October 19, 1999

Honorable Board of Commissioners

Community Development Commission

of the County of Los Angeles

383 Kenneth Hahn Hall of Administration

500 West Temple Street

Los Angeles, California 90012

Dear Commissioners:

DISPOSITION AND DEVELOPMENT AGREEMENT WITH
INDUSTRY SHERIFF'S YOUTH ACTIVITIES LEAGUE
TO DEVELOP NINE HOMES IN UNINCORPORATED VALINDA (1)
(3 Vote)

IT IS RECOMMENDED THAT YOUR BOARD:

Approve a Disposition and Development Agreement (DDA), in substantially the form of the attached, between the Community Development Commission and the Industry Sheriff's Youth Activities League, a non-profit corporation (the Developer), to develop nine single family, for-sale homes on two Commission-owned properties located at 537 North Azusa Avenue and 17062 Wing Lane in unincorporated Valinda (the Site).

Authorize the Executive Director of the Community Development Commission to prepare and execute all documents required for the purposes described above, including documents which are required for subordination of the Commission's loans.

PURPOSE OF RECOMMENDED ACTION:

The purpose of this action is to approve a DDA, and related actions, to develop nine units of single family for-sale housing in unincorporated Valinda.

JUSTIFICATION:

The proposed DDA will assist the Developer in purchasing and developing affordable for-sale housing for low-income families whose incomes are equal to or less than 80 percent of area median income for the Los Angeles-Long Beach Metropolitan Statistical Area, adjusted for household size, as defined by U.S. Department of Housing and Urban Development (HUD). The DDA will also provide secondary and tertiary financing to the low-income homebuyers.

FISCAL IMPACT:

There is no impact on the County general fund.

FINANCING:

In 1994, the Commission purchased the North Azusa Avenue property to develop public housing, which is no longer feasible due to the recession of funds from HUD. In 1999, the adjacent Wing Lane property was acquired to increase the total site to better accommodate a single family development. Both properties were purchased with CDBG funds allocated to the First Supervisorial District.

The Commission proposes to sell the Site to the Developer for $546,500, the total amount originally paid by Commission for the two properties. The Commission will provide a non-funded Site Purchase Loan to the Developer, in the amount of $546,500, which will be secured by a Promissory Note and Deed of Trust. During the construction phase of the development, the Site Purchase Loan will become subordinate to a Developer-secured private construction loan in the amount of $1,190,830.

A grant of up to $160,000 will also be provided to the Developer to construct off-site improvements, including site engineering, permits, fees and consultant services. The grant will be funded using CDBG funds allocated to the First Supervisorial District. Additionally, the Developer will defer $158,400 in fees, including developer fees and costs of sale.

The Developer intends to form a single asset, non-profit corporation prior to the close of escrow on the Site. The Developer will assign its development rights to the new non-profit corporation, which will be controlled by the Developer. The new non-profit corporation will enter into an agreement with Abell-Helou, G.P., an experienced home builder, to develop the Site for the Developer.

The homes will be sold for the fair market value, as determined by a Commission-approved appraisal upon the completion of construction or at the time of sale. It is anticipated that the homes will sell for $170,000 each. Individual homebuyers will provide approximately $110,287 toward the purchase price, using private funds from a Commission-approved mortgage lender and other sources. The Developer will apply for secondary financing from City of Industry Redevelopment Housing Set-Aside Funds (Industry Funds) to provide each homebuyer with a minimum of $39,628 in secondary financing. This commitment will be evidenced by an award to the Developer for the qualified homebuyers. Additionally, the Commission will permit the Developer to convert up to $60,722 per home from funds, which would otherwise be used to repay a portion of the Site Purchase Loan, to make third trust deed loans (tertiary financing) to individual homebuyers. Tertiary financing will not be funded, but secured by a Tertiary Promissory Note and Tertiary Deed of Trust. Any funds not converted into tertiary financing will be considered a land write-down and will convert into a grant to the project.

Industry Funds are administered by the County Housing Authority to help finance the development of affordable housing within a 15-mile radius of the City of Industry. In the event the Developer is unsuccessful in receiving an allocation of Industry Funds through a Request For Proposal process, the Commission will not proceed with disposition of the site, and the Developer will be relieved of its obligations under the DDA.

The total development cost is anticipated to be $2,055,730. A Financial Analysis is provided as Exhibit A.

FACTS AND PROVISION/LEGAL REQUIREMENTS:

The proposed project is being federally funded, and is not subject to the requirements of the Greater Avenues for Independence (GAIN) Program implemented by the County of Los Angeles. Instead, the Developer must comply with Section 3 of the Housing and Community Development Act of 1968, as amended, which requires that employment and other economic opportunities generated by certain U.S. Department of Housing and Urban Development (HUD) assistance be directed to low- and very low-income persons, particularly to persons who are recipients of HUD housing assistance.

The DDA is being presented in substantially final form. It will be effective following approval as to form by County Counsel and execution by all parties.

IMPACT ON CURRENT PROGRAM:

Approval of the DDA will increase the number of affordable homes in Los Angeles County.

Respectfully submitted,

CARLOS JACKSON

Executive Director

Attachments: 2

ATTACHMENT A

FINANCIAL ANALYSIS

Azusa-Wing Lane Development
537 North Azusa Avenue & 17062 Wing Lane, unincorporated Valinda

The proposed project will consist of nine single family for-sale homes to be constructed on two adjacent Commission-owned properties located at 537 North Azusa Avenue and 17062 Wing Lane, unincorporated Valinda. All nine homes will be reserved for qualified low-income homebuyers with incomes equal to or less than 80 percent of the area median income for the Los Angeles/Long Beach Metropolitan Statistical Area (MSA) as established by the U.S. Department of Housing and Urban Development (HUD), adjusted for family size. The following is a financial analysis of the development based on current available data on development costs, buyer funds and sale prices. The final sales price for each home will be determined by appraisal following the completion of construction.

In the event the Developer does not receive the minimum allocation of Industry Funds, as outlined below, the project will not proceed.

Development Phase:

    

Total

Per Home

         

Sources

        

Commission Acquisition Loan (CDBG)

  

$546,500

$60,722

Commission Off-Sites Grant (CDBG)

    

$160,000

$17,778

Deferred Developer Costs

   

$158,400

$17,600

Construction Loan (Private)

   

$1,190,830

$132,314

Total

    

$2,055,730

$228,414

         

Uses

        

Total Development Cost

    

$2,055,730

$228,414

         

Permanent Phase:

        
         

Sources

       

Homebuyer Sources (Private)

    

$992,580

$110,287

2nd Trust Deeds (Industry Funds)

    

$356,650

$39,628

3rd Trust Deeds (CDBG Land-write Down)

$546,500

$60,722

Commission Off-Site Grant (CDBG)

    

$160,000

Total

    

$2,055,730

$228,414

         

Uses

        

Total Development Cost

    

$2,055,730
$228,414

DISPOSITION AND DEVELOPMENT AGREEMENT

BY AND BETWEEN

COMMUNITY DEVELOPMENT COMMISSION
OF THE COUNTY OF LOS ANGELES

AND

INDUSTRY SHERIFF'S YOUTH ACTIVITIES LEAGUE
A NON PROFIT CORPORATION

October, 1999

TABLE OF CONTENTS

TRANSACTION SUMMARY 1

R E C I T A L S 2

1. COMMISSION LOANS AND LAND WRITE-DOWN GRANT 3

2. RESERVED 4

3. OTHER FINANCING 5

4. SALE AND PURCHASE OF THE SITE/ ENTITLEMENTS 5

5. PROJECT CONSTRUCTION 19

6. SALE OF ASSISTED UNITS TO QUALIFIED BUYERS 33

7. DEVELOPER'S OBLIGATION TO REFRAIN FROM DISCRIMINATION 35

8. DEVELOPER'S CONSTRUCTION AND OTHER COVENANTS 36

9. INDEPENDENT CONTRACTOR 37

10. ASSIGNMENT OF THIS AGREEMENT 37

11. EVENTS OF DEFAULT AND REMEDIES 38

12. OFFSITE IMPROVEMENTS 41

13. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES 42

14. RIGHT OF ACCESS AND INSPECTION 42

15. CONFLICT OF INTEREST; NO INDIVIDUAL LIABILITY 42

16. AMENDMENTS, CHANGES AND MODIFICATIONS 42

17. EXECUTION OF COUNTERPARTS 43

18. NOTICES 43

19. SEVERABILITY 43

20. INTERPRETATION 44

21. NO WAIVER; CONSENTS 44

22. GOVERNING LAW 44

23. TERMINATION FOR IMPROPER CONSIDERATION 44

24. COMMISSION'S QUALITY ASSURANCE PLAN 44

25. DEVELOPER'S WARRANTY ADHERENCE TO COUNTY'S CHILD SUPPORT COMPLIANCE PROGRAM 45

26. RESERVED 45

28. CONFLICT OF INTEREST 45

29. COMPLIANCE WITH LAWS 45

30. ACCESS AND RETENTION OF RECORDS 48

31. REPRESENTATIONS AND WARRANTIES OF DEVELOPER 48

32. APPROVALS 50

33. GOOD FAITH AND FAIR DEALING 50

34. ASSIGNMENT OF INTEREST IN THE SITE OR THE PROJECT 50

TABLE OF EXHIBITS I

DISPOSITION AND DEVELOPMENT AGREEMENT

CDBG Fund - Project No. G89101

Transaction Summary

Project Name: AZUSA-WING LANE

Developer Name: Industry Sheriff's Youth Activities League, a Non-Profit Corporation

_ Limited Partnership _ LLC [X] Nonprofit Public Benefit Corporation Other

Jurisdiction of Borrower Entity: Los Angeles County

Total Number of Units in Project: 9 Location (Jurisdiction): Unincorporated Valinda

_ Incorporated [X] Unincorporated Total Project Sites/Acreage: Two adjacent parcels totaling 1.09 acres for the purpose of developing and constructing nine single family for-sale homes.

Project Type: Single Family For-Sale

Affordability (# assisted units, income levels): All Nine (9) Units to be developed shall be called Assisted Units and marketed and sold to low-income, qualified Buyers whose household incomes do not exceed eighty percent (80%) of the area median income.

Maximum Total Site Purchase Loan Allocation for All Units Combined: $546,500

Maximum Site Purchase Loan Per Unit: $60,722

Repayment Terms on Tertiary Financing Loans: "Silent Third" payable on sale or transfer of Unit,

with Shared Appreciation Feature.

Other Anticipated Financing Sources for Unit Purchasers / Priority Relative to Industry Loan:

(1) Pacific Western National Bank X senior _ junior _ parity/NA

(2) Industry Fund X senior _ junior parity/NA

(3) CDBG Grant _ senior _ junior [X] parity/NA

The foregoing Transaction Summary is provided for the convenience of the parties. In case of any conflict, the detailed terms below and/or in the attachments to this Loan Agreement shall control.

THIS DISPOSITION AND DEVELOPMENT AGREEMENT ("Agreement") is made as of the day of , 1999, by and between the COMMUNITY DEVELOPMENT COMMISSION COUNTY OF LOS ANGELES, a public body corporate and politic (herein referenced as "Commission"), and the developer entity listed in the Transaction Summary above ("Developer"). The Commission and Developer are sometimes referred to collectively herein as the "Parties" and each individually as a "Party."

R E C I T A L S

A. WHEREAS, Developer intends to purchase two parcels of land from the Commission in order to develop the housing development ("Project') described in the Transaction Summary above. The Project will be developed on sites ("Site") legally described on Exhibit "B-1" to this Agreement. A detailed Project description is attached hereto as Exhibit "B-2" and reduced site plans and elevations for the Project are attached hereto as Exhibit "B-3."

B. WHEREAS, upon completion of the Project, Developer intends to sell all of the "Units" (as defined in Section 5.1) in the Project at an "Affordable Housing Cost" to "Qualified Buyers" (as those two terms are defined in Section 6.1).

C. WHEREAS, Commission's commitment to sell the land and provide Developer with a land acquisition loan ("Site Purchase Loan") and Tertiary Financing ("Tertiary Financing") to Qualified Buyers of Units in the Project under the terms and conditions set forth in this Agreement will benefit both Developer and Commission by increasing the marketability of the Project and providing affordable housing opportunities for persons of "Lower Income" as specified herein and in the Transaction Summary above.

E. WHEREAS, as more particularly described below, Developer will deliver to the

Commission, among other items, the "Promissory Note," the "Purchase Deed of Trust" and the Covenants, Conditions & Restrictions ("CC&R's"; as those terms are defined in Exhibit "A") to, respectively, evidence and secure repayment of the Site Purchase Loan and ensure that the affordability and habitability of the Project is maintained in accordance with the terms of those instruments and this Agreement.

NOW, THEREFORE, the Parties agree as follows:

A G R E E M E N T

1. COMMISSION LOANS AND LAND WRITE-DOWN GRANT

1.1 Site Purchase Loan

Commission agrees, subject to the terms and conditions of this Agreement, to make the Site Purchase Loan in order to facilitate the development of a total of nine (9) single family for-sale units in the Project. All nine units shall be call "Assisted Units." The Site Purchase Loan will be a non-funded loan totaling $546,500. The Site Purchase Loan will be evidenced by a promissory note in the form set forth on the attached Exhibit "D-1" (the "Promissory Note"). The remaining funds needed to complete the development of the Site will come from other funds obtained by the Developer as described in Sections 3 and 4.12.a. The Site Purchase Loan shall be secured by a deed of trust in the form attached hereto as "Exhibit D-2" (the "Deed of Trust").

Except for the default interest provisions in the Promissory Note, the disbursed and unpaid principal balance of the Site Purchase Loan shall accrue interest at the rate of zero percent (0%) per annum, simple interest commencing on the date of the close of the Purchase Escrow, and ending on the date when all sums are paid, as provided herein and in the Promissory Note. Interest shall be computed on the basis of actual number of days elapsed and a 365-day year. Absent an Event of Default or any other event of acceleration under this Agreement or the Note, and subject to the debt conversion as described below and in the Note, all principal due under the Site Purchase Loan will be due and payable in proportional increments equal to the amount of the Site Purchase Loan attributable to that Assisted Unit as it is sold to a Qualified Buyer. Interest and all other charges due under the Site Purchase Loan shall also be due and payable on the dates the Assisted Units are sold, the amounts of such payments being as set forth in the Promissory Note.

All or a part of sums payable at the sale of each Assisted Unit may be converted into Tertiary Financing or Land Write-Down Grants (as described below in Section 1.2 and 1.3).

Notwithstanding the payment terms set forth above, upon the occurrence of any "Event of Default" as set forth in Section 11 below, the entire outstanding principal balance of the Promissory Note, together with any outstanding interest and other amounts payable thereunder, shall, at the election of the Commission and, where required under this Agreement, upon notice to Developer thereof, become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Developer. Except to the extent any Event of Default hereunder results directly or indirectly from any fraud or intentional and material misrepresentation by Developer in connection with this Agreement or the Site Purchase Loan, in the event of the occurrence of an Event of Default, the Commission's only recourse under the Deed of Trust shall be against the Site and the Project, the proceeds thereof, and other income arising from its use and occupancy as provided in the Deed of Trust, and any other collateral given to the Commission as security for repayment of the Site Purchase Loan.

At any time after the disbursement of the Site Purchase Loan funds to be disbursed under this Agreement, Developer may prepay all or a portion of the unpaid principal amount of the Site Purchase Loan and accrued interest and any other sums outstanding without penalty. Developer hereby agrees and understands that the prepayment of the Promissory Note shall not relieve Developer of the duty to comply with the covenants described in Sections 5.9, 6, 7, as well as the indemnities contained in Sections 4.11, 5.1g, 8.1 and any other indemnities and other obligations surviving this Agreement, and all such obligations and covenants shall remain in full force and effect pursuant to their terms. All payments or other reductions of outstanding Site Purchase Loan amounts, including any prepayments or funds received upon acceleration as described in this Section 1.1, shall be applied first toward any outstanding costs of collection or other amounts (excluding loan principal or interest thereon) due under the Promissory Note or this Agreement, then toward outstanding interest accrued at the "Default Rate" (as defined in the Promissory Note), if any, then toward any deferred principal, and finally toward the remaining principal balance under the Promissory Note.

The obligation of Developer to repay the Site Purchase Loan and all accrued interest thereon shall be absolute and unconditional, and until such time as all of the outstanding principal of and interest on the Promissory Note (as well as all other fees, charges and expenses due thereunder) shall have been fully paid, Developer agrees that it: (a) will use the funds disbursed under the Promissory Note solely for the purposes set forth herein; and (b) will not terminate or suspend any payment or obligations under this Agreement, the Promissory Note, the Deed of Trust or any other document executed hereunder or in connection herewith for any cause, including without limitation, any acts or circumstances that may constitute failure of consideration, commercial frustration of purpose, or any duty, liability or obligation arising out of or in connection with this Agreement or any document executed hereunder or in connection herewith.

1.2 Tertiary Financing

For each Qualified Buyer purchasing an Assisted Unit in the completed Project, the Commission agrees to allow a Tertiary Financing as defined in Section 5.12.

1.3 Land Write-Down Grants

In cases where the total actual, reasonable cost to develop a Assisted Unit, including all land acquisition and construction costs (the "Total Per Unit Development Cost") exceeds the appraised value of a Assisted Unit at the time of sale (as determined in accordance with Section 5.14), a portion of the Site Purchase Loan attributable to that Assisted Unit may be converted to a Land Write Down-Grant in accordance with Section 5.12 in an amount equal to the difference between the Total Per Unit Development Cost and such appraised value. The Commission shall have sole and absolute discretion to allocate between a Tertiary Financing and a Assisted Unit Grant all or part of the Site Purchase Loan attributable to the applicable Assisted Unit. In no event shall the sum of any Tertiary Financing and Land Write-Down Grant for a single Unit exceed $60,722.

2. Reserved

3. OTHER FINANCING

The Commission's obligation to provide the grant and loan funds referenced in this Agreement and to convey the Site to the Developer is, among other things, are contingent upon the Developer's receipt of Industry Financing which must be approved by the Commission and in sufficient amounts and with terms that, together with the Senior Construction Financing, any other Construction Loan, the Commission Assistance, and the Permanent Loans, allow for all nine units in the Project to be completed and sold to Qualified Buyers at an Affordable Housing Cost. At the time of execution of this Agreement, the Industry Financing is anticipated to be a loan from the Industry Fund program administered by the Housing Authority of the County of Los Angeles ("HACOLA") in the amount of Three Hundred Fifty Six Thousand Six Hundred Fifty Dollars ($356,650). The loan amount and terms of this Industry Financing shall be subject to approval by the Commission. Upon the sale of a Unit in the Project, the Industry Financing will take the form of secondary trust deed loans to the Qualified Buyer of a Unit ("Industry Financing Unit Assistance"). Certain financial assumptions relating to the development of the Project, including the contribution of the Industry Financing, are attached for informational purposes only as Exhibit "C" (the "Financial Assumptions"). The Developer acknowledges that the sources and uses information set forth in the Financial Assumptions may change, and that the Commission is not obligated to fund in accordance with the estimated projections set forth on the Financial Assumptions. To the extent there is any inconsistency between the terms and conditions of this Agreement and the Financial Assumptions, the terms and conditions of this Agreement shall control.

4. SALE AND PURCHASE OF THE SITE/ ENTITLEMENTS

4.1 Sale and Purchase of the Site

4.2 Escrow

At or prior to the close of the Purchase Escrow, as specified in the Schedule of Performance, the Commission shall deliver into escrow the Grant Deed and such other documents as may be reasonably required by the Escrow Holder or the title company issuing the title policies described in Section 4.6 (the "Title Company"); and the Developer shall deliver into escrow the documentation described in the Closing Conditions set forth in Section 4.17 (and such other documents as may be reasonably required by the Escrow Holder or the Title Company), and an amount equal to all costs associated with the close of the Purchase Escrow except for the Commission's prorated share of ad valorum taxes and assessments. The closing costs to be paid by Developer shall include, without limitation, any costs relating to the preparation of a survey, all title premium charges for the Developer's Title Policy even with respect to the standard premium for CLTA coverage, the title premium for the Commission Title Policy, recording fees, all escrow and notary fees, Developer's prorated share of any ad valorum taxes and assessments upon the Site, and any costs necessary to remove from title monetary liens which the Commission has not agreed to remove. Each Party shall be responsible for its own attorney's fees relating to the preparation and negotiation of this Agreement and the other documents attached hereto or referenced herein. The Developer and the Commission authorize Escrow Holder to pay all Project closing costs after the Escrow Holder has satisfactorily notified the Commission and Developer of the amount of such costs.

Any addition, deletion, or modification of any provision contained in escrow instructions referenced in this Section 4.2, shall be in writing and signed by both the Commission and the Developer.

All communications from the Escrow Holder to the Commission or the Developer shall be directed to the addresses and in the manner established in Section 18 of this Agreement for notices, demands, and communications between the Commission and the Developer.

The liability of the Escrow Holder under this Agreement is limited to performance of the obligations imposed upon it under this Section 4.2, and Sections 4.16 and 4.17.

Neither the Commission nor the Developer shall be liable for any real estate commissions or brokerage fees which may arise in connection with Developer's purchase of the Site hereunder. The Commission and the Developer each represent that neither has engaged any broker, agent, or finder in connection with this transaction. Each Party hereto agrees to defend, indemnify and hold harmless the other from and against all Losses and Liabilities (as hereinafter defined) with respect to any commissions owing to any individual or entity based upon the acts of such Party in connection with the Site.

As used in this Agreement, "Losses and Liabilities" shall mean liabilities, claims, losses, causes of action, charges, penalties, damages, costs and expenses (including costs of investigation and reasonable attorneys' fees and costs of counsel acceptable to the Commission), of whatsoever character, nature and kind, whether to property or person, whether by direct or derivative action, and whether known or unknown, suspected or unsuspected, latent or patent.

4.3 Conveyance of Title and Delivery of Possession

Possession of the Site shall be delivered to the Developer concurrently with the conveyance of title, except Developer may have limited access to the Site before conveyance of title as permitted in Section 4.11 of this Agreement. The Developer shall accept title and possession on or before the date specified in the Schedule of Performance.

4.4 Reserved

4.5 Condition of Title

The Commission shall convey the Site to the Developer, and the Developer shall accept the Site from the Commission subject to (i) the terms, conditions and provisions set forth in the Grant Deed, this Agreement, the Deed of Trust and the CC&R's; and (ii) such recorded easements, encumbrances, covenants, assessments, leases, taxes and other title matters (the "Title Matters") accepted by Developer in accordance with this Section. The Developer shall, within thirty (30) days after the date of this Agreement, deliver written notice to the Commission and the Escrow Holder approving or disapproving any such Title Matters and, in the event the Developer fails to deliver such notice, any Title Matters shall be deemed approved by the Developer. In the event that the Developer timely disapproves of any Title Matter, the Commission shall have thirty (30) days (the "Title Cure Period") after receipt of the notice of such disapproval to elect, by written notice to the Developer and to the Escrow Holder, to remedy such disapproval by agreeing, prior to the close of the Purchase Escrow, to obtain removal from title of the objectionable Title Matter or by obtaining an endorsement from the Title Company with respect to such Title Matter. In the event the Developer timely and reasonably disapproves of any Title Matter and the Commission does not elect during the Title Cure Period to remedy such disapproval in the manner set forth above, then the Developer may, as its sole and exclusive remedies, either, within ten (10) days after expiration of the Title Cure Period, terminate this Agreement by written notice to the Commission and the Escrow Holder, in which event neither Party hereto shall have any further obligation to the other hereunder, or proceed to the close of the Purchase Escrow, in which case the Developer agrees to purchase the Site subject to the disapproved Title Matters.

4.6 Title Insurance

In the event that the Title Company advises the Commission, the Developer or the Escrow Holder in writing that it is unwilling or unable to issue the Developer's Title Policy or the Commission Title Policy (as hereinafter defined) by the earlier of the satisfaction of all other Closing Conditions or the date set forth in the Schedule of Performance, then this Agreement may be terminated by either Party hereto by written notice to the other Party and the Escrow Holder in which event neither Party hereto shall have any further obligation to the other hereunder, provided, however, that in no event shall the Developer be permitted to terminate this Agreement pursuant to this Section 4.6 without first giving the Commission thirty (30) days written notice of its intent to so terminate this Agreement in order to give the Commission the opportunity to assist in obtaining a new title company to issue said policy or policies.

As a further condition to the close of the Purchase Escrow, the Title Company shall issue to the Commission a lender's policy of title insurance (with customary endorsements, including but not limited to Nos. 100, 103.7 and 116, and such other endorsements as the Commission shall reasonably require) in the amount of the Site Purchase Loan (the "Commission Title Policy") insuring the Commission's interest as beneficiary under the Deed of Trust, and specifically insuring that the lien of the Deed of Trust against the Property is subject only to the Senior Construction Financing and any exceptions to title applicable to the Site which were shown in a preliminary title report provided to the Commission by the Title Company and approved in writing by the Commission (collectively, with the Senior Construction Financing, "Permitted Senior Encumbrances"). Standard lender's title insurance coverage (without the need for a survey) will be accepted by the Commission unless another Project lender requires extended coverage, in which case an ALTA extended coverage policy will also be provided to the Commission.

4.7 Taxes and Assessments

Ad valorum taxes and assessments, if any, on the Site, and taxes upon this Agreement or any rights hereunder, levied, assessed, or imposed for any period prior to the conveyance of title shall be borne by the Commission. All ad valorum taxes and assessments levied or imposed after closing of the Purchase Escrow shall be paid by the Developer.

4.8 Conveyance Free of Possession

4.9 Zoning of the Site

As a condition to closing of the Purchase Escrow, the Developer at its sole cost and expense shall cause the zoning of the Site (including obtaining any conditional use permit, site plan approval, variance, and other permit or approval) to be such as to permit the development, construction, use, operation and maintenance of the Project in accordance with this Agreement. In the event that the Developer is unsuccessful prior to the date of the close of the Purchase Escrow (as set forth in the Schedule of Performance) to cause the zoning of the Site to conform to the zoning necessary to permit the development, construction, use, operation and maintenance of the Project as provided herein above, this Agreement may be terminated hereto by either Party by written notice and the Developer and Commission shall have no further obligation hereunder. However, in no event shall the Developer terminate this Agreement pursuant to this Section 4.9 without first giving the Commission thirty (30) days prior written notice of its intent to so terminate this Agreement in order to give the Commission the opportunity to cause such zoning to so conform. The Commission shall in no event have any responsibility to the Developer in the event the Commission is unsuccessful in obtaining any required zone changes or variances for the Site and the Developer's sole remedy in such event shall be to terminate this Agreement.

4.10 Condition of the Site

In particular, but not in limitation of the foregoing paragraph, the Commission shall not be responsible for any items of work on the Site, or matters caused by items of work on the Site, and it shall be the sole responsibility of the Developer to investigate and determine the conditions of the Site including without limitation the soils conditions and the suitability of such soil conditions for the Developer Improvements (as hereinafter defined) to be constructed by the Developer. If the soil conditions are not in all respects entirely suitable for the use or uses to which the Site will be put, then it is the sole responsibility and obligation of the Developer to take such action as may be necessary to place the soil conditions of the Site in a condition suitable for the development of the Site.

The Developer shall be responsible for the mitigation measures identified in the Environmental Assessment prepared by the Commission dated (which Developer acknowledges having received) to reduce impacts associated with the proposed development, including those measures described below:

4.11 Preliminary Work by the Developer

Prior to the conveyance of title from the Commission to the Developer, a representative of the Developer, upon at least twenty-four (24) hour prior notice to the Commission, shall have the right of access to the Site at all reasonable times for the purpose of obtaining data, making surveys, preparing plans and conducting tests necessary to carry out this Agreement. The Commission shall have access to all data and information on the Site readily available from the Developer, but without warranty or representing by the Developer as to the completeness, correctness, or validity of such data and information. In the event that the Commission has previously performed preliminary work at the Site, including but not limited to the preparation of plans, surveys or environmental studies, this information will be made available to the Developer, upon request, without warranty or representing by the Commission as to the completeness, or validity of such data and information.

Any preliminary work undertaken on the Site by the Developer shall be done only at the sole expense of the Developer. Copies of data, surveys, and tests obtained or made by the Developer on the Site shall be filed with the Commission. Any preliminary work by the Developer shall be undertaken only after securing any necessary permits from the appropriate governmental agencies.

The Developer shall indemnify and hold the Commission and the County and all officials, employees, agents, attorneys, and other representatives of the Commission and the County ("Commission/County Representatives"), and each of them, harmless from and against any and all Losses and Liabilities resulting from any injury, death, damage to person or property, or other damages including without limitation damages incurred by the Commission respecting any work in relation to those portions of the Site to entered by, or arising out of any activity of, the Developer or its contractors, subcontractors, agents, employees, invitees or licensees on, or relating to, such portions of the Site. Prior to entering onto any portion of the Site pursuant to this Section 4.11 the Developer shall obtain and deliver to the Commission a certificate(s) evidencing that the insurance coverage has been obtained which satisfies the requirements set forth in Section 5.1.g and 8.1 below, and protects against all such potential Losses and Liabilities and names the Commission and the County as additional insureds.

a. Construction Financing

As specified in the Schedule of Performance, the Developer shall prior to, and as a condition to, the close of the Purchase Escrow deliver to the Commission an irrevocable written commitment ("Construction Commitment"), subject to such standard and reasonable conditions as are customarily imposed on such a commitment by an institutional lender, from a Qualified Financial Institution (as defined in Section 4.13), which is licensed to do business in California ("Senior Construction Lender"), by which such Senior Construction Lender agrees to make the Senior Construction Financing available to the Developer for the development and construction of the Developer Improvements in accordance with this Agreement. The Construction Commitment shall be in an amount not less than $1,190,830 (or such higher amount which the Commission may give Developer written notice of prior to Developer's delivery to the Commission of a Construction Commitment satisfying the conditions of this Section 4.12), which amount represents 100% of estimated hard construction costs, and a portion of the estimated soft costs, less the off-site grant. In the event that the Developer is unable to secure a conventional loan for this amount or an amount deemed acceptable by the Commission, the Commission has the authority to terminate this Agreement without liability, by giving written notice of termination to Developer.

The documents evidencing the Senior Construction Financing shall provide that any proceeds from fire or extended coverage insurance shall be used for repair or rebuilding of the Developer Improvements financed or to be financed by the Senior Construction Financing, provided such proceeds are sufficient to so repair the Developer Improvements and not to repay the outstanding balance of the Senior Construction Financing. The Senior Construction Financing shall have a term of at least twelve (12) months, but shall be no longer than the period during which the Developer is obligated under this Agreement and the Schedule of Performance to complete and sell all 18 Units in the Project. The Senior Construction Financing shall be consistent with the terms and provisions of this Agreement and, to the extent not inconsistent with this Agreement, the Senior Construction Financing shall be subject to the Senior Construction Lender's usual and customary commercial terms and conditions. The Developer agrees to take all actions, furnish all information, give all consents and pay all sums required to keep the Construction Commitment and Senior Construction Financing in full force and effect and shall comply with all conditions thereof, and shall promptly execute, acknowledge and deliver all loan applications, credit applications and data, financial statements, and loan documents in connection therewith. The Developer agrees that it shall draw upon and utilize the Senior Construction Financing only for financing the development costs for the Site. In the event that the Commission determines that the Senior Construction Lender is unable to effectively monitor the disbursement of the Senior Construction Financing, the Commission shall give Developer notice of such determination and Developer shall exercise its best efforts to cause the Senior Construction Lender to agree to permit the Senior Construction Financing funds to be transferred to the Commission or its agent, in which case the Commission or its agent shall oversee the disbursement of such funds.

The Developer agrees that as a condition to the close of the Purchase Escrow it shall obtain written approval by the Commission of the Senior Construction Financing on or before the date specified in the Schedule of Performance. Such approval of the Senior Construction Financing will not constitute a waiver by the Commission of any breach or violation of this Agreement by the Developer that is a result of acts that purport to be in compliance with or in furtherance of the Senior Construction Financing.

In the event that the Developer is unsuccessful, by the dates set forth in the Schedule of Performance, in obtaining a Construction Commitment or obtaining approval of any such Construction Commitment obtained, this Agreement may be terminated by either Party hereto by written notice to the other Party, in which event neither Party hereto shall have any further obligation to the other hereunder.

4.13 Permanent Financing

The Developer shall work with one or more commercial lenders approved by the Commission for the transaction contemplated by this Agreement ("Participating Lender(s)") to ensure that fixed rate permanent mortgage loans are made available to each Qualified Buyer at the lowest commercially available rate and at the most favorable terms. To facilitate the most favorable terms being available to Qualified Buyers, the Developer must take the following actions:

c) Ensure, if mortgage revenue bond financing is not available or does not provide Qualified Buyers the most favorable financing terms, that Qualified Buyers are directed to lenders participating in any available first time home buyer or mortgage credit certificate programs offered by agencies operating in the jurisdiction containing the Site.

Prior to the deadline specified therefor in the Schedule of Performance, the Developer agrees to deliver to the Commission written commitment(s) ("Permanent Financing Interest Letter(s)"), subject to such standard and reasonable conditions as are customarily imposed on such a commitment by an institutional lender(s), from a Qualified Financial Institution(s) which is licensed to do business in California ("Permanent Lender(s)"), by which such Permanent Lender(s) agrees to make first trust deed loans to each income Qualified Buyer (as defined in Section 6 below) of an affordable home and secured by such purchaser's fee interest in the residence. Each Permanent Loan shall be consistent with this Agreement; otherwise, the Permanent Loan shall be subject to the Permanent Lender's usual and customary terms and conditions. The Developer covenants and agrees to take all actions, and to pay all sums required to keep the Permanent Financing Interest Letter(s) in full force and effects and shall comply with all conditions thereof and shall promptly execute, acknowledge and deliver all loan applications, credit applications and data, financial statements and loan documents in connection therewith. The Developer agrees that, prior to any other use of any Permanent Loan proceeds, it shall draw upon and utilize the Permanent Loan proceeds for repayment of the Senior Construction Financing replaced thereby.

A "Qualified Financial Institution" shall mean a bank, savings bank, pension fund, insurance company or other institutional entity licensed in California which is duly established and in the business of financing the size and type of development contemplated hereunder and which, in the sole opinion of the Commission, has a sufficient net worth, liquidity position and credit rating to meet the contemplated Permanent Financing Interest Letter.

The approval or disapproval of any Permanent Lender(s) will not constitute a waiver of any breach or violation of this Agreement by the Developer that is a result of acts that are or purport to be in compliance with or in furtherance of said Permanent Loans.

In the event that the Developer is unsuccessful, by the dates set forth in the Schedule of Performance, in obtaining a Permanent Financing Interest Letter(s) or obtaining approval of any such commitment obtained, this Agreement may be terminated by either Party hereto by written notice to the other Party, in which event neither Party hereto shall have any further obligation to the other hereunder.

4.14 Construction Contract

By the deadline specified therefor in the Schedule of Performance, Developer agrees to deliver to the Commission for its approval a written agreement (the "Construction Contract") for construction of the Developer Improvements on the Site and any and all work on the Site not in the public right of way. The Construction Contract shall include a construction schedule (which shall be consistent with the Schedule of Performance attached as Exhibit G) and a schedule of values ("Construction Budget"). The Construction Contract shall obligate Abell-Dedmon Company or another general contractor approved by the Commission (either, the "General Contractor"), who is bonded as required herein, appropriately licensed in California, and experienced in completing the type of Developer Improvements and Site work contemplated by this Agreement, to commence and complete the Developer Improvements and Site work to be constructed on the Site in accordance with this Agreement. The Construction Contract shall be a guaranteed maximum cost contract assuring completion of the Developer Improvements for a fixed price, subject to such reasonable adjustments as are customarily allowed with respect to such contracts for authorized change orders or other like matters (it being further provided in the Construction Contract that all change orders other than Minor Field Changes, as defined in Section 5.1d, shall require the written approval of the Commission). The fixed price for the Construction Contract shall be in an amount that, when added to all consultant and loan fees, "points," commissions, charges, developer's fees, fixtures, taxes, interest, start-up and any other costs and expenses of developing and completing the Developer Improvements and Site work (the aggregate of these costs is sometimes referred to collectively as "Development Cost"), does not exceed the aggregate amount of (i) the Construction Commitment, (ii) all equity to be contributed by and demonstrated to be available to the Developer to the cost of constructing the Developer Improvements.

The Developer shall obtain the Commission's written approval of the Construction Contract and the General Contractor on or before the date specified in the Schedule of Performance. The Commission's approval of any Construction Contract will not constitute a waiver by the Commission of any breach or violation of this Agreement that is a result of acts that are or purport to be in compliance with or in furtherance of said Construction Contract.

4.15 Commission Approval of Financing Submission and the Construction Contract

The Developer must obtain the approval of the Commission, which approval shall not be unreasonably withheld, with respect to all financing and related documentation required to be delivered pursuant to Sections 4.12 and 4.13 and for the Construction Contract pursuant to Section 4.14 (collectively, the "Submissions").

The Commission shall approve or disapprove the Submissions within the time set forth in the Schedule of Performance. The Developer shall have ten (10) business days from receipt of any notice from the Commission disapproving a Submission ("Disapproval Notice") within which to notify the Commission that the Developer will revise the Submission as requested or to object to such Commission disapproval. If the Developer does not notify the Commission in writing within such ten (10) day period that it specifically objects to the Commission disapproval, the Developer shall be deemed to have agreed to revise the Submission as requested by the Commission. If the Developer objects to the Commission disapproval, and if the Developer so notifies the Commission within said ten (10) day period of its specific objection, then the Commission and the Developer agree that they will meet to discuss their differences within ten (10) days after the Developer gives such notice. Unless excused, failure of the Developer to meet with the Commission within said ten (10) day period shall constitute a waiver by the Developer of any objections. Following said meeting, or following the Developer's deemed approval or waiver of any objections, the Developer shall revise the objected-to Submission and resubmit it to the Commission as soon as possible, but in no event later than thirty (30) days after receipt of the Disapproval Notice. Any such resubmission shall be approved or disapproved and revised within the times set forth herein with respect to the initial Submissions. Notwithstanding the above time periods, if the Commission deems it appropriate or necessary to hold a public meeting of the Commission, or any agency or commission thereof, before the action specified is to be taken, the period for such action by the Commission shall be extended by a reasonable amount of time, not to exceed thirty (30) days, in each case, for the holding of such public meeting(s). Such extended period shall be at the option of the Commission only; provided that, if the Commission elects to receive the above extension, the time for Developer's performance of its obligations under this paragraph shall be extended by a period of time equal to the actual extension obtained by the Commission.

4.16 Conditions Precedent to Developer's Obligations

The following are conditions precedent to the Developer's obligation to purchase the Site under this Agreement, and if such conditions are not satisfied, the Developer or the Commission may elect to terminate this Agreement as specifically provided in each of the Sections of this Agreement referenced herein below:

a). The satisfaction of the condition of title pursuant to Section 4.5 and the willingness and ability of the Title Company to issue to the Developer's Title Policy in accordance with Section 4.6.

b) The cost of the required remediation of any soil condition on the Site not exceeding $25,000 in accordance with Section 4.10.

d) The Developer obtaining a Construction Commitment and Permanent Financing Interest Letter(s), both of which are acceptable to the Commission in accordance with Section 4.12 and 4.13.

The obligation of the Commission to convey title of the Site to Developer and to perform all of its other obligations under this Agreement, including, without limitation, the making of the Site Purchase Loan, the Tertiary Financing and the Land Write-Down Grants shall be expressly subject to satisfaction of all of the following conditions collectively, with the Developer's conditions set forth in Section 4.16, the "Closing conditions") on or before the date specified in the Schedule of Performance for the close of the Purchase Escrow:

(1) The execution of this Agreement by the Commission and Developer, and delivery of a fully-executed copy to Escrow Holder.

(2) Developer's deposit into the Purchase Escrow of a duly executed Promissory Note.

(3) Developer's due execution (with notary acknowledgment) and deposit into the Purchase Escrow of Covenants, Conditions and Restrictions in the form attached hereto as Exhibit "M" ("CC&R's).

(4) Developer's due execution (with notary acknowledgment) and deposit into the Purchase Escrow of the Deed of Trust.

(5) Receipt by the Commission from Developer of such other documents, certifications and authorizations as are reasonably required by the Commission, in form and substance satisfactory to the Commission, evidencing that (i) this Agreement, the Promissory Note, the Deed of Trust, the CC&R's, and all other documents given or executed in connection herewith (collectively, the "Transaction Documents") are duly and validly executed by and on behalf of and constitute the valid and enforceable obligation of Developer pursuant to the respective terms of each of such documents, and (ii) the execution and delivery of the Transaction Documents, and the performances thereunder by Developer, will not breach or violate any applicable Governmental Restrictions nor constitute a breach of or default under any instrument or agreement to which Developer is a party.

(6) Escrow Holder shall have assured the Commission that upon recordation of the Deed of Trust there will be provided to the Commission the Commission Title Policy described in Section 4.6 of this Agreement.

(7) The Industry Financing, as described in Section 3, is available to Developer, and Developer has duly executed and delivered into the appropriate escrow the Industry Financing documents and all other documents required to be executed in connection with the Industry Financing;

(8) No Event of Default shall exist under this Agreement or under any agreement or instrument relating to the Senior Construction Financing or the Industry Financing, and Developer has demonstrated to the satisfaction of the Commission's Executive Director (or his designee) that all financing sources for development of the Project, including but not limited to Developer's equity, are or will be available in sufficient amounts to provide for full and timely completion of the Project. In particular, but not by way of limitation (i) the Construction Loan Commitment has been approved by the Commission, is in full force and effect, with all pre-conditions to funding having been satisfied and with the Senior Construction Lender having certified in writing to the Commission and the Escrow Holder that it is ready to record the Senior Construction Financing immediately upon recordation of the Grant Deed, and (ii) the Permanent Financing Interest Letter(s) has (have) been approved by the Commission, is (are) in full force and effect, with all pre-conditions to funding having been satisfied other than the lien-free completion of the Developer Improvements and with the Permanent Lender(s) having certified in writing to the Commission and Escrow Holder that it is ready to issue Permanent Loans to Qualified Buyers satisfying its credit requirements.

(9) Developer shall have entered into the Construction Contract and all plans and specifications have been approved by the Commission, and all other requirements of Exhibit "J," Construction Requirements, applicable prior to the commencement of construction have been satisfied by Developer.

(10) Developer shall have furnished the Commission with certificates of insurance evidencing the coverage required by Section 5.g below.

(11) Developer shall have certified and demonstrated to the Commission that the requirements of Sections 4.9 and 5.h have been satisfied.

(12) Developer shall have provided to the Commission, in form satisfactory to the Commission, certified copies of (i) Developer's governing partnership agreement, operating agreement, or articles and bylaws, together with a certification by the managing member, managing general partner or president that such agreement or articles or bylaws has not been amended or modified except as described in the certification, (ii) a good standing certificate from the California Secretary of State, certifying that Developer is duly qualified and in good standing, and (iii) all other documents necessary to evidence to the Commission's satisfaction that the individuals and entities executing this Agreement and the Transaction Documents, and other entities on whose behalf such documents are executed, are fully authorized to do so and to bind the respective entities, including Developer, to the terms hereof and thereof.

Not as a Closing Condition, but prior to the commencement of sales or marketing of Units, Developer shall have obtained the Commission's written approval of an affirmative marketing plan, sales guidelines, and a summary of the rules, procedures and programs for the Project including specifically the procedures to be employed by which Qualified Buyers shall be selected in the event that, at any given time, the number of Qualified Buyers exceeds the number of Units available for sale by such Qualified Buyers.

When, and only when, Escrow Holder has confirmed that Closing Conditions (1), (2), (3), (4), (6) and (7) of this Section 4.17 have been satisfied, and has received written certification from the the Developer and the Commission's Executive Director that all other Closing Conditions set forth in Section 4.16 and this 4.17, respectively, have been timely satisfied or waived, then Escrow Holder shall carry out the close of the Purchase Escrow ("Close of Escrow") by:

(i) recording the Grant Deed;

(ii) causing the Deed of Trust and the CC&R's to be recorded in the Official Records of Los Angeles County, California;

(iii) delivering the executed original Promissory Note to the Commission;

(iv) causing the Developer's Title Policy and the Commission Title Policy to be issued to the Developer and the Commission, respectively, in the forms and the amounts specified above; and

(v) disbursing the Site Purchase Loan proceeds to the extent provided for pursuant to Section 1.1 hereof and the supplemental instructions to Escrow Holder approved pursuant to Closing Condition (13) above (unless funds are to be disbursed through a separate disbursement agent as provided therein).

The close of the Purchase Escrow shall occur concurrently with or subsequent to the closing for the Senior Construction Financing and concurrently with the Industry Financing. Notwithstanding any other provision, Escrow Holder shall in no event disburse proceeds of the Site Purchase Loan (other than to the Commission) unless and until the closings for the Senior Construction Financing and the Industry Financing have occurred. If the close of the Purchase Escrow does not occur prior to the time for such closing set forth in the Schedule of Performance, then, unless the Escrow Holder has received written instructions signed by both the Commission and Developer extending the closing, the Purchase Escrow shall terminate, and Escrow Holder shall promptly return all funds and documents to the Party depositing them.

5. PROJECT CONSTRUCTION

Developer shall commence construction of the Project in accordance with the Schedule of Performance and shall complete the Project on or before June 30, 2001. "Completion of the Project" shall be deemed to have occurred when the Commission has received satisfactory evidence that the Project has been completed in compliance with this Agreement and that all final permits and certificates necessary to the operation of the Project as contemplated herein have been obtained, including, without limitation, the following, each of which is subject to the Commission's review and approval:

(1) A signed certificate from the General Contractor, in a form reasonably acceptable to the Commission, certifying to the Commission that construction was completed substantially in accordance with the requirements of the Plans and this Agreement, and all other related improvements required to be completed by the Developer under this Agreement have been completed.

(2) A certificate of occupancy (the "Certificate of Occupancy") and any other final permits and licenses necessary to permit the use and occupancy of the Project for its intended purposes, which have been issued by proper governmental agencies.

(3) Certificates of insurance issued by Developer's insurance agent evidencing compliance with all insurance requirements set forth in the this Agreement.

(4) Unconditional Waivers and Releases Upon Final Payment, in statutory form, executed by all persons or entities furnishing services or supplies in connection with the Project and showing no outstanding sums due or in dispute.

(5) All mechanics liens which have been recorded have been released or statutory release bonds with respect to such mechanics liens issued by sureties satisfactory to the Commission have been obtained and recorded.

(6) A valid notice of completion has been filed at least thirty five (35) days prior to the making of the final payment to the General Contractor and all subcontractors and suppliers.

5.1 Development of the Site by Developer

a. Scope of Development - Developer Improvements

The Site shall be developed as a residential development comprised of nine (9) detached single family houses (each, a "Unit"; collectively, "Units") as more specifically described herein, in the Scope of Work attached as Exhibit "E" ("Scope of Work") and in the approved Plans (as hereinafter defined), such development being subject to all applicable Governmental Restrictions, and containing all necessary parking areas, walkways, streets, driveways, landscaping, central and ancillary public areas, and other improvements associated with the development of the Site, as depicted on the Plans approved by the Commission in accordance with this Section 5.1. (The development of the Project on the Site in accordance with this Agreement is sometimes referred to as the "Developer Improvements.") Developer shall cause the construction of the Developer Improvements to be done in a good and workmanlike manner substantially according to the Plans and this Agreement.

b. Basic Concept Drawings

The Developer has submitted to the Commission and the Commission has approved certain basic concept drawings and related documents containing the overall plan for development of the Site (collectively, "Basic Concept Drawings"). The Site shall be developed as generally established in the Basic Concept Drawings, which shall include any changes that are mutually agreed upon between the Developer and the Commission.

c. Construction Plans, Drawings, and Related Documents

In addition to the Basic Concept Drawings, the Developer will prepare and submit construction plans, drawings, specifications, including construction and equipment specifications, and related documents (sometimes collectively referred to as the "Plans") to the Commission for architectural and site planning review and written approval. The Plans are to be in conformance with the requirements set forth in this Agreement (including Exhibit E), consistent with the Basic Concept Drawings and conform to the 1994 Uniform Building Code, as amended from time to time, and other applicable Governmental Restrictions. The Plans are to be submitted in two stages: preliminary and final working drawings and specifications. Final working drawings and specifications are hereby defined as those in sufficient detail that shall obtain a building permit.

The Plans include preliminary and final finish grading and landscaping plans, and public improvement and street plans and specifications for the Site. All Plans shall be prepared and submitted within the times established in the Schedule of Performance, subject to extensions as are authorized herein or as mutually agreed to by the Parties.

During the preparation of all Plans, Commission staff and the Developer shall hold regular progress meetings to coordinate the preparation of, submission to, and review of Plans by the Commission. The Commission and the Developer shall communicate and consult informally as frequently as is necessary to insure that the formal submittal of the Plans to the Commission can receive prompt and speedy consideration.

d. Commission Approval of Plans

Subject to the terms of this Agreement, the Commission shall have the right of architectural and site planning review of all documents, including any changes therein. However, the Developer shall also obtain any architectural and site planning review required by any agency, department, board, or commission of the County within the times required for review of such Plans and other submissions and changes therein by the Developer. The Developer shall also submit any Plans and other submissions required for development permits or building permits to be issued by County departments or other public agencies.

The Commission shall approve or disapprove the Plans referred to in Section 5.1.c of this Agreement within the times established in the Schedule of Performance, Exhibit "G". Any disapproval by the Commission shall state in writing (the "Notice of Disapproval") the reasons for disapproval and the changes which the Commission requests be made. Such reasons and such changes must be consistent with this Agreement (including the Scope of Work), and any items previously approved or deemed approved hereunder by the Commission. The Developer, upon receipt of a Notice of Disapproval shall revise the Plans and resubmit them to the Commission within thirty (30) days after receipt of the Notice of Disapproval, and the deadline set forth in the Schedule of Performance by which Developer is required to secure approval of such disapproved Plans shall be adjusted accordingly; provided, however, that in no case shall the Commission be entitled to require changes inconsistent with this Agreement (and in particular the Scope of Work) and any previously approved items. Any resubmission(s) shall be approved or disapproved and revised within the times set forth herein with respect to the initial submission of such Plans. Notwithstanding the above time periods, if the Commission is required by law to hold a public meeting of the Commission, or any agency thereof, before the action specified is to be taken, the period for such action by the Commission shall be extended by a reasonable amount of time, in each case, for the holding of such public meeting.

The Developer shall have the right during the course of construction to make Minor Field Changes, as hereinafter defined, without seeking the approval of the Commission. "Minor Field Changes shall be defined as those interior changes from the approved Plans which will not be visible from the exterior of any structure on the Site, will not increase the cost of constructing the Developer Improvements, and will not affect the ability of the Developer to complete the Developer Improvements in accordance with the Schedule of Performance attached as Exhibit G. If the Developer desires to make any change in the Plans after their approval by the Commission, other than a Minor Field Change, the Developer shall submit the proposed change to the Commission for its written approval, which approval shall not unreasonably be withheld. The Commission shall not be deemed to have unreasonably withheld its consent to any proposed change by the Developer (i) of any construction or equipment specification expressly set forth in the Plans previously approved, where substitute materials or equipment are proposed by the Developer which the Commission has solely determined to be of inferior quality; (ii) which does not conform to the Basic Concept Drawings, the Scope of Work, the approvals previously granted by the Commission under this Section 5.1.d, or other applicable requirements of this Section 5.1; (iii) if such proposed change increases the cost of the Developer Improvements in excess of $ ; or (iv) extends the Schedule of Performance more than days. The Commission shall approve or disapprove the proposed change and notify the Developer in writing within thirty (30) days after submission to the Commission.

The Developer understands that any administrative approval by Commission staff or any approval by the governing board of the Commission of any Plans or other submissions by the Developer shall not be construed to constitute an approval by County of same and the County shall retain full and absolute discretion respecting the granting or withholding of County approvals required under this Agreement or by applicable Governmental Restrictions in connection with the construction of the Developer Improvements and the use of the Site.

e. Cost of Construction

The cost of developing the Site and constructing all the Developer Improvements thereon shall be borne solely by the Developer. The Commission and the Developer shall otherwise each pay the costs necessary to administer and carry out their respective responsibilities and obligations under this Agreement.

f. Construction Schedule

The Developer shall promptly begin and thereafter diligently prosecute to completion the construction of the Developer Improvements and the development of the Site. The Developer shall begin and complete all construction and development within the times specified in the Schedule of Performance or reasonable extension of said dates as may be granted by the Commission pursuant to Section 5.1d of this Agreement. The Schedule of Performance is subject to revision from time to time as mutually agreed upon in writing between the Developer and the Commission.

During the period of construction, but not more frequently than once a month, the Developer shall submit to the Commission a written progress report of the construction when and as requested in writing by the Commission. The report shall be in such form and detail as may reasonably be required by the Commission and shall include a reasonable number of construction photographs taken since the last report submitted by the Developer.

g. Indemnification and Insurance

From and after the execution of this Agreement, the Developer hereby agrees to indemnify and hold harmless the Commission and the County and all Commission/County Representatives, and each of them, from and against all Losses and Liabilities related directly or indirectly to, or arising out of or in connection with (i) any breach or default by the Developer hereunder, (ii) any of the Developer's activities on the Site (or the activities of Developer's agents, employees, lessees, representatives, licensees, guests, invitees, contractors, subcontractors or independent contractors on the Site), including without limitation the inspection of the Site by the Developer prior to the close of the Purchase Escrow as permitted by this Agreement, the construction of any Developer Improvements on the Site and the use or condition of any such Developer Improvements, or (iii) any other fact, circumstance or event related to the Developer's performance hereunder.

Without limiting the Developer's indemnification of the Commission as set forth above, upon the close of Escrow, the Developer shall provide and maintain at its sole cost and expense for the periods stated below, from insurers admitted in California or having a minimum rating of or equivalent to A:VIII in Best's Insurance Guide:

(i) Comprehensive general and automobile liability insurance, including contractual liability, with a combined single limit of a least one million dollars ($1,000,000) for each occurrence and two million dollars ($2,000,000) general aggregate. The Commission and the County and the Commission/County Representatives shall be carried as additional insureds with respect to liability arising from activities performed by or on behalf of Developer. Such insurance shall be primary insurance with respect to the Commission/County and shall contain cross liability protection. Such insurance shall be maintained continuously for as long as the Developer shall own the Site, and shall be endorsed to require thirty (30) days prior written notice from insurer to Commission before cancellation or change in coverage. The Developer shall require its contractor and subcontractors to include the Commission and the County and Commission/County Representatives as additional insureds on all general liability insurance covering work at the Site.

(ii) "All Risk" property insurance, including builder's risk protection during the course of construction, covering the full replacement value of the Developer Improvements. Such insurance shall include debris removal and shall provide coverage for earthquake and flood if this protection is available from responsible carriers at reasonable cost. Such insurance shall be maintained as long as Developer shall own the Developer Improvements.

(iii) Worker's Compensation insurance as required by the Labor Code of the State of California.

The Developer shall deliver to the Commission certificates of insurance with original endorsements evidencing the coverage required by this Agreement. The certificates and endorsements shall be signed by a person authorized by the insurers to bind coverage on its behalf. The Commission reserves the right to require complete certified copies of all policies at any time.

The above insurance may provide for such deductibles or self-insured retention as may be acceptable to the Commission. In the event such insurance does provide for deductibles or self insurance, Developer agrees that it will protect the Commission and the County and the Commission/County Representatives in the same manner as these interests would have been protected had full commercial insurance been in effect. If required by the Commission from time to time, the Developer shall increase the limits of its liability insurance to reasonable amounts customary for owners of improvements similar to those on the Site.

At no cost to the Commission, the Developer shall provide in favor of the Commission a completion bond or, as an alternative, cause Developer's contractor to provide a Material and Labor Bond and a Performance Bond naming the Commission as obligee, each bond to be for one hundred percent (100%) of the full amount of the Construction Contract which is estimated to be approximately $1,190,830. Such bonds shall be executed by a responsible corporate surety authorized to issue such bonds in California and shall be acceptable to and approved by the Commission.

As an alternative to the aforementioned bonding requirement, the Developer may provide an irrevocable Letter of Credit or an irrevocable "Set Aside" Letter in the amount of One Hundred and Twenty Five percent (125%) of the Construction Contract. Such Letter of Credit or "Set-Aside" Letter must be issued by a Qualified Financial Institution and approved by the Commission.

Failure on the part of the Developer to procure or maintain any required insurance shall constitute a material breach of this Agreement under which the Commission may immediately terminate this Agreement or, at the discretion of the Commission, procure or renew such insurance and pay any and all premiums in connection therewith, and all monies so paid by the Commission shall be repaid by the Developer to the Commission upon demand with interest at the legal rate.

Failure on the part of the Developer to procure and maintain the aforementioned bonds and/or Letter of Credit or "Set Aside" Letter shall constitute a material breach of this Agreement under which the Commission may immediately terminate this Agreement.

h. County and Other Governmental Agency Permits

Before commencement of construction or development of any buildings, structures, or other work of improvement upon the Site, the Developer shall, at its own expense, unless herein agreed, determine and secure or cause to be secured any and all permits which may be required by the County or any other governmental agency affected by or with jurisdiction over such construction, development, or work. The Commission may provide all assistance, including agreed upon financial assistance, deemed appropriate by the Commission. The Developer shall secure all building permit(s) for the Developer Improvements no later than the date set forth in the Schedule of Performance.

i. Rights of Access

For the purposes of assuring compliance with this Agreement (including this Section 5), Commission/County Representatives shall have the reasonable right of access to the Site in accordance with Section 14 of this Agreement without charges or fees and at normal business hours.

j. Commission Requirements; Local, State, and Federal Laws

The Developer shall carry out the construction of the Developer Improvements in conformity with the Construction Requirements of the Commission, as set forth on the attached Exhibit "I," and all applicable Governmental Restrictions.

As used in this Agreement, "Governmental Restrictions" shall mean and include any and all laws, statutes, ordinances, codes, rules, regulations, directives, writs, injunctions, orders, decrees, rulings, conditions of approval, or authorizations, now in force or which may hereafter be in force, of any governmental entity, agency or political subdivision as they pertain to the performance of this Agreement or development of the Project, including specifically but without limitation all code and other requirements of the jurisdiction in which the Project is located; the California Environmental Quality Act; applicable federal, state and local fair housing laws any applicable provisions of California law relating to subdivision approval, and public bid and prevailing wage requirements. Developer shall be solely responsible for determining whether any state or federal prevailing wage requirements may be applicable to the Project, and for implementing any and all prevailing wage requirements which may apply, regardless of whether they may be obligations of the contractor or of the party awarding the contract. Prevailing wage laws include, among others, California Labor Code Section 1720 et seq., and the federal Davis-Bacon Act (40 U.S.C. §276a). If applicable, these requirements may include, among others, the requirement that prevailing wages be paid, that prevailing wage schedules be posted at the job site, and that detailed wage records be maintained. If applicable, Developer within 45 days prior to the awarding of the Construction Contract shall request the California Department of Labor Statistics and Research, Prevailing Wage Unit, to make a special determination as to the prevailing wages applicable to the Project. Developer shall indemnify, defend and hold the Commission, the County and the Commission/County Representatives harmless for any suit, cost, attorneys' fees, claim, administrative proceeding, damage, wage award, fine, penalty or liability arising out of or relating to the payment or non-payment of prevailing wages in connection with the Project.

k. Anti-discrimination During Construction

The Developer covenants for itself and its successors and assigns that with respect to the construction of the Developer Improvements, the Developer and its contractors and suppliers will abide by the anti-discrimination provisions set forth in Sections 7 and 29 of this Agreement.

5.2 Reserved

5.3 Taxes, Assessments, Encumbrances, and Liens

After the conveyance of the Site to the Developer in accordance with this Agreement, the Developer shall pay, when due, all real estate taxes and assessments assessed and levied on the Site. Prior to the issuance of a Certificate of Completion, the Developer shall not place or allow to be placed on the Site any mortgage, trust deed, encumbrance, lien, levy, attachment or other voluntary or involuntary encumbrance unauthorized by this Agreement (each, an "Unpermitted Lien"). The Developer shall remove or have removed any Unpermitted Lien made on the Site (or any portion thereof), or shall assure the satisfaction thereof, within a reasonable time, but in any event prior to a sale thereunder. Nothing herein contained shall be deemed to prohibit the Developer from contesting the validity or amounts of any tax, assessment, encumbrance, or lien, nor to limit the remedies available to the Developer in respect thereto.

The Developer understands that under certain conditions its control of the Site or portion thereof under this Agreement may give rise to the imposition of a possessory interest tax on the Site, and in such event, the Developer agrees to pay when due any such possessory interest tax.

5.4 Reserved

5.5 Security Financing; Rights of Holders

a. Permitted Construction Loan

Notwithstanding Sections 5.3 and 34 of this Agreement, a Construction Loan which satisfies the requirements of and is approved in accordance with Section 4.12.a may encumber the Site, or a portion thereof, prior to the issuance of a Certificate of Completion pursuant to Section 5.8 for the completion of all Developer Improvements. Developer shall promptly notify the Commission of any Unpermitted Lien that is created or attached to the Site prior to issuance of a Certificate of Completion for the construction of Developer Improvements on the Site.

This Agreement shall not be deemed or construed to permit or authorize any Senior Construction Lender to devote the Site to any uses, or construct any improvements thereon, other than those uses and Developer Improvements provided for and authorized by this Agreement.

Whenever the Commission shall deliver any notice or demand to the Developer with respect to any breach or default by the Developer in completion of construction of the Developer Improvements, the Commission shall at the same time deliver a copy of such notice or demand to the Senior Construction Lender authorized by this Agreement who has previously made a written request to the Commission therefor. The Senior Construction Lender shall (insofar as the rights of the Commission are concerned) have the right, at its option, within sixty (60) days after the receipt of the notice, to cure or remedy or commence to cure or remedy any such default and to add the cost thereof to the security interest debt and the lien on its security interest. In the event there is a construction lender in addition to the Senior Construction Lender (the Senior Construction Lender and any other construction lender each hereinafter sometimes referred to as a "Construction Lender"), the right to cure or remedy a breach or default of the Developer under this Section 5.5.c shall be exercised by the Senior Construction Lender or as the Construction Lenders may otherwise agree among themselves (provided in such case that a copy of the intercreditor agreement evidencing such agreement be provided by the Construction Lenders to the Commission), but there shall be only one exercise of such right to cure and remedy a breach or default of the Developer under this Section 5.5.c. Nothing contained in this Agreement shall be deemed to permit or authorize a Construction Lender to undertake or continue the construction or completion of the Developer Improvements (beyond the extent necessary to conserve or protect the Developer Improvements or construction already made) without first having expressly assumed the Developer's obligations to the Commission hereunder by written agreement satisfactory to the Commission. A Construction Lender in that event must agree to complete, in the manner provided in this Agreement, the Developer Improvements to which the lien or title of the Construction Lender relates. A Construction Lender properly completing such improvements shall be entitled, upon written request made to the Commission, to a Certificate of Completion from the Commission.

5.6 Failure of Holder to Complete Improvements

If a Construction Lender has not timely exercised its right to complete construction of the Developer Improvements on the Site in accordance with Section 5.5.c, or if a Construction Lender has exercised its right to complete the construction of the Developer Improvements but has not proceeded diligently with construction at all times thereafter, the Commission may, but is not obligated to, purchase the Construction Loan by payment to the Construction Lender of the amount of the unpaid debt, plus any accrued and unpaid interest. If the ownership of the Site has vested in the Construction Lender, the Commission, if it so desires, shall be entitled to a conveyance of the Site from the Construction Lender to the Commission upon payment to the holder of an amount equal to the sum of the following:

a. The total unpaid Construction Loan debt at the time title became vested in the holder (less all appropriate credits, including those resulting from collection and application of rentals and other income received during foreclosure proceedings);

b. All expenses with respect to foreclosure;

c. The net expenses, if any (exclusive of general overhead), incurred by the holder as a direct result of the subsequent management of the Site;

d. The costs of any authorized improvements made by the Construction Lender; and

e. An amount equivalent to the interest that would have accrued on the aggregate of such amounts had all such amounts become part of the Construction Loan and such debt had continued in existence to the date of payment by the Commission.

Upon Completion of the Project as defined in Section 5 above, the Commission shall furnish the Developer with a certificate of completion duly executed by the Commission ("Certificate of Completion") upon Developer's written request. Such Certificate of Completion shall be in such form as to permit it to be recorded in the Office of the County Recorder of Los Angeles County.

A Certificate of Completion shall be, and shall state that it is, conclusive determination of satisfactory completion of the construction required by this Agreement upon the Site and of full compliance with the terms hereof. After issuance of the Certificate of Completion, any party then owning or thereafter purchasing, leasing, or otherwise acquiring any interest in the Site covered by the Certificate of Completion shall not (because of such ownership, purchase, or acquisition) incur any obligation or liability under this Agreement, except that such party shall be bound by any covenants contained in the Grant Deed, CC&R's, Deed of Trust, Tertiary Deed of Trust, or Unit CC&R's and/or other instruments of transfer in accordance with the provisions of Section 6 of this Agreement. Except as otherwise provided herein, after the issuance of a Certificate of Completion for the Site, neither the Commission, the County, nor any other person shall have any rights, remedies, or controls with respect to the Site that it would otherwise have or be entitled to exercise under this Agreement as a result of a default in or breach of any provision of this Agreement, and the respective rights and obligations of the parties with reference to the Site shall be as set forth in the Grant Deed of the Site to Developer, which shall be in accordance with the provisions of Section 6 of this Agreement.

The Commission shall not unreasonably withhold the Certificate of Completion. If the Commission refuses or fails to furnish a Certificate of Completion for the Site after such written request from the Developer, the Commission shall, within thirty (30) days of such written request, provide the Developer with a written statement of the reasons the Commission refused or failed to furnish a Certificate of Completion. The statement shall also contain the Commission's opinion of the action the Developer must take to obtain a Certificate of Completion. If the reason for such refusal is confined to the immediate unavailability of specific items or materials for landscaping, the Commission will issue its Certificate of Completion upon the posting of a bond by the Developer with the Commission in an amount representing a fair value of the work not yet completed.

The Certificate of Completion shall not constitute evidence of compliance with or satisfaction of any obligation of the Developer to any holder or any insurer of a mortgage securing a Construction Loan. The Certificate of Completion is not a notice of completion as referred to in California Civil Code Section 3093.

5.9 Hazardous Materials

The Developer covenants that it shall use and maintain the Site in compliance with all Governmental Restrictions applicable to Hazardous Materials, as hereinafter defined, including specifically but without limitation all recommendations required by the "Phase I" and "Phase II" environmental assessments (provided by the Commission without warranty or representation). Developer further represents, warrants and covenants that it has not and shall not deposit or permit the deposit of Hazardous Materials in, on, under or upon the Site or the Project. Developer further covenants and agrees to remove or remediate, at its expense (subject to any reimbursement it may be able to obtain from third parties) any Hazardous Materials located in, on, under or upon the Site or the Project as of the date hereof and which are deposited in, on, under or upon the Site or the Project from and after the date hereof and during Developer's inspection or ownership of the Site or ownership of the Project, including any asbestos, lead-based paint and any other Hazardous Materials located in the Project, to the extent required by and in accordance with the requirements of the applicable Governmental Restrictions. The foregoing shall not be construed or understood to prohibit Developer from allowing Hazardous Materials to be brought upon the Site or the Project so long as they are materials which are customary and common to the normal course of business in the construction of well-designed housing and so long as such materials are used, stored and disposed of in accordance with all applicable Governmental Restrictions. Developer agrees to indemnify, defend and hold the Commission and County and the Commission/County Representatives harmless from and against any Losses and Liabilities arising directly or indirectly out of the presence of Hazardous Materials in, on, under or upon the Site or the Project, existing as of the date hereof and deposited (or claimed to have been deposited) in, on, under or upon the Site or the Project from and after the date hereof and during Developer's ownership or inspection of the Site or ownership of the Project, including without limitation any Losses and Liabilities arising out of any deposits of Hazardous Materials as described hereinabove or out of Developer's failure to remove or remediate all such Hazardous Materials in, on or upon the Site and the Project, as required above. Developer hereby releases, waives and discharges the Commission and County and the Commission/County Representatives or from all present and future claims, demands, suits, legal and administrative proceedings and from all Losses and Liabilities arising out of or in any way connected with Developer's ownership of the Site or Project, or any condition of environmental contamination in, on, under, upon or around the Site, or the existence of Hazardous Materials in any state in, on, under, upon or around the Site, and in connection with such release and waiver Developer is familiar with and hereby waives the provisions of Section 1542 of the California Civil Code which provides as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."

For purposes of this Agreement, the term "Hazardous Materials" means, without limitation, gasoline, petroleum products, explosives, radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic substances, polychlorinated biphenyls or related or similar materials, asbestos or any other substance or material as may now or hereafter be defined as a hazardous or toxic substance by any federal, state or local environmental law, ordinance, rule or regulation, including, without limitation, (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act (42 U.S.C. Section 6901 et seq.), (ii) the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), (iii) the Clean Air Act (42 U.S.C. Section 7401 et seq.), (iv) the Resource Conservation and Recovery Act, as amended by the Hazardous and Solid Waste Amendments of 1984 (42 U.S.C. Section 6902 et seq.), (v) the Toxic Substances Control Act (15 U.S.C. Section 2601-2629), (vi) the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.), (vii) the Carpenter-Presley-Tanner Hazardous Substance Account Act (CA Health & Safety Code Section 25300 et seq.), (viii) the Hazardous Waste Control Law (CA Health & Safety Code Section 25100, et seq.), (ix) the Porter-Cologne Water Quality Control Act (CA Water Code Section 13000 et seq.), (x) the Safe Drinking Water and Toxic Enforcement Act of 1986, (xi) the Hazardous Materials Release Response Plans and Inventory (CA Health & Safety Code Section 25500 et seq.), (xii) the Air Resources Law (CA Health & Safety Code Section 39000 et seq.), or (xiii) in any of the regulations adopted and publications promulgated pursuant to the foregoing.

5.10 Subordination of Site Purchase Loans to Permitted Construction Loan

The Commission acknowledges the intent of the Developer to secure the Senior Construction Financing pursuant to Section 4.12.a of this Agreement. The Commission agrees to subordinate its security interest in the Site to such mortgage, deeds of trust, or other security instruments securing the Senior Construction Financing which have been approved by the Commission as provided in Section 4.12.a. The Commission agrees to deliver documents required by the Developer to evidence such subordination.

The Commission further agrees to subordinate to the Senior Construction Financing the affordability restrictions contained in the CC&R's and in Sections 6 of this Agreement during the construction period of the Project. The construction period shall start upon the commencement of construction and shall end upon the issuance of a Certificate of Completion pursuant to Section 5.8 of this Agreement. The Commission agrees to deliver documents to evidence such subordination of the affordability restrictions. At the end of the construction period, the subordination of the affordability restrictions shall have no further force or effect.

5.11 Reserved

5.12 Tertiary Financing and Land Write-Down Grant

Upon recordation of a Certificate of Completion for the Developer Improvements and provided the Developer is not in default of any of its obligations under this Agreement, the Commission will permit the Developer to apply funds which would otherwise be used to repay the Site Purchase Loan to make Tertiary Financing (each such tertiary loan is hereinafter referred to as "Tertiary Financing") on behalf of the Commission to Qualified Buyers (as defined in Section 6) of Units approved in writing by the Commission. Prior to making each, the Developer or the Permanent Lender shall submit to the Commission or its designee such loan applications, documentation and other information and data (collectively, "Loan Information") requested by the Commission to permit the Commission to (i) verify that the proposed purchaser is a Qualified Buyer, and (ii) determine the credit-worthiness of the purchaser; provided, however, that the Commission shall accept, in lieu of the Loan Information, copies of all loan applications and other documentation and data received by the Permanent Lender in connection with its consideration of the Permanent Loan to each Qualified Buyer so long as such documentation contains the information required by the Commission for each Commission Loan made, to make its findings under (i) and (ii) hereinabove in this Section 5.12. All Tertiary Financing shall be evidenced by a shared appreciation promissory note in favor of the Commission in the form specified by the Commission (the "Tertiary Promissory Note"), which shall be secured by a second or third priority deed of trust in favor of the Commission recorded against the Qualified Buyer's fee interest in the Unit and which shall be in the form specified by the Commission (the "Tertiary Deed of Trust"). The Qualified Buyer shall also execute and deliver to the Commission a loan agreement with respect to the Tertiary Financing in the form specified by the Commission ("Tertiary Financing Agreement") and certain covenants, conditions and restrictions pertaining to the Unit containing the affordability restrictions set forth in this Agreement and the CC&R's, which covenants, conditions and restrictions shall be in the form specified by the Commission ("Project CC&R's") for recordation upon the Unit sale. Amounts represented by each Tertiary Financing shall accrue 0% interest due and be payable thirty (30) years after recordation of the applicable Tertiary Deed of Trust with all payments of principal deferred for the term of the Tertiary Promissory Note; provided, however, that the Tertiary Promissory Note shall, at the option of the Executive Director of the Commission, be immediately due and payable upon the first to occur of the sale or refinance of the Unit to which it applies.

If at the time of sale of a Assisted Unit, the Total Per Unit Development Cost exceeds the appraised value of the Assisted Unit being sold (as such appraisal is determined in accordance with Section 5.14), the Commission agrees to allow the difference in cost be allocated in the form of a land write down grant for the Assisted Unit ("Land Write-Down Grant"); provided that in no event shall the total amount of any Land Write-Down Grant exceed Eighteen Thousand Dollars ($18,000) per Unit.

(Tertiary Financing and the Land Write-Down Grants are referred to collectively as "Commission Assistance.")

Upon the closing of the sale of each Assisted Unit to a Qualified Buyer and the making of any Commission Assistance, the principal amount due and payable under the Site Purchase Loan and interest accrued thereunder as of such date shall be reduced by the amount of the Commission Assistance.

Notwithstanding anything to the contrary in this Section 5.12, the Commission Assistance shall not exceed for each Assisted Unit the lesser of Sixty Thousand Seven Hundred and Twenty Two Dollars ($60,722) or the Financing Gap. The "Financing Gap" for each Assisted Unit shall be an amount equal to the difference between (i) the "Buyer's Cost" for the Unit, which shall be the sum of the purchase price agreed to by Developer and the Qualified Buyer for that Unit (not to exceed the maximum price designated in Exhibit "L"), plus Buyer's share, not to exceed 2.5% of the purchase price, of normal and reasonable closing costs approved by Commission and (ii) the "Affordable Buyer Contribution" which shall be the maximum Qualified Buyer contribution (including proceeds of a Permanent Loan) toward the Buyer's Cost consistent with sale of the Unit to the Qualified Buyer at an Affordable Housing Cost (as defined in Section 6.1), as calculated and/or approved by Commission based upon the income level of the Qualified Buyer and the interest rate(s) applicable to the Qualified Buyer's Permanent Loan and the Industry Financing Unit Loan.

5.13 Developer Fee and Developer's Responsibility for Final Accounting

Prior to the sale of any Unit, it shall be the responsibility of the Developer to make all necessary arrangements, including financial, for an appraisal to determine the Sales Price for all Units, which appraisal shall be subject to the approval of the Commission.

The Developer shall, at the close of escrow for the sale of each Unit, be required to provide the Commission a copy of each closing statement clearly evidencing the disbursement of all escrowed funds. The aggregate maximum amount available to the Developer as a "development fee" from the nine (9) sales escrows of all of the Units in the Project shall be NINETY THOUSAND DOLLARS ($90,000), which "development fee" shall be payable prorata with the sale of each of the Units ("Development Fee Unit Share"); provided that in no event shall the Developer be entitled at the close of escrow of any Assisted Unit to the applicable Development Fee Unit Share unless and until the Commission has been paid in full all of the Site Purchase Loan attributed to that Assisted Unit in accordance with Section 1.1.

In addition to the Development fee, the Developer shall be permitted reimbursement from each escrow proceeds for costs incurred for those items shown below, but such amounts shall also not be payable with respect to sales of Assisted Units until the Commission has been paid in full on the attributable portion of the Site Purchase Loan. The dollar amounts shown represent the maximum reimbursement from each sales escrow to the Developer or his designee.

6. SALE OF ASSISTED UNITS TO QUALIFIED BUYERS

Developer shall use the Site solely for the purpose of developing constructing and selling the Project as an owner-occupied residential development with the total number of Units, all of which are to be assisted, specified on Exhibit "L" hereto. All Units shall be sold only to "Qualified Buyers" (i.e. persons whose household income is less than 80 percent of area median income, as more particularly defined in Exhibit "L" below) in accordance with the escrow procedures set forth in Section 4.2 to persons and families of "Lower Income" as specified in the Transaction Summary above. All of the Qualified Buyer's costs associated with the purchase and financing of such Units shall not exceed, as to the household of each Qualified Buyer, an "Affordable Housing Cost," as defined in California Health & Safety Code Section 50052.5. Developer shall not sell any Unit for a purchase price or other consideration exceeding the maximum sales prices designated on Exhibit "L". Such maximum sales prices may be adjusted only with the prior written approval of Commission's Executive Director in his sole discretion from time to time.

6.2 Reserved

6.3 Escrow Procedures for Unit Sales

The Developer shall cause the agreement for the purchase of each Unit to be evidenced by a purchase agreement ("Unit Buyer Agreement") in a form approved by Commission's Executive Director, fully executed by Developer and the Qualified Buyer to be approved by Commission. The Unit Buyer Agreement will provide that the obligation of the Developer to convey title thereunder to the prospective buyer shall be conditioned upon the approval of Commission and otherwise upon satisfaction of the requirements of this Section 6.3. Within seven (7) days after the execution of the Unit Buyer Agreement, escrow shall be opened at an escrow company satisfactory to Commission. Upon identifying a potential Qualified Buyer, Developer, or its designee, shall provide to Commission, or its designee, by personal delivery or by first-class U.S. Mail, a reservation request completed by the prospective buyer, together with the Loan Information and/or other verifying information or documentation required in Section 5.12 as to the prospective buyer with respect to residency, employment and income (collectively, "Reservation Request"). If the Reservation Request is approved by Commission in its reasonable discretion, then upon Commission's receipt of a Unit Buyer Agreement signed by the Qualified Buyer, Commission shall furnish the escrow holder with escrow instructions and Tertiary Financing loan documents in a form specified by the Commission. Escrow shall not close unless and until, among other things:

The escrow holder holds the following: (a) a Tertiary Promissory Note executed by the Qualified Buyer in favor of Commission, in an initial principal amount equal to the amount of the Tertiary Financing; (b) a Tertiary Deed of Trust executed and acknowledged by the Qualified Buyer in favor of Commission; (c)  a grant deed with respect to the Unit purchased by the Qualified Buyer in a form approved by Commission and executed and acknowledged by the Developer; (d) a Tertiary Financing Agreement executed by the Qualified Buyer in favor of the Commission; (e) Project CC&R's executed by the Qualified Buyer in favor of the Commission; (f) such other documents to be provided by the Qualified Buyer reasonably requested by the escrow company or the title company issuing the title policy to the Qualified Buyer insuring the Unit; (g) cash deposited by the Qualified Buyer and/or the Permanent Lender representing the Affordable Buyer Contribution; and (h) an all-risk insurance policy insuring the Unit in an amount equal to the full replacement value of the Unit. The policy shall name the Commission as loss payee and shall contain a statement of obligation on behalf of the carrier to notify the Commission of any material change, cancellation or termination of coverage at least thirty (30) days in advance of such material change, cancellation or termination. Any certificate of insurance must be in a form, content, and with companies approved by Commission. In addition, escrow for the purchase of the Unit shall not close unless and until a title company is ready, willing and able to issue to the Commission a policy of title insurance in the amount of the Tertiary Promissory Note, insuring the priority of the Tertiary Deed of Trust, subject only to the deed of trust securing the Qualified Buyer's primary purchase money borrowing from the Permanent Lender and other exceptions approved by the Commission following the Commission's prior review of a preliminary title report for the Unit, which preliminary title report must be received by the Commission no later than seven (7) days after the approval by the Commission of the Reservation Request.

Developer shall not knowingly sell any Unit to a spouse, parent, grandparent, child, grandchild, sibling, aunt, uncle, nephew, niece, or first cousin of any principal, officer, member, director, partner, owner, employee or agent of Developer or any person holding a beneficial interest in Developer. Developer shall not accept any payment of money or other consideration (other than the purchase price and other customary payments made in connection with the purchase) in return for or in an attempt to recapture all or any portion of the purchase price subsidy contemplated by this Agreement.

Beginning upon completion of the Project, and continuing for so long as Developer shall own some or all of the Units, Developer shall, as to portions of the Project it owns, (i) maintain all improvements and landscaping on the Site in first-class order, condition, and repair (and, as to landscaping, in a healthy and thriving condition) in accordance with the approved Plans for the Project and all Governmental Restrictions, and (ii) manage the Project and Project finances reasonably prudently and in compliance with applicable Governmental Restrictions so as to maintain a safe and attractive living environment for Project residents.

7. DEVELOPER'S OBLIGATION TO REFRAIN FROM DISCRIMINATION

There shall be no discrimination against or segregation of any person, or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Site, nor shall Developer itself or any person claiming under or through it establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the Site or any portion thereof. The nondiscrimination and nonsegregation covenants set forth in this Section 7 and in Sections 5.1k and 29 shall remain in effect in perpetuity.

7.1 Form of Nondiscrimination and Nonsegregation Clauses

Developer shall refrain from restricting the rental, sale or lease of the Site or any portion thereof (and from discriminating against any employee or applicant for employment in connection with the construction of the Developer Improvements) on the basis of race, color, creed, religion, sex, marital status, national origin, or ancestry of any person. All such deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses:

(a) In deeds: "The grantee herein covenants by and for himself or herself, and his or her heirs, executors, administrators and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the land herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the land herein conveyed. The foregoing covenants shall run with the land."

(b) In leases: "The lessee herein covenants by and for himself or herself, and his or her heirs, executors, administrators and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the land herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the land herein leased."

(c) In contracts: "There shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the premises, nor shall the parties to this contract or any person claiming under or through them, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the premises.

Nothing in this Section or in Sections 7 or 5.1k shall be construed or understood to limit, restrict or in any way waive the income requirements described in this Agreement.

8. DEVELOPER'S CONSTRUCTION AND OTHER COVENANTS

8.1 Indemnification

From and after the date hereof, Developer agrees to and does hereby indemnify, defend and save harmless the Commission and the County and the Commission/County Representatives from and against any and all Losses and Liabilities, which Losses and Liabilities arise directly or indirectly from or in connection with Developer's activities on the Site or in connection with the Project, including, but not limited to Losses and Liabilities respecting bodily injury, death, property damage, workers' compensation, liability or expense arising from or in connection with services performed on behalf of Developer by any person pursuant to this Agreement, and which Losses and Liabilities (i) are based on events which occur or are claimed to have occurred during Developer's inspection or ownership of the Site or ownership of the Project, (ii) result directly or indirectly from Developer's inspection or ownership of the Site or ownership of the Project, or (iii) result directly or indirectly from Commission's entering into this Agreement. This covenant shall survive the termination or this Agreement and the sale of all of the Units in the Project.

8.2 Audit by State and Federal Agencies

Developer agrees that in the event this Agreement or the Site Purchase Loan is subjected to audit, monitoring or other inspections by appropriate state and federal agencies, it shall be responsible for complying with such inspections and paying, on behalf of itself and Commission, the full amount of the liability to the funding agency resulting from such inspections.

8.3 Program Evaluation and Review

Developer shall allow Commission authorized personnel to inspect and monitor its facilities and program operations as they relate to the Project or this Agreement, including the interview of Developer's staff and program participants, as reasonably required by Commission until the termination of this Agreement.

8.4 Reserved

8.5 Construction Loan Defaults

Developer shall comply with all monetary and non-monetary covenants associated with any loan secured by an interest in the Site or the Project, including but not limited to the Senior Construction Financing and the Industry Financing. Developer shall provide to the Commission a copy of any notice of default within three business days after receiving any notice of a default or alleged default of such covenants by Developer, and Developer shall promptly cure any such default and cooperate in permitting the Commission, to the extent the Commission in its sole discretion elects to do so, to cure or assist in curing the default (as is otherwise described in Section 5.7). Any cost or expenditure incurred by the Commission in providing or assisting in such a cure shall be deemed added to the outstanding principal amount of the Site Purchase Loan.

8.6 Barriers to the Disabled

The Project shall be developed to comply with all applicable federal, state and local requirements for access for disabled persons.

8.7 Lead-Based Paint

Developer and its contractors and subcontractors shall not use lead-based paint in construction of the Project. Developer shall incorporate or cause to be incorporated this provision in all contracts and subcontracts for work performed on the Site which involve the application of paint.

9. INDEPENDENT CONTRACTOR

In their performance of this Agreement, both Parties will be acting in an independent capacity and not as agents, employees, partners, joint venturers, or associates of one another. The employees or agents of one Party shall not be deemed or construed to be the agents or employees of the other Party for any purpose whatsoever, including workers' compensation liability. Developer shall bear the sole responsibility and liability for furnishing or causing the General Contractor to furnish workers' compensation benefits to any person for injuries arising from or connected with services performed on behalf of Developer pursuant to this Agreement.

10. ASSIGNMENT OF THIS AGREEMENT

This Agreement shall be assignable by Developer only if Developer obtains the prior express written consent of Commission, which consent may be withheld by Commission in its sole and absolute discretion. Notwithstanding anything herein to the contrary, no purported assignment of this Agreement or the Site Purchase Loan shall be effective if such assignment would violate the terms, conditions and restrictions of any Governmental Restrictions. The Commission's consent to such assignment shall be expressly conditioned upon (i) the assignee's execution of such documents as required by Commission including, without limitation, any and all documents deemed necessary by Commission to provide for said assignee's assumption of all of the obligations of Developer hereunder and under the Promissory Note, the Deed of Trust, the CC&R's and all other documents executed in connection therewith, and (ii) Commission's approval of the financial and credit-worthiness of such proposed assignee.

Any attempt by Developer to assign any performance or benefit under the terms of this Agreement, without the prior written consent of Commission as provided herein, shall be null and void and shall constitute a material breach of this Agreement.

11. EVENTS OF DEFAULT AND REMEDIES

11.1. Developer Events of Default

The occurrence of any of the following shall, after the giving of any notice described therein, (to the extent required) constitute an event of default by Developer hereunder ("Event of Default"):

(a) The failure of Developer to pay or perform any monetary covenant or obligation hereunder or under the terms of the Promissory Note or the Deed of Trust;

(b) The failure of Developer to perform any non-monetary covenant or obligation hereunder or under the Note or the Deed of Trust, without curing such failure within thirty (30) days after receipt of written notice of such default from Commission (or from any party authorized by Commission to deliver such notice as identified by Commission in writing to Developer) specifying the nature of the event or deficiency giving rise to the default and the action required to cure such deficiency. Provided, however, that if any default with respect to a non-monetary obligation is such that it cannot be cured within a 30-day period, it shall be deemed cured if Developer commences the cure within said 30-day period and diligently prosecutes such cure to completion thereafter. Notwithstanding anything herein to the contrary, the herein described notice requirements and cure periods shall not apply to any Event of Default described in subsections (c) through (h) of this Section 11.1;

(c) The material falsity of any representation or breach of any warranty or covenant made by Developer under the terms of this Agreement;

(d) Developer or any constituent member or partner, or majority shareholder, of Developer shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of its property, (ii) fail to pay or admit in writing its inability to pay its debts generally as they become due, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent or (v) commence a voluntary case under the Federal bankruptcy laws of the United States of America or file a voluntary petition that is not withdrawn within ten (10) days of the filing thereof or answer seeking an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy or insolvency proceeding;

(e) If without the application, approval or consent of Developer, a proceeding shall be instituted in any court of competent jurisdiction, under any law relating to bankruptcy, in respect of Developer or any constituent member or partner, or majority shareholder, of Developer, for an order for relief or an adjudication in bankruptcy, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of Developer or of all or any substantial part of Developer's assets, or other like relief in respect thereof under any bankruptcy or insolvency law, and, if such proceeding is being contested by Developer, in good faith, the same shall (i) result in the entry of an order for relief or any such adjudication or appointment, or (ii) continue undismissed, or pending and unstayed, for any period of ninety (90) consecutive days;

(f) Failure to sell all of the Units in the Project to Qualified Buyers pursuant to this Agreement within one year following completion of the Project;

(g) Developer shall suffer or attempt to effect an assignment of this Agreement or a Transfer in violation of Sections 10 above or 34 below; or

(h) Developer shall be in default under the terms of an Construction Loan or any other secured or unsecured obligation secured by the Site or relating to the Project, unless the default is cured within the cure period, if any, applicable thereto under the terms of the obligation which is in default.

11.2. Remedies

Upon the occurrence of an Event of Default hereunder, the Commission may, in its sole discretion, take any one or more of the following actions:

11.3. No Remedy Exclusive

No remedy herein conferred upon or reserved to Commission is intended to be exclusive of any other available remedy or remedies, but each such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now existing at law or in equity or by statute; and may be exercised in such number, at such times and in such order as Commission may determine in its sole discretion. No delay or omission to exercise any right or power upon the occurrence of any Event of Default hereunder shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient by Commission. In order to entitle Commission to exercise any right or remedy reserved to it under this Agreement, no notice shall be required except as expressly provided herein.

11.4. Commission Default and Developer Remedies

Upon fault or failure of Commission to meet any of its obligations under this Agreement without curing such failure within thirty (30) days after receipt of written notice of such failure from Developer specifying the nature of the event or deficiency giving rise to the default and the action required to cure such deficiency, Developer may, as its sole and exclusive remedies:

(a) Demand and obtain payment from Commission of any sums due to or for the benefit of Developer pursuant to the express terms of this Agreement;

(b) Bring an action in equitable relief seeking the specific performance by Commission of the terms and conditions of this Agreement or seeking to enjoin any act by Commission which is prohibited hereunder; and/or

(c) Bring an action for declaratory relief seeking judicial determination of the meaning of any provision of this Agreement.

Without limiting the generality of the foregoing, Developer shall in no event be entitled to, and hereby waives, any right to seek consequential damages of any kind or nature from Commission arising out of or in connection with this Agreement, and in connection with such waiver Developer is familiar with and hereby waives the provisions of Section 1542 of the California Civil Code which provides as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."

12. OFFSITE IMPROVEMENTS

Developer shall comply with the additional construction requirements set forth on Exhibit "F" attached hereto. The Commission shall provide the Developer with a grant of up to One Hundred Sixty Thousand Dollars ($160,000) to perform such offsite improvements.

13. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES

In the event that either Party hereto brings any action or files any proceeding in connection with the enforcement of its respective rights under this Agreement, the Deed of Trust, the Note or the CC&Rs as a consequence of any breach by the other Party of its obligations thereunder, the prevailing Party in such action or proceeding shall be entitled to have its reasonable attorneys' fees and out-of-pocket expenditures paid by the losing Party. The attorneys' fees so recovered shall include fees for prosecuting or defending any appeal and shall be awarded for any supplemental proceedings until the final judgment is satisfied in full.

14. RIGHT OF ACCESS AND INSPECTION

The Commission shall have the right at any time during normal business hours to enter upon the Site for purposes of inspection. If the Commission in its reasonable discretion determines that any work or materials, actions or expenditures are not in conformity with this Agreement or any applicable Governmental Restrictions, the Commission shall give the Developer notice of this nonconformity and consult with the Developer on curing the matter. The Commission may then, at its election, itself cure the matter if the Developer has not done so as soon as reasonably practicable, but, in any event, within thirty (30) days after the Commission's notice to the Developer. Such cure by the Commission may include, without limitation, stopping the work and ordering replacement or correction of any such work or materials regardless of whether or not such work or materials have theretofore been used in the construction of any portion of the Project. Inspection by the Commission of the Project or the Site or any construction thereof is for the sole purpose of protecting the Commission and is not to be construed as an acknowledgment, acceptance or representation by the Commission or the County that there has been compliance with any Plans approved pursuant to this Agreement, or any terms or provisions of this Agreement, or that the Project or the Site or any of the construction thereof is or will be free of faulty materials or workmanship.

15. CONFLICT OF INTEREST; NO INDIVIDUAL LIABILITY

No County/Commission Representative shall have any personal interest, direct or indirect, in this Agreement, nor shall any County/Commission Representative participate in any decision relating to this Agreement which affects such County/Commission Representative's pecuniary interest in any corporation, partnership or association in which County/Commission Representative is directly or indirectly interested. No County/Commission Representative shall be personally liable in the event of a breach of this Agreement by Commission.

16. AMENDMENTS, CHANGES AND MODIFICATIONS

This Agreement may not be amended, changed or modified without the prior written consent of the parties hereto.

17. EXECUTION OF COUNTERPARTS

This Agreement with exhibits constitutes the entire understanding and agreement of the parties and may be executed in several counterparts, each of which shall be an original and all of which shall constitute one and the same document.

18. NOTICES

All notices, demands, requests, elections, approvals, disapprovals, consents or other communications given under this Agreement shall be in writing and shall be given by personal delivery, certified mail, return receipt requested, or overnight guaranteed delivery service and addressed as follows:

If to Commission Community Development Commission County of Los Angeles

Two Coral Circle

Attn: Executive Director

With a copy to: Community Development Commission County of Los Angeles

Two Coral Circle

Attn: Director of Housing Development and Preservation

If to Developer: Industry Sheriff's Youth Activities League

With copies to: Abell-Helou, GP.

Notices shall be effective upon receipt, if given by personal delivery, the earlier of (i) three (3) business days after deposit with United States Mail, or (ii) the date of actual receipt as evidenced by the return receipt, if delivered by certified mail, and one (1) day after deposit with the delivery service, if delivered by overnight guaranteed delivery service. Each Party shall promptly notify the other Party of any change(s) of address to which notice shall be sent pursuant to this Agreement.

19. SEVERABILITY

The invalidity or unenforceability of any one or more provisions of this Agreement will in no way affect any other provision.

20. INTERPRETATION

Whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa, and each gender will include any other gender. The captions of the paragraphs of this Agreement are for convenience only and do not define or limit any terms or provisions. Time is of the essence in the performance of this Agreement by Developer. Each Party has been represented by counsel in the negotiation of this Agreement and it shall not be interpreted in favor of or against any Party on account of relative responsibilities in drafting. Attached hereto for the convenience of the parties as Exhibit "A" is a directory indicating the location of definitions for certain defined terms used in this Agreement. In the event of any conflict between the body of this Agreement and Exhibit "A," the body of this Agreement shall prevail and supersede.

21. NO WAIVER; CONSENTS

Any waiver by Commission must be in writing and will not be construed as a continuing waiver. No waiver will be implied from any delay or failure by Commission to take action on account of any default of Developer. Consent by Commission to any act or omission by Developer will not be construed to be a consent to any other or subsequent act or omission or to waive the requirement for Commission's consent to be obtained in any future or other instance.

22. GOVERNING LAW

This Agreement shall be governed by the laws of the State of California.

23. TERMINATION FOR IMPROPER CONSIDERATION

The Commission may, by written notice to Developer, immediately terminate the right of Developer to proceed under this Agreement if it is found that consideration, in any form, was offered or given by Developer, either directly or through an intermediary, to any Commission officer, employee or agent with the intent of securing this Agreement or securing favorable treatment with respect to the award, amendment or extension of this Agreement or the making of any determinations with respect to the Developer's performance pursuant to this Agreement. In the event of such termination, Commission shall be entitled to pursue the same remedies against Developer as it could pursue in the event of default by the Developer.

Developer shall immediately report any attempt by a Commission officer or employee to solicit such improper consideration. The Report shall be made to the Executive Director of Commission or the County Auditor-Controller's Employee Fraud Hotline 800/544-6861.

Among other items, such improper consideration may take the form of cash, discounts, service, the provision of travel or entertainment, or tangible gifts.

24. COMMISSION'S QUALITY ASSURANCE PLAN

The Commission or its agent will evaluate Developer's performance under this Agreement on not less than an annual basis. Such evaluation will include assessing Developer's compliance with all contract terms and performance standards. Developer deficiencies which Commission determines are severe or continuing and that may place performance of the Agreement in jeopardy if not corrected will be reported to the Board of Commissioners. The report will include improvement/corrective action measures taken by Commission and Developer. If improvement does not occur consistent with the corrective measures, Commission may terminate this Agreement or impose other penalties as specified in this agreement.

25. DEVELOPER'S WARRANTY ADHERENCE TO COUNTY'S CHILD SUPPORT COMPLIANCE PROGRAM

To the extent applicable, Developer will adhere to the County's child support compliance program as described on the attached Exhibit "N."

26. Reserved

27. Reserved

28. CONFLICT OF INTEREST

The Developer represents, warrants and agrees that to the best of its knowledge, it does not presently have, nor will it acquire during the term of this Agreement, any interest direct or indirect, by contract, employment or otherwise, or as partner, joint venturer or shareholder (other than as a shareholder holding a one percent (1%) or less interest in publicly traded companies) or affiliate with any business or business entity that has entered into any contract, subcontract or arrangement with Commission. Upon execution of this Agreement and during its term, as appropriate, the Developer shall disclose in writing to Commission any other contract or employment during the term of this Agreement by any other persons, business or corporation in which employment will or may likely develop a conflict of interest between Commission's interest and the interests of the third parties.

29. COMPLIANCE WITH LAWS

Developer agrees to be bound by applicable Governmental Restrictions as they pertain to the performance of the Agreement, including, but not limited to, Sections a through g below. This Agreement is subject to and incorporates the terms of the Housing and Community Development Act of 1974, as amended by the Cranston-Gonzales National Affordable Housing Act, 1990 and 24 CFR Part 85. .

a. Civil Rights Act of 1964, Title VI

Developer shall comply with the Civil Rights Act of 1964 Title VI which provides that no person shall, on the grounds of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving federal assistance.

b. Section 109 of HUD Act of 1974

Developer shall comply with Section 109 of the Housing and Community Development Act of 1974 which states that no person in the United States shall, on the grounds of race, color, national origin, or sex be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity funded in whole or in part with funds made available under this title.

Developer shall comply with Executive Order 1126 and 11375, Equal Opportunity in Employment which requires that during the performance of this Agreement, the Contractor will not discriminate against any employee or applicant for employment because of race, color, religion, sex or national origin. The Developer will take affirmative action to ensure that applicants are employed, and that employees are treated fairly during employment, without regard to their race, color, religion, sex or national origin. Such action shall include, but not be limited to the following: employment, upgrading, demotion, or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. The Developer agrees to post in conspicuous places, available to employees and applicants for employment, notices to be provided by the contracting officer setting forth the provisions of the non-discrimination clause.

The Developer will, in all solicitations or advertisements for employees placed by or on behalf of the Developer, state that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex or national origin.

The Developer will send to each labor union or representative of workers with which he has a collective bargaining agreement or other contract or understanding, a notice to be provided by the agency of the Developer's commitments under Section 202 of Executive Order No. 11246 of September 24, 1965, and shall post copies of the notice in conspicuous places available to employees and applicants for employment. The Developer will comply with all provisions of Executive Order No. 11246 of September 24, 1965, and of the rules, regulations and relevant orders of the Secretary of Labor.

The Developer will furnish all information and reports required by the Executive Order and by the rules, regulations and orders of the Secretary of Labor, or pursuant thereto, and will permit access to its books, records, and accounts by Commission and the Secretary of Labor for purposes of investigation to ascertain compliance with such rules, regulations and orders.

In the event of Developer's noncompliance with the non-discrimination clauses of this Agreement or with any of such rules, regulations or orders, this Agreement may be cancelled, terminated or suspended in whole or in part and the Developer may be declared ineligible for further Government contracts in accordance with procedures authorized in the Executive Orders and such other sanctions may be imposed and remedies invoked as provided in the Executive Order or by rule, regulation or order of the Secretary of Labor, or as otherwise provided by law.

The Developer will include the provisions of these paragraphs in every subcontract or purchase order unless exempted by rules, regulations, or orders of the Secretary of Labor issued pursuant to Section 204 of the Executive Order No. 11246 of September 24, 1965, that such provisions will be binding upon each subcontractor or vendor. The Developer will take such actions with respect to any subcontract or purchase order as Commission may direct as a means of enforcing such provisions including sanctions for noncompliance, provided however, that in the event the Developer becomes involved in, or is threatened with litigation with a subcontractor or vendor as a result of such direction by Commission, the Developer may request the United States to enter into such litigation to protect the interests of the United States.

Developer shall comply with Section 3 of the Housing and Community Development Act of 1968, as amended (12 U.S.C. 1701 Et Seq.), which requires that to the greatest extent feasible opportunities for training and employment be given to lower income residents of the project area and contracts for work in connection with the project be awarded to business concerns which are located in or owned in substantial part by persons residing in the area of the project.

e. Age Discrimination Act of 1975 and Section 504 of the Rehabilitation Act of 1973

No person in the United States shall be excluded from participating in, denied the benefits of, or subject to discrimination under this agreement on the basis of age or with respect to an otherwise qualified handicapped individual.

f. Federal Lobbyist Requirements

The Developer is prohibited by the Department of Interior and Related Agencies Appropriations Act, known as the Byrd Amendments, and HUD's 24 Code of Federal Regulations (CFR) 87, from using federally appropriated funds for the purpose of influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, loan or cooperative agreement, and any extension, continuation, renewal, amendment or modification of said documents.

The Developer must certify in writing that they are familiar with the Federal Lobbyist Requirements and that all persons and/or subcontractors acting on behalf of the Developer will comply with the above-described lobbyist requirements.

Failure on the part of the Developer or persons/subcontractors acting on behalf of the Agreement to fully comply with the Federal lobbyist requirements described herein shall be subject to civil penalties.

g. County Lobbyist Ordinance

Developer and each County lobbyist or County lobbyist firm, as defined in Los Angeles County Code Chapter 2.160 (County Ordinance 93-0031), retained by the Developer, shall fully comply with the requirements as set forth in said County Code. The Developer must also certify in writing that they are familiar with the Los Angeles County Code Chapter 2.160 and that all persons acting on behalf of the Developer will comply with the County Code.

Failure on the part of the Developer and or Lobbyist to fully comply with the County lobbyist requirements shall constitute a material breach of the Agreement upon which the Commission may immediately terminate this Agreement and the Contractor shall be liable for civil action.

30. ACCESS AND RETENTION OF RECORDS

Developer shall provide access to Commission, any Federal agency providing funds to be used for the Project, the Comptroller General of the United States, or any of their duly authorized representatives to any books, for the purpose of making audits, examinations, excerpts and transcriptions, all documents, papers and records of the Developer which are directly pertinent to the construction of the Developer Improvements and this Agreement. The Developer is required to retain the aforementioned records for a period of five years after Commission pays final payment and other pending matters are closed under this Agreement. In addition to the books and records described above, upon seventy-two (72) hours written notice, at any reasonable time during such time as this Agreement is in effect, Developer shall prepare and submit to the Commission, all additional reports (other than the progress reports required to be prepared under Section 5.1f) reasonably required by the Commission or its representatives which in the reasonable judgment of the Commission and its representatives may be relevant to a question of compliance with this Agreement, the Deed of Trust or the CC&R's. Developer shall also retain all such reports, records and data relating to the Project for the five-year period described above. In the event any litigation, claims or audit is started during the period when this Agreement is in effect, said books and records shall be retained until all litigation, claims or audit findings involving said books and records have been resolved.

31. REPRESENTATIONS AND WARRANTIES OF DEVELOPER

Developer hereby warrants and represents to Commission that:

31.1. Organization and Standing

Developer is a legal entity as described in the Transaction Summary above, duly organized, qualified to operate in California, and validly existing and in good standing under all applicable laws, and has all requisite power and authority to enter into and perform its obligations under this Agreement, the Promissory Note, the Deed of Trust, the CC&R's and all other documents executed in connection herewith.

31.2. Enforceability

This Agreement, the Promissory Note, the Deed of Trust, the CC&R's and all other instruments to be executed by Developer in connection herewith constitute the legal, valid and binding obligation of Developer, without joinder of any other party.

31.3. Authorization and Consents

The execution, delivery and performance of this Agreement and all other instruments to be executed in connection herewith is consistent with the operating agreement, partnership agreement, or articles and bylaws governing Developer and have been duly authorized by all necessary action of Developer's members, partners, directors, officers and shareholders.

31.4. Due and Valid Execution

This Agreement, the Promissory Note, the Deed of Trust, the CC&R's and all other instruments to be executed in connection herewith, will, as of the date of their execution, have been duly and validly executed by Developer.

31.5. Licenses

Developer will obtain and maintain all material licenses, permits, consents and approvals required by all applicable governmental authorities to develop and sell the Units.

31.6. Litigation and Compliance

To Developer's current actual knowledge, there are no suits, other proceedings or investigations pending or threatened against, or affecting the business or the properties of Developer which could materially impair its ability to perform its obligations under this Agreement, nor is Developer in violation of any applicable Governmental Restrictions which could materially impair Developer's ability to perform its obligations under this Agreement.

31.7. Default

To Developer's current actual knowledge, there are no facts now in existence which would, with the giving of notice or the lapse of time, or both, constitute an "Event of Default" hereunder, as described in Section 11.

31.8. No Violations

The execution and delivery of this Agreement, the Promissory Note, the Deed of Trust, the CC&R's and all other documents executed or given hereunder, and the performances thereunder by Developer, as applicable, will not constitute a breach of or default under any instrument or agreement to which Developer may be a party nor, to Developer's current actual knowledge, will the same constitute a breach of or violate any applicable Governmental Restrictions.

32. APPROVALS

With respect to those matters set forth hereinabove providing for Commission's approval, consent or determination, such approval, consent or determination may be given or withheld at Commission's sole and absolute discretion.

Any review or approval of any matter by the Commission or any Commission official or employee under this Agreement shall be solely for the benefit of Commission, and neither Developer nor any other person shall rely upon such review or approval as an indication of the wisdom, soundness, safety, appropriateness, or presence or absence of any matter. Without limiting the generality of the foregoing, Developer and not Commission shall be solely responsible for assuring compliance with laws, the suitability of the Site for the Project, the adequacy of the plans, and the safety of the Project construction sites, the completed Project, and the operation thereof.

33. GOOD FAITH AND FAIR DEALING

The Commission and Developer agree to perform all of their obligations and the actions required of each hereunder in good faith and in accordance with fair dealing.

34. ASSIGNMENT OF INTEREST IN THE SITE OR THE PROJECT

Without the prior written approval of Commission, which approval Commission may withhold in its sole and absolute discretion, Developer shall not (i) sell, encumber, assign or otherwise transfer (collectively, "Transfer") all or any portion of its interest in the Site or the Project, (ii) permit the Transfer of greater than 49% of its ownership and/or control, in the aggregate, taking all transfers into account on a cumulative basis, or (iii) Transfer any of its rights or obligations under this Agreement, as further described in Section 10. Developer hereby agrees that any purported Transfer not approved by Commission as required herein shall be ipso facto null and void, and no voluntary or involuntary successor to any interest of Developer under such a proscribed Transfer shall acquire any rights pursuant to this Agreement.

At any time Developer desires to effect a Transfer hereunder, Developer shall notify Commission in writing (the "Transfer Notice") and, except with respect to a sale of a Unit in the Project in the ordinary course of Developer's business, shall submit to Commission for its prior written approval (i) all proposed agreements and documents (collectively, the "Transfer Documents") memorializing, facilitating, evidencing and/or relating to the circumstances surrounding such proposed Transfer, and (ii) a certificate setting forth representations and warranties by Developer and the proposed transferee to Commission sufficient to establish and insure that all requirements of this Section 34 have been and will be met. No Transfer Documents shall be approved by Commission unless they expressly provide for the assumption by the proposed transferee of all of Developer's obligations hereunder. The Transfer Notice shall include a request that Commission consent to the proposed Transfer. Commission agrees to make its decision on Developer's request for consent to such Transfer, as promptly as possible, and, in any event, not later than thirty (30) days after Commission receives the last of the items required by this Section 34. In the event Commission consents to a proposed Transfer, then such Transfer shall not be effective unless and until Commission receives copies of all executed and binding Transfer Documents which Transfer Documents shall conform with the proposed Transfer Documents originally submitted by Developer to Commission. Upon the effectiveness of any such Transfer, Developer shall be released from its obligations hereunder only if the written Commission consent expressly provides such a release. Except as expressly provided herein to the contrary, all Developer obligations hereunder shall run with the land and be binding on successors and assigns.

Notwithstanding anything in this Agreement which may be or appear to be to the contrary, Developer agrees that it shall not be permitted to make any Transfer, whether or not Commission consent is required therefor and even if Commission has consented thereto, if there exists an Event of Default under this Agreement at the time the Transfer Notice is tendered to Commission or at any time thereafter until such Transfer is to be effective.

The provisions of this Section 34 shall apply to each successive Transfer and proposed transferee in the same manner as initially applicable to Developer under the terms set forth herein.

The prohibitions against Transfer contained in this Section 34 shall not apply subsequent to the issuance of the Certificate of Completion with respect to the Developer Improvements constructed upon the Site. The prohibitions against Transfer contained in this Section 34 shall not be deemed to prevent the granting of easements or permits to facilitate the development of the Site or to prohibit or restrict the sale of any part or parts of the Developer Improvements in accordance with this Agreement.

In the absence of specific written agreement by the Commission, no Transfer otherwise approved by the Commission shall be deemed to relieve the Developer or any other party from any obligations under this Agreement. If the Developer violates any provision of this Section 34, the Commission may terminate this Agreement immediately upon written notice to Developer.

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date and year first above written.

COMMISSION:

By:

Carlos Jackson

Title: Executive Director

APPROVED AS TO FORM:

Lloyd W. Pellman, County Counsel

By:______________________

Deputy

By:

Title:

By:

Title:

Top Of Page