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HomeMy WebLinkAbout2015-052 I RESOLUTION NO. 2015-52 2 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF 3 SAN BERNARDINO AUTHORIZING THE EXECUTION OF A HOME 4 INVESTMENT PARTNERSHIP LOAN AGREEMENT BETWEEN THE CITY OF SAN BERNARDINO AND VAL 9 HOUSING PARTNERS, L.P. FOR THE 5 DEVELOPMENT OF THE VALENCIA AND 9TH PROJECT 6 WHEREAS, the Valencia Avenue and 9th Street (Val 9) housing project is a joint 7 effort between the City of San Bernardino, National Community Renaissance of California (CORE), San Bernardino County Housing and Community Development Department and 8 Housing Authority of the County of San Bernardino to redevelop Waterman Gardens; and 9 WHEREAS, the complete project entails demolishing 252 existing units and constructing over four hundred affordable and market rate units on the actual Waterman 10 Gardens site; and 11 WHEREAS, the Val 9 project is the first phase of the Waterman Gardens projects 12 consisting of construction of 76 units which will be used to house existing Waterman Gardens 13 tenants during the rehabilitation of their units; and 14 WHEREAS, on June 16, 2014 the City Council approved loaning $1,500,000 of Home Investment Partnership (HOME) funds to Val 9 Partners, Inc. for the development of 15 the Val 9 Project, 16 NOW THEREFORE, BE IT RESOLVED BY THE MAYOR AND COMMON 17 COUNCIL OF THE CITY OF SAN BERNARDINO AS FOLLOWS: 18 Section 1. The Mayor and Common Council of the City of San Bernardino do hereby authorize and direct the City Manager to execute and fulfill the terms of the 19 attached HOME loan agreement between the City and Val 9 Housing Partners, L.P. for the construction of affordable housing, also known as the Valencia 20 Avenue and 9th Street Project (Val 9), a copy of which is attached and 21 incorporated herein by reference as fully as though set forth at length. 22 Section 2. The Mayor and Common Council of the City of San Bernardino do hereby 23 authorize and direct the City Manager to execute any additional documents or agreements necessary to effectuate the loan of$1.5 million to Val 9 Housing 24 Partners, including amendments to the attached HOME loan agreement, subordination agreements, recording documents, or regulatory agreements, so 25 long as the additional documents or agreements do not increase the amount of 26 the loan or substantially change any other term of the loan and are approved as to form by the City Attorney or his designee. 27 28 /// 1 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF 2 SAN BERNARDINO AUTHORIZING THE EXECUTION OF A HOME INVESTMENT PARTNERSHIP LOAN AGREEMENT BETWEEN THE CITY OF 3 SAN BERNARDINO AND VAL 9 HOUSING PARTNERS, L.P. FOR THE 4 DEVELOPMENT OF THE VALENCIA AND 9TH PROJECT 5 I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Mayor and Common Council of the City of San Bernardino at a joint regular meeting thereof, held on the 6 16th day of March, 2015, by the following vote, to wit: 7 8 Council Members: AYES NAYS ABSTAIN ABSENT 9 MARQUEZ X 10 BARRIOS X 11 12 VALDIVIA X 13 SHORETT X 14 NICKEL X 15 JOHNSON X 16 MULVIHILL X 17 � ,I 18 19 Georgeann Hanna, Cit Clerk 20 �1 The foregoing resolution is hereby approved this day of March, 2015. 21 22 23 R. Carey Davi , Mayor City of San mardino 24 25 Approved as to form: Gary D. Saenz, City Attorney 26 27 Z 28 By. 2015-52 HOME INVESTMENT PARTNERSHIPS ACT LOAN AGREEMENT Between CITY OF SAN BERNARDINO and Val 9 Housing Partners, L.P. (Val 9 Apartments) 2015-52 TABLE OF CONTENTS Page ARTICLE 1. DEFINITIONS AND EXHIBITS............................................................................. 2 Section1.1 Definitions................................................................................................... 2 Section1.2 Exhibits. ...................................................................................................... 7 ARTICLE 2. LOAN PROVISIONS............................................................................................... 7 Section2.1 Loan. ........................................................................................................... 7 Section2.2 Interest......................................................................................................... 7 Section 2.3 Use of Loan Funds...................................................................................... 7 Section2.4 Security. ...................................................................................................... 8 Section 2.5 Subordination.............................................................................................. 8 Section 2.6 Conditions Precedent to Disbursement of Loan Funds............................... 9 Section 2.7 Repayment Schedule................................................................................. 13 Section 2.8 Non-Recourse. .......................................................................................... 18 Section 2.9 Other Financing. ....................................................................................... 18 ARTICLE 3. CONSTRUCTION OF THE DEVELOPMENT.................................................... 19 Section 3.1 Schedule of Performance.......................................................................... 19 Section 3.2 Permits and Approvals.............................................................................. 19 Section 3.3 Construction Contract............................................................................... 19 Section3.4 Bid Package. ............................................................................................. 20 Section 3.5 Construction Bonds................................................................................... 20 Section 3.6 Commencement of Construction. ............................................................. 20 Section 3.7 Completion of Construction...................................................................... 20 Section 3.8 Construction Pursuant to Plans and Laws; Prevailing Wages; Accessibility.............................................................................................. 21 Section 3.9 Equal Opportunity..................................................................................... 23 Section 3.10 Minority and Women-Owned Contractors. .............................................. 23 Section 3.11 Progress Reports. ...................................................................................... 23 Section 3.12 Construction Responsibilities. .................................................................. 23 Section 3.13 Mechanics Liens, Stop Notices, and Notices of Completion....................23 Section 3.14 Inspections. ............................................................................................... 24 Section 3.15 Approved Development Budget; Revisions to Budget.............................24 Section 3.16 Developer Fee. ..........................................................................................25 Section 3.17 Marketing Plan.......................................................................................... 25 Section 3.18 Tenant Services Plan and Budget. ............................................................ 26 ARTICLE 4. LOAN REQUIREMENTS...................................................................................... 27 Section 4.1 Financial Accountings and Post-Completion Audits................................ 27 Section 4.2 Annual Operating Budget. ........................................................................ 27 Section4.3 Information. .............................................................................................. 27 Section4.4 Records. .................................................................................................... 27 i 2015-52 TABLE OF CONTENTS (continued) Page Section4.5 City Audits................................................................................................ 29 Section 4.6 HOME Requirements................................................................................29 Section 4.7 Hazardous Materials. ................................................................................ 33 Section 4.8 Maintenance and Damage......................................................................... 36 Section4.9 Fees and Taxes.......................................................................................... 36 Section 4.10 Notice of Litigation................................................................................... 36 Section 4.11 Operation of Development as Affordable Housing. ................................. 37 Section 4.12 Nondiscrimination..................................................................................... 37 Section4.13 Transfer..................................................................................................... 38 Section 4.14 Insurance Requirements............................................................................ 39 Section 4.15 Anti-Lobbying Certification. .................................................................... 43 Section 4.16 Covenants Regarding Approved Financing.............................................. 43 Section 4.17 Affordability and Project Monitoring.......................................................44 Section 4.18 Crime-Free Multi-Housing Program Participation...................................45 ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BORROWER.........................45 Section 5.1 Representations and Warranties................................................................45 ARTICLE 6. DEFAULT AND REMEDIES................................................................................47 Section 6.1 Events of Default. ..................................................................................... 47 Section6.2 Remedies...................................................................................................49 Section6.3 Right of Contest........................................................................................49 Section 6.4 Remedies Cumulative...............................................................................49 Section 6.5 Limited Partner Cure Rights..................................................................... 50 ARTICLE 7. GENERAL PROVISIONS ..................................................................................... 50 Section 7.1 Relationship of Parties.............................................................................. 50 Section7.2 No Claims. ................................................................................................ 50 Section 7.3 Discretion Retained By City..................................................................... 50 Section 7.4 Indemnification......................................................................................... 51 Section 7.5 Non-Liability of City Officials, Employees and Agents. ......................... 51 Section 7.6 No Third Party Beneficiaries. ................................................................... 51 Section 7.7 Conflict of Interest.................................................................................... 51 Section 7.8 Notices, Demands and Communications.................................................. 52 Section7.9 Amendments. ............................................................................................ 53 Section 7.10 City Approval............................................................................................ 53 Section7.11 Applicable Law......................................................................................... 53 Section7.12 Parties Bound............................................................................................ 53 Section 7.13 Attorneys' Fees.......................................................................................... 53 Section7.14 Severability. .............................................................................................. 54 Section7.15 Force Majeure........................................................................................... 54 Section7.16 Waivers. .................................................................................................... 54 Section 7.17 Title of Parts and Sections. ....................................................................... 54 ii 2015-52 TABLE OF CONTENTS (continued) Page Section 7.18 Entire Understanding of the Parties.......................................................... 54 Section 7.19 Multiple Originals; Counterpart................................................................ 54 Exhibit A: Legal Description of the Property Exhibit B: Approved Development Budget Exhibit C: Schedule of Performance Exhibit D: Form of Promissory Note Exhibit E: From of Deed of Trust Exhibit F: Form of Regulatory Agreement Exhibit G: Certification of Continuing Program Compliance Exhibit H: Section 3 Compliance Exhibit I: Project Deliverables Exhibit J: Statement of Residual Receipts iii 2015-52 HOME INVESTMENT PARTNERSHIPS ACT LOAN AGREEMENT (Waterman Gardens-Valencia 9) This HOME Investment Partnerships Act Loan Agreement(the "Agreement") is dated March_, 2015 (the "Effective Date"), and is between the City of San Bernardino, a charter city of the State of California(the "City"), and Val 9 Housing Partners, L.P., a California limited partnership ('Borrower"). RECITALS A. Defined terms used but not defined in these recitals are as defined in Article 1 of this Agreement. B. The City has received Home Investment Partnerships Act funds from the United States Department of Housing and Urban Development("HUD")pursuant to the Cranston- Gonzales National Housing Act of 1990 ("HOME Funds"). The HOME Funds must be used by the City in accordance with 24 C.F.R. Part 92. C. The Borrower is or concurrently herewith will become the fee owner of the real property located at the northwest corner of Valencia Avenue and 91h Street, in the City of San Bernardino, County of San Bernardino, State of California, as more particularly described in Exhibit A (the "Propert y"). Borrower intends to construct a Seventy-Six (76)unit multifamily affordable housing development (including one manager's unit) (the "Improvements"). The Improvements and the Property are referred to as the "Development." D. Borrower desires to borrow from the City and the City desires to lend Borrower One Million Five Hundred Thousand Dollars ($1,500,000) of HOME Funds (the "Loan"). The Loan will be evidenced by the Note and secured by the Deed of Trust, as defined below. E. The Loan is being made to finance construction costs associated with the Development in order to help achieve financial feasibility for the Development. The Development will increase the supply of affordable rental housing in the City of San Bernardino. Due to the assistance provided Borrower pursuant to this Agreement, the City has classified seven(7)units as HOME-assisted units (each such unit a "City-Assisted Unit"), which Units are "floating" Units as defined in 24 C.F.R. 92.2520). The City-Assisted Units are required to be one (1)one-bedroom Unit and six (6) three-bedroom Units and are to be intermingled throughout the Development and of comparable quality to all other Units and must meet the Uniform Federal Accessibility Standards and Section 3.8(f) below. F. The City has prepared a Mitigated Negative Declaration under the California Environmental Quality Act(Public Resources Code Sections 21000 et sec l.) ("CE A") requirements,pursuant to 14 CCR Section 15070. The City considered the environmental effects of the Development as show in the Mitigated Negative Declaration and determined that no further CEQA analysis is required pursuant to 14 California Code of Regulations Section 15162. 1 2015-52 G. In accordance with the National Environmental Policy Act of 1969, as amended (42 U.S.C. 4321-4347) ("NEPA"),the City has completed and approved all applicable environmental review for the activities proposed to be undertaken under this Agreement and issued a Finding of No Significant Impact. The Parties therefore agree as follows: AGREEMENT ARTICLE 1. DEFINITIONS AND EXHIBITS Section 1.1 Definitions. The following terms have the following meanings: (a) "Agreement" means this HOME Investment Partnerships Act Loan Agreement. (b) "AHP Loan"has the meaning set forth in Section 2.9. (c) "Annual Payment" has the meaning set forth in Section 2.7(b). (d) "Approved Development Budget" means the proforma development budget, including sources and uses of funds, as approved by the City, and attached hereto and incorporated herein as Exhibit B as such may be modified pursuant to Section 3.15. (e) "Approved Financing" means all of the following loans, grants and equity obtained by Borrower and approved by the City for the purpose of financing the Development: (i) An unsecured construction bridge loan from Wells Fargo Bank, National Association in the approximate amount of Eight Million Six Hundred Sixty Six Thousand Three Hundred Forty-Eight Dollars ($8,666,348.00) (the"Construction Loan"); (ii) A HUD/FHA 221(d)(4) loan from PNC Bank, National Association in the approximate amount of Ten Million Six Hundred Seventy-One Thousand Dollars ($10,671,000) (the "PNC Loan"); (iii) A loan from the Housing Authority of the County of San Bernardino (the "Housing Authority") of up to One Million Dollars ($1,000,000) (the "Housing Authority Loan"); (iv) Low Income Housing Tax Credit investor limited partner capital contribution in the approximate amount of Twelve Million Four Hundred Twenty-Four Thousand Two Hundred Twenty-Three Dollars ($12,424,223) (the "Tax Credit Investor Equity"); 2 2015-52 (v) A HOME Investment Partnership Act loan from the County of San Bernardino,made pursuant to the Sub-Recipient Agreement, of approximately Eight Hundred Ten Thousand Dollars ($810,000) (the"County HOME Loan"); and (vi) Deferred Developer Fees in an approximate amount of Four Hundred Ninety-Seven Thousand Three Hundred Fifteen Dollars ($497,315) (the "Deferred Developer Fee") as described in Section 3.16(c). (0 "Bid Package" means the package of documents Borrower's general contractor is required to distribute to potential bidders as part of the process of selecting subcontractors for the Development. The Bid Package is to include the following: (i) an invitation to bid; (ii) copy of the proposed construction contract; and (iii) all Construction Plans. (g) "Borrower" has the meaning set forth in the first paragraph of this Agreement. (h) "CEQA" has the meaning set forth in Paragraph F of the Recitals. (i) "Certificate of Occupancy" means the certificate of occupancy or equivalent document issued by the City to certify completion of the construction of the Development. 0) "CHDO"means a certified Community Housing Development Organization as defined in 24 C.F.R. 92.300. For the purposes of this Agreement, the certified CHDO is National Community Renaissance of California, as may be substituted pursuant to Section 4.6(c) of this Agreement. (k) "City" has the meaning set forth in the first paragraph of this Agreement. (1) "City Manager"means the person holding the office of city manager for the City pursuant to Article V, Section 100 of the Charter of the City of San Bernardino. (m) "Commencement of Construction" has the meaning set forth in Section 3.6. (n) "Completion Component" has the meaning set forth in Section 2.6. (o) "Completion Date" means the date that all of the following have occurred: (i) a final certificate of occupancy, or equivalent document is issued by the City to certify completion of the construction of the Development; (ii)the final disbursement of HOME funds for the Development has been made; (iii) the City has verified the Development complies with the property standards set forth in 24 CFR 92.251; and (iv) all project completion information has been entered by the City into the Integrated Disbursement and Information System (IDIS). (p) "Completion of Construction" has the meaning set forth in Section 3.7. (q) "Construction Closing" means the date that all deeds of trust associated with Approved Financing necessary for the construction of the Development as shown on the Approved Development Budget are recorded against the Property. 3 2015-52 (r) "Construction Contract" has the meaning set forth in Section 3.3. (s) "Construction Plans" means all construction documentation upon which Borrower and the General Contractor rely in constructing the Development on the Property (including the units in the Development, landscaping,parking, and common areas) as approved by the City, as applicable, and includes,but is not limited to, final architectural drawings, landscaping plans and specifications, final elevations,building plans and specifications, and scope of construction working drawings. (t) "County" means the County of San Bernardino, a political subdivision of the State of California. (u) "City-Assisted Units" has the meaning set forth in Paragraph E of the Recitals. (v) "Deed of Trust" means the Deed of Trust with Assignment of Rents, Security Agreement, and Fixture Filing among Borrower, as Trustor, a trustee approved by the City, and the City, as beneficiary, that will encumber the Property to secure repayment of the Loan and performance of the covenants of the Loan Documents. A copy of the form of Deed of Trust is attached as Exhibit E. (w) "Default Rate" has the meaning set forth in Section 6.2(d). (x) "Developer Fee" has the meaning set forth in Section 3.16 and includes the Deferred Developer Fee defined in subsection(e) above. (y) "Development" has the meaning set forth in Paragraph C of the Recitals. (z) "Escrow" means the escrow account established by the Borrower for the closing of Development financing with an another escrow company satisfactory to the City. (aa) "Event of Default" has the meaning set forth in Section 6.1. (bb) "Final Cost Certification" has the meaning set forth in Section 4.1. (cc) "Final Development Cost" means the total of the cost of acquisition, development and construction (including soft costs) of the Development as shown on the Final Cost Certification. (dd) "General Contractor" has the meaning set forth in Section 3.3. (ee) "Hazardous Materials" has the meaning set forth in Section 4.7. (ff) "Hazardous Materials Claims" has the meaning set forth in Section 4.7. (gg) "Hazardous Materials Law" has the meaning set forth in Section 4.7. 4 2015-52 (hh) "HOME" means the HOME Investment Partnerships Act Program pursuant to the Cranston-Gonzales National Affordable Housing Act of 1990 (42 U.S.C. 12705 et seq.), as amended. (ii) "HOME Funds" has the meaning set forth in Paragraph B of the Recitals. 0j) "HOME Term" means the period beginning on the date of this Agreement and ending on the twentieth(20th) anniversary of the Completion Date. (kk) "Housing Authority"means the Housing Authority of the County of San Bernardino. (11) "HUD" has the meaning set forth in Paragraph B of the Recitals. (mm) "Improvements" has the meaning set forth in Paragraph C of the Recitals. (nn) "Investor Limited Partner" means Wells Fargo Affordable Housing Community Development Corporation or a permitted transferee. (oo) "Loan" has the meaning set forth in Paragraph D of the Recitals. (pp) "Loan Documents" means this Agreement, the Note, the Regulatory Agreement, and the Deed of Trust. (qq) "Marketing Plan" has the meaning set forth in Section 3.17(a). (rr) "NEPA" has the meaning set forth in Paragraph G of the Recitals. (ss) "Net Proceeds of Permanent Financing" means the amount by which Permanent Financing exceeds the Final Development Costs. (tt) "Note" means the Promissory Note that evidences Borrower's obligation to repay the Loan. A copy of the form of Note is attached as Exhibit D. (uu) "Notice of Completion" means the Notice of Completion executed by Borrower in the form specified in California Civil Code Section 3093. (vv) "Partnership Agreement" means the Agreement of Limited Partnership executed by the partners of Borrower, to be amended and restated upon admittance of the tax credit investor limited partner to the partnership, and as may be further amended pursuant to the requirements of Section 4.13(c)(ii) hereof. (ww) "Permanent Closing" means the date that all deeds of trust (or assignments of deeds of trust) associated with Approved Financing necessary for the permanent financing of the Development as shown on the Approved Development Budget that have been recorded against the Property are converted to permanent loans deeds of trust (which for the PNC Loan shall be deemed to occur on the date amortizing payments on the PNC Loan begin), which shall also be referenced as the "Conversion Date". 5 2015-52 (xx) "Permanent Financing" means the sum of the following amounts: (i) the PNC Loan (ii) the County HOME Loan, (iii)the Housing Authority Loan; (iv) the AHP Loan (if applicable); (v)the Loan; and (vi) any future additional HOME Loans made by City. (yy) "Permitted Limited Partner" has the meaning set forth in Section 6.5. (zz) "Permitted Transfer" has the meaning set forth in Section 4.13. (aaa) "Predevelopment Component I " has the meaning set forth in Section 2.6. (bbb) "Predevelopment Component II " has the meaning set forth in Section 2.6. (ccc) "Property" has the meaning set forth in Paragraph C of the Recitals. (ddd) 'Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive Covenants between the City and Borrower related to the Loan, to be recorded against the Property. A copy of the form of Regulatory Agreement is attached as Exhibit F. (eee) 'Residual Receipts" has the meaning set forth in Section 2.7(a)(vi). (fff) "Schedule of Performance" means the schedule for performance of various tasks and obligations under this Agreement that is attached as Exhibit C, as such may be modified pursuant to Section 3.1. (ggg) "Senior Lender" has the meaning set forth in Section 2.5. (hhh) "Services Budget" has the meaning set forth in Section 3.18. (iii) "Services Plan" has the meaning set forth in Section 3.18. 0jj) "Sub-Recipient Agreement"means that certain HOME Investment Partnership Program (HOME) Sub-Recipient Agreement, dated as of February 2, 2015,by and between the City and the County. (kkk) "TCAC" means the California Tax Credit Allocation Committee. (111) "Tenant" means the tenant household that occupies a unit in the Development. (mmm)"Term" means the period of time that commences on the date of this Agreement, and expires,unless sooner terminated in accordance with this Agreement, on the fifty-fifth (55th) anniversary of the Completion Date. (nnn) "Transfer" has the meaning set forth in Section 4.13. 6 2015-52 Section 1.2 Exhibits. The following exhibits are attached to this Agreement and incorporated into this Agreement by this reference: Exhibit A: Legal Description of the Property Exhibit B: Approved Development Budget Exhibit C: Schedule of Performance Exhibit D: Form of Promissory Note Exhibit E: From of Deed of Trust Exhibit F: Form of Regulatory Agreement Exhibit G: Certification of Continuing Program Compliance Exhibit H: Section 3 Compliance Exhibit I: Project Deliverables Exhibit J: Statement of Residual Receipts ARTICLE 2. LOAN PROVISIONS Section 2.1 Loan. The City shall lend to Borrower the Loan for the purposes set forth in Section 2.3 of this Agreement. Borrower's obligation to repay the Loan is evidenced by the Note. Section 2.2 Interest. (a) Subject to the provisions of Subsection (b)below, simple interest will accrue on the outstanding principal balance of the Loan at a per annum rate of interest equal to three percent (3%) commencing on the date of each disbursement. (b) Upon the occurrence of an Event of a Default, interest on the Loan will begin to accrue,beginning on the date of such occurrence and continuing until the date the Loan is repaid in full or the Event of Default is cured, at the Default Rate. Section 2.3 Use of Loan Funds. (a) Borrower shall use the Loan to fund the predevelopment, construction and permanent financing of the Development consistent with the Approved Development Budget. Borrower shall use the Loan only to fund costs associated with the residential portions of the Development. (b) No portion of the Loan shall be used to fund costs incurred more than twenty-four(24) months prior to the Effective Date or for any costs not allowed under 24 C.F.R. 92.206. (c) Borrower may not use the Loan proceeds for any other purposes without the prior written consent of the City. 7 2015-52 Section 2.4 Security. Borrower shall secure its obligation to repay the Loan, as evidenced by the Note,by executing the Deed of Trust, and causing or permitting it to be recorded as a lien against the Property in second(2"d) lien priority to the deed of trust securing the Approved Financing in the following order: the PNC Loan,the Loan, the Housing Authority Loan, and the County HOME Loan subject to Section 2.5 below. Borrower shall also cause or permit the Regulatory Agreement to be recorded against the Property. Section 2.5 Subordination. Any agreement by the City to subordinate the Deed of Trust and/or Regulatory Agreement to an encumbrance securing and/or evidencing Approved Financing(each such Approved Financing, a "Senior Loan"), will be subject to the satisfaction of each of the following conditions: (a) All of the proceeds of the proposed Senior Loan, less any transaction costs, are used to provide acquisition, construction and/or permanent financing for the Development. (b) The proposed lender of a Senior Loan(each a "Senior Lender") is a state or federally chartered financial institution, a nonprofit corporation or a public entity that is not affiliated with Borrower or any of Borrower's affiliates, other than as a depositor or a lender, except as may otherwise be permitted by the City, at its sole and absolute discretion. (c) Borrower demonstrates to the City's satisfaction that subordination of the Deed of Trust and the Regulatory Agreement is necessary to secure adequate acquisition, construction and/or permanent financing to ensure the viability of the Development, including the operation of the Development as affordable housing, as required by the Loan Documents. To satisfy this requirement, Borrower must provide to the City, in addition to any other information reasonably required by the City, evidence demonstrating that the proposed amount of the Senior Loan is necessary to provide adequate acquisition, construction and/or permanent financing to ensure the viability of the Development, and adequate financing for the Development would not be available without the proposed subordination. (d) The subordination agreement(s) is structured to minimize the risk that the Deed of Trust and the Regulatory Agreement will be extinguished as a result of a foreclosure by the Senior Lender or other holder of the Senior Loan. To satisfy this requirement, the subordination agreement must provide the City with adequate rights to cure any defaults by Borrower, including: (i) providing the City or its successor with copies of any notices of default at the same time and in the same manner as provided to Borrower; and (ii) providing the City with a cure period of at least sixty(60) days to cure any default. (e) The subordination(s) of the Loan is effective only during the original term of the Senior Loan and any extension of its term that is approved in writing by the City. 8 2015-52 (f) The subordination does not limit the effect of the Deed of Trust and the Regulatory Agreement before a foreclosure, nor require the consent of the Senior Lender prior to the City exercising any remedies available to the City under the Loan Documents. (g) Upon a determination by the City Manager that the conditions in this Section have been satisfied,the City Manager will be authorized to execute the approved subordination agreement without the necessity of any further action or approval by the Mayor and Common Council. Execution of any subordination agreement will evidence and constitute the determination of the City that all requirements of this Section 2.5 have been satisfied or waived. (h) So long as the Secretary of Housing and Urban Development or his/her successor or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens— Valencia 9, FHA Project No. 143-35130, the provisions of this Section 2.5 shall not apply to a subordination to the HUD financing. The City Manager has the authority to execute that certain Subordination Agreement form HUD-92420M or such other form subordination agreement required by HUD. Section 2.6 Conditions Precedent to Disbursement of Loan Funds. The disbursements made pursuant to this Section 2.6 may not exceed the amount of the Loan. The City shall disburse the Loan into Escrow in three components: (i) a "Predevelopment Component I" in the amount of One Million Two Hundred Thirty Thousand Dollars ($1,230,000); (ii) a "Predevelopment Component 11" in the amount of One Hundred Twenty Thousand Dollars ($120,000); and (iii) a "Completion Component" in the amount of One Hundred Fifty Thousand Dollars ($150,000). The division of the Loan between the Predevelopment Component I, the Predevelopment Component II and the Completion Component may be readjusted by the City Manager on behalf of the City without the need for formal amendment of this Agreement. The County will disburse the the Predevelopment Component I at Construction Closing subject to the conditions precedent setforth in subsection (a)below, the Predevelopment Component 11 subject to the conditions precedent setforth in subsection(b)below (but in no event before the Construction Closing), and the Completion Component at Permanent Closing subject to the conditions precedent setforth in subsection(c). (a) Predevelopment Component 1. The City is not obligated to make a disbursement of the Predevelopment Component I at Construction Closing, or to take any other action under the Loan Documents unless the following conditions precedent are satisfied: (i) There exists no Event of Default nor any act, failure, omission or condition that would constitute an Event of Default under this Agreement; (ii) Borrower holds good and marketable fee title to the Property or is acquiring title to the Property; (iii) Borrower has delivered to the City a copy of Borrower's organizational documents and a corporate authorizing resolution authorizing Borrower's execution of the Loan Documents and the transactions contemplated by the Loan Documents; 9 2015-52 (iv) There exists no material adverse change in the financial condition of Borrower from that shown by the financial statements and other data and information furnished by Borrower to the City prior to the date of this Agreement; (v) Borrower has furnished the City with evidence of the insurance coverage meeting the requirements of Section 4.14 below; (vi) Borrower has caused to be executed and delivered to the City the Loan Documents and any other instruments, and policies required under the Loan Documents; (vii) The Deed of Trust and the Regulatory Agreement have been recorded against the Property in the Office of the Recorder of the County of San Bernardino; (viii) Borrower is in compliance with the Schedule of Performance; (ix) All environmental review necessary for the construction of the Development has been completed, and Borrower has provided the City evidence of compliance with all CEQA and NEPA mitigation measures; (x) The City has determined the undisbursed proceeds of the Loan, together with other funds or firm commitments for funds that Borrower has obtained in connection with the acquisition and construction of the Development, are not less than the amount the City determines is necessary to pay for the acquisition and construction of the Development and to satisfy all of the covenants contained in this Agreement and the Regulatory Agreement; (xi) Borrower has obtained all permits and approvals necessary for the construction of the Development, as required by Section 3.2, provided however the Borrower may satisfy this requirement with regards to the building permit, if the Borrower obtains a permit ready letter from the City Building Department; (xii) Borrower has submitted a certification from the architect certifying that the plans and specifications and design documents for the Development ensure that the City- Assisted Units are in compliance with Section 3.8(f) of this Agreement. (xiii) The City has received a copy of the General Contractor's Construction Contract as required pursuant to Section 3.3 below; (xiv) The City has received and approved the labor and material (payment)bonds as required pursuant to Section 3.5 below; (xv) A title insurer reasonably acceptable to the City is unconditionally and irrevocably committed to issuing an LP-10 2006 ALTA Lender's Policy of title insurance insuring the priority of the Deed of Trust in the amount of the Loan, subject only to such exceptions and exclusions as may be reasonably acceptable to the City, and containing such endorsements as the City may reasonably require. The Borrower shall provide whatever documentation(including an indemnification agreement), deposits or surety is reasonably required by the title company in order for the City's Deed of Trust to be senior in lien priority to 10 2015-52 any mechanics liens in connection with any start of construction that has occurred prior to the recordation of the Deed of Trust against the Property in the Office of the Recorder of the County of San Bernardino; (xvi) Borrower has executed a Partnership Agreement approved by the City, with the Investor Limited Partner, in which the tax credit equity investor is obligated to provide Borrower the Tax Credit Investor Equity; (xvii) Borrower has closed, or is concurrently closing, on the construction financing including the Construction Loan and the County HOME Loan and is eligible to receive the proceeds of those loans and has received the amount of Tax Credit Investor Equity stated as the first installment in the Partnership Agreement (estimated to be approximately Two Million Four Hundred Eight Four Thousand Eight Hundred Forty-Five Dollars ($2,484,845); (xviii) The City has received a written draw request from Borrower, including(1) certification that the condition set forth in Section 2.6(a)(i) continues to be satisfied, (2) certification that the proposed uses of funds consistent with the Approved Development Budget, (3) the amount of funds needed, and, (4) where applicable, a copy of the bill or invoice covering a cost incurred or to be incurred. When a disbursement is requested to pay any contractor in connection with improvements on the Property, the written request must be accompanied by (i) certification by the Borrower's architect reasonably acceptable to the City that the work for which disbursement is requested has been completed (although the City reserves the right to inspect the Property and make an independent evaluation); and(ii) lien releases and/or mechanics lien title insurance endorsements reasonably acceptable to the City. (b) PredeveloRment Component II. The City is not obligated to make a disbursement of the Predevelopment Component 1I, or to take any other action under the Loan Documents unless the following conditions precedent are satisfied: (i) All requirements set forth in Section 2.6(a)have been and continue to be satisfied and there exists no Event of Default nor any act, failure, omission or condition that would constitute an Event of Default under this Agreement; (ii) Any substitution of the sole and managing general partner allowed pursuant to Section 4.6 have been completed; (iii) Borrower has complied with the requirements of Section 2.9 below; and (iv) The Borrower's sole member and managing general partner, or the sole member of the general partner,meets the legal and organizational characteristics described in 24 C.F.R. 92.2 and has been and continues to be annual recertified as a CHDO by the City of San Bernardino for the entire HOME Term; (v) There exists no Event of Default nor any act, failure, omission or condition that would constitute an Event of Default under this Agreement; and 11 2015-52 (vi) The City has received a written draw request from Borrower, including(1) certification that the condition set forth in Section 2.6(a) continue to be satisfied, (2) certification that the proposed use of funds is consistent with the Approved Development Budget, (3) the amount of funds needed, and, (4) where applicable, a copy of the bill or invoice covering a cost incurred or to be incurred. Notwithstanding anything to the contrary, if the conditions set forth in this subsection(b)have been satisfied by the Construction Closing, Borrower shall be eligible to draw down the Predevelopment Component II simultaneously with the Construction Closing. (vii) If and to the extent that the sole general partner or the sole member of the general partner, does not meet the requirements of Section 4.6(c)hereof,the City shall have no obligation to disburse any of the proceeds of the Predevelopment II Component. (c) Completion Component. The City is not obligated to make a disbursement of the Completion Component at Permanent Closing, or to take any other action under the Loan Documents unless the following conditions precedent are satisfied: (i) All requirements set forth in Section 2.6(a) and 2.6(b) have been and continue to be satisfied and there exists no Event of Default nor any act, failure, omission or condition that would constitute an Event of Default under this Agreement; (ii) The Borrower has been issued a Certificate of Completion for the Development by City; (iii) The Borrower has been issued a Certificate of Occupancy for the Development by City; (iv) The City has received satisfactory evidence that the City-Assisted Units are rented to eligible tenants at the required rents in compliance with the requirements of this Agreement and the Regulatory Agreement; (v) The Borrower has satisfied all conditions for the receipt of the third installment of the Tax Credit Investor Equity, consistent with Borrower's Partnership Agreement; (vi) The City has received from Borrower current evidence of the insurance coverage meeting the requirements of Section 4.14 below; (vii) The City has received an approved a report setting forth: (1) the income,household size,race, and ethnicity of Tenants of the City-Assisted Units; (2) the unit size, rent amount and utility allowance for all City-Assisted Units; and (3) the accessible units in the Development pursuant to Section 3.8(f); (viii) The City has received a draft of the Final Cost Certification for the Development from Borrower showing all uses and sources; (ix) The City has received from Borrower and approved a form of Tenant lease; 12 2015-52 (x) The City has received from Borrower and approved the Marketing Plan; (xi) The City has received from Borrower and approved a copy of the Services Plan for the provision of service to residents; (xii) The City has received from Borrower all relevant contract activity information,including compliance with Section 3 (including items included in Exhibit H of this Agreement, incorporated herein by this reference) and MBE/WBE requirements; (xiii) Borrower has submitted a certification from the architect certifying that the City-Assisted Units have been constructed in compliance with Section 3.8(f) of this Agreement; (xiv) The City has received from Borrower a copy of the management agreement and contact information for the property manager of the Development and the name and phone number of the on-site property manager; (xv) If Borrower is required to pay prevailing wages under the Davis- Bacon Act(40 U.S.C. 3141-3148),the Borrower has submitted copies of all certified payrolls to the City, and any identified payment issues have been resolved, or Borrower is working diligently to resolve any such issues; and (xvi) The City has received a written draw request from Borrower, including(1) certification that the condition set forth in Section 2.6(a) and 2.6(b) continue to be satisfied, (2) certification that the proposed use of funds is consistent with the Approved Development Budget, (3) the amount of funds needed, and, (4) where applicable, a copy of the bill or invoice covering a cost incurred or to be incurred; and (xvii) If and to the extent that the sole managing general partner does not meet the requirements of Section 4.6(c)hereof, the City shall have no obligation to disburse any of the proceeds of the Completion Component. (d) The Borrower hereby agrees and acknowledges that the City will have not less than seventy(70) days from the date the City receives a completed draw request to disburse funds under this Section 2.6. (e) All funds to be disbursed pursuant to this Agreement shall be available to be disbursed to a Senior Lender, if and to the extent, the Senior Lender takes over the construction of the Development, the Senior Lender agrees to be bound to the terms hereof and the Senior Lender has cured any Default of the Borrower. Section 2.7 Repayment Schedule. (a) Special Definitions. The following definitions apply to this Section 2.7: (i) "Annual Operating Expenses" means for each calendar year, the following costs reasonably and actually incurred for operation and maintenance of the Development, and subject to the limits contained in the Approved Development Budget: 13 2015-52 (1) property taxes and assessments imposed on the Development; (2) debt service and associated fees currently due on a non- optional basis (excluding debt service due from residual receipts or surplus cash of the Development) on loans associated with development of the Development and approved by the County; (3) bond monitoring fee, issuer fees, trustee's fees and other fees and cost payable to a trustee and/or issuer in connection with tax-exempt bonds issued as part of Approved Financing; (4) property management fees and reimbursements (including deferred payments of previously approved property management fees), on—site property management office expenses, and salaries of property management and maintenance personnel payable to a property manager approved by the City pursuant to the Regulatory Agreement, not to exceed amounts that are standard in the industry and pursuant to a management contract approved by the City pursuant to the Regulatory Agreement; (5) the fee in an amount not to exceed Twenty-One Thousand Six Hundred Dollars ($21,600) subject to an annual increase that is equal to the greater of three percent (3%) or the percentage increase in the Consumer Price Index for All Urban Consumers, U.S. Urban Wage Earners and Clerical Workers (Los Angeles CMSA, CA, for All Items (1982- 84 = 100)) (the "CPI"), as published by the Bureau of Labor Statistics of the United States Department of Labor,payable to a service provider approved by the City pursuant to the Regulatory Agreement, for the provision of on-site social services for Tenants which amount shall be consistent with the Services Budget approved by the City, and pursuant to a Services Plan approved by the City in accordance with Section 3.18; (6) the Partnership Asset Management Fee; (7) fees for accounting, audit, and legal services incurred by Borrower's general partner in the management of the Development, not to exceed amounts that are standard in the industry and to the extent not included in the Partnership Asset Management Fee; (8) premiums for property damage and liability insurance; (9) utility services not paid for directly by Tenants, including water, sewer, and trash collection; (10) maintenance and repair; (11) any annual license or certificate of occupancy fees required for operation of the Development; (12) security services; (13) advertising and marketing; 14 2015-52 (14) cash deposited into an operating reserve in an amount sufficient to replenish the operating reserve to the amount required by the Partnership Agreement approved by the City(approximately Five Hundred One Thousand Three Hundred Forty-Five Dollars ($501,345) or the amount required in connection with the permanent financing(or any greater amount approved in writing by the City)but with the operating reserve capped at six (6) months gross rent from the Development(as such rent may vary from time to time); (15) payment of any previously unpaid portion of the Developer Fee(with interest at the applicable federal rate) due, not to exceed a cumulative Developer Fee in the maximum amount set forth in Section 3.16 below; (16) Fees or charges due on a non-optional basis on loans associated with the construction of the Development and approved by the City, including but not limited to inspection fees or compliance monitoring fees; (17) Deposits to a replacement reserve account of$550 per unit per annum; (18) extraordinary operating costs specifically approved in writing by the City; (19) . payments of deductibles in connection with casualty insurance claims not normally paid from reserves, the amount of uninsured losses actually replaced, repaired or restored, and not normally paid from reserves, and other ordinary and reasonable operating expenses approved in writing by the City and not listed above. Annual Operating Expenses do not include the following: depreciation, amortization, depletion or other non-cash expenses, any amount expended or withdrawn from any reserve account, and any capital cost associated with the Development, as determined by the accountant for Borrower. (ii) "City Prorata Percentage" means the percentage resulting from dividing the Loan funds disbursed to Borrower in accordance with this Agreement,by the sum of such Loan funds and the County HOME Loan and the Housing Authority Loan funds disbursed to Borrower. (iii) "Gross Revenue" means for each calendar year, all revenue, income,receipts, and other consideration actually received from operation and leasing of the Development. Gross Revenue includes,but is not limited to: (1) all rents, fees and charges paid by Tenants; (2) Section 8 payments or other rental subsidy payments received for the dwelling units (excluding any such payments applicable to a pre-occupancy period and donated to the Housing Authority prior to occupancy of the Development); (3) deposits forfeited by Tenants; (4) all cancellation fees; 15 2015-52 (5) price index adjustments and any other rental adjustments to leases or rental agreements; (6) net proceeds from vending and laundry room machines; (7) the proceeds of business interruption or similar insurance not paid to Senior Lenders; (8) the proceeds of casualty insurance not used to rebuild the Development and not paid to Senior Lenders; and (9) condemnation awards for a taking of part or all of the Development for a temporary period. Gross Revenue does not include Tenants' security deposits, loan proceeds, capital contributions or similar advances. (iv) "Lenders' Share of Residual Receipts" means fifty percent (50%) of the Residual Receipts, inclusive of any Residual Receipts payment due under the County HOME Loan and the Housing Authority Loan. (v) "Partnership Asset Management Fee" means the total of the annual partnership management fees and asset management fees payable to the limited partner or general partner of Borrower pursuant to Borrower's Partnership Agreement, in an amount not to exceed Twenty Four Thousand Dollars ($24,000)per year, subject to an annual increase that is equal to the greater of three percent (3%) or the percentage increase in CPI, for the fifteen (15)-year compliance period as described in Section 42(i)(1) of the Internal Revenue Code of 1986, as amended, and in an amount to be approved by the County at the end of such compliance period for the remainder of the Term. (vi) "Residual Receipts" means for each calendar year, the amount by which Gross Revenue exceeds Annual Operating Expenses. (vii) "Statement of Residual Receipts" means an itemized statement of Residual Receipts, in the form attached here to as Exhibit J, incorporated herein by this reference. The first Statement of Residual Receipts will cover the period that begins on the Completion Date and ends on December 31 s`of that same year. Subsequent statements of Residual Receipts will cover the twelve-month period that ends on December 31 of each year. (b) Annual Payments. Commencing on April 1 st of the year following the Completion Date, and on April 1 st of each year thereafter during the Term, Borrower shall make a Loan payment in an amount equal to the City's Prorata Percentage of Lenders' Share of Residual Receipts (each, an "Annual Payment"). The City shall apply all Annual Payments as follows: (1) first, to accrued interest, and (2) second, to principal. On or prior to the date that Borrower pays its Annual Payment, Borrower shall submit the following to the City: (i) The Statement of Residual Receipts for the relevant period, for the subject property; 16 2015-52 (ii) A statement from the independent public accountant that audited the Borrower's financial records for the relevant period, which statement must confirm that Borrower's calculation of the Lenders' Share of Residual Receipts is accurate based on Gross Revenue and Annual Operating Expenses; and (iii) Any additional documentation reasonably required by the City to substantiate Borrower's calculation of Lenders' Share of Residual Receipts. (c) Special Repayment From Net Proceeds. Subject to the rights of Senior Lenders and subject to HUD approval, and to the extent additional subordinate loan proceeds, equity or surplus development sources following a cost certification, Surplus Cash or other non- Project Assets are available, no later than ten (10) days after the date Borrower receives its final Tax Credit Investor Equity contribution, Borrower shall pay to the City one-hundred percent (100%) of the Net Proceeds of Permanent Financing, as a special repayment of the Loan. No later than one hundred twenty(120) days following completion of construction of the Development, Borrower shall submit to the City for its review a preliminary calculation of the Net Proceeds of Permanent Financing and a draft of the Final Cost Certification as defined Section 4.1 below. The City shall approve or disapprove Borrower's determination of the amount of the Net Proceeds of Permanent Financing in writing within thirty(30) days of receipt. If Borrower's determination is disapproved by the City, Borrower shall re-submit documentation to the City until the City approval is obtained. Notwithstanding anything to the contrary, the Borrower may request a deduction from the Net Proceeds of Permanent Financing to reduce the outstanding balance of the County Loan, the Housing Authority Loan, or Deferred Developer Fee (subject to the restrictions in Section 3.16 hereof)upon approval from the City and the County, which approval shall not be unreasonably withheld. (d) Special Repayment For Un-leased Units. As required under 24 C.F.R. 92.252, if Borrower fails to lease any one of the City-Assisted Units within eighteen (18)months of the Completion of Construction of the Development,the Borrower shall pay to the City a proportionate share of the indebtedness of Borrower to the City under this Agreement and the Note attributable to each of the City-Assisted Units that has remained un-leased for the entire eighteen (18) month period, together with any accrued interest thereon calculated pursuant to Section 2.2, which amount shall be immediately due and payable. Amounts required to be repaid pursuant to this subsection (d) that are not immediately repaid as required hereunder a result of the limitations set forth in subsection(g) shall be added to the outstanding principal of the Loan and become part of the secured obligation of the Borrower. (e) Payment in Full. Borrower shall pay all outstanding principal and accrued interest on the Loan, in full, on the earliest to occur of. (i) an Event of Default, and(ii) the expiration of the Term. (f) Prepayment. Borrower may prepay the Loan at any time without premium or penalty. However, the Regulatory Agreement and the Deed of Trust will remain in effect for the entire Term, regardless of any prepayment. (g) So long as the Secretary of Housing and Urban Development ("HUD") or his/her successor or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130,payments on the Loan shall be payable only 17 2015-52 from the 75% of"Surplus Cash" or from non-Project Assets, as the terms "Surplus Cash" and "Project Assets" are defined in the Regulatory Agreement for Multifamily Projects (the"HUD Regulatory Agreement")between HUD and Borrower. The restrictions on payment imposed by the previous sentence shall not excuse any default caused by the failure of the Borrower to pay the indebtedness evidenced by the Note or this Agreement. Additionally, that Borrower's obligation to indemnify and hold the City harmless shall be limited to available Surplus Cash of the Borrower or non-Project assets of the Borrower, or available liability insurance proceeds. So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130, the indemnifications provisions in this Section 2.7 shall not apply to HUD. Section 2.8 Non-Recourse. Except as provided below, upon recordation of the Deed of Trust against the Property, neither Borrower, nor any partner of Borrower, will have any direct or indirect personal liability for payment of the principal of, and interest on, the Loan or the performance of the covenants of Borrower under the Deed of Trust. Following recordation of the Deed of Trust, the sole recourse of the City with respect to the principal of, or interest on, the Note and defaults by Borrower in the performance of its covenants under the Deed of Trust will be to the property described in the Deed of Trust; provided, however, that nothing contained in the foregoing limitation of liability limits or impairs the enforcement of all the rights and remedies of the City against all such security for the Note, or impairs the right of City to assert the unpaid principal amount of the Note as demand for money within the meaning and intendment of Section 431.70 of the California Code of Civil Procedure or any successor provision thereto. The foregoing limitation of liability is intended to apply only to the obligation to repay the principal of, and payment of interest on the Note and the performance of Borrower's obligations under the Deed of Trust. Except as hereafter set forth; nothing contained herein is intended to relieve Borrower of its obligation to indemnify the City under Sections 3.8, 4.6, 4.7, and 7.4 of this Agreement, or liability for(i) loss or damage of any kind resulting from waste, fraud or willful misrepresentation; (ii) the failure to pay taxes, assessments or other charges which may create liens on the Property that are payable or applicable prior to any foreclosure under the Deed of Trust (to the full extent of such taxes, assessments or other charges); (iii) the fair market value of any personal property or fixtures removed or disposed of by Borrower other than in accordance with the Deed of Trust; and (iv) the misappropriation of any proceeds under any insurance policies or awards resulting from: (A) condemnation or the exercise of the power of eminent domain; or(B)by reason of damage, loss or destruction to any portion of the Property. So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130,the indemnifications provisions in this Section 2.8 shall not apply to HUD. Section 2.9 Other Financing. (a) The Borrower is required to apply for and utilize, to the extent available, Affordable Housing Program Funds ("AHP Loan") administered by the Federal Home Loan Bank and other sources of permanent financing to partially finance the Development. (b) AHP Loan. The Borrower shall submit a timely and complete application for the AHP Loan which is subject to a competitive application process implemented by the 18 2015-52 Federal Home Loan Bank of San Francisco and its member institutions. To satisfy the requirements of this Section, the Borrower shall submit a timely and complete AHP Loan application for Affordable Housing Program's 2015 Round A Application due no later than the March 9, 2015 Round A application deadline. If the Borrower does not receive an AHP Loan in the 2015 Round A Application cycle, then the Borrower shall submit a timely and complete application for the 2015 Round B Application cycle. If the Borrower does not receive an AHP Loan Commitment in the 2015 Round B Application cycle, then the Agency may confer with the Borrower in good faith for a period not to exceed sixty(60) days to determine if the Borrower should submit a further application for an AHP Loan in a subsequent application round or if a feasible and mutually acceptable alternate arrangement can be made to finance the construction of the Development. Any agreement that is reached between the parties regarding an alternative financing plan for the Development shall be memorialized in an amendment to this Agreement. Submitting a timely and complete application for an AHP Loan shall be a condition precedent to the Agency's obligation to disburse the Predevelopment Component II. (c) If and to the extent the Borrower receives an AHP Loan or additional sources of permanent financing, the loan proceeds of the AHP Loan and the additional permanent financing, may, pursuant to Section 2.7(c),be used: (1) first to make mandatory prepayments of the Housing Authority Loan until such loan is fully repaid; (2) the remaining funds will be split equally and shall be used to make a mandatory prepayment of the Loan and to reduce the outstanding balance of the Deferred Developer Fee. ARTICLE 3. CONSTRUCTION OF THE DEVELOPMENT Section 3.1 Schedule of Performance. Borrower shall perform the tasks described in the Schedule of Performance no later than the dates set forth in the Schedule of Performance, subject to Section 7.15. The Schedule of Performance may be modified in writing by the City Manager on behalf of the City without the need for formal amendment of this Agreement or further approval by the Mayor and Common Council. Section 3.2 Permits and Approvals. Borrower shall obtain all permits and approvals necessary for the construction of the Development no later than the date set forth in the Schedule of Performance. Section 3.3 Construction Contract. (a) Not later than thirty(30) days prior to the proposed Commencement of Construction, Borrower shall submit to the City for its approval a draft of the proposed construction contract for the Development (the "Construction Contract") with Borrower's general contractor(the "General Contractor"). All construction work and professional services are to be performed by persons or entities licensed or otherwise authorized to perform the applicable construction work or service in the State of California. The Construction Contract is to provide that at least ten percent (10%) of the costs incurred will be payable only upon completion of the construction, or such other amount that may be allowed under a Senior Loan subject to written 19 2015-52 approval by the City. The Construction Contract must include all applicable HOME requirements set forth in Section 4.6 below. The City's approval of the construction contract may not be deemed to constitute approval of or concurrence with any term or condition of the construction contract except as such term or condition may be required by this Agreement. Borrower shall use its best efforts to coordinate with the local County Workforce Development Department (WDD), and all other applicable County requirements,to maximize the practicable opportunity to participate in the construction of the Development. Borrower shall, at a minimum, make contact with the County WDD and provide project information for local hire opportunities. Documentation of such notifications must be maintained by Borrower and available to the City as requested. Section 3.4 Bid Package. The Borrower shall cause Borrower's General Contractor to provide the Bid Package to all subcontractors. Section 3.5 Construction Bonds. Not later than thirty(30) days prior to the proposed Commencement of Construction Borrower shall deliver to the City copies of labor and material bonds and performance bonds for the construction of the Development in an amount equal to one hundred percent (100%) of the scheduled cost of the construction of the Development. Such bonds must name the City as a co- obligee. Section 3.6 Commencement of Construction. Borrower shall cause the Commencement of Construction of the Development no later than the date set forth in the Schedule of Performance, which in no event shall be any later than twelve (12) months from the Effective Date. For the purposes of this Agreement, "Commencement of Construction" means the date set for the start of construction of the Development in the notice to proceed issued by Borrower to Borrower's general contractor. Section 3.7 Completion of Construction. For purposes of this Agreement, "Completion of Construction" means the following: (a) Borrower shall diligently prosecute construction of the Development to completion, and shall cause the completion of the construction of the Development no later than the date set forth in the Schedule of Performance. (b) Borrower shall record a Notice of Completion within ten(10) days of completion of construction of the Development and provide the County a copy of the recorded Notice of Completion. (c) Borrower shall provide the City Manager a copy of the Certificate of Occupancy, or other evidence of completion of the Development within ten (10) days of receipt from the City. 20 2015-52 Section 3.8 Construction Pursuant to Plans and Laws, Wages; Accessibility. (a) Borrower shall construct the Development in conformance with the Construction Plans approved by the City's Building Department. Borrower shall notify the City in a timely manner of any changes in the work required to be performed under this Agreement, including any additions, changes, or deletions to the Construction Plans. A written change order authorized by the City must be obtained before any of the following changes, additions, or deletions in work for the Development may be performed: (i) any change in the work the cost of which exceeds Seventy-Five Thousand Dollars ($75,000); or(ii) any set of changes in the work the cost of which cumulatively exceeds One Hundred Twenty-Five Thousand Dollars ($125,000). Consent to any additions, changes, or deletions to the work do not relieve or release Borrower from any other obligations under this Agreement, or relieve or release Borrower or its surety from any surety bond. (b) Borrower shall cause all work performed in connection with the Development to be performed in compliance with: (i) all applicable laws, ordinances,rules and regulations of federal, state, county or municipal governments or agencies now in force or that may be enacted hereafter, including without limitation and to the extent applicable,the prevailing wage provisions of the federal Davis-Bacon Act and implementing rules and regulations, as further set forth in subsection(c)below, and state prevailing wages pursuant to California Labor Code Section 1770 et seq., and the regulations pursuant thereto, as further set forth in subsection (d) below; (ii) the property standards set out in 24 C.F.R. 5.701 et seq. and 24 C.F.R. 92.251 or adopted by the City in conformance therewith; and (iii) all directions, rules and regulations of any fire marshal,health officer,building inspector, or other officer of every governmental agency now having or hereafter acquiring jurisdiction. The work will proceed only after procurement of each permit, license, or other authorization that may be required by any governmental agency having jurisdiction, and Borrower shall be responsible to the City for the procurement and maintenance thereof, as may be required of Borrower and all entities engaged in work on the Development. (c) The Borrower shall cause construction of the Development to be in compliance with the prevailing wage requirements of the federal Davis-Bacon Act (40 U.S.C. 3141-3148) and the attached labor compliance provisions in the attached Exhibit H incorporated herein by this reference. Borrower shall indemnify, hold harmless and defend (with counsel reasonably acceptable to the City) the City against any claim for damages, compensation, fines, penalties or other amounts arising out of the failure or alleged failure of any person or entity (including Borrower, its contractor and subcontractors) to pay prevailing wages as determined pursuant to the prevailing wage provisions of the federal Davis-Bacon Act and implementing rules and regulations in connection with the construction of the Development or any other work undertaken or in connection with the Property. The requirements in this Subsection survive repayment of the Loan and the reconveyance of the Deed of Trust. Borrower agrees and 21 2015-52 acknowledges that the City and County will monitor compliance with federal Davis-Bacon Act requirements, and will make best efforts to coordinate with HUD. (d) The Borrower shall pay and shall cause the contractor and subcontractors to pay prevailing wages in the construction of the Development as those wages are determined pursuant to California Labor Code Section 1720 et seq., to employ apprentices as required by California Labor Code Sections 1777.5 et s_q., and the implementing regulations of the Department of Industrial Relations (the "DIR"). Borrower shall and shall cause the contractor and subcontractors to comply with the other applicable provisions of California Labor Code Sections 1720 et sue., 1777.5 et s_q., and implementing regulations of the DIR. Borrower shall and shall cause the contractor and subcontractors to keep and retain such records as are necessary to determine if such prevailing wages have been paid as required pursuant to California Labor Code Section 1720 et seq., and apprentices have been employed are required by California Labor Code Section 1777.5 et sue. Copies of the currently applicable current per diem prevailing wages are available from DIR. During the construction of the Development, Borrower shall or shall cause the contractor to post at the Property the applicable prevailing rates of per diem wages. Borrower shall indemnify,hold harmless and defend (with counsel reasonably acceptable to the City) the City against any claim for damages, compensation, fines,penalties or other amounts arising out of the failure or alleged failure of any person or entity(including Borrower, its contractor and subcontractors) to pay prevailing wages as determined pursuant to California Labor Code Section 1720 et seq., to employ apprentices pursuant to California Labor Code Section 1777.5 et seq., and implementing regulations of the DIR or to comply with the other applicable provisions of California Labor Code Sections 1720 et sue., 1777.5 et seq., and the implementing regulations of the DIR in connection with the construction of the Development or any other work undertaken or in connection with the Property. The requirements in this Subsection survive the repayment of the Loan, and the reconveyance of the Deed of Trust. So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130, the indemnifications provisions in this Section 3.8 shall not apply to HUD. (e) The general contractor and all Subcontractors shall be required to pay their laborers and mechanics employed under this Contract, a wage not less than minimum wage classification, as specified in the applicable Federal law when the Contract amount for the Prime contract exceeds $2,000. The General Contractor is responsible for ensuring Subcontractor compliance with Davis-Bacon and Related Act Requirements. Federal Labor Standards Provisions (HUD 4010) apply to this Development. Certified payroll submitted to the City are required during the term of construction, and Borrower shall copy the County on all such submissions. Payment of disbursement components may be delayed when certified payrolls are not properly submitted. (f) In compliance with Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794, et sue.), a minimum of four(4)units in the Development shall be constructed to be readily accessible and usable by households with a mobility impaired member and a minimum of two (2) units shall be constructed and to be readily accessible and usable by households with a hearing or visually impaired member. All City-Assisted Units in the Development shall also be built to comply with the Uniform Federal Accessibility Standards under 49 C.F.R. 31528. 22 2015-52 Section 3.9 Equal Opportunity. During the construction of the Development discrimination on the basis of race, color, creed,religion, age, sex, sexual orientation,marital status, national origin, ancestry, or disability in the hiring, firing,promoting, or demoting of any person engaged in the construction work is not allowed. Section 3.10 Minority and Women-Owned Contractors. Borrower shall use its best efforts to afford minority-owned and women-owned business enterprises the maximum practicable opportunity to participate in the construction of the Development. Borrower shall, at a minimum, notify applicable minority-owned and women- owned business firms located in San Bernardino County of bid opportunities for the construction of the Development. A listing of minority owned and women owned businesses located in the County and neighboring counties is available from the County. Documentation of such notifications must be maintained by Borrower and available to the City as requested. Section 3.11 Progress ss Reports. Until such time as Borrower has received a Certificate of Occupancy from the City for the Development, Borrower shall provide the City with quarterly progress reports regarding the status of the construction of the Development, including a certification that the actual construction costs to date conform to the Approved Development Budget, as it may be amended from time to time pursuant to Section 3.15 below. Section 3.12 Construction Responsibilities. (a) Borrower is responsible for the coordination and scheduling of the work to be performed so that commencement and completion of the construction of the Development will take place in accordance with this Agreement. (b) Borrower is solely responsible for all aspects of Borrower's conduct in connection with the Development, including(but not limited to) the quality and suitability of the plans and specifications, the supervision of construction work, and the qualifications, financial condition, and performance of all architects, engineers, contractors, subcontractors, suppliers, consultants, and property managers. Any review or inspection undertaken by the City with reference to the Development is solely for the purpose of determining whether Borrower is properly discharging its obligations to the City, and may not be relied upon by Borrower or by any third parties as a warranty or representation by the City as to the quality of the design or construction of the Development. Section 3.13 Mechanics Liens Stop Notices and Notices of Completion. (a) If any claim of lien is filed against the Property or a stop notice affecting the Loan is served on the City or any other lender or other third party in connection with the Development,then Borrower shall, within twenty(20) days after such filing or service, either pay and fully discharge the lien or stop notice, effect the release of such lien or stop notice by 23 2015-52 delivering to the City a surety bond in sufficient form and amount, or provide the City with other assurance satisfactory to the City that the claim of lien or stop notice will be paid or discharged. (b) If Borrower fails to discharge any lien, encumbrance, charge, or claim in the manner required in this Section, then in addition to any other right or remedy, the City may (but is under no obligation to) discharge such lien, encumbrance, charge, or claim at Borrower's expense. Alternately, the City may require Borrower to immediately deposit with the City the amount necessary to satisfy such lien or claim and any costs,pending resolution thereof. The City may use such deposit to satisfy any claim or lien that is adversely determined against Borrower. (c) Borrower shall file a valid notice of cessation or notice of completion upon cessation of construction work on the Development for a continuous period of thirty(30) days or more, and take all other steps necessary to forestall the assertion of claims of lien against the Property. Borrower authorizes the City,but the City has no obligation, to record any notices of completion or cessation of labor, or any other notice that the City deems necessary or desirable to protect its interest in the Development and Property. Section 3.14 Inspections. Borrower shall permit and facilitate, and shall require its contractors to permit and facilitate, observation and inspection at the Development, during construction and after completion of construction,by the City (or the County on City's behalf) and by any public authorities during reasonable business hours for the purposes of determining compliance with this Agreement. Borrower agrees and acknowledges that the City must conduct or cause to be conducted on-site inspections, consistent with the requirements of 24 C.F.R. 92.504(d), to determine compliance with the property standards set forth in 24 C.F.R. 92.251, at least once every three (3) years after the completion of construction of the Development. After the completion of an inspection the City shall deliver a copy of the inspection report to the Borrower. If the City determines as a result of such inspection that there are any life-threatening health and safety related deficiencies, Borrower has the obligation to correct such deficiencies immediately, in accordance with 24 C.F.R. 92.251. If the City determines as a result of the inspection that there are any deficiencies for any of the inspectable items in the Development, the Borrower shall correct such deficiencies within fifteen(15) days from the delivery of the inspection report or if a period longer than fifteen (15) days is reasonably necessary to correct the deficiency, then Borrower must begin to correct the deficiency within fifteen (15) days and correct the deficiency as soon as reasonably possible. In addition, the Borrower acknowledges that the City may re-inspect the Development to verify all deficiencies have been corrected or rely on third party documentation submitted by the Borrower for non- hazardous deficiencies in conformance with 24 C.F.R. 92.504(d). Section 3.15 Approved Development Budget-, Revisions to Budget. As of the date of this Agreement, the City has approved the Approved Development Budget set forth in Exhibit B. Borrower shall submit any proposed or required amendments to the Approved Development Budget, along with evidence that the changes to the Approved Development Budget are reasonable and necessary, to the City for approval within five(5) days 24 2015-52 of the date Borrower receives information indicating that actual costs of the Development vary or will vary from the costs shown on the Approved Development Budget, which approval shall not be unreasonably withheld or delayed. Written consent of the City will be required to amend the Approved Development Budget. The City will make best efforts to respond in writing within seven(7) days after receipt of a proposed amendment to the Approved Development Budget. Section 3.16 Developer Fee. (a) The maximum cumulative Developer Fee that may be paid to any entity or entities providing development services to the Development, whether paid up-front or on a deferred basis,may not exceed Two Million Dollars ($2,000,000), of which approximately Four Hundred Ninety-Seven Thousand Three Hundred Fifteen Dollars ($497,315) shall be deferred subject to subsection(c)below, and in no event may exceed the amount allowed by TCAC and as approved by the City. For the purposes of this Agreement "Developer Fee" has the meaning set forth in California Code of Regulations, Title 4, Section 10302. Except for the Developer Fee, no compensation from any source shall be received by or be payable to the Borrower or any affiliate of the Borrower in connection with the provision of development and construction management services for the acquisition and construction of the Development. (b) The Development is contemplated to be the first of a multi-phase,mixed income, mixed use redevelopment of the Waterman Gardens neighborhood. In an effort to facilitate new housing, infrastructure,human capital, educational, retail and commercial development in the identified target areas and to benefit the construction and operation of the Development. National Community Renaissance of California(the "Developer Fee Recipient") shall perform the items listed in Exhibit 1, incorporated herein by this reference(the"Project Deliverables"). (c) Cost savings at completion. Pursuant to Section 2.7(c), the Borrower may request to reduce the outstanding balance of the Deferred Developer Fee subject to the City's reasonable approval. Section 3.17 Marketing Plan. (a) No later than six (6)months prior to the projected date of the Completion of Construction of the Improvements, Borrower shall submit to the City for approval its plan for marketing the Development to income-eligible households as required pursuant to the Regulatory Agreement, including information on affirmative marketing efforts and compliance with fair housing laws and 24 C.F.R. 92.351(a) (the "Marketing Plan"). (b) Upon receipt of the Marketing Plan, the City will promptly review the Marketing Plan and will approve or disapprove it within fifteen (15) days after submission. If the Marketing Plan is not approved, Borrower shall submit a revised Marketing Plan within fifteen (15) days. Borrower shall follow this procedure for resubmission of a revised Marketing Plan until the Marking Plan is approved by the City. (c) If after five (5)months after the Completion of Construction any City- Assisted Unit remains unoccupied, the Developer shall submit a detail report of the ongoing marketing efforts, and if deemed appropriate by the City, any necessary amendments or updates 25 2015-52 to the Marketing Plan aimed at ensuring any unoccupied City-Assisted Unit is promptly leased. If any of the City-Assisted Units remain unoccupied eleven (11)months after the Completion of Construction, the Developer shall submit a detailed report of the ongoing marketing efforts and submit to the City an update to the Marketing Plan. Failure to lease all of the City-Assisted Units to an eligible tenant within eighteen (18)months of Completion of Construction shall trigger the special repayment pursuant to Section 2.7(d). Section 3.18 Tenant Services Plan and Budget. (a) Borrower will be providing on-site services to all tenants in the Development (the "Tenant Services"). No later than six (6)months prior to the projected date of the Completion of Construction of the Improvements, Borrower shall submit to the City for approval a proposed services plan which shall include written guidelines or procedures for providing the Tenant Services (the "Services Plan"), and a proposed budget for the provision of Tenant Services (the "Services Budget"). (b) The Services Plan shall include the types of Tenant Services provided, staffing levels (including caseload and hours of employment), and overall coordination of the Tenant Services. (c) The Services Budget shall show required expenditures from Annual Operating Expenses in an approximate amount of Twenty One Thousand Six Hundred Dollars ($21,600) ($1,800 per Month) subject to an annual increase that is equal to the greater of three percent (3%) or the percentage increase in CPI to fund Tenant Services. (d) Upon receipt of the proposed Services Plan and Services Budget, the City shall promptly review the proposed Services Plan and Services Budget and shall approve or disapprove them within thirty(30) days after submission. If either the Services Plan or Services Budget is not approved, the Borrower shall submit a revised Services Plan and/or Services Budget within thirty(30) days following the Borrower's receipt of the City's written disapproval. If the City does not approve the revised Services Plan and/or Services Budget because the Borrower fails to make specific revisions requested by the City, the Borrower shall be in default hereunder. (e) It is currently anticipated that the Borrower will provide additional social services to Tenants in the Development in excess of those payable from Annual Operating Expenses. The Borrower hereby agrees to make best efforts to apply for and obtain social services funding to fund approximately Nine Thousand Dollars ($9,000) of additional Tenant Services at the Development, subject to an annual increase that is equal to the greater of three percent (3%) or the percentage increase in CPI. To the extent that the Developer obtains such funding, such funding shall be excluded from Operating Income and shall instead be dedicated to paying for the additional Tenant Services. If Borrower is unable to obtain additional funds for Tenant Services or to the extent the Developer receives less than the amount necessary to fund the additional social services actually provided to Tenants of the Development approved under the Services Plan and Services Budget, the City hereby agrees that Borrower shall be allowed to accrue such amounts and be paid for such services from future Operating Income. 26 2015-52 ARTICLE 4 LOAN REQUIREMENTS Section 4.1 Financial Accountings and Post-Completion Audits. (a) No later than ninety(90) days following issuance of the Certificate of Occupancy for the Development, Borrower shall provide to the City for its review and approval a financial accounting of all sources and uses of funds for the Development. (b) No later than one hundred fifty(150) days following Completion of Construction of the Development, Borrower shall submit an audited financial report showing the sources and uses of all funds utilized for the Development. This requirement may be satisfied by providing the Final Cost Certification to the City. "Final Cost Certification" means the Final Cost Certification Sources and Uses of Funds prepared by Borrower for the Development that: (i)Borrower submits to TCAC; and (ii)has been prepared using generally accepted accounting procedures in effect in the United States from time to time, consistently applied. Section 4.2 Annual Operating Budget. At the beginning of each year of the Term, Borrower shall provide to the City an annual budget for the operation of the Development. Unless rejected by the City in writing within fifteen(15) days after receipt of the budget, the budget will be deemed accepted. If rejected by the City in whole or in part, Borrower shall submit a new or corrected budget within thirty(30) calendar days of notification of the City's rejection and the reasons therefor. The provisions of this Section relating to time periods for resubmission of new or corrected budgets will continue to apply until such budget has been approved by the City. Section 4.3 Information. Borrower shall provide any information reasonably requested by the City in connection with the Development, including(but not limited to) any information required by HUD in connection with Borrower's use of the Loan funds. Section 4.4 Records. (a) Borrower shall keep and maintain at the Development, or elsewhere with the City's written consent, full, complete and appropriate books,records and accounts relating to the Development, including all such books, records and accounts necessary or prudent to evidence and substantiate in full detail Borrower's calculation of Residual Receipts, and disbursements of Residual Receipts. Books, records and accounts relating to Borrower's compliance with the terms,provisions, covenants and conditions of this Agreement are to be kept and maintained in accordance with generally accepted accounting principles consistently applied, and are to be consistent with requirements of this Agreement. All such books, records, and accounts are to be open to and available for inspection and copying by HUD, the City, its auditors or other authorized representatives at reasonable intervals during normal business hours. Copies of all tax returns and other reports that Borrower may be required to furnish to any governmental agency are to be open for inspection by the City at all reasonable times at the place that the books, records and accounts of Borrower are kept. Borrower shall preserve such records for a period of not less than five(5) years after the creation of such records in compliance with 27 2015-52 all HUD records and accounting requirements. If any litigation, claim, negotiation, audit exception,monitoring, inspection or other action relating to the use of the Loan is pending at the end of the record retention period stated herein, then Borrower shall retain the records until such action and all related issues are resolved. The records are to include all invoices,receipts, and other documents related to expenditures from the Loan funds. Borrower shall cause records to be accurate and current and in such a form as to allow the City to comply with the record keeping requirements contained in 24 C.F.R. 92.508. Such records are to include but are not limited to: (i) Records providing a full description of the activities undertaken with the use of the Loan funds. (ii) Records demonstrating compliance with City and HUD property standards and lead-based paint requirements, including, as applicable, the Uniform Physical Conditions Standards established by HUD pursuant to 24 C.F.R. 5.703; (iii) Records documenting compliance with the fair housing, equal opportunity, and affirmative fair marketing requirements; (iv) Financial records as required by 24 C.F.R. 92.505, and OMB Circular A-110 (24 C.F.R. Part 84); (v) Records demonstrating compliance with the Tenant Selection Plan requirements pursuant to 24 C.F.R. 92.253(d), and HOME affordability and income requirements; (vi) Records demonstrating compliance with MBE/WBE requirements; (vii) Records demonstrating compliance with 24 C.F.R. Part 135 which implements Section 3 of the Housing Development Act of 1968 (including those in Exhibit H of this Agreement); (viii) Records demonstrating compliance with applicable relocation requirements, which must be retained for at least five(5) years after the date by which persons displaced from the property have received final payments; (ix) Records demonstrating compliance with labor requirements including certified payrolls from Borrower's General Contractor evidencing that applicable prevailing wages have been paid. (x) Records demonstrating compliance with 24 C.F.R. 8.20. (b) The City shall notify Borrower of any records it deems insufficient. Borrower has fifteen(15) calendar days after the receipt of such a notice to correct any deficiency in the records specified by the City in such notice, or if a period longer than fifteen (15) days is reasonably necessary to correct the deficiency, then Borrower must begin to correct the deficiency within fifteen (15) days and correct the deficiency as soon as reasonably possible. 28 2015-52 Section 4.5 City Audits. (a) Each year, Borrower shall provide the City with a copy of Borrower's annual audit, which is to include information on all of Borrower's activities, in addition the Borrower's general partners shall submit audited financial statements and the Borrower and the Borrower's general partners shall submit all other financial information reasonably requested by the City determined by the City as necessary for compliance with the requirements of 24 C.F.R. 504(d). Borrower shall also follow audit requirements of the Single Audit Act and OMB Circulars A-122 and 110. (b) In addition, the City or any designated agent or employee of the City at any time is entitled to audit the Residual Receipts of the Development, and all of Borrower's books,records, and accounts pertaining thereto. Such audit is to be conducted during normal business hours at the principal place of business of Borrower and other places where records are kept. Immediately after the completion of an audit,the City shall deliver a copy of the results of the audit to Borrower. If it is determined as a result of such audit that there has been a deficiency in a loan repayment to the City,then such deficiency will become immediately due and payable with interest at the Default Rate from the date the deficient amount should have been paid. In addition, if any audit conducted pursuant to this Section 4.5 determines that Residual Receipts have been understated for any fiscal year by more than five percent(5%), then the Borrower shall pay, in addition to the amounts set forth above, all of the costs and expenses incurred by the City in connection with the audit and review of Borrower's accounts or records. Section 4.6 HOME Requirements. (a) Borrower shall comply with all applicable laws and regulations governing the use of the HOME Loan funds as set forth in 24 C.F.R. Part 92, including the requirements of the Regulatory Agreement. In the event of any conflict between this Agreement and applicable laws and regulations governing the use of the Loan funds, the applicable laws and regulations govern. During the HOME Term,these requirements are federal requirements, implemented by the City; thereafter, these requirements are deemed local City requirements. (b) The laws and regulations governing the use of the Loan funds include(but are not limited to) the following: (i) Eligible Project Costs. Restrictions on funding only eligible project costs as defined under 24 C.F.R. 92.206 (subject to Section 2.3 above). (ii) Environmental and Historic Preservation. 24 C.F.R. Part 50 and 24 C.F.R. Part 58, which prescribe procedures for compliance with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4361), and the additional laws and authorities listed at 24 C.F.R. 58.5. (iii) Applicability of OMB Circulars. The applicable policies, guidelines, and requirements of OMB Circulars Nos. A-87, A-102, Revised, A-110, A-122, and A-133. 29 2015-52 (iv) Debarred Suspended or Ineligible Contractors. The prohibition on the use of debarred, suspended, or ineligible contractors set forth in 24 C.F.R. Part 24. (v) Civil Rights Housing and Community Development, and Age Discrimination Acts. The Fair Housing Act (42 U.S.C. 3601 et ie .) and implementing regulations at 24 C.F.R. Part 100; Title VI of the Civil Rights Act of 1964 as amended; Title VIII of the Civil Rights Act of 1968 as amended; Section 104(b) and Section 109 of Title I of the Housing and Community Development Act of 1974 as amended; Section 504 of the Construction Act of 1973 (29 USC 794, et se .); the Age Discrimination Act of 1975 (42 USC 6101, et seq.); Executive Order 11063 as amended by Executive Order 12259 and implementing regulations at 24 C.F.R. Part 107; Executive Order 11246 as amended by Executive Orders 11375, 12086, 11478, 12107; Executive Order 11625 as amended by Executive Order 12007; Executive Order 12432; Executive Order 12138 as amended by Executive Order 12608, Executive Order 13672 concerning Gender Identity. (vi) Lead-Based Paint. The requirement of the Lead-Based Paint Poisoning Prevention Act, as amended (42 U.S.C. 4821 et sN.),the Residential Lead-Based Paint Hazard Reduction Act(42 U.S.C. 4851 et sue.), and implementing regulations at 24 C.F.R. Part 35. (vii) Relocation. The requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (42 U.S.C. 4601, et seq.), and implementing regulations at 49 C.F.R. Part 24; 24 C.F.R. 570.606; Section 104(d) of the Housing and Community Development Act of 1974 and implementing regulations at 24 C.F.R. 42 et se .; 24 C.F.R. 92.353; and California Government Code Section 7260 et sN. and implementing regulations at 25 California Code of Regulations Sections 6000 et sue. If and to the extent that development of the Development results in the permanent or temporary displacement of residential tenants, homeowners, or businesses, then Borrower shall comply with all applicable local, state, and federal statutes and regulations with respect to relocation planning, advisory assistance, and payment of monetary benefits. Borrower shall prepare and submit a relocation plan to the City for approval. Borrower is solely responsible for payment of any relocation benefits to any displaced persons and any other obligations associated with complying with such relocation laws. Borrower shall indemnify, defend (with counsel reasonably chosen by the City), and hold harmless the City against all claims that arise out of relocation obligations to residential tenants,homeowners, or businesses permanently or temporarily displaced by the Development. (viii) Discrimination against the Disabled. The requirements of the Fair Housing Act(42 U.S.C. 3601 et sec.) and implementing regulations at 24 C.F.R. Part 100; Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), the Uniform Federal Accessibility Standards (24 C.F.R. 8.20, et SeMc. 8.51) and federal regulations issued pursuant thereto,which prohibit discrimination against the disabled in any federally assisted program,the requirements of the Architectural Barriers Act of 1968 (42 U.S.C. 4151-4157) and the applicable requirements of Title II and/or Title III of the Americans with Disabilities Act of 1990 (42 U.S.C. 12131 et sM.), and federal regulations issued pursuant thereto. (ix) Clean Air and Water Acts. The Clean Air Act, as amended, 42 U.S.C. 7401 et seq., the Federal Water Pollution Control Act, as amended, 33 U.S.C. 1251 et 30 2015-52 sue., and the regulations of the Environmental Protection Agency with respect thereto, at 40 C.F.R. Part 1500, as amended from time to time. (x) Uniform Administrative Requirements. The provisions of 24 C.F.R. 92.505 regarding cost and auditing requirements. (xi) Training Opportunities. The requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. 1701u("Section 3") and implementing regulations 24 C.F.R. 135 et se ., requiring that to the greatest extent feasible opportunities for training and employment be given to lower income residents of the project area and agreements for work in connection with the project be awarded to business concerns which are located in, or owned in substantial part by persons residing in, the areas of the project. Borrower agrees to include the following language in all subcontracts executed under this Agreement: (1) The work to be performed under this contract is subject to the requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. 1701u. The purpose of Section 3 is to ensure that employment and other economic opportunities generated by HUD assistance or HUD-assisted projects covered by Section 3, shall, to the greatest extent feasible,be directed to low- and very low-income persons,particularly persons who are recipients of HUD assistance for housing. (2) The parties to this contract agree to comply with HUD's regulations in 24 C.F.R. Part 135, which implement Section 3. As evidenced by their execution of this contract,the parties to this contract certify that they are under no contractual or other impediment that would prevent them from complying with the Part 135 regulations. (3) The contractor agrees to send to each labor organization or representative of workers with which the contractor has a collective bargaining agreement or other understanding, if any, a notice advising the labor organization or workers'representative of the contractor's commitments under this Section 3 clause; and will post copies of the notice in conspicuous places at the work site where both employees and applicants for training and employment positions can see the notice. The notice shall describe the Section 3 preference; shall set forth minimum number and job titles subject to hire; availability of apprenticeship and training positions;the qualifications for each; the name and location of the person(s) taking applications for each of the positions; and the anticipated date the work shall begin. (4) The contractor agrees to include this Section 3 clause in every subcontract subject to compliance with regulations in 24 C.F.R. Part 135, and agrees to take appropriate action, as provided in an applicable provision of the subcontract or in this Section 3 clause,upon a finding that the subcontractor is in violation of the regulations in 24 C.F.R. Part 135. The contractor will not subcontract with any subcontractor where the contractor has notice or knowledge that the subcontractor has been found in violation of the regulations in 24 C.F.R. Part 135. (5) The contractor will certify that any vacant employment positions, including training positions,that are filled (1) after the contractor is selected but before the contract is executed, and (2) with persons other than those to whom the regulations of 24 31 2015-52 C.F.R. Part 135 require employment opportunities to be directed, were not filled to circumvent the contractor's obligations under 24 C.F.R. Part 135. (6) Noncompliance with HUD's regulations in 24 C.F.R. Part 135 may result in sanctions,termination of this contract for default, and debarment or suspension from future HUD assisted contracts. (7) With respect to work performed in connection with Section 3 covered Indian housing assistance, section 7(b) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450e) also applies to the work to be performed under this contract. Section 7(b) requires that to the greatest extent feasible (i)preference and opportunities for training and employment shall be given to Indians, and (ii)preference in the award of contracts and subcontracts shall be given to Indian organizations and Indian-owned Economic Enterprises. Parties to this contract that are subject to the provisions of Section 3 and section 7(b) agree to comply with Section 3 to the maximum extent feasible,but not in derogation of compliance with section 7(b). (xii) Labor Standards. The labor requirements set forth in 24 C.F.R. 92.354; the prevailing wage requirements of the Davis-Bacon Act and implementing rules and regulations (40 U.S.C. 3141-3148); the Copeland "Anti-Kickback" Act (40 U.S.C. 276(c)) which requires that workers be paid at least once a week without any deductions or rebates except permissible deductions; the Contract Work Hours and Safety Standards Act—CWHSSA(40 U.S.C. 3701-3708) which requires that workers receive "overtime" compensation at a rate of 1- 1/2 times their regular hourly wage after they have worked forty(40)hours in one(1)week; and Title 29, Code of Federal Regulations, Subtitle A, Parts 1, 3 and 5 are the regulations and procedures issued by the Secretary of Labor for the administration and enforcement of the Davis- Bacon Act, as amended. (xiii) Drug Free Workplace. The requirements of the Drug Free Workplace Act of 1988 (P.L. 100-690) and implementing regulations at 24 C.F.R. Part 24. (xiv) Anti-Lobbying; Disclosure Requirements. The disclosure requirements and prohibitions of 31 U.S.C. 1352 and implementing regulations at 24 C.F.R. Part 87. (xv) Historic Preservation. The historic preservation requirements set forth in the National Historic Preservation Act of 1966, as amended (16 U.S.C. Section 470) and the procedures set forth in 36 C.F.R. Part 800. If archeological, cultural, or historic period resources are discovered during construction, all construction work must come to a halt and Borrower shall immediately notify the City. Borrower shall not shall alter or move the discovered material(s)until all appropriate procedures for "post-review discoveries" set forth in Section 106 of the National Historic Preservation Act have taken place,which include,but are not limited to, consultation with the California State Historic Preservation Officer and evaluation of the discovered material(s)by a qualified professional archeologist. (xvi) Flood Disaster Protection. The requirements of the Flood Disaster Protection Act of 1973 (P.L. 93-234) (the "Flood Act"). No portion of the assistance provided under this Agreement is approved for acquisition or construction purposes as defined under 32 2015-52 Section 3(a) of the Flood Act, for use in an area identified by HUD as having special flood hazards which is not then in compliance with the requirements for participation in the national flood insurance program pursuant to Section 201(d) of the Flood Act. The use of any assistance provided under this Agreement for such acquisition or construction in such identified areas in communities then participating in the National Flood Insurance Program is subject to the mandatory purchase of flood insurance requirements of Section 102(a) of the Flood Act. If the Property is located in an area identified by HUD as having special flood hazards and in which the sale of flood insurance has been made available under the National Flood Insurance Act of 1968, as amended, 42 U.S.C. 4001 et SeMc., the property owner and its successors or assigns must obtain and maintain, during the ownership of the Property, such flood insurance as required with respect to financial assistance for acquisition or construction purposes under-Section 102(s) of the Flood Act. Such provisions are required notwithstanding the fact that the construction on the Property is not itself funded with assistance provided under this Agreement. (xvii) Religious Organizations. If the Borrower is a religious organization, as defined by the HOME requirements, the Borrower shall comply with all conditions prescribed by HUD for the use of HOME funds by religious organizations, including the First Amendment of the United States Constitution regarding church/state principles and the applicable constitutional prohibitions set forth in 24 C.F.R. 92.257. (xviii) HUD Regulations. Any other HUD regulations present or as may be amended, added, or waived in the future pertaining to the Loan funds. (c) To be eligible to receive disbursements of the Predevelopment Component II and the Completion Component, the Borrower's sole and managing general partner, or its sole member, must meet the legal and organizational characteristics described in 24 C.F.R. 92.2 and must have been and continues to be annually certified as a CHDO by the City. The City hereby acknowledges and agrees that Borrower may request to substitute the sole member of its sole and managing general partner, or the sole member of the general partner, for the purpose of complying with the requirements of this subsection(c) at any time prior to the disbursement of the Predevelopment Component II and Completion Component. Any time prior to the Construction Closing, the Borrower may request in writing to substitute the sole member of its sole and managing general partner, and the City hereby agrees to such substitution so long as the entity substituted entity meets the requirements hereof and expressly agrees to assume the obligations of the Borrower's sole and managing general partner hereunder. Notwithstanding anything to the contrary, if at any time after the execution of this document, the City determines that the Borrower's sole and managing general partner does not satisfy the conditions hereunder, the City may at its sole and absolute discretion choose not to disburse the Predevelopment Component II and the Completion Component. So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130, any substitutions under this Section 4.6 (c) shall be subject to prior HUD approval. Section 4.7 Hazardous Materials. (a) Borrower shall keep and maintain the Property in compliance with, and may not cause or permit the Property to be in violation of any federal, state or local laws, ordinances or regulations relating to industrial hygiene or to the environmental conditions on, 33 2015-52 under or about the Property including,but not limited to, soil and ground water conditions. Borrower may not use, generate,manufacture, store or dispose of on,under, or about the Property or transport to or from the Property any flammable explosives, radioactive materials, hazardous wastes, toxic substances or related materials, including without limitation, any substances defined as or included in the definition of"hazardous substances," hazardous wastes," "hazardous materials," or "toxic substances" under any applicable federal or state laws or regulations (collectively referred to hereinafter as "Hazardous Materials") except such of the foregoing as may be customarily used in construction of projects like the Development or kept and used in and about residential property of this type. (b) Borrower shall immediately advise the City in writing if at any time it receives written notice of(i) any and all enforcement, cleanup,removal or other governmental or regulatory actions instituted, completed or threatened against Borrower or the Property pursuant to any applicable federal, state or local laws, ordinances, or regulations relating to any Hazardous Materials, ("Hazardous Materials Law"), (ii) all claims made or threatened by any third party against Borrower or the Property relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials (the matters set forth in clauses (i) and (ii) above are hereinafter referred to as "Hazardous Materials Claims"), and (iii) Borrower's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to be classified as "border-zone property" (as defined in California Health and Safety Code Section 25117.4) under the provision of California Health and Safety Code, Section 25220 et sM., or any regulation adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use of the Property under any Hazardous Materials Law. (c) The City has the right to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims and to have its reasonable attorneys' fees in connection therewith paid by Borrower. Borrower shall indemnify and hold harmless the City and its board members, supervisors, directors, officers, employees, agents, successors and assigns from and against any loss, damage, cost, expense or liability directly or indirectly arising out of or attributable to the use, generation, storage, release,threatened release, discharge, disposal, or presence of Hazardous Materials on, under, or about the Property including without limitation: (i) all foreseeable consequential damages, (ii) the costs of any required or necessary repair, cleanup or detoxification of the Property and the preparation and implementation of any closure, remedial or other required plans, and (iii) all reasonable costs and expenses incurred by the City in connection with clauses (i) and (ii), including but not limited to reasonable attorneys' fees and consultant's fees. This indemnification applies whether or not any government agency has issued a cleanup order. Losses, claims, costs, suits, liability, and expenses covered by this indemnification provision include, but are not limited to: (1) losses attributable to diminution in the value of the Property, (2)loss or restriction of use of rentable space on the Property, (3) adverse effect on the marketing of any rental space on the Property, and (4) penalties and fines levied by, and remedial or enforcement actions of any kind issued by any regulatory agency(including but not limited to the costs of any required testing,remediation, repair, removal, cleanup or detoxification of the Property and surrounding properties). This obligation to indemnify will survive termination of this Agreement. So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens 34 2015-52 —Valencia 9, FHA Project No. 143-35130, the indemnifications provisions in this Section 4.7 shall not apply to HUD. (d) Without the City's prior written consent, which will not be unreasonably withheld, Borrower may not take any remedial action in response to the presence of any Hazardous Materials on, under or about the Property,nor enter into any settlement agreement, consent decree, or other compromise in respect to any Hazardous Material Claims, which remedial action, settlement, consent decree or compromise might, in the City's judgment, impair the value of the City's security hereunder; provided, however, that the City's prior consent is not necessary in the event that the presence of Hazardous Materials on, under, or about the Property either poses an immediate threat to the health, safety or welfare of any individual or is of such a nature that an immediate remedial response is necessary and it is not reasonably possible to obtain the City's consent before taking such action,provided that in such event Borrower shall notify the City as soon as practicable of any action so taken. The City agrees not to withhold its consent, where such consent is required hereunder, if(i) a particular remedial action is ordered by a court of competent jurisdiction, (ii) Borrower will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required action, (iii) Borrower establishes to the satisfaction of the City that there is no reasonable alternative to such remedial action which would result in less impairment of the City's security hereunder, or(iv) the action has been agreed to by the City. (e) Borrower hereby acknowledges and agrees that (i) this Section is intended as the City's written request for information (and Borrower's response) concerning the environmental condition of the Property as required by California Code of Civil Procedure Section 726.5, and (ii) each representation and warranty in this Agreement (together with any indemnity obligation applicable to a breach of any such representation and warranty) with respect to the environmental condition of the Property is intended by the Parties to be an "environmental provision" for purposes of California Code of Civil Procedure Section 736. (f) In the event that any portion of the Property is determined to be "environmentally impaired" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(3)) or to be an "affected parcel" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(1)), then, without otherwise limiting or in any way affecting the City's or the trustee's rights and remedies under the Deed of Trust, the City may elect to exercise its rights under California Code of Civil Procedure Section 726.5(a) to (i) waive its lien on such environmentally impaired or affected portion of the Property and (ii) exercise(1) the rights and remedies of an unsecured creditor, including reduction of its claim against Borrower to judgment, and (2) any other rights and remedies permitted by law. For purposes of determining the City's right to proceed as an unsecured creditor under California Code of Civil Procedure Section 726.5(a), Borrower will be deemed to have willfully permitted or acquiesced in a release or threatened release of Hazardous Materials, within the meaning of California Code of Civil Procedure Section 726.5(d)(1), if the release or threatened release of Hazardous Materials was knowingly or negligently caused or contributed to by any lessee, occupant, or user of any portion of the Property and Borrower knew or should have known of the activity by such lessee, occupant, or user which caused or contributed to the release or threatened release. All costs and expenses, including (but not limited to) attorneys' fees, incurred by the City in connection with any action commenced under this paragraph, including any action required by California Code of 35 2015-52 Civil Procedure Section 726.5(b)to determine the degree to which the Property is environmentally impaired,plus interest thereon at the lesser of ten percent (10%) and the maximum rate permitted by law,until paid, will be added to the indebtedness secured by the Deed of Trust and is due and payable to the City upon its demand made at any time following the conclusion of such action. Section 4.8 Maintenance and Damage. (a) During the course of both construction and operation of the Development, Borrower shall maintain the Development and the Property in good repair and in a neat, clean and orderly condition. If there arises a condition in contravention of this requirement, and if Borrower has not cured such condition within thirty(30) days after receiving written notice from the City of such a condition, then in addition to any other rights available to the City, the City may perform all acts necessary to cure such condition, and to establish or enforce a lien or other encumbrance against the Property, subject to the provisions provided in subsection(b)below. (b) Subject to the requirements of Senior Lenders, and if economically feasible in the City's judgment after consultation with Borrower, if any improvement now or in the future on the Property is damaged or destroyed, then Borrower shall, at its cost and expense, diligently undertake to repair or restore such improvement consistent with the plans and specifications approved by the City with such changes as have been approved by the City. Such work or repair is to be commenced no later than the later of one hundred twenty(120) days, or such longer period approved by the City in writing, after the damage or loss occurs or thirty(30) days following receipt of the insurance proceeds, and is to be complete within one(1) year thereafter. Any insurance proceeds collected for such damage or destruction are to be applied to the cost of such repairs or restoration and, if such insurance proceeds are insufficient for such purpose, then Borrower shall make up the deficiency. If Borrower does not promptly make such repairs then any insurance proceeds collected for such damage or destruction are to be promptly delivered by Borrower to the City as a special repayment of the Loan, subject to the rights of HUD and the Senior Lenders, as applicable. Section 4.9 Fees and Taxes. Borrower is solely responsible for payment of all fees, assessments, taxes, charges, and levies imposed by any public authority or utility company with respect to the Property or the Development, and shall pay such charges prior to delinquency. However, Borrower is not required to pay and discharge any such charge so long as (i) the legality thereof is being contested diligently and in good faith and by appropriate proceedings, and (ii) if requested by the City, Borrower deposits with the City any funds or other forms of assurance that the City in good faith from time to time determines appropriate to protect the City from the consequences of the contest being unsuccessful. Section 4.10 Notice of Litigation. Borrower shall promptly notify the City in writing of any litigation that has the potential to materially affect Borrower or the Property and of any claims or disputes that involve a material risk of such litigation. 36 2015-52 Section 4.11 Operation of Development as Affordable Housing. (a) Promptly after completion of construction Borrower shall operate the Development as an affordable housing development consistent with(i) HUD's requirements for use of the HOME Funds, (ii)the Regulatory Agreement, and (iii) any other regulatory requirements imposed on Borrower including but not limited to regulatory agreements associated with the County Loan,the Housing Authority Loan,the AHP Loan and Low Income Housing Tax Credits provided by TCAC. (b) Before leasing any City-Assisted Unit in the Development Borrower shall submit its proposed form of lease agreement for the City's review and approval. The Lease must not contain any provision which is prohibited by 24 C.F.R. 92.253(b) and any modifications thereto. The term of the lease for any unit in the Development is to be for no less than one(1) year, except by mutual agreement between Borrower and the Tenant. Any Borrower termination of a lease agreement for any unit in the Development or refusal to renew must be in conformance with 24 C.F.R. 92.253(c), and must be preceded by not less than sixty(60) days written notice to the Tenant by Borrower specifying the grounds for the action. (c) Before leasing any City-Assisted Unit in the Development, Borrower shall provide the City, for its review and approval, with Borrower's written tenant selection plan(the "Tenant Selection Plan"), which plan shall be in compliance with the requirements of 24 C.F.R. 92.253(d), and the Marketing Plan. (d) Borrower shall evaluate the income eligibility of each Tenant household in City-Assisted Units pursuant to the City's approved Tenant certification procedures within sixty (60) days before the household's expected occupancy of one of the City-Assisted Units. Borrower shall certify each Tenant household's income on an annual basis. (e) Borrower shall maintain all documents setting forth the household income of each household occupying a City-Assisted Unit, and the total amount for rent,utilities, and related services charged to each household occupying the Development, as prescribed by the Regulatory Agreement. Section 4.12 Nondiscrimination. (a) Borrower covenants by and for itself and its successors and assigns that there will be no discrimination against or segregation of a person or of a group of persons on account of race, color, religion, creed, age (except for lawful senior housing in accordance with state and federal law), familial status, disability, sex, sexual orientation, marital status, ancestry or national origin in the sale, lease, sublease, transfer,use, occupancy, tenure or enjoyment of the Property, nor may Borrower or any person claiming under or through Borrower establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the Property. The foregoing covenant will run with the land. 37 2015-52 Section 4.13 Transfer. (a) Definition. For purposes of this Agreement, "Transfer" means any sale, assignment, or transfer, whether voluntary or involuntary, of(i) any rights and/or duties under this Agreement, and/or(ii) any interest in the Development, including(but not limited to) a fee simple interest, a joint tenancy interest, a life estate, a partnership interest, a leasehold interest, a security interest, or an interest evidenced by a land contract by which possession of the Development is transferred and Borrower retains title. The term "Transfer" excludes the leasing of any single unit in the Development to an occupant in compliance with the Regulatory Agreement. The City Manager is authorized to execute assignment and assumption agreements on behalf of the City to implement any approved Transfer. (b) Prohibition. No Transfer is permitted without the prior written consent of the City, which the City may withhold in its sole discretion. The Loan will automatically accelerate and be due in full upon any Transfer made without the prior written consent of the City. So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens-Valencia 9, FHA Project No. 143-35130, the acceleration provisions in this Section 4.13 (b) shall not apply. (c) Permitted Transfers. The following are permitted Transfers approved by the City(each a "Permitted Transfer"): (i) The grant of the security interests in the Development for Approved Financing. (ii) The Borrower anticipates syndicating the low income housing tax credits that will be generated by the Development. The City hereby approves the admission of an investor limited partner into the partnership,provided that: (1) all documents associated with the admission of an investor limited partner for purposes of the low income housing tax credit syndication of the Development, including the Partnership Agreement, are submitted to the City for review and approval, which approval shall not be unreasonably withheld or delayed; (2) that the Partnership Agreement and other partnership documents are consistent with and do not conflict with the Loan Documents and the approved Development Budget; and (3) the partnership documents provide for capital contributions by the investor limited partner in the Partnership in amounts not less than those set forth in the Approved Development Budget or as otherwise approved by the City in its reasonable discretion. (iii) In the event the Developer syndicates low income housing tax credits generated by the Development, the City hereby approves future Transfers of the limited partner interest in the Partnership provided that: (1) such Transfers do not affect the timing and amount of the limited partner capital contributions provided for in the Partnership Agreement last approved by the City pursuant to Section 2.6(b)(x) or Section 4.13(c)(ii); and; (2) in subsequent Transfers, a wholly owned affiliate of the initial limited partner retains a membership or partnership interest and serves as a managing member or managing general partner of the successor limited partner; and (3) in subsequent Transfers the initial limited partner remains liable for all unpaid capital contributions. Notwithstanding anything to the contrary, once all capital contributions provided for in the Partnership Agreement have been made, the limited partner interest in the Partnership may be transferred with prior written notice to the City. 38 2015-52 (iv) The removal, or withdrawal in lieu of removal, of Borrower's general partner for cause pursuant to the Partnership Agreement shall not require the City's consent or constitute a default under this Agreement. Notwithstanding anything to the contrary, in the event that the general partner Borrower is removed by the limited partner of Borrower, or withdraws in lieu of being removed, for cause following default under the Borrower's Partnership Agreement, the City hereby approves the transfer of the general partner interest to a 501(c)(3) tax-exempt nonprofit public benefit corporation that is selected by the limited partner and approved in advance and in writing by the City, which approval shall not be unreasonably withheld, provided that: (1) all documents associated with the removal of the general partner, including the Partnership Agreement, are submitted to the City for review and approval, which approval shall not be unreasonably withheld or delayed; (2) that the Partnership Agreement and other partnership documents are consistent with and do not conflict with the Loan Documents and the approved Development Budget. (v) The substitution of the sole and managing general partner of the Borrower, or the sole member of the general partner, in place of the current sole and managing general partner of the Borrower, or the sole member of the general partner, as allowed under Section 4.6(c) of this Agreement and for purposes of complying with 24 C.F.R. 300 an 24 C.F.R. 92.2. (d) During the term of the City Loan Borrower will not refinance,re- syndicate, take out a line of credit or otherwise further encumber the property or restructure the debt constituting the Approved Financing without prior notification and approval of the City. Notwithstanding anything to the contrary, Borrower shall be required to provide written notification to the City at least one hundred twenty(120) days prior to submittal of applications for refinancing, tax credits, lines of credit and any other application in which the property may be used as security. (e) So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens —Valencia 9, FHA Project No. 143-35130, any transfer under this Section 4.13 shall be subject to prior HUD approval. Section 4.14 Insurance Requirements. (a) Borrower shall maintain the following insurance coverage throughout the Term of the Loan written by insurers authorized to do business in the State of California and with a minimum "Best" Insurance Guide rating of"A-VII". If the Borrower uses existing coverage to comply with these requirements and that coverage does not meet the specified requirements, the Borrower agrees to amend, supplement, or endorse the existing coverage to do so. The type(s) of insurance required is determined by the scope of the contract services. (b) Without in anyway affecting the indemnity herein provided and in addition thereto, the Borrower shall secure and maintain throughout the contract term the following types of insurance with limits as shown: (i) Workers' Compensation/Employers Liability. 39 2015-52 (1) Workers' Compensation A program of Workers' Compensation insurance or a state-approved, self-insurance program in an amount and form to meet all applicable requirements of the Labor Code of the State of California, including Employer's Liability with $250,000 limits covering all persons including volunteers providing services on behalf of the Borrower and all risks to such persons under this Agreement. (2) If Borrower has no employees, it may certify or warrant to the City that it does not currently have any employees or individuals who are defined as "employees" under the Labor Code and the requirement for Workers' Compensation coverage will be waived by the City Manager. (3) With respect to borrowers that are non-profit corporations organized under California or federal law, volunteers for such entities are required to be covered by Workers' Compensation insurance. (ii) Comprehensive General Liability. General Liability Insurance covering all operations performed by or on behalf of Borrower providing coverage for bodily injury and property damage with a combined single limit of not less than One Million Dollars ($1,000,000),per occurrence. The policy coverage must include: (1) Premises operations and mobile equipment. (2) Products and completed operations. (3) Broad form property damage (including completed operations). (4) Explosion, collapse, and underground hazards. (5) Personal injury. (6) Contractual liability. (7) $2,000,000 general aggregate limit. (iii) Comprehensive Automobile Liability. (1) Primary insurance coverage must be written on ISO Business Auto coverage form for all owned, hired and non-owned automobiles or symbol I (any auto). (2) The policy must have a combined single limit of not less than One Million Dollars ($1,000,000) for bodily injury and property damage,per occurrence. (3) If the Borrower is transporting one or more non-employee passengers in performance of contract services, the automobile liability policy must have a combined single limit of Two Million Dollars ($2,000,000) for bodily injury and property damage per occurrence. 40 2015-52 (4) If the Borrower owns no autos, a non-owned auto endorsement to the General Liability policy described above is acceptable. (iv) Builders' Risk/Property Insurance. Builders' Risk insurance during the course of construction, and upon completion of construction,property insurance covering the Development, in form appropriate for the nature of such property, covering all risks of loss, excluding earthquake, for one hundred percent (100%) of the replacement value,with deductible, if any, acceptable to the City, naming the City as a Loss Payee, as its interests may appear. Flood insurance must be obtained if required by applicable federal regulations. (v) Commercial Crime. Commercial crime insurance covering all officers and employees, for loss of Loan proceeds caused by dishonesty, in an amount approved by the City,naming the City a Loss Payee, as its interests may appear. (c) Borrower shall cause any general contractor, agent, or subcontractor working on the Development under direct contract with Borrower or subcontract to maintain insurance of the types and in at least the minimum amounts described in subsections (i), (ii), and (iii) above,meeting all of the general requirements of subsections (e) and (f)below and naming the City as an additional insured. The Borrower agrees to monitor and review all such coverage and assumes all responsibility ensuring that such coverage is provided as required here. (d) An umbrella(over primary) or excess policy may be used to comply with limits or other primary coverage requirements. When used,the umbrella policy must apply to bodily injury/property damage,personal injury/advertising injury and must include a "dropdown" provision providing primary coverage for any liability not covered by the primary policy. The coverage must also apply to automobile liability. (e) The required insurance must be provided under an occurrence form, and Borrower shall maintain the coverage described in subsections (a) continuously throughout the Term. Should any of the required insurance be provided under a form of coverage that includes an annual aggregate limit or provides that claims investigation or legal defense costs be included in such annual aggregate limit, such annual aggregate limit must be three times the occurrence limits specified above. (f) Comprehensive General Liability and Comprehensive Automobile Liability insurance policies must be endorsed to name as an additional insured the City and its elected officials, officers, agents, and employees.. The additional insured endorsements must not limit the scope of coverage for the City to vicarious liability but must allow coverage for the City to the full extent provided by the policy. Such additional insured coverage must be at least as broad as Additional Insured (Form B) endorsement form ISO, CG 2010.11 85. (g) All policies and bonds are to contain(i) the agreement of the insurer to give the City at least thirty(30) days' notice prior to cancellation (including, without limitation, for non-payment of premium) or any material change in said policies; (ii) an agreement that such policies are primary and non-contributing with any insurance that may be carried by the City; (iii) a provision that no act or omission of Borrower shall affect or limit the obligation of the insurance carrier to pay the amount of any loss sustained; and (iv) a waiver by the insurer of all 41 2015-52 rights of subrogation against the City and its authorized parties in connection with any loss or damage thereby insured against. (h) Construction contracts for projects over Three Million Dollars ($3,000,000) and less than Five Million Dollars ($5,000,000)require limits of not less than Five Million Dollars ($5,000,000) in General Liability and Auto Liability coverage. (i) The Borrower shall require the carriers of required coverage's to waive all rights of subrogation against the City, its elected officials, officers, employees, agents, volunteers, contractors and subcontractors. All general or auto liability insurance coverage provided shall not prohibit the Borrower and Borrower's employees or agents from waiving the right of subrogation prior to a loss or claim. The Borrower hereby waives all rights of subrogation against the City. 0) All policies required herein are to be primary and non-contributory with any insurance or self-insurance programs carried or administered by the City. (k) The Borrower shall furnish Certificates of Insurance to the City evidencing the insurance coverage prior to the close of Escrow, additional endorsements, as required shall be provided prior to the commencement of performance of services hereunder, which certificates shall provide that such insurance shall not be terminated or expire without thirty(30) days written notice to the City, and Borrower shall maintain such insurance from the time Borrower commences performance of services hereunder until the completion of such services. Within fifteen (15) days following the close of Escrow, the Borrower shall furnish a copy of the Declaration page for all applicable policies and will provide complete certified copies of the policies and endorsements immediately upon request. (1) The Borrower agrees to ensure that coverage provided to meet these requirements is applicable separately to each insured and there will be no cross liability exclusions that preclude coverage for suits between the Borrower and the City or between the City and any other insured or additional insured under the policy. (m) Any and all deductibles or self-insured retentions in excess of Ten Thousand Dollars ($10,000) shall be declared to and approved by the City Manager. (n) In the event that'any policy of insurance required in this Section does not comply with the requirements, is not procured, or is canceled and not replaced, the City has the right but not the obligation or duty to obtain such insurance it deems necessary and any premiums paid by the City will be promptly reimbursed by Borrower or City disbursements to Borrower will be reduced to pay for the City purchased insurance. (o) Insurance requirements are subject to periodic review by the City. The City Manager is authorized,but not required, to reduce, waive or suspend any insurance requirements whenever the City Manager determines that any of the required insurance is not available, is unreasonably priced, or is not needed to protect the interests of the City. In addition, if the City determines that heretofore unreasonably priced or unavailable types of insurance coverage or coverage limits become reasonably priced or available,the City Manager is authorized,but not required, to change the above insurance requirements to require additional 42 2015-52 types of insurance coverage or higher coverage limits,provided that any such change is reasonable in light of past claims against the City, inflation, or any other item reasonably related to the City's risk. Any change requiring additional types of insurance coverage or higher coverage limits must be made by amendment to this Agreement. Borrower agrees to execute any such amendment within thirty(30) days of receipt. Any failure, actual or alleged, on the part of the City to monitor or enforce compliance with any of the insurance and indemnification requirements will not be deemed as a waiver of any rights on the part of the City. Section 4.15 Anti-Lobbying_Certification. Borrower certifies,to the best of Borrower's knowledge or belief,that: (a) No Federal appropriated funds have been paid or will be paid,by or on behalf of it, to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract,the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement; (b) If any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, grant, loan, or cooperative agreement, it will complete and submit Standard Form-LLL, Disclosure Form to Report Lobbying, in accordance with its instructions. This certification is a material representation of fact upon which reliance was placed when this Agreement was made or entered into. Submission of this certification is a prerequisite for making or entering into this Agreement imposed by Section 1352, Title 31, U.S. Code. Any person who fails to file the required certification shall be subject to a civil penalty of not less than Ten Thousand Dollars ($10,000) and no more than One Hundred Thousand Dollars ($100,000) for such failure. Section 4.16 Covenants Regarding Approved Financing (a) Borrower shall promptly pay the principal and interest when due on any Approved Financing. (b) Borrower shall promptly notify the City in writing of the existence of any default under any documents evidencing Approved Financing whether or not a default has been declared by the lender and provide the City copies of any notice of default. (c) Borrower may not amend,modify, supplement, cancel or terminate any of the documents evidencing Approved Financing without the prior written consent of the City. 43 2015-52 (d) Borrower may not incur any indebtedness of any kind other than Approved Financing or encumber the Development with any liens (other than liens for Approved Financing approved by the City) without the prior written consent of the City. Section 4.17 Affordability and Project Monitoring. (a) Throughout the Term,the Borrower shall comply with all applicable record keeping and monitoring requirements set forth in (24 C.F.R. Section 92.508) of the HOME Regulations and shall annually complete and submit to City a Certification of Continuing Program Compliance in the form attached hereto as Exhibit G, and incorporated herein. (b) Representatives of the City shall be entitled to enter the Property upon at least twenty-four(24)hours' notice at reasonable times to monitor compliance with this Agreement,to inspect the records of the Development with respect to the Affordable Units, and to conduct an independent audit of such records. The Borrower agrees to cooperate with the City in making the Property available for such inspection. If for any reason the City is unable to obtain the Borrower's consent to such an inspection, the Borrower understands and agrees that the City may obtain, at the Borrower's expense, an administrative inspection warrant or other appropriate legal order to obtain access to and search the Property. The Borrower agrees to maintain records in a business-like manner and to make such records available to the City upon twenty-four(24) hours' notice at reasonable times. Unless the City otherwise approves, such records shall be maintained for the most recent five years until five years after the HOME Term. (c) Throughout the Term, the Borrower grants the City inspection rights as set forth in Section 3.14 above, and Borrower shall make best efforts to allow the City to comply with all applicable physical monitoring requirements set forth in (24 C.F.R. Section 92.504(d) and 24 C.F.R. 92.251) of the HOME Regulations. (d) The City will enforce a per-unit affordability monitoring charge on all HOME assisted developments. HOME assisted developments will be charged as follows: • 1-20 assisted units= $35.00 per unit/ annually • 20+ assisted units = $25.00 per unit/ annually (e) The County and the City shall make best efforts to coordinate physical inspections of the Development. The City will enforce a physical inspection charge on all HOME assisted developments. The inspection charge for HOME assisted development will be the lesser of: (1) Five Thousand Dollars ($5,000)per inspection; or(2) the actual costs incurred by the City to secure a qualified third party, independent of the Borrower,to conduct the physical inspections in accordance with the requirements set forth in this Agreement, and any related staffing costs incurred by the City in association therewith. Notwithstanding anything to the contrary, the Borrower will not be required to pay the physical inspection charge to the City if the County conducts the required physical inspection and allows the City to rely on said inspection and so long as the County's inspections are materially consistent with the City's requirements under this Agreement. 44 2015-52 (f) The Borrower shall pay such charge within seven (7) days of receipt of an invoice from the City. (g) The City reserves the right to waive or defer a portion of the monitoring charge if a development is unable to pay these costs. All waivers must be submitted in writing, with adequate supporting financial documentation, for review by the City Manager. Section 4.18 Crime-Free Multi-Housing Unit Program Participation. Property owners and managers shall be required to participate in the San Bernardino Police Department's Crime Free Multi-Housing Program,wherein specialized training and other resources are provided to multi-family property owners and managers to reduce the potential for onsite criminal activity. Completion of the Department's training and designation as a Certified Crime-Free Property shall be achieved and maintained by the owner/representative and onsite property manager. ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BORROWER Section 5.1 Representations and Warranties. Borrower hereby represents and warrants to the City as follows and acknowledges, understands, and agrees that the representations and warranties set forth in this Article 5 are deemed to be continuing during all times when any or all of the Loan remains outstanding. The Borrower shall immediately advise the City in writing if there is any change relating to any matters set forth or referenced in the items set forth below: (a) Organization. Borrower is duly organized, validly existing and in good standing under the laws of the State of California and has the power and authority to own its property and carry on its business as now being conducted. Copies of the documents evidencing the organization of the Borrower delivered to the City are true and correct copies of the originals. (b) CHDO Certification. Borrower's sole and managing general partner, or its sole member,meets the legal and organizational characteristics described in 24 C.F.R. 92.2 and has been and continues to be certified as a CHDO by the City for the entire HOME Term. (c) Authority of Borrower. Borrower has full power and authority to execute and deliver this Agreement and to make and accept the borrowings contemplated hereunder, to execute and deliver the Loan Documents and all other documents or instruments executed and delivered, or to be executed and delivered,pursuant to this Agreement, and to perform and observe the terms and provisions of all of the above. (d) Authority of Persons Executing Documents. This Agreement and the Loan Documents and all other documents or instruments executed and delivered, or to be executed and delivered,pursuant to this Agreement have been executed and delivered by persons who are duly authorized to execute and deliver the same for and on behalf of Borrower, and all actions required under Borrower's organizational documents and applicable governing law for the authorization, execution, delivery and performance of this Agreement and the Loan 45 2015-52 Documents and all other documents or instruments executed and delivered, or to be executed and delivered,pursuant to this Agreement,have been duly taken. (e) Valid Binding_Agreements. This Agreement and the Loan Documents and all other documents or instruments which have been executed and delivered pursuant to or in connection with this Agreement constitute or, if not yet executed or delivered, will when so executed and delivered constitute, legal, valid and binding obligations of Borrower enforceable against it in accordance with their respective terms. (f) No Breach of Law or Agreement. Neither the execution nor delivery of this Agreement and the Loan Documents or of any other documents or instruments executed and delivered, or to be executed or delivered, pursuant to this Agreement, nor the performance of any provision, condition, covenant or other term hereof or thereof, will conflict with or result in a breach of any statute, rule or regulation, or any judgment, decree or order of any court,board, commission or agency whatsoever binding on Borrower, or any provision of the organizational documents of Borrower, or will conflict with or constitute a breach of or a default under any agreement to which Borrower is a party, or will result in the creation or imposition of any lien upon any assets or property of Borrower, other than liens established pursuant hereto. (g) Compliance with Laws-, Consents and Approvals. The construction of the Development will comply with all applicable laws, ordinances,rules and regulations of federal, state and local governments and agencies and with all applicable directions,rules and regulations of the fire marshal,health officer,building inspector and other officers of any such government or agency. (h) Pending Proceedings. Borrower is not in default under any law or regulation or under any order of any court,board, commission or agency whatsoever, and there are no claims, actions, suits or proceedings pending or, to the knowledge of Borrower, threatened against or affecting Borrower or the Development, at law or in equity,before or by any court, board, commission or agency whatsoever which might, if determined adversely to Borrower, materially affect Borrower's ability to repay the Loan or impair the security to be given to the City pursuant hereto. (i) Title to Land. At the time of recordation of the Deed of Trust, Borrower will have good and marketable fee title to the Development and there will exist thereon or with respect thereto no mortgage, lien, pledge or other encumbrance of any character whatsoever other than liens for current real property taxes and liens ancillary to the Approved Financing and liens in favor of the City or approved in writing by the City. 0) Financial Statements. The financial statements of Borrower and other financial data and information furnished by Borrower to the City fairly and accurately present the information contained therein. As of the date of this Agreement,there has not been any material adverse change in the financial condition of Borrower from that shown by such financial statements and other data and information. (k) Sufficient Funds. Borrower holds or reasonably expects to receive firm financial commitments for sufficient funds to complete the acquisition of the Property and the 46 2015-52 construction of the Development in accordance with the plans and specifications approved by the City. (1) Taxes. Borrower and its subsidiaries have filed all federal and other material tax returns and reports required to be filed, and have paid all federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their income or the Property otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with generally accepted accounting principles. There is no proposed tax assessment against Borrower or any of its subsidiaries that could, if made,be reasonably expected to have a material adverse effect upon the Property, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of Borrower and its subsidiaries, taken as a whole, which would be expected to result in a material impairment of the ability of Borrower to perform under any Loan Document to which it is a party, or a material adverse effect upon the legality, validity, binding effect or enforceability against Borrower of any Loan Document. ARTICLE 6. DEFAULT AND REMEDIES Section 6.1 Events of Default. Each of the following constitutes an "Event of Default" by Borrower under this Agreement: (a) Failure to Construct. Failure of Borrower to obtain permits, commence, and prosecute to completion, construction of the Development within the times set forth in the Schedule of Performance. (b) Failure to Make PaMent_. Failure to repay the principal and any interest on the Loan when such payment is due pursuant to the Loan Documents. (c) Breach of Covenants. Failure by Borrower to duly perform, comply with, or observe any of the conditions, terms, or covenants of any of the Loan Documents (other than obligations described in subsections (a) and (b) above), and Borrower fails to cure such default within thirty(30) days after receipt of written notice thereof from the City to Borrower; provided,however, that if a different period or notice requirement is specified under any other section of this Article 6, the specific provisions shall control. (d) Default Under Other Loans. A default is declared under any other financing for the Development by the lender of such financing and such default remains uncured following any applicable notice and cure period. (e) Insolvency. A court having jurisdiction makes or enters any decree or order(i) adjudging Borrower to be bankrupt or insolvent, (ii) approving as properly filed a petition seeking reorganization of Borrower, or seeking any arrangement for Borrower under the bankruptcy law or any other applicable debtor's relief law or statute of the United States or any state or other jurisdiction, (iii) appointing a receiver, trustee, liquidator, or assignee of Borrower in bankruptcy or insolvency or for any of their properties, (iv) directing the winding up or 47 2015-52 liquidation of Borrower if any such decree or order described in clauses (i) to (iv), inclusive, is unstayed or undischarged for a period of ninety(90) calendar days; or(v) Borrower admits in writing its inability to pay its debts as they fall due or will have voluntarily submitted to or filed a petition seeking any decree or order of the nature described in clauses (i) to (iv),inclusive. The occurrence of any of the Events of Default in this paragraph will act to accelerate automatically, without the need for any action by the City,the indebtedness evidenced by the Note. (0 Assignment; Attachment. Borrower assigns its assets for the benefit of its creditors or suffers a sequestration or attachment of or execution on any substantial part of its property, unless the property so assigned, sequestered, attached or executed upon is returned or released within ninety(90) calendar days after such event or, if sooner,prior to sale pursuant to such sequestration, attachment, or execution. The occurrence of any of the events of default in this paragraph shall act to accelerate automatically, without the need for any action by the City, the indebtedness evidenced by the Note. (g) Suspension, Termination. Borrower voluntarily suspends its business or, the partnership is dissolved or terminated, other than a technical termination of the partnership for tax purposes. (h) Liens on Property and the Development. Any claim of lien (other than liens approved in writing by the City) is filed against the Development or any part thereof, or any interest or right made appurtenant thereto, or the service of any notice to withhold proceeds of the Loan and the continued maintenance of said claim of lien or notice to withhold for a period of twenty(20) days, without discharge or satisfaction thereof or provision therefor(including, without limitation,the posting of bonds) satisfactory to the City. (i) Condemnation. The condemnation, seizure, or appropriation of all or the substantial part of the Property and the Development, except that condemnation by the County or City shall cause the Loan to accelerate but shall not be a Default. 0) Unauthorized Transfer. Any Transfer other than as permitted pursuant to Section 4.13. (k) Representation or Warranty Incorrect. Any Borrower representation or warranty contained in this Agreement, or in any application, financial statement, certificate, or report submitted to the City in connection with any of the Loan Documents,proves to have been incorrect in any material respect when made. (1) Failure to Timely Lease. Failure of Borrower to lease all of the City- Assisted Units within eighteen (18) months of the Completion of Construction of the Development. (m) Applicability to General Partner. The occurrence of any of the events set forth in subsection(e), subsection (f), or subsection (g) in relation to Borrower's managing general partner. 48 2015-52 Section 6.2 Remedies. Upon the occurrence of an Event of Default and following the expiration of all applicable notice and cure periods the City(1) is relieved of any obligation to make or continue the Loan and (ii)has the right to proceed with any and all remedies set forth in this Agreement and the Loan Documents, including but not limited to the following: (a) Acceleration of Note. The City may cause all indebtedness of Borrower to the City under this Agreement and the Note, together with any accrued interest thereon, to become immediately due and payable. Borrower waives all right to presentment, demand, protest or notice of protest or dishonor. The City may proceed to enforce payment of the indebtedness and to exercise any or all rights afforded to the City as a creditor and secured party under the law including the Uniform Commercial Code, including foreclosure under the Deed of Trust. Borrower is liable to pay the City on demand all reasonable expenses, costs and fees (including, without limitation,reasonable attorney's fees and expenses)paid or incurred by the City in connection with the collection of the Loan and the preservation,maintenance,protection, sale, or other disposition of the security given for the Loan. So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130, the acceleration provisions in this Section 6.2 shall not apply. (b) Specific Performance. The City has the right to mandamus or other suit, action or proceeding at law or in equity to require Borrower to perform its obligations and covenants under the Loan Documents or to enjoin acts on things that may be unlawful or in violation of the provisions of the Loan Documents. (c) Termination. The City has the right to terminate this Agreement and, at its sole option,to seek any remedies at law or equity available hereunder. (d) Right to Cure at Borrower's Expense. The City has the right(but not the obligation)to cure any monetary default by Borrower under a loan other than the Loan. Borrower shall reimburse the City for any funds advanced by the City to cure a monetary default by Borrower upon demand therefor, together with interest thereon at the lesser of the maximum rate permitted by law and ten percent(10%)per annum (the "Default Rate") from the date of expenditure until the date of reimbursement. Section 6.3 Right of Contest. Borrower may contest in good faith any claim, demand, levy, or assessment the assertion of which would constitute an Event of Default hereunder. Any such contest is to be prosecuted diligently and in a manner unprejudicial to the City or the rights of the City hereunder. Section 6.4 Remedies Cumulative. No right,power, or remedy given to the City by the terms of this Agreement or the Loan Documents is intended to be exclusive of any other right, power, or remedy; and each and every such right, power, or remedy will be cumulative and in addition to every other right, power, or remedy given to the City by the terms of any such instrument, or by any statute or otherwise 49 2015-52 against Borrower and any other person. Neither the failure nor any delay on the part of the County to exercise any such rights and remedies will operate as a waiver thereof, nor does any single or partial exercise by the City of any such right or remedy preclude any other or further exercise of such right or remedy, or any other right or remedy. Section 6.5 Limited Partner Cure Rights The City agrees to provide any limited partner of Borrower who has requested written notice from the City("Permitted Limited Partner") a duplicate copy of all notices of default that the City may give to or serve in writing upon Borrower pursuant to the terms of the Loan Documents, at the address provided to the City,provided, the City shall have no liability to the Permitted Limited Partner for its failure to do so. The Permitted Limited Partner shall have the right,but not the obligation, to cure any Default of Borrower set forth in such notice, during any applicable cure period described in the Loan Documents, and the City will accept tender of such cure as if delivered by Borrower. ARTICLE 7. GENERAL PROVISIONS Section 7.1 Relationship of Parties. Nothing contained in this Agreement is to be interpreted or understood by any of the Parties, or by any third persons, as creating the relationship of employer and employee,principal and agent, limited or general partnership, or joint venture between the City and Borrower or its agents, employees or contractors, and Borrower will at all times be deemed an independent contractor and to be wholly responsible for the manner in which it or its agents, or both, perform the services required of it by the terms of this Agreement. Borrower has and retains the right to exercise full control of employment, direction, compensation, and discharge of all persons assisting in the performance of services under the Agreement. In regards to the construction and operation of the Development, Borrower is solely responsible for all matters relating to payment of its employees, including compliance with Social Security, withholding, and all other laws and regulations governing such matters, and must include requirements in each contract that contractors are solely responsible for similar matters relating to their employees. Borrower is solely responsible for its own acts and those of its agents and employees. Section 7.2 No Claims. Nothing contained in this Agreement creates or justifies any claim against the City by any person that Borrower may have employed or with whom Borrower may have contracted relative to the purchase of materials, supplies or equipment, or the furnishing or the performance of any work or services with respect to the purchase of the Property, the construction or operation of the Development, and Borrower shall include similar requirements in any contracts entered into for the construction or operation of the Development. Section 7.3 Discretion Retained By City. The City's execution of this Agreement in no way limits the discretion of the City in the permit and approval process in connection with the construction of the Development. 50 2015-52 Section 7.4 Indemnification. The Borrower agrees to indemnify, defend (with counsel reasonably approved by City) and hold harmless the City and its authorized officers, employees, agents and volunteers ("Indemnities") from any and all claims, actions, losses, damages, and/or liability arising out of this contract from any cause whatsoever, including the acts, errors or omissions of any person and for any costs or expenses incurred by the City on account of any claim except where such indemnification is prohibited by law. This indemnification provision shall apply regardless of the existence or degree of fault of Indemnities. The Borrower's indemnification obligation applies to the City's "active" as well as "passive" negligence but does not apply to the City's "sole negligence" or "willful misconduct" within the meaning of Civil Code Section 2782. This indemnification provision is not intended to and does not limit, negate,modify,nullify, or change the nonrecourse provisions of this Agreement or any other agreement, document, instrument, certificate or covenant executed by Borrower. The provisions of this Section will survive the expiration of the Term and the reconveyance of the Deed of Trust. The Borrower's duty to indemnify the City shall be limited to available surplus cash and/or residual receipts of the Borrower or non-Project assets of the Borrower. So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130, the indemnifications provisions, including but not limited to those in Sections 2.7, 2.8, 3.8, 4.6, 4.7, 7.4 of this Agreement, shall not apply to HUD. Section 7.5 Non-Liability of City Officials, Employees and Agents. No member, official, employee or agent of the County is personally liable to Borrower in the event of any default or breach by the City or for any amount that may become due to Borrower or its successor or on any obligation under the terms of this Agreement. Section 7.6 No Third Party Beneficiaries. There are no third party beneficiaries to this Agreement. Section 7.7 Conflict of Interest. (a) Except for approved eligible administrative or personnel costs, no person described in Section 7.7(b)below who exercises or has exercised any functions or responsibilities with respect to the activities funded pursuant to this Agreement or who is in a position to participate in a decision-making process or gain inside information with regard to such activities,may obtain a financial interest or financial benefit from the activity, or have an interest in any contract, subcontract or agreement with respect thereto, or the proceeds thereunder, either for themselves or those with whom they have family or business ties, during, or at any time after, such person's tenure. Borrower shall exercise due diligence to ensure that the prohibition in this Section 7.7(a) is followed. (b) The conflict of interest provisions of Section 7.7(a) above apply to any person who is an employee, agent, consultant, officer, or any immediate family member of such 51 2015-52 person, or any elected or appointed official of the City, or any person related within the third (3rd) degree of such person. (c) In accordance with California Government Code Section 1090 and the Political Reform Act, California Government Code section 87100 et seq.,no person who is a director, officer,partner, trustee or employee or consultant of Borrower, or immediate family member of any of the preceding,may make or participate in a decision,made by the City or a City board, commission or committee, if it is reasonably foreseeable that the decision will have a material effect on any source of income, investment or interest in real property of that person or Borrower. Interpretation of this section is governed by the definitions and provisions used in the Political Reform Act, California Government Code Section 87100 et sec., its implementing regulations manual and codes, and California Government Code Section 1090. (d) Borrower shall comply with the conflict of interest provisions set forth in 24 C.F.R. 92.356. Section 7.8 Notices, Demands and Communications. All notices required or permitted by any provision of this Agreement must be in writing and sent by registered or certified mail,postage prepaid, return receipt requested, or delivered by express delivery service, return receipt requested, or delivered personally, to the principal office of the Parties as follows: City: City Manager City of San Bernardino 300 N "D" Street, Sixth Floor San Bernardino, CA 92418 Attn: Housing Director Borrower: Val 9 Housing Partners, L.P. 9421 Haven Avenue Rancho Cucamonga, CA 91730 Attn: Chief Financial Officer With a copy to: Law Offices of Edward A. Hopson 655A No. Mountain Avenue Upland, CA 91786 Attn: Edward A. Hopson With a copy to: Wells Fargo Community Lending & Investment Wells Fargo Bank Affordable Housing Community Development Corporation 301 South College Street, 17th Floor MAC D1053-170 Charlotte,NC 28288 52 2015-52 With a copy to: Kutak Rock 1650 Farnam Street Omaha, NE 68102 Attn: Robert Coon Such written notices, demands and communications may be sent in the same manner to such other addresses as the affected Party may from time to time designate by mail as provided in this Section. Receipt will be deemed to have occurred on the date shown on a written receipt as the date of delivery or refusal of delivery(or attempted delivery if undeliverable). Section 7.9 Amendments. No alteration or variation of the terms of this Agreement is valid unless made in writing by the Parties. The City Manager is authorized to execute on behalf of the City amendments to the Loan Documents or amended and restated Loan Documents as long as any material change in the amount or terms of this Agreement is approved by the Mayor and Common Council. So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130 any amendments under this Section 7.9 shall be subject to prior HUD approval. Section 7.10 City Approval. The City has authorized the City Manager to execute the ancillary Loan documents and deliver such approvals or consents as are required by this Agreement, and to execute estoppel certificates concerning the status of the Loan and the existence of Borrower defaults under the Loan Documents, including subordination agreements substantially consistent with the terms of Section 2.5 above. Section 7.11 Applicable Law. This Agreement is governed by the laws of the State of California. Section 7.12 Parties Bound. Except as otherwise limited herein, this Agreement binds and inures to the benefit of the parties and their heirs, executors, administrators, legal representatives, successors, and assigns. This Agreement is intended to run with the land and to bind Borrower and its successors and assigns in the Property and the Development for the entire Term, and the benefit hereof is to inure to the benefit of the City and its successors and assigns. Section 7.13 Attorne ss Fees. If any lawsuit is commenced to enforce any of the terms of this Agreement, the prevailing Party will have the right to recover its reasonable attorneys' fees and costs of suit from the other Party. 53 2015-52 Section 7.14 Severability. If any term of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable,the remainder of the provisions will continue in full force and effect unless the rights and obligations of the Parties have been materially altered or abridged by such invalidation, voiding or unenforceability. Section 7.15 Force Majeure. In addition to specific provisions of this Agreement,performance by either Party will not be deemed to be in default where delays or defaults are due to war, insurrection, strikes, lock- outs, riots, floods, earthquakes, fires, quarantine restrictions, freight embargoes, lack of transportation, or court order. An extension of time for any cause will be deemed granted if notice by the Party claiming such extension is sent to the other within ten(10) days from the commencement of the cause and such extension of time is not rejected in writing by the other Party within ten(10) days of receipt of the notice. In no event will the City be required to agree to cumulative delays in excess of ninety(90) days. Section 7.16 Waivers. Any waiver by the City of any obligation or condition in this Agreement must be in writing. No waiver will be implied from any delay or failure by the City to take action on any breach or default of Borrower or to pursue any remedy allowed under this Agreement or applicable law. Any extension of time granted to Borrower to perform any obligation under this Agreement does not operate as a waiver or release from any of its obligations under this Agreement. Consent by the City to any act or omission by Borrower may not be construed to be consent to any other or subsequent act or omission or to waive the requirement for the City's written consent to future waivers. Section 7.17 Title of Parts and Sections. Any titles of the sections or subsections of this Agreement are inserted for convenience of reference only and are to be disregarded in interpreting any part of the Agreement's provisions. Section 7.18 Entire Understanding of the Parties The Loan Documents constitute the entire agreement of the Parties with respect to the Loan. Section 7.19 Multiple Originals, Counterpart. This Agreement may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts. [Signature Page Follows] 54 2015-52 WHEREAS,this Agreement has been entered into by the undersigned as of the Effective Date. BORROWER: Val 9 Housing Partners, L.P., a California limited partnership Date: By: Val 9 MGP, LLC, a California limited liability company, its sole general partner By: National Community Renaissance of California, its sole member and manager By: Tracy Thomas, Chief Financial Officer CITY: CITY OF SAN BERNARDINO, a charter city of the State of California Date: ..� % 2 By: Al en Ifarker, City Manager ATTEST Georgeann Hanna City Clerk Date: C�/J� APPROVED AS TO FORM: Gary D. Saenz City Att rney By: AGREEMENT TO SUBORDINATE TO RAD USE AGREEMENT Waterman Gardens—Valencia 9 Lender: City of San Bernardino This Agreement to Subordinate to RAD Use Agreement (this "Agreement") is entered into this day of March, 2015,by the City of San Bernardino, a municipal corporation(the "Lender") and Val 9 Housing Partners, L.P., a California limited partnership (the"Owner"). Collectively,the Lender and the Owner are the"Parties". WHEREAS, Owner owns certain real property and improvements thereon as more particularly described on Exhibit A, attached hereto and made a part hereof(the"Proper WHEREAS, Owner executed the following documents contemporaneously herewith for the benefit of Lender(collectively referred to as the"Loan Documents"): 1. A certain HOME Investment Partnership Act Loan Agreement; 2. A certain Promissory Note Secured By Deed of Trust; 3. A certain Deed of Trust With Assignment of Rents, Security Agreement and Fixture Filing, which is being recorded prior hereto in the Recorder's Office of San Bernardino County, California; and 4. A certain Regulatory Agreement and Declaration of Restrictive Covenants, which is being recorded prior hereto in the Recorder's Office of San Bernardino County, California. WHEREAS, HUD has authorized the conversion of a portion of Project No. CA019000120 (the "Project") from public housing to Section 8 assistance under the Rental Assistance Demonstration ("RAD") program pursuant to the Consolidated and Further Continuing Appropriations Act of 2012 and HUD Notice PIH-2012-32(H) Rev-1 (July 2, 2012), as may be further amended; and has issued a RAD Conversion Commitment for the Project; and WHEREAS, as required by HUD as a condition of the RAD conversion, the Owner executed as of even date herewith a Rental Assistance Demonstration RAD Use Agreement(the "RAD Use Agreement") for the benefit of HUD; and WHEREAS, HUD requires as a condition of the RAD conversion that the Parties agree to subordinate the Loan Documents to the RAD Use Agreement. NOW THEREFORE, let it be known to all interested parties,that for good and valuable consideration, the receipt of which is hereby acknowledged,the undersigned do hereby agree: 1. Subordination. Notwithstanding the manner or order of perfection of the Loan Documents and the RAD Use Agreement, and notwithstanding any provisions of the Uniform Commercial Code as adapted in the State of California or elsewhere and any applicable law or decision or any other agreement currently in force between any of the parties hereto, and so long as the Section 8 Project Based KH 337641.3 1 Voucher Housing Assistance Payments Contract and the Rental Assistance Demonstration Rider thereto exist, the Loan Documents will and shall be in all respects subject to and subordinate in priority to the RAD Use Agreement. The subordination of the Loan Documents shall (a) extend to and continue in effect with respect to any and all extensions,renewals, and modifications made to said Loan Documents; and (b) remain in effect notwithstanding any future amendment, modification or extension of the RAD Use Agreement. 2. Covenant Regarding Amendments. The Parties covenant and warrant that the Loan Documents shall not be amended, restated, replaced, supplemented or extended in any respect without prior written consent of HUD. 3. Loan Documents Remain In Full Force and Effect. It is expressly understood and agreed that except for the subordination specifically intended and accomplished by this Agreement, the Loan Documents shall be and remain in full force and effect. 4. Notices. All notices or demands hereunder to the parties hereto shall be sufficient if made in writing and (a) delivered in person, (b) deposited in the mail, certified, postage prepaid, or (c) delivered by a recognized overnight carrier (such as Federal Express) and addressed to the parties respectively as follows: If to Lender: Office of the City Manager City of San Bernardino 300 N "D" Street, 6th Floor San Bernardino, CA 92418 Attn: Housing Director If to the Owner: Val 9 Housing Partners, L.P. c/o National Community Renaissance of California 9421 Haven Avenue Rancho Cucamonga, CA 91730 Attention: Executive Director Notice shall be deemed to be effective upon delivery if hand delivered; forty eight (48) hours from the date such notice is deposited in the U.S. mail or, one (1) business day from the date such notice is delivered to a recognized overnight carrier for next business day delivery. 5. Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the subordination of the Loan Documents. 6. Binding Effect; No Oral Modification. This Agreement and every covenant hereof shall be binding upon the Parties and their respective successors and assigns. This Agreement shall not be modified or amended except by a written KH 337641.3 2 instrument executed by all parties hereto and approved in writing by HUD, if required. 7. Governing Law. This Agreement is made and executed under and will be governed and construed by the laws of the State of California. 8. Counterparts. This Agreement may be signed in counterparts with the same effect as if all signatories had executed the same instrument. [SIGNATURE PAGES TO FOLLOW] KH 337641.3 3 IN WITNESS WHEREOF,the undersigned have each duly executed this Agreement to Subordinate to the RAD Use Agreement as of the date first above written. LENDER: CITY OF SAN BERNARDINO, a municipal corporation By. . Allen Karker, City Manager APPROVED AS TO LEGAL FORM: Gary D. Saenz City Attorney By: Nam Title: ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached,and not the truthfulness,accuracy, or validity of that document. STATE OF CALIFORNIA ) COUNTY OF--!�41N6�,44ZIfV 0 ) On 1-71115 11 ,before me, r9'fJ�E�L�nj �� Notary Public,personally appeared Allen Parker, City Manager for the City of San Bernardino,who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity,and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. -!J�/�c� Na e• _ KATHMM 0"BRA I Notary Public •, Comnksion No. 1945501 %WARY ousl.>c-CAUP of"" r KATHEI�NE O.HERRERA SM BERNARDWO COUNTY My CWW.EVWW JULY A 2D16 Commission No. 1945501 NOTARY PUBLIC-MIFORNIA SAN BERNAROINO COUNTY My Comm E)q*n JULY 25.201 S 4 OWNER: VAL 9 HOUSING PARTNERS,L.P.,a California limited partnership By: Val 9 MGP,LLC,a California limited liability company, its sole general partner By: National Community Renaissance of California, its sole member and manager By: Tracy Thomas Chief Financial Officer ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) COUNTY OF ) On before me, ,Notary Public,personally appeared Tracy Thomas,Chief Financial Officer of National Community Renaissance of California,who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that she executed the same in her authorized capacity, and that by her signature on the instrument the person, or the entity upon behalf of which the person acted,executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Notary Public 5 AFTER RECORDING RETURN TO: 6 Exhibit A Property Description THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS: A PORTION OF LOT 7, BLOCK 42 OF RANCHO SAN BERNARDINO ACCORDING TO THE OFFICIAL MAP RECORDED IN BOOK 7, PAGE 2, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE NORTH LINE OF NINTH ST. 1,774.70 FEET EAST FROM THE CENTER LINE OF WATERMAN AVENUE; THENCE NORTHERLY PARALLEL TO THE WEST LINE OF SAID LOT 7 A DISTANCE OF 602.75 FEET; THENCE EASTERLY PARALLEL TO THE SOUTH LINE OF SAID LOT 7 TO A POINT 50.00 FEET FROM THE EAST LINE OF SAID LOT 7; THENCE SOUTHERLY PARALLEL TO THE SAID EAST LINE OF LOT 7 TO THE SOUTH LINE OF SAID LOT 7; THENCE WESTERLY ALONG THE SAID SOUTH LINE OF LOT 7 OF THE TRUE POINT OF BEGINNING. SAID LAND IS ALSO SHOWN AS PARCEL 1 OF CERTIFICATE OF COMPLIANCE FOR LOT LINE ADJUSTMENT NO. 88-30 RECORDED SEPTEMBER 29, 1989 AS INSTRUMENT NO. 89-365668 OF OFFICIAL RECORDS. APN(s): 147-191-12 7 IN WITNESS WHEREOF,the undersigned have each duly executed this Agreement to Subordinate to the RAD Use Agreement as of the date first above written. LENDER: CITY OF SAN BERNARDINO, a municipal corporation �`= / By: Gc---� A11 Parker, City Manager APPROVED AS TO LEGAL FORM: Gary D. Saenz City Attorney By: „c Nam Title: ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached,and not the truthfulness,accuracy,or validity of that document. STATE OF CALIFORNIA ) COUNTY OFc--- On I ,before me } °tary Public,personally appeared Allen Parker, City Manager for the City of San Bernardino,who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity,and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. �� KATHERINE O.HERRERA Name• • Commission No. 1945WI Notary Public �E z NOTARY PUBLIC-CALIFORNIA w. SAN BERNARDMO COUNTY My Comm.E*wf JULY 2S.7015 4 City: CITY OF SAN BERNARDINO, a municipal corporation By: v" Allen J. Parker City Manager ATTEST: Name: -ez n Title: c APPROVED AS TO FORM: / Il' Name. Ew¢n tea c Cs- SMRH:436360498.4 S-3 2015-52 The undersigned accepts and acknowledges the provisions of Section 3.16 as set forth herein. DEVELOPER FEE RECIPIENT: NATIONAL COMMUNITY RENAISSANCE OF CALIFORNIA, a California nonprofit public benefit corporation By: Tracy Thomas, Chief Financial Officer SUBORDINATION AGREEMENT (City Trust Deed and Regulatory Agreement) THIS SUBORDINATION AGREEMENT ("Agreement") is made as of March _, 2015, by and among VAL 9 HOUSING PARTNERS, L.P., a California limited partnership ("Borrower"), the CITY OF SAN BERNARDINO, a municipal corporation ("City"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association ("Bank"). RECITALS A. Pursuant to that certain Building Loan Agreement (the "Loan Agreement") by and between Borrower and Bank, dated as of even date herewith, Bank has agreed to make a loan (the 'Bank Loan ) to Borrower to enable Borrower to finance the construction of the Waterman Gardens- Valencia 9 Apartments, a 76-unit affordable multi-family housing project located in the City of San Bernardino, California (the "Project"), on real property, as described in Exhibit A, owned by Borrower. B. The obligations of Borrower for repayment of the Loan are evidenced by a promissory note (the "Note") in the amount of Eight Million Six Hundred Sixty-Six Thousand Three Hundred Forty- Eight and No/100 Dollars ($8,666,348.00) and are secured by, among other things, that certain Pledge and Security Agreement executed by the Borrower and the General Partner of Borrower, in favor of Bank (the "Pledge and Assignment"). The Loan Agreement, the Note, the Pledge and Assignment and all other documents evidencing or otherwise relating to the Loan are collectively referred to herein as "Loan Documents". C. City has agreed to make a loan in the principal amount of $1,500,000.00 (the "City Loan")to Borrower. The City Loan is being made pursuant to that certain Home Investments Partnership Program (HOME) Loan Agreement dated , 2015 (the "City Loan Agreement") by and among Borrower, and City. The City Loan is evidenced by a promissory note in the amount of $1,500,000.00 (the "City Note"), the Borrower's obligations under which are secured by a Deed of Trust With Assignment of Rents, Security Agreement, and Fixture Filing (the "City Deed of Trust"), to be recorded in the Official Records of San Bernardino County, California (the "Official Records"). In addition, in connection with the City Loan, on or about even date herewith, Borrower and City have executed that certain Regulatory Agreement and Declaration of Restrictive Covenants (the "City Regulatory Agreement"), to be recorded in the Official Records. Both the City Loan Agreement and the City Regulatory Agreement impose certain restrictions upon the Property. The City Loan Agreement, the City Note, the City Deed of Trust and the City Regulatory Agreement are collectively referred to herein as the"City Loan Documents". D. The Bank Loan and the City Loan shall be referred to collectively in this Agreement as the "Loans", and each individually as a "Loan". The Loans are being made to Borrower to finance the construction of an affordable housing project (the "Improvements") on that certain real property (the "Property") in the City of San Bernardino, County of San Bernardino, State of California, which is legally described on Exhibit A attached hereto and incorporated herein by this reference. E. As a material condition to Bank making the Bank Loan that the City execute and deliver this Agreement. F. City and Borrower agree to the subordination in favor of Bank. AGREEMENT THEREFORE, for valuable consideration and to induce Bank to make the Bank Loan, City and Borrower hereby agree for the benefit of Bank as follows: SMRH:436360498.4 -1- 1. Subordination. City agrees that its right to receive payments on the City Loan and under the City Note are subordinated to the prior payment in full of all Bank Loan and Note. The rights to payment subordinated hereby include all payments of principal and interest thereon, and any redemption or retirement, any purchase or other acquisition of such Note for cash or property. 2. No Payment on City Note. No payment under the City Note or otherwise in respect of the City Loan shall be made unless and until the Bank Loan has been paid in full. If any payment on the City Loan of any kind or character, whether in cash or property, is received by the City prior to payment in full of the Bank Loan, such payment or distribution shall be paid over to Bank but only to the extent of the amounts then due and owing on the Bank Loan. 3. Distributions upon Insolvency or Bankruptcy. Upon insolvency or bankruptcy of Borrower, Bank shall first be entitled to receive payment in full of all Bank Loan, in accordance with the terms of the Bank Loan Documents, before the City shall be entitled to receive any payment from Borrower. 4. Specific Performance. Bank is hereby authorized to demand specific performance of this Agreement at any time when City shall have failed to comply with any of the provisions of this Agreement. City hereby irrevocably waives any defense based on the adequacy of a remedy at law, which might be asserted as a bar to such remedy of specific performance. 5. Application of Proceeds. Bank, in making disbursements pursuant to the Loan Documents, is under no obligation or duty to, nor has Bank represented that it will, see to the application of such proceeds by the person or persons to whom Bank disburses such proceeds, and any application or use of such proceeds for purposes other than those provided for in such agreement or agreements shall not defeat the subordination herein made in whole or in part; and 6. Consents. City and Bank respectively declare, agree and acknowledge that: (a) City consents to and approves (i)all provisions of the Bank Loan Documents submitted to City prior to the execution of this Agreement; (ii)all other agreements between Borrower and Bank for the disbursement of the proceeds of the Bank Loan submitted to City prior to the execution of this Agreement; and (b) City intentionally and unconditionally waives, relinquishes and subordinates its right to receive payments on the City Loan to the prior payment in full of the Bank Loan and understands that in reliance upon, and in consideration of, such waiver, relinquishment and subordination, specific loans and advances are being and will be made, and specific monetary and other obligations are being and will be entered into which would not be made or entered into but for said reliance upon this waiver, relinquishment and subordination. 7. Rights Upon Default. Notwithstanding anything to the contrary contained in this Agreement, Bank hereby agrees as follows: (a) Upon the occurrence of an event of default under the Loan Documents, Bank shall promptly notify City at the address set forth below of the occurrence of such event of default, which notification shall be provided to City contemporaneously with the delivery to Borrower of any notice of default under the Loan Documents; (b) City shall have the right (i)to receive any notices of default under the Loan Documents and (ii)to cure any default by the Borrower under the Loan Documents within ninety (90) days after its receipt of such notice of default under the Loan Documents; (c) After a default under the Loan Documents, if City cures the default on a timely basis within the cure periods which apply to the Borrower pursuant to the Loan Documents, Bank will not SMRH:436360498.4 -2- exercise any right it may have to accelerate the Note by reason of the default so cured. This paragraph 5(c) shall not be deemed to prohibit Bank from accelerating the Note by reason of a later uncured default; and (d) If City forecloses its deed of trust or accepts a conveyance of the Property in lieu of such foreclosure, Bank shall have the right to declare a default under the "due-on-sale" provisions contained in the Loan Documents and accelerate the indebtedness secured thereby and implement remedies thereunder, unless Bank approves of the transfer of the Property to the purchaser at foreclosure of the City Deed of Trust or the recipient of a conveyance of the Property in lieu of such foreclosure, which approval may be granted, conditioned or withheld in Bank's sole discretion. 8. Limited Standstill. City declares, agrees, and acknowledges that it will not, without 90 days' prior written notice to Bank following written notice of default under the City Loan Documents: (i) commence any action to foreclose or exercise any power of sale under the City Deed of Trust or the City Loan Documents; (ii) accept a deed or assignment in lieu of foreclosure for the Property or any part or portion thereof; (iii) take possession or control of the Property, or collect or accept any rents from the Property; (iv) seek or obtain appointment of a receiver for the Property; (vi) take any action that would terminate any leases or other rights held by or granted to or by third parties with respect to the Property; (vi) initiate any petition for bankruptcy, assignment for the benefit of creditors or creditor's agreement with respect to the Borrower other than as provided in the City Loan Documents; or (vii) take any other enforcement action against the Property or any part or portion thereof. City may, with notice to, but without the consent of the Bank, take such other enforcement action as City shall determine, including, but not limited to, action for specific performance of the obligations of the Borrower under the City Loan Documents. In addition, City may seek and obtain the appointment of a receiver reasonably acceptable to the Bank for the purpose of assuring compliance with the City Loan Documents. 9. Subrogation. The Subordinated Creditor agrees that no payment or distribution to Bank pursuant to the provisions of this Agreement shall entitle the Subordinated Creditor to exercise any rights of subrogation in respect thereof until the Senior Indebtedness has been paid in full. 10. Insurance and Condemnation Proceeds. The determination as to whether proceeds of policies of insurance covering the Property or awards from proceedings in eminent domain may be released for application to costs of restoration of the Property and Improvements shall be made by the the HUD Insured Lender (as that term is defined in the Loan Agreement) or by the Bank as the senior-most Lender in the order of lien priority. If not so applied, the proceeds of all policies of insurance covering the Property or Improvements or any awards from proceedings in eminent domain or condemnation relating to the Property shall be applied toward each Loan in the order of lien priority until such Loan is paid in full. In the event that, following any such application and disposition of the insurance proceeds, condemnation award or other compensation, resulting in full repayment of all indebtedness secured by the Loan Documents, any balance remains, and the Bank has no further obligation to disburse any portion of the Bank Loan, then such excess shall be made payable to the junior lender next in line following the order of lien priority until the excess insurance proceeds are exhausted. 11. Restoration. If the legal holder of the Loan Documents shall at any time release to Borrower any such insurance proceeds or condemnation award for the purpose of restoration of the Property or Improvements, such release shall not be deemed to be an additional advance under the Bank's Loan Documents nor shall such release otherwise be deemed to be in violation of any restriction upon any amount permitted to be secured by the Bank's Loan Documents. 12. Further Assurances. Until the Bank Loan has been repaid in full, City and its respective successors or assigns, shall execute, acknowledge and deliver, upon the Bank's demand, at any time or times, any and all further subordinations, agreements or other instruments, in recordable form or otherwise, reasonably sufficient for that purpose or that Bank, its successors or assigns may hereafter reasonably require for carrying out the purpose and intent of this Agreement, so long as such further instruments do not contain provisions inconsistent with the terms and conditions of the City Loan Documents. SMRH:436360498.4 -3- 13. Confirmation. City hereby confirms to and agrees with Bank, and Bank hereby confirms to and agrees with City, as to the following: (a) Each Lender has delivered to each other Lender, true and complete copies of its documents, and such documents have not been amended, modified or supplemented in any way. (b) To the City's knowledge, there are no defaults (or conditions or events which, with notice or the passage of time or both, would constitute a default), known to each Lender as of the date hereof, by Borrower under its obligations set forth in such Lender's documents. (c) No Lender shall enter into any agreement to materially amend or modify the terms of any of such Lender's documents without notice to and the consent of each other Lender, which consent shall not be unreasonably withheld. (d) Each Lender shall deliver to each other Lender, at the address indicated in Section 12 below, copies of any notices of default delivered to Borrower in connection with each respective Lender's documents. 14. Notices. All notices of any kind which any party hereto may be required or may desire to serve on the others shall be deemed served upon personal delivery, or, if mailed, upon the first to occur of receipt or the expiration of 72 hours after deposit in United States Postal Service, certified mail, return receipt requested, postage prepaid, and addressed as follows: If to Bank: Wells Fargo Bank, N.A. Community Lending and Investment 333 S. Grand Avenue, 7th Floor MAC #E2064-075 Los Angeles, CA 90071 Attn: Sandra Smith-Martin Loan No.: 1013111 If to City: City of San Bernardino 300 North "D" Street San Bernardino, CA 92401 Attention: Allen Parker, City Manager If to Borrower: Val 9 Housing Partners, L.P. c/o National Community Renaissance of California 9065 Haven Avenue, Suite 100 Rancho Cucamonga, CA 91730 Attention: Executive Director 15. Modification and Release. Bank may, without affecting the subordination of the City Loan Documents: (a) release or compromise any obligation of any nature with respect to the Loan Documents; (b) release its security interest in, or surrender, release or permit any substitution or exchange of all or any part of any properties securing repayment of the Note; (c)retain or obtain a security interest in any property to secure payment of the Note junior to the liens and security interests of the City Loan Documents; or (d) modify, amend, defer, extend, consolidate or supplement any of the original or subsequent Loan Documents; provided, however, that Bank shall not increase the principal amount of the Note or increase the interest rates under the Note without the prior written consent of City. The provision of this Section 15 is solely for the purpose of defining the relative rights of Bank on the one hand, and City on the other hand, against Borrower and its property and nothing herein shall impair, as between (i) Borrower and Bank and (ii) Borrower and City, the obligations of Borrower under such documents. 16. Obligations Not Affected. All rights and interests of Bank hereunder, and all agreements and obligations of Borrower and City hereunder, shall remain in full force and effect irrespective of: SMRH:436360498.4 -4- (a) any lack of validity or enforceability of the Bank Loan Documents or any other agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Senior Indebtedness, or any other amendment or waiver of any term or condition of any Bank Loan Document; (c) any exchange, release or nonperfection of any Bank Liens, if any, or any release or amendment or waiver of any term or condition of any Bank Lien, if any; or (d) any other circumstance which might otherwise constitute a defense available to, or a discharge of Borrower or City in respect of this Agreement. This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Bank Loan is rescinded or must be otherwise returned by Bank upon a bankruptcy or insolvency of Borrower, all as though such payment had not been made. 17. Event of Default. The parties acknowledge that any default under the City Loan Documents (other than defaults that are timely cured by Borrower or waived by City) shall constitute a default under the Loan Documents and any default under the Loan Documents (other than defaults that are timely cured by Borrower or waived by Bank) shall constitute a default under the City Loan Documents. 18. Governing Law. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and shall be construed and enforced in accordance with the laws of California, without reference to its conflict of law rules. 19. Severability. If any of the provisions or terms of this Agreement shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other of the terms hereof, and this Agreement shall be construed as if such invalid or unenforceable term had never been contained herein. 20. Counterparts. This Agreement may be executed in counterparts, each of which, when taken together, shall constitute one original Agreement. 21. Headings. The descriptive headings herein are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. 22. Entire Agreement/Amendment. This Agreement represents the entire Agreement among the parties hereto with respect to the subject matter hereof, and, except as expressly provided herein, shall not be affected by reference to any other documents. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but such may be accomplished only by an instrument in writing signed by the parties hereto and Bank. 23. Costs of Enforcement. Borrower agrees to pay to Bank any and all reasonable costs and expenses, including, without limitation, reasonable legal fees (including allocated fees of in-house counsel), incurred by Bank in protecting or enforcing the rights of Bank under this Agreement as a result of City's default hereunder whether or not a lawsuit is commenced. For all purposes of this Agreement such costs and expenses shall be considered as part of the Bank Loan. 24. Assignments and Participations. Notwithstanding any provision of any of the Bank Loan Documents or any other provision of this Agreement, Bank may sell, assign or otherwise grant participations in any of its rights, powers, benefits and obligations under the Bank Loan Documents and this Agreement, or any of its interest therein or herein or in any of the Bank Loan or to any other person, without notice to any of the parties hereto and the obligations of the parties hereto under this Agreement SMRH:436360498.4 -5- are undertaken for the benefit of each such person as well as the Bank (and, if so requested by any person to whom the Bank so sells, assigns or otherwise grants a participation in accordance with the provisions of this section, each of the parties hereto will deliver a written acknowledgement to such person to such effect). 25. Continuing Agreement. This Agreement is a continuing agreement and shall (a) remain in full force and effect until the Bank Loan shall have been paid in full; (b) be binding on City, Borrower and Bank and their respective successors and assigns; and (c) inure to the benefit of Bank and its successors and assigns and to any person to whom the Bank may grant any participation in the Bank Loan Documents. NOTICE: THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE PRIORITIES OF THE CITY LOAN AND THE BANK LOAN, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. IT IS RECOMMENDED THAT, PRIOR TO THE EXECUTION OF THIS AGREEMENT, THE PARTIES CONSULT WITH THEIR ATTORNEYS WITH RESPECT HERETO. SMRH:436360498.4 -6- BORROWER: VAL 9 HOUSING PARTNERS, L.P., a California limited partnership By: Val 9 MGP, LLC, a California limited liability company Its General Partner By: National Community Renaissance of California, a California nonprofit public benefit corporation Its Sole Member By: Tracy Thomas Chief Financial Officer SMRH:436360498.4 S-1 BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION a national banking association By: Christian M. von Merkatz Assistant Vice President SMRH:436360498.4 S-2 City: CITY OF SAN BERNARDINO, a municipal corporation By: a'z" c� All J. Parker City Manager ATTEST: ame: Title: e/e APPROVED AS TO FORM: Name. lt� Y�aFw� r G, SMRH:436360498.4 S-3 EXHIBIT A DESCRIPTION OF PROPERTY All that certain real property located in the City of San Bernardino, County of San Bernardino, State of California, described as follows: A PORTION OF LOT 7, BLOCK 42 OF RANCHO SAN BERNARDINO ACCORDING TO THE OFFICIAL MAP RECORDED IN BOOK 7, PAGE 2, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE NORTH LINE OF NINTH ST. 1,774.70 FEET EAST FROM THE CENTER LINE OF WATERMAN AVENUE; THENCE NORTHERLY PARALLEL TO THE WEST LINE OF SAID LOT 7 A DISTANCE OF 602.75 FEET; THENCE EASTERLY PARALLEL TO THE SOUTH LINE OF SAID LOT 7 TO A POINT 50.00 FEET FROM THE EAST LINE OF SAID LOT 7; THENCE SOUTHERLY PARALLEL TO THE SAID EAST LINE OF LOT 7 TO THE SOUTH LINE OF SAID LOT 7; THENCE WESTERLY ALONG THE SAID SOUTH LINE OF LOT 7 OF THE TRUE POINT OF BEGINNING. SAID LAND IS ALSO SHOWN AS PARCEL 1 OF CERTIFICATE OF COMPLIANCE FOR LOT LINE ADJUSTMENT NO. 88-30 RECORDED SEPTEMBER 29, 1989 AS INSTRUMENT NO. 89-365668 OF OFFICIAL RECORDS. APN: 147-191-12 Exhibit A SMRH:436360498.4 -1- FIRST AMENDMENT TO LOAN AGREEMENT (Waterman Gardens- Valencia Val 9) This First Amendment to Loan Agreement (the "First Amendment") is entered into as of March 17, 2015,by and among the City of San Bernardino, a charter city of the State of California (the "City"), and Val 9 Housing Partners, L.P., a California limited partnership (the 'Borrower"), with reference to the following facts: RECITALS A. The City and the Borrower entered into that certain Loan Agreement dated as of March 17, 2015 (the "Loan Agreement"). These recitals refer to and utilize certain capitalized terms which are defined in Article 1 of the Loan Agreement. Capitalized terms used in this First Amendment,but not defined, shall have the meaning set forth in the Loan Agreement. B. Pursuant to Section 7.9 of the Loan Agreement, no alteration or variation of the terms of the Loan Agreement is valid unless made in writing by the Parties. Any material change in the amount or terms of the Loan Agreement must be approved by the Mayor and Common Council. C. On March 17, 2015, the governing board of the City approved and authorized the City Manager to execute this First Amendment and any and all documents necessary to effectuate the disbursement of the City Loan in accordance with the requirements of the Loan Agreement as modified by this First Amendment. D. To implement and effectuate the Loan Agreement and construction of the Development, the City and the Borrower desire to enter into this First Amendment to: (i) Revise sources of the Approved Financing in order to provide the Borrower flexibility in the source of permanent and construction financing approved for the construction of the Development; (ii) Revise the Conditions to Disbursement of the Predevelopment Component I of the City Loan; and (iii) Revise certain Permitted Transfers in the event of default; and (iv) Make conforming non-substantive changes to effectuate the purpose of the Loan Agreement as modified by this First Amendment. NOW, THEREFORE, the City and the Borrower agree as follows: AMENDMENTS TO LOAN AGREEMENT Section 1. Amendment to Section 1.1(e). Section 1.1(e) of the Loan Agreement is hereby deleted in its entirety and replaced and amended as follows: 1 1610\08\1670050.2 "(e) "Approved Financing" means all of the following loans, grants and equity obtained by Borrower and approved by the City for the purpose of financing the Development: (i) An unsecured equity bridge loan from Wells Fargo Bank,National Association in the approximate amount of Eight Million Six Hundred Sixty-Six Thousand Three Hundred Forty-Eight Dollars ($8,666,348) (the "Construction Loan") which will be made to the Borrower or the General Partner. If the Construction Loan is made to the General Partner, the General Partner intends to contribute the sum of the Construction Loan to the Borrower as a partnership contribution. The City acknowledges that the Construction Loan is intended to be repaid from Tax Credit Investor Equity as and when available; (ii) A HUD/FHA 221(d)(4) loan from PNC Bank, National Association in the approximate amount of Ten Million Six Hundred Seventy- One Thousand Dollars ($10,671,000) (the "PNC Loan") or such other source of construction or permanent financing as is reasonably approved by the City in writing (a "City Approved Alternative Loan"). All references to the PNC Loan including those in Section 1.1(vv), Section 1.1 (ww) and Section 2.4 shall be read to refer to any applicable permanent City Approved Alternative Loan; (iii) A loan from the Housing Authority of the County of San Bernardino (the "Housing Authority") of up to One Million Dollars ($1,000,000) (the "Housing Authority Loan"); (iv) Low Income Housing Tax Credit investor limited partner capital contribution in the approximate amount of Twelve Million Four Hundred Twenty-Four Thousand Two Hundred Twenty-Three Dollars ($12,424,223) (the "Tax Credit Investor Equity"); (v) A HOME Investment Partnership Act loan from the County of San Bernardino of approximately Eight Hundred Ten Thousand Dollars ($8 1 0,000)(the "County HOME Loan"); (vi) A seller carryback note in the amount of Five Hundred Thousand Dollars ($500,000) from National Community Renaissance of California(the "Acquisition Loan"); and (vii) Deferred Developer Fees in an approximate amount of Four Hundred Ninety-Seven Thousand Three Hundred Fifteen Dollars ($497,315) (the "Deferred Developer Fee") as described in Section 3.16(c)." Section 2. Amendment to Section 2.6(a). Section 2.6(a) is hereby deleted in its entirety and replaced and amended as follows: 2 1610\08\1670050.2 "(a) Predevelopment Component I. The City is not obligated to make a disbursement of the Predevelopment Component I at Construction Closing, or to take any other action under the Loan Documents unless the following conditions precedent are satisfied: (i) There exists no Event of Default nor any act, failure, omission or condition that would constitute an Event of Default under this Agreement; (ii) Borrower holds good and marketable fee title to the Property or is acquiring title to the Property; (iii) Borrower has delivered to the City a copy of Borrower's organizational documents and a corporate authorizing resolution authorizing Borrower's execution of the Loan Documents and the transactions contemplated by the Loan Documents; (iv) There exists no material adverse change in the financial condition of Borrower from that shown by the financial statements and other data and information furnished by Borrower to the City prior to the date of this Agreement; (v) Borrower has furnished the City with evidence of the insurance coverage meeting the requirements of Section 4.14 below; (vi) Borrower has caused to be executed and delivered to the City the Loan Documents and any other instruments, and policies required under the Loan Documents; (vii) The Deed of Trust and the Regulatory Agreement have been recorded against the Property in the Office of the Recorder of the County of San Bernardino; (viii) Borrower is in compliance with the Schedule of Performance; (ix) All environmental review necessary for the construction of the Development has been completed, and Borrower has provided the City evidence of compliance with all CEQA and NEPA mitigation measures; (x) The City has determined the undisbursed proceeds of the Loan, together with the firm commitment for the PNC Loan and commitments for funds that Borrower has obtained in connection with the acquisition and construction of the Development, are not less than the amount the City determines is necessary to pay for the acquisition and construction of the Development and to satisfy all of the covenants contained in this Agreement and the Regulatory Agreement. Notwithstanding anything to the contrary, the City shall not be required to disburse any funds under this Section 3 1610\08\1670050.2 2.6(a) unless and until the Borrower has obtained a firm commitment for permanent take- out financing for any construction related City Approved Alternative Loan that is in addition to any firm commitment associated with the PNC Loan; (xi) Borrower has obtained all permits and approvals necessary for the construction of the Development, as required by Section 3.2, provided however the Borrower may satisfy this requirement with regards to the building permit, if the Borrower provides the City with a permit ready letter from the City Building Department; (xii) Borrower has submitted a certification from the architect certifying that the plans and specifications and design documents for the Development ensure that the City-Assisted Units are in compliance with Section 3.8(f) of this Agreement. (xiii) The City has received a copy of the General Contractor's Construction Contract as required pursuant to Section 3.3 below and has issued a notice to proceed with construction to the Contractor and the Contractor has commenced construction of the Development; (xiv) The City has received and approved the labor and material (payment)bonds as required pursuant to Section 3.5 below; (xv) A title insurer reasonably acceptable to the City is unconditionally and irrevocably committed to issuing an LP-10 2006 ALTA Lender's Policy of title insurance insuring the priority of the Deed of Trust in the amount of the Loan, subject only to such exceptions and exclusions as may be reasonably acceptable to the City, and containing such endorsements as the City may reasonably require. The Borrower shall provide whatever documentation (including an indemnification agreement), deposits or surety is reasonably required by the title company in order for the City's Deed of Trust to be senior in lien priority to any mechanics liens in connection with any start of construction that has occurred prior to the recordation of the Deed of Trust against the Property in the Office of the Recorder of the County of San Bernardino; (xvi) Borrower has executed a Partnership Agreement approved by the City, with the Investor Limited Partner, in which the tax credit equity investor is obligated to provide Borrower the Tax Credit Investor Equity; (xvii) Borrower has closed, or is concurrently closing, on the construction financing including the Construction Loan (or if necessary, the General Partner of the Borrower has closed on the Construction Loan and is obligated to contribute all Construction Loan proceeds to the Borrower as a capital contribution in accordance with the Borrower's Partnership Agreement), the City Approved Alternative Loan or the PNC Loan, and the County HOME Loan and is eligible to receive the proceeds of those loans and has received the amount of Tax Credit Investor Equity stated as the first installment in the Partnership Agreement that is allocated to development 4 1610\08\1670050.2 costs and not closing costs (estimated cumulative with closing costs to be approximately Two Million Four Hundred Eight Four Thousand Eight Hundred Forty-Five Dollars ($2,484,845); (xviii) The City has received a written draw request from Borrower, including (1) certification that the condition set forth in Section 2.6(a)(i) continues to be satisfied, (2) certification that the proposed uses of funds consistent with the Approved Development Budget, (3) the amount of funds needed, and, (4) where applicable, a copy of the bill or invoice covering a cost incurred or to be incurred. When a disbursement is requested to pay any contractor in connection with improvements on the Property, the written request must be accompanied by (i) certification by the Borrower's architect reasonably acceptable to the City that the work for which disbursement is requested has been completed (although the City reserves the right to inspect the Property and make an independent evaluation); and (ii) lien releases and/or mechanics lien title insurance endorsements reasonably acceptable to the City." Section 3. Amendment to Section 3.16(a). Section 3.16(a) is hereby deleted in its entirety and replaced and amended as follows: "(a) The maximum cumulative Developer Fee that may be paid to any entity or entities providing development services to the Development, whether paid up-front or on a deferred basis, may not exceed Two Million Dollars ($2,000,000), of which approximately Four Hundred Ninety-Seven Thousand Three Hundred Fifteen Dollars ($497,315) shall be deferred subject to subsection (c) below, and in no event may exceed the amount allowed by TCAC and as approved by the City. For the purposes of this Agreement "Developer Fee" has the meaning set forth in California Code of Regulations, Title 4, Section 10302. Except for the Developer Fee, no compensation from any source shall be received by or be payable to the Borrower or any affiliate of the Borrower in connection with the provision of development and construction management services for the acquisition and construction of the Development." Section 4. Amendment to Section 4.13(c)(iv). Section 4.13(c)(iv) is hereby deleted in its entirety and replaced and amended to read as follows: "(iv) The removal, or withdrawal in lieu of removal, of Borrower's general partner for cause pursuant to the Partnership Agreement shall not require the City's consent or constitute a default under this Agreement. Notwithstanding anything to the contrary set forth in this Agreement or any of the other Loan Documents, in the event that the general partner of Borrower is removed by the limited partner of Borrower, or withdraws in lieu of being removed, for cause following default under Borrower's Partnership Agreement, the City hereby approves the transfer of the general partner interest to an affiliate of the limited partner of Borrower(which affiliate is not a 501(c)(3) tax-exempt public benefit corporation and does not meet the requirements of Section 4.6(c) or 5.1(b) hereof) to act as the interim replacement general partner for a period of time not longer than 60 days, with the understanding and agreement that the replacement general partner following the interim general partner shall be a 501(c)(3) tax-exempt nonprofit public benefit corporation that is selected by the limited partner and approved in advance and in writing 5 1610\08\1670050.2 by the City; provided that: (1) all documents associated with the removal of the general partner, including the Partnership Agreement, are submitted to the City for review and approval, which approval shall not be unreasonably withheld, conditioned or delayed; (2) the Partnership Agreement and other partnership documents are consistent with and do not conflict with the Loan Documents and the approved Development Budget." Section 5. Amendment to Section 5.1. Section 5.1 is hereby amended to add subsection (m) which shall read as follows: "(m) TCAC Readiness. Borrower has fully and timely complied with all requirements to satisfy the TCAC readiness deadline on or before March 23, 2015." Section 6. Approved Development Budget. The Development Budget attached as Exhibit B to the Loan Agreement is hereby replaced with the updated Approved Development Budget attached hereto as Exhibit 1, incorporated into the Loan Agreement by this reference. Section 7. Schedule of Performance. The Schedule of Performance attached as Exhibit C to the Loan Agreement is hereby replaced with the updated Approved Development Budget attached hereto as Exhibit 2, incorporated into the Loan Agreement by this reference Section 8. No Other Chanjzes to the Agreement. Except as expressly modified by this First Amendment, all other provisions of the Loan Agreement remain unmodified and continue in full force and effect. Section 9. Conflicts with the Agreement. In the event of any conflict between this First Amendment and the Loan Agreement, the provisions of this First Amendment shall prevail. Section 10.Effective Date. This First Amendment shall be effective on the date first set forth above. Section 11. Successors and Assigns. This First Amendment shall be binding on and inure to the benefit of the legal representatives,heirs, successors and assigns of the parties. Section 12.California Law. This First Amendment shall be governed by and construed in accordance with the laws of the State of California. Section 13,Counterparts; Multiple Originals. This First Amendment may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts. 6 610\08\1670050.2 IN WITNESS WHEREOF, the City, and the Borrower have entered into this First Amendment as of the date first set forth above. BORROWER: Val 9 Housing Partners, L.P., a California limited partnership Date: By: Val 9 MGP, LLC, a California limited liability company, its sole general partner By: National Community Renaissance of California, its sole member and manager By: Tracy Thomas, Chief Financial Officer CITY: CITY OF SAN BERNARDINO, a charter city of the State of California Date: By: Allen Parker, City Manager ATTEST Georgeann Hanna City Clerk By: �. Date: APPROVED AS TO FORM: Gary D. Saenz City Attorney By: 1610\08\1670050.2 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) COUNTY OF 5iAff 6&k1V,,9a1A1, ) On ®� /'� / , before me, 11V"5 ,Notary Public, personally appeared i�( /V —,�� ,, who proved to me on the basis of satisfactory evidence to be the person j whose name(/ subscribed to the within instrument and acknowledged to me that6U&4hey executed the same in �the authorized c apacity(j.es�, and that by is fir signatureX on the instrumon�4, or the entity upon behalf of which the personWacted, executed the instrument. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. KATHERINE Q.HERREAA Commission No. 1945601 ' +> NOTARY PMIC-CA NOIMM SAN BERNARDWO COMW RICO-EmOWAPLY26.3MO Name: Notary Public ATTACHMENT 1 REPLACEMENT EXHIBIT B APPROVED DEVELOPMENT BUDGET Attachment I-1 1610\08\1670050.2 z 0> 0 vo o 0 m0 cn ° 0000 * z � = O CO) 0 n o Cn N 0 7 O v) n y N 0 r K CD `< < 71 �I N m CD `G`G 1I -n N m n tv Dy Qoomw � � � o. 00mw v � N m OL OUJCt) o 3 n -V o CnU2o Q o ° 0 r o o CD a000Om ?•� m 03Co0cc) r m � O D chi 0 22mS. r 22mn v c ry Z h > � � � n Z � � r n C 0 0 CD m co O Z m co 0 0 O n CO) :s C cD x -1 ; m � � y -' DO cn CD CD Z CL 0` 0 0 0 r ao 3 m O o o a =r n a Om a a D D y 0 � c rn co U) 0 0 °c :3 3 0o f 3. -v v co 0 s m m (D n n CD O O 0 CD Q. Z uoi c o , 3-0a 3 2) N CD N CD y C N � 0 < -iii 7 W EA CA EA fA 69 4 3 � C�7 �W O EA N o lw t E 69 00- N n Cp 0 V to A� N O V - � OD ffl O M N W CO OD -I 00 O Cn O Cn -N A C to D V ? 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O �I N Cn Cn N Cn C Cn C V -I O A W OD N V - -,l O (D -N W 00 N ;J to W O O O W Cb Cn to W O Cfl O O (3) W Cn � x o 00 0 o a� in o o -co al � o a) In o m N Cn �l O O O 00 O " Cn —1 Cfl O O O OD O Z mArn0Ornoo a) -N C� -IWO rn O O � DEVELOPMENT COSTS I Date:3/13/15 Project Name: Waterman Gardens-Valencia 9 Project Address: San Bernardino,CA Developer: NCRC/TCC/HACSB/HPI Number of Dwelling Units: 76 Gross Building Area: 81,378 CURRENT Per Unit Per Sq-Ft % 1.Acquisition Purchase Price $ 500,000 $ 6,579 $ 6 1.83% Closing Costs $ 25,000 $ 329 $ 0 0.09% Acquisition Cost Total: $ 525,000 $ 6,908 $ 6 1.92% 2.Fees/Permits&Studies $ - Study:Surveys $ 37,500 $ 493 $ 0 0.14% Environmental Studies(soils,traffic,etc.) $ 37,500 $ 493 $ 0 0.14% Construction:Labor Compliance $ 100,000 $ 1,316 $ 1 0.37% Construction:Special Inspections $ 100,000 $ 1,316 $ 1 0.37% Fee:Building and Permit $ 2,013,580 $ 26,494 $ 25 7.35% Fee:Architecture&Engineering $ 1,000,000 $ 13,158 $ 12 3.65% Fees/Permits&Studies Cost Total: $ 3,288,580 $ 43,271 $ 40 12.01% 3.Direct Construction(Prevailing Wage) $ Demolition $ - $ - $ - 0.00% Residential Construction $ 13,201,212 $ 173,700 $ 162 48.22% Joint-Use Community Center/Leasing Office/Amenities $ - $ - $ - 0.00% Onsite Improvements $ 1,533,733 $ 20,181 $ 19 5.60% Landscaping/Common Areas $ - $ - $ - 0.00% Offsite Improvements $ $ $ 0.00% Contractor's Contingency/Undisbursed Funds $ $ $ 0.00% Subtotal: $ 14,734,945 $ 193,881 $ 181 53.82% Contractor's Overhead&Profit $ 1,178,796 $ 15,510 $ 14 4.31 Subtotal: $ 15,913,741 $ 209,391 $ 196 58.12% General Conditions $ 884,097 $ 11,633 $ 11 3.23% Performance Bond $ 174,791 $ 2,300 $ 2 0.64% Subtotal: $ 16,972,628 $ 223,324 $ 209 61.99% Off Site Improvements(Off-Site Improvement Contract) $ 681,282 $ 8,964 $ 8 2.49% Owner-Contingency(HUD Working Capital Reserve) $ 213,420 $ 2,808 $ 3 0.78% Owner-Contingency(Non HUD Wkg Cap Reserve+Offsite) $ 669,276 $ 8,806 $ 8 2.44% Direct Construction Cost Total: $ 18,536,606 $ 234,938 $ 219 65.22% 4.Indirect Construction $ - Developer's Fee $ 1,033,725 $ 13,602 $ 13 3.78% Deferred Developer Fee $ 966,275 $ 12,714 $ 12 3.53% Subtotal: $ 2,000,000 $ 26,316 $ 25 7.30% Builders Risk/Liability Insurance $ 140,000 $ 1,842 $ 2 0.51% Real Estate Taxes(Portion in HUD Working Capital) $ 10,000 $ 132 $ 0 0.04% Legal:NCORE Legal $ 125,000 $ 1,645 $ 2 0.46% Legal:PNC Lender Legal $ 100,000 $ 1,316 $ 1 0.37% Accounting/Inspection $ 50,000 $ 329 $ 1 0.18% Indirect Contingency-Relocation Parcel 1A Conversion $ 75,000 $ 987 $ 1 0.27% Indirect Contingency-General Uses $ 40,000 $ 526 $ 0 0.15% Indirect Construction Cost Total: $ 2,540,000 $ 33,092 $ 31 9.28% 5.Rent Up/Marketing $ - HUD Working Capital-Mkt/Adv/FFE(112 of 4%of Loan) $ 213,420 $ 2,808 $ 3 0.78% Non-HUD Lease-up $ - $ - $ - 0.00% HUD Initial Oper Deficit Escrow/Interest(3%of Loan Amt) $ 320,130 $ 4,212 $ 4 1.17% Common Area Furnishings/FIFE(In HUD WC) $ - $ - $ - 0.00 WFB/Non-HUD Operating Reserve(6 Months) $ 537,326 $ 7,070 $ 7 1.96% Rent Up/Marketing Cost Total: $ 1,070,876 $ 14,090 $ 13 3.91% 6.Financing Costs $ - 221(d)(4)Construction Period Loan Interest(23 months) $ 420,000 $ 5,526 $ 5 1.53% PNC 221(d)(4)Loan Fees $ 106,710 $ 1,404 $ 1 0.39% Appraisal/Market Study $ 25,000 $ 329 $ 0 0.09 HUD Application Fee(.3%of loan amount) $ 32,013 $ 421 $ 0 0.12% HUD Inspection Fee (.5%of loan amount) $ 53,355 $ 702 $ 1 0.19% HUD MIP(.9%of loan amount) $ 96,039 $ 1,264 $ 1 0.35% Lender Ordered 3rd Party Reports/Tax Credit Legal $ 128,000 $ 1,684 $ 2 0.47% Tax Credit Allocation Fee $ 56,937 $ 749 $ 1 0.21 Wells Bridge Loan Costs&Interest(23 months) $ 400,000 $ 5,263 $ 5 1.46% Misc.RAD/FHA Processing Costs(Recap Advisors) $ 75,000 $ 987 $ 1 0.27% Title and Recording(Constr.-10K/Perm.-5K) $ 25,000 $ 329 $ 0 0.09% Financing Cost Total: $ 1,418,054 $ 18,659 $ 17 5.18% Development Cost $ - Subtotal Development Cost $ 26,854,116 $ 344,050 $ 322 98.08% Subtotal Acquisition Cost $ 525,000 $ 6,908 $ 6 1.92% Development Cost Total: $ 27,379,116 $ 350,958 $ 328 100.00% Construction estimates are based on prevailing wage and subject to change and may be revised due to entitlement issues,changes in construction standards, architectural and engineering requirements,and other unforseen circumstances. co W co W co OW co m m m w m 0 D OO co m co m co co y co W N m m m m m m m m m m m m C 10 m m m m m m m m m m z m a a a a a a a a a n ".m a a a a a a a a a a c z CD o 7O v 0 _ o m CD 03 o. v v CD o D - a 'D r o m S 05<m D a m a m D O a m = m m H m 0 y d m m 0° is 0) m X X J 0 W N CD m 3 3 O 0, 0, A 0)0) 0t 0, A W N m y y o 0 0 0 o y o 0 0 0 0 0 y o 0 0 0 o y 0 0 0 0 0 c c O c c Low G) � c c O o o O o O x- O'CD m m m m � m d nyrp Z W < 2 m O W O O O N N U,O W W 0. 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(CO (0((D CO ((D (" 00 00 00 OD co N N N N N 0,0, N m 0) O O O O O D J" V J J (O (D CO (D (D w w w co W OD CD W 00 W J $0000 0000 0 0000 80000 808 W 88 0000888 fA EA EA fA<A Gj 6f9 fA j,Gj j» EA bj IT bj WW W Cl) W W ((D0 ((�O((�D (OO,((On W W W W W 00000 A A A A A A A A A A W W W W W (WO (WO CO W (WO (WO A A A A A O0 OD 00 OD CO O) 0) o) o)0) T 0)Q) 0) 0) 000 O O 00000 O O O O O 00000 69 69 69 fA H 69 fA 69 EA fA EA 69 fA fA 69 EA EA EA Vf fA W W W W W O O O O O W W OD W W 0) 0)0) O)W 0,0, 0 01 01 m W OD W W W W Cl) Cl) Cl) bA EA bA fA fA EA EA EA bH Hi EA E_A EA fA T V)EA E_A b9 T • OD OD W W W W 000),, 01 0) 0) W W W W W 0 0 O O O S S S S 0 0 0 0 0 0 O O O O O N N N N N CO CO (D(O O . ' S S S S S S S S S 0 0 0 0 0000 0 00 N N FA w FA bA EA N bA EA V)bA 5H (A (A fA w 69 bA M bA W(A EA fo r • N A W A N) W co N U7 N O N N J A 00 A W p (O (D J w A N A A N W A UJ W C0 N O 8 m O co A A A (O co A A O W O O 0 0 0 co N W W A 00 co w O O i 0 0 O 0 O O O O W W O OD O co N OPERATING EXPENSES Date:3113/15 Project Address:San Bernardino,CA Developer:NCRC/TCC/HACSB/HPI Number of Dwelling Units:76 Gross Building Area:81,378 1.Management Current Per Month PUPY Percent Management Fee $ 48,336 $ 4,028.00 $ 636.00 $ 53.00 9.11% Management Total: $ 48,336 $ 4,028.00 $ 636.00 $ 53.00 9.11% 2.Administration Marketing/Credit Checks $ 2,025 $ 168.75 $ 26.64 $ 2.22 0.38% Audit(Reznick)/File Mgmt(Compliance) $ 16,585 $ 1,382.08 $ 218.22 $ 18.19 3.13% Legal $ 2,000 $ 166.67 $ 26.32 $ 2.19 0.38% Office Expenses/MISC $ 28,184 $ 2,348.67 $ 370.84 $ 30.90 5.31% Administration Total: $ 48,794 $ 4,066 $ 642 $ 54 9.20% 'Agency Approved Alternative Loan-Other source of construction or permam Housing Authority of County of San Bemardir $ 50,000 $ 4,166.67 $ 657.89 $ 54.82 9.43% Main Personnel $ 32,000 $ 2,666.67 $ 421.05 $ 35.09 6.03% Leasing Commissions $ 1,000 $ 83.33 $ 13.16 $ 1.10 0.19% Payroll Txs,Ins&Wkr.Comp. $ 43,336 $ 3,611.33 $ 570.21 $ 47.52 8.17% Salaries and Benefits Total: $ 126,336 $ 10,528.00 $ 1,662.32 $ 138.53 23.82% 4.Maintenance Supplies $ 7,363 $ 613.58 $ 96.88 $ 8.07 1.39% Repairs Contract $ 1,050 $ 87.50 $ 13.82 $ 1.15 0.20% Pest Control $ 2,400 $ 200.00 $ 31.58 $ 2.63 0.45% Fire Prevention $ 4,025 $ 335.42 $ 52.96 $ 4.41 0.76% Security Systems $ 3,000 $ 250.00 $ 39.47 $ 3.29 0.57% Elevator $ 7,000 $ 583.33 $ 92.11 $ 7.68 1.32% Misc. $ 8,350 $ 695.83 $ 109.87 1.57% Pool(Future CAM for WG Facilities) $ 6,000 $ 500.00 $ 78.95 $ 6.58 1.13% Maintenance Total: $ 39,188 $ 3,265.67 $ 515.63 $ 33.81 7.39% 5. Utilities Not Paid by Tenants Trash Removal $ 12,936 $ 1,078.00 $ 170.21 $ 14.18 2.44% Electricity $ 25,500 $ 2,125.00 $ 335.53 $ 27.96 4.81% Water/Sewer $ 53,931 $ 4,494.25 $ 709.62 $ 59.13 10.17% Gas $ 8,400 $ 700.00 $ 110.53 $ 9.21 1.58% Utilities Total: $ 100,767 $ 8,397.25 $ 1,325.88 $ 110.49 19.00% 6.Insurance Prop&Liab Insurance($29,989) $ 29,898 $ 2,491.50 $ 393.39 $ 32.78 5.64% Insurance Total: $ 29,898 $ 2,491.50 $ 393.39 $ 32.78 5.64% 7.Tax and Reserves Real Estate Taxes $ 5,000 $ 416.67 $ 65.79 $ 5.48 0.94% Replacement Reserves $ 41,800 $ 3,483.33 $ 550.00 $ 45.83 7.88% Tax and Reserves Total: $ 46,800 $ 3,900.00 $ 615.79 $ 51.32 8.82% 8.Other Security Patrol $ 30,000 $ 2,500.00 $ 394.74 $ 32.89 5.66% Grounds Contract $ 20,425 $ 1,702.08 $ 268.75 $ 22.40 3.85% Turn Over $ 3,000 $ 250.00 $ 39.47 $ 3.29 0.57% Support Services $ 21,600 $ 1,800.00 $ 284.21 $ 23.68 4.07% Payment to HACSB:Voucher Admin $ 9,900 $ 825.00 $ 130.26 $ 13016 1.87% Fee-County HOME Monitoring Fees($35 PL $ 140 $ 11.67 $ 1.84 $ - 0.03% Fee-City HOME Monitoring Fees($35 PUPY $ 245 $ 20.42 $ 3.22 $ 0.05% Fee-Combined HOME Physical Inspection 3 $ 5,000 $ 416.67 $ 65.79 $ 0.94% Other Total: $ 90,310 $ 7,525.83 $ 1,188.29 $ 212.53 17.03% Operating Expenses Total: $ 530,429 $ 44,202.42 $ 6,979.33 $ 685.96 100.00% Per Unit/Per Year $ 6,979.33 Excluding Tax,Reserves&Svcs $ 462,029 $ 6,079.33 $ 6,079.33 Per Unit/Per Year $ 6,079 TAX CREDIT ESTIMATE Date:3113/15 Project Name: Waterman Gardens-Valencia 9 Project Address: San Bernardino,CA Developer: NCRC/TCC/HACSB/HPI Number of Dwelling Units: 76 Gross Building Area: 61.378 Project Costs Basis-9%ACP Land CosVAcquisition Land Cost $ 500,000 XXXXXXXXXXXXXX Legal/Broker Fees $ 25,000 XXXXXXXXXXXXXX Demolition $ - XXXXXXXXXXXXXX Land CoeVAcquisition Total: $ 525,000 $ - Construction Residential Construction:New $ 13,201,212 $ 13,201,212 Residential Construction. $ - $ - Onsite Improvements $ 1,533,733 $ 1,533,733 Other $ - $ OH-Site Improvements $ - $ - Toxic Abatement $ - $ - Contraclor's Overhead 8 Profit $ 1,178,796 $ 1,178,796 General Conditions $ 884,097 $ 884,097 Performance Bond $ 174,791 $ 174,791 Off Site Improvements(Off-Site Improvement Contract) $ 681,282 $ 681,282 Owner-Paid by Owner $ 213,420 $ 213,420 Owner-Contingency $ 669,276 $ 669,276 Construction Total: $ 18,536,606 $ 18,536,606 •Agency Approved Alternative Loan-Other source of construction or permanent financing as is reasonably approved by Count Housing Authority of County of San Bernardino for the purl$ 2,013,580 $ 2,013,580 Surveys/Environmental $ 275,000 $ 275,000 Design and Reimbursables $ 1,000,000 $ 1,000,000 Permits/Fees/Architecture Total: $ 3,288,580 $ 3,288,580 221(d)(4)Loan Interest&Fees Construction Loan Interest $ 420,000 $ 300,000 Origination Fee $ 106,710 $ 76,221 As-built Appraisal $ 25,000 $ 25,000 Title 8 Recording $ 12,500 $ 12,500 Bridge loan costs $ 400,000 $ 400,000 Misc.RAD/FHA Processing $ 75,000 XXXXXXXXXXXXXX Construction Interest&Fees Total: $ 1,039,210 $ 813,721 Other 2211 Costs Lender Ordered 3rd Party Reports $ 128,000 XXXXXXXXXXXXXX Credit Enhancement/Application Fee/MIP $ 96,039 XXXXXXXXXXXXXX The and Recording $ 12,500 XXXXXXXXXXXXXX Permanent Financing Total: $ 236,539 $ - HUD/Legal Fees HUD Inspection Fees $ 53,355 XXXXXXXXXXXXXX HUD Application Fee $ 32,013 $ 32,013 Syndication/HUD Perm Legal $ 100,000 XXXXXXXXXXXXXX Acquisition/Org $ 125,000 $ 50,000 Legal Fees Total: $ 310,368 $ 82,013 Reserves Marketing/Advertising Expense $ 213,420 XXXXXXXXXXXXXX Common Area Furnishings $ - $ - Reserve NCRC Social Service Fee(Capitalized) $ - XXXXXXXXXXXXXX Reserve:NCRC Lease-up $ - XXXXXXXXXXXXXX Reserve:HUD Required Initial Deficit Escrow $ 320,130 XXXXXXXXXXXXXX Reserve:Investor-Operating Reserve(Capitalized) $ 537,326 XXXXXXXXXXXXXX Reserve:HUD-Minimum Capital Investment $ - XXXXXXXXXXXXXX Reserve:Investor-Partnership Fee(Capitalized) $ - XXXXXXXXXXXXXX Reserve:HUD-Excess Amenities $ - XXXXXXXXXXXXXX Reserve:Investor- $ - XXXXXXXXXXXXXX Reserves Total: $ 1,070,876 $ - Other TCAC Applill/Monitoring Fees $ 56,937 XXXXXXXXXXXXXX Community Outreach $ 75,000 $ 75,000 Soft Costs Contingency $ 40,000 $ 20,000 Other $ - $ - Accounting/AUdit $ 50,000 $ 50,000 Taxes $ 10,000 $ 10,000 Insurance $ 140,000 $ 140,000 Others Total: $ 371,937 $ 295,000 Developer Costs Developer Overhead/Fee $ 2,000,000 $ 1,400,000 Development Consultant $ - $ - Construction Manager $ - $ - Special Needs Consultant $ - If - Developer Costs Total: $ 2,000,000 $ 1,400,000 Residential Costs Total: $ 27,379,116 $ 24,415,920 Commercial Costs Total $ - $ Pr Ject Costs Total: $ 27,379,116 $ 24,415,920 Eligible Basis Total: $ 24,415,920 Adjusted Threshold basis $ 21,966,013 Ineligible Basis Total: $ - Voluntarily Exluded Eligible Basis Amount Total: 12,611,650 Reduction if Eligible>Threshold Basis Total: $ 12,611,650 Additional Reduction Eligible Basis Total: $ Basis Reduction Total: $ 12,611,650 Eligible Basis Total Less Basis Reduction $ 11,804,270 Adjusted Threshold Basis Limit Total: $ 11,804,270 Requested Unadjusted Eligible Basis Total: $ 11,804,270 OCT or DDA Adjustment. 130% Adjusted Eligible Basis Total: $ 15,345,552 Applicable Fraction 100% Qualified Basis. $ 15,345,552 Basis Reduction Total. $ Adjusted Qualified Basis Total: $ 15,345,552 7.70% Annual Federal Credit Total: $ 1,181,607 10 Years: 10 Maximum Federal Credit Total $ 11,816,075 Tax Credit Factor: $ 1.09 Estimated Syndication Net Proceeds: $ 12,879,521 WFB Community Development Corporation Amount $ 12,424,223 CTCAC Recommended Tax Credit Amount $1,139,951 ATTACHMENT 2 REPLACEMENT EXHIBIT C SCHEDULE OF PERFORMANCE Attachment 2-1 1610\08\1670050.2 Val9 Loan Agreement Exhibit C—Schedule of Performance Schedule of Performance Val 9 Apartments 950 N.Valencia Avenue,San Bernardino,92410 Milestone Date Key-Prerequisite Milestone Receive Entitlements/Environmental Clearance 4/14/2014 Submit Entitlements Apply for 9%Tax Credits 7/1/2014 Receive Entitlements Receive 9%Tax Credit Reservation 9/24/2014 Apply for 9%Credits Select Tax Credit Investor 10/20/2014 Receive CTCAC Award Submit plans and applications for plan check and building permit 10/20/2014 Receive CTCAC Award Obtain Approval of Construction Plans March 2015 No later than 180-day CTCAC deadline (March 23,2015) Obtain FHA/HUD Loan Commitment March 2015 No later than 180-day CTCAC deadline (March 23,2015) Final Construction Contract March 2015 No later than 180-day CTCAC deadline (March 23,2015) Pay impact fees and obtain construction permits March 2015 No later than 180-day CTCAC deadline (March 23,2015) Begin Construction March 2015 No later than 180-day CTCAC deadline (March 23,2015) Management Plan May 2016 Complete construction August 2016 100%Occupied November 2016 Permanent Loan Closng December 2016 FIRST AMENDMENT TO LOAN AGREEMENT (Waterman Gardens- Valencia Val 9) This First Amendment to Loan Agreement (the "First Amendment") is entered into as of March 17, 2015, by and among the City of San Bernardino, a charter city of the State of California(the "City"), and Val 9 Housing Partners, L.P., a California limited partnership (the "Borrower"), with reference to the following facts: RECITALS A. The City and the Borrower entered into that certain Loan Agreement dated as of March 17, 2015 (the "Loan Agreement"). These recitals refer to and utilize certain capitalized terms which are defined in Article 1 of the Loan Agreement. Capitalized terms used in this First Amendment, but not defined, shall have the meaning set forth in the Loan Agreement. B. Pursuant to Section 7.9 of the Loan Agreement, no alteration or variation of the terms of the Loan Agreement is valid unless made in writing by the Parties. Any material change in the amount or terms of the Loan Agreement must be approved by the Mayor and Common Council. C. On March 17, 2015, the governing board of the City approved and authorized the City Manager to execute this First Amendment and any and all documents necessary to effectuate the disbursement of the City Loan in accordance with the requirements of the Loan Agreement as modified by this First Amendment. D. To implement and effectuate the Loan Agreement and construction of the Development, the City and the Borrower desire to enter into this First Amendment to: (i) Revise sources of the Approved Financing in order to provide the Borrower flexibility in the source of permanent and construction financing approved for the construction of the Development; (ii) Revise the Conditions to Disbursement of the Predevelopment Component I of the City Loan; and (iii) Revise certain Permitted Transfers in the event of default; and (iv) Make conforming non-substantive changes to effectuate the purpose of the Loan Agreement as modified by this First Amendment. NOW, THEREFORE, the City and the Borrower agree as follows: AMENDMENTS TO LOAN AGREEMENT Section 1. Amendment to Section 1.1(e). Section 1.1(e) of the Loan Agreement is hereby deleted in its entirety and replaced and amended as follows: 1 1610\08\1670050.2 "(e) "Approved Financing" means all of the following loans, grants and equity obtained by Borrower and approved by the City for the purpose of financing the Development: (i) An unsecured equity bridge loan from Wells Fargo Bank,National Association in the approximate amount of Eight Million Six Hundred Sixty-Six Thousand Three Hundred Forty-Eight Dollars ($8,666,348) (the "Construction Loan") which will be made to the Borrower or the General Partner. If the Construction Loan is made to the General Partner, the General Partner intends to contribute the sum of the Construction Loan to the Borrower as a partnership contribution. The City acknowledges that the Construction Loan is intended to be repaid from Tax Credit Investor Equity as and when available; (ii) A HUD/FHA 221(d)(4) loan from PNC Bank, National Association in the approximate amount of Ten Million Six Hundred Seventy- One Thousand Dollars ($10,671,000) (the "PNC Loan") or such other source of construction or permanent financing as is reasonably approved by the City in writing (a "City Approved Alternative Loan"). All references to the PNC Loan including those in Section 1.1(vv), Section 1.1 (ww) and Section 2.4 shall be read to refer to any applicable permanent City Approved Alternative Loan; (iii) A loan from the Housing Authority of the County of San Bernardino (the "Housing Authority") of up to One Million Dollars ($1,000,000) (the "Housing Authority Loan"); (iv) Low Income Housing Tax Credit investor limited partner capital contribution in the approximate amount of Twelve Million Four Hundred Twenty-Four Thousand Two Hundred Twenty-Three Dollars ($12,424,223) (the "Tax Credit Investor Equity"); (v) A HOME Investment Partnership Act loan from the County of San Bernardino of approximately Eight Hundred Ten Thousand Dollars ($8 1 0,000)(the "County HOME Loan"); (vi) A seller carryback note in the amount of Five Hundred Thousand Dollars ($500,000) from National Community Renaissance of California(the "Acquisition Loan"); and (vii) Deferred Developer Fees in an approximate amount of Four Hundred Ninety-Seven Thousand Three Hundred Fifteen Dollars ($497,315) (the "Deferred Developer Fee") as described in Section 3.16(c)." Section 2. Amendment to Section 2.6(a). Section 2.6(a) is hereby deleted in its entirety and replaced and amended as follows: 2 1610\08\1670050.2 "(a) Predevelopment Component I. The City is not obligated to make a disbursement of the Predevelopment Component I at Construction Closing, or to take any other action under the Loan Documents unless the following conditions precedent are satisfied: (i) There exists no Event of Default nor any act, failure, omission or condition that would constitute an Event of Default under this Agreement; (ii) Borrower holds good and marketable fee title to the Property or is acquiring title to the Property; (iii) Borrower has delivered to the City a copy of Borrower's organizational documents and a corporate authorizing resolution authorizing Borrower's execution of the Loan Documents and the transactions contemplated by the Loan Documents; (iv) There exists no material adverse change in the financial condition of Borrower from that shown by the financial statements and other data and information furnished by Borrower to the City prior to the date of this Agreement; (v) Borrower has furnished the City with evidence of the insurance coverage meeting the requirements of Section 4.14 below; (vi) Borrower has caused to be executed and delivered to the City the Loan Documents and any other instruments, and policies required under the Loan Documents; (vii) The Deed of Trust and the Regulatory Agreement have been recorded against the Property in the Office of the Recorder of the County of San Bernardino; (viii) Borrower is in compliance with the Schedule of Performance; (ix) All environmental review necessary for the construction of the Development has been completed, and Borrower has provided the City evidence of compliance with all CEQA and NEPA mitigation measures; (x) The City has determined the undisbursed proceeds of the Loan, together with the firm commitment for the PNC Loan and commitments for funds that Borrower has obtained in connection with the acquisition and construction of the Development, are not less than the amount the City determines is necessary to pay for the acquisition and construction of the Development and to satisfy all of the covenants contained in this Agreement and the Regulatory Agreement. Notwithstanding anything to the contrary, the City shall not be required to disburse any funds under this Section 3 1610\08\1670050.2 2.6(a) unless and until the Borrower has obtained a firm commitment for permanent take- out financing for any construction related City Approved Alternative Loan that is in addition to any firm commitment associated with the PNC Loan; (xi) Borrower has obtained all permits and approvals necessary for the construction of the Development, as required by Section 3.2, provided however the Borrower may satisfy this requirement with regards to the building permit, if the Borrower provides the City with a permit ready letter from the City Building Department; (xii) Borrower has submitted a certification from the architect certifying that the plans and specifications and design documents for the Development ensure that the City-Assisted Units are in compliance with Section 3.8(f) of this Agreement. (xiii) The City has received a copy of the General Contractor's Construction Contract as required pursuant to Section 3.3 below and has issued a notice to proceed with construction to the Contractor and the Contractor has commenced construction of the Development; (xiv) The City has received and approved the labor and material (payment) bonds as required pursuant to Section 3.5 below; (xv) A title insurer reasonably acceptable to the City is unconditionally and irrevocably committed to issuing an LP-10 2006 ALTA Lender's Policy of title insurance insuring the priority of the Deed of Trust in the amount of the Loan, subject only to such exceptions and exclusions as may be reasonably acceptable to the City, and containing such endorsements as the City may reasonably require. The Borrower shall provide whatever documentation (including an indemnification agreement), deposits or surety is reasonably required by the title company in order for the City's Deed of Trust to be senior in lien priority to any mechanics liens in connection with any start of construction that has occurred prior to the recordation of the Deed of Trust against the Property in the Office of the Recorder of the County of San Bernardino; (xvi) Borrower has executed a Partnership Agreement approved by the City, with the Investor Limited Partner, in which the tax credit equity investor is obligated to provide Borrower the Tax Credit Investor Equity; (xvii) Borrower has closed, or is concurrently closing, on the construction financing including the Construction Loan (or if necessary, the General Partner of the Borrower has closed on the Construction Loan and is obligated to contribute all Construction Loan proceeds to the Borrower as a capital contribution in accordance with the Borrower's Partnership Agreement), the City Approved Alternative Loan or the PNC Loan, and the County HOME Loan and is eligible to receive the proceeds of those loans and has received the amount of Tax Credit Investor Equity stated as the first installment in the Partnership Agreement that is allocated to development 4 1610\08\1670050.2 costs and not closing costs (estimated cumulative with closing costs to be approximately Two Million Four Hundred Eight Four Thousand Eight Hundred Forty-Five Dollars ($2,484,845); (xviii) The City has received a written draw request from Borrower, including(1) certification that the condition set forth in Section 2.6(a)(i) continues to be satisfied, (2) certification that the proposed uses of funds consistent with the Approved Development Budget, (3) the amount of funds needed, and, (4) where applicable, a copy of the bill or invoice covering a cost incurred or to be incurred. When a disbursement is requested to pay any contractor in connection with improvements on the Property, the written request must be accompanied by(i) certification by the Borrower's architect reasonably acceptable to the City that the work for which disbursement is requested has been completed (although the City reserves the right to inspect the Property and make an independent evaluation); and (ii) lien releases and/or mechanics lien title insurance endorsements reasonably acceptable to the City." Section 3. Amendment to Section 3.16(a). Section 3.16(a) is hereby deleted in its entirety and replaced and amended as follows: "(a) The maximum cumulative Developer Fee that may be paid to any entity or entities providing development services to the Development, whether paid up-front or on a deferred basis, may not exceed Two Million Dollars ($2,000,000), of which approximately Four Hundred Ninety-Seven Thousand Three Hundred Fifteen Dollars ($497,315) shall be deferred subject to subsection (c) below, and in no event may exceed the amount allowed by TCAC and as approved by the City. For the purposes of this Agreement "Developer Fee" has the meaning set forth in California Code of Regulations, Title 4, Section 10302. Except for the Developer Fee, no compensation from any source shall be received by or be payable to the Borrower or any affiliate of the Borrower in connection with the provision of development and construction management services for the acquisition and construction of the Development." Section 4. Amendment to Section 4.13(c)(iv). Section 4.13(c)(iv) is hereby deleted in its entirety and replaced and amended to read as follows: "(iv) The removal, or withdrawal in lieu of removal, of Borrower's general partner for cause pursuant to the Partnership Agreement shall not require the City's consent or constitute a default under this Agreement. Notwithstanding anything to the contrary set forth in this Agreement or any of the other Loan Documents, in the event that the general partner of Borrower is removed by the limited partner of Borrower, or withdraws in lieu of being removed, for cause following default under Borrower's Partnership Agreement, the City hereby approves the transfer of the general partner interest to an affiliate of the limited partner of Borrower(which affiliate is not a 501(c)(3) tax-exempt public benefit corporation and does not meet the requirements of Section 4.6(c) or 5.1(b) hereof)to act as the interim replacement general partner for a period of time not longer than 60 days, with the understanding and agreement that the replacement general partner following the interim general partner shall be a 501(c)(3) tax-exempt nonprofit public benefit corporation that is selected by the limited partner and approved in advance and in writing 5 1610\08\1670050.2 by the City; provided that: (1) all documents associated with the removal of the general partner, including the Partnership Agreement, are submitted to the City for review and approval, which approval shall not be unreasonably withheld, conditioned or delayed; (2) the Partnership Agreement and other partnership documents are consistent with and do not conflict with the Loan Documents and the approved Development Budget." Section 5. Amendment to Section 5.1. Section 5.1 is hereby amended to add subsection(m) which shall read as follows: "(m) TCAC Readiness. Borrower has fully and timely complied with all requirements to satisfy the TCAC readiness deadline on or before March 23, 2015." Section 6. Approved Development Budget. The Development Budget attached as Exhibit B to the Loan Agreement is hereby replaced with the updated Approved Development Budget attached hereto as Exhibit 1, incorporated into the Loan Agreement by this reference. Section 7. Schedule of Performance. The Schedule of Performance attached as Exhibit C to the Loan Agreement is hereby replaced with the updated Approved Development Budget attached hereto as Exhibit 2, incorporated into the Loan Agreement by this reference Section S. No Other Changes to the Agreement. Except as expressly modified by this First Amendment, all other provisions of the Loan Agreement remain unmodified and continue in full force and effect. Section 9. Conflicts with the Agreement. In the event of any conflict between this First Amendment and the Loan Agreement, the provisions of this First Amendment shall prevail. Section 10.Effective Date. This First Amendment shall be effective on the date first set forth above. Section 11. Successors and Assigns. This First Amendment shall be binding on and inure to the benefit of the legal representatives, heirs, successors and assigns of the parties. Section 12. California Law. This First Amendment shall be governed by and construed in accordance with the laws of the State of California. Section 13. Counterparts; Multiple Originals. This First Amendment may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts. 6 1610\08\1670050.2 IN WITNESS WHEREOF, the City, and the Borrower have entered into this First Amendment as of the date first set forth above. BORROWER: Val 9 Housing Partners, L.P., a California limited partnership Date: By: Val 9 MGP, LLC, a California limited liability company, its sole general partner By: National Community Renaissance of California, its sole member and manager J By. Tracy Tho as, Chi f Financial Officer CITY: CITY OF SAN BERNARDINO, a charter city of the State of California Date: / By: Allooffarker, City Manager ATTEST Georgeann Hanna City Clerk Date: APPROVED AS TO FORM: Gary D. Saenz City Attorney By: 7 1610\08\1670050.2 ATTACHMENT 1 REPLACEMENT EXHIBIT B APPROVED DEVELOPMENT BUDGET Attachment 1-1 1610\08\1670050.2 z 0> O o0 0 ogomo ° 000Og z * = o 0 N, = CD c c �< co CD D X m c c m ; C 0 S. 0 .�. 0 0 0 N 0 7 7 p N (� to 0 @ �+ N CL S� o � W =o Q -0 o Cl) W o m o So Cl) r O o m Om � , mM 03000 r mv0 D m -aa 22mc�° o � � _ = mom Q) c o N Q cD O D -i °, D " K0 � Z � � r n � � C O C) � CD ma) OZ moo 0 0 on W c� °c CD ;u -1 7 -1 m � d D � D � (n D m Z 0 r nO� z 00 , 3 M o o rr at O (D CD (D CL a `-1 D D N O c (n w � 0 CD O CD < < C2 = CD 0 �.,• fD CD "r O CD CD 7 D 0 CD m0 r r � cn CD Q � cOn cO D? gym °' d N y m O c (n N oo -4 Z Cn = 0 rn 0 m w 7 O N 69 69 69 69 69 69 69 " OD C7 Op3 j -a V N O ( (7 D 69 69' -69 - fl -w co (b o to A 0) w --4 (b O w o) cn P a) SU c -I (LZ n y v " OO N v -4 .01 " 000 O co -4 ;u C) N- � W GJOOO .4, CoOOOOw O .P -1 QD O O O N O co O O O co O OO O m 7 v O co C) O O N O N 000 .9, O .P O O -' * O W 0 0 0 W O O) W O o 0 00 O (A O Z =' CD CD 2 m = CO , O 0 W w (n N 0 "O 7 0 p1 m (n c c o co r W , -n ;uo o > > co ° -n ;uo0E o D D (n p , 0) 7 < Q � S.0 � m � fD < Q 7 0 N �. C o -� m y -O C 0 m (D 0 c o w cfl CD 0 0 c 0 O n3i 0. a- C-) o vi > > CD 0 o o y M m C. co o y -n ( -n o D 0 N < -n (n -n 0 -t w cod (D 0 co 0 Z v, 0 m n (D 0 lD y y ti m m (D 0 0 y C CA o m X00 -1 m CD � � g° n0 z 2 r vO, 2 r (1) O CD Z X Q O c n ( ( C Vl y n z 0 � G 7 r r" D to 69 69 .69 69 EA 69 69 -W 69 69 69 69 69 69 69 69 0 z m m d =' < C OD W l -� -� - co w 0' a W Ut N CP -co A O �I N Ut In N CJt c C!1 14 — -11 O .A. W Oo N V — W OD N �7 (o OD O O O Cn m C➢t (O OD O c0 O o ) OD CT ;u X O OD O O w (nt O O OD cn .P O w Cn O m N Cn -I O O O OD O Cn -I O O O O OD O Z O .P C) O O (Y) O O Cn .A (A -4 W O CA O O -q DEVELOPMENT COSTS I Date:3/13/15 Project Name: Waterman Gardens-Valencia 9 Project Address: San Bernardino,CA Developer: NCRC/TCC/HACSB/HPI Number of Dwelling Units: 76 Gross Building Area: 81,378 CURRENT Per Unit Per Sq-Ft % 1.Acquisition Purchase Price $ 500,000 $ 6,579 $ 6 1.83% Closing Costs $ 25,000 $ 329 $ 0 0.09% Acquisition Cost Total: $ 525,000 $ 6,908 $ 6 1.92% 2.Fees/Permits&Studies $ - Sludy:Surveys $ 37,500 $ 493 $ 0 0.14% Environmental Studies(soils,traffic,etc.) $ 37,500 $ 493 $ 0 014% Construction:Labor Compliance $ 100,000 $ 1,316 $ 1 0.37% Construction:Special Inspections $ 100,000 $ 1,316 $ 1 0.37% Fee:Building and Permit $ 2,013,580 $ 26,494 $ 25 7.35% Fee:Architecture&Engineering $ 1,000,000 $ 13,158 $ 12 3.65°A Fees/Permits&Studies Cost Total: $ 3,288,580 $ 43,271 $ 40 12.01% 3.Direct Construction(Prevailing Wage) $ Demolition $ - $ $ - 0.00% ResidentialConstruclion $ 13,201,212 $ 173,700 $ 162 48.22% Joint-Use Community Center/Leasing Office/Amenities $ . $ _ $ - 0.00% Onsite Improvements $ 1,533,733 $ 20,181 $ 19 5.60% Landscaping/Common Areas $ - $ $ - 0.00% Offsite Improvements $ $ $ 0.00% Contractor's Contingency/Undisbursed Funds $ $ $ 0.00% Subtotal: $ 14,734,945 $ 193,861 $ 181 53.82% Contractor's Overhead&Profit $ 1,178,796 $ 15,510 $ 14 4.31% Subtotal: $ 15,913,741 $ 209,391 $ 196 58.12% General Conditions $ 884,097 $ 11,633 $ 11 3.23% Performance Bond $ 174,791 $ 2.300 $ 2 0.64% Subtotal: $ 16,972,628 $ 223,324 $ 209 61.99% Off Site Improvements(OH--Site Improvement Contract) $ 681,282 $ 8,964 $ 8 2.49% Owner-Contingency(HUD Working Capital Reserve) $ 213,420 $ 2,808 $ 3 0.78% Owner-Contingency(Non HUD Wkg Cap Reserve+ONsite) $ 669,276 $ 8,806 $ 8 2.44% Direct Construction Cost Total: $ 18,536,606 $ 234,938 $ 219 65.22% 4.Indirect Construction $ _ Developers Fee $ 1,033,725 $ 13,602 $ 13 3.78% Deferred Developer Fee $ 966,275 $ 12,714 $ 12 3.53% Subtotal: $ 2,000,000 $ 26,316 $ 25 7.300A Builders Risk/Liability Insurance $ 140,000 $ 1,842 $ 2 0.51 1A Real Estate Taxes(Portion in HUD Working Capital) $ 10,000 $ 132 $ 0 0.04% Legal:NCORE Legal $ 125,000 $ 1,645 $ 2 0.46% Legal:PNC Lender Legal $ 100,000 $ 1,316 $ 1 0.37% Accounting/inspection $ 50,000 $ 329 $ 1 0.18% Indirect Contingency-Relocation Parcel 1A Conversion $ 75,000 $ 987 $ 1 0.27% Indirect Contingency-General Uses $ 40,000 $ 526 $ 0 0.15% Indirect Construction Cost Total: $ 2,540,000 $ 33,092 $ 31 9.28% 5.Rent Up/Marketing $ _ HUD Working Capital-Mkt/Adv/FIFE(112 of 4 0A of Loan) $ 213,420 $ 2,808 $ 3 0.78% Non-HUD Lease-up $ . $ - $ - 0.00% HUD Initial Oper Deficit Escrow/Interest(3%of Loan Amt) $ 320,130 $ 4,212 $ 4 1.17°A Common Area Furnishings/FFE(In HUD WC) $ - $ - $ - 0.00% WFB/Non-HUD Operating Reserve(6 Months) $ 537,326 $ 7,070 $ 7 1.96% Rent Up/Marketing Cost Total: $ 1.070,876 $ 14,090 $ 13 3.91% 6.Financing Costs $ _ 221(d)(4)Construction Period Loan Interest(23 months) $ 420,000 $ 5,526 $ 5 1.53% PNC 221(d)(4)Loan Fees $ 106,710 $ 1,404 $ 1 0.39% Appraisal/Market Study $ 25,000 $ 329 $ 0 0.09% HUD Application Fee(.3%of loan amount) $ 32,013 $ 421 $ 0 0.12% HUD Inspection Fee (.5%of loan amount) $ 53,355 $ 702 $ 1 0.19% HUD MIP(.9%of loan amount) $ 96,039 $ 1,264 $ 1 0.351/5 Lender Ordered 3rd Party Reports/Tax Credit Legal $ 128,000 $ 1,684 $ 2 0.47% Tax Credit Allocation Fee $ 56,937 $ 749 $ 1 0.21% Wells Bridge Loan Costs&Interest(23 months) $ 400,000 $ 5,263 $ 5 1.46°A Misc.RAO/FHA Processing Costs(Recap Advisors) $ 75,000 $ 987 $ 1 0.270% Title and Recording(Constr.-10K/Perm.-5K) $ 25,000 $ 329 $ 0 0.09% Financing Cost Total: $ 1,418,054 $ 18,659 $ 17 5.18% Development Cost $ _ Subtotal Development Cost $ 26,854,116 $ 344,050 $ 322 98.08% Subtotal Acquisition Cost $ 525,000 $ 6,906 $ 6 1.926 Development Cost Total: $ 27,379,116 $ 350,958 $ 328 100.00% Construction estimates are based on prevailing wage and subject to change and may be revised due to entitlement Issues,changes in construction standards, architectural and engineering requirements,and other unforseen circumstances. 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Ed 2pp mWm m m m �m�nn(m(nn�(fnDn((1n0n((m nn co W co W OWD W 03 co 0m 0m W m0 0m L A A A A ?A A L A W W W W W (D CD CD CO CO A m'CO'CO OD OD N in m Ol m 6 O)OI Of b) O O O O O O O O O O 00000 O O O O O fA fA fA W fA fA N M fA fA M d(to W fA (A(A E W fA w8 88 w 80008 mmmmm mmmmm m O1 Ot(n to m m m m m W W W W Cl) 69 f4 j 69 49 @ • m 0000 0 m W 0)n W(A(V W CJ O0 O00 O O O O O N N�n m m O O O O O N N N N N 0 0 0 0 0 O O O O O m m m m 1D boobb 0 0 b b b b b b b b 08$88 00000 00000 00000 00 00 b N (A M In fA fA H fA m 0 fA w to w w fA fA fA to fA fA fA dl fA 1 y • A A j W fD (Nnm N W m (D O V ED A N A A N W A (O m O O O a O O 0 0 0 0 m m O m 1a m m 00 O O � 000 O m i m O m O m N3 N OPERATING EXPENSES Date:3/13115 Project Address:San Bernardino,CA Developer.NCRC/TCC/HACSB/HPI Number of Dwelling Units:76 Gross Building Area:81,378 1.Management Current PerMonlh PUPY Percent Management Fee $ 48,336 $ 4,028.00 $ 636.00 $ 53.00 9.11% Management Total: S 48,336 $ 4,028.00 $ 636.00 $ 53.00 9.11% 2.Administration Marketing/Credit Checks $ 2,025 $ 168.75 $ 26.64 $ 2.22 0.38% Audit(Reznick)/File Mgmt(Compliance) $ 16,585 $ 1,382.06 $ 218.22 $ 18.19 3.13% Legal $ 2,000 $ 166.67 $ 26.32 $ 2.19 0.38% Office Expenses/MISC $ 28,184 $ 2,348.67 $ 370.84 $ 30.90 5.31% Administration Total: $ 48,794 $ 4,066 $ 642 $ 54 9.20% Agency Approved Alternative Loan-Other source of construction or permanr Housing Authority of County of San Bemardin$ 50,000 $ 4,166.67 $ 657.89 $ 54.82 9.43% Main Personnel $ 32,000 $ 2,666.67 $ 421.05 $ 35.09 6.03% Leasing Commissions $ 1,000 $ 83.33 $ 13.16 $ 1.10 019% Payroll Txs,Ins&Wkr.Comp. $ 43,336 $ 3,611.33 $ 570.21 $ 47.52 8.17% Salaries and Benefits Total: $ 126,336 $ 10,528.00 $ 1,662.32 $ 138.53 23.82% 4.Maintenance Supplies $ 7,363 '$ 613.58 $ 96.88 S 8.07 1.39% Repairs Contract $ 1,050 $ 87.50 S 13.82 $ 1.15 0.20% Pest Control $ 2,400 $ 200.00 S 31.58 $ 2.63 0.45% Fire Prevention $ 4,025 $ 335.42 $ 52.96 $ 4.41 0.76% Security Systems $ 3,000 $ 250.00 $ 39.47 $ 3.29 0.57% Elevator $ 7,000 $ 583.33 $ 92.11 $ 7.68 1.32% Misc. $ 8,350 $ 695.83 $ 109.87 1.57% Pool(Future CAM for WG Facilities) $ 6,000 $ 500.00 $ 78.95 $ 6.58 1.13% Maintenance Total: $ 39,188 $ 3,265.67 $ 515.63 $ 33.81 7.39% 5. Utilities Not Paid by Tenants Trash Removal $ 12,936 $ 1,078.00 $ 170.21 $ 14.18 2.44% Electricity $ 25,500 $ 2,125.00 $ 335.53 $ 27.96 4.81% Water/Sewer $ 53,931 $ 4,494.25 $ 709.62 $ 59.13 10.17% Gas $ 8,400 $ 700.00 $ 110.53 $ 9.21 1.58% Ulllilles Total: $ 100,767 $ 8,397.25 $ 1,325.88 $ 110.49 19.00% 6,insurance Prop&Ltab Insurance($29,989) $ 29,898 $ 2,491.50 $ 393.39 $ 32.78 5.64% Insurance Total: $ 29,896 $ 2,491.50 $ 393.39 $ 32.78 5.64% 7.Tax and Reserves Real Estate Taxes $ 5,000 $ 416.67 $ 65.79 $ 5.48 0.94% Replacement Reserves $ 41,800 $ 3,483.33 $ 550.00 $ 45.83 7.88% Tax and Reserves Total: $ 46,800 .$ 3,900.00 $ 615.79 $ 51.32 8.82% 8.Other Security Patrol $ 30,000 $ 2,500.00 $ 394.74 $ 32.89 5.66% Grounds Contract $ 20,425 $ 1,702.08 $ 268.75 $ 22.40 3.85% Turn Over $ 3,000 $ 250.00 $ 39.47 S 3.29 0.57% Support Services $ 21,600 S 1,800.00 $ 284.21 $ 23.68 4.07% Payment to HACSB:VoucherAdmfn $ 9,900 $ 825.00 $ 130.26 $ 130.26 1.87% Fee-County HOME Monitoring Fees($35 PL $ 140 $ 11.67 $ 1.84 $ - 0.03% Fee-City HOME Monitoring Fees($35 PUPI $ 245 $ 20.42 $ 3.22 S 0.05% Fee-Combined HOME Physical Inspection 3 $ 5,000 $ 416.67 $ 65.79 $ 0.94% Other Total: $ 90,310 $ 7,525.83 $ 1,188.29 $ 212.53 17.03% Operating Expenses Total: $ 530,429 $ 44,202.42 $ 6,979.33 $ 685.96 100.00% Per Unit/Per Year $ 6,979.33 Excluding Tax,Reserves&Svcs $ 462,029 $ 6,079.33 $ 6,079.33 Per Unit/Per Year $ 6,079 TAX CREDIT ESTIMATE Date:3113115 Project Name: Waterman Gardens-Valencia 9 Project Address: San Bernardino,CA Developer: NCRC/TCC/HACSB/HPI Number or Dwelling Units: 76 Gross Building Area: 81,378 Project Costs Basis•9%ACP Lard CosUAcqulsltlon Land Cost S 500,000 LegavB(oker Fees S 25,000 Demolition S - )O=X)OO(X)0()= Land COSVACqulsltlon Total: $ 525,000 S - Construction Residential Construction:New 5 13,201,212 S 13,201,212 Residential Construction: S . $ - Onsite Improvements S 1,533,733 $ 1,533,733 Other $ $ Off-Sfte Improvements $ $ Toxic Abatement $ - S - Conlractor's Overhead 8 Profit S 1,178,796 S 1,178,796 General CondObns $ 884,097 S 860,097 Performance Bond S 174,791 S 174,791 Off Ste Improvements(Off-Site Improvement Contract) S 681,282 S 661,282 Ovmer-Paid by Owner $ 213,420 5 213,420 Owner-Contingency S 669,276 S 669.276 Construction Total: S 18,518,608 S 18,536,606 •Agency Approved Alternative loan-Other source of construction or permanent financing as Is reasonably approved by Count Housing Authority of County of San Bernardino for the purl S 2,013,580 S 2,013,580 Sumeys/Envlronmental S 275,000 S 275,000 Design and Reimbursables S 1.000,000 S 1,000.000 Permlts/Foos/Architoctura Total: $ 3,288,580 $ 3,288,580 221(d)(4)Loan Interest 8 Fees Corolnlc0on Loan Interest - $ 420,000 S 300,000 Odginallon Fee S 106,710 S 76,221 As-bull Appraisal S 25,000 S 25,000 Title 8 Recording $ 12,500 S 12,500 Bridge loan costs $ 400,000 S 400,000 Miser RAD/FHA Processing $ 75.000 XXXXXX)W=)= Construction Interest&Fees Total: S 1,039,210 S 813,721 Other 221(d)(4)Coats Lender Ordered 3rd Party Reports $ 128,000 Credit Enhancement I Application Fee/MIP $ 96,039 We and Recording S 12.580 Permanent Financing Total: $ 236,539 $ - HUD/legal Foos HUD Inspection Fees S 53,355 X)000CX)00=XXX HUD Application Fee $ 32,013 S 32.013 SyndicaUoNHUD Perm Legal S 100,000 )D=X=0=XXX AequkiUorvOrg S 125,000 S 50,000 Legal Fees Total: $ 310,368 $ 82,013 Reserves Marketing/Advenking Expense S 213.420 Common Area Furnishings S S Reserve:NCRC SOctal Service Fee(Capitalized) $ )OOC(XX)00(XXXXX Reserve:NCRC Lease-up S - Reserve:HUD Required Initial Deficit Escrow S 320,130 Reserve:Investor-Operating Reserve(Capitaltzed) S 537,326 XXXXXXX)O=)= Reserve:HUD-Minimum Capital Investment S - XXXXX()OOCO XXX Reserve:Investor-Partnership Fee(Capilaf¢ed) $ Reserve:HUD-Excess Amenities $ - Reserve:investor- $ - )000(X)OOOOOO= Reserves Total: S 1,070,876 S - Other TCAC AppVResrvJMoniloring Fees S 56,937 XXXXXX)COCXXXXX Community Outreach $ 75,000 S 75,000 Soft Costs Contingency $ 40,000 S 20,000 Other S . S Accounting/Audit S 50,000 $ 50.000 Taxes 5 10,000 S 10,000 Insurance s 140,000 5 140.000 Others Total: S 371,937 S 295,000 Developer Costs Developer Overhead/Fee S 2.000,000 $ 1,400,000 Development Consultant S - S Construction Manager S - S - SpecialNeedsConsultant S - S - Developer Costs Total: S 2,000,000 S 1,400,000 Residential Costs Total: S 27,379,116 $ 2015,920 Commercial Costs Total:S . $ Project Costs Total:_$ 27.379,116 S 24,415,920 Ellglblo Basis Total: S 24,415,920 Adjusted Threshold bask S 21,966,013 Ineligible Basis Total: $ - Voluntariy Exluded Eligible Bask Amount Total: 12,611,650 Reduction U Eligible,Threshold Basis Total: S 12.611.650 Additional Reduction Eligible Bask Total: S Basis Reduction Total: $ 12,611,650 Eligible Basis Total Less Bask Reduction: S 11,804,270 Adjusted Threshold Basis Limit Tolat $ 11,804,270 Requested Unadjustod Eligible Basis Total: $ 11,804,270 OCT or ODA Adjustment 130% Adjusted Eligible Bask Total: S 15.345.552 Applicable Fraction 100% Oualified Basis: 5 15,345,552 Bask Reduction Tout 5 Adjusted Oualif ed Basis Total: S 15,345,552 7.70% Annual Federal Credit Total: S 11181,607 10 Years: 10 Maximum Federal Credt Total: 5 11,816.075 Tax Credit Factor: $ 1.09 Estimated Syndication Net Proceeds: S 12,879.521 WFB Community Development Corporation Amount S 12.424.223 CTCAC Recommended Tax Credit Amount 51,139.951 ATTACHMENT 2 REPLACEMENT EXHIBIT C SCHEDULE OF PERFORMANCE Attachment 2-1 1610\08\1670050.2 Va19 Loan Agreement Exhibit C—Schedule of Performance Schedule of Performance Val 9 Apartments 950 N.Valencia Avenue,San Bernardino,92410 Milestone Date Key-Prerequisite Milestone Receive Entitlements/Environmental Clearance 4/14/2014 Submit Entitlements Apply for 9%Tax Credits 7/1/2014 Receive Entitlements Receive 9%Tax Credit Reservation 9/24/2014 Apply for 9%Credits Select Tax Credit Investor 10/20/2014 Receive CTCAC Award Submit plans and applications for plan check and building permit 10/20/2014 Receive CTCAC Award Obtain Approval of Construction Plans March 2015 No later than 180-day CTCAC deadline (March 23,2015) Obtain FHA/HUD Loan Commitment March 2015 No later than 180-day CTCAC deadline (March 23,2015) Final Construction Contract March 2015 No later than 180-day CTCAC deadline (March 23,2015) Pay impact fees and obtain construction permits March 2015 No later than 180-day CTCAC deadline (March 23,2015) Begin Construction March 2015 No later than 180-day CTCAC deadline (March 23,2015) Management Plan May 2016 Complete construction August 2016 100%Occupied November 2016 Permanent Loan Closng December 2016 ESTOPPEL FOR LOAN DOCUMENTS This ESTOPPEL FOR LOAN DOCUMENTS (this "Agreement") is made as of March [_], 2015, by THE CITY OF SAN BERNARDINO (the "City") in favor of VAL 9 HOUSING PARTNERS, L.P. ("Partnership"). RECITALS A. City and Partnership entered into that certain Home Investment Partnerships Act Loan Agreement dated March 3, 2015 as amended by tat certain First Amendment to Loan Agreement dated as of March 17, 2015 (collectively the "Loan Agreement"), that certain Promissory Note Secured by Deed of Trust (the "Note") dated March 17, 2015, that certain Deed of Trust With Assignment of Rents, Security Agreement and Fixture Filing dated March 17, 2015 (the "Deed of Trust"), and that certain Regulatory Agreement and Declaration of Restrictive Covenants dated March 17, 2015 (the "Covenants") (the Loan Agreement, the Note, the Deed of Trust and the Covenants shall be collectively referred to as the "Loan Documents"). In the event of any conflict between the Loan Documents and this Agreement, this Agreement shall control in all instances to the extent of any inconsistencies. All terms not defined herein shall have the meanings set forth in the Loan Documents. B. Partnership intends to construct a 76 unit multifamily affordable housing development (including one manager's unit) on certain property located in San Bernardino, California more particularly described on the Loan Documents (the "Project") and in connection therewith, Partnership has obtained a conditional commitment from Wells Fargo Affordable Housing Community Development Corporation (the "Investor Limited Partner") to invest in the Partnership as the investor limited partner and owner of the 99.99% interest in the Partnership, all in accordance with the terms and conditions set forth in that certain Amended and Restated Agreement of Limited Partnership of the Partnership dated March [_], 2015 (the "Partnership Agreement"). C. The Investor Limited Partner would not agree to invest in the Partnership in accordance with the terms of the Partnership Agreement unless the City executes this Agreement confirming the status of the Loan Documents and the satisfaction of certain matters set forth therein. NOW THEREFORE, for good and adequate consideration, the receipt and sufficiency of which are hereby acknowledged, City hereby certifies to Investor Limited Partner as follows, which certifications shall be effective as of the date of the closing of the equity investment of the Investor Limited Partner(the "Closing Date"). 1. To the beset of the City's knowledge, the Loan Documents are in full force and effect. To the City's actual knowledge, the Partnership is not in default under the Loan Documents, nor does any condition exist which, with notice or the passage of time or both, would constitute a default, breach, event of default, or failure of condition thereunder. 2. The City hereby approves of the Partnership Agreement and all ancillary documents executed in connection therewith (collectively, the "Partnership Syndication 4848-5141-5842.2 Documents") in the forms provided to the City pursuant to the terms of Section 2.6(xvi) of the Loan Agreement and Section 4.13(c)(ii) of the Loan Agreement, including without limitation, the capital contribution schedule set forth in the Partnership Syndication Documents. 3. City acknowledges and agrees that the Partnership has timely completed and submitted an application for the AHP Loan as required under Section 2.9(b) of the Loan Agreement. 4. City hereby approves of the Construction Contract in the form provided to the City pursuant to the terms of Section 3.3(a) of the Loan Agreement. 5. In accordance with the terms of Section 6.5 of the Loan Agreement, the Investor Limited Partner requests a duplicate copy of all notices of default that the City may give to or serve in writing upon the Partnership pursuant to the terms of the Loan Documents. The address for the Investor Limited Partner is set forth in the Loan Documents. 6. Notwithstanding anything to the contrary set forth in the Covenants or any of the Loan Documents, City acknowledges that the Partnership will apply for a property tax exemption for the Project under California Revenue and Taxation Section 214(g), and that the pursuit of and receipt of such tax exemption will not constitute a default under the Loan Documents and does not require any consent of the City. 7. Notwithstanding anything to the contrary set forth in the Loan Documents, City shall not have a security interest or lien in the (i) operating reserve established under the Partnership Agreement or(ii) the Developer Fee to be paid to Developer pursuant to the terms of the Development Fee Agreement (as those terms are defined in the Tax Credit Syndication Documents). 8. The Investor Limited Partner shall be deemed a third party beneficiary of this Agreement. [Signature page on the following page] 2 4848-5141-5842.2 IN WITNESS WHEREOF, the City has caused this Agreement to be executed as of the day and year first above written. CITY: CITY OF SAN BERARDINO, a charter city of the State of California oii2 By: Ile . Parker City Manager ATTEST: Name: I/CV)II 1. Title: APPROVED AS TO FORM: Name: Title: 3 4848-5141-5842.2 ESTOPPEL FOR LOAN DOCUMENTS This ESTOPPEL FOR LOAN DOCUMENTS (this "Agreement") is made as of March [_], 2015, by THE CITY OF SAN BERNARDINO (the "City") in favor of VAL 9 HOUSING PARTNERS, L.P. ("Partnership"). RECITALS A. City and Partnership entered into that certain Home Investment Partnerships Act Loan Agreement dated March 17, 2015 as amended by that certain First Amendment to Loan Agreement dated as of March 17, 2015 (collectively the "Loan Agreement"), that certain Promissory Note Secured by Deed of Trust (the "Note") dated March 17, 2015, that certain Deed of Trust With Assignment of Rents, Security Agreement and Fixture Filing dated March 17, 2015 (the "Deed of Trust"), and that certain Regulatory Agreement and Declaration of Restrictive Covenants dated March 17, 2015 (the "Covenants") (the Loan Agreement, the Note, the Deed of Trust and the Covenants shall be collectively referred to as the "Loan Documents"). In the event of any conflict between the Loan Documents and this Agreement, this Agreement shall control in all instances to the extent of any inconsistencies. All terms not defined herein shall have the meanings set forth in the Loan Documents. B. Partnership intends to construct a 76 unit multifamily affordable housing development (including one manager's unit) on certain property located in San Bernardino, California more particularly described on the Loan Documents (the "Project") and in connection therewith, Partnership has obtained a conditional commitment from Wells Fargo Affordable Housing Community Development Corporation (the "Investor Limited Partner") to invest in the Partnership as the investor limited partner and owner of the 99.99% interest in the Partnership, all in accordance with the terms and conditions set forth in that certain Amended and Restated Agreement of Limited Partnership of the Partnership dated March [_], 2015 (the "Partnership Agreement"). C. The Investor Limited Partner would not agree to invest in the Partnership in accordance with the terms of the Partnership Agreement unless the City executes this Agreement confirming the status of the Loan Documents and the satisfaction of certain matters set forth therein. NOW THEREFORE, for good and adequate consideration, the receipt and sufficiency of which are hereby acknowledged, City hereby certifies to Investor Limited Partner as follows, which certifications shall be effective as of the date of the closing of the equity investment of the Investor Limited Partner (the "Closing Date"). 1. To the beset of the City's knowledge, the Loan Documents are in full force and effect. To the City's actual knowledge, the Partnership is not in default under the Loan Documents, nor does any condition exist which, with notice or the passage of time or both, would constitute a default, breach, event of default, or failure of condition thereunder. 2. The City hereby approves of the Partnership Agreement and all ancillary documents executed in connection therewith (collectively, the "Partnership Syndication 4848-5141-5842.2 Documents") in the forms provided to the City pursuant to the terms of Section 2.6(xvi) of the Loan Agreement and Section 4.13(c)(ii) of the Loan Agreement, including without limitation, the capital contribution schedule set forth in the Partnership Syndication Documents. 3. City acknowledges and agrees that the Partnership has timely completed and submitted an application for the AHP Loan as required under Section 2.9(b) of the Loan Agreement. 4. City hereby approves of the Construction Contract in the form provided to the City pursuant to the terms of Section 3.3(a) of the Loan Agreement. 5. In accordance with the terms of Section 6.5 of the Loan Agreement, the Investor Limited Partner requests a duplicate copy of all notices of default that the City may give to or serve in writing upon the Partnership pursuant to the terms of the Loan Documents. The address for the Investor Limited Partner is set forth in the Loan Documents. 6. Notwithstanding anything to the contrary set forth in the Covenants or any of the Loan Documents, City acknowledges that the Partnership will apply for a property tax exemption for the Project under California Revenue and Taxation Section 214(g), and that the pursuit of and receipt of such tax exemption will not constitute a default under the Loan Documents and does not require any consent of the City. 7. Notwithstanding anything to the contrary set forth in the Loan Documents, City shall not have a security interest or lien in the (i) operating reserve established under the Partnership Agreement or (ii) the Developer Fee to be paid to Developer pursuant to the terms of the Development Fee Agreement (as those terms are defined in the Tax Credit Syndication Documents). 8. The Investor Limited Partner shall be deemed a third party beneficiary of this Agreement. [Signature page on the following page] 2 4848-5141-5842.2 IN WITNESS WHEREOF, the City has caused this Agreement to be executed as of the day and year first above written. CITY: CITY OF SAN BERARDINO, a charter city of the State of California By: Allen . Parker City Manager ATTEST: Name: Cz- Title. APPROVED AS TO FORM: Nam CAJ 3 4848-5141-5842.2 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) COUNTY OF 66kIVAkbI IP ) On © / '� / ,before me, jn ,Notary Public, personally appeared who proved to me on the basis of satisfactory evidence to be the person whose name(aj�is e subscribed to the within instrument and acknowledged to me that6 fey executed the same in �the authorized capacity(yej, and that by is sir-signatureX on the instrumon, o r the entity upon behalf of which the personVacted, executed the instrument. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. KATHERMtE G.HERRERA Commission No. 1945501 �• NOTARY PUBLIC-CALIFORNIA SAN BERNARDINO COUNTY My Comm.Expires JMY 25,1016 N Name: Notary Public RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: Wells Fargo Bank, N.A. Community Lending and Investment 333 S. Grand Avenue, 7th Floor MAC#E2064-075 Los Angeles, California 90071 Attention: Sandra Smith-Martin Loan No.: 1013651 SPACE ABOVE THIS LINE FOR RECORDER'S USE SUBORDINATION AGREEMENT (City Trust Deed and Regulatory Agreement) NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT OR INSTRUMENTS. THIS SUBORDINATION AGREEMENT ("Agreement") is made as of March _, 2015, by and among VAL 9 HOUSING PARTNERS, L.P., a California limited partnership ("Borrower"), the CITY OF SAN BERNARDINO, a municipal corporation ("City"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association ("Bank"). RECITALS A. Pursuant to that certain Building Loan Agreement (the "Loan Agreement") by and between Borrower and Bank, dated as of even date herewith, Bank has agreed to make a loan (the "Bank Loan") to Borrower to enable Borrower to finance the construction of the Waterman Gardens- Valencia 9 Apartments, a 76-unit affordable housing project located in the City of San Bernardino, California(the "Project"), on real property, as described in Exhibit A, owned by Borrower. B. The obligations of Borrower for repayment of the Loan are evidenced by a promissory note (the Note") in the amount of Ten Million Six Hundred Seventy-One Thousand and No/100 Dollars ($10,671,000.00) and are secured by, among other things, a Construction Deed of Trust with Absolute Assignment of Rents, Security Agreement and Fixture Filing (the "Deed of Trust") executed by Borrower, as trustor, for the benefit of Bank, as beneficiary. The Deed of Trust is being recorded concurrently herewith in the Official Records of San Bernardino County, California (the "Official Records"). The Loan Agreement, the Note, the Deed of Trust and all other documents evidencing or otherwise relating to the Loan are collectively referred to herein as "Loan Documents". C. City has agreed to make a loan in the principal amount of $1,500,000.00 (the "City Loan")to Borrower. The City Loan is being made pursuant to that certain Home Investments Partnership Program (HOME) Loan Agreement dated , 2015 (the "City Loan Agreement") by and among Borrower, and City. The City Loan is evidenced by a promissory note in the amount of $1,500,000.00 with (the "City Note"), the Borrower's obligations under which are secured by a Deed of Trust With Assignment of Rents, Security Agreement, and Fixture Filing (the "City Deed of Trust"), to be recorded in the Official Records. In addition, in connection with the City Loan, on or about even date herewith, Borrower and City have executed that certain Regulatory Agreement and Declaration of Restrictive Covenants (the "City Regulatory Agreement"), to be recorded in the Official Records. Both the City Loan Agreement and the City Regulatory Agreement impose certain restrictions upon the Property. The City Loan Agreement, the City Note, the City Deed of Trust and the City Regulatory Agreement are collectively referred to herein as the"City Loan Documents". SMRH:436639190.4 -1- D. The Bank Loan and the City Loan shall be referred to collectively in this Agreement as the "Loans", and each individually as a "Loan". The Loans are being made to Borrower to finance the construction of an affordable housing project (the "Improvements") on that certain real property (the "Property") in the City of San Bernardino, County of San Bernardino, State of California, which is legally described on Exhibit A attached hereto and incorporated herein by this reference. E. As a condition to Bank making the Bank Loan secured by the Deed of Trust, Bank requires that the Deed of Trust be unconditionally and at all times remain a lien or charge upon the Property, prior and superior to all the rights of City under its deed of trust and that City specifically and unconditionally subordinate its deed of trust to the lien or charge of Deed of Trust. F. City and Borrower agree to the subordination in favor of Bank. AGREEMENT THEREFORE, for valuable consideration and to induce Bank to make the Loan, City and Borrower hereby agree for the benefit of Bank as follows: 1. Subordination. Bank's Deed of Trust securing the Note in favor of Bank, and any modifications, renewals or extensions thereof, together with Bank's right to repayment of the Bank Loan and Bank's rights under any other Loan Documents, shall unconditionally be and at all times remain a lien or charge on the Property prior and superior to the City Deed of Trust, the City Regulatory Agreement, the City Loan Agreement, the repayment of the City Loan and the City's rights under the City Regulatory Agreement or the City Loan Agreement (notwithstanding any language to the contrary contained in the City Regulatory Agreement or the City Loan Agreement) or under any other City Loan Documents subject to the terms of this Agreement; and 2. Entire Agreement. This Agreement shall be the whole agreement with regard to the subordination of the City Deed of Trust, the City Regulatory Agreement, the City Loan Agreement, the repayment of the City Loan and the City's rights under the City Regulatory Agreement, the City Loan Agreement and any of the other City Loan Documents to the lien or charge of the Deed of Trust, together with Bank's right to repayment of the Bank Loan and Bank's rights under any other Loan Documents. 3. Application of Proceeds. Bank, in making disbursements pursuant to the Loan Documents, is under no obligation or duty to, nor has Bank represented that it will, see to the application of such proceeds by the person or persons to whom Bank disburses such proceeds, and any application or use of such proceeds for purposes other than those provided for in such agreement or agreements shall not defeat the subordination herein made in whole or in part; and 4. Consents. City and Bank respectively declare, agree and acknowledge that: (a) City consents to and approves (i) all provisions of the Loan Documents submitted to City prior to the execution of this Agreement; (ii) all other agreements between Borrower and Bank for the disbursement of the proceeds of the Bank Loan submitted to City prior to the execution of this Agreement; and (b) City intentionally and unconditionally waives, relinquishes and subordinates the lien or charge of the instruments securing the City Loan, in favor of the Bank's liens or charges of the Deed of Trust and other Loan Documents upon the Property and Improvements as referred to in this Agreement and understands that in reliance upon, and in consideration of, such waiver, relinquishment and subordination, specific loans and advances are being and will be made, and specific monetary and other obligations are being and will be entered into which would not be made or entered into but for said reliance upon this waiver, relinquishment and subordination. SMRH:436639190.4 -2- 5. Rights Upon Default. Notwithstanding anything to the contrary contained in this Agreement, Bank hereby agrees as follows: (a) Upon the occurrence of an event of default under the Loan Documents, Bank shall promptly notify City at the address set forth below of the occurrence of such event of default, which notification shall be provided to City contemporaneously with the delivery to Borrower of any notice of default under the Loan Documents; (b) City shall have the right (i)to receive any notices of default under the Loan Documents and (ii)to cure any default by the Borrower under the Loan Documents within ninety (90) days after its receipt of such notice of default under the Loan Documents; (c) After a default under the Loan Documents, if City cures the default on a timely basis within the cure periods which apply to the Borrower pursuant to the Loan Documents, Bank will not exercise any right it may have to accelerate the Note by reason of the default so cured. This paragraph 5(c) shall not be deemed to prohibit Bank from accelerating the Note by reason of a later uncured default; and (d) If City forecloses its deed of trust or accepts a conveyance of the Property in lieu of such foreclosure, Bank shall have the right to declare a default under the "due-on-sale" provisions contained in the Loan Documents and accelerate the indebtedness secured thereby and implement remedies thereunder, unless Bank approves of the transfer of the Property to the purchaser at foreclosure of the City Deed of Trust or the recipient of a conveyance of the Property in lieu of such foreclosure, which approval may be granted, conditioned or withheld in Bank's sole discretion. 6. Limited Standstill. City declares, agrees, and acknowledges that it will not, without 90 days' prior written notice to Bank following written notice of default under the City Loan Documents: (i) commence any action to foreclose or exercise any power of sale under the City Deed of Trust or the City Loan Documents; (ii) accept a deed or assignment in lieu of foreclosure for the Property or any part or portion thereof; (iii) take possession or control of the Property, or collect or accept any rents from the Property; (iv) seek or obtain appointment of a receiver for the Property; (vi) take any action that would terminate any leases or other rights held by or granted to or by third parties with respect to the Property; (vi) initiate any petition for bankruptcy, assignment for the benefit of creditors or creditor's agreement with respect to the Borrower other than as provided in the City Loan Documents; or (vii) take any other enforcement action against the Property or any part or portion thereof. City may, with notice to, but without the consent of the Bank, take such other enforcement action as City shall determine, including, but not limited to, action for specific performance of the obligations of the Borrower under the City Loan Documents. In addition, City may seek and obtain the appointment of a receiver reasonably acceptable to the Bank for the purpose of assuring compliance with the City Loan Documents. 7. Subrogation. Neither City nor its respective successors and assigns, shall acquire by subrogation, contract or otherwise any lien upon any other estate, right or interest in the Property or Improvements (including without limitation any which may arise in respect to real estate taxes, assessments or other governmental charges) which is or may be prior in right to Bank's Deed of Trust or other Loan Documents, or any extension, consolidation, modification or supplement thereto, unless within sixty (60) days following written notice of such intention by City, or its successors or assigns, the then holder of the Deed of Trust or security instrument shall fail or refuse to purchase or acquire by subrogation or otherwise such prior lien, estate, right or interest, or shall fail within such period to commence and thereafter proceed diligently to purchase or acquire the same. 8. Insurance and Condemnation Proceeds. The determination as to whether proceeds of policies of insurance covering the Property or awards from proceedings in eminent domain may be released for application to costs of restoration of the Property and Improvements shall be made by the Bank as the senior-most Lender in the order of lien priority. If not so applied, the proceeds of all policies of insurance covering the Property or Improvements or any awards from proceedings in eminent domain or condemnation relating to the Property shall be applied toward each Loan in the order of lien priority SMRH:436639190.4 -3- until such Loan is paid in full. In the event that, following any such application and disposition of the insurance proceeds, condemnation award or other compensation, resulting in full repayment of all indebtedness secured by the Loan Documents, any balance remains, and the Bank has no further obligation to disburse any portion of the Bank Loan, then such excess shall be made payable to the junior lender next in line following the order of lien priority until the excess insurance proceeds are exhausted. 9. Restoration. If the legal holder of the Loan Documents shall at any time release to Borrower any such insurance proceeds or condemnation award for the purpose of restoration of the Property or Improvements, such release shall not be deemed to be an additional advance under the Bank's Loan Documents nor shall such release otherwise be deemed to be in violation of any restriction upon any amount permitted to be secured by the Bank's Loan Documents. 10. Further Assurances. So long as the Bank's Loan Documents shall remain a lien upon the Property or Improvements or any part thereof, City and its respective successors or assigns, shall execute, acknowledge and deliver, upon the Bank's demand, at any time or times, any and all further subordinations, agreements or other instruments in recordable form reasonably sufficient for that purpose or that Bank, its successors or assigns may hereafter reasonably require for carrying out the purpose and intent of this Agreement, so long as such further instruments do not contain provisions inconsistent with the terms and conditions of the City Loan Documents. 11. Confirmation. City hereby confirms to and agrees with Bank, and Bank hereby confirms to and agrees with City, as to the following: (a) Each Lender has delivered to each other Lender, true and complete copies of its documents, and such documents have not been amended, modified or supplemented in any way. (b) To the City's knowledge, there are no defaults (or conditions or events which, with notice or the passage of time or both, would constitute a default), known to each Lender as of the date hereof, by Borrower under its obligations set forth in such Lender's documents. (c) No Lender shall enter into any agreement to materially amend or modify the terms of any of such Lender's documents without notice to and the consent of each other Lender, which consent shall not be unreasonably withheld. (d) Each Lender shall deliver to each other Lender, at the address indicated in Section 12 below, copies of any notices of default delivered to Borrower in connection with each respective Lender's documents. 12. Notices. All notices of any kind which any party hereto may be required or may desire to serve on the others shall be deemed served upon personal delivery, or, if mailed, upon the first to occur of receipt or the expiration of 72 hours after deposit in United States Postal Service, certified mail, return receipt requested, postage prepaid, and addressed as follows: If to Bank: Wells Fargo Bank, N.A. Community Lending and Investment 333 S. Grand Avenue, 7th Floor MAC# E2064-075 Los Angeles, California 90071 Attention: Sandra Smith-Martin Loan No.: 1013651 If to City: City of San Bernardino 300 North "D" Street San Bernardino, CA 92401 Attention: Allen Parker, City Manager SMRH:436639190.4 -4- If to Borrower: Val 9 Housing Partners, L.P. c/o National Community Renaissance of California 9421 Haven Avenue Rancho Cucamonga, CA 91730 Attention: Executive Director 13. Modification and Release. Bank may, without affecting the subordination of the City Loan Documents: (a) release or compromise any obligation of any nature with respect to the Loan Documents; (b)release its security interest in, or surrender, release or permit any substitution or exchange of all or any part of any properties securing repayment of the Note; (c) retain or obtain a security interest in any property to secure payment of the Note; or (d) modify, amend, defer, extend, consolidate or supplement any of the original or subsequent Loan Documents; provided, however, that Bank shall not increase the principal amount of the Note or increase the interest rates under the Note without the prior written consent of City. 14. Priority of Payments. In the event of any judicial or nonjudicial sale of the Property or any of the collateral securing the Bank Loan, or any portion thereof, pursuant to the Loan Documents, or of any liquidation or dissolution of Borrower, or of any execution sale, receivership, insolvency, bankruptcy, liquidation, readjustment, reorganization, or similar proceeding relating to Borrower or any portion of its property, all amounts due under the Loan Documents shall first be paid in full according to the order of lien priority before any payment is made upon or in respect of the obligations under the City Loan Documents. 15. Application of Sections. The provisions of Sections 13 and 14 above are solely for the purpose of defining the relative rights of Bank on the one hand, and City on the other hand, against Borrower and its property and nothing herein shall impair, as between (i) Borrower and Bank and (ii) Borrower and City, the obligations of Borrower under such documents. 16. Event of Default. The parties acknowledge that any default under the City Loan Documents (other than defaults that are timely cured by Borrower or waived by City) shall constitute a default under the Loan Documents and any default under the Loan Documents (other than defaults that are timely cured by Borrower or waived by Bank) shall constitute a default under the City Loan Documents. 17. Counterparts. This Agreement may be executed in counterparts, each of which, when taken together, shall constitute one original Agreement. NOTICE: THIS AGREEMENT CONTAINS PROVISIONS WHICH ALLOW THE PERSON OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN LOANS WHICH MAY BE OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT OR INSTRUMENTS AND THE PROCEEDS OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT OF THE PROPERTY. IT IS RECOMMENDED THAT, PRIOR TO THE EXECUTION OF THIS AGREEMENT, THE PARTIES CONSULT WITH THEIR ATTORNEYS WITH RESPECT HERETO. SMRH:436639190.4 -5- BORROWER: VAL 9 HOUSING PARTNERS, L.P., a California limited partnership By: Val 9 MGP, LLC, a California limited liability company Its General Partner By: National Community Renaissance of California, a California nonprofit public benefit corporation Its Sole Member By: Tracy Thomas Chief Financial Officer SMRH:436639190.4 S-1 BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION a national banking association By: Christian M. von Merkatz Assistant Vice President SMRH:436639190.4 S-2 City: CITY OF SAN BERNARDINO, a municipal corporation By: �- AII . Parker City Manager ATTEST: Name: C� �' /I� Title: APPROVED AS TO FORM: Name: c..o SMRH:436639190.4 S-3 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California ) County of ) On before me, a Notary Public, personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature SMRH:436639190.4 Acknowledgment EXHIBIT A DESCRIPTION OF PROPERTY All that certain real property located in the City of San Bernardino, County of San Bernardino, State of California, described as follows: A PORTION OF LOT 7, BLOCK 42 OF RANCHO SAN BERNARDINO ACCORDING TO THE OFFICIAL MAP RECORDED IN BOOK 7, PAGE 2, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE NORTH LINE OF NINTH ST. 1,774.70 FEET EAST FROM THE CENTER LINE OF WATERMAN AVENUE; THENCE NORTHERLY PARALLEL TO THE WEST LINE OF SAID LOT 7 A DISTANCE OF 602.75 FEET; THENCE EASTERLY PARALLEL TO THE SOUTH LINE OF SAID LOT 7 TO A POINT 50.00 FEET FROM THE EAST LINE OF SAID LOT 7; THENCE SOUTHERLY PARALLEL TO THE SAID EAST LINE OF LOT 7 TO THE SOUTH LINE OF SAID LOT 7; THENCE WESTERLY ALONG THE SAID SOUTH LINE OF LOT 7 OF THE TRUE POINT OF BEGINNING. SAID LAND IS ALSO SHOWN AS PARCEL 1 OF CERTIFICATE OF COMPLIANCE FOR LOT LINE ADJUSTMENT NO. 88-30 RECORDED SEPTEMBER 28, 1989 AS INSTRUMENT NO. 89-365668 OF OFFICIAL RECORDS. APN: 147-191-12 Exhibit A SMRH:436639190.4 -1- EXHIBIT A LEGAL DESCRIPTION OF THE PROPERTY A-1 EXHIBIT A LEGAL DESCRIPTION THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA,AND IS DESCRIBED AS FOLLOWS: A PORTION OF LOT 7,BLOCK 42 OF RANCHO SAN BERNARDINO ACCORDING TO THE OFFICIAL MAP RECORDED IN BOOK 7, PAGE 2, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE NORTH LINE OF NINTH ST. 1,774.70 FEET EAST FROM THE CENTER LINE OF WATERMAN AVENUE; THENCE NORTHERLY PARALLEL TO THE WEST LINE OF SAID LOT 7 A DISTANCE OF 602.75 FEET; THENCE EASTERLY PARALLEL TO THE SOUTH LINE OF SAID LOT 7 TO A POINT 50.00 FEET FROM THE EAST LINE OF SAID LOT 7; THENCE SOUTHERLY PARALLEL TO THE SAID EAST LINE OF LOT 7 TO THE SOUTH LINE OF SAID LOT 7;THENCE WESTERLY ALONG THE SAID SOUTH LINE OF LOT 7 OF THE TRUE POINT OF BEGINNING. SAID LAND IS ALSO SHOWN AS PARCEL 1 OF CERTIFICATE OF COMPLIANCE FOR LOT LINE ADJUSTMENT NO. 88-30 RECORDED SEPTEMBER 29, 1989 AS INSTRUMENT NO. 89-365668 OF OFFICIAL RECORDS. APN(s): 147-191-12 EXHIBIT B APPROVED DEVELOPMENT BUDGET B-1 0 * -1 to -1 U) O Ch 0 D a 0 0 0 0 m0 0- 000c) * 0 � 20 3 m (D 0 0 ; s C C w (D 0 0 �' (D s CD C C C Do- o o W v CO)m o 0 o Cl) 00)i v N m 7 � W W = O n a m 0 W W = O n O � 0 N W O N i 3 A ."� N ' ' W (fl -0 A Z Z 0 22mc or3 2Sm� c or CO) 0 w D K 0 � m ai r c7 = C C Cu m M 0 Z °° 0 0 00 R1 7 CD O m -I 00 .ON+ Z N CD CD CD r l< l< 0 D D 0 3 o Q (0n ? a a CD N CD D D N 0 O N (D (p N 0 3 O O '< CL v � M o 0 o C 9 CL Z � 0 N 0m lu (D CD � d 0 O n N 7 O 69 69 69 64 EA V W CD Of o N 69 69 N 63 69 69 6D 69 00 O V <0 6 N O V Nom_ OD N On CL W co OD O (T A O W N co O cn 0) A 0) C O N CD O V v 800N -4 V A - oO W 00 -4 C7N 7 r7 3 pp_O O O A tD 0) O O O ) .N 0 a 0 p� ico 000N O i C0000 W 00 O M — O O i C.0 O O O N O (D W O O O W O O W O O O W O Cn O Z = O N (o "� 0 D (n W < m CD - n 92 N C N 0T ;70 E nDDy 0 ?t n D > W E 5' o o M Si �' Co CD CD o o m (o - m m a w < 3 CO - sv < :3 U) a 0 co. m C. om0 E 0' 0 .a o v°, N y 0 y o v°, � Nn c ' -own o y N �, 0 n N Z N N CD o 0 CD w v in CD 0 o (D m CO o m 0 o m C o (D U) `Z) Z CD CD CD Qon � N 0 -1 j 1p 0 0 T 0 CL (D CD 03' CD m m m � Z v, co (n 3 cs? y cn 0 0 c Z n 61%cn cfl cfl to 69 va vj di 6)69 69 63 6) Q) 6) 69 D r O N d _ _ r Q. V N W W V s 0o W (7 (n W A 0 0 Cn Cn N Cn W A O J N 0n (n N (n C V �l O A W OD N V J O (0 A W 00 N � z CO O O O O 0) OD Cn 0 00 O CO O O O OD Cn = i 0 (b O O O (n O i 0 OD (n A O 0) Cn O M 0 i Cn -,I O O O 00 O i Cn J (0 O O O OD O Z Of A 0) (D O 0) (D 0 0) A 0) -1 W O 0) 0 0 O O 40 b')Ui 69(0 bi 69 69 69 69 69 V)69 fA 69 EA 69 lC 0 D m o S ca r� W _ N A A O N A A O O 00 A 0) �I W W 0) O OD A Na W J W W 0) C Sv 0 NCAO W oo N0 N (AOA 000 0 N CO t71 (n (O � OOVO V1 (n (O CONO O J Cl -4 O N (D O (A Cn W — W N (0 O Cn i (n W — OD v ") m •► M ca e� X_ N i i 0 0) � o rn � m O (n W -4 � --4 W O CO W (0 -4 O (4 C CO N O w J O CO Z i O Cp O V O N O 00 -• A 0) -4 O N en 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 DEVELOPMENT COSTS Date:3113115 Project Name: Waterman Gardens-Valencia 9 Project Address: San Bernardino,CA Developer: NCRC/TCC/HACSB/HPI Number of Dwelling Units: 76 Gross Building Area: 81,378 CURRENT Per Unit Per Sq-Ft % 1.Acquisition Purchase Price $ 500,000 $ 6,579 $ 6 1.83% Closing Costs $ 25,000 $ 329 $ 0 0.09% Acquisition Cost Total: $ 525,000 $ 6,908 $ 6 1.921 2.Fees/Permits&Studies $ - Study:Surveys $ 37,500 $ 493 $ 0 0.14% Environmental Studies(soils,traffic,etc.) $ 37,500 $ 493 $ 0 0.14% Construction:Labor Compliance $ 100,000 $ 1,316 $ 1 0.37% Construction:Special Inspections $ 100,000 $ 1,316 $ 1 0.37% Fee:Building and Permit $ 2,013,580 $ 26,494 $ 25 7.35% Fee:Architecture&Engineering $ 1,000,000 $ 13,158 $ 12 3.65% Fees/Permits&Studies Cost Total: $ 3,288,580 $ 43,271 $ 40 12.01% 3.Direct Construction(Prevailing Wage) $ Demolition $ - $ - $ - 0.00% Residential Construction $ 13,201,212 $ 173,700 $ 162 48.22% Joint-Use Community Center/Leasing Office/Amenities $ - $ - $ - 0.00% Onsite Improvements $ 1,533,733 $ 20,181 $ 19 5.60% Landscaping/Common Areas $ - $ - $ - 0.00% Offsite Improvements $ $ $ 0.00% Contractor's Contingency/Undisbursed Funds $ $ $ 0.00% Subtotal: $ 14,734,945 $ 193,881 $ 181 53.82% Contractor's Overhead&Profit $ 1,178,796 $ 15,510 $ 14 4.31% Subtotal: $ 15,913,741 $ 209,391 $ 196 58.12% General Conditions $ 884,097 $ 11,633 $ 11 3.23% Performance Bond $ 174,791 $ 2,300 $ 2 0.64% Subtotal: $ 16,972,628 $ 223,324 $ 209 61.99% Off Site Improvements(Off-Site Improvement Contract) $ 681,282 $ 8,964 $ 8 2.49% Owner-Contingency(HUD Working Capital Reserve) $ 213,420 $ 2,808 $ 3 0.78% Owner-Contingency(Non HUD Wkg Cap Reserve+Offsite) $ 669,276 $ 8,806 $ 8 2.44% Direct Construction Cost Total: $ 18,536,606 $ 234,938 $ 219 65.22% 4.Indirect Construction $ - Developer's Fee $ 1,033,725 $ 13,602 $ 13 3.78% Deferred Developer Fee $ 966,275 $ 12,714 $ 12 3.53% Subtotal: $ 2,000,000 $ 26,316 $ 25 7.30% Builders Risk/Liability Insurance $ 140,000 $ 1,842 $ 2 0.51% Real Estate Taxes(Portion in HUD Working Capital) $ 10,000 $ 132 $ 0 0.04% Legal:NCORE Legal $ 125,000 $ 1,645 $ 2 0.46% Legal:PNC Lender Legal $ 100,000 $ 1,316 $ 1 0.37% Accounting/Inspection $ 50,000 $ 329 $ 1 0.18% Indirect Contingency-Relocation Parcel 1A Conversion $ 75,000 $ 987 $ 1 0.27% Indirect Contingency-General Uses $ 40,000 $ 526 $ 0 0.15% Indirect Construction Cost Total: $ 2,540,000 $ 33,092 $ 31 9.28% 5.Rent Up/Marketing $ - HUD Working Capital-Mkt/Adv/FFE(112 of 4%of Loan) $ 213,420 $ 2,808 $ 3 0.78% Non-HUD Lease-up $ - $ - $ - 0.00% HUD Initial Oper Deficit Escrow/Interest(3%of Loan Amt) $ 320,130 $ 4,212 $ 4 1.17% Common Area Furnishings/FFE(In HUD WC) $ - $ - $ - 0.00% WFB/Non-HUD Operating Reserve(6 Months) $ 537,326 $ 7,070 $ 7 1.96% Rent Up/Marketing Cost Total: $ 1,070,876 $ 14,090 $ 13 3.91% 6.Financing Costs $ - 221(d)(4)Construction Period Loan Interest(23 months) $ 420,000 $ 5,526 $ 5 1.53% PNC 221(d)(4)Loan Fees $ 106,710 $ 1,404 $ 1 0.39% Appraisal/Market Study $ 25,000 $ 329 $ 0 0.09% HUD Application Fee(.3%of loan amount) $ 32,013 $ 421 $ 0 0.12% HUD Inspection Fee (.5%of loan amount) $ 53,355 $ 702 $ 1 0.19% HUD MIP(.9%of loan amount) $ 96,039 $ 1,264 $ 1 0.35% Lender Ordered 3rd Party Reports/Tax Credit Legal $ 128,000 $ 1,684 $ 2 0.47% Tax Credit Allocation Fee $ 56,937 $ 749 $ 1 0.21% Wells Bridge Loan Costs&Interest(23 months) $ 400,000 $ 5,263 $ 5 1.46% Misc.RAD/FHA Processing Casts(Recap Advisors) $ 75,000 $ 987 $ 1 0.27% Title and Recording(Constr.-1 OK/Perm.-5K) $ 25,000 $ 329 $ 0 0.09% Financing Cost Total: $ 1,418,054 $ 18,659 $ 17 5.18% Development Cost $ - Subtotal Development Cost $ 26,854,116 $ 344,050 $ 322 98.08% Subtotal Acquisition Cost $ 525,000 $ 6,908 $ 6 1.92% Development Cost Total: $ 27,379,116 $ 350,958 $ 328 100.00% Construction estimates are based on prevailing wage and subject to change and may be revised due to entitlement issues,changes in construction standards, architectural and engineering requirements,and other unforseen circumstances. O A W N ? A A A A A A A W W W W W N N N N N A co m m co co co co co co Cn m co m m v m m co co co co co Z m m m m m m (D m m m m m m m m m m m m m m m m m c z CD o n to v 0 m ao v • a c ° c a =v r m m CL m D C o a m = 'o ... .. m m OD -4 Z CO O)o m m CD x x ao (7 m m m 3 3 0) N N A W O) N N A W T N m A Cl) O O N A W 0) O O o N 0 O O O N O O O O N O 1 0) 0 N co 0 0 0 0 0 o 0 o v o ca o 0 0 0 o to o 0 o e o n o.C) C 9 C C ? c 5 Q Q Q =- N O O l l O O O O D O 0) 2 m v O W O o 0 N N N O W W O W O ao N A O O T A O 3 A C m Dt O m W O 0 N A _ (T) N O N fA!A EA 69 69 EA N fA 6N E9 69 EA fA fA fA fA fA fA(A fA d A D _ OJ J �I D7 co O 41 T W -I O) 0)W T 01 N A N W _ D N A A 0)(O W O Ou O Q) W 00 W N N O pp N OD A W Q) A N 0) 0) co W (D W N N v 8 N J N 00 00 O N Z EA bA fA 69 E9 fA b)fA fA 6A 09 fA fA 60 ffl fA fA U)fA fA 0 Z D v v m ' MffM cowco00W D W W W-co W NW CO N ONO NN CO N N N N N N W OD 00 00 W W O A 0) O O 00 O N N N N N O O O O O N N N N N fA fA 69!A fA N fA fA 6A fA EA fA 161 V)4A d)69 EA 69 69 • ch • DN N N N N 0 j j j W W OD co O m W W W W W W O O O O O m (D (D O co co A A A A A N m N N 0) .Tl m O W 01 O . OD. DO . A A A A A . 00 W.QD = EA 69 d EA fA 6A fA 69 fA 6H fA EA N 16.164 EA fA 69 6 fA 0 m 0 0 Z o O 00 CO v(n co -I j A co O) Q) A w N N W 0) 00 OD O N A OO J N OO W Q) ID A A W J .+ W OD v ID O co O W U)O W CD(D N 2 0 _ M 0 69,69 -to io io o)o) o)o) O 0 0 O (O to 00 W W 'D N N N N N N N N U O O O O D �:,4 �4 CO CD (0 to CD W W W W W oD OD CO 00 00 00000 0 0 0 0 0 00000 0 0 0 0 0 v O v 00000 O O O O O 00000 0 0 0 0 0 H 6H fA 69 fA N f!)FA fA 69 fA 69 fA fA d2 69 fA 69 fA fA N N N N N — (A CO w w W (D (D co(D w W (.J W W W O O O O O OD 00 co w OD N O) N N N w co m W OO au aD ao W O A A A A A -Cl. A A A -Cl W Cl)W W W CO (O (D (D(D A A A A A co 00 co w 00 0) ()O) 0) (D O) (3) 0) 0)(3) 00000 O O O O O O O O 0 0 O O O O O fA 69 69 69 FA EA 49 6A fA fA fA d)69 FA fA fA fA lA 69 69 0 N N W • W N W W W W W 88888 w w w 00 w 47 W O) T Q7 N N N N D) OD CO OD 00 CO W W W W W fA N fA fA fA 69 6A fA N fA fA N[A ffl E9 d)EA fA EA b) • -CO 00 W 00 W Q) T Q7 01 Q7 W W W W W 0 0'o-0-0 00000 D) 0)N m N O O O O O N N) N N N 00000 O O O O O CO (D(O ID CD 00000 0 0 0 0 0 00000 0 0 0 0 0 00000 0 0 0 0 0 00000 0 0 0 0 0 (A y. Vi fA fA 6A EA a 69 EA fA fA 69 a 69 69 69 fA E9 df 6A 64 EA EA 69 • N W N N N A N W (D 8 N N N O N ((,,�� 0) N J A pAp A W O1 (D O J O A N A A N w A (O N 00 N(1) m O w A? A (D 00 A A O W 0) O 00 O O 000 W N w 00 A w w O O O . . . 00 O 0 0 0 0 O 0) 0) O W O O N OPERATING EXPENSES Date:3/13/15 Project Address:San Bernardino,CA Developer:NCRC/TCC/HACSB/HPI Number of Dwelling Units:76 Gross Building Area:81,378 1.Management Current Per Month PUPY Percent Management Fee $ 48,336 $ 4,028.00 $ 636.00 9.11% Management Total: $ 48,336 $ 4,028.00 $ 636.00 9.11° 2.Administration Marketing/Credit Checks $ 2,025 $ 168.75 $ 26.64 0.38% Audit(Reznick)/File Mgmt(Compliance) $ 16,585 $ 1,382.08 $ 218.22 3.13% Legal $ 2,000 $ 166.67 $ 26.32 0.38% Office Expenses/MISC $ 28,184 $ 2,348.67 $ 370.84 5.31% Administration Total: $ 48,794 $ 4,066 $ 642 9.20% 3.Salaries and Benefits Manager/Asst.Manager $ 50,000 $ 4,166.67 $ 657.89 9.43% Main Personnel $ 32,000 $ 2,666.67 $ 421.05 6.03% Leasing Commissions $ 1,000 $ 83.33 $ 13.16 0.19% Payroll Txs,Ins&Wkr.Comp. $ 43,336 $ 3,611.33 $ 570.21 8.17% Salaries and Benefits Total: $ 126,336 $ 10,528.00 $ 1,662.32 23.82% 4.Maintenance Supplies $ 7,363 $ 613.58 $ 96.88 1.39% Repairs Contract $ 1,050 $ 87.50 $ 13.82 0.20% Pest Control $ 2,400 $ 200.00 $ 31.58 0.45% Fire Prevention $ 4,025 $ 335.42 $ 52.96 0.76% Security Systems $ 3,000 $ 250.00 $ 39.47 0.57% Elevator $ 7,000 $ 583.33 $ 92.11 1.32% Misc. $ 8,350 $ 695.83 $ 109.87 1.57% Pool(Future CAM for WG Facilities) $ 6,000 $ 500.00 $ 78.95 1.13% Maintenance Total: $ 39,188 $ 3,265.67 $ 515.63 7.39% 5. Utilities Not Paid by Tenants Trash Removal $ 12,936 $ 1,078.00 $ 170.21 2.44% Electricity $ 25,500 $ 2,125.00 $ 335.53 4.81% Water/Sewer $ 53,931 $ 4,494.25 $ 709.62 10.17% Gas $ 8,400 $ 700.00 $ 110.53 1.58% Utilities Total: $ 100,767 $ 8,397.25 $ 1,325.88 19.00% 6.Insurance Prop&Liab Insurance($29,989) $ 29,898 $ 2,491.50 $ 393.39 5.64% Insurance Total: $ 29,898 $ 2,491.50 $ 393.39 5.64% 7.Tax and Reserves Real Estate Taxes $ 5,000 $ 416.67 $ 65.79 0.94% Replacement Reserves $ 41,800 $ 3,483.33 $ 550.00 7.88% Tax and Reserves Total: $ 46,800 $ 3,900.00 $ 615.79 8.82% 8.Other Security Patrol $ 30,000 $ 2,500.00 $ 394.74 5.66% Grounds Contract $ 20,425 $ 1,702.08 $ 268.75 3.85% Turn Over $ 3,000 $ 250.00 $ 39.47 0.57% Support Services $ 21,600 $ 1,800.00 $ 284.21 4.07% Payment to HACSB:Voucher Admin $ 9,900 $ 825.00 $ 130.26 1.87% Fee-County HOME Monitoring Fees($35 PL $ 140 $ 11.67 $ 1.84 0.03% Fee-City HOME Monitoring Fees($35 PUPY $ 245 $ 20.42 $ 3.22 0.05% Fee-Combined HOME Physical Inspection 3 $ 5,000 $ 416.67 $ 65.79 0.94% Other Total: $ 90,310 $ 7,525.83 $ 1,188.29 17.03% Operating Expenses Total: $ 530,429 $ 44,202.42 $ 6,979.33 100.00% Per Unit/Per Year $ 6,979.33 Excluding Tax,Reserves&Svcs $ 462,029 $ 6,079.33 $ 6,079.33 Per Unit/Per Year $ 6,079 TAX CREDIT ESTIMATE Date:3113/15 Project Name: Waterman Gardens-Valencia 9 Project Address: San Bernardino,CA Developer: NCRC/TCC/HACSB/HPI Number of Dwelling Units: 76 Gross Building Area: 81,378 Project Costs Basis-9%ACP Land Cost/Acquisition Land Cost $ 500,000 XXXXXXXXXXXXXX LegaVBroker Fees $ 25,000 XXXXXXXXXXXXXX Demolition $ - XXXXXXXXXXXXXX Land Cost/Acquisition Total: $ 525,000 S Construction Residential Construction:New $ 13,201,212 $ 13,201,212 Residential Construction: $ - $ - Onsiteimprovements $ 1,533,733 $ 1,533,733 Other $ - $ - Ol ite Improvements $ - $ Toxic Abatement $ - $ - Contractor's Overhead 8 Proff $ 1,178,796 $ 1.178.796 General Conditions $ 884,097 $ 884,097 Performance Bond $ 174,791 $ 174,791 Off Site Improvements(Off Site Improvement Contract) $ 681,282 $ 681,282 Owner-Paid by Owner $ 213,420 $ 213,420 Owner-Contingency $ 669,276 $ 669,276 Construction Total: $ 18,536,606 $ 18,536,606 Permits/Fees/Architecture Bldg Fees/Permits $ 2,013,580 $ 2,013,580 Surveys/Environmental $ 275,000 $ 275,000 Design and Relmbursables $ 1,000,000 $ 1,000,000 Permits/Fears/Architecture Total: $ 3,288,580 $ 3,288,580 221(d)(4)Loan Interest&Fees Construction Loan Interest $ 420,000 $ 300,000 Origination Fee $ 106,710 $ 76,221 As-built Appraisal $ 25,000 $ 25,000 Tdle 8 Recording $ 12,500 S 12,500 Bridge loan costs $ 400,000 $ 400,000 Misc.RAD/FHA Processing $ 75,000 XXXXXXXXXXXXXX Construction Interest 8 Fees Total: $ 1,039,210 $ 813,721 Other 221(d)(4)Costs Lender Ordered 3rd Party Reports $ 128,000 XXXXXXXXXXXXXX Credit Enhancement/Application Fee/MIP $ 96,039 XXXXXXXXXXXXXX Title and Recording $ 12,500 XXXXXXXXXXXXXX Permanent Financing Total: $ 236,539 $ - HUD/Legal Fees HUD Inspection Fees $ 53,355 XXXXXXXXXXXXXX HUD Application Fee $ 32,013 $ 32,013 Syndication/HUD Perm Legal $ 100,000 XXXXXXXXXXXXXX Acquisition/Org $ 125,000 $ 50,000 Legal Fees Total: $ 310,368 $ 82,013 Reserves Marketing/Advertising Expense $ 213,420 XXXXXXXXXXXXXX Common Area Furnishings $ - $ - Reserve NCRC Social Service Fee(Capital¢ed) $ - XXXXXXXXXXXXXX Reserve NCRC Lease-up $ - XXXXXXXXXXXXXX Reserve:HUD Required Initial Deficit Escrow $ 320,130 XXXXXXXXXXXXXX Reserve:Investor-Operating Reserve(Capitalaed) $ 537,326 XXXXXXXXXXXXXX Reserve:HUD-Minimum Capital Investment $ - XXXXXXXXXXXXXX Reserve:Investor-Partnership Fee(Capitalized) $ - XXXXXXXXXXXXXX Reserve'.HUD-Excess Amenities $ - XXXXXXXXXXXXXX Reserve:Investor- $ - XXXXxxxXXXXXXX Reserves Total: $ 1,070,876 $ - Other TCAC Appl/Resry/Monitoring Fees $ 56,937 XXXXXXXXXXXXXX Community Outreach $ 75,000 $ 75,000 Soft Costs Contingency $ 40,000 $ 20,000 Other $ - $ - Accounting/Audit $ 50,000 $ 50,000 Taxes $ 10,000 $ 10,000 Insurance $ 140,000 $ 140,000 Others Total: E 371,937 $ 295,000 Developer Costs Developer Overhead/Fee $ 2,000,000 $ 1 400,000 Development Consultant $ - $ - Construction Manager $ - $ Special Needs Consultant $ - $ - Developer Costs Total: $ 2,000,000 $ 1,400,099 Residential Costs Total: $ 27,379,116 $ 24,415,920 Commercial Costs Total'. $ - $ - Project Costs Total: $ 27,379,116 $ 24,415,920 Eligible Basis Total: $ 24,415,920 Adjusted Threshold basis $ 21,966,013 Ineligible Basis Total: $ - Voluntarily Exluded Eligible Basis Amount Total: 12,611,650 Reduction If Eligible>Threshold Basis Total. $ 12,611,650 Additional Reduction Eligible Basis Total: $ - Basis Reduction Total: E 12,611,650 Eligible Basis Total Less Basis Reduction: $ 11,804,270 Adjusted Threshold Basis Limit Total: $ 11,804,270 Requested Unadjusted Eligible Basis Total: $ 11,894,279 OCT or DDA Adjustment 130% Adjusted Eligible Basis Total: $ 15,345,552 Applicable Fraction 100% Qualified Basis: $ 15,345,552 Basis Reduction Total: $ - Adjusted Qualified Basis Total: $ 15,345,552 7.70% Annual Federal Credit Total: $ 1,181,607 10 Years. 10 Maximum Federal Credit Total. $ 11,816,075 Tax Credit Factor: $ 1.09 Estimated Syndication Net Proceeds: $ 12,879,521 WFB Community Development Corporation Amount $ 12,424,223 CTCAC Recommended Tax Credit Amount $1,139,951 CASH FLOW ANALYSIS Date:3/13115 Project Name: Waterman Gardens-Valencia 9 Project Address: San Bernardino,CA Developer: NCRC/TCC/HACSB/HPI NCRC CALCULATION OF DS.MIP Number of Dwelling Units: 76 MIP-Add to Loan Constant 045% Gross Building Area: 81,378 Conventional Loan Rate: 350% Conventional Loan Ye 40 Assumptions Conventional Loan Type: AMORTIZED Residential Income lnfl.Rate: 2.50% Laundry Inc/Month/Unit. 0 Debt Coverage Ratio: 1.204 Laundry&Misc.Infi Factor: 2.50% Laundry Inc/Year: 0 Cash Available for Debt Service: 544,222 Operating Expense Intl.Factor: 3.50% Unit Operating Exp: 6,079.3 Developer RR Cash Flow Distribution% 5000% Real Estate Infl Factor: 2.00% Unit Property Taxes'. 66 Public Agency RR Cash Flow Distribution% 5000% Vacancy Rate: 5.00% Unit Social Services: 284 Perm Loan Size $10,671,000 Number of Units: 76 Unit Replacement Reserve: 550 Loan Constant 4.65% MIP Adjusted Sizing Constant 5.10% DEBT SVC-LESSER OF NCRC OR PNC C/ 541,780 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Revenue Gross Rental Income 1,248,360 1,279,569 1,311,558 1,344,347 1,377,956 1 412,405 1,447,715 1,483908 1,521,005 1,559,031 Laundry&Miscellaneous 0 0 0 0 0 0 0 0 0 0 Gross Income 1,248,360 1,279 569 1,311,558 1,344,347 1,377,956 1,412,405 1.447715 1483,908 1,521,005 1,559,031 Vacancy -62,418 -63,978 -65,578 -67,217 -68,898 -70,620 -72,386 -74,195 -76,050 -77,952 Other 0 0 0 0 0 0 0 0 0 0 Effective Gross Income 1,185,942 1,215,591 1,245,980 1,277,130 1,309,058 1,341,785 1,375,329 1,409,712 1,444,955 1,481,079 Expense Operating Expense 462,029 478,200 494.937 512,260 530,189 548,746 567,952 587,830 608,404 629,698 Property Taxes 5,000 5,100 5,202 5,306 5,412 5,520 5,631 5,743 5,858 5,975 Social Services 21,600 22,356 23,138 23,948 24,786 25,654 26,552 27,481 28,443 29,439 Replacement Reserve 41,800 41 800 41,800 41,800 41,800 41,800 41,800 41,800 41,800 41,800 Expense Total 530,429 547,456 565,077 583,314 602,188 621,720 641,934 662,855 684,505 706,912 NOI Before Debt Service 655,513 668,135 680,903 693,816 706,871 720,065 733,395 746,858 760,450 774,167 Debt Service tat Mort gage Debt Service 541,780 541780 541,780 541,780 541,780 541,780 541,780 541,780 541,780 541780 Debt Service Coverage 1.21 1.23 1.26 1.28 1.30 1.33 1.35 1.38 1 40 1.43 CASH AVAILABLE AFTER DEBT SERVICE Available Cash Flax 113,733 126,354 139,123 152,036 165,090 178,285 191,615 205,078 218,670 232,387 NOTE:COUfVTY HOME AND CITYMACSB CALCULATIONS OF PUBUC AGENCY DISTRIBUTION WILL BE COMPLETED PRIOR TO INVESTOR CALCULATION 6 NOT INCLUDE(7 UNPAID CREDITS ADJUSTORS AND OTHER ITEMS NOT DEFINED AS OPERATING EXPENSES IN THECOUNTYHOME,CITYMACSB NOTES.SEE-CALCULATION OF RESIDUAL RECEIPTS ATTACHED METHODOLOGY WHICHEXPLAINS HOW THE COUNTYHOME LOANAND INVESTOR ARLP AREQU87EMENTS ON RESIDUAL RECEIPTS CALCULATIONS SHOULD BE RECONCILED. PAYMENTS TO INVESTOR LIMITED PARTNER (1)Unpaid Credit Adjustors-Calculated Post-Residual Receipt Calculation per County HOME Does (li)LP Partnership Asset Management Fees 3.00% 5,000 5,150 5,305 5,464 5,628 5,796 5,970 6,149 6,334 6,524 (II,)Investor Limited Partner Loans (iv)OPERATING RESERVE UNTIL BALANCE EQUALS REQUIRED (v)CASH AVAILABLE FOR DEFERRED DEVELOPER FEE: Available Cash Flow 108,733 121,204 133,818 146,572 159,463 172,488 185,644 198,928 212,336 225,863 Balance Beginning 973,893 865,160 743,956 610,137 463,565 304,102 131,614 0 0 0 Simple Interest @ AFR 0.00% 0 0 0 0 0 0 0 0 0 0 Payment Subject to Section 3.16 b of County HOME Loan 100.00% -108,733 -121204 -133,818 -146,572 -159,463 -172,488 -131614 0 0 0 Balance Remaining $ 973,893 865,160 743,956 610,137 463,565 304,102 131,614 0 0 0 0 (vi)CASH AVAILABLE FOR OTHER FEES 0 0 0 0 0 0 54,030 198,928 212,336 225,863 (A)DEFERRED MANAGEMENT FEE/GP OPERATING LOANS (vi)SOCIAL SERVICE PROVIDER FEES(CUMULATIVE): 59,1100 HTH-Current Add'I Services-Greater of 3%or CPI l nflator(3.5%) 3.00% 9,000 9,270 9,548 9,835 10,130 10,433 10746 11,069 11,401 11,743 HTH-Current Paid Addl Services Fees 0 0 0 0 0 0 10746 11,069 11,401 11,743 HTH-Previous Unpaid,Deferred or Accrued Addl Services Fees 0 9,000 18,270 27,818 37,653 47,782 58,216 14,932 0 0 HTH-Current Unpaid Adel Services Fees 9,000 9,270 9,548 9,835 10,130 10,433 0 0 0 0 HTH-Cash Available to pay Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 0 43,284 187,860 200,935 214,120 HTH-Cash Needed to pay Previous unpaid GP Asset Mgmt Fees 0 9,000 18.270 27,818 37,653 47,782 58,216 14,932 0 0 HTH-Cash Used to pay Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 0 43,284 14,932 0 0 HTH-Previous&Current unpaid GP Partnership Asset Mgmt Fees 9,000 18,270 27,818 37,653 47,782 58,216 14,932 0 0 0 HTH-Cash Used to Pay Current 8 Unpaid Previous GP AM Fees 0 0 0 0 0 0 54,030 26,001 11,401 11,743 Paymand Subject to Section 3.18 a of County HOME Loan (viii)CASH AVAILABLE FOR GP PARTNERSHIP AM FEES 0 0 0 0 0 0 0 172,928 200,935 214,120 (viii)GP PARTNERSHIP ASSET MGMT FEES(CUMULATIVE): $19,000 Fee-Val 9 MGP,LLC Asset Mgmt.Fee 300% 7,0'0 7,210 7,426 7,649 7,879 8,115 8,358 8,609 8,867 9,133 Fee-WAI,LLC Asset Mgmt.Fee 3.00% 6,000 6.180 6,365 6,556 6,753 6,956 7,164 7,379 7,601 7.829 Fee-Val 9 DGP,LLC Asset Mgml.Fee 3.00% 6,000 6,180 6,365 6,556 6,753 6,956 7,164 7,379 7,601 7,829 Current due GP Partnership Asset Mgmt Fees 19,000 19,570 20,157 20,762 21,385 22,026 22,687 23,368 24,059 24,791 Current Paid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 23,368 24,069 24,791 Previous unpaid GP Partnership Asset Mgmt Fees 0 19,000 38,570 58,727 79,489 100,874 122,900 145,587 0 0 Current unpaid GP Partnership Asset Mgmt Fees 19,000 19,570 20,157 20,762 21,385 22,026 22,687 0 0 0 Cash Available to pay Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 0 0 149,560 176,866 189,329 Cash Needed to pay Previous unpaid GP Asset Mgmt Fees 0 19,000 38,570 58.727 79,489 100,874 122,900 145,587 0 0 Cash Used to pay Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 0 0 145,587 0 0 Previous 8 Current unpaid GP Partnership Asset Mgmt Fees 19,000 38,570 58,727 79,489 100,874 122,900 145,587 0 0 0 Cash Used to Pay Current&Unpaid Previous GP Asset Mgmt Fees 0 0 0 0 0 0 0 168,954 24,069 24,791 CASH AVAILABLE FOR RESIDUAL RECEIPTS DISTRIBUTION: 0 0 0 0 0 0 0 3,973 176,866 189,329 TEST=TOTAL SUM OF RESIDUAL RECEIPTS OK OK OR OK OK OK OR OK OR OR (viii)CITY OF SAN BERNARDINO HOME LOAN Balance Beg nning 1,500,000 1,545,000 1,591,350 1,639091 1,688,263 1,738,911 1,791078 1,844,811 1,899,255 1,916157 Simple Interest @ AFR 3.00% 45,000 46,350 47,741 49,173 50,648 52,167 53,732 55,344 56,978 57,485 Payment @%of RR .. 0 0 0 0 0 0 0 -900 -40,075 -42,899 Balance Remaining 1,545,000 1,591,350 1,639,091 1688,263 1,738,911 1 791,078 1,844,811 1,899,255 1,916,157 1,930,742 (viii)COUNTY OF SAN BERNARDINO HOME LOAN Balance Beg nning 810,000 834,300 659,329 885,109 911,662 939,012 967,182 996,198 1,025,598 1034,725 Simple Interest @AFR 3.00% 24,300 25,029 25,780 26,553 27,350 28,170 29,015 29,886 30,768 31,042 Payment @%of RR _- 0 0 0 0 0 0 0 -486 -21,641 -23,166 Balance Remaining 834,300 859,329 885,109 911,662 939,012 967,182 996,198 1,025,598 1,034,725 1,042,601 (viii)COUNTY OF SAN BERNARDINO HOUSING AUTHORITY Balance Beginning 1,000,000 1,030,000 1,060,900 1,092727 1,125,509 1,159,274 1,194,052 1,229,874 1,266,170 1,277,436 Simple Interest @AFR 3.00% 30,000 30,900 31,827 32,782 33,765 34,778 35,822 36,896 37,985 38,323 Payment @%of RR _ 0 0 0 0 0 0 0 -600 -26,717 -28,500 Balance Remaining 1,030,000 1,060,900 1,092,727 1,125,509 1,159,274 1,194,052 1,229,874 1,266,170 1,277,438 1,287,162 Intl 10%TO INVESTOR LIMITED PARTNER ..... 0 0 0 0 0 0 0 199 8,843 9,466 (x)CASH FLOW AVAILABLE FOR MGP 8 CLASS A LP 0 0 0 0 0 0 0 1,788 79,590 85,198 VAL 9 MGP,LLC 70.00% 0 0 0 0 0 0 0 1,252 55,713 59,639 VAL9 DGP.LLC 10.00% 0 0 0 0 0 0 0 179 7,959 8,520 WATERMAN AFFORDABLE I LLC 20.00% 0 0 0 0 0 0 0 358 15,918 17,040 CASH FLOW ANALYSIS Project Name: Waterman Gi Project Address: San Berr ii Developer: NCRC/TCC Number of Dwelling Units: 76 Gross Building Area: 81,378 Assumptions Sources of Financing Public Agency Prorate Percentage Calculation w/HACSB Residential Income 10 Rate: 2.50% Total Per Unit Percent Total %of PA Loans of 50%OF RR Select% Laundry&Misc.InFl.Factor: 250%HUD 221(d)(4)Loan OR Agency Approved Alternatir 10,671,000 140,408 38S7%CITY HOME 1,500,000 45.32% 2266% 22.66% Operating Expense Intl.Factor: 3 50%City of SB HOME 1,500,000 19,737 5.48%COUNTY HOME 810,000 24.47% 12.24% 1224% Real Estate Infl.Factor: 2 00%Wells Fargo Equity 12,424 223 163,477 45.38%HACSB 1,000,000 30.21% 15.11% 15.11% Vacancy Rate: 5.00%County of SB-HACSS 1,000,000 13,158 3.65% 0.00% 000% 0.00% Number of Units: 76 County of SB-HOME 810,000 10,658 2.96% 0.00% 0.00% 0.00% Deferred Developer Fee 973,893 12,814 3.56% Total: 3,310,000 100.00% 50.00% 50.00-A Dmalopmera Costs Total: 27,379,116 360,252 100.WA Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Revenue Gross Rental Income 1,598,006 1637.957 1,678,905 1,720,878 1,763,900 1,807,997 1,853,197 1,899,527 1,947,016 1,995,691 2,045,583 2,096723 Laundry&Miscellaneous 0 0 0 0 0 0 0 0 0 0 0 0 Gross Income 1,598,006 1637,957 1678,905 1,720,878 1,763,900 1,807,997 1,853,197 1,899,527 1,947,016 1,995,691 2,045,583 2,096,723 Vacancy -79,900 -81,898 -83,945 -86,044 -88,195 -90,400 -92,660 -94,976 -97,351 -99,785 -102,279 -104,836 Other 0 0 0 0 0 0 0 0 0 0 0 0 Effective Gross Income 1,518,106 1,556.059 1,594,960 1,634,834 1,675,705 1,717,598 1,760,538 1,804,551 1,849,665 1,895,906 1,943,304 1,991,887 Expense Operating Expense 651,738 674,548 698,156 722,593 747,884 774,060 801,152 829,192 858,214 888,251 919,340 951,517 Property Taxes 6,095 6,217 6.341 6,468 6,597 6729 6,864 7,001 7,141 7,284 7,430 7,578 Social Be,,.. 30,469 31,535 32,639 33,781 34,964 36,188 37,454 38,765 40,122 41,526 42,979 44,484 Replacement Reserve 41,800 41,800 41,800 41,800 41,800 41 800 41 800 41,800 41 800 41,800 41,800 41,800 Expense Total 730,101 754,101 778,938 804,843 831,245 858,777 887,270 916,768 947,277 978,861 1,011,549 1,045,379 NOI Before Debt Service 788,005 801,958 816,022 830,192 844,460 858,821 873,268 887,793 902,388 917,045 931,755 M,508 Debt Service 1st Mortgage Debt Service 541,780 541,780 541,780 541,780 541,780 541,780 541,780 541,780 541,780 541,780 541,780 541,780 Debt Service Coverage 1.45 148 1.51 1.53 1.56 1.59 1.61 1.64 1.67 1.69 1.72 1.75 CASH AVAILABLE AFTER DEBT SERVICE Available Cash Flow 246,225 260,178 274,242 288,412 302,680 317,041 331,488 346,013 360,608 375,265 389,975 404,728 NOTE:COUIVTYHOMEAND CRY/HACSB CALCULATIONS OF PUBLIC AGENC7 ADJUSTORS AND OTHER ITEMS NOT DEFINED AS OPERATING EXPENSES IN WHICHDIPLAINS HOW THE COUNTY HOME LOANAND INVESTOR ARLPAR PAYMENTS TO INVESTOR LIMITED PARTNER (i)Unpaid Credit Adjustors-Calculated Past-Residual Receipt Calculation per Count (it)LP Partnership Asset Management Fees 3.00% 6,720 6,921 7,129 7,343 7,563 7,790 8,024 8,264 8,512 8,768 9,031 9,301 (iii)Investor Limited Partner Loans (iv)OPERATING RESERVE UNTIL BALANCE EQUALS REOURED (v)CASH AVAILABLE FOR DEFERRED DEVELOPER FEE: Available Cash Flow 239,505 253,257 267,113 281,069 295,117 309,251 323,464 337748 352,096 366,497 380,944 395,426 Balance Beginning 0 0 0 0 0 0 0 0 0 0 0 0 Simple Interest@ AFR 000% 0 0 0 0 0 0 0 0 0 0 0 0 Payment Subject to Section 3.16 b of County HOME Loan 10000% 0 0 0 0 0 1 0 0 0 0 0 0 Balance Remaining $ 973893 0 0 0 0 0 0 0 0 0 0 0 0 (vi)CASH AVAILABLE FOR OTHER FEES 239,505 253,257 267,113 281,069 295,117 309,251 323,464 337,748 352,096 366,497 380,944 395,426 (A)DEFERRED MANAGEMENT FEE/GP OPERATING LOANS (vi)SOCIAL SERVICE PROVIDER FEES(CUMULATIVE): $9,000 HTH-Current Addl Services-Greater of 3%or CPI Inflator(3.5%) 3.00% 12,095 12,458 12,832 13,217 13,613 14,022 14,442 14,876 15,322 15,782 16,255 16,743 HTH-Current Paid Addl Services Fees 12,095 12 458 12,832 13,217 13,613 14,022 14,442 14,876 15,322 15 782 16,255 16 743 HTH-Previous Unpaid,Deferred or Accrued Addl Services Fees 0 0 0 0 0 0 0 0 0 0 0 0 HTH-Current Unpaid Addl Services Feas 0 0 0 0 0 0 0 0 0 0 0 0 HTH-Cash Available to pay Previous unpaid GP Asset Mgmt Fees 227,410 240,799 254,282 267,852 281,504 295,229 309,022 322,873 336,774 350,716 364,689 378,683 HTH-Cash Needed to pay Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 HTH-Cash Used to pay Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 1 0 0 0 0 0 0 HTH-Previous&Current unpaid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 HTH-Cash Used to Pay Current&Unpaid Previous GP AM Fees 12,095 12,458 12,832 13,217 13,613 14,022 14,442 14,876 15,322 15.782 16,255 16,743 Payment Subject to Section 3.18 a of County HOME Loan (viii)CASH AVAILABLE FOR GP PARTNERSHIP AM FEES 227,410 240,799 254,282 267,852 281,504 295,229 309,022 322.873 336,774 350,716 364,689 378,683 (viii)GP PARTNERSHIP ASSET MGMT FEES(CUMULATIVE): $19,000 Fee-Val 9 MGP,LLC Asset Mgmt.Fee 3.00% 9,407 9 690 9,980 10,280 0 0 0 0 0 0 0 0 Fee-WAI,LLC Asset Mgml.Fee 3.00% 8,063 8,305 8,555 8,811 0 0 0 0 0 0 0 0 Fee-Val 9 DGP,LLC Asset Mgmt.Fee 3.00% 8,063 8,305 8,555 8,811 0 0 0 0 1 0 0 0 Current due GP Partnership Asset Mgmt Fees 25534 26,300 27,089 27,902 0 0 0 0 0 0 0 0 Current Paid GP Partnership Asset Mgml Fees 25,534 26,300 27,089 27,902 0 0 0 0 0 0 0 0 Previous unpaid GP Partnership Asset Mgmt Fees 0 0 1 1 0 0 0 0 0 0 0 0 Current unpaid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 Cash Avail tittle to pay Previous unpaid GP Asset Mgmt Fees 201,875 214,498 227,192 239 281,50 .950 4 295,229 309,022 322,873 336,774 350,716 364,689 378,683 Cash Needed to pay Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 Cash Used to pay Previous unpaid GP Asset Mgmt Fees 0 1 0 0 0 0 0 0 0 0 0 0 Previous&Current unpaid GP Partnership Asset Mgmt Feas 0 0 0 0 0 0 0 0 0 0 0 0 Cash Used to Pay Current&Unpaid Previous GP Asset Mgmt Fees 25,534 26,300 27,089 27,902 0 0 0 0 0 0 0 0 CASH AVAILABLE FOR RESIDUAL RECEIPTS DISTRIBUTION: 201,875 214.498 227,192 239,950 281,504 295,229 309,022 322,873 336,774 350,716 364.689 378,683 TEST=TOTAL SUM OF RESIDUAL RECEIPTS OK OK OK OK OK OK OK OK OK OK OK OK (viii)CITY OF SAN BERNARDINO HOME LOAN Balance Beginning 1,930,742 1,942,922 1,952,608 1,959,707 1,964,129 1,959 268 1,951,152 1,939,666 1,924,698 1,906,130 1,883,847 1,857 729 Simplelmert @AFR 3.00% 57,922 58,288 58,578 58,791 58,924 58,778 58,535 58,190 57,741 57,184 56,515 55,732 Payment @7/.of RR _.... -45,742 -48,602 51,479 -54,369 -63,785 -66,895 -70,020 -73,158 -76,308 -79,467 -82,633 -85,804 Balance Remaining 1,942,922 1,952,608 1,959,707 1,964,129 1,959,268 1,951,152 1,939,666 1,924698 1,906,130 1,883,847 1,857,729 1,827,656 )COUNTY OF SAN BERNARDINO HOME LOAN Balance Beginning 1,042,601 1,049,178 1,054,408 1,058,242 1,060,630 1,058,005 1,053,622 1,047 420 1,039,337 1,029,310 1,017,277 1,003,174 Si mple Interest @ AFR 3.00% 31,278 31,475 31632 31747 31,819 31740 31,609 31,423 31,180 30,879 30,518 30,095 Payment@%of RR -24,701 -26,245 -27,798 -29,359 -34,444 -36,123 -37,811 -39,506 -41,206 -42,912 -44,622 -46,334 Balance Remaining 1,049,178 1,054408 1,058.242 1060630 1,058,005 1,053,622 1,047.420 1,039,337 1,029,310 1,017,277 1,003,174 986,934 (viii)COUNTY OF SAN BERNARDINO HOUSING AUTHORITY Balance Beginning 1,287,162 1,295,282 1,301,739 1,306,472 1,309,420 1,306,179 1,300,768 1,293,111 1,283,132 1270,754 1,255,898 1,238,486 Simple Interest@ AFR 300% 38,615 38,858 39,052 39,194 39,283 39,185 39,023 38,793 38,494 38,123 37,677 37,155 Pay ment@%of RR -30,495 -32,402 -34,319 -36,246 -42,523 -44,597 46,680 -48,772 -50,872 -52,978 -55,089 -57,203 Balance Remaining 1,295,282 1,301 739 1,306,472 1.309,420 1,306,179 1,300,768 1,293,111 1,283,132 1,270,754 1,255,898 1,238,486 1,218,437 (1x)10%70 INVESTOR LIMITED PARTNER 10,094 10,725 11,360 11,997 14,075 14,761 15,451 16,144 16,839 17,536 18,234 18,934 (x)CASH FLOW AVAILABLE FOR MGP&CLASS A LP 90,844 96,524 102,236 107,977 126,677 132,853 139,060 145,293 151,548 157,822 164,110 170,408 VAL9 MGP,LLC 70.00% 63,591 67,567 71,566 75,584 88,674 92,997 97,342 101,705 106,084 110,475 114,877 119,285 VAL9 DGP,LLC 10.00% 9,D84 9,652 10,224 10,798 12,668 13,285 13,906 14,529 15,155 15,782 16,411 17,041 WATERMAN AFFORDABLE I LLC 20.00% 18,169 19,305 20,447 21.595 25,335 26,571 27,812 29,059 30,310 31,564 32,822 34,082 CASH FLOW ANALYSIS Project Name: Waterman G: Project Address: San Bernardi Developer: NCRC/TCC PNC CALCULATION OF DS. Orioinal Rate Lock Number of Dwelling Units: 76 locked Interest It- 3.511% 3.47% Gross Building Area: 81,378 Amorc 480 480 Loan Constant 4.6487% 4.6]71% AsSYmptions MIP 0.4500% 0.4500% Residential Income lnfl.Rate: 2.50% sizing constant 5.0387% 5.0771% Laundry&Misc.Infl.Factor: 250% DSCB 1.20 1.20 Operating Expense lnfl.Factor: 3.50% NOI 655513 65553 Real Estate Infl.Factor: 200% DSCR-based loan A-u. $30]33]00 $10]59 200 Vacancy Rate: 5.00% Final PNC LOAN SIZE 10,671,000 Number of Units: 76 Annual DS $498,047 $493,761 Annual VIP 44212 4S 8.020 Total $546,259 $541780 Year 23 Year 24 Year 25 Year 26 Year Z7 Year 28 Year 29 Year 30 Year 31 Year 32 Year 33 Year 34 Revenue Gross Rental Income 2,149,141 2,202,869 2,257,941 2,314,390 2,372,249 2,431,556 2,492,345 2,554,653 2,618,519 2,683,982 2,751,082 2,819,859 Laundry&Miscellaneous 0 0 0 0 0 0 0 0 0 0 0 0 Gross Income 2,149,141 2,202,869 2,257,941 2,314,390 2,372,249 2,431,556 2,492,345 2,554,653 2,618,519 2,683,982 2,751082 2,819,859 Vacancy -107,457 -110,143 -112,897 -115,719 -118,612 -121,578 -124,617 -127,733 -130,926 -134,199 -137,554 -140,993 Other 0 0 0 0 0 0 0 0 0 0 0 0 Effective Gross Income 2,041,684 2,092,726 2,145,044 2,198,670 2,253,637 2,309,978 2,367,727 2,426,920 2,487,593 2,549,783 2,613,528 2,678,886 Expense Operating Expense 984,820 1,019289 1,054,964 1,091,888 1,130,104 1,169,657 1,210,595 1,252,966 1,296820 1,342,209 1,389,186 1,437,808 Property Taxes 7,730 7,884 8,042 8203, 8,367 8,534 8,705 8,879 9,057 9,238 9,423 9,611 Beer tServices 46,041 47,652 49,320 51,046 52,833 54,682 56,596 58,577 60,627 62,749 64,945 67,218 Replacement Reserve 41,800 41800 41800 41800 41800 41,800 41511. 41800 41800 41,800 41,800 41,800 Expense Total 1,080,391 1,116,625 1,154,128 1,192,937 1,233,104 1,274.674 1,317,696 1,362,222 1,406,304 1,455,995 1,505,354 1,556,437 NOI Before Debt Service 961,293 976,100 990,918 1,005,733 1,020,533 1,035,304 1,050,031 1,064,698 1,079,290 1,093,788 1,108,174 1,122,429 Debt Service 1st Mortgage Debt Service 541780 541,780 541780 541,780 541,780 541,780 541780 541.780 541,780 541,780 541,780 541,780 Debt Service Coverage 1.77 1.80 1.83 1.86 1.88 1 9, 1.94 1.97 1.97 1.97 1.97 1.97 CASH AVAILABLE AFTER DEBT SERVICE Available Cash Flax 419,513 434,320 449,138 463,953 478,753 493,524 508,251 522,918 537,510 552,008 566,394 580,649 NOTE:COUNTYHOME AND CITY1HACSB CALCULATIONS OF PUBLIC AGENCI ADJUSTORS AND OTHER ITEMS NOT DEFINED AS OPERATING EXPENSES IN W hil EXPLAINS HOW THE COUWY HOW LOAN AND INVESTOR ARLP AR. PAYMENTS TO INVESTOR LIMITED PARTNER (i)Unpaid Credit Adjustors-Calculated Post-Residual Receipt Calculation per Count LP Partnership Asset Management Fees 3.00% 9,581 9,868 10,164 10,469 10,783 11,106 11,440 11783 12,136 12,500 12,875 13,262 hill Investor Limited Partner Loans IN)OPERATING RESERVE UNTIL BALANCE EQUALS REQUIRED (v)CASH AVAILABLE FOR DEFERRED DEVELOPER FEE: Available Cash Flow 409,933 424,453 438,974 453,484 467,970 482,418 496,811 511,136 525,373 539,507 553,519 567,388 Balance Beginning 0 1 0 0 0 0 0 0 0 0 0 0 Simple Interest @AFR 0.00% 0 0 0 0 0 0 0 0 0 11 0 0 tion Payment Subject to Seem b of County HOME Loan 100.00% 0 0 0 0 0 0 0 0 0 0 0 0 Balance Remaining $ 973,893 0 0 0 0 0 0 0 0 0 0 0 0 (vi)CASH AVAILABLE FOR OTHER FEES 409,933 424,453 438,974 453,484 467,970 482,418 496,811 511,136 525,373 539,507 553,519 567,388 Ivl)DEFERRED MANAGEMENT FEE I GP OPERATING LOANS (vi)SOCIAL SERVICE PROVIDER FEES(CUMULATIVE): $9.Atld'I Services Greater of 3%or CPI Inflator(3.5%) 3.00% 17,245 17,762 18,295 18,844 19,409 19,992 20,591 21,209 21,845 22,501 23,176 23.871 HTH-Current Paid Adel Services Fees 17,245 17,762 18,295 18.844 19,409 19,992 20,591 21,209 21,845 22,501 23,176 23,871 HTH-Previous Unpaid,Deferred or Accrued Aden Services Fees 0 0 0 0 0 0 0 0 0 0 0 0 HTH:Current Unpaid Add'I Services Fees 0 0 0 0 0 0 0 0 0 0 0 0 HTH Cash Availabe to pay Previous unpaid GP Asset Mgmt Fees 392,688 406,690 420,679 434,640 448,561 462,426 476,220 489,926 503,528 517,007 530,343 543,517 HTH-Cash Needed to pay Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 HTH-Cash Used to pay Previous unpaid GP Asset Ml Fees 0 0 0 0 0 0 0 0 0 0 0 0 HTH-Previous&Current unpaid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 HTH-Cash Used to Pay Current&Unpaid Previous GP AM Fees 17,245 17,762 18,295 18,844 19,409 19,992 20,591 21,209 21,845 22,501 23,176 23,871 Payment Subject to Section 3.18 a of County HOME Loan (viii)CASH AVAILABLE FOR GP PARTNERSHIP AM FEES 392,688 406,690 420,679 434,640 448,561 462,426 476,220 489,926 503,528 517,007 530,343 543,517 (viii)GP PARTNERSHIP ASSET MGMT FEES(CUMULATIVE): $19,000 Fee Val 9 MGP,LLC Asset Mgmt.Fee 3.00% 0 0 0 0 0 0 0 0 0 0 0 0 Fee--WA1,LLC Asset Mgmt Fee 3.00% 0 0 0 0 0 0 0 0 0 0 0 0 Fee-Val 9 DGP,LLC Asset Mgmt Fee 3.00% 0 0 0 0 1 0 0 0 0 0 0 0 Current due GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 Current Paid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 Previous unpaid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 Current unpaid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 Cash Available to pay Previous unpaid GP Asset Mgmt Fees 392688 406,690 420679 434,640 448,561 462,426 476,220 489,926 503,528 517,007 530,343 543,517 Cash Needed to pay Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 Cash Used to pay Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 Previous&Current unpaid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 Cash Used to Pay Current&Unpaid Previous GP Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 CASH AVAILABLE FOR RESIDUAL RECEIPTS DISTRIBUTION: 392,688 406,690 420,679 434,640 448,561 462,426 476,220 489,926 503,528 517,007 530,343 543,517 TEST=TOTAL SUM OF RESIDUAL RECEIPTS OK OK OK OK OK OK OK OK OK OK OK OK (viii)CITY OF SAN BERNARDINO HOME LOAN Balance Beginning 1,827,656 1,793,508 1755,163 1,712,498 1665,390 1,613,714 1,557,346 1,496,1615 1430,036 1,358.844 1282,463 1,200,768 Simple Interest @AFR 3.00% 54,830 53,805 52,655 51,375 49,962 48,411 46,720 44,885 42,901 40,765 38,474 36,023 Payment @%of RR -88,978 -92,150 -95,320 -98,483 -101638 -104,779 -107,905 -111,011 -114,092 -117,147 -120,168 -123,153 Balance Remaining 1793,5D8 1,7551 63 1712,498 t,665,390 1,613.714 1,557,346 1496,161 1,430,036 1,358,844 1,282,463 1200,768 1,113,638 )COUNTY OF SAN BERNARDINO HOME LOAN Balance Beginning 986,934 968,495 947,788 924,749 699,310 871,405 840,967 807,927 772,219 733,776 692,530 648,415 Simple Interest @AFR 3.00% 29,608 29,055 28,434 27,742 26,979 26,142 25,229 24,238 23,167 22,0153 20,776 19,452 Payment @%of RR -. -48,048 -49,761 -515473 -53,181 -54,884 -56,581 -58,269 -59,946 -61,610 -63,259 -64,891 -66,503 Balance Remaining 968,495 947,788 924,749 899,310 871,405 640,967 807,927 772,219 733,776 692,530 648,415 601.365 (viii)COUNTY OF SAN BERNARDINO HOUSING AUTHORITY Balance Beginning 1,218,437 1,195.672 1,170,109 1.141,665 1,110,260 1,075,809 1,038,230 997,441 953,357 905,896 854,975 800,512 Simple Interest @AFR 3.00% 36,553 35,870 35,103 34,250 33,308 32,274 31,147 29,923 28,601 27,177 25,649 24,015 Payment @%of RR -59,318 -61,434 -63,547 -65,656 -67,758 -6 9,853 -71,937 -74,007 -76,062 -78,098 -80,112 -82,102 Balance Remaining 1,195672 1,170,109 1,141,665 1,110,260 1,075,809 1.038,230 997,441 953,357 905,896 854,975 800,512 742,425 (is)10%TO INVESTOR LIMITED PARTNER - 19634 20,335 21,034 21,732 22,428 23,121 23,811 24,496 25,176 25,850 26,517 27,176 (x)CASH FLOW AVAILABLE FOR MGP&CLASS LP - - 176,709 183,011 189,305 195,588 201,852 208,092 214,299 220,467 226,588 232,653 238,654 244,582 VA 9MGP.LLC 70.00% 123,697 128,107 132.514 136,912 141,297 145,664 150,009 154,327 158,611 162,857 167058 171,208 VAL 9 DGP,LLC 10.00% 17,671 18,301 18,931 19,559 20,185 20,809 21,430 22,047 22,659 23,265 23,865 24,458 WATERMAN AFFORDABLE I LLC 2000% 35,342 36.602 37,861 39,118 40,370 41,618 42,860 44,093 45,318 46,531 47,731 48,916 CASH FLOW ANALYSIS Project Name: Waterman G: Project Address: San Bernardii Developer: NCRC/TCC Number of Dwelling Units: 76 Gross Building Area: 81,378 Assumptions Residential Income Infl.Rate: 2.50% Laundry&Misc.Infi.Factor: 2.50% Operating Expense Infl.Factor. 350% Real Estate Infl.Factor 2.00% Vacancy Rate. 5.00% Number of Units. 76 Year 35 Year 36 Year 37 Year 38 Year 39 Year 40 Year 41 Year 42 Year 43 Year 44 Year 45 Year 46 Revenue Gross Rental Income 2,890,356 2,962,614 3,036,680 3,112,597 3.190.412 3,270,172 3,351,926 3,435,724 3,521618 3,609,658 3,699,899 3,792,397 Laundry&Miscellaneous 0 0 0 0 0 0 0 0 0 0 0 0 Gross Income 2,890,356 2.962,614 3,036,680 3,112,597 3,190,412 3,270172 3,351,926 3,435,724 3,521,618 3.609,658 3,699,899 3,792,397 Vacancy -144,518 -148 -151,834 -155,630 -159,521 -163,509 -167,596 -171,131 786 -176,081 -180,483 -184,995 -189,620 Other 0 0 0 0 0 0 0 0 0 0 0 0 Effective Gross Income 2,745,838 2,814,484 2,884,846 2,956,967 3,030,891 3,106,663 3,184,330 3,263,938 3,345,537 3,429,175 3,514,904 3,802,777 Expense Operating Expense 1488,131 1,540,215 1,594,123 1,649,917 1707,664 1767,433 1,829,293 1,893,318 1,959,584 2,028,170 2,099.156 2,112.626 Property Taxes 9,803 9,999 10,199 10,403 10,611 10,824 11,040 11,261 11486 11,716 11,950 12,189 Social Services 69,571 72,006 74,526 77,134 79,834 82,628 85,520 88,513 91,611 94,818 98,136 101,571 Replacement Reserve 41,800 41,800 4t 800 41,800 41,800 41,800 41800 41,Boo 41,800 41,800 41,800 41,800 Expense Total 1,609,305 1,864,020 1,720,848 1,779,255 1,839,910 1,902,684 1,967,653 2,034,892 2,104,182 2,176,503 2,251,042 2,328,186 NOI Before Debt Service 1,136,533 1,150,463 1,164,198 1,177,712 1,190,981 1,203,979 1,216,677 1,229,046 1,241,055 1,252,672 1,263,862 1,274.591 Debt Service 1st Mortgage Debt Service 541 780 541,780 541,780 541,780 541,780 541,780 0 0 0 0 0 0 Debt Service Coverage 1.97 1.97 1.97 1.97 1.97 1.97 CASH AVAILABLE AFTER DEBT SERVICE Available Cash Flow 594,753 608,683 622,418 635,932 649,201 662,199 1,216,677 1,229,046 1,241,055 1,252,672 1,263,862 1,274,591 NOTE:COUNTYHOME AND CITY1HACSB CALCULA71ONS OF PUBLIC AGENCI ADJUSTORS AND OTHER ITEMS NOT DEFINED AS OPERATING EXPENSES IN WHICHEXPLAINS HOW THE COUNTY HOME LOANAND INVESTOR ARLP AR PAYMENTS TO INVESTOR LIMITED PARTNER (I)Unpaid Credit Adjustors-Calculated Post-Residual Receipt Calculation per Count (li)LPPartnership Asset Management Fees 300% 13,660 14,069 14491 14,926 15,374 15,835 16,310 16,799 17,303 17,823 18,357 18.908 (lit)Investor Limited Partner Loans (iv)OPERATING RESERVE UNTIL BALANCE EQUALS REOURED (v)CASH AVAILABLE FOR DEFERRED DEVELOPER FEE: Available Cash Flow 581,093 594,614 607,926 621,006 633,827 646,364 1,200,367 1,212,246 1223,752 1,234,849 1,245,505 1,255,683 Balance Beginning 0 0 0 0 1 0 0 0 0 0 0 0 Simple Interest @ AFR 0.00% 0 0 0 0 0 0 0 0 0 0 0 0 Payment Subject to Section 3.16 b of Canty HOME Loan 100.00% 0 0 0 0 0 0 0 0 0 0 0 0 Balance Remaining $ 973,893 0 0 0 0 0 0 0 0 0 0 0 0 (vi)CASH AVAILABLE FOR OTHER FEES 581,093 594614 607,926 621,006 633,827 646,364 1,200,367 1,212,246 1,223,752 1,234,849 1,245,505 1,255,683 (vi)DEFERRED MANAGEMENT FEE/GP OPERATING LOANS (vi)SOCIAL SERVICE PROVIDER FEES(CUMULATIVE): $9,000 HTH-Current Add'I Services-Greater o131 or CPI Inflator(35%) 3.00% 24,587 25,325 26,085 26,867 27673 28,503 29,358 30.239 31,146 32,081 33,043 34,034 HTH-Current Paid Add'I Services Fees 24.587 25,325 26,085 26,867 27,673 28,503 29,358 30,239 31,146 32,081 33,043 34,034 HTH-Previous Unpaid,Deferred or Accrued Add'I Services Fees 0 0 0 0 0 0 0 0 0 0 0 0 HTH-Current Unpaid Add'I Services Fees 0 0 0 0 0 0 0 0 0 0 0 0 HTH-Cash Availadeto pay Previousunpaid GP Asset Mgmt Fees 556,506 569,289 581,842 594,139 606,154 617,861 1,171008 1,182,007 1,192,605 1,202,769 1,212,462 1,221649 HTH-Cash Needed to pay Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 HTH-Cash Used to pay Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 HTH-Previous&Current unpaid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 HTH-Cash Used to Pay Current&Unpaid Previous GPAM Fees 24,587 25,325 26,085 26,867 27,673 28,503 29,358 30,239 31,146 32,081 33,043 34,034 Payment Subject to Section 3.18 a of County HOME Loan (vili)CASH AVAILABLE FOR GP PARTNERSHIP AM FEES 556,506 569,289 581,842 594,139 606,154 617,861 1,171,008 1,182,007 1,192,605 1,202,769 1,212,462 1,221,649 (viii)GP PARTNERSHIP ASSET MGMT FEES(CUMULATIVE): $19,000 Fee-Val 9 MGP,LLC Asset Mgmt.Fee 3.00% 0 0 0 0 0 0 0 0 0 0 0 0 Fee-WA1,LLC Asset Mgmt.Fee 3.00% 0 0 0 0 0 0 0 0 0 0 0 0 Fee-Val 9 DGP,LLC Asset Mgmt Fee 3.00% 0 0 0 0 0 0 0 0 0 0 0 0 Current due GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 Current Paid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 Previous unpaid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 Current unpaid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 Cash Available to Pay Previous unpaid GP Asset Mgmt Fees 556,506 569,289 581,842 594,139 606,154 617,861 1,171,008 1,182,007 1,192,605 1,202,769 1,212,462 1,221,649 Gash Needed to pay Previous unpaid GP Asset M9mt Fees 0 0 0 0 0 0 0 0 0 0 0 0 Cash Used to pay Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 Previous&Current unpaid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 Cash Used to Pay Current&Unpaid Previous GP Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 0 0 0 CASH AVAILABLE FOR RESIDUAL RECEIPTS DISTRIBUTION: 556,506 569,289 581,842 594.139 606.154 617,861 1,171,008 1,182,007 1,192,605 1,202,769 1,212,462 1,221,649 TEST-TOTAL SUM OF RESIDUAL RECEIPTS OK OK OK OK OK OK OK OK OK OK OK OK (viii)CITY OF SAN BERNARDINO HOME LOAN Balance Beginning 1,113,638 1,020.951 922,585 818,427 708,356 592260 470,030 218,796 -42,466 -03,740 -45,053 4 404 Simple Interest @AFR 3.00% 33,409 30,629 27678 24,553 21,251 17,768 14,101 6,564 -1,274 -1,312 -1,352 -1,392 Payment @%of RR -126,097 -128,993 -t 31,837 -134,624 -137,346 -139,999 -265,334 -267,826 0 0 0 0 Balance Remaining 1,020,951 922,586 818,427 708,356 592,260 470,030 218,796 -42,466 -43,740 -45,053 -46,404 47,796 (viii)COUNTY OF SAN BERNARDINO HOME LOAN Balance Beginning 601,365 551,313 498,197 441,950 382,512 319,821 253,816 118,150 -22,932 -23,620 -24,328 -25,058 Simple Interest @AFR 3.00% 18,041 16,539 14,946 13,259 11,475 91595 7614 3,544 -688 -709 -730 -752 Payment @%of RR 4 -68,092 -69,656 -71,192 -72,697 -74,167 -75,599 -143,280 -144,626 0 0 0 0 Balance Remaining 551,313 498,197 441,950 382,512 319,821 253,816 118,150 -22,932 -23,620 -24,328 -25,058 -25,810 (viii)COUNTY OF SAN BERNARDINO HOUSING AUTHORITY Balance Beginning 742,425 680,634 615,058 545,616 472,237 394,840 313,353 145,864 -28,311 -29,160 -30,035 -30,936 Simple inter est @AFR 3.00% 22,273 20,419 18,452 16,369 14,167 11,845 9,401 4,376 -849 -875 -901 -928 Payment@%of RR . i -84064 -85,995 -87,891 -89,749 -91,564 -93,332 -176,889 -178,551 0 0 0 0 Balance Remaining 680,634 615,058 545,618 472,237 394,840 313,353 145,864 -28,311 -29,160 -30,035 -30,936 -31,864 (ix)10%TO INVESTOR LIMITED PARTNER 27,825 28,464 29,092 29,707 30,308 30,893 58,550 59,100 59,630 60,138 60,623 61,082 (x)CASH FLOW AVAILABLE FOR MGP&CLASS LP -1 250,428 256,180 261,829 267,362 272,769 278,037 526,954 531,903 1,132,975 1,142,630 1,151,839 1,160,566 VAL9 MGP,LLC 70.00% 175,299 179,326 183,280 187,154 190,939 194,626 368,868 372,332 793,083 799,841 806,287 812,396 VAL9 DGP,LLC 10.00% 25,043 25,618 26,183 26,736 27,277 27,804 52,695 53,190 113,298 114,263 115,184 116,057 WATERMAN AFFORDABLE 1 LLC 20.00% 50,086 5 1,236 52,366 53,472 54,554 55,607 105,391 106,381 226,595 228,526 230,366 232,113 CASH FLOW ANALYSIS Project Name: Waterman Gi Project Address: San Bernardii Developer: NCRC/TCC Number of Dwelling Units: 76 Gross Building Area: 81,378 Assumption Residential Income I n8.Rate: 250% Laundry&Misc.Infi Factor. 2.50% Operating Expense Intl.Factor: 350% Real Estate Infl.Factor 2.00% Vacancy Rate: 5.00% Number of Units: 76 Year 47 Year 48 Year 49 Year 50 Year 51 Year 52 Year 53 Year 54 Year 55 Revenue Gross Rental Income 3,887,207 3,984,387 4,083,997 4,186,097 4,290,749 4,398,018 4,507,968 4,620,667 4,736,184 Laundry&Miscellaneous 0 0 0 0 0 0 0 0 0 Gross Income 3887,207 3,984,387 4,083,997 4,186,097 4,290,749 4,398,018 4,507,968 4,620,667 4,736,184 Vacancy -194,360 -199,219 -204,200 -209,305 -214,537 -219,901 -225,398 -231,033 -236,809 Other 0 0 0 0 0 0 0 0 0 Effective Gross Income 3,692,847 3,785,168 3,879,797 3,976,792 4,076,212 4,178,117 4,282,570 4,389,634 4,499,375 Expense Operating Expense 2,248,668 2,327,371 2,408,829 2,493,138 2,580,398 2,670,712 2,764,187 2,860,934 2,961,066 Property Taxes 12,433 12,682 12,935 13,194 13,458 13,727 14,002 14,282 14,567 Sodal Services 105,126 108,805 112,614 116,555 120,634 124,857 129,227 133,750 138,431 Replacement Reserve 41,800 41,800 41,800 41,1 O 41,800 41 800 41,800 41 800 41,800 Expense Total 2,408,027 2,490,658 2,576,178 2,564,887 2,758,291 2,851,086 2,949,215 3,050,785 3,155,864 NOI Before Debt Service 1,284,820 1,294,509 1,303,619 1,312,104 1,319,921 1,327,021 1,333,355 1,338,869 1,343,511 Debt Service 1st Mortgage Debt Service 0 0 0 0 0 0 0 0 0 Debt Service Coverage CASH AVAILABLE AFTER DEBT SERVICE Available Cash Flow 1,284,820 1,294,509 1,303,619 1,312,104 1,319,921 1,327,021 1,333,355 1,338,869 1,343,511 NOTE:COUNTY HOME AND CITYMACSS CALCULATIONS OF PUBLIC AGENCI AOJUS TORS AND OTHER ITEMS NOT DEFINED AS OPERATING EXPENSES IN WNCH EXPLAINS HOW THE COUNTYHOME LOAN AND INVESTOR ARLP AR PAYMENTS TO INVESTOR LIMITED PARTNER (i)Unpaid Credit Adjustors-Calculated Past-Residual Receipt Calculation per Count (ii)LP Partnership Asset Management Fees 3.00% 19,475 20,059 20,661 21,281 21,920 22,577 23,254 23,952 24,671 (Iii)Investor Limited Partner Loans (iv)OPERATING RESERVE UNTIL BALANCE EQUALS REOURED (v)CASH AVAILABLE FOR DEFERRED DEVELOPER FEE: Available Cash Flow 1,265,344 1,274 450 1,282,957 1,290,823 1,298,002 1,304 444 1,310,100 1,314,917 1,318,840 Balance Beginning 0 0 0 0 0 0 0 0 0 Simple Interest@ AFR 0.00% 1 1 0 0 0 0 0 0 0 Payment Subject to Section 3.16 b of County HOME Loan 100.00% 0 0 0 0 0 0 0 0 0 Balance Remaining $ 973,893 0 0 0 0 0 0 0 0 0 (vi)CASH AVAILABLE FOR OTHER FEES 1,265,344 1,274 450 1,282,957 1,290 823 1,298,002 1,304444 1,310,100 1,314,917 1,318,840 (vi)DEFERRED MANAGEMENT FEE I GP OPERATING LOANS (vi)SOCIAL SERVICE PROVIDER FEES(CUMULATIVE): $9,000 HTH-Current Add'I Services-Greater of 3%or CPl Inflator(3.5%) 3.00% 35,055 36,107 37,190 38,306 39,455 40,639 41,858 43,114 44,407 HTH-Current Paid Addl Services Fees 35,055 36,107 37,190 38,306 39,455 40,639 41,858 43,114 44,407 HTH-Previous Unpaid,Deferred or Accrued Add'1 Services Feas 0 0 0 0 0 0 0 0 0 HTH-Current Unpaid Add'1 Services Fees 0 0 0 0 0 0 0 0 0 HTH-Cash Availableto pay Previous unpaid GP Asset Mgmt Fees 1,230,289 1,238343 1245,767 1,252,517 1,258,546 1,263,805 1,268,242 1,271,803 1,274,433 HTH-Cash Needed too Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 HTH-Cash Used to pay Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 HTH-Previous&Current unpaid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 HTH-Cash Used to Pay Current&Unpaid Previous GP AM Fees 35,055 36,107 37,190 38,306 39,455 40,639 41,858 43,114 44,407 Payment Subject to Section 3.18 a of County HOME I- (viii)CASH AVAILABLE FOR GP PARTNERSHIP AM FEES 1,230,289 1,238,343 1,245,767 1,252,517 1,258,546 1,263,805 1,268,242 1,271,803 1,274,433 (viii)GP PARTNERSHIP ASSET MGMT FEES(CUMULATIVE): $19,000 Fee-Val 9 MGP,LLC Asset Mgmt.Fee 3.00% 0 0 0 0 0 0 0 0 0 Fee-WA1,LLC Asset Mgmt.Fee 3.00% 0 0 0 0 0 0 0 0 0 Fee-Val9 Di LLC Asset MgmL Fee 3.00% 0 0 0 0 0 0 0 0 0 Current due GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 Current Paid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 Previous unpaid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 Current unpaid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 Cash Available to pay Previous unpaid GP Asset Mgmt Fees 1,230,289 1,238,343 1,245,767 1,252,517 1,258,546 1263,805 1,268,242 1,271,803 1,274,433 Cash Needed to pay Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 Cash Used to pay Previous unpaid GP Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 Previous&Current unpaid GP Partnership Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 Cash Used to Pay Current&Unpaid Previous GP Asset Mgmt Fees 0 0 0 0 0 0 0 0 0 CASH AVAILABLE FOR RESIDUAL RECEIPTS DISTRIBUTION: 1,230,289 1,238343 1,245,767 1,252,517 1,258,546 1,263,805 1,268,242 1,271803 1,274,433 TEST=TOTAL SUM OF RESIDUAL RECEIPTS OK OK OK OK OK OK OK OK OK (viii)CITY OF SAN BERNARDINO HOME LOAN Balance Beginning -47,796 -49,230 -50,707 -52,228 -53,795 -55,409 -57,071 -58,783 80,547 Simple Interest @AFR 3.00% -1,434 -1477 -1,521 -1,567 -1,614 -1662 -1,712 -1,764 -1,816 Payment @%of RR .. 0 0 0 0 0 0 0 0 0 Balance Remaining -49,230 -50,707 -52,228 -53,795 -55,409 -57,071 -58,783 60,547 -62,363 (viii)COUNTY OF SAN BERNARDINO HOME LOAN Balance Beginning -25,810 -26,584 -27,382 -28,203 -29,049 -29,921 -30,818 -31743 -32,695 Simple Interest @ AFR 3.00% -774 -798 -821 -846 -871 -898 -925 -952 -981 Payment @%of RR 0 0 0 0 0 0 0 0 0 Balance Remaining -26,584 -27,382 -28,203 -29,049 -29,921 -30,818 -31 743 -32,695 -33,676 (viii)COUNTY OF SAN BERNARDINO HOUSING AUTHORITY Balance Beginning -31,864 -32,820 -33,805 -34,819 -35,863 -36,939 -38,047 -39,189 -40365 Simple Interest @AFR 3.00% -956 -985 -1,014 -1,045 -1,076 -1,108 -1,141 -1,176 -1,211 Payment @%of RR 0 0 0 0 0 0 0 0 0 Balance Remaining -32,820 -33,805 -34,819 -35,863 -36,939 -38,047 -39,189 -40,365 -41,576 (ix)101/6 TO INVESTOR LIMITED PARTNER 61,514 61,917 62,288 62,626 62,927 63,190 63,412 63,590 63,722 (x)CASH FLOW AVAILABLE FOR MGP&CLASS LP 1,168,775 1,176,426 1,183,479 1,189,891 1,195,619 1,200,615 1,204,830 1,208,213 1,210,711 VAL 9 MGP,LLC 70.00% 818,142 823,498 828,435 832,924 836,933 840,430 843,381 845,749 847,498 VAL9 DGP,LLC 10.00% 116,877 117643 118,348 118,989 119,562 120,061 120,483 120,821 121071 WATERMAN AFFORDABLE I LLC 20.00% 233,755 235,285 236,696 237,978 239,124 240,123 240,966 241,643 242,142 5D 2 o m 3 00 c o c o 0 C g m m m c : °' w w w J o D w & - A m m J Qc� -I X1 m r m m 0, D D y �.C'n�n N %_i C a Q c ?T_a z S r a Q f� !n 3 ° c N z 'C a EL _ m m m m v c x � < a 3 `-CL A tn0 ?o noa Ram o � m o ) v -ODJ m D m N N E vsc m 00 ° J m m = o`a F # Q m S ° m m CD o o m m m a 0= n3j l o o aoID cb o a m �� 'o n 2 m� � 3 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K n O N 0 O O O O O O N O M n -° R O m 2 n m 0(All N Oo G)N { EXHIBIT C SCHEDULE OF PERFORMANCE C-1 Val9 Loan Agreement Exhibit C—Schedule of Performance Schedule of Performance Va 19 Apa rtments 950 N.Valencia Avenue,San Bernardino,92410 Milestone Date Key-Prerequisite Milestone Receive Entitlements/Environmental Clearance 4/14/2014 Submit Entitlements Apply for 9%Tax Credits 7/1/2014 Receive Entitlements Receive 9%Tax Credit Reservation 9/24/2014 Apply for 9%Credits Select Tax Credit Investor 10/20/2014 Receive CTCAC Award Submit plans and applications for plan check and building permit 10/20/2014 Receive CTCAC Award Obtain Approval of Construction Plans March 2015 No later than 180-day CTCAC deadline (March 23,2015) Obtain FHA/HUD Loan Commitment March 2015 No laterthan 180-day CTCAC deadline (March 23,2015) Final Construction Contract March 2015 No later than 180-day CTCAC deadline (March 23,2015) Pay impact fees and obtain construction permits March 2015 No later than 180-day CTCAC deadline (March 23,2015) Begin Construction March 2015 No later than 180-day CTCAC deadline (March 23,2015) Management Plan May 2016 Complete construction August 2016 100%Occupied November 2016 Permanent Loan Closng December 2016 EXHIBIT D FORM OF PROMISSORY NOTE D-1 PROMISSORY NOTE SECURED BY DEED OF TRUST (Waterman Gardens- Valencia 9 Apartments) $1,500,000 San Bernardino, California March 17, 2015 FOR VALUE RECEIVED, the undersigned Val 9 Housing Partners, L.P., a California limited partnership ("Borrower")hereby promises to pay to the order of the City of San Bernardino, a charter of the State of California ("Holder"), the principal amount of up to One Million Five Hundred Thousand Dollars ($1,500,000), subject to Section 2.6 of the Loan Agreement, plus interest thereon pursuant to section 2 below. 1. Borrower's Obligation. This Promissory Note Secured by Deed of Trust (the "Note") evidences Borrower's obligation to repay Holder the principal amount of up to One Million Five Hundred Thousand Dollars ($1,500,000) for the funds loaned to Borrower by Holder to finance the construction of the Development pursuant to the HOME Investment Partnerships Act Loan Agreement between Borrower and Holder of even date herewith (the "Loan Agreement"). All capitalized terms used but not defined in this Note have the meanings set forth in the Loan Agreement. 2. Interest. (a) Subject to the provisions of subsection (b)below, simple interest will accrue on the outstanding principal balance of the Loan at a per annum rate of interest equal to three percent (3%), commencing on the date of disbursement until full repayment of the principal of the Loan. (b) If an Event of Default occurs, interest will accrue on all amounts due under this Note at the Default Rate until such Event of Default is cured by Borrower or waived by Holder. 3. Term and Repayment Requirements. The unpaid principal balance hereunder, together with accrued interest thereon, is due and payable no later than the date that is the fifty- fifth (55th) anniversary of the Completion Date(as defined in the Loan Agreement),but in no event will the Loan mature prior to the maturity of any HUD insured senior loan approved by the City. This Note is due and payable as set forth in Section 2.7 of the Loan Agreement. 4. No Assumption. This Note is not assumable by the successors and assigns of Borrower without the prior written consent of Holder, except as provided in the Loan Agreement. 5. Security. This Note, with interest, is secured by the Deed of Trust. Upon execution, the Deed of Trust will be recorded in the official records of San Bernardino County, California. Upon recordation of the Deed of Trust, this Note will become nonrecourse to 1 Borrower, pursuant to and except as provided in Section 2.8 of the Loan Agreement which section is hereby incorporated into this Note. The terms of the Deed of Trust are hereby incorporated into this Note and made a part hereof. 6. Terms of Payment. (a) Borrower shall make all payments due under this Note in currency of the United States of America to Holder at Office of the City Manager, City of San Bernardino, 300 N "D" Street, Sixth Floor, San Bernardino, CA 92418, Attn: Housing Director, or to such other place as Holder may from time to time designate. (b) All payments on this Note shall be without expense to Holder, and Borrower agrees to pay all costs and expenses, including re-conveyance fees and reasonable attorney's fees of Holder, incurred in connection with the payment of this Note and the release of any security hereof. (c) Notwithstanding any other provision of this Note, or any instrument securing the obligations of Borrower under this Note, if, for any reason whatsoever, the payment of any sums by Borrower pursuant to the terms of this Note would result in the payment of interest that exceeds the amount that Holder may legally charge under the laws of the State of California,then the amount by which payments exceed the lawful interest rate will automatically be deducted from the principal balance owing on this Note, so that in no event is Borrower obligated under the terms of this Note to pay any interest that would exceed the lawful rate. (d) The obligations of Borrower under this Note are absolute and Borrower waives any and all rights to offset, deduct or withhold any payments or charges due under this Note for any reason whatsoever. (e) Borrower may prepay the amounts due under this Note at any time without premium or penalty. 7. Event of Default; Acceleration. (a) Upon the occurrence of an Event of Default, the entire unpaid principal balance, together with all interest thereon, and together with all other sums then payable under this Note and the Deed of Trust will, at the option of Holder, become immediately due and payable without further demand. (b) Holder's failure to exercise the remedy set forth in subsection 7(a) above or any other remedy provided by law upon the occurrence of an Event of Default does not constitute a waiver of the right to exercise any remedy at any subsequent time in respect to the same or any other Event of Default. The acceptance by Holder of any payment that is less than the total of all amounts due and payable at the time of such payment does not constitute a waiver of the right to exercise any of the foregoing remedies or options at that time or at any subsequent time, or nullify any prior exercise of any such remedy or option, without the express consent of Holder, except as and to the extent otherwise provided by law. 2 (c) So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130, the provisions of this Section 7 shall not apply. 8. Waivers. (a) Borrower hereby waives diligence,presentment,protest and demand, and notice of protest, notice of demand, notice of dishonor and notice of non-payment of this Note. Borrower expressly agrees that this Note or any payment hereunder may be extended from time to time, and that Holder may accept further security or release any security for this Note, all without in any way affecting the liability of Borrower. (b) Any extension of time for payment of this Note or any installment hereof made by agreement of Holder with any person now or hereafter liable for payment of this Note must not operate to release, discharge,modify, change or affect the original liability of Borrower under this Note, either in whole or in part. 9. Miscellaneous Provisions. (a) All notices to Holder or Borrower shall be given in the manner and at the addresses set forth in the Loan Agreement, or to such addresses as Holder and Borrower may therein designate. (b) Borrower promises to pay all costs and expenses, including reasonable attorney's fees, incurred by Holder in the enforcement of the provisions of this Note, regardless of whether suit is filed to seek enforcement. (c) This Note may not be changed orally,but only by an agreement in writing signed by the party against whom enforcement of any waiver, change,modification or discharge is sought. (d) This Note shall be governed by and construed in accordance with the laws of the State of California. (e) The times for the performance of any obligations hereunder are to be strictly construed, time being of the essence. (f) The Loan Documents, of which this Note is a part, contain the entire agreement between the parties as to the Loan. This Note may not be modified except upon the written consent of the parties. (g) So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130,payments due under this soft note shall be payable only from 75% of available surplus cash of said project, as the term surplus cash is defined in the Regulatory Agreement for Multifamily Projects between HUD and the Borrower. 3 The restriction on payment imposed by this paragraph shall not excuse any default caused by the failure of the maker to pay the indebtedness evidenced by this soft note. [Signature Page Follows] 4 IN WITNESS WHEREOF, Borrower has executed this Promissory Note as of the day and year first above written. BORROWER: Val 9 Housing Partners, L.P., a California limited partnership By: Val 9 MGP, LLC, its sole and managing general partner By: National Community Renaissance of California, its sole and managing member By: Tracy Thomas, Chief Financial Officer PROMISSORY NOTE SECURED BY DEED OF TRUST (Waterman Gardens- Valencia 9 Apartments) $1,500,000 San Bernardino, California March 17, 2015 FOR VALUE RECEIVED, the undersigned Val 9 Housing Partners, L.P., a California limited partnership ("Borrower") hereby promises to pay to the order of the City of San Bernardino, a charter of the State of California("Holder"), the principal amount of up to One Million Five Hundred Thousand Dollars ($1,500,000), subject to Section 2.6 of the Loan Agreement, plus interest thereon pursuant to section 2 below. 1. Borrower's Obligation. This Promissory Note Secured by Deed of Trust(the "Note") evidences Borrower's obligation to repay Holder the principal amount of up to One Million Five Hundred Thousand Dollars ($1,500,000) for the funds loaned to Borrower by Holder to finance the construction of the Development pursuant to the HOME Investment Partnerships Act Loan Agreement between Borrower and Holder of even date herewith (the "Loan Agreement"). All capitalized terms used but not defined in this Note have the meanings set forth in the Loan Agreement. 2. Interest. (a) Subject to the provisions of subsection (b) below, simple interest will accrue on the outstanding principal balance of the Loan at a per annum rate of interest equal to three percent (3%), commencing on the date of disbursement until full repayment of the principal of the Loan. (b) If an Event of Default occurs, interest will accrue on all amounts due under this Note at the Default Rate until such Event of Default is cured by Borrower or waived by Holder. 3. Term and Repayment Requirements. The unpaid principal balance hereunder, together with accrued interest thereon, is due and payable no later than the date that is the fifty- fifth (55`h) anniversary of the Completion Date (as defined in the Loan Agreement), but in no event will the Loan mature prior to the maturity of any HUD insured senior loan approved by the City. This Note is due and payable as set forth in Section 2.7 of the Loan Agreement. 4. No Assumption. This Note is not assumable by the successors and assigns of Borrower without the prior written consent of Holder, except as provided in the Loan Agreement. 5. Security. This Note, with interest, is secured by the Deed of Trust. Upon execution, the Deed of Trust will be recorded in the official records of San Bernardino County, California. Upon recordation of the Deed of Trust, this Note will become nonrecourse to 1 Borrower, pursuant to and except as provided in Section 2.8 of the Loan Agreement which section is hereby incorporated into this Note. The terms of the Deed of Trust are hereby incorporated into this Note and made a part hereof. 6. Terms of Payment. (a) Borrower shall make all payments due under this Note in currency of the United States of America to Holder at Office of the City Manager, City of San Bernardino, 300 N "D" Street, Sixth Floor, San Bernardino, CA 92418, Attn: Housing Director, or to such other place as Holder may from time to time designate. (b) All payments on this Note shall be without expense to Holder, and Borrower agrees to pay all costs and expenses, including re-conveyance fees and reasonable attorney's fees of Holder, incurred in connection with the payment of this Note and the release of any security hereof. (c) Notwithstanding any other provision of this Note, or any instrument securing the obligations of Borrower under this Note, if, for any reason whatsoever, the payment of any sums by Borrower pursuant to the terms of this Note would result in the payment of interest that exceeds the amount that Holder may legally charge under the laws of the State of California, then the amount by which payments exceed the lawful interest rate will automatically be deducted from the principal balance owing on this Note, so that in no event is Borrower obligated under the terms of this Note to pay any interest that would exceed the lawful rate. (d) The obligations of Borrower under this Note are absolute and Borrower waives any and all rights to offset, deduct or withhold any payments or charges due under this Note for any reason whatsoever. (e) Borrower may prepay the amounts due under this Note at any time without premium or penalty. 7. Event of Default: Acceleration. (a) Upon the occurrence of an Event of Default, the entire unpaid principal balance, together with all interest thereon, and together with all other sums then payable under this Note and the Deed of Trust will, at the option of Holder, become immediately due and payable without further demand. (b) Holder's failure to exercise the remedy set forth in subsection 7(a) above or any other remedy provided by law upon the occurrence of an Event of Default does not constitute a waiver of the right to exercise any remedy at any subsequent time in respect to the same or any other Event of Default. The acceptance by Holder of any payment that is less than the total of all amounts due and payable at the time of such payment does not constitute a waiver of the right to exercise any of the foregoing remedies or options at that time or at any subsequent time, or nullify any prior exercise of any such remedy or option, without the express consent of Holder, except as and to the extent otherwise provided by law. 2 (c) So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130, the provisions of this Section 7 shall not apply. 8. Waivers. (a) Borrower hereby waives diligence, presentment,protest and demand, and notice of protest, notice of demand, notice of dishonor and notice of non-payment of this Note. Borrower expressly agrees that this Note or any payment hereunder may be extended from time to time, and that Holder may accept further security or release any security for this Note, all without in any way affecting the liability of Borrower. (b) Any extension of time for payment of this Note or any installment hereof made by agreement of Holder with any person now or hereafter liable for payment of this Note must not operate to release, discharge, modify, change or affect the original liability of Borrower under this Note, either in whole or in part. 9. Miscellaneous Provisions. (a) All notices to Holder or Borrower shall be given in the manner and at the addresses set forth in the Loan Agreement, or to such addresses as Holder and Borrower may therein designate. (b) Borrower promises to pay all costs and expenses, including reasonable attorney's fees, incurred by Holder in the enforcement of the provisions of this Note, regardless of whether suit is filed to seek enforcement. (c) This Note may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. (d) This Note shall be governed by and construed in accordance with the laws of the State of California. (e) The times for the performance of any obligations hereunder are to be strictly construed, time being of the essence. (0 The Loan Documents, of which this Note is a part, contain the entire agreement between the parties as to the Loan. This Note may not be modified except upon the written consent of the parties. (g) So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130, payments due under this soft note shall be payable only from 75% of available surplus cash of said project, as the term surplus cash is defined in the Regulatory Agreement for Multifamily Projects between HUD and the Borrower. 3 The restriction on payment imposed by this paragraph shall not excuse any default caused by the failure of the maker to pay the indebtedness evidenced by this soft note. [Signature Page Follows] 4 IN WITNESS WHEREOF, Borrower has executed this Promissory Note as of the day and year first above written. BORROWER: Val 9 Housing Partners, L.P., a California limited partnership By: Val 9 MGP, LLC, its sole and managing general partner By: National Community Renaissance of California, its sole and managing member By: Tracy'fhorQajs Chief Financial Officer EXHIBIT E FORM OF DEED OF TRUST E-1 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Office of the City Manager City of San Bernardino 300 N "D" Street, Sixth Floor San Bernardino, CA 92418 Attn: Housing Director No fee for recording pursuant to Government Code Section 27383 DEED OF TRUST WITH ASSIGNMENT OF RENTS, SECURITY AGREEMENT, AND FIXTURE FILING (Waterman Gardens- Valencia 9 Apartments) THIS DEED OF TRUST WITH ASSIGNMENT OF RENTS, SECURITY AGREEMENT, AND FIXTURE FILING ("Deed of Trust") is made as of March 17, 2015,by and among Val 9 Housing Partners, L.P., a California limited partnership ("Trustor"), Fidelity National Title Insurance Company Name ( as "Trustee"), and the City of San Bernardino, a political subdivision of the State of California (as "Beneficiary"). FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt of which is hereby acknowledged, Trustor hereby irrevocably grants, transfers, conveys and assigns to Trustee, IN TRUST, WITH POWER OF SALE, for the benefit and security of Beneficiary, under and subject to the terms and conditions hereinafter set forth, Trustor's fee interest in the property located in the County of San Bernardino, State of California, that is described in the attached Exhibit A, incorporated herein by this reference (the "Propert y"). TOGETHER WITH all interest, estates or other claims,both in law and in equity which Trustor now has or may hereafter acquire in the Property and the rents; TOGETHER WITH all easements, rights-of-way and rights used in connection therewith or as a means of access thereto, including(without limiting the generality of the foregoing) all tenements, hereditaments and appurtenances thereof and thereto; TOGETHER WITH any and all buildings and improvements of every kind and description now or hereafter erected thereon, and all property of the Trustor now or hereafter affixed to or placed upon the Property; TOGETHER WITH all building materials and equipment now or hereafter delivered to said property and intended to be installed therein; TOGETHER WITH all right, title and interest of Trustor, now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, 1 adjoining the Property, and any and all sidewalks, alleys and strips and areas of land adjacent to or used in connection with the Property; TOGETHER WITH all estate, interest,right, title, other claim or demand, of every nature, in and to such property, including the Property,both in law and in equity, including,but not limited to, all deposits made with or other security given by Trustor to utility companies, the proceeds from any or all of such property, including the Property, claims or demands with respect to the proceeds of insurance in effect with respect thereto, which Trustor now has or may hereafter acquire, any and all awards made for the taking by eminent domain or by any proceeding or purchase in lieu thereof of the whole or any part of such property, including without limitation, any awards resulting from a change of grade of streets and awards for severance damages to the extent Beneficiary has an interest in such awards for taking as provided in Paragraph 4.1 herein; TOGETHER WITH all of Trustor's interest in all articles of personal property or fixtures now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the Property which are necessary to the complete and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, including all other goods and chattels and personal property as are ever used or furnished in operating a building, or the activities conducted therein, similar to the one herein described and referred to, and all renewals or replacements thereof or articles in substitution therefor, whether or not the same are, or will be, attached to said building or buildings in any manner; and TOGETHER WITH all of Trustor's interest in all building materials, fixtures, equipment, work in process and other personal property to be incorporated into the Property; all goods, materials, supplies, fixtures, equipment,machinery, furniture and furnishings, signs and other personal property now or hereafter appropriated for use on the Property, whether stored on the Property or elsewhere, and used or to be used in connection with the Property; all rents, issues and profits, and all inventory, accounts, accounts receivable, contract rights, general intangibles, chattel paper, instruments, documents, notes drafts, letters of credit, insurance policies, insurance and condemnation awards and proceeds,trade names, trademarks and service marks arising from or related to the Property and any business conducted thereon by Trustor; all replacements, additions, accessions and proceeds; and all books, records and files relating to any of the foregoing. All of the foregoing, together with the Property, is herein referred to as the "Security." To have and to hold the Security together with acquittances to the Trustee, its successors and assigns forever. FOR THE PURPOSE OF SECURING THE FOLLOWING OBLIGATIONS (collectively, the "Secured Obligations"): A. Payment to Beneficiary of all sums at any time owing under or in connection with the Note(defined in Section 1.4 below) until paid or cancelled and any other amounts owing under the Loan Documents (defined in Section 1.3 below). Said principal and other payments are due and payable as provided in the Note or other Loan Documents, as applicable. The Note 2 and all its terms are incorporated herein by reference, and this conveyance secures any and all extensions thereof, however evidenced; B. Payment of any sums advanced by Beneficiary to protect the Security pursuant to the terms and provisions of this Deed of Trust following a breach of Trustor's obligation to advance said sums and the expiration of any applicable cure period, with interest thereon as provided herein; C. Performance of every obligation, covenant or agreement of Trustor contained herein and in the Loan Documents; and D. All modifications, extensions and renewals of any of the Secured Obligations (including without limitation, (i) modifications, extensions or renewals at a different rate of interest, or(ii) deferrals or accelerations of the required principal payment dates or interest payment dates or both, in whole or in part), however evidenced, whether or not any such modification, extension or renewal is evidenced by a new or additional promissory note or notes. AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES: ARTICLE 1 DEFINITIONS In addition to the terms defined elsewhere in this Deed of Trust, the following terms have the following meanings in this Deed of Trust: Section 1.1 The term "Loan" means the loan made by the Beneficiary to the Trustor in the amount up to One Million Five Hundred Thousand Dollars ($1,500,000), subject to Section 2.6 of the Loan Agreement. Section 1.2 The term "Loan Agreement" means that certain HOME Investment Partnerships Act Loan Agreement between Trustor and Beneficiary, dated March 3, 2015, as such may be amended from time to time, providing for the Beneficiary to loan to Trustor up to One Million Five Hundred Thousand Dollars ($1,500,000), subject to Section 2.6 of the Loan Agreement. Section 1.3 The term "Loan Documents" means this Deed of Trust, the Note, the Loan Agreement, and the Regulatory Agreement, and any other debt, loan or security instruments between Trustor and the Beneficiary relating to the Loan. Section 1.4 The term "Note" means the Promissory Note in the principal amount of up to One Million Five Hundred Thousand Dollars ($1,500,000) of even date herewith, executed by Trustor in favor of the Beneficiary, the payment of which is secured by this Deed of Trust. (A copy of the Note is on file with the Beneficiary and terms and provisions of the Note are incorporated herein by reference.) 3 Section 1.5 The term "Principal" means the amount required to be paid under the Note. Section 1.6 The term "Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive Covenants of even date herewith by and between the Beneficiary and the Trustor. ARTICLE 2 MAINTENANCE AND MODIFICATION OF THE PROPERTY AND SECURITY Section 2.1 Maintenance and Modification of the Property by Trustor. The Trustor agrees that at all times prior to full payment and performance of the Secured Obligations,the Trustor will, at the Trustor's own expense,maintain,preserve and keep the Security or cause the Security to be maintained and preserved in good condition. The Trustor will from time to time make or cause to be made all repairs, replacements and renewals deemed proper and necessary by it. The Beneficiary has no responsibility in any of these matters or for the making of improvements or additions to the Security. Trustor agrees to pay fully and discharge (or cause to be paid fully and discharged) all claims for labor done and for material and services furnished in connection with the Security, diligently to file or procure the filing of a valid notice of cessation upon the event of a cessation of labor on the work or construction on the Security for a continuous period of thirty(30) days or more, and to take all other reasonable steps to forestall the assertion of claims of lien against the Security or any part thereof. Trustor irrevocably appoints, designates and authorizes Beneficiary as its agent (said agency being coupled with an interest) with the authority, but without any obligation, to file for record any notices of completion or cessation of labor or any other notice that Beneficiary deems necessary or desirable to protect its interest in and to the Security or the Loan Documents; provided,however, that Beneficiary exercises its rights as agent of Trustor only in the event that Trustor fails to take, or fails to diligently continue to take, those actions as hereinbefore provided. Upon demand by Beneficiary, Trustor shall make or cause to be made such demands or claims as Beneficiary specifies upon laborers,materialmen, subcontractors or other persons who have furnished or claim to have furnished labor, services or materials in connection with the Security. Nothing herein contained requires Trustor to pay any claims for labor,materials or services which Trustor in good faith disputes and is diligently contesting provided that Trustor shall, within thirty(30) days after the filing of any claim of lien,record in the Office of the Recorder of San Bernardino County, a surety bond in an amount 1 and 1/2 times the amount of such claim item to protect against a claim of lien, or provide other form of security acceptable to the Beneficiary at the Beneficiary's sole and absolute discretion. Section 2.2 Granting of Easements. Trustor may not grant easements, licenses, rights-of-way or other rights or privileges in the nature of easements with respect to any property or rights included in the Security except 4 those required or desirable for installation and maintenance of public utilities including, without limitation, water, gas, electricity, sewer, telephone and telegraph, or those required by law, and as approved, in writing,by Beneficiary. Section 2.3 Assignment of Rents. Subject to the rights of any approved senior mortgage lender, as part of the consideration for the indebtedness evidenced by the Note, Trustor hereby absolutely and unconditionally assigns and transfers to Beneficiary all the rents and revenues of the Property including those now due, past due, or to become due by virtue of any lease or other agreement for the occupancy or use of all or any part of the Property, regardless of to whom the rents and revenues of the Property are payable. Trustor hereby authorizes Beneficiary or Beneficiary's agents to collect the aforesaid rents and revenues and hereby directs each tenant of the Property to pay such rents to Beneficiary or Beneficiary's agents; provided, however, that prior to written notice given by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents, Trustor shall collect and receive all rents and revenues of the Property as trustee for the benefit of Beneficiary and Trustor to apply the rents and revenues so collected to the Secured Obligations with the balance, so long as no such breach has occurred,to the account of Trustor, it being intended by Trustor and Beneficiary that this assignment of rents constitutes an absolute assignment and not an assignment for additional security only. Upon delivery of written notice by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents, and without the necessity of Beneficiary entering upon and taking and maintaining full control of the Property in person,by agent or by a court-appointed receiver, Beneficiary shall immediately be entitled to possession of all rents and revenues of the Property as specified in this Section 2.3 as the same becomes due and payable, including but not limited to, rents then due and unpaid, and all such rents will immediately upon delivery of such notice be held by Trustor as trustee for the benefit of Beneficiary only; provided, however, that the written notice by Beneficiary to Trustor of the breach by Trustor contains a statement that Beneficiary exercises its rights to such rents. Trustor agrees that commencing upon delivery of such written notice of Trustor's breach by Beneficiary to Trustor, each tenant of the Property shall make such rents payable to and pay such rents to Beneficiary or Beneficiary's agents on Beneficiary's written demand to each tenant therefor, delivered to each tenant personally,by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by Trustor. Subject to the rights of any approved senior mortgage lender, Trustor hereby covenants that Trustor has not executed any prior assignment of said rents, that Trustor has not performed, and will not perform, any acts or has not executed and will not execute, any instrument which would prevent Beneficiary from exercising its rights under this Section 2.3, and that at the time of execution of this Deed of Trust, there has been no anticipation or prepayment of any of the rents of the Property for more than two (2)months prior to the due dates of such rents. Trustor covenants that Trustor will not hereafter collect or accept payment of any rents of the Property more than two (2)months prior to the due dates of such rents. Trustor further covenant that Trustor will execute and deliver to Beneficiary such further assignments of rents and revenues of the Property as Beneficiary may from time to time request. 5 Upon Trustor's breach of any covenant or agreement of Trustor in the Loan Documents, Beneficiary may in person,by agent or by a court-appointed receiver, regardless of the adequacy of Beneficiary's security, enter upon and take and maintain full control of the Property in order to perform all acts necessary and appropriate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of leases, the collection of all rents and revenues of the Property, the making of repairs to the Property and the execution or termination of contracts providing for the management or maintenance of the Property, all on such terms as are deemed best to protect the security of this Deed of Trust. In the event Beneficiary elects to seek the appointment of a receiver for the Property upon Trustor's breach of any covenant or agreement of Trustor in this Deed of Trust, Trustor hereby expressly consents to the appointment of such receiver. Beneficiary or the receiver will be entitled to receive a reasonable fee for so managing the Property. All rents and revenues collected subsequent to delivery of written notice by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents are to be applied first to the costs, if any, of taking control of and managing the Property and collecting the rents, including,but not limited to, attorney's fees,receiver's fees, premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies, taxes, assessments and other charges on the Property, and the costs of discharging any obligation or liability of Trustor as lessor or landlord of the Property and then to the sums secured by this deed of Trust. Beneficiary or the receiver is to have access to the books and records used in the operation and maintenance of the Property and will be liable to account only for those rents actually received. Beneficiary is not liable to Trustor, anyone claiming under or through Trustor or anyone having an interest in the Property by reason of anything done or left undone by Beneficiary under this Section 2.3. If the rents of the Property are not sufficient to meet the costs, if any, of taking control of and managing the Property and collecting the rents, any funds expended by Beneficiary for such purposes will become part of the Secured Obligations pursuant to Section 3.3 hereof. Subject to Section 2.8 of the Loan Agreement,unless Beneficiary and Trustor agree in writing to other terms of payment, such amounts are payable by Trustor to Beneficiary upon notice from Beneficiary to Trustor requesting payment thereof and will bear interest from the date of disbursement at the rate stated in Section 3.3. If the Beneficiary or the receiver enters upon and takes and maintains control of the Property, neither that act nor any application of rents as provided herein will cure or waive any default under this Deed of Trust or invalidate any other right or remedy available to Beneficiary under applicable law or under this Deed of Trust. This assignment of rents of the Property will terminate at such time as this Deed of Trust ceases to secure the Secured Obligations. ARTICLE 3 TAXES AND INSURANCE; ADVANCES Section 3.1 Taxes, Other Governmental Charges and Utility Charges. 6 Trustor shall pay, or cause to be paid,prior to the date of delinquency, all taxes, assessments, charges and levies imposed by any public authority or utility company that are or may become a lien affecting the Security or any part thereof; provided,however,that Trustor is not required to pay and discharge any such tax, assessment, charge or levy so long as (a) the legality thereof is promptly and actively contested in good faith and by appropriate proceedings, and (b) Trustor maintains reserves adequate to pay any liabilities contested pursuant to this Section 3.1. With respect to taxes, special assessments or other similar governmental charges, Trustor shall pay such amount in full prior to the attachment of any lien therefor on any part of the Security; provided,however, if such taxes, assessments or charges can be paid in installments, Trustor may pay in such installments. Except as provided in clause (b) of the first sentence of this paragraph, the provisions of this Section 3.1 may not be construed to require that Trustor maintain a reserve account, escrow account, impound account or other similar account for the payment of future taxes, assessments, charges and levies. In the event that Trustor fails to pay any of the items required by this Section to be paid by Trustor, Beneficiary may(but is under no obligation to)pay the same, after the Beneficiary has notified the Trustor of such failure to pay and the Trustor fails to fully pay such items within seven (7)business days after receipt of such notice. Any amount so advanced therefor by Beneficiary, together with interest thereon from the date of such advance at the maximum rate permitted by law, will become part of the Secured Obligations secured hereby, and Trustor agrees to pay all such amounts. Section 3.2 Provisions Respecting Insurance. Trustor agrees to provide insurance conforming in all respects to that required under the Loan Documents during the course of construction and following completion, and at all times until all amounts secured by this Deed of Trust have been paid, all Secured Obligations secured hereunder have been fulfilled, and this Deed of Trust has been reconveyed. All such insurance policies and coverages are to be maintained at Trustor's sole cost and expense. Certificates of insurance for all of the above insurance policies, showing the same to be in full force and effect, are to be delivered to the Beneficiary upon demand therefor at any time prior to Trustor's satisfaction of the Secured Obligations. Section 3.3 Advances. In the event the Trustor fails to maintain the full insurance coverage required by this Deed of Trust or fails to keep the Security in accordance with the Loan Documents, the Beneficiary, after at least seven (7) days prior notice to Trustor, may(but is under no obligation to) (i) take out the required policies of insurance and pay the premiums on the same, and (ii) make any repairs or replacements that are necessary and provide for payment thereof. All amounts so advanced by the Beneficiary will become part of the Secured Obligations (together with interest as set forth below) and will be secured hereby, which amounts the Trustor agrees to pay on the demand of the Beneficiary, and if not so paid, will bear interest from the date of the advance at the lesser of ten percent (10%)per annum or the maximum rate permitted by law. So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project 7 No. 143-35130, no advances may be made under this Section 3.3 without the prior written consent of the U.S. Department of Housing and Urban Development(HUD). ARTICLE 4 DAMAGE, DESTRUCTION OR CONDEMNATION Section 4.1 Awards and Damages. All judgments, awards of damages, settlements and compensation made in connection with or in lieu of(1)the taking of all or any part of or any interest in the Property by or under assertion of the power of eminent domain, (2) any damage to or destruction of the Property or any part thereof by insured casualty, and (3) any other injury or damage to all or any part of the Property(collectively,the "Funds") are hereby assigned to and are to be paid to the Beneficiary by a check made payable to the Beneficiary. The Beneficiary is authorized and empowered (but not required) to collect and receive any Funds and is authorized to apply them in whole or in part to any indebtedness or obligation secured hereby, in such order and manner as the Beneficiary determines at its sole option. The Beneficiary is entitled to settle and adjust all claims under insurance policies provided under this Deed of Trust and may deduct and retain from the proceeds of such insurance the amount of all expenses incurred by it in connection with any such settlement or adjustment. All or any part of the amounts so collected and recovered by the Beneficiary may be released to Trustor upon such conditions as the Beneficiary may impose for its disposition. Application of all or any part of the Funds collected and received by the Beneficiary or the release thereof will not cure or waive any default under this Deed of Trust. The rights of the Beneficiary under this Section 4.1 are subject to the rights of any senior mortgage lender. The Beneficiary shall release the Funds to Trustor to be used to reconstruct the improvements on the Property provided that Beneficiary reasonably determines that Trustor (taking into account the Funds) has sufficient funds to rebuild the improvements in substantially the form that existed prior to the casualty or condemnation. ARTICLE 5 AGREEMENTS AFFECTING THE PROPERTY; FURTHER ASSURANCES; PAYMENT OF PRINCIPAL AND INTEREST Section 5.1 Other Agreements Affecting Property. The Trustor shall duly and punctually perform all terms, covenants, conditions and agreements binding upon it under the Loan Documents and any other agreement of any nature whatsoever now or hereafter involving or affecting the Security or any part thereof. Section 5.2 Agreement to Pay Attorneys' Fees and Expenses. In the event of any Event of Default (as defined in Section 7.1)hereunder, and if the Beneficiary employs attorneys or incurs other expenses for the collection of amounts due hereunder or the enforcement of performance or observance of an obligation or agreement on the part of the Trustor in this Deed of Trust, the Trustor agrees that it will, on demand therefor, pay to the Beneficiary the reasonable fees of such attorneys and such other reasonable expenses so 8 incurred by the Beneficiary. Any such amounts paid by the Beneficiary will be added to the Secured Obligations, and will bear interest from the date such expenses are incurred at the lesser of ten percent (10%) per annum or the maximum rate permitted by law. So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130,the provisions of this Section 5.2 shall not apply to HUD. Section 5.3 Payment of the Principal. The Trustor shall pay to the Beneficiary the Principal and any other payments as set forth in the Note in the amounts and by the times set out therein. Section 5.4 Personal Property. To the maximum extent permitted by law,the personal property subject to this Deed of Trust is deemed to be fixtures and part of the real property and this Deed of Trust constitutes a fixtures filing under the California Commercial Code. As to any personal property not deemed or permitted to be fixtures, this Deed of Trust constitutes a security agreement under the California Commercial Code. Section 5.5 Financing Statement. The Trustor shall execute and deliver to the Beneficiary such financing statements pursuant to the appropriate statutes, and any other documents or instruments as are required to convey to the Beneficiary a valid perfected security interest in the Security. The Trustor shall perform all acts that the Beneficiary reasonably requests so as to enable the Beneficiary to maintain a valid perfected security interest in the Security in order to secure the payment of the Note in accordance with its terms. The Beneficiary is authorized to file a copy of any such financing statement in any jurisdiction(s) as it deems appropriate from time to time in order to protect the security interest established pursuant to this instrument. Section 5.6 Operation of the Security. The Trustor shall operate the Security(and, in case of a transfer of a portion of the Security subject to this Deed of Trust,the transferee shall operate such portion of the Security) in full compliance with the Loan Documents. Section 5.7 Inspection of the Security. At any and all reasonable times upon forty-eight (48)hours'notice, the Beneficiary and its duly authorized agents, attorneys, experts, engineers, accountants and representatives,may inspect the Security, without payment of charges or fees. Section 5.8 Nondiscrimination. The Trustor herein covenants by and for itself, its heirs, executors, administrators, and assigns, and all persons claiming under or through them,that there will be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, 9 religion, age, sex, sexual orientation,marital status, national origin or ancestry in the sale, lease, sublease, transfer,use, occupancy, tenure or enjoyment of the Security,nor will the Trustor itself or any person claiming under or through it establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location,number,use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the Security. The foregoing covenants run with the land. ARTICLE 6 HAZARDOUS WASTE Trustor shall keep and maintain the Property in compliance with, and shall not cause or permit the Property to be in violation of any federal, state or local laws, ordinances or regulations relating to industrial hygiene or to the environmental conditions on,under or about the Property including,but not limited to, soil and ground water conditions. Trustor shall not use, generate, manufacture, store or dispose of on,under, or about the Property or transport to or from the Property any flammable explosives, radioactive materials, hazardous wastes,toxic substances or related materials, including without limitation, any substances defined as or included in the definition of"hazardous substances," hazardous wastes," "hazardous materials," or "toxic substances under any applicable federal or state laws or regulations (collectively referred to hereinafter as "Hazardous Materials") except such of the foregoing as may be customarily used in construction or operation of a multi-family residential development. Trustor shall immediately advise Beneficiary in writing if at any time it receives written notice of: (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against Trustor or the Property pursuant to any applicable federal, state or local laws, ordinances, or regulations relating to any Hazardous Materials, ("Hazardous Materials Law"); (ii) all claims made or threatened by any third party against Trustor or the Property relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials (the matters set forth in clauses (i) and (ii) above are hereinafter referred to as "Hazardous Materials Claims"); and (iii)Trustor's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to be classified as "border-zone property" (as defined in California Health and Safety Code Section 25117.4) under the provision of California Health and Safety Code Section 25220 et seg., or any regulation adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use of the Property under any Hazardous Materials Law. Beneficiary has the right to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims and to have its reasonable attorneys' fees in connection therewith paid by Trustor. Trustor shall indemnify and hold harmless Beneficiary and its elected officials, supervisors, directors, officers, employees, agents, successors and assigns from and against any loss, damage, cost, expense or liability directly or indirectly arising out of or attributable to the use, generation, storage, release, threatened release, discharge, disposal, or presence of Hazardous Materials on,under, or about the Property including without limitation: (a) all foreseeable consequential damages; (b) the costs of any required or necessary repair, cleanup or detoxification of the Property and the 10 preparation and implementation of any closure, remedial or other required plans; and (c) all reasonable costs and expenses incurred by Beneficiary in connection with clauses (a) and (b), including but not limited to reasonable attorneys' fees and consultant's fees. This indemnification applies whether or not any government agency has issued a cleanup order. Losses, claims, costs, suits, liability, and expenses covered by this indemnification provision include,but are not limited to: (1) losses attributable to diminution in the value of the Property; (2) loss or restriction of use of rentable space on the Property; (3) adverse effect on the marketing of any rental space on the Property; and (4)penalties and fines levied by, and remedial or enforcement actions of any kind issued by any regulatory agency(including but not limited to the costs of any required testing,remediation,repair, removal, cleanup or detoxification of the Property and surrounding properties). Without Beneficiary's prior written consent,which may not be unreasonably withheld, Trustor may not take any remedial action in response to the presence of any Hazardous Materials on,under or about the Property, nor enter into any settlement agreement, consent decree, or other compromise in respect to any Hazardous Material Claims, which remedial action, settlement, consent decree or compromise might, in Beneficiary's reasonable judgment, impairs the value of the Beneficiary's security hereunder; provided,however, that Beneficiary's prior consent is not necessary in the event that the presence of Hazardous Materials on,under, or about the Property either poses an immediate threat to the health, safety or welfare of any individual or is of such a nature that an immediate remedial response is necessary and it is not reasonably possible to obtain Beneficiary's consent before taking such action, provided that in such event Trustor notifies Beneficiary as soon as practicable of any action so taken. Beneficiary agrees not to withhold its consent,where such consent is required hereunder, i£ (i) a particular remedial action is ordered by a court of competent jurisdiction; (ii) Trustor will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required action; (iii) Trustor establishes to the reasonable satisfaction of Beneficiary that there is no reasonable alternative to such remedial action which would result in less impairment of Beneficiary's security hereunder; or(iv) the action has been agreed to by Beneficiary. The Trustor hereby acknowledges and agrees that: (i) this Article is intended as the Beneficiary's written request for information (and the Trustor's response) concerning the environmental condition of the Property as required by California Code of Civil Procedure Section 726.5, and (ii) each representation and warranty in this Deed of Trust or any of the other Loan Documents (together with any indemnity applicable to a breach of any such representation and warranty) with respect to the environmental condition of the property is intended by the Beneficiary and the Trustor to be an "environmental provision" for purposes of California Code of Civil Procedure Section 736. In the event that any portion of the Property is determined to be "environmentally impaired" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(3)) or to be an "affected parcel" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(1)), then, without otherwise limiting or in any way affecting the Beneficiary's or the Trustee's rights and remedies under this Deed of Trust, the Beneficiary may elect to exercise its rights under California Code of Civil Procedure Section 726.5(a)to (1) waive its lien on such environmentally impaired or affected portion of the Property and (2) exercise(a) the rights and remedies of an unsecured creditor, including reduction of its claim against the Trustor to 11 judgment, and (b) any other rights and remedies permitted by law. For purposes of determining the Beneficiary's right to proceed as an unsecured creditor under California Code of Civil Procedure Section 726.5(a),the Trustor will be deemed to have willfully permitted or acquiesced in a release or threatened release of hazardous materials, within the meaning of California Code of Civil Procedure Section 726.5(d)(1), if the release or threatened release of hazardous materials was knowingly or negligently caused or contributed to by any lessee, occupant, or user of any portion of the Property and the Trustor knew or in the exercise of reasonable diligence should have known of the activity by such lessee, occupant, or user which caused or contributed to the release or threatened release. All costs and expenses, including(but not limited to) attorneys' fees, incurred by the Beneficiary in connection with any action commenced under this paragraph, including any action required by California Code of Civil Procedure Section 726.5(b)to determine the degree to which the Property is environmentally impaired,plus interest thereon at the default rate specified in the Loan Agreement until paid, will be added to the indebtedness secured by this Deed of Trust and will be due and payable to the Beneficiary upon its demand made at any time following the conclusion of such action. ARTICLE 7 EVENTS OF DEFAULT AND REMEDIES Section 7.1 Events of Default. The following are events of default following the expiration of any applicable notice and cure periods (each an "Event of Default"): (i) failure to make any payment to be paid by Trustor under the Loan Documents; (ii) failure to observe or perform any of Trustor's other covenants, agreements or obligations under the Loan Documents, including,without limitation,the provisions concerning discrimination; (iii) failure to make any payment or observe or perform any of Trustor's other covenants, agreements, or obligations under any Secured Obligations, which default is not cured within the times and in the manner provided therein; and (iv) failure to make any payments or observe or perform any of Trustor's other covenants, agreements or obligations under any other debt instrument or regulatory agreement secured by the Property, which default is not cured within the time and in the manner provided therein. Section 7.2 Acceleration of Maturity. If an Event of Default has occurred and is continuing, then at the option of the Beneficiary, the amount of any payment related to the Event of Default and all unpaid Secured Obligations are immediately due and payable, and no omission on the part of the Beneficiary to exercise such option when entitled to do so may be construed as a waiver of such right. So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130, the provisions of this Section 7.2 shall not apply. Section 7.3 The Beneficiary's Right to Enter and Take Possession. If an Event of Default has occurred and is continuing, the Beneficiary may: 12 (a) Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its security, enter upon the Property and take possession thereof(or any part thereof) and of any of the Security, in its own name or in the name of Trustee, and do any acts that it deems necessary or desirable to preserve the value or marketability of the Property, or part thereof or interest therein, increase the income therefrom or protect the security thereof. The entering upon and taking possession of the Security will not cure or waive any Event of Default or Notice of Sale (as defined in Section 7.3(c),below) hereunder or invalidate any act done in response to such Event of Default or pursuant to such Notice of Sale, and, notwithstanding the continuance in possession of the Security, Beneficiary will be entitled to exercise every right provided for in this Deed of Trust, or by law upon occurrence of any Event of Default, including the right to exercise the power of sale; (b) Commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof; (c) Deliver to Trustee a written declaration of an Event of Default and demand for sale, and a written notice of default and election to cause Trustor's interest in the Security to be sold ("Notice of Sale"),which notice Trustee or Beneficiary shall cause to be duly filed for record in the Official Records of San Bernardino County; or (d) Exercise all other rights and remedies provided herein, in the instruments by which the Trustor acquires title to any Security, or in any other document or agreement now or hereafter evidencing, creating or securing the Secured Obligations. Section 7.4 Foreclosure By Power of Sale. Should the Beneficiary elect to foreclose by exercise of the power of sale herein contained, the Beneficiary shall deliver to the Trustee the Notice of Sale and shall deposit with Trustee the Note which is secured hereby(and the deposit of which will be deemed to constitute evidence that the Secured Obligations are immediately due and payable), and such receipts and evidence of any expenditures made that are additionally secured hereby as Trustee may require. (a) Upon receipt of the Notice of Sale from the Beneficiary, Trustee shall cause to be recorded,published and delivered to Trustor such Notice of Sale as is then required by law and by this Deed of Trust. Trustee shall, without demand on Trustor, after the lapse of that amount of time as is then required by law and after recordation of such Notice of Sale as required by law, sell the Security, at the time and place of sale set forth in the Notice of Sale, whether as a whole or in separate lots or parcels or items, as Trustee deems expedient and in such order as it determines, unless specified otherwise by the Trustor according to California Civil Code Section 2924g(b), at public auction to the highest bidder, for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold,but without any covenant or warranty, express or implied. The recitals in such deed or any matters of facts will be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Trustor, Trustee or Beneficiary, may purchase at such sale. 13 (b) After deducting all reasonable costs, fees and expenses of Trustee, including costs of evidence of title in connection with such sale, Trustee shall apply the proceeds of sale to payment o£ (i) the unpaid Principal amount of the Note; (ii) all other Secured Obligations owed to Beneficiary under the Loan Documents; (iii) all other sums then secured hereby; and (iv)the remainder, if any, to Trustor. (c) Trustee may postpone sale of all or any portion of the Property by public announcement at such time and place of sale, and from time to time thereafter, and without further notice make such sale at the time fixed by the last postponement, or may, in its discretion, give a new Notice of Sale. Section 7.5 Receiver. If an Event of Default occurs and is continuing, Beneficiary, as a matter of right and without further notice to Trustor or anyone claiming under the Security, and without regard to the then value of the Security or the interest of Trustor therein,may apply to any court having jurisdiction to appoint a receiver or receivers of the Security(or a part thereof), and Trustor hereby irrevocably consents to such appointment and waives further notice of any application therefor. Any such receiver or receivers will have all the usual powers and duties of receivers in like or similar cases, and all the powers and duties of Beneficiary in case of entry as provided herein, and will continue as such and exercise all such powers until the date of confirmation of sale of the Security,unless such receivership is sooner terminated. Section 7.6 Remedies Cumulative. No right, power or remedy conferred upon or reserved to the Beneficiary by this Deed of Trust is intended to be exclusive of any other right,power or remedy,but each and every such right, power and remedy will be cumulative and concurrent and will be in addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity. Section 7.7 No Waiver. (a) No delay or omission of the Beneficiary to exercise any right,power or remedy accruing upon any Event of Default will exhaust or impair any such right, power or remedy, and may not be construed to be a waiver of any such Event of Default or acquiescence therein; and every right, power and remedy given by this Deed of Trust to the Beneficiary may be exercised from time to time and as often as may be deemed expeditious by the Beneficiary. Beneficiary's express or implied consent to breach, or waiver of, any obligation of the Trustor hereunder will not be deemed or construed to be a consent to any subsequent breach, or further waiver, of such obligation or of any other obligations of the Trustor hereunder. Failure on the part of the Beneficiary to complain of any act or failure to act or to declare an Event of Default, irrespective of how long such failure continues, will not constitute a waiver by the Beneficiary of its right hereunder or impair any rights, power or remedies consequent on any Event of Default by the Trustor. (b) If the Beneficiary(i) grants forbearance or an extension of time for the payment or performance of any Secured Obligation, (ii) takes other or additional security or the payment of any sums secured hereby, (iii) waives or does not exercise any right granted in the 14 Loan Documents, (iv) releases any part of the Security from the lien of this Deed of Trust, or otherwise changes any of the terms, covenants, conditions or agreements in the Loan Documents, (v) consents to the granting of any easement or other right affecting the Security, or(vi)makes or consents to any agreement subordinating the lien hereof, any such act or omission will not release, discharge, modify, change or affect the original liability under this Deed of Trust, or any other obligation of the Trustor or any subsequent purchaser of the Security or any part thereof, or any maker, co-signer, endorser, surety or guarantor(unless expressly released); nor will any such act or omission preclude the Beneficiary from exercising any right,power or privilege herein granted or intended to be granted in any Event of Default then made or of any subsequent Event of Default, nor, except as otherwise expressly provided in an instrument or instruments executed by the Beneficiary,will the lien of this Deed of Trust be altered thereby. Section 7.8 Suits to Protect the Security. The Beneficiary has the power to (a) institute and maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Security and the rights of the Beneficiary as may be unlawful or any violation of this Deed of Trust, (b)preserve or protect its interest (as described in this Deed of Trust) in the Security, and (c) restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement for compliance with such enactment, rule or order would impair the Security thereunder or be prejudicial to the interest of the Beneficiary. Section 7.9 Trustee May File Proofs of Claim. In the case of any receivership, insolvency,bankruptcy, reorganization, arrangement, adjustment, composition or other proceedings affecting the Trustor, its creditors or its property, the Beneficiary, to the extent permitted by law, will be entitled to file such proofs of claim and other documents as may be necessary or advisable in order to have the claims of the Beneficiary allowed in such proceedings and for any additional amount that becomes due and payable by the Trustor hereunder after such date. Section 7.10 Waiver. The Trustor waives presentment, demand for payment, notice of dishonor, notice of protest and nonpayment, protest, notice of interest on interest and late charges, and diligence in taking any action to collect any Secured Obligations or in proceedings against the Security, in connection with the delivery, acceptance, performance, default, endorsement or guaranty of this Deed of Trust. ARTICLE 8 MISCELLANEOUS Section 8.1 Amendments. This Deed of Trust cannot be waived, changed, discharged or terminated orally,but only by an instrument in writing signed by Beneficiary and Trustor. So long as the Secretary of 15 Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130, any amendments under this Section 8.1 shall be subject to prior HUD approval. Section 8.2 Reconve ay nce by Trustee. Upon written request of Beneficiary stating that all Secured Obligations have been paid or forgiven, and all obligations under the Loan Documents have been performed in full, and upon surrender of this Deed of Trust to Trustee for cancellation and retention, and upon payment by Trustor of Trustee's reasonable fees, Trustee shall reconvey the Security to Trustor, or to the person or persons legally entitled thereto. Section 8.3 Notices. If at any time after the execution of this Deed of Trust it becomes necessary or convenient for one of the parties hereto to serve any notice, demand or communication upon the other party, such notice, demand or communication must be in writing and is to be served personally or by depositing the same in the registered United States mail,return receipt requested,postage prepaid and (1) if intended for Beneficiary is to be addressed to: Office of the City Manager City of San Bernardino 300 N "D" Street, Sixth Floor San Bernardino, CA 92418 Attn: Housing Director and (2) if intended for Trustor is to be addressed to: Val 9 Housing Partners, L.P. 9421 Haven Avenue Rancho Cucamonga, CA 91730 Attn: Chief Financial Officer Any notice, demand or communication will be deemed given,received,made or communicated on the date personal delivery is effected or, if mailed in the manner herein specified, on the delivery date or date delivery is refused by the addressee, as shown on the return receipt. Either party may change its address at any time by giving written notice of such change to Beneficiary or Trustor as the case may be, in the manner provided herein, at least ten(10) days prior to the date such change is desired to be effective. Trustor's limited partner shall have all the notice and cure rights set forth in the Loan Agreement. Section 8.4 Successors and Joint Trustors. Where an obligation created herein is binding upon Trustor,the obligation also applies to and binds any transferee or successors in interest. Where the terms of the Deed of Trust have the effect of creating an obligation of the Trustor and a transferee, such obligation will be deemed to 16 be a joint and several obligation of the Trustor and such transferee. Where Trustor is more than one entity or person, all obligations of Trustor will be deemed to be a joint and several obligation of each and every entity and person comprising Trustor. Section 8.5 Cations. The captions or headings at the beginning of each Section hereof are for the convenience of the parties and are not a part of this Deed of Trust. Section 8.6 Invalidity of Certain Provisions. Every provision of this Deed of Trust is intended to be severable. In the event any term or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court or other body of competent jurisdiction, such illegality or invalidity will not affect the balance of the terms and provisions hereof, which terms and provisions will remain binding and enforceable. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the debt, or if the lien is invalid or unenforceable as to any part of the Security, the unsecured or partially secured portion of the debt, and all payments made on the debt, whether voluntary or under foreclosure or other enforcement action or procedure,will be considered to have been first paid or applied to the full payment of that portion of the debt that is not secured or partially secured by the lien of this Deed of Trust. Section 8.7 Governing Law. This Deed of Trust is governed by the laws of the State of California. Section 8.8 Gender and Number. In this Deed of Trust the singular includes the plural and the masculine includes the feminine and neuter and vice versa, if the context so requires. Section 8.9 Deed of Trust, Mortgage. Any reference in this Deed of Trust to a mortgage also refers to a deed of trust and any reference to a deed of trust also refers to a mortgage. Section 8.10 Actions. Trustor shall appear in and defend any action or proceeding purporting to affect the Security. Section 8.11 Substitution of Trustee. Beneficiary may from time to time substitute a successor or successors to any Trustee named herein or acting hereunder to execute this Trust. Upon such appointment, and without conveyance to the successor trustee,the latter will be vested with all title, powers, and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and substitution is to be made by written instrument executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which, when duly recorded in the proper office of the 17 county or counties in which the Property is situated, will be conclusive proof of proper appointment of the successor trustee. Section 8.12 Statute of Limitations. The pleading of any statute of limitations as a defense to any and all obligations secured by this Deed of Trust is hereby waived to the full extent permissible by law. Section 8.13 Acceptance by Trustee. Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Except as otherwise provided by law, the Trustee is not obligated to notify any party hereto of a pending sale under this Deed of Trust or of any action or proceeding in which Trustor, Beneficiary, or Trustee is a party unless brought by Trustee. Section 8.14 Tax Credit Provisions. Notwithstanding anything to the contrary contained herein or in any documents secured by this Deed of Trust or contained in any subordination agreement, and to the extent applicable, the Beneficiary acknowledges and agrees that in the event of a foreclosure or deed-in-lieu of foreclosure (collectively, "Foreclosure") with respect to the Security encumbered by this Deed of Trust,the following rule contained in 26 U.S.C. Section 42(h)(6)(E)(ii), as amended, applies: For a period of three (3) years from the date of Foreclosure, with respect to any unit that had been regulated by the Regulatory Agreement with the California Tax Credit Allocation Committee: (i)none of the tenants occupying those units at the time of Foreclosure may be evicted or their tenancy terminated (other than for good cause); (ii) nor may any rent be increased except as otherwise permitted under Section 42 of the Internal Revenue Code. [Signature Page Follows] 18 IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year first above written. TRUSTOR: Val 9 Housing Partners, L.P., a California limited partnership By: Val 9 MGP, LLC, a California limited liability company, its sole general partner By: National Community Renaissance of California, its sole member and manager By: Tracy Thomas, Chief Financial Officer Fublic or other officer completing this certificate verifies only the the individual who signed the document to which this certificate is nd not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) COUNTY OF ) On ,before me, ,Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: Notary Public EXHIBIT A LEGAL DESCRIPTION The land is situated in the State of California, County of San Bernardino, City of San Bernardino and is described as follows: A-1 ' RECORDING REQUESTED BY Electronically Recorded in Official Records,County of San Bernardino 3/2012015 FIDELITY NATIONAL TITLE 12:39 PM FV .Zoo�/g1A-� BOB DUTTON SAN ASSESSOR-RECORDER-CLERK RECORDING REQUESTED BY �� 688 Fidelity National Title MA AND WHEN RECORDED MAIL TO: Office of the City Manager Doc#: 2015-0109633 Titles: 4 Pages: 21 City of San Bernardino Fees .00 300 N "D" Street, Sixth Floor Taxes .00 San Bernardino, CA 92418 PAIDr .00 Attn: Housing Director No fee for recording pursuant to Government Code Section 27383 DEED OF TRUST WITH ASSIGNMENT OF RENTS, SECURITY AGREEMENT, AND FIXTURE FILING (Waterman Gardens- Valencia 9 Apartments) THIS DEED OF TRUST WITH ASSIGNMENT OF RENTS, SECURITY AGREEMENT, AND FIXTURE FILING ("Deed of Trust") is made as of March 17, 2015, by and among Val 9 Housing Partners, L.P., a California limited partnership ("Trustor"prFidelity National Title Insurance Company Name ( as "Trustee"), and the City of San Bernardino, a political subdivision of the State of California (as "Beneficiary"). -�k Tr'vs-fvrs odctrm 'is.' 911.11 PkVen A&., Aevicho CuCew-lo►'�a, CW 917 30 FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt of which is hereby acknowledged, Trustor hereby irrevocably grants, transfers, conveys and assigns to Trustee, IN TRUST, WITH POWER OF SALE, for the benefit and security of Beneficiary, under and subject to the terms and conditions hereinafter set forth, Trustor's fee interest in the property located in the County of San Bernardino, State of California, that is described in the attached Exhibit A, incorporated herein by this reference (the "Propert y"). TOGETHER WITH all interest, estates or other claims, both in law and in equity which Trustor now has or may hereafter acquire in the Property and the rents; TOGETHER WITH all easements, rights-of-way and rights used in connection therewith or as a means of access thereto, including (without limiting the generality of the foregoing)all tenements, hereditaments and appurtenances thereof and thereto; TOGETHER WITH any and all buildings and improvements of every kind and description now or hereafter erected thereon, and all property of the Trustor now or hereafter affixed to or placed upon the Property; TOGETHER WITH all building materials and equipment now or hereafter delivered to said property and intended to be installed therein; TOGETHER WITH all right, title and interest of Trustor, now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, 1 RECORDING REQUESTED BY FIDELITY NATIONAL TITLE RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Office of the City Manager City of San Bernardino 300 N "D" Street, Sixth Floor San Bernardino, CA 92418 Attn: Housing Director No fee for recording pursuant to Government Code Section 27383 DEED OF TRUST WITH ASSIGNMENT OF RENTS, SECURITY AGREEMENT, AND FIXTURE FILING (Waterman Gardens- Valencia 9 Apartments) THIS DEED OF TRUST WITH ASSIGNMENT OF RENTS, SECURITY AGREEMENT, AND FIXTURE FILING ("Deed of Trust") is made as of March 17, 2015, by and among Val 9 Housing Partners, L.P., a California limited partnership ("Trustor")*, Fidelity National Title Insurance Company Name ( as "Trustee"), and the City of San Bernardino, a political subdivision of the State of California (as "Beneficiary"). -l(Ti"vs-h3r5 odclr-ns is.' 941a1 I-kven A-✓e_, A6incho e.LJCc4rgo0J0-, CW 917 30 FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt of which is hereby acknowledged, Trustor hereby irrevocably grants, transfers, conveys and assigns to Trustee, IN TRUST, WITH POWER OF SALE, for the benefit and security of Beneficiary, under and subject to the terms and conditions hereinafter set forth, Trustor's fee interest in the property located in the County of San Bernardino, State of California, that is described in the attached Exhibit A, incorporated herein by this reference (the "PropertX"). TOGETHER WITH all interest, estates or other claims, both in law and in equity which Trustor now has or may hereafter acquire in the Property and the rents; TOGETHER WITH all easements, rights-of-way and rights used in connection therewith or as a means of access thereto, including (without limiting the generality of the foregoing) all tenements, hereditaments and appurtenances thereof and thereto; TOGETHER WITH any and all buildings and improvements of every kind and description now or hereafter erected thereon, and all property of the Trustor now or hereafter affixed to or placed upon the Property; TOGETHER WITH all building materials and equipment now or hereafter delivered to said property and intended to be installed therein; TOGETHER WITH all right, title and interest of Trustor, now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, 1 adjoining the Property, and any and all sidewalks, alleys and strips and areas of land adjacent to or used in connection with the Property; TOGETHER WITH all estate, interest, right, title, other claim or demand, of every nature, in and to such property, including the Property, both in law and in equity, including, but not limited to, all deposits made with or other security given by Trustor to utility companies, the proceeds from any or all of such property, including the Property, claims or demands with respect to the proceeds of insurance in effect with respect thereto, which Trustor now has or may hereafter acquire, any and all awards made for the taking by eminent domain or by any proceeding or purchase in lieu thereof of the whole or any part of such property, including without limitation, any awards resulting from a change of grade of streets and awards for severance damages to the extent Beneficiary has an interest in such awards for taking as provided in Paragraph 4.1 herein; TOGETHER WITH all of Trustor's interest in all articles of personal property or fixtures now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the Property which are necessary to the complete and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, including all other goods and chattels and personal property as are ever used or furnished in operating a building, or the activities conducted therein, similar to the one herein described and referred to, and all renewals or replacements thereof or articles in substitution therefor, whether or not the same are, or will be, attached to said building or buildings in any manner; and TOGETHER WITH all of Trustor's interest in all building materials, fixtures, equipment, work in process and other personal property to be incorporated into the Property; all goods, materials, supplies, fixtures, equipment, machinery, furniture and furnishings, signs and other personal property now or hereafter appropriated for use on the Property, whether stored on the Property or elsewhere, and used or to be used in connection with the Property; all rents, issues and profits, and all inventory, accounts, accounts receivable, contract rights, general intangibles, chattel paper, instruments, documents, notes drafts, letters of credit, insurance policies, insurance and condemnation awards and proceeds, trade names, trademarks and service marks arising from or related to the Property and any business conducted thereon by Trustor; all replacements, additions, accessions and proceeds; and all books, records and files relating to any of the foregoing. All of the foregoing, together with the Property, is herein referred to as the "Security." To have and to hold the Security together with acquittances to the Trustee, its successors and assigns forever. FOR THE PURPOSE OF SECURING THE FOLLOWING OBLIGATIONS (collectively, the "Secured Obligations"): A. Payment to Beneficiary of all sums at any time owing under or in connection with the Note (defined in Section 1.4 below) until paid or cancelled and any other amounts owing under the Loan Documents (defined in Section 1.3 below). Said principal and other payments are due and payable as provided in the Note or other Loan Documents, as applicable. The Note 2 and all its terms are incorporated herein by reference, and this conveyance secures any and all extensions thereof, however evidenced; B. Payment of any sums advanced by Beneficiary to protect the Security pursuant to the terms and provisions of this Deed of Trust following a breach of Trustor's obligation to advance said sums and the expiration of any applicable cure period, with interest thereon as provided herein; C. Performance of every obligation, covenant or agreement of Trustor contained herein and in the Loan Documents; and D. All modifications, extensions and renewals of any of the Secured Obligations (including without limitation, (i) modifications, extensions or renewals at a different rate of interest, or (ii) deferrals or accelerations of the required principal payment dates or interest payment dates or both, in whole or in part), however evidenced, whether or not any such modification, extension or renewal is evidenced by a new or additional promissory note or notes. AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES: ARTICLE 1 DEFINITIONS In addition to the terms defined elsewhere in this Deed of Trust, the following terms have the following meanings in this Deed of Trust: Section 1.1 The term "Loan" means the loan made by the Beneficiary to the Trustor in the amount up to One Million Five Hundred Thousand Dollars ($1,500,000), subject to Section 2.6 of the Loan Agreement. Section 1.2 The term "Loan Agreement" means that certain HOME Investment Partnerships Act Loan Agreement between Trustor and Beneficiary, dated March 3, 2015, as such may be amended from time to time, providing for the Beneficiary to loan to Trustor up to One Million Five Hundred Thousand Dollars ($1,500,000), subject to Section 2.6 of the Loan Agreement. Section 1.3 The term "Loan Documents" means this Deed of Trust, the Note, the Loan Agreement, and the Regulatory Agreement, and any other debt, loan or security instruments between Trustor and the Beneficiary relating to the Loan. Section 1.4 The term "Note" means the Promissory Note in the principal amount of up to One Million Five Hundred Thousand Dollars ($1,500,000) of even date herewith, executed by Trustor in favor of the Beneficiary, the payment of which is secured by this Deed of Trust. (A copy of the Note is on file with the Beneficiary and terms and provisions of the Note are incorporated herein by reference.) 3 f Section 1.5 The term "Principal" means the amount required to be paid under the Note. Section 1.6 The term "Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive Covenants of even date herewith by and between the Beneficiary and the Trustor. ARTICLE 2 MAINTENANCE AND MODIFICATION OF THE PROPERTY AND SECURITY Section 2.1 Maintenance and Modification of the Property by Trustor. The Trustor agrees that at all times prior to full payment and performance of the Secured Obligations, the Trustor will, at the Trustor's own expense, maintain, preserve and keep the Security or cause the Security to be maintained and preserved in good condition. The Trustor will from time to time make or cause to be made all repairs, replacements and renewals deemed proper and necessary by it. The Beneficiary has no responsibility in any of these matters or for the making of improvements or additions to the Security. Trustor agrees to pay fully and discharge (or cause to be paid fully and discharged) all claims for labor done and for material and services furnished in connection with the Security, diligently to file or procure the filing of a valid notice of cessation upon the event of a cessation of labor on the work or construction on the Security for a continuous period of thirty (30) days or more, and to take all other reasonable steps to forestall the assertion of claims of lien against the Security or any part thereof. Trustor irrevocably appoints, designates and authorizes Beneficiary as its agent (said agency being coupled with an interest) with the authority, but without any obligation, to file for record any notices of completion or cessation of labor or any other notice that Beneficiary deems necessary or desirable to protect its interest in and to the Security or the Loan Documents; provided, however, that Beneficiary exercises its rights as agent of Trustor only in the event that Trustor fails to take, or fails to diligently continue to take, those actions as hereinbefore provided. Upon demand by Beneficiary, Trustor shall make or cause to be made such demands or claims as Beneficiary specifies upon laborers, materialmen, subcontractors or other persons who have furnished or claim to have furnished labor, services or materials in connection with the Security. Nothing herein contained requires Trustor to pay any claims for labor, materials or services which Trustor in good faith disputes and is diligently contesting provided that Trustor shall, within thirty(30) days after the filing of any claim of lien, record in the Office of the Recorder of San Bernardino County, a surety bond in an amount 1 and 1/2 times the amount of such claim item to protect against a claim of lien, or provide other form of security acceptable to the Beneficiary at the Beneficiary's sole and absolute discretion. Section 2.2 Granting of Easements. Trustor may not grant easements, licenses, rights-of-way or other rights or privileges in the nature of easements with respect to any property or rights included in the Security except 4 those required or desirable for installation and maintenance of public utilities including, without limitation, water, gas, electricity, sewer, telephone and telegraph, or those required by law, and as approved, in writing, by Beneficiary. Section 2.3 Assignment of Rents. Subject to the rights of any approved senior mortgage lender, as part of the consideration for the indebtedness evidenced by the Note, Trustor hereby absolutely and unconditionally assigns and transfers to Beneficiary all the rents and revenues of the Property including those now due, past due, or to become due by virtue of any lease or other agreement for the occupancy or use of all or any part of the Property, regardless of to whom the rents and revenues of the Property are payable. Trustor hereby authorizes Beneficiary or Beneficiary's agents to collect the aforesaid rents and revenues and hereby directs each tenant of the Property to pay such rents to Beneficiary or Beneficiary's agents; provided, however, that prior to written notice given by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents, Trustor shall collect and receive all rents and revenues of the Property as trustee for the benefit of Beneficiary and Trustor to apply the rents and revenues so collected to the Secured Obligations with the balance, so long as no such breach has occurred, to the account of Trustor, it being intended by Trustor and Beneficiary that this assignment of rents constitutes an absolute assignment and not an assignment for additional security only. Upon delivery of written notice by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents, and without the necessity of Beneficiary entering upon and taking and maintaining full control of the Property in person, by agent or by a court-appointed receiver, Beneficiary shall immediately be entitled to possession of all rents and revenues of the Property as specified in this Section 2.3 as the same becomes due and payable, including but not limited to, rents then due and unpaid, and all such rents will immediately upon delivery of such notice be held by Trustor as trustee for the benefit of Beneficiary only; provided, however, that the written notice by Beneficiary to Trustor of the breach by Trustor contains a statement that Beneficiary exercises its rights to such rents. Trustor agrees that commencing upon delivery of such written notice of Trustor's breach by Beneficiary to Trustor, each tenant of the Property shall make such rents payable to and pay such rents to Beneficiary or Beneficiary's agents on Beneficiary's written demand to each tenant therefor, delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by Trustor. Subject to the rights of any approved senior mortgage lender, Trustor hereby covenants that Trustor has not executed any prior assignment of said rents, that Trustor has not performed, and will not perform, any acts or has not executed and will not execute, any instrument which would prevent Beneficiary from exercising its rights under this Section 2.3, and that at the time of execution of this Deed of Trust, there has been no anticipation or prepayment of any of the rents of the Property for more than two (2) months prior to the due dates of such rents. Trustor covenants that Trustor will not hereafter collect or accept payment of any rents of the Property more than two (2) months prior to the due dates of such rents. Trustor further covenant that Trustor will execute and deliver to Beneficiary such further assignments of rents and revenues of the Property as Beneficiary may from time to time request. 5 Upon Trustor's breach of any covenant or agreement of Trustor in the Loan Documents, Beneficiary may in person, by agent or by a court-appointed receiver, regardless of the adequacy of Beneficiary's security, enter upon and take and maintain full control of the Property in order to perform all acts necessary and appropriate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of leases, the collection of all rents and revenues of the Property, the making of repairs to the Property and the execution or termination of contracts providing for the management or maintenance of the Property, all on such terms as are deemed best to protect the security of this Deed of Trust. In the event Beneficiary elects to seek the appointment of a receiver for the Property upon Trustor's breach of any covenant or agreement of Trustor in this Deed of Trust, Trustor hereby expressly consents to the appointment of such receiver. Beneficiary or the receiver will be entitled to receive a reasonable fee for so managing the Property. All rents and revenues collected subsequent to delivery of written notice by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents are to be applied first to the costs, if any, of taking control of and managing the Property and collecting the rents, including, but not limited to, attorney's fees, receiver's fees, premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies, taxes, assessments and other charges on the Property, and the costs of discharging any obligation or liability of Trustor as lessor or landlord of the Property and then to the sums secured by this deed of Trust. Beneficiary or the receiver is to have access to the books and records used in the operation and maintenance of the Property and will be liable to account only for those rents actually received. Beneficiary is not liable to Trustor, anyone claiming under or through Trustor or anyone having an interest in the Property by reason of anything done or left undone by Beneficiary under this Section 2.3. If the rents of the Property are not sufficient to meet the costs, if any, of taking control of and managing the Property and collecting the rents, any funds expended by Beneficiary for such purposes will become part of the Secured Obligations pursuant to Section 3.3 hereof. Subject to Section 2.8 of the Loan Agreement, unless Beneficiary and Trustor agree in writing to other terms of payment, such amounts are payable by Trustor to Beneficiary upon notice from Beneficiary to Trustor requesting payment thereof and will bear interest from the date of disbursement at the rate stated in Section 3.3. If the Beneficiary or the receiver enters upon and takes and maintains control of the Property, neither that act nor any application of rents as provided herein will cure or waive any default under this Deed of Trust or invalidate any other right or remedy available to Beneficiary under applicable law or under this Deed of Trust. This assignment of rents of the Property will terminate at such time as this Deed of Trust ceases to secure the Secured Obligations. ARTICLE 3 TAXES AND INSURANCE; ADVANCES Section 3.1 Taxes Other Governmental Charges and Utility Charges. 6 Trustor shall pay, or cause to be paid, prior to the date of delinquency, all taxes, assessments, charges and levies imposed by any public authority or utility company that are or may become a lien affecting the Security or any part thereof; provided, however, that Trustor is not required to pay and discharge any such tax, assessment, charge or levy so long as (a) the legality thereof is promptly and actively contested in good faith and by appropriate proceedings, and (b) Trustor maintains reserves adequate to pay any liabilities contested pursuant to this Section 3.1. With respect to taxes, special assessments or other similar governmental charges, Trustor shall pay such amount in full prior to the attachment of any lien therefor on any part of the Security; provided, however, if such taxes, assessments or charges can be paid in installments, Trustor may pay in such installments. Except as provided in clause (b) of the first sentence of this paragraph, the provisions of this Section 3.1 may not be construed to require that Trustor maintain a reserve account, escrow account, impound account or other similar account for the payment of future taxes, assessments, charges and levies. In the event that Trustor fails to pay any of the items required by this Section to be paid by Trustor, Beneficiary may (but is under no obligation to) pay the same, after the Beneficiary has notified the Trustor of such failure to pay and the Trustor fails to fully pay such items within seven (7) business days after receipt of such notice. Any amount so advanced therefor by Beneficiary, together with interest thereon from the date of such advance at the maximum rate permitted by law, will become part of the Secured Obligations secured hereby, and Trustor agrees to pay all such amounts. Section 3.2 Provisions Respecting Insurance. Trustor agrees to provide insurance conforming in all respects to that required under the Loan Documents during the course of construction and following completion, and at all times until all amounts secured by this Deed of Trust have been paid, all Secured Obligations secured hereunder have been fulfilled, and this Deed of Trust has been reconveyed. All such insurance policies and coverages are to be maintained at Trustor's sole cost and expense. Certificates of insurance for all of the above insurance policies, showing the same to be in full force and effect, are to be delivered to the Beneficiary upon demand therefor at any time prior to Trustor's satisfaction of the Secured Obligations. Section 3.3 Advances. In the event the Trustor fails to maintain the full insurance coverage required by this Deed of Trust or fails to keep the Security in accordance with the Loan Documents, the Beneficiary, after at least seven (7) days prior notice to Trustor, may (but is under no obligation to) (i) take out the required policies of insurance and pay the premiums on the same, and (ii) make any repairs or replacements that are necessary and provide for payment thereof. All amounts so advanced by the Beneficiary will become part of the Secured Obligations (together with interest as set forth below) and will be secured hereby, which amounts the Trustor agrees to pay on the demand of the Beneficiary, and if not so paid, will bear interest from the date of the advance at the lesser of ten percent (10%) per annum or the maximum rate permitted by law. So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project 7 No. 143-35130, no advances may be made under this Section 3.3 without the prior written consent of the U.S. Department of Housing and Urban Development (HUD). ARTICLE 4 DAMAGE, DESTRUCTION OR CONDEMNATION Section 4.1 Awards and Damages. All judgments, awards of damages, settlements and compensation made in connection with or in lieu of(1) the taking of all or any part of or any interest in the Property by or under assertion of the power of eminent domain, (2) any damage to or destruction of the Property or any part thereof by insured casualty, and (3) any other injury or damage to all or any part of the Property (collectively, the "Funds") are hereby assigned to and are to be paid to the Beneficiary by a check made payable to the Beneficiary. The Beneficiary is authorized and empowered (but not required) to collect and receive any Funds and is authorized to apply them in whole or in part to any indebtedness or obligation secured hereby, in such order and manner as the Beneficiary determines at its sole option. The Beneficiary is entitled to settle and adjust all claims under insurance policies provided under this Deed of Trust and may deduct and retain from the proceeds of such insurance the amount of all expenses incurred by it in connection with any such settlement or adjustment. All or any part of the amounts so collected and recovered by the Beneficiary may be released to Trustor upon such conditions as the Beneficiary may impose for its disposition. Application of all or any part of the Funds collected and received by the Beneficiary or the release thereof will not cure or waive any default under this Deed of Trust. The rights of the Beneficiary under this Section 4.1 are subject to the rights of any senior mortgage lender. The Beneficiary shall release the Funds to Trustor to be used to reconstruct the improvements on the Property provided that Beneficiary reasonably determines that Trustor (taking into account the Funds) has sufficient funds to rebuild the improvements in substantially the form that existed prior to the casualty or condemnation. ARTICLE 5 AGREEMENTS AFFECTING THE PROPERTY; FURTHER ASSURANCES; PAYMENT OF PRINCIPAL AND INTEREST Section 5.1 Other Agreements Affecting Propert y. The Trustor shall duly and punctually perform all terms, covenants, conditions and agreements binding upon it under the Loan Documents and any other agreement of any nature whatsoever now or hereafter involving or affecting the Security or any part thereof. Section 5.2 Agreement to Pay Attorneys' Fees and Expenses. In the event of any Event of Default (as defined in Section 7.1) hereunder, and if the Beneficiary employs attorneys or incurs other expenses for the collection of amounts due hereunder or the enforcement of performance or observance of an obligation or agreement on the part of the Trustor in this Deed of Trust, the Trustor agrees that it will, on demand therefor, pay to the Beneficiary the reasonable fees of such attorneys and such other reasonable expenses so 8 incurred by the Beneficiary. Any such amounts paid by the Beneficiary will be added to the Secured Obligations, and will bear interest from the date such expenses are incurred at the lesser of ten percent (10%) per annum or the maximum rate permitted by law. So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130, the provisions of this Section 5.2 shall not apply to HUD. Section 5.3 Payment of the Principal. The Trustor shall pay to the Beneficiary the Principal and any other payments as set forth in the Note in the amounts and by the times set out therein. Section 5.4 Personal Propert X. To the maximum extent permitted by law, the personal property subject to this Deed of Trust is deemed to be fixtures and part of the real property and this Deed of Trust constitutes a fixtures filing under the California Commercial Code. As to any personal property not deemed or permitted to be fixtures, this Deed of Trust constitutes a security agreement under the California Commercial Code. Section 5.5 Financing Statement. The Trustor shall execute and deliver to the Beneficiary such financing statements pursuant to the appropriate statutes, and any other documents or instruments as are required to convey to the Beneficiary a valid perfected security interest in the Security. The Trustor shall perform all acts that the Beneficiary reasonably requests so as to enable the Beneficiary to maintain a valid perfected security interest in the Security in order to secure the payment of the Note in accordance with its terms. The Beneficiary is authorized to file a copy of any such financing statement in any jurisdiction(s) as it deems appropriate from time to time in order to protect the security interest established pursuant to this instrument. Section 5.6 Operation of the Security. The Trustor shall operate the Security (and, in case of a transfer of a portion of the Security subject to this Deed of Trust, the transferee shall operate such portion of the Security) in full compliance with the Loan Documents. Section 5.7 Inspection of the Security. At any and all reasonable times upon forty-eight (48) hours' notice, the Beneficiary and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, may inspect the Security, without payment of charges or fees. Section 5.8 Nondiscrimination. The Trustor herein covenants by and for itself, its heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there will be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, 9 religion, age, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Security, nor will the Trustor itself or any person claiming under or through it establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the Security. The foregoing covenants run with the land. ARTICLE 6 HAZARDOUS WASTE Trustor shall keep and maintain the Property in compliance with, and shall not cause or permit the Property to be in violation of any federal, state or local laws, ordinances or regulations relating to industrial hygiene or to the environmental conditions on, under or about the Property including, but not limited to, soil and ground water conditions. Trustor shall not use, generate, manufacture, store or dispose of on, under, or about the Property or transport to or from the Property any flammable explosives, radioactive materials, hazardous wastes, toxic substances or related materials, including without limitation, any substances defined as or included in the definition of"hazardous substances," hazardous wastes," "hazardous materials," or "toxic substances" under any applicable federal or state laws or regulations (collectively referred to hereinafter as "Hazardous Materials") except such of the foregoing as may be customarily used in construction or operation of a multi-family residential development. Trustor shall immediately advise Beneficiary in writing if at any time it receives written notice o£ (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against Trustor or the Property pursuant to any applicable federal, state or local laws, ordinances, or regulations relating to any Hazardous Materials, ("Hazardous Materials Law"); (ii) all claims made or threatened by any third party against Trustor or the Property relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials (the matters set forth in clauses (i) and (ii) above are hereinafter referred to as "Hazardous Materials Claims"); and (iii) Trustor's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to be classified as "border-zone property" (as defined in California Health and Safety Code Section 25117.4) under the provision of California Health and Safety Code Section 25220 et seq., or any regulation adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use of the Property under any Hazardous Materials Law. Beneficiary has the right to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims and to have its reasonable attorneys' fees in connection therewith paid by Trustor. Trustor shall indemnify and hold harmless Beneficiary and its elected officials, supervisors, directors, officers, employees, agents, successors and assigns from and against any loss, damage, cost, expense or liability directly or indirectly arising out of or attributable to the use, generation, storage, release, threatened release, discharge, disposal, or presence of Hazardous Materials on, under, or about the Property including without limitation: (a) all foreseeable consequential damages; (b)the costs of any required or necessary repair, cleanup or detoxification of the Property and the 10 preparation and implementation of any closure, remedial or other required plans; and (c) all reasonable costs and expenses incurred by Beneficiary in connection with clauses (a) and (b), including but not limited to reasonable attorneys' fees and consultant's fees. This indemnification applies whether or not any government agency has issued a cleanup order. Losses, claims, costs, suits, liability, and expenses covered by this indemnification provision include, but are not limited to: (1) losses attributable to diminution in the value of the Property; (2) loss or restriction of use of rentable space on the Property; (3) adverse effect on the marketing of any rental space on the Property; and (4) penalties and fines levied by, and remedial or enforcement actions of any kind issued by any regulatory agency (including but not limited to the costs of any required testing, remediation, repair, removal, cleanup or detoxification of the Property and surrounding properties). Without Beneficiary's prior written consent, which may not be unreasonably withheld, Trustor may not take any remedial action in response to the presence of any Hazardous Materials on, under or about the Property, nor enter into any settlement agreement, consent decree, or other compromise in respect to any Hazardous Material Claims, which remedial action, settlement, consent decree or compromise might, in Beneficiary's reasonable judgment, impairs the value of the Beneficiary's security hereunder; provided, however, that Beneficiary's prior consent is not necessary in the event that the presence of Hazardous Materials on, under, or about the Property either poses an immediate threat to the health, safety or welfare of any individual or is of such a nature that an immediate remedial response is necessary and it is not reasonably possible to obtain Beneficiary's consent before taking such action, provided that in such event Trustor notifies Beneficiary as soon as practicable of any action so taken. Beneficiary agrees not to withhold its consent, where such consent is required hereunder, if: (i) a particular remedial action is ordered by a court of competent jurisdiction; (ii) Trustor will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required action; (iii) Trustor establishes to the reasonable satisfaction of Beneficiary that there is no reasonable alternative to such remedial action which would result in less impairment of Beneficiary's security hereunder; or(iv) the action has been agreed to by Beneficiary. The Trustor hereby acknowledges and agrees that: (i) this Article is intended as the Beneficiary's written request for information (and the Trustor's response) concerning the environmental condition of the Property as required by California Code of Civil Procedure Section 726.5, and (ii) each representation and warranty in this Deed of Trust or any of the other Loan Documents (together with any indemnity applicable to a breach of any such representation and warranty) with respect to the environmental condition of the property is intended by the Beneficiary and the Trustor to be an "environmental provision" for purposes of California Code of Civil Procedure Section 736. In the event that any portion of the Property is determined to be "environmentally impaired" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(3)) or to be an "affected parcel" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(1)), then, without otherwise limiting or in any way affecting the Beneficiary's or the Trustee's rights and remedies under this Deed of Trust, the Beneficiary may elect to exercise its rights under California Code of Civil Procedure Section 726.5(a) to (1) waive its lien on such environmentally impaired or affected portion of the Property and (2) exercise (a) the rights and remedies of an unsecured creditor, including reduction of its claim against the Trustor to 11 judgment, and (b) any other rights and remedies permitted by law. For purposes of determining the Beneficiary's right to proceed as an unsecured creditor under California Code of Civil Procedure Section 726.5(a), the Trustor will be deemed to have willfully permitted or acquiesced in a release or threatened release of hazardous materials, within the meaning of California Code of Civil Procedure Section 726.5(d)(1), if the release or threatened release of hazardous materials was knowingly or negligently caused or contributed to by any lessee, occupant, or user of any portion of the Property and the Trustor knew or in the exercise of reasonable diligence should have known of the activity by such lessee, occupant, or user which caused or contributed to the release or threatened release. All costs and expenses, including (but not limited to) attorneys' fees, incurred by the Beneficiary in connection with any action commenced under this paragraph, including any action required by California Code of Civil Procedure Section 726.5(b) to determine the degree to which the Property is environmentally impaired, plus interest thereon at the default rate specified in the Loan Agreement until paid, will be added to the indebtedness secured by this Deed of Trust and will be due and payable to the Beneficiary upon its demand made at any time following the conclusion of such action. ARTICLE 7 EVENTS OF DEFAULT AND REMEDIES Section 7.1 Events of Default. The following are events of default following the expiration of any applicable notice and cure periods (each an "Event of Default"): (i) failure to make any payment to be paid by Trustor under the Loan Documents; (ii) failure to observe or perform any of Trustor's other covenants, agreements or obligations under the Loan Documents, including, without limitation, the provisions concerning discrimination; (iii) failure to make any payment or observe or perform any of Trustor's other covenants, agreements, or obligations under any Secured Obligations, which default is not cured within the times and in the manner provided therein; and (iv) failure to make any payments or observe or perform any of Trustor's other covenants, agreements or obligations under any other debt instrument or regulatory agreement secured by the Property, which default is not cured within the time and in the manner provided therein. Section 7.2 Acceleration of Maturity. If an Event of Default has occurred and is continuing, then at the option of the Beneficiary, the amount of any payment related to the Event of Default and all unpaid Secured Obligations are immediately due and payable, and no omission on the part of the Beneficiary to exercise such option when entitled to do so may be construed as a waiver of such right. So long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130, the provisions of this Section 7.2 shall not apply. Section 7.3 The Beneficiary's Right to Enter and Take Possession. If an Event of Default has occurred and is continuing, the Beneficiary may: 12 (a) Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its security, enter upon the Property and take possession thereof(or any part thereof) and of any of the Security, in its own name or in the name of Trustee, and do any acts that it deems necessary or desirable to preserve the value or marketability of the Property, or part thereof or interest therein, increase the income therefrom or protect the security thereof. The entering upon and taking possession of the Security will not cure or waive any Event of Default or Notice of Sale (as defined in Section 73(c), below) hereunder or invalidate any act done in response to such Event of Default or pursuant to such Notice of Sale, and, notwithstanding the continuance in possession of the Security, Beneficiary will be entitled to exercise every right provided for in this Deed of Trust, or by law upon occurrence of any Event of Default, including the right to exercise the power of sale; (b) Commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof; (c) Deliver to Trustee a written declaration of an Event of Default and demand for sale, and a written notice of default and election to cause Trustor's interest in the Security to be sold ("Notice of Sale"), which notice Trustee or Beneficiary shall cause to be duly filed for record in the Official Records of San Bernardino County; or (d) Exercise all other rights and remedies provided herein, in the instruments by which the Trustor acquires title to any Security, or in any other document or agreement now or hereafter evidencing, creating or securing the Secured Obligations. Section 7.4 Foreclosure By Power of Sale. Should the Beneficiary elect to foreclose by exercise of the power of sale herein contained, the Beneficiary shall deliver to the Trustee the Notice of Sale and shall deposit with Trustee the Note which is secured hereby (and the deposit of which will be deemed to constitute evidence that the Secured Obligations are immediately due and payable), and such receipts and evidence of any expenditures made that are additionally secured hereby as Trustee may require. (a) Upon receipt of the Notice of Sale from the Beneficiary, Trustee shall cause to be recorded, published and delivered to Trustor such Notice of Sale as is then required by law and by this Deed of Trust. Trustee shall, without demand on Trustor, after the lapse of that amount of time as is then required by law and after recordation of such Notice of Sale as required by law, sell the Security, at the time and place of sale set forth in the Notice of Sale, whether as a whole or in separate lots or parcels or items, as Trustee deems expedient and in such order as it determines, unless specified otherwise by the Trustor according to California Civil Code Section 2924g(b), at public auction to the highest bidder, for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed or any matters of facts will be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Trustor, Trustee or Beneficiary, may purchase at such sale. 13 (b) After deducting all reasonable costs, fees and expenses of Trustee, including costs of evidence of title in connection with such sale, Trustee shall apply the proceeds of sale to payment of. (i) the unpaid Principal amount of the Note; (ii) all other Secured Obligations owed to Beneficiary under the Loan Documents; (iii) all other sums then secured hereby; and (iv) the remainder, if any, to Trustor. (c) Trustee may postpone sale of all or any portion of the Property by public announcement at such time and place of sale, and from time to time thereafter, and without further notice make such sale at the time fixed by the last postponement, or may, in its discretion, give a new Notice of Sale. Section 7.5 Receiver. If an Event of Default occurs and is continuing, Beneficiary, as a matter of right and without further notice to Trustor or anyone claiming under the Security, and without regard to the then value of the Security or the interest of Trustor therein, may apply to any court having jurisdiction to appoint a receiver or receivers of the Security (or a part thereof), and Trustor hereby irrevocably consents to such appointment and waives further notice of any application therefor. Any such receiver or receivers will have all the usual powers and duties of receivers in like or similar cases, and all the powers and duties of Beneficiary in case of entry as provided herein, and will continue as such and exercise all such powers until the date of confirmation of sale of the Security, unless such receivership is sooner terminated. Section 7.6 Remedies Cumulative. No right, power or remedy conferred upon or reserved to the Beneficiary by this Deed of Trust is intended to be exclusive of any other right, power or remedy, but each and every such right, power and remedy will be cumulative and concurrent and will be in addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity. Section 7.7 No Waiver. (a) No delay or omission of the Beneficiary to exercise any right, power or remedy accruing upon any Event of Default will exhaust or impair any such right, power or remedy, and may not be construed to be a waiver of any such Event of Default or acquiescence therein; and every right, power and remedy given by this Deed of Trust to the Beneficiary may be exercised from time to time and as often as may be deemed expeditious by the Beneficiary. Beneficiary's express or implied consent to breach, or waiver of, any obligation of the Trustor hereunder will not be deemed or construed to be a consent to any subsequent breach, or further waiver, of such obligation or of any other obligations of the Trustor hereunder. Failure on the part of the Beneficiary to complain of any act or failure to act or to declare an Event of Default, irrespective of how long such failure continues, will not constitute a waiver by the Beneficiary of its right hereunder or impair any rights, power or remedies consequent on any Event of Default by the Trustor. (b) If the Beneficiary (i) grants forbearance or an extension of time for the payment or performance of any Secured Obligation, (ii) takes other or additional security or the payment of any sums secured hereby, (iii) waives or does not exercise any right granted in the 14 Loan Documents, (iv) releases any part of the Security from the lien of this Deed of Trust, or otherwise changes any of the terms, covenants, conditions or agreements in the Loan Documents, (v) consents to the granting of any easement or other right affecting the Security, or(vi) makes or consents to any agreement subordinating the lien hereof, any such act or omission will not release, discharge, modify, change or affect the original liability under this Deed of Trust, or any other obligation of the Trustor or any subsequent purchaser of the Security or any part thereof, or any maker, co-signer, endorser, surety or guarantor(unless expressly released); nor will any such act or omission preclude the Beneficiary from exercising any right, power or privilege herein granted or intended to be granted in any Event of Default then made or of any subsequent Event of Default, nor, except as otherwise expressly provided in an instrument or instruments executed by the Beneficiary, will the lien of this Deed of Trust be altered thereby. Section 7.8 Suits to Protect the Security. The Beneficiary has the power to (a) institute and maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Security and the rights of the Beneficiary as may be unlawful or any violation of this Deed of Trust, (b)preserve or protect its interest (as described in this Deed of Trust) in the Security, and (c) restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement for compliance with such enactment, rule or order would impair the Security thereunder or be prejudicial to the interest of the Beneficiary. Section 7.9 Trustee May File Proofs of Claim. In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or other proceedings affecting the Trustor, its creditors or its property, the Beneficiary, to the extent permitted by law, will be entitled to file such proofs of claim and other documents as may be necessary or advisable in order to have the claims of the Beneficiary allowed in such proceedings and for any additional amount that becomes due and payable by the Trustor hereunder after such date. Section 7.10 Waiver. The Trustor waives presentment, demand for payment, notice of dishonor, notice of protest and nonpayment, protest, notice of interest on interest and late charges, and diligence in taking any action to collect any Secured Obligations or in proceedings against the Security, in connection with the delivery, acceptance, performance, default, endorsement or guaranty of this Deed of Trust. ARTICLE 8 MISCELLANEOUS Section 8.1 Amendments. This Deed of Trust cannot be waived, changed, discharged or terminated orally, but only by an instrument in writing signed by Beneficiary and Trustor. So long as the Secretary of 15 Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130, any amendments under this Section 8.1 shall be subject to prior HUD approval. Section 8.2 Reconveyance by Trustee. Upon written request of Beneficiary stating that all Secured Obligations have been paid or forgiven, and all obligations under the Loan Documents have been performed in full, and upon surrender of this Deed of Trust to Trustee for cancellation and retention, and upon payment by Trustor of Trustee's reasonable fees, Trustee shall reconvey the Security to Trustor, or to the person or persons legally entitled thereto. Section 8.3 Notices. If at any time after the execution of this Deed of Trust it becomes necessary or convenient for one of the parties hereto to serve any notice, demand or communication upon the other party, such notice, demand or communication must be in writing and is to be served personally or by depositing the same in the registered United States mail, return receipt requested, postage prepaid and (1) if intended for Beneficiary is to be addressed to: Office of the City Manager City of San Bernardino 300 N "D" Street, Sixth Floor San Bernardino, CA 92418 Attn: Housing Director and (2) if intended for Trustor is to be addressed to: Val 9 Housing Partners, L.P. 9421 Haven Avenue Rancho Cucamonga, CA 91730 Attn: Chief Financial Officer Any notice, demand or communication will be deemed given, received, made or communicated on the date personal delivery is effected or, if mailed in the manner herein specified, on the delivery date or date delivery is refused by the addressee, as shown on the return receipt. Either party may change its address at any time by giving written notice of such change to Beneficiary or Trustor as the case may be, in the manner provided herein, at least ten (10) days prior to the date such change is desired to be effective. Trustor's limited partner shall have all the notice and cure rights set forth in the Loan Agreement. Section 8.4 Successors and Joint Trustors. Where an obligation created herein is binding upon Trustor, the obligation also applies to and binds any transferee or successors in interest. Where the terms of the Deed of Trust have the effect of creating an obligation of the Trustor and a transferee, such obligation will be deemed to 16 \ 1 be a joint and several obligation of the Trustor and such transferee. Where Trustor is more than one entity or person, all obligations of Trustor will be deemed to be a joint and several obligation of each and every entity and person comprising Trustor. Section 8.5 Captions. The captions or headings at the beginning of each Section hereof are for the convenience of the parties and are not a part of this Deed of Trust. Section 8.6 Invalidity of Certain Provisions. Every provision of this Deed of Trust is intended to be severable. In the event any term or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court or other body of competent jurisdiction, such illegality or invalidity will not affect the balance of the terms and provisions hereof, which terms and provisions will remain binding and enforceable. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the debt, or if the lien is invalid or unenforceable as to any part of the Security, the unsecured or partially secured portion of the debt, and all payments made on the debt, whether voluntary or under foreclosure or other enforcement action or procedure, will be considered to have been first paid or applied to the full payment of that portion of the debt that is not secured or partially secured by the lien of this Deed of Trust. Section 8.7 Governing Law. This Deed of Trust is governed by the laws of the State of California. Section 8.8 Gender and Number. In this Deed of Trust the singular includes the plural and the masculine includes the feminine and neuter and vice versa, if the context so requires. Section 8.9 Deed of Trust, Mortgage. Any reference in this Deed of Trust to a mortgage also refers to a deed of trust and any reference to a deed of trust also refers to a mortgage. Section 8.10 Actions. Trustor shall appear in and defend any action or proceeding purporting to affect the Security. Section 8.11 Substitution of Trustee. Beneficiary may from time to time substitute a successor or successors to any Trustee named herein or acting hereunder to execute this Trust. Upon such appointment, and without conveyance to the successor trustee, the latter will be vested with all title, powers, and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and substitution is to be made by written instrument executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which, when duly recorded in the proper office of the 17 county or counties in which the Property is situated, will be conclusive proof of proper appointment of the successor trustee. Section 8.12 Statute of Limitations. The pleading of any statute of limitations as a defense to any and all obligations secured by this Deed of Trust is hereby waived to the full extent permissible by law. Section 8.13 Acceptance by Trustee. Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Except as otherwise provided by law, the Trustee is not obligated to notify any party hereto of a pending sale under this Deed of Trust or of any action or proceeding in which Trustor, Beneficiary, or Trustee is a party unless brought by Trustee. Section 8.14 Tax Credit Provisions. Notwithstanding anything to the contrary contained herein or in any documents secured by this Deed of Trust or contained in any subordination agreement, and to the extent applicable, the Beneficiary acknowledges and agrees that in the event of a foreclosure or deed-in-lieu of foreclosure (collectively, "Foreclosure") with respect to the Security encumbered by this Deed of Trust, the following rule contained in 26 U.S.C. Section 42(h)(6)(E)(ii), as amended, applies: For a period of three (3) years from the date of Foreclosure, with respect to any unit that had been regulated by the Regulatory Agreement with the California Tax Credit Allocation Committee: (i) none of the tenants occupying those units at the time of Foreclosure may be evicted or their tenancy terminated (other than for good cause); (ii) nor may any rent be increased except as otherwise permitted under Section 42 of the Internal Revenue Code. [Signature Page Follows] 18 IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year first above written. TRUSTOR: Val 9 Housing Partners, L.P., a California limited partnership By: Val 9 MGP, LLC, a California limited liability company, its sole general partner By: National Community Renaissance of California, its sole member and manager By: Tracy Tho as, Chi f Financial Officer A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) COUNTY OF On 03 /11 15 , before me, _( �) 1 Z,-%-. , Notary Public, personally appeared who proved to me on the basis of satisfactory evidence to Ik the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: WRIELA M. HOFFMAN Name: Notary Public Commission#2055787 < =d Notary Public-California i Z San Bernardino County M Comm.Expires Jan 24,2018 A- EXHIBIT A LEGAL DESCRIPTION The land is situated in the State of California, County of San Bernardino, City of San Bernardino and is described as follows: A PORTION OF LOT 7, BLOCK 42 OF RANCHO SAN BERNARDINO ACCORDING TO THE OFFICIAL MAP RECORDED IN BOOK 7, PAGE 2, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE NORTH LINE OF NINTH ST. 1,774.70 FEET EAST FROM THE CENTER LINE OF WATERMAN AVENUE; THENCE NORTHERLY PARALLEL TO THE WEST LINE OF SAID LOT 7 A DISTANCE OF 602.75 FEET;THENCE EASTERLY PARALLEL TO THE SOUTH LINE OF SAID LOT 7 TO A POINT 50.00 FEET FROM THE EAST LINE OF SAID LOT 7;THENCE SOUTHERLY PARALLEL TO THE SAID EAST LINE OF LOT 7 TO THE SOUTH LINE OF SAID LOT 7;THENCE WESTERLY ALONG THE SAID SOUTH LINE OF LOT 7 OF THE TRUE POINT OF BEGINNING. SAID LAND IS ALSO SHOWN AS PARCEL 1 OF CERTIFICATE OF COMPLIANCE FOR LOT LINE ADJUSTMENT NO. 88-30 RECORDED SEPTEMBER 29, 1989 AS INSTRUMENT NO. 89-365668 OF OFFICIAL RECORDS. APN(s): 147-191-12 A-1 EXHIBIT F FORM OF REGULATORY AGREEMENT F-1 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Office of the City Manager City of San Bernardino 300 N "D" Street, Sixth Floor San Bernardino, CA 92418 Attn: Housing Director No fee for recording pursuant to Government Code Section 27383 REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (Waterman Gardens- Valencia 9 Apartments) This Regulatory Agreement and Declaration of Restrictive Covenants (the "Agreement") is dated March 17, 2015 and is between the City of San Bernardino, a charter city of the State of California(the "City"), and Val 9 Housing Partners, L.P., a California limited partnership ("Borrower"). RECITALS A. Defined Terms used but not defined in these recitals are as defined in Article 1 of this Agreement. B. Borrower owns or is acquiring real property located at the northwest corner of Valencia Avenue and 9ch Street, in the City of San Bernardino, County of San Bernardino, State of California, as more particularly described in Exhibit A(the "Pro pert "). Borrower intends to construct on the Property a Seventy-Six (76) unit multifamily affordable housing development (including one manager's unit) (the "Improvements"). The Improvements and the Property are referred to as the "Development". C. Pursuant to a HOME Investment Partnerships Act Loan Agreement by and between the City and Borrower, dated as of March 17, 2015 (the "Loan Agreement"), the City has made a loan of up to One Million Five Hundred Thousand ($1,500,000) of HOME Investment Partnerships Act funds ("HOME Funds") to fund costs associated with the acquisition and construction of the Improvements (the "Loan"). The City has the authority to loan the HOME Funds pursuant to 24 C.F.R. 92.205. D. The City has agreed to make the Loan on the condition that the Development be maintained and operated in accordance with restrictions concerning affordability, operation, and maintenance that are set forth in this Agreement and in the related documents evidencing the Loan. 1 E. In consideration of receipt of the Loan at an interest rate substantially below the market rate, Borrower agrees to observe all the terms and conditions set forth below. The parties therefore agree as follows. ARTICLE 1 DEFINITIONS; EXHIBITS 1.1 Definitions. The following terms have the following meanings: (a) "Actual Household Size" means the actual number of persons in the applicable household. (b) "Adjusted Income" means the total anticipated annual income of all persons in the Tenant household as calculated pursuant to 24 C.F.R. 92.203(b)(1). Adjusted income includes income from all persons in the household, including nonrelated individuals. (c) "Agreement" has the meaning set forth in the first paragraph of this Agreement. (d) "City" has the meaning set forth in the first paragraph of this Agreement. (e) "City Manager"means the person holding the office of city manager for the City pursuant to Article V, Section 100 of the Charter of the City of San Bernardino. (f) "County" means the County of San Bernardino, a political subdivision of the State of California. (g) "Completion Date" means the date that all of the following have occurred: (i) a final certificate of occupancy, or equivalent document is issued by the City to certify completion of the construction of the Development; (ii)the final disbursement of HOME funds for the Development has been made; (iii) the City has verified the Development complies with the property standards set forth in 24 C.F.R. 92.251; and (iv) all project completion information has been entered by the City into the Integrated Disbursement and Information System (IDIS). (h) "Completion of Construction" means the date the construction of the Development is completed as evidenced by the issuance of a certificate of occupancy or equivalent document issued by the City, to certify completion of the construction of the Development. (i) "City-Assisted Units" means the seven (7) Units within the Development designated as assisted by the City pursuant to this Agreement, which Units are "floating" Units as defined in 24 C.F.R. 92.2520). 0) "Deed of Trust" means the Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing of even date herewith by and among Borrower, as trustor, 2 Fidelity National Title Insurance Company, as trustee, and the City, as beneficiary, that will encumber the Property to secure repayment of the Loan and Borrower's performance of the covenants set forth in the documents evidencing the Loan. (k) "Development" has the meaning set forth in Paragraph B of the Recitals. (1) "High HOME Rent" means a monthly Rent amount not exceeding the maximum rent published by HUD for a Low Income Household for the applicable bedroom size as set forth in 24 C.F.R. 92.252(a). (m) "HOME" means Home Investment Partnerships Act Program funded pursuant to the Cranston-Gonzales National Housing Act of 1990. (n) "HOME Funds" has the meaning set forth in Paragraph C of the Recitals. (o) "HOME Regulations" means the regulations set forth in 24 C.F.R. Part 92. (p) "HOME Term" means the period beginning on the date of this Agreement and ending on the twentieth (20th) anniversary of the date of this Agreement. (q) "HUD" means the United States Department of Housing and Urban Development. (r) "Loan" has the meaning set forth in Paragraph C of the Recitals. (s) "Loan Agreement" has the meaning set forth in Paragraph C of the Recitals. (t) "Loan Documents" means the documents executed by Borrower evidencing the Loan including this Agreement, the Note, Deed of Trust, and Loan Agreement. (u) "Low HOME Rent" means a monthly Rent amount not exceeding the maximum rent published by HUD for a Very Low Income Household for the applicable bedroom size or as otherwise set forth in 24 C.F.R. 92.252(b). (v) "Low Income Household" means a Tenant household with an Adjusted Income that does not exceed eighty percent (80%) of Median Income, with adjustments for smaller and larger families, except that HUD may establish income ceilings higher or lower than eighty percent (80%) of Median Income on the basis of HUD findings that such variations are necessary because of prevailing levels of construction costs or fair market rents, or unusually high or low family incomes, as such definition may be amended pursuant to 24 C.F.R. Section 92.2. An individual who is a student that is ineligible to receive Section 8 assistance under 24 C.F.R. 5.612, and thus ineligible to receive any type of HOME assistance, shall not qualify as a Low Income Household. (w) "Management Agent" has the meaning set forth in Section 5.2. 3 (x) "Median Income" means the median gross yearly income, adjusted for Actual Household Size as specified herein, in the County of San Bernardino, California, as published from time to time by HUD. In the event that such income determinations are no longer published, or are not updated for a period of at least eighteen(18) months, the City shall provide Borrower with other income determinations that are reasonably similar with respect to methods of calculation to those previously published by HUD. (y) "Note" means the promissory note of even date herewith that evidences Borrower's obligation to repay the Loan, as such may be amended form time to time. (z) "Property" has the meaning set forth in Paragraph B of the Recitals. (aa) "Rent" means the total monthly payments by the Tenant of a Unit for the following: (i)use and occupancy of the Unit and land and associated facilities, including parking; (ii) any reasonable and customary separately charged fees or service charges assessed by Borrower which are required of all Tenants which meet the requirements under 24 C.F.R. 92.214(b)(3), other than security deposits; (iii)the City-approved utility allowance, calculated pursuant to 24 C.F.R. 92.252(d), for the cost of an adequate level of service for utilities paid by the Tenant, including garbage collection, sewer, water, electricity, gas and other heating, cooking and refrigeration fuel,but not telephone service or cable TV; and (iv) any other interest, taxes, fees or charges for use of the land or associated facilities and assessed by a public or private entity other than Borrower, and paid by the Tenant. In no event shall the Rent of a City-Assisted Unit exceed the amount approved by the City pursuant to Section 2.2 hereof. (bb) "Service Provider" has the meaning set forth in Section 5.6. (cc) "Tenant" means the tenant household that occupies a Unit in the Development. (dd) "Tenant Services" has the meaning set forth in Section 5.6. (ee) "Term" means the term of this Agreement which commences as of the date of this Agreement, and unless sooner terminated pursuant to the terms of this Agreement, expires on the date fifty-five (55) years from the Completion Date. (ff) "Unit(s)" means one (1) or more of the units in the Development. (gg) "Very Low Income Household" means a household with an Adjusted Income that does not exceed fifty percent (50%) of Median Income, with adjustments for smaller and larger families, except that HUD may establish income ceilings higher or lower than fifty percent (50%) of Median Income on the basis of HUD findings that such variations are necessary because of prevailing levels of construction costs or fair market rents, or unusually high or low family incomes, as set forth in 24 C.F.R. Section 92.2. An individual who is a student that is ineligible to receive Section 8 assistance under 24 C.F.R. 5.612, and thus ineligible to receive any type of HOME assistance, shall not qualify as a Very Low Income Household. 4 (hh) "Very Low Income Units" means the Units which, pursuant to Section 2.1(a)below, are required to be occupied by Very Low Income Households. 1.2 Exhibits The following exhibits are attached to this Agreement and incorporated into this Agreement by this reference: Exhibit A: Legal Description of the Property Exhibit B: Schedule of HOME Rents Exhibit C: Certificate of Continuing Program Compliance Exhibit D: Form of Certification of Tenant Eligibility Exhibit E: HUD Rider ARTICLE 2 AFFORDABILITY AND OCCUPANCY COVENANTS 2.1 Occupancy Requirements. (a) Very Low Income Units. During the Term, Borrower shall rent seven(7) City-Assisted Units, and ensure that these Units are occupied or, if vacant, available for occupancy,by Very Low Income Households. (b) Intermingling of Units. The City-Assisted Units are required to be one(1) one-bedroom Unit and six (6) three-bedroom Units and are to be intermingled throughout the Development and of comparable quality to all other Units. All Tenants must have equal access to and enjoyment of all common facilities in the Development. (c) Disabled Persons Occupancy. Borrower shall cause the Development to be operated at all times in compliance with the provisions o£ (i) the Unruh Act, (ii) the California Fair Employment and Housing Act, (iii) Section 504 of the Rehabilitation Act of 1973, (iv) the United States Fair Housing Act, as amended, and (v) the Americans With Disabilities Act of 1990, which relate to disabled persons access. Borrower shall indemnify, protect, hold harmless and defend (with counsel reasonably satisfactory to the City) the City, and its elected officials, officers and employees, from all suits, actions, claims, causes of action, costs, demands,judgments and liens arising out of Borrower's failure to comply with applicable legal requirements related to housing for persons with disabilities. The provisions of this subsection will survive expiration of the Term or other termination of this Agreement, and remain in full force and effect. 2.2 Allowable Rent. (a) Very Low Income Rent. Subject to the provisions of Section 2.3 below, the Rent paid by Tenants of Very Low Income Units may not exceed the Low HOME Rent provided annually by the City. 5 (b) No Additional Fees. Borrower may not charge any fee, other than Rent, to any Tenant of the City-Assisted Units for any housing or other services provided by Borrower. 2.3 Rent Increases; Increased Income of Tenants. (a) Rent Increases. The proposed initial Rents and subsequent Rents for all City-Assisted Units shall be provided to the Borrower by the City prior to initial or subsequent occupancy and prior to a rent increase, and shall be subject to the HOME Regulations. A schedule of current HOME rents is attached as Exhibit B. Borrower may not impose any Rent increases on City-Assisted Units, without prior submission to the City of any proposed Rent increases and without written approval from the City of the proposed Rent increases. The Rent for such City-Assisted Units may be increased no more than once annually based upon the annual income certification described in Article 3 and in no event shall any increase exceed three (3%)percent. Tenants shall be given at least sixty(60) days written notice prior to any Rent increase. The City will provide Borrower with a schedule of maximum permissible Rents for the City-Assisted Units annually. (b) Non-Qualifying Household. If, upon the annual certification of the income a Tenant of a City-Assisted Unit, Borrower determines that the income of a Very Low Income Household has increased above the qualifying limit for a Low Income Household, such Tenant shall be permitted to retain the Unit and upon expiration of the Tenant's lease and upon sixty(60) days written notice, the Rent must be increased to the lesser of one-twelfth (1/121")of thirty percent (30%) of the actual Adjusted Income of the Tenant, or fair market rent (subject to 24 C.F.R. 92.252(1)(2) regarding low income housing tax credit requirements), and Borrower shall rent the next available Unit to a Very Low Income Household or Low Income Household as applicable to comply with the requirements of Section 2.1 above, at a Rent not exceeding the maximum Rent specified in Section 2.2, or re-designate another comparable Unit in the Development with a Very Low Income Household or Low Income Household as applicable as a City-Assisted Unit, to meet the requirements of Section 2.1 above. Upon renting the next available Unit in accordance with Section 2.1 or re-designating another Unit in the Development as a City-Assisted Unit,the Unit with the over-income Tenant will no longer be considered a City-Assisted Unit. (c) Termination of Occupancy. Upon termination of occupancy of a City- Assisted Unit by a Tenant, such Unit will be deemed to be continuously occupied by a household of the same income level as the initial income level of the vacating Tenant, until such Unit is reoccupied or another Unit is re-designated as a City-Assisted Unit, at which time categorization of the Unit will be established based on the occupancy requirements of Section 2.1. 2.4 Units Available to the Disabled. Borrower shall construct the Development in compliance with all applicable federal and state disabled persons accessibility requirements including but not limited to the Federal Fair Housing Act; Section 504 of the Rehabilitation Act of 1973; Title II and/or Title III of the Americans with Disabilities Act; and Title 24 of the California Code of Regulations. In compliance with Section 504 of the Rehabilitation Act, Borrower shall construct a minimum of four(4) units in the Development shall be constructed to be readily accessible and usable by households with a mobility impaired member and a minimum of two (2) units shall be constructed and to be readily accessible and usable by households with a 6 hearing or visually impaired member. ARTICLE 3 INCOME CERTIFICATION AND REPORTING 3.1 Income Certification. Borrower shall obtain, complete, and maintain on file, immediately prior to initial occupancy and annually thereafter, income certifications from each Tenant renting any of the City-Assisted Units. Borrower shall cause each Tenant in a City- Assisted Unit to execute a Certification of Tenant Eligibility in the form attached as Exhibit D. Borrower shall fill out the "Development Owner" portion of the Certification of Tenant Eligibility and provide it to the City along with supporting documentation collected by Borrower. Borrower shall make a good faith effort to verify the accuracy of the income provided by all applicants or all members of the occupying household, as the case may be, in the income certification. To verify the information Borrower shall take two or more of the following steps: (i) obtain pay stubs for the most recent two months; (ii) obtain an income tax return for the most recent tax year; (iii) conduct a credit agency or similar search; (iv) obtain an income verification form from the applicant's current employer verifying employment for the last two months; (v) obtain an income verification form from the Social Security Administration and/or the California Department of Social Services if the applicant receives assistance from either of such agencies, verifying assistance for the last two months; or(vi) if the applicant is unemployed and does not have a tax return, obtain another form of independent verification. Copies of the Certifications of Tenant Eligibility and accompanying documentation must be submitted to the City annually for each of the City-Assisted Units. 3.2 Reporting Requirements. Borrower shall submit to the City(a) not later than the forty-fifth (45th) day after the close of each calendar year, or such other date as may be requested by the City, a signed copy of the Certification of Program Compliance in the form attached as Exhibit C, and (b)within fifteen (15) days after receipt of a written request, any other information or completed forms requested by the City in order to comply with reporting requirements of HUD, the State of California, and the City. 3.3 Additional Information. Borrower shall provide any additional information reasonably requested by the City. 3.4 Records. Borrower shall maintain complete, accurate and current records pertaining to the Development, and shall permit any duly authorized representative of the City to inspect records, including records pertaining to income and household size of Tenants and Rent charged to such Tenants. All Tenant lists, applications and waiting lists relating to the Development are to be at all times: (i) separate and identifiable from any other business of Borrower, (ii)maintained as required by the City, in a reasonable condition for proper audit, and (iii) subject to examination during business hours by representatives of the City. Borrower shall retain copies of all materials obtained or produced with respect to occupancy of the units for a period of at least five (5) years. The City may audit, examine and make copies of all books, records or other documents of Borrower that pertain to the Development. 3.5 HOME Record Requirements. For the period of the HOME Term all records 7 maintained by Borrower pursuant to Sections 3.2 and 3.4 above are to be (i)maintained in compliance with all applicable HUD records and accounting requirements, and (ii) open to and available for inspection and copying by HUD and its authorized representatives at reasonable intervals during normal business hours; provided however, records pertaining to Tenant income verifications, Rents, and Development physical inspections must be kept for the most recent five(5) year period and are subject to HUD inspection for five(5) years after expiration of the HOME Term. Borrower is subject to the audit requirements set forth in 24 CFR 92.505 during the HOME Term. 3.6 On-Site Inspection. The City may perform, or cause to be performed, an on-site inspection of the Development (including Units, subject to the rights of Tenants) at least one (1) time per year upon twenty-four(24)hours' notice during normal business hours to monitor compliance with this Agreement. Borrower shall cooperate in making the Property available for such inspection. Borrower agrees and acknowledges that the City must conduct on-site inspections, consistent with the requirements of 24 C.F.R. 92.504(d), to determine compliance with the property standards set forth in 24 C.F.R. 92.251, at least once every three (3) years after the completion of construction of the Development. After the completion of an inspection the City shall deliver a copy of the inspection report to the Borrower. If the City determines as a result of such inspection that there are any life-threatening health and safety related deficiencies, Borrower has the obligation to correct such deficiencies immediately, in accordance with 24 C.F.R. 92.251. If the City determines as a result of the inspection that there are any deficiencies for any of the inspectable items in the Development,the Borrower shall correct such deficiencies within fifteen(15) days from the delivery of the inspection report or if a period longer than fifteen (15) days is reasonably necessary to correct the deficiency, then Borrower must begin to correct the deficiency within fifteen(15) days and correct the deficiency as soon as reasonably possible. In addition, the Borrower acknowledges that the City may re-inspect the Development to verify all deficiencies have been corrected or rely on third party documentation submitted by the Borrower for non- hazardous deficiencies in conformance with 24 C.F.R 92.504(d). ARTICLE 4 OPERATION OF THE DEVELOPMENT 4.1 Residential Use. Borrower shall operate the Development for residential use only and such ancillary uses permitted at the Development as approved by the City. No part of the Development may be operated as emergency shelters (including shelters for disaster victims) or facilities such as nursing homes, convalescent homes,hospitals,residential treatment facilities, correctional facilities,halfway houses, housing for students, or dormitories (including farmworker dormitories). 4.2 Compliance with Loan Documents and Program Requirements. Borrower's actions with respect to the Property shall at all times be in full conformity with: (i) all requirements of the Loan Documents; (ii) all requirements imposed on projects assisted with HOME Funds as contained in 42 U.S.C. Section 12701, et seq., 24 C.F.R. Part 92, and other 8 implementing rules and regulations, as such may be amended or supplemented from time to time, and (iii) any other regulatory requirements imposed on Borrower. 4.3 Taxes and Assessments. Borrower shall pay all real and personal property taxes, assessments and charges and all franchise, income, employment, old age benefit, withholding, sales, and other taxes assessed against it, or payable by it, at such times and in such manner as to prevent any penalty from accruing, or any lien or charge from attaching to the Property; provided,however,that Borrower may apply for a property tax exemption for the Property under any provision of law or contest in good faith, any such taxes, assessments, or charges. In the event Borrower exercises its right to contest any tax, assessment, or charge against it, Borrower, on final determination of the proceeding or contest, will immediately pay or discharge any decision or judgment rendered against it, together with all costs, charges and interest. 4.4 Property Tax Exemption. Borrower shall not without the prior written consent of the City apply for a property tax exemption for the Property under any provision of law except California Revenue and Taxation Section 214(g). ARTICLE 5 PROPERTY MANAGEMENT, MAINTENANCE AND TENANT SERVICES 5.1 Management Responsibilities. Borrower is responsible for all management functions with respect to the Development, including without limitation the selection of Tenants in accordance with the requirements of 24 C.F.R. 92.253(d), certification and recertification of household size and income, evictions, collection of rents and deposits,maintenance, landscaping, routine and extraordinary repairs,replacement of capital items, and security. The City has no responsibility for management of the Development. Borrower shall retain a professional property management company approved by the City in its reasonable discretion to perform Borrower's management duties hereunder. An on-site property manager is also required. 5.2 Management Agent. Borrower shall cause the Development to be managed by an experienced management agent reasonably acceptable to the City, with a demonstrated ability to operate residential facilities like the Development in a manner that will provide decent, safe, and sanitary housing(the "Management Agent"). The City pre-approves the National Community Renaissance of California as the initial Management Agent. Borrower shall submit for the City's approval the identity of any proposed subsequent Management Agent. Borrower shall also submit such additional information about the background, experience and financial condition of any proposed Management Agent as is reasonably necessary for the City to determine whether the proposed Management Agent meets the standard for a qualified Management Agent set forth above. If the proposed Management Agent meets the standard for a qualified Management Agent set forth above, the City shall approve the proposed Management Agent by notifying Borrower in writing. Unless the proposed Management Agent is disapproved by the City within thirty(30) days, which disapproval is to state with reasonable specificity the basis for disapproval, it shall be deemed approved. 5.3 Periodic Performance Review. The City reserves the right to conduct an annual (or more frequently, if deemed necessary by the City)review of the management practices and 9 financial status of the Development. The purpose of each periodic review will be to enable the City to determine if the Development is being operated and managed in accordance with the requirements and standards of this Agreement. Borrower shall cooperate with the City in such reviews. 5.4 Replacement of Management Agent. If, as a result of a periodic review, the City determines in its reasonable judgment that the Development is not being operated and managed in accordance with any of the material requirements and standards of this Agreement, the City shall deliver notice to Borrower of its intention to cause replacement of the Management Agent, including the reasons therefor. Within fifteen(15) days after receipt by Borrower of such written notice,the City staff and Borrower shall meet in good faith to consider methods for improving the financial and operating status of the Development, including, without limitation,replacement of the Management Agent. HUD and Senior Lender(which for the purposes of this Section shall be PNC Bank,National Association) and the Investor Limited Partner(as defined in Section 1.1 of the Loan Agreement) will receive an opportunity to participate in all meetings required under this Section. If, after such meeting, City staff recommends in writing the replacement of the Management Agent, Borrower shall promptly dismiss the then-current Management Agent, and shall appoint as the Management Agent a person or entity meeting the standards for a management agent set forth in Section 5.2 above and approved by the City pursuant to Section 5.2 above, and subject to the rights of HUD, the Senior Lender and the Investor Limited Partner. Any contract for the operation or management of the Development entered into by Borrower shall provide that the Management Agent may be dismissed and the contract terminated as set forth above. Failure to remove the Management Agent in accordance with the provisions of this Section constitutes a default under this Agreement, and the City may enforce this provision through legal proceedings as specified in Section 6.7 below. 5.5 Approval of Management Policies. Borrower shall submit its written management policies with respect to the Development to the City for its review, and shall amend such policies in any way necessary to ensure that such policies comply with the provisions of this Agreement. 5.6 Tenant Services Provider. (a) The Borrower will be providing on-site services which Borrower will make available to all Tenants in the Development (the "Tenant Services"). The Borrower shall submit to the City for approval the name and qualifications of any proposed services provider (the "Services Provider"). 10 (b) The Services Provider shall have demonstrated the ability to provide Tenant Services in residential facilities like the Development in an effective manner. The Borrower shall submit such additional information about the background, experience and financial condition of any proposed Services Provider as is reasonably necessary for the City to determine whether the proposed Services Provider meets the standards for a qualified Services Provider of developments of this type. (c) If the proposed Services Provider meets the standard for a qualified Services Provider set forth above,the City shall approve the proposed Services Provider by notifying Borrower in writing. Unless the proposed Services Provider is disapproved by the City within thirty(30) days, which disapproval is to state with reasonable specificity the basis for disapproval, it shall be deemed approved. The City hereby approves Hope Through Housing Foundation as the initial Services Provider for the Development. 5.7 Property Maintenance. Borrower shall maintain, for the entire Term of this Agreement, all interior and exterior Improvements, including landscaping, on the Property in good condition and repair(and, as to landscaping, in a healthy condition) and in accordance with all applicable laws, rules, ordinances, orders and regulations of all federal, state, county, municipal, and other governmental agencies and bodies having or claiming jurisdiction and all their respective departments,bureaus, and officials, and in a decent, safe, sanitary condition and in good repair pursuant to the Uniform Physical Conditions Standards established by HUD pursuant to 24 C.F.R. 5.703 and as required under 24 C.F.R. 92.251. The City places prime importance on quality maintenance to protect its investment and to ensure that all City and City-assisted affordable housing projects within the City are not allowed to deteriorate due to below-average maintenance. Normal wear and tear of the Development will be acceptable to the City assuming Borrower agrees to provide all necessary improvements to assure the Development is maintained in good condition. Borrower shall make all repairs and replacements necessary to keep the improvements in good condition and repair. In the event that Borrower breaches any of the covenants contained in this section and such default continues for a period of five(5) days after written notice from the City with respect to graffiti, debris, waste material, and general maintenance or thirty (30) days after written notice from the City with respect to landscaping and building improvements, then the City, in addition to whatever other remedy it may have at law or in equity,has the right to enter upon the Property and perform or cause to be performed all such acts and work necessary to cure the default. Pursuant to such right of entry, the City is permitted (but is not required) to enter upon the Property and to perform all acts and work necessary to protect,maintain, and preserve the improvements and landscaped areas on the Property, and to attach a lien on the Property, or to assess the Property, in the amount of the expenditures arising from such acts and work of protection,maintenance, and preservation by the City and/or costs of such cure, which amount shall be promptly paid by Borrower to the City upon demand. 5.8 Crime Prevention Program. During the Term of this Agreement Borrower agrees to participate in the San Bernardino Police Department's Crime Free Multi-Housing program (the "Crime Prevention Program"). The City's periodic review of the management of the 11 Development pursuant to Section 5.3 will include an evaluation of Borrower's participation in the Crime Prevention Program. ARTICLE 6 MISCELLANEOUS 6.1 Lease Provisions. In leasing the Units within the Development, Borrower shall use a form of written lease approved by the City. The lease must not contain any provision which is prohibited by 24 C.F.R. Section 92.253(b) and any amendments thereto. The form of lease must comply with all requirements of this Agreement,the other Loan Documents and must, among other matters: (a) provide for termination of the lease for failure to: (i) provide any information required under this Agreement or reasonably requested by Borrower to establish or recertify the Tenant's qualification, or the qualification of the Tenant's household, for occupancy in the Development in accordance with the standards set forth in this Agreement, or(ii) qualify as a Very Low Income Household or Low Income Household as a result of any material misrepresentation made by such Tenant with respect to the income computation. (b) be for an initial term of not less than one (1) year, unless by mutual agreement between the Tenant and Borrower, and provide for no increase in Rent during such year. After the initial year of tenancy, the lease may be month-to-month by mutual agreement of Borrower and the Tenant. Notwithstanding the above, any rent increases are subject to the requirements of Section 2.3 (a) above. (c) include a provision which requires a Tenant who is residing in a Unit required to be accessible pursuant to Section 2.4 and who is not in need of an accessible Unit to move to a non-accessible Unit when a non-accessible Unit becomes available and another Tenant or prospective Tenant is in need of an accessible Unit. 6.2 Lease Termination. Any termination of a lease or refusal to renew a lease for a City-Assisted Unit within the Development must be in conformance with 24 C.F.R. 92.253(c), and must be preceded by not less than sixty(60) days written notice to the Tenant by Borrower specifying the grounds for the action. 6.3 Nondiscrimination. (a) All of the Units must be available for occupancy on a continuous basis to members of the general public who are income eligible. Except as provided in subsection (b) below, Borrower may not give preference to any particular class or group of persons in renting or selling the Units, except to the extent that the Units are required to be leased to income eligible households pursuant to this Agreement. Borrower herein covenants by and for Borrower, assigns, and all persons claiming under or through Borrower, that there exist no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, sexual orientation,marital status,national origin, source of income(e.g., SSI), ancestry, or disability, in the leasing, subleasing, transferring, use, occupancy, tenure, or 12 enjoyment of any unit nor will Borrower or any person claiming under or through Borrower, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number,use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees of any unit or in connection with the employment of persons for the construction, operation and management of any unit. (b) Borrower shall accept as Tenants, on the same basis as all other prospective Tenants,persons who are recipients of federal certificates for rent subsidies pursuant to the existing housing program under Section 8 of the United States Housing Act, or its successor. Borrower may not apply selection criteria to Section 8 certificate or voucher holders that is more burdensome than criteria applied to all other prospective Tenants, nor will Borrower apply or permit the application of management policies or lease provisions with respect to the Development which have the effect of precluding occupancy of units by such prospective Tenants. 6.4 Term. The provisions of this Agreement apply to the Property for the entire Term even if the Loan is paid in full prior to the end of the Term. This Agreement binds any successor, heir or assign of Borrower, whether a change in interest occurs voluntarily or involuntarily,by operation of law or otherwise, except as expressly released by City. City is making the Loan on the condition, and in consideration of, this provision, and would not do so otherwise. 6.5 Notice of Expiration of Term. (a) At least six (6) months prior to the expiration of the Term, Borrower shall provide by first-class mail,postage prepaid, a notice to all Tenants containing: (i)the anticipated date of the expiration of the Term; (ii) any anticipated increase in Rent upon the expiration of the Term; (iii) a statement that a copy of such notice will be sent to the City; and (iv) a statement that a public hearing may be held by the City on the issue and that the Tenant will receive notice of the hearing at least fifteen (15) days in advance of any such hearing. Borrower shall also file a copy of the above-described notice with the City Manager. (b) In addition to the notice required above, Borrower shall comply with the requirements set forth in California Government Code Sections 65863.10 and 65863.11. Such notice requirements include: (i) a twelve(12) month notice to existing tenants,prospective tenants and Affected Public Agencies (as defined in California Government Code Section 65863.10(a)) prior to the expiration of the Term, (ii) a six (6) month notice requirement to existing tenants, prospective tenants and Affected Public Agencies prior to the expiration of the Term; (iii) a notice of an offer to purchase the Development to "qualified entities" (as defined in California Government Code Section 65863.11(d)), if the Development is to be sold within five (5) years of the end of the Term; (iv) a notice of right of first refusal within the one hundred eighty(180) day period that qualified entities may purchase the Development. 6.6 Covenants to Run With the Land. The City and Borrower hereby declare their express intent that the covenants and restrictions set forth in this Agreement run with the land, and bind all successors in title to the Property,provided,however, that on the expiration of the Term of this Agreement said covenants and restrictions expire. Each and every contract, deed or 13 other instrument hereafter executed covering or conveying the Property or any portion thereof, is to be held conclusively to have been executed, delivered and accepted subject to the covenants and restrictions, regardless of whether such covenants or restrictions are set forth in such contract, deed or other instrument,unless the City expressly releases such conveyed portion of the Property from the requirements of this Agreement. 6.7 Enforcement by The City. If Borrower fails to perform any obligation under this Agreement, and fails to cure the default within thirty(30) days after the City has notified Borrower in writing of the default or, if the default cannot be cured within thirty(30) days, fails to commence to cure within thirty(30) days and thereafter diligently pursue such cure and complete such cure within ninety(90) days, the City may enforce this Agreement by any or all of the following actions, or any other remedy provided by law: (a) Calling the Loan. The City may declare a default under the Note, accelerate the indebtedness evidenced by the Note, and proceed with foreclosure under the Deed of Trust. (b) Action to Compel Performance or for Damages. The City may bring an action at law or in equity to compel Borrower's performance of its obligations under this Agreement, and may seek damages. (c) Remedies Provided Under Loan Documents. The City may exercise any other remedy provided under the Loan Documents. 6.8 Attorneys' Fees and Costs. In any action brought to enforce this Agreement, the prevailing party must be entitled to all costs and expenses of suit, including reasonable attorneys' fees. This section must be interpreted in accordance with California Civil Code Section 1717 and judicial decisions interpreting that statute. 6.9 Recording and Filing. The City and Borrower shall cause this Agreement, and all amendments and supplements to it, to be recorded in the Official Records of the County of San Bernardino. 6.10 Governing Law. This Agreement is governed by the laws of the State of California. 6.11 Waiver of Requirements. Any of the requirements of this Agreement may be expressly waived by the City in writing,but no waiver by the City of any requirement of this Agreement extends to or affects any other provision of this Agreement, and may not be deemed to do so. 6.12 Amendments. This Agreement may be amended only by a written instrument executed by all the parties hereto or their successors in title that is duly recorded in the official records of the County of San Bernardino. 6.13 Notices. Any notice requirement set forth herein will be deemed to be satisfied three (3) days after mailing of the notice first-class United States certified mail,postage prepaid, 14 addressed to the appropriate party as follows: City: Office of the City Manager City of San Bernardino 300 N "D" Street, Sixth Floor San Bernardino, CA 92418 Attn: Housing Director Borrower: Val 9 Housing Partners, L.P. 9421 Haven Avenue Rancho Cucamonga, CA 91730 Attn: Chief Financial Officer With a copy to: Law Offices of Edward A. Hopson 655A No. Mountain Avenue Upland, CA 91786 With a copy to: Wells Fargo Community Lending & Investment Wells Fargo Bank Affordable Housing Community Development Corporation 301 South College Street, 17th Floor MAC D1053-170 Charlotte,NC 28288 With a copy to: Kutak Rock 1650 Farnam Street Omaha,NE 68102 Attn: Robert Coon Such addresses may be changed by notice to the other party given in the same manner as provided above. 6.14 Severability. If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid,illegal or unenforceable, the validity, legality and enforceability of the remaining portions of this Agreement will not in any way be affected or impaired thereby. 6.15 Multiple Originals, Counterparts. This Agreement may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts. 6.16 Revival of Agreement after Foreclosure. In the event there is a foreclosure of the Property,this Agreement will revive according to its original terms if, during the Term, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes 15 the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the Development or Property. 6.17 HUD Rider. The HUD Rider is attached to this Agreement as Exhibit E, and incorporated into this Agreement by this reference. [Remainder of Page Left Intentionally Blank] 16 WHEREAS, this Agreement has been entered into by the undersigned as of the Effective Date. BORROWER: Date: VAL 9 HOUSING PARTNERS, L.P., a California limited partnership By: Val 9 MGP, LLC, a California limited liability company, its sole general partner By: National Community Renaissance of California, its sole member and manager By: Tracy Thomas, Chief Financial Officer [Signature Page Continues] CITY: CITY OF SAN BERNARDINO By: Allen arker, City Manager Date: APPROVED AS TO FORM: Gary D. Saenz City Attorney By A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) COUNTY OF ) On ,before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: Notary Public A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) COUNTY OF ) On ,before me, ,Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: Notary Public EXHIBIT A LEGAL DESCRIPTION The land is situated in the State of California, County of San Bernardino, City of San Bernardino and is described as follows: A-1 ` RECORDING REQUESTED BY FIDELITY NATIONAL TITLE Electronically Recorded in Official Records,County of San Bernardino 12:39 3/2012D15 PM 12:39 PM BOB DUTTON SAN ASSESSOR-RECORDER-CLERK RECORDING REQUESTED BY 688 Fidelity National Title MA AND WHEN RECORDED MAIL TO: Doc#: 2015-0109632 Titles: 2 Pages: 21 Office of the City Manager Fees .00 City of San Bernardino Taxes .00 300 N "D" Street, Sixth Floor Other .00 San Bernardino, CA 92418 PAID Attn: Housing Director No fee for recording pursuant to Government Code Section 27383 REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (Waterman Gardens- Valencia 9 Apartments) This Regulatory Agreement and Declaration of Restrictive Covenants (the "Agreement") is dated March 17, 2015 and is between the City of San Bernardino, a charter city of the State of California(the "City"), and Val 9 Housing Partners, L.P., a California limited partnership ("Borrower"). RECITALS A. Defined Terms used but not defined in these recitals are as defined in Article 1 of this Agreement. B. Borrower owns or is acquiring real property located at the northwest corner of Valencia Avenue and 91h Street, in the City of San Bernardino, County of San Bernardino, State of California, as more particularly described in Exhibit A (the "Pro e "). Borrower intends to construct on the Property a Seventy-Six (76) unit multifamily affordable housing development (including one manager's unit) (the "Improvements"). The Improvements and the Property are referred to as the "Development". C. Pursuant to a HOME Investment Partnerships Act Loan Agreement by and between the City and Borrower, dated as of March 17, 2015 (the "Loan Agreement"), the City has made a loan of up to One Million Five Hundred Thousand ($1,500,000) of HOME Investment Partnerships Act funds ("HOME Funds")to fund costs associated with the acquisition and construction of the Improvements (the "Loan"). The City has the authority to loan the HOME Funds pursuant to 24 C.F.R. 92.205. D. The City has agreed to make the Loan on the condition that the Development be maintained and operated in accordance with restrictions concerning affordability, operation, and maintenance that are set forth in this Agreement and in the related documents evidencing the Loan. 1 RECORDING REQUESTED BY FIDELITY NATIONAL TITLE ,230_'1/S71,7.2-i° RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Office of the City Manager City of San Bernardino 300 N "D" Street, Sixth Floor San Bernardino, CA 92418 Attn: Housing Director No fee for recording pursuant to Government Code Section 27383 REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (Waterman Gardens- Valencia 9 Apartments) This Regulatory Agreement and Declaration of Restrictive Covenants (the "Agreement") is dated March 17, 2015 and is between the City of San Bernardino, a charter city of the State of California(the "City"), and Val 9 Housing Partners, L.P., a California limited partnership ("Borrower"). RECITALS A. Defined Terms used but not defined in these recitals are as defined in Article 1 of this Agreement. B. Borrower owns or is acquiring real property located at the northwest corner of Valencia Avenue and 91h Street, in the City of San Bernardino, County of San Bernardino, State of California, as more particularly described in Exhibit A (the "Property"). Borrower intends to construct on the Property a Seventy-Six (76) unit multifamily affordable housing development (including one manager's unit) (the "Improvements"). The Improvements and the Property are referred to as the "Development". C. Pursuant to a HOME Investment Partnerships Act Loan Agreement by and between the City and Borrower, dated as of March 17, 2015 (the "Loan Agreement"), the City has made a loan of up to One Million Five Hundred Thousand ($1,500,000) of HOME Investment Partnerships Act funds ("HOME Funds") to fund costs associated with the acquisition and construction of the Improvements (the "Loan"). The City has the authority to loan the HOME Funds pursuant to 24 C.F.R. 92.205. D. The City has agreed to make the Loan on the condition that the Development be maintained and operated in accordance with restrictions concerning affordability, operation, and maintenance that are set forth in this Agreement and in the related documents evidencing the Loan. 1 E. In consideration of receipt of the Loan at an interest rate substantially below the market rate, Borrower agrees to observe all the terms and conditions set forth below. The parties therefore agree as follows. ARTICLE 1 DEFINITIONS; EXHIBITS 1.1 Definitions. The following terms have the following meanings: (a) "Actual Household Size" means the actual number of persons in the applicable household. (b) "Adjusted Income" means the total anticipated annual income of all persons in the Tenant household as calculated pursuant to 24 C.F.R. 92.203(b)(1). Adjusted income includes income from all persons in the household, including nonrelated individuals. (c) "Agreement" has the meaning set forth in the first paragraph of this Agreement. (d) "City" has the meaning set forth in the first paragraph of this Agreement. (e) "City Manager" means the person holding the office of city manager for the City pursuant to Article V, Section 100 of the Charter of the City of San Bernardino. (f) "County" means the County of San Bernardino, a political subdivision of the State of California. (g) "Completion Date" means the date that all of the following have occurred: (i) a final certificate of occupancy, or equivalent document is issued by the City to certify completion of the construction of the Development; (ii)the final disbursement of HOME funds for the Development has been made; (iii) the City has verified the Development complies with the property standards set forth in 24 C.F.R. 92.251; and (iv) all project completion information has been entered by the City into the Integrated Disbursement and Information System (IDIS). (h) "Completion of Construction" means the date the construction of the Development is completed as evidenced by the issuance of a certificate of occupancy or equivalent document issued by the City, to certify completion of the construction of the Development. (i) "City-Assisted Units" means the seven (7) Units within the Development designated as assisted by the City pursuant to this Agreement, which Units are "floating" Units as defined in 24 C.F.R. 92.2520). 0) "Deed of Trust" means the Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing of even date herewith by and among Borrower, as trustor, 2 Fidelity National Title Insurance Company, as trustee, and the City, as beneficiary, that will encumber the Property to secure repayment of the Loan and Borrower's performance of the covenants set forth in the documents evidencing the Loan. (k) "Development" has the meaning set forth in Paragraph B of the Recitals. (1) "High HOME Rent" means a monthly Rent amount not exceeding the maximum rent published by HUD for a Low Income Household for the applicable bedroom size as set forth in 24 C.F.R. 92.252(a). (m) "HOME" means Home Investment Partnerships Act Program funded pursuant to the Cranston-Gonzales National Housing Act of 1990. (n) "HOME Funds" has the meaning set forth in Paragraph C of the Recitals. (o) "HOME Regulations" means the regulations set forth in 24 C.F.R. Part 92. (p) "HOME Term" means the period beginning on the date of this Agreement and ending on the twentieth (20th) anniversary of the date of this Agreement. (q) "HUD" means the United States Department of Housing and Urban Development. (r) "Loan" has the meaning set forth in Paragraph C of the Recitals. (s) "Loan Agreement" has the meaning set forth in Paragraph C of the Recitals. (t) "Loan Documents" means the documents executed by Borrower evidencing the Loan including this Agreement, the Note, Deed of Trust, and Loan Agreement. (u) "Low HOME Rent" means a monthly Rent amount not exceeding the maximum rent published by HUD for a Very Low Income Household for the applicable bedroom size or as otherwise set forth in 24 C.F.R. 92.252(b). (v) "Low Income Household" means a Tenant household with an Adjusted Income that does not exceed eighty percent (80%) of Median Income, with adjustments for smaller and larger families, except that HUD may establish income ceilings higher or lower than eighty percent(80%) of Median Income on the basis of HUD findings that such variations are necessary because of prevailing levels of construction costs or fair market rents, or unusually high or low family incomes, as such definition may be amended pursuant to 24 C.F.R. Section 92.2. An individual who is a student that is ineligible to receive Section 8 assistance under 24 C.F.R. 5.612, and thus ineligible to receive any type of HOME assistance, shall not qualify as a Low Income Household. (w) "Management Agent" has the meaning set forth in Section 5.2. 3 (x) "Median Income" means the median gross yearly income, adjusted for Actual Household Size as specified herein, in the County of San Bernardino, California, as published from time to time by HUD. In the event that such income determinations are no longer published, or are not updated for a period of at least eighteen (18) months, the City shall provide Borrower with other income determinations that are reasonably similar with respect to methods of calculation to those previously published by HUD. (y) "Note" means the promissory note of even date herewith that evidences Borrower's obligation to repay the Loan, as such may be amended form time to time. (z) "Property" has the meaning set forth in Paragraph B of the Recitals. (aa) "Rent" means the total monthly payments by the Tenant of a Unit for the following: (i) use and occupancy of the Unit and land and associated facilities, including parking; (ii) any reasonable and customary separately charged fees or service charges assessed by Borrower which are required of all Tenants which meet the requirements under 24 C.F.R. 92.214(b)(3), other than security deposits; (iii) the City-approved utility allowance, calculated pursuant to 24 C.F.R. 92.252(d), for the cost of an adequate level of service for utilities paid by the Tenant, including garbage collection, sewer, water, electricity, gas and other heating, cooking and refrigeration fuel, but not telephone service or cable TV; and (iv) any other interest,taxes, fees or charges for use of the land or associated facilities and assessed by a public or private entity other than Borrower, and paid by the Tenant. In no event shall the Rent of a City-Assisted Unit exceed the amount approved by the City pursuant to Section 2.2 hereof. (bb) "Service Provider" has the meaning set forth in Section 5.6. (cc) "Tenant" means the tenant household that occupies a Unit in the Development. (dd) "Tenant Services" has the meaning set forth in Section 5.6. (ee) "Term" means the term of this Agreement which commences as of the date of this Agreement, and unless sooner terminated pursuant to the terms of this Agreement, expires on the date fifty-five (55) years from the Completion Date. (ff) "Unit(s)" means one (1) or more of the units in the Development. (gg) "Very Low Income Household" means a household with an Adjusted Income that does not exceed fifty percent (50%) of Median Income, with adjustments for smaller and larger families, except that HUD may establish income ceilings higher or lower than fifty percent (50%) of Median Income on the basis of HUD findings that such variations are necessary because of prevailing levels of construction costs or fair market rents, or unusually high or low family incomes, as set forth in 24 C.F.R. Section 92.2. An individual who is a student that is ineligible to receive Section 8 assistance under 24 C.F.R. 5.612, and thus ineligible to receive any type of HOME assistance, shall not qualify as a Very Low Income Household. 4 (hh) "Very Low Income Units" means the Units which, pursuant to Section 2.1(a) below, are required to be occupied by Very Low Income Households. 1.2 Exhibits The following exhibits are attached to this Agreement and incorporated into this Agreement by this reference: Exhibit A: Legal Description of the Property Exhibit B: Schedule of HOME Rents Exhibit C: Certificate of Continuing Program Compliance Exhibit D: Form of Certification of Tenant Eligibility Exhibit E: HUD Rider ARTICLE 2 AFFORDABILITY AND OCCUPANCY COVENANTS 2.1 Occupancy Requirements. (a) Very Low Income Units. During the Term, Borrower shall rent seven(7) City-Assisted Units, and ensure that these Units are occupied or, if vacant, available for occupancy, by Very Low Income Households. (b) Intermingling of Units. The City-Assisted Units are required to be one (1) one-bedroom Unit and six (6) three-bedroom Units and are to be intermingled throughout the Development and of comparable quality to all other Units. All Tenants must have equal access to and enjoyment of all common facilities in the Development. (c) Disabled Persons Occupancy. Borrower shall cause the Development to be operated at all times in compliance with the provisions of: (i) the Unruh Act, (ii) the California Fair Employment and Housing Act, (iii) Section 504 of the Rehabilitation Act of 1973, (iv) the United States Fair Housing Act, as amended, and (v) the Americans With Disabilities Act of 1990, which relate to disabled persons access. Borrower shall indemnify, protect, hold harmless and defend (with counsel reasonably satisfactory to the City) the City, and its elected officials, officers and employees, from all suits, actions, claims, causes of action, costs, demands,judgments and liens arising out of Borrower's failure to comply with applicable legal requirements related to housing for persons with disabilities. The provisions of this subsection will survive expiration of the Term or other termination of this Agreement, and remain in full force and effect. 2.2 Allowable Rent. (a) Very Low Income Rent. Subject to the provisions of Section 2.3 below, the Rent paid by Tenants of Very Low Income Units may not exceed the Low HOME Rent provided annually by the City. 5 (b) No Additional Fees. Borrower may not charge any fee, other than Rent, to any Tenant of the City-Assisted Units for any housing or other services provided by Borrower. 2.3 Rent Increases, Increased Income of Tenants. (a) Rent Increases. The proposed initial Rents and subsequent Rents for all City-Assisted Units shall be provided to the Borrower by the City prior to initial or subsequent occupancy and prior to a rent increase, and shall be subject to the HOME Regulations. A schedule of current HOME rents is attached as Exhibit B. Borrower may not impose any Rent increases on City-Assisted Units, without prior submission to the City of any proposed Rent increases and without written approval from the City of the proposed Rent increases. The Rent for such City-Assisted Units may be increased no more than once annually based upon the annual income certification described in Article 3 and in no event shall any increase exceed three (3%) percent. Tenants shall be given at least sixty (60) days written notice prior to any Rent increase. The City will provide Borrower with a schedule of maximum permissible Rents for the City-Assisted Units annually. (b) Non-Qualifying Household. If, upon the annual certification of the income a Tenant of a City-Assisted Unit, Borrower determines that the income of a Very Low Income Household has increased above the qualifying limit for a Low Income Household, such Tenant shall be permitted to retain the Unit and upon expiration of the Tenant's lease and upon sixty (60) days written notice,the Rent must be increased to the lesser of one-twelfth (1/12" of thirty percent (30%) of the actual Adjusted Income of the Tenant, or fair market rent(subject to 24 C.F.R. 92.252(1)(2) regarding low income housing tax credit requirements), and Borrower shall rent the next available Unit to a Very Low Income Household or Low Income Household as applicable to comply with the requirements of Section 2.1 above, at a Rent not exceeding the maximum Rent specified in Section 2.2, or re-designate another comparable Unit in the Development with a Very Low Income Household or Low Income Household as applicable as a City-Assisted Unit, to meet the requirements of Section 2.1 above. Upon renting the next available Unit in accordance with Section 2.1 or re-designating another Unit in the Development as a City-Assisted Unit, the Unit with the over-income Tenant will no longer be considered a City-Assisted Unit. (c) Termination of Occupancy. Upon termination of occupancy of a City- Assisted Unit by a Tenant, such Unit will be deemed to be continuously occupied by a household of the same income level as the initial income level of the vacating Tenant, until such Unit is reoccupied or another Unit is re-designated as a City-Assisted Unit, at which time categorization of the Unit will be established based on the occupancy requirements of Section 2.1. 2.4 Units Available to the Disabled. Borrower shall construct the Development in compliance with all applicable federal and state disabled persons accessibility requirements including but not limited to the Federal Fair Housing Act; Section 504 of the Rehabilitation Act of 1973; Title II and/or Title III of the Americans with Disabilities Act; and Title 24 of the California Code of Regulations. In compliance with Section 504 of the Rehabilitation Act, Borrower shall construct a minimum of four(4) units in the Development shall be constructed to be readily accessible and usable by households with a mobility impaired member and a minimum of two (2) units shall be constructed and to be readily accessible and usable by households with a 6 hearing or visually impaired member. ARTICLE 3 INCOME CERTIFICATION AND REPORTING 3.1 Income Certification. Borrower shall obtain, complete, and maintain on file, immediately prior to initial occupancy and annually thereafter, income certifications from each Tenant renting any of the City-Assisted Units. Borrower shall cause each Tenant in a City- Assisted Unit to execute a Certification of Tenant Eligibility in the form attached as Exhibit D. Borrower shall fill out the "Development Owner" portion of the Certification of Tenant Eligibility and provide it to the City along with supporting documentation collected by Borrower. Borrower shall make a good faith effort to verify the accuracy of the income provided by all applicants or all members of the occupying household, as the case may be, in the income certification. To verify the information Borrower shall take two or more of the following steps- (i) obtain pay stubs for the most recent two months; (ii) obtain an income tax return for the most recent tax year; (iii) conduct a credit agency or similar search; (iv) obtain an income verification form from the applicant's current employer verifying employment for the last two months; (v) obtain an income verification form from the Social Security Administration and/or the California Department of Social Services if the applicant receives assistance from either of such agencies, verifying assistance for the last two months; or(vi) if the applicant is unemployed and does not have a tax return, obtain another form of independent verification. Copies of the Certifications of Tenant Eligibility and accompanying documentation must be submitted to the City annually for each of the City-Assisted Units. 3.2 Reporting Requirements. Borrower shall submit to the City (a) not later than the forty-fifth(45`") day after the close of each calendar year, or such other date as may be requested by the City, a signed copy of the Certification of Program Compliance in the form attached as Exhibit C, and (b) within fifteen (15) days after receipt of a written request, any other information or completed forms requested by the City in order to comply with reporting requirements of HUD, the State of California, and the City. 3.3 Additional Information. Borrower shall provide any additional information reasonably requested by the City. 3.4 Records. Borrower shall maintain complete, accurate and current records pertaining to the Development, and shall permit any duly authorized representative of the City to inspect records, including records pertaining to income and household size of Tenants and Rent charged to such Tenants. All Tenant lists, applications and waiting lists relating to the Development are to be at all times: (i) separate and identifiable from any other business of Borrower, (ii) maintained as required by the City, in a reasonable condition for proper audit, and (iii) subject to examination during business hours by representatives of the City. Borrower shall retain copies of all materials obtained or produced with respect to occupancy of the units for a period of at least five (5) years. The City may audit, examine and make copies of all books, records or other documents of Borrower that pertain to the Development. 3.5 HOME Record Requirements. For the period of the HOME Term all records 7 maintained by Borrower pursuant to Sections 3.2 and 3.4 above are to be (i) maintained in compliance with all applicable HUD records and accounting requirements, and (ii) open to and available for inspection and copying by HUD and its authorized representatives at reasonable intervals during normal business hours; provided however, records pertaining to Tenant income verifications, Rents, and Development physical inspections must be kept for the most recent five(5) year period and are subject to HUD inspection for five (5) years after expiration of the HOME Term. Borrower is subject to the audit requirements set forth in 24 CFR 92.505 during the HOME Term. 3.6 On-Site Inspection. The City may perform, or cause to be performed, an on-site inspection of the Development(including Units, subject to the rights of Tenants) at least one (1) time per year upon twenty-four(24)hours' notice during normal business hours to monitor compliance with this Agreement. Borrower shall cooperate in making the Property available for such inspection. Borrower agrees and acknowledges that the City must conduct on-site inspections, consistent with the requirements of 24 C.F.R. 92.504(d),to determine compliance with the property standards set forth in 24 C.F.R. 92.251, at least once every three (3) years after the completion of construction of the Development. After the completion of an inspection the City shall deliver a copy of the inspection report to the Borrower. If the City determines as a result of such inspection that there are any life-threatening health and safety related deficiencies, Borrower has the obligation to correct such deficiencies immediately, in accordance with 24 C.F.R. 92.251. If the City determines as a result of the inspection that there are any deficiencies for any of the inspectable items in the Development, the Borrower shall correct such deficiencies within fifteen (15) days from the delivery of the inspection report or if a period longer than fifteen (15) days is reasonably necessary to correct the deficiency, then Borrower must begin to correct the deficiency within fifteen (15) days and correct the deficiency as soon as reasonably possible. In addition,the Borrower acknowledges that the City may re-inspect the Development to verify all deficiencies have been corrected or rely on third party documentation submitted by the Borrower for non- hazardous deficiencies in conformance with 24 C.F.R 92.504(d). ARTICLE 4 OPERATION OF THE DEVELOPMENT 4.1 Residential Use. Borrower shall operate the Development for residential use only and such ancillary uses permitted at the Development as approved by the City. No part of the Development may be operated as emergency shelters (including shelters for disaster victims) or facilities such as nursing homes, convalescent homes, hospitals, residential treatment facilities, correctional facilities, halfway houses, housing for students, or dormitories (including farmworker dormitories). 4.2 Compliance with Loan Documents and Program Requirements. Borrower's actions with respect to the Property shall at all times be in full conformity with: (i) all requirements of the Loan Documents; (ii) all requirements imposed on projects assisted with HOME Funds as contained in 42 U.S.C. Section 12701, et seq., 24 C.F.R. Part 92, and other 8 implementing rules and regulations, as such may be amended or supplemented from time to time, and (iii) any other regulatory requirements imposed on Borrower. 4.3 Taxes and Assessments. Borrower shall pay all real and personal property taxes, assessments and charges and all franchise, income, employment, old age benefit, withholding, sales, and other taxes assessed against it, or payable by it, at such times and in such manner as to prevent any penalty from accruing, or any lien or charge from attaching to the Property; provided, however, that Borrower may apply for a property tax exemption for the Property under any provision of law or contest in good faith, any such taxes, assessments, or charges. In the event Borrower exercises its right to contest any tax, assessment, or charge against it, Borrower, on final determination of the proceeding or contest, will immediately pay or discharge any decision or judgment rendered against it, together with all costs, charges and interest. 4.4 Property Tax Exemption. Borrower shall not without the prior written consent of the City apply for a property tax exemption for the Property under any provision of law except California Revenue and Taxation Section 214(g). ARTICLE 5 PROPERTY MANAGEMENT, MAINTENANCE AND TENANT SERVICES 5.1 Management Responsibilities. Borrower is responsible for all management functions with respect to the Development, including without limitation the selection of Tenants in accordance with the requirements of 24 C.F.R. 92.253(d), certification and recertification of household size and income, evictions, collection of rents and deposits, maintenance, landscaping, routine and extraordinary repairs, replacement of capital items, and security. The City has no responsibility for management of the Development. Borrower shall retain a professional property management company approved by the City in its reasonable discretion to perform Borrower's management duties hereunder. An on-site property manager is also required. 5.2 Management Agent. Borrower shall cause the Development to be managed by an experienced management agent reasonably acceptable to the City, with a demonstrated ability to operate residential facilities like the Development in a manner that will provide decent, safe, and sanitary housing (the "Management Agent"). The City pre-approves the National Community Renaissance of California as the initial Management Agent. Borrower shall submit for the City's approval the identity of any proposed subsequent Management Agent. Borrower shall also submit such additional information about the background, experience and financial condition of any proposed Management Agent as is reasonably necessary for the City to determine whether the proposed Management Agent meets the standard for a qualified Management Agent set forth above. If the proposed Management Agent meets the standard for a qualified Management Agent set forth above, the City shall approve the proposed Management Agent by notifying Borrower in writing. Unless the proposed Management Agent is disapproved by the City within thirty (30) days, which disapproval is to state with reasonable specificity the basis for disapproval, it shall be deemed approved. 5.3 Periodic Performance Review. The City reserves the right to conduct an annual (or more frequently, if deemed necessary by the City) review of the management practices and 9 financial status of the Development. The purpose of each periodic review will be to enable the City to determine if the Development is being operated and managed in accordance with the requirements and standards of this Agreement. Borrower shall cooperate with the City in such reviews. 5.4 Replacement of Management Agent. If, as a result of a periodic review, the City determines in its reasonable judgment that the Development is not being operated and managed in accordance with any of the material requirements and standards of this Agreement, the City shall deliver notice to Borrower of its intention to cause replacement of the Management Agent, including the reasons therefor. Within fifteen (15) days after receipt by Borrower of such written notice, the City staff and Borrower shall meet in good faith to consider methods for improving the financial and operating status of the Development, including, without limitation, replacement of the Management Agent. HUD and Senior Lender (which for the purposes of this Section shall be PNC Bank,National Association) and the Investor Limited Partner(as defined in Section 1.1 of the Loan Agreement) will receive an opportunity to participate in all meetings required under this Section. If, after such meeting, City staff recommends in writing the replacement of the Management Agent, Borrower shall promptly dismiss the then-current Management Agent, and shall appoint as the Management Agent a person or entity meeting the standards for a management agent set forth in Section 5.2 above and approved by the City pursuant to Section 5.2 above, and subject to the rights of HUD, the Senior Lender and the Investor Limited Partner. Any contract for the operation or management of the Development entered into by Borrower shall provide that the Management Agent may be dismissed and the contract terminated as set forth above. Failure to remove the Management Agent in accordance with the provisions of this Section constitutes a default under this Agreement, and the City may enforce this provision through legal proceedings as specified in Section 6.7 below. 5.5 Approval of Management Policies. Borrower shall submit its written management policies with respect to the Development to the City for its review, and shall amend such policies in any way necessary to ensure that such policies comply with the provisions of this Agreement. 5.6 Tenant Services Provider. (a) The Borrower will be providing on-site services which Borrower will make available to all Tenants in the Development (the "Tenant Services"). The Borrower shall submit to the City for approval the name and qualifications of any proposed services provider (the "Services Provider"). 10 (b) The Services Provider shall have demonstrated the ability to provide Tenant Services in residential facilities like the Development in an effective manner. The Borrower shall submit such additional information about the background, experience and financial condition of any proposed Services Provider as is reasonably necessary for the City to determine whether the proposed Services Provider meets the standards for a qualified Services Provider of developments of this type. (c) If the proposed Services Provider meets the standard for a qualified Services Provider set forth above, the City shall approve the proposed Services Provider by notifying Borrower in writing. Unless the proposed Services Provider is disapproved by the City within thirty (30) days, which disapproval is to state with reasonable specificity the basis for disapproval, it shall be deemed approved. The City hereby approves Hope Through Housing Foundation as the initial Services Provider for the Development. 5.7 Property Maintenance. Borrower shall maintain, for the entire Term of this Agreement, all interior and exterior Improvements, including landscaping, on the Property in good condition and repair(and, as to landscaping, in a healthy condition) and in accordance with all applicable laws, rules, ordinances, orders and regulations of all federal, state, county, municipal, and other governmental agencies and bodies having or claiming jurisdiction and all their respective departments, bureaus, and officials, and in a decent, safe, sanitary condition and in good repair pursuant to the Uniform Physical Conditions Standards established by HUD pursuant to 24 C.F.R. 5.703 and as required under 24 C.F.R. 92.251. The City places prime importance on quality maintenance to protect its investment and to ensure that all City and City-assisted affordable housing projects within the City are not allowed to deteriorate due to below-average maintenance. Normal wear and tear of the Development will be acceptable to the City assuming Borrower agrees to provide all necessary improvements to assure the Development is maintained in good condition. Borrower shall make all repairs and replacements necessary to keep the improvements in good condition and repair. In the event that Borrower breaches any of the covenants contained in this section and such default continues for a period of five (5) days after written notice from the City with respect to graffiti, debris, waste material, and general maintenance or thirty (30) days after written notice from the City with respect to landscaping and building improvements, then the City, in addition to whatever other remedy it may have at law or in equity, has the right to enter upon the Property and perform or cause to be performed all such acts and work necessary to cure the default. Pursuant to such right of entry, the City is permitted (but is not required) to enter upon the Property and to perform all acts and work necessary to protect, maintain, and preserve the improvements and landscaped areas on the Property, and to attach a lien on the Property, or to assess the Property, in the amount of the expenditures arising from such acts and work of protection, maintenance, and preservation by the City and/or costs of such cure, which amount shall be promptly paid by Borrower to the City upon demand. 5.8 Crime Prevention Program. During the Term of this Agreement Borrower agrees to participate in the San Bernardino Police Department's Crime Free Multi-Housing program (the "Crime Prevention Program"). The City's periodic review of the management of the 11 Development pursuant to Section 5.3 will include an evaluation of Borrower's participation in the Crime Prevention Program. ARTICLE 6 MISCELLANEOUS 6.1 Lease Provisions. In leasing the Units within the Development, Borrower shall use a form of written lease approved by the City. The lease must not contain any provision which is prohibited by 24 C.F.R. Section 92.253(b) and any amendments thereto. The form of lease must comply with all requirements of this Agreement, the other Loan Documents and must, among other matters: (a) provide for termination of the lease for failure to: (i)provide any information required under this Agreement or reasonably requested by Borrower to establish or recertify the Tenant's qualification, or the qualification of the Tenant's household, for occupancy in the Development in accordance with the standards set forth in this Agreement, or(ii) qualify as a Very Low Income Household or Low Income Household as a result of any material misrepresentation made by such Tenant with respect to the income computation. (b) be for an initial term of not less than one (1) year, unless by mutual agreement between the Tenant and Borrower, and provide for no increase in Rent during such year. After the initial year of tenancy, the lease may be month-to-month by mutual agreement of Borrower and the Tenant. Notwithstanding the above, any rent increases are subject to the requirements of Section 2.3 (a) above. (c) include a provision which requires a Tenant who is residing in a Unit required to be accessible pursuant to Section 2.4 and who is not in need of an accessible Unit to move to a non-accessible Unit when a non-accessible Unit becomes available and another Tenant or prospective Tenant is in need of an accessible Unit. 6.2 Lease Termination. Any termination of a lease or refusal to renew a lease for a City-Assisted Unit within the Development must be in conformance with 24 C.F.R. 92.253(c), and must be preceded by not less than sixty (60) days written notice to the Tenant by Borrower specifying the grounds for the action. 6.3 Nondiscrimination. (a) All of the Units must be available for occupancy on a continuous basis to members of the general public who are income eligible. Except as provided in subsection (b) below, Borrower may not give preference to any particular class or group of persons in renting or selling the Units, except to the extent that the Units are required to be leased to income eligible households pursuant to this Agreement. Borrower herein covenants by and for Borrower, assigns, and all persons claiming under or through Borrower, that there exist no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, sexual orientation, marital status, national origin, source of income (e.g., SSI), ancestry, or disability, in the leasing, subleasing, transferring, use, occupancy, tenure, or 12 enjoyment of any unit nor will Borrower or any person claiming under or through Borrower, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees of any unit or in connection with the employment of persons for the construction, operation and management of any unit. (b) Borrower shall accept as Tenants, on the same basis as all other prospective Tenants, persons who are recipients of federal certificates for rent subsidies pursuant to the existing housing program under Section 8 of the United States Housing Act, or its successor. Borrower may not apply selection criteria to Section 8 certificate or voucher holders that is more burdensome than criteria applied to all other prospective Tenants, nor will Borrower apply or permit the application of management policies or lease provisions with respect to the Development which have the effect of precluding occupancy of units by such prospective Tenants. 6.4 Term. The provisions of this Agreement apply to the Property for the entire Term even if the Loan is paid in full prior to the end of the Term. This Agreement binds any successor, heir or assign of Borrower, whether a change in interest occurs voluntarily or involuntarily, by operation of law or otherwise, except as expressly released by City. City is making the Loan on the condition, and in consideration of, this provision, and would not do so otherwise. 6.5 Notice of Expiration of Term. (a) At least six (6) months prior to the expiration of the Term, Borrower shall provide by first-class mail, postage prepaid, a notice to all Tenants containing: (i) the anticipated date of the expiration of the Term; (ii) any anticipated increase in Rent upon the expiration of the Term; (iii) a statement that a copy of such notice will be sent to the City; and(iv) a statement that a public hearing may be held by the City on the issue and that the Tenant will receive notice of the hearing at least fifteen (15) days in advance of any such hearing. Borrower shall also file a copy of the above-described notice with the City Manager. (b) In addition to the notice required above, Borrower shall comply with the requirements set forth in California Government Code Sections 65863.10 and 65863.11. Such notice requirements include: (i) a twelve (12) month notice to existing tenants, prospective tenants and Affected Public Agencies (as defined in California Government Code Section 65863.10(a))prior to the expiration of the Term, (ii) a six (6) month notice requirement to existing tenants, prospective tenants and Affected Public Agencies prior to the expiration of the Term; (iii) a notice of an offer to purchase the Development to "qualified entities" (as defined in California Government Code Section 65863.11(d)), if the Development is to be sold within five (5) years of the end of the Term; (iv) a notice of right of first refusal within the one hundred eighty (180) day period that qualified entities may purchase the Development. 6.6 Covenants to Run With the Land. The City and Borrower hereby declare their express intent that the covenants and restrictions set forth in this Agreement run with the land, and bind all successors in title to the Property, provided, however, that on the expiration of the Term of this Agreement said covenants and restrictions expire. Each and every contract, deed or 13 other instrument hereafter executed covering or conveying the Property or any portion thereof, is to be held conclusively to have been executed, delivered and accepted subject to the covenants and restrictions, regardless of whether such covenants or restrictions are set forth in such contract, deed or other instrument, unless the City expressly releases such conveyed portion of the Property from the requirements of this Agreement. 6.7 Enforcement by The City. If Borrower fails to perform any obligation under this Agreement, and fails to cure the default within thirty (30) days after the City has notified Borrower in writing of the default or, if the default cannot be cured within thirty(30) days, fails to commence to cure within thirty(30) days and thereafter diligently pursue such cure and complete such cure within ninety (90) days, the City may enforce this Agreement by any or all of the following actions, or any other remedy provided by law: (a) Calling the Loan. The City may declare a default under the Note, accelerate the indebtedness evidenced by the Note, and proceed with foreclosure under the Deed of Trust. (b) Action to Compel Performance or for Damages. The City may bring an action at law or in equity to compel Borrower's performance of its obligations under this Agreement, and may seek damages. (c) Remedies Provided Under Loan Documents. The City may exercise any other remedy provided under the Loan Documents. 6.8 Attorneys' Fees and Costs. In any action brought to enforce this Agreement, the prevailing party must be entitled to all costs and expenses of suit, including reasonable attorneys' fees. This section must be interpreted in accordance with California Civil Code Section 1717 and judicial decisions interpreting that statute. 6.9 Recording and Filing. The City and Borrower shall cause this Agreement, and all amendments and supplements to it, to be recorded in the Official Records of the County of San Bernardino. 6.10 Governing Law. This Agreement is governed by the laws of the State of California. 6.11 Waiver of Requirements. Any of the requirements of this Agreement may be expressly waived by the City in writing, but no waiver by the City of any requirement of this Agreement extends to or affects any other provision of this Agreement, and may not be deemed to do so. 6.12 Amendments. This Agreement may be amended only by a written instrument executed by all the parties hereto or their successors in title that is duly recorded in the official records of the County of San Bernardino. 6.13 Notices. Any notice requirement set forth herein will be deemed to be satisfied three (3) days after mailing of the notice first-class United States certified mail, postage prepaid, 14 addressed to the appropriate party as follows: City: Office of the City Manager City of San Bernardino 300 N "D" Street, Sixth Floor San Bernardino, CA 92418 Attn: Housing Director Borrower: Val 9 Housing Partners, L.P. 9421 Haven Avenue Rancho Cucamonga, CA 91730 Attn: Chief Financial Officer With a copy to: Law Offices of Edward A. Hopson 655A No. Mountain Avenue Upland, CA 91786 With a copy to: Wells Fargo Community Lending & Investment Wells Fargo Bank Affordable Housing Community Development Corporation 301 South College Street, 17th Floor MAC D1053-170 Charlotte,NC 28288 With a copy to: Kutak Rock 1650 Farnam Street Omaha,NE 68102 Attn: Robert Coon Such addresses may be changed by notice to the other party given in the same manner as provided above. 6.14 Severability. If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions of this Agreement will not in any way be affected or impaired thereby. 6.15 Multiple Originals, Counterparts. This Agreement may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts. 6.16 Revival of Agreement after Foreclosure. In the event there is a foreclosure of the Property, this Agreement will revive according to its original terms if, during the Term, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes 15 the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the Development or Property. 6.17 HUD Rider. The HUD Rider is attached to this Agreement as Exhibit E, and incorporated into this Agreement by this reference. [Remainder of Page Left Intentionally Blank] 16 WHEREAS, this Agreement has been entered into by the undersigned as of the Effective Date. BORROWER: Date: March 19, 2015 VAL 9 HOUSING PARTNERS, L.P., a California limited partnership By: Val 9 MGP, LLC, a California limited liability company, its sole general partner By: National Community Renaissance of California, its sole member and manager By: 4 Tracy Tho s, Chijf Financial Officer [Signature Page Continues] r CITY: CITY OF SAN BERNARDINO By: 4 2 Allen Qelr6, City Manager Dater//Z s`— APPROVED AS TO FORM: Gary D. Saenz City Attorney B • V CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT CIVIL CODE§ 1189 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached,and not the truthfulness,accuracy,or validity of that document. State of Calif I County of &r_ rJin�� ) On V 3 f �l)s before me, Date / Here Insert Name and Title of the fficer personally appeared �'J a M a� Name(s) of Signer(s) who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s)on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. GABRIELA M.HOFFMAN Commission#2055787 Z WITNESS my hand and o icial seal. -: Notary Public-California i San Bernardino County C Comm.Ex Tres Jan 24,2018 Signature Signature of-Aletary-Public Place Notary Seal Above OPTIONAL Though this section is optional, completing this information can deter alteration of the document or fraudulent reattachment of this form to an unintended document. Description of Attached Document Title or Type of Document: Document Date: Number of Pages: Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer(s) Signer's Name: Signer's Name: ❑Corporate Officer — Title(s): ❑ Corporate Officer — Title(s): ❑ Partner — ❑ Limited ❑General ❑ Partner — ❑ Limited ❑ General ❑ Individual ❑Attorney in Fact ❑ Individual ❑Attorney in Fact ❑Trustee ❑Guardian or Conservator ❑Trustee ❑ Guardian or Conservator ❑ Other: ❑ Other: Signer Is Representing: Signer Is Representing: 02014 National Notary Association -www.NationalNotary.org • 1-800-US NOTARY(1-800-876-6827) Item#5907 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) COUNTY OF JAAI,6&kN ,,9kZ1 1,0 ) On �� / '� / ,before in %/�(� - ,Notary Public, personally appeared who proved to me on the basis of satisfactory evidence to be the person s'j whose name(/)(�subscribed to the within instrument and acknowledged to me that4gfey executed the same in i authorized capacity(it<, and that by is ignatureX on the instrument the person, or the entity upon behalf of which the personvacted, executed the instrument. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. KATHERINE G.HERRERA Commission No. 1945501 NOTARY PUBLIC-CALIFORNIA SAN BERNARDINO COUNTY My Comm.Expires JULY 25.2015 Name: Notary Public EXHIBIT A LEGAL DESCRIPTION The land is situated in the State of California, County of San Bernardino, City of San Bernardino and is described as follows: A PORTION OF LOT 7, BLOCK 42 OF RANCHO SAN BERNARDINO ACCORDING TO THE OFFICIAL MAP RECORDED IN BOOK 7, PAGE 2, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE NORTH LINE OF NINTH ST. 1,774.70 FEET EAST FROM THE CENTER LINE OF WATERMAN AVENUE; THENCE NORTHERLY PARALLEL TO THE WEST LINE OF SAID LOT 7 A DISTANCE OF 602.75 FEET;THENCE EASTERLY PARALLEL TO THE SOUTH LINE OF SAID LOT 7 TO A POINT 50.00 FEET FROM THE EAST LINE OF SAID LOT 7;THENCE SOUTHERLY PARALLEL TO THE SAID EAST LINE OF LOT 7 TO THE SOUTH LINE OF SAID LOT 7;THENCE WESTERLY ALONG THE SAID SOUTH LINE OF LOT 7 OF THE TRUE POINT OF BEGINNING. SAID LAND IS ALSO SHOWN AS PARCEL 1 OF CERTIFICATE OF COMPLIANCE FOR LOT LINE ADJUSTMENT NO. 88-30 RECORDED SEPTEMBER 29, 1989 AS INSTRUMENT NO. 89-365668 OF OFFICIAL RECORDS. APN(s): 147-191-12 A-1 EXHIBIT B HOME PROGRAM RENTS The attached HOME Rents reflect the current HOME rents as of the Effective Date. The initial Rents and subsequent Rents for all City-Assisted Units must be provided to the Borrower by the City prior to occupancy and are subject to the HOME Regulations. The City will provide Borrower with a schedule of maximum permissible Rents for the City-Assisted Units annually. B-1 EXHIBIT C INITIAL CERTIFICATE OF PROGRAM COMPLIANCE Val 9 Housing Partners, L.P., a California limited partnership ("Owner"),hereby certifies that it will comply with all applicable, ongoing HOME Program requirements for the Property's Affordability Period which has been determined to be fifty-five (55) years from the date of issuance of the Certificate of Occupancy for the above-described Project. Affordability shall be maintained as follows: [Insert project description]. During the term of the Regulatory Agreement the Owner will rent seven (7) City-Assisted Units, and ensure that these units are occupied or, if vacant, available for occupancy, by Very Low Income Households. Property owners and managers have participated in the San Bernardino Police Department's Crime Free Multi-Housing Program, wherein specialized training and other resources are provided to multi-family property owners and managers to reduce the potential for onsite criminal activity. Completion of the Department's program has been achieved and will be maintained by the owner/representative and/or regional/-onsite property manager. Owner is maintaining and attaching the following records and reports in order to assist the City in meeting its record keeping and reporting requirements under the HOME Program: 1. Files on the annual review and certification of tenant income; 2. All information on the qualification of affordable rents; 3. Terms and conditions of all signed leases between Tenants and Owner; 4. All other reports and records requested by City pursuant to the Loan Documents. [Signature Page Follows] C-1 Dated: OWNER: Val 9 Housing Partners, L.P., a California limited partnership By: Val 9 MGP, LLC, a California limited liability company, its sole general partner By: National Community Renaissance of California, its sole member and manager By: Tracy Thomas, Chief Financial Officer C-2 ANNUAL CERTIFICATION OF CONTINUING PROGRAM COMPLIANCE Val 9 Housing Partners, L.P., a California limited partnership ("Owner"),hereby certifies that it will comply with all applicable, ongoing HOME Program requirements for the Property's Affordability Period which has been determined to be fifty-five (55) years from the date of issuance of the Certificate of Occupancy for the above-described Project. Affordability shall be maintained as follows: [Insert project description]. During the term of the Regulatory Agreement the Owner will rent four (4) City-Assisted Units, and ensure that these units are occupied or, if vacant, available for occupancy, by Very Low Income Households. Property owners and managers have participated in the San Bernardino Police Department's Crime Free Multi-Housing Program, wherein specialized training and other resources are provided to multi-family property owners and managers to reduce the potential for onsite criminal activity. Completion of the Department's program has been achieved and will be maintained by the owner/representative and/or regional/-onsite property manager. Owner is maintaining and attaching the following records and reports in order to assist the City in meeting its record keeping and reporting requirements under the HOME Program: 1. Files on the annual review and certification of tenant income; 2. All information on the qualification of affordable rents; 3. Terms and conditions of all signed leases between Tenants and Owner; 4. All other reports and records requested by City pursuant to the Loan Documents. [Signature Page Follows] C-1 Dated: OWNER: Val 9 Housing Partners, L.P., a California limited partnership By: Val 9 MGP, LLC, a California limited liability company, its sole general partner By: National Community Renaissance of California, its sole member and manager By: Tracy Thomas, Chief Financial Officer C-2 CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE The following information with respect to Val 9 Apartments (the "Development"), is being provided by Val 9 Housing Partners, L.P., a California limited partnership (the "Owner") to the City of San Bernardino, (the "City"), pursuant to that certain HOME Investment Partnerships Act Loan Agreement dated as of March _, 2015 and the Regulatory Agreement dated as of March , 2015 with respect to the Development: (A) The total number of residential units which are completed and available for occupancy is The total number of such units occupied is (B) The following residential units (identified by unit number) have been designated City- Assisted Units, as described in the Regulatory Agreement (for a total of ); (C) The following residential units which are included in (B) above, have been designated as City-Assisted Units since , 20 , the date on which the last "Certificate of Continuing Program Compliance" was filed with the City by ; Unit Number Previous Designation of Replacing Unit Number Unit (if any) If a floating unit was substituted, please attach any information on unit substitutions and filling of vacancies to evidence maintenance of required unit mix and income targeting.) (D) The following residential units are considered to be occupied by Very Low Income Households and Low Income Households based on the information set forth below: Date of Persons Total Monthly Number Adjusted Initial Rental of Unit Unit Name of Tenant Residing Gross Occupancy Amount No. in Unit Income Attach a Separate Sheet i f Necessary C-3 (E) In renting the residential units in the Development, Owner has not given preference to any particular group or class of persons not allowed under the Regulatory Agreement (except for persons who qualify as qualified Very Low Income Households). All of the residential units in the Development have been rented pursuant to a written lease, and the term of each lease is at least 12 months. A copy of the form lease for City-Assisted Units is attached. (F) Property owners and managers have participated in the San Bernardino Police Department's Crime Free Multi-Housing Program, wherein specialized training and other resources are provided to multi-family property owners and managers to reduce the potential for onsite criminal activity. Completion of the Department's program has been achieved and is being maintained by the owner/representative and/or regional/-onsite property manager. (G) Each building in the Development and all City-Assisted Units in the Development are suitable for occupancy and comply with all applicable State and local health, safety and other applicable codes, ordinances, and requirements and the ongoing property standards, as specified in Section of the 5.7 of the Regulatory Agreement. (H) The information provided in this "Certificate of Continuing Program Compliance" is accurate and complete, and no matters have come to the attention of Owner which would indicate that any of the information provided herein, or in any "Certification of Tenant Eligibility obtained from the tenants named herein, is inaccurate or incomplete in any respect. IN WITNESS WHEREOF, I have hereunto affixed my signature, on behalf of Owner, on this _day of , 20_. OWNER: Val 9 Housing Partners, L.P., a California limited partnership By: Val 9 MGP, LLC, a California limited liability company, its sole general partner By: National Community Renaissance of California, its sole member and manager By: Tracy Thomas, Chief Financial Officer C-4 EXHIBIT D FORM OF CERTIFICATION OF TENANT ELIGIBILITY Rental Unit Street Address Unit No City Zip Code I/We, the undersigned, being first duly sworn, state that I/we have read and answered fully and truthfully each of the following questions for all persons who are to occupy the unit in the above Development for which application is made, all of whom are listed below: 1. 2. 3. 4. 5. Name of Members Relationship to Place of in the Household Head of Household Age Ethnicity Employment Ethnicity: ❑ White ❑ Black or African American ❑ Asian ❑ Asian &White ❑ American Indian or Alaska Native ❑ Native Hawaiian or Other Pacific Islander ❑ American Indian or Alaska Native & White ❑ Black or African American &White ❑ American Indian or Alaska Native&Black or African American ❑ Other Multi Race ❑ Hispanic Date of Occupancy of Rental Unit by Tenant: Date of Lease Signed for Rental Unit by Tenant: Amount of Rent Paid Per Month: Certification Date (Earlier of Date of Occupancy or Date Lease signed): 6. Anticipated Annual Income. The anticipated total annual income from all sources of each person listed in 1 for the twelve (12) month period beginning on the Certification Date listed above, including income described in (a) below, but excluding all income described in (b) below, is $ (a) The amount set forth above includes all of the following income (unless such income is described in (b) below): all wages and salaries, overtime pay, commissions, fees, tips and bonuses before payroll deductions; net income from the operation of a business or profession or from the rental of real or personal property (without deducting expenditures for business expansion or amortization D-1 of capital indebtedness or any allowance for depreciation of capital assets); interest and dividends (including income from assets as set forth in item 7(b) below); full amount of periodic payments received from Social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits and other similar types of periodic receipts; payments in lieu of earnings, such as unemployment and disability compensation, worker's compensation and severance pay; the maximum amount of public assistance available to the above persons; periodic and determinable allowances, such as alimony and child support payments and regular contributions and gifts received from persons not residing in the dwelling; all regular pay, special pay and allowances of a member of the Armed Forces (whether or not living in the dwelling) who is the head of the household or spouse; and any earned income tax credit to the extent it exceeds income tax liability. (b) The following income is excluded from the amount set forth above: casual, sporadic or irregular gifts; amounts that are specifically for or in reimbursement of medical expenses; lump sum additions to family assets, such as inheritances, insurance payment (including payments under health and accident insurance and worker's compensation), capital gains and settlement for personal or property losses; amounts of educational scholarships paid directly to student or educational institution, and amounts paid by the government to a veteran for use in meeting the costs of tuition, fees, books and equipment, but in either case only to the extent used for such purposes; hazardous duty pay to a member of the household in the armed forces who is away from home and exposed to hostile fire; relocation payments under Title II of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970; income from employment of children (including foster children) under the age of eighteen (18) years; foster child care payments; the value of coupon allotments under the Food Stamp Act of 1977; payments to volunteers under the Domestic Volunteer Service Act of 1973; payments received under the Alaska Native Claims Settlement Act; income derived from certain submarginal land of the United States that is held in trust for certain Indian tribes; payments on allowances made under the Department of Health and Human Services' Low-Income Home Energy Assistance Program; and payments received from the Job Partnership Training Act. 7. Net Family Assets. If any of the persons described in item 1 above (or any person whose income or contributions were included in item 6) has any savings, stocks, bonds, equity in real property or other form of capital investment (excluding interests in Indian trust lands),provide: (a) the total value of all such assets owned by all such persons: $ , and (b) the amount of income expected to be derived from such assets D-2 in the twelve (12) month period commencing this date: $ 8. Students (a) Will any of the persons listed in item 1 above be or have they been full-time students during five (5) calendar months of this calendar year at an educational institution (other than a correspondence school) with regular faculty and students? Yes No (b) (Complete only if the answer to Question 8(a) is "Yes"). Is any such person (other than nonresident aliens) married and eligible to file a joint federal income tax return, a veteran of the U.S. military? Yes No The above information is full, true, and complete to the best of my knowledge. I have no objections to inquiries being made for the purpose of verifying the statements made herein. Signature: Date (Signature Must be Notarized) D-3 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA ) COUNTY OF ) On ,before me, ,Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Name: Name: Notary Public D-4 FOR COMPLETION BY DEVELOPMENT OWNER ONLY: A. Calculation of eligible income: (1) Enter amount entered for entire household in 6 above: $ (2) If the amount entered in 7(a) above is greater than $5,000, enter $ (i) the product of the amount entered in 7(a) above multiplied by the current passbook savings rate as determined by HUD: $ (ii) the amount entered in 7(b) above: $ (iii) enter the greater of line (i) or line (ii): $ (3) TOTAL ELIGIBLE INCOME (Line A(1) plus line A(2)(iii)): $ B. Enter number of family members listed in item 1 above: C. The amount entered in A(3) (Total Eligible Income) is: $ Less than $ of median income for the area in which the Development is located, which is the maximum income at which a household may be determined to be a qualifying tenant as that term is defined in the Agreement. More than the above-mentioned amount. D. Number of units assigned: E. Monthly rent: $ F. This unit (was/was not) last occupied for a period of thirty-one (31) consecutive days by a person or persons whose adjusted income, as certified in the above manner, was equal to or less than the amount at which a person would have qualified as a qualifying tenant under the terms of the Agreement. G. Applicant: Qualifies as a qualifying tenant. Does not qualify as a qualifying tenant. D-5 EXHIBIT E HUD RIDER This RIDER TO RESTRICTIVE COVENANTS is made as of March 17, 2015,by VAL 9 HOUSING PARTNERS, L.P., a California limited partnership ("Borrower") and THE CITY OF SAN BERNARDINO, a public body, corporate and politic ("Agency"),but shall only be effective so long as the Secretary of Housing and Urban Development or his/her successors or assigns are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130. WHEREAS, Borrower has obtained or intends to obtain financing from PNC Bank, National Association("Lender") for the benefit of the project known as Waterman Gardens— Valencia 9, FHA No. 143-35130 ("Project"), which loan is or will be secured by a Multifamily Deed of Trust, Assignment of Rents and Security Agreement("Security Instrument") to be recorded in the Recorder's Office of San Bernardino County, California ("Records"), and shall be insured by the United States Department of Housing and Urban Development("HUD"); WHEREAS, Borrower has received a loan from the Agency, which Agency is requiring certain restrictions be recorded against the Project including that certain Regulatory Agreement and Declaration of Restrictive Covenants dated March 17, 2015 (the"Restrictive Covenants"); and WHEREAS, HUD requires as a condition of its insuring Lender's financing to the Project, that the lien and covenants of the Restrictive Covenants be subordinated to the lien, covenants, and enforcement of the Security Instrument; and WHEREAS, the Agency has agreed to subordinate the Restrictive Covenants to the lien of the Mortgage Loan in accordance with the terms of this Rider. NOW, THEREFORE, in consideration of the foregoing and for other consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: (a) In the event of any conflict between any provision contained elsewhere in the Restrictive Covenants and any provision contained in this Rider, the provision contained in this Rider shall govern and be controlling in all respects as set forth more fully herein. (b) The following terms shall have the following definitions: "Code" means the Internal Revenue Code of 1986, as amended. "HUD" means the United States Department of Housing and Urban Development. "HUD Regulatory Agreement" means the Regulatory Agreement between Borrower and HUD with respect to the Project, as the same may be supplemented, amended or modified from time to time. "Lender" means PNC Bank, National Association, its successors and assigns. E-1 "Mortgage Loan" means the mortgage loan made by Lender to the Borrower pursuant to the Mortgage Loan Documents with respect to the Project. "Mortgage Loan Documents" means the Security Instrument, the HUD Regulatory Agreement and all other documents required by HUD or Lender in connection with the Mortgage Loan. "National Housing Act" means the National Housing Act of 1934, as amended. "Program Obligations" has the meaning set forth in the Security Instrument. "Residual Receipts" has the meaning specified in the HUD Regulatory Agreement. "Security Instrument" means the mortgage or deed of trust from Borrower in favor of Lender, as the same may be supplemented, amended or modified. "Surplus Cash" has the meaning specified in the HUD Regulatory Agreement. (c) Notwithstanding anything in the Restrictive Covenants to the contrary, the provisions hereof are expressly subordinate to (i) the Mortgage Loan Documents, including without limitation,the Security Instrument, and (ii)Program Obligations (the Mortgage Loan Documents and Program Obligations are collectively referred to herein as the "HUD Requirements"). Borrower covenants that it will not take or permit any action that would result in a violation of the Code, HUD Requirements or Restrictive Covenants. In the event of any conflict between the provisions of the Restrictive Covenants and the provisions of the HUD Requirements, HUD shall be and remains entitled to enforce the HUD Requirements. Notwithstanding the foregoing, nothing herein limits the Agency's ability to enforce the terms of the Restrictive Covenants, provided such terms do not conflict with statutory provisions of the National Housing Act or the regulations related thereto. The Borrower represents and warrants that to the best of Borrower's knowledge the Restrictive Covenants impose no terms or requirements that conflict with the National Housing Act and related regulations. (d) In accordance with 26 U.S.C. 42(h)(6)(E)(i)(1), in the event of foreclosure (or deed in lieu of foreclosure), the Restrictive Covenants (including without limitation, any and all land use covenants and/or restrictions contained herein) shall automatically terminate, with the exception of the requirements of 26 U.S.C. 42(h)(6)(E)(ii) above, to the extent applicable, or as otherwise approved by HUD. (e) Borrower and the Agency acknowledge that Borrower's failure to comply with the covenants provided in the Restrictive Covenants does not and shall not serve as a basis for default under the HUD Requirements, unless a default also arises under the HUD Requirements. (f) Except for the Agency's reporting requirement, in enforcing the Restrictive Covenants the Agency will not file any claim against the Project, the Mortgage Loan proceeds, any reserve or deposit required by HUD in connection with the Security Instrument or HUD Regulatory Agreement, or the rents or other income from the property other than a claim against: i. Available surplus cash, if the Borrower is a for-profit entity; ii. Available distributions of surplus cash and residual receipts authorized for release E-2 by HUD, if the Borrower is a limited distribution entity; or iii. Available residual receipts authorized by HUD, if the Borrower is a non-profit entity or iv. A HUD-approved collateral assignment of any HAP contract. (g) For so long as the Mortgage Loan is outstanding, Borrower and Agency shall not further amend the Restrictive Covenants, with the exception of clerical errors or administrative correction of non-substantive matters, without HUD's prior written consent. (h) Subject to the HUD Regulatory Agreement, the Agency may require the Borrower to indemnify and hold the Agency harmless from all loss, cost, damage and expense arising from any claim or proceeding instituted against Agency relating to the subordination and covenants set forth in the Restrictive Covenants, provided, however, that Borrower's obligation to indemnify and hold the Agency harmless shall be limited to available surplus cash and/or residual receipts of the Borrower or non-Project assets of the Borrower. E-3 EXHIBIT G G-1 EXHIBIT G INITIAL CERTIFICATION OF CONTINUING PROGRAM COMPLIANCE Val 9 Housing Partners, L.P. Val 9 Apartments Val 9 Housing Partners, L.P. hereby certifies that it will comply with all applicable, ongoing HOME program requirements for the Property's Affordability Period which has been determined to twenty(20)years under HUD HOME Regulations, and an additional County imposed Affordability Period of thirty-five (35)years, for a total affordability term of fifty-five (55)years from the date of recordation of the Notice of Completion for the above-described project as follows: Four(4)units being made available to income qualifying households earning fifty percent(45%)or less than the AMI. Borrower will maintain the following records and reports in order to assist the County in meeting its record keeping and reporting requirements: 1. Files on the annual review and certification of tenant income; 2. All information on the qualification of affordable rents; 3. Terms and conditions of all signed leasehold agreements between tenants and Borrower; 4. All legal reports and records required by County. Val 9 Housing Partners, L.P. By: Val 9 MGP, LLC Its sole and general partner By: National Community Renaissance of California Its sole member By: Tracy Thomas, CFO G-1 1610\08\1613286.6 EXHIBIT H SECTION 3 COMPLIANCE H-1 City of San Bernardino SECTION 3 PLAN This document serves as the Section 3 Plan for the Valencia Gardens Apartments (Val 9) in compliance with the requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended (12. U.S.C. 1701u) (Section 3), to ensure that training, employment and other economic opportunities generated by certain HUD financial assistance, to the greatest extent feasible, and consistent with existing Federal, State and Local laws and regulations, be directed to low- and very low-income persons, particularly those who are recipients of government assistance for housing, and to business concerns, which provide economic opportunities to low- and very low-income persons. I. SECTION 3 PLAN The contractor, subcontractor, developer and/or sub-recipient will develop a Section 3 Action Plan to identify the goals, objectives, and actions that will be implemented to ensure compliance with the requirements of Section 3. A sample format is included as Attachment A. II. PREFERENCE FOR SECTION 3 RESIDENTS IN TRAINING AND EMPLOYMENT OPPORTUNITIES In providing training and employment opportunities, generated from the expenditure of Section 3 activities to Section 3 residents, the following order of preference will be followed: A. Highest Priority: Low- and very-low income residents certified as Section 3 eligible residing in the neighborhood where the project is located. B. Second Priority: Participants of public and social service programs funded by City of San Bernardino HUD funding. C. Third Priority: Other low- and very-low income residents throughout the City certified as Section 3 eligible. III. NUMERICAL GOALS FOR TRAINING AND EMPLOYMENT OPPORTUNITIES The City, contractor, subcontractor, developer and/or sub-recipient will, to the greatest extent feasible, when awarding contracts or providing training and/or employment opportunities for activities or projects subject to the requirements of Section 3, strive to comply with the goals established in this section. The numerical goals established in this section represent minimum numerical targets. Training and employment opportunities will be made available to Section 3 residents as follows: 30 percent of the aggregate number of new hires/training opportunities resulting from funds awarded for FY and continuing thereafter. Number of Section 3 jobs/training opportunities anticipated for this project is: << >> IV. LIST OF STRATEGIES TO BE ADOPTED FOR COMPLIANCE WITH THE STATED EMPLOYMENT, TRAINING AND CONTRACTING GOALS The contractor, subcontractor, developer and/or sub-recipient must submit a current list of employees as of the date the Section 3 Plan is submitted for approval along with anticipated new hires. A list of employees can be submitted on the "Worker Utilization Form" included as Attachment B or an official company form that includes the same information requested on the Worker Utilization Form. The contractor, subcontractor, developer and/or sub-recipient must also develop a list of strategies to be adopted for compliance with the stated employment, training and contracting goals. V. NUMERICAL GOALS FOR CONTRACTING ACTIVITIES These goals apply to contract awards in excess of $100,000 in connection with a Section 3 eligible project, and it applies to contractors, subcontractors, developers, and/or sub-recipients. The contractor, subcontractor, developer and/or sub-recipient commits to award to Section 3 business concerns: A. At least 10 percent of the total dollar amount of all Section 3 covered contracts for building trades work arising in connection with housing rehabilitation, housing construction and other public construction; and B. At least 3 percent of the total dollar amount of all other Section 3 covered contracts. C. In the event that the contractor, subcontractor, developer and/or sub-recipient is unable to reach the goals stated above, they will be required to contribute the difference between 10% of the covered contract amount (3% for non-construction related covered contracts) and the amount provided to Section 3 business concerns and/or in the employment of Section 3 residents in to the City's Section 3 Implementation Fund. VI. PREFERENCE FOR SECTION 3 BUSINESS CONCERNS The following order of preference will be followed when providing contracting opportunities to Section 3 businesses: A. First priority will be given to Section 3 business concerns that provide economic opportunities for Section 3 residents in the service area or neighborhood in which the Section 3 covered project is located. B. Second priority will be given to Section 3 business concerns selected to carry out HUD funded Programs. C. Third priority will be given to Section 3 business concerns that provide economic opportunities for Other Section 3 Residents located outside the service area or neighborhood in which the Section 3 covered project is located. VII. SECTION 3 CLAUSE All Section 3 covered contracts shall include the following clause (referred to as the "Section 3 Clause"): A. The work to be performed under this contract is subject to the requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. 170lu (section 3). The purpose of section 3 is to ensure that employment and other economic opportunities generated by HIJD assistance or HUD-assisted projects covered by section 3, shall, to the greatest extent feasible, be directed to low- and very low-income persons, particularly persons who are recipients of HUD assistance for housing. B. The parties to this contract agree to comply with HUD's regulations in 24 CFR Part 135, which implement section 3. As evidenced by their execution of this contract, the parties to this contract certify that they are under no contractual or other impediment that would prevent them from complying with the part 135 regulations. C. The contractor agrees to send to each labor organization or representative of workers with which the contractor has a collective bargaining agreement or other understanding, if any, a notice advising the labor organization or workers' representative of the contractor's commitments under this section 3 clause, and will post copies of the notice in conspicuous places at the work site where both employees and applicants for training and employment positions can see the notice. The notice shall describe the section 3 preference, shall set forth minimum number and job titles subject to hire, availability of apprenticeship and training positions, the qualifications for each; and the name and location of the person(s) taking applications for each of the positions; and the anticipated date the work shall begin. D. The contractor agrees to include this section 3 clause in every subcontract subject to compliance with regulations in 24 CFR Part 135, and agrees to take appropriate action, as provided in an applicable provision of the subcontract or in this section 3 clause, upon a finding that the subcontractor is in violation of the regulations in 24 CFR Part 135. The contractor will not subcontract with any subcontractor where the contractor has notice or knowledge that the subcontractor has been found in violation of the regulations in 24 CFR Part 135. E. The contractor will certify that any vacant employment positions, including training positions, that are filled (1) after the contractor is selected by before the contract is executed, and (2) with persons other than those to whom the regulations of 24 CFR part 135 require employment opportunities to be directed, were not filled to circumvent the contractors obligations under 24 CFR part 135. F. Noncompliance with HUD's regulations in 24 CFR part 135 may result in sanctions, termination of this contract for default, and debarment or suspension from future HUD assisted contracts. G. With respect to work performed in connection with section 3 covered Indian housing assistance, section 7(b) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450e) also applies to the work to be performed under this contract, Section 7(b) requires that to the greatest extent feasible (i) preference in the award of contracts and subcontracts shall be given to Indian organizations and Indian-owned Economic Enterprises. Parties to this contract that are subject to the provisions of section 3 and section 7(b) agree to comply with section 3 to the maximum extent feasible, but not in derogation of compliance with section 7(b). VIII. REPORTING The contractor, subcontractor, developer and/or sub-recipient will submit fully documented Section 3 Summary Reports to the City, that provide a comprehensive review of all Section 3 employment, training, and contracting that occurred during the previous 12 months. The Section 3 report is due to the City by July 31 S`of each covered year. Attachment A SECTION 3 PLAN (OWNER/DEVELOPER AND GENERAL CONTRACTOR) For (Name of Development) Submitted by: Name of Owner/Developer: Address: Contact Information: Name of General Contractor: Address: Contact Information: General Statement as the owner, and , as the general contractor are committed to comply with the Section 3 act, the Section 3 regulations, and the City of San Bernardino ("City") Section 3 Guidelines. It is our desire to work together to ensure compliance, to the greatest extent feasible, through the awarding of contracts for work and services to Section 3 companies, and to provide employment and training to Section 3 residents. We commit to include the Section 3 clause in the construction contract and all subcontracts in excess of$1 00,000,00. All subcontractors interested in submitting bids for contracts will be informed of the Section 3 requirements and goals. We agree to provide the City with copies of all bids received in response to the invitation to bid and copies of all contracts awarded in excess of$100,000.00. Goals Contracting: To demonstrate compliance with Section 3 regulations, it is desirous to award at least 10 percent of the total dollar amount of all Section 3 covered contracts for building trades work, and, at least 3 percent of the total dollar amount of all other Section 3 covered contracts (i.e., professional services) to Section 3 business concerns. Construction contract: $ 10%: $ 3% $ These goals are affirmed: Initials: If we do not feel it is feasible to meet the minimum goals set forth above, we will be prepared to demonstrate why it was not possible. We understand failure to follow our Section 3 Plan could result in the Secretary of Housing and Urban Development ("HUD") finding us non-compliant with the Section 3 regulations. Employment and Training: To demonstrate compliance with Section 3 regulations, it is desirous to employ Section 3 residents as 30 percent of the aggregate number of new hires, and to provide training to those new hires. We agree to provide information regarding existing employees and hiring needs as a part of this plan. Any goal established in this plan must be met. If we fail to do so, we agree to provide an explanation and documentation as to why the goal was not met. Outreach We are committed to conduct an aggressive outreach campaign to make Section 3 Businesses and Section 3 Residents aware of contracting and possible hiring opportunities in connection with this Section 3 Covered Project. Efforts will include, but not be limited to, publication of opportunities in the local newspapers, use of signage at the project site, flyers posted in the neighborhood and surrounding areas, notification of local housing authorities, contractor and trade organizations, employment agencies, career centers and local Youthbuild chapters. Proiect Neighborhood Area The project neighborhood area is: This area will be the primary focus of all outreach attempts. Section 3 Coordinator Name: Contact Information: This person will serve as the main point of contact for all Section 3 related issues on behalf of the owner, general contractor, and the subcontractor. Reporting We agree to submit a Master Subcontractor List on the 201h day of each month after construction of the Section 3 Covered Project has commenced. We agree to submit a final report to the City on HUD Form 60002 at completion of construction of the Section 3 Covered Project. We agree to immediately report any changes in this plan, including but not limited to, changes in the dollar amount of contracts awarded and staffing needs of the subcontractors. Attachments The following attachments are incorporated into and made a part of this Section 3 Plan: Section 3 Clause that will be included in all contracts Contracting Plan Outreach to Solicit Bids from Section 3 Businesses Permanent Employee Listing for the Owner/Developer Permanent Employee Listing for the General Contractor Workforce Needed for Section 3 Covered Project for the Owner/Developer Workforce Needed for Section 3 Covered Project for the General Contractor We agree to provide to the City the following documentation as soon as the information is available to us: • Outreach to Solicit Bids from Section 3 Businesses (updated) • New Hires for the Owner/Developer • New Hires for the General Contractor • Section 3 New Hires Trained for the Owner/Developer • Section 3 New Hires Trained for the General Contractor • HUD 60002 Final Report Submitted to the City of San Bernardino Date: OWNER/DEVELOPER: (Print/type name) By: (Print/type name and title) Date: GENERAL CONTRACTOR: (Print/type name) By: (Print/type name and title) SECTION 3 PLAN (SUBCONTRACTOR WITH CONTRACT IN EXCESS OF $1009000) For (Name of Development) Submitted by: Name of Subcontractor: Address: Contact Information: General Statement as the subcontractor, is committed to comply with the Section 3 act, the Section 3 regulations, and the City of San Bernardino ("City") Section 3 Guidelines. It is our desire to work together with the Owner and the General Contractor to ensure compliance, to the greatest extent feasible, through the awarding of contracts for work and services to Section 3 companies, and to provide employment and training to Section 3 residents. We commit to include the Section 3 clause in all subcontracts. We have been informed of the Section 3 requirements and goals set forth by the Owner and the General Contractor. Our submission of this document shall also be our agreement to follow the Section 3 Plan submitted to City by the Owner/Developer and the General Contractor. Employment and Training To demonstrate compliance with Section 3 regulations, it is desirous to employ Section 3 residents as 30 percent of the aggregate number of new hires, and to provide training to those new hires. We agree to provide information regarding existing employees and hiring needs as a part of this plan. Any goal established in this plan must be met, or proof provided as to why the goal was not met. Attachments The following attachments are incorporated into and made a part of this Section 3 Plan: Section 3 Clause that will be included in all contracts Permanent Employee Listing for the Subcontractor Workforce Needed for Section 3 Covered Project for the Subcontractor We agree to provide to the owner the following documentation as soon as the information is available to us: • New Hires for the Subcontractor • Section 3 New Hires Trained for the Subcontractor • HUD 60002 Final Report We agree to immediately report any changes in this plan, including but not limited to, changes in the dollar amount of contracts awarded and staffing needs. CONTRACTING PLAN WORKSHEET Instruction for completing this worksheet A. List each contract or trade anticipated (including those in excess of $100,000) in connection with this project and describe the type of work they will be performing B. Approximate dollar value of each contract C. List whether the service is Construction(C) or Professional (P) D. Indicate whether this contract will be awarded to a Section 3 business concern. (C) Section 3 Contract or Trade Dollar Value (P) Business OUTREACH TO SOLICIT BIDS FROM SECTION 3 BUSINESSES General Contractor Project Name Period Covered Date Submitted Indicate the efforts that will be made to notify Section 3 business concerns of contracting opportunities generated by HUD financial assistance for housing and community development programs, to the greatest extent feasible (use additional pages if necessary). All efforts must be documented. After the contracts are awarded, attach copies of all publications, notices, pictures of posted notices, and any other outreach material utilized, along with a list of all Section 3 business concerns that responded to your outreach efforts. PERMANENT EMPLOYEE LISTING (OWNER/DEVELOPER) Name of Company Project Name Period Covered Date Submitted NOTE: A computer generated employee registry can be submitted as long as it lists the employee name and job category. Name of Employee Job Category PERMANENT EMPLOYEE LISTING (GENERAL CONTRACTOR) Name of Company Project Name Period Covered Date Submitted NOTE: A computer generated employee registry can be submitted as long as it lists the employee name and job category. Name of Employee Job Category PERMANENT EMPLOYEE LISTING (SUB CONTRACTOR) Name of Company Project Name Period Covered Date Submitted NOTE:A computer generated employee registry can be submitted as long as it lists the employee name and job category. Name of Employee Job Category WORKFORCE NEEDED FOR SECTION 3 COVERED PROJECT (OWNER/DEVELOPER- ESTIMATED) Name of Company Project Name Period Covered Date Submitted Number of Number of Total Estimated Positions Positions to be Positions Occupied by Number of Filled with Needed for Permanent Positions Not Section 3 Job Category Project Employees Occupied Residents Reason for no available job opportunities: WORKFORCE NEEDED FOR SECTION 3 COVERED PROJECT (GENERAL CONTRACTOR- ESTIMATED) Name of Company Project Name Period Covered Date Submitted Number of Number of Total Estimated Positions Positions to be Positions Occupied by Number of Filled with Needed for Permanent Positions Not Section 3 Job Category Project Employees Occupied Residents Reason for no available job opportunities: WORKFORCE NEEDED FOR SECTION 3 COVERED PROJECT (SUBCONTRACTOR- ESTIMATED) Name of Company Project Name Period Covered Date Submitted Number of Number of Total Estimated Positions Positions to be Positions Occupied by Number of Filled with Needed for Permanent Positions Not Section 3 Job Category Project Employees Occupied Residents Reason for no available job opportunities: NEW HIRES (OWNER/DEVELOPER) Name of Company Project Name Period Covered Date Submitted Non- Length of Length of Section Section Employment Employment in 3 New 3 New Last 4 b Dates Hours Hire Hire Employee Name digits Position Start End Proposed Actual SS# If you have new hires, but none are Section 3 residents, please explain. NEW HIRES (GENERAL CONTRACTOR) Name of Company Project Name Period Covered Date Submitted Non- Length of Length of Section Section Employment Employment in 3 New 3 New Last 4 by Dates Hours Hire Hire Employee Name digits Position Start End Proposed Actual SS# If you have new hires, but none are Section 3 residents, please explain. NEW HIRES (SUBCONTRACTOR) Name of Company Project Name Period Covered Date Submitted Non- Length of Length of Section Section Employment Employment in 3 New 3 New Last 4 by Dates Hours Hire Hire Employee Name digits Position Start End Proposed Actual SS# If you have new hires, but none are Section 3 residents, please explain. SECTION 3 NEW HIRES TRAINED (OWNER/DEVELOPER) Name of Company Project Name Period Covered Date Submitted Employee Name: Last 4 digits of ss#: Position: Type of Training Provided: Employee Name: Last 4 digits of ss#: Position: Type of Training Provided: Employee Name: Last 4 digits of ss#: Position: Type of Training Provided: Employee Name: Last 4 digits of ss#: Position: Type of Training Provided: SECTION 3 NEW HIRES TRAINED (GENERAL CONTRACTOR) Name of Company Project Name Period Covered Date Submitted Employee Name: Last 4 digits of ss#: Position: Type of Training Provided: Employee Name: Last 4 digits of ss#: Position: Type of Training Provided: Employee Name: Last 4 digits of ss#: Position: Type of Training Provided: Employee Name: Last 4 digits of ss#: Position: Type of Training Provided: SECTION 3 NEW HIRES TRAINED (SUBCONTRACTOR) Name of Company Project Name Period Covered Date Submitted Employee Name: Last 4 digits of ss#: Position: Type of Training Provided: Employee Name: Last 4 digits of ss#: Position: Type of Training Provided: Employee Name: Last 4 digits of ss#: Position: Type of Training Provided: Employee Name: Last 4 digits of ss#: Position: Type of Training Provided: CERTIFICATION FOR RESIDENT SEEKING SECTION 3 PREFERENCES IN TRAINING AND EMPLOYMENT: Section 3 Covered Project: I, am a legal resident of the City of County of , State of California, and meet the income eligibility guidelines for a low- or very-low-income person as set out in the most current Income Figures provided by The Secretary of Housing and Urban Development ("HUD"). My permanent residence address is: I have attached the following documentation as evidence of my status: Copy of Lease (if with public Copy of receipt of public assistance housing authority) Other evidence: Please state Copy of Evidence of participation in a public assistance program Proof of Household Income (last W-2s or tax returns with social security numbers blacked out) A Section 3 resident seeking the preference in training and employment provided by this part must submit evidence to the general contractor or subcontractor, that the person is a Section 3 resident, as defined in Section 135.5. I hereby certify the information provided by me to be true and correct, and understand any falsification of any of the information could subject me to punishment under the law. Signature Print Name Date SECTION 3 CLAUSE/AFFIRMATIVE ACTION Every applicant, recipient, contracting part, contractor and subcontractor shall incorporate, or cause to be incorporated, in all contracts for work in connection with a Section 3 covered project, the following clause(referred to as a Section 3 clause): The work to be performed under this contract is on a project assisted under a program providing direct Federal financial assistance from the Department of Housing and Urban Development and is subject to the requirements of Section 3 of the Housing and Urban Development act of 1968, as amended, 12 U.S.C. 1701 n. Section 3 requires that to the greatest extent feasible opportunities for training and employment be given to lower income residents of the project area and contracts for work in connection with the project be awarded to business concerns which are located in, or owned in substantial part by persons residing in the area of the project. The parties to this contract certify and agree that they are under no contractual or other disability which would prevent them from complying with these requirements. The contractor will send to each labor organization or representative of workers with which he has a collective bargaining agreement or other contract or understanding, if any, a notice advising the said labor organization or workers representative of his commitments under this Section 3 clause and shall post copies of the notice in conspicuous places available to employees and applicants for employment and training. The contractor will include this Section 3 clause in every subcontract for work in connection with the project and will, at the direction of the applicant for, or recipient of Federal financial assistance, take appropriate action pursuant to the subcontract upon a finding that the subcontractor is in violation of regulations issued by the Secretary of Housing and Urban Development, 24 CFR 135. The contractor will not subcontract with any subcontractor where it has notice or knowledge that the latter has been found in violation of regulations under 24 CFR 135 and will not let any subcontract unless the subcontractor has first provided it with a preliminary statement of ability to comply with the requirements of these regulations. Compliance with the provisions of Section 3, the regulations set forth in 24 CFR 135, and all applicable rules and orders of the Department issued there under prior to the execution of the contract, shall be a condition of the Federal financial assistance provided to the project, binding upon the applicant or recipient, its contractors and subcontractors, its successors, and assigns to those sanctions specified by the grant or loan agreement or contract though which Federal Assistance is provided and to such sanctions as are specified by 24 CFR 135. CONTRACTOR CERTIFICATION As the contractor for this renovation, I hereby certify that, if I do not have one, I will comply with the community's Affirmative Action Plan which includes executive order 11246 and Section 3 listed above. During the term of this contract I intend to hire employees and will be residents of the community. Dated: Contractor Witness Attachment B vas ,,,fir qt� 0 0 AAwl gi EXHIBIT I PROJECT DELIVERABLES I-1 EXHIBIT I ADDITIONAL SCOPE OF WORK Pursuant to Section 3.16(b)the Borrower will be eligible to draw down up to $600,000 of Developer Fee on the condition that the Borrower submits sufficient evidence to the County evidencing that that the Borrower has performed or obtains performance of the following Additional Scope of Work items for the benefit of the Development. No Developer Fee shall be paid under this subsection 3.16(b)unless the County has received a written draw request from Borrower, including (1) certification that the funds will be used for Additional Scope of Work, (2) certification that the proposed uses of funds consistent with the budget for the Additional Scope of Work, (3)the amount of funds needed, and, (4) where applicable, a copy of the bill or invoice covering a cost incurred or to be incurred. Item Valuation Detailed Description Current Status HTH Services $175,000 Planning,hiring,management of community service staff from In Progress developer selection until loan closing of Development March 2015 Promise Zone $150,000 Review and study of Guidelines,organization of effort, Completed reparation of proposals in 2013,2014 Marketing $120,000 Preparation of market segmentation analysis and branding and In Progress marketing plan for neighborhood July 2015 RAD Innovation $100,000 Preparation of rent comparability study and site based waiting In Progress list(with income tiering) July 2015 Schools Work $75,000 Hiring schools master planning firm for collaborative planning In Progress effort September 2015 Specific Plan $75,000 Planning,preparation,negotiation of Specific Plan for area up In Progress to City Council authorization of Specific Plan effort April 2015 Collaborative $50,0000 Create and manage Leadership Council to negotiate,design In Progress Partnership and management of partnership with partners in education, July 2015 Management employment,health care and services otal Budget $745,000 I-1 1610\08\1613286.6 EXHIBIT J STATEMENT OF RESIDUAL RECEIPTS J-1 EXHIBIT J FORM OF RESIDUAL RECEIPTS REPORT Residual Receipts Report for the Year Ending Date Prepared: ,20_ Please complete the following information and execute the certification at the bottom of this form. Annual Operating Income Please report Annual Operating Income for the year ending on the following lines: Rent Payments received(including Section 8 tenant assistance (1) $ payments, if any) Interest Income(do not include interest income from replacement and operating reserves nor interest income on tenant security deposits) (2) $ Additional Income Related to Project Operations (for example, vending machine income, tenant forfeited deposits, laundry income not paid to the residents' association, business interruption insurance casualty insurance, not used to rebuild) (3) $ Total Annual Operating Income (Add lines 1, 2,and 3) (4) $ Operating Expenses Please report Operating Expenses incurred in relation to the operations of the Project for the year ending , on the following lines: Operating and Maintenance Expenses (5) $ Utilities (6) $ Fees and licenses (7) $ Property management Expenses and On-Site Staff Payroll (8) $ Administrative Expenses Incurred by Project 1610\08\1662871.2 Property/Possessory Interest Taxes (9) $ Insurance (10) $ Other Expenses Related to Operations of the Project (11) $ Total Annual Operating Expenses (12) $ (Add Lines 5, 6, 7, 8, 9, 10,and 11) Net Operating Income (Subtract Line 12 from Line 4) (13) $ Do not include expense unrelated to the Project's operations, such as depreciation, amortization, accrued principal and interest expense on deferred payment debt, or capital expenditures paid from withdrawals from the Replacement Reserves or other reserve accounts. Additional Cash Flow Payments Obligated Debt Service Payments(as approved by the County and other parties that may have such approval rights) (14) $ Scheduled Deposits Capital and Operating Reserves(as approved by the County) (15) $ Additional Payment Obligations(i.e. additional Resident Services, Deferred Developer Fee) (16) $ Total Additional Cash Flow Payments(Add lines 14, 15 and 16) (17) $ Residual Receipts for Year Ending (Subtract Line 17 from Line 13) (18) $ Percentage of Residual Receipts to be Paid to the County (19) $ Amount Payable to the County(Multiply Line 18 by Line 19) (20) $ 1610\08\1662871.2 The following certification should be executed by the Executive Director or Chief Financial Officer of the Borrower,or the Managing General Partner of the Borrower. I certify that the information provided in this form is true, accurate,and correct in all respects. Date By: (Print Name) Its: (Title) 1610\08\1662871.2 SECOND AMENDMENT TO LOAN AGREEMENT (Waterman Gardens- Valencia Val 9) This Second Amendment to Loan Agreement (the "Second Amendment") is entered into as of March 16 , 2015, by and among the City of San Bernardino, a charter city of the State of California(the "City"), and Val 9 Housing Partners, L.P., a California limited partnership (the "Borrower"), with reference to the following facts: RECITALS A. The City and the Borrower entered into that certain Loan Agreement and a certain First Amendment thereto, each dated as of March 17, 2015 (together, the "Loan Agreement"). These recitals refer to and utilize certain capitalized terms which are defined in Article 1 of the Loan Agreement. Capitalized terms used in this Second Amendment, but not defined, shall have the meaning set forth in the Loan Agreement. B. Pursuant to Section 7.9 of the Loan Agreement, no alteration or variation of the terms of the Loan Agreement is valid unless made in writing by the Parties. Any material change in the amount or terms of the Loan Agreement must be approved by the Mayor and Common Council. C. On March 16, 2015, the Mayor and Common Council approved and authorized the City Manager to execute all documents necessary to effectuate the disbursement of the City Loan in accordance with the requirements of the Loan Agreement. D. To implement and effectuate the Loan Agreement and construction of the Development, the City and the Borrower desire to enter into this Second Amendment in order make non- material changes at the request of HUD. NOW, THEREFORE, the City and the Borrower agree as follows: Section 1. Section 2.7(g) of the Loan Agreement is hereby amended by replacing the opening word"So"with the phrase, "Notwithstanding anything to the contrary in this Agreement, so". Section 2. Section 7.4, second paragraph, is hereby deleted in its entirety and replaced and amended as follows: "Notwithstanding anything to the contrary in this Agreement, so long as the Secretary of Housing and Urban Development or his/her successors or assigns, are the insurers or holders of the first mortgage on the Waterman Gardens—Valencia 9, FHA Project No. 143-35130, under the indemnifications provisions, including but not limited to those in Sections 2.7, 2.8, 3.8, 4.6, 4.7, 7.4 of this Agreement, Borrower's obligation to indemnify and hold the City harmless shall be limited to available Surplus Cash of the Borrower or non-Project assets of the Borrower or KH 344080.1 available liability insurance proceeds and the indemnification provisions shall not apply to HUD." Section 3. No Other Changes to the Agreement. Except as expressly modified by this Second Amendment, all other provisions of the Loan Agreement remain unmodified and continue in full force and effect. Section 4. Conflicts with the Agreement. In the event of any conflict between this Second Amendment and the Loan Agreement, the provisions of this Second Amendment shall prevail. Section 5. Effective Date. This Second Amendment shall be effective on the date first set forth above. Section 6. Successors and Assigns. This Second Amendment shall be binding on and inure to the benefit of the legal representatives, heirs, successors and assigns of the parties. Section 7. California Law. This Second Amendment shall be governed by and construed in accordance with the laws of the State of California. Section 8. Counterparts; Multiple Ori ig nals. This Second Amendment may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts. KH 344080.1 2 IN WITNESS WHEREOF, the City, and the Borrower have entered into this Second Amendment as of the date first set forth above. BORROWER: Val 9 Housing Partners, L.P., a California limited partnership Date: By: Val 9 MGP, LLC, a California limited liability company, its sole general partner By: National Community Renaissance of California, its sole member and manager By: Tracy Thomas, Chief Financial Officer CITY: CITY OF SAN BERNARDINO, a charter city of the State of California Date: h' By: e. Allen Parker, City Manager ATTEST Georgeann Hanna City Clerk Date: V 915 APPROVED AS TO FORM: Gary D. Saenz City Attorney By: ho KH 344080.1 3