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AHA-2017-005RESOLUTION NO. 017 7-005 A RESOLUTION OF THE ANAHEIM HOUSING AUTHORITY APPROVING AN AFFORDABLE HOUSING AGREEMENT BETWEEN THE ANAHEIM HOUSING AUTHORITY AND AVON DAKOTA HOUSING PARTNERS II, L.P., AUTHORIZING THE EXECUTIVE DIRECTOR TO NEGOTIATE THE TERMS OF AND FINALIZE SUCH AFFORDABLE HOUSING AGREEMENT; AUTHORIZING THE EXECUTIVE DIRECTOR TO IMPLEMENT SUCH AFFORDABLE HOUSING AGREEMENT; AND MAKING CERTAIN OTHER FINDINGS IN CONNECTION THEREWITH WHEREAS, the Anaheim Housing Authority ("Authority") is a California housing authority duly organized and existing under the California Housing Authorities Law, Part 2 of Division 24, Section 34200, et seq., of the Health and Safety Code ("HAL"), and has been authorized to transact business and exercise the power of a California housing authority pursuant to action of the City Council ("City Council") of the City of Anaheim; and WHEREAS, the City of Anaheim ("City") is a California municipal corporation and charter city; and WHEREAS, the City is a participating jurisdiction with the United States Department of Housing and Urban Development ("HUD") that has received funds ("HOME Funds") from HUD pursuant to Title II of the Cranston Gonzalez National Affordable Housing Act (42 U.S.C. 12701 12839) and the HOME Program regulations codified at 24 CFR Part 92, as amended by the "2013 HOME Final Rule" at 24 CFR Part 92 (Complete Rule) http://www.ecfr.gov/cgi-bin/text- idx?tpl=/ecfrbrowse/Title24/24cfr92 main�02.tpl (together, "HOME Program"); and WHEREAS, HOME Program has, among its purposes, the strengthening of public-private partnerships to provide more affordable housing, and particularly to provide decent, safe, sanitary, and affordable housing, with primary attention to housing for very low income and lower income households in accordance with the HOME Program; and WHEREAS, the HOME Program funds are used by the Authority, as a participating jurisdiction, to carry out multi-year housing strategies through acquisition, rehabilitation, and new construction of housing for target income persons and families; and WHEREAS, there is a multifamily residential neighborhood in the City commonly called "Avon/Dakota" that is located in an area bounded on the east by L3 Communications at 602 E. Vermont Avenue and the development site at 700 E. South Street, on the north by South Street, on the south by Vermont Street, and on the west by Thomas Jefferson Elementary School and Olive Elementary School and which area is part of the Central Anaheim Policing District ("Avon/Dakota Neighborhood"); and WHEREAS, the Avon/Dakota Neighborhood has been identified as a Level III "challenged" neighborhood under the City of Anaheim's Neighborhood Improvement Program; this designation is due to evidence of moderate to substantial social, economic and physical decline, as well as increased calls for service from the police department and code enforcement; and, further, the Avon/Dakota Neighborhood has seen a transition from owner -occupied units to mainly tenant occupied units and as a result, deferred maintenance is evident; and 1 WHEREAS, in order to eliminate deterioration and to revitalize the Avon Dakota Neighborhood, Authority and The Related Companies of California, LLC, a California limited liability company ("TRCC"), entered into that certain Neighborhood Revitalization Agreement for the Avon/Dakota Neighborhood, dated as of June 1, 2010, and amended by that certain First Amendment to the Neighborhood Revitalization Agreement for the Avon/Dakota Neighborhood, dated as of February 1, 2011 (collectively, the "Revitalization Agreement"); and WHEREAS, in connection with the Revitalization Agreement, the City, the former Anaheim Redevelopment Agency (the "Agency") and the Authority entered into that certain Cooperation Agreement dated as of June 1, 2010 and that certain amended Cooperation Agreement (Additional Funding for Avon/Dakota Neighborhood Revitalization) dated as of January 1, 2011 dated as of January 1, 2011 (together, "Cooperation Agreements") whereby (1) City agreed to transfer to Authority up to Three Million Dollars ($3,000,000) in HOME Program funds, up to Ninety -Six Thousand Dollars ($96,000) in CDBG Program funds, and up to Six Hundred Sixty -Three Thousand Dollars ($663,000) in NSP funds (as therein described and defined); (2) Agency (now the City, acting as the Successor Agency to the Anaheim Redevelopment Agency, referred to herein as the "Successor Agency") agreed to transfer to Authority One Million Forty -One Thousand Dollars ($1,041,000) from the Housing Fund; (3) Authority agreed to use such transferred funds to cause with TRCC the preparation and implementation of the Revitalization Plan (hereinafter defined) and the Revitalization Agreement; and (4) by the amendment thereto, increased funding available to Authority for expenditures under the Revitalization Agreement by an additional Fifteen Million Dollars ($15,000,000) for a total of up to $19,800,000; and WHEREAS, the Cooperation Agreements and the Revitalization Agreement, together, are "enforceable obligations" of the Agency under Assembly Bill xl 26 which added Parts 1.8 and 1.85 to Division 24 of the Health and Safety Code ("Dissolution Act") and have been listed (by the Agency prior to February 1, 2012 and by the Successor Agency on and after February 1, 2012) on the "Enforceable Obligation Payment Schedule" ("EOPS") and initial "Recognized Obligation Payment Schedule" ("ROPS) and will continue to be so listed until the Cooperation Agreements and the Revitalization Agreement, and all implementing contracts and instruments thereto, are fully performed and implemented; however, the California Department of Finance challenged the characterization of these obligations as enforceable obligations and prevailed at the trial court level in such dispute; and WHEREAS, the Authority additionally maintains a Low and Moderate Income Housing Asset Fund (the "Housing Asset Fund") pursuant to Health and Safety Code Section 34176 and 34176.1 and, pursuant to the Revitalization Agreement, the Authority Executive Director is authorized to use moneys held in the Housing Asset Fund to provide assistance to the Developer in furtherance of the revitalization of the Avon/Dakota Neighborhood; and WHEREAS, pursuant to the Revitalization Agreement, Authority and TRCC jointly and cooperatively prepared a revitalization plan for the Avon/Dakota Neighborhood ("Revitalization Plan"), and agreed to implement the Revitalization Plan in the manner set forth in the Revitalization Agreement; and WHEREAS, pursuant to the Revitalization Agreement, the funds appropriated to Authority pursuant to the Cooperation Agreements are and will continue to be allocated and disbursed as Authority reasonably determines necessary for the Revitalization Plan and its implementation; and 2 WHEREAS, the Revitalization Agreement and Revitalization Plan set forth general procedures whereby TRCC and/or Authority would acquire properties within the Avon -Dakota Neighborhood for subsequent improvement as funded pursuant thereto; further, the Revitalization Agreement authorized property acquisition by TRCC subject to the discretion and approval of the Authority; and WHEREAS, the Revitalization Plan prepared by Authority and TRCC contemplates that limited partnerships in which affiliates of TRCC act as a general partner ("TRCC Affiliates") would undertake a multiple phase project ("Project") expanding and improving the supply of affordable housing for Very Low and Low Income Households to develop a viable urban community by providing decent, safe housing and a suitable living environment. The Project is more particularly described in Attachment No. 3 to the "Agreement", as defined below; and WHEREAS, pursuant to the terms of the Revitalization Agreement, Authority and TRCC agreed that the Authority and each TRCC Affiliate would enter into a separate Affordable Housing Agreement for each phase of the Project. Avon Dakota Housing Partners II, L.P. (Developer) is the TRCC Affiliate for the second phase of the Project, and TRCC has assigned its right, title and interest under the Revitalization Agreement with respect to such phase of the Project to Developer; and WHEREAS, Authority has acquired or is under contract to acquire certain real properties generally located at 809 S. Dakota Street, 824 S. Dakota Street, 862 S. Dakota Street, 868 S. Dakota Street and 606 E. Avon Place in the City (together, "Site"), and Authority desires to convey a ground leasehold interest in the Site to Developer for the rehabilitation and long term operation of an affordable rental housing project as the second phase of the Project in accordance with the terms of the Agreement ("Phase II"). Phase II is being undertaken in accordance with the Revitalization Plan prepared in accordance with the Revitalization Agreement; and WHEREAS, the Site is currently improved with seven buildings, including a total of twenty- one (21) apartment units; and WHEREAS, Authority's acquisition of the Site and conveyance thereof to the Developer for rehabilitation and long-term management and operation as affordable housing shall at all times conform to the requirements of the federal Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA), as amended, the implementing regulations of Handbook 1378 of the Department of Housing and Urban Development (HUD), the California Relocation Assistance Law, Government Code Section 7260, et seq., and the Relocation Assistance and Real Property Acquisition Guidelines adopted by the Department of Housing and Community Development and set forth at Title 25, California Code of Regulations Section 6000, et seq. (Guidelines) (collectively, the "Relocation Laws"); and WHEREAS, in accordance with the Relocation Laws, Authority has caused to be prepared a Relocation Plan with respect to each separate property comprising the Site, and has caused such Relocation Plans to be made available to the public, specifically including tenants of the Site, prior to the public hearing for consideration of the Agreement and the Relocation Plans; and WHEREAS, Developer and Authority, as applicable, shall comply with the Relocation Plans approved for the Project, as they may be amended from time to time; and WHEREAS, Developer is experienced in the construction, development, operation and management of high quality housing which is affordable to persons and families of low, very low and 3 extremely low income in Southern California, including without limitation dwelling units developed utilizing HOME Funds and Housing Asset Funds; and WHEREAS, Developer has proposed to enter into an agreement entitled "Affordable Housing Agreement (Avon Dakota Neighborhood — Phase II)" (the "Agreement") under which Developer proposes to: (i) ground lease the Site from Authority pursuant to a ground lease in the form attached to the Agreement as Attachment No. 7 ("Ground Lease"), (ii) develop the Site with Phase II of the Project, consisting of twenty-one (21) apartment units, of which thirteen (13) apartment units shall additionally be subject to restrictions under the HOME Program, and parking for rental to and occupancy by qualified Very Low and Low Income Households, (iii) borrow an amount described in Section 5.1.1 of the Agreement for the development of Phase II at the Site from Authority ("Authority Subordinate Loan"), which Authority Subordinate Loan shall be repaid from eighty-five percent (85%) of the Residual Receipts from the operation of Phase II, and (iv) operate Phase II as affordable housing throughout the 55 -year "Affordability Period" pursuant to the requirements of the Agreement; and WHEREAS, all initially capitalized terms used in this Resolution without definition have the meanings set forth in the Agreement; and WHEREAS, Authority desires to (i) ground lease the Site to Developer pursuant to the Ground Lease, and (ii) make the Authority Subordinate Loan to Developer to assist Developer in the rehabilitation and operation of Phase II in accordance with the Agreement; and WHEREAS, Developer (as "Applicant" to TCAC) intends to submit an application to TCAC ("Application") to obtain an allocation of federal nine percent (9%) Low Income Housing Tax Credits ("Tax Credits") for Phase 11. If Developer does not receive such allocation of 9% Tax Credits after such first Application to TCAC, Developer shall submit an Application for 9% Tax Credits in the next round following notification that Developer's first Application was not successful. If Developer's second round Application is not successful, the provisions of Section 3.10.1(a)(iii) of the Agreement shall apply; and WHEREAS, by Authority's commitment of monies sourced in whole or in part from the Housing Asset Fund and/or HOME Funds for the Agreement and/or the Authority Subordinate Loan, neither Authority (or Successor Agency or City) nor Developer intends in any manner to waive any constitutional and/or legal rights under the Dissolution Act or any other applicable laws; therefore, Authority (and Successor Agency and City) and Developer expressly and intentionally reserve all rights under any and all applicable laws to challenge the validity of any or all provisions of the Dissolution Act in any legal manner or proceeding, including challenging determinations made by the Oversight Board and/or California Department of Finance, without prejudice to the City or Successor Agency or Authority or Developer; and WHEREAS, Developer shall own (under a long-term ground lease from the Authority) and shall develop and operate Phase II and shall cause Phase I1 to be maintained and managed in accordance with the Agreement and the Ground Lease to be executed by Authority and Developer with respect to Phase Il, and all other Transaction Documents, during the entire Affordability Period; and WHEREAS, the Project (including, without limitation, Phase II) is vital to and in the best interest of the City of Anaheim and the health, safety and welfare of its residents, and is in accordance with the public purposes of applicable state and local laws and requirements; and 4 WHEREAS, the Authority has prepared such notices, plans and reports as may be required prior to consideration of this matter and has made available for public inspection all such matters prior to the public consideration of this matter; and WHEREAS, the Authority and City held a public hearing to consider the Agreement and the transaction contemplated therein in accordance with the Housing Authorities Law, the California Community Redevelopment Law, Health and Safety Code Section 33000, et seq., and the Dissolution Act; and WHEREAS, the Authority has duly considered all terms and conditions of the proposed Agreement, including all attachments thereto, and believes that the Project is in the best interests of the City of Anaheim and the health, safety, and welfare of its residents, and in accord with the public purposes and provisions of applicable state and local laws and requirements. NOW, THEREFORE, BE IT RESOLVED BY THE ANAHEIM HOUSING AUTHORITY: Section 1. The Authority Board finds and determines that the foregoing recitals are true and correct and are a substantive part of this Resolution. Section 2. The Authority Board hereby finds and determines, based on all documentation, testimony and other evidence in the record before it, that (a) the proposed sale and development of the Site will assist in the elimination of blight by allowing several parcels (the Site) previously under separate ownership and management, to be combined under single ownership and property management and developed with rehabilitated multifamily rental housing units which will be affordable to persons and families of low, very low and extremely low income; and (b) the consideration being paid to the Authority is not less than the fair reuse value at the use and with the covenants and conditions and development costs authorized by the Affordable Housing Agreement. Section 3. The Authority Board hereby approves the Affordable Housing Agreement between the Authority and the Developer, with such changes as may be mutually agreed upon by the Authority Executive Director (or his duly authorized representative), the City Attorney, and the Developer, respectively, as are minor and in substantial conformance with the form of the Agreement submitted herewith. The Authority Board hereby approves the Relocation Plan for the Site, and authorizes the Authority Executive Director to amend or modify such Relocation Plan from time to time as the Executive Director determines to be appropriate, all in accordance with the Relocation Laws. The Authority Executive Director and the Authority Secretary/City Clerk are hereby authorized to execute and attest the Agreement, including any related attachments, on behalf of Authority. In such regard, the Authority Executive Director (or his duly authorized representative) is authorized to sign the final version of the Agreement after completion of any such non -substantive, minor revisions. Copies of the final form of the Agreement, when duly executed and attested, shall be placed on file in the office of the City Clerk. Further, the Authority Executive Director (or his duly authorized representative) is authorized to implement the Agreement and take all further actions and execute all documents referenced therein and/or necessary and appropriate to carry out the transaction contemplated by the Agreement, including all exhibits thereto. The Authority Executive Director (or his duly authorized representative) is hereby authorized to the extent necessary during the implementation of the Agreement to make technical or minor changes and interpretations of the Agreement after execution, as necessary to properly implement and carry out the Agreement, including all exhibits thereto, provided any and all such changes shall not in any manner materially affect the rights and obligations of the Authority under the Agreement. Section 4. In addition to the authorization of Section 3 above, the Authority Executive Director is hereby authorized, on behalf of the Authority, to sign all other documents necessary or appropriate to carry out and implement the Agreement, including all exhibits thereto and including causing the issuance of warrants in implementation thereto, and to administer the Authority's obligations, responsibilities and duties to be performed under the Agreement, including all exhibits thereto. Section 5. The Authority Board hereby confirms the authority of the Authority Executive Director, in his discretion, pursuant to the Revitalization Agreement and the Cooperation Agreements, to use Housing Asset Funds to acquire real property and interests in real property in the Avon/Dakota Neighborhood. Section 6. As the "lead agency" under the California Environmental Quality Act (Public Resources Code Section 21000, et seq.; herein referred to as "CEQA"), the Governing Board of the Housing Authority hereby finds and determines that the proposed ground lease of the Site consists of the sale of surplus government property (a Class 12 Project) that will not cause a significant effect on the environment and that the Agreement and the sale of the Site pursuant to the Amended Letter is therefore categorically exempt from CEQA pursuant to Section 15312 of Title 14 of the California Code of Regulations. This finding is based on the Authority's determination that (a) the Site does not have significant values for wildlife habitat or other environmental purposes, and (b) the Site is of such size, shape, or inaccessibility that it is incapable of independent development or use. The Governing Board of the Authority further determines that Phase II consists of an in -fill development project (a Class 32 Project) and is therefore categorically exempt from CEQA pursuant to Section 15332 of Title 14 of the California Code of Regulations. This finding is based on the Authority's determination that (a) Phase 11 is consistent with the applicable general plan designation and all applicable general plan policies as well as with applicable zoning designation and regulations; (b) the proposed development occurs within city limits on a project site of no more than five acres substantially surrounded by urban uses; (c) the Site has no value as habitat for endangered, rare or threatened species; (d) approval of the project would not result in any significant effects relating to traffic, noise, air quality, or water quality; and (e) the Site can be adequately served by all required utilities and public services. Section 7. The Authority Secretary shall certify to the adoption of this Resolution. M THE FOREGOING RESOLUTION IS PASSED, APPROVED AND ADOPTED BY THE GOVERNING BOARD OF THE ANAHEIM HOUSING AUTHORITY THIS SIXTH (6th) DAY OF JUNE, 2017, BY THE FOLLOWING ROLL CALL VOTE: AYES: Authority Members Murray, Barnes, Moreno, Kring, and Faessel NOES: None ABSTAIN: Chairman Tait ABSENT: Vice Chairman Vanderbilt ATTST: 01a.- Authority Secretary ANAHEIM "SING AUTHORITY �• By: Chair 7 ATTACHMENT TO RESOLUTION ATTACH COPY OF AGREEMENT ATTACHMENT TO RESOLUTION Page 1 of 1 AFFORDABLE HOUSING AGREEMENT (Avon Dakota Neighborhood - Phase II) by and among ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic, and AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership, TABLE OF CONTENTS Page 1. DEFINITIONS..................................................................................................................5 1.1. Defined Terms.....................................................................................................5 2. GROUND LEASE OF THE SITE...................................................................................24 2.1. Ground Lease....................................................................................................24 2.1.1 Term....................................................................................................24 2.1.2 Rent....................................................................................................25 2.1.3 Title to Improvements... ....................................................................... 26 2.2. Conditions Precedent to Commencement of Ground Lease and Authority SubordinateLoan...............................................................................................26 2.2.1 Authority's Conditions Precedent to the Closing..................................26 2.2.2 Developer Conditions Precedent to the Closing...................................29 2.3. Environmental Condition of the Site...................................................................30 2.3.1 Environmental Condition of the Site.....................................................30 2.3.2 Studies and Reports............................................................................30 2.3.3 Approval of Environmental Condition of the Site..................................31 2.3.4 Indemnification....................................................................................31 2.3.5 Duty to Prevent Hazardous Material Contamination ............................32 2.3.6 Release of Authority and City by Developer........................................32 2.3.7 Environmental Inquiries.......................................................................32 2.4. Escrow ...............................................................................................................33 2.4.1 Costs of Escrow..................................................................................34 2.4.2 Escrow Instructions.............................................................................34 2.4.3 Authority of Escrow Agent...................................................................34 2.4.4 Escrow Closing....................................................................................34 2.4.5 Termination of Escrow.........................................................................35 2.4.6 Closing Procedure...............................................................................35 2.4.7 Review of Title.....................................................................................36 2.4.8 Title Insurance.....................................................................................36 3. DEVELOPMENT OF PHASE 11......................................................................................37 3.1. Development of Phase 11....................................................................................37 3.1.1 Developer's Obligations.......................................................................37 3.1.2 Authority Additional Subsidies.............................................................37 3.1.3 Subsidies to be Added to Authority Subordinate Loan.........................38 3.1.4 Source of Funds for Additional Subsidy...............................................38 3.2. Design Review of Development Plans...............................................................38 3.2.1 Basic Concept Drawings.....................................................................38 3.2.2 Construction Drawings and Related Documents..................................38 3.2.3 Standards for Disapproval...................................................................38 3.2.4 Consultation and Coordination............................................................39 3.2.5 Revisions and Change Orders.............................................................39 3.2.6 Defects in Development Plans.............................................................40 3.2.7 Selection of Subcontractors.................................................................40 3.2.8 Authority Construction Manager..........................................................40 3.3. Timing of Development of Phase 11....................................................................41 3.4. City and Other Governmental Permits................................................................41 3.5. Release of Construction Covenants...................................................................41 4 TABLE OF CONTENTS 3.8. Insurance Requirements .................................................................................... 42 3]51 Minimum Cove rsenlenta........... —.................................. —42 3]5.2 Property |nsur8nC8-------------------------'/44 3.6.3 Reduction inRequirements .................................. .............................. 45 3.6.4 Obligation to Repair and Restore Damage Due to Casualty Covered bvInsurance ............ .................... ............... ........................ 45 3.8.5 Damage nrDestruction Due toCause Not Required 0obe OPERATION[)FHOUSING ..................... .............................................................. ..... 60 4.1. Number ofHousing Units ............................................................. ..................... 60 4.2. Affordable Rent ................................................................................... —......... 51 4.3. Duration of Affordability Requirements; Affordability Period --------.....O2 4'4. Selection OfTenants ......................................... ................................................ U2 4.5. HouSehnkj|noommRaouirennents-----------------------. 6%3 4.5.1 Income Categories .......... ............................................................... ... U4 4.8. Intentionally Omitted ........................................................................................ 04 4.7. Leases; Rental Agreements for Housing Units ..................................... ............ 04 4.8. Marketing and Tenant Selection Plan ....... —..................................................... b4 4.9. Social Services .................................................................................... ............ 05 4.9.1 Alternative Social and Supportive Services ......................................... O5 Covered bvInsurance .............. ............................................. ........ ... 45 3.7. Indemnity ................................................................................... ....................... 45 3.8. Entry by ----------------_______________. 46 3.8. Compliance with Laws ....................................................................................... 46 3.9] Prevailing Wage Laws ......................................................................... 17 3.9.2 Section Compliance ............................................................ ............. 4D 3.9.3 Federal Program Regulations .... ....................................................... 40 3.10. Financing ofPhase U .............................. ................. .................................... ... 51 3.10.1 Preferred Financing Structure .............................................................. 51 3.10.2 Submission OfEvidence ufFinancing .................................................. b2 3.10.3 Alternate Financing Sources ............ ................................................... 54 310.4 Tax Credit Equity ................................................................................. 55 3.10.5 Required Submissions ... ...................................... .............................. 55 3.10.6 Holder Performance nf Development 0fPhase U ................................. 55 8j0.7 Notice CfDefault b}Mortgagee orDeed ofTrust Holders; Right toCure .......... .............................................................. ...................... 5b 310.8 Fai|ureofHoNertOConnpletePhooaU--------------- —hb 3.10.9 Right of Authority to Cure Mortgage VrDeed nfTrust Default .............. 57 310.10 Subordination nfAffordability Covenants; Non -Subordination nf Authority's Fee Interest ..................................................................... .57 3]0.11 Failure b}Obtain Financing ................................................................. 58 3.11. Cost Savings Obligation ..................................................................................... 58 3.11] Audit h0Determine Cost Savings Amount ............................................ 5M 311.2 Cost Savings Payment as Payment ofPrincipal onAuthority SubordinateLoan ....................................... ........................................ 58 311.3 Timing of Payment of Cost Savings ..................................................... 58 3.12. Article }(XX|VCompliance ........................ ......................... ............................... 5Q 3.13. Estoppel Certificates and Confirmation ................................................. ............ 5H 3.13.1 EstoppelCertificate ......................... .............................. .............. ..... b9 OPERATION[)FHOUSING ..................... .............................................................. ..... 60 4.1. Number ofHousing Units ............................................................. ..................... 60 4.2. Affordable Rent ................................................................................... —......... 51 4.3. Duration of Affordability Requirements; Affordability Period --------.....O2 4'4. Selection OfTenants ......................................... ................................................ U2 4.5. HouSehnkj|noommRaouirennents-----------------------. 6%3 4.5.1 Income Categories .......... ............................................................... ... U4 4.8. Intentionally Omitted ........................................................................................ 04 4.7. Leases; Rental Agreements for Housing Units ..................................... ............ 04 4.8. Marketing and Tenant Selection Plan ....... —..................................................... b4 4.9. Social Services .................................................................................... ............ 05 4.9.1 Alternative Social and Supportive Services ......................................... O5 5. [:t 7 TABLE OF CONTENTS (continued) Page Developer..........................................................................................................80 7.4.1 Prohibition...........................................................................................80 7.4.2 Permitted Transfers.............................................................................80 7.4.3 Authority Consideration of Requested Transfer...................................81 7.4.4 Approval of Refinancing of Primary Loan.............................................82 7.5. Successors and Assigns....................................................................................83 7.6. Non -Liability of Officials and Employees of Authority or City..............................83 7.7. Relationship between Authority and Developer..................................................83 7.8. Executive Director; Authority Approvals and Actions..........................................83 7.9. Counterparts......................................................................................................83 7.10. Integration ..........................................................................................................84 4.10.1 General Maintenance..........................................................................65 4.10.2 Program Maintenance.........................................................................66 4.10.3 Occupancy Limits................................................................................67 4.11. Management of Phase II....................................................................................67 4.11.1 Property Manager................................................................................67 4.11.2 Property Management Plan.................................................................68 4.11.3 Gross Mismanagement.......................................................................68 4.11.4 Code Enforcement..............................................................................69 4.12. Capital Reserve Requirements..........................................................................69 4.13. Operating Budget and Operating Reserve.........................................................70 4.14. Non -Discrimination Covenants...........................................................................71 4.15. Monitoring and Recordkeeping..........................................................................72 4.16. Regulatory Agreement.......................................................................................72 AUTHORITY SUBORDINATE LOAN............................................................................72 5.1. Authority Subordinate Loan................................................................................72 5.1.1 Authority Subordinate Loan.................................................................72 5.1.2 Adjustment of Authority Subordinate Loan Amount at Closing.............73 5.2. Repayment of Authority Subordinate Loan.........................................................73 5.2.1 Residual Receipts Report....................................................................73 5.2.2 Annual Financial Statement.................................................................73 5.2.3 Right to Audit.......................................................................................74 5.2.4 Assumption.........................................................................................74 5.3. Security for Authority Subordinate Loan.............................................................74 5.4. Conditions Precedent to Authority Subordinate Loan.........................................74 DEFAULTAND REMEDIES..........................................................................................74 6.1. Events of Default................................................................................................74 6.2. Remedies..........................................................................................................75 6.3. Force Majeure....................................................................................................75 6.4. Termination by Developer..................................................................................75 6.5. Termination by Authority....................................................................................76 6.6. Attorneys' Fees..................................................................................................76 6.7. Remedies Cumulative........................................................................................77 6.8. Waiver of Terms and Conditions........................................................................77 GENERALPROVISIONS ..............................................................................................77 7.1. Time is of the Essence.......................................................................................77 7.2. Notices...............................................................................................................77 7.3. Representations and Warranties of Developer...................................................78 7.4. Limitation Upon Change in Ownership, Management and Control of Developer..........................................................................................................80 7.4.1 Prohibition...........................................................................................80 7.4.2 Permitted Transfers.............................................................................80 7.4.3 Authority Consideration of Requested Transfer...................................81 7.4.4 Approval of Refinancing of Primary Loan.............................................82 7.5. Successors and Assigns....................................................................................83 7.6. Non -Liability of Officials and Employees of Authority or City..............................83 7.7. Relationship between Authority and Developer..................................................83 7.8. Executive Director; Authority Approvals and Actions..........................................83 7.9. Counterparts......................................................................................................83 7.10. Integration ..........................................................................................................84 LIST OF ATTACHMENTS ATTACHMENT NO. 1 - Avon Dakota Neighborhood Map ATTACHMENT NO. 2 - Narrative Description of Avon Dakota Neighborhood ATTACHMENT NO. 3 - TABLE OF CONTENTS ATTACHMENT NO. 4 - Legal Description of Phase II (continued) Schedule of Performance ATTACHMENT NO. 6 - Page ATTACHMENT NO. 7 - 7.11. Real Estate Brokerage Commission...................................................................84 Form of Authority Promissory Note 7.12. Titles and Captions............................................................................................84 ATTACHMENT NO. 10 - 7.13. Interpretation......................................................................................................84 Form of Completion Guaranty 7.14. No Waiver..........................................................................................................84 ATTACHMENT NO. 13 - 7.15. Covenant Not to Sue..........................................................................................84 Form of Release of Construction Covenants 7.16. Developer's Payment and Reimbursement of Authority's Post -Effective ATTACHMENT NO. 16 - Preliminary Financing Plan DateThird Party Costs.......................................................................................85 Form of Operating Budget ATTACHMENT NO. 18 - 7.16.1 Third Party Costs Defined; Obligation..................................................85 ATTACHMENT NO. 19 - Scope of Social and Supportive Services 7.16.2 Payment of Third Party Costs..............................................................85 7.16.3 Exception to Payment of Post -Effective Date Third Party Costs ..........85 7.17. Modifications......................................................................................................86 7.18. Severability........................................................................................................86 7.19. Computation of Time..........................................................................................86 7.20. Legal Advice......................................................................................................86 7.21. Cooperation.......................................................................................................86 7.22. Conflicts of Interest............................................................................................86 7.23. No Third Party Beneficiaries Except for City.......................................................86 LIST OF ATTACHMENTS ATTACHMENT NO. 1 - Avon Dakota Neighborhood Map ATTACHMENT NO. 2 - Narrative Description of Avon Dakota Neighborhood ATTACHMENT NO. 3 - Depiction of Project ATTACHMENT NO. 4 - Legal Description of Phase II ATTACHMENT NO. 5 - Schedule of Performance ATTACHMENT NO. 6 - Scope of Development ATTACHMENT NO. 7 - Form of Ground Lease ATTACHMENT NO. 8 - Form of Authority Promissory Note ATTACHMENT NO. 9 - Form of Authority Deed of Trust ATTACHMENT NO. 10 - Form of Regulatory Agreement ATTACHMENT NO. 11 - Form of Completion Guaranty ATTACHMENT NO. 12 - Form of Notice of Affordability Restrictions ATTACHMENT NO. 13 - Form of Request for Notice ATTACHMENT NO. 14 - Form of Release of Construction Covenants ATTACHMENT NO. 15 - List of Environmental Reports ATTACHMENT NO. 16 - Preliminary Financing Plan ATTACHMENT NO. 17 - Form of Operating Budget ATTACHMENT NO. 18 - Form of Residual Receipts Report ATTACHMENT NO. 19 - Scope of Social and Supportive Services iv AFFORDABLE HOUSING AGREEMENT (Avon Dakota Neighborhood - Phase II) This AFFORDABLE HOUSING AGREEMENT (Avon Dakota Neighborhood — Phase II) ("Agreement"), dated for purposes of identification only as of June _, 2017, is entered into by and among ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic ("Authority"), and AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership ("Developer"). RECITALS The following recitals are a substantive part of this Agreement. A. WHEREAS, Authority is a California housing authority duly organized and existing under the California Housing Authorities Law, Part 2 of Division 24, Section 34200, et seq., of the Health and Safety Code ("HAL"), and has been authorized to transact business and exercise the power of a California housing authority pursuant to action of the City Council ("City Council") of the City of Anaheim. B. WHEREAS, the City of Anaheim ("City") is a California municipal corporation and charter city. C. WHEREAS, The City is a participating jurisdiction with the United States Department of Housing and Urban Development ("HUD") that has received funds ("HOME Funds") from HUD pursuant to Title II of the Cranston Gonzalez National Affordable Housing Act (42 U.S.C. 12701 12839) and the HOME Program regulations codified at 24 CFR Part 92, as amended by the "2013 HOME Final Rule" at 24 CFR Part 92 (Complete Rule) http://www. ecfr.g ov/cg i-bi n/text-idx?tpl=/ecfrbrowse/Title24/24cfr92_m a i n_02.tpl (together, "HOME Program"). The HOME Program has, among its purposes, the strengthening of public-private partnerships to provide more affordable housing, and particularly to provide decent, safe, sanitary, and affordable housing, with primary attention to housing for very low income and lower income households in accordance with the HOME Program. The HOME Program funds are used by the Authority, as a participating jurisdiction, to carry out multi-year housing strategies through acquisition, rehabilitation, and new construction of housing for target income persons and families. D. WHEREAS, there is a multifamily residential neighborhood in the City commonly called "Avon/Dakota" that is located in an area bounded on the east by L3 Communications at 602 E. Vermont Avenue and the development site at 700 E. South Street, on the north by South Street, on the south by Vermont Street, and on the west by Thomas Jefferson Elementary School and Olive Elementary School and which area is part of the Central Anaheim Policing District ("Avon/Dakota Neighborhood"). A map depicting the Avon/Dakota Neighborhood is attached hereto as Attachment No. 1 and fully incorporated by this reference. The narrative description of the Avon Dakota Neighborhood is attached as Attachment No. 2 and fully incorporated by this reference. E. WHEREAS, the Avon/Dakota Neighborhood has been identified as a Level III "challenged" neighborhood under the City of Anaheim's Neighborhood Improvement Program. This designation is due to evidence of moderate to substantial social, economic and physical decline, as well as increased calls for service from the police department and code enforcement. The Neighborhood has seen a transition from owner -occupied units to mainly tenant occupied units and as a result, deferred maintenance is evident. F. WHEREAS, in order to eliminate deterioration and to revitalize the Avon Dakota Neighborhood, Authority and The Related Companies of California, LLC, a California limited liability company ("TRCC"), entered into that certain Neighborhood Revitalization Agreement for the Avon/Dakota Neighborhood, dated as of June 1, 2010, and amended by that certain First Amendment to the Neighborhood Revitalization Agreement for the Avon/Dakota Neighborhood, dated as of February 1, 2011 (collectively, the "Revitalization Agreement"). G. WHEREAS, in connection with the Revitalization Agreement, the City, the former Anaheim Redevelopment Agency (the "Agency") and the Authority entered into that certain Cooperation Agreement dated as of June 1, 2010 and that certain amended Cooperation Agreement (Additional Funding for Avon/Dakota Neighborhood Revitalization) dated as of January 1, 2011 dated as of January 1, 2011 (together, "Cooperation Agreements") whereby (1) City agreed to transfer to Authority up to Three Million Dollars ($3,000,000) in HOME Program funds, up to Ninety -Six Thousand Dollars ($96,000) in CDBG Program funds, and up to Six Hundred Sixty -Three Thousand Dollars ($663,000) in NSP funds (as therein described and defined); (2) Agency (now the City, acting as the Successor Agency to the Anaheim Redevelopment Agency, referred to herein as the "Successor Agency") agreed to transfer to Authority One Million Forty -One Thousand Dollars ($1,041,000) from the Housing Fund; (3) Authority agreed to use such transferred funds to cause with TRCC the preparation and implementation of the Revitalization Plan (hereinafter defined) and the Revitalization Agreement; and (4) by the amendment thereto, increased funding available to Authority for expenditures under the Revitalization Agreement by an additional Fifteen Million Dollars ($15,000,000) for a total of up to $19,800,000. H. WHEREAS, the Cooperation Agreements and the Revitalization Agreement, together, are "enforceable obligations" of the Agency under Assembly Bill x1 26 which added Parts 1.8 and 1.85 to Division 24 of the Health and Safety Code ("Dissolution Act") and have been listed (by the Agency prior to February 1, 2012 and by the Successor Agency on and after February 1, 2012) on the "Enforceable Obligation Payment Schedule" ("EOPS") and initial "Recognized Obligation Payment Schedule" ("ROPS) and will continue to be so listed until the Cooperation Agreements and the Revitalization Agreement, and all implementing contracts and instruments thereto, are fully performed and implemented; however, the California Department of Finance challenged the characterization of these obligations as enforceable obligations and prevailed at the trial court level in such dispute. I. WHEREAS, pursuant to the Revitalization Agreement, the Authority and City have entered into an additional Cooperation Agreement dated concurrently herewith pursuant to which the City agreed to contribute up to $ in moneys sourced from the City's HOME Funds for purposes of acquiring properties and providing financial assistance to the Developer in furtherance of Phase II (defined below) pursuant to this Agreement. J. WHEREAS, the Authority additionally maintains a Low and Moderate Income Housing Asset Fund (the "Housing Asset Fund") pursuant to Health and Safety Code Section 34176 and 34176.1 and may elect to use moneys held in the Housing Asset Fund to provide assistance to the Developer in furtherance of Phase 11 (defined below) pursuant to this Agreement. K. WHEREAS, pursuant to the Revitalization Agreement, Authority and TRCC jointly and cooperatively prepared a revitalization plan for the Avon/Dakota Neighborhood E ("Revitalization Plan"), and agreed to implement the Revitalization Plan in the manner set forth in the Revitalization Agreement. L. WHEREAS, pursuant to the Revitalization Agreement, the funds appropriated to Authority pursuant to the Cooperation Agreements are and will continue to be allocated and disbursed as Authority reasonably determines necessary for the Revitalization Plan and its implementation. M. WHEREAS, the Revitalization Agreement and Revitalization Plan set forth general procedures whereby TRCC and/or Authority would acquire properties within the Avon -Dakota Neighborhood for subsequent improvement as funded pursuant thereto; further, the Revitalization Agreement authorized property acquisition by TRCC subject to the discretion and approval of the Authority. N. WHEREAS, the funds used or to be used by Authority for Phase II include multiple funding sources of federal, state, and local funds. O. WHEREAS, the Revitalization Plan prepared by Authority and TRCC contemplates that limited partnerships in which affiliates of TRCC act as a general partner ("TRCC Affiliates") would undertake a multiple phase project ("Project") expanding and improving the supply of affordable housing for Very Low and Low Income Households to develop a viable urban community by providing decent, safe housing and a suitable living environment. The Project is depicted on Attachment No. 3 attached hereto and incorporated herein by this reference. P. WHEREAS, pursuant to the terms of the Revitalization Agreement, Authority and TRCC agreed that the Authority and each TRCC Affiliate would enter into a separate Affordable Housing Agreement for each phase of the Project. Developer is the TRCC Affiliate for the second phase of the Project, and TRCC has assigned its right, title and interest under the Revitalization Agreement with respect to such first phase of the Project to Developer. Q. WHEREAS, Authority has acquired or is under contract to acquire certain real properties generally located at 809 S. Dakota Street, 824 S. Dakota Street, 862 S. Dakota Street, 868 S. Dakota Street and 606 E. Avon Place in the City (together, "Site"), and Authority desires to convey a ground leasehold interest in the Site to Developer for the rehabilitation and long term operation of an affordable rental housing project as the first phase of the Project in accordance with the terms of this Agreement ("Phase II"). Phase II is being undertaken in accordance with the Revitalization Plan prepared in accordance with the Revitalization Agreement. R. WHEREAS, the Site is currently improved with seven buildings, including a total of twenty-one (21) apartment units. S. WHEREAS, Authority's acquisition, rehabilitation, and relocation for the Project conforms and will continue to conform to the requirements of the federal Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA), as amended, the implementing regulations of Handbook 1378 of the Department of Housing and Urban Development (HUD), the California Relocation Assistance Law, Government Code Section 7260, et seq. (Law), and the Relocation Assistance and Real Property Acquisition Guidelines adopted by the Department of Housing and Community Development and set forth at Title 25, California Code of Regulations Section 6000, et seq. (Guidelines) (collectively, the "Relocation Laws"). 3 T. WHEREAS, Authority will relocate tenants at the Site prior to development of the Site by Developer pursuant to the Relocation Laws. U. WHEREAS, Authority and South Street Housing Partners, L.P. (the "South Street Developer"), an affiliate of TRCC, previously entered into an Affordable Housing Agreement (700 E. South Street Project), dated as of June 1, 2010 ("South Street Agreement"), which provides for the development of an affordable housing development at 700 East South Street in the City ("South Street Development"). Although Phase II is not within the scope of the South Street Agreement and is not governed by its terms, the parties anticipate that the development of Phase II pursuant to this Agreement and the revitalization activities to be undertaken pursuant to the South Street Agreement will be mutually beneficial activities that will help to improve the living conditions within the South Street Development and the Avon/Dakota Neighborhood. V. WHEREAS, Developer is experienced in the construction, development, operation and management of high quality housing which is affordable to persons and families of Low to Moderate Income, including Very Low Income Households in Southern California. W. WHEREAS, Developer desires to: (i) ground lease the Site from Authority pursuant to a ground lease in the form attached hereto as Attachment No. 7 ("Ground Lease"), (ii) develop the Site with Phase II of the Project, consisting of twenty-one (21) apartment units and parking for rental to and occupancy by qualified Very Low and Low Income Households, (iii) borrow an amount described in Section 5.1.1 for the development of Phase II at the Site from Authority ("Authority Subordinate Loan"), which Authority Subordinate Loan shall be repaid from eighty-five percent (85%) of the Residual Receipts from the operation of Phase ll, and (iv) operate Phase II as affordable housing throughout the Affordability Period pursuant to the requirements of this Agreement. X. WHEREAS, Authority desires to (i) ground lease the Site to Developer pursuant to the Ground Lease, and (ii) make the Authority Subordinate Loan to Developer to assist Developer in the rehabilitation and operation of Phase II in accordance with this Agreement. Y. WHEREAS, Developer (as "Applicant" to TCAC) intends to submit an application to TCAC ("Application") to obtain an allocation of federal nine percent (9%) Low Income Housing Tax Credits ("Tax Credits") for Phase II. If Developer does not receive such allocation of 9% Tax Credits after such first Application to TCAC, Developer shall submit an Application for 9% Tax Credits in the next round following notification that Developer's first Application was not successful. If Developer's second round Application is not successful, the provisions of Section 3.10.1(a)(iii) shall apply. Z. WHEREAS, by Authority's commitment of monies sourced in whole or in part from the Housing Fund hereunder and/or HOME Funds for this Agreement or the Authority Subordinate Loan, Authority (and Successor Agency and City) and Developer do not intend in any manner to waive any constitutional and/or legal rights hereunder or thereunder; therefore, Authority (and Successor Agency and City) and Developer expressly and intentionally reserve all rights under any and all applicable laws to challenge the validity of any or all provisions of the Dissolution Act in any legal manner or proceeding without prejudice to the City or Successor Agency or Authority or Developer. AA. WHEREAS, Developer shall own, develop, and operate the Phase II of the Project and shall cause Phase II of the Project to be maintained and managed in accordance with this Agreement and the Transaction Documents during the entire Affordability Period. 0 BB. WHEREAS, the Project (including, without limitation, Phase II) is vital to and in the best interest of the City of Anaheim and the health, safety and welfare of its residents, and is in accordance with the public purposes of applicable state and local laws and requirements. CC. WHEREAS, capitalized terms used in this Agreement are defined in these Recitals and in Section 100, et seq. NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and conditions herein contained, the parties hereto agree as follows: DEFINITIONS 1.1. Defined Terms. The defined terms set forth in this Section 101 shall be used to interpret this Agreement and all attachments hereto except to the extent such terms are otherwise defined in the attachments hereto. "Additional Rent" is defined in Section 2.1.2. "Additional Subsidy" is defined in Section 5.1.1. "Affiliate" shall mean any person or entity directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with Developer, which shall include each of the constituent partners or members of Developer's limited partnership (but not the Investor Limited Partner). The term "control," as used in the immediately preceding sentence, means, with respect to a person that is a corporation, the right to exercise, directly or indirectly, at least 50% of the voting rights attributable to the shares of the controlled corporation, and, with respect to a person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled person. "Affordability Period" shall mean the not less than fifty-seven (57) year duration of the affordable housing and operational covenants, conditions, restrictions, and requirements which are set forth in this Agreement, the Ground Lease, and the Regulatory Agreement, as set forth in Section 4.3. "Affordable Rent" shall mean the maximum amount of out-of-pocket housing cost to be charged monthly by Developer and paid by each of the eligible Very Low and Low Income Households for each of the Housing Units at Phase II as determined and calculated pursuant to the affordable rent and the rent limitations according to TCAC, the Tax Credit Rules, the HOME Requirements and the Tax Credit Regulatory Agreement applicable to Phase II, in accordance with Section 4.2. For purposes of Affordable Rent, the monthly housing payment shall mean the total of monthly payments by each tenant household of a Housing Unit for use and occupancy of a Housing Unit and facilities associated therewith, including a reasonable allowance for utilities for an adequate level of service, as set forth in more detail in Section 4.2 hereof. "Agreement" shall mean this Affordable Housing Agreement (Avon Dakota Neighborhood - Phase II), including all attachments hereto, between Authority and Developer. "Annual Financial Statement" shall mean the certified financial statement of Developer for Phase II using generally accepted accounting principles ("GAAP"), as separately accounted for Phase II, including Operating Expenses and Annual Project Revenue, prepared at Developer's expense, by an independent certified public accountant reasonably acceptable to Authority, as well as the Residual Receipts Report, the form of which is attached hereto as Attachment No. 18. Each Annual Financial Statement submitted by Developer shall include a statement and certification (and supporting documentation) of the total amount of the Developer Fee and Deferred Developer Fee for Phase II, along with the cumulative amount thereof paid to date and the amount thereof paid within the applicable reporting year as reported and certified in the Annual Financial Statement. Once every three (3) years or sooner as and when requested by Authority and/or Executive Director, along with and as a part of the Annual Financial Statement and Residual Receipts Report, Developer shall submit true, legible, and complete copies of the source documentation supporting the Annual Financial Statement and the and Residual Receipts Report. "Annual Project Revenue" shall mean all gross income and all revenues of any kind from Phase II in a calendar year, of whatever form or nature, whether direct or indirect, with the exception of the items excluded below, received by, paid to, or for the account or benefit of Developer or any Affiliate of Developer or any of their agents or employees (provided, in no event shall amounts counted as Annual Project Revenue be double counted if paid by a Developer to one or more of its Affiliates), from any and all sources, resulting from or attributable to the operation, leasing and occupancy of Phase II, determined on the basis of GAAP applied on a consistent basis, and shall include, but not be limited to: (i) gross rentals paid by tenants of Phase II under leases, and payments and subsidies of whatever nature, including without limitation any payments, vouchers or subsidies from HUD or any other person or organization, received on behalf of tenants under their leases; (ii) amounts paid to Developer or any Affiliate of Developer on account of Operating Expenses for further disbursement by Developer or such Affiliate to a third party or parties, including, without limitation, grants received to fund social services or other housing supportive services at Phase II; (iii) late charges and interest paid on rentals; (iv) rents and receipts from licenses, concessions, vending machines, coin laundry, and similar sources; (v) other fees, charges, or payments not denominated as rental but payable to Developer in connection with the rental of office, retail, storage, or other space in Phase II; (vi) consideration received in whole or in part for the cancellation, modification, extension or renewal of leases; and (vii) interest and other investment earnings on security deposits, reserve accounts and other Phase II accounts to the extent disbursed. Notwithstanding the foregoing, Annual Project Revenue shall not include the following items: (a) security deposits from tenants (except when applied by Developer to rent or other amounts owing by tenants); (b) capital contributions to Developer by its members, partners or shareholders (including capital contributions required to pay the Deferred Developer Fee; (c) condemnation or insurance proceeds; (d) there shall be no line item, expense, or revenue shown allocable to vacant unit(s) at Phase II; (e) receipt by an Affiliate of management fees or other bona fide arms -length payments for reasonable and necessary Operating Expenses associated with Phase II. "Application" and "Applications" shall mean, individually and collectively, Developer's Tax Credit applications to be submitted to TCAC to obtain an allocation of 4% or 9% Tax Credits, as applicable, for Phase II, and/or such other financing as may be applied for pursuant to Section 3.10. All Applications submitted by Developer shall be consistent with the terms of this Agreement. "Applicable Federal Rate" shall mean the interest rate set by the United States Treasury from time to time for the purpose of determining applicable Low Income Housing Tax Credit interest rates. The Applicable Federal Rate is currently set at 9%. "Area Median Income" and "AMI" shall mean the area median household income set forth for each county in California (and for this Agreement for Orange County), as annually determined by TCAC. 51 "Audit" is defined in Section 3.11. "Authority" shall mean the Anaheim Housing Authority, a public body, corporate and politic, exercising governmental functions and powers and organized and existing under the California Housing Authorities Law, Part 2 of Division 24, Section 34200, et seq. of the Health and Safety Code. "Authority Deed of Trust" shall mean the leasehold deed of trust for Phase II, substantially in the form attached hereto as Attachment No. 9. The Authority Deed of Trust shall be executed by Developer in favor of Authority and recorded against the ground leasehold interest of Developer in the Site at the Closing, and shall secure repayment of the Authority Subordinate Loan. "Authority Loan Documents" shall mean this Agreement, the Authority Promissory Note, the Authority Deed of Trust, and any other documents reasonably required by Authority to provide the Authority Subordinate Loan to Developer. "Authority Promissory Note" shall mean the Authority Promissory Note for Phase II, substantially in the form attached hereto as Attachment No. 8, which shall evidence Developer's obligation to repay the Authority Subordinate Loan for Phase II from eighty-five percent (85%) of Residual Receipts from Phase II. "Authority Subordinate Loan" shall mean Authority's loan to Developer for Phase II in an amount set forth in Section 5.1.1, which shall be subordinate to the Primary Loan. The Authority Subordinate Loan shall be evidenced by an Authority Promissory Note and secured by an Authority Deed of Trust, which shall be recorded against the ground leasehold interest of Developer in the Site, and secured by Developer's leasehold interest in the Site. Developer shall repay the Authority Subordinate Loan by making annual payments equal to eighty-five percent (85%) of the Residual Receipts from Phase II. "Base Rent" shall have the meaning established therefor in the Ground Lease. "Basic Concept Drawings" shall mean the plans and drawings to be submitted and approved by Authority, as set forth in Section 3.2.1 hereof. "Best Knowledge" shall mean the actual knowledge or constructive knowledge of the party's employees and agents who manage the Site or have participated in the preparation of this Agreement, and all documents and materials in the possession of such party, and shall not impose a duty of investigation, except as to documents of record or actually provided to such party or its employees or agents, whether actually known or not. "Capital Replacement Reserve" shall mean a separate reserve fund account to be established upon closing of the permanent Primary Loan for Phase II and maintained by Developer separately for Phase II, which shall equal not less than the greater of (a) Three Hundred Dollars ($300) per year for each Housing Unit at Phase II (21 Housing Units times $300 equals $6,300), and (b) the amount required by Developer's Investor Limited Partner and/or Lenders, to be used as the primary resource to fund capital improvements and replacement improvements for Phase II. The amount of $300 for each Housing Unit that is set aside by the Developer (or its Property Manager) shall be allocated from the gross rents received from the Site and deposited into a separate interest bearing trust account for capital replacements to the fixtures and equipment that are normally capitalized under generally accepted accounting 7 principles and shall include common areas. The non-availability of funds in the Capital Replacement Reserve does not in any manner relieve or lessen Developer's obligation to undertake any and all necessary capital repairs and improvements and to continue to maintain Phase II in the manner prescribed herein. Upon written request of Authority, but not more than once per year, Developer, at its expense, shall submit to Authority Executive Director an accounting for the Capital Replacement Reserve for Phase 11. Capital repairs to and replacement of Phase II shall include only those items with a long useful life, includinq without limitation the following: carpet and drape replacement; appliance replacement; exterior painting, including exterior trim; hot water heater replacement; plumbing fixtures replacement, including tubs and showers, toilets, lavatories, sinks, faucets; air conditioning and heating replacement; asphalt repair and replacement, and seal coating; roofing repair and replacement; landscape tree replacement; irrigation pipe and controls replacement; sewer line replacement; water line replacement; gas line pipe replacement; lighting fixture replacement; elevator replacement and upgrade work; miscellaneous motors and blowers; common area furniture and planters replacement; and common area repainting. Pursuant to the procedure for submittal of each Annual Budget for Phase II to Executive Director by Developer, Executive Director will evaluate the cumulative amount on deposit in the Capital Replacement Reserve account for Phase II and exercise his/her sole, reasonable discretion to determine if existing balance(s) in, proposed deposits to, shortfalls, if any, and/or a cumulative unexpended/unencumbered account balance in such Capital Replacement Reserve account are adequate to provide for necessary capital repairs and improvement to the Site and Phase II (provided that required annual deposits thereto are not required to exceed $300/per Housing Unit). "City" shall mean the City of Anaheim, a California municipal corporation and charter city. The City is not a party to this Agreement and shall have no obligations hereunder; provided, however, City is an intended third -party beneficiary of the covenants and restrictions, as well as the enforcement rights (without any obligation), set forth in this Agreement. "Closing" shall mean the close of escrow for Phase 11, whereby Authority shall convey a ground leasehold interest in the Site to Developer pursuant to Section 2.4.4, when the Ground Lease for the Site shall become effective and the Term thereof shall commence. "Closing Date" shall mean, for Phase 11, the date the Memorandum of Ground Lease and the Grant Deed are recorded against the Site as more specifically set forth in Section 2.4.4 hereof. "Completion Guaranty" is defined in Section 2.2.1(h). "Conditions Precedent" shall mean the conditions precedent to the execution, effectiveness and commencement of the Ground Lease and Authority's obligation to make the Authority Subordinate Loan, as set forth in Section 2.2. "Construction Contract" shall mean each and every contract between Developer, the General Contractor, and/or any Subcontractor for the construction of Phase 11, or any part thereof, including construction of any on-site or off-site improvements included in the Scope of Development, the Entitlement approved by the City, and the Development Plans. The Construction Contract between Developer and the General Contractor shall be for a fixed fee or guaranteed maximum fee to complete all work to be performed or caused to be performed by the General Contractor under such Construction Contract. Each Construction Contract shall be reviewed and reasonably approved (or disapproved) by Authority Executive Director, with each contract to include: (i) a full recitation of Section 3 and the Section 3 Clause with an express acknowledgement and agreement by the General Contractor and each Subcontractor, as E-1' applicable, to fully comply with the Section 3 Clause, (ii) an express acknowledgement and agreement by the General Contractor and each Subcontractor, as applicable, that as a condition precedent to the final payment under its contract, the General Contractor or Subcontractor, as applicable, shall provide written evidence, in form reasonably satisfactory to the Authority Executive Director and/or HUD, that it and all its subcontractor(s) have complied with the Section 3 Clause in completing the development of Phase II, and (iii) reference to all other applicable federal regulations and laws based on the final federal funding sources, if any, to which such General Contractor or Subcontractor, as applicable, must comply in undertaking the construction and development of Phase II; provided it is understood by the parties that it is and shall remain primarily Developer's obligation to obtain and submit all required Section 3 Clause documentation. "Construction Drawings" shall mean the construction plans and drawings to be submitted and approved by Authority for Phase II, as set forth in Section 3.2.2 hereof. "Cost Savings" shall mean Developer's obligation to pay, subject to the approval of TCAC, any resulting cost savings for Phase II to Authority to the extent any cost savings are available upon completion of construction of Phase II as more fully set forth in Sections 3.11. "County" shall mean the County of Orange, California. "CPI" shall mean the United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index for Urban Wage Earners and Clerical Workers, Subgroup "All Items," for the Los Angeles -Costa Mesa -Riverside area, 1982 — 84 = 100, or successor or equivalent index in case such index is no longer published. CPI adjustments under this Agreement shall commence not earlier than one year following the issuance of the temporary certificate of occupancy for Phase II. "Debt Service" shall mean payments made in a calendar year pursuant to the approved Primary Loan obtained for the lease, construction/development, and operation of Phase II pursuant to Section 3.10. "Default" or "Event of Default" shall mean the failure of a party to perform any action or comply with any covenant required by this Agreement, including the attachments hereto, within the time periods provided herein following notice and opportunity to cure, as set forth in Section 6.1 hereof. "Deferred Developer Fee" shall mean any deferred Developer Fee to be paid from Annual Project Revenue, which is included under the financing which has been approved by Authority pursuant to Section 3.10. [As of the Effective Date, Developer intends to include a Deferred Developer Fee in the amount of approximately $539,500 as a permanent source of financing for Phase II.] "Developer" shall mean Avon Dakota Housing Partners II, L.P., a California limited partnership and its permitted successors and assigns. The administrative general partner of Developer is Related/Avon Dakota Development Co., LLC, a California limited liability company, and the managing general partner/nonprofit partner of Developer is Avon Dakota MGP, LLC, a California limited liability company. "Developer Fee" shall mean a fee for Phase II to be paid by Developer pursuant to the Development Services Agreement, which fee is compensation to perform, or to engage and E supervise others to perform, services in connection with the negotiating, coordinating, and supervising the planning, architectural, engineering and construction activities necessary to cause completion and complete Phase II, including all other on-site and off-site improvements required to be constructed in connection therewith, in accordance with the Scope of Development, the Entitlement, and the Development Plans, as set forth in the Final Budget and approved as a part of the evidence of financing pursuant to Section 3.10 herein. In no event shall the Developer Fee exceed One Million Seventy-Nine Thousand Dollars ($1,079,000). From and after the Closing, Developer shall defer the maximum amount of the Developer Fee permitted to be paid from cash flow, as set forth in the Tax Credit Rules, if and to the extent such deferral is necessary to keep the Final Budget in balance or to complete construction of Phase ll. "Development Impact Fees" shall mean amounts required to be paid to or through the City prior to and as a condition to issuance of building permits for Phase II, including, without limitation, sanitation district, traffic signal assessment, schools, public works/drainage, public works/sewer connection, and/or public works/sewer assessment. "Development Plans" shall mean the Basic Concept Drawings and Construction Drawings for Phase II to be submitted to City (and Authority staff) for review and approval, pursuant to Section 3.2. "Effective Date" shall mean the date the Executive Director of the Authority executes this Agreement. "Entitlement" shall mean and include each application and discretionary action of the City, through its administrators and, if applicable, by its City Council, Planning Commission, or other boards or commissions for Phase ll, and this Agreement, including the findings in compliance with the California Environmental Quality Act ("CEQA"), Conditional Use Permits, Reclassification No. 2006-00175, and any and all conditions of approval related thereto, as set forth in the conditions of approval for Phase 11. Pursuant to Section 21159.23 of the Public Resources Code, Phase I I is exempt from CEQA. "Environmental Claims" shall mean (i) any judicial or administrative enforcement actions, proceedings, claims, orders (including consent orders and decrees), directives, notices (including notices of inspection, notices of abatement, notices of non-compliance or violation and notices to comply), requests for information or investigation instituted or threatened by any governmental authority pursuant to any Governmental Requirements, or (ii) any suits, arbitrations, legal proceedings, actions or claims instituted, made or threatened that relate, in the case of either (i) or (ii), to any damage, contribution, cost recovery, compensation, loss or injury resulting from the release or threatened release (whether sudden or non-sudden or accidental or non-accidental) of, or exposure to, any Hazardous Materials, or the violation or alleged violation of any Governmental Requirements, or the generation, manufacture, use, storage, transportation, treatment, or disposal of Hazardous Materials. "Environmental Laws" shall mean all laws, ordinances and regulations relating to Hazardous Materials, including, without limitation: the Clean Air Act, as amended, 42 U.S.C. Section 7401, et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901, et seq.; the Comprehensive Environment Response, Compensation and Liability Act of 1980, as amended (including the Superfund Amendments and Reauthorization Act of 1986, "CERCLA"), 42 U.S.C. Section 9601, et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the Occupational Safety and Health Act, as amended, 10 29 U.S.C. Section 651, the Emergency Planning and Community Right to Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 300f et seq.; all comparable state and local laws, laws of other jurisdictions or orders and regulations; and all laws, ordinances, statutes, codes, rules, regulations, orders and decrees of the United States, the State, the County, City, or any other political subdivision in which the Site is located, and of any other political subdivision, agency or instrumentality exercising jurisdiction over Authority, Developer, or the Site. "Environmental Reports" shall mean all existing documents, surveys, studies, and reports relating to the physical and/or environmental condition of the Site. "Escrow" shall have the meaning set forth in Section 2.4. "Escrow Agent" shall have the meaning set forth in Section 2.4. "Executive Director" shall mean and include the Authority's Executive Director and his/her authorized designee(s). Whenever the consent, approval or other action of the "Executive Director" is required herein, such consent may be provided by Authority's Executive Director or his/her authorized designee(s), or the Executive Director in his/her sole discretion may submit such request to the Authority Board for action to approve or disapprove such request. "Federal Program Limitations" shall mean compliance with the HOME Program and HOME Regulations, as amended by the 2013 HOME Final Rule, as applicable to the Project, and also includes any and all other applicable federal regulations relating to fair housing and non- discrimination applicable to the Project and rules and regulations made applicable to the Project due to the provision of PBV Assistance to the HAP Units. Developer covenants, acknowledges, and agrees it is subject to the HAL and all Federal Program Limitations, including (with respect to the HOME Units) the HOME Program and HOME Regulations (whichever are most restrictive and to the extent applicable to the Project), in connection with its performance under this Agreement, and agrees it shall endeavor to cause the use and operation of the Properties to conform to the Federal Program Limitations. "Final Budget" shall mean the final budget for the construction and development of Phase II, as approved by Authority pursuant to Section 3.10 hereof. "General Contractor" shall mean the general contractor to be hired by Developer to engage and supervise the subcontractors in the performance and completion of the construction of Phase II and all other on-site and off-site improvements required to be constructed in connection with Phase 11, all in accordance with the Scope of Development, the Entitlement to be approved by City, and the Development Plans. The General Contractor shall be reasonably acceptable to and approved by Authority Executive Director, in his/her reasonable discretion; provided, that, Portrait Homes, Inc., a California corporation, or its affiliate, is hereby pre -approved to act as the General Contractor for the development of Phase 11. The parties acknowledge that the General Contractor will not be performing actual construction work for any portion of Phase 11, but instead shall hire Subcontractors (after competitive bidding pursuant to Section 3.2.7) who shall be reasonably approved by Authority Executive Director in accordance with this Agreement. "Governmental Requirements" shall mean all laws, ordinances, statutes, codes, rules, regulations, orders, and decrees of the United States, the State of California, the County, City, or any other political subdivision in which the Site is located, and of any other political subdivision, 11 agency, or instrumentality exercising jurisdiction over Developer or the Site, as may be amended from time to time. "Grant Deed" shall mean the grant deed to be executed by the Authority in favor of Developer at the Closing Date, conveying fee title to the Improvements to Developer. "Ground Lease" shall mean the Ground Lease to be entered into for Phase II by Authority and Developer, which shall be substantially in the form attached hereto as Attachment No. 7. "Guarantor" shall mean The Related Companies, L.P., a New York limited partnership, and which shall also be the "Guarantor" under the Completion Guaranty, Attachment No. 11 hereto. "HAL" shall mean the Housing Authorities Law, Health and Safety Code Section 34200, et seq. "Hazardous Materiar' or "Hazardous Materials" shall mean and include any substance, material, or waste which is or becomes regulated by any local governmental authority, including the County, Orange County Health Care Agency, the Regional Water Quality Control Board, the State of California, or the United States Government, including, but not limited to, any material or substance which is: (i) defined as a "hazardous waste," "acutely hazardous waste," "restricted hazardous waste," or "extremely hazardous waste" under Sections 25115, 25117 or 25122.7, or listed pursuant to Section 25140, of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law); (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter Presley Tanner Hazardous Substance Account Act); (iii) defined as a "hazardous material," "hazardous substance," or "hazardous waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory); (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances); (v) petroleum; (vi) asbestos and/or asbestos containing materials; (vii) lead based paint or any lead based or lead products; (viii) polychlorinated biphenyls, (ix) designated as a "hazardous substance" pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section 1317); (x) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); (xi) Methyl tertiary Butyl Ether; (xii) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601, et seq. (42 U.S.C. Section 9601); (xiii) any other substance, whether in the form of a solid, liquid, gas or any other form whatsoever, which by any Governmental Requirements either requires special handling in its use, transportation, generation, collection, storage, handling, treatment or disposal, or is defined as "hazardous" or harmful to the environment; and/or (xiv) lead based paint pursuant to and defined in the Lead Based Paint Poisoning Prevention Act, Title X of the 1992 Housing and Community Development Act, 42 U.S.C. § 4800, et seq., specifically §§ 4821-4846, and the implementing regulations thereto. Notwithstanding the foregoing, "Hazardous Materials" shall not include such products in quantities as are customarily used in the construction, maintenance, rehabilitation, management, operation and residence of residential developments or associated buildings and grounds, or typically used in residential activities in a manner typical of other comparable residential developments, or substances commonly ingested by a significant population living within Phase II, including without limitation alcohol, aspirin, tobacco and saccharine. 12 "HOME Amount" means Dollars ($ ) or such greater amount as may be provided by City as the HOME Amount in implementation of the Phase II Cooperation Agreement and this Agreement. "HOME Funds" is defined in the Recitals hereto. "HOME Program" is defined in the Recitals hereto. "HOME Regulations" shall mean the implementing regulations of the HOME Program set forth at 24 CFR §92.1, et seq. as such regulations now exist (as amended by the 2013 HOME Final Rule) and as they may hereafter be amended, to the extent applicable to the Project. Developer covenants hereunder to comply with the HAL and all applicable HOME Regulations in the performance of this Agreement, whichever are more restrictive. In implementation of these requirements, this Agreement, the Project, and all eligible contributions and expenditures hereunder shall conform to the following: (a) The housing developed hereunder does and shall qualify as affordable housing under 24 CFR §92.252 because each Housing Unit shall be rented at an Affordable Rent; and (b) This Agreement serves as the written agreement that imposes and enumerates (by meeting or exceeding) all of the affordability requirements from 24 CFR §92.252; the property standards requirements of 24 CFR §92.251; and income determinations made in accordance with 24 CFR §92.203. "HOME Requirements" means limitations on household income and/or household size as established by the HOME Regulations. "HOME Units" shall mean thirteen (13) of the Housing units as follows: (a) at 809 Dakota Street: (i) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be Low HOME Units, and (ii) two (2) of the two (2) bath Housing Units shall be High HOME Units; (b) at 868 Dakota Street: (i) one (1) of the two (2) bedroom, two (2) bath Housing Units shall be Low HOME Units, and (ii) three (3) of the two (2) bath Housing Units shall be High HOME Units; and (c) at 606 Avon Place: (i) one (1) of the one (1) bedroom, two (2) bath Housing Units shall be a Low HOME Unit, (ii) two (2) of the one (1) bedroom, two (2) bath Housing Units shall be High HOME Units, and (iii) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be High HOME Units. The designation of Housing Units as HOME Units shall terminate at the end of the HOME Compliance Period, unless extended by agreement of the Authority and the Developer. "Housing Asset Fund" is defined in the Recitals hereto. "Housing Asset Fund Requirements" means the requirements of Health and Safety Code Section 34176 and 34176.1 and all requirements of the California Community Redevelopment Law, Health and Safety Code Section 33000, et seq., that apply to the use of Housing Asset Funds by the Authority, as successor to the former Anaheim Redevelopment Agency's housing functions. "Housing Unit" and "Housing Units" shall mean, individually and collectively, the twenty-one (21) individual apartment units in Phase II to be constructed and operated by Developer on the Site as affordable rental housing for the Affordability Period. 13 "HUD" shall mean the United States Department of Housing and Urban Development. "Improvements" shall mean the apartment complex and any other improvements to be constructed on the Site as part of Phase II pursuant to this Agreement and as approved by the Executive Director and City. "Indemnitees" is defined in Section 2.3.4. "Investor Limited Partner" shall mean each Tax Credit limited partner of Developer for Phase II. "Land Subsidy" is defined in Section 5.1.1. "Legal Description" shall mean the description of the Site which is attached hereto as Attachment No. 4 and incorporated herein. "Lender" shall mean each of the responsible financial lending institutions or persons or entities approved by Authority in its reasonable discretion, which provide the Primary Loans, including acquisition loan(s), construction loan(s) or permanent loan(s) for the construction, development, and/or operation of Phase II, as set forth in Section 3.10 hereof. "Low Income," "Lower Income," "Low Income Households" or "Lower Income Households" shall have the same meaning as prescribed in Section 4.5.1(f) hereof and shall mean and include both: (i) lower income households as defined in the Tax Credit Rules and (ii) 60% AMI Low Income Households. Lower Income Households include Very Low Income Households and Extremely Low Income Households, as defined in the Tax Credit Rules. "Marketing and Tenant Selection Plan" shall mean the marketing and tenant selection plan to be prepared by Developer and submitted to Authority for its review and approval as a Condition Precedent to Closing, as further described in Section 4.8. "Material Adverse Change" means any event the occurrence of which is reasonably likely to have a material adverse effect on Developer's ability to fulfill its obligations under any Transaction Document, including without limitation: (a) a voluntary or involuntary bankruptcy of Developer (which is not dismissed within ninety (90) days of institution); (b) a court order placing Developer under receivership; (c) a sale of all or substantially all of the assets held by Developer; (d) any violation of Developer or other failure of Developer to comply at all times with any applicable law, statute, ordinance, code, rule, regulation, judgment, order, ruling, condition or other requirement of a statutory, regulatory, administrative, judicial or quasi-judicial nature or any other legal or governmental requirement of whatever kind or nature related to Phase II, which violation is likely to have a material adverse effect on the ability of Developer to perform its duties and obligations under any Transaction Document; and/or (e) Developer incurs one or more liabilities, contingent or otherwise, or pending or threatened litigation or any asserted or unasserted claim exists against Developer with respect 14 to Phase II, which would have a material adverse effect on its ability to perform its duties and obligations under any Transaction Document. "Memorandum of Ground Lease" shall mean the Memorandum of Ground Lease for Phase II to be executed by Developer and Authority in a form to be reasonably approved by Authority Executive Director in his/her reasonable discretion, which Memorandum of Ground Lease shall include notice of the Ground Lease for Phase II and the terms and provisions contained therein, and shall state that in no event shall Authority's fee interest in the Site be subordinated to deeds of trust or any other liens for financing recorded against the Site. "Notice" shall mean a notice in the form prescribed by Section 7.2 hereof. "Notice of Affordability Restrictions" shall mean the notice to be executed by the parties in substantially the form attached hereto as Attachment No. 12 and incorporated herein, which shall recite the affordability restrictions and restrictions on transfer imposed on the Site by this Agreement, the Ground Lease, and the Regulatory Agreement, and which shall be recorded against the Site at the Closing for Phase II, all as required by and in compliance with Health and Safety Code Section 33334.3(f)(3)(B). "Official Records" shall mean the official land records of the County Recorder of the County. "Operating Budget" and "Annual Budget" shall mean the annual operating budget for Phase I I that sets forth the projected Operating Expenses for the upcoming year that is subject to and shall be submitted for review and approval by Executive Director, in his/her reasonable discretion, each year during the Affordability Period as set forth in Section 4.13 hereof. The Operating Budget shall be in substantially the form attached hereto as Attachment No. 17 and incorporated herein, or such other form as may be required by Authority from time to time. "Operating Expenses" shall mean actual, reasonable and customary (for comparable high quality rental housing developments in Orange County) costs, fees and expenses directly incurred, paid, and attributable to the operation, maintenance and management of Phase II in a calendar year, which is reasonably consistent with the annual Operating Budget for Phase II approved by Authority pursuant to Section 4.13 hereof, including: painting, cleaning, repairs, alterations, landscaping, utilities, refuse removal, certificates, permits and licenses, sewer charges, real and personal property taxes, assessments, insurance, security, advertising and promotion, janitorial services, cleaning and building supplies, purchase, repair, servicing and installation of appliances, equipment, fixtures and furnishings, fees and expenses of property management, fees and expenses of accountants, attorneys and other professionals, the cost of social services and other housing supportive services provided at Phase II consistent with Developer's approved Application(s) to TCAC for the Site, repayment of any completion or operating loans made to Developer, and other actual, reasonable and customary operating costs and capital costs which are directly incurred and paid by Developer, but which are not paid from or eligible to be paid from the Capital Replacement Reserve or any other reserve accounts for Phase ll. To the extent the Operating Expenses for Phase II deviate from the approved annual Operating Budget for a given year by more than ten percent (10%) in aggregate for that year, the Authority Executive Director shall reasonably review and approve to confirm such Operating Expenses are reasonable and actually incurred; provided, no approval shall be required for emergency expenditures reasonably necessary or appropriate to preserve life, limb, or property. 15 Operating Expenses shall exclude all of the following: (i) salaries of employees of Developer or Developer's general overhead expenses, or expenses, costs and fees paid to an Affiliate of Developer, to the extent any of the foregoing exceed the expenses, costs or fees that would be payable in a bona fide arms' length transaction between unrelated parties in the Orange County area for the same work or services; (ii) any amounts paid directly by a tenant of Phase II to a third party in connection with expenses which, if incurred by Developer, would be Operating Expenses; (iii) optional or elective payments with respect to the Primary Loan (unless made with the consent of the Executive Director in her reasonable discretion); (iv) any payments with respect to any project -related loan or financing other than the Primary Loan (unless made with the consent of the Executive Director in his/her reasonable discretion); (v) expenses, expenditures, and charges of any nature whatsoever arising or incurred by Developer prior to completion of Phase II with respect to the development, maintenance and upkeep of Phase ll, or any portion thereof, including, without limitation, all costs and capitalized expenses incurred by Developer in connection with the lease of the Site from the Authority (e.g. not leasing to low income tenants), all predevelopment and preconstruction activities conducted by Developer in connection with Phase Il, including, without limitation, the preparation of all plans and the performance of any tests, studies, investigations or other work, and the construction of Phase II and any on-site or off-site work in connection therewith; (vi) depreciation, amortization, and accrued principal and interest expense on deferred payment debt; and (vii) any Partnership Related Fees to the extent they are not paid as capitalized expenses. "Operating Reserve" shall mean the Operating Reserve for Phase ll, which shall be funded by an installment of Tax Credit equity in a target amount equal to three (3) months of (i) Debt Service on the permanent Primary Loan and (ii) Operating Expenses pursuant to an approved Annual Budget for Phase II ("Target Amount"); provided, a larger Operating Reserve may be maintained if required by the Lender or Tax Credit Investor for Phase 11. The Operating Reserve shall thereafter be replenished from Annual Project Revenue to maintain the Operating Reserve balance of the Target Amount. "Partnership Agreement" shall mean the agreement(s) which set(s) forth the terms of Developer's (or its approved Affiliate(s)) limited partnership, as such agreement(s) may be amended from time to time, so long as consistent with the requirements of this Agreement. The Partnership Agreement shall reference and acknowledge Developer's obligation to repay the Authority Subordinate Loan in accordance with the terms of this Agreement. Developer shall provide copies of any amendments or modifications to the Partnership Agreement to the Authority within fifteen (15) days following execution thereof. "Partnership Related Fees" shall mean the following fees of Developer (or partners thereof pursuant to the Partnership Agreement) which are actually paid in the following order of priority: (i) a limited partner asset management fee payable to the Investor Limited Partner of Developer in the amount of $5,000 (increased annually by the greater of CPI or 3%); and (ii) a general partner(s) (administrative and/or managing partner(s)) partnership management fee payable to the general partner(s) of Developer in the amount of $10,000 (increased annually by the greater of CPI or 3%). In no event shall the fees for Phase II described in (i) and (ii) above together cumulatively exceed Fifteen Thousand Dollars ($15,000), increased annually by CPI (but in no event by more 16 than CPI). In the event insufficient Annual Project Revenues exist to provide for payment of all or part of the specific Partnership Related Fees listed above, no interest shall accrue on the unpaid portions of such Partnership Related Fees, but the unpaid balance will be added to the Partnership Related Fees due in the next following years. "Phase ll" shall mean the rehabilitation of the interior and exterior of the Site of twenty- one (21) Housing Units in seven buildings, including providing trash enclosures, laundry facilities, demolition of existing garages and construction of new carports if space permits and incorporation of landscaping at the Site. "Phase 11 Cooperation Agreement" means that certain agreement between City and Authority entitled and dated concurrently herewith under which the City has agreed to make HOME Funds available to Authority for the Phase II Project. A copy of the Phase II Cooperation Agreement is on file with City as a public record. "Phase 11 Amended and Restated Joint Use Agreement" means a recordable instrument acceptable to Authority to be recorded among Official Records that allows the residents of the development known as Avon Dakota Phase I and the Project to utilize the community center facilities located in the Vintage Crossings project owned and operated by South Street Anaheim Housing Partners, L.P. ("South Street"). This agreement to use the South Street facilities must extend to Project Access, the entity contracted to provide such social services to the residents. In addition, South Street will agree to allow Related Management Company ("RMC"), the property manager for Vintage Crossings, Avon Dakota Phase I and the Project, to utilize the management/leasing offices located in the Vintage Crossings project for the purpose of conducting management activities for the Project. "Phase 11 Reciprocal Easement Agreement" means an instrument acceptable to Authority to be recorded among Official Records pertaining to 815 S. Dakota Street (owned and operated by Avon Dakota Housing Partners II, L.P.) and 809 S. Dakota Street. As part of the Project improvements, street access for 809 S. Dakota Street will be removed and tenant parking for 809 S. Dakota Street will only be accessible through 815 S. Dakota Street's parking lot. "Portable Voucher" shall mean Section 8 tenant -based vouchers, certificates of family participation under 24 CFR part 882 (Rental Certificate Program), rental vouchers under 24 CFR part 887 (Rental Voucher Program), and comparable documents evidencing participation in a program pursuant to the HOME Investment Partnership Act, 42 U.S.C. §12701, et seq. and the implementing regulations located at 24 CFR part 92, as such now exist and as may hereafter be amended, or other tenant -based rental assistance programs. "Preliminary Financing Plan" shall mean the preliminary budget for the construction and development of Phase II and the proforma showing the preliminary estimated sources and uses and the 57 year cash flow for Phase II, which is attached hereto as Attachment No. 16 and incorporated herein. "Primary Loan" and "Primary Loans" shall mean, individually and collectively, the permanent and construction financing obtained by Developer for Phase II from one or more institutional lender(s) other than an Affiliate of Developer, as approved by Authority Executive Director, which loan(s) shall be senior to Authority's Regulatory Agreement, but subordinate to Authority's fee interest in the Site and the Entitlement for Phase Il. 17 "Project" shall mean a multiple phase affordable housing project on real property depicted on Attachment No. 3 attached hereto. Phase II is the first phase of the Project. "Property Management Fee" shall mean the fee to be paid by Developer to the Property Manager for property management services performed at Phase II, which fee shall not exceed six percent (6%) of effective gross income attributable to the Housing Units at Phase II. Developer shall notify Authority in writing of any change in the formula for the Property Phase I I Management Fee. "Property Management Plan" shall mean the management plan required to be created by Developer and submitted to Executive Director for approval, which approval shall not be unreasonably withheld, which shall include a detailed plan and strategy for long term marketing (consistent with the Marketing and Tenant Selection Plan), operation, maintenance, repair and security of Phase II, inclusive of on-site social services to the residents of Phase II, and the method of selection of tenants, rules and regulations for tenants, and other rental policies and procedures for Phase II as set forth in Section 4.11.2. "Property Manager" is defined in Section 4.11.1. "Refinancing Net Proceeds" shall mean the proceeds of any approved refinancing of any of the Primary Loans or other approved financing secured by the Site, net of: (i) the amount of the financing which is satisfied out of such proceeds; (ii) reasonable and customary costs and expenses incurred in connection with the refinancing; (iii) the balance, if any, of the Deferred Developer Fee; (iv) the balance of loans to Developer made by the limited partners of Developer for development or operating deficits, amounts expended to maintain compliance with the Tax Credit Regulatory Agreement, or contributions for capital expenditures in excess of available Phase II revenues, if any, including interest at the Applicable Federal Rate; (v) the balance, if any, of operating loans or development loans made by the general partners of Developer, including interest at the Applicable Federal Rate; (vi) the return of capital contributions or loans, if any, to Developer made by the general partners of Developer that were used to pay the Deferred Developer Fee; (vii) payment of unpaid Tax Credit adjustment amounts or reimbursement of Tax Credit adjustment amounts paid by the administrative and/or managing general partners and/or the guarantors to Developer pursuant to the Partnership Agreement, if any; and (viii) the payment to the administrative general partner of Developer of a refinancing fee, which fee is and shall be subject to the approval of the Executive Director at the time of each refinancing and which shall not exceed six percent (6%) of the amount of the approved refinancing. "Regulatory Agreement" or "Authority Regulatory Agreement" shall mean the Authority Regulatory Agreement for Phase II, which shall be entered into by Authority and Developer concurrently with the Closing for Phase II and which shall be recorded as an encumbrance to the Site in substantially the form attached hereto as Attachment No. 10 and incorporated herein, in accordance with Section 4.16 hereof. The Authority Regulatory Agreement for Phase II may be subordinate to the Primary Loan, and the Tax Credit Regulatory Agreement for Phase II subject to the requirements of this Agreement. "Release of Construction Covenants" shall mean the document which shall evidence Developer's satisfactory completion of Phase II, as set forth in Section 3.5 hereof, substantially in the form of Attachment No. 14 hereto. "Rent" is defined in Section 2.1.2. 18 "Request for Notice" or "Request for Notice of Default" shall mean the request for notice of default pursuant to Civil Code Section 2924b to be recorded against the Site in connection with the Escrow for Phase II substantially in the form attached hereto as Attachment No. 13 and fully incorporated by this reference. "Reservation" and "Reservations" mean, individually and collectively, the reservation of Tax Credits by TCAC for Phase II. "Reserve Deposits" shall mean any payments to the Capital Replacement Reserve and Operating Reserve accounts pursuant to Sections 4.12 and 4.13 hereof. "Residual Receipts" shall mean Annual Project Revenue for Phase II less the sum of: (i) Operating Expenses, including payment of Rent and Additional Rent under the Ground Lease; (ii) Debt Service; (iii) Reserve Deposits in accordance with the requirements of the Investor Limited Partner and the Partnership Agreement, and the Lender of the Primary Loan in its transaction documents, but in no event less than as required by this Agreement and the Ground Lease; (iv) Partnership Related Fees (including accrued but unpaid Partnership Related Fees from the prior year or prior years, as applicable); (v) payment of unpaid Tax Credit adjustment amounts or reimbursement of Tax Credit adjustment amounts paid by the administrative and/or managing general partners and/or the guarantors to Developer pursuant to the Partnership Agreement, if any; (vi) repayment of loans, if any, made by the limited partner(s) of Developer, including interest at the interest rate provided in the Partnership Agreement, for development and/or operating expense deficits or other loans directly and reasonably related to Phase II and operation thereof as provided hereunder; (A) provided, that, the propriety of any such loans to Phase II, if any, made by the limited partner(s) of Developer pursuant to the Partnership Agreement (and during the term thereof) shall be subject to the reasonable prior consent of and reasonably verified by the Executive Director; and (B) provided, further, that the propriety of any such loans made by the limited partner(s) of Developer shall be deemed to be reasonable and may be made without the prior consent of the Executive Director if such loans are made to pay any expense or obligation of Developer relating to the physical condition and/or operation of Phase II and for which Annual Project Revenue, reserves or other funds of Developer are not otherwise available (but Developer shall submit evidence and documentation to the Executive Director showing that such loans are made to pay expenses relating to the physical condition and/or operation of Phase II and that Annual Project Revenue, reserves or other funds of Developer are not available to pay such expenses); 19 (vii) Property Management Fee for Phase II which remains unpaid after payment of Operating Expenses, if any; (vii) Deferred Developer Fee for Phase II which remains unpaid, if any, including interest at the Applicable Federal Rate; (ix) repayment of outstanding development and operating loans or credit adjustor advances or development fee advances, if any, made by the administrative and/or managing general partners and/or the Guarantor (or any other guarantor required by the Investor Limited Partner or the Primary Lender) to Developer, with all such loans to be repaid without interest; provided, that, as a condition to use of any Annual Project Revenue to repay such loan(s) pursuant to this subparagraph (ix), Developer shall submit evidence and documentation to the Executive Director showing that such loans are required to be made pursuant to the terms of the Partnership Agreement; and (x) capital contributions or loans to Developer, if any, made by the general partners of Developer that were used to pay the Developer Fee. Residual Receipts shall be calculated on a cash basis. Developer's annual loan payments on the Authority Subordinate Loan shall be paid by Developer to Authority under the Authority Subordinate Loan and shall include: Eighty-five percent (85%) of the Residual Receipts received from operation of Phase II until payment in full of the Authority Subordinate Loan. The remaining fifteen percent (15%) of the Residual Receipts received from the operation of Phase II shall be retained by Developer or used by Developer to pay any fees or charges not specifically deducted from Annual Project Revenues above. In the event any calculation of Annual Project Revenue less subsections (i) through (xi) inclusive above results in a negative number, then Residual Receipts shall be zero ($0) for that year. In addition, none of the fees, costs, expenses, or items described above in calculation of Residual Receipts shall include any duplicate entry/item, or double accounting for a cost item. For example, an audit fee incurred by Developer (or any partner of Developer or an Affiliate) and deducted or included above in category/subsection (i) Operating Expenses shall not also be deducted or included in category/subsection (v) Partnership Related Fees in the calculation of Residual Receipts. "Residual Receipts Report" shall mean the report in substantially the form attached hereto as Attachment No. 18 and incorporated herein, which shall be completed by Developer and submitted to Authority annually for Phase II in accordance with Section 5.2.1. Residual Receipts shall be calculated using cash basis accounting. It is understood the Residual Receipts Report is subject to all of the terms and conditions set forth in this Agreement. The summary of the items in the Residual Receipts Report is not intended to supersede or modify the more complete description in this Agreement; in the event of any inconsistency between the Residual Receipts Report and this Agreement, this Agreement shall govern. 20 "RMC" shall mean Related Management Company, L.P., which has been pre -approved as the Property Manager for Phase II, subject to the provisions of Section 4.11 herein. "Schedule of Performance" shall mean each Schedule of Performance attached hereto as Attachment No. 5. "Scope of Development" shall mean that certain Scope of Development attached hereto as Attachment No. 6 and incorporated herein, which describes the scope and quality of the apartment complex to be constructed by Developer at the Site pursuant to the terms and conditions of this Agreement. "Section 3" shall mean and refer to Section 3 of the Housing and Urban Development Act of 1968, 12 U.S.C. § 1701 u, as amended. Authority has prepared a Section 3 "checklist" and other forms related to Section 3 compliance; and as provided by Authority to Developer, its General Contractor, Subcontractors, or other contractor(s) or subcontractor(s), as applicable, such forms shall be utilized in all contracts and subcontracts to which Section 3 applies. "Section 3 Clause" shall mean the language, set forth below, which is required to be included in each and every Construction Contact entered into by Developer, the General Contractor, each Subcontractor and/or any other contractor(s) or subcontractor(s), as applicable, for the development of Phase II. For purposes of this Section 3 Clause and compliance therewith, whenever the word "contractor" is used it shall mean and include, as applicable, Developer, General Contractor, any and all Subcontractors, and any other contractor(s) and subcontractor(s) performing work on Phase II. Developer hereby acknowledges and agrees to take all responsibility for compliance with all Section 3 Clause federal requirements applicable to Phase II and further acknowledges and agrees that compliance with all Section 3 Clause requirements for Phase II by Developer, the General Contractor, all Subcontractors, and/or other contractor(s), subcontractor(s), and other agents, is the primary obligation of Developer. Developer shall provide or cause to be provided to its General Contractor and each Subcontractor, and each of its other contractor(s), subcontractor(s) and agents, a checklist for compliance with the Section 3 Clause federal requirements, to obtain from the General Contractor, each Subcontractor, and other contractor(s), subcontractor(s), and agents, all applicable items, documents, and other evidence of compliance with the items, actions, and other provisions within the checklist, and to submit all such completed Section 3 Clause documentation and proof of compliance to the Executive Director. The particular text to be utilized in any and all contracts of the General Contractor or any Subcontractor doing work covered by Section 3 shall be in substantially the form of the following Section 3 Clause, as reasonably determined by Authority, or as directed by HUD or its representative, and shall be executed by the applicable contractor under penalty of perjury: "(i) The work to be performed under this contract is subject to the requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. 1701 u ("Section 3"). The purpose of Section 3 is to ensure that employment and other economic opportunities generated by HUD assistance or HUD assisted projects covered by Section 3, shall, to the greatest extent feasible, be directed to low and very low income persons (inclusive of Very Low and Low Income Persons, Very Low and Low Income Households, and Very Low and Low Income Tenants served by Phase II), particularly persons who are recipients of HUD assistance for housing. 21 "(ii) The parties to this contract agree to comply with HUD's regulations in 24 CFR Part 135, which implement Section 3. As evidenced by their execution of this contract, the parties to this contract certify that they are under no contractual or other impediment that would prevent them from complying with the Part 135 regulations. "(iii) The contractor agrees to send to each labor organization or representative of workers with which the contractor has a collective bargaining agreement or other understanding, if any, a notice advising the labor organization or workers' representative of the contractor's commitments under this Section 3 clause, and will post copies of notices in conspicuous places at the work site where both employees and applicants for training and employment positions can see the notice. The notice shall describe the Section 3 preference, shall set forth minimum number of job titles subject to hire, availability of apprenticeship and training positions, the qualifications for each; and the name and location of person(s) taking applications for each of the positions; and the anticipated date the work shall begin. "(iv) The contractor agrees to include this Section 3 clause in every subcontract subject to compliance with regulations in 24 CFR Part 135, and agrees to take appropriate action, as provided in an applicable provision of the subcontract or in this Section 3 clause, upon a finding that the subcontractor is in violation of the regulations in 24 CFR Part 135. The contractor will not subcontract with any subcontractor where the contractor has notice or knowledge that the subcontractor has been found in violation of the regulations in 24 CFR Part 135. "(v) The contractor will certify that any vacant employment positions, including training positions, that are filled (a) after the contractor is selected but before the contract is executed, and (b) with persons other than those to whom the regulations of 24 CFR Part 135 require employment opportunities to be directed, were not filled to circumvent the contractor's obligations under 24 CFR Part 135. "(vi) Noncompliance with HUD's regulations in 24 CFR Part 135 may result in sanctions, termination of this contract for default, and debarment or suspension from future HUD assisted contracts. "(vii) With respect to work performed in connection with Section 3 covered Indian Housing assistance, section 7(b) of the Indian Self Determination and Education Assistance Act (25 U.S.C. 450e) also applies to the work to be performed under this contract. Section 7(b) requires that to the greatest extent feasible, (a) preference and opportunities for training and employment shall be given to Indians, and (b) preference in the award of contracts and subcontracts shall be given to Indian organizations and Indian owned Economic Enterprises. Parties to this contract that are subject to the provisions of Section 3 and section 7(b) agree to comply with Section 3 to the maximum extent feasible, but not in derogation of compliance with section 7(b)." After the foregoing Section 3 Clause, Developer shall add the signature block of the General Contractor, Subcontractor, or other contractor(s) and subcontractor(s), as applicable, and shall add the following text immediately above the signature block: "The contractor/provider by this his signature affixed hereto declares under penalty of perjury that contractor has read the requirements of this Section 3 Clause and accepts all its requirements contained therein for all of his operations related to this contract." 22 "Site" shall mean the real property, generally located at 809 South Dakota Street, 824 South Dakota Street, 862 South Dakota Street, 868 South Dakota Street and 606 E. Avon Place in the City of Anaheim, as more particularly described in the Legal Description, which shall be ground leased by Authority to Developer pursuant to the Ground Lease for Phase II. After completion of the construction of Phase II, the Improvements shall be deemed a part of the Site and whenever the term "Site" is used in this Agreement it shall mean and include the land and all Improvements. "South Street Agreement" shall have the meaning set forth in the Recitals hereto. "South Street Developer" shall have the meaning set forth in the Recitals hereto. "South Street Development" shall have the meaning set forth in the Recitals hereto. "Subcontractor" and "Subcontractors" shall mean, individually and collectively, one or more subcontractors hired by Developer's General Contractor for Phase II to perform and complete, or to engage and supervise others to perform and complete, the construction and rehabilitation of Phase II and all other on-site and off-site improvements required to be constructed in connection with Phase Il, all of which shall be in accordance with the Scope of Development, the Entitlement, and the Development Plans. Each of the Subcontractors shall be selected after competitive bidding in accordance with Section 3.2.7, and Authority shall have every reasonable right and opportunity to observe and review all material stages of such competitive bidding process, including a right to review the invitation to bidders, each bid package, each responsive bid form, each submitted bid package and the right to be present when each bid is opened by Developer and/or the General Contractor. Developer shall submit to Authority information regarding the entity serving as the Subcontractor for any portion of the construction of Phase II and all other on-site and off-site improvements required to be constructed in connection therewith in accordance with the Scope of Development, the Entitlement, and the Development Plans, including all required licenses, certifications, insurance, etc., as reasonably requested by Authority Executive Director. "Substantial Damage" is defined in Section 3.6.4 hereof. "Tax Credit Regulatory Agreement" shall mean the regulatory agreement(s) which may be required to be recorded against the Site with respect to the issuance of Tax Credits for Phase II. The Tax Credit Regulatory Agreement shall be subordinate and junior to the Ground Lease and Entitlement. "Tax Credit Rules" shall mean Section 42 of the Internal Revenue Code and/or California Revenue and Taxation Code Sections 17057.5, 17058, 23610.4 and 23610.5 and California Health and Safety Code Section 50199, et seq., as applicable, as the foregoing may be amended from time to time, and the rules and regulations implementing the foregoing, including Title 4 Cal. Code Regs. Section 10300, et seq. "Tax Credits" shall mean federal 9% or 4% (as applicable) Low Income Housing Tax Credits granted pursuant to Section 42 of the Internal Revenue Code and/or California Revenue and Taxation Code Sections 17057.5, 17058, 23610.4 and 23610.5 and California Health and Safety Code Section 50199, et seq., as applicable. "TCAC" shall mean the California Tax Credit Allocation Committee, the allocating agency for Tax Credits in California. 23 "Term" shall mean the 57 -year Term of the Ground Lease, as defined therein, as it may be earlier terminated or extended according to the terms thereof. "Third Party Costs" is defined in Section 716. "Transaction Documents" shall mean this Affordable Housing Agreement, the Ground Lease, the Notice of Affordability Restrictions, the Authority Regulatory Agreement, the Authority Promissory Note, and the Authority Deed of Trust, to the extent such documents continue to encumber Phase II. The Cooperation Agreements referenced in the recitals of this Affordable Housing Agreement do not constitute Transaction Documents. "Transfer Net Proceeds" shall mean the proceeds of any transfer, in whole or in part, of Developer's leasehold interest in the Site or any sale, assignment, sublease, or other transfer, in whole or in part of Developer's interests in the Site, net reasonable and customary costs and expenses incurred in connection with such transfer. "Very Low Income" and/or "Very Low Income Households" shall have the same meaning as prescribed in Section 4.5.1(e) hereof and shall mean and include: (i) very low income households as defined in the Tax Credit Rules; (ii) 30% AMI Very Low Income Households; (iii) 40% AMI Very Low Income Households; and (iv) 50% AMI Very Low Income Households. Very Low Income Households include Extremely Low Income Households, as defined in the Tax Credit Rules. "30% AMI Very Low Income Households" shall mean those households earning not greater than thirty percent (30%) of Orange County Area Median Income, adjusted for household size, which is set forth by regulation of TCAC. "40% AMI Very Low Income Households" shall mean those households earning not greater than forty percent (40%) of Orange County Area Median Income, adjusted for household size, which is set forth by regulation of TCAC. "50% AMI Very Low Income Households" shall mean those households earning not greater than fifty percent (50%) of Orange County Area Median Income, adjusted for household size, which is set forth by regulation of TCAC. "60% AMI Low Income Households" shall mean those households earning not greater than sixty percent (60%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. "2013 HOME Final Rule" is defined in the Recitals hereto. 2. GROUND LEASE OF THE SITE. 2.1. Ground Lease. Subject to the terms and conditions set forth in this Agreement, Authority agrees to lease the Site to Developer, and Developer agrees to lease the Site from Authority pursuant to the terms of the Ground Lease, which shall be substantially in the form attached hereto as Attachment No. 7. 2.1.1 Term. The Term of the Ground Lease shall commence on the date of recordation of the Memorandum of Ground Lease in the Official Records ("Commencement Date"), and shall continue thereafter until the earlier to occur of (a) the fifty-seventh (57th) 24 anniversary of the recordation of the Release of Construction Covenants for Phase II in the Official Records or (b) December 31, 2078. The Term of the Ground Lease shall not commence in any event until the Conditions Precedent set forth in Section 2.2 have been satisfied and the Closing shall have occurred. 2.1.2 Rent. Prior to or concurrently with the Commencement Date (defined in the Ground Lease) and on each anniversary thereof during the Term of the Ground Lease, Developer shall pay to Authority the Base Rent. In addition, Developer shall pay Additional Rent pursuant to this Section 2.1.2 and the Ground Lease and shall be subject to adjustment pursuant to the Rent adjustment provisions set forth in subdivision (b) of this Section 2.1.2. The Base Rent and the Additional Rent together constitute the "Rent"; provided that the Rent shall be subject to adjustment as provided in subdivision (b) of this Section 2.1.2. (a) Additional Rent. In addition to the Rent required by this Section 2.1.2, Developer shall also pay to Authority as "Additional Rent' under the Ground Lease any amounts required to be paid by Developer to Authority to reimburse Authority for any payments made by Authority that are required to be paid by Developer pursuant to the Ground Lease, such as taxes and other impositions, insurance premiums, or costs of maintaining the Site and Phase II, all with interest, as shall be set forth in more detail in the Ground Lease. (b) Rent Adjustment upon Full Payment of Authority Promissory Note or 20th Anniversary of Commencement Date. In the event of and upon the later to occur of (i) full payment of the Authority Promissory Note or (ii) the twentieth (20th) anniversary of the Commencement Date for the Ground Lease, the annual Rent due under the Ground Lease shall be reset based on the fair market value of the remaining leasehold interest under the Ground Lease (taking into account the restrictions contained in the Ground Lease and recorded against Phase ll, including the Tax Credit Regulatory Agreement, hereinafter referred to as the "Recorded Restrictions," to the extent the Recorded Restrictions remain applicable and enforceable) as independently appraised and at an annual rental based on a percentage of such appraised value as determined by a qualified, independent appraiser (conducted by a certified appraiser reasonably acceptable to Executive Director and Developer), who shall take into account the cumulative amounts which have been actually paid to Authority as Rent under the Ground Lease, including without limitation taking into consideration the remaining balance, if any, on the Authority Subordinate Loan as of the time of the appraisal, and including a reasonable return on investment of between eight percent (8%) and ten percent (10%). Such independent appraisal(s) shall determine the fair market value of Phase II, at its highest and best use (but taking the Recorded Restrictions into account, to the extent the Recorded Restrictions remain applicable and enforceable) at the time of such appraisal but shall also take into consideration an overall fair market ground lease rent over the 57 -year term of the Ground Lease with an objective that Authority receive over such 57 -year term cumulatively a fair market value ground lease rent (taking the Recorded Restrictions into account, to the extent the Recorded Restrictions remain applicable and enforceable) under the Ground Lease. In such regard, if the Rent paid to date has underpaid, cumulatively, toward achieving a fair market ground lease rent (taking the Recorded Restrictions into account, to the extent the Recorded Restrictions remain applicable and enforceable) over the 57 -year Term of the Ground Lease, then the appraiser shall take that fact into consideration when determining an adjusted fair market Rent for the remainder of the Term. Likewise, if the Rent paid to date has been overpaid, cumulatively, toward achieving a fair market Ground Lease rent (taking the Recorded Restrictions into account, to the extent the Recorded Restrictions remain applicable and enforceable) over the 57 -year Term, then the appraiser shall take that fact into consideration when determining the adjusted Rent for the remainder of the Term. 25 In the event the Rent under the Ground Lease is reset pursuant to the foregoing paragraph, this adjusted annual Rent for the remaining Term of the Ground Lease, as determined by the independent appraiser as described above, shall be used to adjust the Rent due and required to be paid annually under the Ground Lease to the lesser of (1) such appraised rent for Phase II (to be increased by 20% every five (5) years to account for inflation), or (2) eighty-five percent (85%) of the Remaining Residual Receipts for Phase 11. In any year, if the appraised value rent (to be increased by 20% every five (5) years to account for inflation) exceeds eighty-five percent (85%) of the Remaining Residual Receipts for Phase ll, the amount by which such appraised value rent (increased by 20% every five (5) years to account for inflation) exceeds eighty-five percent (85%) of the Remaining Residual Receipts for Phase 11 to be paid pursuant to this subdivision (b) in a given year shall accrue and be carried over and added to the amount of the Rent to be paid in later years for Phase 11 by Developer. 2.1.3 Title to Improvements. Upon execution of the Ground Lease for the Site, fee title to all Improvements located at the Site shall be conveyed to Developer for Phase 11 pursuant to the Grant Deed. Upon expiration or earlier termination of the Ground Lease, the Improvements located on the Site shall automatically vest in Authority; provided, in the event of a foreclosure of Developer's interest in the Ground Lease, title to the Improvements shall vest in the successor tenant under the Ground Lease, subject to the terms of the Ground Lease (or a new Ground Lease approved by Authority) entered into after such foreclosure, which shall provide that upon ultimate termination or expiration of the Ground Lease or such new Ground Lease entered into upon foreclosure or deed in lieu of foreclosure, title to such Improvements shall automatically vest in Authority. 2.2. Conditions Precedent to Commencement of Ground Lease and Authority Subordinate Loan. The commencement of the Term of the Ground Lease for the Site and Authority's obligation to make the Authority Subordinate Loan relating to Phase II, is conditioned upon the satisfaction (or waiver by the benefited party) of the following terms and conditions within the times designated below (each, a "Condition Precedent," collectively, "Conditions Precedent"). 2.2.1 Authority's Conditions Precedent to the Closing. Authority's obligations to make the Authority Subordinate Loan and the commencement of the Term and effectiveness of the Ground Lease for the Site, are each subject to the fulfillment by Developer (or written waiver by Authority) of each and every one of the Conditions Precedent (a) through (o), inclusive, described below, which are solely for the benefit of Authority, and which shall be fulfilled by Developer or waived by Authority within the time periods provided herein: (a) Execution and Recording of Documents. Developer shall have duly executed and delivered to Escrow Agent the Authority Promissory Note, Authority Deed of Trust, Regulatory Agreement, Ground Lease, Memorandum of Ground Lease, Notice of Affordability Restrictions, Request for Notice, the Phase II Amended and Restated Joint Use Agreement, the Phase 11 Reciprocal Easement Agreement and any other documents required hereunder for Phase 11, and such documents shall be ready for and meet all conditions to the Closing pursuant to the requirements of this Agreement. The Authority Deed of Trust, Regulatory Agreement, Memorandum of Ground Lease, Notice of Affordability Restrictions and Request for Notice shall be ready to record in the Official Records at Closing. (b) Grading Permits and Building Plans/Permits. Developer shall have obtained City and Authority approval of its Construction Drawings and all final grading and building plans for all of the Improvements to be constructed during Phase 11 as required by Section 3.4. Grading permits shall be ready to issue upon payment of fees and any and all 26 conditional building permits shall be ready to be issued concurrently with the grading permits upon payment of all necessary fees and all required security shall have been posted in order to commence and complete construction of Phase 11. The conditional building permits shall state that final unconditional building permits shall be issued upon satisfactory completion of grading, subject to the sole discretion of City's Building and Planning Departments. (c) Entitlement. Developer shall have obtained City and Authority approval of the Basic Concept Drawings pursuant to Section 3.2 herein, and shall have received all Entitlements for Phase II (but for payment of fees associated therewith) from the City, including administrative adjustment(s), conditional use permit(s) or variance(s), if required, density bonus incentives, and compliance with and/or preparation of documentation, studies, and other reports as required by the California Environmental Quality Act and the National Environmental Policy Act, as applicable. (d) Final Budget. Developer shall have submitted to Authority for its approval the detailed Final Budget for the construction and development of Phase 11, and Authority shall have approved the Final Budget for Phase II in its reasonable discretion. (e) Evidence of Financing. Developer shall have provided written proof reasonably acceptable to Authority that Developer has obtained commitments for equity contributions, reservation of Tax Credits, and other approved affordable housing subsidies and/or loans, and the Primary Loan (including the construction and permanent financing) for Phase 11, all subject to customary conditions, and Authority shall have reasonably approved such financing commitments pursuant to Section 3.10, The Primary Loan construction financing for Phase II shall have closed and funded prior to or be ready to close and fund concurrently with the Closing for the Authority Subordinate Loan for Phase 11. (f) Partnership Agreement; Organizational Documents; Resolution. Developer shall have duly executed or, shall execute concurrently with Closing, a Partnership Agreement reasonably acceptable to Authority in accordance with Section 3.10 and a Certificate of Limited Partnership shall have been filed with the California Secretary of State, under which the limited partners are committed to make equity contributions in an amount, which together with the proceeds of the Primary Loan, the Tax Credits, the Authority Subordinate Loan, and any additional affordable housing subsidies and loans are sufficient to finance the construction and development of Phase II. In addition, Developer shall have certified in writing to Authority that the Primary Loan, Tax Credits, Authority Subordinate Loan, any additional affordable housing subsidies, Deferred Developer Fee, and required equity contributions, are together projected to be sufficient to pay for the completion of development of Phase 11. Authority shall have received and approved the Partnership Agreement and any other relevant organizational documents of Developer, including a resolution authorizing a representative of Developer to enter into this Agreement, the Regulatory Agreement, the Ground Lease, and to execute all of their documents required under the terms of this Agreement, all on behalf of Developer. (g) Construction Contract. Developer shall have provided to Authority (not later than ten (10) days prior to the Closing to enable Authority Executive Director to review, comment and approve or disapprove) a signed copy of the Construction Contracts between Developer and the General Contractor and Developer shall also deliver to Authority (not later than ten (10) days prior to the Closing), signed copies of all subcontracts between Developer's General Contractor and any subcontractor that have been executed prior to the Closing and, from and after the Closing, Developer shall deliver to the Authority copies of any 27 additional subcontracts between the General Contractor and any subcontractors executed after the Closing. All such Construction Contracts and subcontracts shall be certified by the General Contractor to be a true and correct copy thereof. Authority Executive Director shall have reasonably approved such General Contractor and all Subcontractors selected prior to the Closing (which Subcontractors shall be selected after competitive bidding pursuant to Section 3.2.7) as having the experience and financial resources (based on audited or unaudited financial statements submitted to Authority) necessary to construct and complete Phase II; provided, however, Portrait Homes, Inc. (or its affiliate), is pre -approved to act as the General Contractor for the construction of Phase II. Developer shall submit to Authority evidence regarding each entity serving as a Subcontractor for the construction of each portion of Phase ll, along with satisfactory evidence of necessary license(s), certification(s), bonding and insurance, as well as documentation associated with the competitive solicitation required by Section 3.2.7 (with respect to the General Contractor's license bond required by the State of California) and insurance, all as required by this Agreement and as reasonably requested by Authority Executive Director. Each Construction Contract (and all subcontracts) shall include the Section 3 Clause. The Construction Contract with the General Contractor shall be for a fixed, all-inclusive fee or guaranteed maximum fee to complete all work to be performed by the General Contractor to construct Phase II, subject to approved change orders. (h) Completion Guaranty. Developer shall obtain and provide for the benefit of Authority and City, a completion guaranty ("Completion Guaranty"), in substantially the form set forth in Attachment No. 11 and incorporated herein, pursuant to which The Related Companies, L.P., a New York limited partnership as guarantor ("Guarantor"), shall be the guarantor, legally and financially, to cause completion of the construction of Phase II (1) substantially within the time limits set forth in the Schedule of Performance attached hereto as Attachment No. 5, (2) substantially in accordance with the Scope of Development, the Entitlement, and the Development Plans, as the same may be modified from time to time in accordance with the terms of this Agreement, (3) free and clear of any mechanics liens, materialmen's liens and equitable liens, and (4) all costs of construction shall be paid prior to delinquency. In addition, each Completion Guaranty will provide for the waiver by Guarantor of any and all rights, waivers and defenses which may otherwise be available under state or federal law to prevent Authority's (or City's) enforcement of Guarantor's obligations under the Completion Guaranty. (i) Review and Approval of Title. Developer shall not have elected to terminate this Agreement due to the condition of title to the Site pursuant to Section 2.4.7. (j) Authority's Title Policy. The Title Company (as hereinafter defined) shall have unconditionally committed to issue the Authority Title Policy for the Site to Authority pursuant to Section 2.4.8. (k) Environmental Condition of the Site. The environmental condition of the Site shall be reasonably acceptable to Developer, and Developer shall not have elected to terminate this Agreement pursuant to Section 2.3.3. (1) Proof of Insurance. Developer shall have provided to Authority certificates of insurance and endorsements which satisfy all requirements of Section 3.6 hereof as to Phase Il. (m) Property Management Plan. Developer shall have submitted to Authority, and Authority shall have reasonably approved, the Property Management Plan for 28 Phase II, including a copy of one or more agreements with social services providers for Phase II, in accordance with Section 4.9. (n) Marketing and Tenant Selection Plan. Developer shall have submitted to Authority, and Authority shall have reasonably approved, the Marketing and Tenant Selection Plan for Phase II and which shall evidence and include the tenant selection criteria provided for herein. (o) No Default; Representations and Warranties. Developer shall not be in Default of any of its obligations under the terms of this Agreement. All representations and warranties of Developer contained herein shall be true and correct in all material respects on and as of the Closing Date for Phase II as though made at that time, and all covenants of Developer which are required to be performed prior to the Closing shall have been performed by such date. 2.2.2 Developer Conditions Precedent to the Closing. Developer's obligations to proceed with the commencement of the Term and effectiveness of the Ground Lease are subject to the fulfillment or waiver by Developer of each and all of the Conditions Precedent (a) through (j), inclusive, described below, which are solely for the benefit of Developer, and which shall be fulfilled or waived by the time periods provided for herein: (a) Execution and Recording of Documents. Authority shall have duly executed and delivered to Escrow Agent the Grant Deed, Ground Lease, Memorandum of Ground Lease, Notice of Affordability Restrictions, Request for Notice, and any other documents required hereunder for Phase Ii, and such documents shall be ready for and meet all conditions to the Closing pursuant to the requirements of this Agreement. The Grant Deed, Memorandum of Ground Lease, Notice of Affordability Restrictions and Request for Notice, shall be ready to record in the Official Records at Closing. (b) Land Use Entitlement. Developer shall have obtained City and Authority approval of the Basic Concept Drawings, and shall have received the necessary Entitlement for Phase II from City, including conditional use permit(s) or variance(s), if any are required. (c) Grading Permits and Building Plans/Permits. Developer shall have obtained City and Authority approval of its Construction Drawings and all final grading and building plans for Phase II. Initial rough grading as well as complete grading permits shall be ready to issue upon payment of fees and any and all conditional building permits shall be ready to be issued concurrently with such grading permits upon payment of all necessary fees and all required security shall have been posted in order to commence and complete construction of Phase II. The conditional building permits shall state that final unconditional building permits shall be issued upon satisfactory completion of all rough and complete grading subject to the sole discretion of City's Building and Planning Departments. (d) Condition of Site. Authority shall have fulfilled its obligations pursuant to Section 3.1.2 hereof to deliver the Site to Developer clear of occupants. (e) Final Budget. Authority shall have approved a detailed Final Budget for the construction and development of Phase II, and Authority shall have approved the Final Budget for Phase II in its reasonable discretion. 29 M Evidence of Financing. Developer shall have obtained, and Authority shall have approved, a commitment for equity contributions, a reservation of Tax Credits, and other affordable housing subsidies and/or loans, and the Primary Loan, including the construction financing and permanent financing commitment for Phase II in form and substance acceptable to Developer, all subject to customary conditions, and Authority shall have reasonably approved such financing pursuant to Section 3.10. The Primary Loan construction financing for Phase I I shall have closed prior to or be ready to close concurrently with the Closing for Phase Il. (g) Review and Approval of Title. Developer shall have reviewed and approved the condition of title to the Site as provided herein. (h) Developer's Title Policy. The Title Company shall have unconditionally committed to issue the Developer Title Policy for Phase II to Developer pursuant to Section 2.4.8. (i) Environmental Condition of the Site. The environmental condition of the Site and Improvements shall be reasonably acceptable to Developer and Developer shall not have elected to terminate this Agreement pursuant to Section 2.3.3. Q) Relocation. Authority shall have relocated tenants at the Site pursuant to the Relocation Laws. (k) No Default; Representations and Warranties. Authority shall not be in Default of any of its obligations under the terms of this Agreement. All representations and warranties of Authority contained herein shall be true and correct in all material respects on and as of the Closing Date for Phase 11 as though made at that time, and all covenants of Developer which are required to be performed prior to Closing shall have been performed by such date. 2.3. Environmental Condition of the Site. 2.3.1 Environmental Condition of the Site. Authority has delivered to Developer any and all Environmental Reports relating to the Site and the Improvements in the Authority's possession. A list of the Environmental Reports delivered to Developer and Environmental Reports to be prepared, copies of which shall be delivered to Developer promptly upon receipt and approval thereof by Authority, is set forth in Attachment No. 15, which is attached hereto and incorporated herein. Except as disclosed in the Environmental Reports delivered to Developer, Authority represents to Developer that it is not aware of, to its Best Knowledge, and it has not received any additional or unrelated notice or communication from any governmental agency having jurisdiction over the Site or Improvements, notifying it of the presence of Hazardous Materials in, on, or under the Site or Improvements, or any portion thereof. At all times relevant to this Agreement or the Ground Lease, Developer agrees to provide Authority with any additional supplemental or updated documents relating to the physical and/or environmental condition of the Site and Improvements, including those relating to the soils and groundwater, which are received by Developer. 2.3.2 Studies and Reports. Prior to the commencement of the Ground Lease, Developer may obtain data and make any other or additional surveys, tests, studies, and reports necessary to evaluate the suitability of the Site and Improvements for Phase II, including the investigation of the environmental condition of the Site and Improvements (collectively, the "Studies"). Any studies undertaken on the Site by Developer prior to the commencement of the Ground Lease shall be done at the sole expense of Developer, and Developer shall execute a 30 Right of Entry and License Agreement in a form reasonably acceptable to Authority prior to undertaking any such work and/or entering the Site. Any studies shall be undertaken only after all insurance required by and conforming to the requirements of such Right of Entry and License Agreement has been issued and is in full force and effect, and Developer has secured any necessary permits therefor from the appropriate governmental agencies. Developer hereby agrees to promptly provide Authority with any and all Studies relating to the environmental condition of the Site upon Developer's acquisition thereof. 2.3.3 Approval of Environmental Condition of the Site. Prior to the Closing, and within the time set forth in the Schedule of Performance, Developer shall approve or disapprove the environmental condition of the Site by written notice to Authority. In the event that Developer disapproves the environmental condition of the Site, this Agreement shall be terminated as provided in Section 6.4 hereof prior to the Closing for Phase Il. In the event Developer disapproves the condition of the Site or Improvements because it determines that environmental remediation is required to place the Site and/or Improvements in a condition suitable for use as required hereunder and subject to Developer's termination right set forth in the immediately preceding sentence, Authority and Developer shall negotiate in good faith regarding the remediation of the Site and Improvements, and the allocation of the cost of performing such environmental remediation. If after such negotiation the parties are unable to reach agreement upon the remediation of the Site and Improvements, any party may terminate this Agreement as provided herein prior to the Closing. 2.3.4 Indemnification. Developer shall save, protect, pay for, defend (with counsel acceptable to Authority and/or City, as applicable), indemnify and hold harmless Authority, City, and their respective elected and appointed officials, officers, employees, attorneys, representatives, volunteers, contractors and agents (collectively, "Indemnitees") from and against any and all Environmental Claims and any and all liabilities, suits, actions, claims, demands, penalties, damages (including, without limitation, penalties, fines and monetary sanctions), losses, costs or expenses (including, without limitation, consultants' fees, investigation and laboratory fees, attorneys' fees and remedial and response costs and third -party claims or costs) (the foregoing are hereinafter collectively referred to as "Liabilities") that may now or in the future be incurred or suffered by Indemnitees by reason of, resulting from, in connection with or arising in any manner whatsoever as a direct or indirect result of: (i) the presence, use, release, escape, seepage, leakage, spillage, emission, generation, discharge, storage, or disposal of any Hazardous Materials in, on, under, or about, or the transportation of any such Hazardous Materials to or from, the Site; (ii) the violation, or alleged violation, of any statute, ordinance, order, rule, regulation, permit, judgment, or license relating to the use, generation, release, leakage, spillage, emission, escape, discharge, storage, disposal, or transportation of Hazardous Materials in, on, under, or about, or to or from, the Site; (iii) the physical and environmental condition of the Site, (iv) any Liabilities relating to any Environmental Laws and other Governmental Requirements relating to Hazardous Materials and/or the environmental and/or physical condition of the Site, and (v) any Environmental Claims relating to Phase II or the Site; provided, however, that the foregoing indemnity shall not apply to any Liabilities arising or occurring (a) prior to the commencement of the Ground Lease, (b) after the expiration or earlier termination of the Term of the Ground Lease or the date Developer vacates the property, whichever occurs later, or (c) as a result of the grossly negligent or wrongful acts or omissions of Authority or City. The foregoing indemnification shall continue in full force and effect regardless of whether such condition, liability, loss, damage, cost, penalty, fine, and/or expense shall accrue or be discovered before or after the termination of the Ground Lease. This indemnification supplements and in no way limits the indemnification set forth in Section 3.7. 31 2.3.5 Duty to Prevent Hazardous Material Contamination. During the construction, development, operation and management of Phase II, Developer shall take all necessary precautions to prevent the release of any Hazardous Materials into the environment on or under the Site. Such precautions shall include, but not be limited to, compliance with all Environmental Laws and other Governmental Requirements. Developer shall notify Authority, and provide to Authority a copy or copies of any notices of violation, notices to comply, citations, inquiries, clean-up or abatement orders, cease and desist orders, reports filed pursuant to self -reporting requirements and reports filed or applications made pursuant to all Environmental Laws and other Governmental Requirements, and Developer shall report to Authority, as soon as possible after each incident, any unusual or potentially important incidents in the event of a release of any Hazardous Materials into the environment. 2.3.6 Release of Authority and City by Developer. With the exception of the obligations of Authority (and City as beneficiaries of the covenants thereunder) under the Ground Lease, the Entitlement, Environmental Laws and Governmental Requirements (except to the extent the responsibility for compliance with Environmental Laws and Governmental Requirements has been assumed by Developer hereunder), Developer hereby waives, releases and discharges forever the Indemnitees from all present and future claims, demands, suits, legal and administrative proceedings and from all liability for damages, losses, costs, liabilities, fees and expenses, including attorneys' fees, court and litigation costs and fees of expert witnesses, present and future, arising out of or in any way connected with Developer's possession or use of the Site pursuant to the Ground Lease, improvement of the Site in accordance with this Agreement, the Scope of Development, and the Entitlement, and for the operation of Phase II at the Site, of any Hazardous Materials on the Site, or the existence of Hazardous Materials contamination in any state on, under, or about the Site, however they came to be located there. In connection with the foregoing, Developer acknowledges that it is aware of and familiar with the provisions of Section 1542 of the California Civil Code that provides 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." As such relates to this Section 2.3.6, Developer hereby waives and relinquishes all rights and benefits that it may have under Section 1542 of the California Civil Code. Notwithstanding the foregoing, this waiver, discharge, and release shall not be effective in the event the presence or release of Hazardous Materials on the Site occurs as a result of the gross negligence or willful misconduct of Authority or City or their officers, employees, representatives and agents. 2.3.7 Environmental Inquiries. Developer shall notify Authority upon receipt, and provide to Authority a copy or copies, of the following environmental permits, disclosures, applications, entitlements or inquiries relating to the Site and Phase II: notices of violation, notices to comply, citations, inquiries, clean up or abatement orders, cease and desist orders, reports filed pursuant to self -reporting requirements and reports filed or applications made pursuant to any Environmental Laws and other applicable Governmental Requirements relating to Hazardous Materials and underground tanks, and Developer shall report to Authority, as soon as possible 32 after each incident, all material information relating to or arising from such incident, including, but not limited to, the following: (a) All required reports of releases of Hazardous Materials, including notices of any release of Hazardous Materials as required by any Governmental Requirements; (b) All notices of suspension of any permits relating to Hazardous Materials; (c) All notices of violation from federal, state or local environmental authorities relating to Hazardous Materials; (d) All orders under the State Hazardous Waste Control Act and the State Hazardous Substance Account Act and corresponding federal statutes, concerning investigation, compliance schedules, clean up, or other remedial actions; (e) All orders under the Porter Cologne Act, including corrective action orders, cease and desist orders, and clean up and abatement orders; (f) Any notices of violation from OSHA or Cal OSHA concerning employees' exposure to Hazardous Materials; (g) All complaints and other pleadings filed against Developer relating to Developer's storage, use, transportation, handling or disposal of Hazardous Materials on or about the Site; and (h) Any and all other notices, citations, inquiries, orders, filings or any other reports containing information which would have a materially adverse effect on the Site or Authority's liabilities or obligations relating to Hazardous Materials. In the event of a release of any Hazardous Materials into the environment, Developer shall, as soon as possible after the release, furnish to Authority a copy of any and all reports relating thereto and copies of all correspondence with governmental agencies relating to the release. Upon request of Authority, but subject to any limitations imposed by law or by court order, Developer shall furnish to Authority a copy or copies of any and all other environmental entitlements or inquiries relating to or affecting the Site in Developer's possession and/or shall notify Authority of any environmental entitlements or inquiries relating to or affecting the Site within Developer's actual or constructive knowledge if Developer is not in possession of same, including, but not limited to, all permit applications, permits and reports including, without limitation, those reports and other matters which may be characterized as confidential. 2.4. Escrow. Within the time set forth in the Schedule of Performance, the parties shall open an escrow ("Escrow") for the Closing for the conveyance by Authority to Developer of a ground leasehold interest in the Site and the disbursement of the Authority Subordinate Loan for Phase ll, with First American Title Company or another escrow company mutually satisfactory to both parties ("Escrow Agent"). As used herein, "Closing" refers to the close of Escrow for the conveyance of the Site pursuant to the Ground Lease, including the execution of the Authority Promissory Note and Ground Lease and the execution and recordation of the Grant Deed, Authority Deed of Trust, Regulatory Agreement, Memorandum of Ground Lease, Notice of Affordability Restrictions and Request for Notice of Default and the commencement of the Ground Lease Term. 33 2.4.1 Costs of Escrow. Developer shall pay all Escrow charges, the premium for Developer's Title Policy, Authority's Title Policy (including both an owner's policy and a lender's policy, both with requested endorsements), all recording fees and documentary transfer taxes, if any, due with respect to the Closing, and all other fees, charges, and costs which arise from Escrow. 2.4.2 Escrow Instructions. This Agreement constitutes the joint escrow instructions of Developer and Authority, and the Escrow Agent to whom these instructions are delivered is hereby empowered to act under this Agreement. The parties agree to do all acts reasonably necessary to close each Escrow within the time set forth in the Schedule of Performance. All funds received in each Escrow shall be deposited with other escrow funds in a general escrow account(s) and may be transferred to any other such escrow trust account in any state or national bank doing business in the State of California. If in the opinion of any party it is necessary or convenient in order to accomplish the Closing of the Escrow, a party may require that the parties sign supplemental escrow instructions; provided that if there is any inconsistency between this Agreement and the supplemental escrow instructions, then the provisions of this Agreement shall control, unless the supplemental escrow instructions expressly state the intent to amend this Agreement. The parties agree to execute such other and further documents as may be reasonably necessary, helpful or appropriate to effectuate the provisions of this Agreement. The Closing shall take place within five (5) days after the date when the Conditions Precedent set forth in Section 2.2 have been satisfied or waived by the respective parties as to Phase 11. Escrow Agent is instructed to release Authority's Escrow Closing statement and Developer's Escrow Closing statement to the respective parties. 2.4.3 Authority of Escrow Agent. Escrow Agent is authorized to, and shall: (a) Pay and charge Developer for the premium of the Developer's Title Policy and the Authority's Title Policy (including both an owner's policy and a lender's policy, both with requested endorsements), and any endorsements thereto requested by Developer and/or Authority and any amount necessary to place title in the condition necessary to satisfy this Agreement; (b) Pay and charge Developer for one-half of all Escrow fees (c) Pay and charge Authority for one-half of all Escrow fees and charges and all documentary transfer taxes associated with the Ground Lease for Phase 11; (d) Verify proper and complete execution of the Authority Promissory Note and verify proper and complete execution of and record the Authority Deed of Trust, Grant Deed, Memorandum of Ground Lease, Regulatory Agreement, Notice of Affordability Restrictions, and Request for Notice of Default upon Closing; and (e) Do such other actions as necessary, including obtaining any Developer and Authority title insurance, required to fulfill the parties' obligations under this Agreement. 2.4.4 Escrow Closing. Subject to Section 3.10, et seq., regarding financing for Phase II and the discretionary consents, including approvals and/or disapprovals, and timing therefor, the Closing for the conveyance of the ground leasehold estate in the Site by Authority to 34 Developer, and the commencement of the Term of the Ground Lease for the Site shall occur within five (5) days of the parties' satisfaction of all of the Conditions Precedent set forth in Section 2.2 hereof, but in no event later than the times set forth in the Schedule of Performance (collectively, the "Closing Date"). The Closing Date may be extended by the mutual written agreement of Developer and the Executive Director. The Closing shall occur at a location within Orange County at a time and place reasonably agreed on by the parties. 2.4.5 Termination of Escrow. If Escrow is not in condition to close by the Closing Date, then any party who is not in material default under this Agreement may, in writing, demand the return of money or property and proceed under the default and/or termination provisions of this Agreement. If any party makes a written demand for return of documents or properties, the Escrow shall not cancel until five (5) days after Escrow Agent shall have delivered copies of such demand to all other parties at the respective addresses shown in this Agreement. If any objections are raised within said five (5) day period, Escrow Agent is authorized to hold all papers and documents until instructed by a court of competent jurisdiction or by mutual written instructions of the parties. Developer, however, shall have the sole option to withdraw any money deposited by it with Escrow Agent or Authority less Developer's liability for costs of Escrow. Termination of this Agreement shall be without prejudice as to whatever legal rights any party may have against the other arising from this Agreement. If no demands are made, the Escrow Agent shall proceed with the Closing as soon as possible. 2.4.6 Closing Procedure. Escrow Agent shall close the Escrow as follows: (a) Accept receipt of fully and duly executed Authority Promissory Note, Authority Deed of Trust, Grant Deed, Ground Lease, Memorandum of Ground Lease, Regulatory Agreement, Notice of Affordability Restrictions, and Request for Notice of Default; (b) Record documents in the following order: (i) Record first the Memorandum of Ground Lease in the Official Records, with instructions for the Recorder of Orange County, California to deliver the Memorandum of Ground Lease to Authority; (ii) Record the Grant Deed in the Official Records with instructions for the Recorder of Orange County, California, to deliver the Grant Deed to Developer; (iii) Record the Primary Loan lien instrument, including the deed of trust securing the Primary Loan, in the Official Records; (iv) Record the Regulatory Agreement in the Official Records, with instructions for the Recorder of Orange County, California to deliver the Regulatory Agreement to Authority; (v) Record the Notice of Affordability Restrictions in the Official Records, with instructions for the Recorder of Orange County, California to deliver the Notice of Affordability Restrictions to Authority; (vi) Record the Authority Deed of Trust in the Official Records, with instructions for the Recorder of Orange County, California to deliver the Authority Deed of Trust to Authority; 35 (vii) Record the Request for Notice of Default in the Official Records, with instructions for the Recorder of Orange County, California to deliver the Request for Notice of Default to Authority; (c) Instruct the Title Company to deliver Developer's Title Policy to Developer and Authority's Title Policy to Authority; (d) File any informational reports required by Internal Revenue Code Section 6045(e), as amended, and any other applicable requirements; and (e) Forward to both Developer and Authority a separate accounting of all funds received and disbursed for each party and copies of all executed and recorded or filed documents deposited into Escrow, with such recording and filing date and information endorsed thereon. 2.4.7 Review of Title. Authority shall be responsible for obtaining a preliminary title report ("Title Report") from First American Title Insurance Company or another title company mutually satisfactory to both parties ("Title Company") with respect to the title to the Site. Developer and Authority each shall have the right to reasonably approve or disapprove the exceptions to title set forth in the Title Report ("Exceptions"); provided, however, that the following Exceptions are hereby approved by the parties: (a) The lien of any non -delinquent property taxes and assessments (to be prorated at the time of Closing); and (b) The provisions to be set forth in the Grant Deed, Memorandum of Ground Lease (which shall incorporate by reference the terms of the Ground Lease), Regulatory Agreement, and Notice of Affordability Restrictions. Each party shall have thirty (30) days from the date of its receipt of the Title Report and legible copies of all back-up documents listed as Exceptions therein or shown on any Survey to give written notice to the other party and to Escrow Agent of approval or disapproval of any of such Exceptions; provided, however, that if following review of the Title Report, the Title Company adds additional exceptions to coverage for matters not caused by a party, each party shall have the right to approve or disapprove any such exceptions (such new exceptions shall likewise be included within the definition of the term "Exceptions"). Except for deed(s) of trust and regulatory agreement(s) approved as part of the financing for Phase II pursuant to Section 3.10, Authority and Developer shall not voluntarily create any new exceptions to title following the Effective Date and prior to the Closing, including without limitation, any liens or stop notices related to any studies or other work at the Site. Authority and Developer shall use good faith efforts to attempt to remove or modify any Exceptions which are unacceptable. If any Exceptions disapproved by Developer are not removed, insured, or endorsed around by the Title Company, each party shall have the option to either proceed to Closing and accept title in its existing condition, or to terminate this Agreement. 2.4.8 Title Insurance. Concurrently with the Closing for Phase II, there shall be issued to Developer at Developer's sole cost, a CLTA or, if requested by Developer, an ALTA leasehold policy of title insurance, together with all endorsements Developer may reasonably require (collectively, the "Developer Title Policy"), issued by the Title Company insuring that Developer holds proper interest in the Site as tenant under the Ground Lease and holds fee title to the Improvements under the Grand Deed, and that the title to the Site is vested in Authority in 36 the condition required by this Agreement. The Title Company shall provide Developer and Authority with copies of the Developer Title Policy. Concurrently with the Closing for Phase II, there shall be issued to Authority an ALTA extended coverage lender's policy of title insurance, together with all endorsements Authority may reasonably require (collectively, the "Authority Title Policy"), issued by the Title Company insuring that the lien of the Authority Deed of Trust against the Site is subordinate only to the Primary Loan for Phase II and to no other monetary encumbrance against the Site. The Title Company shall provide Developer and Authority with copies of the Authority Title Policy. The Authority Title Policy insuring the priority of the Authority Subordinate Loan shall be for the full amount of the Authority Subordinate Loan for Phase ll. 3. DEVELOPMENT OF PHASE II. 3.1. Development of Phase II. 3.1.1 Developer's Obligations. Subject to the terms of this Agreement, Developer agrees to construct and develop or cause construction and development through completion of Phase II, including all on-site and off-site improvements required to be constructed in accordance with the Scope of Development and in compliance with the Entitlement approved by the City and all applicable local codes, development standards, ordinances and zoning ordinances, other applicable Governmental Requirements, and the Development Plans which are approved by the City and Authority pursuant to Section 3.2 hereof. (a) Scope of Development. "Phase II" is described in more detail on the Scope of Development attached hereto as Attachment No. 6. 3.1.2 Authority Additional Subsidies. [Anaheim/Related Staff to revise/comment.] (a) Delivery of Site. (i) Relocation Costs. Authority shall relocate the tenants currently occupying the Site. Such relocation shall be conducted in accordance with all applicable federal, state, and local laws, rules and regulations. Such relocation is anticipated to cost approximately $[ ]. (ii) Miscellaneous Site Assembly and Maintenance Costs. Authority will incur costs in an approximate amount of $[ ] in connection with miscellaneous Site preparation activities and property management and maintenance of the Site. (iii) Timing. Authority will use reasonable efforts to complete the work described in subdivisions (i) and (ii) of this Section 3.1.2(a) prior to Closing. (b) Energy -Efficient Appliance Rebate. The City will provide $1,500 per Housing Unit, for a total of approximately $31,500, as a rebate for Developer's installation of eligible energy-efficient appliances in the Housing Units at Phase II; provided, payment of such amounts by Authority (or Authority causing City or another entity to pay) is expressly conditioned upon completion of construction of Phase II and installation of such eligible energy-efficient appliances by Developer at Phase II and the confirmation and issuance by the City (or other authorized entity) of the applicable certification relating to installation of such eligible 37 energy-efficient appliances by Developer for Phase II. The selection of specific energy-efficient appliances to be installed at Phase II shall be subject to the reasonable approval of Authority Executive Director and City Building, Public Utilities and Planning departments. 3.1.3 Subsidies to be Added to Authority Subordinate Loan. The cumulative value of all improvements to be constructed and the cumulative amount of all rebates, waivers, and other subsidies to be provided by Authority and/or City pursuant to Section 3.1.2 shall be added to the principal balance owing under the Authority Subordinate Loan for Phase II. 3.1.4 Source of Funds for Additional Subsidy. Authority Executive Director may elect to use a variety of funding sources to provide and pay for the Additional Subsidy amounts listed above in Section 3.1.2, including the federal HOME Investment Partnership Act funds and any and all other funding sources available to the Authority. Developer acknowledges that these and other sources of Phase II funding may impose and require compliance with additional federal, state, and/or local requirements and Developer hereby agrees to comply with any and all such requirements to the extent applicable to Phase II. 3.2. Design Review of Development Plans. 3.2.1 Basic Concept Drawings. Within the time set forth in the Schedule of Performance, Developer shall submit to Authority, and Authority shall review and approve, disapprove, or conditionally approve basic concept drawings for Phase II and all appurtenant improvements, including elevations of all four sides of Phase ll, preliminary landscape plans (both hardscape and softscape and other amenities of common areas) consistent with the City of Anaheim Residential Design Guidelines for Affordable Housing Developments, a traffic and circulation plan as applicable or as may be required, and a rendered perspective, and all appurtenant improvements (collectively, "Basic Concept Drawings"). In the event Developer wishes to in any way alter or modify such Basic Concept Drawings, Developer shall re -submit such modified Basic Concept Drawings to both Authority and City for their reasonable review and approval of such modifications. 3.2.2 Construction Drawings and Related Documents. Within the time set forth in the Schedule of Performance, Developer shall submit to Authority, and Authority shall review and approve, disapprove, or conditionally approve, detailed construction plans/working drawings with respect to Phase II, prepared by the architect for Phase II, and the components described in (a) through (c) below (together, "Construction Drawings"). (a) Signage plans, materials and color board. (b) Common area amenities, including all recreational or leisure areas or improvements. (c) Lighting schedules including a photo illumination plan, to determine if there is adequate lighting within Phase II, with samples or manufacturer's literature for exterior lighting. Lighting locations are to be shown on landscape plans and elevations. 3.2.3 Standards for Disapproval. Authority Executive Director shall have the right to disapprove the Basic Concept Drawings in his/her reasonable and complete discretion. Authority Executive Director shall have the right to disapprove in her reasonable discretion any of the Construction Drawings if (a) the Construction Drawings do not conform to the approved Basic Concept Drawings, or (b) the Construction Drawings do not conform to the Scope of Development or this Agreement, or (c) the Construction Drawings are incomplete. Authority review and subsequent approval or disapproval shall be conducted within the time periods set forth in the Schedule of Performance, and an Authority disapproval, if any, shall include a written statement of the reasons for such disapproval. Developer, upon receipt of any such disapproval, shall revise such portions and resubmit the disapproved Basic Concept Drawings or Construction Drawings, as the case may be, by the time established therefor in the Schedule of Performance; provided, however, in no event shall any such drawings be deemed approved. Developer acknowledges and agrees that Authority is entitled to approve or disapprove the Basic Concept Drawings and Construction Drawings (collectively, "Development Plans") in order to satisfy Authority's obligation to promote the sound development and redevelopment of the Site, to promote a high level of design which will impact the surrounding development, and to provide an environment for the social, economic and psychological growth and well-being of the citizens of the City and all residents of Phase II. 3.2.4 Consultation and Coordination. During the preparation of the Development Plans and throughout construction of Phase II, City Community Development staff and authorized representatives of Developer shall hold joint progress meetings with City staff to coordinate the preparation of, submission to, and review of the Development Plans by Authority Executive Director and City. City Community Development staff and authorized Developer representatives shall communicate and consult informally as frequently as is necessary to ensure that the formal submittal of any documents to Authority and/or City can receive prompt and thorough consideration. Authority shall designate a City Community Development staff member to serve as the project manager for Phase II, who shall be responsible for the coordination of Authority's activities under this Agreement and for coordinating the permitting process. 3.2.5 Revisions and Change Orders. In the event Authority disapproves or conditionally approves the Development Plans, or any part(s) thereof, or if Developer desires to propose any substantial revisions to the approved Development Plans, or any part(s) thereof, Developer shall submit its revisions or proposed changes thereto to Authority Executive Director and City, and shall also proceed in accordance with any and all Governmental Requirements regarding such revisions, within the time frame set forth in the Schedule of Performance for the resubmittal of such Development Plans, or any part(s) thereof. Any revision or change to such Development Plans proposed by Developer may be disapproved by Authority through its Executive Director in his/her reasonable discretion pursuant to subdivision (a) below. Any and all change orders or revisions required by the City and its inspectors that are required under the Anaheim Municipal Code and all other applicable Uniform Codes (e.g. Building, Plumbing, Fire, Electrical, etc.) and under other Governmental Requirements shall be included by Developer in its Development Plans and completed during the construction of Phase II. In the event Developer requests revisions, alterations, or modifications to the Development Plans, or any part(s) thereof, for any reason including increased construction costs because of unforeseen occurrences or conditions relating to the construction of Phase ll, any revisions, alterations, or modifications shall be subject to the approval of Authority in its reasonable discretion (and the City's Planning/Building Department in its discretion) pursuant to subdivision (a) below. Developer shall be required to pay any and all increased costs of construction due to any such revisions, alterations, or modifications of the Development Plans, or any part(s) thereof. (a) Approval of Change Orders. Developer shall not be required to obtain Authority Executive Director approval of any change orders or other revisions or modifications to the Construction Drawings, so long as each change order, revision, or modification is consistent with the approved Basic Concept Drawings does not cause any value M engineering not previously authorized by Authority and does not affect materially the design, materials, and architectural quality and integrity of Phase II, except that Developer shall be required to obtain Authority Executive Director approval to the extent such change order, revision, or modification will result in a cost adjustment which, cumulatively with all other change orders, revisions, and modifications, exceeds the amount set forth as the contingency line item in the approved Final Budget for Phase ll. Notwithstanding the immediately preceding sentence, Authority shall have the right to review any and all material changes, revisions or modifications to the Construction Drawings and/or any and all material change orders to the Construction Contract with the General Contractor which are approved by Developer. 3.2.6 Defects in Development Plans. Neither Authority nor City shall be responsible to Developer or to any third parties in any way for (a) any defects in the Development Plans, (b) any structural or other defects in any work done according to the approved Development Plans, nor (c) any delays caused by the review and approval processes established by this Section 3.2. Developer shall hold harmless, indemnify and defend the Indemnitees from and against any claims or suits for damages to property or injuries to persons (including death) arising out of or in any way relating to defects, latent or patent, in the Development Plans, or the actual construction work and improvements comprising Phase ll, including, without limitation, the violation of any Governmental Requirements, or arising out of or in any way relating to any defects in any work done and/or improvements completed according to the approved Development Plans. 3.2.7 Selection of Subcontractors. Developer or the General Contractor, as applicable, shall solicit no fewer than three (3) competitive bids from qualified, licensed, insured, and bonded Subcontractors for each portion of the construction work to be separately contracted for by each Developer or the General Contractor, as applicable, and Developer shall select the Subcontractor(s) that have submitted the lowest responsible and responsive bid for each such separately contracted -for portion of Phase ll. Authority shall have every reasonable right and opportunity to review all materials, bid packages, and related documents and to observe and attend all stages of and meetings related to such competitive bidding process, including, without limitation, a right to review the invitation to bidders and each submitted bid package and the right to be present when each bid is opened by Developer and/or the General Contractor and all selected Subcontractors shall be reasonably acceptable to Authority Executive Director. Developer shall provide copies of all documents and other information reasonably necessary or appropriate to permit Authority to verify that Developer has solicited competitive bids from such qualified contractors pursuant to this Section 3.2 and selected the lowest responsible and responsive Subcontractors as required herein, including copies of the invitation to bidders, all documents distributed to potential bidders by Developer, and all submissions received from bidding contractors in response thereto. Developer shall also submit to Authority evidence regarding each entity serving and/or contracting as the Subcontractor for each portion of the construction of Phase II and all other on-site and off-site improvements required to be constructed in connection therewith in accordance with the Scope of Development, the Entitlement to be approved by City, and the Development Plans, including all required licenses, certifications, insurance, etc., as reasonably requested by Authority Executive Director. 3.2.8 Authority Construction Manager. Authority shall have the right to employ (at its sole cost and expense) a construction manager of its choosing ("Construction Manager") to oversee the competitive bidding and selection of all Subcontractors in accordance with Section 3.2.7 above and the construction and other development work performed at the Site pursuant to this Agreement. The Construction Manager shall be retained to provide Authority with assurances that all work is performed in a timely and safe manner and in accordance with this Agreement, the Scope of Development, the Development Plans, the approved Construction 40 Contracts, any approved change orders and other legal requirements. Authority may also direct the Construction Manager (or another consultant selected by Authority, in Authority's sole discretion) to evaluate the Development Plans and prepare an independent development cost estimate to assist Authority in determining whether Developer (or General Contractor, as applicable) is obtaining commercially reasonable bids for Phase II from Subcontractors. Developer shall ensure that Authority's Construction Manager shall have full access to the Site and to all records of Developer, the General Contractor, and each and all Subcontractors relating to Phase II to permit the Construction Manager to perform its duties as described in this Section 3.2.8, and each Construction Contract shall provide appropriate provisions to effectuate this Section 3.2.8. 3.3. Timing of Development of Phase II. Developer hereby covenants and agrees to commence the construction and development of Phase II within the time set forth in the Schedule of Performance (subject to force majeure pursuant to Section 6.3 hereof). Developer further covenants and agrees to diligently prosecute to completion the construction and development of Phase II in accordance with the approved Development Plans (as the same may be modified in accordance herewith) and to file a notice of completion therefor pursuant to California Civil Code Section 3093 within the time set forth in the Schedule of Performance. 3.4. City and Other Governmental Permits. As a Condition Precedent to Closing for Phase I I pursuant to Section 2.2, Developer shall have received, or shall be ready to receive upon payment of required fees, all required final grading permits and conditional building permits for the construction of Phase II. Before commencement of construction of Phase 11 Developer shall secure or cause its General Contractor (and subcontractors) to secure any and all permits and approvals which may be required by City or any other governmental agency affected by such construction, including, without limitation, rough grading permits, final grading permits, conditional building permits, and final building permits. The conditional building permits may state that the final unconditional building permits shall be issued upon satisfactory completion of rough and complete grading, subject to the sole discretion of the City's Building and Planning Departments. Developer shall pay all necessary fees and timely submit to the City final drawings with final corrections to the Development Plans to obtain any and all such permits. City Community Development staff will, without obligation to incur liability or expense therefor, use their reasonable efforts to expedite the City's issuance of final building permits and certificates of occupancy that meet Governmental Requirements and this Agreement. 3.5. Release of Construction Covenants. Promptly after the completion of the development of Phase II in conformity with this Agreement (as reasonably determined by Authority Executive Director or her designee) and as determined completed by the City's building official, upon the written request of Developer, Authority shall furnish Developer with a Release of Construction Covenants for Phase II (substantially in the form attached hereto as Attachment No. 14, and incorporated herein) which evidences and determines the satisfactory completion of the construction and development of Phase II in accordance with this Agreement. The issuance and recordation of the Release of Construction Covenants with respect to Phase II shall not supersede, cancel, amend or limit the continued effectiveness of any obligations relating to the maintenance, operation, uses, payment of monies, or any other obligations, except for the obligation to complete the development of Phase II as of the time of the issuance of the Release of Construction Covenants for Phase 11. Upon receipt of a request for the issuance of a Release of Construction Covenants for Phase 11, the Authority shall, within thirty (30) days, either issue the Release of Construction Covenants as requested or provide a detailed written explanation of the remaining work which must be performed or other requirements for the issuance of such Release of Construction Covenants. If Authority fails to issue a Release of Construction Covenants without 41 providing such detailed written explanation as to what actions Developer must take to obtain such Release of Construction Covenants within such thirty (30) day period, Developer shall be deemed to be entitled to such Release of Construction Covenants, and Authority shall, within three (3) days of demand by Developer, issues such Release of Construction Covenants to Developer. 3.6. Insurance Requirements. Developer shall secure from a company or companies licensed to conduct insurance business in the State of California, pay for, and maintain in full force and effect from and after the Closing, and continuing for the Term of the Ground Lease, insurance for Phase II as required herein, issued by an "A:VI" or better rated insurance carrier as rated by A.M. Best Company. Developer shall furnish certificates of insurance and endorsements to Authority not fewer than fifteen (15) days prior to the Closing and shall furnish complete copies of such policy or policies upon request by Authority or City. [Please confirm insurance language with Dave Nunley.] 3.6.1 Minimum Coverage/Endorsements. Notwithstanding any inconsistent statement in the policy or any subsequent endorsement attached hereto, the protection afforded by these policies shall be written on an occurrence basis in which Authority, City, and their respective elected and appointed officials, officers, employees, agents and representatives (together, "Additional Insureds") are named as additional insureds on all coverage, except for Workers' Compensation coverage, but including Employers Liability coverage, and shall: (a) Name the Additional Insureds (from above) as additional insureds on a Commercial General Liability ("CGL") policy; (b) Include an endorsement to the CGL policy naming the Additional Insureds as additional insureds, and said endorsement shall be delivered to Authority Executive Director prior to and as a Condition Precedent to the Closing (and maintained as required herein); provided, however, that an individual endorsement specifically naming the Additional Insureds shall not be required if Developer provides documentation which, in the sole discretion of Authority, demonstrates that the Additional Insureds are otherwise automatically covered under some sort of blanket policy language that clearly establishes the Additional Insureds' status as additional insureds under the policy, without the need for a separate endorsement in favor of the Additional Insureds; (c) Provide a broad form commercial general liability insurance in the amount of Twenty Million Dollars ($20,000,000) per occurrence, which will be considered equivalent to the required minimum limits, and such insurance shall (i) be written on an occurrence form, (ii) be written with a primary policy form with limits of not less than $1,000,000 per occurrence; (iii) be written with one or more excess layers to bring the total of primary and excess coverage limits to not less than $20,000,000 per occurrence, (iv) not be written with a deductible greater than $20,000 per occurrence (without prior written approval by Authority, which approval shall be granted or denied in Authority's sole and absolute discretion), (v) not be written with a self-insured retention (without prior written approval by Authority, which approval shall be granted or denied in Authority's sole and absolute discretion), and (vi) contain a waiver of subrogation in favor of the Authority and City. Such insurance shall include independent contractor coverage and shall cover the acts, errors, omissions, or works of any of Developer's subcontractors and any other person(s) acting on behalf of Developer, as respects any liability that may occur to Developer and/or any Additional Insureds from such acts, errors, omissions or work; (d) Provide primary Automobile Liability insurance for owned, non - owned, and hired vehicles, as applicable to, or for any use related to, Phase ll, in an amount not !A less than One Million Dollars ($1,000,000) combined single limit, with excess insurance coverage to bring the total amount of Automobile Liability insurance coverage to an amount not less than Five Million Dollars ($5,000,000) per accident for bodily injury and property damage; (e) Bear an endorsement or shall have attached a rider providing that Authority shall be notified not less than thirty (30) days before any expiration, cancellation, non -renewal, reduction in coverage, increase in deductible, or other material modification of such policy or policies, and shall be notified not less than ten (10) days after any event of nonpayment of premium (collectively, "Cancellation Notice"), provided, however, that an individual endorsement specifically naming the Authority shall not be required if Developer provides documentation which, in the sole discretion of Authority, demonstrates that the Authority will automatically receive such Cancellation Notice under some sort of blanket policy language, without the need for a separate endorsement in favor of the Authority; and certification: (f) Developer shall also file with Authority the following signed "I am aware of, and will comply with, Section 3700 of the Labor Code, requiring every employer to be insured against liability of Workers' Compensation or to undertake self-insurance before commencing any of the work." Developer shall comply with Sections 3700 and 3800 of the Labor Code by securing, paying for and maintaining in full force and effect from and after the Closing of Escrow, and continuing for the Term of the Ground Lease, complete Workers' Compensation insurance, to statutory limits, with Employers Liability limits not less than One Million Dollars ($1,000,000) per occurrence, and shall furnish a Certificate of Insurance to Authority before the commencement of construction. Every Workers' Compensation insurance policy shall bear an endorsement or shall have attached a rider providing that, in the event of expiration, proposed cancellation, or reduction in coverage of such policy for any reason whatsoever, Authority shall be notified, giving Developer a sufficient time to comply with applicable law, but in no event less than thirty (30) days before such expiration, cancellation, or reduction in coverage is effective or ten (10) days in the event of nonpayment of premium. (g) All Additional Insureds shall not be responsible for any claims in law or equity occasioned by the failure of Developer to comply with this Section 3.6.1. Authority shall have the right, but not the obligation, to pay a premium on behalf of Developer (h) Should any of the insurance coverage required herein be written with an annual aggregate: (i) such aggregate shall be disclosed in writing to Authority, (ii) should total incurred claims (paid plus reserves) against such insurance exceed fifty percent (50%) of the applicable aggregate, Developer shall prompt notify Authority in writing, and (iii) should total incurred claims (paid plus reserves) against such insurance exceed seventy-five percent (75%) of the applicable aggregate, Developer shall promptly notify Authority in writing and promptly take whatever action is necessary to have the aggregate reinstated to an amount not less than fifty percent (50%) of the original aggregate amount. (i) For all insurance required under this subsection 3.6.1, Authority shall have the right, at every ten (10) year period of the Ground Lease, to review the types and limits of insurance coverage required herein and to make reasonable adjustments, provided that such types and limits shall not exceed that typically carried by the owner and operator of a first 43 class apartment complex, of approximately the same size, in Orange County, California, based on reasonable research and investigation by Authority. 3.6.2 Property Insurance. Commencing upon the Closing and continuing until the later of (i) the expiration or earlier termination of the Term of the Ground Lease or (ii) the date Developer vacates the Site, Developer shall secure, maintain, and pay for the following all-risk Property Insurance for Phase II; provided, however, in the case of Builder's Risk insurance where Developer is not the general contractor, Developer may cause the required Builder's Risk insurance to be secured, maintained, and paid for by the general contractor: (a) Prior to the start of construction and continuing until the completion of construction (the latter of final acceptance of Phase II or issuance of the final certificate of occupancy for Phase II): all-risk Builder's Risk (course of construction) insurance coverage but excluding the perils of earthquake (land movement) and flood, in an amount equal to the full cost of the hard construction costs of Phase II. Such insurance shall be written on an all-risk form, and shall cover, at a minimum: all work, materials, and equipment to be incorporated into Phase II; Phase II during construction; the completed Phase II until such time as it is accepted by the City; and storage and transportation risks; and such coverage shall not be terminated until permanent Property Insurance is in place, as required in Section 3.6.2(b). Such insurance shall protect/insure the interests of Developer/owner and the General Contractor, and other contractor(s), and all subcontractors, as each of their interests may appear. If such insurance includes an exclusion for "design error," such exclusion shall only be for the object or portion which failed. Such insurance shall include an insurer's waiver of subrogation in favor of each protected/insured party thereunder and the Authority and City. Authority shall be named as an additional loss payee, as its interests may appear, with a Lenders Loss Payable endorsement, which shall be delivered to Authority prior to the start of construction. (b) Commencing with the completion of construction and continuing until the later of (i) the expiration or earlier termination of the Term of the Ground Lease or (ii) the date Developer vacates the Site: (a) all-risk physical damage insurance coverage ("Property Insurance"), on an all-risk basis, covering all insurable structures and equipment, including coverage for building code changes, but excluding the perils of earthquake (land movement) and flood, in an amount not less than 100% of the replacement cost of the total values at risk, which shall be adjusted for increased costs of construction and replacement on an annual basis, to protect against loss of, damage to, or destruction of Phase II; such insurance shall not contain a coinsurance clause; (b) business interruption and extra expense insurance to protect Developer and all additional loss payees covering loss of revenues and/or extra expense incurred by reason of the total or partial suspension or delay of, or interruption in, the operation of Phase Il, or any portion thereof, caused by loss or damage to or destruction of any part of the insurable real property structures or equipment as a result of the perils insured against under such Property Insurance, covering a period of suspension, delay or interruption of at least eighteen (18) calendar months, in an amount not less than the amount required to cover such business interruption and/or extra expense loss during any such period; such insurance shall not contain a deductible in an amount in excess of a thirty (30) day period; and (c) as applicable, boiler and machinery insurance in the aggregate amount of the full replacement value of the equipment typically covered by such insurance. On the coverage required underthis subparagraph 3.6.2(b), Authority shall be named as an additional loss payee, as its interests may appear, with a Lenders Loss Payable endorsement whenever possible, and if not attainable for Additional Insured other than Authority, then a loss payable endorsement may be utilized, which shall be delivered to Authority at the completion of construction and prior to the expiration of the Builders Risk insurance coverage required herein. (c) For all insurance required under this subsection 3.6.2, said polices shall provide, by endorsement, that they will not be cancelled, non -renewed or reduced in scope or coverage, without at least thirty (30) days prior written notice to Authority, except in the event of non-payment of premium which shall provide for at least ten (10) days prior written notice to Authority. 3.6.3 Reduction in Requirements. Authority's Risk Manager is hereby authorized to reduce the requirements set forth herein, on a temporary or permanent basis, in the event he determines, in his sole discretion, that such reduction is in Authority's best interest. 3.6.4 Obligation to Repair and Restore Damage Due to Casualty Covered by Insurance. Subject to Section 3.6.5 below, if Phase 11 shall be totally or partially destroyed or rendered wholly or partly uninhabitable by fire or other casualty required to be insured against by Developer, Developer shall promptly proceed to obtain insurance proceeds and take all steps necessary to begin reconstruction and, immediately upon receipt of insurance proceeds, to promptly and diligently commence the repair or replacement of Phase II to substantially the same condition as Phase 11 is required to be constructed pursuant to this Agreement, if and to the extent the insurance proceeds are sufficient to cover the actual cost of repair, replacement, or restoration, and Developer shall complete the same as soon as possible thereafter so that Phase II can be occupied in accordance with this Agreement. Subject to force majeure delays pursuant to Section 6.3 hereof, in no event shall the repair, replacement, or restoration period exceed one (1) year from the date Developer obtains insurance proceeds unless Authority's Executive Director, in his/her reasonable discretion, approves a longer period of time. Authority shall cooperate with Developer, at no expense to Authority, in obtaining any governmental permits required for the repair, replacement, or restoration. If, however, the then -existing laws of any other governmental agencies with jurisdiction over the Site do not permit the repair, replacement, or restoration, Developer may elect not to repair, replace, or restore Phase II by giving notice to Authority (in which event Developer will be entitled to all insurance proceeds but Developer shall be required to remove all debris from the Site) or Developer may reconstruct such other improvements on the Site as are consistent with applicable land use regulations and approved by the Authority and the other governmental agency or agencies with jurisdiction. 3.6.5 Damage or Destruction Due to Cause Not Required to be Covered by Insurance. If Phase 11 is completely destroyed or suffers Substantial Damage (as hereinafter defined) caused by a casualty for which Developer is not required to (and has not) insured against, or if insurance proceeds are insufficient to rebuild then Developer shall not be required to repair, replace, or restore such improvements and may elect not to do so by providing Authority with written notice of election not to repair, replace, or restore within ninety (90) days after such substantial damage or destruction. In such event, the Ground Lease shall be automatically terminated and Developer shall immediately tender possession of the Site to Authority. As used in this Section 3.6.5, "Substantial Damage" caused by a casualty not required to be (and not) covered by insurance shall mean damage or destruction which is fifteen percent (15%) or more of the replacement cost of the improvements comprising Phase 11. In the event Developer does not timely elect not to repair, replace, or restore Phase 11 as set forth in the first sentence of this Section 3.6.5, Developer shall be conclusively deemed to have waived its right not to repair, replace, or restore Phase 11 and thereafter Developer shall promptly commence and complete the repair, replacement, or restoration of the damaged or destroyed Phase 11 in accordance with Section 3.6.4 above. 3.7. Indemnity. Developer shall defend, indemnify, pay for, assume all responsibility for, and hold the Indemnitees, harmless from all claims, demands, damages, defense costs or 45 liability of any kind or nature relating to the subject matter of this Agreement or the validity, applicability, interpretation or implementation hereof and for any damages to property or injuries to persons, including accidental death (including attorneys' fees and costs), which may be caused by any acts or omissions of Developer under this Agreement, whether such activities or performance thereof be by Developer or by anyone directly or indirectly employed or contracted with by Developer and whether such damage shall accrue or be discovered before or after termination of this Agreement and arising prior to the later of (i) the expiration or earlier termination of the Term of the Ground Lease or (ii) the date Developer vacates the Site. Developer shall not be liable for property damage or bodily injury to the extent occasioned by the gross negligence or willful misconduct of Authority or City or their agents or employees. Developer shall have the obligation to defend any such action; provided, however, that this obligation to defend shall not be effective if and to the extent that Developer determines in its reasonable discretion that such action is meritorious or that the interests of the parties justify a compromise or a settlement of such action, in which case Developer shall compromise or settle such action in a way that fully protects Indemnitees from any liability or obligation. In this regard, Developer's obligation and right to defend shall include the right to hire (subject to written reasonable approval by Authority and City) attorneys and experts necessary to defend, the right to process and settle reasonable claims, the right to enter into reasonable settlement agreements and pay amounts as required by the terms of such settlement, and the right to pay any judgments assessed against Indemnitees. If Developer defends any such action, as set forth above, (i) Developer shall indemnify and hold harmless Indemnitees from and against any claims, losses, liabilities, or damages assessed or awarded against either of them by way of judgment, settlement, or stipulation and (ii) Authority shall be entitled to settle any such claim only with the written consent of Developer and any settlement without Developer's consent shall release Developer's obligations under this Section 3.7 with respect to such settled claim. 3.8. Entry by Authority. From the date of the Closing and thereafter, Developer (and its successor and assigns) shall permit Authority, City, and their officers, employees, consultants, and agents at all reasonable times, and in compliance with the reasonable safety policies and procedures of Developer and its contractor, to enter onto the Site and inspect the work of development of Phase II to determine that the same is in conformity with the Development Plans and all the requirements hereof. Developer acknowledges that Authority and City are under no obligation to supervise, inspect, or inform Developer of the progress of construction, and Developer shall not rely upon Authority or City therefor. Any inspection by Authority and/or City is entirely for their purposes in determining whether Developer is in compliance with this Agreement and is not for the purpose of determining or informing Developer of the quality or suitability of construction or any other work at the Site. Developer shall rely entirely upon its own supervision and inspection in determining the quality and suitability of the materials and work, and the performance of architects, subcontractors, and material suppliers. 3.9. Compliance with Laws. Developer shall carry out the design, construction, development and operation of Phase II in conformity with all applicable federal, state and local laws, including, without limitation, all applicable state labor standards, City zoning and development standards, building, plumbing, mechanical and electrical codes, and all other provisions of the Anaheim Municipal Code, and all applicable disabled and handicapped access requirements, including without limitation the Americans With Disabilities Act, 42 U.S.C. Section 12101, et seq., Government Code Section 4450, et seq., Government Code Section 11135, et seq., and the Unruh Civil Rights Act, Civil Code Section 51, et seq., and any other applicable Governmental Requirements. Developer (and its Affiliates and successors and assigns) shall pay prior to delinquency all ad valorem real estate taxes, possessory interest taxes, and assessments as to Phase ll, subject to Developer's (and its Affiliates and successors and ku assigns) right to contest in good faith any such taxes. Developer may apply for and receive any exemption from the payment of property taxes or assessments on any interest in or as to Phase II without the prior approval of Authority. 3.9.1 Prevailing Wage Laws. Developer shall carry out the construction through completion of Phase II and the overall development of the Site in conformity with all applicable federal, state and local labor laws and regulations, including, without limitation, as applicable, the requirements to pay prevailing wages under federal law (the Davis -Bacon Act, 40 U.S.C. Section 3141, et seq., and the regulations promulgated thereunder set forth at 29 CFR Part 1 (collectively, "Davis -Bacon")) and California law (Labor Code Section 1720, et seq.). The parties acknowledge that federal and/or state funding sources and financing scenarios may trigger compliance with applicable state and federal prevailing wage laws and regulations. The applicability of federal, state and local prevailing wage laws will be determined based upon the final financing structure and sources of funding of Phase II, as approved by Authority Executive Director pursuant to Section 3.10. Developer shall be solely responsible, expressly or impliedly, for determining and effectuating compliance with all applicable federal, state and local public works requirements, prevailing wage laws, labor laws and standards, and Authority (and City) makes no representation, either legally and/or financially, as to the applicability or non -applicability of any federal, state and local laws to Phase II, either onsite or offsite. Developer expressly, knowingly and voluntarily acknowledges and agrees that Authority (and City) has not previously represented to Developer or to any representative, agent or Affiliate of Developer, or its General Contractor or any subcontractor(s) for the construction or development of Phase ll, in writing or otherwise, in a call for bids or otherwise, that the work and construction undertaken pursuant to this Agreement is (or is not) a "public work," as defined in Section 1720 of the Labor Code or under Davis -Bacon. Developer knowingly and voluntarily agrees that Developer shall have the obligation to provide any and all disclosures or identifications with respect to Phase II as required by Labor Code Section 1781 and/or by Davis -Bacon, as the same may be amended from time to time, or any other similar law or regulation. Developer shall indemnify, protect, pay for, defend (with legal counsel acceptable to Authority and City) and hold harmless the Indemnitees, from and against any and all loss, liability, damage, claim, cost, expense and/or "increased costs" (including reasonable attorneys' fees, court and litigation costs, and fees of expert witnesses) which, in connection with the development, construction (as defined by applicable law) and/or operation of Phase II, including, without limitation, any and all public works (as defined by applicable law), results or arises in any way from any of the following: (i) the noncompliance by Developer with any applicable local, state and/or federal law or regulation, including, without limitation, any applicable federal and/or state labor laws or regulations (including, without limitation, if applicable, the requirement to pay state and/or federal prevailing wages); (ii) the implementation of Section 1781 of the Labor Code and/or of Davis -Bacon, as the same may be amended from time to time, or any other similar law or regulation; and/or (iii) failure by Developer to provide any required disclosure or identification as required by Labor Code Section 1781 and/or by Davis -Bacon, as the same may be amended from time to time, or any other similar law or regulation. It is agreed by the parties that, in connection with the development and construction (as defined by applicable law or regulation) of Phase ll, including, without limitation, any and all public works (as defined by applicable law or regulation), Developer shall bear all risks of payment or non-payment of prevailing wages under applicable federal, state and local law or regulation and/or the implementation of Labor Code Section 1781 and/or by Davis -Bacon, as the same may be amended from time to time, and/or any other similar law or regulation. "Increased costs," as used in this Section 3.9.1, shall have the meaning ascribed to it in Labor Code Section 1781, as M the same may be amended from time to time. The foregoing indemnity shall survive termination of this Agreement and shall continue after completion of the construction and development of Phase II by Developer. 3.9.2 Section 3 Compliance. Developer agrees to comply with and to cause the General Contractor, each Subcontractor, and any other contractors and/or subcontractors or agents of Developer to comply with the requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. § 1701 u, and the implementing regulations, in connection with the construction of Phase II. Developer shall submit to Authority each Construction Contract with appropriate provisions providing for the construction of Phase II in conformance with the terms of this Agreement, including the Section 3 Clause. The General Contractor, each Subcontractor, and any other contractors or subcontractors or agents of Developer shall have provided to Authority the certification in appendix B of 24 CFR Part 24 that neither it nor its principals is presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation from Phase II, and Authority shall be responsible for determining whether each contractor has been debarred. 3.9.3 Federal Program Regulations. Developer acknowledges that Authority used HOME Funds to acquire some of the properties comprising the Site. Therefore, Developer shall carry out the Rehabilitation of the Housing Units and the operation of Phase II in conformity with all requirements of the HOME Program (including the 2013 Final Rule) to the extent applicable to Phase II. In the event Developer desires to change the affordable housing or maintenance requirements for the Site from the specific requirements set forth in this Agreement in order to comply with a subsequently enacted amendment to the HOME Program, Developer shall notify Authority in writing of such proposed change and the amendment related thereto at least thirty (30) days prior to implementing such change. In the event Authority disapproves of such change and Developer's interpretation of the amendment related thereto, Authority shall notify Developer of its disapproval in writing and the parties shall seek clarification from the appropriate HUD Field Office. Only if HUD concurs with Developer's interpretation of the HOME Program shall Developer be permitted to implement the proposed change. (a) Property Standards. Developer agrees to ensure that Rehabilitation of Phase II will comply with all applicable requirements of the HOME Regulations, including 24 CFR §92.251, including the following requirements: (i) State and Local Requirements. Phase II and all Housing Units and common areas at the Site shall meet all applicable State and local codes, ordinances, and zoning requirements, including all applicable requirements set forth in the Anaheim Municipal Code and all applicable State and local residential and building codes. Phase II and all Housing Units and common areas at the Site must meet all such applicable requirements upon Project completion. (ii) HUD Requirements. Phase II and all Housing Units and common areas at the Site shall also meet the requirements described in paragraphs (i) through (iv) of this Section 1302.1(b): (A) Accessibility. Phase II and all Housing Units and common areas at the Site shall meet the accessibility requirements of 24 CFR part 8, which implements Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), and Titles II and III of the Americans with Disabilities Act (42 U.S.C. 12131-12189) implemented at 28 CFR parts 35 and 36, as applicable. Covered multifamily dwellings, as defined at 24 CFR 100.201, must also meet the design and construction requirements at 24 CFR 100.205, which implements the Fair Housing Act (42 U.S.C. 3601-3619). (B) Disaster Mitigation. Where relevant, Phase II must be constructed to mitigate the impact of potential disasters (e.g., earthquakes, hurricanes, flooding, and wildfires), in accordance with State and local codes, ordinances, or other State and local requirements, or such other requirements as HUD may establish. (C) Written Cost Estimates, Construction Contracts and Construction Documents. The Construction Contract(s) and Development Plans must describe the Rehabilitation work to be undertaken in adequate detail so that the Authority can conduct inspections in accordance with the HOME Regulations. The Developer shall also provide written cost estimates for Rehabilitation for Authority's review; Authority shall determine whether such cost estimates are reasonable. (D) Rehabilitation Progress Inspections. Developer shall permit and facilitate progress and final inspections of Rehabilitation by the Authority to ensure that work is done in accordance with the applicable codes, the Construction Contract(s), and Development Plans. (iii) Ongoing Property Condition Standards: Rental Housing. Authority has established property standards for rental housing ("Authority's Property Standards"), which standards include all inspectable items and inspectable areas specified by HUD based on the HUD physical inspection procedures (Uniform Physical Condition Standards (UPCS)) prescribed by HUD pursuant to 24 CFR 5.705. Developer shall ensure that Phase II, including all Housing Units and common areas at the Site, shall comply with the Authority's Property Standards throughout the Affordability Period. In accordance with the Authority's Property Standards, Developer shall maintain Phase II, including all Housing Units and common areas at the Site: (i) as decent, safe, and sanitary housing in good repair, (ii) free of all health and safety defects and life-threatening deficiencies, and (iii) in compliance with the lead-based paint requirements in 24 CFR Part 35. (iv) Inspections: Corrective and Remedial Actions. In accordance with the HOME Regulations, Authority shall undertake ongoing inspections of Phase II in accordance with §92.504(d). Authority has developed written inspection procedures and procedures for ensuring that timely corrective and remedial actions are taken by the Developer to address identified deficiencies. (b) Labor Standards. In addition to compliance with Section 1303.1, the Construction Contract for Phase ll, as well as any other contract for the Rehabilitation work, shall contain a provision requiring that not less than the wages prevailing in the locality, as predetermined by the Secretary of the United States Department of Labor pursuant to the Davis - Bacon Act (40 U.S.C. §276a -276a-5), will be paid to all laborers and mechanics employed in the Rehabilitation work, and such contract(s) shall also be subject to the overtime provisions, as applicable, of the Contract Work Hours and Safety Standards Act (40 U.S.C. §3701, et seq.). Participating contractors, subcontractors, and other participants must comply with regulations issued under these Acts and with other federal laws and regulations pertaining to labor standards and HUD Handbook 1344.1 (Federal Labor Standards Compliance in Housing and Community Development Programs), as applicable. Developer shall supply to Authority certification, in form and substance satisfactory to HUD and Executive Director, as to compliance with the provisions of this Section before receiving any disbursement of federal funds for the Rehabilitation work. Developer shall require the General Contractor to implement and enforce all applicable prevailing wage and labor laws, including California Labor Code Section 1720, Davis -Bacon, and other applicable labor laws and regulations including, e.g., the requirement that all workers sign in and sign out of the job site. (c) Handicapped Accessibility. Developer shall comply with (a) Section 504 of the Rehabilitation Act of 1973, and implementing regulations at 24 CFR 8C governing accessibility of projects assisted with federal funds; and (b) the Americans with Disabilities Act of 1990, and implementing regulations at 28 CFR 35-36 in order to provide handicapped accessibility to the extent readily achievable; and (c) the Uniform Federal Accessibility Standards (UFAS) pursuant to the Architectural Barriers Act of 1968, 42 U.S.C. 4151-4157, as amended. (d) Use of Debarred, Suspended, or Ineligible Participants. Developer shall comply (and cause the General Contractor to comply) with the provisions of 24 CFR 24 relating to the employment, engagement of services, awarding of contracts, or funding of any contractor or subcontractor during any period of debarment, suspension, or placement in ineligibility status. The Contractor, each subcontractor, and any other contractors or subcontractors or agents of Developer (subject to compliance with 24 CFR part 135) shall have provided to Authority the certification in appendix B of 24 CFR Part 24 that neither it nor its principals is presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation from this Project, and Authority shall be responsible for determining whether each contractor has been debarred. (e) Maintenance of Drug -Free Workplace. Developer shall certify that Developer will provide a drug-free workplace in accordance with 2 CFR 2429. (f) Lead -Based Paint. Authority, as a recipient of federal funds, has modified and conformed all of its federally funded housing programs to the Lead -Based Paint Poisoning Prevention Act, Title X of the 1992 Housing and Community Development Act, 42 U.S.C. §4800, et seq., specifically §§4821 4846, and the implementing regulations thereto. In this regard, Developer shall comply with all applicable federal requirements relating to lead-based paint. (g) Affirmative Marketing. Developer shall adopt and implement affirmative marketing procedures and requirements at the Site in accordance with Section 92.351 of the HOME Regulations. (h) Nondiscrimination, Equal Opportunity and Fair Housing. Developer shall carry out Phase 11 and perform its obligations under this Agreement in compliance with all of the federal laws and regulations regarding nondiscrimination equal opportunity and fair housing described in 24 CFR 92.350 and 24 CFR 5.105. (i) Energy Conservation Standards. As applicable to Phase 11, Developer shall cause the Site to meet the cost-effective energy conservation and effectiveness standards in 24 CFR 965 and 24 CFR 990.185. (j) Displacement and Relocation. Developer acknowledges and agrees that, pursuant to Federal Program Limitations and consistent with the other goals and objectives of that part and pursuant to the adopted relocation plan, Authority must ensure that it has taken all reasonable steps to minimize the displacement of persons as a result of the 50 Rehabilitation work. Furthermore, to the extent feasible, and subject to the tenant screening criteria set forth in the Management Plan, residential tenants must be provided a reasonable opportunity to lease and occupy a suitable, decent, safe, sanitary and affordable Housing Unit at the Site or comparable outside property upon completion of the Rehabilitation work. Developer shall cause all Relocation of tenants and occupants of the Site to be conducted in accordance with the Relocation Laws and all Federal Program Limitations. Developer further agrees to cooperate with Authority in meeting the requirements of the Federal Program Limitations and shall take all actions and measures reasonably required by Executive Director (or his duly authorized representative) in connection therewith. (k) Requests for Disbursements of Funds. Developer may not request disbursements of funds hereunder until the funds are needed for payment of eligible costs of Phase 11. The amount of each request shall be limited to the amount needed for the acquisition of the Site and the Rehabilitation as set forth in the Final Budget. (1) Eligible Costs. Developer shall only use HOME Program funds to pay costs defined as "eligible costs" under Federal Program Limitations. (m) Records and Reports. Developer shall maintain and from time to time submit to Authority such records, reports and information as Executive Director may reasonably require in order to permit Authority to meet the recordkeeping and reporting requirements required of them pursuant to 24 CFR 92.508. Without limiting the following, Developer shall maintain records and submit annual reports as required by this Agreement and Attachment No. 19. (n) Conflict of Interest. Developer shall comply with and be bound by the conflict of interest provisions set forth at 24 CFR 570.611. (o) Conflicts between and among Federal Program Limitations, Housing Asset Fund Requirements and the HAL. If and to the extent applicable for any source of federal revenue expended to implement Phase II and in the event of any conflict or inconsistency between applicable Federal Program Limitations, Housing Asset Fund Requirements and/or the HAL, then the more stringent requirement(s) shall control. (p) Layering Review. Developer acknowledges that a layering review will be performed in accordance with Federal Program Limitations. In connection with such review Developer acknowledges and agrees it shall be required to represent and certify to Authority that no government assistance other than the HOME Loan, the Tax Credits, the MHSA Loan and/or PBV Assistance, has been obtained or is contemplated to be obtained for the acquisition, Rehabilitation and operation of the Site. If such layering review is conducted, Developer agrees to notify Authority in the event that it applies for or proposes to use governmental funds, other than as listed in the previous sentence, for the Site or the Improvements thereto. 3.10. Financing of Phase II. 3.10.1 Preferred Financing Structure. Developer shall use its reasonable and best efforts to apply for and secure an allocation of 9% Tax Credits for Phase 11. (a) Potential Multiple Tax Credit Applications. The parties acknowledge and agree that the specific financing for Phase II is not assured, and that the 51 possible financing structures and varied funding sources and scenarios for Phase II shall be pursued in the following order of preference and priority: (i) Developer shall use best efforts to submit a complete 9% Tax Credit Application for Phase II (which Application shall be consistent with the terms of this Agreement) to TCAC on or before the first TCAC deadline which occurs after the Effective Date, which deadline is currently set at [June 28, 2017]. (ii) In the event Developer does not receive an allocation of 9% Tax Credits for Phase II based on its first Application submittal to TCAC, Developer shall use best efforts to submit a complete 9% Tax Credit Application for Phase II (which Application shall be consistent with the terms of this Agreement) to TCAC on or before the second TCAC deadline which occurs after the Effective Date, and the two following TCAC deadlines if no Allocation is received as a result of the prior Tax Credit Application, for a total of four Tax Credit Applications with respect to Phase ll. (iii) In the event Developer does not receive an allocation of 9% Tax Credits for Phase II based on its first four (4) Applications to TCAC (as described in subdivisions (i) and (ii) of this Section 3.10.1(a)), Authority and Developer shall meet and confer in good faith to determine if another method of financing Phase II is available and preferable to the method set forth herein which may include, without limitation, financing Phase II with tax exempt bonds and 4% Tax Credits. After such meeting(s) with Developer, Authority shall, at its reasonable discretion but sole option, either: (i) negotiate with Developer regarding alternative financing methods and sources of funding for Phase II and Authority and Developer shall amend this Agreement to provide for such alternative financing methods for Phase Il, or (ii) terminate this Agreement pursuant to Section 6.5. The obligation of Authority to meet and confer does not create any inference that Authority or City will infuse any moneys other than those moneys explicitly committed by the express terms of this Agreement. (iv) In the event Authority terminates this Agreement as permitted by subdivision (iv) above, Developer shall deliver, convey and assign to Authority all of Developer's right and interest in and to all Development Plans and all planning, architectural, design and construction plans, drawings, specifications and all other related documents prepared for or caused to be prepared related in any manner to Phase II pursuant to the terms of an assignment agreement in form and content reasonably acceptable to Authority and Developer and their respective legal counsel. In such event, Authority shall reimburse Developer for the third party costs actually, reasonably, and directly incurred by Developer after the Effective Date and up to the date of termination of this Agreement for preparation of the Development Plans and planning, architectural, design, and construction plans, drawings, specifications and related documents actually delivered, conveyed, and assigned to Authority pursuant to this Section 3.10.1(a)(iv) (and expressly excluding attorneys' fees, accounting fees, in-house staff time, and Developer overhead, as the parties intend such reimbursement to be directly related to production of such Development Plans); provided, in no event shall Authority be obligated to reimburse Developer for more than Two Hundred Twenty-Five Thousand Dollars ($225,000.00) pursuant to this Section 3.10.1(a)(iv). 3.10.2 Submission of Evidence of Financing. Prior to and as a Condition Precedent to the Closing, Developer shall submit to Authority, and Authority (and its financial consultant(s) and legal counsel(s)) shall review and approve (or disapprove) evidence that Developer has obtained sufficient equity capital and firm and binding commitments for financing 52 necessary to undertake the construction, completion and operation of Phase II, in accordance with this Agreement. (a) Required Financing Submittals; Submittal of Construction Contract. Such evidence of financing for Phase II and readiness to commence construction of Phase II shall include all of the following: (i) An updated proforma and Final Budget for Phase II showing the projected costs of construction of Phase II, including all onsite and offsite improvements to be constructed in connection therewith. (ii) A copy of the Lender's binding commitment obtained by Developer for the Primary Loan for Phase II and, when available, copies of all loan documents evidencing the Primary Loan therefor. The Primary Loan commitments for financing shall be in such form and content acceptable to Authority and its financial advisor(s) and its legal advisor(s) and as such reasonably evidences a legally binding, firm and enforceable commitment, subject only to the Lender's customary and normal conditions and terms and subject to the requirements of this Section 3.10. The commitment also shall state the specific terms and requirements, if any, by the Lender relating to subordination of the Regulatory Agreement and the Authority Subordinate Loan (but in no event the Ground Lease). Developer shall provide written certification to Authority that the loan documents submitted are correct copies of the actual loan documents to be executed by Developer concurrently with the Closing. If the Lender requires a subordination agreement between or among Lender, Authority and/or Developer, Authority shall review the form of subordination subject to the reasonable review and approval of Authority Executive Director and legal counsel(s), subject to one or more of the conditions set forth in Section 3.10.10 necessary for the Primary Loan to be a title insured first monetary lien on Phase II; provided, however, in no event shall Authority's fee interest in the Site be subordinated to the Primary Loan or any other financing obtained by Developer or any other encumbrance or lien against the Site. All costs incurred for the review and completion of each subordination agreement (except and excluding the first subordination agreement entered into at the Closing for Phase II) and any amendment, modification or other reaffirmation thereof shall be expressly subject to Developer (or another person or entity other than Authority or City) paying all Third Party Costs (as defined in Section 716) incurred by Authority (or City) in connection therewith, with payment of such incurred costs a condition precedent to any obligation of Authority to sign such subordination or reaffirmation document, except as to the first subordination agreement pre - Closing for Phase II for which Authority will assume Authority's own costs. (iii) A current certified financial statement of Developer (and all partners and members thereof, except the Investor Limited Partner) and/or other documentation satisfactory to Authority as evidence of other sources of capital sufficient to demonstrate that Developer has adequate funds to cover the difference, if any, between construction and completion costs, and the financing authorized by the Tax Credits, Primary Loan, and any additional subsidies, sources of funding, or financing obtained by Developer for the development of Phase II. (iv) Copies of the Construction Contract(s) and all other contracts between Developer and its General Contractor (and all available contracts with Subcontractors) for the construction of Phase II and any other on-site or off-site improvements required to be constructed for Phase II, certified by Developer to be a true, correct, and fully executed copy thereof, and which shall include reference to this Agreement and General Contractor's (and all Subcontractors') specific obligation to carry out the construction and 53 completion of Phase II (or part thereof) in conformity with the approved Development Plans, the HAL, Section 3, all applicable federal and state prevailing wage laws, applicable Environmental Laws, and all applicable Governmental Regulations. The scope of work in the Construction Contracts shall conform in all respects to the Scope of Development, the Entitlement, and the approved Development Plans, and such scope of work shall be subject to the Executive Director's sole and absolute approval. (v) Authority shall have the right to approve or disapprove such evidence of financing within thirty (30) days of submission by Developer to Authority of all complete items required by this Section 3.10 or as otherwise reasonably imposed by Developer's financing and such approval or disapproval shall be not less than ten (10) days prior to the date scheduled for the Closing (so long as Authority has had not fewer than fifteen (15) days for review of a complete submittal). In this regard, Developer agrees it shall use best efforts to cause its Lender to timely provide complete drafts of documents for review by Authority and its legal counsel(s) to perform within such time frames. Approval shall not be unreasonably withheld or conditioned. If Authority disapproves any such evidence of financing, Authority shall do so by written notice to Developer stating the reasons for such disapproval and Developer shall promptly obtain and submit to Authority new evidence of financing within reset but equal time periods. If Developer's submission of new evidence of financing is timely and complete and provides Authority with adequate time to review such evidence within the times established in this Section 3.10, Authority shall approve or disapprove such new evidence of financing in the same manner and within the same times established in this Section 3.10 for the approval or disapproval of the evidence of financing as submitted to Authority initially. The evidence of financing shall be deemed to be an ongoing representation by Developer that the sum total of all sources of financing are equal to and not greater than the amount of Phase II costs as set forth in the Final Budget for Phase II and that such Final Budget is consistent with the Tax Credit Application, Tax Credit Reservation, and any and all updates thereto submitted by Developer to TCAC. Once the complete evidence of financing is approved by Authority, Developer shall promptly notify Authority in writing of any change in, additional conditions to, or additional sources of financing, including, without limitation, the award of state or federal Tax Credits, and any updates or additional information material or relevant to such financing and/or the Tax Credits. The representations made by Developer with respect to the budgets and costs for Phase II and the sources of funding and method of financing for Phase II, inclusive of all submittals and information related to the Tax Credits, were and remain the basis used by Authority to negotiate the financial terms of this Agreement and any change in such budgets and sources of Phase II funding or financing for Phase II shall, at the sole discretion of Authority, be cause to renegotiate the financial terms hereof for Phase II. 3.10.3 Alternate Financing Sources. It is the intent of the parties to maximize the leverage of Authority funds and to this end, Developer shall use commercially reasonable efforts to secure sources of non -local subsidies for Phase II, including an allocation of federal Tax Credits for Phase Il, in accordance with Section 3.10.1(a), other local, state, and federal loans and grants, and federal credits and rebates for energy efficient appliances to be installed at Phase II in accordance with the Scope of Development and the approved Development Plans. Developer acknowledges that other sources of Phase II funding may impose and require compliance with additional federal, state, and/or local requirements, such as requirements relating to the HOME Investment Partnerships Act and other HUD requirements, and Developer hereby agrees to comply with any and all such requirements to the extent applicable to Phase II. 54 3.10.4 Tax Credit Equity. The following requirements must be satisfied in order for the equity financing for Tax Credit funding for Phase II to be approved by Authority pursuant to this Section 3.10: (a) Developer shall have solicited no less than three (3) competitive bids from Tax Credit investors for Phase II and shall have selected the Tax Credit investor(s) offering the most beneficial rates and terms, as reasonably approved by Authority Executive Director. Developer shall submit complete documentation relating to such competitive solicitation to Authority, including true copies of the invitation to bidders and each full bid package submitted by bidding Tax Credit investors, in order to permit Authority to evaluate the Tax Credit Investor proposed by Developer and the terms of financing and Tax Credit equity offered by such Tax Credit investor. All such documentation shall be submitted no less than thirty (30) days prior to Closing. Within ten (10) business days of delivery to Authority of such documentation, Authority and Developer shall meet and confer in good faith to select jointly and reasonably the Tax Credit Investor for Phase II based on the proposal which provides the greatest benefit to Phase II, as a whole. (b) The equity investment of the Tax Credit Investor shall not be less than the approximate prevailing price for 9% Tax Credits at such time, taking into consideration all relevant factors such as timing of required payments and amount of the Tax Credits. (c) The identity of the Tax Credit Investor shall be reasonably acceptable to Authority Executive Director, Authority financial advisor(s), and legal counsel(s). 3.10.5 Required Submissions. Developer shall submit the following documents as evidence of Tax Credit financing: (a) The Partnership Agreement or equivalent funding commitment letter from the equity investors in Phase II which demonstrates that Developer has sufficient funds and committed capital/equity for commencement through completion of construction, and that such funds have been committed to construction of Phase II, and a current financial statement of Developer. (b) A complete copy of each Application and supporting documentation submitted to TCAC by Developer, within five (5) days following Developer's submission thereof to TCAC. (c) A copy of a preliminary Reservation letter from TCAC notifying Developer that an allocation of 9% Tax Credits, has been reserved for Phase II, along with certification that there have not been any material changes to the information provided by Developer in the Applications, as defined and referenced in such Reservation letters, and that if there are material changes then such information will be provided to TCAC (and Authority) forthwith. 3.10.6 Holder Performance of Development of Phase II. The holder of any mortgage or deed of trust authorized by this Agreement shall not be obligated by the provisions of this Agreement to develop Phase II or any portion thereof, or to guarantee such construction or completion; nor shall any covenant or any other provision in this Agreement be construed so to obligate such holder. 55 3.10.7 Notice of Default to Mortgagee or Deed of Trust Holders; Right to Cure. With respect to any mortgage or deed of trust granted by Developer as provided herein, whenever Authority may deliver any notice or demand to Developer with respect to any breach or default by Developer hereunder or under any other document executed pursuant to this Agreement, Authority shall at the same time deliver to each holder of record of any mortgage or deed of trust authorized by this Agreement a copy of such notice or demand. Each holder shall (insofar as the rights granted by Authority are concerned) have the right, but not the obligation, at its option, within sixty (60) days after the receipt of the notice, to cure or remedy or commence to cure or remedy and thereafter to pursue with due diligence the cure or remedy of any default and to add the cost thereof to the mortgage debt and the lien of its mortgage. Nothing contained in this Agreement shall be deemed to permit or authorize any holder to undertake or continue the construction or completion of Phase II, or any portion thereof (beyond the extent necessary to conserve or protect the improvements or construction already made) without first having expressly assumed Developer's obligations to Authority under this Agreement by a written assumption agreement reasonably satisfactory to Authority and its legal counsel(s). The holder, in that event, must agree to complete, or cause to be completed by a party which is reasonably acceptable to Authority, in the manner provided in this Agreement, the improvements to which the lien or title of holder relates. Any holder (or assignee approved by Authority) properly completing the improvements for Phase II shall be entitled, upon compliance with the requirements of Section 3.5 of this Agreement, to a Release of Construction Covenants as to Phase II. It is understood that a holder (or assignee approved by Authority) shall be deemed to have satisfied the sixty (60) day time limit set forth above for commencing to cure or remedy a Developer default which requires possession of the Site (or portion thereof), if and to the extent any holder (or assignee approved by Authority) has within the sixty (60) day period commenced proceedings to obtain possession and thereafter the holder diligently pursues such proceedings to completion and cures or remedies the default. Notwithstanding anything to the contrary contained herein, Authority agrees that any cure of any default made or tendered by one or more of Developer's limited partners shall be deemed to be a cure by Developer and shall be accepted or rejected on the same basis as if made or tendered by Developer. Copies of all notices which are sent to Developer under the terms of this Agreement shall also be sent to all approved limited partners who have requested such notice. 3.10.8 Failure of Holder to Complete Phase II. In any case where, ninety (90) days after the holder of any mortgage or deed of trust creating a lien or encumbrance upon the Site, or any part thereof, receives a notice from Authority of a default by Developer in completion of construction of all or any part of Phase I I under this Agreement, and the holder has not exercised the option to construct or cause to be constructed Phase II as set forth in Section 3.10.7, or if it has exercised the option but has defaulted hereunder and failed to timely cure such default, Authority may fully assume the mortgage or deed of trust by assuming all payment and performance obligations due to the holder for and in the amount of the unpaid mortgage or deed of trust debt, including principal and interest and all other sums secured by the mortgage or deed of trust. If the possession of the Site or any part thereof has vested in the holder, Authority, if it so desires, shall be entitled to a conveyance from the holder to Authority upon payment to the holder of an amount equal to the sum of the following: (a) The unpaid mortgage or deed of trust debt at the time the Ground Lease and possession of Phase II became vested in the holder (less all appropriate credits, including those resulting from collection and application of rentals and other income received during foreclosure proceedings); 56 (b) All reasonable and customary expenses with respect to foreclosure, including reasonable attorneys' fees; (c) The net expense, if any (exclusive of general overhead), incurred by the holder as a direct result of the subsequent management of Phase 11 or part thereof; (d) The costs of any necessary improvements made by the holder (or assignee approved by Authority) pursuant to the requirements of this Agreement or as otherwise approved by Authority; (e) An amount equivalent to the interest that would have accrued on the aggregate of such amounts had all amounts become part of the mortgage or deed of trust debt and such debt had continued in existence to the date of payment by Authority; and (f) Any reasonable and customary prepayment charges imposed by the Lender pursuant to its Primary Loan documents and agreed to by Developer. 3.10.9 Right of Authority to Cure Mortgage or Deed of Trust Default. In the event of Developer's default or breach of the Primary Loan, including the loan agreement, promissory note, mortgage or deed of trust, or a default under the terms of Developer's Partnership Agreement for Phase 11, Developer shall immediately deliver to Authority a copy of any default notice pertaining thereto. If the holder of the Primary Loan, including the loan agreement, promissory note, mortgage or deed of trust has not exercised its option to construct prior to the issuance of the Release of Construction Covenants as to Phase 11, pursuant to Section 3.10.7, Authority shall have the right but not the obligation to cure the default of the Primary Loan, including the loan agreement, promissory note, mortgage or deed of trust. Authority shall likewise have the right but not the obligation to cure any Partnership Agreement default. In such event, Authority shall be entitled to reimbursement from Developer of all proper costs and expenses incurred by Authority in curing any default. 3.10.10 Subordination of Affordability Covenants; Non -Subordination of Authority's Fee Interest. In the event Authority finds that an economically feasible method of financing for the construction and operation of Phase II without the subordination of the Regulatory Agreement and the lien of the Authority Deed of Trust is not reasonably available, Authority may agree to subordinate the covenants contained in the Regulatory Agreement and the lien of the Authority Deed of Trust to the deed of trust securing the Primary Loan and/or the Tax Credit Regulatory Agreement, subject to the terms of this Section 3.10.10. Each and any subordination agreement evidencing or affirming Authority's subordination of the Regulatory Agreement and the lien of the Authority Deed of Trust (but not, and in no event, Authority's fee interest in the Site entered into by Authority shall contain written commitments which Authority Executive Director finds are reasonably designed to protect Authority's investment in Phase II (and Agency's investment of Housing Fund monies in the Site) in the event of default; any such subordination agreement(s) shall contain contractual obligation of such Lender to include, without limitation, the following: (a) concurrent delivery to Authority of a true copy of each and any notice provided by the Lender for Phase 11 to Developer (as its borrower) during the term of the Primary Loan for Phase 11; (b) a reasonably extended cure period and right to Authority to cure and assume the Primary Loan, and/or other senior lien(s) for Phase 11 upon the same terms applicable to the approved financing to Developer pursuant to the loan documents applicable thereto with such right, but with no obligation, to the Authority being available both from the date of issuance of any notice of default through and after the recordation of a formal Notice of Default by the Lender for Phase 11 pursuant to applicable California Code of Civil Procedure foreclosure requirements, and 57 (c) a right of Authority to cure a default on each of the senior loan(s) for Phase II prior to foreclosure and after recordation of a Notice of Default pursuant to applicable California Code of Civil Procedure requirements; and such cure rights may also include: (d) a right of Authority to negotiate with the senior lender(s) for Phase II after notice of default from the senior Lender (or lender(s)) and prior to foreclosure, (e) an agreement that if prior to foreclosure of the senior loan for Phase II, Authority takes title to the Site and cures the default on the senior loan(s) for Phase II, the senior Lender (or lender(s)) will not exercise any right it may have to accelerate the senior loan by reason of the transfer of title to Authority, and (f) a right of Authority to acquire Developer's leasehold interest in the Site from Developer at any time after a material default on the senior loan for Phase ll. Notwithstanding the foregoing, (1) the Ground Lease shall be senior and non - subordinate to the Primary Loan, including any and all construction and permanent financing for Phase ll, and (2) the actual rights granted to Authority in consideration of the subordination of the liens of its Regulatory Agreement and Authority Deed of Trust shall be set forth in an agreement among the Authority, Developer and the Primary Lender to be dated and recorded against the Site in the Official Records concurrently with the Authority Deed of Trust. 3.10.11 Failure to Obtain Financing. In the event Developer, despite exercising its reasonable and best efforts to obtain required construction financing for Phase II, fails to obtain financing as specified in the Agreement by the time required in Section 3.10.1(a) and in the Schedule of Performance, either Developer or Authority may terminate this Agreement as provided in Sections 6.4 and 6.5 hereof, respectively. 3.11. Cost Savings Obligation. Subject to the approval of TCAC, Developer hereby agrees to provide and pay to Authority a Cost Savings payment for Phase II in an amount to be determined based on the Audit to be conducted upon completion of construction for Phase II as set forth in this Section 3.11. 3.11.1 Audit to Determine Cost Savings Amount. The actual amount of Cost Savings to be paid to Authority shall be determined after the Audit, as hereafter defined and described, and the amount of such Cost Savings shall be equal to the amount by which the total sources of permanent financing for Phase II exceed the costs of development incurred for Phase ll. Within one hundred twenty (120) days following the completion of construction of Phase ll, as evidenced by issuance of the final certificate of occupancy by the City's building official, Developer shall cause its certified public accountant(s) to perform a final audit of the costs of development of Phase II in accordance with the requirements of the Tax Credits and generally accepted accounting principles ("GAAP") and generally accepted auditing standards (herein, referred to as "Audit"). If the Audit determines that the total sources of permanent financing for Phase II (including long-term permanent debt and equity) exceed Developer's total costs to develop Phase II (including, without limitation, all hard and soft costs and all on-site and off-site improvements required in connection with the development of Phase II, excluding the demolition of buildings and other costs which Authority is causing to be completed at no cost to Developer pursuant to Section 3.1.2), such excess shall be considered the "Cost Savings" for Phase II; provided, that, to the extent payment of such Cost Savings would reduce Developer's "tiebreaker" points in Developer's Tax Credit Application, "Cost Savings" shall be reduced to the largest amount of Cost Savings that Developer can pay to the Authority without reducing such "tiebreaker" points. 3.11.2 Cost Savings Payment as Payment of Principal on Authority Subordinate Loan. The Cost Savings for Phase ll, once determined by the Audit pursuant to Section 3.11.1, shall, subject to the approval of TCAC, be due and paid by Developer and allocated and credited as a principal payment on the Authority Subordinate Loan for Phase II, as and when paid. 58 3.11.3 Timing of Payment of Cost Savings. The Cost Savings payable under this Agreement for Phase II shall become due and payable by Developer to Authority after receipt by Developer of the final Tax Credit equity and completion of construction, but not later than sixty (60) days after Developer receives its final Tax Credit equity payment for Phase II, and such Cost Savings shall be paid in a lump sum as a principal payment toward the Authority Subordinate Loan balance for Phase II. 3.12. Article XXXIV Compliance. Authority, through the City of Anaheim, has previously obtained the approval of the voters of the City authorizing up to a specific percentage of housing constructed in the City to be publicly funded low -rent housing. The City voters approved Measure G at a special municipal election on June 3, 1980, which voter approval authorized construction of publicly funded low -rent housing in the City prospectively. The results of this election were certified and declared by City Council Resolution No. 80R-332 on July 29, 1980, and such authorization applies to Phase II in compliance with Article XXXIV of the California Constitution and as implemented by Health & Safety Code Section 37000, et seq. 3.13. Estoppel Certificates and Confirmation. 3.13.1 Estoppel Certificate. At the request of any Lender or Investor Limited Partner, Authority shall promptly execute and deliver (but at no cost to Authority) one or more estoppel certificate(s) in such form as may be reasonably requested by any Lender or Investor Limited Partner, limited to certifying the status of this Agreement, the Authority Subordinate Loan documents, or the Ground Lease and Developer's leasehold interest under the Ground Lease and such matters as are reasonably requested by any Lender or Investor Limited Partner (provided no such matters shall effect Authority's fee interest or alter or amend the terms of this Agreement, the Authority Subordinate Loan documents, or the Ground Lease, and any such certificate shall be subject to the terms of ABx1 26 and any amendments, successor statutes or related statues (and interpretations thereof) in effect at the time such estoppel is to be issued). Such estoppel certificate shall include, but not be limited to, certification by Authority that (a) this Agreement, the Authority Subordinate Loan documents, and the Ground Lease are unmodified and in full force and effect (or, if modified, state the nature of such modification and certify that this Agreement, the Authority Subordinate Loan documents, and the Ground Lease, as so modified, are in full force and effect), (b) all rents currently due under the Ground Lease have been paid (or, if unpaid, the period and amount of any arrearages, penalties, interest and other charges), and (c) there are not, to Authority's knowledge, any uncured Events of Default on the part of Developer under this Agreement, the Authority Subordinate Loan documents, or the Ground Lease or facts, acts or omissions which with the giving of notice or passing of time, or both, would constitute an Event of Default (or, if there is a default, the nature and scope of the Default) under this Agreement, the Authority Subordinate Loan documents, or the Ground Lease. Any such estoppel certificate(s) (which shall be subject to the limitations of this Section 3.13.1) may be conclusively relied upon by any Lender or Investor Limited Partner. 3.13.2 Revitalization Agreement. The Authority hereby represents, warrants, covenants and confirms the following, each of which is true, correct and complete as of the date of this Agreement and as of the Closing Date: (a) This Authority and the Developer are entering into this Agreement in implementation of the Revitalization Plan and in accordance with the terms of the Revitalization Agreement. -M (b) No default has occurred by TRCC under the Revitalization Agreement, and no event or occurrence has occurred that, with the giving of notice or the passage of time, or both, would constitute a default by TRCC under the Revitalization Agreement. (c) TRCC has properly assigned its rights with respect to Phase II under the Revitalization Agreement to Developer and, for all purposes, the Authority consents to approves of such assignment to Developer of all of TRCC's rights under the Revitalization Agreement with respect to Phase 11. (d) Developer shall have no obligations under the Revitalization Agreement, the Revitalization Plan or otherwise with respect to any phases of the Project other than Phase 11, and no default under any such agreement with respect to any phases of the Project other than Phase 11 shall constitute a default by Developer under this Agreement or any other agreements associated with Phase 11. (e) Notwithstanding Section 14.9 of the Revitalization Agreement, in the event of any conflict between the terms of the Revitalization Agreement and this Agreement (or any exhibit or attachment to this Agreement), this Agreement (and its exhibits and attachments, as applicable) shall prevail. 4. OPERATION OF HOUSING. 4.1. Number of Housing Units. Developer covenants and agrees to make available, restrict occupancy to, and rent the Housing Units in Phase II to Very Low and Low Income Households, in accordance with this Section 4.1 and the Regulatory Agreement for Phase II as follows: (a) Two (2) of the two (2) bedroom Housing Units in Phase II to 30% AMI Very Low Income Households at an Affordable Rent; (b) One (1) of the three (3) bedroom Housing Units in Phase II to 30% AMI Very Low Income Households at an Affordable Rent; (c) Two (2) of the one (1) bedroom Housing Units in Phase II to 40% AMI Very Low Income Households at an Affordable Rent; (d) One (1) of the two (2) bedroom Housing Units in Phase II to 40% AMI Very Low Income Households at an Affordable Rent; (e) Two (2) of the three (3) bedroom Housing Units in Phase II to 40% AMI Very Low Income Households at an Affordable Rent; (f) One (1) of the one (1) bedroom Housing Units in Phase II to 50% AMI Very Low Income Households at an Affordable Rent; (g) Six (6) of the two (2) bedroom Housing Units in Phase II to 50% AMI Very Low Income Households at an Affordable Rent; (h) Two (2) of the three (3) bedroom Housing Units in Phase II to 50% AMI Very Low Income Households at an Affordable Rent; M (i) Three (3) of the two (2) bedroom Housing Units in Phase II to 60% AMI Low Income Households at an Affordable Rent; and 0) One (1) of the three (3) bedroom Housing Units in Phase II to 60% AMI Low Income Households at an Affordable Rent. 4.2. Affordable Rent. Affordable Rent shall be charged for all Housing Units throughout the Affordability Period. The maximum Affordable Rent chargeable for the Housing Units shall be annually determined by Authority (and as charged and implemented by Developer) in accordance with the following requirements: (a) The Affordable Rent for the Housing Units to be rented to 30% AMI Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of thirty percent (30%) of AMI for Orange County as determined and published annually by TCAC for a family of a size appropriate to the unit. (b) The Affordable Rent for the Housing Units to be rented to 40% AMI Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of forty percent (40%) of AMI for Orange County as determined and published annually by TCAC for a family of a size appropriate to the unit. (c) The Affordable Rent for the Housing Units to be rented to 50% AMI Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of fifty percent (50%) of AMI for Orange County as determined and published annually by TCAC for a family of a size appropriate to the unit. (d) The Affordable Rent for the Housing Units to be rented to 60% AMI Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of sixty percent (60%) of AMI for Orange County as determined and published annually by TCAC for a family of a size appropriate to the unit. Developer shall, and shall cause its Property Manager to, operate Phase II and cause occupancy of all Housing Units thereon in conformity with these covenants and this Agreement. For purposes of this Agreement, "Affordable Rent" shall mean the total of monthly payments for (a) use and occupancy of each Housing Unit and land and facilities associated therewith, (b) any separately charged fees or service charges assessed by Developer which are required of all tenants, other than security deposits, (c) a reasonable allowance for an adequate level of service of utilities not included in (a) or (b) above, including garbage collection, sewer, water, electricity, gas and other heating, cooking and refrigeration fuels, but not including telephone service, or cable TV or internet services, and (d) possessory interest, taxes or other fees or charges assessed for use of the land and facilities associated therewith by a public or private entity other than Developer. No additional charge shall be assessed against tenant households of the Housing Units for any social or supportive services provided at the Site. In addition, thirteen (13) of the Housing Units shall constitute "HOME Units", as follows: (a) at 809 Dakota Street: (i) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be Low HOME Units, and (ii) two (2) of the two (2) bath Housing Units shall be High HOME Units; (b) at 868 Dakota Street: (i) one (1) of the two (2) bedroom, two (2) bath Housing Units shall be Low HOME Units, and (ii) three (3) of the two (2) bath Housing Units shall be High HOME Units; 61 and (c) at 606 Avon Place: (i) one (1) of the one (1) bedroom, two (2) bath Housing Units shall be a Low HOME Unit, (ii) two (2) of the one (1) bedroom, two (2) bath Housing Units shall be High HOME Units, and (iii) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be High HOME Units. The HOME Units may be "floating" HOME Units, such that the specific Housing Units designated as HOME Units may change as long as the requirements set forth in the immediately preceding sentence relating to the number of two and three-bedroom Housing Units required to be designated as HOME Units are at all times complied with. The HOME Units shall be rented in conformity with Low HOME or High HOME rents in conformity with the HOME Regulations consistent with the identification of such HOME Units as Low HOME or High HOME Units, respectively, in the definition of HOME Units. The HOME Units shall be rented at the lower of (i) rent determined for Low HOME or High HOME Units or (ii) rent as otherwise determined in conformity with this Agreement. 4.3. Duration of Affordability Requirements; Affordability Period. Phase II and all the Housing Units thereon shall be subject to the requirements of this Section 4, et seq. for the full term of the Affordability Period. 4.4. Selection of Tenants. (a) Developer shall be responsible for the selection of tenants for the Housing Units in compliance with all lawful and reasonable criteria, and shall adopt a tenant selection system that shall be approved (or disapproved) by Authority Executive Director in her reasonable discretion, pursuant to which Developer shall establish and maintain a chronological waiting list system for selection of tenants in the order of priority set forth below, and which shall be set forth in the Marketing and Tenant Selection Plan and the Property Management Plan, which plans are required to be submitted by Developer and approved by Authority pursuant to Sections 2.2, 4.8 and 4.11.2 hereof and the Ground Lease for Phase II and as a Condition Precedent to the Closing. Throughout the Affordability Period and the Term of the Ground Lease, Developer shall establish and maintain for Phase II such waiting list of eligible, prospective tenants to facilitate re -tenanting Housing Units in compliance with the approved Marketing and Tenant Selection Plan, Property Management Plan and Anaheim Municipal Code. Further, subject to applicable Fair Housing Laws and in compliance with the Anaheim Municipal Code, in particular Section 18.52.160 thereof, Authority shall be afforded a priority marketing period for thirty (30) days after receiving written notice from Developer that one or more Housing Units have become vacant at Phase II, during which time Authority and Developer shall work cooperatively to select tenants for any vacant Housing Units at Phase ll. Developer shall provide prompt written notice to Authority when vacancies of Housing Units occur to facilitate timely re -tenanting of Housing Units pursuant to the approved Marketing and Tenant Selection Plan, Property Management Plan and Anaheim Municipal Code. Subject to applicable Fair Housing Laws, Developer's waiting list of prospective, eligible tenants for Housing Units at Phase II shall include and follow the following order of priority for selection of tenants, and Authority will follow such order of priority: (i) Very Low and Low Income Households, as applicable, who have been displaced from their residences due to programs or projects implemented by the City of Anaheim or another governmental entity; (ii) Very Low and Low Income Households, as applicable, who have applied for and have received rental vouchers from Authority; 62 (iii) Very Low and Low Income Households, as applicable, who are listed on Authority's waiting lists for affordable housing and who live and/or work in Anaheim; and (iv) Very Low and Low Income Households, as applicable, who live and/or work in Anaheim. (b) In the event Developer rents a Housing Unit to a household holding a Portable Voucher, if required by the Executive Director in writing to the Developer, the rental agreement (or lease agreement, as applicable) between Developer, as landlord, and the subtenant shall expressly provide that monthly rent charged shall be the Affordable Rent required hereunder for the Housing Unit (not fair market rent) and that the rent collected directly from such subtenant holding a Portable Voucher shall be not more than 40% of subtenant's actual gross income pursuant to the applicable voucher program regulations; i.e., the rent charged to such subtenant under the rental agreement shall be the Affordable Rent chargeable hereunder and not market rent for the area (as determined by a current rent reasonable review conducted in accordance with Section 8 Federal Program Limitations applicable to Portable Vouchers), as would otherwise be permitted under the applicable Portable Voucher program. Thus, if required by the Executive Director in writing in accordance herewith, the subsidy payment to Developer under any Portable Voucher shall not exceed the difference between the amount the subtenant actually pays to Developer towards such subtenant's rent and the Affordable Rent chargeable for the applicable Housing Unit hereunder. (c) Developer hereby acknowledges and agrees that, upon completion of construction of Phase II and leasing of the Housing Units to Very Low and Low Income Households pursuant to this Agreement, Developer will have received governmental subsidies from Authority and from TCAC through the Tax Credits allocated to Phase II (and/or other subsidies included in the final financing sources for Phase ll, as approved by Authority pursuant to Section 3.10) in exchange for Developer's agreement to limit the rents charged to tenants of Phase II to an Affordable Rent and Developer further acknowledges and agrees that acceptance of additional governmental rental subsidies resulting in total, cumulative rent payments to Developer in excess of an Affordable Rent for any of the Housing Units at Phase II would constitute an unjustified windfall to Developer at the expense of Authority and the federal and state governments. (d) In the event of a conflict between this Agreement and the approved Marketing and Tenant Selection Plan, the Marketing and Tenant Selection Plan shall control. The Marketing and Tenant Selection Plan shall be completed and approved by Authority prior to and as a Condition Precedent to Closing pursuant to Section 2.2.1(n). 4.5. Household Income Requirements. On or before one hundred twenty (120) days following the end of Developer's fiscal year, commencing the first year after issuance of the first certificate of occupancy for Phase ll, and annually thereafter, Developer shall prepare and submit to Authority, at Developer's expense, a written summary of the income, household size, and rent payable by each of the tenants of the Housing Units and, upon the written request of the Authority, copies of each and all leases or rental agreements and the current rules and regulations for Phase II. At Authority's request, Developer shall also provide to Authority completed income computation and certification forms, all in a form reasonably acceptable to Authority, for each and all tenants. Developer shall obtain, or shall cause to be obtained by the Property Manager, a certification from each household leasing a Housing Unit demonstrating that such household is a 30% AMI Very Low Income Household, 40% AMI Very Low Income Household, 50% AMI Very 63 Low Income Household, or 60% AMI Low Income Household, as applicable and according to the Area Median Income annually determined and published by TCAC for Orange County, and meets the eligibility and occupancy requirements established for the Housing Unit. Developer shall verify, or shall cause to be verified by the Property Manager, the income and household size certification of the tenant household. 4.5.1 Income Categories. (a) "30% AMI Very Low Income Households" shall mean those households earning not greater than thirty percent (30%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. (b) "40% AMI Very Low Income Households" shall mean those households earning not greater than forty percent (40%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. (c) "50% AMI Very Low Income Households" shall mean those households earning not greater than fifty percent (50%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. (d) "60% AMI Low Income Households" shall mean those households earning not greater than sixty percent (60%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. (e) "Very Low Income" and/or "Very Low Income Households" shall mean and include: (i) very low income households as defined in the Tax Credit Rules and (ii) 30% AMI Very Low Income Households, (iii) 40% AMI Very Low Income Households, and (iv) 50% AMI Very Low Income Households. Very Low Income Households include Extremely Low Income households, as defined in the Tax Credit Rules. (f) "Low Income," "Lower Income," "Low Income Households" or "Lower Income Households" shall mean and include both: (i) lower income households as defined in the Tax Credit Rules and (ii) 60% AMI Low Income Households. Lower Income Households include Very Low Income Households and Extremely Low Income Households, as defined in the Tax Credit Rules. 4.6. Intentionally Omitted. 4.7. Leases; Rental Agreements for Housing Units. Developer shall submit a standard lease form for use at Phase II to Authority Executive Director for approval, which lease form shall comply with the requirements of this Agreement, including all applicable provisions of the HAL. Authority shall reasonably approve such lease form upon finding that such lease form is consistent with this Agreement, including all applicable provisions of the HAL. Developer shall enter into a written lease, in the form approved by Authority, with each tenant/tenant household of Phase Il. During the Affordability Period, any material changes to the lease form are subject to the reasonable review and approval of the Executive Director. The lease form shall also comply with all applicable HOME Regulations. 4.8. Marketing and Tenant Selection Plan. Prior to and as a Condition Precedent to Closing, Developer shall prepare and obtain Authority's approval, which approval shall not be unreasonably withheld, of the Marketing and Tenant Selection Plan, During the Affordability MA Period, any material changes to an approved Marketing and Tenant Selection Plan are subject to reasonable review and approval by the Executive Director. The rental of the Housing Units, as and when they are vacated by the existing tenants, shall be conducted in accordance with the approved Marketing and Tenant Selection Plan and any affirmative marketing requirements which have been adopted by the Authority prior to the date hereof. The availability of Housing Units shall be marketed in accordance with the Marketing and Tenant Selection Plan as the same may be amended from time to time with Authority's prior written approval, which approval shall not unreasonably be withheld. Developer shall provide Authority with periodic reports with respect to the marketing for lease of the Housing Units. Authority agrees to exercise reasonable efforts to assist Developer in connection with the implementation of the Marketing and Tenant Selection Plan; provided, however, Authority shall not be under any obligation to incur any out-of-pocket expenses in connection therewith. 4.9. Social Services. Developer shall use its best efforts to create a comprehensive social service program that is targeted to the needs of the residents at Phase II which shall, at a minimum, include the services described in the Scope of Social and Supportive Services set forth on Attachment No. 19, which is attached hereto and incorporated herein, and such other services as may be approved by the Authority Executive Director, which approval shall not be unreasonably withheld. Any change in the scope, amount, or type of supportive services to be provided at the Site shall be subject to prior approval of Authority. Developer shall provide social services at Phase II in accordance with this Section throughout the entire Affordability Period. The parties shall cooperate in good faith to attempt to agree upon a budget for the social and supportive services to be provided at Phase II; provided, the parties anticipate that Developer will make all reasonable attempts to obtain additional funding sources for the various social services programs required to be implemented at Phase II throughout the Affordability Period. 4.9.1 Alternative Social and Supportive Services. In the event that, despite Developer's reasonable best efforts, Developer is unable to provide all of the social and supportive services described in Attachment No. 19, Developer shall use reasonable best efforts to provide comparable social and supportive services programming at Phase II that are reasonably similar in scope and content to the Scope of Social and Supportive Services attached hereto as Attachment No. 19, and that meet all the regulations promulgated by TCAC, during the entire duration of the Affordability Period. Such substitute services shall be subject to the prior written approval of the Authority Executive Director, which approval shall not be unreasonably withheld, conditioned or delayed. In the event the characteristics of the resident population at Phase II change substantially, Authority Executive Director shall have the authority to approve revisions to the Scope of Social and Supportive Services attached hereto as Attachment No. 19, in his/her reasonable discretion. 4.10. Maintenance. 4.10.1 General Maintenance. Developer shall maintain the Site and all improvements thereon, including lighting and signage, in good condition, free of debris, waste and graffiti, and in compliance with all applicable provisions of the Anaheim Municipal Code. Developer shall maintain in accordance with the Maintenance Standards (as hereinafter defined) the improvements and landscaping on the Site. Such Maintenance Standards shall apply to all buildings, signage, common amenities, lighting, landscaping, irrigation of landscaping, architectural elements identifying the Site and any and all other improvements on the Site and Phase II. To accomplish the maintenance, Developer shall either staff or contract with and hire licensed and qualified personnel to perform the maintenance work, including the provision of 65 labor, equipment, materials, support facilities, and any and all other items necessary to comply with the requirements of this Agreement. Developer and its maintenance staff, contractors or subcontractors shall comply with the following standards as to Phase II (collectively, "Maintenance Standards"): (a) The Site shall be maintained in conformance and in compliance with the approved final as -built plans, and reasonable maintenance standards which comply with the industry standard for comparable first quality affordable housing projects in the County, including but not limited to painting and cleaning of all exterior surfaces and other exterior facades comprising all private improvements and public improvements to the curbline. The Site shall be maintained in good condition and in accordance with the industry custom and practice generally applicable to comparable first quality affordable housing projects in the County. (b) Landscape maintenance shall include, but not be limited to: watering/irrigation; fertilization; mowing; edging; trimming of grass; tree and shrub pruning; trimming and shaping of trees and shrubs to maintain a healthy, natural appearance and safe road conditions and visibility, and irrigation coverage; replacement, as needed, of all plant materials; control of weeds in all planters, shrubs, lawns, ground covers, or other planted areas; and staking for support of trees. (c) Clean-up maintenance shall include, but not be limited to: maintenance of all sidewalks, paths and other paved areas in clean and weed -free condition; maintenance of all such areas clear of dirt, mud, trash, debris or other matter which is unsafe or unsightly; removal of all trash, litter and other debris from improvements and landscaping prior to mowing; clearance and cleaning of all areas maintained prior to the end of the day on which the maintenance operations are performed to ensure that all cuttings, weeds, leaves and other debris are properly disposed of by maintenance workers. Authority agrees to notify Developer in writing if the condition of the Site does not meet with the Maintenance Standards and to specify the deficiencies and the actions required to be taken by Developer to cure the deficiencies. Upon notification of any maintenance deficiency, Developer shall have thirty (30) days within which to correct, remedy or cure the deficiency. If the written notification states the problem is urgent relating to the public health and safety, then Developer shall have forty-eight (48) hours to rectify the problem. In the event Developer does not maintain the Site in the manner set forth herein and in accordance with the Maintenance Standards, Authority shall have, in addition to any other rights and remedies hereunder, the right to maintain the Site, or to contract for the correction of such deficiencies, after written notice to Developer, and Developer shall be responsible for the payment of all such costs incurred by Authority. 4.10.2 Program Maintenance. In addition to the routine maintenance and repair required pursuant to Section 4.10.1, Developer shall perform the following minimum programmed maintenance of the Improvements to the Site: five (5) years; (a) Interior painting and window covering replacement at least every (b) Exterior painting at least every ten (10) years; (c) Repair and resurfacing of parking areas and walkways at least every five (5) years; and (d) Replacement of all deteriorated or worn landscaping and play equipment at least every five (5) years. Upon the request of Developer, the Executive Director, at her sole and absolute discretion, may grant a waiver or deferral of any program maintenance requirement. Developer shall keep such records of maintenance and repair as are necessary to prove performance of the program maintenance requirements. 4.10.3 Occupancy Limits. The maximum occupancy of the Housing Units in Phase II shall not exceed more than such number of persons as is equal to two persons per bedroom, plus one. Thus, for the two (2) bedroom Housing Units, the maximum occupancy shall not exceed five (5) persons. For the three (3) bedroom Housing Units, the maximum occupancy shall not exceed seven (7) persons. 4.11. Management of Phase II. 4.11.1 Property Manager. Developer shall manage or cause Phase II, and all appurtenances thereto that are a part of Phase II, to be managed in a prudent and business -like manner, consistent with good property management standards for other comparable high quality, well-managed affordable rental housing projects in the County. Developer may contract with a property management company or property manager, to operate and maintain Phase II in accordance with the terms of this Section 4.11 ("Property Manager"); provided, however, the selection and hiring of the Property Manager (and each successor or assignee), including any Affiliate, is and shall be subject to prior written approval of Authority's Executive Director (or designee) in her sole and reasonable discretion. Related Management Company, L.P. ("RMC"), is hereby approved to act as the Property Manager, subject to Executive Director review of the scope of services, itemized fees, and fee contract for property management between Developer and RMC. The Property Manager shall manage Phase II in accordance with the definitions of Affordable Rent contained in Section 4.2 hereof, the tenant selection requirements contained in Section 4.4, and the definitions relating to income contained in Section 4.5. Any fee paid to the Property Manager for social services provided to the tenants shall be exclusive of the fee paid to the Property Manager relating to the management of Phase II. Except for RMC, Developer shall conduct due diligence and background evaluation of any potential third party property manager or property management company to evaluate experience, references, credit worthiness, and related qualifications as a property manager. Any proposed property manager shall have significant and relevant prior experience with affordable housing projects and properties comparable to Phase II and the references and credit record of such property manager/company shall be investigated (or caused to be investigated) by Developer prior to submitting the name and qualifications of such proposed property manager to the Executive Director for review and approval. A complete and true copy of the results of such background evaluation shall be provided to the Executive Director. Approval of a Property Manager by Authority's Executive Director shall not be unreasonably delayed but shall be in his/her sole reasonable discretion, and Authority Executive Director shall use good faith efforts to respond as promptly as practicable in order to facilitate effective and ongoing property management of Phase II by one qualified Property Manager. The replacement of RMC by Developer and/or the selection by Developer of any new or different Property Manager during the Term of the Ground Lease shall also be subject to the foregoing requirements. 67 4.11.2 Property Management Plan. Prior to and as a Condition Precedent to Closing, Developer shall prepare and submit to the Executive Director for review and approval, which approval shall not be unreasonably withheld, a management plan for Phase II which includes a detailed plan and strategy for long-term marketing, operation, maintenance, repair and security of Phase Il, inclusive of social services for the residents of the Housing Units, and the method of selection of tenants, rules and regulations for tenants, and other rental policies for Phase II ("Property Management Plan"). Executive Director approval of the Property Management Plan shall not be unreasonably withheld or delayed. Subsequent to approval of the Property Management Plan by the Executive Director the ongoing management and operation of Phase II shall be in compliance with the approved Property Management Plan. During the Affordability Period, Developer and its Property Manager may from time to time submit to the Executive Director proposed amendments to the Property Management Plan, the implementation of which shall also be subject to the prior written approval of the Executive Director, which approval shall not be unreasonably withheld. 4.11.3 Gross Mismanagement. During the Affordability Period, and in the event of "Gross Mismanagement" (as defined below) of Phase II, Executive Director and/or Authority shall have and retain the authority to direct and require any condition(s), acts, or inactions of Gross Mismanagement to cease and/or be corrected immediately, and further to direct and require the immediate removal of the Property Manager and replacement with a new qualified and approved Property Manager, if such condition(s) is/are not ceased and/or corrected after expiration of thirty (30) days from the date of written notice from Executive Director. If Developer or Property Manager has commenced to cure such Gross Mismanagement condition(s) on or before the 20th day from the date of written notice (with evidence of such submitted to the Executive Director), but has failed to complete such cure by the 30th day (or such longer period if the cure cannot reasonably be accomplished in thirty (30) days as reasonably determined by the non -defaulting party), then Developer and its Property Manager shall have an additional 10 days to complete the cure of Gross Mismanagement condition(s). In no event shall any condition of Gross Mismanagement continue uncured for a period exceeding forty-five (45) days from the date of the initial written notice of such condition(s), except that the condition described in subdivision (d) below may exist for up to, but no longer than, seventy-five (75) days without triggering Authority's right to remove the Property Manager as described in the immediately following sentence as long as Developer is diligently working to cure such conditions of Gross Mismanagement. If such condition(s) do persist beyond such period, Executive Director shall have the sole and absolute right to immediately and without further notice to Developer (or to Property Manager or any other person/entity) to remove the Property Manager and Developer shall contract with a replacement Property Manager reasonably acceptable to Authority (in accordance with Section 4.11. 1) within thirty (30) days following Authority's removal of the defaulting Property Manager, If Developer takes steps to select a new Property Manager that selection is subject to the requirements set forth above for selection of a Property Manager. For purposes of this Agreement, the term "Gross Mismanagement" shall mean management of Phase II in a manner which violates the terms and/or intention of this Agreement to operate a first quality affordable housing complex, and shall include, but is not limited to, any one or more of the following: (a) Habitually leasing to tenants who exceed the prescribed income levels; (b) Habitually allowing tenants to exceed the prescribed occupancy levels without taking immediate action to stop such overcrowding; (c) Under -funding required reserve accounts if Annual Project Revenues are sufficient to maintain such reserve accounts; (d) Failing to timely maintain Phase II in accordance with the Property Management Plan and Maintenance Standards; (e) Fraud or embezzlement of Phase II funds, including without limitation funds in the reserve accounts; (f) Failing to fully cooperate with the Anaheim Police Department or other local law enforcement agency(ies) with jurisdiction over Phase II, in maintaining a crime - free environment within Phase 11; (g) Failing to fully cooperate with the Anaheim Fire Department or other local public safety agency(ies) with jurisdiction over Phase 11, in maintaining a safe and accessible environment within Phase Il; (h) Failing to fully cooperate with the Anaheim Planning & Building Department, including the Code Enforcement Division, or other local health and safety enforcement agency(ies) with jurisdiction over Phase 11, in maintaining a decent, safe and sanitary environment within Phase II; and (i) Spending funds from the Capital Replacement Reserve account for items that are not defined as eligible costs, including eligible capital and/or replacement costs, under the standards imposed by GAAP (and/or, as applicable, generally accepted auditing principles). Notwithstanding the requirements of the Property Manager to correct any condition of Gross Mismanagement as described above, Developer is obligated and shall use its best efforts to correct any defects in property management or operations at the earliest feasible time and, if necessary, to replace the Property Manager as provided above. Developer shall include advisement and provisions of the foregoing requirements and requirements of this Agreement within any contract between Developer and its Property Manager for Phase 11. 4.11.4 Code Enforcement. Developer acknowledges and agrees that Authority, City, and their employees and authorized agents, shall have the right to conduct code compliance and/or code enforcement inspections of Phase II and the individual Housing Units for Phase ll, both exterior and interior, at reasonable times and upon reasonable notice (not less than 48 hours prior notice, except in an emergency) to Developer and/or an individual tenant. If such notice is provided by Authority or City representative(s) to Developer, then Developer (or its Property Manager) shall immediately and directly advise any affected tenant of such upcoming inspection and cause access to the area(s) and/or Housing Units at Phase 11 to be made available and open for inspection. Developer shall include express advisement of such inspection rights within the lease/rental agreements for each Housing Unit in t Phase II in order for each and every tenant and tenant household to be aware of this inspection right and such inspection(s) shall not unreasonably interfere with use and enjoyment of the site. 4.12. Capital Reserve Requirements. Commencing upon the closing for the permanent Primary Loan for Phase 11, Developer shall annually set aside an amount of not less than Three Hundred Dollars ($300.00) per Housing Unit (21 Housing Units times $300 equals $6,300) or such increased amount required by TCAC or the Partnership Agreement or the Lender under the Primary Loan for Phase II) from the gross rents received from Phase II, into a separate interest-bearing trust account defined as the Capital Replacement Reserve. Funds in the Capital Replacement Reserve shall be used only for capital repairs, improvements and replacements to Phase II, including fixtures and equipment, which are normally capitalized under generally accepted accounting principles. The non-availability of funds in the Capital Replacement Reserve does not in any manner relieve or lessen Developer's obligation to undertake any and all necessary capital repairs, improvements, or replacements and to continue to maintain Phase II in the manner prescribed herein for Phase II. Not less than once per year, Developer, at its expense, shall submit to Authority Executive Director an accounting for the Capital Replacement Reserve for Phase II. Capital improvements and repairs to, and replacements at Phase II shall include only those items with a long useful life, including without limitation the following: carpet and drapery replacement; appliance replacement; exterior painting, including exterior trim; hot water heater replacement; plumbing fixtures replacement, including tubs and showers, toilets, lavatories, sinks, faucets; air conditioning and heating replacement; asphalt repair and replacement, and seal coating; roofing repair and replacement; landscape tree replacement; irrigation pipe and controls replacement; sewer line replacement; water line replacement; gas line replacement; lighting fixture replacement; elevator replacement and upgrade work; miscellaneous motors and blowers; common area furniture replacement; and common area repainting. Pursuant to the procedure for submittal of each Annual Budget for Phase II to Executive Director by Developer, Executive Director will evaluate the cumulative amount on deposit in the Capital Replacement Reserve account and exercise his/her sole, reasonable discretion to determine if existing balance(s) in, proposed deposits to, shortfalls, if any, and/or a cumulative unexpended/unencumbered account balance in such Capital Replacement Reserve account are adequate to provide for necessary capital repairs and improvement for Phase II (provided that required annual deposits thereto are not required to exceed $300/per Housing Unit). 4.13. Operating Budget and Operating Reserve. Within twelve (12) months after commencement of construction of Phase II, but in no event later than ninety (90) days prior to the completion of construction of Phase II, and not less than annually thereafter on or before November 1 of each year following the issuance of the first certificate of occupancy issued by the City's building official for Phase ll, Developer shall submit to Authority on not less than an annual basis an Operating Budget for Phase ll, which budget shall be subject to the written approval of Executive Director or his/her designee, which approval shall not be unreasonably withheld. The Executive Director's discretion in review and approval of each proposed annual Operating Budget shall include, without limitation, authority to review individual categories, line items, and accounts, such as the following: extent, type, and amount for social services at or associated with Phase Il; existing balance(s) in and proposed deposits to the Capital Replacement Reserve for Phase II to evaluate shortfalls and/or cumulative unexpended/unencumbered deposits (provided that required annual deposits thereto are not required to exceed $300/per unit); conformity of any annual increases in the Partnership Related Fees for Phase II with the increases permitted in the definition of "Partnership Related Fees"; reasonableness and conformity to prevailing market rates in Orange County and rates and fees for goods and services to be provided Developer or any of its parent, affiliated, or subsidiary entities, etc. for Phase II. Developer shall, or shall cause the Property Manager to, set aside, in an "Operating Reserve" for Phase II in a separate interest bearing trust account, a target amount equal to three (3) months of (i) Debt Service on the Primary Loan and (ii) Operating Expenses for Phase II ("Target Amount"), which shall be funded by Tax Credit equity; provided, a larger Operating Reserve may be maintained if required by the approved Lender or Tax Credit Investor for Phase ll. The Operating Reserve shall thereafter be replenished from Annual Project Revenue (net of Operating Expenses and Debt Service) to maintain the Operating Reserve balance at the Target Amount. The Target Amount shall be retained in the Operating Reserve to cover shortfalls between Annual Project Revenue and actual Operating Expenses, but shall in no event be used to pay for capital items or capital costs properly payable from the Capital Replacement Reserve. Developer shall, not less than once per every twelve (12) months, submit to the Executive Director evidence reasonably satisfactory to Authority of compliance herewith. 4.14. Non-Discrimination Covenants. Developer covenants by and for itself, its successors and assigns, and all persons claiming under or through them that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Site, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the Site. The foregoing covenants shall run with the land. Developer shall refrain from restricting the rental or lease of the Site on any of the bases listed above. All leases or contracts relating to the Site shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: (a) In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." (b) In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following conditions: "That there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased." 71 (c) In contracts: "There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this Agreement, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." The covenants established in this Section 4.14 shall, without regard to technical classification and designation, be binding for the benefit and in favor of Authority/Agency and their successors and assigns, and shall remain in effect in perpetuity. 4.15. Monitoring and Recordkeeping. Throughout the Affordability Period, Developer shall comply with all applicable recordkeeping and monitoring requirements of the HAL and shall annually complete and submit to Authority a Certification of Continuing Program Compliance in a form provided by Authority. Representatives of Authority (and City) shall be entitled to enter the Site upon at least forty-eight (48) hours' notice, to monitor compliance with this Agreement, to inspect the records of the Site, and to conduct an independent audit or inspection of such records. Developer agrees to cooperate with Authority in making all of its records for Phase II and making the Site and all Housing Units thereon available for inspection or audit. Records shall be made available for review and inspection and/or audit in Orange County, California. Developer agrees to maintain all records relating to Phase II in a businesslike manner, and to maintain such records for the term of this Agreement. 4.16. Annual Monitoring Fee. Concurrently with the delivery of each Annual Financial Statement and Residual Receipts Report to Authority, Developer shall pay an Annual Monitoring Fee to Authority in the amount of One Thousand Fifty Dollars ($1,050), increased annually by 3%, which shall compensate Authority for its costs incurred to monitor Developer's compliance with this Agreement. 4.17. Regulatory Agreement. The requirements of this Agreement that shall remain applicable after the Closing Date for Phase II are set forth in the Authority Regulatory Agreement for Phase II which is attached hereto as Attachment No. 10 and incorporated herein. The execution and recordation of the Regulatory Agreement for Phase II is a Condition Precedent to the Closing, as set forth in Section 2.2 hereof. 5. AUTHORITY SUBORDINATE LOAN. 5.1. Authority Subordinate Loan. Authority hereby agrees to make the Authority Subordinate Loan to Developer, as described in Section 5.1.1 below and subject to the terms and conditions set forth in this Agreement, and subject further to the terms and conditions set forth within the documents and instruments executed by Developer in connection with Phase II transaction, including each Regulatory Agreement. 5.1.1 Authority Subordinate Loan. Authority hereby agrees to loan to Developer, and Developer hereby agrees to borrow from Authority, the sum of Four Million One Hundred Forty -One Thousand Five Hundred Dollars ($4,141,500.00), consisting of: (a) Four Million One Hundred Ten Thousand Dollars ($4,110,000.00), representing the value of the ground 72 leasehold interest in the Site being provided to Developer ("Land Subsidy"), plus (b) an amount equal to those additional subsidies described in Section 3.1.2 above in the estimated amount of $31,500 (the "Additional Subsidy").] 5.1.2 Adjustment of Authority Subordinate Loan Amount at Closing. The amount of the Additional Subsidy set forth in Section 5.1.1 above is based in part on estimated costs. Thus, the final amount of the Authority Subordinate Loan for Phase II shall be adjusted at Closing based on the actual cost incurred to relocate the occupants of the Site, and the amounts of the various payments, fee waivers, and other local subsidies applicable to Phase II, as described in more detail in Section 3.1.2, et seq.; provided, in no event shall the amount of the Authority Subordinate Loan exceed the amounts set forth in Section 5.1.1 above. 5.2. Repayment of Authority Subordinate Loan. Developer's obligation to repay the Authority Subordinate Loan for Phase II shall be set forth in the Authority Promissory Note for Phase II, substantially in the form attached hereto as Attachment No. 8. The Authority Promissory Note for Phase II shall be for a term of fifty-seven (57) years from the date of the Authority Promissory Note and shall bear simple interest at the rate of one percent (1 %) per annum. The Authority Promissory Note for Phase II shall be payable from eighty-five percent (85%) of Residual Receipts from the operation of Phase II, until the Authority Promissory Note has been paid in full. Developer shall also pay to Authority eighty-five percent (85%) of the Refinancing Net Proceeds immediately upon any refinancing of Phase II (or any part thereof) and eighty-five percent (85%) of the Transfer Net Proceeds immediately upon any transfer in whole or in part of Phase II or the Site. Payments towards the Authority Subordinate Loan shall be applied first to accrued interest, next to any principal amount of the Additional Subsidy owing under the Authority Promissory Note, and finally to any principal amount of the Land Subsidy owing under the Authority Promissory Note. 5.2.1 Residual Receipts Report. Developer shall annually, on or before one hundred twenty (120) days after the end of Developer's fiscal year, commencing in the first year after the issuance of the first certificate of occupancy for Phase II issued by City's building official, submit to Authority a Residual Receipts Report for Phase II, which shall provide the basis for Developer's payment of Residual Receipts to Authority. 5.2.2 Annual Financial Statement. Developer shall also annually submit to Authority, on or before one hundred twenty (120) days after the end of Developer's fiscal year, commencing in the first year after the issuance of a certificate of substantial completion for the Project, Annual Financial Statements as to the Project that have been reviewed by an independent certified public accountant, together with an expressed written opinion of the certified public accountant that such Annual Financial Statement presents the financial position, results of operations, and cash flows fairly and in accordance with GAAP, as to the Project. Each Annual Financial Statement submitted by Developer shall include a statement and certification (and supporting documentation) of the total amount of the Developer Fee and Deferred Developer Fee (if any) for the Project, along with the cumulative amount thereof paid to date and the amount thereof paid within the applicable reporting year as reported and certified in the Annual Financial Statement for the Project. In the event of an occurrence described in Section 4.1.2 which triggers Developer's obligation to pay an adjusted Annual Rent pursuant to that Section, Developer shall remain obligated to submit Annual Financial Statements to Authority in accordance with this Section and the requirements of the Affordable Housing Agreement to enable Authority to determine the appropriate amount of adjusted Annual Rent to be paid to Authority pursuant to Section 4.1.2 and to enable Authority to verify that Reserve Deposits are made and Operating Expenses are incurred in accordance with this Ground Lease and the approved Operating 73 Budget. Developer shall also prepare and provide to Authority, concurrently with delivery of each Annual Financial Statement, a reconciliation from the accrual -based Annual Financial Statement to the cash -based Residual Receipts calculation. 5.2.3 Right to Audit. Developer shall keep full and accurate books of account, records and other pertinent data with respect to operations of Phase II. Such books of account, records, and other pertinent data shall be kept for a period of three (3) years after the end of each Developer's fiscal year, and shall be made available for review or audit by the Authority or its designees with a three (3) day written notification to Developer. If any audit results in Developer restating Residual Receipts upward for any year, then Developer shall accompany delivery of such audit report to Authority with the additional payment to the Authority resulting from said restatement. If any such audit report results in Developer restating Residual Receipts downward for any year, the Developer shall carry forward the overpayment made to the Authority as a credit against payments under the Authority Subordinate Loan in subsequent years. (a) If any annual payment required pursuant to Section 5.2.3 above is not received by Agency within ten (10) calendar days after payment is due, Developer shall pay to Authority a late charge of five percent (5%) of such payment, such late charge to be immediately due and payable without demand by Agency. (b) Authority shall be entitled within three (3) years after the end of each Developer fiscal year to inspect and examine all Developer's books of account, records, and other pertinent data. Developer shall cooperate fully with Authority in making the inspection. Authority shall also be entitled, also within three (3) years after the end of each Developer fiscal year, to an independent audit of Developer's books of account, records, and other pertinent data; the cost of such audit shall be an Operating Expense of Phase II. 5.2.4 Assumption. The Authority Promissory Note for Phase II shall not be assumable by successors and assigns of Developer without the prior written consent of the Authority pursuant to Section 7.4 hereof. 5.3. Security for Authority Subordinate Loan. The Authority Promissory Note shall be secured by an Authority Deed of Trust to be recorded as an encumbrance to Developer's ground leasehold interest in the Site, substantially in the form attached hereto as Attachment No. 9. The Authority Deed of Trust securing the Authority Promissory Note for Phase II shall be junior and subordinate to the Primary Loan and the deed of trust securing the Primary Loan. The Authority Deed of Trust shall be senior and non -subordinate to all other financing, encumbrances, and liens, except the approved Primary Loan, and such other loan(s) as may be approved by the Authority pursuant to Section 3.10 hereof. 5.4. Conditions Precedent to Authority Subordinate Loan. Authority's obligation to make the Authority Subordinate Loan to Developer for Phase II is subject to the fulfillment or waiver by Authority of each and all of the Conditions Precedent described in Section 2.2.1 above, which are solely for the benefit of Authority, any of which may be waived by the Authority's Executive Director in her sole and absolute discretion. 6. DEFAULT AND REMEDIES. 6.1. Events of Default. An "Event of Default" or "Default" shall occur under this Agreement when there shall be a breach of any condition, covenant, warranty, promise or representation contained in this Agreement and the breach shall continue for a period of thirty 74 (30) days after written notice thereof to the defaulting party without the defaulting party curing such breach, or if the breach cannot reasonably be cured within a thirty (30) day period, commencing the cure of the breach within the thirty (30) day period and thereafter diligently proceeding to cure the breach; provided, however, that if a different period or notice requirement is specified for any particular breach under any other paragraph of this Agreement, the specific provision shall control. 6.2. Remedies. The occurrence of any Event of Default shall give the non -defaulting party the right to proceed with any and all remedies set forth in this Agreement, including an action for damages, an action or proceeding at law or in equity to require the defaulting party to perform its obligations and covenants under the documents executed pursuant hereto or to enjoin acts or things which may be unlawful or in violation of the provisions of such documents, and the right to terminate this Agreement. 6.3. Force Majeure. Subject to the party's compliance with the notice requirements as set forth below, performance by a party hereunder shall not be deemed to be in default, and all performance and other dates specified in this Agreement shall be extended, where delays or defaults are due to causes beyond the control and without the fault of the party claiming an extension of time to perform, which may include, without limitation, the following: war, insurrection, strikes, lockouts, riots, floods, earthquakes, fires, assaults, acts of God, acts of the public enemy, epidemics, quarantine restrictions, freight embargoes, lack of transportation, governmental restrictions or priority, litigation, unusually severe weather, inability to secure necessary labor, materials or tools, acts or omissions of the other party, or acts or failures to act of any public or governmental entity (except that Authority's acts or failure to act shall not excuse performance of Authority hereunder). Subject to the timing and provisions of Section 3.10.1, in no event shall Developer's difficulty or inability to obtain and secure the Primary Loan or other financing become an event of force majeure. An extension of the time for any such cause shall be for the period of the enforced delay and shall commence to run from the time of the commencement of the cause, if notice by the party claiming such extension is sent to the other party within thirty (30) days of the commencement of the cause. 6.4. Termination by Developer. Subject to the timing and provisions of Section 3.10.1, in the event that Developer is not in Default under this Agreement and: (a) Developer is unable to obtain sufficient financing for the development and operation of Phase II in accordance with the provisions of Section 3.10; or (b) Developer fails to receive an allocation of Tax Credits for Phase II; 140 (c) Developer disapproves of the environmental condition of the Site or Improvements pursuant to Section 2.3.3; or (d) Developer disapproves the condition of title to the Site pursuant to Section 2.4.7; or (e) One or more of the Conditions Precedent set forth in Section 2.2.2 is not satisfied (or waived by Developer) on or before the time set forth in the Schedule of Performance, and such Condition Precedent is not satisfied after notice and an opportunity to satisfy as provided in Section 6.1 hereof, and such failure is not caused by Developer; or rV M Authority is otherwise in Default of this Agreement and fails to cure such Default within the time set forth in Section 6.1 hereof; then this Agreement and any rights of Authority or any assignee or transferee with respect to or arising out of this Agreement shall, at the option of Developer, be terminated by Developer by written notice thereof to Authority. From the date of the written notice of termination of this Agreement by Developer to Authority and thereafter this Agreement shall be deemed terminated, subject to the rights of the Lender pursuant to the approved financing for the Primary Loan(s), Developer shall have the option to terminate the Ground Lease, as provided in more detail therein, and there shall be no further rights or obligations between the parties as to Phase 11, except that if Authority is in default hereunder Developer, after delivery of notice of default and expiration of the cure period provided in Section 6.1 hereof, may pursue any remedies it has at law or equity. 6.5. Termination by Authority. Subject to the timing and provisions of Section 3.10.1 (including, without limitation, the reimbursement provisions set forth therein), in the event that Authority is not in Default under this Agreement, and: (a) Developer is unable to obtain sufficient financing for the development and operation of Phase 11 in accordance with the provisions of Section 3.10.1, subject to Developer's right of reimbursement and Authority's right to all plans pursuant to Section 3.10.1(a); or (b) Developer fails to receive an allocation of Tax Credits for Phase 11 and Authority elects to terminate this Agreement pursuant to Section 3.10.1(a), subject to the restrictions contained in Section 3.10.1(a) and further subject to Developer's right of reimbursement and Authority's right to all plans pursuant to Section 3.10.1(a); or (c) One or more of the Conditions Precedent set forth in Section 2.2.1 is not satisfied (or waived by Authority) on or before the time set forth in the Schedule of Performance, and such Condition Precedent is not satisfied after notice and an opportunity to satisfy as provided in Section 6.1 hereof, and such failure is not caused by Authority; or (d) Developer is otherwise in Default of this Agreement and fails to cure such Default within the time set forth in Section 6.1 hereof; then this Agreement and any rights of Developer or any assignee or transferee with respect to or arising out of this Agreement shall, at the option of Authority, be terminated by Authority by written notice thereof to Developer. From the date of the written notice of termination of this Agreement by Authority to Developer and thereafter this Agreement shall be deemed terminated, and there shall be no further rights or obligations between the parties as to Phase 11 (except as provided in Section 3.10 as to Developer's delivery and assignment of Development Plans and other materials to Authority, if applicable), except that if Developer is in default hereunder Authority, after delivery of notice of default and expiration of the cure period provided in Section 6.1 hereof, may pursue any remedies it has at law or equity. 6.6. Attorneys' Fees. In addition to any other remedies provided hereunder or available pursuant to law, if any party brings an action or proceeding to enforce, protect or establish any right or remedy hereunder or under any of the documents executed pursuant hereto, the prevailing party shall be entitled to recover from the other party its costs of suit, including without limitation expert witness fees, and reasonable attorneys' fees. 76 6.7. Remedies Cumulative. No right, power, or remedy given to Authority 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 Authority by the terms of any such instrument, or by any statute or otherwise against Developer and any other person. 6.8. Waiver of Terms and Conditions. Authority may, in its sole discretion, waive in writing any of the terms and conditions of this Agreement. Waivers of any covenant, term, or condition contained herein shall not be construed as a waiver of any subsequent breach of the same covenant, term, or condition. 7. GENERAL PROVISIONS. 7.1. Time is of the Essence. Time is expressly made of the essence with respect to the performance by Authority and Developer of each and every obligation and condition of this Agreement. 7.2. Notices. Any approval, disapproval, demand, document or other notice ("Notice") which any party may desire to give to another party under this Agreement must be in writing and may be given either by (i) personal service, (ii) delivery by reputable document delivery service such as Federal Express that provides a receipt showing date and time of delivery, (iii) facsimile transmission, or (vi) mailing in the United States mail, certified mail, postage prepaid, return receipt requested, addressed to the address of the party as set forth below, or at any other address as that party may later designate by Notice. Service shall be deemed conclusively made at the time of service if personally served; upon confirmation of receipt if sent by facsimile transmission; the next business day if sent by overnight courier and receipt is confirmed by the signature of an agent or employee of the party served; the next business day after deposit in the United States mail, properly addressed and postage prepaid, return receipt requested, if served by express mail; and three (3) days after deposit thereof in the United States mail, properly addressed and postage prepaid, return receipt requested, if served by certified mail. Developer: Avon Dakota Housing Partners II, L.P. 18201 Von Karman Avenue, Suite 900 Irvine, California 92612 Attention: William A. Witte Fax No.: (949) 660-7273 With a Copy to: Bocarsly Emden Cowan Esmail & Arndt LLP 633 West Fifth Street, 70th Floor Los Angeles, California 90071 Attention: Lance Bocarsly Fax No.: (213) 239-0410 With a Copy to: Any Lender(s) and/or the Investor Limited Partner whose name and address is identified in a written notice sent to Authority and referencing this Agreement. 77 Authority: Anaheim Housing Authority 201 South Anaheim Boulevard, Suite 1003 Anaheim, California 92805 Attention: Linda N. Andal, Secretary Fax No.: (714) 765-4105 With Copies To: Anaheim Housing Authority 201 South Anaheim Boulevard, Suite 1003 Anaheim, California 92805 Attention: John E. Woodhead IV, Executive Director Fax No.: (714) 765-4630 Stradling Yocca Carlson & Rauth 660 Newport Center Drive, Suite 1600 Newport Beach, California 92660 Attention: Celeste Brady Fax No.: (949) 823-5141 Anaheim Housing Authority 200 South Anaheim Boulevard, Suite 356 Anaheim, California 92805 Attention: Leonie Mulvihill, Deputy City Attorney IV Fax No.: (714) 765-5123 Such addresses may be changed by Notice to the other party(ies) given in the same manner as provided above. 7.3. Representations and Warranties of Developer. Developer hereby represents and warrants to Authority as follows: (a) Organization. Developer is a California limited partnership duly organized, validly existing, formed, and in good standing under the laws of the State of California that has the power and authority to own property and carry on business as is now being conducted. (b) Authority of Developer. Developer 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 Authority Promissory Note and Authority Deed of Trust for the Authority Subordinate Loan, the Regulatory Agreement, Ground Lease, Memorandum of Ground Lease, Notice of Affordability Restrictions, Request for Notice 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) Valid Binding Agreements. This Agreement, the Authority Promissory Note and Authority Deed of Trust for the Authority Subordinate Loan, the Regulatory Agreement, the Ground Lease, Memorandum of Ground Lease, Request for Notice, Notice of Affordability Restrictions, and all other documents or instruments which have been executed and delivered pursuant to or in connection with this Agreement constitute or, if not yet executed or delivered, will when so executed and delivered constitute, legal, valid and binding obligations of Developer enforceable against it in accordance with their respective terms. 78 (d) Pending Proceedings. Developer is not in default under any law or regulation or under any order of any federal, state, or local court, board, commission or agency whatsoever, and there are no claims, actions, suits or proceedings pending or, to the knowledge of Developer, threatened against or affecting Developer or the Site, at law or in equity, before or by any federal, state, or local court, board, commission or agency whatsoever which might, if determined adversely to Developer, materially affect Developer's ability to perform its obligations hereunder. (e) Tax Credits. All information included or to be included within and provided to TCAC in the Applications submitted by Developer upon which TCAC issues its preliminary Reservation letters shall be true and correct in all material respects as of the date of each Application. In the event any information or representation made by Developer to TCAC related, directly or indirectly, to the Tax Credits is not true, complete, and correct in all material respects, Developer shall, and acknowledges it has an obligation to, inform TCAC and Authority of such changes and to provide updated information to TCAC, Authority, and its Lender(s), as necessary. (f) Commercial or Private Funding Review. Developer agrees to notify Authority in the event that it applies for or proposes to use other sources of funds for Phase I I prior to the issuance of the Release of Construction Covenants as to Phase 11. (g) No Material Adverse Change. Developer hereby represents and warrants, as of the date of this Agreement, that all documents, materials and information provided by Developer to Authority relating to Developer's qualifications, financial strength, and ability to perform its obligations hereunder are true, correct and complete in all material respects as of their respective dates and no Material Adverse Change has occurred or is reasonably likely to occur that would make any such documents, materials or information incorrect, incomplete, or misleading in any material respect. (i) Developer shall, upon learning of any fact or condition which would cause any of the warranties and representations in this Section 7.3 not to be true in all material respects as of Closing, immediately give written notice of such fact or condition to the Authority. Such exception(s) to a representation shall not be deemed a Default by the Developer hereunder, but shall constitute an exception which the Authority shall have a right to approve or disapprove if Authority, in its sole discretion, determines that such exception would have an effect on the value of Phase 11 or Developer's ability to perform Developer's obligations under this Agreement and the Ground Lease. If Authority, acting in its sole discretion, elects to close the Escrow following disclosure of such information, Developer's representations and warranties contained in this Section 7.3 shall be deemed to have been made as of the Closing, subject to such exception(s). If, following the disclosure of such information, Authority elects, acting in its sole discretion, to not close the Escrow, then Authority shall give notice to the Developer of such election within ten (10) days after disclosure of such information and this Agreement and the Escrow shall thereafter automatically terminate and neither party shall have any further rights, obligations or liabilities hereunder. (ii) The representations and warranties set forth in this Section 7.3, subject to such exception(s), shall survive the Closing. During the entire Affordability Period and the entire Term of the Ground Lease, within five (5) business days following a written request from Authority or City, Developer shall either re -affirm in writing the material truth and accuracy of the representations and warranties set forth in this Section 7.3, or identify any material inaccuracies of such representations and warranties. The fact that a representation or warranty 79 contained in this Section 7.3 has become inaccurate or misleading shall not, in and of itself, constitute a breach under this Agreement or the Ground Lease; however, (a) failure to notify Authority of material inaccuracies in these representations and warranties within ten (10) business days of Authority's request for such information, and (b) any overt material misrepresentation by Developer relating to such representations and warranties shall each constitute an Event of Default under this Agreement, subject to delivery of notice and expiration of the cure rights provided in this Agreement and to Section 21.1.5 of the Ground Lease. (iii) During the entire Affordability Period and the entire Term of the Ground Lease, the Developer shall have the ongoing obligation to promptly (but in no event later than five (5) business days following a Material Adverse Change) inform Authority (in writing) of the occurrence of any Material Adverse Change. 7.4. Limitation Upon Change in Ownership, Management and Control of Developer. 7.4.1 Prohibition. The identities and qualifications of Developer, as an Affiliate of The Related Companies of California, LLC, and as an experienced and successful Developer and operator of affordable apartment complexes, are of particular concern to Authority. It is because of this identity and these qualifications that Authority has entered into this Agreement with Developer. Except as expressly set forth in Section 7.4.2 below, no voluntary or involuntary successor in interest of Developer shall acquire any rights or powers under this Agreement by assignment, assumption or otherwise, nor shall Developer make any total or partial transfer, conveyance, encumbrance to secure financing or refinancing, assignment or sublease of the whole or any part of the leasehold interest in the Site, nor shall there be any change in the general or limited partners of Developer, without the prior written approval of Authority Executive Director pursuant to Section 7.4.3 below, except as expressly set forth herein, which approval shall not be unreasonably withheld or delayed. 7.4.2 Permitted Transfers. Notwithstanding other provisions of this Agreement to the contrary, Authority approval of an assignment or transfer of this Agreement or conveyance of Developer's leasehold interest in the Site, or any part thereof, shall not be required in connection with any of the following ("Permitted Transfers"): (a) The granting of temporary easements or permits to facilitate the construction and development of Phase II. (b) A transfer by and/or to the Developer, as to such Developer's rights under this Agreement to enter into a Ground Lease and thereafter develop and operate Phase II in accordance with this Agreement as follows: Avon Dakota Housing Partners ll, L.P., a California limited partnership, is hereby designated as the Developer entity authorized to enter into the Ground Lease and develop Phase II on the Site. (c) A right of first refusal and/or option to purchase Developer's interest in this Agreement and Developer's interest in the Site or the Investor Limited Partner's interest in Developer, from and after the fifteenth (15th) year after the issuance of a certificate of occupancy for Phase II by City to one or more general partners of Developer. (d) Syndication to and with the approved Investor Limited Partner(s) selected and approved by Authority pursuant to Section 3.10.4(a) and addition of such investor(s) W as limited partners in the limited partnership pursuant to the Partnership Agreement, and assignment by such entities of funds controlled by them. (e) A transfer of a general partnership interest in Developer to a nonprofit managing general partner entity. (f) Notwithstanding anything to the contrary contained herein, without the consent of Authority, each Investor Limited Partner shall have the right to assign its interests as limited partner in Developer to an entity which is controlled by such Investor Limited Partner or is under common control with such Investor Limited Partner. (g) Notwithstanding anything to the contrary contained herein, Investor Limited Partner shall have the right to remove either general partner of Developer, or both general partners, and substitute any Investor Limited Partner or an affiliate thereof as a general partner of Developer, pursuant to the Partnership Agreement, without Authority's consent. Any proposed replacement of a general partner with an entity other than an Investor Limited Partner or an affiliate thereof will be subject to Authority's prior consent, which shall not be unreasonably withheld. (h) Subject to the restrictions of Section 4.0, et seq., including the Ground Lease for Phase II, the rental or lease for occupancy of each of the Housing Units in Phase II to qualified Very Low and Low Income Households. (i) Assignment for approved financing purposes, subject to such financing being considered and approved by Authority pursuant to Section 3.10 hereof. (j) In the event of a Permitted Transfer by Developer pursuant to this Section 7.4.2 not requiring Authority's prior approval, Developer nevertheless agrees that at least ten (10) days prior to such pre -approved assignment or transfer it shall give written notice to Authority of such assignment or transfer along with a true and complete copy of the assignment or transfer document conforming to the requirements of this Agreement. (k) Notwithstanding anything to the contrary in this Agreement, the general partners in Developer shall have the right, without the approval or consent of the Authority, to pledge or otherwise encumber its or their partnership interests in Developer to any Lender(s) and the foreclosure of such pledge by a Lender shall not cause an Event of Default hereunder. 7.4.3 Authority Consideration of Requested Transfer. Authority agrees that it will not unreasonably withhold approval of a request for an assignment or transfer made pursuant to this Section 7.4.3, provided (a) Developer delivers written notice to Authority requesting such approval, (b) the proposed assignee or transferee possesses a reasonable level of operational experience and capability with respect to the operation of similar types of affordable rental housing projects in Southern California, (c) the proposed assignee or transferee possesses a reasonable level of net worth and resources as necessary to develop, operate, and manage Phase II, and (d) the assignee(s) or transferee(s) completely and fully assume(s) the obligations of Developer under this Agreement pursuant to an assignment and assumption agreement(s) in a form which is reasonably acceptable to Authority and its legal counsel(s). Such notice shall be accompanied by evidence regarding the proposed assignee's or purchaser's qualifications and experience and its financial commitments and resources sufficient to enable Authority to evaluate the proposed assignee or purchaser pursuant to the criteria set forth in this Section 7.4.3 and other criteria as reasonably determined by Authority. Authority shall approve or disapprove the m request within thirty (30) days of its receipt of Developer's notice and submittal of complete information and materials required herein. Authority approval shall not be required for transfers or assignments for Authority approved financing purposes including foreclosure or deed in lieu of foreclosure; provided, there shall be no deemed approval of a transfer or assignment for financing secured by Developer's ground leasehold interest in the Site that will: (a) increase the interest rate applicable to such debt, or (b) increase the outstanding principal amount of such debt, or (c) cause or require the release or withdrawal of cash or equity from any part of Phase II, or (d) extend the term of repayment of such debt, or (e) otherwise increase the aggregate annual debt service payments on such loan (and such assignments are subject to Authority approval pursuant to Section 7.4.4 hereof). In no event, however, shall Authority be obligated to approve the assignment or transfer of the Ground Lease or Regulatory Agreement, pursuant to this Section 7.4.3, except to an approved transferee or assignee of Developer's rights in and to the Site and Phase II, based on Authority's reasonable determination that such transferee or assignee has the experience, financial strength, knowledge, and overall capability to own, operate and manage Phase II in accordance with the terms, conditions, and restrictions contained in this Agreement. In addition, Authority shall not be required to grant its approval of any proposed transfer or assignment unless all information reasonably requested by Authority relating to the proposed transferee or assignee entity and all general and limited partners of such entity, including true and correct copies of an executed Partnership Agreement, if the proposed assignee/transferee is a partnership, true and correct copies of articles of incorporation if the proposed assignee/transferee is a corporation, plus current certified financial statements of the entity and financial statements relating to other affordable rental housing projects developed and/or operated by such entity(ies) and reporting and compliance documentation for such projects submitted for public entities providing funding to such projects, etc., as applicable. In the event Developer transfers all or any portion of Phase II, subject to and with Authority approval, any Transfer Net Proceeds received by Developer shall be split between Authority and Developer in the same manner as Residual Receipts (eighty-five percent (85%) to Authority and fifteen percent (15%) to Developer). (a) Addition of Limited Partner(s) to Developer Entity as Tax Credits Investment Entity. Authority acknowledges that Developer anticipates that one of the limited partner(s) to be added to Developer's limited partnership entity will be the Investor Limited Partner for Phase 11. As of the Effective Date, Developer has not solicited bids for or selected its Investor Limited Partner for Phase ll. In this regard, Developer agrees that as a Condition Precedent to the Closing, it shall use best efforts to solicit not fewer than three (3) and use best efforts to obtain not fewer than two (2) competitive bids from prospective, qualified Investors Limited Partners for Phase ll. After such competitive bidding, Developer shall submit complete documentation relating to such competitive solicitation to Authority, including true copies of the invitation to bidders and each full bid package submitted by bidding Tax Credit investors, in order to permit Authority to evaluate the Tax Credit Investor proposed by Developer and the terms of financing and Tax Credit equity offered by such Tax Credit investor. All such documentation shall be submitted no less than thirty (30) days prior to Closing. Within ten (10) days of delivery to Authority of such documentation, Authority and Developer shall meet and confer to select jointly the Tax Credit Investor for Phase II based on the proposal which provides the greatest benefit to Phase II and the Avon Dakota Neighborhood, as a whole. 7.4.4 Approval of Refinancing of Primary Loan. Authority Executive Director shall have the right to review all documents related to and to approve (which approval shall not be unreasonably withheld) or disapprove any refinancing of the Primary Loan and any other debt secured by Developer's ground leasehold interest in the Site, which refinancing will: (a) increase the interest rate applicable to such debt, or (b) increase the outstanding principal amount of such debt, or (c) cause or require the release or withdrawal of cash or equity from any part of Phase II, or (d) extend the term of repayment of such debt, or (e) otherwise increase the aggregate annual debt service payments on such loan. Authority Executive Director shall reasonably consider any such proposed refinancing based on an economic evaluation conducted by Authority's economic consultant that analyzes the effect of the proposed refinancing on (i) the availability of Residual Receipts to repay the Authority Subordinate Loan, (ii) the availability of Cost Savings pursuant to Section 3.11, and (iii) the ability of Developer to repay in full the Primary Loan and any other debt or other liens against the Site as such payment becomes due. In the event Developer refinances either or both Primary Loan(s) (or other debt), subject to and with Authority approval, and Developer withdraws equity from Phase ll, any Refinancing Net Proceeds shall be split between Authority and Developer in the same manner as Residual Receipts (eighty- five percent (85%) to Authority and fifteen percent (15%) to Developer). 7.5. Successors and Assigns. This Agreement shall run with the land, and all of the terms, covenants and conditions of this Agreement shall be binding upon Developer and the permitted successors and assigns of Developer. Whenever the term "Developer" is used in this Agreement, such term shall include any of Developer's approved Affiliate assignee(s) or transferee(s), or any other permitted successors and assigns as herein provided. 7.6. Non -Liability of Officials and Employees of Authority or City. No member, elected or appointed official, or employee of Authority or City shall be personally liable to Developer or any successor in interest in the Event of Default or other breach by Authority or for any amount which may become due to Developer or its successors, or for performance of any obligations under the terms of this Agreement. 7.7. Relationship between Authority and Developer. It is hereby acknowledged and agreed that the relationship between Authority and Developer is not that of a partnership or joint venture or other investor partner and that Authority and Developer shall not be deemed or construed for any purpose to be the agent of the other. Accordingly, except as expressly provided in this Agreement, Authority shall have no rights, powers, duties or obligations with respect to the development, operation, maintenance or management of Phase II. 7.8. Executive Director; Authority Approvals and Actions. Authority shall maintain authority of this Agreement and the authority to implement this Agreement through Authority's Executive Director (or her duly authorized representative). The Executive Director and his/her duly authorized representative(s) shall have the authority to make approvals, issue interpretations, waive provisions, request issuance of warrants and make payments authorized hereunder, make and execute further agreements and/or enter into amendments of this Agreement on behalf of Authority so long as such actions do not materially or substantially change or modify the uses or development permitted on the Site, or materially or substantially add to the costs, responsibilities, or liabilities incurred or to be incurred by Authority (or City) as specified herein, and such interpretations, waivers and/or amendments may include extensions of time to perform as specified in the Schedule of Performance. All material and/or substantive interpretations, waivers, or amendments shall require the consideration, action and written consent of the Authority Board. Further, Executive Director shall maintain the right to submit to the Authority Board for consideration and action any non -material or non -substantive interpretation, waiver or amendment, if in her reasonable judgment she desires to do so. 7.9. Counterparts. This Agreement may be signed in multiple counterparts all of which together shall constitute an original binding agreement. This Agreement is executed in three (3) originals, each of which is deemed to be an original. RN 7.10. Integration. This Agreement contains the entire understanding between the parties relating to the transaction contemplated by this Agreement. All prior or contemporaneous agreements, understandings, representations and statements, oral or written, are merged in this Agreement and shall be of no further force or effect. Each party is entering this Agreement based solely upon the representations set forth herein and upon each party's own independent investigation of any and all facts such party deems material. This Agreement includes pages 1 through 87, S-1 through S-3, and Attachment Nos. 1 through 18, which together constitute the entire understanding and agreement of the parties, notwithstanding any previous negotiations, approved terms and conditions, or agreements between the parties or their predecessors in interest with respect to all or any part of the subject matter hereof. 7.11. Real Estate Brokerage Commission. Authority and Developer each represent and warrant to the other that no broker or finder is entitled to any commission or finder's fee in connection with this transaction, and Developer and Authority agree to defend and hold harmless each other from any claim to any such commission or fee resulting from any action on its part. 7.12. Titles and Captions. Titles and captions are for convenience of reference only and do not define, describe or limit the scope or the intent of this Agreement or of any of its terms. References to Section and Paragraph numbers are to sections and paragraphs in this Agreement, unless expressly stated otherwise. 7.13. Interpretation. As used in this Agreement, masculine, feminine or neuter gender and the singular or plural number shall each be deemed to include the others where and when the context so dictates. The word "including" shall be construed as if followed by the words "without limitation." This Agreement shall be interpreted as though prepared jointly by both parties. 7.14. No Waiver. A waiver by any party of a breach of any of the covenants, conditions or agreements under this Agreement to be performed by the other party shall not be construed as a waiver of any succeeding breach of the same or other covenants, agreements, restrictions or conditions of this Agreement or the Attachments hereto. 7.15. Covenant Not to Sue. The following covenant relating to Developer's obligation not to sue regarding Phase II or the Site or any issues ancillary thereto (but excluding the specific performance of this Agreement) is a material incentive for and a part of the consideration to Authority to enter into this Agreement with Developer. Therefore, Authority shall have no obligation to enter into the Ground Lease for Phase ll, and the performance obligations of Authority under this Agreement shall automatically terminate, in the event from and after the Effective Date and until the Closing, Developer, or any Affiliate of Developer or any of its partners, officers, directors, employees, agents, representatives, consultants, attorneys, or any person acting at the direction of Developer, undertakes any act to oppose, or to commence, participate in, prosecute, or otherwise object to, or to litigate, directly or indirectly, any permit or discretionary decision of Authority, City, City's Planning Commission, or any other City board or commission relating to the Site and/or Phase II of whatever form or nature (but excluding the specific performance of this Agreement). Notwithstanding the foregoing, nothing set forth in this Section 715 shall prevent Developer from asserting its rights relating to the performance and enforcement of this Agreement or due to the abuse of discretion by a governmental entity considering and acting upon a future discretionary decision related to the parameters of this covenant. Further, nothing in the foregoing covenant shall prevent Developer from asserting Developer's rights with respect to prospective action or future conduct by any person who interferes, opposes, or delays implementation and completion of Phase II. 7.16. Developer's Payment and Reimbursement of Authority's Post -Effective Date Third Party Costs. 7.16.1 Third Party Costs Defined; Obligation. Developer shall pay for and reimburse Authority for all costs reasonably incurred by Authority and City for any and all out of pocket, third party costs, fees, and expenses incurred by Authority or City (but not in-house staff time) for attorneys, economic consultants, appraisers, engineers, affordable housing consultants, escrow company fees, title company fees, and other consulting and/or professional services incurred by Authority or City arising from and/or related in any respect to the implementation of this Agreement or Phase II from the period of time commencing upon the Closing for Phase II through the term of the Affordability Period (together, "Third Party Costs"). The Third Party Costs may include costs incurred in connection with (a) post -Closing enforcement of the Regulatory Agreement, Ground Lease, or other documents for Phase II (collectively, "Phase II Documents"), including the following: (i) commencement of, appearance in, or defense of any action or proceeding purporting to affect the rights or obligations of the parties to any Phase II Documents, and (ii) all claims, demands, causes of action, liabilities, losses, commissions and other costs against which Authority or City are indemnified under the Phase II Documents, provided as to defense of any action which Authority or City have tendered the defense to Developer and Developer fails to defend any such action; and (b) other costs incurred related to requests for or provision of estoppel certificates, subordination agreements, affordable housing documents, escrow instructions, advisory assistance, any other documentation, legal advice, affordable housing advice, or other third party contracts for consulting or professional services necessitated by Authority's, City's or Developer's post -Closing implementation of this Agreement, and/or requested by Developer, and/or its Lender or other independent contractor or consultant to Developer post -Closing arising from or related in any manner to this Agreement. 7.16.2 Payment of Third Party Costs. Within ten (10) days of the submittal by Authority staff of copies of invoices or billings for Third Party Costs incurred, it is and shall be the obligation of Developer to reimburse and pay to Authority one hundred percent (100%) of these Third Party Costs, unless Developer reasonably contests such Third Party Costs. (a) This reimbursement obligation shall bear interest from the date occurring ten (10) days after Authority gives written demand to Developer at the rate of ten percent (10%), or the maximum rate then permitted by law. (b) This reimbursement obligation shall survive the issuance of the final Release of Construction Covenants for Phase II and termination of this Agreement. 7.16.3 Exception to Payment of Post -Effective Date Third Party Costs. Notwithstanding Section 716, 716.1, and 716.2 above, Developer shall not be responsible to pay and reimburse for Third Party Costs if the costs incurred are attributable to one or more of the following events: (a) City Council, Authority Board, successor agency Board, Planning Commission, Zoning Administrator, or other City official with discretionary approval and/or disapproval rights over Phase II or the implementation of this Agreement disapproves, denies, or refuses to take action on an application for a permit or other discretionary application necessary to commence and complete Phase Il; or M. (b) Default by Authority under this Agreement. 7.17. Modifications. Any alteration, change or modification of or to this Agreement, in order to become effective, shall be made in writing and in each instance signed by a duly authorized representative on behalf of each party. 7.18. Severability. If any term, provision, condition or covenant of this Agreement or its application to any party or circumstances or Phase II shall be held, to any extent, invalid or unenforceable, the remainder of this Agreement, or the application of the term, provision, condition or covenant to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected, and shall be valid and enforceable to the fullest extent permitted by law. 7.19. Computation of Time. The time in which any act is to be done under this Agreement is computed by excluding the first day and including the last day, unless the last day is a holiday or Saturday or Sunday, and then that day is also excluded. The term "holiday" shall mean all holidays as specified in Section 6700 and 6701 of the California Government Code. If any act is to be done by a particular time during a day, that time shall be Pacific Time Zone time. 7.20. Legal Advice. Each party represents and warrants to the other the following: they have carefully read this Agreement, and in signing this Agreement, they do so with full knowledge of any right which they may have; they have received independent legal advice from their respective legal counsel as to the matters set forth in this Agreement, or have knowingly chosen not to consult legal counsel as to the matters set forth in this Agreement; and, they have freely signed this Agreement without any reliance upon any agreement, promise, statement or representation by or on behalf of the other party, or their respective agents, employees or attorneys, except as specifically set forth in this Agreement, and without duress or coercion, whether economic or otherwise. 7.21. Cooperation. Each party agrees to cooperate with the other in this transaction and, in that regard, to sign any and all documents which may be reasonably necessary, helpful or appropriate to carry out the purposes and intent of this Agreement including, but not limited to, implementation agreements, releases or other agreements. 7.22. Conflicts of Interest. No member, elected or appointed public official or employee of Authority (or City) shall have any personal interest, direct or indirect, in this Agreement, nor shall any such member, elected or appointed public official or employee participate in any decision relating to the Agreement which affects his personal interests, his economic interests, or the interests of any corporation, partnership or association in which he is directly or indirectly interested. 7.23. No Third Party Beneficiaries Except for City. City shall be a third party beneficiary of this Agreement. Except for City, there shall be no third party beneficiaries of this Agreement. 0 IN WITNESS WHEREOF, Authority and Developer have executed this Affordable Housing Agreement (Avon Dakota Neighborhood - Phase II) as of the date and year first set forth above. DEVELOPER: AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership By: Avon Dakota MGP, LLC, a California limited liability company, its managing general partner By: Affordable Housing Access, Inc., a California nonprofit public benefit corporation, its sole member and manager Jonathan B. Webb, President By: Related/Avon Dakota Development Co., LLC, a California limited liability company, its administrative general partner By: Frank Cardone, Vice President [Signatures for Affordable Housing Agreement (Avon Dakota Neighborhood - Phase II) continue on following page] S-1 [Signatures for Affordable Housing Agreement (Avon Dakota Neighborhood - Phase II) continued from previous page] AUTHORITY: ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic -31 ATTEST: John E. Woodhead IV, Executive Director or Authorized Designee LINDA N. ANDAL, AUTHORITY SECRETARY Linda N. Andal ��;i�Z�1�J��Z_F•�t�1,7�7:7►�iA OFFICE OF CITY ATTORNEY Leonie Mulvihill Deputy City Attorney IV STRADLING YOCCA CARLSON & RAUTH Authority Special Counsel S-2 ATTACHMENT NO. 1 AVON DAKOTA NEIGHBORHOOD MAP ATTACHMENT NO. 1 AVON DAKOTA NEIGHBORHOOD MAP Page 1 of 1 ATTACHMENT NO. 2 NARRATIVE DESCRIPTION OF AVON DAKOTA NEIGHBORHOOD The Avon Dakota Multifamily Residential Neighborhood Area is bounded by L3 Communications (602 E. Vermont Avenue) and the South Street Development (700 E. South Street) to the east, South Street to the north, Vermont Street to the south and Thomas Jefferson Elementary School to the west. ATTACHMENT NO. 2 NARRATIVE DESCRIPTION OF AVON DAKOTA NEIGHBORHOOD Page 1 of 1 ATTACHMENT NO. 3 DEPICTION OF THE PROJECT ATTACHMENT NO. 3 DEPICTION OF THE PROJECT Page 1 of 1 ATTACHMENT NO. 4 LEGAL DESCRIPTION OF PHASE II Real property in the City of Anaheim, County of Orange, State of California, described as follows: [to come] ATTACHMENT NO. 4 LEGAL DESCRIPTION OF PHASE II Page 1 of 1 ATTACHMENT NO. 5 SCHEDULE OF PERFORMANCE (809, 824, 862 and 868 South Dakota Street and 606 E. Avon Place) A. Approval and Execution of Agreement Not later than June—, 2017. Authority shall execute the Agreement, if and when approved by Authority and Anaheim City Council. B. Basic Concept Drawings Submitted and approved by Developer shall prepare and submit Basic Authority. Concept Drawings for Phase II to Authority for review and approval. C. Construction Drawings On or before one hundred and twenty Developer shall submit Construction (120) days after Developer obtains a Drawings for Phase II to Authority for review. preliminary reservation of Tax Credits for Phase ll. D. Approval of Construction Drawings Within 10 business days of receipt. Authority shall review and approve, approve with conditions or disapprove Developer's Construction Drawings for Phase Il. E. Conditions Precedent to Commencement At least two (2) days prior to the of Ground Lease anticipated Closing date. Developer and Authority shall satisfy, or waive all Conditions Precedent to the commencement of the Ground Lease set forth in Section 202. F. Close of Escrow Within two (2) days of notification by Escrow shall close for Phase II when all Authority and Developer to Escrow Conditions Precedent to Closing have been that all Conditions Precedent are satisfied or waived by the benefited party. satisfied and/or waived and Developer's financing is ready to close. G. Obtain Building Permits No later than ten (10) business days Developer shall, at its own expense, secure after the Closing. any and all permits and approvals required for the construction of Phase 11. H. Commence Construction No later than thirty (30) days after the Developer shall commence construction of Closing. Phase II. ATTACHMENT NO. 5 SCHEDULE OF PERFORMANCE Page 1 of 2 K. M Submit First Operating Budget Within nine (9) months from the Developer shall submit to Authority the first commencement of construction for (annual) Operating Budget for Phase 11. the Project, but in no event later than thirty (30) days prior to the completion of construction. Approve First Operating Budget Within ten (10) business days after a Authority shall review and approve, complete submittal of the first conditionally approve, or disapprove the first Operating Budget for Phase II to (annual) Operating Budget for Phase 11. Authority. Complete Construction Within fifteen (15) months from the Developer shall complete construction of commencement of construction for Phase II. Phase II. Notify Housing Authority At least ninety (90) days prior to Developer shall notify Authority of impending City's issuance of the Certificate of Certificate of Occupancy for Phase 11 and Occupancy for Phase II. commence implementation of the approved Marketing and Tenant Selection Plan. Final Certificate of Occupancy Within ninety (90) days of completion Developer shall obtain the final Certificate of of construction of Phase II. Occupancy for Phase ll. N. Issue Release of Construction Covenants Within thirty (30) days of receipt of a Authority shall furnish Developer with a complete Developer request. Release of Construction Covenants upon completion of Phase II and satisfaction of Section 305 of the Agreement. ATTACHMENT NO. 5 SCHEDULE OF PERFORMANCE Page 2 of 2 ATTACHMENT NO. 6 SCOPE OF DEVELOPMENT [Anaheim and Related Staff to update/confirm] The first phase of the Project will include the rehabilitation of seven (7) buildings at 809, 824, 862 and 868 S. Dakota Street and 606 E. Avon Place. The Scope of Development for this phase of the Project shall include the rehabilitation of all twenty-one (21) apartment units, of which three (3) shall be one bedroom units, twelve (12) shall be two bedroom units and six (6) shall be three bedroom units. Phase I I will also include [three (3) trash enclosures and (_) parking spaces, of which (_) spaces will be carports and (_) spaces will be open/tandem spaces.] TABULATIONS: 809 S. Dakota: 4 — 3 bedroom unit Parking: _ carport spaces Construct trash enclosure for (_) bins 824S. Dakota: 2 — 2 bedroom unit 2 — 3 bedroom units Parking: _ [open] spaces 862S. Dakota: 2 — 2 bedroom, one bath units 2 — 2 bedroom, two bath units Parking: _ [open] spaces [Rehabilitate existing trash enclosure that is also used by the tenants at 516 E. South Street] 868 S. Dakota: 4 — 2 bedroom units Parking: [_ carports spaces and _ open/tandem spaces] [Construct trash enclosure for (_) bins 606 E. Avon Place: 3 — 1 bedroom units 2 — 2 bedroom units Parking: f 1 [Construct trash enclosure for (_) bins] ATTACHMENT NO. 6 SCOPE OF DEVELOPMENT Page 1 of 3 Construction Scope of Work: CLASSIFICATION Notes QUANITY DEMOLITION AND PREP INTERIORS 16 units KITCHEN Replace Kitchen Cabinets 16 units Replace Countertops 16 units Replace Flooring Kitchen & Dining 16 units Replace Light Fixture 16 units Install GFI Outlets @ Kitchen 16 units Replace Kitchen Hood Includes exhaust fan ducting 16 units Replace Refrigerator 16 units Replace Kit. Sink & Faucet includes trap/waste) 16 units Replace Garbage Disposal (badger V 1/2 h 16 units Replace Range labor reflects shut off & gas line 16 units BATHROOMS R&R Tubs & Surrounds 16 units Repair Sub Floors Allowance 16 units Replace Drain 16 units .Replace Pullman Cabinet 16 units Replace Pullman Tops 16 units Replace Sink & Faucet 16 units Install New Bath Mirror 16 units Replace Bath & Shower Fixtures 16 units Install GFI outlet 16 units ,Replace Medicine Cabinet 16 units Replace Bathtub Valve 16 units Install New Flooring sheet vin ]) 16 units Replace Light Fixtures 16 units Replace Exhaust Fan and Humistat Need to install duct to outside 16 units Remove and Replace Toilets as needed 16 units LIVING AREA Final Clean 16 units R&R Carpet 16 units R&R Closet Doors vin I 16 units Install Hardwired Smoke Detectors / Carbon Monoxide 16 units Install Ceiling Fans 16 units Replace Switch & Plus 16 units Wiring for Cable TV Allowance 16 units R&R Gas Wall Heater 16 units Replace or Repair Interior Doors and Trim 16 units Replace Finish Hardware 16 units Replace Window Blinds 16 units Replace Light Fixtures 16 units Paint Interiors 16 units Misc. Drywall Repair Allowance 16 units Mold Clean-up Allowance 16 units Asbestos and Lead Remediation Allowance 16 units Termite Treatment tent Allowance 16 units Drywall If Unit Remediated 1AIlowance 16 units SCOPE OF DEVELOPMENT Page 2 of 3 ATTACHMENT NO. 6 SCOPE OF DEVELOPMENT Page 3 of 3 BUILDING EXTERIORS *Assumption: Keep existing electrical panels and circuit load capacity as is Re lace Windows 13 units Replace Sliding Glass Doors 4 buildings Paint Extedor Allowance 4 buildings Stucco Repairs Allowance 1 project Exterior Railings & Stairs Allowance 4 buildings R&R Entry Doors 16 units R&R Deck & Balcony.Waterproofing Allowance 1 project Room Additions Allowance 5 new bdrms Site Demolition Allowance 4 buildings Carports Allowance project Trash Enclosure Allowance 3 units Laundry Rooms Allowance 1 units ROOFING & SHEET METAL New Roofing 4 buildings Repair Dry Rot Facsia & Rafter Tails as needed Allowance 4 buildings Replace Sheet Metal 4 buildings Replace Damaged Roof Sheeting as needed Allowance 10 sheets 4 buildings Repair Roof Substructure Allowance 4 buildings Replace Gutter & Downspout 4 buildings COMMON AREAS Install New Tanked Water Heater 4 buildings ADA Compliant Access Allowance 1 project Camera & Snake All Sewer Lines 4 buildings Replace Mailboxes Allowance Per Building 4 buildin s SITE IMPROVEMENTS Repair Irrigation System Allowance Per Building 4 buildings Enhance Landscaping Allowance Per Building 4 buildings Replace Damaged Concrete - Walkways & Flatwork Allowance Per Building 4 buildings Upgrade Site Lighting Allowance Per Building 4 buildings Replace Exterior Wood Fencing Allowance Per Building 4 buildin s Replace Entry Gates 4 buildings Dryrot Repairs Allowance Per Building 4 buildings OFF -SITES * Assumption: Keep existing dry and wet utility connections to the buildings as is ATTACHMENT NO. 6 SCOPE OF DEVELOPMENT Page 3 of 3 ATTACHMENT NO. 7 FORM OF GROUND LEASE GROUND LEASE (Avon Dakota Neighborhood - Phase II) by and between ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic, "Landlord" and AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership "Tenant" Dated as of ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 1 of 86 Table of Contents Page ARTICLE 1 LEASE OF THE PROPERTY...............................................................................1 1.1. Ground Lease of the Property; Ownership of Improvements................................1 1.2. Purpose of Ground Lease....................................................................................2 1.3. Recorded Encumbrances.....................................................................................2 1.4. Memorandum of Ground Lease...........................................................................2 ARTICLE 2 DEFINITIONS......................................................................................................2 ARTICLE3 TERM................................................................................................................21 ARTICLE4 RENT.................................................................................................................21 4.1. Rent...................................................................................................................21 4.2. Payment of Rent................................................................................................22 4.3. Reporting Requirements; Audit..........................................................................22 4.4. Utilities...............................................................................................................24 4.5. Taxes and Assessments....................................................................................24 4.6. Overdue Interest................................................................................................25 ARTICLE 5 POSSESSION OF PROPERTY.........................................................................25 5.1. Acceptance of Premises....................................................................................25 5.2. Ownership of Improvements..............................................................................26 5.3. Surrender of Property........................................................................................26 5.4. Abandonment....................................................................................................27 ARTICLE 6 REPRESENTATIONS AND WARRANTIES; MATERIAL ADVERSE CHANGE...........................................................................................................27 6.1. Landlord's Representations...............................................................................27 6.2. Tenant's Representations..................................................................................28 6.3. Tenant Obligation to Notify re Material Adverse Change....................................29 ARTICLE 7 CONSTRUCTION OF THE IMPROVEMENTS..................................................29 7.1. Commencement and Completion of Construction..............................................29 7.2. Construction Cost..............................................................................................29 7.3. Diligent Prosecution to Completion....................................................................30 7.4. Completion of Construction................................................................................30 7.5. Changes; Landlord Consent..............................................................................30 7.6. Landlord's Review..............................................................................................31 7.7. Right of Access..................................................................................................31 7.8. Governmental Approvals....................................................................................31 7.9. Landlord's Right to Discharge Lien....................................................................31 7.10. Notice of Non-Responsibility..............................................................................32 7.11. Notice of Completion..........................................................................................32 7.12. Subsequent Alterations......................................................................................32 7.13. Force Majeure....................................................................................................32 ARTICLE 8 USE OF THE PROPERTY.................................................................................32 8.1. Covenants re Use..............................................................................................32 8.2. Reserved...........................................................................................................33 8.3. Covenants Regarding Operation of Housing Units.............................................33 ATTACHMENT NO. 7 FORM OF GROUND LEASE Page i of 86 Table of Contents Paqe 8.4. Reserved...........................................................................................................41 8.5. Covenant to Pay Taxes and Assessments.........................................................41 8.6. Reserved...........................................................................................................41 8.7. Non -Discrimination Covenants...........................................................................41 8.8. Covenants Regarding Operating Budget and Operating Reserve ......................42 8.9. Covenants Regarding Capital Replacement Reserve........................................43 8.10. Certificate of Continuing Program Compliance...................................................43 ARTICLE 9 INSURANCE......................................................................................................44 9.1. Landlord Not Liable............................................................................................44 9.2. Indemnification...................................................................................................44 9.3. Insurance...........................................................................................................44 9.4. Other Insurance.................................................................................................48 9.5. Contractors........................................................................................................48 9.6. Waiver of Subrogation.......................................................................................48 9.7. Insurance Submissions......................................................................................49 ARTICLE 10 MAINTENANCE; REPAIRS; ALTERATIONS; RECONSTRUCTION ..................49 10.1. General Maintenance.........................................................................................49 10.2. Program Maintenance........................................................................................50 ARTICLE 11 OWNERSHIP OF AND RESPONSIBILITY FOR IMPROVEMENTS ..................50 11.1. Ownership During Term.....................................................................................50 11.2. Ownership at Expiration or Termination.............................................................51 11.3. Waste................................................................................................................52 11.4. Alteration of Improvements................................................................................52 ARTICLE 12 SIGNS AND MARKETING.................................................................................52 ARTICLE 13 INDEMNIFICATION...........................................................................................53 ARTICLE 14 DAMAGE OR DESTRUCTION OF PROPERTY OR IMPROVEMENTS ............53 14.1. Tenant's Repair Obligation.................................................................................53 14.2. Tenant's Restoration of Premises......................................................................54 14.3. Procedure for Restoring Improvements..............................................................55 14.4. Mortgagee Protection.........................................................................................56 ARTICLE 15 EMINENT DOMAIN...........................................................................................57 15.1. Notice................................................................................................................57 15.2. Representation in Proceedings or Negotiations.................................................57 15.3. Total Taking.......................................................................................................57 15.4. Substantial Taking.............................................................................................58 15.5. Tenant's Right to Revoke Notice of Termination................................................59 15.6. Partial Taking.....................................................................................................59 15.7. Obligation to Repair on Partial Taking................................................................59 15.8. Temporary Taking..............................................................................................59 15.9. Mortgagee Protection.........................................................................................60 15.10. Appraisal............................................................................................................60 ATTACHMENT NO. 7 FORM OF GROUND LEASE Page ii of 86 Table of Contents Paqe ARTICLE 16 ENVIRONMENTAL............................................................................................61 16.1. No Use of Hazardous Materials on the Property................................................61 16.2. Notice and Remediation by Tenant....................................................................62 16.3. Environmental Indemnity....................................................................................62 ARTICLE17 ASSIGNMENT...................................................................................................62 17.1. Prohibition Against Transfer: No Sale or Assignment During Term ....................63 ARTICLE 18 MORTGAGES...................................................................................................66 18.1. Ground Leasehold Mortgages.. .......................................................................... 66 18.2. Landlord's Forbearance and Right to Cure Defaults on Mortgages ....................67 18.3. Limited Liability of Mortgagee for Prior Indemnified Acts....................................68 18.4. Landlord Cooperation........................................................................................68 18.5. No Subordination of Landlord's Fee Interest, Affordable Housing Covenants, or Entitlements................................................................................69 18.6. Priority...............................................................................................................69 18.7. Claims................................................................................................................69 18.8. Further Amendments.........................................................................................69 18.9. Loan Obligations................................................................................................69 18.10. Liens and Encumbrances Against Tenant's Interest in this Ground LeaseholdEstate...............................................................................................69 18.11. Cost of Loans to be Paid by Tenant...................................................................73 18.12. No Merger..........................................................................................................73 18.13. Transfer Rights..................................................................................................73 ARTICLE19 SUBLEASING....................................................................................................73 19.1. Subleasing of Property.......................................................................................73 19.2. Nondisturbance Agreements..............................................................................74 19.3. Rights of Mortgagees.........................................................................................74 ARTICLE 20 PERFORMANCE OF TENANT'S COVENANTS................................................74 20.1. Right of Performance.........................................................................................74 20.2. Reimbursement and Damages...........................................................................75 ARTICLE 21 EVENTS OF DEFAULT; REMEDIES.................................................................75 21.1. Events of Default................................................................................................75 21.2. Remedies..........................................................................................................76 21.3. Receipt of Rent, No Waiver of Default................................................................78 21.4. Effect on Indemnification....................................................................................78 ARTICLE 22 PERMITTED CONTESTS..................................................................................78 ARTICLE 23 FORCE MAJEURE............................................................................................79 23.1. Delay of Performance........................................................................................79 23.2. Notice and Cure Requirements..........................................................................79 ARTICLE 24 CONSENT RIGHTS...........................................................................................79 ARTICLE 25 GENERAL PROVISIONS...................................................................................79 25.1. Notices...............................................................................................................79 ATTACHMENT NO. 7 FORM OF GROUND LEASE Page iii of 86 Table of Contents Paqe 25.2. Certificates.........................................................................................................81 EXHIBIT B: 25.3. No Merger of Title..............................................................................................81 INITIAL MONTHLY RENT SCHEDULE 25.4. Utility Services...................................................................................................81 25.5. Quiet Enjoyment................................................................................................81 25.6. No Claims Against Landlord...............................................................................81 25.7. Inspection..........................................................................................................82 25.8. No Waiver by Landlord.......................................................................................82 25.9. Holding Over......................................................................................................82 25.10. Exculpation of Tenant's Personal Liability..........................................................82 25.11. No Partnership...................................................................................................82 25.12. Remedies Cumulative........................................................................................82 25.13. Attorney's Fees..................................................................................................82 25.14. Time Is of the Essence.......................................................................................83 25.15. Survival of Representations, Warranties and Covenants....................................83 25.16. Construction of Ground Lease...........................................................................83 25.17. Severability........................................................................................................83 25.18. Entire Agreement; Modification..........................................................................83 25.19. Binding Effect and Benefits................................................................................83 25.20. Further Assurances............................................................................................83 25.21. Counterparts......................................................................................................83 25.22. Number and Gender..........................................................................................83 25.23. Incorporation by Reference................................................................................83 25.24. Modification or Termination.............................................................................84 I� l:Tl lti�� EXHIBIT A: LEGAL DESCRIPTION EXHIBIT B: INCOME COMPUTATION AND CERTIFICATION EXHIBIT C: INITIAL MONTHLY RENT SCHEDULE EXHIBIT D: MEMORANDUM OF GROUND LEASE ATTACHMENT NO. 7 FORM OF GROUND LEASE Page iv of 86 GROUND LEASE (Avon Dakota Neighborhood - Phase II) This GROUND LEASE (Avon Dakota Neighborhood - Phase II) ("Ground Lease") dated as of ("Effective Date") is entered into by and between ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic ("Landlord"), and AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership ("Tenant"). RECITALS A. Landlord is a California housing authority acting under the California Housing Authorities Law, Part 2 of Division 24 of the Health and Safety Code. B. Tenant is controlled by an experienced owner, developer and manager of affordable housing for low and moderate -income families. C. Landlord is the owner of certain real property situated in the City of Anaheim, County of Orange, State of California, and legally described in Exhibit A ("Property"). D. Landlord and Tenant have entered into that certain Affordable Housing Agreement (Avon Dakota Neighborhood - Phase II), dated as of June _, 2017 ("Affordable Housing Agreement") which provides for the development and operation of a twenty-one (21) unit multifamily apartment project for Very Low Income Households and Low Income Households. E. The Affordable Housing Agreement provides for Landlord to ground lease the Property to Tenant, and for Tenant to plan, design, construct, develop and operate the Project thereon. F. All Conditions Precedent to the parties entering into this Ground Lease have been satisfied or waived. G. The foregoing Recitals constitute a substantive part of this Ground Lease. H. This Ground Lease is in the vital and best interests of the City of Anaheim, California, and the health, safety and welfare of its residents, and in accordance with the public purposes of applicable state and local laws and requirements. NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and conditions herein contained, Landlord and Tenant agree as follows: ARTICLE 1 LEASE OF THE PROPERTY 1.1. Ground Lease of the Property; Ownership of Improvements. Landlord hereby leases the Property to Tenant, and Tenant hereby hires the Property from Landlord, on the terms and conditions set forth in this Ground Lease. Subject to the provisions of Section 5.3 hereof, Tenant will concurrent with the Effective Date of this Ground Lease and thereafter during the Term hereof, hold fee title to all Improvements constructed on the Property during the Term hereof, and shall continue to hold fee title to such Improvements during such Term. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 1 of 86 1.2. Purpose of Ground Lease. The purpose of this Ground Lease is to provide for the construction, maintenance, management, and operation of the Project as a twenty-one (21) unit affordable multifamily apartment complex to be made available for the Affordability Period at an Affordable Rent pursuant to this Ground Lease and the City Covenants. Tenant shall not occupy or use the Property, nor permit the Property to be occupied or used, nor do or permit anything to be done in or on the Property, in whole or in part, for any other purpose other than affordable housing during the Affordability Period pursuant to the terms and provisions of this Ground Lease. The foregoing notwithstanding, after the foreclosure of a Mortgage, or acceptance by a Mortgagee of an assignment or deed in lieu of foreclosure, the Property may be used for any lawful purpose, so long as such use is in conformity with this Ground Lease or the New Ground Lease between Landlord and such Mortgagee as applicable hereunder, which New Ground Lease shall include provision for payment of adjusted Rent in an amount not less than provided in Sections 4.1.3, as applicable. 1.3. Recorded Encumbrances. This Ground Lease, the interests of Landlord and Tenant hereunder, and the Property, are in all respects subject to and bound by all of the covenants, conditions, restrictions, reservations, rights, rights-of-way and easements of record, including without limitation the City Covenants entered into between Tenant and the City of Anaheim ("City") dated and recorded against the Property in the Official Records concurrently herewith. 1.4. Memorandum of Ground Lease. A short form Memorandum of Ground Lease (Avon Dakota Neighborhood - Phase II) referring to this Ground Lease, substantially in the form attached hereto as Exhibit D and incorporated herein, shall be executed by Landlord and Tenant concurrently herewith and recorded in the Official Records. ARTICLE 2 DEFINITIONS Unless otherwise defined herein, all capitalized terms shall have the same meanings ascribed to them in the Affordable Housing Agreement. If not defined in the Affordable Housing Agreement, capitalized terms used herein are defined where first used in this Ground Lease and/or as set forth in this Article 2. For the purpose of supplying such definitions, the Affordable Housing Agreement, notwithstanding anything contained therein or herein to the contrary, shall not merge with this Ground Lease. "Additional Rent" shall mean the additional rent which may be required to be paid by Tenant to Landlord pursuant to Section 4.1.1. "Affiliate" shall mean any person or entity directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with Tenant, which shall include each of the constituent partners or members of Tenant's limited partnership (but not the Investor Limited Partner). The term "control," as used in the immediately preceding sentence, means, with respect to a person that is a corporation, the right to exercise, directly or indirectly, at least 50% of the voting rights attributable to the shares of the controlled corporation, and, with respect to a person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled person. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 2 of 86 "Affordability Period" shall mean the period commencing on the Commencement Date and continuing thereafter until the earlier of (i) the fifty-seventh (57th) anniversary of the date the Release of Construction Covenants (defined below) is recorded against the Property in the Official Records, in accordance with Section 3.5 of the Affordable Housing Agreement; or (ii) December 31, 2078. "Affordable Housing Covenants" shall mean those covenants set forth in Article 8 of this Ground Lease. "Affordable Housing Agreement" shall mean the Affordable Housing Agreement, as amended and clarified from time to time. "Affordable Rent" shall mean the maximum amount of out of pocket housing cost to be charged monthly by Tenant and paid by each of the eligible Very Low and Low Income Households for each of the Housing Units at the Project as determined and calculated pursuant to the affordable rent and the rent limitations according to TCAC, the Tax Credit Rules, the HOME Requirements and the Tax Credit Regulatory Agreement applicable to the Project, in accordance with Section 8.3.2 hereof and Section 4.2 of the Affordable Housing Agreement. For purposes of Affordable Rent, the monthly housing payment shall mean the total of monthly payments by each subtenant household (exclusive of any and all payments attributable to rental subsidies, or other public subsidies by the Anaheim Housing Authority or any other local, state, or federal governmental agency) of a Housing Unit for use and occupancy of a Housing Unit and facilities associated therewith, including a reasonable allowance for utilities for an adequate level of service. "Annual Financial Statement" shall mean the certified financial statement of Tenant for the Project using generally accepted accounting principles ("GAAP"), as separately accounted for the Project, including Operating Expenses and Annual Project Revenue, prepared at Tenant's expense, by an independent certified public accountant reasonably acceptable to Landlord, as well as the Residual Receipts Report, the form of which is attached to the Affordable Housing Agreement as Attachment No. 18. Each Annual Financial Statement submitted by Tenant shall include a statement and certification (and supporting documentation) of the total amount of the Developer Fee and Deferred Developer Fee for the Project, along with the cumulative amount thereof paid to date and the amount thereof paid within the applicable reporting year as reported and certified in the Annual Financial Statement. Once every three (3) years or sooner as and when requested by Landlord and/or Executive Director, along with and as a part of the Annual Financial Statement and Residual Receipts Report, Tenant shall submit true, legible, and complete copies of the source documentation supporting the Annual Financial Statement and Residual Receipts Report. "Annual Project Revenue" shall mean all gross income and all revenues of any kind from the Project in a calendar year, of whatever form or nature, whether direct or indirect, with the exception of the items excluded below, received by, paid to, or for the account or benefit of Tenant or any Affiliate of Tenant or any of their agents or employees (provided, in no event shall amounts counted as Annual Project Revenue be double counted if paid by Tenant to one or more of its Affiliates), from any and all sources, resulting from or attributable to the operation, leasing and occupancy of the Project, determined on the basis of GAAP applied on a consistent basis, and shall include, but not be limited to: (i) gross rentals paid by subtenants of the Project under leases, and payments and subsidies of whatever nature, including without limitation any payments, vouchers or subsidies from HUD or any other person or organization, received on behalf of ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 3 of 86 subtenants under their leases; (ii) amounts paid to Tenant or any Affiliate of Tenant on account of Operating Expenses for further disbursement by Tenant or such Affiliate to a third party or parties, including, without limitation, grants received to fund social services or other housing supportive services at the Project; (iii) late charges and interest paid on rentals; (iv) rents and receipts from licenses, concessions, vending machines, coin laundry, and similar sources; (v) other fees, charges, or payments not denominated as rental but payable to Tenant in connection with the rental of office, retail, storage, or other space in the Project; (vi) consideration received in whole or in part for the cancellation, modification, extension or renewal of leases; and (vii) interest and other investment earnings on security deposits, reserve accounts and other Project accounts to the extent disbursed. Notwithstanding the foregoing, Annual Project Revenue shall not include the following items: (a) security deposits from subtenants (except when applied by Tenant to rent or other amounts owing by subtenants); (b) capital contributions to Tenant by its members, partners or shareholders (including capital contributions required to pay the Deferred Developer Fee; (c) condemnation or insurance proceeds; (d) there shall be no line item, expense, or revenue shown allocable to vacant unit(s) at the Project; or (e) receipt by an Affiliate of management fees or other bona fide arms -length payments for reasonable and necessary Operating Expenses associated with the Project. "Applicable Federal Rate" shall mean the interest rate set by the United States Treasury from time to time for the purpose of determining applicable Low Income Housing Tax Credit interest rates. The Applicable Federal Rate is published by the Internal Revenue Service in monthly revenue rulings. "Approved Financing" shall mean the construction and permanent financing initially approved by Landlord for the Project pursuant to Section 3.10 of the Affordable Housing Agreement, obtained by Tenant for the construction/development and operation of the Project and, thereafter, in accordance with the terms of this Ground Lease. "Area Median Income" and "AMI" shall mean the area median household income set forth for each county in California (and for this Ground Lease for Orange County), as annually determined by TCAC pursuant to the Tax Credit Rules. "Authority Deed of Trust" shall mean the Authority Subordinate Loan Deed of Trust and Assignment of Rents (Avon Dakota Neighborhood - Phase II) executed by Tenant in favor of Landlord and recorded against the ground leasehold interest in the Property in order to secure Tenant's obligations under the Authority Promissory Note and any other Transaction Documents. "Authority Promissory Note" shall mean that certain Authority Subordinate Loan Promissory Note Secured by Deed of Trust (Avon Dakota Neighborhood - Phase II) executed by Tenant in favor of Landlord to evidence Tenant's obligation to repay the Authority Subordinate Loan to Landlord from eighty-five percent (85%) of Remaining Residual Receipts from the Project. "Authority Subordinate Loan" shall mean the Authority Subordinate Loan (as defined in the Affordable Housing Agreement) to be provided to Tenant in connection with the development of the Project, in an amount of Four Million One Hundred Forty One Thousand Five Hundred Dollars ($4,141,500). The Authority Subordinate Loan is evidenced by the Authority Promissory Note and secured by the Authority Deed of Trust. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 4 of 86 "Award" shall mean any compensation or payment made or paid for the Total, Partial or Temporary Taking of all or any part of or interest in the Property and/or the Improvements, whether pursuant to judgment, agreement or otherwise. "Base Rent" shall mean the sum of One Dollar ($1.00) payable as of the Commencement Date and on each anniversary of the Commencement Date which occurs during the Term. "Capital Improvements" shall mean all work and improvements with respect to the Property for which costs and expenses may be capitalized in accordance with GAAP. "Capital Replacement Reserve" shall mean a separate reserve fund account to be established upon closing of the permanent Primary Loan for the Project and maintained by Tenant separately for the Project, which shall equal not less than Three Hundred Dollars ($300) per year for each Housing Unit at the Project (16 Housing Units times $300 equals $6,300), to be used as the primary resource to fund capital improvements and replacement improvements for the Project. The amount of $300 for each Housing Unit that is set aside by the Tenant (or its Property Manager) shall be allocated from the gross rents received from the Property and deposited into a separate interest bearing trust account for capital replacements to the fixtures and equipment that are normally capitalized under generally accepted accounting principles and shall include common areas. The nonavailability of funds in the Capital Replacement Reserve does not in any manner relieve or lessen Tenant's obligation to undertake any and all necessary capital repairs and improvements and to continue to maintain the Project in the manner prescribed herein. Upon written request of Landlord, but not more than once per year, Tenant, at its expense, shall submit to Landlord's Executive Director an accounting for the Capital Replacement Reserve for the Project. Capital repairs to and replacement of the Project shall include only those items with a long useful life, including, without limitation, the following: carpet and drape replacement; appliance replacement; exterior painting, including exterior trim; hot water heater replacement; plumbing fixtures replacement, including tubs and showers, toilets, lavatories, sinks, faucets; air conditioning and heating replacement; asphalt repair and replacement, and seal coating; roofing repair and replacement; landscape tree replacement; irrigation pipe and controls replacement; sewer line replacement; water line replacement; gas line pipe replacement; lighting fixture replacement; elevator replacement and upgrade work; miscellaneous motors and blowers; common area furniture and planters replacement; and common area repainting. Pursuant to the procedure for submittal of each Annual Budget for the Project to Executive Director by Tenant, Executive Director will evaluate the cumulative amount on deposit in the Capital Replacement Reserve account for the Project and exercise her sole, reasonable discretion to determine if existing balance(s) in, proposed deposits to, shortfalls, if any, and/or a cumulative unexpended/unencumbered account balance in such Capital Replacement Reserve account are adequate to provide for necessary capital repairs and improvement to the Property and the Project (provided that required annual deposits thereto are not required to exceed $300/per Housing Unit). "Certificate of Continuing Program Compliance" shall mean the certificate to be delivered by Tenant to Landlord annually until the expiration of the Affordability Period pursuant to Section 8.10, in a form acceptable to and approved by the Executive Director. "City" shall mean the City of Anaheim, a California municipal corporation and charter city. The City is not a party to this Ground Lease and shall have no obligations hereunder; provided, however, City is an intended third -party beneficiary of the covenants and restrictions, as well as the enforcement rights (without any obligation), set forth in this Ground Lease. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 5 of 86 "Commencement Date" shall mean the date upon which the Memorandum of Ground Lease is recorded in the Official Records. "CPI" shall mean the United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index for Urban Wage Earners and Clerical Workers, Subgroup "All Items," for the Los Angeles -Costa Mesa -Riverside area, 1982 — 84 = 100, or successor or equivalent index in case such index is no longer published. CPI adjustments under this Ground Lease shall commence not earlier than one year following the issuance of the final certificate of occupancy for the Project. "Debt Service" shall mean payments (including any required reserves) made in a calendar year pursuant to the approved Primary Loan obtained for the construction, development and operation of the Project pursuant to Section 3.10 of the Affordable Housing Agreement and any new financing or refinancing in accordance with this Ground Lease, but excluding Rent and excluding payments to Landlord under the Authority Promissory Note. "Deferred Developer Fee" shall mean any deferred Developer Fee to be paid from Annual Project Revenue, which is included under the financing which has been approved by Landlord pursuant to Section 3.10 of the Affordable Housing Agreement. [As of the Commencement Date, Tenant intends to include a Deferred Developer Fee in the amount of approximately $539,500 as a permanent source of financing for the Project.] "Developer Fee" shall mean a fee for the Project to be paid by Tenant pursuant to the Development Services Agreement, which fee is compensation to perform, or to engage and supervise others to perform, services in connection with the negotiating, coordinating, and supervising the planning, architectural, engineering and construction activities necessary to cause completion and complete the Project, including all other on-site and off-site improvements required to be constructed in connection therewith, in accordance with the Scope of Development, the Entitlement, and the Development Plans, as set forth in the Final Budget and approved as a part of the evidence of financing pursuant to Section 3.10 of the Affordable Housing Agreement. From and after the Closing, Tenant shall defer up to the maximum amount of the Developer Fee permitted to be paid from cash flow, as set forth in the Tax Credit Rules, if and to the extent such deferral is necessary to keep the Final Budget in balance or to complete construction of the Project. "Development Plans" shall mean the Basic Concept Drawings and Construction Drawings (as those terms are defined in the Affordable Housing Agreement) all as approved by City and Landlord, a set of which, initialed by Tenant, and on file in the offices of Landlord. "Entitlement" shall mean and include each application and discretionary action of the City, through its administrators and, if applicable, by its City Council, Planning Commission, or other boards or commissions for the Project and the Improvements, including the findings in compliance with the California Environmental Quality Act ("CEQA"), Conditional Use Permits, Reclassification No. 2006-00175, and any and all conditions of approval related thereto, including, without limitation, the City Covenants and any amendments, supplements, and modifications thereto, as set forth in the conditions of approval for the Project. Pursuant to Section 21159.23 of the Public Resources Code, the Project is exempt from CEQA. "Event of Default" has the meaning set forth in Article 21. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 6 of 86 "Executive Director" shall mean the Executive Director of Landlord or his or her designee. "Federal Program Limitations" shall mean compliance with the HOME Program and HOME Regulations, as amended by the 2013 HOME Final Rule, as applicable to the Project, and also includes any and all other applicable federal regulations relating to fair housing and non- discrimination applicable to the Project and rules and regulations made applicable to the Project due to the provision of PBV Assistance to the HAP Units. Developer covenants, acknowledges, and agrees it is subject to the HAL and all Federal Program Limitations, including (with respect to the HOME Units) the HOME Program and HOME Regulations (whichever are most restrictive and to the extent applicable to the Project), in connection with its performance under this Agreement, and agrees it shall endeavor to cause the use and operation of the Properties to conform to the Federal Program Limitations. "First Mortgage -Construction Financing" shall mean a loan from an Institutional Lender to be secured by a leasehold deed of trust in first (1st) lien position against Tenant's leasehold interest in the Property (but not, in any event, to be secured by Landlord's fee interest in the Property), which shall be used by Tenant to pay the cost of constructing the Project. "First Mortgage -Permanent Financing" shall mean a loan in an amount not to exceed the amount of the First Mortgage -Construction Financing from an Institutional Lender to be secured by a leasehold deed of trust in first (1st) lien position against Tenant's leasehold interest in the Property which replaces the First Mortgage -Construction Financing upon the completion of construction of the Project or results from a conversion of the First Mortgage -Construction Financing into the First Mortgage -Permanent Financing pursuant to the terms of such loan and satisfaction of the applicable conversion conditions. "Foreclosure Transferee" shall mean any Lender or other transferee of Tenant's leasehold interest under this Ground Lease as a result of a judicial foreclosure, nonjudicial foreclosure or assignment of the leasehold in lieu of foreclosure. Any such Foreclosure Transferee shall operate the Property in compliance with this Ground Lease or a New Ground Lease between Landlord and such Foreclosure Transferee pursuant to Article 18 hereof. "General Contractor" shall mean the general contractor to be hired by Tenant to engage and supervise the subcontractors in the performance and completion of the construction of the Project and all other on-site and off-site improvements required to be constructed in connection with the Project, all in accordance with the Scope of Development, the Entitlement approved by City, and the approved Development Plans. The General Contractor shall be reasonably acceptable to and approved by the Executive Director, in her reasonable discretion; provided, Portrait Homes, Inc., a California corporation, or its affiliate, is hereby pre -approved to act as the General Contractor for the development of the Project. The parties acknowledge that the General Contractor will not be performing actual construction work for any portion of the Project, but instead shall hire Subcontractors (after competitive bidding pursuant to Section 302.7 of the Affordable Housing Agreement) who shall be reasonably approved by the Executive Director in accordance with the Affordable Housing Agreement. "Governmental Requirements" shall mean all laws, ordinances, statutes, codes, rules, regulations, orders, and decrees of the United States, the State of California, the County, the City, or any other political subdivision in which the Property is located, and of any other political subdivision, agency, or instrumentality exercising jurisdiction over Tenant or the Property, as may be amended from time to time. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 7 of 86 "Gross Mismanagement" is defined in Section 8.3.11.3 hereof. "Ground Lease" shall mean this Ground Lease (Avon Dakota Neighborhood - Phase II). "Guarantor" shall mean The Related Companies, L.P., a New York limited partnership, and which shall also be the "Guarantor" under the Completion Guaranty, Attachment No. 11 to the Affordable Housing Agreement. "HAL" shall mean the Housing Authorities Law, Health and Safety Code Section 34200, et seq. "Hazardous Material" or "Hazardous Materials" shall mean and include any substance, material, or waste which is or becomes regulated by any local governmental authority, including the County, the Orange County Health Care Agency, the Regional Water Quality Control Board, the State of California, or the United States Government, including, but not limited to, any material or substance which is: (i) defined as a "hazardous waste," "acutely hazardous waste," "restricted hazardous waste," or "extremely hazardous waste" under Sections 25115, 25117 or 25122.7, or listed pursuant to Section 25140, of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law); (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter Presley Tanner Hazardous Substance Account Act); (iii) defined as a "hazardous material," "hazardous substance," or "hazardous waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory); (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances); (v) petroleum; (vi) asbestos and/or asbestos containing materials; (vii) lead based paint or any lead based or lead products; (viii) polychlorinated biphenyls, (ix) designated as a "hazardous substance" pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section 1317); (x) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903); (xi) Methyl tertiary Butyl Ether; (xii) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601, et seq. (42 U.S.C. Section 9601); (xiii) any other substance, whether in the form of a solid, liquid, gas or any other form whatsoever, which by any Governmental Requirements either requires special handling in its use, transportation, generation, collection, storage, handling, treatment or disposal, or is defined as "hazardous" or harmful to the environment; and/or (xiv) lead based paint pursuant to and defined in the Lead Based Paint Poisoning Prevention Act, Title X of the 1992 Housing and Community Development Act, 42 U.S.C. § 4800, et seq., specifically §§ 4821-4846, and the implementing regulations thereto. Notwithstanding the foregoing, "Hazardous Materials" shall not include such products in quantities as are customarily used in the construction, maintenance, rehabilitation, management, operation and residence of residential developments or associated buildings and grounds, or typically used in residential activities in a manner typical of other comparable residential developments, or substances commonly ingested by a significant population living within the Project, including without limitation alcohol, aspirin, tobacco and saccharine. "HOME Regulations" shall mean the implementing regulations of the HOME Program set forth at 24 CFR §92.1, et seq. as such regulations now exist (as amended by the 2013 HOME Final Rule) and as they may hereafter be amended, to the extent applicable to the Project. Developer covenants hereunder to comply with the HAL and all applicable HOME Regulations in ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 8 of 86 the performance of this Agreement, whichever are more restrictive. In implementation of these requirements, this Agreement, the Project, and all eligible contributions and expenditures hereunder shall conform to the following: (a) The housing developed hereunder does and shall qualify as affordable housing under 24 CFR §92.252 because each Housing Unit shall be rented at an Affordable Rent; and (b) This Agreement serves as the written agreement that imposes and enumerates (by meeting or exceeding) all of the affordability requirements from 24 CFR §92.252; the property standards requirements of 24 CFR §92.251; and income determinations made in accordance with 24 CFR §92.203. "HOME Units" shall mean thirteen (13) of the Housing units as follows: (a) at 809 Dakota Street: (i) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be Low HOME Units, and (ii) two (2) of the two (2) bath Housing Units shall be High HOME Units; (b) at 868 Dakota Street: (i) one (1) of the two (2) bedroom, two (2) bath Housing Units shall be Low HOME Units, and (ii) three (3) of the two (2) bath Housing Units shall be High HOME Units; and (c) at 606 Avon Place: (i) one (1) of the one (1) bedroom, two (2) bath Housing Units shall be a Low HOME Unit, (ii) two (2) of the one (1) bedroom, two (2) bath Housing Units shall be High HOME Units, and (iii) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be High HOME Units. The designation of Housing Units as HOME Units shall terminate at the end of the HOME Compliance Period, unless extended by agreement of the Landlord and the Tenant. "Housing Asset Fund" is defined in the Recitals hereto. "Housing Asset Fund Requirements" means the requirements of Health and Safety Code Section 34176 and 34176.1 and all requirements of the California Community Redevelopment Law, Health and Safety Code Section 33000, et seq., that apply to the use of Housing Asset Funds by the Authority, as successor to the former Anaheim Redevelopment Agency's housing functions. "Housing Unit" and "Housing Units" shall mean individually and collectively the twenty- one (21) individual apartment units at the Project to be constructed and operated by Tenant (or its Affiliate(s)) on the Property as affordable rental housing throughout the entire Affordability Period. "HUD" shall mean the United States Department of Housing and Urban Development. "Impositions" shall mean all taxes (including, without limitation, sales and use taxes); assessments (including, without limitation, all assessments for public improvements or benefits whether or not commenced or completed prior to the Commencement Date and whether or not to be completed within the Term); water, sewer or other rents, rates and charges; excises; levies; license fees; permit fees; inspection fees and other authorization fees and other charges; in each case whether general or special, ordinary or extraordinary, foreseen or unforeseen, of every character (including all interests and penalties thereon), which are attributable or applicable to any portion of the Term and may be assessed, levied, confirmed or imposed on or in respect of, or be a lien upon (a) the Property or the Improvements, or any part thereof, or any estate, right or interest therein, (b) any occupancy, use or possession of or activity conducted on the Property or the Improvements, or any part thereof, or (c) this Ground Lease. The term "Impositions" shall ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 9 of 86 also include any and all increases in the foregoing, whether foreseen or unforeseen, ordinary or extraordinary, including, without limitation, any increase in real property taxes resulting from a sale of the Property by Landlord. "Improvements" shall mean the apartment complex and any other improvements, including the building fixtures thereon, now located on the Property, if any, or hereafter constructed on the Property as part of the Project; all landscaping, fencing, walls, paving, curbing, drainage facilities, lighting, parking areas, roadways and similar site improvements now located or hereafter placed upon the Property. "Indemnitees" has the meaning set forth in Section 16.3 of this Ground Lease. "Institutional Lender" shall mean any one of the following institutions having assets or deposits in the aggregate of not less than One Hundred Million Dollars ($100,000,000): a California chartered bank; a bank created and operated under and pursuant to the laws of the United States of America; an "incorporated admitted insurer" (as that term is used in Section 1100.1 of the California Insurance Code); a "foreign (other state) bank" (as that term is defined in Section 1700(1) of the California Financial Code); a federal savings and loan association (Cal. Fin. Code Section 8600); a commercial finance lender (within the meaning of Section 2600 et seq. of the California Financial Code); a "foreign (other nation) bank" provided it is licensed to maintain an office in California, is licensed or otherwise authorized by another state to maintain an agency or branch office in that state, or maintains a federal agency or federal branch in any state (Section 1716 of the California Financial Code); a bank holding company or subsidiary of a bank holding company which is not a bank (Section 3707 of the California Financial Code); a trust company, savings and loan association, insurance company, investment banker, college or university, pension or retirement fund or system, either governmental or private, or any pension or retirement fund or system of which any of the foregoing shall be trustee, provided the same be organized under the laws of the United States or of any state thereof; and a Real Estate Investment Trust, as defined in Section 856 of the Internal Revenue Code of 1986, as amended, provided such trust is listed on either the American Stock Exchange or the New York Stock Exchange. "Institutional Lender" shall specifically include "Insurance Requirements" shall mean all terms of any insurance policy covering or applicable to the Property or the Improvements, or any part thereof, all requirements imposed by the issuer of any such policy, and all orders, rules, regulations and other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) applicable to or affecting the Property or the Improvements, or any part thereof, or any use or condition of the Property or the Improvements, or any part thereof. "Investor Limited Partner" shall mean each Tax Credit investor limited partner of Tenant for the Project, specifically: "Legal Description" shall mean the description of the Property attached hereto as Exhibit A and incorporated herein. "Lender" shall mean each of the responsible financial lending institutions or persons or entities approved by Landlord in its reasonable discretion, which provide the Primary Loan, including acquisition loan(s), construction loan(s) or permanent loan(s) for the construction, development, and/or operation of the Project, in accordance with the Approved Financing. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 10 of 86 "Low Income," "Lower Income," "Low Income Households," or "Lower Income Households" shall mean and include both: (i) lower income households as defined in the Tax Credit Rules, and (ii) 60% AMI Low Income Households. Lower Income Households include Very Low Income Households and Extremely Low Income Households, as defined in the Tax Credit Rules. "Maintenance Standards" shall mean those standards set forth in Section 10.1 hereof. "Marketing and Tenant Selection Plan" shall mean the marketing and subtenant selection plan to be prepared for the Project in accordance with Section 8.3.7. "Material Adverse Change" means any event the occurrence of which is reasonably likely to have a material adverse effect on Tenant's ability to fulfill its obligations under any Transaction Document, including without limitation: (a) a voluntary or involuntary bankruptcy of Tenant (which is not dismissed within ninety (90) days of institution); (b) a court order placing Tenant under receivership; (c) a sale of all or substantially all of the assets held by Tenant; (d) any violation of Tenant or other failure of Tenant to comply at all times with any applicable law, statute, ordinance, code, rule, regulation, judgment, order, ruling, condition or other requirement of a statutory, regulatory, administrative, judicial or quasi-judicial nature or any other legal or governmental requirement of whatever kind or nature related to the Project, which violation is likely to have a material adverse effect on the ability of Tenant to perform its duties and obligations under any Transaction Document; and/or (e) Tenant incurs one or more liabilities, contingent or otherwise, or pending or threatened litigation or any asserted or unasserted claim exists against Tenant with respect to the Project, which would have a material adverse effect on its ability to perform its duties and obligations under any Transaction Document. "Memorandum of Ground Lease" refers to the Memorandum of Ground Lease to be recorded against the Property in the Official Records as described in Section 1.4, in the form attached hereto as Exhibit D and incorporated herein. "Mortgage" has the meaning set forth in Section 18.1 of this Ground Lease. "Mortgagee" has the meaning set forth in Section 18.1 of this Ground Lease. "Mortgagee's Notice" has the meaning set forth in Section 18.2(a) of this Ground Lease. "New Ground Lease" is defined in Section 18.10(c)(8). "Notice of Intended Taking" shall mean any notice or notification on which a reasonably prudent person would rely and which said person would interpret as expressing an existing intention of Taking as distinguished from a mere preliminary inquiry or proposal. It includes, without limitation, the service of a condemnation summons and complaint on a party to this Ground Lease. The notice is considered to have been received when a party to this Ground ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 11 of 86 Lease receives from the condemning agency or entity a notice of intent to take, in writing, containing a description or map of the taking which reasonably defines the extent of the taking. "Official Records" shall mean the Official Records of the County Recorder of Orange County, California. "Operating Budget" and "Annual Budget" shall mean the annual operating budget for the Project that sets forth the projected Operating Expenses for the upcoming year that is subject to and shall be submitted for review and approval to and reviewed and approved by Executive Director, in her reasonable discretion, each year during the Affordability Period as set forth in Section 8.8 hereof. The Operating Budget shall be in substantially the form attached to the Affordable Housing Agreement as Attachment No. 17 and incorporated herein, or such other form as may be required by Landlord from time to time. "Operating Expenses" shall mean actual, reasonable and customary (for comparable high quality rental housing developments in Orange County) costs, fees and expenses directly incurred, paid, and attributable to the operation, maintenance and management of the Project in a calendar year, including: painting, cleaning, repairs, alterations, landscaping, utilities, refuse removal, certificates, permits and licenses, sewer charges, real and personal property taxes, assessments, insurance, security, advertising and promotion, janitorial services, cleaning and building supplies, purchase, repair, servicing and installation of appliances, equipment, fixtures and furnishings, fees and expenses of property management, fees and expenses of accountants, attorneys and other professionals, the cost of social services and other housing supportive services provided at the Project consistent with Tenant's approved Application(s) to TCAC for the Property, repayment of any completion or operating loans made to Tenant, and other actual, reasonable and customary operating costs and capital costs which are directly incurred and paid by Tenant, but which are not paid from or eligible to be paid from the Capital Replacement Reserve or any other reserve accounts for the Project. To the extent the Operating Expenses for the Project deviate from the approved annual Operating Budget for a given year by more than ten percent (10%) in aggregate for that year, the Executive Director shall reasonably review and approve to confirm such Operating Expenses are reasonable and actually incurred; provided, no approval shall be required for emergency expenditures reasonably necessary or appropriate to preserve life, limb, or property. Operating Expenses shall exclude all of the following: (i) salaries of employees of Tenant or Tenant's general overhead expenses, or expenses, costs and fees paid to an Affiliate of Tenant, to the extent any of the foregoing exceed the expenses, costs or fees that would be payable in a bona fide arms' length transaction between unrelated parties in the Orange County area for the same work or services; (ii) any amounts paid directly by a subtenant of the Project to a third party in connection with expenses which, if incurred by Tenant, would be Operating Expenses; (iii) optional or elective payments with respect to the Primary Loan (unless made with the consent of the Executive Director in his/her reasonable discretion); (iv) any payments with respect to any Project -related loan or financing other than the Primary Loan (unless made with the consent of the Executive Director in her reasonable discretion or otherwise in accordance with this Ground Lease); (v) expenses, expenditures, and charges of any nature whatsoever arising or incurred by Tenant prior to completion of the Project with respect to the development, maintenance and upkeep of the Project, or any portion thereof, including, without limitation, all costs and capitalized expenses incurred by Tenant in connection with the lease of the Property from Landlord (e.g. not leasing to low income subtenants), all predevelopment and preconstruction activities conducted by Tenant in connection with the Project, including, without ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 12 of 86 limitation, the preparation of all plans and the performance of any tests, studies, investigations or other work, and the construction of the Project and any on site or off site work in connection therewith; (vi) depreciation, amortization, and accrued principal and interest expense on deferred payment debt; and (vii) any Partnership Related Fees to the extent they are not paid as capitalized expenses. "Operating Reserve" shall mean the Operating Reserve for the Project, which shall be funded by an installment of Tax Credit equity in a target amount equal to three (3) months of (i) Debt Service on the permanent Primary Loan and (ii) Operating Expenses pursuant to an approved Annual Budget for the Project ("Target Amount"); provided, a larger Operating Reserve may be maintained if required by the approved Lender or Tax Credit Investor for the Project. "Partial Taking" shall mean any taking of the fee title of the Property and/or the Improvements that is not either a Total, Substantial or Temporary Taking. "Partnership Agreement" shall mean the agreement(s) which set(s) forth the terms of Tenant's (or its approved Affiliate(s)) limited partnership, as such agreement(s) may be amended from time to time, so long as consistent with the requirements of this Ground Lease. "Partnership Related Fees" shall mean the following fees of Developer (or partners thereof pursuant to the Partnership Agreement) which are actually paid in the following order of priority: (i) a limited partner asset management fee payable to the Investor Limited Partner of Developer in the amount of $5,000 (increased annually by the greater of CPI or 3%); and (ii) a general partner(s) (administrative and/or managing partner(s)) partnership management fee payable to the general partner(s) of Developer in the amount of $10,000 (increased annually by the greater of CPI or 3%). In no event shall the fees for Phase II described in (i) and (ii) above together cumulatively exceed Fifteen Thousand Dollars ($15,000), increased annually by CPI (but in no event by more than CPI). In the event insufficient Annual Project Revenues exist to provide for payment of all or part of the specific Partnership Related Fees listed above, no interest shall accrue on the unpaid portions of such Partnership Related Fees, but the unpaid balance will be added to the Partnership Related Fees due in the next following years. "Portable Voucher" shall mean Section 8 tenant -based vouchers, certificates of family participation under 24 CFR part 882 (Rental Certificate Program), rental vouchers under 24 CFR part 887 (Rental Voucher Program), and comparable documents evidencing participation in a program pursuant to the HOME Investment Partnership Act, 42 U.S.C. §12701, et seq. and the implementing regulations located at 24 CFR part 92, as such now exist and as may hereafter be amended, or other tenant -based rental assistance programs. "Potential Default" shall mean any condition or event which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. "Primary Loan" or "Primary Loans" shall mean the First Mortgage -Construction Financing and/or the First Mortgage -Permanent Financing, as the context dictates, or any refinancing of either of them if approved by Landlord or otherwise effected in accordance with this ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 13 of 86 Ground Lease, obtained by Tenant for the Project, from one or more Institutional Lender(s) other than an Affiliate of Tenant, as approved by Executive Director, which loan(s) shall be senior to the Authority Deed of Trust but subordinate to Landlord's fee interest in the Property, the Affordable Housing Covenants and the Entitlement obtained by Tenant. "Project" shall mean the construction or rehabilitation and development at the Property of twenty-one (21) Housing Units) in two-story buildings. "Property" shall mean approximately real property generally located at 809 South Dakota Street, 824 South Dakota Street, 862 South Dakota Street, 868 South Dakota Street and 606 E. Avon Place in the City of Anaheim, as more particularly described in the Legal Description. "Property Management Plan" shall mean the plan for the management of the Project to be submitted pursuant to Section 8.3.11.2 hereof. "Property Manager" shall mean the individual property manager or property management company contracted by and with Tenant, after obtaining Executive Director's written approval of such individual or company, to perform the operation, maintenance, and management of the Project. Related Management Company, L.P. is approved by the Authority as the Property Manager "Refinancing Net Proceeds" shall mean the proceeds of any approved refinancing of any of the Primary Loans or other approved financing secured by the Property, net of: (i) the amount of the financing which is satisfied out of such proceeds; (ii) reasonable and customary costs and expenses incurred in connection with the refinancing; (iii) the balance, if any, of the Deferred Developer Fee; (iv) the balance of loans to the Project made by the limited partners of Tenant for development or operating deficits, amounts expended to maintain compliance with the Tax Credit Regulatory Agreement, or contributions for capital expenditures in excess of available Project revenues, if any, including interest as provided in the Partnership Agreement; (v) the balance, if any, of operating loans or development loans made by the general partners of Tenant to the Project, including interest as provided in the Partnership Agreement; (vi) the return of capital contributions, if any, to the Project made by the general partners of Tenant that were used to pay the Deferred Developer Fee; (vii) payment of unpaid Tax Credit adjustment amounts or reimbursement of Tax Credit adjustment amounts paid by the administrative and/or managing general partners and/or the guarantors to the Project pursuant to the approved Partnership Agreement, if any; and (viii) the payment to the administrative general partner of Tenant of a refinancing fee, which fee is and shall be subject to the approval of the Executive Director at the time of each refinancing and which shall not exceed six percent (6%) of the amount of the approved refinancing. "Release of Construction Covenants" shall mean the Release of Construction Covenants in substantially the form attached to the Affordable Housing Agreement as Attachment No. 14, which shall be recorded against the Property upon compliance with the requirements set forth in Section 305 of the Affordable Housing Agreement. "Rent" shall mean the rent payable pursuant to Section 4 of this Ground Lease, including annual rent payments provided for in Section 4.1, Additional Rent provided for in Section 4.1.1, and adjusted Rent as provided for in Sections 4.1.2 and 4.1.3. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 14 of 86 "Remaining Residual Receipts" is defined in the definition of "Residual Receipts" set forth below. "Reserve Deposits" shall mean any payments to the Operating Reserve account for the Project pursuant to Section 8.8 hereof and payments to the Capital Replacement Reserve account for the Project pursuant to Section 8.9 hereof. "Resident Lease" and "Resident Leases" are defined in Section 19.1. "Residual Receipts" shall mean Annual Project Revenue for the Project less the sum of: (i) Operating Expenses, including payment of Rent and Additional Rent under this Ground Lease; (ii) Debt Service; (iii) Reserve Deposits in accordance with the requirements of the Investor Limited Partner and the Partnership Agreement, and the Lender of the Primary Loan in its transaction documents, but in no event less than as required by this Agreement and this Ground Lease; (iv) Partnership Related Fees (including accrued but unpaid Partnership Related Fees from the prior year or prior years, as applicable); (v) payment of unpaid Tax Credit adjustment amounts or reimbursement of Tax Credit adjustment amounts paid by the administrative and/or managing general partners and/or the guarantors to Developer pursuant to the Partnership Agreement, if any; (vi) repayment of loans, if any, made by the limited partner(s) of Tenant, including interest at the interest rate provided in the Partnership Agreement, for development and/or operating expense deficits or other loans directly and reasonably related to Phase II and operation thereof as provided hereunder; (A) provided, that, the propriety of any such loans to the Project, if any, made by the limited partner(s) of Tenant pursuant to the Partnership Agreement (and during the term thereof) shall be subject to the reasonable prior consent of and reasonably verified by the Executive Director; and (B) provided, further, that the propriety of any such loans made by the limited partner(s) of Tenant shall be deemed to be reasonable and may be made without the prior consent of the Executive Director if such loans are made to pay any expense or obligation of Tenant relating to the physical condition and/or operation of the Project and for which Annual Project Revenue, reserves or other funds of Tenant are not otherwise available (but Tenant shall submit evidence and documentation to the Executive Director showing that such loans are made to pay expenses relating to the physical condition and/or operation of the Project and that Annual Project Revenue, reserves or other funds of Tenant are not available to pay such expenses); (vii) Property Management Fee for the Project which remains unpaid after payment of Operating Expenses, if any; ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 15 of 86 (viii) Deferred Developer Fee for the Project which remains unpaid, if any, including interest at the Applicable Federal Rate; (ix) repayment of outstanding development and operating loans or credit adjustor advances or development fee advances, if any, made by the administrative and/or managing general partners and/or the Guarantor (or any other guarantor required by the Investor Limited Partner or the Primary Lender) to Tenant, with all such loans to be repaid without interest; provided, that, as a condition to use of any Annual Project Revenues to repay such loan(s) pursuant to this subparagraph (ix), Tenant shall submit evidence and documentation to the Executive Director showing that such loans are required to be made pursuant to the terms of the Partnership Agreement; and (x) capital contributions or loans to Tenant, if any, made by the general partners of Tenant that were used to pay the Developer Fee. Residual Receipts shall be calculated on a cash basis. Tenant's annual loan payments on the Authority Subordinate Loan and adjusted Rent pursuant to Section 4.1.2 hereof shall be paid by Tenant to Authority under the Authority Subordinate Loan and shall include: Eighty-five percent (85%) of the Residual Receipts received from operation of the Project until payment in full of the Authority Subordinate Loan, and thereafter as Rent hereunder pursuant to Section 4.1.2. The remaining fifteen percent (15%) of the Residual Receipts received from the operation of the Project shall be retained by Tenant or used by Tenant to pay any fees or charges not specifically deducted from Annual Project Revenues above. In the event any calculation of Annual Project Revenue less subsections (i) through (xi) inclusive above results in a negative number, then Residual Receipts shall be zero ($0) for that year. In addition, none of the fees, costs, expenses, or items described above in calculation of Residual Receipts shall include any duplicate entry/item, or double accounting for a cost item. For example, an audit fee incurred by Tenant (or any partner of Tenant or an Affiliate) and deducted or included above in category/subsection (i) Operating Expenses shall not also be deducted or included in category/subsection (v) Partnership Related Fees in the calculation of Residual Receipts. "Residual Receipts Report" shall mean the report in substantially the form attached to the Affordable Housing Agreement as Attachment No. 18, which shall be completed by Tenant and submitted to Landlord annually for the Project in accordance with Section 4.3.1. It is understood the Residual Receipts Report is subject to all of the terms and conditions set forth in the Affordable Housing Agreement. The summary of the items in the Residual Receipts Report is not intended to supersede or modify the more complete description in the Affordable Housing Agreement; in the event of any inconsistency between the Residual Receipts Report and the Affordable Housing Agreement, the Affordable Housing Agreement shall govern. "RMC" shall mean Related Management Company, L.P., which has been pre -approved as the Property Manager for the Project. "Scope of Development" shall mean the Scope of Development attached to the Affordable Housing Agreement as Attachment No. 6. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 16 of 86 "Section 3" shall mean and refer to Section 3 of the Housing and Urban Development Act of 1968, 12 U.S.C. §1701 u, as amended. Landlord has prepared a Section 3 "checklist" and other forms related to Section 3 compliance; and as provided by Landlord to Tenant, its General Contractor, Subcontractors (both as defined in the Affordable Housing Agreement), or other contractor(s) or subcontractor(s), as applicable, such forms shall be utilized in all contracts and subcontracts to which Section 3 applies. Tenant shall be solely responsible to determine the extent to which Section 3 applies to the Project. "Section 3 Clause" shall mean the language, set forth below, which is required to be included in each and every Construction Contact entered into by Tenant, the General Contractor, each Subcontractor and/or any other contractor(s) or subcontractor(s), as applicable, for the development of the Project. For purposes of this Section 3 Clause and compliance therewith, whenever the word "contractor" is used it shall mean and include, as applicable, the Tenant, General Contractor, any and all Subcontractors, and any other contractor(s) and subcontractor(s) performing work on the Project. Tenant hereby acknowledges and agrees to take all responsibility for compliance with all Section 3 Clause federal requirements and further acknowledges and agrees that compliance with all Section 3 Clause requirements by Tenant, the General Contractor, all Subcontractors, and/or other contractor(s), subcontractor(s), and other agents is the primary obligation of Tenant. Tenant shall provide or cause to be provided to its General Contractor and each Subcontractor, and each of its other contractor(s), subcontractor(s) and agents a checklist for compliance with the Section 3 Clause federal requirements, to obtain from the General Contractor, each Subcontractor, and other contractor(s), subcontractor(s), and agents all applicable items, documents, and other evidence of compliance with the items, actions, and other provisions within the checklist, and to submit all such completed Section 3 Clause documentation and proof of compliance to the Executive Director. The particular text to be utilized in any and all contracts of the General Contractor or any Subcontractor doing work covered by Section 3 shall be in substantially the form of the following Section 3 Clause, as reasonably determined by Landlord, or as directed by HUD or its representative, and shall be executed by the applicable contractor under penalty of perjury: " (i) The work to be performed under this contract is subject to the requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. 1701u ("Section 3"). The purpose of Section 3 is to ensure that employment and other economic opportunities generated by HUD assistance or HUD assisted projects covered by Section 3, shall, to the greatest extent feasible, be directed to low and very low income persons (inclusive of Very Low Income Persons, Very Low Income Households, and Very Low Income Tenants served by the Project), particularly persons who are recipients of HUD assistance for housing. "(ii) The parties to this contract agree to comply with HUD's regulations in 24 CFR Part 135, which implement Section 3. As evidenced by their execution of this contract, the parties to this contract certify that they are under no contractual or other impediment that would prevent them from complying with the Part 135 regulations. "(iii) The contractor agrees to send to each labor organization or representative of workers with which the contractor has a collective bargaining agreement or other understanding, if any, a notice advising the labor organization or workers' representative ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 17 of 86 of the contractor's commitments under this Section 3 clause, and will post copies of notices in conspicuous places at the work site where both employees and applicants for training and employment positions can see the notice. The notice shall describe the Section 3 preference, shall set forth minimum number of job titles subject to hire, availability of apprenticeship and training positions, the qualifications for each; and the name and location of person(s) taking applications for each of the positions; and the anticipated date the work shall begin. "(iv) The contractor agrees to include this Section 3 clause in every subcontract subject to compliance with regulations in 24 CFR Part 135, and agrees to take appropriate action, as provided in an applicable provision of the subcontract or in this Section 3 clause, upon a finding that the subcontractor is in violation of the regulations in 24 CFR Part 135. The contractor will not subcontract with any subcontractor where the contractor has notice or knowledge that the subcontractor has been found in violation of the regulations in 24 CFR Part 135. "(v) The contractor will certify that any vacant employment positions, including training positions, that are filled (a) after the contractor is selected but before the contract is executed, and (b) with persons other than those to whom the regulations of 24 CFR Part 135 require employment opportunities to be directed, were not filled to circumvent the contractor's obligations under 24 CFR Part 135. "(vi) Noncompliance with HUD's regulations in 24 CFR Part 135 may result in sanctions, termination of this contract for default, and debarment or suspension from future HUD assisted contracts. "(vii) With respect to work performed in connection with Section 3 covered Indian Housing assistance, section 7(b) of the Indian Self Determination and Education Assistance Act (25 U.S.C. 450e) also applies to the work to be performed under this contract. Section 7(b) requires that to the greatest extent feasible, (a) preference and opportunities for training and employment shall be given to Indians, and (b) preference in the award of contracts and subcontracts shall be given to Indian organizations and Indian owned Economic Enterprises. Parties to this contract that are subject to the provisions of Section 3 and section 7(b) agree to comply with Section 3 to the maximum extent feasible, but not in derogation of compliance with section 7(b)." After the foregoing Section 3 Clause, Tenant shall add the signature block of the General Contractor, Subcontractor, or other contractor(s) and subcontractor(s), as applicable, and shall add the following text immediately above the signature block: "The contractor/provider by this his signature affixed hereto declares under penalty of perjury that contractor has read the requirements of this Section 3 Clause and accepts all its requirements contained therein for all of his operations related to this contract." "Substantial Taking" shall mean the taking of so much of the Property and/or the Improvements that the portion of the Property and/or the Improvements not taken cannot be repaired or reconstructed, taking into consideration the amount of the award available for repair or reconstruction, so as to constitute a complete, rentable structure, capable of producing a proportionately fair and reasonable net annual income after payment of all Operating Expenses, and all other charges payable under this Ground Lease, and after performance of all covenants and conditions required by Tenant by law and under this Ground Lease. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 18 of 86 "Taking" shall mean a taking or damaging, including severance damage, by eminent domain or by inverse condemnation or for any public or quasi -public use under any statute. The taking may occur as a result of a transfer pursuant to the recording of a final order in condemnation, a voluntary transfer or conveyance to the taking authority under threat of condemnation, or a transfer while condemnation proceedings are pending. Unless otherwise provided, the taking shall be deemed to occur as of the earlier of (a) the date actual physical possession is taken by the condemnor, or (b) the date on which the right to compensation and damages accrues under the law applicable to the Property and/or the Improvements. "Taking," as used in this Ground Lease does not include the voluntary dedication of any portion of the Property necessary to obtain building permits or to comply with any other applicable governmental rule, regulation or statute; nor does it include the enactment of any law, ordinance or regulation which may affect the use or value of the Property but which does not involve an actual taking of any portion thereof. Eminent domain actions filed by Landlord against former owners of portions of the Property and pending as of the Commencement Date shall not be deemed, construed or interpreted as a Taking under this Ground Lease. "Target Amount" shall have the meaning set forth in the definition of "Operating Reserve. "Tax Credit Compliance Period" shall mean the 15 -year compliance period described in Section 42(1)(1) of the Internal Revenue Code of 1986, as amended. "Tax Credit Regulatory Agreement" shall mean the regulatory agreement which may be required to be recorded against the Property with respect to the issuance of Tax Credits for the Project. The Tax Credit Regulatory Agreement is and shall remain subordinate and junior to this Ground Lease, and the City Covenants. "Tax Credit Rules" shall mean Section 42 of the Internal Revenue Code and/or California Revenue and Taxation Code Sections 17057.5, 17058, 23610.4 and 23610.5 and California Health and Safety Code Section 50199, et seq., as applicable, as the foregoing may be amended from time to time, and the rules and regulations implementing the foregoing, including Title 4 Cal. Code Regs. Section 10300, et seq. "Tax Credits" shall mean federal 9% or 4% Low Income Housing Tax Credits granted pursuant to Section 42 of the Internal Revenue Code and/or California Revenue and Taxation Code Sections 17057.5, 17058, 23610.4 and 23610.5 and California Health and Safety Code Section 50199, et seq., as applicable. "TCAC" shall mean the California Tax Credit Allocation Committee, the allocating agency for Tax Credits in California. "Temporary Taking" shall mean a taking of all or any part of the Property and/or the Improvements for a term certain which term is specified at the time of taking. Temporary Taking does not include a taking which is to last for an indefinite period or a taking which will terminate only upon the happening of a specified event unless it can be determined at the time of the taking substantially when such event will occur. If a taking for an indefinite term should take place, it shall be treated as a Total, Substantial or Partial Taking in accordance with the definitions set forth herein. "Tenant" shall mean Avon Dakota Housing Partners ll, L.P., a California limited partnership, and its permitted successors and assigns, as Tenant under this Ground Lease. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 19 of 86 "Term" has the meaning set forth in Article 3 of this Ground Lease. "Total Taking" shall mean the taking of the fee title to all of the Property. "Transaction Documents" shall mean this Ground Lease, the Affordable Housing Agreement the Authority Promissory Note, and the Authority Deed of Trust, to the extent such documents continue to encumber the Project. "Transfer Net Proceeds" shall mean the proceeds of any transfer, in whole or in part, of Tenant's leasehold interest in the Property or any sale, assignment, sublease, or other transfer, in whole or in part of Tenant's interests in the Property, net of: (i) the amount of the financing which is satisfied out of such proceeds; (ii) reasonable and customary costs and expenses incurred in connection with the transfer; (iii) the balance, if any, of the Deferred Developer Fee; (iv) the balance of loans to the Project made by the limited partners of Tenant for development or operating deficits, amounts expended to maintain compliance with the Tax Credit Regulatory Agreement, or contributions for capital expenditures in excess of available Project revenues, if any, including interest as provided in the Partnership Agreement; (v) the balance, if any, of operating loans or development loans made by the general partners of Tenant to the Project, including interest as provided in the Partnership Agreement; (vi) the return of capital contributions, if any, to the Project made by the general partners of Tenant that were used to pay the Deferred Developer Fee; (vii) payment of unpaid Tax Credit adjustment amounts or reimbursement of Tax Credit adjustment amounts paid by the administrative and/or managing general partners and/or the guarantors to the Project pursuant to the approved Partnership Agreement, if any; and (viii) the payment to the administrative general partner of Tenant of a fee, which fee is and shall be subject to the approval of the Executive Director at the time of each refinancing and which shall not exceed six percent (6%) of the amount of the approved refinancing. "Very Low Income" and/or "Very Low Income Households" shall mean and include: (i) very low income households as defined in the Tax Credit Rules; (ii) 30% AMI Very Low Income Households; (iii) 40% AMI Very Low Income Households; and (iv) 50% AMI Very Low Income Households. Very Low Income Households include Extremely Low Income Households, as defined in the Tax Credit Rules. "30% AMI Very Low Income Households" shall mean those households earning not greater than thirty percent (30%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. "40% AMI Very Low Income Households" shall mean those households earning not greater than forty percent (40%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. "50% AMI Very Low Income Households" shall mean those households earning not greater than fifty percent (50%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. "60% AMI Low Income Households" shall mean those households earning not greater than sixty percent (60%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. "2013 HOME Final Rule" is defined in the Recitals hereto. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 20 of 86 ARTICLE 3 TERM The term of this Ground Lease ("Term") shall commence on the date of recordation of the Memorandum of Ground Lease in the Official Records ("Commencement Date"), and shall continue thereafter until the earlier of (i) the fifty-seventh (57th) anniversary of the recordation of the Release of Construction Covenants for the Project against the Property in the Official Records, in accordance with the Affordable Housing Agreement; or (ii) December 31, 2078. ARTICLE 4 RENT 4.1. Rent. Prior to or concurrently with the Commencement Date, Tenant has paid to Landlord an amount equal to One Dollar ($1.00), thereafter, on each anniversary of the Commencement Date which occurs during the Term (together, the "Base Rent"). 4.1.1 Additional Rent. In addition to the Base Rent required by Section 4.1 above, Tenant shall also pay to Landlord as "Additional Rent" under this Ground Lease any amounts required to be paid by Tenant to Landlord pursuant to Section 20.2. The Base Rent and the Additional Rent together constitute the "Rent"; provided that the Rent shall be subject to adjustment as provided in Section 4.1.2. 4.1.2 Rent Adjustment upon Full Payment of Authority Promissory Note or 20th Anniversary of Commencement Date. In the event of and upon the later to occur of (i) full payment of the Authority Promissory Note or (ii) the twentieth (20th) anniversary of the Commencement Date for this Ground Lease, the annual Rent due under this Ground Lease shall be reset based on the fair market value of the remaining leasehold interest under this Ground Lease (taking into account the restrictions contained in this Ground Lease and recorded against the Project, including the Tax Credit Regulatory Agreement, hereinafter referred to as the "Recorded Restrictions," to the extent the Recorded Restrictions remain applicable and enforceable) as independently appraised and at an annual rental based on a percentage of such appraised value as determined by a qualified, independent appraiser (conducted by a certified appraiser reasonably acceptable to Executive Director and Tenant), who shall take into account the cumulative amounts which have been actually paid to Landlord as Rent under this Ground Lease, including, without limitation, taking into consideration the remaining balance, if any, on the Authority Subordinate Loan as of the time of the appraisal, and including a reasonable return on investment of between eight percent (8%) and ten percent (10%). Such independent appraisal(s) shall determine the fair market value of the Project, at its highest and best use (but taking the Recorded Restrictions into account, to the extent the Recorded Restrictions remain applicable and enforceable) at the time of such appraisal but shall also take into consideration an overall fair market ground lease rent over the 57 -year term of this Ground Lease with an objective that Landlord receive over such 57 -year term cumulatively a fair market value ground lease rent (taking the Recorded Restrictions into account, to the extent the Recorded Restrictions remain applicable and enforceable) under this Ground Lease. In such regard, if the Rent paid to date has underpaid, cumulatively, toward achieving a fair market ground lease rent (taking the Recorded Restrictions into account, to the extent the Recorded Restrictions remain applicable and enforceable) over the 57 -year Term of this Ground Lease, then the appraiser shall take that fact into consideration when determining an adjusted fair market Rent for the remainder of the ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 21 of 86 Term. Likewise, if the Rent paid to date has been overpaid, cumulatively, toward achieving a fair market Ground Lease rent (taking the Recorded Restrictions into account, to the extent the Recorded Restrictions remain applicable and enforceable) over the 57 -year Term, then the appraiser shall take that fact into consideration when determining the adjusted Rent for the remainder of the Term. In the event the Rent under this Ground Lease is reset pursuant to the foregoing paragraph, this adjusted annual Rent for the remaining Term of this Ground Lease, as determined by the independent appraiser as described above, shall be used to adjust the Rent due and required to be paid annually under this Ground Lease to the lesser of (1) such appraised rent for Phase II (to be increased by 20% every five (5) years to account for inflation), or (2) eighty-five percent (85%) of the Remaining Residual Receipts for the Project. In any year, if the appraised value rent (to be increased by 20% every five (5) years to account for inflation) exceeds eighty-five percent (85%) of the Remaining Residual Receipts for the Project, the amount by which such appraised value rent (increased by 20% every five (5) years to account for inflation) exceeds eighty-five percent (85%) of the Remaining Residual Receipts for the Project. It to be paid pursuant to this Section 4.1.2 in a given year shall accrue and be carried over and added to the amount of the Rent to be paid in later years for Phase II by Developer. 4.1.3 No Rent Post -Foreclosure or Affirmation of Ground Lease in Bankruptcy. During the term of the Primary Loan and for each subsequent Approved Financing, in the event of and upon (i) completion of judicial or nonjudicial foreclosure proceedings for any authorized Primary Loan or any conveyance in lieu of foreclosure or (ii) execution of a New Ground Lease, the annual Rent due under this Ground Lease (or under a New Ground Lease) shall be reset to One Dollar ($1.00) per year for the remainder of the Term hereof. 4.2. Payment of Rent. All Rent and Additional Rent (referred to collectively as "Rent") that becomes due and payable pursuant to this Ground Lease shall be paid to Landlord at the address listed in Section 25.1 or such other place as Landlord may from time to time designate by written notice to Tenant without notice or demand, and without setoff, counterclaim, abatement, deferment, suspension or deduction. Except as expressly provided herein or in the Affordable Housing Agreement, under no circumstances or conditions, whether now existing or hereafter arising, or whether beyond the present contemplation of the parties, shall Landlord be expected or required to make any payment of any kind whatsoever or to perform any act or obligation whatsoever or be under any obligation or liability hereunder or with respect to the Property. 4.3. Reporting Requirements; Audit. 4.3.1 Residual Receipts Report. Tenant shall annually, on or before one hundred twenty (120) days after the end of Tenant's fiscal year, commencing in the first year after the issuance of the first certificate of occupancy for the Project issued by City's building official, submit to Landlord a Residual Receipts Report for the Project, which shall provide the basis for Tenant's payment of Residual Receipts to Landlord. In the event of an occurrence described in Section 4.1.2 which triggers Tenant's obligation to pay an adjusted Rent pursuant to that Section, Tenant shall remain obligated to submit a Residual Receipts Report annually to Landlord in accordance with this Section and the requirements of the Affordable Housing Agreement to enable Landlord to determine the appropriate amount of adjusted Rent to be paid to Landlord pursuant to Section 4.1.2. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 22 of 86 4.3.2 Annual Financial Statement. Tenant shall also annually submit to Landlord, on or before one hundred twenty (120) days after the end of Tenant's fiscal year, commencing in the first year after the issuance of a certificate of substantial completion for the Project, Annual Financial Statements as to the Project that have been reviewed by an independent certified public accountant, together with an expressed written opinion of the certified public accountant that such Annual Financial Statement presents the financial position, results of operations, and cash flows fairly and in accordance with GAAP, as to the Project. Each Annual Financial Statement submitted by Tenant shall include a statement and certification (and supporting documentation) of the total amount of the Developer Fee and Deferred Developer Fee (if any) for the Project, along with the cumulative amount thereof paid to date and the amount thereof paid within the applicable reporting year as reported and certified in the Annual Financial Statement for the Project. In the event of an occurrence described in Section 4.1.2 which triggers Tenant's obligation to pay an adjusted Annual Rent pursuant to that Section, Tenant shall remain obligated to submit Annual Financial Statements to Landlord in accordance with this Section and the requirements of the Affordable Housing Agreement to enable Landlord to determine the appropriate amount of adjusted Annual Rent to be paid to Landlord pursuant to Section 4.1.2 and to enable Landlord to verify that Reserve Deposits are made and Operating Expenses are incurred in accordance with this Ground Lease and the approved Operating Budget. Tenant shall also prepare and provide to Landlord, concurrently with delivery of each Annual Financial Statement, a reconciliation from the accrual -based Annual Financial Statement to the cash -based Residual Receipts calculation. (a) Annual Monitoring Fee. Concurrently with the delivery of each Annual Financial Statement and Residual Receipts Report to Landlord, Tenant shall pay an Annual Monitoring Fee to Landlord in the amount of One Thousand Fifty Dollars ($1,050), increased annually by 3%, which shall compensate Landlord for its costs incurred to monitor Developer's compliance with this Ground Lease. 4.3.3 Right to Audit. Tenant shall keep full and accurate books of account, records and other pertinent data with respect to operations of the Project. Such books of account, records, and other pertinent data shall be kept for a period of three (3) years after the end of each Tenant's fiscal year, and shall be made available for review or audit by the Landlord or its designees with a three (3) day written notification to Tenant. If any audit results in a restatement of Residual Receipts upward for any year, then Tenant shall deliver the additional required payment resulting from said restatement to Landlord within thirty (30) days of receiving notice of the results of the audit. If any such audit report results in Tenant restating Residual Receipts downward for any year, the Tenant shall carry forward the overpayment made to the Landlord as a credit against payments under the Authority Subordinate Loan in subsequent years. In the event of an underpayment of greater than three percent (3%) of the total amount due to Landlord in a given year, Tenant shall reimburse Landlord for the amount of the audit fee paid to the third party auditor for the applicable audit. (a) Concurrent with Tenant's submission of an Annual Financial Statement in any year, Tenant shall submit to Landlord any adjusted Rent payable out of Residual Receipts pursuant to Section 4.1.2 of this Ground Lease, in an amount consistent with such Annual Financial Statement. If Tenant fails to pay such adjusted Rent within ten (10) calendar days of delivery of such Annual Financial Statement to Landlord, Tenant shall pay to Landlord a late charge of five percent (5%) of the amount of the late adjusted Rent payment, such late charge to be immediately due and payable without demand by the Agency. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 23 of 86 (b) Landlord shall be entitled within three (3) years after the end of each Tenant fiscal year to inspect and examine all Tenant's books of account, records, and other pertinent data. Tenant shall cooperate fully with Landlord in making the inspection. Landlord shall also be entitled, also within three (3) years after the end of each Tenant fiscal year, to an independent audit of Tenant's books of account, records, and other pertinent data; the cost of such audit shall be an Operating Expenses of the Project. 4.3.4 After Foreclosure. After the foreclosure of a Mortgage, acceptance by a Mortgagee of an assignment or deed in lieu of foreclosure, or appointment of a receiver at the request or demand of a Mortgagee, the Mortgagee shall have no obligation to produce Tenant's books and records for the periods prior to the foreclosure or appointment of the receiver. 4.4. Utilities. Tenant shall be responsible for the payment of all water, gas, electricity, refuse collection and disposal, and all other utilities used by Tenant on the Property. Landlord expressly has no obligation regarding provision of or payment for utilities serving the Property. 4.5. Taxes and Assessments. 4.5.1 Notice of Possessory Interest; Payment of Taxes and Assessments on Value of Entire Property. In accordance with California Revenue and Taxation Code Section 107.6(a), Landlord hereby notifies Tenant that by entering into this Ground Lease, a possessory interest subject to assessment and collection of property taxes may be created. Tenant or other party in whom the possessory interest is vested may be subject to the payment of property taxes levied on such interest. If possessory interest taxes are assessed, Tenant agrees it is responsible for payment thereof and Landlord has no obligation or liability of any kind or nature relating to payment of property taxes. Tenant shall, at its sole cost and expense, seek exemption from, or contest the payment of, assessments and the collection of property taxes pursuant to Revenue and Taxation Code Section 214, or a successor statute. During the pendency of such contest or request, Tenant's non-payment of assessments or taxes when due shall not constitute a default hereunder if (i) the validity of such assessments and taxes are actively contested in good faith and by appropriate proceedings, (ii) Tenant has demonstrated to Landlord's reasonable satisfaction that leaving such assessments or taxes unpaid pending the outcome of such proceedings could not result in conveyance of the Property in satisfaction of such assessments or taxes or otherwise impair Landlord's estates in the Property, (iii) Tenant has furnished Landlord with a bond or other security satisfactory to Landlord in an amount not less than 120% of the applicable claim (including interest and penalties) and (iv) upon the final disposition of such proceedings, Tenant shall promptly pay all taxes and assessments then due, inclusive of any unpaid accrued penalties and interest. Landlord is a tax exempt public entity and no property taxes will be or are legally assessable against its fee interest. 4.5.2 Payment of Taxes. Subject to any applicable exemptions, Tenant is responsible for and shall pay any and all real property and/or possessory interest taxes applicable to the Property during the term of this Ground Lease. All such payments shall be made prior to the delinquency date of such payment. Tenant shall promptly furnish Landlord with satisfactory evidence that such taxes have been paid or that an exemption from such taxes has been obtained. If any such taxes paid by Tenant shall cover any period of time prior to or after the expiration of the Term, Tenant's share of such taxes shall be equitably prorated to cover only the period of time within the tax fiscal year during which this Ground Lease shall be in effect, and Landlord shall reimburse Tenant to the extent required. If Tenant shall fail to pay any such taxes, Landlord shall have the right to pay the same, in which case Tenant shall repay such amount to Landlord ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 24 of 86 within ten (10) days after demand from Landlord together with interest at the rate set forth in Section 4.6. 4.5.3 Definition. As used herein, the term "real property tax" shall include any form of real estate tax or assessment (including, without limitation, on possessory interests), general, special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levy or tax (other than inheritance, personal income, or estate taxes) imposed on the Property or any interest (including, without limitation, possessory interests) therein by any authority having the direct or indirect power to tax, including any city, state or federal government, or any school, agricultural, sanitary, fire, street, drainage or other improvement district thereof, as against any legal or equitable interest of Landlord or Tenant in the Property or in the real property of which the Property is a part, as against Landlord's right to rent or other income therefrom, and as against Landlord's business of leasing the Property. The term "real property tax" shall also include any tax, fee, levy, assessment or charge (i) in substitution of, partially or totally, any tax, fee, levy, assessment or charge hereinabove included within the definition of "real property tax," or (ii) the nature of which was hereinbefore included within the definition of "real property tax," or (iii) which is imposed as a result of a transfer, either partial or total, of Landlord's interest in the Property or which is added to a tax or charge hereinbefore included within the definition of real property tax by reason of such transfer, or (iv) which is imposed by reason of this lease transaction, any modifications or changes hereto, or any transfers hereof. 4.5.4 Personal Property. Tenant shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property of Tenant contained in the Property or elsewhere. When possible, Tenant shall cause said trade fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Landlord. 4.5.5 Apportionment. If any of Tenant's said personal property shall be assessed with Landlord's real property, first Tenant shall advise the County of Orange Tax Assessor and Tax Collector of the same in writing, and Tenant shall pay Landlord the taxes attributable to Tenant not later than the later of (a) ten (10) days after receipt of a written statement setting forth the taxes applicable to Tenant's property or (b) fifteen (15) days prior to the date said taxes are due and payable. 4.6. Overdue Interest. Any amount due to Landlord, if not paid when due and on or before expiration of the period for cure as set forth herein, after Landlord's delivery of notice thereof to Tenant, shall bear interest from the date due until paid at the lower of: (a) the reference or prime rate of Bank of America, N.A., in effect from time to time plus three percent (3%); or (b) the highest rate of interest allowed under applicable usury law. ARTICLE 5 POSSESSION OF PROPERTY 5.1. Acceptance of Premises. Tenant hereby accepts the Property and acknowledges that the Property is in the condition called for by the Affordable Housing Agreement and this Ground Lease. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 25 of 86 5.2. Ownership of Improvements. Unless otherwise provided herein, during the Term of this Ground Lease title to all Improvements, now existing, if any, to be constructed, or later made, on the Property are and shall be vested in Tenant as set forth in Article 11 hereof. 5.3. Surrender of Property. 5.3.1 Expiration or Termination. Tenant agrees that on the expiration or earlier termination of the Term, which in the case of an early termination due to the occurrence of an Event of Default is not timely cured by Tenant in accordance with the provisions of this Ground Lease, the leasehold estate hereby granted to Tenant shall be terminated and forfeited and shall revert to Landlord, its successors and assigns, and all Improvements on the Property shall become the property of Landlord, its successors and assigns, free and clear from any liens or claims whatsoever (other than non -monetary liens previously approved or otherwise accepted in writing by Landlord), in good condition, reasonable wear and tear excepted without further compensation therefor from Landlord to Tenant or any other person subject to the provisions of Article 18 herein. Following any such expiration or termination, Tenant shall execute, acknowledge and deliver to Landlord a quitclaim deed, or other document required by a reputable title company, conveying all Tenant's right, title, and interest in and to the Property and Improvements to Landlord. In the event Tenant receives a written default notice relating to or arising from the Primary Loan or any other mortgage, deed of trust or security instrument secured by the leasehold interest granted hereunder, the Property or the Improvements, or from TCAC or the Internal Revenue Service, then Tenant shall provide written notice of such alleged default to the Executive Director within five (5) days of receipt thereof. Tenant hereby irrevocably appoints Landlord as Tenant's agent and attorney-in-fact (such agency being coupled with an interest), and as such agent and attorney-in-fact Landlord may, without the obligation to do so, in Tenant's name, or in the name of Landlord, prepare, execute and file or record such statements, applications and other documents necessary to create, perfect or preserve any of Landlord's interests and rights in or to the Property and any of the Improvements, and, upon the earlier expiration or termination of the Term (including termination due to an Event of Default hereunder after expiration of the applicable cure periods as set forth in Article 21 hereof) take any other action required by Tenant hereunder. 5.3.2 Condition. On expiration or earlier termination of the Term and in furtherance of the provisions relating to surrender of the Property set forth in Section 5.3.1 above, Tenant shall peaceably and quietly leave and surrender the Property and the Improvements to Landlord in good order, condition and repair, reasonable wear and tear and obsolescence excepted. Tenant shall leave in place and in good order, condition and repair, all fixtures and machinery; except (if Tenant is not then in default under this Ground Lease or the Transaction Documents) Tenant shall have the right to remove only Tenant -owned appliances, other unattached equipment, moveable furniture and merchandise that Tenant shall have installed, which removal must be done without damage to the Property or Improvements. Landlord shall have the right to have the Property and the Improvements inspected at Tenant's cost to determine whether the Property and the Improvements have been properly maintained, repaired and restored in accordance with the terms of this Ground Lease. That notwithstanding and subject to the exception of the environmental indemnities which shall survive any termination in perpetuity, Tenant shall not be responsible for the interior physical condition of individual occupied apartments on the termination or expiration of this Ground Lease. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 26 of 86 5.3.3 Delivery of Documents. Contemporaneously with the expiration or earlier termination of the Term and subject to the provisions of Sections 5.3.1 and 5.3.2 hereof, Tenant shall immediately deliver to Landlord the following: (i) Such documents, instruments and conveyances as Landlord may reasonably request to enable Landlord's ownership of the Property and the Improvements to be reflected of record, including, without limitation, a quitclaim deed in recordable form to the Property and the Improvements. (ii) If requested by Landlord, a lender's policy of title insurance, surety bond, or other security reasonably acceptable to Landlord insuring against all claims and liens against the Property and the Improvements other than those incurred by Landlord or accepted by Landlord in writing. (iii) All construction plans, surveys, permits, existing contracts for services, maintenance, operation, and any other documents relating to use, operation, management, and maintenance of the Improvements as may be in effect and/or in the possession of Tenant at the time and from time to time thereafter. (iv) All documents and instruments required to be delivered by Tenant to Landlord pursuant to this Section shall be complete, legible, originals or true copies, and shall otherwise be in a form reasonably satisfactory to Landlord. 5.4. Abandonment. Tenant shall not abandon or vacate the Property or the Improvements at any time during the Term. If Tenant shall abandon, vacate or otherwise surrender the Property or the Improvements, or be dispossessed (other than dispossession as the result of a Substantial Taking or a Taking) thereof by process of law or otherwise, the same shall constitute a default under this Ground Lease on the part of Tenant and, in addition to any other remedy available on the part of Landlord, any of Tenant's property left in, upon or about the Property or the Improvements (except for underground storage tanks) shall, at Landlord's option, be deemed to be abandoned and shall become the property of Landlord. The appointment of a receiver pursuant to a Mortgagee's exercise of its rights under a Mortgage, or the foreclosure of a Mortgage, shall not be a default under this Section. REPRESENTATIONS AND WARRANTIES; MATERIAL ADVERSE CHANGE 6.1. Landlord's Representations. Landlord represents and warrants to Tenant it owns the Property in fee simple and has the power and authority to enter into this Ground Lease and perform all obligations and agreements incidental or pertinent to this Ground Lease. Landlord makes no representation or warranty with respect to the condition of the Property or its fitness or availability for any particular use, and Landlord shall not be liable for any latent or patent defect therein. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 27 of 86 6.2. Tenant's Representations. Tenant represents and warrants to Landlord, as of the Commencement Date, as follows: 6.2.1 Tenant is a California limited partnership duly organized, validly existing, formed, and in good standing under the laws of the State of California that has the power and authority to own property and carry on business as is now being conducted. 6.2.2 Tenant has full power and authority to execute and deliver this Ground Lease and to make and accept the borrowings contemplated hereunder, to execute and deliver the Authority Promissory Note and Authority Deed of Trust for the Authority Subordinate Loan, Memorandum of Ground Lease, Notice of Affordability Restrictions, Request for Notice and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Ground Lease, and to perform and observe the terms and provisions of all of the above. 6.2.3 This Ground Lease, the Affordable Housing Agreement, the Authority Promissory Note and Authority Deed of Trust for the Authority Subordinate Loan, Memorandum of Ground Lease, Request for Notice, Notice of Affordability Restrictions, and all other documents or instruments which have been executed and delivered pursuant to or in connection with this Ground Lease constitute or, if not yet executed or delivered, will when so executed and delivered constitute, legal, valid and binding obligations of Tenant enforceable against it in accordance with their respective terms, subject to application of laws relating to bankruptcy, insolvency, or other laws affecting the enforcement generally of creditors' rights and remedies. 6.2.4 Tenant is not in default under any law or regulation or under any order of any federal, state, or local court, board, commission or agency whatsoever, and there are no claims, actions, suits or proceedings pending or, to the knowledge of Tenant, threatened against or affecting Tenant or the Property, at law or in equity, before or by any federal, state, or local court, board, commission or agency whatsoever which might, if determined adversely to Tenant, materially affect Tenant's ability to perform its obligations hereunder. 6.2.5 All information included or to be included within and provided to TCAC in the Applications (defined in the Affordable Housing Agreement) submitted by Tenant upon which TCAC issues its preliminary reservation letters shall be true and correct in all material respects as of the date of each Application unless the same has otherwise been disclosed to TCAC and Landlord. In the event any information or representation made by Tenant to TCAC related, directly or indirectly, to the Tax Credits is not true, complete, and correct in all material respects, Tenant shall, and acknowledges it has an obligation to, inform TCAC and Landlord of such changes and to provide updated information to TCAC, Landlord, and its Lender(s), as necessary. 6.2.6 Tenant agrees to notify Landlord in the event that it applies for or proposes to use other sources of funds for the Project prior to the issuance of the Release of Construction Covenants as to the Project. 6.2.7 Tenant has examined the Property and acknowledges that it hereby accepts possession of the Property in its "AS IS" condition, with all faults and defects, including, without limitation, any physical condition or environmental condition of the Property. 6.2.8 All documents, materials and information provided by Tenant to Landlord relating to Tenant's qualifications, financial strength, and ability to perform its obligations ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 28 of 86 hereunder are true, correct and complete in all material respects as of their respective dates and no Material Adverse Change has occurred or is reasonably likely to occur that would make any such documents, materials or information incorrect, incomplete, or misleading in any material respect. The representations and warranties set forth in this Section 6.2 and Section 7.3 of the Affordable Housing Agreement shall survive the Commencement Date. During the entire Affordability Period and the entire Term of the Ground Lease, within ten (10) business days following a written request from Landlord or City, Tenant shall either re -affirm in writing the material truth and accuracy of the representations and warranties set forth in this Section 6.2 and Section 7.3 of the Affordable Housing Agreement, or identify any material inaccuracies of such representations and warranties. The fact that a representation or warranty contained in this Section 6.2 or Section 7.3 of the Affordable Housing Agreement has become inaccurate or misleading shall not, in and of itself, constitute a breach under the Affordable Housing Agreement or this Ground Lease; however, (a) failure to notify Landlord of material inaccuracies in these representations and warranties within ten (10) business days of Landlord's request for such information and (b) any intentional material misrepresentation by Tenant relating to such representations and warranties shall each constitute an Event of Default hereunder, subject to delivery of notice and expiration of the cure period provided hereunder. The provisions of this paragraph shall be of no further force or effect upon a foreclosure, deed in lieu of foreclosure, or execution of a New Ground Lease. 6.3. Tenant Obligation to Notify re Material Adverse Change. During the entire Term hereof, Tenant shall have the ongoing obligation to promptly (but in no event later than five (5) business days following a Material Adverse Change) inform Landlord (in writing) of the occurrence of any Material Adverse Change. The provisions of this Section 6.3 shall be of no further force or effect upon a foreclosure, deed in lieu of foreclosure, or execution of a New Ground Lease. ARTICLE 7 CONSTRUCTION OF THE IMPROVEMENTS 7.1. Commencement and Completion of Construction. Tenant shall cause the work for construction of the Improvements to be commenced and prosecuted with due diligence and shall plan, design, construct, and complete the Improvements in accordance with the Affordable Housing Agreement, the Scope of Development attached to the Affordable Housing Agreement, and all Development Plans as approved by City and Landlord. All Improvements, together with all off-site improvements that may be made by reason of Governmental Requirements as a condition to the construction upon the Property, shall be constructed in a good and workmanlike manner using materials of good quality and in substantial compliance with the Affordable Housing Agreement, and shall comply with all applicable governmental permits, laws, ordinances and regulations. Upon a foreclosure, deed in lieu of foreclosure, or execution of a New Ground Lease, Tenant's obligation to construct Improvements shall be limited to constructing the Improvements in accordance with the approved Construction Drawings. 7.2. Construction Cost. Tenant shall bear the entire and sole cost of constructing the Improvements, including all fees and mitigation measures. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 29 of 86 7.3. Diligent Prosecution to Completion. Once the work is begun, Tenant shall, with reasonable diligence, prosecute the Improvements to completion. The Improvements shall be completed and ready for use within twenty-four (24) months after the Commencement Date (subject to extensions authorized by Executive Director) provided, however, that the time for completion shall be extended for as long as Tenant shall be prevented from completing the Improvements by delays beyond Tenant's control, to the extent provided in the Affordable Housing Agreement and Article 23. Additionally, upon the written request of Tenant, the Executive Director may, at his/her sole and absolute discretion, grant one or more extensions of the date by which the Improvements must be completed of, in the aggregate, not more than 180 days. All work shall be performed in a good and workmanlike manner, shall substantially comply with the Development Plans, and shall comply with all applicable governmental permits, laws, ordinances, and regulations. The provisions of this Section 7.3 shall be of no further force or effect upon a foreclosure, deed in lieu of foreclosure, or execution of a New Ground Lease. 7.4. Completion of Construction. The Improvements shall be considered complete for purposes of this Ground Lease only when (a) all work described in the final Construction Drawings (as defined in the Affordable Housing Agreement) has been substantially completed, and (b) all work for the Project requiring inspection or certification by governmental agencies has been completed and all requisite certificates, approvals and other necessary authorizations (including any required final certificates of occupancy) have been obtained for each building. 7.5. Changes; Landlord Consent. If Tenant desires to propose any substantial revisions to the approved Development Plans, or any part(s) thereof, Tenant shall submit its revisions or proposed changes thereto to the Executive Director in accordance with the Affordable Housing Agreement, and shall also proceed in accordance with any and all Governmental Requirements regarding such revisions, within the time frame set forth in the Schedule of Performance attached to the Affordable Housing Agreement for the resubmittal of such Development Plans, or any part(s) thereof. Any revision or change to such Development Plans proposed by Tenant may be disapproved by Landlord through its Executive Director in his/her reasonable discretion pursuant to subdivision (a) below. Any and all change orders or revisions required by the City and its inspectors that are required under the Anaheim Municipal Code and all other applicable Uniform Codes (e.g. Building, Plumbing, Fire, Electrical, etc.) and under other Governmental Requirements shall be included by Tenant in its Development Plans and completed during the construction of the Project. In the event Tenant requests revisions, alterations, or modifications to the Development Plans, or any part(s) thereof, for any reason including increased construction costs because of unforeseen occurrences or conditions relating to the construction of the Project, any revisions, alterations, or modifications shall be subject to the approval of Landlord in its reasonable discretion (and the City's Planning/Building Department in its discretion) pursuant to subdivision (a) below. Tenant shall be required to pay any and all increased costs of construction due to any such revisions, alterations, or modifications of the Development Plans, or any part(s) thereof. (a) Approval of Change Orders. Tenant shall not be required to obtain Executive Director approval of any change orders or other revisions or modifications to the Construction Drawings, so long as each change order, revision, or modification is consistent with the approved Basic Concept Drawings, does not cause any value engineering not previously authorized by Landlord and does not affect materially the design, materials, and architectural quality and integrity of the Project, except that Tenant shall be required to obtain Executive Director approval to the extent such change order, revision, or modification will result in a cost adjustment which, cumulatively with all other change orders, revisions, and modifications, ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 30 of 86 exceeds the amount set forth as the contingency line item in the approved Final Budget for the Project. Notwithstanding the immediately preceding sentence, Landlord (acting through its Executive Director) shall have the right to review any and all material changes, revisions or modifications to the Construction Drawings and/or any and all material change orders to the Construction Contract with the General Contractor which are approved by Tenant. 7.6. Landlord's Review. Landlord does not have, and by this Ground Lease expressly disclaims, the duty to review the Development Plans for the purpose of determining compliance with building codes, safety features or standards or for the purpose of determining or approving engineering or structural design, sufficiency or integrity. Landlord's approval of a direction or request to change the plans, specifications or drawings submitted by Tenant is not and shall not be a review or approval of the quality, adequacy or suitability of such plans, specifications or drawings, nor of the labor, materials, services or equipment to be furnished or supplied in connection therewith. Landlord does not have and expressly disclaims any right of supervision or control over the architects, designers, engineers or other draft persons and professionals responsible for the drafting and formulation of the Plans, or any right of supervision or control of contractors, builders, trades and other persons engaged in constructing and fabricating the improvements pursuant to the Development Plans. Landlord further acknowledges that it shall not have any right to disapprove any plan, specification or drawing which logically evolves from any previously approved plan, specification or drawing or to request or require a change in any previously approved item. 7.7. Right of Access. During normal construction hours, upon at least three (3) business days' prior written notice to Tenant, representatives of Landlord shall have the reasonable right of access to the Property without charges or fees for the purpose of inspecting the work of the Improvements; provided, however, that such representatives shall present and identify themselves at Tenant's construction office, be accompanied by a representative of Tenant while on the Property and obey Tenant's, or its contractor's, safety rules and regulations. In addition, Landlord shall have the right to authorize the City and other public agencies to enter the Property, upon the same terms after reasonable prior written notice to Tenant, for the purpose of constructing, reconstructing, maintaining or repairing any public improvements or public facilities located on the Property. Landlord shall deliver written notice of the identity of its representatives to Tenant before such representatives enter the Property. Landlord hereby indemnifies and holds Tenant, and its contractors, subcontractors, agents, representatives and employees, and the Property, harmless from and against any loss, cost, damage or liability, including, without limitation, attorneys' fees, which results from the exercise by Landlord, or any party acting under Landlord's authority, of the rights granted by this Section 7.7. 7.8. Governmental Approvals. If requested by Landlord in writing, Tenant covenants and agrees to deliver to Landlord conformed copies (and certified copies of all recorded instruments) of all governmental approvals and permits obtained by Tenant for the construction, alteration or reconstruction of any Improvements upon the Property in accordance with the Development Plans. In no event shall Tenant commence construction of any Improvements pursuant to the provisions of this Article 7 until such time as Tenant shall have obtained all necessary governmental approvals and permits to so construct such Improvements. 7.9. Landlord's Right to Discharge Lien. If Tenant does not cause to be recorded the bond described in California Civil Code Section 3143 or otherwise protect the Property under any alternative or successor statute, and a final judgment has been entered against Tenant by a court of competent jurisdiction for the foreclosure of a mechanic's, materialmen's, contractor's, or ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 31 of 86 subcontractor's lien claim, and if Tenant fails to stay the execution of the judgment by lawful means or to pay the judgment, Landlord shall have the right, but not the duty, subject to the notice and cure rights of Mortgagees set forth elsewhere in this Ground Lease, to pay or otherwise discharge, stay, or prevent the execution of any such judgment or lien or both. Tenant shall reimburse Landlord for all sums paid by Landlord under this Section, together with all Landlord's reasonable attorneys' fees and costs, plus interest on those sums, fees, and costs from the date of payment until the date of reimbursement at the rate set forth in Section 4.6. 7.10. Notice of Non -Responsibility. After the recordation of the Certificate of Completion for the Improvements in the Official Records, Tenant shall provide Landlord with prior written notice of not less than fifteen (15) days before commencing construction of any structural alteration of the Improvements, or any non-structural alteration which will cost more than Fifty Thousand Dollars ($50,000.00), and shall permit Landlord to record and post appropriate notices of non -responsibility on the Property. The foregoing Fifty Thousand Dollar ($50,000.00) limitation shall be increased each calendar year by the corresponding percentage increase in CPI. 7.11. Notice of Completion. Upon completion of construction of the Improvements, Tenant shall file or cause to be filed a notice of completion. Tenant hereby appoints Landlord as Tenant's attorney-in-fact to file the notice of completion upon Tenant's failure to do so after the work of improvement has been substantially completed. 7.12. Subsequent Alterations. Following the construction of the Improvements in substantial accordance with the Development Plans, Tenant may from time to time, at its sole expense, make improvements and other alterations to the Property which Tenant reasonably determines to be beneficial. Tenant shall not make any alteration or improvement to the Property, the cost of which exceeds Fifty Thousand Dollars ($50,000.00), without Landlord's prior written consent (except that no such consent is required if such alteration or improvement is contained in the current Operating Budget which has been approved by Landlord), which consent shall not be unreasonably withheld or delayed. The foregoing dollar amount limitation shall be increased each calendar year by the corresponding increase in CPI. Tenant shall timely pay any obligation incurred by Tenant with respect to any such alterations or improvements that could become a lien against the Property and shall defend, indemnify and hold Landlord harmless in connection therewith. 7.13. Force Majeure. All obligations of Tenant to promptly commence and thereafter diligently prosecute to completion the construction of the Project shall be extended by such number of days as Tenant shall be delayed by reason of events of force majeure pursuant to Article 23. ARTICLE 8 X&I4ro1ay:1Q>:Z6l»14 CA 8.1. Covenants re Use. Tenant covenants and agrees for itself, its successors, assigns, and every successor in interest to Tenant's interest in the Property or any part thereof, that Tenant shall devote the Property to the uses specified in this Ground Lease until the expiration or earlier termination of the Term hereof. All uses conducted on the Property, including, without limitation, all activities undertaken by Tenant pursuant to this Ground Lease, shall conform to all applicable provisions of the Anaheim Municipal Code. The foregoing covenants shall run with the land. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 32 of 86 8.1.1 Covenant Regarding Specific Uses. Tenant covenants and agrees for itself, its successors, assigns, and every successor in interest to Tenant's interest in the Property or any part thereof, that Tenant shall use the Property to operate the affordable rental housing project called the Project until the expiration of the Affordability Period. (a) Affordable Housing. Tenant covenants and agrees for itself and its successors, assigns and every successor in interest to Tenant's interest in the Property or any part thereof, that Tenant shall use and operate the Property and the Improvements as rental housing and for ancillary purposes for persons and households at the income levels prescribed below in Section 8.3, including 30% AMI Very Low Income Households, 40% AMI Very Low Income Households, 50% AMI Very Low Income Households, and 60% AMI Low Income Households available at an Affordable Rent and for no other use pursuant to the terms and conditions of this Ground Lease, including all terms and conditions relating to subtenant selection, subtenant income, Affordable Rent, rent increases, property management, certifications, access and reporting and tax credit requirements, which are then currently in effect. Income computation(s) and certification(s) of all household/occupants of the Housing Units shall be submitted to Landlord in accordance with this Ground Lease. 8.2. Reserved. 8.3. Covenants Regarding Operation of Housing Units. Tenant shall provide for the rental of the Housing Units in accordance with this Section 8.3. 8.3.1 Number of Housing Units. Tenant covenants and agrees to make available, restrict occupancy to, and rent: (i) Two (2) of the two (2) bedroom Housing Units in Phase II to 30% AMI Very Low Income Households at an Affordable Rent; (ii) One (1) of the three (3) bedroom Housing Units in Phase II to 30% AMI Very Low Income Households at an Affordable Rent; (iii) Two (2) of the one (1) bedroom Housing Units in Phase II to 40% AMI Very Low Income Households at an Affordable Rent; (iv) One (1) of the two (2) bedroom Housing Units in Phase II to 40% AMI Very Low Income Households at an Affordable Rent; (v) Two (2) of the three (3) bedroom Housing Units in Phase II to 40% AMI Very Low Income Households at an Affordable Rent; (vi) One (1) of the one (1) bedroom Housing Units in Phase II to 50% AMI Very Low Income Households at an Affordable Rent; (vii) Six (6) of the two (2) bedroom Housing Units in Phase II to 50% AMI Very Low Income Households at an Affordable Rent; (viii) Two (2) of the three (3) bedroom Housing Units in Phase II to 50% AMI Very Low Income Households at an Affordable Rent; ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 33 of 86 (ix) Three (3) of the two (2) bedroom Housing Units in Phase II to 60% AMI Low Income Households at an Affordable Rent; and (x) One (1) of the three (3) bedroom Housing Units in Phase II to 60% AMI Low Income Households at an Affordable Rent. 8.3.2 Affordable Rent. (a) Affordable Rent shall be charged for all Housing Units (other than one manager's unit) throughout the Affordability Period. The maximum Affordable Rent chargeable for the Housing Units shall be annually determined by Landlord (and as charged and implemented by Tenant) in accordance with the following requirements: (i) The Affordable Rent for the Housing Units to be rented to 30% AMI Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of thirty percent (30%) of AMI for Orange County as determined and published annually by TCAC for a family of a size appropriate to the unit. (ii) The Affordable Rent for the Housing Units to be rented to 40% AMI Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of forty percent (40%) of AMI for Orange County as determined and published annually by TCAC for a family of a size appropriate to the unit. (iii) The Affordable Rent for the Housing Units to be rented to 50% AMI Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of fifty percent (50%) of AMI for Orange County as determined and published annually by TCAC for a family of a size appropriate to the unit. (iv) The Affordable Rent for the Housing Units to be rented to 60% AMI Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of sixty percent (60%) of AMI for Orange County as determined and published annually by TCAC for a family of a size appropriate to the unit. Tenant shall, and shall cause its Property Manager to, operate the Project and cause occupancy of all Housing Units thereon in conformity with these covenants and this Ground Lease. (b) For purposes of this Ground Lease, "Affordable Rent" shall mean the total of monthly payments for (a) use and occupancy of each Housing Unit and land and facilities associated therewith, (b) any separately charged fees or service charges assessed by Tenant which are required of all subtenants, other than security deposits, (c) a reasonable allowance for an adequate level of service of utilities not included in (a) or (b) above, including garbage collection, sewer, water, electricity, gas and other heating, cooking and refrigeration fuels, but not including telephone service, or cable TV or internet services, and (d) possessory interest, taxes or other fees or charges assessed for use of the land and facilities associated therewith by a public or private entity other than Tenant. No additional charge shall be assessed against subtenant households of the Housing Units for any social or supportive services provided at the Property. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 34 of 86 In illustration of the foregoing description of Affordable Rent, an "Initial Monthly Rent Schedule for Avon Dakota Neighborhood - Phase II" is included in Exhibit C. The schedule is illustrative only and in the event of any inconsistency between such schedule and the specific provisions of this Ground Lease, the provisions of this Ground Lease shall prevail. In addition, thirteen (13) of the Housing Units shall constitute "HOME Units", as follows: (a) at 809 Dakota Street: (i) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be Low HOME Units, and (ii) two (2) of the two (2) bath Housing Units shall be High HOME Units; (b) at 868 Dakota Street: (i) one (1) of the two (2) bedroom, two (2) bath Housing Units shall be Low HOME Units, and (ii) three (3) of the two (2) bath Housing Units shall be High HOME Units; and (c) at 606 Avon Place: (i) one (1) of the one (1) bedroom, two (2) bath Housing Units shall be a Low HOME Unit, (ii) two (2) of the one (1) bedroom, two (2) bath Housing Units shall be High HOME Units, and (iii) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be High HOME Units. The HOME Units may be "floating" HOME Units, such that the specific Housing Units designated as HOME Units may change as long as the requirements set forth in the immediately preceding sentence relating to the number of two and three-bedroom Housing Units required to be designated as HOME Units are at all times complied with. The HOME Units shall be rented in conformity with Low HOME or High HOME rents in conformity with the HOME Regulations consistent with the identification of such HOME Units as Low HOME or High HOME Units, respectively, in the definition of HOME Units. The HOME Units shall be rented at the lower of (i) rent determined for Low HOME or High HOME Units or (ii) rent as otherwise determined in conformity with this Ground Lease. 8.3.3 Duration of Affordability Requirement, Affordability Period. The Project and all the Housing Units therein shall be subject to the requirements of this Section 8.3, et seq. for the full Term of this Ground Lease. The 57 -year duration of these covenants and this requirement shall be known as the "Affordability Period." 8.3.4 Selection of Tenants. (a) Tenant shall be responsible for the selection of subtenants for the Housing Units in compliance with all lawful and reasonable criteria, and shall adopt a subtenant selection system that shall be approved (or disapproved) by Landlord Executive Director in her reasonable discretion, pursuant to which Tenant shall establish and maintain a chronological waiting list system for selection of subtenants in the order of priority set forth below, and which shall be set forth in the Marketing and Tenant Selection Plan and the Property Management Plan, which plans are required to be submitted by Tenant and approved by Landlord. Throughout the Affordability Period and the Term of this Ground Lease, Tenant shall establish and maintain for the Project waiting lists of eligible, prospective subtenants to facilitate re -tenanting Housing Units in compliance with the approved Marketing and Tenant Selection Plan, Property Management Plan and Anaheim Municipal Code. Further, subject to applicable Fair Housing Laws and in compliance with the Anaheim Municipal Code, in particular Section 18.52.160 thereof, Landlord shall be afforded a priority marketing period for thirty (30) days after receiving written notice from Tenant that one or more Housing Units have become vacant at the Project, during which time Landlord and Tenant shall work cooperatively to select tenants for any vacant Housing Units at the Project. Tenant shall provide prompt written notice to Landlord when vacancies of Housing Units occur to facilitate timely re -tenanting of Housing Units pursuant to the approved Marketing and Tenant Selection Plan, Property Management Plan and Anaheim Municipal Code. Subject to applicable Fair Housing Laws, Tenant's waiting list of prospective, eligible subtenants for ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 35 of 86 Housing Units at the Project shall include and follow the following order of priority for selection of subtenants, and Landlord will follow such order of priority: (i) Very Low and Low Income Households, as applicable, who have been displaced from their residences due to programs or projects implemented by the City of Anaheim or another governmental entity; (ii) Very Low and Low Income Households, as applicable, who have applied for and have received rental vouchers from Landlord; (iii) Very Low and Low Income Households, as applicable, who are listed on Landlord's waiting lists for affordable housing and who live and/or work in Anaheim; and (iv) Very Low and Low Income Households, as applicable, who live and/or work in Anaheim. (b) In the event Tenant rents a Housing Unit to a household holding a Portable Voucher, if required by the Executive Director in writing to the Tenant, the rental agreement (or lease agreement, as applicable) between Tenant, as landlord, and the subtenant shall expressly provide that monthly rent charged shall be the Affordable Rent required hereunder for the Housing Unit (not fair market rent) and that the rent collected directly from such subtenant holding a Portable Voucher shall be not more than 40% of subtenant's actual gross income pursuant to the applicable voucher program regulations; i.e., the rent charged to such subtenant under the rental agreement shall be the Affordable Rent chargeable hereunder and not market rent for the area (as determined by a current rent reasonable review conducted in accordance with Section 8 Federal Program Limitations applicable to Portable Vouchers), as would otherwise be permitted under the applicable Portable Voucher program. Thus, if required by the Executive Director in writing in accordance herewith, the subsidy payment to Tenant under any Portable Voucher shall not exceed the difference between the amount the subtenant actually pays to Tenant towards such subtenant's rent and the Affordable Rent chargeable for the applicable Housing Unit hereunder. (c) In the event of a conflict between this Ground Lease and an approved Marketing and Tenant Selection Plan, the Marketing and Tenant Selection Plan shall control. 8.3.5 Household Income Requirements. On or before one hundred twenty (120) days following the end of Tenant's fiscal year, commencing the first year after issuance of the first certificate of occupancy for the Project, and annually thereafter, Tenant shall prepare and submit to Landlord, at Tenant's expense, a written summary of the income, household size, and rent payable by each of the subtenants of the Housing Units and, upon the written request of the Landlord, copies of each and all leases or rental agreements and the current rules and regulations for the Project. At Landlord's request, Tenant shall also provide to Landlord completed income computation and certification forms, all in a form reasonably acceptable to Landlord, for each and all subtenants. Tenant shall obtain, or shall cause to be obtained by the Property Manager, a certification from each household leasing a Housing Unit demonstrating that such household is a 30% AMI Very Low Income Household, 40% AMI Very Low Income Household, 50% AMI Very Low Income Household, or 60% AMI Low Income Household, as applicable and according to the Area Median Income annually determined and published by TCAC for Orange County, and meets ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 36 of 86 the eligibility and occupancy requirements established for the Housing Unit. Tenant shall verify, or shall cause to be verified by the Property Manager, the income and household size certification of the subtenant household. The current form of Landlord's Income Computation and Certification is attached hereto as Exhibit B and incorporated herein. 8.3.6 Resident Leases. Tenant shall submit a standard lease form for use at the Project to the Executive Director for approval, which lease form shall comply with applicable requirements of this Ground Lease, the HAL, the HOME Regulations and Tax Credit Rules, and other applicable federal and state regulations. Landlord shall reasonably approve such Resident Lease form upon finding that such lease form is consistent with this Ground Lease, the HAL, the HOME Regulations and Tax Credit Rules. Tenant shall enter into a written lease, in the form of the Resident Lease approved by Landlord, with each subtenant/subtenant household of the Project. During the Affordability Period, any material changes to the Resident Lease form are subject to the reasonable review and approval of the Executive Director. 8.3.7 Marketing and Tenant Selection Plan. Within the time set forth in the Schedule of Performance attached to the Affordable Housing Agreement, Landlord shall submit the Marketing and Tenant Selection Plan to Tenant; Landlord and Tenant shall reasonably agree upon the form of the Marketing and Tenant Selection Plan. During the Affordability Period, any material changes to an approved Marketing and Tenant Selection Plan are subject to reasonable review and approval by the Executive Director. The rental of the Housing Units, as and when they are vacated by the existing subtenants, shall be conducted in accordance with the approved Marketing and Tenant Selection Plan and any affirmative marketing requirements which have been adopted by the Landlord prior to the date hereof. The availability of Housing Units shall be marketed in accordance with the Marketing and Tenant Selection Plan as the same may be amended from time to time with Landlord's prior written approval, which approval shall not unreasonably be withheld. Tenant shall provide Landlord with periodic reports with respect to the marketing for lease of the Housing Units. Landlord agrees to exercise reasonable efforts to assist Tenant in connection with the implementation of the Marketing and Tenant Selection Plan; provided, however, Landlord shall not be under any obligation to incur any out-of-pocket expenses in connection therewith. 8.3.8 Social Services. Tenant shall provide social services at the Project in accordance with this Section throughout the entire Affordability Period. The parties shall cooperate in good faith to attempt to agree upon a budget for the social and supportive services to be provided at the Project; provided, the parties anticipate that Tenant will make all reasonable attempts to obtain additional funding sources for the various social services programs required to be implemented at the Project throughout the Affordability Period. (a) Alternative Social and Supportive Services. In the event that, despite Tenant's reasonable best efforts, Tenant is unable to provide all of the social and supportive services described in Attachment No. 19 to the Affordable Housing Agreement, Tenant shall use reasonable best efforts to provide comparable social and supportive services programming at the Project that are reasonably similar in scope and content to the Scope of Social and Supportive Services attached as Attachment No. 19 to the Affordable Housing Agreement, and that meet all the regulations promulgated by TCAC, during the entire fifty-five (55) year Affordability Period. Such substitute services shall be subject to the prior written approval of the Executive Director, which approval shall not be unreasonably withheld, conditioned or delayed. In the event the characteristics of the resident population at the Project change substantially, the Executive Director shall have the authority to approve revisions to the Scope of Social and ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 37 of 86 Supportive Services attached as Attachment No. 19 to the Affordable Housing Agreement, in his/her reasonable discretion. (b) Termination Post -Foreclosure, Deed in Lieu, or Upon Execution of New Ground Lease. The provisions of Section 8.3.8.1 shall be of no further force or effect upon a foreclosure, deed in lieu of foreclosure, or execution of a New Ground Lease. 8.3.9 Monitoring and Record Keeping. Throughout the Affordability Period, Tenant shall comply with all applicable recordkeeping and monitoring requirements of the HAL and shall annually complete and submit to Landlord a Certification of Continuing Program Compliance in a form provided by Landlord. Representatives of Landlord and City shall be entitled to enter the Property upon at least forty-eight (48) hours' notice, to monitor compliance with this Ground Lease, and the Affordable Housing Agreement, to inspect the records of the Property, and to conduct an independent audit or inspection of such records. Tenant agrees to cooperate with Landlord in making all of its records for the Project and making the Property and all Housing Units thereon available for inspection or audit. Records shall be made available for review and inspection and/or audit in Orange County, California. Tenant agrees to maintain all records relating to the Project in a businesslike manner, and to maintain such records for the term of this Ground Lease. Concurrently with Tenant's annual delivery of the Certificate of Continuing Program Compliance to Landlord, Tenant shall deliver a report setting forth the income, household size, and rent payable by each of the subtenants of the Housing Units at the Project in a form acceptable to and approved by the Executive Director. 8.3.10 Intentionally Omitted. 8.3.11 Management of the Project. (a) Property Manager. Tenant shall manage or cause the Project, and all appurtenances thereto that are a part of the Project, to be managed in a prudent and business- like manner, consistent with good property management standards for other comparable high quality, well-managed affordable rental housing projects in the County. Tenant may contract with a property management company or property manager, to operate and maintain the Project in accordance with the terms of this Section 8.3.11 ("Property Manager"); provided, however, the selection and hiring of the Property Manager (and each successor or assignee), including any Affiliate, is and shall be subject to prior written approval of the Executive Director (or designee) in her sole and reasonable discretion. Related Management Company, L.P. ("RMC"), is hereby approved to act as the Property Manager, subject to Executive Director review of the scope of services, itemized fees, and fee contract for property management between Tenant and RMC. The Property Manager shall manage the Project in accordance with the income requirements contained in Section 8.3.1, the definitions of Affordable Rent contained in Section 8.3.2 hereof, and the subtenant selection requirements contained in Section 8.3.4. Any fee paid to the Property Manager for social services provided to the subtenants shall be exclusive of the fee paid to the Property Manager relating to the management of the Project. Except for RMC, Tenant shall conduct due diligence and background evaluation of any potential third party property manager or property management company to evaluate experience, references, credit worthiness, and related qualifications as a property manager. Any proposed property manager shall have significant and relevant prior experience with affordable housing projects and properties comparable to the Project and the references and credit record of such property manager/company shall be investigated (or caused to be investigated) by Tenant prior to submitting the name and qualifications of such proposed property manager to the Executive ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 38 of 86 Director for review and approval. A complete and true copy of the results of such background evaluation shall be provided to the Executive Director. Approval of a Property Manager by the Executive Director shall not be unreasonably delayed but shall be in her sole reasonable discretion, and the Executive Director shall use good faith efforts to respond as promptly as practicable in order to facilitate effective and ongoing property management of the Project by one qualified Property Manager. The replacement of RMC by Tenant and/or the selection by Tenant of any new or different Property Manager during the Term of this Ground Lease shall also be subject to the foregoing requirements. (b) Property Management Plan. Tenant shall prepare and submit to the Executive Director for review and approval, which approval shall not be unreasonably withheld, a management plan for the Project which includes a detailed plan and strategy for long term marketing, operation, maintenance, repair and security of the Project, inclusive of social services for the residents of the Housing Units, and the method of selection of subtenants, rules and regulations for subtenants, and other rental policies for the Project ("Property Management Plan"). Executive Director approval of the Property Management Plan shall not be unreasonably withheld or delayed. Subsequent to approval of the Property Management Plan by the Executive Director the ongoing management and operation of the Project shall be in compliance with the approved Property Management Plan. During the Affordability Period, Tenant and its Property Manager may from time to time submit to the Executive Director proposed amendments to the Property Management Plan, the implementation of which shall also be subject to the prior written approval of the Executive Director, which approval shall not be unreasonably withheld. (c) Gross Mismanagement. During the Affordability Period, and in the event of "Gross Mismanagement" (as defined below) of the Project, Executive Director and/or Landlord shall have and retain the authority to direct and require any condition(s), acts, or inactions of Gross Mismanagement to cease and/or be corrected immediately, and further to direct and require the immediate removal of the Property Manager and replacement with a new qualified and approved Property Manager, if such condition(s) is/are not ceased and/or corrected after expiration of thirty (30) days from the date of written notice from Executive Director. If Tenant or Property Manager has commenced to cure such Gross Mismanagement condition(s) on or before the 20th day from the date of written notice (with evidence of such submitted to the Executive Director), but has failed to complete such cure by the 30th day (or such longer period if the cure cannot reasonably be accomplished in thirty (30) days as reasonably determined by the non -defaulting party), then Tenant and its Property Manager shall have an additional 10 days to complete the cure of Gross Mismanagement condition(s). In no event shall any condition of Gross Mismanagement continue uncured for a period exceeding forty-five (45) days from the date of the initial written notice of such condition(s), except that the condition described in subdivision (d) below may exist for up to, but no longer than, seventy-five (75) days without triggering Landlord's right to remove the Property Manager as described in the immediately following sentence as long as Tenant is diligently working to cure such conditions of Gross Mismanagement. If such condition(s) do persist beyond such period, Executive Director shall have the sole and absolute right to immediately and without further notice to Tenant (or to Property Manager or any other person/entity) to remove the Property Manager and Tenant shall contract with a replacement Property Manager reasonably acceptable to Landlord (in accordance with Section 8.3.11.1) within thirty (30) days following Landlord's removal of the defaulting Property Manager. If Tenant takes steps to select a new Property Manager that selection is subject to the requirements set forth above for selection of a Property Manager. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 39 of 86 For purposes of this Ground Lease, the term "Gross Mismanagement" shall mean management of the Project in a manner which violates the terms and/or intention of this Ground Lease to operate a first quality affordable housing complex, and shall include, but is not limited to, any one or more of the following: (i) Habitually leasing to subtenants who exceed the prescribed income levels; (ii) Habitually allowing subtenants to exceed the prescribed occupancy levels without taking immediate action to stop such overcrowding; (iii) Under -funding required reserve accounts if Annual Project Revenues are sufficient to maintain such reserve accounts; (iv) Failing to timely maintain the Project in accordance with the Property Management Plan and Maintenance Standards; (v) Fraud or embezzlement of Project funds, including without limitation funds in the reserve accounts; (vi) Failing to fully cooperate with the Anaheim Police Department or other local law enforcement agency(ies) with jurisdiction over the Project, in maintaining a crime - free environment within the Project; (vii) Failing to fully cooperate with the Anaheim Fire Department or other local public safety agency(ies) with jurisdiction over the Project, in maintaining a safe and accessible environment within the Project; (viii) Failing to fully cooperate with the Anaheim Planning & Building Department, including the Code Enforcement Division, or other local health and safety enforcement agency(ies) with jurisdiction over the Project, in maintaining a decent, safe and sanitary environment within the Project; and (ix) Spending funds from the Capital Replacement Reserve account for items that are not defined as eligible costs, including eligible capital and/or replacement costs, under the standards imposed by GAAP (and/or, as applicable, generally accepted auditing principles). Notwithstanding the requirements of the Property Manager to correct any condition of Gross Mismanagement as described above, Tenant is obligated and shall use its best efforts to correct any defects in property management or operations at the earliest feasible time and, if necessary, to replace the Property Manager as provided above. Tenant shall include advisement and provisions of the foregoing requirements and requirements of this Ground Lease within any contract between Tenant and its Property Manager for the Project. (d) Code Enforcement. Tenant acknowledges and agrees that Landlord, City, and their employees and authorized agents, shall have the right to conduct code compliance and/or code enforcement inspections of the Project and the individual Housing Units for the Project, both exterior and interior, at reasonable times and upon reasonable notice (not less than 48 hours prior notice, except in an emergency) to Tenant and/or an individual subtenant. If such notice is provided by Landlord or City representative(s) to Tenant, then Tenant (or its ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 40 of 86 Property Manager) shall immediately and directly advise any affected subtenant of such upcoming inspection and cause access to the area(s) and/or Housing Units at the Project to be made available and open for inspection. Tenant shall include express advisement of such inspection rights within the lease/rental agreements for each Housing Unit in the Project in order for each and every subtenant and subtenant household to be aware of this inspection right and such inspection(s) shall not unreasonably interfere with use and enjoyment of the site. 8.3.12 Occupancy Limits. The maximum occupancy of the Housing Units in the Project shall not exceed more than such number of persons as is equal to two persons per bedroom, plus one. Thus, for the two (2) bedroom Housing Units, the maximum occupancy shall not exceed five (5) persons. For the three (3) bedroom Housing Units, the maximum occupancy shall not exceed seven (7) persons. 8.3.13 Ground Lease Prior and Senior to Mortgages. This Ground Lease is and shall remain a senior, non -subordinate lien against the Property, and shall not be subordinated to the Primary Loan or any Mortgages or other liens against the Property; provided, however, that the Affordable Housing Covenants set forth herein, including without limitation all provisions set forth in this Article 8, shall be subordinated to the lien of the Primary Loan and any Mortgage approved by Landlord. 8.4. Reserved. 8.5. Covenant to Pay Taxes and Assessments. Tenant shall pay prior to delinquency all ad valorem real estate taxes, special taxes, assessments and special assessments levied against the Property, subject to Tenant's right to contest any such tax in good faith and any property tax exemptions. 8.6. Reserved. 8.7. Non -Discrimination Covenants. Tenant covenants by and for itself, its successors and assigns, and all persons claiming under or through them that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Property, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the Property. The foregoing covenants shall run with the land. Tenant shall refrain from restricting the rental or lease of the Property on any of the bases listed above. All leases or contracts relating to the Property shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: (i) In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 41 of 86 conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." (ii) In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased. (iii) In contracts: "There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this Ground Lease, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." 8.8. Covenants Regarding Operating Budget and Operating Reserve. Within twelve (12) months after commencement of construction of the Project, but in no event later than ninety (90) days prior to the completion of construction of the Project, and not less than annually thereafter on or before November 1 of each year following the issuance of the first certificate of occupancy issued by the City's building official for the Project, Tenant shall submit to Landlord on not less than an annual basis an Operating Budget for the Project, which budget shall be subject to the written approval of Executive Director or her designee, which approval shall not be unreasonably withheld. The Executive Director's discretion in review and approval of each proposed annual Operating Budget shall include, without limitation, authority to review individual categories, line items, and accounts, such as the following: extent, type, and amount for social services at or associated with the Project; existing balance(s) in and proposed deposits to the Capital Replacement Reserve for the Project to evaluate shortfalls and/or cumulative unexpended/unencumbered deposits (provided that required annual deposits thereto are not required to exceed $300/per unit); conformity of any annual increases in the Partnership Related Fees for the Project with the increases permitted in the definition of "Partnership Related Fees"; reasonableness and conformity to prevailing market rates in Orange County and rates and fees ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 42 of 86 for goods and services to be provided Tenant or any of its parent, affiliated, or subsidiary entities, etc. for the Project. Tenant shall, or shall cause the Property Manager to, set aside, in the Operating Reserve for the Project the Target Amount. The Operating Reserve shall initially be funded using Tax Credit equity and shall thereafter be replenished from Annual Project Revenue (net of Operating Expenses and Debt Service) to maintain the Operating Reserve balance at the Target Amount. The Target Amount shall be retained in the Operating Reserve to cover shortfalls between Annual Project Revenue and actual Operating Expenses, but shall in no event be used to pay for capital items or capital costs properly payable from the Capital Replacement Reserve. Tenant shall, not less than once per every twelve (12) months, submit to the Executive Director evidence reasonably satisfactory to Landlord of compliance herewith. The provisions of this Section 8.8 shall be of no further force or effect upon a foreclosure, deed in lieu of foreclosure, or execution of a New Ground Lease. 8.9. Covenants Regarding Capital Replacement Reserve. Commencing upon the closing for the permanent Primary Loan for the Project, Tenant shall annually set aside an amount of not less than Three Hundred Dollars ($300.00) per Housing Unit (16 Housing Units times $300 equals $6,300) or such increased amount required by TCAC or the Partnership Agreement or the Lender under the Primary Loan for the Project) from the gross rents received from the Project, into a separate interest bearing trust account defined as the Capital Replacement Reserve. Funds in the Capital Replacement Reserve shall be used only for capital repairs, improvements and replacements to the Project, including fixtures and equipment, which are normally capitalized under generally accepted accounting principles. The non-availability of funds in the Capital Replacement Reserve does not in any manner relieve or lessen Tenant's obligation to undertake any and all necessary capital repairs, improvements, or replacements and to continue to maintain the Project in the manner prescribed herein for the Project. Not less than once per year, Tenant, at its expense, shall submit to the Executive Director an accounting for the Capital Replacement Reserve for the Project. Capital improvements and repairs to, and replacements at the Project shall include only those items with a long useful life, including without limitation the following: carpet and drapery replacement; appliance replacement; exterior painting, including exterior trim; hot water heater replacement; plumbing fixtures replacement, including tubs and showers, toilets, lavatories, sinks, faucets; air conditioning and heating replacement; asphalt repair and replacement, and seal coating; roofing repair and replacement; landscape tree replacement; irrigation pipe and controls replacement; sewer line replacement; water line replacement; gas line replacement; lighting fixture replacement; elevator replacement and upgrade work; miscellaneous motors and blowers; common area furniture replacement; and common area repainting. Pursuant to the procedure for submittal of each Annual Budget for the Project to Executive Director by Tenant, Executive Director will evaluate the cumulative amount on deposit in the Capital Replacement Reserve account and exercise her sole, reasonable discretion to determine if existing balance(s) in, proposed deposits to, shortfalls, if any, and/or a cumulative unexpended/unencumbered account balance in such Capital Replacement Reserve account are adequate to provide for necessary capital repairs and improvement for the Project (provided that required annual deposits thereto are not required to exceed $300/per Housing Unit). 8.10. Certificate of Continuing Program Compliance. On or before one hundred twenty (120) days following the end of Tenant's fiscal year, commencing the first year after issuance of the first certificate of occupancy for the Project, and annually thereafter, until the expiration of the Affordability Period, Tenant shall deliver to Landlord a Certificate of Continuing Program Compliance in a form acceptable to Executive Director. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 43 of 86 ARTICLE 9 INSURANCE [Anaheim to confirm] 9.1. Landlord Not Liable. Except as the result of any grossly negligent or willful/intentional acts or omissions by Landlord or its representatives, employees or agents, or as otherwise expressly set forth herein, Landlord shall not be liable for injury to Tenant's business or any loss of income therefrom or for any damage or liability of any kind or for any injury to or death of persons or damage to property of Tenant, or to Tenant's sublessees of each and all of the Housing Units at the Project, or to Tenant's agents, employees, servants, contractors, subtenants, licensees, concessionaires, customers or business invitees or any other person which occurs on the Property during the Term. 9.2. Indemnification. Except with respect to any grossly negligent or willful/intentional acts or omissions of Landlord or its representatives, employees or agents, Tenant shall indemnify, defend, pay for, and hold harmless the Indemnitees from and against all liability, loss, damage, cost or expense (including reasonable attorneys' fees and court costs) arising from or as a result of the death of any person or any accident, injury, loss or damage whatsoever caused to any person or to the property of any person caused by Tenant's performance of its obligations under this Ground Lease or any actions, inactions, errors, or omissions of Tenant, whether such performance, errors or omissions of Tenant be made by Tenant, its contractors or subcontractors, or anyone directly or indirectly employed by Tenant, and whether such damage shall accrue or be discovered before or after the termination of this Ground Lease. This indemnification provision supplements and in no way limits the scope of the indemnifications in Article 13. The indemnity obligation of Tenant under this Article shall survive the expiration or termination, for any reason, of this Ground Lease. This Section notwithstanding, indemnification with respect to Hazardous Materials shall be governed by Section 16.3 hereof. 9.3. Insurance. Tenant shall secure from a company or companies licensed to conduct insurance business in the State of California, pay for, and maintain in full force and effect from and after the Closing, and continuing for the Term of this Ground Lease, insurance for the Project as required herein, issued by an "A:VI" or better rated insurance carrier as rated by A.M. Best Company. Tenant shall furnish certificates of insurance and endorsements to Landlord not fewer than fifteen (15) days prior to the Closing and shall furnish complete copies of such policy or policies upon request by Landlord or City. 9.3.1 Minimum Coverage/Endorsements. Notwithstanding any inconsistent statement in the policy or any subsequent endorsement attached hereto, the protection afforded by these policies shall be written on an occurrence basis in which Landlord, City, and their respective elected and appointed officials, officers, employees, agents and representatives (together, "Additional Insureds") are named as additional insureds on all coverage, except for Workers' Compensation coverage, but including Employers Liability coverage, and shall: (i) Name the Additional Insureds (from above) as additional insureds on a Commercial General Liability ("CGL") policy; (ii) Include an endorsement to the CGL policy naming the Additional Insureds as additional insureds, and said endorsement shall be delivered to the Executive ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 44 of 86 Director prior to and as a Condition Precedent to the Closing (and maintained as required herein); provided, however, that an individual endorsement specifically naming the Additional Insureds shall not be required if Tenant provides documentation which, in the sole discretion of Landlord, demonstrates that the Additional Insureds are otherwise automatically covered under some sort of blanket policy language that clearly establishes the Additional Insureds' status as additional insureds under the policy, without the need for a separate endorsement in favor of the Additional Insureds; (iii) Provide a broad form commercial general liability insurance in the amount of Twenty Million Dollars ($20,000,000) per occurrence, which will be considered equivalent to the required minimum limits, and such insurance shall (i) be written on an occurrence form, (ii) be written with a primary policy form with limits of not less than $1,000,000 per occurrence; (iii) be written with one or more excess layers to bring the total of primary and excess coverage limits to not less than $20,000,000 per occurrence, (iv) not be written with a deductible greater than $20,000 per occurrence (without prior written approval by Landlord, which approval shall be granted or denied in Landlord's sole and absolute discretion), (v) not be written with a self-insured retention (without prior written approval by Landlord, which approval shall be granted or denied in Landlord's sole and absolute discretion), and (vi) contain a waiver of subrogation in favor of the Landlord and City. Such insurance shall include independent contractor coverage and shall cover the acts, errors, omissions, or works of any of Tenant's subcontractors and any other person(s) acting on behalf of Tenant, as respects any liability that may occur to Tenant and/or any Additional Insureds from such acts, errors, omissions or work; (iv) Provide primary Automobile Liability insurance for owned, non - owned, and hired vehicles, as applicable to, or for any use related to, the Project, in an amount not less than One Million Dollars ($1,000,000) combined single limit, with excess insurance coverage to bring the total amount of Automobile Liability insurance coverage to an amount not less than Five Million Dollars ($5,000,000) per accident for bodily injury and property damage; (v) Bear an endorsement or shall have attached a rider providing that Landlord shall be notified not less than thirty (30) days before any expiration, cancellation, non- renewal, reduction in coverage, increase in deductible, or other material modification of such policy or policies, and shall be notified not less than ten (10) days after any event of nonpayment of premium (collectively, "Cancellation Notice"), provided, however, that an individual endorsement specifically naming the Landlord shall not be required if Tenant provides documentation which, in the sole discretion of Landlord, demonstrates that the Landlord will automatically receive such Cancellation Notice under some sort of blanket policy language, without the need for a separate endorsement in favor of the Landlord; and (vi) Tenant shall also file with Landlord the following signed certification: "I am aware of, and will comply with, Section 3700 of the Labor Code, requiring every employer to be insured against liability of Workers' Compensation or to undertake self-insurance before commencing any of the work." Tenant shall comply with Sections 3700 and 3800 of the Labor Code by securing, paying for and maintaining in full force and effect from and after the Closing of Escrow, and continuing for the Term of this Ground Lease, complete Workers' Compensation insurance, to statutory limits, with Employers Liability limits not less than One Million Dollars ($1,000,000) per ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 45 of 86 occurrence, and shall furnish a Certificate of Insurance to Landlord before the commencement of construction. Every Workers' Compensation insurance policy shall bear an endorsement or shall have attached a rider providing that, in the event of expiration, proposed cancellation, or reduction in coverage of such policy for any reason whatsoever, Landlord shall be notified, giving Tenant a sufficient time to comply with applicable law, but in no event less than thirty (30) days before such expiration, cancellation, or reduction in coverage is effective or ten (10) days in the event of nonpayment of premium. (vii) All Additional Insureds shall not be responsible for any claims in law or equity occasioned by the failure of Tenant to comply with this Section 9.3.1. Landlord shall have the right, but not the obligation, to pay a premium on behalf of Tenant. (viii) Should any of the insurance coverage required herein be written with an annual aggregate: (i) such aggregate shall be disclosed in writing to Landlord, (ii) should total incurred claims (paid plus reserves) against such insurance exceed fifty percent (50%) of the applicable aggregate, Tenant shall prompt notify Landlord in writing, and (iii) should total incurred claims (paid plus reserves) against such insurance exceed seventy-five percent (75%) of the applicable aggregate, Tenant shall promptly notify Landlord in writing and promptly take whatever action is necessary to have the aggregate reinstated to an amount not less than fifty percent (50%) of the original aggregate amount. (ix) For all insurance required under this Section 9.3.1, Landlord shall have the right, at every ten (10) year period of this Ground Lease, to review the types and limits of insurance coverage required herein and to make reasonable adjustments, provided that such types and limits shall not exceed that typically carried by the owner and operator of a first class apartment complex, of approximately the same size, in Orange County, California, based on reasonable research and investigation by Landlord. 9.3.2 Property Insurance. Commencing upon the Closing and continuing until the later of (i) the expiration or earlier termination of the Term of this Ground Lease or (ii) the date Tenant vacates the Property, Tenant shall secure, maintain, and pay for the following all risk Property Insurance for the Project and the Property; provided, however, in the case of Builder's Risk insurance where Tenant is not the General Contractor, Tenant may cause the required Builder's Risk insurance to be secured, maintained, and paid for by the General Contractor: (i) Prior to the start of construction and continuing until the completion of construction (the latter of final acceptance of the Project or issuance of the final certificate of occupancy for the Project): all-risk Builder's Risk (course of construction) insurance coverage but excluding the perils of earthquake (land movement) and flood, in an amount equal to the full cost of the hard construction costs of the Project. Such insurance shall be written on an all risk form, and shall cover, at a minimum: all work, materials, and equipment to be incorporated into the Project; the Project during construction; the completed Project until such time as it is accepted by the City; and storage and transportation risks; and such coverage shall not be terminated until permanent Property Insurance is in place, as required in Section 9.3.2(b). Such insurance shall protect/insure the interests of Tenant/owner and the General Contractor, and other contractor(s), and all subcontractors, as each of their interests may appear. If such insurance includes an exclusion for "design error," such exclusion shall only be for the object or portion which failed. Such insurance shall include an insurer's waiver of subrogation in favor of each protected/insured party thereunder and the Landlord and City. Landlord shall be named as an additional loss payee, ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 46 of 86 as its interests may appear, with a Lenders Loss Payable endorsement, which shall be delivered to Landlord prior to the start of construction. (ii) Commencing with the completion of construction and continuing until the later of (i) the expiration or earlier termination of the Term of this Ground Lease or (ii) the date Tenant vacates the Property: (a) all-risk physical damage insurance coverage ("Property Insurance"), on an all-risk basis, covering all insurable structures and equipment, including coverage for building code changes, but excluding the perils of earthquake (land movement) and flood, in an amount not less than 100% of the replacement cost of the total values at risk, which shall be adjusted for increased costs of construction and replacement on an annual basis, to protect against loss of, damage to, or destruction of the Project; such insurance shall not contain a coinsurance clause; (b) business interruption and extra expense insurance to protect Tenant and all additional loss payees covering loss of revenues and/or extra expense incurred by reason of the total or partial suspension or delay of, or interruption in, the operation of the Project, or any portion thereof, caused by loss or damage to or destruction of any part of the insurable real property structures or equipment as a result of the perils insured against under such Property Insurance, covering a period of suspension, delay or interruption of at least eighteen (18) calendar months, in an amount not less than the amount required to cover such business interruption and/or extra expense loss during any such period; such insurance shall not contain a deductible in an amount in excess of a thirty (30) day period; and (c) as applicable, boiler and machinery insurance in the aggregate amount of the full replacement value of the equipment typically covered by such insurance. On the coverage required under this Section 9.3.2(b), Landlord shall be named as an additional loss payee, as its interests may appear, with a Lenders Loss Payable endorsement whenever possible, and if not attainable for Additional Insured other than Landlord, then a loss payable endorsement may be utilized, which shall be delivered to Landlord at the completion of construction and prior to the expiration of the Builders Risk insurance coverage required herein. (iii) For all insurance required under this Section 9.3.2, said polices shall provide, by endorsement, that they will not be cancelled, non -renewed or reduced in scope or coverage, without at least thirty (30) days prior written notice to Landlord, except in the event of non-payment of premium which shall provide for at least ten (10) days prior written notice to Landlord. 9.3.3 Reduction in Requirements. Landlord's Risk Manager is hereby authorized to reduce the requirements set forth herein, on a temporary or permanent basis, in the event he determines, in his sole discretion, that such reduction is in Landlord's best interest. 9.3.4 Obligation to Repair and Restore Damage Due to Casualty Covered by Insurance. Subject to Section 9.3.5 below, if the Project shall be totally or partially destroyed or rendered wholly or partly uninhabitable by fire or other casualty required to be insured against by Tenant, Tenant shall promptly proceed to obtain insurance proceeds and take all steps necessary to begin reconstruction and, immediately upon receipt of insurance proceeds, to promptly and diligently commence the repair or replacement of the Project to substantially the same condition as the Project is required to be constructed pursuant to this Ground Lease, if and to the extent the insurance proceeds are sufficient to cover the actual cost of repair, replacement, or restoration, and Tenant shall complete the same as soon as possible thereafter so that the Project can be occupied in accordance with this Ground Lease. Subject to force majeure delays pursuant to Article 23 hereof, in no event shall the repair, replacement, or restoration period exceed twenty-four (24) months from the date Tenant obtains insurance proceeds unless the ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 47 of 86 Executive Director, in her reasonable discretion, approves a longer period of time. Landlord shall cooperate with Tenant, at no expense to Landlord, in obtaining any governmental permits required for the repair, replacement, or restoration. If, however, the then existing laws of any other governmental agencies with jurisdiction over the Property do not permit the repair, replacement, or restoration, Tenant may elect not to repair, replace, or restore the Project by giving notice to Landlord (in which event Tenant will be entitled to all insurance proceeds but Tenant shall be required to remove all debris from the applicable portion of the Property) or Tenant may reconstruct such other improvements on the Property as are consistent with applicable land use regulations and approved by Landlord and City and the other governmental agency or agencies with jurisdiction. 9.3.5 Damage or Destruction Due to Cause Not Required to be Covered by Insurance. If the Project is completely destroyed or suffers Substantial Damage (as hereinafter defined) caused by a casualty for which Tenant is not required to (and has not) insured against, or if insurance proceeds are insufficient to rebuild then Tenant shall not be required to repair, replace, or restore such improvements and may elect not to do so by providing Landlord with written notice of election not to repair, replace, or restore within ninety (90) days after such substantial damage or destruction. In such event, this Ground Lease shall be automatically terminated and Tenant shall immediately tender possession of the Property to Landlord. As used in this Section 9.3.5, "Substantial Damage" caused by a casualty not required to be (and not) covered by insurance shall mean damage or destruction which is fifteen percent (15%) or more of the replacement cost of the improvements comprising the Project. In the event Tenant does not timely elect not to repair, replace, or restore the Project as set forth in the first sentence of this Section 9.3.5, Tenant shall be conclusively deemed to have waived its right not to repair, replace, or restore the Project and thereafter Tenant shall promptly commence and complete the repair, replacement, or restoration of the damaged or destroyed Project in accordance with Section 9.3.4 above. 9.4. Other Insurance. Tenant shall also obtain and maintain such other insurance in forms and amounts reasonably required from time to time by Landlord or the City Risk Manager for protection against the same or other insurable hazards which are then typically insured against by similar properties in Orange County, California, provided that such coverage is available at commercially reasonable rates. 9.5. Contractors. All contractors employed by Tenant with contracts of Fifty Thousand Dollars ($50,000.00) or more shall be required to furnish evidence of Comprehensive General Liability insurance subject to all the requirements stated herein with limits of not less than One Million Dollars ($1,000,000.00) combined single limit each occurrence. The Indemnitees shall have the right to receive evidence of compliance with the foregoing by contractors at any time upon written request therefor. 9.6. Waiver of Subrogation. Each policy of insurance procured pursuant to Article 9 shall contain, if obtainable upon commercially reasonable terms, either (i) a waiver by the insurer of the right of subrogation against either party hereto for negligence of such party, or (ii) a statement that the insurance shall not be invalidated should any insured waive in writing prior to a loss any or all right of recovery against any party for loss accruing to the property described in the insurance policy. Each of the parties hereto waives any and all rights of recovery against the other, or against the officers, employees, agents and representatives of such other party, for loss or damage to such waiving party or its property or the property of others under its control, arising from any cause insured against under the form of insurance policies required to be carried ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 48 of 86 pursuant to Article 9 of this Ground Lease or under any other policy of insurance carried by such waiving party. 9.7. Insurance Submissions. Tenant shall deliver to Landlord (i) insurance certificates confirming the existence of the insurance required by this Ground Lease, and including the applicable clauses referenced above and (ii) endorsements to the above -required policies, which add to these policies the applicable clauses and provisions referenced above. Such endorsements shall be signed by an authorized representative of the insurance company and shall include the signatory's company affiliation and title. ARTICLE 10 MAINTENANCE; REPAIRS; ALTERATIONS; RECONSTRUCTION 10.1. General Maintenance. Tenant shall maintain the Property and all improvements thereon, including lighting and signage, in good condition, free of debris, waste and graffiti, and in compliance with the terms of the Redevelopment Plan and all applicable provisions of the City of Anaheim Municipal Code. Tenant shall maintain in accordance with the Maintenance Standards (as hereinafter defined) the improvements and landscaping on the Property. Such Maintenance Standards shall apply to all buildings, signage, common amenities, lighting, landscaping, irrigation of landscaping, architectural elements identifying the Property and any and all other improvements on the Property and the Project. To accomplish the maintenance, Tenant shall either staff or contract with and hire licensed and qualified personnel to perform the maintenance work, including the provision of labor, equipment, materials, support facilities, and any and all other items necessary to comply with the requirements of this Ground Lease. Tenant and its maintenance staff, contractors or subcontractors shall comply with the following standards as to the Project (collectively, "Maintenance Standards"): (i) The Property shall be maintained in conformance and in compliance with the approved final as -built plans, and reasonable maintenance standards which comply with the industry standard for comparable first quality affordable housing projects in the County, including but not limited to painting and cleaning of all exterior surfaces and other exterior facades comprising all private improvements and public improvements to the curbline. The Property shall be maintained in good condition and in accordance with the industry custom and practice generally applicable to comparable first quality affordable housing projects in the County. (ii) Landscape maintenance shall include, but not be limited to: watering/irrigation; fertilization; mowing; edging; trimming of grass; tree and shrub pruning; trimming and shaping of trees and shrubs to maintain a healthy, natural appearance and safe road conditions and visibility, and irrigation coverage; replacement, as needed, of all plant materials; control of weeds in all planters, shrubs, lawns, ground covers, or other planted areas; and staking for support of trees. (iii) Clean-up maintenance shall include, but not be limited to: maintenance of all sidewalks, paths and other paved areas in clean and weed -free condition; maintenance of all such areas clear of dirt, mud, trash, debris or other matter which is unsafe or unsightly; removal of all trash, litter and other debris from improvements and landscaping prior to mowing; clearance and cleaning of all areas maintained prior to the end of the day on which the ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 49 of 86 maintenance operations are performed to ensure that all cuttings, weeds, leaves and other debris are properly disposed of by maintenance workers. Landlord agrees to notify Tenant in writing if the condition of the Property does not meet with the Maintenance Standards and to specify the deficiencies and the actions required to be taken by Tenant to cure the deficiencies. Upon notification of any maintenance deficiency, Tenant shall have thirty (30) days within which to correct, remedy or cure the deficiency. If the written notification states the problem is urgent relating to the public health and safety, then Tenant shall have forty-eight (48) hours to rectify the problem. In the event Tenant does not maintain the Property in the manner set forth herein and in accordance with the Maintenance Standards, Landlord shall have, in addition to any other rights and remedies hereunder, the right to maintain the Property, or to contract for the correction of such deficiencies, after written notice to Tenant, and Tenant shall be responsible for the payment of all such costs incurred by Landlord. 10.2. Program Maintenance. In addition to the routine maintenance and repair required pursuant to Section 10. 1, Tenant shall perform the following minimum programmed maintenance of the Improvements on the Property: (i) five (5) years; every five (5) years; and Interior painting and window covering replacement at least every Exterior painting at least every ten (10) years; Repair and resurfacing of parking areas and walkways at least (iv) Replacement of all deteriorated or worn landscaping and play equipment at least every five (5) years. Upon the request of Tenant, the Executive Director, at her sole and absolute discretion, may grant a waiver or deferral of any program maintenance requirement. Tenant shall keep such records of maintenance and repair as are necessary to prove performance of the program maintenance requirements. ARTICLE 11 OWNERSHIP OF AND RESPONSIBILITY FOR IMPROVEMENTS 11.1. Ownership During Term. 11.1.1 Improvements. Subject to the provisions of Sections 5.3.1 and 5.3.2 hereof, all Improvements on the Property as permitted or required by this Ground Lease shall, during the Term, be and remain the property of Tenant, and Landlord shall not have title thereto. Tenant shall not, however, demolish, remove, sell, encumber, lease, assign or otherwise convey any Improvements from the Property except as permitted herein. 11.1.2 Personal Property. All personal property, furnishings, fixtures and equipment, including, without limitation, Tenant -owned appliances, which are not so affixed to the Property or the buildings thereon as to require substantial damage to the buildings upon removal thereof shall constitute personal property including, but not limited to: (a) functional items related to the everyday operations of the Property; (b) personal property furnishings, fixtures and ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 50 of 86 equipment of the nature or type deemed by law as permanently resting upon or attached to the buildings or land by any means, including, without limitation, cement, plaster, nails, bolts or screws, or essential to the ordinary and convenient use of the Property and the Improvements. If Tenant is not then in default under this Ground Lease or the Transaction Documents (after expiration of any applicable cure period), at any time during the Term and at termination thereof, Tenant shall have the right to remove any and all such personal property, furnishings, fixtures and equipment; provided that Tenant shall repair any damage to the Property or the Improvements caused by such removal. 11.1.3 Basic Building Systems. For purposes of this Ground Lease, the personal property, furnishings, fixtures and equipment described in this Section 11.1 shall not include those major building components or fixtures necessary for operation of the basic building systems such as, but not limited to, the elevators, plumbing, sanitary fixtures, heating and central air-cooling system. 11.2. Ownership at Expiration or Termination. 11.2.1 Property of Landlord. In accordance with provisions of Sections 5.3.1 and 5.3.2 hereof, and except as provided in Section 11.2.2, all Improvements which constitute or are a part of the Property shall become (without the payment of any compensation whatsoever to Tenant or to others) the property of Landlord free and clear of all liens, claims and encumbrances on such Improvements by Tenant, and anyone claiming under or through Tenant, except for such title exceptions permitted or required during the Term with Landlord's prior written consent. Tenant shall then quitclaim to Landlord any and all rights, interests and claims to the Improvements. Tenant agrees to and shall defend, indemnify and hold Landlord harmless from and against all liability and loss which may arise from the assertion of any such liens, claims and any encumbrances on such Improvements (except claims arising due to Landlord's actions) and except for such title exceptions permitted or required during the Term, so long as upon expiration or earlier termination of the Term of this Ground Lease, no exception to title to the Property exists other than exceptions specifically approved by Landlord in writing. 11.2.2 Removal by Tenant. Tenant shall not be required or permitted to remove the Improvements, or any of them, at the expiration or earlier termination of the Term; provided, however, that, subject to the provisions of Section 5.3.2 hereof, within thirty (30) days following the expiration or earlier termination of the Term, Tenant may remove all personal property, furniture, and equipment. 11.2.3 Unremoved Property. Any personal property, furnishings or equipment not removed by Tenant pursuant to Section 11.2.2 hereof, shall, without compensation to Tenant, become Landlords' property, free and clear of all claims to or against them by Tenant or any third person, firm or entity arising by, through or under Tenant. 11.2.4 Maintenance and Repair of Improvements. Subject to the provisions of this Ground Lease concerning condemnation, alterations and damage and destruction, Tenant agrees to assume full responsibility for the operation and maintenance of the Property and the Improvements and all fixtures and furnishings thereon or therein throughout the Term hereof without expense to Landlord, and to perform all repairs and replacements necessary to maintain and preserve the Property, the Improvements, fixtures and furnishings in a decent, safe and sanitary condition consistent with good practices and in compliance with all applicable laws. Tenant agrees that Landlord shall not be required to perform any maintenance, repairs or ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 51 of 86 services, or to assume any expense not specifically assumed herein in connection with the Property and the Improvements thereon unless specifically required under the terms of this Ground Lease. Except as otherwise provided in this Section 11.2 and in Section 11.4, the condition of the Improvements required to be maintained hereunder upon completion of the work of maintenance or repair shall be equal in value, quality and use to the condition of such Improvements before the event giving rise to the work. 11.3. Waste. Subject to the alteration rights of Tenant and damage and destruction or condemnation of the Property or any part thereof, Tenant shall not commit or suffer to be committed any waste of the Property or the Improvements, or any part thereof. Tenant agrees to keep the Property and the Improvements clean and clear of refuse and obstructions, and to dispose properly of all garbage, trash and rubbish. 11.4. Alteration of Improvements. Except as provided in Section 7.1, Tenant shall not make or permit to be made any material, exterior alteration of, addition to or change in, the Improvements which would affect the exterior elevations (including materials selection and color) or the size, bulk and scale of the Property, other than routine maintenance and repairs, nor demolish all or any part of the Improvements, without the prior written consent of Landlord. Nothing herein shall prohibit interior alterations or decorations, or the removal and replacement of interior improvements consistent with the specified use of the Property. In requesting consent for such exterior improvements as required by the foregoing, Tenant shall submit to Landlord detailed plans and specifications of the proposed work and an explanation of the need and reasons thereof. Tenant may make such other improvements, alterations, additions or changes to the Improvements which do not affect the exterior elevations (including materials selection and color) or the size, bulk and scale thereof without Landlord's prior written consent. Notwithstanding the prohibition in this Section 11.4, Tenant may make such changes, repairs, alterations, improvements, renewals or replacements to the exterior elevations, materials, size, bulk or scale of the Improvements as are required (a) by reason of any law, ordinance, regulation or order of a competent government authority, (b) for the continued safe and orderly operation of the Property, or (c) to continue to receive Tax Credits for the Project. ARTICLE 12 SIGNS AND MARKETING Tenant shall not place or suffer to be placed on the Property or upon the roof or any exterior door or wall or on the exterior or interior of any window of the Improvements, any sign, awning, canopy, marquee, advertising matter, decoration, lettering or other thing of any kind (exclusive of the signs, awnings and canopies, if any, which may be provided for in the Development Plans) without the written consent of the Executive Director first had and obtained. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 52 of 86 ARTICLE 13 INDEMNIFICATION Tenant shall defend, indemnify, pay for, assume all responsibility for, and hold the Indemnitees, harmless from all claims, demands, damages, defense costs or liability of any kind or nature relating to the subject matter of this Ground Lease or the validity, applicability, interpretation or implementation hereof and for any damages to property or injuries to persons, including accidental death (including attorneys' fees and costs), which may be caused by any acts or omissions of Tenant under this Ground Lease, whether such activities or performance thereof be by Tenant or by anyone directly or indirectly employed or contracted with by Tenant and whether such damage shall accrue or be discovered before or after termination of this Ground Lease and arising prior to the later of (i) the expiration or earlier termination of the Term of this Ground Lease or (ii) the date Tenant vacates the Property. Tenant shall not be liable for property damage or bodily injury to the extent occasioned by the gross negligence or willful misconduct of Landlord or City or their agents or employees. Tenant shall have the obligation to defend any such action; provided, however, that this obligation to defend shall not be effective if and to the extent that Tenant determines in its reasonable discretion that such action is meritorious or that the interests of the parties justify a compromise or a settlement of such action, in which case Tenant shall compromise or settle such action in a way that fully protects Indemnitees from any liability or obligation. In this regard, Tenant's obligation and right to defend shall include the right to hire (subject to written reasonable approval by Landlord and City) attorneys and experts necessary to defend, the right to process and settle reasonable claims, the right to enter into reasonable settlement agreements and pay amounts as required by the terms of such settlement, and the right to pay any judgments assessed against Indemnitees. If Tenant defends any such action, as set forth above, (i) Tenant shall indemnify and hold harmless Indemnitees from and against any claims, losses, liabilities, or damages assessed or awarded against either of them by way of judgment, settlement, or stipulation and (ii) Landlord shall be entitled to settle any such claim only with the written consent of Tenant and any settlement without Tenant's consent shall release Tenant's obligations under this Article 13 with respect to such settled claim. This Section notwithstanding, indemnification with respect to Hazardous Materials shall be governed by Section 16.3. ARTICLE 14 DAMAGE OR DESTRUCTION OF PROPERTY OR IMPROVEMENTS 14.1. Tenant's Repair Obligation. 14.1.1 In case of damage to or destruction of the Property or the Improvements, or any part thereof, by fire or other cause at any time during the Term of this Ground Lease, Tenant, if and to the extent insurance proceeds are available, shall restore the same as nearly as possible to their value, condition and character immediately prior to such damage or destruction. Such restoration shall be commenced with due diligence and in good faith, and prosecuted with due diligence and in good faith, unavoidable delays excepted. 14.1.2 In case of damage to or destruction of the Improvements by fire or other cause resulting in a loss exceeding in the aggregate Ten Thousand Dollars ($10,000), Tenant shall promptly give written notice thereof to Landlord. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 53 of 86 14.1.3 The provisions of this Section 14.1 shall be subject to Tenant's obligation to obtain insurance as set forth in Section 9.3. 14.2. Tenant's Restoration of Premises. 14.2.1 If, during the Term, the Improvements are damaged or destroyed, and the total amount of loss does not exceed thirty-three percent (33%) of the replacement value of the Improvements, Tenant shall make the loss adjustment with the insurance company insuring the loss, with the approval of Landlord, which approval shall not be unreasonably withheld or delayed. The proceeds shall be paid directly to a Mortgagee, if any, and if there is not a Mortgagee, to Landlord and Tenant for the sole purpose of making the restoration of the Improvements in accordance with this Article 14. 14.2.2 If, during the Term, the Improvements are damaged or destroyed, and the total amount of loss exceeds thirty-three percent (33%) of the replacement value of the Improvements, Tenant shall make the loss adjustment with the insurance company insuring the loss, with the approval of Landlord, which approval shall not be unreasonably withheld or delayed, and the insurance company shall immediately pay the proceeds to a bank or trust company designated by Landlord and approved by Tenant ("Insurance Trustee"), which approval shall not be unreasonably withheld or delayed. Any approved leasehold Mortgagee shall be an acceptable Insurance Trustee. All sums deposited with the Insurance Trustee shall be held for the following purposes and the Insurance Trustee shall have the following powers and duties: (i) The sums shall be paid in installments by the Insurance Trustee to the contractor retained by Tenant and approved by Landlord as construction progresses, for payment of the cost of restoration. A ten percent (10%) retention fund shall be established that will be paid to the contractor on completion of restoration, payment of all costs, expiration of all applicable lien periods, and proof that the Property and the Improvements are free of all mechanics' liens and Iienable claims; (ii) Payments shall be made on presentation of certificates or vouchers from the architect or engineer retained by Tenant and approved by Landlord showing the amount due. If the Insurance Trustee, in its reasonable discretion, determines that the certificates or vouchers are being improperly approved by the architect or engineer retained by Tenant, the Insurance Trustee shall have the right to appoint an architect or an engineer to supervise construction and to make payments on certificates or vouchers approved by the architect or engineer retained by the Insurance Trustee. The reasonable expenses and charges of the architect or engineer retained by the Insurance Trustee shall be paid by the Insurance Trustee out of the trust fund; (iii) If, after the work of restoration has commenced (and subject to Section 9.3), the sums held by the Insurance Trustee are not sufficient to pay the actual cost of restoration, Tenant shall deposit the amount of the deficiency with the Insurance Trustee within ten (10) days after receipt of request for payment of such amount from the Insurance Trustee, which request shall be made by the Insurance Trustee promptly after it is determined there will be a deficiency; (iv) If the Insurance Trustee has received notice from Landlord that Tenant is in default under this Ground Lease, then, subject to the lien of a Mortgagee's Mortgage ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 54 of 86 and the Mortgagee's prior written consent, the Insurance Trustee shall pay to Landlord an amount sufficient to cure such default as specified in Landlord's notice to the Insurance Trustee; (v) Any amounts remaining after making the payments hereinabove referred to in clauses (a), (b) and (d) shall be paid to any leasehold Mortgagee to the extent (a) required by any Mortgage and (b) such leasehold Mortgagee makes written demand therefor to the Insurance Trustee; (vi) Any undisbursed funds remaining after compliance with all of the provisions of this Section 14.2 shall, if and to the extent required by any Mortgage, be delivered to the Mortgagee, and if there is no leasehold Mortgagee, to Tenant; and (vii) All actual costs and charges of the Insurance Trustee shall be paid by Tenant. If the Insurance Trustee resigns or for any reason is unwilling to act or continue to act, Landlord shall substitute a new Insurance Trustee in the manner described in this Section. 14.2.3 Both parties shall promptly execute all documents and perform all acts reasonably required by the Insurance Trustee to perform its obligations under this Section 14.2. 14.2.4 The provisions of this Section 14.2 shall be subject to Tenant's obligation to obtain insurance as set forth in Section 9.3. 14.3. Procedure for Restoring Improvements. 14.3.1 If and to the extent Tenant is obligated to restore the Improvements pursuant to this Article 14, Tenant shall restore the Improvements substantially in accordance with the Development Plans. Within ninety (90) days after the date of such damage or destruction, Tenant, at its cost, shall prepare and deliver to Landlord final plans and specifications and working drawings complying with applicable laws that will be necessary for such restoration. Such plans and specifications shall specify differences from the Development Plans. The plans and specifications and working drawings are subject to the approval of Landlord only insofar as they vary from the Development Plans. Landlord shall have twenty (20) days after receipt of the plans and specifications and working drawings to either approve or disapprove the plans and specifications and working drawings and return them to Tenant. If Landlord disapproves the plans and specifications and working drawings, Landlord shall notify Tenant of its objections in writing, specifying the objections clearly and stating what modifications are required for Landlord's approval. Tenant acknowledges that the plans and specifications and working drawings shall be subject to approval of the appropriate government bodies and that they will be prepared in such a manner as to obtain that approval. 14.3.2 The restoration shall be accomplished as follows: (i) Tenant shall commence and pursue the restoration with due diligence and shall complete the restoration within twenty-four (24) months after final plans and specifications and working drawings have been approved by the appropriate government bodies and all required permits have been obtained. (ii) Tenant shall retain a licensed contractor that is bondable. The contractor shall be required to carry public liability and property damage insurance, builders risk insurance, standard fire and extended coverage insurance, with vandalism and malicious mischief ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 55 of 86 endorsements, during the period of construction in accordance with Article 9. Such insurance shall contain waiver of subrogation clauses in favor of Landlord and Tenant in accordance with the provisions of and to the extent required by Section 9.7. (iii) Tenant shall notify Landlord of the date of commencement of the restoration not later than ten (10) days before commencement of the restoration to enable Landlord to post and record notices of non -responsibility. The contractor retained by Tenant shall not commence construction until a completion bond and a labor and materials bond have been delivered to Landlord to insure completion of the construction; provided, however, if Landlord determines, in the exercise of its reasonable discretion, that adequate protections exist, Landlord may waive the requirement that a completion bond or labor and materials bond be obtained in connection with a restoration hereunder. (iv) Tenant shall accomplish the restoration in a manner that will cause the least inconvenience, annoyance, and disruption to the Property and the Improvements. (v) On completion of the restoration Tenant shall immediately record a notice of completion. (vi) The restoration shall not be commenced until sums sufficient to cover the cost of restoration are placed with the Insurance Trustee as provided in Section 14.2. 14.3.3 The provisions of this Section 14.3 shall be subject to Tenant's obligation to obtain insurance as set forth in Section 9.3. 14.4. Mortgagee Protection. The following provisions are for the protection of a Mortgagee and shall, notwithstanding anything contained in this Ground Lease to the contrary, control: 14.4.1 Insurance. Any insurance proceeds payable from any policy of insurance (other than liability insurance) required by this Ground Lease shall be paid to the Mortgagee, if any, to the extent required by the Mortgage and shall be applied in accordance with the requirements of the Mortgage. The Mortgagee, if any, shall have the right to participate in all adjustments, settlements, negotiations or actions with the insurance company regarding the amount and allocation of any such insurance proceeds. Any insurance policies permitted or required by this Ground Lease shall name the Mortgagee, if any, as an additional insured or loss payee, as appropriate, if required by such Mortgage. 14.4.2 Restoration. Tenant shall have no obligation to restore or repair the Improvements following the occurrence of any casualty for which insurance is not required under this Ground Lease. The Mortgagee, if any and if it exercises any of its remedies set forth in this Ground Lease, shall have no obligation to restore or repair damage to the Improvements. Tenant shall have no obligation to restore or repair damage to the Improvements if the casualty occurs during the last five (5) years of this Ground Lease Term. In the event such a loss occurs in the last five (5) years, then, at the election of Tenant, with the prior written consent of the Mortgagee, if any, insurance proceeds shall be used, first, to clear the Property of the damaged Improvements and any debris, and second, the balance shall be used to either restore or repair the Property or to reduce or pay in full the Mortgage as more particularly provided in the Primary Loan documents, with any excess being payable in the same manner as Remaining Residual Receipts, specifically, fifteen percent (15%) to Tenant and eighty-five percent (85%) to Landlord to repay the Authority ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 56 of 86 Promissory Note and, upon repayment in full of the Authority Promissory Note, to payment of the adjusted Rent hereunder, determined pursuant to Section 4.1.2 hereof. ARTICLE 15 EMINENT DOMAIN 15.1. Notice. The party receiving any notice of the kind specified in this Section 15.1 shall promptly give the other party notice of the receipt, contents and date of the notice received. For purposes of this Article 15, the term "Notice" shall include: (i) Notice of Intended Taking; (ii) Service of any legal process relating to condemnation of the Property or the Improvements; (iii) Notice in connection with any proceedings or negotiations with respect to such condemnation; or (iv) Notice of intent or willingness to make or negotiate a private purchase, sale or transfer in lieu of condemnation. All Notices given pursuant to this Article 15 shall also be provided to the Investor Limited Partner. 15.2. Representation in Proceedings or Negotiations. Landlord and Tenant shall each have the right to represent their respective interests in each proceeding or negotiation with respect to a Taking or intended Taking and to make full proof of their claims. No agreements or settlement with or sale or transfer to the condemning authority shall be made without the consent of Landlord, but, as to its reversionary interest only, Landlord may enter into such agreement, settlement, sale or transfer without the consent of Tenant. Landlord and Tenant each agree to execute and deliver to the other any instruments which may be required to effectuate or facilitate the provisions of this Ground Lease relating to condemnation. 15.3. Total Taking. 15.3.1 In the event of a Total Taking, this Ground Lease shall terminate as of the date of the Taking. 15.3.2 If this Ground Lease is terminated pursuant to this Section 15.3, the Award for such Taking shall be apportioned and distributed as follows: (i) First, to the Mortgagee, if any, to the extent of the Mortgage; (ii) Second, to Landlord, a sum equal to the fair market value of Landlord's fee interest in the Property (subject to the remaining Term and the Rent reserved), if Landlord's fee interest in the Property is acquired in the Total Taking, on the date immediately preceding the Taking or threat of condemnation. The parties shall commence said appraisal by the earlier of ten (10) days after Tenant's receipt of a Notice of Intended Taking or ten (10) days after the date of the Taking; ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 57 of 86 (iii) Third, to Tenant, a sum equal to the fair market value of the Improvements made by Tenant on the date immediately preceding the Taking as determined by the appraisal method set forth in Section 15.10 and determined as if there were no Taking, nor threat of condemnation; plus the residual value of the Term, subject to the Rent reserved; plus any part of the Award attributable to the Tax Credits; and (iv) Fourth, to Landlord, the remainder, if any. 15.4. Substantial Taking. 15.4.1 In the event of a Taking which, in Tenant's and Landlord's mutually agreeable judgment is substantial, Tenant may, subject to the rights of the Mortgagee, if any, terminate this Ground Lease. If Tenant elects to terminate this Ground Lease under this provision, Tenant shall give written notice of its election to do so to Landlord within forty-five (45) days after receipt of a copy of a Notice of Intended Taking. In the event Landlord disputes the right of Tenant to terminate this Ground Lease under this provision, Landlord shall give Tenant notice of this fact within forty-five (45) days after receiving the notice of Tenant's election to terminate, and the parties shall either raise this issue in the eminent domain proceeding, if any, as an issue with respect to the apportionment of the Award between Landlord and Tenant or, if there is no eminent domain proceeding, pursue other remedies as permitted by Section 21.2. In the event it is determined that Tenant does not have the right to terminate this Ground Lease, the apportionment of the Award for such Taking and the obligations of Tenant to restore shall be governed by the terms of Section 15.6 or Section 15.8, whichever is applicable. 15.4.2 In the event it is determined that Tenant has the right to terminate this Ground Lease, or in the event Landlord does not dispute Tenant's right to terminate this Ground Lease, such termination shall be as of the time when the Taking entity takes possession of the portion of the Property and the Improvements taken. In such event, the Award for such Substantial Taking (including any award for severance, consequential or other damages which will accrue to the portion of the Property and/or the Improvements not taken) shall be apportioned and distributed as follows: (i) First, to the Mortgagee, if any, to the extent of the Mortgage; (ii) Second, to Landlord, a sum equal to the fair market value of the Landlord's fee interest in the Property taken (subject to the remaining Term and the Rent reserved) immediately preceding the date of the Taking as determined by the appraisal process provided for in Section 15.10, commenced as provided in Section 15.3.2, and as modified by Section 15.6.3; (iii) Third, to Landlord, an amount equal to the portion of the award for severance, consequential or other damages which accrued to the portion of the Landlord's fee interest in the Property and/or Improvements not taken; (iv) Fourth, to Tenant a sum equal to the fair market value of the Improvements made by Tenant taken immediately preceding the date of the Taking as determined by the appraisal process provided for in Section 15.10, commenced as provided in Section 15.3.2, and as modified by Section 15.6.3; plus the residual value of the Term, subject to the Rent reserved; plus any part of the Award attributable to the Tax Credits; and ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 58 of 86 (v) Fifth, to Landlord, the remainder, if any. 15.5. Tenant's Right to Revoke Notice of Termination. Notwithstanding anything to the contrary contained in Section 15.4, if Tenant has elected to terminate this Ground Lease, and the taking authority abandons or revises the Taking, Tenant shall have forty-five (45) days from receipt of written notice of such abandonment or revision to revoke its notice of termination of this Ground Lease. 15.6. Partial Taking. 15.6.1 In the event of a Partial Taking, this Ground Lease shall continue in full force and effect and there shall be no abatement in or reduction of any of Tenant's obligations hereunder. 15.6.2 The Award for such Partial Taking shall be apportioned and distributed first to the Mortgagee, if any, to the extent of the Mortgage, then to Landlord and Tenant in proportion to the fair market value of their respective interests in the Property and Improvements, as such interests existed immediately prior to such Partial Taking. Tenant's only interest in the Property and the Improvements for purposes of this Section 15.6.2 is in those Improvements constructed or rehabilitated by Tenant. Notwithstanding anything contained herein to the contrary, any part of the Award attributable to the Tax Credits shall belong to Tenant. 15.6.3 The fair market value of the parties' respective interests in the Property and the Improvements shall be determined by the appraisal process provided in Section 15.10, except that the assumptions listed in such Section shall not apply. Rather, the appraisal shall be based on the value of the Property as improved and encumbered by this Ground Lease and on the value of the Improvements as they stand, but without regard to any Taking or threat of condemnation. 15.6.4 Any Award for severance, consequential or other damages which accrues by reason of the Partial Taking to the portion of the Property or the Improvements not taken shall be distributed first to the Mortgagee, if any, to the extent of the Mortgage, then shall be apportioned between Landlord and Tenant in accordance with the diminution in value of their respective interests. 15.7. Obligation to Repair on Partial Taking. Promptly after any Partial Taking and regardless of the amount of the Award for such Taking, Tenant shall, to the extent of the Award received by Tenant and in the manner specified in the provisions of this Ground Lease, repair, alter, modify or reconstruct the Improvements and/or other improvements on the Property so as to make them usable for the designated purpose and capable of producing a fair and reasonable net income. 15.8. Temporary Taking. 15.8.1 In the event of a Temporary Taking of the whole or any part of the Property and/or Improvements, the Term shall not be reduced or affected in any way and Tenant shall continue to pay in full any sum or sums of money and charges herein reserved and provided to be paid by Tenant, and, subject to the other provisions of this Section 15.8, Tenant shall be entitled to any Award or payment for the temporary use of the Property and/or Improvements prior ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 59 of 86 to the termination of this Ground Lease, and Landlord shall be entitled to any Award or payment for such use after the termination of this Ground Lease. 15.8.2 If, after the occurrence of a temporary taking, possession of the Property and/or Improvements shall revert to Tenant prior to the expiration of the Term, Tenant shall, to the extent of the amount of any award or payment, unless at such time there remains less than five (5) years in the Term, restore the Property and/or Improvements and in all other respects indemnify and hold Landlord harmless from the effects of such Taking so that the Property and/or Improvements in every respect shall upon completion of such restoration be in the same condition as they were prior to the taking thereof. 15.8.3 Any Award or payment for damages or cost of restoration made on or after the termination of this Ground Lease shall be paid first to the Mortgagee, if any, to the extent of the Mortgage, then to Landlord absolutely, together with the remaining balance of any other funds paid to Tenant for such damages or cost of restoration and Tenant shall thereupon be excused from any obligation to restore the Property and/or Improvements upon the termination of such Temporary Taking except that any obligation that may have accrued for Tenant to restore the Property and/or Improvements prior to the commencement of said Temporary Taking shall continue to be the obligation of Tenant. 15.9. Mortgagee Protection. Notwithstanding anything contained in this Ground Lease to the contrary, any and all condemnation proceeds shall be paid first to the Mortgagee, if any, to be applied in accordance with the Mortgage and other documents that govern the loan secured by the Mortgage to reduce the Mortgage if required by the Mortgage documents. 15.10. Appraisal. Whenever an appraisal of the Property is called for under the terms of this Ground Lease, the parties shall use the following procedure: 15.10.1 Appointment of Appraiser. Within ten (10) days after notice from Landlord to Tenant, Landlord and Tenant shall each appoint an MAI appraiser to participate in the appraisal process provided for in this Section 15.10 and shall give written notice thereof to the other party. Upon the failure of either party so to appoint, the nondefaulting party shall have the right to apply to the Superior Court of Orange County, California, to appoint an appraiser to represent the defaulting party. Within ten (10) days of the parties' appointment, the two (2) appraisers shall jointly appoint a third MAI appraiser and give written notice thereof to Landlord and Tenant, or if within ten (10) days of the appointment of said appraisers the two (2) appraisers shall fail to appoint a third, then either party hereto shall have the right to make application to said Superior Court to appoint such third appraiser. 15.10.2 Determination of Fair Market Value. (i) Within thirty (30) days after the appointment of the third appraiser, the appraisers shall determine the fair market value of the Property and the Improvements in accordance with the provisions hereof, and shall execute and acknowledge their determination of fair market value in writing and cause a copy thereof to be delivered to each of the parties hereto. (ii) The appraisers shall determine the fair market value of the Property and the Improvements as of the date of Landlord's notice referred to in Section 15.10.1 above, based on sales of comparable property in the area in which the Property is located. If, however, in the judgment of a majority of the appraisers, no such comparable sales are available, then the ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 60 of 86 appraisal shall be based on the following assumptions: (i) that the Property is free and clear of this Ground Lease, the Improvements and all other improvements, and all easements and encumbrances; and (ii) that the Property is available for immediate sale and development for the purposes and at the density and intensity of development permitted under the zoning, subdivision and land use planning ordinances and regulations applicable to the Property in effect on the Commencement Date of this Ground Lease, and any changes or amendments thereto or modification or variance from the provisions thereof or conditional use permits which could reasonably be anticipated to have been granted or approved as of the date of this Ground Lease. In the event of an appraisal made with respect to a partial taking pursuant to Section 15.6.3 hereof, the assumptions in that section shall apply in lieu of the foregoing assumptions in this paragraph. Notwithstanding anything contained herein to the contrary, if the appraisal, for the particular purposes for which it is being done, should reasonably reflect the rent restrictions imposed on the Property pursuant to Article 8 of this Ground Lease, then such rent restrictions shall be taken into consideration by the appraisers. (iii) If a majority of the appraisers are unable to agree on fair market value within thirty (30) days of the appointment of the third appraiser, the three (3) appraisals shall be added together and their total divided by three (3). The resulting quotient shall be the fair market value of the Property and the Improvements. If, however, the low appraisal and/or high appraisal is or are more than ten percent (10%) lower and/or higher than the middle appraisal, the low and/or high appraisal shall be disregarded. If only one appraisal is disregarded, the remaining two appraisals shall be added together and their total divided by two (2). The resulting quotient shall be the fair market value of the Property and the Improvements. If both the low and high appraisals are disregarded, the middle appraisal shall be the fair market value of the Property. 15.10.3 Payment of Fees. Each of the parties hereto shall (a) pay for the services of its appointee, (b) pay one-half (1/2) of the fee charged by the appraiser selected by their appointees, and (c) pay one-half (1/2) of all other proper costs of the appraisal. ARTICLE 16 ENVIRONMENTAL 16.1. No Use of Hazardous Materials on the Property. Tenant covenants and agrees that it shall not, and that it shall not permit any subtenant to, treat, use, store, dispose, release, handle or otherwise manage Hazardous Materials on the Property except in connection with any construction, operation, maintenance or repair of the Improvements or in the ordinary course of its business, and that such conduct shall be done in compliance with all applicable federal, state and local laws, including all Environmental Laws. Tenant's violation of the foregoing prohibition shall constitute a breach hereunder and Tenant shall indemnify, hold harmless and defend Landlord for such violation as provided below. Except for Hazardous Materials first brought onto the Property by Tenant after the Commencement Date in violation of Environmental Laws, neither the presence of Hazardous Materials on or under the Property as of the Commencement Date nor the presence of Hazardous Materials on or under the Property after the Commencement Date shall constitute a breach by Tenant of any representation, warranty and covenant contained herein and to the extent the presence of such Hazardous Materials requires remediation, the costs of such remediation shall be borne by Landlord, rather than Tenant, pursuant to the provisions of Section 16.3 below. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 61 of 86 16.2. Notice and Remediation by Tenant. Tenant shall promptly give Landlord, and Landlord shall give Tenant, written notice of any notices, demands, claims or orders received by Tenant from any governmental agency pertaining to Hazardous Materials which may affect the Property. 16.3. Environmental Indemnity. Tenant shall save, protect, pay for, defend (with counsel acceptable to Landlord and/or City, as applicable), indemnify and hold harmless Landlord, City, and their respective elected and appointed officials, officers, employees, attorneys, representatives, volunteers, contractors and agents (collectively, "Indemnitees") from and against any and all Environmental Claims and any and all liabilities, suits, actions, claims, demands, penalties, damages (including, without limitation, penalties, fines and monetary sanctions), losses, costs or expenses (including, without limitation, consultants' fees, investigation and laboratory fees, attorneys' fees and remedial and response costs and third -party claims or costs) (the foregoing are hereinafter collectively referred to as "Liabilities") that may now or in the future be incurred or suffered by Indemnitees by reason of, resulting from, in connection with or arising in any manner whatsoever as a direct or indirect result of: (i) the presence, use, release, escape, seepage, leakage, spillage, emission, generation, discharge, storage, or disposal of any Hazardous Materials in, on, under, or about, or the transportation of any such Hazardous Materials to or from, the Property; (ii) the violation, or alleged violation, of any statute, ordinance, order, rule, regulation, permit, judgment, or license relating to the use, generation, release, leakage, spillage, emission, escape, discharge, storage, disposal, or transportation of Hazardous Materials in, on, under, or about, or to or from, the Property; (iii) the physical and environmental condition of the Property, (iv) any Liabilities relating to any Environmental Laws and other Governmental Requirements relating to Hazardous Materials and/or the environmental and/or physical condition of the Property, and (v) any Environmental Claims relating to the Project or the Property; provided, however, that the foregoing indemnity shall not apply to any Liabilities arising or occurring (a) prior to the commencement of this Ground Lease, (b) after the expiration or earlier termination of the Term of this Ground Lease or the date Tenant vacates the property, whichever occurs later, or (c) as a result of the grossly negligent or wrongful acts or omissions of Landlord or City. The foregoing indemnification shall continue in full force and effect regardless of whether such condition, liability, loss, damage, cost, penalty, fine, and/or expense shall accrue or be discovered before or after the termination of this Ground Lease. This indemnification supplements and in no way limits the scope of the indemnification set forth in Article 13. ARTICLE 17 ASSIGNMENT Because of the importance that Landlord places on Tenant's qualification, expertise and identity, and the reliance Landlord makes upon Tenant's ability to construct, complete, and operate the Project, during the Affordability Period, Tenant shall not assign or attempt to assign this Ground Lease or any right herein, except to such transferees as approved or permitted pursuant to this Article 17. Notwithstanding the foregoing, Tenant may sublease the Housing Units at the Project to Lower Income and Very Low Income Households at an Affordable Rent as provided herein. In addition, Tenant may grant a right of first refusal and/or option to purchase Tenant's interest in this Ground Lease and Tenant's interest in the Property, in the fifteenth (15th) year after the issuance of a certificate of occupancy for the Project by City to one or more general partners of Tenant. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 62 of 86 17.1. Prohibition Against Transfer: No Sale or Assignment During Term. The identities and qualifications of Tenant, as an Affiliate of The Related Companies of California, LLC, and as an experienced and successful Tenant and operator of affordable apartment complexes, are of particular concern to Landlord. It is because of this identity and these qualifications that Landlord has entered into this Ground Lease with Tenant. Except as expressly set forth in Sections 17.1.1 and 17.1.2, no voluntary or involuntary successor in interest of Tenant shall acquire any rights or powers under this Ground Lease by assignment, assumption or otherwise, nor shall Tenant make any total or partial transfer, conveyance, encumbrance to secure financing or refinancing, assignment or sublease of the whole or any part of the leasehold interest in the Property, nor shall there be any change in the general or limited partners of Tenant, without the prior written approval of the Executive Director pursuant to Section 17.1.4 below, which approval shall not be unreasonably withheld or delayed. 17.1.1 Permitted Transfers. Notwithstanding other provisions of this Ground Lease to the contrary, Landlord approval of an assignment or transfer of this Ground Lease or conveyance of Tenant's leasehold interest in the Property, or any part thereof, shall not be required in connection with any of the following ("Permitted Transfers"): (i) The granting of temporary easements or permits to facilitate the construction and development of the Project. (ii) A right of first refusal and/or option to purchase Tenant's interest in this Ground Lease and Tenant's interest in the Property or the limited partner's interest in Tenant, from and after the fifteenth (15th) year after the issuance of a certificate of occupancy for the Project by City to one or more general partners of Tenant. (iii) A transfer of a general partnership interest in Tenant to a nonprofit managing general partner entity. (iv) Notwithstanding anything to the contrary contained herein, without the consent of the Landlord, each Investor Limited Partner shall have the right to assign its interests as limited partner in the Tenant to an entity which is controlled by such Investor Limited Partner or is under common control with such Investor Limited Partner. (v) Notwithstanding anything to the contrary contained herein, Investor Limited Partner shall have the right to remove either general partner of Tenant, or both general partners, and substitute any Investor Limited Partner or an affiliate thereof as a general partner of the Tenant, pursuant to the Partnership Agreement, without Landlord's consent. Any proposed replacement of a general partner with an entity other than an Investor Limited Partner or an affiliate thereof will be subject to Landlord's prior consent, which shall not be unreasonably withheld. (vi) Subject to the restrictions of Section 4, et seq. of the Affordable Housing Agreement and Section 8.3, et seq. of this Ground Lease, the rental or lease for occupancy of each of the Housing Units in the Project to qualified Very Low and Low Income Households. (vii) Assignment for approved financing purposes, subject to such financing being considered and approved by Landlord pursuant to this Ground Lease. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 63 of 86 (viii) In the event of a Permitted Transfer by Tenant pursuant to this Section 17.1.1 not requiring Landlord's prior approval, Tenant nevertheless agrees that within thirty (30) days following such pre-approved assignment or transfer it shall give written notice to Landlord of such assignment or transfer along with a true and complete copy of the proposed assignment or transfer document conforming to the requirements of this Ground Lease. (ix) Notwithstanding anything to the contrary in this Ground Lease, the general partners in Tenant shall have the right, without the approval or consent of the Landlord, to pledge or otherwise encumber its partnership interest in Tenant to Mortgagee and the foreclosure of such pledge by Mortgagee shall not cause an Event of Default hereunder. 17.1.2 Conditions. In addition to the provisions of Section 17.1.1, Tenant's right to make an assignment after the recordation of the Release of Construction Covenants issued pursuant to the Affordable Housing Agreement shall be governed by Section 17.1.3 below and shall be subject to compliance with the following further conditions: (A) No Default. At the time of such assignment, this Ground Lease shall be in full force and effect and either no Event of Default (as defined in Section 21.1) then exists or no Event of Default will exist upon consummation of the assignment. (B) Assumption. The assignee shall have executed an express assumption of the obligations and liabilities of Tenant under this Ground Lease from and after the date of delivery and recording of the assignment and there shall have been delivered to Landlord at the time of the request for such assignment a conformed copy of such assumption. (C) Hold Property Interests Together. Tenant shall hold the Property, both its leasehold interest under this Ground Lease and the Improvements held hereunder together, and shall not separately sell, lease (except for occupancy of individual Housing Units in accordance with this Ground Lease), assign or transfer all or any part of its leasehold interest in the Property or its fee interest in the Improvements. 17.1.3 Landlord Consideration of Requested Transfer. Landlord agrees that it will not unreasonably withhold approval of a request for an assignment or transfer made pursuant to this Section 17.1, provided (a) Tenant delivers written notice to Landlord requesting such approval, (b) the proposed assignee or transferee possesses a reasonable level of operational experience and capability with respect to the operation of similar types of affordable rental housing projects in Southern California, (c) the proposed assignee or transferee possesses a reasonable level of net worth and resources as necessary to develop, operate, and manage the Project, (d) such assignment or transfer will not negatively affect the Rent or adjusted Rent to be paid to Landlord pursuant to Section 4.1, et seq. (exclusive of Section 4.1.3), and (e) the assignee(s) or transferee(s) completely and fully assume(s) the obligations of Tenant under this Ground Lease pursuant to an assignment and assumption agreement(s) in a form which is reasonably acceptable to Landlord and its legal counsel(s). Such notice shall be accompanied by evidence regarding the proposed assignee's or purchaser's qualifications and experience and its financial commitments and resources sufficient to enable Landlord to evaluate the proposed assignee or purchaser pursuant to the criteria set forth in this Section 17.1.4 and other criteria as reasonably determined by Landlord. Landlord shall approve or disapprove the request within thirty (30) days of its receipt of Tenant's notice and submittal of complete information and materials required herein. Landlord approval shall not be required for transfers or assignments for Approved Financing including foreclosure or deed in lieu of foreclosure. In no event, however, ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 64 of 86 shall Landlord be obligated to approve the assignment or transfer of this Ground Lease or the City Covenants requiring Landlord's approval, pursuant to this Section 17.1.4, except to an approved transferee or assignee of Tenant's rights in and to the Property and the Project, based on Landlord's reasonable determination that such transferee or assignee has the experience, financial strength, knowledge, and overall capability to own, operate and manage the Project in accordance with the terms, conditions, and restrictions contained in this Ground Lease. In addition, Landlord shall not be required to grant its approval of any proposed transfer or assignment unless all information reasonably requested by Landlord relating to the proposed transferee or assignee entity and all general and limited partners of such entity, including true and correct copies of an executed Partnership Agreement, if the proposed assignee/transferee is a partnership, true and correct copies of articles of incorporation if the proposed assignee/transferee is a corporation, plus current certified financial statements of the entity and financial statements relating to other affordable rental housing projects developed and/or operated by such entity(ies) and reporting and compliance documentation for such projects submitted for public entities providing funding to such projects, etc., as applicable. (i) In the event Tenant transfers all or any portion of the Project, subject to and with Landlord approval, any Transfer Net Proceeds shall be split between Landlord and Tenant in the same manner as Remaining Residual Receipts (eighty-five percent (85%) to Landlord and fifteen percent (15%) to Tenant) until Landlord has received all Rent under this Ground Lease, as adjusted pursuant to Sections 4.1.2 or 4.1.3 hereof, as applicable (including accrued and unpaid Rent as well as prepayment of Rent attributable to the remaining Term of this Ground Lease) and all Additional Rent owing hereunder. Thereafter, any remaining Transfer Net Proceeds shall belong to Tenant. The provisions of this Section 17.1.3(a) shall be of no further force or effect upon a foreclosure, deed in lieu of foreclosure, or execution of a New Ground Lease. 17.1.4 Approval of Refinancing of Primary Loan. The Executive Director shall have the right to review all documents related to and to approve (which approval will not be unreasonably withheld) or disapprove any refinancing of the Primary Loan and any other debt secured by Tenant's ground leasehold interest in the Property, which refinancing will: (a) increase the interest rate applicable to such debt, or (b) increase the outstanding principal amount of such debt, or (c) cause or require the release or withdrawal of cash or equity from any part of the Project, or (d) otherwise increase the aggregate annual debt service payments on such loan. The Executive Director shall reasonably consider any such proposed refinancing based on an economic evaluation conducted by Landlord's economic consultant that analyzes the effect of the proposed refinancing on (i) the availability of Residual Receipts to repay the Authority Subordinate Loan, (ii) the availability of Cost Savings pursuant to Section 3.11 of the Affordable Housing Agreement, and (iii) the ability of Tenant to repay in full the Primary Loan and any other debt or other liens against the Property as such payment becomes due. In the event Tenant refinances either or both Primary Loan(s) (or other debt), subject to and with Landlord approval, and Tenant withdraws equity from the Project, any Refinancing Net Proceeds shall be split between Landlord and Tenant in the same manner as Remaining Residual Receipts (eighty-five percent (85%) to Landlord and fifteen percent (15%) to Tenant) until Landlord has received all Rent under this Ground Lease, as adjusted pursuant to Sections 4.1.2 or 4.1.3 hereof, as applicable (including accrued and unpaid Rent as well as prepayment of Rent attributable to the remaining Term of this Ground Lease) and all Additional Rent owing hereunder. Thereafter, any remaining Refinancing Net Proceeds shall belong to Tenant. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 65 of 86 17.1.5 Assignment Agreement. No assignment of any interest in this Ground Lease made with Landlord's consent or as herein otherwise permitted shall be effective unless and until there shall have been delivered to Landlord an executed counterpart of such assignment or other transfer document containing an agreement, in recordable form, executed by the assignor and the proposed assignee, wherein and whereby such assignee assumes due performance of the obligations on the assignor's part to be performed under this Ground Lease from the effective date of the assignment to the end of the Term. 17.1.6 Further Assignments. The consent by Landlord to an assignment shall not in any way be construed to relieve Tenant from obtaining the express consent in writing of Landlord to any further assignment if required by the terms of this Ground Lease. 17.1.7 Other Rights of Mortgagees. Landlord agrees that none of the restrictions or limitations on assignment or transfer by Tenant set forth in this Article 17 shall be construed to limit or abrogate the rights of a Mortgagee to (a) seek the appointment of a receiver, or (b) delegate or assign its rights under this Ground Lease to any third party in connection with the exercise of said Mortgagee's rights and remedies under its Mortgage. 17.1.8 Prohibition Against Landlord Transfers. Notwithstanding anything to the contrary set forth in this Ground Lease, unless required by statute, court order or operation of law, Landlord shall not transfer, assign, pledge, or hypothecate its fee interest in the Property (other than to entities under common control with Landlord or other governmental entities under applicable law) prior to the expiration of the Tax Credit Compliance Period without the consent of Investor Limited Partner, which consent shall not be unreasonably withheld, conditioned, or delayed. 17.1.9 Terminable Upon Foreclosure. Notwithstanding anything contained in this Ground Lease to the contrary, upon foreclosure of a Mortgage, acceptance by a Mortgagee of an assignment or deed in lieu of foreclosure or execution of a New Ground Lease, Article 17 of this Ground Lease shall be terminable by the purchaser at the foreclosure sale, or the assignee or grantee of a deed in lieu of foreclosure, by notice to Landlord. ARTICLE 18 MORTGAGES 18.1. Ground Leasehold Mortgages. At all times during the Term, Tenant shall have the right to mortgage, pledge, deed in trust, assign rents, issues and profits and/or collaterally (or absolutely for purposes of security if required by an approved Lender) assign its leasehold estate and interest in this Ground Lease (but in no event Landlord's fee interest), or otherwise encumber this Ground Lease, and/or the interest of Tenant hereunder, in whole or in part, and any interests or rights appurtenant to this Ground Lease, and to assign or pledge the same as security for any debt (the holder of any such mortgage, pledge or other encumbrance, and the beneficiary of any such deed of trust being hereafter referred to as "Mortgagee" and the mortgage, pledge, deed of trust or other instrument as amended or modified as permitted by the terms of this Ground Lease and with the approval of Landlord's Executive Director, hereafter referred to as "Mortgage"), upon and subject to each and all of the following terms and conditions: (i) Prior to the issuance of a Release of Construction Covenants for the Project, Mortgages entered into by Tenant shall be limited in purpose to and shall not exceed ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 66 of 86 the amount necessary and appropriate to develop the Improvements, and to acquire and install equipment and fixtures thereon. Said amount shall include all hard and soft costs of acquisition, development, construction, lease -up and operation of the Improvements. Upon and after the issuance of the Release of Construction Covenants for the Project, Mortgages entered into by Tenant shall be subject to the reasonable approval of Landlord's Executive Director. (ii) Any permitted Mortgages entered into by Tenant are to be originated only by a Lender or Lenders approved in writing by Landlord, which approval will not be unreasonably withheld and for which Landlord shall state the reasons for any such disapproval. Any Lender must be duly licensed or registered with any regulatory agency having jurisdiction over its operation, if any; and any Lender must not be under any order or judgment of any court or administrative agency restricting or impairing its operation as a Lender where the restriction or impairment would be directly related to the proposed loan to Tenant. Upon the reasonable request of Landlord, the beneficial owners of Lender must be disclosed to Landlord. is hereby preapproved as a Lender, subject to Landlord's reasonable approval of the terms of any Mortgage encumbering Tenant's leasehold interest in the Property or the Project. (iii) All rights acquired by said Mortgagee shall be subject to each and all of the covenants, conditions and restrictions set forth in this Ground Lease, and to all rights of Landlord hereunder, none of which covenants, conditions and restrictions is or shall be waived by Landlord by reason of the giving of any Mortgage. If Tenant encumbers its leasehold estate by way of a Mortgage with the reasonable consent of Landlord as permitted herein, and should Landlord be advised in writing of the name and address of the Mortgagee, then this Ground Lease shall not be terminated or canceled on account of any Event of Default by Tenant in the performance of the terms, covenants or conditions hereof until Landlord shall have complied with the provisions of Section 18.2 hereof as to the Mortgagee's rights to cure. Notwithstanding the foregoing and subject to Section 8.3.10 herein, the Mortgage of the Primary Loan is subject to the terms and conditions of a subordination agreement between the Lender and Landlord and any other Mortgage is subject to the terms of this Ground Lease. (iv) No cancellation, surrender, termination, amendment, or modification of this Ground Lease shall be effective without the written consent of the holder of any Mortgage including, without limitation, 18.2. Landlord's Forbearance and Right to Cure Defaults on Mortgages. (i) Notice. Landlord will give to Mortgagee, at such address as is specified by the Mortgagee in accordance with Section 25.1 hereof, a copy of each notice or other communication with respect to any claim that a default exists or is about to exist from Landlord to Tenant hereunder at the time of giving such notice or communication to Tenant, and Landlord will give to Mortgagee a copy of each notice of any rejection of this Ground Lease by any trustee in bankruptcy of Tenant. Landlord will not exercise any right, power or remedy with respect to any Event of Default hereunder, and no notice to Tenant of any such Event of Default and no termination of this Ground Lease in connection therewith shall be effective, unless Landlord has given to Mortgagee written notice or a copy of its notice to Tenant of such Event of Default or any such termination, as the case may be, and an opportunity to cure as provided in Section 18.10 ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 67 of 86 below. Further, after the receipt by Tenant of a notice of default under this Ground Lease and the expiration of any applicable period of cure given to Tenant under this Ground Lease, Landlord shall deliver an additional notice ("Mortgagee's Notice") to Mortgagee specifying the default and stating that Tenant's cure period has expired. (ii) Mortgagee's Transferees, etc. In the event the leasehold estate hereunder shall be acquired by foreclosure, trustee's sale or deed or assignment in lieu of foreclosure of a Mortgage, the purchaser at such sale or the transferee by such assignment and its successors as holders of the leasehold estate hereunder shall not be liable for any past due Rent, if any, or other obligations accruing after its or their subsequent sale or transfer of such leasehold estate and such purchaser or transferee and its successors shall be entitled to transfer such estate or interest without consent or approval of Landlord. Additionally, in the event the leasehold estate hereunder shall be acquired by foreclosure, trustee's sale or deed or assignment in lieu of foreclosure of a Mortgage, the purchaser at such sale or the transferee by such assignment and its successors as holders of the leasehold estate hereunder shall be liable for the payment of all Rent (including Additional Rent and any adjusted Rent pursuant to Section 4.1, et seq., if any), becoming due with respect to the period during which such purchaser, transferee or other successor is the holder of the leasehold estate hereunder during the entirety of the remaining Term. This Section shall also apply to the rights of a Mortgagee in connection with the entry into a New Ground Lease under Section 18.10(c)(8) and to the appointment of a receiver on behalf of a Mortgagee. 18.3. Limited Liability of Mortgagee for Prior Indemnified Acts. A Mortgagee (or any permitted successor to Tenant's leasehold interest hereunder arising through a Mortgagee) shall not be obligated to assume the liability of Tenant for any indemnities arising for a period prior to such Mortgagee (or such successor) acquiring the right to possession of the Property under this Ground Lease. 18.4. Landlord Cooperation. Landlord covenants and agrees that it will act and fully cooperate with Tenant in connection with Tenant's right to grant leasehold mortgages as hereinabove provided. At the request of Tenant or any proposed or existing Mortgagee, Landlord shall promptly execute and deliver (but at no cost to Landlord) (i) such documents or instruments reasonably requested to evidence, acknowledge and/or perfect the rights of Mortgagees as herein provided; and (ii) an estoppel certificate in such form as may be reasonably requested by a Mortgagee, limited to certifying the status of this Ground Lease and Tenant's leasehold interest herein and such matters as are reasonably requested by Tenant or such Mortgagees (provided no such matters shall effect Landlord's fee interest or alter or amend the terms of this Ground Lease) unless expressly approved by Landlord. Such estoppel certificate shall include, but not be limited to, certification by Landlord that (a) this Ground Lease is unmodified and in full force and effect (or, if modified, state the nature of such modification and certify that this Ground Lease, as so modified, is in full force and effect), (b) all rents currently due under this Ground Lease have been paid (or, if unpaid, the period and amount of any arrearages, penalties, interest and other charges), and (c) there are not, to Landlord's knowledge, any uncured Events of Default on the part of Tenant under this Ground Lease or facts, acts or omissions which with the giving of notice or passing of time, or both, would constitute an Event of Default (or, if there is a default, the nature and scope of the default). Any such estoppel certificate may be conclusively relied upon by any proposed or existing leasehold Mortgagee or permitted assignee of Tenant's interest in this Ground Lease. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 68 of 86 18.5. No Subordination of Landlord's Fee Interest, Affordable Housing Covenants, or Entitlements. Landlord's fee interest in the Property, the Affordable Housing Covenants, and the Entitlement shall each and all be senior to, and shall not be subordinated to, any financing obtained by Tenant in connection with the Property. 18.6. Priority. This Ground Lease, any extensions, renewals or replacements thereof, any sublease entered into by Tenant as sublessor, and any Mortgage or other encumbrance recorded by any Mortgagee shall be superior to any future mortgages, deeds of trust or similar encumbrances placed by Landlord on the Property and to any lien right, if any, of Landlord on the buildings, and any furniture, fixtures, equipment or other personal property of Tenant upon the Property or any interest of Landlord in sublease rentals or similar agreements, and, subject to payment of costs and expenses incurred therefor being paid by Tenant, Landlord agrees to execute, acknowledge (if appropriate) and deliver any additional documents reasonably requested by Mortgagee to confirm the foregoing. 18.7. Claims. Landlord and Tenant shall deliver to Mortgagee notice of any litigation between the parties or involving the Property or this Ground Lease. Mortgagee shall have the right, at its option and its expense, to intervene and become a party to any such proceedings. If Mortgagee elects not to intervene or become a party, Landlord shall deliver to Mortgagee prompt notice of and a copy of any award, decision or settlement agreement made in connection with any such proceeding. 18.8. Further Amendments. Subject to Section 18.5 above, Landlord and Tenant shall cooperate in including in the Ground Lease by suitable and reasonable amendment or amendments from time to time of a provision or provisions that may be reasonably requested by any proposed Mortgagee for the purpose of implementing the mortgagee protection provisions contained in this Ground Lease to allow the Mortgagee reasonable means to protect or preserve the lien of its Mortgage upon the occurrence of a default under the terms of this Ground Lease. Subject to Section 18.5 above, Landlord and Tenant each agree to execute and deliver (and to acknowledge for recording purposes, if necessary) such agreement(s) or instrument(s) reasonably required to effect such amendment(s). 18.9. Loan Obligations. Nothing contained in this Ground Lease shall relieve Tenant of its obligations and responsibilities under any Mortgage loans and Mortgage loan documents to operate the Project as set forth therein. 18.10. Liens and Encumbrances Against Tenant's Interest in this Ground Leasehold Estate. (i) Tenant (and Foreclosure Transferee, as applicable) shall have the right, subject to Landlord's reasonable consent pursuant to Sections 17.1.4 and 18.1 of this Ground Lease, to encumber the leasehold estate created by this Ground Lease and the Improvements with one or more deeds of trust or mortgages, in conformance with the requirements of Sections 17.1.4 and 18.1 hereof and subject to Section 18.5 above. (ii) Tenant shall not have the right to encumber Landlord's fee interest in the Property or Landlord's reversionary interest in the Improvements. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 69 of 86 (iii) For as long as there is any lien securing any Mortgage loans: (A) Landlord shall not agree to any mutual termination or accept any surrender of this Ground Lease, nor shall Landlord consent to any amendment or modification of this Ground Lease without the prior written consent of each Lender which has an outstanding Mortgage loan. (B) Notwithstanding any default by Tenant under this Ground Lease, Landlord shall have no right to terminate this Ground Lease unless Landlord shall have given each Lender that has an outstanding Mortgage loan written notice of such default (which describes the default(s) in reasonable detail) and such Lender or Lenders shall have failed to remedy such default or acquire Tenant's leasehold estate created by this Ground Lease or commence foreclosure or other appropriate proceedings as set forth in, and within the time specified by, this Section 18. (C) Any Lender which has an outstanding Mortgage loan shall have the right, but not the obligation, at any time to pay any or all of the Rent due pursuant to the terms of this Ground Lease, and do any other act or thing required of Tenant by the terms of this Ground Lease, to prevent termination of this Ground Lease. Any Mortgagee and its agents and contractors shall have a right to enter the Property for purposes of accomplishing the foregoing, so long as such Mortgagee indemnifies and holds Landlord harmless from any and all damage and/or liability arising from such entry upon the Property. Each Lender shall have ninety (90) days after receipt of a Mortgagee's Notice to cure the default described in the Mortgagee's Notice. All payments so made and all things so done shall be as effective to prevent a termination of this Ground Lease as the same would have been if made and performed by Tenant instead of by Lender(s). (D) In addition to the cure period provided in paragraph (3) above, if the default is such that possession of the Property may be reasonably necessary to remedy the default, any Lender that has an outstanding Mortgage loan shall have a reasonable time after the expiration of such ninety (90) day period within which to remedy such default, provided that (i) such Lender shall have fully cured any default in the payment of any monetary obligations of Tenant under this Ground Lease within such ninety (90) day period and shall continue to pay currently such monetary obligations when the same are due, and (ii) such Lender shall have acquired Tenant's leasehold estate hereunder or commenced foreclosure or other appropriate proceedings prior to or within such period, and shall be diligently prosecuting the same. (E) Any default under this Ground Lease which by its nature cannot be remedied by any Lender shall be deemed to be remedied if (i) within ninety (90) days after receiving a Mortgagee's Notice, or prior thereto, any Lender shall have acquired Tenant's leasehold estate or commenced foreclosure or other appropriate proceedings, (ii) Lender shall diligently prosecute any such proceedings to completion, (iii) Lender shall have fully cured any default in the payment of any monetary obligations of Tenant hereunder which does not require possession of the Property, and (iv) after gaining possession of the Property, the Lender shall perform all other obligations of Tenant hereunder capable of performance by Lender when the obligations are due. (F) If any Lender is prohibited, stayed or enjoined by any bankruptcy, insolvency or other judicial proceedings involving Tenant from commencing or ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 70 of 86 prosecuting foreclosure or other appropriate proceedings, the times specified for commencing or prosecuting such foreclosure or other proceedings shall be extended for the period of such stay, prohibition or injunction; provided that any Lender shall have fully cured any default in the payment of any monetary obligations of Tenant under this Ground Lease and shall continue to pay currently such monetary obligations when the same fall due; provided, further, that such Lender shall not interfere with Landlord's efforts to seek compliance by Tenant with any non -monetary obligation under this Ground Lease. (G) In the event any Foreclosure Transferee becomes Tenant under this Ground Lease by means of foreclosure or assignment of the leasehold interest hereunder in lieu of foreclosure or pursuant to any New Ground Lease obtained under subsection (8) below, that Foreclosure Transferee shall be personally liable under this Ground Lease or such New Ground Lease only for the period of time that Foreclosure Transferee remains Tenant thereunder, and that Foreclosure Transferee's right to assign this Ground Lease or such New Ground Lease shall be subject to the restrictions of Article 17 and Section 18.13 and as otherwise set forth in this Ground Lease. Nothing in this Section 18.10 shall be construed to obligate any Foreclosure Transferee to remedy any default of Tenant, and any failure of any Lender to complete any such cure after commencing the same shall not give rise to any liability of any other Lender to Landlord or Tenant. (H) If this Ground Lease is terminated due to a foreclosure, order of a bankruptcy court, or otherwise, upon written request by Foreclosure Transferee given within sixty (60) days after such termination, Landlord shall enter into a New Ground Lease of the Property with the Foreclosure Transferee ("New Ground Lease") for the remainder of this Ground Lease Term with the same agreements, covenants, reversionary interests and conditions (except for any requirements which have been fulfilled by Tenant prior to termination) as are contained in this Ground Lease and with priority equal to this Ground Lease, which New Ground Lease shall be effective as of the date of termination of the original Ground Lease; provided, however, that a Foreclosure Transferee shall promptly exercise best efforts to and shall cure any defaults by Tenant susceptible to cure by Foreclosure Transferee. The Tenant under the New Ground Lease shall have the same right, title and interest in and to all Improvements located on the Property as Tenant had under the terminated Ground Lease immediately prior to its termination. Landlord shall by quitclaim deed or by the terms of the New Ground Lease convey to the Foreclosure Transferee title to the improvements, if any, which become vested in Landlord as a result of the termination of the Ground Lease and shall assign Landlord's interest in all existing subleases for all or any part of the Property and all attornment given by the subleases. Landlord shall not terminate or agree to terminate any such sublease or enter into any new lease or sublease for all or any portion of the Property without Mortgagee's prior written consent. Foreclosure Transferee shall be responsible for all costs reasonably incurred by Landlord in connection with the preparation and execution of such New Ground Lease. (1) The Investor Limited Partner shall have the same rights to receive notices of default as any Lender authorized under this Section 18.10(c). Nothing in this Section 18.10(c)(9) shall limit or impair the Investor Limited Partner's rights to cure under Section 21.1.5 below. (J) The parties shall not amend this Ground Lease without the consent of each Lender and the Investor Limited Partner. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 71 of 86 (K) No Mortgagee shall be required to perform any act which is not susceptible to performance by a Mortgagee, such as to cure a filing or condition of bankruptcy or insolvency or to cure or commence the cure of any default which is Borrower's failure to pay any lien, charge or encumbrance which is junior in priority to the Mortgagee's encumbrance. (iv) Any Mortgage created pursuant to Section 18.1 or subsection (a) of this Section 18.10 shall be subject to the provisions of this Ground Lease and all rights of Landlord under this Ground Lease. (v) No Mortgagee or its designee or transferee shall be or become liable to Landlord as an assignee of this Ground Lease or otherwise unless it expressly assumes by written instrument executed by Landlord and Mortgagee or its designee or transferee such liability (in which event the Mortgagee's, designee's or transferee's liability shall be limited to the period of time during which it is the owner of the leasehold estate created hereby) and no assumption shall be inferred from or result from acceptance of an estoppel certificate from Landlord, acceptance of a Mortgage of Tenant's leasehold estate, or by foreclosure or other appropriate proceedings in the nature thereof or as the result of any other action or remedy provided for by such ground leasehold Mortgage or other instrument or from a conveyance from Tenant pursuant to which the purchaser at foreclosure or grantee shall acquire the rights and interest of Tenant under the terms of this Ground Lease. (vi) On transfer of the Ground Lease at any foreclosure sale, or upon creation of a New Ground Lease, any or all of the following Events of Default relating to the prior lessee under the Ground Lease shall be deemed cured: (A) Attachment, execution or other judicial levy upon the Ground Lease; (B) Assignment of the Ground Lease for the direct or indirect benefit of creditors of the prior Tenant; (C) Judicial appointment of a receiver or similar officer to take possession of the Ground Lease; (D) Filing any petition by, for or against Tenant under any chapter of the federal Bankruptcy Act or any federal or state debtor relief statute, as amended; (E) Any failure by Tenant to make a disclosure of a hazardous substance release as required by applicable federal, state or local law, the Ground Lease, or otherwise; and (F) Any other defaults personal to the prior owner of the Ground Lease and/or not otherwise reasonably curable by Mortgagee. (vii) A Foreclosure Transferee shall succeed to all interest of Tenant in any security or other deposits or other impound payments paid by Tenant to Landlord, except to the extent such security or other deposit or impound payment is used to cure an Event of Default of Tenant hereunder. (viii) Foreclosure of any Mortgage or any sale thereunder, whether by judicial proceedings or by virtue of any power of sale contained in such Mortgage, or any ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 72 of 86 conveyance of the leasehold estate under this Ground Lease from Tenant to a Foreclosure Transferee in lieu of foreclosure or other appropriate proceedings in the nature thereof, shall not require the consent of Landlord or constitute a breach of any provision or a default under this Ground Lease. Landlord shall recognize the Foreclosure Transferee as the Tenant under this Ground Lease following any such transfer, subject to the obligations of the Foreclosure Transferee to comply with this Ground Lease. 18.11. Cost of Loans to be Paid by Tenant. The Tenant affirms that it shall bear all of the costs and expenses in connection with (i) the preparation and securing of the Mortgage loans, (ii) the delivery of any instruments and documents and their filing and recording, if required, (iii) all taxes and charges payable in connection with the Mortgage loans, and (iv) all costs reasonably incurred by Landlord in providing any estoppel certificates and/or in making any amendments of this Ground Lease requested by Tenant or Lenders. 18.12. No Merger. There shall be no merger, without the consent of the Mortgagee under any Mortgage, of the leasehold estate and the fee estate in the Property merely because both estates are acquired or become vested in the same person or entity. 18.13. Transfer Rights. Foreclosure of any Mortgage, or any sale thereunder, whether by judicial proceedings or by virtue of any power contained in the Mortgage, or any conveyance of the leasehold estate hereunder from Tenant to any Mortgagee or an affiliate of Mortgagee or entity controlled by Mortgagee, through, or in lieu of, foreclosure or other appropriate proceedings in the nature thereof, shall not require the consent of Landlord or constitute a breach of any provision of or a default under this Ground Lease, and upon such foreclosure, sale or conveyance, Landlord shall recognize the purchaser or other transferee in connection therewith as Tenant hereunder, subject to the obligations of the Foreclosure Transferee to comply with this Ground Lease. ARTICLE 19 SUBLEASING 19.1. Subleasing of Property. All subleases made by Tenant to residents of the Housing Units at the Project (each, a "Resident Lease"; collectively, "Resident Leases") shall be in compliance with the Affordable Housing Covenants, the HOME Regulations, this Ground Lease, and all applicable regulations promulgated by TCAC and the requirements of the Tax Credit Regulatory Agreement, and shall be subject to the following provisions and restrictions: 19.1.1 Each Resident Lease shall contain a provision, satisfactory to Landlord, requiring the subtenant to attorn to Landlord upon (a) an Event of Default by Tenant under this Ground Lease, and (b) receipt by such subtenant of written notice of such Event of Default and instructions to make such subtenant's rental payments to Landlord. 19.1.2 On any termination of this Ground Lease prior to the expiration of the Term, all of Tenant's interest as sublessor under any and all existing valid and enforceable Resident Leases for which Landlord has issued a non -disturbance agreement shall be deemed automatically assigned, transferred and conveyed to Landlord and subtenants under such Resident Leases shall be deemed to have attorned to Landlord. Landlord shall thereafter be bound on such Resident Leases to the same extent Tenant, as sublessor, was bound thereunder and Landlord shall have all the rights under such Resident Leases that Tenant, as sublessor, had ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 73 of 86 under such Resident Leases; provided, however, that any amendments to any such Resident Lease made after the issuance of a non -disturbance agreement to a subtenant shall not be binding on Landlord. 19.1.3 Each Resident Lease shall expressly provide that it is subject to each and all of the covenants, conditions, restrictions and provisions of this Ground Lease. 19.2. Nondisturbance Agreements. Landlord shall execute nondisturbance agreements with any subtenant, which nondisturbance agreement shall provide that (a) so long as such subtenant has not defaulted under the terms of the Resident Lease, such subtenant's rights will not be terminated by Landlord on Landlord's exercise of Landlord's right to terminate this Ground Lease for Tenant's breach, and (b) Landlord shall not be bound by prepayments of more than one month's rent or security deposits in excess of one month's rent under such nondisturbance agreement unless such excess prepayment and/or deposit has, in fact, been transferred to Landlord. 19.3. Rights of Mortgagees. Notwithstanding anything contained in this Ground Lease to the contrary, all attornment provisions applicable to Landlord shall also be applicable to a Mortgagee and, as between Landlord and Mortgagee, the Mortgagee shall have priority in any attornment situation. ARTICLE 20 PERFORMANCE OF TENANT'S COVENANTS 20.1. Right of Performance. 20.1.1 Rights of Landlord. If Tenant shall at any time fail to pay any Imposition or other charge in accordance with Article 4 hereof, within the time period therein permitted, or shall fail to pay for or maintain any of the insurance policies provided for in Article 9 hereof, within the time therein permitted, or to make any other payment or perform any other act on its part to be made or performed hereunder, within the time permitted by this Ground Lease, then Landlord, after thirty (30) days' written notice to Tenant and the Investor Limited Partner (or, in case of an emergency, on such notice, or without notice, as may be reasonable under the circumstances) and without waiving or releasing Tenant from any obligation of Tenant hereunder, may (but shall not be required to): (i) pay such Imposition or other charge payable by Tenant pursuant to the provisions of Article 4 hereof, or (ii) pay for and maintain such insurance policies provided for in Article 9 hereof, or (iii) make such other payment or perform such other act on Tenant's part to be made or performed as in this Ground Lease provided. 20.1.2 Rights of Mortgagees. Notwithstanding anything in this Ground Lease to the contrary, all of the performance rights available to Landlord under this Section 20.1.1 shall also be available to Mortgagee, and, as between Landlord and Mortgagee, the performance rights ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 74 of 86 of Mortgagee under Section 18.10 shall take precedence over the performance rights of Landlord under Section 20.1.1. 20.1.3 Rights of Investor Limited Partner. Prior to making a payment to a third party on behalf of Tenant as permitted by Section 20.1.1, Landlord shall provide not fewer than five (5) business days' notice (and longer, if reasonably possible under the circumstances, as required by Section 20.1.1) to the Investor Limited Partner and the Investor Limited Partner shall have the right to make the payment on Tenant's behalf prior to Landlord's right under Section 20.1.1. 20.2. Reimbursement and Damages. All sums so paid by Landlord and all costs and expenses incurred by Landlord in connection with the performance of any such act, together with interest thereon at the rate provided in Section 4.6 from the respective dates of Landlord's making of each such payment or incurring of each such cost or expense, shall constitute Additional Rent payable by Tenant under this Ground Lease and shall be paid by Tenant to Landlord on demand. Landlord shall not be limited in the proof of any damages which Landlord may claim against Tenant arising out of or by reason of Tenant's failure to provide and keep in force insurance as aforesaid, to the amount of the insurance premium or premiums not paid or incurred by Tenant and which would have been payable upon such insurance, but Landlord shall also be entitled to recover as damages for such breach, the uninsured amount of any loss (to the extent of any deficiency in the insurance required by the provisions of this Ground Lease), damages, costs and expenses of suit, including reasonable attorneys' fees, suffered or incurred by reason of damage to, or destruction of, the Improvements, occurring during any period in which Tenant shall have failed or neglected to provide insurance as aforesaid. ARTICLE 21 EVENTS OF DEFAULT; REMEDIES 21.1. Events of Default. Any one or all of the following events shall constitute an "Event of Default" hereunder: 21.1.1 If Tenant shall default in the payment of any Rent or Additional Rent when and as the same become due and payable and such default shall continue for more than ten (10) days after Landlord shall have given written notice thereof to Tenant; or 21.1.2 The abandonment or vacation of the Property by Tenant for a period of thirty (30) days or more; or 21.1.3 The entry of any decree or order for relief by any court with respect to Tenant, or any assignee or transferee of Tenant (hereinafter "Assignee"), in any involuntary case under the Federal Bankruptcy Code or any other applicable federal or state law; or the appointment of or taking possession by any receiver, liquidator, assignee, trustee, sequestrator or other similar official of Tenant or any Assignee (unless such appointment is in connection with a Mortgagee's exercise of its remedies under its Mortgage), or of any substantial part of the property of Tenant or such Assignee, or the ordering or winding up or liquidating of the affairs of Tenant or any Assignee and the continuance of such decree or order unstayed and in effect for a period of ninety (90) days or more (whether or not consecutive); or the commencement by Tenant or any such Assignee of a voluntary proceeding under the Federal Bankruptcy Code or any other applicable state or federal law or consent by Tenant or any such Assignee to the entry of any ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 75 of 86 order for relief in an involuntary case under any such law, or consent by Tenant or any such Assignee to the appointment of or taking of possession by a receiver, liquidator, assignee, trustee, sequestrator or other similar official of Tenant or any such Assignee, or of any substantial property of any of the foregoing, or the making by Tenant or any such Assignee of any general assignment for the benefit of creditors; or Tenant or any such Assignee takes any other voluntary action related to the business of Tenant or any such Assignee or the winding up of the affairs of any of the foregoing. 21.1.4 If Tenant shall default in the performance of or compliance with any other term, covenant or condition of this Ground Lease (other than as set forth in Sections 21.1.1 and 21.1.2) and such default shall continue for more than thirty (30) days after Landlord shall have given written notice thereof to Tenant, provided, however, if cure of such default reasonably requires more than thirty (30) days, then, provided that Tenant commences to cure within such thirty (30) day period and thereafter diligently and continuously prosecutes the cure to completion (within no more than one hundred eighty (180) days following Landlord's written notice to Tenant), Tenant shall not be in default during the cure period. 21.1.5 Notwithstanding anything to the contrary contained in this Ground Lease, prior to declaring any default or taking any remedy permitted under this Ground Lease or applicable law based upon an alleged default under this Ground Lease by Tenant, Landlord shall deliver written notice to the Investor Limited Partner of Tenant's failure to cure such default, and Investor Limited Partner shall have one hundred eighty (180) days to cure such alleged default (whether of a monetary or nonmonetary nature). In addition, if a Default is caused by the general partner of Tenant and the Investor Limited Partner removes the general partner of Tenant, such removal shall be deemed to have cured the Default so long as the Investor Limited Partner and/or Tenant, as applicable, diligently continues to cure any remaining Events of Default after such general partner is removed. 21.1.6 Notwithstanding anything to the contrary contained in this Ground Lease, in the event Landlord's failure or refusal to consent to a loan from a limited partner of Tenant if and when required by clause (vi) in the definition of Residual Receipts results in a circumstance that would otherwise constitute an Event of Default hereunder, such circumstance, in and of itself, shall not constitute an Event of Default hereunder and Landlord shall not be entitled terminate this Ground Lease due to such circumstance; provided that nothing in the foregoing modifies (a) Tenant's performance obligations under this Ground Lease or (b) Landlord's remedies with respect to Events of Default that cannot be remedied by the loan proposed to be made by Tenant's limited partner. 21.2. Remedies. 21.2.1 If an Event of Default shall occur and continue as aforesaid, then in addition to any other remedies available to Landlord at law or in equity, Landlord shall have the immediate option to terminate this Ground Lease and bring suit against Tenant and recover as an award in such suit the following: (i) the worth at the time of award of the unpaid rent and all other sums due hereunder which had been earned at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent and all other sums due hereunder which would have been earned after termination until the ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 76 of 86 time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid rent and all other sums due hereunder for the balance of the Term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; (iv) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Ground Lease or which in the ordinary course of things could be likely to result therefrom; and (v) such amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable California law. 21.2.2 The "worth at the time of the award" of the amounts referred to in Sections 21.2.1(a) and 21.2.1(b) above shall be computed by allowing interest at the rate provided in Section 4.6 as of the date of the award. The "worth at the time of award" of the amount referred to in Section 21.2.1(c) above shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1 %). 21.2.3 If an Event of Default occurs, Landlord shall also have the right, with or without terminating this Ground Lease, but subject to any nondisturbance agreements entered into with subtenants, to reenter the Property and remove all persons and property from the Property; such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of Tenant. 21.2.4 If an Event of Default occurs, Landlord shall also have the right, subject to the rights of any permitted Mortgagee with or without terminating this Ground Lease, to relet the Property. If Landlord so elects to exercise its right to relet the Property but without terminating this Ground Lease, then rentals received by Landlord from such reletting shall be applied: First, to the payment of any indebtedness other than rent due hereunder from Tenant to Landlord; Second, to the payment of any cost of such reletting; Third, to the payment of the cost of any alterations and repairs to the Property; Fourth, to the payment of Rent and/or Additional Rent due and unpaid hereunder; and Fifth, the residue, if any, shall be held by Landlord and applied in payment of future Rent and/or Additional Rent as the same may become due and payable hereunder. Should the amount of rental received from such reletting during any month which is applied to the payment of Rent and/or Additional Rent hereunder be less than that agreed to be paid during that month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord immediately upon demand therefor by Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall also pay to Landlord, as soon as ascertained, any costs and expenses incurred by Landlord in such reletting or in making alterations and repairs not covered by the rentals received from such reletting. 21.2.5 No reentry or taking possession of the Property by Landlord pursuant to Sections 21.2.3 or 21.2.4 shall be construed as an election to terminate this Ground Lease unless a written notice of such intention is given to Tenant or unless the termination thereof is decreed by a court of competent jurisdiction. Notwithstanding any reletting without termination by Landlord because of any default by Tenant, Landlord may at any time after such reletting elect to terminate this Ground Lease for any such default. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 77 of 86 21.3. Receipt of Rent, No Waiver of Default. The receipt by Landlord of the rents or any other charges due to Landlord, with knowledge of any breach of this Ground Lease by Tenant or of any default on the part of Tenant in the observance or performance of any of the conditions or covenants of this Ground Lease, shall not be deemed to be a waiver of any provisions of this Ground Lease. No acceptance by Landlord of a lesser sum than the rents or any other charges then due shall be deemed to be other than on account of the earliest installment of the rents or other charges due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment of rent or charges due be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such installment or pursue any other remedy provided in this Ground Lease. The receipt by Landlord of any rent or any other sum of money or any other consideration paid by Tenant after the termination of this Ground Lease, or after giving by Landlord of any notice hereunder to effect such termination, shall not, except as otherwise expressly set forth in this Ground Lease, reinstate, continue, or extend the term of this Ground Lease, or destroy, or in any manner impair the efficacy of any such notice of termination as may have been given hereunder by Landlord to Tenant prior to the receipt of any such sum of money or other consideration, unless so agreed to in writing and signed by Landlord. Neither acceptance of the keys nor any other act or thing done by Landlord or by its agents or employees during the Term shall be deemed to be an acceptance of a surrender of the Property or the Improvements, excepting only an agreement in writing signed by Landlord accepting or agreeing to accept such a surrender. 21.4. Effect on Indemnification. Notwithstanding the foregoing, nothing contained in this Article 21 shall be construed to limit the Indemnitees' right to indemnification as otherwise provided in this Ground Lease. ARTICLE 22 PERMITTED CONTESTS Tenant, at no cost or expense to Landlord, may contest (after prior written notice to Landlord), by appropriate legal proceedings conducted with due diligence, the amount or validity or application, in whole or in part, of any Imposition or lien or any Governmental Requirements or Insurance Requirements, provided that (a) in the case of liens of mechanics, materialmen, suppliers or vendors, or Impositions or liens therefor, such proceedings shall suspend the collection thereof from Landlord, and shall suspend a foreclosure against the Property and/or the Improvements, or any interest therein, or any Rent, if any, (b) neither the Property nor the Improvements, nor any part thereof or interest therein, nor the Rent, if any, nor any portion thereof, would be in any danger of being sold, forfeited or lost by reason of such proceedings, (c) in the case of Governmental Requirements, Landlord would not be in any danger of any criminal liability or, unless Tenant shall have furnished a bond or other security therefor satisfactory to Landlord, any additional civil liability for failure to comply therewith and the Property and the Improvements would not be subject to the imposition of any lien as a result of such failure, and (d) Tenant shall have furnished to Landlord, if requested, a bond or other security, satisfactory to Landlord. If Tenant shall fail to contest any such matters, or to give Landlord security as hereinabove provided, Landlord may, but shall not be obligated to, contest the matter or settle or compromise the same without inquiring into the validity or the reasonableness thereof. Landlord, at the sole cost and expense of Tenant, will cooperate with Tenant and execute any documents or pleadings legally required for any such contest. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 78 of 86 ARTICLE 23 FORCE MAJEURE 23.1. Delay of Performance. Subject to Section 23.2 below, any prevention, delay, nonperformance or stoppage by Tenant due to any of the following causes shall be excused: any regulation, order, act, restriction or requirement or limitation imposed by any federal, state, municipal or foreign government or any department or agency thereof, or civil or military authority; acts of God; acts or omissions of Landlord or its agents or employees; fire, explosion or floods; strikes, walkouts or inability to obtain materials; war, terrorism, riots, sabotage or civil insurrection; or any other causes beyond the reasonable control of Tenant. 23.2. Notice and Cure Requirements. No prevention, delay, or stoppage of performance shall be excused unless: (i) Tenant notifies Landlord within thirty (30) days of such prevention, delay or stoppage that it is claiming excuse of its obligations under this Article 23; and (ii) Tenant diligently proceeds within thirty (30) days of the conclusion of such prevention, delay or stoppage to cure the condition causing the prevention, delay or stoppage; and (iii) Tenant effects such cure within a reasonable time. ARTICLE 24 CONSENT RIGHTS Unless otherwise expressly provided in this Ground Lease, all approvals or consents of Landlord (or Landlord's Executive Director), Tenant, or any Lender, Mortgagee, or Investor Limited Partner, shall not be unreasonably withheld, conditioned, or delayed. ARTICLE 25 GENERAL PROVISIONS 25.1. Notices. Any approval, disapproval, demand, document or other notice ("Notice") which either party may desire to give to the other party under this Ground Lease must be in writing and may be given either by (i) personal service, (ii) delivery by reputable document delivery service such as Federal Express that provides a receipt showing date and time of delivery, (iii) by facsimile transmission or (iv) mailing in the United States mail, certified mail, postage prepaid, return receipt requested, addressed to the address of the party as set forth below, or at any other address as that party may later designate by Notice. Service shall be deemed conclusively made at the time of service if personally served; upon confirmation of receipt if sent by facsimile transmission; the next business day if sent by overnight courier and receipt is confirmed by the signature of an agent or employee of the party served; the next business day after deposit in the United States mail, properly addressed and postage prepaid, return receipt requested, if served by express mail; and three (3) days after deposit thereof in the United States mail, properly addressed and postage prepaid, return receipt requested, if served by certified mail. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 79 of 86 25.1.1 Any notice to Landlord shall be given to: Anaheim Housing Authority c/o City Hall, Office of the City Clerk 100 South Anaheim Boulevard Anaheim, California 92805 Attention: Linda N. Andal, Secretary Fax No.: (714) 765-4105 With Copies To: Anaheim Housing Authority 201 South Anaheim Boulevard, 10th Floor Anaheim, California 92805 Attention: Leonie Mulvihill, Deputy City Attorney IV Fax No.: (714) 765-4630 Stradling Yocca Carlson & Rauth 660 Newport Center Drive, Suite 1600 Newport Beach, California 92660 Attention: Celeste Brady Fax No.: (949) 823-5141 25.1.2 Any notice to Tenant shall be given to: Avon Dakota Housing Partners II, L.P. 18201 Von Karman Avenue, Suite 900 Irvine, California 92612 Attention: William A. Witte Fax No.: (949) 660-7273 With copies to: Bocarsly Emden Cowan Esmail & Arndt LLP 633 West Fifth Street, 70th Floor Los Angeles, California 90071 Attention: Lance Bocarsly Fax No.: (213) 239-0410 With a Copy to: Any Lender(s) and/or the Investor Limited Partner whose name and address is identified in a written notice sent to Landlord and referencing this Ground Lease. Any party may, by virtue of written Notice in compliance with this Section 25.1, alter or change the address or the identity of the person to whom any notice, or copy thereof, is to be sent. 25.2. Certificates. Landlord or Tenant, as the case may be, shall execute, acknowledge and deliver to the other, promptly upon request by Landlord, Tenant, ground leasehold Mortgagee or Investor Limited Partner, a Certificate of Landlord or Tenant, as the case may be, certifying (a) that this Ground Lease is unmodified and in full force and effect (or, if there have been ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 80 of 86 modifications, that this Ground Lease is in full force and effect, as modified, and stating the date of each instrument so modifying this Ground Lease), (b) the date, if any, through which the Rent, if any, has been paid, (c) whether there are then existing any offsets or defenses against the enforcement of any term hereof on the part of Tenant to be performed or complied with (and, if so, specifying the same), and (d) whether any default exists hereunder and, if any such default exists, specifying the nature and period of existence thereof and what action Landlord or Tenant, as the case may be, is taking or proposes to take with respect thereto and whether notice thereof has been given to the party in default. Any Certificate may be relied upon by any prospective purchaser, transferee, mortgagee or trustee under a deed of trust or leasehold estate in the Property or any part thereof or of Landlord's or Tenant's interest under this Ground Lease. Tenant will also deliver to Landlord, promptly upon request, such information with respect to the Property or any part thereof as from time to time may reasonably be requested. 25.3. No Merger of Title. There shall be no merger of this Ground Lease or the leasehold estate created by this Ground Lease with any other estate in the Property or any part thereof by reason of the fact that the same person, firm, corporation or other entity may acquire or own or hold, directly or indirectly: (a) this Ground Lease or the leasehold estate created by this Ground Lease or any interest in this Ground Lease or in any such leasehold estate, and (b) any other estate in the Property and the Improvements or any part thereof or any interest in such estate, and no such merger shall occur unless and until all persons, corporations, firms and other entities, including any leasehold Mortgagee or leasehold Mortgagees, having any interest (including a security interest) in (i) this Ground Lease or the leasehold estate created by this Ground Lease, and (ii) any other estate in the Property or the Improvements or any part thereof shall join in a written instrument effecting such merger and shall duly record the same. 25.4. Utility Services. Tenant shall pay or cause to be paid all charges for all public or private utility services and all sprinkler systems and protective services at any time rendered to or in connection with the Property or the Improvements, or any part thereof, and shall comply with all contracts existing on the date hereof or subsequently executed by Tenant relating to any such services, and will do all other things required for the maintenance and continuance of all such services. 25.5. Quiet Enjoyment. Tenant, upon paying the Rent, if any, and other charges herein provided for and upon performing and complying with all covenants, agreements, terms and conditions of this Ground Lease to be performed or complied with by it, shall lawfully and quietly hold, occupy and enjoy the Property during the term of this Ground Lease without hindrance or molestation by Landlord, or any person or persons claiming through Landlord. 25.6. No Claims Against Landlord. Nothing contained in this Ground Lease shall constitute any consent or request by Landlord, express or implied, for the performance of any labor or services or the furnishing of any materials or other property with respect to the Property or any part thereof, nor as giving Tenant any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against Landlord or its interest in the Property in respect thereof. 25.7. Inspection. Landlord and its authorized representatives may enter the Property or any part thereof at all reasonable times for the purpose of inspecting, servicing or posting notices, protecting the Property or the Improvements, or for any other lawful purposes. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 81 of 86 Notwithstanding the immediately preceding sentence, except in the event of an emergency, Landlord may only enter the Housing Units after giving Tenant three (3) days' prior written notice. 25.8. No Waiver by Landlord. To the extent permitted by applicable law, no failure by Landlord to insist upon the strict performance of any term hereof or to exercise any right, power or remedy consequent upon a default under this Ground Lease, and no acceptance of rent during the continuance of any such default, shall constitute a waiver of any such default or of any such term. No waiver of any default shall affect or alter this Ground Lease, which shall continue in full force and effect, or the rights of Landlord with respect to any other then existing or subsequent default. 25.9. Holding Over. In the event Tenant shall hold over or remain in possession of the Property or the Improvements with the consent of Landlord after the expiration of the Term, such holding over or continued possession shall create a tenancy for month to month only, upon the same terms and conditions as are herein set forth so far as the same are applicable. 25.10. Exculpation of Tenant's Personal Liability. Notwithstanding anything to the contrary provided in this Ground Lease, including, without limitation, the remedies provisions set forth in Section 21.2 above, it is specifically understood and agreed that there shall be no personal liability or obligation on the part of Tenant or any partner of Tenant or any assignee or successor in interest of Tenant hereunder (including, without limitation, any mortgagee, trustee or beneficiary under any mortgage or deed of trust which may acquire Tenant's interest under this Ground Lease through foreclosure or deed in lieu of foreclosure or any purchaser at a foreclosure sale) with respect to the provisions of this Ground Lease relating to the payment of Rent and the performance of other obligations under this Ground Lease; but that Landlord and all those claiming by, through or under Landlord, its successors and assigns, shall look solely to the interest of Tenant, its successors and assigns in this Ground Lease and the Improvements, for the satisfaction of each and every provision and each and every right, privilege or remedy of Landlord or any other party, in the event of any breach or default of Tenant or any assignee or successor in interest of any of the provisions made by or to be performed by Tenant. However, Tenant acknowledges and agrees that this exculpation of Tenant's personal liability for the payment of Rent shall in no way limit the exercise of Landlord's other remedies, including, without limitation, termination of this Ground Lease. 25.11. No Partnership. Anything contained herein to the contrary notwithstanding, Landlord does not in any way or for any purpose become a partner of Tenant in the conduct of its business, or otherwise, or a joint venturer or member of a joint enterprise with Tenant hereunder. 25.12. Remedies Cumulative. The various rights, options, elections and remedies of Landlord and Tenant, respectively, contained in this Ground Lease shall be cumulative and no one of them shall be construed as exclusive of any other, or of any right, priority or remedy allowed or provided for by law and not expressly waived in this Ground Lease. 25.13. Attorney's Fees. In the event of a dispute between the parties arising out of or in connection with this Ground Lease, whether or not such dispute results in litigation, the prevailing party (whether resulting from settlement before or after litigation is commenced) shall be entitled to have and recover from the losing party reasonable attorneys' fees and costs of suit incurred by the prevailing party. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 82 of 86 25.14. Time Is of the Essence. Time is of the essence of this Ground Lease and all of the terms, provisions, covenants and conditions hereof. 25.15. Survival of Representations, Warranties and Covenants. The respective representations, warranties and covenants contained herein shall survive the Commencement Date and continue throughout the Term. 25.16. Construction of Ground Lease. This Ground Lease shall be construed in accordance with the substantive laws of the State of California, without regard to the choice of law rules thereof. The rule of construction that a document be construed strictly against its drafter shall have no application to this Ground Lease. 25.17. Severability. If one or more of the provisions of this Ground Lease shall be held to be illegal or otherwise void or invalid, the remainder of this Ground Lease shall not be affected thereby and shall remain in full force and effect to the maximum extent permitted under applicable laws and regulations. 25.18. Entire Agreement; Modification. This Ground Lease contains the entire agreement of the parties with respect to the matters discussed herein. This Ground Lease may be amended only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 25.19. Binding Effect and Benefits. This Ground Lease shall inure to the benefit of and be binding on the parties hereto and their respective successors and assigns. Except as otherwise set forth herein, nothing in this Ground Lease, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Ground Lease. 25.20. Further Assurances. Each party hereto will promptly execute and deliver without further consideration such additional agreement, assignments, endorsements and other documents as the other party hereto may reasonably request to carry out the purposes of this Ground Lease. 25.21. Counterparts. This Ground Lease may be executed simultaneously in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Ground Lease. 25.22. Number and Gender. Whenever the singular number is used in this Ground Lease and required by the context, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders. 25.23. Incorporation by Reference. Every Exhibit attached to this Ground Lease and referred to herein is hereby incorporated by reference. ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 83 of 86 25.24. Modification or Termination. Except for the rights of Mortgagees pursuant to Article 18 hereinabove, during the entire Tax Credit Compliance Period, no amendment or voluntary termination of this Ground Lease by Tenant shall be effective without Investor Limited Partner's prior written consent, which consent shall not be unreasonably withheld, conditioned, or delayed. [Signatures to Ground Lease [Avon Dakota Neighborhood - Phase ll] appear on following pages.] ATTACHMENT NO. 7 FORM OF GROUND LEASE Page 84 of 86 IN WITNESS WHEREOF, the undersigned have executed this Ground Lease as of the date first above written. "TENANT" AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership By: Avon Dakota MGP, LLC, a California limited liability company, its managing general partner By: Affordable Housing Access, Inc., a California nonprofit public benefit corporation, its sole member and manager la Jonathan B. Webb, President By: Related/Avon Dakota Development Co., LLC, a California limited liability company, its administrative general partner in Frank Cardone, Vice President [Signatures continue on following page] ATTACHMENT NO. 7 FORM OF GROUND LEASE Page S-1 of 86 [Signatures continue from previous page] "LANDLORD" ANAHEIM HOUSING AUTHORITY a public body, corporate and politic ma ATTEST: LINDA N. ANDAL, AUTHORITY SECRETARY Linda N. Andal APPROVED AS TO FORM: OFFICE OF CITY ATTORNEY Leonie Mulvihill Deputy City Attorney IV STRADLING YOCCA CARLSON & RAUTH Authority Special Counsel John E. Woodhead IV, Executive Director or Authorized Designee ATTACHMENT NO. 7 FORM OF GROUND LEASE Page S-2 of 86 EXHIBIT A LEGAL DESCRIPTION OF THE PROPERTY Real property in the City of Anaheim, County of Orange, State of California, described as follows: [to come] EXHIBIT A TO GROUND LEASE LEGAL DESCRIPTION OF THE PROPERTY Page 1 of 1 EXHIBIT B INCOME COMPUTATION AND CERTIFICATION NOTE TO APARTMENT OWNER: This form is designed to assist you in computing Annual Income in accordance with the method set forth in the applicable state and federal laws and regulations, including without limitation, the Department of Housing and Urban Development ("HUD") Regulations (24 CFR 813). You should make certain that this form is at all times up to date with applicable state and federal laws and regulations. Re: , Anaheim, California I/We, the undersigned, state that I/we have read and answered fully, frankly and personally each of the following questions for all persons who are to occupy the unit being applied for in the above -referenced apartment project. Listed below are the names of all persons who intend to reside in the unit: 1. Names of Members of Household 2. Relationship to Head of Household 3. Age 4. Social Security Number 5. Place/Source of Employment 6. Monthly Gross Income Amount (before deductions) HEAD SPOUSE Income Computation 1. The total anticipated income, calculated in accordance with the provisions of this paragraph 1, of all persons over the age of 18 years listed above for the 12 -month period beginning the date that I/we plan to move into a unit is $ Included in the total anticipated income listed above are: (a) all wages and salaries, overtime pay, commissions, fees, tips and bonuses and other compensation for personal services, before payroll deductions; (b) the net income from the operation of a business or profession or from the rental of real or personal property (without deducting expenditures for business expansion or amortization of capital indebtedness or any allowance for depreciation of capital assets), EXHIBIT B TO GROUND LEASE INCOME COMPUTATION AND CERTIFICATION Page 1 of 11 (c) interest and dividends (including income from assets excluded below); (d) the full amount of periodic payments received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits and other similar types of periodic receipts, including any lump sum payment for the delayed start of a periodic payment; (e) payments in lieu of earnings, such as unemployment and disability compensation, workmen's compensation and severance pay; (f) the maximum amount of public assistance available to the above persons other than the amount of any assistance specifically designated for shelter and utilities; (g) periodic and determinable allowances, such as alimony and child support payments and regular contributions and gifts received from persons not residing in the dwelling; (h) all regular pay, special pay and allowances of a member of the Armed Forces (whether or not living in the dwelling) who is the head of the household or spouse; and (i) any earned income tax credit to the extent that it exceeds income tax liability. Excluded from such anticipated income are: (a) casual, sporadic or irregular gifts; (b) amounts which are specifically for or in reimbursement of medical expenses; (c) lump sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and workmen's compensation), capital gains and settlement for personal or property losses; (d) amounts of educational scholarships paid directly to the student or the educational institution, and amounts paid by the government to a veteran for use in meeting the costs of tuition, fees, books and equipment. Any amounts of such scholarships or payments to veterans not used for the above purposes are to be included in income; (e) special pay to a household member who is away from home and exposed to hostile fire; (f) relocation payments under Title II of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970; (g) foster child care payments; (h) the value of coupon allotments for the purchase of foods pursuant to the Food Stamp Act of 1977; (i) payments to volunteers under the Domestic Volunteer Service Act of 1973; EXHIBIT B TO GROUND LEASE INCOME COMPUTATION AND CERTIFICATION Page 2 of 11 (j) payments received under the Alaska Native Claims Settlement Act; (k) income derived from certain submarginal land of the United States that is held in trust for certain Indian tribes; (1) payments or allowances made under the Department of Health and Human Services' Low -Income Home Energy Assistance Program; (m) payments received from the Job Training Partnership Act; (n) income derived from the disposition of funds of the Grand River Band of Ottawa Indians; and (o) the first $2,000.00 of per capita shares received from judgment funds awarded by the Indian Claims Commission or the Court of Claims. Do the persons whose income or contributions are included in item 6 above: (a) have savings, stocks, bonds, equity in real property or other form of capital investment (excluding the values of necessary items of personal property such as furniture and automobiles and interests in Indian trust land); or Yes No (b) have they disposed of any assets (other than at a foreclosure or Credit Bankruptcy sale) during the last two years at less than fair market value? Yes No (c) If the answer to (a) or (b) above is yes, does the combined total value of all such assets owned or disposed of by all such persons total more than $5,000? Yes No (d) If the answer to (c) above is yes, state: (1) the amount of income expected to be derived from such assets in the 12 -month period beginning on the date of initial occupancy in the unit that you propose to rent: $, (2) the amount of such income, if any, that was included in item 1. above: $ EXHIBIT B TO GROUND LEASE INCOME COMPUTATION AND CERTIFICATION Page 3 of 11 3. (a) Are all of the individuals who propose to reside in the unit full-time students?* Yes No (b) If the answer to 3(a) is yes, is at least 1 of the proposed occupants of the unit a husband and wife entitled to file a joint federal income tax return? Yes No 4. Neither myself nor any other occupant of the unit I/we propose to rent is the owner of the rental housing project in which the unit is located (hereinafter the "Owner"), has any family relationship to the Owner, or owns directly or indirectly any interest in the Owner. For purposes of this paragraph, indirect ownership by an individual shall mean ownership by a family member, ownership by a corporation, partnership, estate or trust in proportion to the ownership or beneficial interest in such corporation, partnership, estate or trust held by the individual or a family member; and ownership, direct or indirect, by a partner of the individual. 5. This certificate is made with the knowledge that it will be relied upon by the Owner to determine maximum income for eligibility to occupy the unit, and I/we declare that all information set forth herein is true, correct and complete and based upon information I/we deem reliable and that the statement of total anticipated income contained in paragraph 1 is reasonable and based upon such investigation as the undersigned deemed necessary. 6. I/we will assist the Owner in obtaining any information or documents required to verify the statements made herein, including either an income verification from my/our present employer(s) or copies of federal tax returns for the immediately preceding calendar year. 7. I/we acknowledge that I/we have been advised that the making of any misrepresentation or misstatement in this declaration will constitute a material breach of my/our agreement with the Owner to lease the unit and will entitle the Owner to prevent or terminate my/our occupancy of the unit by institution of an action for ejection or other appropriate proceedings. 8. Housing Authority Statistical Information (Optional — will be used for reporting purposes only). Race (Head of Household) White Black Asian Hispanic Native American Other Physical Disability: Yes No I/we declare under penalty of perjury that the foregoing is true and correct. * A full-time student is an individual enrolled as a full-time student during each of 5 calendar months during the calendar year in which occupancy of the unit begins at an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance and is not an individual pursuing a full-time course of institutional or farm training under the supervision of an accredited agent of such an educational organization or of a state or political subdivision thereof. EXHIBIT B TO GROUND LEASE INCOME COMPUTATION AND CERTIFICATION Page 4 of 11 Executed this day of California. Applicant Applicant in the County of , [Signatures of all persons over the age of 18 years listed in column 2 above required.] FOR COMPLETION BY APARTMENT OWNER ONLY: 1. Calculation of eligible income: a. Enter amount entered for entire household in column 6 above: $ b. (1) If answer to question 2(c) above is yes, enter the total amount entered in 2(d)(1), subtract from that figure the amount entered in 2(d)(2) and enter the remaining balance ($ ) (2) Multiply the amount entered in question 2(c) times the current passbook savings rate to determine what the total annual earnings on the amount in 2(c) would be if invested in passbook savings ($ ), subtract from that figure the amount entered in 2(d)(2) and enter the remaining balance ($ ) (3) Enter at right the greater of the amount calculated under (1) and (2) above: $ C. TOTAL ELIGIBLE INCOME (line 1.a plus line 1.b(3)): $ 2. The amount entered in 1.c: Qualifies the applicant(s) as a: 30% Very Low Income Household; 40% Very Low Income Household; 50% Very Low Income Household; EXHIBIT B TO GROUND LEASE INCOME COMPUTATION AND CERTIFICATION Page 5 of 11 60% Low Income Household; Does not qualify the applicant(s) as a Very Low or Low Income Household. Number of apartment unit assigned:. Bedroom Size: Rent: $ Tenant -Paid Utilities: Water Gas Electric Trash Other (list Type) _ 4. Was this apartment unit last occupied for a period of 31 consecutive days by persons whose aggregate anticipated annual income as certified in the above manner upon their initial occupancy of the apartment unit qualified them as Very Low or Low Income Household? Yes No Method used to verify applicant(s) income: Employer income verification. Social Security Administration verification Department of Social Services verification Copies of tax returns Other: ( ) Manager EXHIBIT B TO GROUND LEASE INCOME COMPUTATION AND CERTIFICATION Page 6 of 11 INCOME VERIFICATION (For Employed Persons) The undersigned employee has applied for a rental unit located in a project financed by the Anaheim Housing Authority for persons of low income. Every income statement of a prospective tenant must be stringently verified. Please indicate below the employee's current annual income from wages, overtime, bonuses, commissions or any other form of compensation received on a regular basis. Annual Wages: Overtime: Bonuses: Commissions: Total Current Income: I hereby certify that the statements above are true and complete to the best of my knowledge. Dated: Signature Title: I hereby grant you permission to disclose my income to in order that they may determine my income eligibility for rental of an apartment located in a project which has been financed by the Anaheim Housing Authority. Dated: Please send form to: Signature EXHIBIT B TO GROUND LEASE INCOME COMPUTATION AND CERTIFICATION Page 7 of 11 INCOME VERIFICATION (For Social Security Recipients) TO: SOCIAL SECURITY ADMINISTRATION Ladies and Gentlemen: I have applied for a rental unit located in a project financed by the Anaheim Housing Authority for persons of low income. Every income statement of a prospective tenant must be stringently verified. In connection with my application for a rental unit, I hereby give my consent to release to the specific information requested below. Dated: Social Security No.: Address (Print): Monthly Benefits Began/Will Begin: Signature Name (Print): Social Security Benefit Amount: Other Benefit(s): Amount: Medicare Deduction: Are benefits expected to change? Yes If yes, please state date and amount Date: of change: Amount: No If recipient is not receiving full benefit amount, please indicate reason and date recipient will start receiving full benefit amount: Reason: Dated: Telephone: Please send form to: Date of Resumption: Signature Name (Print): _ Title: EXHIBIT B TO GROUND LEASE INCOME COMPUTATION AND CERTIFICATION Page 8 of 11 Amount: INCOME VERIFICATION (For Department of Social Services Aid Recipients) TO: CALIFORNIA DEPARTMENT OF SOCIAL SERVICES Ladies and Gentlemen: I am receiving assistance through your office. I have applied for a rental unit located in a project financed by the Anaheim Housing Authority for persons of very low income. Every income statement of a prospective tenant must be stringently verified. In connection with my application for a rental unit, I hereby authorize the Department of Social Services to release to the specific information requested below. Dated: Signature Caseload Number: Name (Print): Case Number: Case Worker: 1. Number of persons included in budget: 2. Total monthly budget: $ a. Amount of grant: $ Date aid last began: b. Other income and source: C. Is other income included in total budget? Yes No 3. Please specify type of aid (AFDC, FR, Food Stamps, ANB, MediCal, etc.) 4. If recipient is not receiving full grant, please indicate reason: Overpayment due to client's failure to report other income Computation error Other EXHIBIT B TO GROUND LEASE INCOME COMPUTATION AND CERTIFICATION Page 9 of 11 5. Date when full grant will resume: Dated: Telephone: Your very early response will be appreciated. Please return form to: Case Worker's Signature District Office EXHIBIT B TO GROUND LEASE INCOME COMPUTATION AND CERTIFICATION Page 10 of 11 INCOME VERIFICATION (For Self-Employed Persons) I hereby attach copies of my individual federal and state income tax returns for the immediately preceding calendar year and certify that the information shown in such income tax returns is true and complete to the best of my knowledge. Dated: Signature EXHIBIT B TO GROUND LEASE INCOME COMPUTATION AND CERTIFICATION Page 11 of 11 EXHIBIT C INITIAL MONTHLY RENT SCHEDULE FOR AVON DAKOTA PHASE II 2017 INCOME LIMITS AND RENTS SCHEDULE— No. of Units Unit Type Income Limit Gross Monthly Rent Current Utility Allowance Net Monthly Rent 2 2 Bd 30% Median Income $704 $29 $675 1 3 Bd 30% Median Income $813 $48 $765 2 1 Bd 40% Median Income $783 $47 $736 1 2 Bd 40% Median Income $939 $29 $910 2 3 Bd 40% Median Income $1,085 $48 $1,037 1 1 Bd 50% Median Income $978 $47 $931 6 2 Bd 50% Median Income $1,173 $29 $1,144 2 3 Bd 50% Median Income $1,356 $48 $1,308 3 2 Bd 60% Median Income $1,408 $29 $1,379 1 3 Bd 60 % Median Income $1,627 $48 $1,579 TOTAL = 21 The foregoing is by way of illustration only; Affordable Rent shall be determined in accordance with the Ground Lease. EXHIBIT C TO GROUND LEASE INITIAL MONTHLY RENT SCHEDULE Page 1 of 1 EXHIBIT D MEMORANDUM OF GROUND LEASE RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Anaheim Housing Authority 201 South Anaheim Boulevard, 10th Floor Anaheim, California 92805 Attention: Executive Director This document is exempt from the payment of a recording fee pursuant to Government Code §§ 6103 and 27383. MEMORANDUM OF GROUND LEASE (Avon Dakota Neighborhood - Phase II) This MEMORANDUM OF GROUND LEASE (Avon Dakota Neighborhood - Phase II) ("Memorandum") is executed as of , 20_ by and between the ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic ("Authority"), and AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership ("Developer"). RECITALS A. Authority and Developer have entered into that certain unrecorded Affordable Housing Agreement, dated as of June _, 2017 ("Affordable Housing Agreement"). A copy of the Affordable Housing Agreement is on file with Authority as a public record. B. In accordance with and in furtherance of the Affordable Housing Agreement, Authority and Developer have entered into that certain Ground Lease (Avon Dakota Neighborhood - Phase II) ("Ground Lease") dated concurrently herewith pursuant to which Authority has conveyed a ground leasehold interest in that certain parcel of real property, which is legally described in Attachment No. 1 attached hereto and incorporated herein by reference ("Property") to Developer and Developer has agreed to construct, develop and operate an affordable rental apartment complex thereon. In no event shall Authority's fee interest in the Property be subordinated to any deed of trust or other lien or encumbrance for financing. EXHIBIT D TO GROUND LEASE MEMORANDUM OF GROUND LEASE (Phase II) Page 1 of 4 C. Copies of the Affordable Housing Agreement and Ground Lease are available for public inspection at Authority's office at 201 South Anaheim Boulevard, 10th Floor, Anaheim, California. D. The term of the Ground Lease commences the date hereof and continues thereafter until the earlier of (i) the fifty-seventh (57th) anniversary of the recordation of the Release of Construction Covenants against the Property in the Official Records; or (ii) December 31, 2078. E. The annual rent payable pursuant to the Ground Lease includes the pre -paid capitalized rent, plus the Additional Rent, plus any reset/adjusted Rent, which is provided for and fully described in the Ground Lease. F. The Ground Lease provides that a short form memorandum of the Ground Lease shall be executed and recorded in the Official Records of Orange County, California. [Memorandum continues on following page] EXHIBIT D TO GROUND LEASE MEMORANDUM OF GROUND LEASE (Phase II) Page 2 of 4 NOW, THEREFORE, the parties hereto certify as follows: Pursuant to the Ground Lease, Authority has conveyed a leasehold interest in the Property to Developer for a term of over fifty-seven (57) years. This Memorandum is not a complete summary of the Ground Lease, and shall not be used to interpret the provisions of the Ground Lease. AUTHORITY: ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic In ATTEST: LINDA N. ANDAL, AUTHORITY SECRETARY Linda N. Andal APPROVED AS TO FORM: OFFICE OF CITY ATTORNEY Leonie Mulvihill Deputy City Attorney IV STRADLING YOCCA CARLSON & RAUTH Authority Special Counsel John E. Woodhead IV, Executive Director or Authorized Designee [Signatures continue on following page] EXHIBIT D TO GROUND LEASE MEMORANDUM OF GROUND LEASE (Phase II) Page 3 of 4 [Signatures continue from previous page] DEVELOPER: AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership By: Avon Dakota MGP, LLC, a California limited liability company, its managing general partner By: Affordable Housing Access, Inc., a California nonprofit public benefit corporation, its sole member and manager in Jonathan B. Webb, President By: Related/Avon Dakota Development Co., LLC, a California limited liability company, its administrative general partner in Frank Cardone, Vice President EXHIBIT D TO GROUND LEASE MEMORANDUM OF GROUND LEASE (Phase II) Page 4 of 4 ATTACHMENT NO. 1 TO EXHIBIT D LEGAL DESCRIPTION OF THE PROPERTY Real property in the City of Anaheim, County of Orange, State of California, described as follows: [to come] ATTACHMENT NO. 1 TO EXHIBIT D LEGAL DESCRIPTION OF THE PROPERTY Page 1 of 1 ATTACHMENT NO. 8 FORM OF AUTHORITY PROMISSORY NOTE AUTHORITY SUBORDINATE LOAN PROMISSORY NOTE SECURED BY DEED OF TRUST (Avon Dakota Neighborhood - Phase II) $[4,141,500] Anaheim, California , 201_ ("Note Date") FOR VALUE RECEIVED, AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership ("Developer"), promises to pay to the ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic ("Authority"), at its offices located at 201 South Anaheim Boulevard, 10th Floor, Anaheim, California 92805, or at such other place as Authority may from time to time designate in writing, (a) the principal sum of Four Million One Hundred Forty One Thousand Five Hundred Dollars ($4,141,500), or so much of the proceeds as have been disbursed by Authority to Developer pursuant to the Affordable Housing Agreement (as defined below); and (b) all costs and expenses payable hereunder (together, "Note Amount"). RECITALS A. This Authority Subordinate Loan Promissory Note Secured by Deed of Trust (Avon Dakota Neighborhood - Phase II) ("Note") is made pursuant to that certain Affordable Housing Agreement by and between Developer and Authority, dated as of June _, 2017 ("Affordable Housing Agreement"). B. Capitalized terms not described herein shall have the meanings ascribed to them in the Affordable Housing Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Developer agrees as follows: 1. Agreement. The principal sums hereunder have been and are being loaned by Authority to Developer in accordance with and pursuant to the Affordable Housing Agreement, which is a public record on file in the office of the City Clerk of the City of Anaheim. The terms of the Affordable Housing Agreement are incorporated herein and made a part hereof to the same extent and with the same force and effect as if fully set forth herein. In the event of any inconsistencies between the terms of this Note and the terms of such Affordable Housing Agreement or other document(s) related to the Note Amount, the terms of this Note shall prevail. A default by Developer under any of the provisions of the Agreement, that certain Ground Lease (Avon Dakota Neighborhood - Phase II) of even date herewith by and between Developer and Authority, that certain Authority Deed of Trust of even date herewith by Developer in favor of Authority (collectively, the "Transaction Documents") shall, after the expiration of any cure period under the respective agreement(s), be a default hereunder, and a default hereunder shall be a default under the Transaction Documents (other than the Ground Lease). In addition, any action taken by Authority or City to cure a default by Developer under the Primary Loan entered into between Developer and as Lender the Primary Loan (and any approved ATTACHMENT NO. 8 FORM OF AUTHORITY PROMISSORY NOTE Page 1 of 8 successor permanent Lender) shall constitute an Event of Default hereunder if Developer has not cured such default within fifteen (15) days of receiving notice of such Event of Default. 2. Interest. One percent (1 %) simple interest per annum (based on a 365 -day year and charged on the basis of the actual number of days elapsed) shall accrue on the Note Amount and all other amounts due under this Note, except as set forth in Section 9 hereof. 3. Payment. The Note Amount due hereunder shall be paid by Developer's annual payment to the Authority of an amount equal to eighty-five percent (85%) of Remaining Residual Receipts from the operation of Phase ll, until this Note has been paid in full. Developer shall also pay to Authority eighty-five percent (85%) of the Refinancing Net Proceeds immediately upon any refinancing of Phase II (or any part thereof) and eighty-five percent (85%) of the Transfer Net Proceeds immediately upon any transfer in whole or in part of Phase II or the Site. Annual Residual Receipts payments shall be made and delivered by Developer to Authority on or before one hundred twenty (120) days after the last day of Developer's fiscal year (which is the calendar year) relating to such payment during the term of this Note, commencing the first year following the issuance of the first Certificate of Occupancy for Phase 11. Concurrently with the delivery of each Residual Receipts payment due pursuant to this Note, Developer shall deliver to Authority the Residual Receipts Report for the corresponding fiscal year, which shall be a part of the Annual Financial Statement, in the form provided by Executive Director, which Residual Receipts Report shall provide the basis for Developer's payment of Residual Receipts to Authority. Residual Receipts shall be calculated on a cash basis, based upon such report and subject to the following subsections. Developer shall also prepare and provide to Authority, concurrently with delivery of each Annual Financial Statement, a reconciliation from the accrual - based Annual Financial Statement to the cash -based Residual Receipts calculation. In the event there are no Residual Receipts for the calendar year relating to such payment, no annual payment for such year shall be required hereunder; provided, however, in such event, no adjustment shall be made to the Note Amount and the amount of unpaid accrued interest for each calendar year in which no payment has been made shall be paid in accordance with Section 5 hereof. Any remaining portion of the Note Amount, plus unpaid accrued interest, shall be due and payable on the fifty-seventh (57th) anniversary of the Note Date. Notwithstanding the foregoing, the full Note Amount may be accelerated as set forth herein. a. Definitions. Except as otherwise provided in this Note, capitalized words and terms used in this Note, if not otherwise defined herein, shall have the meanings ascribed thereto in the Affordable Housing Agreement. b. Residua/ Receipts. During the term of this Note, Developer agrees to pay after the end of each calendar year within the time(s) set forth in Section 3 above, the specified percentage of Residual Receipts, as described in Section 3 above in this Note and pursuant to the Affordable Housing Agreement. If there is no Residual Receipts, then no payment is due for that year and no corresponding adjustment to the outstanding principal amount of this Note shall be made. C. Security for Authority Subordinate Loan. This Note is secured by a Deed of Trust of even date herewith and recorded as an encumbrance to the Developer's leasehold interest in the Site pursuant to the Ground Lease and fee interest in the Improvements at Phase 11. ATTACHMENT NO. 8 FORM OF AUTHORITY PROMISSORY NOTE Page 2of8 d. Disbursement of Authority Subordinate Loan. The Note Amount shall be deemed to have been disbursed by the Authority to the Developer as of the Note Date. 4. Form of Payments. All amounts due hereunder are payable in immediately available funds and lawful monies of the United States of America. 5. Application of Payments. All payments shall be applied (i) first, to costs and fees owing hereunder, (ii) second, to the payment of unpaid accrued interest owing hereunder for each calendar year in which no payment was made by Developer pursuant to Section 3 hereof, (iii) third, to the payment of accrued interest for the preceding calendar year, (iv) fourth, to the payment of any outstanding principal amount of the Additional Subsidy; and (v) fifth, to the payment of any outstanding principal amount of the Capitalized Ground Rent. 6. Prepayment. At any time, Developer may prepay in whole or in part the outstanding principal balance under this Note, together with all accrued interest, if any, and unpaid fees, costs and expenses, if any, payable hereunder, without penalty or premium. Notwithstanding the foregoing, any such prepayment in whole of this Note shall cause the amount of Rent payable under the Ground Lease to be reset and adjusted in accordance with the provisions of Section 4.1.2 of the Ground Lease (except if such prepayment in full occurs prior to the twentieth (20th) anniversary of the Commencement Date of the Ground Lease, the Rent owing under the Ground Lease shall be reset and adjusted beginning upon the twentieth (20th) anniversary of the Commencement Date of the Ground Lease). 7. Security. This Note and all amounts payable hereunder are secured by the Deed of Trust and Assignment of Rents (Authority Subordinate Loan), a subordinate trust deed of even date herewith executed by Developer in favor of Authority ("Authority Deed of Trust"), which Authority Deed of Trust shall only be subordinate to: (a) that certain Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (Construction Trust Deed) executed by Developer, as borrower, in favor of ., (b) the Ground Lease, (c) the Tax Credit Regulatory Agreement, and (d) such other encumbrances approved by the Authority in writing. The terms of the Authority Deed of Trust are incorporated herein and made a part hereof to the same extent and with the same force and effect as if fully set forth herein. A default under any of the provisions of the Authority Deed of Trust shall be a default hereunder, and a default hereunder shall be a default under the Authority Deed of Trust. 8. Acceleration and Other Remedies. The entire balance due under this Note shall be paid to the Authority, or otherwise satisfied as provided below, upon demand by the Authority, which may be given upon the earlier to occur of any of the following events (each, an "Event of Default"): (i) the uncured default of Developer under the Transaction Documents, this Note, or the Authority Deed of Trust, in each case, after delivery of notice and expiration of the applicable cure period provided in the respective agreement or instrument; or (ii) the sale, lease or other transfer or conveyance (other than the permitted rentals and conveyances under the Affordable Housing Agreement and/or the Ground Lease) of all or any part of the Site or the Improvements, or any interest therein (individually or collectively, a "Transfer"), without the prior written consent of Authority, which consent may be withheld in Authority's sole and absolute discretion; Authority may, at Authority's option, declare the outstanding principal amount of this Note, together with the then accrued and unpaid interest thereon and other charges hereunder, and all other sums secured by the Authority Deed of Trust, to be due and payable immediately, and upon such declaration, such principal and interest and other sums shall immediately become and be due and payable without demand or notice, all as further set forth in the Authority Deed of Trust. All ATTACHMENT NO. 8 FORM OF AUTHORITY PROMISSORY NOTE Page 3 of 8 costs of collection, including, but not limited to, reasonable attorneys' fees and all expenses incurred in connection with protection of, or realization on, the security for this Note, may be added to the principal hereunder, and shall accrue interest as provided herein. Authority shall at all times have the right to proceed against any portion of the security for this Note in such order and in such manner as Authority may consider appropriate, without waiving any rights with respect to any of the security. Any delay or omission on the part of Authority in exercising any right hereunder, under the Agreement, the Transaction Documents or under the Authority Deed of Trust shall not operate as a waiver of such right, or of any other right. No single or partial exercise of any right or remedy hereunder or under the Agreement, the Transaction Documents, the Authority Deed of Trust or any other document or agreement shall preclude other or further exercises thereof, or the exercise of any other right or remedy. The acceptance of payment of any sum payable hereunder, or part thereof, after the due date of such payment shall not be a waiver of Authority's right to either require prompt payment when due of all other sums payable hereunder or to declare an Event of Default for failure to make prompt or complete payment. Notwithstanding anything to the contrary contained in this Note, prior to declaring any default or taking any remedy permitted under this Note or applicable law based upon an alleged default under this Note by Developer, ("Investor Limited Partner"), in its capacity as the limited partner of Developer or their successors or assigns as limited partner(s) of Developer, shall have an additional period of not less than (a) ten (10) days to cure such alleged default if of a monetary nature, and (b) thirty (30) days to cure such alleged default if of a nonmonetary nature; provided, however, if in order to cure such a nonmonetary default Investor Limited Partner, as the limited partner, must remove the general partner of Developer, Investor Limited Partner, as the limited partner, shall so notify Authority and so long as Investor Limited Partner, as the limited partner, is diligently and continuously attempting to so remove such general partner, Investor Limited Partner, as the limited partner, shall have until the date thirty (30) days after the effective date of the removal of the general partner or general partners to cure such default. 9. Alternate Rate. Upon the occurrence (and failure to cure) of any Event of Default, or upon the maturity hereof (by acceleration or otherwise), the entire unpaid principal sum, at the option of Authority, shall bear interest, from the date of occurrence of such Event of Default or maturity and after judgment and until collection, at the "Alternate Rate," such rate being the highest interest rate then permitted by law. Interest calculated at the Alternate Rate, when and if applicable, shall be due and payable immediately without notice or demand. Developer agrees that in the event of any Event of Default, Authority will incur additional expense in servicing the loan evidenced by this Note and will suffer damage and loss resulting from such Event of Default. Developer agrees that in such event Authority shall be entitled to damages for the detriment caused thereby, which damages are extremely difficult and impractical to ascertain. Therefore, Developer agrees that the Alternate Rate (as applied to the unpaid principal balance, accrued interest, fees, costs and expenses incurred) is a reasonable estimate of such damages to Authority, and Developer agrees to pay such sum on demand. 10. Waivers. Developer and all endorsers, guarantors and sureties hereof jointly and severally waive presentment, demand, notice of protest and nonpayment, notice of default or delinquency, notice of acceleration, notice of costs, expenses or leases or interest thereon, notice of dishonor, diligence in collection or in proceeding against any of the rights or interests in or to properties securing this Note, and the benefit of any exemption under any homestead exemption laws, if applicable. Developer expressly agrees that this Note or any payment hereunder may be extended from time to time at the Authority's sole discretion and that the Authority may accept ATTACHMENT NO. 8 FORM OF AUTHORITY PROMISSORY NOTE Page 4of8 security in consideration for any such extension or release any security for this Note at its sole discretion all without in any way affecting the liability of Developer. No extension of time for payment of this Note made by agreement by the Authority with any person now or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the original liability of Developer under this Note, either in whole or in part. The obligations of Developer under this Note shall be absolute and Developer waives any and all rights to offset, deduct or withhold any payments or charges due under this Note for any reasons whatsoever. No previous waiver and no failure or delay by Authority in acting with respect to the terms of this Note or the Authority Deed of Trust shall constitute a waiver of any breach, default, or failure or condition under this Note, the Authority Deed of Trust or the obligations secured thereby. A waiver of any term of this Note, the Authority Deed of Trust or of any of the obligations secured thereby must be made in writing and shall be limited to the express written terms of such waiver. 11. Consents. Developer and all endorsers, guarantors and sureties consent to: (a) any renewal, extension or modification (whether one or more, and subject to the terms and provisions of the Agreement relating to modification, extension, and/or amendment) of the terms of the Agreement as such terms relate to this Note or the terms or time of payment under this Note, (b) the release or surrender or exchange or substitution of all or any part of the security, whether real or personal, or direct or indirect, for the payment hereof, (c) the granting of any other indulgences to Developer, and (d) the taking or releasing of other or additional parties primarily or contingently liable hereunder. Any such renewal, extension, modification, release, surrender, exchange or substitution may be made without notice to Developer or to any endorser, guarantor or surety hereof, and without affecting the liability of said parties hereunder. 12. Successors and Assigns. Whenever "Authority" is referred to in this Note, such reference shall be deemed to include the Anaheim Housing Authority and its successors and assigns, including, without limitation, any subsequent assignee or holder of this Note. All covenants, provisions and agreements by or on behalf of Developer, and on behalf of any makers, endorsers, guarantors and sureties hereof which are contained herein shall inure to the benefit of the Authority and Authority's successors and assigns. Authority may, at its option, assign its right to receive payment under this Note without necessity of obtaining the consent of Developer. Whenever "Developer" is referred to in this Note, such reference shall be deemed to include Avon Dakota Housing Partners II, L.P., a California limited partnership. And its approved successors and assigns, including, without limitation, any approved subsequent assignee or obligor of this Note, if such approval is given in accordance with the Agreement. In no event shall Developer assign or transfer any portion of this Note without the prior express written consent of Authority, to the extent required in the Agreement. 13. Usury. It is the intention of Developer and Authority to conform strictly to the Interest Law, as defined below, applicable to this loan transaction. Accordingly, it is agreed that notwithstanding any provision to the contrary in this Note, or in any of the documents securing payment hereof or otherwise relating hereto, the aggregate of all interest and any other charges or consideration constituting interest under the applicable Interest Law that is taken, reserved, contracted for, charged or received under this Note, or under any of the other aforesaid agreements or otherwise in connection with this loan transaction, shall under no circumstances exceed the maximum amount of interest allowed by the Interest Law applicable to this loan transaction. If any excess of interest in such respect is provided for in this Note, or in any of the documents securing payment hereof or otherwise relating hereto, then, in such event: (a) the provisions of this paragraph shall govern and control; ATTACHMENT NO. 8 FORM OF AUTHORITY PROMISSORY NOTE Page 5 of 8 (b) neither Developer nor Developer's heirs, legal representatives, successors or assigns shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest allowed by the Interest Law applicable to this loan transaction; (c) any excess shall be deemed canceled automatically and, if theretofore paid, shall be credited on this Note by Authority or, if this Note shall have been paid in full, refunded to Developer; and (d) the effective rate of interest shall be automatically subject to reduction to the Maximum Legal Rate of Interest (as defined below), allowed under such Interest Law, as now or hereafter construed by courts of appropriate jurisdiction. To the extent permitted by the Interest Law applicable to this loan transaction, all sums paid or agreed to be paid to Authority for the use, forbearance or detention of the indebtedness evidenced hereby shall be amortized, prorated, allocated and spread throughout the full term of this Note. For purposes of this Note, "Interest Law" shall mean any present or future law of the State of California, the United States of America, or any other jurisdiction which has application to the interest and other charges under this Note. The "Maximum Legal Rate of Interest" shall mean the maximum rate of interest that Authority may from time to time charge Developer, and under which Developer would have no claim or defense of usury under the Interest Law. 14. Costs of Enforcement. Developer agrees to pay upon demand all reasonable costs and expenses, including attorneys' fees, expert witness fees, costs and disbursements (including appeals), incurred by the Authority to enforce the terms of this Note. In addition to the foregoing award of attorneys' fees, Authority shall be entitled to its attorneys' fees incurred in any post-judgment proceedings to enforce any judgment in connection with this Note. This provision is separate and several and shall survive the merger of this provision into any judgment. 15. Non-Recourse Obligation. Nothing contained in this Note shall be deemed to cause Developer (or any of its partners, or any of their respective directors, officers, employees, partners, principals or members) personally to be liable to pay or perform any of its obligations evidenced hereby, and Authority shall not seek any personal or deficiency judgment on such obligations, and the sole remedy of Authority shall be against the Site and the collateral under the Authority Deed of Trust; provided, however, that the foregoing shall not in any way affect any rights Authority may have (as a secured party or otherwise) hereunder or under the Authority Deed of Trust or Transaction Documents, or any other rights Authority may have to: (a) recover directly from Developer any funds, damages or costs (including, without limitation, reasonable attorneys' fees, expert witness fees, and costs) incurred by Authority as a result of fraud, intentional misrepresentation or intentional waste by Developer; or (b) recover directly from Developer any condemnation or insurance proceeds, or other similar funds or payments attributable to the Site which under the terms of the Transaction Documents should have been paid to Authority and any costs and expenses incurred by Authority in connection therewith (including, without limitation, reasonable attorneys' fees, expert witness fees, and costs). 16. Miscellaneous. Time is of the essence hereof. If this Note is now, or hereafter shall be, signed by more than one party or person, it shall be the joint and several obligation of such parties or persons (including, without limitation, all makers, endorsers, guarantors and sureties), and shall be binding upon such parties and upon their respective successors and assigns. This Note shall be governed by and construed under the laws of the State of California. Developer irrevocably and unconditionally submits to the jurisdiction of the Superior Court of the State of California for the County of Orange or the United States District Court of the Central ATTACHMENT NO. 8 FORM OF AUTHORITY PROMISSORY NOTE Page 6 of 8 District of California, as Authority hereof may deem appropriate, in connection with any legal action or proceeding arising out of or relating to this Note. Developer also waives any objection regarding personal or professional jurisdiction or venue. [Signature block appears on following page] ATTACHMENT NO. 8 FORM OF AUTHORITY PROMISSORY NOTE Page 7 of 8 IN WITNESS WHEREOF, the Developer has caused this Authority Subordinate Loan Promissory Note Secured by Deed of Trust (Avon Dakota Neighborhood - Phase II) to be executed as of the date first set forth above. "DEVELOPER" AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership By: Avon Dakota MGP, LLC, a California limited liability company, its managing general partner By: Affordable Housing Access, Inc., a California nonprofit public benefit corporation, its sole member and manager Jonathan B. Webb, President By: Related/Avon Dakota Development Co., LLC, a California limited liability company, its administrative general partner 0 Frank Cardone, Vice President ATTACHMENT NO. 8 FORM OF AUTHORITY PROMISSORY NOTE Page 8 of 8 ATTACHMENT NO. 9 FORM OF AUTHORITY DEED OF TRUST AUTHORITY DEED OF TRUST Recording Requested By and When Recorded Mail To: Anaheim Housing Authority 201 South Anaheim Blvd, 10th Floor Anaheim, California 92805 Attn: Executive Director (Space above for Recorder's use.) (This document is exempt from the payment of a recording fee pursuant to Government Code Section 6103.) AUTHORITY SUBORDINATE LOAN DEED OF TRUST AND ASSIGNMENT OF RENTS (Avon Dakota Neighborhood - Phase II) This AUTHORITY SUBORDINATE LOAN DEED OF TRUST AND ASSIGNMENT OF RENTS (Avon Dakota Neighborhood - Phase II) ("Deed of Trust"), dated as of , 201_, is executed by AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership ("Trustor"), as trustor, whose address is 18201 Von Karman Avenue, Suite 900, Irvine, California 92612, in favor of First American Title Insurance Company ("Trustee"), as trustee, for the benefit of the ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic ("Beneficiary"), as beneficiary, whose address is 201 South Anaheim Boulevard, 10th Floor, Anaheim, California 92805, Attention: Executive Director. Each capitalized term used herein and not otherwise defined herein shall have the meaning given such term in the "Affordable Housing Agreement" (as defined in Section 2.1(b), below). ARTICLE I GRANT OF SECURITY 1.1 Grant of Security. FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt and adequacy of which are hereby acknowledged, Trustor hereby irrevocably grants, transfers and assigns to Trustee, IN TRUST, WITH POWER OF SALE, AND RIGHT OF ENTRY AND POSSESSION, for the benefit and security of Beneficiary, all rights, titles, interests, estates, powers and privileges that Trustor now has or may hereafter acquire in or to the following property and interests therein (collectively, the "Property"): ATTACHMENT NO. 9 FORM OF AUTHORITY DEED OF TRUST Page 1 of 16 (a) That certain ground leasehold interest in and to certain real property ("Land") in the City of Anaheim, County of Orange, State of California, more particularly described on Attachment A attached hereto; (b) All buildings and other improvements now or hereafter located on the Land, including, but not limited to, the Fixtures (as defined below) and any and all other equipment, machinery, appliances and other articles attached to such buildings and other improvements (collectively, the "Improvements"); (c) All fixtures (collectively, the "Fixtures") now or hereafter located on, attached to, installed in or used in connection with the Land and the Improvements, including all awnings, boilers, furnaces, pipes, plumbing, elevators, cleaning, call and sprinkler systems, fire extinguishing machinery and equipment, water tanks, heating, ventilating, air conditioning and air cooling machinery and equipment, gas and electric machinery and equipment, and other equipment, machinery and appliances and other fixtures of every kind and nature; (d) All rights, rights-of-way, easements, licenses, profits, privileges, tenements, hereditaments and appurtenances now owned or hereafter acquired by Trustor and used in connection with the Land and the Improvements or as a means of access to either or both; (e) All of Trustor's right, title and interest now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, adjoining the Land, and any and all sidewalks, alleys and strips and gores of land adjacent to or used in connection with the Land and Improvements; (f) All oil, gas and other mineral rights in or relating to the Land, and all royalty, leasehold and other rights of Trustor in or relating thereto; (g) All water, water rights and riparian rights (including, without limitation, shares of stock evidencing the same) in or relating to the Land; (h) All leases and subleases relating to all or any part of the Land and the Improvements or any interest therein, now or hereafter existing or entered into, including all deposits, advance rentals and other payments of a similar nature but not including the Rents, as defined and separately assigned in Article 4; (i) All options to purchase or lease all or any part of the Land or Improvements or any interest therein (and any greater estate in the Land or Improvements now owned or hereafter acquired pursuant thereto); Q) All other estates, easements, licenses, interests, rights, titles, claims or demands, both in law and in equity, which Trustor now has or may hereafter acquire in the Land and the Improvements, including, without limitation, (1) any and all awards made for the taking by eminent domain, or by any proceeding or purchase in lieu thereof, of all or any part of the Property, including any award resulting from a change of grade of streets and any award for severance damages, and (2) any and all proceeds of any insurance covering the Property. ATTACHMENT NO. 9 FORM OF AUTHORITY DEED OF TRUST Page 2 of 16 ARTICLE II SECURED OBLIGATIONS 2.1 Secured Obligations. This Deed of Trust, and the lien created hereby, is made for the purpose of securing the following obligations (collectively, the "Secured Obligations"): (a) the payment and performance by Trustor of all indebtedness and other obligations evidenced by that certain Authority Subordinate Loan Promissory Note Secured by Deed of Trust (Avon Dakota Neighborhood - Phase II) ("Note") dated of even date herewith, made by Trustor to the order of Beneficiary, in the original principal amount of up to $[4,141,500], together with interest on such indebtedness according to the terms of the Note, as such Note may be amended from time to time; (b) the payment and performance of all indebtedness and other obligations of Trustor to Beneficiary contained in (i) that certain unrecorded Affordable Housing Agreement, dated as of June _, 2017, by and among Beneficiary and Trustor ("Affordable Housing Agreement"), a copy of which is on file with Beneficiary as a public record, (ii) this Deed of Trust, and (iii) the other "Transaction Documents" (as defined in the Note), whether or not the total amount thereof may exceed the face amount of the Note, shall be secured hereby to the same extent as though said agreements were fully incorporated in this Deed of Trust; (c) the payment and performance of all indebtedness and other obligations as the then record owner of a ground leasehold estate in and to the Land and the Improvements may undertake to pay and perform for the benefit of Beneficiary, or its successors or assigns, when such indebtedness and obligations are contained in a document which recites that the obligations thereunder are secured by this Deed of Trust; (d) the payment by Trustor of all amounts advanced by or on behalf of Beneficiary or Trustee to improve, protect or preserve the Property or the security of this Deed of Trust, with interest thereon as provided herein; and (e) the payment and performance of all amendments, modifications, extensions, renewals and replacements of or for any of the foregoing (including, without limitation, (i) amendments or modifications of the required principal payment dates or interest payment dates, or both, as the case may be, accelerating or deferring such interest payment dates in whole or in part, or (ii) amendments, modifications, extensions or renewals at a different rate of interest), whether or not any such amendment, modification, extension, renewal or replacement is evidenced by a new or additional promissory note or other document. ARTICLE III COVENANTS 3.1 Payment of Secured Obligations. Trustor shall pay and perform the Secured Obligations when due. 3.2 Maintenance, Repair, Alterations. Trustor shall maintain and preserve the Property in good condition and repair; Trustor, except upon the prior written consent of Beneficiary, shall not remove, demolish or materially alter any of the Improvements, other than to ATTACHMENT NO. 9 FORM OF AUTHORITY DEED OF TRUST Page 3 of 16 make repairs in the ordinary course of business of a non-structural nature which serve to preserve or increase the value of the Property; Trustor shall complete promptly and in a good and workmanlike manner any Improvement which may be now or hereafter constructed on the Land, shall promptly restore in like manner any Improvement which may be damaged or destroyed thereon from any cause whatsoever, and shall pay when due all claims for labor performed and materials furnished therefor; Trustor shall comply with all laws, ordinances, rules, regulations, orders, covenants, conditions, restrictions and "Permitted Encumbrances" (as hereinafter defined) now or hereafter affecting the Property, or any part thereof, or the conduct or operation of Trustor's business; Trustor shall not commit, suffer or permit any act to be done in, upon or to all or any part of the Property in violation of any such laws, ordinances, rules, regulations, orders, covenants, conditions or Permitted Encumbrances now or hereafter affecting the Property; Trustor shall not commit or permit any waste or deterioration of the Property, and shall keep and maintain abutting grounds, sidewalks, roads, parking and landscape areas in good and neat order and repair; Trustor shall not take (nor fail to take) any action, which if taken (or not so taken) would increase in any way the risk of fire or other hazard occurring to or affecting the Property or which otherwise would impair the security of Beneficiary in the Property; Trustor shall comply with the provisions of all leases, if any, constituting a portion of the Property; Trustor shall not abandon the Property or any portion thereof or leave the Property unprotected, unguarded, vacant or deserted; Trustor shall not initiate, join in or consent to any change in any zoning ordinance, general plan, specific plan, private restrictive covenant or other public or private restriction limiting the uses which may be made of the Property by Trustor or by the owner thereof without the prior written consent of Beneficiary; Trustor shall secure and maintain in full force and effect all permits necessary for the use, occupancy and operation of the Property; except as otherwise prohibited or restricted by the Transaction Documents, or any of them, Trustor shall do any and all other acts which may be reasonably necessary to protect or preserve the value of the Property and the rights of Trustee and Beneficiary with respect thereto. 3.3 Insurance. 3.3.1 Insurance. Trustor shall at all times maintain in full force and effect, at Trustor's sole cost and expense, policies of insurance in form, substance, amounts and with companies as required by the Agreement. In the event of any damage or destruction to the Property, all insurance proceeds shall be applied in accordance with the terms and provisions of the Agreement or, in the absence thereof, as required by law. 3.4 Condemnation and Other Awards. Upon learning of the condemnation or other taking for public or quasi -public use of, or of the institution or the threatened institution of any proceeding for the condemnation or other taking for public or quasi -public use of, all or any part of the Property, Trustor shall immediately notify Beneficiary and Trustee of such fact. Trustor shall take all actions reasonably required by Beneficiary or Trustee in connection therewith to defend and protect the interests of Trustor, Beneficiary and/or Trustee in the Property. At Beneficiary's option, but subject to the rights of senior lienholders, Beneficiary or Trustor may be the nominal party in such proceeding but in any event Beneficiary shall be entitled, without regard to the adequacy of its security, to participate in and to control the same and to be represented therein by counsel of its choice. Trustor hereby assigns to Beneficiary, as security for the Secured Obligations, all compensation, awards, damages and other amounts payable to Trustor in connection with any condemnation or other taking of all or any part of the Property for public or semi-public use (including, but not limited to, the proceeds of any settlement, regardless of whether or not condemnation or other taking proceedings are instituted in connection therewith). Upon receipt, Trustor shall, subject to the rights of senior lienholders, immediately deliver all such ATTACHMENT NO. 9 FORM OF AUTHORITY DEED OF TRUST Page 4 of 16 compensation, awards, damages and other amounts to Beneficiary. All such proceeds shall be applied to restore and rebuild the Property, and thereafter applied to reimburse Beneficiary and Trustee for all costs and expenses, including reasonable attorneys' fees, incurred in connection with the collection of such award or settlement. The balance of such award or settlement shall be applied in accordance with the terms of the Agreement or, in the absence thereof, as required by law. Application or release of such proceeds as provided herein shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. 3.5 Taxes and Impositions. Except as otherwise provided in the Transaction Documents, and subject to availability of any legal exemptions therefor, Trustor shall pay, prior to delinquency, all of the following (collectively, the "Impositions"): (a) All general and special real property taxes and assessments imposed on the Property; (b) All other taxes and assessments and charges of every kind that are assessed upon the Property (or upon the owner and/or operator of the Property) and that create or may create a lien upon the Property (or upon any personal property or fixture used in connection with the Property), including, without limitation, non-governmental levies and assessments pursuant to applicable covenants, conditions or restrictions; and (c) All license fees, taxes and assessments imposed on Beneficiary (other than Beneficiary's income or franchise taxes) which is/are measured by or based upon (in whole or in part) the amount of the obligations secured by the Property. If permitted by law, Trustor may pay the Imposition in installments (together with any accrued interest). Trustor shall not be required to pay any Imposition so long as (i) its validity is being actively contested in good faith and by appropriate proceedings, (ii) Trustor has demonstrated to Beneficiary's reasonable satisfaction that leaving such Imposition unpaid pending the outcome of such proceedings could not result in conveyance of the Property in satisfaction of such Imposition or otherwise impair Beneficiary's interest under this Deed of Trust, and (iii) Trustor has furnished Beneficiary with a bond or other security satisfactory to Beneficiary in an amount not less than 120% of the applicable claim (including interest and penalties). Upon demand by Beneficiary from time to time, Trustor shall deliver to Beneficiary, within 30 days following the due date of any Imposition, evidence of payment reasonably satisfactory to Beneficiary. In addition, upon demand by Beneficiary from time to time, Trustor shall furnish to Beneficiary a tax reporting service for the Property of a type and duration, and with a company, reasonably satisfactory to Beneficiary. 3.6 Utilities. Trustor shall promptly pay all gas, electricity, water, sewer and other utility charges which are incurred for the benefit of the Property or which may become a lien against the Property and all other assessments and other charges of a similar nature, public or private, relating to the Property or any portion thereof, regardless of whether or not any such charge is or may become a lien thereon. 3.7 Liens. Except as permitted by the Agreement or the Ground Lease, Trustor shall not cause, incur, suffer or permit to exist or become effective any lien, encumbrance or charge upon all or any part of the Property or any interest therein. Trustor shall pay and promptly discharge, at Trustor's sole cost and expense, all liens, encumbrances and charges upon all or any part of the Property or any interest therein, or contest such claim in conformity with the ATTACHMENT NO. 9 FORM OF AUTHORITY DEED OF TRUST Page 5 of 16 Agreement. If Trustor shall fail to remove and discharge any such lien, encumbrance or charge, then, in addition to any other right or remedy of Beneficiary, Beneficiary may, but shall not be obligated to, discharge the same, without notice to or demand on Trustor, and without inquiring into the validity of such lien, encumbrance or charge or the existence of any defense or offset thereto, either by paying the amount claimed to be due, or by procuring the discharge of such lien, encumbrance or charge by depositing in a court a bond or the amount claimed or otherwise giving security for such claim, or in any other manner permitted or required by law. Subject to the rights of Trustor under the Agreement, the Trustor shall, immediately upon demand therefor by Beneficiary, pay to Beneficiary an amount equal to all costs and expenses incurred by Beneficiary in connection with the exercise by Beneficiary of the foregoing right to discharge any such lien, encumbrance or charge, together with interest thereon from the date of such expenditure until paid at the "Alternate Rate" (as defined in the Note). 3.8 Sale or Lease of Property. Except as otherwise provided in the Agreement or the Ground Lease, Trustor shall not sell, lease or otherwise transfer all or any part of the Property or any interest therein without the prior written consent of Beneficiary. 3.9 Inspections. Beneficiary, Trustee and their respective agents, representatives and employees, are each authorized, upon notice reasonable under the circumstances (which may be written or oral) and subject to the rights of subtenants, if any, to enter at any time upon any part of the Property during normal business hours for the purpose of inspecting the same and for the purpose of performing any of the acts Beneficiary and/or Trustee are authorized to perform hereunder or under the terms of any of the Transaction Documents. Such entry by the Beneficiary shall be upon 24 -hours' prior notice, and shall be undertaken at Beneficiary's expense, with Beneficiary holding harmless the Trustor from any claims or injuries which occur in connection with the exercise of the Beneficiary's rights pursuant to this Section 3.9. The rights of Beneficiary to enter and inspect pursuant to this Section 3.9 are in addition to and do not limit the rights of the City of Anaheim to conduct building inspections. 3.10 Defense of Actions. Trustor, at no cost or expense to Beneficiary or Trustee, shall appear in and defend any action or proceeding purporting to affect the security of this Deed of Trust, any of the other Transaction Documents, all or any part of the Property or any interest therein, any additional or other security for the obligations secured hereby, or the interests, rights, powers or duties of Beneficiary or Trustee hereunder, provided that Trustee or Beneficiary shall have first tendered the defense to Trustor. If Beneficiary or Trustee elects to become a party to such action or proceeding, or is made a party thereto, Trustor shall indemnify, defend and hold Trustee and Beneficiary harmless from all liability, damage, cost and expense incurred by Trustee and Beneficiary, or either of them, by reason of such action or proceeding (including, without limitation, reasonable attorneys' fees and expenses), whether or not such action or proceeding is prosecuted to judgment or decision. 3.11 Protection of Security. If Trustor fails to make any payment or to do any act as and in the manner provided in this Deed of Trust or any of the other Transaction Documents, Beneficiary and/or Trustee, each in its own discretion, without obligation so to do, following written notice or demand to Trustor as provided in the Agreement, and without releasing Trustor from any obligation, may make or do the same in such manner and to such extent as either may reasonably deem necessary to protect the security of this Deed of Trust. In connection therewith (without limiting their general powers), Beneficiary and Trustee shall each have and are hereby given the right, but not the obligation, following occurrence (prior to cure) of an Event of Default: (i) to enter upon and take possession of the Property; (ii) to make additions, alterations, repairs ATTACHMENT NO. 9 FORM OF AUTHORITY DEED OF TRUST Page 6 of 16 and improvements to the Property which in the judgment of either may be necessary or proper to keep the Property in good condition and repair; (iii) to appear and participate in any action or proceeding affecting or which may affect the security hereof or the rights or powers of Beneficiary or Trustee; (iv) to pay, purchase, contest or compromise any encumbrance, claim, charge, lien or debt which in the judgment of either may affect or appears to affect the security of this Deed of Trust or to be or to appear to be prior or superior hereto; and (v) in exercising such powers, to pay all necessary or appropriate costs and expenses and employ necessary or desirable consultants. 3.12 Beneficiary's Powers. Without affecting the liability of Trustor or any other person liable for the payment of any obligation herein mentioned, and without affecting the lien or charge of this Deed of Trust upon any portion of the Property not then or theretofore released as security for the full amount of all Secured Obligations, Beneficiary may, from time to time and without notice (i) release any person so liable, (ii) extend the maturity or alter any of the terms of any such obligation (provided, however, that the consent of Trustor shall be required with respect to the extension or alteration of any unpaid obligation of Trustor to Beneficiary), (iii) waive any provision contained herein or grant other indulgences, (iv) release or reconvey, or cause to be released or reconveyed at any time at Beneficiary's option any parcel, a portion or all of the Property, (v) take or release any other or additional security for any obligation herein mentioned, or (vi) make compositions or other arrangements with debtors in relation thereto. By accepting payment or performance of any obligation secured by this Deed of Trust after the payment or performance thereof is due or after the filing of a notice of default and election to sell, Beneficiary shall not have thereby waived its right to require prompt payment and performance, when due, of all other obligations secured hereby, or to declare a default for failure so to pay or perform, or to proceed with the sale under any notice of default and election to sell theretofore given by Beneficiary, or with respect to any unpaid balance of the indebtedness secured hereby. The acceptance by Beneficiary of any sum in an amount less than the sum then due shall not constitute a waiver of the obligation of Trustor to pay the entire sum then due. 3.13 Costs, Fees and Expenses. Trustor shall pay, on demand, all costs, fees, expenses, advances, charges, losses and liabilities paid or incurred by Beneficiary and/or Trustee under or in connection with this Deed of Trust, the enforcement of this Deed of Trust, the collection of the Secured Obligations, and/or the exercise of any right, power, privilege or remedy given Beneficiary and/or Trustee under this Deed of Trust, including, (a) foreclosure fees, trustee's fees and expenses, receiver's fees and expenses and trustee's sale guaranty premiums, (b) costs and expenses paid or incurred by Beneficiary and/or Trustee and/or any receiver appointed under this Deed of Trust in connection with the operation, maintenance, management, protection, preservation, collection, sale or other liquidation of the Property, (c) advances made by Beneficiary and/or Trustee to complete or partially construct all or any part of any improvements which may have been commenced on the Land or otherwise to protect the security of this Deed of Trust, (d) costs of evidence of title, costs of surveys and costs of appraisals, and (e) the fees, costs and expenses of attorneys, accountants and other consultants; together with interest thereon from the date of expenditure until so paid at the Alternate Rate. ARTICLE IV ASSIGNMENT OF RENTS, ISSUES AND PROFITS 4.1 Assignment of Rents, Issues and Profits. Trustor hereby absolutely and irrevocably assigns and transfers to Beneficiary all of its right, title and interest in and to all rents, ATTACHMENT NO. 9 FORM OF AUTHORITY DEED OF TRUST Page 7 of 16 issues, profits, royalties, income and other proceeds and similar benefits derived from the Property (collectively, the "Rents"), and hereby gives to and confers upon Beneficiary the right, power and authority to collect such Rents. Trustor irrevocably appoints Beneficiary its true and lawful attorney-in-fact, at the option of Beneficiary, at any time and from time to time, to demand, receive and enforce payment, to give receipts, releases and satisfactions, and to sue, in its name or in the name of Trustor, for all Rents, and to apply the same to the obligations secured hereby; provided, however, that Trustor shall have a license to collect Rents (but not more than one month in advance unless the written approval of Beneficiary has first been obtained), and to retain and enjoy the same, so long as an Event of Default shall not have occurred hereunder and be continuing. The assignment of the Rents in this Article 4 is intended to be an absolute assignment from Trustor to Beneficiary and not merely the passing of a security interest. 4.2 Collection Upon Default. Upon the occurrence of an Event of Default hereunder, Trustor's license to collect the Rents shall automatically terminate and Beneficiary may, at any time without notice, either in person, by agent or by a receiver appointed by a court, and without regard to the adequacy of any security for the obligations hereby secured, enter upon and take possession of the Property, or any part thereof, and, with or without taking possession of the Property or any part thereof, in its own name sue for or otherwise collect such Rents (including those past due and unpaid, and all prepaid Rents and all other monies which may have been or may hereafter be deposited with Trustor by any lessee or tenant of Trustor to secure the payment of any Rent or for any services thereafter to be rendered by Trustor or any other obligation of any tenant to Trustor arising under any lease, and Trustor agrees that, upon the occurrence of any Event of Default hereunder, Trustor shall promptly deliver all Rents and other monies to Beneficiary), and Beneficiary may apply the same, less costs and expenses of operation and collection, including, without limitation, attorneys' fees, whether or not suit is brought or prosecuted to judgment, upon any reasonable indebtedness or obligation of Trustor secured hereby, and in such order as Beneficiary may determine notwithstanding that said indebtedness or the performance of said obligation may not then be due. The collection of Rents, or the entering upon and taking possession of the Property, or the application of Rents as provided above, shall not cure or waive any default or notice of default hereunder or invalidate any act performed in response to such default or pursuant to such notice of default or be deemed or construed to make Beneficiary a mortgagee -in -possession of all or any part of the Property. ARTICLE V REMEDIES UPON DEFAULT 5.1 Events of Default. The occurrence of any of the following events or conditions shall constitute an event of default ("Event of Default") hereunder: 5.1.1 Trustor shall fail to pay any amount owing under this Deed of Trust when due, and such failure is not cured within ten (10) days after Beneficiary gives Trustor written notice of such failure; 5.1.2 Trustor shall fail to observe or perform any other obligation contained in this Deed of Trust, and such failure is not cured within thirty (30) days after Beneficiary gives Trustor notice of such failure; provided that, if cure cannot reasonably be effected within such 30 - day period, such failure shall not be an Event of Default so long as Borrower promptly (in any event, within thirty (30) days after receipt of such notice) commences cure, and thereafter diligently prosecutes such cure to completion; ATTACHMENT NO. 9 FORM OF AUTHORITY DEED OF TRUST Page 8 of 16 5.1.3 The occurrence of an "Event of Default" under the Agreement, the Transaction Documents or the Note after delivery of notice and expiration of the cure period provided therein; 5.1.4 A default under any other document or agreement secured hereby, subject to any applicable cure period; or 5.1.5 The occurrence of a "Default" or "Event of Default" under the loan documents entered into between Trustor and , in its capacity as Debt Lender, or any successor permanent lender approved by Beneficiary that is not cured within the applicable cure or grace period therefor (including cure or grace periods for the Investor Limited Partner), if Beneficiary, City, or Agency cures such Event of Default, after delivery of notice of such cure by Beneficiary, City, or Agency to Trustor and expiration of fifteen (15) days following such Event of Default. 5.2 Acceleration Upon Default; Additional Remedies. Upon the occurrence of an Event of Default, Beneficiary may, at its option, terminate its obligations under the Transaction Documents and declare all Secured Obligations to be immediately due and payable without any presentment, demand, protest or further notice of any kind; and whether or not Beneficiary exercises said option, Beneficiary may: 5.2.1 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 and take possession of the Property, or any part thereof, in its own name or in the name of Trustee, and do any acts which it deems necessary or desirable to complete the construction of the Improvements on the Land, to preserve the value, marketability or rentability of the Property, or part thereof or interest therein, increase the income therefrom or protect the security hereof and, with or without taking possession of the Property, sue for or otherwise collect the Rents, including those past due and unpaid, and apply the same, less costs and expenses of operation and collection including attorneys' fees, upon any Secured Obligations, all in such order as Beneficiary may determine. The entering upon and taking possession of the Property, the collection of such Rents and the application thereof as aforesaid, shall not cure or waive any default or notice of default hereunder or invalidate any act done in response to such default or pursuant to such notice of default and, notwithstanding the continuance in possession by Trustee, Beneficiary or a receiver of all or any portion of the Property or the collection, receipt and application of any of the Rents, the Trustee or Beneficiary shall be entitled to exercise every right provided for in any of the Transaction Documents or by law upon occurrence of any Event of Default, including the right to exercise the power of sale; 5.2.2 Commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants contained herein; 5.2.3 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 Property to be sold, which notice Trustee or Beneficiary shall cause to be duly filed for record in the official records of the County in which the Property is located; 5.2.4 Exercise any and/or all of the rights and remedies available to a secured party under the California Uniform Commercial Code in such order and in such manner as Beneficiary, in its sole discretion, may determine (including, without limitation, requiring Trustor to ATTACHMENT NO. 9 FORM OF AUTHORITY DEED OF TRUST Page 9 of 16 assemble the collateral and make the collateral available to Beneficiary at a reasonably convenient location or location); provided, however, that the expenses of retaking, holding, preparing for sale or the like as provided thereunder shall include reasonable attorneys' fees and other expenses of Beneficiary and Trustee and shall be additionally secured by this Deed of Trust; and/or 5.2.5 Exercise all other rights and remedies provided herein, in any Transaction Document or other document or agreement now or hereafter securing all or any portion of the obligations secured hereby, or provided by law or in equity. 5.2.6 Notwithstanding anything to the contrary contained in this Deed of Trust, prior to declaring any default or taking any remedy permitted under this Deed of Trust or applicable law based upon an alleged default under this Deed of Trust by Trustor, Beneficiary shall deliver written notice to the Investor Limited Partner of Trustor's failure to cure such default, and Investor Limited Partner shall have one hundred eighty (180) days to cure such alleged default (whether of a monetary or nonmonetary nature). In addition, if a Default is caused by the general partner of Trustor and the Investor Limited Partner removes the general partner of Trustor, such removal shall be deemed to have cured the Default so long as the Investor Limited Partner and/or Trustor, as applicable, diligently continues to cure any remaining Events of Default after such general partner is removed. 5.3 Foreclosure By Power of Sale. 5.3.1 Should Beneficiary elect to foreclose by exercise of the power of sale herein contained, Beneficiary shall notify Trustee and shall deposit with Trustee this Deed of Trust and the Note and such receipts and evidence of expenditures made and secured hereby as Trustee may require. 5.3.2 Upon receipt of notice from Beneficiary, Trustee shall cause to be recorded, published and delivered to Trustor such notice of default and election to sell as is then required by law. 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 after notice of sale having been given as required by law, sell the Property at the time and place of sale fixed by it in said notice of sale, either as a whole, or in separate lots or parcels or items and in such order as Beneficiary may direct Trustee so to do, at public auction to the highest bidder for cash in lawful money of the United States of America 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 of any matter or fact shall be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Trustor, Trustee or Beneficiary, may purchase at such sale. 5.3.3 After deducting all fees, costs and expenses incurred by Beneficiary or Trustee in connection with such sale, including costs of evidence of title, Beneficiary shall apply the proceeds of sale in the following priority, to payment of (i) first, all amounts expended under the terms hereof, not then repaid, with accrued interest at the Alternate Rate; (ii) second, all other Secured Obligations; and (iii) the remainder, if any, to the person or persons legally entitled thereto. 5.3.4 Subject to applicable law, Trustee may postpone the sale of all or any portion of the Property by public announcement at the time and place of sale, and from time to ATTACHMENT NO. 9 FORM OF AUTHORITY DEED OF TRUST Page 10 of 16 time thereafter may postpone such sale by public announcement or subsequently noticed sale, 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. 5.3.5 A sale of less than the whole of the Property or any defective or irregular sale made hereunder shall not exhaust the power of sale provided for herein; and subsequent sales may be made hereunder until all obligations secured hereby have been satisfied, or the entire Property sold, without defect or irregularity. 5.4 Appointment of Receiver. Upon the occurrence of an Event of Default under this Deed of Trust, Beneficiary, as a matter of right and without notice to Trustor or anyone claiming under Trustor, and without regard to the then value of the Property 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 Property, and Trustor hereby irrevocably consents to such appointment and waives 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 Property unless such receivership is sooner terminated. 5.5 Application of Funds After Default. Except as otherwise herein provided and subject to the rights of senior lienholders, upon the occurrence of an Event of Default hereunder, Beneficiary may, at any time without notice, apply any or all sums or amounts received and held by Beneficiary to pay insurance premiums, Impositions, or either of them, or as rents or income of the Property, or as insurance or condemnation proceeds, and all other sums or amounts received by Beneficiary from or on account of Trustor or the Property, or otherwise, upon any Secured Obligation, in such manner and order as Beneficiary may elect, notwithstanding that such Secured Obligation may not yet be due. The receipt, use or application of any such sum or amount shall not be construed to affect the maturity of any indebtedness secured by this Deed of Trust, or any of the rights or powers of Beneficiary or Trustee under the terms of the Transaction Documents, or any of the obligations of Trustor or any guarantor under the Transaction Documents; or to cure or waive any default or notice of default under any of the Transaction Documents; or to invalidate any act of Trustee or Beneficiary. 5.6 Remedies Not Exclusive. Trustee and Beneficiary, and each of them, shall be entitled to enforce payment and performance of any indebtedness or obligation secured hereby and to exercise all rights and powers under this Deed of Trust or under any Project Document or other agreement or any law now or hereafter in force, notwithstanding some or all of the said indebtedness and obligations secured hereby may now or hereafter be otherwise secured, whether by guaranty, mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither the acceptance of this Deed of Trust nor its enforcement whether by court action or pursuant to the power of sale or other powers herein contained, shall prejudice or in any manner affect Trustee's or Beneficiary's right to realize upon or enforce any other security now or hereafter held by Trustee or Beneficiary, it being agreed that Trustee and Beneficiary, and each of them, shall be entitled to enforce this Deed of Trust and any other security for the obligations hereby secured now or hereafter held by Beneficiary or Trustee in such order and manner as they may in their absolute discretion determine. No remedy herein conferred upon or reserved to Trustee or Beneficiary is intended to be exclusive of any other remedy herein, or granted to Beneficiary under any other agreement, or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or granted to Beneficiary under any other agreement, or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any ATTACHMENT NO. 9 FORM OF AUTHORITY DEED OF TRUST Page 11 of 16 of the Transaction Documents to the Trustee or Beneficiary or to which either of them may be otherwise entitled may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by the Trustee or Beneficiary, and either of them may pursue inconsistent remedies. Trustor may be joined in any action brought by Beneficiary to foreclose under or otherwise enforce this Deed of Trust. 5.7 Request for Notice. Trustor hereby requests that a copy of any notice of default and that a copy of any notice of sale hereunder be mailed to it at the address set forth in the first paragraph of this Deed of Trust. ARTICLE VI MISCELLANEOUS 6.1 Amendments. This instrument cannot be waived, modified, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of any waiver, modification, discharge or termination is sought. 6.2 Waivers. Trustor waives, to the extent permitted by law, (i) the benefit of all laws now existing or that may hereafter be enacted providing for any appraisement before sale of any portion of the Property, and, whether now existing or hereafter arising or created, (ii) all rights of valuation, appraisement, stay of execution, notice of election to mature or declare due the whole of the secured indebtedness and marshaling in the event of foreclosure of the liens hereby created, and (iii) all rights and remedies which Trustor may have or be able to assert by reason of the laws of the State of California pertaining to the rights and remedies of sureties; provided, however, nothing contained herein shall be deemed to be a waiver of Trustor's rights under Section 2924, 2924b and 2924c of the California Civil Code, or under Sections 580a or 726 of the California Code of Civil Procedure. 6.3 Statements by Trustor. Trustor shall, within ten (10) days after notice thereof from Beneficiary, deliver to Beneficiary a written statement setting forth the amounts then unpaid and secured by this Deed of Trust and stating whether any offset or defense exists against such amounts. 6.4 Statements by Beneficiary. For any statement or accounting requested by Trustor or any other entitled person pursuant to Section 2943 or Section 2954 of the California Civil Code or pursuant to any other provision of applicable law, or for any other document or instrument furnished to Trustor by Beneficiary, Beneficiary may charge the maximum amount permitted by law at the time of the request therefor, or if there be no such maximum, then in accordance with Beneficiary's customary charges therefor or the actual cost to Beneficiary therefor, whichever is greater. 6.5 Reconveyance by Trustee. Upon written request of Beneficiary stating that all Secured Obligations have been paid and fully performed, and upon surrender by Beneficiary of this Deed of Trust and the Note to Trustee for cancellation and retention and upon payment by Trustor of Trustee's fees and the costs and expenses of executing and recording any requested reconveyance, Trustee shall reconvey to the person or persons legally entitled thereto, without warranty, any portion of the Property then held hereunder. The recitals in any such reconveyance of any matter or fact shall be conclusive proof of the truthfulness thereof. The grantee in any such reconveyance may be described as "the person or persons legally entitled thereto." ATTACHMENT NO. 9 FORM OF AUTHORITY DEED OF TRUST Page 12 of 16 6.6 Notices. All notices, demands, approvals and other communications provided for herein shall be in writing and shall be personally delivered or mailed by United States mail, as certified or registered material, return receipt requested, postage prepaid, to the appropriate party at the address set forth in the first paragraph of this Deed of Trust. Addresses for notice may be changed from time to time by written notice to all other parties. All communications shall be effective when actually received; provided, however, that nonreceipt of any communication as the result of a change of address of which the pending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such communication. A copy of all notices to Trustor hereunder shall be provided to the Investor Limited Partner, at the following addresses: With a copy to: 6.7 Acceptance by Trustee. Trustee accepts this trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. The trust created hereby is irrevocable by Trustor. 6.8 Headinqs. Article and section headings are included in this Deed of Trust for convenience of reference only and shall not be used in construing this Deed of Trust. 6.9 Severability. Every provision of this Deed of Trust is intended to be severable. In the event any provision hereof is declared to be illegal, invalid or unenforceable for any reason whatsoever by a court of competent jurisdiction, such illegality, invalidity or unenforceability shall not affect the legality, validity or enforceability of the remaining provisions hereof, which provisions shall remain binding and enforceable. 6.10 Subrogation. To the extent that proceeds of the Note are used, either directly or indirectly, to pay any outstanding lien, charge or prior encumbrance against the Property, Beneficiary shall be subrogated to any and all rights and liens held by any owner or holder of such outstanding liens, charges and prior encumbrances, irrespective of whether such liens, charges or encumbrances are released. 6.11 Governing Law. This Deed of Trust shall be governed by, and construed in accordance with, the laws of the State of California. 6.12 Statute of Limitations. The right to plead, use or assert any statute of limitations as a plea, defense or bar of any kind, or for any purpose, to any obligation secured hereby, or to any complaint or other pleading or proceeding filed, instituted or maintained for the purpose of ATTACHMENT NO. 9 FORM OF AUTHORITY DEED OF TRUST Page 13 of 16 enforcing this Deed of Trust or any rights hereunder, is hereby waived by Trustor to the full extent permitted by law. 6.13 Interpretation. 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; and the word "person" shall include corporation, partnership or other form of association. Any reference in this Deed of Trust to any document, instrument or agreement creating or evidencing an obligation secured hereby shall include such document, instrument or agreement both as originally executed and as it may from time to time be modified. 6.14 Trust Irrevocable. The trust created hereby is irrevocable by Trustor. All amounts payable by Trustor pursuant to this Deed of Trust shall be paid without notice, demand, counterclaim, setoff, deduction or defense and without abatement, suspension, deferment, diminution or reduction. Trustor hereby waives all rights now or hereafter conferred by statute or otherwise to any abatement, suspension, deferment, diminution or reduction of any amount secured hereby and payable by Trustor to Beneficiary or Trustee. 6.15 Further Assurances. Trustor agrees to do or cause to be done such further acts and things and to execute and deliver or to cause to be executed and delivered such additional assignments, agreements, powers and instruments, as Beneficiary or Trustee may reasonably require or deem advisable to correct any defect, error or omission in this Deed of Trust or the execution or acknowledgment of this Deed of Trust, to subject to the lien of this Deed of Trust any of Trustor's properties covered or intended to be covered hereby, to perfect and maintain such lien, to keep valid and effective the charges and lien hereof, to carry into effect the purposes of this Deed of Trust or to better assure and confirm to Beneficiary or Trustee their respective rights, powers and remedies hereunder. 6.16 Trustee's Powers. At any time, and from time to time, without liability therefor and without notice, upon written request of Beneficiary and presentation of this Deed of Trust and the note secured hereby for endorsement, and without affecting the personal liability of any person for payment of the indebtedness or the performance of any other obligation secured hereby or the effect of this Deed of Trust upon the remainder of the Property, Trustee may (i) reconvey all or any part of the Property, (ii) consent in writing to the making of any map or plat thereof, (iii) join in granting any easement thereon, or (iv) join in any extension agreement, agreement subordinating the lien or charge hereof, or other agreement or instrument relating hereto or to all or any part of the Property. 6.17 Substitution of Trustee. Beneficiary may, from time to time, by written instrument executed and acknowledged by Beneficiary and recorded in the county or counties where the Property is located, or by any other procedure permitted by applicable law, substitute a successor or successors for the Trustee named herein or acting hereunder. 6.18 Successors and Assigns. This Deed of Trust applies to, inures to the benefit of and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors and assigns. [Signatures block begins on following page] ATTACHMENT NO. 9 FORM OF AUTHORITY DEED OF TRUST Page 14 of 16 IN WITNESS WHEREOF, Trustor has duly executed this Deed of Trust as of the date first above written. "TRUSTOR" AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership By: Avon Dakota MGP, LLC, a California limited liability company, its managing general partner By: Affordable Housing Access, Inc., a California nonprofit public benefit corporation, its sole member and manager am Jonathan B. Webb, President By: Related/Avon Dakota Development Co., LLC, a California limited liability company, its administrative general partner In Frank Cardone, Vice President ATTACHMENT NO. 9 FORM OF AUTHORITY DEED OF TRUST Page 15 of 16 ATTACHMENT A TO DEED OF TRUST LEGAL DESCRIPTION Real property in the City of Anaheim, County of Orange, State of California, described as follows: [to come] ATTACHMENT A TO DEED OF TRUST LEGAL DESCRIPTION Page 1 of 1 ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT REGULATORY AGREEMENT RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Anaheim Housing Authority 201 South Anaheim Boulevard, Suite 1003 Anaheim, California 92805 Attention: Executive Director This document is exempt from the payment of a recording fee pursuant to Government Code §§ 6103 and 27383. REGULATORY AGREEMENT This REGULATORY AGREEMENT ("Regulatory Agreement") is entered into as of , 20, by and among the ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic ("Authority"), and AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership ("Developer"). RECITALS A. Authority is the owner of certain real property located at 808 South Dakota Street, 814 South Dakota Street, 815 South Dakota Street and 833 South Dakota Street within the City of Anaheim ("Site"), which is legally described in the Legal Description attached hereto as Exhibit A and incorporated herein by reference, and is the subject of this Regulatory Agreement ("Site"). B. Developer and Authority entered into that certain unrecorded Affordable Housing Agreement (Avon Dakota Neighborhood - Phase II) dated as of June _, 2017 ("Affordable Housing Agreement"). A copy of the Affordable Housing Agreement is on file with Authority as a public record. Subject to the terms and conditions of the Affordable Housing Agreement, Authority has agreed to ground lease the Site to Developer pursuant to a Ground Lease, and Developer has agreed to construct an affordable rental housing project consisting of twenty-one (21) units ("Phase II"), and operate Phase II on the Site with all of the units to be made available to Very Low and Low Income Households (collectively, "Housing Units"). C. Pursuant to the Affordable Housing Agreement, Authority agreed to ground lease the Site to Developer pursuant to the Ground Lease, and Developer agreed to develop and operate Phase II thereon. ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 1 of 19 D. The execution and recording of this Regulatory Agreement is a requirement of the Affordable Housing Agreement. Terms used herein have the meanings set forth in the Affordable Housing Agreement unless otherwise specifically defined herein. NOW, THEREFORE, in exchange for the mutual covenants, restrictions, and agreements set forth herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. Development of Phase II. Developer agrees to develop the Site subject to the terms and in accordance with the provisions of the Affordable Housing Agreement, the Scope of Development which is attached to the Affordable Housing Agreement as Attachment No. 6, the Schedule of Performance which is attached to the Affordable Housing Agreement as Attachment No. 5, the Ground Lease, the Entitlement as approved by the City, the Anaheim Municipal Code, and all other applicable federal, state and local codes, regulations, and ordinances. 2. Housing Units. (a) Number of Housing Units. Number of Housing Units. Developer covenants and agrees to make available, restrict occupancy to, and rent the Housing Units in Phase II to Very Low and Low Income Households, in accordance with this Section 2 and the Affordable Housing Agreement for Phase II as follows: (i) Two (2) of the two (2) bedroom Housing Units in Phase II to 30% AMI Very Low Income Households at an Affordable Rent; (ii) One (1) of the three (3) bedroom Housing Units in Phase II to 30% AMI Very Low Income Households at an Affordable Rent; (iii) Two (2) of the one (1) bedroom Housing Units in Phase II to 40% AMI Very Low Income Households at an Affordable Rent; (iv) One (1) of the two (2) bedroom Housing Units in Phase II to 40% AMI Very Low Income Households at an Affordable Rent; (v) Two (2) of the three (3) bedroom Housing Units in Phase II to 40% AMI Very Low Income Households at an Affordable Rent; (vi) One (1) of the one (1) bedroom Housing Units in Phase II to 50% AMI Very Low Income Households at an Affordable Rent; (vii) Six (6) of the two (2) bedroom Housing Units in Phase II to 50% AMI Very Low Income Households at an Affordable Rent; (viii) Two (2) of the three (3) bedroom Housing Units in Phase II to 50% AMI Very Low Income Households at an Affordable Rent; (ix) Three (3) of the two (2) bedroom Housing Units in Phase II to 60% AMI Low Income Households at an Affordable Rent; and (x) One (1) of the three (3) bedroom Housing Units in Phase II to 60% AMI Low Income Households at an Affordable Rent. ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 2 of 19 (b) Affordable Rent. Affordable Rent shall be charged for all Housing Units throughout the Affordability Period. The maximum Affordable Rent chargeable for the Housing Units shall be annually determined by Authority (and as charged and implemented by Developer) in accordance with the following requirements: (i) The Affordable Rent for the Housing Units to be rented to 30% AMI Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of thirty percent (30%) of AMI for Orange County as determined and published annually by TCAC for a family of a size appropriate to the unit. (ii) The Affordable Rent for the Housing Units to be rented to 40% AMI Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of forty percent (40%) of AMI for Orange County as determined and published annually by TCAC for a family of a size appropriate to the unit. (iii) The Affordable Rent for the Housing Units to be rented to 50% AMI Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of fifty percent (50%) of AMI for Orange County as determined and published annually by TCAC for a family of a size appropriate to the unit. (iv) The Affordable Rent for the Housing Units to be rented to 60% AMI Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of sixty percent (60%) of AMI for Orange County as determined and published annually by TCAC for a family of a size appropriate to the unit. Developer shall, and shall cause its Property Manager to, operate Phase II and cause occupancy of all Housing Units thereon in conformity with these covenants and this Regulatory Agreement. For purposes of this Regulatory Agreement, "Affordable Rent" shall mean the total of monthly payments for (a) use and occupancy of each Housing Unit and land and facilities associated therewith, (b) any separately charged fees or service charges assessed by Developer which are required of all tenants, other than security deposits, (c) a reasonable allowance for an adequate level of service of utilities not included in (a) or (b) above, including garbage collection, sewer, water, electricity, gas and other heating, cooking and refrigeration fuels, but not including telephone service, or cable TV or internet services, and (d) possessory interest, taxes or other fees or charges assessed for use of the land and facilities associated therewith by a public or private entity other than Developer. No additional charge shall be assessed against tenant households of the Housing Units for any social or supportive services provided at the Site. In addition, thirteen (13) of the Housing Units shall constitute "HOME Units", as follows: (a) at 809 Dakota Street: (i) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be Low HOME Units, and (ii) two (2) of the two (2) bath Housing Units shall be High HOME Units; (b) at 868 Dakota Street: (i) one (1) of the two (2) bedroom, two (2) bath Housing Units shall be Low HOME Units, and (ii) three (3) of the two (2) bath Housing Units shall be High HOME Units; and (c) at 606 Avon Place: (i) one (1) of the one (1) bedroom, two (2) bath Housing Units shall be a Low HOME Unit, (ii) two (2) of the one (1) bedroom, two (2) bath Housing Units shall be High HOME Units, and (iii) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be High HOME Units. The HOME Units shall be rented in conformity with Low HOME or High HOME rents in conformity with the HOME Regulations consistent with the identification of such HOME ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 3 of 19 Units as Low HOME or High HOME Units, respectively, in the definition of HOME Units. The HOME Units shall be rented at the lower of (i) rent determined for Low HOME or High HOME Units or (ii) rent as otherwise determined in conformity with this Regulatory Agreement. (c) Duration of Affordability Requirements; Affordability Period. Phase II and all the Housing Units thereon shall be subject to the requirements of this Section 2, et seq. for the full term of not less than fifty-seven (57) years from the date that the Release of Construction Covenants is recorded against the Site in the Official Records. The duration of these covenants and this requirement shall be known as the "Affordability Period." (d) Selection of Tenants. (i) Developer shall be responsible for the selection of tenants for the Housing Units in compliance with all lawful and reasonable criteria, and shall adopt a tenant selection system that shall be approved (or disapproved) by Authority Executive Director in his/her reasonable discretion, pursuant to which Developer shall establish and maintain a chronological waiting list system for selection of tenants in the order of priority set forth below, and which shall be set forth in the Marketing and Tenant Selection Plan and the Property Management Plan, which plans are required to be submitted by Developer and approved by Authority pursuant to Sections 3 and 7(b) hereof. Throughout the Affordability Period and the Term of the Ground Lease, Developer shall establish and maintain for Phase II such waiting list of eligible, prospective tenants to facilitate re -tenanting Housing Units in compliance with the approved Marketing and Tenant Selection Plan, Property Management Plan, and Anaheim Municipal Code. Further, subject to applicable Fair Housing Laws and in compliance with the Anaheim Municipal Code, in particular Section 18.52.160 thereof, Authority shall be afforded a priority marketing period for thirty (30) days after receiving written notice from Developer that one or more Housing Units have become vacant at Phase ll, during which time Authority and Tenant shall work cooperatively to select tenants for any vacant Housing Units at Phase II. Developer shall provide prompt written notice to Authority when vacancies of Housing Units occur to facilitate timely re -tenanting of Housing Units pursuant to the approved Marketing and Tenant Selection Plan, Property Management Plan and Anaheim Municipal Code. Subject to applicable Fair Housing Laws, Developer's waiting list of prospective, eligible tenants for Housing Units at Phase II shall include and follow the following order of priority for selection of tenants, and Authority will follow such order of priority: (A) Very Low and Low Income Households, as applicable, who have been displaced from their residences due to programs or projects implemented by the City of Anaheim or another governmental entity; (B) Very Low and Low Income Households, as applicable, who have applied for and have received rental vouchers from Authority; (C) Very Low and Low Income Households, as applicable, who are listed on Authority's waiting lists for affordable housing and who live and/or work in Anaheim; and (D) Very Low and Low Income Households, as applicable, who live and/or work in Anaheim. ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 4 of 19 (ii) In the event Tenant rents a Housing Unit to a household holding a Portable Voucher, if required by the Executive Director in writing to the Tenant, the rental agreement (or lease agreement, as applicable) between Tenant, as landlord, and the subtenant shall expressly provide that monthly rent charged shall be the Affordable Rent required hereunder for the Housing Unit (not fair market rent) and that the rent collected directly from such subtenant holding a Portable Voucher shall be not more than 40% of subtenant's actual gross income pursuant to the applicable voucher program regulations; i.e., the rent charged to such subtenant under the rental agreement shall be the Affordable Rent chargeable hereunder and not market rent for the area (as determined by a current rent reasonable review conducted in accordance with Section 8 Federal Program Limitations applicable to Portable Vouchers), as would otherwise be permitted under the applicable Portable Voucher program. Thus, if required by the Executive Director in writing in accordance herewith, the subsidy payment to Tenant under any Portable Voucher shall not exceed the difference between the amount the subtenant actually pays to Tenant towards such subtenant's rent and the Affordable Rent chargeable for the applicable Housing Unit hereunder. (iii) Developer hereby acknowledges and agrees that, upon completion of construction of Phase II and leasing of the Housing Units to Very Low and Low Income Households pursuant to this Regulatory Agreement, Developer will have received governmental subsidies from Authority and from TCAC through the Tax Credits allocated to Phase II (and/or other subsidies included in the final financing sources for Phase II, as approved by Authority pursuant to the Affordable Housing Agreement) in exchange for Developer's agreement to limit the rents charged to tenants of Phase II to an Affordable Rent and Developer further acknowledges and agrees that acceptance of additional governmental rental subsidies resulting in total, cumulative rent payments to Developer in excess of an Affordable Rent for any of the Housing Units at Phase II would constitute an unjustified windfall to Developer at the expense of Authority and the federal and state governments. (iv) In the event of a conflict between this Regulatory Agreement and the approved Marketing and Tenant Selection Plan, the Marketing and Tenant Selection Plan shall control. (e) Household Income Requirements. On or before one hundred twenty (120) days following the end of Developer's fiscal year, commencing the first year after issuance of the first certificate of occupancy for Phase II, and annually thereafter, Developer shall prepare and submit to Authority, at Developer's expense, a written summary of the income, household size, and rent payable by each of the tenants of the Housing Units and, upon the written request of the Authority, copies of each and all leases or rental agreements and the current rules and regulations for Phase Il. At Authority's request, Developer shall also provide to Authority completed income computation and certification forms, all in a form reasonably acceptable to Authority, for each and all tenants. Developer shall obtain, or shall cause to be obtained by the Property Manager, a certification from each household leasing a Housing Unit demonstrating that such household is a 30% AMI Very Low Income Household, 40% AMI Very Low Income Household, 50% AMI Very Low Income Household, or 60% AMI Low Income Household, as applicable and according to the Area Median Income annually determined and published by TCAC for Orange County, and meets the eligibility and occupancy requirements established for the Housing Unit. Developer shall verify, or shall cause to be verified by the Property Manager, the income and household size certification of the tenant household. ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 5 of 19 M Affordable Rent; Household Income Categories/Definitions. (i) "30% AMI Very Low Income Households" shall mean those households earning not greater than thirty percent (30%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. (ii) "40% AMI Very Low Income Households" shall mean those households earning not greater than forty percent (40%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. (iii) "50% AMI Very Low Income Households" shall mean those households earning not greater than fifty percent (50%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. (iv) "60% AMI Low Income Households" shall mean those households earning not greater than sixty percent (60%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. (v) "Very Low Income" and/or "Very Low Income Households" shall mean and include: (a) very low income households as defined in the Tax Credit Rules and (b) 30% AMI Very Low Income Households, (c) 40% AMI Very Low Income Households, and (d) 50% AMI Very Low Income Households. Very Low Income Households include Extremely Low Income households, as defined in the Tax Credit Rules. (vi) "Low Income," "Lower Income," "Low Income Households" or "Lower Income Households" shall mean and include both: (i) lower income households as defined in the Tax Credit Rules and (ii) 60% AMI Low Income Households. Lower Income Households include Very Low Income Households and Extremely Low Income Households, as defined in the Tax Credit Rules. (g) Occupancy Limits. The maximum occupancy of the Housing Units in Phase II shall not exceed more than such number of persons as is equal to two persons per bedroom, plus one. Thus, for the two (2) bedroom Housing Units, the maximum occupancy shall not exceed five (5) persons. For the three (3) bedroom Housing Units, the maximum occupancy shall not exceed seven (7) persons. . 3. Marketing Program. Prior to and as a Condition Precedent to the commencement of the Ground Lease, Developer shall have prepared and obtained Authority's approval, which approval shall not be unreasonably withheld, of a marketing program for the leasing of the Housing Units at Phase II ("Marketing Program"). During the Affordability Period, any material changes to an approved Marketing Program are subject to reasonable review and approval by the Executive Director. The rental of the Housing Units, as and when they are vacated by the existing tenants, shall be conducted in accordance with the approved Marketing Program and any affirmative marketing requirements which have been adopted by the Authority prior to the date hereof. The availability of Housing Units shall be marketed in accordance with the Marketing Program as the same may be amended from time to time with Authority's prior written approval, which approval shall not unreasonably be withheld. Developer shall provide Authority with periodic reports with respect to the marketing for lease of the Housing Units. Authority agrees to exercise reasonable efforts to assist Developer in connection with the implementation of the ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 6 of 19 Marketing Program; provided, however, Authority shall not be under any obligation to incur any out-of-pocket expenses in connection therewith. 4. Social Services. In the event that, despite Developer's reasonable best efforts, Developer is unable to provide all of the social and supportive services in the Scope of Social and Supportive Services attached as Attachment No. 19 to the Affordable Housing Agreement, Developer shall use reasonable best efforts to provide comparable social and supportive services programming at Phase II that are reasonably similar in scope and content to the Scope of Social and Supportive Services attached as Attachment No. 19 to the Affordable Housing Agreement that that meet all the regulations promulgated by TCAC, during the entire fifty-five (55) year Affordability Period. Such substitute services shall be subject to the prior written approval of the Authority Executive Director, which approval shall not be unreasonably withheld, conditioned or delayed. In the event the characteristics of the resident population at Phase II change substantially, Authority Executive Director shall have the authority to approve revisions to the Scope of Social and Supportive Services attached to the Affordable Housing Agreement as Attachment No. 19, in his/her sole and exclusive discretion. 5. Leases; Rental Agreements for Housing Units. Developer shall submit a standard lease form for use at Phase II to Authority Executive Director for approval, which lease form shall comply with the requirements of this Regulatory Agreement, including all applicable provisions of the HAL. Authority shall reasonably approve such lease form upon finding that such lease form is consistent with this Regulatory Agreement, including all applicable provisions of the HAL. Developer shall enter into a written lease, in the form approved by Authority, with each tenant/tenant household of Phase 11. During the Affordability Period, any material changes to the lease form are subject to the reasonable review and approval of the Executive Director. In the event Authority uses Home Investment Partnerships Act ("HOME") funds to provide any portion of the Additional Subsidy to Developer, the lease form shall also comply with all applicable HOME rules and regulations. 6. Maintenance. (a) General Maintenance. Developer shall maintain the Site and all improvements thereon, including lighting and signage, in good condition, free of debris, waste and graffiti, and in compliance with all applicable provisions of the Anaheim Municipal Code. Developer shall maintain in accordance with the Maintenance Standards (as hereinafter defined) the improvements and landscaping on the Site. Such Maintenance Standards shall apply to all buildings, signage, common amenities, lighting, landscaping, irrigation of landscaping, architectural elements identifying the Site and any and all other improvements on the Site and Phase 11. To accomplish the maintenance, Developer shall either staff or contract with and hire licensed and qualified personnel to perform the maintenance work, including the provision of labor, equipment, materials, support facilities, and any and all other items necessary to comply with the requirements of this Regulatory Agreement. Developer and its maintenance staff, contractors or subcontractors shall comply with the following standards as to Phase II (collectively, "Maintenance Standards"): (i) The Site shall be maintained in conformance and in compliance with the approved final as -built plans, and reasonable maintenance standards which comply with the industry standard for comparable first quality affordable housing projects in the County, including but not limited to painting and cleaning of all exterior surfaces and other exterior facades ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 7 of 19 comprising all private improvements and public improvements to the curbline. The Site shall be maintained in good condition and in accordance with the industry custom and practice generally applicable to comparable first quality affordable housing projects in the County. (ii) Landscape maintenance shall include, but not be limited to: watering/irrigation; fertilization; mowing; edging; trimming of grass; tree and shrub pruning; trimming and shaping of trees and shrubs to maintain a healthy, natural appearance and safe road conditions and visibility, and irrigation coverage; replacement, as needed, of all plant materials; control of weeds in all planters, shrubs, lawns, ground covers, or other planted areas; and staking for support of trees. (iii) Clean-up maintenance shall include, but not be limited to: maintenance of all sidewalks, paths and other paved areas in clean and weed -free condition; maintenance of all such areas clear of dirt, mud, trash, debris or other matter which is unsafe or unsightly; removal of all trash, litter and other debris from improvements and landscaping prior to mowing; clearance and cleaning of all areas maintained prior to the end of the day on which the maintenance operations are performed to ensure that all cuttings, weeds, leaves and other debris are properly disposed of by maintenance workers. Authority agrees to notify Developer in writing if the condition of the Site does not meet with the Maintenance Standards and to specify the deficiencies and the actions required to be taken by Developer to cure the deficiencies. Upon notification of any maintenance deficiency, Developer shall have thirty (30) days within which to correct, remedy or cure the deficiency. If the written notification states the problem is urgent relating to the public health and safety, then Developer shall have forty-eight (48) hours to rectify the problem. In the event Developer does not maintain the Site in the manner set forth herein and in accordance with the Maintenance Standards, Authority shall have, in addition to any other rights and remedies hereunder, the right to maintain the Site, or to contract for the correction of such deficiencies, after written notice to Developer, and Developer shall be responsible for the payment of all such costs incurred by Authority. (b) Program Maintenance. In addition to the routine maintenance and repair required pursuant to Section 6(a), Developer shall perform the following minimum programmed maintenance of the Improvements to the Site: (i) five (5) years; every five (5) years; and Interior painting and window covering replacement at least every Exterior painting at least every ten (10) years; Repair and resurfacing of parking areas and walkways at least (iv) Replacement of all deteriorated or worn landscaping and play equipment at least every five (5) years. Upon the request of Developer, the Executive Director, at her sole and absolute discretion, may grant a waiver or deferral of any program maintenance requirement. Developer shall keep such records of maintenance and repair as are necessary to prove performance of the program maintenance requirements. ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 8 of 19 7. Management of Phase II. (a) Property Manager. Developer shall manage or cause Phase II and all appurtenances thereto that are a part of Phase 11, to be managed in a prudent and business -like manner, consistent with good property management standards for other comparable high quality, well-managed affordable rental housing projects in the County. Developer may contract with a property management company or property manager, to operate and maintain Phase II in accordance with the terms of this Section 7 ("Property Manager"); provided, however, the selection and hiring of the Property Manager (and each successor or assignee), including any Affiliate, is and shall be subject to prior written approval of Authority's Executive Director (or designee) in her sole and reasonable discretion. Related Management Company, L.P. ("RMC"), is hereby approved to act as the Property Manager, subject to Executive Director review of the scope of services, itemized fees, and fee contract for property management between Developer and RMC. The Property Manager shall manage Phase II in accordance with the definitions of Affordable Rent contained in Section 2(b) hereof, the tenant selection requirements contained in Section 2(d), and the definitions relating to income contained in Section 2(e). Any fee paid to the Property Manager for social services provided to the tenants shall be exclusive of the fee paid to the Property Manager relating to the management of Phase II. Except for RMC, Developer shall conduct due diligence and background evaluation of any potential third party property manager or property management company to evaluate experience, references, credit worthiness, and related qualifications as a property manager. Any proposed property manager shall have significant and relevant prior experience with affordable housing projects and properties comparable to Phase II and the references and credit record of such property manager/company shall be investigated (or caused to be investigated) by Developer prior to submitting the name and qualifications of such proposed property manager to the Executive Director for review and approval. A complete and true copy of the results of such background evaluation shall be provided to the Executive Director. Approval of a Property Manager by Authority's Executive Director shall not be unreasonably delayed but shall be in her sole reasonable discretion, and Authority Executive Director shall use good faith efforts to respond as promptly as practicable in order to facilitate effective and ongoing property management of Phase II by one qualified Property Manager. The replacement of RMC by Developer and/or the selection by Developer of any new or different Property Manager during the Term of the Ground Lease shall also be subject to the foregoing requirements. (b) Property Management Plan. Developer shall prepare and submit to the Executive Director for review and approval, which approval shall not be unreasonably withheld, a management plan for Phase I I which includes a detailed plan and strategy for long term marketing, operation, maintenance, repair and security of Phase Il, inclusive of social services for the residents of the Housing Units, and the method of selection of tenants, rules and regulations for tenants, and other rental policies for Phase II ("Property Management Plan"). In this regard, Authority preapproves RMC as the Property Manager subject to Executive Director review of the fee contract for property management between Developer and RMC. Executive Director approval of the Property Management Plan shall not be unreasonably withheld or delayed. Subsequent to approval of the Property Management Plan by the Executive Director the ongoing management and operation of Phase 11 shall be in compliance with the approved Property Management Plan. During the Affordability Period, Developer and its Property Manager may from time to time submit to the Executive Director proposed amendments to the Property Management Plan, the implementation of which shall also be subject to the prior written approval of the Executive Director, which approval shall not be unreasonably withheld. ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 9 of 19 (c) Gross Mismanagement. During the Affordability Period, and in the event of "Gross Mismanagement" (as defined below) of Phase II, Executive Director and/or Authority shall have and retain the authority to direct and require any condition(s), acts, or inactions of Gross Mismanagement to cease and/or be corrected immediately, and further to direct and require the immediate removal of the Property Manager and replacement with a new qualified and approved Property Manager, if such condition(s) is/are not ceased and/or corrected after expiration of thirty (30) days from the date of written notice from Executive Director. If Developer or Property Manager has commenced to cure such Gross Mismanagement condition(s) on or before the 20th day from the date of written notice (with evidence of such submitted to the Executive Director), but has failed to complete such cure by the 30th day (or such longer period if the cure cannot reasonably be accomplished in thirty (30) days as reasonably determined by the non -defaulting party), then Developer and its Property Manager shall have an additional 10 days to complete the cure of Gross Mismanagement condition(s). In no event shall any condition of Gross Mismanagement continue uncured for a period exceeding forty-five (45) days from the date of the initial written notice of such condition(s), except that the condition described in subdivision (iv) below may exist for up to, but no longer than, seventy-five (75) days without triggering Authority's right to remove the Property Manager as described in the immediately following sentence as long as Developer is diligently working to cure such conditions of Gross Mismanagement. If such condition(s) do persist beyond such period, Executive Director shall have the sole and absolute right to immediately and without further notice to Developer (or to Property Manager or any other person/entity) to remove the Property Manager and Developer shall contract with a replacement Property Manager reasonably acceptable to Authority (in accordance with Section 7(a)) within thirty (30) days following Authority's removal of the defaulting Property Manager. If Developer takes steps to select a new Property Manager that selection is subject to the requirements set forth above for selection of a Property Manager. For purposes of this Regulatory Agreement, the term "Gross Mismanagement" shall mean management of Phase II in a manner which violates the terms and/or intention of this Regulatory Agreement to operate a first quality affordable housing complex, and shall include, but is not limited to, any one or more of the following: (i) Habitually leasing to tenants who exceed the prescribed income levels; (ii) Habitually allowing tenants to exceed the prescribed occupancy levels without taking immediate action to stop such overcrowding; (iii) Under -funding required reserve accounts if Annual Project Revenues are sufficient to maintain such reserve accounts; (iv) Failing to timely maintain Phase II in accordance with the Property Management Plan and Maintenance Standards; (v) Fraud or embezzlement of Phase II funds, including without limitation funds in the reserve accounts; (vi) Failing to fully cooperate with the Anaheim Police Department or other local law enforcement agency(ies) with jurisdiction over Phase II, in maintaining a crime - free environment within Phase II; ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 10 of 19 (vii) Failing to fully cooperate with the Anaheim Fire Department or other local public safety agency(ies) with jurisdiction over Phase II, in maintaining a safe and accessible environment within Phase II; (viii) Failing to fully cooperate with the Anaheim Planning & Building Department, including the Code Enforcement Division, or other local health and safety enforcement agency(ies) with jurisdiction over Phase 11, in maintaining a decent, safe and sanitary environment within Phase 11; and (ix) Spending funds from the Capital Replacement Reserve account for items that are not defined as eligible costs, including eligible capital and/or replacement costs, under the standards imposed by GAAP (and/or, as applicable, generally accepted auditing principles). Notwithstanding the requirements of the Property Manager to correct any condition of Gross Mismanagement as described above, Developer is obligated and shall use its best efforts to correct any defects in property management or operations at the earliest feasible time and, if necessary, to replace the Property Manager as provided above. Developer shall include advisement and provisions of the foregoing requirements and requirements of this Regulatory Agreement within any contract between Developer and its Property Manager for Phase II. (d) Code Enforcement. Developer acknowledges and agrees that Authority, City, and their employees and authorized agents, shall have the right to conduct code compliance and/or code enforcement inspections of Phase II and the individual Housing Units for Phase ll, both exterior and interior, at reasonable times and upon reasonable notice (not less than 48 hours prior notice, except in an emergency) to Developer and/or an individual tenant. If such notice is provided by Authority or City representative(s) to Developer, then Developer (or its Property Manager) shall immediately and directly advise any affected tenant of such upcoming inspection and cause access to the area(s) and/or Housing Units at Phase II to be made available and open for inspection. Developer shall include express advisement of such inspection rights within the lease/rental agreements for each Housing Unit in Phase I I in order for each and every tenant and tenant household to be aware of this inspection right and such inspection(s) shall not unreasonably interfere with use and enjoyment of the site. 8. Capital Reserve Requirements. Commencing upon the closing for the permanent Primary Loan for Phase II, Developer shall annually set aside an amount of not less than Three Hundred Dollars ($300.00) per Housing Unit (16 Housing Units times $300 equals $6,300) or such increased amount required by TCAC or the Partnership Agreement or the Lender under the Primary Loan for Phase II) from the gross rents received from Phase Il, into a separate interest bearing trust account defined as the Capital Replacement Reserve. Funds in the Capital Replacement Reserve shall be used only for capital repairs, improvements and replacements to Phase II, including fixtures and equipment, which are normally capitalized under generally accepted accounting principles. The non-availability of funds in the Capital Replacement Reserve does not in any manner relieve or lessen Developer's obligation to undertake any and all necessary capital repairs, improvements, or replacements and to continue to maintain Phase II in the manner prescribed herein for Phase II. Not less than once per year, Developer, at its expense, shall submit to Authority Executive Director an accounting for the Capital Replacement Reserve for Phase II. Capital improvements and repairs to, and replacements at Phase II shall include only those items with a long useful life, including without limitation the following: carpet and drapery replacement; appliance replacement; exterior painting, including exterior trim; hot water ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 11 of 19 heater replacement; plumbing fixtures replacement, including tubs and showers, toilets, lavatories, sinks, faucets; air conditioning and heating replacement; asphalt repair and replacement, and seal coating; roofing repair and replacement; landscape tree replacement; irrigation pipe and controls replacement; sewer line replacement; water line replacement; gas line replacement; lighting fixture replacement; elevator replacement and upgrade work; miscellaneous motors and blowers; common area furniture replacement; and common area repainting. Pursuant to the procedure for submittal of each Annual Budget for Phase II to Executive Director by Developer, Executive Director will evaluate the cumulative amount on deposit in the Capital Replacement Reserve account and exercise her sole, reasonable discretion to determine if existing balance(s) in, proposed deposits to, shortfalls, if any, and/or a cumulative unexpended/unencumbered account balance in such Capital Replacement Reserve account are adequate to provide for necessary capital repairs and improvement for Phase II (provided that required annual deposits thereto are not required to exceed $300/per Housing Unit). 9. Operating Budget and Operating Reserve. Within twelve (12) months after commencement of construction of Phase II, but in no event later than ninety(90)days prior to the completion of construction of Phase Il, and not less than annually thereafter on or before November 1 of each year following the issuance of the first certificate of occupancy issued by the City's building official for Phase ll, Developer shall submit to Authority on not less than an annual basis an Operating Budget for Phase II, which budget shall be subject to the written approval of Executive Director or her designee, which approval shall not be unreasonably withheld. The Executive Director's discretion in review and approval of each proposed annual Operating Budget shall include, without limitation, authority to review individual categories, line items, and accounts, such as the following: extent, type, and amount for social services at or associated with Phase II; existing balance(s) in and proposed deposits to the Capital Replacement Reserve for Phase II to evaluate shortfalls and/or cumulative unexpended/unencumbered deposits (provided that required annual deposits thereto are not required to exceed $300/per unit); conformity of any annual increases in the Partnership Related Fees for Phase II with the increases permitted in the definition of "Partnership Related Fees"; reasonableness and conformity to prevailing market rates in Orange County and rates and fees for goods and services to be provided Developer or any of its parent, affiliated, or subsidiary entities, etc. for Phase II. Developer shall, or shall cause the Property Manager to, set aside, in an "Operating Reserve" for Phase II in a separate interest bearing trust account, a target amount equal to three (3) months of (i) Debt Service on the Primary Loan and (ii) Operating Expenses for Phase II ("Target Amount"), which shall be funded by Tax Credit equity; provided, a larger Operating Reserve may be maintained if required by the approved Lender or Tax Credit Investor for Phase II. The Operating Reserve shall thereafter be replenished from Annual Project Revenue (net of Operating Expenses and Debt Service) to maintain the Operating Reserve balance at the Target Amount. The Target Amount shall be retained in the Operating Reserve to cover shortfalls between Annual Project Revenue and actual Operating Expenses, but shall in no event be used to pay for capital items or capital costs properly payable from the Capital Replacement Reserve. Developer shall, not less than once per every twelve (12) months, submit to the Executive Director evidence reasonably satisfactory to Authority of compliance herewith. 10. Duty to Prevent Hazardous Material Contamination. During the development and operation of Phase II, Developer shall take all necessary precautions to prevent the release of any Hazardous Materials into the environment on or under the Site. Such precautions shall include compliance with all Governmental Requirements with respect to Hazardous Materials. Developer shall notify Authority, and provide to Authority a copy or copies, of any notices of ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 12 of 19 violation, notices to comply, citations, inquiries, clean-up or abatement orders, cease and desist orders, reports filed pursuant to self -reporting requirements and reports filed or applications made pursuant to any Governmental Requirement relating to Hazardous Materials and underground tanks, and Developer shall report to Authority, as soon as possible after each incident, any unusual, potentially important incidents in the event of a release of any Hazardous Materials into the environment. For purposes of this Section, "Governmental Requirements" shall mean all laws, ordinances, statutes, codes, rules, regulations, orders and decrees of the United States, the state, the county, the City, or any other political subdivision in which the Site is located, and of any other political subdivision, agency or instrumentality exercising jurisdiction over Authority, Developer or the Site. For purposes of this Section, "Hazardous Materials" means any substance, material, or waste which is or becomes regulated by any local governmental authority, the County, including the Orange County Health Care Agency, the Regional Water Quality Control Board, the State of California (including the Department of Toxic Substances Control), other state, regional or local governmental authority, or the United States Government, including, but not limited to, any material or substance which is (i) defined as a "hazardous waste," "extremely hazardous waste," or "restricted hazardous waste" under Section 25115, 25117 or 25122.7, or listed pursuant to Section 25140 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter -Presley -Tanner Hazardous Substance Account Act), (iii) defined as a "hazardous material," "hazardous substance," or "hazardous waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi) friable asbestos, (vii) polychlorinated biphenyls, (viii) designated as "hazardous substances" pursuant to Section 311 of the Clean Water Act (33 U.S.C. §1317), (ix) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. §6901, et seq. (42 U.S.C. §6903) or (x) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §9601, et seq. Notwithstanding the foregoing, "Hazardous Materials" shall not include such products in quantities as are customarily used in the construction, maintenance, rehabilitation, management, operation and residence of residential developments or associated buildings and grounds, or typically used in residential activities in a manner typical of other comparable residential developments, or substances commonly ingested by a significant population living within Phase ll, including without limitation alcohol, aspirin, tobacco and saccharine. 11. Compliance With Laws. Developer shall carry out the design, development and operation of Phase II in conformity with all applicable laws, including all applicable state labor standards, City zoning and development standards, building, plumbing, mechanical and electrical codes, and all other provisions of the Anaheim Municipal Code, and all applicable disabled and handicapped access requirements, including without limitation the Americans With Disabilities Act, 42 U.S.C. Section 12101, et seq., Government Code Section 4450, et seq., Government Code Section 11135, et seq., and the Unruh Civil Rights Act, Civil Code Section 51, et seq. Developer shall additionally comply with all HOME Regulations and other applicable Federal Program Limitations as set forth in the Affordable Housing Agreement, specifically including Section 3.9.3 thereof. ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 13 of 19 12. Non-Discrimination Covenants. Developer covenants by and for itself, its successors and assigns, and all persons claiming under or through them that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Site, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the Site. The foregoing covenants shall run with the land. Developer shall refrain from restricting the rental or lease of the Site on any of the bases listed above. All leases or contracts relating to the Site shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: (a) In deeds. "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." (b) In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following conditions: "That there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased." (c) In contracts: "There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this Regulatory Agreement, nor shall the ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 14 of 19 grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." The covenants established in this Section 14 shall, without regard to technical classification and designation, be binding for the benefit and in favor of Authority and their successors and assigns, and shall remain in effect in perpetuity. 13. Monitoring and Recordkeeping. Throughout the Affordability Period, Developer shall comply with all applicable recordkeeping and monitoring requirements of the HAL and shall annually complete and submit to Authority a Certification of Continuing Program Compliance in a form provided by Authority. Representatives of Authority (and City) shall be entitled to enter the Site upon at least forty-eight (48) hours' notice, to monitor compliance with this Regulatory Agreement, to inspect the records of the Site, and to conduct an independent audit or inspection of such records. Developer agrees to cooperate with Authority in making all of its records for Phase II and making the Site and all Housing Units thereon available for inspection or audit. Records shall be made available for review and inspection and/or audit in Orange County, California. Developer agrees to maintain all records relating to Phase II in a businesslike manner, and to maintain such records for the term of this Regulatory Agreement. 14. Annual Monitoring Fee. Concurrently with the delivery of each Annual Financial Statement and Residual Receipts Report to Authority, Developer shall pay an Annual Monitoring Fee to Authority in the amount of One Thousand Fifty Dollars ($1,050), increased annually by 3%, which shall compensate Authority for its costs incurred to monitor Developer's compliance with this Agreement. 15. Defaults and Remedies. Defaults of this Regulatory Agreement and remedies therefor shall be governed by the provisions of Section 6, et seq., of the Affordable Housing Agreement. 16. Waiver of Terms and Conditions. Any party may, in its sole discretion, waive in writing any of the terms and conditions of this Regulatory Agreement. Waivers of any covenant, term, or condition contained herein shall not be construed as a waiver of any subsequent breach of the same covenant, term, or condition. 17. Non -Liability of Authority or City Officials and Employees. No member, official, employee or agent of Authority or City shall be personally liable to Developer, or any successor in interest, in the event of any default or breach by Authority o or for any amount which may become due to Developer or its successors, or on any obligations under the terms of this Regulatory Agreement. 18. Time. Time is of the essence in this Regulatory Agreement. 19. Notices. Any approval, disapproval, demand, document or other notice ("Notice") which any party may desire to give to another party under this Regulatory Agreement must be in writing and may be given either by (i) personal service, (ii) delivery by reputable document delivery service such as Federal Express that provides a receipt showing date and time of delivery, (iii) facsimile transmission, or (iv) mailing in the United States mail, certified mail, postage prepaid, return receipt requested, addressed to the address of the party as set forth below, or at ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 15 of 19 any other address as that party may later designate by Notice. Service shall be deemed conclusively made at the time of service if personally served; upon confirmation of receipt if sent by facsimile transmission; the next business day if sent by overnight courier and receipt is confirmed by the signature of an agent or employee of the party served; the next business day after deposit in the United States mail, properly addressed and postage prepaid, return receipt requested, if served by express mail; and three (3) days after deposit thereof in the United States mail, properly addressed and postage prepaid, return receipt requested, if served by certified mail. Developer: Avon Dakota Housing Partners II, L.P. 18201 Von Karman Avenue, Suite 900 Irvine, California 92612 Attention: William A. Witte Fax No.: (949) 660-7273 With a Copy to: Bocarsly Emden Cowan Esmail & Arndt LLP 633 West Fifth Street, 70th Floor Los Angeles, California 90071 Attention: Lance Bocarsly Fax No.: (213) 239-0410 Authority: Anaheim Housing Authority 201 South Anaheim Boulevard, Suite 1003 Anaheim, California 92805 Attention: Linda N. Andal, Secretary Fax No.: (714) 765-4105 With Copies To: Anaheim Housing Authority 201 South Anaheim Boulevard, Suite 1003 Anaheim, California 92805 Attention: John E. Woodhead IV, Executive Director Fax No.: (714) 765-4630 Stradling Yocca Carlson & Rauth 660 Newport Center Drive, Suite 1600 Newport Beach, California 92660 Attention: Celeste Brady Fax No.: (949) 823-5141 Anaheim Housing Authority 200 South Anaheim Boulevard, Suite 356 Anaheim, California 92805 Attention: Leonie Mulvihill, Deputy City Attorney IV Fax No.: (714) 765-5123 Such addresses may be changed by Notice to the other party given in the same manner as provided above. 20. Successors and Assigns. This Regulatory Agreement shall run with the land, and all of the terms, covenants and conditions of this Regulatory Agreement shall be binding upon Developer and Authority and the permitted successors and assigns of Developer and Authority. ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 16 of 19 Whenever the term "Developer" or "Authority" is used in this Regulatory Agreement, such term shall include any other successors and assigns as herein provided. 21. Except City, No Third Parties Benefited. Except as to the City of Anaheim, who the parties agree is an intended third party beneficiary of this Regulatory Agreement, this Regulatory Agreement is made and entered into for the sole protection and benefit of Authority (and City) and their successors and assigns and Developer and its successors and assigns, and no other person or persons shall have any right of action hereon. 22. Partial Invalidity. If any provision of this Regulatory Agreement shall be declared invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions hereof shall not in any way be affected or impaired. 23. Governing Law. This Regulatory Agreement and other instruments given pursuant hereto shall be construed in accordance with and be governed by the laws of the State of California. Any references herein to particular statutes or regulations shall be deemed to refer to successor statutes or regulations, or amendments thereto. 24. Amendment. This Regulatory Agreement may not be changed orally, but only by agreement in writing signed by Developer and Authority. [Signatures for Regulatory Agreement continue on following pages.] ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 17 of 19 IN WITNESS WHEREOF, the parties hereto have executed this Regulatory Agreement as of the date and year first set forth below. DEVELOPER: AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership By: Avon Dakota MGP, LLC, a California limited liability company, its managing general partner By: Affordable Housing Access, Inc., a California nonprofit public benefit corporation, its sole member and manager in Jonathan B. Webb, President By: Related/Avon Dakota Development Co., LLC, a California limited liability company, its administrative general partner In Frank Cardone, Vice President [Signatures for Regulatory Agreement continue on following pages.] ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 18 of 19 [Signatures for Regulatory Agreement continue from previous page.] AUTHORITY: ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic John E. Woodhead, IV, Executive Director or authorized designee ATTEST: LINDA N. ANDAL, AUTHORITY SECRETARY Linda N. Andal APPROVED AS TO FORM: OFFICE OF CITY ATTORNEY Leonie Mulvihill Deputy City Attorney IV STRADLING YOCCA CARLSON & RAUTH Authority Special Counsel ATTACHMENT NO. 10 FORM OF REGULATORY AGREEMENT Page 19 of 19 EXHIBIT A TO ATTACHMENT NO. 10 LEGAL DESCRIPTION Real property in the City of Anaheim, County of Orange, State of California, described as follows: [to come] EXHIBIT A TO REGULATORY AGREEMENT LEGAL DESCRIPTION Page 1 of 1 ATTACHMENT NO. 11 FORM OF COMPLETION GUARANTY COMPLETION GUARANTY This COMPLETION GUARANTY ("Guaranty") is made as of 20_, by The Related Companies, L.P., a New York limited partnership ("Guarantor"), in favor of the City of Anaheim, a California municipal corporation and charter city ("City"), and Anaheim Housing Authority, a public body corporate and politic ("Authority"). As used herein, the term "Anaheim Parties" means City and/or Authority, as the context dictates. RECITALS A. Authority is the owner of that certain real property in the City of Anaheim more particularly described on Exhibit "A" attached hereto and made a part hereof ("Site"); B. Authority, and Avon Dakota Housing Partners Il, L.P. ("Developer") entered into that certain Affordable Housing Agreement (Avon Dakota Neighborhood - Phase II), dated as of June _, 2017 (the "AHA"), pursuant to which Developer agreed to construct an affordable rental housing development on the Site within the time and in accordance with the terms and conditions of the AHA; C. In accordance with the AHA, Authority and Developer have entered into a Ground Lease for the Site, dated ( , 20,] pursuant to which Developer has leased Site from the Authority, in furtherance of the objectives of the AHA; D. Pursuant to the AHA, the Authority agreed to (i) convey the leasehold interest in the Site in consideration for Developer's agreement and covenant to develop twenty-one (21) affordable apartment units on the Site in conformance with the AHA ("Phase II"), and (ii) make a loan to Developer in the amount of $[4,141,500] ("Authority Subordinate Loan") to finance part of the development on the Site, which loan is evidenced by an Authority Promissory Note and secured by an Authority Deed of Trust encumbering Developer's leasehold estate in the Site (together with the AHA, the "Loan Documents"); and E. Guarantor is an Affiliate of Developer, has a substantial financial interest in the business and affairs of Developer and it will receive substantial economic benefit should Developer be permitted to develop the Site in the manner and in accordance with the terms of the AHA. THEREFORE, to induce the Anaheim Parties to enter into the Loan Documents and to make the Authority Subordinate Loan, and in consideration thereof, Guarantor unconditionally guarantees and agrees as follows: 1. AHA. Guarantor acknowledges receipt of a copy of the AHA and all of the instruments described therein and/or attached thereto. The AHA is incorporated herein by this reference as though fully set forth herein. AHA as used herein shall mean, refer to and include the AHA, as well as any riders, exhibits, addenda, amendments and attachments thereto (which are hereby incorporated herein by this reference) or other documents expressly incorporated by ATTACHMENT NO. 11 FORM OF COMPLETION GUARANTY Page 1 of 8 reference in the AHA. Any capitalized term not otherwise defined herein shall have the meaning ascribed to it in the AHA. 2. Guaranty. Guarantor hereby guarantees the performance by Developer of its obligation to complete construction of Phase II and all associated on-site and off-site improvements (collectively, the "Improvements") on the Site pursuant to the terms and conditions set forth in the AHA and in accordance with the Schedule of Performance attached to the AHA. Without limiting the generality of the foregoing, Guarantor guarantees that: (a) such construction shall be substantially completed within the time limits set forth in the AHA, subject to force majeure delays, as provided in Section 6.3 of the AHA; (b) the development of the Improvements shall be constructed and substantially completed in accordance with the Development Plans and all other plans, specifications and the other provisions of the AHA (collectively, "Specifications") without substantial deviation therefrom, as the same may be modified from time to time in accordance with the AHA; (c) the development shall be constructed and completed free and clear of any mechanic's liens, materialmen's liens and equitable liens; and (d) all costs of construction shall be paid prior to delinquency. 3. Lien Free Completion. Substantial completion of construction of the Improvements on the Site free and clear of liens shall be deemed to have occurred upon: (a) (i) Authority's receipt of all required occupancy permit(s) for Phase II issued by the local government agency having jurisdiction and authority to issue same, and (ii) the expiration of the statutory period(s) within which valid mechanic's liens, materialmen's liens and/or stop notices may be recorded and/or served by reason of the construction of Phase ll, or, alternatively, Authority's receipt of valid, unconditional releases thereof from all persons entitled to record said liens or serve said stop notices; or (b) Authority's receipt of such other evidence of lien free completion as Authority deems satisfactory in its reasonable discretion. 4. Obligations of Guarantor Upon Default By Developer. If the construction of the Improvements is not substantially completed in the manner and within the time required by the AHA, Guarantor shall, within thirty (30) days of receipt of written demand of the Anaheim Parties: (a) diligently proceed to complete construction at Guarantor's sole cost and expense; (b) fully pay and discharge all claims for labor performed and material and services furnished in connection with the construction of the Improvements; and (c) release and discharge all claims of stop notices, mechanic's liens, materialmen's liens and equitable liens that may arise in connection with the construction of the Improvements. Guarantor's obligations hereunder shall be subject to Authority's unconditional and irrevocable agreement to make the undisbursed Authority Subordinate Loan funds available to Guarantor (pursuant to the terms and conditions of the Loan Documents) for the purposes of completing construction of the Improvements and fulfilling Guarantor's other obligations under this Guaranty; provided, however, that the obligation of Authority to make such undisbursed Authority Subordinate Loan funds available to Guarantor is expressly conditioned upon there being no continuing default by Guarantor under this Guaranty. 5. Remedies. If Guarantor fails to promptly perform its obligations under this Guaranty, the Anaheim Parties shall have the following remedies: 5.1 At the Anaheim Parties' option, and without any obligation to do so, to proceed to perform on behalf of Guarantor any or all of Guarantor's obligations hereunder and Guarantor shall, upon demand and whether or not construction is actually completed by the Anaheim Parties, pay to the Anaheim Parties all sums expended by the Anaheim Parties in ATTACHMENT NO. 11 FORM OF COMPLETION GUARANTY Page 2 of 8 performing Guarantor's obligations hereunder together with interest thereon at the highest rate specified in the Authority Promissory Note; and 5.2 From time to time and without first requiring performance by Developer or exhausting any or all security for the Authority Subordinate Loan, to bring any action at law or in equity or both to compel Guarantor to perform its obligations hereunder, and to collect in any such action compensation for all loss, cost, damage, injury and expense sustained or incurred by the Anaheim Parties as a direct or indirect consequence of the failure of Guarantor to perform its obligations. 6. Rights of the Anaheim Parties. Guarantor authorizes the Anaheim Parties, without giving notice to Guarantor or obtaining Guarantor's consent and without affecting the liability of Guarantor, from time to time to: (a) approve modifications to the Development Plans and Specifications so long as such modifications do not materially increase the cost of constructing Phase II nor materially increase the time necessary to complete Phase II; (b) change the terms or conditions of disbursement of the Authority Subordinate Loan so long as such changes do not materially interfere with Developer's ability to construct Phase II as and when required under the AHA; (c) otherwise modify the Loan Documents, including, without limitation, making changes in the terms of repayment of the Authority Subordinate Loan or modifying, extending or renewing payment dates; releasing or subordinating security in whole or in part; changing the interest rate; or advancing additional funds in its discretion for purposes related to the purposes specified in the Loan Documents; or (d) assign this Guaranty in whole or in part. 7. Guarantor's Waivers. Guarantor waives: (a) any defense based upon any legal disability or other defense of Developer, any other guarantor or other person, or by reason of the cessation or limitation of the liability of Developer from any cause other than full payment and performance of those obligations of Developer which are guaranteed hereunder; (b) any defense based upon any lack of authority of the officers, directors, partners or agents acting or purporting to act on behalf of Developer or any principal of Developer or any defect in the formation of Developer or any principal of Developer; (c) any defense based upon the application by Developer of the proceeds of the Authority Subordinate Loan for purposes other than the purposes represented by Developer to the Anaheim Parties or intended or understood by the Anaheim Parties or Guarantor; (d) any and all rights and defenses arising out of an election of remedies by the Anaheim Parties, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantor's rights of subrogation and reimbursement against the principal by the operation of Section 580d of the California Code of Civil Procedure or otherwise; (e) any defense based upon the Anaheim Parties' failure to disclose to Guarantor any information concerning Developer's financial condition or any other circumstances bearing on Developer's ability to pay and perform its obligations under the Authority Promissory Note or any of the other Loan Documents; (f) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other respects more burdensome than that of a principal; (g) any defense based upon the Anaheim Parties' election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code or any successor statute; (h) any defense based upon any borrowing or any grant of a security interest under Section 364 of the Federal Bankruptcy Code; (i) any right of subrogation, any right to enforce any remedy which any of the Anaheim Parties may have against Developer and any right to participate in, or benefit from, any security for the Authority Promissory Note or the other Loan Documents now or hereafter held by the Anaheim Parties; Q) presentment, demand, protest and notice of any kind; ATTACHMENT NO. 11 FORM OF COMPLETION GUARANTY Page 3 of 8 and (k) the benefit of any statute of limitations affecting the liability of Guarantor hereunder or the enforcement hereof. Guarantor further waives all rights and defenses that Guarantor may have because the Developer's debt is secured by real property. This means, among other things: (1) the Anaheim Parties may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Developer. (2) If any of the Anaheim Parties forecloses on any real property collateral pledged by Developer: (A) The amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price. (B) the Anaheim Parties may collect from Guarantor even if the Anaheim Parties, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Developer. The foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Developer's debt is secured by real property. These rights and defenses being waived by Guarantor include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure. Without limiting the generality of the foregoing or any other provision hereof, Guarantor further expressly waives to the extent permitted by law any and all rights and defenses, including without limitation any rights of subrogation, reimbursement, indemnification and contribution, which might otherwise be available to Guarantor under California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433, or under California Code of Civil Procedure Sections 580a, 580b, 580d and 726, or any of such sections. Finally, Guarantor agrees that the performance of any act or any payment which tolls any statute of limitations applicable to the Authority Promissory Note or any of the other Loan Documents shall similarly operate to toll the statute of limitations applicable to Guarantor's liability hereunder. 8. Guarantor's Warranties. Guarantor warrants and acknowledges that: (a) Authority would not make the Authority Subordinate Loan but for this Guaranty; (b) Guarantor has reviewed all of the terms and provisions of the Loan Documents, including the AHA, Development Plans, and Specifications; (c) there are no conditions precedent to the effectiveness of this Guaranty; (d) Guarantor has established adequate means of obtaining from sources other than the Anaheim Parties, on a continuing basis, financial and other information pertaining to Developer's financial condition, the Property, the progress of construction of the Improvements, and the status of Developer's performance of its obligations under the Loan Documents, and the Anaheim Parties have made no representation to Guarantor as to any such matters; (e) the most recent financial statements of Guarantor previously delivered to lender are true and correct in all material respects, have been prepared in accordance with generally accepted accounting principles consistently applied (or other principles acceptable to the Anaheim Parties) and fairly present in all material respects the financial condition of Guarantor as of the respective dates thereof, and no material adverse change has occurred in the financial condition of Guarantor since the respective dates thereof and (f) Guarantor has not and will not, without the prior written consent of the Anaheim Parties, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all or substantially all of Guarantor's assets, or any interest therein, other than in the ordinary course of Guarantor's business. 9. Subordination. Guarantor subordinates all present and future indebtedness owing by Developer to Guarantor to the obligations at any time owing by Developer to the Anaheim Parties under the Authority Promissory Note and the other Loan Documents. Guarantor assigns all such indebtedness to the Anaheim Parties as security for this Guaranty, the Authority Promissory Note and the other Loan Documents. Guarantor agrees to make no claim for such ATTACHMENT NO. 11 FORM OF COMPLETION GUARANTY Page 4 of 8 indebtedness until all obligations of Developer under the Authority Promissory Note and the other Loan Documents have been fully discharged. Guarantor further agrees not to assign all or any part of such indebtedness unless each of the Anaheim Parties is given prior notice and such assignment is expressly made subject to the terms of this Guaranty. If the Anaheim Parties so request, (a) all instruments evidencing such indebtedness shall be duly endorsed and delivered to the Anaheim Parties, (b) all security for such indebtedness shall be duly assigned and delivered to the Anaheim Parties, (c) such indebtedness shall be enforced, collected and held by Guarantor as trustee for the Anaheim Parties and shall be paid over to the Anaheim Parties on account of the Authority Subordinate Loan but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty, and (d) Guarantor shall execute, file and record such documents and instruments and take such other action as the Anaheim Parties deem necessary or appropriate to perfect, preserve and enforce the Anaheim Parties' rights in and to such indebtedness and any security therefor. If Guarantor fails to take such action, the Anaheim Parties, as attorney-in-fact for Guarantor, is hereby authorized to do so in the name of Guarantor. The foregoing power of attorney is coupled with an interest and cannot be revoked. 10. Bankruptcy of Developer. In any bankruptcy or other proceeding in which the filing of claims is required by law, Guarantor shall file all claims which Guarantor may have against Developer relating to any indebtedness of Developer to Guarantor and shall assign to the Anaheim Parties all rights of Guarantor thereunder. If Guarantor does not file any such claim, the Anaheim Parties, as attorney-in-fact for Guarantor, is hereby authorized to do so in the name of Guarantor or, in the Anaheim Parties' discretion, to assign the claim to a nominee and to cause proof of claim to be filed in the name of the Anaheim Parties' nominee. The foregoing power of attorney is coupled with an interest and cannot be revoked. The Anaheim Parties or their nominee shall have the right, in its reasonable discretion, to accept or reject any plan proposed in such proceeding and to take any other action which a party filing a claim is entitled to do. In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to the Anaheim Parties the amount payable on such claim and, to the full extent necessary for that purpose, Guarantor hereby assigns to the Anaheim Parties all of Guarantor's rights to any such payments or distributions; provided, however, Guarantor's obligations hereunder shall not be satisfied except to the extent that the Anaheim Parties receive cash by reason of any such payment or distribution. If the Anaheim Parties receive anything hereunder other than cash, the same shall be held as collateral for amounts due under this Guaranty. If all or any portion of the obligations guaranteed hereunder are paid or performed, the obligations of Guarantor hereunder shall continue and shall remain in full force and effect in the event that all or any part of such payment or performance is avoided or recovered directly or indirectly from the Anaheim Parties as a preference, fraudulent transfer or otherwise under the Bankruptcy Code or other similar laws, irrespective of (a) any notice of revocation given by Guarantor prior to such avoidance or recovery, or (b) full payment and performance of all of the indebtedness and obligations evidenced and secured by the Loan Documents. 11. Authority Subordinate Loan Sales and Participations; Disclosure of Information. Guarantor agrees that Authority may elect, at any time, to sell, assign, or grant participations in all or any portion of its rights and obligations under the Loan Documents and this Guaranty, and that any such sale, assignment or participation may be to one or more financial institutions, private investors, and/or other entities, at Authority's sole discretion. Guarantor further agrees that Authority may disseminate to any such actual or potential purchaser(s), assignee(s) or participant(s) all documents and information (including, without limitation, all financial information) which has been or is hereafter provided to or known to Authority with respect to: (a) the Property and Phase II and their operation; (b) any party connected with the Authority Subordinate Loan ATTACHMENT NO. 11 FORM OF COMPLETION GUARANTY Page 5 of 8 (including, without limitation, the Guarantor, the Developer, any partner, joint venturer or member of Developer, any constituent partner, joint venturer or member of Developer, any other guarantor and any non -borrower trustor); and/or (c) any lending relationship other than the Authority Subordinate Loan which Authority may have with any party connected with the Authority Subordinate Loan. In the event of any such sale, assignment or participation, Authority and the parties to such transaction shall share in the rights and obligations of Authority as set forth in the Loan Documents only as and to the extent they agree among themselves. In connection with any such sale, assignment or participation, Guarantor further agrees that the Guaranty shall be sufficient evidence of the obligations of Guarantor to each purchaser, assignee, or participant, and upon written request by Authority, Guarantor shall consent to such amendments or modifications to the Loan Documents as may be reasonably required in order to evidence any such sale, assignment, or participation. Anything in this Guaranty to the contrary notwithstanding, and without the need to comply with any of the formal or procedural requirements of this Guaranty, including this Section, any lender may at any time and from time to time pledge and assign all or any portion of its rights under all or any of the Loan Documents to a Federal Reserve Bank; provided that no such pledge or assignment shall release such lender from its obligations thereunder. 12. Additional, Independent and Unsecured Obligations. This Guaranty is independent of the obligations of Developer under the Authority Promissory Note, the Authority Deed of Trust and the other Loan Documents. The Anaheim Parties may bring a separate action to enforce the provisions hereof against Guarantor without taking action against Developer or any other party or joining Developer or any other party as a party to such action. Except as otherwise provided in this Guaranty, this Guaranty is not secured and shall not be deemed to be secured by any security instrument unless such security instrument expressly recites that it secures this Guaranty. 13. Attorneys' Fees; Enforcement. If any attorney is engaged by the Anaheim Parties to enforce or defend any provision of this Guaranty, or any of the other Loan Documents relating to the construction of the Improvements, or as a consequence of any Default, breach or failure of condition under the Loan Documents relating to the construction of the Improvements, with or without the filing of any legal action or proceeding, Guarantor shall pay to the Anaheim Parties, immediately upon demand all reasonable attorneys' fees and costs incurred by the Anaheim Parties in connection therewith, together with interest thereon from the date of such demand until paid at the rate of interest applicable to the principal balance of the Authority Promissory Note as specified therein. 14. Rules of Construction. The word "Developer" as used herein shall include both the named Developer and any other person at any time assuming or otherwise becoming primarily liable for all or any part of the obligations of the named Developer under the Authority Promissory Note and the other Loan Documents. The term "person" as used herein shall include any individual, company, trust or other legal entity of any kind whatsoever. If this Guaranty is executed by more than one person, the term "Guarantor" shall include all such persons. When the context and construction so require, all words used in the singular herein shall be deemed to have been used in the plural and vice versa. All headings appearing in this Guaranty are for convenience only and shall be disregarded in construing this Guaranty. 15. Credit Reports. Each legal entity and individual obligated on this Guaranty hereby authorizes the Anaheim Parties to order and obtain, from a credit reporting agency of the Anaheim Parties' choice, a third party credit report on such legal entity and individual. ATTACHMENT NO. 11 FORM OF COMPLETION GUARANTY Page 6 of 8 16. Governing Law. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of California, except to the extent preempted by federal laws. Guarantor and all persons and entities in any manner obligated to the Anaheim Parties under this Guaranty consent to the jurisdiction of any federal or state court within the State of California having proper venue and also consent to service of process by any means authorized by California or federal law. 17. Miscellaneous. The provisions of this Guaranty will bind and benefit the heirs, executors, administrators, legal representatives, nominees, successors and assigns of Guarantor and the Anaheim Parties. The liability of all persons and entities that are in any manner obligated hereunder shall be joint and several. If any provision of this Guaranty shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that portion shall be deemed severed from this Guaranty and the remaining parts shall remain in full force as though the invalid, illegal or unenforceable portion had never been part of this Guaranty. 18. Enforceability. Guarantor hereby acknowledges that: (a) the obligations undertaken by Guarantor in this Guaranty are complex in nature, and (b) numerous possible defenses to the enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as part of the Anaheim Parties' consideration for entering into this transaction, the Anaheim Parties have specifically bargained for the waiver and relinquishment by Guarantor of all such defenses, and (d) Guarantor has had the opportunity to seek and receive legal advice from skilled legal counsel in the area of financial transactions of the type contemplated herein. Given all of the above, Guarantor does hereby represent and confirm to the Anaheim Parties that Guarantor is fully informed regarding, and that Guarantor does thoroughly understand: (i) the nature of all such possible defenses, and (ii) the circumstances under which such defenses may arise, and (iii) the benefits which such defenses might confer upon Guarantor, and (iv) the legal consequences to Guarantor of waiving such defenses. Guarantor acknowledges that Guarantor makes this Guaranty with the intent that this Guaranty and all of the informed waivers herein shall each and all be fully enforceable by the Anaheim Parties, and that the Anaheim Parties are induced to enter into this transaction in material reliance upon the presumed full enforceability thereof. IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date appearing on the first page of this Guaranty. "GUARANTOR" The Related Companies, L.P., a New York limited partnership By: The Related Realty Group, Inc., its general partner By: Its: ATTACHMENT NO. 11 FORM OF COMPLETION GUARANTY Page 7 of 8 ATTACHMENT NO. 12 NOTICE OF AFFORDABILITY RESTRICTIONS RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Anaheim Housing Authority 201 South Anaheim Boulevard, Suite 1003 Anaheim, California 92805 Attention: Executive Director This document is exempt from the payment of a recording fee pursuant to Government Code §§ 6103 and 27383. NOTICE OF AFFORDABILITY RESTRICTIONS ON TRANSFER OF PROPERTY This Notice of Affordability Restrictions on Transfer of Property (or "Notice of Affordability Restrictions") is executed and recorded pursuant to Section 33334.3(f)(3)(B) of the California Health and Safety Code as amended by AB 987, Chapter 690, Statutes of 2007 (herein, "Chapter 690"), and affects that certain real property generally located at 809 South Dakota Street, 824 South Dakota Street, 862 South Dakota Street, 868 South Dakota Street and 606 E. Avon Place in the City of Anaheim, California ("City") as legally described in Exhibit "A" hereto ("Site"). The Anaheim Housing Authority ("Authority"), and Avon Dakota Housing Partners, L.P., a California limited partnership ("Developer") have previously entered into an unrecorded Affordable Housing Agreement (Avon Dakota Neighborhood - Phase II) dated as of June _, 2017 (the "AHA"). 1. The AHA provides for affordability restrictions and restrictions on the transfer of the Site, as more particularly set forth in the AHA. A copy of the AHA is on file with Authority as a public record and is deemed incorporated herein. Reference is made to the AHA with regard to the ATTACHMENT NO. 12 NOTICE OF AFFORDABILITY RESTRICTIONS Page 1 of 15 complete text of the provisions of such agreement and all defined terms therein, which provides for affordability restrictions and restrictions on the transfer of the Site. 2. The AHA provides for Authority to convey a leasehold interest in the Site to Developer and for Developer to (a) rehabilitate 16 rental dwelling units at the Site and (b) rent a specified number of such dwelling units to households of limited income, paying an affordable rent; such restrictions are set forth at greater length in a document entitled the Regulatory Agreement, substantially in the form of Attachment No. 10 to the Affordable Housing Agreement ("Regulatory Agreement"), which has been entered into by and among Authority and Developer, and which is expected to be recorded substantially concurrently herewith among the Official Records of Orange County, California. The Regulatory Agreement and the AHA are deemed to be incorporated herein by reference. 3. Section 2 of the Regulatory Agreement provides as follows: "2. Housing Units. "(a) Number of Housing Units. Developer covenants and agrees to make available, restrict occupancy to, and rent the Housing Units in Phase II to Very Low and Low Income Households, in accordance with this Section 4.1 and the Regulatory Agreement for Phase II as follows: "(i) Two (2) of the two (2) bedroom Housing Units in Phase II to 30% AMI Very Low Income Households at an Affordable Rent; "(ii) One (1) of the three (3) bedroom Housing Units in Phase II to 30% AMI Very Low Income Households at an Affordable Rent; "(iii) Two (2) of the one (1) bedroom Housing Units in Phase II to 40% AMI Very Low Income Households at an Affordable Rent; ATTACHMENT NO. 12 NOTICE OF AFFORDABILITY RESTRICTIONS Page 2 of 15 "(iv) One (1) of the two (2) bedroom Housing Units in Phase II to 40% AMI Very Low Income Households at an Affordable Rent; "(v) Two (2) of the three (3) bedroom Housing Units in Phase II to 40% AMI Very Low Income Households at an Affordable Rent; "(vi) One (1) of the one (1) bedroom Housing Units in Phase II to 50% AMI Very Low Income Households at an Affordable Rent; "(vii) Six (6) of the two (2) bedroom Housing Units in Phase II to 50% AMI Very Low Income Households at an Affordable Rent; "(viii) Two (2) of the three (3) bedroom Housing Units in Phase II to 50% AMI Very Low Income Households at an Affordable Rent; "(ix) Three (3) of the two (2) bedroom Housing Units in Phase II to 60% AMI Low Income Households at an Affordable Rent; and "(x) One (1) of the three (3) bedroom Housing Units in Phase II to 60% AMI Low Income Households at an Affordable Rent. "(b) Affordable Rent. Affordable Rent shall be charged for all Housing Units throughout the Affordability Period. The maximum Affordable Rent chargeable for the Housing Units shall be annually determined by Authority (and as charged and implemented by Developer) in accordance with the following requirements: "(i) The Affordable Rent for the Housing Units to be rented to 30% AMI Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of thirty percent (30%) of AMI for Orange ATTACHMENT NO. 12 NOTICE OF AFFORDABILITY RESTRICTIONS Page 3 of 15 County as determined and published annually by TCAC for a family of a size appropriate to the unit. "(ii) The Affordable Rent for the Housing Units to be rented to 40% AMI Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of forty percent (40%) of AMI for Orange County as determined and published annually by TCAC for a family of a size appropriate to the unit. "(iii) The Affordable Rent for the Housing Units to be rented to 50% AMI Very Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of fifty percent (50%) of AMI for Orange County as determined and published annually by TCAC for a family of a size appropriate to the unit. "(iv) The Affordable Rent for the Housing Units to be rented to 60% AMI Low Income Households shall not exceed one -twelfth (1/12) of thirty percent (30%) of sixty percent (60%) of AMI for Orange County as determined and published annually by TCAC for a family of a size appropriate to the unit. "Developer shall, and shall cause its Property Manager to, operate Phase II and cause occupancy of all Housing Units thereon in conformity with these covenants and this Regulatory Agreement. "For purposes of this Regulatory Agreement, "Affordable Rent" shall mean the total of monthly payments for (a) use and occupancy of each Housing Unit and land and facilities associated therewith, (b) any separately charged fees or service charges assessed by Developer which are required of all tenants, other than security deposits, (c) a reasonable allowance for an adequate level of service of utilities not included in (a) or (b) above, including garbage collection, sewer, water, electricity, gas and other heating, cooking and ATTACHMENT NO. 12 NOTICE OF AFFORDABILITY RESTRICTIONS Page 4 of 15 refrigeration fuels, but not including telephone service, or cable TV or internet services, and (d) possessory interest, taxes or other fees or charges assessed for use of the land and facilities associated therewith by a public or private entity other than Developer. No additional charge shall be assessed against tenant households of the Housing Units for any social or supportive services provided at the Site. "In addition, thirteen (13) of the Housing Units shall constitute "HOME Units", as follows: (a) at 809 Dakota Street: (i) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be Low HOME Units, and (ii) two (2) of the two (2) bath Housing Units shall be High HOME Units; (b) at 868 Dakota Street: (i) one (1) of the two (2) bedroom, two (2) bath Housing Units shall be Low HOME Units, and (ii) three (3) of the two (2) bath Housing Units shall be High HOME Units; and (c) at 606 Avon Place: (i) one (1) of the one (1) bedroom, two (2) bath Housing Units shall be a Low HOME Unit, (ii) two (2) of the one (1) bedroom, two (2) bath Housing Units shall be High HOME Units, and (iii) two (2) of the two (2) bedroom, two (2) bath Housing Units shall be High HOME Units. The HOME Units shall be rented in conformity with Low HOME or High HOME rents in conformity with the HOME Regulations consistent with the identification of such HOME Units as Low HOME or High HOME Units, respectively, in the definition of HOME Units. The HOME Units shall be rented at the lower of (i) rent determined for Low HOME or High HOME Units or (ii) rent as otherwise determined in conformity with this Regulatory Agreement. "(c) Duration of Affordability Requirements; Affordability Period. Phase II and all the Housing Units thereon shall be subject to the requirements of this Section 2, et seq. for the full term of not less than fifty-seven (57) years from the date that the Release ATTACHMENT NO. 12 NOTICE OF AFFORDABILITY RESTRICTIONS Page 5 of 15 of Construction Covenants is recorded against the Site in the Official Records. The duration of these covenants and this requirement shall be known as the "Affordability Period." "(d) Selection of Tenants. "(i) Developer shall be responsible for the selection of tenants for the Housing Units in compliance with all lawful and reasonable criteria, and shall adopt a tenant selection system that shall be approved (or disapproved) by Authority Executive Director in his/her reasonable discretion, pursuant to which Developer shall establish and maintain a chronological waiting list system for selection of tenants in the order of priority set forth below, and which shall be set forth in the Marketing and Tenant Selection Plan and the Property Management Plan, which plans are required to be submitted by Developer and approved by Authority pursuant to Sections 3 and 7(b) hereof. Throughout the Affordability Period and the Term of the Ground Lease, Developer shall establish and maintain for Phase II such waiting list of eligible, prospective tenants to facilitate re - tenanting Housing Units in compliance with the approved Marketing and Tenant Selection Plan, Property Management Plan, and Anaheim Municipal Code. Further, subject to applicable Fair Housing Laws and in compliance with the Anaheim Municipal Code, in particular Section 18.52.160 thereof, Authority shall be afforded a priority marketing period for thirty (30) days after receiving written notice from Developer that one or more Housing Units have become vacant at Phase II, during which time Authority and Tenant shall work cooperatively to select tenants for any vacant Housing Units at ATTACHMENT NO. 12 NOTICE OF AFFORDABILITY RESTRICTIONS Page 6 of 15 Phase II. Developer shall provide prompt written notice to Authority when vacancies of Housing Units occur to facilitate timely re -tenanting of Housing Units pursuant to the approved Marketing and Tenant Selection Plan, Property Management Plan and Anaheim Municipal Code. Subject to applicable Fair Housing Laws, Developer's waiting list of prospective, eligible tenants for Housing Units at Phase II shall include and follow the following order of priority for selection of tenants, and Authority will follow such order of priority: "(A) Very Low and Low Income Households, as applicable, who have been displaced from their residences due to programs or projects implemented by the City of Anaheim or another governmental entity; (B) Very Low and Low Income Households, as applicable, who have applied for and have received rental vouchers from Authority; (C) Very Low and Low Income Households, as applicable, who are listed on Authority's waiting lists for affordable housing and who live and/or work in Anaheim; and (D) Very Low and Low Income Households, as applicable, who live and/or work in Anaheim. (ii) In the event Developer rents a Housing Unit to a household holding a Portable Voucher, if required by the Executive Director in writing to the Developer, the rental agreement (or lease agreement, as applicable) between Developer, as landlord, and the subtenant shall expressly provide that monthly rent charged shall be the Affordable Rent required hereunder for the Housing Unit (not fair market rent) and that the ATTACHMENT NO. 12 NOTICE OF AFFORDABILITY RESTRICTIONS Page 7 of 15 rent collected directly from such subtenant holding a Portable Voucher shall be not more than 40% of subtenant's actual gross income pursuant to the applicable voucher program regulations; i.e., the rent charged to such subtenant under the rental agreement shall be the Affordable Rent chargeable hereunder and not market rent for the area (as determined by a current rent reasonable review conducted in accordance with Section 8 Federal Program Limitations applicable to Portable Vouchers), as would otherwise be permitted under the applicable Portable Voucher program. Thus, if required by the Executive Director in writing in accordance herewith, the subsidy payment to Developer under any Portable Voucher shall not exceed the difference between the amount the subtenant actually pays to Developer towards such subtenant's rent and the Affordable Rent chargeable for the applicable Housing Unit hereunder. (iii) Developer hereby acknowledges and agrees that, upon completion of construction of Phase II and leasing of the Housing Units to Very Low and Low Income Households pursuant to this Regulatory Agreement, Developer will have received governmental subsidies from Authority and from TCAC through the Tax Credits allocated to Phase II (and/or other subsidies included in the final financing sources for Phase II, as approved by Authority pursuant to the Affordable Housing Agreement) in exchange for Developer's agreement to limit the rents charged to tenants of Phase II to an Affordable Rent and Developer further acknowledges and agrees that acceptance of additional governmental rental subsidies resulting in total, cumulative rent payments to Developer in excess of an ATTACHMENT NO. 12 NOTICE OF AFFORDABILITY RESTRICTIONS Page 8 of 15 Affordable Rent for any of the Housing Units at Phase II would constitute an unjustified windfall to Developer at the expense of Authority and the federal and state governments. (iv) In the event of a conflict between this Regulatory Agreement and the approved Marketing and Tenant Selection Plan, the Marketing and Tenant Selection Plan shall control. "(e) Household Income Requirements. On or before one hundred twenty (120) days following the end of Developer's fiscal year, commencing the first year after issuance of the first certificate of occupancy for Phase II, and annually thereafter, Developer shall prepare and submit to Authority, at Developer's expense, a written summary of the income, household size, and rent payable by each of the tenants of the Housing Units and, upon the written request of the Authority, copies of each and all leases or rental agreements and the current rules and regulations for Phase II. At Authority's request, Developer shall also provide to Authority completed income computation and certification forms, all in a form reasonably acceptable to Authority, for each and all tenants. Developer shall obtain, or shall cause to be obtained by the Property Manager, a certification from each household leasing a Housing Unit demonstrating that such household is a 30% AMI Very Low Income Household, 40% AMI Very Low Income Household, 50% AMI Very Low Income Household, or 60% AMI Low Income Household, as applicable and according to the Area Median Income annually determined and published by TCAC for Orange County, and meets the eligibility and occupancy requirements established for the Housing Unit. Developer shall verify, or shall cause to be verified by the Property Manager, the income and household size certification of the tenant household. ATTACHMENT NO. 12 NOTICE OF AFFORDABILITY RESTRICTIONS Page 9 of 15 "(f) Affordable Rent; Household Income Categories/Definitions. "(i) "30% AMI Very Low Income Households" shall mean those households earning not greater than thirty percent (30%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. "(ii) "40% AMI Very Low Income Households" shall mean those households earning not greater than forty percent (40%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. "(iii) "50% AMI Very Low Income Households" shall mean those households earning not greater than fifty percent (50%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. IN) "60% AMI Low Income Households" shall mean those households earning not greater than sixty percent (60%) of Orange County Area Median Income, adjusted for household size, which is set forth annually by regulation of TCAC. "(v) "Very Low Income" and/or "Very Low Income Households" shall mean and include: (a) very low income households as defined in the Tax Credit Rules and (b) 30% AMI Very Low Income Households, (c) 40% AMI Very Low Income Households, and (d) 50% AMI Very Low Income Households. Very Low Income Households include Extremely Low Income households, as defined in the Tax Credit Rules. "(vi) "Low Income," "Lower Income," "Low Income Households" or "Lower Income Households" shall mean and include both: (i) lower ATTACHMENT NO. 12 NOTICE OF AFFORDABILITY RESTRICTIONS Page 10 of 15 income households as defined in the Tax Credit Rules and (ii) 60% AMI Low Income Households. Lower Income Households include Very Low Income Households and Extremely Low Income Households, as defined in the Tax Credit Rules. "(g) Occupancy Limits. The maximum occupancy of the Housing Units in Phase II shall not exceed more than such number of persons as is equal to two persons per bedroom, plus one. Thus, for the two (2) bedroom Housing Units, the maximum occupancy shall not exceed five (5) persons. For the three (3) bedroom Housing Units, the maximum occupancy shall not exceed seven (7) persons." 4. The restrictions contained in the Regulatory Agreement expire fifty-seven (57) years following the date the Release of Construction Covenants is recorded against the Site in the Official Records of Orange County, California. The Regulatory Agreement is being submitted for recordation contemporaneously with this Notice of Affordability Restrictions. 5. The commonly known address for the Site is 809 South Dakota Street, 824 South Dakota Street, 862 South Dakota Street, 868 South Dakota Street, and 606 E. Avon Place in the City of Anaheim. 6. The assessor's parcel numbers for the Site are , , , and ; such numbers are subject to change. 7. The legal description for the Site is attached hereto as Exhibit A and is incorporated herein by reference. 8. The Regulatory Agreement, which includes the affordability restrictions referenced above, is expected to be submitted for recordation in the Office of the Orange County Recorder contemporaneously with this Notice of Affordability Restrictions. 9. This Notice of Affordability Restrictions is intended merely to satisfy the requirements of Chapter 690 of the Act. The AHA and the Regulatory Agreement both remain in full force and effect and are not ATTACHMENT NO. 12 NOTICE OF AFFORDABILITY RESTRICTIONS Page 11 of 15 amended or altered in any manner whatsoever by this Notice of Affordability Restrictions. 10. Capitalized terms shall have the meaning established under the AHA (including all Attachments and Exhibits thereto) excepting only to the extent as otherwise expressly provided under this Notice of Affordability Restrictions. 11. Persons having questions regarding this Notice of Affordability Restrictions, the AHA or the Attachments and Exhibits thereto (including the Regulatory Agreement) should contact Authority at its offices (201 South Anaheim Boulevard, Suite 1003, Anaheim, or such other address as may be designated by Authority from time to time). [Signatures begin on following page] ATTACHMENT NO. 12 NOTICE OF AFFORDABILITY RESTRICTIONS Page 12 of 15 DEVELOPER: AVON DAKOTA HOUSING PARTNERS, L.P., a California limited partnership By: Avon Dakota MGP, LLC, a California limited liability company, its managing general partner By: Affordable Housing Access, Inc., a California nonprofit public benefit corporation, its sole member and manager Jonathan B. Webb, President By: Related/Avon Dakota Development Co., LLC, a California limited liability company, its administrative general partner am Frank Cardone, Vice President [Signatures for Notice of Affordability Restrictions continue on following pages.] ATTACHMENT NO. 12 NOTICE OF AFFORDABILITY RESTRICTIONS Page 13 of 15 [Signatures for Notice of Affordability Restrictions continue from previous page.] AUTHORITY: ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic in ATTEST: John E. Woodhead, IV Executive Director or authorized designee LINDA N. ANDAL, AUTHORITY SECRETARY Linda N. Andal APPROVED AS TO FORM: OFFICE OF CITY ATTORNEY Assistant City Attorney ATTACHMENT NO. 12 NOTICE OF AFFORDABILITY RESTRICTIONS Page 14 of 15 EXHIBIT A TO ATTACHMENT NO. 12 LEGAL DESCRIPTION Real property in the City of Anaheim, County of Orange, State of California, described as follows: [to come] ATTACHMENT NO. 12 NOTICE OF AFFORDABILITY RESTRICTIONS Page 15 of 15 ATTACHMENT NO. 13 FORM OF REQUEST FOR NOTICE REQUEST FOR NOTICE OF DEFAULT RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Anaheim Housing Authority 201 South Anaheim Boulevard, Suite 1003 Anaheim, California 92805 Attn: Executive Director This document is exempt from the payment of a recording fee pursuant to Government Code Section 6103. REQUEST FOR NOTICE UNDER CIVIL CODE SECTION 2924B In accordance with California Civil Code Section 2924b request is hereby made that a copy of any Notice of Default and a copy of any Notice of Sale under the Deeds of Trusts recorded as Instrument Nos. and on _, 20 in the Official Records of Orange County, California, and describing land therein as set forth in the legal description attached hereto as Exhibit A and incorporated herein, executed by AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership, as Trustor/Borrower, in which , a is/are named as Beneficiary(ies), and a is named as Trustee, be mailed to: ANAHEIM HOUSING AUTHORITY, a California public body, corporate and politic, 201 South Anaheim Boulevard, Suite 1003, Anaheim, California 92805, Attn: Executive Director. [Request continues on following page] ATTACHMENT NO. 13 FORM OF REQUEST FOR NOTICE Page 1 of 3 NOTICE: A COPY OF ANY NOTICE OF DEFAULT AND OF ANY NOTICE OF SALE WILL BE SENT ONLY TO THE ADDRESS CONTAINED IN THIS RECORDED REQUEST. IF ADDRESS CHANGES, A NEW REQUEST MUST BE RECORDED. DEVELOPER: AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership By: Avon Dakota MGP, LLC, a California limited liability company, its managing general partner By: Affordable Housing Access, Inc., a California nonprofit public benefit corporation, its sole member and manager Jonathan B. Webb, President By: Related/Avon Dakota Development Co., LLC, a California limited liability company, its administrative general partner in Frank Cardone, President [Signatures for Request for Notice of Default continue on following page.] ATTACHMENT NO. 13 FORM OF REQUEST FOR NOTICE Page 2 of 3 [Signatures for Request for Notice of Default continue from previous page.] AUTHORITY: ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic By: ATTEST: John E. Woodhead IV, Executive Director or authorized designee LINDA N. ANDAL, AUTHORITY SECRETARY Linda N. Andal APPROVED AS TO FORM: OFFICE OF CITY ATTORNEY Leonie Mulvihill Deputy City Attorney IV STRADLING YOCCA CARLSON & RAUTH Authority Special Counsel ATTACHMENT NO. 13 FORM OF REQUEST FOR NOTICE Page 3 of 3 EXHIBIT A TO ATTACHMENT NO. 13 LEGAL DESCRIPTION Real property in the City of Anaheim, County of Orange, State of California, described as follows: [to come] EXHIBIT A TO REQUEST FOR NOTICE LEGAL DESCRIPTION Page 1 of 1 ATTACHMENT NO. 14 FORM OF RELEASE OF CONSTRUCTION COVENANTS RELEASE OF CONSTRUCTION COVENANTS RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Attention: This document is exempt from the payment of a recording fee pursuant to Government Code §§ 6103 and 27383. RELEASE OF CONSTRUCTION COVENANTS This RELEASE OF CONSTRUCTION COVENANTS ("Release") is hereby made as of , 20_, by the ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic ("Authority"), in favor of AVON DAKOTA HOUSING PARTNERS II, L.P., a California limited partnership ("Developer"). Authority and Agency are sometimes referred to herein collectively as "Authority/Agency." RECITALS A. Authority and Developer have entered into an Affordable Housing Agreement (Avon Dakota Neighborhood - Phase II), dated as of June _, 2017 (the, "Agreement"), which Agreement provides for the development of an affordable rental housing complex consisting of twenty-one (21) rental apartment units, in which all of the Housing Units will be made available to Very Low and Low Income Households at an Affordable Rent, on certain real property generally located at 809 South Dakota Street, 824 South Dakota Street, 862 South Dakota Street, 868 South Dakota Street and 606 E. Avon Place in the City of Anaheim, California, which is legally described on Exhibit "A" attached hereto and made a part hereof by this reference ("Site"). B. "Phase 11" consists of the construction on the Site of twenty-one (21) Housing Units in two -story buildings ("Development of Phase 11"). As required in the Agreement, Authority shall furnish Developer with a Release of Construction Covenants upon completion of the Development of Phase 11, which Release shall be in such form as to permit it to be recorded in the Official Records of Orange County, California. D. Authority has conclusively determined that the Development of Phase II as required by the Agreement has been satisfactorily completed at the Site. ATTACHMENT NO. 14 FORM OF RELEASE OF CONSTRUCTION COVENANTS Page 1 of 3 NOW, THEREFORE, Authority hereto certifies as follows: 1. As provided in the Agreement, Authority does hereby certify that the Development of Phase II has been fully and satisfactorily performed and completed in accordance with the Agreement. 2. After the recordation of this Release, any person or entity then owning or thereafter purchasing, or otherwise acquiring any interest in the Site will not (because of such ownership, purchase, or acquisition) incur any obligation or liability under the Agreement, except that such party shall be bound by any and all of the covenants, conditions, and restrictions which survive such recordation, including, without limitation, the Ground Lease and the Regulatory Agreement; provided, the recordation of this Release shall not alter in any way the order of priority of any liens or encumbrances against the Site, including the Primary Loan for Phase II. 3. This Release is not a notice of completion as referred to in Section 3093 of the California Civil Code. 4. The recitals above are incorporated in full as part of the substantive text of this Release. [Signatures appear on following pages.] ATTACHMENT NO. 14 FORM OF RELEASE OF CONSTRUCTION COVENANTS Page 2 of 3 IN WITNESS WHEREOF, Authority has executed this Release of Construction Covenants as of the date first set forth above. AUTHORITY: ANAHEIM HOUSING AUTHORITY, a public body, corporate and politic John E. Woodhead IV, Executive Director or authorized designee ATTEST: LINDA N. ANDAL, AUTHORITY SECRETARY Authority Secretary APPROVED AS TO FORM: OFFICE OF CITY ATTORNEY Leonie Mulvihill Deputy City Attorney IV STRADLING YOCCA CARLSON & RAUTH Authority Special Counsel ATTACHMENT NO. 14 FORM OF RELEASE OF CONSTRUCTION COVENANTS Page 3 of 3 EXHIBIT A TO ATTACHMENT NO. 14 LEGAL DESCRIPTION Real property in the City of Anaheim, County of Orange, State of California, described as follows: [to come] EXHIBIT A TO RELEASE OF CONSTRUCTION COVENANTS LEGAL DESCRIPTION Page 1 of 1 [to come] ATTACHMENT NO. 15 LIST OF ENVIRONMENTAL REPORTS ATTACHMENT NO. 15 LIST OF ENVIRONMENTAL REPORTS Page 1 of 1 ATTACHMENT NO. 16 PRELIMINARY FINANCING PLAN PRELIMINARY FINANCING PLAN (BUDGET AND PROFORMA) The following Budget and Proforma describe the parties' assumptions and reasonable expectations regarding the costs and sources of financing for the Project as of the Effective Date. ATTACHMENT NO. 16 PRELIMINARY FINANCING PLAN Page 1 of 1 ATTACHMENT NO. 17 FORM OF OPERATING BUDGET ATTACHMENT NO. 17 FORM OF OPERATING BUDGET Page 1 of 4 2018 2018 2017 2018 PUPM Annual Increase Actuals Budget Budget (Decrease) O., ERATING'INCOME Rental Income Rents Section 8 Subsidy Payments Total Rental Income: Total Rental Income Vacancy Loss Subtotal Other Income Laundry Vending Application Fees NSF and Late Charges Damages and Cleaning Fees Forfeited Security Deposits Other Revenue Total Other Income: Financial Income Interest Earned on Security Deposits Interest Earned on Reserves Interest Earned on Impound Accounts Income from Investments - Misc. Total Financial Income: NET TOTAL INCOME: O RATING EXPENSES Rental Expenses Advertising/Marketing Credit Checks Miscellaneous Renting Expenses Total Rental Expenses: Administrative Expenses Office Salaries/Payroll Managers Salary Managers unit Payroll Processing Fee ATTACHMENT NO. 17 FORM OF OPERATING BUDGET Page 1 of 4 ATTACHMENT NO. 17 FORM OF OPERATING BUDGET Page 2 of 4 2018 2018 2017 2018 PUPM Annual Increase Actuals Budget Budget (Decrease) Office Expenses Copier/Copying Telephone Answering Service Cell Phones and Pagers Intercom Postage/Copies Computer Equipment Computer Charges Internet/Cable Connection Mileage/Travel Dues and Subscriptions Seminars/Training Bank Charges Management Fee ($ PUPM) Partnership Management Fee Asset Management Fee Compliance Monitoring CPA/Bookkeeping Legal Expenses Audit Expenses Collection Loss Misc. Administrative Expenses Total Administrative Expenses: Utility Expenses Electricity Water Gas Sewer Total Utility Expenses: Operating and Maintenance Expenses Salaries - Janitor/Cleaning Salaries - Maintenance Salaries - Repairs Salaries - Overtime Salaries - Bonus Supplies - Janitorial/Cleaning Supplies - Grounds Supplies - Repairs Supplies - Plumbing Supplies - Electrical Supplies - Security Supplies - Decorating/Paint ATTACHMENT NO. 17 FORM OF OPERATING BUDGET Page 2 of 4 ATTACHMENT NO. 17 FORM OF OPERATING BUDGET Page 3 of 4 2018 2018 2017 2018 PUPM Annual Increase Actuals Budget Budget (Decrease) Supplies - Uniforms Supplies - Misc. Contract - Social Service Coordinator Contract - Janitorial/Cleaning Contract - Extermination Contract - Grounds Contract - Repairs Contract - Plumbing Contract - Electrical Contract - Decorating/Paint Contract - Security/Alarm Contract - Consultants Misc. Operating Expenses Unit Turnover Costs Garbage Removal Elevator Repair/Contract Heating and Cooling Repair/Contract Swimming Pool Maintenance Vehicle Maintenance/Equipment Misc. Maintenance Lock and Key Expenses Window and Glass Expense Fire Extinguisher Service and Supplies Uniforms/Laundry Flooring Replacement Window Covering Replacement Appliance Replacement A/C - Heater Replacement Furniture/Fixtures Replacement Plumbing Replacement Tub Refinishing Garbage Disposal Replacement Cabinets Replacement Other Replacement Total Operating & Maintenance Expenses: Taxes and Insurance Real Estate Taxes Payroll Taxes Property and Liability Insurance Fidelity Bond Insurance Worker's Compensation Insurance Health Insurance & Employee Benefits 401 K Matching/EE Benefits Other Insurance ATTACHMENT NO. 17 FORM OF OPERATING BUDGET Page 3 of 4 ATTACHMENT NO. 17 FORM OF OPERATING BUDGET Page 4 of 4 2018 2018 2017 2018 PUPM Annual Increase Actuals Budget Budget (Decrease) Misc. Taxes, Licenses and Permits Total Taxes and Insurance: Financial Expenses/Debt Service Interest Principal Misc. Financial Expenses Total Financial Expenses/Debt Service: Reserves Operating Reserves Replacement Reserves Other Reserves Total Reserves: TOTAL OPERATING EXPENSES CASH FLOW ATTACHMENT NO. 17 FORM OF OPERATING BUDGET Page 4 of 4 ATTACHMENT NO. 18 FORM OF RESIDUAL RECEIPTS REPORT Anaheim Housing Authority (Avon/Dakota Neighborhood, Phase 11 Affordable Housing Project) Residual Receipts Report for the Year Ending Date Prepared Please complete the following information and execute the certification at the bottom of this form. Annual Project Revenue Please report Annual Project Revenue for the year ending lines: Rent Payments received (including Section 8 tenant assistance payments, if any) Interest Income (do not include interest income from replacement and operating reserves nor interest income on tenant security deposits) Additional Income Related to Project Operations (for example, vending machine income, tenant forfeited deposits, laundry income not paid to the residents' association) Total Annual Project Revenue (Add lines 1, 2, and 3) Operating Expenses'' Please report Operating Expenses incurred in relation to the operations of the Project for the year ending on the following lines: Operating and Maintenance Expenses Utilities Property management Expenses and On -Site Staff Payroll Administrative Expenses Incurred by Project ATTACHMENT NO. 18 FORM OF RESIDUAL RECEIPTS REPORT Page 1 of 3 on the following (2) (3) (4) (5) (6) (7) (8) 4t Property/Possessory Interest Taxes Insurance Other Expenses Related to Operations of the Project Please list these expenses: Total Annual Operating Expenses (Add lines 5, 6, 7, 8, 9, 10, and 11) Net Operating Income (Subtract Line 12 from Line 4) Do not include expense unrelated to the Project's operations, such as depreciation, amortization, accrued principal and interest expense on deferred payment debt, or capital expenditures paid from withdrawals from the Capital Replacement Reserve. Additional Cash Flow Payments Obligated Debt Service Payments (as approved by Authority and other parties that may have such approval rights) Scheduled Deposits to Capital and Operating Reserves (as approved by Authority) (9) $ (10) $ (11) $ (12) $ (13) $ (14) $ (15) $ Additional Payment Obligations (such as Partnership Related (16) $ Fees, Deferred Developer Fee, repayments on loans by partners, or unpaid Tax Credit amounts, as approved by Authority to have priority over Residual Receipt Payment to Authority.) Total Additional Cash Flow Payments (Add lines 14, 15, and (17) $ 16) Residual Receipts for Year Ending (18) $ (Subtract Line 17 from Line 13) Percentage of Residual Receipts to be (19) Paid to Authority (as Rent pursuant to that certain Ground Lease by and between Authority and Borrower dated Amount Payable to Authority (Multiply Line 18 by Line 19) (20) $ The amount payable to Authority listed on Line 20 is subject to payment according to the terms of the Ground Lease by and between Authority and Borrower dated ATTACHMENT NO. 18 FORM OF RESIDUAL RECEIPTS REPORT Page 2 of 3 . If Line 20 is $0.00 or negative, you owe nothing to Authority this year. If Line 20 is a positive number, remit check payable to and attach to this report. Computation of Residual Receipts for the Year Ending The following certification should be executed by the Executive Director or Chief Financial Officer of the Borrower, or the Managing General Partner of the Borrower. I certify that the information provided in this form is true, accurate, and correct in all respects. By: (Print Name) Its: (Title) ATTACHMENT NO. 18 FORM OF RESIDUAL RECEIPTS REPORT Page 3 of 3 Date ATTACHMENT NO. 19 SCOPE OF SOCIAL AND SUPPORTIVE SERVICES Social and Supportive Service Programming. Developer shall provide a social service program, free of charge to the residents of the Project, that complies with meeting TCAC's Service Amenities requirements. Each and all material changes to the scope and details of this Social and Supportive Services Program require the prior written consent of the Executive Director, which shall be given or withheld in his sole and reasonable discretion. 1. Adult Educational Classes. Developer shall use best efforts to provide classes, workshops, and other activities aimed at improving the important life skills of adult residents. Accordingly, Developer shall use best efforts to provide social and supportive services directed at adult residents which may include, without limitation, classes regarding financial literacy, computer training; homebuyer education, General Education Diploma classes, English as a Second Language classes, parenting classes, employment readiness classes and workshops, and resume building classes and workshops. Adult Education Classes shall be provided not fewer than sixty (60) hours per year. 2. After -School Enrichment. Classes and other supervised activities for school -aged children shall be provided between the hours of approximately 2:30 p.m. and 6:00 p.m., Monday through Friday, depending on local school schedules. Such After School Enrichment programs shall include, without limitation, mentoring, homework assistance, and recreational activities. Based upon the needs of the residents, After School Enrichment programs may also include drug and gang prevention, art classes, on-site tutoring, and computer literacy classes. After School Enrichment activities shall be conducted not fewer than ten (10) hours per week, Monday to Friday, throughout the school year. [Anaheim Staff to review and confirm] ATTACHMENT NO. 19 SCOPE OF SOCIAL AND SUPPORTIVE SERVICES Page 1 of 1 SECRETARY'S CERTIFICATE STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss. CITY OF ANAHEIM ) I, LINDA ANDAL, Secretary of the Anaheim Housing Authority, do hereby certify that the foregoing is the original Resolution No. AHA 2017-005 adopted at a regular meeting provided by law, of the Anaheim Housing Authority held on the 6th day of June, 2017, by the following vote of the members thereof: AYES: Authority Members Murray, Barnes, Moreno, Kring, and Faessel NOES: None ABSTAIN: Chairman Tait ABSENT: Vice Chairman Vanderbilt IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of June, 2017, SECRETARY OF THE ANAHEIM HOUSING AUTHORITY (SEAL)