CITY COUNCIL City of Lemon Grove by jolinmilioncherie

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									                   LEMON GROVE COMMUNITY DEVELOPMENT AGENCY
                             AGENDA ITEM SUMMARY

Item No. __3 ___ __
Mtg. Date __March 17, 2009__
Dept.     __Executive Director’s Office__

Item Title:   Owner Participation Agreements for Citronica One and Two

Staff Contact:    Graham Mitchell, Executive Director

Recommendation:

  Adopt resolution (Attachment B) approving an Owner Participation Agreement for Citronica
  One and an Owner Participation Agreement for Citronica Two with Hitzke Development
  Corporation.



Item Summary:
The Community Development Agency has been working with Hitzke Development Corporation on
two significant development projects in the Downtown Village area. Two Owner Participation
Agreements have been negotiated and are presented for Agency Board consideration.
The staff report (Attachment A) provides background information regarding the projects, a
summary of the pre-development agreement, a description of the entitled projects, an analysis of
the owner participation agreements, and a fiscal analysis of the Agency’s participation.




Fiscal Impact:
The Agency has committed $4,453,158 to the projects through a pre-development agreement.
The Owner Participation Agreements pledge an additional $810,134 in redevelopment funds.


Environmental Review:
   Not subject to review                                Negative Declaration
   Categorical Exemption, Section                         Mitigated       Negative      Declaration
                                                    (completed)

Public Information:
   None                      Newsletter article         Notice to property owners within 300 ft.
   Notice published in local newspaper                  Neighborhood meeting

Attachments:
A. Staff Report
B. Resolution
C. Owner Participation Agreement – Citronica One
D. Owner Participation Agreement – Citronica Two



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                                                                          Attachment A

                  LEMON GROVE COMMUNITY DEVELOPMENT AGENCY
                                STAFF REPORT
Item No.      3 ____

Mtg. Date     March 17, 2009

Item Title:   Owner Participation Agreements for Citronica One and Two

Staff Contact:    Graham Mitchell, Executive Director

Discussion:
Staff presents two owner participation agreements (development agreements) between the
Agency and Hitzke Development Corporation for Agency Board consideration. This staff report
provides background information regarding the projects, a summary of the pre-development
agreement, a description of the entitled projects, an analysis of the owner participation
agreements, and a fiscal analysis of the Agency’s participation.
Background
By January 2008 Hitzke Development Corporation (Hitzke) had entered into purchase
agreements for three properties located on the block west of the Lemon Grove Trolley Station.
Once the properties were secured by purchase agreements, Hitzke submitted a proposed
development plan for two of the properties (the most northern properties along North Avenue).
The preliminary plan called for two separate developments—a 54-unit mixed-use affordable
rental development on Main Street/North Avenue (the location of a strip commercial center) and
between a 75 to 100-unit mixed-use project at the corner of Olive Street/North Avenue (the
location of the Windmill trailer park). The 54-unit project is referred to as Citronica One and the
other project is referred to as Citronica Two.
Hitzke approached the Agency seeking assistance for pre-development expenses and for
purchasing three properties under contract. Also, Hitzke began preparing project plans in order
to obtain planned development permits from the Planning Commission. On January 26, 2009,
the Planning Commission approved planned development permits for each of the projects.
Pre-Development Agreement
On July 15, 2008, the Agency Board approved a pre-development agreement with Hitzke. The
agreement pledged approximately $5.3 million in Agency financial assistance for specified pre-
development activities and assistance with land acquisition. The table below defines how the
pre-development assistance funds were allocated:
       Pre-Development Activities:        Escrow/Title Fees                             $15,000
                                          Engineering/Design/Legal (Citronica)         $233,000
                                          Design (Promenade)                            $55,000
                                          Other (Relocation/Market Studies)             $41,500
       subtotal                                                                        $344,500
       Land Acquisition:                  Kidwell/Fergen                             $2,214,000
                                          COACH Trailer Park                         $2,000,000
                                          Martin                                       $765,000
       subtotal                                                                      $4,979,000
       TOTAL                                                                         $5,323,500




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Attachment A
Since the approval of the pre-development agreement, all of the properties have closed,
meaning Hitzke owns the northern portion of the block and the property which is currently
occupied by Dave’s Feed. By March 2009, Hitzke had hoped to have the project referred to as
Citronica One designed and approved for development. In fact, the majority of the pre-
development funding was initially intended to support Citronica One. However, Hitzke has
been able to stretch the pre-development funds to complete the design of both Citronica One
and Two. As such, both projects have received entitlements from the Planning Commission in
the form of two planned development permits.
Project Description
On January 26, 2009 the Planning Commission approved two planned development permits:
PDP 08-002 entitles Citronica One and PDP 08-005 entitles Citronica Two. The following tables
describe each of the projects.
                                        CITRONICA ONE

      Location:                         7751 North Avenue (corner of Main Street and
                                        North Avenue)
      Land size:                        32,058 square feet (.74 net acres)
      Project size:                     86,600 square feet, including garage
                                        65 feet maximum height (5 stories)
      # of Housing Units:               56 units
                                            4 studio units/1 bath
                                          16 1 bedroom/1 bath
                                          16 2 bedroom/1 bath
                                          20 3 bedroom/2 bath (1 unit is for the on-site
                                                                  property manager)
      Type of Housing Units:            Family apartments, affordability 30-60% AMI
      Square Footage of Retail Space:   3,650 square feet
      On-Site Parking:                  71 spaces in underground structure (2 levels)
                                        6 above ground spaces
      Project Features:                 Roof top patio
                                        Photovoltaic system
                                        Built-in computer terminals w/free Internet
      Parkland Development Fee:         $6,599




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                                                                        Attachment A
                                      CITRONICA TWO

    Location:                          7701 North Avenue (corner of Olive Street and
                                       North Avenue)
    Land size:                         25,365 square feet (.58 net acres)
    Project size:                      99,120 square feet, including garage
                                       68 feet maximum height (5 stories)
    # of Housing Units:                80 units
                                          36 studio/1 bath
                                          36 1 bedroom/1 bath
                                           8 2 bedroom/1 bath
    Type of Housing Units:             Senior apartments, 30-60% AMI
    Square Footage of Retail Space:    3,500 square feet, plus
                                       1,200 square feet for medical services
    On-Site Parking:                   60 spaces in underground structure (1 level)
                                       The acquisition of a narrow strip of adjacent
                                       property will provide 12 on-street parking spaces
    Project Features:                  Roof top patio
                                       Photovoltaic system
                                       Built-in computer terminals w/free Internet
    Parkland Development Fee:          $30,480

The combined units of these projects will completely satisfy the City’s Regional Housing Needs
Assessment (RHNA) for the very low and low categories.
Owner Participation Agreements
Each Owner Participation Agreement (OPA) defines the contractual relationship between the
developer and the Agency by addressing a number of issues, including: the scope of
development, the developer’s obligations, the Agency’s role, and general provisions.
Both agreements obligate Hitzke to develop the projects as defined by PDP 08-002 and PDP
08-005. To develop these sites, Hitzke plans to secure $40,516,416. The following breaks
down financial sources for the project:
                                          Citronica      Citronica                      % of
Funding Source                                                              Total
                                             One           Two                         Funding
Bank                                      $2,065,000     $2,150,000     $4,215,000     10.4%
9% Tax Credits                          $14,172,473 $14,268,346 $28,440,819            70.2%
LG Community Development Agency           $2,763,292     $2,500,000     $5,263,292     13.0%
Solar Credit/Rebates                        $125,000       $125,000         $250,000    0.6%
Rental Income                                $83,085       $113,722         $196,807    0.5%
Deferred Developer Fee                      $897,229     $1,253,269     $2,150,498      5.3%
TOTAL                                   $20,106,079 $20,410,337 $40,516,416



                                                                                               -5-
Attachment A
The following characterizes the Agency’s role in Citronica One:
The Agency, through the pre-development agreement contributed $147,861 for pre-
development activities and $2,214,000 for land acquisition. The OPA pledges an additional
$401,431 to the project, resulting in a total Agency contribution of $2,763,292. This contribution
equates to a $50,242 redevelopment subsidy per affordable housing unit. In comparison, the
Citron Court project relied on a $78,257 per unit subsidy.
The following characterizes the Agency’s role in Citronica Two:
The Agency, through the pre-development agreement contributed $91,297 for pre-development
activities and $2,000,000 for land acquisition. The OPA pledges an additional $408,703 to the
project, resulting in a total Agency contribution of $2,500,000. This contribution equates to a
$32,051 redevelopment subsidy per affordable housing unit.
Fiscal Analysis
If approved, the OPAs would commit a total of $5,263,292 to Citronica One and Citronica Two.
To date, the Agency has committed $4,453,158 to the projects. The OPAs commit another
$810,134 in funding. Because the budget dedicated a total of $5,402,000 to the projects, the
OPAs do not require additional funding. The following table shows how the project is reflected
in the budget and the balance at the end of the year, assuming these and other costs remain
the same. Staff recommends that any reserve funds remain in the General Capital and General
Bond funds.
                                     BUDGETED           YEAR-END
                  FUND
                                    COMMITMENT          BALANCE
         50 General Capital                 $72,000       $1,071,300
         55 General Bond                 $1,765,000       $4,747,300
         58 Infill Grant                   $686,000         $200,000
         51 Housing Set-Aside              $517,000       $1,846,092
         56 Housing Bond                 $2,362,000          $17,700
         TOTAL                           $5,402,000
Staff estimates that the projects will generate in tax increment approximately $110,000 the first
year. Over a ten year period, staff projects that this will yield approximately $2,000,000 in tax
increment.


Conclusion:
Staff recommends that the Agency Board adopt the resolution approving the two OPAs. Not
only will the development of these projects fulfill the City’s Regional Housing Needs
Assessment, but the project will prompt additional development on the Main Street Promenade
block and will generate tax increment to finance additional programs or fund future bonds.




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                                                                           Attachment B
                                    RESOLUTION NO.

   RESOLUTION OF THE LEMON GROVE COMMUNITY DEVELOPMENT AGENCY
 APPROVING AN OWNER PARTICIPATION AGREEMENT FOR THE CITRONICA ONE
 PROJECT BETWEEN THE AGENCY AND CITRONICA LEMON GROVE, L.P. AND AN
OWNER PARTICIPATION AGREEMENT FOR THE CITRONICA TWO PROJECT BETWEEN
          THE AGENCY AND HITZKE DEVELOPMENT CORPORATION


      WHEREAS, the Lemon Grove Community Development Agency (the “Agency”) is
responsible for the implementation of the Redevelopment Plan; and
         WHEREAS, the Redevelopment Plan affects and controls the development and use of
all real property located within the Project Area as more particularly described and set forth in
the Redevelopment Plan, consistent with the policies and standards of the General Plan; and
        WHEREAS, the goals for the Redevelopment Plan include the alleviation of blighting
conditions, stimulation of economic development activities, and provision of affordable housing
opportunities in the Project Area; and
       WHEREAS, the Agency is interested in exploring revitalization opportunities in the
Project Area, and specifically seeks to facilitate projects that rely on public/private partnerships
and those that help create affordable housing opportunities; and
        WHEREAS, execution of the Agency’s purpose may require the Agency to financially
assist development companies and to acquire real property within the project area; and
       WHEREAS, the Lemon Grove City Council approved the Downtown Village Specific
Plan on June 7, 2005, which calls for mixed-use, transit-oriented development in the downtown
area, specifically the block directly west of the Lemon Grove Trolley Depot; and
        WHEREAS, Hitzke Development Corporation submitted a proposed phased
development on the block west of the Lemon Grove Trolley Depot that meets the goals
established in the Downtown Village Specific Plan; and
        WHEREAS, the Agency entered into a Pre-Development Agreement with Hitzke
Development Corporation on July 31, 2008 in which the Agency committed to $5,323,500 to aid
in the purchase of properties and for pre-development activities; and
       WHEREAS, since that time, Hitzke Development Corporation has purchased five
parcels in the Citronica Project Area; and
        WHEREAS, also since that time, Hitzke Development Corporation has obtained
entitlements to develop two projects referred to as Citronica One and Citronica Two; and
        WHEREAS, Hitzke Development Corporation has requested that the Agency enter into
two Owner Participation Agreements, one agreement for Citronica One and another agreement
for Citronica Two; and
      WHEREAS, the Agency and Hitzke Development Corporation have negotiated two
Owner Participation Agreements; and
        WHEREAS, the Pre-Development Agreement permits Hitzke Development Corporation
to assign its interests to any single purpose entity, acceptable to the Agency, in which HDC has
management authority; and




                                                                                                 -7-
Attachment B
        WHEREAS, Hitzke Development Corporation has since assigned its interest in the
Citronica One project to Citronica Lemon Grove, L.P. while retaining management authority in
the partnership; and
        WHEREAS, the Agency finds Citronica Lemon Grove, L.P. to be an acceptable assignee
of Hitzke Development Corporation; and
        WHEREAS, the Agency’s financial assistance will aid in the development of the
Citronica One project, which includes 54 units of affordable housing and 3,650 square feet of
commercial space, and Citronica Two, which includes 78 units of affordable housing and 4,700
square feet of commercial space; and
       WHEREAS, the provision of the affordable housing units helps the City meet its
Regional Housing Needs Assessment (RHNA) goals and the Agency’s goal to provide
affordable housing opportunities; and
        WHEREAS, the projects are key in facilitating additional development in the Downtown
Village Specific Plan area, which will provide opportunities for economic growth, additional
housing, improvements to the MTS bus route system, augmentation of the trolley corridor, and
additional tax increment revenue for the Agency; and
      WHEREAS, it is in the interest of the Agency to financially participate with Hitzke
Development Corporation and Citronica Lemon Grove, L.P. through the Owner Participation
Agreements.
      NOW, THEREFORE, BE IT RESOLVED that the Board of the Lemon Grove Community
Development Agency hereby:
        1. Approves an Owner Participation Agreement for Citronica One (Attachment C)
           between the Agency and Citronica Lemon Grove, L..P.; and
        2. Authorizes the Executive Director to execute said Owner Participation Agreement;
           and
        3. Approves an Owner Participation Agreement for Citronica Two (Attachment D)
           between the Agency and Hitzke Development Corporation; and
        4. Authorize the Executive Director to execute said owner Participation Agreement.
/////
/////




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                                                                           Attachment C
                            OWNER PARTICIPATION AGREEMENT
                                  FOR CITRONICA ONE

        THIS OWNER PARTICIPATION AGREEMENT (“Agreement”) is entered into as of the
_____ day of ____________, 2009, between the LEMON GROVE COMMUNITY
DEVELOPMENT AGENCY (the "Agency") and CITRONICA LEMON GROVE, L.P., a California
limited partnership (the "Participant"). The Agency and the Participant agree as follows:

I.   [§100] SUBJECT OF AGREEMENT
     A. [§101] Purpose of this Agreement
                Pursuant to Section 33334.2 of the California Health and Safety Code, the
Agency has set aside twenty percent (20%) of tax increment revenues it has received to
improve, increase, and preserve the supply of affordable housing in the City of Lemon Grove,
California (the "City"). The Agency desires to use a portion of these monies to provide loans to
the Participant to assist in the development of certain real property (the "Site"), more specifically
described in Section 105, located within the City generally and within the Lemon Grove
Redevelopment Project Area specifically. With financial assistance from the Agency, Participant
has acquired the Site for development of the Citronica One project (the “Project”), which is more
particularly described in Section 202 below. As more specifically discussed in Sections 301 and
302 below, all monies to purchase the Site and provide loans to Participant in connection with
the Project shall be paid solely out of the Agency’s low/moderate income housing funds.
                The Project will benefit extremely low, very low and low-income households in
the City, and provides increased employment and retail opportunities for residents of the City
and the community. The acquisition of the Site and construction of the Project by the
Participant, the provision of the Agency assistance provided for hereunder, and the fulfillment
generally of this Agreement, are in the best interests of the City and the welfare of its residents
and the Agency, and in accordance with the public purposes and provisions of applicable
Federal, State and local laws and requirements.
               Pursuant to Health and Safety Code Section 33490, the Agency adopted an
Implementation Plan which included a section addressing the Agency's housing obligations and
expenditures of the Housing Fund monies throughout the community for programs and projects
to increase, improve and preserve the community's supply of housing affordable to low and
moderate-income households. Completion of the Project will help implement the goals of the
Implementation Plan including Goal 1, Objectives 1.2 and 1.3, Goal 2, Objectives 2.1 and 2.5,
and Goal 3, Objectives 3.1 and 3.3.
               To the extent that the Agency is required to cause the construction of
replacement housing, any housing constructed pursuant to this Agreement which is also income
restricted pursuant to Health and Safety Code Section 33413(a) may be counted toward any
such requirement.
               Agency and Hitzke Development Corporation ("HDC") entered into that certain
Pre-Development & Land Acquisition Assistance Agreement dated as of July 31, 2008 (the
"Pre-Development Agreement"). In accordance with Section 1 of the Pre-Development
Agreement, which provides that HDC may assign its interest in the Pre-Development
Agreement to any single purpose entity in which HDC has management authority, HDC has
assigned all of its interest in the Pre-Development Agreement, as such relates to the Site, to
Participant pursuant to that certain Assignment and Assumption Agreement dated as of
February 1, 2009 between HDC and Participant. Capitalized terms used but not otherwise




                                                                                                  -9-
Attachment C
defined herein shall have the meanings ascribed to the same in the Pre-Development
Agreement.
                 Pursuant to the Pre-Development Agreement, Agency agreed to provide certain
pre-development assistance to Participant in connection with Participant's development of the
Citronica Development. The Site (referred to as the "Kidwell/Fergen Parcel" in the Pre-
Development Agreement), together with the Coach Parcel and the Martin Parcel comprise the
Development Parcel under the Pre-Development Agreement. As contemplated under Section 3
of the Pre-Development Agreement, Agency and Participant now desire to enter into this
Agreement specifically in relation to the Project. Within the time frames set forth in the Pre-
Development Agreement, Agency and Participant agree to use best efforts to enter into two
additional mutually acceptable Owner Participation Agreements, one regarding the Martin
Parcel, the other regarding the Coach Parcel. In accordance with the terms set forth below, as
of the Effective Date, this Agreement shall contain all rights and obligations of the parties in
connection with the Site only and the Pre-Development Agreement shall be deemed terminated
in its entirety with regard to the Site.
       B. [§102] Parties to this Agreement.
          1. [§103] The Agency
           The Agency is a public body, corporate and politic, exercising governmental
functions and powers, and organized and existing under the Community Redevelopment Law of
the State of California (Health and Safety Code Section 33000 et seq.) The principal office of
the Agency is located at 3232 Main Street, Lemon Grove, California 91945. The term "Agency"
shall mean any assignee or successor in interest to the Agency.
          2. [§104] The Participant
            The Participant is Citronica Lemon Grove, L.P., a California limited partnership,
whose General Partners are Hitzke Development Corporation, a California corporation and
Cascade Housing Association, a 501(c)(3) Oregon nonprofit organization. The principal address
of the Participant is 43460 Ridge Park Drive, Suite 206, Temecula, California 92590.
           Whenever the term "Participant" is used herein, such term shall include any
transferee, assignee or successor in interest as herein provided for in this section.
             The qualifications and identity of the Participant are of particular concern to the
Agency, and it is because of such qualifications and identity that the Agency has entered into
this Agreement. Prior to the issuance of the Certificate of Completion for the Project, as set forth
in Section 214 hereof, no voluntary or involuntary successor in interest of the Participant shall
acquire any rights or powers under this Agreement, and the Participant shall not assign all or
any part of this Agreement without the prior written approval of the Agency, which approval will
not be unreasonably withheld. This Agreement may be terminated by the Agency at any time if
there is any significant change (voluntary or involuntary) in the management or control of the
Participant prior to the completion of development of the Project as evidenced by the issuance
of a Certificate of Completion therefore.
            Notwithstanding the foregoing, the Agency hereby approves the following transfers of
interest in the Participant ("Approved Transferees"): the addition of tax credit investors as
members; transfer of any portion of the Project to an affiliate or nonprofit corporation, limited
liability company or other entity created by Participant of which HDC is the sole owner or a
general partner; and the acquisition of a investment member’s interest in the Participant.




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                                                                         Attachment C
   C. [§105] The Site
        The Site is shown on the "Map of the Site," attached to this Agreement as Exhibit A and
incorporated herein by reference, and as more particularly described in the "Legal Description of
the Site," attached hereto as Exhibit B and incorporated herein by reference.

II. [§200] IMPROVEMENT OF THE SITE
   A. [§201] Scope of Development
        Participant has acquired the Site and shall develop the Site with the Project. The Project
shall be defined as a mixed-use multi-family residential housing complex consisting of not more
than 55 income restricted rental dwelling units (each referred to herein as a "Unit”) and one
manager’s unit which will not be income restricted (together referred to as the “Residential
Component”) and approximately 3,400 square feet of retail/commercial space (the “Retail
Component”) pursuant to architectural, site and construction plans approved by the City, the
terms of this Agreement and the Scope of Development attached hereto as Exhibit C. Upon
completion of construction of the Project, the completed Units of the Residential Component
shall be rented to Eligible Households (as defined in Section 401 hereof) and the Retail
Component shall be rented at market rate. Participant shall diligently pursue development of the
Project in accordance with the Scope of Development and in accordance with the Schedule of
Performance attached hereto as Exhibit D. Existing Occupants of the Site shall be relocated by
Participant, at Participant's expense.
   B. [§202] Project Financing
        In addition to the Agency assistance provided for in Section 300 below, the Participant
intends to seek to utilize federal and Low-Income Housing Tax Credits (the "Tax Credit
Financing") for the Project. Participant and Agency specifically agree and warrant that Agency
assistance shall be used only for construction of the Residential Component. The Participant
shall complete all actions necessary to secure all approvals and commitments necessary to
effectuate the Tax Credit Financing, or other alternative funding, as the case may be, in an
amount satisfactory to undertake and complete the construction of the Project. Agency
acknowledges and agrees that in connection with the Tax Credit Financing, Participant may
transfer the Retail Component to an Approved Transferee (the "Retail Owner") and require the
partial release of the Agency Deed of Trust in order to release the Agency's lien against the
Retail Component in accordance with Section 305 below, provided that such partial release
shall be subject to Retail Owner granting the Agency a new deed of trust over the Retail
Component. Participant and Agency agree to fully cooperate with one another in connection
with such transfer and agree to take such further actions and to execute, deliver and file such
further documents, as may be reasonably necessary to carry out such transfer or to facilitate the
satisfaction of any conditions in connection with the Tax Credit Financing.
      Subject to the Agency assistance provided for hereunder, the cost of acquiring the Site
and constructing all improvements thereon shall be borne by the Participant.
   C. [§203] Development Review
        Within the time established in the Schedule of Performance (Exhibit D), the Participant
shall submit to the City all construction plans, drawings and related documents for the
development of the Project. Participant shall obtain all approvals and permits that may be
required under the City's plan check, development review and approval process for the
construction work to be completed on the Project. Participant shall design and construct the
Project so that it is in substantial compliance with the attached approved drawings.




                                                                                              -11-
Attachment C
        During the preparation of any drawings and plans for the development of the Project, the
Agency staff and the Participant shall meet with City staff and communicate and consult
informally and as frequently as is necessary to ensure that the formal submittal of any
documents to the City pursuant to this Section 204 can receive prompt consideration. The
Participant shall submit for Agency's review copies of all contracts for the construction,
engineering, architectural, marketing, sales and any other technical consultants for the Project.
Agency shall have the right to review any bid process that may be employed by Participant to
ensure compliance with all of the foregoing. Participant shall provide Agency with all information
Agency requests regarding any such bid process.
       D. [§204] Schedule of Performance
        Participant shall promptly begin and thereafter diligently prosecute to completion the
construction and development of the Project, as provided in the Scope of Development (Exhibit
C), within the times specified in the Schedule of Performance (Exhibit D) with such reasonable
extensions of said times as may be granted by the Agency. The Schedule of Performance
(Exhibit D) is subject to revision from time to time as mutually agreed upon in writing between
the Participant and the Agency. The Agency's Executive Director shall have the authority to
approve, on behalf of the Agency, any such extensions of time he or she deems reasonable and
appropriate.
       E. [§205] Bodily Injury and Property Damage, Insurance Indemnification
          During the periods of construction on the Site and until such time as Participant is
entitled to obtain the final Certificate of Completion from the Agency pursuant to Section 214
below indicating completion of the construction work required by this Agreement, the Participant
agrees to and shall indemnify, protect, defend and hold the Agency and the City, and their
respective agents, servants, employees and contractors, harmless from and against any and all
liability, loss, damage, costs or expenses (including reasonable attorneys' fees and court costs)
arising from or as a result of the death of any person or any accident, injury, loss or damage
whatsoever caused to any person or, to the property of any person which shall occur on or
adjacent to the Site and which shall be caused by any acts done thereon or any errors or
omissions of the Participant, or its agents, servants, employees or contractors. The Participant
shall not be responsible for (and such indemnity shall not apply to) any acts, errors or omissions
of the Agency or the City, or their respective agents, servants, employees or contractors. The
Agency and the City shall not be responsible for any acts, errors or omissions of any person or
entity except the Agency and the City and their respective agents, servants, employees or
contractors.
          Prior to the commencement of any work on the Site, the Participant shall furnish, or
cause to be furnished, to the Agency duplicate originals of policies or appropriate certificates of
insurance and relevant endorsements evidencing Participant’s and contractor’s protective
liability insurance on an occurrence basis insuring against bodily injury and property damage in
a combined single limit of liability per occurrence in the amount of $2,000,000, general
aggregate limit of $2,000,000 and builder's all risk insurance in an amount not less than the full
insurable value of the improvements to the Site on a replacement cost basis, naming the
Agency and the City as additional insureds. Participant shall also provide evidence of worker's
compensation insurance in the statutory amount required by law. Participant's contractor, and
subcontractors if any, shall also submit evidence of liability insurance in the same form and
amount as required by Participant in this Section 205.




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                                                                            Attachment C
   F. [§206] Local, State and Federal Laws
         Participant shall carry out the construction of the Project in conformity with all applicable
laws, including all applicable federal and state labor laws and regulations. Laws and
Regulations pertaining to the payment of prevailing wages can be found in the California Labor
Code Sections 1720-1815. Any contractor or subcontractor who performs work on the Project,
if applicable, must pay workers the prevailing wage for the appropriate trade, classification or
type of work. The current prevailing wage rates are determined by the California Director of
Industrial Relations and available from the Department of Industrial Relations website at:
http://www.dir.ca.gov/DLSR/statistics_research.html. Each contractor and subcontractor must
keep accurate payroll records and prevailing wage rates must be posted at the job site. Non-
compliance with prevailing wage requirements may subject a contractor and/or subcontractor to
penalties.
   G. [§207] City and Other Governmental Permits
       Prior to the commencement of construction (or any work related thereto) upon the Site,
the Participant shall secure, or cause to be secured, any and all permits which may be required
by the City or any other public utility or governmental agency affected by such construction.
   H. [§208] Rights of Access During Construction
        Representatives of the Agency and the City shall have the reasonable right of access to
the Site, with reasonable notice to the Participant, 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.
   I.   [§209] Anti-Discrimination During Construction
        The Participant, for itself and its successors and assigns, agrees that in the construction
and renovation of improvements on the Site provided for in this Agreement, the Participant will
not discriminate against any employee or applicant for employment because of race, color,
creed, religion, sex, marital status, ancestry or national origin.
   J. [§210] Prohibition Against Transfer and Assignment of Agreement
          Prior to the completion of the Project and the issuance of a Certificate of Completion
therefor, the Participant shall not, except as permitted by Section 104 of this Agreement, assign
or attempt to assign this Agreement or any rights herein, nor make any total or partial sale,
transfer, conveyance, assignment or lease of the Project, without the prior written approval of
the Agency, which approval shall not be unreasonably withheld. This prohibition shall not apply
subsequent to the completion of the Project as evidenced by the Agency’s issuance of its
Certificate of Completion. This prohibition shall not be deemed to prevent the granting of permits
to facilitate the construction and development of the Project. Further, this prohibition shall not be
deemed to prevent the rental of the Units to tenants and Eligible Households, subject to the
affordability and use restrictions provided for herein, or rental of any portion of the Retail
Component to a retail tenant or transfer of the Retail Component to the Retail Owner.
   K. [§211] Security Financing; Rights of Holders
        1. [§212] Holder Not Obligated to Construct
           The holder of any mortgage, deed of trust or other security interest providing
construction financing for the Project shall in no way be obligated by the provisions of this
Agreement to construct or renovate, or complete construction or renovation of, the
improvements, or to guarantee such construction or renovation or completion.




                                                                                                  -13-
Attachment C
       2. [§213] Notice of Default to Mortgage Deed of Trust or Other Security/Interest
Holders Right to Cure/Modifications
              Whenever the Agency shall deliver any notice or demand to the Participant with
respect to any breach or default by the Participant of this Agreement, the Agency shall at the
same time deliver to each investor limited partner to the Project, holder of record of any
mortgage, deed of trust or other security interest authorized by this Agreement (who has
previously made a request therefor) a copy of such notice or demand. Each such limited partner
and holder shall (insofar as the rights of the Agency are concerned) have the right, at its option
within ninety (90) days after the receipt of the notice, to cure or remedy or commence to cure or
remedy any such default and to add the cost thereof to the security interest debt and the lien on
its security interest. Nothing contained in this Agreement shall be deemed to permit or authorize
such holder to undertake or continue the construction of the Project, or the completion thereof
(beyond the extent necessary to conserve or protect the improvements or construction already
made) without first having expressly assumed the Participant's obligations to the Agency by
written agreement satisfactory to the Agency. The holder in that event must agree to complete,
in the manner provided in this Agreement, the construction of the improvements to which the
lien or title of such holder relates, and submit evidence satisfactory to the Agency that it has the
qualifications and financial responsibility necessary to perform such obligations. If a holder of
record of any mortgage, deed of trust of other security interest authorized by this Agreement
should, as a condition of providing the Tax Credit Financing or other financing necessary for the
development of all or a portion of the Project, requests any modification of this Agreement in
connection with the Retail Component or in order to protect its interest in the Project or this
Agreement, Agency shall consider such request in good faith consistent with the purpose and
intent of this Agreement and obligations of the parties under this Agreement.
       L. [§214] Certificate of Completion
        As more fully described in the Scope of Development, the Site will be developed with the
Project within the times set forth in the Schedule of Performance. When the obligations of
Participant under Sections 201, 203, 204 and 216 have been met and Participant has obtained
final approval stating that all conditions have been met for occupancy from the City after final
inspection, Participant may request that Agency furnish the Participant with a Certificate of
Completion for such work, in a form suitable for recording in the Official Records of San Diego
County, California, and substantially similar to that set forth in Exhibit E to this Agreement. The
Certificate of Completion shall be, and shall so state, conclusive determination of satisfactory
completion of the construction of the Project as required by this Agreement.
         After recording of the Certificate of Completion, any party then owning or thereafter
purchasing the Project or any portion thereof shall not (because of such ownership) incur any
obligation or liability under this Agreement, except that such party shall be bound by any
covenants contained in the grant deed, mortgage, deed of trust, covenants, conditions and
restrictions, contract or other instrument in accordance with the applicable provisions of Section
400 of this Agreement.
         A Certificate of Completion shall not constitute evidence of compliance with or
satisfaction of any obligation by the Participant to any holder of a mortgage or any insurer of a
mortgage securing money loaned to finance the improvements or any part thereof. A Certificate
of Completion is not notice of completion as referred to in California Civil Code Section 3093.
The Certificate of Completion provided for in this Section 214 is not a Certificate of Occupancy
or final approval of building permit issued by the City.




-14-
                                                                           Attachment C
   M. [§215] Records; Reporting Requirements
       Upon completion of the Project and immediately subsequent to the initial occupancy of
each unit in the Project, the Participant shall submit to the Agency all information required by the
Agency, including without limitation, for the Residential Component, the address, date of
completion of the Units, initial rent level, the income level of the Eligible Household and number
of persons in the Eligible Household, the number of bedrooms, and any other information
requested by the Agency.
        Thereafter, with respect to the Residential Component, the Participant shall submit to the
Agency annual reports during the term of the Affordable Housing Covenant, together with
supporting evidence, identifying the Eligible Household(s) occupying the Unit(s), the income and
family size of the new Eligible Households occupying the Unit(s), and the rental rate for each
Eligible Household occupying the Unit(s). Such annual reports shall be due by April 15 of each
year and, with reference to the Project, shall be sufficiently detailed to allow the Agency to
complete the annual report required by Health and Safety Code Section 33080.1(c)
        The Participant shall maintain in accordance with generally accepted accounting
principles, complete books and records relating to the acquisition, construction and
development of the Project and the rental of the Units within the Residential Component of the
Project. Upon request for examination by the Agency, the Participant at any time during normal
business hours, shall make available all of its records with respect to all matters covered by this
Agreement, including records relating to the Eligible Households. Participant shall permit the
Agency to audit, examine and make excerpts or transcripts from these records.
   N. [§216] Covenants, Conditions and Restrictions.
        At the time set forth in the Schedule of Performance, certain Covenants, Conditions and
Restrictions ("CC&R's") shall be recorded against the Site. The CC&R's shall be reviewed and
approved by the Executive Director of the Agency and Participant prior to their recordation.

III. [§300] AGENCY ASSISTANCE
   A. [§301] Site Pre-Development Loan.
        Pursuant to the Pre-Development Agreement, Agency has provided financial assistance
to Participant in the form of a predevelopment loan in the amount of $147,860.9. Agency shall
provide additional financial assistance to Participant in the amount of $401,431.1, which
together with the amount already provided will total $549,292 and shall be referred to herein as
the "Site Pre-Development Loan".
   B. [§302] Acquisition of Land; Site Acquisition Loan
        Pursuant to that certain Standard Offer, Agreement and Escrow Instructions for
Purchase of Real Estate (Non-Residential), dated as of March 1, 2008 (as amended, the
"Purchase Agreement") between Participant as "Buyer" and Constance J. Kidwell, Scott H.
Kidwell and Gina T. Fergen, as Trustees of the R.F. Fergen Equity Trust aka the R-Trust,
collectively as "Seller", Participant acquired the Site in fee simple on March 5, 2009 (the
"Acquisition Closing") for a total purchase price of $2,214,000 (the "Land Acquisition Costs").
Pursuant to the Pre-Development Agreement, Agency made a loan to Participant in the total
amount of the Land Acquisition Costs (the "Site Acquisition Loan") as evidenced by that certain
(a) Promissory Note Secured by Deed of Trust dated as of March 1, 2009 (the "Agency Loan
Note") and (b) Deed of Trust dated as of March 1, 2009 (the "Agency Deed of Trust") and
recorded in the official records of San Diego County on March 5, 2009 as Instrument No. 09-
109268 (collectively, the "Agency Loan Documents").




                                                                                                -15-
Attachment C
       C. [§303] Agency Loan
        The Site Pre-Development Loan and the Site Acquisition Loan are collectively referred to
herein as the "Agency Loan" (with an aggregate loan amount of $2,763,292). Upon
Participant’s satisfaction of the conditions for disbursement of the Agency Loan proceeds set
forth below, the Site Predevelopment Loan shall be cancelled and the Site Predevelopment
Loan amount of $549,292 shall be added to the Agency Loan Note. In addition, upon
disbursement of the entirety of the Agency Loan proceeds, Participant agrees to modify the
Agency Loan Documents to reflect the total amount of the Agency Loan ($2,763,292) in
accordance with the Modification of Note and Deed of Trust attached hereto as Exhibit F.
          The Agency shall disburse the Agency Loan proceeds only if no default exists under this
Agreement and no default would result from the disbursement or application thereof. In
addition, the Agency shall deliver the final installment of the Agency Loan to the Participant, only
if all of the following have occurred:
        (a) No default exists and no default would result from the disbursement or application
thereof;
       (b) The Participant shall execute and deliver to the Agency the Modification of Note and
Deed of Trust (Exhibit F) (in recordable form) evidencing the updated amount of the Agency
Loan; and
       (c) The Participant shall deliver to the Agency a binding commitment by a title insurance
company acceptable to the Agency to issue a modification to Agency's lender's policy of title
insurance issued by Stewart Title Guaranty Company (Policy No.: _________________) in
connection with Participant's acquisition of the Site, reflecting the updated loan amount of
$2,763,292.
         The Agency agrees that the Agency Deed of Trust (i) shall be subordinate to the Tax
Credit Financing and any other deed(s) of trust executed in favor of Participant's permanent and
construction mortgage lender(s), provided, that any such subordination shall be subject to the
provisions set forth in Section 305 hereof and paragraph 3 of the Addendum to Agency Deed of
Trust (Exhibit G); and (ii) upon transfer of the Retail Component to the Retail Owner, may be
partially reconveyed at the request of Participant in order to release the Agency's lien against
Retail Component.
      The Agency Loan shall be repaid pursuant to the terms and conditions set forth in the
Agency Loan Note.
       D. [§304] Affordable Housing Covenant
        Prior to and as a condition precedent to funding by the Agency of the balance of the
Agency Loan proceeds, the Participant shall also execute and deliver an affordable housing
covenant (the "Affordable Housing Covenant") to the Agency in the form substantially as set
forth in Exhibit H hereto and incorporated herein by reference. The Affordable Housing
Covenant shall be recorded against the entire Site but will specifically exclude the Retail
Component.
       E. [§305] Subordination of Agency Loan
        The Agency agrees to subordinate the Agency Deed of Trust provided for in Section
303, above, to financing obtained by Participant through the Tax Credit Financing, or alternative
financing obtained by Participant; provided that any such subordination shall be subject to the
provisions set forth in this Section 305 and paragraph 3 of the Addendum to the Agency Deed of
Trust (Exhibit G). The Agency shall have the right to review and approve the terms and
conditions of any such senior financing, which approval shall not be unreasonably withheld. The



-16-
                                                                           Attachment C
Agency shall have the right to record a request that the Agency receive notice of any default by
the Participant under the Tax Credit Financing or other financing obtained by the Participant
with respect to the Project. To implement any such subordination, the Agency agrees to
cooperate with the Participant and execute such subordination agreements and/or intercreditor
agreements that may be reasonably required, in form and content approved by Agency counsel.

IV. [§400] USE OF THE SITE
   A. [§401] Residential Component
        The Participant covenants and agrees for itself, its successors, its assigns and every
successor in interest, that fifty-five (55) of the Units constructed on the Site shall be rented to
qualified low income persons and families whose income does not exceed the limits set forth
below ("Eligible Households") in compliance with the Affordable Housing Covenant.
          The maximum housing cost of the Eligible Households for each of the income levels set
forth above must comply with the most restrictive of: i) the regulations promulgated by the
California Department of Housing and Community Development Sections 6910-6932 in Title 25
of the California Code of Regulations, governing the Agency's set aside housing fund; ii) the
eligibility requirements established by the Tax Credit Financing; and iii) the regulatory
agreement relating to any other federally administered program providing financing for the
Project.
         Rental restrictions establishing the criteria for rental of the Units to Eligible Households
are contained in the Affordable Housing Covenant to be recorded against the Site and
applicable to the Units. The Units shall remain affordable for the longer of: (a) fifty five (55)
years from the date of recordation of the Affordable Housing Covenant, or (b) until payment in
full of all amounts owed to the Agency under the Agency Loan Note.
   B. [§402] Retail Component
       The Participant covenants and agrees for itself, its successors, its assigns and every
successor in interest, that all of the Retail Component of the Site shall be in compliance with the
recorded CC&R’s.
   C. [§403] Property Management; Maintenance of the Project
       Within the time set forth in the Schedule of Performance (Exhibit D), the Participant shall
prepare and enter into an agreement with a property management company approved by the
Agency to manage the Project. The Participant shall submit a copy of such agreement to the
Agency, provided the Agency shall not have the right to approve or disapprove such agreement
except to ensure compliance of such agreement with the provisions of this Agreement and the
Affordable Housing Covenant. The property management and maintenance agreement shall
name the Agency as a third-party beneficiary permitting the Agency the right to enforce the
Agreement. The Participant shall promptly notify the Agency in the event there is any change in
the property management company managing the Project.
       The Participant covenants that it shall maintain, or cause to be maintained, the Site and
the Project, in a manner consistent with the provisions set forth therefor in the Lemon Grove
Municipal Code and shall keep the Site reasonably free from any accumulation of debris or
waste materials prior to and after completion of the Project.
       If, at any time, Participant fails to maintain the Site, the Agency shall have the right to
take necessary corrective action pursuant to the provisions set forth in the Agency Loan Note,
and the Affordable Housing Covenant.




                                                                                                 -17-
Attachment C
       Failure by Participant to maintain, or cause to be maintained, the Site in the condition
provided in this Section 402 shall constitute a default under the Agency Loan Note and the
Affordable Housing Covenant.
       D. [§404] Obligation to Refrain from Discrimination
        The Participant covenants and agrees for itself, its successors, its assigns and every
successor in interest to the Site, the Units or any part thereof, that there shall be no
discrimination against or segregation of any person or group of persons on account of race,
color, creed, religion, sex, marital status, physical handicap, medical condition, sexual
orientation, source of income, ancestry or national origin in the sale, lease, sublease, transfer,
use, occupancy, tenure or enjoyment of the Site, nor shall the Participant or any person claiming
under or through the Participant establish or permit any such practice or practices of
discrimination or segregation with reference to the selection, location, number, use or
occupancy of tenants, lessees, subtenants, sublessees or vendees of the Units. The foregoing
covenants shall run with the land in accordance with Section 33438 of the Health and Safety
Code and shall remain in effect in perpetuity.
       E. [§405] Form of Nondiscrimination and Nonsegregation Clause
        The Participant shall refrain from restricting the rental; sale or lease of any portion of the
Site on the basis of race, color, creed, religion, sex, marital status, physical handicap, medical
condition, sexual orientation, source of income, ancestry or national origin of any person.
Pursuant to Sections 33337 and 33436 of the Health and Safety Code or any successor statute,
all such deeds, leases or contracts shall contain or be subject to substantially the following
nondiscrimination or nonsegregation clauses:
        1. In deeds: "The grantee herein covenants by and for himself or herself, his or her
heirs, executors, administrators and assigns, and all persons claiming under or through them,
that there shall be no discrimination against. or segregation of, any person or group of persons
on account of race, color, creed, religion, sex, marital status, physical handicap, medical
condition, sexual orientation, source of income, national origin or ancestry in the sale, lease,
sublease, transfer, use, occupancy, tenure or enjoyment of the land herein conveyed, nor shall
the grantee, or any person claiming under or , through him or her, establish or permit any such
practice or practices of discrimination or segregation with reference to the selection, location,
number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the land
herein conveyed. The foregoing covenants shall run with the land."
        2. In leases: "The lessee herein covenants by and for himself or herself, his or her
heirs, executors, administrators and assigns, and all persons claiming under or through him or
her, and this lease is made and accepted upon and subject to the following conditions:
That there shall be no discrimination against or segregation of any person or group of persons
on account of race, color, creed, religion, sex, marital status, physical handicap, medical
condition, sexual orientation, source of income, national origin or ancestry in the leasing,
subleasing, transferring, use, occupancy, tenure or enjoyment of the land herein leased, nor
shall the lessee himself or herself, or any person claiming under or through him or her, establish
or permit any such practice or practices of discrimination or segregation with reference to the
selection, location, number, use or occupancy of tenants, lessees, sublessees, subtenants or
vendees in the land 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, marital status, physical
handicap, medical condition, sexual orientation, source of income, national origin or ancestry in
the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land, nor shall




-18-
                                                                           Attachment C
the transferee , or any person claiming under or through him or her, establish or permit any such
practice or practices of discrimination or segregation with reference to the selection, location,
number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the land."
   F. [§406] Rights of Access
        For the purposes of assuring compliance with this Agreement, representatives of the
Agency and the City shall have the reasonable right of access to the Site, with reasonable
notice to Participant and without charges or fees for the purpose of inspection of the Site.
   G. [§407] Effect and Duration of Covenants
        The covenants contained in Section 401 of this Agreement shall be deemed to run with
the land in accordance with Section 33334.3(f) of the Health and Safety Code or any successor
statute and shall remain in effect for the longer of: (a) a period of not less than fifty five (55)
years from the date of recordation of the Affordable Housing Covenant against the Site, or (b)
until payment in full of all amounts owed to the Agency under the Agency Loan Note. The
covenants against discrimination contained in Sections 404 and 405 of this Agreement shall be
deemed to run with the land in accordance with Section 33438 of the Health and Safety Code or
any successor statute and shall remain in effect in perpetuity. The covenants established in this
Agreement shall, without regard to technical classification and designation, be binding on the
part of the Participant and any successors and assigns to the Site or any part thereof, and the
tenants, lessees, sublessees and occupants of the Site, for the benefit of and in favor of the
Agency, the City and their successors or assigns and may be enforced by the Agency, the City
and their successors and assigns.

V. [§500] DEFAULTS AND REMEDIES
   A. [§501] Defaults
        Failure or delay by either party to perform any term or provision of this Agreement
constitutes a default under this Agreement. The nondefaulting party shall notify the defaulting
party that a default exists and that the defaulting party must cure same within thirty (30) days of
receipt of the notice of default. The party who so fails or delays must immediately commence to
cure, correct or remedy such failure or delay, and shall complete such cure, correction or
remedy with reasonable diligence and during any period of curing shall not be in default.
Notwithstanding the foregoing, any default in the payment of any amounts owed under the
Agency Loan Note shall not constitute a default of the Participant hereunder so long as there
are any amounts owed under the Tax Credit Financing, or any other senior debt approved by
the Agency, and any such event shall be governed by the provisions of the intercreditor
agreement or other subordination agreement executed by the Agency with respect to the Tax
Credit Financing or other senior debt.
   B. [§502] Legal Actions
        In addition to any other rights or remedies, either party may institute legal action to cure,
correct or remedy any default, to recover damages for any default or to obtain any other remedy
consistent with the purpose of this Agreement. Such legal actions must be instituted in the
Superior Court of the County of San Diego, State of California, in any other appropriate court in
that county, or in the Federal District Court in the Southern District of California.
        The nondefaulting party may also, at its option, cure the breach and sue in any court of
proper jurisdiction to collect the reasonable costs incurred by virtue of curing or correcting the
defaulting party's breach. Further, the nondefaulting party may file legal action to require the
defaulting party to specifically perform the terms and conditions of this Agreement.




                                                                                                 -19-
Attachment C
       C. [§503] Applicable Law
      The laws of the State of California shall govern the interpretation and enforcement of this
Agreement.
       D. [§504] Rights and Remedies are Cumulative
        Except as otherwise expressly stated in this Agreement, the rights and remedies of the
parties are cumulative, and the exercise by either party of one or more of such rights or
remedies shall not preclude the exercise by it, at the same time or different times, of any other
rights or remedies for the same default or any other default by the other party.
       E. [§505] Damages
        If either party defaults with regard to any of the provisions of this Agreement, the non-
defaulting party shall serve written notice of such default upon the defaulting party. If the default
is not commenced to be cured within thirty (30) days after service of the notice of default and is
not cured promptly in a continuous and diligent manner within a reasonable period of time after
commencement, the defaulting party shall be liable to the non-defaulting party for damages
caused by such default.
       G. [§506] Specific Performance
        If either party defaults with regard to any of the provisions of this Agreement, the non-
defaulting party shall serve written notice of such default upon the defaulting party. If the default
is not commenced to be cured within thirty (30) days after service of the notice of default and is
not cured promptly in a continuous and diligent manner within a reasonable period of time after
commencement, the non-defaulting party, at its option, may thereafter (but not before)
commence an action for specific performance of the terms of this Agreement pertaining to such
default.

VI. [§600] GENERAL PROVISIONS
       A. [§601] Conflicts of Interest
        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 this Agreement which affects his personal interests or the interests of any
corporation, partnership or association in which he is directly or indirectly interested.
       The Participant 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.
       B. [§602] Nonliability of Agency Officials and Employees
       No member, official or employee of the Agency or the City shall be personally liable to
the Participant in the event of any default or breach by the Agency or for any amount which may
become due to the Participant or on any obligations under the terms of this Agreement.
       C. [§603] Force Majeure; Extension of Times of Performance
       In addition to specific provisions of this Agreement, performance by the parties
hereunder shall not be deemed to be in default and all performance and dates shall be
extended where delays or defaults are due to strikes, lock-outs, riots, floods, earthquakes, fires,
casualties, freight embargoes, lack of transportation, governmental restrictions, litigation beyond
the control or without the fault the party seeking relief, unusually severe weather, acts or
omissions of the other party, acts or the failure to act of the City or any other public or
governmental agency or entity (except that acts or the failure to act of Agency shall not excuse




-20-
                                                                        Attachment C
performance by Agency), or any other causes without the fault of the party claiming an
extension of time to perform. Notwithstanding anything to the contrary in this Agreement, an
extension of time for any such cause shall be for the period of the enforced delay and shall
commence to run from the time of the commencement of the cause, if the notice by the party
claiming such an extension is sent to the other party within thirty (30) days of the
commencement of the cause. Times of performance under this Agreement may also be
extended in writing by the written mutual agreement of Agency and Participant.

VII. [§700] ENTIRE AGREEMENT, WAIVERS AND AMENDMENTS
   This Agreement is executed in three (3) originals each of which is deemed to be an original.
This Agreement comprises pages 1 through 18, inclusive and Exhibits A through H which
constitute the entire understanding and agreement of the parties with respect to the Project.
   This Agreement may be executed in counterparts, each of which, when taken together, shall
constitute an original.
   This Agreement integrates all of the terms and conditions mentioned herein or incidental
hereto and supersedes all negotiations or previous agreements between the parties with
respect to all or any part of the subject matter hereof.
    All waivers of the provisions of this Agreement must be in writing and signed by the
appropriate authorities of the Agency and the Participant, and all amendments hereto must be in
writing and signed by the appropriate authorities of the Agency and the Participant.

VIII.   [§800] TIME FOR ACCEPTANCE OF AGREEMENT BY AGENCY
    This Agreement, when executed by the Participant and delivered to the Agency, must be
authorized, executed and delivered by the Agency within thirty (30) days after the date of
signature by the Participant or this Agreement shall be void, except to the extent that the
Participant may consent in writing to further extensions of time for the authorization, execution
and delivery of this Agreement. The effective date of this Agreement (the "Effective Date") shall
be the date first set forth above.

IX. [§900] NOTICES
    Any notice, demand, request, consent, approval or communication that either party desires
or is required to give to the other party shall be in writing and shall be deemed given as of the
time of hand delivery to the addresses set forth below, or three days after deposit into the
United States mail, postage prepaid, by registered or certified mail, return receipt requested.
Unless notice of a different address has been given in accordance with this Section, all such
notices shall be addressed as follows:




                                                                                             -21-
Attachment C
       If to Agency, to:       Lemon Grove Community Development Agency
                       3232 Main Street
                       Lemon Grove, CA 91945
                       Attn: Executive Director
                       Tel: (619) 825-3800
                       Fax: (619) 825-3804
       If to Participant, to:       Citronica Lemon Grove, L.P.
                        c/o Hitzke Development Corporation
                        43460 Ridge Park Drive, Suite 260
                        Temecula, CA 92590
                        Attn.: Ginger Hitzke
                        Tel.: (951) 699-8400
                        Fax: (619) 923-3544
                                         Cascade Housing Association
                                         87460 Cedar Flat Road
                                         Springfield, OR 97478
                                         Attn: Kelly Williams
                                         Tel: (541) 726-6181
                                         Fax: (541) 747-1535
       With a Copy to:       Allen Matkins Leck Gamble Mallory & Natsis LLP
                     515 South Figueroa Street, 9th Floor
                     Los Angeles, CA 90071-3398
                     Attn: Claudia Gutierrez, Esq.
                     Tel: (213) 622-5555
                     Fax: (213) 620-8816
                          [SIGNATURES APPEAR ON FOLLOWING PAGE]




-22-
                                                                   Attachment C
   IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
and year first set forth above.
   LEMON GROVE COMMUNITY DEVELOPMENT AGENCY


   By:__________________________
   Its: Executive Director

   ATTEST: _____________________________


   APPROVED AS TO FORM:


   By:__________________________
      Agency Counsel


   CITRONICA LEMON GROVE, L.P., a California Limited Partnership

   By: Hitzke Development Corporation, a California corporation
   Its: Administrative General Partner


   By:_________________________
      Ginger Hitzke
      Its: President


   By: Cascade Housing Association
   Its: Managing General Partner


   By:_________________________
      Kelly Williams
      Its: Secretary-Treasurer




                                                                                 -23-
Attachment C
               EXHIBIT A
               SITE PLAN




-24-
                                                                           Attachment C
                                            EXHIBIT B
                              LEGAL DESCRIPTION OF THE SITE

APNS 480-043-04, 480-043-05, and 480-043-06
The land referred to herein is situated in the State of California County of San Diego, City of
Lemon Grove, and described as follows:
Parcel A:
That portion of Lot 11 in Subdivision No. 3 of Lot 12, Ex-Mission Rancho, in the County of San
Diego, State of California, according to Licensed Survey Map No. 5, filed in the office of the
County Recorder of said San Diego County, described as follows:
Commencing at the northeast corner of said Lot 11; thence south 89°04’00” west along the
northerly line of said Lot, a distance of 433.00 feet to the northwest corner of land conveyed to
Sadie Rittenmeyer by deed dated January 6, 1947, and recorded in book 2411, page 108 of
official records; thence south 0°41’00” west along the westerly line thereof, 108.25 feet to the
southwest corner of said Rittenmeyer’s land; thence north 89°04’00” east along the southerly
line of said land 238 feet to the southeast corner thereof; thence north 0°41’00” east along the
easterly line of said land 30.50 feet to the true point of beginning; thence leaving said easterly
line of south 89°16’00” east 161.69 feet to an intersection with the easterly line of said Lot 11;
thence northeasterly along said easterly line 84.56 feet to the northeast corner of said Lot;
thence south 89°04’00” west along the north line of said Lot to an intersection with a line bearing
north 0°41’00” east from the true point of beginning; thence south 0°41’00” west to the true point
of beginning.
Excepting therefrom the following described land.
Beginning at the northeast corner of said Lot 11; thence (1) from a tangent bearing south
26°02’21” west along the easterly line of said Lot 11, said easterly line being a curve concave
easterly having a radius of 1,532.69 feet, through a central angle of 1°52’47”, a distance of
50.28 feet to a point of cusp; thence (2) from a tangent bearing north 24°09’34” east, along a
curve concave southwesterly having a radius of 32.00 feet, through a central angle of
114°39’11”, a distance of 64.03 feet to a point of cusp on the north line of said Lot 11; thence (3)
tangent to last said curve, north 89°30’ east, 50.80 feet to the point of beginning.
Parcel B:
That portion of Lot 11, subdivision no. 3 Lot 12 of Ex-Mission Rancho, in the County of San
Diego, State of California, according to Licensed Survey Map No. 5, filed in the office of the
county recorder of San Diego County, described as follows:
Commencing northeast corner of said Lot 11; thence south 89°04’00” west, along the northerly
line of said Lot, a distance of 433 feet to the northwest corner of land conveyed to Sadie
Rittenmeyer by deed dated January 8, 1947, and recorded in book 2411, page 108 of official
records; thence south 0°41’00” west along the westerly line thereof 108.25 feet to the southwest
corner of said Rittenmeyer’s lands; thence north 89°04’00” east, along the southerly line of said
land 238 feet to the southeast corner thereof; said corner being the true point of beginning;
thence north 0°41’00” east, along the easterly line of said Rittenmeyer’s land 30.50 feet; thence
leaving said easterly line south 89°16’00” east, 161.69 feet to an angle point in the easterly line
of said Lot 11; thence southeasterly along said easterly line to the most easterly corner of land
conveyed to Lynda May Maupin, by deed dated May 16, 1941, and re-recorded in book 1183,
page 325 of official records; thence along portions of the northerly and easterly boundaries of




                                                                                                  -25-
Attachment C
said Maupin’s land, north 89°16’00” west, 131.47 feet and north 0°41’00” east, 41.63 feet to the
true point of beginning.
Parcel C:
That portion of Lot 11 in Subdivision No. 3 of Lot 12 of Ex-Mission Rancho, in the County of San
Diego, State of California, according to Licensed Survey Map No. 5, filed in the office of the
county recorder, March 23, 1892 described as follows:
Beginning at the northeast corner of said Lot 11; thence south 89°04’ west along the northerly
line thereof 433 feet the northwest corner of land conveyed to Joseph Caplew by deed dated
June 6, 1894 and recorded in book 231, page 259 of deeds, records of San Diego County;
thence south 0°41’ west along the westerly line thereof 216.50 feet to the southwest corner of
land so conveyed to Caplew; thence north 0°41’ east along the said westerly line 108.25 feet;
thence north 89°4’ east 238 feet; thence south 0°41’ west 41.63 feet to the true point of
beginning, being a point in the easterly line of the land conveyed to Gladya Williams by deed
recorded 4 20, 1956 in book 6068, page 18 of official records; thence south 89°16’ east 131.47
feet to the easterly line of said Lot 11; thence southerly along said easterly line 67.14 feet to the
southeast corner of said Caplew’s land; thence south 8904’ west along the southerly line of
said land to the said easterly line of Williams land; thence north 041’ east along said easterly
line to the point of beginning.
Parcel D:
All that portion of Lot 11 in Subdivision No. 3 in Tract 12 of the partition of the Rancho Mission
of San Diego, in the County of San Diego, State of California, according to Licensed Surveyor’s
Map No. 5, filed in the office of the recorder of said San Diego County, March 23, 1892,
described as follows:
Commencing at a point which is 423.5 feet north of a point on the south line of said Lot 11 which
last mentioned point is 795 feet east of the southwest corner of said Lot 11; thence south 80
feet; thence east to the easterly line of said Lot 11; thence northerly along the easterly line of
said Lot 11 to a point directly east of the point of commencement; thence west to the point of
commencement.
Excepting therefrom that portion described as follows.
Beginning at a point which is 416.5 feet north of a point on the south line of said Lot 11 which
last mentioned point is 795 feet east of the southwest corner of said Lot 11; thence south 73.0
feet; thence east to the easterly line of said Lot 11; thence northerly along the easterly line of
said Lot 11 to a point directly east of the point of beginning; thence west to the point of
beginning.
Also excepting therefrom that portion described as follows:
Beginning at a point on the northerly line of said Lot 11 distant thereon south 89°04’00” west,
195.00 feet from the northeast corner thereof, said point being the northwest corner of land
conveyed to Henry E. Lange, et ux, by deed dated October 11, 1955 and recorded in book
5839, page 332 of official records; thence south 0041’00” west along the westerly line of said
land and along the westerly line of land conveyed to Jack B. Lange, et ux, by deed December
22, 1955 recorded in book 5935, page 228 of official records, a distance of 149.88 feet to the
southwest corner of said last mentioned Lange land; thence continuing south 0041’00” west
along the southerly prolongation of the west line of said land 73.36 feet to the northerly
boundary of land conveyed to Sverre N. Lohne by deed dated August 26, 1995 and recorded in
book 5780, page 281 of official records; thence west along said northerly boundary to the
northwest corner of said land being a point on the easterly line of land conveyed to A.F. Sonks



-26-
                                                                         Attachment C
by deed dated August 15, 1942 and recorded in book 1390, page 180 of official records; thence
northerly along the easterly line of said land 7.00 feet to the northeast corner thereof; thence
south 8905’00” west along the northerly line of said land 3.00 feet to the southeast corner of
land conveyed to Arther Takanashi, et ux, by deed dated September 11, 1947 and recorded in
book 2514, page 285 of official records; thence north 00°41’00” east along the easterly line of
said land 59.00 feet to the northeast corner thereof being a point on the southerly boundary of
land conveyed to John H. Bolster, et ux, by deed dated October 25, 1949 and recorded in book
3367, page 54 of official records; thence along the southerly and easterly boundary of said land,
north 89°04’00” east, 84.00 feet and north 00°41’00” east, 157.24 feet to the northerly line of
said Lot 11; thence north 89°04’00” east along said northerly line 17.00 feet to the point of
beginning.
(End of Legal Description)


                                           EXHIBIT C
                                  SCOPE OF DEVELOPMENT

I.   PRIVATE DEVELOPMENT
     A. General
       The Participant agrees that the Site shall be developed and improved in accordance with
the provisions of this Agreement, including, without limitation, Planned Development Permit
PDP08-002, and the plans, drawings and related documents approved by the Agency and/or
City pursuant hereto. The Participant, its architect, engineer and contractors, shall work with
Agency staff to coordinate the overall design, architecture and color of the improvements to be
constructed on the Site.
     B. Construction of the Improvements
      The Participant shall construct on the Site the Project as described in Section 201 and
shown on the Planned Development Permit PDP08-002. The units shall consist of:
        ( 4)   Studio Units
        (16)   1 Bedroom Units
        (16)   2 Bedroom Units
        (20)   3 Bedroom Units
     C. Architecture and Design
        The improvements shall be of high architectural quality, shall be well landscaped, and
shall be effectively and aesthetically designed. The shape, scale of volume, and exterior finish
of the units must be consonant with, visually related to, physically related to, and an
enhancement of adjacent buildings within the neighborhood.
     D. Applicable Codes
        The Participant's improvements shall be constructed in accordance with the Uniform
Building Code (with City modifications) and the Municipal Code.




                                                                                             -27-
Attachment C
       E. On Site Demolition and Clearance
      1. On the Site, demolish or salvage, clear, grub and remove (as called for in the
approved construction plans) existing buildings, pavements, walks, curbs, gutters and other
improvements; and
       2. Remove, plug and/or crush in place utilities, such as storm sewers, sanitary sewers,
water systems, electrical overhead and underground systems and telephone and gas systems
located on the Site, as may be required following any necessary relocation of the utilities.
       F. Compaction, Finish Grading and Site Work
      1. The Participant shall compact, finish grade and do such site preparation as is
necessary for the construction of the Participant's Project.




-28-
                                                                       Attachment C
                                          EXHIBIT D
                              SCHEDULE OF PERFORMANCE


       Approximate Date                     Event

  December 20, 2009               In accordance with TCAC for 9% tax credits which may be
                                  awarded on August 5, 2009, Developer pulls building
                                  permits and obtains construction loan and tax credit equity
                                  contribution
                                  Recordation of CC&R's

  June, 2011                      Construction complete

  November, 2011                  Project 100% occupied

  April, 2012                     Developer obtains permanent loan and tax credit equity
                                  contribution.


If developer does not receive an award of tax credits in the May 2009 funding round, Developer
shall have an ability to apply for funding for up to 36 additional months with Construction
Completion, Occupancy and Permanent Loan Conversion to extend.




                                                                                            -29-
Attachment C
                                           EXHIBIT E
                         FORM OF CERTIFICATE OF COMPLETION


RECORDED AT THE REQUEST OF AND
WHEN RECORDED RETURN TO:




                             CERTIFICATE OF COMPLETION OF
                            CONSTRUCTION AND IMPROVEMENT

        WHEREAS, the LEMON GROVE COMMUNITY DEVELOPMENT AGENCY (hereinafter
referred to as the "Agency") and CITRONICA LEMON GROVE, L.P., a California limited
partnership ("Participant"), entered into that certain Owner Participation Agreement for Citronica
One dated _____________________(the "OPA"); and
       WHEREAS, pursuant to the OPA, the Participant has developed that certain real
property legally described in the attached Exhibit A (herein, the "Site") by constructing, or
causing to be constructed, the multi-family residential housing project and retail space (the
"Project") required under the OPA; and
        WHEREAS, pursuant to Section 214 of the OPA, promptly after completion of
construction of the Project (as set forth in the OPA) to be completed by the Participant and upon
the written request by the Participant, and upon Agency’s acceptance of the written request, the
Agency is required to furnish the Participant with a Certificate of Completion relating to such
construction work; and
       WHEREAS, the issuance by the Agency of the Certificate of Completion shall be
conclusive evidence that the Participant has complied with the terms of the OPA pertaining to
construction of the improvements upon the Site; and
       WHEREAS, the Participant has requested that the Agency furnish the Participant with
the Certificate of Completion; and
      WHEREAS, the Agency has conclusively determined that construction of the
improvements on the Site as required by the OPA has been satisfactorily completed;
       NOW, THEREFORE:
        1.     As provided in the OPA, the Agency does hereby certify that construction of the
multi-family residential units and appurtenant areas on the Site and the Retail Component as
required by the OPA has been fully and satisfactorily performed and completed.
        2.    The OPA is therefore of no further force and effect, and all rights, duties,
obligations and liabilities of the Agency and the Participant thereunder with respect to the Site
shall cease to exist. Any continuing and existing rights, duties, obligations and liabilities



-30-
                                                                          Attachment C
pertaining to the Site are provided in the Agency Loan Note provided for in Section 303 of the
OPA, and the Affordable Housing Covenant, Construction and Permanent Financing Loan Deed
of Trust executed by the Participant in favor of the Agency which have been recorded against
the Site.
        3.      This Certificate of Completion shall not be deemed or construed to constitute
evidence of compliance with or satisfaction of any obligation of the Participant to any holder of a
mortgage, or any insurer of a mortgage, securing money loaned to finance the construction of
the improvements on the Site. This Certificate of Completion is not a notice of completion as
referred to in Section 3093 of the California Civil Code.
      IN WITNESS WHEREOF, the Agency has executed this Certificate of Completion as of
_____________________, 200_____


   LEMON GROVE COMMUNITY DEVELOPMENT AGENCY


   By:__________________________
   Its: Executive Director


Accepted by
   CITRONICA LEMON GROVE, L.P., a California Limited Partnership

   By: Hitzke Development Corporation, a California corporation
   Its: Administrative General Partner


   By:_________________________
      Ginger Hitzke
      Its: President


   By: Cascade Housing Association
   Its: Managing General Partner


   By:_________________________
      Kelly Williams
      Its: Secretary-Treasurer




                                                                                               -31-
Attachment C
                                           EXHIBIT F
                   FORM MODIFICATION OF NOTE AND DEED OF TRUST

RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:



Lemon Grove Community Development Agency
3232 Main Street
Lemon Grove, California 91945
Attention: Executive Director

____________________________________________________________________________

                      MODIFICATION OF NOTE AND DEED OF TRUST

THIS MODIFICATION OF NOTE AND DEED OF TRUST (this "Agreement") is executed as of
___________, 2009, between Lemon Grove Community Development Agency ("Lender") and
______________________ ("Borrower"), with reference to the following facts:

        A. Borrower and Lender executed that certain Owner Participation Agreement for
Citronica _____dated as of ___________, 2009 (the "OPA"), pursuant to which Lender agreed
to make a loan (the "Loan") to Borrower in connection with the acquisition and development of
certain real property located in the City of Lemon Grove, County of San Diego, State of
California, more particularly described in the Deed of Trust (as hereinafter defined). The Loan is
evidenced by that certain Note Secured by Deed of Trust (the "Original Agency Note") dated
as of ___________, 2009, in the original principal amount of $_______________ (the "Original
Loan Amount"), executed by Borrower and payable to Lender. The Original Note is secured by
a Deed of Trust (the "Agency Deed of Trust") of even date therewith, executed by Borrower,
as Trustor, for the benefit of Lender, as Beneficiary, which Deed of Trust was recorded on
 __________, 2009 as Instrument No. ______________ of the Official Records of San Diego
County, California (the "Official Records"). The Deed of Trust encumbers a fee estate in
certain real property more particularly described therein and on Exhibit A hereto.

      B. The OPA, the Note, and the Deed of Trust, are referred to herein collectively as the
"Loan Documents".

      C. Pursuant to the OPA, Lender has agreed to increase the Original Loan Amount by
$_____________ to total of $_______________.

       NOW, THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:

        Modification of Note. The Original Agency Note is amended and restated in its entirety
as set forth in the Amended and Restated Note Secured by Deed of Trust dated concurrently
herewith, executed by Borrower in favor of Lender (the "Agency Note").




-32-
                                                                            Attachment C
         Modification of Agency Deed of Trust. Section (a) in the recitals of the Agency Deed of
Trust is deleted in its entirety and replaced with the following: "Payment of the Note Amount
(i.e., $__________________)".

        Conforming Modifications. All references in the Agency Note and the Agency Deed of
Trust to the amount of the Loan are modified to refer to the principal amount of
$_____________. The Agency Note, and the Agency Deed of Trust are each hereby modified
to provide that all references therein to the "Agency Note," and the "Agency Deed of Trust" shall
be deemed to refer to the Agency Note and the Agency Deed of Trust as amended hereby. The
Agency Deed of Trust is hereby modified to provide that the Agency Deed of Trust secures the
Agency Note, as amended hereby. It is the intention of the parties hereto that this Agreement
shall be deemed to form a part of the Agency Note and a part of the Agency Deed of Trust and
shall always be construed as amending the Agency Note and the Agency Deed of Trust; except
as specifically supplemented and amended hereby.

       Confirmation of Obligations. Except to the extent modified by this Agreement, Borrower
hereby confirms each of the covenants, agreements and obligations of Borrower set forth in the
Loan Documents.

       Counterparts. This Agreement may be executed in any number of counterparts, each of
which when executed and delivered to Lender will be deemed to be an original, and all of which,
taken together, will be deemed to be one and the same instrument.

        Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of California. If any court of competent jurisdiction determines any
provision of this Agreement to be invalid, illegal or unenforceable, that portion shall be deemed
severed from the rest, which shall remain in full force and effect as though the invalid, illegal or
unenforceable portion had never been a part hereof.




                                                                                                 -33-
Attachment C
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth
above.
                                          BORROWER:
                                          _______________________________
                                          _______________________________


                                          By:
                                          Name:________________________
                                          Title:_________________________


                                          By:
                                          Name:________________________
                                          Title:_________________________

                                          LENDER:
                                          LEMON GROVE COMMUNITY DEVELOPMENT
                                          AGENCY


                                          By:
                                          Name:________________________
                                          Title:_________________________


ATTEST: _____________________________

APPROVED AS TO FORM:


By:__________________________
       Agency Counsel




-34-
                                                                          Attachment C
                                           EXHIBIT G
                         FORM OF ADDENDUM TO DEED OF TRUST
                               ADDENDUM TO DEED OF TRUST

This Addendum to Deed of Trust is part of the Deed of Trust dated ______________, 2009 to
which it is attached between CITRONICA LEMON GROVE, L.P., a California limited
partnership, as Trustor, and the COMMUNITY DEVELOPMENT AGENCY OF THE CITY OF
LEMON GROVE, as Beneficiary. The following provisions are made a part of the Deed of Trust:
    1. No Discrimination. The Trustor 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, age, marital status, physical handicap, medical
condition, sexual orientation, source of income, national origin or ancestry in the sale, lease,
sublease, transfer, use, occupancy, tenure or enjoyment of the Property, nor shall the Trustor
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 Property.
   2. Nondiscrimination Clauses. All deeds, leases or contracts made relative to the Property,
the improvements thereon or any part thereof, shall contain or be subject to the
nondiscrimination clauses set forth in California Health and Safety Code Section 33436.
    3. Subordination. Beneficiary agrees that the terms and conditions of the Note and this
Deed of Trust shall be subject to and subordinate to the terms and conditions of financing
obtained by Trustor through a lender acceptable to Beneficiary for the construction of the
Residential Component (as defined in the Owner Participation Agreement between Trustor and
Beneficiary dated as of _________, 2009 (the "OPA")); provided that if such alternative
construction financing is not provided pursuant to an adopted federal or state program, such
lender shall agree to include in its deed of trust the following conditions: (i) Beneficiary shall
receive any notices of default issued by such lender to Trustor; (ii) Beneficiary shall have the
right to cure any default by Trustor within forty-five (45) days after a notice of default; (iii)
Beneficiary shall have the right to foreclose under its Deed of Trust without the lender
accelerating its debt, provided Beneficiary has cured or is attempting to cure any defaults under
such lender's deed of trust; and (iv) Beneficiary shall have the right to transfer the Project to a
nonprofit corporation who shall own and operate the Project as an affordable rental housing
project with the consent of such lender, which consent shall not be unreasonably withheld.
     4. Default. Notwithstanding any other provisions in this Deed of Trust, the occurrence of
any of the following shall constitute an event of default under the Note and this Deed of Trust,
and a default may be declared under this Deed of Trust solely upon the occurrence of any of the
following: (i) Any failure by Trustor to pay any amount due under the Note within thirty (30) days
of its due date; or (ii) Any other default by Trustor under the terms of the Affordable Housing
Covenant provisions after expiration of applicable notice and cure periods.
   5. Hazardous Substances.
       (a) As used in this Section 5, the following terms shall have the following meanings:
            (i) "Environmental Laws" means all statutes, ordinances, orders, rules, regulations,
plans, policies or decrees and the like now or hereafter in effect relating to (A) Hazardous
Substance Activity or Hazardous Substances; (B) the generation, use, storage, transportation or
disposal of Hazardous Substances, or solid waste; or (C) occupational safety and health,
industrial hygiene, land use or the protection of human, plant or animal health, safety or welfare,
including, without limitation, the Comprehensive Environmental Response, Compensation, and



                                                                                               -35-
Attachment C
Liability Act of 1980 (42 U.S.C. Section 9601 et seq .) ("CRELA"); the Hazardous Material
Transportation Act (49 U.S.C. Section 180 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. Section 136 et seg.); the Resource- Conservation and Recovery Act
(42 U.S.C. Section 6901 et seq.); the Clean Air Act (42 U.S.C. Section 740 _et seq.); the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seg.); the Occupational Safety
and health Act (29 U.S.C. Section 651 et seg.); the Safe Drinking Water Act (42 U.S.C. Section
300f et seq.); the Porter-Cologne Water Quality Control Act (California Water Code Section
13020 et seq.); the Safe Drinking Water and Toxic Enforcement Act of 1986 (California Health &
Safety Code Section 25249.5 et seg.); the Hazardous Substance Account Act (California Health
& Safety Code Section 25300 et seq.); the Hazardous Waste Control Act (California Health &
Safety Code Section 25100 et seg.); The California Environmental Quality Act (California Public
Resources Code Section 2100 et seg.); and the rules, regulations and ordinances of the City of
Murrieta or County of Riverside or any applicable federal, state and local agencies or bureaus,
as amended from time to time.
           (ii) "Foreclosure Transfer" means the transfer of title to all or any part of the Property
or the Trust Estate at a foreclosure sale under the Deed of Trust, either pursuant to judicial
decree or the power of sale contained in the Deed of Trust, or by deed in lieu of such
foreclosure.
           (iii) "Hazardous Substances" means (A) any chemical, compound, material, mixture
or substance that is now or hereafter defined or listed in, or otherwise classified pursuant to, any
Environmental Laws as a "hazardous substance," "hazardous material," "hazardous waste,"
"extremely hazardous waste," "acutely hazardous waste," "radioactive waste," "infectious
waste," "biohazardous waste," "toxic substance," "pollutant," "toxic pollutant," "contaminant" as
well as any other formulation not mentioned herein intended to define, list, or classify
substances by reason of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "EP toxicity" or "TCLP toxicity"; (B) petroleum,
natural gas, natural gas liquids, liquified natural gas, synthetic gas usable for fuel (or mixtures of
natural gas and such synthetic gas) and ash produced by a resource recovery facility utilizing a
municipal solid waste stream, and drilling fluids, produced waters and other wastes associated
with the exploration, development or production of crude oil, natural gas, or geothermal
resources; (C) "hazardous substance" as defined in Section 2782.6(d) of the California Civil
Code; (D) "waste" as defined in Section 13050(d) of the California Water Code; (E) asbestos in
any form; (F) urea formaldehyde foam insulation; (G) polychlorinated biphenyls (PCBs); (H)
radon; and (1) any other chemical, material, or substance that, because of its quantity,
concentration, or physical or chemical characteristics, exposure to which is limited or regulated
for health and safety reasons by any governmental authority, or which poses a significant
present or potential hazard to human health and safety or to the environment if released into the
workplace or the environment.
           (iv) "Hazardous Substance Activity" means any actual, proposed, or threatened use,
storage, holding, existence, location, release (including, without limitation, any spilling, leaking,
leaching, pumping, pouring, emitting, emptying, dumping, disposing into the environment, and
the continuing migration into or through soil, surface water, groundwater or any body of water or
the air), discharge, deposit, placement, generation, processing, construction, treatment,
abatement, removal, disposal, disposition, handling, or transportation of any Hazardous
Substance from, under, in, into, or on the Property, including without limitation, the movement or
migration of any Hazardous Substances from surrounding property, surface water, groundwater
or any body of water, or the air under, in, into or onto the Property and any residual Hazardous
Substances contamination in, on, or under the Property.




-36-
                                                                         Attachment C
           (v) "Losses" means all charges, losses, liabilities, damages (whether actual,
consequential, punitive, or otherwise denominated), costs, fees, demands, claims for personal
injury or real or personal property damage, actions, administrative proceedings (including
informal proceedings), judgments, causes of action, assessments, fines, penalties, costs, and
expenses of any kind or character, foreseeable and unforeseeable, liquidated and contingent,
proximate and remote, including, without limitation, the following: (A) the reasonable fees and
expenses of outside legal counsel; (B) the reasonable fees and expenses of accountants, third-
party consultants, and other independent contractors retained by an Beneficiary; (C) costs,
including capital, operating and maintenance costs, incurred in connection with any investigation
or monitoring of site conditions or any clean-up, remedial, removal or restoration work required
or performed by any federal, state or local governmental agency or political subdivision or
performed by any non-governmental entity or person that is required by Environmental Laws or
administrative ruling or directive because of the presence, suspected presence, release or
suspected release of Hazardous Substances in violation of Environmental Laws in the air, soil,
surface water or groundwater at the Property; (D) any and all diminution in value of the
Property, loss of use or damage to the Property, or loss of profits or loss of business
opportunity; and (E) reasonable costs and expenses of enforcing this provision.
           (vi) "Environmental Losses" means Losses rising out of or as a result of: (A) the
occurrence of any Hazardous Substance Activity; (B) any violation of any applicable
Environmental laws relating to the Property or to the ownership, use, occupancy or operation
thereof; (C) any investigation, inquiry, order, hearing, action, or other proceeding by or before
any governmental agency in connection with any Hazardous Substance Activity; or (D) any
claim, demand or cause of action, or any action or other proceeding, whether meritorious or not,
brought or asserted against any Indemnitee which directly or indirectly relates to, arises from or
is based on any of the matters described in clauses (A), (B), or (C), or any allegation of any
such matters.
        (b) Trustor represents and warrants to Beneficiary that Trustor has conducted as
appropriate inquiry and investigation, and, to the best of Trustor's knowledge, based on such
inquiry and investigation, no portion of the Property is being used or has ever been used at any
previous time, for the disposal, storage, treatment, processing or other handling of Hazardous
Substances, nor have any Hazardous Substances migrated onto or from the Property. Neither
the Property nor Trustor is in violation of or subject to any existing, pending or threatened
investigation by any governmental authority under any Environmental Law. Trustor's prior and
intended use of the Property will not result in the disposal or release of any Hazardous
Substances on, under, about or to the Property or the migration of any Hazardous Substances
from the Property. The foregoing representations and warranties shall be continuing and shall
be true and correct for the period from the date hereof to the release of this Deed of Trust
(whether by payment of the indebtedness secured hereby or foreclosure or action in lieu
thereof), and these representations and warranties shall survive such release.
       (c) Trustor represents and warrants to Beneficiary that Trustor has complied with all
recommendations by any engineers retained by Trustor and all requirements of any applicable
department of environmental resources, environmental protection agency or similar
governmental agency, and there are no recommendations by said engineers or requirements
ordered by said agency or any other governmental body for environmental investigation or
cleanup with respect to the Property.
       (d) On and after the date hereof, Trustor shall not (a) allow any Hazardous Substances
to be installed, used, introduced, stored, treated, disposed of, generated, manufactured,
discharged, dumped, transported or brought in, upon or over the Property in violation of
applicable law; (b) allow any soil or ground water contamination or pollution with any Hazardous



                                                                                              -37-
Attachment C
Substances on the Property in violation of applicable law; (c) allow any Hazardous Substances
to migrate from the Property in violation of applicable law; (d) allow any Hazardous Substances
to migrate onto the Property from any adjacent properties in violation of applicable law; or (e)
allow or cause the Property to be in violation of, or to trigger a duly initiated and prosecuted
investigation of the Property by any governmental authority under applicable limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations, schedules or
timetables contained in any local, state and/ or federal laws, regulations, codes, ordinances,
plans, administrative or judicial orders, decrees, judgments, notices or demand letters issued,
entered, promulgated or approved thereunder relating to the environment, land use, water and
air quality and Hazardous Substances ("Environmental Requirements").
        (e) If the presence of any Hazardous Substances on the Property caused or permitted
by Trustor results in any contamination of the Property, Trustor shall promptly take all actions, at
its sole expense, as are necessary to return the Property to the condition existing prior to the
introduction of any such Hazardous Substances to the Property; provided that Beneficiary's
approval of such actions shall first be obtained, which approval shall not be unreasonably
withheld so long as such actions would not potentially have any material adverse long-term or
short-term effect on the Property.
        (f) At any time after the occurrence and during the continuance of any default under this
Section 5, Beneficiary shall have the following rights and remedies, in addition to any other
rights and remedies Beneficiary has under this Deed of Trust:
            (i) As provided in California Code of Civil Procedure Section 564, Beneficiary or its
employees, acting by themselves or through a court appointed receiver may do any of the
following: (i) enter upon, possess, manage, operate, dispose of, and contract to dispose of the
Property or any part thereof; (ii) take custody of all accounts; (iii) negotiate with governmental
authorities with respect to the Property's environmental compliance and remedial measures; (iv)
take any action necessary to enforce compliance with environmental provisions, including
spending Rent Payments to abate any environmental problem; (v) make, terminate, enforce or
modify leases of part or all of the Property; (vi) contract for goods and services, hire agents,
employees, and counsel, make repairs, alterations, and improvements to the Property
necessary in Beneficiary's judgment to protect or enhance the security hereof; and/ or (vii) take
any and all other actions which may be necessary or desirable to comply with Trustor's
obligations hereunder and under the Loan Documents. All sums realized by the receiver or
Beneficiary under this subparagraph, less all costs and expenses incurred by either of them
under this subparagraph, including attorneys' fees, and less such sums as Beneficiary or the
receiver deems appropriate as a reserve to meet future expenses under this subparagraph,
shall be applied on any indebtedness secured hereby in such order as Beneficiary shall
determine. Neither application of said sums to said indebtedness, nor any other action taken by
Beneficiary or the receiver under this subparagraph shall cure or waive any default or notice of
default hereunder, or nullify the effect of any such notice of default. Beneficiary, or any
employee or agent of Beneficiary, or a receiver appointed by a court, may take any action or
proceeding hereunder without regard to the adequacy of the security for the indebtedness
secured hereunder, the existence of a declaration that the indebtedness secured hereby has
been declared immediately due and payable, or the filing of a notice of default.
           (ii) With or without notice, and without releasing Trustor from any obligation
hereunder, to cure any default of Trustor or in connection with any such default, Beneficiary or
its agents, acting by themselves or through a court-appointed receiver, may enter upon the
Property or any part thereof and perform such acts and things as Beneficiary deems necessary
or desirable to inspect, investigate, assess, and protect the security hereof, including of any of
Beneficiary's other rights: (i) to obtain a court order to enforce Beneficiary's right to enter and



-38-
                                                                          Attachment C
inspect the Property under California Civil Code Section 2929.5 (in respect of which the decision
of Beneficiary as to whether there exists a release or threatened release of hazardous
substance, as defined therein, onto the Property shall be deemed reasonable .and conclusive
as between the parties hereto); and (ii) to have a receiver appointed under California Code of
Civil Procedure Section 564 to enforce Beneficiary's right to enter and inspect the Property for
hazardous substances as defined therein. All costs and expenses incurred by Beneficiary with
respect to the audits, tests, inspections, and examinations which Beneficiary or its agents or
employees may conduct, including the fees of engineers, laboratories, contractors, consultants,
and attorneys, shall be paid by Trustor. All costs and expenses incurred by Trustee and
Beneficiary pursuant to this subparagraph (including court costs, consultant fees and attorney
fees, whether incurred in litigation or not and whether before or after judgment) shall bear
interest at the Note Rate, from the date they are incurred until said sums have been paid.
             (iii) Beneficiary may seek a judgment that Trustor has breached its covenants,
representations and/ or warranties with respect to the environmental matters set forth above in
this Section 5, by commencing and maintaining an action or actions in any court of competent
jurisdiction for breach of contract pursuant to California Code of Civil Procedure Section 736,
whether commenced prior to foreclosure of the Property or after foreclosure of the Property, and
to seek the recovery of any and all costs, damages, expenses, fees, penalties, fines, judgments,
indemnification payments to third parties, and other out-of-pocket costs or expenses actually
incurred by Beneficiary or advanced by Beneficiary (collectively, the "Environmental Costs")
relating to the cleanup, remediation or other response action required by applicable law or which
Beneficiary believes necessary to protect the Property, it being conclusively presumed between
Beneficiary and Trustor that all such Environmental Costs incurred or advanced by Beneficiary
relating to the cleanup, remediation, or other response action respecting the Property were
made by Beneficiary in good faith. All Environmental Costs incurred by Beneficiary under this
subparagraph (including court costs, consultant fees and attorney fees, whether incurred in
litigation or not and whether before or after judgment) shall bear interest at the Note Rate, from
the date of expenditure until said sums have been paid. Beneficiary shall be entitled to bid, at
any sale of the Property held hereunder, the amount of said costs, expenses and interest in
addition to the amount of the other obligations hereby secured as a credit bid, the equivalent of
cash.
             (iv) As provided in California Code of Civil Procedure Section 726.5, Beneficiary may
waive its lien against the Property or any portion thereof, to the extent such property is found to
be environmentally impaired as defined therein, and to exercise any and all rights and remedies
of an unsecured creditor against Trustor and all of Trustor's assets and property for the recovery
of any deficiency and Environmental Costs, including seeking an attachment order under
California Code of Civil Procedure Section 433.010. Beneficiary and Trustor each represents
and warrants for itself that it has no actual knowledge of any release of any Hazardous
Substance (as defined in Section 726.5) on, to or under the Property. As between Beneficiary
and Trustor, for purposes of California Code of Civil Procedure Section 726.5, Trustor shall
have the burden of proving that Trustor or any related party (or any affiliate or agent of Trustor
or any related party) did not cause or contribute to, and was not in any way negligent in
permitting, any release or threatened release of the Hazardous Substance.
           (v) Trustor acknowledges and agrees that notwithstanding any term or provision
contained herein or in the Loan Documents, the Environmental Costs and all judgments and
awards entered against Trustor pursuant to Section 5(f)(iv) above shall be exceptions to any
nonrecourse or exculpatory provision of the Loan Documents, and Trustor shall be fully and
personally liable for the Environmental Costs and such judgments and awards and such liability
shall not be limited to the original principal amount of the obligations secured by this Deed of




                                                                                               -39-
Attachment C
Trust, and Trustor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release,
reconveyance, or any other transfer of the Property or this Deed of Trust. Trustor hereby agrees
to indemnify, defend and hold harmless Beneficiary from and against any and all Environmental
Losses.
       CITRONICA LEMON GROVE, L.P., a California Limited Partnership

       By: Hitzke Development Corporation, a California corporation
       Its: Administrative General Partner


       By:_________________________
          Ginger Hitzke
          Its: President


       By: Cascade Housing Association
       Its: Managing General Partner


       By:_________________________
          Kelly Williams
          Its: Secretary-Treasurer




-40-
                                                                            Attachment C
                                             EXHIBIT H
                              AFFORDABLE HOUSING COVENANT

RECORDING REQUESTED BY
AND AFTER RECORDATION, MAIL TO:
Lemon Grove Community Development Agency
3232 Main Street
Lemon Grove, CA 91945


                              AFFORDABLE HOUSING COVENANT
    For valuable consideration, the receipt of which is hereby acknowledged, the LEMON
GROVE COMMUNITY DEVELOPMENT AGENCY ("Agency"), acting to carry out the
obligations under Sections 33334.2 and 33413 of the California Health and Safety Code
establishing an affordable housing program for the City of Lemon Grove, hereby agrees with
CITRONICA LEMON GROVE, L.P., a California limited partnership ("Developer"), with respect
to that certain parcel of real property (the "Site") legally described on Exhibit A, that the Site and
the fifty-five (55) multi-family residential units to be constructed thereon (the "Project") will be
subject to the conditions, restrictions, reservations and rights of Agency specified below:
    1. USE OF THE PROJECT. The Developer hereby covenants and- agrees, for itself, its
lessees, successors and assigns, as follows:
       A. In consideration for the Agency's financial assistance in connection with acquisition
and development of the Project on the Site, the Agency and Developer have executed this
Agreement to assure the Project meets the requirements of California Health and Safety Code
Sections 33334.2 and 33413, and remains affordable for the longest feasible period, but for not
fewer than fifty five (55) years.
       B. Rent and Income Restrictions. Fifty-five of the residential units to be developed at the
Project (the "Affordable Units") shall be rented to low income households whose income does
not exceed the limits set forth below ("Eligible Households"):
            The maximum housing cost of the Eligible Households for each of the income levels
set forth above must comply with the regulations promulgated by the California Department of
Housing and Community Development Sections 6910-6932 in Title 25 of the California Code of
Regulations, governing the Agency's set aside housing fund, or with the eligibility requirements
established by the Tax Credit Financing or the regulatory agreement relating to any other
federally administered program providing financing for the Project.
For purposes of this Covenant:
            "Median Income" shall mean the median income for households in San Diego
County, California, as published from time to time by the United States Department of Housing
and Urban Development ("HUD") in a manner consistent with the determination of median gross
income under Section 8 of the United States Housing Act of 1937, as amended, and as defined
in Title 25, California Code of Regulations, Section 6932. In the event that such income
determinations are no longer published by HUD, or are not updated for a period of at least 18
months; the Agency shall provide the Developer with other income determinations that are
reasonably similar with respect to methods of calculation to those previously published by HUD
or are not updated for a period of at least 18 months, the Agency shall provide the Developer
with other income determinations that are reasonably similar with respect to methods of
calculation to those previously published by HUD.



                                                                                                  -41-
Attachment C
       C. Reporting Requirements. Annual reports and annual income recertifications must be
submitted to the Agency. The reports, at a minimum, shall include:
           (1) The number of persons per unit
           (2) Tenant name
           (3) Initial occupancy date
           (4) Rent paid per month
           (5) Gross income per year
           Such information shall be reported to the Agency pursuant to Health and Safety
Code Section 33418, in substantially the form attached hereto as Exhibit B, or in a substantially
equivalent format acceptable to the Agency.
              Annual income recertifications shall also contain those documents used to certify
eligibility. Agency may, from time to time during the term of this Covenant, request additional or
different information and Developer shall promptly supply such information in the reports
required hereunder. Developer shall maintain all necessary books and records, including
property, personal and financial records, in accordance with requirements prescribed by Agency
with respect to all matters covered by this Covenant. Developer, at such time and in such forms
as Agency may require, shall furnish to Agency statements, records, reports, data and
information pertaining to matters covered by this Covenant. Upon request for examination by
Agency, Developer, at any time during normal business hours, shall make available all of its
records with respect to all matters covered by this Covenant. Developer shall permit Agency to
audit, examine and make excerpts or transcripts from these records.
    2. MAINTENANCE. The Developer and all successors in interest, agree that they shall
maintain, or cause to be maintained, the Site and the Project in a manner consistent with the
provisions set forth therefor in the Lemon Grove Municipal Code, and shall keep the entire Site
and the Project reasonably free from any accumulation of debris or waste materials prior to and
after construction.
          If, at any time, Developer fails to maintain the Site or the Project, or both of them, and
has either failed to commence to cure such condition or to diligently prosecute to completion the
condition or the condition is not corrected after expiration of thirty (30) days from the date of
written notice from Agency to Developer, Agency may perform the necessary corrective
maintenance, and Developer shall pay such costs as are reasonably incurred for such
maintenance. The Agency shall have the right to place a lien on the Project and the lease hold
interest should Developer not reimburse Agency for such costs within sixty (60) days following
Agency's written demand to Developer for reimbursement of such costs. Developer, on behalf of
itself its heirs, successors and assigns, hereby grants to Agency and its officers, employees and
agents, an irrevocable license to enter upon the Site to perform such maintenance during
normal business hours after receipt of written notice from Agency as hereinabove described and
Developer's failure to cure or remedy such failure within thirty (30) days of such notice. Any
such entry shall be made only after reasonable notice to Developer, and Agency shall indemnify
and hold Developer harmless from any claims or liabilities pertaining to any such entry by
Agency. Failure by Developer to maintain the Site in the condition provided in this Section 2
may, in Agency's reasonable discretion, constitute a default under this Covenant.
     3. NO TRANSFER. Except with respect to Approved Transferees, the Developer shall not
sell, transfer, convey, encumber, assign or lease the whole or any part of the Project without the
prior approval of the Agency. Developer shall request approval by written notice at least ninety
(90) days prior to, any proposed transfer. This prohibition shall not be deemed to prevent the




-42-
                                                                         Attachment C
granting of easements or permits to facilitate the rehabilitation or development of the Project or
to prohibit or restrict the rental or leasing of units when the rehabilitation of the Project is
completed.
Notwithstanding the foregoing, the transfer of limited partnership interests in the Developer and
any ownership interest in Developer's limited partners is permitted without the consent of the
Agency.
    4. MANAGEMENT. During the term of this Covenant, Developer shall promptly notify the
Agency in the event there is any change in the property management company managing the
Project. The property management and maintenance agreement shall name the Agency as a
third-party beneficiary permitting the Agency the right to enforce the Agreement. Developer shall
submit a copy of such agreement to the Agency, provided the Agency shall not have the right to
approve or disapprove such agreement except to ensure compliance of such agreement with
the provisions of this paragraph 4.
    5. NO DISCRIMINATION. 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, marital status, physical handicap,
medical condition, sexual orientation, source of income, national origin or ancestry in the sale,
lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Site, nor shall the
Developer itself or any person claiming under or through it establish or permit any such practice
or practices of discrimination or segregation with reference to the selection, location, number,
use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the Site.
    6. NONDISCRIMINATION AND NONSEGREGATION CLAUSES. All deeds, leases or
contracts made relative to the Site, the improvements thereon or any part thereof, shall contain
or be subject to substantially the following nondiscrimination and nonsegregation clauses:
        A. In deeds: The grantee herein covenants by and for himself or herself, his or her
heirs, executors, administrators and assigns, and all persons claiming under or through them,
that there shall be no discrimination against or segregation of any person or group of persons
on account of race, color, creed, religion, sex, marital status, physical handicap, medical
condition, sexual orientation, source of income, national origin or ancestry in the sale, lease,
sublease, transfer, use, occupancy, tenure or enjoyment of the land herein conveyed, nor shall
the grantee, or any person claiming under or through him or her, establish or permit any such
practice or practices of discrimination or segregation with reference to the selection, location,
number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the land
herein conveyed. The foregoing covenants shall run with the land.
        B. In leases: The lessee herein covenants by and for himself or herself, his or her heirs,
executors, administrators and assigns, and all persons claiming under or through him or her,
and this lease is made and accepted upon and subject to the following conditions:
           That there shall be no discrimination against or segregation of any person or group
of persons on account of race, color, creed, religion, sex, marital status, physical handicap,
medical condition, sexual orientation, source of income, national origin or ancestry in the
leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the land herein
leased, nor shall the lessee himself or herself, or any person claiming under or through him or
her, establish or permit any such practice or practices of discrimination or segregation with
reference to the selection, location, number, use or occupancy of tenants, lessees, sublessees,
subtenants or vendees in the land herein leased.




                                                                                              -43-
Attachment C
        C. 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, marital status, physical
handicap, medical condition, sexual orientation, source of income, national origin or ancestry in
the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land, nor shall
the transferee, or any person claiming under or through him or her, establish or permit any such
practice or practices of discrimination or segregation with reference to the selection, location,
number, use or occupancy of tenants, lessees, sublessees, subtenants or vendees in the land.
     7. NO IMPAIRMENT OF LIEN. No violation or breach of the covenants, conditions,
restrictions, provisions or limitations contained in this Covenant shall defeat or render invalid or
in any way impair the lien or charge of any mortgage, deed of trust or other financing or security
instrument; provided, however, that any successor of Developer to the Project, including the
Retail Component of the Project as that term is defined in the Agreement shall be bound by
such covenants, conditions, restrictions, limitations and provisions, whether such successor's
title was acquired by foreclosure, deed in lieu of foreclosure, trustee's sale or otherwise.
    8. MARKETING. Developer shall make reasonable efforts during the term of the Covenant
to target its marketing and advertising efforts for the Project to residents of the City of Lemon
Grove and individuals employed within the City.
    9. DURATION. The covenants contained in paragraph 1 of this Covenant shall be deemed
to run with the land in accordance with Section 33334.3(f) of the Health and Safety Code or any
successor statute and shall remain in effect for not less than fifty five (55) years following
recordation of this Covenant. The covenants against discrimination contained in paragraphs 5
and 6 of this Covenant shall be deemed to run with the land in accordance with Section 33438
of the Health and Safety Code or any successor statute and shall remain in effect in perpetuity.
    10. SUCCESSORS AND ASSIGNS. The covenants contained in this Covenant shall be
binding for the benefit of the Agency and its respective successors and assigns, third party
beneficiaries, and any successor in interest to the Site or the Project or any part thereof, and
such covenants shall run in favor of the Agency and such aforementioned parties for the entire
period during which such covenants shall be in force and effect, without regard to whether the
Agency is or remains an owner of any land or interest therein to which such covenants relate.
The Agency, and such aforementioned parties, in the event of any breach of any such
covenants, shall have the right to exercise all of the rights and remedies, and to maintain, any
actions at law or suits in equity or other proper proceedings to enforce the curing of such
breach. The covenants contained in this Covenant shall be for the benefit of and shall be
enforceable only by the Agency, and its respective successors and assigns, third party
beneficiaries, and such aforementioned parties.
    11. SUBORDINATION. Upon written request by Developer, Agency shall agree that the
terms and conditions of this Covenant shall be subject to and subordinate to the terms and
conditions of financing obtained by Developer, through a lender acceptable to the Agency (the
"Lender") and upon terms and conditions reasonably approved by the Agency, for construction
or permanent financing, to be secured by a mortgage against the Site; provided, any Lender for
construction or permanent financing that is not obtained through an approved federal or state
program shall agree to include in its subordination agreement and deed of trust the following
conditions: (i) Agency shall receive any notices of default issued by Lender to Developer; (ii)
Agency shall have the right to cure any default by Developer within forty-five (45) days after a
notice of default; (iii) Agency shall have the right to foreclose its Deed of Trust without Lender
accelerating its debt, provided Agency has cured or is attempting to cure any defaults under the
deed of trust; and (iv) Agency shall have the right to transfer the Project to another nonprofit
corporation, or to a limited partnership or limited liability company whose general partner is a




-44-
                                                                         Attachment C
nonprofit corporation, who shall own and operate the Project as an affordable rental housing
project with the consent of Lender, which consent shall not be unreasonably withheld.
   IN WITNESS WHEREOF, the Agency and Developer have caused this instrument to be
executed on their behalf by their respective officers thereunto duly authorized, this _____ day of
March, 2009.
AGENCY:
   LEMON GROVE COMMUNITY DEVELOPMENT AGENCY


   By:__________________________
   Its: Executive Director


OWNER:
   CITRONICA LEMON GROVE, L.P., a California Limited Partnership

   By: Hitzke Development Corporation, a California corporation
   Its: Administrative General Partner


   By:_________________________
      Ginger Hitzke
      Its: President


   By: Cascade Housing Association
   Its: Managing General Partner


   By:_________________________
      Kelly Williams
      Its: Secretary-Treasurer




                                                                                              -45-
Attachment C
                                   EXHIBIT A TO COVENANT
                             LEGAL DESCRIPTION OF PROPERTY

APNS 480-043-04, 480-043-05, and 480-043-06
The land referred to herein is situated in the State of California County of San Diego, City of
Lemon Grove, and described as follows:
Parcel A:
That portion of Lot 11 in Subdivision No. 3 of Lot 12, Ex-Mission Rancho, in the County of San
Diego, State of California, according to Licensed Survey Map No. 5, filed in the office of the
County Recorder of said San Diego County, described as follows:
Commencing at the northeast corner of said Lot 11; thence south 89°04’00” west along the
northerly line of said Lot, a distance of 433.00 feet to the northwest corner of land conveyed to
Sadie Rittenmeyer by deed dated January 6, 1947, and recorded in book 2411, page 108 of
official records; thence south 0°41’00” west along the westerly line thereof, 108.25 feet to the
southwest corner of said Rittenmeyer’s land; thence north 89°04’00” east along the southerly
line of said land 238 feet to the southeast corner thereof; thence north 0°41’00” east along the
easterly line of said land 30.50 feet to the true point of beginning; thence leaving said easterly
line of south 89°16’00” east 161.69 feet to an intersection with the easterly line of said Lot 11;
thence northeasterly along said easterly line 84.56 feet to the northeast corner of said Lot;
thence south 89°04’00” west along the north line of said Lot to an intersection with a line bearing
north 0°41’00” east from the true point of beginning; thence south 0°41’00” west to the true point
of beginning.
Excepting therefrom the following described land.
Beginning at the northeast corner of said Lot 11; thence (1) from a tangent bearing south
26°02’21” west along the easterly line of said Lot 11, said easterly line being a curve concave
easterly having a radius of 1,532.69 feet, through a central angle of 1°52’47”, a distance of
50.28 feet to a point of cusp; thence (2) from a tangent bearing north 24°09’34” east, along a
curve concave southwesterly having a radius of 32.00 feet, through a central angle of
114°39’11”, a distance of 64.03 feet to a point of cusp on the north line of said Lot 11; thence (3)
tangent to last said curve, north 89°30’ east, 50.80 feet to the point of beginning.
Parcel B:
That portion of Lot 11, subdivision no. 3 Lot 12 of Ex-Mission Rancho, in the County of San
Diego, State of California, according to Licensed Survey Map No. 5, filed in the office of the
county recorder of San Diego County, described as follows:
Commencing northeast corner of said Lot 11; thence south 89°04’00” west, along the northerly
line of said Lot, a distance of 433 feet to the northwest corner of land conveyed to Sadie
Rittenmeyer by deed dated January 8, 1947, and recorded in book 2411, page 108 of official
records; thence south 0°41’00” west along the westerly line thereof 108.25 feet to the southwest
corner of said Rittenmeyer’s lands; thence north 89°04’00” east, along the southerly line of said
land 238 feet to the southeast corner thereof; said corner being the true point of beginning;
thence north 0°41’00” east, along the easterly line of said Rittenmeyer’s land 30.50 feet; thence
leaving said easterly line south 89°16’00” east, 161.69 feet to an angle point in the easterly line
of said Lot 11; thence southeasterly along said easterly line to the most easterly corner of land
conveyed to Lynda May Maupin, by deed dated May 16, 1941, and re-recorded in book 1183,
page 325 of official records; thence along portions of the northerly and easterly boundaries of




-46-
                                                                            Attachment C
said Maupin’s land, north 89°16’00” west, 131.47 feet and north 0°41’00” east, 41.63 feet to the
true point of beginning.
Parcel C:
That portion of Lot 11 in Subdivision No. 3 of Lot 12 of Ex-Mission Rancho, in the County of San
Diego, State of California, according to Licensed Survey Map No. 5, filed in the office of the
county recorder, March 23, 1892 described as follows:
Beginning at the northeast corner of said Lot 11; thence south 89°04’ west along the northerly
line thereof 433 feet the northwest corner of land conveyed to Joseph Caplew by deed dated
June 6, 1894 and recorded in book 231, page 259 of deeds, records of San Diego County;
thence south 0°41’ west along the westerly line thereof 216.50 feet to the southwest corner of
land so conveyed to Caplew; thence north 0°41’ east along the said westerly line 108.25 feet;
thence north 89°4’ east 238 feet; thence south 0°41’ west 41.63 feet to the true point of
beginning, being a point in the easterly line of the land conveyed to Gladya Williams by deed
recorded 4 20, 1956 in book 6068, page 18 of official records; thence south 89°16’ east 131.47
feet to the easterly line of said Lot 11; thence southerly along said easterly line 67.14 feet to the
southeast corner of said Caplew’s land; thence south 8904’ west along the southerly line of
said land to the said easterly line of Williams land; thence north 041’ east along said easterly
line to the point of beginning.
Parcel D:
All that portion of Lot 11 in Subdivision No. 3 in Tract 12 of the partition of the Rancho Mission
of San Diego, in the County of San Diego, State of California, according to Licensed Surveyor’s
Map No. 5, filed in the office of the recorder of said San Diego County, March 23, 1892,
described as follows:
Commencing at a point which is 423.5 feet north of a point on the south line of said Lot 11 which
last mentioned point is 795 feet east of the southwest corner of said Lot 11; thence south 80
feet; thence east to the easterly line of said Lot 11; thence northerly along the easterly line of
said Lot 11 to a point directly east of the point of commencement; thence west to the point of
commencement.
Excepting therefrom that portion described as follows.
Beginning at a point which is 416.5 feet north of a point on the south line of said Lot 11 which
last mentioned point is 795 feet east of the southwest corner of said Lot 11; thence south 73.0
feet; thence east to the easterly line of said Lot 11; thence northerly along the easterly line of
said Lot 11 to a point directly east of the point of beginning; thence west to the point of
beginning.
Also excepting therefrom that portion described as follows:
Beginning at a point on the northerly line of said Lot 11 distant thereon south 89°04’00” west,
195.00 feet from the northeast corner thereof, said point being the northwest corner of land
conveyed to Henry E. Lange, et ux, by deed dated October 11, 1955 and recorded in book
5839, page 332 of official records; thence south 0041’00” west along the westerly line of said
land and along the westerly line of land conveyed to Jack B. Lange, et ux, by deed December
22, 1955 recorded in book 5935, page 228 of official records, a distance of 149.88 feet to the
southwest corner of said last mentioned Lange land; thence continuing south 0041’00” west
along the southerly prolongation of the west line of said land 73.36 feet to the northerly
boundary of land conveyed to Sverre N. Lohne by deed dated August 26, 1995 and recorded in
book 5780, page 281 of official records; thence west along said northerly boundary to the
northwest corner of said land being a point on the easterly line of land conveyed to A.F. Sonks



                                                                                                 -47-
Attachment C
by deed dated August 15, 1942 and recorded in book 1390, page 180 of official records; thence
northerly along the easterly line of said land 7.00 feet to the northeast corner thereof; thence
south 8905’00” west along the northerly line of said land 3.00 feet to the southeast corner of
land conveyed to Arther Takanashi, et ux, by deed dated September 11, 1947 and recorded in
book 2514, page 285 of official records; thence north 00°41’00” east along the easterly line of
said land 59.00 feet to the northeast corner thereof being a point on the southerly boundary of
land conveyed to John H. Bolster, et ux, by deed dated October 25, 1949 and recorded in book
3367, page 54 of official records; thence along the southerly and easterly boundary of said land,
north 89°04’00” east, 84.00 feet and north 00°41’00” east, 157.24 feet to the northerly line of
said Lot 11; thence north 89°04’00” east along said northerly line 17.00 feet to the point of
beginning.
(End of Legal Description)




-48-
                              Attachment D
   EXHIBIT B TO COVENANT
TENANT INCOME CERTIFICATION




                                        -49-
Attachment D
               OWNER PARTICIPATION AGREEMENT




-50-
                            WNER PARTICIPATION AGREEMENT
                                    FOR CITRONICA TWO

THIS OWNER PARTICIPATION AGREEMENT (“Agreement”) is entered into as of the _____
day of ____________, 2009, between the LEMON GROVE COMMUNITY DEVELOPMENT
AGENCY (the "Agency") and HITZKE DEVELOPMENT CORPORATION, a California
corporation (the "Participant"). The Agency and the Participant agree as follows:

I.   [§100] SUBJECT OF AGREEMENT
     A. [§101] Purpose of this Agreement
        Pursuant to Section 33334.2 of the California Health and Safety Code, the Agency has
set aside twenty percent (20%) of tax increment revenues it has received to improve, increase,
and preserve the supply of affordable housing in the City of Lemon Grove, California (the
"City"). The Agency desires to use a portion of these monies to provide loans to the Participant
to assist in the development of certain real property (the "Site"), more specifically described in
Section 105, located within the City generally and within the Lemon Grove Redevelopment
Project Area specifically. With financial assistance from the Agency, Participant has acquired
the Site for development of the Citronica Two project (the “Project”), which is more particularly
described in Section 202 below. As more specifically discussed in Sections 301 and 302 below,
all monies to purchase the Site and provide loans to Participant in connection with the Project
shall be paid solely out of the Agency’s low/moderate income housing funds.
        The Project will benefit extremely low, very low and low-income households in the City,
and provides increased employment and retail opportunities for residents of the City and the
community. The acquisition of the Site and construction of the Project by the Participant, the
provision of the Agency assistance provided for hereunder, and the fulfillment generally of this
Agreement, are in the best interests of the City and the welfare of its residents and the Agency,
and in accordance with the public purposes and provisions of applicable Federal, State and
local laws and requirements.
        Pursuant to Health and Safety Code Section 33490, the Agency adopted an
Implementation Plan which included a section addressing the Agency's housing obligations and
expenditures of the Housing Fund monies throughout the community for programs and projects
to increase, improve and preserve the community's supply of housing affordable to low and
moderate-income households. Completion of the Project will help implement the goals of the
Implementation Plan including Goal 1, Objectives 1.2 and 1.3, Goal 2, Objectives 2.1 and 2.5,
and Goal 3, Objectives 3.1 and 3.3.
       To the extent that the Agency is required to cause the construction of replacement
housing, any housing constructed pursuant to this Agreement which is also income restricted
pursuant to Health and Safety Code Section 33413(a) may be counted toward any such
requirement.
        Agency and Participant entered into that certain Pre-Development & Land Acquisition
Assistance Agreement dated as of July 31, 2008 (the "Pre-Development Agreement").
Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to
the same in the Pre-Development Agreement.
        Pursuant to the Pre-Development Agreement, Agency agreed to provide certain pre-
development assistance to Participant in connection with Participant's development of the
Citronica Development. The Site (referred to as the "Coach Parcel" in the Pre-Development
Agreement), together with the Kidwell/Fergen Parcel and the Martin Parcel comprise the


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Development Parcel under the Pre-Development Agreement. As contemplated under Section 3
of the Pre-Development Agreement, Agency and Participant now desire to enter into this
Agreement specifically in relation to the Project. Within the time frames set forth in the Pre-
Development Agreement, Agency and Participant agree to use best efforts to enter into two
additional mutually acceptable Owner Participation Agreements, one regarding the Martin
Parcel, the other regarding the Kidwell/Fergen Parcel. In accordance with the terms set forth
below, as of the Effective Date, this Agreement shall contain all rights and obligations of the
parties in connection with the Site only and the Pre-Development Agreement shall be deemed
terminated in its entirety with regard to the Site.
   B. [§102] Parties to this Agreement.
       1. [§103] The Agency
           The Agency is a public body, corporate and politic, exercising governmental
functions and powers, and organized and existing under the Community Redevelopment Law of
the State of California (Health and Safety Code Section 33000 et seq.) The principal office of
the Agency is located at 3232 Main Street, Lemon Grove, California 91945. The term "Agency"
shall mean any assignee or successor in interest to the Agency.
       2. [§104] The Participant
           The Participant is Hitzke Development Corporation, a California corporation whose
president is Ginger Hitzke. The principal address of the Participant is 43460 Ridge Park Drive,
Suite 260, Temecula, California 92590.
           Whenever the term "Participant" is used herein, such term shall include any
transferee, assignee or successor in interest as herein provided for in this section.
             The qualifications and identity of the Participant are of particular concern to the
Agency, and it is because of such qualifications and identity that the Agency has entered into
this Agreement. Prior to the issuance of the Certificate of Completion for the Project, as set forth
in Section 214 hereof, no voluntary or involuntary successor in interest of the Participant shall
acquire any rights or powers under this Agreement, and the Participant shall not assign all or
any part of this Agreement without the prior written approval of the Agency, which approval will
not be unreasonably withheld. This Agreement may be terminated by the Agency at any time if
there is any significant change (voluntary or involuntary) in the management or control of the
Participant prior to the completion of development of the Project as evidenced by the issuance
of a Certificate of Completion therefore.
             Notwithstanding the foregoing, the Agency hereby approves the following transfers of
interest in the Participant ("Approved Transferees"): the addition of tax credit investors as
members; transfer of any portion of the Project to an affiliate or nonprofit corporation, limited
liability company or other entity created by Participant of which Participant is the sole owner,
manager or general partner; and the acquisition of a investment member’s interest in the
Participant.
   C. [§105] The Site
        The Site is shown on the "Map of the Site," attached to this Agreement as Exhibit A and
incorporated herein by reference, and as more particularly described in the "Legal Description of
the Site," attached hereto as Exhibit B and incorporated herein by reference.




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II. [§200] IMPROVEMENT OF THE SITE
   A. [§201] Scope of Development
        Participant has acquired the Site and shall develop the Site with the Project. The Project
shall be defined as a mixed-use multi-family residential housing complex consisting of not more
than eighty (80) income restricted rental dwelling units (each referred to herein as a "Unit”) and
two manager’s units which will not be income restricted (together referred to as the “Residential
Component”) and approximately 4,700 square feet of retail/commercial space (the “Retail
Component”) pursuant to architectural, site and construction plans approved by the City, the
terms of this Agreement and the Scope of Development attached hereto as Exhibit C. Upon
completion of construction of the Project, the completed Units of the Residential Component
shall be rented to Eligible Households (as defined in Section 401 hereof) and the Retail
Component shall be rented at market rate. Participant shall diligently pursue development of the
Project in accordance with the Scope of Development and in accordance with the Schedule of
Performance attached hereto as Exhibit D. Existing Occupants of the Site shall be relocated by
Participant, at Participant's expense.
   B. [§202] Project Financing
        In addition to the Agency assistance provided for in Section 300 below, the Participant
intends to seek to utilize federal and Low-Income Housing Tax Credits (the "Tax Credit
Financing") for the Project. Participant and Agency specifically agree and warrant that Agency
assistance shall be used only for construction of the Residential Component. The Participant
shall complete all actions necessary to secure all approvals and commitments necessary to
effectuate the Tax Credit Financing, or other alternative funding, as the case may be, in an
amount satisfactory to undertake and complete the construction of the Project. Agency
acknowledges and agrees that in connection with the Tax Credit Financing, Participant may
transfer the Retail Component to an Approved Transferee (the "Retail Owner") and require the
partial release of the Agency Deed of Trust in order to release the Agency's lien against the
Retail Component in accordance with Section 305 below, provided that such partial release
shall be subject to Retail Owner granting the Agency a new deed of trust over the Retail
Component. Participant and Agency agree to fully cooperate with one another in connection
with such transfer and agree to take such further actions and to execute, deliver and file such
further documents, as may be reasonably necessary to carry out such transfer or to facilitate the
satisfaction of any conditions in connection with the Tax Credit Financing.
      Subject to the Agency assistance provided for hereunder, the cost of acquiring the Site
and constructing all improvements thereon shall be borne by the Participant.
   C. [§203] Development Review
        Within the time established in the Schedule of Performance (Exhibit D), the Participant
shall submit to the City all construction plans, drawings and related documents for the
development of the Project. Participant shall obtain all approvals and permits that may be
required under the City's plan check, development review and approval process for the
construction work to be completed on the Project. Participant shall design and construct the
Project so that it is in substantial compliance with the attached approved drawings.
        During the preparation of any drawings and plans for the development of the Project, the
Agency staff and the Participant shall meet with City staff and communicate and consult
informally and as frequently as is necessary to ensure that the formal submittal of any
documents to the City pursuant to this Section 204 can receive prompt consideration. The
Participant shall submit for Agency's review copies of all contracts for the construction,
engineering, architectural, marketing, sales and any other technical consultants for the Project.


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Agency shall have the right to review any bid process that may be employed by Participant to
ensure compliance with all of the foregoing. Participant shall provide Agency with all information
Agency requests regarding any such bid process.
   D. [§204] Schedule of Performance
        Participant shall promptly begin and thereafter diligently prosecute to completion the
construction and development of the Project, as provided in the Scope of Development (Exhibit
C), within the times specified in the Schedule of Performance (Exhibit D) with such reasonable
extensions of said times as may be granted by the Agency. The Schedule of Performance
(Exhibit D) is subject to revision from time to time as mutually agreed upon in writing between
the Participant and the Agency. The Agency's Executive Director shall have the authority to
approve, on behalf of the Agency, any such extensions of time he or she deems reasonable and
appropriate.
   E. [§205] Bodily Injury and Property Damage, Insurance Indemnification
          During the periods of construction on the Site and until such time as Participant is
entitled to obtain the final Certificate of Completion from the Agency pursuant to Section 214
below indicating completion of the construction work required by this Agreement, the Participant
agrees to and shall indemnify, protect, defend and hold the Agency and the City, and their
respective agents, servants, employees and contractors, harmless from and against any and all
liability, loss, damage, costs or expenses (including reasonable attorneys' fees and court costs)
arising from or as a result of the death of any person or any accident, injury, loss or damage
whatsoever caused to any person or, to the property of any person which shall occur on or
adjacent to the Site and which shall be caused by any acts done thereon or any errors or
omissions of the Participant, or its agents, servants, employees or contractors. The Participant
shall not be responsible for (and such indemnity shall not apply to) any acts, errors or omissions
of the Agency or the City, or their respective agents, servants, employees or contractors. The
Agency and the City shall not be responsible for any acts, errors or omissions of any person or
entity except the Agency and the City and their respective agents, servants, employees or
contractors.
          Prior to the commencement of any work on the Site, the Participant shall furnish, or
cause to be furnished, to the Agency duplicate originals of policies or appropriate certificates of
insurance and relevant endorsements evidencing Participant’s and contractor’s protective
liability insurance on an occurrence basis insuring against bodily injury and property damage in
a combined single limit of liability per occurrence in the amount of $2,000,000, general
aggregate limit of $2,000,000 and builder's all risk insurance in an amount not less than the full
insurable value of the improvements to the Site on a replacement cost basis, naming the
Agency and the City as additional insureds. Participant shall also provide evidence of worker's
compensation insurance in the statutory amount required by law. Participant's contractor, and
subcontractors if any, shall also submit evidence of liability insurance in the same form and
amount as required by Participant in this Section 205.
   F. [§206] Local, State and Federal Laws
         Participant shall carry out the construction of the Project in conformity with all applicable
laws, including all applicable federal and state labor laws and regulations. Laws and
Regulations pertaining to the payment of prevailing wages can be found in the California Labor
Code Sections 1720-1815. Any contractor or subcontractor who performs work on the Project,
if applicable, must pay workers the prevailing wage for the appropriate trade, classification or
type of work. The current prevailing wage rates are determined by the California Director of
Industrial Relations and available from the Department of Industrial Relations website at:



                                                    54
http://www.dir.ca.gov/DLSR/statistics_research.html. Each contractor and subcontractor must
keep accurate payroll records and prevailing wage rates must be posted at the job site. Non-
compliance with prevailing wage requirements may subject a contractor and/or subcontractor to
penalties.
   G. [§207] City and Other Governmental Permits
       Prior to the commencement of construction (or any work related thereto) upon the Site,
the Participant shall secure, or cause to be secured, any and all permits which may be required
by the City or any other public utility or governmental agency affected by such construction.
   H. [§208] Rights of Access During Construction
        Representatives of the Agency and the City shall have the reasonable right of access to
the Site, with reasonable notice to the Participant, 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.
   I.   [§209] Anti-Discrimination During Construction
        The Participant, for itself and its successors and assigns, agrees that in the construction
and renovation of improvements on the Site provided for in this Agreement, the Participant will
not discriminate against any employee or applicant for employment because of race, color,
creed, religion, sex, marital status, ancestry or national origin.
   J. [§210] Prohibition Against Transfer and Assignment of Agreement
          Prior to the completion of the Project and the issuance of a Certificate of Completion
therefor, the Participant shall not, except as permitted by Section 104 of this Agreement, assign
or attempt to assign this Agreement or any rights herein, nor make any total or partial sale,
transfer, conveyance, assignment or lease of the Project, without the prior written approval of
the Agency, which approval shall not be unreasonably withheld. This prohibition shall not apply
subsequent to the completion of the Project as evidenced by the Agency’s issuance of its
Certificate of Completion. This prohibition shall not be deemed to prevent the granting of permits
to facilitate the construction and development of the Project. Further, this prohibition shall not be
deemed to prevent the rental of the Units to tenants and Eligible Households, subject to the
affordability and use restrictions provided for herein, or rental of any portion of the Retail
Component to a retail tenant or transfer of the Retail Component to the Retail Owner.
   K. [§211] Security Financing; Rights of Holders
        1. [§212] Holder Not Obligated to Construct
           The holder of any mortgage, deed of trust or other security interest providing
construction financing for the Project shall in no way be obligated by the provisions of this
Agreement to construct or renovate, or complete construction or renovation of, the
improvements, or to guarantee such construction or renovation or completion.
       2. [§213] Notice of Default to Mortgage Deed of Trust or Other Security/Interest
Holders Right to Cure/Modifications
           Whenever the Agency shall deliver any notice or demand to the Participant with
respect to any breach or default by the Participant of this Agreement, the Agency shall at the
same time deliver to each investor limited partner to the Project, holder of record of any
mortgage, deed of trust or other security interest authorized by this Agreement (who has
previously made a request therefor) a copy of such notice or demand. Each such limited partner
and holder shall (insofar as the rights of the Agency are concerned) have the right, at its option


                                                  55
within ninety (90) days after the receipt of the notice, to cure or remedy or commence to cure or
remedy any such default and to add the cost thereof to the security interest debt and the lien on
its security interest. Nothing contained in this Agreement shall be deemed to permit or authorize
such holder to undertake or continue the construction of the Project, or the completion thereof
(beyond the extent necessary to conserve or protect the improvements or construction already
made) without first having expressly assumed the Participant's obligations to the Agency by
written agreement satisfactory to the Agency. The holder in that event must agree to complete,
in the manner provided in this Agreement, the construction of the improvements to which the
lien or title of such holder relates, and submit evidence satisfactory to the Agency that it has the
qualifications and financial responsibility necessary to perform such obligations. If a holder of
record of any mortgage, deed of trust of other security interest authorized by this Agreement
should, as a condition of providing the Tax Credit Financing or other financing necessary for the
development of all or a portion of the Project, requests any modification of this Agreement in
connection with the Retail Component or in order to protect its interest in the Project or this
Agreement, Agency shall consider such request in good faith consistent with the purpose and
intent of this Agreement and obligations of the parties under this Agreement.
   L. [§214] Certificate of Completion
        As more fully described in the Scope of Development, the Site will be developed with the
Project within the times set forth in the Schedule of Performance. When the obligations of
Participant under Sections 201, 203, 204 and 216 have been met and Participant has obtained
final approval from the City after final inspection stating that all conditions for occupancy have
been met, Participant may request that Agency furnish the Participant with a Certificate of
Completion for such work, in a form suitable for recording in the Official Records of San Diego
County, California, and substantially similar to that set forth in Exhibit E to this Agreement. The
Certificate of Completion shall be, and shall so state, conclusive determination of satisfactory
completion of the construction of the Project as required by this Agreement.
         After recording of the Certificate of Completion, any party then owning or thereafter
purchasing the Project or any portion thereof shall not (because of such ownership) incur any
obligation or liability under this Agreement, except that such party shall be bound by any
covenants contained in the grant deed, mortgage, deed of trust, covenants, conditions and
restrictions, contract or other instrument in accordance with the applicable provisions of Section
400 of this Agreement.
         A Certificate of Completion shall not constitute evidence of compliance with or
satisfaction of any obligation by the Participant to any holder of a mortgage or any insurer of a
mortgage securing money loaned to finance the improvements or any part thereof. A Certificate
of Completion is not notice of completion as referred to in California Civil Code Section 3093.
The Certificate of Completion provided for in this Section 214 is not a Certificate of Occupancy
or final approval of building permit issued by the City.
   M. [§215] Records; Reporting Requirements
       Upon completion of the Project and immediately subsequent to the initial occupancy of
each unit in the Project, the Participant shall submit to the Agency all information required by the
Agency, including without limitation, for the Residential Component, the address, date of
completion of the Units, initial rent level, the income level of the Eligible Household and number
of persons in the Eligible Household, the number of bedrooms, and any other information
requested by the Agency.
      Thereafter, with respect to the Residential Component, the Participant shall submit to the
Agency annual reports during the term of the Affordable Housing Covenant, together with



                                                   56
supporting evidence, identifying the Eligible Household(s) occupying the Unit(s), the income and
family size of the new Eligible Households occupying the Unit(s), and the rental rate for each
Eligible Household occupying the Unit(s). Such annual reports shall be due by April 15 of each
year and, with reference to the Project, shall be sufficiently detailed to allow the Agency to
complete the annual report required by Health and Safety Code Section 33080.1(c)
        The Participant shall maintain in accordance with generally accepted accounting
principles, complete books and records relating to the acquisition, construction and
development of the Project and the rental of the Units within the Residential Component of the
Project. Upon request for examination by the Agency, the Participant at any time during normal
business hours, shall make available all of its records with respect to all matters covered by this
Agreement, including records relating to the Eligible Households. Participant shall permit the
Agency to audit, examine and make excerpts or transcripts from these records.
   N. [§216] Covenants, Conditions and Restrictions.
        At the time set forth in the Schedule of Performance, certain Covenants, Conditions and
Restrictions ("CC&R's") shall be recorded against the Site. The CC&R's shall be reviewed and
approved by the Executive Director of the Agency and Participant prior to their recordation.

III. [§300] AGENCY ASSISTANCE
   A. [§301] Site Pre-Development Loan.
        Pursuant to the Pre-Development Agreement, Agency has provided financial assistance
to Participant in the form of a predevelopment loan in the amount of $91,296.74. Agency shall
provide additional financial assistance to Participant in the amount of $408,703.26, which
together with the amount already provided will total $500,000 and shall be referred to herein as
the "Site Pre-Development Loan".
   B. [§302] Acquisition of Land; Site Acquisition Loan
        On December 9, 2008, Participant acquired the Site pursuant to that certain Purchase
and Sale Agreement and Joint Escrow Instructions dated as of February 14, 2008 (as amended,
the "Purchase Agreement") between Participant as "Buyer" and COACH of San Diego, Inc., a
California nonprofit public benefit corporation as "Seller"( for a total purchase price of
$2,000,000 (the "Land Acquisition Costs"). Pursuant to the Pre-Development Agreement,
Agency made a loan to Participant in the total amount of the Land Acquisition Costs (the "Site
Acquisition Loan") as evidenced by that certain (a) Promissory Note Secured by Deed of Trust
dated as of December 1, 2008 (the "Agency Loan Note") and (b) Deed of Trust dated as of
December 1, 2008 (the "Agency Deed of Trust") and recorded in the official records of San
Diego County on December 9, 2008 as Instrument No. 2008-0628851 (collectively, the "Agency
Loan Documents").
   C. [§303] Agency Loan
        The Site Pre-Development Loan and the Site Acquisition Loan are collectively referred to
herein as the "Agency Loan" (with an aggregate loan amount of $2,500,000). Upon
Participant’s satisfaction of the conditions for disbursement of the Agency Loan proceeds set
forth below, the Site Predevelopment Loan shall be cancelled and the Site Predevelopment
Loan amount of $500,000 shall be added to the Agency Loan Note. In addition, upon
disbursement of the entirety of the Agency Loan proceeds, Participant agrees to modify the
Agency Loan Documents to reflect the total amount of the Agency Loan ($2,500,000) in
accordance with the Modification of Note and Deed of Trust attached hereto as Exhibit F.




                                                 57
          The Agency shall disburse the Agency Loan proceeds only if no default exists under this
Agreement and no default would result from the disbursement or application thereof. In
addition, the Agency shall deliver the final installment of the Agency Loan to the Participant, only
if all of the following have occurred:
        (a) No default exists and no default would result from the disbursement or application
thereof;
       (b) The Participant shall execute and deliver to the Agency the Modification of Note and
Deed of Trust (Exhibit F) (in recordable form) evidencing the updated amount of the Agency
Loan; and
       (c) The Participant shall deliver to the Agency a binding commitment by a title insurance
company acceptable to the Agency to issue a modification to Agency's lender's policy of title
insurance issued by Stewart Title Guaranty Company (Policy No.: O-9301-276087) in
connection with Participant's acquisition of the Site, reflecting the modified loan amount
($2,500,000).
            The Agency agrees that the Agency Deed of Trust (i) shall be subordinate to the Tax
Credit Financing and any other deed(s) of trust executed in favor of Participant's permanent and
construction mortgage lender(s), provided, that any such subordination shall be subject to the
provisions set forth in Section 305 hereof and paragraph 3 of the Addendum to Agency Deed of
Trust (Exhibit G); and (ii) upon transfer of the Retail Component to the Retail Owner, may be
partially reconveyed at the request of Participant in order to release the Agency's lien against
Retail Component.
          The Agency Loan shall be repaid pursuant to the terms and conditions set forth in
the Agency Loan Note.
   D. [§304] Affordable Housing Covenant
        Prior to and as a condition precedent to funding by the Agency of the balance of the
Agency Loan proceeds, the Participant shall also execute and deliver an affordable housing
covenant (the "Affordable Housing Covenant") to the Agency in the form substantially as set
forth in Exhibit H hereto and incorporated herein by reference. The Affordable Housing
Covenant shall be recorded against the entire Site but will specifically exclude the Retail
Component.
   E. [§305] Subordination of Agency Loan
        The Agency agrees to subordinate the Agency Deed of Trust provided for in Section
303, above, to financing obtained by Participant through the Tax Credit Financing, or alternative
financing obtained by Participant; provided that any such subordination shall be subject to the
provisions set forth in this Section 305 and paragraph 3 of the Addendum to the Agency Deed of
Trust (Exhibit G). The Agency shall have the right to review and approve the terms and
conditions of any such senior financing, which approval shall not be unreasonably withheld. The
Agency shall have the right to record a request that the Agency receive notice of any default by
the Participant under the Tax Credit Financing or other financing obtained by the Participant
with respect to the Project. To implement any such subordination, the Agency agrees to
cooperate with the Participant and execute such subordination agreements and/or intercreditor
agreements that may be reasonably required, in form and content approved by Agency counsel.




                                                   58
IV. [§400] USE OF THE SITE
   A. [§401] Residential Component
        The Participant covenants and agrees for itself, its successors, its assigns and every
successor in interest, that eighty (80) of the Units constructed on the Site shall be rented to
qualified low income persons and families whose income does not exceed the limits set forth
below ("Eligible Households") in compliance with the Affordable Housing Covenant.
          The maximum housing cost of the Eligible Households for each of the income levels set
forth above must comply with the most restrictive of: i) the regulations promulgated by the
California Department of Housing and Community Development Sections 6910-6932 in Title 25
of the California Code of Regulations, governing the Agency's set aside housing fund; ii) the
eligibility requirements established by the Tax Credit Financing; and iii) the regulatory
agreement relating to any other federally administered program providing financing for the
Project.
         Rental restrictions establishing the criteria for rental of the Units to Eligible Households
are contained in the Affordable Housing Covenant to be recorded against the Site and
applicable to the Units. The Units shall remain affordable for the longer of: (a) fifty five (55)
years from the date of recordation of the Affordable Housing Covenant, or (b) until payment in
full of all amounts owed to the Agency under the Agency Loan Note.
   B. [§402] Retail Component
       The Participant covenants and agrees for itself, its successors, its assigns and every
successor in interest, that all of the Retail Component of the Site shall be in compliance with the
recorded CC&R’s.
   C. [§403] Property Management; Maintenance of the Project
       Within the time set forth in the Schedule of Performance (Exhibit D), the Participant shall
prepare and enter into an agreement with a property management company approved by the
Agency to manage the Project. The Participant shall submit a copy of such agreement to the
Agency, provided the Agency shall not have the right to approve or disapprove such agreement
except to ensure compliance of such agreement with the provisions of this Agreement and the
Affordable Housing Covenant. The property management and maintenance agreement shall
name the Agency as a third-party beneficiary permitting the Agency the right to enforce the
Agreement. The Participant shall promptly notify the Agency in the event there is any change in
the property management company managing the Project.
       The Participant covenants that it shall maintain, or cause to be maintained, the Site and
the Project, in a manner consistent with the provisions set forth therefor in the Lemon Grove
Municipal Code and shall keep the Site reasonably free from any accumulation of debris or
waste materials prior to and after completion of the Project.
       If, at any time, Participant fails to maintain the Site, the Agency shall have the right to
take necessary corrective action pursuant to the provisions set forth in the Agency Loan Note,
and the Affordable Housing Covenant.
       Failure by Participant to maintain, or cause to be maintained, the Site in the condition
provided in this Section 402 shall constitute a default under the Agency Loan Note and the
Affordable Housing Covenant.
   D. [§404] Obligation to Refrain from Discrimination
      The Participant covenants and agrees for itself, its successors, its assigns and every
successor in interest to the Site, the Units or any part thereof, that there shall be no


                                                  59
discrimination against or segregation of any person or group of persons on account of race,
color, creed, religion, sex, marital status, physical handicap, medical condition, sexual
orientation, source of income, ancestry or national origin in the sale, lease, sublease, transfer,
use, occupancy, tenure or enjoyment of the Site, nor shall the Participant or any person claiming
under or through the Participant establish or permit any such practice or practices of
discrimination or segregation with reference to the selection, location, number, use or
occupancy of tenants, lessees, subtenants, sublessees or vendees of the Units. The foregoing
covenants shall run with the land in accordance with Section 33438 of the Health and Safety
Code and shall remain in effect in perpetuity.
   E. [§405] Form of Nondiscrimination and Nonsegregation Clause
        The Participant shall refrain from restricting the rental; sale or lease of any portion of the
Site on the basis of race, color, creed, religion, sex, marital status, physical handicap, medical
condition, sexual orientation, source of income, ancestry or national origin of any person.
Pursuant to Sections 33337 and 33436 of the Health and Safety Code or any successor statute,
all such deeds, leases or contracts shall contain or be subject to substantially the following
nondiscrimination or nonsegregation clauses:
            1. In deeds: "The grantee herein covenants by and for himself or herself, his or her
heirs, executors, administrators and assigns, and all persons claiming under or through them,
that there shall be no discrimination against. or segregation of, any person or group of persons
on account of race, color, creed, religion, sex, marital status, physical handicap, medical
condition, sexual orientation, source of income, national origin or ancestry in the sale, lease,
sublease, transfer, use, occupancy, tenure or enjoyment of the land herein conveyed, nor shall
the grantee, or any person claiming under or , through him or her, establish or permit any such
practice or practices of discrimination or segregation with reference to the selection, location,
number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the land
herein conveyed. The foregoing covenants shall run with the land."
            2. In leases: "The lessee herein covenants by and for himself or herself, his or her
heirs, executors, administrators and assigns, and all persons claiming under or through him or
her, and this lease is made and accepted upon and subject to the following conditions:
That there shall be no discrimination against or segregation of any person or group of persons
on account of race, color, creed, religion, sex, marital status, physical handicap, medical
condition, sexual orientation, source of income, national origin or ancestry in the leasing,
subleasing, transferring, use, occupancy, tenure or enjoyment of the land herein leased, nor
shall the lessee himself or herself, or any person claiming under or through him or her, establish
or permit any such practice or practices of discrimination or segregation with reference to the
selection, location, number, use or occupancy of tenants, lessees, sublessees, subtenants or
vendees in the land 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, marital status,
physical handicap, medical condition, sexual orientation, source of income, national origin or
ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land,
nor shall the transferee , or any person claiming under or through him or her, establish or permit
any such practice or practices of discrimination or segregation with reference to the selection,
location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of
the land."




                                                    60
   F. [§406] Rights of Access
        For the purposes of assuring compliance with this Agreement, representatives of the
Agency and the City shall have the reasonable right of access to the Site, with reasonable
notice to Participant and without charges or fees for the purpose of inspection of the Site.
   G. [§407] Effect and Duration of Covenants
        The covenants contained in Section 401 of this Agreement shall be deemed to run with
the land in accordance with Section 33334.3(f) of the Health and Safety Code or any successor
statute and shall remain in effect for the longer of: (a) a period of not less than fifty five (55)
years from the date of recordation of the Affordable Housing Covenant against the Site, or (b)
until payment in full of all amounts owed to the Agency under the Agency Loan Note. The
covenants against discrimination contained in Sections 404 and 405 of this Agreement shall be
deemed to run with the land in accordance with Section 33438 of the Health and Safety Code or
any successor statute and shall remain in effect in perpetuity. The covenants established in this
Agreement shall, without regard to technical classification and designation, be binding on the
part of the Participant and any successors and assigns to the Site or any part thereof, and the
tenants, lessees, sublessees and occupants of the Site, for the benefit of and in favor of the
Agency, the City and their successors or assigns and may be enforced by the Agency, the City
and their successors and assigns.

V . [§500] DEFAULTS AND REMEDIES
   A. [§501] Defaults
        Failure or delay by either party to perform any term or provision of this Agreement
constitutes a default under this Agreement. The nondefaulting party shall notify the defaulting
party that a default exists and that the defaulting party must cure same within thirty (30) days of
receipt of the notice of default. The party who so fails or delays must immediately commence to
cure, correct or remedy such failure or delay, and shall complete such cure, correction or
remedy with reasonable diligence and during any period of curing shall not be in default.
Notwithstanding the foregoing, any default in the payment of any amounts owed under the
Agency Loan Note shall not constitute a default of the Participant hereunder so long as there
are any amounts owed under the Tax Credit Financing, or any other senior debt approved by
the Agency, and any such event shall be governed by the provisions of the intercreditor
agreement or other subordination agreement executed by the Agency with respect to the Tax
Credit Financing or other senior debt.
   B. [§502] Legal Actions
        In addition to any other rights or remedies, either party may institute legal action to cure,
correct or remedy any default, to recover damages for any default or to obtain any other remedy
consistent with the purpose of this Agreement. Such legal actions must be instituted in the
Superior Court of the County of San Diego, State of California, in any other appropriate court in
that county, or in the Federal District Court in the Southern District of California.
        The nondefaulting party may also, at its option, cure the breach and sue in any court of
proper jurisdiction to collect the reasonable costs incurred by virtue of curing or correcting the
defaulting party's breach. Further, the nondefaulting party may file legal action to require the
defaulting party to specifically perform the terms and conditions of this Agreement.
   C. [§503] Applicable Law
      The laws of the State of California shall govern the interpretation and enforcement of this
Agreement.


                                                  61
   D. [§504] Rights and Remedies are Cumulative
        Except as otherwise expressly stated in this Agreement, the rights and remedies of the
parties are cumulative, and the exercise by either party of one or more of such rights or
remedies shall not preclude the exercise by it, at the same time or different times, of any other
rights or remedies for the same default or any other default by the other party.
   E. [§505] Damages
        If either party defaults with regard to any of the provisions of this Agreement, the non-
defaulting party shall serve written notice of such default upon the defaulting party. If the default
is not commenced to be cured within thirty (30) days after service of the notice of default and is
not cured promptly in a continuous and diligent manner within a reasonable period of time after
commencement, the defaulting party shall be liable to the non-defaulting party for damages
caused by such default.
   G. [§506] Specific Performance
        If either party defaults with regard to any of the provisions of this Agreement, the non-
defaulting party shall serve written notice of such default upon the defaulting party. If the default
is not commenced to be cured within thirty (30) days after service of the notice of default and is
not cured promptly in a continuous and diligent manner within a reasonable period of time after
commencement, the non-defaulting party, at its option, may thereafter (but not before)
commence an action for specific performance of the terms of this Agreement pertaining to such
default.

VI. [§600] GENERAL PROVISIONS
   A. [§601] Conflicts of Interest
        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 this Agreement which affects his personal interests or the interests of any
corporation, partnership or association in which he is directly or indirectly interested.
       The Participant 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.
   B. [§602] Nonliability of Agency Officials and Employees
       No member, official or employee of the Agency or the City shall be personally liable to
the Participant in the event of any default or breach by the Agency or for any amount which may
become due to the Participant or on any obligations under the terms of this Agreement.
   C. [§603] Force Majeure; Extension of Times of Performance
       In addition to specific provisions of this Agreement, performance by the parties
hereunder shall not be deemed to be in default and all performance and dates shall be
extended where delays or defaults are due to strikes, lock-outs, riots, floods, earthquakes, fires,
casualties, freight embargoes, lack of transportation, governmental restrictions, litigation beyond
the control or without the fault the party seeking relief, unusually severe weather, acts or
omissions of the other party, acts or the failure to act of the City or any other public or
governmental agency or entity (except that acts or the failure to act of Agency shall not excuse
performance by Agency), or any other causes without the fault of the party claiming an
extension of time to perform. Notwithstanding anything to the contrary in this Agreement, an
extension of time for any such cause shall be for the period of the enforced delay and shall
commence to run from the time of the commencement of the cause, if the notice by the party


                                                    62
claiming such an extension is sent to the other party within thirty (30) days of the
commencement of the cause. Times of performance under this Agreement may also be
extended in writing by the written mutual agreement of Agency and Participant.

VII. [§700] ENTIRE AGREEMENT, WAIVERS AND AMENDMENTS
   This Agreement is executed in three (3) originals each of which is deemed to be an original.
This Agreement comprises pages 1 through 17, inclusive and Exhibits A through H which
constitute the entire understanding and agreement of the parties with respect to the Project.
   This Agreement may be executed in counterparts, each of which, when taken together, shall
constitute an original.
   This Agreement integrates all of the terms and conditions mentioned herein or incidental
hereto and supersedes all negotiations or previous agreements between the parties with
respect to all or any part of the subject matter hereof.
    All waivers of the provisions of this Agreement must be in writing and signed by the
appropriate authorities of the Agency and the Participant, and all amendments hereto must be in
writing and signed by the appropriate authorities of the Agency and the Participant.

VIII.   [§800] TIME FOR ACCEPTANCE OF AGREEMENT BY AGENCY
    This Agreement, when executed by the Participant and delivered to the Agency, must be
authorized, executed and delivered by the Agency within thirty (30) days after the date of
signature by the Participant or this Agreement shall be void, except to the extent that the
Participant may consent in writing to further extensions of time for the authorization, execution
and delivery of this Agreement. The effective date of this Agreement (the "Effective Date") shall
be the date first set forth above.

IX. [§ 900] NOTICES
    Any notice, demand, request, consent, approval or communication that either party desires
or is required to give to the other party shall be in writing and shall be deemed given as of the
time of hand delivery to the addresses set forth below, or three days after deposit into the
United States mail, postage prepaid, by registered or certified mail, return receipt requested.
Unless notice of a different address has been given in accordance with this Section, all such
notices shall be addressed as follows:
    If to Agency, to:       Lemon Grove Community Development Agency
                    3232 Main Street
                    Lemon Grove, CA 91945
                    Attn: Executive Director
                    Tel: (619) 825-3800
                    Fax: (619) 825-3804
    If to Participant, to:       Hitzke Development Corporation
                     43460 Ridge Park Drive, Suite 260
                     Temecula, CA 92590
                     Attn.: Ginger Hitzke
                     Tel.: (951) 699-8400
                     Fax: (619) 923-3544




                                                63
   With a Copy to:       Allen Matkins Leck Gamble Mallory & Natsis LLP
                 515 South Figueroa Street, 9th Floor
                 Los Angeles, CA 90071-3398
                 Attn: Claudia Gutierrez, Esq.
                 Tel: (213) 622-5555
                 Fax: (213) 620-8816
   IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
and year first set forth above.
   LEMON GROVE COMMUNITY DEVELOPMENT AGENCY


   By:__________________________
   Its: Executive Director


   ATTEST:__________________________


   APPROVED AS TO FORM:


   By:__________________________
      Agency Counsel


   HITZKE DEVELOPMENT CORPORATION, a California corporation


   By:__________________________
      Ginger Hitzke
      Its: President




                                              64
EXHIBIT A
SITE PLAN




 65
                                            EXHIBIT B
                              LEGAL DESCRIPTION OF THE SITE

APN 480-043-22
The land referred to herein is situated in the State of California County of San Diego, City of
Lemon Grove, and described as follows:
Parcel A:
That portion of Lot 11 of Subdivision No. 3 of Tract 12, Ex-Mission Rancho, in the County of San
Diego, State of California, according to Licensed Survey Map thereof No. 5, filed in the office of
the County Recorder of San Diego County described as follows:
Beginning at a point on the north line of said Lot 11, distant thereon south 89 04' west 433.0
feet from the northeast corner of said Lot, said point being the northwest corner of the land
described in deed to Joseph Ceplew recorded July 27, 1894 in book 231, page 159 of deeds;
thence along the west line of said Ceplew's land, south 041' west 108.25 feet; thence north
8904' east parallel to the north line of said Lot 11, a distance of 140.0 feet; thence north 041'
east parallel to said west line of Ceplew's land 108.25 feet to a point in the north line of said
Lot 11, distant thereon north 8904' east 140.00 feet from the point of beginning; thence south
8904' west 140.0 feet to the point of beginning.
Parcel B:
That portion of Lot 11 of Subdivision No. 3 of Tract 12, Ex-Mission, in the County of San Diego,
State of California, according to Licensed Survey Map thereof No. 5, filed in the office of the
County Recorder of San Diego County, described as follows:
Beginning at a point on the north line of said Lot 11, distant thereon south 8904' west 433.00
feet from the northeast corner of said Lot, said point being the northwest corner of the land
described in deed to Joseph Ceplew recorded July 27, 1894 in book 231, page 159 of deeds;
thence along the west line of said Ceplew's land; south 041' west 108.25 feet to the true point
of beginning; thence north 8904' east parallel to the north line of said Lot 11 a distance of 140.0
feet; thence south 041' west parallel to the westerly line of said Ceplew's land a distance of
48.99 feet to a point said point being north 041' east 59.0 feet from a point in the southerly line
of that portion of land as conveyed to Lyda Maupin by deed dated May 16, 1941 and recorded
June 2, 1941 in book 1183, page 325 of official records of San Diego County; thence south
8904' west parallel to said southerly line a distance of 140.0 feet to a point in the westerly line
of said Ceplew's land distant thereon north 041' east along the westerly line as conveyed to
Ceplew a distance of 48.99 feet to the true point of beginning.
Parcel C:
That portion of Lot 11 of Subdivision No. 3 of Tract 12, Ex-Mission Rancho, in the County of San
Diego, State of California, according to Licensed Survey Map thereof No. 5, filed in the office of
the County Recorder of San Diego County, described as follows:
Beginning at a point on the north line of said Lot 11, distant thereon south 8904' west 293.00
feet from the northeast corner of said Lot 11, said point being north 8904' east 140.0 feet from
the northwest corner of the land described in deed to Joseph Ceplew recorded July 27, 1894 in
book 231, page 139 of deeds; thence south 041' west parallel to the west line of said land
157.24 feet; thence north 8904' east parallel to the north line of said Lot 11, a distance of 81.00
feet; thence north 041' east parallel to the west line of said Ceplew's land 157.24 feet to a point



                                                    66
in the north line of said Lot 11, distant thereon north 8904' east 81.00 feet from the point of
beginning; thence south 8904' west along said north line 81.0 feet to the point of beginning.
(End of Legal Description)




                                                  67
                                           EXHIBIT C
                                  SCOPE OF DEVELOPMENT

I.   PRIVATE DEVELOPMENT
     A. General
       The Participant agrees that the Site shall be developed and improved in accordance with
the provisions of this Agreement, including, without limitation, Planned Development Permit
PDP08-005, and the plans, drawings and related documents approved by the Agency and/or
City pursuant hereto. The Participant, its architect, engineer and contractors, shall work with
Agency staff to coordinate the overall design, architecture and color of the improvements to be
constructed on the Site.
     B. Construction of the Improvements
      The Participant shall construct on the Site the Project as described in Section 201 and
shown on the Planned Development Permit PDP08-002. The units shall consist of:
        (36)   Studio Units
        (36)   1 Bedroom Units
        (8) 2 Bedroom Units
     C. Architecture and Design
        The improvements shall be of high architectural quality, shall be well landscaped, and
shall be effectively and aesthetically designed. The shape, scale of volume, and exterior finish
of the units must be consonant with, visually related to, physically related to, and an
enhancement of adjacent buildings within the neighborhood.
     D. Applicable Codes
        The Participant's improvements shall be constructed in accordance with the Uniform
Building Code (with City modifications) and the Municipal Code.
     E. On Site Demolition and Clearance
      1. On the Site, demolish or salvage, clear, grub and remove (as called for in the
approved construction plans) existing buildings, pavements, walks, curbs, gutters and other
improvements; and
       2. Remove, plug and/or crush in place utilities, such as storm sewers, sanitary sewers,
water systems, electrical overhead and underground systems and telephone and gas systems
located on the Site, as may be required following any necessary relocation of the utilities.
        F. Compaction, Finish Grading and Site Work
      1. The Participant shall compact, finish grade and do such site preparation as is
necessary for the construction of the Participant's Project.




                                                 68
                                         EXHIBIT D
                              SCHEDULE OF PERFORMANCE

       Approximate Date                                    Event

  December 20, 2009              In accordance with TCAC for 9% tax credits which may be
                                 awarded on August 5, 2009, Developer pulls building
                                 permits and obtains construction loan and tax credit equity
                                 contribution
                                 Recordation of CC&R's

  June, 2011                     Construction complete

  November, 2011                 Project 100% occupied

  April, 2012                    Developer obtains permanent loan and tax credit equity
                                 contribution.


If developer does not receive an award of tax credits in the May 2009 funding round, Developer
shall have an ability to apply for funding for up to 36 additional months with Construction
Completion, Occupancy and Permanent Loan Conversion to extend.




                                               69
                                           EXHIBIT E
                          FORM OF CERTIFICATE OF COMPLETION


RECORDED AT THE REQUEST OF AND
WHEN RECORDED RETURN TO:




                             CERTIFICATE OF COMPLETION OF
                            CONSTRUCTION AND IMPROVEMENT

    WHEREAS, the LEMON GROVE COMMUNITY DEVELOPMENT AGENCY (hereinafter
referred to as the "Agency") and HITZKE DEVELOPMENT CORPORATION, a California
corporation ("Participant"), entered into that certain Owner Participation Agreement for Citronica
Two dated _____________________(the "OPA"); and
    WHEREAS, pursuant to the OPA, the Participant has developed that certain real property
legally described in the attached Exhibit A (herein, the "Site") by constructing, or causing to be
constructed, the multi-family residential housing project and retail space (the "Project") required
under the OPA; and
    WHEREAS, pursuant to Section 214 of the OPA, promptly after completion of construction
of the Project (as set forth in the OPA) to be completed by the Participant and upon the written
request by the Participant, and upon Agency’s acceptance of the written request, the Agency is
required to furnish the Participant with a Certificate of Completion relating to such construction
work; and
    WHEREAS, the issuance by the Agency of the Certificate of Completion shall be conclusive
evidence that the Participant has complied with the terms of the OPA pertaining to construction
of the improvements upon the Site; and
   WHEREAS, the Participant has requested that the Agency furnish the Participant with the
Certificate of Completion; and
    WHEREAS, the Agency has conclusively determined that construction of the improvements
on the Site as required by the OPA has been satisfactorily completed;
   NOW, THEREFORE:
    1. As provided in the OPA, the Agency does hereby certify that construction of the multi-
family residential units and appurtenant areas on the Site and the Retail Component as required
by the OPA has been fully and satisfactorily performed and completed.
    2. The OPA is therefore of no further force and effect, and all rights, duties, obligations and
liabilities of the Agency and the Participant thereunder with respect to the Site shall cease to



                                                   70
exist. Any continuing and existing rights, duties, obligations and liabilities pertaining to the Site
are provided in the Agency Loan Note provided for in Section 303 of the OPA, and the
Affordable Housing Covenant, Construction and Permanent Financing Loan Deed of Trust
executed by the Participant in favor of the Agency which have been recorded against the Site.
    3. This Certificate of Completion shall not be deemed or construed to constitute evidence
of compliance with or satisfaction of any obligation of the Participant to any holder of a
mortgage, or any insurer of a mortgage, securing money loaned to finance the construction of
the improvements on the Site. This Certificate of Completion is not a notice of completion as
referred to in Section 3093 of the California Civil Code.
                                 [signatures appear on following page]




                                                  71
   IN WITNESS WHEREOF, the Agency has executed this Certificate of Completion as of
_____________________, 200_____
   LEMON GROVE COMMUNITY DEVELOPMENT AGENCY


   By:__________________________
   Its: Executive Director
      Accepted by
   HITZKE DEVELOPMENT CORPORATION, a California corporation


   By:__________________________
      Ginger Hitzke
      Its: President




                                          72
                                           EXHIBIT F
                   FORM MODIFICATION OF NOTE AND DEED OF TRUST

RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:



Lemon Grove Community Development Agency
3232 Main Street
Lemon Grove, California 91945
Attention: Executive Director

____________________________________________________________________________

                      MODIFICATION OF NOTE AND DEED OF TRUST

THIS MODIFICATION OF NOTE AND DEED OF TRUST (this "Agreement") is executed as of
___________, 2009, between Lemon Grove Community Development Agency ("Lender") and
______________________ ("Borrower"), with reference to the following facts:

        D. Borrower and Lender executed that certain Owner Participation Agreement for
Citronica _____dated as of ___________, 2009 (the "OPA"), pursuant to which Lender agreed
to make a loan (the "Loan") to Borrower in connection with the acquisition and development of
certain real property located in the City of Lemon Grove, County of San Diego, State of
California, more particularly described in the Deed of Trust (as hereinafter defined). The Loan is
evidenced by that certain Note Secured by Deed of Trust (the "Original Agency Note") dated
as of ___________, 2009, in the original principal amount of $_______________ (the "Original
Loan Amount"), executed by Borrower and payable to Lender. The Original Note is secured by
a Deed of Trust (the "Agency Deed of Trust") of even date therewith, executed by Borrower,
as Trustor, for the benefit of Lender, as Beneficiary, which Deed of Trust was recorded on
 __________, 2009 as Instrument No. ______________ of the Official Records of San Diego
County, California (the "Official Records"). The Deed of Trust encumbers a fee estate in
certain real property more particularly described therein and on Exhibit A hereto.

      E. The OPA, the Note, and the Deed of Trust, are referred to herein collectively as the
"Loan Documents".

      F. Pursuant to the OPA, Lender has agreed to increase the Original Loan Amount by
$_____________ to total of $_______________.

       NOW, THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:

        Modification of Note. The Original Agency Note is amended and restated in its entirety
as set forth in the Amended and Restated Note Secured by Deed of Trust dated concurrently
herewith, executed by Borrower in favor of Lender (the "Agency Note").




                                                 73
         Modification of Agency Deed of Trust. Section (a) in the recitals of the Agency Deed of
Trust is deleted in its entirety and replaced with the following: "Payment of the Note Amount
(i.e., $__________________)".

        Conforming Modifications. All references in the Agency Note and the Agency Deed of
Trust to the amount of the Loan are modified to refer to the principal amount of
$_____________. The Agency Note, and the Agency Deed of Trust are each hereby modified
to provide that all references therein to the "Agency Note," and the "Agency Deed of Trust" shall
be deemed to refer to the Agency Note and the Agency Deed of Trust as amended hereby. The
Agency Deed of Trust is hereby modified to provide that the Agency Deed of Trust secures the
Agency Note, as amended hereby. It is the intention of the parties hereto that this Agreement
shall be deemed to form a part of the Agency Note and a part of the Agency Deed of Trust and
shall always be construed as amending the Agency Note and the Agency Deed of Trust; except
as specifically supplemented and amended hereby.

       Confirmation of Obligations. Except to the extent modified by this Agreement, Borrower
hereby confirms each of the covenants, agreements and obligations of Borrower set forth in the
Loan Documents.

       Counterparts. This Agreement may be executed in any number of counterparts, each of
which when executed and delivered to Lender will be deemed to be an original, and all of which,
taken together, will be deemed to be one and the same instrument.

        Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of California. If any court of competent jurisdiction determines any
provision of this Agreement to be invalid, illegal or unenforceable, that portion shall be deemed
severed from the rest, which shall remain in full force and effect as though the invalid, illegal or
unenforceable portion had never been a part hereof.




                                                    74
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth
above.
                                          BORROWER:
                                          _______________________________
                                          _______________________________


                                          By:
                                          Name:________________________
                                          Title:_________________________


                                          By:
                                          Name:________________________
                                          Title:_________________________

                                          LENDER:
                                          LEMON GROVE COMMUNITY DEVELOPMENT
                                          AGENCY


                                          By:
                                          Name:________________________
                                          Title:_________________________


ATTEST: _____________________________

APPROVED AS TO FORM:


By:__________________________
   Agency Counsel




                                             75
                                           EXHIBIT G
                         FORM OF ADDENDUM TO DEED OF TRUST
                               ADDENDUM TO DEED OF TRUST

This Addendum to Deed of Trust is part of the Deed of Trust dated ______________, 2009 to
which it is attached between HITZKE DEVELOPMENT CORPORATION, a California
corporation, as Trustor, and the COMMUNITY DEVELOPMENT AGENCY OF THE CITY OF
LEMON GROVE, as Beneficiary. The following provisions are made a part of the Deed of Trust:
    1. No Discrimination. The Trustor 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, age, marital status, physical handicap, medical
condition, sexual orientation, source of income, national origin or ancestry in the sale, lease,
sublease, transfer, use, occupancy, tenure or enjoyment of the Property, nor shall the Trustor
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 Property.
   2. Nondiscrimination Clauses. All deeds, leases or contracts made relative to the Property,
the improvements thereon or any part thereof, shall contain or be subject to the
nondiscrimination clauses set forth in California Health and Safety Code Section 33436.
    3. Subordination. Beneficiary agrees that the terms and conditions of the Note and this
Deed of Trust shall be subject to and subordinate to the terms and conditions of financing
obtained by Trustor through a lender acceptable to Beneficiary for the construction of the
Residential Component (as defined in the Owner Participation Agreement between Trustor and
Beneficiary dated as of _________, 2009 (the "OPA")); provided that if such alternative
construction financing is not provided pursuant to an adopted federal or state program, such
lender shall agree to include in its deed of trust the following conditions: (i) Beneficiary shall
receive any notices of default issued by such lender to Trustor; (ii) Beneficiary shall have the
right to cure any default by Trustor within forty-five (45) days after a notice of default; (iii)
Beneficiary shall have the right to foreclose under its Deed of Trust without the lender
accelerating its debt, provided Beneficiary has cured or is attempting to cure any defaults under
such lender's deed of trust; and (iv) Beneficiary shall have the right to transfer the Project to a
nonprofit corporation who shall own and operate the Project as an affordable rental housing
project with the consent of such lender, which consent shall not be unreasonably withheld.
     4. Default. Notwithstanding any other provisions in this Deed of Trust, the occurrence of
any of the following shall constitute an event of default under the Note and this Deed of Trust,
and a default may be declared under this Deed of Trust solely upon the occurrence of any of the
following: (i) Any failure by Trustor to pay any amount due under the Note within thirty (30) days
of its due date; or (ii) Any other default by Trustor under the terms of the Affordable Housing
Covenant provisions after expiration of applicable notice and cure periods.
   5. Hazardous Substances.
       (a) As used in this Section 5, the following terms shall have the following meanings:
            (i) "Environmental Laws" means all statutes, ordinances, orders, rules, regulations,
plans, policies or decrees and the like now or hereafter in effect relating to (A) Hazardous
Substance Activity or Hazardous Substances; (B) the generation, use, storage, transportation or
disposal of Hazardous Substances, or solid waste; or (C) occupational safety and health,
industrial hygiene, land use or the protection of human, plant or animal health, safety or welfare,
including, without limitation, the Comprehensive Environmental Response, Compensation, and


                                                   76
Liability Act of 1980 (42 U.S.C. Section 9601 et seq .) ("CRELA"); the Hazardous Material
Transportation Act (49 U.S.C. Section 180 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. Section 136 et seg.); the Resource- Conservation and Recovery Act
(42 U.S.C. Section 6901 et seq.); the Clean Air Act (42 U.S.C. Section 740 _et seq.); the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seg.); the Occupational Safety
and health Act (29 U.S.C. Section 651 et seg.); the Safe Drinking Water Act (42 U.S.C. Section
300f et seq.); the Porter-Cologne Water Quality Control Act (California Water Code Section
13020 et seq.); the Safe Drinking Water and Toxic Enforcement Act of 1986 (California Health &
Safety Code Section 25249.5 et seg.); the Hazardous Substance Account Act (California Health
& Safety Code Section 25300 et seq.); the Hazardous Waste Control Act (California Health &
Safety Code Section 25100 et seg.); The California Environmental Quality Act (California Public
Resources Code Section 2100 et seg.); and the rules, regulations and ordinances of the City of
Murrieta or County of Riverside or any applicable federal, state and local agencies or bureaus,
as amended from time to time.
                      (ii) "Foreclosure Transfer" means the transfer of title to all or any part of
the Property or the Trust Estate at a foreclosure sale under the Deed of Trust, either pursuant to
judicial decree or the power of sale contained in the Deed of Trust, or by deed in lieu of such
foreclosure.
            (iii) "Hazardous Substances" means (A) any chemical, compound, material, mixture
or substance that is now or hereafter defined or listed in, or otherwise classified pursuant to, any
Environmental Laws as a "hazardous substance," "hazardous material," "hazardous waste,"
"extremely hazardous waste," "acutely hazardous waste," "radioactive waste," "infectious
waste," "biohazardous waste," "toxic substance," "pollutant," "toxic pollutant," "contaminant" as
well as any other formulation not mentioned herein intended to define, list, or classify
substances by reason of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "EP toxicity" or "TCLP toxicity"; (B) petroleum,
natural gas, natural gas liquids, liquified natural gas, synthetic gas usable for fuel (or mixtures of
natural gas and such synthetic gas) and ash produced by a resource recovery facility utilizing a
municipal solid waste stream, and drilling fluids, produced waters and other wastes associated
with the exploration, development or production of crude oil, natural gas, or geothermal
resources; (C) "hazardous substance" as defined in Section 2782.6(d) of the California Civil
Code; (D) "waste" as defined in Section 13050(d) of the California Water Code; (E) asbestos in
any form; (F) urea formaldehyde foam insulation; (G) polychlorinated biphenyls (PCBs); (H)
radon; and (1) any other chemical, material, or substance that, because of its quantity,
concentration, or physical or chemical characteristics, exposure to which is limited or regulated
for health and safety reasons by any governmental authority, or which poses a significant
present or potential hazard to human health and safety or to the environment if released into the
workplace or the environment.
            (iv) "Hazardous Substance Activity" means any actual, proposed, or threatened use,
storage, holding, existence, location, release (including, without limitation, any spilling, leaking,
leaching, pumping, pouring, emitting, emptying, dumping, disposing into the environment, and
the continuing migration into or through soil, surface water, groundwater or any body of water or
the air), discharge, deposit, placement, generation, processing, construction, treatment,
abatement, removal, disposal, disposition, handling, or transportation of any Hazardous
Substance from, under, in, into, or on the Property, including without limitation, the movement or
migration of any Hazardous Substances from surrounding property, surface water, groundwater
or any body of water, or the air under, in, into or onto the Property and any residual Hazardous
Substances contamination in, on, or under the Property.




                                                   77
            (v) "Losses" means all charges, losses, liabilities, damages (whether actual,
consequential, punitive, or otherwise denominated), costs, fees, demands, claims for personal
injury or real or personal property damage, actions, administrative proceedings (including
informal proceedings), judgments, causes of action, assessments, fines, penalties, costs, and
expenses of any kind or character, foreseeable and unforeseeable, liquidated and contingent,
proximate and remote, including, without limitation, the following: (A) the reasonable fees and
expenses of outside legal counsel; (B) the reasonable fees and expenses of accountants, third-
party consultants, and other independent contractors retained by an Beneficiary; (C) costs,
including capital, operating and maintenance costs, incurred in connection with any investigation
or monitoring of site conditions or any clean-up, remedial, removal or restoration work required
or performed by any federal, state or local governmental agency or political subdivision or
performed by any non-governmental entity or person that is required by Environmental Laws or
administrative ruling or directive because of the presence, suspected presence, release or
suspected release of Hazardous Substances in violation of Environmental Laws in the air, soil,
surface water or groundwater at the Property; (D) any and all diminution in value of the
Property, loss of use or damage to the Property, or loss of profits or loss of business
opportunity; and (E) reasonable costs and expenses of enforcing this provision.
            (vi) "Environmental Losses" means Losses rising out of or as a result of: (A) the
occurrence of any Hazardous Substance Activity; (B) any violation of any applicable
Environmental laws relating to the Property or to the ownership, use, occupancy or operation
thereof; (C) any investigation, inquiry, order, hearing, action, or other proceeding by or before
any governmental agency in connection with any Hazardous Substance Activity; or (D) any
claim, demand or cause of action, or any action or other proceeding, whether meritorious or not,
brought or asserted against any Indemnitee which directly or indirectly relates to, arises from or
is based on any of the matters described in clauses (A), (B), or (C), or any allegation of any
such matters.
           (b) Trustor represents and warrants to Beneficiary that Trustor has conducted as
appropriate inquiry and investigation, and, to the best of Trustor's knowledge, based on such
inquiry and investigation, no portion of the Property is being used or has ever been used at any
previous time, for the disposal, storage, treatment, processing or other handling of Hazardous
Substances, nor have any Hazardous Substances migrated onto or from the Property. Neither
the Property nor Trustor is in violation of or subject to any existing, pending or threatened
investigation by any governmental authority under any Environmental Law. Trustor's prior and
intended use of the Property will not result in the disposal or release of any Hazardous
Substances on, under, about or to the Property or the migration of any Hazardous Substances
from the Property. The foregoing representations and warranties shall be continuing and shall
be true and correct for the period from the date hereof to the release of this Deed of Trust
(whether by payment of the indebtedness secured hereby or foreclosure or action in lieu
thereof), and these representations and warranties shall survive such release.
       (c) Trustor represents and warrants to Beneficiary that Trustor has complied with all
recommendations by any engineers retained by Trustor and all requirements of any applicable
department of environmental resources, environmental protection agency or similar
governmental agency, and there are no recommendations by said engineers or requirements
ordered by said agency or any other governmental body for environmental investigation or
cleanup with respect to the Property.
           (d) On and after the date hereof, Trustor shall not (a) allow any Hazardous
Substances to be installed, used, introduced, stored, treated, disposed of, generated,
manufactured, discharged, dumped, transported or brought in, upon or over the Property in
violation of applicable law; (b) allow any soil or ground water contamination or pollution with any


                                                   78
Hazardous Substances on the Property in violation of applicable law; (c) allow any Hazardous
Substances to migrate from the Property in violation of applicable law; (d) allow any Hazardous
Substances to migrate onto the Property from any adjacent properties in violation of applicable
law; or (e) allow or cause the Property to be in violation of, or to trigger a duly initiated and
prosecuted investigation of the Property by any governmental authority under applicable
limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules
or timetables contained in any local, state and/ or federal laws, regulations, codes, ordinances,
plans, administrative or judicial orders, decrees, judgments, notices or demand letters issued,
entered, promulgated or approved thereunder relating to the environment, land use, water and
air quality and Hazardous Substances ("Environmental Requirements").
        (e) If the presence of any Hazardous Substances on the Property caused or permitted
by Trustor results in any contamination of the Property, Trustor shall promptly take all actions, at
its sole expense, as are necessary to return the Property to the condition existing prior to the
introduction of any such Hazardous Substances to the Property; provided that Beneficiary's
approval of such actions shall first be obtained, which approval shall not be unreasonably
withheld so long as such actions would not potentially have any material adverse long-term or
short-term effect on the Property.
        (f) At any time after the occurrence and during the continuance of any default under this
Section 5, Beneficiary shall have the following rights and remedies, in addition to any other
rights and remedies Beneficiary has under this Deed of Trust:
            (i) As provided in California Code of Civil Procedure Section 564, Beneficiary or its
employees, acting by themselves or through a court appointed receiver may do any of the
following: (i) enter upon, possess, manage, operate, dispose of, and contract to dispose of the
Property or any part thereof; (ii) take custody of all accounts; (iii) negotiate with governmental
authorities with respect to the Property's environmental compliance and remedial measures; (iv)
take any action necessary to enforce compliance with environmental provisions, including
spending Rent Payments to abate any environmental problem; (v) make, terminate, enforce or
modify leases of part or all of the Property; (vi) contract for goods and services, hire agents,
employees, and counsel, make repairs, alterations, and improvements to the Property
necessary in Beneficiary's judgment to protect or enhance the security hereof; and/ or (vii) take
any and all other actions which may be necessary or desirable to comply with Trustor's
obligations hereunder and under the Loan Documents. All sums realized by the receiver or
Beneficiary under this subparagraph, less all costs and expenses incurred by either of them
under this subparagraph, including attorneys' fees, and less such sums as Beneficiary or the
receiver deems appropriate as a reserve to meet future expenses under this subparagraph,
shall be applied on any indebtedness secured hereby in such order as Beneficiary shall
determine. Neither application of said sums to said indebtedness, nor any other action taken by
Beneficiary or the receiver under this subparagraph shall cure or waive any default or notice of
default hereunder, or nullify the effect of any such notice of default. Beneficiary, or any
employee or agent of Beneficiary, or a receiver appointed by a court, may take any action or
proceeding hereunder without regard to the adequacy of the security for the indebtedness
secured hereunder, the existence of a declaration that the indebtedness secured hereby has
been declared immediately due and payable, or the filing of a notice of default.
            (ii) With or without notice, and without releasing Trustor from any obligation
hereunder, to cure any default of Trustor or in connection with any such default, Beneficiary or
its agents, acting by themselves or through a court-appointed receiver, may enter upon the
Property or any part thereof and perform such acts and things as Beneficiary deems necessary
or desirable to inspect, investigate, assess, and protect the security hereof, including of any of
Beneficiary's other rights: (i) to obtain a court order to enforce Beneficiary's right to enter and


                                                  79
inspect the Property under California Civil Code Section 2929.5 (in respect of which the decision
of Beneficiary as to whether there exists a release or threatened release of hazardous
substance, as defined therein, onto the Property shall be deemed reasonable .and conclusive
as between the parties hereto); and (ii) to have a receiver appointed under California Code of
Civil Procedure Section 564 to enforce Beneficiary's right to enter and inspect the Property for
hazardous substances as defined therein. All costs and expenses incurred by Beneficiary with
respect to the audits, tests, inspections, and examinations which Beneficiary or its agents or
employees may conduct, including the fees of engineers, laboratories, contractors, consultants,
and attorneys, shall be paid by Trustor. All costs and expenses incurred by Trustee and
Beneficiary pursuant to this subparagraph (including court costs, consultant fees and attorney
fees, whether incurred in litigation or not and whether before or after judgment) shall bear
interest at the Note Rate, from the date they are incurred until said sums have been paid.
             (iii) Beneficiary may seek a judgment that Trustor has breached its covenants,
representations and/ or warranties with respect to the environmental matters set forth above in
this Section 5, by commencing and maintaining an action or actions in any court of competent
jurisdiction for breach of contract pursuant to California Code of Civil Procedure Section 736,
whether commenced prior to foreclosure of the Property or after foreclosure of the Property, and
to seek the recovery of any and all costs, damages, expenses, fees, penalties, fines, judgments,
indemnification payments to third parties, and other out-of-pocket costs or expenses actually
incurred by Beneficiary or advanced by Beneficiary (collectively, the "Environmental Costs")
relating to the cleanup, remediation or other response action required by applicable law or which
Beneficiary believes necessary to protect the Property, it being conclusively presumed between
Beneficiary and Trustor that all such Environmental Costs incurred or advanced by Beneficiary
relating to the cleanup, remediation, or other response action respecting the Property were
made by Beneficiary in good faith. All Environmental Costs incurred by Beneficiary under this
subparagraph (including court costs, consultant fees and attorney fees, whether incurred in
litigation or not and whether before or after judgment) shall bear interest at the Note Rate, from
the date of expenditure until said sums have been paid. Beneficiary shall be entitled to bid, at
any sale of the Property held hereunder, the amount of said costs, expenses and interest in
addition to the amount of the other obligations hereby secured as a credit bid, the equivalent of
cash.
            (iv) As provided in California Code of Civil Procedure Section 726.5, Beneficiary
may waive its lien against the Property or any portion thereof, to the extent such property is
found to be environmentally impaired as defined therein, and to exercise any and all rights and
remedies of an unsecured creditor against Trustor and all of Trustor's assets and property for
the recovery of any deficiency and Environmental Costs, including seeking an attachment order
under California Code of Civil Procedure Section 433.010. Beneficiary and Trustor each
represents and warrants for itself that it has no actual knowledge of any release of any
Hazardous Substance (as defined in Section 726.5) on, to or under the Property. As between
Beneficiary and Trustor, for purposes of California Code of Civil Procedure Section 726.5,
Trustor shall have the burden of proving that Trustor or any related party (or any affiliate or
agent of Trustor or any related party) did not cause or contribute to, and was not in any way
negligent in permitting, any release or threatened release of the Hazardous Substance.
            (v) Trustor acknowledges and agrees that notwithstanding any term or provision
contained herein or in the Loan Documents, the Environmental Costs and all judgments and
awards entered against Trustor pursuant to Section 5(f)(iv) above shall be exceptions to any
nonrecourse or exculpatory provision of the Loan Documents, and Trustor shall be fully and
personally liable for the Environmental Costs and such judgments and awards and such liability
shall not be limited to the original principal amount of the obligations secured by this Deed of



                                                  80
Trust, and Trustor's obligations shall survive the foreclosure, deed in lieu of foreclosure, release,
reconveyance, or any other transfer of the Property or this Deed of Trust. Trustor hereby agrees
to indemnify, defend and hold harmless Beneficiary from and against any and all Environmental
Losses.
       HITZKE DEVELOPMENT CORPORATION, a California corporation




               By:_________________________
               Ginger Hitzke
               Its: President




                                                  81
                                                 EXHIBIT H
                                 AFFORDABLE HOUSING COVENANT

       RECORDING REQUESTED BY
       AND AFTER RECORDATION, MAIL TO:
       Lemon Grove Community Development Agency
       3232 Main Street
       Lemon Grove, CA 91945


                              AFFORDABLE HOUSING COVENANT

    For valuable consideration, the receipt of which is hereby acknowledged, the LEMON
GROVE COMMUNITY DEVELOPMENT AGENCY ("Agency"), acting to carry out the
obligations under Sections 33334.2 and 33413 of the California Health and Safety Code
establishing an affordable housing program for the City of Lemon Grove, hereby agrees with
HITZKE DEVELOPMENT CORPORATION, a California corporation ("Developer"), with respect
to that certain parcel of real property (the "Site") legally described on Exhibit A, that the Site and
the eighty (80) multi-family residential units to be constructed thereon (the "Project") will be
subject to the conditions, restrictions, reservations and rights of Agency specified below:
   1. USE OF THE PROJECT. The Developer hereby covenants and- agrees, for itself, its
lessees, successors and assigns, as follows:
       A. In consideration for the Agency's financial assistance in connection with acquisition
and development of the Project on the Site, the Agency and Developer have executed this
Agreement to assure the Project meets the requirements of California Health and Safety Code
Sections 33334.2 and 33413, and remains affordable for the longest feasible period, but for not
fewer than fifty five (55) years.
       B. Rent and Income Restrictions. Eighty (80) of the residential units to be developed at
the Project (the "Affordable Units") shall be rented to low income households whose income
does not exceed the limits set forth below ("Eligible Households"):
The maximum housing cost of the Eligible Households for each of the income levels set forth
above must comply with the regulations promulgated by the California Department of Housing
and Community Development Sections 6910-6932 in Title 25 of the California Code of
Regulations, governing the Agency's set aside housing fund, or with the eligibility requirements
established by the Tax Credit Financing or the regulatory agreement relating to any other
federally administered program providing financing for the Project.
For purposes of this Covenant:
                       "Median Income" shall mean the median income for households in San
Diego County, California, as published from time to time by the United States Department of
Housing and Urban Development ("HUD") in a manner consistent with the determination of
median gross income under Section 8 of the United States Housing Act of 1937, as amended,
and as defined in Title 25, California Code of Regulations, Section 6932. In the event that such
income determinations are no longer published by HUD, or are not updated for a period of at
least 18 months; the Agency shall provide the Developer with other income determinations that
are reasonably similar with respect to methods of calculation to those previously published by
HUD or are not updated for a period of at least 18 months, the Agency shall provide the



                                                    82
Developer with other income determinations that are reasonably similar with respect to methods
of calculation to those previously published by HUD.
       C. Reporting Requirements. Annual reports and annual income recertifications must be
submitted to the Agency. The reports, at a minimum, shall include:
   (1) The number of persons per unit
   (2) Tenant name
   (3) Initial occupancy date
   (4) Rent paid per month
   (5) Gross income per year
       Such information shall be reported to the Agency pursuant to Health and Safety Code
Section 33418, in substantially the form attached hereto as Exhibit B, or in a substantially
equivalent format acceptable to the Agency.
          Annual income recertifications shall also contain those documents used to certify
eligibility. Agency may, from time to time during the term of this Covenant, request additional or
different information and Developer shall promptly supply such information in the reports
required hereunder. Developer shall maintain all necessary books and records, including
property, personal and financial records, in accordance with requirements prescribed by Agency
with respect to all matters covered by this Covenant. Developer, at such time and in such forms
as Agency may require, shall furnish to Agency statements, records, reports, data and
information pertaining to matters covered by this Covenant. Upon request for examination by
Agency, Developer, at any time during normal business hours, shall make available all of its
records with respect to all matters covered by this Covenant. Developer shall permit Agency to
audit, examine and make excerpts or transcripts from these records.
    2. MAINTENANCE. The Developer and all successors in interest, agree that they shall
maintain, or cause to be maintained, the Site and the Project in a manner consistent with the
provisions set forth therefor in the Lemon Grove Municipal Code, and shall keep the entire Site
and the Project reasonably free from any accumulation of debris or waste materials prior to and
after construction.
          If, at any time, Developer fails to maintain the Site or the Project, or both of them, and
has either failed to commence to cure such condition or to diligently prosecute to completion the
condition or the condition is not corrected after expiration of thirty (30) days from the date of
written notice from Agency to Developer, Agency may perform the necessary corrective
maintenance, and Developer shall pay such costs as are reasonably incurred for such
maintenance. The Agency shall have the right to place a lien on the Project and the lease hold
interest should Developer not reimburse Agency for such costs within sixty (60) days following
Agency's written demand to Developer for reimbursement of such costs. Developer, on behalf of
itself its heirs, successors and assigns, hereby grants to Agency and its officers, employees and
agents, an irrevocable license to enter upon the Site to perform such maintenance during
normal business hours after receipt of written notice from Agency as hereinabove described and
Developer's failure to cure or remedy such failure within thirty (30) days of such notice. Any
such entry shall be made only after reasonable notice to Developer, and Agency shall indemnify
and hold Developer harmless from any claims or liabilities pertaining to any such entry by
Agency. Failure by Developer to maintain the Site in the condition provided in this Section 2
may, in Agency's reasonable discretion, constitute a default under this Covenant.
     3. NO TRANSFER. Except with respect to Approved Transferees, the Developer shall not
sell, transfer, convey, encumber, assign or lease the whole or any part of the Project without the


                                                  83
prior approval of the Agency. Developer shall request approval by written notice at least ninety
(90) days prior to, any proposed transfer. This prohibition shall not be deemed to prevent the
granting of easements or permits to facilitate the rehabilitation or development of the Project or
to prohibit or restrict the rental or leasing of units when the rehabilitation of the Project is
completed.
Notwithstanding the foregoing, the transfer of limited partnership interests in the Developer and
any ownership interest in Developer's limited partners is permitted without the consent of the
Agency.
    4. MANAGEMENT. During the term of this Covenant, Developer shall promptly notify the
Agency in the event there is any change in the property management company managing the
Project. The property management and maintenance agreement shall name the Agency as a
third-party beneficiary permitting the Agency the right to enforce the Agreement. Developer shall
submit a copy of such agreement to the Agency, provided the Agency shall not have the right to
approve or disapprove such agreement except to ensure compliance of such agreement with
the provisions of this paragraph 4.
    5. NO DISCRIMINATION. 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, marital status, physical handicap,
medical condition, sexual orientation, source of income, national origin or ancestry in the sale,
lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Site, nor shall the
Developer itself or any person claiming under or through it establish or permit any such practice
or practices of discrimination or segregation with reference to the selection, location, number,
use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the Site.
    6. NONDISCRIMINATION AND NONSEGREGATION CLAUSES. All deeds, leases or
contracts made relative to the Site, the improvements thereon or any part thereof, shall contain
or be subject to substantially the following nondiscrimination and nonsegregation clauses:
         A. In deeds: The grantee herein covenants by and for himself or herself, his or her heirs,
executors, administrators and assigns, and all persons claiming under or through them, that
there shall be no discrimination against or segregation of any person or group of persons on
account of race, color, creed, religion, sex, marital status, physical handicap, medical condition,
sexual orientation, source of income, national origin or ancestry in the sale, lease, sublease,
transfer, use, occupancy, tenure or enjoyment of the land herein conveyed, nor shall the
grantee, or any person claiming under or through him or her, establish or permit any such
practice or practices of discrimination or segregation with reference to the selection, location,
number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the land
herein conveyed. The foregoing covenants shall run with the land.
        B. In leases: The lessee herein covenants by and for himself or herself, his or her heirs,
executors, administrators and assigns, and all persons claiming under or through him or her,
and this lease is made and accepted upon and subject to the following conditions:
            That there shall be no discrimination against or segregation of any person or group
of persons on account of race, color, creed, religion, sex, marital status, physical handicap,
medical condition, sexual orientation, source of income, national origin or ancestry in the
leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the land herein
leased, nor shall the lessee himself or herself, or any person claiming under or through him or
her, establish or permit any such practice or practices of discrimination or segregation with
reference to the selection, location, number, use or occupancy of tenants, lessees, sublessees,
subtenants or vendees in the land herein leased.



                                                   84
          C. 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, marital status, physical
handicap, medical condition, sexual orientation, source of income, national origin or ancestry in
the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land, nor shall
the transferee, or any person claiming under or through him or her, establish or permit any such
practice or practices of discrimination or segregation with reference to the selection, location,
number, use or occupancy of tenants, lessees, sublessees, subtenants or vendees in the land.
     7. NO IMPAIRMENT OF LIEN. No violation or breach of the covenants, conditions,
restrictions, provisions or limitations contained in this Covenant shall defeat or render invalid or
in any way impair the lien or charge of any mortgage, deed of trust or other financing or security
instrument; provided, however, that any successor of Developer to the Project, including the
Retail Component of the Project as that term is defined in the Agreement shall be bound by
such covenants, conditions, restrictions, limitations and provisions, whether such successor's
title was acquired by foreclosure, deed in lieu of foreclosure, trustee's sale or otherwise.
    8. MARKETING. Developer shall make reasonable efforts during the term of the Covenant
to target its marketing and advertising efforts for the Project to residents of the City of Lemon
Grove and individuals employed within the City.
    9. DURATION. The covenants contained in paragraph 1 of this Covenant shall be deemed
to run with the land in accordance with Section 33334.3(f) of the Health and Safety Code or any
successor statute and shall remain in effect for not less than fifty five (55) years following
recordation of this Covenant. The covenants against discrimination contained in paragraphs 5
and 6 of this Covenant shall be deemed to run with the land in accordance with Section 33438
of the Health and Safety Code or any successor statute and shall remain in effect in perpetuity.
    10. SUCCESSORS AND ASSIGNS. The covenants contained in this Covenant shall be
binding for the benefit of the Agency and its respective successors and assigns, third party
beneficiaries, and any successor in interest to the Site or the Project or any part thereof, and
such covenants shall run in favor of the Agency and such aforementioned parties for the entire
period during which such covenants shall be in force and effect, without regard to whether the
Agency is or remains an owner of any land or interest therein to which such covenants relate.
The Agency, and such aforementioned parties, in the event of any breach of any such
covenants, shall have the right to exercise all of the rights and remedies, and to maintain, any
actions at law or suits in equity or other proper proceedings to enforce the curing of such
breach. The covenants contained in this Covenant shall be for the benefit of and shall be
enforceable only by the Agency, and its respective successors and assigns, third party
beneficiaries, and such aforementioned parties.
    11. SUBORDINATION. Upon written request by Developer, Agency shall agree that the
terms and conditions of this Covenant shall be subject to and subordinate to the terms and
conditions of financing obtained by Developer, through a lender acceptable to the Agency (the
"Lender") and upon terms and conditions reasonably approved by the Agency, for construction
or permanent financing, to be secured by a mortgage against the Site; provided, any Lender for
construction or permanent financing that is not obtained through an approved federal or state
program shall agree to include in its subordination agreement and deed of trust the following
conditions: (i) Agency shall receive any notices of default issued by Lender to Developer; (ii)
Agency shall have the right to cure any default by Developer within forty-five (45) days after a
notice of default; (iii) Agency shall have the right to foreclose its Deed of Trust without Lender
accelerating its debt, provided Agency has cured or is attempting to cure any defaults under the
deed of trust; and (iv) Agency shall have the right to transfer the Project to another nonprofit
corporation, or to a limited partnership or limited liability company whose general partner is a



                                                  85
nonprofit corporation, who shall own and operate the Project as an affordable rental housing
project with the consent of Lender, which consent shall not be unreasonably withheld.
   IN WITNESS WHEREOF, the Agency and Developer have caused this instrument to be
executed on their behalf by their respective officers thereunto duly authorized, this _____ day of
March, 2009.
       AGENCY:


       LEMON GROVE COMMUNITY DEVELOPMENT AGENCY


       By: ____________________
           Its: Executive Director




       OWNER:


       HITZKE DEVELOPMENT CORPORATION, a California corporation


                  By:_________________________
               Ginger Hitzke
                  Its: President




                                                  86
                                   EXHIBIT A TO COVENANT
                             LEGAL DESCRIPTION OF PROPERTY

APN 480-043-22
The land referred to herein is situated in the State of California County of San Diego, City of
Lemon Grove, and described as follows:
Parcel A:
That portion of Lot 11 of Subdivision No. 3 of Tract 12, Ex-Mission Rancho, in the County of San
Diego, State of California, according to Licensed Survey Map thereof No. 5, filed in the office of
the County Recorder of San Diego County described as follows:
Beginning at a point on the north line of said Lot 11, distant thereon south 89 04' west 433.0
feet from the northeast corner of said Lot, said point being the northwest corner of the land
described in deed to Joseph Ceplew recorded July 27, 1894 in book 231, page 159 of deeds;
thence along the west line of said Ceplew's land, south 041' west 108.25 feet; thence north
8904' east parallel to the north line of said Lot 11, a distance of 140.0 feet; thence north 041'
east parallel to said west line of Ceplew's land 108.25 feet to a point in the north line of said
Lot 11, distant thereon north 8904' east 140.00 feet from the point of beginning; thence south
8904' west 140.0 feet to the point of beginning.
Parcel B:
That portion of Lot 11 of Subdivision No. 3 of Tract 12, Ex-Mission, in the County of San Diego,
State of California, according to Licensed Survey Map thereof No. 5, filed in the office of the
County Recorder of San Diego County, described as follows:
Beginning at a point on the north line of said Lot 11, distant thereon south 8904' west 433.00
feet from the northeast corner of said Lot, said point being the northwest corner of the land
described in deed to Joseph Ceplew recorded July 27, 1894 in book 231, page 159 of deeds;
thence along the west line of said Ceplew's land; south 041' west 108.25 feet to the true point
of beginning; thence north 8904' east parallel to the north line of said Lot 11 a distance of 140.0
feet; thence south 041' west parallel to the westerly line of said Ceplew's land a distance of
48.99 feet to a point said point being north 041' east 59.0 feet from a point in the southerly line
of that portion of land as conveyed to Lyda Maupin by deed dated May 16, 1941 and recorded
June 2, 1941 in book 1183, page 325 of official records of San Diego County; thence south
8904' west parallel to said southerly line a distance of 140.0 feet to a point in the westerly line
of said Ceplew's land distant thereon north 041' east along the westerly line as conveyed to
Ceplew a distance of 48.99 feet to the true point of beginning.
Parcel C:
That portion of Lot 11 of Subdivision No. 3 of Tract 12, Ex-Mission Rancho, in the County of San
Diego, State of California, according to Licensed Survey Map thereof No. 5, filed in the office of
the County Recorder of San Diego County, described as follows:
Beginning at a point on the north line of said Lot 11, distant thereon south 8904' west 293.00
feet from the northeast corner of said Lot 11, said point being north 8904' east 140.0 feet from
the northwest corner of the land described in deed to Joseph Ceplew recorded July 27, 1894 in
book 231, page 139 of deeds; thence south 041' west parallel to the west line of said land
157.24 feet; thence north 8904' east parallel to the north line of said Lot 11, a distance of 81.00
feet; thence north 041' east parallel to the west line of said Ceplew's land 157.24 feet to a point



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in the north line of said Lot 11, distant thereon north 8904' east 81.00 feet from the point of
beginning; thence south 8904' west along said north line 81.0 feet to the point of beginning.
(End of Legal Description)




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Attachment D




          -89-
Attachment D
                  EXHIBIT B TO COVENANT
               TENANT INCOME CERTIFICATION




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