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HomeMy WebLinkAbout25F - AGMT - 605-611 EAST WASHINGTON ST LOANREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: MARCH 7, 2011 TITLE: LOAN AGREEMENT - 605-611 EAST WASHINGTON STREET ?l CITY MANAGER RECOMMENDED ACTION CLERK OF COUNCIL USE ONLY: APPROVED ? As Recommended ? As Amended ? Ordinance on 15` Reading ? Ordinance on 2"d Reading ? Implementing Resolution ? Set Public Hearing For_ CONTINUED TO FILE NUMBER Authorize the City Manager, or designee, and Clerk of the Council to execute the attached loan agreement with Santa Ana WBBB, LP in an amount not to exceed $2,500,000, subject to non- substantive changes approved by the City Manager and City Attorney. COMMUNITY REDEVELOPMENT AND HOUSING COMMISSION ACTION At its regular meeting on February 15, 2011, by a vote of 5:0 (Bist absent), the Community Redevelopment and Housing Commission approved the recommended action. DISCUSSION On March 1, 2010, Orange Housing Development Corporation (OHDC), a non-profit 501(c)(3), and C&C Development (C&C), a for-profit developer, were awarded the contract to implement the multi-family rental program funded by the Federal National Stabilization Program (NSP). They have formed a Limited Partnership named Santa Ana WBBB, LP (Developer) for financing purposes. In June 2010, the developer acquired foreclosed vacant lots at 605-611 East Washington (Exhibit 1) using NSP funds. The entitlement process is being completed and the project is proceeding with funding in order to commence construction. The developer proposes to construct 36 multi- family rental units of which 10% or 4 units will be rented to extremely low income families (at or below 30% of the Area Median Income (AMI)) and 31 units will be rented to very low income families (at or below 50% of AMI). The one remaining unit will be designated as a manager unit. The project will have 8 two-bedrooms, 27 three-bedrooms and 1 five-bedroom. The following table contains the breakdown of the units by bedroom size and affordability as well as maximum rents: 25F-1 Loan Agreement - 605-611 E. Washington Street March 7, 2011 Page 2 Gross Rents for Units for Affordable Units 30% AMI 50% AMI No. Of Bedrooms Gross Rent # of Units Max. Income Gross Rent # of Units Max. Income 2 n/a 0 n/a $981 8 $41,850 3 $724 4 $30,100 $1134 22 $50,200 5 n/a 0 n/a $1395 1 $61,350 The architecture and materials for this project are designed to promote sustainability. The developer will be seeking Leadership in Energy & Environmental Design (LEED) Gold Certification for this development. LEED is a third-party certification program and the nationally accepted benchmark for the design, construction and operation of high performance green buildings. There are four levels of LEED certification: Certified, Silver, Gold and Platinum. The total development cost is $14,832,587. The developer will be applying to the California Debt Limit Allocation Committee (CDLAC) for tax exempt financing and to the California Tax Credit Allocation Committee (TCAC) for low income housing tax credits; both sources will be used to help meet permanent and construction financing costs. There is a $6,389,497 gap and staff is recommending it be filled with $2.5 million from HOME and $3,888,497 from the Redevelopment Agency. The following table summarizes the sources and uses: Sources Tax Exempt Bonds/Permanent Lender $ 1,987,126 HOME (City) $ 2,500,000 Tax-Increment (Redevelopment Agency) $3,888,497 NSP Funds/Ac uisition 655,000 General Partner Equity $ 67 Deferred Developer Fee $1,027,183 Limited Partner Equity Tax Credits $ 4,774,714 Total $14,832,587 Uses Acquisition 671,250 Construction $ 9,694,087 Fees and Permits $1,014,085 Developer fee $1,764,193 Soft Costs $ 1,271,365 Costs Deferred Until Conversion $ 234,031 Financing Costs $ 183,577 Total $ 14,832,587 25F-2 Loan Agreement - 605-611 March 7, 2011 Page 3 E. Washington Street Construction of these units will assist the City and Agency in meeting the Regional Housing Needs Assessment (RHNA) goals identified in the Housing Element, Consolidated Plan and the Implementation Plan. In addition, the 5 bedroom unit will fulfill the only outstanding replacement housing obligation of the Agency. ENVIRONMENTAL COMPLIANCE In accordance with the National Environmental Policy Act, the proposed project has been cleared per Section 58.36, Part 58. Pursuant to Section 15238(b) of the California Environmental Quality Act, the construction of these housing units is ministerial, and is exempt from review. FISCAL IMPACT Funds are available in the HOME account (no. 13018780-69151). &Jau-cili Nancy T. ards Interim Ex tive Director Community Development Agency NTE/SLB/JP-H/mlr Exhibits: 1. Map 2. Agreement APPROVED AS TO FUNDS AND ACCOUNTS: Francisco Gutierrez Executive Director U Finance & Management Services Agency 25F-3 25F-4 as!s I srH ST fV78 j424 141.9 PROJECT SITE: ,.756 3as 1430 415 605-611 E. Washington 14t0 1348 p F4 ,4-v z 335 i7'4 :776 14TH ST 317 37S J37, 317 J00 A4x 300 .71 1 UNx 4. ^ \\ 5SWA$HINGTgNAY ??\ 1130 73S ? ? ? ? ? $ m r 7 4 ? ` 1174 2.29 171N 7I7 rI1N ? t IIS .1!4 Y t?s 605 - 611 East Washington Exhibit 1 25F-5 25F-6 LOAN AGREEMENT This LOAN AGREEMENT ("Agreement") is entered into on this 7th day of March, 2011 by and among the CITY OF SANTA ANA, a California municipal corporation and charter city duly organized and existing under the Constitution and Laws of the State of California ("City"), the COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA, a public body, corporate and politic ("Agency"), and SANTA ANA WBBB, LP., a California limited partnership (collectively, "Developer"). RECITALS The following recitals are a substantive part of this Agreement: A. In furtherance of the objectives of the California Community Redevelopment Law, Health and Safety Code Section 33000, et seq. ("Redevelopment Law"), the Agency desires to assist in the redevelopment of certain real property located at 605-611 East Washington (APN# 398-151-11 and 398-151-12), within the boundaries of the City, as more particularly described on Exhibit A and incorporated herein ("Property"). The Property consists of undeveloped vacant property. A map of the Property ("Site Map") is attached hereto and incorporated herein as Exhibit B. A Site Plan is attached hereto and incorporated herein as Exhibit C. B. The Property is currently owned by the Developer. The Developer acquired the Property using funds loaned to the Developer by the City ("NSP Loan") pursuant to that certain Neighborhood Stabilization Program Rental Housing Development Loan Agreement, dated as of June 1, 2010 ("NSP Loan Agreement"). The NSP Loan is evidenced by that certain City Promissory Note Secured by Subordinated Deed of Trust to the City of Santa Ana, California (605-611 E. Washington Street), dated as of June 1, 2010 ("NSP Promissory Note"), in the original principal amount of $655,000, and is secured by that certain City Deed of Trust and Assignment of Rents in favor of the City, recorded against the Property in the official records of Orange County, California, on June 2, 2010 ("NSP Deed of Trust"). Pursuant to the NSP Loan Agreement, Developer shall comply with those certain Affordability Covenants and Restrictions by and between Developer and City, recorded against the Property in the official records of Orange County, California on June 2, 2010 as Instrument No. 2010000258490 ("NSP Covenants"). The NSP Loan Agreement, NSP Promissory Note, NSP Deed of Trust, and NSP Covenants are referred to collectively herein as the "NSP Documents." C. In furtherance of the HOME Program, the Redevelopment Law, and the Agency's Redevelopment Plan, Developer has applied to City and Agency for Loans with which to: 1. construct the Improvements at the Property, 2. provide deeper levels of affordability for the Affordable Units at the Property, and thereafter to maintain, operate and professionally manage the Property as decent, safe, sanitary and affordable rental housing. D. The City, Agency and Developer desire by this Agreement for City and Agency to provide financial assistance to Developer in the form of loans and for the Developer to agree to y., construct and maintain affordable multi-family residential housing on the Property which shall remain affordable for a period of not fewer than 55 years. City shall provide a "City Loan" and the Agency shall provide an "Agency Loan" (together, the "Loans") to the Developer for development of the Property, all in accordance with the terms of this Agreement. E. Separate Promissory Notes shall be executed by Developer in the amount of the Loans to be made by City and Agency to Developer pursuant to this Agreement. The Agency Promissory Note will be in the original principal amount of $3,888,497 (see the Agency Promissory Note attached hereto and incorporated herein as Exhibit F) and the City Promissory Note will be in the original principal amount of $2,500,000 (see the City Promissory Note attached hereto and incorporated herein as Exhibit G). Separate Deeds of Trust will be executed for each promissory note and recorded against the Property in the Official Records (see the Agency Deed of Trust and City Deed of Trust attached hereto and incorporated herein as Exhibits H-1 and H-2, respectively). F. The City's and Agency's respective Loans to the Developer, and the Developer's construction of the Improvements on the Property pursuant to the terms of this Agreement, are in the vital and best interest of the City and the health, safety, and welfare of its residents, and in accord with the public purposes and provisions of applicable federal, state, and local laws and requirements under which the redevelopment of the Project has been undertaken. G. Prior to and as a Condition Precedent to disbursement of any portion of the Loans, Developer shall apply for an obtain (and submit evidence documenting the same to the Executive Director) (1) an allocation of tax exempt bond financing from the California Debt Limit Allocation Committee (CDLAC), (2) an allocation of federal 4% low income housing tax credits ("Tax Credits") from the California Tax Credit Allocation Committee (TCAC), and (3) a firm commitment for a Senior Loan from a Senior Lender, all as reasonably approved by the Executive Director pursuant to Section 311.1 below. H. It is agreed by and between the Parties that the foregoing Recitals are a substantive part of this Agreement and the following terms and conditions are approved and together with the Recitals and all exhibits and attachments hereto, all of which are incorporated herein by this reference, shall constitute the entire Agreement between the Agency and Developer. 1. If there is any discrepancy between federal and state guidelines with regard to any of the terms and conditions contained herein, the more stringent (most restrictive) requirements shall apply. NOW, THEREFORE, for and in consideration of the mutual covenants and agreements herein contained, City, Agency and Developer agree as follows: 100. DEFINITIONS AND INTERPRETATION 101. Defined Terms. All capitalized terms used herein, including, without limitation, in the Recitals above and in all other Project Documents, unless otherwise expressly defined, are defined where first used in this Agreement, and/or as set forth in this Section 101. "Affordable Housing" means housing operated in accordance with the requirements of 24 CFR 92.252 and the rents governed by California Health and Safety Code Section 50053. Zs9-s "Affordability Restrictions" means that certain Affordability Restrictions on Transfer of Property, which contains the covenants and restrictions pertaining to the operation, maintenance, and management of the Project as Affordable Housing for a term of not fewer than 55 years, which covenants and restrictions shall run with the land, to be executed by the Agency, the City, and the Developer and recorded against the Property in the Official Records. The Affordability Restrictions and the legally required notice thereof are attached hereto as Exhibit I and incorporated herein. "Affordable Rent" means the monthly rents which do not exceed the maximum amount applicable to Extremely Low Income and Very Low Income households, as applicable, as described in Article 700. "Agency" is defined in the preamble hereto. In the event the Agency is disestablished, dissolved, ceases to exist, or otherwise becomes unable to exercise its rights under this Agreement prior to the expiration of the Term, the City shall be entitled to exercise any and all rights granted to the Agency hereunder. "Agency/City" means the Agency and/or the City, as the context dictates. "Agency Deed of Trust" means the deed of trust encumbering the Property, in the form attached hereto as Exhibit H-1 to be executed by Developer in order to secure the Agency Promissory Note. "Agency Loan" means the loan to be made to Developer by the Agency solely from tax increment moneys. "Agency Promissory Note" means that certain promissory note in the original principal amount of $3,888,497, in the form attached hereto as Exhibit F, which shall be executed by Developer in favor of Agency to evidence the obligation of Developer to repay the Agency Loan through residual receipts as further described in the Agency Promissory Note. "Agreement" means this Loan Agreement by and among the City, Agency and Developer. "Area Median Income" or "AMI" shall mean the median income for the Orange County, California PMSA as determined by HUD from time to time. "Annual Budget" and "Operating Budget" shall mean the annual operating budget for the Project that sets forth the projected Operating Expenses (defined in the Promissory Notes) for the upcoming year that is subject to and shall be submitted for review and approval by Executive Director, in his/her reasonable discretion, each year during the Affordability Period. "Basic Concept and Schematic Drawings" are described in Section 302.3. "Building Permit" means the building and grading permit(s) to be issued by City and required for the construction of the Improvements. "Business Day" means any Monday, Tuesday, Wednesday, Thursday or Friday on which Santa Ana City Hall is open to the public for the conduct of City affairs. "Calendar Year" means each consecutive twelve (12) month period from January 1 to December 31. 20-9 "City" is defined in the preamble hereto. "City Loan" means the loan to be made to Developer by City solely from HOME Program funds. "City Deed of Trust" means the deed of trust encumbering the Property, in the form attached hereto as Exhibit H-2, to be executed by Developer in order to secure the City Promissory Note. "City Promissory Note" means that certain promissory note in the original principal amount of $2,500,000, in the form attached hereto as Exhibit G, which shall be executed by Developer in favor of City to evidence the obligation of Developer to repay the City Loan through residual receipts as further described in the City Promissory Note. "Conditions Precedent" means the conditions precedent to the disbursement of any portion of the proceeds of the Loans, including the initial disbursement and the final disbursement of the Retainage, as set forth in Sections 601, 602 and 603. "Construction Contract" means each and every contract between Developer, the General Contractor, and/or any subcontractor for the construction of the Improvements, or any part thereof, including construction of any on-site or off-site improvements included in the Scope of Development, the land use entitlement approved by the City, and the approved Design Development Drawings. The Construction Contract between Developer and the General Contractor shall be for a fixed fee to complete all work to be performed or caused to be performed by the General Contractor under such Construction Contract. Each Construction Contract shall be reviewed and reasonably approved (or disapproved) by Executive Director, with each contract to include: (i) a full recitation of Section 3 and the Section 3 Clause with an express acknowledgement and agreement by the General Contractor and each subcontractor, as applicable, to fully comply with the Section 3 Clause, (ii) an express acknowledgement and agreement by the General Contractor and each subcontractor, as applicable, that as a Condition Precedent to the final payment under its contract, the General Contractor or subcontractor, as applicable, shall provide written evidence, in form reasonably satisfactory to the Executive Director and/or HUD, that it and all its subcontractor(s) have complied with the Section 3 Clause in completing the development of the Project, and (iii) reference to all other applicable federal regulations and laws based on the final federal funding sources, if any, to which such General Contractor or subcontractor, as applicable, must comply in undertaking the construction and development of the Project; provided it is understood by the parties that it is and shall remain primarily the Developer's obligation to obtain and submit all required Section 3 Clause documentation. "County" means the County of Orange, California. "Deeds of Trust" means, collectively, the Agency Deed of Trust and City Deed of Trust. "Design Development Drawings" means those plans and drawings to be submitted to the City and Agency for approval, pursuant to Section 302.1. "Developer" is defined in the preamble hereto. Developer is a California limited partnership currently comprised of Orange Housing Development Corporation, a California non-profit public benefit corporation and community housing development organization, and C&C Development Co., LLC, a California limited liability company. 250-10 "Developer's Representative" shall mean the Chief Executive Officer or the Managing General Partner of Developer or his/her designee. "Environmental Laws" means any federal, state or local law, statute, ordinance or regulation pertaining to environmental regulation, contamination or cleanup of any Hazardous Materials including, but not limited to: (i) sections 25115, 25117, 25122.7,or 25140 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter- Presley-Tanner Hazardous Substance Account Act), (iii) Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) Section 311 of the Clean Water Act (33 U.S.C. section 1317), (vi) Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. section 6901, et seq. (42 U.S.C. section 6903, (vii) Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. section 9601 et seq., or (viii) any state or federal lien or "superlien" law, any environmental cleanup statute or regulation, or any permit, approval, authorization, license, variance or permission required by any governmental authority having jurisdiction. "Event of Default" and "Default" are defined in Section 2001. "Executive Director" means, collectively, the City Manager of the City and/or the Executive Director of the Agency, and/or the authorized designee(s) of either of them. "Extremely Low Income" means an adjusted income which does not exceed thirty percent (30%) of the Area Median Income for the Orange County, California PMSA, as adjusted for household size and periodically published by HUD, as such qualifying limit is amended from time to time. "General Contractor" means the general contractor to be hired by Developer to engage and supervise the subcontractors in the performance and completion of the construction of the Improvements and all other on-site and off-site improvements required to be constructed in connection with the Project, all in accordance with the Scope of Development, the land use entitlement to be approved by City, and the approved Design Development Drawings. The General Contractor shall be reasonably acceptable to and approved by the Executive Director, in his or her reasonable discretion. [The parties acknowledge that the General Contractor will not be performing actual construction work for any portion of the Project, but instead shall hire subcontractors, who shall be reasonably approved by the Executive Director.] [confirm] "Governmental Authority" means any governmental or quasi governmental agency, board, bureau, commission, department, court, administrative tribunal or other instrumentality or authority, and any public utility. "Governmental Requirements" means all applicable laws, ordinances, statutes, codes, rules, regulations, orders, and decrees of the United States, the State of California, the County, the City, or any other political subdivision with jurisdiction over property within the City, and of any other political subdivision, agency, or instrumentality exercising jurisdiction over the Agency, Developer or Property, including all applicable federal, state, and local occupation, safety and health laws, rules, regulations and standards, applicable state and labor standards, applicable prevailing 250-11 wage requirements, the City zoning and development standards, City permits and approvals, building, plumbing, mechanical and electrical codes, as they apply to work undertaken pursuant to this Agreement, and all other provisions of the City and its Municipal Code (as they apply to work undertaken pursuant to this Agreement), and the Unruh Civil Rights Act, Civil Code § 51 et seq. "Hazardous Materials" means any substance, material, or waste which is or becomes, regulated by any local governmental authority, the State of California, or the United States government, including, but not limited to, any material or substance which is (i) defined as a "hazardous waste," "extremely hazardous waste," or "restricted hazardous waste under Section 25115, 25117, or 25122.7, or listed pursuant to Section 25140 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (iii) defined as a "hazardous material," "hazardous substance," or " hazardous waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi) friable asbestos, (vii) polychlorinated biphenyls, (viii) designated as "hazardous substances" pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section 1317), (ix) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.,(42 U.S.C. section 6903) or (x) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. section 9601 etseq. "HOME Program" shall mean the Title II of the Cranston-Gonzalez National Affordable Housing Act, as amended, specifically the HOME Investment Partnership Act, 42 U.S.C. § 12701, et seq. and the implementing HOME Regulations at 24 CFR §92.1, et seq., as such law now exists and as it may hereafter be amended, to the extent applicable to the Project. "HOME Regulations" shall mean the implementing regulations of the HOME Program set forth at 24 CFR §92.1, et seq. as such regulations now exist and as they may hereafter be amended, to the extent applicable to the Project. Developer covenants hereunder to comply with the Redevelopment Law and all applicable HOME Regulations in the performance of this Agreement and the other Project Documents, whichever are more restrictive. In implementation of these requirements, this Agreement, the Project, and all eligible contributions and expenditures hereunder shall conform to the following: a. The housing developed hereunder does and shall qualify as affordable housing under 24 CFR §92.252 because each Housing Unit shall be rented at an Affordable Rent; and b. This Agreement serves as the written agreement that imposes and enumerates (by meeting or exceeding) all of the affordability requirements from 24 CFR §92.252; the property standards requirements of 24 CFR §92.251; and income determinations made in accordance with 24 CFR §92.203. "HOME Units" shall mean eleven (11) of the Housing Units (specifically, ten (10) of the three-bedroom units and one (1) five-bedroom unit) which shall be designated as HOME Units and shall be subject to all applicable HOME Regulations. [All HOME Units shall be "Low HOME" units 250-12 pursuant to the HOME Regulations.] [confirm] The HOME Units shall be "fixed" HOME Units, such that the specific Housing Units designated as HOME Units shall not change. Developer shall designate eleven (11) of the Housing Units as HOME Units, subject to approval by the Executive Director and in accordance with this paragraph, the HOME Program, and the HOME Regulations. "Housing Unit" or "Housing Units" means the thirty-six (36) individual apartment units at the Property to be constructed, leased, managed, and operated by Developer as long term Affordable Housing and in implementation of the Project (inclusive of the Affordable Units and the HOME Units). "HUD" means the United States Department of Housing and Urban Development and any successors or assigns thereof. "Improvements" means all improvements and fixtures to be constructed by Developer at the Property, including, without limitation, landscaping, trees and plant materials; and offsite improvements (including, without limitation, streets, curbs, storm drains, and adjacent street lighting), all as more specifically defined in Section 301 and in the Scope of Development attached hereto. "Indemnitees" means City and Agency, and their past and present elected officials, officers, employees, attorneys, contractors, elective and appointive boards and commissions, representatives, agents, and volunteers. "Legal Description" means the legal description of the Property attached hereto as Exhibit A and incorporated herein. "Loan Documents" means, collectively, this Agreement, the City Promissory Note, the City Deed of Trust, the Agency Promissory Note, the Agency Deed of Trust, the Affordability Restrictions, and any other agreement, document, or instrument that the City or Agency requires in connection with the Loans or from time to time to effectuate the purposes of this Agreement. "Loans" means the Agency Loan and the City Loan. "Notice" is defined in Section 2102. "NSP Loan" means the loan made to the Developer by the City pursuant to that certain Neighborhood Stabilization Program Rental Housing Development Loan Agreement, dated as of June 1, 2010. Developer used the proceeds of the NSP Loan to pay the cost of acquiring the Property. "NSP Covenants" means those certain Affordability Covenants and Restrictions by and between Developer and City, recorded against the Property in the official records of Orange County, California on June 2, 2010 as Instrument No. 2010000258490, which set forth certain affordability, use and maintenance restrictions applicable to the Property and the Project. "NSP Deed of Trust" means that certain City Deed of Trust and Assignment of Rents recorded against the Property in the Official Records on June 2, 2010 as Instrument No. 2010000258491, which secures repayment of the NSP Loan. "NSP Documents" is defined in Recital B. 250-13 "Official Records" means the official land records maintained by the Recorder of the County. "Partnership Agreement" means the Amended and Restated Limited Partnership Agreement of Santa Ana WBBB, LP, dated August 9, 2010, as it may be amended in accordance with the financing for the Project that is approved by the Executive Director pursuant to Section 31 L. "Project" means the construction of the Improvements upon the Property and the operation of the Project by Developer pursuant to this Agreement and the Project Documents. "Project Costs" means all costs of any nature incurred in connection with the Project in accordance with generally accepted accounting principles. "Project Documents" means this Agreement and the other Loan Documents, the NSP Documents, the Affordability Restrictions, and all other documents, agreements and instruments to be executed by Developer in furtherance of the Project. "Promissory Notes" means the Agency Promissory Note and the City Promissory Note. "Property" means that certain parcel of real property that is located at 605-611 East Washington in the City of Santa Ana, and is. more fully described in the Legal Description of the Property attached hereto as Exhibit A, which is incorporated herein by reference. "Redevelopment Law" means the California Community Redevelopment Law, Health and Safety Code Section 33000, et seq., as it may be amended from time to time. "Release of Construction Covenants" has the meaning set forth in Section 310. "Retainage" is defined in Section 611. "Schedule of Performance" means the Schedule of Performance attached hereto as Exhibit J and incorporated herein, which sets forth the dates and/or time periods by which certain obligations set forth in this Agreement must be accomplished. The Schedule of Performance is subject to revision from time to time as mutually agreed upon in writing between the Developer and the Executive Director, and the Executive Director is authorized to make such revisions as he or she deems reasonably necessary. "Scope of Development' means the Scope of Development attached hereto as Exhibit K and incorporated herein, which describes the scope, amount and quality of development of the Improvements to be constructed by the Developer pursuant to the terms and conditions of this Agreement. "Senior Lender" means the state of federal financial institution that provides the Senior Loan, as approved by City pursuant to Section 311. "Senior Loan" shall mean the senior loan being made by the Senior Lender concurrent with the Agency Loan and the City Loan, for payment of a portion of the Project Costs, and shall include any subsequent loan that refinances the initial Senior Loan (as approved by the Executive Director). The Senior Loan shall consist of those related loan documents including, but not limited to the Senior Loan Agreement and the Senior Deed of Trust (collectively "Senior Loan Documents"). 250-14 "Senior Loan Deed of Trust" means the deed of trust securing the Senior Loan by encumbering the Property. "Senior Loan Documents" means, collectively, the Senior Loan Agreement governing the Senior Loan, the Senior Loan Note, the Senior Loan Deed of Trust, and any other agreement, document or instrument that the Senior Lender requires in connection with the Senior Loan. "Senior Loan Note" means the promissory note evidencing the Senior Loan. "Site Map" means the map depicting the Site which is attached hereto as Exhibit B and incorporated herein. "Site Plan" means the Site Plan depicting the Improvements which is attached hereto as Exhibit C and incorporated herein. "Tax Credits" is defined in Recital G. "Term," "Term of Affordability" and "Affordability Period" shall mean the term of effectiveness of this Agreement and the Affordability Restrictions, which shall each remain in effect for not fewer than fifty-five (55) years from the issuance of the final Certificate of Occupancy for the Project. "Very Low Income" means an adjusted income which does not exceed fifty percent (50%) of the Area Median Income for the Orange County, California PMSA, as adjusted for household size, and periodically published by HUD, as such qualifying limit is amended from time to time. 102. Singular and Plural Terms. Any defined term used in the plural in this Agreement or any other Loan Document shall refer to all members of the relevant class and any defined term used in the singular shall refer to any number of the members of the relevant class. 103. References and Other Terms. Any reference to this Agreement or any Loan Document shall include such document both as originally executed and as it may from time to time be modified. References herein to Articles and Sections shall be construed as references to this Agreement unless a different document is named. References to Exhibits shall be construed as references to the exhibits attached to this Agreement unless a different document is named. References to subparagraphs shall be construed as references to the same Section in which the reference appears. The term "document" is used in its broadest sense and encompasses agreements, certificates, opinions, consents, instruments and other written material of every kind. The terms "including" and "include" mean "including (include) without limitation." 104. Exhibits Incorporated. All attachments and exhibits attached to this Agreement, as now existing and as the same may from time to time be modified, are incorporated herein by this reference. 200. PROJECT BUDGET A line-item budget for the Project, [including a summary statement of sources and uses of funds and a projected cash flow showing repayment of the Loans,] is included in Exhibit D ("Project Budget"). Developer shall submit a final, updated Project Budget to Agency/City for approval by the Executive Director as a Condition Precedent to the initial disbursement of any proceeds of the Loans. 250-15 Any material change to the approved Project Budget requested by Developer shall be subject to the prior written approval of the Executive Director. 300. DEVELOPMENT OF THE SITE 301. Scope of Development. Subject to all of the other terms and conditions set forth in this Agreement, Developer shall develop or cause the development of the Improvements on the Property in accordance with the Scope of Development, the City of Santa Ana's Municipal Code, and the Basic Concept and Schematic Drawings and Design Development Drawings submitted by Developer and reasonably approved by the City and Agency as set forth herein, at all times set forth in the Schedule of Performance. The Improvements shall generally consist of the construction of a thirty-six (36) unit multi-family residential Project on the Property (including eight (8) two-bedroom units, twenty-seven (27) three-bedroom units, and one (1) five-bedroom unit), along with associated landscaping and other required onsite and offsite improvements. The Improvements are generally depicted on the Site Plan and described in the Scope of Development. 302. Design Review. 302.1 Developer Submissions. Within the time set forth in the Schedule of Performance and as a Condition Precedent to disbursement of any portion of the Loans, the Developer shall submit to the Agency/City any and all plans and drawings which may be required by the City with respect to any permits and land use entitlements which are required to be obtained to develop the Improvements, and such plans for the Improvements as required by the City in order for the Developer to obtain Building Permits for the Improvements (collectively, the "Design Development Drawings"). Within thirty (30) days after the Agency/City's disapproval or conditional approval of such plans, the Developer shall revise the portions of such plans identified by the Agency/City as requiring revisions and resubmit the revised plans to the Agency/City. The Design Development Drawings shall be consistent with the Site Plan and the approved Basic Concept and Schematic Drawings. 302.1.1 Special Development Requirements. The Design Development Drawings shall, to the extent compatible with applicable design requirements of the City of Santa Ana and the Project Documents, incorporate design elements and building practices that will reduce the maintenance and utility costs, and also reduce the adverse environmental impacts otherwise associated with residential construction. Such design elements and practices may include, but are not limited to passive solar design, environmentally sensitive landscaping, installation of energy efficient furnaces and water heaters (Energy Star Appliances), and installation of high efficiency toilets. 302.2 City Review and Approval. The City and the Agency shall have all rights to review and approve or disapprove all Design Development Drawings and other required submittals in accordance with the Santa Ana Municipal Code and this Agreement, and nothing set forth in this Agreement shall be construed as the City/Agency's approval of any or all of the Design Development Drawings. 302.3 Basic Concept and Schematic Drawings. The Basic Concept and Schematic Drawings for the Project were submitted to the Agency and City prior to the execution of this Agreement by Developer. Agency and City shall review and approve, conditionally approve or disapprove the Basic Concept Drawings for the Project (and Developer shall make any required revisions) within the time set forth in the Schedule of Performance. The Basic Concept and 10 25F-16 Schematic Drawings generally depict all improvements and include the Site Plan, all exterior elevations, renderings showing the exterior design, architectural style, and appearance of the affordable housing development, landscaping concepts, and the interior floor plans for each unit to be developed on the Property. The objective of the Basic Concept and Schematic Drawings prepared and submitted by the Developer to the City was to provide reasonable opportunity to evaluate the aesthetic appearance, neighborhood compatibility, and general scope and quality of the Project on the Property. The Improvements shall be developed in accordance with the approved Basic Concept and Schematic Drawings and related documents, except for such changes which may be mutually agreed upon between the Developer and the Executive Director. Any such changes shall be within the limitations established in the approved Design Development Drawings. In the event of any inconsistency between the Design Development Drawings and the Basic Concept and Schematic Drawings, the approved Design Development Drawings shall govern. 302.4 Revisions. Any and all change orders or revisions required by the City and its inspectors which are required under the Municipal Code and all other applicable Uniform Codes (e.g. Building, Plumbing, Fire, Electrical, etc.) and under other applicable laws and regulations shall be included by the Developer in its Design Development Drawings and other required submittals and shall be completed during the construction of the Improvements. 302.5 Defects in Plans. The Agency and the City shall not be responsible either to the Developer or to third parties in any way for any defects in the Design Development Drawings, nor for any structural or other defects in any work done according to the approved Design Development Drawings, nor for any delays reasonably caused by the review and approval processes established by this Section 302. 303. Land Use Approvals. Before commencement of construction of the Improvements or other works of improvement upon the Property, the Developer shall, at its own expense, secure or cause to be secured any and all land use and other entitlements, permits and approvals which may be required for the Improvements by the City or any other governmental agency affected by such construction or work. The Developer shall, without limitation, apply for and secure the following (as required), and pay all costs, charges and fees associated therewith: (a) Lot Line Adjustment/Merger; (b) Developer shall obtain all building and grading permits and pay all fees required by the City, Orange County and other governmental agencies with jurisdiction over the Improvements. Notwithstanding anything to the contrary set forth herein, the execution of this Agreement does not constitute the granting of or a commitment to obtain any required land use permits, entitlements or approvals required by the Agency or the City. Developer acknowledges and agrees that all plans prepared for the Project (including the Design Development Drawings) shall be subject to the City's normal planning review process and further that such plans may be subject to review by the City's Planning Commission. 304. Schedule of Performance. The Developer shall submit all Design Development Drawings, obtain all permits, commence and complete all construction of the Improvements, and satisfy all other obligations and conditions of this Agreement within the times established therefore in the Schedule of Performance attached hereto as Exhibit J and incorporated herein. The Agency 20-17 and City shall perform all of their obligations hereunder within the times established therefore in the Schedule of Performance. 305. Cost of Construction. Except to the extent otherwise expressly set forth in this Agreement, all of the cost of the planning, designing, developing and constructing all of the Improvements, including preparation of the Property and grading, shall be borne solely by the Developer. 306. Reserved. 307. Completion of Project. Developer shall commence and diligently proceed with development of the Project. In any event, Developer shall complete the Project not later than the date established therefor in the Schedule of Performance unless extended by agreement of Agency, City and Developer. 308. Rights of Access. For purposes of assuring compliance with this Agreement, representatives of the City and Agency shall have the right of access to the Property, without charges or fees, at normal construction hours during the period of construction for the purposes of this Agreement, including but not limited to, the inspection of the work being performed in constructing the Improvements so long as such City and Agency representatives comply with all safety rules. The City and Agency (or their representatives) shall, except in emergency situations, notify the Developer prior to exercising their rights pursuant to this Section 308. 309. Compliance With Laws. The Developer shall carryout the design and construction of the Improvements in conformity with all applicable laws, including all applicable federal and state labor standards, the City zoning and development standards, building, plumbing, mechanical and electrical codes, and all other provisions of the City of Santa Ana Municipal Code, and all applicable disabled and handicapped access requirements, including without limitation the Americans With Disabilities Act. 42 U.S.C. Section 12101, et seq., Government Code Section 4450, et seq, Government Code Section 11135, et seq., the Unruh Civil Rights Act, Civil Code Sections 51, et seq., and any other applicable Governmental Requirements. 309.1 Prevailing Wage Requirements. Developer shall carry out the construction through completion of the Improvements and the overall development of the Property in conformity with all applicable federal, state and local labor laws and regulations, including, without limitation, as applicable, the requirements to pay prevailing wages under federal law (the Davis-Bacon Act, 40 U.S.C. Section 3141, et seq., and the regulations promulgated thereunder set forth at 29 CFR Part 1 (collectively, "Davis-Bacon")) and California law (Labor Code Section 1720, et seq.). The applicability of federal, state and local prevailing wage laws will be determined based upon the final financing structure and sources of funding of the Project, as approved by Executive Director pursuant to Section 311, et seq. Developer shall be solely responsible, expressly or impliedly, for determining and effectuating compliance with all applicable federal, state and local public works requirements, prevailing wage laws, labor laws and standards, and neither Agency nor City makes any representation, either legally and/or financially, as to the applicability or non-applicability of any federal, state and local laws to the Project, either onsite or offsite. Developer expressly, knowingly and voluntarily acknowledges and agrees that neither Agency nor City has previously represented to Developer or to any representative, agent or affiliate of Developer, or its General Contractor or any 25?-18 subcontractor(s) for the construction or development of the Project, in writing or otherwise, in a call for bids or otherwise, that the work and construction undertaken pursuant to this Agreement is (or is not) a "public work," as defined in Section 1720 of the Labor Code or under Davis-Bacon. Developer knowingly and voluntarily agrees that Developer shall have the obligation to provide any and all disclosures or identifications with respect to the Project as required by Labor Code Section 1781 and/or by Davis-Bacon, as the same may be amended from time to time, or any other similar law or regulation. Developer shall indemnify, protect, pay for, defend (with legal counsel acceptable to Agency and City) and hold harmless the Indemnitees, from and against any and all loss, liability, damage, claim, cost, expense and/or "increased costs" (including reasonable attorneys fees, court and litigation costs, and fees of expert witnesses) which, in connection with the development, construction (as defined by applicable law) and/or operation of the Project, including, without limitation, any and all public works (as defined by applicable law), results or arises in any way from any of the following: (i) the noncompliance by Developer with any applicable local, state and/or federal law or regulation, including, without limitation, any applicable federal and/or state labor laws or regulations (including, without limitation, if applicable, the requirement to pay state and/or federal prevailing wages); (ii) the implementation of Section 1781 of the Labor Code and/or of Davis-Bacon, as the same may be amended from time to time, or any other similar law or regulation; and/or (iii) failure by Developer to provide any required disclosure or identification as required by Labor Code Section 1781 and/or by Davis-Bacon, as the same may be amended from time to time, or any other similar law or regulation. It is agreed by the parties that, in connection with the development and construction (as defined by applicable law or regulation) of the Project, including, without limitation, any and all public works (as defined by applicable law or regulation), Developer shall bear all risks of payment or non-payment of prevailing wages under applicable federal, state and local law or regulation and/or the implementation of Labor Code Section 1781 and/or by Davis-Bacon, as the same may be amended from time to time, and/or any other similar law or regulation. "Increased costs," as used in this Section 309.1, shall have the meaning ascribed to it in Labor Code Section 1781, as the same may be amended from time to time. The foregoing indemnity shall survive termination of this Agreement and shall continue after completion of the construction and development of the Project by Developer. 309.2 Section 3 Compliance. Developer agrees to comply with and to cause the General Contractor, each subcontractor, and any other contractors and/or subcontractors or agents of Developer to comply with the requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. § 1701u, and the implementing regulations, in connection with the construction of the Project. Developer shall submit to Agency/City each Construction Contract with appropriate provisions providing for the construction of the Project in conformance with the terms of this Agreement, including the Section 3 Clause set forth below. The General Contractor, each subcontractor, and any other contractors or subcontractors or agents of Developer shall have provided to the Executive Director the certification in appendix B of 24 CFR Part 24 that neither it nor its principals is presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation from the Project, and Developer shall be responsible for determining whether each contractor has been debarred. Section 3 of the Housing and Urban Development act of 1968, 12 U.S.C., 1701u, as amended by Section 915 of the Housing and Community Development Act of 1992 requires that economic opportunities generated by HUD financial assistance for housing and community development programs be targeted toward low- and very low- income persons. Whenever HUD assistance generates opportunities for employment or contracting, state and local grantees, as well as 13 25F-19 other recipients of HUD housing assistance funds must, to the greatest extent feasible, provide these opportunities to low- and very low- income persons and to businesses owned by or employing low- and very low- income persons. Section 3 applies to projects for which HUD's share of project costs exceeds $200,000 and contracts and subcontracts awarded on projects for which HUD's share or project costs exceeds $200,000 and the contract or subcontract exceeds $100,000. For purposes of this Section 3 Clause and compliance thereto, whenever the word "contractor" is used it shall mean and include, as applicable, the Developer, and its contractor and subcontractor(s), if any. The particular text to be utilized in any and all contracts of any contractor doing work covered by Section 3 shall be in substantially the form of the following, as reasonably determined by the Agency, or as directed by HUD or its representative, and shall be executed by the applicable contractor under penalty of perjury: "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. 170lu ("Section 3"). 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 (inclusive of Extremely Low Income households and Very Low Income households served by the Project), particularly persons who are recipients of HUD assistance for housing. The parties to this contract agree to comply with HUD's regulations in 24 CFR 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. 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 notices 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 of job titles subject to hire, availability of apprenticeship and training positions, the qualifications for each; and the name and location of person(s) taking applications for each of the position; and the anticipated date the work shall begin. The contractor agrees to include this Section 3 clause in every subcontract subject to compliance with regulations in 24 CFR 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 24 CFR part 135. The contractor will not subcontract with any 254 20 subcontractor where the contractor has notice or knowledge that the subcontractor has been found in violation of the regulations in 24 CFR part 135. 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 CFR part 135 require employment opportunities to be directed, were not filled to circumvent the contractor's obligations under 24 CFR part 135. Noncompliance with HUD's regulations in 24 CFR part 135 may result in sanctions, termination of this contract for default, and debarment or suspension from future HUD assisted contracts." After the foregoing Section 3 Clause, there shall be a signature block for the contractor, as applicable, the following text shall be included immediately above the signature block: "The contractor/provider by his/her signature affixed hereto declares under penalty of perjury that contractor has read the requirements of the Section 3 Clause and accepts all its requirements contained therein for all of his/her operations related to this contract." To the extent applicable, the Developer shall comply and/or cause compliance with Section 3 Clause requirements for the Project. For example, when and if Developer or its contractor(s)/subcontractor(s) hire(s) full time employees, rather than volunteer labor or materials, Section 3 is applicable and all disclosure and reporting requirements apply. 309.3 Liens and Stop Notices. The Developer shall not allow to be placed on the Property or any part thereof any lien or stop notice. If a claim of a lien or stop notice is given or recorded affecting the Improvements the Developer shall within thirty (30) days of such recording or service or within five (5) days of the Agency's demand whichever last occurs: (a) pay and discharge the same; or (b) affect the release thereof by recording and delivering to the Agency a surety bond in sufficient form and amount, or otherwise; or (c) provide the Agency with other assurance which the Agency deems, in its sole discretion, to be satisfactory for the payment of such lien or bonded stop notice and for the full and continuous protection of Agency from the effect of such lien or bonded stop notice. 310. Release of Construction Covenants. Promptly after completion of the Improvements or any portion thereof in conformity with this Agreement, the Agency shall furnish the Developer with a "Release of Construction Covenants," substantially in the form of Exhibit L hereto which is incorporated herein by reference. The Agency shall not unreasonably withhold such Release of Construction Covenants. The Release of Construction Covenants shall be a conclusive determination of satisfactory completion of the applicable portion of the Improvements and the Release of Construction Covenants shall so state. Any party then owning or thereafter purchasing, leasing, or otherwise acquiring any interest in the Property shall not (because of such ownership, 15 25F-21 purchase, lease or acquisition) incur any obligation or liability under this Agreement except for those continuing covenants as set forth herein and in the Affordability Restrictions. If the Agency refuses or fails to furnish the Release of Construction Covenants, after written request from the Developer, the Agency shall, within thirty (30) days of written request therefore, provide the Developer with a written statement of the reasons the Agency refused or failed to furnish the Release of Construction Covenants. The statement shall also contain the Agency's opinion of the actions the Developer must take to obtain the Release of Construction Covenants. The Release of Construction Covenants shall not constitute evidence of compliance with or satisfaction of any obligation of the Developer to any holder of any mortgage, or any insurer of a mortgage securing money loaned to finance the Improvements, or any part thereof. The Release of Construction Covenants is not a notice of completion as referred to in Section 3093 of the California Civil Code. 311. Financing of the Improvements. 311.1 Approval of Financing. Within the time set forth in the Schedule of Performance and as a Condition Precedent to the commencement of construction or disbursement of any proceeds of the Loans, Developer shall submit to Agency and City evidence that Developer has obtained sufficient equity capital and/or has obtained firm and binding commitments for construction and permanent financing necessary to undertake the development of the Property and the construction of the Improvements in accordance with this Agreement. The parties anticipate that Developer shall apply for and use commercially reasonable efforts to obtain (1) an allocation of tax exempt bond financing from the California Debt Limit Allocation Committee (CDLAC), (2) an allocation of Tax Credits from the California Tax Credit Allocation Committee (TCAC), and (3) a firm commitment for a Senior Loan from a Senior Lender, all as reasonably approved by the Executive Director based on documentation submitted by Developer. Agency/City shall approve or disapprove such evidence of financing commitments within thirty (30) days of receipt of a complete submission. Approval shall not be unreasonably withheld or conditioned. If Agency/City shall disapprove any such evidence of financing, Agency/City shall do so by Notice to Developer stating the reasons for such disapproval and Developer shall promptly obtain and submit to Agency/City new evidence of financing (or terminate this Agreement as permitted by Section 2003). Agency/City shall approve or disapprove such new evidence of financing in the same manner and within the same times established in this Section 311.1 for the approval or disapproval of the evidence of financing as initially submitted to Agency/City. Developer shall close the approved financing prior to or concurrently with the first disbursement of the Loans. Such evidence of financing shall include the following: (a) a copy of a legally binding, firm and enforceable loan commitment(s) from an approved Senior Lender or Letter of Credit obtained by Developer for 100% of the estimated cost to construct the Improvements, from unrelated financial institutions for the Senior Loan for financing to fund the construction, operation and maintenance of the Improvements, subject to such lenders' reasonable, customary and normal conditions and terms, and/or (b) a certification from the chief financial officer of Developer that Developer has sufficient funds to complete the construction, operation, and maintenance of the Improvement and that such funds have been committed to such construction, and/or (c) documentation showing that Developer has obtained allocations of tax exempt bond financing from CDLAC and Tax Credits from TCAC, along with evidence that Developer has obtained a commitment from a tax credit investor to provide equity in exchange for a limited partnership interest in Developer pursuant to the Partnership Agreement, and/or (d) other documentation satisfactory to the Agency/City as evidence of other sources of capital sufficient to demonstrate that Developer has Zs?-ii adequate funds to cover the difference between the total cost of the construction and completion of the Improvements, less financing authorized by those loans set forth in subparagraph (a) above. 311.2 No Encumbrances Except Agency recorded documents (Deeds of Trust/Affordability Restrictions on Transfer of Property). The Developer shall not enter into any conveyance for financing prior to the Release of Construction Covenants without the prior written approval of the Agency, which approval Agency agrees to give if any such conveyance for financing is given to a responsible financial lending institution or person or entity ("Holder"). The Developer may enter into a conveyance for financing after the completion of the Improvements as evidenced by the recording of the Release of Construction Covenants without the approval of the Agency. 311.3 Holder Not Obligated to Construct Improvements. The Holder of any mortgage or deed of trust authorized by this Agreement shall not be obligated by the provisions of this Agreement to construct or complete the Improvements or any portion thereof, or to guarantee such construction or completion; nor shall any covenant or any other provision in this Agreement be construed so as to obligate such Holder. Nothing in this Agreement shall be deemed to construe, permit or authorize any such Holder to devote the Property to any uses or to construct any improvements thereon, other than those uses or improvements provided for or authorized by this Agreement. 311.4 Notice of Default to Mortgagee or Deed of Trust Holders; Right to Cure. With respect to any mortgage or deed of trust granted by Developer as provided herein, whenever the Agency may deliver any notice or demand to Developer with respect to any Default by Developer in completion of construction of the Improvements, the Agency may at the same time deliver to each holder of record of any mortgage or deed of trust authorized by this Agreement a copy of such notice or demand. Each such Holder shall (insofar as the rights granted by the Agency are concerned) have the right, at its option, within sixty (60) days after the receipt of the notice, to cure or remedy or commence to cure or remedy and thereafter to pursue with due diligence the cure or remedy of any such Default and to add the cost thereof to the mortgage debt and the lien of its mortgage. Such Holder shall permitted to undertake or continue the construction or completion of the Improvements, or any portion thereof, if necessary to conserve or protect the Improvements or construction already completed without having first expressly assumed Developer's obligations to the Agency hereunder. Except as set forth in the immediately preceding sentence, such Holder may enforce the terms of this Agreement against the Agency only if it has first expressly assumed Developer's obligations to the Agency under this Agreement by written agreement reasonably satisfactory to the Agency. Agency shall fund its obligations under this Agreement to any Holder who undertakes to complete the Improvements. Any such Holder properly completing such improvement shall be entitled, upon compliance with the requirements of Section 310 of this Agreement, to a Release of Construction Covenants. It is understood that a Holder shall be deemed to have satisfied the sixty (60) day time limit set forth above for commencing to cure or remedy a Developer Default which requires title and/or possession of the Property (or portion thereof) if and to the extent any such Holder has within such sixty (60) day period commenced proceedings to obtain title and/or possession and thereafter the Holder diligently pursues such proceedings to completion and cures or remedies the Default. 311.5 Right of the Agency to Cure Mortgage or Deed of Trust Default. In the event of a mortgage or deed of trust default or breach by Developer prior to the completion of the construction of any of the Improvements or any part thereof, Developer shall immediately deliver to Agency a copy of any mortgage holder's notice of default. If the Holder of any mortgage or deed of 25r-23 trust has not exercised its option to construct, the Agency shall have the right but no obligation to cure the default. In such event, the Agency shall be entitled to reimbursement from Developer of all proper costs and expenses incurred by the Agency in curing such default. The Agency shall also be entitled to a lien upon the Property to the extent of such costs and disbursements. Any such lien shall be junior and subordinate to the mortgages or deeds of trust pursuant to this Section 311. 311.6 Changes Requested by Holder. In the event that a lender or Holder which has been approved pursuant to this Section 311, et seq., requires one or more amendments to this Agreement, or any of the attachments hereto, the Agency agrees to reasonably consider approving such proposed amendment, and if such proposed amendment(s) does not materially affect the Agency's interests hereunder, the Agency Executive Director or his or her designee is hereby authorized to make such amendment(s) without further authorization from the Agency. 311.7 Subordination of Affordability Restrictions. In the event the Executive Director finds that an economically feasible method of financing for the construction and operation of the Project without the subordination of the Affordability Restrictions is not reasonably available, Executive Director may agree to subordinate the covenants contained in the Regulatory Agreement and the lien of the Loans to the Senior Loan, the Bond Regulatory Agreement and/or the Tax Credit Regulatory Agreement, subject to the terms of this Section 311.7. Each and any subordination agreement evidencing or affirming Agency's and City's subordination of the Affordability Restrictions entered into by Agency and/or City shall contain written commitments which the Executive Director finds are reasonably designed to protect Agency's and City's investment in the Project in the event of default; any such subordination agreement(s) shall contain contractual obligation of such Senior Lender to include, without limitation, the following: (a) concurrent delivery to Agency and City of a true copy of each and any notice provided by the Senior Lender for the Project to Developer (as its borrower) during the term of the Senior Loan for the Project; (b) a reasonably extended cure period and right to Agency and City to cure and assume the Senior Loan, and/or other senior lien(s) for the Project upon the same terms applicable to the approved financing to Developer pursuant to the loan documents applicable thereto with such right, but with no obligation, to the Agency and City being available both from the date of issuance of any notice of default through and after the recordation of a formal Notice of Default by the Senior Lender for the Project pursuant to applicable California Code of Civil Procedure foreclosure requirements, and (c) a right of Agency and City to cure a default on each of the senior loan(s) for the Project prior to foreclosure and after recordation of a Notice of Default pursuant to applicable California Code of Civil Procedure requirements; and such cure rights may also include: (d) a right of Agency and City to negotiate with the Senior Lender(s) for the Project after notice of default from the Senior Lender(s) and prior to foreclosure, (e) an agreement that if prior to foreclosure of the Senior Loan for the Project, Agency or City takes title to the Property and cures the default on the senior loan(s) for the Project, the Senior Lender(s) will not exercise any right it may have to accelerate the Senior Loan by reason of the transfer of title to Agency or City, and (f) a right of Agency and City to acquire Developer's interest in the Property from Developer at any time after a material default on the Senior Loan for the Project. 18 25F-24 400. [RESERVED] 500. LOANS 501. Agency Loan. 501.1 Amount and Purpose. Subject to the terms and conditions of this Agreement, Agency agrees to make the Agency Loan to Developer from tax increment money in the principal amount of up to $3,888,497 for those purposes described in this Agreement. 501.2 Agency Promissory Note and Deed of Trust. The Agency Loan shall be evidenced by the Agency Promissory Note in the form attached hereto as Exhibit F. The Agency Loan shall be secured by the Agency Deed of Trust in the form attached hereto as Exhibit H-1. The Agency Deed of Trust shall be a deed of trust encumbering the Property in second position, subordinate only to the Senior Loan Deed of Trust. 501.3 Use of Agency Loan Proceeds. Proceeds of the Agency Loan shall be used only for costs incurred by Developer to construct the Improvements as set forth in the approved Project Budget. 501.4 Agency Loan Terms. The terms and conditions of the Agency Loan are as set forth in the Agency Promissory Note which is a residual receipts note. 502. City Loan. 502.1 Amount and Purpose. Subject to the terms and conditions of this Agreement, City agrees to make the City Loan from HOME Program funds to Developer in the principal amount of up to $2,500,000 for those purposes described in this Agreement. 502.2 City Promissory Note and Deed of Trust. The City Loan shall be evidenced by the City Promissory Note in the form attached hereto as Exhibit G. The City Loan shall be secured by the City Deed of Trust in the form attached hereto as Exhibit H-2. The City Deed of Trust shall be a deed of trust encumbering the Property in third position, subordinate only to the Senior Loan Deed of Trust, as approved by the Executive Director, and the Agency Deed of Trust. 502.3 Use of City Loan Proceeds. The proceeds of the City Loan shall be used only for costs incurred by Developer to construct the Improvements as set forth in the approved Project Budget. 502.4 City Loan Terms. The terms and conditions of the City Loan are as set forth in the City Promissory Note which is a residual receipts note. The HOME Program compliance period is fifteen (15) years, commencing on the date that all work is complete and the Property is fully occupied. 250'-25 503. Other Terms and Conditions of the Loans. (a) The Agency Promissory Note and City Promissory Note shall become immediately due and payable, in the event of any of the following: (i) failure to complete the Project within the time set forth in the Schedule of Performance; (ii) violation of any of the use covenants and restrictions contained in this Agreement or any other Project Document after the expiration of any applicable notice and cure periods; (iii) an Event of Default by Developer under this Agreement or any other Project Document which is not timely cured after expiration of any applicable notice and cure periods pursuant to the terms of this Agreement or the applicable Project Document. 600. CONDITIONS TO DISBURSEMENT OF LOAN PROCEEDS 601. Conditions Precedent. In addition to the Conditions Precedent set forth in Sections 602 and 603 below, Agency/City's obligation to disburse the Loan Amounts is subject to the satisfaction, or waiver by the Executive Director, of the following Conditions Precedent: 601.1 Loan Documents. Developer shall have delivered to the Agency, signed by the authorized officer or officers of Developer, with such signature(s) acknowledged where necessary, each of the following documents: (a) this Agreement; (b) the City Promissory Note; (c) the City Deed of Trust; (d) the Agency Promissory Note; (e) the Agency Deed of Trust; and (f) the Affordability Restrictions. 601.2 Design Approvals. The Developer shall have obtained approval by the Agency of the Design Development Drawings as set forth in Section 302. 601.3 Land Use Approvals. The Developer shall have received all land use approvals and permits required pursuant to Section 303. 601.4 Construction Contract; General Contractor. Developer shall have provided to Agency and City (within a reasonable time for Executive Director to review, comment and approve or disapprove) a signed copy of the Construction Contracts between Developer and the General Contractor and between Developer's General Contractor and each subcontractor for the construction of the Improvements inclusive of all on-site and off-site improvements required to be constructed in connection therewith, if any, certified by the General Contractor to be a true and 250"-26 correct copy thereof, and Executive Director shall have reasonably approved such General Contractor) as having the experience and financial resources (based on audited or unaudited financial statements submitted to Executive Director) necessary to construct and complete the Project. Developer shall submit to Agency and City evidence regarding each entity serving as a subcontractor for the construction of each portion of the Improvements, along with satisfactory evidence of necessary license(s), certification(s), bonding (with respect to the General Contractor's license bond required by the State of California) and insurance, all as required by this Agreement and as reasonably requested by Executive Director. Each Construction Contract (and all subcontracts) shall include the Section 3 Clause set forth in Section 309.2 hereof. The Construction Contract with the General Contractor shall be for a fixed, all-inclusive fee to complete all work to be performed by the General Contractor to construct the Improvements, subject to approved change orders. 601.5 Construction Security. Developer shall have obtained and shall have delivered to Agency and City an unconditional and irrevocable standby letter of credit in an amount equal to fifteen percent (15%) of the total the construction costs for the Project, as set forth in the Project Budget which is approved by Agency and City for the Project (collectively, "Performance Letter of Credit"), along with reasonably satisfactory evidence demonstrating the General Contractor's financial strength (such as the two most recent audited or unaudited financial statements of General Contractor) and reputation for quality and timely work and performance necessary to complete the Project in accordance with this Agreement. The Performance Letter of Credit shall be deposited with the Executive Director and shall be in full force and effect with Agency and City's unconditional and irrevocable right to draw on such instrument until thirty-five (35) days after the date of recordation of the notice of completion in the event Developer (or its General Contractor) ceases construction in violation of this Agreement or fails to complete construction of the Project in violation of this Agreement. In such event, Agency and City shall have the right to draw on the Performance Letter of Credit in its sole discretion, and have the sole and absolute right to determine whether the proceeds of the Performance Letter of Credit shall be used to pay for the completion of the Project. Agency and City will provide Developer with a copy of Agency's and City's (as Beneficiaries) signed and dated statement provided to the Lender pursuant to the Performance Letter of Credit effecting Agency's and City's draw on the Performance Letter of Credit, which copy will be transmitted to Developer on the same date that the statement is transmitted to the Lender. In lieu of the Performance Letter of Credit, Developer may propose providing Agency and City other forms of other and/or additional security addressing the completion of construction (such as payment and performance bonds covering one hundred percent (100%) of the Project), other bonds and sureties, guarantees and/or combinations of any of those, collectively referred to herein as "Alternate Security"), which Agency and City will approve and accept if the Executive Director determines in her sole, reasonable discretion that such Alternate Security will provide Agency and City a level of security that is substantially similar and equivalent to the Performance Letter of Credit. 601.6 Financing. The Agency shall have approved Developer's evidence of financing of the Improvements on the Property as provided in Section 311.1 and such financing shall be available for development of the Improvements or, to the extent said financing consists of a third party loan or loans, said loan or loans shall have closed and funded or be ready to close and fund concurrently with the Loans. 601.7 Final Project Budget and Construction Schedule. Developer shall have submitted to Agency/City and Agency/City shall have approved the final/updated Project Budget and updated construction schedule for the construction of Improvements. 25'127 601.8 Corporate Resolution. Developer shall deliver to Agency a certified copy of a resolution of Developer's Board of Directors authorizing (or ratifying) the execution of this Agreement and establishing funding for fulfilling Developer's obligations under this Agreement. 601.9 Opinion. The Executive Director shall have received and approved a standard borrower's counsel's opinion from Developer's counsel which shall be a law firm licensed to practice within the State of California and having experience in transactions similar in size and nature to the transaction contemplated hereunder. 601.10 Management Plan. Developer shall have prepared and submitted to Agency, and Agency shall have approved, a Management Plan, as provided in Section 1205. 601.11 Agency Authority. No legal proceeding, legislation, regulation or other legal impediment shall have been enacted or shall have become legally effective to prevent Agency from making the Agency Loan to Developer. 601.12 Title Insurance. Agency and City shall have received a 2006 ALTA Lender's loan policy of title insurance ("Agency/City Title Policy"), or evidence of a commitment therefore satisfactory to City, issued by First American Title Insurance Company and in form and substance satisfactory to Agency/City, together with all endorsements and binders required, naming City and Agency as the insured, in a policy amount of not less than the City Loan Amount and the Agency Loan Amount, showing Developer as the fee owner of the Property and insuring the combined City Deed of Trust and the Agency Deed of Trust to be valid priority liens on the Property. The City Promissory Note and Deed of Trust and the Agency Promissory Note and Deed of Trust shall be subordinate only to the Senior Loan Note and Senior Loan Deed of Trust, as approved by the Executive Director. The order of priority of the various monetary encumbrances and regulatory agreements affecting the Property shall be as follows: 1. Affordability Restrictions Section 311.7) 2. Senior Loan Deed of Trust 3. Agency Deed of Trust 4. City Deed of Trust 5. This Agreement 6. NSP Covenants 7. NSP Deed of Trust (unless subordinated pursuant to 601.13 Affordability Restrictions. Developer shall have delivered to the Agency, in the form attached hereto as Exhibit I, the Affordability Restrictions pursuant to which, among other things, Developer agrees that the Property shall be used only for decent, safe, and sanitary rental Affordable Housing pursuant to the affordability requirements of Code of Federal Regulations ("CFR") Section 92.252 or 92.254 and California Health and Safety Code Sections 50053 and 33334.3, as applicable. Zs?=is 601.14 Documents Recorded. This Agreement, the Agency Deed of Trust, the City Deed of Trust and the Affordability Restrictions shall have been recorded in the Official Records of the County. 601.15 Request for Notice. Agency shall have recorded a request for notice of default under the Senior Loan ("Request for Notice of Default"). 601.16 Insurance. Agency/City shall have received evidence satisfactory to the Agency/City Attorney and the City's Risk Manager that all of the policies of insurance required by Article 1900 of this Agreement are in full force and effect. 601.17 No Litigation. No litigation or other proceeding shall be pending or threatened by any third parties which seeks to enjoin the transactions contemplated herein. 601.18 Representations and Warranties. The representations and warranties of Developer contained in this Agreement and the other Project Documents shall be correct as of each disbursement of any proceeds of the Loans as though made on and as of that date, and if requested by the Executive Director, Agency/City shall have received a certificate to that effect signed by Developer's Representative. 601.19 No Default. No Event of Default by Developer under this Agreement or any other Project Document shall have occurred, and no event shall have occurred which, with the giving of notice or the passage of time or both, would constitute an Event of Default by Developer under this Agreement or any other Project Document, and if requested by the Executive Director, Agency/City shall have received a certificate to that effect signed by Developer's Representative. 602. Additional Conditions Precedent to Any Disbursement. Agency/City's obligation to make any disbursement of the Loans (including the first and final disbursements) is subject to the satisfaction of the following Conditions Precedent: 602.1 Conditions Precedent. All Conditions Precedent set forth in Section 601 shall have been satisfied (and shall remain satisfied) by Developer (or shall have been waived by Executive Director). 602.2 Satisfactory Progress. The Executive Director shall be satisfied, based on his/her own inspections or other reliable information, that the construction is progressing satisfactorily in conformance with all applicable laws and other requirements (including HOME regulations). 602.3 Condition of Title. Either (i) the Executive Director reasonably believes that no event has occurred that would give rise to a colorable claim against the Property (e.g., a mechanic's lien) superior to the claim of Agency/City against the Property with respect to the subject disbursement, or if such claim is made, then Executive Director shall receive satisfactory evidence that such claim has been bonded over until its resolution; or (ii) Agency/City must have received, at Developer's expense but payable out of the Loan proceeds from the title insurer who issued the Agency/City Title Policy, all endorsements thereto then reasonably required by Agency/City (including, without limitation, CLTA Form 122 -- priority of advance endorsements). 20-29 602.4 Representations and Warranties. The representations and warranties of Developer contained in this Agreement and the other Project Documents shall be correct as of the date of the disbursement as though made on and as of that date. 602.5 No Default. No Event of Default by Developer shall remain uncured (unless, to the extent permitted under this Agreement, Developer is diligently taking action to cure such default) and no event shall have occurred which, with the giving of notice or the passage of time or both, would constitute an Event of Default by Developer. 603. Final Disbursement. Agency/City's obligation to disburse the Retainage pursuant to Section 611 is subject to the satisfaction of the following additional Conditions Precedent: 603.1 Construction Complete. The construction of the Improvements including all on-site and off-site improvements and all landscaping shall be complete, as reasonable determined by the Executive Director. 603.2 Certificate of Occupancy Issued. Any portion of the construction work requiring inspection or certification by any Governmental Authority shall have been inspected and certified as complete. Developer shall request that the City Building Department issue a Certificate of Occupancy, a copy of which shall be delivered to the Executive Director, in order for final disbursement to occur. 603.3 Lien Free. At least one of the following shall have occurred: (a) Thirty-five (35) days shall have passed since the recording of a valid notice of completion for the construction of the final Improvements to be constructed, and no mechanic's or material man's lien shall be outstanding; or (b) Ninety-five (95) days shall have passed since actual completion of the construction of all required Improvements, and no mechanic's or materialman's lien shall be outstanding; or (c) Developer shall have bonded over any mechanic's or materialmen's lien affecting the Property, to Agency/City's reasonable satisfaction. 604. Disbursement Procedures for Loan(s). The Loan proceeds shall be disbursed to finance the construction of the Project. Subject to Section 604. 1, the Loan proceeds shall not be used for any purpose other than for construction related costs, including Developer fee and soft costs related to development of the Project, all in accordance with the approved Project Budget, with such costs all subject to Agency/City's prior review. All disbursements shall be made as reimbursements to Developer for costs actually and reasonably incurred by Developer for the construction of the Improvements in accordance with the Project Budget, based on detailed invoices and/or bills received from the General Contractor, materials suppliers, consultants and subcontractors that have performed work on the Project. Developer and Agency/City shall agree on a draw request schedule to ensure that the Agency/City is provided with frequent updates regarding the status of the construction of the Improvements, the status of expenditures in accordance with the Project Budget, and the status of invoices submitted by and payments to the General Contractor, suppliers, consultants, and subcontractors performing work at the Project. 24 25F-30 605. Termination for Failure of Condition. If (a) any of the conditions set forth herein are not timely satisfied (subject to applicable notice and cure rights) or waived by the Executive Director within the times set forth in the Schedule of Performance, and (b) Agency/City is not in default under this Agreement, Agency/City may terminate this Agreement without any further liability on its part by giving written notice of termination to Developer. Upon the giving of such notice, all principal, interest and other amounts owing under the specified due date. 606. Waiver of Conditions. The conditions set forth pertaining to Agency/City's obligation to make disbursements of the Agency Loan and City Loan proceeds are for Agency/City's benefit only and the Executive Director may waive all or any part of such rights by written notice to Developer. 606.1 Waiver of Disbursement Conditions. Unless Agency/City otherwise agrees in writing, the making by Agency/City of any disbursement with knowledge that any condition to such disbursement is not fulfilled shall constitute a waiver of such condition only with respect to the particular disbursement made, and such condition shall be condition to all further disbursements until fulfilled. 606.2 Modification of Disbursement Conditions and Procedures. The Executive Director shall have the authority to modify the disbursement conditions and procedures set forth herein in order to conform them to the payment provisions of the contract for construction. 607. Disbursement Requests. The Loan proceeds shall be disbursed on a line-item by line-item basis in accordance with the Project Budget.and subject to the Conditions Precedent in this Section. In no event shall Agency/City have any obligation to disburse any amount for any item in excess of the amount allocated to such item in the Project Budget. Disbursements shall be made only upon Developer's written request in the form of a Draw Request showing all costs which Developer intends to fund with such disbursement, itemized in such detail as Agency/City may reasonably require, accompanied in each case by (a) invoices and lien releases satisfactory to Agency/City, including in any event partial lien releases executed by each contractor and subcontractor who has received any payment for work performed, and (b) all other documents and information reasonably required by Agency/City. Disbursement Requests shall be submitted no less than ten (10) Business Days prior to the date of the requested disbursement, and shall not be submitted more often than monthly. Prior to each disbursement by Agency/City of proceeds of the Agency/City Loan, Developer shall deliver to Agency/City a draw request ("Draw Request"), and all required supporting information as set forth in the Loan Documents or as otherwise reasonably required by Agency/City in order to provide information for evaluating the requested disbursement pursuant to customary construction lending practices of institutional lenders in Southern California. Agency/City shall notify the Developer of approval or disapproval of each Draw Request within five (5) business days after receipt of the Draw Request, using the Agency's/City's "Disbursement/Change Order Approval Notice". Agency/City shall have the right, but not the obligation, to discontinue processing Draw Requests unless and until receipt of notification from the other of approval or disapproval of each outstanding Draw Request. 608. Manner of Disbursement. Agency/City may make any disbursement by check payable to Developer; or on a voucher basis; or by check payable jointly to Developer and any 25 25F-31 contractor, subcontractor or other claimant; or directly to any such claimant; or by any other means reasonably selected by Agency/City. 609. Cost Overruns. In the event that, at any time and for any reason, (a) the actual cost reasonably estimated by Agency/City or Developer to be required to complete all matters included in any line item in the Project Budget exceeds the amount allocated to that line item in the Project Budget, (b) Project Costs for any matters not covered by a specific line item have been or will be incurred, or (c) the undisbursed portion of the proceeds of the Loans is or may be insufficient to pay all Project Costs for construction of the Improvements that may be payable under the Agency/City Loan Documents or otherwise in connection with the construction, Developer shall, within ten (10) days after it receives written notice thereof from Agency/City of any of the foregoing matters, do one or more of the following: (a) provide satisfactory evidence to Agency/City that Developer has previously paid such excess Project Costs or otherwise provided for such insufficiency (collectively, the "Excess Cost") with funds from a source other than the Agency/City Loan; (b) reallocate sufficient funds to pay the Excess Cost from funds allocated to "Contingency" in the Project Budget; provided, however, that the Executive Director's consent to any such reallocation shall be required; or (c) deposit an amount equal to the Excess Cost in a non-interest bearing account ("Overrun Account") with Agency/City from which withdrawals may be made only with the consent of the Executive Director but which will be exhausted prior to any further disbursement for any line item, so that any resulting surplus in any line item of the Project Budget will then be reallocated to the line item(s) in which the Excess Costs are expected to be incurred. Agency/City shall have no obligation to make further disbursements under the Loans until Developer has paid or otherwise provided for all Excess Costs as required above. Amounts deposited by Developer in the Overrun Account for any Excess Costs shall be disbursed by Agency/City prior to the disbursement of any remaining Agency Loan or City Loan proceeds in the manner described in subdivision (c), above. 610. Cost Savings. Subject to Section 609, upon completion of and disbursement for all matters covered by any line items in the Project Budget, any remaining undisbursed amounts allocated to that line item shall be retained by the City, with a corresponding reduction in the principal amount of the Loans. 611. Retainage. Agency/City will withhold a "Retainage" of 10% from each Disbursement for each of the hard cost line items of the Project Cost breakdown (and other line items thereof designated for withholding of retainage) set forth in the Project Budget until all conditions to the final disbursement of proceeds of the Loans have been satisfied. In lieu of Agency/City's withholding the Retainage, Developer can by written notice to Agency/City elect not to draw any overhead or profit (in an amount not less than the full Retainage) as would otherwise be permitted under the Construction Contract until such time as Retainage would otherwise have been released. Agency/City shall not retain funds for building materials purchased by Developer or for soft costs of construction for which Developer supplies documentation to Agency/City that Developer has provided payment in full. 26 25F-32 612. Holdback. The Retainage otherwise available for disbursement shall be subject to a holdback of one hundred twenty-five percent (125%) of the estimated cost (as determined by the Executive Director) for "punch-list" items. Such holdback will be released when all punch-list items have been completed to the satisfaction of Agency/City. 700. AFFORDABILITY REQUIREMENTS, USE AND MAINTENANCE OF THE PROPERTY 701. Use Covenants and Restrictions. (a) Developer agrees and covenants, which covenants shall run with the land and bind Developer, its successors, its assign and every successor in interest to the Property that Developer will make all but one of the Housing Units on the Property available to Extremely Low Income and Very Low Income households at rents affordable to such households throughout the entire Term of this Agreement. The HOME Program requirements applicable to the HOME Units shall be enforced until the date that is fifteen (15) years after the date on which the City reports the Project as complete to HUD. Upon expiration of the 15 year HOME Program compliance period, the Agency/City shall require that all Affordable Units remain affordable, with rents calculated based on assumed household size at the same income levels, as required by the Redevelopment Law and adopted Agency guidelines. (b) The Project shall consist of thirty-six (36) Housing Units. Thirty-five (35) of the Housing Units shall be Affordable Units. 'Eleven (11) of the Affordable Units shall also be HOME Units. The HOME Units shall be fixed units and shall be distributed throughout the Project with comparable amenities to the other units, as approved by the Executive Director. 702. Affordable Rent. The Affordable Rent to be charged for the Affordable Units shall be calculated pursuant to this Section 702. No. Affordable No. HOME Income Rest. Bedrooms Gross Rent Units Units Max Income Very low-50% Two Bedroom $981 8 0 $41,850 Very low-50% Three Bedroom $1134 22 10 $50,200 Very low-50% Five Bedroom $1395 1 1 $60,350 Ext. low-30% Three Bedroom $724 4 0 $30,100 Total Affordable Units 35 11 (a) The Affordable Rents for Very Low Income households shall not exceed the lower and more restrictive of- 0) The very low income rents as calculated under the methodology presented in California Health and Safety Code Section 50053(b)(2); or (ii) The standards set forth by the California Tax Credit Allocation Committee (TCAC); or (iii) With respect to the HOME Units, the Low HOME rent amount set forth in the HOME Regulations. 27 25F-33 (b) The Affordable Rents for Extremely Low Income households shall not exceed the lower and more restrictive of- (i) The extremely low income rents as calculated under the methodology presented in California Health and Safety Code Section 50053(b)(1); or (ii) The standards set forth by the California Tax Credit Allocation Committee (TCAC). (c) Utility allowances shall be deducted from the maximum gross monthly rent charged to tenants of the Affordable Units. The Santa Ana Housing Authority publishes the utility allowance. 703. Rent Increases. On an annual basis, the Agency/City shall provide the Developer with the maximum allowable schedule of rents for the Property. In no event can Developer charge any tenant more than such amount. 800. AGENCY AND CITY REPRESENTATIONS AND WARRANTIES 801. Agency Representations and Warranties. Agency hereby represents and warrants to Developer, as of the date of this Agreement, as follows: 801.1 Authority. Agency is a public body, corporate and politic, existing pursuant to the California Community Redevelopment> Law (California Health and Safety Code Section 33000, et seq.), which has been authorized to transact business pursuant to action of the City. As of the date of this Agreement, Agency has full right, power and lawful authority to execute, perform, and deliver this Agreement, together with its exhibits, and has been fully authorized by all requisite actions on the part of Agency. 801.2 No Conflict. To the best of Agency's knowledge, Agency's execution, delivery and performance of its obligations under this Agreement will not constitute a default or a breach under any contract, agreement or order to which Agency is a party or by which it is bound. 802. City Representations and Warranties. City hereby represents and warrants to Developer, as of the date of this Agreement, as follows: 802.1 Authority. City is a California municipal corporation and charter City. As of the date of this Agreement, City has full right, power and lawful authority to execute, perform, and deliver this Agreement, together with its exhibits, and has been fully authorized by all requisite actions on the part of City. 802.2 No Conflict. To the best of City's knowledge, City's execution, delivery and performance of its obligations under this Agreement will not constitute a default or a breach under any contract, agreement or order to which City is a party or by which it is bound. 900. DEVELOPER REPRESENTATIONS AND WARRANTIES 901. As a material inducement to Agency/City to enter into this Agreement, Developer represents and warrants as follows: 28 25F-34 901.1 Formation, Qualification and Compliance. Developer is a California limited partnership currently comprised of Orange Housing Development Corporation, a California nonprofit public benefit corporation, and C&C Development Co., LLC, a California limited liability company. Developer is a duly organized California limited partnership formed within and in good standing under the laws of the State of California. Developer has full right, power and lawful authority to undertake all obligations as provided herein and the execution, performance and delivery of this Agreement by Developer has been fully authorized by all requisite actions on the part of the Developer. Orange Housing Development Corporation is (a) a non-profit public-benefit corporation, validly existing and in good standing under the laws of the State of California, (b) has all requisite authority to conduct its business and own and lease its properties, (c) has qualified and is in good standing as a Community Housing Development Organization, and (d) is qualified and in good standing in every jurisdiction in which the nature of its business makes qualification necessary or where failure to qualify could have a material adverse effect on its financial condition or the performance of its obligations under the Loan Documents. Developer is in compliance with all laws applicable to its business and has obtained all approvals, licenses, exemptions and other authorizations from, and has accomplished all filings, registrations and qualifications with, any Governmental Authority that are necessary for the transaction of its business. 901.2 Execution and Performance of Loan Documents. (a) Developer has all requisite authority to execute and perform its obligations under the Loan Documents. (b) The execution and delivery by Developer of each Loan Document, and the performance of Developer's obligations thereunder, has been authorized by all necessary action and does not and will not: (i) require any consent or approval not heretofore obtained of any person having any interest in Developer; (ii) violate any provision of, or require any consent or approval not heretofore obtained under, any articles of incorporation, by-laws or other governing document applicable to Developer; (iii) result in or require the creation of any lien, claim, charge or other right of others of any kind (other than under the Agency/City Loan Documents) on or with respect to any property now or hereafter owned or leased by Developer; (iv) to best of its knowledge, violate any provision of any law presently in effect; or (v) constitute a breach or default under, or permit the acceleration of obligations owed under, any contract, loan agreement, lease or other agreement or document to which Developer is a party or by which Developer or any of its property is bound. (c) Developer is not in default, in any respect that is materially adverse to the interests of Agency/City under the Loan Documents or that would have any material adverse effect on the financial condition of Developer or the conduct of its business, under any law, contract, 25P-35 lease or other agreement or document described in sub-paragraph (d) or (e) of the previous subsection. (d) No approval, license, exemption or other authorization from, or filing, registration or qualification with, any Governmental Authority is required which has not been previously obtained in connection with: (i) the execution of Developer of, and the performance by Developer of its obligations under, the Loan Documents; and (ii) the creation of the liens described in the Loan Documents. 901.3 Financial and Other Information. To the best of Developer's knowledge, all financial information furnished to Agency/City with respect to Developer in connection with the Loans (a) is complete and correct in all material respects as of the date of preparation thereof, (b) accurately presents the financial condition of Developer, and (c) has been prepared in accordance with generally accepted accounting principles consistently applied or in accordance with such other principles or methods as are reasonably acceptable to Agency/City. To the best of Developer's knowledge, all other documents and information furnished to Agency/City with respect to Developer, in connection with the Loans, are correct and complete insofar as completeness is necessary to give the Agency/City accurate knowledge of the subject matter. To the best of Developer's knowledge Developer has no material liability or contingent liability not disclosed to Agency/City in writing and there is no material lien, claim, charge or other right of others of any kinds (including liens or retained security titles of conditional vendors) on any property of Developer not disclosed in such financial statements or otherwise disclosed to Agency/City in writing. 901.4 Experience and Qualifications. Developer has the experience and qualifications necessary to perform as Developer pursuant to this Agreement and the other Project Documents. 901.5 No Material Adverse Change. There has been no material adverse change in the condition, financial or otherwise, of Developer since the dates of the latest financial statements furnished to Agency/City. Since those dates, Developer has not entered into any material transaction not disclosed in such financial statements or otherwise disclosed to Agency/City in writing. 901.6 Tax Liability. Developer has filed all required federal, state and local tax returns and has paid all taxes (including interest and penalties, but subject to lawful extensions disclosed to Agency/City in writing) other than taxes being promptly and actively contested in good faith and by appropriate proceedings. Developer is maintaining adequate reserves for tax liabilities (including contested liabilities) in accordance with generally accepted accounting principles or in accordance with such other principles or methods as are reasonably acceptable to Agency/City. 901.7 Governmental Requirements. To best of its knowledge, Developer is in compliance with all Governmental Requirements relating to the Property and/or the Project and all Governmental Authority approvals, including zoning, land use, planning requirements, and requirements arising from or relating to the adoption or amendment of, any applicable general plan, subdivision and parcel map requirement; environmental requirements, including the requirements of the California Environmental Quality Act and the National Environmental Policy Act and the 30 25F-36 preparation and approval of all required environmental impact statements and reports; use, occupancy and building permit requirements; and public utilities requirements. 901.8 Rights of Others. Developer is in compliance with all covenants, conditions, restrictions, easements, rights of way and other rights of third parties relating to the Property. 901.9 Litigation. There are no material actions or proceedings pending or, to the best of the Developer's knowledge, threatened against or affecting Developer, any of the members of the Developer non-profit corporation, or any property of Developer before any Governmental Authority, except as disclosed to Agency/City in writing prior to the execution of this Agreement. If at any time during the Term of this Agreement there arises any material legal proceeding, real or threatened, to which the Developer entity becomes, or may be made a party, or to which any of its property is or may become subject, or any other event occurs, which could materially or adversely affect the ability of the Developer to carry out its obligations hereunder, Developer shall promptly (and in any event within five (5) business days) notify the Agency in writing. 901.10 Bankruptcy. To the best of Developer's knowledge, no attachments, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings are pending or threatened against Developer, nor are any of such proceedings contemplated by Developer. 901.11 Information Accurate. To the best of Developer's knowledge, all information, regardless of its form, conveyed by Developer to Agency/City, by whatever means, is accurate, correct and sufficiently complete to give Agency/City true and accurate knowledge of its subject matter, and does not contain any misrepresentation or omission. 901.12 Conflicts of Interest. No member, official or employee of the Agency/City shall have any personal interest, direct or indirect, in this Agreement, nor shall any such member, official or employee participate in any decision relating to this Agreement which affects his/her personal interests or the interests of any corporation, partnership or association in which he/she has a direct or indirect financial interest. The Developer warrants that it neither has paid nor given, nor will pay or give, any third party any money or other consideration for obtaining this Agreement. 901.13 Nonliability of Agency/City Officials and Employees. No member, official or employee of the City or Agency shall be personally liable to the Developer in the event of any default or breach by the City or Agency or for any amount which may become due to Developer or on any obligations under the terms of this Agreement. 901.14 No Assignment. Developer expressly acknowledges and agrees that the City and Agency have only agreed to assist the Developer as a means by which to induce, the construction/development of the Property. Accordingly, Developer further expressly acknowledges and agrees that this Agreement is a personal right of Developer that is neither negotiable, transferable, nor assignable except as set forth herein. Developer may assign some or all of its rights under the Agreement only with the prior written consent of the Executive Director (such consent not to be unreasonably withheld), except that no prior consent is necessary for an assignment by a limited partner of Developer to an affiliate, or as otherwise provided in the Deed(s) of Trust. 31 25F-37 901.15 Applicable Law. This Agreement shall be interpreted, governed and enforced under federal and state laws. 901.16 Third Parties. This Agreement is made for the sole benefit of Developer and the City and Agency and their successors and assigns, and no other person or persons shall have any rights or remedies under or by reason of this Agreement or any right to the exercise of any right or power of the Agency/City hereunder or arising from any default by Developer, nor shall the Agency/City owe any duty whatsoever to any claimant for labor performed or materials furnished in connection with the construction of the Property. 901.17 Control of Property. The parties acknowledge that neither the Agency nor City has at any time participated in any manner in the management or operation of the Property, and will not so participate at any time hereafter. 902. Obligation to Notify re Changes. Until the final disbursement of the Loans, Developer shall, upon learning of any fact or condition which would cause any of the warranties and representations in this Article 900 not to be true, immediately give written notice of such fact or condition to Agency. Such exception(s) to a representation shall not be deemed a breach by Developer hereunder, but shall constitute an exception which Agency and City shall have a right to approve or disapprove if such exception would have an effect on the value and/or operation of the Property. If Agency and City elect to make any disbursement of the Loans following disclosure of such information, Developer's representations and warranties contained herein shall be deemed to have been made as of such disbursement, subject to such exception(s). If, following the disclosure of such information, Agency and City elect not to make further disbursements of the Loans, then this Agreement shall automatically terminate, and neither party shall have any further rights, obligations or liabilities hereunder. The representations and warranties set forth in this Article 900 shall survive the final disbursement of the Loans and continue for the Term hereof. 1000. CONDITIONS FOR CONSTRUCTION 1001. Permits and Approvals. Developer shall diligently obtain all permits, including all building permits, licenses, approvals, exemptions and other authorizations of Governmental Agencies required in connection with the construction and conversion of the Property. 1002. Commencement and Completion of Construction. The construction of the Project shall be considered complete for purposes of this Agreement only when (a) all work described has been completed and fully paid for, and (b) all work requiring inspection or certification by Governmental Authority has been completed and all requisite certificates, approvals and other necessary authorizations (including required final certificates of occupancy) have been obtained. 1003. Change Orders. The contract for construction shall not be modified except pursuant to change orders. All change orders: (a) shall be in writing, numbered in sequence, signed by Developer and submitted to City prior to the proposed effectiveness thereof and accompanied by any working drawings and a written narrative of the proposed change. (b) Shall be subject to the Executive Director's and Senior Lender's prior written approval of the Executive Director and Bank. 32 25F-38 1004. Entry and Inspection. At all times prior to completion of the construction, upon reasonable notice, Agency/City and their agents shall have (a) the right of free access to the Property and all sites away from the Property where materials for the construction are stored, (b) the right to inspect all labor performed and materials furnished for the construction, and (c) the right to inspect and copy all documents pertaining to the construction. 1005. Construction Information. From time to time during the course of the construction, within ten (10) Business Days following Agency or City's written demand therefore, Developer shall furnish requested reports of Project Costs, progress schedules and contractors' costs breakdowns for the construction, itemized as to trade description and item, showing the name of the contractor(s) and/or subcontractor(s), and including such indirect costs as real estate taxes, legal and accounting fees, insurance, architects' and engineers' fees, loan fees, interest during construction and contractors' overhead. 1006. Protection Against Liens. Developer shall diligently file a valid Notice of Completion upon completion of the construction, diligently file a notice of cessation in the event of a cessation of labor on the construction for a period of thirty (30) days or more, and take all actions reasonably required to prevent the assertion of claims of lien against the Property. In the event that any claim of lien is asserted against the property or any stop notice or claim is asserted against the Agency or the City by any person furnishing labor or materials to the Property, Developer shall immediately give written notice of the same to Agency/City and shall, promptly and in any event within ten (10) Business Days after written demand therefor, (a) pay and discharge the same, (b) effect the release thereof by delivering to Agency/City a surety bond complying with the requirement of applicable laws for such release, or (c) take such other action as Agency/City may require to release Agency/City from any obligation or liability with respect to such stop notice or claim. 1100. FEDERAL (HOME PROGRAM) AND REDEVELOPMENT COVENANTS 1101. CHDO. Orange Housing Development Corporation, the sole member of the managing general partner of Developer, represents and warrants that it qualifies and is in good standing as a Community Housing Development Organization under the HOME Program. Developer hereby covenants and agrees to maintain such status throughout the term of this Agreement, and to provide the Agency and City with written documentation necessary to demonstrate maintenance of said status on an annual basis. In the event Orange Housing Development Corporation transfers its general partnership interest in Developer to another entity (with the consent of the Executive Director or as otherwise permitted by this Agreement), Developer hereby agrees that such successor entity shall qualify and be in good standing as a Community Housing Development Organization under the HOME Program and shall satisfy the requirements and meet the qualifications of Orange Housing Development Corporation, as described in Section 901.1. 1102. Qualification as Affordable Housing. As more particularly provided in the Affordability Restrictions on Transfer of Property, Developer shall use, manage and operate the Property in accordance with the requirements of 24 CFR 92.252 and California Health and Safety Code Section 50053 so as to qualify the housing on the Property as Affordable Housing with affordable rents. 33 25F-39 1103. Tenant and Participant Protection. Developer shall comply with the requirements of 24 CFR 92.253. 1104. Lease Requirements. The requirements set forth in Section 1207 hereof shall apply to all resident lease agreements for HOME Units at the Project. 1105. Handicapped Accessibility. Developer shall comply with (a) Section 504 of the Rehabilitation Act of 1973, and implementing regulations at 24 CFR 8C governing accessibility of projects assisted under the HOME Program; and (b) the Americans with Disabilities Act of 1990, and implementing regulations at 28 CFR 35-36 in order to provide handicapped accessibility to the extent readily achievable. 1106. Use of Debarred, Suspended, or Ineligible Participants. Developer shall comply with the provisions of 24 CFR 24 relating to the employment, engagement of services, awarding of contracts, or funding of any contractor or subcontractor during any period of debarment, suspension, or placement in ineligibility status. 1107. Maintenance of Drug-Free Workplace. Developer shall certify that Developer will provide a drug-free workplace in accordance with 24 CFR 84.13. 1108. Lead-Based Paint. Developer shall comply with the requirements, as applicable of the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846) and implementing regulations at 24 CFR 35. 1109. Affirmative Marketing. Developer shall implement and perform such affirmative marketing procedures and requirements for the Property as required by 24 CFR 92.351. 1110. Equal Opportunity and Fair Housing. Developer shall carry out the construction and perform its obligations under this Agreement in compliance with all of the state and federal laws and regulations regarding equal opportunity and fair housing described in 24 CFR 92.350. Developer must also follow the requirements of Health and Safety Code Section 33435. 1111. Property Standards. Developer shall cause the Property to meet the housing quality standards set forth in 24 CFR. 882.109, as well as all applicable local, state and federal codes and ordinances, including zoning ordinances. Developer shall also cause the Property to meet the current edition of the Model Energy Code published by the Council of American Building Officials. 1112. Displacement and Relocation. Developer acknowledges and agrees that, pursuant to 24 CFR 92.253 and consistent with the other goals and objectives of this part, City must ensure that it has taken all reasonable steps to minimize the displacement of persons as a result of the construction. Furthermore, to the extent feasible, residential tenants must be provided a reasonable opportunity to lease and occupy a suitable, decent, safe, sanitary and affordable dwelling unit on the Property upon completion of the construction. Developer agrees to cooperate fully and completely with City in meeting the requirements of 24 CFR 92.253 and shall take all actions and measures reasonably required by the Executive Director in connection therewith. All applicable state guidelines must also be followed. 1113. Other Program Requirements. Developer shall carry out each activity in compliance with all federal laws and regulations described in subpart H of 24 CFR 92, except that 254 40 Developer does not assume City's responsibilities for environmental review in 24 CFR 92.352 or the intergovernmental review process in 24 CFR 92.359. 1.114. Request for Disbursements of Funds. Notwithstanding anything contained in this Agreement to the contrary, Developer may not request disbursements of funds under this Agreement until the funds are needed for payment of eligible costs (such funds shall be used solely towards the construction of the Project). The amount of each request shall be limited to the amount needed. 1115. Eligible Costs. Developer shall use HOME Funds to pay costs defined as "eligible costs" pursuant to 24 CFR 92.206. 1116. Records and Reports. Developer shall maintain and from time to time submit to Agency/City such records, reports and information as the Executive Director may reasonably require in order to permit City to meet the record keeping and reporting requirements required of it pursuant to 24 CFR 92.508. 1117. Uniform Administrative Requirements. Developer shall comply with the requirements and standards of OMB Circular No. A-122, "Cost Principles for Non-Profit Organizations," and with the following Attachments to OMB Circular No. A-110: (a) Attachment A, "Cash Depositories", except for paragraph 4 concerning deposit insurance; (b) Attachment B, "Bonding and Insurance"; (c) Attachment C, "Retention and Custodial Requirements for Records", except that in lieu of the provisions in paragraph 4, the retention period for records pertaining to individual CDBG activities starts from the date of submission of the annual performance and evaluation report, as prescribed in 24 CFR 570.507, in which the specific activity is reported on for the final time; (d) Attachment F, "Standards for Financial Management Systems"; Paragraph 2; (e) Attachment H, "Monitoring and Reporting Program Performance", (f) Attachment O, "Procurement Standards." 1118. Conflict of Interest. Developer shall comply with and be bound by the conflict of interest provisions set forth at 24 CFR 570.611, as well as state regulations pertaining to conflict of interest. 1119. Monitoring. Developer shall cure any defects or deficiencies found by the Agency/City while conducting such inspections within two weeks of written notice thereof, or such longer period as is reasonable within the sole discretion of the Agency/City. 1120. Recertification of Tenant Income. (a) Developer shall take all necessary steps to review the income of all tenants prior to renting to them, as well as reviewing current tenants on an annual basis, in 35 25F-41 accordance with HOME regulations and guidelines. Every fifth (5th) year, Developer shall require new original income documents to be submitted by tenants. Tenants in HOME Units whose incomes no longer comply with federal income guidelines shall have their rents adjusted in accordance with federal HOME guidelines (24 CFR 92.252-92.253). (b) HOME Units continue to qualify as affordable housing despite a temporary non-compliance caused by increases in the incomes of existing tenants if actions satisfactory to HUD are being taken to ensure that all vacancies are filled in accordance with this Section until the noncompliance is corrected. 1121. Other HOME Program Requirements. Developer shall comply with all other applicable requirements of the HOME Program. 1122. Controlling Covenants. If there is a discrepancy between State and Federal law with regard to any of the aforementioned covenants, the more stringent requirement shall apply. 1200. MAINTENANCE, MANAGEMENT, OPERATION, PRESERVATION AND REPAIR OF PROPERTY 1201. Maintenance of the Property. Developer shall, at its sole cost and expense, maintain or cause to be maintained the interior and exterior of the Project and all Housing Units thereof and the Property in a decent, safe and sanitary manner, in accordance with the HUD Housing Quality Standards (HQS) and the maintenance standards required by Section 92.251 of the HOME Regulations, and in accordance with the standard of maintenance of first class apartments within Orange County, California. None of the Housing Units in the Project shall at any time be utilized on a transient basis, nor shall the Property or any portion thereof ever be used as a hotel, motel, dormitory, fraternity or sorority house, rooming house, hospital, nursing home, sanitarium or rest home, or be converted to condominium ownership. If at any time Developer fails to maintain the Project or the Property in accordance with this Agreement and such condition is not corrected within five (5) days after written notice from City with respect to graffiti, debris, and waste material, or thirty days after written notice from City with respect to general maintenance, landscaping and building improvements, then City, in addition to whatever remedy it may have at law or at equity, shall have the right to enter upon the applicable portion of the Project or the Property and perform all acts and work necessary to protect, maintain, and preserve the Project and the Property, and to attach a lien upon 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 City and/or costs of such cure, including a reasonable administrative charge, which amount shall be promptly paid by Developer to City upon demand. The liens created under this Section shall be subject and subordinate to the lien of the mortgage or deed of trust encumbering the Property (or any part of the Property) for the Primary Loan approved pursuant to the terms of this Agreement. 1201.1 Alterations and Repair. Developer shall not remove, demolish or materially alter any Improvement without Agency/City's prior consent, except to make non- structural repairs which preserve or increase the Property's value, and shall promptly restore, in a good and professional manner, any Improvement (or other aspect or portion of the Property) that is damaged or destroyed from any cause. 1202. Compliance with Laws. Developer shall comply with all Governmental Requirements (including, without limitation, all requirements relating to' the obtaining of 36 25F-42 Governmental Authority approvals), all Governmental Authority approvals and all rights of third parties, relating to Developer, the Property or Developer's operation of the Project thereon. 1203. Taxes and Impositions. Developer shall pay, prior to delinquency, all of the following (collectively, the "Impositions"): (a) all general and special real property taxes and assessments imposed on the Property; (b) all other taxes and assessments and charges of every kind that are assessed upon, the Property (or upon the owner and/or operator of the Property) and that create or may create a lien upon the Property (or upon any personal property or fixtures used in connection with the Property), including, without limitation, non-governmental levies and assessments pursuant to applicable covenants, conditions or restrictions; and (c) all license fees, taxes and assessments imposed on City (other than City's income or franchise taxes) which are measured by or based upon (in whole or in part) the amount of the obligations secured by the Property. If permitted by law, Developer may pay any Imposition in installments (together with any accrued interest). 1203.1 Right to Contest. Developer shall not be required to pay any Imposition so long as (a) its validity is being actively contested in good faith and by appropriate proceedings, (b) Developer has demonstrated to Agency/City's reasonable satisfaction that leaving such Imposition unpaid pending the outcome of such proceedings could not result in conveyance of the Property in satisfaction of such Imposition or otherwise impair City and Agency's interests under, the Loan Documents, and (c) Developer has furnished Agency/City with a bond or other security satisfactory in an amount not less than 100% of the applicable claim (including interest and penalties). 1203.2 Evidence of Payment. Upon demand by Agency/City from time to time, Developer shall deliver to City, within thirty (30) days following the due date of any Imposition, evidence of payment reasonably satisfactory to Agency/City. 1203.3 Books and Records. Developer shall maintain complete books of account and other records reflecting its operations (in connection with any other businesses as well as with respect to the Property), in accordance with generally accepted accounting principles applied on a consistent basis or in accordance with such other principles or methods as are reasonably acceptable to Agency/City, in accordance with 24 CFR 92.508. 1204. Payment of Fees. Developer shall pay annually to City/Agency on December 1 of each year, monitoring and administrative fees described in the Bond Regulatory Agreement between the Housing Authority of the City of Santa Ana and the Developer, executed upon issuance of bonds pertaining to this Project. 1205. Management Plan. As a Condition Precedent to the first disbursement of the Loans to the Developer, Developer shall submit to the Executive Director a Management Plan in a form that is acceptable to the Executive Director, including, but not limited to, the components listed below. Approval of the Management Plan must be obtained from the Executive Director prior to any disbursement of the Loans to the Developer. Developer shall manage the units in accordance with the approved Management Plan, including such amendments as may be approved in writing from time to time by the Executive Director, for the term of the income and rent restrictions contained in these Restrictions. The components of the Management Plan shall include: 25? 43 1205.1 Management Agent. Developer shall submit the name and qualifications of the proposed Management Agent. The Executive Director shall approve or disapprove the proposed Management Agent in writing based on the experience and qualifications of the Management Agent. 1205.2 Management Agreement. Developer shall submit a copy of the proposed management agreement specifying the amount of the management fee, and the relationship and division of responsibilities between Developer and Management Agent. 1205.3 Annual Budget and Projected Cash Flows. Prior to the first disbursement of the Loans, and annually thereafter not later than one hundred fifty (150) days after the close of each calendar year thereafter, Developer shall submit a projected operating budget and cash flow to the Executive Director. The budget and cash flow shall be in a form that is acceptable to the Executive Director. 1205.4 Tenant Selection Policies. Developer shall adopt and include as part of its Management Plan written tenant selection policies and criteria for the Affordable Units that meet each of the following requirements: (a) Developer's tenant selection policies shall be consistent with the purpose of providing housing for Extremely Low Income and Very Low Income households; (b) Such policies shall be reasonably related to program eligibility and the applicants' ability to perform the obligations of the approved resident lease agreement; (c) Such policies shall give reasonable consideration to the housing needs of senior citizens that would have a federal preference under 42 U.S.C. § 12744 of the Cranston- Gonzalez National Affordable Housing Act of 1992; (d) Such policies shall provide for: (i) The selection of tenants from a written waiting list approved by the Agency and City, in the chronological order of their application, insofar as is practicable; and (ii) The prompt written notification to any rejected applicant of the grounds for any rejection; (e) Such policies shall provide first priority in the selection of qualified eligible tenants to households that are referred by the Agency or City; (f) Such policies shall carry out the adopted affirmative marketing procedures of the City of Santa Ana, which are designed to provide information and otherwise attract eligible persons from all racial, ethnic and gender groups in the housing market area to the units. Prior to the date of this Agreement, City has provided Developer with the City's affirmative marketing procedures; and (g) Developer and Agency shall cooperate to effectuate the tenant selection policies described in this Section prior to the initial renting, or upon occurrence of a vacancy, and the re-renting of any Affordable Unit. 38 25F-44 1205.5 Termination of Tenancy. Developer, its successors or assigns, must adhere to federal and state law requirements with regard to termination of any tenancy of each and every Affordable Unit. Developer may not terminate the tenancy or refuse to renew the lease of a tenant of an Affordable Unit within the Project except for failure to pay rent, serious or repeated violation of the terms and conditions of the lease; for violation of applicable federal, state, or local law; or for other good cause. Any termination or refusal to renew must be preceded by not less than 30 days by Developer's service upon the tenant of a written notice specifying the grounds for the action. 1205.6 Termination of Management Contract; Replacement of Management Agent. If at any time the Agency determines that the units are not being managed or maintained in accordance with the approved Management Plan, Developer shall change the management agent or the practices complained of, upon receipt of written notice from the Executive Director. The Executive Director may require Developer to change management practices or to terminate the management contract and designate and retain a different management agent. The management contract shall provide that it is subject to termination by Developer without penalty, upon thirty (30) days prior written notice, at the direction of the Executive Director. Within ten (10) days following a direction of the Executive Director to replace the management agent, the Developer shall select another management agent or make other arrangements satisfactory to the Executive Director or designee for continuing management of the Housing Units. 1206. Vouchers. Developer, its successors and assigns, shall not refuse to lease a unit to a holder of a rental voucher under 24 CFR part 887 (Housing Choice Voucher Program) or to a holder of a comparable document evidencing participation in a tenant-based assistance program because of the status of the prospective tenant as a holder of such certificate of family participation, rental voucher, or comparable tenant-based assistance document. Total rents charged to such tenants, including the tenant contribution and rental assistance, shall not exceed the Affordable Rent permitted to be charged pursuant to this Agreement, the Affordability Restrictions, and the NSP Documents. 1207. Lease Requirements. Developer shall execute or cause to be executed a written lease in a form approved in writing by Agency and City (other than immaterial modifications thereto) which complies with the applicable HOME Regulations, the Redevelopment Law, and all applicable federal, state and local laws and regulations, with each tenant household identifying by name all permitted occupants, both adults and minors, occupying each unit. The lease between tenants occupying the units and Developer must be for not less than one year, unless by mutual agreement between the tenant and Developer. The lease may not contain any of the following provisions (in which references to "owner" shall mean the Developer, its successors or assigns): (a) Agreement by the tenant to be sued, to admit guilt, or to a judgment in favor of the owner in a lawsuit brought in connection with the lease; (b) Agreement by the tenant that the owner may take, hold, or sell personal property of household members without notice to the tenant and a court decision on the rights of the parties. This prohibition, however, does not apply to an agreement by the tenant concerning disposition of personal property remaining in the housing unit after the tenant has moved out of the Unit. The owner may dispose of this personal property in accordance with state law; 39 25F-45 (c) Agreement by the tenant not to hold the owner or the owner's agent legally responsible for any action or failure to act, whether intentional or negligent; (d) Agreement of the tenant that the owner may institute a lawsuit without notice to the tenant; (e) Agreement by the tenant that the owner may evict the tenant or household members without instituting a civil court proceeding in which the tenant has the opportunity to present a defense, or before a court decision on the rights of the parties; (f) Agreement by the tenant to waive any right to a trial by jury; (g) Agreement by the tenant to waive the tenant's right to appeal, or to otherwise challenge in court, a court decision in connection with the lease; and (h) Agreement by the tenant to pay attorney's fees or other legal costs even if the tenant wins in a court proceeding by the owner against the tenant The tenant, however; may be obligated to pay costs if the tenant loses. 1208. Project Operating Budget. Developer must promptly deposit all project income directly into a segregated depository account established exclusively for the Project ("Project Operating Account") in accordance with the Operating Budget prepared by Developer and approved by the Executive Director each year. Withdrawals from this account may be made only in accordance with the provisions of this Agreement and the approved Operating Budget, as it may be revised from time to time with Agency/City approval. Developer may make withdrawals from this account solely for the payment of project expenses and project fees included in the approved Operating Budget. Withdrawals from this account for other purposes may be made only with the prior written approval of the Agency/City. 1209. Replacement Reserve Account. Developer must establish or cause to be established a segregated interest-bearing replacement reserve depository account ("Replacement Reserve Account") no later than sixty (60) days after the Notice of Completion is filed. Developer must make monthly deposits from project income into the Replacement Reserve Account in accordance with the approved Annual Budget, as amended from time to time. Developer may withdraw funds from the Replacement Reserve Account solely to fund capital improvements for the Project, such as replacing or repairing structural elements, furniture, fixtures or equipment of the Project that are reasonably required to preserve the Project. Developer may not withdraw funds from the Replacement Reserve Account for any other purpose without the prior written approval of the Agency/City. 1210. Monitoring and Recordkeeping. Throughout the Term of this Agreement, Developer shall comply with all applicable recordkeeping and monitoring requirements set forth in the Redevelopment Law and the HOME Program, including Section 92.508 (or successor regulation) of the HOME Regulations and Section 33418 of the Redevelopment Law, and shall annually complete and submit to Agency/City a Certification of Continuing Program Compliance substantially in the form of Exhibit N hereto, or other form provided by the Executive Director. Representatives of the Agency and City shall be entitled to enter the Property, upon at least twenty-four (24) hours notice, to monitor compliance with this Agreement, to inspect the records of the Project, and to conduct an independent audit or inspection of such records. Developer agrees to cooperate with City in making the Property and all Housing Units thereon available for such inspection or audit. 40 25F-46 Developer agrees to maintain records in a businesslike manner, to make such records available to the Agency and City upon twenty-four (24) hours notice, and to maintain such records for the entire Term of this Agreement. Developer shall cure any defects or deficiencies found by the Agency/City while conducting such inspections within two weeks of written notice thereof, or such longer period as is reasonable within the sole discretion of the Agency/City. Without limiting the generality of the foregoing, Developer shall prepare, maintain and submit to the Agency, as appropriate, the following records and reports in compliance with Health and Safety Code Section 33418 and 24 CFR 92.504(c)(12): 1210.1 Annual Reports. Developer shall file with the Agency an Annual Report (herein referred to as the "Annual Report") within one hundred fifty (150) days following the end of each calendar year, commencing with the end of the calendar year (or portion thereof) in which the first disbursement of the Loans occurs. The Annual Report shall contain a certification by Developer as to such information as the Executive Director may then require, including, but not limited to, the following: (a) The fiscal condition of the Project, including the Annual Budget; an updated Project cash flow projection; a financial statement for the previous calendar year that includes a balance sheet and a profit and loss statement indicating any surplus or deficit in operating accounts; a detailed itemized listing of income and expenses; and the amounts contained in any fiscal reserves. Such Annual Budget and financial statement shall be prepared in accordance with generally accepted accounting practices, consistently applied. The Executive Director may require that the financial statement be audited at Developer's expense by an independent certified public accountant acceptable to the Executive Director. (b) Any substantial physical defects in the Project, including a description of any major repair or maintenance work undertaken or needed in the previous and current years. Such statement shall describe what steps Developer has taken in order to maintain the Project in a safe and sanitary condition in accordance with applicable housing and building codes and the property standards set forth in 24 CFR 92.251. (c) A report regarding the occupancy of the Affordable Units indicating the income of each current resident and the current rents charged each resident and whether those rents include utilities, including records that demonstrate that the Project meets the requirements of 24 CFR 92.253 for tenant and participant protection under the HOME Program and the requirements of the Agreement and these Restrictions. (d) General management performance, including tenant relations and other relevant information. (e) Records that demonstrate that the Affordable Units meet the affordability requirements of 24 CFR 92.252 and Section 50053 of the California Health and Safety Code, for the required period of affordability according to Section 33334.3 of the California Health and Safety Code. (f) Evidence of a currently paid hazard insurance policy in accordance with the requirements of the Agency Deed of Trust and the City Deed of Trust, with a loss payable endorsement naming the Agency and City as a loss payees together with other approved lenders (as 250-47 their interests may appear), with a "Replacement Cost Endorsement" in amount sufficient to prevent Developer or Agency/City from becoming a co-insurer under the terms of the policy, but in any event in an amount not less than 100% of the then full replacement cost, to be determined at least once annually and subject to reasonable approval by the Executive Director. (g) Evidence of a currently paid liability insurance policy, naming the Agency and City as additional insureds and in a form approved by legal counsel to the Agency and City, with coverage as described in the Agreement. (h) Termite reports pertaining to the Property shall be provided every fifth (5th) year. (i) Such other information as may be reasonably required by the Executive Director or his/her designee. 1210.2 Records and Audits. Developer shall maintain the following records, and make them available for inspection by the Agency, the City, the State or HUD: (a) records which demonstrate that the project meets the property standard specified in 24 CFR 92.251; (b) records, for each Affordable Unit, which demonstrates that the project meets the requirements of 24 CFR 92.252; (c) records which demonstrate compliance with the tenant and participant protections, as specified in 24 Section 29.253; (d) records which demonstrate compliance with the Equal Opportunity and Fair Housing requirements outlined in these Restrictions, including: (i) data on the extent to which each racial and ethnic group and single head of household (by gender of head of household) have applied for, participated in, or benefited from, any program or activity funded in whole or in part with HOME funds; (ii) documentation of actions undertaken to meet the equal opportunity requirements of 24 CFR 92.350, which implements Section 3 of the Housing Development Act of 1968, as amended (12 U.S.C. § 1701u); (iii) documentation and data on the steps taken to implement Developer's outreach programs to minority-owned and women-owned businesses to meet the minority outreach requirements of 24 CFR 92.350; (e) documentation of the steps taken to carry out an affirmative marketing program in accordance with 24 CFR 92.351, if applicable; (f) if applicable, records which demonstrate compliance with the requirements relating to relocation of displaced persons, as described in 24 CFR 92.353. At a minimum, these shall include project occupancy lists identifying the name and address of all persons occupying the project property upon Developer's acquisition (i.e., the date on which Developer obtained site control); 42 25F-48 92.355; (g) records concerning lead-based paint in accordance with 24 CFR (h) if applicable, records which support any requests for waivers of the conflict of interest prohibition as stated in 24 CFR 92.356; (i) records of certifications of contractor qualifications as they relate to the debarment and suspension requirement as stated in 24 CFR 92.357 and 24 CFR Part 24; and 0) any other reports issued by other agencies monitoring the Project. 1210.3 Retention of Records. All records pertaining to each calendar year of HOME Program funds must be retained for the most recent five year period, except that for rental housing projects, records may be retained for five years after the project completion date; except that records of individual tenant income verifications, project rents and project inspections must be retained for the most recent five year period, until five years after the affordability period terminates (24 CFR 92.508). Developer shall cooperate with the Agency and City to retain all books and records relevant to the Agreement for a minimum of five years after the expiration of the Agreement and any and all amendments hereto, or for five years after the conclusion or resolution of any and all audits or litigation relevant to the Agreement, whichever is later. The Agency, the City, the State, the Office of the Auditor General of HUD, and/or their representatives shall have unrestricted reasonable access to all locations, books, and records for the purpose of monitoring, auditing, or otherwise examining said locations, books, and records with or without prior notice. 1210.4 Delivery of Records upon Termination of Agreement. If so directed by the Agency, the City, the State or HUD upon termination of the Agreement, Developer shall cause all records, accounts, documentation and all other materials relevant to the work to be delivered to the Agency, the City, the State or HUD, as depository. 1210.5 Access to Records. All records, accounts, documentation and other materials relevant to the Project shall be accessible at any time to the authorized representatives of the Agency, the City, the State or HUD, on reasonable prior notice, for the purpose of examination or audit. 1210.6 Annual Audit. The Agency/City may perform an annual audit at the close of each calendar year in which these Restrictions are in effect. Developer shall reasonably cooperate with Agency/City with respect to such audit. 1211. Effect of Violation of the Terms and Provisions of this Agreement After Completion of Construction. The Agency and City are deemed the beneficiaries of the terms and provisions of this Agreement, the other Project Documents, and all covenants running with the land, for and in their own right and for the purposes of protecting the interest of the community and other parties, public or private, in whose favor and for whose benefit this Agreement, the other Project Documents, and the covenants running with the land have been provided, without regard to whether the Agency or City have been, remain or are owners of any land or interest therein in the Property or in the Project. The Agency and City shall have the right, if the Agreement or covenants are breached, to exercise all rights and remedies, and to maintain any actions or suits at law or in equity or other proper proceedings to enforce the curing of such breaches to which it or any other 43 25F-49 beneficiaries of this Agreement and covenants may be entitled. The covenants contained in this Agreement shall remain in effect as follows: (a) The covenants against discrimination, as set forth in Article 1300 and the environmental covenants set forth in Article 1400 shall remain in effect in perpetuity. (b) All other covenants set forth herein and in the other Project Documents, including the covenants pertaining to the operation, use, maintenance and management of the Property as Affordable Housing set forth in Article 700 and this Article 1200, shall remain in effect throughout the entire Term hereof. 1300. NONDISCRIMINATION COVENANTS 1301. Obligation to Refrain from Discrimination. Developer covenants and agrees for itself, its successors, its assigns and every successor in interest to the Property or any part thereof, that there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, ancestry or national origin in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property nor shall Developer itself or any person claiming under or through him establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Property. The foregoing covenants shall run with the land and shall remain in effect in perpetuity. 1302. Nondiscrimination in Employment. Developer certifies and agrees that all persons employed or applying for employment by it, its affiliates, subsidiaries, or holding companies, and all subcontractors, bidders and vendors, are and will be treated equally by it without regard to, or because of race, color, religion, ancestry, national origin, sex, age, pregnancy, childbirth or related medical condition, medical condition or physical or mental disability, and in compliance with Title VII of the Civil Rights Act of 1964, 42 U S.C. Section 2000, et seq., the Federal Equal Pay Act of 1963,29 U.S.C. Section 206(d), the Age Discrimination in Employment Act of 1967, 29 U S.C. Section 621, et seq., the Immigration Reform and Control Act of 1986, 8 U.S.C. Section 1324b, et seq., 42 U.S.C. Section 1981, the California Fair Employment and Housing Act, Cal. Government Code Section 12900, et seq., the California Equal Pay Law, Cal. Labor Code Section 1197.5, Cal. Government Code Section 11135, the Americans with Disabilities Act, 42 U.S.C. Section 12101, et seq., and all other applicable anti-discrimination laws and regulations of the United States and the State of California as they now exist or may hereafter be amended. 1303. Statutory Nondiscrimination Covenants. Except to the extent preferences are permitted or required by this Agreement, Developer covenants by and for itself, its successors and assigns, and all persons claiming under or through them that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926. 1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Property, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the Property. Developer shall refrain from restricting the rental, sale or lease of the Property or any portion thereof on the basis of any of the characteristics listed above. Developer shall also comply 44 25F-50 with the equal opportunity and fair housing requirements set forth in Section 92.350 of the HOME Regulations. The foregoing covenants shall run with the land and remain in effect in perpetuity. All such deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: (a) In Deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." (b) In Leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following conditions: "That there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein' leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased." (c) In Contracts: "There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this Agreement, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." 1303.2 In Affordable Housing Restrictions. The foregoing covenants shall (a) be included in the Affordability Restrictions, (b) run with the land, and (c) remain effective for the entire Term of Affordability (for not fewer than 55 years). 1304. Covenants Remain in Perpetuity. The covenants established in this Article 1300 shall, without regard to technical classification and designation, run with the land and be binding on Developer and any successor in interest to the Property, in favor of Agency and City and their successors and assigns, and shall remain in effect in perpetuity. 45 25F-51 1400. ENVIRONMENTAL MATTERS 1401. Representation and Warranty. Except as Developer has expressly disclosed to Agency and City in writing, Developer has no knowledge (a) of the presence on, under or about the Property, now or in the past, of any Hazardous Materials, or of the transportation to or from the Property of any Hazardous Materials, (b) that asbestos or polychlorinated biphenyls (PCBs) are contained in or stored on the Property, or (c) that there are any underground storage tanks located in, on or under the Property, and (d) Developer has not received any notice or other communication from any Governmental Authority having jurisdiction over the Property notifying Developer of the presence of Hazardous Materials in, on, or under the Property, or any portion thereof. 1402. Compliance with Environmental Laws. Developer shall take all necessary precautions to prevent the release into the environment of any Hazardous Materials which are located in, on or under the Property. Such precautions shall include compliance with all Governmental Requirements with respect to Hazardous Materials. In addition, the Developer shall install and utilize such equipment and implement and adhere to such procedures as are consistent with commercially reasonable standards as respects the disclosure, storage, use, removal and disposal of Hazardous Materials. In addition, Developer shall (a) comply with all Environmental Laws and environmental permits applicable to the construction and operation of the Property, (b) immediately pay or cause to be paid all costs and expenses incurred by reason of such compliance, (c) keep the Property free and clear of any environmental claims or liens imposed pursuant to any Environmental Law, and (d) obtain and renew all environmental permits required for ownership or use of the Property. 1403. Presence of Hazardous Materials. Developer shall not, and shall not permit anyone else to, generate, use, treat, store, handle, release, or dispose of Hazardous Materials on the Property, or transport or permit the transportation of Hazardous Materials to or from the Property except for de minimis quantities used at the Property in compliance with all applicable Environmental Laws and required in connection with the routine operation and maintenance of the Property. 1404. Notice of Environmental Matters. Developer shall notify the Agency/City, and provide to the Agency/City a copy or copies, of all environmental permits, disclosures, applications, entitlements or inquiries relating to the Property which have been conveyed to Developer, including notices of violation, notices to comply, citations, inquiries, clean-up or abatement orders, cease and desist order, reports filed pursuant to self-reporting requirements and reports filed or applications made pursuant to any Governmental Requirement relating to Hazardous Materials and underground tanks. The Developer shall report to the Agency, as soon as possible after each incident, any unusual or potentially important incidents with respects to the environmental condition of the Property. In the event of a release of any Hazardous Materials into the environment, Developer shall, as soon as possible after the release, furnish to Agency/City a copy of any and all reports relating thereto and copies of all correspondence with governmental agencies relating to the release. Upon request, Developer shall furnish to Agency/City a copy or copies of any and all other environmental entitlements or inquiries relating to or affecting the Property including, but not limited to, all permit applications, permits and reports including, without limitation, those reports and other matters which may be characterized as confidential. Developer shall immediately advise Agency/City in writing of any of the following: (a) any pending or threatened environmental claim against Developer or the Property, (b) any condition or occurrence that (i) results in noncompliance with any applicable environmental law, (ii) could reasonably be anticipated to cause the Property to be subject to any 46 25F-52 restrictions on the ownership, occupancy, use or transferability of the Property under any environmental Law, or (iii) could reasonably be anticipated to form the basis of an environmental claim against the Property or Developer. 1405. Developer Environmental Indemnity. Developer acknowledges that Developer located the Property and performed due diligence regarding the condition of the Property prior to acquiring the Property, to Developer's satisfaction and without assistance from the City or Agency. Developer hereby agrees that at Developer's expense, defend (using counsel satisfactory to Agency and City), indemnify, assume all responsibility for, and save and hold the Indemnitees harmless from and against any claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage, or expense (including, without limitation, attorney's fees), resulting from, arising out of, or based upon (i) the release, use, generation, discharge, storage or disposal of any Hazardous Materials in violation of Environmental Laws during the period of the Developer's ownership of the Property, on, under, in or about, or the transportation of any such Hazardous Materials to or from, the Property by Developer or any of Developer Parties during the period of the Developer's ownership of the applicable Property, or (ii) the violation, or alleged violation of any Environmental Laws relating to the use, generation, release, discharge, storage, disposal or transportation of Hazardous Materials on, under, in or about, to or from, the Property during the period of the Developer's ownership of the Property. This indemnity shall include, without limitation, any damage, liability, fine, penalty, cost or expense arising from or out of any claim, action, suit, or proceeding for personal injury (including sickness, disease or death), tangible or intangible property damage, compensation for lost wages, business income, profits or other economic loss, damage to the natural resource or the environment, nuisance, contamination, leak, spill, release or other adverse effect on the environment. 1500. OTHER AFFIRMATIVE COVENANTS While any obligation of Developer under the Promissory Notes or Deeds of Trust remain outstanding, the following provisions shall apply, except to the extent that Executive Director otherwise consents in writing: 1501. Existence. The sole member of Developer's managing general partner Orange Housing Development Corporation shall maintain its existence in good standing under the laws of the State of California, and its status as a CHDO under federal law and Developer shall provide documentation of such status annually to the Agency/City. 1502. Protection of Lien. Developer shall maintain the lien of the Agency/City Deed(s) of Trust as a valid second and third priority deed of trust on the Property and take all actions, and execute and deliver to Agency/City all documents, reasonably required by Agency/City from time to time in connection therewith. 1503. Notice of Certain Matters. Developer shall give notice to Agency/City, within ten (10) days of Developer's learning thereof, of each of the following: (a) any filed litigation or claim affecting or relating to the Property and involving an amount in excess of $5,000; and any litigation or claim that might subject Developer or any general partner to liability in excess of $5,000, whether covered by insurance or not; (b) any dispute between Developer and a Governmental Authority relating to the Property, the adverse determination of which might materially affect the Property; 47 25F-53 (c) any change in Developer's principal place of business; (d) any aspect of the Improvements that is not in substantial conformity with the plans or code; (e) any Event of Default or event which, with the giving of notice or the passage of time or both, would constitute an Event of Default; (f) any material default by Developer or any other party under any Senior Loan document, or the receipt by Developer of any notice of default under any Senior Loan document; (g) the creation or imposition of any mechanics' or materialmans' lien or other lien against the Property which might materially affect the Property; and/or (h) any material adverse change in the financial condition of Developer. 1504. Further Assurances. Developer shall execute and acknowledge (or cause to be executed and acknowledged) and deliver to Agency/City all documents, and take all actions, reasonably required by Agency/City from time to time to confirm the rights created or now or hereafter intended to be created under the Loan Documents; to protect and further the validity, priority and enforceability of the Agency/City Deeds of Trust; to subject to the Deed(s) of Trust any property intended by the terms of any Loan Documents to be covered by the Agency/City Deeds of Trust or otherwise to carry out the purposes of the Loan Documents and the transactions contemplated thereunder. 1505. Annual Financial Statements. Developer shall deliver to Agency/City, within one hundred fifty (150) days after the end of each Calendar Year, (a) a certified public accountant reviewed balance sheet for Developer as of the end of such Calendar Year and a certified public accountant reviewed statement of profit and loss for Developer and for Developer's operations in connection with the Property for such Calendar Year, together with all supporting schedules, (b) a certificate of such certified public accountant that such documents were reviewed by such certified public accountant in accordance with generally accepted accounting principles and otherwise comply with generally accepted accounting principles review requirements, and (c) a certificate of Developer's chief financial officer that such documents: (i) were prepared in accordance with generally accepted accounting principles applied on a consistent basis or in accordance with such other principles or methods as are reasonably acceptable to Agency/City, (ii) fairly present Developer's financial condition, (iii) show all material liabilities, direct and contingent, and (iv) fairly present the results of Developer's operations. Developer shall also provide the Agency/City with any other annual audit reports issued by other monitoring agencies. Developer shall include in said reports a residual receipts report. In addition to the foregoing, Developer shall comply with the requirements set forth in Section 1210. 1506. Audits and Access to Records. Developer agrees that Agency/City, the U.S. Department of Housing and Urban Development, the Comptroller General of the United States or any of their authorized representatives shall have the right of access, upon reasonable notice, to any books, documents, papers, or other records of Developer which are pertinent to this Agreement in order to make audits, examinations, abstracts, excerpts or transcripts. Developer will maintain all books and records pertaining to this Agreement for a period of not less than five (5) years after all 48 25F-54 matters pertaining to this Agreement (i.e., audit, disputes or litigation) are resolved in accordance with applicable federal or state laws, regulations or policies, and when a period of affordability or recapture applies to Developer's activities, for a period of not less than five (5) years after the affordability or recapture period ends. In addition to the foregoing, Developer shall comply with the requirements set forth in Section 1210. 1507. Termite Inspection Report. Developer shall deliver a termite report pertaining to the Property to the Agency/City every fifth (5th) year beginning January 2016. 1600. OTHER NEGATIVE COVENANTS While any obligation of Developer under the Promissory Notes or Deeds of Trust remain outstanding, the following provisions shall apply, except to the extent that Executive Director otherwise consents in writing: 1601. Default on Senior Loan. Developer shall not default on any of the Senior Loan documents, provided however, that Developer shall have such period as is provided in the Senior Loan Documents during which to effectuate a cure. 1602. Transfers of Interest in Property or Agreement. 1602.1 Prohibition. The qualifications and identity of the Developer are of particular concern to the Agency and City. It is because of those qualifications and identity that Agency and City have entered into this Agreement and the other Project Documents with the Developer. For the period commencing upon the date of this Agreement and until the expiration of the Term hereof, no voluntary or involuntary successor in interest of the Developer shall acquire any rights or power under this Agreement, nor shall the Developer make any total or partial sale, transfer, conveyance, assignment, subdivision, refinancing or lease of the whole or any part of the Property or the Improvements thereon without prior written approval of the Agency/City, except as expressly set forth herein. Any proposed total or partial sale, transfer, conveyance, assignment, subdivision, refinancing or lease of the whole or any part of the Property or the Improvements will constitute a Default pursuant to Article 2000 hereof. 1602.2 Permitted Transfers. Notwithstanding any other provision of this Agreement to the contrary, Agency approval of an assignment of this Agreement or conveyance of the Property or Improvements, or any part thereof, shall not be required in connection with any of the following: (a) Any transfers to an entity or entities in which the Developer, or either of its general partners, retains ownership or beneficial interest and retains management and control of the transferee entity or entities. (b) The conveyance or dedication of any portion of the Property to the City or other appropriate governmental agency, or the granting of easements or permits to facilitate construction of the Improvements (as defined herein). (c) Any requested assignment for financing purposes (subject to such financing being considered and approved by the Agency pursuant to Section 311), including the grant 49 25F-55 of a deed of trust to secure the funds necessary for construction and permanent financing of the Improvements. (d) Removal of the investor limited partner of Developer upon the expiration of the fifteen (15) year tax credit compliance period applicable to the Project. In the event of an assignment by Developer under subparagraphs (a) or (c) above not requiring the Agency's prior approval, Developer nevertheless agrees that at least thirty (30) days prior to such assignment it shall give written notice to Agency/City of such assignment and satisfactory evidence that the assignee has assumed jointly with Developer the obligations of this Agreement. 1602.3 Agency/City Consideration of Requested Transfer. Agency and City agree that they will not unreasonably withhold approval of a request made pursuant to this Section 1602, provided the Developer delivers written notice to the Agency/City requesting such approval. Such notice shall be accompanied by sufficient evidence regarding the proposed assignee's or purchaser's development and/or operational qualifications and experience, and its financial commitments and resources, in sufficient detail to enable the Agency to evaluate the proposed assignee or purchaser pursuant to the criteria set forth in this Section 1602 and as reasonably determined by the Agency/City. The Agency/City shall evaluate each proposed transferee or assignee on the basis of its development and/or qualifications and experience in the construction of facilities similar to the Improvements, and its financial commitments and resources, and may reasonably disapprove any proposed transferee or assignee, during the period for which this Section 1602 applies, which the Agency/City determines does not possess equal or better qualifications that the transferring Developer. An assignment and assumption agreement in a form satisfactory to the Agency/City's legal counsel shall also be required for all proposed assignments. Within thirty (30) days after the receipt of the Developer's written notice requesting Agency approval of an assignment or transfer pursuant to this Section 1602, the Agency/City shall either approve or disapprove such proposed assignment or shall respond in writing by stating what further information, if any, the Agency/City reasonably requires in order to determine the request complete and determine whether or not to grant the requested approval. Upon receipt of such a response, the Developer shall promptly furnish to the Agency/City such further information as may be reasonably requested. 1602.4 Successors and Assigns. All of the terms, covenants and conditions of this Agreement shall be binding upon the Developer and its permitted successors and assigns. Whenever the term "Developer" is used in this Agreement, such term shall include any other permitted successors and assigns as herein provided. 1602.5 Assignment by City or Agency. City and Agency may assign or transfer any of their rights or obligations under this Agreement without the approval of the Developer. 1700. ENFORCED DELAY; EXTENSION OF TIMES OF PERFORMANCE In addition to specific provisions of this Agreement, performance by either party hereunder shall not be deemed to be in Default, and all performance and other dates specified in this Agreement shall be extended, where delays or Defaults are due to causes beyond the control or without the fault of the party claiming an extension of time to perform, which may include: war; insurrection; strikes; lockouts; riots; floods; earthquakes; fires; casualties; acts of God; acts of the public enemy; acts of 50 25F-56 terrorism; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually severe weather; inability to secure necessary labor, materials or tools, delays of any contractor, subcontractor or supplier; acts or omissions of the other party; acts or failures to act of the City, Agency, or any other public or governmental agency or entity (other than the acts or failures to act of the Agency or City which shall not excuse performance by the Agency or City). Notwithstanding anything to the contrary in this Agreement, an extension of time for any such cause shall be for the period of the enforced delay and shall commence to run from the time of the commencement of the cause, if notice by the party claiming such extension is sent to the other party within thirty (30) days of the commencement of the cause. Times of performance under this Agreement may also be extended in writing by the mutual agreement of Agency/City (through the Executive Director) and Developer. Notwithstanding any provision of this Agreement to the contrary, the lack of funding to complete the Improvements shall not constitute grounds of enforced delay pursuant to this Article 1700. 1800. INDEMNIFICATION 1801. Nonliability of Agency and City. Developer acknowledges and agrees that: (a) The relationship between Developer and Agency/City is and shall remain solely that of borrower and lender, Agency/City neither undertakes nor assumes any responsibility to review, inspect, supervise, approve (other than for aesthetics) or inform Developer of any matter in connection with the construction, including matters relating to: (i) the performance of the construction work, (ii) architects, contractors, subcontractors and materialmen, or the workmanship of or materials used by any of them,. or (iii) the progress of the construction; and Developer shall rely entirely on its own judgment with respect to such matters and acknowledges that any review, inspection, supervision, approval or information supplied to Developer by City in connection with such matters is solely for the protection of Agency/City and that neither Developer nor any third party is entitled to rely on it; (b) Notwithstanding any other provision of any Loan Document: (i) the Agency and City are not a partner, joint venture, alter-ego, manager, controlling person or other business associate or participant of any kind of Developer and Agency/City does not intend to ever assume any such status; (ii) Agency/City's activities in connection with the Loan(s) shall not be "outside the scope of the activities of a lender of money" within the meaning of California Civil Code Section 3434, as modified or recodified from time to time, and Agency/City does not intend to ever assume any responsibility to any person for the quality or safety of the Property or the Project; and (iii) Agency/City shall not be deemed responsible for or a participant in any acts, omissions or decisions of Developer; (c) Agency/City shall not be directly or indirectly liable or responsible for any loss or injury of any kind to any person or property resulting from any construction on, or occupancy or use of, the Property, whether arising from: (i) any defect in any building, grading, landscaping or other onsite or offsite improvement; (ii) any act or omission of Developer or any of Developer's agents, employees, independent contractors, licensees or invitees; or (iii) any accident on the Property or any fire or other casualty or hazard thereon; and (d) By accepting or approving anything required to be performed or given to Agency/City under the Loan Documents, including any certificate, financial statement, survey, appraisal or insurance policy, Agency/City shall not be deemed to have warranted or represented the 51 25F-57 sufficiency or legal effect of the same, and no such acceptance or approval shall constitute a warranty or representation by Agency/City to anyone. 1802. Developer Indemnity. Without limiting Developer's obligations to indemnify the Indemnitees set forth in Section 1405, Developer shall, at Developer's expense, defend (using counsel satisfactory to Agency and City), indemnify, assume all responsibility for, and save and hold the Indemnities harmless from any and all losses, damages, liabilities, claims, causes of action, judgments, settlements, court costs, demands, defense costs, reasonable attorneys' fees, expert witness fees, and other legal expenses, costs of evidence of title, costs of evidence of value, and other expenses which they may suffer or incur and any liability of any kind or nature arising from or relating to the subject matter of this Agreement and/or any other Project Document or the validity, applicability, interpretation or implementation hereof or thereon and for any damages to property or injuries to persons directly or indirectly related to or in connection with the construction of the Improvements, operation, management, or ownership of the Property, including accidental death (including reasonable attorneys fees and costs), whether such damage shall accrue or be discovered before or after termination of this Agreement. Developer shall not be obligated to indemnify the Indemnitees for property damage or bodily injury to the extent occasioned by the negligence or willful misconduct of any of the Indemnitees. Developer shall have the obligation to defend any such action; provided, however, that this obligation to defend shall not be effective if and to the extent that Developer determines in its reasonable discretion that such action is meritorious or that the interests of the parties justify a compromise or a settlement of such action, in which case Developer shall compromise or settle such action in a way that fully protects the Indemnitees from any liability or obligation. In this regard, Developer's obligation and right to defend shall include the right to hire (subject to reasonable written approval by City and Agency) attorneys and experts necessary to defend, the right to process and settle reasonable claims, the right to enter into reasonable settlement agreements and pay amounts as required by the terms of such settlement, and the right to pay any judgments assessed against Developer or any other Indemnitees. If Developer defends any such action, as set forth above, (i) to the extent of Developer's indemnification obligations as set forth herein, Developer shall indemnify and hold harmless Indemnitees from and against any claims, losses, liabilities, or damages assessed or awarded against either of them by way of judgment, settlement, or stipulation and (ii) City and Agency shall be entitled to settle any such claim only with the written consent of Developer and any settlement without Developer's consent shall release Developer's obligations under this Section 1802 with respect to such settled claim. The foregoing agreements by Developer shall remain in effect for the entire Term of this Agreement. At the request of Developer, City and Agency shall cooperate with and assist Developer in its defense of any such claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage, or expense; provided that City and Agency shall not be obligated to incur any expense in connection with such cooperation or assistance. Notwithstanding the foregoing, Developer shall not be required to indemnify the Agency with respect to actions arising from the proposal made by the Governor of California to eliminate redevelopment agencies. 1803. Reimbursement of Agency/City. Developer shall reimburse Agency/City immediately upon written demand for all costs reasonably incurred by Agency/City (including the reasonable fees and expenses of attorneys, accountants, appraisers and other consultants, whether the same are independent contractors or employees of City) in connection with the enforcement of the Loan Documents and all related matters including all claims, demands, causes of action, liabilities, losses, commissions and other costs against which Agency/City is indemnified under the Loan Documents. Such reimbursement obligations shall bear interest from the date occurring twenty (20) days after Agency/City gives written demand to Developer and shall be secured by the Agency/City 52 25F-58 Deed(s) of Trust. Such reimbursement obligations shall survive the cancellation of the Agency Promissory Note and/or the City Promissory Note, release and reconveyance of the Agency/City Deed(s) of Trust, issuance of a Release of Construction Covenants, and termination of this Agreement. 1900. INSURANCE, CASUALTY AND CONDEMNATION 1901. Policies Required. While any obligation of Developer under the Project Documents remains outstanding, Developer shall maintain at Developer's sole expense, with insurers either (i) admitted in California or (ii) which are not admitted to California but have an A.M. Best Rating of "A" or above and reasonably approved by the Agency/City, the following policies of insurance in form and substance reasonably satisfactory to the City Attorney: [subject to Approval by City Risk Manager] (a) worker's compensation insurance and any other insurance required by law in connection with the construction; (b) prior to commencement and following completion of the construction, fire and hazard "all risk" insurance covering 100% of the replacement cost of the Improvements in the event of fire, lightning, windstorm, vandalism, malicious mischief and all other risks normally covered by "all risk" coverage policies in the area where the Property is located (including loss by flood if the Property is in an area designated as subject to the danger of flood); (c) upon commencement of the construction and at all times prior to completion of the construction, builder's risk-all risk insurance covering 100% of the replacement cost of all Improvements (including offsite materials) during the course of construction in the event of fire, lightning, windstorm, vandalism, earthquake, malicious mischief and all other risks normally covered by "all risk" coverage policies in the area where the Property is located (including loss by flood if the Property is in an area designated as subject to the danger of flood); (d) public liability insurance in amounts reasonably required by Agency/City from time to time, and in no event less than $1,000,000 for "single occurrence;" (e) property damage insurance in amounts reasonably required by the Agency/City from time to time, and in no event less than $1,000,000; and (f) any other insurance reasonably required by Agency/City. All such insurance shall provide that it may not be canceled or materially modified without thirty (30) days prior written notice to Agency/City. The policies required under subparagraphs (b) and (c) shall include a "lender's loss payable endorsement" (Form 438BFU) in form and substance satisfactory to Agency/City, showing the Agency and the City as encumbrance, The Agency and the City shall be named as an additional insured(s) in the policies required under subparagraphs (d) and (e). Certificates of insurance for the above policies (and/or original policies, if required by Agency/City) shall be delivered within ten (10) days after demand therefore, and prior to start of any construction work All policies insuring against damage to the Improvements shall contain an agreed value clause sufficient to eliminate any risk of co-insurance. No less than thirty (30) days prior to the expiration of each policy, Developer shall deliver to Agency/City evidence of renewal or replacement of such policy reasonably satisfactory to City Attorney. 53 25F-59 1902. Agency/City Attorney May Modify. The Agency/City Attorney may modify the type and amounts of insurance (including reasonable increases in policy limits) required pursuant to this Section. 1903. Claims and Proceedings. Developer shall give Agency/City immediate notice of any material casualty to any portion of the Property, whether or not covered by insurance, and of the initiation or threatened initiation of any proceeding for the condemnation or other taking for public or quasi-public use of any portion of the Property (collectively, "Condemnation"), and shall provide Agency/City with copies of all documents which pertain to any such casualty or Condemnation. Developer shall take all action reasonably required by Agency/City in connection therewith to protect the interests of Developer and/or City, and Agency/City shall be entitled (without regard to the adequacy of its security) to participate in any action, claim, adjustment or proceeding and to be represented therein by counsel of its choice. Developer shall not settle, adjust, or compromise any claim, action, adjustment or proceeding without prior written approval, which approval shall not be unreasonably withheld or delayed. 1904. Delivery of Proceeds to Agency/City. In the event that, notwithstanding the "lender's loss payable endorsement" requirement set forth above, the proceeds of any casualty insurance policy described herein are paid to Developer, Developer shall, subject to any superior rights of the Senior Lender, deliver such proceeds to the Agency and City immediately upon receipt. 1905. Application of Casualty Insurance Proceeds. Any proceeds collected ("Proceeds") under any casualty insurance policy described in this Agreement shall be disbursed to Developer as provided below, but only upon fulfillment of each of the following conditions ("Restoration Conditions") within ninety (90) days (unless extended by mutual agreement of Developer and Agency/City) following, the occurrence of the damage for which the Proceeds are collected: (a) Developer shall demonstrate to Agency/City's reasonable satisfaction that the Proceeds (together with amounts deposited by Developer pursuant to subparagraph (b)) will be adequate to repair the Improvements and to restore the fair market value of the Property, within a time period reasonably determined by Agency/City, to at least the value it had immediately prior to sustaining the damage. Such demonstration shall include delivery to Agency/City of (i) plans and specifications reasonably satisfactory to Agency/City, and (ii) a construction contract in form and content, and with a contractor, reasonably satisfactory to Agency/City. (b) To the extent that the Proceeds are insufficient to accomplish the restoration required above, Developer shall deliver to Agency/City funds ("Shortfall Funds") in the amount of such shortfall, which funds shall be assigned to City as security for Developer's obligation hereunder and held and disbursed in the same manlier as the Proceeds. (c) Developer shall execute such documents as City requires to evidence and secure Developer's obligation to use all amounts disbursed for the diligent restoration of the Property. (d) No Event of Default shall remain uncured. 1906. Method of Disbursement and Undisbursed Funds. Any Proceeds and Shortfall Funds to be disbursed to Developer shall be held by Agency/ City and disbursed in accordance with then customary disbursement procedures and related provisions. Any amounts remaining 54 25F-60 undisbursed following completion of such restoration shall be returned to Developer up to the amount of any Shortfall Funds deposited by Developer, and any other amounts remaining shall either be paid to Developer or applied by Agency/City against any obligations to Agency/City that are secured by a lien on the Property, as they elect in their sole and absolute discretion. 1907. Failure to Satisfy Conditions. In the event that Developer fails to fulfill the Restoration Conditions within ninety (90) days (unless extended pursuant to Section 1905) following the date on which the damage occurs, the Proceeds shall be applied by Agency/City against any obligations to Agency/City that are secured by a lien on the Property, and the selection of which such obligations to apply the Proceeds against shall be made by Agency/City in their sole and absolute discretion. 1908. Restoration. Nothing in this Article 1900 shall be construed to excuse Developer from repairing and restoring all damage to the Property in accordance with other Loan Document provisions, regardless of whether insurance proceeds are available or sufficient. 1909. Condemnation; Treatment of Compensation. Subject to any superior rights of Senior Lender, Developer hereby assigns to the Agency and City, as security for all obligations to Agency or City secured by a lien on the Property, all amounts payable to Developer in connection with any condemnation, and any proceeds of any related settlement (collectively, "Compensation"). Subject to any superior rights of Senior Lender, Developer shall deliver such remaining Compensation to Agency/City immediately upon receipt. If the taking results in a loss of the Property to an extent that, in the reasonable opinion of Agency/City, such taking renders or is likely to render the Property not economically viable or if, in Agency/City's reasonable judgment Developer's security is otherwise impaired, Agency/City may apply the Compensation received due to judgment or settlement in connection with any condemnation or other taking to reduce the unpaid obligations secured in such order as Agency/City may determine, and without any adjustment in the amount or due dates of payments due under the Note. If so applied, any award in excess of the unpaid balance of the Note and other sums due to Agency/City shall be paid to Developer or Developer's assignee. Agency/City shall have no obligation to take any action in connection with any actual or threatened condemnation or other proceeding. (a) Notwithstanding the foregoing, as long as the value of Agency/City's liens are not impaired, any condemnation proceeds may be used by the Developer for repair and/or restoration of the Project. (b) Nothwithstanding the foregoing, during the tax credit compliance period for the Project, as determined under Section 42 of the Internal Revenue Code, any condemnation proceeds may be used by the Developer for repair and/or restoration of the Project. 1910. Waiver of Subrogation. Developer hereby waives all rights to recover against the Agency or the City (or any officer, employee, agent or representative of Agency or City) for any loss incurred by Developer from any cause insured against or required by any Loan Document, to be insured against; provided, however, that this waiver of subrogation shall not be effective with respect to any insurance policy if the coverage thereunder would be materially reduced or impaired as a result. Developer shall use its best efforts to obtain only policies which permit the foregoing waiver of subrogation. 55 25F-61 2000. DEFAULTS AND REMEDIES 2001. Events of Default. Subject to the extensions of time set forth in Article 1700, failure by either party to perform any action or covenant required by this Agreement or any other Project Document within the time periods provided herein (or therein) following notice and failure to cure as described hereafter, constitutes a "Default" or "Event of Default" under this Agreement. A party claiming a Default shall give written notice of Default to the other party specifying the Default complained of. Except as otherwise expressly provided in this Agreement, the claimant shall not institute any proceeding against any other party, and the other party shall not be in Default if such party within thirty (30) days from receipt of such notice immediately, with due diligence, commences to cure, correct or remedy such failure or delay and shall complete such cure, correction or remedy with diligence. Without limiting the generality of the foregoing, the occurrence of any of the following, whatever the reason therefore, shall constitute an Event of Default by Developer under this Agreement: (a) Developer fails to make any payment of principal or interest under the Promissory Notes when due, and such failure is not cured within fifteen (15) Business Days after Developer's receipt of written notice that such payment was not received when due; (b) Developer fails to perform any other obligation for the payment of money under any Loan Document, and such failure is not cured within fifteen (15) Business Days after Developer's receipt of written notice that such obligation was not performed when due; (c) Developer fails to perform any obligation (other than the obligations described in subparagraphs (a) and (b) above) under any Loan Document, and such failure is not cured within thirty (30) days after Developer's receipt of written notice that such obligation was not performed; provided that, if cure cannot reasonably be effected within such thirty (30)-day period, such failure shall not be an Event of Default so long as Developer (in any event, within ten (10) days after receipt of such notice) commences to cure, and thereafter diligently (in any event within ninety (90) days after receipt of such notice) prosecutes such cure to completion; (d) Any representation or warranty in any Loan Document proves to have been incorrect in any material respect when made; (e) The Property is materially damaged or destroyed by fire or other casualty unless Developer fulfills the Restoration Conditions set forth in the insurance provisions of this Agreement within ninety (90) days (unless extended pursuant to Section 1905) and thereafter diligently restores the Property in accordance with this Agreement; (f) Work on the construction ceases for thirty (30) consecutive days for any reason (other than governmental orders, decrees or regulations, acts of God or any other deity, strikes or other causes beyond Developer's reasonable control), provided that the same do not, in the aggregate and in the Agency/City's reasonable judgment, threaten to delay the completion of the construction beyond the required completion date set forth in the Schedule of Performance; (g) Developer is enjoined or otherwise prohibited by any Governmental Authority from constructing and/or occupying the improvements and such injunction or prohibition continues unstayed for sixty (60) days or more for any reason; 56 25F-62 (h) Developer is dissolved, liquidated or terminated, or all or substantially all of the assets of Developer are sold or otherwise transferred without the Executive Director's prior written consent; (i) Developer is the subject of an order for relief by a bankruptcy court, or is unable or admits its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; or Developer applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or any part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of Developer and the appointment continues undischarged or unstayed for ninety (90) days; or Developer institutes or consents to any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, custodianship, conservatorship, liquidation, construction or similar proceeding relating to it or any part of its property; or any similar proceeding is instituted without the consent of Developer and continues undismissed or unstayed for ninety (90) days; or any judgment, writ, warrant of attachment or execution, or similar process is issued or levied against any property of Developer and is not released, vacated or fully bonded within ninety (90) clays after its issue or levy; or 0) (i) any of the Senior Loan documents is revoked or terminated, in whole or in part and for any reason (except due to repayment in full of the Senior Loan), without the Executive Director's prior written consent, or (ii) Developer defaults or otherwise fails to perform any of its duties or obligations under or in connection with any of the Senior Loan documents, subject to all applicable notice and cure ,periods, or (iii) any of the Senior Loan documents is amended, supplemented or otherwise modified without Agency/City's prior written consent, which consent shall not be unreasonably withheld. Notwithstanding anything to the contrary contained herein, Agency/City hereby agrees that any cure of any default made or tendered by Developer's Limited Partner shall be deemed to be a cure by Developer and shall be accepted or rejected on the same basis as if made or tendered by Developer. 2002. Remedies Upon Default. Upon the occurrence of any Event of Default, Agency/City may, at its option and in its absolute discretion, do any or all of the following: (a) By written notice to Developer, declare the principal of all amounts owing under the Loan Documents, together with all accrued interest and other amounts owing in connection therewith, to be immediately due and payable, regardless of any other specified due date; (b) In its own right or by a court-appointed receiver, take possession of the Property, enter into contracts for and otherwise proceed with the completion of the construction by expenditure of its own funds; (c) Exercise any of its rights under the Loan Documents and any rights provided by law, including, without limitation, the right to seek specific performance and the right to foreclose on any security and exercise any other rights with respect to any security, all in such order and manner as City elects in its sole and absolute discretion; (d) Suspend or terminate the award of HOME funds if Developer fails to comply with any term of that award; and 57 25F-63 (e) Suspend or terminate the award of the tax increment funds if Developer fails to comply with any term of that award. 2003. Termination by the Developer. In the event that the Developer is not in default under this Agreement or any other Project Document and the Agency and City do not provide the Loans pursuant to this Agreement; or in the event of any default of the Agency or City prior to the first disbursement of the Loans, which is not cured within the time set forth in Section 2001 hereof, and any such failure is not cured within the applicable time period after written demand by the Developer, then this Agreement may, at the option of the Developer, be terminated by written notice thereof to the Agency/City. From the date of the written notice of termination of this Agreement by the Developer to the Agency/City and thereafter this Agreement shall be deemed terminated and there shall be no further rights or obligations between the parties arising from this Agreement, except that the parties may pursue any other remedies they may have hereunder. 2004. Termination by the Agency or City. In the event that neither Agency nor City is in Default under this Agreement, and (i) the Developer (or any successor in interest) assigns or attempts to assign or transfer this Agreement or any Project Document or any rights therein or in the Property in violation of Section 1602 of this Agreement; or (ii) one or more of the Conditions Precedent to the Loans set forth in Sections 601, 602, and 603 hereof is not fulfilled on or before the time set forth in this Agreement and/or the Schedule of Performance and such failure is not caused by the Agency or City; or (iii) the Developer fails to commence construction of the Improvements within the time set forth in the Schedule of Performance or fails to proceed with or suspends construction of the Improvements for at least a ninety (90) day period and such default or failure shall not be cured within thirty (30) days after the date of written demand therefor by the Agency; or (iv) the Developer does not submit evidence of financing, certificates of insurance, construction plans, drawings and related documents as required by this Agreement and within the time set forth in the Schedule of Performance, in the manner and by the dates respectively provided in this Agreement and such default or failure shall not be cured within thirty (30) days after the date of written demand therefor by the Agency; or (v) the Developer is otherwise in Default of this Agreement and fails to cure such default within the time set forth in Section 2001 hereof; then this Agreement and any right of the Developer or any assignee or transferee with respect to or arising out of the Agreement or the Property, shall, at the option of the Agency/City, be terminated by the Agency/City by notice to the Developer and thereafter this Agreement shall be deemed terminated and there shall be no further rights or obligations between the parties, except that the parties may pursue any other remedies they may have hereunder. 2005. Institution of Legal Actions. In addition to any other rights or remedies and subject to the restriction otherwise set forth in this Agreement, either party may institute and action at law or equity to seek specific performance of the terms of this Agreement, or to cure, correct or remedy any Default, to recover damages for any Default, or to obtain any other remedy consistent with the purpose of this Agreement. Such legal actions must be instituted in the Superior Court in the County of Orange, State of California, or in the District for the Central District of California. 2006. Acceptance of Service of Process. In the event that any legal action is commenced by the Developer against the City or Agency, service of process on the City or Agency shall be made by personal service upon the Executive Director of the City or Agency or in such other manner as may be provided by law. In the event that any legal action is commenced by the City or Agency against the Developer, service of process on the Developer shall be made by personal service upon 58 25F-64 the Chief Executive Officer of the Managing General Partner of the Developer or in such other manner as may be provided by law. 2007. Damages. In the event that the Agency/City is liable for damages to Developer, such liability shall not exceed costs incurred by the Developer in the performance of this Agreement and shall not extend to compensation for loss of future income, profits or assets; provided, however, Developer's only remedy for any breach of this Agreement by the Agency/City shall be an action for specific performance of such party's obligations or exercise of Developer's right to terminate this Agreement pursuant to Section 2002(f). 2008. Nonrecourse Liability. Neither Developer, nor any partner of Developer, shall have any personal liability under this Agreement, the Agency Promissory Note, the City Promissory Note, and Deeds of Trust, and any judgment, decree or order for the payment of money obtained in any action to enforce the obligation of Developer to repay the loan evidenced by such documents shall be enforceable against Developer only to the extent of Developer's interest in the Property. 2009. Cumulative Remedies; No Waiver. Agency/City's rights and remedies under the Project Documents are cumulative and in addition to all rights and remedies provided by law. The exercise by Agency/City of any right or remedy shall not constitute a cure or waiver of any default, nor invalidate any notice of default or any act done pursuant to any such notice, nor prejudice the Agency or City in the exercise of any other right or remedy. No waiver of any default shall be implied from any omission by Agency/City to take action on account of such default if such default persists or is repeated. No waiver of any default shall affect any default other than the default expressly waived, and any such waiver shall be operative only for the time and to the extent stated. No waiver of any provision of any Project Document shall be construed as a waiver of any subsequent breach of the same provision. Agency/City's consent to or approval of any act by Developer requiring further consent or approval shall not be deemed to waive or render unnecessary Agency/City's consent to or approval of any subsequent act. The Agency or the City's acceptance of the late performance of any obligation shall not constitute a waiver by Agency/City of the right to require prompt performance of all further obligations; Agency/City's acceptance of any performance following the sending or filing of any notice of default shall not constitute a waiver of either party's right to proceed with the exercise of its remedies for any unfulfilled obligations; and Agency/City's acceptance of any partial performance shall not constitute a waiver by Agency/City of any rights. 2100. MISCELLANEOUS 2101. Obligations Unconditional and Independent. Notwithstanding the existence at any time of any obligation or liability of Agency/City to Developer, or any other claim by developer against Agency/City, in connection with the Loan or otherwise, Developer hereby waives any right it might otherwise have (a) to offset any such obligation, liability or claim against Developer's obligations under the Loan Documents, or (b) to claim that the existence of any such outstanding obligation, liability or claim excuses the nonperformance by Developer of any of its obligations under the Loan Documents. 2102. Notices. All notices, demands, approvals and other communications provided for in the Loan Documents (each, a "Notice") shall be in writing and be delivered to the appropriate party by personal service or U.S. mail at its address as follows: 59 25F-65 If to Developer: Santa Ana WBBB, LP c/o Orange Housing Development Corporation 414 E. Chapman Avenue Orange, California 92866 Attention: Chief Executive Officer With a copy to: C&C Development Co., LLC 14211 Yorba Street, Suite 200 Tustin, California 92780 If to Agency/City: City of Santa Ana Executive Director (CDA/RDA) 20 Civic Center Plaza (M-37) P.O. Box 1988 Santa Ana, California 92702 [What is correct address?] With a copy to: City/Agency Attorney City of Santa Ana 20 Civic Center Plaza, 7th Floor (M-29) Santa Ana, California 92702 Addresses for notice may be changed as required by written notice to all other parties. All notices personally served shall be effective when actually received. All notices mailed shall be effective three (3) days after deposit in the U.S. Mail, postage prepaid. The foregoing notwithstanding, the non-receipt of any notice as the result of a change of address of which the sending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such notice. 2103. Survival of Representations and Warranties. All representations and warranties in the Loan Documents shall survive the making of the Loan(s) described herein and have been or will be relied on by Agency/City notwithstanding any investigation made by either party. 2104. No Third Parties Benefited. This Agreement is made for the purpose of setting forth rights and obligations of Developer and the Agency and City, and no other person shall have any rights hereunder or by reason hereof. 2105. Binding Effect; Assignment of Obligations. This Agreement shall bind, and shall inure to the benefit of, Developer and Agency/City and their respective successors and assigns. Other than as expressly provided to the contrary in this Agreement, Developer shall not assign any of its rights or obligations under any Loan Document without the prior written consent of Agency/City, which consent may be withheld in Agency/City's sole and absolute discretion. Any such assignment without such consent shall, at Agency or City's option, be void. 2106. Prior Agreements; Amendments; Consents. This Agreement (together with the other Project Documents and all exhibits and attachments hereto and thereto) contains the entire agreement between the Agency, City and Developer with respect to the Loan(s) and the Property, and all prior negotiations, understandings and agreements are superseded by this Agreement and such other Project Documents. Except for the other Project Documents all prior or contemporaneous agreements, understandings, representations and statements, oral or written, are merged in this Agreement and shall be of no further force or effect. Each party is entering this Agreement based 60 25F-66 solely upon the representations set forth herein and upon each party's own independent investigation of any and all facts such party deems material. No modification of any Project Document (including waivers of rights and conditions) shall be effective unless in writing and signed by the party against whom enforcement of such modification is sought, and then only in the specific instance and for the specific purpose given. 2107. Governing Law. All of the Loan Documents shall be governed by, and construed and enforced in accordance with, the laws of the State of California and Federal law, whichever is more stringent. Developer irrevocably and unconditionally submits to the jurisdiction of the Superior Court of the State of California for the County of Orange or the United States District Court of the Central District of California, as Agency/City may deem appropriate, in connection with any legal action or proceeding arising out of or relating to this Agreement or the Loan Documents. Assuming proper service of process, Developer also waives any objection regarding personal or in rem jurisdiction or venue. 2108. Severability of Provisions. No provision of any Loan Document that is held to be unenforceable or invalid shall affect the remaining provisions, and to this end all provisions of the Loan Documents are hereby declared to be severable. 2109. Headings. Article and section headings are included in the Loan Documents for convenience of reference only and shall not be used in construing the Loan Documents. 2110. Conflicts. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, this Agreement, unless otherwise expressly provided, shall prevail; provided however that, with respect to any matter addressed in both such documents, the fact that one document provides for greater, lesser or different rights or obligations than the other shall not be deemed a conflict unless the applicable provisions are inconsistent and could not be simultaneously enforced or performed. 2111. Conflict of Interest. No member, official or employee of the Agency or City shall have any personal interest, direct or indirect, in this Agreement, nor shall any such member, official or employee participate in any decision relating to the Agreement which affects his/her personal interests or the interests of any corporation, partnership or association in which he/she is directly or indirectly interested. 2112. Warranty Against Payment of Consideration. Developer warrants that it has not paid or given, and will not pay or give, any third person any money or other consideration for obtaining this Agreement. 2113. Nonliability of Agency/City Officials and Employees. No member, official or employee of Agency/City shall be personally liable to Developer, or any successor in interest, in the event of any default or breach by Agency/City or for any amount which may become, due to Developer or successor, or on any obligation under the terms of this Agreement. 2114. Relationship Among Agency, City and Developer. It is hereby acknowledged that the relationship among the Agency, City and the Developer is not that of a partnership or joint venture and that the Agency, City and Developer shall not be deemed or construed for any purpose to be the agent of the other. Accordingly, except as expressly provided herein or in the Attachments 61 25F-67 hereto, the Agency and City shall have no rights, powers, duties or obligations with respect to the development, operation, maintenance or management of the Improvements. 2115. Plans and Data. Where Developer does not proceed with the work and construction of the Property, and when this Agreement is terminated with respect thereto for any reason, Developer shall deliver to Agency/City any and all plans and data concerning the Property, and Agency/City or any person or entity designated by Agency/City shall have the right to use such plans and data without compensation to Developer. Such right of Agency/City shall be subject to any right of the preparer of the plans to their use. 2116. Authority to Enter Agreement. Each undersigned represents and warrants that its signature hereinbelow has the power, authority and right to bind their respective parties to each of the terms of this Agreement, and shall indemnify the Agency and City fully, including reasonable costs and attorney's fees, for any injuries or damages to Agency/City in the event that such authority or power is not, in fact, held by the signatory or is withdrawn. 2117. Agency and City Approvals and Actions. The Agency and City shall maintain authority of this Agreement and the authority to implement this Agreement through the Executive Director (or his duly authorized representative). The Executive Director shall have the authority to make approvals, issue interpretations, waive provisions, and/or enter into amendments of this Agreement on behalf of the Agency so long as such actions do not materially or substantially change the uses or development permitted on the Property, or materially or substantially add to the costs incurred or to be incurred by the Agency as specified herein, and such approvals, interpretation, waivers and/or amendments may include extensions of time to perform as specified in the Schedule of Performance. All other material and/or substantial interpretations, waivers, or amendments shall require the consideration, action and written consent of the Agency Board and City Council. The Executive Director may transfer and assign the authority to this Agreement to the City Manager of the City at any time, upon giving notice to Developer but without Developer's approval. 2118. Counterparts. This Agreement may be signed in multiple counterparts which, when signed by all parties, shall constitute a binding agreement and shall be deemed to be an original. 2119. Real Estate Brokerage Commission. The Agency, the City and the Developer each represent and warrant to the other that no broker or finder is entitled to any commission or finder's fee in connection with the Loans. The parties each agree to defend and hold harmless the other parties from any claim to any such commission or fee from any broker, agent or finder with respect to this Agreement which is payable by such party. 2120. Attorney's Fees. In any action between the parties to interpret, enforce, reform, modify, rescind, or otherwise in connection with any of the terms or provisions of this Agreement, the prevailing party in the action shall be entitled, in addition to damages, injunctive relief, or any other relief to which it might be entitled, reasonable costs and expenses including, without limitation, litigation costs and reasonable attorneys' fees. 2121. Interpretation. As used in this Agreement, masculine, feminine or neuter gender and the singular or plural number shall each be deemed to include the others where and when the context so dictates. The word "including" shall be construed as if followed by the words "without limitation." This Agreement shall be interpreted as though prepared jointly by both parties. 62 25F-68 2122. No Waiver. A waiver by any party of a breach of any of the covenants, conditions or agreements under this Agreement to be performed by another party shall not be construed as a waiver of any succeeding breach of the same or other covenants, agreements, restrictions or conditions of this Agreement. 2123. Computation of Time. The time in which any act is to be done under this Agreement is computed by excluding the first day, and including the last day, unless the last day is a holiday or Saturday or Sunday, and then that day is also excluded. The term "holiday" shall mean all holidays as specified in Section 6700 and 6701 of the California Government Code. If any act is to be done by a particular time during a day, that time shall be Pacific Time Zone time. 2124. Legal Advice. Each party represents and warrants to the other the following: they have carefully read this Agreement, and in signing this Agreement, they do so with full knowledge of any right which they may have; they have received independent legal advice from their respective legal counsel as to the matters set forth in this Agreement, or have knowingly chosen not to consult legal counsel as to the matters set forth in this Agreement; and, they have freely signed this Agreement without any reliance upon any agreement, promise, statement or representation by or on behalf of the other party, or their respective agents, employees, or attorneys, except as specifically set forth in this Agreement, and without duress or coercion, whether economic or otherwise. 2125. Time of Essence. Time is expressly made of the essence with respect to the performance by the Agency, the City, and the Developer of each and every obligation and condition of this Agreement. - 2126. Cooperation. Each party agrees to cooperate with the other in this transaction and, in that regard, to sign any and all documents which may be reasonably necessary, helpful, or appropriate to carry out the purposes and intent of this Agreement including, but not limited to, releases or additional agreements. 2127. Transfer of Developer Limited Partner's Interest. Notwithstanding anything to the contrary in this Agreement or the Loan Documents, no consent shall be required of either the City or the Agency (and it shall not be deemed a default or an Event of Default under any of the Loan Documents), in connection with the transfer and/or the assignment by the Developer's limited partner of its interest in the Developer to an entity controlled or managed by an entity which is related to or under common control with the Developer's limited partner. 2128. Removal of Developer's General Partner. Notwithstanding anything to the contrary in this Agreement or the Loan Documents, the removal and/or replacement of a General Partner for cause in accordance with the Partnership Agreement shall not require the consent of either the City or Agency and shall not shall not constitute a default or an Event of Default under this Agreement or the Loan Documents or accelerate the maturity of the City Loan or the Agency Loan. If the Developer's limited partner exercises its right to remove a General Partner, City and Agency will not unreasonably withhold their consent to the substitute general partner; provided however, the consent of either the City or Agency shall not be required if the substitute general partner is an affiliate of the Developer's limited partner. The substitute general partner shall assume all of the rights and obliterations of the removed general partner hereunder. {Signatures on following page) 63 25F-69 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date set forth at the beginning of this Agreement. AGENCY: COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA, a public body, corporate and politic By: ATTEST: Maria D. Huizar, Secretary APPROVED AS TO FORM By: Lisa E. Storck Assistant Counsel CITY: Executive Director CITY OF SANTA ANA, a municipal corporation By: ATTEST: Maria D. Huizar, Cleric of the Council APPROVED AS TO FORM By: Lisa E. Storck Assistant City Attorney City Manager 64 25F-70 DEVELOPER: SANTA ANA WBBB LP, a California Limited Partnership By: ORANGE HOUSING DEVELOPMENT CORPORATION, a California nonprofit corporation, its managing general partner By: Eunice Bobert Chief Executive Officer By: C&C Development, LLC, a California limited liability company, its developer general partner By: Todd R. Cottle, its member By: The Cottle Family Trust Dated 3/8/1987, its member By. Barry A. Cottle, Trustee 65 25F-71 25F-72