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HomeMy WebLinkAboutR26- Economic Development Agency CITY OF SAN BERNARDINO ECONOMIC DEVELOPMENT AGENCY ORIGINAL FROM: Emil A.Marzullo SUBJECT: Lugo Senior Apartments, LLC (Meta Housing Interim Executive Director Corporation) - Acquisition and Development - Loan Agreement for the redevelopment of 119- Units of senior housing DATE: November 22,2010 ----------------- -------------------------- -------------- --- --- Svnoysis of Previous Commission/Council/Committee Action(s): On October 7, 2010, Redevelopment Committee Members Johnson, Marquez and Brinker unanimously voted to recommend that the Community Development Commission consider this action for approval. -!Cevm---- -- -- ------------------------------------ ---- -- Recommended Motion(s): (Community Development Commission) Resolution of the Community Development Commission of the City of San Bernardino approving and authorizing the Interim Executive Director of the Redevelopment Agency of the City of San Bernardino("Agency")to execute an Acquisition and Development Residual Receipts Loan Agreement by and between the Agency and Lugo Senior Apartments,LLC (IVDA Redevelopment Project Area-Affordable Senior Citizen Rental Housing Development) Contact Person(s): Carey K.Jenkins Phone: (909)663-1044 Project Area(s): IVDA Redevelopment Project Area Ward(s): 1 Supporting Data Attached: Q Staff Report 0 Resolution(s)B Agreement(s)/Contract(s) ❑ Map(s)❑Letter(s) FUNDING REQUIREMENTS: Amount: $ 6,500,000 Source: Low/Mod Housing Set Aside Funds Budget Authority: Fiscal Year 2009-2010 Budget(NOFA) Signature: Fiscal Review: S.- /- " Emil A.Vtarzullo Interim Execu've Director Lori Panzino-Tillery,Interi hief Financial Officer Commission/Council Notes: p3(� P:VgeM WommDe vCmmiesi m\CDC201g12-040U,Sm.,Apart ,LP-Retiiduilft iptvL Ag mm15RCpc COMMISSION MEETING AGENDA Meeting Date: 12/06/2010 Agenda Item Number: Lvca ECONOMIC DEVELOPMENT AGENCY STAFF REPORT LUGO SENIOR APARTMENTS,LLC (META HOUSING CORPORATION)-ACQUISITION AND DEVELOPMENT LOAN AGREEMENT FOR THE REDEVELOPMENT OF 119-UNITS OF SENIOR HOUSING BACKGROUND: In an attempt to address a number of affordable housing objectives,the Redevelopment Agency of the City of San Bernardino ("Agency") initiated the launch of an annual notice of funding availability ("NOFA"). The reasons for issuing such a procurement document included, among other things,the ability to provide a systematic allocation of funds on a regular basis; foster an environment where similar projects could be reviewed on the same merits at the same time; allow the City of San Bernardino ("City") to address its overall housing production goals as stated in its Housing Element and the Agency's Housing Implementation Plan; provide a means for the City to implement specific housing policy goals and objectives (for example, higher quality affordable housing stock and better on-site management); and finally, create development opportunities within the City and generate interest from a greater number of development professionals. For FY 2009-2010, the Agency allocated $6.5 million in tax increment housing set-aside funds for projects that consisted of the acquisition and rehabilitation of existing and blighted larger scale multi-family rental housing developments. The Agency sought to emphasize this type of redevelopment strategy as it currently represents the most pressing affordable housing need within the City. As documented in the City's 2010 Consolidated Plan, San Bernardino has approximately 7,100 vacant dwelling units (11% of 64,500 identified units). This includes a mix of single-family homes, smaller three and four-plex properties and larger scale multiplex properties. Many of these dwellings are in various stages of neglect and decay and are creating a blighting influence on certain neighborhoods. With the existing number of underutilized and potentially blighted units in the City at such a high level, a determination was made to seek development opportunities that would rehabilitate certain existing properties as opposed to constructing brand new developments that would otherwise increase the number of housing units in an already saturated market. Such a redevelopment plan would also serve to immediately stabilize certain areas of the City adversely affected by poorly maintained and operated residential housing complexes thus limiting the number of public service calls to these facilities. On March 17, 2010,the NOFA was distributed to a wide variety of for-profit and non-profit developers and related entities that specialize in large-scale housing redevelopment projects in an attempt to garner support for the program and to create interest in the City's development opportunities. This was followed by a non- mandatory bidder's conference on April 14, held at the Agency's office. Finally, the Agency received five responses to the NOFA on May 21, 2010. Upon receipt,the responses were submitted to a review panel that consisted of Agency housing staff and its Senior Planner, as well as the City Planner and an Agency financial consultant. Based on a review of the written responses, oral interviews with the finalists and site visits to each of the proposed development sites, the final rankings were as follows: _ PV4nm %Comm De CommlssimTX2 010\11-0610 LugoSeiarApammmv,LP-R iA Receipts L AgmemeosSR.o COMMISSION MEETING AGENDA Meeting Date: 12/06/2010 Agenda Item Number: Economic Development Agency Staff Report Lugo Senior Apartments, LLC—Acquisition and Development Residual Receipts Loan Agreement Page 2 Developer Site Location Rank Meta Housing Corporation 839 Lugo Avenue 1 Alliance Property Group and Wasatch 200 East 301' Street 2 Mary Erickson Community Housing 1433 East Lynwood Drive 3 Jamboree Housing 1433 East Lynwood Drive 3 Housing Action Resource Trust 1471 East Eureka Street 5 The project ranking 2nd submitted by Alliance Property Group was initially recommended for funding by Agency Staff. However, at the direction of the Council, this project is no longer being considered and has been removed from the NOFA process altogether. The third ranking project is the Lynwood Property which was submitted under two separate development proposals. Based on its current condition, the property meets all of the criteria described in the Agency NOFA. However, the separate applications submitted for the Lynwood Property were not considered due to uncertainty over which respondent had appropriate site control,which was a requirement in the NOFA. It is the Agency's intention to pursue this property through the bank that holds the defaulted note and/or the current owner if an agreement between all parties can be reached. Based on accounts from the City's Code Enforcement Department and from residents of the property,the site is in a significant state of disrepair creating certain health and safety issues. The project that ranked 5d' in scoring, missed on key NOFA criteria including an adequate explanation of the project's funding structure and a lack of verifiable site control. As a result it was denied further consideration. CURRENT ISSUE: The project under consideration consists of the acquisition and major rehabilitation of the 120-unit Lugo Apartments located at 839 Lugo Avenue. Ultimately, the property will be transformed into a 119-unit seniors-only community. The project site is located within Census Tract 58, which is bounded by 9th Street, Sierra Way and Waterman Avenue. The Project is situated on 3.13 acres. A location map is provided as Attachment"A"to this report. Available public records indicate that the subject buildings were constructed in three phases. The Single- family residence was constructed in 1949, the one-story apartment buildings were constructed circa 1964 and the two-story buildings were constructed in 1975. City records document that rehabilitation of the property has occurred within the past 2 years in the form of a re-roof, certain window replacements, installation of new plumbing and water heaters and correction of water damage due to a structural fire in 2010. It is zoned as a CO-26 District, suitable for high density multifamily structures. Based on information submitted by the Developer,the property is currently 65%occupied. P Wgeadm\Comm Dev Co iwm\CDC 201012-0640 Lugo Senior Apa ems,LP-Residual Reeeipse L=A"mem SR.dou COMMISSION MEETING AGENDA Meeting Date: 12/06/2010 Agenda Item Number: �.Z�e Economic Development Agency Staff Report Lugo Senior Apartments, LLC—Acquisition and Development Residual Receipts Loan Agreement Page 3 The property consists of seven (7) two-story apartment buildings, two (2) one-story apartment buildings, and one (1) one-story office/apartment building. The property also includes a detached garage, an outdoor pool, open and covered asphalt-paved parking spaces, and landscaped areas. The buildings are wood framed construction with stucco exterior finish and composition shingles and composition built-up roofing. There are a total of 145 parking spaces comprised of 75 uncovered spaces and 70 covered parking spaces. The appraised value of the property in its current condition is $7,125,000, which is the amount specified in the sales agreement. As a part of the application process, a physical needs assessment dated August 10, 2010, was conducted on the property. The assessment looked at all mechanical systems, interior spaces, community rooms, onsite recreational facilities and individual units. As a result of this assessment a detailed rehabilitation budget was established and consists of the following items: • Project Amenities/Common Space — "resident friendly" access, drought tolerant landscaping, walking area similar to a pet park, pool redesign to include shade structure, solar panel install and ADA access into pool and entire pool area. • Recreation Room/Clubhouse Building — new 9a' street entrance with security entry gates, guest parking, lighting and landscaping, new security accessed clubhouse to provide social gathering space, library and computer room. • Exterior Design to discourage criminal activity — Site lighting, building lighting, security video cameras,a property line perimeter wall and landscaping. • Exterior Design (Building Materials)—dual glazed energy efficient windows, metal entrance doors, decorative wrought iron handrails and guardrails, handicap ramps, elevator and access bridges between buildings for ADA access, re-roof, exterior paint, new asphalt pavement in parking and driveway areas,repair and reconstruction of existing carport structures. • Interior Design — First floor ADA accessible units with handicap grab bars, new paint, flooring, energy efficient light fixtures, heating equipment, low flow shower heads, faucets and toilets, kitchen and bath cabinets,countertops and kitchen appliances. • Current Building Design (Non-Compliant Code Issues) — ADA compliance to meet California Building Code height, spacing and structural design requirements and new smoke detectors, and GFI outlets The Developer Meta Housing Corporation (the "Developer") will serve as the developer on this project. The Developer is a Los Angeles-based firm specializing in the development and financing of affordable and market-rate apartment communities for families and seniors. Many of these projects have been financed with tax exempt bonds, tax credits and similar structures utilizing the capital markets. The principals of the Developer and its affiliates have actively participated in the development of more than 12,000 residential units. ----------------------------------------------------------------- P:Ugeodas\Ca De Com nionTM201M12-040LugoSew«Aparo LP,ResidualR ipuL Ay enlSkd COMMISSION MEETING AGENDA Meeting Date: 12/06/201,0 Agenda Item Number: Z/'Y Economic Development Agency Staff Report Lugo Senior Apartments, LLC—Acquisition and Development Residual Receipts Loan Agreement Page 4 As it relates to senior housing, "active living in place" is the credo for their communities, offering amenities and programs that help residents embrace the full potential of a high quality senior life style. The Developer has a specific expertise in acquiring and rehabilitating existing residential units to suit senior living. Within the immediate areas of Southern California, the Developer owns and actively manages 867 units of rehabilitated affordable senior housing. The communities where these projects are located include Pomona,Azusa, Ontario,Duarte, Hemet, Santa Ana, and Commerce. Project Financing The Developer is currently in escrow to acquire the project site in the amount of $6,600,000 plus site closing costs. The Agency's agreed upon subsidy for the Project is an amount up to $6,500,000 and would be used to subsidize a portion of the site acquisition, assist with tenant relocation and pay for pre- development costs. Other sources of funds used to acquire the site would come from a first trust deed loan from a traditional commercial bank in the amount of up to $4,600,000. The remaining, predevelopment, rehabilitation and soft costs associated with the project would be paid by an allocation of low-income housing tax credits. The total project cost is estimated at $18,515,000. Under this financing scenario, the Agency's investment in the project would equal approximately 35% of total development costs. Please refer to Attachment `B" which details the sources and uses of project funds. At this stage of project development, the Agency's funds would be allocated in the form of a second trust deed loan in order to acquire the property and initiate the much-needed relocation. As this process is occurring, the Developer would apply to the State of California Tax Credit Allocation Committee for an award of tax credits to complete the project financing. Language within the Agency's loan agreement would give the Developer adequate time to complete the financing but would require a date specific for this event to occur. If, for whatever reason,the project is unable to move forward the Agency would require the return of its invested capital as stated in the terms and conditions of the loan agreement. Redevelopment Impact From a redevelopment perspective,the return to the Agency and the City is significant. With its investment of$6,500,000,the Agency would have an impact on the following: • $25,000 in estimated development impact and permitting fees to the City. • The creation of 245 construction related jobs with hourly wages between$8.00 and $30.00. • The creation and/or retention of 4 permanent jobs with hourly wages between$15.00 and $25.00. • The creation of up to 119 units of senior housing. • Agency-authorized and endorsed ownership of the project with professional on-site property management, on-site supportive services and changing the tenant population to seniors only resulting in a greatly reduced number of public service calls. PUgmd Tomm Dev COmmiss TDC 20=2-0 10 Lugo Senior Apmvnents,LP-Rcsidu ReceiptsLmoAgreememSR.dm. COMMISSION MEETING AGENDA Meeting Date: 12/06/2010 Agenda Item Number: 920 Economic Development Agency Staff Report Lugo Senior Apartments, LLC—Acquisition and Development Residual Receipts Loan Agreement Page 5 • On-site tenant services including health, wellness, lifelong learning, community building, and creative arts programs offered through a third party non-profit organization specializing in these activities. • Address the rehabilitation of the City's existing housing stock without having to construct new units,thus preventing a continued saturation of the overall housing market. • Control over a property that has been the subject of significant blighting influences and public service calls thus helping to scale back many of the related problems in that neighborhood of the City. • Taken in total with other properties under consideration such as the Northbrook and Lynwood Apartments as a part of this NOFA process, the proposed acquisition and rehabilitation strategy creates an opportunity to proactively battle further urban decay while at the same time greatly increasing the Agency's number of affordable housing units it can register with the California Department of Housing and Community Development. The job titles with corresponding job creation numbers for both the construction and permanent phases are detailed in Attachment"C"to this report. Existing_AoDrovals Approvals to change the property to age-restricted units will be required prior to construction. ENVIRONMENTAL IMPACT: This request is exempt under the California Environmental Quality Act ("CEQA"), pursuant to Section 15302, Class 2 which consists of replacement or reconstruction of existing structures and facilities where the new structure will be located on the same site as the structure replaced and will have substantially the same purpose and capacity as the structure replaced. The development under consideration consists of the acquisition and substantial rehabilitation of an apartment complex. Agency Staff will confirm that the Developer will file a Notice of Exemption in a timely manner. FISCAL IMPACT: There is no City General Fund impact as a result of the Project. The Agency anticipates subsidizing the Project in the amount of$6,500,000, in the form of a deferred payment residual receipts loan secured by a 2nd trust deed. The source of these funds is derived from tax increment housing set-aside and has been identified in the FY 2009-2010 Agency Budget. RECOMMENDATION: That the Community Development Commission adopt the attached Resolution. cl,_ Emil A. Marzullo, Interim Executive Director RUgen Tom MvCmpmlSYp0WM10WI23 10 LWSeoimAp�,LR-Rg6"ReceiptsL A,u emSkd COMMISSION MEETING AGENDA Meeting Date: 12/06/2010 Agenda Item Number: COPY ® I RESOLUTION NO. 2 RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION OF THE CITY OF SAN BERNARDINO APPROVING AND 3 AUTHORIZING THE INTERIM EXECUTIVE DIRECTOR OF THE 4 REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO ("AGENCY") TO EXECUTE AN ACQUISITION AND DEVELOPMENT 5 RESIDUAL RECEIPTS LOAN AGREEMENT BY AND BETWEEN THE AGENCY AND LUGO SENIOR APARTMENTS, LLC (IVDA 6 REDEVELOPMENT PROJECT AREA - AFFORDABLE SENIOR CITIZEN RENTAL HOUSING DEVELOPMENT) 7 8 WHEREAS, the Redevelopment Agency of the City of San Bernardino ("Agency") is a 9 public body, corporate and politic; and 10 WHEREAS, Meta Housing Corporation (the "Developer") has entered into an escrow 11 purchase agreement to acquire the Lugo Apartments complex located at 839-869 N. Lugo Avenue 12 and 187 E. 9`h Street in the City of San Bernardino, California (APNs: 0140-231-44 and 0140-231- 13 43 collectively, the "Property"); and 14 WHEREAS, on September 23, 2010, Agency staff received initial approval from the 15 Redevelopment Committee of the Economic Development Agency for the selection of Developer 16 in response to the Notice of Funding Availability for affordable housing circulated by the Agency; 17 and 18 WHEREAS, once acquired the Developer will conduct an extensive renovation of the 19 Property to include all one hundred nineteen (119) dwelling units, enhanced site amenities and 20 upgrades to common area spaces, the creation of exterior design to discourage criminal activity, 21 elevators and access bridges to enhance ease of movement of senior tenants and enhancements to 22 the Property clubhouse and recreation room (the "Project'); and 23 WHEREAS, the Developer will rent only to such very low and moderate income senior 24 citizen households as defined by the State of California Department of Housing and Community 25 Development pursuant to Health & Safety Code Section 50053; and 26 WHEREAS, the Agency proposes to lend up to $6,500,000 in low and moderate income 27 housing tax increment set aside funds ("Low and Moderate Housing Funds") to the Developer in 28 1 P:Upndes\Resolution,\Resolutions @010\12-06-10 Lugo Senior APmtmem.LP CDC R so.d= 1 order to acquire the Property, conduct existing tenant relocations and to pay for other pre- [�r+/ 2 construction costs; and 3 WHEREAS, the Agency is authorized to make such a loan pursuant to the provision of 4 Health & Safety Code Section 33449 to provide public benefit and carry out the purposes of the 5 Redevelopment Plan, as it may be amended from time to time; and 6 WHEREAS, this Project also assists in meeting the inclusionary housing requirements for 7 affordable housing provided by Low and Moderate Housing Funds pursuant to the provisions of 8 Health & Safety Code Section 33413(b)(2); and 9 WHEREAS, such loan will be repaid from residual receipts of the Project as defined in the 10 Acquisition and Development Residual Receipts Loan Agreement (the "Loan Agreement') and 11 also will be secured by a promissory note and deed of trust recorded against the property ; and 12 WHEREAS, the Agency and the Developer propose to enter into additional documents to 13 carry out the Loan Agreement, including, but not limited to the Regulatory Agreement Use 14 Covenant, Promissory Note and Deed of Trust(collectively the "Loan Documents"); and 15 WHEREAS, the Developer has the background, experience and financial capability to 16 develop the Project and is prepared to obtain first trust deed financing to be used in conjunction 17 with other Project funds to acquire and rehabilitate the Property in an amount up to $8,000,000 and 18 is applying for low and moderate income housing tax credits from the California Tax Credit 19 Allocation Committee ("TCAC") in an amount up to $8,600,000; and 20 WHEREAS, the Project is exempt under the California Environmental Quality Act 21 ("CEQA"), pursuant to Section 15302, Class 2 which consists of replacement or reconstruction of 22 existing structures and facilities where the new structure will be located on the same site as the 23 structure replaced and will have substantially the same purpose and capacity as the structure 24 replaced. 25 NOW, THEREFORE, THE COMMUNITY DEVELOPMENT COMMISSION OF THE 26 CITY OF SAN BERNARDINO DOES HEREBY RESOLVE, DETERMINE AND ORDER, AS Q27 FOLLOWS: 28 2 P:\Age ndas\Resolmions\ResolutionsVA10\13-06-10 Lugo Snior Apanmems,LP CDC Reso.dmx I Section 1. The Recitals of this Resolution are true and correct. 2 Section 2. The Community Development Commission of the City of San Bernardino 3 ("Commission") hereby finds and determines that the Project is exempt under the California 4 Environmental Quality Act ("CEQA"), pursuant to Section 15302, Class 2 which consists of 5 replacement or reconstruction of existing structures and facilities where the new structure will be 6 located on the same site as the structure replaced and will have substantially the same purpose and 7 capacity as the structure replaced. No potentially adverse environmental effects are anticipated to 8 be associated with the redevelopment of the Property. 9 Section 3. The Commission hereby approves the Loan Documents and hereby authorizes 10 the Interim Executive Director of the Agency to execute the Loan Documents on behalf of the 11 Agency; and the Interim Executive Director of the Agency is hereby further authorized to make 12 minor corrections, additions, clarifications, and interpretations to the Loan Documents, provided 13 said changes are not substantive in nature, do not increase the monetary impact to the Agency and 14 are consented to by the Agency Counsel, and to carry out the necessary actions to implement the �•J 15 provisions of such Loan Documents. 16 Section 4. This Resolution shall take effect from and after its date of adoption by this 17 Commission. 18 19 20 21 22 23 24 25 26 27 28 3 1):\Agendas\Resolutions\Resolutions @010\12.&10 Lugo Senior Apenmems,LP CDC Reso.doa RESOLUTION OF THE COMMUNITY DEVELOPMENT COMMISSION 1 OF THE CITY OF SAN BERNARDINO APPROVING AND 2 AUTHORIZING THE INTERIM EXECUTIVE DIRECTOR OF THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO 3 ("AGENCY") TO EXECUTE AN ACQUISITION AND DEVELOPMENT RESIDUAL RECEIPTS LOAN AGREEMENT BY AND BETWEEN THE 4 AGENCY AND LUGO SENIOR APARTMENTS, LLC (IVDA REDEVELOPMENT PROJECT AREA - AFFORDABLE SENIOR CITIZEN 5 RENTAL HOUSING DEVELOPMENT) 6 7 I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Community 8 Development Commission of the City of San Bernardino at a meeting 9 thereof,held on the day of 20010, by the following vote to wit: 10 Commission Members: Ayes Nays Abstain Absent 11 MARQUEZ _ 12 DES JARDINS _ BRINKER 13 SHORETT 14 KELLEY 15 JOHNSON _ 16 MC CAMMACK 17 18 Secretary 19 20 The foregoing Resolution is hereby approved this day of 12010. 21 22 Patrick J. Morris, Chairperson Community Development Commission 23 of the City of San Bernardino 24 Approved as to Form: 25 26 By: �Gt.�1�2 V� ,. -(7]a fa 27 A ncy Counsel 28 4 P NgendesUtesoWtiomUtesolu[ions @OIOUb06-10 Lugo Senior Apvt nt,LP CDC Re.&d x ACQUISITION AND DEVELOPMENT RESIDUAL RECEIPTS LOAN AGREEMENT by and between REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO a public body, corporate and politic and LUGO SENIOR APARTMENTS,L.L.C. a California limited liability company for a loan in the principal amount: not to exceed $6,500,000 in Low-Mod Income Housing Set-Aside Funds December 6, 2010 1 P:Wgendas\Agenda A hments\Agenda AMcbmMs\Agoras-Amend 2010\12-06-10 Lugo Senior Apa menu-Acquisition and Developmem Residual Receipts Loau Agreemem.doc THIS 2010 ACQUISITION AND DEVELOPMENT RESIDUAL RECEIPTS LOAN AGREEMENT (this "Agreement") is dated as of December 6, 2010, by and between the Redevelopment Agency of the City of San Bernardino, a public body corporate and politic ("Agency"), and Lugo Senior Apartments, L.L.C., a California limited liability company (`Borrower"). The Agency and the Borrower are sometimes referred to as collectively herein as the "Parties" and each individually as a "Party." This Agreement is entered into with respect to the facts presented in the following Recitals: RECITALS A. WHEREAS, the Borrower desires to borrow the principal amount not to exceed SIX MILLION FIVE HUNDRED THOUSAND Dollars ($6,500,000) (the "Agency Loan") from the Agency for the purpose of providing acquisition, relocation, rehabilitation and permanent financing for a one hundred and nineteen (119) unit senior housing project, also known as Lugo Senior Apartments. Said project will consist of one hundred and nine (109) one-bedroom units and ten (10) two-bedroom units. B. WHEREAS, the Agency's source of funding for the Agency Loan is the Low-Mod Housing Set-Aside Funds Program administered by the Agency. C. WHEREAS, the rehabilitation Project will be on a site ("Site") commonly known as 839 — 867 N. Lugo Avenue, San Bernardino, CA 92410 and legally described on Exhibit "A" to this Agreement. D. WHEREAS, as more particularly provided below, the Borrower will deliver to the Agency, among other items,the "Agency Deed of Trust", the "Agency Promissory Note", the "Agency Regulatory Agreement" (as those terms are defined below) to, respectively, secure repayment of the Agency Loan by the Borrower as provided herein and to ensure that the affordability and habitability of the Project is maintained in accordance with the terms of these instruments and this Agreement. E. WHEREAS, the Agency desires to make the Agency Loan to the Borrower, on the terms and conditions set forth herein. NOW THEREFORE, in consideration of the above recitals, the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt, legal sufficiency and adequacy of which are hereby acknowledged,the Parties hereto agree as follows: AGREEMENT SECTION 1.1. Inteeration of Understandin¢ This Agreement constitutes the entire agreement of the Borrower and the Agency with respect to the subject matter covered herein. The Borrower and the Agency agree that there are no other agreements or understandings between the Agency and the Borrower except as set forth in this Agreement. The Borrower and the Agency further agree that no representation has been made by either party to the other as an inducement to enter into this Agreement. 2 P 4lgendesWgevde Anechmems\AgendaAmchmems\AgnttsAmend 2010\12-06-10 Lugo Senior Apar[ ms-Acquisitionand Development Residual Receipts Loan Agm =.dac SECTION 1.2. Purpose of Agreement. [fir The purpose of this Agreement is to effectuate the rehabilitation of one currently occupied building located at 839 - 867 N. Lugo Avenue, San Bernardino, CA, 92410 by providing affordable rental housing loan assistance to the Borrower: (i) to acquire the Site; (ii) relocate the existing tenants at the Site to the extent relocation is required, and; (iii) for the design and rehabilitation of the Project for use and occupancy by Moderate and Lower-Income Senior Households, and Very Low-Income Senior Households. The development of the Project on the Site and the fulfillment generally of this Agreement are in the best interests of the Agency and City and the welfare of its residents and are in accordance with the public purposes and provisions of applicable federal, state, and local laws and regulations under which the Project has been undertaken and is being assisted. SECTION 1.3. Definitions. In addition to the meaning ascribed to certain words and phrases as set forth in the Recitals of this Agreement or in other sections of this Agreement including any of the Exhibits to this Agreement, other words and phrases shall have the meaning described below: • Affordable Housing Cost. The words "Affordable Housing Cost' shall have the meaning asset out in Health and Safety Code Section 50052.5, as amended from time to time, and in Section 4.1 hereof. • Agency Loan. The words "Agency Loan" mean and refer to the loan to be originated by the Agency in favor of the Borrower in a principal amount not to exceed SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($6,500,000). The provisions of the Agency Loan are set forth in Section 2.1. The Agency Loan shall be evidenced by the Agency Note (Exhibit "B") and shall be secured by the Agency Deed of Trust (Exhibit "C") and the other Agency Loan Documents. • Agency Deed of Trust. The words "Agency Deed of Trust' mean and refer to the deed of trust which encumbers the Site and the Project as security for the repayment of the Agency Loan. The general form of the Agency Deed of Trust is Exhibit"C"of this Agreement. • Agency Loan Documents. The words "Agency Loan Documents" mean and refer to collectively, all of the documents executed by the Borrower in favor of the Agency which either evidence the Agency Loan or provide the Agency with security for the repayment of the Agency Loan. The Agency Loan Documents include without limitation: 1) the Agency Note; 2) the Agency Deed of Trust; 3) the Agency Regulatory Agreement and the Agency Senior Household Rental Housing Use Covenant. • Agency Note. The words "Agency Note" mean and refer to the promissory Note by the Borrower in favor of the Agency, as lender, which evidences the Agency Loan in the principal amount not to exceed SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($6,500,000). The form of the Agency Note is Exhibit`B" of this Agreement. • Agency Regulatory Agreement. The words "Agency Regulatory Agreement' mean and refer to that certain Agency Program Regulatory Agreement and declaration of covenants and restrictions by and between the Borrower and the Agency affecting the repayment provisions and other terns 3 P:\Agendu\Agenda Anschments\Agnnda Attachnn=Mgm Amend 2010\12-0&10 Lugo Senior Apartments-Acquisition and Development Residual Receipts Loan Agreementdoc and conditions affecting the Agency Loan. The form of the Agency Regulatory Agreement is Exhibit"D"of this Agreement. • Agency Senior Household Rental Housing Use Covenant. The words "Agency Senior Household Rental Housing Use Covenant" mean and refer to that certain Agency Senior Household Rental Housing Use Covenant and the declaration of covenants and restrictions by and between the Borrower and the Agency affecting the repayment provisions and other terms and conditions affecting the Agency Loan. The form of the Agency Senior Household Rental Housing Use Covenant is Exhibit"E"of this Agreement. • Acquisition Escrow. The words "Acquisition Escrow" mean and refer to the land transfer transaction account by and among the Escrow Agent,the Borrower and the Agency. The Borrower shall acquire the Site upon the close of the Acquisition Escrow. • Approved Project Pro Forma. The words "Approved Project Pro Forma" mean and refer to the document dated November 23, 2010, prepared by the Borrower and approved by the Agency on the date of approval of this Agreement, in support of the Borrower's request for the Agency to consider the approval of this Agreement. The Approved Project Pro Forma, includes the Project Construction Budget. The Borrower Project Pro Forma is included as part of Exhibit "F" of this Agreement. • Area Median Income. The words "Area Median Income" or "AMI" shall mean the median income for the Ontario/Riverside/San Bernardino Metropolitan Statistical Area, adjusted for r„ household size as periodically adjusted by the Housing and Community Development Department of the State of California("HCD") in accordance with California Community Redevelopment Law, as it may be amended from time to time, or any successor entity designated under state law as responsible for establishing such"Area Median Income". • Assisted Units. The words "Assisted Units" mean and refer to the senior rental housing dwelling units to be constructed by the Borrower as part of the Project. Each of the Assisted Units shall be rented only at an Affordable Housing Cost as set out in Section 4.1 hereof. • Borrower. The word "Borrower" means Lugo Senior Apartments, L.P., a California limited partnership. • Borrower Investigations. The words "Borrower Investigations"mean and refer to the Borrower's due diligence investigations of the Site to determine the suitability of the Site for the Project. The scope of the Borrower Investigation shall include all matters relevant to the Project as determined at the discretion of the Borrower. • City. The word "City"means and refers to the City of San Bernardino. • Construction or Rehabilitation Lender. The words "Construction Lender" means and refers to the entity or entities which provides the Construction or Rehabilitation Loan to the Borrower. © • Construction or Rehabilitation Loan. The words "Construction or Rehabilitation Loan" mean and refer to the loan (or collectively loans from multiple sources, including instrumentalities of the 4 P.Wgendas\Agenda Anachments\Agenda Attuhments\AgrrntsAmend 201012-0610 Lugo Senior Apartments-Acquisition uW Development Residual Receipts Loan Agreement.doc j © State of California) which the Borrower shall hereafter obtain in an approximate principal amount not to exceed that amount set forth on the Project Pro Forma submitted by the Borrower to the Agency in order to provide for the rehabilitation and improvement of the Project. The Construction Loan may be derived from one or more sources of financing obtained by the Borrower, including without limitation from an instrumentality of the State of California, from the proceeds of a construction loan provided by a state or federally regulated third-party lending institution, or from a combination of these. The Agency is not providing the Construction or Rehabilitation Loan. • Construction Loan Documents. The words "Construction Loan Documents" mean and refer to the various documents and instruments by and between the Borrower and the Construction Lender which evidence the Construction Loan for the improvement of the Project. • Construction Loan Escrow. The words "Construction Loan Escrow" mean and refer to the loan financing transaction account by and between the Borrower, Construction Lender and the Escrow Agent through which the initial disbursement of the Construction Loan shall be paid to the Borrower. The Agency shall not be a party to the Construction Loan Escrow. • Days. The words "day" or "days" shall mean calendar days in all instances unless modified specifically to mean business days to thus exclude weekends and holidays from the calculation of the number of days. • Development Project Permit. The words "Development Project Permit(s)" mean and refer to all of the regulatory and building permits which the Borrower shall hereafter apply for and obtain from the City and each of the other agencies with regulatory jurisdictions over the improvement of each element of the Project. • Effective Date. The words "Effective Date" mean and refer to the date this Agreement has been fully executed by the Borrower and the Agency. • Escrow Holder. The words "Escrow Holder" mean and refer to Chicago Title Company or such other escrow agent as mutually acceptable to the Borrower and the Agency. The Escrow Holder shall administer the Acquisition Escrow, unless the parties to such escrow may otherwise appoint another agent to serve as escrow agent for a particular transfer or transaction. • Extremely Low Income Senior Household. The Words "Extremely Low Income Senior Household" shall have the meaning set out in Section 4.1 below. • Hazardous Substances. The words "Hazardous Substances" mean and refer to (i) any hazardous or toxic substance or material including petroleum, petroleum-based products, asbestos and asbestos containing materials ("ACM") and lead-based paint (eiLBP"), or waste which is or becomes regulated by any local governmental authority,the State of California or the United States Government and/or (ii) any substance or material identified by the United States Government, the State of California or any local governmental authority as hazardous or toxic and which is included © on any list of such substances published by any such governmental entity, provided, however that any such substance or material which is authorized by the United States Government or the State of California for use as a consumer product or in connection with the development, operation or 5 PM4endas\Agenda Anaclments\Agenda Attachmems\Agrmts-Amend 2010\1Y 10 Lugo Senior Apartments-Acquisition and Development Residual Receipts Loan Agreement.doe ® maintenance of the Project when used in accordance with applicable law, shall not be deemed to be a Hazardous Substance for the purpose of subphase (ii) of this definition of Hazardous Substance. • Limited Partner Loan. The words"Limited Partner Loan" mean and refer to any loan made by a limited partner of the Borrower to the Borrower pursuant to the terms of any Tax Credit Limited Partnership Agreement. • Project. The words "Project" shall mean all of the work of investigation, design, rehabilitation, pre-construction/predevelopment planning and relocation necessary in order for the Borrower to acquire the Site and thereafter obtain financing to construct, demolish and rehabilitate ("Rehabilitation") and place in service thereon the affordable Senior Household rental housing project consisting of not more than one hundred and eighteen (118) affordable rental units as set out in Section 4.1 hereof and one(1)unit for occupancy by on-site management personnel. • Project Construction Budget. The words "Project Construction Budget" mean and refer to the budget of rehabilitation costs for the Project as prepared by the Borrower. The Project Construction Budget includes a reasonable course of construction contingency reserve and reserves for marketing and leasing the completed rental units in the Project for initial occupancy. The Project Construction Budget is included in the Approved Project Pro Forma. • Purchase Price. The words "Purchase Price" shall mean that amount payable by the Borrower to the third party owner for the purchase of the Site, which Purchase Price is Six Million Six Hundred Thousand Dollars ($6,600,000), exclusive of any Acquisition Escrow Closing costs. • Residual Rental Receipts of the Project. The words "Residual Rental Receipts of the Project" and "Residual Rental Receipts" and "Residual Receipts" mean, for any period of time, the total gross cash receipts of the Borrower from ordinary operations (i.e., excluding the proceeds of(A) capital transactions, (B)the capital contributions of the partners and (C)the proceeds of any loans), less (i) the total cash disbursements of the Borrower (such as, but not limited to, operating expenses, costs of repair or restoration of the Project, property management fees, supportive services fees financing fees or other requirements of any Project lender and interest and principal repayments of any loans, other than loans from the any partner of the Borrower, (ii) amounts paid in connection with the establishment or maintenance of reserves as required to be maintained by the Borrower; and (iii)the following amounts deducted in the following order of priority: (1) any priority distributions to be paid to a limited partner of the Borrower pursuant to the terms of the Tax Credit Limited Partnership Agreement, including, without limitation, any credit adjuster payments or asset management fees. (2) payments made to maintain/replenish any operating reserve as required by the Tax Credit Limited Partnership Agreement. (3) repayment of any Limited Partner Loans. © (4) payment of the managing general partner asset management fee pursuant to the Tax Credit Limited Partnership Agreement. 6 R: pndes\Agendn AnnchmemsNgesWa AUac MU\AgsmU-Amend 2010\12-06-10 Lugo Senior Ape morns-Acquisition and Development Revduml Rwmpts Lum Ageem=doc (5) payments of deferred developer fee pursuant to the Tax Credit Limited Partnership Agreement. (6) repayment of any operating or completion loans made to the Borrower by a general partner of the Borrower pursuant to the Tax Credit Limited Partnership Agreement. • Schedule of Performance. The words "Schedule of Performance" shall mean that certain schedule of Project development performance milestones set forth in Exhibit "G" of this Agreement, and as the same may hereafter be amended by the mutual written agreement of the Parties. • Senior Household. The words "Senior Household" shall mean and refer to a person or family eligible to occupy a rental dwelling unit at the Project who is/are at the time of initial occupancy of the rental dwelling unit by such person(s): (i) 62 years of age or older; and, if applicable (ii) provided at least one (1) member of the family is 62 years of age or older, a "qualified permanent resident", as this term is defined in Civil Code Section 51.3(c)(2) and (3), as that may be amended from time to time. • Sixty-Five Percent AMI Senior Household. The words "Sixty-Five Percent Senior Household" shall have the meaning set out in Section 4.1 below. • State TCAC. The words "State TCAC" mean and refer to the State of California Tax Credit Allocation Committee. • State TCAC Regulatory Agreement. The words "State TCAC Regulatory Agreement" mean and refer to the affordable rental housing regulatory agreement by and between the Borrower and the California Tax Credit Allocation Committee (as established under Health and Safety Code Section 50199.8) which shall affect the Site and the Project, whereby the Project shall be made subject to compliance with the conditions of affordable rental dwelling unit tax credit eligibility under Section 42 of the Internal Revenue Code, and all applicable Revenue Rulings of the Internal Revenue Service; notwithstanding, nothing contained therein shall modify the affordability or senior nature of the project. • Tax Credit Limited Partnership Agreement. The words "Tax Credit Limited Partnership Agreement" mean and refer to the federal affordable rental housing tax credit limited partner investor agreement by and between the Borrower and one or more of its limited partners acting as investors in the project (the "Investor Limited Partners"). The final form of such Tax Credit Limited Partnership Agreement shall be subject to the written approval of the Agency prior to the Close of the Construction Loan Escrow and such approval shall not be unreasonably withheld, conditioned or delayed. • Title Company. The words"Title Company" shall mean the same as Escrow Holder. 7 p:Agendas\Agenda Att ents\Apnda Atta ems\Agamt Amend 2010\12-06-10 Lugo Smior Apuments-Acquisition and Development Residual Receipts Loan Agrmment.doc • Very Low-Income Senior Households. The words "Very Low Income Senior Households" shall have the meaning set out in Section 4.1 hereof. SECTION 1.4. Parties to the Agreement. (a) The Parties to this Agreement are the Borrower and the Agency. The City is not a party to this Agreement nor is the City responsible in any manner for the representations of the Agency contained herein, for any financial obligation of the Agency set forth in this Agreement or for any other covenant or undertaking of the Agency in favor of the Borrower as arise, under this Agreement. (b) The Borrower is as identified above. The principal office of the Borrower for purposes of this Agreement is currently located at 1640 South Sepulveda Boulevard, #425, Los Angeles, CA 90025. (c) Prior to the Effective Date, the Borrower has provided the Agency with satisfactory evidence of the legal formation and existence of the Borrower and the good standing of the Borrower to transact business within the State, and to accept transfer of the Site from the Agency. SECTION 1.5. Change in Borrower Ownership Management and Control of the Borrower--Assignment and Transfer. (a) The word "Transfer" as used in this Section 1.5, and elsewhere in this Agreement means: (1) Any total or partial sale, assignment or conveyance, or any trust or power, or any transfer in any other mode or form or series of such sales, assignments or contracts or agreements to do any of the foregoing or the like which results in a change in more than fifty percent (50%) of the ownership or equity interest of the Borrower's interest in this Agreement is sold assigned, conveyed or the like, (each of the events described in subphrases (i), (ii)and(iii), above being referred as"Change of Control"); or (2) Any total or partial sale, assignment, conveyance, or transfer by the Borrower of the Project and/or the Agreement in any other mode or form, of or with respect to any ownership interest in Borrower which results in a Change of Control; or (3) Any merger, consolidation, sale or lease of all or substantially all of the assets of the Borrower in the Agreement, any Borrower Land, the Site or any part thereof or any interest therein or the improvements constructed thereon (or series of such sales, assignments and the like)which results in Change in Control; or (4) Any total or partial sale, assignment or conveyance or any trust or power, or any transfer in any other mode or form (or series of such sales, assignments or other transfers) which results in any reduction of the ownership interest of John M. Husky, having less than one-hundred percent(100%) ownership interest in the Borrower; or (5) Any sale, assignment or conveyance or any trust or power, or any transfer in any mode or form which results in a disposition or transfer by the Borrower of any interest in the Site, except that Changes in Control of the Borrower shall not be deemed a disposition or transfer of the Site for these purposes; or 8 P:NgendaaWgeiMa Attnch=nts\Ageuda Anachments\Agtmts-Amend 2010\12-06-10 Lugo senior Apsrt uems-Acquisition and Development Residual Receipts Loan Ageemem.doc (6) The leasing, licensing or grant of any concession of or relating to part or all of the Project or any part thereof or any interest therein, except for Project purposes of this Agreement. (b) For the purposes of this Section 1.5, the following Transfers shall not be deemed to result in a Change of Control: (1) Any Transfer of the Site or this Agreement to a limited partnership in which Borrower acts as a general partner. (2) Any Transfer of any interest in the Borrower, voluntarily or involuntarily or otherwise provided such a Transfer is not a default under any permitted Security Financing Interest or other covenant of the Borrower in favor of State TCAC; (3) An amendment to the Tax Credit Limited Partnership Agreement: (i) which does not result in a reduction of the installments of the Investor Limited Partner's capital contributions to be made during and at the time of completion of the Project on the date and subject to the existing terms and conditions set forth in the Tax Credit Limited Partnership Agreement (including without limitation credit adjustments as provided therein) or (ii) which does not materially and adversely affect the ability of the Borrower to perform its obligations under this Agreement, or (iii) which does not result in a default under the permitted Security Financing Interest or State TCAC covenant; (4) Notwithstanding anything to the contrary contained herein, the respective interests of the Borrower's Investor Limited Partner may be transferable in accordance with the terms of the Tax Credit Limited Partnership Agreement without the consent of the Agency, so long as the Borrower is not then in default under the permitted Security Interest or the Agency Loan Documents and upon the expiration of the tax credit compliance period, the interests of the Investor Limited Partner in the Borrower may be transferred to the Borrower, or its affiliate, without the consent of the Agency; (5) Notwithstanding anything to the contrary contained herein, the Borrower's Investor Limited Partner shall be permitted to remove any general partner of the Borrower, for cause in accordance with the Tax Credit Limited Partnership Agreement without the consent of the Agency; provided, however, that Investor Limited Partner shall not elect and appoint a successor general partner therefore without the consent of the Agency, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, the substitute general partner shall assume all of the rights and obligations of the removed general partner hereunder; (6) Agency transfer of the interests of the Borrower in this Agreement, and the Site, if then applicable, by the Agency at the request of the Borrower to a limited partnership in which the Borrower acts as a general partner. (c) This Agreement is entered into solely for the purpose of the development of the Project. The Borrower recognizes that the qualifications and identity of those individuals acting as the principals of the Borrower are of particular concern to the Agency, in view of: RBAgershaMgeMa Attachmems%4enda AttschmentsVtgrcrt -Amend 201012-0610 largo Seoim Apartments-Acquisition and Development Residual Receipts Loet Agreement dnc (1) The importance of the redevelopment of the Site to the general welfare of the community; and (2) The fact that a Transfer by the Borrower of this Agreement or the Site is for all practical purposes a transfer or disposition of the responsibilities of the Borrower, with respect to the Project. The Borrower further recognizes and acknowledges that it is because of the qualifications and identity of the Borrower, and in particular, John M. Huskey, an individual who is the principal of Borrower of that the Agency is entering into this Agreement with the Borrower, and, as a consequence, Transfers are permitted only as provided in this Agreement. (d) The following types of a Transfer shall be permitted and approved by the Agency and are referred to herein as a"Permitted Transfer": (1) Any Transfer by the Borrower following Acquisition Escrow Closing creating a permitted"Security Financing Interest" which conforms to the provisions of Section 3.14; (2) Any Transfer directly resulting from the foreclosure of a Security Financing Interest created by the Borrower in the Project; or the granting of a deed in lieu of foreclosure of a Security Financing Interest in the Project; (3) A Transfer under (1) or (2) above, which includes a collateral assignment to the beneficiary of the Security Financing of the Borrower's beneficial interest in the Project; (4) Any Transfer of any interest in the Borrower to any affiliate of or other entity related to the Borrower which does not result in a Change of Control under Section 1.5(a); (5) Any Transfer of any interest the Borrower which does not result in a Change of Control in the Borrower under Section 1.5(a); (6) Any Transfer which is a lease of either an Assisted Unit (dwelling) from the Borrower to the tenant,which is consistent with the Agency Regulatory Agreement; (7) Any Transfer which is a sale, lease, exchange, or other conveyance of the Site, or any portion thereof, by the Borrower to the Agency, the City or the Agency or to an entity which is controlled by the Agency, the City and/or the Agency, including a joint powers authority or a non-profit corporation in which a majority of the directors are appointed by the Agency,the City and/or the Agency; (8) Any Transfer which grants a construction-related or public utility easement on the Site or which establishes a reciprocal easement for ingress, egress and maintenance affecting lands adjacent to the Site. (e) No Permitted Transfer of this Agreement,the Project or the Site by the Borrower(other than a Permitted Transfer created pursuant to a Security Financing Interest under Section 3.14 or Section 1.5(d)(6) and (8)) shall be effective unless, at the time of the Permitted Transfer, the person or entity to which such Transfer is made, shall expressly assume the obligations of the Borrower under I 10 {j P:\Agendas\Agende Attechrunts\Ageuda AtLLChmemsNgnns-AmeM 2010\12-0610 Lugo Senior Apartments-Acquisition and Development Residual Receipts Loan Ageemem.doc i E r this Agreement (or to the extent that the Permitted Transfer arises under Section 1.5(d)(4) or (5), such person shall assume the obligations of the Borrower with respect to the Project) and such person or entity also agrees to be subject to the conditions and restrictions to which the Borrower is subject under this Agreement. Such an assumption of obligation shall be evidenced by a written instrument delivered to the Agency in a recordable form which is reasonably satisfactory to the Agency not less than sixty (60) days prior to the date on which such Permitted Transfer is proposed to occur. (f) Provided the particular transaction is a Permitted Transfer, the Borrower is not required to give the Agency more than sixty (60) days advance notice of such a Permitted Transfer. Concurrently with the delivery of notice of the Permitted Transfer, the Borrower shall also provide the Agency with a suitably detailed written description of the proposed Permitted Transfer. If the Borrower desires to effect a Transfer for which the Agency prior approval is required, the Borrower shall submit to the Agency as part of its request for consent from the Agency, the form of an assignment and assumption agreement which shall set forth the terms and conditions of the proposed Transfer and the transferee's assumption of the Borrower's obligations under this Agreement which are assigned to such transferee. the Agency' approval of any Transfer requiring the Agency approval shall be evidenced in writing and the Agency agrees not to unreasonably withhold delay or condition its approval of any such Transfer, provided such proposed transferee can demonstrate successful and satisfactory experience in the development ownership, operation, and management of a facility comparable in size and quality to the Project, or portion thereof, as proposed for Transfer. Any such transferee for itself and its successors and assigns, and for the benefit of the Agency shall expressly assume all of the obligations of the Borrower to the Agency under this Agreement with respect to the `— interest to be transferred. The Agency agrees that it shall be unreasonable for the Agency to: (i) require the Borrower or the proposed transferee to pay any fee or charge to the Agency in consideration for the Agency's approval of such a Transfer, except for reimbursement of reasonable the Agency overhead costs, allocated on an hourly basis for the Agency employees and consultants who are engaged in the documentation of such a Transfer; or (ii) require the Borrower or the proposed transferee to consent to the approval of any material change requested by the Agency in any prior condition of approval affecting the Project; except as may be reasonably required in connection with the Agency' approval of such a transfer to offset a specific cost or expense of the Agency or to compensate the Agency for a material adverse financial impact upon the Agency in connection with such a Transfer. There shall be submitted to the Agency for review all instruments and other legal documents proposed to effect any such Transfer; and the approval or disapproval of the Agency shall be provided to the Borrower in writing setting forth the grounds for the Agency' disapproval of a transfer, if applicable, within thirty (30) days of receipt by the Agency of the Borrower's request and the form of assignment and assumption agreement proposed to be used in the transaction. SECTION 1.6. List of Exhibits to Agreement. Each of the following items or documents are hereby deemed to be approved by the Parties as of the date of approval of this Agreement by the Interim Executive Director of the Agency and each such item or document is incorporated into the text of this Agreement by this reference: 1 Exhibit"A" Legal Description of the Site Exhibit eB" Agency Promissory Note ��rr Exhibit"C" Agency Deed of Trust PAAgend.\Agende Anachments Aptd.AvachmWSlAgrMS-Amend 20M12-06-10 Lugo Senior Apartments-Acquisition and Development Residual Receipts Loan Agament.doc i i Exhibit"D" Agency Regulatory Agreement Exhibit"E" Agency Senior Household Rental Housing Use Covenant Exhibit"F" Approved Project Pro Forma Exhibit"G" Schedule of Performance ARTICLE II SECTION 2.1 The Agency Loan. (1) Subject to the terms and conditions of this Agreement and the provision of funds from the Agency, the Agency shall make an affordable housing development loan (the "Agency Loan") to the Borrower in the principal amount not to exceed Six Million Five Hundred Thousand Dollars ($6,500,000). Approximately Four Million Dollars ($4,000,000) of the available proceeds of the Agency Loan will be applied towards the acquisition of the Site by the Borrower together with other loan funds to be obtained by the Borrower from third parry sources or commercial lenders. The remaining Two Million Five Hundred Thousand Dollars ($2,500,000) will be used to pay for relocation of the existing tenants at the Site and other predevelopment costs necessary for development of the Project. The outstanding principal balance of the Agency Loan shall bear a rate of interest of ten percent (10%) per annum compounded quarterly on the outstanding principal balance from the date of disbursement to Borrower until the commencement of construction but not to exceed twenty-four (24) months from and after the closing date of the Acquisition Escrow. Upon the commencement of construction of the Project as shall be certified in writing by the Borrower to the Agency, the accrued and unpaid interest incurred as of that date shall be added to the principal balance of the Agency Loan, and from and after the date of the commencement of construction of the Project and the Agency Loan shall bear interest at a rate of three percent (3%) per annum simple annual interest until all principal and accrued and unpaid interest on the Agency Loan with the principal balance adjustment as set forth above has been paid in full. (2) The Agency Loan shall be for an initial term of twenty-four (24) months from the date when the Acquisition Escrow is closed and the Escrow Agent disburses the initial draw of proceeds of the Agency Loan to the Borrower for the Acquisition of the Site. A single twelve-month extension may be granted by the Agency, at the Agency's sole discretion, if the Agency deems that the Borrower is making a good-faith effort towards obtaining the necessary construction financing for the commencement of the construction of the Project. As set forth in subsection (1) above, upon commencement of construction of the Project as certified in writing by the Borrower to the Agency, the interest rate on the Agency Loan will automatically convert as provided in subsection (1) above for the remaining term of fifty-five (55)years from the date of closing of the Acquisition Escrow, and with the Agency Loan maturing no earlier than the expiration date of the term of the Agency Regulatory Agreement. In the event that the Interest Rate Conversion Conditions (as defined in Section 2.4) do not occur on or before the Interest Rate Conversion Deadline (as defined in Section 2.4), the Borrower shall be required to repay the full amount of the then existing principal balance of the Agency Loan together with all accrued and unpaid interest thereon at the initial interest rate of ten percent (10%) per annum. The Agency Loan shall be due and payable immediately upon the occurrence of the Interest Rate Conversion Deadline subject to the provisions of Section 5.1(b)(i), and any failure of the Borrower to so pay the amounts owed under the Agency Loan shall be an Event of Default as defined and as further provided in Section 5.1(a). P'.t pndaMgenda AttachmetdaWgenda AMChmentsUgrmts-Amend 201012-0610 Lugo Senior ApMments-Acquisition and Development Residual Receipts Loan Agreement doe e (3) The Agency Loan shall be evidenced by the Agency Note to be executed by the Borrower in favor of the Agency concurrently with this Agreement, and shall be secured by a deed of trust on the Site substantially in the form of the Agency Deed of Trust and the other Agency Loan Documents. The Agency Note shall be fully executed and delivered no later than the date of this Agreement. The Agency Deed of Trust and the other Agency Loan Documents shall be executed by the Borrower prior to the Close of the Acquisition Escrow. (4) The Borrower shall, prior to the maturity date of the Agency Note, repay the Agency Loan plus interest in installments as set forth herein and in the Agency Note. The installments of principal and interest that are due under the Agency Note shall be payable by the Borrower prior to its maturity solely from the special source of funds defined in the Agency Note as "Residual Rental Receipts of the Project". Under the provisions of this Agreement fifty percent (50%) of the Residual Rental Receipts of the Project shall be designated for repayment to those public agencies providing financing to the Project. Since, as of the Effective Date, the Agency is the only public agency identified as a provider of financing to the Project, the entire fifty percent (50%) shall be allocated towards repayment of the Agency loan. If the Borrower should obtain any financing from another public agency after the Effective Date, the Agency Interim Executive Director shall have the authority (but not the requirement) to approve a reduction in the pro-rata share pertaining to the Agency loan to be commensurate with the percentage of public agency financing being provided by the Agency without submitting such change to the governing body of the Agency. (5) The Agency Note shall be secured by the Agency Deed of Trust, pursuant to which the �..% Borrower grants to the Agency a lien on the Site and the Project for the purpose of providing financing for the acquisition,relocation and rehabilitation costs of the Project. (6) The Borrower must not be in default under this Agreement or under any of the Agency Loan Documents. (7) Notwithstanding any other provision of this Loan Agreement or the Agency Note to the contrary, on the "maturity date" of the Agency Note the outstanding principal balance and all accrued and unpaid interest thereunder shall be due and payable. (8) The Agency hereby acknowledges that the Agency Note is a non-recourse obligation of the Borrower and shall contain substantially the following text: "The sole recourse of the Holder to recover any sum under this Promissory Note shall be to the Property subject to the Agency Deed of Trust, except in the event of: (a) fraud by the Borrower (or its assignee), (b) any material misrepresentation made by the Borrower to the Agency under the Agreement, (c) misappropriation by the Borrower (or its assignee) of any rents, security deposits, tax collection amounts, security deposits, or insurance or condemnation awards of the Project, (d) commission of bad faith waste by the Borrower(or its assignee) or(e) the presence { of"Hazardous Substances" on the Site, as this term is defined in the Agency Deed of Trust." i SECTION 2.2 Other Financing Other sources of financing may include, but not be limited to (i) senior lien financing ("Senior 1 Financing"), to which the Agency shall expressly subordinate the liens of the Agency Deed of Trust 13 SP Agendas\Agenda AttachmmuUpnda Attachmmts\Agrmu-Amend 2010\I2A 10 Lugo Senior Apartmems-A,.iekion atW Development Residual Reeeipu L.Agreement.doc © and Agency Regulatory Agreement; (ii) financing junior in priority to the lien of the Agency Deed of Trust ("Junior Financing"); and (iv) other financing sources listed in the Financing Summary below ("Other Financing"). The Agency Senior Household Rental Housing Use Covenant shall not be subordinated to such other financing. Project Financing Sources/Priority Relative to Agency Loan: Note: Final funding amounts are subject to change upon the approval of the Agency. (1)Private Construction Loan $8,382,097 ❑O senior ❑junior ❑parity/NA (2)Private Permanent Loan $2,500,000 ❑x senior ❑junior ❑parity/NA (3)Private Acquisition/Bridge Loan $3,500,000 ❑x senior ❑junior ❑parity/NA (4 Tax Credit Equity $9,000,000 ❑senior 1]junior ❑parity/NA (5)Other $ ❑senior ❑junior ❑parity/NA The foregoing Financing Summary is provided for the convenience of the Parties. In case of any conflict, the detailed terms in this Agreement and/or in the Exhibits to this Agreement shall control. SECTION 2.3 Acquisition Escrow (a) Except to the extent the Agency's Interim Executive Director directs in writing that some or all of the disbursement and/or deliveries shall occur outside of Escrow, disbursement of the Agency Loan proceeds in accordance with this Agreement, delivery of the executed Agency Note to the Agency and recordation of the Agency Deed of Trust and other Agency Loan Documents shall be carried out through an escrow account ("Escrow") to be established by the Parties with a title or escrow company ("Escrow Holder") specifically approved in writing for this transaction by the Agency. The Borrower shall obtain the Agency's written approval of an Escrow Holder and open Escrow not later than ninety (90) days following execution of this Agreement. The Parties may execute supplemental instructions to Escrow Holder consistent with the terms of this Agreement,but in the event of a conflict between the terms of this Agreement and any supplemental escrow instructions, the terms of this Agreement shall control. Except as otherwise expressly provided herein, any fees and costs incurred by Escrow Holder in the performance of its duties hereunder and agreed to be paid by the Parties shall be paid exclusively by the Borrower. (b) The obligation of the Agency to make disbursements of the Agency Loan proceeds under this Agreement shall be expressly subject to satisfaction of all of the following conditions (collectively, the "Closing Conditions") on or before the date ("Closing Deadline") which is ninety (90) days following the date of this Agreement. (i) The execution of this Agreement by the Agency and the Borrower, and delivery of a fully-executed copy to Escrow Holder; (ii) The Borrower's due execution and deposit into Escrow of a certified copy of the Agency Note; (iii) The Borrower's due execution (with notary acknowledgment) and deposit into Escrow of the Agency Regulatory Agreement in the form attached hereto as Exhibit "D", recorded against the interest of the Borrower; 14 P:\Agendu\Ageada A tunerm\Ageada A"a t n.%\A g=m Aw 42010\12-06-10 Lugo Senior Apomntl-Acgoisitioa and Development Residual Receipts Loan Agreement doc (iv) The Borrower's due execution (with notary acknowledgment) and deposit into Escrow of the Agency Deed of Trust; (v) Receipt by the Agency from the Borrower of such other documents, certifications and authorizations as are reasonably required by the Agency, in form and substance satisfactory to the Agency, evidencing that (1) this Agreement, the Agency Note, the Agency Deed of Trust, the Agency Regulatory Agreement, the Agency Senior Household Rental Housing Use Covenant and all other documents given or executed in connection with the Agency Loan herewith (are duly and validly executed by the Borrower and constitute the valid and enforceable obligation of the Borrower pursuant to the respective terms, and (2) the execution and delivery of the Agency Loan Documents, and the performances thereunder by the Borrower, will not breach or violate any law applicable or governmental regulation to which the Borrower is subject nor constitute a breach of or default under any instrument or agreement to which the Borrower may be a parry; (vi) North American Title or another title company approved by the Agency ("Title Company") shall have assured the Agency in writing that upon recordation of the Agency Deed of Trust there will be provided to the Agency, at the Borrower's sole expense, a lender's policy of title insurance (with customary endorsements, including but not limited to Nos. 100, 103.7, 116 and 122 and such other endorsements as the Agency shall reasonably require) (the "Agency Title Policy") issued by the Title Insurance Company in the amount of the Agency Loan, insuring the Agency's interest in the Site as beneficiary under the Agency Deed of Trust, and specifically insuring that the lien of the Agency Deed of Trust and the Agency Regulatory Agreement against the Property are subject only to the Senior Financing, if any, and any exceptions to title applicable to the Property which were expressly approved in writing by the Agency (collectively with the Senior Financing, "Permitted Senior Encumbrances"). Standard lender's title insurance coverage (without the need for a survey)will be accepted by the Agency. (vii) No Event of Default shall exist under this Agreement or under any agreement or instrument relating to the Senior Financing, Other Financing, or Junior Financing, if any, and the Borrower has demonstrated to the satisfaction of the Agency Interim Executive Director (or his designee)that all financing sources for acquisition, of the Project, ,are or will be available. (viii) The Borrower shall have furnished the Agency with evidence satisfactory to the Agency evidencing the insurance coverages required by this Agreement; (c) When, and only when, Escrow Holder has confirmed that all Closing Conditions have been satisfied, and has received written certification from the Agency's Interim Executive Director, or his designee, that all other Closing Conditions have been timely satisfied or waived, then Escrow Holder shall carry out the close of Escrow("Close of Escrow")by: (i) causing the Agency Deed of Trust and the Agency Regulatory Agreement to be recorded in the Official Records of San Bernardino County, California; (ii) delivering the executed original the Agency Note to the Agency; (iii) causing the Agency Title Policy to be issued to the Agency in the form and amount specified above; and 15 P.Ngendas\Agenda Anachments\Apnde Attachments\Ag is-Amend 2010\12-0610 Lugo Sm.Apwments-A,,Wtian end Developmm¢Residual Receipts Ltsm Alp MM.dop (iv) promptly following recordation, delivering conformed copies of the recorded documents to the Agency and the Borrower. (d) Time is of the essence with respect to the rights and obligations of the Parties under this Agreement and if the Close of Escrow does not occur prior to the Closing Deadline, then the Escrow shall terminate, and Escrow Holder shall promptly return all funds and documents to the Party depositing them. SECTION 2.4. Conditions Precedent to Interest Rate Conversion of the Agency Loan. (a) The obligation of the Agency to convert the interest rate on the Agency Loan as provided in Section 2.1(1) and thus modify the terms and conditions of the Agency Loan accordingly, shall be expressly subject to satisfaction of all of the following conditions (collectively, the "Interest Rate Conversion Conditions") on or before the date ("Interest Rate Conversion Deadline") which shall be twenty four (24) months following the close of Acquisition Escrow unless extended at the sole discretion of the Agency as provided in Section 2.1(2): (i) the Agency has approved the update of the Approved Project Pro Forma as provided in Section 2.5; (ii) the State TCAC has issued its reservation of affordable rental housing tax credits to the Borrower and the Project in an amount that will generate not less than $8,550,00.00 of net funds available for the Project or some other amount necessary for project feasibility and approved by the Agency, and such reservation of State TCAC has been accepted by the Borrower and is in full force and effect at the time of the close of the Construction Loan Escrow; (iii) the Agency has approved the final form of the Tax Credit Limited Partnership Agreement and the Borrower has confirmed to the Agency that upon the close of the Construction Loan Escrow, the Agency shall receive a written opinion of a nationally recognized firm of lawyers that such Tax Credit Limited Partnership Agreement is a valid lawful binding obligation of the Borrower and is in full force and effect; and (iv) The Borrower shall have commenced or be ready to commence Project rehabilitation, and shall have furnished the Agency with copies of (A) a contract for the Project development ("Rehabilitation Contract') entered into with a general contractor ("General Contractor") previously approved in writing by the Agency; (B) a payment bond with respect to the Project posted by the General Contractor which is in an amount equal to the amount of the contract price identified in the Rehabilitation Contract, is issued by a surety reasonably acceptable to the Agency, is in form and content reasonably approved by the Agency, has been recorded in the Official Records of San Bernardino, and names the Agency as an additional obligee; and(C) a performance bond for 100 percent (100%) of the contract price, guaranteeing the completion of the Project development which is in form and content reasonably approved by the Agency, is issued by a surety reasonably acceptable to the Agency, and names the Agency,the Agency and the City as additional obligees. 16 P:\Agendas\Agenda Attnhmeas\Agenda At hmmts\Agrmts-Amend 2010\12-0&10 Lugo Smim Apvtmems-Ac,66wi and Development Residual R¢eipu Lom Agreement d. (b) The provisions of this subsection (b) shall not be deemed to be additional Interest Rate Conversion Conditions but the requirements stated herein shall occur within the time limits as set forth in this subsection(b). At least ninety(90) days prior to the initial occupancy of the Project and prior to the commencement of tenant selection for the Project, the Borrower shall have obtained the Agency's written approval of an affirmative marketing plan, leasing guidelines and a summary of the rules, procedures and programs for the Project including specifically the procedures to be employed by which the tenants of the assisted units . Such procedures shall address the process to be followed,by the Borrower in the event that, at any given time, the number of Eligible Persons applying to lease units at the Project exceeds the number of units available. (c) The provisions of this subsection (c) shall not be deemed to be additional Interest Rate Conversion Conditions but the requirements as stated herein shall occur as set forth in this subsection (c). At least thirty (30) days prior to the commencement of tenant selection for the Project, the Borrower shall have furnished and obtained the Agency's approval of an operating budget and a Management Plan for the Project. The Management Plan shall include a preliminary Operating Budget in a format mandated by the Agency and approved by the Agency at its sole discretion. In the event the preliminary Operating Budget is proposed for revision at the time the Certificate of Occupancy is issued, any such revision must be approved by the Agency at its sole discretion. SECTION 2.5. Approved Project Pro Forma. (a) As of the Effective Date, the Borrower has prepared and presented the Agency with an QApproved Project Pro Forma for the Project. The Approved Project Pro Forma for the Project is on file with the Agency. Upon the completion of the improvement of the Project, the Borrower shall provide an accounting to the Agency for the actual cost incurred by the Borrower in connection with the acquisition and rehabilitation of the Project as set forth here. (b) At all times following the Effective Date, the Borrower shall keep and maintain and make available for review and inspection by the Agency and its auditors accounting books and records for Project acquisition and development costs incurred in connection with the Project in accordance with generally accepted principles of business accounting. The Agency and its accountants and auditors shall have the right upon reasonable prior notice to conduct inspections and reviews of the accounting books and records of the Borrower relating to the Project, at the business offices of the Borrower. The Borrower shall cooperate with the Agency in the production of its accounting books and records for the Project, as reasonably required by the Agency and its auditors to conduct an audit or review of actual Project acquisition and development costs at any time during the course of improvement of the Project. (c) The written accounting described in this Section 2.5 shall be subject to review by the Agency under Section 2.6. In the event that such written accounting for the costs incurred and paid by the Borrower during course of construction of the Project indicates that the total estimated costs incurred and paid by the Borrower for the acquisition, development and rehabilitation of the Project at the time of completion is then determined to be less than the anticipated Project costs as presented in the Borrower Project Pro Forma by an amount that is equal to or greater than One Hundred Thousand Dollars ($100,000), a "Substantial Deviation" shall be deemed to have occurred for the Project. The QParties shall meet and confer with respect to the occurrence of a Substantial Deviation, and the Borrower shall provide the Agency with such additional documentation regarding the occurrence of a Substantial Deviation as the Agency may reasonably request. 17 P:Ugeidas\Agenda Amchments*enda A=hm=Bu A us-Amend 2010\12-0610 Lugo Smi.,Apastmems-Acquisition Residual Rav,ts Loan Agreement.doc © (d) In the event of an occurrence of a Substantial Deviation to the Approved Project Pro Forma, the Borrower and the Agency shall implement an adjustment to the amount of Residual Rental Receipts, payable to the Agency under the Agency Note by either (i) the Borrower payment to the Agency in cash of the total amount of the deference as calculated pursuant to subsection (c) above the total Project costs were less than demonstrated on the Approved Project Pro Forma with a corresponding reduction in the principal amount of the Residual Receipts Note, or (ii) if the Borrower has spent amounts representing the Substantial Deviation for all costs associated with the rehabilitation of the Project in a dollar amount greater than the dollar amounts set forth in the Approved Project Pro Forma, then the principal amount of Residual Receipts Note shall be reduced by the amount of such Substantial Deviation. Such adjustments to the Residual Receipts Notes and potential payment of funds to the Agency shall be the Agency's financial assumptions for the approval of the Project and this Agreement. SECTION 2.6. Project Audit and Accounting. (a) The Borrower (including for purposes hereof any Borrower affiliate that owns or has any interest in the Project) shall provide the Agency with annual financing statements of its operations with respect to its ownership and operation of the Project no later than one hundred eighty (180) days after the conclusion of each Project Accounting Year, beginning for calendar year 2012 through the end of the regulatory period under the Agency Regulatory Agreement. Upon reasonable notice from the Agency, the Borrower shall make available for inspection at the office of the Agency all updated financial information of the Borrower for the confidential inspection by either a financial consultant to -^ the Agency or a certified public accountant retained by the Agency to review such information. Such financial information shall be made available on a confidential basis. No financial information of the Borrower shall be disclosed by the Agency or its consultants to third persons, other than such consultants of the Agency shall be permitted to comment to the Agency regarding the financial condition of the Borrower as it relates to the ability of the Borrower to continue with the Project consistent with this Agreement. the Agency shall use all reasonable efforts to protect the confidentially of the Borrower's financial information, subject to disclosures required by applicable law. (b) the Agency shall have the right at reasonable times to conduct its independent audit of the financial statements, or any component thereof, of the Borrower as to those matters set forth in Section 2.5 above at its sole cost and expense. Each party shall reasonably cooperate with the other party during the conduct of any such audit. Notwithstanding the foregoing, the Agency shall have any right to inspect books and/or records of the Borrower as to which the Borrower reasonably asserts a claim of attorney/client communications or other attorney work product under applicable law. ARTICLE III REDEVELOPMENT OF THE PROJECT AND EACH ELEMENT THEREOF SECTION 3.1. Relocation Requirements. Following the Close of Escrow, the Borrower shall cause the Project relocation work to commence promptly, proceed diligently, and make good faith efforts to complete the relocation of existing tenants at the Site no later than six (6) months following the Close of Escrow, subject to extension for up to an additional six(6) months at the sole discretion of the Agency. If it is determined by the Agency that the Borrower is not making satisfactory progress towards relocating all of the 18 PAAgendes\Agenda AttachmentsWgenda Amchmevl\Agm[o-Amerd 2010\124&10 logo Senior Apastm ets-Acquisition and D wlopment Residual Receipts Loan Agreementdac tenants at the Site, then the Agency shall have the option of declaring the Borrower in default and the Agency and the Borrower shall be subject to the provisions of Sections 5.1 through 5.9 of this Agreement. SECTION 3.2. Rehabilitation Requirements. Following the Close of Escrow, the Borrower shall cause the Project rehabilitation work to commence promptly, proceed diligently, and achieve "Completion of the Project" no later than thirty six (36)months following the Close of Escrow, subject to extension for up to an additional twelve (12) months to the extent of force majeure delays beyond the Borrower's reasonable control. "Completion of the Project" shall be deemed to have occurred when the Agency has received satisfactory evidence that the Project has been completed in compliance with this Agreement and as represented in the Borrower's approved funding application to the Agency, and that all final permits and certificates necessary to the operation of the Project as contemplated herein have been obtained, including, without limitation, the following, each of which is subject to the Agency' review and approval: (1) a signed certificate from the general contractor, in a form reasonably acceptable to the Agency, certifying to the Agency that the Development Improvements were completed substantially in accordance with the requirements of the plans and this Agreement, and all other related on-site and off-site improvements have been completed; (2) a certificate of occupancy and other final permits and licenses necessary to permit the use and occupancy of the Project for its intended purposes, which have been issued by proper governmental agencies; and (3) evidence satisfactory to the Agency that the statutory period for the filing of mechanics' liens (sixty (60) days following filing of the statutory notice of completion) has expired and the Property is free from such liens. Construction shall proceed in accordance with construction plans approved in writing by the Agency prior to the commencement of any rehabilitation work and in accordance with the Schedule of Performance, Exhibit "G", and shall conform to the layout and design represented in the Borrower's approved application submitted to the Agency. The Borrower shall comply with any CEQA mitigation measures or other environmental conditions imposed by any other applicable governmental authority in connection with the Project. SECTION 3.3. Intentionally blank. SECTION 3.4 Scope of Development-Development Improvements The Site shall be developed as a residential development comprised of one hundred nineteen (119) units (the "Units" or "Assisted Units"), of which ten (10) will be two-bedroom units and one hundred nine (109)will be one-bedroom units, which will be reserved for rental to Moderate and Low- Income Senior Households, and Very Low-Income Senior Households or less for the applicable MSA ("Eligible Tenants"), such development being subject to all applicable Governmental Restrictions, and containing all necessary parking areas, walkways, streets, driveways, landscaping, and other improvements associated with the development of the Site, as depicted on the Plans approved by the Agency in accordance with this Section 3.4. (The development of the Project on the Site in accordance with this Agreement is sometimes referred to as the "Development Improvements.") The Borrower shall cause the rehabilitation of the Development Improvements to be done in a good and workmanlike manner substantially according to the Plans and this Agreement. I 19 PAAgendas\Agends A=chmmu\Agenda Atmchments\Agrmts-Amend 2010\12 4610 Lugo Senior Apartments-Acquisition and Development Residual Receipts Loan Agre .M dac The cost of developing the Site and constructing all the Development Improvements thereon shall be borne solely by the Borrower. The Agency and the Borrower shall otherwise each pay the costs necessary to administer and carry out their respective responsibilities and obligations under this Agreement. SECTION 3.5 Schedule of Performance The Borrower shall promptly begin and thereafter diligently prosecute to completion the rehabilitation of the Development Improvements and the development of the Site. The Borrower shall begin and complete all rehabilitation and development within the times specified in the Schedule of Performance or reasonable extension of said dates as may be granted by the Agency pursuant to Section 6.6 of this Agreement. The Schedule of Performance is subject to revision from time to time as mutually agreed upon in writing between the Borrower and the Agency. During the period of rehabilitation, but not more frequently than once a month, the Borrower shall submit to the Agency a written progress report of the rehabilitation when and as requested in writing by the Agency. The report shall be in such form and detail as may reasonably be required by the Agency and shall include a reasonable number of construction photographs taken since the last report submitted by the Borrower. SECTION 3.6 City and Other Governmental Agency Permits: Compliance with Laws Before commencement of rehabilitation or development of any buildings, structures, or other work of improvement upon the Site, the Borrower shall, at its own expense, unless herein agreed, determine and secure or cause to be secured any and all permits which may be required by the City or any other governmental agency affected by or with jurisdiction over such rehabilitation, development, or work. the Agency may provide all assistance, including agreed upon financial assistance, deemed appropriate by the Agency. The Borrower shall secure all building permit(s) for the Development Improvements no later than the date set forth in the Schedule of Performance. The Borrower at all times shall comply with all applicable local, state and federal laws and regulations. SECTION 3.7 Rights of Access For the purposes of assuring compliance with this Agreement (including this Section 3.7), the Agency Representatives shall have the reasonable right of access to the Site in accordance with Section 14 of this Agreement without charges or fees and at normal business hours. SECTION 3.8 Anti-discrimination During Rehabilitation The Borrower covenants for itself and its successors and assigns that with respect to the rehabilitation of the Development Improvements, the Borrower and its contractors and suppliers will abide by the anti-discrimination provisions set forth in Section 4.3 of this Agreement. SECTION 3.9 Schedule of Performance The Borrower shall comply with and meet the deadlines listed in Exhibit "G" to this Agreement, the Schedule of Performance. 20 P Npn s�genda Anachmmts4 gnWa AttxhmeaasV gtndsAmend 201o\12A 10U,80 Senior Apartments-Acquisition and De olopmem Residual Receipts Loan Agreementdoc ® SECTION 3.10 Maintenance of the Site Following Close of the Acquisition Escrow and Prior to the Recordation of the Certificate of Completion. Subject to the Close of the Acquisition Escrow the Borrower covenants and agrees for itself, its successors, and assigns to maintain the Site, in a good condition free from any accumulation of debris or waste material. In the event that at any time between the Close of the Acquisition Escrow and completion of the Rehabilitation, the Borrower, or its successors or assigns, fails to perform the maintenance as required herein,the Agency shall have the right,but not the obligation, to enter the Site and undertake maintenance activities upon thirty (30) days prior written notice to the Borrower. In such event, and cumulative with all of the other rights and remedies of the Agency, including the separate and cumulative remedies of the Agency as arise under Agency Regulatory Agreement, the Borrower shall reimburse the Agency for all reasonable sums incurred by it for such maintenance activities. The obligation of the Borrower under this Section 3.10 with respect to the Site shall be discharged on the date when the Agency has issued its Certificate of Completion for the redevelopment of the Project. SECTION 3.11 Relocation Requirements. If applicable, the Borrower shall be responsible for assuring compliance with all relocation requirements as governed by federal relocation laws and regulations for projects funded in whole or in part with Agency, including the Federal Uniform Relocation Assistance and Real Property Policies Act (42 U.S.A. 4601 et seq., as amended), and the Federal Relocation Regulations (49 CFR Part 24), HUD Relocation Handbook 1378. In circumstances where both federal and state funds are contributed to a program or Project, it is the policy of the Agency to follow the requirements that provide the displaced person or household with the greatest benefit. For example, if in a mixed-funded project, the assistance or benefit under state law is more favorable to the displaced person or household, then the state law applies, and if the opposite is the case, then applicable federal laws and regulations (California Relocation Assistance Law, etc.) shall apply. Any relocation assistance shall be provided through and in the manner directed by the Agency, provided, however, that the Borrower shall indemnify, defend and hold harmless the Agency and the City of San Bernardino ("City") for relocation payments, consulting fees and expenses incurred in connection with the Project. At the Agency' election in the Agency' sole discretion, the Agency may hire a relocation consultant to coordinate the relocation. The fees and costs of the consultant shall be paid or reimbursed by the Borrower. SECTION 3.12 Environmental Conditions. The Borrower shall comply with any National Environmental Policy Act of 1969 (NEPA) or California Environmental Quality Act (CEQA) mitigation measures or other environmental conditions imposed by the Agency or any other applicable governmental authority in connection with the Project. SECTION 3.13 City of San Bernardino Construction Job Employment Outreach Program of the Borrower. ® (a) The Borrower hereby agrees to use faith efforts to recruit San Bernardino residents, for any new job or entry level employment positions, and to the extent of all other factors being equal and consistent with other applicable law, the Borrower covenants on a best efforts basis to give San Bernardino residents preference for hiring for such new entry level job or employment positions and to 21 P)Agendas\Ap da Attachrww,\Agevda Auwlunen \AU is-Ammd 2010\12-0610 Lugo Senior Aputments-Acquisition and Development Residual Receipts Loan Agreement doe i ,. the maximum reasonable and feasible extent, use the services of businesses which are located in the City of San Bernardino which result from the performance of this Agreement and which are performed within the City. (b) "Good faith efforts" of the Borrower for the purposes of this Section 3.13 include, but are not limited to,the following factors: (1) advertisement in local media concerning employment, contracting and subcontracting opportunities; (2) providing written notice to a reasonable number of local business enterprises soliciting their interest in contracting or subcontracting in sufficient time to allow them to participate effectively; (3) establishing an applicant pool of eligible persons who have responded to such entry level employment outreach efforts of the Borrower; (4) attendance at pre-solicitation or pre-bid meetings that were scheduled by the City to inform contractors or subcontractors of contracting and subcontracting opportunities for local business enterprises; (5) following up initial solicitation of interest by contacting local business enterprises by telephone to determine with certainty whether they are interested in participating; (6) selecting portions of the work to be performed by local business enterprises; (7) providing interested local business enterprises and other enterprises with adequate information about the plans, specifications and requirements of contracts and subcontracts; (8) negotiating in good faith with interested local business enterprises to perform work; and (9) making reasonable efforts to assist interested local business enterprises in obtaining necessary sources of supply, lines of credit or insurance in order to participate in such work associated with the Project. (c) If requested to do so by the Agency,the Borrower shall provide the Agency with access to copies of all of its records pertaining or relating to its employment practices, except to the extent such records or portions of such records are confidential or privileged under state or federal law. (d) Nothing contained in this contract shall be construed in any manner so as to require or permit any act which is prohibited by law. SECTION 3.14 Security Interests. (a) The holder of any Security Financing Interest authorized by this Agreement ("Holder") is not obligated to construct or complete any improvement of the Project. However, nothing in this 22 P V+gendas�Agende Attechment,\A,..de AtachmenteUgmts-Ammd 2010\12-06-10 Lugo Swim Apmmems-Acquisition.W Development Raidwl Receipts Loan Agament doe Agreement shall be deemed to permit or authorize any such Holder to devote the Site, or any portion thereof, to any use, or to construct any improvements thereon, other than those uses of improvements provided for or authorized by this Agreement. (b) Whenever the Agency, pursuant to its rights set forth in this Agreement, delivers any notice or demand to the Borrower to cure or correct a default or breach with respect to the redevelopment of the Project, the Agency shall at the same time deliver to each Holder of record any Security Financing Interest creating a lien upon the Site, a copy of such notice or demand of the Agency. Each such Holder shall (insofar as the rights of the Agency are concerned)have the right, but not the obligation, at its option, within thirty(30) days after the receipt of the notice,to cure or remedy or commence to cure or remedy any such default or breach affecting the Site which is subject to the lien of the Security Financing Interest held by such Holder and to all the costs thereof to the security interest debt and the lien on the security interest. (c) In any case where within one hundred eighty (180) days after the occurrence of a default or breach by the Borrower for which the Agency has given notice to the holder of any Security Financing Interest under Section 3.14(6), and such holder has exercised its option to construct the improvement of the Project, but such holder has not proceeded diligently with rehabilitation, the Agency shall thereupon be afforded the same rights and remedies against such holder of a Security Financing Interest for such default or breach of the Borrower as the Agency would otherwise originally have had against the Borrower under this Agreement. o (d) In the event of a default or breach by the Borrower under a Security Financing Interest prior to the completion of redevelopment of the Project or portion thereof, and the holder has not exercised its option to complete the improvement of the Project (or such portion thereof encumbered by the Security Financing Interest), the Agency, at its sole option and election, but without any obligation to do so, may cure the default or breach of the Borrower to such holder, prior to the completion of any foreclosure under such holder's Security Financing Interest. In such event the Agency shall be entitled to reimbursement from the Borrower of the principal amount paid by the Agency to cure or satisfy the defaults plus interest, at the penalty rate set forth in the agency Loan Note, and all reasonable other costs and expenses incurred by the Agency in curing the default of the Borrower. The Borrower hereby agrees that the Agency shall also be entitled to a lien upon the Project, or any portion thereof to secure the repayment of such amount to the Agency. the Agency agrees that in the event that the such a lien in favor of the Agency may arise under this Section 3.14(d), that the lien of the Agency shall be subordinate to any other Security Financing Interest approved or deemed approved by the Agency prior to the date of such advance by the Agency. the Agency shall execute from time to time any and all documentation reasonably requested by the Borrower to effect such subordination of the lien right of the Agency as may arise under this Section 3.9(d) with respect to the Project. (e) In addition to the optional right of the Agency to cure a default or breach of the Borrower under a Security Financing Interest as set forth in Section 3.14(d), the Agency, at its sole option and election, shall have the right to satisfy any other lien or encumbrance affecting the Project after the Borrower has received a thirty (30) day notice of intention of the Agency to pay such lien or Qencumbrance. the Agency shall not pay or satisfy such a lien or encumbrance until the Borrower has been accorded a reasonable period of time to challenge, cure or satisfy such a lien or encumbrance; provided, however, that nothing in this Agreement shall require the Borrower to pay or make provisions for the payment of any lien or charge (except a lien or charge for ad valorem property taxes) 23 P:\Ageades\Ageada AttachmentMpnda Amch eMM mt.Am d2010\12-0610 Lugo Senior ApMrnems-Acquid[ion and Ibvelopment Residual Receipts Loan Ag,..aLdoc © so long as the Borrower in good faith shall contest the validity or amount therein and so long as such delay in payment by the Borrower shall not subject the Project or any portion thereof to forfeiture or security lien sale. In the event that the Agency may satisfy any such lien or encumbrance the Agency shall be entitled to reimbursement from the Borrower of the principal amount paid by the Agency to cure or satisfy the lien or encumbrance plus interest at the penalty rate set forth in the Agency Note, and all reasonable costs and expenses incurred by the Agency in satisfying the lien or encumbrance. The Borrower hereby agrees that the Agency shall also be entitled to a lien upon the Project, or any portion thereof, to secure such repayment to the Agency. Any such lien of the Agency under this Section 3.14(e) shall be subordinate to each Security Financing Interest approved or deemed approved by the Agency. (f) The Borrower, for itself, its successors and assignees hereby warrants and agrees that the Borrower shall give to any Holder notice of the terms and conditions contained in this Section 3.14 and shall use commercially reasonable efforts to cause each provision contained in this Section 3.14 dealing with Security Financing Interests and rights of holders of such interests, either to be inserted into the relevant deed of trust or mortgage or to be acknowledged by the Holder prior to its perfection of any such Security Financing Interest right or interest in the Site or the Project. SECTION 3.15 Estoppel Statement. Upon the request of the Borrower, a proposed Permitted Transferee under Section 1.5 of the Borrower, or any Holder, the Agency shall issue a signed estoppel statement stating that this ® Agreement is in full force and effect and that no default hereunder exists on the part of the Borrower or any successor, or if such default is claimed by the Agency to then exist, such estoppel statement shall identify the nature of such default. Such estoppel statement shall be delivered by the Agency to the Borrower within thirty (30) days following receipt of written request therefore. the Agency may charge the Borrower for the reasonable cost of the Agency incurred in consultation with its attorney in connection with such request for an estoppels statement in an amount not to exceed $5,000. SECTION 3.16 Insurance of the Borrower. (a) In order to protect the Agency, its governing board, commissions, agents, officers, employees and authorized representatives against all claims and liability for death, injury, loss and damage as a result of the Borrower's actions in connection with the Agency Loan, the assistance provided by the Agency under this Agreement and the design, rehabilitation, operation and financing of the Project, the Borrower shall secure and maintain insurance as described in this Section 3.16. Such insurance shall be in full force and effect as of the Effective Date, and thereafter the Borrower shall continuously maintain such insurance for the term of the Agency Regulatory Agreement. The Borrower shall pay any deductibles under all required insurance policies. (b) The Borrower shall submit written proof to the Agency that the Borrower is insured against liability for workers' compensation in accordance with the provisions of section 3700 of the Labor Code. In signing the Agreement, the Borrower makes the following certification, required by section 1861 of the Labor Code: f "The undersigned on behalf of the Borrower is aware of the provisions of section 3700 of the Labor Code which require every employer to be insured against liability for workers' compensation or to undertake self-insurance in accordance with the provisions 24 P:NgendaaWgmde AtmchmentsUgeide Attachments\Agents-Ameed 2010\1L 10 Lugo Senior Apartments-Acquisition and Development Residual Receipts Loan Agreement doe ® of that code, and the undersigned on behalf of the Borrower will comply with such provisions before commencing the performance of the work of the Agreement." The Borrower shall require each contractor and sub-contractor engaged to perform any work on the Project to provide workers' compensation for all of such contractors' or sub-contractors' employees, unless the contractors' or sub-contractors' employees are covered by worker's compensation insurance afforded by the Borrower. If any class of employees engaged in work or services performed in connection with the Project is not covered by Labor Code Section 3700, the Borrower shall provide and/or require each contractor or sub-contractor to provide adequate insurance for the coverage of employees not otherwise covered. (c) The Borrower shall maintain in full force and effect, at all times during the term of the Agreement,the following insurance: (i) Commercial General Liability Insurance coverage, including, but not limited to, premises-operations, contractual liability insurance (specifically concerning the indemnity provisions of the Agreement and the Agency Deed of Trust and the Agency Regulatory Agreement), products-completed operations hazards, personal injury (including bodily injury and death), and property damage for liability arising out of the rehabilitation of the Project and/or the Borrower's operation of the Site pending commencement of rehabilitation of the Project. Said insurance coverage shall have minimum limits for bodily injury and property damage liability of TWO MILLION f-- DOLLARS ($2,000,000) each occurrence and FOUR MILLION DOLLARS I ($4,000,000) aggregate. (ii) Automobile liability insurance against claims of personal injury (including bodily injury and death) and property damage covering all owned, leased, hired and non-owned vehicles used by the Borrower with minimum limits for bodily injury and property damage of ONE MILLION DOLLARS ($1,000,000) each occurrence and TWO MILLION DOLLARS ($2,000,000) aggregate. Such insurance shall be provided by a business or commercial vehicle policy. (iii) If the Borrower hires one or more consultants to provide design services, such as architectural or engineering services in connection with the Project, the Borrower shall require such consultant to provide professional liability (errors and omissions) insurance, for liability arising out of, or in connection with, the performance of such design services, with limits of not less than ONE MILLION DOLLARS ($1,000,000). (iv) Upon acceptance of the Project construction items by the Borrower, or any portion thereof, from each contractor, the Borrower shall maintain fire and extended coverage insurance on the Project on a blanket basis or with an agreed amount clause in amount not less than one hundred percent (100%) of the Project's replacement value. (d) During the course of rehabilitation of the Project, the Borrower shall require that all contractors performing work on the Project to maintain the following insurance coverages at all times during the performance of said work: 25 P Wgendu\Agende Atlutunents4Agenda AttacM1mmtsWgmns-Amend 2010\12 4610 Lugo Senior Apartments-Acquisition and Development Residual Receipts Lom Agreemeut.doc i �7 ® (i) builders risk insurance to be written on an all risk completed value form, in an aggregate amount equal to 100%of the completed insurable value of the building(s). (ii) Commercial general liability Insurance with limits of not less than ONE MILLION DOLLARS ($1,000,000) per occurrence and TWO MILLION DOLLARS ($2,000,000) aggregate to protect the Borrower during the construction phase from claims involving bodily injury and/or death and damage to the property of others. Said insurance shall include an endorsement to include owners' and contractors' protective coverage. (iii) Automobile liability insurance against claims of personal injury (including bodily injury and death) and property damage covering all owned, leased, hired and non-owned vehicles used in the performance of a contractor's obligations to the Borrower with minimum limits for bodily injury and property damage of ONE MILLION DOLLARS ($1,000,000) each occurrence and ONE MILLION DOLLARS ($1,000,000) aggregate. Such insurance shall be provided by a business or commercial vehicle policy. (e) The commercial general liability insurance required in Section 3.16(c) and (d), above shall include an endorsement naming the Agency, the Agency, the City and their officials, officers, agents, and employees as additional insureds for liability arising out of the Agreement and any operation related thereto. (f) If any of the insurance coverages required under Section 3.16(d) of the Agreement is written on a claims-made basis, such insurance policy shall provide an extended reporting period continuing through the fifth (5`") anniversary following the date of acceptance of the improvements by the Borrower. (g) As of the Effective Date, evidence of insurance in compliance with the requirements of this Section 3.16 shall be furnished to the Agency by the Borrower, as evidenced by endorsements to such policies or contracts of insurance issued by the insurer in favor of the Agency and/or by one or more"certificate of insurance"issued by the authorized agents or attorneys-in-fact of such insurers in a form acceptable to the Agency Counsel. Receipt of evidence of insurance that does not comply with the above requirements shall not constitute a waiver of the insurance requirements set forth above. (h) The insurance coverages required to be maintained and/or provided by the Borrower under this Agreement shall be maintained until the completion of all of the Borrower's obligations under the Agreement, and shall not be reduced, modified, or canceled without thirty (30) days prior written notice to the Agency. Also, phrases such as "endeavor to" and "but failure to mail such notice shall impose no obligation or liability of any kind upon the company" shall not be included in the cancellation wording of all certificates of insurance or any coverage for the Agency. The Borrower shall immediately obtain replacement coverage for any insurance policy that is terminated, canceled, non-renewed, or whose policy limits have been exhausted or upon insolvency of the insurer that issued the policy. ® (i) All insurance shall be issued by an insurance company or companies that have an AM Best Rating of A - V or better and listed in the current `Best's Insurance Guide" publication and be a California admitted insurance company. 26 P\AgendaaW,arda ARecAmentsWgenda Attachnuaut A is-Amend 2010\12-0610 Lugo Senior Apanmenu-Acquisition and Development Residual Rmeipts Loan Agreement doe ® (j) All insurance afforded by the Borrower pursuant to the Agreement shall be primary to and not contributing to any other insurance maintained by the Agency. Insurance coverage in the minimum amounts set forth herein shall not be construed to relieve the Borrower for any liability, whether within, outside, or in excess of such coverage, and regardless of solvency or insolvency of the insurer that issues the coverage; nor shall it preclude the Agency from taking such other actions as are available to it under any other provision of the Agreement or otherwise in law. Failure by the Borrower to maintain all such insurance in effect at all times required by the Agreement shall be an event of default by Borrower. The Agency, at its sole option, may exercise any remedy available to it in connection with such an event of default. Alternatively, the Agency may purchase such required insurance coverage, and without further notice to the Borrower,the Agency shall invoice any sums due from the Borrower any premiums and associated costs advanced or paid by the Agency for such insurance or the Agency may demand that additional sums be paid to the Agency by the Borrower. Any failure by the Agency to take this alternative action shall not relieve the Borrower of its obligation to obtain and maintain the insurance coverages required by the Agreement. (k) During the term of the Agency Deed of Trust if any inconsistency or conflict between the insurance coverage provisions of this Section 3.16 and the Agency Deed of Trust, the insurance coverage provisions of the Agency Deed of Trust shall prevail and be applicable to the Borrower SECTION 3.17 Taxes,Assessments, Encumbrances and Liens. (a) The Borrower shall pay prior to the delinquency all real property taxes and assessments assessed and levied on or against the Site subsequent to the Close of the Acquisition Escrow. (b) The Borrower shall not place and shall not allow to be placed on the Site any mortgage, trust deed, deed of trust, encumbrance or lien not otherwise authorized by this Agreement. The Borrower shall remove, or shall have removed, any levy or attachment made on the Site, or shall assure the satisfaction thereof. Nothing herein contained shall be deemed to prohibit the Borrower from contesting the validity or amounts of any tax assessment, encumbrance or lien, or to limit the remedies available to the Borrower in respect thereto. ARTICLE IV USE OF THE SITE AND THE PROJECT SECTION 4.1. Use of the Site. (a) Borrower hereby covenants and agrees, for itself and its successors and assigns, that the Site and the Project shall be developed, used and maintained as senior rental housing for occupancy by very-low, low and moderate income senior households("Eligible Persons") as follows: Extremely Low-Income Senior Households. The words "Extremely Low-Income Senior Households" mean and refer to Senior Households whose income does not exceed 30% of Area Median Income as defined herein. QVery Low-Income Senior Households. The words "Very Low-Income Senior Households" mean and refer to persons and households whose income does not exceed 50%percent of Area Median Income as defined herein. 27 P Ageodas\Agenda AttechmentsVagenda AnachmentsVlgmts`A and 2010 I2 10 Wgo SeNor Apartments-Acquisition W Development Residual Receipts Loan Agreement doc i ® Sixty-Five Percent (65%) AMI Senior Households. The words "Sixty-Five Percent (65 9/0) AMI Senior Households" means those low-income or moderate income Senior Households whose total annual income does not exceed 65% of AMI; such Sixty-Five Percent AMI Households are a combination of Low-Income Senior Households (those those whose total annual income is at or below 60 % AMI) and Moderate-Income Households (those whose total annual income is at or below 110% OF AMI). Agency and Borrower have determined that this mix of housing units meets the legal, operational and financing requirements of both parties as established by HCD pursuant to Health & Safety Code Section 50053 and any accompanying regulations, as those may be amended from time to time. Notwithstanding anything contained herein to the contrary, the rents under this Agreement shall be those established by California Redevelopment Law(Health and Safety Code Sections 50053, 50073 and Section 50079.5) and administered by HCD, notwithstanding any inconsistency with such requirements for tax credit financing. Failure to comply with these requirements constitutes a default hereunder, (b) As of the Effective Date of the Agreement, in addition to the affordability covenants set out here and in the Agency Regulatory Agreement, the Borrower has warranted to the Agency that the Assisted Units in the Project shall be reserved for use and occupancy by households as defined in whose annual income level at the time of initial occupancy by each such household of its Assisted Unit in the Project shall be generally as follows: ® (c) As of the Effective Date of the Agreement, in addition to the affordability covenants set out here and in the Agency Regulatory Agreement, the Borrower has warranted to the Agency that the Assisted Units in the Project shall be reserved for use and occupancy by households as defined in whose annual income level at the time of initial occupancy by each such household of its Assisted Unit in the Project shall be generally as follows: "Senior Citizen Household" means and refers to a person or family eligible to occupy a rental dwelling unit in the Eligible Property who is/are at the time of initial occupancy of the rental dwelling unit by such person(s): 1. Sixty(62)years of age or older; and, if applicable; 2. Provided at least one (1) member of the household is: (i) 55 years of age or older with such household limited to two (2) adult individuals, and (ii) a "qualified permanent resident," as this term is defined in Civil Code Section 51.3(b)(2) with no minor children comprising such household except as required by Civil Code Section 51.3(b)(3). Household Income Level (% 1-BR units 2-BR units Total Total Assisted of Area Median Income) Units Units Thirty Percent 30% 10 1 11 11 Fifty Percent 50%) 49 4 53 53 Sixty-five Percent 65% 49 5 54 54 © Manager's Unit 1 0 1 0 TOTAL 109 10 119 118 28 P Wgendas\Agenda AttachmaroMgenda A chmenta\A rats-Amend 2010\12-0 101.ugo Senior Apartments-Acquisition and Development Residual Reveipts Loan Agmement.doc SECTION 4.2. No Inconsistent Use. The Borrower covenants and agrees that it shall not devote the Site to uses inconsistent with either this Agreement, the Agency Regulatory Agreement or the Agency Senior Household Rental Housing Use Covenant. The Borrower has entered into the Agency Senior Household Rental Housing Use Covenant which confirms the maintenance of the Assisted Units for Senior Citizen Households for the 99-year term of that Agreement SECTION 4.3. Discrimination Prohibited. Except as provided in the Agency Regulatory Agreement and Agency Senior Household Rental Housing Use Covenant, with respect to the reservation of each of the rental units in the Project for occupancy by Eligible Persons, there shall be no discrimination against, or segregation of, any persons, or group of persons, on account of race, sexual orientation, source of income, color, creed, religion, sex, marital status, familial status, disability, ancestry or national origin in the rental, sale, lease, sublease, transfer, use, occupancy, or enjoyment of the Project or the Site, or any portion thereof, nor shall the Borrower, or any person claiming under or through the Borrower, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the Project or the Site or any portion thereof. The nondiscrimination and nonsegregation covenants contained in the Agency Regulatory Agreement shall remain in effect in perpetuity. SECTION 4.4. Effect of Covenants. IIn addition to those covenants set out in the Agency Senior Household Rental Housing Use Covenant, the Agency is the beneficiary of the terms and provisions of this Agreement and of the restrictions and community redevelopment and affordable rental housing covenants running with the land, whether or not appearing in the Agency Regulatory Agreement, for and in its own right and for the purposes of protecting the interests of the community in whose favor and for whose benefit the covenants running with the land have been provided. The community redevelopment and affordable rental housing covenants in favor of the Agency shall run without regard to whether the Agency has been remains or is an owner of any interest in the Site, and shall be effective as both covenants and equitable servitudes against the Site. If any of the community redevelopment and affordable rental housing covenants set forth in this Agreement are breached, the Agency shall have the right 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 may be entitled. No other person or entity shall have any right to enforce the terms of this Agreement under a theory of third-party beneficiary or otherwise except the City as the successor in regulatory function of the Agency and residents of the Project and applicants to become residents of the Project, as provided in Health and Safety Code Section 33334.4, or other applicable law. SECTION 4.5. Listing of Provisions of this Agreement which Shall Remain In Full Effect Following the Recordation of the Certificate of Completion. ♦„g' In addition to the provisions of this Article IV, Article V and Article VI of this Agreement which shall remain in full force and effect following the recordation of the Certificate of Completion each of the following shall remain in full force and effect following the recordation of the Certificate of Completion for the Project: 29 P AgendaMgenda A=hments\Agenda Atuchments\Agsmts-Amend 2010Ib 10 Lugo Swum Apartments-Acquisition and Development Residual Receipu Loan Ageement doc �-- (i) Agency Loan Documents; (ii) the covenants of the Borrower under the Agency Regulatory Agreement and the Agency Y Senior Household Rental Housing Use Covenant; (iii) the provisions of Section 5.9 of this Agreement; ARTICLE V DEFAULTS. SECTION 5.1. Events of Default. (a) The occurrence of any of the following is a default and shall constitute a material breach of this Agreement and, if not corrected, cured or remedied in the time period set forth in Section 5.1(b), shall constitute an"Event of Default"hereunder: (i) failure of the Borrower or any person under its direction or control to comply with or perform when due any material term, obligation, covenant or condition contained in this Agreement; (ii) failure by the Agency to comply with or perform when due any material term, obligation, covenant or condition contained in this Agreement; O (iii) failure by the Borrower or any person under its direction or control to comply with or perform when due any material term, obligation, covenant or condition contained in the Agency Deed of Trust, Promissory Note, Regulatory Agreement or Agency Senior Household Rental Housing Use Covenant; (iv) any warranty, representation or statement made or furnished to the Agency by the Borrower under this Agreement is false or misleading in any material respect either now or at the time made or furnished; (v) the dissolution or termination of the existence of the Borrower as an ongoing business, insolvency, appointment of a receiver for any part of the property of the Borrower, any assignment for the benefit of creditors, any type of creditor workout or the commencement of any proceeding under any bankruptcy or insolvency laws by or against the Borrower; (vi) the Borrower has not commenced the construction of the Project within twenty- four (24) months after the closing of the Acquisition Escrow and the Borrower has not timely repaid the Agency Loan prior to the Interest Rate Conversion Deadline in whole together with all accrued and unpaid interest thereon. (b) Upon the determination by the Agency that a default has occurred, the Borrower shall © cause such default to be cured within the following periods of time: (i) If a monetary Event of Default occurs under the terms of the Agency Note, the Agency Deed of Trust or the Agency Loan Documents, prior to exercising any 30 P:UgeMn\Agenda Att hsn=tsWgeMa AOachmems\Agonts-Amend 2010\12-0610Lugo Senior Apartments-Acquisition and Development Residual Receipts Losn Agonnont.don remedies under this Agreement the Agency shall give the Borrower written notice of such default as set out here or as set out in such documents. The Borrower shall have a period of thirty(30) days after such notice is given within which to cure the default prior to exercise of remedies by the Agency, or such longer period of time as may be specified in the Agency Loan Documents. (ii) If a non-monetary event of default occurs under the terms of the Agency Note, the Agency Deed of Trust, or the Agency Loan Documents, prior to exercising any remedies under this Agreement the Agency shall give the Borrower written notice of such default as set out here or as set out in such documents. If the default is reasonably capable of being cured within thirty (30) days, as determined by the Agency in its sole discretion, the Borrower shall have such period to effect a cure prior to exercise of remedies by the Agency under this Agreement and the Agency Loan Documents, or such longer period of time as may be specified in this Agreement and the Agency Loan Documents. If the default is such that it is not reasonably capable of being cured within thirty (30) days, as determined by the Agency in its sole discretion, or such longer period if so specified, and if the Borrower (a) initiates corrective action within said period, and (b) diligently, continually, and in good faith works to effect a cure as soon as possible, then the Borrower shall have such additional time as is determined by the Agency, in its sole discretion, to be reasonably necessary to cure the default prior to exercise of any remedies by the Agency. If the Borrower or its successor in interest is a limited partnership, if the Borrower fails to take corrective action or to cure the default within such a specified time, the Agency shall give the Borrower written notice thereof, whereupon the limited partner may remove and replace the general partner with a substitute general partner who shall effect a cure within a reasonable time thereafter in Iaccordance with the foregoing provisions. In no event shall the Agency be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by a failure to cure a default or the default is not cured within ninety(90) days after the first notice of default is given. Notwithstanding anything to the contrary contained herein, the Agency hereby agrees that any cure of any default made or tendered by one or more of the Borrower's limited partners shall be deemed to be a cure by the Borrower and shall be accepted or rejected on the same basis as if made or tendered by the Borrower. Copies of all notices which are sent by the Agency to the Borrower hereunder shall also be sent to the Borrower's limited partners at the address provided by the Borrower and on file with the Agency; provided, however, that the Borrower shall also have the affirmative duty to provide copies of such notices to the Borrowers' limited partners and any failure of the Agency to provide such copies of notices to the Borrower's limited partners shall not limit or in any manner prejudice or invalidate any proceedings taken by the Agency in furtherance of such notice. 31 P.Wgendas\Agenda Anachmems\Agenda Attachments\Agtmts-Amend 2010\12-06 40 Lugo Smior Apenments-Acquisition and Development Reside]Receipts Loan Agreementdoc SECTION 5.2. Notice of Default. Subject to the provisions of Section 5.1 hereof, the non-defaulting party shall give written notice of default to the party in default in accordance with Section 6.3, stating that such notice is a "Notice of Defaults", specifying the default complained of by the injured party and requiring the default to be remedied within thirty (30) days of the date of the Notice of Default. Except as required to protect against further material damage, the injured party may not institute legal proceedings against the party in default until thirty (30) days after giving notice. Failure or delay in giving notice shall not constitute a waiver of any default,nor shall it change the time of occurrence of the default. If the default specified in the Notice of Default is such that it is not reasonably capable of being cured within thirty (30) days, and if the party to whom the notice is addressed initiates corrective action within said thirty(30) day period and diligently works to effect a cure as soon as possible, then such party may have such additional time as authorized in writing by the other party as reasonably necessary to complete the cure of the breach prior to exercise of any other remedy for the occurrence of an Event of Default. Such authorization for additional time to cure shall not be unreasonably withheld. If a party fails to take corrective action relating to a default within thirty (30) days following the date of notice (or to complete the cure within the additional as may be authorized by the other parry), an Event of Default shall be deemed to have occurred. SECTION 5.3. Inaction Not a Waiver of Default. Any failure or delays by either party in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies. Delays by either parry in asserting any of its rights and remedies shall not deprive either party of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies. SECTION 5.4. Remedies: Enforcement of Agreement. (a) The non-defaulting party at its discretion shall have the right to terminate this Agreement upon an Event of Default. If the non-defaulting party chooses to terminate the Agreement due to the occurrence of an Event of Default, the non-defaulting party shall give the defaulting party forty-five (45) days prior written notice of the effective termination date. (b) In addition to pursuing the rights and remedies available to the Agency under this Agreement, the Agency may foreclose on the Agency Deed of Trust and exercise its other remedies under any of the Agency Loan Documents or the Agency Regulatory Agreement. (c) In addition to any other rights or remedies, either party may institute legal action to cure, correct or remedy any default,to recover damages for any default, or to obtain any other remedy consistent with the purposes of this Agreement. Such legal actions must be instituted in the Superior Court of the County of San Bernardino, State of California or in any other appropriate court in that County. In the event that any legal action is commenced by the Borrower against the Agency, service of process on the Agency shall be made by personal service upon the Chairman of the Board of the Agency, or in such other manner as may be provided by law. In the event that any legal action is commenced by the Agency against the Borrower, service of process on the Borrower shall be made by 32 P Wgendas\Agenda AnachmeNaWgerda Anachments\Ag=s-Amend 201012 10 Lugo Senior Apartments-Acquisition and Development Residual Receipu Loan Ageement.doc personal service on the Borrower's agent for service of process, or in such other manner as may be provided by law,and shall be valid whether made within or without the State of California. SECTION 5.5. Rights and Remedies are Cumulative. Except with respect to any rights and remedies expressly declared to be exclusive in this Agreement as relates to a failure of conditions precedent occurring before the Close of the Acquisition Escrow, the rights and remedies of the Parties as set forth in this Article V are cumulative and the exercise by either party of one or more of such rights or remedies shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the same default or any other default by the other party. SECTION 5.6. No Consequential Damages. Notwithstanding any other term of this Agreement, neither the Agency or its officers, officials, employees and agents shall be liable to the Borrower or to any third party for any loss of use of the Site or the Project, loss of goodwill relating to the Borrower, the Site, the Project, interruption of business, or for indirect, incidental or special or consequential damages (including without limitation, lost revenues or profits of the Borrower) or similar damages, whether based on tort, contract or other legal or equitable grounds. SECTION 5.7. Additional Borrower Indemnification In addition the Borrower shall indemnify and hold the Agency, the City and their directors, officers, elected officials, employees, agents, authorized volunteers, or representatives, free and harmless from all claims, demands, actions, damages and liabilities of any kind and nature arising from bodily injury, including death, violations of right to privacy, or property damage, based or asserted upon any actual or alleged act or omission of their employees, agents, or subcontractors, relating to or in any way connected with the performance of the terms of this Agreement, unless the bodily injury, property damage or other claimed injury was actually caused by the willful misconduct or gross negligence of the Agency or City, their directors, officers, elected officials, employees, agents, authorized volunteers, or representatives. As part of the foregoing indemnity, the Borrower shall protect and defend at its expense, including attorney's fees, the Agency, the City, their directors, officers, elected officials, employees, agents, authorized volunteers, or representatives, from any and all administrative or other legal actions based upon such actual or alleged acts or omissions. SECTION 5.8. Attorneys' Fees. Except as otherwise required by Section 5.7 hereof, in the event of litigation between the Parties arising out of this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees and other costs and expenses incurred, including such fees and costs incurred on appeal, in addition to whatever other relief the prevailing party may be entitled to. As used in the preceding sentence, the words "reasonable attorney's fees" in the case of the Agency, shall also include the salary and benefits payable to lawyers employed in the Office of the City Attorney of the City, who provide legal counsel to the Agency in such litigation as allocated on an hourly basis in addition to such other counsel as may be selected by the Agency under such circumstances. 33 P\AgendaAAgenda Auachments\Agenda AttachmeMS\Agnm-Amend 2010\12-06-10 Lugo Senior AparlmeMs-Acquisi ioo and Development Residual Receipts Loan Agreement.doc SECTION 5.9. Survival of Provisions. The provisions of the following sections of this Agreement shall survive the termination of this Agreement: In the event that a termination of this Agreement may occur after the Close of the Acquisition Escrow,the following provisions of this Agreement shall survive such termination: (1) all of the Agency Loan Documents; (2) the Agency Regulatory Agreement; (3) all of the provisions of Article IV of this Agreement, "Use of the Site and the Project'; Sections 5.4, "Remedies; Enforcement of Agreement", Section 5.5, "Rights and Remedies are Cumulative", Section 5.6, "No Consequential Damages'; Section 5.7, "Additional Borrower Indemnification", Section 5.8, "Attorney's Fees", Section 6.5, "Nonliability of the Agency Officials and Employees"and Section 6.8, "Representations and Warranties of Borrower". ARTICLE VI MISCELLANEOUS SECTION 6.1. Governing Law. The laws of the State of California shall govern the interpretation and enforcement of this Agreement. SECTION 6.2. No Joint Venture. Nothing in this Agreement shall be construed to constitute the creation of a partnership or joint venture between the Agency and the Borrower or any contractor or other person relating to the Project or the Site. the Agency is not an agent or representative of the Borrower. This Agreement does not create a contractual relationship between the Agency and any such third-person and shall not be construed to benefit or bind the Agency in any way with or create any contractual duties by the Agency to any contractor, subcontractor,material man, laborer, or any other person. SECTION 6.3. Notices. Notices, demands, and communications between the Agency and the Borrower shall be sufficiently given if personally delivered or delivered by a nationally-recognized courier service or sent by registered or certified mail,postage prepaid, return receipt requested, to the following addresses: If to the Agency: Redevelopment Agency of the City of San Bernardino Attention: Emil A. Marzullo, Interim Executive Director Q 201 North IIE" Street, Suite 301 San Bernardino, CA 92401 Phone: (909) 663-1044 Fax: (909) 663-2294 34 P.NgendaslAgenda AOach..=t lgendaA .hrnws�gmtsAaand 20IM12-0 10 Lugo Serde Apartments-Auuisition and Development Residual R eipts Loan Ag rnm.don With a Copy to: Redevelopment Agency of the City of San Bernardino Attention: Carey K. Jenkins,Director Housing and Community Development 201 North"E" Street, Suite 301 San Bernardino, CA 92401 Phone: (909) 663-1044 Fax: (909) 888-9413 If to Borrower: c/o Meta Housing Corporation Attention: John Huskey 1640 South Sepulveda Boulevard,#425 Los Angeles, CA 90025 With a Copy to: Bocarsly Emden Cowan Esmail& Ardnt, LLP Attention: Lance Bocarsly 633 West Fifth Street, 70th Floor Los Angeles, CA 90071 Any notice shall be deemed to have been received as of the earlier time of actual receipt by the addressee thereof or the expiration of forty-eight (48) hours after depositing of such notice in the United States Postal System in the manner described in this Section. Such written notices, demands, and communications may be sent in the same manner to such other addresses as a party may from time to time designate in writing. SECTION 6.4. Conflicts of Interest. No member, official, or employee of the Agency shall have any personal interest, direct or indirect, in this Agreement nor shall any such member, official,or employee participate in any decision relating to this Agreement which affects his personal interests or the interests of any corporation, partnership, or association in which he is, directly or indirectly, interested. SECTION 6.5. Nonliability of the Agency Officials and Employees. No member, official, employee, or consultant of the Agency or City shall be personally liable to the Borrower, or any successor in interest of the Borrower, in the event of any default or breach by the Agency or for any amount which may become due to the Borrower or to its successor, or on any obligations under the terms of this Agreement nor shall any such member, official, employee, or consultant of the Agency, the Agency or City have personal liability for payment of any amounts that may become due and payable by the Agency to the Borrower under this Agreement. SECTION 6.6. Enforced Delay: Extension of Time of Performance. (a) In addition to specific provisions of this Agreement, performance by either party hereunder shall not be deemed to be in default, or considered to be a default, where delays or defaults are due to force majeure events beyond the control of such party, including, without limitation, war, ® insurrection, strikes, lockouts, riots, floods, earthquakes, fires, casualties, acts of God, acts of the public enemy, epidemics, quarantine restrictions, government imposed moratorium legislation, freight embargoes, lack of transportation, weather-caused delays, inability to secure necessary labor, materials or tools, delays of any contractor, subcontractor or supplier, that are not attributable to the fault of the 35 PUgendns\Ap de Anachmern.V,snda Anechrn to%Agmts-Amend 201MI2 10 LAW Senior ApMmeRS-Acquisition and 13cwopment Residual Receipts Loan Agreementdoc i party claiming an extension of time, that suspends the commencement of rehabilitation of the Project, or, if after such construction is commenced, suspends the prosecution of the work of improvement of the Project. An extension of time for any such force majeure cause shall be for the period of the enforced delay and shall commence to run from the date of occurrence of the delay; provided, however, that the party claiming the existence of the delay first provides the other party with written notice of the occurrence of the delay, within ten(10) days after the commencement of such occurrence of a force majeure event and, thereafter, takes prompt and reasonable action within its control to restore, reconstruct, or rebuild any damage to the Project caused by such force majeure event and resume regular business operation. (b) The inability of the Borrower to obtain the Construction Loan or the failure of the City to provide any necessary approval relating to the development of the Project or the inability of the Borrower to satisfy any other condition of this Agreement relating to the design, financing or development of the Project on the Site, shall not be deemed to be a force majeure event or otherwise provide grounds for the assertion of the existence of a forced delay under this Section 6.6. The Parties each expressly acknowledge and agree that changes in either general economic conditions or changes in the economic assumptions of either of them that provided a basis for entering into this Agreement occurring at any time after the execution of this Agreement, are not force majeure events and do not provide either party with grounds for asserting the existence of a forced delay in the performance of j any covenant or undertaking arising under this Agreement. Each party expressly assumes the risk that changes in general economic conditions or changes in their economic assumptions could impose an inconvenience or hardship on the continued performance by such party under this Agreement and that Osuch inconvenience or hardship is not a force majeure event and does not excuse the performance by such party of its obligations under this Agreement. I SECTION 6.7. Modifications. Any alteration, change or modification of or to this Agreement, in order to become effective, shall be made by written instrument or endorsement thereon and in each such instance executed on behalf of each party hereto. If an Investor Limited Partner or a lender of the Senior Financing should, as a condition of providing funding for the Project, request any modification of this Agreement in order to protect its interests in the Project or this Agreement, the Interim Executive Director of the Agency shall consider such request in good faith consistent with the purpose and intent of this Agreement and the rights and obligations of the Parties under this Agreement. The Interim Executive Director of the Agency shall have the authority to approve revisions to the terms of this Agreement requested if he/she reasonably determines, based upon the advice of counsel to the Agency, that such revisions: (a) are limited to minor, technical or procedural matters; (b) do not increase the amount of the Agency Loan; (c) do not result in a reduction of equity and loan funds required of the Borrower to be sufficient for the Borrower to complete the Project; (d) do not materially adversely affect the economic feasibility of the Project; (e) do not materially adversely affect the security of the Agency Deed of Trust; and (f) do not materially reduce any benefit to the Agency or the public pursuant to this Agreement or increase any financial obligation of the Agency pursuant to this Agreement. The Interim Executive Director of the Agency shall have the right to approve or disapprove such changes in his/her sole discretion or may submit alteration, change or modification of the provisions of this Agreement to the governing body of the Agency if deemed appropriate by the Interim Executive Director of the Agency. 36 1':AgendaskAgenda AnachmennAAgenda AttacM1memsWgrmts,Amend 201012-06-10 Lugo Senior Apartments-Acquisition and Development Residual Receipts Loan Agreement doe SECTION 6.8. Representations and Warranties of Borrower. The Borrower hereby makes the following representations, covenants and warranties and acknowledges that the execution of this Agreement by the Agency has been made in material reliance by the Agency on such covenants, representations and warranties: (1) The Borrower is a duly organized and validly existing California limited partnership. The Borrower has the legal right, power and authority to enter into this Agreement and the instruments and documents referenced herein and to consummate the transactions contemplated hereby. The persons executing this Agreement and the instruments referenced herein on behalf of the Borrower hereby represent and warrant that such persons have the power, right and authority to bind the Borrower. (2) The Borrower has taken all requisite action and obtained all requisite consents in connection with entering into this Agreement and the instruments and documents referenced herein and the consummation of the transactions contemplated hereby, and no consent of any other party is required. (3) This Agreement is, and all agreements, instruments and documents to be executed by the Borrower pursuant to this Agreement shall be, duly executed by and are or shall be valid and legally binding upon the Borrower and enforceable in accordance with their respective terms. (4) Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby shall result in a breach of or constitute a default under any other agreement, document, instrument or other obligation to which the Borrower is a party or by which the Borrower may be bound, or under law, statute, ordinance, rule, governmental regulation or any writ, injunction, order or decree of any court or governmental body applicable to the Borrower or to the Site. All representations and warranties contained in this Section 6.8 are true and correct on the Effective Date and on the Closing of the Acquisition Escrow, and the Borrower's liability for misrepresentation or breach of warranty, representation or covenant, wherever contained in this Agreement, shall survive the execution and delivery of this Agreement and the close of each such escrow as referred in the preceding sentence. SECTION 6.9. Representations and Warranties of the Agency. The Agency hereby makes the following representations, covenants and warranties and acknowledges that the execution of this Agreement by the Borrower has been made and the acquisition by the Borrower of the Site will have been made in material reliance by the Borrower on such covenants,representations and warranties: (1) Each and every undertaking and obligation of the Agency under this Agreement shall be performed by the Agency timely when due; and that all representations and warranties of the Agency under this Agreement and its Exhibits shall be true in all material respects as of the Effective Date. 37 P.\Agendas\Agenda AttachmentsUgenda Attachments\Agrmts-Amend 2010\12-06-10 Lugo Senior Apenmems-Acquisition and Development Residual Receipts Loan Agreement doc © (2) The Agency is acting as a community redevelopment agency, duly formed and operating under the laws of California. As such, the Agency has the legal power, right and authority to enter into this Agreement and to execute the instruments and documents referenced herein, and to consummate the transactions contemplated hereby. (3) The governing body of the Agency has taken official action to approve this Agreement and the instruments and documents referenced herein and the consummation of the transactions contemplated hereby. (4) The persons executing any instruments for or on behalf of the Agency have been authorized to act on behalf of the Agency and that this Agreement is valid and enforceable against the Agency in accordance with its terms and each instrument to be executed by the Agency pursuant hereto or in connection therewith will, when executed, be valid and enforceable against the Agency in accordance with its terms. No approval, consent, order or authorization of, or designation or declaration of any other person, is required in connection with the valid execution and delivery of and compliance with this Agreement by the Agency. If the Agency becomes aware of any act or circumstance which would change or render incorrect, in whole or in part, any representation or warranty made by the Agency under this Agreement, whether as of the date given or any time thereafter through the Closing and whether or not such representation or warranty was based upon the Agency' knowledge and/or belief as of a certain date, the Agency will give immediate written notice of such changed fact or circumstance to the QBorrower, but such notice shall not release the Agency of its liabilities or obligations with respect thereto. All representations and warranties contained in this Section 6.9(a) are true and correct on the date hereof and on the Closing Date and any Agency liability for misrepresentation or breach of warranty, representation or covenant, wherever contained in this Agreement, shall survive the execution and delivery of this Agreement and the Close of Escrow. SECTION 6.10. Binding Effect of Agreement. This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto, their legal representatives, successors, and assigns. SECTION 6.11. Assurances to Act in Good Faith. The Agency and the Borrower agree to execute all documents and instruments and to take all action and shall use their best efforts to accomplish the purposes of this Agreement. The Agency and the Borrower shall each diligently and in good faith pursue the satisfaction of any conditions or contingencies subject to their approval. SECTION 6.12. Severability. Wherever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law. If, however, any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such © prohibition or invalidity, without invalidating the remainder of such provision or the remaining I provisions of this Agreement. 38 P:\Agendas\A,,mda AttachmentMprala Attedm¢ms\Agmtb-AmmM 2010\12-06-10 Lugo Senior ApanmeMS-Acquisition and Development Residual Receipts Loan Agreement doe IN WITNESS WHEREOF the Agency and the Borrower have each executed this Agreement as of the date first written above. AGENCY Redevelopment Agency of the City of San Bernardino Date: By: Emil A. Marzullo, Interim Executive Director Approved as to Form and Legal Content: By: C6V)". -C� A ency Counsel BORROWER Lugo Senior Apartments, L.L.C., a California limited liability company Date: By: Name: Title: Approved as to Form: By: Legal Counsel for Borrower 39 P:NAVM s\Agende AnacAments\Agends A nhments\Agmts-A cM 2010\12-06-IO USo Senior Apmtmenb-Acquisition end Development Residwl Receipts L Ageementdoc EXHIBIT "A" Legal Description of the Site 40 P.Ugendas\Agenda A=hmamMgenda ARach MA#W mts-Amend 2010\12-0610[.ago Samor Apartments-Acquisition and Development Residual Receipts Loan Agreemencdoc i LEGAL DESCRIPTION The following described Real Property in the State of California, County of San Bernardino. That portion of Lot 2, Block 3 as shown on a plat of RANCHO SAN BERNARDINO as per plat recorded in Book 7 of Maps, page 2, records of said County, described as follows: BEGINNING AT A point on the Northerly line of said Lot 2 from which the Northwest corner thereof bears South 890 52' West, 142 feet; thence continuing on said northerly line of Lot 2 North 890 52' East, 30 feet; thence South 000 15' 31" East parallel to the Westerly line of said Lot 2, 130 feet; thence South 890 52' West parallel to said Northerly line of Lot 2, 50 feet; thence North 00° 15' 31" West parallel to the Westerly line of said Lot 2, 130 feet to the point of beginning. ® EXHIBIT "B" Agency Promissory Note 41 PMi,,andacAScnda AttachmentaVAgenda Attachmento Agrmts-Amend 2010\12-06-10 Lugo Senior Apartments-Acquisition and Development Residual Receipts Loan Agreemencdoe Q LUGO APARTMENTS,L.L.C. PROMISSORY NOTE Total Not to Exceed$6,500,000 , 20_ For value received, the undersigned, LUGO APARTMENTS, L.L.C., a California limited liability Company ("Borrower"), whose principal address is set forth below, promises to pay to the order of the REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, a 3 public body, corporate and politic, ("Agency") at 201 North "E" Street, Suite 301, San Bernardino, California 92401, the principal sum not to exceed the principal amounts as may be disbursed by A¢encv to Borrower from time to time as noted on the attached disbursement I schedule set forth herein as Exhibit "A" with interest to accrue from and after the date of each such disbursement (the "Loan"), or such amount as may be advanced hereunder, plus accrued and unpaid interest as provided herein below, and all other charges due hereunder, in accordance i with the terms and conditions of that certain Acquisition and Development Loan Agreement J dated as of December 6, 2010 entered into between Borrower and Agency (the "Loan !! Agreement"), and the terms and conditions of this Promissory Note (this "Note"). As set forth in greater detail in the Loan Agreement, the purpose of the Loan is to provide Borrower with acquisition, predevelopment and relocation financing in connection with an affordable senior housing project ("Project") on a site more particularly described in the Loan Agreement ("Eligible Property"). i 1. Interest. Unless otherwise provided, the terms in this Agreement shall have the definitions set out in the Loan Agreement. 1.1 The outstanding principal balance of the Agency Loan shall bear a rate of interest of ten percent(10%)per annum compounded quarterly on the outstanding principal balance from the date of disbursement to Borrower until the commencement of rehabilitation but not to exceed twenty-four (24) months from and after the closing date of the Acquisition Escrow. Upon the commencement of rehabilitation of the Project as shall be certified in writing by the Borrower to the Agency, the accrued and unpaid interest incurred as of that date shall be added to the ' principal balance of the Agency Loan, and from and after the date of the commencement of construction of the Project and the Agency Loan shall bear interest at a rate of three percent (3%) per annum simple annual interest until all principal and accrued and unpaid interest on the 1 Agency Loan with the principal balance adjustment as set forth above has been paid in full. l P:Wgendas\Agenda Anachments\Exhibib\2010\12-0610 Wgo Senior Apu rtts-P ntismty Note(Exhibit B) 1.2 The Agency Loan shall be for an initial term of twenty-four (24) months from the date when the Acquisition Escrow is closed and the Escrow Agent disburses the initial draw of proceeds of the Agency Loan to the Borrower for the Acquisition of the Site. A single twelve- month extension may be granted by the Agency, at the Agency's sole discretion, if the Agency deems that the Borrower is making a good-faith effort towards obtaining the necessary construction financing for the commencement of the construction of the Project. As set forth in subsection (1) above, upon commencement of rehabilitation of the Project as certified in writing by the Borrower to the Agency, the interest rate on the Agency Loan will automatically convert as provided in subsection (1) above for the remaining term of fifty-five (55) years from the date of closing of the Acquisition Escrow, and with the Agency Loan maturing no earlier than the expiration date of the term of the Agency Regulatory Agreement. In the event that the Interest Rate Conversion Conditions do not occur on or before the Interest Rate Conversion Deadline, the Borrower shall be required to repay the full amount of the then existing principal balance of the Agency Loan together with all accrued and unpaid interest thereon at the initial interest rate of ten percent (10%) per annum. The Agency Loan shall be due and payable immediately upon the occurrence of the Interest Rate Conversion Deadline subject to the provisions of the Loan Agreement and any failure of the Borrower to so pay the amounts owed under the Agency Loan shall be an Event of Default as defined and as further provided in the Loan Agreement. 1.3 Payment Dates and Amounts. Except as otherwise provided in this Note, Borrower shall repay the Loan, together with accrued interest in arrears, in annual installments on June 15th of each calendar year for the previous calendar year, commencing on June 15, 20_. Absent prepayment or acceleration, each of the annual payments due June 15, 20 through and including the June 15th following the 55th anniversary of the closing the Acquisition Escrow ("Maturity Date") shall be in an amount equal to fifty percent (50%) of "Residual Receipts" for the prior calendar year, as defined herein. Residual Receipts shall be calculated and reported to Agency annually for each calendar year no later than June 15th of the following calendar year on forms specified and provided by Agency from time to time. All calculations and records are subject to audit by Agency. Notwithstanding any other provision of this Note, unless due sooner, the entire outstanding principal balance of the Loan together with any outstanding interest and any other sums payable under this Note shall be due and payable in full on the Maturity Date. 1.4 Calculation of Residual Receipts. Borrower shall provide to Agency for inspection and copying any records, receipts, account books, ledgers, checks, or other documents or other evidence requested by Agency for the purpose of verifying Borrower's calculation of Residual Receipts, and shall promptly pay to Agency any further amount due but not paid as a result of any miscalculation by Borrower. In no event shall any Loan payment attributable to an Event of Default(as hereafter defined) or acceleration be deferred. 1.5 Default Rate. Any amounts (including but not limited to amounts of principal and interest on the Loan) which Borrower does not pay when due under the terms of this Note shall bear interest at the rate of fifteen percent (15%) per annum, simple interest ("Default Rate"), Ofrom the date due until the date paid or the maximum rate otherwise allowed by law. 2 P:WgeMas\Agenda Amcbmmts\F Wbrts=OA2-06-10 Lugo Senior Apartments-Pmmiswty NM(Exhibn B) 1.6 Definition of Residual Receipts The words "Residual Receipts" mean, for any period of time, the total gross cash receipts of the Borrower from ordinary operations (i.e., excluding the proceeds of(A) capital transactions, (B) the capital contributions of the partners and (C) the proceeds of any loans, less (i) the total cash disbursements of the Borrower (such as, but not limited to, operating expenses, costs of repair or restoration of the Project, property management fees, supportive services fees financing fees or other requirements of any Project lender and interest and principal repayments of any loans, other than loans from the any partner of the Borrower, (ii) amounts paid in connection with the establishment or maintenance of reserves as required to be maintained by the Borrower, , and(iii)the following amounts deducted in the following order of priority: (1) any priority distributions to be paid to a limited partner of the Borrower pursuant to the terms of the Tax Credit Limited Partnership Agreement, including, without limitation, any credit adjuster payments or asset management fees. (2) payments made to maintain/replenish any operating reserve as required by the Tax Credit Limited Partnership Agreement. (3) repayment of any [Limited Partnership Loan] loans made to the Borrower by the limited partner of the Borrower. [Carey— you will get a better definition of what these are] (4) payment of the managing general partner asset management fee pursuant to the Tax Credit Limited Partnership Agreement. (5) payments of deferred developer fee pursuant to the Tax Credit Limited Partnership Agreement. (6) repayment of any operating or completion loans made to the Borrower by a general partner of the Borrower pursuant to the Tax Credit Limited Partnership Agreement. 2. Acceleration. Notwithstanding the payment terms set forth in Section 1 above, upon the occurrence of any"Event of Default" as set forth in Section 9 below,the entire outstanding principal balance of this Note, together with any outstanding interest and other amounts payable hereunder, shall, at the election of Agency and upon notice to Borrower thereof become immediately due and payable without presentment, demand, protest or other notices of any kind, all of which are hereby waived by Borrower. 3. Prepayment; Application of Payments. At any time after the disbursement of the Loan proceeds, Borrower may prepay all or a portion of the unpaid principal amount of the Loan and accrued interest and any other sums outstanding without penalty. All payments, including any prepayments or funds received upon P NgmWea\Agende Ana .t,\Ex bitSU010\12- 10 Lugo Swim ApMmmta-Pmmiasory NNUtt(Ex bit B) Qacceleration pursuant to Section 2 above, shall be applied first toward any outstanding costs of collection or other amounts (excluding Loan principal or interest thereon) due under this Note or the Loan Agreement, then toward outstanding interest accrued at the Default Rate, if any, then toward outstanding interest accrued at the Basic Rate, if any, and finally toward the remaining principal balance under the Note. 4. Security and Source of Payment. Borrower's obligations under this Note and the Loan Agreement shall, at all rimes during which any amount remains outstanding, be secured by the deed of trust ("Deed of Trust") of even date herewith, and of which Agency is the beneficiary, recorded against Borrower's interest in the Eligible Property and the Project(collectively,the "Property"). The security interest in the Property granted to Agency pursuant to the Deed of Trust shall be subordinate only to the Senior Financing, as defined in the Loan Agreement, if any, and such exceptions to title shown in the title report for the Property which are approved in writing by Agency. The sole recourse of the Holder to recover any sum under this Promissory Note shall be to the Property subject to the Agency Deed of Trust, except in the event o£ (a) fraud by the Borrower (or its assignee), (b) any material misrepresentation made by the Borrower to the Agency under the Loan Agreement, (c)misappropriation by the Borrower(or its assignee) of any rents, security deposits, tax collection amounts, security deposits, or insurance or condemnation awards of the Project, (d) commission of bad faith waste by the Borrower (or its assignee) or (e) the presence of"Hazardous Substances" on the Site, as this term is defined in the Agency Deed of Trust." 5. Obligation of Borrower Unconditional. The obligation of Borrower to repay the Loan and all accrued interest thereon and all other sums due thereunder shall be absolute and unconditional, and until such time as all of the outstanding principal of, interest on and all other sums due under,this Note shall have been fully paid, Borrower agrees that it: (a) will use the funds solely for the purposes set forth herein; and (b) will not terminate or suspend any payment or obligations under this Note, the Loan Agreement, or any other document executed hereunder or in connection herewith for any cause, including without limitation, any acts or circumstances that may constitute failure of consideration, commercial frustration of purpose, or any duty, liability or obligation arising out of or in connection with this Note, the Loan Agreement or any document executed hereunder or in connection herewith. 6. Pumose of Loan. The Loan proceeds shall be used by Borrower only to provide acquisition, predevelopment and relocation financing for the housing development described in the Loan Agreement. In no event shall Borrower use or otherwise invest the proceeds of the Loan except as expressly provided in this Note. P1Agrndn\Ag tt enda Aacbments\Euhibits\2010\12-06-10 Lup Srnior Apartments-Promissory ote(Exhibit B) 7. Covenants of Borrower. As additional consideration for the making of the Loan by Agency, Borrower covenants as follows: 7.1 Compliance with the Loan Agreement and the Deed of Trust. Borrower shall comply with all of its obligations under the Loan Agreement and the Deed of Trust. Any amounts payable by Borrower under the Deed of Trust (other than amounts also payable hereunder) shall be deemed added to the principal amount of the Loan payable hereunder. 7.2 Other Loans. Borrower shall comply with all monetary and nonmonetary covenants associated with any loan secured by an interest in the Property or the Project. Borrower shall provide to Agency a copy of any notice of default within five business days after receiving any notice of a default or alleged default of such covenants by Borrower, and Borrower shall promptly cure any such default and cooperate in permitting Agency, to the extent Agency in its sole discretion elects to do so, to cure or assist in curing the default. Any cost or expenditure incurred by Agency in providing or assisting in such a cure shall be added to the outstanding principal amount of the Loan. 8. Assignment of this Note. This Note shall be assignable by Borrower only if Borrower obtains the prior express written consent of Agency, which consent may be withheld by Agency in its sole discretion. Notwithstanding anything to the contrary in this Note, no purported assignment of this Note and the Loan shall be effective if such assignment would violate the terms, conditions and restrictions of any Applicable Governmental Restrictions. The Agency's consent to such assignment shall be expressly conditioned upon (i) the assignee's execution of such documents as required by Agency in its sole discretion, including, without limitation, any and all documents deemed necessary by Agency to provide for said assignee's assumption of all of the obligations of Borrower hereunder and under Agency Loan Documents, and (ii) Agency's approval of the financial and credit worthiness of such proposed assignee and the assignee's ability to perform all of the Borrower's covenants under this Note and any of the other Agency Loan Documents. 9. Events of Default and Remedies. A. Borrower Events of Default. The occurrence of any of the following shall, after the giving of any notice and the expiration of any applicable cure period described therein, constitute an event of default by Borrower hereunder("Event of Default"): (1) The failure of Borrower to pay or perform any monetary covenant or obligation hereunder or under the terms of this Note or the Deed of Trust or the Loan Agreement, without curing such failure within ten(10) calendar days after the date such payment is due. Notwithstanding anything herein to the contrary,the herein described cure period shall not apply ® to a failure by Borrower to timely repay Agency Loan at the Maturity Date of this Note; P:1Agendas4Agenda Anwhmems lExhibitsV01OV2- 101.ugo Senior Apenmems-Promissory Note(Exhibit1l) (2) The failure of Borrower to perform any nonmonetary covenant or obligation hereunder or under the terns of this Note, the Deed of Trust or the Loan Agreement, without curing such failure within thirty(30) calendar days after receipt of written notice of such default from Agency (or from any party authorized by Agency to deliver such notice as identified by Agency in writing to Borrower) specifying the nature of the event or deficiency giving rise to the default and the action required to cure such deficiency; provided, however, that if any default with respect to a nonmonetary obligation is such that it cannot be cured within a thirty day period, it shall be deemed cured if Borrower commences the cure within said thirty day period and diligently prosecutes such cure to completion thereafter with the cure completed in any event within 180 calendar days after the notice. Notwithstanding anything herein to the contrary, the herein described notice cure periods shall not apply to any Event of Default described in Sections 9(A)(3)through 9(A)(8)below; (3) The material falsity of any representation or breach of any warranty or covenant made by Borrower under the terms of this Note, the Loan Agreement or the Deed of Trust as of the date made; (4) Borrower shall (a)apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of its property, (b)fail to pay or admit in writing its inability to pay its debts generally as they become due, (c)make a general assignment for the benefit of creditors, (d)be adjudicated a bankrupt or insolvent or (e) commence a voluntary case under the Federal bankruptcy laws of the United States of America or file a voluntary petition that is not withdrawn within ten (10) calendar days after the filing thereof or answer seeking an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy or insolvency proceeding; (5) If without the application, approval or consent of Borrower, a proceeding shall be instituted in any court of competent jurisdiction, under any law relating to bankruptcy, in respect of Borrower, for an order for relief or an adjudication in bankruptcy, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of Borrower or of all or any substantial part of Borrower's assets, or other like relief in respect thereof under any bankruptcy or insolvency law, and, if such proceeding is being contested by Borrower, in good faith,the same shall (a)result in the entry of an order for relief or any such adjudication or appointment, or (b) continue undismissed, or pending and unstayed, for any period of ninety(90)consecutive calendar days; (6) Following completion of the rehabilitation of the Project, voluntary cessation of the operation of the Project for a continuous period of more than thirty (30) calendar days or the involuntary cessation of the operation of the Project in accordance with this Note for a continuous period of more than sixty (60)calendar days; (7) Borrower shall suffer or attempt to effect a Transfer (as defined in the ® Loan Agreement), in violation of Section 1.5 of the Loan Agreement; or 6 PWgendes\Agenda Attachmenu\ExhibitsU010\12- 10Lugo Senior Apartments-Promissory Note(Exhibit 3) (8) Borrower shall be in default under the Regulatory Agreement, Senior Financing, Junior Financing, Other Financing or any other secured or unsecured obligation relating to the Project, unless the default is cured within the cure period, if any, applicable thereto under the terms of the obligation which is in default. B. Agency Remedies. Upon the occurrence of an Event of Default hereunder, Agency may, in its sole discretion,take any one or more of the following actions: (1) By notice to Borrower, declare the entire then unpaid principal balance of the Loan immediately due and payable, and the same shall become due and payable without further demand, protest or further notice of any kind, all of which are hereby expressly waived by Borrower. Upon such declaration, outstanding principal and (to the extent permitted by law) interest and any other sums outstanding in connection with the Loan shall thereafter bear interest at the Default Rate, payable from the date of such declaration until paid in full; (2) Subject to the nonrecourse provisions of Section 4 above, take any and all actions and do any and all things which are allowed, permitted or provided by law, in equity or by statute, in the sole discretion of Agency, to collect the amounts then due and thereafter to become due hereunder, to exercise its rights under the Deed of Trust, and to enforce performance and observance of any obligation, agreement or covenant of the Borrower under this Note or under any other document executed in connection herewith; (3) Subject to the nonrecourse provisions of Section 4 above, upon the occurrence of an Event of Default, which is occasioned by Borrower's failure to pay money, whether under this Note or the Loan Agreement, Agency may, but shall not be obligated to, make such payment. If such payment is made by Agency, Borrower shall deposit with Agency, upon written demand therefor, such sum plus interest at the Default Rate. The Event of Default with respect to which any such payment has been made by Agency shall not be deemed cured until such repayment has been made by Borrower. Until repaid, such amounts shall have the security afforded disbursements under this Note; (4) Subject to the nonrecourse provisions of Section 4 above, upon the occurrence of an Event of Default described in Section 9(A)(3) or 9(A)(4) hereof, Agency shall be entitled and empowered by intervention in such proceedings or otherwise to file and prove a claim for the whole amount owing and unpaid on the Loan and, in the case of commencement of any judicial proceedings,to file such proof of claim and other papers or documents as may be necessary or advisable in the judgment of Agency and its counsel to protect the interests of Agency and to collect and receive any monies or other property in satisfaction of its claim. C. No Remedy Exclusive. No remedy herein conferred upon or reserved to Agency is intended to be exclusive of any other available remedy or remedies, but each such remedy shall be cumulative and shall be in addition to every other remedy given under this Note or now or hereafter existing at law or in equity or by statute; and may be exercised in such number, at such times and in such order as Agency may determine in its sole discretion. No delay or omission to exercise any right or power upon the occurrence of any Event of Default hereunder PMgendas\Agee&Atlachmcros Exhibits=10\12O 10 Up Scmr Ape mn-Promiswry Note(Fxhib6 B) Qshall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient by Agency. In order to entitle Agency to exercise any right or remedy reserved to it under this Note, no notice shall be required except as expressly provided herein. D. Agency Default and Borrower Remedies. Upon fault or failure of Agency to meet any of its obligations under this Note without curing such failure within thirty(30) calendar days after receipt of written notice of such failure from Borrower specifying the nature of the event or deficiency giving rise to the default and the action required to cure such deficiency, Borrower may, as its sole and exclusive remedies: i (1) Demand and obtain payment from Agency of any sums due to or for the benefit of Borrower pursuant to the express terms of this Note; i (2) Bring an action in equitable relief seeking the specific performance by Agency of the terms and conditions of this Note or seeking to enjoin any act by Agency which is prohibited hereunder; or (3) Bring an action for declaratory relief seeking judicial determination of the meaning of any provision of this Note. I © Without limiting the generality of the foregoing, Borrower shall in no event be entitled to, and hereby waives, any right to seek indirect or consequential damages of any kind or nature from Agency arising out of or in connection with this Note, and in connection with such waiver Borrower is familiar with and hereby waives the provisions of Section 1542 of the California Civil Code which provides as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." 10. Aereement to Pay Attorneys' Fees and Expenses. In the event that either party hereto brings any action or files any proceeding in connection with the enforcement of its respective rights under this Note or any of the other Loan i Documents as a consequence of any breach by the other party of its obligations hereunder or thereunder, the prevailing party in such action or proceeding shall be entitled to have its reasonable attorneys' fees and out-of-pocket expenditures paid by the losing party. The attorneys' fees so recovered shall include fees for prosecuting or defending any appeal and shall be awarded for any supplemental proceedings until the final judgment is satisfied in full. In addition to the foregoing award of attorneys' fees, the prevailing party in any lawsuit on this Note or any other Loan Document shall also be entitled to its attorneys' fees incurred in any post judgment proceedings to collect or enforce the judgment. In addition to the foregoing, O Borrower agrees to pay or reimburse Agency, upon demand by Agency, for all costs incurred by j Agency in connection with the enforcement of this Note, and any other Loan Document, 8 P:VA ndaxNgeMa Ananhmertts\Exhibhs\2010\12-0610 Lugo Senior Apa esrts-Promismry Nine(Exhibit B) i including without limitation, reasonable attorneys' fees and costs, if there shall be filed by or against Borrower any proceedings under any federal or state bankruptcy or insolvency laws, whether Agency is a creditor in such proceeding or otherwise. 11. Conflict of Interest:No Individual Liability. No official or employee of Agency shall have any personal interest, direct or indirect, in this Note, nor shall any official or employee of Agency participate in any decision relating to this Note which affects such official's or employee's pecuniary interest in any corporation, partnership or association in which such official or employee is directly or indirectly interested. No official or employee of Agency shall be personally liable in the event of a breach of this Note by Agency. 12. Amendments, Changes and Modifications. This Note may not be amended, changed, modified, or altered without the prior written consent of the parties hereto. 13. Notices. All notices, demands, requests, elections, approvals, disapprovals, consents or other communications given under this Note shall be in writing and shall be given by personal delivery, facsimile, certified mail (return receipt requested), or overnight guaranteed delivery service and faxed or addressed as follows: If to Agency: Redevelopment Agency of the City of San Bernardino 201 North`B" Street, Suite 301 San Bernardino, California 92401 Attn.: Interim Executive Director Fax No. (909) 663-2294 With a copy to: Redevelopment Agency of the City of San Bernardino 201 North"E" Street, Suite 301 San Bernardino, California 92401 Attn.: Director of Housing and Community Development Fax No. (909) 888-9413 If to Borrower: Meta Housing Corporation 1640 South Sepulveda Boulevard,#425 Los Angeles, CA 90025 Attn.: John Huskey 9 P'.\Agendas\Agmda AUaohmenU\ExhibitA2010\12-06-10 Lugo Senior Apartments-Promissory Note(Exhibit B) With a Copy to: Bocarsly Emden Cowan Esmail &Ardnt, LLP 633 West Fifth Street, 70th Floor Los Angeles, CA 90071 Attn.: Lance Bocarsly Notices shall be effective upon receipt, if given by personal delivery; upon receipt, if faxed, provided there is written confirmation of receipt (except that if received after 5 p.m., notice shall be deemed received on the next business day); the earlier of (i) three (3) business days after deposit with United States Mail, or (ii) the date of actual receipt as evidenced by the return receipt, if delivered by certified mail; or (iii) one (1) day after deposit with the delivery service, if delivered by overnight guaranteed delivery service. Each party shall promptly notify the other party of any change(s)of address to which notice shall be sent pursuant to this Note. 14. Severabilitv. The invalidity or unenforceability of any one or more provisions of this Note will in no way affect any other provision. 15. Interpretation. Whenever the context requires, all words used in the singular will be construed to have r^ been used in the plural, and vice versa, and each gender will include any other gender. The captions of the paragraphs of this Note are for convenience only and do not define or limit any terms or provisions. Time is of the essence in the performance of this Note by Borrower. Each Party has been represented by counsel in the negotiation of this Note, and it shall not be interpreted in favor of or against any Party on account of relative responsibilities in drafting. Notwithstanding any other provision of this Note, nothing herein or in this Note shall be deemed to require Borrower to pay interest in the amount of any applicable usury law or other legal limitation on interest, and the terms hereof and of this Note shall be interpreted to require in each instance the lesser of(i) the amount stated in this Note; and (ii) the maximum applicable legal limit. Defined terms not otherwise defined herein shall have the meaning assigned to them by the Loan Agreement. 16. No Waiver: Consents. Any waiver by Agency must be in writing and will not be construed as a continuing waiver. No waiver will be implied from any delay or failure by Agency to take action on account of any default of Borrower. Consent by Agency to any act or omission by Borrower will not be construed as consent to any other or subsequent act or omission or to waive the require- ment for Agency's consent to be obtained in any future or other instance. 17. Governin¢ Law. This Note shall be governed by the laws of the State of California. 10 PAAgenduN Senda Atlarhments\ExhibitsM10\12-0610 Lugo Senior Apartments-Promissory Note(Exhibit B) 18. Representations, Warranties and Additional Covenants of Borrower. Borrower hereby represents, warrants and covenants to Agency that: A. Organization and Standing. Borrower is a California legal entity as described in the Loan Agreement, duly formed, qualified to operate in California and validly existing and in good standing under all applicable laws, and has all requisite power and authority to enter into and perform its obligations under this Note, the Loan Agreement, Deed of Trust, the Regulatory Agreement and all other documents executed in connection herewith. B. Enforceability. This Note and all other instruments to be executed by Borrower in connection with the Loan constitute the legal, valid and binding obligation of Borrower, without joinder of any other party. C. Authorization and Consents. The execution, delivery and performance of this Note and all other instruments to be executed in connection herewith is consistent with the operating agreement,partnership agreement or articles and bylaws governing Borrower and have been duly authorized by all necessary action of Borrower's members, partners, directors, officers and shareholders. D. Due and Valid Execution. This Note and all other instruments to be executed in ® connection herewith, will, as of the date of their execution, have been duly and validly executed by Borrower. E. Licenses. Borrower will obtain and maintain all material licenses, permits, consents and approvals required by all applicable governmental authorities to own and operate the Project. F. Litigation and Compliance. There are no suits, other proceedings or investigations pending or threatened against, or affecting the business or the properties of Borrower (other than those as have been previously disclosed in writing to Agency) which could impair its ability to perform its obligations under this Note, nor is Borrower in violation of any laws or ordinances which could materially impair Borrower's ability to perform its obligations under this Note. G. Default. There are no facts now in existence which would, with the giving of notice or the lapse of time, or both, constitute an "Event of Default" hereunder, as described in Section 9. H. No Violations. The execution and delivery of this Note and all other documents executed or given thereunder, and the performances hereunder and thereunder by Borrower, as applicable, will not constitute a breach of or default under any instrument or agreement to which Borrower may be a party nor will the same constitute a breach of or violate any law or ^, governmental regulation. 11 P:\Agevdas\Agende A bmems\Exhibns\2010\12-06-10 Lugo$mior Apu ems-Promissory Note(Exhibit B) 19. Annrovals. Except with respect to those matters set forth hereinabove providing for Agency's approval, consent or determination to be at Agency's "sole discretion" or "sole and absolute discretion," Agency hereby agrees to act reasonably with regard to any approval, consent, or other determination given by Agency hereunder. Agency agrees to give Borrower written notice of its approval or disapproval following submission of items to Agency for approval, including, in the case of any disapproved item, the reasons for such disapproval. Any review or approval of any matter by Agency or any Agency official or employee under this Note shall be solely for the benefit of Agency, and neither Borrower nor any other person shall rely upon such review or approval as an indication of the wisdom, soundness, safety, appropriateness, or presence or absence of any matter. Without limiting the generality of the foregoing, Borrower and not Agency shall be solely responsible for assuring compliance with laws, the suitability of the Eligible Property for the Project, the adequacy of the plans, and the safety of the Project construction site,the completed Project, and the operation thereof. Any consent to a Transfer given by Agency under this Note, the Deed of Trust, the Loan Agreement, or any of the other documents executed in connection therewith, may be given by Agency's Interim Executive Director or its Director of Housing and Community Development without action by Agency's governing body, unless the Interim Executive Director or the Director of Housing and Community Development elects to refer the matter to the governing body. 20. Good Faith and Fair Dealine. The Agency and Borrower agree to perform all of their obligations and the actions required of each hereunder in good faith and in accordance with fair dealing. 21. Waiver. Borrower agrees that it will still be liable for repayment of this Note, subject to the nonrecourse provision of Section 4 above, even if the holder hereof does not follow the procedures of presentment, protest, demand, diligence, notice of dishonor and of nonpayment, which requirements are hereby waived. Failure of Agency or other holder hereof to exercise any right or remedy hereunder shall not constitute a waiver of any future or other default. No accep- tance of a past due installment or indulgence granted from time to time shall be construed to be a waiver of, or to preclude the exercise of, the right to insist upon prompt payment thereafter or to impose late charges retroactively or prospectively, or to waive or preclude the exercise of any other rights which Agency may have. 12 PAAgendas\Agenda Alta ents\Exldbks\2010\12A 10 Lugo Senior Apahmen[s-Promissory Nom(Exhibk B) IN WITNESS WHEREOF, Borrower has executed this Note as of the date and year first above written BORROWER: LUGO APARTMENTS,L.L.C. a California limited liability company By: Name: Title: O 13 P.Wgen&sWgendx Anach ents\Exhibks\2010\12-06-10 Lugo Smw Ape Ws-Pm iswry NNe(Exhibit B) EXHIBIT "A" to Promissory Note LOAN DISBURSEMENT SCHEDULE Date of Principal Advance: Principal Amount: 0 14 P'.\Agemles\Agmde At hmems�xhibits\2010\12.06-10 Lugo Savior Apertmems-Promissory Note(Exhibit B) ® EXHIBIT "C" Agency Deed of Trust 42 P\Agendas\Agenda Anachmems\Agenda Attachments\Agrmts-Amend 2010\12-0610 Ingo Senior Apartments-Acquisition and Development Residual Rmeipts Loan Agreement doe Recording Requested by and When Recorded Mail To: REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO 201 North"E" Street, Suite 301 San Bernardino, CA 92401 Attn.: Director of Housing and Community Development Above Space For Recorder's Use Only Document entitled to free recording per Govt.Code Section 6103 DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING THIS DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING ("Deed of Trust") is made as of December 6, 2010, by and between LUGO SENIOR APARTMENTS, L.L.C, a California limited liability company ("Trustor"), North American Title ("Trustee"); and the REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, a public body, corporate and politic ("Agency"). RECITALS A. THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, a public body corporate and politic ("Agency") shall be identified as a beneficiary of this Deed of Trust and shall have the right to all of the benefits pertaining therein. B. Solely and Jointly, the Agency shall be the"Beneficiary"of this Deed of Trust. C. Agency and Trustor are parties to the Acquisition and Development Loan Agreement ("Loan Agreement") dated as of the 6ffi day of December, 2010, on the terms and conditions of which Trustor shall borrow low and moderate income housing funds ("Housing Funds") from Agency and Agency shall lend to Trustor, the original principal amount of up to SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($6,500,000) in Low-Mod Housing Funds ("Housing Loan"). The Housing Loan is evidenced by a promissory note of even date herewith executed by Trustor(the"Note") in the principal amount of the Housing Loan. D. Trustor intends to use the Housing Loan proceeds for the purpose of providing financing for the housing development described in the Loan Agreement (the "Project"). The Project will be developed on a site legally described in Attachment"A"to this Deed of Trust(the "Property"). PAAgendas\Agenda A=hmrnts\Exhibits\2010\12-06-10 Lugo Smim Apartmrnts-Dad ofTm4(Exhibit C) NOW THEREFORE, in consideration of the Housing Loan, Trustor hereby irrevocably grants, conveys, transfers and assigns to Trustee, its successors and assigns, in trust, with power of sale and right of entry and possession as provided below all of its present and future estate, right, title and interest in and to the Property, together with all right, title and interest of Trustor therein and in and to, and grants to Beneficiary a security interest in,the following: (A) All development rights, air rights, water, water rights, and water stock relating to the Eligible Property. (B) All present and future structures, buildings, improvements, appurtenances and fixtures of any kind on the Property, including but not limited to all apparatus, attached equipment and appliances used in connection with the operation or occupancy of the Eligible Property, such as heating and air-conditioning systems and facilities used to provide any utility services, ventilation, vehicular cleaning, storage or other services on the Eligible Property, and all signage, carpeting and floor coverings, partitions, generators, screens, awnings, boilers, furnaces, pipes, plumbing, vacuum systems, brushes, blowers, cleaning, call and sprinkler systems, fire extinguishing apparatus and equipment, water tanks, heating, ventilating, air conditioning and air cooling equipment, and gas and electric machinery and equipment, it being intended and agreed that all such items will be conclusively considered to be a part of the Eligible Property conveyed by this Deed of Trust, whether or not attached or affixed to the Eligible Property. (C) All appurtenances of the Eligible Property and all rights of Trustor in and to any streets, roads or public places, easements or rights of way,relating to the Eligible Property. (D) All of the rents, royalties, profits and income related to the Eligible Property, to the extent not prohibited by any applicable law. (E) All proceeds and claims arising on account of any damage to or taking of the Eligible Property and all causes of action and recoveries for any loss or diminution in value of the Eligible Property. (F) All existing and future goods, inventory, equipment and all other personal property of any nature whatsoever now or hereafter located on the Eligible Property which are now or in the future owned by Trustor and used in the operation or occupancy of the Eligible Property or in any rehabilitation on the Eligible Property but which are not effectively made real property under subsection (B) above, including but not limited to all appliances, furniture and furnishings, building service equipment, and building materials, supplies, equipment, machinery, plumbing and plumbing material and supplies, concrete, lumber, hardware, electrical wiring and electrical material and supplies, roofing material and supplies, doors, paint, drywall, insulation, cabinets, ceramic material and supplies, flooring, attached appliances, fencing, landscaping and all other materials, supplies and property of every kind and nature. 2 PUgendas,Agmde A KhmentsTE 1nibits\2010\12-06-10Lugo Senior Apsrtoune-Dad of Trust(Exhibit Q (G) All present and future accounts, general intangibles, chattel paper, contract rights, deposit accounts, instruments and documents as those terns are defined in the California Uniform Commercial Code, now or hereafter relating or arising with respect to the Eligible Property and/or the use thereof or any improvements thereto, including without limitation: (i)all rights to the payment of money, including escrow proceeds arising out of the sale or other disposition of all or any portion of the estate of Trustor upon the Eligible Property now or hereafter existing thereon; (ii)all plans, specifications and drawings relating to the development of the Eligible Property and/or any construction thereon; (iii) all use permits, licenses, occupancy permits, construction and building permits, and all other permits and approvals required by any governmental or quasi-governmental authority in connection with the development, construction, use, occupancy or operation of the Eligible Property; (iv)any and all agreements relating to the development, construction, use, occupancy and/or operation of the Eligible Property between Trustor and any contractor, subcontractor, project manager or supervisor, architect, engineer, laborer or supplier of materials; (v)all lease or rental agreements; (vi) all names under which the Eligible Property is now or hereafter operated or known and all rights to carry on business under any such names or any variant thereof, (vii) all trademarks relating to the Eligible Property and/or the development, construction, use, occupancy or operation thereof-, (viii) all goodwill relating to the Eligible Property and/or the development, construction, use, occupancy or operation thereof; (ix) all reserves, deferred payments, deposits, refunds, cost savings, bonds, insurance policies and payments of any kind relating to the Eligible Property; (x) all loan commitments issued to Trustor in connection with any sale or financing of the Eligible Property; © (xi) all funds deposited with Beneficiary by Trustor, and all accounts of Trustor with Beneficiary, including all accounts containing security deposits and prepaid rents paid to Trustor in connection with any leases of the Eligible Property, and all proceeds thereof; and (xii) all supplements, modifications and amendments to the foregoing. (H) All of the right, title and interest of Trustor in and to all sales contracts of any nature whatsoever now or hereafter executed covering any portion of the Eligible Property, together with all deposits or other payments made in connection therewith. (I) All of the right, title and interest of Trustor in and to any construction contracts, plans and specifications, building permits, and all other documents necessary for completion of the improvements to the construction of the Eligible Property. (J) All water stock relating to the Eligible Property, all shares of stock or other evidence of ownership of any part of the Eligible Property that is owned by Trustor in common with others, and all documents of membership in any owner's or members' association or similar group having responsibility for managing or operating any part of the Eligible Property. Trustor does hereby covenant with Trustee and Beneficiary, that Trustor has good right to bargain, sell and convey Trustor's interest in the Eligible Property in manner and form as above written; and Trustor warrants and will defend same to Beneficiary, forever, against all lawful claims and demands whatsoever except as stated above. 3 ® R: gendes\AgeM Atteclunems�ibitst2010\12-0610 Lugo Senior Ape ents-Deed ofTw(Exhibh C) i THIS DEED OF TRUST IS FOR THE PURPOSE OF SECURING: (1) performance of each agreement of Trustor herein contained or incorporated herein by reference; (2) payment of the indebtedness (including, without limitation, interest thereon) evidenced by the Note, and any extension or renewal or modification thereof; (3) performance of each agreement of Trustor contained in the Loan Agreement or any of the other "Loan Documents" (as defined in the Loan Agreement), and any extension, renewal or modification of such other Loan Documents; TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR HEREBY COVENANTS AND AGREES AS FOLLOWS: 1. Payment of Secured Obligations. To pay when due (a) the principal of, and the interest on, the indebtedness evidenced by the Note, (b) charges, fees and all other sums as provided in the Loan Agreement, and (c)the principal of, and interest on, any future advances secured by this Deed of Trust. 2. Maintenance, Repair, Alterations. To keep the Eligible Property in good © condition and repair; to complete promptly and in a good and workmanlike manner all improvements to be constructed on the Eligible Property, including specifically all improvements described in the Loan Agreement, and promptly restore in like manner any structure that may be damaged or destroyed thereon; to pay when due all claims for labor performed and materials furnished therefore, to comply with all laws, ordinances, regulations, covenants, conditions and restrictions now or hereafter affecting the Eligible Property or any part thereof or requiring any alterations or improvements thereon; not to commit or permit any waste or deterioration of the Eligible Property; to keep and maintain abutting grounds, sidewalks, roads, parking and land- scape areas in good and neat order and repair; not to commit, suffer or permit, to the extent Trustor is able by the exercise of commercially reasonable best efforts, any act to be done in or upon the Eligible Property in violation of any law, ordinance or regulation. 3. Insurance. To provide, maintain at its expense and deliver to Beneficiary at all times until payment in full of all obligations secured hereby, insurance as required by the Loan Agreement or the Note. In the event of any loss or damage, Trustor shall give immediate notice thereof to Beneficiary, and Beneficiary may thereupon make proof of such loss or damage, if the same is not promptly made by Trustor. Trustor and Beneficiary hereby agree to cooperate in making any adjustment and compromise of any loss covered by the aforementioned insurance policies upon the Eligible Property, and Trustor authorizes and empowers Beneficiary, at its option, to collect and receive the proceeds, and endorse checks and drafts issued therefor. Beneficiary agrees that in the event of any loss covered by insurance policies on the Eligible Property subject to this Deed of Trust, provided there is not then existing any material default ® (or such existing default will be cured by the proceeds of such insurance) in the observance or 4 P.\Agendes\Ageide A chmene\Exblbits\2010\12-06 epia 10 Lugo S Apartments-Dad of T=tl st(Exhibit C) Qperformance of any of the covenants and agreements contained herein or in the Note or any future notes secured hereby, or in any other agreement with or for the benefit of the Beneficiary in connection with any indebtedness secured hereby, the proceeds of such insurance shall be used for the repair or restoration of the Eligible Property and will be disbursed in accordance with such protective terms and conditions as Beneficiary may reasonably impose. Trustor hereby fully assigns to Beneficiary all current and future claims it may have under any policy of insurance related to the Eligible Property or the Project, regardless of whether such insurance was required to be maintained under the Housing Loan Documents. Any and all unexpired insurance shall inure to the benefit of and pass to the purchaser of the Eligible Property at any foreclosure sale, or any Trustee's sale held pursuant hereto. Further, Beneficiary may at the time in its sole discretion require Trustor to submit satisfactory evidence of insurance policies obtained pursuant to this Paragraph 3 and of Trustor's compliance with all the provisions of said policies. 4. Lawsuits. To appear in and defend, or otherwise take such action therein as the Beneficiary and Trustee or either of them may deem advisable with respect to, any action or proceeding affecting the security for the Housing Loan in which Beneficiary or Trustee may appear. 5. Beneficiary Statement. To pay all charges for all court costs and expenses t.�. which Beneficiary may elect to advance in order to keep unimpaired, protect, and preserve the title thereto; and to pay for any statement provided for by law in effect at the date hereof regarding the obligations secured hereby, any amount demanded by the Beneficiary not to exceed the maximum allowed by law at the time when said statement is demanded. 6. Condemnation. That all judgments, awards of damages and settlements, hereafter made as a result of or in lieu of any condemnation or other proceedings for public use of, or for any damage to, the Eligible Property or the improvements thereon, are hereby assigned to Beneficiary. If (i) Trustor is not then in material default hereunder (or such default will be cured with the proceeds from the foregoing), and (ii) the taking is a partial taking, all proceeds thereof shall be applied to restoring the Eligible Property, if practicable, as reasonably determined by Beneficiary. In the event (i) Trustor is then in material default hereunder (and such default will not be cured with the proceeds of the foregoing), (ii)the taking is a total taking, or(iii) the taking is a partial taking and Beneficiary has reasonably determined that restoration of the Eligible Property is not practicable, the proceeds shall be paid to Beneficiary to the extent of those monies due and owing under the Note, this Deed of Trust, future notes or future deeds of trust, and Beneficiary is hereby authorized to receive such monies. Trustor agrees to execute such further assignments of any such award,judgment or settlement which may be received by Trustor. Subject to any prior rights of creditors under the Senior Financing (as defined in the Loan Agreement), Beneficiary may apply any and all such sums to the indebtedness secured hereby in such manner as it elects or, at its option, the entire amount so received by it or any part ® thereof may be released. Neither the application nor the release of any such sums shall cure or R\Agendas\Age a AttwhmentsTxhibits\2010\120 10 UV Senor Apartments-Deed ofi st(&tmbnQ waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. 7. Permitted Acts of Beneficiary. That without affecting the liability of any person, including Trustor (other than any person released pursuant hereto), for the payment of any indebtedness secured hereby, Beneficiary is authorized and empowered as follows: Beneficiary may at any time, and from time to time, either before or after the maturity of the obligations secured hereby, and without notice (a) release any person liable for the payment of any of the indebtedness, (b)make any agreement extending the time or otherwise altering the terms of payment of any of the indebtedness, (c) accept additional security therefor of any kind, or(d)release any property, real or personal, securing the indebtedness. 8. Reconveyance of Eligible Property. That upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of this Deed of Trust and the Note to Trustee for cancellation and retention, and upon payment of its fees, Trustee shall reconvey, without warranty, the Eligible Property then held hereunder. The recitals in such reconveyance of any matters of fact shall be conclusive proof of the truthfulness thereof. The grantee in such reconveyance may be described as "the person or persons legally entitled thereto." 9. Default and Trustee's Sale. That upon the occurrence of an "Event of Default" under this Deed of Trust (as defined in Section 18 below) Beneficiary may declare all �... principal remaining unpaid, all interest then earned and remaining unpaid, and all sums other than principal or interest secured hereby, immediately due and payable (and thenceforth at the option of the Beneficiary and except as otherwise prohibited by law, the entire balance of the unpaid principal shall thereafter bear interest at the Default Rate of interest per annum set forth in the Note until paid) and may proceed to exercise the power of sale granted by this Deed of Trust by delivery to Trustee of written declaration of default and demand for sale and of written notice of default and of election to cause to be sold said Eligible Property, which notice Trustee shall cause to be filed for record. Beneficiary also shall deposit with Trustee this Deed of Trust, the Note and all documents evidencing expenditures secured hereby. After the lapse of such time as may then be required by law following the recordation of said notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell the Eligible Property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels, and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States, payable at time of sale. Trustee may postpone sale of all or any portion of the Eligible Property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement at the time fixed by the preceding postponement. Trustee shall deliver to such purchaser its deed conveying the Eligible Property so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustor, Trustee or ® Beneficiary, may purchase at such sale. 6 P1Ageedm\Agenda A=hmemsT-xhibit&M10U2-0 10 Lugo gmi Apm,mems-Dead offm (ExhibitQ After deducting all costs, fees and expenses of Trustee, including cost of evidence of title in connection with sale, Trustee shall apply the proceeds of sale to payment of. first, all sums expended by the Beneficiary under the terms hereof or under the Note, not then repaid, with accrued interest at the Deferral Rate; second, all other sums then secured hereby; and the remainder, if any,to the person or persons legally entitled thereto. 10. Substitute Trustees. Beneficiary, or any successor in ownership of any indebtedness secured hereby, may from time to time, by instrument in writing, substitute a successor or successors to any Trustee named herein or acting hereunder, which instrument, executed by the Beneficiary and duly acknowledged and recorded in the Office of the Recorder of the County of San Bernardino, and by otherwise complying with the provisions of California Civil Code Section 2934a, or any successor section, shall be conclusive proof of proper substitution of such successor Trustee or Trustees, who shall, without conveyance from the Trustee predecessor, succeed to all its title, estate, right, powers and duties. Said instrument must contain the name of the original Trustor, Trustee and Beneficiary hereunder, the book and page where this Deed of Trust is recorded and the name and address of the new Trustee. 11. Successors Bound. That this Deed of Trust applies to, inures to the benefit of, and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors, assigns, trustees and receivers. In this Deed of Trust, whenever the context so requires, the masculine gender includes the feminine and/or neuter, and the singular number Qincludes the plural. 12. Evidence of Title. That if, because of any default hereunder, or because of the filing or contemplated filing of any legal proceedings affecting the Eligible Property, Beneficiary deems it necessary to obtain an additional evidence of title or to cure any defect in title, Beneficiary may procure such evidence or cure such defect, pay the cost thereof, and shall have an immediate claim against Trustor therefor, together with a lien upon the Eligible Property for the amount so paid, with interest at the Deferral Rate. Beneficiary is further authorized to require an appraisal of the Eligible Property at any time that Beneficiary may reasonably request. 13. Default in Other Instruments; Bankruptcv. That default in the terms of any other instrument securing the debt secured hereby, and/or the filing or other commencement of any bankruptcy or insolvency proceedings including any assignment for the benefit of creditors or other proceedings intended to liquidate or rehabilitate, by, for or against Trustor shall after any applicable notice and cure period constitute default under this Deed of Trust. 14. Statute of Limitations. That the pleading of any statute of limitations as a defense to any and all obligations secured by this Deed of Trust is hereby waived by the Trustor, to the full extent permissible by law. 15. Severability. That the invalidity of any one or more covenants, phrases, clauses, sentences, paragraphs or sections of this Deed of Trust shall not affect the remaining ® portions of this Deed of Trust or any part hereof and this Deed of Trust shall be constructed as if PAAgendas\Agenda Anachments\Exhibhs\2010\12-0610 Lugo Senior Apartments-Deed Gff t(Exhibit Q such invalid covenants, phrases, sentences, paragraphs or sections, if any, had not been inserted herein. 16. Order of Application. That if the indebtedness secured hereby is now or hereafter becomes further secured by a security agreement, deed of trust, pledge, contract of guaranty or other additional securities, Beneficiary may to the full extent allowed by law, at its option, exhaust any one or more of said securities as well as the security hereunder, either concurrently or independently and in such order as it may determine, and may apply the proceeds received upon the indebtedness secured hereby without affecting the status of, or waiving any right to exhaust all or any other security including the security thereunder and without waiving any breach or default in any right or power, whether exercised hereunder or contained herein, or in any such other security. 17. Covenants of Trustor. (a) Audit by State and Federal Agencies. In the event the Housing Loan is subjected to audit, monitoring or other inspections by appropriate state and federal agencies, Trustor shall comply with such inspections and pay, on behalf of itself and Beneficiary, the full amount of the cost to the inspecting agency of such inspections (unless such inspection and any resulting liability arises solely from the gross negligence or willful misconduct of Beneficiary). (b) Program Evaluation and Review Trustor shall allow Beneficiary's authorized personnel to inspect and monitor its facilities and program operations as they relate to the Project or the Eligible Property, including the interview of Trustor's staff, tenants, and other program participants, as reasonably required by Beneficiary during the term of the Housing Loan. 18. Default. The Trustor shall be in default under this Deed of Trust upon any of the following events which, if not cured within the applicable cure period provided, if any, shall constitute an event of default hereunder("Event of Default"): a. The failure of Trustor to pay or perform any monetary covenant or obligation hereunder or under the terms of the Note,the Loan Agreement or any other documents executed in connection therewith, without curing such failure within ten (10) calendar days the date such payment is due. Notwithstanding anything herein to the contrary, the herein described cure period shall not apply to a failure by Trustor to timely repay the Housing Loan at the Maturity Date of the Note; b. The failure of Trustor to perform any nonmonetary covenant or obligation hereunder or under the terms of the Loan Agreement, the Note or any other documents executed in connection therewith, without curing such failure within thirty (30) calendar days after receipt of written notice of such default from Beneficiary (or from any party authorized by Beneficiary to deliver such notice as identified p P� by Beneficiary in writing to Trustor) specifying ,,nd.s\A, aA .0 .nm\Ehibin\20IM12- F10 Lugo Srn.w Agetlomq-D ofT8 OkWbkQ / the nature of the event or deficiency giving rise to the default and the action required to cure such deficiency; provided, however, that if any default with respect to a nonmonetary obligation is such that it cannot be cured within a 30-day period, it shall be deemed cured if Trustor commences the cure within said 30-day period and diligently prosecutes such cure to completion thereafter. Notwithstanding anything herein to the contrary, the herein described notice requirements and cure periods shall not apply to any Event of Default described in Sections 18(c) through 18(h) below; C. The material falsity of any representation or breach of any warranty or covenant made by Trustor under the terms of this Deed of Trust, the Note, the Loan Agreement or any other document executed in connection therewith as of the date made; d. Trustor shall (a)apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of its property, (b) fail to pay or admit in writing its inability to pay its debts generally as they become due, (c)make a general assignment for the benefit of creditors, (d) be adjudicated a bankrupt or insolvent or (e) commence a voluntary case under the Federal bankruptcy laws of the United States of America or file a voluntary petition that is not withdrawn within ten (10) days of the filing thereof or answer seeking an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy or insolvency proceeding; e. If without the application, approval or consent of Trustor, a proceeding shall be instituted in any court of competent jurisdiction, under any law relating to bankruptcy, in respect of Trustor for an order for relief or an adjudication in bankruptcy, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of Trustor or of all or any substantial part of Trustor's assets, or other like relief in respect thereof under any bankruptcy or insolvency law, and, if such proceeding is being contested by Trustor, in good faith, the same shall (a) result in the entry of an order for relief or any such adjudication or appointment, or(b) continue undismissed, or pending and unstayed, for any period of ninety (90) consecutive days; f. Trustor shall suffer or attempt to effect a "Transfer" (as defined in Section 33 below) other than in full compliance with the terms of this Deed of Trust. g. Trustor shall not be in default under the Regulatory Agreement,the Senior Financing, any Junior Financing or Other Financing (as all these terms are defined in the Loan Agreement), or any other secured or unsecured obligation relating to the Project, unless the default is cured or waived within the cure period, if any, applicable thereto under the terms of the obligation which is in default; or h. Following completion of the construction of the Project, voluntary cessation of the operation of the Project for a continuous period of more than thirty (30) days or 9 PAAgendas\Agenda Amchmems\Exhibita\2010\12-0-I O Ugo Senior Apmtmems-Deed of Tmg(Exhibit Q Qthe involuntary cessation of the operation of the Project in accordance with this Deed of Trust for a continuous period of more than sixty(60) days. 19. Acceleration. The entire principal and all accrued and unpaid interest on the Note shall be due and payable as therein set forth; provided, however, that the entire balance of the outstanding principal and all accrued and unpaid interest on the Note, together with any outstanding interest and other amounts payable thereunder, shall, at the election of Beneficiary and upon notice to Trustor thereof(except in the case of default described in Section 18 (c) or (d), in which case no notice shall be required), become immediately due and payable upon any Event of Default as set forth in the Note, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Trustor. 20. Breach by Trustor, Cure by Beneficiary or Trustee. In the event of Trustor's failure to comply with any or all of the promises and agreements set forth in this Deed of Trust or to make any payment or to do any act as provided in this Deed of Trust, then Beneficiary or Trustee, but without obligation to do so and without notice to or demand upon Trustor and without releasing Trustor from any obligation hereof, may make or do the same in such manner and to such extent as either in its sole judgment may deem necessary to protect the security hereof (including, without limitation, to procure insurance and pay the premiums therefor; to pay unpaid water rents, sewer service charges, and other governmental or municipal charges and rates, and all or any part of the unpaid taxes, assessments, and reassessments, if in its judgment the same are just and valid; to pay the cost of appraisals, reappraisals, and extensions of title; to enter or have its agents enter upon the Eligible Property whenever reasonably necessary for the purpose of inspecting the Eligible Property or making repairs or installations as it deems necessary to preserve the Eligible Property or to protect the same from vandalism, without thereby becoming liable as a trespasser or mortgagee or beneficiary in possession, and to pay for such repairs and installations). Beneficiary and Trustee are hereby authorized to enter upon the Eligible Property for such purposes; to appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; to pay, purchase, contest or compromise any encumbrance, charge or lien which in the judgment of either appears to be prior or superior hereto; and, in exercising any such powers,to pay necessary expenses, employ counsel of its choice and pay the reasonable fees of such counsel. Trustor agrees to pay immediately and without demand all sums so expended by Beneficiary or Trustee, with interest from the date of expenditure at the amount allowed by law in effect at the date hereof, and that Beneficiary shall have a lien upon the Eligible Property for the sums so expended and such interest thereon. 21. Security Agreement. That all property covered by this Deed of Trust be deemed to constitute real property or interests in real property to the maximum extent permitted under applicable law. To the extent that any tangible property, equipment or other property covered by this Deed of Trust constitutes personal property, such personal property shall constitute additional security. This Deed of Trust shall create in Beneficiary a security interest in such personal property and shall in respect thereof constitute a security agreement (the "Security �.� Agreement"). Beneficiary shall be entitled to all of the rights and remedies in respect of any 10 PAAgendas\Agenda Attwhma s\Exhibits\2010\12-0 10 Lugo Senior Aps =Ms-Deed ofTw(axhWbitQ personal property included in the Eligible Property covered by this Deed of Trust afforded a secured parry under the Uniform Commercial Code and other applicable law. At Beneficiary's request Trustor will at any time and from time to time finish Beneficiary for filing financing statements signed by Trustor in form satisfactory to Beneficiary. Trustor acknowledges and agrees that thirty (30) days' notice as to the time, place and date of any proposed sale of any personal property shall be deemed reasonable for all purposes. Trustor agrees that the Security Agreement created hereby shall survive the termination or reconveyance of this Deed of Trust unless Beneficiary executes documentation expressly terminating the Security Agreement. 22. Assumption of Liability. Except as provided in Section 33, the assumption of liability for the payment of the indebtedness hereby secured, by any successor in interest to Trustor in the Eligible Property (in the event Beneficiary elects not to accelerate the repayment of the Loan Agreement pursuant to any transfer or disposition of the Eligible Property by operation of law or otherwise) shall not release Trustor from any liability Trustor has hereunder or under the other Loan Documents for the payment of such indebtedness or any sums advanced under and secured by this Deed of Trust. Any forbearance or indulgence of Beneficiary, or extensions of time for the payment of all or any part of the indebtedness secured hereby, or the release of a part of the Eligible Property from the lien of this Deed of Trust, for, or without, payment of a consideration, shall not in any manner diminish or reduce the liability of Trustor(subject to the nonrecourse provisions of Section 27) for the payment of the indebtedness now or hereafter secured hereby; and that any payments made upon the said indebtedness shall be deemed to have been made on behalf and for the benefit of all parties obligated to pay the same. The acceptance of payments in excess of the installments provided to be paid upon the Note or the consideration paid for any such release shall not alter or diminish the obligation of Trustor to thereafter make payments in the amounts and on the dates provided therein, until the . same are fully paid. 23. Future Advances. That upon the request of the Trustor or its successor in ownership of the Eligible Property, Beneficiary may, at its option, at any time before full payment of the Note secured hereby, make ftuher advances to the Trustor or its successors in ownership, and the same, with interest and late charges as permitted by law, shall be secured by this Deed of Trust; and provided further that if Beneficiary, at its option, shall make a further advance or advances as aforesaid,the Trustor or its successors in ownership agree to execute and deliver to Beneficiary a note to evidence the same, payable on or before the maturity of the indebtedness under the Note secured hereby and bearing such other terms as Beneficiary shall require. Trustor further acknowledges and agrees: that this Deed of Trust is intended to, and shall, secure not only the original indebtedness under the Note, but any and all fixture advances made directly by Beneficiary to Trustor;that this Deed of Trust shall secure any unpaid balances of advances made with respect to the Eligible Property; that Beneficiary shall have the benefit of all statutes now existing or henceforth enacted to assure repayment of any such future advances plus interest thereon; that to secure the payment of said original indebtedness and future advances Beneficiary shall also have a lien upon all other personal property and securities 11 e:Ngud.\4 da n aeh.m,\EAibitOOIO\12-610 Lugo Senior ApMmenh-Deed ofTw(ExhibitQ now or hereafter in its possession belonging to Trustor; that all rights, powers and remedies con- ferred upon Beneficiary herein are in addition to each and every other right which Beneficiary has hereunder; that all rights, powers and remedies conferred upon Beneficiary in equity or by law may be enforced concurrently therewith; that Beneficiary shall be subrogated to the rights and seniority of any prior lien paid or released by reason of the application thereon of any of the proceeds hereof, and that each and all of the covenants, agreements, and provisions hereof shall bind the respective heirs, executors, administrators, successors, and assigns of Trustor and Beneficiary herein, and all others who subsequently acquire any right, title, or interest in the Eligible Property, or to this Deed of Trust and the indebtedness secured hereby. 24. Captions. That the captions of the sections of this Deed of Trust are for convenience only and shall not be considered in resolving questions of interpretation or construction. 25. Estoppel Certificates. That Trustor shall from time to time at Beneficiary's request famish Beneficiary or any person designated by Beneficiary, a certified statement in form reasonably satisfactory to Beneficiary confirming as of the date of the certificate the unpaid principal balance and accrued interest on the Note and stating that Trustor is not in default hereunder (or describing any default), and stating that Trustor has no defense, right of set off or counterclaim in the payment of the indebtedness, or any part thereof, or the observance or performance of any obligation (or describing any such defense, set off or counterclaim). Any purchaser or assignee of the Note or this Deed of Trust or any interest therein may rely on such certificate. 26. Books and Records. That Trustor and all subsequent owners of the Eligible Property, if any, shall keep and maintain full and correct books and records showing in detail the earnings and expenses of the Eligible Property and shall permit Beneficiary at no expense to Trustor or its representatives to examine such books and records and all supporting data and vouchers, from time to time at reasonable times, on request, at Trustor's offices or at another mutually agreed upon location. 27. Obligation Nonrecourse. Except to the extent any Event of Default hereunder results directly or indirectly from any fraud or intentional and material misrepresentation by Borrower in connection with the Loan Agreement,the Loan Agreement is a nonrecourse obligation of Trustor and in the event of the occurrence of an Event of Default, Beneficiary's only recourse under this Deed of Trust shall be against the Eligible Property, the proceeds thereof, the rents and other income arising from its use and occupancy as provided in this Deed of Trust, and any other collateral given to Beneficiary as security for repayment of the Loan Agreement. 28. Fixture Filing. This Deed of Trust is also a fixture filing with respect to the personal property which is or is to become fixtures on the Eligible Property., and is to be recorded in the real property records of San Bernardino County, California. 12 P:Wgendas\AgeM A IbttttxasTxhibits\201M12- 10 Lugo Senior Apartments-Deed ofTrust(Exhibit Q 29. Assignment of Rents. All of the existing and future rents, royalties, income, and profits of the Eligible Property that arise from its use or occupancy are hereby absolutely and presently assigned to Beneficiary. However, until Trustor is in default under this Deed of Trust, Trustor will have a license to collect and receive those rents, royalties, income and profits. Upon any Event of Default by Trustor, Beneficiary may terminate Trustor's license in its discretion, at any time, without notice to Trustor, and may thereafter collect the rents, royalties, income and profits itself or by an agent or receiver. No action taken by Beneficiary to collect any rents, royalties, income or profits will make Beneficiary a"mortgagee-in-possession" of the Eligible Property, unless Beneficiary personally or by agent enters into actual possession of the Eligible Property. Possession by a court-appointed receiver will not be considered possession by Beneficiary. All rents, royalties, income and profits collected by Beneficiary or a receiver will be applied first to pay all expenses of collection, and then to the payment of all costs of operation and management of the Eligible Property, and then to the payment of the indebtedness and obligations secured by the Deed of Trust in whatever order Beneficiary directs in its absolute discretion and without regard to the adequacy of its security. If required by Beneficiary, each lease or occupancy agreement affecting any of the Eligible Property must pro- vide, in a manner approved by Beneficiary, that the tenant will recognize as its lessor any person succeeding to the interest of Trustor upon any foreclosure of this Deed of Trust. The expenses (including receivers' fees, if any, compensation to any agent appointed by Beneficiary, counsel fees, costs and compensation to any agent appointed by Beneficiary, and disbursements) incurred in taking possession and making such collection, shall be deemed a portion of the expense of this trust. The entering upon and taking possession of the Eligible Property, and/or the collection of such rents, issues and profits and the application thereof as aforesaid, shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. Beneficiary may exercise any one or more of the remedies in this section without waiving its right to exercise any such remedies again or for the first time in the future. The foregoing shall be subject to the provisions of applicable law. 30. Applicable Law. This Deed of Trust shall be governed by, and construed in accordance with,the laws of the State of California. 31. Approvals. Except with respect to those matters set forth hereinabove providing for the Beneficiary's approval, consent or determination to be at the Beneficiary's "sole discretion" or "sole and absolute discretion," the Beneficiary hereby agrees to act reasonably with regard to any approval, consent, or other determination given by the Beneficiary hereunder. The Beneficiary agrees to give Trustor written notice of its approval or disapproval following submission of items to the Beneficiary for approval, including, in the case of any disapproved item, the reasons for such disapproval. Any consent to a transfer under Section 33 of this Deed of Trust, and any other consent or approval by Beneficiary under this Deed of Trust or any of the other Low-Mod Housing Loan Documents, may be given by Beneficiary's Executive Director without action of Beneficiary's governing board unless the Executive Director in his or her sole discretion elects to refer the matter to the board. .Mll 13 P4lgeodes\Ag Aftwhmems\ xhibits\2010\12-0 6 40 Lugo Senior Apmtmeots-DeedofTma(ExhibitQ Q32. Good Faith and Fair Dealing. The Beneficiary and Trustor agree to perform all of their obligations and the actions required of each hereunder in good faith and in accordance with fair dealing. 33. Assignment of Interest. a. Except as may otherwise be permitted in the Loan Agreement, without the prior written approval of the Beneficiary, which approval the Beneficiary may withhold in its sole and absolute discretion, Trustor shall not (i) sell, encumber, assign or otherwise transfer (collectively, "Transfer") all or any portion of its interest in the Eligible Property or the Project (excluding tenant leases pursuant to the terms of the Loan Agreement), (ii) permit the Transfer of any portion of its ownership and/or control, or (iii) Transfer any of its rights or obligations under the Loan Documents. Trustor hereby agrees that any purported Transfer not approved by the Beneficiary as required herein shall be ipso facto null and void, and no voluntary or involuntary successor to any interest of Trustor under such a proscribed Transfer shall acquire any rights pursuant to the Loan Agreement or this Deed of Trust. b. At any time Trustor desires to effect a Transfer (except as permitted by the Loan Agreement) hereunder, Trustor shall notify the Beneficiary in writing (the "Transfer Notice") and shall submit to the Beneficiary for its prior written approval (i) all proposed agreements and documents (collectively, the "Transfer Documents") memorializing, facilitating, evidencing and/or relating to the circumstances surrounding such proposed Transfer, and (ii) a certificate setting forth representations and warranties by Trustor and the proposed transferee to the Beneficiary sufficient to establish and ensure that all requirements of this Section 33 have been and will be met. No Transfer Documents shall be approved by the Beneficiary unless they expressly provide for the assumption by the proposed transferee of all of Trustor's obligations under the L Loan Documents. The Transfer Notice shall include a request that the Beneficiary consent to the proposed Transfer and shall also include a request that Trustor be released from further obligations under the Loan Documents. The Beneficiary agrees to make its decision on Trustor's request for consent to such Transfer, as promptly as possible, and, in any event, not later than thirty (30) calendar days after the Beneficiary receives the last of the items required by this Section 33. In the event the Beneficiary consents to a proposed Transfer, then such Transfer shall not be effective unless and until the Beneficiary receives copies of all executed and binding Transfer Documents which Transfer Documents shall conform with the proposed Transfer Documents originally submitted by Trustor to the Beneficiary. From and after the effective date of any such Transfer, Trustor shall be released from its obligations under this Deed of Trust and the other Housing Loan Documents accruing subsequent to such effective date. C. Notwithstanding anything in this Deed of Trust to the contrary, Trustor agrees that it shall not be permitted to make any Transfer, whether or not the Beneficiary consent is required therefor and even if the Beneficiary has consented thereto, if there exists an Event of Default under this Deed of Trust at the time the Transfer Notice is tendered to the ® Beneficiary or at any time thereafter until such Transfer is to be effective. P:WgmduUgendeA .hme.tsTF hibhs�2010\12-06-10Lugo Sm.,Age .0-Dnd of'Tl (ExhibitQ I Qd. The provisions of this Section 33 shall apply to each successive Transfer and proposed transferee in the same manner as initially applicable to Trustor under the terms set forth herein. IN WITNESS WHEREOF,the undersigned have executed this Deed of Trust as of the date first above written. TRUSTOR: LUGO SENIOR APARTMENTS, L.L.C. a California limited liability company Date: By: Name: Title: BENEFICIARY: REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, a public body, corporate and politic Date: By: Emil A. Marzullo, Interim Executive Director Approved as to Legal Form and Content By: Timothy J. Sabo,Agency Counsel 15 P:WgenduWgwdx Atmcbments\Exhibitst3010V2-06.10 Lugo swim Apmtmenh-Deed ufTmm(Exhibit C) 0 Attachment "A" To the Deed of Trust 0 ® 16 P\AgerAM\Agm&Att=hmmG\Exhibrtet2010\12-0610 Lugo Smior Apartments-O od of Twit(Exhibit C) LEGAL DESCRIPTION The following described Real Property in the State of California, County of San Bernardino. That portion of Lot 2, Block 3 as shown on a plat of RANCHO SAN BERNARDINO as per plat recorded in Book 7 of Maps, page 2, records of said County, described as follows: BEGINNING AT A point on the Northerly line of said Lot 2 from which the Northwest corner thereof bears South 890 52' West, 142 feet; thence continuing on said northerly line of Lot 2 North 890 52' East, 30 feet; thence South 000 15' 31" East parallel to the Westerly line of said Lot 2, 130 feet; thence South 890 52' West parallel to said Northerly line of Lot 2, 50 feet; thence North 00° 15' 31" West parallel to the Westerly line of said Lot 2, 130 feet to the point of beginning. EXHIBIT "D" Agency Regulatory Agreement 43 P:Ngudas\Agenda Anach uanrs\Agenda Attachments\Agrmts-Amend 2010\12-06-10 Lugo Senior Apartments-Acquisition and Development Residual Receipts Loan Agreement doc RECORDING REQUESTED BY AND AFTER RECORDATION,MAIL TO: REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO 201 North`B" Street, Suite 301 San Bernardino, CA 92401 Attn.: Director of Housing and Community Development (Space Above Line for Recorder's Use) Recording Fee Exempt Pursuant to Government Code Section 6103 AFFORDABLE SENIOR HOUSING REGULATORY AGREEMENT THIS AGREEMENT CONTAINING COVENANTS, CONDITIONS, AND RESTRICTIONS ("Regulatory Agreement') is executed as of the 6u' day of December, 2010 by and between the REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, a public body corporate and politic ("Agency") and LUGO SENIOR APARTMENTS, L.L.C., a California limited liability company ("Owner"), with reference to the following: A. THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, a public body corporate and politic ("Agency") shall have the right to directly enforce the restrictions therein in the event Owner fails to do so. B. Agency and Owner are parties to the Acquisition and Development Loan Agreement ("Loan Agreement") dated as of the 6a' day of December, 2010, on the terms and conditions of which Owner shall borrow from the Agency's Low and Moderate Income Housing Funds ("Housing Funds"), and Agency shall lend to Owner, the original principal amount of up to SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($6,500,000) in Housing Funds ("Loan") for the purpose of providing financing for the housing development described in the Loan Agreement (the "Project"). The Project will be developed on a site legally described in Exhibit"A"to this Agreement(the"Eligible Property"). C. Unless otherwise expressly provided, all defined terms used in this Agreement shall have the defined meanings provided for in the Loan Agreement and/or Agency Loan Documents. NOW THEREFORE, in consideration of the representations, covenants, and obligations of Owner contained in this Loan Agreement, Owner, on behalf of itself and its successors and assigns, hereby covenants and agrees as follows: (1) Use of the Site . ® The Project consists of one hundred and nineteen (119) units, with one hundred and nine (109) one-bedroom units and ten (10) two-bedroom units plus one managers' unit, on approximately 3.13 net acres, reserved for households as set out in Section 4.1 of the Loan 1 P Wgendas\Agenda AraohmemaTE blts12010\12-06-10 Lugo Senior Apartmems-Regulatory Agreement(Exhibit D) Agreement, this Agreement and the Agency Senior Household Rental Housing Use Covenant (also called the "Eligible Property"). a. Limitations on Tenants. Senior Households. The Project shall be reserved for development, use improvement and occupancy for senior citizen household multi-family residential purposes, as the term "Senior Citizen Household" is defined below and in the Agency Senior Household Rental Housing Use Covenant For the purpose of this paragraph, the following definitions of certain terms shall apply: "Senior Citizen Household" means and refers to a person or family eligible to occupy a rental dwelling unit in the Eligible Property who is/are at the time of initial occupancy of the rental dwelling unit by such person(s): 1. Sixty-two(62)years of age or older; and, if applicable; 2. Provided at least one (1) member of the household is: (i) 62 years of age or older with such household limited to two (2) adult individuals, and (ii) a "qualified permanent resident," as this term is defined in Civil Code Section 51.3(b) (2) with no minor children comprising such household except as required by Civil Code Section 51.3(b) (3). Notwithstanding any other provisions of this Agreement or the Loan Documents, the Owner has entered into the Agency Senior Household Rental Housing Covenant for the 99- year term of that Agreement. Affordability Requirements. Borrower hereby covenants and agrees, for itself and its successors and assigns, that the Site and the Project shall be developed, used and maintained as senior rental housing for occupancy by Extremely Low, Very-Low, and Sixty-Five Percent AMI Households (also called the"Eligible Persons") as follows: Extremely Low-Income Senior Households. The words "Extremely Low- Income Senior Households" mean and refer to Senior Households whos income does not exceed 30%of Area Median Income as defined herein. Very Low-Income Senior Households. The words "Very Low-Income Senior Households" mean and refer to persons and households whose income does not exceed 50% percent of Area Median Income as defined herein. Sixty-Five Percent (65%) AMI Senior Households. The words "Sixty-Five Percent (65%) AMI Senior Households" mean those low-income or moderate income Senior Households whose total annual income does not exceed 65% of AMI; such Sixty-Five Percent AMI Households are a combination of Low-Income Senior Households (those whose total annual income is at or below 60 % AMI) and Moderate-Income Households (those whose total ® annual income is at or below 110% OF AMI). Agency and Borrower have determined that this mix of housing units meets the legal, operational and financing requirements of both parties as 2 P\Agendn\Agenda Atmchm s%Exbibits\2010\12-06-10 Lugo Senior ApMments-Regulawry Ag ent(Exhibit D) established by HCD pursuant to Health & Safety Code Section 50053 and any accompanying regulations, as those may be amended from time to time. Notwithstanding anything contained herein to the contrary, the rents under this Agreement shall be those established by California Redevelopment Law (Health and Safety Code Sections 50053 50073 and Section 50079.5) and administered by HCD, notwithstanding any inconsistency with such requirements for tax credit financing. Failure to comply with these requirements constitutes a default hereunder, b. As of the Effective Date of the Agreement, in addition to the affordability covenants set out here and in the Agency Regulatory Agreement, the Borrower has warranted to the Agency that the Assisted Units in the Project shall be reserved for use and occupancy by households as defined in whose annual income level at the time of initial occupancy by each such household of its Assisted Unit in the Project shall be generally as follows: Household Income Level 1-BR units 2-BR units Total Total Assisted (% of Area Median Units Units Income Thirty Percent 30%) 10 1 11 11 Fifty Percent 50%) 49 4 53 53 Sixty-five Percent 65%) 49 5 54 54 Manager's Unit 1 0 1 0 V TOTAL 109 10 1 119 118 "Affordable Housing Cost" shall mean, as to each Eligible Tenant, a rental rate which results in monthly payments which, including a reasonable utility allowance, do not exceed for a the percentage of income set out above. For example, for a Very Low-Income Household, the product of thirty percent(30%)times fifty percent(50%) of Area Median Income adjusted for family size appropriate to the Assisted Unit. Owner shall specifically provide in each Assisted Unit lease and shall strictly enforce the requirement that each Assisted Unit be occupied at all times by the eligible household who has leased that Assisted Unit, and that any other occupant of the unit be another qualified member of the lessee's household. Agency shall be identified as a third party beneficiary of that covenant and shall have the right to directly enforce that restriction in the event Owner fails to do so. Prior to execution of any Assisted Unit lease with respect to the Project, Owner shall submit to the Agency and obtain its written approval of a standard form occupancy lease and Owner shall thereafter use the approved form for all leases of Assisted Units in the Project, with only such further modifications thereto as are first submitted to and approved in writing by the Agency. Notwithstanding anything to the contrary in this Agreement, Owner hereby covenants on behalf of itself, and its successors and assigns, which covenant shall run with the land and bind every successor and assign in interest of Owner, that, throughout the Fifty-Five (55) year term of this Regulatory Agreement, Owner and such successors and assigns shall use the Eligible Property solely for the purpose of constructing and operating the Project as a 3 P\AgMMas\Agenda AttachmeercsTE bns\2010\12-06-10 Lugo Senior Apo .MS- Ag,...t(Fxbibit D) residential development with the defined number of dwelling units and, with respect to the units designated to be assisted as consideration for the Loan ("Assisted Units"), one hundred eighteen (118) Assisted Units shall be in accordance with the tenant income levels specified in this Agreement. C. Tenant Selection Process, Reports and Records Concerning Tenancies. Owner shall maintain such records and satisfy such reporting requirements as may be reasonably imposed by Agency to monitor compliance with the tenanting requirements described in Paragraph (1)(a) above, including without limitation the requirement that Owner deliver reports to Agency commencing at the close of the initial occupancy of the Project, and continuing annually thereafter, setting forth the name of each tenant, the unit occupied and the income of the tenant and the amount of rent payable by each tenant. Owner shall also be required to have each prospective tenant complete a rental application prior to occupancy and to obtain evidence from each such tenant as may be reasonably required by Agency to certify such tenant's qualification for occupancy of the Project. Owner's obligation to provide such reports shall remain in force and effect for the same duration as the use covenants set forth in this Paragraph(1). (2) Management of Project. Subject to the terms and conditions contained herein below, Owner shall at all times during the operation of the Project pursuant to this Agreement retain an entity to perform the management and/or supervisory functions ("Manager") with respect to the operation of the Project, including day-to-day administration, maintenance and repair. Owner shall, before execution or any subsequent amendment or replacement thereof, submit and obtain Agency's written approval (which shall not be unreasonably withheld, conditioned or delayed) of a management contract ("Management Contract") entered into between Owner and an entity ("Management Entity") reasonably acceptable to the Agency. Subject to any regulatory or licensing requirements of any other applicable governmental agency, the Management Contract may be for a term of up to fifteen (15) years and may be renewed for successive terms in accordance with its terms, but may not be materially amended or modified without the written consent of Agency . . The Management Contract shall also provide that the Management Entity shall be subject to termination for failure to meet project maintenance and operational standards set forth herein or in other agreements between Owner and Agency. Owner shall promptly terminate any Management Entity which commits or allows such failure, unless the failure is cured within a reasonable period, but, in no event exceeding 60 calendar days from Management Entity's receipt of notice of the failure from Owner or Agency. Owner's obligation to retain a Management Entity shall remain in force and effect for the same duration as the use covenants set forth in Paragraph(1) of this Agreement. (3) Operations and Maintenance. Owner hereby covenants on behalf of itself, and its successors and assigns, which covenant shall run with the land and bind every successor and assign in interest of Owner, that Owner and such successors and assigns shall use the Eligible Property solely for the purpose of constructing and operating the Project and ancillary improvements thereon, in accordance with and of the quality prescribed by this Agreement, the Loan Agreement, the Agency Senior Household Rental Housing Use Agreement, and the Loan Documents, as applicable. . 4 PAA,..d.,\A,.d.An.ch M.\EWbin\20IM12-0 10 LUp senior Ape M,-RgWMu Agrmnrot(Exhibit u) Owner covenants and agrees for itself, its successors and assigns, which covenants shall run with the land and bind every successor or assign in interest of Owner, that during development of the Eligible Property pursuant to this Agreement and thereafter, the Eligible Property, nor any portion thereof, shall be improved, used or occupied in violation of any Applicable Governmental Restrictions (as defined below) or the restrictions contained in this Agreement. Furthermore, Owner and its successors and assigns shall not maintain, commit, or permit the maintenance or commission on the Eligible Property, or any portion thereof, of any nuisance, public or private, as now or hereafter defined by any statutory or decisional law applicable to the Eligible Property, or any portion thereof As used herein, "Applicable Governmental Restrictions" shall mean and include any and all laws, statutes, ordinances, codes, rules, regulations, directives, writs, injunctions, orders, decrees, rulings, conditions of approval, or authorizations, now in force or which may hereafter be in force, of any governmental entity, agency or political subdivision as they pertain to the performance of this Agreement or development or operation of the Project, including specifically but without limitation all code and other requirements of the jurisdiction in which the Project is located; the California Environmental Quality Act; the laws specified in the Development Agreement; fair housing laws; and applicable federal, state and local laws. Owner shall indemnify, defend and hold Agency harmless for any suit, cost, attorneys' fees, claim, administrative proceeding, damage, award, fine, penalty or liability arising out of Owner's failure to comply with any Applicable Governmental Restrictions, including, without limitation, the nonpayment of any prevailing wages required to be paid in connection with the Project. Owner shall, at its expense, (i) maintain all improvements and landscaping on the Eligible Property in good order, condition, and repair (and, as to landscaping, in a healthy and thriving condition) in accordance with the plans for the Project approved by Agency in accordance with the Development Agreement and all Applicable Governmental Restrictions, and (ii) manage the Project and Project finances reasonably prudently and in compliance with Applicable Governmental Restrictions so as to maintain a safe and attractive living environment for Project residents. (4) Performance of Maintenance. a. Owner shall maintain in accordance with Agency Standards, as hereinafter defined, the private improvements, public improvements and landscaping to the curb line(s) on and abutting the Eligible Property. Said improvements shall include, but not be limited to,buildings, sidewalks and other paved areas,pedestrian lighting, landscaping, irrigation of landscaping, architectural elements identifying the Eligible Property and any and all other improvements on the Eligible Property and in the public right-of-way to the nearest curb line(s) abutting the Eligible Property. b. To accomplish the maintenance, Owner shall either staff or contract with and hire licensed and qualified personnel to perform the maintenance work, including the provision of labor, equipment, materials, support facilities, and any and all other © items necessary to comply with the requirements of this Agreement. 5 F' pMa Benda AM6.,�T\ ibina 010\12-0&10 Lugo Senior Apartmema.Regulatory Agreement(Exhibit D) Agency Standards: The following standards ("Agency Standards") shall be complied with by Owner and its maintenance staff, contractors or subcontractors (i) Ordinary Maintenance Standards - Owner shall maintain the Eligible Property in good repair, order and condition at all times in order to assure that the Eligible Property is kept in a decent, safe, and sanitary condition, and that the buildings, grounds, and equipment are to be maintained in a manner that will preserve their condition. (ii) Annual Inspection Standards - Owner shall annually inspect the Eligible Property. The completed annual inspection will be documented and reported to Agency on an annual basis, and at the end of each year Owner shall submit to Agency a declaration certifying that the annual inspection was performed at the Eligible Property. Owner shall retain records of the inspection and make them available for review by Agency at the request of Agency. (iii) Extraordinary Maintenance. Owner shall perform any extraordinary repairs or replacements necessary in order to maintain the Eligible Property, including extraordinary replacement of equipment, betterment, and additions. Extraordinary repairs or replacement consists of major repairs and rehabilitation involving substantial expenditures which usually are needed only at relatively long intervals of time, or are caused by such occurrences as earthquake, fire, obsolescence and, in some instances, neglect. Such items as replacement of roofs, replacement of corroded gas and heating lines, and rehabilitation of landscaping(ground-cover)would be considered in this category. (iv) Agency may enter and inspect the premises at any time after notifying Owner 72 hours prior to the planned inspection, and said notice shall be delivered to Owner at the address indicated in paragraph 17(e)below. (5) Failure to Maintain Improvements. In the event Owner does not maintain the Eligible Property to the curb line in the manner set forth herein and in accordance with Agency Standards, Agency shall have the right to maintain such private and/or public improvements, or to contract for the correction of such deficiencies, after (i) written notice to Owner stating that the condition of said improvements does not meet with Agency Standards and specifying the deficiencies and the actions required to be taken by Owner to cure the deficiencies ("Deficiency Notice"); and (ii) the lapse of the applicable "Cure Period," as hereinafter defined. Upon receipt of the Deficiency Notice, Owner shall have thirty (30) calendar days within which to correct, remedy or cure the deficiency, unless such deficiency is not capable of being cured within such 30 day period, then such amount of time as is needed to cure such deficiency provided owner is diligently pursuing cure; provided however, if the Deficiency Notice states the problem is urgent relating to public health and safety, then Owner shall have forty-eight (48) hours to rectify the problem(collectively the"Cure Periods"). 6 PMgendaMSende AUchmematExhibitst2010\12- 10 Lugo Seniar Apwmnts-Regulatory Agrxmem(Exhibit D) In the event Owner fails to correct, remedy, or cure such maintenance deficiency after the Deficiency Notice and after the applicable Cure Period has lapsed, then Agency shall have the right to maintain such improvements. Owner agrees to pay Agency, upon demand, charges and costs incurred by Agency in connection with such maintenance. Until so paid, Agency shall have a lien on the Eligible Property for the amount of such maintenance charges and costs, which lien shall be perfected by the recordation of a "Notice of Claim of Lien" against the Eligible Property. Upon recordation of a Notice of a Claim of Lien against the Eligible Property, such lien shall constitute a lien on the fee estate in and to the Eligible Property prior and superior to all other monetary liens except: (i) all taxes, bonds, assessments, and other levies which by law would be superior thereto; (ii) the lien or charges of any mortgage, deed of trust, or other security interest then of record made in good faith and for value, it being understood that the priority for any such lien for costs incurred to comply with this Agreement shall date from the date of the recordation of the Notice of Claim of Lien. Any such lien shall be subject and subordinate to any lease or sublease of the interest of Owner in the Eligible Property or any portion thereof and to any easement affecting the Eligible Property or any portion thereof entered into at any time (either before or after) the date of recordation of such a Notice. Any lien in favor of Agency created or claimed hereunder is expressly made subject and subordinate to any mortgage or deed of trust made in good faith and for value, recorded as of the date of the recordation of the Notice of Claim of Lien describing such lien as aforesaid, and no such lien shall in any way defeat, invalidate, or impair the obligation or priority of any such mortgage or deed of trust, unless the mortgage or beneficiary thereunder expressly subordinates his interest, or record,to such lien. No lien in favor of Agency created or claimed hereunder shall in any way defeat, invalidate, or impair the obligation or priority of any lease, sublease or easement unless such instrument is expressly subordinated to such lien. Upon foreclosure of any mortgage or deed of trust made in good faith and for value and recorded prior to the recordation of any unsatisfied Notice of Claim of Lien, the foreclosure-purchaser shall take title to the Eligible Property free of any lien imposed herein by Agency that has accrued up to the time of the foreclosure sale, and upon taking title to the Eligible Property, such foreclosure-purchaser shall only be obligated to pay costs associated with this Agreement accruing after the foreclosure- purchaser acquires title to the Eligible Property. If the Eligible Property is ever legally divided with the written approval of Agency and fee title to various portions of the Eligible Property is held under separate ownerships, then the burdens of the maintenance obligations set forth herein and in the Agreement and the charges levied by Agency to reimburse Agency for the cost of undertaking such maintenance obligations of Owner and its successors and the lien for such charges shall be apportioned among the fee owners of the various portions of the Eligible Property under different ownerships proportionate to the square footage of the land contained in the respective portions of the Eligible Property owned by them. Upon apportionment, no separate owner of a portion of the Eligible Property shall have any liability for the apportioned liabilities of any other separate owner of another portion of the Eligible Property, and the lien shall be similarly apportioned and shall only constitute a lien against the portion of the Eligible Property owned in fee by the Owner who is liable for the apportioned lien and against no other portion of the Eligible Property. Owner acknowledges and agrees the Eligible Property may also pursue any and all other remedies available in law or equity. Owner shall be liable for any and all reasonable attorneys' fees, and other legal costs or fees incurred in collecting said maintenance costs. 7 P V gendasWgenda A hmmts\Exhibits @O1O12-06-10 Lugo Senior Apartments-Regulatory Agreement(Exhibit D) (6) Resident Qualifying Standards, Policies and Procedures a. Income Qualification Not fewer than 118 units are to be reserved for Eligible Persons as defined in this Agreement, the Loan Agreement and the Senior Household Rental Housing Use Covenant. b. Household Size Occupancy shall not exceed State of California occupancy standards. Minimum occupancy standards shall be one person per bedroom. C. Selection Considerations Prospective renters will be pre-screened to confirm income does not exceed parameters stated. Those that fit criteria will complete a rental application, resident applicant questionnaire, Tenant Income Certification and appropriate certification and verification forms. Upon receipt, selection of renters will take into consideration: • Date and time application is completed and received • Credit and Criminal Background reports • Income • References • Past Rental history d. Required Applicant Documentation Applicant will be required to provide the following documents to Property Management Company for further review: • Previous year's tax returns • Two (2) most recent pay check stubs • Copies of Social Security Cards on each family member • Completed rental application (employment, banking information and personal references will be checked) • Criminal Background check and Credit check • Photo copy of adult Drivers License(s) • Address of last two places of residence e. Non Discrimination Policy Owner warrants 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 leasing, transferring, use, occupancy, tenure or enjoyment of the Eligible Property, nor shall the lessee himself, or any person claiming under or through him, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, sub lessees, subtenants or ® vendees in the properties herein being leased. 8 PSAgendn\Agenda An.hmems\Exhibib @010\12-0&10 Lugo Smior Apu enta-Regulatory Agreement(Exhibit D) f. Lease Agreements �...- Standard month to month lease agreements will be used. Lease agreement must include Owner's Rules and Regulations in addition to any addendums used in common practice by the Property Management Company. • Renters must agree to standards, rules and procedures as set forth in the lease agreements • Renters must sign and agree to adhere to the Crime Free Prevention Addendum g. Resident Re-certifications Annually, renters must recertify their qualifications to continue to reside within the apartments. Renters must complete: questionnaire, provide income and household size documentation, updated employment information, and any other documents the Property Management Company deems necessary. Renters must qualify based upon current income qualifying standards with documentation which shall be provided to the Property Management Company annually. h. Evictions/Move Outs A notice to move may be issued to by the Property Management Company to the Tenant at any time for the following violations: • Failure to pay rent • Violation of the Crime Free Addendum • Failure to follow Owner's rules and regulations • Change of family size (above occupancy limits) • Change of income level,plus or minus • Repeated complaints Residents asked to move due to income considerations will be given 60 days notice. (7) Owner's Obligation to Refrain From Discrimination. There shall be no discrimination against or segregation of any person, or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Eligible Property, nor shall Owner itself or any person claiming under or through it establish or permit any such practice or practices of dis- crimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the Eligible Property or any portion thereof. The nondiscrimination and nonsegregation covenants set forth herein shall remain in effect in perpetuity. Owner shall refrain from restricting the rental, sale or lease of the Eligible Property or any portion thereof on the basis of race, color, creed, religion, sex, marital status, national origin, or ancestry of any person. All such deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: 9 PAAgeadax\Ageoda A hmrntr\Exhibitr\2010\1246-10 Wgo Sector ApMmartr-Reguhrory Agre ew(Exhibit D) Qa. In deeds: "The grantee herein covenants by and for himself or herself, and his or her heirs, executors, administrators and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin,or ancestry in the sale, lease, sublease,transfer,use, occupancy,tenure, or enjoyment of the land herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the land herein conveyed. The foregoing covenants shall run with the land." b. In leases: "The lessee herein covenants by and for himself or herself, and his or her heirs, executors, administrators and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the land herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the land herein leased." c. In contracts: "There shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the premises, nor shall the parties to this contract or any person claiming under or through them, 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 premises." Nothing in this Paragraph shall be construed or understood to limit, restrict or in any way waive the income requirements described in this Agreement. (8) Covenants Run With the Land; Duration of Covenants. The covenants and agreements established in this Agreement shall be covenants running with the land and shall, without regard to technical classification and designation, be binding on Owner and any successor-in-interest to Owner's interest in the Eligible Property, or any part thereof, for the benefit of and in favor of Agency and its successors and assigns. The covenants of this Agreement shall remain in effect through the Term, notwithstanding the repayment of the Loan by Owner prior to the Maturity Date. The covenants contained in Paragraph 7 of this Agreement shall remain in effect in perpetuity. The Improvements to the curb line(s) and the maintenance thereof touch and concern the Eligible Property and inure to the benefit of any and all present or successive owners 10 P.\AgendaskAgende AnwentensExhibits @010113-06-10 Lugo Senior Apartments-Regulator,Agreement(Exhibit D) i of the Eligible Property. Therefore, whenever the word "owner" is used herein, it shall include the owner as of date of execution of this Agreement, and any and all successor owners or assigns of the Eligible Property, and the provisions hereof are expressly binding upon all such successive owners and assigns and the parties agree all such provisions shall run with the land. Agency shall cause a fully executed copy of this Agreement to be recorded in the Office of the San Bernardino County Recorder. Notwithstanding the foregoing, in the event Owner or its successors or assigns shall convey its fee interest in all or any portion of the Eligible Property, the conveying owner shall be free from and after the date of recording such conveyance of all liabilities, respecting the performance of the restrictions, covenants or conditions contained in this Agreement thereafter to be performed with respect to the Eligible Property, or any part thereof, it being intended that the restrictions, covenants and conditions shall be binding upon the record owners of the Eligible Property only during such time as that person is the owner of the Eligible Property, provided that the conveying owner shall remain liable for any actions prior to the date of the conveyance. (9) Enforcement. In amplification and not in restriction of the provisions set forth hereinabove, it is intended and agreed that Agency shall be deemed the beneficiary of the terms and provisions of this Agreement and of the restrictions and covenants running with the land for and in its own right and for the purposes of protecting the interests of the community and other parties, public or private, in whose favor and for whose benefit the covenants running with the land have been provided. Each covenant of Owner, shall, without regard to technical classification and designation, inure to the benefit of the successors, transferees and assigns of Agency for the entire period during which such covenants shall be in force and effect, and shall be binding upon the successors, transferees and assigns of Owner, whether by merger, consolidation, sale, transfer, liquidation or otherwise. Each covenant in favor of Agency is for the benefit of the real property owned by Agency in the area surrounding the Eligible Property. The covenants herein running with the land shall also be equitable servitudes upon the Eligible Property and each part thereof and shall bind each and every person having any interest in the Eligible Property or part thereof, whether such interest is fee, easement, leasehold, beneficial or otherwise, and each successor or assign of such person having any such interest in the Eligible Property or part thereof. The Agency shall have the right if any of the covenants set forth in this Agreement which are provided for its benefit 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 breach to which it may be entitled. In the event that suit is brought for the enforcement of this Agreement or as the result of any alleged breach hereof, the prevailing party or parties in such suit shall be entitled to recover their reasonable attorneys' fees from the losing party or parties, and any judgment or decree rendered in such proceedings shall include an award thereof. Except for the Agency, the covenants and restrictions contained in this Agreement shall not benefit or be enforceable by any owner of any other real property or any person or entity having any interest in any such other real property. (10) Compliance with Law. Owner shall comply with all Applicable Governmental Restrictions relating to the uses of or condition of the Eligible Property private improvements and public improvements to the curb line(s). Local laws for the purposes of this ® paragraph shall include only those ordinances which are nondiscriminatory in nature and applicable to the public welfare, health, safety and aesthetics. If any new local laws relating to 11 PAAgendns Agenda AttacbmemsTE bitsUOM12-0640 Lugo gmim Apartments-Regulatory Ageement(Exhibit D) Othe uses of or condition of the improvements create a condition or situation that constitutes a lawful nonconforming use as defined by local ordinance with respect to the Eligible Property or any portion thereof, then so long as the lawful nonconforming use status remains in effect (i.e., until such lawful status is properly terminated by amortization as provided for in the new local law or otherwise), Owner shall be entitled to enjoy the benefits of such lawful nonconforming use pursuant to the lawful nonconforming uses ordinance. (11) Indemnification and Insurance. a. Indemnification. In the event that Owner is not acting as a Design Professional, Owner agrees to indemnify, defend and save harmless Agency and their elected and appointed officials, officers, representatives, employees, and agents (hereinafter collectively referred to as "Agents"), from and against any and all liability, demands, damages, claims, causes of action, fees (including reasonable attorney's fees and costs and expert witness fees), and expenses, including, but not limited to, claims for bodily injury, property damage, and death (hereinafter collectively referred to as "Liabilities"), that arise out of, pertain to, or relate to this Agreement, the services and/or materials provided pursuant to this Agreement, the Eligible Property, or Project. Owner shall not be required to indemnify, defend, and save harmless Agency and its Agents from any Liabilities that arise from the active negligence, sole negligence or willful misconduct of Agency, Agency's agents, servants, or independent contractors who are directly responsible to Agency. Such indemnification language shall also be incorporated in Owner's contracts with any general contractors and subcontractors in favor of Agency. I - In the event that Owner is acting as a Design Professional, Owner agrees to indemnify, defend and save harmless Agency and their Agents from and against any and all Liabilities that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of Owner. Such indemnification language, in favor of Agency, shall also be incorporated in Owner's contracts with any Design Professionals in favor of the Public Agency. These indemnification provisions shall remain in full force and effect and survive the cancellation, termination and/or expiration of this Agreement. Owner agrees to require any entities with which it contracts to agree to and abide by the above mentioned indemnification requirements in favor of Agency, as applicable to each of them. b. Insurance. Without limiting Owner's indemnifications of Agency provided in this Agreement, Owner shall procure and maintain at its own expense the insurance described in this section for the duration of this Agreement, unless otherwise set forth herein. Such insurance shall be secured from carriers admitted in California, or authorized to do business in California. Such carriers shall be in good standing with the California Secretary of State's Office and the California Department of Insurance. Such carriers must be approved by the California Department of Insurance and must be included on the California Department of Insurance List of Eligible Surplus Line Insurers (hereinafter"LESLI"). Such carriers must have a minimum rating of or equivalent to A(v) in Best's Insurance Guide. Owner shall, concurrent with the execution of this Agreement, deliver to Agency certificates of insurance with original endorsements evidencing the general liability, automobile insurance, worker's compensation and property insurance coverage required by this Agreement at such time that such exposures are at �►' 12 P\Agendas\Agenda Atmc emsTxhibits\2010\12-0 6-10 Lugo Senw Apsnments-R.,.Jmory Agmemem(R bit D) risk, but in no event later than the Close of Escrow. The certificate and endorsements shall be signed by a person authorized by the insurers to bind coverage on its behalf Agency reserves the right to require complete certified copies of all policies at any time. Said insurance shall be in a form acceptable to Agency and may provide for such deductibles as may be acceptable to Agency. In the event such insurance does provide for deductibles or self-insurance, Owner agrees that it and/or the entities with which it contracts, will defend, indemnify and hold harmless Agency, its elected and appointed officers, officials, representatives, employees, and agents in the same manner as they would have been defended, indemnified and held harmless if full coverage under any applicable policy had been in effect. Each such certificate shall stipulate that Agency is to be given at least thirty (30) days' written notice in advance of any cancellation or any reduction in limit(s) for any policy of insurance required herein. Owner shall give Agency immediate notice of any insurance claim or loss which may be covered by insurance. Owner represents and warrants that the insurance coverage required herein will also be provided by Owner's general contractors as detailed below. The aforementioned insurance policies shall be primary insurance with respect to Agency. The aforementioned insurance policies shall contain a waiver of subrogation for the benefit of Agency. Failure on the part of Owner and any general contractors hired by owner to perform work on the Eligible Property, to procure or maintain the insurance coverage required herein shall constitute a material breach of this Agreement pursuant to which Agency may immediately terminate this Agreement and exercise all other rights and remedies set forth herein, at its sole and absolute discretion, and without waiving such default or limiting the rights or remedies of Q Agency, procure or renew such insurance and pay any and all premiums in connection therewith and all monies so paid by Agency shall be immediately repaid by the Owner to Agency upon demand including interest thereon at the Default Rate. In the event of such a breach, Agency shall have the right, at its sole election, to participate in and control any insurance claim adjustment or dispute with the insurance carver. Owner's failure to assert or delay in asserting any claim shall not diminish or impair Agency's rights against the Owner or the insurance carrier. When Owner is naming Agency, and/or the City as additional insureds on any of the commercial general liability insurance policies set forth herein, then the additional insured endorsement shall contain language similar to the language contained in ISO form CG 20 10 10 01. When any entity, with which Owner is contracting, is naming Agency and/or the City as additional insureds on any of the commercial general liability insurance policies set forth herein, then the additional insured endorsement shall contain language similar to the language contained in ISO form CG 20 1011 85. The following insurance policies shall be maintained by Owner and any General Contractor with which Owner contracts for the duration of this Agreement unless otherwise set forth herein: (i) General Liability: For projects in which the direct construction costs are projected to be less than $15,000,000, Commercial General Liability insurance, including coverage for bodily injury, property damage and contractual liability, with a combined single Q limit not less than One Million Dollars ($1,000,000) for each occurrence (Two Million Dollars ($2,000,000) General Aggregate), including, but not limited to, products and completed 13 P:Ugendas\Agenda Attechmeas�hibks\20IM @-0&10Lugo SeM.,Apartments-R"].Wry Agreement(Exhibit D) operations coverage. The Agency and the City and their elected and appointed officers, officials, representatives, employees, and agents shall be named as additional insureds on such policy. Owner shall require its general contractor to carry Commercial General Liability insurance of not less than One Million Dollars ($1,000,000) for each occurrence (Two Million Dollars ($2,000,000) General Aggregate), including, but not limited to, products and completed operations protection. Owner shall further require its general contractor to provide additional insured status for Owner, the Agency and the City and their elected and appointed officers, officials, representatives, employees, and agents, on such policy. If required by Agency from time to time, Owner shall increase the limits of Owner's liability insurance to reasonable amounts necessary for owners of improvements similar to the Eligible Property. The policy shall contain a waiver of subrogation for the benefit of Agency. (ii) Property Insurance: "Special Form" property insurance coverage, which shall include, without limitation, builders risk insurance and insurance against the perils of fire and physical loss or damage including, without duplication of coverage, theft, vandalism, malicious mischief, collapse, flood, false work,testing and startup,temporary buildings and debris removal including demolition occasioned by enforcement of any applicable legal requirements. The amount of the property coverage shall at all times exceed the full replacement value of materials supplied or installed by others and all existing structures, improvements and fixtures on the Property. The insurer shall waive any coinsurance via an "agreement" endorsement. Said insurance shall be maintained for the duration of this Agreement. The Agency,the City and their © elected and appointed officers, officials, representatives, employees, and agents shall be named as additional insureds on such policy. (iii)Workers' Compensation: Owner's employees, if any, shall be covered by Workers' Compensation insurance in an amount and in such form as to meet all applicable requirements of the Labor Code of the State of California and Employers Liability limits up to One Million Dollars ($1,000,000) per accident. Owner shall require that the identical worker's compensation insurance requirements be incorporated into Owner's contract with any general contractors with which it contracts in relation to the Project. Said entities shall maintain the insurance for the duration of this Agreement or the duration of the construction that is the subject of their contracts with Owner, whichever is greater. (iv)Automobile Liability: Combined single limit automobile liability insurance up to One Million Dollars ($1,000,000) per accident for bodily injury and property damage, covering owned (if any), non-owned and hired vehicles. Owner shall require that the identical automobile liability insurance requirements be incorporated into Owner's contract with any general contractors with which it contracts in relation to the Project. Said entities shall maintain the insurance for the duration of this Agreement or the duration of the construction that is the subject of their contracts with Owner, whichever is greater. The Agency, the City and their elected and appointed officers, officials, representatives, employees, and agents shall be named as additional insureds on such policies. © (12) Waiver. Failure or delay by either party to perform any term or provision of this Agreement constitutes a default under this Agreement. The aggrieved party shall give written notice of the default to the party in default in accordance with Paragraph (15)e hereof. 14 P:Wgendes�pnda Auacbmonu\ExhibitO010\12A 10 Lugo senior Ayahmeot,-Regolamy Agreement(Fx bit D) The defaulting party shall no longer be in default if the defaulting parry cures such default within thirty (30) calendar days after receiving the Default Notice; provided, however, that if such default cannot be reasonably cured within such thirty (30) day period, the defaulting party shall be given such longer period as reasonably necessary (which in the case of a default by Owner shall be as reasonably determined by Agency) and the defaulting parry shall no longer be in default if it commences to cure such default within such thirty (30) day period and completes such cure with reasonable and due diligence. Notwithstanding anything to the contrary contained herein, Agency hereby agrees that any cure of any default made or tendered by one or more of Owner's limited partners shall be deemed to be a cure by Owner and shall be accepted or rejected on the same basis as if made or tendered by Owner. Copies of all notices which are sent to Owner hereunder shall also be sent to Owner's limited partner at the address provided by Owner and on file with the Agency. The waiver by one party of the performance of any covenant, condition, or promise shall not invalidate this Agreement nor shall it be considered a waiver by such party of any other covenant, condition or promise hereunder. The exercise of any remedy shall not preclude the exercise of other remedies Agency or Owner may have at law or at equity. (13) Modification. This Agreement may be modified only by subsequent mutual written agreement executed by Owner and Agency. (14) Intentionally Omitted. (15) Miscellaneous Provisions. a. Interpretation. The provisions of this document shall be liberally construed to effectuate its purpose. Time is of the essence of this Agreement. b. Severability. Invalidation of any of the covenants, conditions, restrictions, or other provisions contained in this Agreement by judgment or court order shall in no way affect any of the other covenants, conditions, restrictions, or provisions hereof, which shall remain in full force and effect. C. Headings. The caption headings of the various sections and paragraphs of this Agreement are for convenience and identification only, and shall not be deemed to limit or define the contents of their respective sections or paragraphs. d. Effective Date. This Agreement shall take effect upon its recording in the Office of San Bernardino County Recorder. e. Notices. Formal notices, demands, and communications between Agency and Owner shall be given either by personal service,by overnight courier, or by mailing in the United States mail, certified mail, postage prepaid, return receipt requested, addressed to the principal offices of AHS or Owner,as follows: 15 PAAgendas\Agesda Attazhmeas\Exhibns\2010\12-O lO Lugo Senior Apannnots-Regulatory Agreement(Exhibh D) If to Agency: Redevelopment Agency of the City of San Bernardino 201 North"E" Street, Suite 301 San Bernardino, California 92401 Attn.: Interim Executive Director With a copy to: Redevelopment Agency of the City of San Bernardino 201 North"Ell Street, Suite 301 San Bernardino, California 92401 Ann.: Director of Housing and Community Development If to Owner: c/o Meta Housing Corporation 1640 South Sepulveda Boulevard, #425 Los Angeles, CA 90025 Atm.: John Huskey With a Copy to: Bocarsly Emden Cowan Esmail& Arndt, LLP 633 West Fifth Street, 70th Floor Los Angeles, CA 90071 Attn:. Lance Bocarsly Notices shall be effective upon receipt, if given by personal delivery, the earlier of(i) three (3) business days after deposit with United States Mail, or (ii) the date of actual receipt as evidenced by the return receipt, if delivered by �-- certified mail, and one (1) day after deposit with the delivery service, if delivered by overnight guaranteed delivery service. Each party shall promptly notify the other party of any change(s) of address to which notice shall be sent pursuant to this Agreement. f Exhibits. Each Exhibit mentioned in this Agreement is attached hereto and incorporated herein by this reference. g. Execution in Counterparts. The parties may execute this document in two or more counterparts; each counterpart shall be deemed an original instrument as against any parry who has executed it. 16 P,4Agendes\Agenda AttechmentsTxhibitOO10A2-0 10 Lugo Senor Apartments-Regulatory Ageement(Exhibit D) IN WITNESS WHEREOF, Agency and Owner have caused this instrument to be executed on their behalf by their respective officers hereunto duly authorized as of date first written above. AGENCY REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, a public body, corporate and politic By: EMIL A. MARZULLO Interim Executive Director Approved as to Form and Legal Content: By: Timothy J. Sabo,Agency Counsel OWNER: LUGO SENIOR APARTMENTS, L.L.C., a California limited liability company By: Name: Title: 17 R\AgendaslAgende Anwhmems\Exhibits @010\12-0610 Lugo Senior Apartments-Regulatory Agreement(Exhibit D) ® EXHIBIT "A" LEGAL DESCRIPTION OF ELIGIBLE PROPERTY 18 P\Agen&s\AgeMa An=h=nts\Exhibits\2010\12-0610 Lugo Srnior Apartments-Regulatory Agreement(Exhibit D) LEGAL DESCRIPTION The following described Real Property in the State of California, County of San Bernardino. That portion of Lot 2, Block 3 as shown on a plat of RANCHO SAN BERNARDINO as per plat recorded in Book 7 of Maps, page 2, records of said County, described as follows: BEGINNING AT A point on the Northerly line of said Lot 2 from which the Northwest corner thereof bears South 890 52' West, 142 feet; thence continuing on said northerly line of Lot 2 North 890 52' East, 30 feet; thence South 000 15' 31" East parallel to the Westerly line of said Lot 2, 130 feet; thence South 890 52' West parallel to said Northerly line of Lot 2, 50 feet; thence North 000 15' 31" West parallel to the Westerly line of said Lot 2, 130 feet to the point of beginning. QEXHIBIT "E" Agency Senior Household Rental Housing Use Covenant 0 44 PAAgendu\A e.&AttachmeMAA,.de Attachmrnn\ABnits-AmerW 201012- 10 Lugo Srnior Apw=nts-Acquisition aM D velopmem Residual R eipu Loan Ageement doc RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Redevelopment Agency of the City of San Bernardino Attn.: Interim Executive Director 201 North"E" Street, Suite 301 San Bernardino, California 92401 (Space Above Line For Use By Recorder) Recording Fee Exempt Pursuant to Government Code Section 6103 REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO SENIOR HOUSEHOLD RENTAL HOUSING USE COVENANT Acquisition and Development Loan Agreement (2010 Lugo Senior Apartments L.L.C.) THIS AGREEMENT CONTAINING COVENANTS, CONDITIONS, AND RESTRICTIONS ("Regulatory Agreement") is executed as of the day of , 20 by and between the REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, a public body corporate and politic ("Agency") and LUGO SENIOR APARTMENTS, L.L.C., a California limited liability company("Owner"), with reference to the following: A. THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, a public body corporate and politic ("Agency") shall have the right to directly enforce the restrictions therein in the event Owner fails to do so. B. Agency and Owner are parties to the Acquisition and Development Loan Agreement ("Loan Agreement") dated as of the day of 20_, on the terms and conditions of which Owner shall borrow from the Agency's Low and Moderate Income Housing Funds ("Housing Funds"), and Agency shall lend to Owner, the original principal amount of up to SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($6,500,000) in Housing Funds ("Loan") for the purpose of providing financing for the housing development described in the Loan Agreement (the "Project"). The Project will be developed on a site legally described in Exhibit"A"to this Agreement(the"Eligible Property"). C. Unless otherwise expressly provided, all defined terms used in this Agreement shall have the defined meanings provided for in the Loan Agreement. NOW THEREFORE, in consideration of the representations, covenants, and obligations of Owner contained in this Loan Agreement, Owner, on behalf of itself and its successors and assigns, hereby covenants and agrees as follows: Section 1. (a) As used in this Agreement, the term "Senior Citizen Household" means and refers to a person or family who is eligible to occupy a dwelling unit on the Site because at the time of such person's initial occupancy of such dwelling unit, such person is: (i) 62 years of age or older; and if applicable; 1 P'.NgendasWgenda AhechmeoU\Exhi1bits1201012-06-10 Lugo Snior AWrooms-Housieg Ux Cov t(Exhibit E) �- (ii) provided at least one (1) member of the family is 62 years of age or older, a "qualified permanent resident", as this term is defined in Civil Code Section 51.3(c) (2) and (3). (b) As used in this Agreement, the term "Owner" means and refers to each successor or assign of the interest of Owner in the Site for the term of this Covenant. (c) The definitions in the Loan Documents shall apply to this Agreement unless otherwise provided herein. Section 2. Except during the temporary rehabilitation period as set out in the Agency Loan Agreement, the Owner shall reserve and restrict the Site for improvement, use and residential occupancy, by persons and families who at the time of initial occupancy of a dwelling unit on the Site continuously and thereafter satisfy the requirements of a Senior Citizen Household as the affordability requirements of the Loan Agreement Regulatory Agreement for the term of that agreement. Notwithstanding, the Owner may reserve one (1) of the dwelling units on the Site for occupancy by on-site residential management employees or contractors of the Owner, and the household of such on-site residential management employees of the Owner need not qualify as a Senior Citizen Household. Section 3. This Agreement, including, without limitations, the Senior Citizen Household occupancy requirements under Section 2 of this Agreement, shall be in effect `�— following the date of its recordation for a term of ninety-nine(99) years. Section 4. The Owner and the Agency hereby declare their specific intent that the covenants, reservations and restrictions set forth herein are community redevelopment covenants and are part of a plan for the promotion and preservation of housing reserved for Senior Citizen Households within the territorial jurisdiction of the City and that each shall be deemed covenants running with the land and shall pass to and be binding upon the Site and each successor-in- interest of the Owner in the Site for the term set forth in Section 3. The Owner hereby expressly assumes the duty and obligation to perform each of the covenants and to honor each of the reservations and restrictions set forth in this Agreement. Each and every contract, deed or other instrument hereafter executed covering or conveying the Site or any interest therein shall conclusively be held to have been executed, delivered and accepted subject to such covenants, reservations, and restrictions, regardless of whether such covenants, reservations and restrictions are set forth in such contract, deed or other instrument. Section 5. The Agency and the Owner hereby declare their understanding and intent that the burden of the covenants set forth herein touch and concern the land in that the Owner's legal interest in the Site is affected by the affordable dwelling use and occupancy covenants hereunder. The Agency and the Owner hereby further declare their understanding and intent that the benefit of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Site by the intended beneficiaries of such covenants, reservations and Q restrictions, and by furthering the Senior Citizen Household housing goals and objectives of the Agency and in order to make the Site available for acquisition. rehabilitation and redevelopment by the Owner. 2 P:\Agendas4Agenda Apacluneets\Exhibits\2010\120610 Lugo Senior Apa res-Housing Use CoveosM(Exhibit E) Section 6. (a) The failure of the Owner or any person under its direction or control to comply with or perform when due any material term, obligation, covenant or condition contained in this Agreement is a default and shall constitute a material breach of this Agreement and, if not corrected, cured or remedied in the time period set forth in Section 6(b), shall constitute an "Event of Default"hereunder and under the Loan Documents. (b) The Agency shall give written notice of default to the Owner stating that such notice is a "Notice of Default", specifying the default and requiring the default to be remedied within thirty (30) days of the date of the Notice of Default. Except as required to protect against further material damage, the Agency may not institute legal proceedings against the Owner until a minimum of thirty (30) days after giving notice. Failure or delay in giving notice shall not constitute a waiver of any default, nor shall it change the time of occurrence of the default. If the default specified in the Notice of Default is such that it is not reasonably capable of being cured within thirty (30) days, and if the Owner initiates corrective action within said thirty (30) day period and diligently works to effect a cure as soon as possible, then the Owner may have such additional time as authorized in writing by the Agency as reasonably necessary to complete the cure of the breach prior to exercise of any other remedy for the occurrence of an Event of Default. Such authorization for additional time to cure shall not be unreasonably withheld. If the Owner fails to take corrective action within thirty (30) days following the date of the Notice (or to complete the cure within the additional as may be authorized by Agency), an Event of Default may be deemed to have occurred. (c) Any failure or delays by the Agency in asserting any of its rights and remedies as to any default arising under this Agreement shall not operate as a waiver of any default or of any such rights or remedies. Delays by the Agency in asserting any of its rights and remedies shall not deprive the Agency of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies. (d) Upon the occurrence of an Event of Default, the Agency shall be entitled to seek any appropriate remedy or damages by initiating legal proceedings as follows: (i) by mandamus or other suit, action or proceeding at law or in equity, to require the Owner to perform its obligations and covenants hereunder, or enjoin any acts or things which may be unlawful or in violation of the rights of the Agency; or (ii) by other action at law or in equity as necessary or convenient to enforce the obligations, covenants and agreements of the Owner to the Agency. (e) The rights and remedies of the Agency as set forth in this Section 6 are cumulative and the exercise by the Agency of one or more of such rights or remedies shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the © same default or any other default by the Owner. (f) In the event of litigation between the parties arising out of this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees and other costs and 3 P:b,g des\Agenda An.hment.TE ibits @010\1246-10Lugo Senior Apart men is-Housing UseCmcsunt(Echibk E) expenses incurred, including such fees and costs incurred on appeal, in addition to whatever �`— other relief the prevailing parry may be entitled to. As used in the preceding sentence, the words "reasonable attorney's fees" in the case of the Agency include the salary and benefits payable to lawyers employed in the Office of the City Attorney of the City, who may provide legal counsel to the Agency in such litigation as allocated on an hourly basis. (g) No third party shall have any right or power to enforce any provision of this Agreement on behalf of the Agency or to compel the Agency to enforce any provision of this Agreement against the Owner of the Site. Section 7. Any notice required to be given under this Agreement shall be given by personal delivery or by First Class United States mail at the addresses specified below or at such other address as may be specified in writing by the parties hereto: If to the Agency: Redevelopment Agency of the City of San Bernardino Attention: Interim Executive Director 201 North "E" Street, Suite 301 San Bernardino, California 92401 Phone: (909) 663-1044 Fax: (909) 663-2294 With a Copy to: Redevelopment Agency of the City of San Bernardino Attention: Carey K. Jenkins, Director Housing and Community Development 201 North"E" Street, Suite 201 San Bernardino, CA 92401 Phone: (909) 663-1044 Fax: (909) 888-9413 If to the Owner: c/o Meta Housing Corporation 1640 South Sepulveda Boulevard, #425 Los Angeles, CA 90025 Attention: John Huskey With a Copy to: Bocarsly Emden Cowan Esmail& Arndt, LLP 633 West Fifth Street, 70th Floor Los Angeles, CA 90071 Attention: Lance Bocarsly Notice shall be deemed given five (5) calendar days after the date of mailing to the party, or, if personally delivered, when received by the Interim Executive Director of the Agency. Section 8. This Agreement shall be governed by the laws of the State of California with venue for any litigation in the County of San Bernardino, Central Division. 4 P Wgendu\Agende AnuhmensslExhibhOOI0\12-06-10 Lugo Senior Apar ,,e Ha"%Use Coveoens(EAM E) Section 9. This Agreement may be amended after its recordation only by a written instrument executed by the Owner and by the Agency. No waiver of any tern or condition of this Agreement shall be a continuing waiver thereof. IN WITNESS WHEREOF, the Owner and the Agency have caused this Agreement to be signed, acknowledged and attested on their behalf by duly authorized representatives in counterpart original copies which shall upon execution by all of the parties be deemed to be one original document. AGENCY Redevelopment Agency of the City of San Bernardino, a public body, corporate and politic Dated: By: Emil A. Marzullo, Interim Executive Director Approved as to Form: By: Agency Counsel OWNER LUGO SENIOR APARTMENTS, L.L.C., a limited liability company Dated: By: Name: Title: [NOTARY JURAT ATTACHED] 5 P:4Agendes\Agenda Annh=nts\Exhibits @010\12-0610 Lugo Senior A,...ts-Housing Use P,o.M(Exhibil E) EXHIBIT "A" VVV Legal Description of the Site 0 6 P:\AgendesUgenda Anauhments\Exhibhs=10\j20 I0Lugo Senior Apvt MU.Housing Use Co nt(Exhibit E) LEGAL DESCRIPTION The following described Real Property in the State of California, County of San Bernardino. That portion of Lot 2, Block 3 as shown on a plat of RANCHO SAN BERNARDINO as per plat recorded in Book 7 of Maps, page 2, records of said County, described as follows: BEGINNING AT A point on the Northerly line of said Lot 2 from which the Northwest corner thereof bears South 890 52' West, 142 feet; thence continuing on said northerly line of Lot 2 North 890 52' East, 30 feet; thence South 000 15' 31" East parallel to the Westerly line of said Lot 2, 130 feet; thence South 890 52' West parallel to said Northerly line of Lot 2, 50 feet; thence North 000 15' 31" West parallel to the Westerly line of said Lot 2, 130 feet to the point of beginning. EXHIBIT "F" Approved Project Pro Forma 45 P'.\Agendas\Agende 2010\12-0610 Lugo Swim Apartments-Acquisition and Development Residue)Raeipt Loan Ageement.doc EXHIBIT F-FINANCING PLAN PROFORMA SOURCES AND USES 8 Approved 11 2510 DEVELOPMENT BUDGET A,11.6O1 CM.: filmrzplp /MY: 110 (CONSTRUCTION) PmJNt Name: 3OOSeniw AneMnems IIN: 185 839 Pm/M Aprlmss; LU0o Avenue 9epa: Pro/acl3pensoc Mel.HousnD Co,. SOURCE A e Omer Sources: Total 3eurces Cammente n[e 850 ITN DOO SL LOCI 9et.ete Hasa n] Name Omer Sources TL E ui Cpnst.Lqn Del.Fee (byN qd ACQUISITION A[u.uWn[oel or ft. AT)i8W 1mcm 651100 ),125,OW SuOMb Ma&per NOFA Demolidon o wA Leker$In qsb 0 0 25,000 25000 EMiwle hlkm hom legmtlnla Brokers lee 0 PNtlO Sells TOTAL ACOIASIiION 773e00 Ill�M00p 61 0 ]185 850 CONSTRUCTION IIAM COSTS Environment RemeclMbn I 1 150.000 150.000 NIA G ngffisIfiowo& 25,000 25000 NIA UnNIAnninglatuoring 0A TOW aNa Walt 0 0`- 17%000 0 '..O W e 000 WA Eelimab M1Sn GC DneO N V a LIN CNa*veOOo ReeaO 3.858,320 3,85%3 320 PM MmuOM M M Dem. paM 0 WA Eslimele flown CC b.MC N Vlak Law.emplea 400.000 '.400,000 plan Yclu0e0 F PM M Dew. Eslimele hnm GC Dosed on Wak Ow ead%ofNCenl Coneems Sal m %I BBB PIm%: M D.W. Conefrucllan CNOn 4u,003 - 4700321 % 603E TOTAL CONSTRUCTION COSTS 0 a a NO 0 S m SOFTCOSTS AMDUMUrM mnpn TOM ArchdEn nw.Aaas 50000 125000 Pa Eatlmw hem NNNM Str aEn I..fie SIOOMS Sury 10.0001 8000 18,000 ES1i..Coo ArcMbm GMeclln,cM.lWMs ID000 10000 20000 Eallmele hbn lvcNYM Pen.I e II RepN. 1000] BpN 18.000 Eslimele hbn N lgiM TofNSur yaagfteeoe, 30,000 0. xe NO 0 '85000 Financing COab Padev,Loan A 1108547 Fee 100,002 1[00]0 Eatlmele hplllpMx eN ft,cl Nf10%rw1% .t,7& Lon Inlernl 125000 123.000 mot to C tlrerm Donn M.N% Title a .W P 0 8501 to M recOMeO SutrraM Pre O ftnall. Cew 0 0 LeON 0 :xxe NO Construcliq Lam Orl nMiq Fn N,Wa Ulm 12-W l emwM t2wNM1 53%5%rne,tlreen Cffe AReeAding eml 275,00 275,000 Owm .Sa% Tilba RAoW 30000 85000 EfOmw Ykm hbn ngnl lea $VtrYM pmvf.FlNnFe Cew 0 0 NEON 0 3e3000 PelmammlLOm Orl inlie Fee 2]003 y/OOp t%Mlgnanoum L1NN ENoell.a I.Fee 10,000 :WON Eumela from IMMs eR figeel 10,OW 47 ON EaYmelp leken flan n[nl Npb trtoM Pxm.Fimnefe,Caab 0 0 47 0 "1 ON TINN FinaMlrlp Ceab 0 0 851000 0 NT WO cow N Pd.a Ium 40,000 40 ON ESnmela lrcm lmMr Tax lep.r LOOM WNO 00000 Eslimele hom Invnlw 40,Oen ert elCNnM 100000 ANON Eeernale taken hamoos OMs T" Caw 0 0 Inam 0 'In ON A iul 0CW 9.000 Eslimele flan lento P e Tnea 50,000 N NO Eslimele Ykm flan r tlMa Ineunnce N 003 10 NO Estimate flan InauTq BrcAs Eenmale flan RMwaOq Ralocatlon 1 eu 485 1 eu 00. e.g.Cm TCAC AIIa Wmr Fw EDM "C��dtt ax CrNltR ulien"CmsuNenls 125000 Eslimele Yken hom rpanitlpaYEnlillemenWemlltFw 20000 Eanooeem MUNIM McAenn 41anl-u )a OOD Eslmele flan P .Meo er FumiMln )5000 ESlimw I.AmhilM MYke13Nn 10000 Eetlmw Ykm Ilan—W Ne'.0 fAScmnnn IODOW EalimeY lekm 1.m[enlOMs CNMmc'tlm Man a N00p ESnmw Irani CM SMl Coe,Conn ]a.000 rt3%al aaRCOSb TOTALSOF]COSTE 1TN - 0'. 11]1085 - 0 RESERVES 9-mm ed teed deb s0fmsx m0 sllmMetl M1eed selvb n O e. Retervea 1]5000 wired D TCAC R epuwoem,nl Reserves C omm a ea a TOTAL RESERVES I al of 174,0001 0 17600 DEVELOPER COSTS Devel xO.MeeONmN Fee 956347 961.615 1,316,262 T Icorl of OM N lovmmt CanauHenl Fen p RnneN CdnsuMnt Fen 0 Coostiveten Ma,s,eeoeft Fee p .a Adoonm m. 0 .lee (.pece,, 0 TOTAL DEVELOPER COSTS 0 0' aN ] Nt tla 1,316,H2 s mgMCgb 0 TOTAL DEVELOPMENT COST 1 eN0 1700000 e303037 Meta 1]853]12 Gray celle-aula:elglelea EXHIBIT F-FINANCING PLAN PROFORMA Appes 11.22-10 SOURCES AND USES& DEVELOPMENT BUDGET owkbba vale: w1nolo lines: 119 (PERMANENT) Pro/ecl Name: w301 Ia AP DRS: 130 P J.O!AWlmee: 038 Lm A.. setls: 0 P/ecr sOone.,. MabM wCap. SOURCES A enc: Oth S..: TWI Bnumes 6000000 1 1 Z200,M!. 241121 -'1T 713 Name Ot0er SOUTAa[ TOE. Perm LOes tW1. USES Nrswma AcaulslnoN As0ua0ion cost or value 4773.Bm 2.351.100 7.125000 L WCbsln coat. 0 2500!1 26..Om BmkaM1 lee 11 01 01 0 —0 TOTAL ACDUISIRON I 4,M,4QQI H 0 0 1160000 CONS MICTION HARD COSTS Envacnmemel RemMiafion 0 150 m0 0 1w m GrBi !Earl m 0 25000 0 25000 Undovpmral.Wn, 0 0 0 0 TOM V.WeM 0 176000 0 0 175000 Unit COnaWaL sllaE 0 1.6041,330 2 WO 40563'X1 Perkin 0 0 0 0 Lm.. 0 4Hm0 0 4mm0 Ov adffl,WvOeel CagMOm 0 521 SH 0 531.88 cwaruvO Con 0 418032 03032 TOTAL LONSTRU ON COSTS 0 31%2m 2m 0 sMOHo SOFT COSTS A201tewuMEn0lneMn Total AmhJEn Iwer.Foes Wmi 125 mD 0 170,000 Su &En Ineedn Studies 0 0 Sury 10000 B.HO 0-:.. lam G.e&nlnl.Imle. 10000 10.000 0 : mm PhM 1611 Reports 10 m0 000 0 15mo Tola 4ulver L EeWOOrin0 3008 HOm ' .0.,. 0 WHO Flnencln Cesb 0 Wed.I-On Iicabn Fee MINX 0 - 100,08 Predev.Login interest 125000 0 125,m0 Title 6 Recp in 0 0 0 0 SabMta Pr ..Fleswln CO 0 236000 0 0 236000 C onal C Loan Od iMbn Fee 80m 0 01,000 COnamc60n Lun Iwmesl 2]S 000 0 215000 Mlle B Recall H m0 0 30Dm SHAwa COOL. Cwb 0 03380 0 '0 "I'm emam4 Lwn 0 Ina0oe Fee 27, 21.000 Credit EnlbMe.6 AMI.Fee 10.000 to m Title 6 R..dhg 10 m0 .10000 So ww Pmm.f ede,Cowls 0 .00H 0 0 ra Fetal Finmwn0 Coat 0- 8108 0 0 001 Legal COW LMber Leel Pd ft APO. I 40pm 01 40000 Tax Credit Atlo 10m0 01 40 Davebar Leal Cpmael ;J125 0 )0080 TOW Le Cesb 0 0 18000 nl.d 0 HO Taxes 50,000 Ins. m 000 RO.Ion 183 0 TCAC NIONAmibr Fees 880 CmaWlewa 12600 0 En6llemewmmmit Fees 2000 0 Market MM-u 1 73000 1 1 75,0001 75 HO ]6000 Market Stu lam lam O I 100 0m 18000 UnMclbn Mme H mil m 000 SH COI Cenli 75000 761100 TOTAL 9OFTCD414 1iH 113108 0 0 J ]100 RESERVES O n Revervee :11475=Re bcement Rete s 0 0 ed Olner s .1 0 TOTAL RESERVES 01 175,0001 01 0 176000 OEVELOPERCOSTS DevO,W Ove WPm01 Fee 1107481 241.121 -:1316062 Deveb MCOOvI1M Fee$ 0 FinmNN CoesWIM Fen 1 0 Oonamcli0n Maw emM Fee p `ry M MMAW.lm p Ilner a ec p TOTAL DEVELOPER COSTS 0 1Tb 81 0 81131 1]10003 5 kalbn C.I. 0 TOTAL DEVELOPMENT COST 6000 36M 331 3300 000 200171 0600 713 Gre,ceb=eNaulcubled EXHIBIT F - FINANCING PLAN PROFORMA QUNIT MIX Application Date: 8/10/2010 Approved 11-23-10 Project Name: Lugo Senior Apartments Project Address: 839 Lugo Avenue Project Sponsor. Meta Housing Corp. Square #of Utility Rent+ Market #of BRs Footage Units %of AMI Rent Allowance Utility Rent 1 543 10 30 326 39 365 1 543 28 45 509 39 548 1 543 44 50 570 39 1.609 1 543 26 60 590 39 629 2 727 2 30 614 44 658 2 727 2 45 614 44 658 2 727 4 50 670 44 714 2 727 2 60 714 44 758 0 0 2 1070 1 MGR UNIT 898 0 898 Total 119 65,394 Monthly 784,728 Annual QGrey cells = autocalculated EXHIBIT F -FINANCING PLAN PROFORMA Approved 11-23-10 YEAR 1 OPERATING BUDGET Application Date: 8/10/2010 Project Name: Lugo Senior Apartments Project Address: 839 Lugo Avenue Project Sponsor: Meta Housing Corp. Residential Non-Residential Totals INCOME Residential-Tenant Rents 784,728 784,728 Residential-Tenant Assistance Payments 0 0 Commercial Space 0 0 Parking 0 0 Miscellaneous Rent Income 0 0 Supportive Services Income 0 0 Interest Income-Project Operations 0 0 Laundry and Vending 9,996 9,996 Tenant Charges 0 0 Miscellaneous Income 1 0 0 Gross Potential Income 794,724 0 794,724 Vacan Loss 55,631 `55,631 EFFECTIVE GROSS INCOME - 739,093 0 739,093 OPERATING EXPENSES Mane ement Management Fee 44,346 44,346 Asset Management Fee 5,355 5,355 Administrative Rent-Free Unit 10,776 10,776 Sub-total Management Expenses 60,477 0 60,477 SalarieslBenefrts Office Salaries -g Manager's Salary 55,000 .55,000 Health Insurance and Other Benefits 11,000 11,000 Other Salaries/Benefits 0 0 Administration Sub-total Salaries/Bene/its 66,000 0 66,000 ® Advertising and Marketing 9,000 :9;000 Office Expenses 20,000 20,000 Office Rent 0 Legal Expense-Pro a 6,000 6,000 Audit Expense 6,500 6,500 Bookkeeping/Accounting Services 7,500 7,500 Bad Debts 2,500 2,500 City Monitoring Fee 5,355 5,355 Sub-total Administration Expenses 56,855 0 .56,855 Utilities JElectricitv 42,000 42,000 Water 24,000 24,000 Gas 9,000 '9,000 Sewer 28,000 ..28,000 Sub-total Utilities 103,000 0 ;'..:103,000 Taxes and Licenses Real Estate Taxes 5,000 -:.5,000 Pa oil Taxes 0 Miscellaneous Taxes,Licenses and Permits p Sub-total Taxes and Licenses '5,000 0 5,000 Insurance Pro a and Liabili Insurance 24,000 24,000 Fideli Bond Insurance 0 Worker's Compensation 6,000 6,000 Sub-total Insurance 30,000 0 30,000 Maintenance&Re it Payroll 45,000 .,115,000 Supplies 9,000F7�. „9000 Contracts 30,000 a",:-..30000 Garbage and Trash Removal 14,400 Security PayrollfContract yGilm"Y4, g HVAC Repairs and Maintenance 10,000 'rx, 70000 Vehicle and Maintenance Equipment Operation and Repairs 3,500 Miscellaneous Operating and Maintenance Expenses 16,650 16,650 Sub-total Maintenance 8 Repair Expenses 128 5 0 w,1110', '',�' 0 ,9N 128,550 Supportive Services 21 420 :% - a*;'0 21,420 TOTAL OPERATING EXPENSES 471,302 1 ..01 471,302 NET OPERATING INCOME(INCOME minus OPERATING EXPENSES 267,792 0 '267,792 0 N N O M mom 1000- 1 1 n � N N N O O N pi N m Vl 1 M m P M M � ® , M W V M M 1 O Oi VIOOOm N p O\ O v1 .N m m Om W O n h'O M M N V1 Iry N Q VI m W n W ti N O M M M tl ) O O n N (� MV1nm OlN m0 .1 NOIOOmm N .j m p N N Q m m m m N m NOM O p MO N m p M N W N N M m M z ¢ O W O n O M O+ n ry N N LL N NN V rp m Mo . . - OOV V n f_ V M M m O W O m p N I M N n m K Ot n O 'O n'O N m N .i N S a Q n 00 w W M- vl m m p p X y O M ON W - p N N n p W O n " 'COMM n N O m m V1 p 00 N N M N N m N n IO m 'D m N N W N n p m m p Vf W N ti N y O O' 0 N 16 4 O .i p1 'O mN mom WONOOO n O n N M o W V m 'O m M MO w VIpO Mm h'ON Mpm mm ¢ N m m N O W N O ONO VV 7 tO m m N N m pN M p m m0 :-I MV OlPflo 01WN m wm t0 W N N IO O m N O p N N O OtNm y l0'O O NN m p p 'I N m N ON , ,NO NN m c p M N M O C O m K n N 0 NN MM N m W N wO N IlO Cl N . N W O n pm m N Om W N m W N N O V, ON ON m p p "NV 10 O N ON m O � N M'I N M N W Ill M m m M V O O ry QOVfNIN NOM ONop N N a n al n m N n m N n p NOM nn mp p .-INN m m MN N ,ontim Mm moo Iopomo0 K I.pl 1(1p N V m mill N M"Nm y .-INN np nO0 pMNp N w T N O N O m N O m N O N w � O+OM Yl n Wp p NNO In W , NO " Ol .i mom Olmnm00 ry CU NON Nm mll If1 NMMN E O-' Np W MO No V NONN "I W w nN N o p mN p W Nlnn �N ' No . p n W p p INN an d a � W p - mm IN mOp NMMMOO 'm mm E MO N p m mlll p n1001N n m W a+ m In M n�o o+ m m o ¢ I M I N M m.. N m m p N O M,u y �mm NN mpp NNI z ¢ vm m n vlry N 0 0 > c ¢ � n n O . 0 W o N O O O M O o ^' Ovplo MNp np W10 mOOM N N N N J - K Ol p I(1 W m N'O N W O m O .� IO N O N n J W M� n O n m p p INN m Im+l v } m n Y N 1 N m a v IN. . n M moo I m O m m O O N ry m O'N n 01 n W I/1 M W N M W K11101(1 nn NIOM IpNMm N d. y N L: � .pi lNit tml n O N OO cR O y O W N p N N O O d \ < V O C O N L 6 N ry M m O 0 vOi dt O O Ipil'nD O N 11 C 2QN mn100 MN N'OM MOWN ' N Y N ¢ p Ill m N n 06 N n n O Ol N U Q 0 0 ¢ a a a 0 ry m a Q (D F C LL• o O LL 1�N0 N 00 }1 I In m a O WNn 1'1 NN U W LL i (a7 E E o zw EW w a ?rm �p1 u v v a Z Iy N N '° Nd PCLLLL � m H Y, o K c v� cEvay o � Q c U' olm 2E3 E ���� LL w v c W m"Em m m a vyi m Y' " o m t yf�W" U o > w oz 0096 ��000z u ® EXHIBIT "G" Schedule of Performance 46 P:WgendmUgenda AttchmentAAgenda Attechmarts\Agmrts-Amend 201002- 10 Lugo Senior Apuvnents-Acquisition and Development Residual Receipts] an Agreement doc O O _ N N N N N N Cl) O O O O O O O O O O O O O O O y N N N N N N N N N N N N N N N A � O O N O M 1 1 � O O N N M I Q Cl) N M M M 01 Q) (O O c Z c W O r N N N N N N r r y O O O O O O O O O O O O O O � N N N N N N N N N N N N N N Or O r O . . . r r m r Cl) O M r N N N M M M M M M c r M r _Q M M C Z C d m T C p M V V N N M M O V Z O M O N CJ O W W W N � C w o Z U J (g w U CO U N s X LV ¢ a am w L W CL c O tl O E N E N m (D a w o Q @ E o c m m E m > o o � c O a m F U o w — N N > m C Q O ,V C > N O C W O c E c O C > .� V N O > O N U C M Q N > C! C LL � C y E N O a m r N o m N c -C — c L m c O N c N Q U m x 2 y a E U @ c Q `� r U L d c E d w ( O -m c U m N o � '° C o c O o d w m o O (D N m N N J > co O N N a) O O N c 0 W O " '0 "' N M V (O Z Y © F November 30, 2010 Commissioner Patrick Morris, Community Development Commission City of San Bernardino 300 North D Street San Bernardino, CA 92408 Re: 9`h & Lugo Street Project Dear Commission Member: I strongly support the proposed Senior Apartment Project that is being considered at 839 Lugo Street. The rehabilitation of the units and conversion to a senior complex will help turn the surrounding neighborhood around. I urge you to support this project. Sincerely Entered Into Rec. at MCC/2C Mtg: ixl#1 a Agenda Re o: R a co by: City Oerk CDC Secretary City of San Bernardino t November 29, 2010 Community Development Commission City of San Bernardino 300 North D Street San Bernardino, CA 92418 Re: 9`s & Lugo Street Apartment Project Dear Commission Member: There is a matter which will be on your December 6, 2010 Agenda regarding the project referenced above. As a resident of the surrounding community I want to voice my strong support for this project. I am particularly excited about the reuse as a Senior Apartment Complex. Our neighborhood will be substantially improved by this project. Please give this project your support. Thanking you in advance for helping improve our community. Sincerely, Al /� cc: Carey Jenkins, Economic Development i r i December 2, 2010 Community Development Commission City of San Bernardino 300 North D Street San Bernardino, CA 92418 Re: 91h & Lugo Senior Project Dear Commission Members: The above referenced matter will be presented to you on December 6 for discussion and action. I urge you to give this project your attention and approval. A reminder that the senior units that will become available, once the property is rehabilitated, will move our community closer to addressing the housing needs of our senior citizens as is outlined in the City's adopted Housing plan. Sincerely, } n1� /Vdu November 29, 2010 Community Development Commission City of San Bernardino 300 North D Street San Bernardino, CA 92418 Re: 9th & Lugo Street Apartment Project Dear Commission Members: I would like you to know that I strongly support the proposed project being considered for the 9`h & Lugo Street Apartment Project. The rehabilitation and establishing the facilities as a senior complex will greatly enhance the neighborhood. It is my desire that you will give your complete support to this project. Sincerely, � OV 7 cc: Mr. Carey Jenkins, Economic Development Agency t December 2, 2010 Community Development Commission City of San Bernardino 300 North D Street San Bernardino, CA 92418 Re: 9`h & Lugo Senior Project Dear Commission Members; As a faith based organization in the immediate area of 91h & Lugo, I support the project being proposed for 839 Lugo Street and I urge you to give your full support inasmuch as the activity complies with the City of San Bernardino's General Housing Plan, which has been adopted. The completed project will not only improve the surrounding community but will also provide much needed quality housing for our seniors. Sincerely sr. 55eau10 V, Lorna'ly T