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Item 2b: ARA Resolution 238 Approving Owner Participation Agreement between Arcadia Commons L.P. and ARA for Campus Commons Senior Housing Project
DISCUSSION FT' ril ii DATE: September 21, 2010 TO: Chairman and Redevelopment Agency Board STAFF REPORT Arcadia Redevelopment Agency FROM: Jason Kruckeberg, Assistant City Manager /Development Services- Director By: Jerry Schwartz, Economic Development Manager SUBJECT: ARCADIA REDEDVELOPMENT AGENCY RESOLUTION NO. ARA 238 APPROVING AN OWNER PARTICIPATION AGREEMENT BETWEEN ARCADIA COMMONS, L.P. AND THE ARCADIA REDEVELOPMENT AGENCY FOR THE CAMPUS COMMONS SENIOR HOUSING PROJECT Recommendation: Approve ARA Resolution No. 238 BACKGROUND The Campus Commons housing project is a 43 -unit development for low and very low income senior citizens. It is located at 16 Campus Drive, and is being developed by a partnership of Davila Properties and Ashwood Construction, known for this project as Arcadia Commons, L.P. The project received its entitlements from the City Council at the July 6 meeting. During a study session on July 6, the Agency Board gave conceptual approval to providing up to $6.9 million in Agency low and moderate income housing funds to fill a funding gap and make the project financially feasible. Based on the project entitlements and the conceptual funding approval, the Agency and developers have negotiated an Owner Participation Agreement to document the project, the Agency's financial participation, and the responsibilities of the parties in bringing the project to fruition. An Owner Participation Agreement (OPA) is a common document that is utilized when the Redevelopment Agency is not a property owner but is a financial partner with the property owner /developer. An OPA was used for the Heritage Park senior housing project on Las Tunas Boulevard to document the Agency's long term loan to insure financial feasibility. The Campus Commons senior housing project is similar because the developer is acquiring the project site but needs a long term loan from the Agency's low /mod housing fund to make the project financially feasible. The developers of the Campus Commons project have requested a long term loan of up to $6.9 million from the Agency. As mentioned above, the Agency Board gave conceptual approval to this amount on July 6. Because the Redevelopment Law includes rules requiring the use of Agency low /mod funds based on the proportion of lower income residents to the overall City population, the Agency cannot invest all of the $6.9 million up front. The most that can currently be loaned to the project is $3,544,435. The remaining $3,335,565 can be loaned to the project in 2015. This rule regarding proportionality was discussed during the July 6 Study Session. During the July 6 Agency Study Session, the developers explained that they would need the remaining Agency funds before 2015. The funds will be required once the project is open, occupied, and has operated at stabilized occupancy for six months. At that time, the developers will convert from a construction loan to permanent financing and would require the remaining Agency funds. However since the Agency cannot legally loan these remaining funds until 2015, the developers are working with their bank to arrange a "bridge" loan that would provide funds when needed. The bridge loan would be repaid by the Agency in 2015 when it is legally permitted to expend additional low /mod funds on senior housing. The Agency would also be responsible for any interest on the loan and any fees from the lender. The developers also explained that the $6.9 million request included interest and bank fees for the bridge loan. They anticipate that the principal amount of the bridge loan will be at most $2.9 million, with the possibility that it could be reduced from that level. Reductions could include the developers delaying the receipt of some developer fees until 2015, the receipt by the developers of tax credit proceeds in excess of the amount in its budget, and a reduction in overall project costs below the budgeted amounts. The OPA includes these parameters for the bridge loan so that any loan that is ultimately arranged will meet these requirements. The OPA memorializes the details of the long term loan from the Agency's low /mod housing fund to the project and the repayment from residual receipts over 55 years. This is included in the OPA and in a Loan Agreement that will also be executed by the parties. Other aspects of the OPA are the scope of development, a project timeline, details regarding the guarantor of the Agency's long term loan, a development budget, the marketing plan and certification of income qualification for the applicants, and the certificate of completion that the Agency will issue when its requirements under the OPA are met. The purpose of the OPA is to make sure each party understands the obligations and expectations of the other party, to end up with the project that the Agency wants, and to create a process to resolve any disputes or issues that were not anticipated. From the Agency's perspective, the OPA protects its interests and funds. As a result, the document is lengthy and detailed. The next steps for the project include continuing to work on the bridge loan, and the developers completing their financing, proceeding with the purchase of the site, relocation of the tenants, and development of construction drawings towards the issuance of a building permit. Construction would probably begin late this year or early ARA Resolution No. 238 September 21, 2010 Page 2 of 3 2011, depending on the timing to complete relocation and demolition of the existing buildings, and the issuance of a building permit. CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) The Owner Participation Agreement is not considered a project per CEQA (CEQA Guidelines, Section 15061 (b) (3)). The Campus Commons project was approved with a Negative Declaration on July 6, 2010 as part of the approval of the entitlements for the project. FISCAL IMPACT Under the OPA, the Agency would provide a long term loan of up to $6.9 million from the low and moderate income housing fund. There is no impact on the General Fund. RECOMMENDATION Approve ARA Resolution No. ARA 238 approving the Owner Participation Agreement with Arcadia Commons, L.P. for the development of the Campus Commons senior housing project. Approved: , JPCn -a-.Q Donald Penman, City Manager /Executive Director Attachment: ARA Resolution No. 238 Owner Participation Agreement (OPA) ARA Resolution No. 238 September 21, 2010 Page 3 of 3 RESOLUTION NO. ARA -238 A RESOLUTION OF THE ARCADIA REDEVELOPMENT AGENCY APPROVING THE OWNER PARTICIPATION AGREEMENT BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF ARCADIA AND ARCADIA COMMONS LLP FOR THE CAMPUS COMMONS AFFORDABLE HOUSING PROJECT WHEREAS, pursuant to the provisions of California Community Redevelopment Law (Health and Safety Code Section 33000, et seq.) ( "CRL "), the City of Arcadia ( "City ") approved and adopted on December 26, 1973 the Redevelopment Plan ( "Redevelopment Plan ") for the Central Redevelopment Project Area ( "Project Area ") and the Redevelopment Agency of the City of Arcadia ( "Agency ") has the responsibility to implement the Redevelopment Plan; and WHEREAS, the Agency is engaged in activities necessary to execute and implement the Redevelopment Plan for the Project Area pursuant to the provisions of the CRL; and WHEREAS, the Agency is required to set aside not Tess than twenty percent (20 %) of all tax increment funds received annually ( "Low and Moderate Income Housing Funds ") for the purpose of increasing, preserving, and improving housing affordable to persons of very low, low- and moderate - income; and WHEREAS, the Agency is authorized pursuant to CRL Sections 33334.2 and 33334.3 to expend Low and Moderate Income Housing Funds for the purpose of increasing, improving, and preserving the community's supply of low- and moderate - income housing; and WHEREAS, the Agency now desires and intends to enter into an Owner Participation Agreement ( "Agreement ") with Arcadia Commons LP ( "Developer ") for the 1 development of a forty -two (42) unit senior citizen housing complex that will be affordable to low and very low income senior citizen households for a period of fifty -five (55) years, and one (1) manager's unit (the "Project "); and WHEREAS, the Agency desires to provide financial assistance to Developer for development of the Project in the amount of Six Million Nine Hundred Thousand Dollars ($6,900,000) (the "Loan "), which Loan consists of funds from the Agency's Redevelopment Low and Moderate Income Housing Fund; and WHEREAS, through the Agreement and accompanying documents, the Agency is imposing occupancy and affordability restrictions on the Project in part in order to meet replacement housing requirements applicable to the Redevelopment Area pursuant to CRL Section 33413(a); and WHEREAS, the redevelopment of the site on which the Project is located ( "Property ") in accordance with the Agreement is in the best interests of the City and Agency and the health, safety and welfare of the City's taxpayers and residents and is in accordance with the public purposes set forth in the Redevelopment Plan and CRL, and the implementation of the Agreement will provide substantial benefits to the Agency and will further important policies and goals of the Agency by providing and preserving affordable housing; and WHEREAS, pursuant to the terms of CRL Section 33334.14(a), the Agency finds that an economically feasible alternative method of financing, refinancing or assisting the development of the affordable units on substantially comparable terms and conditions, but without subordination to bond financing, is not reasonably available; and 2 WHEREAS, the City Planning Commission held a duly noticed public hearing on May 11, 2010 to review an amendment to the City's General Plan and the Project's requisite land use entitlements in order to permit the Project on the site; and WHEREAS, the City Council held a duly noticed public hearing on July 6, 2010 to review the amendment to the City's General Plan and the Project's requisite land use entitlements in order to permit the Project on the Property, and the City Council approved the amendment and land use entitlements; and WHEREAS, the California Environmental Quality Act (Public Resources Code Sections 21000, et seq.) ( "CEQA "), imposes no conditions on the Agency's consideration and approval of this Agreement, because the project is exempt from CEQA requirements pursuant to Public Resources Code Section 15332 as an in -fill development consistent with the applicable general plan and zoning designations and regulations, as amended, on a project site of no more than five acres substantially surrounded by urban uses with no value as habitat for endangered, rare or threatened species; and the Project will not result in any significant effects relating to traffic, noise, air quality or water quality and can be served adequately by all required utilities and public services; and WHEREAS, the City Council adopted the Relocation Plan for the Project at a duly noticed meeting on September 21, 2010; and WHEREAS, the Agency intends to approve a Replacement Housing Plan for the Project at a duly noticed meeting of the Agency; and WHEREAS, Agency and Developer have negotiated the terms of the Agreement, a copy of which is attached to this Resolution. 3 NOW, THEREFORE, THE ARCADIA REDEVELOPMENT AGENCY DOES HEREBY FIND, DETERMINE AND RESOLVE AS FOLLOWS: SECTION 1. The foregoing recitals are true and correct and are incorporated herein. SECTION 2. The Agency Governing Board hereby approves the Agreement in substantially the form attached hereto, subject to any minor or non - substantive modifications as may be approved by the Executive Director with the concurrence of Agency Counsel. SECTION 3. The Agency Governing Board hereby authorizes and directs the Executive Director of the Agency (with the concurrence of Agency Counsel) to execute and deliver on behalf of the Agency the Agreement thirty (30) days following the Agency's approval of the Replacement Housing Plan for the Project. The Agency Governing Board also authorizes the Executive Director of the Agency (with the concurrence of Agency Counsel) to execute any documents and instruments as may be necessary or convenient in the furtherance of the actions authorized by this Resolution. SECTION 4. This Resolution shall take effect immediately upon its adoption by the Agency Governing Board. SECTION 5. The Secretary shall certify to the adoption of this Resolution. [SIGNATURES ON NEXT PAGE] 4 ATTEST: Passed, approved and adopted this day of , 2010. Agency Secretary APPROVED AS TO FORM: Stephen P. Deitsch Agency Counsel 5 Chairman of the Arcadia Redevelopment Agency OWNER PARTICIPATION AND LOAN AGREEMENT (Arcadia Commons) This Owner Participation and Loan Agreement (the "Agreement ") is reference dated as of September , 2010, by and between the Arcadia Redevelopment Agency (the "Agency ") and Arcadia Commons, L.P. (the "Borrower" or "Developer ") with reference to the following facts: RECITALS A. Pursuant to the provisions of California Community Redevelopment Law (Health and Safety Code Section 33000 et seq.) ( "CRL "), , the Agency has the responsibility to implement the Central Redevelopment Project Area Plan adopted by Ordinance No. 1490 of the City Council of the City of Arcadia on December 26, 1973, pursuant to California Community Redevelopment Law (the "Redevelopment Plan ") for the Community Development Project Area (the "Project Area "); B. The Borrower owns or will own that certain real property located outside the Project Area and more particularly described in the attached Exhibit A (the "Property "). The Borrower intends to construct forty -two (42) units of senior housing that will be affordable to low and very low income senior households for a period of fifty -five (55) years and one (1) manager's unit (the "Project "). C. The Agency desires to provide financial assistance to Borrower for development of the Project in the amount of Six Million Nine Hundred Thousand Dollars ($6,900,000) (the "Loan "). The Loan consists of funds from the Agency's Redevelopment Low and Moderate Income Housing Fund D. Through this Agreement and accompanying documents the Agency is imposing occupancy and affordability restrictions on the Project in order to meet replacement housing requirements applicable to the Redevelopment Area pursuant to CRL Section 33413(a) and low and moderate income housing production requirements pursuant to CRL 33413(b)(2)(B). E. The redevelopment of the Property in accordance with this Agreement is in the best interests of the City and Agency and the health, safety and welfare of the City's taxpayers and residents and is in accordance with the public purposes set forth in the Redevelopment Plan and CRL. Implementation of this Agreement will provide substantial benefits to the Agency and will further important policies and goals of the Agency by: (i) eliminating blight; (ii) providing for the orderly development of the Property; (iii) providing for the redevelopment of the Property in conformance with the Redevelopment Plan and (iv) providing and preserving affordable housing. F. As specified in Section 2.5, pursuant to the terms of California Health & Safety Code Section 33334.14(a), the Agency finds that an economically feasible alternative method of financing, refinancing or assisting the Units on substantially comparable terms and conditions, but without subordination to bond financing, is not reasonably available. Arcadia Commons ORANGE \SKLEINB ERG \68259.5 1 G. The City Planning Commission held a duly noticed public hearing on May 11, 2010 to review an amendment to the City's General Plan and the Project's requisite land use entitlements in order to permit the Project on the Property. H. The City Council held a duly noticed public hearing on July 6, 2010 to review the amendment to the City's General Plan and the Project's requisite land use entitlements in order to permit the Project on the Property and approved the amendment and land use entitlements. I. The California Environmental Quality Act (Public Resources Code Sections 21000 et seq.) ( "CEQA "), imposes no conditions on the Agency's consideration and approval of this agreement, because the project is exempt from CEQA requirements pursuant to Public Resources Code Section 15332 as an in -fill development consistent with the applicable general plan and zoning designations and regulations, as amended, on a project site of no more than five acres substantially surrounded by urban uses with no value as habitat for endangered, rare or threatened species. The Project will not result in any significant effects relating to traffic, noise, air quality or water quality and can be served adequately by all required utilities and public services. NOW, THEREFORE, the Agency and the Borrower (collectively the "Parties ") agree as follows: Section 1.1 Definitions. The following capitalized terms have the meanings set forth in this Section 1.1 wherever used in this Agreement, unless otherwise provided: Arcadia Commons ORANGE \SKLEINBERG \68259.5 ARTICLE 1 DEFINITIONS AND EXHIBITS (a) "Agency" shall mean the Arcadia Redevelopment Agency. (b) "Agency Promissory Note" shall mean the promissory note that will evidence Agency's commitment to fund the Permenant Component of the Loan in substantially the form attached hereto as Exhibit "L ". (c) "Agreement" shall mean this Owner Participation and Loan Agreement, including the Exhibits attached to this Agreement. (d) "Approved Development Budget" shall mean the proforma development budget, including sources and uses of funds, as approved by the Agency, and attached hereto and incorporated herein as Exhibit B, but which may be amended with the approval of the Agency as set forth in this Agreement. (e) "Approved Financing" shall mean all of the following funds acquired by the Borrower and approved by the Agency for the purpose of financing the Development, in addition to the Loan: (i) Multifamily housing revenue bonds issued by the California Statewide Communities Development Authority (the "Authority ") in the approximate amount of 2 Six Million Nine Hundred Thousand Dollars ($6,900,000.) in construction bond financing for the purpose of providing construction and permanent financing for the Development (the "Bond Financing "); and (ii) Tax amount of Three Million One Hundred Fifty the approximate F fty Thou and Four Hundred Thirteen rteen Dollars (iii) Bridge loan issued by commercial lender in the principal amount not to exceed Two Million Nine Hundred Thousand Dollars ($2,900,000) for the construction of the Project ( "the Bridge Loan "). The Bridge Loan shall be repaid upon receipt of the Permenant Loan Component from the Agency. The Bridge Loan shall be at commercial reasonable rates and terms and shall not contain any prepayment penalty, fee or other cost associated with the prepayment of the loan. ( "Borrower" shall mean Arcadia Commons, LP, a California limited partnership, and its permitted successors and assigns hereunder. Community Revitalization and Development Corporation, a California nonprofit corporation is the managing general partner of the Borrower. Arcadia Commons, LLC, a California limited liability company is the other general partner of the Borrower. (g) "Borrower Official Action" shall mean the official action of Borrower substantially in the form attached to this Agreement as Exhibit J executed by the authorized representative(s) of Borrower. (h) "Certificate of Completion" shall mean the written certification of Agency that the Project is complete and incompliance with the terms and conditions of this Agreement, substantially in the form of Exhibit G attached hereto and incorporated herein. (i) Arcadia Commons OR ANGE \SKLEINBERG168259.5 "City" shall mean the City of Arcadia, a municipal corporation. (1) "Construction" shall mean the work of improvement to be performed on the Property in substantial accordance with the provisions of this Agreement (k) "Construction Component of Loan" shall mean that portion of the Loan to be disbursed for construction purposes in accordance with the Approved Development Budget and as set forth in Section 2.1(a) of this Agreement. (1) "Construction Contract" means a current agreement between the Borrower and a general building contractor licensed by the State for construction of the entirety of the Project for a guaranteed maximum price or a stipulated price expressly set forth in such contract and in accordance with all of the teinis and conditions of this Agreement. (m) "Deed of Trust" shall mean the deed of trust that will encumber the Development to secure repayment of the Loan in substantially the form attached hereto and incorporated herein as Exhibit D. (n) "Default" shall have the meaning set forth in Section 7.1 below. 3 (o) "Development" shall mean the Property and the Improvements. (p) "Guarantor" shall mean Ashwood Construction, Inc. (q) "Guaranty" shall mean the performance guaranty from the Guarantor to the Agency in substantially the form attached hereto and incorporated herein as Exhibit "M ". (r) "Effective Date" shall mean the first date on which (i) the Agency is in receipt of four (4) counterpart originals of this Agreement executed by the authorized representative(s) of the Borrower, (ii) a certified copy of the Borrower Official Action and (iii) following all legally required notices and hearings, this Agreement is approved by Agency's governing board and executed by the authorized representative(s) of the Agency and delivered to the Borrower. (s) "Executive Director" shall mean the Executive Director of Agency or his or her designee or successor in function. (t) "Government" shall mean any and all courts, boards, agencies, commissions, offices, or authorities of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city or otherwise) whether now or later in existence. below. 4.6 below. below. (u) "Hazardous Materials" shall have the meaning set forth in Section 4.6 (v) "Hazardous Materials Claim" shall have the meaning set forth in Section (w) "Hazardous Materials Law" shall have the meaning set forth in Section 4.6 (x) "Improvements" shall mean the forty three (43) units, community building and office to be constructed under this Agreement, including appurtenant landscaping and improvements. (y) "Law" means all laws, ordinances, requirements, orders, proclamations, directives, rules, and regulations of any Government applicable to the Property or the Project, in any way, including any development, use, maintenance, taxation, operation, or occupancy of, or environmental conditions affecting the Property or the Project, or relating to any taxes, or otherwise relating to this Agreement or any Party's rights or remedies under this Agreement, or any Transfer of any of the foregoing, whether in force on the Effective Date or passed, enacted, or imposed at some later time, subject in all cases, however, to any applicable waiver, variance, or exemption. (z) "Loan" shall mean the loan from the Agency to Borrower from the Low and Moderate Income Housing Fund in the total principal amount not to exceed Six Million Nine Hundred Thousand Dollars ($6,900,000). Arcadia Commons ORANGE \S KLEINB ERG \68259.5 4 (aa) "Loan Documents" shall mean this Agreement, the Note, the Regulatory Agreement, and the Deed of Trust. (bb) "Low and Moderate Income Housing Fund" shall mean that portion of Agency's general property tax increment allocation set aside pursuant to CRL Sections 33334.2 and 33334.3 for the purposes of increasing, providing and preserving the community's supply of low and moderate income housing available at an affordable housing cost to persons and families of low or moderate income. (cc) "Note" shall mean the promissory note that will evidence Borrower's obligation to repay the Loan incorporated herein as Exhibit E. (dd) "Notice of Affordability Restrictions on Transfer of Property" shall mean the notice in substantially the form of Exhibit H to this Agreement to be recorded against the Property upon the Borrower's acquisition of fee title to the Property to provide constructive record notice of the existence and application of the affordability restrictions on the transfer of the Property. (ee) "Notice of Agreement" shall mean the notice in substantially the form of Exhibit I to this Agreement to be recorded against the Property upon the Borrower's acquisition of fee title to the Property to provide constructive record notice of the existence and application of this Agreement to the Property. (ff) (gg) "Permanent Component of Loan" shall mean up to Three Million ThreeHundred Fifty Five Thousand Five Hundred Sixty Five Dollars ($3,355,565) of the Loan to be disbursed for permanent financing purposes in accordance with the Approved Development Budget. The Permanent Component of the Loan shall be used to repay the Bridge Loan, reasonable third party carrying costs of the Bridge Loan up to Five Hundred Thousand Dollars ($500,000). The Permanent Component of the Loan shall be reduced by any costs reductions as provided for herein and any additional proceeds from the tax credits not anticipated or reflected in the Approved Development Budget. (hh) "Permitted Encumbrance" means and refers to (i) subject to Agency's consent, which consent shall not be unreasonably withheld or delayed, at any time prior to the repayment of the Loan any easement, mortgage, lien, deed of trust, or other encumbrance that Borrower reasonably determines is necessary or beneficial for the development and /or operation of any improvements to the Property, commercial leases of any portion of the Property, and (ii) any lien or encumbrance that arises in connection with a permitted Transfer. (ii) "Project" shall mean the design, development, construction and operation of a project consisting of forty -two (42) rental senior housing units that will be affordable to low and very low income senior households for a period of fifty -five (55) years, one (1) manager's unit and all related on and off -site improvements. The Project shall also include all required or associated demolition, on -site and off -site improvements, hardscape improvements, parking areas and carports, and landscaping improvements to the Property, which are specifically described in the scope of work, and which shall be developed in accordance with plans and Arcadia Commons ORANGE \SKLEINB ERG \68259.5 "Parties" shall mean the Agency and Borrower. 5 specifications approved by the City and any conditions imposed by the City in its consideration of Borrower's development applications related to the Project. The Project is more particularly described in the scope of work attached to this Agreement and incorporated herein as Exhibit C. The term Project may be used interchangeably with the term Development. (jj) "Project Entitlements" shall mean the precise plan, any specific plan or general plan amendments, variances, zone changes, and grading permits necessary for development of the Project on the Property to be approved by the City. Project Entitlements shall not include building permits or the formation or approval of districts, bonds or exactions (including, but not limited to, special assessments and special taxes) necessary to finance, directly or indirectly, the construction of public improvements or the provision of public services necessary for the Project. Project Entitlements also shall not include permits to occupy or operate after initial completion of Construction has occurred. (kk) "Property" shall mean the real property located in the City of Arcadia, County of Los Angeles, California, more particularly described in the attached Exhibit A, and all current and future improvements thereon. (11) "Regulatory Agreement" shall mean the Regulatory Agreement and Declaration of Restrictive Covenants between the Agency and the Borrower associated with the Loan substantially in the form attached hereto and incorporated herein as Exhibit F. (mm) "TCAC" means the Tax Credit Allocation Committee (nn) "Tax Credits" means an allocation from TCAC of four percent (4 %) federal low income housing tax credits in an amount of approximately Four Milliam Two Hundred Eighty Nine Thousand Six Hundred Fifty Dollars ($4,289,650) to finance a portion of the total Project costs, all in accordance with Section 42 of the Internal Revenue Code of 1986, as amended, all associated Internal Revenue Service regulations and all associated TCAC regulations. Developer shall get no less than three (3) bids from tax credit investors before selecting the investor who provides the best value to the Project. (oo) Tax Credit Equity The amount of approximately Three Million Eighty - Eight Thousand Five Hundred Forty -Eight Dollars ($3,088,548) to be paid by the Tax Credit Investor to the Borrower to obtain the Tax Credits. (pp) Tax Credit Investor The Person that provides the Tax Credit Equity. The Tax Credit Investor shall be subject to the reasonable approval of Agency. In no event may the Tax Credit Investor be an affiliate of the Borrower. (qq) "Term" shall mean the term of the Loan and of the Regulatory Agreement, which is fifty -five (55) years from the date of the certificate of occupancy for the Development. (ss) "Unit" means one of the forty three (43) units of housing to be constructed on the Property. Arcadia Commons ORANGE \SKLEINBERG \68259.5 (rr) "Transfer" shall have the meaning set forth in Section 5.1 below. 6 (tt) "Unpermitted Encumbrances" means and refers to any mortgage, lien, deed of trust, easement or other encumbrance recorded or asserted against the Property that is not a Permitted Encumbrance. 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: Approved Scope of Work Exhibit D: Deed of Trust Exhibit E: Note Exhibit F: Regulatory Agreement Exhibit G: Certificate of Completion Exhibit H: Notice of Affordability Restrictions on Transfer of Property Exhibit I: Notice of Agreement Exhibit J: Borrower's Official Action Exhibit K: Performance Schedule Exhibit L: Agency Promisory Note Securing Permanent Component of Loan Exhibit M: Personal Garuantee ARTICLE 2 LOAN AND FINANCING PROVISIONS Section 2.1 Loan. The Agency shall loan to the Borrower the Loan in the principal amount of no more than Six Million Nine Hundred Thousand Dollars ($6,900,000) for the purposes set forth in Section 2.3 of this Agreement. The obligation to repay the Loan shall be evidenced by the Note and secured by the Deed of Trust recorded against the Property. The Agency shall disburse the Loan in accordance with the following schedule provided all conditions precedent to disbursement have been and remain satisified: (a) Construction Component of Loan: Three Million Five Hundred Forty Four Thousand Four Hundred Thirty Five Dollars ($3,544,435,) upon close of escrow and satisfaction of all conditions precedents set forth in Section 2.6 of this Agreement. It is anticipated this shall occur on or before on or before December 1, 2010; (b) Permanent Component of Loan: Not to exceed Three Million Three Hundred Fifty Five Thousand Five Hundred Sixty Five Dollars ($3,355,565) no earlier than January 1, 2015 and no later than January 15, 2015 provided all conditions precedents to disbursement as set forth in Section 2.7 of this Agreement have been satisfied and are to be applied solely to pay down the Bridge Loan and any deferred payments provided for in the Approved Development Budget. Section 2.2 Interest. Arcadia Commons ORANGE \SKLEINBERG \68259.5 7 (a) Subject to the provisions of Section 2.2(b) below, the outstanding principal balance of the Loan shall accrue interest at the annual rate of one percent (1 %), per annum, commencing on the date of this Agreement and continuing until the Loan is fully repaid. (b) In the event of a Default, interest on the Loan shall begin to accrue, as of the date of Default and continuing until such time as the Loan funds are repaid in full or the Default is cured, at the default rate of the lesser of ten percent (10 %), compounded annually, or the highest rate permitted by law. Section 2.3 Use of Loan Funds. (a) Agency shall pay to or for the benefit of Borrower the Loan in order to defray certain costs, as discussed in this Section, and insure that restrictive covenants, providing that forty -two (42) of the Units be made available to low and very low income seniors and held at an affordable rent, run with the Project for fifty -five (55) years as provided for in the Regulatory Agreement. The Loan shall consist entirely of Low and Moderate Income Housing Funds. (b) The Borrower shall use the Loan funds solely in compliance with the Approved Development Budget to pay for construction costs of the Development and to repay a portion the Bond Financing consistent with the Approved Development Budget. Section 2.4 The Borrower shall not use the Loan funds for any other purpose without the prior written consent of the Agency. Borrower shall not be entitled to use any portion of the Loan to reimburse Borrower for any internal management, administrative or overhead expenses. Section 2.5 Security. Borrower shall secure its obligation to repay the Loan, as evidenced by the Note, by executing the Deed of Trust, and recording it as a lien against the Property junior to the deeds of trust securing the Bond Financing, provided the deeds of trust securing the Bond Financing are approved by Agency in Agency's reasonable discretion. The Executive Director is hereby authorized to execute such subordination agreements and /or other documents as may be reasonably necessary to evidence subordination, without further authorization from Agency, provided that such subordination agreements contain written commitments which the Executive Director finds are reasonably designed to protect Agency's investment in the event of default, such as one or more of the following: (i) the right of Agency to cure a default on a senior loan prior to foreclosure; (ii) the right of Agency to negotiate with a lender after notice of default from the lender and prior to foreclosure; (iii) an agreement that if, prior to foreclosure on a loan, the Agency takes title to the property and cures the default on the loan, the lender will not exercise any right it may have to accelerate the loan by reason of transfer of title to Agency; and (iv) a right of the Agency to reacquire the Property from the Borrower at any time after a material default on a loan. Nothing set forth herein shall be construed to require the Agency to subordinate any of the subordinate instruments in favor of any person holding any interest in the Property (other than the lender for the loan set forth herein), any Tax Credit regulatory agreement, and any other person claiming under or through any of the foregoing. Pursuant to the terms of California Health & Safety Code Section 33334.14(a), the Agency finds that an economically feasible alternative method of financing, Arcadia Commons ORANGE \SKLEINBERG \68259.5 8 refinancing or assisting the Units on substantially comparable terms and conditions, but without subordination, is not reasonably available. Section 2.6 Construction Component of Loan Disbursement. The Construction Component of Loan shall be disbursed in accordance with the following provisions of this section. The Agency shall not be obligated to make any disbursements of the Construction Component of Loan or take any other action under the Loan Documents unless the following conditions precedent are satisfied prior to each such disbursement of the Construction Component of Loan: (a) There exists no Default nor any act, failure, omission or condition that would constitute an event of Default under this Agreement. (b) Borrower owns a fee simple interest title to the Property. (c) Borrower has executed and delivered to the Agency the Loan Documents, and the Deed of Trust and the Regulatory Agreement which have all been recorded against the Property in the Office of the Recorder of the County of Los Angeles. (d) Borrower has delivered to the Agency a copy of Borrower's organizational documents and an authorizing resolution authorizing Borrower's execution of the Loan Documents and the transactions contemplated by the Loan Documents. (e) Borrower has furnished the Agency with evidence of the insurance coverage meeting the requirements of Section 4.13 below. (f) A title insurer reasonably acceptable to the Agency is unconditionally and irrevocably committed to issuing an ALTA Lender's Policy of 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 Agency, and containing such endorsements as the Agency may reasonably require. (g) The Agency has received and approved all contracts that the Borrower has entered or proposed to enter for construction of the Development as required pursuant to Section 3.4 below. above. Arcadia Commons ORANGE\SKLEINBERG\68259.5 (h) Borrower has closed all Approved Financing described in Section 1.1(e) (i) Borrower has obtained a commitment letter from the Tax Credit Investor in form, substance, and amount consistent with the Approved Development Budget, and acceptable to and approved by the Agency. (j) Agency has received and approved the final plans and specifications for the Development, as required pursuant to Section 3.2 below. (k) The Agency has received copies of the Guaranty executed by Guarantor; 9 (1) The Agency has received a copy of the building permit required to construct the Development; (m) The undisbursed proceeds of the Construction Component of Loan, together with other funds or firm commitments for funds that the Borrower has obtained in connection with the Development, are not less than the amount that the Agency determines is necessary to pay for the construction of the Development and to satisfy all of the covenants contained in this Agreement and the Regulatory Agreement. (n) The Agency has received a written draw request from the Borrower, including certification that the condition set forth in Section 2.6 continues to be satisfied, setting forth the proposed uses of funds consistent with the Approved Development Budget, the amount of funds needed, copies of contracts, invoices, cancelled checks and other such reasonable evidence of those expenses in accordance with the Approved Development Budget. Section 2.7 Permanent Component of Loan Disbursement. The Permanent Component of Loan shall be disbursed in accordance with the following provisions of this section. The Agency shall not be obligated to make any disbursements of the Permanent Component of Loan or take any other action under the Loan Documents unless the following conditions precedent are satisfied prior to each such disbursement of the Permanent Component of Loan: (a) Conditions Precedent to Disbursement (i) There exists no Default nor any act, failure, omission or condition that would constitute an event of Default under this Agreement. (ii) Borrower has met and continues to meet the conditions precedent as set forth in Section 2.5. (iii) The Agency has received and approved an accounting for the final development budget for the construction of the Development from the Borrower showing all uses and sources. (iv) The Agency has received and approved a completion report from the Borrower setting forth the income, household size, and ethnicity of tenants of the Units (except for the manager's unit) and the unit size, rent amount and utility allowance for all Units (except for the manager's unit). (v) The Agency has received and approved from Borrower a form of lease and marketing plan for the Units. (vi) The Agency has received from Borrower evidence of marketing for the Units such as copies of flyers, list of media ads, list of agencies and organizations receiving information on availability of units. (vii) The Agency has received from the Borrower current evidence of the insurance coverage meeting the requirements of Section 4.13 below. Arcadia Commons ORANGE \SKLEINBERG \68259.5 10 (viii) Borrower and Borrower's general partners are in good standing under the laws of the State of California. (ix) The Agency has received from Borrower contact information for the property manager of the Development and the name and phone number of the on -site property manager. (x) Borrower has provided evidence satisfactory to Agency that Borrower has completed construction of the Development (i) in a good and workmanlike manner and in accordance with the approved scope of work, (ii) on a lien -free basis, and (iii) in compliance with all legal requirements, including, without limitation, all applicable laws, building codes, zoning requirements, subdivision requirements, fire and safety laws, the requirements of the Americans with Disabilities Act and, if applicable, the design and rehabilitation requirements established pursuant to the Fair Housing Act, as amended. (xi) The undisbursed proceeds of the Permanent Component of Loan, together with other funds or firm commitments for funds that the Borrower has obtained in connection with the Development, are not less than the amount that the Agency determines is necessary to pay for the permanent financing of the Development and to satisfy all of the covenants contained in this Agreement and the Regulatory Agreement. (xii) The Agency has received a written draw request from the Borrower, including certification that the condition set forth in Section 2.7 continues to be satisfied, and setting forth the proposed uses of funds consistent with the Approved Development Budget, the amount of funds needed and copies of contracts, invoices, cancelled checks and other such reasonable evidence of those expenses incurred by Borrower in accordance with the Approved Development Budget. (b) Agency Promissory Note. The Agency obligation to make the Permenant Component of the Loan shall be evidenced and secured by the Agency Promissory Note. (c) The Permenant Component of the Loan shall be disbursed in one installment no earlier than January 1, 2015 and no later than January 15, 2015. The Permenant Component of the Loan shall be disbursed to repay the Deferred Developer Fee, any delayed City Fees, the Bridge Loan and any associated carrying cost. Section 2.8 Repayment Schedule. The Loan shall be repaid as follows: (a) The Loan shall have a Term that commences on the date of this Agreement and expires fifty -five (55) years after the date of the certificate of occupancy for the Development. (b) Commencing on April 15, 2015, and on April 15 of each year thereafter for the Term of the Loan, Borrower shall make repayments of the Loan equal to fifty percent (50 %) of Residual Receipts (the "Agency's Share of Residual Receipts ") as defined below. The Agency's Share of the Residual Receipts shall be credited first against accrued interest and then against outstanding principal and shall be accompanied by the Borrower's report of Residual Receipts (including an independent auditor's report regarding the auditor's review of Annual Arcadia Commons ORANGE \SKLEINB ERG \68259.5 11 Operating Expenses). The Borrower shall provide the Agency with any documentation reasonably requested by the Agency to substantiate the Borrower's determination of Residual Receipts. The remaining, fifty percent (50 %) of any Residual Receipts shall be available for distribution by the Borrower in accordance with its Partnership Agreement. Notwithstanding the foregoing, if, during the ten (10) years beginning with April 15, 2012, there are Residual Receipts, then one hundred percent (100 %) of the Residual Receipts shall be used first to pay to Borrower any portion of the developer fee (which fee shall in no event exceed One Million Two Hundred Sixty -Five Thousand Eight Hundred Eighty -Eight Dollars ($1,265,880) as shown in the Approved Development Budget) that has been deferred and not previously paid to the Borrower in accordance with its Partnership Agreement . (c) All principal and accrued interest on the Loan shall be due in full on the earlier to occur of (i) the date of any Transfer not authorized by the Agency, (ii) the date of any Default, or (iii) fifty -five (55) years after the date of the certificate of occupancy for the Development. (d) The Borrower shall have the right to prepay the Loan at any time without premium or penalty. However, this Agreement and the Regulatory Agreement shall remain in effect for the entire Term, regardless of any prepayment. (e) The following definitions shall apply for purposes of this Section 2.8: (i) "Annual Operating Expenses" with respect to a particular calendar year shall mean the following costs reasonably and actually incurred for operation and maintenance of the Development to the extent that they are consistent with an annual independent audit performed by a certified public accountant using generally accepted accounting principles: property taxes and assessments imposed on the Development; debt service 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 Agency, including but not limited to the Bond Financing; property management fees and reimbursements, not to exceed fees and reimbursements which are standard in the industry and pursuant to a management contract approved by the Agency; premiums for property damage and liability insurance; utility services not paid for directly by tenants, including water, sewer, and trash collection; maintenance and repair; any annual license or certificate of occupancy fees required for operation of the Development; security services; advertising and marketing; cash deposited into reserves for capital replacements of the Development in an amount not to exceed Two Hundred Fifty Dollars ($250) per Unit; cash deposited into an operating reserve and capitalized as part of the total development budget at completion of construction and rent up capped at One Hundred Seventy -Seven Thousand Five Hundred Dollars ($177,500.) or such larger amount if required by Lender and approved in writing by Agency; extraordinary operating costs specifically approved by the Agency; 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 by the Agency and not listed above. Annual Operating Expenses shall not include the following: depreciation, amortization, depletion or other non -cash expenses or any amount expended from a reserve account. Arcadia Commons ORANGE \SKLEINBERG \68259.5 12 (ii) "Gross Revenue," with respect to a particular calendar year, shall mean all revenue, income, receipts, and other consideration actually received from operation and leasing of the Development. "Gross Revenue" shall include, but not be limited to: all rents, fees and charges paid by tenants, Section 8 payments or other rental subsidy payments received for the dwelling units, deposits forfeited by tenants, all cancellation fees, price index adjustments and any other rental adjustments to leases or rental agreements resulting in actual income; proceeds from vending and laundry room machines; the proceeds of business interruption or similar insurance; the proceeds of casualty insurance to the extent not utilized to repair or rebuild the Development (or applied toward the cost of recovering such proceeds); and condemnation awards for a taking of part or all of the Development for a temporary period. "Gross Revenue" shall also include the fair market value of any goods or services provided in consideration for the leasing or other use of any portion of the Development. "Gross Revenue" shall not include tenants' security deposits, loan proceeds, capital contributions or similar advances. (iii) "Residual Receipts" in a particular calendar year shall mean the amount by which Gross Receipts (as defined above) exceeds Annual Operating Expenses (as defined above). Section 2.9 Reports and Accounting of Residual Receipts. (a) Audited Financial Statement. In connection with the annual payments as defined in Section 2.8(b), within sixty (60) days of the end of the Borrower's fiscal year, the Borrower shall furnish to the Agency an audited statement duly certified by an independent firm of certified public accountants approved by the Agency, setting forth in reasonable detail the computation and amount of Residual Receipts during the preceding calendar year. (b) Books and Records. The Borrower shall keep and maintain on the Property, or at its principal place of business, or elsewhere with the Agency'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. Books, records and accounts relating to Borrower's compliance with the terms, provisions, covenants and conditions of this Agreement shall be kept and maintained in accordance with generally accepted accounting principles consistently applied, and shall be consistent with requirements of this Agreement which provide for the calculation of Residual Receipts on a cash basis. All such books, records, and accounts shall be open to and available for inspection by the Agency, its auditors or other Agency authorized representatives at reasonable intervals during normal business hours at Ashwood Construction, Inc., 5755 E. Kings Canyon Rd., # 110, Fresno, CA 93727. Copies of all tax returns and other reports that Borrower may be required to furnish any governmental agency shall at all reasonable times be open for inspection by the Agency at the place that the books, records and accounts of the Borrower are kept at Ashwood Construction, Inc.. The Borrower shall preserve records on which any statement of Residual Receipts is based for a period of not less than five (5) years after such statement is rendered, and for any period during which there is an audit undertaken pursuant to subsection (c) below then pending. (c) Audits. The receipt by the Agency of any statement pursuant to subsection (a) above or any payment by Borrower or acceptance by the Agency of any loan repayment for any period shall not bind the Agency as to the correctness of such statement or Arcadia Commons ORANGE \S KLE INBERG \68259.5 13 such payment. Within three (3) years after the receipt of any such statement, the Agency or any designated agent or employee of the Agency at any time shall be entitled to audit the Residual Receipts and all books, records, and accounts pertaining thereto. Such audit shall be conducted during normal business hours at the principal place of business of Borrower and other places where records are kept, as specified above. Immediately after the completion of an audit, the Agency shall deliver a copy of the results of such audit to Borrower. If it shall be determined as a result of such audit that there has been a deficiency in a loan repayment to the Agency, then such deficiency shall become immediately due and payable with interest at the default rate set forth in this Agreement, determined as of and accruing from the date that said payment should have been made. In addition, if Borrower's auditor's statement for any Development Fiscal Year shall be found to have understated Residual Receipts by more than five percent (5 %) and at least Five Thousand Dollars ($5,000), and the Agency is entitled to any additional Loan repayment as a result of said understatement, then Borrower shall pay, in addition to the interest charges referenced hereinabove, all of the Agency's reasonable costs and expenses connected with any audit or review of Borrower's accounts and records. (d) Maximization of Residual Receipts. Borrower agrees at all times during the term of the Loan to continue its operations of the Development and to use its skills and diligence to produce the maximum Residual Receipts, subject to the rent and occupancy requirements of the Regulatory Agreement. Section 2.10 Cost Reductions or Increases (a) The Parties acknowledge and agree that the Loan is intended to partially finance the financing "gap" of the Project (the amount needed to pay the excess of the proposed Project costs over the financing and other funding sources available to the Borrower for construction and development of the Project), but in no event to provide funding (when combined with all other sources of financing and other funding sources available to the Borrower for construction and development of the Project) in excess of the proposed project costs as set forth in the Approved Development Budget. (b) Cost Reduction. If the actual Project costs are less than the proposed project costs (the difference between the actual Project costs and the proposed Project costs being a "Cost Reduction "), then the Cost Reduction shall be applied as follows: (i) to the the Deferred Developer Fee unitl such time as the Deferred Developer Fee is Two Hundred Sixty -One Thousand Two Hundred Seventy - Threee Dollars.(261,273). (ii) Once the Deferred Developer Fee is reduced to $261,273, all Project Cost Reductions, after adjusting for any reduction in eligible basis, tax credits, developer fee and syndication/investor proceeds as verified by the cost certification/audit required by CTCAC and Agency, shall be shared equally by the Agency and Developer. The Agency portion of the Cost Reduction shall be used to reduce the amount of assistance required to be paid by the Agency pursuant to this Agreement or to reduce principal on the Loan. The Developer portion of the Cost Reduction shall be applied to reduce the Deferred Developer Fee. Arcadia Commons ORANGE \SKLEINBERG \68259.5 14 (iii) At the time the Deferred Developer Fee has been paid in full, all Project Cost Reductions, after adjustments specified in (ii) above, shall be applied to the Agency assistance required to be paid by the Agency pursuant to this Agreement or to reduce the principal of the Loan. (c) Cost Increases. If the actual Project costs exceed the sum of all financing and other funding sources available to the Borrower for construction and development of the Project (the difference being a "Project Deficit "), the Borrower shall be solely responsible for causing payment (either through third party financing, as approved by the Agency, or Borrower funds) of the Project Deficit. (d) If the actual Project costs are less than the sum of the financing and other funding sources available to Borrower for development and construction of the Project (the difference being a "Project Surplus "), then the Project Surplus, as verified by the cost certification required by CTCAC and Agency, shall be applied to reduce or repay the principal amount of the Loan. At the close of escrow for the transaction, any unexpended amount in the Bridge Loan reserve account shall be applied to reduce the Permenant Component of the Loan. Section 2.11 Tax Credits. (a) Borrower proposes to qualify for and obtain 4% Tax Credits in the amount of approximately $4,289,650 in the allocation round of October,2010, pursuant to the low - income housing tax credit program authorized pursuant to Internal Revenue Code Section 42, California Health and Safety Code Sections 50199.6- 50199.19, Revenue and Taxation Code Sections 17057.5, 17058, 23610.4, and 23610.5, and applicable federal and State regulations such as 4 California Code of Regulations Sections 10300 -10340 (collectively, the "Low- Income Housing Tax Credit Program "). If Borrower does not receive the Tax Credits as a result of such application, Borrower shall re -apply for the immediately following allocation round of 2010 for the 4% Tax Credits. In the event Borrower fails to obtain Tax Credits by this second allocation round, then either Agency or Borrower may terminate this Agreement as provided herein. In the event Borrower obtains Tax Credits, Agency shall not have any responsibilities or obligations with respect thereto. Borrower shall also comply with the requirements set forth below. Developer agrees and acknowledges that if Developer realizes any additional proceeds from the tax not anticipated or reflected in the Approved Development Budget the Permanent Component of the Loan shall be reduced by and equal value. (b) Submission of Documents to Agency. In order to assist Agency in performing its obligations and its rights under this Agreement (e.g., reviewing Borrower's Approved Development Budget, insuring the continued affordability and maintenance of the Project, and obtaining payments due under the Note), Borrower shall promptly submit to the Executive Director all of the following documents at such time as the same are submitted by Borrower to the Tax Credit Allocation Committee or other applicable body or when such documents are received by Borrower, as applicable: (i) Complete copies of Borrower's applications to the Tax Credit Allocation Committee for the preliminary reservation, final reservation, carryover allocation (if applicable), and placed -in- service credit award, and any amendments or modifications thereto (4 California Code of Regulations. 10325(b)-(e) and 10345). Arcadia Commons ORANGE \SKLEINBERG \68259.5 15 (ii) Complete copies of any correspondence or transmittals by the Tax' Credit Allocation Committee to Borrower notifying Borrower regarding the action(s) taken with respect to any of the applications referred to in the preceding clause. (iii) A complete copy of the regulatory agreement between the Tax Credit Allocation Committee and Borrower (4 California Code of Regulations, 10340(c)). (iv) Complete copies of all progress reports submitted by Borrower to the Tax Credit Allocation Committee prior to the issuance of tax credit allocations (4 California Code of Regulations. 10340(d)). (v) Complete copies of all correspondence or transmittals from the Tax Credit Allocation Committee or other jurisdiction (such as the Internal Revenue Service) containing any notification regarding the Project's noncompliance with applicable provisions of the Low - Income Housing Tax Credit Program. (c) Agency Cooperation In Tax Credit Process. Agency shall cooperate with Borrower to assist in the Borrower's receipt of an allocation of Tax Credits from the Tax Credit Allocation Committee; provided, however, Agency does not represent, warranty, or guaranty that Borrower shall obtain a reservation of Tax Credits. Specifically, Agency agrees as follows: (i) Agency shall provide Borrower copies of all correspondence between Agency and the Tax Credit Allocation Committee. (ii) Within the time set forth in the Schedule of Performance, and if requested by Borrower, Agency shall assist Borrower in obtaining a letter from the City Building Department, in a form meeting Tax Credit Allocation Committee requirements, that Borrower is entitled to building permits for the Project upon payment of all required fees. (iii) Agency shall cooperate with Borrower in reasonably considering revisions to this Agreement to conform the Agreement to the requirements of the Low Income Housing Tax Credit Program and the Tax Credit investors; provided, however, that nothing herein shall be construed as a warranty or guaranty that Agency shall approve such modifications to this Agreement. The Agency Executive Director shall have the authority, on behalf of the Agency to modify this Agreement as necessary in his /her respective sole and absolute judgment to conform the Agreement to the requirements of the Low Income Housing Tax Credit Program and the Tax Credit investors so long as such modifications do not materially affect in a substantial manner the Agency's position with respect to Borrower's repayment of the Note; provided, however, that nothing herein shall be construed as a warranty or guaranty that the Executive Director shall so agree to modify this Agreement. Section 3.1 Borrower Covenant to Develop Project. The Borrower covenants to and for the exclusive benefit of the Agency that the Borrower shall commence and complete the development of the Project on the Property, within the time period for such action set forth in the Arcadia Commons ORANGE \SKLEINBERG \68259.5 ARTICLE 3 CONSTRUCTION OF THE DEVELOPMENT 16 Performance Schedule attached hereto and incorporated herein as Exhibit K. The Borrower covenants and agrees for itself, its successors and assigns that the Property shall be improved and developed with the Project, in conformity with the terms and conditions of this Agreement and all applicable Laws and conditions of each Government. The covenants of this Section 3.1 shall run with the land of the Property, until the date of issuance of a Certificate of Completion for the Project. a. Permits and Approvals. All permits and approvals necessary for the construction of the Improvements on the Property must be received no later than December 1, 2010, or the Agency, at its option, and with thirty (30) days' prior written notice to the Borrower and opportunity to cure, may declare Borrower in default hereunder. b. Plans and Specifications. The Borrower shall, within the time period(s) for such actions set forth in the Performance Schedule, prepare and submit a complete development application and any other required application, document, fee, charge or other item (including, without limitation, deposit, fund or surety) required for construction or installation of the Project, pursuant to all applicable Laws and approvals, to each necessary Government for review and approval, as furter described below. The City's zoning, building and land use regulations (whether contained in ordinances, the City's municipal code, conditions of approval or elsewhere), shall be applicable to the construction and installation of the Project on the Property by the Borrower, pursuant to this Agreement. The Borrower acknowledges that all plans and specifications and any changes to any plans or specifications for the Project shall be subject to all applicable Laws and approvals. The Borrower shall obtain all entitlements, permits and other approvals for construction and installation of the Project on the Property from each Government, within the time periods for such actions set forth in the Performance Schedule, and prior to the commencement of any construction or installation of the applicable portion(s) of the Project. i. Simultaneously with submission to the Building Services Division of the Development Services Department, as set forth in the Performance Schedule, Borrower shall submit to the Agency a copy of the Construction Plans for the Project. As used in this Agreement, "Construction Plans" shall mean all construction documentation upon which Borrower and Borrower's Contractor shall rely in building all the improvements on the Property (including the Units, landscaping, parking, and common areas) and shall include, but not necessarily be limited to, final architectural drawings, landscaping plans and specifications, final elevations, building plans and specifications (also known as "working drawings "). ii. The Agency shall review the Construction Plans for conformance with all applicable Laws and the provisions of this Agreement. iii. If the Construction Plans are rejected by Agency in whole or in part, Borrower shall submit new or corrected Construction Plans within thirty (30) days of notification of Agency's rejection and the reasons therefore. The Agency shall then have fifteen (15) days to review and approve Borrower's new or corrected Construction Plans. The provisions of this Section relating to time periods for approval, rejection, or resubmission of new or corrected Construction Plans shall continue to apply until the Construction Plans have been approved by the Agency. Arcadia Commons ORANGE \SKLEINBERG \68259.5 17 iv. Approved Scope of Work. As of the date of this Agreement, the Agency has approved the scope of work set forth in Exhibit C. Borrower shall submit any proposed amendments to the Approved Scope of Work to the Agency for approval. Written consent of the Agency shall be required to amend the Approved Scope of Work. c. Reservations. Notwithstanding any provision to the contrary set forth herein, the approval of this Agreement by the City or the Agency shall not be binding on the City Council, the Planning Commission or any other commission, committee, board or body of the City regarding any approvals of the Project required by such bodies. No action by the City or the Agency with reference to this Agreement or any related documents shall be deemed to constitute issuance or waiver of any required City or Agency permit, approval or authorization regarding the Property, the Project or the Borrower. The Borrower obtains no right, permit or entitlement to construct or install the Project on the Property or any portion of the Property by virtue of this Agreement. d. Project Changes. If any revisions of the Project are both required by a Government, the Borrower shall promptly make any such revisions that are: (i) generally consistent with the Scope of Development and (ii) would not result in any material additional improvements not identified in the Borrower's submitted application. e. Conditions of Approval. Notwithstanding any provision to the contrary in this Agreement, the Borrower agrees to accept and comply fully with any and all reasonable conditions of approval applicable to any approvals, permits or other governmental actions regarding the construction or installation of the Project on the Property, that are both: (i) generally consistent with this Agreement and (ii) would not result in any material additional improvements not identified in the Borrower's submitted application. f. Borrower Payment of Costs and Fees. The Borrower and the Agency agree that the Agency shall not provide any direct financial assistance to the Borrower in connection with the construction or installation of the Project. The Borrower shall be solely responsible for paying for the costs of all design work, construction, labor, materials, fees, permits, applications, surety bonds and other expenses associated with the Project. The Borrower shall pay any and all fees pertaining to the review and approval of the Project by each Government and utility service providers, including the costs of preparation of all required construction, planning and other documents reasonably required by each Government or utility service provider pertinent to the construction, installation or operation of the Project on the Property, including, but not limited to, specifications, drawings, plans, maps, permit applications, land use applications, zoning applications, environmental review and disclosure documents and design review documents. Borrower and Agency agree that payment of the Delayed Fees shall be occur no later than February 1, 2015. The Borrower shall obtain any and all necessary governmental approvals, prior to the commencement of applicable portions of construction and installation of the Project, and the Borrower shall take reasonable precautions to ensure the safety and stability of surrounding properties during the construction and installation of the Project. g. Borrower Changes to Project Construction Plans (Plans and Specifications) During Course of Construction. The Borrower shall have the right, during the Arcadia Commons ORANGE \SKLEINBERG \68259.5 18 course of construction of the Project, to make "minor field changes," without seeking the approval of the Agency, if such changes do not affect the type of use to be conducted within all or any portion of a structure. "Minor field changes" shall be defined as those changes from the approved construction drawings, plans and specifications that have no substantial effect on the Project and are made in order to expedite the work of construction in response to field conditions. Nothing contained in this Section shall be deemed to constitute a waiver of or change in any Approvals governing any such "minor field changes" or in any approvals by any Government otherwise required for any such "minor field changes." Section 3.2 Construction Start and Completion of Project. a. The Borrower shall commence construction and installation of the Project in accordance with the Performance Schedule. Borrower shall cause the commencement of construction of the Project no later forty -five (45) days following the issuance of building permits. Thereafter, the Borrower shall diligently proceed to complete the construction and installation of the Project, in a good and workmanlike manner, in accordance with the Performance Schedule and all applicable Laws and all approvals for the Project issued by each Government. Borrower shall diligently prosecute construction of the Project to completion, and shall cause the completion of the construction of the Project no later than December 1, 2012 (the "Project Completion Date "). b. On or before the Project Completion Date, the Borrower shall: i. Record a Notice of Completion, in accordance with California Civil Code Section 3093, for the entircty of the Project; ii. Cause the Project to be inspected by each Government and correct any defects and deficiencies that may be disclosed by any such inspection; iii. Cause all occupancy certificates and other Approvals necessary for the occupancy and operation of the completed Project to be duly issued. c. The Executive Director, in his or her sole and absolute discretion, may extend the Project Completion Date for up to an additional sixty (60) days, in the aggregate. d. After commencement of the work of improvement of the Project, the Borrower shall not permit the work of improvement of the Project to cease or be suspended for a time period in excess of forty -five (45) calendar days, either consecutively or in the aggregate, other than as a result of an unavoidable delay. Section 3.3 Construction Contract. a. Not later than thirty (30) days prior to the proposed commencement of construction of the Improvements, the Borrower shall submit to the Agency for its approval the proposed construction contract for the construction of the Improvements. All work and professional services shall be performed by persons or entities licensed or otherwise authorized Arcadia Commons ORANGE \S K LE INBERG \68259.5 19 to perform the applicable work or service in the State of California. Each contract that Borrower enters for construction of the Project shall provide that at least ten percent (10 %) of the costs incurred shall be payable only upon completion of construction. The Agency's approval of the construction contract shall in no way be deemed to constitute approval of or concurrence with any term or condition of the construction contract except as such term or condition may be required by this Agreement. b. Upon receipt by the Agency of the proposed construction contract, the Agency shall promptly review same and approve or disapprove it within ten (10) working days. If the construction contract is not approved by the Agency, the Agency shall set forth in writing and notify the Borrower of the Agency's reasons for withholding such approval. The Borrower shall thereafter submit a revised construction contract for Agency approval, which approval shall be granted or denied in five (5) working days in accordance with the procedures set forth above. Any construction contract executed by the Borrower for the Development shall be in the form approved by the Agency. Section 3.4 Compliance with Laws. All work performed in connection with the construction or installation of the Project shall comply with all applicable Laws and approvals. Section 3.5 Borrower Attendance at Agency Meetings. The Borrower agrees to have one or more of its employees or consultants who are knowledgeable regarding this Agreement and the development of the Project, such that such Person(s) can meaningfully respond to Agency or Agency staff questions regarding the progress of the Project, attend meetings with Agency staff or meetings of the Agency governing body, when requested to do so by Agency staff, with reasonable advance written notice to the Borrower. Section 3.6 Agency Right to Inspect Project and Property. The Agency Parties shall have the right of reasonable access to the Property, without the payment of charges or fees, during normal construction hours, during the period of construction or installation of the Project. Any and all Agency representatives who enter the Property shall identify themselves at the construction management office or, if none, to the apparent on -site construction supervisor on the Property, upon their entrance onto the Property, and shall at all times be accompanied by a representative of the Borrower, while on the Property. The Borrower shall make a representative of the Borrower available for this purpose at all times during normal construction hours, upon reasonable advance Notice from the Agency. The Agency shall indemnify and hold the Borrower harmless from injury, property damage or liability to the extent arising out of the exercise by the Agency of the right of access to the Property provided in this Section 3.7, except to the extent that any such injury, property damage or liability arises from the negligence or willful misconduct of any of the Borrower Parties. If in the Agency's reasonable judgment it is necessary, the Agency shall have the further right, from time to time, at its own cost, to retain a consultant or consultants to inspect the Project and verify compliance by the Borrower with the provisions of this Agreement. The Borrower acknowledges and agrees that any such Agency inspections are for the sole purpose of protecting the Agency's rights under this Agreement, are made solely for the Agency's benefit, that the Agency's inspections may be superficial and general in nature, and are for the purposes of informing the Agency of the progress of the Project and the conformity of the Project with the terms and conditions of this Agreement, and that the Borrower shall not be entitled to rely on any such inspection(s) as constituting the Agency's approval, satisfaction or acceptance of any materials, workmanship, conformity of the Project Arcadia Commons ORANGE \S K LE IN B E RG \68259.5 20 with this Agreement or otherwise. The Borrower agrees to make its own regular inspections of the work of construction and installation of the Project to determine that the progress and quality of the Project and all other requirements of the work of construction and installation of the Project are being performed in a manner satisfactory to the Borrower. Section 3.7 Construction Pursuant to Plans and Laws. (a) Borrower shall construct the Project in conformance with Approved Scope of Work approved by the Agency and attached to this Agreement as Exhibit C. Borrower shall notify the Agency in a timely manner of any changes in the work required to be performed under this Agreement, including any additions, changes, or deletions to the plans and specifications approved by the Agency. A written change order authorized by the Agency must be obtained before any of the following changes, additions, or deletions in work for the Project may be performed: (1) any change in the work the cost of which exceeds Ten Thousand Dollars ($10,000); or (2) any set of changes in the work the cost of which cumulatively exceeds Twenty - Five Thousand Dollars ($25,000); or (3) any material change in building materials or equipment, specifications, or the structural or architectural design or appearance of the Project as provided for in the plans and specifications approved by the Agency. Consent to any additions, changes, or deletions to the work shall not relieve or release Borrower from any other obligations under this Agreement, or relieve or release Borrower or its surety, if any, from any surety bond. Agency shall utilize best efforts to approve or disapprove change orders within five (5) working days of receipt of a request for approval. In the event any such change order is not approved or disapproved within seven (7) working days, then such change order shall be deemed approved by City. (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 where applicable) the prevailing wage and other requirements of Sections 1770 et seq., of the California Labor Code and implementing rules and regulations, and (ii) 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 shall 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 Agency for the procurement and maintenance thereof, as may be required of Borrower and all entities engaged in work on the Development. The Borrower acknowledges and agrees that the Agency has made no representations to Borrower that the prevailing wage and other requirements of Labor Code Sections 1720 et seq., are not applicable to the construction of the Development. The Borrower acknowledges and agrees that the Borrower and not the City or Agency shall be responsible for determining whether or not the prevailing wage and other requirements of Labor Code Sections 1720 et seq., are applicable to the construction of the Project. (c) The Borrower shall defend (with counsel reasonably acceptable to the Agency), indemnify and hold harmless the Agency against any claim for damages, compensation, fines, penalties or other amounts arising out of the failure or alleged failure of any person or entity (including the Borrower, its contractor and subcontractors) to pay prevailing wages as determined pursuant to Labor Code Sections 1720 et seq., and implementing Arcadia Commons ORANGE \SKLEINBERG \68259.5 21 regulations of the Department of Industrial Relations or comply with the other applicable provisions of Labor Code Sections 1720 et seq., and implementing regulations of the Department of Industrial Relations in connection with the construction, pursuant to this Agreement, of the Development or any other work undertaken or in connection with the Property and shall indemnify and hold the Agency harmless against any damages, compensation, fines, penalties or other amounts resulting from the prosecution of such claim. This Section 3.8(c) shall survive the repayment of the Loan, the reconveyance of the Deed of Trust and the expiration of the Term and the Agreement Term. (d) THE BORROWER, ON BEHALF OF ITSELF, ITS SUCCESSORS, AND ASSIGNS, WAIVES AND RELEASES THE AGENCY FROM ANY RIGHT OF ACTION THAT MAY BE AVAILABLE TO ANY OF THEM PURSUANT TO LABOR CODE SECTION 1781. THE BORROWER ACKNOWLEDGES THE PROTECTIONS OF CIVIL CODE SECTION 1542 RELATIVE TO THE WAIVER AND RELEASE CONTAINED IN THIS SECTION, WHICH READS AS FOLLOWS: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. (e) BY INITIALING BELOW, THE BORROWER KNOWINGLY AND VOLUNTARILY WAIVES THE PROVISIONS OF SECTION 1542 SOLELY IN CONNECTION WITH THE WAIVERS AND RELEASES OF THIS SECTION: Initials of Authorized Borrower Representative (f) ADDITIONALLY, THE BORROWER SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS THE AGENCY, PURSUANT TO SECTION 3.7, AGAINST ANY CLAIMS PURSUANT TO LABOR CODE SECTION 1781 ARISING FROM THIS AGREEMENT OR THE CONSTRUCTION OR INSTALLATION OF ALL OR ANY PORTION OF THE PROJECT. Section 3.8 Certificate of Completion. a. Issuance. Following the completion of the Project, excluding any normal and minor building "punch- list" items to be completed by the Borrower, the Borrower may request that the Agency inspect the completed Project and issue a Certificate of Completion for the Project. Following the Agency's receipt of such a written request from the Borrower, the Agency shall promptly inspect the Project to determine whether or not the Project has been completed in compliance with this Agreement. If the Agency determines that the Project is complete (excluding any such outstanding "punch- list" items) and in compliance with this Agreement, the Agency shall issue a Certificate of Completion for the Project to the Borrower. If the Agency determines that the Project is not complete or not in compliance with this Arcadia Commons ORANGE \SKLEIN B ERG \68259.5 22 Agreement, the Agency shall send written notice of each non - conformity to the Borrower, within fifteen (15) calendar days following the Agency's receipt of the Borrower's written request for a Certificate of Completion or within three (3) calendar days after the next regular meeting of the Agency governing body, whichever date occurs later, provide the Borrower with a written statement setting forth the reasons for the Agency's failure or refusal to issue a Certificate of Completion. The statement shall also contain the Agency's opinion of the action(s) the Borrower must take to obtain a Certificate of Completion from the Agency. If the reason for the Borrower's failure to complete the Project is confined to the immediate unavailability of specific items or materials for construction or landscaping at a price reasonably acceptable to the Borrower or other minor building "punch- list" items, the Agency may, in its sole and absolute discretion, issue a Certificate of Completion upon the posting of a bond or irrevocable standby letter of credit by the Borrower, in form and substance reasonably acceptable to the Agency, in an amount representing the fair value of the work on the Project remaining to be completed, as reasonably determined by the Agency. If the Agency fails to provide such written statement, within the specified time period, the Borrower shall be deemed, conclusively and without further action of the Agency, to have satisfied the requirements of this Agreement with respect to the construction and installation of the Project, as if a Certificate of Completion had been issued by the Agency pursuant to this Agreement, and the same shall irrevocably be deemed to have been issued as of such date for all purposes of this Agreement. b. Effect. A Certificate of Completion shall only be evidence of the Agency's conclusive determination of satisfactory completion of the construction and installation of the Project in accordance with the terms of this Agreement. A Certificate of Completion shall not constitute a Notice of Completion under Section 3093 of the California Civil Code, nor shall it act to terminate the continuing reservations, covenants, restrictions or conditions contained in the Regulatory Agreement or any other instruments recorded against the Property or set forth in this Agreement or otherwise. A Certificate of Completion is not evidence of the compliance of the Project with any Laws or Approvals. A Certificate of Completion shall not evidence the satisfaction of any obligation of the Borrower to the Agency under this Agreement or otherwise, other than the Borrower's obligation to construct and install the Project. After the recordation of a Certificate of Completion for the Project, any Person then owning or thereafter purchasing, leasing or otherwise acquiring any interest in the Property or the Project shall not (because of such ownership, purchase, lease or acquisition) incur any obligation or liability under this Agreement regarding construction or installation of the Project, but such Person shall be bound by any reservations, covenants, conditions, restrictions and other interests affecting the Property pursuant to this Agreement. Section 3.9 Income Certifications and Marketing Plan. (a) Borrower must determine the income eligibility of each tenant household pursuant to County's approved tenant certification procedures within sixty (60) days before the household's expected occupancy of one of the Development's units. Borrower shall certify each tenant household's income on an annual basis. (b) The maximum household income of a household occupying the Development, and the total charges for rent, utilities, and related services to each household occupying the Development, shall be maintained as provided in the Regulatory Agreement. Arcadia Commons ORANGE \S KLEINBERG \68259.5 23 (c) No later than sixty (60) days following Borrower's commencement of construction of the Development, Borrower shall submit to the Agency 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. (d) Upon receipt of the Marketing Plan, the Agency shall promptly review the Marketing Plan and shall approve or disapprove it within thirty (30) days after submission. If the Marketing Plan is not approved, Borrower shall submit a revised Marketing Plan within thirty (30) days. If the Agency does not approve the revised Marketing Plan because Borrower fails to make specific revisions requested by the Agency, Borrower shall be in default hereunder. Section 3.10 Relocation. If and to the extent that acquisition and construction 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, (including without limitation California Government Code Section 7260 et seq., and accompanying regulations) with respect to relocation planning, advisory assistance, and payment of monetary benefits. Borrower shall be solely responsible for payment of any relocation benefits to any displaced persons and any other obligations associated with complying with such relocation laws. The Borrower shall defend, indemnify and hold harmless (with counsel reasonably acceptable to the Agency and City), the Agency and City against any claim for damages, compensation, fines, penalties, relocation payments or other amounts arising out of the failure or alleged failure of any person or entity (including the Borrower, City or Agency) to satisfy relocation obligations related to the acquisition and construction of the Development. Section 3.11 Equal Opportunity. During the construction of the Development there shall be no 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. Section 3.12 Progress Reports. Until such time as Borrower has received a certificate of occupancy from the City, Borrower shall provide the Agency 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 3.14 below. Section 3.13 Construction Responsibilities. (a) It shall be the responsibility of Borrower to coordinate and schedule the work to be performed so that commencement and completion of construction will take place in accordance with this Agreement. (b) Borrower shall be 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 Arcadia Commons ORANGE \SKLEINBERG \68259.5 24 Agency with reference to the Development is solely for the purpose of determining whether Borrower is properly discharging its obligations to the Agency, and should not be relied upon by Borrower or by any third parties as a warranty or representation by the Agency as to the quality of the design or construction of the Development. Section 3.14 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 Agency or any other lender or other third party in connection with the Development, then Borrower shall, within twenty (20) days after such filing or service, either pay and fully discharge the lien or stop notice, effect the release of such lien or stop notice by delivering to the Agency a surety bond in sufficient form and amount, or provide the Agency with other assurance satisfactory to the Agency 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 Agency may (but shall be under no obligation to) discharge such lien, encumbrance, charge, or claim at Borrower's expense. Alternately, the Agency may require Borrower to immediately deposit with the Agency the amount necessary to satisfy such lien or claim and any costs, pending resolution thereof. The Agency 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 on the Development for a continuous period of thirty (30) days or more, and take all other reasonable steps to forestall the assertion of claims of lien against the Property. Borrower authorizes the Agency, but without any obligation, to record any notices of completion or cessation of labor, or any other notice that the Agency deems necessary or desirable to protect its interest in the Development and Property. Section 3.15 No Unpermitted Encumbrances. The Borrower shall not record and shall not allow to be recorded against all or any portion of the Property or the Project any mortgage, trust deed, deed of trust, encumbrance or lien that is not a Permitted Encumbrance. The Borrower shall remove or shall have removed any Unpermitted Encumbrance made or recorded against all or any portion of the Property or the Project or shall assure the satisfaction of any such Unpermitted Encumbrance to the satisfaction of the Agency. The covenants of the Borrower set forth in this Section regarding the placement of encumbrances on the Property shall run with the land of the Property and bind successive owners of the Property, until recordation of the release of operating covenants. a. Agency Right to Discharge Unpermitted Encumbrances. After sixty (60) calendar days prior written notice to the Borrower, the Agency shall have the right, but not the obligation, to satisfy or remove any Unpermitted Encumbrance against the Property or the Project and receive reimbursement from the Borrower for any amounts paid or incurred in satisfying or removing any such Unpermitted Encumbrance, upon demand. Nothing in this Section though, shall require the Borrower to pay or make provisions for the payment of any tax, assessment, lien or charge that the Borrower is in the process of contesting the validity or amount thereof, in good faith, and so long as such contest shall not subject all or any portion of the Arcadia Commons ORANGE \S KLEINBERG \68259.5 25 Property to forfeiture or sale. Agency's rights under this Section shall terminate upon the repayment of the Loan. Section 3.17 Approved Development Budget; Revisions to Budget. As of the Effective Date of this Agreement, the Agency has approved the Approved Development Budget set forth in Exhibit B. Borrower shall submit any required amendments to the Approved Development Budget to the Agency for approval within fifteen (15) days 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. Written consent of the Agency shall be required to amend the Approved Development Budget. The Executive Director is hereby authorized to act on behalf of Agency to approve any revisions to the financing and /or Improvement plans for the Project which do not materially increase the Agency's financial obligations hereunder. Agency shall utilize best efforts to approve or disapprove requested amendments to the Development Budget within five (5) working days of receipt of a request for approval. ARTICLE 4 LOAN REQUIREMENTS Section 4.1 Applicability. The Borrower shall comply with this Article Four throughout the Term. Section 4.2 Financial Accountings and Post - Completion Audits. No later than sixty (60) days following completion of construction of the Development, Borrower shall provide to Agency an initial estimated unaudited financial accounting of all sources and uses of funds for the Development. 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. Section 4.3 Information. Borrower shall provide any information reasonably requested by the Agency in connection with the Development. Section 4.4 Records. (a) Borrower shall maintain complete, accurate, and current records pertaining to the Development for a period of five (5) years after the creation of such records, and shall permit any duly authorized representative of the Agency to inspect and copy records at the address specified in Section _ above. Such records shall include all invoices, receipts, and other documents related to expenditures from the Loan funds. Records must be kept accurate and current. (b) The Agency shall notify Borrower of any records it deems insufficient. Borrower shall have twenty -one (21) calendar days after the receipt of such a notice to correct any deficiency in the records specified by the Agency in such notice, or if a period longer than twenty -one (21) days is reasonably necessary to correct the deficiency, then Borrower shall begin to correct the deficiency within twenty -one (21) days and correct the deficiency as soon as reasonably possible. Arcadia Commons ORANGE \SKLEINBERG \68259.5 26 Section 4.5 Audits. Borrower shall make available for examination at reasonable intervals and during normal business hours to Agency all books, accounts, reports, files, and other papers or property with respect to all matters covered by this Agreement, and shall permit Agency to audit, examine, and make excerpts or transcripts from such records. The Agency may make audits of any conditions relating to this Agreement. Section 4.6 Hazardous Materials. (a) Borrower 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. Borrower 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 of projects like the Development or kept and used in and about residential property of this type. (b) Borrower shall immediately advise the Agency 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" under the provision of California Health and Safety Code, Sections 25220 et seq., or any regulation adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use of the Property under any Hazardous Materials Law. (c) The Agency shall have 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 defend, indemnify and hold harmless the City and the Agency and their councilmembers, boardmembers, 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 Agency in connection with clauses (i) and (ii), including but not limited to reasonable attorneys' Arcadia Commons ORANGE \SK LEINB ERG \68259.5 27 fees. This obligation to defend, indemnify and hold harmless shall survive termination of this Agreement. (d) Without the Agency's prior written consent, which shall not be unreasonably withheld, Borrower shall 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 Agency's reasonable judgment, impair the value of the Agency's security hereunder; provided, however, that the Agency's prior consent shall not be 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 Agency's consent before taking such action, provided that in such event Borrower shall notify the Agency as soon as practicable of any action so taken. The Agency agrees not to withhold its consent, where such consent is required hereunder, if either (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 reasonable satisfaction of the Agency that there is no reasonable alternative to such remedial action which would result in less impairment of the Agency's security hereunder; or (iv) the action has been agreed to by the Agency. (e) Borrower hereby acknowledges and agrees that (i) this Section is intended as the Agency'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 Agency's or the trustee's rights and remedies under the Deed of Trust, the Agency 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 borrower to judgment, and (b) judgment, and (c) any other rights and remedies permitted by law. For purposes of determining the Agency's right to proceed as an unsecured creditor under California Code of Civil Procedure Section 726.5(a), the Borrower shall 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 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' Arcadia Commons ORANGE \SKLEINBERG \68259.5 28 fees, incurred by the Agency 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 lesser of ten percent (10 %) or the maximum rate permitted by law, until paid, shall be added to the indebtedness secured by the Deed of Trust and shall be due and payable to the Agency upon its demand made at any time following the conclusion of such action. Section 4.7 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, including, without limitation, maintenance, repair, rehabilitation and replacement of any and all asphalt, concrete, landscaping, utility systems, irrigation systems, drainage facilities or systems, grading, subsidence, retaining walls or similar support structures, foundations, signage, ornamentation and all other improvements on or to the Property, now existing or made in the future by or with the consent of the Borrower as necessary to maintain the appearance and character of the Property. Graffiti, as defined in Government Code Section 38772, that has been applied to any exterior surface of a structure or improvement on the Property that is visible from any public right -of -way adjacent or contiguous to the Property, shall be removed by Borrower by either painting over the evidence of such vandalism with a paint that has been color- matched to the surface on which the paint is applied, or graffiti may be removed with solvents, detergents or water, as appropriate. If there arises a condition in contravention of this requirement, and if Borrower has not cured such condition within thirty (30) days after receiving a Agency notice of such a condition, then in addition to any other rights available to the Agency, the Agency shall have the right to perform all acts necessary to cure such condition, and to establish or enforce a lien or other encumbrance against the Property. Any sum expended by the Agency pursuant to this Section that is not paid within thirty (30) calendar days after written demand for payment from the Agency, shall accrue interest at the rate of ten percent (10 %) per annum, until paid. (b) Subject to the requirements of senior lenders, and if economically feasible in the Agency's reasonable judgment, 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 Agency with such changes as have been approved by the Agency. Such work or repair shall be commenced no later than the later of one hundred twenty (120) days after the damage or loss occurs or thirty (30) days following receipt of the insurance proceeds, and shall be complete within one (1) year thereafter (or such longer period for the commencement and completion as may be extended by the Agency in its reasonable discretion). Any insurance proceeds collected for such damage or destruction shall be applied to the cost of such repairs or restoration and, if such insurance proceeds shall be insufficient for such purpose, then Borrower shall make up the deficiency. (c) Borrower hereby grants to the Agency a security interest in the Property with the power to establish and enforce a lien or other encumbrance against the Property, in the manner provided under Civil Code Sections 2924, 2924b and 2924c, to secure the obligations of Borrower and it successors under Section 3.4(c) Section 3.4(b) or Section 3.4(c), including the reasonable attorneys' fees and costs of the Agency associated with the abatement of a Arcadia Commons ORANGE \SKLEINBERG \68259.5 29 maintenance default, including the removal of graffiti. The Notice of Agreement shall provide record notice of such security interest in favor of the Agency. (d) The provisions of this Section shall be a covenant running with the land of the Property and binding successive owners of the Property until the expiration of the effectiveness of the Redevelopment Plan and shall be enforceable by the Agency unless earlier terminated. Nothing in the foregoing provisions of this Section shall be deemed to preclude Borrower from making any alteration, addition, or other change to any improvement or landscaping on the Property that complies with applicable zoning and building regulations of the City. Section 4.8 Fees and Taxes. Borrower shall be solely responsible for payment of all fees, assessments, taxes, charges, and levies imposed by any Government, public authority or utility company with respect to the Property or the Development to the extent owned by Borrower, and shall pay such charges prior to delinquency. However, Borrower shall not be required to pay and discharge any such charge so long as (a) the legality thereof is being contested diligently and in good faith and by appropriate proceedings, and (b) if requested by the Agency, Borrower deposits with the Agency any funds or other forms of assurance that the Agency in good faith from time to time determines appropriate to protect the Agency from the consequences of the contest being unsuccessful. Section 4.9 Notice of Litigation. Borrower shall promptly notify the Agency in writing of any litigation materially affecting Borrower or the Property and of any claims or disputes that involve a material risk of such litigation. Section 4.10 Operation of Development as Affordable Housing. Upon the execution of this Agreement or the recordation of the Regulatory Agreement, whichever is later, the Borrower shall continuously operate and maintain the Development as senior housing rented to occupants and at rent levels in conformity with the Regulatory Agreement for a period of fifty -five (55) years. Section 4.11 Covenant to Pay Taxes a. Payment of Taxes. To the extent applicable, during the Term, the Borrower, for itself and its successors and assigns, covenants and agrees to pay all property tax bills with respect to the Property and all improvements on or to the Property on or before the last day for the timely payment of each property tax installment on each December 10 and April 10 during such time period and to timely pay all supplemental tax bills regarding the Property issued by the County. The Borrower further covenants and agrees to provide to the Agency, upon the Agency's written request, (i) a true and correct copy of all property tax assessment notices, property tax bills and property tax assessment correspondence by and between the Borrower and the County regarding the Property and all improvements on or to the Property, with respect to the preceding fiscal year of the County and (ii) cancelled checks issued by the Borrower in payment of all property tax payments made to the County regarding the Property and all improvements on or to the Property, with respect to the preceding fiscal year of the County. Arcadia Commons ORANGE \S KLE INBERG \68259.5 30 c. Covenant Running with the Land. The covenants of this Section shall run with the land of the Property and bind successive owners of the Property during the Term. Section 4.12 Nondiscrimination. The Borrower covenants by and for itself and its successors and assigns that there shall be no discrimination against or segregation of a person or of a group of persons on account of race, color, religion, creed, 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 shall the Borrower or any person claiming under or through the Borrower establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the Property. The foregoing covenant shall run with the land. Section 4.13 Mandatory Language in all Subsequent Deeds, Leases and Contracts. All deeds, leases, or contracts entered into by the Borrower as to any portion of the Property shall contain the following language: (a) In Deeds: "Grantee herein covenants by and for itself, its successors and assigns that there shall be no discrimination against or segregation of a person or of a group of - persons on account of race, color, religion, creed, disability, sex, sexual orientation, marital status, ancestry or national origin in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property herein conveyed nor shall the grantee or any person claiming under or through the grantee 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 herein conveyed. The foregoing covenant shall run with the land." (b) In Leases: "The lessee herein covenants by and for the lessee and lessee's heirs, personal representatives and assigns and all persons claiming under the lessee or through the lessee that his lease is made subject to the condition that there shall be no discrimination against or segregation of any person or of a group of persons on account of race, color, religion, creed, disability, sex, sexual orientation, marital status, ancestry or national origin in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the land herein leased nor shall the lessee or any person claiming under or through the lessee establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, sublessees, subtenants, or vendees in the land herein leased." Arcadia Commons ORANGE \SKLEINBERG \68259.5 (c) In Contracts: "There shall be no discrimination against or segregation of any person or group of persons on account of race, color, religion, creed, disability, sex, sexual 31 orientation, marital status, ancestry or national origin in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property nor shall the transferee or any person claiming under or through the transferee establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the land." Section 4.14 Survival and Enforcement of Special Redevelopment Covenants. a. Covenants Running with the Land. Each of the special redevelopment covenants set forth in this Section 4.11, 4.12, 4.13 and 4.14 touch and concern the Property and constitute covenants running with the Property and binding upon successive owners of the Property for the time period set forth in each specific covenant. b. Survival. Each such special redevelopment covenant shall survive the issuance and recordation of each and every Certificate of Completion, Certificate of Occupancy and any other document related to conveyance of the Property or construction or installation of the Project, for the time period specifically set forth in each such special redevelopment covenant. c. Enforcement. These special development covenants may be enforced by the Agency or the Agency (as an express intended third party beneficiary), regardless of whether the Agency or the Agency currently or continue to own an interest in any property within the Project Area or benefited by any such covenants. The Borrower irrevocably stipulates and agrees that breach of any of the special redevelopment covenants identified in subsection (a) above will result in great and irreparable damage to the Agency and the Agency, will violate the public policy and the purposes of the California Community Redevelopment Law (Health and Safety Code Sections 33000, et seq.), and will result in damages to the Agency and the Agency, that are either impracticable or extremely difficult to quantify. Accordingly, upon the breach of any special redevelopment covenant set forth in subsection (a) above, the Agency or the Agency, may institute an action for injunctive relief and /or for damages regarding such breach Section 4.15 Insurance Requirements. The Borrower shall maintain the following insurance coverage throughout the Term of the Loan: (a) Worker's Compensation insurance to the extent required by law, including Employer's Liability coverage, with limits not less than One Million Dollars ($1,000,000) each accident. (b) Comprehensive General Liability insurance with limits not less than Two Million Dollars ($2,000,000) each occurrence combined single limit for Bodily Injury and Property Damage, including coverages for Contractual Liability, Personal Injury, Broadform Property Damage, Products and Completed Operations. (c) Comprehensive Automobile Liability insurance with limits not less than One Million Dollars ($1,000,000) each occurrence combined single limit for Bodily Injury and Property Damage, including coverages for owned, non -owned and hired vehicles, as applicable; provided, however, that if the Borrower does not own or lease vehicles for purposes of this Agreement, then no automobile insurance shall be required. Arcadia Commons ORANGE \S K LE IN B E RG \6825 9.5 32 (d) 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 Agency, naming the Agency as a Loss Payee, as its interests may appear. If the Property is in a flood zone, Borrower shall also obtain flood insurance. (e) Blanket Fidelity Bond covering all officers and employees, for loss of Loan proceeds caused by dishonesty, in an amount not less than Three Hundred Thousand Dollars ($300,000) naming the Agency as a Loss Payee, as its interests may appear. The Borrower shall cause any general contractor or agent working on the Development under direct contract with the Borrower to maintain insurance of the types and in at'least the minimum amounts described in subsections (a), (b), and (c) above, and shall require that such insurance shall meet all of the general requirements of subsections (f), (g), and (h) below, including, without limitation, the requirement of subsection (g). Subcontractors working on the Development under indirect contract with the Borrower shall be required to maintain the insurance described in subsections (a), (b), and (c) above. Liability and Comprehensive Automobile Liability insurance to be maintained by such contractors and agents pursuant to this subsection shall name as additional insureds the Agency, its officers, agents, employees and members of the Agency Board. (f) The required insurance shall be provided under an occurrence form, and Borrower shall maintain such coverage continuously so long as the Note is outstanding, except the blanket fidelity bond need not be maintained following issuance of the certificate of occupancy for the Development. 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 shall be three times the occurrence limits specified above. (g) Comprehensive General Liability, Comprehensive Automobile Liability and Property insurance policies shall be endorsed to name as an additional insured the Agency, and its officers, agents, employees and members of the Agency Board. (h) All policies and bonds shall be endorsed to provide thirty (30) days prior written notice of cancellation, reduction in coverage, or intent not to renew to the address established for notices to the Agency. ARTICLE 5 ASSIGNMENT AND TRANSFERS Section 5.1 Definitions. As used in this Agreement, the term "Transfer" means: (a) Any total or partial sale, lease, assignment, or other conveyance, or any trust or power, or any transfer in any other mode or form, of or with respect to this Agreement or of any part of or interest in the Development, or any agreement to do any of the foregoing; or Arcadia Commons ORANGE \S K L E IN B ERG \b 8259.5 33 (b) Any total or partial sale, assignment, or other conveyance, or any trust or power, or any transfer in any other mode or form, of, or with respect to, more than 49% interest of any of the general partners of the Borrower, or any agreement to do any of the foregoing. Section 5.2 Purpose of Restrictions on Transfer. This Agreement is entered into solely for the purpose of the Borrower's construction and operation of the Development in accordance with the terms of this Agreement and the Regulatory Agreement. The qualifications and identity of the Borrower are of particular concern to the Agency, in view of: (a) The importance of the development of the Property to the general welfare of the community; (b) The public aids that have been made available by law and by the government for the purpose of making such development possible; (c) The reliance by the Agency upon the unique qualifications and ability of the Borrower to serve as the catalyst for development of the Property and upon the continuing interest which the Borrower will have in the Property to assure the quality of the use, operation, and maintenance deemed critical by the Agency in the development of the Property; (d) The fact that a change in ownership or control of the owner of the Property, or of a substantial part thereof, or any other act or transaction involving or resulting in a significant change in ownership or with respect to the identity of the parties in control of the Borrower or the degree thereof, is for practical purposes a transfer or disposition of the Property; and (e) The importance to the Agency of the standards of use, operation, and maintenance of the Property. Section 5.3 It is because of the qualifications and identity of the Borrower that the Agency is entering into this Agreement and that Transfers are permitted only as provided in this Agreement. Section 5.4 Prohibited Transfers. The limitations on Transfers set forth in this Article Five shall apply throughout the Term. Except as expressly permitted in this Agreement, the Borrower represents that it has not made or created, and agrees that it will not make or create or suffer to be made or created, any Transfer, either voluntarily or by operation of law, without the prior written approval of the Agency. Any Transfer made in contravention of this Section 5.3 shall at the Agency's discretion be void and shall be deemed to be a default under this Agreement, whether or not the Borrower knew of or participated in such Transfer. Section 5.5 Permitted Transfers Without Prior Agency Approval. The only Transfer permitted at any time without the prior approval of the Agency is the rental of a Unit by the Borrower in the ordinary course of business and in compliance with the Regulatory Agreement. Section 5.6 Permitted Transfers With Prior Approval. Arcadia Commons ORANGE \S KLE INB ERG \68259.5 34 (a) The Borrower may transfer the general partnership interest to an affiliate of Arcadia Campus Commons Associates, LLC, which affiliate shall be approved in advance by the Agency (and such approval shall not be unreasonably withheld), in the event the general partner is removed by the limited partner of Borrower for cause following default under the Borrower's Partnership Agreement. (b) Except as permitted under Section 5.4 and 5.5(a), any Transfer shall be permitted only after (a) the Agency, in its sole discretion, has delivered to Borrower its prior written approval of such Transfer, and (b) the transferee has assumed the Borrower's obligations under this Agreement by signing this Agreement of such other reasonable documentation as the Agency may require. Section 5.7 Release of Borrower. Upon all of the terms of this Article Five being satisfied for a permitted Transfer to be effective, the Borrower or the successor transferor party, as applicable, shall be released from all liability under this Agreement so transferred arising subsequent to the effectiveness of such Transfer. ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BORROWER Section 6.1 Representations and Warranties. Borrower hereby represents and warrants to the Agency as follows: (a) Organization. Borrower is duly organized, validly existing California limited partnership and is in good standing under the laws of the State of California and has the power and authority to own its property and carry on its business as now being conducted. (b) Authority of Borrower. Borrower has full power and authority to execute and deliver this Agreement and to make and accept the borrowings contemplated hereunder, to execute and deliver the Loan Documents and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement, and to perform and observe the terms and provisions of all of the above. (c) Authority of Persons Executing Documents. This Agreement and the Loan Documents and all other documents or instruments executed and delivered, or to be executed and delivered by the Borrower, pursuant to this Agreement have been executed and delivered by persons who are duly authorized to execute and deliver the same for and on behalf of Borrower, and all actions required under Borrower's organizational documents and applicable governing law for the authorization, execution, delivery and performance of this Agreement and the Loan Documents and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement, have been duly taken (to the extent such actions are required as of the date of execution and delivery of the above -named documents). The managing general partner of the Borrower is Community Revitalization and Development Corporation, a California nonprofit corporation. Arcadia Commons, LLC, a California limited liability company is the other general partner of the Borrower. Arcadia Commons ORANGE \S KLE IN B ERG \68259.5 35 (d) Valid Binding Agreements. This Agreement and the Loan Documents and all other documents or instruments which have been executed and delivered by the Borrower 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 by and against it in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting the rights of creditors generally and general principles of equity. (e) No Breach of Law or Agreement. Neither the execution nor delivery of this Agreement and the Loan Documents by the Borrower or of any other documents or instruments executed and delivered, or to be executed or delivered by the Borrower, pursuant to this Agreement, nor the performance by the Borrower 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. (f) Compliance With Laws; Consents and Approvals. The construction of the Development will comply with all applicable laws, ordinances, rules and regulations of federal, state and local governments and agencies and with all applicable directions, rules and regulations of the fire marshal, health officer, building inspector and other officers of any such government or agency. (g) Pending Proceedings. Borrower is not in default under any law or regulation or under any order of any court, board, commission or agency whatsoever, and there are no claims, actions, suits or proceedings pending or, to the knowledge of Borrower, threatened against or affecting Borrower, Borrower's general partners, 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 and adversely affect Borrower's ability to repay the Loan or impair the security to be given to the Agency pursuant hereto. (h) Title to Land. At the time of recordation of the Deed of Trust, Borrower will have good and marketable fee title to the Development and there will exist thereon or with respect thereto no mortgage, lien, pledge or other encumbrance of any character whatsoever other than those liens expressly approved by the Agency as set forth herein, liens for current real property taxes and assessments not yet due and payable, and liens in favor of the Agency or approved in writing by the Agency. (i) Financial Statements. The financial statements of Borrower and other financial data and information furnished by Borrower to the Agency fairly present the information contained therein. As of the date of this Agreement, there has not been any adverse, material change in the financial condition of Borrower from that shown by such financial statements and other data and information. (j) Sufficient Funds. Borrower holds sufficient funds and /or binding commitments for sufficient funds to complete the acquisition of the Development and the Arcadia Commons ORANGE \SKLEINBERG \68259.5 36 construction of Development in accordance with the plans and specifications approved by the Agency. ARTICLE 7 DEFAULT AND REMEDIES Section 7.1 Events of Default. Each of the following shall constitute a "Default" by Borrower under this Agreement: (a) Failure to Construct. Failure of Borrower to commence and complete construction of the Development within the tunes set forth in Article 3 above and in accordance with the terms set forth above; (b) Failure to Make Payment. Failure to repay the principal and any interest on the Loan that is due and payable to the Agency pursuant to the Loan Documents or failure to comply with any provision set forth in 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, and such failure having continued uncured for thirty (30) days after receipt of written notice thereof from the City to the Borrower and to any limited partner of Borrower who has requested written notice from the City of such failure ( "Permitted Limited Partner ") or, if the breach cannot be cured within thirty (30) days, the Borrower shall not be in breach so long as Borrower is diligently undertaking to cure such breach and such breach is cured within ninety (90) days; provided, however, that if a different period or notice requirement is specified under any other section of this Article 4, the specific provisions shall control. The Permitted Limited Partner shall have thirty (30) additional days to cure a breach beyond the cure periods for the Borrower described in this subsection. If a Permitted Limited Partner cannot cure a Default because Borrower's general partner is in bankruptcy and /or because the cure requires removal of a general partner of the Borrower and the Permitted Limited Partner is proceeding diligently to remove such general partner of the Borrower in order to effect a cure of the Default, the cure period shall be extended for such reasonable time as is necessary for the Permitted Limited Partner to effect a cure of the Default, but in no event longer than one hundred eighty (180) days after the date of receipt by the Permitted Limited Partner of written notice of Default. (d) Default Under Other Loans. Failure to make any payment or perform any of Borrower's covenants, agreements, or obligations under the documents evidencing and securing the Approved Financing following expiration of all applicable notice and cure periods. (e) Insolvency. A court having jurisdiction shall have made or entered any decree or order (i) adjudging Borrower or Borrower's general partner to be bankrupt or insolvent, (ii) approving as properly filed a petition seeking reorganization of Borrower or Borrower's general partner or seeking any arrangement for Borrower or Borrower's general partner 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 or Borrower's general partner in bankruptcy or insolvency or for any of their properties, or (iv) directing the winding up or liquidation of Borrower or Borrower's Arcadia Commons ORANGE \S KLE INB ERG \68259.5 37 general partner, if any such decree or order described in clauses (i) to (iv), inclusive, shall have continued unstayed or undischarged for a period of ninety (90) days; or Borrower or Borrower's general partner shall have admitted in writing its inability to pay its debts as they fall due or shall 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 shall act to accelerate automatically, without the need for any action by the Agency, the indebtedness evidenced by the Note. (f) Assignment; Attachment. Borrower or Borrower's general partner shall have assigned its assets for the benefit of its creditors or suffered a sequestration or attachment of or execution on any substantial part of its property, unless the property so assigned, sequestered, attached or executed upon shall have been returned or released within ninety (90) 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 Agency, the indebtedness evidenced by the Note. (g) Suspension; Termination. Borrower or Borrower's general partner shall have voluntarily suspended its business or, Borrower or Borrower's general partner has dissolved or terminated. (h) Liens on Property and the Project. There shall be filed any claim of lien (other than liens approved in writing by the Agency) 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 Agency. (i) Condemnation. The condemnation, seizure, or appropriation of all or the substantial part of the Property and the Development, except that condemnation by the City or Agency shall cause the Loan to accelerate but shall not be a Default. (j) Unauthorized Transfer. Any Transfer other than as permitted by Section 4.13; provided, however, that a Permitted Limited Partner shall have the right to cure an unauthorized Transfer of the general partnership interest in Borrower by removing the unauthorized general partner and replacing it with a general partner approved by the City which approval shall not be withheld unreasonably. (k) Insurance. If the Borrower fails to obtain, maintain or replace any insurance coverage required under this Agreement within seven (7) days' after notice of such Default to the Borrower. (1) Material Deviation in Project. Any material deviation in the work of construction or installation of the Project from the approved Scope of Work, without the prior written approval of the Agency that is not corrected within fifteen (15) days' following written Notice of such Default. Section 7.2 Representation or Warranty Incorrect. Any Borrower representation or warranty contained in this Agreement, or in any application, financial statement, certificate, or Arcadia Commons ORANGE \S KLEINBERG \68259.5 38 report submitted to the Agency in connection with any of the Loan Documents, proving to have been incorrect in any material and adverse respect when made. Section 7.3 Remedies. The occurrence of any Default hereunder following the expiration of all applicable notice and cure periods will, either at the option of the Agency or automatically where so specified, relieve the Agency of any obligation to make or continue the Loan and shall give the Agency 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 Agency shall have the right to cause all indebtedness of the Borrower to the Agency under this Agreement and the Note, together with any accrued interest thereon, to become immediately due and payable. The Borrower waives all right to presentment, demand, protest or notice of protest or dishonor. The Agency may proceed to enforce payment of the indebtedness and to exercise any or all rights afforded to the Agency as a creditor and secured party under the law including the Uniform Commercial Code, including foreclosure under the Deed of Trust. The Borrower shall be liable to pay the Agency on demand all reasonable expenses, costs and fees (including, without limitation, reasonable attorney's fees and expenses) paid or incurred by the Agency in connection with the collection of the Loan and the preservation, maintenance, protection, sale, or other disposition of the security given for the Loan. (b) Specific Performance. The Agency shall have 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 Agreement, including the Loan Documents or to enjoin acts on things which may be unlawful or in violation of the provisions of the Agreement, including the Loan Documents. (c) Right to Cure at Borrower's Expense. The Agency shall have the right (but not the obligation) to cure any monetary default by Borrower under a loan other than the Loan. The Borrower agrees to reimburse the Agency for any funds advanced by the Agency to cure a monetary default by Borrower upon demand therefor, together with interest thereon at the lesser of the maximum rate permitted by law or ten percent (10 %) per annum from the date of expenditure until the date of reimbursement. Section 7.4 Right of Contest. Borrower shall have the right to contest in good faith any claim, demand, levy, or assessment the assertion of which would constitute a Default hereunder. Any such contest shall be prosecuted diligently and in a manner unprejudicial to the Agency or the rights of the Agency hereunder. Section 7.5 Remedies Cumulative. Subject to the non - recourse provisions contained in this Agreement, including the Note, no right, power, or remedy given to the Agency by the terms of this Agreement is intended to be exclusive of any other right, power, or remedy; and each and every such right, power, or remedy shall be cumulative and in addition to every other right, power, or remedy given to the Agency by the terms of any such instrument, or by any statute or otherwise against Borrower and any other person. Neither the failure nor any delay on the part of the Agency to exercise any such rights and remedies shall operate as a waiver thereof, nor shall any single or partial exercise by the Agency of any such right or remedy preclude any other or further exercise of such right or remedy, or any other right or remedy. Arcadia Commons ORANGE \S KLEINB ERG \68259.5 39 ARTICLE 8 GENERAL PROVISIONS Section 8.1 Relationship of Parties. Nothing contained in this Agreement shall 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 Agency and Borrower or its agents, employees or contractors, and Borrower shall at all times be deemed an independent contractor and shall 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 purchase of the Property, construction of the Improvements, and operation of the Development, Borrower shall be 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 shall include requirements in each contract that contractors shall be solely responsible for similar matters relating to their employees. Borrower shall be solely responsible for its own acts and those of its agents and employees. Section 8.2 No Claims. Nothing contained in this Agreement shall create or justify any claim against the Agency 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 of the Improvements, or the operation of the Development, and Borrower shall include similar requirements in any contracts entered into for the purchase of the Property, the construction of the Improvements, or the operation of the Development. Section 8.3 Amendments. No alteration or variation of the terms of this Agreement shall be valid unless made in writing by the Parties. Section 8.4 Indemnification. The Borrower shall indemnify, defend and hold the Agency, its boardmembers, officers, employees, agents, successors and assigns harmless against all claims made against it and expenses (including reasonable attorneys' fees) which arise out of or in connection with this Agreement, the purchase of the Property, or the development, construction, marketing and operation of the Development, except to the extent such claim arises from the grossly negligent or willful misconduct of the Agency. The provisions of this Section 8.4 shall survive the repayment of the Loan, the expiration of the Term and the Agreement Term, and the reconveyance of the Deed of Trust. Section 8.5 Non - Liability of Agency Officials, Employees and Agents. No member, official, employee or agent of the Agency shall be personally liable to Borrower in the event of any default or breach by the Agency or for any amount which may become due to Borrower or its successor or on any obligation under the terms of this Agreement. Arcadia Commons ORANGE \S KL E INB ERG \682 59.5 40 Section 8.6 No Third Party Beneficiaries. There shall be no third party beneficiaries to this Agreement, except that the investor limited partner of the Borrower shall be a third party beneficiary with respect to notice and cure rights granted the limited partner in this Agreement. Section 8.7 Discretion Retained By City. The Agency's execution of this Agreement in no way limits the discretion of the City in the permit and approval process in connection with development of the Development. Section 8.8 Notices, Demands and Communications. Formal notices, demands, and communications between the Parties shall be sufficiently given if and shall not be deemed given unless dispatched 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: Agency: Borrower: With a Copy to: 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 prgvided in this Section. Receipt shall 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). Copies of notice, sent to Borrower shall also be sent to any limited partner of Borrower who requests such notice in writing and provides its address. Section 8.9 Applicable Law; Venue. This Agreement shall be governed by California law. Venue shall be in Los Angeles County. Section 8.10 Parties Bound. Except as otherwise limited herein, the provisions of this Agreement shall be binding upon and inure 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 shall bind Borrower and its successors and assigns in the Property and the Development for the entire Term, and the benefit hereof shall inure to the benefit of the Agency and its successors and assigns. Arcadia Commons ORANGE \SKLEINBERG \68259.5 Arcadia Redevelopment Agency 240 West Huntington Drive or P.O. Box 60021 Arcadia, CA 91066 Attention: Arcadia Campus Commons Associates, a California Limited Partnership 5755 E. Kings Canyon Road, Suite 110 Fresno, CA 93727 Law Offices of Patrick R. Sabelhaus 1006 Fourth Street, Sixth Floor Sacramento, CA 95814 41 Section 8.11 Attorneys' Fees. If any lawsuit is commenced to enforce any of the terms of this Agreement, the prevailing Party will have the right to recover its reasonable attorneys' fees and costs of suit from the other Party. Section 8.12 Conflict of Interest. No member, official or employee of the City, Agency, or Authority having any conflict or interest, direct or indirect, related to this Agreement, the Property or the development or operation of the Development shall participate in any decision relating to this Agreement. The Parties represent and warrant that they do not have knowledge of any such conflict of interest. Section 8.13 Warranty Against Payment of Consideration for Agreement. Borrower warrants that it has not paid or given, and will not pay or give, any third party any money or other consideration for obtaining this Agreement. Third parties, for the purposes of this Section, shall not include persons to whom fees are paid for professional services if rendered by attorneys, financial consultants, accountants, engineers, architects and the like when such fees are considered necessary by Borrower. Section 8.14 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 shall 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 8.15 Force Majeure. In addition to specific provisions of this Agreement, performance by either Party shall 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; or any other similar causes (other than lack of funds of Borrower or Borrower's inability to finance the construction of the Development) beyond the control or without the fault of the Party claiming an extension of time to perform. 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 shall the Agency be required to agree to cumulative delays in excess of one hundred eighty (180) days. Section 8.16 ASSUMPTION OF ECONOMIC RISKS. EACH PARTY EXPRESSLY AGREES THAT ADVERSE CHANGES IN ECONOMIC CONDITIONS, OF EITHER PARTY SPECIFICALLY OR THE ECONOMY GENERALLY, OR CHANGES IN MARKET CONDITIONS OR DEMAND OR CHANGES IN THE ECONOMIC ASSUMPTIONS OF EITHER PARTY THAT MAY HAVE PROVIDED A BASIS FOR ENTERING INTO THIS AGREEMENT SHALL NOT OPERATE TO EXCUSE OR DELAY THE PERFORMANCE OF EACH AND EVERY ONE OF EACH PARTY'S OBLIGATIONS AND COVENANTS ARISING UNDER THIS AGREEMENT. ANYTHING IN THIS AGREEMENT TO THE CONTRARY NOTWITHSTANDING, THE PARTIES EXPRESSLY ASSUME THE RISK OF UNFORESEEABLE CHANGES IN ECONOMIC CIRCUMSTANCES AND /OR MARKET DEMAND /CONDITIONS AND WAIVE, TO THE GREATEST LEGAL EXTENT, ANY DEFENSE, CLAIM, OR CAUSE OF ACTION BASED IN WHOLE OR IN PART ON ECONOMIC NECESSITY, IMPRACTICABILITY, CHANGED ECONOMIC CIRCUMSTANCES, FRUSTRATION OF PURPOSE, OR SIMILAR THEORIES. THE Arcadia Commons ORANGE \S KLEINB ERG \68259.5 42 PARTIES AGREE THAT ADVERSE CHANGES IN ECONOMIC CONDITIONS, EITHER OF THE PARTY SPECIFICALLY OR THE ECONOMY GENERALLY, OR CHANGES IN MARKET CONDITIONS OR DEMANDS, SHALL NOT OPERATE TO EXCUSE OR DELAY THE STRICT OBSERVANCE OF EACH AND EVERY ONE OF THE OBLIGATIONS, COVENANTS, CONDITIONS AND REQUIREMENTS OF THIS AGREEMENT. THE PARTIES EXPRESSLY ASSUME THE RISK OF SUCH ADVERSE ECONOMIC OR MARKET CHANGES, WHETHER OR NOT FORESEEABLE AS OF THE EFFECTIVE DATE. Initials of Authorized Initials of Authorized Representative(s) of Agency Representative(s) of Borrower Section 8.17 Agency Approval. The Executive Director is authorized to sign on his or her own authority amendments to this Agreement which are of routine or technical nature, including minor adjustments not exceeding in the aggregate sixty (60) calendar days to the Schedule of Performance. The Executive Director is hereby authorized to act on behalf of Agency to approve any revisions to the financing and /or Improvement plans for the Project which do not materially increase the Agency's financial obligations or Agency's financial risk hereunder. Any consents or approvals required under this Agreement shall not be unreasonably withheld or made, except where it is specifically provided that a sole discretion standard applies. The Agency shall not unreasonably delay in reviewing and approving or disapproving any proposal by Borrower made in connection with this Agreement. Section 8.18 Waivers. Any waiver by the Agency of any obligation or condition in this Agreement must be in writing. No waiver will be implied from any delay or failure by the Agency 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 shall not operate as a waiver or release from any of its obligations under this Agreement. Consent by the Agency to any act or omission by Borrower shall not be construed to be a consent to any other or subsequent act or omission or to waive the requirement for the Agency's written consent to future waivers. Section 8.19 Effect. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective heirs, executors, administrators, legal representatives, successors and assigns. Section 8.20 Title of Parts and Sections. Any titles of the sections or subsections of this Agreement are inserted for convenience of reference only and shall be disregarded in interpreting any part of the Agreement's provisions. Section 8.21 Entire Understanding of the Parties. This Agreement constitutes the entire understanding and agreement of the Parties with respect to the Loan. Arcadia Commons ORANGE \S KLEIN B ERG \68259.5 43 Section 8.22 Multiple Originals; Counterpart. This Agreement may be executed in multiple original counterparts, each of which is deemed to be an original, and all such counterparts shall constitute one and the same instrument. Arcadia Commons ORANGE \SKLEINBERG \68259.5 44 WHEREAS, this Agreement has been entered into by the undersigned as of the date first above written. Arcadia Commons ORANGE \SKLEINBERG \68259.5 45 Arcadia Campus Commons Associates, a California Limited Partnership By: Arcadia Campus Commons Associates, LLC, General Partner By: Michael J. Conway, Jr. Managing Member Arcadia Campus Commons Associates, a California Limited Partnership By: Community Revitalization and Development Corporation, a California nonprofit public benefit corporation, Managing General Partner By: David Rutledge Secretary /Chief Financial Officer ATTEST By: Agency Secretary APPROVED AS TO FORM By: Agency Counsel Arcadia Commons ORANGE \S KLE IN BERG \68259.5 AGENCY: ARCADIA RDEVELOPMENT AGENCY, a public body corporate and politic By: Name: Title: 46 Parcel 1: Parcel 2: Except Therefrom the Northerly 15 feet. ORANGE \SKLEINBERG \68259.5 EXHIBIT A Legal Description of the Property The land referred to is situated in the County of Los Angeles, City of Arcadia, State of California, and is described as follows: That portion of Lot 3 of Tract No. 950, in the City of Arcadia, County of Los Angeles, State of California, as per map recorded in Book 17 Page 25 of Maps, in the Office of the County Recorder of said County, described as follows: Beginning at a point in the North line of said Lot 3, distant West thereon 160 feet from the Northeast corner of said Lot 3; thence West along said North line 100 feet; thence South along a line which is parallel to the East line of said Lot 3, a distance of 225 feet; thence East along a line which is parallel to said North line 100 feet to a line which is parallel to said East line and which passes through the point of beginning; thence North along said last mentioned parallel line 225 feet to the point of beginning. Excepting Therefrom the Northerly 15 feet which have been Deeded to the City of Arcadia, for road purposes by Deed recorded in Book 21422 Page 318, Official Records. That portion of Lot 3 of Tract 950, in the City of Arcadia, County of Los Angeles, State of California, as per map recorded in Book 17 Page 25 of Maps, in the Office of the County Recorder of said County, described as follows: Beginning at a point in the Northerly line of said Lot 3, distant Westerly thereon, 160.00 feet from the Northeast corner of said lot; thence Southerly parallel with the Easterly line of said lot a distance of 225.00 feet; thence Easterly at right angles to said parallel line 10.00 feet to the Westerly line of the Easterly 150.00 feet of said Lot 3; thence Northerly parallel with said Easterly line 225.00 feet to the Northerly line of said Lot 3; thence Westerly along said Northerly line 10.00 feet to the point of beginning. A -1 ORDER NO. : 2476006809 -33 ORANGE \SKLEINBERG \68259,5 EXHIBIT B Approved Development Budget B -1 Name of Lender /Source Terms in Months Interest Rate Amount of Funds Construction Bond 24 5.000% 6,229,927 City Loan, 55 yrs., Residual 24 1.00% 3,540,000 Deferred Developer Fee 1,265,880 Investor's Equity 926,564 Total Funds for Construction 11,962,371 PART VII. PROJECT FINANCING (Sources of Funds) A. Construction Financing List Below All Projected Sources Required to Complete Construction. 1. Name of Lender /Source Street Address City Type of Financing Commited 2. Name of Lender /Source Arcadia RDA Street Address 240 W. Huntington Dr. Contact Name Jerry Schwartz City Arcadia State CA Phone Number (626) 574 -5409 Type of Financing City Loan X 3. Name of Lender /Source Street Address City Type of Financing 4, Name of Lender /Source Street Address City Type of Financing Commited Commited 1 INot Committed Commited State State CA State CA C Contact Name Phone Number Not Committed [Not Committed Contact Name Phone Number Contact Name Phone Number [Not Committed Arcadia Seniors California Tax Credit Allocation Committee Low - Income Housing Tax Credit Application Rev. February 1, 2006 28 Name of Lender /Source Tenn in Months Interest Rate Amount of Funds Annual Debt Service Residual Receipts/ Deferred Pymt. Perm. Loan 360 5.750% $ 2,212,550 154,945 City Loan, 55 yrs., Residual 660 1.00% $ 6,400,000 Deferred Deferred Dev. Fee /AFR $ 261,273 12,500 $ $ 0 Total Permanent Financing $ 8,873,823 Total Tax Credit Equity $ 3,088,548 Total Sources of Project Funds $ 11,962,371 B. Permanent Financing 1. Name of Lender /Source Street Address City Type of Financing 2. Name of Lender /Source Arcadia RDA Street Address 240 W. Huntington Dr. Contact Name Jerry Schwartz City Arcadia State CA Phone Number (626) 574 -5409 Type of Financing City Loan 3. Name of Lender /Source Street Address City Type of Financing List Below All Projected Sources Of Funds, Including Grants, Land donations, deferred fees, owner equity, etc. Commited Name of Lender /Source Street Address City Type of Financing Commited State Commited © Not Committed Fresno RDA State CA State CA C Contact Name Phone Number Not Committed Contact Name Phone Number Commited Not Committed Contact Name Phone Number Not Committed California Tax Credit Allocation Committee Low - Income Housing Tax Credit Application Rev. Februmy 1, 2006 29 E 6. 0)) z x 0 0 0 a 0 0 0 00 .b L U 0 O o o 0 U 0 0 0 0 0 0 0 0 0 0 00 0 h 0 d• 0 0 1 0 0 O 65 0 O 0 0 0 00 -4 69 O b O er 6, O 69 O 69 O VD VD O 00 00 6, 69 0 00 00 6, O 6. 0 1 o O 69 O 63 O O 69 O 69 0 64 O 69 O 6, 0 0 69 O 69 0 O 0 O O O O O O 0 O 0 0 O O 69 O 69 O 69 O 69 66, O 6R O 69 O 6R O 69 O O O V) 69 0 0 O o 00 O 69 O 69 0 0 0 0 O CO 0 0 O tn 69 O 63 O 0 O V) 69 O 0 0 0 O 00 O O 0 69 O 0 00 fH O 0 trl c■ N O N 0- In 0 N h 0 0 0 V1 v) O O 0 O O O O 0 0 0 M O 0 O h O O O h O O O h 0 0 O 0 O O 0 0 0 o ire O 0 O V1 0 M O O O 0 0 O 0 0 O 0 O O O 0 O 69 O O O O\ N 69 O 69 O 0 0 69 O N r 8, O 69 69 O 63 O 0 0 h 63 O O 0 0) eist 69 0) p 7s. a) a) 0 h - 03 +0 b • v a) v 03 4 b * L' N 0 0q ,.. r G O O t ac°i 4 b0 U ti y o l.. .) Jr P O o 0 a ❑ 0 0 3 0 >; 1 , g g 0 4 23 4 0 as 0 o �+ + `3 > O � > H O N O H h b O G O a� y > bA 0 0 U Q c v) r a o o ° "' U b o o$ u U }" 0 cq u 'P ti cd ' 4 oW �U '8 153 �U �U 0 0 p F 0 .o � z q H x v) o a .a o o i .g U o H � W ;- @® o a e< a) u / • e % ` w [ / / 4 ;.e § / 15 2 $ �� \ \�� ƒ� \ \ \\ § \ \ \/% &�& `@ tic Q —@® . m) \ j ® \ ( 7 . 4 § / § \ k # \ k 7 a o ) * J 0 7 ` ®® b $ et ® 0 - ' ® G / \\ 2 5. \ \ �6, n / \ �7� 0 Iii w2\ 6 0 2 , / /> / / 0 N 0 O LCD N- r b4 so 64)- 0 N ro r • N N c CO co x! O C7 2 A N p b W N _ r-. N U u . l.... H N o O U J 0 d O F L G 0 W 0 2 04 •0 O b = = N U = F.' ° w '- w w o U o F. a E-1 a `a i .G ;F ' � 0 F °' `, p., › o U ¢ a� U p ,? < 0 0 q - o N ,' c q a x O aa 'o ^ro o a w b °_° W y -'R"b > E. *4 4 U o ti W o o D q p o cn U p E U ' a ii • C o U ti p 0 .O 3 z * . U 3 TOTAL PROJECT COST 1.0.000 40,650 0 $11 0 F 0 0 0 so 5 ,050 7 0010 0 351,000 11'7;000 351,000 60,000 $6,7 .000 A. Development Budget D V;LDPhNT BUDGET SPACQNSMON Land Cost or Value Demolition Legal Total Lend. Cost or Value E ristang Inapio emenis Value Off-Site Imprummerns Total Acquisi# on Cost REHABILUATION Site Work Slim-tines General Requirements Contractor Ovethead Contractor Profit Prevailing Wages General Liability Ice Total Rehab. Costs Total Relocation Expenses NEW 4r4y?'i T:s7 rr4. ION Site Work Sanctum General Regnirements Contractor Overhead Contractor Prat Ppo.raiiing Wages General Liability Insurance Total New Const>mction Costs EXHIBIT B 1 ORANGE \S KLE INBERG \68259.5 EXHIBIT C Approved Scope of Work Proprietary information / Proprietary Information / Proprietary Information Exhibit C . bard Cost Breakdown Campus Commons Arcadia Units: 43 SF: 53,347 (Inc. Common Area & Comm Bldg.) siI ng vv; I 1000 1100 1510 1524 1521 1504 1591 2014 2011 2020 2100 2110 2150 2180 2184 2200 2205 2110 22'70 2580 2660 2720 2730 2780 2000 3050 3110 321 3330 3340 4150 41551 4160 5120 $510 5520 $531 5540 6110 £1111 6112 6193 6115 6190 6200 6600 Es'riM'ATE g� EA#+Ef�A i�ECtUiiEititET�tTS 359.tTti(3 ._.._._._.. i_' ir' F E F4CE c. €t.:.LD 10FF'i( : I RENIAL.) "•A1S( i!AT2F tit SITE WUfiKl1aFtArti d SOf1,0[i0 iR,RVi Y & '� I AIK ;N('s LABOR i7F 8F R, I _ ,'3FMC) 1T'ON CLEAR A ',M) GIG `Ei E: f, €2'TF () €al ;I'T f E'� / s & '"7�yltSE [_p_ E CON1 E,%)i.. t_ NDSC:;Ais f _ 03 CONCRETE 5 644,285 C NC RE TE SLAR C,t. IRK C 1T1ER& r'w'AIK C�,YPCRETE -7-7 ii4 . fir ', 327,850 _MASCINRY MASH FN:t CE (.F -A,) 5i MASONRY SiTF PE P, 1KIE E FEhNCwE {35 M,'FALS 320,1fF STMUCRYRAL b Ti:.E. ............ firl :L. COtNY & H AND RAIL INN V,) 1 VVINE1OW r RiI "S 06 WOOD PLASTICS 1,276,055 LUMBER 3'i,r` MIE.G i 1ARDWARI M " T r'NCI PATIO DECKS FRAMING I,ABOR rzT001) RUSSF. S FIN ,i CARPE N;6,'YFiNiEI, €OR GO41NTE 01" S, i `sOL [ S €R AGE ) Proprietary Information / Proprietary Information I Proprietary Information Exhibit C - Hard Cost Breakdown Campus Commons Arcadia Units: 43 SF: 53,347 (Inc. Common Area & Comm. Bldq..) Non Pn tlrr70 W L_ 07 MOIST THERMAL 7200 INSUI,AT3ON 7300 ROOFING K,'ONC T1,77TILE R RJ,j1I.,T-tjP 7620 SHF'ET ME: TAI-&FLASF1fNG_ 7720 L 8000 DOORS, FRAMES & HAfR-DWARE 8600 WINE)OWS 8630 ROL-UP DOORS FOR fMAINTENAN-C',E F UY FINT 42 9200 . ....... ... ... 's, I I, j,." 0 9250 DRYVv*At,!, 9310 C1 SR AIM I r' Ill F, 9680 F'LOORPIG 9790 [fir CIK CTWI ING 9900 PAINJING, 9990 FINAI CLEANIN(3 .......... . .. ......... .. ............ 10 SPECIALTIES 3 1 = 3 43 10430 Sl(,,NAG�" 10522 FfRF EXTINGUISHEJ�S 10552 MAH BOXFS 10820 E 'i - - E 11025 KNOX 8OX 11452 APPIJANCES 12ft .......... T77T2 +�!2 '12300 CABVI& t, rOAK, INSF I PA TIE A-� 12510 ','IJINDOw COVERINGS - - ------ 13 SPECJAL�ZONSTRUU,ION 13100 BENCHL,S 13150 SWIMMING, PO();L 13250 EWRY MONUMI 14PO" SYSTEMS 14240 15300 € ',1A,VAr,)RS 15 MECHANICAL F RE SPRINFF�17S 709,289 15400 15500 PILL)MBINk", F i v A C 15550 T24;Hf,'1RS,'DLJC'1 TES11W."; 16000 RICAL 16100 1JGr f TiNG F IXTURF", 16520 WELIGH'HN(3/INGL Pot ES 16575 SOLAR PHOTOVOLIAIr ° SYI', rf:M 16710 SECURITY Al AW-4 16721 F RE &-ARM }ARE TE LF P� PREWIF* 16780 TELEVI.SiON FREVIVIRV 168001 N: t, [ ;-n -11 - HUNE PUNCHDOWr4 11!CO - " 11 , NflNGENCY - 26% 160 170001 CONTRACTOR CONTINGENCY TOTAL HARD COSTS (WIO GEN REOS) I 11 6,119,16 17001 GENERAL REQUIREMENTS (DIV I ABOVE) $ 351,000 17003 GENERAL LIABILITY INSURANCE $ 60,000 17010 CONTRACTOR OVERHEAD (2%) $ 117,000 17020 CONTRACTOR PROFIT (6%) $ 351,000 Grand Total $ 6,998,160 )prietary Information 1 Proprietary Information I Proprietary Informati ORANGE \S KLE 1NB ERG \68259.5 EXHIBIT D Deed of Trust ORANGE \SKLEINBERG \68259.5 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Arcadia Redevelopment Agency 240 West Huntington Drive (P.O. Box 60021) Arcadia, CA 91066 Attention: No fee for recording pursuant to Government Code Section 27383 DEED OF TRUST WITH ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (Arcadia Commons) THIS DEED OF TRUST WITH ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (" "Deed of Trust " ") is made as of this May September , 2010, by and among Arcadia Commons, LP, a California Limited Partnership ( " "Trus oor " "), _Old Republic Title Company (" "Trustee " "), and the Arcadia Redevelopment Agency, a public body corporate and politic (" "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 City of Arcadia, County of Los Angeles, State of California, that is described in the attached Exhibit A , incorporated herein by this reference (the " "Property "" ). TOGETHER WITH all interest, estates or other claims, both in law and in equity which Trustor now has or may hereafter acquire in the Property and the rents, issues, income, revenues, royalties and profits now or in the future payable with respect to or otherwise derived from the Property, including those past due and unpaid; TOGETHER WITH all easements, rights-of-way and rights used in comzection 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; Arcadia Commons ORANGE \s KLE INB ERG \68259.5 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, 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; and 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 shall be attached to said building or buildings in any manner. 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: (a) Payment of just indebtedness of Trustor to Beneficiary as set forth in the Note (defined in Article 1 below) until paid or cancelled. Said principal and other payments shall be due and payable as provided in the Note. Said Note and all its terms are incorporated herein by Arcadia Commons 2 ORANGE \SKLEINBERG \68259.5 reference, and this conveyance shall secure any and all extensions thereof, however evidenced; and (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; and (c) Performance of every obligation, covenant or agreement of Trustor contained herein and in the Loan Documents (defined in Section 1.3 below). Subsections (a) through (c) may be collectively referred to herein as the "Secured Obligations." AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES: DEFINITIONS In addition to the terms defined elsewhere in this Deed of Trust, the following terms shall have the following meanings in this Deed of Trust: The term " "Loan Agreement "" means that certain Owner Participation and Loan Agreement between Trustor and Beneficiary, of even date herewith, providing for the Beneficiary to loan to the Trustor Six Million Nine Hundred Thousand Dollars ($6,900,000) for the construction and permanent financing costs related to the Property, and all attachments, which is incorporated herein by reference. All initially capitalized terms used and not otherwise defined herein shall have the meaning ascribed to such term by the Loan Agreement. The term " "Loan Documents "" means this Deed of Trust, the Note, the Loan Agreement, the Regulatory Agreement, and any other debt, loan or security instruments between Trustor and the Beneficiary relating to the Property. The term " "Note "" means the promissory note in the principal amount of Six Million Nine Hundred Thousand Dollars ($6,900,000) of even date herewith executed by the 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.). The term ""Principal"" means the amount required to be paid under the Note. The term " "Regulatory Agreement "" means that certain Regulatory Agreement and Declaration of Restrictive Covenants of even date herewith by and between the Beneficiary and the Trustor. Arcadia Commons 3 ORANGE \SKLEINBERG \68259.5 MAINTENANCE AND MODIFICATION OF THE PROPERTY AND SECURITY Maintenance and Modification of the Property by Trustor Trustor shall perform the obligations of the Owner and Borrower as set forth in the Loan Agreement at the time and in the manner respectively provided herein. The Trustor agrees that at all times prior to full payment of the sum owed under the Note, 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 Trustor shall not permit or suffer the use of any of the Property for any purpose other than the use for which the same was intended at the time this Deed of Trust was executed. The Beneficiary shall have 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 of 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 shall exercise its rights as agent of Trustor only in the event that Trustor shall fail to take, or shall fail 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 shall specify 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 shall require 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 Los Angeles 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. Granting of Easements Trustor may not grant easements, licenses, rights -of -way or other rights or privileges in the nature of easements with respect to any property or rights included in the Security except those required or desirable for installation and maintenance of public utilities including, without limitation, water, gas, electricity, sewer, telephone and telegraph, or those required by law, and as approved, in writing, by Beneficiary. Assignment of Rents As part of the consideration for the indebtedness evidenced by the Note, Trustor hereby absolutely and unconditionally assigns and transfers to Beneficiary all the rents and revenues of the Property including those now due, past due, or to become due by virtue of any lease or other agreement for the occupancy or use of all or any part of the Property, Arcadia Commons 4 ORANGE \S KLEINB ERG \68259.5 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 sums secured by this Deed of Trust 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 4 as the same becomes due and payable, including but not limited to rents then due and unpaid, and all such rents shall 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 shall contain a statement that Beneficiary exercises its rights to such rents. Trustor agrees that commencing upon delivery of such written notice of Trustor "s breach by Beneficiary to Trustor, each tenant of the Property shall make such rents payable to and pay such rents to Beneficiary or Beneficiary "s agents on Beneficiary" s written demand to each tenant therefor, delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further as to the existence of a default by Trustor. Trustor hereby covenants that Trustor has not executed any prior assignment of said rents, 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 2.34, 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. 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 shall be entitled to receive a reasonable fee for so managing the Property. Arcadia Commons 5 ORANGE \SKLEINBERG \68259.5 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 shall 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 shall have access to the books and records used in the operation and maintenance of the Property and shall be liable to account only for those rents actually received. Beneficiary shall not be 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 2.34. 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 shall become indebtedness of Trustor to Beneficiary secured by this Deed of Trust pursuant to Section 3.3 hereof. Unless Beneficiary and Trustor agree in writing to other terms of payment, such amounts shall be payable upon notice from Beneficiary to Trustor requesting payment thereof and shall bear interest from the date of disbursement at the rate stated in Section 3.3. Any entering upon and taking and maintaining of control of the Property by Beneficiary or the receiver and any application of rents as provided herein shall not cure or waive any default hereunder or invalidate any other right or remedy of Beneficiary under applicable law or provided herein. This assignment of rents of the Property shall terminate at such time as this Deed of Trust ceases to secure indebtedness held by Beneficiary. TAXES AND INSURANCE; ADVANCES Taxes, Other Governmental Charges and UtilityCharges Trustor shall pay, or cause to be paid, at least fifteen (15) days prior to the date of delinquency, all taxes, assessments, charges and levies imposed by any public authority or utility company which are or may become a lien affecting the Security or any part thereof; provided, however, that Trustor shall not be required to pay and discharge any such tax, assessment, charge or levy so long as (a) the legality thereof shall be 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 may 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 shall 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 shall fail to pay any of the foregoing items required by this Section to be paid by Trustor, Beneficiary may (but shall be under no obligation to) pay the Arcadia Commons 6 ORANGE \S KLEINB ERG \68259.5 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, shall become an additional obligation of Trustor to the Beneficiary and shall be secured hereby, and Trustor agrees to pay all such amounts. 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 and all other obligations secured hereunder fulfilled, and this Deed of Trust reconveyed. All such insurance policies and coverages shall 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, shall be delivered to the Beneficiary upon demand therefor at any time prior to the Beneficiary "s receipt of the entire Principal and all amounts secured by this Deed of Trust. Advances In the event the Trustor shall fail to maintain the full insurance coverage required by this Deed of Trust or shall fail to keep the Security in accordance with the Loan Documents, the Beneficiary, after at least seven (7) days prior notice to Beneficiary, may (but shall be under no obligation to) take out the required policies of insurance and pay the premiums on the same or may make such repairs or replacements as are necessary and provide for payment thereof, and all amounts so advanced therefor by the Beneficiary shall become an additional obligation of the Trustor to the Beneficiary (together with interest as set forth below) and shall he secured hereby, which amounts the Trustor agrees to pay on the demand of the Beneficiary, and if not so paid, shall bear interest from the date of the advance at the lesser of ten percent (10 %) per annum or the maximum rate permitted by law. DAMAGE, DESTRUCTION OR CONDEMNATION Awards and Damages All judgments, awards of damages, settlements and compensation made in connection with or in lieu of (1) 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 in any part thereof by insured casualty, and (3) any other injury or damage to all or any part of the Property (" "Funds " ") are hereby assigned to and shall 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 upon any indebtedness or obligation secured hereby, in such order and manner as the Beneficiary shall determine at its sole option. The Beneficiary shall be 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 shall 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. Notwithstanding the provisions of this Section, the Beneficiary Arcadia Commons 7 ORANGE \SKLE(NBERG \68259.5 shall release the Funds to Trustor to be used to reconstruct the improvements on the Property provided that the Beneficiary reasonably determines that Trustor (when taking into account the Funds) has sufficient funds to rebuild. AGREEMENTS AFFECTING THE PROPERTY; FURTHER ASSURANCES; PAYMENT OF PRINCIPAL AND INTEREST 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. Agreement to Pay Attorneys" Fees and-Expenses In the event of any Event of Default (as defined below) hereunder, and if the. Beneficiary should employ attorneys or incur other expenses for the collection of amounts due 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 incurred by the Beneficiary; and any such amounts paid by the Beneficiary shall be added to the indebtedness secured by the lien of this Deed of Trust, and shall 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. 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. Secured Oblijzations The Secured Obligations are incorporated in and made a part of this Deed of Trust. Upon default of a Secured Obligation, and after the giving of notice and the expiration of any applicable cure period, the Beneficiary, at its option, may declare the whole of the indebtedness secured hereby to be due and payable. This Deed of Trust shall cover, and the property subject hereto shall include, all property now or hereafter affixed or attached to or incorporated upon the Property in, to or under which Trustor now has or hereafter acquires any right, title or interest, which, to the fullest extent permitted by law, shall be deemed fixtures and a part of the Property. To the extent any of the property subject to this Deed of Trust consists of rights in action or personal property covered by the Uniform Commercial Code, this Deed of Trust shall also constitute a security agreement, and Trustor hereby grants to Beneficiary, as secured party, a security interest in such property, including all proceeds thereof, for the purpose of securing the Secured Obligations. In addition, for the purpose of securing the Secured Obligations, Trustor hereby grants to Beneficiary, as secured party, a security interest in all of the property described herein in, to, or under which Trustor now has or hereafter acquires any right, title or interest, whether present, future or contingent, including, but not limited to, all equipment, inventory, accounts, general intangibles, instruments, documents and chattel paper, as those terms are defined in the Uniform Commercial Code, and all other personal property of any kind (including, without limitation, money and rights to the payment of money), whether now existing or hereafter created, that are now or at any time hereafter (i) in the possession or control of Beneficiary in any capacity; (ii) erected upon, attached to or appurtenant to the Property; (iii) located or used on the Property or identified for use on the Property (whether stored on the Property or elsewhere); or (iv) used in connection with, arising from, related to, or Arcadia Commons 8 ORANGE \S KLEINB ERG \68259.5 associated with the Property or any of the personal property described herein, the construction of any improvements on the Property, the ownership, development, maintenance, management or operation of the Property, the use or enjoyment of the Property or the operation of any business conducted thereon, including, without limitation, all such property described as the trust estate hereinabove. The security interests granted in this Section are hereinafter severally and collectively called the "Security Interest ". The Security Interest shall be self - operative with respect to the real property described herein but Trustor shall execute and deliver on demand such additional security agreements, financing statements and other instruments as may be requested in order to impose the Security Interest more specifically upon the real and personal property encumbered hereby. The Security Interest, at all times, shall be prior to any other interest in the personal property encumbered hereby. Trustor shall act and perform as necessary and shall execute and file all security agreements, financing statements, continuation statements and other documents requested by Beneficiary to establish, maintain and continue the perfected Security Interest. Trustor, on demand, shall promptly pay all costs and expenses of filing and recordation, to ensure the continued priority of the Security Interest. Trustor shall not sell, transfer, assign or otherwise dispose of any personal property encumbered hereby without obtaining the prior written consent of Beneficiary, except that the Trustor may, in the ordinary course of business, replace personal property or dispose of personal property that will not be replaced because of its obsolescence. Unless Beneficiary then agrees otherwise in writing, all proceeds from any permitted sale or disposition in excess of that required for full replacement shall be paid to Beneficiary to be applied on the Note. Although proceeds of personal property are covered hereby, this shall not be construed to mean that Beneficiary consents to any sale of such personal property. Upon its recordation in the real property records of Riverside County, this Deed of Trust shall be effective as a financing statement filed as a fixture filing. In that regard, the following information is provided: Name of Debtor: Address of Debtor: Name of Secured Party: Address of Secured Party: Arcadia Commons 9 ORANGE\SKLEMBER068259.5 Personal Property To the maximum extent permitted by law, the personal property subject to this Deed of Trust shall be deemed to be fixtures and part of the real property and this Deed of Trust shall constitute a fixtures filing under the California Commercial Code. As to any personal property not deemed or permitted to be fixtures, this Deed of Trust shall constitute a security agreement under the California Commercial Code. Financing Statement The Trustor shall 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 agrees to perform all acts which the Beneficiary may reasonably request so as to enable the Beneficiary to maintain such valid perfected security interest in the Security in order to secure the payment of the Note in accordance with their terms. The Beneficiary is authorized to file a copy of any such financing statement in any jurisdiction(s) as it shall deem appropriate from time to time in order to protect the security interest established pursuant to this instrument. 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. Inspection of the Security At any and all reasonable times upon seventy -two (72) hours" notice, the Beneficiary and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, shall have the right, without payment of charges or fees, to inspect the Security. 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 shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, age, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Security, nor shall 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 shall run with the land. 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 envirom nental 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 kept and used in and about multifamily residential property. Arcadia Commons 10 ORANGE \S KLE INB ERG \68259.5 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 hereinafter referred to a " "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 "" under the provision of California Health and Safety Code, Sections 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 shall have 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 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: (a) all foreseeable consequential damages; (b) 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 (e) all reasonable costs and expenses incurred by Beneficiary in connection with clauses (a) and (b), including but not limited to reasonable attorneys" fees. Without Beneficiary "s prior written consent, which shall not be unreasonably withheld, Trustor shall 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, impair the value of the Beneficiary "s security hereunder; provided, however, that Beneficiary "s prior consent shall not be 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 shall notify Beneficiary as soon as practicable of any action so taken Beneficiary agrees not to withhold its consent, where such consent is required hereunder, if either (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. 11 Arcadia Commons ORANGE \S KLEINBERG \68259.5 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 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 shall be deemed to have willfully permitted or acquiesced in a release or threatened release of hazardous materials, within the meaning of California Code of Civil Procedure Section 726.5(d)(1), if the release or threatened release of hazardous materials was knowingly or negligently caused or contributed to by any lessee, occupant, or user of any portion of the Property and the Trustor knew or should have known of the activity by such lessee, occupant, or user which caused or contributed to the release or threatened release. All costs and expenses, including (but not limited to) attorneys" fees, incurred by the Beneficiary in connection with any action commenced under this paragraph, including any action required by California Code of Civil Procedure Section 726.5(b) to determine the degree to which the Property is environmentally impaired, plus interest thereon at the rate specified in the Note until paid, shall be added to the indebtedness secured by this Deed of Trust and shall be due and payable to the Beneficiary upon its demand made at any time following the conclusion of such action. EVENTS OF DEFAULT AND REMEDIES Events of Default The following shall constitute Events of Default following the expiration of any applicable notice and cure periods: (1) failure to make any payment to be paid by Trustor under the Loan Documents; (2) 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; or (3) failure to make any payment or perform any of Trustor "s other covenants, agreements, or obligations under any other debt instruments or regulatory agreement secured by the Property, which default shall not be cured within the times and in the manner provided therein. Acceleration of Maturity If an Event of Default shall have occurred and be continuing, then at the option of the Beneficiary, the amount of any payment related to the Event of Default and the unpaid Principal of the Note shall immediately become due and payable, upon written Arcadia Commons 12 ORANGE \S KLEINBERG \68259.5 notice by the Beneficiary to the Trustor (or automatically where so specified in the Loan Documents), and no omission on the part of the Beneficiary to exercise such option when entitled to do so shall be construed as a waiver of such right. Trustor agrees to appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee, and to pay all costs and expenses, including cost of evidence of title and reasonable attorney's fees in any such action or proceeding in which Beneficiary or Trustee may appear. The Beneficiar s Right to Enter and Take Possession If an Event of Default shall have occurred and be continuing, the Beneficiary may: 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 Security 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 which 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 shall not cure or waive any Event of Default or Notice of Default (as defined below) hereunder or invalidate any act done in response to such Default or pursuant to such Notice of Default and, notwithstanding the continuance in possession of the Security, Beneficiary shall 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; Commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof; Deliver to Trustee a written declaration 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 Default and Election to Sell " "), which notice Trustee or Beneficiary shall cause to be duly filed for record in the Official Records of Los Angeles County; or 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 all or any portion of the obligations secured hereby, or provided by law. Foreclosure By Power of Sale Should the Beneficiary elect to foreclose by exercise of the power of sale herein contained, the Beneficiary shall give notice to the Trustee (the " "Notice of Sale " ") and shall deposit with Trustee this Deed of Trust which is secured hereby (and the deposit of which shall be deemed to constitute evidence that the unpaid principal amount of the Note is immediately due and payable), and such receipts and evidence of any expenditures made that are additionally secured hereby as Trustee may require. Upon receipt of such notice from the Beneficiary, Trustee shall cause to be recorded, published and delivered to Trustor such Notice of Default and Election to Sell as then required by law and by this Deed of Trust. Trustee shall, without demand on Trustor, after lapse of such time as may then be required by law and after recordation of such Notice of Default and Arcadia Commons 13 ORANGE \S KLEINB ERG \68259.5 Election to Sell and after Notice of Sale having been given as required by law, sell the Security, at the time and place of sale fixed by it in said Notice of Sale, whether as a whole or in separate lots or parcels or items as Trustee shall deem expedient and in such order as it may determine 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 shall be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Trustor, Trustee or Beneficiary, may purchase at such sale, and Trustor hereby covenants to warrant and defend the title of such purchaser or purchasers. 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 amounts owed to Beneficiary under the Loan Documents; (iii) all other sums then secured hereby; and (iv) the remainder, if any, to Trustor. 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. Receiver If an Event of Default shall have occurred and be 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, shall have the right to 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 shall 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 shall continue as such and exercise all such powers until the date of confirmation of sale of the Security, unless such receivership is sooner terminated. 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 shall be cumulative and concurrent and shall be in addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity. No Waiver No delay or omission of the Beneficiary to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy, or shall 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 a breach by Trustor, or a waiver of any obligation of the Trustor 14 Arcadia Commons ORANGE \S KLEINBERG \68259.5 hereunder shall 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, shall 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. If the Beneficiary (i) grants forbearance or an extension of time for the payment of any sums secured hereby, (ii) takes other or additional security or the payment of any sums secured hereby, (iii) waives or does not exercise any right granted in the Loan Documents, (iv) releases any part of the Security from the lien of this Deed of Trust, or otherwise changes any of the terms, covenants, conditions or agreements in the Loan Documents, (v) consents to the granting of any easement or other right affecting the Security, or (iv) makes or consents to any agreement subordinating the lien hereof, any such act or omission shall 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) such action shall not constitute a waiver or acquiescence therein; nor shall 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 shall the lien of this Deed of Trust be altered thereby. Suits to Protect the Security The Beneficiary shall have 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. 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, shall 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 which may become due and payable by the Trustor hereunder after such date. 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 sums owing under the Note or in proceedings against the Security, in connection with the delivery, acceptance, performance, default, endorsement or guaranty of this Deed of Trust. MISCELLANEOUS Arcadia Commons 15 ORANGE\SKLEMERG \68259.5 Amendments This instrument cannot be waived, changed, discharged or terminated orally, but only by an instrument in writing signed by Beneficiary and Trustor. Reconveyance by Trustee Upon written request of Beneficiary stating that all sums secured hereby have been paid or forgiven, 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. Notices If at any time after the execution of this Deed of Trust it shall become 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 shall be in writing and shall 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 shall be addressed to: Beneficiary: Arcadia Redevelopment Agency 240 West Huntington Drive (P.O. Box 60021) Arcadia, CA 91066 Attn: Trustor: Arcadia Commons, LP 5755 E. Kings Canyon Road, Suite 110 Fresno, CA 93727 With a Copy to: Law Offices of Patrick R. Sabelhaus 1006 Fourth Street, Sixth Floor Sacramento, CA 95814 Any notice, demand or communication shall be deemed given, received, made or communicated on the date personal delivery is affected 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. Successors and Joint Trustors Where an obligation is created herein binding upon Trustor, the obligation shall also apply to and bind 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 shall be deemed to be a joint and several obligation of the Trustor and such transferee. Where Trustor is more than one entity or person, all obligations of Trustor shall be deemed to be a joint and several obligation of each and every entity and person comprising Trustor. Arcadia Commons 16 ORANGE \SKLEINB ERG \68259.5 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. 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 shall not affect the balance of the terms and provisions hereof, which terms and provisions shall 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, shall be considered to have been first paid or applied to the full payment of that portion of the debt which is not secured or partially secured by the lien of this Deed of Trust. Governing Law; Venue This Deed of Trust shall be governed by and construed in accordance with the laws of the State of California. Venue shall be in Los Angeles County. Gender and Number In this Deed of Trust the singular shall include the plural and the masculine shall include the feminine and neuter and vice versa, if the context so requires. Deed of Trust, Mortgage Any reference in this Deed of Trust to a mortgage shall also refer to a deed of trust and any reference to a deed of trust shall also refer to a mortgage. Actions Trustor agrees to appear in and defend any action or proceeding purporting to affect the Security. 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 shall be vested with all title, powers, and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written instrument executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which, when duly recorded in the proper office of the county or counties in which the Property is situated, shall be conclusive proof of proper appointment of the successor trustee. 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. 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 pending sale under this Deed of Trust or of any action of proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee. 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, the Beneficiary acknowledges and agrees that in the event of a foreclosure or deed -in -lieu of Arcadia Commons 17 ORANGE \SKLEINBERG \68259.5 foreclosure (collectively, " "Foreclosure " ") with respect to the property encumbered by this deed of trust, the following rule contained in Section 42(h)(6)(E)(ii) of the Internal Revenue Code of 1986, as amended, shall apply: 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 Code. IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year first above written. Arcadia Commons, LP, a California Limited Partnership By: Arcadia Commons, LLC, a California limited liability company, General Partner C Michael J. Conway, Jr. Managing Member Arcadia Commons, LP, a California Limited Partnership By: Community Revitalization and Development Corporation a California nonprofit public benefit corporation, Managing General Partner David Rutledge Secretary /Chief Financial Officer Arcadia Commons 18 ORANGE \S KLEINBERG \68259.5 STATE OF CALIFORNIA ) ss. COUNTY OF ) On , before me, , personally appeared , personally known to me (or 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. WITNESS my hand and official seal. STATE OF CALIFORNIA ) ss. COUNTY OF ) On , before me, , personally appeared , personally known to me (or 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. WITNESS my hand and official seal. ORANGE \SKLE INSERG \68259.5 EXHIBIT A (Legal Description) O RANGE \S K L E I N B E RG \6 82 5 9.5 EXHIBIT E Note ORANGE \SKLEINSERG \68259.5 PROMISSORY NOTE (Arcadia Commons) $6,900,000 Arcadia, California September 2010 FOR VALUE RECEIVED, Arcadia Commons, LP, a California limited partnership (`Borrower "), promises to pay to the Arcadia Redevelopment Agency, a public body corporate and politic, (the "Agency "), or order, the principal sum of up to Six Million Nine Hundred Thousand Dollars ($6,900,000), or so much as is loaned to Borrower, plus interest thereon pursuant to Section 2 below. Borrower's Obligation. This promissory note (the "Note ") evidences the Borrower's obligation to pay the Agency the principal amount of up to Six Million Nine Hundred Thousand Dollars ($6,900,000) for the funds loaned to the Borrower by Agency to finance the construction and permanent financing costs of the Property pursuant to the Owner Participation and Loan Agreement between the Borrower and the Agency of even date herewith (the "Loan Agreement "). All capitalized terms not otherwise defined in this Note shall have the meanings set forth in the Loan Agreement. Interest. The outstanding principal balance of this Note shall bear interest at the annual rate of one percent (1 %), compounded annually, commencing on the date of the Note until paid; provided, however, if a Default occurs, interest on the principal balance shall begin to accrue, as of the date of Default (following expiration of applicable notice and cure periods), and continuing until such time as the Loan funds are repaid in full or the Default is cured, at the default rate of the lesser of ten percent (10 %), compounded annually, or the highest rate permitted by law. Term and Repayment Requirements. The term of the Loan shall commence with the date of this Note and shall expire fifty -five (55) years after the date of the certificate of occupancy for the Development. This Note shall be due and payable as set forth in Section 2.7 of the Loan Agreement. No Assumption. This Note shall not be assumable by the successors and assigns of Borrower without the prior written consent of the Agency as provided in Article 5 of the Loan Agreement. Security. This Note is secured by a Deed of Trust and Security Agreement (the "Deed of Trust ") of even date herewith, wherein the Borrower is the Trustor and Agency is the Beneficiary, covering the Property. ORANGE \SKLEINBERG \68259.5 Terms of Payment. All payments due under this Note shall be paid in currency of the United States of America, which at the time of payment is lawful for the payment of public and private debts. All payments on this Note shall be paid to Arcadia Redevelopment Agency, 240 West Huntington Drive (or P.O. Box 60021), Arcadia, California 91066, Attention: or to such other place as the Agency may from time to time designate in writing. All payments on this Note shall be without expense to the Agency, and the Borrower agrees to pay all costs and expenses, including re- conveyance fees and reasonable attorney's fees of the Agency, incurred in connection with the payment of this Note and the release of any security hereof. Notwithstanding any other provision of this Note, or any instrument securing the obligations of the Borrower under this Note, if, for any reason whatsoever, the payment of any sums by the Borrower pursuant to the terms of this Note would result in the payment of interest which would exceed the amount that the Agency may legally charge under the laws of the State of California, then the amount by which payments exceeds the lawful interest rate shall automatically be deducted from the principal balance owing on this Note, so that in no event shall the Borrower be obligated under the terms of this Note to pay any interest which would exceed the lawful rate This note shall be non recourse to the Borrower, pursuant to, and except as provided in, Section 2.9, of the Loan Agreement. Default. Any of the following shall constitute an Event of Default under this Note: Any failure to pay, in full, any payment required under this Note when due following written notice by Agency of such failure and ten (10) days opportunity to cure; Any failure in the performance by the Borrower of any term, condition, provision or covenant set forth in this Note subject to the notice and cure period set forth in Section 7.1 of the Loan Agreement; and The occurrence of any Event of Default under the Loan Agreement, or other instrument securing the obligations of the Borrower under this Note or under any other promissory notes hereafter issued by the Borrower to the Agency pursuant to the Loan Agreement, subject to notice and cure periods, if any, set forth therein. ORANGESKLEMEM68259.5 Upon the occurrence of such 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 shall at the option of the Agency become immediately due and payable upon written notice by the Agency to the Borrower without further demand. The failure to exercise the remedy set forth in Subsection 7(b) above or any other remedy provided by law upon the occurrence of one or more of the foregoing events of default shall not constitute a waiver of the right to exercise any remedy at any subsequent time in respect to the same or any other default. The acceptance by Agency hereof of any payment which is less than the total of all amounts due and payable at the time of such payment shall 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 the Agency, except as and to the extent otherwise provided by law. Waivers. The Borrower hereby waives diligence, presentment, protest and demand, and notice of protest, notice of demand, and notice of dishonor of this Note. The Borrower expressly agrees that this Note or any payment hereunder may be extended from time to time, and that the Agency may accept further security or release any security for this Note, all without in any way affecting the liability of the Borrower. No extension of time for payment of this Note or any installment hereof made by agreement by the Agency with any person now or hereafter liable for payment of this Note shall operate to release, discharge, modify, change or affect the original liability of the Borrower under this Note, either in whole or in part. The obligations of the Borrower under this Note shall be absolute and the Borrower waives any and all rights to offset, deduct or withhold any payments or charges due under this Note for any reason whatsoever. Miscellaneous Provisions. All notices to the Agency or the Borrower shall be given in the manner and at the addresses set forth in the Loan Agreement, or to such addresses as the Agency and the Borrower may hereinafter designate. The Borrower promises to pay all costs and expenses, including reasonable attorney's fees, incurred by the Agency in the enforcement of the provision of this Note, regardless of whether suit is filed to seek enforcement. 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. ORANGE \SKI.EINBERG \68259.5 This Note shall be governed by and construed in accordance with the laws of the State of California. The times for the performance of any obligations hereunder shall be strictly construed, time being of the essence. This document, together with the Loan Documents (as defined in the Loan Agreement), contains the entire agreement between the parties as to the Loan. It may not be modified except upon written consent of the parties. Arcadia Commons, LP, a California Limited Partnership By: Arcadia Commons, LLC, a California limited liability company, General Partner IC Michael J. Conway, Jr. Managing Member Arcadia Commons, LP, a California Limited Partnership By: Community Revitalization and Development Corporation a California nonprofit public benefit corporation, Managing General Partner David Rutledge Secretary /Chief Financial Officer ORANGE \S KLEINB ERG \68259.5 EXHIBIT F Regulatory Agreement ORANGE \S KLEINBERG \68259.5 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Arcadia Redevelopment Agency 240 West Huntington Drive (P.O. Box 60021) Arcadia, CA 91066 Attention: REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS This Regulatory Agreement and Declaration of Restrictive Covenants (the "Agreement ") is made and entered into as of September _, 2010, by and between the Arcadia Redevelopment Agency, a public body, corporate and politic (the "Agency ") and Arcadia Commons, LP, a California limited partnership ( "Owner "). RECITALS 1. The Owner and the Agency entered in an Owner Participation and Loan Agreement dated of even date herewith (the "Loan Agreement "), whereby the Agency provided a loan to the Owner in the amount of Six Million Nine Hundred Thousand Dollars ($6,900,000) (the "Loan ") to construct and finance the development of that certain real property located in Arcadia, California more particularly described in Exhibit A attached to this Agreement and incorporated by this reference (the "Property "). The improvements on the Property (the "Improvements ") include forty -two (42) senior housing units affordable to low- and very low - income households and one (1) manager's unit. The forty -two (42) senior housing units shall be affordable to low and very low - income households for a period of fifty -five (55) years following the certificate of occupancy for the Development. The Property and the Improvements will be referred to collectively as the Development. All initially capitalized terms used and not otherwise defined herein shall have the meaning ascribed to such term by the Loan Agreement. 3. The Loan is evidenced by a Promissory Note dated of even date herewith (the "Promissory Note "), and a deed of trust dated of even date herewith, and recorded against the Property (the "Deed of Trust "). 4. The Agency has agreed to loan funds to Owner on the condition that the Development be maintained and operated in accordance with Health and Safety Sections 33334.2 et seq. The Agency intends to utilize the Improvements to obtain replacement housing credits pursuant to Health and Safety Code Section 33413(a) and affordable housing production credits pursuant to Health and Safety Code Section 33413(b)(2)(B), and in accordance with additional restrictions concerning affordability, operation and maintenance of the Development as specified in this Agreement. Arcadia Commons 1 ORANGESKLEINBERM68259.5 5. In consideration of receipt of the Agency Loan and repayment terms substantially below market rate loans, the Owner further agrees to observe all the terms and conditions set forth below. 6. In order to ensure that the Development will be used and operated in accordance with these conditions and restrictions, the Agency and Owner wish to enter into this Agreement. THEREFORE, the Agency and Owner hereby agree as follows. ARTICLE 9 DEFINITIONS Section 9.1 Definitions When used in this Agreement, the following terms shall have the respective meanings assigned to them in this Article 1. (a) "Actual Household Size" shall mean the actual number of persons in the applicable household. (b) "Adjusted Income" shall mean the total anticipated annual income of all persons in a household, as calculated in accordance with 25 California Code of Regulations Section 6914 or pursuant to a successor State housing program that utilizes a reasonably similar method of calculation of adjusted income. In the event that no such program exists, the Agency shall provide the Owner with a reasonably similar method of calculation of adjusted income as provided in said Section 6914. (c) "Agency" shall mean the Arcadia Redevelopment Agency, a public body, corporate and politic. (d) "Agreement" shall mean this Regulatory Agreement and Declaration of Restrictive Covenants. (e) "Assumed Household Size" shall have the meaning set forth in Section 2.2(d) below. (f) "City" shall mean the City of Arcadia, a municipal corporation. (g) "Development" shall mean the Property and the forty -three (43) units on the Property, as well as a community building, office and all landscaping, roads and parking spaces existing thereon, as the same may from time to time exist. (h) "Median Income" shall mean the median gross yearly income adjusted for Actual Household Size or Assumed Household Size as specified herein, in the County of Los Angeles, California, as determined by the U.S. Department of Housing and Urban Development pursuant to Section 8 of the United States Housing Act of 1937, and as published from time to time by the U.S. Department of Housing and Urban Development. 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 Agency shall provide the Owner with other income determinations which are reasonably similar with respect to methods of calculation to those previously published by HUD. Arcadia Commons 2 ORANGE \S KLE INBERG \68259.5 (i) "Owner" shall mean Arcadia Commons, LP, a California Limited Partnership, and its successors and assigns to the Development. 0) "Property" shall mean the real property described in Exhibit A attached hereto and incorporated herein, and all current and future improvements thereon. (k) "Rent" shall mean the total of monthly payments by the tenants of a Unit for the following: use and occupancy of the Unit and land and associated facilities, including parking; any separately charged fees or service charges assessed by Owner which are required of all tenants, other than security deposits; 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; 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 Owner, and paid by the tenant. (1) "Senior" shall mean mean a person sixty -two (62) years of age or older, pursuant to California Civil Code Section 51.3. (m) "Sixty Percent Household" shall mean a household with an Adjusted Income that does not exceed sixty percent (60 %) Median Income. (n) "Sixty Percent Rent" shall mean the maximum allowable rent for a Sixty Percent Unit pursuant to Section 2.2(b) below. (o) "Sixty Percent Unit" shall mean the Units which, pursuant to Section 2.1(b) are required to be rented to Sixty Percent Households. (p) "Term" shall mean the term of this Agreement, commencing on the date of this Agreement and expiring on the fifty -fifth (55 anniversary of the date of issuance by the City of a certificate of occupancy for the Development. (q) "Units" shall mean the forty -three (43) rental units located on the Property. (r) "Very Low Income Household" shall mean a household with an Adjusted Income that does not exceed the qualifying limits for very low income households, adjusted for Actual Household Size, as established and amended from time to time pursuant to Section 8 of the United States Housing Act of 1937, and as published by the State of California Department of Housing and Community Development. (s) "Very Low Income Rent" shall mean the maximum allowable rent for a Very Low Income Unit pursuant to Section 2.2 (a) below. (t) "Very Low Income Unit" shall mean the Units which, pursuant to Section 2.1(a) below, are required to be occupied by Very Low Income Households. Arcadia Commons 3 ORANGE \S KL E IN B ERG \6 8259.5 ARTICLE 10 AFFORDABILITY COVENANTS Section 10.1 Occupancy Requirements (a) Very Low Income Units Thirteen (13) of the Units shall be rented and occupied by or, if vacant, available for rental and occupancy by Very Low Income Households. (b) Sixty Percent Units Twenty -Nine (29) of the Units shall be rented and occupied by or, if vacant, available for rental and occupancy by Sixty Percent Households. (c) Bedroom Size The Units (excluding the manager's unit) shall be available in the following bedroom sizes: ................................................................................................................................................................ i 1 bdrm ; ............................... . bdrm Total .................................................................................:..... .............. ................. VerLow Income Units .............. y .................................................................................. ..............................' . 1 _ ........ ............_ i ................ ............ ............. . . ... .. ... 3 ......... .................._. ... ..... . .. 1 . 3 ...... ._................., !...._Sixty Percent ............... ............................... ......................... .......... .,............................. 23 `:..... 6 29 Manager's Unit . ....................... . ...................................................................:............................. 1 0 ............................... 1 . . . . . . . . . . 1 ................................................................. AL................._................ ...................... .............................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i . . . . . . . . . 34....... ...... ...... ............ ,..... ...... . . . . . . . . . : . . . . . . . . . . . . . . . . . . . . . . . ................ . ............. .. . _ . . . . . . . . . ...................... 9... ............................. _ ......................... . . . . . . . . . . . . ............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _ .43.........................., (d) Senior Occupancy (i)Except for the resident manager's unit, if used as such, all Units in the Development shall be occupied or held available for occupancy by households containing Senior residents. The Development shall be operated at all times in compliance with the provisions of. (a) the Unruh Act, including but not limited to California Civil Code Sections 51.2, 51.3 and 51.4 which relate to the requirements for lawful senior housing; (b) the United States Fair Housing Act, as amended, 42 U.S.C. Section 3607(b) and 24 CFR 100.304, which relate to lawful senior housing; (c) the California Fair Employment and Housing Act, Government Code Section 12900 et sect., which relates to lawful senior housing; and (d) any other applicable law or regulation (including the Americans With Disabilities Act, to the extent applicable to the Development). Owner shall develop and implement appropriate age verification procedures to ensure compliance with the requirements of this Section. The Owner shall provide County with a copy of its written verification procedures. (ii)Owner agrees to indemnify, protect, hold harmless and defend (by counsel reasonably satisfactory to Agency) Agency, and its boardmembers, officers and employees, from all suits, actions, claims, causes of action, costs, demands, judgments and liens arising out of Owner's failure to comply with applicable legal requirements related to housing for seniors and persons with disabilities. The provisions of this subsection shall survive expiration of the Term or other termination of this Agreement, and shall remain in full force and effect. Section 10.2 Allowable Rent Owner covenants that no Very Low Income Household or Sixty Percent Household shall pay an amount in excess of the applicable Rent set forth below. (a) Very Low Income Rent Subject to the provisions of Section 2.3 below, the Rent (including utility allowance) charged to Tenants of the Very Low Income Units shall Arcadia Commons 4 ORANGE \SKLEINBERG \68259.5 not exceed one - twelfth (1/12 1h) of thirty percent (30 %) of fifty percent (50 %) of Median Income, adjusted for Assumed Household Size. (b) Sixty Percent Rent. Subject to Section 23 below, the Rent charged to Tenants of the Lower Income Units shall not exceed one - twelfth (1 /12 of thirty percent (30 %) of sixty percent (60 %) of Median Income, adjusted for Assumed Household Size. (c) Agency pproval of Rents Initial rents for all Units (excluding the Manager's Unit) shall be approved by the Agency prior to occupancy. All rent increases shall also be subject to Agency approval. (d) Assumed Household Size In calculating the allowable Rent for the Lower Income Units, the following assumed household sizes shall be utilized: Number of Bedrooms Assumed Household Size One 2 Two 3 Section 10.3 Increased Income of Occupying Households (a) Very Low Income Household to Sixty Percent Household If, upon recertification of the income of a Tenant of a Very Low Income Unit, the Owner determines that a former Very Low Income Household's Adjusted Income has increased and exceeds the qualifying income for a Very Low Income Household set forth in Section 1.1(q), but does not exceed the maximum qualifying income for a Sixty Percent Household, then, upon expiration of the Tenant's lease: (i)Such Tenant's Unit shall be considered a Sixty Percent Unit; (ii)Such Tenant's Rent may be increased to a Sixty Percent Rent, upon sixty (60) days' written notice to the Tenant; and (iii)The Owner shall rent the next available Unit to a Very Low Income Household at Rent not exceeding the maximum Rent specified in Section 2.2(a) to comply with the requirements of Section 2.1(a) and Section 2.2(a) above. (b) Non - Qualifying Household In the event, upon recertification of an occupant household's income, the Owner determines that a former Very Low Income Household or Sixty Percent Household, has an Adjusted Income exceeding sixty percent (60 %) of Median Income, such household shall be permitted to continue to occupy the Unit, and upon expiration of the household's lease and upon sixty (60) days written notice, the Rent may be increased to one - twelfth (1/12 1h) of thirty percent (30 %) of the household's actual income. The Owner shall rent the next available Unit to a Very Low Income Household or a Sixty Percent Household as necessary to meet the requirements of Section 2.1(a) above. (c) Under no circumstances shall Owner increase rent more than five percent (5 %) in any twelve (12) month period provided, however, if any annual change in Median Arcadia Commons ORANGE \S KLEINBERG \68259.5 Income would result in an increase of more than 5% in any year, Owner shall be permitted to increase rent in any subsequent year up to 5% to address such Median Income increase Section 10.4 Acknowledgment of Owner Owner hereby acknowledges that this Agreement imposes certain restrictions on the use and occupancy of the Project and the Property during the Term of this Agreement. Owner acknowledges and understands that the restrictions shall be applicable to the Project and the Property for the Term hereof. Initials of Owner Section 10.5 Reservation of Property for Affordable Housing The Owner covenants and agrees to reserve and restrict the Property for residential occupancy by individuals and families who, at the time of initial occupancy of a Unit and continuously thereafter (subject to the other provisions of this Agreement), until the end of the Term, are members of a Very Low Income or Sixty Percent Household. Only one (1) Unit within the Project may be used as a manager unit at any given time. a. Continuous Operation Covenant The Owner covenants to and for the benefit of the Agency to cause the Project to be continuously operated, in accordance with the other provisions of this Section, throughout the Term Section 10.6 Affordable Senior Residential Rental Property Restrictive Covenant The Owner covenants to and for the benefit of the Agency that the Owner shall construct, own, manage and operate, or cause the management and operation of, the Project to provide senior residential rental housing available only to Sixty Percent Households at a Sixty Percent Rent and Very Low Income Households at a Very Low Income Rent (except for the Manager's Unit) and for no other purposes in accordance with this Agreement during the Term. The Owner hereby covenants to develop the Property with the Project. The Owner will not knowingly permit any Unit to be used on a transient basis and will not lease or rent any Unit for a period of less than six (6) months. No Unit will, at any time, be leased or rented for use as a hotel, motel, time share, dormitory, fraternity house, sorority house, rooming house, hospital, nursing home, sanitary or rest home. a. Continuous Operation Covenant The Owner covenants to and for the benefit of the Agency to cause the Project to be continuously operated, in accordance with the other provisions of this Section, throughout the Term Section 10.7 Lease Provisions Lease Provisions. Owner for itself, its successors and assigns hereby covenants and agrees that, in connection with the lease of Units (except for the Manager's Unit) in the Project to Very Low Income and Sixty Percent Households during the Term, it shall comply with the following requirements: a. The lease between Owner and the Very Low Income and Sixty Percent Households shall be for not less than one (1) year, unless by mutual agreement between Owner and the Very Low Income and /or Sixty Percent Households, but in such a case for not less than six (6) months, as required by applicable provisions of the United States Internal Revenue Code. Arcadia Commons 6 ORANGE \SKLEINBERG \68259.5 b. The Lease shall contain provisions which authorize Owner to immediately terminate the tenancy of any household one or more of whose members misrepresented any fact material to the household's qualification as a Sixty Percent or Very Low Income Household. Each lease or rental agreement shall also provide that the household is subject to annual certification in accordance with Section 3.1 below, and that, if the household's income increases above the applicable limits for a Very Low Income Household or Sixty Percent Household, such household's Rent may be subject to increase. C. The lease shall not contain any of the following provisions: i. an agreement by the Very Low Income or Sixty Percent Household to be sued, to admit guilt or to entry of a judgment in favor of Owner in a lawsuit brought in connection with the lease; ii. an agreement by the Very Low Income or Sixty Percent Household that Owner may take, hold or sell personal property of household members, without notice to the Very Low Income or Sixty Percent Household and a court decision on the rights of the parties, other than an agreement by the tenant concerning disposition of personal property remaining in the housing unit, after the Very Low Income or Sixty Percent Household has moved out of the unit; iii. an agreement by the Very Low Income or Sixty Percent Household not to hold Owner or its agents legally responsible for any action or failure to act, whether intentional or negligent; iv. an agreement by the Very Low Income or Sixty Percent Household that Owner may institute a lawsuit without notice to the Very Low Income or Sixty Percent Household; V. an agreement by the Very Low Income or Sixty Percent Household that Owner may evict the Very Low Income or Sixty Percent Household without instituting a civil court proceeding in which the Very Low Income or Sixty Percent Household has the opportunity to present a defense, or before a court decision on the rights of the parties; vi, an agreement by the Very Low Income or Sixty Percent Household to waive any right to a trial by jury; vii. an agreement by the Very Low Income or Sixty Percent Household to waive the Very Low Income or Sixty Percent Household's right to appeal, or to otherwise challenge a court decision in connection with the lease; viii. an agreement by the Very Low Income or Sixty Percent Household to pay attorney's fees or other legal costs, even if the Very Low Income or Sixty Percent Household wins in a court proceeding by Owner against the Very Low Income or Sixty Percent Household; provided, however, the Very Low Income or Sixty Percent Household may be obligated to pay costs in the event it loses such a legal action. Arcadia Commons 7 ORANGES KLE MB ERG \68259.5 d. Owner shall not terminate the tenancy or refuse to renew the lease of a Very Low Income or Sixty Percent Household, except for serious or repeated violations of the terms and conditions of the lease; for violation of applicable federal, state, or local law; or for other good cause. Owner shall, in connection with a termination of a tenancy or a refusal to renew a lease, serve written notice upon the Very Low Income or Sixty Percent Household specifying the grounds for the action, at least thirty (30) calendar days before the termination of the tenancy. e. Owner shall adopt written tenant selection policies and criteria that: i. are consistent with the purpose of providing housing for individuals who have an income that is no more than the Very Low Income or Sixty Percent Rent; ii. are reasonably related to program eligibility and the applicants' ability to perform the obligations of the lease; iii. give reasonable consideration to the housing needs of individuals who occupy substandard housing (including individuals that are homeless or living in a shelter for homeless individuals); individuals that are paying more than fifty percent (50 %) of their annual income for rent; or individuals that are involuntarily displaced; iv. provide for the selection of tenants from a written waiting list in the chronological order of their application, insofar as is practicable; and V. give prompt written notification to any rejected applicant of the grounds for rejection. f. Except as may otherwise be required by the rental requirements of the financing approved pursuant to the Agreement, as applicable, all Units (except for the Manager's Unit) shall be available at a Sixty Percent Rent or Very Low Income Rent for occupancy on a continuous basis to the appropriate Very Low Income or Sixty Percent Household with a Sixty Percent Rent or Very Low Income Rent for the income category attributable to that restricted Unit. Owner shall not give preference to any particular class or group of persons in renting the Units. Owner shall include a statement in all advertisements, notices and signs for the availability of units for rent to the effect that Owner is an Equal Housing Opportunity Provider. Section 10.8 Condominium Conversion The Owner shall not convert Development units to condominium or cooperative ownership or sell condominium or cooperative conversion rights to the Property during the Term of this Agreement. ARTICLE 11 INCOME CERTIFICATION AND REPORTING Section 11.1 Income Certification The Owner will obtain, complete and maintain on file, immediately prior to initial occupancy and annually thereafter, income certifications from Arcadia Commons 8 ORANGE \SKLEINBERG \68259.5 each household renting any of the Units, substantially in the form attached hereto as Exhibit B. The Owner shall make a good faith effort to verify that the income provided by an applicant or occupying household in an income certification is accurate by taking one or more of the following steps as a part of the verification process: (1) obtain a pay stub for the most recent pay period; (2) obtain an income tax return for the most recent tax year; (3) conduct a credit agency or similar search; (4) obtain an income verification form from the applicant's current employer; (5) obtain an income verification form from the Social Security Administration and /or the California Department of Social Services if the applicant receives assistance from either of such agencies; or (6) if the applicant is unemployed and has no such tax return, obtain another form of independent verification. Copies of tenant income certifications shall be available to the Agency upon request. All such verification information shall only be obtained by Owner after obtaining the household's written consent for the release of such information to Owner. Copies of income certifications shall be available to Agency upon request. Owner shall ensure appropriate language is included in the lease requiring tenant to provide incpome information annually and acknowledge that should its income increase the household may be subject to higher rent. Section 11.2 Annual Report to Agency On April 15`" of each year the Owner shall submit an annual report to the Agency, in a form approved by the Agency. The annual report shall include for each Unit covered by this Agreement, the Rent and the income and household size of the household occupying the Unit. The report shall also state the date the tenancy commenced for each rental Unit and such other information as the Agency may be required by law to obtain. Section 11.3 Additional Information Owner shall provide any additional information reasonably requested by the Agency. Section 11.4 Records Owner shall maintain complete, accurate and current records pertaining to the Units for five (5) years after creating such records, and shall permit any duly authorized representative of the Agency to inspect and copy records, including records pertaining to income and household size of tenant households. ARTICLE 12 OPERATION OF THE DEVELOPMENT Section 12.1 Residential Use The Development shall be operated only for residential use. No part of the Development shall be operated as transient housing. Section 12.2 Taxes and Assessments Owner shall pay all real and personal property taxes, assessments, if any, 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 line or charge from attaching to the Property; provided, however, that Owner shall have the right to contest in good faith, any such taxes, assessments, or charges. In the event Owner exercises its right to contest any tax, assessment, or charge against it, Owner, on final determination of the proceeding or contest, shall immediately pay or discharge any decision or judgment rendered against it, together with all costs, charges and interest. Arcadia Commons 9 ORANGE \SKLEINBERG \68259.5 Section 12.3 Nondiscrimination All of the Units shall be available for occupancy on a continuous basis to members of the general public who are income eligible. Owner shall 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 Sixty Percent or Very Low Income Households. There shall be 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, or ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of any Unit nor shall Owner or any person claiming under or through the Owner, 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 operation and management of the Development. All deeds, leases or contracts made or entered into by Owner as to the Units or the Development or portion thereof, shall contain covenants concerning discrimination as prescribed by the Loan Agreement. ARTICLE 13 PROPERTY MANAGEMENT AND MAINTENANCE Section 13.1 Management Responsibilities The Owner is responsible for all management functions with respect to the Development, including without limitation the selection of tenants, certification and recertification of household size and income, evictions, collection of rents and deposits, maintenance, landscaping, routine and extraordinary repairs, replacement of capital items, and security. The Agency shall have no responsibility over management of the Development. The Owner shall retain a professional property management company approved by the Agency in its reasonable discretion to perform its management duties hereunder. A resident manager shall also be required. Section 13.2 Management Agent The Development shall at all times be managed by an experienced management agent reasonably acceptable to the Agency, with demonstrated ability to operate residential facilities like the Development in a manner that will provide decent, safe, and sanitary housing (as approved, the "Management Agent "). The Owner shall submit for the Agency's approval the identity of any proposed Management Agent. The Owner shall also submit such additional information about the background, experience and financial condition of any proposed Management Agent as is reasonably necessary for the Agency 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 Agency shall approve the proposed Management Agent by notifying the Owner in writing. Unless the proposed Management Agent is disapproved by the Agency within thirty (30) days, which disapproval shall state with reasonable specificity the basis for disapproval, it shall be deemed approved. Section 13.3 Performance Review The Agency reserves the right to conduct an annual (or more frequently, if deemed reasonably necessary by the Agency) review of the management practices and financial status of the Development. The purpose of each periodic review will be to enable the Agency to determine if the Development is being operated and managed in accordance with the requirements and standards of this Agreement. The Owner shall cooperate with the Agency in such reviews. Arcadia Commons 10 ORANGE \SK1,EINBERG \68259.5 Section 13.4 Replacement of Management Agent If, as a result of a periodic review, the Agency 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 Agency shall deliver notice to Owner of its intention to cause replacement of the Management Agent, including the reasons therefor. Within fifteen (15) days of receipt by Owner of such written notice, Agency staff and the Owner shall meet in good faith to consider methods for improving the financial and operating status of the Development. If after a reasonable period as determined by the Agency (not to exceed sixty (60) days), the Agency determines that the Owner is not operating and managing the Development in accordance with the material requirements and standards of this Agreement, the Agency may require replacement of the Management Agent. If, after the above procedure, the Agency requires in writing the replacement of the Management Agent, Owner shall promptly dismiss the then 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 Agency pursuant to Section 5.2 above. Any contract for the operation or management of the Development entered into by Owner shall provide that the contract can be terminated as set forth above. Failure to remove the Management Agent in accordance with the provisions of this Section shall constitute default under this Agreement, and the Agency may enforce this provision through legal proceedings as specified in Section 6.3. . Section 13.5 Approval of Management Policies The Owner shall submit its written management policies with respect to the Development to the Agency for its review, and shall amend such policies in any way necessary to ensure that such policies comply with the provisions of this Agreement. Section 13.6 Capital Replacement Reserve Account Developer shall establish an account for the payment of repair and replacement of capital items ( "Capital Replacement Reserve Account ") in an initial amount equal to ($). Each Fiscal Year thereafter, Developer shall deposit into the Capital Reserve Replacement Account an additional amount of at least Two Hundred Fifty Dollars ($250) per Unit per year. Section 13.7 Property Maintenance The Owner agrees, for the entire Term of this Agreement, and in addition to any requirements set forth in the Loan Agreement, to maintain 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 accordance with the following maintenance conditions: The Agency places prime importance on quality maintenance to protect its investment and to ensure that all Agency and Agency- assisted affordable housing projects within the Agency are not allowed to deteriorate due to below- average maintenance. Normal wear and tear of the Development will be acceptable to the Agency assuming the Owner agrees to provide all necessary improvements to assure the Development is maintained in good condition. The Owner Arcadia Commons 11 ORANGES KLEINBERM68259.5 shall make all repairs and replacements necessary to keep the improvements in good condition and repair. In the event that the Owner breaches any of the covenants contained in this section and such default continues for a period of seven (7) days after written notice from the Agency with respect to graffiti, debris, waste material, and general maintenance or thirty (30) days after written notice from the Agency with respect to landscaping and building improvements, then the Agency, in addition to whatever other remedy it may have at law or in equity, shall have 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 Agency shall be permitted (but is not required) to enter upon the Property and 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 Agency and /or costs of such cure, including a ten percent (10 %) administrative charge, which amount shall be promptly paid by the Owner to the Agency upon demand. ARTICLE 14 MISCELLANEOUS Section 14.1 Term The provisions of this Agreement shall apply to the Property for the entire Term even if the entire Loan is paid in full prior to the end of the Term; provided, however, that the provisions of Sections of the Agreement shall run with the Property and shall remain in effect in perpetuity. This Agreement shall bind any successor, heir or assign of Owner, whether a change in interest occurs voluntarily or involuntarily, by operation of law or otherwise, except as expressly released by the Agency. The Agency makes the Loan on the condition, and in consideration of, this provision, and would not do so otherwise. Section 14.2 Covenants to Run With the Land The Agency and Owner hereby declare their express intent that the covenants and restrictions set forth in this Agreement shall run with the land, and shall bind all successors in title to the Property, provided, however, that on the expiration of the Term of this Agreement said covenants and restrictions shall expire. Each and every contract, deed or other instrument hereafter executed covering or conveying the Property or any portion thereof shall be held conclusively to have been executed, delivered and accepted subject to such covenants and restrictions., regardless of whether such covenants or restrictions are set forth in such contract, deed or other instrument, unless the Agency expressly releases such conveyed portion of the Property from the requirements of this Agreement. Section 14.3 Enforcement by the Agency If Owner fails to perform any obligation under this Agreement, and fails to cure the default within thirty (30) days after the Agency has notified the Owner 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 subject also to the notice and cure rights of the limited partner of Owner set forth in Section 7.1 of the Loan Agreement), the Agency shall have the right to enforce this Agreement by any or all of the following actions, or any other remedy provided by law: Arcadia Commons 12 ORANGE \S KLE INB ERG \68259.5 (a) Calling the he Agency Loan The Agency may declare a default under the Agency Note, accelerate the indebtedness evidenced by the Note, and with respect to the Agency Loan, proceed with foreclosure under the Deed of Trust. (b) Action to Compel Performance or for Damages The Agency may bring an action at law or in equity to compel the Owner's performance of its obligations under this Agreement, and /or for damages. (c) Remedies Provided Under Loan Agreement The Agency may exercise any other remedy provided under the Loan Agreement. Section 14.4 Attorneys Fees and Costs In any action brought to enforce this Agreement, the prevailing party shall be entitled to all costs and expenses of suit, including reasonable attorneys' fees. This section shall be interpreted in accordance with California Civil Code Section 1717 and judicial decisions interpreting that statute. Section 14.5 Recording and Filing The Agency and Owner shall cause this Agreement, and all amendments and supplements to it, to be recorded against the Property in the Official Records of Los Angeles County. Section 14.6 Governing Law; Venue This Agreement shall be governed by the laws of the State of California. Venue shall be in Los Angeles County. Section 14.7 Amendments This Agreement may be amended only by a written instrument executed by all the parties hereto or their successors in title, and duly recorded in the real property records of Los Angeles County, California. Section 14.8 Notice All notices given or certificates delivered under this Agreement shall be in writing and be deemed received on the delivery or refusal date shown on the delivery receipt, if. (i) personally delivered by a commercial service which furnishes signed receipts of delivery or (ii) mailed by certified mail, return receipt requested, postage prepaid, addressed as follows: Agency: Arcadia Redevelopment Agency 240 West Huntington (P.O. Box 60021) Arcadia, CA 91066 Owner: Arcadia Commons, LP, 5755 E. Kings Canyon Road, Suite 110 Fresno, CA 93727 With a Copy to: Law Offices of Patrick R. Sabelhaus 1006 Fourth Street, Sixth Floor Sacramento, CA 95814 Any of the parties may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or communications shall be sent. Arcadia Commons 13 ORANGE \SKLEINBERG \68259.5 Section 14.9 Severability If any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions of this Agreement shall not in any way be affected or impaired thereby. IN WITNESS WHEREOF, the Agency and Owner have executed this Agreement by duly authorized representatives, all on the date first written above. Arcadia Commons, LP, a California Limited Partnership By: Arcadia Commons, LLC, a California limited liability company, General Partner C Michael J. Conway, Jr. Managing Member Arcadia Commons, LP, a California Limited Partnership By: Community Revitalization and Development Corporation a California nonprofit public benefit corporation, Managing General Partner By: David Rutledge Secretary /Chief Financial Officer Arcadia Commons 14 ORANGE \S KLEINBERG \68259.5 AGENCY: Arcadia Redevelopment Agency, a public body corporate and politic C Name: Title: ATTEST C Agency Secretary Arcadia Commons 15 ORANGE \S K LE 1N B ERG \68259.5 EXHIBIT A Property Description ORANGE \S KLE1N B ERG \68259.5 Exhibit B Income Certification ORANGE \S KLEINBERG \68259.5 ORANGE \S KLEINBERG168259.5 EXHIBIT G Certificate of Completion ORANGE \S KLEINBERG \68259.5 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Arcadia Redevelopment Agency 240 West Huntington Drive or P.O. Box 60021 Arcadia, CA 91066 Attention: Executive Director (Space above for Recorder's Use Only) REDEVELOPMENT AGENCY OF THE CITY OF ARCADIA CERTIFICATE OF COMPLETION (Arcadia Commons) We, , Chairperson and , Secretary of the Redevelopment Agency of the City of Arcadia, a public body corporate and politic (the "Agency ") certify that: By its Resolution No. _, adopted and approved the Agency resolved: Section 1 . The Project required to be constructed in accordance with that certain Owner Participation and Loan Agreement (Arcadia Commons) (the "Agreement ") dated , 2010, by and between the Agency and Arcadia Commons, L.P., a California limited partnership (the "Developer "), on that certain real property specifically described in the legal description(s) attached to this Certificate of Completion as Exhibit "A" (the "Property "), is complete in accordance with the provisions of the Agreement. Section 2 . This Certificate of Completion constitutes conclusive evidence of the Agency's determination of the Developer's satisfaction of its obligation under the Agreement to construct and install the Project on the Property, including any and all buildings, parking areas, landscaping areas and related improvements necessary to support or meet any requirements applicable to the Project and its use and occupancy on the Property, whether or not such improvements are located on the Property or on other property subject to the Agreement, excluding any normal and customary tenant improvements and minor building "punch- list" items. Notwithstanding any provision of this Certificate of Completion, the Agency may enforce any covenant surviving this Certificate of Completion in accordance with the terms and conditions of the Agreement. The Agreement is an official record of the Agency and a copy of the Agreement may be inspected in the office of the Secretary of the Agency located at California , during the regular business hours of the Agency. O RAN G F, \S K L E IN B E RG \6 82 5 9.5 DATED AND ISSUED this _ day of Chairperson Secretary [ALL SIGNATURES MUST BE NOTARIZED] ORANGE \S K LE 1NB ERG \68259.5 Exhibit " A " Legal Description of the Property ORANGE \SKLEINBERG \68259.5 EXHIBIT H Notice of Affordability Restrictions on Transfer of Property ORANGE \S KLE INBERG \68259.5 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Arcadia Redevelopment Agency 240 West Huntington Drive or P.O. Box 60021 Arcadia, CA 91066 Attention: Executive Director NOTICE OF AFFORDABILITY RESTRICTIONS ON TRANSFER OF PROPERTY Important notice to owners, purchasers, tenants, lenders, brokers, escrow and title companies, and other persons, regarding affordable housing restrictions on the real property described in this Notice: Restrictions have been recorded with respect to the property described below (referred to in this Notice as the "Property ") which restrict the price and terms at which the Property may be sold or rented. These restrictions may limit the sales price or rents of the Property to an amount which is less than the fair market value of the Property. These restrictions limit the income of persons and households who are permitted to purchase and rent the Property. Title of Document Containing Affordable Housing Restrictions: Owner Participation and Loan Agreement (Arcadia Commons) (referred to in this Notice as the "Affordable Housing Restrictions "). Parties to Affordable Housing Restrictions: Arcadia Redevelopment Agency, a public body corporate and politic ( "Agency "), and Arcadia Commons, L.P., a California limited partnership ( "Developer" or "Owner "). The Affordable Housing Restrictions are recorded (check one) o as Document No. , official records of ; or o concurrently with this Notice, official records of County. Legal Description of Property: Street Address of Property: , Unit No. , California. Assessor's Parcel Number of Property: Summary of Affordable Housing Restrictions (check as applicable): County, on o This Document restricts the amount of rent which may be charged for rental housing units in the Property, as follows: o This Document restricts the sales price which may be charged for the sale of the ownership housing unit or units on the Property, as follows: o This Document restricts the income level of the tenant or buyer of the Property, as follows: o Term of Restrictions: 55 years commencing on the date of the certificate of occupancy for the Development. This Notice does not contain a full description of the details of all of the terms and conditions of the Affordable Housing Restrictions. You will need to obtain and read the Affordable Housing Restrictions to fully understand the restrictions and requirements which apply to the Property. This Notice is being recorded and filed in compliance with Health and Safety Code Section 33334.3(f)(3) and (4), and shall be indexed against the Agency and the current Owner of the Property. Dated: , 2010. Arcadia Redevelopment Agency Executive Director IN Secretary [ALL SIGNATURES MUST BE NOTARIZED] ORANGE \SKLEINBERG \68259.5 EXHIBIT I Notice of Agreement ORANGE \S KLE INB ERG \68259.5 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Arcadia Redevelopment Agency 240 West Huntington Drive or P.O. Box 60021 Arcadia, CA 91066 Attention: Executive Director (Space Above Line For Use By Recorder) [Recordation of this Document Is Exempt From Fees Payable to the Recorder Under Government Section Code 27383] REDEVELOPMENT AGENCY OF THE CITY OF ARCADIA Notice of Agreement 2010 Owner Participation and Loan Agreement (Arcadia Commons) TO ALL INTERESTED PERSONS PLEASE TAKE NOTICE that as of , 2010, Arcadia Commons, L.P., a California limited partnership, (the "Developer ") and the Redevelopment Agency of the City of Arcadia, a public body, corporate and politic (the "Agency "), entered into an agreement entitled "Owner Participation and Loan Agreement (Arcadia Commons)" (the "Agreement "). A copy of the Agreement is on file with the Secretary of the Agency and is available for inspection and copying by interested persons as a public record of the Agency during the regular business hours of the Agency. The Agreement affects the real property (the "Property ") described in Exhibit "A" attached to this Notice of Agreement. The meaning of defined terms used in this Notice of Agreement shall be the same as set forth in the Agreement. PLEASE TAKE FURTHER NOTICE that the Agreement contains certain community redevelopment covenants running with the land and other agreements of the parties affecting the Property, as set forth below: "[INSERT ALL COVENANTS]" O RANG E \SKLEINBERG \68259.5 THIS NOTICE OF AGREEMENT is dated as of , 2010, and has been executed on behalf of the parties to the Agreement on the date indicated next to the signatures of their authorized officers. This Notice of Agreement may be executed in counterparts and when fully executed each counterpart shall be deemed to be one original instrument. Dated: AGENCY REDEVELOPMENT AGENCY OF THE CITY OF ARCADIA Executive Director ATTEST: Agency Secretary APPROVED AS TO FORM: Agency Counsel Dated: Dated: DEVELOPER ARCADIA COMMONS, L.P., A CALIFORNIA LIMITED PARTNERSHIP By: _ Its By: Its [ALL SIGNATURES MUST BE NOTARIZED] ORANGES K LE MB ERG \68259.5 Exhibit "A" OR ANGE \SKLEINBERG \68259.5 EXHIBIT J Borrower's Official Action ORANGE \SKLEINBERG \68259.5 ORANGE \SKLEINBERG \68259.5 RESOLUTION OF THE GENERAL PARTNERS OF Arcadia Campus Commons Associates, a California limited partnership WHEREAS ARCADIA CAMPUS COMMONS ASSOCIATES, a California limited partnership, (the "Partnership ") by its consent action as authorized by California law wishes to enter into a loan transaction with the ARCADIA REDEVLEOPMENT AGENCY (the "Agency ") which includes entering into various documents related to said transaction, including without limitation, an Owner Participation and Loan Agreement (the "OPA "); RESOLVED that the PARTNERSHIP has all legal rights, permissions and authority to enter into the above - mentioned transactions; 2. RESOLVED further that the loan transaction is in the best interests of the Partnership, does not conflict with, contravene or violate any other agreement or encumbrance which the Partnership is a party to; RESOLVED FURTHER that David Rutledge as Secretary and Chief Executive Officer of the Managing General Partner of the Partnership, COMMUNITY REVITALIZATION AND DEVELOPMENT CORPORATION, a California nonprofit public benefit corporation, ( "CRDC" or the "Corporation ") has all necessary authority, right and power to execute any and all documentation for the Corporation concerning any and all matters necessary to enter into the above mentioned loan transaction with the Lender. 4. RESOLVED FURTHER that Michael J. Conway, Jr., Steven L. Froberg, and Katherine Bree Comstock, as Members of the General Partner of the Partnership, ARCADIA CAMPUS COMMONS ASSOCIATES, LLC, a California limited liability company, (the "LLC ") have all necessary authority, right and power to execute any and all documentation concerning any and all matters necessary to enter into the above mentioned loan transaction as Members of the General Partner with the Agency. RESOLVED FURTHER that all actions already taken by either the PARTNERSHIP, CRDC or LLC, are hereby ratified; 6. RESOLVED FURTHER that David Rutledge, Michael J. Conway, Jr., Steven L. Froberg, and Katherine Bree Comstock are hereby authorized and appointed to sign all documents for this transaction on behalf of the PARTNERSHIP. [Signatures on following page] Resolution of Arcadia Campus Commons Associates 09/16/10 Dated: September _, 2010 ARCADIA CAMPUS COMMONS ASSOCIATES, a California limited partnership By: Community Revitalization and Development Corporation, a California nonprofit public benefit corporation Its: Managing General Partner David Rutledge, Secretary /Chief Executive Officer By: Arcadia Campus Commons Associates, LLC, a California limited liability company Its: General Partner Michael J. Conway, Jr., Manager /Member Steven L. Froberg, Member Katherine Bree Comstock, Member Resolution of Arcadia Campus Commons Associates 09/16/10 2 EXHIBIT K Performance Schedule SUBJECT TO REVISION PRIOR TO EXECUTION ORAN GE\S KLE 1N B E RG \68259.5 1 EXH C AMP US r ST1'E UNTROL NO 2000 AGENCY STUDY SESSION FE€ MA 2010 E1+N�TITlMfEN -T PROCESSMG AND DESIGN A PR(A AL )JA�t : 2010 APPUC TION FOR TAX -E} IPT & TAX CREDITS JXJI., 2010 TEFRA EE A'RIN G AUG 2010 APPROV 4:L OF 4UrbMR PARTICIPATION ACREEM ENT ;SEP 201:0 ALLOCATION OF TAX -EXE: PT BONDS SEP ` 010 START CON STRUCTION DP AWM;GS, SEP 2010 BOND CLOSIN+GAND L.AIM ACQ&. IS1TTClM DEC 2010 SUBMIT CONSTRUCTION DRA GS DEC 2010 START TENANT RELOCATION N DEC 2010 COMPLETE PLAIT CHECK FEB 2011 . C€ NEPLETE TENANT RELOCATION FEB 2011 START OF 0O STRUCTION FEB 2011 COMPLETION OF CONS71RUMON APR 2012 COMPLETE RENT LP JUL 2012 PERM LOAN CONVERSION JAN 2013 F AL RDA PAS` IN JAN 2015 EXHIBIT L Agency Promisorry Note Securing Permanent Component of Loan ORANGE \SKLEINBERG \68259.5 ORANGE \S KLE INB ERG \68259.5 REDEVELOPMENT AGENCY OF THE CITY OF ARCADIA AGENCY PROMISSORY NOTE (Unsecured Loan) $3,355,565.00 USD September_, 2010 Arcadia, California FOR VALUE RECEIVED, the undersigned, THE REDEVELOPMENT AGENCY OF THE CITY OF ARCADIA ( "Maker "), a California public agency, promises to pay to ARCADIA COMMONS, LLC ( "Holder "), a California limited liability company, or order, at Arcadia, CA (or at such other place as Holder may specify from time to time in writing), the principal sum of up to Three Million Three Hundred Fifty Five Thousand Five Hundred Sixty Five Dollars ($3,355,565.00), as provided herein. Said payment shall not be due prior to January 1, 2015 and must be made no later than January 15, 2015. This Promissory Note is made with reference to that certain "Owner Participation and Loan Agreement (Arcadia Commons)" dated , 2010, for reference purposes only ( "Agreement ") between Maker and Holder. All initially capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Agreement. 1. Maker will pay to Holder the principal amount of this Promissory Note, and accrued interest, as follows: 1.1 The unpaid principal balance of this Promissory Note shall not bear interest 1.2 Maker shall pay the principal amount of this Promissory Note in one payment pursuant to the terms and conditions of the Agreement provided that Holder is not in Default of said Agreement and all conditions precedent to disbursement of the Permanent Component of the Loan have occurred. 2. All payments due hereunder are payable in lawful money of the United States of America in same day funds. This Note may be prepaid in full at any time without penalty. 3. Interest. This Note shall not bear interest. 4 Should Maker fail to make any payment under this Note when due or within thirty (30) days following written notice of such failure from Holder, Holder may, at Holder's option, without prior notice, declare the unpaid balance of this Note to be immediately due and payable, and the same shall immediately become due and payable 5. The unenforceability or invalidity of any provision or provisions of this Note as to any persons or circumstances shall not render that provision or those provisions unenforceable or invalid as to ORANGETHULL71997. I any other person or circumstances, and all provisions hereof, in all other respects, shall remain valid and enforceable. 6. This Note shall bind Maker and Maker's successors, and assigns and the benefits hereof shall inure to Holder and Holder's successors and assigns. This Note is not secured. THIS NOTE MAY BE ASSIGNED, SOLD, ALIENATED, PLEDGED OR HYPOTHECATED SOLELY FOR THE PURPOSE OF SECURING CONSTRUCTION FINANCING FOR THE PROJECT (AS DEFINED IN THE AGREEMENT) OR FOR THE PURPOSE OF REFINANCING, REFUNDING OR RETIRING SUCH CONSTRUCTION FINANCING WITH PERMANENT FINANCING. 7. The validity, interpretation and performance of this Note shall be governed by and construed in accordance with the laws of the State of California, without regard to conflicts of laws principles. 8. Time is of the essence of this Note. 9. Maker and all other persons liable or to become liable for all or part of this indebtedness, jointly and severally waive demand, presentment for payment, notice of nonpayment, protest and notice of protest hereon, and agree to pay, in the Event of Default hereunder, all costs of collection, including attorneys fees, whether or not suit is commenced. 10. The Holder and the Maker acknowledge and stipulate that the obligation hereunder was entered into in the City of Arcadia, Los Angeles County, California. Any legal action or proceeding to interpret, enforce, or which in any way arises out of this Note shall be instituted and prosecuted in the appropriate court in Los Angeles County, California. Maker and Holder expressly waive, to the maximum legal extent, any legal right they may have to have such action or proceeding transferred to or prosecuted in any other court or jurisdiction. MAKER: THE REDEVELOPMENT AGENCY OF THE CITY OF ARCADIA, a California public agency ME Executive Director ORANGETHULL\7I997A EXHIBIT M Guarantee ORANGMSKLEMERM68259.5 CORPORATE GUARANTEE by and between ASHWOOD CONSTRUCTION, INC. a California Corporation and REDEVELOPMENT AGENCY OF THE CITY OF ARCADIA a public body, corporate and politic GUARANTEE, dated as of , 2010, made by Ashwood Construction. Inc., California Corporation ( "Guarantor "), in favor of Redevelopment Agency of the City of Arcadia, Arcadia, California, ( "Beneficiary "). For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and to induce Beneficiary to timely consent to the Owner Participation Agreement (the "Agreement ") with Arcadia Commons LP (Arcadia Commons), Guarantor agrees as follows: I. Interpretive Provisions. A. The words "hereof," "herein" and "hereunder" and words of similar import, when used in this Guarantee, shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and section and paragraph references are to this Guarantee unless otherwise specified. B. The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. II. Guarantee, A. Effective upon the signature of the Agreement, Guarantor unconditionally and irrevocably guarantees to Beneficiary the timely and complete performance of all standard terms and obligations under the Agreement, including Construction of the Project as those terms are defined in the Agreement (the "Standard Terms "). The Guarantee is an irrevocable, absolute, continuing guarantee of payment and performance, and not a guarantee of collection. If Arcadia Commons fails to perform any of its Standard Terms and obligations in full when due in accordance with the terms of the Agreement, Guarantor will promptly secure the completion of the Standard Terms and obligations, pay the same to Beneficiary or procure payment of same to Beneficiary. B. This Guarantee shall remain in full force and effect until the performance in full of all Standard Terms and at a time when no additional Standard Terms remain outstanding or will accrue to Beneficiary under the Agreement. ORANGE \SKLEINBERG \68259.5 III. Waiver. Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Standard Terms and notice of or proof of reliance by Beneficiary upon this Guarantee or acceptance of this Guarantee. Guarantor waives diligence, presentment, protest and demand for payment to Beneficiary with respect to the Standard Terms; provided, however, that Guarantor shall be furnished with a copy of any notice of or relating to default under the Agreement to which Arcadia Commons is entitled or which is served upon Arcadia Commons at the same time such notice is sent to or served upon Arcadia Commons. IV. Representations and Warranties. Each of Guarantor and Beneficiary represents and warrants that: (i) the execution, delivery and performance by it of this Guarantee are within its corporate, limited liability company or other powers, have been duly authorized by all necessary corporate, limited liability company or other action, and do not contravene any law, order, decree or other governmental restriction binding on or affecting it; and (ii) no authorization or approval or other action by, and no notice to or filing with, any govermmental authority or regulatory body is required for the due execution, delivery and performance by it of this Guarantee, except as may have been obtained or made, other than, in the case of clauses (i) and (ii), contraventions or lack of authorization, approval, notice, filing or other action that would not, individually or in the aggregate, impair or delay in any material respect such party's ability to perform its obligations hereunder. V. Binding Effect. This Guarantee, when executed and delivered by Beneficiary, will constitute a valid and legally binding obligation of Guarantor, enforceable against it in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency or other similar laws applicable to creditors' rights generally and by equitable principles (whether enforcement is sought in equity or at law). VI. Notices. All notices, requests, demands, approvals, consents and other communications hereunder shall be in writing and shall be deemed to have been duly given and made if served by personal delivery upon the party for whom it is intended or delivered by registered or certified mail, return receipt requested, or if sent by Telecopier, provided that the telecopy is promptly confirmed by telephone confirmation thereof, to the party at the address set forth below, or such other address as may be designated in writing hereafter, in the same manner, by such party: To Guarantor: To Beneficiary: OR ANGE \SKLEINBERG \68259.5 VII. Integration. This Guarantee represents the agreement of Guarantor with respect to the subject matter hereof and there are no promises or representations by Guarantor or Beneficiary relative to the subject matter hereof other than those expressly set forth herein. VIII. Amendments in Writing. None of the terms or provisions of this Guarantee may be waived, amended, supplemented or otherwise modified except by a written instrument executed by Guarantor and Beneficiary, provided that any right, power or privilege of Beneficiary arising under this Guarantee may be waived by Beneficiary in a letter or agreement executed by Beneficiary. IX. Section Headings. The section headings used in this Guarantee are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. X. No Assignment or Benefit to Third Parties. This Agreement shall be binding upon and inure to the benefit of the parties hereto. Nothing in this Agreement, express or implied, is intended to confer upon anyone other than Guarantor and Beneficiary and their respective permitted assigns, any rights or remedies under or by reason of this Guarantee. XI. Expenses. All costs and expenses incurred in connection with this Guarantee and the transactions contemplated hereby shall be borne by the party incurring such costs and expenses. XII. Counterparts. This Guarantee may be executed by Guarantor and Beneficiary on separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. XIII. Governing Law. This Guarantee shall be governed by and construed and interpreted in accordance with the laws of the state of California without regard to principles of conflicts of law. XIV. Waiver of ,fury Trial. Each party hereto hereby irrevocably and unconditionally waives trial by jury in any legal action or proceeding relating to this Guarantee and for any counterclaim therein. TO EFFECTUATE THIS GUARANTEE, each of the undersigned has caused this Guarantee to be duly executed and delivered by its duly authorized officer on the date set forth below the authorized signature. "GUARANTOR" By: Name: ORANGE \SKLEINBERG \68259.5 Title: Date: "BENEFICIARY" By: Name: Title: Date: ORANGE \S KLE INB ERG \68259.5 LOAN AGREEMENT by and between ARCADIA REDEVELOPMENT AGENCY and ARCAMA COMMONS. L P, a C:.aliforilia limited partnership (Arcadia Commons) Arcadia Commons ORANGE \SKLEINBERG \68259.5 TABLE OF CONTENTS (continued) Page ARTICLE 1 DEFINITIONS AND EXHIBITS ................................................. ..............................1 Section1.1 Definitions ..................................................................... ..............................1 Section1.2 Exhibits .......................................................................... ..............................3 ARTICLE 2 LOAN PROVISIONS ................................................................... ..............................4 Section2.1 Loan ............................................................................... ..............................4 Section2.2 Interest ........................................................................... ..............................4 Section 2.3 Use of Loan Funds ......................................................... ..............................4 Section2.4 Security .......................................................................... ..............................4 Section 2.5 Construction Component of Loan Disbursement .......... ..............................4 Section 2.6 Permanent Component of Loan Disbursement .............. ..............................6 Section 2.7 Repayment Schedule ..................................................... ..............................7 Section 2.8 Reports and Accounting of Residual Receipts .............. ..............................8 Section2.9 Non - Recourse ................................................................ ..............................9 ARTICLE 3 CONSTRUCTION OF THE DEVELOPMENT ......................... .............................10 Section 3.1 Permits and Approvals .................................................. .............................10 Section4.1 Section 3.2 Plans and Specifications ............................................... .............................10 Section 3.3 Approved Scope of Work ............................................ ..............................1 l Section 3.4 Construction Contract ................................................. ............................... l l Section 3.5 Performance and Payment Bonds ............................... ............................... l l Section 3.6 Commencement of Construction .................................. .............................11 Section4.5 Section 3.7 Completion of Construction ......................................... .............................11 Section 4.6 Section 3.8 Construction Pursuant to Plans and Laws .................... .............................11 Section 4.7 Section 3.9 Income Certifications and Marketing Plan ................... .............................12 Section4.8 Section3.10 Relocation ..................................................................... .............................13 Section 4.9 Section 3.11 Equal Opportunity ........................................................ .............................13 Section 3.12 Progress Reports ........................................................... .............................13 Section 4.10 Section 3.13 Construction Responsibilities ....................................... .............................13 Section 4.11 Section 3.14 Mechanics Liens, Stop Notices, and Notices of Completion .................... 14 Section3.15 Inspections .................................................................... .............................14 Section 3.16 Approved Development Budget; Revisions to Budget . .............................14 ARTICLE 4 LOAN REQUIREMENTS.,. ..... I ......... I .................................................................... 15 Section4.1 Applicability ................................................................. .............................15 Section 4.2 Financial Accountings and Post - Completion Audits .... .............................15 Section4.3 Information ................................................................... .............................15 Section4.4 Records ......................................................................... .............................15 Section4.5 Audits ............................................................................ .............................15 Section 4.6 Hazardous Materials ..................................................... .............................15 Section 4.7 Maintenance and Damage ............................................ Section4.8 .............................17 Fees and Taxes Section 4.9 .............................................................. .............................18 Notice Litigation of ...................................................... .............................18 Section 4.10 Operation of Development as Affordable Housing ...... .............................18 Section 4.11 Nondiscrimination ........................................................ .............................18 r Arcadia Commons ORANGE \SKLE INB ERG \68259.5 TABLE OF CONTENTS (continued) Page Section 4.12 Mandatory Language in all Subsequent Deeds, Leases and Contracts....................................................................... .............................18 Section 4.13 Insurance Requirements ............................................... .............................19 ARTICLE 5 ASSIGNMENT AND TRANSFERS .......................................... .............................21 Section5.1 Definitions .................................................................... .............................21 Section 5.2 Purpose of Restrictions on Transfer ............................. .............................21 Section 5.3 Prohibited Transfers ..................................................... .............................21 Section 5.4 Permitted Transfers Without Prior Agency Approval .. .............................22 Section 5.5 Permitted Transfers With Prior Approval .................... .............................22 Section 5.6 Release of Borrower ..................................................... .............................22 ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BORROWER ...........................22 Section 6.1 Representations and Warranties ................................... .............................22 ARTICLE 7 DEFAULT AND REMEDIES .................................................... .............................24 Section 7.1 Events of Default .......................................................... .............................24 Section7.2 Remedies ...................................................................... .............................26 Section7.3 Right of Contest ............................................................ .............................26 Section 7.4 Remedies Cumulative ................................................... .............................26 ARTICLE 8 GENERAL PROVISIONS .......................................................... .............................27 Section 8.1 Relationship of Parties .................................................. .............................27 Section8.2 No Claims ..................................................................... .............................27 Section8.3 Amendments ................................................................. .............................27 Section 8.4 Indemnification ............................................................. .............................27 Section 8.5 Non - Liability of Agency Officials, Employees and Agents ......................27 Section 8.6 No Third Party Beneficiaries ........................................ .............................27 Section 8.7 Discretion Retained By City ......................................... .............................28 Section 8.8 Notices, Demands and Communications ...................... .............................28 Section8.9 Applicable Law ............................................................. .............................28 Section8.10 Parties Bound ................................................................ .............................28 Section8.11 Attorneys' Fees ............................................................. .............................28 Section8.12 Severability ................................................................... .............................29 Section8.13 Force Majeure ............................................................... .............................29 Section 8.14 Agency Approval .......................................................... .............................29 Section8.15 Waivers ......................................................................... .............................29 Section 8.16 Title of Parts and Sections ............................................ .............................29 Section 8.17 Entire Understanding of the Parties .............................. .............................29 Section 8.18 Multiple Originals; Counterpart ................................... .............................30 Exhibit A: Legal Description of the Property Exhibit B: Approved Development Budget Exhibit C: Scope of Approved Work ii Arcadia Commons ORANGES KLEINBERM68259.5