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Home My WebLink About FULL AGENDA_2018-12-18 NOTE : If you need special assistance to participate in this Council meeting, please contact Michael Ortiz, City ADA Program Coordinator, at (714) 647-5624. Please call prior to the meeting date, to allow the City enough time to make reasonable arrangements for accessibility to this meeting. [Americans with Disabilities Act, Title II, 28 CFR 35.102] HOUSING AUTHORITY SPECIAL MEETING AGENDA DECEMBER 18, 2018 CITY COUNCIL CHAMBER 22 Civic Center Plaza Santa Ana, California 5:45 p.m. (Immediately following the City Council Closed Session Meeting) TOBER 2, 2006 Miguel A. Pulido Chairperson Vicente Sarmiento Authority Member - Ward 1 VSarmiento@santa-ana.org David Penaloza Authority Member - Ward 2 DPenaloza@santa-ana.org Jose Solorio Authority Member - Ward 3 JSolorio@santa-ana.org Roman Reyna Authority Member - Ward 4 RReyna@santa-ana.org Juan Villegas Vice-Chairperson - Ward 5 JVillegas@santa-ana.org Cecilia Iglesias Authority Member – Ward 6 CIglesias@santa-ana.org Authority Member telephone: 714-647-6900 Agenda item inquiries: 714-647-6520 Sonia R. Carvalho Steven A. Mendoza Maria D. Huizar Authority General Counsel Executive Director Recording Secretary HOUSING AUTHORITY AGENDA 2 DECEMBER 18, 2018 Basic Housing Authority Meeting Information Five-Year Strategic Plan (2014-2019) Detailed information at: http://www.santa-ana.org/strategic-planning/ Vision, Mission and Guiding Principles - The City of Santa Ana is committed to achieving a shared vision for the organization and its community. The vision, mission and guiding principles (values) are the result of a thoughtful and inclusive process designed to set the City and organization on a course that meets the challenges of today and tomorrow. Vision - The dynamic center of Orange County which is acclaimed for our: •Investment in youth •Safe and healthy community •Neighborhood pride •Thriving economic climate •Enriched and diverse culture •Quality government services Mission - To deliver efficient public services in partnership with our community which ensures public safety, a prosperous economic environment, opportunities for our youth, and a high quality of life for residents.” Guiding Principles •Collaboration •Efficiency •Equity •Excellence •Fiscal Responsibility •Innovation •Transparency Strategic Plan Goals/Objectives/Strategies: Goal 1 - Community Safety Goal 2 - Youth, Education, Recreation Goal 3 - Economic Development Goal 4 - City Financial Stability Goal 5 - Community Health, Livability, Engagement & Sustainability Goal 6 - Community Facilities & Infrastructure Goal 7 - Team Santa Ana ********* Code of Ethics and Conduct - The people of the City of Santa Ana, at an election held on February 5, 2008, approved an amendment to the City Charter which established the Code of Ethics and Conduct for elected officials and members of appointed boards, commissions, and committees to assure public confidence. A copy of the City’s Code can be found on the Clerk of the Council’s webpage. The following are the core values expressed: Integrity · Honesty · Responsibility · Fairness · Accountability · Respect · Efficiency Agenda Information - The agenda descriptions provide the public with a general summary of the items of business to be considered by the Authority. The Authority is not limited in any way by the “Recommended Action” and may take any action which the Authority deems to be appropriate on an agenda item. Except as otherwise provided by law, no action shall be taken on any item not listed on the agenda. Public Comments/Public Input - Pursuant to Government Code Sec. 54954.3, the public may address the Housing Authority and any other legislative body scheduled to meet on same day and time on any and all matters within the City of Santa Ana's jurisdiction. At the discretion of the Chair, at the first Public Comment portion of the meeting, all comments may be considered jointly. The public will be given the opportunity to speak on any and all matters contained on any of the Consent Calendar and Business Calendar items and/or on issues of public interest within the jurisdiction of the City. For public hearings, members of the public shall be given three (3) minutes for each duly noticed hearing (unless the matter is continued prior to taking public testimony). All requests to speak shall be submitted in writing to the Clerk of the Council at the beginning of the meeting and before Public Comments begin. Speaker forms will be available at the meeting. REQUESTS TO SPEAK SHALL NOT BE ACCEPTED AFTER THE PUBLIC COMMENT SESSION BEGINS WITHOUT PERMISSION OF THE CHAIR. When speaking, all persons addressing the Legislative Body shall follow the rules of decorum as detailed on the back of the speaker form. The presiding officer shall have the power and responsibility to enforce decorum and order of the meeting as set forth in Section 2-104(c) of the Santa Ana Municipal Code. Consent Calendar - All matters listed under the Consent Calendar are considered to be routine by the Housing Authority and will be enacted by one motion without discussion unless a member of the Authority “pulls” an item(s) from the consent calendar for a separate vote. Senate Bill 343 - As required by Senate Bill 343, any non-confidential writings or documents provided to a majority of the Housing Authority members regarding any item on this agenda will be made available for public inspection in the Clerk of the Council Office during normal business hours. Agenda & Minutes - Staff reports and documents relating to each agenda item are on file in the Office of the Clerk of the Council and are available for public inspection during regular business hours, 8:00 a.m. – 5:00 p.m., Monday through Thursday and alternate Fridays. The Clerk’s office is located in City Hall, 20 Civic Center Plaza, Room 809, Santa Ana, California, (714) 647-6520. Authority meeting agendas, staff reports, and Minutes are available the Friday before an Authority meeting at the following website address: www.santa- ana.org Televised Meeting Schedule - All regular meetings will be televised and available for viewing on the City’s cable channel. Meetings held in the Council Chamber or other designated locations which are televised live on CTV3 Time Warner Cable will be cablecast Mondays at 6:00 p.m., Tuesdays immediately following the meeting at 9:00 a.m., Wednesdays at 6:00 p.m., and Sundays at 1:00 p.m. Meetings held in locations that do not have a live cable feed will be videotaped and shown on CTV3 the day after the meeting. DVD copies of the meetings for loan will be available for public circulation at the Santa Ana Main Library the day after a meeting. HOUSING AUTHORITY AGENDA 3 DECEMBER 18, 2018 CITY OF SANTA NA HOUSING AUTHORITY SPECIAL MEETING DECEMBER 18, 2018 CALL TO ORDER CHAIRPERSON PULIDO HOUSING AUTHORITY BOARD MEMBERS IGLESIAS, PENALOZA, REYNA, SARMIENTO SOLORIO, VILLEGAS Executive Director, Authority General Counsel, Recording Secretary PUBLIC COMMENT ON AGENDA ITEMS AND ITEMS OF PUBLIC INTEREST (Refer to page 2 “Public Input” for description.) CONSENT CALENDAR R ECOM M E N DED ACTION : Approve staff recommendation on Consent Calendar Items: 1 through 2. 1. REGULAR MEETING MINUTES OF DECEMBER 4, 2018 {STRATEGIC PLAN NO. 5, 1} RECOMMENDED ACTION : Approve Minutes. 2. EXCUSED ABSENCES RECOMMENDED ACTION : Excuse absent Housing Authority Member(s). *** END OF CONSENT CALENDAR *** BUSINESS CALENDAR JOINT SESSION OF THE CITY COUNCIL AND THE HOUSING AUTHORITY AGENCY 3. RECEIVE AND FILE HOUSING SUCCESSOR ANNUAL REPORT FOR FY 2017-18 – LOW AND MODERATE INCOME HOUSING ASSET FUND {STRATEGIC PLAN NO. 5, 1} RECOMMENDED ACTION : Receive and file. HOUSING AUTHORITY AGENDA 4 DECEMBER 18, 2018 4. APPROVE AMENDED AND RESTATED BOND REGULATORY AGREEMENT FOR CITY GARDENS APARTMENTS {STRATEGIC PLAN NO. 4, 1} RECOMMENDED ACTION : Authorize the Housing Authority Executive Director and Housing Authority Recording Secretary to execute an Amended and Restated Bond Regulatory Agreement with LINC-Bristol Associates I for City Gardens Apartments at 2901-2955 North Bristol Street, Santa Ana, CA 92706, subject to non-substantive changes approved by the Executive Director and Authority General Counsel *** END OF BUSINESS CALENDAR *** COMMENTS 5. HOUSING AUTHORITY MEMBER COMMENTS AT THIS TIME Housing Authority members may comment on non-agenda matters and ask questions of or give directions to staff. NO action may be taken on non-agenda items unless authorized by law. ADJOURNMENT HOUSING AUTHORITY MINUTES 1 DECEMBER 4, 2018 MINUTES OF THE REGULAR MEETING OF THE HOUSING AUTHORITY AGENCY SANTA ANA, CALIFORNI A DECEMBER 4, 2018 CALLED TO ORDER COUNCIL CHAMBER 22 CIVIC CENTER PLAZA SANTA ANA, CA 10:03 P.M. ATTENDANCE AUTHORITY MEMBERS Present: MIGUEL PULIDO MICHELE MARTINEZ, Chair Pro Tem P. DAVID BENAVIDES JOSE SOLORIO SAL TINAJERO JUAN VILLEGAS AUTHORITY MEMBERS Absent: VICENTE SARMIENTO STAFF Present: RAUL GODINEZ, II, City Manager SONIA R. CARVALHO, City Attorney MARIA D. HUIZAR, Authority Secretary PUBLIC COMMENT - None CONSENT CALENDAR ITEMS MOTION: Approve staff recommendation on Consent Calendar Items: 1 and 2. MOTION: Benavides SECOND: Tinajero VOTE: AYES: Benavides, Martinez, Pulido, Solorio, Tinajero, Villegas (6) NOES: None (0) ABSTAIN: None (0) ABSENT: Sarmiento (1) 1-1 HOUSING AUTHORITY MINUTES 2 DECEMBER 4, 2018 1. SPECIAL MEETING MINUTES OF NOVEMBER 20, 2018 {STRATEGIC PLAN NO. 5, 1} MOTION: Approve Minutes. 2. EXCUSED ABSENCES MOTION: Excuse Housing Authority Member Sarmiento from said meeting. *** END OF CONSENT CALENDAR *** COMMENTS 3. HOUSING AUTHORITY MEMBER COMMENTS – None. ADJOURNMENT – 10:04 P.M. Maria Huizar, Recording Secretary 1-2 HOUSING AUTHORITY ITEM #3 ITEM IS A JOINT CITY COUNCIL / HOUSING AUTHORITY ITEM PLEASE REFER TO AGENDA ITEM 80A IN THE CITY COUNCIL PACKET FOR STAFF REPORT This page intentionally left blank 4-1 4-2 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: Orrick, Herrington & Sutcliffe LLP 405 Howard Street San Francisco, CA 94105 Attention: Justin Cooper, Esq. 4143-1754-2168.3 AMENDED AND RESTATED REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS By and Between HOUSING AUTHORITY OF THE CITY OF SANTA ANA, as Issuer and LINC—BRISTOL ASSOCIATES I, A CALIFORNIA LIMITED PARTNERSHIP, as Borrower Dated as of December 1, 2018 Relating to: Housing Authority of the City of Santa Ana Multifamily Housing Revenue Refunding Bonds (City Gardens Apartments) 2006 Series B This Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants amends and restates in its entirety that certain Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants dated as of November 1, 2006, among the Issuer, the Borrower and the Trustee (as defined herein), and recorded November 27, 2006 in the Official records of the County of Orange as Document Number 2006000791116. EXHIBIT 1 4-3 TABLE OF CONTENTS -i- 4143-1754-2168.3 Section 1. Definitions and Interpretation .............................................................................................. 2 Section 2. Representations, Covenants and Warranties of the Borrower ........................................... 6 Section 3. Residential Rental Property ................................................................................................ 6 Section 4. Low Income Tenants ........................................................................................................... 8 Section 5. Tax Status of the Bonds .................................................................................................... 11 Section 6. Modification of Special Tax Covenants ............................................................................. 12 Section 7. Indemnification .................................................................................................................. 12 Section 8. Consideration .................................................................................................................... 14 Section 9. Reliance ............................................................................................................................ 14 Section 10. Sale or Transfer of the Project .......................................................................................... 14 Section 11. Term .................................................................................................................................. 15 Section 12. Covenants to Run With the Land ...................................................................................... 16 Section 13. Burden and Benefit ........................................................................................................... 16 Section 14. Uniformity; Common Plan ................................................................................................. 16 Section 15. Enforcement ...................................................................................................................... 16 Section 16. Recording and Filing ......................................................................................................... 17 Section 17. Payment of Fees ............................................................................................................... 17 Section 18. Governing Law .................................................................................................................. 18 Section 19. Amendments. .................................................................................................................... 18 Section 20. Notice ................................................................................................................................ 19 Section 21. Severability ........................................................................................................................ 19 Section 22. Multiple Counterparts ........................................................................................................ 19 Section 23. No Trustee ........................................................................................................................ 19 Section 24. Compliance by Borrower ................................................................................................... 20 Section 25. Limited Liability .................................................................................................................. 20 Section 26. No Interference or Impairment of Loan ............................................................................. 20 Section 27. Character of Borrower’s Obligations ................................................................................. 20 Section 28. Regulatory Agreement As Replacement........................................................................... 21 Section 29. HUD Rider ......................................................................................................................... 21 HUD RIDER EXHIBIT A LEGAL DESCRIPTION OF THE SITE EXHIBIT B INCOME COMPUTATION AND CERTIFICATION EXHIBIT C CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE EXHIBIT 1 4-4 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: Orrick, Herrington & Sutcliffe LLP 405 Howard Street San Francisco, California 94105 Attention: Justin Cooper 4143-1754-2168.3 AMENDED AND RESTATED REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS THIS AMENDED AND RESTATED REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (as supplemented and amended from time to time, this “Regulatory Agreement”), dated as of December 1, 2018, by and between the Hous ing Authority of the City of Santa Ana, California, a public body, corporate and politic, duly organized and existing under the laws of the State of California (together with any successor to its rights, duties and obligations, the “Issuer”), and LINC — Bristol Associates I, a California Limited Partnership (together with any successor to its rights, duties and obligations hereunder and as owner of the Project identified herein, the “Borrower”), owner of the land described in Exhibit A attached hereto, and am ends and restates that certain Regulatory Agreement and Declaration of Restrictive Covenants, dated as of November 1, 2006 , recorded November 27, 2006 as Instrument No.: 2006000791116 in Official Records, Orange County, California (the “Original Regulatory Agreement”), by and among the Issuer, U.S. Bank National Association, as trustee (the “Trustee”) and as successor in interest to First Trust of California, and the Borrower. W I T N E S S E T H : WHEREAS, the Legislature of the State of California enacted Chapter 1 of Part 2 of Division 24 (commencing with Section 34200) of the Health and Safety Code (the “Act”) to authorize housing authorities to issue revenue bonds to finance the acquisition, construction, rehabilitation or development of multifamily rental housing for families and individuals of very low income; and WHEREAS, in furtherance of the purposes of the Act and as a part of the Issuer’s plan of financing residential housing, the Issuer previously issued $8,140,000 aggregate principal amount of i ts revenue bonds designated “Housing Authority of the City of Santa Ana Multifamily Housing Revenue Refunding Bonds (City Gardens Apartments) 2006 Series B” (the “Bonds”), the proceeds of which were used to provide finance and refinance the acquisition and rehabilitation of a multifamily residential rental housing project located in the area of operation of the Issuer on the site described in Exhibit A hereto and known as City Garden Apartments (the “Project”); and WHEREAS, the proceeds of the Bonds were used to fund a loan (the “Loan”) to the Borrower pursuant to a Financing Agreement, dated as of November 1, 2006, among the Issuer, the Trustee and the Borrower (as supplemented and amended from time to time, the “Financing Agreement”); and WHEREAS, in connection with the issuance of the Bonds, the Issuer, the Borrower and the Trustee entered into the Original Regulatory Agreement, which Original Regulatory Agreement is amended, restated and superseded by this Regulatory Agreement; and WHEREAS, on or before December 31, 2012, the Loan was refinanced with proceeds of a loan made by the Federal National Mortgage Association (“Fannie Mae”) directly to the Borrower (the “Fannie Mae Loan”); the Bonds were retired in full; the Trust Indenture, dated as of November 1 , 2006 (the “Indenture”), pursuant to which the Bonds had been issued was discharged; and the trust was terminated pursuant to the Indenture; EXHIBIT 1 4-5 2 WHEREAS, upon retirement of the Bonds and discharge of the Indenture as described above, the Trustee ceased to act in the capacity of trustee and, in accordance with the terms of the Indenture and the Original Regulatory Agreement, the Trustee shall no longer have any duties or responsibilities under this Regulatory Agreement and all references to the Trustee in this Regulatory Agreement shall be deemed references to the Issuer, with the result that the Trustee’s written consent is not required in connection with the amendment of the Original Regulatory Agreement by this Regulatory Agreement and that this Regulatory Agreement shall become effective upon execution by the Borrower and the Issuer, and shall thereafter be duly recorded in the real property records of the County (as hereinafter defined); and WHEREAS, the Borrower has arranged for a loan to be made by Red Mortgage Capital, LLC, a Delaware limited liability company, and to be insured by the United States Department of Housing and Urban Development, to the Borrower (the “Red Capital Loan”) to refinance the Project, including by retiring the Fannie Mae Loan; and WHEREAS it is a condition to funding of the Red Capital Loan that the Issuer and the Borrower enter into this Regulatory Agreement, including the HUD Rider attached hereto and made a part hereof; and WHEREAS, to satisfy the public purposes for which the Bonds were issued, and to satisfy the purposes of the Issuer in determining to issue the Bonds, certain limits on the occupancy of units in the Project need to be established and certain other requirements need to be met; NOW, THEREFORE, in consideration of the issuance of the Bonds by the Issuer and the mutual covenants and undertakings set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Issuer, the Trustee and the Borrower hereby agr ee as follows: Section 1. Definitions and Interpretation. Capitalized terms used herein shall have the respective meanings assigned to them in this Section 1 unless the context in which they are used clearly requires otherwise: “Act” means Chapter 1 of Part 2 of Division 24 of the Health and Safety Code of the State of California as now in effect and as it may from time to time hereafter be amended or supplemented. “Adjusted Income” means the adjusted income of a person (together with the adjusted income of all persons of the age of 18 years or older who intend to reside with such person in one residential unit) as calculated in the manner prescribed pursuant to Section 8 of the United States Housing Act of 1937, or, if said Section 8 is terminated, as prescribed pursuant to said Section 8 immediately prior to its termination or as otherwise required under Section 142 of the Code and the Act. “Affordable Rent” or “Rents” means monthly rent not in excess of 30% of one-twelfth of 40% of the annual Median Income for the Area, less a utility allowance for electricity only as approved by the Issuer, based upon the following assumed household sizes for the following sizes of dwelling units in the Project: Size of Units Assumed Number of Persons in Household for Low Income Units Affordable Rent Less Approved Utility Allowance (monthly as of 11/1/06) EXHIBIT 1 4-6 3 Studio 1 $558 One bedroom 2 635 Two bedrooms 2 712 In no case shall the Affordable Rent exceed the average market rent charged to tenants of non - Low Income Units with the same number of bedrooms. “Area” means the Primary Metropolitan Statistical Area in which the Project is located, as promulgated by HUD. “Bond Counsel” means an attorney-at-law or a firm of attorneys of recognized expertise in the field of federal income tax matters relating to municipal securities selected by the Issuer. “Bond Documents” has the meaning given to such term in the Indenture. “Bonds” means Housing Authority of the City of Santa Ana Multifamily Housing Revenue Refunding Bonds (City Gardens Apartments) 2006 Series B. “Borrower” means LINC—Bristol Associates I, a California Limited Partnership, and its successors and assigns. “Certificate of Continuing Program Compliance” means the certificate with respect to the Project to be filed by the Borrower with the Issuer which shall be substantially in the form attached to this Regulatory Agreement as Exhibit C. “City” means the City of Santa Ana, California. “Closing Date” means November 22, 2006, the date the Bonds are issued and delivered to the initial purchaser thereof. “Code” means the Internal Revenue Code of 1986, together with applicable temporary and final regulations promulgated, and applicable official public guidance published thereunder. “Completion Date” means December 1, 1996, the date of the completion of the acquisition and rehabilitation of the Project. “County” means the County of Orange, California. “Credit Facility” has the meaning given to such term in the Indenture. “Facilities” means the buildings, structures and other improvements to be acquired and rehabilitated on the Site, and all fixtures and other property owned by the Borrower and located on, or used in connection with, such buildings, structures and other improvements. “Financing Agreement” means the Financing Agreement dated as of November 1, 2006, entered into by the Borrower, the Trustee and the Issuer pursuant to which the Loan was made. “General Partner” means LINC Community Development Corporation, a California nonprofit public benefit corporation, the general partner of the Borrower. EXHIBIT 1 4-7 4 “HUD” means the United States Department of Housing and Urban Development. “Income Computation and Certification” means a tenant Income Computation and Certification in the form attached as Exhibit B hereto or in such other comparable form as may be provided by the Issuer to the Borrower, or as otherwise approved by the Issuer. “Indenture” means the Indenture of Trust, dated as of November 1, 2006, between the Issuer and the Trustee, pursuant to which the Bonds have been issued, as amended f rom time to time. “Issuer” means the Housing Authority of the City of Santa Ana. “Loan” means the mortgage loan made to the Borrower pursuant to the Financing Agreement to provide refinancing for the acquisition and rehabilitation of the Project. “Loan Documents” has the meaning given to such term in the Indenture. “Lender” means Red Mortgage Capital, LLC, a Delaware limited liability company, its successors and assigns. “Low Income Tenants” means individuals or families with an Adjusted Income which does n ot exceed 40% of the Median Income for the Area, adjusted for household size. In no event, however, will the occupants of a residential unit be considered to be Low Income Tenants if all the occupants are students, as defined in Section 151(c)(4) of the Code, as such may be amended, no one of which is entitled to file a joint federal income tax return. “Low Income Units” means the dwelling units in the Project designated for occupancy by Low Income Tenants at Affordable Rents pursuant to Section 4(a) of this Regulatory Agreement. “Median Income for the Area” means the median income for the Area as most recently determined by the Secretary of the Treasury (which determination is required by Code Section 142(d)(2)(B) to be consistent with determinations of area median gross income under Section 8 of the United States Housing Act of 1937, or, if such program is terminated, under such program as in affect immediately before such termination). “Note” means the Multifamily Note executed by the Borrower in a principal amount equal to the principal amount of the Loan. “Prior Regulatory Agreement” means the Regulatory Agreement and Declaration of Restrictive Covenants, dated as of December 1, 1996, by and among the Issuer, the Borrower and First Trust of California, National Association, as original trustee, together with any amendments thereto or supplements thereof, recorded December 18, 1996 in the Official records of the County of Orange as Document Number 19960638397. “Program Administrator” means a governmental agency, a financial institution, a certified public accountant, an apartment management firm, a mortgage insurance company or other business entity performing similar duties or otherwise experienced in the administration of restrictions on bond financed multifamily housing projects which shall initially be the Issuer and, at the Issuer’s election, any other person EXHIBIT 1 4-8 5 or entity appointed by the Issuer who shall enter into an administration agreement in a form acceptable to the Issuer and the Program Administrator. “Project” means the Facilities and the Site. “Qualified Project Period” means the period beginning on the Bond Issuance Date, and ending on the later of (a) the date which is 15 years after the Closing Date, (b) the first day on which no tax exempt private activity bond issued with respect to the Project is outstanding or (c) the date on which any assistance provided with respect to the Project under Section 8 of the United States Housing Act of 1937 terminates. For purposes of clause (b), the term “private activity bond” has the meaning contemplated in Section 142(d)(2)(A)(ii) of the Code. “Registered Owner” or “Bondowner” or “owner” When used with respect to the Bonds, the owner of a Bond then outstanding under the Indenture as shown on the registratio n books maintained by the Trustee pursuant to the Indenture. “Regulations” means the income tax regulations promulgated by the United States Department of the Treasury pursuant to the Code from time to time. “Regulatory Agreement” means this Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants, together with any amendments hereto or supplements hereof. “Site” means the parcel or parcels of real property described in Exhibit “A”, which is attached hereto and by this reference incorporated herein, and all rights and appurtenances thereunto appertaining. “State” means the State of California. “Tax Certificate” means the Certificate as to Arbitrage, dated the Closing Date, executed and delivered by the Issuer and the Borrower, together with the Certificate Regarding Use of Proceeds, dated the Closing Date, executed and delivered by the Borrower. “Tax-Exempt” means with respect to interest on any obligations of a state or local government, including the Bonds, that such interest is excluded from gross income for federal income tax purposes; provided, however, that such interest may be includable as an item of tax preference or otherwise includable directly or indirectly for purposes of calculating other tax liabilities, including any a lternative minimum tax or environmental tax, under the Code. “Trustee” means U.S. Bank National Association, acting as trustee under the Indenture or any successor trustee appointed in accordance with the terms of the Indenture. Unless the context clearly requires otherwise, as used in this Regulatory Agreement, words of the masculine, feminine or neuter gender shall be construed to include each other gender when appropriate and words of the singular number shall be construed to include the plural number, a nd vice versa, when appropriate. This Regulatory Agreement and all the terms and provisions hereof shall be construed to effectuate the purposes set forth herein and to sustain the validity hereof. The defined terms used in the preamble and recitals of this Regulatory Agreement have been included for convenience of reference only, and the meaning, construction and interpretation of all defined EXHIBIT 1 4-9 6 terms shall be determined by reference to this Section 1 notwithstanding any contrary definition in the preamble or recitals hereof. The titles and headings of the sections of this Regulatory Agreement have been inserted for convenience of reference only, and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof or be considered or given any effect in construing this Regulatory Agreement or any provisions hereof or in ascertaining intent, if any question of intent shall arise. Section 2. Representations, Covenants and Warranties of the Borrower . The Borrower hereby represents, as of the date hereof, and covenants, warrants and agrees as follows: (a) The Borrower hereby incorporates herein, as if set forth in full herein, each of the representations, covenants and warranties of the Borrower contained in the Tax Certi ficate and the Financing Agreement relating to the Project. (b) The Borrower hereby represents and warrants that the Project is located entirely within the City. (c) The Borrower acknowledges, represents and warrants that it understands the nature and structure of the transactions contemplated by this Regulatory Agreement; that it is familiar with the provisions of all of the documents and instruments relating to the Bonds to which it is a party or of which it is a beneficiary; that it understands the financial and legal risks inherent in such transactions; and that it has not relied on the Issuer for any guidance or expertise in analyzing the financial or other consequences of such financing transactions or otherwise relied on the Issuer in any manner except to issue the Bonds in order to provide funds to assist the Borrower in refinancing the acquisition and rehabilitation of the Project. Section 3. Residential Rental Property. The Borrower hereby acknowledges and agrees that the Project will be owned, managed and operated as a “qualified residential rental project” (within the meaning of Section 142(d) of the Code) until the expiration of the Qualified Project Period. To that end, and for the term of this Regulatory Agreement, the Borrower hereby represents, as of the date hereof, and covenants, warrants and agrees as follows: (a) The Project was and is constructed, developed and operated for the purpose of providing multifamily residential rental property, and the Borrower owns, manages and operates the Project as a project to provide multifamily residential rental property comprised of a building or structure or several interrelated buildings or structures, together with any functionally related and subordinate facilities, and no other facilities, in accordance with applicable provisions of Section 142(d) of the Code and Section 1.1038(b) of the Regulations, and the Act, and in accordance with such requirements as may be imposed thereby on the Project from time to time. (b) All of the dwelling units in the Project are similarly con structed units, and, to the extent required by the Code and the Regulations, each dwelling unit in the Project contains complete separate and distinct facilities for living, sleeping, eating, cooking and sanitation for a single person or a family, including a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking range, refrigerator and sink. (c) None of the dwelling units in the Project are or will at any time be utilized on a transient basis, or will ever be used as a hotel, motel, dormitory, fraternity house, sorority house, EXHIBIT 1 4-10 7 rooming house, nursing home, hospital, sanitarium, rest home, retirement house or trailer court or park. (d) No part of the Project is or will at any time be owned by a cooperative housing corporation, nor shall the Borrower take any steps in connection with a conversion to such ownership or uses. Other than obtaining a final subdivision map on the Project and a Final Subdivision Public Report from the California Department of Real Estate, the Borrower shall not take any steps in connection with a conversion of the Project to a condominium ownership except with the prior written approving opinion of Bond Counsel that the interest on the Bonds will not become taxable thereby under Section 103 of the Code. (e) All of the dwelling units in the Project are and will be available for rental on a continuous basis to members of the general public and the Borrower will not give preference to any particular class or group in renting the dwelling units in the Project, except to the extent that dwelling units are required to be leased or rented to Low Income Tenants under this Regulatory Agreement, or to tenants with incomes that do not exceed 60% of the Median Income for the Area pursuant to the tax credit application and regulatory agreement relating thereto. (f) The Site consists of a parcel or parcels that are contiguous except for the interposition of a road, street or stream, and all of the Facilities comprise a single geographically and functionally integrated project for residential rental property, as evidenced by the ownership, management, accounting and operation of the Project. (g) No dwelling unit in the Project shall be occupied by the Borrower. Notwithstanding the foregoing, if the Project contains five or more dwelling units, this subsection shall not be construed to prohibit occupancy of dwelling units by one or more resident managers or maintenance personnel any of whom may be the Borrower; provided that the number of such managers or maintenance personnel is not unreasonable given industry standards in the area for the number of dwelling units in the Project. (h) Should involuntary noncompliance with the provisions of Section 1.103-8(b) of the Regulations be caused by fire, seizure, requisition, foreclosure, transfer of title by deed in lieu of foreclosure, change in a federal law or an action of a federal agency after the Bond Issuance Date which prevents the Issuer from enforcing the requirements of the Regulations, or condemnation or similar event, the Borrower covenants that, within a “reasonable period” determined in accordance with the Regulations, it will either prepay the Loan or apply any proceeds received as a result of any of the preceding events to reconstruct the Project to meet the requirements of Section 142(d) of the Code and the Regulations. (i) The Borrower shall not discriminate on the basis of race, creed, color, sex, source of income (e.g. AFDC, SSI), physical disability, age, national origin or marital status in the rental, lease, use or occupancy of the Project or in connection with the employment or application for employment of persons for the rehabilitation, operation and management of the Project. The Issuer hereby elects to have the Project meet the requirements of section 142(d) (1)(A) of the Code. EXHIBIT 1 4-11 8 Section 4. Low Income Tenants. Pursuant to the requirements of the Issuer and Section 142(d) of the Code and applicable provisions of the Act, the Borrower hereby represents, as of the date hereof, and warrants, covenants and agrees as follows: (a) During the Qualified Project Period: (i) Not less than 20% of the units in the Project shall be designated as Low Income Units which are occupied, or held vacant for occupancy, and shall be continuously occupied by Low Income Tenants. All of the Low Income Units shall be gen erally distributed in terms of location and number of bedrooms throughout the Project. The Low Income Units shall be of comparable quality and offer a range of sizes and number of bedrooms comparable to those units which are available to other tenants. T enants in the Low Income Units shall have equal access and enjoyment to all common facilities of the Project. (ii) The monthly rent paid by the persons occupying the Low Income Units shall be Affordable Rent. (iii) Low Income Units shall remain available on a priority basis for occupancy by Low Income Tenants at an Affordable Rent. A unit occupied by a Low Income Tenant who at the commencement of the occupancy is a Low Income Tenant shall be treated as occupied by a Low Income Tenant until a recertification of such tenant’s income in accordance with Section 4(d) below demonstrates that such tenant no longer qualifies as a Low Income Tenant and thereafter any residential unit in the Project is occupied by a new resident other than a Low Income Tenant. Moreover, a unit previously occupied by a Low Income Tenant and then vacated shall be considered occupied by a Low Income Tenant until reoccupied, other than for a temporary period, at which time the character of the unit shall be predetermined. In no event shall such temporary period exceed 31 days. (b) The Borrower will obtain and maintain on file an Income Computation and Certification form, in the form of Exhibit B hereto, from each Low Income Tenant occupying a Low Income Unit, dated the Bond Issuance Date or immediately prior to the initial occupancy of such Low Income Tenant in the Project, as applicable. In addition, the Borrower will provide such further information as may be required in the future by the State of California, the Issuer, the Act, Section 142(d) of the Code and the Regulations, as the same may be amended from time to time, or in such other form and manner as may be required by applicable rules, rulings, policies, procedures or other official statements now or hereafter promulgated, proposed or made by the Department of the Treasury or the Internal Revenue Service with respect to obligations issued under Section 142(d) of the Code. The Borrower shall make a good faith effort to verify that the income provided by an applicant in an income certification is accurate by taking any of the following steps as a part of the verification process: (1) obtain a pay stub for the most recent pay period, (2) obtain an income tax return for the most recent tax year, (3) obtain an income verification form from the applic ant’s current employer, (4) obtain an income verification form from the Social Security Administration and/or the California Department of Social Services if the applicant receives assistance from either of such agencies, or (5) if the applicant is unemplo yed and has no such tax return, obtain another form of independent verification. EXHIBIT 1 4-12 9 Copies of the most recent Income Computation and Certifications for Low Income Tenants commencing or continuing occupancy of a Low Income Unit shall be attached to the Certificate of Continuing Program Compliance to be filed with the Program Administrator within 20 days of each January 1st during the Qualified Project Period. (c) Immediately prior to the first anniversary date of the occupancy of a Low Income Unit by one or more Low Income Tenants, or the first anniversary of the initial qualification of such tenants as Low Income Tenants, as applicable, and on each anniversary date thereafter, the Borrower shall recertify the income of the occupants of such Low Income Unit by obtaining a completed Income Computation and Certification based upon the current income of each occupant of the unit. In the event the recertification demonstrates that such household’s income exceeds the income at which the occupants of such household would qualify as Low Income Tenants, such household will no longer qualify as a Low Income Tenant, and at such time the Borrower shall rent the next available unit of comparable size to the extent available to one or more Low Income Tenants. In no event shall the rent of any tenant who has ceased to be a Low Income Tenant be raised above Affordable Rent before such time as a new Low Income Tenant is qualified and commences occupancy of a unit in the Project at an Affordable Rent or a unit in the Project is held available for occupancy at an Affordable Rent. At such time as the Borrower has recertified the income of the Low Income Tenants to meet the 20% requirement of this paragraph, the Borrower shall no longer be obligated to comply with the Affordable Rent requirement as to such tenants who have ceased to qualify as Low Income Tenants based on such recertification. No tenant in the Project shall be denied continued occupancy in the Project because, after occupancy, such tenant’s household income increases such that the income for such household will no longer qualify such household as Low Income Tenants except as may be required for the Project to continue to comply with applicable “tax credit” occupancy restrictions. An “available” unit is one that is unoccu pied by a tenant. (d) Within 10 days of the last day of each calendar quarter during the term of this Regulatory Agreement, the Borrower shall advise the Issuer and the Program Administrator of the status of the occupancy of the Project by delivering to such parties, and, upon request, to the Lender, a Certificate of Continuing Program Compliance. (e) The Borrower will maintain complete and accurate records pertaining to the Low Income Units, and will permit any duly authorized representative of the Issuer, the Trustee, the Lender, the Department of the Treasury or the Internal Revenue Service to inspect the books and records of the Borrower pertaining to the Project, including those records pertaining to the occupancy of the Low Income Units. (f) The Borrower will prepare and submit to the Issuer and the Program Administrator, if any, and, upon request, to the Lender, within 30 days after each anniversary of the Completion Date, a Certificate of Continuing Program Compliance executed by the Borrower stating (i) the percentage of the dwelling units of the Project which were occupied or deemed occupied, pursuant to subsection (a) hereof, by Low Income Tenants during such period, and (ii) that either (A) no unremedied default has occurred under this Regulatory Agreement or (B) a default has occurred, in which event the certificate shall describe the nature of the default and set forth the measures being taken by the Borrower to remedy such default. The Borrower shall submit to the Secretary of the Treasury annually on the anniversary date of the start of the Qualified Project Period, or such EXHIBIT 1 4-13 10 other date as is required by the Secretary, the Annual Certification of a Residential Rental Project (or such other form as required by the Secretary of the Treasury) and shall provide a copy of such certification to the Issuer and the Program Administrator, if any, and, upon request, to the Lender, so as to comply with Section 142(d)(7) of the Code. (g) The Borrower shall accept as tenants, on the same basis as all other prospective tenants, persons who are recipients of federal certificates or vouchers for rent subsidies pursuant to the existing program under Section 8 of the United States Housing Act of 1937, or its successor. The Borrower shall not apply selection criteria to Section 8 certificate or voucher holders that are more burdensome than criteria applied to all other prospective tenants. The Borrower shall not apply selection criteria to Low Income Tenants that is more burdensome than criteria applied to non-Low Income Tenants. T he Borrower shall not apply selection criteria to Low Income Tenant applicants referred by the Issuer that are more burdensome than criteria applied to all other Low Income Tenants. (h) Each lease pertaining to a Low Income Unit shall contain a provision to th e effect that the Borrower has relied on the income certification and supporting information supplied by the Low Income Tenant in determining qualification for occupancy of the Low Income Unit, and that any material misstatement in such certification (whether or not intentional) will be cause for immediate termination of such lease. Each lease may also contain a provision that failure to cooperate with the annual recertification process reasonably instituted by the Borrower pursuant to Section 4(d) above m ay at the option of the Borrower disqualify the unit as a Low Income Unit or provide grounds for termination of the lease. (i) As dwelling units become available for occupancy and ending at the end of the Qualified Project Period, the Borrower will: (a) maintain a list of persons who have notified the Borrower within the prior 90 days of their desire to rent a unit in the Project and who have Adjusted Incomes which would qualify them as Low Income Tenants, and (b) offer to rent on a priority basis the units which have been designated for occupancy by Low Income Tenants to the persons on such list prior to offering to rent such units to any other persons; provided, however, that nothing contained herein shall require the Borrower to offer to rent the units which have been designated for occupancy on a priority basis by Low Income Tenants to such persons on terms and conditions which are more favorable than the terms and conditions on which Low Income Units will be offered to the public generally. The Borrower sha ll inform persons on such list of the need to restate their interest in renting a unit in the Project every 90 days in order to remain on such list. Section 4A. Additional Restrictions Imposed by the Issuer. The Borrower hereby represents, warrants and covenants, at all times during the Qualified Project Period, as follows: (a) The Borrower shall not permit the number of occupants in any dwelling unit in the Project to exceed the Section 8 occupancy guidelines set forth in the federal Housing Quality Standards relating to the number of persons in each living/sleeping area. The Borrower shall certify compliance with this Section 4A(a) in its annual Certificate of Continuing Program Compliance required pursuant to Section 4(g) hereof. (b) The Borrower shall annually provide for inspection of the Project by an independent consultant satisfactory to the Issuer with expertise in the operation of multifamily EXHIBIT 1 4-14 11 residential rental projects in the State of California similar to the Project; provided, however, such independent consultant may be a representative of the Lender or an independent consultant chosen by the Lender. The Borrower shall provide notice to the Issuer and the Lender 30 days prior to such inspection and permit representatives of the Issuer and the Lender to accompany the consultant on its inspection of the Project. Within 30 days after the inspection, the consultant shall prepare a written report evaluating the management and maintenance of the Project by the Borrower within the previous 12-month period. The Borrower shall implement within 90 days of its receipt of such report, or any longer period approved by the Issuer at the request of the Borrower, any reasonable recommendations set forth in such report that provide for the maintenance of the Project in a condition that is substantially similar to the condition of the Project on the Completion Date giving consideration to normal wear and tear of the Project; provided, however, any consideration of normal wear and tear of the Project shall not allow any s ignificant deferred maintenance of the Project. At the request of the Borrower or the Lender, the Issuer shall meet with such party or parties to consider the manner in which the consultant’s recommendations will be implemented by the Borrower; provided, however, that the Issuer shall be under no obligation to waive or modify any of such recommendations. Any failure by the Borrower to implement any recommendation as set forth in the preceding sentence shall constitute an Event of Default hereunder and shall be enforced as set forth in Section 15 hereof. (c) Notwithstanding the provisions of Section 4, above, not less than 20% of the units in the Project shall, for a period of 55 years from the Closing Date, be designated as Low Income Units which are occupied, or held vacant for occupancy, by Low Income Tenants and the monthly rent paid by the persons occupying the Low Income Units shall be Affordable Rent. The requirements of Section 4 shall apply to the rental of Low Income Units for the duration of said 55 - year period. Section 5. Tax Status of the Bonds. The Borrower and the Issuer each hereby represents, as of the date hereof, and warrants, covenants and agrees that: (a) It will not knowingly take or permit, or omit to take or cause to be taken, as is appropriate, any action that would adversely affect the exclusion from gross income for federal income tax purposes or the exemption from California personal income taxation of the interest on the Bonds and, if it should take or permit, or omit to take or cause to be taken, any such action, it will take all lawful actions necessary to rescind or correct such actions or omissions promptly upon obtaining knowledge thereof; (b) It will take such action or actions as may be necessary, in the written opinion of Bond Counsel filed with the Issuer, the Trustee, the Lender and the Borrower, to comply fully with the Act and all applicable rules, rulings, policies, procedures, Regulations or other official statements promulgated, proposed or made by the Department of the Treasury or the Int ernal Revenue Service pertaining to obligations issued under Section 142(d) of the Code to the extent necessary to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds; and (c) It will file of record such documents and take such other steps as are necessary, in the written opinion of Bond Counsel filed with the Issuer, the Trustee, the Lender and the Borrower, in order to insure that the requirements and restrictions of this Regulatory Agreement EXHIBIT 1 4-15 12 will be binding upon all owners of the Project, including, but not limited to, the execution and recordation of this Regulatory Agreement in the real property records of the County. The Borrower hereby covenants to include the requirements and restrictions contained in this Regulatory Agreement in any document transferring any interest in the Project to another person to the end that such transferee has notice of, and is bound by, such restrictions, and to obtain the agreement from any transferee to abide by all requirements and restrictions of this Regulatory Agreement. Section 6. Modification of Special Tax Covenants. The Borrower, the Trustee and the Issuer hereby agree as follows: (a) To the extent any amendments to the Act, the Regulations or the Code shall, in the written opinion of Bond Counsel filed with the Issuer, the Trustee and the Borrower, impose requirements upon the ownership or operation of the Project more restrictive than those imposed by this Regulatory Agreement which must be complied with in order to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds, this Regulatory Agreement shall be deemed to be automatically amended to impose such additional or more restrictive requirements. (b) To the extent that the Act, the Regulations or the Code, or any amendments thereto, shall, in the written opinion of Bond Counsel filed with the Issuer, the Trustee and the Borrower, impose requirements upon the ownership or operation of the Project less restrictive than imposed by this Regulatory Agreement, this Regulatory Agreement may be amended or modified to provide such less restrictive requirements but only by written amendment signed by the Issuer, at its sole discretion, the Trustee and the Borrower, with the consent of the Lender, and only upo n receipt by the Issuer and the Trustee of the written opinion of Bond Counsel to the effect that such amendment will not affect the Tax-Exempt status of interest on the Bonds or violate the requirements of the Act, and otherwise in accordance with Section 19 hereof. (c) The Borrower, the Issuer and, if applicable, the Trustee shall execute, deliver and, if applicable, file of record any and all documents and instruments, necessary to effectuate the intent of this Section 6, and each of the Borrower and the Iss uer hereby appoints the Trustee as its true and lawful attorney-in-fact to execute, deliver and, if applicable, file of record on behalf of the Borrower or the Issuer, as is applicable, any such document or instrument (in such form as may be approved in writing by Bond Counsel) if either the Borrower or the Issuer defaults in the performance of its obligations under this subsection (b); provided, however, that the Trustee shall take no action under this subsection (b) without first notifying the Borrower or the Issuer, or both of them, as is applicable, unless directed in writing by the Issuer or the Borrower and without first providing the Borrower or the Issuer, or both, as is applicable, an opportunity to comply with the requirements of this Section 6. Section 7. Indemnification. The Borrower hereby covenants and agrees that it shall indemnify and hold harmless the Issuer and the Program Administrator, if not the Issuer (the “Issuer Indemnity”) and the Trustee, including for such purposes, their respective officers, members, com missioners, directors, officials, employees and agents from and against all claims, liabilities, obligations, damages, penalties, litigation, costs, charges and expenses (including without limitation reasonable attorneys, accounting, consulting, engineering, and other fees and expenses), imposed on, incurred by or asserted against the EXHIBIT 1 4-16 13 Issuer Indemnity or the Trustee and arising from, resulting from, or in any way connected with or related to (i) any cause whatsoever in connection with the approval of tax -exempt financing for the Project or the making or administration of the Loan; (ii) any act or omission of the Borrower or the General Partner or any of its agents, servants, employees, or licensees, in connection with the Loan or the Project; (iii) the operation, use, occupancy, maintenance, or ownership of the Project (including compliance with laws, ordinances and rules and regulations of public authorities relating thereto); (iv) the Trustee’s acceptance or administration of the trusts under and/or the Iss uer’s execution of the Indenture, the Financing Agreement or this Regulatory Agreement, or the exercise or performance by Issuer Indemnity of any powers or duties under the Indenture, the Financing Agreement or this Regulatory Agreement; or (v) the issuanc e of any Bonds or any certifications or representations of the Borrower or the General Partner made in connection therewith and the carrying out of any of the transactions contemplated by the Bonds and this Regulatory Agreement; provided, however, that this provision shall not require the Borrower to indemnify the Issuer Indemnity or the Trustee from any claims, costs, fees, expenses or liabilities arising from the willful failure to perform its obligations under any of the foregoing documents or willful misconduct of the Issuer Indemnity or the willful misconduct or negligence of the Trustee, as applicable. The indemnity provided in this Section shall include within its scope, without limitation, any and all active or passive negligence on the part of Issuer Indemnity (other than willful misconduct) or any claims of combined negligence on the part of Issuer Indemnity and Borrower, to the extent Issuer Indemnity is not prohibited by law from contracting for indemnification against such active, passive or combined negligent conduct; any claims for wrongful death; any vicarious liability imposed upon the Issuer Indemnity; and any liability imposed by law on the Issuer Indemnity on a strict liability theory or pursuant to any local, state or federal environmental statute, regulation or law; and the Borrower expressly acknowledges that the scope of its obligation to indemnify, hold harmless and defend the Issuer extends to and includes all loss, costs, damages, expenses, suits, judgments, actions and liabilities of whatsoever nature arising out of or related to the Issuer’s obligations, liabilities and/or responsibilities with respect to the Americans with Disabilities Act of 1990, as amended, (the “ADA”) insofar as they relate to the Project or arise out of the Issuer’s issuance of the Bonds, including, but not limited to, any claims that the Project is inaccessible to or that the Borrower discriminates against disabled individuals; it being expressly agreed by the Borrower that the issuance of the Bonds and/or the making of the Loan are not willful misconduct excusing the Borrower from its indemnification obligations with respect to the Issuer’s potential ADA liability. It is the express intention of the parties that Borrower shall indemnify Issuer Indemnity against any and all such liability hereunder, and that the foregoing indemnification with respect to the Borrower shall survive the termination of this Regulatory Agreement. The Borrower also shall pay and discharge and shall indemnify and hold harmless the Issue r Indemnity and the Trustee from any taxes (including, without limitation, any ad valorem taxes and sales taxes, but not income taxes on fees and expenses paid to the Trustee), assessments, impositions and other charges in respect of the Project. In the event that any action or proceeding is brought against the Issuer Indemnity or the Trustee with respect to which indemnity may be sought hereunder, the Borrower, upon written notice from the indemnified party, shall assume the investigation and defense thereof, including the employment of counsel selected by the Borrower (and otherwise acceptable to the indemnified party) and the payment of all expenses related thereto. The Issuer Indemnity or the Trustee, as applicable, shall have the right to retain separate defense counsel at the sole cost and expense of Borrower, upon such indemnitee’s reasonable determination, with the consent of the Borrower (which consent shall not be unreasonably withheld), that such separate counsel is necessary to provide such indem nified party with an adequate defense to any such action or proceeding. EXHIBIT 1 4-17 14 In addition thereto, the Borrower will pay upon demand all of the fees and expenses paid or incurred by the Issuer Indemnity and all of the reasonable fees and expenses paid or incurre d by the Trustee in enforcing the provisions hereof. The provisions of this Section and Section 17 shall survive the resignation or removal of the Trustee, the repayment of the Loan and the retirement of the Bonds. Section 8. Consideration. The Issuer has issued the Bonds to provide funds to make the Loan to refinance the Project, all for the purpose, among others, of inducing the Borrower to acquire, rehabilitate and operate the Project. In consideration of the issuance of the Bonds by the Issuer, the Borrower has entered into this Regulatory Agreement and has agreed to restrict the uses to which the Project can be put on the terms and conditions set forth herein. Section 9. Reliance. The Issuer and the Borrower hereby recognize and agree that the representations, warranties, covenants and agreements set forth herein may be relied upon by all persons interested in the legality and validity of the Bonds, and in the exclusion from gross income for federal income tax purposes and the exemption from California personal income ta xation of the interest on the Bonds. In performing their duties and obligations hereunder, the Issuer and the Trustee may rely upon statements and certificates of the Borrower and Low Income Tenants, and upon audits of the books and records of the Borrower pertaining to the Project. In addition, the Issuer and the Trustee may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the Issuer or the Trustee hereunder in good faith and in conformity with such opinion. In determining whether any default or lack of compliance by the Borrower exists under this Regulatory Agreement, the Trustee shall not be required to conduct any investigation into or review of the operations or records of the Borrower and may rely solely on any notice or certificate delivered to the Trustee by the Borrower or the Issuer with respect to the occurrence or absence of a default. Section 10. Sale or Transfer of the Project. The Borrower intends to hold the Project for its own account, has no current plans to sell, transfer or otherwise dispose of the Project, and hereby covenants and agrees not to sell, transfer or otherwise dispose of the Project, or any portion thereof (other than for individual tenant use as contemplated hereunder), without obtaining the prior consent of the Issuer, which consent shall not be unreasonably withheld or delayed, and receipt by the Issuer and the Trustee of (i) evidence satisfactory to the Issuer that the Borrowe r’s purchaser or transferee has assumed in writing and in full, the Borrower’s duties and obligations under this Regulatory Agreement and the Financing Agreement, (ii) an opinion of counsel of the transferee that the transferee has duly assumed the obligat ions of the Borrower under this Regulatory Agreement and that such obligations and this Regulatory Agreement are binding on the transferee, (iii) evidence acceptable to the Issuer that either (A) the purchaser or assignee has experience in the ownership, operation and management of rental housing projects such as the Project without any record of material violations of discrimination restrictions or other state or federal laws or regulations applicable to such projects, or (B) the purchaser or assignee agrees to retain a property management firm with the experience and record described in subparagraph (A) above or if the purchaser or assignee does not have management experience, the Issuer will or will cause the Program Administrator to provide on-site training in program compliance if the Issuer determines such training is necessary, (iv) evidence that no event of default exists under any of this Regulatory Agreement, the Financing Agreement, the Mortgage or any document related to the Loan, and payment of all fees and expenses of the Issuer and the Trustee due under any of such documents are current or will be current as of the date of the sale or transfer, and (v) an opinion of Bond Counsel to the effect that such transfer will not, in itself, cause interes t EXHIBIT 1 4-18 15 on any Bond to become includable in the gross income of the recipients thereof for federal income tax purposes. Notwithstanding the above, the Issuer hereby acknowledges and consents to the transfer of the Project to the General Partner pursuant to that certain Option Agreement dated as of December 18, 1996 between the General Partner and the Borrower. It is hereby expressly stipulated and agreed that any sale, transfer or other disposition of the Project in violation of this Section 10 shall be null, void and without effect, shall cause a reversion of title to the Borrower, and shall be ineffective to relieve the Borrower of its obligations under this Regulatory Agreement. Nothing in this Section 10 shall affect any provision of any other document or instrument between the Borrower and any other party which requires the Borrower to obtain the prior written consent of such other party in order to sell, transfer or otherwise dispose of the Project. Not less than 30 days prior to consummating any sale, transfer or disposition of any interest in the Project, the Borrower shall deliver to the Issuer and the Trustee a notice in writing explaining the nature of the proposed transfer. Upon the written assumption of the Borrower’s obligations hereunder, the Borrower shall no longer remain liable for its obligations hereunder to the extent of any interest so assigned. Any syndication by the Borrower of the Project shall be in compliance with any applicable requirements of the Act, and (i) the terms and conditions of the syndication shall not reduce or limit any of the requirements of the Act or regulations adopted or documents executed pursuant to the Act, (10 no requirements of the Issuer shall be subordinated to the syndication agreement, and (iii) the syndicatio n shall not result in the provision of fewer assisted units, or the reduction of any benefits or services, than were in existence prior to the syndication agreement. Section 11. Term. Subject to the following paragraph of this Section 11, this Regulatory Agreement and all and several of the terms hereof shall become effective upon its execution and delivery and shall remain in full force and effect during the Qualified Project Period, it being expressly agreed and understood that the provisions hereof are intended to survive the retirement of the Bonds and expiration, termination or cancellation of the Indenture, the Mortgage Note or the Financing Agreement. Notwithstanding any other provisions of this Regulatory Agreement to the contrary, this entire Regulatory Agreement, or any of the provisions or sections hereof, may be terminated upon agreement by the Issuer, the Trustee and the Borrower subject to compliance with any of the provisions contained in this Regulatory Agreement only if there shall have been received an opinion of Bond Counsel that such termination will not adversely affect the exclusion from gross income for federal income tax purposes or the exemption from State personal income taxation of the interest on the Bonds. The Borrower shall provide notice of any termination of this Regulatory Agreement to the Trustee and the Lender. The terms of this Regulatory Agreement to the contrary notwithstanding, this Regulatory Agreement, and all and several of the terms hereof, shall terminate and be of no further force and effect in the event of (i)(a) involuntary noncompliance with the provisions of this Regulatory Agreement caused by a foreclosure of the lien of a deed of trust on the Project or delivery of a deed in lieu of foreclosure whereby a third party shall take possession of the Project or (i)(b) involuntary non-compliance with the provisions of this Regulatory Agreement caused by fire, seizure, requisition, change in a federal law or an action of a federal agency after the date hereof which prevents the Issuer and the Trustee from enforcing the provisions hereof or condemnation or a similar event, and (ii) either (A) in each case, the payment in full and retirement of the (or extinguishment in accordance with the terms of the Indenture) of the Bonds, each theretofore or within a reasonable period thereafter or (B) in each case, an opinion of Bond Counsel is delivered to the Issuer to the effect that such termination will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds; provided, however, that the preceding provisions of this sentence shall cease to apply and the restrictions contained herein shall be reinstated if, at any time EXHIBIT 1 4-19 16 subsequent to the termination of such provisions as the result of the f oreclosure or the delivery of a deed in lieu of foreclosure or a similar event, the Borrower or any related person to it (within the meaning of Section 1.10310(e) of the Regulations) obtains an ownership interest in the Project for Federal income tax purposes. Upon the termination of the terms of this Regulatory Agreement, the parties hereto agree to execute, deliver and record appropriate instruments of release and discharge of the terms hereof; provided, however, that the execution and delivery of such instruments shall not be necessary or a prerequisite to the termination of this Regulatory Agreement in accordance with its terms. Section 12. Covenants to Run With the Land. The Borrower hereby subjects the Project (including the Site) to the covenants, reservations and restrictions set forth in this Regulatory Agreement. The Issuer and the Borrower hereby declare their express intent that the covenants, reservations and restrictions set forth herein shall be deemed covenants running with the land and shall pass to a nd be binding upon the Borrower’s successors in title to the Project; provided, however, that on the termination of this Regulatory Agreement said covenants, reservations and restrictions shall expire. Each and every contract, deed or other instrument hereafter executed covering or conveying the Project or any portion thereof shall conclusively be held to have been executed, delivered and accepted subject to such covenants, reservations and restrictions, regardless of whether such covenants, reservations a nd restrictions are set forth in such contract, deed or other instruments. No breach of any of the provisions of this Regulatory Agreement shall defeat or render invalid the lien of a mortgage made in good faith and for value encumbering the Site. Section 13. Burden and Benefit. The Issuer and the Borrower hereby declare their understanding and intent that the burden of the covenants set forth herein touch and concern the land in that the Borrower’s legal interest in the Project is rendered less valuable thereby. T he Issuer and the Borrower hereby further declare their understanding and intent that the benefit of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Project by Low Income Tenants, and by furthering the public purposes for which the Bonds were issued. Section 14. Uniformity; Common Plan. The covenants, reservations and restrictions hereof shall apply uniformly to the entire Project in order to establish and carry out a common plan for the use, development and improvem ent of the Site. Section 15. Enforcement. If the Borrower defaults in the performance or observance of any covenant, agreement or obligation of the Borrower set forth in this Regulatory Agreement, and if such default remains uncured for a period of 30 days after notice thereof shall have been given by the Issuer or the Trustee to the Borrower (provided, however, that the Issuer may at its sole option extend such period if the Borrower provides the Issuer with an opinion of Bond Counsel to the effect that such extension will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds), then the Trustee, to the extent directed by and acting on behalf of the Issuer, (i) shall provide written notice to the Lender of such default, describe the nature of the default, indicate whether the default has been cured and, if not, whether it is curable within a reasonable period of time or is incurable, and (ii) shall declare an “Event of Default” to have occurred hereunder, and (Hi) subject to the provisions of the Indenture, may take any one or more of the following steps: (a) by mandamus or other suit, action or proceeding at law or in equity, require the Borrower to perform its obligations and covenants hereunder or enjoin any acts or things which may be unlawful or in violation of the rights of the Issuer or the Trustee hereunder; EXHIBIT 1 4-20 17 (b) have access to and inspect, examine and make copies of all of the books and records of the Borrower pertaining to the Project; or (c) take such other action at law or in equity as may appear necessary or desirable to enforce the obligations, covenants and agreements of the Borrower hereunder. Provided, however, that neither the Issuer nor the Trustee may seek to recover damages from the Borrower except as permitted pursuant to Section 7 hereof. The Trustee shall have the right, in accordance with this Section 15 and the provisions of the Indenture, without the consent or approval of the Issuer, to exercise any or all of the rights or remedies of the Issuer hereunder; provided that prior to taking any such act the Trustee shall give the Issuer written notice of its intended action. All reasonable fees, costs and expenses of the Trustee incurred in taking any action pursuant to this Section 15 shall be the sole responsibility of the Borrower. After the Indenture has been discharged, or if the Trustee fails to act under this Section 15, the Issuer may act on its own behalf to declare an “Event of Default” to have occurred and to take any one or more of the steps specified hereinabove to the same extent and with the same effect as if taken by the Trustee. Notwithstanding anything herein or in the Indenture to the contrary, so long as the Bonds are outstanding and have not been paid in full, the liability of the Borrower hereunder shall be limited as provided in Section 5.11(a) of the Financing Agreement. The parties hereto agree that the maturity date of the Mortgage Note may be accelerated solely by the holder thereof upon the occurrence of a default on the part of the Borrower under the Loan Documents that is not cured during any applicable grace period in accordance with their respective terms and for no other reason and that neither the Issuer nor the Trustee has any right to accelerate the maturity date of the Mortgage Note. Section 16. Recording and Filing. The Borrower shall cause this Regulatory Agreement and all amendments and supplements hereto and thereto, to be recorded and filed, prior to the recording of the Mortgage and the disbursement of the Loan, in the real property records of the County and in such other places as the Issuer or the Trustee may reasonably request. The Borrower shall pay all fees and charges incurred in connection with any such recording. Section 17. Payment of Fees. Notwithstanding any prepayment of the Loan and notwithstanding a discharge of the Indenture, throughout the term of this Regulatory Agreement, the Borrower shall continue to pay to the Issuer its administration fee described below and in the event of default, to the Issuer and to the Trustee reasonable compensation for any services rendered by either of them hereunder and reimbursement for all expenses reasonably incurred by either of them in connection therewith. The Borrower shall pay to the Issuer (i) an initial fee in the amount of $10 ,175.00 on or before the Closing Date, and (ii) an annual administration fee in an amount equal to $10,175.00 (such amount being equal to .125% of the original aggregate principal amount of the Bonds) in arrears in equal semi -annual installments, on June 15 and December 15 of each year commencing on June 15, 2007 (the first semi - annual installment shall be prorated for the period beginning on December 1, 2006 through June 15, 2007). The fee of the Issuer referenced in this Section shall in no way limit amounts payable by the Borrower under Section 7 or 15 hereof, or otherwise arising in connection with the Issuer’s or Trustee’s enforcement of the EXHIBIT 1 4-21 18 provisions of this Regulatory Agreement. In the event that the Issuer appoints a Program Administrator to administer the provisions of this Regulatory Agreement, the fees and expenses of such Program Administrator shall be payable from the annual administration fee payable hereunder; provided, however, in the event that the fees and expenses of such Program Administrator are in excess of the annual administration fee set forth above, the Borrower shall be liable for and shall pay such excess directly to such Program Administrator. During any period in which a property tax exemption with respect to the Project is in e ffect, in addition to the administration fee set forth in the preceding paragraph, the Borrower shall pay semi -annually to the Issuer on June 15 and December 15 of each year subsequent to receiving such property tax exemption, commencing on such June 15 or December 15 immediately succeeding the granting of such property tax exemption, an annual amount equal to $20,350.00 (such amount being equal to .25% of the original aggregate principal amount of the Bonds). In the event that the Bonds are prepaid in part or in full prior to the end of the term of this Regulatory Agreement, the Issuer’s fee for the remainder of the term of this Regulatory Agreement, at the option of the Issuer, shall either continue to be paid as set forth in the second sentence of this Se ction 17 or be paid by the Borrower at the time of the prepayment of the Bonds in a lump sum amount equal to the present value (based on a discount rate equal to the yield on the Bonds, as determined by the Issuer at the time of prepayment) of the Issuer’s fee for the number of years remaining under this Regulatory Agreement. In addition, the Borrower shall pay to the Issuer a late fee of $625 per month for each month that the Borrower is delinquent in meeting the reporting requirements of paragraphs (b), (c), (d) and (f) of Section 4 and paragraph (b) of Section 4A and if the Borrower fails to cure such delinquency within 30 days of the date such delinquency first occurs. In connection with the retiring of the Bonds in 2012, Issuer hereby acknowledges receipt from Borrower of a lump sum payment of the Issuer’s fee set forth in the second sentence of this Section 17, as provided in the fourth paragraph of this Section 17. Section 18. Governing Law. This Regulatory Agreement shall be governed by the laws of the State of California. Except as expressly provided herein and in the Agreement, the Trustee’s rights, duties and obligations hereunder are governed in their entirety by the terms and provisions of the Indenture. Section 19. Amendments. (a) Except as provided in Section 7(a) hereof, this Regulatory Agreement may be amended only by a written instrument executed by the parties hereto or their successors in title, and duly recorded in the real property records of the County, and only upon (i) receipt by the Issuer and the Trustee of an opinion from Bond Counsel that such amendment will not adversely affect the Tax-Exempt status of interest on the Bonds and is not contrary to the provisions of the Act and (ii) the written consent of the Lender, who shall receive a copy of any such amendment. (b) Anything to the contrary contained herein notwithstanding, the Issuer, the Trustee and the Borrower hereby agree to amend this Regulatory Agreement to the extent required, in the opinion of Bond Counsel, in order that interest on the Bonds remai ns Tax-Exempt. The parties requesting such amendment shall notify the other parties to this Regulatory Agreement of the proposed amendment, with a copy of such proposed amendment to Bond Counsel and a request that Bond Counsel render to the Issuer and the Trustee an opinion as to the effect of such proposed EXHIBIT 1 4-22 19 amendment upon the Tax-Exempt status of interest on the Bonds. This provision shall not be subject to any provision of any other agreement requiring any party hereto to obtain the consent of any other person in order to amend this Regulatory Agreement. (c) Any waiver of, or consent to, any condition under this Regulatory Agreement must be expressly made in writing. Section 20. Notice. All notices, certificates or other communications shall be sufficiently given and (except for notices to the Trustee, which shall be deemed given only when actually received by the Trustee) shall be deemed given on the date personally delivered or on the second day following the date on which the same have been mailed by first class mail, postage prepaid, addressed as follows: Issuer: Housing Authority of the City of Santa Ana 20 Civic Center Plaza, M-37 Santa Ana, California 92701 Attn: Executive Director Borrower: LINC—Bristol Associates I c/o LINC Community Development Corporation 110 Pine Avenue, Suite 500 Long Beach, California 90802 Attn: President Lender: Red Mortgage Capital, LLC 1717 Main Street, Suite 900 Dallas, Texas 75201 Attn: Loan Servicing Any of the foregoing parties may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, documents or other communications shall be sent. A copy of any notice provided by the Issuer or the Trustee to the Borrower hereunder shall be provide d by the Issuer or the Trustee, as applicable, to the Lender, as such term is defined and at the address for such entity described in the Indenture. Section 21. Severability. If any provision of this Regulatory Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions hereof shall not in any way be affected or impaired thereby. Section 22. Multiple Counterparts. This Regulatory Agreement may be executed in multiple counterparts, all of which shall constitute one and the same instrument, and each of which shall be deemed to be an original. Section 23. No Trustee. As of the date hereof, there are no Bonds outstanding with respect to the Project, there is no Indenture, there is no trust estate, and there is no Trustee. As a re sult, and in accordance with the terms of the Indenture and the Original Regulatory Agreement, the Trustee shall no longer have any duties or responsibilities under this Regulatory Agreement and all references to the Trustee in this Regulatory Agreement shall be deemed references to the Issuer. EXHIBIT 1 4-23 20 Section 24. Compliance by Borrower. The Trustee shall not be responsible for monitoring or verifying compliance by the Borrower with its obligations under this Regulatory Agreement. Section 25. Limited Liability. All obligations of the Issuer incurred hereunder shall be limited obligations, payable solely and only from Bond proceeds, Revenues (as defined in the Indenture) and other amounts payable under the Financing Agreement. Section 26. No Interference or Impairment of Loan. Notwithstanding anything herein to the contrary, as long as the Credit Facility remains outstanding and there has been no Wrongful Dishonor (as such term is defined in the Indenture), none of the Issuer, the Lender, the Trustee nor any other person shall: (a) initiate or take any action which may have the effect, directly or indirectly, of impairing the ability of the Borrower to timely pay the principal of, interest on, or other amounts due and payable under, the Loan; or (b) upon the occurrence of an event of default under the Loan, take any action to accelerate or otherwise enforce payment or seek other remedies with respect to the Loan; or provided that this prohibition shall not be construed to limit the rights of the Issuer and the Trustee to specifically enforce this Regulatory Agreement in order to provide for the operation of the Project in the manner required by the Act, the Code and the Issuer, and provided further that this prohibition shall not be construed to limit the rights of the Issuer or the Trustee to enforce their rights against the Borrower under Section 7, Section 15 or 17 hereof or other Reserved Rights, so long as such enforcement does not cause the Borrower to file a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Borrower under any applicable liquidation, insolvency, bankruptcy, rehabilitation, composition, reorganization, conservation or other similar law in effect now or in the future; provided further, however, that neither the Issuer nor the Trustee may cause the Loan to become due and payable or cause the Trustee to redeem the Bonds or declare the principal of all Bonds and interest accrued thereon to be immediately due and payable or cause the noteholder to foreclose or take any action under the Loan Documents to obtain such performance or observance; and provided further that any right of the Issuer or the Trustee to take any action at law or in equity to enforce the obligations, covenants and agreements of the Borrower under the Regulatory Agreement (including any claim under Section 7 or Section 15 hereof) shall be subordinate to the Loan. Section 27. Character of Borrower’s Obligations. Notwithstanding any provisions of this Agreement to the contrary, including but not limited to the other provisions of this Section 27, all obligations of the Borrower under this Regulatory Agreement for the payment of money and all claims for damages against the Borrower occasioned by breach or alleged breach by the Borrower of its obligations under this Regulatory Agreement, including indemnification obligations, shall not be a lien on the Project and no Person shall have the right to enforce such obligations other than directly against the Borrower as provided in Section 15 of this Agreement. It is hereby acknowledged that the obl igation to repay the Loan is not an obligation of the Borrower for payment of money under this Regulatory Agreement, but is governed by the terms of the Financing Agreement and the Loan Documents. No subsequent owner of the Project shall be liable or obligated for the breach or default of any obligation of the Borrower under this Agreement on the part of any prior Borrower, including but not limited to any payment or indemnification obligation. Such obligations are personal to the Person who was the EXHIBIT 1 4-24 21 Borrower at the time the default or breach was alleged to have occurred and such Person shall remain liable for any and all damages occasioned thereby even after such Person ceases to be the Borrower. Notwithstanding the foregoing, each Borrower shall in any event comply with and be liable for all obligations of the Borrower hereunder during its period of ownership of the Project. Section 28. Regulatory Agreement As Replacement. The parties hereto acknowledge and agree that the provisions of this Regulatory Agreement amend and restate in full the provisions of the Original Regulatory Agreement (and the Prior Regulatory Agreement, which was amended, restated and superseded in full by the Original Regulatory Agreement). The parties hereto hereby agree that the provisions contained in this Regulatory Agreement shall supersede and replace in full the provisions of the Original Regulatory Agreement and such agreement shall have no further force or effect. Section 29. HUD Rider. The parties hereto acknowledge and agree that the terms and provisions of the HUD Rider annexed hereto is hereby incorporated into this Regulatory Agreement by this reference. The parties hereto hereby agree that if any of the provisions contained in this Regulatory Agreement conflicts with a provision of the HUD Rider, the provisions of the HUD Rider shall control. EXHIBIT 1 4-25 22 IN WITNESS WHEREOF, the Issuer and the Borrower have executed this Regulatory Agreement by duly authorized representatives, all as of the date first written hereinabove. ATTEST: HOUSING AUTHORITY OF THE CITY OF SANTA ANA ACTING AS THE HOUSING SUCCESSOR AGENCY ___________________________ ___________________________ Maria D. Huizar Steven A. Mendoza Housing Authority Recording Secretary Executive Director APPROVED AS TO FORM Sonia R. Carvalho Authority General Counsel ___________________________ By: Ryan O. Hodge Assistant Counsel LINC-BRISTOL ASSOCIATES I, a California limited partnership, (the “borrower”) By: LINC COMMUNITY DEVELOPMENT CORPORATION, a California nonprofit public benefit corporation, its general partner By: _____________________________________ EXHIBIT 1 4-26 1 HUD RIDER TO RESTRICTIVE COVENANTS This RIDER TO RESTRICTIVE COVENANTS is made as of December 1, 2018, by LINC—Bristol Associates I, a California Limited Partnership (“Borrower”) and the Housing Authority of the City of Santa Ana, California, a public body, corporate and politic, duly organized and existing under the laws of the State of California (together with any successor to its rights, duties and obligations, “Issuer”). WHEREAS, Borrower has obtained financing from Red Mortgage Capital, LLC (“Lender”) for the benefit of the project known as City Gardens Apartments (“Project”), which loan is secured by a Multifamily Deed of Trust, Assignment of Leases and Rents and Security Agreement (“Securit y Instrument”) dated as of December 1, 2018, and recorded in the Official Records, Orange County, California (“Records”) prior hereto, and is insured by the United States Department of Housing and Urban Development (“HUD”); WHEREAS, Borrower has received tax-exempt bond financing from the Issuer, which Issuer has required certain restrictions be recorded against the Project; and WHEREAS, Borrower entered into that certain Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants to which this Rider is attached and made a part thereof (“Restrictive Covenants”) with respect to the Project, as more particularly described in Exhibit A attached hereto, dated as of December 1, 2018 and to be recorded in the Records; WHEREAS, HUD requires as a condition of its insuring Lender’s financing to the Project, that the lien and covenants of the Restrictive Covenants be subordinated to the lien, covenants, and enforcement of the Security Instrument; and WHEREAS, the Issuer has agreed to subordinate the Restrictive Covenants to the lien of the Mortgage Loan in accordance with the terms of this Rider. NOW, THEREFORE, in consideration of the foregoing and for other consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: (a) In the event of any conflict between any provision contained elsewhere in the Restrictive Covenants and any provision contained in this HUD Rider, the provision contained in this Rider , the provision contained in this Rider shall govern and be controlling in all respects as set forth more fully herein. (b) The following terms shall have the following definitions: "Code" means the Internal Revenue Code of 1986, as amended. "HUD" means the United States Department of Housing and Urban Development. "HUD Regulatory Agreement" means the Regulatory Agreement between Borrower and HUD with respect to the Project, as the same may be supplemented, amended or modified from time to time. EXHIBIT 1 4-27 2 “Lender” means Red Mortgage Capital, LLC, a Delaware limited liability company, its successors and assigns. “Mortgage Loan” means the mortgage loan made by Lender to the Borrower pursuant to the Mortgage Loan Documents with respect to the Project. “Mortgage Loan Documents” means the Security Instr ument, the HUD Regulatory Agreement and all other documents required by HUD or Lender in connection with the Mortgage Loan. “National Housing Act” means the National Housing Act of 1934, as amended. “Program Obligations” has the meaning set forth in the Security Instrument. “Residual Receipts” has the meaning specified in the HUD Regulatory Agreement. “Security Instrument” means the mortgage or deed of trust from Borrower in favor of Lender, as the same may be supplemented, amended or modified. “Surplus Cash” has the meaning specified in the HUD Regulatory Agreement. (c) Notwithstanding anything in the Restrictive Covenants to the contrary, the provisions thereof are expressly subordinate to (i) the Mortgage Loan Documents, including without limitation, the Security Instrument, and (ii) Program Obligations (the Mortgage Loan Documents and Program Obligations are collectively referred to herein as the “HUD Requirements”). Borrower covenants that it will not take or permit any action that would result in a violati on of the Code, the HUD Requirements or the Restrictive Covenants. In the event of any conflict between the provisions of the Restrictive Covenants and the provisions of the HUD Requirements, HUD shall be and remains entitled to enforce the HUD Requirements. Notwithstanding the foregoing, nothing herein limits the Issuer’s ability to enforce the terms of the Restrictive Covenants, provided such terms do not conflict with statutory provisions of the National Housing Act or the regulations related thereto. The Borrower represents and warrants that, to the best of Borrower’s knowledge, the Restrictive Covenants impose no terms or requirements that conflict with the National Housing Act and related regulations. (d) In the event of foreclosure (or deed in lieu of foreclosure), the Restrictive Covenants (including without limitation, any and all land use covenants and/or restrictions contained herein) shall automatically terminate. (e) Borrower and the Issuer acknowledge that Borrower’s failure to comply with the covenants provided in the Restrictive Covenants does not and shall not serve as a basis for default under the HUD Requirements, unless a default also arises under the HUD Requirements. (f) Except for the Issuer’s reporting requirement, in enforcing the Restrictive Covenants the Issuer will not file any claim against the Project, the Mortgage Loan proceeds, any reserve or deposit required by HUD in connection with the Security Instrument or HUD Restrictive Covenants, or the rents or other income from the property other than a claim against: i. Available surplus cash, if the Borrower is a for-profit entity; EXHIBIT 1 4-28 3 ii. Available distributions of surplus cash and residual receipts authorized for release by HUD, if the Borrower is a limited distribution entity; or iii. Available residual receipts authorized by HUD, if the Borrower is a non-profit entity. or iv. A HUD-approved collateral assignment of any HAP contract. (g) For so long as the Mortgage Loan is outstanding, Borrower and Iss uer shall not further amend the Restrictive Covenants, with the exception of clerical errors or administrative correction of non-substantive matters, without HUD’s prior written consent. (h) Subject to the HUD Regulatory Agreement, the Issuer may require the Borrower to indemnify and hold the Issuer harmless from all loss, cost, damage and expense arising from any claim or proceeding instituted against Issuer relating to the subordination and covenants set forth in the Restrictive Covenants, provided, however, that Borrower’s obligation to indemnify and hold the Issuer harmless shall be limited to available surplus cash and/or residual receipts of the Borrower. (i) No action shall be taken in accordance with the rights granted herein to preserve the tax exemption of the interest on the notes or bonds, or prohibiting the owner from taking any action that might jeopardize the tax-exemption, except in strict accord with Program Obligations. EXHIBIT 1 4-29 4 EXHIBIT A LEGAL DESCRIPTION OF THE SITE The land situated in the State of California, County of Orange, and described as follows: Parcel No. 3 of Parcel Map filed in Book 20, Page 6 of Parcel Maps, in the City of Santa Ana, County of Orange, State of California, in the Office of the County Recorder of Orange County, California. APN: 002-231-35 EXHIBIT 1 4-30 5 EXHIBIT B INCOME COMPUTATION AND CERTIFICATION NOTE TO APARTMENT OWNER: This form is designed to assist you in computing Annual Income in accordance with the method set forth in the Department of Housing and Urban Project (“HUD”) Regulations (24 CFR 813). You should make certain that this form is at all times up to date with the HUD Regulations. Re: 2901 N. Bristol Santa Ana, California I/We, the undersigned state that I/we have read and answered fully, frankly and personally each of the following questions for all persons who are to occupy the unit being applied for in the above apartment project. Listed below are the names of all persons who intend to reside in the unit: 1. 2. 3. 4. 5. Name of Members of the Household Relationship to Head of Household Age Social Security Number Place of Employment HEAD SPOUSE Income Computation 6.The total anticipated income, calculated in accordance with the provisions of this Certification, of all persons over the age of 18 years listed above for the 12-month period beginning the date that I/we plan to move into a unit is $_________________. Included in the total anticipated income listed above are: (a) all wages and salaries, overtime pay, commissions, fees, tips and bonuses and other compensation for personal services, before payroll deductions; (b) the net income from the operation of a business or profession or from the rental of real or personal property (without deducting expenditures for business expansion or amortization of capital indebtedness or any allowance for depreciation of capital assets), (c) interest and dividends (including income from assets excluded below); (d) the full amount of periodic payments received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits and other similar types of periodic receipts, including any lump sum payment for the delayed start of a periodic payment: EXHIBIT 1 4-31 6 (e) payments in lieu of earnings, such as unemployment and disability compensation, workmen’s compensation and severance pay; (f) the maximum amount of public assistance available to the above persons other than the amount of any assistance specifically designated for shelter and utilities; (g) periodic and determinable allowances, such as alimony and child support payments and regular contributions and gifts received from persons not residing in the dwelling; (h) all regular pay, special pay and allowances of a member of the Armed Forces (whether or not living in the dwelling) who is the head of the household or spouse; and (i) any earned income tax credit to the extent that it exceeds income tax liability. Excluded from such anticipated income are: (a) casual, sporadic or irregular gifts; (b) amounts which are specifically for or in reimbursement of medical expenses; (c) lump sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and workmen’s compensation), capital gains and settlement for personal or property losses; (d) amounts of educational scholarships paid directly to the student or the educational institution, and amounts paid by the government to a veteran for use in meeting the cos ts of tuition, fees, books and equipment. Any amounts of such scholarships or payments to veterans not used for the above purposes are to be included in income; (e) special pay to a household member who is away from home and exposed to hostile fire; (f) relocation payments under Title II of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970; (g) foster child care payments; (h) the value of coupon allotments for the purchase of food pursuant to the Food Stamp Act of 1977; (i) payments to volunteers under the Domestic Volunteer Service Act of 1973; (j) payments received under the Alaska Native Claims Settlement Act; (k) income derived from certain submarginal land of the United States that is held in trust for certain Indian tribes; (l) payments or allowances made under the Department of Health and Human Services’ Low- Income Home Energy Assistance Program; EXHIBIT 1 4-32 7 (m) payments received from the Job Training Partnership Act; (n) income derived from the disposition of funds of the Grand River Band of Ottawa Indians; (o) the first $2,000.00 of per capita shares received from judgment funds awarded by the Indian Claims Commission or the Court of Claims; and (p) at the discretion of Housing Authority of the City of Santa Ana all other incom e exclusions recognized by the HUD Section 8 Certificate and Voucher Programs. 7. Do the persons whose income or contributions are included in item 6 above? (a) have savings, stocks, bonds, equity in real property or other form of capital investment (excluding the values of necessary items of personal property such as furniture and automobiles and interests in Indian trust land)? No Yes (b) have they disposed of any assets (other than at a foreclosure or Credit Bankruptcy sale) during the last two years at less than fair market value? No Yes (c) If the answer to (a) or (b) above is yes, does the combined total value of all such assets owned or disposed of by all such persons total more than $5,000? No Yes (d) If the answer to (c) above is yes, state: (1) the amount of income expected to be derived from such assets in the 12-month period beginning on the date of initial occupancy in the unit that you propose to rent: $_____________________ (2) the amount of such income, if any, that was included in item 6 above: $_____________________ 8. (a) Are all of the individuals who propose to reside in the unit full-time students*? No Yes *A full-time student is an individual enrolled as a full-time student during each of 5 calendar months during the calendar year in which occupancy of the unit begins at an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance and is not an individual pursuing a full -time course of institutional or farm training under the EXHIBIT 1 4-33 8 supervision of an accredited agent of such an educational organization or of a state or pol itical subdivision thereof. (b) If the answer to 8(a) is yes, is at least 1 of the proposed occupants of the unit a husband and wife entitled to file a joint federal income tax return? No Yes 9. Neither myself nor any other occupant of the unit I/we propose to rent is the owner of the rental housing project in which the unit is located (hereinafter the “Owner”), has any family relationship to the Owner; or owns directly or indirectly any interest in the Owner. For purposes of this paragraph, indirect ownership by an individual shall mean ownership by a family member, ownership by a corporation, partnership, estate or trust in proportion to the ownership or beneficial interest in such corporation, partnership, estate or trustee held by the individual or a family member; and ownership, direct or indirect, by a partner of the individual. 10. This certificate is made with the knowledge that it will be relied upon by the Borrower to determine maximum income for eligibility to occupy the unit, and I/we decla re that all information set forth herein is true, correct and complete and based upon information I/we deem reliable and that the statement of total anticipated income contained in paragraph 6 is reasonable and based upon such investigation as the undersigned deemed necessary. 11. I/we will assist the Owner in obtaining any information or documents required to verify the statements made herein, including either an income verification from my/our present employer(s) or copies of federal tax returns for the immediately preceding calendar year. 12. I/we acknowledge that I/we have been advised that the making of any misrepresentation or misstatement in this declaration will constitute a material breach of my/our agreement with the Owner to lease the unit and will entitle the Owner to prevent or terminate my/our occupancy of the unit by institution of an action for ejection or other appropriate proceedings. I/we declare under penalty of perjury that the foregoing is true and correct. Executed this _____ day of __________ in the City of __________ California. _______________________________________ Applicant _______________________________________ Applicant [Signature of all persons over the age of 18 years listed in number 2 above required] EXHIBIT 1 4-34 9 FOR COMPLETION BY APARTMENT OWNER ONLY: 1. calculation of eligible income: a. Enter amount entered for entire household in 6 above: $________ b. (1) If answer to 7(c) above is yes, enter the total amount entered in 7(d)(1), subtract from that figure the amount entered in 7(d)(2) and enter the remaining balance ($_______); (2) Multiply the amount entered in 7(c) times the current passbook savings rate to determine what the total annual earnings on the amount in 7(c) would be if invested in passbook savings ($_______) subtract from that figure the amount entered in 7(d)(2) and enter the remaining balance ($_______); (3) Enter at right the greater of the amount calculated under (1) or (2) above: $_______ c. TOTAL ELIGIBLE INCOME Line 1.a plus line 1.b(3)): $_______ 2. The amount entered in 1.c: _______ Qualifies the applicant(s) as a Low Income Tenant(s). _______ Does not qualify the applicant(s) as a Low Income Tenant(s). 3. Number of apartment unit assigned: _______ Bedroom Size: _____ Rent: $_______ 4. This apartment unit [was/was not] last occupied for a period of 31 consecutive days by persons whose aggregate anticipated annual income as certified in the above manner upon their initial occupancy of the apartment unit qualified them as Low Income Tenants. 5. Method used to verify applicant(s) income: _______ Employer income verification. _______ Copies of tax returns. _______ Other (_______) _______________________________________ Manager EXHIBIT 1 4-35 10 INCOME VERIFICATION (for employed persons) The undersigned employee has applied for a rental unit located in a project financed under the Housing Authority of the City of Santa Ana Multifamily Housing Revenue Bond Program for persons of low income. Every income statement of a prospective tenant must be stringently verified. Please indicate below the employee’s current annual income from wages, overtime, bon uses, commissions or any other form of compensation received on a regular basis. Annual wages _____ Overtime _____ Bonuses _____ Commissions _____ Total current income I hereby certify that the statements above are true and complete to the best of my knowledge. _________________________ _________________________ _________________________ Signature Date Title I hereby grant you permission to disclose my income to in order that they may determine my income eligibility for rental of an apartment located in their project which has been financed under the Housing Authority of the City of Santa Ana Multifamily Revenue Refunding Bonds. _______________________________________ _______________________________________ Signature Date Please send to: _______________________________________ _______________________________________ _______________________________________ _______________________________________ EXHIBIT 1 4-36 11 INCOME VERIFICATION (for self-employed persons) I hereby attach copies of my individual federal and state income tax returns for the immediately preceding calendar year and certify that the information shown in such income tax returns is true and complete to the best of my knowledge. _______________________________________ _______________________________________ Signature Date EXHIBIT 1 4-37 12 EXHIBIT C CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE The undersigned, being a general partner of LINC—BRISTOL ASSOCIATES I, A California Limited Partnership (the “Borrower”), has read and is thoroughly familiar with the provisions of the various documents associated with the Borrower’s participation in the Housing Authority of the City of S anta Ana (the “Issuer”) Multifamily Housing Program, such documents including: 1. the Regulatory Agreement and Declaration of Restrictive Covenants, dated as of November 1, 2006 (the “Regulatory Agreement”) among the Borrower, the Issuer and U.S. Bank Nati onal Association, as Trustee (the “Trustee”); and 2. the Financing Agreement, dated as of November 1, 2006, among the Borrower, the Issuer, Washington Capital DUS, Inc., as lender (the “Lender”) and the Trustee. As of the date of this Certificate, the foll owing percentages of completed residential units in the Project (as defined in the Regulatory Agreement) (i) are occupied by Low Income Tenants (as such term is defined in the Regulatory Agreement), or (ii) are currently vacant and being held available for such occupancy and have been so held continuously since the date a Low-Income Tenant vacated such unit; as indicated: Occupied by Low Income Tenants: __________% Unit Nos. Held vacant for occupancy continuously since last occupied by Low Income Tenant: __________% Unit Nos. Vacant Units: __________% Unit Nos. It hereby is confirmed that each Low Income Tenant currently residing in a unit in the Project has completed an Income Computation and Certification in the form approved by the Issuer and tha t since commencement of the Qualified Project Period at least 20% of the occupied units in the Project have been rented to (or are vacant and last occupied by) Low Income Tenants at Affordable Rents (each of the foregoing capitalized terms having the meaning assigned in the Regulatory Agreement). It is hereby certified that the Borrower is in compliance with Section 4A(a) of the Regulatory Agreement. EXHIBIT 1 4-38 13 The undersigned hereby certifies that the Borrower is not in default under any of the terms and provisions of the above documents. LINC—BRISTOL ASSOCIATES I, A CALIFORNIA LIMITED PARTNERSHIP (the “Borrower”) By: LINC HOUSING CORPORATION, a California nonprofit public benefit corporation, its general partner By: ________________________________ EXHIBIT 1 4-39