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(e) The City Equity Share includes an amount equal to the "initial subsidy" and "proportionate share of appreciation," in accordance with California Government Code section 65915(c)(2), and shall be determined as follows: (i) An amount equal to the difference between the fair market value of the Affordable Unit at the time of the initial purchase and the Affordable Sales Price (the"Initial Subsidy"), plus (ii) An amount equal to the product of(1) the appreciation of the Affordable Unit, as measured by the increase in the fair market value of the Affordable Unit at the time of the sale to the Homebuyer and the resale of the Affordable Unit, and (2) the percentage that the Initial Subsidy represented of the fair market value of the Affordable Unit when it was purchased by the Homebuyer (the"Proportionate Share of Appreciation"). (0 Payment of the City Equity Share is subject to the following: (1) payment to satisfy a First Lien from a primary lender, as approved by City at the time of the initial sale, or subsequent approval in the event of a refinance event, and (2) an amount equal to the down payment and the cost of improvements paid by the Homebuyer. Following payment of the City Equity Share, the Homebuyer shall receive the remainder of any closing proceeds, less any costs of closing, including any and all real estate broker commissions. (g) When the City Equity Share becomes due, the proceeds from the sale of the Property shall first satisfy a First Lien, and the Homebuyer shall receive proceeds for the value of any improvements and any down payment actually paid. The City Equity Share shall be paid prior to disbursement of remaining sales proceeds to the Homebuyer. 3.5.4 In order to assist City with calculation of the City Equity Share, Developer or a Homebuyer, as applicable, shall provide City with a calculation of the fair market value of each Affordable Unit at the initial sale which shall be determined as follows: (a) For the initial sale,Developer shall propose to the City a fair market value based on a price per square foot that is based on comparable sales of other units within the Project. (b) Except for the initial sales subject to sub-paragraph (a), prior to the sale of an Affordable Unit, a qualified appraiser shall conduct an appraisal of the Affordable Unit to determine fair market value without the restrictions of this Agreement. If a seller or prospective Homebuyer disputes the appraised value,then that party may pay for the costs of a second appraisal and, if there is still disagreement, the average of the two appraisals shall be used to determine the fair market value. (c) The fair market value of the Affordable Unit, as determined in accordance with the above, shall be provided to the City for approval or disapproval, which City shall provide within thirty (30) days of receipt of the proposed fair market value. If City does not provide a written response within such time period, then the proposed fair market value shall be deemed approved by the City. Page 13 5 5394.0010 1\43721567.1