omissions of the Developer or any of its agents, contractors, subcontractors or
employees relating to the subject matter of this Agreement, including but not
limited to (i) the design, development and construction of the
improvements upon the Site, whether the damage shall accrue or be discovered
before or after termination of this Agreement, (ii) any breach or default
by the Developer of its obligations under this Agreement (other than under
those provisions hereof which expressly limit the Agency’s remedies), and (iii) the
operation and use of the Project. The Developer shall not be liable for any
Loss arising from the wrongdoing or gross negligence of any of the Indemnitees.
As used herein, (i) “Loss” shall mean all loss, costs and expenses arising
out of all claims, demands, losses, damages, liens, liabilities, injuries,
deaths, penalties, relocation or disruption of use, fines, lawsuits and other
proceedings, judgments and awards rendered therein, including reasonable
attorneys’ fees and costs, and (ii) “Indemnitees”
shall mean the Agency, the City, and their respective board members,
commissioners, council members, officers, employees and agents. The Developer’s
duty to indemnify shall survive the termination of this Agreement.

 

§
316.2          Insurance Requirements

 

The Developer
shall maintain or cause to be maintained, and keep in full force and effect,
the following insurance coverage issued by companies admitted to do business

 

29

 

in California unless
otherwise approved by the Agency’s [Illegible] Management Division (which
approval shall not be unreasonably withheld or delayed).

 

§316.2.1         Policy Requirements

 

1.         Commercial General Liability
Insurance. A policy of commercial general liability insurance (occurrence
form) having a combined single limit of not less than Two Million Dollars
($2,000,000) per occurrence, and Ten Million Dollars ($10,000,000) in the
aggregate, providing coverage for, among other things, blanket contractual
liability, premises, products/completed operations, bodily injury, property
damage and personal injury coverage, with deletion of the exclusion for
explosion, collapse or underground hazard, if applicable. The commercial
general liability insurance policy shall be broad form and provide for and
protect the Agency and the City against incurring any legal cost in defending
claims for alleged loss.

 

2.         Automobile Liability Insurance.
The Developer shall require contractors working on the Site to have
comprehensive automobile liability insurance having a combined single limit of
not less than One Million Dollars ($1,000,000) per occurrence and Two Million
Dollars ($2,000,000) in the aggregate, and insuring the contractor against
liability for claims arising out of ownership, maintenance, or use of any
owned, hired or non-owned automobiles.

 

3.         Workers’ Compensation and Employer’s
Liability Insurance. Workers’ compensation insurance having limits not less
than those required by state statute and federal statute, if applicable, and
covering all persons employed by the Developer and the Developer’s contractors
in the conduct of its operations on the Site (including the “all states” and
volunteer’s endorsements, if applicable), together with employer’s liability
insurance coverage in the amount of at least One Million Dollars ($1,000,000).

 

4.         Property Insurance. A Builder’s
Risk policy of insurance or equivalent (including boiler and machinery
comprehensive form, if applicable) covering the Project during the course of
construction in an amount equal to the full replacement cost thereof. An “all
risk” policy of insurance or equivalent (including boiler and machinery
comprehensive form, if applicable) covering the improvements on the Site in an
amount equal to the full insurable replacement cost thereof (including costs
attributable to a change in laws), without deduction for depreciation, with
such reasonable deductible amounts as may be customary from time to time in
other comparable mixed-use commercial developments. Such, “all risk” policy of
insurance or equivalent shall insure against all risks, including loss or damage
by earthquake (with coverage levels based on maximum probable loss analysis as
set forth in a seismic analysis prepared by a licensed engineer), to the extent
such earthquake coverage is available at commercially reasonable rates, fire,
windstorm, aircraft, vehicle, smoke damage, water damage, flood, sprinkler
leakage, riot civil commotion and terrorist acts. The Developer can satisfy its
obligations under this paragraph by having such obligations fulfilled by a
tenant, subtenant or operating agent.

 

§316.2.2        General

 

1.         Insurance Companies. Insurance
required to be maintained pursuant to this Agreement shall be written by
companies licensed to do business in California and having a “General
Policyholders Rating” of at least “A” (or such higher rating as may be

 

30

 

required by a Mortgage)
as set forth in the most current issue of “Best’s Key Rating Guide.”

 

2.         Certificates of Insurance. The
Developer shall monitor the insurance of Developer’s contractors and maintain
proof of such insurance during construction. The Developer shall deliver to the
Agency certificates of insurance with original endorsements for all coverages
required by this § 316.2. The certificates and endorsements of each insurance
policy shall be signed by a person authorized by the insurer to bind coverage
on its behalf. The certificates and endorsements shall be on forms reasonably
acceptable to the Agency. The Developer shall furnish the Agency with
certificates of insurance and the Developer’s contractors shall provide same to
the Developer prior to commencement of construction and certificates of renewal
or “binders” thereof at least ten (10) days prior to expiration of each
policy, but in all events prior to expiration. Each certificate shall expressly
provide that such policies shall not be cancelable or otherwise subject to
modification except after sixty (60) days’ prior written notice to the Agency
(except in the case of cancellation for nonpayment of premium in which case
cancellation shall not take effect until at least ten (10) days’ written
notice has been given to each additional insured).

 

3.         Additional Insureds. All
policies of insurance required hereunder (other than worker’s compensation
insurance) shall name “The Community Redevelopment Agency of the City of Los
Angeles, California” and “The City of Los Angeles” as additional insureds. The
commercial general liability policy required under Paragraph 1 of § 316.2.1
above shall provide for severability of interest.

 

4.         Excess Coverage. Any umbrella
liability policy or excess liability policy shall be in “following form” and
shall contain a provision to the effect that, if the underlying aggregate is
exhausted, the excess coverage will drop down as primary insurance.

 

5.         Notification of Incidents. The
Developer shall promptly notify the Agency of the occurrence of any accidents
or incidents in connection with the Project which could give rise to a claim
under any of the insurance policies required under this § 316.2. The Developer
shall notify its insurer of the occurrence of any accidents or incidents in
connection with the Project within the time periods required under each
insurance contract and shall provide a copy of that notice to the Agency.
During construction, the Developer shall require the contractors to comply with
the requirements of this Paragraph 5.

 

6.         Full Insurable Value. The term “full
insurable value” shall mean the actual replacement cost (without deduction for
depreciation) of the covered improvements immediately before such casualty or
other loss, including the cost of construction of the improvements,
architectural and engineering fees, and inspection and supervision. Developer
shall make available to the Agency upon request, for its review and approval, all
documents, data and resources used in determining the full insurable value.

 

7.         No Cancellation. All policies of
insurance shall not be subject to cancellation, reduction in coverage, or
non-renewal except after notice in writing shall have been sent to the Agency
not less than ten (10) days prior to expiration or thirty (30) days prior
to the effective date of any other cancellation, amendment or reduction in
coverages.

 

31

 

8.         Premiums. The Developer agrees
to pay all premiums timely for all insurance required by this § 316.2 and, at
its sole cost and expense, to comply and secure compliance with all insurance
requirements necessary for the maintenance of such insurance.

 

9.         Certificates. The Developer
shall submit insurance certificates with appropriate endorsements as proof of
insurance required by this Agreement to the Agency prior to commencement of
construction.

 

10.       Blanket Policies Compliance. The
insurance described in this § 316.2 may be carried under a policy or policies
covering other liabilities and locations of the Developer and/or may be
satisfied in whole or in part under any plan of self insurance permitted
hereunder from time to time.

 

11.       Waiver of Subrogation. The
Developer shall use its reasonable efforts to ensure that each policy of
property insurance relating to the Project, shall permit a waiver of
subrogation.

 

12.       Duration of Obligations. The
Developer shall, for each Subarea, obtain the policies required in § 316.2.1
within the time set forth in the Schedule of Performance and shall maintain
such policies until the issuance of a Release of Construction Covenants for
that Subarea.

 

13.       Notice. Developer shall send all
required insurance information to the Agency’s Risk Management Division at 354
South Spring Street, Suite 500, Los Angeles, California 90013. All
correspondence shall reference Agency Contract No. 4075.

 

§316.3           Restoration

 

If any of the
improvements to be constructed on the Site are damaged or destroyed prior to
the issuance of a Release of Construction Covenants by the Agency and provided
the proceeds together with any deductible under any insurance maintained under
this Section 316 are sufficient, as the Agency and the Developer mutually
determine, then, as soon as reasonably practicable thereafter, such
improvements shall be repaired, rebuilt and restored by the Developer at least
to a condition substantially equivalent to their condition immediately prior to
the damage or destruction, to the extent permitted by law. Such repair,
reconstruction and restoration shall be in accordance with this Agreement,
including but not limited to the Scope of Development, the Concept Plan, and
City-approved plans and permits. If and to the extent that, as the Agency and
the Developer mutually determine, the proceeds together with any deductible
under any insurance maintained under this Section 316, are insufficient to
pay the substantial cost of such repair, rebuilding or restoration due to a
default by the Developer with respect to its obligations to maintain such
insurance under this Agreement, then the Developer shall nevertheless be
obligated to pay the cost of such repair, rebuilding, or restoration. Any
material changes that the Developer proposes to make to the design of the replacement
or repaired improvements shall be subject to the Agency’s approval under Section 306
of this Agreement. If and to the extent that the proceeds together with any
deductible under any insurance maintained under this Section 316, are
insufficient to pay the substantial cost of such repair, rebuilding or
restoration notwithstanding that the Developer has performed its obligations to
maintain insurance under this under this Section 316, then the Developer
shall not be obligated to repair, rebuild or restore the improvements. If the
Agency and the Developer mutually determine that the Developer is not required
to

 

32

 

repair, rebuild or
[Illegible] the Improvements pursuant to this [Illegible], then the Developer
shall demolish and remove the improvements and restore the affected portion of
the Site to a clean and level condition, to the extent such proceeds are
sufficient to pay the costs of that work. Within thirty (30) days following the
written request of the Developer, describing accurately and with specificity
the affected portion of the Site and certifying that it has been restored to a
clean and level condition to the extent required hereunder, the Agency shall
furnish the Developer with an executed and acknowledged Release of Construction
Covenants (as defined in Section 319 hereof), with respect to that portion
of the Site.

 

§316.4           Rights of Mortgagees

 

If any Mortgagee
has the right to retain any proceeds or control the disbursement of any
proceeds and in fact exercises such right, but notwithstanding the exercise by
such Mortgagee of such right there remain proceeds which are insufficient to
pay the cost or repair, rebuilding or restoration of all structures which were
covered by the insurance policy or policies in question, but which are
sufficient to pay the cost of repair, rebuilding or restoration of the damaged
or destroyed improvements, then, subject to the rights of Mortgagees, the
Developer shall be obligated to prioritize the use of the remaining proceeds so
as to repair, rebuild and restore such improvements in the manner set forth in
§316.3.

 

SECTION 317         CONSTRUCTION SIGNS

 

The Developer
shall provide the construction site signs (“Construction
Signs”)  in accordance
with the Agency’s standards for such signs set forth in the Scope of
Development (Attachment 1). The Construction Signs shall be erected on the Site
prior to commencing construction of the improvements on a Subarea and in
locations reasonably approved by the Agency.

 

SECTION 318         COMPLIANCE WITH LAWS AND POLICIES ;
COMMUNITY BENEFITS PACKAGE

 

The Developer
shall carry out the design and construction of the improvements on the Site In
conformity with all applicable laws, including all applicable federal, state,
and local labor standards, the City zoning and development standards, building,
plumbing, mechanical and electrical codes, and all other provisions of the City
Municipal Code, and all applicable disabled and handicapped access
requirements, including without limitation the Americans With Disabilities Act,
42 U.S.C. Section 12101, et seq., Government
Code Section 4450, et seq., Government
Code Section 11135, et seq., and
the Unruh Civil Rights Act, Civil Code Section 51, et seq. The Developer shall also comply
with all requirements arising out of the use of public funds in the acquisition
of any portion of the Site or in the construction of any improvements on the
Site, including but not limited to requirements arising from the HUD Loan and
EDI Grant, and the federal reporting requirements arising from the Agency’s
administration thereof. Notwithstanding the foregoing, the Developer shall have
the right in good faith to contest or challenge any asserted non-compliance. In
addition, the Developer shall comply with Agency policies as of the Date of
Agreement and the City of Los Angeles ordinances and policies and the
provisions of the Community Benefits Package attached as Attachment No. 10
to this Agreement, which collectively include but are not limited to the
following. Between the

 

33

 

Community Benefits
package and the other terms of this Agreement, those provisions that impose a
greater obligation on the Developer or are more restrictive of the Developer’s
rights shall be controlling of the Developer’s rights and obligations under
this Agreement.

 

§318.1           Non-Discrimination During
Construction: Equal Opportunity

 

The Developer, for
itself and its successors and assigns, and transferees agrees that in the
construction of the improvements on the Site provided for in this Agreement:

 

(1)       It will not discriminate against any
employee or applicant for employment because of race, color, creed, religion,
sex, sexual preference/orientation, age, disability, medical condition,
Acquired Immune Deficiency Syndrome (AIDS) acquired or perceived, retaliation
for having filed a discrimination complaint, marital status, national origin or
ancestry (“nondiscrimination factors”).
The Developer will take affirmative action to ensure that applicants are
employed, and that employees are treated without regard to the
nondiscrimination factors during employment including, but not limited to,
activities of: upgrading, demotion, or transfer; recruitment or recruitment
advertising, layoff or termination; rates of pay or other forms of
compensation; and selection for training, including apprenticeship. The
Developer agrees to post in conspicuous places, available to employees and
applicants for employment, the applicable nondiscrimination clause set forth
herein;

 

(2)       It will, ensure that its solicitations or
advertisements for employment are in compliance with the aforementioned
nondiscrimination factors; and

 

(3)       It will cause the foregoing provisions to
be inserted in all contracts for the construction of the improvements entered
into after the effective date of this Agreement; provided, however, that the
foregoing provisions shall not apply to contracts or subcontracts for standard
commercial supplies or raw materials.

 

§318.2           Employment and Contracting
Procedures

 

It is the intent
of the Redevelopment Plan to preserve the area’s existing employment base and
revitalize the local commercial economy. Accordingly, residents of the Project
Area shall be provided reasonable preferences in any new employment created as
a result of the redevelopment work generated through Agency assistance. Also,
to the greatest extent feasible, contracts for work to be performed in
connection therewith shall be awarded to business concerns that are located in
or owned in substantial part by persons residing in the Project Area.

 

The Developer and
the Agency acknowledge and agree that it is the policy of the Agency to promote
and ensure economic advancement of minorities and women as well as other
economically disadvantaged persons through employment and in the award of
contracts and subcontracts for construction in redevelopment project areas.
Subject to the foregoing, the Developer shall employ or select employees,
contractors and subcontractors possessing the necessary skill, expertise, experience,
cost level and efficiency for the development of the Project.

 

§318.2.1        Utilization of Minority and Women
Businesses (M/WBE)

 

(a)        The Agency’s goal is that contracts and
subcontracts awarded by developers and their prime contractors be awarded to MBE
firms in a dollar amount that is equal to twenty percent (20%), and WBE firms
in a dollar amount equal to five percent

 

34

 

(5%) of the [Illegible]
of all contracts to be awarded in connection with any Agency redevelopment
project.

 

(b)       The Developer shall use commercially
reasonable efforts to seek out and award contracts and advocate the seeking out
and awarding of contracts and subcontracts for the development of the Project
to contracting firms that are located or owned in substantial part by persons
residing in the Project Area and to those firms representative of minorities
and women. This requirement applies to both the construction and operations
phases of the Project.

 

§318.2.2        Utilization of Project Area Residents

 

Developer shall
comply with the provisions of the “First
Source Hiring Plan” included in the Community Benefits Package, in
connection with the development, construction and initial opening of the
Project. Such agreement provides, among other things, that the Developer shall
in all general contracts for the development of the Project (and its
contractors shall in all subcontracts thereunder), require that to the greatest
extent feasible, the labor force in all categories be comprised of residents
within the Project Area. The Developer and its contractors shall also, to the
greatest extent feasible, require that such labor force be diversified and
therefore, proportionately representative of the minorities and women residing
in the in the Project Area. This paragraph shall require the commercially
reasonable efforts of Developer and its contractors but shall not require the
hiring of any person unless such person has the experience and ability, and
where necessary, the appropriate trade union affiliation, to qualify such
person for the job. The Developer and its contractors shall make commercially
reasonable efforts to include within its employ, directly or indirectly,
twenty-five percent (25%) of the aggregate number of construction hires from
Project Area residents.

 

§318.2.3        One Stop Employment Center

 

The Developer
acknowledges that the Project will generate construction and permanent jobs
on-site as well as permanent jobs from the development of new and expanding
business opportunities in the immediately surrounding area. The Developer
agrees to cooperate in increasing the access of the community to these job
opportunities by providing for a “One Stop
Employment Center” in accordance with paragraph (3) of § 103.1
hereof. As needed to comply with Agency, City, or HUD requirements, the
Developer shall earlier provide an equivalent temporary facility on the Site.
In conjunction with the City’s Community Development Department (“CDD”) or other agreed vendor of such
services, the Developer will make a good faith commercially reasonable effort
to coordinate with the City’s existing job outreach and training delivery
system to provide job opportunities created by the Project to the participants
in CDD’s employment programs. The Developer agrees to reasonably cooperate with
CDD and trade unions in recruiting the work force for the Project from target
poverty census tracts City-wide and from census tracts within a three-mile
radius of the Site. To assist the Developer in its outreach efforts, the Agency
or CDD will provide the Developer with the zip codes comprising the target
poverty census tracts.

 

During the
management and operation of the Project, the Developer shall make a continuing
reasonable commitment to ensure the participation of its management and vendors
in utilizing CDD’s job training programs to provide employment opportunities at
all levels to qualified persons from target poverty census tracts City-wide and
those census tracts within a three-mile radius of the Site. The Developer shall
also, through its

 

35

 

leases, encourage its
[Illegible] to take advantage of local talent [Illegible]  local businesses and to utilize the
One-Stop Employment Center for the tenants’ hiring needs.

 

The Developer
agrees to monitor the participation of its contractor, subcontractors and
vendors in CDD’s outreach and job training program. The Developer will report
to the Agency on its performance in meeting its job training and outreach goals
in a format and at such times as mutually and reasonably agreed to by the
Agency and the Developer. The Agency and the Developer shall cooperate in
developing forms reasonably acceptable to the Agency and the Developer for
reporting such information to the Agency by zip codes.

 

§318.2.4        Information and Documentation.

 

(a)       During the construction and operation of
the improvements on the Site, Developer shall provide to the Agency all reports
required pursuant to this Agreement and such information and documentation as
reasonably requested by the Agency.

 

(b)       The Developer shall monitor and enforce,
or shall cause its general contractor to monitor and enforce, the affirmative
action and equal opportunity requirements imposed by this Agreement. In the
event Developer fails to monitor of enforce these requirement, the Agency may,
after notice from the Agency and an opportunity to cure such failure as set
forth in Section 1001 of this Agreement, declare Developer in default of
this Agreement and pursue any of the remedies available under this Agreement.

 

(c)       As requested, the Agency shall provide
such technical assistance necessary to implement this § 318.2.

 

§318.3           Prevailing Wages

 

The Developer
shall pay or cause to be paid to all workers employed in connection with the
construction of the Project (excluding demolition of existing improvements and
construction of tenant improvements), not less than the prevailing rates of
wages, as provided in the statutes applicable to Agency public work contracts,
including without limitation Sections 33423-33426 of the California Health and
Safety Code and Sections 1770-1880 of the California Labor Code, in accordance
with the Agency’s “Policy on Payment of Prevailing Wages By Private
Redevelopers or Developers” dated February 1986. In addition to any
restitution required by the Agency’s Policy and/or applicable law, the
Developer or any owner determined by the Agency to have violated any provision
of the Agency’s Policy, shall forthwith pay the following as a penalty to the
Agency:

 

(1)       Payment of less than prevailing wages:
$50 per calendar day, or portion thereof, for each worker paid less than
prevailing wages.

 

(2)       Failure to provide all reasonably
requested records and/or provide access to job site or worker: $500 per day, or
portion thereof.

 

(3)       If the construction work covered under
this Agreement is financed in whole or in part with assistance provided under a
program of the U.S. Department of Housing and Urban Development or some other
source of Federal funding, Developer shall comply with or cause its contractor
and all subcontractors to comply with the requirements of the Davis-Bacon Act
(40 U.S.C. 276 et seq.) To the extent applicable to the Project, the
Davis-Bacon Act requires the payment of wages to all laborers and

 

36

 

mechanics at a rate
[Illegible] than the minimum wage specified the Secretary of Labor in the
periodic wage rate determinations as described in the Federal Labor Standards
Provisions (HUD-4010) available from the Agency’s Compliance Division. The
Agency represents and warrants that Agency policies as of the Date of Agreement
do not require the use of the HUD Loan proceeds or any other federal funds for
construction of improvements.

 

(4)       Prior to the commencement of grading work
in connection with the construction of the improvements on the Site, and as
soon as practicable in accordance with the Schedule of Performance, the
Developer shall contact the Agency to schedule a pre-construction orientation
meeting with the Developer and with the General Contractor to explain such
matters as the specific rates of wages to be paid to workers in connection with
the development of the Project, pre-construction conference requirements,
record keeping and reporting requirements necessary for the evaluation of the
Developer’s compliance with this § 318.3.

 

(5)       The Developer shall monitor and enforce
the prevailing wage requirements imposed on its contractors and subcontractors,
including withholding payments to those contractors or subcontractors who
violate these requirements. In the event that the Developer fails to monitor or
enforce these requirements against any contractor or subcontractor, the
Developer shall be liable for the full amount of any underpayment of wages,
plus costs and reasonable attorneys’ fees, as if the Developer was the actual
employer, and the Agency may withhold monies owed to the Developer, may impose
penalties on the Developer in the amounts specified herein, may take action
directly against the contractor or subcontractor as permitted by law, and/or
may declare the Developer in default of this Agreement and pursue any of the
remedies available under this Agreement.

 

(6)       Any contractor or subcontractor who is at
the time of bidding debarred by the Labor Commissioner pursuant to Section 1777.1
of the California Labor Code is ineligible to bid on the construction of any of
the improvements to be constructed on the Site or to receive any contract or
subcontract for work covered under this Agreement. Any contractor or subcontractor
who is at the time of the contract listed in the List of Parties Excluded From
Federal Procurement or Nonprocurement Programs issued by the U.S. General
Services Administration pursuant to Section 3(a) of the Davis-Bacon
Act is ineligible to receive a contract for work covered under this Agreement.

 

(7)       By entering into this Agreement, the
Developer certifies that it is not a person or firm ineligible to be awarded
Government contracts by virtue of Section 3 (a) of the Davis-Bacon
Act or 29 CFR 5.12(a)(l) or to be awarded HUD contracts or participate in
HUD programs pursuant to 24 CFR Part 24. The Developer agrees to include,
or cause to be included, the above provision, to be applicable to contractors
and subcontractors, in each contract and subcontract for work covered under
this Agreement.

 

(8)       Tenant improvements are outside the
requirements of this § 318.3.

 

(9)       For the purposes of assuring compliance
with the provisions of this § 318.3, representatives of the Agency and the City
shall have the reasonable right of access and inspection, without charges or
fees and at normal construction hours, to any construction trailer located on
the Site where relevant records are kept by the Developer or its designee. The
Agency and the City shall indemnify and pay for the defense of the Developer
and hold it harmless from any damage caused and all liability, loss, cost and

 

37

 

expense including,
without limitation, reasonable attorneys’ fees and costs, arising out of this
right of access and inspection.

 

(10)                The Developer
agrees to include, or cause to be included, the requirements of this § 318.3 in
all bid specifications for work covered under this Agreement and to be
applicable to all contractors and subcontractors, in each contract and
subcontract for work covered under this Agreement.

 

§318.4                       Public
Art Policy

 

The Developer
agrees to conform to all of the requirements of the Agency’s “Public Art Policy” as specifically set
forth in Attachment No. 9 attached hereto.

 

§318.5                       Living
Wage

 

The Developer and
the Agency agree that any individuals employed directly by the Developer, the
Agency or any of their respective contractors or subcontractors in the
improvements, shall be paid wages (the “Living
Wage”) during the operations and maintenance of the Project or any
portion thereof, not less than the minimum wages determined in accordance with
the City’s “Living Wage Ordinance” and
in accordance with the “Living Wage Plan” contained
in the Community Benefits Package. Further, the Developer agrees to encourage
tenants and prospective tenants of the Project to pay their employees the
Living Wage by, among other things, (i) including in tenant packages
references to the Living Wage and the Developer’s support thereof, and (ii) providing
an example by implementing the Living Wage Plan as to Developer’s employees.
All other things being equal (including but not limited to economic terms and
financial strength), the Developer shall, in its selection of tenants in the
Project, provide a preference to tenants that are willing to make a commitment
to paying a Living Wage to their employees. The Developer’s obligation to
comply with the City’s Living Wage Ordinance shall apply for the entire time
during which that Ordinance is in effect. The Developer’s obligation to comply
with the remaining obligations in this Section 318.5 shall continue for
the duration of the Continuing Covenants in the Agreement Containing Covenants
Affecting Real Property (Attachment No. 14). The City shall be responsible
for monitoring the Developer’s compliance with the City’s Living Wage Ordinance
and the provisions of this § 318.5.

 

SECTION 319                          RELEASE
OF CONSTRUCTION CONVENANTS (CERTIFICATE OF COMPLETION)

 

Promptly after
Completion of all construction and development required by this Agreement to be
completed by the Developer upon or with respect to each Subarea and upon
written request by the Developer, the Agency shall furnish the Developer with
an executed and acknowledged “Release of
Construction Covenants” in substantially the form appended to this
Agreement as Attachment No. 11 and incorporated herein by this reference;
provided that, the Agency shall not be obligated to issue a Release of
Construction Covenants until the Developer has submitted the Certified Project
Cost Statement required by Section 601 of this Agreement. The Agency may
not withhold the Release of Construction Covenants for a Subarea if the Developer
has Completed the initial tenant improvements for at least ninety percent (90%)
of the restaurant, retail, and office space in that Subarea and the Agency has
determined that the Developer is otherwise entitled to a Release of
Construction Covenants for that Subarea. If the initial

 

38

 

tenant improvements for
at least ninety percent (90%) of the restaurant, retail, and office space in a
Subarea have not been Completed solely due to the fact that the space has not
been fully leased and if the Developer is otherwise fully entitled to a Release
of Construction Covenants for that Subarea, the Agency shall not be required to
issue a Release of Construction Covenants for that Subarea, but the Agency shall
provide a certificate of estoppel setting forth the reason it is withholding
the Release of Construction Covenants and the Agency shall agree, subject to
obtaining appropriate protections of the Agency’s security, to subordinate the
construction covenants for that Subarea to the lien of Developer’s lender. The
Agency shall not unreasonably withhold or delay the Release of Construction
Covenants. The Release of Construction Covenants shall be a conclusive
determination of satisfactory Completion of the construction required by this
Agreement upon or with respect to the Subarea, and a termination of the
construction covenants contained in this Agreement and the construction
covenants of the Agreement Containing Covenants Affecting Real Property as
those covenants apply to that Subarea, and the Release of Construction
Covenants shall so state. Upon issuance of the Release of Construction
Covenants, the Agency shall release any Payment and Performance Bonds for the
improvements covered by that Release of Construction Covenants.

 

The Release of
Construction Covenants shall be in such form as to permit it to be recorded in
the Recorder’s Office of Los Angeles County.

 

If the Agency
refuses or fails to furnish a Release of Construction Covenants after written
request from the Developer, the Agency shall, within thirty (30) days of its
receipt of the written request, provide the Developer with a written statement
of the reasons the Agency refused or failed to furnish the Release of
Construction Covenants. The statement shall also contain the Agency’s opinion
of the action the Developer must take to obtain a Release of Construction
Covenants; provided, however, that the statement need not contain technical
information or instructions.

 

If the reason for
the Agency’s refusal to issue a Release of Construction Covenants is confined
to the Developer’s failure to complete specific punch list items, the Agency
shall issue the Release of Construction Covenants upon the posting of a Payment
and Performance Bond by the Developer, first approved in writing by the Agency
as to form and substance, in favor of the Agency in an amount representing the
fair value of the work not yet completed. The bond shall specify a deadline for
completion of the outstanding items, which shall be the earliest reasonable
date and shall not be more than ninety (90) days after the issuance of the
Release of Construction Covenants.

 

If the Agency
fails to issue either a Release of Construction Covenants or the written
statement describing its reasons for refusing to furnish a Release of
Construction Covenants within thirty (30) days of its receipt of the Developer’s
written request therefor, then the Developer may submit to the Agency by
certified mail a second request. If the Agency fails to issue either a Release
of Construction Covenants or the written statement described in the immediately
preceding paragraph within ten (10) days of its receipt of the second
request from the Developer, then the Developer shall be deemed entitled to such
Release of Construction Covenants; provided that, both the first and second
requests for a Release of Construction Covenants must be accompanied by
evidence of Completion of the improvements and provided further that, the
second request must contain the following statement, in bold print, all
capitals, 14-point type:

 

39

 

NOTICE
IS HEREBY GIVEN THAT FAILURE TO RESPOND TO THIS REQUEST IN WRITING WITHIN 10
BUSINESS DAYS IN THE MANNER REQUIRED BY SECTION 319 OF THE OWNER PARTICIPATION
AGREEMENT SHALL BE DEEMED AN APPROVAL OF THIS REQUEST PURSUANT TO THAT SECTION.

 

The Release of
Construction Covenants shall not constitute evidence of compliance with or
satisfaction of any obligation of the Developer to any holder of a mortgage, or
any insurer of a mortgage securing money loaned to finance the improvements, or
any part thereof, or of the Developer’s performance of any obligation under
this Agreement other than completion of the construction to which the Release
of Construction Covenants pertains. The Release of Construction Covenants is
not a notice of completion as referred to in Section 3093 of the
California Civil Code.

 

ARTICLE 4.  SITE
ASSEMBLY

 

SECTION 401                          DEVELOPER PARCELS

 

§ 401.1          Obtaining Title

 

Within the time
set forth in the Schedule of Performance, the Developer shall acquire all of
JAR No Ho’s right, title and interest in the Developer Parcels from Jar No Ho
pursuant to the JV Agreement.

 

§401.2             Condition of Title

 

The Developer
hereby covenants and agrees that, from the Date of Agreement and continuing at
all times until the Agency issues a Release of Construction Covenants for the
improvements to be constructed on the applicable Subarea, it shall not record
any liens, covenants, restrictions, easements, or leases against the Developer
Parcels or otherwise permit any encumbrances to be recorded against the
Developer Parcels, except for (i) encumbrances approved by the Agency,
which approval shall not be unreasonably withheld; (ii) the covenants,
conditions, restrictions and easements arising out of the provisions of this
Agreement, including but not limited to, dedication for street purposes; and (iii) those
easements and covenants burdening the Developer Parcels and/or the Site arising
from agreements previously entered into between the Developer and third parties
with respect to property abutting the Developer Parcels and/or the Site;
provided however, that such easements and covenants referenced in clause (iii) do
not impede or render the development of the Site pursuant to this Agreement
economically infeasible and are otherwise consistent with the development of
the Site pursuant to this Agreement.

 

§401.3             Retention and
Development

 

The Developer
shall, subject to the conditions for transfer set forth in Section 702,
retain fee title to the Developer Parcels and construct the improvements on the
Developer Parcels, as provided in this Agreement.

 

40

 

§401.4             Relocation
Obligations

 

All right(s) to
possession of all portions of the Developer Parcels necessary for construction
and operation of the Project pursuant to this Agreement shall be cleared by the
Developer at its sole cost and expense. The relocation of any occupants or
businesses, if any, required for construction and operation of the Project,
including provision of relocation assistance and benefits pursuant to
Relocation Laws, shall be the sole financial responsibility of the Developer.
Relocation obligations, if any, which arise from the Developer Parcels and/or this
Agreement shall be administered by the Agency (or its designee, a qualified
relocation consultant chosen by the Agency) in conformity with the Relocation
Laws, with such costs of administration paid by the Developer. The Developer
shall deliver a retainer to the Agency in the sum of THIRTY THOUSAND DOLLARS
($30,000), to be applied to the payment of Agency’s costs. The internal
administrative costs of the Agency shall be charged at the actual and
reasonable cost thereof not to exceed a total amount of FIVE THOUSAND DOLLARS
($5,000). The Agency’s costs for consultants or legal services required for
providing such assistance shall be the actual sums billed to the Agency for
such consulting or legal services pursuant to Board-approved professional
services contracts. All Agency costs in excess of $30,000 shall be paid within
ten (10) days after written request therefor by the Agency. If costs
incurred by the Agency (including internal administrative costs) equal less
than $30,000, the balance shall be refunded to the Developer. Notwithstanding
any other provision in this Agreement, the Developer’s obligation to pay such
Agency costs shall survive the termination of this Agreement.

 

All of the cost
and expenses incurred or to be incurred by Developer to cause the vacating of
the Developer Parcels and/or relocation of all occupants and businesses from
the Developer Parcels for construction and operation of the Project (including,
but not limited to, payments made to displaced persons and businesses, pre- or
post-relocation rental payments, fees and actual expenses of attorneys,
relocation consultants and other experts employed to effect the relocation of
occupants and businesses, etc.) shall be the sole financial responsibility of
the Developer. Any costs arising out of or related in any respect to such
displacement, such as, but without limitation, claims for loss of business
goodwill, payment for furniture, fixtures and equipment, payment for leasehold
bonus value, and any other compensable interest under Relocation Laws shall be
the sole financial responsibility of the Developer.

 

§401.4.1                       Indemnification
for Relocation Claims

 

The Developer
hereby covenants and agrees to indemnify, save, protect, hold harmless, pay for
and defend the Agency, its members, officers, employees, representatives,
agents, and consultants, from and against any and all liabilities, suits,
actions, claims, demands, penalties, damages (including, without limitation,
penalties, fines and monetary sanctions), losses, costs, or expenses, including,
without limitation, reasonable consultants’ and reasonable attorneys’ fees, or
relocation benefits claimed or payable under the Relocations Laws which may now
or in the future be incurred or suffered by the Agency by reason of, or
resulting from, in full or in part, or in any respect whatsoever from the
displacement of businesses or other occupants of the Developer Parcels pursuant
to this Agreement. This indemnification shall survive the termination of this
Agreement.

 

The Developer, on
behalf of itself and any and all successors and assigns, hereby fully and
finally releases the Agency, the City, and their respective past and present

 

41

 

elective and appointed
boards, commissions, officials, employees, representatives and agents from any
and all manner of actions, causes of actions, suits, obligations, liabilities,
judgments, executions, debts, claims, and demands of every kind and nature
whatsoever, known and unknown, which the Developer or any of its successors or
assigns may now have or hereafter obtain against the Agency or the City or
their respective past and present elective and appointive boards, commissions,
officials, employees, representatives and agents by reason of, arising out of,
relating to, or resulting from, in full or in part, or in any respect
whatsoever from the displacement of businesses or other occupants of the
Developer Parcels pursuant to this Agreement. The parties agree that, with
respect to the release of claims as set forth above, all rights under Section 1542
of the California Civil Code and any similar law of any state or territory of
the United States are expressly waived. Section 1542 reads as follows:

 

	
   

  	
  Civil
  Code Section 1542. Certain claims not affected by general releases. A
  general release does not extend to claims which the creditor does not know or
  suspect to exist in his favor at the time of executing the release which if
  known by him must have materially effected his settlement with the debtor.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Developer’s Initials

  	
   

  

 

SECTION 402                          AGENCY
ACQUISITION OF PROPERTY

 

It is the intent
of the Parties that the Agency’s acquisition of the Site (to the extent not
first acquired by the Developer) pursuant to this Agreement shall be funded by
a combination of available public funds (referred to herein as “Acquisition Funds”) and a Letter of Credit
(as defined in Section 402.6.2) provided by the Developer. As set forth
more fully in § 402.6, the Letter of Credit shall be in an amount that, when
added to the available Acquisition Funds, equals the total amount of the
Developer Advance (which is defined in Article 2 of this Agreement and
which includes Acquisition Costs and the Agency’s costs of complying with
Relocation Laws). It is also the intent of the Parties that the Agency, to the
extent feasible, shall acquire property by first drawing upon the available
Acquisition Funds before making draws upon the Developer Letter of Credit, and
in its use of Acquisition Funds, by first drawing upon the Agency bond funds
described in Section 402.1.2 and the CDBG Funds described in Section 402.1.3,
before drawing upon the HUD Loan; provided that, the Parties acknowledge and
agree that parcels will be acquired as they become available.

 

§402.1                       Acquisition
Funds

 

§402.1.1                       HUD Loan

 

(a) It is
anticipated that a loan from the United States Department of Housing and Urban
Development (“HUD”) in the
approximate amount of fourteen million dollars ($14,000,000) may be available,
through the City’s Community Development Department, to partially fund the
acquisition of the Site (“HUD Loan”).

 

(b) The
Agency shall make every reasonable effort to enter into a loan agreement with
the City for the HUD Loan by the date provided in the Schedule of Performance
on

 

42

 

terms reasonably
acceptable to the Agency. It is understood and agreed that the Agency will draw
down only that portion of the HUD Loan proceeds that is needed, when added to
other available Acquisition Funds, to acquire the Acquisition Parcels. The
Agency and the Developer acknowledge and agree that the obtaining of the HUD
Loan is subject to the final approval of HUD.

 

(c) The
Developer acknowledges and agrees that the Agency’s use of the proceeds of the
HUD Loan as Acquisition Funds will cause the development of the Project to be
subject to certain HUD requirements (“HUD
Requirements”). The Developer agrees that it shall fully comply with
those HUD Requirements in its development and operation of the Project.

 

(d) If the
Agency is unable to obtain the HUD Loan by the date provided in the Schedule of
Performance, then the Agency and the Developer shall use every reasonable
effort to identify and obtain other replacement funding for the HUD Loan on or
before the date set forth in the Schedule of Performance for the Developer to
deliver the Original Letter of Credit to the Agency, as such time may be
extended in accordance with the requirements of this Agreement.

 

(e) If the
Agency is unable to obtain the HUD Loan by the date provided in the Schedule of
Performance and the Agency is unable to obtain replacement funding for both the
HUD Loan and the EDI Grant described in Section 604.2, then the Developer
shall have the right to terminate this Agreement.

 

(f) In the
event the HUD Loan is obtained by the Agency, in consideration of the
conveyance of the Agency Parcels and the Acquisition Parcels from the Agency to
the Developer and the performance by the Agency of its obligations under this
Agreement, the Developer covenants and agrees that it shall execute an
assignment and assumption agreement in a form and substance approved by the
Agency’s Administrator and legal counsel, by which the Developer shall
expressly assume and be bound by the duty to perform the Agency’s repayment
obligations under the HUD Loan, except to the extent of the Agency’s HUD Loan
Repayment Obligation set forth in the Public-Private Feasibility Agreement
(Attachment No. 8). The Developer shall execute such assignment and
assumption agreement within thirty (30) days of receipt by Developer of written
notice from the Agency that the City has approved the agreement between the
City and the Agency for the HUD Loan, provided that the Agency shall have
delivered copies of the HUD Loan documents to the Developer.

 

§402.1.2                       Agency
Bond Funds

 

Subject to all the
terms and conditions of this Agreement, and within the time set forth in the
Schedule of Performance, the Agency shall provide as Acquisition Funds the
amount of FIVE MILLION DOLLARS ($5,000,000) in Agency bond proceeds or other available
funds for acquisition.

 

§402.1.3                       Community
Development Block Grant Funds

 

The Agency shall
use every reasonable effort to obtain a Community Development Block Grant in
the amount of THREE MILLION DOLLARS ($3,000,000) (“CDBG Funds”) to be used by the Agency as Acquisition Funds.

 

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§402.1.4                       Additional
Public Funds

 

If the Agency’s
costs of acquiring the Acquisition Parcels, the LADOT Parcel, and the MTA
Parcel substantially exceed the amount set forth in the acquisition and
relocation budgets prepared pursuant to § 402.5, the Agency shall use its good
faith efforts to identify sources of additional public funds that may be
available to finance the acquisition of those parcels and to reasonably assist
the Developer in obtaining such funds. The Agency’s agreement to provide this
assistance shall in no way be deemed to constitute a pledge of Agency funds or
a monetary obligation of the Agency. Any additional public funds obtained
pursuant to this paragraph shall be included as Acquisition Funds for the
purpose of determining the amount of the Letter of Credit.

 

§ 402.2                    Acquisition
and Relocation Estimates

 

Within the time
provided in the Schedule of Performance, the Agency shall prepare or cause to
be prepared preliminary estimates of the costs associated with acquiring the
Acquisition Parcels (to the extent not first acquired by the Developer), the
LADOT Parcel, and the interests in the MTA Parcel to be acquired pursuant to §
406.1 of this Agreement. Such estimates shall include the Agency’s Acquisition
Costs and the Agency’s cost, if any, of complying with Relocation Laws, and
shall indicate the Acquisition Funds, if any, expected to be allocated to each
Parcel. The Agency shall consult with the Developer in preparing the
preliminary estimates.

 

§ 402.3                    Appraisals
and Appraisal Advance

 

Upon receipt of
the Developer’s request for assistance, pursuant to § 403.1, the Agency shall
prepare or cause to be prepared acquisition appraisals for the Acquisition Parcels
to be acquired by the Agency pursuant to Section 403 of this Agreement (to
the extent not first acquired by the Developer). The Agency’s costs of
obtaining such appraisals shall be included in the Agency’s Acquisition Costs.
The Agency shall provide the person(s) preparing such appraisals with all
Phase I and Phase II Environmental Assessments prepared by the Agency for such
parcels or prepared by the Developer and delivered to the Agency and found to
be reasonably satisfactory for such purposes by the Agency Administrator or
designee.

 

§ 402.4                    Environmental
Due Diligence

 

Within the time
set forth in the Schedule of Performance, the Agency shall, for each
Acquisition Parcel to be acquired by the Agency pursuant to Section 403 of
this Agreement (to the extent not first acquired by the Developer), the LADOT
Parcel, and the MTA Parcel, for which Phase I Environmental Assessments have
not already been ordered by the Agency or provided to the Developer, conduct or
cause to be conducted a Phase I Environmental Assessment by a company
reasonably acceptable to Developer. The Agency’s costs of obtaining such Phase
I Assessments shall be included in the Agency’s Acquisition Costs.

 

§ 402.5                    Acquisition
and Relocation Budgets

 

Within the time
provided in the Schedule of Performance, the Agency shall prepare or cause to
be prepared budgets for the Agency’s acquisition of the Acquisition Parcels to
be acquired by the Agency pursuant to Section 403 of this Agreement (to
the extent not first acquired by the Developer), the LADOT Parcel, and the MTA
Parcel,

 

44

 

which shall include
[Illegible] estimates of Acquisition Costs, the [Illegible], if any, of
complying with Relocation Laws, and available Acquisition Funds. The budgets
shall include a reasonable description or itemization of the costs in each
category. The Agency shall submit the budgets to the Developer for its review.
The Agency Administrator shall determine the amount of the Developer Advance
based upon the budgets.

 

§ 402.6                    Developer
Advance of Costs

 

The Developer
shall advance to the Agency the amount of the Developer Advance less the
available Acquisition Funds as provided in this § 402.6. The Agency shall have
no obligation to repay or reimburse the Developer for any portion of the
Developer Advance except as provided in the “Public-Private
Feasibility Agreement” (Attachment No. 8) and, subject to the
provisions of § 402.8, the Pre-Conveyance Termination Note and the
Pre-Conveyance Termination Deed of Trust.

 

§
402.6.1                    Original
Letter of Credit

 

Subject to the
extension provisions in the last sentence of this paragraph, and provided the
Agreement has not theretofore been terminated pursuant to Section 1003,
within the time set forth in the Schedule of Performance, the Developer shall
deliver to the Agency an irrevocable at-sight, standby letter of credit, first
approved in writing by the Agency as to form, content and issuer, in an amount
determined pursuant to this § 402.6.1, and otherwise complying with the requirements
of this Agreement (the “Original Letter of
Credit”). The Developer may, by written notice delivered to the
Agency within the time originally required for delivery of the Original Letter
of Credit, extend the time for delivery of the Original Letter of Credit by up
to sixty (60) days; but in no event shall the time for delivery to the Agency
of the Original Letter of Credit be later than two hundred and ten (210) days
after the Date of Agreement.

 

The Original Letter of
Credit shall be in an amount equal to the difference between the total amount
of the Developer Advance and the immediately available Acquisition Funds, as
established by the Agency Administrator based on the budgets prepared by the
Agency and reviewed by the Developer pursuant to § 402.5. The Agency shall
consult with the Developer in determining the amount of the Developer Advance
and shall provide written notice to the Developer of the amount of the Original
Letter of Credit no later than thirty (30) days prior to the date the Developer
is required to deliver the Original Letter of Credit to the Agency.

 

§
402.6.2                    Cost
Overruns

 

If the Agency
determines that the amount of the Developer Advance is likely to exceed the
budget amount, or that the Acquisition Funds are not available in the budget
amount used to calculate the amount of the Original Letter of Credit, the
Agency shall consult with the Developer regarding the reasons for the increase
in the Developer Advance and the need for additional letter(s) of credit
and/or amendment(s) to the Original Letter of Credit. Within thirty (30)
days after the Agency provides written notice to the Developer, or earlier if
payment is ordered by a court or referee, the Developer shall deliver to the
Agency additional letter(s) of credit and/or amendment(s) to the
Original Letter of Credit, first approved in writing by the Agency as to form,
content and issuer (each referred to herein as an “Additional Letter of Credit”), in such amounts as are
properly requested by the Agency. The Agency may provide such notice at any
time

 

45

 

and from time to time.
The Original Letter of Credit, together [Illegible] all Additional Letters of
Credit, are referred to collectively herein as the “Letter of Credit.”

 

The Agency shall
have the right to draw on the Letter of Credit from time to time to pay any and
all Acquisition Costs and/or costs associated with complying with Relocation
Laws. The only condition for any draw on the Letter of Credit shall be a
certification by the Agency Administrator or designee that the draw is
permitted under the terms of this Agreement, including without limitation, §
402.7 and § 402.8 hereof. The Developer and the Agency shall consult to attempt
to schedule relocating and business closures to lawfully minimize Acquisition
Costs and costs of complying with Relocation Laws without delaying completion
of the Project. Within fifteen (15) days following each draw on the Letter of
Credit, the Agency shall provide the Developer with a written report showing
the specific nature and amount of each such draw. The Developer shall be
responsible to pay to the issuer of the letter of credit all interest incurred
in respect to each and every draw on the Letter of Credit.

 

The term of the
Original Letter of Credit shall be not less than one (1) year, and such
term shall be subject to extension if Acquisition Costs or costs of complying
with Relocation Laws will or might be incurred following the scheduled
expiration of the Letter of Credit. The Original Letter of Credit and any
Additional Letters of Credit shall contain the “Automatic Renewal Clause”
required by the Agency’s policy governing letters of credit. The Agency shall
be entitled to draw down the full amount of the Letter of Credit in the event
the Developer fails to renew or replace the Letter of Credit not later than 30
days prior to its expiration date. The condition shall be satisfied upon the
delivery of the renewed or new Letter of Credit acceptable to the Agency Deputy
Administrator for Financial Services and Chief Financial Officer or his/her
designee. If the Letter of Credit has expired and the Agency gives written
notice to the Developer that Acquisition Costs will or may be incurred
following such expiration, the Developer shall immediately cause the issuance
of a new letter of credit first approved in writing by the Agency as to form,
content and issuer, in the amount properly requested by the Agency.

 

§ 402.7                    Precondition
to Agency’s Right to Make Draws Under the Letter of Credit

 

Notwithstanding
any provision hereof to the contrary, the Agency shall not draw on the Letter
of Credit unless, prior to or concurrently with such draw, the Agency has, with
respect to those portions of the applicable Subarea that have not been acquired
by the Developer, either (i) adopted, in the sole discretion of the
Agency, a resolution of necessity pursuant to California Code of Civil
Procedure Sections 1245.210 et  seq. authorizing the acquisition
thereof using the Agency’s power of eminent domain; (ii) acquired fee
title; or (iii) entered into a binding and enforceable agreement to
purchase fee title without contingencies on the seller’s obligations other than
the payment of the purchase price, and opened an escrow for purposes of
acquiring title. It is the intent of the Parties, as previously set forth in
this Section 402, that to the extent feasible, the Agency shall not draw
on the Letter of Credit so long as Acquisition Funds remain available.

 

§ 402.8                    Security
for Developer Advance

 

The Agency shall not draw
on the Letter of Credit unless, prior to or concurrently with each such draw,
the Agency’s Administrator has executed and delivered to the Developer on
behalf of the Agency a promissory note in substantially the form appended to
this

 

46

 

Agreement as Attachment No. 12-A
and incorporated herein by this reference (the “Pre-Conveyance Termination Note”), the performance of which
shall be secured by a deed(s) of trust first reasonably approved in
writing by the Agency and the Developer in the form appended to this Agreement
as Attachment No. 12-B (the “Pre-Conveyance
Termination Deed of Trust”) as revised to reflect the reconveyance
provisions of this Section 402.8, which the Agency’s Administrator shall
execute, acknowledge and deliver on behalf of the Agency concurrently with the
Pre-Conveyance Termination Note(s). The Agency shall not encumber any portion
of the Site during the term of this Agreement except in implementing the
provisions of this § 402.8 or as otherwise reasonably agreed by the Developer,
and shall not during such term take any steps to impair the contemplated
security to be provided by the Pre-Conveyance Termination Deed(s) of
Trust. The property subject to the Pre-Conveyance Termination Deed(s) of
Trust shall be any portion of the Acquisition Parcels then owned by the Agency,
and, if and only if the Agency does not obtain the HUD Loan, the Agency
Parcels; provided that the Agency’s Administrator shall execute, acknowledge
and deliver additional Pre-Conveyance Termination Deed(s) of Trust as
subsequent parcels are acquired using the proceeds of the Letter of Credit. The
Pre-Conveyance Termination Deed(s) of Trust shall provide for reconveyance
thereunder of the property subject to the Pre-Conveyance Termination Deed(s) of
Trust that either (a) is conveyed to Developer, or (b) is excluded
from the Site pursuant to Section 102 of this Agreement, or (c) is to
be conveyed to a third party as provided by Section 3(b) of the
Pre-Conveyance Termination Promissory Note, subject to concurrent payment of
Net Sales Proceeds to Developer. The Pre-Conveyance Termination Deed(s) of
Trust shall also provide for reconveyance to the Agency, at no cost to the
Agency, of any Agency Parcels encumbered by such deed(s) of trust if the
Agency terminates this Agreement because of a Developer Event of Default.

 

SECTION 403                          ACQUISITION
PARCELS

 

§ 403.1                    Developer’s
Efforts to Acquire

 

During the 90-day period
immediately following the Date of Approval of this Agreement, the Developer
shall use all commercially reasonable efforts to acquire fee title to the
Acquisition Parcels, or as much thereof as possible, through voluntary
negotiation without any Agency involvement. The Developer shall, prior to the
expiration of that 90-day period, either complete the documentation of the
acquisition or request in writing the Agency’s assistance in acquiring those
portions of the Acquisition Parcels that the Developer was unable to acquire or
execute an agreement to acquire.

 

§ 403.2                    Agency
Acquisition of Acquisition Parcels

 

The Agency may, in
its sole discretion, decide either to limit its attempts to acquire the
Acquisition Parcels to voluntary negotiation with the property owners or to
consider exercising its power of eminent domain. The Agency expressly reserves
the right, and hereby agrees, to substantially comply with all applicable laws
in connection with any exercise or potential exercise of the power of eminent
domain.

 

§ 403.3                    Agency
Offers to Purchase

 

The Agency may, in
its sole discretion, attempt to acquire the Acquisition Parcels or any portion
thereof through voluntary negotiation with the property owner. The Agency
shall, for any portion of the Acquisition Parcels sought to be acquired by the

 

47

 

Agency, cause to be
[Illegible] two independent appraisals by licensed appraisers in private
practice, subject to Agency policy. Based upon such appraisals, the Agency
shall establish an amount that it believes to be just compensation for the
property sought to be acquired, which amount shall not be less than the
property’s appraised fair market value. Prior to establishing the amount of
just compensation for any portion of the Acquisition Parcels, the Agency shall
consult with the Developer regarding such amount. The Agency expressly reserves
to itself the authority to determine the terms of any such offer and to control
the course and timing of the negotiations.

 

§ 403.4                    Eminent
Domain Actions; Orders for Possession

 

(a) The
Agency may, in its sole discretion, decide to consider exercising its power of
eminent domain in the acquisition of the Acquisition Parcels or any portion
thereof. Nothing in this Agreement shall be deemed to obligate the Agency to
pursue the acquisition of the Acquisition Parcels or any portion thereof
through the exercise of eminent domain. If the Agency chooses to exercise its
power of eminent domain in acquiring the Acquisition Parcels or any portion
thereof and such acquisition cannot be completed prior to the date for
conveyance of the property to the Developer as specified in the Schedule of
Performance, the Agency shall use every reasonable effort to obtain an order of
prejudgment possession to allow the Developer to take possession of such
property pursuant to Section 507 of this Agreement.

 

(b) If the
Agency determines in its sole discretion not to adopt a resolution of necessity
pursuant to California Code of Civil Procedure Sections 1245.210 et  seq.
to authorize the acquisition of all or any part of the Acquisition Parcels using
the Agency’s power of eminent domain and such acquisition cannot be completed
through voluntary negotiation prior to the date for conveyance of the property
to the Developer as specified in the Schedule of Performance, then the
Developer and the Agency may agree to exclude such portion of the Acquisition
Parcels from the Site, pursuant to Section 102 of this Agreement.

 

§ 403.5                    Settlement
of Eminent Domain Actions

 

If the Agency
chooses to exercise its power of eminent domain in acquiring the Acquisition
Parcels or any portion thereof, the Agency may continue to negotiate with the
property owner to reach a settlement of the condemnation action. The Agency
shall advise the Developer regarding the terms of such settlement offers, but
the Agency expressly reserves to itself the authority to determine the terms of
any such settlement. If the Agency is successful in negotiating a settlement
that results in a dismissal of the condemnation action, the Developer shall
remain obligated to pay the costs of such condemnation action and the
settlement thereof, in accordance with the terms of this Agreement.

 

SECTION 404                          SUBAREA D PARCELS

 

It is contemplated
by the Parties that the LAUSD will acquire the Subarea D Parcels for
development of a high school. If
the LAUSD decides not to acquire Subarea D or any portion thereof, or acquires
Subarea D or any portion thereof and thereafter decides to dispose of Subarea D
or any portion thereof, Subarea D or the applicable portion thereof shall be
included in the Site and the Agency and the Developer shall use good faith
efforts to agree on Site Modifications for that property pursuant to Section 102(c).
If

 

48

 

the
Agency and the developer agree on those Site Modifications, and subject to
first obtaining the approval of the Agency Board and the City Council in the
manner required by law, the property shall be treated as Acquisition Parcels
for purposes of this Agreement and the Agency shall make every reasonable
effort to acquire expeditiously that property (to the extent not first acquired
by the Developer) for conveyance to the Developer pursuant to this Agreement.

 

SECTION 405                          LADOT PARCEL

 

The Agency shall use every reasonable effort to enter into a
replacement parking agreement with LADOT within the time provided in the
Schedule of Performance, whereby LADOT will convey to the Agency fee title to
the LADOT Parcel in exchange for the Agency providing replacement parking or
making a cash purchase. If the Agency is unable to enter into that agreement
within the time provided in the Schedule of Performance, then the Developer and
the Agency shall use every reasonable effort to agree to Site Modifications
reflecting LADOT’s continued ownership of the LADOT Parcel.

 

SECTION 406                          MTA PROPERTY

 

§ 406.1                    MTA Parcel

 

The Agency shall make every reasonable effort to enter into an
agreement with the MTA within the time provided in the Schedule of Performance,
whereby the MTA will convey to the Agency such easements or interests in the
MTA Parcel as are necessary or convenient to the implementation of this
Agreement and reserving such interests as the MTA requires for operation and
maintenance of the blast relief vent located on the MTA Parcel.

 

§ 406.2                    MTA Right of Way

 

If the LAUSD acquires Subarea D, the Agency shall make every reasonable
effort to enter into an agreement with the MTA and the LAUSD within the time
provided in the Schedule of Performance, whereby the MTA and the LAUSD will
cooperate with the Agency and the Developer to relocate the MTA Right of Way,
in order to facilitate the development of the Project pursuant to this
Agreement. The Developer agrees to reasonably cooperate with the Agency, the
LAUSD, and the MTA in identifying a substitute location for the MTA Right of
Way and acquiring and conveying to the MTA such interests as are reasonably
necessary to accomplish the relocation. If the Agency is enters into such
agreement with the MTA and the LAUSD within the time provided in the Schedule
of Performance, then the Developer shall submit to the Agency for its approval
Site Modifications reflecting the new location of the MTA Right of Way. The
Agency and the Developer agree to use good faith efforts to agree upon any Site
Modifications required pursuant to this § 406.2.

 

49

 

ARTICLE 5.
CONVEYANCE OF AGENCY ACQUIRED PROPERTY

 

SECTION 501                          AGREEMENT TO SELL AND
PURCHASE; REDEVELOPMENT PURPOSE

 

Conditioned upon the Agency’s prior acquisition of title to the
Acquisition Parcels (to the extent not first acquired by the Developer), the
LADOT Parcel, and the MTA Parcel, (and/or upon obtaining orders of prejudgment
possession) and in accordance with, subject to, and conditioned on all the
terms, covenants, and conditions of this Agreement, and in consideration of the
performance by the Developer of all of its obligations under this Agreement in
furtherance of the Redevelopment Plan, the Agency agrees to sell to the
Developer that portion of the Site to which the Agency holds title and the Developer
agrees to purchase that portion of the Site from the Agency, for the
consideration and subject to the terms, conditions and provisions set forth
herein,

 

SECTION 502                          PERMITTED ENCUMBRANCES

 

Within the time specified in the Schedule of Performance, the Agency
and the Developer shall approve the “Permitted
Encumbrances” with respect to each parcel to be conveyed by the
Agency to the Developer pursuant to this Agreement. Such approval shall not be
unreasonably withheld. The Developer agrees not to object to any encumbrance
against title, including without limitation, those easements and covenants
burdening the Site arising from agreements previously entered into between the
Agency and third parties with respect to property abutting the Site (“Prior Agency Encumbrances”), unless such
encumbrance, in Developer’s reasonable judgment, would materially impair the
Developer’s ability to use or finance the property affected thereby for the
purposes set forth in this Agreement. The Agency agrees to use reasonable
efforts to cooperate with the Developer and such third parties so that such
Prior Agency Encumbrances (i) do not materially impede or render the
development of the Site pursuant to this Agreement economically infeasible and (ii) are
otherwise consistent with the development of the Site pursuant to this
Agreement. Notwithstanding the foregoing, the Developer may object to any
monetary lien other than current real property taxes and assessments. If the
Developer objects to a title matter on a parcel to be conveyed by the Agency to
the Developer, the Agency will have twenty-five (25) days either (a) to
remove the objected-to matter or commit in writing to remove it on or before
the closing at which the affected parcel will be conveyed to the Developer, or (b) if
the Agency is unwilling or unable to remove it, to so advise the Developer in
writing. If the Agency advises the Developer that the Agency is unwilling or
unable to remove an objected-to matter, then the Developer shall have
twenty-five (25) days to advise the Agency in writing that the Developer either
withdraws its objection or refuses to do so, in which latter event the
condition precedent regarding the approval of Permitted Encumbrances will have
failed. In that event, the Developer and the Agency may agree to exclude that
parcel from the Site, as provided in Section 102 of this Agreement.
Notwithstanding the above, the Developer hereby approves as a Permitted
Encumbrance (i) any deed of trust, security agreement and fixture filing
(with assignment of rents) previously recorded against any parcel to secure
repayment of the HUD Loan, provided that any such deed of trust, security
agreement and fixture filing (with assignment of rents) is made subordinate to
Developer’s construction financing for development of the Site pursuant hereto
and to Developer’s permanent financing as such shall change from time to time,
as approved by HUD; and (ii) the easements and encumbrances arising out of
the “Declaration of Covenants, Conditions, and Restrictions and Reservation of
Easements for the Academy”

 

50

 

dated
October 16, [Illegible] recorded with the Registrar-Record [Illegible] Los
Angeles County, and the Developer hereby acknowledges its receipt and review of
that document.

 

SECTION 503                          CONSIDERATION

 

§503.1                       Agency Parcels, Acquisition
Parcels, the MTA Parcel, and the LADOT Parcel

 

The Developer’s purchase price for the Agency Parcels, the Acquisition
Parcels, the MTA Parcel, and the LADOT Parcel, or any portion thereof, shall be
calculated at Twenty Five and No/100 Dollars per square foot ($25.00/sf), plus
that portion of the Agency’s costs, consisting of escrow fees, costs of
clearing title and obtaining title insurance, ALTA surveys, geotechnical
studies, and Phase I environmental assessments, in the amount of $1.26 per
square foot (collectively, the “Purchase
Price”). The Developer shall pay the Purchase Price to the Agency at
the times and in the manner and form set forth in the Public-Private
Feasibility Agreement (Attachment No. 8).

 

SECTION 504                          CONVEYANCE ESCROW

 

The Agency agrees to open an escrow in the City of Los Angeles for the
conveyance pursuant to Section 501, of the Agency Parcels, the Acquisition
Parcels (to the extent not first acquired by the Developer), the LADOT Parcel,
and the MTA Parcel with Chicago Title Insurance Company, as escrow agent (“Escrow Agent”),  within the time provided in the Schedule of Performance.

 

Section 102, Section 106, Article 2, Section 402
through Section 406 inclusive, and Section 501 through Section 510
inclusive, of this Agreement constitute the joint escrow instructions of the
Agency and the Developer, and a duplicate original of this Agreement shall be
delivered to the Escrow Agent upon the opening of the escrow. In connection
with each separate closing contemplated hereunder, the Agency and the Developer
shall provide additional escrow instructions consistent with this Agreement, as
needed to carry out the intent of this Agreement. The Escrow Agent is hereby
empowered to act under such instructions, and upon indicating its acceptance
thereof in writing, delivered to the Agency and the Developer within five (5) days
after opening of the escrow, the Escrow Agent shall carry out its duties as
escrow agent hereunder. Any amendment to the escrow instructions shall be in
writing and signed by both the Agency and the Developer. At the time of any
amendment, the Escrow Agent shall agree to carry out its duties as Escrow Agent
under such amendment.

 

As will be more particularly described in the additional escrow
instructions, the Escrow Agent is authorized to:

 

	
  1.

  	
  Pay, and charge the Developer and the Agency for any
  fees, charges and costs payable under this Section 504 of this
  Agreement. Before such payments are made, the Escrow Agent shall notify the
  Agency and the Developer of the fees, charges and costs necessary to clear
  title and close the escrow, which shall be subject to the reasonable approval
  of the Agency and the Developer.

  
	
   

  	
   

  
	
  2.

  	
  Disburse funds and deliver
  the Grant Deed and other documents to the parties entitled thereto when the
  Agency and the Developer have fulfilled the conditions of the escrow with
  respect to any Subarea.

  

 

51

 

	
  3.

  	
  Record any instruments delivered through this escrow
  if necessary or proper to vest title in the Developer in accordance with the
  terms and provisions of the escrow instructions portion of this Agreement (Section 102,
  Section 106, Article 2, Section 402 through Section 406
  inclusive, and Section 501 through Section 510 inclusive).

  

 

All communications from the Escrow Agent to the Agency or the Developer
shall be directed to the addresses and in the manner established in Section 1102
of this Agreement controlling notices, demands, and communications between the
Agency and the Developer.

 

The Developer shall pay in escrow to the Escrow Agent the following
fees, charges and costs promptly after the Escrow Agent has notified the
Developer of the amount of such fees, charges, and costs, but not earlier than
two (2) business days prior to the scheduled date for the close of escrow:

 

	
  1.

  	
  one-half
  of the escrow fee, recording fees, and notary fees;

  
	
   

  	
   

  
	
  2.

  	
  the
  premiums for the title insurance policies as set forth in this Agreement; and

  
	
   

  	
   

  
	
  3.

  	
  any State, County, or City documentary stamps or
  transfer tax.

  

 

Subject to Section 503 providing for inclusion in the Developer’s
Purchase Price of a portion of the Agency’s costs, the Agency shall pay in
escrow to the Escrow Agent the following fees, charges and costs promptly after
the Escrow Agent has notified the Agency of the amount of such fees, charges,
and costs, but not earlier than two (2) business days prior to the
scheduled date for the close of escrow:

 

	
  1.

  	
  Costs
  necessary to place the title in the condition for conveyance required by the
  provisions of this Agreement;

  
	
   

  	
   

  
	
  2.

  	
  one-half
  of the escrow fee, recording fees, and notary fees;

  
	
   

  	
   

  
	
  3.

  	
  ad valorem taxes and assessments, if any, levied,
  assessed or imposed for the period prior to conveyance of title.

  

 

Ad valorem taxes and assessments, if any, on any portion of the Site
conveyed to the Developer by the Agency pursuant to this Agreement, and taxes
upon this Agreement or any rights hereunder, levied, assessed or imposed for
any period commencing after conveyance of title or possession to the Developer,
shall be borne by the Developer.

 

All funds received in this escrow shall be deposited by the Escrow
Agent in a separate interest bearing account acceptable to the Developer and
the Agency with any state or national bank doing business in the State of
California and reasonably approved by the Developer and the Agency, and all
interest accruing on the account shall be payable to the Party which deposited
the funds.

 

If the escrow is not in condition to close on or before the time for
conveyance established in the Schedule of Performance for any Subarea, as such
time may be extended by mutual written agreement of the Parties, either Party
who has fully performed the acts to be performed before the conveyance of title
may, in writing directed to the Escrow Agent, demand the return of its money,
papers, and/or documents. No demand for return shall be recognized until
fifteen (15) days after the Escrow Agent (or the Party making such demand) has
mailed copies of the demand to the other Party or parties at the address of
that Party’s principal place of business. Objections, if any, shall

 

52

 

be
raised by written Notice to the Escrow Agent and to the other Party within the
15-day period, in which event the Escrow Agent is authorized to hold all money,
papers, and documents included in the demand for return until instructed by a
mutual written agreement of the Parties, or upon failure thereof, by a court of
competent jurisdiction. If no objections are made within the 15-day period, the
Escrow Agent shall immediately return the demanded money, papers, or documents,
and provided that the failure of a closing condition with respect to any parcel
is not due to a default by either Party (in which case Article 10 shall
govern), the Parties may agree to exclude such parcel from the Site in
accordance with Section 102(b) hereof.

 

SECTION 505                          CONDITION OF TITLE AND TITLE
INSURANCE

 

The Agency shall convey to the Developer fee title to the Agency
Parcels, the Acquisition Parcels (to the extent not first acquired by the
Developer), the LADOT Parcel, and those easements or interests in the MTA
Parcel acquired by the Agency pursuant to § 406.1, free and clear of all
recorded liens, encumbrances, covenants, restrictions, easements, leases, taxes
and other defects, except (i) the Permitted Encumbrances agreed upon
pursuant to Section 502 hereof; and (ii) the covenants, conditions,
restrictions and easements arising out of the provisions of this Agreement,
including but not limited to, dedication for street purposes.

 

The Agency shall convey to the Developer title to the Agency Parcels,
the Acquisition Parcels (to the extent not first acquired by the Developer),
the LADOT Parcel, and the MTA Parcel in the condition provided in this Section 505
of this Agreement by one or more grant deeds substantially in the form attached
hereto and incorporated herein as Attachment No. 13 (“Grant Deed”).

 

Title to the Agency Parcels, the Acquisition Parcels (to the extent not
first acquired by the Developer), the LADOT Parcel, and the MTA Parcel shall be
conveyed free of any possession or right of possession except that of the
Developer, unless waived by the Developer in writing in its discretion.

 

Subject to any mutually agreed upon extension of time, the Agency shall
deposit with the Escrow Agent at least two (2) business days before the
date established for the conveyance in the Schedule of Performance the Grant
Deed or other instrument conveying to the Developer each of the applicable
Agency Parcels, Acquisition Parcels (to the extent not first acquired by the
Developer) LADOT Parcel, and MTA Parcel.

 

Concurrently with the conveyance of the applicable Agency Parcels,
Acquisition Parcels (to the extent not first acquired by the Developer), LADOT
Parcel, and MTA Parcel to the Developer (or upon the Agency subsequently
obtaining fee title), the Escrow Agent shall cause the filing of the applicable
Grant Deed and Agreement Containing Covenants Affecting Real Property for
recordation among the land records in the Office of the County Recorder of Los
Angeles County.

 

Concurrently with recordation of the Grant Deeds or instruments
conveying possession of the applicable Agency Parcels, Acquisition Parcels (to
the extent not first acquired by the Developer), LADOT Parcel, and MTA Parcel,
and as a precondition to the Developer’s obligation to close escrow, Chicago
Title Insurance Company (“Title Company”)
shall provide and deliver to the Developer a title insurance policy or policies
issued by the Title Company, effective as of the applicable closing date,
insuring that the Developer’s interest in the applicable Agency Parcels,
Acquisition Parcels (to the extent

 

53

 

not
first acquired by the Developer), LADOT Parcel, and MTA Parcel is in the
condition required by Section 505 of this Agreement. The Title Company
shall provide the insurance policies, including any endorsements or extended
coverage required by the Developer, and the title insurance policies shall be
in such amount as the Developer may require, provided that the Developer pays
any cost of such policies, including any endorsements or extended coverage.

 

Concurrently with the issuance of the title policy or policies for the
Agency Parcels, the Acquisition Parcels (to the extent not first acquired by
the Developer), the LADOT Parcel, and the MTA Parcel, and as a precondition to
the Developer’s obligation to close escrow, the Title Company shall provide the
Developer with such further policies, additional endorsements, and extended
coverage as the Developer reasonably requires to insure its title in the
applicable Agency Parcels, Acquisition Parcels (to the extent not first
acquired by the Developer), LADOT Parcel, and MTA Parcel, including but not
limited to an additional title policy or policies to insure the amount of the
Developer’s estimated construction costs of the improvements on the applicable
portion of the Site, provided however that the Developer shall pay the costs of
such additional endorsements and extended coverage.

 

SECTION 506                          CONVEYANCE OF TITLE AND
DELIVERY OF POSSESSION

 

§ 506.1                    Conditions Precedent and
Closing Obligations

 

Subject to any mutually agreed upon extension of time, the Agency’s
obligation to convey to the Developer title to any portion of the Agency
Parcels, the Acquisition Parcels (to the extent not first acquired by the
Developer), the LADOT Parcel, and the MTA Parcel shall be subject to the
satisfaction, on or before the date specified in the Schedule of Performance,
of all conditions precedent to conveyance of those parcels expressly set forth
in this Agreement, including without limitation the following:

 

	
  1.

  	
  The
  Developer shall have submitted and the Agency shall have approved the Developer’s
  Evidence of Financing in accordance with Section 109 of this Agreement.

  
	
   

  	
   

  
	
  2.

  	
  The
  Developer shall have obtained all required land use entitlements and the
  City’s approval of construction and landscaping plans for development of the
  applicable Subarea.

  
	
   

  	
   

  
	
  3.

  	
  If
  applicable, the Developer shall have deposited into escrow a fully executed
  instrument dedicating to the City that portion of the parcel being conveyed
  to the Developer that the City shall require for the construction of the
  public improvements as a condition of approval of any final tract map or
  other entitlement for the applicable Subarea.

  
	
   

  	
   

  
	
  4.

  	
  The
  Developer shall have obtained all City approvals required to secure a grading
  and excavation permit for the development of the applicable Subarea.

  
	
   

  	
   

  
	
  5.

  	
  The
  Developer shall have obtained all approvals from governmental entities having
  jurisdiction over the applicable Subarea, other than the City, if any,
  required in connection with the development of the applicable Subarea.

  
	
   

  	
   

  
	
  6.

  	
  The Developer shall have
  submitted evidence reasonably satisfactory to the Agency demonstrating that
  the Developer has obtained all insurance, with respect to the applicable
  Subarea, required under this Agreement.

  

 

54

 

	
  7.

  	
  The
  Developers representations and warranties set [Illegible] Section 1110
  of this Agreement shall be true and correct in all material respects as of
  the date of conveyance.

  
	
   

  	
   

  
	
  8.

  	
  The
  Developer shall be in substantial compliance with its obligations under this
  Agreement.

  
	
   

  	
   

  
	
  9.

  	
  The
  Developer shall have signed in recordable form, for recordation concurrently
  with the close of escrow an “Agreement
  Containing Covenants Affecting Real Property” reasonably approved
  as to form and content by the Agency’s legal counsel, and in the form of
  Attachment No. 14 hereto, burdening the applicable Subarea with the
  covenants running with the land to be imposed by this Agreement.

  
	
   

  	
   

  
	
  11.

  	
  The
  Developer shall have delivered to the Agency the Original Letter of Credit
  and any subsequently required letter(s) of credit in accordance with §
  402.6 of this Agreement.

  
	
   

  	
   

  
	
  12.

  	
  If
  applicable, the Developer shall have executed and delivered to the Agency a
  reconveyance or partial reconveyance (as applicable) of the Pre-Conveyance
  Termination Deed of Trust with respect to any parcel then being conveyed to
  the Developer, in form and substance reasonably satisfactory to the Agency.
  In addition, the Developer shall have cancelled any Pre-Conveyance
  Termination Note for that parcel and delivered the same to Escrow Agent with
  instructions to release such cancelled Pre-Conveyance Termination Note to the
  Agency upon the closing of the conveyance of that parcel.

  
	
   

  	
   

  
	
  13.

  	
  The
  Developer shall have delivered to the Agency the HUD Letter of Credit or Guaranty
  required by the Public-Private Feasibility Agreement (Attachment No. 8).

  
	
   

  	
   

  
	
  14.

  	
  The
  Developer shall have delivered to the Agency satisfactory evidence that it
  holds or will hold upon the closing, fee title to the Developer Parcels
  contained within the applicable Subarea free and clear of all recorded liens,
  encumbrances, covenants, restrictions, easements, leases, taxes and other
  defects, except (i) encumbrances approved by the Agency, which approval
  shall not be unreasonably withheld; (ii) the covenants, conditions,
  restrictions and easements arising out of the provisions of this Agreement,
  including but not limited to, dedication for street purposes; and
  (iii) those easements and covenants burdening the Developer Parcels
  and/or the Site arising from agreements previously entered into between the
  Developer and third parties with respect to property abutting the Developer
  Parcels and/or the Site; provided however, that such easements and covenants
  referenced in clause (iv) do not impede or render the development of the
  Site pursuant to this Agreement economically infeasible and are otherwise
  consistent with the development of the Site pursuant to this Agreement.

  
	
   

  	
   

  
	
  15.

  	
  The Agency shall not be obligated to close escrow on
  any parcel unless the close of escrow on all parcels within the applicable
  Subarea (except the Developer Parcels) shall occur simultaneously.

  

 

As a precondition
to close of escrow, zoning of the applicable Subarea shall be such as to permit
development of the applicable Subarea and construction of the improvements
thereon in accordance with the provisions of this Agreement and the use,
operation and maintenance of the improvements on the applicable Subarea in
accordance

 

55

 

with the provisions of
this is Agreement. The Agency shall provide all proper assistance to the
Developer in connection therewith, and it shall not take any action to
interfere with the Developer’s attempt to obtain any discretionary or
ministerial permits required for the development of the applicable Subarea
pursuant to this Agreement.

 

§
506.1.1                   Additional
Condition Precedent to Conveyance of Any Portion of Subareas A and B

 

The Agency’s
obligation to convey to the Developer any portion of Subareas A and B shall also
be subject to the Agency having approved the management plan for the
residential units that is required by § 103.1(e) of this Agreement.

 

The Developer
shall have signed in recordable form, for recordation concurrently with the
close of escrow the “Affordability Covenants”
reasonably approved as to form and content by the Agency’s legal counsel, and
in the form of Attachment No. 4 hereto, burdening the applicable property
with the covenants running with the land to be imposed by those covenants.

 

§
506.1.2                   Additional
Condition Precedent to Conveyance of Any Portion of Subareas B and C

 

The Agency’s
obligation to convey to the Developer any portion of Subareas B and C shall
also be subject to the Agency having approved the REA’s required by Article 9
hereof.

 

The foregoing
conditions in this § 506.1 are for the sole benefit of the Agency. If any of
the foregoing conditions is not satisfied for any reason, the Agency shall have
the right, in its sole election, either to waive such condition and proceed to
the close of escrow, or in the alternative, to pursue an agreement with the
Developer to exclude the affected parcels from the Site, in which case the
Parties shall proceed in accordance with Section 102(b) hereof.

 

§ 506.2                    Conditions
Precedent to Developer’s Closing Obligations

 

Subject to any
mutually agreed upon extension of time, the Developer’s obligation to accept
from the Agency title to any portion of the Agency Parcels, the Acquisition
Parcels (to the extent not first acquired by the Developer), the LADOT Parcel,
and the MTA Parcel shall be subject to the satisfaction, on or before the date
specified in the Schedule of Performance, of all conditions precedent to
conveyance of those parcels expressly set forth in this Agreement, including
without limitation the following:

 

	
  1.

  	
  The
  Developer shall have obtained all required land use entitlements and the
  City’s approval of construction plans for the development of the applicable
  Subarea.

  
	
   

  	
   

  
	
  2.

  	
  The
  Developer shall have obtained all City approvals required to secure a grading
  and excavation permit for the applicable Subarea.

  
	
   

  	
   

  
	
  3.

  	
  The
  Developer shall have obtained all approvals from governmental entities having
  jurisdiction over the applicable Subarea, other than the City, if any,
  required in connection with the development of the applicable Subarea.

  
	
   

  	
   

  
	
  4.

  	
  The Agency shall be in
  substantial compliance with its obligations under this Agreement.

  

 

56

 

	
  5.

  	
  The
  Title Company shall be committed to issue a title insurance policy or
  policies insuring fee title of all parcels in the applicable Subarea (except
  the Developer Parcels) in accordance with the requirements and conditions set
  forth in Section 505 hereof.

  
	
   

  	
   

  
	
  6.

  	
  The
  Developer shall not be obligated to close escrow on any parcel unless the
  close of escrow on all parcels within the applicable Subarea (except the
  Developer Parcels) shall occur simultaneously.

  
	
   

  	
   

  
	
  7.

  	
  The Developer shall have satisfied, or will satisfy
  upon the closing, any and all conditions of the financing commitments
  contained in the Developer’s Evidence of Financing for the applicable Subarea
  approved by the Agency in accordance with Section 109 of this Agreement

  

 

As a precondition
to close of escrow, zoning of the applicable Subarea shall be such as to permit
development of the applicable Subarea and construction of the improvements
thereon in accordance with the provisions of this Agreement and the use,
operation and maintenance of the improvements on the applicable Subarea in
accordance with the provisions of this Agreement.

 

The foregoing
conditions in this § 506.2 are for the sole benefit of the Developer. If any of
the foregoing conditions is not satisfied for any reason, the Developer shall
have the right, in its sole election, either to waive such condition and
proceed to the close of escrow, or in the alternative, to pursue an agreement
with the Agency to exclude the affected parcels from the Site, in which case
the Parties shall proceed in accordance with Section 102(b) hereof.

 

SECTION 507                          ORDERS
OF POSSESSION

 

At (or prior to,
if requested by the Developer in accordance with the terms of this Agreement)
the dates for conveyance to the Developer of title to the Acquisition Parcels
(to the extent not first acquired by the Developer), as set forth in the
Schedule of Performance, the Agency may convey and the Developer shall accept
conveyance of any portion of the Acquisition Parcels to which the Agency has
not obtained title, but in which the Agency has a right of exclusive possession
pursuant to an order of prejudgment possession or similar judicial order (“Condemnation Parcel”), if the following
conditions are met:

 

	
  1.

  	
  The
  Agency delivers exclusive possession of the Condemnation Parcel to the
  Developer; and

  
	
   

  	
   

  
	
  2.

  	
  All
  occupants, if any, have been relocated from the Condemnation Parcel as of the
  date of such conveyance; and

  
	
   

  	
   

  
	
  3.

  	
  The
  Title Company is committed to issue a title policy insuring the Developer’s
  interest in the Condemnation Parcel, subject only to exceptions permitted
  pursuant to Section 505 of this Agreement and satisfying all other
  requirements set forth in Section 505 hereof; and

  
	
   

  	
   

  
	
  4.

  	
  The
  Agency is diligently proceeding with all condemnation actions; and

  
	
   

  	
   

  
	
  5.

  	
  The Agency deposits the
  Grant Deed to the Condemnation Parcel in the escrow provided in
  Section 504 of this Agreement, for recordation and delivery to the
  Developer upon the Agency obtaining fee title.

  

 

57

 

If the Agency
[Illegible] possession of the Condemnation [Illegible] as herein provided, the
Developer shall not terminate this Agreement under the provisions of § 1003.2
of this Agreement, but shall accept such right of possession and shall proceed
with the development of the Site in accordance with the Scope of Development.

 

The Agency shall
diligently proceed with all condemnation actions to obtain final judgments in
such matters on or before the date set forth in the Schedule of Performance for
the conveyance of title to the Developer, and take any other action necessary
to perfect the transfer of title to the Developer.

 

All references to
conveyance of title in this Agreement shall, without limitation, also be deemed
to include the conveyance of a Condemnation Parcel permitted hereunder.

 

SECTION 508      SUITABILITY OF THE SITE

 

Prior to the close
of escrow for the conveyance to the Developer of any portion of the Site, the
Developer shall have the right, at its sole cost and expense, to engage its own
environmental consultant (“Developer’s
Environmental Consultant”), to make such investigations as the
Developer deems necessary, including without limitation any “Phase 1” and/or “Phase
2” investigations, soil reports, geotechnical data, and any other information
regarding the physical condition of that portion of the Site, and the Agency
shall promptly be provided a copy of all reports and test results provided by
Developer’s Environmental Consultant (the “Environmental
Reports”), without creating any liability for the Developer or the
preparer of such Environmental Reports. Prior to the date set forth in the
Schedule of Performance, the Agency shall give the Developer copies of all “Phase
1” and/or “Phase 2” investigations, soils reports, geotechnical data, and other
information regarding the physical condition of that portion of the Site, if
any, actually known by the Agency’s Administrator or designee to exist in the
files of the Agency.

 

The Agency
Parcels, the Acquisition Parcels (to the extent not first acquired by the
Developer), LADOT Parcel, and the MTA Parcel shall be delivered from the Agency
to the Developer in an “as is” physical condition, with no warranty, express or
implied by the Agency as to the presence of Hazardous Materials, or the
condition of the soil, its geology or the presence of known or unknown faults.
If the condition of the Site is not in all respects entirely suitable for the
use or uses to which the Site will be put, then it is the sole responsibility
and obligation of the Developer to place the Site in all respects in a
condition entirely suitable for the development thereof at the sole cost, risk
and expense of the Developer, subject to the provisions of § 308.1 hereof.

 

§ 508.1       Zoning
of the Site

 

It shall be the
Developer’s responsibility at its sole cost and expense, to ensure that the
zoning of each Subarea shall be such as to permit the development and use of
that Subarea in accordance with the provisions of this Agreement. The Developer
shall use every commercially reasonable effort to obtain any variances,
conditional use permits or other discretionary or ministerial approvals needed
to implement this Agreement. The Agency shall use reasonable and appropriate
efforts to cooperate with the Developer in seeking any variances, conditional
use permits or other discretionary or ministerial approvals needed to implement
this Agreement, without liability to the Agency. If the Developer reasonably
determines that the approved zoning or entitlement of a Subarea will
substantially impede or render the development of that Subarea pursuant to this

 

58

 

Agreement [Illegible]  infeasible, the Developer may [Illegible]
to the Agency for approval Site Modifications for that Subarea.

 

SECTION 509      REPRESENTATIONS AND WARRANTIES AND
INDEMNIFICATION

 

The Developer
hereby represents and warrants, to its actual knowledge, that the development,
construction and uses of the Site permitted under this Agreement do not require
the presence of any Hazardous Substance on the Site in quantities above what is
considered commercially necessary for the uses contemplated in this Agreement.
By this Agreement, the Developer provides to the Agency, effective upon the
later of (i) the Date of Agreement, or (ii) the date the Developer
acquires title to the applicable parcel, an indemnification of the Agency and
the City and their respective members, officers, employees, agents, contractors
and consultants relating to the environmental condition of the Developer Parcels
and any other parcel conveyed by the Agency to the Developer pursuant to this
Agreement and the presence of Hazardous Materials thereon, as set forth below.
Therefore, except for damage caused by the wrongdoing or gross negligence of
the Agency, its employees, officers or agents, the Developer hereby agrees to
indemnify, defend and hold harmless the Agency and the City and their
respective members, officers, agents, employees, contractors and consultants,
from any claims, actions, suits, legal and administrative proceedings,
liability, injury, deficiency, damages, fines, penalties, punitive damages,
costs and expenses (including, without limitation, the cost of any cleanup,
remediation, removal, mitigation, monitoring or testing of Hazardous Materials,
and reasonable attorneys’ fees) resulting from, arising out of, or based upon (i) the
presence, release, use, generation, discharge, storage or disposal of any
Hazardous Materials on, under, in or about, or the transportation of any
Hazardous Materials to or from, the Developer Parcels and any other parcel
conveyed by the Agency to the Developer pursuant to this Agreement; or (ii) the
violation, or alleged violation, of any statute, ordinance, order, rule,
regulation, permit, judgment or license relating to the use, generation,
release, discharge, storage, disposal or transportation or Hazardous Materials
on, under, in or about, to or from, the Developer Parcels and any other parcel
conveyed by the Agency to the Developer pursuant to this Agreement.

 

From the later of (i) the
Date of Agreement, or (ii) the date the Developer acquires the applicable
parcel, except to the extent caused by the wrongdoing or gross negligence of
the Agency, its members, officers, employees, agents, contractors and
consultants, the Developer hereby waives, releases and discharges the Agency,
the City and their respective members, officers, employees, agents, contractors
and consultants, from any and all present and future claims, demands, suits,
legal and administrative proceedings, and from all liability for damages,
losses, costs, liabilities, fees and expenses (including, without limitation,
attorneys’ fees) arising out of or in any way connected with the Agency’s or
the Developer’s use, maintenance, ownership or operation of the Developer
Parcels and any other parcel conveyed by the Agency to the Developer pursuant
to this Agreement, any Hazardous Materials on the Developer Parcels and any
other parcel conveyed by the Agency to the Developer pursuant to this
Agreement, or the existence of Hazardous Materials contamination in any state
on the Developer Parcels and any other parcel conveyed by the Agency to the
Developer pursuant to this Agreement, however the Hazardous Materials came to
be placed there, except to the extent arising out of the wrongdoing or gross
negligence of the Agency or its employees, officers or agents. The Developer
acknowledges that it is aware of and familiar with the provisions of Section 1542
of the California Civil Code, which provides as follows:

 

59

 

“A general [Illegible]  does not extend to claims which the
[Illegible] does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially affected his
settlement with the debtor.”

 

As such relates to
this Article 5, Developer hereby waives and relinquishes all rights and
benefits that it may have under Section 1542 of the California Civil Code.

 

SECTION 510      PRELIMINARY WORK BY DEVELOPER AND RIGHT OF
ENTRY

 

Commencing upon
the Date of Agreement, representatives of the Developer shall have the right of
access to and entry upon such properties that are owned by the Agency or of
which the Agency has possession, at all reasonable times, for the purposes of
conducting any investigations pursuant to Section 508 hereof and
performing any required clean up and removal of Hazardous Materials, and for
the purposes of making such further surveys and tests as the Developer deems
necessary and/or desirable to carry out this Agreement.

 

In addition, upon
the request of the Developer at any time after the Date of Agreement and in all
negotiated purchase agreements for the acquisition of the Acquisition Parcels,
the LADOT Parcel, and the MTA Parcel, or any portion thereof, the Agency shall
use good faith efforts to require the sellers to permit the Developer to have
the right to enter such properties, and to obtain pre-condemnation orders to
permit the Developer the right to enter where the owner’s consent for entry
cannot be obtained, for the purpose of conducting any tests and inspections in
accordance with this Section 510, at the Developer’s sole cost and
expense. The Agency agrees to assign such entry rights as it acquires pursuant
hereto to the Developer.

 

To the extent provided
by the foregoing, the Developer shall have the right to conduct investigations
on and beneath all portions of the Site and all improvements thereon to
determine the presence of Hazardous Materials. The Developer agrees to pay the
entire costs of such investigations.

 

The Developer
hereby agrees to indemnify, defend and hold harmless the Agency and the City,
and their officers, employees, agents, contractors and consultants, for any and
all claims, liability and damages arising out of any work or activity of the
Developer, its agents, or its employees pursuant to this Section 510,
except to the extent caused by the wrongdoing or gross negligence of the
Agency, its officers, employees, agents, contractors or consultants, and
provide to the Agency such assurances, including proof of insurance, as the
Agency may reasonably require.

 

ARTICLE 6. PROJECT FINANCING

 

SECTION 601      PROJECT COSTS

 

§
601.1      Project Cost Budget

 

As a condition
precedent to the Agency’s obligation to convey any portion of a Subarea, Developer
shall submit and obtain the Agency’s approval of a Project Cost Budget. The
Project Cost Budgets for the Subareas shall reasonably reflect the Project pro
formas used to determine the Agency Obligation set forth in the Public-Private

 

60

 

Feasibility Agreement
Attachment No, 8), and shall state [Illegible] anticipated amount of Project
Costs and shall include a separate dollar amount for each category (1 through
17) in the definition of Project Costs in § 601.2 below and a reasonable
description or itemization of the costs in each category.

 

Except for
Approved Post-Construction Capital Expenditures provided for in § 601.2 below,
a cost or expense that is not included in the Project Cost Budget approved by
the Agency shall not be a Project Cost for purposes of this Agreement unless
the Developer submits evidence reasonably satisfactory to the Agency, at the
earliest practicable date, demonstrating that such cost or expense is
reasonable and necessary for the initial construction of improvements on the
applicable Subarea and was not reasonably foreseeable on the date the Agency
approved the Project Cost Budget for that Subarea.

 

§ 601.2          Definition of Project Costs

 

“Project
Costs” as used herein (for purposes of the Developer’s
Evidence of Financing and calculating the Agency Participation Payment and the
Agency obligation pursuant to Paragraph I.D. of the Public-Private Feasibility
Agreement) means the Developer’s actual costs and expenses of acquiring the Site
(which for any portion of the Site that the Developer acquires from the Agency
is defined as the Purchase Price paid by the Developer for that property) and
the following actual costs and expenses of the development work to be performed
by or on behalf of the Developer for or in connection with the development of
the improvements required or contemplated by this Agreement and plans approved
by the City on or with respect to the Site, to the extent that such costs and
expenses are incurred and paid for by the Developer to third parties or to
Developer’s employees (provided that such charges are not included in the
Developer’s Overhead Fee and do not exceed the amount a third party would
reasonably charge for such services) in connection with the initial construction
and are either included in the Agency-approved Project Cost Budget or approved
in writing by the Agency pursuant to § 601.1 above.

 

1.     Land
development work, including demolition and excavation, asbestos abatement,
soils compaction and remediation, utility relocation and abandonment and
off-site improvements.

 

2.     Construction of the
improvements on the Site and installation of the required fixtures, furniture,
machinery and equipment, and repair of any damage caused and arising during
construction from a casualty not covered by insurance proceeds.

 

3.     Building permits and
entitlement fees not paid for or reimbursed by the Agency.

 

4.     Premiums for casualty, public
liability and property damage and other similar insurance during construction
and on bonds securing work against liens for labor and materials.

 

5.     Real estate taxes and
assessments upon the Site or the improvements during the period of
construction.

 

6.     Interest on construction
loans prior to the issuance by the Agency of the Release of Construction
Covenants.

 

7.     Fees for (i) architects,
engineers, accountants; and (ii) real estate and financial advisors and
attorneys previously identified to the Agency.

 

61

 

8.     Purchasing fees paid to third
parties not affiliated with the Developer in connection with the purchase of
furniture, fixtures and equipment.

 

9.     Development fees or the value
of dedications or other in lieu credits paid to government agencies, including
traffic mitigation costs and fees and other governmental exactions.

 

10.   Charges and premiums for
searching and insuring title.

 

11.   Out-of-pocket costs incurred by
the Developer in connection with construction financing, including, without
limitation, commitment fees, mortgage broker fees, standby fees and fees of a
like nature, printing and duplicating expenses, documentary transfer tax
stamps, mortgage taxes, and recording charges.

 

12.   Customary and reasonable
pre-opening expenses.

 

13.   Costs of required studies,
reports and inspections.

 

14.   Broker’s commissions or finders
fees for land assembly and leasing.

 

15.   The cost of initial tenant
improvements paid for by the Developer to be reimbursed to the Developer in the
form of rental payments, but excluding any such costs to the extent reimbursed
or paid for in any other form by any third party, and the cost of the lease
buy-out of an existing tenant within the Site improvements developed by the
Developer where necessary to obtain the initial occupancy of another tenant
therein.

 

16.   Other customary and reasonable
costs in connection with the initial construction and not otherwise included in
categories 1 through 15 above, provided that such costs are supported by
documentation reasonably acceptable to the Agency.

 

17.   A Developer’s Overhead Fee of
three percent (3 %) of an amount equal to (i) the sum of items 1 through
16 of this § 601.2, plus (ii) other costs not included in the
Agency-approved Project Cost Budget and approved by the Agency pursuant to §
601.1 herein.

 

Prior to the Agency’s
issuance of the Release of Construction Covenants for a Subarea pursuant to
this Agreement, the Developer shall submit to the Agency, for the review and
written approval or disapproval of the Agency’s Administrator, a statement (“Certified Project Cost Statement”) setting
forth the total amount of Project Costs, a separate amount for each category in
the definition of Project Costs in this § 601.2, and a reasonable description
or itemization of the costs incurred in each category, together with a certificate
of an independent certified public accountant reasonably acceptable to the
Agency (“Accountant”). The
Certified Project Cost Statement shall be adjusted as needed to reflect
allowable additional costs incurred and savings realized subsequent to its
submission to the Agency and before the Agency’s issuance of the Release of
Construction Covenants. The Accountant’s certificate shall be addressed to the
Agency, and shall state that the Accountant is familiar with the definition of
Project Costs in this Agreement and shall attest to the accuracy of the
Certified Project Cost Statement, subject to usual and customary
qualifications. The Accountant shall be selected by the Developer, but shall be
one of the following:

 

i)                 Arthur
Andersen & Co., LLP;

 

ii)              Deloitte &
Touche, LLP;

 

62

 

iii)           Ernst &Young,
LLP;

 

iv)          KMPG Peat Marwick, LLP;

 

v)             Price Waterhouse
Coopers, LLP;

 

vi)          Any national accounting
firm, first approved in writing by the Agency, having at the time of delivery
of the Certified Project Cost Statement a reputation and stature in the
accounting community comparable to the foregoing firms as of the Date of
Agreement.

 

The parties
acknowledge that additional significant capital expenditures involving items
included as Project Costs under § 601.2 above, and related tenant improvements
and lease-buyouts as described for initial tenancies under § 601.2 above, may
be made by the Developer after the recordation of the Release of Construction
Covenants, which expenditures are not a normal re-tenanting expense, are not a
maintenance or operational expenditure typical for the normal maintenance or
operation of a development similar to the subject development, and are not made
in connection with the initial tenanting of commercial space within the
improvements developed on the Site, but are instead made in order to materially
augment Gross Revenues. Such expenditures meeting the description of the
immediately preceding sentence (“Proposed
Post-Construction Capital Expenditures”) shall not be included in
Project Costs for any purpose under this Agreement, unless first submitted to
the Agency’s Administrator and approved as a Project Cost (“Approved Post-Construction Capital Expenditures”).
The Agency’s Administrator shall reasonably consider any Proposed
Post-Construction Capital Expenditure submitted for approval or disapproval,
but must take into account whether that approval will have any material adverse
economic impact on the Agency’s economic interests, including without
limitation the Agency Participation Payments.

 

SECTION 602      DEVELOPER’S OBLIGATIONS

 

Except for the
Agency’s agreement to provide financial assistance pursuant to § 402.1 and
except for the obligations of the Public-Private Feasibility Agreement, the
Developer shall be responsible for the payment of all costs associated with the
acquisition of the Site and the construction and operation of the improvements
on the Site pursuant to this Agreement and the plans approved by the City.

 

SECTION 603      AGENCY’S OBLIGATIONS

 

The Developer and
the Agency acknowledge and agree that, due to substantial project costs in the
areas of property acquisition, and relocation, the development of the Site as
contemplated under this Agreement would not be feasible in the absence of the
financial assistance provided for in the Public-Private Feasibility Agreement
(Attachment No. 8), the Developer’s agreement to initially advance such
costs and the Agency’s conditional agreement to reimburse a portion of such
costs.

 

The Agency shall
make the payments required in and shall otherwise comply with the
Public-Private Feasibility Agreement appended to this Agreement as Attachment No. 8
and incorporated herein by this reference.

 

63

 

§ 603.1       Agency
Obligation Limited

 

Without limiting
either Party’s rights or remedies in the event of the other Party’s default,
the Agency shall have no obligation to reimburse the Developer for any costs
paid or amounts advanced by the Developer pursuant to this Agreement except as
specified in the Public-Private Feasibility Agreement, and, subject to the
provisions of § 402.8 of this Agreement, the Pre-Conveyance Termination Note
and the Pre-Conveyance Termination Deed of Trust.

 

SECTION 604      AGENCY ASSISTANCE IN OBTAINING OTHER
FUNDING

 

§
604.1          EDA Grant

 

The Agency and the
Developer shall use every reasonable effort to cause the City to enter into a
cooperation agreement with the Agency whereby the City will provide an Economic
Development Assistance Grant in an amount sufficient to pay the costs of
constructing any off-Site public improvements required by the City as a
condition of Project entitlement and any required off-Site mitigation measures.

 

§
604.2          EDI Grant

 

The Agency shall
use every reasonable effort to obtain an Economic Development Initiative Grant
(“EDI Grant”) from HUD in the approximate amount of ONE MILLION, EIGHT HUNDRED
THOUSAND DOLLARS ($1,800,000), to be used for the payment of a portion of the
interest accruing on the HUD Loan. The Agency and the Developer acknowledge and
agree that the obtaining of the EDI Grant is subject to the final approval of
HUD.

 

SECTION 605         AGENCY PARTICIPATION IN PROJECT

 

§
605.1          Intent

 

It is the intent of the
Parties that the Agency will be repaid for the full amount of financial
assistance for Site acquisition that is provided by the Agency pursuant to §
402.1.2 of this Agreement (the Agency bond funds) and for the full amount of
the Agency Obligation to be paid to the Developer pursuant to the Public-Private
Feasibility Agreement attached hereto as Attachment No. 8, with such
repayment to be made solely through the Developer’s payment of the Agency
Participation Payments as required by this Section 605. In addition, it is
the intent of the Parties that the Agency will be paid the amount by which the
fair market value of the Agency Parcels at the time of conveyance to the
Developer exceeds the Developer’s Purchase Price for those Parcels, with such
payment to be made solely through the Developer’s payment of the Agency
Participation Payments as required by this Section 605. It is also the
intent of the Parties that the Agency and the public will participate in the
financial success of the Project through the Developer’s payment of the Agency
Participation Payments.

 

For purposes of
calculation and payment of the Agency Participation Payment, the following
terms shall have the following respective meanings:

 

64

 

“Project
Element” means, a subset of the improvement to be developed
on the Site pursuant to this Agreement, which has been reasonably, mutually
defined and identified by the Agency and the Developer as a Project Element
based upon Subarea and land use.

 

“Developer’s
Annual Return” means, solely for purposes of determining the
Agency Participation Payment, for each Project Element, an amount equal to
eleven and one-half percent (11.5%) of Adjusted Project Costs (and shall
include Annual Return Shortfalls, if any, without interest thereon).

 

“Adjusted
Project Costs” means, for each Project Element, Project Costs
as approved by the Agency, plus Approved Post-Construction Capital
Expenditures, if any, plus the total of all Annual Return Shortfalls, if any.

 

“Approved
Post-Construction Capital Expenditures” means, for each
Project Element, capital expenditures made by the Developer after the
recordation of the Release of Construction Covenants, if any, approved as a
Project Cost by the Agency pursuant to § 601.1 of this Agreement.

 

“Annual
Return Shortfall” means, for each Project Element, the amount
in any Operating Year by which the calculated amount of the Developer’s Annual
Return exceeds the Net Operating Income.

 

“Agency
Participation Payment” means, for each Project Element in
each Operating Year, an amount equal to twenty percent (20%) of an amount equal
to the Net Operating Income for that Operating Year less the Developer’s Annual
Return.

 

“Net
Operating Income” means, for each Project Element, the Gross
Revenues less a defined “Operating Cost.” The
Operating Cost shall be defined for each Project Element and shall be based on
standards established by the Building Owners and Managers Association (“B.O.M.A. Standards”) for comparable land
uses and elements.

 

“Gross
Revenues” means, for each Project Element, all revenue of any
kind or nature received by the Developer or the Developer’s agents each
Operating Year from the rental, lease, licensing, operation, use or ownership
of the Project Element, and any sale, assignment, or lease of the on- and
off-site signage rights associated with the Project Element; provided, however,
that the proceeds of any sale of signage rights shall be equitably allocated to
reflect an annualized income; and further provided, that pursuant to § 605.3
below, Gross Revenues shall not include any proceeds from the sale or
refinancing of the Project Element. In addition, Gross Revenues shall not
include (i) sales tax, the payment of which is not included in Operating
Costs, (ii) amounts refunded by the Developer to the payor, (iii) amounts
received in reimbursement for utilities, to the extent those utilities are not
included in Operating Costs, (iv) amounts received from sale of fixtures,
equipment, or property that are not stock in trade, and (vi) “bad debt.”
The term “bad debt” shall refer to amounts accrued and payable to the
Developer, but which were not in fact collected or received by the Developer.
The Developer agrees that it will use every commercially reasonable effort
consistent with this Agreement, to maximize the Gross Revenues from each
Project Element.

 

“Operating
Commencement Date” means, for each Project Element, a date
that is twenty four (24) months immediately following the date of issuance by
the City of the final Certificate of Occupancy for the development of the Project
Element.

 

65

 

“Operating [Illegible]” means, for each
Project Element, [Illegible] twelve month period that commences on the
Operating Commencement Date and each anniversary of the Operating Commencement
Date, provided that the Developer may convert Operating Years to calendar
years, provided appropriate and equitable adjustments are made for any partial
year to the reasonable satisfaction of the Agency’s Administrator, and provided
that there is no reduction in the required forty-year term of the Agency
Participation Payments.

 

§  605.2       Form of
Participation

 

As an additional
consideration for the performance by the Agency of its obligations hereunder,
the Developer shall, for each Project Element, pay the “Agency Participation Payment” to the
Agency each “Operating Year” commencing
with the “Operating Commencement Date”. The
obligation of the Developer to make the Agency Participation Payments shall
continue for a period of forty (40) Operating Years after the Operating
Commencement Date, subject to the Buyout provisions provided below, and shall,
during such 40-year term, survive the sale, Transfer or refinance of the Site
or any portion thereof and the improvements on the Site or any portion thereof,
and not be affected or reduced in any way by reason of any such sale, Transfer
or refinance, except as otherwise expressly provided in this Section 605.

 

The Developer
shall pay to the Agency, for each Project Element, the Agency Participation
Payment for each Operating Year within ninety (90) days of the end of such
Operating Year, together with a certified statement submitted for the Agency’s
approval or disapproval documenting in detail the basis for the calculation of
the Agency Participation Payment due to the Agency for that Project Element.
Each Agency Participation Payment shall be made in an amount consistent with
the Agency approved certified statement for the subject Operating Year.

 

§ 605.3       Effect
of Sale or Refinance

 

Upon the sale or
refinance of a Project Element, the Agency Participation Payment shall be
revised as follows:

 

§
605.3.1       Sale

 

(a) The
Developer shall within thirty (30) days of the sale of a Project Element, pay
to the Agency a payment equal to ten percent (10%) of the Net Proceeds of such
sale, with Net Proceeds defined as the amount by which the gross sale proceeds
exceeds the sum of the Developer’s reasonable and customary transaction costs
for the sale and the Adjusted Project Costs for the Project Element.

 

(b) For the
purpose of calculating future Agency Participation Payments for that Project
Element, the Adjusted Project Costs for that Project Element shall be defined
as the gross proceeds of the sale,

 

(c) In the
event the first sale of a Project Element is a bona fide arms-length sale to a
third party in which the Developer has no financial, ownership or other
interest (a “First Sale”), then the First Sale shall result in the payment to
the Agency required by sub-section (a) of this Section 605.3.1, and
shall affect future Agency Participation Payments as described in sub-section (b) of
this Section 605.3.1, but upon any subsequent

 

66

 

sale
of the Project Element no such sub-section (a) payment [Illegible] be made
to the Agency and no such sub-section (b) adjustment to the definition of
Adjusted Project Costs shall be made. All Agency Participation Payments made
following a First Sale shall be made and calculated based upon using the gross
proceeds of such First Sale as the Adjusted Project Costs.

 

§ 605.3.2       Refinance

 

(a) The Developer shall within thirty (30) days of a refinance of
a Project Element that occurs prior to a First Sale of that Project Element,
pay to the Agency a payment equal to ten percent (10%) of the Net Proceeds of
such refinance, with Net Proceeds defined as the amount by which the gross
refinancing proceeds exceeds the sum of the amount of the equity attributable
to the applicable refinanced Project Element and construction or permanent
mortgage debt attributable to the refinanced Project Element that is repaid,
the Developer’s reasonable and customary refinancing costs, and any accrued
Annual Return Shortfalls for that Project Element.

 

(b) For the purpose of calculating future Agency Participation
Payments for that Project Element, the Adjusted Project Costs for the Project
Element shall be increased by the amount of the Net Proceeds of any refinancing
of that Project Element that occurs prior to a First Sale of that Project
Element.

 

§ 605.4       Buyout Provisions

 

“Buyout” means, for each Project Element, the termination of the
Developer’s obligation to continue paying any further Agency Participation
Payments beyond the Effective Date by paying the Buyout Amount to the Agency.

 

For the first ten years following the Operating Commencement Date for a
Project Element, no Buyout shall be permitted for that Project Element.
Commencing with the tenth (10th) anniversary of
the Operating Commencement Date for a Project Element, the Developer may at any
time Buyout the Agency Participation Payments for that Project Element and
terminate any obligation to continue paying any further such Agency
Participation Payment by paying the Buyout Amount for that Project Element to
the Agency within sixty (60) days of the Effective Date, provided Developer
shall have given . Agency written notice of its intent to effect such Buyout,
and shall have identified in such written notice the Effective Date of such
Buyout, and further provided such identified Effective Date shall be a date which
is on or after the date the Agency receives such written notice.

 

Following the tenth anniversary of the Operating Commencement Date for
a Project Element, the “Buyout Amount” means an amount equal to the greater of:

 

(a)                     the amount
obtained by multiplying the amount of Agency Participation Payment for the
twelve month period immediately prior to the Effective Date by ten (10); or

(b)                    the amount of
Six Million Dollars ($6,000,000) increased by a six percent (6%) annual rate
calculated from the Operating Commencement Date for that Project Element to the
Effective Date, pro rated to that Project Element in the same proportion that
the total square footage of the Project Element bears to the total square
footage of the constructed Project.

 

67

 

“Effective Date” means, for each Project Element, the date on which the
Buyout, if any, occurs.

 

ARTICLE 7.
LIMITATION ON TRANSFER AND ENCUMBRANCE

 

SECTION 701         RECOGNITION
OF REDEVELOPMENT PURPOSE

 

The Developer recognizes and acknowledges that;

 

1.                          Development
of the Site is important to the general welfare of the community; and

 

2.                          Substantial
financing and other public aids have been made available by law and by the
government for the purpose of making redevelopment possible; and

 

3.                          The
Developer’s qualifications and identity are of particular concern to the
community and the Agency.

 

Accordingly, the Developer agrees to comply with the provisions of this
Article 7.

 

SECTION 702.        CONDITIONS FOR TRANSFER

 

§ 702.1           Agency Approval: Documentation: Agency’s Cost
to Review

 

For the reasons set forth above in Section 701, the Developer
shall not (except as set forth in § 106.2 hereof), prior to the Agency’s
issuance of the Release of Construction Covenants, assign this Agreement nor
sell the Site or any portion thereof, nor lease (except as provided in § 702.6
hereof) nor make any total or partial conveyance or transfer in any mode or
form of all or any part of the Site or the improvements thereon, or any
interest therein, nor shall there be any change in the identity of the
Developer or change in the ownership of the Developer or in the relative
proportions thereof, or with respect to the identity of the parties in control
of the Developer or the degree thereof, by any method or means (other than such
changes occasioned by the death or incapacity of any individual),
(collectively, “Transfer”),
without the prior written approval of the Agency, which approval shall not be
unreasonably withheld or delayed if the Agency reasonably determines that the
proposed Transferee (as defined herein below) has qualifications equal to or
better than the assignee provided for in § 106.2 hereof, as of the Date of
Agreement in all material respects, including but not limited to (a) financial
strength, (b) experience in the successful development, operation,
management and marketing of restaurant, office, residential, and retail
improvements, as applicable to the Subarea or Project Element that is the
subject of the proposed Transfer, (c) character and reputation, and (d) the
ability to perform all of the applicable agreements, undertakings, and
covenants of this Agreement, the Grant Deed, the Agreement Containing Covenants
Affecting Real Property and all other applicable agreements entered into by the
Developer which relate to the development, management, operation, maintenance,
and restoration of the Site and of the improvements thereon. The Developer
shall promptly notify the Agency of any and all changes whatsoever in the
identity of the parties in ownership or control of the Developer or the degree
thereof, of which it or any of its officers have been notified or otherwise
have knowledge or information. Any entity formation agreements and documents
(or changes therein) related to a Transfer, as well as the agreements and

 

68

 

documents
[Illegible] any Transfer, shall be subject to the [Illegible] of the Agency’s
Administrator in connection with its approval of the Transfer.

 

To assist the Agency in determining whether or not the proposed
Transferee is so qualified, the Developer shall furnish to the Agency at no
expense to the Agency, prior to that Transfer, detailed and complete financial
statements of the proposed Transferee, certified by the Chief Financial Officer
(or his or her equivalent) of the proposed Transferee, together with detailed
and complete information about the business of the proposed Transferee,
including its experience in developing and operating improvements of the type
to be constructed on the Site, the use to be made of the Site and the
improvements thereon by the proposed Transferee, projections by the proposed
Transferee of the sources of funds to be used to pay any indebtedness that the
proposed Transferee will assume or take subject to, or agree to pay, in connection
with the Transfer, and other claims on and requirements for those funds,
together with any other information the Agency may reasonably require to assist
the Agency in determining whether or not the proposed Transferee is so
qualified. To the extent permitted by law, if the Developer or such Transferee
provides the Agency with any proprietary financial information relating to a
proposed Transferee, the Agency shall not, without the Developer’s prior
written consent, disclose or make any such financial information available to
the public.

 

The Developer shall pay all costs of consulting and legal services
incurred by the Agency to review any Transfer proposed by the Developer. The
costs of the Agency for consultants or legal services required for providing
such assistance shall be the actual sums billed to the Agency for such
consulting or legal services. All costs shall be paid within ten (10) days
after written request by the Agency.

 

§ 702.2          Transferee’s
Assumption of Agreement

 

Approval by the Agency of any Transfer shall be conditioned upon such
assignee, conveyee or transferee (collectively “Transferee”)  agreeing,
in writing, to assume the rights and obligations thereby transferred and to
keep and perform all covenants, conditions and provisions of this Agreement,
the Grant Deed and the Agreement Containing Covenants Affecting Real Property
that are applicable to the rights acquired.

 

§ 702.3          Transfers
Null and Void

 

Any purported Transfer shall be null and void unless it complies with
the terms of this Section 702.

 

§ 702.4          Intentionally
Omitted

 

§ 702.5          Security
Interests

 

The limitations on Transfer contained in this Section 702 shall
not be deemed to apply to or prevent, nor shall the Agency’s approval be
required under this Section in connection with, the granting of any
security interest expressly permitted under this Agreement (it being understood
that the granting of such a security interest shall not be considered a
Transfer pursuant to this Section, but shall be governed solely by the provisions
of Section 703 of this Agreement); nor the exercise by any mortgagee of
its right to foreclose its mortgage by power of sale or judicial foreclosure;
nor any Transfer

 

69

 

of
an interest by mortgagee having acquired the Developer’s interest in the Site
as a result of its rights under the mortgage, or by any successor to the
mortgagee whose interest shall have been acquired by, through or under any
mortgage or shall have been derived immediately from any holder thereof.
Notwithstanding the foregoing provisions of this paragraph § 702.5, the
limitations on Transfer contained in this Section shall apply to any
mortgagee that acquires its interest in the Site or the improvements thereon
other than by the exercise of its rights pursuant to the mortgage or deed in
lieu of foreclosure.

 

§ 702.6          Leasing
of Space

 

With respect to the leasing of space for occupancy prior to the Agency’s
issuance of a Release of Construction Covenants for the applicable Subarea, the
Developer shall not be required to submit the documentation otherwise required
for a Transfer by § 702.1, nor obtain the assignment and assumption
agreement otherwise required by § 702.2, nor pay the costs referred to in §
702.1; provided, however, that such lease shall contain appropriate provisions
conforming the use and operation of the premises to this Agreement and the
covenants of the Grant Deed and the Agreement Containing Covenants Affecting
Real Property, and further provided, that the Developer has complied with Section 103.1
of this Agreement.

 

§ 702.7          Sale
or Lease Following the Issuance of Release of Construction Covenants

 

Notwithstanding the foregoing, no Agency approval is required for any
Transfer of all or any part of the Site or the improvements thereon for which
the Developer has obtained, or is entitled to obtain pursuant to Section 319
hereof, a Release of Construction Covenants.

 

SECTION 703         NO
ENCUMBRANCES EXCEPT TO FINANCE DEVELOPMENT

 

§ 703.1          Advance
Notice to Agency; Agency Approval

 

Notwithstanding Section 702, mortgages, deeds of trust, sale and
lease-back financing, or any other form of conveyance required for any
reasonable method of financing are permitted, but only for the purpose of
securing loans of funds to be used only for financing the acquisition of the
Site and the construction of improvements on the Site, and any other
expenditures necessary and appropriate to develop the Site in accordance with
this Agreement, including without limitation the Project Costs. The Developer
shall notify the Agency in advance of any mortgage, deed of trust, or sale and
lease-back financing, if the Developer proposes to enter into the same. The
Agency shall have the right to approve or disapprove any such mortgage or deed
of trust, but the Agency shall not unreasonably withhold or delay its approval
if the Developer submits evidence reasonably satisfactory to the Agency
demonstrating (a) that the mortgage, deed of trust or other security
instrument is consistent with the provisions of this Agreement; and (b) the
mortgage, deed of trust or other security instrument expressly acknowledges
that the rights of any holder or person acquiring title through or following
foreclosure are subordinate and subject to the provisions of the Grant Deed and
the Agreement Containing Covenants Affecting Real Property. The Developer shall
not enter into any mortgage or deed of trust without having first obtained the
Agency’s written approval or a

 

70

 

written
waiver of its right to approve. The words “mortgage”
and “deed of trust” as used herein
include all other modes of financing real estate acquisition, construction, and
land development.

 

§ 703.2          Unapproved
Encumbrances

 

The Developer shall not place or allow to be placed on the Site or any
part thereof or the improvements thereon, any mortgage, deed of trust,
encumbrance or lien other than as expressly authorized by § 401.1 hereof (but
applying to the Developer Parcels and any other parcel acquired by the Developer
pursuant to this Agreement) and this Section 703. The Developer shall
remove or cause to be removed any levy or attachment made on the Site or any
part thereof, or assure the satisfaction thereof within a reasonable time but
in any event prior to a sale thereunder.

 

§ 703.3          Holder
Not Obligated to Construct; Holder’s Right to Cure

 

The holder of any mortgage, deed of trust or other security interest
authorized by this Agreement (the “Mortgagee”)
shall in no way be obligated by the provisions of this Agreement to construct
or complete the construction of improvements, or to guarantee such construction
or completion. Each such holder shall (insofar as the rights of the Agency are
concerned) have the right at its option to cure or remedy or commence to cure or
remedy any Developer default consistent with the terms and conditions of this
Agreement. Nothing contained in this Agreement shall be deemed to permit or
authorize such holder to undertake or continue the construction or completion
of the improvements without first having expressly assumed the Developer’s
obligations to the Agency by written agreement reasonably satisfactory to the
Agency. The holder in that event must agree to complete, in the manner provided
in this Agreement, the improvements to which the lien or title of such holder
relates, and submit evidence reasonably satisfactory to the Agency that it has
the financial responsibility and, itself or through contract with qualified
parties, the qualifications necessary to perform such obligations. Any such
holder properly Completing such improvements shall be entitled, upon request
made to the Agency, to a Release of Construction Covenants from the Agency with
respect to such improvements, in accordance with Section 319 hereof.

 

§ 703.4          Holder’s
Failure to Complete Improvements

 

If the holder of a mortgage, deed of trust, or other security interest
undertakes the construction or completion of the improvements on any portion of
the Site and thereafter fails to achieve Completion of those improvements within
the time specified in the Schedule of Performance, following the expiration of
the applicable cure period pursuant to § 1001.3 hereof, the Agency shall have
all rights and remedies against that holder as may be available at law or in
equity to cure, correct or remedy any default, to obtain specific performance,
to recover damages for any default, or to obtain any other remedy consistent
with the purpose of this Agreement. Such rights and remedies are cumulative,
and except with respect to rights and remedies expressly declared to be
exclusive in this Agreement, the exercise of one or more of such rights or
remedies shall not preclude the exercise, at the same or different times, of
any other rights or remedies for the same default or any other default by the
holder.

 

71

 

§703.5           Agency
Notice of Default; Agency’s Right to [Illegible]

 

The documents executed in connection with any mortgage or deed of trust
encumbering any portion of the Site shall provide that the Agency shall have
the right to receive notices of default by the Developer thereunder and a
reasonable opportunity to cure any such default.

 

ARTICLE 8.
CONTINUING OBLIGATIONS

 

§ 801        USE
OF THE SITE

 

§ 801.1  Uses, Operations, and Maintenance

 

The Developer hereby covenants and agrees on behalf of it and any
successors and assigns in the Site or any portion thereof or any improvements
thereon or any interest therein that the Developer and such successors and
assigns shall:

 

1.                         Develop
and construct improvements on the Site solely in substantial accordance with
the Redevelopment Plan, the Grant Deed, the Agreement Containing Covenants
Affecting Real Property, the terms of this Agreement (including but not limited
to the Scope of Development), and plans approved by the City.

 

2.                         Devote
the Site, or cause the Site to be devoted, to uses solely in accordance with
the Redevelopment Plan, the Grant Deed, the Agreement Containing Covenants
Affecting Real Property, the terms of this Agreement (including but not limited
to the Scope of Development), and plans approved by the City.

 

3.                         Use every
commercially reasonable effort to operate or cause the office, restaurant, and
retail improvements on the Site to be operated and continuously open for
business to the general public in accordance with the standards set forth in
this Agreement, the Grant Deed and the Agreement Containing Covenants Affecting
Real Property.

 

4.                         Install
and curate the public art on the Site according to guidelines provided in, and
to further the goals of, the “Public Art Policy” attached hereto as 9.

 

5.                         Maintain,
repair and operate the Site and all improvements constructed or to be
constructed thereon (including landscaping, public art, lighting and signage),
or cause the Site and all such improvements to be maintained, in a first
quality condition, free of debris, waste and graffiti, and in compliance with
the terms of the Redevelopment Plan, the Agreement Containing Covenants
Affecting Real Property, the City of Los Angeles Municipal Code, and a
Maintenance Program approved by the Agency, which shall provide for the
following:

 

(a)                     All
improvements on the Site shall be maintained in good condition in accordance
with the custom and practice generally applicable to comparable first quality
office, residential, restaurant or retail improvements, as applicable, in Los
Angeles County, and in conformance and compliance with all plans, drawings and
related documents approved by the Agency pursuant to this Agreement, all
conditions of approval of land use entitlements adopted by the City or the
Planning Commission, including painting and cleaning of all exterior surfaces
of all private improvements and of public improvements to the curb line.

 

72

 

(b)                    Landscape
maintenance shall include, without limitation, watering/irrigation;
fertilizing; mowing; edging; trimming of grass; pruning, trimming and shaping
of trees and shrubs to maintain a natural and healthy appearance, road
visibility, and irrigation coverage; replacement, as needed, of all plant
materials; control of weeds in all planters, shrubs, lawns, ground covers, or
other planted areas; and staking for support of trees.

 

(c)                     Clean-up
maintenance shall include, without limitation, maintenance of all sidewalks,
paths and other paved areas in a clean and weed-free condition; maintenance of
all areas clear of dirt, mud, trash, debris or other matter that is unsafe or
unsightly; removal of all trash, litter and other debris from improvements and landscaping;
clearance and cleaning of all areas so maintained before the end of each day on
which maintenance operations are performed to ensure that all cuttings, weeds,
leaves and other debris are properly disposed of by maintenance workers.

 

(d)                    All maintenance
and clean-up procedures shall incorporate water and energy conservation
measures, use of non- or low-VOC products, natural fertilizers, non- or
low-toxic pest control, recycling of green waste and other recyclable waste
consistent with the Waste Reduction and Recycling Program Plan.

 

6.                         Prepare
and implement a Waste Reduction and Recycling Program Plan in substantial
accordance with the terms of this Agreement for the design, demolition and
construction stages of each Phase of the Project and for the management and
operation of all Project occupancies. Facilities shall be provided and
maintained to accommodate the physical requirements for these identified
programs. Implementation shall include continuing education and outreach
programs for all project occupants and employees to reduce the output of solid
waste, including yard waste, through recycling and reduction of waste at the
source.

 

7.                         Provide
for the commissioning of all buildings and building systems during appropriate
Project design stages and upon completion of construction and arrange for
periodic monitoring of the operations of all buildings and systems by the U. S.
Green Building Council or similar organization acceptable to the Agency, in
substantial accordance with the terms of this Agreement. The Developer agrees
to report the rating certification, commissioning and monitoring results to the
Agency and the City.

 

8.                         Prepare
and implement a coordinated Signage Plan, in accordance with the terms of this
Agreement and the Design for Development establishing sign design standards for
all exterior identification, commercial, information and directional signage.

 

9.                         Require
that all mechanical and telecommunications equipment be enclosed within
buildings, concealed from view or incorporated and treated as architectural
features. All equipment shall serve the Project only and shall be removed when
no longer required for service.

 

10.                   If the Agency
gives written notice to the Developer that the maintenance or condition of the
Site or any portion thereof or any improvements thereon does not comply with
this Agreement and such notice describes the deficiencies, the

 

73

 

Developer [Illegible]
correct, remedy or cure the [Illegible] within thirty (30) days following the
submission of such notice, unless the notice accurately states that the
deficiency is an urgent matter relating to public health and safety, in which
case the Developer shall cure the deficiency with all due diligence and shall
complete the cure at the earliest possible time. If the Developer fails to
maintain the Site or any portion thereof or any improvements thereon in
accordance with this Agreement and fails to cure any deficiencies within the
applicable period described above, the Agency shall have, in addition to any
other rights and remedies hereunder, the right to maintain the Site and the
improvements thereon, or portion thereof, or to contract for the correction of
any deficiencies, and the Developer shall be responsible for payment of all
such costs incurred by the Agency.

 

11.                   Pay when due
all real estate taxes and any special taxes or assessments of any bond
financing issued by the Agency or City in connection with the redevelopment of
the Site, assessed and levied on the Site or any portion thereof or any
improvements thereon or any interest therein and refrain from appealing,
challenging or contesting in any manner the validity or amount of any ad
valorem property tax assessment, encumbrance or lien; provided, however, that
the Developer may appeal, challenge or contest (i) the initial assessment
of the assessed value of the Site or Subarea, as applicable, following the
issuance of the Release of Construction Covenants by the Agency, to the extent
that such initial assessment is more than ten percent (10%) higher than the
Project Cost approved by the Agency pursuant to Section 601 of this
Agreement; and (ii) any increase in assessment of the Site improperly
assessed because of a purported change of ownership where no such change took
place; and (iii) any assessment occurring by reason of a bona fide
arms-length sale of the Site or any portion thereof to the extent such
assessment results in an assessment in excess of the purchase price of such
bona fide arms-length sale, provided, however, that no such appeal, challenge
or contest results in an assessment that is lower than that existing prior to
such sale.

 

12.                   Not
discriminate upon the basis of race, color, religion, creed, national origin,
ancestry, disability, medical condition, age, marital status, sex, sexual
preference/orientation, Acquired Immune Deficiency Syndrome (AIDS) acquired or
perceived, or retaliation for having filed a discrimination complaint, in the
sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the
Site, or any improvements erected or to be erected thereon, or any part
thereof.

 

13.                   Refrain from
making any Transfer of all or any portion of the Site, or any improvements
thereon, or any interest therein prior to the issuance of a Release of Construction
Covenants, without the prior written approval of the Agency’s Administrator in
accordance with Section 702 hereof.

 

14.                   Pay when due
the Agency Participation Payment in accordance with Section 605 of this
Agreement.

 

§
801.2          Management Of The Site
And Improvements

 

At all times, the
Developer shall manage or cause to be managed the Site and all improvements
thereon in a prudent and business-like manner as necessary to maintain the Site
and all improvements thereon in a first-class condition. The Developer shall
submit

 

74

 

to the Agency for its
approval, which shall not be [Illegible] withheld, an operation and maintenance
plan for those improvements on the Site that are not subject to a REA approved
by the Agency, which shall include, but not be limited to the items listed in
this §801.2.

 

The Developer
shall assume responsibility for the operation and maintenance (including
repair, restoration and reconstruction) of all of the improvements constructed
on the Site and the costs thereof, and the Agency and the City shall have no
liability for costs of such operation and maintenance by the Developer or for
any claims arising from the operation and maintenance (including repair,
restoration and reconstruction) of such improvements. Without limiting the
generality of the foregoing, the Developer, in the maintenance of the
improvements, shall observe the following standards:

 

1.                         Maintain
the surface of all automobile and pedestrian areas level, smooth and evenly
covered with the type of surfacing materials originally installed thereon or
such substitute thereof as shall be in all respects equal thereto or better in
quality, appearance and durability.

 

2.                         Maintain
such appropriate entrance, exit and directional signs, markers and lights as
shall be reasonably required and in accordance with prevailing practices in the
operation of similar developments.

 

3.                         Clean
lighting Fixtures and relamp and/or reballast as needed.

 

4.                         Repaint
striping, markers, directional signs, etc., as necessary to maintain in
first-class condition.

 

5.                         Provide
appropriate security personnel and implement reasonable security measures. The
Developer shall seek the advice of the police department in planning
appropriate security measures.

 

6.                         Maintain
public right-of-way items between the property and the street in conformance
with City law and policy.

 

7.                         Maintain
all surface and storm lateral drainage systems on the Site.

 

8.                         Maintain
all sanitary sewer lateral connections on or to the Site.

 

SECTION 802         COMPLIANCE WITH FEDERAL, STATE, AND
LOCAL LAW

 

The Developer
shall operate and maintain the Project and all the improvements on the Site in
conformity with all Governmental Requirements, including, without limitation,
all applicable federal and state labor standards.

 

SECTION 803         OBLIGATION TO REFRAIN FROM
DISCRIMINATION

 

§
803.1          No Discrimination or
Segregation

 

The Developer
covenants by and for itself and any successors in interest that there shall be
no discrimination against or segregation of any person or group of persons on
account of race, color, creed, religion, sex, sexual preference/orientation,
age, disability, medical condition, Acquired Immune Deficiency Syndrome (AIDS)
acquired or perceived, retaliation for having filed a discrimination complaint,
marital status, national origin or ancestry, in the sale, lease, sublease,
transfer, use, occupancy, tenure or enjoyment of the Project, nor shall the
Developer itself, or any person claiming under or

 

75

 

through it, [Illegible]
permit any such practice or [Illegible]  of
discrimination or segregation with reference to the selection, location,
number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees
of the Project. The foregoing covenants shall run with the land.

 

§ 803.2          Form of Nondiscrimination and
Nonsegregation Clauses

 

The Developer
shall refrain from restricting the rental, sale or lease of the Site or
improvements thereon, or any portion thereof, on the basis of race, color,
creed, religion, sex, sexual preference/orientation, age, disability, medical
condition, Acquired Immune Deficiency Syndrome (AIDS) acquired or perceived,
retaliation for having filed a discrimination complaint, marital status,
national origin or ancestry of any person. All deeds, leases or contracts for
the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the
Site or improvements thereon, or any portion thereof, shall contain or be
subject to substantially the following nondiscrimination or nonsegregation
clauses:

 

1.                         In deeds:
“The grantee herein covenants by and for itself, its heirs, executors,
administrators, successors, and assigns, and all persons claiming under or
through it, that there shall be no discrimination against or segregation of,
any person or group of persons on account of race, color, creed, religion, sex,
sexual preference/orientation, age, disability, medical condition, Acquired
Immune Deficiency Syndrome (AIDS) acquired or perceived, retaliation for having
filed a discrimination complaint, marital status, national origin or ancestry
in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of
the premises herein conveyed, nor shall the grantee itself or any person
claiming under or through it, establish or permit any such practice or
practices of discrimination or segregation with reference to the selection,
location, number, use or occupancy of tenants, lessees, subtenants, sublessees
or vendees in the land or premises herein conveyed. The foregoing covenants
shall run with the land.”

 

2.                         In
leases: “The lessee herein covenants by and for itself, its heirs, executors,
administrators, successors, and assigns, and all persons claiming under or
through it, and this lease is made and accepted upon and subject to the
following conditions: That there shall be no discrimination against or
segregation of any person or group of persons, on account of race, color,
creed, religion, sex, sexual preference/orientation, age, disability, medical
condition, Acquired Immune Deficiency Syndrome (AIDS) acquired or perceived,
retaliation for having filed a discrimination complaint, marital status,
national origin or ancestry in the leasing, subleasing, transferring, use,
occupancy, tenure or enjoyment of the land or premises herein leased, nor shall
the lessee itself, or any person claiming under or through it, establish or
permit such practice or practices of discrimination or segregation with
reference to the selection, location, number, use or occupancy of tenants,
lessees, sublessees, subtenants or vendees in the land or premises herein
leased.”

 

3.                         In
contracts: “There shall be no discrimination against or segregation of any
person, or group of persons, on account of race, color, creed, religion, sex,
sexual preference/orientation, age, disability, medical condition, Acquired
Immune Deficiency Syndrome (AIDS) acquired or perceived, retaliation for having
filed a discrimination complaint, marital status, national origin or ancestry
in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of
the land or premises, nor shall the transferee itself or any person claiming
under or through it, establish or permit any such practice or practices of
discrimination or segregation

 

76

 

with reference
[Illegible] the selection, location, number, use [Illegible] occupancy of
tenants, lessees, subtenants, sublessees or vendees of the land or premises.”

 

SECTION 804         AGREEMENT
CONTAINING COVENANTS AFFECTING REAL PROPERTY

 

§
804.1          Recordation

 

As a condition
precedent to the recordation of the Grant Deed(s) for each Subarea, the
Developer shall execute and deliver to the Escrow Agent for recording in the
Official Records of Los Angeles County an Agreement Containing Covenants
Affecting Real Property with respect to that Subarea in substantially the form
appended to this Agreement as Attachment No. 14 and incorporated herein by
this reference. Agreements Containing Covenants Affecting Real Property shall
be recorded with reference to the entire Site.

 

§
804.2          Effect Duration, and
Release of Covenants

 

The covenants
established in this Agreement, the Grant Deeds and the Agreements Containing
Covenants Affecting Real Property shall, without regard to technical
classification and designation, be binding on the Developer and any successor
in interest to the Site, or any part thereof, for the benefit and in favor of
the Agency, its successors and assigns, and the City. The covenants against
discrimination shall remain in effect in perpetuity. All covenants contained in
this Agreement and the covenants for the construction of improvements on the
Site contained in the Grant Deeds and the Agreements Containing Covenants
Affecting Real Property shall expire with respect to each Subarea upon the
recording of the Release of Construction Covenants with respect to such Subarea
to be issued by the Agency pursuant to this Agreement. All other covenants
shall remain in effect pursuant to the applicable provisions of the Grant Deed
and the Agreement Containing Covenants unless and until they expire in
accordance with the terms thereof.

 

ARTICLE 9. RECIPROCAL EASEMENT
AGREEMENTS

 

This Agreement is
intended to provide for the development and operation of the Site as a coherent
and unified whole as provided in the Scope of Development. Accordingly, where
appropriate as provided in the Scope of Development, as a condition precedent
to each close of escrow for property to be conveyed by the Agency to the
Developer, the Developer and the Agency shall cooperate in the recordation in
the land records of the County of Los Angeles of Reciprocal Easement Agreements
(“REA’s”) approved by the Agency.
The REA’s shall include, but not be limited to, provisions addressing:

 

(i)       the
use of each Subarea as an integrated development, including public open space
and parking facilities and providing for the common use thereof;

 

(ii)      standards
and procedures conforming to the terms of this Agreement for the repair,
maintenance, alteration and construction of the improvements on each Subarea;

 

(iii)     standards
and procedures conforming to the terms of this Agreement for the operation and
management of the improvements on each Subarea;

 

77

 

(iv)                the [Illegible] of
existing easements and rights [Illegible] way, including but not limited to the
easement benefiting the property commonly known as the Academy Project;

 

(v)                   public
liability and fire and extended coverage insurance for common areas; and

 

(vi)                signage criteria
for each Subarea.

 

The Agency Administrator
or designee shall sign each REA solely to indicate the Agency’s approval of the
REA’s terms and each REA shall provide that its terms shall not be modified
without the Agency’s written consent, which shall not be unreasonably delayed
or withheld.

 

ARTICLE 10. DEFAULTS, REMEDIES, AND
TERMINATION

 

SECTION 1001      DEFAULT

 

§
1001.1       Event of Default

 

The occurrence of
any of the following shall constitute a default under this Agreement (an “Event of Default”):

 

1. Failure by a
Party to perform any material term or provision of this Agreement within the
time specified in said term or provision (as such time may be extended pursuant
to Section 1105 of this Agreement or by mutual written consent of the
Parties) unless such failure is cured within ten (10) business days after
a Default Notice has been given to the defaulting Party by the Party claiming a
default.

 

2. Failure by a
Party to observe or perform any other material term or provision of this
Agreement unless such failure is cured within thirty (30) days after a Default
Notice has been given to the defaulting Party by the Party claiming a default
(as such time may be extended pursuant to Section 1105 of this Agreement
or by mutual written consent of the Parties); provided that if the nature of
such failure is (a) such that the same cannot be reasonably cured within a
thirty (30) day period, and (b) is other than the payment of a sum of
money, a Party shall not be deemed to be in default if it diligently commences
such cure within such period and thereafter diligently proceeds to cure such
failure as soon as reasonably possible but in no event later than one-hundred
and twenty (120) days following delivery of the Default Notice.

 

§ 1001.2       Default Notice

 

As used herein, a “Default Notice” shall mean a written
notice,

 

(i) specifying
the nature of the default;

 

(ii) containing
the following statement, in bold print, all capitals, 14-point type:

 

“NOTICE IS HEREBY GIVEN THAT FAILURE TO CURE THE SPECIFIC
DEFAULT COULD RESULT IN TEH TERMINATION OF THE OWNER PARTICIPATION AGREEMENT
AND/OR THE LOSS OF VALUABLE RIGHTS YOU HAVE UNDER THAT AGREEMENT”;

 

78

 

and,

 

(iii) given in accordance with Section 1102 below.

 

SECTION 1002      RIGHTS
AND REMEDIES

 

Except as otherwise expressly provided in this Agreement, upon the
occurrence of an Event of Default, the injured Party shall have all rights and
remedies against the defaulting Party as may be available at law or in equity
to cure, correct or remedy any default, to obtain specific performance, to
recover damages for any default, or to obtain any other remedy consistent with
the purpose of this Agreement. Such rights and remedies are cumulative, and
except with respect to rights and remedies expressly declared to be exclusive
in this Agreement, the exercise of one or more of such rights or remedies shall
not preclude the exercise, at the same or different times, of any other rights
or remedies for the same default or any other default by the defaulting Party.

 

§ 1002.1       Institution
of Legal Actions

 

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. The cure
periods set forth in Section 1001.1 herein shall not be interpreted to
prevent an injured Party from, at any time following delivery of the Default
Notice, seeking a remedy reasonably determined to be necessary to prevent
further material damage. Legal actions must be instituted in the Superior Court
of the County of Los Angeles, State of California, in any other appropriate court
of that county, or in the United States District Court for the Central District
of California.

 

§ 1002.2       Acceptance
of Service of Process

 

In the event that any legal action is commenced by the Developer
against the Agency, service of process on the Agency shall be made by personal
service upon the Administrator, or in such other manner as may be provided by
law.

 

In the event that any legal action is commenced by the Agency against
the Developer, service of process on the Developer shall be made by personal
service upon the Developer (or upon a member of the Developer) and shall be
valid whether made within or without the State of California, or in such manner
as may be provided by law.

 

§ 1002.3       Right
of Reverter

 

The Developer represents and agrees that the Developer’s undertakings
pursuant to this Agreement are, and will be used for, the purpose of
redevelopment of the Site and not for speculation in landholding. Therefore,
after the Agency’s conveyance of any portion of the Site to the Developer, the Agency
shall have the right, at its option, to reenter and take possession of that
portion of the Site with all improvements thereon, and revest in the Agency the
estate theretofore conveyed to the Developer, if after conveyance of title and
prior to the recordation of the Release of Construction Covenants to be issued
by the Agency, the Developer or its successors or assigns, in breach of this
Agreement as follows:

 

79

 

1.                         Subject
to the provisions of Section 1105 herein below, [Illegible] to proceed
with the construction of the improvements on the Site as required by this
Agreement for a period of ninety (90) days after written notice thereof from
the Agency;

 

2.                         Subject
to the provisions of Section 1105 herein below, abandons or materially
suspends construction of the improvements on the Site for a period of ninety
(90) days after written notice thereof from the Agency;

 

3.                         Assigns
or purports to assign this Agreement (or any rights therein), or sells, Transfers,
conveys, assigns or leases the whole or any part of the Site, or any of the
improvements to be constructed thereon, in violation of this Agreement, which
is not corrected within thirty (30) days of such assignment, sale, Transfer,
conveyance, or lease.

 

Such right to
reenter and repossess shall be subject to and limited by and shall not defeat,
render invalid or limit:

 

1.                         Any bona
fide mortgage, deed of trust or other security instrument, provided that such
mortgage, deed of trust or other security instrument is permitted by this
Agreement; or

 

2.                         Any
rights or interest provided in this Agreement for the protection of the holder
of such bona fide, permitted mortgages, deeds of trust or other security
instruments.

 

Upon the revesting
in the Agency of title to any portion of the Site as provided in this § 1002.3,
the Agency shall, pursuant to its responsibilities under the California
Community Redevelopment Law (Health and Safety Code Sections 33000 et seq.),
use its every reasonable effort to resell the reverting properties as soon as
possible and in such manner as the Agency shall find feasible and consistent
with the objectives of the law and of the Redevelopment Plan, to a qualified
and responsible party or parties (as determined by the Agency), who will assume
the obligation of making or completing the improvements, or such other
improvements in their stead, as shall be reasonably satisfactory to the Agency
and in accordance with the uses specified for the Site in the Redevelopment
Plan. Upon such resale by the Agency of the reverting properties or any portion
thereof, the proceeds thereof shall be applied as follows:

 

1.                         First, to
reimburse the Agency on its own behalf and/or on behalf of the City of Los
Angeles, for all costs and expenses of the Agency incident to such sale and/or
conveyance, for all costs and expenses incurred by the Agency (less any net
income derived by the Agency therefrom in connection with such management); all
taxes, assessments and water and sewer charges with respect thereto; any
payments made, or necessary to be made, to discharge or prevent from attaching
or being made any subsequent encumbrances or liens due to obligations, defaults
or acts of the Developer, its successors or transferees; any expenditures made
or obligations incurred with respect to the making or completion of the
improvements or any part thereof on the reverting properties, or with respect
to the removal of the improvements on the reverting properties and the
restoration of the reverting properties to a level condition; and any amounts
otherwise owing to the Agency by the Developer or its successors or
transferees; and

 

2.                         Second,
to reimburse the Developer, its successors or transferees up to the amount
equal to the sum of (A) the Developer’s acquisition costs allocable to the
reverting properties and (B) Project Costs allocable to the reverting
properties, less (C)

 

80

 

gains or income withdrawn
or made by the Developer [Illegible] successors or assigns therefrom or from
the improvements thereon or as a result of any amounts payable by the Agency
pursuant to this Agreement.

 

3.                         Any
balance remaining after such reimbursements shall be retained by the Agency as
its property.

 

The rights
established in this § 1002.3 are to be interpreted in light of the fact that
the purpose of this Agreement is the redevelopment of the Site and not land
speculation. After a Release of Construction Covenants has been recorded for
any portion of the Site, the Agency will, if requested by the Developer,
quitclaim to the Developer the Agency’s right of reverter for that portion of
the Site.

 

SECTION 1003      TERMINATION BEFORE CONVEYANCE

 

§
1003.1       Termination by Agency on
Developer’s Default

 

In addition to
other remedies set forth in this Agreement, the Agency may terminate this
Agreement at its option with respect to any then-unconveyed Subarea if an Event
of Default occurs, including but not limited to:

 

(i)        The
Developer (or any successor or assign of the Developer) assigns or purports to
assign this Agreement or any right therein or its interest in the Site or any
portion thereof or any improvements thereon, contrary to the provisions of this
Agreement; or

 

(ii)       There
is a change in ownership of the Developer contrary to the provisions of this
Agreement; or

 

(iii)      The
Developer defaults in its obligation to acquire the Developer Parcels, within
the time and as required by § 401.1 herein; or

 

(iv)     The
Developer fails to timely submit the Original Letter of Credit or any
additional Letter of Credit in accordance with all of the requirements of this
Agreement; or

 

(v)      The
Developer fails to timely execute the Agreement Containing Covenants Affecting
Real Property or to permit the recordation thereof or to perform any of its
material obligations thereunder; or

 

(vi)     The
Developer fails to accept a conveyance of any portion of the Site when required
by the provisions of this Agreement, provided that all of Developer’s
conditions set forth in § 506.2 hereof have been either satisfied or waived.

 

§
1003.2       Termination by Developer

 

In addition to other
remedies set forth in this Agreement, the Developer shall have the right to
terminate this Agreement with respect to any then-unconveyed portion of the
Site at its option if:

 

(i)                       (a) the
Agency, in violation of the terms of this Agreement, fails to convey fee title
to the Developer, provided that all of Agency’s conditions set forth in § 506.1
hereof have been either satisfied or waived; and (b) the Developer
delivers a Default Notice pursuant to § 1001.2 above and any pertinent cure
period applicable pursuant to § 1001.3 with respect thereto has expired; or

 

81

 

(ii)                    if, prior to
the [Illegible] Developer is required by this Agreement to deliver to Agency
the Original Letter of Credit, the Developer, after and despite diligent and
good faith efforts, is unable to obtain the Original Letter of Credit by reason
of material changes in the condition of the national financial markets
involving the widespread and general unavailability of capital so as to
materially adversely affect the availability or feasibility of the financing of
the development of the Site pursuant to this Agreement, and such inability to
obtain the Original Letter of Credit by reason of such material changes is
documented in an opinion obtained by the Developer from an economic or
financial expert approved by the Agency, who has established qualifications in
the national real estate and capital markets; or

 

(iii)                 the Agency, prior
to the time the Developer is required by this Agreement to deliver to the
Agency the Original Letter of Credit and the HUD Letter of Credit or Guaranty,
fails to obtain the street widening property acquisition funds and the off-site
improvement funds contemplated by Paragraphs IV and V of the Public-Private
Feasibility Agreement, or

 

(iv)                the Agency, prior
to the date provided in the Schedule of Performance, fails to obtain both the
HUD Loan and the EDI Grant pursuant to Section 402.1.1(d), or substitute
public funds in the event or to the extent such funds are not obtained.

 

§
1003.3       Termination by Agency or
Developer

 

Either the Agency
or the Developer may terminate this Agreement with respect to any
then-unconveyed portion of a Subarea upon thirty (30) days written notice to
the other in the event that all land use entitlements required for the
development of that Subarea pursuant to this Agreement are not finally approved
by the City and all other governmental agencies having jurisdiction thereof,
within the time provided in the Schedule of Performance, as such time may be
extended by mutual consent of the Parties.

 

SECTION 1004      AGENCY’S OPTION TO ACQUIRE

 

In consideration
of the Agency’s covenants and agreements hereunder, the Developer hereby grants
to the Agency an exclusive and irrevocable option to purchase the Developer
Parcels, or any portion thereof, pursuant to the terms of this Section 1004
(“Agency Option”). The Developer
hereby agrees to the recordation against the Developer Parcels in the land
records of the County of Los Angeles, within the time set forth in the Schedule
of Performance, of a memorandum of the Agency Option in the form of the “Memorandum of Agency Option” attached as
Attachment No. 15, incorporated by reference. The provisions of this Section 1004
shall survive the termination of this Agreement.

 

§ 1004.1       Term of Option

 

The Agency may
exercise the Agency Option for the Developer Parcels within a Subarea at any
time prior to midnight of the last day of an eighteen- (18-) month period that
commences upon the earlier of (a) the date of the Agency’s termination of
this Agreement with respect to that Subarea due to the Developer’s default,
pursuant to §

 

82

 

1003.1 hereof or (b) [Illegible]
earliest date that the Agency can exercise its right to reenter and take
possession of any portion of that Subarea pursuant to § 1002.3 hereof (“Option Period”).

 

§
1004.2       Option Price

 

The option
purchase price shall be established as follows. For the Developer Parcels
identified as Assessor’s Parcel No. 2350-013-012 and No. 2350-013-013,
the option purchase price shall be the appraised fair market value at the time
of the Agency’s exercise of its option. For the other Developer Parcels that
have been acquired by the Developer prior to the Date of Approval of this
Agreement, the option purchase price shall be the appraised fair market value
as of the Date of Approval of this Agreement.

 

For the Developer
Parcels that are acquired by the Developer after the Date of Approval of this
Agreement, the option purchase price shall be the lesser of (i) the
Developer’s acquisition costs for the Developer Parcel less rental and other
income derived from that Developer Parcel and (ii) an amount equal to the
appraised fair market value of that Developer Parcel increased by ten percent
(10%); provided that, the Agency may, in its discretion, seek approval from the
Agency Board of Commissioners to increase this ceiling on the option purchase
price.

 

For the purposes
of this § 1004.2, the Developer shall be deemed to have acquired a Developer
Parcel if the Developer either holds fee title to the parcel or has entered
into a binding agreement to purchase the parcel. Appraised fair market value,
for purposes of determining the Agency’s option purchase price, shall be
determined pursuant to Agency policies and procedures. The option purchase
price shall be paid in cash upon closing of escrow.

 

§
1004.3       Form of Title and
Title Insurance

 

Title to the
Developer Parcels shall be conveyed by grant deed. Title shall be free and
clear of all encumbrances and possessory interests except those previously
waived in writing by the Agency. The Developer authorizes the Agency to apply
for a preliminary commitment for title insurance on the Developer’s behalf
immediately upon exercise of the Agency Option. Building or any use
restrictions general to the area and utility easements not inconsistent with
the uses contemplated under this Agreement shall not be deemed encumbrances. If
the Agency Option is exercised, the Agency shall be entitled to possession from
the time of the closing of the sale. The Developer Parcels shall be delivered
from the Developer to the Agency in an “as is” physical condition, with no
warranty, express or implied by the Developer as to the presence of Hazardous
Materials, or the condition of the soil, its geology or the presence of known
or unknown faults, except to the extent of the Developer’s representations made
pursuant to § 308.1 of this Agreement; provided that, the Developer shall, at
the Agency’s request, remove those improvements that the Developer caused to be
constructed upon the Developer Parcels and restore the Developer Parcels to a
level condition.

 

§
1004.4       Exercise of Option

 

The Agency shall
exercise its Agency Option by giving written notice of exercise of the option
on or before the date that is ninety (90) days prior to the expiration of the
Option Period. This notice may be personally delivered to the Developer or
mailed to the Developer by certified mail, return receipt requested, or it may
be recorded in the land records of the County of Los Angeles with a copy mailed
to the Developer. The Agency

 

83

 

shall exercise its Agency
Option with respect to all of the Developer Parcels contained within a
particular Subarea, or it shall have no right to exercise its Agency Option
with respect to any Developer Parcel within that same Subarea. The Developer
hereby agrees that if the Agency fails to exercise the Agency Option in regard
to a particular Developer Parcel, the Developer shall waive any defense or
objection it may have to the Agency’s exercise of its power of eminent domain
with respect to that Developer Parcel.

 

SECTION 1005      ASSIGNMENT OF CONTRACT AND PLANS

 

Any and all
information provided to the Agency pursuant to this Agreement (including but
not limited to architectural plans, engineering studies and environmental
studies), shall become the property of the Agency, without any liability to the
Developer or the preparer of such materials. In the event of the Agency’s
termination of this Agreement with respect to a Subarea because of the
Developer’s default, pursuant to § 1003.1 hereof or if the Agency has the right
to reenter and take possession of any portion of a Subarea pursuant to § 1002.3
hereof, the Agency shall have the right, in its sole discretion, to take
possession of any such information and use such information in connection with
the development of the Site; provided, that such use shall be without liability
to the Developer or its contractors who prepared such materials. To effectuate
the foregoing provision, the Developer agrees to execute and deliver to the
Agency, concurrently with the Developer’s execution of this Agreement, an “Assignment of Contracts and Plans” in the
form of Attachment No. 16, incorporated by reference.

 

ARTICLE 11.   GENERAL PROVISIONS

 

SECTION 1101      NON-MERGER

 

None of the terms,
covenants, agreements or conditions set forth in this Agreement shall be deemed
to be merged with any Grant Deed or Agreement Containing Covenants Affecting
Real Property.

 

SECTION 1102      NOTICES, DEMANDS AND COMMUNICATIONS
BETWEEN THE PARTIES

 

Formal notices,
demands and communications between the Agency and the Developer shall be
sufficiently given if dispatched by registered or certified mail, postage
prepaid, return receipt requested, by facsimile, or by courier not affiliated
with the sender at the cost of the sending Party with written evidence of
receipt, to the principal offices of the Agency and of the Developer as
designated in § 106.1 and § 106.2, respectively. In addition, copies of Default
Notices to the Developer shall be given to the following persons:

 

Clifford P. Goldstein,
Partner 

J. H. Snyder Co.

5757 Wilshire Blvd., Penthouse 30 

Los Angeles, CA. 90036

 

Michael Wise, Partner

J. H. Snyder Co.

5757 Wilshire Blvd., Penthouse 30

Los Angeles, CA. 90036

 

84

 

Peter [Illegible]  

Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro,
LLP 

Eighteenth Floor 

2121 Avenue of the Stars 

Los Angeles, CA. 90067

 

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, as provided in
this Section.

 

SECTION 1103      CONFLICT OF INTEREST

 

To the extent
prohibited by law, no member, official or employee of the Agency shall have any
personal interest, direct or indirect, in this Agreement nor shall any such
member, official or employee participate in any decision relating to the
Agreement which affects his or her personal interests or the interests of any
corporation, partnership or association in which he or she is directly or
indirectly interested.

 

The 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.

 

SECTION 1104      NON-LIABILITY OF CITY AND AGENCY OFFICIALS
AND EMPLOYEES

 

No member,
official or employee of the City or the Agency shall be personally liable to
the Developer, or any successor in interest, in the event of any default or
breach by the Agency or for any amount which may become due to the Developer or
its successor or on any obligations under the terms of this Agreement. The
Developer hereby waives and releases any claim it may have against any member,
official or employee of the Agency or the City with respect to any default or
breach by the Agency (or the City) or for any amount which may become due to
the Developer or its successors, or on any obligations, under the terms of this
Agreement. The Developer makes such release with full knowledge of Civil Code Section 1542
and hereby waives any and all rights thereunder to the extent of this release. Section 1542
of the Civil Code provides as follows:

 

“A general release
does not extend to claims which the creditor does not know or suspect to exist
in his favor at the time of executing the release, which if known by him must
have materially affected his settlement with the debtor.”

 

SECTION 1105      ENFORCED DELAY IN PERFORMANCE; FORCE
MAJEURE

 

For the purposes
of any of the provisions of this Agreement, neither the Agency nor the
Developer, as the case may be, nor any successors in interest, shall be
considered in breach of, or default in, its obligations under this Agreement
(excepting therefrom obligations to pay money) as a result of the enforced
delay in the performance of such obligations due to causes beyond its
reasonable control and without its fault or negligence, including but not
limited to failure of governmental agencies (other than the Agency) to act or
to issue necessary entitlements, permits or licenses, acts of God, acts of the
public enemy, acts of the Federal Government, acts of the other Party
(including but not limited to delays in performing such other Party’s
obligations pursuant to this Agreement), fires, floods, earthquakes, epidemics,
quarantine restrictions, strikes, labor disputes, freight embargoes, inability
to obtain materials or supplies or unusually severe

 

85

 

weather or delays of
contractors or subcontractors due to such [Illegible]; it being the purpose and
intent of this provision that in the event of the occurrence of any such
enforced delay, the time or times for performance of the obligations of the
Agency or the Developer, as the case may be, shall be extended for the period
of the enforced delay. Provided that the Party seeking the benefit of the
provisions of this Section shall promptly notify the other Party in
writing of such enforced delay and of the causes thereof, the extension of time
for performance shall run from ten (10) days prior to the date on which
such notice is given, but in no event earlier than the date of commencement of
the cause. Financial inability alone shall not extend the time for performance,
or excuse non-performance or untimely performance, of any obligation under this
Agreement.

 

SECTION 1106      INSPECTION OF BOOKS

 

The Agency has the
right upon three (3) business days’ notice (excluding weekends and holidays)
at all reasonable times to inspect the books and records of the Developer
pertaining to the Site as pertinent to the purposes of this Agreement. The
books and records referred to in this Section 1106 shall be maintained or
made available in a single location in Los Angeles County.

 

SECTION 1107      APPROVALS

 

Except as
expressly provided otherwise in this Agreement, approvals required of the
Agency or the Developer shall not be unreasonably withheld or delayed. If this
Agreement requires the Developer to submit plans, drawings or other documents
or information to the Agency for approval, which shall be deemed approved if
not acted on by the Agency within the specified time, said plans, drawings or
other documents shall be accompanied by a letter stating that they are being
submitted and will be deemed approved unless disapproved by the Agency within
the stated time. If the Developer fails to include such a letter with its
submission, said plans, drawings or other documents shall not be deemed
approved based on the Agency’s failure to act within the specified time.

 

SECTION 1108      AGENCY’S AUTHORIZED REPRESENTATIVE

 

Unless otherwise
specified or the context requires otherwise, all references to the Agency in
this Agreement and its attachments shall mean the Administrator of the Agency
or any officer or employee of the Agency to whom the Administrator or the Board
of the Agency delegates authority to perform, carry out and/or enforce this
Agreement. Unless otherwise specified or the context requires otherwise, all
references to the Agency Administrator shall mean the Administrator or his or
her designee.

 

SECTION 1109      REAL ESTATE COMMISSIONS; FINDER’S FEES

 

The Agency shall
not be liable for any real estate commission or brokerage or finder’s fees that
may arise from this Agreement. The Developer agrees to indemnify and hold
harmless the Agency from any claim by any broker, agent or finder retained by
the Developer. Each Party represents to the other Party that it has not
incurred any liability for the payment of any real estate commission or
brokerage or finder’s fee in connection with this Agreement and the Developer
agrees that the Developer shall be solely responsible for any cost or expense
in connection with any such commission or fee that arises out of any action
taken by the Developer.

 

86

 

SECTION 1110      DEVELOPER’S REPRESENTATIONS AND WARRANTIES

 

The Developer
hereby represents the following to the Agency for the purpose of inducing the
Agency to enter into this Agreement and to consummate the transactions
contemplated hereby, all of which shall be true as of the Date of Agreement:

 

1.                         The
Developer has the legal power, right and authority to enter into this Agreement
and the instruments and documents referenced herein to which the Developer is a
party, to consummate the transactions contemplated hereby, to take any steps or
actions contemplated hereby, and to perform its obligations hereunder.

 

2.                         All
requisite action has been taken by the Developer and all requisite consents for
Developer have been obtained in connection with entering into this Agreement
and the instruments and documents referenced herein to which the Developer is a
party, and the consummation of the transaction contemplated hereby.

 

3.                         This Agreement
is duly executed by the Developer, and all agreements, instruments and
documents to be executed by the Developer pursuant to this Agreement shall, at
such time as they are required to be executed hereunder, be duly executed by
the Developer, and each such agreement is, or shall be at such time as it is
required to be executed hereunder, valid and legally binding upon the Developer
and enforceable in accordance with its terms and the execution and delivery
thereof shall not, with due notice or the passage of time, constitute a default
under or violate the terms of any indenture, agreement or other instrument to
which the Developer is a party.

 

4.                         There is
no litigation pending or threatened that, in the reasonable opinion of the
Developer, would materially interfere with the Developer’s performance of its
duties and obligations hereunder.

 

5.                         The
Developer is not the subject of a bankruptcy proceeding.

 

6.                         The
Developer is not developing any of the improvements on the Site for the purpose
of relocating a big box retailer or auto dealership that has a market area that
includes the Site within its boundaries. Solely for purposes of this paragraph,
the terms “relocating”, “big box retailer”, “auto dealership” and “market area”
shall have the meaning given to them in California Health & Safety
Code Section 33426.7.

 

SECTION 1111      RELATIONSHIP TO PARTIES

 

Nothing contained
in this Agreement shall be deemed or construed as creating a partnership, joint
venture, or any other relationship between the parties hereto, other than as
expressly specified in the provisions contained herein, or cause the Agency to
be responsible in any way for the debts or obligations of the Developer or any
other party.

 

SECTION 1112      BINDING UPON SUCCESSORS AND ASSIGNS

 

This Agreement shall
be binding upon and inure to the benefit of the permitted successors in
interest, transferees and assigns of each of the Parties. Any reference in this
Agreement to a Party shall be deemed to apply to the permitted successor in
interest, transferee or assign of that Party who has acquired an interest in
compliance with the terms of this Agreement or through action of law.

 

87

 

SECTION 1113
 INTERRPRETATION OF [Illegible]
[Illegible] TERMINOLOGY; APPLICATION OF LAWS

 

This Agreement has
been negotiated at arm’s length and between persons sophisticated and
knowledgeable in the matters addressed in this Agreement. In addition, each
Party has been given the opportunity to consult with experienced and
knowledgeable legal counsel. Accordingly, any rule of law (including Civil
Code section 1654) or legal decision that would require interpretation of any
ambiguities in this Agreement against the Party that has drafted it is not
applicable and is waived. The provisions of this Agreement shall be interpreted
in a reasonable manner to effectuate the purpose and intent of the parties to
this Agreement.

 

When the context
so requires when used in this Agreement, the masculine gender shall be deemed
to include the feminine and neuter gender and the neuter gender shall be deemed
to include the masculine and feminine gender. When the context to requires when
used in this Agreement, the singular shall be deemed to include the plural. The
paragraph and section headings have been used for convenience only, and shall
not be used in the interpretation hereof.

 

SECTION 1114
 WAIVERS

 

The waiver by the
Agency of any term, covenant, or condition herein contained shall not be a
waiver of such term, covenant, or condition on any subsequent breach.

 

SECTION 1115
 TIME OF ESSENCE

 

Time is of the
essence of this Agreement and each and all of its provisions in which
performance is a factor.

 

SECTION 1116
 ATTORNEYS’ FEES AND COSTS

 

If any action or
proceeding is brought by either Party against the other under this Agreement,
whether for interpretation, enforcement or otherwise, the prevailing Party
shall be entitled to recover all costs and expenses, including the reasonable
fees of its attorney and any expert witnesses in such action or proceeding.
This provision shall also apply to any post-judgment action by either Party,
including without limitation efforts to enforce a judgment.

 

SECTION 1117
 SEVERABILITY

 

Any provision of
this Agreement that shall prove to be invalid, void, or illegal shall in no way
affect, impair, or invalidate any other provision hereof and such other
provisions shall remain in full force and effect.

 

SECTION 1118
 NON-EXCLUSIVITY

 

No remedy or
election hereunder shall be deemed exclusive but shall, wherever possible, be
cumulative with all other remedies at law or in equity.

 

SECTION 1119
 ENTIRE UNDERSTANDING OF THE PARTIES

 

This Agreement,
including any document or instrument incorporated herein by reference, contains
a complete and final expression of the agreement between the Agency

 

88

 

and the Developer,
[Illegible] here are no promises, representations, [Illegible], warranties, or
inducements either express or implied other than as are set forth in this
Agreement. Any and all previous discussions or agreements between the Agency
and the Developer with respect to the premises, whether oral or written, are
superseded by this Agreement.

 

SECTION 1120
 AMENDMENTS TO THIS AGREEMENT

 

No amendment,
change, or addition to, or waiver of termination of, this Agreement or any part
hereof shall be valid unless in writing and signed by both the Agency and the
Developer.

 

SECTION 1121
 NO THIRD PARTY BENEFICIARIES

 

The parties to
this Agreement acknowledge and agree that the provisions of this Agreement are
for the sole benefit of the Agency and the Developer, and not for the benefit,
directly or indirectly, of any other person or entity, except as otherwise
expressly provided herein.

 

SECTION 1122
 AUTHORITY TO SIGN

 

The individual
executing this Agreement on behalf of the Developer hereby represents that he
has full authority to do so and to bind the Developer to perform pursuant to
the terms and conditions of this Agreement.

 

SECTION 1123
 INCORPORATION BY REFERENCE

 

Each of the
attachments and exhibits attached hereto is incorporated herein by this
reference.

 

SECTION 1124
 ESTOPPEL CERTIFICATES

 

Each Party hereto
agrees that upon reasonable notice at reasonable times it shall, at the request
of the other Party, execute estoppel certificates regarding the status of the
performance of the other Party of its obligations hereunder. The Agency’s
Administrator shall be authorized to execute such estoppel certificates on
behalf of the Agency.

 

SECTION 1125
 COMPOSITION OF AGREEMENT

 

This Agreement is
executed in eight (8) duplicate originals, each of which is deemed to be
an original. This Agreement includes Ninety One (91) pages and Seventeen
(17) attachments.

 

SECTION 1126
 FURTHER ASSURANCES

 

The Parties agree
to take such further actions and execute such further documents as are
reasonably necessary or desirable to effectuate the intent of this Agreement,
including but not limited to further actions and further documents required by
Developer’s lenders, so long as such further actions or such further documents
do not materially alter any of the terms of this Agreement.

 

SECTION 1127
 TIME FOR ACCEPTANCE

 

This Agreement
shall not take effect unless and until it is approved, executed and delivered
by the Agency. This Agreement must be authorized, executed and delivered by

 

89

 

the
Agency within ninety (90) days after the Developer’s delivery to the Agency of
this Agreement executed by the Developer, or the Developer may terminate this
Agreement on written notice to the Agency. The date of this Agreement (“Date of Agreement”) shall be the date on
which it is executed by the Agency.

 

	
   

  	
   

  	
  DEVELOPER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SL No Ho, LLC

  a California limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  Dec
  6, ‘01

  	
   

  	
  By:

  	
  /s/ Clifford P.
  Goldstein

  
	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  CLIFFORD P. GOLDSTEIN

  AUTHORIZED MEMBER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AGENCY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THE
  COMMUNITY REDEVELOPMENT AGENCY OF

  THE CITY OF LOS ANGELES, CALIFORNIA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  3/5/02

  	
   

  	
  By:

  	
  /s/ Authorized Signatory

  
	
   

  	
   

  	
   

  	
   

  	
  Administrator

  
	
  ATTEST

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Authorized
  Signatory

  	
   

  	
   

  
	
   

  	
  Agency Secretary

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  APPROVED AS TO FORM:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ROCKARD J. DELGADILLO

  CITY ATTORNEY

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Authorized
  Signatory

  	
   

  	
   

  
	
   

  	
  Assistant/Deputy City
  Attorney

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  APPROVED AS TO FORM:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  KANE, BALLMER &
  BERKMAN

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Authorized
  Signatory

  	
   

  	
   

  
	
   

  	
  Special Counsel to the
  Agency

  	
   

  	
   

  
							

 

90

 

JAR
No Ho Project [Illegible]  (“JAR
No Ho”), its successors and [Illegible], joins herein for the purpose of
consenting to the terms of this Agreement and, for consideration received,
covenants to convey to the Developer, pursuant to the JV Agreement, those
Developer Parcels that are owned or controlled by JAR No Ho or any of its
members as of the Date of Agreement. For consideration received, JAR No Ho
hereby grants to the Agency an exclusive and irrevocable option to purchase
those Developer Parcels or any portion thereof pursuant to the terms of Section 1004
of this Agreement, provided that, the term of the Agency Option for those
Developer Parcels shall commence upon JAR No Ho’s failure to convey those
Developer Parcels to the Developer within the time set forth in the Schedule of
Performance. JAR No Ho agrees to cooperate with the Agency in the recordation
in the land records of Los Angeles County of a Memorandum of Agency Option in
the form of Attachment No. 15 to this Agreement.

 

	
   

  	
   

  	
   

  	
  JAR
  No Ho Project LLC

  a California limited liability company

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  JARCO/SLG&G,
  LLC,

  
	
   

  	
   

  	
   

  	
  A
  California limited liability company,

  
	
   

  	
   

  	
   

  	
  Its
  managing member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  JARCO
  COMMERCIAL REAL ESTATE, INC.

  A California corporation

  Its managing member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  12-10-01

  	
   

  	
  By:

  	
  /s/ J. Allen Radford

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  J. Allen Radford

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  	
  President

  

 

91

 

ATTACHMENT NO 8

 

PUBLIC-PRIVATE FEASIBILITY AGREEMENT

 

I.         Use of Available Site-Generated
Property Tax Increment

 

A.                      HUD loan Repayment - Subject to all of
the terms and conditions of this Agreement (including, without limitation, the
provisions of Paragraph I.E. below limiting the Agency’s payment obligation
hereunder to particular sources of funds), the amount payable by the Agency
under this paragraph I.A.2 of this Attachment No. 8 shall be the principal
amount of SIX MILLION FIFTY THOUSAND DOLLARS ($6,050,000) plus any interest
thereon as provided in this Paragraph I.A.

 

1.                          The
Agency will use every reasonable effort to enter into a cooperation agreement
with the City whereby the City will provide an EDI Grant to the Agency in the
amount of ONE MILLION EIGHT HUNDRED THOUSAND DOLLARS ($1,800,000) to be applied
by the Agency to the payment of interest accruing on the HUD Loan.

 

2.                          Subject
to all of the terms and conditions of this Agreement, on or before September 30
of each year, beginning with the first September 30 which follows the
Completion Date, but not earlier than the date of the Agency’s first draw of
funds from the HUD Loan, and continuing until the HUD Loan has been paid in
full, the Agency shall apply to the repayment of the HUD Loan an amount equal
to the lesser of (i) fifty percent (50%) of Available Site-Generated
Property Tax Increment received by the Agency during the prior Agency Fiscal
Year, or (ii) such portion of such Available Site-Generated Property Tax
Increment received by the Agency during the prior Agency fiscal year that is
sufficient to pay the annual payment of principal and accrued interest on the
HUD Loan for that year to the extent such annual debt service exceeds the
available EDI Grant funds. Agency payments of interest on the HUD Loan shall
not reduce the principal amount of the Agency obligation under this Paragraph I
A. The Agency hereby covenants to refrain from taking any action that would
diminish or impair in any way its receipt (and subsequent payment of the Agency
obligation) of Available Site-Generated Property Tax Increment.

 

3.                          Subject
to all of the terms and conditions of this Agreement, on or before September 30
of each year, beginning with the first September 30 which follows the
Completion Date, but not earlier than the date of the Agency’s first draw of
funds from the HUD Loan, and continuing until the HUD Loan has been paid in
full, the Developer shall pay to the Agency an amount that is sufficient.

 

1

 

when added to the
available EDI Grant funds and the Available Site-Generated Property Tax
Increment to be paid for such fiscal year by the Agency pursuant to Paragraph
I.A.2, to pay the annual payment of principal and accrued interest on the HUD
Loan for that year. Within the time set forth in the Schedule of Performance,
the Developer shall deliver to the Agency either (i) an irrevocable
at-sight, standby letter of credit, first approved in writing by the Agency
Administrator and legal counsel as to form, content and issuer, in an amount
equal to the principal amount of the HUD Loan (“HUD Letter of Credit”); or (ii) a continuing absolute
written guaranty of Developer’s obligations under this Paragraph I.A.3 first
approved in writing by the Agency Administrator and legal counsel as to form,
content and issuer, in an amount equal to the principal amount of the HUD Loan,
and reasonably found by the Agency Administrator or designee to be issued by a
person or persons of sufficient creditworthiness and sufficient and available
net worth (“HUD Guaranty”) (the
HUD Letter of Credit and the HUD Guaranty are sometimes referred to in this
Agreement as the “HUD Letter of Credit or
Guaranty”). The Agency shall have the right to draw or obtain
payment on the HUD Letter of Credit or Guaranty upon the Developer’s failure to
make any payment to the Agency required by this Paragraph I.A.3, and with no
duty on the part of the Agency to first enforce any remedy to collect amounts
in default from Developer. In the event the Agency obtains the HUD Loan, then
the payment by Developer of all amounts due under this Paragraph I.A.3 and the
delivery to Agency by Developer of the HUD Letter of Credit or Guaranty shall
satisfy, to the extent of the principal amount of the HUD Loan, the Developer’s
obligation to pay the Purchase Price to the Agency otherwise required by Section 503.1
of the Owner Participation Agreement. The amount of the HUD Letter of Credit or
Guaranty shall be reduced at the close of escrow for the conveyance of the
final portion of the Site from the Agency to the Developer, to an amount equal
to the Developer’s total Purchase Price to the Agency otherwise required by Section 503.1
of the Owner Participation Agreement and may be further reduced with the prior
written approval of the Agency Administrator or designee based upon a proven
track record of generated Available Site-Generated Property Tax Increment.

 

4.                          If (i) the
Developer pays to the Agency an amount sufficient to repay the principal
balance and accrued interest on the HUD Loan, or (ii) the Agency is unable
to obtain the HUD Loan and the Original Letter of Credit required of the
Developer is increased as a result thereof (either of which shall be the “Trigger Event”), the Agency shall
thereafter make payments to the Developer of Available Site-Generated Property
Tax Increment as set forth in this Paragraph I.A.4. The principal amount of the
Agency

 

2

 

obligation under this
Paragraph 1.A.4 shall equal the unpaid principal balance of the Agency
obligation under this Paragraph I.A. on the date of the Trigger Event (the “Unpaid Principal”). The Unpaid Principal
Shall bear interest at the rate of six percent (6%) per annum from the date of
the Trigger Event. Subject to all the terms and conditions of this Agreement,
on or before September 30 of each year, beginning with the first September 30
that follows the date of the Trigger Event and continuing until the Unpaid
Principal and any accrued interest thereon has been paid in full, the Agency
shall pay the Developer an amount equal to fifty percent (50%) of Available
Site-Generated Property Tax. Increment received by the Agency during the prior
Agency Fiscal Year. The Agency hereby covenants to refrain from taking any
action that would diminish or impair in any way its receipt (and subsequent
payment of the Unpaid Principal and interest thereon) of Available
Site-Generated Property Tax Increment.

 

5.                          The
Agency payments required by Paragraph I.A.2 and Paragraph I.A.4 (if applicable)
shall continue until the earlier of (i) the payment of amounts by the
Agency under Paragraph I.A.2 and Paragraph I.A.4 (if applicable) which together
are sufficient to pay the principal amount of $6,050,000 and any accrued
interest thereon, or (ii) February, 2029. Interest prior to any Trigger
Event shall be calculated at the rate of interest for the HUD Loan. No further
payments shall be required of the Agency under either Paragraph I.A.2 or
Paragraph I.A.4 upon the termination of the Agency obligation pursuant to this
Paragraph I.A.5.

 

B.                      Repayment
of Developer’s Advance of Costs –  Subject
to all of the terms and conditions of this Agreement (including, without
limitation, the provisions of Paragraph I.E. below limiting the Agency’s
payment obligation hereunder to particular sources of funds), the principal
amount payable by the Agency to the Developer under this Paragraph I.B. of this
Attachment No. 8 shall be an amount equal to (i) the amount of the
Developer Advance determined pursuant to Section 402.6 of the Owner
Participation Agreement; less (ii) the Acquisition Funds used by the
Agency to acquire any portion of the Site; plus (iii) in the event the
Agency obtains the HUD Loan and the Developer provides the HUD Letter of Credit
or Guaranty as required by the Owner Participation Agreement, an amount equal
to the amount, if any, by which the principal amount of the HUD Loan exceeds
the Purchase Price; less (iv) an amount equal to the Purchase Price to the
extent the payment by Developer of the Purchase Price is not satisfied under
Paragraph I.A.3 above; which net amount shall bear interest at the rate of six
percent (6%) per annum from the date of disbursement.

 

1.                          Subject
to all of the terms and conditions of this Agreement, on or before September 30
of each year, beginning with the first

 

3

 

September 30 which
follows the Completion Date and continuing until the Agency obligation under
this Paragraph 1.8. (and any accrued interest thereon) has been paid in full,
the Agency shall pay to the Developer an amount equal to forty percent (40%) of
Available Site-Generated Property Tax Increment received by the Agency during
the prior Agency Fiscal Year. The Agency hereby covenants to refrain from
taking any action that would diminish or impair in any way its receipt (and
subsequent payment of the Agency obligation and interest thereon) of Available
Site-Generated Property Tax Increment.

 

2.                          The
Agency obligation pursuant to this Paragraph I.B. shall continue until the earlier
of (i) payment in full of this Paragraph I.B Agency obligation or (ii) February,
2029.

 

C.                      Payment
of Qualifying Remediation Costs – Subject to all of the terms and
conditions of this Agreement (including, without limitation, the provisions of Section 308.1
of the Owner Participation Agreement and Paragraph I.E. below limiting the
Agency’s payment obligation hereunder to particular sources of funds), the
Agency shall annually pay to the Developer an amount equal to the lesser of (i) forty
percent (40%) of Available Site-Generated Property Tax Increment received by
the Agency during the prior Agency Fiscal Year and (ii) such portion of
such Available Site-Generated Property Tax Increment that is equal to one-half
(1/2) of the unreimbursed portion of the Developer’s uninsured remediation
costs pursuant to Section 308.1 of the Owner Participation Agreement.

 

1.                          The
Agency obligation pursuant to this Paragraph I.C. shall be subordinate to the
Agency obligation pursuant to Paragraph I.B.

 

2.                          The
Agency obligation pursuant to this Paragraph I.C. shall continue until the
earlier of (i) payment in full of this Agency obligation or (ii) February,
2029.

 

D.                      Payment
of Annual Return Shortfall — Subject to all the terms and conditions of
this Agreement (including, without limitation, the provisions of Paragraph I.E.
below limiting the Agency’s payment obligation hereunder to particular sources
of funds), on or before September 30 of each year, beginning with the
first September 30 that follows the later of (i) the end of the first
occurring Stabilization Year, and (ii) the first date on which the
assessed value of a Subarea reflects the completion of the improvements on that
Subarea pursuant to the Owner Participation Agreement, and continuing until the
Agency obligation under this Paragraph I.D. has been paid in full, the Agency
shall pay to the Developer an amount equal to the lesser of (i) ninety
percent (90%) of Available Site- Generated Property Tax Increment received by
the Agency during the

 

4

 

prior Agency Fiscal Year
and (ii) the total amount of the Annual Return Shortfall, if any, across
all Subareas.

 

1.                          “Stabilization
Year” as used herein shall mean, for any Subarea, the earlier of (i) the
calendar year in which actual revenues from the rental of Project Elements in
the Subarea achieve ninety percent (90%) of the scheduled revenues from the
rental of Project Elements in that Subarea for any one consecutive three month
period, at one hundred percent (100%) occupancy (with allowance for a ten
percent (10%) revenue vacancy), and (ii) twenty-four (24) months following
the issuance of a temporary Certificate of Occupancy for all of the
improvements in that Subarea.

 

2.                          “Annual
Return Shortfall” as used herein shall mean, for each Subarea, the amount in
any Operating Year by which the calculated amount of the Developer’s Annual
Return exceeds the sum of (i) Net Operating Income for that Operating
Year, plus (ii) payments made by the Agency during that Operating Year pursuant
to Paragraph I.A. and Paragraph I.C., plus (iii) an amount equal to the
difference between the fair market rent for the Restricted Units within that
Subarea and the Affordable Rent for those Restricted Units.

 

3.                          “Operating
Year” as used herein shall mean, for each Subarea, the calendar year preceding
the first year during which the Agency is obligated to make the payments set
forth in this Paragraph I.D., and each succeeding year.

 

4.                          “Developer’s
Annual Return” as used herein shall mean an amount equal to (i) for
Subarea A, 10.05% of Adjusted Project Costs, (ii) for Subarea B, 10.52% of
Adjusted Project Costs, and (iii) for Subarea C, 10.85% of Adjusted
Project Costs.

 

5.                          “Adjusted
Project Costs” as used herein shall mean, for each Subarea, Project Costs as
approved by the Agency, plus Approved Post-Construction Capital Expenditures,
if any. Project Costs shall not include any Letter of Credit provided by the
Developer to the Agency pursuant to Section 402.6 of the Owner
Participation Agreement.

 

6.                          Any
portion of the Annual Return Shortfall payable to the Developer pursuant to
this Paragraph I.D. that remains unpaid in any Operating Year shall accrue,
together with annual interest at the rate of six percent (6%).

 

7.                          At least
thirty days before the date that the Agency obligation under this Paragraph
I.D. becomes due for each Operating Year and continuing until the Agency
obligation has been paid in full,

 

5

 

[Illegible] Developer
shall submit to the Agency for the review and written approval or disapproval
of the Agency’s Administrator a Certified Project Cost Statement in the form
required by Section 601.2 of the Owner Participation Agreement.

 

8.                          The
Agency obligation pursuant to this Paragraph I.D. shall cease for each Subarea
in any Operating Year in which the Annual Return Shortfall for that Subarea
equals zero, and in any event, shall cease as to all Subareas upon the earlier
to occur of, (i) the Agency has made total payments across all Subareas pursuant
to this Paragraph I.D. in the amount of FIVE MILLION DOLLARS ($5,000,000) plus
the total interest that has accrued pursuant to Paragraph I.D.6, if any, and (ii) February,
2029.

 

9.                          The
Agency obligation pursuant to this Paragraph I.D. shall be subordinate to the
Agency obligation pursuant to Paragraph I.A., Paragraph I.B., and Paragraph
I.C.

 

E.                        Limited
Obligation – The Agency obligation pursuant to Paragraph I.A.,
Paragraph I.B., Paragraph I.C., and Paragraph I.D. are special and limited
obligations payable solely from the sources of funds expressly identified in
this Section I. As to a given Subarea or Phase or Project Element, the
Agency shall have no obligation to pay any amounts to Developer pursuant to
this Section I unless the Completion Date shall have occurred as to that
Subarea or Phase or Project Element and a Developer Event of Default shall not
have occurred as to any of its obligations under the Owner Participation
Agreement or the Agreement Containing Covenants Affecting Real Property or the
Grant Deed applicable to that Subarea or Phase or Project Element.

 

II.                       Affordable
Housing Subsidy – The Agency shall make the following payments to the
Developer in a total amount equal to the amount required to offset the
projected reduction in revenue resulting from the recordation of the
Affordability Covenants against the residential units to be constructed on
Subareas A and B (“Housing Subsidy”).
The Housing Subsidy shall be allocated equitably across the Restricted Units
constructed on Subareas A and B. The Developer’s obligations with respect to
the provision of Restricted Units set forth in Section 103.1(e)(1) of
the Owner Participation Agreement shall be excused to the extent and only to
the extent that the Agency fails to provide the Housing Subsidy.

 

A.                      HOME
Funds – The Agency shall use every reasonable effort to obtain from the
City HOME funds in the amount of FIVE MILLION DOLLARS ($5,000,000) (“HOME Funds”) to reimburse the Developer
for that portion of the Developer’s costs that is attributable to the
acquisition of property for the residential units. Subject to all the terms and
conditions of this Agreement, the Agency shall pay to the Developer upon the
commencement of construction for the residential units to be constructed

 

6

 

on Subareas A and B that
portion of the HOME funds that does not exceed the amount of the Housing
Subsidy.

 

B.                      Currently
Available Housing Trust Funds — Upon the commencement of construction
for the residential units to be constructed on Subareas A and B, the Agency
shall pay to the Developer the lesser of (i) SIX MILLION TWO HUNDRED
THOUSAND DOLLARS ($6,200,000) of currently available funds in the North
Hollywood Housing Trust Fund (“Currently
Available Housing Trust Funds”), or (ii) such portion of such
Currently Available Housing Trust Funds that is required, when added to the
HOME Funds, to pay the Housing Subsidy.

 

C.                      Site-Generated
Housing Trust Funds — Subject to all of the terms and conditions of
this Agreement, on or before September 30 of each year, beginning with the
first September 30 which follows the Completion Date for the residential
units to be constructed on Subareas A and B, and continuing until the Housing
Subsidy has been paid in full, the Agency shall pay to the Developer an amount
equal to the lesser of (i) one hundred percent (100%) of the amount of tax
increment revenues from the Site that was set aside pursuant to Sections
33334.2 et  seq. of the California Health and Safety Code or any
successor law for low and moderate-income housing purposes during the prior
Agency Fiscal Year (“Site-Generated Housing
Trust Funds”), and (ii) such portion of such Site-Generated
Housing Trust Funds that is required, when added to the HOME Funds and the
Currently Available Housing Trust Funds, to pay the Housing Subsidy within an
amortization period that commences with the Completion Date for the residential
units to be constructed on Subareas A and B and terminates at the end of Agency
Fiscal Year 2028-2029. The Agency hereby covenants to refrain from taking any
action that would diminish or impair in any way its receipt (and subsequent
payment of the Housing Subsidy) of Site-Generated Housing Trust Funds.

 

D.                      North
Hollywood Housing Trust Funds — Subject to all of the terms and
conditions of this Agreement, on or before September 30 of each year,
beginning with the first September 30 which follows the Completion Date
for the residential units to be constructed on Subareas A and B and continuing
until the Housing Subsidy has been paid in full, the Agency shall pay to the
Developer an amount equal to the lesser of (i) one hundred percent (100%)
of the amount of tax increment revenues from the North Hollywood Redevelopment
Project that was set aside pursuant to Sections 33334.2 et  seq.
of the California Health and Safety Code or any successor law for low-and
moderate-income housing purposes during the prior Agency Fiscal Year (“North Hollywood Housing Trust Funds”), and
(ii) such portion of such North Hollywood Housing Trust Funds that is
required, when added to the HOME Funds, the Currently Available Housing Trust
Funds, and the Site-Generated Housing Trust Funds, to pay the Housing Subsidy
within an amortization period that commences with the Completion Date for the residential
units to be constructed on Subareas

 

7

 

A and [Illegible]
[Illegible] terminates at the end of Agency Fiscal Year 2028-2029. The Agency
hereby covenants to refrain from taking any action that would diminish or
impair in any way its receipt (and subsequent payment of the Housing Subsidy)
of North Hollywood Housing Trust Funds.

 

E.                        Limited
Obligation — The Agency’s obligation to pay the Housing Subsidy is a
special and limited obligation payable solely from the sources of funds
expressly identified in this Section II. As to a given Subarea, the Agency
shall have no obligation to pay any amounts to Developer pursuant to this Section II
unless the Completion Date shall have occurred for the residential units to be
constructed on the applicable Subarea and a Developer Event of Default shall
not have occurred as to any of its obligations under the Owner Participation
Agreement or the Agreement Containing Covenants Affecting Real Property or the
Grant Deed or the Affordability Covenants, as such pertain to the applicable
Subarea.

 

III.                   Currently
Available Tax Allocation Bond Funds — Subject to all the terms and
conditions of this Agreement, the Agency shall use FIVE MILLION DOLLARS
($5,000,000) of currently available tax allocation bond funds as Acquisition
Funds for the Agency’s acquisition of property to be conveyed to the Developer
pursuant to the Owner Participation Agreement.

 

IV.                  Property
Acquisition for Street Widening — The Agency and the Developer shall
use every reasonable effort to cause the City to enter into a cooperation
agreement with the Agency whereby the City will provide THREE MILLION DOLLARS
($3,000,000) of Community Development Block Grant funds to the Agency for the
Agency’s use in acquiring property for street widening on the Site.

 

V.                      EDA Funds
for Off-Site Improvements — The Agency and the Developer shall use
every reasonable effort to cause the City to enter into a cooperation agreement
with the Agency whereby the City will provide funds sufficient to pay the cost
of constructing any off-Site public improvements required by the City as a
condition of Project entitlement and any required off-Site mitigation measures.

 

VI.                  Definitions
— Unless otherwise defined in this Public-Private Feasibility Agreement,
capitalized terms contained herein shall have the meaning given to them in the
Owner Participation Agreement.

 

A.                      “Agency
Fiscal Year” as used herein shall mean each twelve-month period beginning on July 1
and ending on June 30.

 

B.                      “Available
Site-Generated Property Tax Increment” means the total ad valorem property tax
increment revenue allocated to and received by the Agency in any fiscal year
pursuant to Section 33670(b) of the California Health and Safety
Code, as said statute may be amended from time to

 

8

 

time, by application of
the one percent (1%) tax levied against real property as permitted by Article XIIIA
of the California Constitution in an amount reasonably attributed by the Agency
solely to an increase in the assessed value of the Site over and above its
assessed value as of the Date of Agreement, but specifically excluding
therefrom all of the following: (i) a portion of such tax increment
revenues equal to the percentage of tax increment revenues from the
redevelopment project area as a whole that is set aside pursuant to Sections
33334.2 et  seq. of the California Health and Safety Code or any
successor law for low- and moderate-income housing purposes; and (ii) a
portion of such tax increment revenues equal to the portion of tax increment
revenue from the redevelopment project area as a whole that the Agency is
required to pay to any and all governmental entities pursuant to any provision
of law, as amended from time to time, or pursuant to tax sharing/pass-through
agreements (including any and all agreements entered into prior to the Owner
Participation Agreement by the Agency and such governmental entities
implementing the tax sharing/pass-through agreements); and (iii) a portion
of such tax increment revenues equal to the percentage of tax increment
revenues in the redevelopment project area as a whole which the Agency may be
required by the State of California to pay from time to time, including, by way
of example and without limiting the generality of the foregoing, any payments
which the Agency may be required to pay to the Education Revenue Augmentation
Fund pursuant to Section 33681 et  seq. of the California
Health and Safety Code; and (iv) the amount of any revenues received by
the Agency that are attributable to any special taxes or assessments or
voter-approved indebtedness; and (v) charges for County administrative
charges, fees or costs equal to the percentage of such charges in the Project
Area as a whole.

 

C.                      “Completion
Date” as used herein shall mean, for the improvements on each Subarea, the date
of “Completion” as that term is defined in Article 2 of the Owner
Participation Agreement; provided that, tenant improvements shall not be
required to have been completed.

 

D.                      “Reimbursement
Term” as used herein means the period during which Agency is obligated to make
payments to the Developer to the extent set forth in this Public-Private
Feasibility Agreement.

 

VII.              General
Provisions

 

A.                      This
Public-Private Feasibility Agreement is part of the Owner Participation
Agreement and is subject to all of the terms and conditions thereof.

 

B.                      The Agency
shall have the right at its option, and as a non-exclusive remedy, to set off
amounts owed by the Developer to the Agency due to an Event of Default arising
from Developer’s failure to pay amounts due under the Owner Participation
Agreement, including but not limited to the

 

9

 

Agency Participation
Payments, against amounts payable by the Agency to the Developer under this
Public-Private Feasibility Agreement.

 

C.                      The Agency’s
obligations hereunder may be prepaid by the Agency, in whole or in part, at any
time and from time to time without penalty, from any funds lawfully available
to the Agency for such purposes.

 

D.                      The Agency’s
obligation to pay Available Site-Generated Property Tax Increment in accordance
with this Public-Private Feasibility Agreement shall be subordinate to the
Agency’s existing bonded indebtedness and bond issuance(s) and the
refunding or refinancing thereof and any future bonds the Agency may issue and
the bonded indebtedness incurred in connection therewith, provided that the
Agency determines at the time of issuance of any such future bonds that such
issuance and indebtedness will not materially adversely affect the Agency’s
ability to perform its obligations under the Owner Participation Agreement.
Bonded indebtedness includes any indebtedness incurred by the Agency for bonds,
notes, interim certificates, debentures, certificates of participation or other
obligations issued by the Agency. The Agency’s obligation to pay a portion of
Available Site-Generated Property Tax Increment under this Public-Private
Feasibility Agreement is not and shall not be construed as a “pledge” of
property tax revenues for purposes of Section 33671.5 of the California Health and Safety Code.

 

E.                        Any
balance remaining in the Agency’s payment obligations under this Public-Private
Feasibility Agreement after the Reimbursement Term has ended shall
automatically be deemed forgiven.

 

10

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