Rialto City Council
February 11, 2025

AFFORDABLE HOUSING LOAN AGREEMENT
by and between

RIALTO HOUSING AUTHORITY
and
INLAND VALLEY HOUSING PARTNERS, L.P.

Dated as of March 1, 2025

AFFORDABLE HOUSING LOAN AGREEMENT
THIS AFFORDABLE HOUSING LOAN AGREEMENT (the “Agreement”) is entered into as of March 1, 2025 by and between the RIALTO HOUSING AUTHORITY, a public body, corporate and politic (the “Housing Authority”), and INLAND VALLEY HOUSING PARTNERS, L.P., a California limited partnership (the “Developer”).

RECITALS
Pursuant to the provisions of the Housing Authorities Law of the State of California (Part 2 of Division 24 of the California Health and Safety Code, Section 34200, et seq.), the City Council of the City of Rialto (the “City”) has activated the Rialto Housing Authority (the “Housing Authority”) by Resolution No. 5047 on November 4, 2003. The goal of the Housing Authority is to alleviate the lack of sanitary, safe and affordable housing within the City.

The Willow/Winchester neighborhood has historically been the City’s highest generator of requests for police service and has been a center for gang activity. The Rialto Police Department has received over 2,106 police calls for service in the neighborhood in 2003 and 2,546 calls in 2004. 78 serious “Part I” crimes (aggravated assault, burglary, larceny/motor vehicle theft, robbery, homicide, rape and other serious crimes) occurred in this neighborhood in 2003, and 119 more have occurred in 2004. The Willow/Winchester neighborhood also has a number of serious health and safety code violations, and serious deterioration and blighting conditions in the buildings and common areas are widespread.

The Southern California Housing Development Corporation, a California nonprofit public benefit corporation (“SoCal”), the predecessor-in-interest to Developer, and the Housing Authority, entered into that certain Affordable Housing Agreement dated as of February 1, 2005 (the “Original AHA”), pursuant to which, among other things, the Housing Authority agreed to sell to SoCal certain units of affordable housing located on real property in the City of Rialto, County of San Bernardino (the “Property”) legally described in Attachment No. 1 attached hereto, and to provide a residual receipts loan in the original principal amount of Fourteen Million Seven Hundred Fifty Four Thousand Seven Hundred Twenty Two and No/100 Dollars ($14,754,722) (the “2006 Loan”), to enable SoCal to acquire, rehabilitate and operate such housing units as affordable housing (the “Housing Units”). As a condition of the receipt of such funds, the parties agreed to ensure that the Housing Units were restricted to Very Low and Lower Income Households at an Affordable Rent. The former Redevelopment Agency of the City of Rialto (“Former RDA”) provided funding for the 2006 Loan from the Former RDA’s Low and Moderate Income Housing Fund through the issuance of its bonds.

SoCal assigned the Original AHA to the Developer in accordance with that certain Assignment and Assumption Agreement dated as of August 1, 2006 (the “2006 Assignment”) and amended the AHA in accordance with that certain First Supplement to Affordable Housing Agreement, dated as of August 1, 2006 (the “Supplement,” and together with the Original AHA, the “Prior AHA”), by and between the Housing Authority and the Developer.

The 2006 Loan was evidenced by a promissory note (the “2006 Note”) executed by Developer in favor of the Housing Authority dated August 1, 2006, and secured by a Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing (the “2006 Deed of Trust”), dated August 1, 2006, and recorded against the Property on August 17, 2006, as Instrument No. 2006-0563301 in the Official Records of the County of San Bernardino (the “Official Records”).

The 2006 Loan was subject to the terms and conditions of a Regulatory Agreement (the “Original Regulatory Agreement”) by and between the Housing Authority and the Assignor dated August 1, 2006 and recorded against the Property on August 17, 2006, as Instrument No. 2006-0563300 in the Official Records. The Original Regulatory Agreement was amended by that certain First Amendment to Regulatory Agreement dated as of May 1, 2008 by and between the Housing Authority and Assignor and recorded against the Property on June 4, 2008, as Instrument No. 2008-0253726 in the Official Records (the “First Amendment to Regulatory Agreement,” and by that certain Second Amendment to Regulatory Agreement dated as of March 1, 2025 by and between the Housing Authority and Assignor and recorded against the Property on __________, as Instrument No. __________________ in the Official Records (the “Second Amendment to Regulatory Agreement,” and together with the Original Regulatory Agreement and the First Amendment to Regulatory Agreement, as amended, the “Regulatory Agreement”). The Regulatory Agreement is attached hereto as Attachment No. 2 and incorporated herein.

The Developer or its affiliates desired to rehabilitate and renovate the Property through the use of tax-exempt financing and tax credits (the “Project”). On December 6, 2023, the Developer was awarded an allocation or 4% tax credits from the California Tax Credit Allocation Committee. The Developer was advised that to accomplish such financing the overall debt secured by the Property may not exceed the current appraised value of the Property and to accommodate the financing of Developer and move forward with the Project, the Developer requested the Housing Authority to modify the 2006 Loan (the “Modified 2006 Loan”) through, among other things, the forgiveness of a portion of the 2006 Loan, the mandatory retirement of the Modified 2006 Loan with the repayment proceeds funding a new permanent loan to the Developer or its affiliates on substantially similar terms as the Modified 2006 Loan (the “Loan”).

The Developer and the Housing Authority entered into the Modification to Loan Documents and Release of Option Agreement, dated as of March 1, 2025 (the “Modification Agreement”), which was recorded on _________, as Instrument No. _______ in the Official Records, to amend the terms of the Housing Authority Loan which, among other things, included the forgiveness of $13,913,212 of amounts due and owing under the 2006 Note, resulting in a new 2006 Note Amount of $8,064,951, modified the interest rate from 3% to estimated [4.86%], extended the maturity, modified the affordability period and included a requirement of mandatory retirement of the 2006 Note on the [Closing/Completion Date].

By this Agreement, and subject to the terms and conditions herein, the Housing Authority desires to restructure the financial assistance provided to Developer in the acquisition of the Housing Units by using the repayment proceeds of the 2006 Note to fund a new permanent loan in the amount of [$8,064,951] to Developer as a replacement of the 2006 Loan with substantially similar terms to the 2006 Loan (the “Housing Authority Loan”). The Developer desires to Rehabilitate and operate the Housing Units as an affordable multifamily rental housing project (the “Housing Complex”).

This Agreement is intended to replace the Prior AHA, and the Housing Authority Loan is intended to replace the 2006 Loan, the Housing Authority Loan to be evidenced by a promissory note (the “Housing Loan Promissory Note”) executed by Developer in favor of the Housing Authority dated the [Conversion Date], and secured by a Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing (the “Deed of Trust”), dated as of March 1, 2025, and recorded against the Property on ________________, as Instrument No. ___________________ in the Official Records, and subject to the Regulatory Agreement.

The Developer has obtained multifamily housing bond financing (“Multifamily Bonds”) and federal 4% Tax Credits for the Housing Complex. This Agreement has been structured specifically to accommodate a federal 4% Tax Credit and Multifamily Bond financing structure.

The acquisition, Rehabilitation and operation of the Housing Complex pursuant to this Agreement is in the vital and best interest of the City and the health, safety and welfare of its residents, and in accord with the public purposes and provisions of applicable state and local laws and requirements.

NOW, THEREFORE, the parties hereto agree as follows:
100. DEFINITIONS
“Act” means the Community Redevelopment Law of the State of California, Health and Safety Code Section 33000, et seq., as the same may from time to time be amended. “ADA” shall mean the Americans with Disabilities Act of 1990, 42 U.S.C. § 12101, et seq., as the same may from time to time be amended. “Affordability Period” shall mean the duration of the affordable housing requirements which are set forth in this Agreement and the Regulatory Agreement, as set forth in Section 602 hereof. “Affordable Rent” shall have the meaning set forth in Health and Safety Code Section 50053, as further defined in Section 605 hereof. “Agency” means the former Redevelopment Agency of the City of Rialto, a public body, corporate and politic. “Agency Bonds” means the bonds issued by the Agency to obtain some or all of the funds allocated to the Housing Authority for the purposes of carrying out the Housing Authority’s obligations under this Agreement and the 2006 AHA. “Agreement” means this Affordable Housing Loan Agreement between Housing Authority and the Developer. “Annual Project Revenue” shall mean all gross income and all revenues of any kind from the Housing Complex in a calendar year, including without limitation, Rents, Section 8 housing assistance payments, if any, late charges, vending machine income, and any other revenues of whatever kind or nature from the Housing Complex, except that interest on security deposits and required reserves shall not be considered Annual Project Revenue. “Best Knowledge” means the actual knowledge of the party’s employees and agents who 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. “CC&Rs” means the Declaration of Restrictions (Enabling Declaration Establishing a Plan for Condominium Ownership of Phase I-Tract 8074), recorded on August 6, 1969 in Book 7281, Page 555 of the Official Records of San Bernardino County, California, as such document is amended from time to time. “Certificate of Completion” means the document which evidences the Developer’s satisfactory completion of the Rehabilitation of the Housing Complex, as set forth in Section 406 hereof, substantially in the form of Attachment No. 9 hereto. “City” means the City of Rialto, California, a California municipal corporation. The City is not a party to this Agreement and shall have no obligations hereunder. “Closing” means ___________________.
“Closing Date” means __________________.
“Consumer Price Index” means the Consumer Price Index published by the Bureau of Labor Statistics of the U.S. Department of Labor for Urban Wage Earners and Clerical Workers, Los Angeles-Riverside-Orange County, California (1982-84=100) “All Items.” In the event the compilation and/or publication of the Consumer Price Index shall be transferred to any other governmental department, bureau or agency or shall be discontinued, then the index most nearly the same as the Consumer Price Index shall be used to make such calculation, as determined by the Housing Authority. “County” shall mean the County of San Bernardino, California. “Conversion” means the ________________
“Conversion Date” means _______
“Debt Service” means regularly scheduled payments of principal and interest made in a calendar year pursuant to the approved financing obtained for the acquisition, Rehabilitation and ownership of the Housing Complex which is senior in lien priority to the Housing Authority Loan, but excluding payments made pursuant to the Housing Authority Loan Promissory Note. “Default” means the failure of a party to perform any action or covenant required by this Agreement within the time periods provided herein following notice and opportunity to cure, as set forth in Section 701 hereof. “Deferred Developer Fees” shall mean any deferred developer fee allowable under the financing which has been approved by the Housing Authority pursuant to Section 501 hereof. “Developer” means Inland Valley Housing Partners, L.P., a California limited partnership, and its permitted successors and assigns. “Financing Plan” is set forth in Attachment No. 5 and referenced in Section 501 hereof. “Governmental Requirements” means 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 Housing Complex is located, and of any other political subdivision, agency, or instrumentality exercising jurisdiction over the Developer or the Housing Complex. “Hazardous Materials” means any substance, material, or waste which is or becomes regulated by any local governmental authority, the County, the State of California, regional 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,1' “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 byphenyls, (viii) listed under Article 9 or defined as “hazardous” or “extremely hazardous” pursuant to Article 11 of Title 22 of the California Code of Regulations, Division 4, Chapter 20, (ix) designated as “hazardous substances” pursuant to Section 311 of the Clean Water Act (33 U.S.C. §1317), (x) 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 (xi) 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 or management 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 Housing Complex, including without limitation alcohol, aspirin, tobacco and saccharine. “Housing Authority” means the Rialto Housing Authority, a public body, corporate and politic, and any assignee of or successor to its rights, powers and responsibilities. “Housing Authority Loan” means the loan from the Housing Authority to the Developer pursuant to Section 301 hereof. “Housing Authority Loan Deed of Trust” means the Deed of Trust to be executed by the Developer and recorded as security for the repayment of the Housing Authority Loan Promissory Note. “Housing Authority Loan Promissory Note” means the Promissory Note to be executed by the Developer for the repayment of the Housing Authority Loan. “Housing Complex” means the Housing Units to be acquired, rehabilitated, consolidated and operated by the Developer as provided herein. “Housing Fund” means the former Agency’s Low and Moderate Income Housing Fund, established pursuant to Health and Safety Code Section 33334.3 and transferred to the Housing Authority. “Housing Units” means the one hundred fifty-two (152) individual multifamily residential rental units within the Housing Complex to be rehabilitated and operated by the Developer. “Legal Description” means the description of the Housing Units which is attached hereto as Attachment No. 1 and incorporated herein. “Lender” means each of the responsible financial lending institutions or persons or entities approved by the Housing Authority in its reasonable discretion, which provide construction loans or permanent loans for the acquisition, Rehabilitation or operation of the Housing Complex, as set forth in Section 501 hereof. “Lower Income Household” shall mean a household earning not greater than that percentage of San Bernardino County area median income, adjusted for household size, which is set forth by regulation of the California Department of Housing and Community Development, pursuant to Health and Safety Code Section 50079.5. “Multifamily Bond Regulatory Agreement” means the regulatory agreement which Developer may be required to execute in connection with the issuance of the Multifamily Bonds. “Multifamily Bonds” means the California Statewide Communities Development Authority Multifamily Housing Revenue Bonds (Citrus Grove) 2025 Series B, in the aggregate face amount (maximum principal amount) of $[32,895,715], to be issued to make a loan to Developer in the original aggregate principal amount $[32,895,715] for the acquisition and development of the Housing Complex, as provided in Section 502 hereof. “Notice” shall mean a notice in the form prescribed by Section 802 hereto. “Operating Budget” means the operating budget for the Housing Complex which is submitted and approved pursuant to Section 611 hereof. “Operating Expenses” shall mean actual, reasonable and customary (for comparable high quality rental housing developments in San Bernardino County) costs, fees and expenses directly incurred, paid, and attributable to the operation, maintenance and management of the Housing Complex in a calendar year, which are in accordance with the Operating Budget approved by the Housing Authority pursuant to Section 610 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 which are not paid from the capital replacement reserve, fees and expenses of property management, fees and expenses of accountants, attorneys and other professionals, the cost of social services in accordance with Section 611 hereof, repayment of any completion or operating loans made to Developer, its successors or assigns, and other actual, reasonable and customary operating costs and capital costs which are directly incurred and paid by the Developer, but which are not paid from the operating reserve or other reserve accounts. The Operating Expenses shall not in any event include expenses not related to the operation of the Housing Complex, including without limitation, depreciation, amortization, and accrued principal and interest expense on deferred payment debt. “Partnership Agreement” means the agreement which sets forth the terms of the Developer’s limited partnership, as such agreement may be amended from time to time. “Regulatory Agreement” shall mean that certain Regulatory Agreement dated August 1, 2006 and recorded against the Property on August 17, 2006, as Instrument No. 2006-0563300 in the Official Records, as amended by that certain First Amendment to Regulatory Agreement dated as of May 1, 2008 and recorded against the Property on June 4, 2008, as Instrument No. 2008-0253726 in the Official Records, as further amended by that certain Second Amendment to Regulatory Agreement dated as of March 1, 2025 and recorded against the Property on __________, as Instrument No. __________________ in the Official Records, as the same may be supplemented, modified or amended in accordance with its terms. The Regulatory Agreement is attached hereto as Attachment No. 2 and incorporated herein. “Rehabilitation” or “Rehabilitate” means the rehabilitation of the Housing Complex in accordance with the requirements of this Agreement. “Rehabilitation Plans” means the plans for the Rehabilitation of the Housing Complex in accordance with Section 402 hereof. “Rent” shall mean the total of monthly payments by the tenants of a Housing Unit for use and occupancy for the Housing Unit and facilities associated therewith, including a reasonable allowance for utilities for an adequate level of service, as defined in 25 California Code of Regulations §6918. “Repayment Funds” shall mean funds used to repay the 2006 Loan which shall be deposited into an account controlled by JP Morgan Chase Bank, N.A. (“Senior Lender”) in the name of the Housing Authority. Upon Conversion the Repayment Funds shall be used to make the Housing Authority Loan. “Reserve Deposits” shall mean any payments to the Operating Reserve account and Capital Replacement Reserve account pursuant to Sections 609 and 610 hereof. “Residual Receipts” shall mean Annual Project Revenue less the sum of (i) Operating Expenses, (ii) Debt Service, (iii) Reserve Deposits, (iv) Deferred Developer Fees, and (v) annual issuer and bond monitoring fees, a partnership management fee to the managing general partner of Developer, and/or a general partner asset management fee payable to one or more of the general partners of the Developer, and/or a limited partner asset management fee payable to one or more of the limited partners of Developer, and an annual audit fee, with such fees in such amounts which are set forth in the Financing Plan which is approved by the Housing Authority, until the Housing Authority Loan Promissory Note has been paid in full; provided, however, that if such calculation results in a negative number, Residual Receipts shall be zero for that year. “Schedule of Performance” means that certain Schedule of Performance attached hereto as Attachment No. 7 and incorporated herein, which sets forth the time for performing the various obligations of this Agreement. “Scope of Development” means that certain Scope of Development attached hereto as Attachment No. 8 and incorporated herein, which describes the scope, amount, and quality of the Rehabilitation of the Housing Complex by the Developer pursuant to the terms and conditions of this Agreement. “Substantial Damage” is defined in Section 407.2 hereof. “Tax Credits” shall mean 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 Sections 50199, et seq. “Tax Credit Rules” means 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 the foregoing maybe amended from time to time, and the rules and regulations implementing the foregoing. “Tax Credit Regulatory Agreement” shall mean the regulatory agreement which may be required to be recorded against the Housing Units with respect to the issuance of Tax Credits, as set forth in Section 607 hereof. “TCAC” means the California Tax Credit Allocation Committee, the allocating agency for Tax Credits in California. “Very Low Income Household” shall mean a household earning not greater than the applicable percentage of San Bernardino County area median income, adjusted for household size, as set forth by regulation of the California Department of Housing and Community Development, pursuant to Health and Safety Code Section 50105.

REPRESENTATIONS AT CONVERSION
Developer Representations and Conditions.

No Default. At the Conversion, the Developer shall not be in material Default in any of its obligations set forth in this Agreement and the Regulatory Agreement and all representations and warranties of Developer contained herein and therein shall be true and correct in all material respects.

Retirement of 2006 Note; Funding of Housing Authority Loan. At the Conversion, the 2006 Note was retired on or prior to the date of the Certificate of Completion, and the Repayment Funds were deposited in an account in the name of the Housing Authority subject to the Assignment of Deposit Account dated as of March 1, 2025 (the “Assignment of Deposit Account”) by and between the Housing Authority and JPMORGAN CHASE BANK, N.A, as assignee, and such Repayment Funds are available at Conversion to fund the Housing Authority Loan.

Execution of Documents. The Developer has executed the Housing Authority Promissory Note in favor of the Housing Authority, and the Deed of Trust, as recorded, constitutes a lien upon the Property.

No Litigation. No litigation shall be pending or threatened which seeks to enjoin the transactions contemplated by this Agreement or the Regulatory Agreement.

Housing Authority Representations and Conditions.

No Default. At the Conversion, the Housing Authority shall not be in material Default in any of its obligations set forth in this Agreement, the Regulatory Agreement or the Assignment of the Deposit Account and all representations and warranties of Housing Authority contained herein and therein shall be true and correct in all material respects.

Execution of Documents. On or prior to the Conversion Date, the Housing Authority shall have executed and recorded a Reconveyance of the 2006 Deed of Trust and the Prior AHA shall be deemed terminated by the parties.

No Litigation. No litigation shall be pending or threatened which seeks to enjoin the transactions contemplated by this Agreement or the Regulatory Agreement.

HOUSING AUTHORITY FINANCIAL ASSISTANCE
Housing Authority Loan. In order to assist the Developer with the financing of the Rehabilitation, the Housing Authority agrees to refinance the 2006 Loan and use the Repayment Funds of the 2006 Note to fund at Conversion a new permanent loan to Developer in the amount of [Eight Million Sixty Four Thousand Nine Hundred Fifty One and No/100 Dollars ($8,064,951)] (the “Housing Authority Loan”), subject to the terms and conditions set forth in this Agreement, and subject further to the terms and conditions set forth within the documents and instruments executed by the Developer in connection with this transaction, and further subject to the Regulatory Agreement. The Housing Authority Loan shall be evidenced by the Housing Authority Promissory Note in the form of Attachment No. 3 attached hereto and incorporated herein. [At or before the Conversion, the Developer shall pay to the Housing Authority the sum of _____________ Dollars ($_________) / add to the Note Amount the sum of $___________, representing interest accrued on 2006 Note from March 1, 2025 to the Conversion Date and loaned back to the Developer under this Agreement.] Upon execution of this Agreement, the Developer shall pay to the City of Rialto by certified check or wire a loan modification fee equal to $500,000.

Repayment of Housing Authority Loan. The Developer’s obligation to repay the Housing Authority Loan shall be set forth in the Housing Authority Loan Promissory Note. The Housing Authority Loan Promissory Note shall be for a term of fifty-five (55) years from the Conversion Date, and shall bear compound interest at the rate of [Four and Eighty-Six Hundredths Percent (4.86%)] per annum commencing on the [date of the Housing Authority Loan Promissory Note/date hereof]. The Housing Authority Loan Promissory Note shall be payable from the percentage of the “Residual Receipts” of the Housing Complex which is set forth in the approved Financing Plan, after payment of Operating Expenses directly incurred, paid, and attributable to the operation, maintenance, and management of the Housing Complex, (ii) Debt Service which is senior to the Housing Authority Loan Promissory Note, (iii) deposits to required reserve accounts (“Reserve Deposits”), (iv) Deferred Developer Fee payments which are paid within ten years of completion of construction of the Housing Complex, and (v) a partnership management fee to the managing general partner of Developer, and/or a general partner asset management fee payable to one or more of the general partners of the Developer, and/or a limited partner asset management fee payable to one or more of the limited partners of Developer, annual issuer and bond monitoring fee, and an annual audit fee, with such fees in such amounts which are set forth in the Financing Plan which is approved by the Housing Authority, until the Housing Authority Loan Promissory Note has been paid in full; provided, however, that if such calculation results in a negative number, Residual Receipts shall be zero for that year. The Developer shall annually, on or before ninety (90) days after the end of the year, commencing in the year after the Closing, submit to the Housing Authority a Residual Receipts Report, in the form attached hereto as Attachment No. 6 and incorporated herein, which shall provide the basis for the Developer's payment of Residual Receipts to the Housing Authority. The Housing Authority Loan Promissory Note shall be non-recourse to the Developer.

Security for Housing Authority Loan. The Housing Authority Loan Promissory Note shall be secured by the Housing Authority Loan Deed of Trust to be recorded with the execution of this Agreement as an encumbrance to the Property substantially in the form of Attachment No. 4 attached hereto, which is incorporated herein.

Disbursement of Housing Authority Loan. The proceeds of the Housing Authority Loan shall be disbursed to Developer from Repayment Funds only to refinance a portion of the purchase price for the acquisition of the Housing Units. No portion of the proceeds of the Housing Authority Loan shall be used to pay for any of the costs of the Rehabilitation of the Housing Units.

Subordination. The Housing Authority Loan Deed of Trust shall be made subordinate to the deeds of trust for the Multifamily Bonds and the interim funding to be obtained by the Developer, as set forth in the Financing Plan approved by the Housing Authority pursuant to Section 501 hereof.

Developer and the Housing Authority hereby agree that the liens of the Housing Authority Deed of Trust and the Regulatory Agreement shall be subordinate to and inferior in lien priority to deeds of trust and regulatory agreements, as applicable, entered into by Developer in connection with Rehabilitation financing for the Housing Complex. Housing Authority agrees to enter into subordination agreements, in form and substance reasonably acceptable to the Housing Authority, to evidence the foregoing subordination. Notwithstanding the above, to the extent the regulatory agreements entered into by Developer in connection with the Rehabilitation financing for the Project are less restrictive with respect to the requirements applicable to tenant selection, tenant income levels and unit rent levels than as provided in the Regulatory Agreement or this Agreement, the terms of the Regulatory Agreement and this Agreement shall control except as provided in Section 509.

Assumption. The Housing Authority Loan Promissory Note shall not be assumable by successors and assigns of Developer except for those successors approved or permitted pursuant to Section 805 hereof.

REHABILITATION OF THE HOUSING COMPLEX
Rehabilitation of the Housing Complex. Commencing with the date of this Agreement, the Developer agrees to perform the rehabilitation of the Housing Complex (the “Rehabilitation”) substantially in accordance with the Scope of Development which is attached hereto as Attachment No. 7 and incorporated herein, all applicable local codes, development standards, ordinances and zoning ordinances in effect at the time of project completion, and the Rehabilitation Plans which are approved by the City pursuant to Section 402 hereof.

Rehabilitation Plans. The Developer shall submit to the City such plans, materials and drawings describing the Rehabilitation of the Housing Complex (collectively, the “Rehabilitation Plans”) which may be required by the City with respect to any permits and entitlements which are required to be obtained to Rehabilitate the Housing Complex. Developer, on or prior to the date set forth in the Schedule of Performance (subject to force majeure pursuant to Section 703 hereof), shall further submit to the City such plans for the Rehabilitation of the Housing Complex as required by the City in order for Developer to obtain building permits for such Rehabilitation work. Within thirty (30) days after the City's disapproval or conditional approval of such plans, Developer shall revise the portions of such plans identified by the City as requiring revisions and resubmit the revised plans to the City. The City shall have all rights to review and approve or disapprove all Rehabilitation Plans and other required submittals in accordance with the City Municipal Code, and nothing set forth in this Agreement shall be construed as the City's approval of any or all of the Rehabilitation Plans. Any and all change orders or revisions required by the City and its inspectors which are required under the Municipal Code and all other applicable Uniform Codes (e.g. Building, Plumbing, Fire, Electrical, etc.) and under other applicable laws and regulations shall be included by the Developer in its Rehabilitation Plans and other required submittals and shall be completed during the Rehabilitation of the Housing Complex. The Housing Authority and the City shall not be responsible either to the Developer or to third parties in any way for any defects in the Rehabilitation Plans, nor for any structural or other defects in any work done according to the approved Rehabilitation Plans, nor for any delays reasonably caused by the review and approval processes established by this Section 402.

Cost of Rehabilitation of the Housing Complex. All of the funds necessary to complete the Rehabilitation of the Housing Complex shall be obtained by the Developer, in accordance with the Financing Plan approved by the Housing Authority hereunder. None of the funds for the Rehabilitation shall be obtained from the proceeds of the Housing Authority Loan.

Timing of Rehabilitation of the Housing Complex. The Developer hereby covenants and agrees to commence the Rehabilitation of the Housing Complex within the time set forth in the Schedule of Performance, which is attached hereto as Attachment No. 8 and incorporated herein (subject to force majeure pursuant to Section 703 hereof). The Developer further covenants and agrees to diligently prosecute to completion the Rehabilitation of the Housing Complex in accordance with the approved Rehabilitation Plans and to file a Notice of Completion pursuant to California Civil Code Section 3093 within the time set forth in the Schedule of Performance.

City and Other Governmental Permits. Before commencement of the Rehabilitation of the Housing Complex, the Developer shall secure or cause its contractor to secure any and all permits and land use entitlements which may be required by the City or any other governmental agency affected by such construction, including without limitation building permits. The Developer shall pay all necessary fees and timely submit to the City final drawings with final corrections to obtain such permits, and the staff of the Housing Authority will, without obligation to incur liability or expense therefor, use its best efforts to expedite the City’s issuance of building permits and certificates of occupancy for construction that meets the requirements of the City Code, and all other applicable laws and regulations.

Certificate of Completion. Promptly after the completion of the Rehabilitation of the Housing Complex in conformity with this Agreement (as reasonably determined by the Housing Authority Executive Director or his or her designee), upon the written request of the Developer, the Housing Authority shall furnish the Developer with a Certificate of Completion (substantially in the form attached hereto as Attachment No. 9) which evidences and determines the satisfactory completion of the Rehabilitation of the Housing Complex in accordance with this Agreement. The issuance and recordation of the Certificate of Completion with respect to the Housing Complex shall not supersede, cancel, amend or limit the continued effectiveness of any obligations relating to the maintenance, or uses, or payment of monies, or any other obligations, except for the obligation to complete the Rehabilitation of the Housing Complex or applicable portion thereof as of the time of the issuance of the Certificate of Completion.

Insurance. The Developer shall take out and maintain or shall cause its contractor to take out and maintain until the issuance of the Certificate of Completion pursuant to this Agreement, (a) a comprehensive general liability policy in the amount of not less than Two Million Dollars ($2,000,000) combined single limit policy, (b) a comprehensive automobile liability policy in not less than the amount of Two Million Dollars ($2,000,000) combined single limit, and (c) a policy of all-risk property insurance in an amount not less than one hundred percent (100%) of the full insurable value of the Housing Units owned by the Developer. The required amount of insurance shall be subject to increases as the Housing Authority may reasonably require from time to time, but not more frequently than every twenty-four (24) months, and in no event shall such increase or increases exceed the increase during such period in the Consumer Price Index. Such policies shall protect the Developer and Housing Authority from claims for such damages, and be issued by an insurance carrier qualified to do business in the State of California. Such policy or policies shall be written on an occurrence form. The Developer shall also furnish or cause to be furnished to the Housing Authority evidence satisfactory to the Housing Authority that Developer and any contractor with whom it has contracted for the performance of work on the Housing Complex or otherwise pursuant to this Agreement carries workers’ compensation insurance as required by law. Prior to the commencement of the Rehabilitation, the Developer shall furnish a certificate of insurance countersigned by an authorized agent of the insurance carrier setting forth the general provisions of the insurance coverage. This countersigned certificate shall name the Housing Authority and its officers, agents, and employees as additionally insured parties under the policy, and the certificate shall be accompanied by a duly executed endorsement evidencing such additional insured status which shall be provided as a separate endorsement attached to the certificate. The certificate and separate endorsement by the insurance carrier shall contain a statement of obligation on the part of the carrier to notify the Housing Authority of any material change, cancellation or termination of the coverage at least thirty (30) days in advance of the effective date of any such material change, cancellation or termination, and to notify the Housing Authority within ten (10) days of Developer's failure to pay any premium when due. Coverage provided hereunder by the Developer shall be primary insurance and not be contributing with any insurance maintained by the Housing Authority, and the policy shall contain such an endorsement. The insurance policy or the endorsement shall contain a waiver of subrogation for the benefit of the Housing Authority. The required certificate shall be furnished by the Developer prior to the commencement of the Rehabilitation. 407.1 Restore Obligation to Repair and Damage Due to Casualty Covered by Insurance. Subject to Section 407.2 below, if during the period of the Rehabilitation, any portion of the Housing Complex 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 the destroyed portion of the Housing Complex to substantially the same condition as the Housing Complex is required to be rehabilitated 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 the destroyed portion of the Housing Complex can be occupied in accordance with this Agreement. Subject to force majeure delays pursuant to Section 803 hereof, in no event shall the repair, replacement, or restoration period exceed [one (1) year] from the date Developer obtains insurance proceeds unless Housing Authority’s Executive Director, in his or her reasonable discretion, approves a longer period of time. Housing Authority shall cooperate with Developer, at no expense to Housing 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 Housing Complex do not permit the repair, replacement, or restoration, Developer may elect not to repair, replace, or restore the Housing Complex by giving notice to Housing Authority (in which event Developer will be entitled to all insurance proceeds but Developer shall be required to remove all debris from the applicable portion of the destroyed portion of the Housing Complex and Developer shall concurrently repay to the Housing Authority the pro rata portion of the Housing Authority Loan attributable to the destroyed Housing Units) or Developer may reconstruct such other improvements on the site of the destroyed Housing Units as are consistent with applicable land use regulations and approved by the City, Housing Authority, and the other governmental agency or agencies with jurisdiction. 407.2 Damage or Destruction Due to Cause Not Required to be Covered by Insurance. If during the period of construction any portion of the Housing Complex is completely destroyed or substantially damaged by a casualty for which Developer is not required to (and has not) insured against, then Developer shall not be required to repair, replace, or restore such improvements and may elect not to do so by providing Housing 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, Developer shall concurrently repay to the Housing Authority the pro rata portion of the Housing Authority Loan attributable to the destroyed Housing Units. As used in this Section 407.2, “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 destroyed portion of the Housing Complex. In the event Developer does not timely elect not to repair, replace, or restore the destroyed portion of the Housing Complex as set forth in the first sentence of this Section 407.2, Developer shall be conclusively deemed to have waived its right not to repair, replace, or restore the destroyed portion of the Housing Complex and thereafter Developer shall promptly commence and complete the repair, replacement, or restoration of the damaged or destroyed Housing Complex in accordance with Section 407.1 above.

Indemnity. Developer shall, at its expense, defend, indemnify, and hold harmless the Housing Authority and its officers, agents, employees and representatives harmless from any and all losses, liabilities, claims, lawsuits, causes of action, judgments, settlements, court costs, attorneys' fees, and other legal expenses, costs of evidence of title, costs of evidence of value, and other damages of whatsoever nature arising out of or in connection with, or relating in any manner to any act or omission of Developer or its agents, employees, contractors and subcontractors of any tier and employees thereof in connection with or arising from Developer's performance or nonperformance of its obligations under this Agreement, Developer’s ownership or operation of the Housing Complex, the Rehabilitation of the Housing Complex, or challenges to the approval, validity, applicability, interpretation or implementation of this Agreement or the California Environmental Quality Act approvals made in connection therewith, except that arising from the negligence or misconduct of the Housing Authority or its officers, agents, employees or representatives.

Entry by the Housing Authority. Developer shall permit the Housing Authority, through its officers, agents or employees, at all reasonable times (but subject to tenants' rights of possession) to enter onto the Housing Complex and inspect the work of Rehabilitation of the Housing Complex to determine that the same is in conformity with the Rehabilitation Plans and all the requirements hereof Developer acknowledges that the Housing Authority is under no obligation to supervise, inspect, or inform Developer of the progress of the Rehabilitation, and Developer shall not rely upon the Housing Authority therefor. Any inspection by the Housing Authority is entirely for its 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. 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.

Compliance With Laws. The Developer shall carry out the design, Rehabilitation and operation of the Housing Complex in conformity with all applicable laws, including all applicable state labor standards, the Housing Authority Law, Health and Safety Code Section 34200, et seq., City zoning and development standards, building, plumbing, mechanical and electrical codes; and all other provisions of the City 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. The Developer shall pay prior to delinquency all ad valorem real estate taxes and assessments on the Housing Complex, subject to the Developer's right to contest in good faith any such taxes. The Developer may apply for and receive any exemption from the payment of property taxes or assessments on any interest in or to the Housing Complex without the prior approval of the Housing Authority.

Prevailing Wages. With respect to the Rehabilitation of the Housing Complex set forth herein and in the Scope of Development, Developer and its contractors and subcontractors shall pay prevailing wages and employ apprentices in compliance with Health and Safety Code Sections 33423 through 33426, and Labor Code Section 1770, et seq., and shall be responsible for the keeping of all records required pursuant to Labor Code Section 1776, complying with the maximum hours requirements of Labor Code Sections 1810 through 1815, and complying with all regulations and statutory requirements pertaining thereto. Such requirements are set forth in greater detail in Attachment No. 10 attached hereto, which is incorporated herein. Upon the request of the Housing Authority, the Developer shall certify to the Housing Authority that it is in compliance with the requirements of this Section 411.

Developer shall indemnify, protect, defend and hold harmless the Housing Authority and its officers, employees, contractors and agents, with counsel reasonably acceptable to the Housing Authority, 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, and/or operation of the Improvements, including, without limitation, any and all public works (as defined by applicable law), results or arises in any way from any of the following: (1) the noncompliance by Developer of any applicable local, state and/or federal law, including, without limitation, any applicable federal and/or state labor laws (including, without limitation, if applicable, the requirement to pay state prevailing wages); (2) the implementation of Section 1781 of the Labor Code, as the same may be amended from time to time, or any other similar law; and/or (3) failure by Developer to provide any required disclosure or identification as required by Labor Code Section 1781, as the same may be amended from time to time, or any other similar law. It is agreed by the parties that, in connection with the Rehabilitation of the Housing Complex, including, without limitation, any and all public works (as defined by applicable law), Developer shall bear all risks of payment or non-payment of prevailing wages under California law and/or the implementation of Labor Code Section 1781, as the same maybe amended from time to time, and/or any other similar law. “Increased costs,” as used in this Section 411, shall have the meaning ascribed to it in Labor Code Section 1781, as the same maybe amended from time to time. The foregoing indemnity shall survive termination of this Agreement and shall continue after completion of the Rehabilitation of the Housing Complex by the Developer.

FINANCING OF THE ACQUISITION AND REHABILITATION OF THE HOUSING COMPLEX.

Housing Authority Approval of Financing Plan. The Developer has submitted to the Housing Authority a final Financing Plan which contains: (i) an acquisition and Rehabilitation budget for the Housing Complex, (ii) a sources and uses analysis for the period of the Rehabilitation, including an analysis of the additional subsidized financing which is necessary from other public bodies and required deferral of developer fees, (iii) a sources and uses· analysis from the date of the origination of the permanent loan, if any, including an analysis of the additional subsidized financing which is necessary from other public entities and required deferral of developer fees, (iv) a 30 year cash flow analysis of the Housing Complex from the date of the initial acquisition of the Housing Units, (v) an operating budget for the Housing Complex, including without limitation an operating reserve fund and capital replacement reserve fund, (vi) evidence of financing as provided in Section 502 hereof, (vii) all fees and obligations proposed to be payable prior to the payment of Residual Receipts, (viii) the proposed allocation of Residual Receipts between the repayment of the Housing Authority Loan, the repayment of other loans (with no less than fifty percent applicable to the repayment of the Housing Authority Loan and other financing), and retention by the Developer, (ix) the lien priority of all forms of financing, and (x) all underlying assumptions for each of the above. The Developer shall also submit to the Housing Authority for its approval any revisions to the Financing Plan.

While the Financing Plan will be prepared based on the best, good faith estimate of the Developer of the costs which are likely to be incurred for the Housing Complex, the parties recognize that events and circumstances not currently contemplated, some of which are outside of the control of the parties, could result in changes in the project costs, necessitating changes in the Financing Plan. Changes in the scope of the project could be made during any public hearing or approval process which result in increased costs for the project not contemplated in the budget contained in the Financing Plan. Changes in costs could be occasioned by conditions found in the field which were not anticipated as of the date of execution of this Agreement, including changes (and delays which result from changes) as a result of onsite inspections. Due to the impact of other, competing demands for staff time, inspections themselves might be delayed.

Because of the specialized nature of the funding for this project, unanticipated material changes could constitute a challenge to project completion and may cause costs to the project unanticipated in the budget contained in the Financing Plan. Should Developer become aware of any such material fact or circumstance which will result in a material increase in the proposed construction cost for the project (a cost or costs will constitute a “material increase” if (1) alone or cumulatively, such costs result in increased expenses for the project in excess of $100,000, but which expenses might be absorbed out of contingency funds, or (2) alone or cumulatively, such costs result in an increase of in excess of $250,000 which cannot be paid from sources of funds identified in the budget in the Financing Plan, Developer shall give written notice to Housing Authority, which notice shall identify the material change or changes, shall itemized the costs which Developer anticipates will result therefrom and shall request that the Housing Authority take one or more of the following actions:

Transfer sums among line items with the project budget in the Financing Plan. At the request of Developer, and subject to the approval of Housing Authority, which will not be unreasonably withheld, funds reflected in one line item of the project budget which are unexpended at the substantial completion of the work delineated therein may be transferred to the account and line item for contingencies, or, with the consent of the Housing Authority, not to be unreasonably withheld, transferred directly to another account for another line item in the project budget in the Financing Plan.

Request approval of modifications reasonably necessary or required to deal with such changed circumstances and material increases. Such modifications might include phasing or deferral of project amenities until additional funding is available or secured, downsizing or eliminating project design items or amenities, etc. The Housing Authority's Executive Director or his or her representative is hereby authorized to act on behalf of the Housing Authority to approve any revisions to the financing and/or improvement plans for the Housing Complex which do not materially increase the Housing Authority's financial obligations hereunder. The Housing Authority's consent to any such modifications shall not be unreasonably withheld.

Identify additional funding sources sufficient to pay such material increases. Such funding sources might, upon approval by the Housing Authority, include an increase in the Housing Authority Loan or Housing Authority support for applications for additional and/or, new funding from additional or new governmental or private funding programs established for low and moderate income housing. In the event that, despite the best efforts of the parties, an alternative resolution to such material increases and/or materially altered facts and circumstances is not mutually approved by the parties or does not become available within a reasonable time, on written notice to the Housing Authority, the Developer may take all or any one of the following actions: (A) halt onsite construction until the matter is resolved; (B) defer construction of the next phase of the Rehabilitation of the Housing Complex until a reasonable resolution is available; or (C) in the absence of resolution within a reasonable amount of time, take such steps as maybe reasonably necessary to begin liquidation of the Housing Complex by sale, on the best terms then available. In the event that, despite the best efforts of the parties, an alternative resolution to such material increases and/or materially altered facts and circumstances is not mutually approved by the parties or does not become available within a reasonable time, on written notice to the Housing Authority, the Developer may take all or any one of the following actions: (A) halt onsite construction until the matter is resolved; (B) defer construction of the next phase of the Rehabilitation of the Housing Complex until a reasonable resolution is available; or (C) in the absence of resolution within a reasonable amount of time, take such steps as maybe reasonably necessary to begin liquidation of the Housing Complex by sale, on the best terms then available. In the event of Housing Complex termination and liquidation, Developer shall use its best efforts to cause Housing Units to be sold for a price sufficient to pay all third party debt, to repay, prorate, the Housing Authority Loan and Developer’s out of pocket costs, or to repay the same in full, as funds are available. After the payment of all third party costs and expenses, and all Housing Authority loans and Developer out of pocket costs, any remaining sale proceeds shall be retained by Developer as compensation for its efforts to date. In connection with such termination and liquidation, Housing Authority shall take such steps as may be necessary, upon repayment of the amount of Housing Authority financing reasonably available from liquidation, to terminate affordability requirements then constituting a lien on the Housing Complex.

Financing Sources. It is the intent of the parties to maximize the leverage of Housing Authority funds by making every effort to secure sources of non-local subsidies for the Housing Complex. Accordingly, the Developer has obtained multifamily housing bond financing (the “Multifamily Bonds”) and federal 4% Tax Credits for the Housing Complex. In addition to Tax Credits, the Developer shall maintain and continue the existing funding for the Housing Complex from County of San Bernardino HOME funds and the California Housing and Community Development Department’s Multifamily Housing Program as shown in the Financing Plan. The parties have determined that other sources of subsidized funding (including federal 9% Tax Credits) are either not reasonably available for the Housing Complex, or will increase the net costs of Rehabilitation of the Housing Complex. Upon completion of Rehabilitation of the Housing Complex, the Developer shall cause its accountants to perform a final audit of the costs of Rehabilitation of the Housing Complex in accordance with the requirements of the Tax Credits (the “Audit”). If the Audit determines that the total sources of permanent financing for the Housing Complex (including long-term permanent debt and equity) exceed the total cost of acquisition and Rehabilitation of the Housing Complex, the Developer shall pay to the Housing Authority an amount equal to such excess, which amount shall be applied to the repayment of the Housing Authority Loan.

Required Submissions. Developer has submitted the following documents as evidence of financing:

A copy of a TEFRA resolution or other approval(s) obtained by the Developer with respect to the Multifamily Bonds.

A copy of a commitment for construction financing and/or bridge loan financing during the period of the Rehabilitation of the Housing Units.

A limited partnership agreement or funding commitment letter from the equity investors in the Housing Complex which demonstrates that Developer has sufficient funds for such construction, and that such funds have been committed to the acquisition and Rehabilitation of the Housing Complex, and a current :financial statement of Developer and Developer’s other sources of equity capital.

A copy of a preliminary reservation letter from TCAC notifying the Developer that an allocation of Tax Credits has been reserved for the acquisition and Rehabilitation of the Housing Complex.

Other documentation reasonably satisfactory to Housing Authority as evidence of other sources of capital, all of which together are sufficient to demonstrate that the Developer has adequate funds, together with the proceeds of any other financing, to acquire, Rehabilitate and operate the Housing Complex.

Tax Credit Equity. The following requirements must be satisfied in order for the equity financing for Tax Credit funding to be approved by the Housing Authority pursuant to Section 501 (which requirements maybe waived in the Housing Authority's sole and absolute discretion):

The equity investment of the limited partners of the limited partnership shall not be less than the approximate prevailing price for Tax Credits at such time, taking into consideration all relevant factors such as timing of required payments and amount of the Tax Credits.

The identity of the syndicator and the initial limited partners of the limited partnership shall be reasonably acceptable to the Housing Authority.

In connection with the formation of such limited partnership for the equity financing, the Developer or an affiliate of Developer controlled by Developer shall be the managing general partner of the limited partnership at all times.

The Developer or its affiliates shall be entitled to a developer fee from the equity financing of not greater than the developer fee set forth in the approved Financing Plan. The Developer acknowledges that some portion of the developer fee may be required to be deferred until after the completion of the Rehabilitation and commencement of operation of the Housing Complex in order to ensure that sufficient funds are available for the costs of Rehabilitation and operation of the Housing Complex.

Holder Performance of Rehabilitation of the Housing Complex. The holder of any mortgage or deed of trust authorized by this Agreement shall not be obligated by the provisions of this Agreement to perform the Rehabilitation of the Housing Complex 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.

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 Housing Authority may deliver any notice or demand to Developer with respect to any breach or default by the Developer hereunder or under any other document executed pursuant to this Agreement, Housing 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 such holder shall (insofar as the rights granted by Housing Authority are concerned) have the right, but not the obligation, at its option, within thirty (30) days after the receipt of the notice, to cure or remedy or commence to cure or remedy and thereafter to pursue with due diligence the cure or remedy of any such default and to add the cost thereof to the mortgage debt and the lien of its mortgage. Nothing contained in this Agreement shall be deemed to permit or authorize holder of a mortgage or deed of trust executed prior to the issuance of the Certificate of Completion to undertake or continue the construction or completion of the Rehabilitation, 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 Housing Authority by written agreement reasonably satisfactory to Housing Authority. The holder, in that event, must agree to complete, or cause to be completed by a party which is reasonably acceptable to the Housing Authority, in the manner provided in this Agreement, the improvements to which the lien or title of such holder relates. Any such holder (or assignee approved by the Housing Authority) properly completing such improvement shall be entitled, upon compliance with the requirements of Section 406 of this Agreement, to a Certificate of Completion. It is understood that a holder (or assignee approved by the Housing Authority) shall be deemed to have satisfied the thirty (30) day time limit set forth above for commencing to cure or remedy a Developer default which requires title and/or possession of the Housing Complex (or portion thereof), if and to the extent any such holder (or assignee approved by the Housing Authority) has within such thirty (30) day period commenced proceedings to obtain title and/or possession and thereafter the holder diligently pursues such proceedings to completion and cures or remedies the default.

Failure of Holder to Complete Rehabilitation. In any case where, ninety (90) days after the holder of any mortgage or deed of trust creating a lien or encumbrance upon the Housing Complex or any part thereof receives a notice from Housing Authority of a default by Developer in completion of construction of any of the Rehabilitation under this Agreement, and such holder has not exercised the option to perform the Rehabilitation or cause the Rehabilitation to be performed as set forth in Section 506, or if it has exercised the option but has defaulted hereunder and failed to timely cure such default, Housing Authority may purchase the mortgage or deed of trust by payment to the holder of 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 Housing Complex or any part thereof has vested in the holder, Housing Authority, if it so desires, shall be entitled to a conveyance from the holder to Housing Authority upon payment to the holder of an amount equal to the sum of the following:

The unpaid mortgage or deed of trust debt at the time title 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); All expenses with respect to foreclosure including reasonable attorneys' fees; The net expense, if any (exclusive of general overhead), incurred by the holder as a direct result of the subsequent management of the Housing Complex or part thereof; The costs of any improvements made by such holder (or assignee approved by the Housing Authority) pursuant to the requirements of this Agreement or as otherwise approved by the Housing Authority; An amount equivalent to the interest that would have accrued on the aggregate of such amounts had all such amounts become part of the mortgage or deed of trust debt and such debt had continued in existence to the date of payment by Housing Authority; and Any prepayment charges imposed by the lender pursuant to its loan documents and agreed to by the Developer.

Right of Housing Authority to Cure Mortgage or Deed of Trust Default. In the event of a loan agreement, promissory note, mortgage or deed of trust default or breach by the Developer, or a default under the terms of Developer's partnership agreement, Developer shall immediately deliver to Housing Authority a copy of any default notice pertaining thereto. If the holder of any loan agreement, promissory note, mortgage or deed of trust has not exercised its option to construct prior to the issuance of the Certificate of Completion, pursuant to Section 506 hereof, Housing Authority shall have the right but not the obligation to cure the default of such loan agreement, promissory note, mortgage, deed of trust or partnership agreement. In such event, Housing Authority shall be entitled to reimbursement from the Developer of all proper costs and expenses incurred by Housing Authority in curing such default. Housing Authority shall also be entitled to a lien upon the Housing Complex to the extent of such costs and disbursements. Any such lien shall be junior and subordinate to the mortgages or deeds of trust approved by the Housing Authority pursuant to Section 501.

Subordination of Affordability Covenants. In the event that the Housing Authority finds that an economically feasible method of financing for the construction and operation of the Housing Complex, without the subordination of the affordable housing covenants as may be set forth in this Agreement and the Regulatory Agreement, is not reasonably available, the Housing Authority shall make the affordable housing covenants set forth in this Agreement and the Regulatory Agreement junior and subordinate to the deeds of trust and other documents required in connection with the construction and permanent financing for the Housing Complex approved pursuant to Section 501. Any subordination agreement entered into by the Housing Authority shall contain written commitments which the Housing Authority finds are reasonably designed to protect Housing Authority’s investment in the event of default, such as any of the following: (a) a right of Housing Authority to cure a default on the loan prior to foreclosure, (b) a right of Housing Authority to negotiate with the lender after notice of default from the lender and prior to foreclosure, and (c) an agreement that if prior to foreclosure of the loan, Housing Authority takes title to the property and cures the default on the loan, the lender will not exercise any right it may have to accelerate the loan by reason of the transfer of title to Housing Authority, and (d) a right of Housing Authority to acquire the Housing Complex from the Developer at any time after a material default on the lender’s loan.

OPERATION OF HOUSING
Number of Affordable Units. Developer agrees to make available, restrict occupancy to, and rent not less than Fifty Percent (50%) of the Housing Units to Very Low Income Households, and the remainder of the Housing Units (other than the one or two Housing Units which Developer may make available for occupancy by Developer's on-site property management staff) to Lower Income Households, all at an Affordable Rent.

Duration of Affordability Requirements. The Housing Units shall be subject to the requirements of this Article 600 for a term that is fifty-five (55) years from the date of the issuance of the Certificate of Completion for the Rehabilitation of the Housing Units. The duration of this requirement shall be known as the “Affordability Period.” In the event that the Parties reasonably determine that the Housing Units can no longer be used for multifamily housing purposes, and that it is infeasible to Rehabilitate the Housing Units, the Parties may agree to terminate the Affordability Period upon the date that the Housing Units are no longer habitable for multifamily housing purposes.

Selection of Tenants. Developer shall be responsible for the selection of tenants for the Housing Units in compliance with lawful and reasonable criteria, as set forth in the Regulatory Agreement and the Management Plan which is required to be submitted and approved by the Housing Authority pursuant to Section 609 hereof.

Household Income Requirements. Following the initial lease-up of the Housing Units, and annually thereafter, the Developer shall submit to Housing Authority, at Developer’s expense, a summary of the income, household size and rent payable by each of the tenants of the Housing Units. At the Housing Authority's request, the Developer shall also provide to the Housing Authority completed income computation and certification forms, in a form reasonably acceptable to the Housing Authority, for any such tenant or tenants. Developer shall obtain, or shall cause to be obtained by the Property Manager, a certification from each household leasing an Affordable Unit demonstrating that such household is a Very Low Income Household or Lower Income Household, as applicable, and meets the eligibility requirements established for the Housing Unit. Developer shall verify, or shall cause to be verified by the Property Manager, the income certification of the household.

Affordable Rent. The maximum Monthly Rent chargeable for the Affordable Units shall be annually determined in accordance with the following requirements. The Monthly Rent for the Affordable Units to be rented to Very Low Income Households shall not exceed one-twelfth (1/12) of thirty percent (30%) of fifty percent (50%) of San Bernardino County Median Income for a family of a size appropriate to the unit. The Monthly Rent for the Affordable Units to be rented to Lower Income Households shall not exceed one-twelfth (1/12) of thirty percent (30%) of sixty percent (60%) of San Bernardino County Median Income for a family of a size appropriate to the unit.

For purposes of this Agreement, “Monthly Rent” means the total of monthly payments for (a) use and occupancy of each Affordable Unit and land and facilities associated therewith, (b) any separately charged fees or service charges assessed by the 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, 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. In the event that all utility charges are paid by the landlord rather than the tenant, no utility allowance shall be deducted from the rent.

For purposes of this Agreement, because the Tax Credit requirements constitute pertinent federal requirements applicable to the Housing Complex, “family of a size appropriate to the unit” means one and one-half persons for a one bedroom unit, three persons for a two-bedroom unit, and four and one-half persons for a three-bedroom unit. Notwithstanding the foregoing, however, if it is conclusively determined that Health and Safety Code 50053 requires that the appropriate household size for a three bedroom unit is four persons instead of four and one-half persons, the parties agree to make such changes to the number of Housing Units restricted to Very Low and Lower Income Households as are necessary to come into compliance with the Affordable Rent requirements without reducing the cumulative project-wide amount of rent payable by the tenants of the Housing Complex.

Selection of Tenants. Each Affordable Unit shall be leased to tenants selected by the Developer who meet all of the requirements provided herein. Developer shall prepare and obtain Housing Authority's approval, which approval shall not be unreasonably withheld, of a marketing program for the leasing of the Affordable Units at the Housing Complex (the “Marketing Program”). The leasing of the Affordable Units shall thereafter be marketed in accordance with the Marketing Program as the same may be amended from time to time with Housing Authority's prior written approval, which approval shall not unreasonably be withheld. Developer shall provide Housing Authority with periodic reports with respect to the leasing of the Affordable Units. The Housing Authority agrees to exercise reasonable efforts to assist Developer in connection with the implementation of the Marketing Program; provided, however, Housing Authority shall not be under any obligation to incur any out-of-pocket expenses in connection therewith.

Relationship to Tax Credit, Bond and Other Requirements. Notwithstanding any other provisions of this Agreement, to the extent that the regulatory agreement executed by the Developer as a requirement of receiving the Multifamily Bonds (the “Bond Regulatory Agreement”), the regulatory agreement executed by the Developer as a requirement of receiving the Tax Credits (the “Tax Credit Regulatory Agreement”), and/or the regulatory requirements imposed in connection with any other financing obtained by the Housing Authority or the Developer are less restrictive with respect to the requirements applicable to tenant selection, tenant income levels and unit rent levels than as provided in this Agreement and the Regulatory Agreement, this Agreement and the Regulatory Agreement shall control. In the event that the Housing Authority determines that it is required under applicable law to restrict fewer Affordable Units to Very Low and/or Lower Income Households, the parties shall make appropriate modifications to this Agreement and the Regulatory Agreement to come into compliance with applicable law.

Maintenance. The Developer shall maintain, or cause to be maintained by the tenants or other persons, the interior and exterior of the Housing Units and the Housing Complex in a decent, safe and sanitary manner, and in accordance with the standard of maintenance of first class dwelling units within San Bernardino County, California. None of the Housing Units in the Housing Complex shall at any time be utilized on a transient basis, nor shall the Housing Complex or any portion thereof ever be used as a hotel, motel, dormitory, fraternity or sorority house, rooming house, hospital, nursing home, sanitarium or rest home. If at any time Developer fails to maintain or cause to be maintained the Housing Complex in accordance with this Agreement and such condition is not corrected within five days after written notice from the Housing Authority with respect to graffiti, debris, and waste material, or thirty days after written notice from the Housing Authority with respect to general maintenance, landscaping and building improvements, then the Housing Authority, in addition to whatever remedy it may have at law or at equity, shall have the right to enter upon the applicable portion of the Housing Complex and perform all acts and work necessary to protect, maintain, and preserve the Housing Complex, and to attach a lien upon the Housing Complex, or to assess the Housing Complex, in the amount of the expenditures arising from such acts and work of protection, maintenance, and preservation by the Housing Authority and/or costs of such cure, including a reasonable administrative charge, which amount shall be promptly paid by Developer to the Housing Authority upon demand. The Developer shall not create separate parcels within the Housing Complex, or convey individual parcels within the Housing Complex, but shall maintain ownership of all of the Housing Units and all of the parcels within the Housing Complex as a single unit of real property.

Management Plan. The Developer has submitted to the Housing Authority a approved “Management Plan” which sets forth in detail the Developer’s property management duties, a tenant selection process in accordance with Section 603 hereof, a security system and crime prevention program, the procedures for the collection of rent, the procedures for eviction of tenants, the rules and regulations of the Housing Complex and manner of enforcement, a standard lease form, an operating budget, the identity of the manager of the Housing Complex (the “Property Manager”), and other matters relevant to the management of the Housing Complex. The Management Plan shall require the Developer to adhere to a fair lease and grievance procedure and provide a plan for tenant participation in management decisions. The management of the Housing Complex shall be in compliance with the Management Plan which has been approved by the Housing Authority.

If the Housing Authority determines that the performance of the Property Manager is deficient based upon the standards set forth in the Management Plan and in this Agreement, the Housing Authority shall provide notice to the Developer of such deficiencies, and the Developer shall use its best efforts to correct such deficiencies. In the event that such deficiencies have not been cured within the time set forth in Section 601 hereof, the Housing Authority shall have the right to require the Developer to immediately remove and replace the Property Manager with another property manager or property management company which is reasonably acceptable to the Housing Authority, which is not related to or affiliated with the Developer, and which has not less than five (5) years experience in property management, including significant experience managing housing facilities of the size, quality and scope of the Housing Complex. 610 Capital Reserve Requirements. The Developer shall also, or cause the Property Manager to, annually set aside an amount of [[Five Hundred Dollars ($456) per Housing Unit]], from the gross rents received from the Housing Complex, into a separate interest-bearing trust account (the “Capital Replacement Reserve”). Such amount shall be adjusted annually by three percent (3%). Funds in the Capital Replacement Reserve shall be used for capital replacements to the Housing Complex 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 the Developer of the obligation to undertake necessary capital repairs and improvements and to continue to maintain the Housing Complex in the manner prescribed herein. Not less than once per year, Developer, at its expense, shall submit to the Housing Authority an accounting for the Capital Replacement Reserve. Capital repairs to and replacement of the Housing Complex 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; gas line pipe replacement; lighting fixture replacement; elevator replacement and upgrade work; miscellaneous motors and blowers; common area furniture replacement; and common area repainting.

Operating Budget and Reserve. The Developer shall submit to Housing Authority on not less than an annual basis an operating budget for the Housing Complex (the “Operating Budget”), which budget shall be subject to the written approval of the Housing Authority Executive Director or designee, which approval shall not be unreasonably withheld. The Developer shall, or shall cause the Property Manager to, set aside in a separate interest-bearing trust account, commencing upon the rental of the Housing Units, not less than [[Two Hundred Forty Thousand Nine Hundred and Eighty-Five Dollars ($240,985)]], subject to adjustment on a pro rata basis if fewer than one hundred sixty Housing Units are conveyed to the Developer (the “Operating Reserve”), and shall make further annual deposits from the Annual Project Revenue, to the extent available, to replenish the Operating Reserve to the amount existing in such account prior to the withdrawal of funds. Such amount shall be retained in the Operating Reserve to cover shortfalls between Housing Complex income and actual operating expenses, and emergency expenses (such as uninsured casualties), but shall in no event be used to pay for capital items properly payable from the Capital Replacement Reserve. Developer shall, not less than once per every twelve (12) months, submit to the Housing Authority evidence reasonably satisfactory to the Housing Authority of compliance herewith. The Developer may, from time to time after completion of the Rehabilitation and stabilization of the Housing Unit rentals, propose modifications to the Operating Reserve requirement, and the Housing Authority shall reasonably consider such proposed modifications.

Social Services. At all times during the Affordability Period, Developer shall operate a community learning center and tot lot within the Housing Complex, and shall provide activities and programs that are determined by the parties to be appropriate to the needs of the resident population. The specific types of programs will be determined upon a survey of resident needs and will be approved by the Housing Authority. The types of social services to be provided may be revised with the prior approval of the Housing Authority, which approval shall not be unreasonably withheld.

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 race, color, religion, sex, marital status, familial status, disability, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Housing Complex, nor shall Developer itself or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the Housing Complex. The Developer shall refrain from restricting the rental, sale or lease of the Housing Complex on the basis of race, color, creed, religion, sex, marital status, familial status, disability, national origin or ancestry of any person. All such deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses:

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 race, color, creed, religion, sex, marital status, familial status, disability, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land herein conveyed, nor shall the grantee 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, subtenants, sublessees or vendees in the land herein conveyed. The foregoing covenants shall run with the land.” 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:
“There shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, familial status, disability, ancestry or national origin 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.” In contracts: “There shall be no discrimination against or segregation of, any person, or group of persons on account of race, color, creed, religion, sex, marital status, familial status, disability, ancestry or national origin, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the premises, nor shall the transferee 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, subtenants, sublessees or vendees of the premises.” The covenants established in this Section 613 shall, without regard to technical classification and designation, be binding for the benefit and in favor of the Housing Authority and its successors and assigns, and shall remain in effect in perpetuity.

Monitoring and Recordkeeping. Throughout the Affordability Period, Developer shall comply with all applicable recordkeeping and monitoring requirements set forth in Health and Safety Code Section 33418 and shall annually complete and submit to Housing Authority a Certification of Continuing Program Compliance in the form provided by or acceptable to the Housing Authority. Representatives of the Housing Authority shall be entitled to enter the Housing Complex, upon at least twenty-four (24) hours notice, to monitor compliance with this Agreement, to inspect the records of the Housing Complex, and to conduct an independent audit or inspection of such records. The Developer agrees to cooperate with the Housing Authority in making the Housing Complex available for such inspection or audit. Developer agrees to maintain records in businesslike manner, and to maintain such records for the term of this Agreement.

Regulatory Agreement. The requirements of this Agreement which are applicable after the disbursement of the Housing Authority Loan are set forth in the “Regulatory Agreement” which is attached hereto as Attachment No. 2 and incorporated herein.

DEFAULT AND REMEDIES
Events of Default. An “Event of Default” shall occur under this Agreement when there shall be a material breach of any condition, covenant, warranty, promise or representation contained in this Agreement and such breach shall continue for a period of thirty (30) days after written notice thereof to the defaulting party without the defaulting party curing such breach, or if such breach cannot reasonably be cured within such thirty (30) day period, commencing the cure of such breach within such thirty (30) day period and thereafter diligently proceeding to cure such breach as soon as reasonably possible, but in no event later than ninety (90) days from the date of the original written notice. 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.

In the event of a non-monetary event of default, prior to exercising any remedies hereunder, Housing Authority shall give Developer and its limited partner simultaneous written notice of such default. If the default is reasonably capable of being cured within thirty (30) days, the Developer and its limited partner shall have such period to effect a cure prior to exercise of remedies by the Housing Authority hereunder. If the default is such that it is not reasonably capable of being cured within thirty (30) days, and if the Developer and/or its limited partner (a) initiates corrective action within said period, and (b) diligently, continually, and in good faith works to effect a cure as soon as possible, then the Developer and/or its limited partner shall have such additional time as is reasonably necessary, not to exceed ninety (90) days, to cure the default prior to exercise of any remedies by the Housing Authority. Housing Authority hereby agrees that any cure of any default made or tendered by one or more of the Developer’s limited partners shall be deemed to be a cure by the Developer and shall be accepted or rejected on the same basis as if made or tendered by the Developer.

Remedies. The occurrence of any Event of Default shall give the nondefaulting party the right to proceed with any and all remedies set forth in this Agreement and/or the documents executed pursuant to 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 this Agreement and/or the documents executed pursuant to this Agreement or to enjoin acts or things which may be unlawful or in violation of the provisions of this Agreement and/or the documents executed pursuant to this Agreement, and the right to terminate this Agreement. In addition, the occurrence of any Event of Default by Developer will relieve the Housing Authority of any obligation to perform hereunder, including without limitation to make or continue the Housing Authority Loan, and the right to cause all indebtedness of the Developer to the Housing Authority under this Agreement and the Housing Authority Loan Promissory Note, together with any accrued interest thereon, to become immediately due and payable.

Force Majeure. Subject to the party's compliance with the notice requirements as set forth below, performance by either party hereunder shall not be deemed to be in default, and all performance and other dates specified in this Agreement shall be extended, where delays or defaults are due to causes beyond the control and without the fault of the party claiming an extension of time to perform, which may include, without limitation, the following: war, acts of terrorism, 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 the Housing Authority's acts or failure to act shall not excuse performance of the Housing Authority hereunder). 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.

Attorneys' Fees. In addition to any other remedies provided hereunder or available pursuant to law, if either party brings an action or proceeding to enforce, protect or establish any right or remedy hereunder or under any of the documents executed pursuant to this Agreement, 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.

Remedies Cumulative. No right, power, or remedy given to the Housing 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 the Housing Authority by the terms of any such instrument, or by any statute or otherwise against Developer and any other person.

Waiver of Terms and Conditions. The Housing 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.

GENERAL PROVISIONS
Time. Time is of the essence in this Agreement.

Notices. Any approval, disapproval, demand, document or other notice (“Notice”) which either party may desire to give to the other 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, or (iii) 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:

Developer: Inland Valley Housing Partners, L.P.
9065 Haven Street
Rancho Cucamonga, California 91730
Attention : Executive Director
Housing Authority: Rialto Housing Authority
150 S. Palm Avenue
Rialto, CA 92376
Attention: Executive Director
Such addresses may be changed by notice to the other party given in the same manner as provided above.

Following admission of an investor limited partner to Developer, copies of all notices which are sent to the Developer hereunder shall also be sent to such limited partner at the address provided for below. The Developer’s limited partners may change their address for receipt of copies of notices by giving notice in writing stating its new address to the Housing Authority.

RSEP Holding, LLC
c/o Red Stone Equity Partners, LLC
Park Avenue, 28th Floor
New York, NY 10016
Attn: General Counsel
with a copy to:

Nixon Peabody LLP
Exchange Place
53 State Street
Boston, MA 02109
Attention: Roger W. Holmes
Representations and Warranties of Developer. Developer hereby represents and warrants to the Housing Authority as follows:

Organization. Developer is a nonprofit public benefit corporation validly existing and in good standing under the laws of the State of California and has the power and authority to own its property and carry on its business as now being conducted.

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 Housing Authority Loan Promissory Note, Housing Authority Loan Deed of Trust, 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.

Valid Binding Agreements. This Agreement, Housing Authority Loan Promissory Note, Housing Authority Loan Deed of Trust and the Regulatory Agreement 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.

Pending Proceedings. Developer is not in default under any law or regulation or under any order of any court, board, commission or agency whatsoever, and there are no claims, actions, suits or proceedings pending or, to the knowledge of Developer, threatened against or affecting Developer or the Housing Complex, at law or in equity, before or by any court, board, commission or agency whatsoever which might, if determined adversely to Developer, materially affect Developer's ability to perform its obligations hereunder.

Housing Authority Representations. The Housing Authority represents and warrants to the Developer as follows:

Authority. The Housing Authority is a public body, corporate and politic, which has been authorized to transact business pursuant to action of the City. The Housing Authority has full right, power and lawful authority to acquire and convey the Housing Units as provided herein, and the execution, performance and delivery of this Agreement by the Housing Authority has been fully authorized by all requisite actions on the part of the Housing Authority.

FIRPTA. The Housing Authority is not a “foreign person” within the· parameters of FIRPTA or any similar state statute, or is exempt from the provisions of FIRPTA or any similar state statute, or the Housing Authority has complied and will comply with all the requirements under FIRPTA or any similar state statute.

No Conflict. The Housing Authority's execution, delivery and performance of its obligations set forth in this Agreement will not constitute a default or a breach under any contract, agreement or order to which the Housing Authority is a party or by which it is bound.

No Litigation. To the Housing Authority’s actual knowledge, there is no threatened or pending litigation against the Housing Authority challenging the validity of this Agreement or any of the actions proposed to be undertaken by the Housing Authority or Developer pursuant to this Agreement. “Actual knowledge,” as used herein, shall not impose a duty of investigation, and shall be limited to the actual knowledge of the Housing Authority’s employees and agents who have participated in the preparation of this Agreement.

Limitation Upon Change in Ownership, Management and Control of the Developer Prohibition. The identity and qualifications of Developer as an experienced and successful redeveloper and operator of rental housing complexes are of particular concern to the Housing Authority. It is because of this identity and these qualifications that the Housing Authority has entered into this Agreement with the Developer. No voluntary or involuntary successor in interest of the Developer shall acquire any rights or powers under this Agreement by assignment or otherwise, nor shall Developer make any total or partial sale, transfer, conveyance, encumbrance to secure financing, assignment or lease of the whole or any part of the Housing Complex without the prior written approval of the Housing Authority pursuant to Subparagraph (c) hereof, except as expressly set forth herein, which approval shall not be unreasonably withheld.

Permitted Transfers. Notwithstanding any other provision of this Agreement to the contrary, Housing Authority approval of an assignment or transfer of this Agreement, the Housing Authority Loan, the Regulatory Agreement, or conveyance of the Housing Complex or any part thereof pursuant to subparagraph (c) of this Section 805, shall not be required in connection with any of the following (the “Permitted Transfers”):

Subject to the restrictions of Sections 601 through 615 of this Agreement and the Regulatory Agreement, the lease of Housing Units to qualified tenants.

Assignment for financing purposes, subject to such financing being considered and approved by the Housing Authority pursuant to Section 501 hereof.

Transfer of this Agreement and/or the Housing Complex to an entity in which Developer owns not less than fifty percent (50%) of the beneficial interest in the Housing Complex, and is under the management and control of the Developer, and the transferee entity executes an agreement reasonably acceptable to the Housing Authority assuming all of the obligations under this Agreement.

Transfer of this Agreement and the Housing Complex to a limited partnership in which The Southern California Housing Development Corporation (or an entity affiliated with and under common control with The Southern California Housing Development Corporation) is a general partner and owns at least a 0.005% interest in the limited partnership, with tax credit investors owning the remainder of the limited partnership.

In the event of actions pursuant to subparagraph (iii) or (iv) not requiring the Housing Authority’s prior approval, Developer nevertheless agrees that at least thirty (30) days prior to such action it shall give written notice to Housing Authority of such action.

Notwithstanding anything to the contrary herein, none of the following shall constitute a violation hereunder:

The withdrawal, removal, replacement, and/or addition of a general partner of the Developer pursuant to the terms of Developer’s partnership agreement, provided that any new general partner is a qualified, experienced affordable housing provider and: (i) is an entity that is exempt from federal taxation pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986, as amended from time to time (or any successor statute), or (ii) is an affiliate of the limited partner. Such transfers of interests shall be subject to the Housing Authority’s consent not to be unreasonably withheld, conditioned or delayed; and The transfer of any of the limited partners’ interests in the Developer or transfers of interests in the limited partner. Transfers of the limited partner interests to a third party shall be subject to the Housing Authority’s consent not to be unreasonably withheld, conditioned or delayed; and The execution and delivery of a purchase option and right of first refusal agreement in favor of the general partner of Developer or an affiliate or its assignee thereof shall not constitute a default under the Loan Documents or accelerate the maturity of the Loan thereunder and the exercise of said purchase option and right of first refusal agreement by the general partner, an affiliate thereof or its assignee, as applicable, identified therein.

Housing Authority Consideration of Requested Transfer. The Housing Authority agrees that it will not unreasonably withhold approval of a request made pursuant to this Section 805, provided (a) the Developer delivers written notice to the Housing Authority requesting such approval, and (b) the proposed assignee or transferee possesses comparable operational experience and capability, and comparable net worth and resources, as the proposed transferor or assignor, and (c) the assignee or transferee assumes the obligations of the Developer under this Agreement in a form which is reasonably acceptable to the Housing Authority. 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 the Housing Authority to evaluate the proposed assignee or purchaser pursuant to the criteria set forth in this Section 805(c) and other criteria as reasonably determined by the Housing Authority. The Housing Authority shall approve or disapprove the request within thirty (30) days of its receipt of the Developer’s notice and all information and materials required herein. In no event, however, shall the Housing Authority be obligated to approve the assignment or transfer of the Housing Authority Loan, Housing Authority Loan Promissory Note or Deed of Trust pursuant to this Section 805, except to an approved transferee or assignee of the Developer’s rights in and to the Housing Complex.

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 the Developer and the permitted successors and assigns of the Developer. Whenever the term “Developer” is used in this Agreement, such term shall include any other permitted successors and assigns as herein provided. 806. Developer Precautions After Closing. Upon the Closing, the Developer shall take all necessary but reasonable precautions to prevent the release into the environment of any Hazardous Materials which are located in, on or under the Housing Units which have been conveyed to the Developer, except as may be provided otherwise by applicable Governmental Requirements. Such precautions shall include compliance with all Governmental Requirements with respect to Hazardous Materials. In addition, the Developer shall install and utilize such equipment and implement and adhere to such procedures as are consistent with commercially reasonable standards as respects the disclosure, storage, use, removal and disposal of Hazardous Materials. 807. Developer Indemnity. Upon the Closing, the Developer agrees to indemnify, defend and hold the Housing Authority harmless from and against any claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage, or expense (including, without limitation, reasonable attorneys' fees), resulting from, arising out of, or based upon (i) the presence, release, use, generation, discharge, storage or disposal of any Hazardous Materials on, under, in or about, or the transportation of any such Hazardous Materials to or from the conveyed Housing Units which occurs during the period of the Developer's ownership thereof, or (ii) the violation, or alleged violation, of any statute, ordinance, order, rule, regulation, permit, judgment or license relating to the use, generation, release, discharge, storage, disposal or transportation of Hazardous Materials on, under, in or about, to or from, the Housing Units which occurs during the period of the Developer’s ownership of the Housing Units. This indemnity shall include, without limitation, any damage, liability, fine, penalty, or expense arising from or out of any claim, action, suit or proceeding for personal injury (including sickness, disease or death), tangible or intangible property damage, compensation for lost wages, business income, profits or other economic loss, damage to the natural resource or the environment, nuisance, contamination, leak, spill, release or other adverse effect on the environment. At the request of the Developer, the Housing Authority shall cooperate with and assist the Developer in its defense of any such claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage, or expense; provided that the Housing Authority shall not be obligated to incur any expense in connection with such cooperation or assistance.

Non-Liability of Officials and Employees of Housing Authority. No member, official or employee of the Housing Authority or the City shall be personally liable to Developer or any successor in interest, in the event of any Default or breach by Housing Authority or for any amount which may become due to Developer or its successors, or on any obligations under the terms of this Agreement.

Relationship Between Housing Authority and Developer. It is hereby acknowledged that the relationship between Housing Authority and Developer is not that of a partnership or joint venture and that Housing Authority and Developer shall not be deemed or construed for any purpose to be the agent of the other. Accordingly, except as expressly provided herein or in the Attachments hereto, Housing Authority shall have no rights, powers, duties or obligations with respect to the Rehabilitation, operation, maintenance or management of the Housing Complex.

Housing Authority Approvals and Actions. The Housing Authority shall maintain authority of this Agreement and the authority to implement this Agreement through the Housing Authority’s Executive Director (or his or her duly authorized representative). The Executive Director shall have the authority to make approvals, issue interpretations, waive provisions, make and execute further agreements and/or enter into amendments of this Agreement on behalf of the Housing Authority so long as such actions do not materially or substantially change the uses or Rehabilitation permitted of the Housing Units, or materially or substantially add to the costs incurred or to be incurred by the Housing Authority 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 other material and/or substantive interpretations, waivers, or amendments shall require the consideration, action and written consent of the Housing Authority Board.

Counterparts. This Agreement may be signed in multiple counterparts which, when signed by all parties, shall constitute a binding agreement. This Agreement is executed in three (3) originals, each of which is deemed to be an original.

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 Attachment Nos. 1 through 10, which together with the Agreement constitute the entire understanding and agreement of the parties, notwithstanding any previous negotiations or agreements between the parties or their predecessors in interest with respect to all or any part of the subject matter hereof.

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. Reference to section numbers are to sections in this Agreement, unless expressly stated otherwise.

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.

No Waiver. A waiver by either 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.

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 on behalf of each party.

Severability. If any term, provision, condition or covenant of this Agreement or its application to any party or circumstances 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.

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.

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.

Time of Essence. Time is expressly made of the essence with respect to the performance by Housing Authority and Developer of each and every obligation and condition of this Agreement.

Cooperation. Each party agrees to cooperate with the other in this transaction and, in that regard, to sign any and all documents which may be reasonably necessary, helpful or appropriate to carry out the purposes and intent of this Agreement including, but not limited to, releases or additional agreements.

Conflicts of Interest. No member, official or employee of Housing Authority shall have any personal interest, direct or indirect, in this Agreement, nor shall any such member, official or employee participate in any decision relating to the Agreement which affects his personal interests or the interests of any corporation, partnership or association in which he is directly or indirectly interested.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year set forth above.

DEVELOPER:

Inland Valley Housing Partners, L.P.,
a California limited partnership
By: Southern California Housing Development Corporation of the Inland Empire, a California nonprofit public benefit
corporation, its general partner
By:______________________________
Its:_______________________________
HOUSING AUTHORITY:

Rialto Housing Authority
______________________________________
By: Joe Baca Its: Authority Chair
ATTEST:

By:________________________________
Barbara A. McGee
Its: Authority Secretary
APPROVED AS TO FORM:

By:________________________________
Eric S. Vail
Its: Authority Counsel
ATTACHMENT NO. 1

LEGAL DESCRIPTION OF THE PROPERTY
ATTACHMENT NO. 2

REGULATORY AGREEMENT
ATTACHMENT NO. 3

HOUSING AUTHORITY PROMISSORY NOTE
ATTACHMENT NO. 4

DEED OF TRUST
ATTACHMENT NO. 5

FINANCING PLAN
ATTACHMENT NO. 6

RESIDUAL RECEIPTS REPORT
ATTACHMENT NO. 7

SCOPE OF DEVELOPMENT
ATTACHMENT NO. 8

SCHEDULE OF PERFORMANCE
ATTACHMENT NO. 9

CERTIFICATE OF COMPLETION
ATTACHMENT NO. 10

PREVAILING WAGE
296668457.4 Attachment No. 5-1
296668457.4 Attachment No. 6-1
296668457.4 Attachment No. 7-1
296668457.4 Attachment No. 8-1
296668457.4 Attachment No. 9-1
296668457.4
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296668457.4 S-1
296668457.4 Attachment No. 1-1
296668457.4 Attachment No. 2-1
296668457.4 Attachment No. 3-1
296668457.4 Attachment No. 4-1