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HomeMy WebLinkAboutMINUTES - 12032013 - C.69RECOMMENDATION(S): 1. APPROVE and AUTHORIZE the Conservation and Development Director, or designee, to execute required legal documents to provide $2,450,000 in HOME Investment Partnership Act (HOME) and $250,000 in Housing Opportunities for Persons with HIV/AIDs (HOPWA) funds to 1550 Third L.P., a California limited partnership, for the Third Avenue Apartment project in Walnut Creek. 2. FIND, as the responsible agency, that the Notice of Exemption (Section 15194 of CEQA Guidelines) prepared by the City of Walnut Creek, as the lead agency, is adequate for purposes of compliance with the California Environmental Quality Act; and 3. DIRECT the Conservation and Development Director, or designee, to file a Notice of Exemption for this project with the County Clerk; and 4. DIRECT the Conservation and Development Director, or designee, to arrange for payment of the $50 handling fee to the County Clerk for filing such Notice of Determination. FISCAL IMPACT: No General Fund impact. HOME funds are provided to the County on a formula allocation basis through the U.S. Department of Housing and Urban Development (HUD). HOME CFDA# 14.256. HOPWA funds are provided to the County on a formula allocation basis through the City of Oakland CFDA# 14.241. APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 12/03/2013 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS AYE:John Gioia, District I Supervisor Candace Andersen, District II Supervisor Mary N. Piepho, District III Supervisor Karen Mitchoff, District IV Supervisor Federal D. Glover, District V Supervisor Contact: Kara Douglas 674-7880 I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. ATTESTED: December 3, 2013 David Twa, County Administrator and Clerk of the Board of Supervisors By: Chris Heck, Deputy cc: C. 69 To:Board of Supervisors From:Catherine Kutsuris, Conservation and Development Director Date:December 3, 2013 Contra Costa County Subject:APPROVAL OF HOME AND HOPWA LEGAL DOCUMENTS FOR THE THIRD AVENUE APARTMENTS IN WALNUT CREEK BACKGROUND: On May 13, 2013, the Board of Supervisors confirmed its allocation of $2,450,000 in HOME funds and allocated $250,000 in HOPWA funds to Satellite Affordable Housing Associates (SAHA) for the Third Avenue Apartment development. The purpose of the Third Avenue Apartment development is to improve the supply of multi-family rental housing affordable to and occupied by lower income households, including households with special needs, in Central County through the construction of a 48 unit apartment building in Walnut Creek. Twenty-three of the units will be designated as County-assisted. Three units will be affordable and available to households earning up to 30 percent of the area median income (AMI). Twenty units will be affordable and available to households earning up to 50 percent of AMI. Two of the three 30 percent AMI units will also be designated as HOPWA units. SAHA has formed a limited partnership, 1550 Third L.P. to develop and own this project. HOME and HOPWA funds will be used to support pre-development and construction of the development. HOME funds will be provided in the form of a 55-year, residual receipt loan with a three percent interest rate. HOPWA funds will be provided as a fully deferred loan with no interest. Affordability and use restrictions are incorporated into the County loan documents. National Environmental Policy Act (NEPA): HOME projects are subject to NEPA and 24 CFR Part 58 review. The NEPA review for this project has been completed. Required mitigations are included in the loan agreement. Additional financing for the development includes City of Walnut Creek (inclusionary and former redevelopment agency funds), nine percent low income housing tax credits, Mental Health Services Act funds, State Developmental Disabled Services funds, Federal Home Loan Bank Affordable Housing Program funds and a Wells Fargo Bank loan. Due to the high construction costs and limited revenue from the restricted rents, the total amount of the financing provided to the project will likely exceed the value of the completed project. Even though the proposed equity investment from low income housing tax credits is substantial compared to the amount of long term debt, the partnership agreement will have numerous safe guards of the investor's equity. These safe guards essentially subordinate the County’s debt to the investor’s equity. Therefore, the County funds may not be fully secured through the value of the property. County Counsel has approved as to form the following attached documents: HOME and HOPWA Loan Agreement Promissory Note Deed of Trust with Assignment Of Rents, Security Agreement, And Fixture Filing Regulatory Agreement and Declaration Of Restrictive Covenants Intercreditor Agreement between the County, 1550 Third Ave LP, and the City of Walnut Creek CONSEQUENCE OF NEGATIVE ACTION: Without the approval and execution of the HOME and HOPWA legal documents, the project will not be constructed. SAHA must close on all financing by December 6, 2013 or its tax credit financing will be lost. CHILDREN'S IMPACT STATEMENT: The Third Avenue Apartment project will support indicator number 3: Families are Economically Self Sufficient ATTACHMENTS Loan Agreement Promissory Note Deed of Trust Regulatory Agreement Intercreditor Agreement 863\01\1371274.2 1 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Contra Costa County Department of Conservation and Development 30 Muir Road Martinez, CA 94553 Attn: Affordable Housing Program Manager No fee for recording pursuant to Government Code Section 27383 DEED OF TRUST WITH ASSIGNMENT OF RENTS, SECURITY AGREEMENT, AND FIXTURE FILING (Third Avenue Apartments) THIS DEED OF TRUST WITH ASSIGNMENT OF RENTS, SECURITY AGREEMENT ("Deed of Trust") is made as of __________, 2013, by and among 1550 Third, L.P., a California limited partnership ("Trustor"), Old Republic Title Company, a California corporation ("Trustee"), and the County of Contra Costa, a political subdivision of the State of California ("Beneficiary"). FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt of which is hereby acknowledged, Trustor hereby irrevocably grants, transfers, conveys and assigns to Trustee, IN TRUST, WITH POWER OF SALE, for the benefit and security of Beneficiary, under and subject to the terms and conditions hereinafter set forth, Trustor's fee interest in the property located in the County of Contra Costa, State of California, that is described in the attached Exhibit A, incorporated herein by this reference (the "Property"). TOGETHER WITH all interest, estates or other claims, both in law and in equity which Trustor now has or may hereafter acquire in the Property and the rents; TOGETHER WITH all easements, rights-of-way and rights used in connection therewith or as a means of access thereto, including (without limiting the generality of the foregoing) all tenements, hereditaments and appurtenances thereof and thereto; TOGETHER WITH any and all buildings and improvements of every kind and description now or hereafter erected thereon, and all property of Trustor now or hereafter affixed to or placed upon the Property; TOGETHER WITH all building materials and equipment now or hereafter delivered to said property and intended to be installed therein; TOGETHER WITH all right, title and interest of Trustor, now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, 863\01\1371274.2 2 adjoining the Property, and any and all sidewalks, alleys and strips and areas of land adjacent to or used in connection with the Property; TOGETHER WITH all estate, interest, right, title, other claim or demand, of every nature, in and to such property, including the Property, both in law and in equity, including, but not limited to, all deposits made with or other security given by Trustor to utility companies, the proceeds from any or all of such property, including the Property, claims or demands with respect to the proceeds of insurance in effect with respect thereto, which Trustor now has or may hereafter acquire, any and all awards made for the taking by eminent domain or by any proceeding or purchase in lieu thereof of the whole or any part of such property, including without limitation, any awards resulting from a change of grade of streets and awards for severance damages to the extent Beneficiary has an interest in such awards for taking as provided in Paragraph 4.1 herein; TOGETHER WITH all of Trustor's interest in all articles of personal property or fixtures now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the Property which are necessary to the complete and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, including all other goods and chattels and personal property as are ever used or furnished in operating a building, or the activities conducted therein, similar to the one herein described and referred to, and all renewals or replacements thereof or articles in substitution therefor, whether or not the same are, or will be, attached to said building or buildings in any manner; and TOGETHER WITH all of Trustor's interest in all building materials, fixtures, equipment, work in process and other personal property to be incorporated into the Property; all goods, materials, supplies, fixtures, equipment, machinery, furniture and furnishings, signs and other personal property now or hereafter appropriated for use on the Property, whether stored on the Property or elsewhere, and used or to be used in connection with the Property; all rents, issues and profits, and all inventory, accounts, accounts receivable, contract rights, general intangibles, chattel paper, instruments, documents, notes drafts, letters of credit, insurance policies, insurance and condemnation awards and proceeds, trade names, trademarks and service marks arising from or related to the Property and any business conducted thereon by Trustor; all replacements, additions, accessions and proceeds; and all books, records and files relating to any of the foregoing. All of the foregoing, together with the Property, is herein referred to as the "Security." To have and to hold the Security together with acquittances to the Trustee, its successors and assigns forever. FOR THE PURPOSE OF SECURING THE FOLLOWING OBLIGATIONS (together, the "Secured Obligations"): A.Payment to Beneficiary of all sums at any time owing under or in connection with (i) the Note (defined in Section 1.6 below) until paid in full or cancelled, and (ii) any other amounts owing under the Loan Documents (defined in Section 1.5 below). Principal and other payments are due and payable as provided in the Note or other Loan Documents, as applicable. 863\01\1371274.2 3 The Note and all its terms are incorporated herein by reference, and this conveyance secures any and all extensions thereof, however evidenced; B.Payment of any sums advanced by Beneficiary to protect the Security pursuant to the terms and provisions of this Deed of Trust following a breach of Trustor's obligation to advance said sums and the expiration of any applicable cure period, with interest thereon as provided herein; C.Performance of every obligation, covenant or agreement of Trustor contained herein and in the Loan Documents; and D.All modifications, extensions and renewals of any of the Secured Obligations (including without limitation, (i) modifications, extensions or renewals at a different rate of interest, or (ii) deferrals or accelerations of the required principal payment dates or interest payment dates or both, in whole or in part), however evidenced, whether or not any such modification, extension or renewal is evidenced by a new or additional promissory note or notes. AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES: ARTICLE 1 DEFINITIONS In addition to the terms defined elsewhere in this Deed of Trust, the following terms have the following meanings in this Deed of Trust: Section 1.1 The term "Default Rate" means the lesser of the maximum rate permitted by law and ten percent (10%) per annum. Section 1.2 The term "Intercreditor Agreement" means that certain Intercreditor Agreement of even date herewith, among Trustor, Beneficiary, and the City of Walnut Creek. Section 1.3 The term "Loan" means the loan made by Beneficiary to Trustor in the amount of Two Million Seven Hundred Thousand Dollars ($2,700,000). Section 1.4 The term "Loan Agreement" means that certain HOME and HOPWA Loan Agreement between Trustor and Beneficiary, of even date herewith, as such may be amended from time to time, providing for the Beneficiary to loan to Trustor Two Million Seven Hundred Thousand Dollars ($2,700,000). Section 1.5 The term "Loan Documents" means this Deed of Trust, the Note, the Loan Agreement, the Intercreditor Agreement, and the Regulatory Agreement, and any other agreements, debt, loan or security instruments between Trustor and Beneficiary relating to the Loan. Section 1.6 The term "Note" means the promissory note in the principal amount of Two Million Seven Hundred Thousand Dollars ($2,700,000) of even date herewith, executed by 863\01\1371274.2 4 Trustor in favor of Beneficiary, as it may be amended or restated, the payment of which is secured by this Deed of Trust. The terms and provisions of the Note are incorporated herein by reference. Section 1.7 The term "Principal" means the amounts required to be paid under the Note. Section 1.8 The term "Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive Covenants of even date herewith by and between Beneficiary and Trustor. ARTICLE 2 MAINTENANCE AND MODIFICATION OF THE PROPERTY AND SECURITY Section 2.1 Maintenance and Modification of the Property by Trustor. The Trustor agrees that at all times prior to full payment and performance of the Secured Obligations, the Trustor will, at the Trustor's own expense, maintain, preserve and keep the Security or cause the Security to be maintained and preserved in good condition. The Trustor will from time to time make or cause to be made all repairs, replacements and renewals deemed proper and necessary by it. The Beneficiary has no responsibility in any of these matters or for the making of improvements or additions to the Security. Trustor agrees to pay fully and discharge (or cause to be paid fully and discharged) all claims for labor done and for material and services furnished in connection with the Security, diligently to file or procure the filing of a valid notice of cessation upon the event of a cessation of labor on the work or construction on the Security for a continuous period of thirty (30) days or more, and to take all other reasonable steps to forestall the assertion of claims of lien against the Security or any part thereof. Trustor irrevocably appoints, designates and authorizes Beneficiary as its agent (said agency being coupled with an interest) with the authority, but without any obligation, to file for record any notices of completion or cessation of labor or any other notice that Beneficiary deems necessary or desirable to protect its interest in and to the Security or the Loan Documents; provided, however, that Beneficiary exercises its rights as agent of Trustor only in the event that Trustor fails to take, or fails to diligently continue to take, those actions as hereinbefore provided. Upon demand by Beneficiary, Trustor shall make or cause to be made such demands or claims as Beneficiary specifies upon laborers, materialmen, subcontractors or other persons who have furnished or claim to have furnished labor, services or materials in connection with the Security. Nothing herein contained requires Trustor to pay any claims for labor, materials or services which Trustor in good faith disputes and is diligently contesting provided that Trustor shall, within thirty (30) days after the filing of any claim of lien, record in the Office of the Recorder of Contra Costa County, a surety bond in an amount 1 and 1/2 times the amount of such claim item to protect against a claim of lien. 863\01\1371274.2 5 Section 2.2 Granting of Easements. Trustor may not grant easements, licenses, rights-of-way or other rights or privileges in the nature of easements with respect to any property or rights included in the Security except those required or desirable for installation and maintenance of public utilities including, without limitation, water, gas, electricity, sewer, telephone and telegraph, or those required by law, and as approved, in writing, by Beneficiary. Section 2.3 Assignment of Rents. As part of the consideration for the indebtedness evidenced by the Note, Trustor hereby absolutely and unconditionally assigns and transfers to Beneficiary all the rents and revenues of the Property including those now due, past due, or to become due by virtue of any lease or other agreement for the occupancy or use of all or any part of the Property, regardless of to whom the rents and revenues of the Property are payable, subject to the rights of senior lenders. Trustor hereby authorizes Beneficiary or Beneficiary's agents to collect the aforesaid rents and revenues and hereby directs each tenant of the Property to pay such rents to Beneficiary or Beneficiary's agents; provided, however, that prior to written notice given by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents, Trustor shall collect and receive all rents and revenues of the Property as trustee for the benefit of Beneficiary and Trustor to apply the rents and revenues so collected to the Secured Obligations with the balance, so long as no such breach has occurred and is continuing, to the account of Trustor, it being intended by Trustor and Beneficiary that this assignment of rents constitutes an absolute assignment and not an assignment for additional security only. Upon delivery of written notice by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents, and without the necessity of Beneficiary entering upon and taking and maintaining full control of the Property in person, by agent or by a court-appointed receiver, Beneficiary shall immediately be entitled to possession of all rents and revenues of the Property as specified in this Section 2.3 as the same becomes due and payable, including but not limited to, rents then due and unpaid, and all such rents will immediately upon delivery of such notice be held by Trustor as trustee for the benefit of Beneficiary only; provided, however, that the written notice by Beneficiary to Trustor of the breach by Trustor contains a statement that Beneficiary exercises its rights to such rents. Trustor agrees that commencing upon delivery of such written notice of Trustor's breach by Beneficiary to Trustor, each tenant of the Property shall make such rents payable to and pay such rents to Beneficiary or Beneficiary's agents on Beneficiary's written demand to each tenant therefor, delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by Trustor. Trustor hereby covenants that Trustor has not executed any prior assignment of said rents, other than as security to senior lenders, that Trustor has not performed, and will not perform, any acts or has not executed and will not execute, any instrument which would prevent Beneficiary from exercising its rights under this Section 2.3, and that at the time of execution of this Deed of Trust, there has been no anticipation or prepayment of any of the rents of the Property for more than two (2) months prior to the due dates of such rents. Trustor covenants that Trustor will not hereafter collect or accept payment of any rents of the Property more than two (2) months prior to the due dates of such rents. Trustor further covenants that, so long as the 863\01\1371274.2 6 Secured Obligations are outstanding, Trustor will execute and deliver to Beneficiary such further assignments of rents and revenues of the Property as Beneficiary may from time to time request. Upon Trustor's breach of any covenant or agreement of Trustor in the Loan Documents, Beneficiary may in person, by agent or by a court-appointed receiver, regardless of the adequacy of Beneficiary's security, enter upon and take and maintain full control of the Property in order to perform all acts necessary and appropriate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of leases, the collection of all rents and revenues of the Property, the making of repairs to the Property and the execution or termination of contracts providing for the management or maintenance of the Property, all on such terms as are deemed best to protect the security of this Deed of Trust. In the event Beneficiary elects to seek the appointment of a receiver for the Property upon Trustor's breach of any covenant or agreement of Trustor in this Deed of Trust, Trustor hereby expressly consents to the appointment of such receiver. Beneficiary or the receiver will be entitled to receive a reasonable fee for so managing the Property. All rents and revenues collected subsequent to delivery of written notice by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents are to be applied first to the costs, if any, of taking control of and managing the Property and collecting the rents, including, but not limited to, attorney's fees, receiver's fees, premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies, taxes, assessments and other charges on the Property, and the costs of discharging any obligation or liability of Trustor as lessor or landlord of the Property and then to the sums secured by this deed of Trust. Beneficiary or the receiver is to have access to the books and records used in the operation and maintenance of the Property and will be liable to account only for those rents actually received. Beneficiary is not liable to Trustor, anyone claiming under or through Trustor or anyone having an interest in the Property by reason of anything done or left undone by Beneficiary under this Section 2.3. If the rents of the Property are not sufficient to meet the costs, if any, of taking control of and managing the Property and collecting the rents, any funds expended by Beneficiary for such purposes will become part of the Secured Obligations pursuant to Section 3.3 hereof. Unless Beneficiary and Trustor agree in writing to other terms of payment, such amounts are payable by Trustor to Beneficiary upon notice from Beneficiary to Trustor requesting payment thereof and will bear interest from the date of disbursement at the rate stated in Section 3.3. If the Beneficiary or the receiver enters upon and takes and maintains control of the Property, neither that act nor any application of rents as provided herein will cure or waive any default under this Deed of Trust or invalidate any other right or remedy available to Beneficiary under applicable law or under this Deed of Trust. This assignment of rents of the Property will terminate at such time as this Deed of Trust ceases to secure the Secured Obligations. 863\01\1371274.2 7 ARTICLE 3 TAXES AND INSURANCE; ADVANCES Section 3.1 Taxes, Other Governmental Charges and Utility Charges. Trustor shall pay, or cause to be paid, prior to the date of delinquency, all taxes, assessments, charges and levies imposed by any public authority or utility company that are or may become a lien affecting the Security or any part thereof; provided, however, that Trustor is not required to pay and discharge any such tax, assessment, charge or levy so long as (a) the legality thereof is promptly and actively contested in good faith and by appropriate proceedings, and (b) Trustor maintains reserves adequate to pay any liabilities contested pursuant to this Section 3.1. With respect to taxes, special assessments or other similar governmental charges, Trustor shall pay such amount in full prior to the attachment of any lien therefor on any part of the Security; provided, however, if such taxes, assessments or charges can be paid in installments, Trustor may pay in such installments. Except as provided in clause (b) of the first sentence of this paragraph, the provisions of this Section 3.1 may not be construed to require that Trustor maintain a reserve account, escrow account, impound account or other similar account for the payment of future taxes, assessments, charges and levies. In the event that Trustor fails to pay any of the items required by this Section to be paid by Trustor, Beneficiary may (but is under no obligation to) pay the same, after the Beneficiary has notified the Trustor of such failure to pay and the Trustor fails to fully pay such items within seven (7) business days after receipt of such notice. Any amount so advanced therefor by Beneficiary, together with interest thereon from the date of such advance at the maximum rate permitted by law, will become part of the Secured Obligations secured hereby, and Trustor agrees to pay all such amounts. Section 3.2 Provisions Respecting Insurance. Trustor agrees to provide insurance conforming in all respects to that required under the Loan Documents during the course of construction and following completion, and at all times until all amounts secured by this Deed of Trust have been paid, all Secured Obligations secured hereunder have been fulfilled, and this Deed of Trust has been reconveyed. All such insurance policies and coverages are to be maintained at Trustor's sole cost and expense. Certificates of insurance for all of the above insurance policies, showing the same to be in full force and effect, are to be delivered to the Beneficiary upon demand therefor at any time prior to Trustor's satisfaction of the Secured Obligations. Section 3.3 Advances. In the event the Trustor fails to maintain the full insurance coverage required by this Deed of Trust or fails to keep the Security in accordance with the Loan Documents, the Beneficiary, after at least seven (7) days prior notice to Trustor, may (but is under no obligation to) (i) take out the required policies of insurance and pay the premiums on the same, and (ii) make any repairs or replacements that are necessary and provide for payment thereof. All 863\01\1371274.2 8 amounts so advanced by the Beneficiary will become part of the Secured Obligations (together with interest as set forth below) and will be secured hereby, which amounts the Trustor agrees to pay on the demand of the Beneficiary, and if not so paid, will bear interest from the date of the advance at the Default Rate. ARTICLE 4 DAMAGE, DESTRUCTION OR CONDEMNATION Section 4.1 Awards and Damages. Subject to the rights of senior lenders, all judgments, awards of damages, settlements and compensation made in connection with or in lieu of (1) the taking of all or any part of or any interest in the Property by or under assertion of the power of eminent domain, (2) any damage to or destruction of the Property or any part thereof by insured casualty, and (3) any other injury or damage to all or any part of the Property (collectively, the "Funds") are hereby assigned to and are to be paid to the Beneficiary by a check made payable to the Beneficiary. The Beneficiary is authorized and empowered (but not required) to collect and receive any Funds and is authorized to apply them in whole or in part to any indebtedness or obligation secured hereby, in such order and manner as the Beneficiary determines at its sole option. The Beneficiary is entitled to settle and adjust all claims under insurance policies provided under this Deed of Trust and may deduct and retain from the proceeds of such insurance the amount of all expenses incurred by it in connection with any such settlement or adjustment. All or any part of the amounts so collected and recovered by the Beneficiary may be released to Trustor upon such conditions as the Beneficiary may impose for its disposition. Application of all or any part of the Funds collected and received by the Beneficiary or the release thereof will not cure or waive any default under this Deed of Trust. The rights of the Beneficiary under this Section 4.1 are subject to the rights of any senior mortgage lender. The Beneficiary shall release the Funds to Trustor to be used to reconstruct the improvements on the Property provided that Beneficiary reasonably determines that Trustor (taking into account the Funds) has sufficient funds to rebuild the improvements in substantially the form that existed prior to the casualty or condemnation. ARTICLE 5 AGREEMENTS AFFECTING THE PROPERTY; FURTHER ASSURANCES; PAYMENT OF PRINCIPAL AND INTEREST Section 5.1 Other Agreements Affecting Property. Trustor shall duly and punctually perform all terms, covenants, conditions and agreements binding upon it under the Loan Documents and any other agreement of any nature whatsoever now or hereafter involving or affecting the Security or any part thereof. Section 5.2 Agreement to Pay Attorneys' Fees and Expenses. In the event of any Event of Default (as defined in Section 7.1) hereunder, and if the Beneficiary employs attorneys or incurs other expenses for the collection of amounts due hereunder or the enforcement of performance or observance of an obligation or agreement on the 863\01\1371274.2 9 part of the Trustor in this Deed of Trust, the Trustor agrees that it will, on demand therefor, pay to the Beneficiary the reasonable fees of such attorneys and such other reasonable expenses so incurred by the Beneficiary. Any such amounts paid by the Beneficiary will be added to the Secured Obligations, and will bear interest from the date such expenses are incurred at the Default Rate. Section 5.3 Payment of the Principal. The Trustor shall pay to the Beneficiary the Principal and any other payments as set forth in the Note in the amounts and by the times set out therein. Section 5.4 Personal Property. To the maximum extent permitted by law, the personal property subject to this Deed of Trust is deemed to be fixtures and part of the real property and this Deed of Trust constitutes a fixtures filing under the California Commercial Code. As to any personal property not deemed or permitted to be fixtures, this Deed of Trust constitutes a security agreement under the California Commercial Code. Section 5.5 Financing Statement. The Trustor shall execute and deliver to the Beneficiary such financing statements pursuant to the appropriate statutes, and any other documents or instruments as are required to convey to the Beneficiary a valid perfected security interest in the Security. The Trustor shall perform all acts that the Beneficiary reasonably requests so as to enable the Beneficiary to maintain a valid perfected security interest in the Security in order to secure the payment of the Note in accordance with its terms. The Beneficiary is authorized to file a copy of any such financing statement in any jurisdiction(s) as it deems appropriate from time to time in order to protect the security interest established pursuant to this instrument. Section 5.6 Operation of the Security. The Trustor shall operate the Security (and, in case of a transfer of a portion of the Security subject to this Deed of Trust, the transferee shall operate such portion of the Security) in full compliance with the Loan Documents. Section 5.7 Inspection of the Security. At any and all reasonable times upon seventy-two (72) hours' notice, the Beneficiary and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, may inspect the Security, without payment of charges or fees. Section 5.8 Nondiscrimination. The Trustor herein covenants by and for itself, its heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there will be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, age, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Security, nor will the Trustor itself 863\01\1371274.2 10 or any person claiming under or through it establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the Security. The foregoing covenants run with the land. ARTICLE 6 HAZARDOUS WASTE Trustor shall keep and maintain the Property (including, but not limited to, soil and ground water conditions) in compliance with all Hazardous Materials Laws and shall not cause or permit the Property to be in violation of any Hazardous Materials Law (defined below). Trustor may not cause or permit the use, generation, manufacture, storage or disposal of on, under, or about the Property or transportation to or from the Property of (i) any substance, material, or waste that is petroleum, petroleum-related, or a petroleum by-product, asbestos or asbestos-containing material, polychlorinated biphenyls, flammable, explosive, radioactive, freon gas, radon, or a pesticide, herbicide, or any other agricultural chemical, and (ii) any waste, substance or material defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "toxic materials", "toxic waste", "toxic substances," or words of similar import under any Hazardous Materials Law (collectively referred to hereinafter as "Hazardous Materials"), except such of the foregoing as may be customarily used in construction or operation of a multi-family residential development. Trustor shall immediately advise Beneficiary in writing if at any time it receives written notice of: (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against Trustor or the Property pursuant to any applicable federal, state or local laws, ordinances, or regulations relating to any Hazardous Materials, health, industrial hygiene, environmental conditions, or the regulation or protection of the environment, and all amendments thereto as of this date and to be added in the future and any successor statute or rule or regulation promulgated thereto ("Hazardous Materials Law"); (ii) all claims made or threatened by any third party against Trustor or the Property relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials (the matters set forth in clauses (i) and (ii) above are hereinafter referred to as "Hazardous Materials Claims"); and (iii) Trustor's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to be classified as "border-zone property" (as defined in California Health and Safety Code Section 25117.4) under the provision of California Health and Safety Code Section 25220 et seq., or any regulation adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use of the Property under any Hazardous Materials Law. Beneficiary has the right to join and participate in, as a party if it so elects, and be represented by counsel acceptable to Beneficiary (or counsel of its own choice if a conflict exists with Trustor) in, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims, and to have its reasonable attorneys' fees in connection therewith paid by Trustor. 863\01\1371274.2 11 Trustor shall indemnify and hold harmless Beneficiary and its boardmembers, directors, officers, employees, agents, successors and assigns from and against any loss, damage, cost, fine, penalty, judgment, award, settlement, expense or liability, directly or indirectly arising out of or attributable to: (i) any actual or alleged past or present violation of any Hazardous Materials Law; (ii) any Hazardous Materials Claim; (iii) any actual or alleged past or present use, generation, manufacture, storage, release, threatened release, discharge, disposal, transportation, or presence of Hazardous Materials on, under, or about the Property; (iv) any investigation, cleanup, remediation, removal, or restoration work of site conditions of the Property relating to Hazardous Materials (whether on the Property or any other property); and (v) the breach of any representation of warranty by or covenant of Trustor in this Article, and Section 5.1(l) of the Loan Agreement. Such indemnity must include, without limitation: (x) all consequential damages; (y) the costs of any required or necessary investigation, repair, cleanup or detoxification of the Property and the preparation and implementation of any closure, remedial or other required plans; and (z) all reasonable costs and expenses incurred by Beneficiary in connection with clauses (x) and (y), including but not limited to reasonable attorneys' fees and consultant fees. This indemnification applies whether or not any government agency has issued a cleanup order. Losses, claims, costs, suits, liability, and expenses covered by this indemnification provision include, but are not limited to: (1) losses attributable to diminution in the value of the Property; (2) loss or restriction of use of rentable space on the Property; (3) adverse effect on the marketing of any rental space on the Property; and (4) penalties and fines levied by, and remedial or enforcement actions of any kind issued by any regulatory agency (including but not limited to the costs of any required testing, remediation, repair, removal, cleanup or detoxification of the Property and surrounding properties). This obligation to indemnify will survive reconveyance of this Deed of Trust and will not be diminished or affected in any respect as a result of any notice, disclosure, knowledge, if any, to or by Beneficiary of Hazardous Materials. Without Beneficiary's prior written consent, which may not be unreasonably withheld, Trustor may not take any remedial action in response to the presence of any Hazardous Materials on, under or about the Property, nor enter into any settlement agreement, consent decree, or other compromise in respect to any Hazardous Material Claims, which remedial action, settlement, consent decree or compromise might, in Beneficiary's reasonable judgment, impairs the value of the Beneficiary's security hereunder; provided, however, that Beneficiary's prior consent is not necessary in the event that the presence of Hazardous Materials on, under, or about the Property either poses an immediate threat to the health, safety or welfare of any individual or is of such a nature that an immediate remedial response is necessary and it is not reasonably possible to obtain Beneficiary's consent before taking such action, provided that in such event Trustor notifies Beneficiary as soon as practicable of any action so taken. Beneficiary agrees not to withhold its consent, where such consent is required hereunder, if (i) a particular remedial action is ordered by a court of competent jurisdiction; (ii) Trustor will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required action; (iii) Trustor establishes to the reasonable satisfaction of Beneficiary that there is no reasonable alternative to such remedial action which would result in less impairment of Beneficiary's security hereunder; or (iv) the action has been agreed to by Beneficiary. The Trustor hereby acknowledges and agrees that (i) this Article is intended as the Beneficiary's written request for information (and the Trustor's response) concerning the 863\01\1371274.2 12 environmental condition of the Property as required by California Code of Civil Procedure Section 726.5, and (ii) each representation and warranty in this Deed of Trust or any of the other Loan Documents (together with any indemnity applicable to a breach of any such representation and warranty) with respect to the environmental condition of the property is intended by the Beneficiary and the Trustor to be an "environmental provision" for purposes of California Code of Civil Procedure Section 736. In the event that any portion of the Property is determined to be "environmentally impaired" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(3) or to be an "affected parcel" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(1), then, without otherwise limiting or in any way affecting the Beneficiary's or the Trustee's rights and remedies under this Deed of Trust, the Beneficiary may elect to exercise its rights under California Code of Civil Procedure Section 726.5(a) to (1) waive its lien on such environmentally impaired or affected portion of the Property and (2) exercise (a) the rights and remedies of an unsecured creditor, including reduction of its claim against the Trustor to judgment, and (b) any other rights and remedies permitted by law. For purposes of determining the Beneficiary's right to proceed as an unsecured creditor under California Code of Civil Procedure Section 726.5(a), the Trustor will be deemed to have willfully permitted or acquiesced in a release or threatened release of hazardous materials, within the meaning of California Code of Civil Procedure Section 726.5(d)(1), if the release or threatened release of hazardous materials was knowingly or negligently caused or contributed to by any lessee, occupant, or user of any portion of the Property and the Trustor knew or should have known of the activity by such lessee, occupant, or user which caused or contributed to the release or threatened release. All costs and expenses, including (but not limited to) attorneys' fees, incurred by the Beneficiary in connection with any action commenced under this paragraph, including any action required by California Code of Civil Procedure Section 726.5(b) to determine the degree to which the Property is environmentally impaired, plus interest thereon at the Default Rate until paid, will be added to the indebtedness secured by this Deed of Trust and will be due and payable to the Beneficiary upon its demand made at any time following the conclusion of such action. ARTICLE 7 EVENTS OF DEFAULT AND REMEDIES Section 7.1 Events of Default. The following are events of default following the expiration of any applicable notice and cure periods (each an "Event of Default"): (i) failure to make any payment to be paid by Trustor under the Loan Documents; (ii) failure to observe or perform any of Trustor's other covenants, agreements or obligations under the Loan Documents, including, without limitation, the provisions concerning discrimination; (iii) failure to make any payment or observe or perform any of Trustor's other covenants, agreements, or obligations under any Secured Obligations, which default is not cured within the times and in the manner provided therein; and (iv) failure to make any payments or observe or perform any of Trustor's other covenants, agreements or obligations under any other debt instrument or regulatory agreement secured by the Property, which default is not cured within the time and in the manner provided therein. 863\01\1371274.2 13 Section 7.2 Acceleration of Maturity. If an Event of Default has occurred and is continuing, then at the option of the Beneficiary, the amount of any payment related to the Event of Default and all unpaid Secured Obligations are immediately due and payable, and no omission on the part of the Beneficiary to exercise such option when entitled to do so may be construed as a waiver of such right. Section 7.3 The Beneficiary's Right to Enter and Take Possession. If an Event of Default has occurred and is continuing, the Beneficiary may: (a)Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its security, enter upon the Property and take possession thereof (or any part thereof) and of any of the Security, in its own name or in the name of Trustee, and do any acts that it deems necessary or desirable to preserve the value or marketability of the Property, or part thereof or interest therein, increase the income therefrom or protect the security thereof. The entering upon and taking possession of the Security will not cure or waive any Event of Default or Notice of Sale (as defined in Section 7.3(c), below) hereunder or invalidate any act done in response to such Event of Default or pursuant to such Notice of Sale, and, notwithstanding the continuance in possession of the Security, Beneficiary will be entitled to exercise every right provided for in this Deed of Trust, or by law upon occurrence of any Event of Default, including the right to exercise the power of sale; (b)Commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof; (c)Deliver to Trustee a written declaration of an Event of Default and demand for sale, and a written notice of default and election to cause Trustor's interest in the Security to be sold ("Notice of Sale"), which notice Trustee or Beneficiary shall cause to be duly filed for record in the Official Records of Contra Costa County; or (d)Exercise all other rights and remedies provided herein, in the instruments by which the Trustor acquires title to any Security, or in any other document or agreement now or hereafter evidencing, creating or securing the Secured Obligations. Section 7.4 Foreclosure By Power of Sale. Should the Beneficiary elect to foreclose by exercise of the power of sale herein contained, the Beneficiary shall deliver to the Trustee the Notice of Sale and shall deposit with Trustee this Deed of Trust which is secured hereby (and the deposit of which will be deemed to constitute evidence that the Secured Obligations are immediately due and payable), and such receipts and evidence of any expenditures made that are additionally secured hereby as Trustee may require. (a)Upon receipt of the Notice of Sale from the Beneficiary, Trustee shall cause to be recorded, published and delivered to Trustor such Notice of Sale as is then required by law and by this Deed of Trust. Trustee shall, without demand on Trustor, after the lapse of 863\01\1371274.2 14 that amount of time as is then required by law and after recordation of such Notice of Sale as required by law, sell the Security, at the time and place of sale set forth in the Notice of Sale, whether as a whole or in separate lots or parcels or items, as Trustee deems expedient and in such order as it determines, unless specified otherwise by the Trustor according to California Civil Code Section 2924g(b), at public auction to the highest bidder, for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed or any matters of facts will be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Trustor, Trustee or Beneficiary, may purchase at such sale. (b)After deducting all reasonable costs, fees and expenses of Trustee, including costs of evidence of title in connection with such sale, Trustee shall apply the proceeds of sale to payment of: (i) the unpaid Principal amount of the Note; (ii) all other Secured Obligations owed to Beneficiary under the Loan Documents; (iii) all other sums then secured hereby; and (iv) the remainder, if any, to Trustor. (c)Trustee may postpone sale of all or any portion of the Property by public announcement at such time and place of sale, and from time to time thereafter, and without further notice make such sale at the time fixed by the last postponement, or may, in its discretion, give a new Notice of Sale. Section 7.5 Receiver. If an Event of Default occurs and is continuing, Beneficiary, as a matter of right and without further notice to Trustor or anyone claiming under the Security, and without regard to the then value of the Security or the interest of Trustor therein, may apply to any court having jurisdiction to appoint a receiver or receivers of the Security (or a part thereof), and Trustor hereby irrevocably consents to such appointment and waives further notice of any application therefor. Any such receiver or receivers will have all the usual powers and duties of receivers in like or similar cases, and all the powers and duties of Beneficiary in case of entry as provided herein, and will continue as such and exercise all such powers until the date of confirmation of sale of the Security, unless such receivership is sooner terminated. Section 7.6 Remedies Cumulative. No right, power or remedy conferred upon or reserved to the Beneficiary by this Deed of Trust is intended to be exclusive of any other right, power or remedy, but each and every such right, power and remedy will be cumulative and concurrent and will be in addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity. Section 7.7 No Waiver. (a)No delay or omission of the Beneficiary to exercise any right, power or remedy accruing upon any Event of Default will exhaust or impair any such right, power or remedy, and may not be construed to be a waiver of any such Event of Default or acquiescence therein; and every right, power and remedy given by this Deed of Trust to the Beneficiary may be exercised from time to time and as often as may be deemed expeditious by the Beneficiary. 863\01\1371274.2 15 Beneficiary's express or implied consent to breach, or waiver of, any obligation of the Trustor hereunder will not be deemed or construed to be a consent to any subsequent breach, or further waiver, of such obligation or of any other obligations of the Trustor hereunder. Failure on the part of the Beneficiary to complain of any act or failure to act or to declare an Event of Default, irrespective of how long such failure continues, will not constitute a waiver by the Beneficiary of its right hereunder or impair any rights, power or remedies consequent on any Event of Default by the Trustor. (b)If the Beneficiary (i) grants forbearance or an extension of time for the payment or performance of any Secured Obligation, (ii) takes other or additional security or the payment of any sums secured hereby, (iii) waives or does not exercise any right granted in the Loan Documents, (iv) releases any part of the Security from the lien of this Deed of Trust, or otherwise changes any of the terms, covenants, conditions or agreements in the Loan Documents, (v) consents to the granting of any easement or other right affecting the Security, or (vi) makes or consents to any agreement subordinating the lien hereof, any such act or omission will not release, discharge, modify, change or affect the original liability under this Deed of Trust, or any other obligation of the Trustor or any subsequent purchaser of the Security or any part thereof, or any maker, co-signer, endorser, surety or guarantor (unless expressly released); nor will any such act or omission preclude the Beneficiary from exercising any right, power or privilege herein granted or intended to be granted in any Event of Default then made or of any subsequent Event of Default, nor, except as otherwise expressly provided in an instrument or instruments executed by the Beneficiary, will the lien of this Deed of Trust be altered thereby. Section 7.8 Suits to Protect the Security. The Beneficiary has the power to (a) institute and maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Security and the rights of the Beneficiary as may be unlawful or any violation of this Deed of Trust, (b) preserve or protect its interest (as described in this Deed of Trust) in the Security, and (c) restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement for compliance with such enactment, rule or order would impair the Security thereunder or be prejudicial to the interest of the Beneficiary. Section 7.9 Trustee May File Proofs of Claim. In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or other proceedings affecting the Trustor, its creditors or its property, the Beneficiary, to the extent permitted by law, will be entitled to file such proofs of claim and other documents as may be necessary or advisable in order to have the claims of the Beneficiary allowed in such proceedings and for any additional amount that becomes due and payable by the Trustor hereunder after such date. Section 7.10 Waiver. The Trustor waives presentment, demand for payment, notice of dishonor, notice of protest and nonpayment, protest, notice of interest on interest and late charges, and diligence in taking any action to collect any Secured Obligations or in proceedings against the Security, in 863\01\1371274.2 16 connection with the delivery, acceptance, performance, default, endorsement or guaranty of this Deed of Trust. ARTICLE 8 MISCELLANEOUS Section 8.1 Amendments. This Deed of Trust cannot be waived, changed, discharged or terminated orally, but only by an instrument in writing signed by Beneficiary and Trustor. Section 8.2 Reconveyance by Trustee. Upon written request of Beneficiary stating that all Secured Obligations have been paid or forgiven, and all obligations under the Loan Documents have been performed in full, and upon surrender of this Deed of Trust to Trustee for cancellation and retention, and upon payment by Trustor of Trustee's reasonable fees, Trustee shall reconvey the Security to Trustor, or to the person or persons legally entitled thereto. Section 8.3 Notices. If at any time after the execution of this Deed of Trust it becomes necessary or convenient for one of the parties hereto to serve any notice, demand or communication upon the other party, such notice, demand or communication must be in writing and is to be served personally or by depositing the same in the registered United States mail, return receipt requested, postage prepaid and (1) if intended for Beneficiary is to be addressed to: County of Contra Costa Department of Conservation and Development 30 Muir Road Martinez, CA 94553 Attention: Affordable Housing Program Manager and (2) if intended for Trustor is to be addressed to: 1550 Third, L.P. c/o 1550 Third LLC 1521 University Avenue Berkeley, CA 94703 Attn: Executive Director With a copy to Investor Limited Partner: Wells Fargo Affordable Housing Community Development Corporation MAC D1053-170 301 South College Street 863\01\1371274.2 17 Charlotte, NC 28288 Attn.: Director of Tax Credit Asset Management Any notice, demand or communication will be deemed given, received, made or communicated on the date personal delivery is effected or, if mailed in the manner herein specified, on the delivery date or date delivery is refused by the addressee, as shown on the return receipt. Either party may change its address at any time by giving written notice of such change to Beneficiary or Trustor as the case may be, in the manner provided herein, at least ten (10) days prior to the date such change is desired to be effective. Section 8.4 Successors and Joint Trustors. Where an obligation created herein is binding upon Trustor, the obligation also applies to and binds any transferee or successors in interest. Where the terms of the Deed of Trust have the effect of creating an obligation of the Trustor and a transferee, such obligation will be deemed to be a joint and several obligation of the Trustor and such transferee. Where Trustor is more than one entity or person, all obligations of Trustor will be deemed to be a joint and several obligation of each and every entity and person comprising Trustor. Section 8.5 Captions. The captions or headings at the beginning of each Section hereof are for the convenience of the parties and are not a part of this Deed of Trust. Section 8.6 Invalidity of Certain Provisions. Every provision of this Deed of Trust is intended to be severable. In the event any term or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court or other body of competent jurisdiction, such illegality or invalidity will not affect the balance of the terms and provisions hereof, which terms and provisions will remain binding and enforceable. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the debt, or if the lien is invalid or unenforceable as to any part of the Security, the unsecured or partially secured portion of the debt, and all payments made on the debt, whether voluntary or under foreclosure or other enforcement action or procedure, will be considered to have been first paid or applied to the full payment of that portion of the debt that is not secured or partially secured by the lien of this Deed of Trust. Section 8.7 Governing Law. This Deed of Trust is governed by the laws of the State of California. Section 8.8 Gender and Number. In this Deed of Trust the singular includes the plural and the masculine includes the feminine and neuter and vice versa, if the context so requires. Section 8.9 Deed of Trust, Mortgage. 863\01\1371274.2 18 Any reference in this Deed of Trust to a mortgage also refers to a deed of trust and any reference to a deed of trust also refers to a mortgage. Section 8.10 Actions. Trustor shall appear in and defend any action or proceeding purporting to affect the Security. Section 8.11 Substitution of Trustee. Beneficiary may from time to time substitute a successor or successors to any Trustee named herein or acting hereunder to execute this Trust. Upon such appointment, and without conveyance to the successor trustee, the latter will be vested with all title, powers, and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and substitution is to be made by written instrument executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which, when duly recorded in the proper office of the county or counties in which the Property is situated, will be conclusive proof of proper appointment of the successor trustee. Section 8.12 Statute of Limitations. The pleading of any statute of limitations as a defense to any and all obligations secured by this Deed of Trust is hereby waived to the full extent permissible by law. Section 8.13 Acceptance by Trustee. Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Except as otherwise provided by law, the Trustee is not obligated to notify any party hereto of a pending sale under this Deed of Trust or of any action or proceeding in which Trustor, Beneficiary, or Trustee is a party unless brought by Trustee. Section 8.14 Tax Credit Provisions. Notwithstanding anything to the contrary contained herein or in any documents secured by this Deed of Trust or contained in any subordination agreement, and to the extent applicable, the Beneficiary acknowledges and agrees that in the event of a foreclosure or deed-in-lieu of foreclosure (collectively, "Foreclosure") with respect to the Security encumbered by this Deed of Trust, the following rule contained in 26 U.S.C. Section 42(h)(6)(E)(ii), as amended, applies: For a period of three (3) years from the date of Foreclosure, with respect to an existing tenant of any low-income unit, (i) such tenant may not be subject to eviction or termination of their tenancy (other than for good cause), (ii) nor may such tenant's gross rent with respect to such unit be increased, except as otherwise permitted under Section 42 of the Internal Revenue Code. [remainder of page intentionally left blank] Signature page County Deed of Trust 863\01\1371274.2 19 IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year first above written. 1550 Third, L.P., a California limited partnership By: 1550 Third LLC, a California limited liability company, its general partner By: Satellite AHA Development, Inc., a California nonprofit public benefit corporation, its sole member By:____________________ Name:___________________ Its:____________________ 863\01\1371274.2 STATE OF CALIFORNIA ) ) COUNTY OF CONTRA COSTA ) On ____________ __, 2013, before me, _______________, Notary Public, personally appeared, _________________________who proved to me on the basis of satisfactory evidence to be the person(s) whose name is subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity, and that by his/her/their signature on the instrument the person, or the entity upon behalf of which the person 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-1 863\01\1371274.2 EXHIBIT A LEGAL DESCRIPTION The land is situated in the State of California, County of Contra Costa, and is described as follows: 863\01\1367099.2 1 RECORDING REQUESTED PURSUANT AND WHEN RECORDED MAIL TO: Contra Costa County Department of Conservation and Development 30 Muir Road Martinez, CA 94553 Attn: Affordable Housing Program Manager No fee for recording pursuant to Government Code Section 27383 __________________________________________________________________________ INTERCREDITOR AGREEMENT (Third Avenue Apartments) This Intercreditor Agreement (the "Agreement") is dated ________, 2013, and is among the City of Walnut Creek, a municipal corporation (the "City"), the County of Contra Costa, a political subdivision of the State of California (the "County"), and 1550 Third, L.P., a California limited partnership ("Borrower"), with reference to the following facts: RECITALS A.Defined terms used but not defined in these recitals are as defined in Section 1 of this Agreement. B.Borrower is the owner of that certain real property located at 1550 Third Avenue in the City of Walnut Creek, County of Contra Costa, State of California, as more particularly described in Exhibit A (the "Property"). Borrower intends to construct forty-eight (48) multifamily housing units on the Property (the "Development"). The Development as well as all landscaping, roads and parking spaces on the Property and any additional improvements on the Property, are the "Improvements". C.The City, as the Successor Housing Agency to the Redevelopment Agency of the City of Walnut Creek pursuant to California Health and Safety Code Section 34176(a), previously made a loan in the amount of One Million Three Hundred Eighty Two Thousand Four Hundred Four Dollars ($1,382,404) (the "Housing Successor Loan") to Satellite Affordable Housing Associates Property Management, Inc., a California nonprofit public benefit corporation (formerly Satellite Housing, Inc.) ("Satellite"). The Housing Successor Loan is evidenced by the following documents (among others), all dated as of December 4, 2012: (i) Amended and Restated Loan Agreement by and between Satellite and the Housing Successor (the "Housing Successor Loan Agreement"); (ii) Amended and Restated Deed of Trust with Assignment of Rents, Security Agreement executed by Satellite for the benefit of the Housing Successor (the "Housing Successor Deed of Trust"); and (iii) Amended and Restated Promissory Note executed 863\01\1367099.2 2 by Satellite for the benefit of the Housing Successor in the amount of the Housing Successor Loan (the "Housing Successor Note"). Pursuant to an Assignment, Assumption, and Modification Agreement dated _________________, 2013, among Satellite, Borrower, and the City, the Housing Successor Loan has been assigned to and assumed by Borrower. D.The City previously made a loan in the amount of Two Million Seven Hundred Eleven Thousand Ninety Six Dollars ($2,711,096) (the "City Loan") to Satellite. The City Loan is evidenced by the following documents (among others) all dated as of December 4, 2012: (i) Amended and Restated Loan Agreement by and between Satellite and the City (the "City Loan Agreement"); (ii) Amended and Restated Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing executed by Satellite for the benefit of the City (the "City Deed of Trust"); and (iii) Amended and Restated Promissory Note executed by Satellite for the benefit of the City in the amount of the City Loan (the "City Note"). Pursuant to an Assignment, Assumption, and Modification Agreement dated ________________, 2013, among Satellite, Borrower, and the City, the City Loan has been assigned to and assumed by Borrower. E.The County is making a loan to Borrower of Two Million Four Hundred Fifty Thousand Dollars ($2,450,000) of HOME Investment Partnerships Act Program funds (the "HOME Loan") and Two Hundred Fifty Thousand Dollars ($250,000) in Housing Opportunities for Persons with AIDS Program funds (the "HOPWA Loan"), for a combined for a total loan amount of Two Million Seven Hundred Thousand Dollars ($2,700,000) (the "County Loan"). The County Loan is evidenced by the following documents, each of even date herewith: (i) HOME and HOPWA Loan Agreement by and between Borrower and the County (the "County Loan Agreement"), (ii) Deed of Trust With Assignment of Rents, Security Agreement and Fixture Filing executed by Borrower for the benefit of the County (the "County Deed of Trust"), (iii) Promissory Note executed by Borrower for the benefit of the County in the amount of the County Loan (the "County Note"). F.The City and the County desire to cause the Housing Successor Deed of Trust, the City Deed of Trust, and the County Deed of Trust (collectively, the "Deeds of Trust") to be equal in lien priority. The City and the County also desire to divide (i) the proceeds of any foreclosure, condemnation or insurance claim, (ii) the Lenders' Share of Residual Receipts, and (iii) the Borrower's Shared Portion of Residual Receipts based on their respective share of the City/County Loan. NOW, THEREFORE, the Parties agree as follows: AGREEMENT 1.Definitions. The following terms have the following meanings: (a)"Adjusted City Loan" means, to the extent less than the full amount of the City Loan is funded, an amount equal to the actual principal amount loaned to Borrower by the City pursuant to the City Loan Agreement minus any Special City Payment. If the full amount of the City Loan is funded and no portion repaid as a Special City Payment, the Adjusted City Loan is equal to the City Loan. 863\01\1367099.2 3 (b)"Adjusted HOME Loan" means, to the extent less than the full amount of the HOME Loan is funded, an amount equal to the actual principal amount loaned to Borrower by the County pursuant to the County Loan Agreement minus any Special County Loan Payment. If the full amount of the HOME Loan is funded and no portion repaid as a Special County Loan Payment, the Adjusted HOME Loan is equal to the HOME Loan. (c)"Adjusted HOPWA Loan" means, to the extent less than the full amount of the HOPWA Loan is funded, an amount equal to the actual principal amount loaned to Borrower by the County pursuant to the County Loan Agreement. If the full amount of the HOPWA Loan is funded, the Adjusted HOPWA Loan is equal to the HOPWA Loan. (d)"Adjusted Housing Successor Loan" means, to the extent less than the full amount of the Housing Successor Loan is funded, an amount equal to the actual principal amount loaned to Borrower by the City pursuant to the Housing Successor Loan Agreement minus any Special Housing Successor Payment. If the full amount of the Housing Successor Loan is funded and no portion repaid as a Special Housing Successor Payment, the Adjusted Housing Successor Loan is equal to the Housing Successor Loan. (e)"Adjusted MHSA Loan" means, to the extent less than the full amount of the MHSA Loan is funded, an amount equal to the actual principal amount loaned to Borrower by CalHFA pursuant to the documents between Borrower and CalHFA evidencing the MHSA Loan. If the full amount of the MHSA Loan is funded, the Adjusted MHSA Loan is equal to the MHSA Loan. (f)"AHP Loan" has the meaning Section 1(k)(iii). (g)"Annual City Loan Payment" has the meaning in Section 2(b). (h)"Annual County Loan Payment" has the meaning in Section 2(a). (i)"Annual Housing Successor Loan Payment" has the meaning in Section 2(c). (j)"Annual Operating Expenses" means for each calendar year, the following costs reasonably and actually incurred for operation and maintenance of the Development: i.property taxes and assessments imposed on the Development; ii.debt service currently due on a non-optional basis (excluding debt service due from residual receipts or surplus cash of the Development) on the Bank Loan and CCRC Loan; iii.on-site service provider fees for tenant social services, provided the County and City have approved, in writing, the plan and budget for such services before such services begin; iv.fees paid to the Housing Authority of Contra Costa County for administration of the Housing Assistance Payment Contract governing the provision of Project- 863\01\1367099.2 4 Based Section 8 Rental Assistance to the Development; v.fees paid to CalHFA for administration of the MHSA Loan; vi.property management fees and reimbursements, on–site property management office expenses, and salaries of property management and maintenance personnel, not to exceed amounts that are standard in the industry and which are pursuant to a management contract approved by the County and the City; vii.the Partnership/Asset Fee; viii.fees for accounting, audit, and legal services incurred by Borrower's general partner in the asset management of the Development, not to exceed amounts that are standard in the industry, to the extent such fees are not included in the Partnership/Asset Fee; ix.premiums for insurance required for the Improvements to satisfy the requirements of any lender of Approved Financing; x.utility services not paid for directly by tenants, including water, sewer, and trash collection; xi.maintenance and repair expenses and services; xii.any annual license or certificate of occupancy fees required for operation of the Development; xiii.security services; xiv.advertising and marketing; xv.cash deposited into the Replacement Reserve Account in the amount set forth in Section 4.2(a) of the County Loan Agreement; xvi.cash deposited into the Operating Reserve Account to maintain the amount set forth in Section 4.2(b) of the County Loan Agreement (excluding amounts deposited to initially capitalize the account); xvii.payment of any previously unpaid portion of Developer Fee (without interest), not to exceed the amount set forth in Section 3.18 of the County Loan Agreement; xviii. extraordinary operating costs specifically approved in writing by the County and the City; xix.payments of deductibles in connection with casualty insurance claims not normally paid from reserves, the amount of uninsured losses actually replaced, repaired or restored, and not normally paid from reserves, and other ordinary and reasonable 863\01\1367099.2 5 operating expenses approved in writing by the County and the City and not listed above. Annual Operating Expenses do not include the following: depreciation, amortization, depletion or other non-cash expenses, initial deposits to capitalize a reserve account, any amount expended from a reserve account, and any capital cost associated with the Development. (k)"Approved Financing" means all of the following loans, grants and equity obtained by Borrower and approved by the County and the City for the purpose of financing the acquisition of the Property and construction of the Development in addition to the City Loan, the County Loan, and the Housing Successor Loan: i.construction loan from Wells Fargo Bank, N. A. in the approximate amount of Fourteen Million One Hundred Seventy-Two Thousand Seven Hundred Eleven Dollars ($14,172,711) (the "Bank Loan"); ii.loan of Mental Health Services Act funds from the California Housing Finance Agency ("CalHFA") in the approximate amount of One Million Three Hundred Sixty-Eight Thousand Eight Hundred Sixty-Four Dollars ($1,368,864) (the "MHSA Loan"); iii.Affordable Housing Program loan from Wells Fargo Financial Bank, N.A. in the approximate amount of Four Hundred Seventy Thousand Dollars ($470,000) (the "AHP Loan"); iv.Low Income Housing Tax Credit investor equity funds in the approximate amount of Fourteen Million Two Hundred Fifty-Seven Thousand Five Hundred Twenty-Nine Dollars ($14,257,529) (the "Tax Credit Investor Equity") provided by the Investor Limited Partner; v.capital contribution from Borrower's general partner in the approximate amount of One Hundred Dollars ($100) (the "GP Capital Contribution"); vi.contribution from Borrower's general partner of California Department of Developmental Services ("DDS") Grant funds in the approximate amount of Four Hundred Thousand Dollars ($400,000) (the "DDS General Partner Contribution"); and vii.permanent loan from California Community Reinvestment Corporation ("CCRC") in the approximate amount of One Million Eight Hundred Sixty-Four Thousand Eight Hundred Thirty Dollars ($1,864,830) (the "CCRC Loan"). (a)"Available Net Proceeds" means the result obtained by multiplying the Net Proceeds of Permanent Financing by 0.75. (l)"Bank Loan" has the meaning set forth in Section 1(k)(i) (m)"Borrower's Shared Portion of Residual Receipts" means twenty-five percent (25%) of Residual Receipts. 863\01\1367099.2 6 (n)"CalHFA" has the meaning set forth in Section 1(k)(ii). (b)"CCRC Loan" has the meaning set forth in Section 1(k)(vii). (c)"City/County Loan" means the sum of the Adjusted HOME Loan, the adjusted HOPWA Loan, the Adjusted Housing Successor Loan, and the Adjusted City Loan. (o)"City Deed of Trust" has the meaning set forth in Paragraph D of the Recitals. (p)"City Loan" has the meaning set forth in Paragraph D of the Recitals. (q)"City Loan Agreement" has the meaning set forth in Paragraph D of the Recitals. (r)"City Loan Prorata Percentage" means the result, expressed as a percentage, obtained by dividing the Adjusted City Loan by the sum of the City/County Loan and the Adjusted MHSA Loan. (s)"City Net Proceeds Prorata Share" means the result obtained by dividing the Adjusted City Loan by the City/County Loan. (t)"City Note" has the meaning set forth in Paragraph D of the Recitals. (u)"County Deed of Trust" has the meaning set forth in Paragraph E of the Recitals. (v)"County Loan" has the meaning set forth in Paragraph E of the Recitals. (w)"County Loan Agreement" has the meaning set forth in Paragraph E of the Recitals. (x)"County Loan Prorata Percentage" means the result, expressed as a percentage, obtained by dividing the sum of (1) the Adjusted HOME Loan and Adjusted HOPWA Loan, by (2) the sum of the City/County Loan and the Adjusted MHSA Loan. (y)"County Net Proceeds Prorata Share" means the result obtained by dividing the sum of the Adjusted HOME Loan and Adjusted HOPWA Loan by the City/County Loan. (z)"County Note" has the meaning set forth in Paragraph E of the Recitals. (d)"DDS General Partner Contribution" has the meaning set forth in Section 1.1(k)(vi). (aa)"Deeds of Trust" has the meaning set forth in Paragraph F of the Recitals. 863\01\1367099.2 7 (bb)"Default Rate" means a rate of interest equal to the lesser of the maximum rate permitted by law and ten percent (10%) per annum. (cc)"Developer Fee" has the meaning set forth in Section 3.18 of the County Loan Agreement. (dd)"Development" has the meaning set forth in Paragraph B of the Recitals. (ee)"Enforcing Party" has the meaning set forth in Section 6(b). (ff)"Fifteen Year Compliance Period" means the fifteen (15)-year compliance period as described in Section 42(i)(1) of the Internal Revenue Code of 1986, as amended. (gg)"Final Cost Certification" means the Final Cost Certification Sources and Uses of Funds prepared by Borrower for the Development that (1) Borrower submits to the California Tax Credit Allocation Committee, and (2) has been prepared using generally accepted accounting standards in effect in the United States of America from time to time, consistently applied. (hh)"Final Development Cost" means the total of the cost of acquisition and construction of the Development as shown on the Final Cost Certification. (ii)"Foreclosure Net Proceeds" means the proceeds that result from a foreclosure, or any other action, whether judicial or non-judicial, less (i) all amounts paid to any senior lien holder, and (ii) expenses incurred by a lender that is a Party to this Agreement in connection with such foreclosure or other action. (jj)"GP Capital Contribution" has the meaning set forth in Section 1(k)(v). (kk)"Gross Revenue" means for each calendar year, all revenue, income, receipts, and other consideration actually received from the operation and leasing of the Development. Gross Revenue includes, but is not limited to: (i)all rents, fees and charges paid by tenants; (ii)Section 8 payments or other rental subsidy payments received for the dwelling units; (iii)deposits forfeited by tenants; (iv)all cancellation fees; (v)price index adjustments and any other rental adjustments to leases or rental agreements; (vi)net proceeds from vending and laundry room machines; 863\01\1367099.2 8 (vii) the proceeds of business interruption or similar insurance not paid to senior lenders; (viii) the proceeds of casualty insurance not used to rebuild the Development and not paid to senior lenders; and (ix)condemnation awards for a taking of part or all of the Development for a temporary period. Gross Revenue does not include tenants' security deposits, loan proceeds, capital contributions or similar advances. (ll)"HOME Loan" has the meaning set forth in Paragraph E of the Recitals. (mm) "HOPWA Loan" has the meaning set forth in Paragraph E of the Recitals. (nn)"Housing Successor Deed of Trust" has the meaning set forth in Paragraph C of the Recitals. (oo)"Housing Successor Loan" has the meaning set forth in Paragraph C of the Recitals. (pp)"Housing Successor Loan Agreement" has the meaning set forth in Paragraph C of the Recitals. (qq)"Housing Successor Loan Prorata Percentage" means the result, expressed as a percentage, obtained by dividing the Adjusted Housing Successor Loan by the sum of the City/County Loan and the Adjusted MHSA Loan. (rr)"Housing Successor Net Proceeds Prorata Share" means the result obtained by dividing the Adjusted Housing Successor Loan by the City/County Loan. (ss)"Housing Successor Note" has the meaning set forth in Paragraph C of the Recitals. (tt)"Improvements" has the meaning set forth in Paragraph B of the Recitals. (uu)"Investor Limited Partner" means Wells Fargo Affordable Housing Community Development Corporation, a North Carolina corporation, its successors and assigns. (vv)"Lenders' Share of Residual Receipts" means fifty percent (50%) of Residual Receipts. (ww) "MHSA Loan" has the meaning set forth in Section 1(k)(ii). (xx)"Net Proceeds of Permanent Financing" means the amount by which Permanent Financing exceeds the Final Development Costs. 863\01\1367099.2 9 (yy)"Parties" means the City, the County, and Borrower. (zz)"Partnership Agreement" means the agreement between Borrower's general partner and the Investor Limited Partner that governs the operation and organization of Borrower as a California limited partnership. (aaa)"Partnership/Asset Fee" means (i) partnership management fees (including any asset management fees) payable pursuant to the Partnership Agreement to any partner or affiliate of Borrower or any affiliate of a partner of Borrower, if any, during the Fifteen Year Compliance Period, and (ii) after expiration of the Fifteen Year Compliance Period, asset management fees payable to Borrower, in the amounts approved by the County as set forth in Section 3.20 of the County Loan Agreement. (bbb) "Permanent Financing" means the sum of the following amounts: (i) the County Loan; (ii) the City Loan; (iii) the Housing Successor Loan; (iv) the CCRC Loan; (v) the AHP Loan; (vi) the MHSA Loan; (vii) the Tax Credit Investor Equity; (viii) the DDS General Partner Contribution; and (ix) the GP Capital Contribution. (ccc)"Property" has the meaning set forth in Paragraph B of the Recitals. (ddd) "Residual Receipts" means for each calendar year, the amount by which Gross Revenue exceeds Annual Operating Expenses. (eee)"Satellite" has the meaning set forth in Paragraph C of the Recitals. (fff)"Special City Loan Payment" has the meaning set forth in Section 3(b). (ggg) "Special County Loan Payment" has the meaning set forth in Section 3(a). (hhh) "Special Housing Successor Loan Payment" has the meaning set forth in Section 3(c). (iii)"Statement of Residual Receipts" means an itemized statement of Residual Receipts. (e)"Tax Credit Investor Equity" has the meaning set forth in Section 1(k)(iv). 2.Annual Payments to County and City. (a)County Loan. i.Commencing on June 30, 2016, and on June 30 of each year thereafter during the Term, Borrower shall make a loan payment in an amount equal to the sum of (1) the County Loan Prorata Percentage of the Lenders' Share of Residual Receipts and (2) the County Net Proceeds Prorata Share multiplied by Borrower's Shared Portion of Residual Receipts (each such payment, an "Annual County Loan Payment"). A numerical example of the 863\01\1367099.2 10 methodology to be used to calculate the Annual County Loan Payment is shown in Exhibit B attached hereto. In the event of a conflict between the text of this Section 2(a) and Exhibit B, the text of this Section 2(a) will prevail. The County shall apply all Annual County Loan Payments to the HOME Loan as follows: (1) first, to accrued interest, and (2) second, to principal. ii.Borrower shall repay the County Loan pursuant to the terms of the County Loan Agreement and the County Note. In the event of any conflict between the repayment terms and provisions of the County Loan Agreement and this Agreement, the provisions of this Agreement apply. The County may not consent to any amendment or waiver of the terms of the County Loan Agreement or the County Note if such amendment or waiver could reasonably be deemed to materially adversely affect the City, without the City's prior written approval, which the City may withhold in its sole discretion. (b)City Loan. i.Commencing on June 30, 2016, and on June 30 of each year thereafter during the Term, Borrower shall make a loan payment in an amount equal to the sum of (1) the City Loan Prorata Percentage of the Lenders' Share of Residual Receipts and (2) the City Net Proceeds Prorata Share multiplied by Borrower's Shared Portion of Residual Receipts (each such payment, an "Annual City Loan Payment"). A numerical example of the methodology to be used to calculate the Annual City Loan Payment is shown in Exhibit B attached hereto. In the event of a conflict between the text of this Section 2(b) and Exhibit B, the text of this Section 2(b) will prevail. The City shall apply all Annual City Loan Payments as follows: (1) first, to accrued interest, and (2) second, to principal for the City Loan. ii.Borrower shall repay the City Loan pursuant to the terms of the City Loan Agreement and the City Note. In the event of any conflict between the repayment terms of the City Loan Agreement and this Agreement, the provisions of this Agreement apply. The City may not consent to any amendment or waiver of the terms of the City Loan Agreement or the City Note, if such amendment or waiver could reasonably be deemed to materially adversely affect the County, without the County's prior written approval, which the County may withhold in its sole discretion (c)Housing Successor Loan. i.Commencing on June 30, 2016, and on June 30 of each year thereafter during the Term, Borrower shall make a loan payment in an amount equal to the sum of (1) the Housing Successor Loan Prorata Percentage of the Lenders' Share of Residual Receipts, and (2) the Housing Successor Net Proceeds Prorata Share multiplied by Borrower's Shared Portion of Residual Receipts (each such payment, an "Annual Housing Successor Loan Payment"). A numerical example of the methodology to be used to calculate the Annual Housing Successor Loan Payment is shown in Exhibit B attached hereto. In the event of a conflict between the text of this Section 2(c) and Exhibit B, the text of this Section 2(c) will prevail. The City shall apply all Annual Housing Successor Loan Payments as follows: (1) first, to accrued interest, and (2) second, to principal for the Housing Successor Loan. ii.Borrower shall repay the Housing Successor Loan pursuant to the terms of the Housing Successor Loan Agreement and the Housing Successor Note. In the event 863\01\1367099.2 11 of any conflict between the repayment terms of the Housing Successor Loan Agreement and this Agreement, the provisions of this Agreement apply. The City may not consent to any amendment or waiver of the terms of the Housing Successor Loan Agreement or the Housing Successor Note, if such amendment or waiver could reasonably be deemed to materially adversely affect the County, without the County's prior written approval, which the County may withhold in its sole discretion. 3.Special Repayments from Net Proceeds of Permanent Financing. (a)No later than ten (10) days after the date Borrower receives its final capital contribution from the Investor Limited Partner, Borrower shall pay to the County as a special repayment of the HOME Loan, an amount equal to the result obtained by multiplying the County Net Proceeds Prorata Share by the Available Net Proceeds (the "Special County Loan Payment"). (b)No later than ten (10) days after the date Borrower receives its final capital contribution from the Investor Limited Partner, Borrower shall pay to the City as a special repayment of the City Loan, an amount equal to the result obtained by multiplying the City Net Proceeds Prorata Share by the Available Net Proceeds (the "Special City Loan Payment"). (c)No later than ten (10) days after the date Borrower receives its final capital contribution from the Investor Limited Partner, Borrower shall pay to the City as a special repayment of the Housing Successor Loan, an amount equal to the result obtained by multiplying the Housing Successor Net Proceeds Prorata Share by the Available Net Proceeds (the "Special Housing Successor Loan Payment"). (d)No later than one hundred eighty (180) days following completion of construction of the Development, Borrower shall submit to the County and the City a preliminary calculation of the Net Proceeds of Permanent Financing and a draft of the Final Cost Certification. The County and the City shall approve or disapprove Borrower's determination of the amount of the Net Proceeds of Permanent Financing in writing within thirty (30) days of receipt. If Borrower's determination is disapproved by the County or the City, Borrower shall re- submit documentation to the County and the City until approval of the County and the City is obtained. 4.Reports and Accounting of Residual Receipts. (a)Annual Reports. In connection with the Annual County Loan Payment, the Annual City Loan Payment, and the Annual Housing Successor Loan Payment, Borrower shall furnish to the City and the County: i.The Statement of Residual Receipts for the relevant period. The first Statement of Residual Receipts will cover the period that begins on January 1, 2015 and ends on December 31st of that same year. Subsequent statements of Residual Receipts will cover the twelve-month period that ends on December 31 of each year; ii.A statement from the independent public accountant that audited the Borrower's financial records for the relevant period, which statement must confirm that 863\01\1367099.2 12 Borrower's calculation of the Lender's Share of Residual Receipts and Borrower's Shared Portion of Residual Receipts is accurate based on Operating Income and Annual Operating Expenses; and iii.Any additional documentation reasonably required by the County or the City to substantiate Borrower's calculation of Lender's Share of Residual Receipts and Borrower's Shared Portion of Residual Receipts. (b)Books and Records. Borrower shall keep and maintain at the principal place of business of Borrower set forth in Section 11 below, or elsewhere with the written consent of the County and the City, full, complete and appropriate books, record and accounts relating to the Development, including all books, records and accounts necessary or prudent to evidence and substantiate in full detail Borrower's calculation of Residual Receipts and disbursements of Residual Receipts. Borrower shall cause all books, records and accounts relating to its compliance with the terms, provisions, covenants and conditions of this Agreement to be kept and maintained in accordance with generally accepted accounting principles consistently applied, and to be consistent with requirements of this Agreement, which provide for the calculation of Residual Receipts on a cash basis. Borrower shall cause all books, records, and accounts to be open to and available for inspection by the County and the City, their auditors or other authorized representatives at reasonable intervals during normal business hours. Borrower shall cause copies of all tax returns and other reports that Borrower may be required to furnish to any government agency to be open for inspection by the County and the City at all reasonable times at the place that the books, records and accounts of Borrower are kept. Borrower shall preserve records on which any statement of Residual Receipts is based for a period of not less than five (5) years after such statement is rendered, and for any period during which there is an audit undertaken pursuant to subsection (c) below then pending. (c)County and City Audits. i.The receipt by the County or the City of any statement pursuant to subsection (a) above or any payment by Borrower or acceptance by the County or the City of any loan repayment for any period does not bind the County or the City as to the correctness of such statement or such payment. The County or the City or any designated agent or employee of the County or the City is entitled at any time to audit the Residual Receipts and all books, records, and accounts pertaining thereto. The County and/or the City may conduct such audit during normal business hours at the principal place of business of Borrower and other places where records are kept. Immediately after the completion of an audit, the County or the City, as the case may be, shall deliver a copy of the results of the audit to Borrower. ii.If it is determined as a result of an audit that there has been a deficiency in a loan repayment to the County and/or the City, then such deficiency will become immediately due and payable, with interest at the Default Rate from the date the deficient amount should have been paid. In addition, if the audit determines that Residual Receipts have been understated for any year by the greater of (i) $2,500, and (ii) an amount that exceeds five percent (5%) of the Residual Receipts, then, in addition to paying the deficiency with interest, Borrower shall pay all of the costs and expenses connected with the audit and review of Borrower's accounts and records incurred by the County and/or the City. 863\01\1367099.2 13 5.Deeds of Trust. Notwithstanding the fact that the Housing Successor Deed of Trust and the City Deed of Trust were recorded prior to the County Deed of Trust, the Deeds of Trust are equal in lien priority. 6.Notice of Default. (a)The County and the City shall each notify the other promptly upon declaring a default or learning of the occurrence of any material event of default, or any event which with the lapse of time would become a material event of default, under its respective loan documents for the Housing Successor Loan, the City Loan and the County Loan. (b)The City and the County agree not to make a demand for payment from Borrower or accelerate the Housing Successor Note, the City Note or the County Note, as the case may be, or commence enforcement of any of the rights and remedies under the Housing Successor Deed of Trust, the City Deed of Trust, or the County Deed of Trust, as the case may be, until the date that is five (5) business days following delivery of written notice by the Party enforcing its rights (the "Enforcing Party") to the other Party stating that a "default" (as defined in the relevant Deed of Trust) has occurred and is continuing and that the Enforcing Party is requesting the other Party's assistance in foreclosure pursuant to Section 7. 7.Cooperation in Foreclosure. (a)It there is a default under the Housing Successor Loan, the City Loan, and/or County Loan, after expiration of any applicable cure periods, the party who is the lender on the defaulted loan shall cooperate with the other lender that is a Party to this Agreement to coordinate any foreclosure proceedings or other appropriate remedies. (b)Neither the County nor the City may contest the validity, perfection, priority, or enforceability of the lien granted to the other Party by a deed of trust secured by the Property. Notwithstanding any failure of a Party to perfect its lien on the Property or any other defect in the security interests or obligations owing to such Party, the priority and rights as between the lenders that are Parties to this Agreement are as set forth in this Agreement. 8.Foreclosure Proceeds. If there is a foreclosure, or any other action, whether judicial or nonjudicial, under any or all of the Deeds of Trust (including the giving of a deed in lieu of foreclosure), the proceeds resulting from such foreclosure or action will be first used to pay (i) all amounts paid to any senior lien holder, and (ii) expenses incurred by the County, the City, or both, in connection with such foreclosure or other action. After such payments (i) the City is entitled to (1) the result obtained by multiplying the City Net Proceeds Prorata Share by the Foreclosure Net Proceeds and, (2) the result obtained by multiplying the Housing Successor Net Proceeds Prorata Share by the Foreclosure Net Proceeds, and (ii) the County is entitled to the result obtained by multiplying the County Net Proceeds Prorata Share by the Foreclosure Net Proceeds. 9.Insurance and Condemnation Proceeds. If the lenders that are a Party to this Agreement are entitled to insurance or condemnation proceeds, the lenders will share such proceeds as follows: (i) the City is entitled to (1) the result obtained by multiplying the City Net Proceeds Prorata Share by the available proceeds and, (2) the result obtained by multiplying the 863\01\1367099.2 14 Housing Successor Net Proceeds Prorata Share by the available proceeds, and (ii) the County is entitled to the result obtained by multiplying the County Net Proceeds Prorata Share by the available proceeds. 10.Title to Property. If either the City or the County is entitled to title to the Property as a consequence of Borrower's default, then title is to be held in tenancy in common by the City and the County in accordance with their respective Foreclosure Prorata Percentages. Subsequent decisions to hold or sell the Property will be made by joint decision of the City and the County. 11.Notices. All notices required or permitted by any provision of this Agreement must be in writing and sent by registered or certified mail, postage prepaid, return receipt requested, or delivered by express delivery service, return receipt requested, or delivered personally, to the principal office of the Parties as follows: City:City of Walnut Creek 1666 North Main Street Walnut Creek, CA 94596 Attn:______________ County:County of Contra Costa Department of Conservation and Development 30 Muir Road Martinez, CA 94553 Attn: Affordable Housing Program Manager Borrower:1550 Third, L.P. c/o 1550 Third LLC 1521 University Avenue Berkeley, CA 94703 Attn: Executive Director Investor Limited Partner:Wells Fargo Affordable Housing Community Development Corporation MAC D1053-170 301 South College Street Charlotte, NC 28288 Attn.: Director of Tax Credit Asset Management Such written notices, demands, and communications may be sent in the same manner to such other addresses as the affected Party may from time to time designate as provided in this Section. Receipt will be deemed to have occurred on the date marked on a written receipt as the date of delivery or refusal of delivery (or attempted delivery if undeliverable). 12.Titles. Any titles of the sections or subsections of this Agreement are inserted for convenience of reference only and are to be disregarded in interpreting any part of the Agreement's provisions. 863\01\1367099.2 15 13.California Law. This Agreement is governed by the laws of the State of California. 14.Severability. If any term of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions will continue in full force and effect unless the rights and obligations of the Parties have been materially altered or abridged by such invalidation, voiding or unenforceability. 15.Legal Actions. If any legal action is commenced to interpret or to enforce the terms of this Agreement or to collect damages as a result of any breach of this Agreement, then the Party prevailing in any such action shall be entitled to recover against the Party not prevailing all reasonable attorneys' fees and costs incurred in such action. 16.Entire Agreement. This Agreement constitutes the entire understanding and agreement of the Parties with respect to the distribution of proceeds upon foreclosure of or other remedies under the Deeds of Trust. 17.Counterparts. This Agreement may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts. 18.Amendments. This Agreement may not be modified except by written instrument executed by and amongst the Parties. [Remainder of Page Left Intentionally Blank] Signature Page Intercreditor Agreement 863\01\1367099.2 16 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above. BORROWER: 1550 Third, L.P., a California limited partnership By: 1550 Third LLC, a California limited liability company, its general partner By: Satellite AHA Development, Inc., a California nonprofit public benefit corporation, its sole member By:____________________ Name:___________________ Its:____________________ COUNTY: COUNTY OF CONTRA COSTA, a political subdivision of the State of California By: __________________ Name:___________________ Its:____________________ Approved as to form: SHARON L. ANDERSON County Counsel By: Kathleen Andrus Deputy County Counsel Signature Page Intercreditor Agreement 863\01\1367099.2 17 CITY: CITY OF WALNUT CREEK By: __________________ Name:___________________ Its:____________________ 863\01\1367099.2 STATE OF CALIFORNIA ) ) COUNTY OF _____________ ) On ____________________, before me, ___________________________, Notary Public, personally appeared ______________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify UNDER 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. Notary Public STATE OF CALIFORNIA ) ) COUNTY OF _____________ ) On ____________________, before me, ___________________________, Notary Public, personally appeared ______________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify UNDER 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. Notary Public 863\01\1367099.2 STATE OF CALIFORNIA ) ) COUNTY OF _____________ ) On ____________________, before me, ___________________________, Notary Public, personally appeared ______________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify UNDER 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. Notary Public A-1 863\01\1367099.2 EXHIBIT A LEGAL DESCRIPTION OF THE PROPERTY B-1 863\01\1367099.2 EXHIBIT B COUNTY/CITY RESIDUAL RECEIPTS NUMERICAL EXPLANATION 1. Assume all funds loaned are disbursed 2. Assume no Special Payments A Adjusted City Loan = $2,711,096 - Special City Payment $2,711,096 B Adjusted HOME Loan = $2,450,000 - Special HOME Payment $2,450,000 C Adjusted HOPWA Loan = $250,000 $250,000 D Adjusted Housing Successor Loan = $1,382,404 - Special Housing Successor Payment $1,382,404 E Adjusted MHSA Loan = $1,368,864 $1,368,864 A+B+C+D+E $8,162,364 A+B+C+D Combined Loan =2,711,096+2,450,000+250,000+1,392,864 $6,793,500 County Loan Prorata Percentage = (B+C)/Combined Loan 33.08% City Loan Prorata Percentage = A/Combined Loan 33.21% Housing Successor Prorata Percentage = D/Combined Loan 16.94% F Lender's Share of Residual Receipts = 50% of Residual Receipts G Borrower's Share of Residual Receipts = 25% of Residual Receipts Annual County Loan Payment = (33.08% of F) + (33.08% of G) Annual City Loan Payment = (33.21% of F) + (33.21% of G) Annual Housing Successor Loan Payment = (16.94% of F) + (16.94% of G) 1 863\01\1367144.4 HOME AND HOPWA LOAN AGREEMENT Third Avenue Apartments This HOME and HOPWA Loan Agreement (the "Agreement") is dated_________, 2013, and is between the County of Contra Costa, a political subdivision of the State of California (the "County"), and 1550 Third, L.P., a California limited partnership ("Borrower"). RECITALS A.Defined terms used but not defined in these recitals are as defined in Article 1 of this Agreement. B.The County has received Home Investment Partnerships Act funds from the United States Department of Housing and Urban Development ("HUD") pursuant to the Cranston-Gonzales National Housing Act of 1990 ("HOME Funds"). The HOME Funds must be used by the County in accordance with 24 C.F.R. Part 92 (the "HOME Regulations"). C.The County has received Housing Opportunities for Persons with AIDS Program funds from HUD pursuant to the HOPWA Program ("HOPWA Funds"). The HOPWA Funds are available to and administered by the County, as a subrecipient of the City of Oakland, which is the representative for the Alameda-Contra Costa County Eligible Metropolitan Area. The HOPWA Funds must be used by the County in accordance with 24 C.F.R. Section 574 et seq. D.Borrower is the owner of that certain real property located at 1550 Third Avenue in the City of Walnut Creek, County of Contra Costa, State of California, as more particularly described in Exhibit A (the "Property"). Borrower intends to construct forty-eight (48) multifamily housing units on the Property, twenty-three (23) of which will be for rental to very low income households and extremely low income households, and one (1) manager's unit (the "Development"). The Development, as well as all landscaping, roads and parking spaces on the Property and any additional improvements on the Property, are the "Improvements". E. The County and Borrower are parties to a HOME Project Agreement dated September 20, 2013 (the "HOME Project Agreement"), pursuant to which the County agreed to lend HOME Funds to Borrower to assist in the construction of the Development. In furtherance of the HOME Project Agreement, Borrower desires to borrow Two Million Four Hundred Fifty Thousand Dollars ($2,450,000) of HOME Funds from the County (the "HOME Loan"), and Two Hundred Fifty Thousand Dollars ($250,000) of HOPWA Funds from the County (the "HOPWA Loan") for a total loan amount of Two Million Seven Hundred Thousand Dollars ($2,700,000) (the "Loan"). F.The Loan is evidenced by the Note, the Regulatory Agreement, and the Intercreditor Agreement, and secured by the Deed of Trust. G.The Loan is being made to finance predevelopment and construction costs of the Development. Construction of the Development is intended to maintain the supply of affordable rental housing in Contra Costa County. Due to the assistance provided Borrower through the 2 863\01\1367144.4 Loan, the County is designating twenty-three (23) units as HOME-assisted units, two (2) of which are also HOPWA-assisted units (the "HOME-Assisted Units"). H.The City has prepared a mitigated negative declaration pursuant to the California Environmental Quality Act (Public Resources Code Sections 21000 et seq.) ("CEQA"). I.In accordance with the National Environmental Policy Act of 1969, as amended (42 U.S.C. 4321-4347) ("NEPA"), the County has completed and approved all applicable environmental review for the activities proposed to be undertaken under this Agreement. The parties therefore agree as follows: AGREEMENT ARTICLE 1 DEFINITIONS AND EXHIBITS Section 1.1 Definitions. The following terms have the following meanings: (a)"Adjusted City Loan" means, to the extent less than the full amount of the City Loan is funded, an amount equal to the actual principal amount loaned to Borrower by the City pursuant to the documents between Borrower and the City evidencing the City Loan minus any special repayment pursuant to Section 4(b) of the Intercreditor Agreement. If the full amount of the City Loan is funded and no portion is repaid as a special repayment pursuant to Section 3(b) of the Intercreditor Agreement, the Adjusted City Loan is equal to the City Loan. (b)"Adjusted HOME Loan" means, to the extent less than the full amount of the HOME Loan is funded, an amount equal the actual principal amount loaned to Borrower by the County pursuant to this Agreement minus any Special Payment. If the full amount of the HOME Loan is funded and no portion is repaid as a Special Payment, the Adjusted HOME Loan is equal to the HOME Loan. (c)"Adjusted HOPWA Loan" means, to the extent less than the full amount of the HOPWA Loan is funded, an amount equal the actual principal amount loaned to Borrower by the County pursuant to this Agreement. If the full amount of the HOPWA Loan is funded, the Adjusted HOPWA Loan is equal to the HOPWA Loan. (d)"Adjusted Housing Successor Loan" means, to the extent less than the full amount of the Housing Successor Loan is funded, an amount equal to the actual principal amount loaned to Borrower by the City pursuant to the documents between Borrower and the City evidencing the Housing Successor Loan minus any special repayment pursuant to Section 4(c) of the Intercreditor Agreement. If the full amount of the Housing Successor Loan is funded and no portion is repaid as a special repayment pursuant to Section 3(c) of the Intercreditor Agreement, the Adjusted Housing Successor Loan is equal to the Housing Successor Loan. (e)"Adjusted MHSA Loan" means, to the extent less than the full amount of the MHSA Loan is funded, an amount equal to the actual principal amount loaned to Borrower 3 863\01\1367144.4 by CalHFA pursuant to the documents between Borrower and CalHFA evidencing the MHSA Loan. If the full amount of the MHSA Loan is funded, the Adjusted MHSA Loan is equal to the MHSA Loan. (f)"Agreement" means this HOPWA and HOME Loan Agreement. (g)"AHAP" means the Agreement to Enter Housing Assistance Payment Contract between Borrower and the Housing Authority governing the commitment of project- based Section 8 rental assistance to the Development by the Housing Authority, as approved by HUD. (h)"AHP Loan" has the meaning set forth in Section 1.1(l)(v). (i)"Annual Operating Expenses" means for each calendar year, the following costs reasonably and actually incurred for operation and maintenance of the Development: (i)property taxes and assessments imposed on the Development; (ii)debt service currently due on a non-optional basis (excluding debt service due from residual receipts or surplus cash of the Development) on the Bank Loan and CCRC Loan; (iii)on-site service provider fees for tenant social services, provided the County has approved, in writing, the plan and budget for such services before such services begin; (iv)fees paid to the Housing Authority for administration of the Housing Assistance Payment Contract governing the provision of Project-Based Section 8 Rental Assistance to the Development; (v)fees paid to CalHFA for administration of the MHSA Loan; (vi)property management fees and reimbursements, on–site property management office expenses, and salaries of property management and maintenance personnel, not to exceed amounts that are standard in the industry and which are pursuant to a management contract approved by the County; (vii) the Partnership/Asset Fee; (viii) fees for accounting, audit, and legal services incurred by Borrower's general partner in the asset management of the Development, not to exceed amounts that are standard in the industry, to the extent such fees are not included in the Partnership/Asset Fee; (ix)premiums for insurance required for the Improvements to satisfy the requirements of any lender of Approved Financing; 4 863\01\1367144.4 (x)utility services not paid for directly by tenants, including water, sewer, and trash collection; (xi)maintenance and repair expenses and services; (xii) any annual license or certificate of occupancy fees required for operation of the Development; (xiii) security services; (xiv) advertising and marketing; (xv) cash deposited into the Replacement Reserve Account in the amount set forth in Section 4.2(a); (xvi) cash deposited into the Operating Reserve Account to maintain the amount set forth in Section 4.2(b) (excluding amounts deposited to initially capitalize the account); (xvii) payment of any previously unpaid portion of Developer Fee (without interest), not to exceed the amount set forth in Section 3.18; (xviii)extraordinary operating costs specifically approved in writing by the County; (xix) payments of deductibles in connection with casualty insurance claims not normally paid from reserves, the amount of uninsured losses actually replaced, repaired or restored, and not normally paid from reserves, and other ordinary and reasonable operating expenses approved in writing by the County and not listed above. Annual Operating Expenses do not include the following: depreciation, amortization, depletion or other non-cash expenses, initial deposits to capitalize a reserve account, any amount expended from a reserve account, and any capital cost associated with the Development. (j)"Annual Payment" has the meaning in Section 2.8(a). (k)"Approved Development Budget" means the proforma development budget, including sources and uses of funds, as approved by the County, and attached hereto and incorporated herein as Exhibit B. (l)"Approved Financing" means all of the following loans, grants and equity obtained by Borrower and approved by the County for the purpose of financing the acquisition of the Property and construction of the Development: (i)loan from the City, as the Successor Housing Agency to the Redevelopment Agency of the City of Walnut Creek pursuant to California Health and Safety 5 863\01\1367144.4 Code Section 34176(a), in the amount of One Million Three Hundred Eighty-Two Thousand Four Hundred Four Dollars ($1,382,404) (the "Housing Successor Loan"); (ii)loan from the City in the amount of Two Million Seven Hundred Eleven Thousand Ninety-Six Dollars ($2,711,096) (the "City Loan"); (iii)construction loan from Wells Fargo Bank, N. A. (the "Bank") in the approximate amount of Fourteen Million One Hundred Seventy-Two Thousand Seven Hundred Eleven Dollars ($14,172,711) (the "Bank Loan"); (iv)loan of Mental Health Services Act ("MHSA") funds from the California Housing Finance Agency ("CalHFA") in the approximate amount of One Million Three Hundred Sixty-Eight Thousand Eight Hundred Sixty-Four Dollars ($1,368,864) (the "MHSA Loan"); (v)Affordable Housing Program ("AHP") loan from Wells Fargo Financial Bank, N.A. in the approximate amount of Four Hundred Seventy Thousand Dollars ($470,000) (the "AHP Loan"); (vi)Low Income Housing Tax Credit investor equity funds in the approximate amount of Fourteen Million Two Hundred Fifty-Seven Thousand Five Hundred Twenty-Nine Dollars ($14,257,529) (the "Tax Credit Investor Equity") provided by the Investor Limited Partner; (vii) capital contribution from Borrower's general partner in the approximate amount of One Hundred Dollars ($100) (the "GP Capital Contribution"); (viii) contribution from Borrower's general partner of California Department of Developmental Services ("DDS") Grant funds in the approximate amount of Four Hundred Thousand Dollars ($400,000) (the "DDS General Partner Contribution"); and (ix)permanent loan from the California Community Reinvestment Corporation ("CCRC") in the approximate amount of One Million Eight Hundred Sixty-Four Thousand Eight Hundred Thirty Dollars ($1,864,830) (the "CCRC Loan"). (m)"Available Net Proceeds" means the result obtained by multiplying the Net Proceeds of Permanent Financing by 0.75. (n)"Bank" has the meaning set forth in Section 1.1(l)(iii). (o)"Bank Loan" has the meaning set forth in Section 1.1(l)(iii). (p)"Bid Package" means the package of documents Borrower's general contractor is required to distribute to potential bidders as part of the process of selecting subcontractors for the Development. The Bid Package is to include the following: (i) an invitation to bid; (ii) copy of the proposed construction contract; (iii) a form of bid guarantee that is reasonably acceptable to the County that guarantees, at a minimum, an amount equal to five 6 863\01\1367144.4 percent (5%) of the bid price; and (iv) all Construction Plans. (q)"Borrower" has the meaning set forth in the first paragraph of this Agreement. (r)"Borrower's Shared Portion of Residual Receipts" means twenty-five percent (25%) of Residual Receipts. (s)"CalHFA" has the meaning set forth in Section 1.1(l)(iv). (t)"CCRC Loan" has the meaning set forth in Section 1.1(l)(ix). (u)"CEQA" has the meaning set forth in Paragraph H of the Recitals. (v)"City" means the City of Walnut Creek, California, a municipal corporation. (w)"City/County Loan" means the sum of the Adjusted HOME Loan, the adjusted HOPWA Loan, the Adjusted Housing Successor Loan, and the Adjusted City Loan. (x)"City Loan" has the meaning in Section 1.1(l)(ii). (y)"Commencement of Construction" has the meaning set forth in Section 3.5. (z)"Completion Date" means the date a final certificate of occupancy, or equivalent document is issued by the City to certify that the Development may be legally occupied. (aa)"Construction Plans" means all construction documentation upon which Borrower and Borrower's general contractor rely in constructing all the Improvements on the Property (including the units in the Development, landscaping, parking, and common areas) and includes, but is not limited to, final architectural drawings, landscaping plans and specifications, final elevations, building plans and specifications (also known as "working drawings"). (bb)"County" has the meaning set forth in the first paragraph of this Agreement. (cc)"County Loan Prorata Percentage" means the result, expressed as a percentage, obtained by dividing the sum of (1) the Adjusted HOME Loan and Adjusted HOPWA Loan, by (2) the sum of the City/County Loan and the Adjusted MHSA Loan. (dd)"County Net Proceeds Prorata Share" means the result obtained by dividing the sum of the Adjusted HOME Loan and Adjusted HOPWA Loan, by the City/County Loan. (ee)"DDS General Partner Contribution" has the meaning set forth in Section 1.1(l)(viii). 7 863\01\1367144.4 (ff)"Deed of Trust" means the Deed of Trust with Assignment of Rents, Security Agreement, and Fixture Filing of even date herewith among Borrower, as Trustor, Old Republic Title Company, as trustee, and the County, as beneficiary, that will encumber the Property to secure repayment of the Loan and performance of the covenants of the Loan Documents. (gg)"Default Rate" means the lesser of the maximum rate permitted by law and ten percent (10%) per annum. (hh)"Developer Fee" has the meaning set forth in Section 3.18. (ii)"Development" has the meaning set forth in Paragraph D of the Recitals. (jj)"Extremely Low Income Household" has the meaning set forth in the Regulatory Agreement. (kk)"Event of Default" has the meaning set forth in Section 6.1. (ll)"Fifteen Year Compliance Period" means the fifteen (15) year compliance period as described in Section 42(i)(1) of the Internal Revenue Code of 1986, as amended. (mm) "Final Cost Certification" has the meaning set forth in Section 4.3. (nn)"Final Development Cost" means the total of the cost of acquisition and construction of the Development as shown on the Final Cost Certification. (oo)"GP Capital Contribution" has the meaning set forth in Section 1.1(l)(vii). (pp)"Gross Revenue" means for each calendar year, all revenue, income, receipts, and other consideration actually received from the operation and leasing of the Development. Gross Revenue includes, but is not limited to: (i)all rents, fees and charges paid by tenants; (ii)Section 8 payments or other rental subsidy payments received for the dwelling units; (iii)deposits forfeited by tenants; (iv)all cancellation fees; (v)price index adjustments and any other rental adjustments to leases or rental agreements; (vi)net proceeds from vending and laundry room machines; (vii) the proceeds of business interruption or similar insurance not paid to senior lenders; 8 863\01\1367144.4 (viii) the proceeds of casualty insurance not used to rebuild the Development and not paid to senior lenders; and (ix)condemnation awards for a taking of part or all of the Development for a temporary period. Gross Revenue does not include tenants' security deposits, loan proceeds, unexpended amounts (including interest) in any reserve account, required deposits to reserve accounts, capital contributions or similar advances. (qq)"Hazardous Materials" means: (i) any substance, material, or waste that is petroleum, petroleum-related, or a petroleum by-product, asbestos or asbestos-containing material, polychlorinated biphenyls, flammable, explosive, radioactive, freon gas, radon, or a pesticide, herbicide, or any other agricultural chemical, and (ii) any waste, substance or material defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "toxic materials", "toxic waste", "toxic substances," or words of similar import under any Hazardous Materials Law. (rr)"Hazardous Materials Claims" means with respect to the Property (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against Borrower or the Property pursuant to any Hazardous Materials Law; and (ii) all claims made or threatened by any third party against Borrower or the Property relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials. (ss)"Hazardous Materials Law" means any federal, state or local laws, ordinances, or regulations relating to any Hazardous Materials, health, industrial hygiene, environmental conditions, or the regulation or protection of the environment, and all amendments thereto as of this date and to be added in the future and any successor statute or rule or regulation promulgated thereto. (tt)"HOME" means the HOME Investment Partnership Act Program pursuant to the Cranston-Gonzales National Affordable Housing Act of 1990 (42 U.S.C. 12705 et seq.), as amended. (uu)"HOME-Assisted Units" has the meaning set forth in Paragraph G of the Recitals. (vv)"HOME Funds" has the meaning set forth in Paragraph B of the Recitals. (ww) "HOME Loan" has the meaning set forth in Paragraph E of the Recitals. (xx)"HOME Project Agreement" has the meaning set forth in Paragraph E of the Recitals. (yy)"HOME Regulations" has the meaning set forth in Paragraph B of the Recitals. 9 863\01\1367144.4 (zz)"HOME Reporting Term" means the period beginning on the Completion Date and ending on the twenty-first (21st) anniversary of the Completion Date. (aaa)"HOPWA" means the Housing Opportunities for Persons with AIDS Program pursuant to the AIDS Housing Opportunity Act (42 USC 12901 et seq.), as amended by the Housing and Community Development Act of 1992 (42 USC 5301 et seq.). (bbb) "HOPWA Eligible Household" means a household that includes at least one Person with HIV/AIDS. (ccc)"HOPWA Funds" has the meaning set forth in Paragraph C of the Recitals. (ddd) "HOPWA Loan" has the meaning set forth in Paragraph E of the Recitals. (eee)"HOPWA Term" means the period beginning on the date of this Agreement and ending on the tenth (10th) anniversary of the date of this Agreement. (fff)"HOPWA Unit" means a unit in the Development restricted to occupancy by a HOPWA-Eligible Household, as further set forth in in the Regulatory Agreement. (ggg) "Housing Authority" means the Housing Authority of Contra Costa County. (hhh) "Housing Successor Loan" has the meaning in Section 1.1(l)(i). (iii)"HUD" has the meaning set forth in Paragraph B of the Recitals. (jjj)"Improvements" has the meaning set forth in Paragraph D of the Recitals. (kkk) "Intercreditor Agreement" means that certain intercreditor agreement entered into by and among the City, the County, and Borrower of even date herewith related to the Loan, the City Loan, and Housing Successor Loan, to be recorded against the Property. (lll)"Investor Limited Partner" means Wells Fargo Affordable Housing Community Development Corporation, a North Carolina corporation, its successors and assigns. (mmm)"Lenders' Share of Residual Receipts" means fifty percent (50%) of Residual Receipts. (nnn) "Loan Documents" means this Agreement, the Note, the Regulatory Agreement, the Intercreditor Agreement, and the Deed of Trust. (ooo) "Loan" has the meaning set forth in Paragraph E of the Recitals. (ppp) "Marketing Plan" has the meaning set forth in Section 3.10. (qqq) "MHSA Loan" has the meaning in Section 1.1(l)(iv). 10 863\01\1367144.4 (rrr)"NEPA" has the meaning set forth in Paragraph I of the Recitals. (sss)"Net Proceeds of Permanent Financing" means the amount by which Permanent Financing exceeds the Final Development Costs. (ttt)"Note" means the promissory note of even date herewith that evidences Borrower's obligation to repay the Loan. (uuu) "Operating Reserve Account" has the meaning set forth in Section 4.2(b). (vvv) "Partnership Agreement" means the agreement between Borrower's general partner and the Investor Limited Partner that governs the operation and organization of Borrower as a California limited partnership. (www)"Partnership/Asset Fee" means: (i) partnership management fees (including any asset management fees) payable pursuant to the Partnership Agreement to any partner or affiliate of Borrower or any affiliate of a partner of Borrower, if any, during the Fifteen Year Compliance Period; and (ii) after expiration of the Fifteen Year Compliance Period, asset management fees payable to Borrower, in the amounts approved by the County as set forth in Section 3.19. (xxx) "Permanent Conversion" means the date the Bank Loan is repaid. (yyy) "Permanent Financing" means the sum of the following amounts: (i) the Loan; (ii) the City Loan; (iii) the Housing Successor Loan; (iv) the CCRC Loan; (v) the AHP Loan; (vi) the MHSA Loan; (vii) the Tax Credit Investor Equity; (viii) the DDS General Partner Contribution; and (ix) the GP Capital Contribution. (zzz)"Persons with HIV/AIDS" has the meaning set forth in the Regulatory Agreement. (aaaa) "Property" has the meaning set forth in Paragraph D of the Recitals. (bbbb) "Qualifying Household" has the meaning set forth in Section 2.8(c). (cccc) "Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive Covenants, of even date herewith, between the County and Borrower related to the Loan, to be recorded against the Property. (dddd) "Rental Shortfall Due Date" has the meaning set forth in Section 2.8(c). (eeee) "Rental Shortfall Payment" has the meaning set forth in Section 2.8(c). (ffff)"Replacement Reserve Account" has the meaning set forth in Section 4.2(a). (gggg) "Residual Receipts" means for each calendar year, the amount by which Gross Revenue exceeds Annual Operating Expenses. 11 863\01\1367144.4 (hhhh) "Retention Amount" means Ten Thousand Dollars ($10,000) of the HOME Loan, the disbursement of which is described in Section 2.7. (iiii)"Social Services Plan" has the meaning set forth in Section 3.10. (jjjj)"Special Payment" has the meaning in Section 2.8(b). (kkkk) "Statement of Residual Receipts" means an itemized statement of Residual Receipts. (llll)"Tax Credit Investor Equity" has the meaning set forth in Section 1.1(l)(vi). (mmmm)"TCAC" means the California Tax Credit Allocation Committee. (nnnn) "Tenant" means the tenant household that occupies a unit in the Development. (oooo) "Tenant Selection Plan" has the meaning set forth in Section 3.10. (pppp) "Term" means the period of time that commences on the date of this Agreement, and expires, unless sooner terminated in accordance with this Agreement, on the fifty-fifth (55th) anniversary of the Completion Date; provided, however, if a record of the Completion Date cannot be located or established, the Term will expire on the fifty-seventh (57th) anniversary of this Agreement. (qqqq) "Transfer" has the meaning set forth in Section 4.15 below. (rrrr)"Very Low Income Household" has the meaning set forth in the Regulatory Agreement. Section 1.2 Exhibits The following exhibits are attached to this Agreement and incorporated into this Agreement by this reference: Exhibit A:Legal Description of the Property Exhibit B:Approved Development Budget Exhibit C:NEPA Mitigation Requirements ARTICLE 2 LOAN PROVISIONS Section 2.1 Loan. Upon satisfaction of the conditions set forth in Section 2.6 and Section 2.7 of this Agreement, the County shall lend to Borrower the Loan for the purposes set forth in Section 2.3 of this Agreement. Borrower's obligation to repay the Loan is evidenced by the Note. 12 863\01\1367144.4 Section 2.2 Interest. (a)HOME Loan. Subject to the provisions of subsection (c) below, simple interest will accrue on the outstanding principal balance of the HOME Loan at a per annum rate of interest equal to three percent (3%), commencing on the date of disbursement. (b)HOPWA Loan. Subject to the provisions of subsection (c) below, no interest will accrue on the outstanding principal balance of the HOPWA Loan. (c)Default Interest. Upon the occurrence of an Event of a Default, interest on the outstanding principal balance of the Loan will begin to accrue, beginning on the date of such occurrence and continuing until the date the Loan is repaid in full or the Event of Default is cured, at the Default Rate. Section 2.3 Use of Loan Funds. (a)Borrower shall use the Loan for predevelopment and development costs, consistent with the Approved Development Budget. Use of the HOME Loan for reimbursement of costs incurred prior to September 1, 2013 is subject to Section 92.206(d)(1) of the HOME Regulations. (b)Borrower may not use the Loan proceeds for any other purposes without the prior written consent of the County. Section 2.4 Security. In consideration of the Loan, Borrower shall (i) secure its obligation to repay the Loan, as evidenced by the Note, by executing the Deed of Trust, and cause or permit it to be recorded as a lien against the Property, and (ii) execute the Regulatory Agreement and the Intercreditor Agreement and cause or permit them to be recorded against the Property. Section 2.5 Subordination. (a)Any agreement by the County to subordinate the Deed of Trust and/or Regulatory Agreement to an encumbrance securing and/or evidencing the Bank Loan will be subject to the satisfaction of each of the following conditions: (i)All of the proceeds of the Bank Loan, less any transaction costs, are used to provide acquisition, construction and/or permanent financing for the Development. (ii)The Bank is a state or federally chartered financial institution, a nonprofit corporation or a public entity that is not affiliated with Borrower or any of Borrower's affiliates, other than as a depositor or a lender. (iii)Borrower demonstrates to the County's satisfaction that subordination of the Deed of Trust and the Regulatory Agreement is necessary to secure adequate acquisition, construction, and/or permanent financing to ensure the viability of the 13 863\01\1367144.4 Development, including the operation of the Development as affordable housing, as required by the Loan Documents. To satisfy this requirement, Borrower must provide to the County, in addition to any other information reasonably required by the County, evidence demonstrating that the proposed amount of the Bank Loan is necessary to provide adequate acquisition, construction, and/or permanent financing to ensure the viability of the Development, and adequate financing for the Development would not be available without the proposed subordination. (iv)The subordination agreement(s) is structured to minimize the risk that the Deed of Trust and the Regulatory Agreement will be extinguished as a result of a foreclosure by the Bank or other holder of the Bank Loan. To satisfy this requirement, the subordination agreement must provide the County with adequate rights to cure any defaults by Borrower, including: (1) providing the County or its successor with copies of any notices of default at the same time and in the same manner as provided to Borrower; and (2) providing the County with a cure period of at least sixty (60) days to cure any default. (v)The subordination(s) of the Loan is effective only during the original term of the Bank Loan and any extension of its term that is approved in writing by the County. (vi)The subordination does not limit the effect of the Deed of Trust and the Regulatory Agreement before a foreclosure, nor require the consent of the Bank prior to the County exercising any remedies available to the County under the Loan Documents. (b)Upon a determination by the County's Deputy Director – Department of Conservation and Development that the conditions in this Section have been satisfied, the Deputy Director – Department of Conservation and Development or his/her designee will be authorized to execute the approved subordination agreement without the necessity of any further action or approval. Section 2.6 Conditions Precedent to Disbursement of Loan Funds. The disbursements made pursuant to this Section 2.6 may not exceed Two Million Six Hundred Ninety Thousand Dollars ($2,690,000). The County is not obligated to disburse any portion of the Loan, or to take any other action under the Loan Documents unless all of the following conditions have been and continue to be satisfied: (a)There exists no Event of Default nor any act, failure, omission or condition that would constitute an Event of Default under this Agreement; (b)Borrower holds title to the Property or is acquiring title to the Property simultaneously with the disbursement of the Loan proceeds; (c)Borrower has delivered to the County a copy of a corporate resolution authorizing Borrower to obtain the Loan and all other Approved Financing, and execute the Loan Documents; (d)There exists no material adverse change in the financial condition of 14 863\01\1367144.4 Borrower from that shown by the financial statements and other data and information furnished by Borrower to the County prior to the date of this Agreement; (e)Borrower has furnished the County with evidence of the insurance coverage meeting the requirements of Section 4.16 below; (f)Borrower has executed and delivered to the County the Loan Documents and has caused all other documents, instruments, and policies required under the Loan Documents to be delivered to the County; (g)The Deed of Trust, the Regulatory Agreement, and the Intercreditor Agreement have been recorded against the Property in the Office of the Recorder of the County of Contra Costa; (h)A title insurer reasonably acceptable to the County is unconditionally and irrevocably committed to issuing an LP-10 2006 ALTA Lender's Policy of title insurance insuring the priority of the Deed of Trust in the amount of the Loan, subject only to such exceptions and exclusions as may be reasonably acceptable to the County, and containing such endorsements as the County may reasonably require. The Borrower shall provide whatever documentation (including an indemnification agreement), deposits or surety is reasonably required by the title company in order for the County's Deed of Trust to be senior in lien priority to any mechanics liens in connection with any start of construction that has occurred prior to the recordation of the Deed of Trust against the Property in the Office of the Recorder of the County of Contra Costa. (i)All environmental review necessary for the construction of the Development has been completed, and Borrower has provided the County evidence of planned compliance with all NEPA and CEQA requirements and mitigation measures applicable to construction, and evidence of compliance with all NEPA and CEQA requirements and mitigation measures applicable to preconstruction; (j)The County has determined the undisbursed proceeds of the Loan, together with other funds or firm commitments for funds that Borrower has obtained in connection with the construction of the Development, are not less than the amount the County determines is necessary to pay for the construction of the Development and to satisfy all of the covenants contained in this Agreement and the Regulatory Agreement; (k)Borrower has obtained all permits and approvals necessary for the construction of the Development; (l)The County has received and approved the Bid Package for the subcontractors for the construction of the Development pursuant to Section 3.2 below; (m)The County has received and approved the general contractor's construction contract that the Borrower has entered or proposed to enter for the construction of the Development pursuant to Section 3.3 below; (n)The County has received and approved labor and material (payment) 15 863\01\1367144.4 bonds and performance bonds as required pursuant to Section 3.4 below; (o)Borrower has closed the loans and obtained the equity financings that comprise the Approved Financing described in Section 1.1(l)(i)-(iii), and Section 1.1(l)(v)-(viii) and has already received, or is eligible to receive, the funds; (p)Borrower has received a commitment from CalHFA for the MHSA Loan; (q)The County has received a fully executed copy of the AHAP; (r)The County has received a fully executed copy of the Partnership Agreement, in which the Investor Limited Partner is obligated to provide Borrower the Tax Credit Investor Equity; (s)The County has received reasonable evidence that the local match requirements set forth in 24 C.F.R. Section 92.218 et seq., have been satisfied pursuant to Section 4.1 of this Agreement; and (t)The County has received a written draw request from Borrower, including: (i) certification that the condition set forth in Section 2.6(a) continues to be satisfied; (ii) certification that the proposed uses of funds is consistent with the Approved Development Budget; (iii) the amount of funds needed; and, (iv) where applicable, a copy of the bill or invoice covering a cost incurred or to be incurred. When a disbursement is requested to pay any contractor in connection with improvements on the Property, the written request must be accompanied by: (1) certification by the Borrower's architect reasonably acceptable to the County that the work for which disbursement is requested has been completed (although the County reserves the right to inspect the Property and make an independent evaluation); and (2) lien releases and/or mechanics lien title insurance endorsements reasonably acceptable to the County. Section 2.7 Conditions Precedent to Disbursement of Retention. The County is not obligated to disburse the Retention Amount unless the following conditions precedent are satisfied: (a)The County has received a completion report from Borrower setting forth: (i) the income, household size, race, and ethnicity of Tenants of the HOME-Assisted Units; (ii) and the unit address, unit size, rent amount and utility allowance for all HOME-Assisted Units; (b)The County has received a Final Cost Certification for the Development from Borrower showing all uses and sources; (c)The County has received from Borrower copies of the certificate of occupancy or equivalent final permit sign-offs for the Development; (d)The County has received from Borrower current evidence of the insurance coverage meeting the requirements of Section 4.16 below; (e)The County has received from Borrower a form of Tenant lease; 16 863\01\1367144.4 (f)The County has received from Borrower a Marketing Plan, Tenant Selection Plan, and Social Services Plan; (g)The County has received from Borrower evidence of marketing for any vacant HOME-Assisted Unit in the Development such as copies of flyers, list of media ads, list of agencies and organizations receiving information on availability of such units, as applicable; (h)The County has received from Borrower all relevant contract activity information, including compliance with Section 3 and MBE/WBE requirements; (i)If Borrower was required to comply with relocation requirements, the County has received from Borrower evidence of compliance with all applicable relocation requirements; (j)The County has received from Borrower a copy of the management agreement and contact information for the property manager of the Development and the name and phone number of the on-site property manager; (k)If Borrower is required to pay prevailing wages under the Davis-Bacon Act (40 U.S.C. 3141-3148), the County has received confirmation that Borrower has submitted all certified payrolls to the County, and any identified payment issues have been resolved, or Borrower is working diligently to resolve any such issues; (l)The County has received from Borrower evidence of compliance with all NEPA mitigation requirements as set forth in Exhibit C; and (m)The County has received a written draw request from Borrower, including certification that the condition set forth in Section 2.6(a) continues to be satisfied, and setting forth the proposed uses of funds consistent with the Approved Development Budget, and, where applicable, a copy of the bill or invoice covering a cost incurred or to be incurred. Borrower shall apply the disbursement for the purpose(s) requested. Section 2.8 Repayment Schedule. (a)Annual Payments of HOME Loan. Commencing on June 30, 2016, and on June 30 of each year thereafter during the Term, Borrower shall make a HOME Loan payment in an amount equal to the sum of (1) the County Loan Prorata Percentage of the Lenders' Share of Residual Receipts and (2) the County Net Proceeds Prorata Share multiplied by Borrower's Shared Portion of Residual Receipts (each such payment, an "Annual Payment"). The County shall apply all Annual Payments first, to accrued interest; and second, to principal. (b)Special Repayments of HOME Loan from Net Proceeds of Permanent Financing. No later than ten (10) days after the date Borrower receives its final capital contribution from the Investor Limited Partner, Borrower shall pay to the County as a special repayment of the HOME Loan, an amount equal to the result obtained by multiplying the County Net Proceeds Prorata Share by the Available Net Proceeds (the "Special Payment"). No later than one hundred eighty (180) days following completion of construction of the Development, Borrower shall submit to the County for its review a preliminary calculation of the Net Proceeds 17 863\01\1367144.4 of Permanent Financing and a draft of the Final Cost Certification as defined Section 4.3 below. The County shall approve or disapprove Borrower's determination of the amount of the Net Proceeds of Permanent Financing in writing within thirty (30) days after receipt. If Borrower's determination is disapproved by the County, Borrower shall re-submit documentation to the County until the County approval is obtained. (c)Special Repayment of HOME Loan for Failure to Lease. If on or before the Rental Shortfall Due Date, Borrower fails to cause each of the HOME-Assisted Units to be rented to and occupied by an Extremely Low Income Household or a Very Low Income Household (each such household, a "Qualifying Household") in accordance with Section 2.1 of the Regulatory Agreement, Borrower shall pay the County the Rental Shortfall Payment, plus accrued interest, on the Rental Shortfall Due Date. (i)The "Rental Shortfall Due Date" is the date that occurs eighteen (18) months after the Completion Date. (ii)The "Rental Shortfall Payment" is an amount equal to the result obtained by multiplying (1) the number of HOME-Assisted Units that have not been rented to and occupied by a Qualifying Household on or before the Rental Shortfall Due Date, by (2) a fraction, the numerator of which is the then-outstanding principal balance on the HOME Loan and the denominator of which is the number of HOME-Assisted Units. (iii)Interest on the Rental Shortfall Payment will accrue in accordance with Section 2.2(a) through the Rental Shortfall Due Date. If the Rental Shortfall Payment is not paid on or before the Rental Shortfall Due Date, interest on the Rental Shortfall Payment will accrue at the Default Rate beginning on the day after the Rental Shortfall Due Date and continuing until the Rental Shortfall Payment is paid in full with interest. (d)Payment in Full of Loan. Borrower shall pay all outstanding principal and accrued interest on the Loan, in full, on the earliest to occur of: (i) any Transfer other than as permitted pursuant to Section 4.15; (ii) an Event of Default; and (iii) the expiration of the Term. (e)Prepayment. Borrower may prepay the Loan at any time without premium or penalty. However, the Regulatory Agreement and the Deed of Trust will remain in effect for the entire Term, regardless of any prepayment or Transfer. Section 2.9 Reports and Accounting of Residual Receipts. In connection with the Annual Payment, Borrower shall furnish to the County: (a)The Statement of Residual Receipts for the relevant period. The first Statement of Residual Receipts will cover the period that begins on January 1, 2015 and ends on December 31st of that same year. Subsequent statements of Residual Receipts will cover the twelve-month period that ends on December 31 of each year; (b)A statement from the independent public accountant that audited the Borrower's financial records for the relevant period, which statement must confirm that Borrower's calculation of the Lenders' Share of Residual Receipts and Borrower's Shared Portion 18 863\01\1367144.4 of Residual Receipts is accurate based on Gross Revenue and Annual Operating Expenses; and (c)Any additional documentation reasonably required by the County to substantiate Borrower's calculation of Lenders' Share of Residual Receipts and Borrower's Shared Portion of Residual Receipts. The receipt by the County of any statement pursuant to subsection (a) above or any payment by Borrower or acceptance by the County of any Loan repayment for any period does not bind the County as to the correctness of such statement or payment. The County may audit the Residual Receipts and all books, records, and accounts pertaining thereto pursuant to Section 4.7 below. Section 2.10 Non-Recourse. Except as provided below, neither Borrower, nor any partner of Borrower, has any direct or indirect personal liability for payment of the principal of, and interest on, the Loan. Following recordation of the Deed of Trust, the sole recourse of the County with respect to the principal of, or interest on, the Note will be to the property described in the Deed of Trust; provided, however, that nothing contained in the foregoing limitation of liability limits or impairs the enforcement of all the rights and remedies of the County against all such security for the Note, or impairs the right of County to assert the unpaid principal amount of the Note as demand for money within the meaning and intendment of Section 431.70 of the California Code of Civil Procedure or any successor provision thereto. The foregoing limitation of liability is intended to apply only to the obligation to repay the principal and interest on the Note. Except as hereafter set forth; nothing contained herein is intended to relieve Borrower of its obligation to indemnify the County under Sections 3.8, 3.9, 4.8(b)(vi), 4.9, and 7.4 of this Agreement, or liability for: (i) loss or damage of any kind resulting from waste, fraud or willful misrepresentation; (ii) the failure to pay taxes, assessments or other charges which may create liens on the Property that are payable or applicable prior to any foreclosure under the Deed of Trust (to the full extent of such taxes, assessments or other charges); (iii) the fair market value of any personal property or fixtures removed or disposed of by Borrower other than in accordance with the Deed of Trust; and (iv) the misappropriation of any proceeds under any insurance policies or awards resulting from condemnation or the exercise of the power of eminent domain or by reason of damage, loss or destruction to any portion of the Property. ARTICLE 3 CONSTRUCTION OF THE DEVELOPMENT Section 3.1 Permits and Approvals. Borrower shall obtain all permits and approvals necessary for the construction of the Development no later than December 15, 2013, or such later date that the County approves in writing. Section 3.2 Bid Package. Not later than thirty (30) days prior to Borrower's proposed date for advertising the Bid Package, Borrower shall submit to the County a copy of Borrower's general contractor's 19 863\01\1367144.4 proposed Bid Package. The County's Deputy Director, Department of Conservation and Development, or his or her designee, shall approve or disapprove the Bid Package within fifteen (15) days after receipt of the Bid Package by the County. If the County rejects the proposed Bid Package the reasons therefore must be given to Borrower. The Borrower will then have fifteen (15) days to revise the proposed Bid Package and resubmit it to the County. The County will then have fifteen (15) days to review and approve Borrower's new or corrected Bid Package. The provisions of this Section will continue to apply until a proposed Bid Package has been approved by the County. Borrower may not publish a proposed Bid Package until it has been approved by the County. Section 3.3 Construction Contract. (a)Not later than fifteen (15) days prior to the proposed Commencement of Construction, Borrower shall submit to the County for its approval a draft of the proposed construction contract for the Development. All construction work and professional services are to be performed by persons or entities licensed or otherwise authorized to perform the applicable construction work or service in the State of California. Each contract that Borrower enters for construction of the Development is to provide that at least ten percent (10%) of the costs incurred will be payable only upon completion of the construction, subject to early release of retention for specified subcontractors upon approval by the County. The construction contract will include all applicable HOME and HOPWA requirements set forth in Section 4.8 below. The County's approval of the construction contract may not be deemed to constitute approval of or concurrence with any term or condition of the construction contract except as such term or condition may be required by this Agreement. (b)Upon receipt by the County of the proposed construction contract, the County shall promptly review same and approve or disapprove it within ten (10) days. If the construction contract is not approved by the County, the County shall set forth in writing and notify Borrower of the County's reasons for withholding such approval. Borrower shall thereafter submit a revised construction contract for County approval, which approval is to be granted or denied in ten (10) days in accordance with the procedures set forth above. Any construction contract executed by Borrower for the Development is to be in the form approved by the County. Section 3.4 Construction Bonds. Not later than thirty (30) days prior to the proposed Commencement of Construction Borrower shall deliver to the County copies of labor and material bonds and performance bonds for the construction of the Development in an amount equal to one hundred percent (100%) of the scheduled cost of the construction of the Development. Such bonds must name the County as a co-obligee. Section 3.5 Commencement of Construction. Borrower shall cause the Commencement of Construction of the Development to occur no later than December 15, 2013, or such later date that the County approves in writing, but in no event later than September 1, 2014. For the purposes of this Agreement, "Commencement of 20 863\01\1367144.4 Construction" means the date set for the start of construction of the Development in the notice to proceed issued by Borrower to Borrower's general contractor. Section 3.6 Completion of Construction. (a)Borrower shall diligently prosecute construction of the Development to completion, and shall cause the construction of the Development to be completed no later than May 31, 2015, or such later date that the County approves in writing. (b)Borrower shall give notice to the County upon completion of construction of the Development. Upon receipt of such notice the County will perform an inspection of the Development to determine if the Development was constructed in accordance with the HOME Regulations, including the property standards set forth in 24 C.F.R. 92.251. If the County determines the Development was not constructed in accordance with the HOME Regulations, the County will provide Borrower with a written report of the deficiencies. Borrower shall correct such deficiencies within the timeframe set forth in the notice provided to Borrower by the County. The Development may not be occupied until such deficiencies have been corrected to the satisfaction of the County. Section 3.7 Changes; Construction Pursuant to Plans and Laws. (a)Changes. Borrower shall construct the Development in conformance with (i) the plans and specifications approved by the City's Building Inspection Department, and (ii) the Approved Development Budget. Borrower shall notify the County in a timely manner of any changes in the work required to be performed under this Agreement, including any additions, changes, or deletions to the plans and specifications approved by the City. Written authorization from the County must be obtained before any of the following changes, additions, or deletions in work for the Development may be performed: (i) any change in the work the cost of which exceeds Twenty-Five Thousand Dollars ($25,000); or (ii) any set of changes in the work the cost of which cumulatively exceeds Fifty Thousand Dollars ($50,000) or ten percent (10%) of the Loan amount, whichever is less; or (iii) any material change in building materials or equipment, specifications, or the structural or architectural design or appearance of the Development as provided for in the plans and specifications approved by the County. The County's consent to any additions, changes, or deletions to the work does not relieve or release Borrower from any other obligations under this Agreement, or relieve or release Borrower or its surety from any surety bond. (b)Compliance with Laws. Borrower shall cause all work performed in connection with the Development to be performed in compliance with: (i)all applicable laws, codes (including building codes and codes applicable to mitigation of disasters such as earthquakes), ordinances, rules and regulations of federal, state, county or municipal governments or agencies now in force or that may be enacted hereafter; (ii)the property standards set out in 24 C.F.R. 92.251 as implemented by Section 5.6 of the Regulatory Agreement, and 24 C.F.R. Section 574.310; and 21 863\01\1367144.4 (iii)all directions, rules and regulations of any fire marshal, health officer, building inspector, or other officer of every governmental agency now having or hereafter acquiring jurisdiction. Borrower may permit the work to proceed only after procurement of each permit, license, or other authorization that may be required by any governmental agency having jurisdiction, and Borrower is responsible to the County for the procurement and maintenance thereof. Section 3.8 Prevailing Wages. (a)Davis Bacon. Borrower shall cause construction of the Development to be in compliance with the prevailing wage requirements of the federal Davis-Bacon Act (40 U.S.C. 3141-3148). Borrower shall indemnify, hold harmless and defend (with counsel reasonably acceptable to the County) the County against any claim for damages, compensation, fines, penalties or other amounts arising out of the failure or alleged failure of any person or entity (including the Borrower, its contractor and subcontractors) to pay prevailing wages as determined pursuant to the prevailing wage provisions of the federal Davis-Bacon Act and implementing rules and regulations in connection with the construction of the Development or any other work undertaken or in connection with the Property. The requirements in this subsection survive the repayment of the Loan, and the reconveyance of the Deed of Trust. (b)State Prevailing Wages. To the extent applicable, Borrower shall pay and shall cause the contractor and subcontractors to pay prevailing wages in the construction of the Development as those wages are determined pursuant to California Labor Code Section 1720 et seq., to employ apprentices as required by California Labor Code Sections 1777.5 et seq., and the implementing regulations of the Department of Industrial Relations (the "DIR"). Borrower shall and shall cause the contractor and subcontractors to comply with the other applicable provisions of California Labor Code Sections 1720 et seq., 1777.5 et seq., and implementing regulations of the DIR. Borrower shall and shall cause the contractor and subcontractors to keep and retain such records as are necessary to determine if such prevailing wages have been paid as required pursuant to California Labor Code Section 1720 et seq., and apprentices have been employed are required by California Labor Code Section 1777.5 et seq. Copies of the currently applicable current per diem prevailing wages are available from DIR. During the construction of the Development, Borrower shall or shall cause the contractor to post at the Property the applicable prevailing rates of per diem wages. Borrower shall indemnify, hold harmless and defend (with counsel reasonably acceptable to the County) the County against any claim for damages, compensation, fines, penalties or other amounts arising out of the failure or alleged failure of any person or entity (including Borrower, its contractor and subcontractors) to pay prevailing wages as determined pursuant to California Labor Code Section 1720 et seq., to employ apprentices pursuant to California Labor Code Section 1777.5 et seq., and implementing regulations of the DIR or to comply with the other applicable provisions of California Labor Code Sections 1720 et seq., 1777.5 et seq., and the implementing regulations of the DIR in connection with the construction of the Development or any other work undertaken or in connection with the Property. The requirements in this Subsection survive the repayment of the Loan, and the reconveyance of the Deed of Trust. Section 3.9 Accessibility. Borrower shall construct the Development in compliance with all applicable federal and 22 863\01\1367144.4 state disabled persons accessibility requirements including but not limited to the Federal Fair Housing Act; Section 504 of the Rehabilitation Act of 1973 ("Section 504"); Title II and/or Title III of the Americans with Disabilities Act; and Title 24 of the California Code of Regulations (collectively, the "Accessibility Requirements"). In compliance with Section 504, a minimum of three (3) Units of all Units must be constructed to be fully accessible to households with a mobility impaired member and an additional one (1) Unit of all Units must be constructed to be fully accessible to hearing and/or visually impaired persons. In compliance with Section 504 Borrower shall provide the County with a certification from the Development architect that to the best of the architect's knowledge, the Development complies with all federal and state accessibility requirements applicable to the Development. Borrower shall indemnify, hold harmless and defend (with counsel reasonably acceptable to the County) the County against any claim for damages, compensation, fines, penalties or other amounts arising out of the failure or alleged failure of any person or entity (including Borrower, its architect, contractor and subcontractors) to construct the Development in accordance with the Accessibility Requirements. The requirements in this Subsection survive repayment of the Loan and the reconveyance of the Deed of Trust. Section 3.10 Marketing Plan; Tenant Selection Plan; and Social Services Plan. (a)Marketing Plan. (i)No later than six (6) months prior to the date construction of the Development is projected to be complete, Borrower shall submit to the County for approval its plan for marketing the Development to income-eligible households and HOPWA Eligible Households as required by the Regulatory Agreement (the "Marketing Plan"). The Marketing Plan must include information on affirmative marketing efforts and compliance with fair housing laws and 24 C.F.R. 92.351(a). (ii)Upon receipt of the Marketing Plan, the County will promptly review the Marketing Plan and will approve or disapprove it within fifteen (15) days after receipt. If the Marketing Plan is not approved, the County will give Borrower specific reasons for such disapproval and Borrower shall submit a revised Marketing Plan within fifteen (15) days of notification of the County's disapproval. Borrower shall follow this procedure for resubmission of a revised Marketing Plan until the Marking Plan is approved by the County. If the Borrower does not submit a revised Marketing Plan that is approved by the County at least three (3) months prior to the date completion of the Development is projected to be complete, Borrower will be in default of this Agreement. (iii)If any HOME-Assisted Units have not been rented to a Qualifying Household on or before the date that is five (5) months after the Completion Date Borrower shall submit to the County a detailed report of ongoing marketing efforts, and if deemed appropriate by the County, any necessary amendments or updates to the Marketing Plan to cause the vacant HOME-Assisted Units to be rented to Qualifying Households. (iv)If any HOME-Assisted Units not been rented to a Qualifying Household on or before the date that is twelve (12) months after the Completion Date Borrower shall submit to the County a detailed report of ongoing marketing efforts, and if deemed 23 863\01\1367144.4 appropriate by the County, any necessary amendments or updates to the Marketing Plan to cause the vacant HOME-Assisted Units to be rented to Qualifying Households. (b)Tenant Selection Plan. (i)No later than six (6) months prior to the date construction of the Development is projected to be complete, Borrower shall submit to the County, for its review and approval, Borrower's written tenant selection plan (the "Tenant Selection Plan"). Borrower's Tenant Selection Plan must, at a minimum, meet the requirements for tenant selection set out in 24 C.F.R. Part 574 and 24 C.F.R. 92.253(d), and any modifications thereto. (ii)Upon receipt of the Tenant Selection Plan, the County will promptly review the Tenant Selection Plan and will approve or disapprove it within fifteen (15) days after receipt. If the Tenant Selection Plan is not approved, the County will give Borrower specific reasons for such disapproval and Borrower shall submit a revised Tenant Selection Plan within fifteen (15) days of notification of the County's disapproval. Borrower shall follow this procedure for resubmission of a revised Tenant Selection Plan until the Tenant Selection Plan is approved by the County. If the Borrower does not submit a revised Tenant Selection Plan that is approved by the County at least three (3) months prior to the date construction of the Development is projected to be complete, Borrower will be in default of this Agreement. (c)Social Services Plan. (i)No later than six (6) months prior to the date construction of the Development is projected to be complete, Borrower shall submit to the County for approval its plan for providing social services from qualified service providers to the HOPWA Eligible Households of the Development as required by 24 C.F.R. Section 574.310(a)(1) and the Regulatory Agreement (the "Social Services Plan"). (ii)Upon receipt of the Social Services Plan, the County will promptly review the Social Services Plan and will approve or disapprove it within fifteen (15) days after receipt. If the Social Services Plan is not approved, the County will give Borrower specific reasons for such disapproval and Borrower shall submit a revised Social Services Plan within fifteen (15) days of notification of the County's disapproval. Borrower shall follow this procedure for resubmission of a revised Social Services Plan until the Social Services Plan is approved by the County. If the Borrower does not submit a revised Social Services Plan that is approved by the County at least three (3) months prior to the date construction of the Development is projected to be complete, Borrower will be in default of this Agreement. Section 3.11 Equal Opportunity. During the construction of the Development discrimination on the basis of race, color, creed, religion, age, sex, sexual orientation, marital status, national origin, ancestry, or disability in the hiring, firing, promoting, or demoting of any person engaged in the construction work is not allowed. 24 863\01\1367144.4 Section 3.12 Minority and Women-Owned Contractors. Borrower shall use its best efforts to afford minority-owned and women-owned business enterprises the maximum practicable opportunity to participate in the construction of the Development. Borrower shall, at a minimum, notify applicable minority-owned and women- owned business firms located in Contra Costa County of bid opportunities for the construction of the Development. A listing of minority owned and women owned businesses located in the County and neighboring counties is available from the County. Documentation of such notifications must be maintained by Borrower and available to the County upon request. Section 3.13 Progress Reports. Until such time as Borrower has received a certificate of occupancy from the City for the Development, Borrower shall provide the County with quarterly progress reports regarding the status of the construction of the Development, including a certification that the actual construction costs to date conform to the Approved Development Budget, as it may be amended from time to time pursuant to Section 3.17 below. Section 3.14 Construction Responsibilities. (a)Borrower is responsible for the coordination and scheduling of the work to be performed so that commencement and completion of the construction of the Development takes place in accordance with this Agreement. (b)Borrower is solely responsible for all aspects of Borrower's conduct in connection with the Development, including (but not limited to) the quality and suitability of the plans and specifications, the supervision of construction work, and the qualifications, financial condition, and performance of all architects, engineers, contractors, subcontractors, suppliers, consultants, and property managers. Any review or inspection undertaken by the County with reference to the Development is solely for the purpose of determining whether Borrower is properly discharging its obligations to the County, and may not be relied upon by Borrower or by any third parties as a warranty or representation by the County as to the quality of the design or construction of the Development. Section 3.15 Mechanics Liens, Stop Notices, and Notices of Completion. (a)If any claim of lien is filed against the Property or a stop notice affecting the Loan is served on the County or any other lender or other third party in connection with the Development, then Borrower shall, within twenty (20) days after such filing or service, either pay and fully discharge the lien or stop notice, effect the release of such lien or stop notice by delivering to the County a surety bond in sufficient form and amount, or provide the County with other assurance satisfactory to the County that the claim of lien or stop notice will be paid or discharged. (b)If Borrower fails to discharge any lien, encumbrance, charge, or claim in the manner required in this Section, then in addition to any other right or remedy, the County may (but is under no obligation to) discharge such lien, encumbrance, charge, or claim at Borrower's expense. Alternately, the County may require Borrower to immediately deposit with 25 863\01\1367144.4 the County the amount necessary to satisfy such lien or claim and any costs, pending resolution thereof. The County may use such deposit to satisfy any claim or lien that is adversely determined against Borrower. (c)Borrower shall file a valid notice of cessation or notice of completion upon cessation of construction work on the Development for a continuous period of thirty (30) days or more, and take all other steps necessary to forestall the assertion of claims of lien against the Property. Borrower authorizes the County, but the County has no obligation, to record any notices of completion or cessation of labor, or any other notice that the County deems necessary or desirable to protect its interest in the Development and Property. Section 3.16 Inspections. Borrower shall permit and facilitate, and shall require its contractors to permit and facilitate, observation and inspection at the Development by the County and by public authorities during reasonable business hours during the Term, for the purposes of determining compliance with this Agreement. Section 3.17 Approved Development Budget; Revisions to Budget. As of the date of this Agreement, the County has approved the Approved Development Budget set forth in Exhibit B. Borrower shall submit any required amendments to the Approved Development Budget to the County for approval within five (5) days after the date Borrower receives information indicating that actual costs of the Development vary or will vary from the costs shown on the Approved Development Budget. Written consent of the County will be required to amend the Approved Development Budget. Section 3.18 Developer Fee. The maximum cumulative Developer Fee that may be paid to any entity or entities providing development services to the Development, whether paid up-front or on a deferred basis, is not to exceed the amount allowed by TCAC and as approved by the County. For the purposes of this Agreement "Developer Fee" has the meaning set forth in California Code of Regulations, Title 4, Section 10302(l). The County approves a Developer Fee of One Million Four Hundred Thousand Dollars ($1,400,000). Section 3.19 Partnership/Asset Fee. During the Fifteen Year Compliance Period, the Partnership/Asset Fee is not to exceed Thirty-Two Thousand Dollars ($32,000) per year. After the expiration of the Fifteen Year Compliance Period, the Partnership/Asset Fee is not to exceed Twenty-Five Thousand Dollars ($25,000) per year. Section 3.20 NEPA Mitigation Requirements. Borrower shall comply with the NEPA mitigation requirements set forth in the attached Exhibit C in the construction of the Development. 26 863\01\1367144.4 ARTICLE 4 LOAN REQUIREMENTS Section 4.1 Match Requirement. The Borrower shall ensure that the Loan is matched with a minimum of Six Hundred Twelve Thousand Five Hundred Dollars ($612,500) in other, non-federal sources, pursuant to and eligible under applicable HOME regulations. Section 4.2 Reserve Accounts. (a)Replacement Reserve Account. Borrower shall establish and maintain an account that is available for capital expenditures for repairs and replacement necessary to maintain the Development in the condition required by the Loan Documents (the "Replacement Reserve Account"). Borrower shall make annual deposits to the Replacement Reserve Account in the amounts required in the Partnership Agreement and/or the documents evidencing the Bank Loan, whichever is greater. In no event shall the annual amount deposited in the Replacement Reserve Account exceed Five Hundred Dollars ($500) per unit, increasing by the applicable consumer price index every five (5) years, or such greater amount required in connection with the Partnership Agreement or any permanent financing, and approved by the County. (b)Operating Reserve Account. Borrower shall establish and maintain an account that is available to fund operating deficits (which is the amount by which Annual Operating Expenses exceed Gross Revenue for any period) (the "Operating Reserve Account"). Borrower shall capitalize the Operating Reserve Account in the amount required by TCAC (currently three months of Annual Operating Expenses); provided, however that if the Partnership Agreement or the documents evidencing the Bank Loan require the Operating Reserve Account to be capitalized in an amount greater than the TCAC requirement, Borrower shall capitalize the Operating Reserve Account as required by the Partnership Agreement or the documents evidencing the Bank Loan, as applicable, for as long as the Partnership Agreement or the Bank Loan, as applicable, is outstanding. In no event may the amount held in the Operating Reserve Account exceed six (6) months gross rent from the Development (as such rent may vary from time to time). Section 4.3 Financial Accountings and Post-Completion Audits. (a)No later than ninety (90) days following completion of construction of the Development, Borrower shall provide to the County for its review and approval a financial accounting of all sources and uses of funds for the Development. (b)No later than one hundred twenty (120) days after Permanent Conversion, Borrower shall submit an audited financial report showing the sources and uses of all funds utilized for the Development. This requirement may be satisfied by providing the Final Cost Certification to the County. "Final Cost Certification" means the Final Cost Certification Sources and Uses of Funds prepared by Borrower for the Development that: (i) Borrower submits to TCAC; and (ii) has been prepared using generally accepted accounting standards in effect in the United States of America from time to time, consistently applied. 27 863\01\1367144.4 Section 4.4 Approval of Annual Operating Budget. At the beginning of each year of the Term, Borrower shall provide to the County an annual budget for the operation of the Development. The County may request additional information to assist the County in evaluating the financial viability of the Development. Unless rejected by the County in writing within thirty (30) days after receipt of the budget, the budget will be deemed accepted. If rejected by the County in whole or in part, Borrower shall submit a new or corrected budget within thirty (30) calendar days after notification of the County's rejection and the reasons therefor. The provisions of this Section relating to time periods for resubmission of new or corrected budgets will continue to apply until such budget has been approved by the County. Section 4.5 Information. Borrower shall provide any information reasonably requested by the County in connection with the Development, including (but not limited to) any information required by HUD in connection with Borrower's use of the Loan funds. Section 4.6 Records. (a)Borrower shall keep and maintain at the principal place of business of the Borrower set forth in Section 7.9 below, or elsewhere with the County's written consent, full, complete and appropriate books, records and accounts relating to the Development including all books, records and accounts necessary or prudent to evidence and substantiate in full detail Borrower's calculation of Residual Receipts and disbursements of Residual Receipts. Borrower shall cause all books, records and accounts relating to its compliance with the terms, provisions, covenants and conditions of this Agreement to be kept and maintained in accordance with generally accepted accounting principles consistently applied, and to be consistent with requirements of this Agreement. Borrower shall cause all books, records, and accounts to be open to and available for inspection and copying by HUD, the County, its auditors or other authorized representatives at reasonable intervals during normal business hours. Borrower shall cause copies of all tax returns and other reports that Borrower may be required to furnish to any government agency to be open for inspection by the County at all reasonable times at the place that the books, records and accounts of Borrower are kept. Borrower shall preserve such records for a period of not less than five (5) years after their creation in compliance with all HUD records and accounting requirements. If any litigation, claim, negotiation, audit exception, monitoring, inspection or other action relating to the use of the Loan is pending at the end of the record retention period stated herein, then Borrower shall retain the records until such action and all related issues are resolved. Borrower shall cause the records are to include all invoices, receipts, and other documents related to expenditures from the Loan funds. Borrower shall cause records to be accurate and current and in a form that allows the County to comply with the record keeping requirements contained in 24 C.F.R. 92.508, 24 C.F.R. 574.450, and 24 C.F.R. 574.530. Such records are to include but are not limited to: (i)Records providing a full description of the activities undertaken with the use of the Loan funds; 28 863\01\1367144.4 (ii)Records demonstrating that each activity undertaken with the HOPWA Funds meets one of the eligible activities of the HOPWA program set forth in 24 C.F.R. Section 574.300 and 24 C.F.R. Section 574.310; (iii)Records demonstrating compliance with the HUD property standards and lead-based paint requirements including the property standards of 24 C.F.R. Section 574.310(b) and the lead-based paint requirements of 24 C.F.R. Section 574.635, and the maintenance requirements set forth in Section 5.6 of the Regulatory Agreement (which implements 24 C.F.R. 92.251); (iv)Records documenting compliance with the fair housing, equal opportunity, and affirmative fair marketing requirements; (v)Financial records as required by 24 C.F.R. 92.505, OMB Circular A-110 (24 C.F.R. Part 84), and during the HOPWA Term, financial records and other documents necessary to document compliance with the requirements of 24 C.F.R. Part 574 et seq; (vi)Records demonstrating compliance with the HOPWA and HOME marketing, tenant selection, affordability, and income requirements; (vii) Records demonstrating compliance with MBE/WBE requirements; (viii) Records demonstrating compliance with 24 C.F.R. Part 135 which implements Section 3 of the Housing Development Act of 1968; (ix)Records demonstrating compliance with applicable relocation requirements, which must be retained for at least five (5) years after the date by which persons displaced from the property have received final payments; (x)Records demonstrating compliance with labor requirements including certified payrolls from Borrower's general contractor evidencing that applicable prevailing wages have been paid; and (xi)Records documenting compliance with the Social Services Plan approved by the County. (b)The County shall notify Borrower of any records it deems insufficient. Borrower has fifteen (15) calendar days after the receipt of such a notice to correct any deficiency in the records specified by the County in such notice, or if a period longer than fifteen (15) days is reasonably necessary to correct the deficiency, then Borrower must begin to correct the deficiency within fifteen (15) days and correct the deficiency as soon as reasonably possible. Section 4.7 County Audits. (a)Each year, Borrower shall provide the County with a copy of Borrower's annual audit, which is to include information on all of Borrower's activities and not just those 29 863\01\1367144.4 pertaining to the Development. Borrower shall also follow audit requirements of the Single Audit Act and OMB Circulars A-122 and 110 as set forth in 24 C.F.R. 547.605 and the additional audit requirements set forth in 24 C.F.R. 574.650. (b)In addition, the County may, at any time, audit all of Borrower's books, records, and accounts pertaining to the Development including but not limited to the Residual Receipts of the Development. Any such audit is to be conducted during normal business hours at the principal place of business of Borrower and wherever records are kept. Immediately after the completion of an audit, the County shall deliver a copy of the results of the audit to Borrower. (c)If it is determined as a result of an audit that there has been a deficiency in a loan repayment to the County then such deficiency will become immediately due and payable, with interest at the Default Rate from the date the deficient amount should have been paid. In addition, if the audit determines that Residual Receipts have been understated for any year by the greater of: (i) Two Thousand Five Hundred Dollars ($2,500); and (ii) an amount that exceeds five percent (5%) of the Residual Receipts, then, in addition to paying the deficiency with interest, Borrower shall pay all of the County's costs and expenses connected with the audit and review of Borrower's accounts and records. Section 4.8 HOME and HOPWA Requirements. (a)Borrower shall comply with all applicable laws and regulations governing the use of the HOME Funds as set forth in 24 C.F.R. Part 92, and use of the HOPWA Funds, as set forth in 24 C.F.R. Part 574 et. seq., including the requirements of the Regulatory Agreement. In the event of any conflict between this Agreement and applicable laws and regulations governing the use of the Loan funds, the applicable laws and regulations govern. During the HOME Reporting Term and the HOPWA Term, these requirements are federal requirements, implemented by the County; thereafter, these requirements are deemed local County requirements. (b)The laws and regulations governing the use of the Loan funds include (but are not limited to) the following: (i)Environmental and Historic Preservation. 24 C.F.R. Part 58, which prescribes procedures for compliance with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4361), and the additional laws and authorities listed at 24 C.F.R. 58.5; (ii)Applicability of OMB Circulars. The applicable policies, guidelines, and requirements of OMB Circulars Nos. A-87, A-102, Revised, A-110, A-122, and A-133; (iii)Debarred, Suspended or Ineligible Contractors. The prohibition on the use of debarred, suspended, or ineligible contractors set forth in 24 C.F.R. Part 24; (iv)Civil Rights, Housing and Community Development, and Age Discrimination Acts. The Fair Housing Act (42 U.S.C. 3601 et seq.) and implementing regulations at 24 C.F.R. Part 100; Title VI of the Civil Rights Act of 1964 as amended; Title VIII of the Civil Rights Act of 1968 as amended; Section 104(b) and Section 109 of Title I of 30 863\01\1367144.4 the Housing and Community Development Act of 1974 as amended; Section 504 of the Rehabilitation Act of 1973 (29 USC 794, et seq.); the Age Discrimination Act of 1975 (42 USC 6101, et seq.); Executive Order 11063 as amended by Executive Order 12259 and implementing regulations at 24 C.F.R. Part 107; Executive Order 11246 as amended by Executive Orders 11375, 12086, 11478, 12107; Executive Order 11625 as amended by Executive Order 12007; Executive Order 12432; Executive Order 12138 as amended by Executive Order 12608; (v)Lead-Based Paint. The requirement of the Lead-Based Paint Poisoning Prevention Act, as amended (42 U.S.C. 4821 et seq.), the Residential Lead-Based Paint Hazard Reduction Act (42 U.S.C. 4851 et seq.), and implementing regulations at 24 C.F.R. Part 35; (vi)Relocation. The requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (42 U.S.C. 4601, et seq.), and implementing regulations at 49 C.F.R. Part 24; Section 104(d) of the Housing and Community Development Act of 1974 and implementing regulations at 24 C.F.R. 42 et seq.; 24 C.F.R. 92.353; 24 C.F.R. 574.630; and California Government Code Section 7260 et seq. and implementing regulations at 25 California Code of Regulations Sections 6000 et seq. If and to the extent that development of the Development results in the permanent or temporary displacement of residential tenants, homeowners, or businesses, then Borrower shall comply with all applicable local, state, and federal statutes and regulations with respect to relocation planning, advisory assistance, and payment of monetary benefits. Borrower shall prepare and submit a relocation plan to the County for approval. Borrower is solely responsible for payment of any relocation benefits to any displaced persons and any other obligations associated with complying with such relocation laws. Borrower shall indemnify, defend (with counsel reasonably chosen by the County), and hold harmless the County against all claims that arise out of relocation obligations to residential tenants, homeowners, or businesses permanently or temporarily displaced by the Development; (vii) Discrimination against the Disabled. The requirements of the Fair Housing Act (42 U.S.C. 3601 et seq.) and implementing regulations at 24 C.F.R. Part 100; Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), and federal regulations issued pursuant thereto, which prohibit discrimination against the disabled in any federally assisted program, the requirements of the Architectural Barriers Act of 1968 (42 U.S.C. 4151-4157) and the applicable requirements of Title II and/or Title III of the Americans with Disabilities Act of 1990 (42 U.S.C. 12131 et seq.), and federal regulations issued pursuant thereto; (viii) Clean Air and Water Acts. The Clean Air Act, as amended, 42 U.S.C. 7401 et seq., the Federal Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq., and the regulations of the Environmental Protection Agency with respect thereto, at 40 C.F.R. Part 1500, as amended from time to time; (ix)Uniform Administrative Requirements. The provisions of 24 C.F.R. 92.505 and 24 C.F.R. 574.650 regarding cost and auditing requirements; (x)Housing Quality Standards. The housing quality standards set forth in 24 C.F.R. Section 574.310(b); 31 863\01\1367144.4 (xi)Supportive Services. The supportive service requirements of 24 C.F.R. Section 574.310(a)(1). Borrower shall procure services to satisfy such service requirements; (xii) Training Opportunities. The requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. 1701u ("Section 3"), requiring that to the greatest extent feasible opportunities for training and employment be given to lower income residents of the project area and agreements for work in connection with the project be awarded to business concerns which are located in, or owned in substantial part by persons residing in, the areas of the project. Borrower agrees to include the following language in all subcontracts executed under this Agreement: (1)The work to be performed under this contract is subject to the requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. 1701u. The purpose of Section 3 is to ensure that employment and other economic opportunities generated by HUD assistance or HUD-assisted projects covered by Section 3, shall, to the greatest extent feasible, be directed to low- and very low-income persons, particularly persons who are recipients of HUD assistance for housing. (2)The parties to this contract agree to comply with HUD's regulations in 24 C.F.R. Part 135, which implement Section 3. As evidenced by their execution of this contract, the parties to this contract certify that they are under no contractual or other impediment that would prevent them from complying with the Part 135 regulations. (3)The contractor agrees to send to each labor organization or representative of workers with which the contractor has a collective bargaining agreement or other understanding, if any, a notice advising the labor organization or workers' representative of the contractor's commitments under this Section 3 clause; and will post copies of the notice in conspicuous places at the work site where both employees and applicants for training and employment positions can see the notice. The notice shall describe the Section 3 preference; shall set forth minimum number and job titles subject to hire; availability of apprenticeship and training positions; the qualifications for each; the name and location of the person(s) taking applications for each of the positions; and the anticipated date the work shall begin. (4)The contractor agrees to include this Section 3 clause in every subcontract subject to compliance with regulations in 24 C.F.R. Part 135, and agrees to take appropriate action, as provided in an applicable provision of the subcontract or in this Section 3 clause, upon a finding that the subcontractor is in violation of the regulations in 24 C.F.R. Part 135. The contractor will not subcontract with any subcontractor where the contractor has notice or knowledge that the subcontractor has been found in violation of the regulations in 24 C.F.R. Part 135. (5)The contractor will certify that any vacant employment positions, including training positions, that are filled (A) after the contractor is selected but before the contract is executed, and (B) with persons other than those to whom the regulations of 24 C.F.R. Part 135 require employment opportunities to be directed, were not filled to circumvent the contractor's obligations under 24 C.F.R. Part 135. 32 863\01\1367144.4 (6)Noncompliance with HUD's regulations in 24 C.F.R. Part 135 may result in sanctions, termination of this contract for default, and debarment or suspension from future HUD assisted contracts. (7)With respect to work performed in connection with Section 3 covered Indian housing assistance, section 7(b) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450e) also applies to the work to be performed under this contract. Section 7(b) requires that to the greatest extent feasible (i) preference and opportunities for training and employment shall be given to Indians, and (ii) preference in the award of contracts and subcontracts shall be given to Indian organizations and Indian-owned Economic Enterprises. Parties to this contract that are subject to the provisions of Section 3 and section 7(b) agree to comply with Section 3 to the maximum extent feasible, but not in derogation of compliance with section 7(b). (xiii) Labor Standards. The labor requirements set forth in 24 C.F.R. 92.354; the prevailing wage requirements of the Davis-Bacon Act and implementing rules and regulations (40 U.S.C. 3141-3148); the Copeland "Anti-Kickback" Act (40 U.S.C. 276(c)) which requires that workers be paid at least once a week without any deductions or rebates except permissible deductions; the Contract Work Hours and Safety Standards Act – CWHSSA (40 U.S.C. 3701-3708) which requires that workers receive "overtime" compensation at a rate of 1-1/2 times their regular hourly wage after they have worked forty (40) hours in one (1) week; and Title 29, Code of Federal Regulations, Subtitle A, Parts 1, 3 and 5 are the regulations and procedures issued by the Secretary of Labor for the administration and enforcement of the Davis-Bacon Act, as amended; (xiv) Drug Free Workplace. The requirements of the Drug Free Workplace Act of 1988 (P.L. 100-690) and implementing regulations at 24 C.F.R. Part 24; (xv) Anti-Lobbying; Disclosure Requirements. The disclosure requirements and prohibitions of 31 U.S.C. 1352 and implementing regulations at 24 C.F.R. Part 87; (xvi) Historic Preservation. The historic preservation requirements set forth in the National Historic Preservation Act of 1966, as amended (16 U.S.C. Section 470) and the procedures set forth in 36 C.F.R. Part 800. If archeological, cultural, or historic period resources are discovered during construction, all construction work must come to a halt and Borrower shall immediately notify the County. Borrower shall not shall alter or move the discovered material(s) until all appropriate procedures for "post-review discoveries" set forth in Section 106 of the National Historic Preservation Act have taken place, which include, but are not limited to, consultation with the California State Historic Preservation Officer and evaluation of the discovered material(s) by a qualified professional archeologist; (xvii) Religious Organizations. If the Borrower is a religious organization, as defined by the HOPWA and/or HOME requirements, the Borrower shall comply with all conditions prescribed by HUD for the use of HOME Funds and HOPWA Funds by religious organizations, including the First Amendment of the United States Constitution 33 863\01\1367144.4 regarding church/state principles and the applicable constitutional prohibitions set forth in 24 C.F.R. 92.257 and 24 C.F.R. 574.300(c); and (xviii)HUD Regulations. Any other HUD regulations present or as may be amended, added, or waived in the future pertaining to the Loan funds. Section 4.9 Hazardous Materials. (a)Borrower shall keep and maintain the Property (including but not limited to, soil and ground water conditions) in compliance with all Hazardous Materials Laws and may not cause or permit the Property to be in violation of any Hazardous Materials Law. Borrower may not cause or permit the use, generation, manufacture, storage or disposal of on, under, or about the Property or transportation to or from the Property of any Hazardous Materials, except such of the foregoing as may be customarily used in construction of projects like the Development or kept and used in and about residential property of this type. (b)Borrower shall immediately advise the County in writing if at any time it receives written notice of any Hazardous Materials Claims, and Borrower's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to be classified as "border-zone property" (as defined in California Health and Safety Code Section 25117.4) under the provision of California Health and Safety Code, Section 25220 et seq., or any regulation adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use of the Property under any Hazardous Materials Law. (c)The County has the right to join and participate in, as a party if it so elects, and be represented by counsel acceptable to the County (or counsel of its own choice if a conflict exists with Borrower) in any legal proceedings or actions initiated in connection with any Hazardous Materials Claims and to have its reasonable attorneys' fees in connection therewith paid by Borrower. (d)Borrower shall indemnify and hold harmless the County and its board members, supervisors, directors, officers, employees, agents, successors and assigns from and against any loss, damage, cost, fine, penalty, judgment, award, settlement, expense or liability, directly or indirectly arising out of or attributable to: (i) any actual or alleged past or present violation of any Hazardous Materials Law; (ii) any Hazardous Materials Claim; (iii) any actual or alleged past or present use, generation, manufacture, storage, release, threatened release, discharge, disposal, transportation, or presence of Hazardous Materials on, under, or about the Property; (iv) any investigation, cleanup, remediation, removal, or restoration work of site conditions of the Property relating to Hazardous Materials (whether on the Property or any other property); and (v) the breach of any representation of warranty by or covenant of Borrower in this Section 4.9, and Section 5.1(l). Such indemnity shall include, without limitation: (x) all consequential damages; (y) the costs of any required or necessary investigation, repair, cleanup or detoxification of the Property and the preparation and implementation of any closure, remedial or other required plans; and (z) all reasonable costs and expenses incurred by the County in connection with clauses (x) and (y), including but not limited to reasonable attorneys' fees and consultant fees. This indemnification applies whether or not any government agency has issued a cleanup order. Losses, claims, costs, suits, liability, and expenses covered by this 34 863\01\1367144.4 indemnification provision include, but are not limited to: (1) losses attributable to diminution in the value of the Property, (2) loss or restriction of use of rentable space on the Property, (3) adverse effect on the marketing of any rental space on the Property, and (4) penalties and fines levied by, and remedial or enforcement actions of any kind issued by any regulatory agency (including but not limited to the costs of any required testing, remediation, repair, removal, cleanup or detoxification of the Property and surrounding properties). This obligation to indemnify will survive termination of this Agreement and will not be diminished or affected in any respect as a result of any notice, disclosure, knowledge, if any, to or by the County of Hazardous Materials. (e)Without the County's prior written consent, which will not be unreasonably withheld, Borrower may not take any remedial action in response to the presence of any Hazardous Materials on, under or about the Property, nor enter into any settlement agreement, consent decree, or other compromise in respect to any Hazardous Material Claims, which remedial action, settlement, consent decree or compromise might, in the County's judgment, impair the value of the County's security hereunder; provided, however, that the County's prior consent is not necessary in the event that the presence of Hazardous Materials on, under, or about the Property either poses an immediate threat to the health, safety or welfare of any individual or is of such a nature that an immediate remedial response is necessary and it is not reasonably possible to obtain the County's consent before taking such action, provided that in such event Borrower shall notify the County as soon as practicable of any action so taken. The County agrees not to withhold its consent, where such consent is required hereunder, if: (i) a particular remedial action is ordered by a court of competent jurisdiction; (ii) Borrower will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required action; (iii) Borrower establishes to the satisfaction of the County that there is no reasonable alternative to such remedial action which would result in less impairment of the County's security hereunder; or (iv) the action has been agreed to by the County. (f)Borrower hereby acknowledges and agrees that: (i) this Section is intended as the County's written request for information (and Borrower's response) concerning the environmental condition of the Property as required by California Code of Civil Procedure Section 726.5; and (ii) each representation and warranty in this Agreement (together with any indemnity obligation applicable to a breach of any such representation and warranty) with respect to the environmental condition of the Property is intended by the Parties to be an "environmental provision" for purposes of California Code of Civil Procedure Section 736. (g)In the event that any portion of the Property is determined to be "environmentally impaired" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(3)) or to be an "affected parcel" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(1)), then, without otherwise limiting or in any way affecting the County's or the trustee's rights and remedies under the Deed of Trust, the County may elect to exercise its rights under California Code of Civil Procedure Section 726.5(a) to: (i) waive its lien on such environmentally impaired or affected portion of the Property; and (ii) exercise, (1) the rights and remedies of an unsecured creditor, including reduction of its claim against Borrower to judgment, and (2) any other rights and remedies permitted by law. For purposes of determining the County's right to proceed as an unsecured creditor under California Code of Civil Procedure Section 726.5(a), Borrower will be deemed to have willfully permitted or 35 863\01\1367144.4 acquiesced in a release or threatened release of Hazardous Materials, within the meaning of California Code of Civil Procedure Section 726.5(d)(1), if the release or threatened release of Hazardous Materials was knowingly or negligently caused or contributed to by any lessee, occupant, or user of any portion of the Property and Borrower knew or should have known of the activity by such lessee, occupant, or user which caused or contributed to the release or threatened release. All costs and expenses, including (but not limited to) attorneys' fees, incurred by the County in connection with any action commenced under this paragraph, including any action required by California Code of Civil Procedure Section 726.5(b) to determine the degree to which the Property is environmentally impaired, plus interest thereon at the Default Rate, until paid, will be added to the indebtedness secured by the Deed of Trust and is due and payable to the County upon its demand made at any time following the conclusion of such action. Section 4.10 Maintenance; Damage and Destruction. (a)During the course of both construction and operation of the Development, Borrower shall maintain the Development and the Property in good repair and in a neat, clean and orderly condition, and in accordance with the Regulatory Agreement. (b)Subject to the requirements of senior lenders, and if economically feasible in the County's judgment after consultation with Borrower, if any improvement now or in the future on the Property is damaged or destroyed, then Borrower shall, at its cost and expense, diligently undertake to repair or restore such improvement consistent with the plans and specifications approved by the County with such changes as have been approved by the County. Such work or repair is to be commenced no later than the later of one hundred twenty (120) days, or such longer period approved by the County in writing, after the damage or loss occurs or thirty (30) days following receipt of the insurance proceeds, and is to be complete within one (1) year thereafter. Any insurance proceeds collected for such damage or destruction are to be applied to the cost of such repairs or restoration and, if such insurance proceeds are insufficient for such purpose, then Borrower shall make up the deficiency. If Borrower does not promptly make such repairs then any insurance proceeds collected for such damage or destruction are to be promptly delivered by Borrower to the County as a special repayment of the Loan, subject to the rights of the senior lenders, if any. Section 4.11 Fees and Taxes. Borrower is solely responsible for payment of all fees, assessments, taxes, charges, and levies imposed by any public authority or utility company with respect to the Property or the Development, and shall pay such charges prior to delinquency. However, Borrower is not required to pay and discharge any such charge so long as: (i) the legality thereof is being contested diligently and in good faith and by appropriate proceedings; and (ii) if requested by the County, Borrower deposits with the County any funds or other forms of assurance that the County in good faith from time to time determines appropriate to protect the County from the consequences of the contest being unsuccessful. 36 863\01\1367144.4 Section 4.12 Notice of Litigation. Borrower shall promptly notify the County in writing of any litigation that has the potential to materially affect Borrower or the Property and of any claims or disputes that involve a material risk of such litigation. Section 4.13 Operation of Development as Affordable Housing. Borrower shall operate the Development as an affordable housing development consistent with: (i) HUD's requirements for use of HOPWA Funds and HOME Funds; (ii) the Regulatory Agreement; and (iii) any other regulatory requirements imposed on Borrower including but not limited to regulatory agreements associated with the City Loan, Housing Successor Loan, and Low Income Housing Tax Credits provided by TCAC. Section 4.14 Nondiscrimination. (a)Borrower covenants by and for itself and its successors and assigns that there will be no discrimination against or segregation of a person or of a group of persons on account of race, color, religion, creed, age (except for lawful senior housing in accordance with state and federal law), familial status, disability, sex, sexual orientation, marital status, ancestry or national origin in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, nor may Borrower or any person claiming under or through Borrower establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the Property. The foregoing covenant will run with the land. (b)Nothing in this Section prohibits Borrower from requiring units in the Development to be available to and occupied by income eligible households in accordance with the Regulatory Agreement, and from requiring the HOPWA Units in the Development to be available to and occupied by HOPWA Eligible Households. Section 4.15 Transfer. (a)For purposes of this Agreement, "Transfer" means any sale, assignment, or transfer, whether voluntary or involuntary, of: (i) any rights and/or duties under this Agreement; and/or (ii) any interest in the Development, including (but not limited to) a fee simple interest, a joint tenancy interest, a life estate, a partnership interest, a leasehold interest, a security interest, or an interest evidenced by a land contract by which possession of the Development is transferred and Borrower retains title. The term "Transfer" excludes the leasing of any single unit in the Development to an occupant in compliance with the Regulatory Agreement. The County Deputy Director – Department of Conservation and Development is authorized to execute assignment and assumption agreements on behalf of the County to implement any approved Transfer. (b)No Transfer is permitted without the prior written consent of the County, which the County may withhold in its sole discretion. The Loan will automatically accelerate and be due in full upon any Transfer made without the prior written consent of the County. 37 863\01\1367144.4 (c)The County hereby approves future Transfers of the limited partner interest of Borrower provided that: (i) such Transfers do not affect the timing and amount of the Investor Limited Partner capital contributions provided for in the Partnership Agreement; and (ii) in subsequent Transfers, the Investor Limited Partner or an affiliate thereof, retains a membership or partnership interest and serves as a managing member or managing general partner of the successor limited partner. (d)The County hereby approves a Transfer of the Property from Borrower to Satellite Affordable Housing Associates, a California nonprofit public benefit corporation ("SAHA"), or a non-profit affiliate of SAHA, and an assumption of the Loan by such transferee at the end of the Fifteen Year Compliance Period, provided that: (i) such Transfer is pursuant to an option or right of first refusal provision in the Partnership Agreement, and (ii) the transferee expressly assumes the obligations of the Borrower under the Loan Documents, utilizing a form of assignment and assumption agreement provided by the County. (e)In the event the general partner of Borrower is removed by the limited partner of Borrower for cause following default under the Partnership Agreement, the County hereby approves the Transfer of the general partner interest to a 501(c)(3) tax exempt nonprofit corporation or other entity with a 501(c)(3) tax exempt nonprofit corporation member or partner, selected by the limited partner and approved by the County. (f)The County hereby approves the grant of the security interests in the Development for Approved Financing. Section 4.16 Insurance Requirements. (a)Borrower shall maintain the following insurance coverage throughout the Term of the Loan: (i)Workers' Compensation insurance to the extent required by law, including Employer's Liability coverage, with limits not less than One Million Dollars ($1,000,000) each accident. (ii)Commercial General Liability insurance with limits not less than Two Million Dollars ($2,000,000) each occurrence combined single limit for Bodily Injury and Property Damage, including coverages for Contractual Liability, Personal Injury, Broadform Property Damage, Products and Completed Operations. (iii)Automobile Liability insurance with limits not less than One Million Dollars ($1,000,000) each occurrence combined single limit for Bodily Injury and Property Damage, including coverages for owned, non-owned and hired vehicles, as applicable. (iv)Builders' Risk insurance during the course of construction, and upon completion of construction, property insurance covering the Development, in form appropriate for the nature of such property, covering all risks of loss, excluding earthquake, for one hundred percent (100%) of the replacement value, with deductible, if any, acceptable to the County, naming the County as a Loss Payee, as its interests may appear. Flood insurance must be obtained if required by applicable federal regulations. 38 863\01\1367144.4 (v)Commercial crime insurance covering all officers and employees, for loss of Loan proceeds caused by dishonesty, in an amount approved by the County, naming the County a Loss Payee, as its interests may appear. (b)Borrower shall cause any general contractor, agent, or subcontractor working on the Development under direct contract with Borrower or subcontract to maintain insurance of the types and in at least the minimum amounts described in subsections (i), (ii), and (iii) above, except that the limit of liability for commercial general liability insurance for subcontractors must be One Million Dollars ($1,000,000), and must require that such insurance will meet all of the general requirements of subsections (d) and (e) below. (c)The required insurance must be provided under an occurrence form, and Borrower shall maintain the coverage described in subsection (a) continuously throughout the Term. Should any of the required insurance be provided under a form of coverage that includes an annual aggregate limit or provides that claims investigation or legal defense costs be included in such annual aggregate limit, such annual aggregate limit must be three times the occurrence limits specified above. (d)Commercial General Liability, Automobile Liability and Property insurance policies must be endorsed to name as an additional insured the County and its officers, agents, employees and members of the County Board of Supervisors. (e)All policies and bonds are to contain: (i) the agreement of the insurer to give the County at least thirty (30) days' notice prior to cancellation (including, without limitation, for non-payment of premium) or any material change in said policies; (ii) an agreement that such policies are primary and non-contributing with any insurance that may be carried by the County; (iii) a provision that no act or omission of Borrower shall affect or limit the obligation of the insurance carrier to pay the amount of any loss sustained; and (iv) a waiver by the insurer of all rights of subrogation against the County and its authorized parties in connection with any loss or damage thereby insured against. Section 4.17 Anti-Lobbying Certification. (a)Borrower certifies, to the best of Borrower's knowledge or belief, that: (i)No Federal appropriated funds have been paid or will be paid, by or on behalf of it, to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement; (ii)If any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, grant, loan, or 39 863\01\1367144.4 cooperative agreement, it will complete and submit Standard Form-LLL, Disclosure Form to Report Lobbying, in accordance with its instructions. (b)This certification is a material representation of fact upon which reliance was placed when this Agreement was made or entered into. Submission of this certification is a prerequisite for making or entering into this Agreement imposed by Section 1352, Title 31, U.S. Code. Any person who fails to file the required certification shall be subject to a civil penalty of not less than Ten Thousand Dollars ($10,000) and no more than One Hundred Thousand Dollars ($100,000) for such failure. Section 4.18 Covenants Regarding Approved Financing and Partnership Agreement. (a)Borrower shall promptly pay the principal and interest when due on any Approved Financing. (b)Borrower shall promptly notify the County in writing of the existence of any default under any documents evidencing Approved Financing whether or not a default has been declared by the lender, and any defaults under the Partnership Agreement, and provide the County copies of any notice of default. (c)Borrower may not amend, modify, supplement, cancel or terminate the Partnership Agreement or any documents related to any loan that is part of the Approved Financing without the prior written consent of the County. (d)Borrower may not incur any indebtedness of any kind other than Approved Financing or encumber the Development with any liens (other than liens for Approved Financing approved by the County) without the prior written consent of the County. (e)The Partnership Agreement may not include any provisions that conflict with the provisions of this Agreement, including, without limitation, the Residual Receipts payment provisions of Section 2.8 above. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BORROWER Section 5.1 Representations and Warranties. Borrower hereby represents and warrants to the County as follows and acknowledges, understands, and agrees that the representations and warranties set forth in this Article 5 are deemed to be continuing during all times when any portion of the Loan remains outstanding: (a)Organization. Borrower is duly organized, validly existing and in good standing under the laws of the State of California and has the power and authority to own its property and carry on its business as now being conducted. (b)Authority of Borrower. Borrower has full power and authority to execute 40 863\01\1367144.4 and deliver this Agreement and to make and accept the borrowings contemplated hereunder, to execute and deliver the Loan Documents and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement, and to perform and observe the terms and provisions of all of the above. (c)Authority of Persons Executing Documents. This Agreement and the Loan Documents and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement have been executed and delivered by persons who are duly authorized to execute and deliver the same for and on behalf of Borrower, and all actions required under Borrower's organizational documents and applicable governing law for the authorization, execution, delivery and performance of this Agreement and the Loan Documents and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement, have been duly taken. (d)Valid Binding Agreements. The Loan Documents and all other documents or instruments executed and delivered pursuant to or in connection with this Agreement constitute or, if not yet executed or delivered, will when so executed and delivered constitute, legal, valid and binding obligations of Borrower enforceable against it in accordance with their respective terms. (e)No Breach of Law or Agreement. Neither the execution nor delivery of the Loan Documents or of any other documents or instruments executed and delivered, or to be executed or delivered, pursuant to this Agreement, nor the performance of any provision, condition, covenant or other term hereof or thereof, will: (i) conflict with or result in a breach of any statute, rule or regulation, or any judgment, decree or order of any court, board, commission or agency whatsoever that is binding on Borrower, or conflict with any provision of the organizational documents of Borrower, or conflict with any agreement to which Borrower is a party; or (ii) result in the creation or imposition of any lien upon any assets or property of Borrower, other than liens established pursuant hereto. (f)Compliance with Laws; Consents and Approvals. The construction of the Development will comply with all applicable laws, ordinances, rules and regulations of federal, state and local governments and agencies and with all applicable directions, rules and regulations of the fire marshal, health officer, building inspector and other officers of any such government or agency. (g)Pending Proceedings. Borrower is not in default under any law or regulation or under any order of any court, board, commission or agency whatsoever, and there are no claims, actions, suits or proceedings pending or, to the knowledge of Borrower, threatened against or affecting Borrower or the Development, at law or in equity, before or by any court, board, commission or agency whatsoever which might, if determined adversely to Borrower, materially affect Borrower's ability to repay the Loan or impair the security to be given to the County pursuant hereto. (h)Title to Land. At the time of recordation of the Deed of Trust, Borrower will have good and marketable fee title to the Development and there will exist thereon or with respect thereto no mortgage, lien, pledge or other encumbrance of any character whatsoever other than liens for current real property taxes and liens in favor of the County or approved in 41 863\01\1367144.4 writing by the County. (i)Financial Statements. The financial statements of Borrower and other financial data and information furnished by Borrower to the County fairly and accurately present the information contained therein. As of the date of this Agreement, there has not been any material adverse change in the financial condition of Borrower from that shown by such financial statements and other data and information. (j)Sufficient Funds. Borrower holds sufficient funds and/or binding commitments for sufficient funds to complete the acquisition of the Property and the construction of the Development in accordance with the terms of this Agreement. (k)Taxes. Borrower and its subsidiaries have filed all federal and other material tax returns and reports required to be filed, and have paid all federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their income or the Property otherwise due and payable, except those that are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with generally accepted accounting principles. There is no proposed tax assessment against Borrower or any of its subsidiaries that could, if made, be reasonably expected to have a material adverse effect on the property, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of Borrower and its subsidiaries, taken as a whole, or which could result in (i) a material impairment of the ability of Borrower to perform under any loan document to which it is a party, or (ii) a material adverse effect upon the legality, validity, binding effect or enforceability against Borrower of any Loan Document. (l)Hazardous Materials. To the best of Borrower's knowledge, except as disclosed in writing by Borrower to the County prior to the date of this Agreement: (i) no Hazardous Material has been disposed of, stored on, discharged from, or released to or from, or otherwise now exists in, on, under, or around, the Property; (ii) neither the Property nor Borrower is in violation of any Hazardous Materials Law; and (iii) neither the Property nor Borrower is subject to any existing, pending or threatened Hazardous Materials Claims. ARTICLE 6 DEFAULT AND REMEDIES Section 6.1 Events of Default. Any one or more of the following constitutes an "Event of Default" by Borrower under this Agreement: (a)Failure to Construct. If Borrower fails to obtain permits, or to commence and prosecute construction of the Development to completion, within the times set forth in Article 3 above. (b)Failure to Make Payment. If Borrower fails to make any payment when such payment is due pursuant to the Loan Documents. (c)Failure to Submit Plans. If Borrower fails to submit a Marketing Plan, 42 863\01\1367144.4 Tenant Selection Plan, or Social Services Plan that is approved by the County in accordance with Section 3.10. (d)Breach of Covenants. If Borrower fails to duly perform, comply with, or observe any other condition, term, or covenant contained in this Agreement (other than as set forth in Section 6.1(a) through Section 6.1(c) and Section 6.1(e) through Section 6.1(m)), or in any of the other Loan Documents, and Borrower fails to cure such default within thirty (30) days after receipt of written notice thereof from the County to Borrower and to the Investor Limited Partner identified in Section 7.9, or any limited partner of Borrower who has requested written notice from the County of such failure ("Permitted Limited Partner"); provided, however, that if a different period or notice requirement is specified under any other section of this Article 6, the specific provisions shall control. If the Permitted Limited Partner cures an Event of Default within the cure period set forth in this subsection, the County will accept such action as curing the Event of Default as if such cure was performed by Borrower. If a Permitted Limited Partner is unable to cure an Event of Default because Borrower's general partner is in bankruptcy and/or because the cure requires removal of the general partner of Borrower and the Permitted Limited Partner is proceeding diligently to remove the general partner of Borrower in order to effect a cure of the Event of Default, the cure period shall be extended for such reasonable time as is necessary for the Permitted Limited Partner to effect a cure of the Event of Default, but in no event longer than sixty (60) days after the date of receipt by the Permitted Limited Partner of written notice of the Event of Default. (e)Default Under Other Loans. If a default is declared under any other financing for the Development by the lender of such financing and such default remains uncured following any applicable notice and cure period. (f)Insolvency. If a court having jurisdiction makes or enters any decree or order: (i) adjudging Borrower to be bankrupt or insolvent; (ii) approving as properly filed a petition seeking reorganization of Borrower, or seeking any arrangement for Borrower under the bankruptcy law or any other applicable debtor's relief law or statute of the United States or any state or other jurisdiction; (iii) appointing a receiver, trustee, liquidator, or assignee of Borrower in bankruptcy or insolvency or for any of their properties; (iv) directing the winding up or liquidation of Borrower if any such decree or order described in clauses (i) to (iv), inclusive, is unstayed or undischarged for a period of ninety (90) calendar days; or (v) Borrower admits in writing its inability to pay its debts as they fall due or will have voluntarily submitted to or filed a petition seeking any decree or order of the nature described in clauses (i) to (iv), inclusive. The occurrence of any of the Events of Default in this paragraph will act to accelerate automatically, without the need for any action by the County, the indebtedness evidenced by the Note. (g)Assignment; Attachment. If Borrower assigns its assets for the benefit of its creditors or suffers a sequestration or attachment of or execution on any substantial part of its property, unless the property so assigned, sequestered, attached or executed upon is returned or released within ninety (90) calendar days after such event or, if sooner, prior to sale pursuant to such sequestration, attachment, or execution. The occurrence of any of the events of default in this paragraph shall act to accelerate automatically, without the need for any action by the County, the indebtedness evidenced by the Note. (h)Suspension; Termination. If Borrower voluntarily suspends its business 43 863\01\1367144.4 or, the partnership is dissolved or terminated, other than a technical termination of the partnership for tax purposes. (i)Liens on Property and the Development. If any claim of lien (other than liens approved in writing by the County) is filed against the Development or any part thereof, or any interest or right made appurtenant thereto, or the service of any notice to withhold proceeds of the Loan and the continued maintenance of said claim of lien or notice to withhold for a period of twenty (20) days, without discharge or satisfaction thereof or provision therefor (including, without limitation, the posting of bonds) satisfactory to the County. (j)Condemnation. If there is a condemnation, seizure, or appropriation of all or the substantial part of the Property and the Development. (k)Unauthorized Transfer. If any Transfer occurs other than as permitted pursuant to Section 4.15. (l)Representation or Warranty Incorrect. If any Borrower representation or warranty contained in this Agreement, or in any application, financial statement, certificate, or report submitted to the County in connection with any of the Loan Documents, proves to have been incorrect in any material respect when made. (m)Applicability to General Partner. The occurrence of any of the events set forth in Section 6.1 (f), through Section 6.1 (h) in relation to Borrower's managing general partner, unless the removal and replacement of the Borrower's managing general partner in accordance with Section 4.15(d), within the time frame set forth in Section 6.1(d) cures such a default. Section 6.2 Remedies. Upon the occurrence of an Event of Default and until such Even of Default is cured or waived, the County is relieved of any obligation to disburse any portion of the Loan. In addition, upon the occurrence of an Event of Default and following the expiration of all applicable notice and cure periods the County may proceed with any and all remedies available to it under law, this Agreement, and the other Loan Documents. Such remedies include but are not limited to the following: (a)Acceleration of Note. The County may cause all indebtedness of Borrower to the County under this Agreement and the Note, together with any accrued interest thereon, to become immediately due and payable. Borrower waives all right to presentment, demand, protest or notice of protest or dishonor. The County may proceed to enforce payment of the indebtedness and to exercise any or all rights afforded to the County as a creditor and secured party under the law including the Uniform Commercial Code, including foreclosure under the Deed of Trust. Borrower is liable to pay the County on demand all reasonable expenses, costs and fees (including, without limitation, reasonable attorney's fees and expenses) paid or incurred by the County in connection with the collection of the Loan and the preservation, maintenance, protection, sale, or other disposition of the security given for the Loan. (b)Specific Performance. The County has the right to mandamus or other 44 863\01\1367144.4 suit, action or proceeding at law or in equity to require Borrower to perform its obligations and covenants under the Loan Documents or to enjoin acts on things that may be unlawful or in violation of the provisions of the Loan Documents. (c)Right to Cure at Borrower's Expense. The County has the right (but not the obligation) to cure any monetary default by Borrower under a loan other than the Loan. Upon demand therefor, Borrower shall reimburse the County for any funds advanced by the County to cure such monetary default by Borrower, together with interest thereon from the date of expenditure until the date of reimbursement at the Default Rate. Section 6.3 Right of Contest. Borrower may contest in good faith any claim, demand, levy, or assessment the assertion of which would constitute an Event of Default hereunder. Any such contest is to be prosecuted diligently and in a manner unprejudicial to the County or the rights of the County hereunder. Section 6.4 Remedies Cumulative. No right, power, or remedy given to the County by the terms of this Agreement or the other Loan Documents is intended to be exclusive of any other right, power, or remedy; and each and every such right, power, or remedy is cumulative and in addition to every other right, power, or remedy given to the County by the terms of any such instrument, or by any statute or otherwise against Borrower and any other person. Neither the failure nor any delay on the part of the County to exercise any such rights and remedies will operate as a waiver thereof, nor does any single or partial exercise by the County of any such right or remedy preclude any other or further exercise of such right or remedy, or any other right or remedy. ARTICLE 7 GENERAL PROVISIONS Section 7.1 Relationship of Parties. Nothing contained in this Agreement is to be interpreted or understood by any of the Parties, or by any third persons, as creating the relationship of employer and employee, principal and agent, limited or general partnership, or joint venture between the County and Borrower or its agents, employees or contractors, and Borrower will at all times be deemed an independent contractor and to be wholly responsible for the manner in which it or its agents, or both, perform the services required of it by the terms of this Agreement. Borrower has and retains the right to exercise full control of employment, direction, compensation, and discharge of all persons assisting in the performance of services under the Agreement. In regards to the construction and operation of the Development, Borrower is solely responsible for all matters relating to payment of its employees, including compliance with Social Security, withholding, and all other laws and regulations governing such matters, and must include requirements in each contract that contractors are solely responsible for similar matters relating to their employees. Borrower is solely responsible for its own acts and those of its agents and employees. 45 863\01\1367144.4 Section 7.2 No Claims. Nothing contained in this Agreement creates or justifies any claim against the County by any person that Borrower may have employed or with whom Borrower may have contracted relative to the purchase of materials, supplies or equipment, or the furnishing or the performance of any work or services with respect to the purchase of the Property, the construction or operation of the Development, and Borrower shall include similar requirements in any contracts entered into for the construction or operation of the Development. Section 7.3 Amendments. No alteration or variation of the terms of this Agreement is valid unless made in writing by the Parties. The County Deputy Director, Department of Conservation and Development is authorized to execute on behalf of the County amendments to the Loan Documents or amended and restated Loan Documents as long as any discretionary change in the amount or terms of this Agreement is approved by the County's Board of Supervisors. Section 7.4 Indemnification. Borrower shall indemnify, defend and hold the County and its board members, supervisors, directors, officers, employees, agents, successors and assigns harmless against any and all claims, suits, actions, losses and liability of every kind, nature and description made against it and expenses (including reasonable attorneys' fees) which arise out of or in connection with this Agreement, including but not limited to the purchase of the Property and the development, construction, marketing and operation of the Development, except to the extent such claim arises from the gross negligence or willful misconduct of the County, its agents, and its employees. The provisions of this Section will survive the expiration of the Term and the reconveyance of the Deed of Trust. Section 7.5 Non-Liability of County Officials, Employees and Agents. No member, official, employee or agent of the County is personally liable to Borrower in the event of any default or breach of this Agreement by the County or for any amount that may become due from the County pursuant to this Agreement. Section 7.6 No Third Party Beneficiaries. Except for the Investor Limited Partner, there are no third party beneficiaries to this Agreement. Section 7.7 Discretion Retained By County. The County's execution of this Agreement in no way limits any discretion the County may have in the permit and approval process related to the construction of the Development. Section 7.8 Conflict of Interest. (a)Except for approved eligible administrative or personnel costs, no person 46 863\01\1367144.4 described in Section 7.8(b) below who exercises or has exercised any functions or responsibilities with respect to the activities funded pursuant to this Agreement or who is in a position to participate in a decision-making process or gain inside information with regard to such activities, may obtain a financial interest or benefit from the activity, or have a financial interest in any contract, subcontract or agreement with respect thereto, or the proceeds thereunder, either for themselves or those with whom they have immediate family or business ties, during, or at any time after, such person's tenure. Borrower shall exercise due diligence to ensure that the prohibition in this Section 7.8(a) is followed. (b)The conflict of interest provisions of Section 7.8(a) above apply to any person who is an employee, agent, consultant, officer, or elected or appointed official of the County. (c)In accordance with California Government Code Section 1090 and the Political Reform Act, California Government Code section 87100 et seq., no person who is a director, officer, partner, trustee or employee or consultant of Borrower, or immediate family member of any of the preceding, may make or participate in a decision, made by the County or a County board, commission or committee, if it is reasonably foreseeable that the decision will have a material effect on any source of income, investment or interest in real property of that person or Borrower. Interpretation of this section is governed by the definitions and provisions used in the Political Reform Act, California Government Code Section 87100 et seq., its implementing regulations manual and codes, and California Government Code Section 1090. (d)Borrower shall comply with the conflict of interest provisions set forth in 24 C.F.R. 92.356 and 24 C.F.R. Section 574.625. Section 7.9 Notices, Demands and Communications. All notices required or permitted by any provision of this Agreement must be in writing and sent by registered or certified mail, postage prepaid, return receipt requested, or delivered by express delivery service, return receipt requested, or delivered personally, to the principal office of the Parties as follows: County:County of Contra Costa Department of Conservation and Development 30 Muir Road Martinez, CA 94553 Attention: Affordable Housing Program Manager Borrower:1550 Third, L.P. c/o 1550 Third LLC 1521 University Avenue Berkeley, CA 94703 Attn: Executive Director 47 863\01\1367144.4 Investor Limited Partner:Wells Fargo Affordable Housing Community Development Corporation MAC D1053-170 301 South College Street Charlotte, NC 28288 Attn.: Director of Tax Credit Asset Management Such written notices, demands and communications may be sent in the same manner to such other addresses as the affected party may from time to time designate by mail as provided in this Section. Receipt will be deemed to have occurred on the date shown on a written receipt as the date of delivery or refusal of delivery (or attempted delivery if undeliverable). Section 7.10 Applicable Law. This Agreement is governed by the laws of the State of California. Section 7.11 Parties Bound. Except as otherwise limited herein, this Agreement binds and inures to the benefit of the parties and their heirs, executors, administrators, legal representatives, successors, and assigns. This Agreement is intended to run with the land and to bind Borrower and its successors and assigns in the Property and the Development for the entire Term, and the benefit hereof is to inure to the benefit of the County and its successors and assigns. Section 7.12 Attorneys' Fees. If any lawsuit is commenced to enforce any of the terms of this Agreement, the prevailing party will have the right to recover its reasonable attorneys' fees and costs of suit from the other party. Section 7.13 Severability. If any term of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions will continue in full force and effect unless the rights and obligations of the parties have been materially altered or abridged by such invalidation, voiding or unenforceability. Section 7.14 Force Majeure. In addition to specific provisions of this Agreement, performance by either party will not be deemed to be in default where delays or defaults are due to war, insurrection, strikes, lock- outs, riots, floods, earthquakes, fires, quarantine restrictions, freight embargoes, lack of transportation, or court order. An extension of time for any cause will be deemed granted if notice by the party claiming such extension is sent to the other within ten (10) days from the commencement of the cause and such extension of time is not rejected in writing by the other party within ten (10) days after receipt of the notice. In no event will the County be required to agree to cumulative delays in excess of one hundred eighty (180) days. 48 863\01\1367144.4 Section 7.15 County Approval. The County has authorized the County Deputy Director- Department of Conservation and Development to execute the Loan Documents and deliver such approvals or consents as are required by this Agreement, and to execute estoppel certificates concerning the status of the Loan and the existence of Borrower defaults under the Loan Documents. Section 7.16 Waivers. Any waiver by the County of any obligation or condition in this Agreement must be in writing. No waiver will be implied from any delay or failure by the County to take action on any breach or default of Borrower or to pursue any remedy allowed under this Agreement or applicable law. Any extension of time granted to Borrower to perform any obligation under this Agreement does not operate as a waiver or release from any of its obligations under this Agreement. Consent by the County to any act or omission by Borrower may not be construed to be consent to any other or subsequent act or omission or to waive the requirement for the County's written consent to future waivers. Section 7.17 Title of Parts and Sections. Any titles of the sections or subsections of this Agreement are inserted for convenience of reference only and are to be disregarded in interpreting any part of the Agreement's provisions. Section 7.18 Entire Understanding of the Parties. The Loan Documents constitute the entire agreement of the parties with respect to the Loan. The Loan Documents supersede the HOME Project Agreement in its entirety. Section 7.19 Multiple Originals; Counterpart. This Agreement may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts. Remainder of Page Left Intentionally Blank Signature page County Loan Agreement 863\01\1367144.4 49 The parties are executing this Agreement as of the date first above written. COUNTY: COUNTY OF CONTRA COSTA, a political subdivision of the State of California By:____________________________________ Name: ____________________________________ Its:____________________________________ APPROVED AS TO FORM: SHARON L. ANDERSON County Counsel By:______________________ Kathleen Andrus Deputy County Counsel BORROWER: 1550 Third, L.P., a California limited partnership By: 1550 Third LLC, a California limited liability company, its general partner By: Satellite AHA Development, Inc., a California nonprofit public benefit corporation, its sole member By:_______________________ Name:______________________ Its:_________________________ A-1 863\01\1367144.4 EXHIBIT A LEGAL DESCRIPTION OF THE PROPERTY The land is situated in the State of California, County of Contra Costa, and is described as follows: B-1 863\01\1367144.4 EXHIBIT B APPROVED DEVELOPMENT BUDGET C-1 863\01\1367144.4 EXHIBIT C NEPA MITIGATION REQUIREMENTS Mitigation Measure(s) Source Method and date County staff informed Project Sponsor Included in County loan document and /or project agreement Verification of Mitigation Measure(s) Responsible for implementation Mitigation Timing Responsible for monitoring and reporting on implementation Monitoring and reporting frequency Verification of compliance Date completed Comments Mold: Remove mold in bathroom in Unit 2 of 1540 3rd Avenue building Phase 1 Environmental Site Assessment, January 30, 2009 Mold survey results Project Sponsor, architect, licensed mold surveyor Pre construction Architect and licensed mold surveyor Once- after mold removal has been completed Letter from architect Copy of Mold Survey Asbestos and lead based paint: Based on the findings of the Phase 1 Environmental Assessment conducted by Furgo West Inc. dated January 30, 2009, it is recommended that prior to renovation or demolition, sampling will be conducted to assess if asbestos containing building materials and/or lead based paint is contained in the building. If found on site, All asbestos- containing materials found on the site must be removed prior to demolition in accordance with Phase 1 Environmental Site Assessment, January 30, 2009 Pre- Demolition Survey September 20, 2012 Asbestos and lead based paint licensed contractor Pre and post demolition Architect and contractor Once- after demolition has been completed. Certification/permit post demolition C-2 863\01\1367144.4 BAAQMD Regulation 11, Rule 2, including specific requirements for surveying, notification, removal, and disposal of material containing asbestos. If lead is found on site, then the project applicant is required to follow all applicable guidelines per the HUD Guidelines for the Evaluation and Control of Lead-Based Paint Hazards in Housing. Soil Toxics: Furgo recommends removing the dieldrin impacted soil from the site prior to or as a part of the site development activities. They recommend confirmation testing after soil removal. Phase 2 Environmental Site Assessment, April 10, 2009 Project Sponsor, architect, contractor Pre and post demolition Architect and contractor Once – after demolition Letter from architect confirming correct demolition EBMUD: When development plans are finalized, SAHA will contact EBMUD's New Business Office and request a water service estimate to City of Walnut Creek Environmental Assessment February 2009 City of Walnut Creek Approved Construction plans Project Sponsor, architect, contractor Pre and post construction Architect and contractor Once – after construction has been completed Copy of Final approved Building Permit C-3 863\01\1367144.4 determine costs and conditions. Geo Tech/Soil Suitability: Submit a soils report o the City of Walnut Creek's Engineering Division. All recommendations, if any, will be required. City of Walnut Creek Environmental Assessment February 2009 Geo Tech/Soils Report City of Walnut Creek Approved Construction plans Project sponsor Pre, during and post construction Architect and contractor Once – after construction has been completed. Copy of Final approved Building Permit Relocation: The relocation of occupants must comply with the Uniform Relocation Act (URA) Project application Relocation consultant Pre construction Project sponsor and relocation consultant Once – post demolition but before construction starts Letter from Relocation Consultant confirming Relocation has been done correctly TABLE OF CONTENTS Page i 863\01\1367144.4 ARTICLE 1 DEFINITIONS AND EXHIBITS............................................................................2 Section 1.1 Definitions................................................................................................... 2 Section 1.2 Exhibits..................................................................................................... 11 ARTICLE 2 LOAN PROVISIONS............................................................................................11 Section 2.1 Loan.......................................................................................................... 11 Section 2.2 Interest....................................................................................................... 12 Section 2.3 Use of Loan Funds.................................................................................... 12 Section 2.4 Security..................................................................................................... 12 Section 2.5 Subordination............................................................................................ 12 Section 2.6 Conditions Precedent to Disbursement of Loan Funds............................. 13 Section 2.7 Conditions Precedent to Disbursement of Retention................................ 15 Section 2.8 Repayment Schedule................................................................................. 16 Section 2.9 Reports and Accounting of Residual Receipts.......................................... 17 Section 2.10 Non-Recourse. .......................................................................................... 18 ARTICLE 3 CONSTRUCTION OF THE DEVELOPMENT...................................................18 Section 3.1 Permits and Approvals.............................................................................. 18 Section 3.2 Bid Package. ............................................................................................. 18 Section 3.3 Construction Contract............................................................................... 19 Section 3.4 Construction Bonds................................................................................... 19 Section 3.5 Commencement of Construction.............................................................. 19 Section 3.6 Completion of Construction...................................................................... 20 Section 3.7 Changes; Construction Pursuant to Plans and Laws................................. 20 Section 3.8 Prevailing Wages...................................................................................... 21 Section 3.9 Accessibility.............................................................................................. 21 Section 3.10 Marketing Plan; Tenant Selection Plan; and Social Services Plan. .......................................................................................................... 22 Section 3.11 Equal Opportunity..................................................................................... 23 Section 3.12 Minority and Women-Owned Contractors............................................... 24 Section 3.13 Progress Reports....................................................................................... 24 Section 3.14 Construction Responsibilities................................................................... 24 Section 3.15 Mechanics Liens, Stop Notices, and Notices of Completion.................... 24 Section 3.16 Inspections................................................................................................ 25 Section 3.17 Approved Development Budget; Revisions to Budget............................. 25 Section 3.18 Developer Fee........................................................................................... 25 Section 3.19 Partnership/Asset Fee................................................................................ 25 Section 3.20 NEPA Mitigation Requirements............................................................... 25 ARTICLE 4 LOAN REQUIREMENTS.....................................................................................26 Section 4.1 Match Requirement................................................................................... 26 Section 4.2 Reserve Accounts...................................................................................... 26 Section 4.3 Financial Accountings and Post-Completion Audits................................ 26 Section 4.4 Approval of Annual Operating Budget..................................................... 27 Section 4.5 Information. .............................................................................................. 27 Section 4.6 Records. .................................................................................................... 27 TABLE OF CONTENTS (continued) Page ii 863\01\1367144.4 Section 4.7 County Audits........................................................................................... 28 Section 4.8 HOME and HOPWA Requirements......................................................... 29 Section 4.9 Hazardous Materials................................................................................. 33 Section 4.10 Maintenance; Damage and Destruction.................................................... 35 Section 4.11 Fees and Taxes.......................................................................................... 35 Section 4.12 Notice of Litigation................................................................................... 36 Section 4.13 Operation of Development as Affordable Housing.................................. 36 Section 4.14 Nondiscrimination..................................................................................... 36 Section 4.15 Transfer..................................................................................................... 36 Section 4.16 Insurance Requirements............................................................................ 37 Section 4.17 Anti-Lobbying Certification..................................................................... 38 Section 4.18 Covenants Regarding Approved Financing and Partnership Agreement................................................................................................. 39 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BORROWER.......................39 Section 5.1 Representations and Warranties................................................................ 39 ARTICLE 6 DEFAULT AND REMEDIES...............................................................................41 Section 6.1 Events of Default...................................................................................... 41 Section 6.2 Remedies................................................................................................... 43 Section 6.3 Right of Contest........................................................................................ 44 Section 6.4 Remedies Cumulative............................................................................... 44 ARTICLE 7 GENERAL PROVISIONS....................................................................................44 Section 7.1 Relationship of Parties.............................................................................. 44 Section 7.2 No Claims................................................................................................. 45 Section 7.3 Amendments............................................................................................. 45 Section 7.4 Indemnification......................................................................................... 45 Section 7.5 Non-Liability of County Officials, Employees and Agents...................... 45 Section 7.6 No Third Party Beneficiaries.................................................................... 45 Section 7.7 Discretion Retained By County................................................................ 45 Section 7.8 Conflict of Interest.................................................................................... 45 Section 7.9 Notices, Demands and Communications.................................................. 46 Section 7.10 Applicable Law......................................................................................... 47 Section 7.11 Parties Bound............................................................................................ 47 Section 7.12 Attorneys' Fees.......................................................................................... 47 Section 7.13 Severability............................................................................................... 47 Section 7.14 Force Majeure........................................................................................... 47 Section 7.15 County Approval....................................................................................... 48 Section 7.16 Waivers..................................................................................................... 48 Section 7.17 Title of Parts and Sections........................................................................ 48 Section 7.18 Entire Understanding of the Parties.......................................................... 48 Section 7.19 Multiple Originals; Counterpart................................................................ 48 EXHIBIT A Legal Description of the Property TABLE OF CONTENTS (continued) Page iii 863\01\1367144.4 EXHIBIT B Approved Development Budget EXHIBIT C NEPA Mitigation Requirements 863\01\1367144.4 HOPWA AND HOME LOAN AGREEMENT Between COUNTY OF CONTRA COSTA And 1550 THIRD, L.P. Third Avenue Apartments dated _________________, 2013 863\01\1371273.2 1 PROMISSORY NOTE (HOME AND HOPWA Loan) $2,700,000 Martinez, California ____________, 2013 FOR VALUE RECEIVED, the undersigned 1550 Third, L.P., a California limited partnership ("Borrower") hereby promises to pay to the order of the County of Contra Costa, a political subdivision of the State of California ("Holder"), the principal amount of Two Million Seven Hundred Thousand Dollars ($2,700,000) plus interest thereon pursuant to Section 2 below. All capitalized terms used but not defined in this Note have the meanings set forth in the Loan Agreement. 1.Borrower's Obligation. This Note evidences Borrower's obligation to repay Holder the principal amount of Two Million Seven Hundred Thousand Dollars ($2,700,000) with interest for the funds loaned to Borrower by Holder to finance the construction of the Development pursuant to the HOME and HOPWA Loan Agreement between Borrower and Holder of even date herewith (the "Loan Agreement"). 2.Interest. (a)HOME Loan. Subject to the provisions of Subsection (c) below, the HOME Loan bears simple interest at a rate of three percent (3%) per annum from the date of disbursement until full repayment of the principal balance of the HOME Loan. (b)HOPWA Loan. Subject to the provisions of Subsection (c) below, no interest will accrue on the outstanding principal balance of the HOPWA Loan. (c)Default Interest. If an Event of Default occurs, interest will accrue on all amounts due under this Note at the Default Rate until such Event of Default is cured by Borrower or waived by Holder. 3.Term and Repayment Requirements. Principal and interest under this Note is due and payable as set forth in Section 2.8 of the Loan Agreement. The unpaid principal balance hereunder, together with accrued interest thereon, is due and payable no later than the date that is the fifty-fifth (55th) anniversary of the Completion Date; provided, however, if a record of the Completion Date cannot be located or established, the Loan is due and payable on the fifty- seventh (57 th) anniversary of the date of this Note. 4.No Assumption. This Note is not assumable by the successors and assigns of Borrower without the prior written consent of Holder, except as provided in the Loan Agreement. 5.Security. This Note, with interest, is secured by the Deed of Trust. Upon execution, the Deed of Trust will be recorded in the official records of Contra Costa County, 863\01\1371273.2 2 California. Upon recordation of the Deed of Trust, this Note will become nonrecourse to Borrower, pursuant to and except as provided in Section 2.10 of the Loan Agreement which Section 2.10 is hereby incorporated into this Note. The terms of the Deed of Trust are hereby incorporated into this Note and made a part hereof. 6.Terms of Payment. (a)Borrower shall make all payments due under this Note in currency of the United States of America to Holder at Department of Conservation and Development, 30 Muir Road, Martinez, CA 94553, Attention: Affordable Housing Program Manager, or to such other place as Holder may from time to time designate. (b)All payments on this Note are without expense to Holder. Borrower shall pay all costs and expenses, including re-conveyance fees and reasonable attorney's fees of Holder, incurred in connection with the payment of this Note and the release of any security hereof. (c)Notwithstanding any other provision of this Note, or any instrument securing the obligations of Borrower under this Note, if, for any reason whatsoever, the payment of any sums by Borrower pursuant to the terms of this Note would result in the payment of interest that exceeds the amount that Holder may legally charge under the laws of the State of California, then the amount by which payments exceed the lawful interest rate will automatically be deducted from the principal balance owing on this Note, so that in no event is Borrower obligated under the terms of this Note to pay any interest that would exceed the lawful rate. (d)The obligations of Borrower under this Note are absolute and Borrower waives any and all rights to offset, deduct or withhold any payments or charges due under this Note for any reason whatsoever. 7.Event of Default; Acceleration. (a)Upon the occurrence of an Event of Default, the entire unpaid principal balance, together with all interest thereon, and together with all other sums then payable under this Note and the Deed of Trust will, at the option of Holder, become immediately due and payable without further demand. (b)Holder's failure to exercise the remedy set forth in Subsection 7(a) above or any other remedy provided by law upon the occurrence of an Event of Default does not constitute a waiver of the right to exercise any remedy at any subsequent time in respect to the same or any other Event of Default. The acceptance by Holder of any payment that is less than the total of all amounts due and payable at the time of such payment does not constitute a waiver of the right to exercise any of the foregoing remedies or options at that time or at any subsequent time, or nullify any prior exercise of any such remedy or option, without the express consent of Holder, except as and to the extent otherwise provided by law. 863\01\1371273.2 3 8.Waivers. (a)Borrower hereby waives diligence, presentment, protest and demand, and notice of protest, notice of demand, notice of dishonor and notice of non-payment of this Note. Borrower expressly agrees that this Note or any payment hereunder may be extended from time to time, and that Holder may accept further security or release any security for this Note, all without in any way affecting the liability of Borrower. (b)Any extension of time for payment of this Note or any installment hereof made by agreement of Holder with any person now or hereafter liable for payment of this Note must not operate to release, discharge, modify, change or affect the original liability of Borrower under this Note, either in whole or in part. 9.Miscellaneous Provisions. (a)All notices to Holder or Borrower are to be given in the manner and at the addresses set forth in the Loan Agreement, or to such addresses as Holder and Borrower may therein designate. (b)Borrower promises to pay all costs and expenses, including reasonable attorney's fees, incurred by Holder in the enforcement of the provisions of this Note, regardless of whether suit is filed to seek enforcement. (c)This Note is governed by the laws of the State of California. (d)The times for the performance of any obligations hereunder are to be strictly construed, time being of the essence. (e)The Loan Documents, of which this Note is a part, contain the entire agreement between the parties as to the Loan. This Note may not be modified except upon the written consent of the parties. IN WITNESS WHEREOF, Borrower is executing this Promissory Note as of the day and year first above written. 1550 Third, L.P., a California limited partnership By: 1550 Third LLC, a California limited liability company, its general partner By: Satellite AHA Development, Inc., a California nonprofit public benefit corporation, its sole member By:____________________ Name:___________________ Its:____________________ 1 863\01\1367104.3 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Contra Costa County Department of Conservation and Development 30 Muir Road Martinez, CA 94553 Attn: Affordable Housing Program Manager No fee for recording pursuant to Government Code Section 27383 __________________________________________________________________________ REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (Third Avenue Apartments) (HOME and HOPWA Funds) This Regulatory Agreement and Declaration of Restrictive Covenants (the "Agreement") is dated ____________, 2013 and is between the County of Contra Costa, a political subdivision of the State of California (the "County"), and 1550 Third, L.P., a California limited partnership ("Borrower"). RECITALS A.Defined terms used but not defined in these recitals are as defined in Article 1 of this Agreement. B.The County has received Home Investment Partnerships Act funds from the United States Department of Housing and Urban Development ("HUD") pursuant to the Cranston-Gonzales National Housing Act of 1990 ("HOME Funds"). The HOME Funds must be used by the County in accordance with 24 C.F.R. Part 92. C.The County has received Housing Opportunities for Persons with AIDS Program funds from HUD pursuant to the HOPWA program ("HOPWA Funds"). The HOPWA Funds are available to and administered by the County, as the subrecipient of the City of Oakland, which is the representative for the Alameda-Contra Costa County Eligible Metropolitan Area. The HOPWA Funds must be used by the County in accordance with 24 C.F.R. Part 574. D. Borrower is the owner of that certain real property located at 1550 Third Avenue in the City of Walnut Creek, County of Contra Costa, State of California, as more particularly described in Exhibit A (the "Property"). Borrower intends to construct forty-eight (48) multifamily housing units on the Property, twenty-three (23) of which will be for rental to very low income households, and one (1) manager's unit (the "Development"). The Development, as 2 863\01\1367104.3 well as all landscaping, roads and parking spaces on the Property and any additional improvements on the Property, are the "Improvements". E.Pursuant to a HOME and HOPWA Loan Agreement by and between the County and Borrower of even date herewith (the "Loan Agreement"), the County is lending Borrower Two Million Four Hundred Fifty Thousand Dollars ($2,450,000) of HOME Funds (the "HOME Loan") and Two Hundred Fifty Thousand Dollars ($250,000) of HOPWA Funds (the "HOPWA Loan") for a total loan amount of Two Million Seven Hundred Thousand Dollars ($2,700,000) (the "Loan"). F.The County has the authority to lend the Loan to Borrower pursuant to Government Code Section 26227, which authorizes counties to spend county funds for programs that will further a county's public purposes. In addition, the County has the authority to loan (i) the HOME Funds pursuant to 24 C.F.R. 92.205 and (ii) the HOPWA Funds pursuant to 24 C.F.R. 574.300. G.The County has agreed to make the Loan on the condition that Borrower maintain and operate the Development in accordance with restrictions set forth in this Agreement and in the related documents evidencing the Loan. H.In consideration of receipt of the Loan at an interest rate substantially below the market rate, Borrower agrees to observe all the terms and conditions set forth below. The parties therefore agree as follows: AGREEMENT ARTICLE 1 DEFINITIONS 1.1 Definitions. The following terms have the following meanings: (a)"Actual Household Size" means the actual number of persons in the applicable household. (b)"Adjusted Income" means, (i) with respect to the Tenant of each HOPWA Unit, the Tenant’s total anticipated annual income as defined in 24 CFR 5.609 and calculated pursuant to 24 CFR 5.611, and as further referenced in 24 CFR 574.310(d)(1), and (ii) with respect to the Tenant of each HOME-Assisted Unit the Tenant’s total anticipated annual income as defined in 24 CFR 5.609 and calculated pursuant to 24 CFR 5.611, and as further referenced in 24 CFR 92.203(b)(1). (c)"Agreement" has the meaning set forth in the first paragraph of this Agreement. 3 863\01\1367104.3 (d)"Assumed Household Size" means the household size "adjusted for family size appropriate to the unit" as such term is defined in Health & Safety Code Section 50052.5(h). (e)"City" means the City of Walnut Creek, California, a municipal corporation. (f)"Completion Date" means the date a final certificate of occupancy, or equivalent document is issued by the City to certify that the Development may be legally occupied. (g)"Deed of Trust" means the Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing of even date herewith by and among Borrower, as trustor, Old Republic Title Company, as trustee, and the County, as beneficiary, that encumbers the Property to secure repayment of the Loan and Borrower's performance of the Loan Documents. (h)"Development" has the meaning set forth in Paragraph D of the Recitals. (i)"Extremely Low Income Household" means a household (i) with an Adjusted Income that does not exceed thirty percent (30%) of Median Income, adjusted for Actual Household Size, and (ii) that is not an individual student not eligible to receive Section 8 assistance under 24 C.F.R. 5.612. (j)"Extremely Low Income Rent" means the maximum allowable rent for an Extremely Low Income Unit pursuant to Section 2.2(b) below. (k)"Extremely Low Income Units" means the Units which, pursuant to Section 2.1(a) below, are required to be occupied by Extremely Low Income Households. (l)"HOME" means the Home Investment Partnerships Act Program funded pursuant to the Cranston-Gonzales National Housing Act of 1990. (m)"HOME-Assisted Units" means the twenty-three (23) HOME-Assisted Units that are (i) restricted to occupancy by Very Low Income Households or Extremely Low Income Households (which, during the HOPWA Term, includes two (2) HOPWA Units), and (ii) are "floating" Units as defined in 24 C.F.R. 92.252(j). (n)"HOME Funds" has the meaning set forth in Paragraph B of the Recitals. (o)"HOME Loan" has the meaning set forth in Paragraph E of the Recitals. (p)"HOME Regulations" means the regulations set forth in 24 C.F.R. Part 92. (q)"HOME Term" means the period beginning on the Completion Date and ending on the twenty-first (21st) anniversary of the date of the Completion Date. 4 863\01\1367104.3 (r)"HOPWA" means the Housing Opportunities for Persons with AIDS Program pursuant to the AIDS Housing Opportunity Act (42 USC 12901 et. seq.), as amended by the Housing and Community Development Act of 1992 (42 USC 5301 et. seq.). (s)"HOPWA Eligible Household" means a household that (i) includes at least one Person with HIV/AIDS, and (ii) satisfies the definition of an Extremely Low Income Household. (t)"HOPWA Funds" has the meaning set forth in Paragraph C of the Recitals. (u)"HOPWA Loan" has the meaning set forth in Paragraph E of the Recitals. (v)"HOPWA Regulations" means the regulations set forth in 24 C.F.R. Part 574. (w)"HOPWA Term" means the period beginning on the date of this Agreement and ending on the tenth (10th) anniversary of the date of this Agreement, unless earlier terminated pursuant to Section 2.4. (x)"HOPWA Units" has the meaning set forth in Section 2.1(a)(1). (y)"HUD" has the meaning set forth in Paragraph B of the Recitals. (z)"Improvements" has the meaning set forth in Paragraph D of the Recitals. (aa)"Intercreditor Agreement" means that certain intercreditor agreement of even date herewith among the City, the County, and Borrower. (bb)"Loan" has the meaning set forth in Paragraph E of the Recitals. (cc)"Loan Agreement" has the meaning set forth in Paragraph E of the Recitals. (dd)"Loan Documents" means the documents evidencing the Loan including this Agreement, the Note, the Loan Agreement, the Intercreditor Agreement, and the Deed of Trust. (ee)"Low HOME Rent" means a monthly Rent that does not exceed the maximum rent published by HUD for a Very Low Income Household for the applicable bedroom size as set forth in 24 C.F.R. 92.252(b). (ff)"Low Income Household" means a Tenant with an Adjusted Income that does not exceed eighty percent (80%) of Median Income, with adjustments for smaller and larger families, except that HUD may establish income ceilings higher or lower than eighty percent (80%) of Median Income on the basis of HUD findings that such variations are necessary 5 863\01\1367104.3 because of prevailing levels of construction costs or fair market rents, or unusually high or low family incomes, as such definition may be amended pursuant to 24 C.F.R. Section 92.2. (gg)"Marketing Plan" has the meaning set forth in Section 4.3(a). (hh)"Median Income" means the median gross yearly income, adjusted for Actual Household Size as specified herein, in the County of Contra Costa, California, as published from time to time by HUD. In the event that such income determinations are no longer published, or are not updated for a period of at least eighteen (18) months, the County shall provide Borrower with other income determinations that are reasonably similar with respect to methods of calculation to those previously published by HUD. (ii)"Note" means the promissory note that evidences Borrower's obligation to repay the Loan, as such may be amended form time to time. (jj)"Person with HIV/AIDS" means a person with the disease of acquired immunodeficiency syndrome or any conditions arising from the etiological agent for acquired immunodeficiency syndrome, including infection with the human immunodeficiency virus (HIV), as confirmed by a certification of HIV-positive test status to be delivered to and maintained on file by Borrower as such definition may be amended as set forth in 24 C.F.R. 574.3. (kk)"Property" has the meaning set forth in Paragraph D of the Recitals. (ll)"Remainder Term" means the period that begins on the date the HOPWA Term expires or is terminated by the County pursuant to Section 2.5, and ends on the last day of the Term. (mm) "Rent" means the total monthly payments by the Tenant of a Unit for the following: use and occupancy of the Unit and land and associated facilities; any separately charged fees or service charges assessed by Borrower which are customarily charged in rental housing and required of all Tenants (subject to the limitations set forth in 24 C.F.R. 92.214(b)(3)), other than security deposits; an allowance for the cost of an adequate level of service for utilities paid by the Tenant, including garbage collection, sewer, water, electricity, gas and other heating, cooking and refrigeration fuel, but not telephone service or cable TV; and any other interest, taxes, fees or charges for use of the land or associated facilities and assessed by a public or private entity other than Borrower, and paid by the Tenant. (nn)"Social Services Plan" has the meaning set forth in Section 4.3(c). (oo)"Tenant" means the tenant household that occupies a Unit in the Development. (pp)"Tenant Selection Plan" has the meaning set forth in Section 4.3(b). 6 863\01\1367104.3 (qq)"Term" means the term of this Agreement which commences as of the date of this Agreement, and unless sooner terminated pursuant to the terms of this Agreement, expires on the fifty-fifth (55th) anniversary of the Completion Date; provided, however, if a record of the Completion Date cannot be located or established, the Term will expire on the fifty- seventh (57th) anniversary of this Agreement. (rr)"Unit(s)" means one (1) or more of the units in the Development. (ss)"Very Low Income Household" means a household (i) with an Adjusted Income that does not exceed fifty percent (50%) of Median Income, with adjustments for smaller and larger families, except that HUD may establish income ceilings higher or lower than fifty percent (50%) of Median Income on the basis of HUD findings that such variations are necessary because of prevailing levels of construction costs or fair market rents, or unusually high or low family incomes, as set forth in 24 C.F.R. Section 92.2, and (ii) that is not an individual student not eligible to receive Section 8 assistance under 24 C.F.R. 5.612. (tt)"Very Low Income Units" means the Units which, pursuant to Section 2.1(b) below, are required to be occupied by Very Low Income Households. ARTICLE 2 AFFORDABILITY AND OCCUPANCY COVENANTS 2.1 Occupancy Requirements. (a)Extremely Low Income Units. (1)During the HOPWA Term, Borrower shall cause two (2) Units to be rented to and occupied by or, if vacant, available for occupancy by, HOPWA-Eligible Households (such units, the “HOPWA Units”). (2)During the HOPWA Term, in addition to the HOPWA Units, Borrower shall cause two (2) Units to be rented to and occupied by or, if vacant, available for occupancy by Extremely Low Income Households, which households are not required to be HOPWA-Eligible Households. (3)During the Remainder Term, Borrower shall cause four (4) Units to be rented to and occupied by or, if vacant, available for occupancy by, Extremely Low Income Households, which households are not required to be HOPWA-Eligible Households. (b)Very Low Income Units. During the Term, Borrower shall cause nineteen (19) Units to be rented to and occupied by or, if vacant, available for occupancy by, Very Low Income Households. (c)Intermingling of Units. Borrower shall cause the HOME-Assisted Units to be intermingled throughout the Development and of comparable quality to all other Units. All Tenants must have equal access to and enjoyment of all common facilities in the Development. 7 863\01\1367104.3 (d)Disabled Persons Occupancy. Borrower shall cause the Development to be operated at all times in compliance with the provisions of: (i) the Unruh Act, (ii) the California Fair Employment and Housing Act, (iii) Section 504 of the Rehabilitation Act of 1973, (iv) the United States Fair Housing Act, as amended, and (v) the Americans With Disabilities Act of 1990, which relate to disabled persons access. Borrower shall indemnify, protect, hold harmless and defend (with counsel reasonably satisfactory to the County) the County, and its board members, officers and employees, from all suits, actions, claims, causes of action, costs, demands, judgments and liens arising out of Borrower's failure to comply with applicable legal requirements related to housing for persons with disabilities. The provisions of this subsection will survive expiration of the Term or other termination of this Agreement, and remain in full force and effect. (e)HOME-Assisted Unit Compliance Deadline. Each HOME-Assisted Unit must be rented to and occupied by an Extremely Low Income Household or a Very Low Income Household pursuant to this Section 2.1 on or before the date that occurs eighteen (18) months after the Completion Date. If Borrower fails to comply with this requirement, Borrower shall repay a portion of the HOME Loan, with interest, in accordance with Section 2.8(c) of the Loan Agreement. 2.2 Allowable Rent. (a)HOPWA Rent. (1)During HOPWA Term. Subject to the provisions of Section 2.4 below and notwithstanding subsection 2.2(b) below, the total monthly Rent paid by a Tenant of a HOPWA Unit during the HOPWA Term may not exceed the amount that is equal to the greater of: (A)thirty percent (30%) of the household's monthly Adjusted Income, as adjusted pursuant to 24 C.F.R. 574.310(d)(1); (B)ten percent (10%) of the household's monthly gross income; and (C)if the household is receiving payments for welfare assistance from a public agency and a part of the payments, adjusted in accordance with the household's actual housing costs, is specifically designated by the agency to meet the household's housing costs, the portion of the payments that is so designated. (2)Following Expiration of the HOPWA Term. Subject to the provisions of Section 2.4 below the Rent paid by a HOPWA Eligible Household that occupies a HOPWA Unit during the HOPWA Term and that continues to reside in the Unit following the expiration of the HOPWA Term, must be equal to the amount specified in Section 2.2(a)(1). (3)Following Termination of the HOPWA Term. Subject to the provisions of Section 2.4 below, the Rent paid by a HOPWA Eligible Household that occupies a 8 863\01\1367104.3 HOPWA Unit during the HOPWA Term and that continues to reside in the Unit following the termination of the HOPWA Term pursuant to Section 2.5 below, must be equal to the amount specified in Section 2.2(b). (b)Extremely Low Income Rent. Subject to the provisions of Section 2.4 below, the Rent paid by Tenants of Extremely Low Income Units may not exceed one-twelfth (1/12) of thirty percent (30%) of thirty percent (30%) of Median Income, adjusted for Assumed Household Size. (c)Very Low Income Rent. Subject to the provisions of Section 2.4 below, the Rent paid by Tenants of Very Low Income Units, may not exceed the Low HOME Rent. (d)No Additional Fees. Borrower may not charge any fee, other than Rent, to any Tenant of the HOME-Assisted Units for any housing or other services provided by Borrower. 2.3 Rent Increases. (a)Rent Amount. The initial Rent for all HOME-Assisted Units must be approved by the County prior to occupancy. The County will provide Borrower with a schedule of maximum permissible Rents for the HOME-Assisted Units and the maximum monthly allowances for utilities and services (excluding telephone) annually. (b)Rent Increases. All Rent increases for all HOME-Assisted Units are subject to County approval. No later than sixty (60) days prior to the proposed implementation of any Rent increase affecting a County-Assisted Unit, Borrower shall submit to the County a schedule of any proposed increase in the Rent charged for HOME-Assisted Units. The Rent for such Units may be increased no more than once annually based upon the annual income certification described in Article 3. The County will disapprove a Rent increase if it violates the schedule of maximum permissible Rents for the HOME-Assisted Units provided to Borrower by the County, or is greater than a 5% increase over the previous year's Rent. Borrower shall give Tenants written notice at least thirty (30) days prior to any Rent increase, following completion of the County approval process set forth above. 2.4 Increased Income of Tenants. (a)Increased Income of HOPWA Eligible Household During HOPWA Term. If upon the annual certification of the income of a HOPWA Eligible Household during the HOPWA Term, Borrower determines that the Tenant has an Adjusted Income exceeding the maximum qualifying income of an Extremely Low Income Household, the Tenant may continue to occupy the Unit and Borrower shall continue to charge such Tenant Rent consistent with Section 2.2(a)(1) above. Borrower shall then rent the next available HOPWA Unit to an Extremely Low Income Household that is also a HOPWA Eligible Household, to comply with the requirements of Section 2.1(a)(1) above. Any Rent increase is subject to Section 2.3 above. (b)Increased Income above Extremely Low Income but below Low Income Limit. If, upon the annual certification of the income of a Tenant of an Extremely Low Income 9 863\01\1367104.3 Unit during the Term, Borrower determines that the Tenant’s income has increased above the qualifying limit for an Extremely Low Income Household, but not above the qualifying income for a Low Income Household, the Tenant may continue to occupy the Unit and Borrower shall continue to charge such Tenant Extremely Low Income Rent. Borrower shall then (i) rent the next available Unit to an Extremely Low Income Household to comply with the requirements of Section 2.1(a)(2) or Section 2.1(a)(3), as applicable, at a Rent not exceeding Extremely Low Income Rent, or (ii) designate another comparable Unit that is occupied by an Extremely Low Income Household as an Extremely Low Income Unit, to comply with the requirements of Section 2.1(a)(2) or Section 2.1(a)(3), as applicable. On the day that Borrower complies with Section 2.1(a)(2) or Section 2.1(a)(3), as applicable, in accordance with this Section 2.4(b), the Unit with the over-income Tenant will no longer be considered a HOME-Assisted Unit. (c)Increased Income above Very Low Income but below Low Income Limit. If, upon the annual certification of the income of a Tenant of a Very Low Income Unit, Borrower determines that the Tenant’s income has increased above the qualifying limit for a Very Low Income Household, but not above the qualifying income for a Low Income Household, the Tenant may continue to occupy the Unit and Borrower shall continue to charge such Tenant the Low HOME Rent. Borrower shall then (i) rent the next available Unit to a Very Low Income Household to comply with the requirements of Section 2.1(b) above, at a Rent not exceeding the Low HOME Rent, or (ii) designate another comparable Unit that is occupied by a Very Low Income Household as a Very Low Income Unit, to comply with the requirements of Section 2.1(b) above. On the day that Borrower complies with Section 2.1(b) in accordance with this Section 2.4(c), the Unit with the over-income Tenant will no longer be considered a HOME- Assisted Unit. (d)Non-Qualifying Household. If, upon the annual certification of the income a Tenant of a HOME-Assisted Unit that is not a HOPWA Unit, Borrower determines that the Tenant’s income has increased above the qualifying limit for a Low Income Household, the Tenant may continue to occupy the Unit. Upon the expiration of such Tenant's lease, Borrower shall: (1)With 60 days’ advance written notice, increase such Tenant’s Rent to the lesser of (i) one-twelfth (1/12) of thirty percent (30%) of the actual Adjusted Income of the Tenant, and (ii) the fair market rent (subject to 24 C.F.R. 92.252(i)(2) regarding low income housing tax credit requirements), and (2)Rent the next available Unit to an Extremely Low Income Household, or a Very Low Income Household, as applicable, to comply with the requirements of Section 2.1 above, at a Rent not exceeding the maximum Rent specified in Section 2.2, or designate another comparable Unit that is occupied by an Extremely Low Income Household, or Very Low Income Household, as applicable, as a HOME-Assisted Unit, to meet the requirements of Section 2.1 above. On the day that Borrower complies with Section 2.1 in accordance with this Section 2.4(d), the Unit with the over-income Tenant will no longer be considered a HOME- Assisted Unit. 10 863\01\1367104.3 (e)Termination of Occupancy. Upon termination of occupancy of a County- Assisted Unit by a Tenant, such Unit will be deemed to be continuously occupied by a household of the same income level as the initial income level of the vacating Tenant, until such unit is reoccupied, at which time categorization of the Unit will be established based on the occupancy requirements of Section 2.1. 2.5 Cure for AIDS. If, in the sole determination of the County, there is a cure for AIDS and therefore no need for the HOPWA Units, the County shall provide to Borrower a written notice that sets forth the termination date of the HOPWA Term. 2.6 Units Available to the Disabled. Borrower shall construct the Development in compliance with all applicable federal and state disabled persons accessibility requirements including but not limited to the Federal Fair Housing Act; Section 504 of the Rehabilitation Act of 1973; Title II and/or Title III of the Americans with Disabilities Act; and Title 24 of the California Code of Regulations. In compliance with Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794, et seq.), a minimum of three (3) Units must be fully accessible to households with a mobility impaired member and an additional one (1) Unit must be fully accessible to hearing and/or visually impaired persons. ARTICLE 3 INCOME CERTIFICATION AND REPORTING 3.1 Income Certification. (a)Borrower shall obtain, complete, and maintain on file, within sixty (60) days before expected occupancy and annually thereafter, income certifications from each Tenant renting any of the HOME-Assisted Units. Borrower shall make a good faith effort to verify the accuracy of the income provided by the applicant or occupying household, as the case may be, in an income certification. To verify the information, Borrower shall take two or more of the following steps: (i) obtain a pay stub for the most recent pay period; (ii) obtain an income tax return for the most recent tax year; (iii) conduct a credit agency or similar search; (iv) obtain an income verification form from the applicant's current employer; (v) obtain an income verification form from the Social Security Administration and/or the California Department of Social Services if the applicant receives assistance from either of such agencies; or (vi) if the applicant is unemployed and does not have a tax return, obtain another form of independent verification. Where applicable, Borrower shall examine at least two (2) months of relevant source documentation. Copies of Tenant income certifications are to be available to the County upon request. (b)For each HOPWA Unit during the HOPWA Term, Borrower shall obtain, complete, and maintain on file, immediately prior to initial occupancy and annually thereafter, a certification from the Tenant that the HOPWA Unit is occupied by a HOPWA Eligible Household. 11 863\01\1367104.3 3.2 Reporting Requirements. (a)Borrower shall submit to the County within one hundred eighty (180) days after the Completion Date, and not later than forty-five (45) days after the close of each calendar year, or such other date as may be requested by the County, a report that includes the following data for each Unit and specifically identifies which Units are HOME-Assisted Units: (i) Tenant income, (ii) the number of occupants, (iii) the Rent, (iv) the number of bedrooms, and (v) the initial address of each Tenant. To demonstrate continued compliance with Section 2.1 Borrower shall cause each annual report after the initial report to include a record of any subsequent Tenant substitutions and any vacancies in HOME-Assisted Units that have been filled. (b)Borrower shall submit to the County within forty-five (45) days after receipt of a written request, or such other time agreed to by the County, any other information or completed forms requested by the County in order to comply with reporting requirements of HUD, the State of California, and the County. 3.3 Tenant Records. Borrower shall maintain complete, accurate and current records pertaining to the Development, and shall permit any duly authorized representative of the County to inspect records, including records pertaining to income and household size of Tenants. All Tenant lists, applications and waiting lists relating to the Development are to be at all times: (i) separate and identifiable from any other business of Borrower, (ii) maintained as required by the County, in a reasonable condition for proper audit, and (iii) subject to examination during business hours by representatives of the County. Borrower shall retain copies of all materials obtained or produced with respect to occupancy of the Units for a period of at least five (5) years. The County may examine and make copies of all books, records or other documents of Borrower that pertain to the Development. 3.4 HOME Record Requirements. During the HOME Term all records maintained by Borrower pursuant to this Agreement are to be (i) maintained in compliance with all applicable HUD records and accounting requirements, and (ii) open to and available for inspection and copying by HUD and its authorized representatives at reasonable intervals during normal business hours; provided however, records pertaining to Tenant income verifications, Rents, and Development inspections are subject to HUD inspection for five (5) years after expiration of the HOME Term. Borrower is subject to the audit requirements set forth in 24 CFR 92.505 during the HOME Term. 3.5 HOPWA Record Requirements. During the HOPWA Term all records maintained by Borrower pursuant to this Agreement for the HOPWA Units are to be (i) maintained in compliance with all applicable HUD records and accounting requirements (including those set out in 24 C.F.R. 574.450 and 24 C.F.R. 574.530), and (ii) open to and available for inspection and copying by HUD and its authorized representatives at reasonable intervals during normal business hours; provided however, records pertaining to Tenant income verifications, Rents, and Development inspections are subject to HUD inspection for five (5) years after expiration of the HOPWA Term. Borrower is subject to the audit requirements set forth in 24 CFR 574.650 during the HOPWA Term. 3.6 Additional Information. Borrower shall provide any additional information 12 863\01\1367104.3 reasonably requested by the County. ARTICLE 4 OPERATION OF THE DEVELOPMENT 4.1 Residential Use. Borrower shall operate the Development for residential use only. No part of the Development may be operated as transient housing. 4.2 Compliance with Loan Documents and Program Requirements. Borrower's actions with respect to the Property shall at all times be in full conformity with: (i) all requirements of the Loan Documents; (ii) all requirements imposed on projects assisted with HOME Funds as contained in 42 U.S.C. Section 12701, et seq., 24 C.F.R. Part 92, and other implementing rules and regulations; (iii) all requirements imposed on projects assisted under the HOPWA Program as contained in 42 U.S.C. Section 12901, et seq., 24 C.F.R. Part 574, and other implementing rules and regulations; and (iv) any other regulatory requirements imposed on the Development. 4.3 Marketing Plan and Social Services Plan. (a)Marketing Plan. (1)No later than six (6) months prior to the date construction of the Development is projected to be complete, Borrower shall submit to the County for approval its plan for marketing the Development to income-eligible households and HOPWA Eligible Households as required by this Agreement (the "Marketing Plan"). The Marketing Plan must include information on affirmative marketing efforts and compliance with fair housing laws and 24 C.F.R. 92.351(a). (2)Upon receipt of the Marketing Plan, the County will promptly review the Marketing Plan and will approve or disapprove it within fifteen (15) days after receipt. If the Marketing Plan is not approved, the County will give Borrower specific reasons for such disapproval and Borrower shall submit a revised Marketing Plan within fifteen (15) days of notification of the County's disapproval. Borrower shall follow this procedure for resubmission of a revised Marketing Plan until the Marking Plan is approved by the County. If the Borrower does not submit a revised Marketing Plan that is approved by the County at least three (3) months prior to the date completion of the Development is projected to be complete, Borrower will be in default of this Agreement. (3)If any HOME-Assisted Units have not been rented to an Extremely Low Income Household or Very Low Income Household on or before the date that is five (5) months after the Completion Date Borrower shall submit to the County a detailed report of ongoing marketing efforts, and if deemed appropriate by the County, any necessary amendments or updates to the Marketing Plan to cause the vacant HOME-Assisted Units to be rented to Extremely Low Income Households and Very Low Income Households in compliance with Section 2.1. 13 863\01\1367104.3 (4)If any HOME-Assisted Units not been rented to an Extremely Low Income Household or Very Low Income Household on or before the date that is twelve (12) months after the Completion Date Borrower shall submit to the County a detailed report of ongoing marketing efforts, and if deemed appropriate by the County, any necessary amendments or updates to the Marketing Plan to cause the vacant HOME-Assisted Units to be rented to Extremely Low Income Households and Very Low Income Households in compliance with Section 2.1. (b)Tenant Selection Plan. (1)No later than six (6) months prior to the date construction of the Development is projected to be complete, Borrower shall submit to the County, for its review and approval, Borrower's written tenant selection plan (the "Tenant Selection Plan"). Borrower's Tenant Selection Plan must, at a minimum, meet the requirements for tenant selection set out in 24 C.F.R. Part 574 and 24 C.F.R. 92.253(d), and any modifications thereto. (2)Upon receipt of the Tenant Selection Plan, the County will promptly review the Tenant Selection Plan and will approve or disapprove it within fifteen (15) days after receipt. If the Tenant Selection Plan is not approved, the County will give Borrower specific reasons for such disapproval and Borrower shall submit a revised Tenant Selection Plan within fifteen (15) days of notification of the County's disapproval. Borrower shall follow this procedure for resubmission of a revised Tenant Selection Plan until the Tenant Selection Plan is approved by the County. If the Borrower does not submit a revised Tenant Selection Plan that is approved by the County at least three (3) months prior to the date construction of the Development is projected to be complete, Borrower will be in default of this Agreement. (c)Social Services Plan. (1)No later than six (6) months prior to the date construction of the Development is projected to be complete, Borrower shall submit to the County for approval its plan for providing social services from qualified service providers to the HOPWA Eligible Households of the Development as required by 24 C.F.R. Section 574.310(a)(1) and this Agreement (the "Social Services Plan"). (2)Upon receipt of the Social Services Plan, the County will promptly review the Social Services Plan and will approve or disapprove it within fifteen (15) days after receipt. If the Social Services Plan is not approved, the County will give Borrower specific reasons for such disapproval and Borrower shall submit a revised Social Services Plan within fifteen (15) days of notification of the County's disapproval. Borrower shall follow this procedure for resubmission of a revised Social Services Plan until the Social Services Plan is approved by the County. If the Borrower does not submit a revised Social Services Plan that is approved by the County at least three (3) months prior to the date construction of the Development is projected to be complete, Borrower will be in default of this Agreement. 14 863\01\1367104.3 4.4 Lease Provisions. (a)No later than four (4) months prior to the date construction of the Development is projected to be complete, Borrower shall submit to the County for approval Borrower’s proposed form of lease agreement for the County's review and approval. When leasing Units within the Development, Borrower shall use the form of lease approved by the County. Borrower may not permit the lease to contain any provision that is prohibited by 24 C.F.R. Section 92.253(b) and any amendments thereto. The form of lease must comply with all requirements of this Agreement, the other Loan Documents and must, among other matters: (1)provide for termination of the lease for failure to: (i) provide any information required under this Agreement or reasonably requested by Borrower to establish or recertify the Tenant's qualification, or the qualification of the Tenant's household, for occupancy in the Development in accordance with the standards set forth in this Agreement, (ii) qualify as an Extremely Low Income Household, or Very Low Income Household as a result of any material misrepresentation made by such Tenant with respect to the income computation, or (iii) qualify as a HOPWA-Eligible Household when and if applicable as a result of any material misrepresentation made by such Tenant with respect to HIV/AIDS status. (2)be for an initial term of not less than one (1) year, unless by mutual agreement between the Tenant and Borrower, and provide for no increase in Rent during such year. After the initial year of tenancy, the lease may be month-to-month by mutual agreement of Borrower and the Tenant. Notwithstanding the above, any rent increases are subject to the requirements of Section 2.3 above. (3)include a provision that requires a Tenant who is residing in a Unit required to be accessible pursuant to Section 2.6 and who is not in need of an accessible Unit to move to a non-accessible Unit when a non-accessible Unit becomes available and another Tenant or prospective Tenant is in need of an accessible Unit. (b)During the HOME Term, Borrower shall comply with the Marking Plan and Tenant Selection Plan approved by the County. 4.5 HOPWA Tenant Requirements. During the HOPWA Term Borrower shall: (a)ensure the confidentiality of the name of any individual requesting or receiving assistance through this project pursuant to 24 C.F.R. 574.440; (b)ensure that qualified service providers in the area make available appropriate supportive services to HOPWA Eligible Households pursuant to 24 C.F.R. 574.310(a)(1); (c)conduct an ongoing assessment of the services required by HOPWA Eligible Households pursuant to 24 C.F.R. 574.500(b)(2); (d)comply with the Social Services Plan approved by the County detailing the services provided to HOPWA Eligible Households; and 15 863\01\1367104.3 (e)ensure that the Development meets the Housing Quality Standards pursuant to 24 C.F.R. 574.310(b). 4.6 Lease Termination. (a)HOME Lease Termination Requirements. Any termination of a lease or refusal to renew a lease for a HOME-Assisted Unit within the Development must be in conformance with 24 C.F.R. 92.253(c), and must be preceded by not less than sixty (60) days written notice to the Tenant by Borrower specifying the grounds for the action. (b)HOPWA Lease Termination Requirements. (1)Any termination of a lease or refusal to renew a lease for a HOPWA Unit within the Development must be in conformance with 24 C.F.R. 574.310(e) during the HOPWA Term, and must be preceded by not less than sixty (60) days written notice to the Tenant by Borrower specifying the grounds for the action. (2)During the HOPWA Term Borrower shall ensure that surviving members of a household that included a Person with HIV/AIDS at the time of his or her death is permitted to continue to occupy the unit and receive supportive services for a reasonable period of up to one (1) year from the time of the death, and is provided with notice of their grace period and with assistance to obtain information about other available housing assistance programs. In addition, in the event such surviving members of a household would be eligible for occupancy in one of the other units within the Development, upon approval from Borrower, such surviving members may remain in their current unit and the next available unit within the Development will become a HOPWA Unit. 4.7 Taxes and Assessments. Borrower shall pay all real and personal property taxes, assessments and charges and all franchise, income, employment, old age benefit, withholding, sales, and other taxes assessed against it, or payable by it, at such times and in such manner as to prevent any penalty from accruing, or any lien or charge from attaching to the Property; provided, however, that Borrower may contest in good faith, any such taxes, assessments, or charges. In the event Borrower exercises its right to contest any tax, assessment, or charge against it, Borrower, on final determination of the proceeding or contest, will immediately pay or discharge any decision or judgment rendered against it, together with all costs, charges and interest. 4.8 Property Tax Exemption. Borrower shall not apply for a property tax exemption for the Property under any provision of law except California Revenue and Taxation Section 214(g) without the prior written consent of the County. 16 863\01\1367104.3 ARTICLE 5 PROPERTY MANAGEMENT AND MAINTENANCE 5.1 Management Responsibilities. Borrower is responsible for all management functions with respect to the Development, including without limitation the selection of Tenants, certification and recertification of household size and income, evictions, collection of rents and deposits, maintenance, landscaping, routine and extraordinary repairs, replacement of capital items, and security. The County has no responsibility for management of the Development. Borrower shall retain a professional property management company approved by the County in its reasonable discretion to perform Borrower's management duties hereunder. An on-site property manager is also required. 5.2 Management Agent. Borrower shall cause the Development to be managed by an experienced management agent reasonably acceptable to the County, with a demonstrated ability to operate residential facilities like the Development in a manner that will provide decent, safe, and sanitary housing (the "Management Agent"). The County has approved Satellite Affordable Housing Associates Property Management as the Management Agent. Borrower shall submit for the County's approval the identity of any proposed subsequent management agent. Borrower shall also submit such additional information about the background, experience and financial condition of any proposed management agent as is reasonably necessary for the County to determine whether the proposed management agent meets the standard for a qualified management agent set forth above. If the proposed management agent meets the standard for a qualified management agent set forth above, the County shall approve the proposed management agent by notifying Borrower in writing. Unless the proposed management agent is disapproved by the County within thirty (30) days, which disapproval is to state with reasonable specificity the basis for disapproval, it shall be deemed approved. 5.3 Periodic Performance Review. The County reserves the right to conduct an annual (or more frequently, if deemed necessary by the County) review of the management practices and financial status of the Development. The purpose of each periodic review will be to enable the County to determine if the Development is being operated and managed in accordance with the requirements and standards of this Agreement. Borrower shall cooperate with the County in such reviews. 5.4 Replacement of Management Agent. If, as a result of a periodic review, the County determines in its reasonable judgment that the Development is not being operated and managed in accordance with any of the material requirements and standards of this Agreement, the County shall deliver notice to Borrower of its intention to cause replacement of the Management Agent, including the reasons therefor. Within fifteen (15) days after receipt by Borrower of such written notice, the County staff and Borrower shall meet in good faith to consider methods for improving the financial and operating status of the Development, including, without limitation, replacement of the Management Agent. If, after such meeting, County staff recommends in writing the replacement of the Management Agent, Borrower shall promptly dismiss the then-current Management Agent, and shall appoint as the Management Agent a person or entity meeting the standards for a 17 863\01\1367104.3 management agent set forth in Section 5.2 above and approved by the County pursuant to Section 5.2 above. Any contract for the operation or management of the Development entered into by Borrower shall provide that the Management Agent may be dismissed and the contract terminated as set forth above. Failure to remove the Management Agent in accordance with the provisions of this Section constitutes a default under this Agreement, and the County may enforce this provision through legal proceedings as specified in Section 6.5 below. 5.5 Approval of Management Policies. Borrower shall submit its written management policies with respect to the Development to the County for its review, and shall amend such policies in any way necessary to ensure that such policies comply with the provisions of this Agreement. 5.6 Property Maintenance. (a)Borrower shall maintain, for the entire Term of this Agreement, all interior and exterior Improvements, including landscaping in decent, safe and sanitary condition, and in good condition and repair, in accordance with (i) 24 C.F.R. Section 92.251, and (ii) the maintenance standards provided by the County (the "Maintenance Standards"). The Maintenance Standards, which set forth inspectable items and areas, and this Agreement, implement 24 C.F.R. Section 92.251. Borrower shall cause the Development to be: (i) maintained in accordance with all applicable laws, rules, ordinances, orders and regulations of all federal, state, county, municipal, and other governmental agencies and bodies having or claiming jurisdiction and all their respective departments, bureaus, and officials, including but not limited to the lead-based paint requirements in 24 C.F.R. part 35; and (ii) free of all health and safety defects. Borrower shall correct any life-threatening maintenance deficiencies, including those set forth in the Maintenance Standards immediately upon notification. (b)At the beginning of each year of the Term, Borrower shall certify to the County that the Development is in compliance with the Maintenance Standards. 5.7 Property Inspections. (a)On-Site Physical Inspections. The County will perform on-site inspections of the Development during the Term to ensure compliance with the Maintenance Standards. The County will perform an on-site inspection within twelve months after completion of construction of the Development and at least once every three (3) years during the Term. If the Development is found to have health and safety violations, the County may perform more frequent inspections. Borrower shall cooperate in such inspections. (b)Violation of Maintenance Standards. If after an inspection, the County determines that Borrower is in violation of the Maintenance Standards, the County will provide Borrower a written report of the violations. Borrower shall correct the violations set forth in the report provided to Borrower by County. The County will perform a follow-up inspection to verify that the violations have been corrected. If such violations continue for a period of ten (10) days after delivery of the report to Borrower by the County with respect to graffiti, debris, 18 863\01\1367104.3 waste material, and general maintenance, or thirty (30) days after delivery of the report to Borrower by the County with respect to landscaping and building improvements, then the County, in addition to whatever other remedy it may have at law or in equity, has the right to enter upon the Property and perform or cause to be performed all such acts and work necessary to cure the violation. Pursuant to such right of entry, the County is permitted (but is not required) to enter upon the Property and to perform all acts and work necessary to protect, maintain, and preserve the improvements and landscaped areas on the Property, and to attach a lien on the Property, or to assess the Property, in the amount of the expenditures arising from such acts and work of protection, maintenance, and preservation by the County and/or costs of such cure, which amount Borrower shall promptly pay to the County upon demand. ARTICLE 6 MISCELLANEOUS 6.1 Nondiscrimination. (a)All of the Units must be available for occupancy on a continuous basis to members of the general public who are income eligible. Borrower may not give preference to any particular class or group of persons in renting or selling the Units, except to the extent that the Units are required to be leased to income eligible households and to HOPWA-Eligible Households pursuant to this Agreement. Borrower herein covenants by and for Borrower, assigns, and all persons claiming under or through Borrower, that there exist no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, sexual orientation, marital status, national origin, source of income (e.g., SSI), ancestry, or disability, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of any unit nor will Borrower or any person claiming under or through Borrower, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees of any unit or in connection with the employment of persons for the construction, operation and management of any unit. (b)Borrower shall accept as Tenants, on the same basis as all other prospective Tenants, persons who are recipients of federal certificates for rent subsidies pursuant to the existing housing program under Section 8 of the United States Housing Act, or its successor. Borrower may not apply selection criteria to Section 8 certificate or voucher holders that is more burdensome than criteria applied to all other prospective Tenants, nor will Borrower apply or permit the application of management policies or lease provisions with respect to the Development which have the effect of precluding occupancy of units by such prospective Tenants. 6.2 Term. The provisions of this Agreement apply to the Property for the entire Term even if the Loan is paid in full prior to the end of the Term. This Agreement binds any successor, heir or assign of Borrower, whether a change in interest occurs voluntarily or involuntarily, by operation of law or otherwise, except as expressly released by County. County is making the Loan on the condition, and in consideration of, this provision, and would not do so 19 863\01\1367104.3 otherwise. 6.3 Notice of Expiration of Term. (a)At least six (6) months prior to the expiration of the Term, Borrower shall provide by first-class mail, postage prepaid, a notice to all Tenants containing (i) the anticipated date of the expiration of the Term, (ii) any anticipated increase in Rent upon the expiration of the Term, (iii) a statement that a copy of such notice will be sent to the County, and (iv) a statement that a public hearing may be held by the County on the issue and that the Tenant will receive notice of the hearing at least fifteen (15) days in advance of any such hearing. Borrower shall also file a copy of the above-described notice with the County Deputy Director-Current Planning. (b)In addition to the notice required above, Borrower shall comply with the requirements set forth in California Government Code Sections 65863.10 and 65863.11. Such notice requirements include: (i) a twelve (12) month notice to existing tenants, prospective tenants and Affected Public Agencies (as defined in California Government Code Section 65863.10(a)) prior to the expiration of the Term, (ii) a six (6) month notice requirement to existing tenants, prospective tenants and Affected Public Agencies prior to the expiration of the Term; (iii) a notice of an offer to purchase the Development to "qualified entities" (as defined in California Government Code Section 65863.11(d)), if the Development is to be sold within five (5) years of the end of the Term; (iv) a notice of right of first refusal within the one hundred eighty (180) day period that qualified entities may purchase the Development. 6.4 Covenants to Run With the Land. The County and Borrower hereby declare their express intent that the covenants and restrictions set forth in this Agreement run with the land, and bind all successors in title to the Property, provided, however, that on the expiration of the Term of this Agreement said covenants and restrictions expire. Each and every contract, deed or other instrument hereafter executed covering or conveying the Property or any portion thereof, is to be held conclusively to have been executed, delivered and accepted subject to the covenants and restrictions, regardless of whether such covenants or restrictions are set forth in such contract, deed or other instrument, unless the County expressly releases such conveyed portion of the Property from the requirements of this Agreement. 6.5 Enforcement by the County. If Borrower fails to perform any obligation under this Agreement, and fails to cure the default within thirty (30) days after the County has notified Borrower in writing of the default or, if the default cannot be cured within thirty (30) days, fails to commence to cure within thirty (30) days and thereafter diligently pursue such cure and complete such cure within sixty (60) days, the County may enforce this Agreement by any or all of the following actions, or any other remedy provided by law: (a)Calling the Loan. The County may declare a default under the Note, accelerate the indebtedness evidenced by the Note, and proceed with foreclosure under the Deed of Trust. (b)Action to Compel Performance or for Damages. The County may bring an action at law or in equity to compel Borrower's performance of its obligations under this 20 863\01\1367104.3 Agreement, and may seek damages. (c)Remedies Provided Under Loan Documents. The County may exercise any other remedy provided under the Loan Documents. 6.6 Attorneys' Fees and Costs. In any action brought to enforce this Agreement, the prevailing party must be entitled to all costs and expenses of suit, including reasonable attorneys' fees. This section must be interpreted in accordance with California Civil Code Section 1717 and judicial decisions interpreting that statute. 6.7 Recording and Filing. The County and Borrower shall cause this Agreement, and all amendments and supplements to it, to be recorded in the Official Records of the County of Contra Costa. 6.8 Governing Law. This Agreement is governed by the laws of the State of California. 6.9 Waiver of Requirements. Any of the requirements of this Agreement may be expressly waived by the County in writing, but no waiver by the County of any requirement of this Agreement extends to or affects any other provision of this Agreement, and may not be deemed to do so. 6.10 Amendments. This Agreement may be amended only by a written instrument executed by all the parties hereto or their successors in title that is duly recorded in the official records of the County of Contra Costa. 6.11 Notices. Any notice requirement set forth herein will be deemed to be satisfied three (3) days after mailing of the notice first-class United States certified mail, postage prepaid, addressed to the appropriate party as follows: County: County of Contra Costa Department of Conservation and Development 30 Muir Road Martinez, CA 94553 Attn: Affordable Housing Program Manager Borrower: 1550 Third, L.P. c/o 1550 Third LLC 1521 University Avenue Berkeley, CA 94704 Attention: Executive Director 21 863\01\1367104.3 Investor Limited Partner: Wells Fargo Affordable Housing Community Development Corporation MAC D1053-170 301 South College Street Charlotte, NC 28288 Attn.: Director of Tax Credit Asset Management Such addresses may be changed by notice to the other party given in the same manner as provided above. 6.12 Severability. If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions of this Agreement will not in any way be affected or impaired thereby. 6.13 Multiple Originals; Counterparts. This Agreement may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts. 6.14 Revival of Agreement after Foreclosure. In the event there is a foreclosure of the Property, this Agreement will revive according to its original terms if, during the Term, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the Development or Property. [remainder of page intentionally left blank] 22 Signature page County Regulatory Agreement 863\01\1367104.3 WHEREAS, this Agreement has been entered into by the undersigned as of the date first written above. COUNTY: COUNTY OF CONTRA COSTA, a political subdivision of the State of California By: __________________ Its:____________________ Approved as to form: SHARON L. ANDERSON County Counsel By: Kathleen Andrus Deputy County Counsel BORROWER: 1550 Third, L.P., a California limited partnership By: 1550 Third LLC, a California limited liability company, its general partner By: Satellite AHA Development, Inc., a California nonprofit public benefit corporation, its sole member By:____________________ Name:___________________ Its:____________________ 863\01\1367104.3 STATE OF CALIFORNIA ) ) COUNTY OF CONTRA COSTA ) On ____________ __, 2013, before me, ______________________, Notary Public, personally appeared, _________________________who proved to me on the basis of satisfactory evidence to be the person(s) whose name is subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity, and that by his/her/their signature on the instrument the person, or the entity upon behalf of which the person 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) STATE OF CALIFORNIA ) ) COUNTY OF CONTRA COSTA ) On ____________ __, 2013, before me, _______________, Notary Public, personally appeared, ___________________________who proved to me on the basis of satisfactory evidence to be the person(s) whose name is subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity, and that by his/her/their signature on the instrument the person, or the entity upon behalf of which the person 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-1 863\01\1367104.3 EXHIBIT A Legal Description The land is situated in the State of California, County of Contra Costa, and is described as follows: