Attachment_G-_OCHFT_Template_ADU_Loan_Agreement.pdf

ACCESSORY DWELLING UNIT LOAN AGREEMENT

(Affordable ADU Loan Program)

This Accessory Dwelling Unit Loan Agreement (this "Agreement") is entered into as of _________________, 20____, (the "Effective Date"), by and between the Orange County Housing Finance Trust, a California joint powers authority (the "Trust"), and _______________ (the "Borrower"). The Trust and Borrower are referred to in this Agreement individually as a “Party” and collectively as the "Parties."

RECITALS

A. The Trust operates an Affordable ADU Loan Program (the "Program") for the purpose of encouraging the production of affordable units in Orange County by easing the financial burden required for and incentivizing the creation of an accessory dwelling unit, as defined by Government Code Section 65852.2(j), or a junior accessory dwelling unit, as defined by Government Code Section 65852.22(i) (together, an "ADU"), on parcels with new or existing owner-occupied homes located in the County.

B. Under the Program, the Trust provides participating eligible homeowners with financing in the form of a deferred payment loan to finance some or all of the cost to create an ADU on the homeowner's property. The Program requires the newly created ADU to be rented to an eligible very low income household for ten years in accordance with the Trust's Affordable ADU Loan Program Guidebook.

C. Borrower is the owner and occupant of the home located in the County at _______________________________ (as more particularly described in Exhibit A attached to this Agreement, the "Property"), and has applied to participate in the Program. The Property is located in the [City of ____________ / unincorporated territory of the County of Orange] (the “Land Use Authority”). The Trust has reviewed the Borrower's application to participate in the Program and has determined that Borrower is eligible to participate in the Program.

D. In accordance with the terms and conditions set forth in this Agreement, the Trust has agreed to provide a loan to the Borrower to finance the construction of an ADU on the Property.

E. The Parties wish to enter into this Agreement in order to set forth the terms and conditions of Borrower's participation in the Program, Borrower's obligations with respect to the use of the loan proceeds and construction of the ADU, and the Trust's role with respect to the Program administration.

NOW, THEREFORE, for good and valuable consideration, the Parties agree as follows:

SECTION 1. Incorporation of Recitals. The Parties acknowledge the accuracy of the Recitals, which by this reference are incorporated into this Agreement.

SECTION 2. Loan. The Trust will provide a loan to Borrower in an amount not to exceed the lesser of One Hundred Thousand Dollars ($100,000) or the actual cost of construction of the ADU (the "Loan") to finance the construction of an ADU on the Property. The maximum amount of the Loan may be increased as provided in Sections 2.1 and 2.2 hereof. The terms and conditions of the Loan are as follows:

(a) Interest Rate. Interest on the Loan shall accrue upon disbursement at the following rates, as applicable:

(i) Interest rate during construction of the ADU: Federal Funds Rate plus five percent (5%) simple interest, with the interest rate subject to forgiveness as provided in paragraph (c)(ii) below.

(ii) Interest rate during Affordability Term: Zero percent (0%) simple interest during such time that the Tenant of the ADU is a Vouchered Tenant, and three percent (3%) simple interest during such time that the Tenant of the ADU is a Non-Vouchered Tenant (as those terms are defined in the Regulatory Agreement).

(iii) Interest rate during vacancy of ADU: For the first ninety (90) days after vacancy, the interest rate applicable to the incoming Tenant in accordance with (ii) above. From the ninety-first date after vacancy until a new Tenant occupies the ADU, the interest rate pursuant to (iv) below.

(iv) Interest rate during non-compliance with ADU requirements: Federal Funds Rate plus five percent (5%) simple interest.

(v) Interest rate after expiration of Affordability Term: If the ADU has been occupied by a Qualified Tenant in accordance with all of the requirements of the Regulatory Agreement for at least sixty (60) months, Federal Funds Rate plus one percent (1%) simple interest. If the ADU has not been occupied by a Qualified Tenant for at least sixty (60) months, Federal Funds Rate plus five percent (5%) simple interest.

(vi) Interest rate after occurrence of a Repayment Event pursuant to paragraph

(b) below: Federal Funds Rate plus six percent (6%) simple interest.

(vii) For purposes of this Agreement, “Federal Funds Rate” means the Effective Federal Funds Rate as reported by the Board of Governors of the Federal Reserve as of the date of this Agreement. In the event that the Federal Funds rate decreases by 0.5% or more between the date of this Agreement and the date of the Trust’s first disbursement of the Loan proceeds, the Borrower may elect on a one-time basis to change the Federal Funds Rate to the then-current Federal Funds Rate by submission of a written notice of election to the Trust.

(b) Repayment of Loan. The full amount of the Loan (principal and interest) shall be due and payable to the Trust upon the earliest to occur of the following (“Repayment Event”):

(i) Sale or transfer of title to the Property.

(ii) Upon expiration of the Affordability Term, if the Property is not owner-occupied at that time.

(iii) Upon expiration of the Term of the Loan.

(iv) Upon subdivision of the Property into two or more parcels.

(v) Upon the ADU no longer being permitted or approved for occupancy by the Land Use Jurisdiction.

The Loan may be prepaid in full or in part to the Trust at any time, with no prepayment penalty.

(c) Loan Forgiveness.

(i) Upon the earlier of the end of the term of the Regulatory Agreement or a Repayment Event, the sum of Thirteen Dollars and Fifteen Cents ($13.15) shall be deducted from the Loan balance for each full day that a Qualified Tenant has occupied the ADU in compliance with the Regulatory Agreement. Qualified Tenant occupancy of the ADU shall be verified in accordance with the procedures set forth in the Regulatory Agreement.

(ii) Upon occupancy of the ADU by a Qualified Tenant for at least sixty (60) months in accordance with all of the requirements of the Regulatory Agreement, the construction period interest pursuant to paragraph (a)(i) above shall be forgiven.

(iii) Upon the issuance of a final certificate of occupancy for the ADU, the portion of the Loan attributable to the Mobility/Accessibility Costs shall be forgiven.

(iv) Upon the commencement of occupancy of the ADU by an Eligible Household, the portion of the Loan attributable to the Property Management Costs shall be forgiven.

(d) Term of Loan. Twenty (20) years from Effective Date, unless earlier terminated or extended as provided hereunder.

(e) Loan Documents. Borrower shall execute and deliver to the Trust a Secured Promissory Note in the amount of the Loan, in the form attached hereto as Exhibit B (the "Note"), and shall execute a Deed of Trust, Security Agreement and Fixture Filing, in the form attached hereto as Exhibit C (the "Deed of Trust"), to secure Borrower's obligations pursuant to the Note. Borrower and the Trust shall enter into an Agreement Containing Covenants and Restrictions Governing Rental of Affordable Accessory Dwelling Unit that imposes rent and occupancy restrictions, in the form attached hereto as Exhibit D (the "Regulatory Agreement").

This Agreement, the Note, the Deed of Trust, and the Regulatory Agreement are collectively referred to in this Agreement as the "Loan Documents." The Deed of Trust and Regulatory Agreement will be recorded against the Property concurrently with the closing of the Loan. The terms of the Note, Deed of Trust, and Regulatory Agreement are all incorporated into this Agreement by reference.

(f) Subordination. Trust shall reasonably consent to subordinate this Loan to refinancing if all of the following conditions are met: (a) the proceeds of such loan do not exceed the amount of the remaining principal secured by the existing deed of trust, plus the reasonable cost of refinancing, (b) the interest rate payable under the note given in connection with the refinancing is less than the interest rate payable under the note secured by the existing deed of trust prior to refinancing, (c) the total debt secured by the Property does not exceed ____________________________, and (d) Borrower is not in Default of this Agreement or the Loan Documents.

2.1 Mobility Improvements. The maximum amount of the Loan may be increased by Five Thousand Dollars ($5,000) to be used for the cost of improvements made to meet the following minimum standards for mobility and accessibility of the ADU (“Mobility/Accessibility Costs”):

(a) Exterior and interior accessible path for mobility-aided persons from the property entrance through entry to every interior room. There may be stairs or other non-accessible barriers as long as an accessible path exists into those rooms and areas.

(b) Doorways are at least 32 inches wide and all hallways are at least 36 inches wide.

(c) At least one bath, on the entry level, with a clear space area of at least 60 inches in diameter, and must have reinforced walls for grab bars to use in entering and exiting the tub/shower and around the toilet. Grab bars do not need to be installed.

(d) Roll-in, no-threshold, or low-threshold bathing facility in an entry level bathroom.

The Loan amount for Mobility/Accessibility Costs is eligible for loan forgiveness as provided in Section 2(c) hereof.

2.2 Property Management Costs. The maximum amount of the Loan may be increased by the cost of professional property management services, provided by a property management company that has been pre-approved by the Trust, necessary for the selection and income qualification of the tenant of the ADU (“Property Management Costs”). Loan increases for Property Management Costs shall be available to Tenant subject to availability of Trust funds for such purpose. The Loan amount for Property Management Costs is eligible for loan forgiveness as provided in Section 2(c) hereof.

SECTION 3. Conditions Precedent to Disbursement of Loan Proceeds. The Trust's obligation to disburse the Loan Proceeds to or on behalf of the Borrower is expressly conditioned upon the satisfaction or written waiver by the Trust of each of the following conditions precedent:

(a) No Material Adverse Change. There exists no material adverse change in the financial condition of Borrower from that shown by the information furnished by Borrower to the Trust prior to the Effective Date of this Agreement.

(b) No Breach. There exists no condition, event, act, or omission which constitutes a breach or Default (as defined in Section 9 of this Agreement) under any of the Loan Documents, or which would constitute such a breach or Default after notice or the lapse of time or both.

(c) Loan Documents. Borrower has executed, acknowledged (as applicable), and delivered to the Trust all of the Loan Documents, and the Deed of Trust and Regulatory

Agreement shall have previously been recorded or will be recorded against the Property in the Orange County Recorder's Office concurrently with the close of escrow of the Loan.

(d) Lender's Policy. A reputable title company approved by the Trust has provided, or is ready to provide, an ALTA Lender's Policy of Title Insurance, together with such endorsements as the Trust may require, in an amount equal to the principal amount of the Loan, insuring the priority of the Deed of Trust and Regulatory Agreement as liens or charges upon the Property, subject only to such exceptions and exclusions as may be reasonably acceptable to the Trust, and containing such endorsements as the Trust may reasonably require. The cost of such policy and endorsements shall be the responsibility of the Borrower.

(e) Permits. Borrower has received all permits, including but not limited to building permits, necessary to perform the construction of the ADU.

(f) Other Financing. If Borrower is utilizing financing other than the Loan proceeds for the construction of the ADU (“Other Financing”), Borrower has provided documentation to the Trust's satisfaction that the sum of the undisbursed proceeds of the Loan, together with the proceeds of the Other Financing that Borrower has obtained, is not less than the amount that is necessary to pay for construction of the ADU. The sum of the Loan and the Other Financing shall not exceed One Hundred Twenty Percent (120%) of the expected cost of construction of the ADU. The Other Financing shall be disbursed prior to the Trust’s disbursement of the Loan.

(g) Approval of ADU Plans. Borrower has submitted to the Trust, and the Trust has approved, the plans for the ADU (“ADU Plans”). The ADU Plans shall be consistent with the “Scope of Work” which is attached hereto as Exhibit E and incorporated herein.

(h) Approval of ADU Budget. Borrower has submitted to the Trust, and the Trust has approved, a budget for the construction of the ADU (“ADU Budget”).

(i) Contractor and Construction Contract Approval. Borrower has submitted to the Trust, and the Trust has approved, the identity of the Contractor for the construction of the ADU in accordance with Section 4(c) hereof. In addition, Borrower shall have submitted to the Trust, and the Trust shall have approved, the construction contract between the Borrower and the Contractor for the construction of the ADU in accordance with Section 4(c) hereof.

(j) Insurance. Borrower has submitted to the Trust all certificates of insurance required by Section 6 hereof.

SECTION 4. Compliance with Approved Construction Plans; Disbursement and Use of Loan Proceeds. Provided that all of the conditions precedent to disbursement of the Loan proceeds in Section 3 above have been either satisfied or waived in writing by the Trust, the Trust will disburse the Loan to Borrower. The Trust may, in its sole discretion, disburse the Funds to an escrow company or other intermediary which would disburse funds and undertake the Trust’s other obligations hereunder (“Construction Escrow”).

(a) Base Component Eligible Uses. Borrower shall use the proceeds from the Loan only for following costs of construction of the ADU on the Property, in accordance with the Scope of Work and approved ADU Plans and ADU Budget (“Eligible Uses”):

Construction materials and labor;

(i) General contractor fees and overhead,

(ii) Demolition necessary for the construction of the ADU;

(iii) Site work, such as water, sewer, or septic connections; utility improvements; or site leveling as is necessary for the construction of the ADU;

(iv) Permit costs; and

(v) Other hard or soft costs approved at the sole and reasonable discretion of the Trust.

(b) Ineligible Uses. The Trust will determine, in its sole and reasonable discretion, costs deemed excessive, unreasonable or not in accordance with the approved ADU Budget, or uses with are not Eligible Uses (“Ineligible Uses”). Ineligible Uses included in project costs will be noted by the Trust at the time of Loan funding, and the Trust will not disburse Loan funds for Ineligible Uses. If the Trust determines that Loan proceeds that have previously been disbursed will not or cannot be used for the Eligible Uses described in Borrower's application, Borrower shall return the Loan proceeds upon the Trust's written demand. Borrower's failure to return such proceeds within fifteen (15) days following the Trust's written demand will constitute a Default (as defined in Section 9 of this Agreement) entitling the Trust to pursue remedies pursuant to Section 10 of this Agreement.

(c) Contract for Work. Borrower agrees to enter into an agreement for the construction of the ADU on the Property with a contractor acceptable to the Trust (the "Contractor"). In order to be approved by Trust, the Contractor (i) be duly licensed in good standing with the California State Contractor’s Licensing Board, and (ii) have successfully completed all previous ADUs financed by the Trust, if any. Prior to entering into such an agreement, the Trust shall review and approve the construction contract. The construction contract shall require Contractor to construct the ADU in accordance with all applicable laws, including state prevailing wage laws if applicable, with the Contractor responsible for determining what laws are applicable to the construction of the ADU. Borrower agrees to complete all rehabilitation work within ____________ (__) days after entering into a construction contract with Contractor for the work specified in such agreement, unless Trust approves a longer period of time in writing for the completion of the work. Failure to timely commence or complete the work within the period specified above or by Trust in writing, shall be a violation of this Agreement and grounds for the Loan to be immediately due and payable.

Borrower agrees to promptly notify Lender of any disputes between Borrower and Contractor.

(d) Drawdown of Proceeds. Loan proceeds will not be disbursed until all other sources of construction financing have been previously disbursed. When Borrower's contractor is ready to receive funds for completed work, Borrower must submit a Trust Funding Request Form to the Trust. The Trust shall approve the request based on approved project costs and issue the funds in a timely manner. An onsite inspection may be required and completed after the request is made and before disbursement to ensure the amount requested matches the work completed.

(e) Borrower Responsibility for Supervision of Work. Borrower hereby acknowledges and agrees that Borrower is solely responsible for the complete supervision, inspection, compliance with building permits, and acceptance of the construction work, materials and processes involved in Borrower's ADU construction project, and that Contractor's work is in accordance with the approved construction contract. Borrower further acknowledges and agrees that Lender is not responsible for any failure of Contractor to fulfill the work specified in the approved construction contract. Lender, or its authorized designee, shall have the right but not the duty to inspect all construction work financed, in whole or in part, with the proceeds of the Loan.

SECTION 5. Representations and Warranties. Borrower represents and warrants to the Trust as follows, which representations and warranties will be true and correct as of the Effective Date, and acknowledges, understands, and agrees that the representations and warranties set forth in this Section are deemed to be continuing during all times when any portion of the Loan remains outstanding:

(a) Except for mortgages secured by the Property and other liens previously disclosed to the Trust, there are no other liens or monetary judgments recorded against the Property.

(b) At the time of recordation of the Deed of Trust, Borrower will have good and marketable fee title to the Property.

(c) At the time of recordation of the Deed of Trust, Borrower occupies the Property and will continue to occupy the Property as Borrower’s principal residence through the Term (as defined in Section 7 of this Agreement).

(d) All information provided by Borrower to the Trust in connection with Borrower’s application for the Loan is true and correct, to Borrower’s knowledge.

SECTION 6. Insurance Requirements.

(a) Borrower shall carry and maintain during the Term of this Agreement a policy of homeowner’s insurance. The policy will be written on a full replacement value basis and will name the Trust as loss payee as its interest may appear. The full replacement value of the improvements to be insured will be determined by the company issuing the policy at the time the policy is initially obtained. Not more frequently than once every two (2) years, the Trust will have the right to notify Borrower that it elects to have the replacement value re-determined by the insurance company. Subject to the rights of any senior lienholder, the proceeds collected under any insurance policy may be applied by the Trust to any indebtedness evidenced by this Agreement or secured by the Deed of Trust and in such order as the Trust may determine, or at the option of the Trust, the entire amount so collected or any part of the amount may be released to Borrower; provided however, if Borrower is not in default under the Loan Documents, the proceeds will be released to Borrower to repair or rebuild the improvements provided that sufficient additional sources of financing to complete such repair or rebuilding are available to complete such work. Such application or release will not cure or waive any default or notice of default under this Agreement or invalidate any act done pursuant to such notice.

(b) The Borrower shall require the Contractor to carry and maintain during the construction of the ADU a policy of Commercial General Liability (CGL) insurance, with policy limits not less than $1,000,000 in aggregate and $1,000,000 for each occurrence covering bodily injury and property damage with the following features: (a) CGL primary insurance endorsement; and (b) CGL policy will include an endorsement which names Trust, its members, employees, and officers as additional insureds.

(c) Each policy of insurance obtained pursuant to this Agreement shall contain endorsements which provide (i) a waiver by the insurer of the right of subrogation against Trust and its members, employees, and officers for negligence of any such person, and (ii) a notice of cancellation or change in coverage endorsement which shall provide that such policy shall not be cancelled or materially changed without at least thirty (30) days’ prior written notice to Trust.

Each policy shall be written as a primary policy not contributing with and not in excess of coverage that may be carried by Trust.

SECTION 7. Term of Agreement. The term of this Agreement commences on the Effective Date and continues until the Loan has been repaid in full (the "Term"); provided however, all provisions of this Agreement that expressly provide for continuation beyond the termination of this Agreement will survive beyond the end of the Term.

(a) Extension of Term of Agreement. Should Borrower opt to extend the term of the Regulatory Agreement, pursuant to Section 3.3 of the Regulatory Agreement, the Term of this Agreement will automatically be extended to continue through the new date of expiration of the Regulatory Agreement.

SECTION 8. Termination by Borrower. If during the Term, Borrower desires to no longer participate in the Program and to terminate this Agreement, Borrower shall notify the Trust in writing and shall repay the entire outstanding balance of the Loan (principal plus interest) within ninety (90) days from the date of Borrower's written notification to the Trust. This Agreement shall terminate upon the Trust's receipt of payment in full of the outstanding principal and interest balance of the Loan.

SECTION 9. Events of Default. Each of the following constitutes a "Default" by Borrower under this Agreement:

(a) Borrower fails to pay the principal and other sums payable when such payment is due pursuant to the Note, and such failure continues for fifteen (15) days after Trust notifies Borrower of the failure in writing.

(b) Borrower fails to duly perform, comply with, or observe any of the conditions, terms, or covenants of the Loan Documents or this Agreement, and such failure continues beyond the expiration of the applicable cure period or if there is no applicable cure period, continues beyond thirty (30) days after written notice from the Trust specifying the default (provided that, in the event of a shorter cure period as set out below or in other Loan Documents, such shorter cure period prevails).

(c) Any of Borrower's representations or warranties in the Loan Documents and/or in Borrower's application for the Loan will prove to have been untrue in any material respect when made, or Borrower will have concealed any material fact from the Trust.

(d) The sale, lease, or change in title or ownership of the Property except as provided in Section 5.6 of the Regulatory Agreement.

(e) A default arises under any loan secured by a mortgage, deed of trust, or other security instrument recorded against the Property and remains uncured beyond any applicable cure period such that the holder of such security instrument has the right to accelerated repayment of such loan.

(f) Subject to Borrower's right to contest the following charges, Borrower's failure to pay taxes or assessments due on the Property or the improvements or failure to pay any other charge that may result in a lien on the Property or the improvements, and Borrower's failure to cure such default within thirty (30) days of delinquency, but in all events prior to the date upon which the holder of any such lien has the right to foreclose on such lien.

Borrower's election not to rent the ADU to an Eligible Tenant Household at an Affordable Rent (as those terms are defined in the Regulatory Agreement) pursuant to the Regulatory Agreement shall not be considered a Default hereunder.

SECTION 10. Remedies.

(a) The occurrence of any Default following the expiration of all applicable notice and cure periods will, either at the option of the Trust or automatically where so specified, relieve the Trust of any obligation to make or continue the Loan and will give the Trust the right to proceed with any and all remedies available under law, in equity, or set forth in this Agreement and the Loan Documents, including but not limited to the following:

(i) Acceleration of Note. The Trust may cause all indebtedness of Borrower to the Trust under this Agreement and the Note, together with any accrued interest on the Note, to become immediately due and payable. Borrower waives all right to presentment, demand, protest or notice of protest or dishonor. The Trust may proceed to enforce payment of the indebtedness and to exercise any or all rights afforded to the Trust as a creditor and secured party under the law including the Uniform Commercial Code, including foreclosure under the Deed of Trust. Borrower is liable to pay the Trust on demand all reasonable expenses, costs and fees (including, without limitation, reasonable attorneys' fees and expenses) paid or incurred by the Trust in connection with the collection of the Loan and the preservation, maintenance, protection, sale, or other disposition of the security given for the Loan.

(ii) Specific Performance. The Trust has the right to mandamus or other suit, action or proceeding at law or in equity to require Borrower to perform its obligations and covenants under the Loan Documents or to enjoin acts or things that may be unlawful or in violation of the provisions of the Loan Documents.

(iii) Right to Cure at Borrower's Expense. The Trust has the right (but not the obligation) to cure any monetary default by Borrower under a loan other than the Loan. Upon demand for reimbursement, Borrower will reimburse the Trust for any funds advanced by the Trust to cure such monetary default by Borrower, together with interest on the funds advanced from the date of expenditure until the date of reimbursement at the Default Rate (as defined in the Note).

(b) Borrower may contest in good faith any claim, demand, levy, or assessment the assertion of which would constitute a Default. Any such contest is to be prosecuted diligently and in a manner unprejudicial to the Trust or the rights of the Trust.

(c) No right, power, or remedy given to the Trust by the terms of this Agreement or the other Loan Documents is intended to be exclusive of any other right, power, or remedy; and each and every such right, power, or remedy is cumulative and in addition to every other right, power, or remedy given to the Trust by the terms of any such instrument, or by any statute or otherwise against Borrower and any other person. Neither the failure nor any delay on the part of the Trust to exercise any such rights and remedies will operate as a waiver of the Trust rights or remedies, nor does any single or partial exercise by the Trust of any such right or remedy preclude any other or further exercise of such right or remedy, or any other right or remedy.

SECTION 11. Indemnification. Borrower agrees to accept all responsibility for loss, damage or injury to any person or entity, and to the greatest extent permitted by law, Borrower will indemnify, defend (with counsel approved by the Trust) and hold the Trust and its members, elected and appointed Board members and officers, officials, employees, agents, consultants, contractors and representatives (collectively, the "Indemnitees") harmless from and against all liability, loss, cost, expense (including without limitation attorneys' fees and costs of litigation), claim, demand, action, suit, judicial or administrative proceeding, penalty, deficiency, fine, order, and damage (all of the foregoing collectively "Claims") arising directly or indirectly, in whole or in part, as a result of or in connection with this Agreement, the construction work, the ADU, or any failure to perform any obligation as and when required by the Loan Documents.

Borrower's indemnification obligations set forth in this Section: (i) will survive the expiration or earlier termination of this Agreement; and (ii) will not extend to Claims to the extent arising from the gross negligence or willful misconduct of the Indemnitees. The Trust does not and will not waive any rights against Borrower that the Trust may have by reason of any indemnity and hold harmless provision set forth in this Agreement because of the acceptance by the Trust, or the deposit with the Trust by Borrower, of any of the insurance policies described in the Loan Documents.

SECTION 12. General Provisions.

(a) Titles. The titles and article or section headings are inserted only for convenience and are in no way to be construed as a part of this Agreement or as a limitation on the scope of the particular provisions to which they refer.

(b) Severability. If any term of this Agreement (including any phrase, provision, covenant, or condition) is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the provisions will continue in full force and effect unless the rights and obligations of the Parties have been materially altered or abridged by such invalidation, voiding, or unenforceability.

(c) Applicable Law and Venue. This Agreement is governed by and construed in accordance with the laws of the State of California. Venue for any action with respect to this Agreement is the State Courts for Orange County and Central District of California for Federal Court actions.

(d) Attorneys' Fees. Each party to this Agreement shall bear its own attorneys’ fees and costs in the event of any action or proceeding in court or any other dispute resolution mechanism permitted under this Agreement which is commenced by either party to interpret or enforce the terms of this Agreement or where any provision hereof is asserted as a defense.

(e) Modifications. This Agreement may not be modified or amended in any respect, except by written instrument specifically referencing such a modification or amendment which is executed by both of the Parties in the same manner as this Agreement is executed.

(f) Waivers. Any waiver by the Trust of any term or provision of this Agreement must be in writing. No waiver will be implied from any delay or failure by the Trust to take action on any breach or Default under this Agreement or to pursue any remedy allowed under this Agreement or applicable law. Waiver of a breach or Default under this Agreement will not constitute a continuing waiver or a waiver of a subsequent breach of the same or any other provision of this Agreement. Any extension of time granted to Borrower to perform any obligation under this Agreement will not operate as a waiver or release from any of its obligations under this Agreement.

(g) Time. In all matters under this Agreement, the Parties agree that time is of the essence. References in this Agreement to days will be to calendar days. If the last day of any period to give or reply to a notice, meet a deadline or undertake any other action occurs on a Saturday, Sunday or Federal or State holiday, then the last day for giving or replying to such notice, meeting such deadline or undertaking any such other action will be the next succeeding Business Day.

(h) Exhibits. The following exhibit is attached to this Agreement and incorporated into this Agreement by reference:

EXHIBIT A: Legal Description of the Property EXHIBIT B: Promissory Note EXHIBIT C: Deed of Trust EXHIBIT D: Regulatory Agreement EXHIBIT E: Scope of Work

(i) Entire Understanding of the Parties. The Loan Documents constitute the entire agreement of the Parties with respect to the Loan.

(j) Notices. Except for any notice, demand, or communication required under applicable law to be given in another matter, all notices, demands, and communications to be sent pursuant to this Agreement will be made in writing, and sent to the Parties at their respective addresses specified below or to such other address as a Party may designate by written notice delivered to the other Parties in accordance with this Section. All notices demands or communications will be sent by: (i) personal delivery, with a delivery receipt; (ii) certified mail, return receipt requested; or (iii) nationally recognized overnight courier, with charges prepaid or charged to the sender's account with a delivery receipt. Delivery will be deemed to have occurred on the date shown on the delivery receipt as the date of delivery, the date delivery was refused, or the date on which the item was returned as undeliverable. Either Party may change the address to which notices are to be sent by notifying the other Parties of the new address, in the manner set forth above.

Trust: Orange County Housing Finance Trust 1 League #62335 Irvine, CA 92602 Attention: Manager

Borrower: At the Property address

(k) Trust Approval. The Board of Directors of the Orange County Housing Finance

Trust has authorized the Manager of the Trust to execute the Loan Documents and deliver such approvals or consents as are required by this Agreement. Any consents or approvals required under this Agreement will not be unreasonably withheld or made, except where it is specifically provided that a sole discretion standard applies.

(l) Parties Not Co-Venturers; Independent Contractor; No Agency Relationship; No Third-Party Beneficiaries. Nothing in this Agreement is intended to or will establish the Parties as partners, co-venturers, or principal and agent with one another. The relationship of Borrower and the Trust will not be construed as a joint venture, equity venture, partnership or any other relationship. The Trust neither undertakes nor assumes any responsibility or duty to Borrower (except as expressly provided in this Agreement) or to any third party. This Agreement is not intended to, nor will it establish any third-party beneficiaries. Borrower will at no time pretend to be or hold themselves out as an employee or agent of the Trust. Except as the Trust may specify in writing, Borrower will not have any authority to act as an agent of the Trust or to bind the Trust to any obligation.

(m) Non-Liability of the Trust and Trust Officials, Employees and Agents. No elected and appointed officer, official, employee, agent, consultant, contractor or representative of the Trust will be personally liable to Borrower or any successor in interest of Borrower, in the event of any default or breach by the Trust, or for any amount of money which may become due to Borrower or Borrower's successor or for any obligation of the Trust under this Agreement.

(n) Joint and Several Obligations. If more than one person has executed this Agreement as Borrower, the obligations of each such person under this Agreement will be joint and several.

(o) Counterparts. This Agreement may be executed in multiple counterparts, each of which is deemed to be an original, and all of which taken together will constitute one and the same instrument.

(p) Borrower Signatures. The individual(s) executing this Agreement on behalf of Borrower represent and warrant that they have the right, power, legal capacity, and authority to enter into and to execute this Agreement on Borrower.

(q) Transfer of Loan. The Trust may assign or transfer this Agreement, the Loan and the Loan Documents at any time in its sole discretion.

[Signatures on following page.]

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the Effective Date.

TRUST:

ORANGE COUNTY HOUSING FINANCE TRUST,

a California joint powers authority

By:

Name:

APPROVED AS TO FORM BY:

Trust Legal Counsel

BORROWER:

Name:

EXHIBIT A

LEGAL DESCRIPTION OF PROPERTY

[To Be Inserted]

EXHIBIT B

PROMISSORY NOTE

EXHIBIT C

DEED OF TRUST

EXHIBIT D

REGULATORY AGREEMENT

EXHIBIT E

SCOPE OF WORK

5501419.1

2.2 Property Management Costs. The maximum amount of the Loan may be increased by the cost of professional property management services, provided by a property management company that has been pre-approved by the Trust, necessary for the selection and...