City ofsouth Gate Item No. 1 JOINT CITY COUNCIL AND HOUSING AUTHORITY

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1 City ofsouth Gate Item No. 1 JOINT CITY COUNCIL AND HOUSING AUTHORITY RECEIVED AENIEA IIIILIL DE For the Special Meeting of: December 8, 2015 Originating Departm nt: Community Development City Manager(tC i4t L. Adams fi1: Mic ad Flad SUBJECT: SUBORDINATION AGREEMENT WITH SG REALTY GROUP, INC., ON REAL PROPERTY LOCATED AT 8931 DUDLEXT AVENUE, SOUTH GATE, AND SUBSTITUTION OF TRUSTEE AND DEED OF FULL RECONVEYANCE ACTION: The City Council and Housing Authority will discuss and consider approval of a Subordination Agreement with SG Realty Group, Inc., on real property located at 8931 Dudlext Avenue, South Gate. If the City Council and Housing Authority desire to approve the Agreement, the following actions would be required: a. The City Council approves Subordination Agreement with SG Realty Group, Inc., on real property located at 8931 Dudlext Avenue, South Gate and the Substitution of Trustee and Deed of Full Reconveyance; b. The Housing Authority approves Subordination Agreement with SG Realty Group, Inc., on real property located at 8931 Dudlext Avenue, South Gate and the Substitution of Trustee and Deed of Full Reconveyance; c. Authorize Mayor/Chairperson to execute the Subordination Agreement and the Substitution of Trustee and Deed of Full Reconveyance in a form acceptable to the City Attorney/Legal Counsel; and d. Authorize the Director of Community Development to act as agent for the City and execute any additional documents required to implement the Agreement. FISCAL IMPACT: There is no fiscal impact directly associated with this transaction. However, if the City Council approves the Subordination Agreement, the City s security interest in the Dudlext property securing performance of a 30-year affordability covenant will continue in ajunior lien position but subject to a senior lien securing payment of a greater loan balance. REPORT SUMMARY: SG Realty Group, Inc. (Developer) seeks to encumber real property located at 8931 Dudlext Avenue, South Gate (Dudlext Property) in the amount of$ 1,016,560, and is requesting that the City subordinate its deed of trust securing payment of the Promissory Note to this new loan. See letter from Developer attached hereto. Developer desires to pay off a $450,000 loan originated in 2007, with an approximate balance of $410,529. Developer further desires to take out equity from the Dudlext property in the amount of $532,945 for the purpose of developing a for-sale market rate single family housing project consisting of four (4) units on San Carlos and Missouri Avenues. 1

2 This matter is presented to the City Council and Housing Authority for discussion and consideration regarding the execution of a Subordination Agreement. The former Redevelopment Agency of the City of South Gate ( Agency ) and Developer initially entered into a Disposition and Development Agreement ( DDA ), on April 5, 1994, for the construction of the Dudlext Senior Housing Expansion Project for rental by very-low income senior citizens. Developer agreed to maintain such affordability for a 30 year period. See attached Grant Deed. Following dissolution of the Agency, the benefit of this affordability covenant was transferred to the Housing Authority. Said DDA stipulates that the loan shall be subject and subordinate only to the security interest of a construction deed of trust for financing development of the site. On or about June 25, 1996, Developer agreed to pay the Agency a principal amount of $1,536, as evidenced by a Promissory Note secured by a Deed of Trust attached hereto. However, there are no payments due the City from Developer under the Promissory Note and 1130 th ofthe principal amount ofthe Promissory Note is forgiven each year so long as Developer complies with the affordability covenant for senior housing on the property. As of June 30, 2015, the remaining balance due to the City of South Gate is $512, ATTACHMENTS: 1. Proposed Subordination Agreement 2. Proposed Substitution of Trustee and Deed of Full Reconveyance 3. Letter from Developer 4. Grant Deed 5. Promissory Note 6. Deed of Trust 2

3 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Universal Bank 3455 Nogales Street, Second Floor West Covina, California Attn: Loan Service Department Loan Number: UNIVERSAL BANK UNIVERSAL BANK (Space above this line for Recorder s use only) SUBORDINATION AGREEMENT (Secondary Financing) NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY BECOMING, OR CONFIRMS THAT YOUR SECURITY INTEREST IN THE PROPERTY NOW IS AND SHALL AT ALL TIMES REMAIN, SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN EVIDENCED BY THE SENIOR SECURITY INSTRUMENT, AS DEFINED BELOW, OF UNIVERSAL BANK. AS SUCH LIEN MAY BE PARTICIPATED, SOLD, EXTENDED, RENEWED, OR OTHERWISE MODIFIED FROM TIME TO TIME. This Subordination Agreement (Secondary Financing) (the Agreement ), dated December 8, 2015 for reference purposes only, is entered into by and among SG Realty Group, Inc., a California corporation (the Borrower ), UNIVERSAL BANK (the Lender ), and City of South Gate, a municipal corporation, and the South Gate Housing Authority, a public body, corporate and politic, as successor-interest to Community Development Commission of the City of South Gate, as successor-in-interest to Redevelopment Agency of the City of South Gate (collectively, the Junior Lien Holder ), with reference to the following facts: A. The Lender has made or is about to make a loan in the original principal amount of One Million Sixteen Thousand Five Hundred Sixty Dollars and th ($1,016,560.00) (the Senior Loan ) to Borrower. The Senior Loan is or will be evidenced by Borrower s Promissory Note dated April 29, 2015 (the Senior Note ). The Senior Loan is secured or will be secured by a deed of trust or mortgage dated April 29, 2015 (the Senior Security Instrument ) executed by Borrower, as trustor, in favor of the Lender, as beneficiary, which is to be recorded in the Official Records of Los Angeles Couhty, State of California (the Official Records ), concurrent herewith the recordation of this Agreement. B. The Senior Security Instrument encumbers or will encumber Borrower s estate in the real property described in Exhibit A attached hereto, including all improvements now or hereafter located thereon (the Improvements ) (such real property and Improvements are referred to collectively as the Real Property ). In connection with the Senior Loan, Borrower has also executed or is about to execute, L

4 among other documents, (1) an Assignment of Leases (the Assignment of Leases ) with respect to the Real Property in favor of the Lender, as assignee; and (2) an Environmental Indemnity Agreement (the Indemnity Agreement ) in favor of the Lender, as indemnitee. The Lender also has filed or intends to file a UCC-1 Financing Statement (the Financing Statement ) in favor of the Lender, as secured party, naming the Borrower, as debtor. The Financing Statement covers certain equipment and other personal property relating to the Real Property, which personal property is referred to collectively as the Personal Property. The Real Property and Personal Property are referred to collectively as the Property. The Senior Note; Senior Security Instrument; Assignment of Leases; Financing Statement; Indemnity Agreement; and all other documents executed by Borrower and delivered to the Lender at the Lender s request in connection with the Senior Loan, including all existing and future amendments, modifications, renewals, supplements, replacements, and extensions of any or all of such documents (referred to collectively as Loan Modifications ) (none of which Loan Modifications shall require the approval of Junior Lien Holder, except as provided in Section 1.2(b) below); and all rights and privileges of the Lender thereunder, are referred to collectively as the Senior Loan Documents. C. Junior Lien Holder has made a loan or loans or other extensions of credit in the aggregate original principal amount of One Million Five Hundred Thirty Six Thousand Six Hundred Forty Nine Dollars and OOI1OO ($1,536,649.00) (referred to collectively as the Subordinate Indebtedness ) to Borrower. The Subordinate Indebtedness is secured by a deed of trust encumbering the Real Property (the Subordinate Security Instrument ) dated June 25, 1996 and recorded on December 18, 1996 as Instrument No in the Official Records. The documents evidencing the Subordinate Indebtedness, the Subordinate Security Instrument, all other documents executed by Borrower and delivered to Junior Lien Holder at Junior Lien Holder s request in connection with the Subordinate Indebtedness, and all existing and future amendments, modifications, renewals, supplements, replacements, and extensions of any or all of such documents, and all rights and privileges of Junior Lien Holder under any or all of such documents, are referred to collectively as the Subordinate Loan Documents. D. It is a condition precedent to the Lender s closing and initial funding of the Senior Loan that the Subordinate Loan Documents shall be and remain at all times unconditionally subordinate to the Senior Loan Documents. Junior Lien Holder is willing to agree that the Senior Security Instrument, when recorded, and other Senior Loan Documents shall constitute a lien or charge on the Property which is unconditionally prior and superior to the lien or charge of the Subordinate Security Instrument and other Subordinate Loan Documents. THEREFORE, in consideration of the mutual benefits accruing to the parties and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Lender to make the Senior Loan to Borrower, Borrower, Junior Lien Holder, and the Lender agree as follows: 1. Subordination. 1.1 Subordination of Subordinate Loan Documents. The Senior Loan Documents, including the Senior Security Instrument, shall unconditionally be and remain at all times a lien or charge on the Property prior and superior to the lien or charge of the Subordinate Loan Documents, including the Subordinate Security Instrument. THIS AGREEMENT SHALL NOT BE DEEMED TO AFFECT THE PRIORITY OF THE SUBORDINATE LOAN DOCUMENTS WITH RESPECT TO ANY OTHER LIEN OR SECURITYINTEREST AFFECTING THE PROPERTY, EXCEPT ONLY FOR THE SUBORDINATION OF THE SUBORDINATE LOAN DOCUMENTS TO THE SENIOR LOAN DOCUMENTS ON THE TERMS OF THIS AGREEMENT. 1.2 Application of Subordination Agreement. Notwithstanding anything to the contrary contained in this Agreement or the Senior Loan Documents: (a) The subordination contained in this Agreement shall apply only with respect to (i) all indebtedness evidenced by the Senior Note, including all principal, interest, default interest, late charges, and prepayment fees; (ii) all Loan Modifications (except as otherwise expressly provided in Section 1.2(b) below); and (iii) all future amounts hereafter advanced by the Lender under and L

5 pursuant to the Senior Loan Documents in connection with or relating to the preservation or protection of all or part of the Property or the Lender s interests in connection with the Property or the Senior Loan (including advances for the payment of real estate taxes and assessments and insurance premiums relating to the Property), and all costs, fees, expenses (including attorneys fees and costs), and amounts hereafter incurred by the Lender or owing to the Lender under or pursuant to the Senior Loan Documents (all such amounts, costs, fees and expenses advanced or incurred by the Lender or owing to the Lender are referred to collectively as the Senior Loan Protective Advances ); (b) The Lender agrees that the subordination contained in this Agreement shall not apply with respect to (i) any future loan or loans (excluding the Senior Loan and all Senior Loan Protective Advances), which future loan or loans (excluding the Senior Loan and all Senior Loan Protective Advances) represent new loans of principal to Borrower evidenced by a separate note or other instrument of any kind (excluding the Senior Note and other Senior Loan Documents) which state that they are secured by the Senior Security Instrument; and (ii) future modifications to the Senior Note or other Senior Loan Documents which increase the original principal face amount of the Senior Note, provided that no Senior Loan Protective Advances shall be deemed to constitute such a modification but in no event shall the total aggregate amount of the indebtedness (including the Senior Loan Protective Advances) subject to this subordination exceed One Million Two Hundred Thousand and 00/1 00 Dollars ($1,200,000.00); and (c) The Senior Security Instrument shall be prior and superior to the Subordinate Loan Documents insofar as the Senior Security Instrument secures all existing and future disbursements of the proceeds of the Senior Loan and all Senior Loan Protective Advances that may hereafter be made by the Lender, regardless of whether such disbursements of the proceeds of the Senior Loan or Senior Loan Protective Advances may constitute optional or obligatory disbursements by the Lender. 1.3 Further Assurances. Within thirty (30) business days after the Lender s written request to the Junior Lien Holder, Junior Lien Holder shall execute, acknowledge (if required for recording purposes), and deliver to the Lender such further documents and instruments as may be reasonably required by the Lender to effectuate the terms of this Agreement, including any documents reasonably required by the Lender to effectuate Junior Lien Holder s subordination of the Subordinate Loan Documents to any Loan Modifications (except as otherwise provided in Section 1.2(b) above) and to the lien of the Senior Security Instrument insofar as such Senior Security Instrument secures any and all Loan Modifications (except as otherwise provided in Section 1.2(b) above). Notwithstanding anything to the contrary contained in this Agreement, nothing in this Agreement constitutes or shall be construed to obligate the Lender to enter into any Loan Modifications. 2. UCC Subordination. Junior Lien Holder authorizes the Lender to take all actions that are necessary or appropriate to file a UCC Financing Statement Amendment (Form UCC3) subordinating Junior Lien Holder s security interest, if any, in the Personal Property under the Subordinate Loan Documents to the Lender s security interest in the Personal Property under the Senior Loan Documents. 3. Rents and Other Proceeds. Without limiting the generality of Sections 1 and 2 above, Junior Lien Holder agrees that (a) all advances of the principal amount of the Senior Loan and all Senior Loan Protective Advances made by the Lender under or pursuant to the Senior Loan Documents, regardless of the optional or obligatory character of any or all of such advances, shall be secured by the first-priority lien of the Senior Security Instrument, which lien shall be prior and superior to the lien of the Subordinate Security Instrument; and (b) all of Junior Lien Holder s rights under the Subordinate Loan Documents in and to each and all of the following shall be unconditionally subject and subordinate to the rights of the Lender, including the Lender s right to cause any or all of the following to be applied first to the payment of principal, interest and all other amounts owing by Borrower to the Lender under the Senior Loan Documents: 3.1 Rents and Profits; Sales Proceeds. All existing and future rents, royalties, issues, profits, proceeds, revenues, income and other benefits of the Property and all leases L

6 affecting the Property, including all security deposits and prepaid rent, and all proceeds of the sale of all or part of the Property; 3.2 Insurance Proceeds. All proceeds of all claims, actions, causes of action, demands, liens, rights, judgments, settlements, awards, compensation, and damages of every kind and nature which Borrower now has or which may hereafter accrue against any person, whether arising in tort, by contract or statute, or in any other manner, which in any way directly or indirectly relate to or arise under any policy of insurance which Borrower maintains with respect to the Property; and 3.3 Condemnation Proceeds. All proceeds of all claims, actions, causes of action, demands, liens, rights, judgments, settlements, awards, compensation, and damages of every kind and nature which Borrower now has or which may hereafter accrue against any person, whether arising in tort, by contract or statute, or in any other manner, which in any way directly or indirectly relate to or arise out of any condemnation of the Property or other taking of the Property for public or quasipublic use by eminent domain or to the transfer of the Property in lieu of condemnation or any such taking. In the event Lender elects to disburse or otherwise release all or any portion of any condemnation award, payment or proceeds to Borrower for the purpose of reconstruction or replacement of the Property (including any improvements now or hereafter located on the Property), Junior Lien Holder shall in no event declare a default under the Subordinate Loan Documents by reason of the condemnation of or damage to or destruction of the Property or by reason of such application by Borrower of such award, payment or proceeds to the costs of reconstruction or replacement of the Property. 4. Repair of Improvements. If the Lender, in its sole but good faith business judgment, elects to release, for the purposes of restoration of the Improvements, all or part of the proceeds of any policies of casualty insurance relating to the Property or all or part of any award or other compensation made for any damages or losses by reason of a taking of the Property by eminent domain, Junior Lien Holder shall consent to the application of such insurance proceeds, awards or compensation for such restoration purposes, subject to reasonable controls over the disbursement of such proceeds for such restoration purposes, as established by the Lender, and no such application shall constitute a default or breach by Borrower under the Subordinate Loan Documents. Nothing contained in this Section shall be deemed to obligate the Lender to release any such proceeds for restoration of the Improvements. 5. Leasing. To the extent, if at all, that Junior Lien Holder s consent is required with respect to any future lease of all or part of the Property ( Lease ), (a) Junior Lien Holder waives such consent requirement with respect to any Lease which has been approved by the Lender; and (b) with respect to any Lease which has been approved by the Lender, Junior Lien Holder shall not unreasonably withhold or delay the granting of any non-disturbance agreement by Junior Lien Holder to the tenant under such an approved Lease, provided such non-disturbance agreement is in a form reasonably acceptable to Junior Lien Holder. Notwithstanding anything to the contrary contained in this Agreement, the Lender s approval of any Lease shall be for the Lender s sole benefit and not for the benefit of Junior Lien Holder or any other person, and the Lender shall have no liability or responsibility of any kind under any circumstances to Junior Lien Holder with respect to the Lender s approval of any Lease affecting the Property. 6. Impounds. Junior Lien Holder shall not collect impound payments for the purpose of escrowing taxes, assessments or other charges imposed on the Property or insurance premiums due on the insurance policies required under the Senior Security Instrument or the Subordinate Security Instrument without the Lender s prior written consent, which consent may be withheld by the Lender in its sole but good faith business judgment. 7. Junior Lien Holders Statements. After receipt of written request by Junior Lien Holder from the Lender, Junior Lien Holder shall within thirty (30) business days furnish to the Lender a statement setting forth the unpaid principal balance of the Subordinate Indebtedness, all accrued but unpaid interest and any other sums due and owing thereunder, the current rate of interest, the monthly payment amount, and that to Junior Lien Holder s actual present knowledge, no default by Borrower exists under the Subordinate Loan Documents (or if such default is actually known to Junior Lien Holder, stating the nature of the default) L235.37

7 8. Consent by Lender to Subordinate Indebtedness; Permitted Payments to Junior Lien Holder. Lender consents to the Subordinate Indebtedness, the Subordinate Security Instrument and the other Subordinate Loan Documents, as disclosed in writing by Borrower to the Lender prior to the date of Lender s execution of this Agreement, and Lender agrees that no Event of Default (as such term is defined in the Senior Loan Documents) by Borrower under the Senior Loan Documents. shall be deemed to exist under the Senior Loan Documents based solely on the existence of the Subordinate Loan Documents, as disclosed in writing by Borrower to the Lender prior to the date of Lender s execution of this Agreement. In the event of any distribution, division, or application, whether partial or complete, voluntary or involuntary, by operation of law or otherwise, of all or any part of Borrower s assets, or the proceeds of Borrower s assets, in whatever form, to creditors of Borrower or upon any indebtedness of Borrower, whether by reason of the liquidation, dissolution or other winding-up of Borrower, or by reason of any execution sale, receivership, insolvency, or bankruptcy proceeding, assignment for the benefit of creditors, proceedings for reorganization, or readjustment of Borrower or Borrower s properties, then and in such event, (a) the indebtedness evidenced by the Senior Loan Documents (the Superior Indebtedness ) shall be paid in full before any payment is made upon the indebtedness evidenced by the Subordinate Loan Documents (the Subordinated Indebtedness ), and (b) all payments and distributions, of any kind or character and whether in cash, property, or securities, which shall be payable or deliverable upon or in respect of the Subordinated Indebtedness shall be paid or delivered directly to Lender for application in payment of the amounts then due on the Superior Indebtedness until the Superior Indebtedness shall have been paid in full; provided, however, that so long as there is no default by Borrower under the terms of the Superior Indebtedness, Borrower may continue to make and Junior Lien Holder may continue to receive the scheduled interest installment payments as they mature on the Subordinated Indebtedness. In the event of any bankruptcy proceeding concerning Borrower, as debtor, Junior Lien Holder agrees that post-petition interest on the Superior Indebtedness to the extent approved by the Court shall be paid prior to payment of any amount of principal or interest on the Subordinated Indebtedness. 9. Certain Payments. If and to the extent that any payment under the Senior Loan Documents (whether by or on behalf of the Borrower, as proceeds of collateral for the Senior Loan, or enforcement of any right of setoff or otherwise) is declared by any court of competent jurisdiction to be a fraudulent conveyance or a preference, set aside, or required to be paid to a trustee, receiver or other similar person under any bankruptcy, insolvency, receivership or similar law, then if such payment is recovered by, or paid over to, such trustee, receiver or other similar person, the Senior Loan, or part thereof originally intended to be satisfied, shall be deemed to be reinstated and outstanding as if such payment had not occurred. 10. Senior Loan Documents. Junior Lien Holder acknowledges and agrees that its consent to or approval of the existing Senior Loan Documents shall not be required. II. Junior Lien Holder s Statement of Outstanding Indebtedness. Junior Lien Holder certifies to the Lender that the total outstanding principal amount of all indebtedness secured by the Subordinate Security Instrument is $512, as of the date of this Agreement. Initial Here: 12. Borrower s Representations and Warranties. Borrower represents and warrants to the Lender and agrees that (a) as of the date of this Agreement and as of the date of recordation of this Agreement in the Official Records, neither Borrower nor Junior Lien Holder is in default under the Subordinate Loan Documents; (b) Borrower shall at all times comply with all of its obligations under the Subordinate Loan Documents and shall not modify or supplement any or all of the Subordinate Loan Documents without the Lender s prior written consent; and (C) the Subordinate Loan Documents which Borrower has furnished or caused to be furnished to the Lender represent the entire agreement between Borrower and Junior Lien Holder regarding the Property and the Subordinate Indebtedness, and there are no other agreements, whether written or oral, between Borrower and Junior Lien Holder with respect to the Property or the Subordinate Indebtedness, except for (i) this Agreement; and (ii) such other documents as Borrower has specifically disclosed in writing to the Lender prior to the Lender s execution of this Agreement; and (d) Borrower s breach of any warranty or obligation of Borrower under this L235.37

8 Agreement shall constitute an Event of Default (as such term is defined in the Senior Loan Documents) by Borrower under the Senior Loan Documents. 13. Junior Lien Holder s Representations and Warranties. Junior Lien Holder represents and warrants to the Lender that (a) as of the date of this Agreement, to the best of Junior Lien Holder s present knowledge, Borrower is not in default under the Subordinate Loan Documents, nor has any event occurred which, with the giving of notice of the passage of time, or both, would constitute a default by Borrower under the Subordinate Loan Documents; (b) no representations or agreements of any kind have been made to Junior Lien Holder by the Lender, Borrower or any other person that would limit or qualify in any way the terms of this Agreement; (c) the Lender has made no representation to Junior Lien Holder as to the creditworthiness of Borrower, any guarantor of the Senior Loan, or any other person; (d) the principal amount of the Subordinate Indebtedness shall not exceed the amount set forth in Section 11 above, other than with respect to sums advanced or paid by Junior Lien Holder for the purpose of protecting or preserving the collateral securing the Subordinate Indebtedness or to otherwise protect its interests in connection with the Subordinate Indebtedness (including advances for the payment of real estate taxes and assessments and insurance premiums relating to the Property or to pay any indebtedness secured by the Senior Security Instrument); and (e) Junior Lien Holder has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower s financial condition. Junior Lien Holder further agrees that Lender shall have no obligation to disclose to Junior Lien Holder information or material acquired by Lender in the course of its relationship with Borrower, other than such notices as are, expressly required by this Agreement, if any. 14. INTENTIONALLY OMITTED. 15. Entire Agreement. This Agreement shall be the whole and only agreement with regard to the subordination of the Subordinate Loan Documents to the Senior Loan Documents and shall supersede and cancel, but only insofar as would affect the priority between the Subordinate Loan Documents and the Senior Loan Documents, any prior agreements as to such subordination, including those provisions, if any, contained in the Subordinate Loan Documents which provide for the subordination of any or all of such documents to the rights of another lender. 16. Headings; Interpretation. The headings to sections of this Agreement are for convenient reference only and shall not be used in interpreting this Agreement. For purposes of this Agreement, (a) the term including shall be deemed to mean including without limitation ; (b) the term person shall include any natural person and any entity, including any corporation, partnership, joint venture, trust, unincorporated organization, trustee, or governmental authority; and (c) the term Property shall be deemed to mean all or any part of the Property, unless otherwise expressly provided in this Agreement. 17. Successors. This Agreement shall inure to the benefit of and be binding on the parties and their respective permitted successors and assigns. 18. Amendments. This Agreement may be modified or supplemented only by a written agreement signed by Borrower, Junior Lien Holder, and the Lender. 19. Senior Loan Disbursements. Junior Lien Holder agrees that the Lender, in making disbursements pursuant to any of the Senior Loan Documents, is under no obligation or duty to, nor has the Lender represented that it will, see to the application of such proceeds by the person or persons to whom the Lender disburses such proceeds, and any application or use of such proceeds for purposes other than those provided for in the Senior Loan Documents shall not defeat this Agreement, in whole or in part. 20. Reliance by the Lender. Junior Lien Holder intentionally and unconditionally subordinates the lien or charge of the Subordinate Loan Documents in favor of the lien or charge on the Property of the Senior Loan Documents. Notwithstanding anything to the contrary contained in this Agreement, (a) none of the terms, covenants, or provisions of this Agreement shall constitute or be construed as conditions precedent or conditions subsequent to the unconditional subordination of the Subordinate Loan Documents to the Senior Loan Documents; and (b) no breach of any term, covenant, L

9 or provision of this Agreement shall in any way impair or otherwise affect the unconditional subordination of the Subordinate Loan Documents to the Senior Loan Documents on the terms of this Agreement. 21. INTENTIONALLY OMITTED. 22. Notices. All notices, communications, and demands by any of the parties under this Agreement shall be in writing and shall be effective on the earliest of (a) personal delivery to the recipient; (b) three (3) days after deposit in registered or certified United States mail, postage prepaid, return receipt requested, addressed to the recipient at the notice address set forth in this Agreement; (c) one (1) business day after deposit with a reputable nationally recognized overnight delivery service, delivery charges prepaid, for next business day delivery addressed to the recipient the notice address set forth in this Agreement; and (d) if notice is sent by facsimile transmission to the recipient s facsimile number as shown in the notice address set forth in this Agreement, on the first (ist) business day after the date on which sending party s facsimile transmitting equipment issues a confirmation record of receipt of such notice by the recipient s facsimile equipment. Any party may, by notice given pursuant to this Section, change the person or persons and/or address or addresses, or designate up to one additional person or up to one additional address for notices to such party, but notice of a change of address shall only be effective upon receipt by the other parties. Each of the parties agrees that it will not refuse or reject delivery of any notice given hereunder, that it will acknowledge, in writing, receipt of the same upon request by any other party (provided that such notice has in fact been received), and that any notice rejected by it shall be deemed for all purposes of this Agreement to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or a reputable nationally recognized overnight delivery service. All notices to the Lender shall be sent to: Universal Bank 3455 Nogales Street, Second Floor West Covina, California Attn: Manager, Loan Service Department Fax: All notices to Junior Lien Holder shall be sent to: City of South Gate and the South Gate Housing Authority 8650 California Avenue South Gate, California Initial Here: All notices to Borrower shall be sent to: SG Realty Group, Inc. P.O. Box 1894 South Gate, California Initial Here: 23. Independent Counsel. Borrower, Junior Lien Holder, and the Lender each acknowledges that it has been represented by independent counsel or has had an opportunity to consult with independent counsel in connection with this Agreement. 24. Miscellaneous. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which, taken together, shall constitute one and the same agreement. Signature and acknowledgement pages to counterparts of this Agreement may be detached from the counterparts and attached to a single original of this Agreement to form physically one document which may be recorded in the Official Records. If Borrower, Junior Lien Holder, or the Lender institutes L

10 an action to enforce its rights under this Agreement or because of a breach of this Agreement, the prevailing party in such action shall be entitled to recover from the other party or parties all reasonable costs and expenses, including reasonable attorneys fees and costs, in addition to any other relief awarded by the court. This Agreement shall be governed by and interpreted in accordance with the laws of the state in which the Property is located. The parties to this Agreement consent to the jurisdiction of any federal or state court within the state in which the Property is located and to service of process by any means authorized by the laws of such state. Each of the individuals executing this Agreement on behalf of Borrower, Lender and Junior Lien Holder, respectively, represents to the other parties that such person has the authority to bind Borrower, Lender and Junior Lien Holder, respectively, to the terms of this Agreement, and each of the other parties may rely on such representation. [SIGNATURES OF THE PARTIES ON FOLLOWING PAGES] L

11 NOTICE: THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE PERSON OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN A LOAN A PORTION OF WHICH MAY BE EXPENDED FOR PURPOSES OTHER THAN IMPROVEMENT OF THE LAND. Dated: December 8, JUNIOR LIEN HOLDER: CITY OF SOUTH GATE, a municipal corporation By: Jorge Morales, Mayor ATTEST: By: Carmen Avalos, City Clerk SOUTH GATE HOUSING AUTHORITY, a public body, corporate and politic, successor-in-interest to the Community Development Commission of the City of South Gate, successor-in-interest to the Redevelopment Agency of the City of South Gate By: Michael Flad, Executive Director ATTEST: By: Carmen Avalos, City Clerk R ul F. Salinas, Legal Counsel BORROWER: L

12 By: SG Realty Group, Inc., a California corporation By: Silvestre Gonzales, President LENDER: Universal Bank Ten Amerine, VP Real Estate Lending Group L

13 INITIALS: _ SUBORDINATION AGREEMENT (SECONDARY FINANCING) EXHIBIT A LEGAL DESCRIPTION OF PROPERTY REAL PROPERTY IN THE CITY OF SOUTH GATE, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS: LOTS 739, 740 AND 741 OF TRACT NO. 6666, IN THE CITY OF SOUTH GATE, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 72 PAGES 45 TO 47, INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPT THE SOUTH 10 FEET OF LOT 741. APN: PROPERTY COMMONLY KNOWN AS: 8931 DUDLEXT AVENUE SOUTH GATE, CALIFORNIA S.G. S.G L235.37

14 ,,, ra notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA COUNTY OF LOS ANGELES On December, 2015, before me, appeared Notary Public, personally who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (seal) A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA COUNTY OF LOS ANGELES On December_, 2015, before me, appeared Notary Public, personally who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (seal) L

15 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: SG Realty Group, Inc. P.O. Box 1894 South Gate, California The undersigned declares DOCUMENTARY TRANSFER TAX is $0.00. This is a reconveyance of realty upon satisfaction of a debt. Cal. R & T Code (Space above line for Recorder s use) SUBSTITUTION OF TRUSTEE AND DEED OF FULL RECONVEYANCE WHEREAS, SG REALTY GROUP, INC., a California corporation, was the original Trustor, and OLD REPUBLIC TITLE was the original Trustee, and CITY OF SOUTH GATE, a municipal corporation, and REDEVELOPMENT AGENCY OF THE CITY OF SOUTH GATE, a public body, corporate and politic, were the original Beneficiaries under that certain Deed of Trust dated June 15, 1995 (the Deed of Trust ), and recorded on July 18, 1995, as Instrument No in Official Records, County of Los Angeles, State of California, encumbering the real property commonly known as 8931 Dudlext Avenue, South Gate, California 90280, and being more particularly described as follows: Lots 739, 740 and 741 of Tract 6666, in the City of SOUTH GATE, County of Los Angeles, State of California, as per map recorded in Book 72, Pages 45 to 47, Inclusive of Maps, in the Office of the County Recorder of said County. Except the South 10 Feet of Lot 741. APN: WHEREAS, the undersigned, CITY OF SOUTH GATE and the SOUTH GATE HOUSiNG AUTHORITY, a public body, corporate and politic, successor-in-interest to the Community Development Commission of the City of South Gate, as successor-in-interest to the Redevelopment Agency of the City of South Gate, are the Beneficiaries under the above referenced Deed of Trust; and WHEREAS, the undersigned desire to substitute a new Trustee under said Deed of Trust in the place and instead of said original Trustee, thereunder, in the manner provided for in said Deed of Trust. NOW, THEREFORE, in accordance with the provisions of the Deed of Trust, the undersigned hereby substitutes and appoints themselves (City of South Gate and the South Gate Housing Authority), whose address is 8650 California Avenue, South Gate, California 90280, in place and instead of Old Republic Title, the Trustee above named, and do hereby vest in said substituted Trustees, all the rights, title, estate, power, duty and trusts conferred by said Deed of Trust upon the Trustee therein named. The undersigned, as substituted Trustees, do hereby RECONVEY, without warranty, to the person or persons legally entitled thereto, all the estate, title and interest acquired by Trustee under said Deed of Trust L

16 Dated: December 8, 2015 CITY OF SOUTH GATE, a municipal corporation By: Jorge Morales, Mayor ATTEST: By: Carmen Avalos, City Clerk T: : R I F. Salinas. City Attorney SOUTH GATE HOUSING AUTHORITY, a public body, corporate and politic, sucessor-in-interest to the Community Development Commission of the City of South Gate, successor-in-interest to the Redevelopment Agency of the City of South Gate By: Michael Flad, Executive Director ATTEST: By: Carmen Avalos, City Clerk FORM: By: Legal Counsel

17 ,,,Notary personally appeared personally appeared A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) COUNTY OF LOS ANGELES ) On December_, 2015, before me, Public, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (seal) A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) ) COUNTY OF LOS ANGELES ) On December_, 2015, before me, Notary Public, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (seal)

18 SGREALTYGRO, INC. PG Box RAYO AVENUE. SOUTh GATE, CA TEL: (323) FAX: (323) September 30, 2015 Raul Salinas, City Attorney City of South Gate 8650 California Avenue South Gate, California Vivian M. Garcia, Housing Administrator City of South Gate, Community Development Department 8650 California Avenue South Gate, California Re: Subordination Request, City Of South Gate Promissory Note, Dated June 26, 1996 Dear Mr. Salinas and Ms. Garcia: We hereby request the City of South Gate subordinate the Promissory Note dated, June 25, 1996 to a new first trust deed and note as described in this submission. The proceeds of this refinance will go to fund a new, for sale single family housing project in the City of South Gate on San Carlos and Missouri Avenues (see Sec. 3). The site of this single family residence for sale housing project was purchased by us in 1993 from the City of South Gate for housing development. Hence, we hereby submit the following information, data and documents to support our requests for subordination. If you have any questions, please contact me at (562) or at Si1 Zcasarngrnt.com. Si cerely, Silvestre Gonzales President 18

19 - JUN ECOPDtNG REQUESTEL) BY CL 0 REPUBUC fltle COMPANY JLJ 52. 4HEN RECORDED RETURN TO NAME: SG REALTY GROUP STREEr 9500 RAYO AVE. ADDRESS SO.tP GATE, CA RECORDED/FILED IN OFFICIAL RECORDS RECORDER SOFFICE s rate LOS ANGELES COUNTY CALIFORNIA AT8A.M. ORDERNUMBER: ESCROW/LOAN NO: SPACE ABOVE FOR RECORDERS USE APN#: TITLE(S) OF DOCUMENT IFEE 3 -q / qj Jo GRANT DEED This page is added to the attached document as the First Page or Sheet there of does not comply with the requirements of Section of Government Code Said code provides in part that Except as otherwise provided by law or regulation, all documents submitted for recording shall have at lease a 112-inch margin on the two vertical sides except in the space reserved for recording information. At least the top 2 1/2 inches of the first page shall be reserved for recording information, the left hand 3 1/2 inches of the space shall be used by the public to show the name of the person requesting recording and the name and address to which the document is to be returned following roccrding In the event the first page or sheet of a document does not comply with these requirements, a separate page shall be attached by the party requesting recording to the front of the document which meets these criteria and which reflects the title or titles of the document as required by Section NOTICE The failure for the attached document to comply with the above may result in the County Recorder assessing a $3.00 per page penalty, including this page, over and above the normal recording tees. 4* * * OLD REPUBLIC. ft TITLE COMPANY * 4 * RECEVEO

20 GU EPiLC TT RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: SG REALTY GROUP, INC. Rayo 9500 Avenue South Gate, California :Space above for recorder. I GRANT DEED For valuable consideration, the receipt of which is hereby acknowledged, THE REDEVELOPMENT AGENCY OF THE CITY OF SOUTH GATE, a public body, corporate and politic, of the State of California (herein called Grantor ), acting to carry out the Law INC., of the State of California, hereby grants to a Community SG REALTY GROUP, California Corporation, (herein called Grantee ) Redevelopment, all its right, title and interest in and to the real property (the Site ) legally described in the document attached hereto as Exhibit incorporated herein by this reference. A, and 1. pursuant to The a Grantor s ownership interest in the Site is conveyed Disposition and Development Agreement (the DDA ) entered into by and between Grantor and Grantee and dated April 5, The Grantor s ownership interest in the Site is also conveyed subject to easements of record and the provisions of that certain Declaration of Covenants, Conditions and Restrictions executed 2. by The Grantor and Grantee and recorded concurrently herewith. Grantee covenants and agrees to use the Site only for the construction of senior citizens multi-family housing and related on and off-site improvements as set forth in the DDA. 3. The Grantee shall not, except as permitted by the DDA, sell, transfer, convey, assign or lease the WiOi or any part of the Site without the prior approval of the Grantor. This prohibition shall not be deemed to prevent the granting of easements or permits to facilitate the development of the Site or to prohibit or restrict the leasing of any part or parts of building or structure when said improvements are completed. a Pagelof6 / AE4TAY T4NSER TAX X or FUu JAtJE cl;. o iw s roprt ti.t A?D I EMA;NING AT ;:ME DF SALT., tate Escrow, Inc.,. CONVYED F.m Nmc. 20

21 4. Prior to recordation of a Certificate of Completion, Grantor shall have the additional right, at its option, to reenter and take possession of any and all portions of the Site with all improvements thereon, if after conveyance, the Grantee or a successor in interest shall: a. Fail to commence construction of the improvements on the Site as required by the DDA for a period of three (3) months after written notice thereof from the Grantor; or b. Abandon or substantially suspend construction of the improvements on the Site for a period of three (3) months after written notice of such abandonment or suspension from the Grantor; or c. Encumber the property in violation of the DDA. d. Transfer, or suffer any involuntary transfer of the Site, or any part thereof, in violation of the DDA. e. Be in default of any material provision of the DDA after notice to cure such default. Such right to repurchase, reenter and take possession to the extent provided in this paragraph 4, shall be subordinate and subject to and be limited by and shall not defeat, render invalid or limit: a. Any mortgage, deed of trust or other security instrument permitted by the DDA; or b. Any right or interest provided in the DDA for the protection of the holder of such mortgages, deeds of trust or other security instruments. 5. The Grantee covenants by and far 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, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enloyxnent of the Site, nor shall the Grantee itself or any person claiming under or through it establisfl or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use of occupancy of tenants, lessees, subtenants, sublessees or vendees in the Site. 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 clauses: Page 2 of 6 21

22 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 discrimination against or segregation of any person or group of persons on no account of race, color, creed, religion, sex, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land herein conveyed, nor shall the grantee himself or 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, subtenants, sublessees or vendees in the land herein conveyed. The forgoing 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 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 account of race, color, creed, religion, sex, niarital status, national origin or ancestry in the leasing, subleasing, transferring, use of occupancy, tenure or enjoyments 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 if discrimination or segregation with reference to the selection, location, number, use of occupancy of tenants, lessees, sublessees, subtenants or vendees in the land herein leased. on C. In contracts: There shall be no discrimination against or segregation of any person or group of account of race, color, creed, religion, sex, marital status, national origin or ancestry in persons on the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land, nor shall the transferee 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. Page 3 of 6 22

23 6. No violation or breach of the covenants, conditions, restrictions, provisions or limitation contained in this Grant Deed shall defeat or render invalid or in any way impair the lien or charge of any mortgage, deed of trust or other financing or provided, however, that security instrument permitted by the DDA: any successor of Grantee to the Site shall be bound by such remaining 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. C J 7. If, after issuance of a Certificate of Completion DEVELOPER fails, after notice in writing of its noncompliance: a. To maintain and operate the Site in accordance with the Declaration of Covenants, Conditions and Restriction (the CC&R s ), executed by the Grantor and Grantee and recorded concurrently herewith, or b. To comply with the requirement of the City Loan as described in the DDA, or c. To comply with any of the requirements of a HUD HOME financial development, including the Requirements of Attachment No. other requirement imposed by 7 HUD. to the DDA or any then Grantor shall, at its option, and without limitation on any other remedy available to it, the right to re-enter and take possession of any and: all portions of the Site together with all improvements thereon, and title thereto shall revert to Agency. Such right of reverter and to reenter and take possession to the extent provided in this paragraph 4, shall be subordinate and subject to and be limited by and shall not defeat, render invalid or limit: a. Any mortgage, deed of trust or other security instrument permitted by the DDA; or b. Any right or interest provided in the DDA for the protection of the holder of such mortgages, deeds of trust or other security instruments. The restriction of this covenant shall terminate in accordance with the termination of the CC&R s 8. The covenants contained in paragraphs 2, 3, & 7 of this Grant Deed shall remain in effect until the later of: (l)the expiration of Thirty (30) years from the issuance of a Certificate of Occupancy for the Site, or, October 31, Page 4 of 6 23

24 The covenants contained in paragraph 4 of this Grant Deed shall remain in effect until the recordation of a Certificate of Completion The covenants contained in Paragraph effect in perpetuity. 5 shall remain in 9. The covenants in paragraph 2, 3, 4, 5, 6 and 7 of this Grant Deed shall be binding for the benefit of the Grantor, its successors and assigns, the City of South Gate and any successor in interest to said parties. Such covenants shall run in favor of the Grantor and such aforementioned parties for the entire period during which such covenants shall be in force and effect, without regard to whether the Grantor is or remains an owner of any land or interest therein to which such covenants relate. The Grantor 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 contained in this Grant Deed shall be for the benefit of and shall be enforceable only by the Grantor, its successors and such aforementioned parties. 10. In the event of any express conflict between this Grant Deed or the DDA, the provisions of this Grant Deed shall control. 11. No provision of any redevelopment plan adopted or contemplated for the City of South Gate which changes the use or development permitted on the Site or changes the restrictions or controls that apply to the Site or otherwise affects the Site shall become effective without the written consent of the Grantee. 12. The Covenants and Conditions of this Grant Deed shall be deemed to be covenants running with the land and shall bind future purchasers, encuinbrancers and transferees. IN WITNESS WHEREOF, the Grantor and Grantee have caused this instrument to be executed on their behalf by their respective officers thereunto duly authorized this -day of AP AS TO FORM: REDEVELOPMENT THE CITY GRANTOR OF By: cluja- AGENCY SOUTH OF GATE, Chairman By: Secr tary Page 5 of 6 24

25 The provisions of this Grant Deed are hereby approved and accepted. 7 SG REALTY GROUP, INC.., a California corporation, GRANTEE By: 1994 By: S IcFP7r Page 6 of 6 25

26 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California County of Los Angeles personahy appeared Albert Robles and Andrew G. Pasmant E personally known to me Name(s) of Sgre(s) OR i proved to me on the basis of satisfactory evidence to be the person(s) V.J.LOPEZ I - colt I497 IL June 15, 1995 before me, Date Nam, and Notc.y Pt4c- CAfu LOSANG OUNW V.J. Lopez, Notary Public ThIe whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. of Oflicor log., Jant Doe. 4otary PobUc WITNESS my hand and official seal. OPTIONAL // S.gnature at Nø/i V ( Though the irifom,ation below is not required by law, it may prove valuable to parsons relying on the document arid could prevent fraudulent removal and reattachment of this form to another document Description of Attached Document Title or Type of Document: Grant Deed Document Date: June 15, 1995 Number of Pages: Six (6) Signer(s) Other Than Named Above: Silvestre Gonzales and Silvestre G. Gonzales Capacity(ies) C aimed by Signer(s) Signers Name: Albert Robles Signer s Name:Andrew G. Pasmant -i LI D Individual Corporate Officer Title(s): Chairman Partner Limited General Attorney-in-Fact Trustee Guardian or Conservator Other: FliGHT THIJMOPHINT OF SIGNER Top o tn-d nere I Individual X Corporate Officer Title(s): Secretary Partner Limited Attorney-in-Fact Trustee E General E Guardian or Conservator r: Other: NIGHT THUrtIBPRLNT OF SIGNER lop o rurrtj pe e Signer Is Representing: Signer Is Representing: Redevelopment Agency of the City of South Gate Redevelooment Mencv of of the City of South Gate 26

27 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT NO. 5Q7 f State of California County of Tn Ar1 On June 15, 1995 before me, DATE personally appeared personally known to me - OR - I - CLAY 8RAND? - COMM.# J Notary Ptlfc CoI4frla LOS ANGElES COUNIY MyComrn.Exp,re,FEB proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and ac knowledged to me that he/she/they executed - the same in his/her/their authorized - person(s) Clay Brandt. Notary Pub1 NAME. TIThE OF OFFICER. E.G...IANE DOE. NOTARY PUSUC Silvestre Gonza1s & S1vt-r C,. Cn1 NAME(S) OF SIGNERS) capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the acted, executed the instrument. WITNES hand and o -, ial seal. SIGNATURE OF NOTARY OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER DESCRIPTION OF AUACHED DOCUMENT INDIVIDUAL EJ CORPORATE OFFICER President & Vice President TITLEORTYPEOFDOCuMENT TIThE(S) E PARTNER(S) LIMITED U GENERAL A1TORNEY-IN-FACT TRUSTEE(S) GUARDIAN/CONSERVATOR OTHER: NUMBER OF PAGES DATE OF DOCUMENT SIGNER IS REPRESENTING: NAME OF PEASONS OR ENTrrY(IESI UDI SIGNER(S) OTHER THAN NAMED ABOVE._ r... f A Q1flO71A 27

28 EXHIBIT A LEGAL DESCRIPTION OP THE SITE Lots 739, 740, and 741, except the South 10 feet of Lot 741 in Tract No. 6666, in the City of South Gate, County of Los Angeles, State of California, as per map recorded in Book 72, Pages 45 to 47 inclusive of Maps, in the office of the County Recorder of said county. 28

29 ø8/j.6/2js5 14: F ) CITY OF SOUTH G1) PAGE 3 PUt(T 5rJ/ CIrY PROMISSORY NOTR $1 536,649, California Junetl-S, FOR VALUE RECEIVED, the undersigned ( Maker ) promises to pay to the order of CITY OF SOtJTH GATE, a public body corporate and politic ( Holder ), at City of South Gate, 8650 California Avenue, South Gate, California or such other place as the Holder may from time to time designate in writing, the Note Amount (as herein defined), in lawful money of the tnited States of America. 2.. This Agency Promissory Note is made and delivered pursuant to and in implementation of that certain Disposition and Development Agreement entered by and among the Holder, the Maker and the South Gate Redevelopment Agency ( Agency ) dated, April 5, 1994 (the Agreement ), a copy of which is on file with the Holder and is incorporated herein by reference. The Agreement provides for a Loan to Maker for the development of certain real property (the Property ) pursuant to certain terms therein set forth. The Maker acknowledges that but for the execution of this Promissory Note, the Holder would not enter into the Agreement. The origiral amount of the note was $l,33,649.o0 dated April 5+h, 1q94. y this note Agency lends Developer, an additional $200, in HQD HOME funds for a total of $1,536, The failure of the Maker to perform under the Agreement shall constitute a default of Maker under the terms of this Promissory Note. 3. For purposes of this Promissory Note, and in accordance with the provisions of the Agreement, the Note Amount shall be One Million Five Huxidxed Thirty Six Thousand Six Hundred Forty-Nine and no/ico Dollars ($1,536,649.00) or such amount as tnay be disbursed from time to time pursuant to the terms and provisions of the Agreement. The Note Amount shall be disburse d for the foregoing Loan in accordance with the provisions of the Agreement. This Promissory Note shall further evidence the obligation of the Maker to pay to the Holder the Note Amount. 4. The Note Amount shall be recourse and shall bear no interest except in the event of noncompliarce or default by maker under the Agreement. In the event of noncompliance Or default by Maker, the Note mount shall bear interest at ten percent annually from the date of default as determined by Holder until the Note Amount is paid in full. Page 1 of 3 29

30 ,.1 Sc ,..t ) 3D 4-0 hi ri IT 3 D 0 0,) H).4 UL j U. f S 4, U), U) 4a Li, U) Ii r 1 H) T i- 1.. : ID H LU ci 1) U: i I 11 U). - LJ ;L II 1 4 i C.. U II 41) ft U) -I..i C...rt :i, - U I,. I U =1 (4 0 U U 4:, L U). -: I U) U U Li U: U) E1 T 0 4) -; 11 U: C. Ii UL. 4-) II 4.1. U i! : U U 11) 1*4 in ;,. ( 4 :I) I L U) U) U) I ) U gr U LI,, r : LI Li) U in I U: r I i UL. I) L,_) I LU I - Ii U Li C ;i - ir V ;T C) U: 114 ),) 4) U) -[IH)fl ízlu a) ft J ri ID 1 0 ID r1 s H- U t tj) II LI) I.) Ci Zn ft U. in IT) 0 rt Lr ft j 41, ).J ILL LIT H çt 0.. I.. 0,I 1 Ii, ; 4-3 )4i W U) I.] Li 1Ji r1 p.. f) 111 LU h IT) : 4< prt III f ft U) (I) Zn I, Ui 0 f 4 1i a V In I:) Ii Ii 4, ).4 C.) I- -,-t r ID U: I-), It U:,, U) U LU P3 U) l C) I ), LI) 141 U) La rj i LU ft fl (U U U). I. ( U W ([I f, Ifl ía U: It) r t, U 1) ) 4_ )- :.. U ci LU ft U) 1-4, Li.) I U) 0. U: IT U).rrj h * t f.ti ) U) j - i 0 t) I I) ) I1 F- : U) U) fl U) Li) t U I-) Ut 1 ID U1 UD fl U: I):) r H) n U) 4) (ii r I. j!. I.L () LU U ca-u L3 H) 1:1 : LIP, o 0, ; U I (1 0 I- 1! 0 Ii rj U)) 4..)

31 8f6/2ee5 14: SF:) CITY OF SOUTH GA 7) P1GE 05 thether or not the same proceeds to a final judgment. 10. This Note shall be subject and subordinate only to the security interest o a construction deed of trust in favor of tiationa]. Bank of Southern California ( lender ), in an amount net to exceed $500, provided that such lender shall include in its deed of trust the following conditions: (a) the Beneficiaxy shall receive any notices of default issued to the Truscor; (b) the Beneficiary sha),l have the right to cure any default by the rrustor within ninety (90) days after a notice of default; and (c) the Beneficiary shall have the right to foreclose this Deed of rust rithout such lender accelerating its debt, provided the Beneficiary has cured or is attempting to cure any defaults under the lender s deed of trust. MA!CER SQ REALTY GROtrP, INC., a Califoruia corporation, DATED: DATED: - By SG REALTY, INC. Q yi 1,_Qa,&thjity7Y ip?r A &s to a: 4 AR4OLD a. ALVAREZ-GLASMA.N SOUTU CPTE CXTT ATTORtEY Page 3 of 3 31

32 c. z t1fl C) rn) I I I- :0 D Cn -a c mc) zoo cnc,5o 3 a, -frt1, 1 21 (I) -1-1 m (I) (0 0 I 0 m w 0 (VI -I xin z m ii m (0 (0 Ii 0 r r

33 RECORDING REQUESTED BY AND WHEN RECORDED f4il TO: Community Redevelopment Agency of the City of South Gate 8650 California Avenue ) South Gate, California ) Attn: Community Redevelopment Director) DEED OF TRUST WITH ASSIGNMENT OF RENTS THIS DEED OF TRUST WITH ASSIGNMENT OF RENTS is made this 2.E+h day of.krne., 1996, by and between SG REALTY GROUP, INC., a California Corporation ( Trustor or Borrower ), and the CITY OF SOUTH GATE and the REDEVELOPMENT AGENCY OF THE CITY OF SOUTH GATE (Jointly Beneficiaries ) and, TI1L. np,jv ( Trustee ) WITNESSETH: That Trustor Irrevocably, Grants Transfers and Assigns, to Trustee, in Trust, with Power of Sale, that property in the County of Los Angeles, State of California, described as: Lots 739, 740, and 741, except the south 10 feet of Lot 741 of Tract No. 6666, in the City of South Gate, County of Los Angeles, State of California, as shown on a map recorded in Book 72, Page 45 to 47 inclusive of Maps, in the office of the County Recorder of said County. TOGETHER WITH: (a) all buildings, improvements and fixtures, now or hereafter placed thereon, it being understood and agreed that all classes of property attached or unattached used in connection herewith shall be deemed fixtures, (b) rents, issues and profits thereof, (c) any water rights and/or stock are appurtenant or pertain to said land, and (d) all sums of money payable on the purchase price of said property secured by a lien thereon or payable under any agreement. BORROWER HEREBY expressly acknowledges and agrees that the subject loan, this Deed of Trust, and the property which serves as security for the Note and Deed of Trust, involves a multifamily residential transaction, one that the Borrower is expressly entering into for profit, and not in any way related to Borrower s home or residence. As such, Borrower further acknowledges and Page 1 of 12 33

34 agrees that the City of South Gate and the South Gate Redevelopment Agency likewise is making this loan on the aforesaid basis, and thus intends to enforce any and all of its rights accordingly. FOR THE PURPOSE OF SECURING: 1. Payment of the Sum of $1,536, with interest thereon according to the terms of a Promissory Note or Notes of even date herewith, made by Trustor, payable to the order of the Beneficiary and extensions or renewals thereof. This Deed of Trust contemplates an additional loan of $200, in City HUD-HOME funds. The original loan was for $1,336, Payment of such additional sums with interest thereon as: (a) may be hereafter borrowed from the Beneficiary by the then record owner or owners of said property when evidenced by another Promissory Note or Notes reciting that they are secured hereby, or (b) as may be added to the indebtedness secured hereby in accordance with the provisions of this Deed of Trust. 3. Performance of each and every obligation, covenant, promise or agreement of Trustor contained herein. 4. Payment, with interest thereon, of any other present or future indebtedness or obligation of the Trustor (or of any successor in interest of the Trustor to said property) to the Beneficiary reciting that they are secured hereby, whether created directly or acquired by assignment, whether absolute or contingent, whether due or not, whether otherwise secured or not, or whether existing at the time of the execution of the Deed of Trust, or arising thereafter. 5. Performance of each agreement of Trustor contained in the Disposition and Development Agreement dated April 5, 1994 (the DDA ) or any other Agreement entered into between Trustor and Beneficiary, for the construction of improvements on the abovedescribed property. TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR AGREES: 1. To keep said property in good condition and repair; to allow Beneficiary or its representatives to enter and inspect the premises at all reasonable times and access thereto shall be permitted for that purpose; not to remove or demolish any building thereon; not to make alterations thereto without the consent of the Beneficiary; to suffer or permit no change in the general nature of the occupancy of the premises without Beneficiary s written consent; to complete or restore promptly and in good and workmanlike manner any building which may be constructed, damaged or destroyed thereon, including, without restricting the generality of the foregoing, damage from termites and dry-rot; to pay when due all claims for labor performed and materials furnished in Page 2 of 12 34

35 connection with such property and not to permit any mechanics lien against such property; to comply with all laws affecting such property or requiring any alterations or improvements to be made thereon; not to initiate or acquiesce in any zoning reclassification without Beneficiary s written consent; not to commit or permit waste thereon; not to commit, suffer or permit any act upon such property in violation of the law; and to paint cultivate, irrigate, fertilize, fumigate, prune, and do all other acts that from the character or use of said property may be reasonably necessary; to promptly pay all amounts due others upon agreements of lease or conditional sale of all fixtures, furnishings and equipment located thereon. If the loan secured hereby or any part thereof is being obtained or should any additional loan be made hereafter for the purpose of financing rehabilitation improvements on said property, Trustor further agrees, anything in this Deed of Trust to the contrary notwithstanding and subject to the terms of the DDA: (a) to complete the same in accordance with City approved plans and specifications satisfactory to Beneficiary; (b) to allow Beneficiary to inspect such property at all times during rehabilitation; (c) to replace any work or materials unsatisfactory to Beneficiary within fifteen (16) calendar days after written notice from Beneficiary of such fact, which notice may be given to Trustor by registered or certified mail, sent to his last known address, or by personal service of the same; (d) that work shall not cease on the rehabilitation of such improvements for any reason whatsoever for a period of fifteen (15) calendar days, without the written permission of the Beneficiary; (e) to pay when due all claims for labor and materials furnished in connection with the said rehabilitation and not permit any claims of lien for said work or material to be filed of record against the said property; and (f) not to permit any notice claims to be presented to Beneficiary. If the said property is part of a larger tract upon which improvements will be constructed, Trustor shall make separate contracts and sub-contracts for said construction which shall pertain to the said property only and shall keep separate, full and complete records of all work and materials furnishes to the said property. Trustee, upon presentation to it of an affidavit signed by the Beneficiary setting forth facts showing a default by Trustor under this paragraph, is authorized to accept as true and conclusive all facts and statements therein, and to act thereon hereunder. 2. To provide, and maintain in force at all times with respect to said property, fire and other types of insurance as may be required by Beneficiary. All of such insurance shall have a loss payable endorsement in favor of Beneficiary, shall be for a term and in form, content, amount and with such companies as may be satisfactory to Beneficiary, and policies therefor shall be delivered to and remain in possession of Beneficiary as further security for the faithful performance of Trustor hereunder. At Page 3 of 12 35

36 least thirty (30) days prior to the expiration of any insurance policy, a policy or policies renewing or extending such expiring insurance shall be delivered to Beneficiary together with written evidence showing payment of the premium therefor and, in the event any such insurance policy and evidence showing payment of the premium therefor are not so delivered to Beneficiary, Trustor, by executing this Deed of Trust, specifically requests Beneficiary to obtain such insurance and Beneficiary, without obligation so to do, without notice to or demand upon Trustor and without releasing Trustor from any obligation hereof, may obtain such insurance through or from any insurance agency or company acceptable to it, pay premium thereof, and may add the amount thereof to the indebtedness secured hereby, which amounts shall bear a like rate of interest. Beneficiary may furnish to any insurance agency or company, or any other person, any information contained in or extracted from any insurance policy therefore delivered to Beneficiary pursuant hereto and any information concerning the loan secured hereby. Neither Trustee nor Beneficiary shall be responsible for such insurance or for the collection of any insurance monies, or for the insolvency of any insurer or insurance underwriter. In case of insurance loss, beneficiary is hereby authorized either (a) upon prior notice to Trustor, to settle and adjust any claim under the insurance policies provided for in this document without the consent of the Trustor, or (b) to allow Trustor to agree with the insurance company or companies on the amount to be paid upon the loss. In either case, the Beneficiary is authorized to collect and make receipt of any such insurance money. If Trustor is obligated to restore or replace the damaged or destroyed buildings or improvements under the terms of any lease or leases which are or may be prior to the lien of this Deed of Trust and such damage or destruction does not result in cancellation or termination of such lese, such proceeds, after deducting therefrom any expenses incurred in the collection thereof, shall be used to reimburse the Trustor for the cost of rebuilding or restoring the buildings or improvements on said premises. In all other cases, such insurance proceeds at the option of the Beneficiary, shall either be applied in reduction of the indebtedness secured hereby whether due or not, or in such order as Beneficiary may determine, or be held by the Beneficiary and used to reimburse the Trustor for the cost of rebuilding or restoring the building or improvements on said premises. Such buildings and improvements shall be restored or rebuilt as to be of a least equal value and substantially the same character as prior to the damage or destruction, and shall be in a condition satisfactory to Beneficiary. Such application or release shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. Any and all unexpired insurance shall inure to the benefit of, and pass to the purchaser of, the property conveyed at any Trustee sale held hereunder. Page 4 of 12 36

37 3. To pay: (a) at least ten (10) days before delinquency, all general; and special City and County taxes, and all assessments on appurtenant water stock, affecting such property; (b) when due, all special assessments for public improvements, without permitting any improvements bond to issue for any special assessment; Cc) when due, all encumbrances, charges and liens, with interest, on said property, or any part thereof, which are or appear to be prior or superior hereto; Cd) if the security of this Deed of Trust is a leasehold estate, to make any payment or do any act required of the Lessee or its successor in interest under the terms of the instrument or instruments creating said leasehold; (e) all costs, fees and expenses of this trust; (f) for any statement regarding the obligation secured hereby any amount demanded by Beneficiary not to exceed the maximum allowed by law thereof at the time when such request is made; (g) such other charges for services rendered by Beneficiary and furnished at Trustor s request or that of any successor in interest to Trustor as the Beneficiary may deem reasonable. If, by the laws of the United States of America, or of any state having jurisdiction over the Trustor, any tax is due or becomes due in respect to the issuance of the Note hereby secured, the Trustor covenants and agrees to pay such tax in the manner required by such law. Should Trustor fail to make any such payment, Beneficiary may elect to make such payment and any amount so paid may be added by Beneficiary to the indebtedness secured hereby and shall bear a like rate of interest. 4. That, should Trustor fail to make any payment or do any act as provided in this Deed of Trust, then Beneficiary or Trustee, but without obligation to do so and without notice to or demand upon Trustor and without releasing Trustor from any obligation hereof, may (a) make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof, Beneficiary or Trustee being authorized to enter upon said property for such purposes; (b) commence, appear in, or defend any action or proceeding purporting to affect the security hereof or the property covered by this Deed of Trust, or the rights or powers of Beneficiary or Trustee; (c) pay, purchase, contest or compromise any encumbrance, charge or lien, which in the judgment of either is or appears to be prior or superior hereto; and Cd) in exercising any such powers, pay necessary expenses, employ counsel and pay his reasonable fees. Trustor agrees to repay any amount so expended on demand of Beneficiary, and any amount so expended may be added by Beneficiary to the indebtedness secured hereby and shall bear a like rate of interest. 5. To appear in and defend any action or proceeding purporting to affect the security hereof or the property which is covered by this Deed of Trust, or the rights or powers of Beneficiary or Trustee, and whether or not Trustor so appears or defends, to pay all costs and expenses, including cost of evidence Page 5 of 12 37

38 of title and attorneys fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear by virtue of being made a party defendant or otherwise irrespective of whether the interest of Beneficiary or Trustee in such property is directly questioned by such action, including any action for the condemnation or partition of said premises, and in any suit brought by Beneficiary to foreclose this Deed of Trust. 6. To pay immediately and without demand, all sums expended under the terms of this Deed of Trust by Beneficiary or Trustee, with interest from the date of expenditure at the rate which the principal obligation secured hereby bears at the time such payment is made, and the repayment of such sums shall be secured hereby. 7. That, should the Trustor or any successor in interest to Trustor in such property drill or extract, or enter into a lease for drilling or extraction of oil, gas or other hydrocarbon substances or any mineral of any kind or character, or sell, convey, further encumber, or alienate said property, or any part thereof, or any interest therein, or be divested of his title or any interest therein in any manner or way, whether voluntarily or involuntarily, Beneficiary shall have the right, at its option, to declare any indebtedness or obligations secured hereby irrespective of the maturity date specified in any Note evidencing the same, immediately due and payable, and no waiver of this right shall be effective unless in writing. 8. That any award, settlement or damages for injury or damages to such property, or in connection with the transaction financed by such loan, and any award of damages in connection with any condemnation for public use of or injury to said property, or any part thereof, is hereby assigned and shall be paid to Beneficiary, who may apply or release such monies received by it in such manner and with the same effect as above provided for the disposition of proceeds of fire or other insurance. 9. That, by accepting payment of any sum secured hereby after its due date or by making any payment, or performing any act on behalf of Trustor, that Trustor was obligated hereunder, but failed, to make, or perform, or by adding any payment so made by Beneficiary to the indebtedness secured hereby, Beneficiary does not waive its right either to require prompt payment when due of all sums so secured or to declare a default for failure so to pay. 10. That at any time, or from time to time, without liability of the Beneficiary or Trustee thereof, and without notice, upon written request of Beneficiary and presentation of this Deed of Trust and any Note secured hereby for endorsement, and without affecting the personal liability of any person for payment of the indebtedness secured hereby, or the lien of the Deed of Trust upon the remainder of said property for the full amount of the indebtedness then or thereafter secured hereby, or the rights or Page 6 of 12 38

39 powers of Beneficiary or the Trustee with respect to the remainder of said property, Trustee may: (a) reconvey any part of said property, (b) consent to the making of any map or plat thereof, (c) join in granting any easement thereon, Cd) join in any agreement subordinating the lien or charge hereof. 11. That the lien hereof shall remain in full force and effect during any postponement or extension of time of payment of the indebtedness secured hereby, or any part thereof. 12. That upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of this Deed of Trust and said Note or Notes to Trustee for cancellation and retention, and upon payment of its fees, Trustee shall reconvey, without warranty, the property then held hereunder. The recitals in such reconveyance of any matters of fact shall be conclusive evidence of the truthfulness thereof. The grantee in such reconveyance may be described as the person or persons legally entitled thereto. Such request and reconveyance shall operate as a re-assignment of the rents, issues, royalties and profits hereinafter assigned to Beneficiary. Five (5) years after issuance of such full reconveyance, Trustee may destroy said Note and this Deed of Trust (unless directed in such request to retain them). 13. That as additional security, Trustor irrevocably assigns to Agency and/or City the rents, issues, and profits of the property affected by this Deed of Trust for the purposes and upon the terms and conditions set forth below. This assignment shall not impose upon Agency any duty to produce rents from the property affected by this Deed of Trust, or cause Agency to be (a) mortgagee in possession for any purpose; (b) responsible for performing any of the obligations of the lessor under any lease; or Cc) responsible for any waste committed by lessees or any other parties, for any dangerous or defective condition of the property affected by this Deed of Trust, or for any negligence in the management, upkeep, repair, or control of such property. This is an absolute assignment, not an assignment for security only, and Beneficiary s right to rents, issues and profits is not contingent upon, and may be exercised without possession of, the property affected by this Deed of Trust. Agency confers upon Trustor a license ( License ) to collect and retain the rents, issues and profits of the property affected by this Deed of Trust as they become due and payable, until the occurrence of a default hereunder. Upon such default, the License shall be automatically revoked and Agency may collect and retain the rents, issues and profits without notice and without taking possession of the property affected by this Deed of Trust. This right to collect rents, issues and profits shall not grant to Agency or Trustee the right to possession, except as otherwise provided herein; and neither said right, nor termination of the License, shall impose upon Agency or Trustee the duty to produce Page 7 of 12 39

40 rents, issues or profits or maintain all or any part of the property affected by this Deed of Trust. If Trustor shall default as aforesaid, Trustor s right to collect any such money shall cease and Beneficiary shall have the right, with or without taking possession of the property affected hereby, to collect all rents, issues, royalties and profits and shall be authorized to, and may, without notice and irrespective of whether declaration of default has been delivered to Trustee and without regard to the adequacy of the security for the indebtedness secured hereby, either personally or by attorney or agent without bringing any action or proceeding, or by receiver to be appointed by the Court, enter into possession and hold, occupy, possess and enjoy the said property, make, cancel, enforce and modify leases, obtain and eject tenants, and set and modify rents and terms of rents, and to sue, and to take, receive and collect all or any part of the said rents, issues, and and after paying such profits of the property affected hereby, costs of maintenance, operation of said property, and of collections including reasonable attorneys fees, as in its judgment it may deem proper, to apply the balance upon any indebtedness then secured hereby, the rents, issues, royalties and profits of said property being hereby assigned to Beneficiary for said purposes. The acceptance of such rents, issues, royalties nd profits shall not constitute a waiver of any other right which Trustee or Beneficiary may enjoy under this Deed of Trust or under the laws of California. Failure of or discontinuance by Beneficiary at any time, or from time to time, to collect any such rents, issues, royalties or profits shall not in any manner affect the subsequent enforcement by Beneficiary of the right, power and The receipt and application by said Beneficiary of all such rents, issues, royalties and profits pursuant hereto, and after execution and delivery of declaration of authority to collect the same. default and demand for sale as hereinafter provided, or during the pendency of Trustee s sale proceedings hereunder, shall not cure such breach or default nor affect said sale proceedings, or any sale made pursuant thereto, but such rents, issues, royalties and profits, less all costs of operation, maintenance, collection and reasonable attorneys fees, when received by Beneficiary, shall be applied in reduction of the indebtedness secured hereby, from time to time, in such order as Beneficiary may determine. Nothing contained herein, nor the exercise of the right by Beneficiary to collect, shall be, or be construed to be, an affirmation by Beneficiary of any tenancy, lease or option, nor an assumption of liability under, nor a subordination of the lien or charge of this Deed of Trust to, any such tenancy, lease or option. 14. That if the security of this Deed of Trust is a leasehold estate, the Trustor agrees that: (a) the term Lease as used herein shall mean the lease creating the leasehold estate ; (b) Trustor shall not amend, change or modify his leasehold interest, or the Lease, or agree to do so, without the written consent of the Beneficiary; (c) Trustor will promptly advise Beneficiary regarding any notice, request or demand received by him from the lessor under Page 8 of 12 40

41 the Lease and promptly furnish Beneficiary with a copy of any such notice, request or demand; (d) as long as any of the indebtedness secured hereby shall remain unpaid, unless the Beneficiary shall otherwise consent thereto in writing, the leasehold estate shall not merge with the fee title but shall always be kept separate and distinct, notwithstanding the union of said estates in any party; Ce) Trustor agrees that it will promptly, strictly, and faithfully perform, fulfill, and comply with all covenants, agreements, terms, conditions and provisions under any lease affecting the premises and to neither do anything, nor to permit anything to be done which may cause modification or termination of any such lease or of the obligations or any lessee or person claiming through such lease or the rents provided for therein or the interest of the lessor or the Beneficiary therein or thereunder. Trustor further agrees he will not execute a Deed of Trust or mortgage which may be or become superior to any leasehold estate that is security for this Deed of Trust. In the event of a violation of any of the covenants set forth in this paragraph, Beneficiary shall have the right, at its option, to declare all sums security hereby immediately due and payable. Consent to or waiver of one of said violations shall not be deemed to be a consent to or waiver of any other violation. If the security for this Deed of Trust is a leasehold estate, the term said property as used in this Deed of Trust shall be deemed to mean the leasehold estate whenever the context so requires for the protection of the Beneficiary. 15. That upon default by Trustor in payment of any indebtedness secured hereby or in performance of any agreement, including, but not limited to: (a) that certain Disposition and Development Agreement between the South Gate Redevelopment Agency, the City of South Gate and Trustor dated April 5, 1994, ( DDA ) that Certain Agreement Containing Covenants, Conditions and Restrictions (the CC&R s), and that certain HOME Participation and Management Agreement (the HOME Agreement ) copies of which are on file with Beneficiary and is incorporated herein by reference, shall constitute a default under this Deed of Trust, and upon default by Trustor under the terms of any encumbrance, charge or lien which is or appears to be prior to or superior hereto, Beneficiary may declare all sums secured hereby immediately due and payable by delivery to Trustee of written declaration of default and demand for sale of written notice of default and of election to cause to be sold said property, which notice Trustee shall cause to be filed for record. Beneficiary shall also deposit with Trustee this Deed of Trust and any Notes and all documents evidencing expenditures secured hereby. After the lapse of such time as then may be required by law following recordation of such notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell said property at the time and place fixed by it in such notice of sale, whether as a whole or in separate parcels, and in such order as it may determine, at public auction to the highest bidder in lawful money of the United States, payable at time of sale. Trustee may Page 9 of 12 41

42 postpone sale of all or any portion of said property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement at the time fixed by the preceding postponement. Trustee shall deliver to such purchaser its Deed conveying the property so sold, but without any covenant or warranty, express or implied. The recital in such Deed of any matters of fact shall be conclusive evidence of the Any person, including Trustor, Trustee, or Beneficiary as hereinafter defined, may purchase at such sale. Trustee may also sell at any such sale and as part thereof any shares of corporate stock securing the obligations secured hereby, and Trustor waives demand and notice of such sale. (Beneficiary at truthfulness thereof. its option may also foreclose on such shares by independent pledge After deducting all costs, fees and expenses of Trustee, and of this Trust, including cost of evidence of title in connection with this sale, and Trustor waives demand and notice of such sale.) sale, Trustee shall apply the proceeds of sale to payment, first, of all sums expended under the terms hereof, not then repaid, with accrued interest at the rate then payable under the Note or Notes secured hereby, and then of all other sums secured hereby, and, if there are any proceeds remaining, shall distribute them to the person or persons legally entitled thereto. 16. To waive, to the fullest extent permissible by law, the right to plead any statute of limitations as a defense to any demand secured hereby. 17. That Beneficiary may, from time to time, by instrument in writing, substitute a successor or successors to any Trustee named herein or acting hereunder, which instrument, executed and acknowledged by Beneficiary and recorded in the office of the recorder of the county or counties where such property is situated, shall be conclusive proof of property substitution of such successor Trustee or Trustees, who shall, without conveyances from the Trustee predecessor, succeed to all its title, estate, rights, powers and duties, including but not limited to the power to reconvey the whole or any part of the property covered by this Deed of Trust. Such instrument must contain the name of the original Trustor, Trustee and Beneficiary hereunder, and the book and page where this Deed of Trust is recorded. If notice of default shall have been recorded, this power of substitution cannot be exercised until after the costs, fees and expenses of the then acting Trustee shall have been paid to such Trustee, who shall endorse receipt thereof upon such instrument. The procedures herein provided for substitution of Trustee shall not be exclusive of other provisions for Substitution provided by law. 18. That this Deed of Trust applies to, insures to the benefit of, and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors and assigns. The term Beneficiary shall mean the owner and holder, including pledgee, of the Note secured hereby, whether or not named as Page 10 of 12 42

43 Beneficiary herein. In Deed of Trust, whenever the context so the masculine gender includes the feminine and/or and the number includes the requires, singular this plural. neuter, 19. That in the event the property secured by Deed of Trust income producing property of four or more, Trustor agrees to with Beneficiary, monthly, on or before the 15th day of each month, a operational Such operational contain a but complete statement of the month s income and expenses of such property, a of vacancies, and a statement of any change in the property or business on such period. is request, written brief material report. list file all consisting this units at Beneficiary s report shall carried therein for 20. That in the event of a demand and the and of a statement regarding the secured by Deed of Trust pursuant to Sections 2943 and 2954 of the Civil Code of (or successor Beneficiary be to make a reasonable charge, not exceeding the maximum amount which permitted by law the time the statement furnished. Beneficiary may also charge Trustor a reasonable fee any other services rendered to Trustor or rendered in behalf in connection with property of Deed of Trust, including changing Beneficiary s records to Deed of Trust and the loan secured hereby in connection with the of said property, or an of insurance or other insurance held by Beneficiary and replacing the same with another such shall is for delivery this entitled casualty written California is releasing said policy. for, at statutes), this pertaining existing policy fire preparation obligations this Trustor s transfer 21. That Trustee accepts Trust when Deed of Trust, duly executed and acknowledged, made a public record as provided by law. Trustee not obligated to any hereto of pending under any Deed of Trust or of any action or proceeding in which Trustor, Beneficiary or Trustee be a unless brought by Trustee. party sale is other this is notify this party shall 22. That should Deed of Trust or any Note secured hereby provide any fee prepayment of any indebtedness secured hereby, Trustor agrees to pay said fee, any, indebtedness be paid to the due date thereof in said Note or Deed of Trust even and notwithstanding Trustor have in payment or in performance of any agreement hereunder, and Beneficiary, by reason have declared sums secured hereby immediately due and payable. defaulted all prior for if this thereof, if if said stated that thereof, shall shall shall this 23. That Trustor has made and in order to induce Beneficiary to make the loan evidenced by the Promissory Note or Notes which Deed of Trust secures, and in the event Trustor has made any misrepresentation or to any Beneficiary option and without have the to declare the indebtedness secured hereby, of the disclosures Page 11 of 12 at its failed that certain representations disclose this notice, shall material material fact, irrespective right 43