EXHIBIT B ADDITIONAL TERMS AND CONDITIONS ADDENDUM

Transcription

1 EXHIBIT B ADDITIONAL TERMS AND CONDITIONS ADDENDUM A. ADVANCES AND CONSTRUCTION 1. CONDITIONS PRECEDENT TO INITIAL ADVANCE. Bank shall make the initial advance of proceeds of the Authority Loan and hereby approves the initial advance of the Borrower Loan as provided in Section 3.4 of this Authority Loan Agreement, and upon satisfaction of each of the following conditions: (a) The conditions to the closing of the Authority Loan have been satisfied. (a) Copies of all organizational documents of Borrower, including, without limitation, Borrower s fully executed limited partnership agreement, as amended to admit its tax credit limited partner, duly filed and/or recorded in the appropriate jurisdiction and certified as required by Bank, and such authorization documents as Bank may require, in form and substance acceptable to Bank, authorizing Borrower to execute, deliver, and perform its obligations under this Agreement and the Loan Documents. (b) Borrower shall have delivered to Bank the Deed of Trust, Borrower Assignments, a rate lock agreement with respect to the Permanent Loan Amount (as defined in Section B1.1) satisfactory to Bank ( Rate Lock Agreement ) and Subordination Agreements, together with the documents and reports described in Section 2 below. (c) Bank shall have reviewed and approved that certain First Amended and Restated Ground Lease Agreement dated September, 2018 (the Ground Lease ) between the County and the Borrower of the Development. (d) Bank shall have received original executed opinions of bond counsel and Borrower s counsel satisfactory in form and content to Bank and its counsel. (e) Receipt by Bank of all fees, including Bank s commitment fee equal to.75% of the principal amount of the Borrower Loan, and a rate lock fee equal to.50% of the Permanent Loan Commitment (as defined in Section B1.1), and a loan processing fee of $500.00, shall have been paid to Bank. B-1

2 (f) All costs (including Costs of Issuance) and expenses of Bank in connection with the closing of the Authority Loan and the Borrower Loan, including, without limitation, the fees and expenses of Bank s counsel, shall have been paid. (g) The additional documents listed in Annex 3 have been executed and delivered to Bank. (h) Operating Account. Borrower shall have established an operating account in the name of Borrower with Bank (the Operating Account ), which shall be administered and controlled by Borrower in accordance with Section 26 of this Agreement. (i) Borrower s Funds Account. Borrower shall have established an account (the Borrower s Funds Account ) with Bank and shall have deposited the amount required by Borrower ( Borrower s Funds ) as set forth in the Project Budget, including without limitation, the proceeds from the subordinated debt approved by Bank for the Development. The Borrower s Funds Account shall be administered and controlled by Bank in accordance with this Exhibit B. 2. CONDITIONS REQUIRED TO BE SATISFIED FOR THE CLOSING TO OCCUR. As a condition to the Closing Date, each of the following conditions, in form and substance satisfactory to Bank, shall be satisfied unless such condition is waived in whole or in part by Bank in writing: 2.1 Other Requirements. Unless waived by Bank, Bank shall have received and approved: (a) A copy of a soils report prepared by a soils engineer acceptable to Bank which sets forth all information and analyses requested by Bank, the substance of which report Bank deems satisfactory. (b) A letter from a soils engineer stating all excavation, grading and foundation work is in full compliance with recommendations contained within the initial B-2

3 soils report. (c) A written environmental audit report prepared by a consultant or other person acceptable to Bank at Borrower s expense, and/or an environmental questionnaire from Borrower in form and substance acceptable to Bank relating to the use and presence of Hazardous Materials in, on, under or about the Development and compliance with applicable Environmental Requirements, the substance of which report Bank deems satisfactory. (d) A copy of any environmental impact report or negative declaration prepared in connection with the construction of the Improvements, together with such documents evidencing the findings of the applicable Governmental Authority and any other official actions taken in connection therewith as Bank shall reasonably request, the substance of which report Bank deems satisfactory. (e) Bank s receipt of a satisfactory cost review of the Development, confirming that Borrower s estimation of such cost is accurate, prepared by a third-party consultant selected by Bank. (f) A certificate from Borrower listing all necessary permits to complete the construction and equipping of the Improvements, together with copies of such permits as may then be requested by Bank. (g) Evidence of compliance with any subdivision map, the Restrictions, or any other Restrictions then applicable, including without limitation compliance with all City parking requirements. (h) The termination, assignment or subordination, as determined by Bank, of all liens on the Collateral in favor of any party (other than Bank), based on a search of the records of the filing office of the California Secretary of State or any other state or local jurisdiction where the Borrower s real or personal property is located, except Permitted Encumbrances. (i) Evidence whether or not the Property is located in an area identified as a special flood hazard zone as defined by the Federal Emergency Management Agency pursuant to the Flood Disaster Protection Act of 1973 and an original Flood Certification in form and substance acceptable to Bank. (j) Complete copies of all Plans and Specifications necessary for the construction B-3

4 and completion of the Improvements, with evidence of approvals required shown thereon. (k) If requested by Bank, a construction progress schedule approved by Bank showing the planned timing, progress of construction and completion date for the Improvements of the Development. (l) Evidence that all utility services required for the construction, occupation and use of the Improvements, including sewer and water hook-ups, are available to the Property and are in adequate supply at the boundaries of the Property. (m) At Borrower s expense, an appraisal on the Development prepared by an appraiser acceptable to Bank in form and substance satisfactory to Bank, equal to the greater of (i) $3,150,000, (ii) the value required to support a 80% Loan to Value Ratio, or (iii) the value required to support a 75% Loan to Cost Ratio, after adjustment for any liens and assessments on the Development that would be senior to the lien of the Deed of Trust. In the event that the appraisal demonstrates that the appraised value of the Development does not support the full Borrower Loan amount, then Borrower shall provide evidence to Bank of sufficient equity or other sources of funds acceptable to the Bank in an amount equal to the difference between the appraised value and $3,150,000 (the Value Shortfall ). (n) A UCC-1 Financing Statement which shall have been duly filed with the California Secretary of State as well as in the records of San Joaquin County, California and any other counties or states Bank deems appropriate to perfect its lien on the Collateral. (o) Copies of any fictitious business name statements with evidence of filing, as applicable and copies of any business licenses, as applicable. (p) Insurance binders, policies, or certificates evidencing the obtaining and premium payment of all policies of insurance required by this Agreement and any other Loan Document. (q) A copy of all executed contracts associated with the Development (the Contracts ), including without limitation, the construction contract (the Construction Contract ) between Trinity Development & Construction, Inc. (the Contractor ) and the Borrower, the architect s contract (the Architect s B-4

5 Contract ) between Basis Architecture and Consulting Inc. (the Architect ) and the Borrower, and the engineer s contract (the Engineer s Contract ) between Dillon & Murphy Engineering (the Engineer ) and the Borrower. All contracts shall be subject to Bank s review and approval. The Construction Contract must be a guaranteed maximum price construction contract with an approved completion bond required for all subcontractors in excess of $250,000 contract award. The Construction Contract shall also include a percentage of completion disbursement plan with a 10% retention until receipt of a completion Endorsement or LP-10. (r) Copies of all executed leases for all or any part of the Development in effect as of the Closing Date, along with an estoppel certificate and a subordination, non- disturbance and attornment agreement executed by each tenant, each in form and substance satisfactory to Bank. (s) Any other information, certificate, document or approval relating to the Development or Improvements as Bank may require. (t) The final Project Budget, which demonstrates that the Borrower Loan, along with the funds provided by other sources, are sufficient to pay all hard and soft costs required to complete the Development and pay operating costs until the Development has stabilized. The Project Budget much also have an interest reserve included sufficient to pay debt service on the Borrower Loan for 20 months. (u) A preliminary title report from Old Republic Title Company, along with all underlying documents and the Ground Lease. (v) (w) Recordation. The Deed of Trust and Subordination Agreements shall have been duly recorded in the proper official County records, with Bank having received such assurances (including but not limited to the Title Policy (as defined in Section 4.1)) as Bank may require to ensure the senior lien priority of its security interests (other than such lien exceptions as approved by Bank in writing (the Permitted Exceptions )). No Materially Adverse Effect. There shall have been no event or occurrence that has resulted in a Materially Adverse Effect. B-5

6 (x) Compliance with Loan Documents. The representations and warranties of Borrower set forth herein shall be true and correct in all respects and no Default shall have occurred and be continuing and no other event shall have occurred and be continuing if the event, with notice or the passage of time or both, would be such a Default. 3. CONDITIONS PRECEDENT TO EACH DISBURSEMENT OF THE BORROWER LOAN 3.1 Conditions Precedent to Disbursements. Bank shall not be obligated to approve any disbursements of the Borrower Loan or to take any other action under the Loan Documents unless all of the following conditions are satisfied in form and substance satisfactory to Bank at the time of such action: (a) (b) (c) There exists no Default and no Event of Default has occurred, which has not been cured; Bank shall have been provided fully executed Contracts, an assignment thereof by Borrower to Bank in form and substance satisfactory to Bank, and acknowledgments and consents thereto by Contractor, Engineer or Architect, as applicable; The undisbursed Borrower Loan proceeds allocated to each line item (each an Item ) in the Project Budget, together with all sums (if any) to be provided by Borrower as shown in the Project Budget, shall at all times be not less than the amount that Bank from time to time determines, in Bank s sole judgment, to be necessary to: (i) (ii) (iii) pay, through final completion of the Improvements, all costs of development, construction financing and leasing of the Development in accordance with the Project Budget (determined on an Item-by-Item basis) and the Loan Documents; pay all sums which may accrue under the Loan Documents; and enable Borrower to perform and satisfy all of its covenants and agreements contained in the Loan Documents. B-6

7 If Bank determines, in Bank s sole judgment, at any time that such funds are not sufficient for such purposes described above, Borrower shall deposit additional Borrower s Funds in the amount of the deficiency determined by Bank into the Borrower s Funds Account, as directed by Bank, within five (5) days after Bank s written demand; and (d) (e) Borrower has delivered to Bank all documents or other materials requested by Bank pursuant to, and Borrower has taken all action and accomplished all things required by, this Exhibit B or any of the other Loan Documents. The representations and warranties of Borrower set forth in this Exhibit B or any of the other Borrower Loan Documents are true and correct on and as of the date of the making of such disbursement as though made on and as of such date. (f) Bank shall have received such other approvals, opinions, or documents from Borrower or third parties in form and substance acceptable to Bank as Bank may reasonably request. 3.2 Borrower s Funds. It is agreed that from time to time upon the written request of Borrower and subject to the written approval of Bank, as and when additional funds are needed to pay the costs of the Development as shown on the Project Budget, the funds in the Borrower s Funds Account and interest thereon shall be used as Borrower s Funds. Upon final completion of the Improvements in accordance with this Agreement and payment of amounts then due hereunder or under the Loan Documents, and if there exists no Default or Event of Default, Bank shall release any funds remaining in the Borrower s Funds Account to Borrower. 3.3 Special Conditions; Acceleration. Notwithstanding any other provision hereof or of the other Loan Documents: (a) no disbursements of the Borrower Loan shall be permitted unless and until Bank has received satisfactory evidence that building permits for the construction of the Improvements (excluding for these purposes tenant improvements) have been issued by the City or County, as applicable, and (b) if Borrower has not provided such satisfactory evidence on or before the Borrower Loan automatically shall be due and payable in full, notwithstanding the Maturity Date set forth in the Borrower Note, or any other provisions of this Exhibit B or the other Borrower Loan Documents. 3.4 Disbursement of Borrower Loan. The proceeds of the Borrower Loan, when B-7

8 qualified for disbursement, and any Borrower s Funds shall be deposited into the Borrower s Funds Account or otherwise disbursed to or for the benefit or account of Borrower, as determined solely by Bank, in accordance with this Agreement. 3.5 Disbursement Requirements. Subject to the conditions set forth in Section 3.1, the proceeds of the Borrower Loan and Borrower s Funds shall be disbursed in accordance with the Project Budget and the Disbursement Requirements set forth in Annex 1 attached hereto and made a part hereof. 3.6 Order of Disbursement. Except for $50,001 to be disbursed from the Borrower Loan on the Closing Date, disbursements made after the deposit of Borrower s Funds shall be made from the Borrower s Funds Account until all of such Borrower s Funds are depleted. 3.7 Disbursement Authorization. Advances of the Borrower Loan (each an Advance ) may be disbursed to or for the benefit or account of Borrower, as determined solely by Bank, upon the written request of Borrower s authorized representatives, as listed in the Authorized Signatures for Construction Draw Requests dated of even date herewith, in the form of attached Annex 2, who are each authorized to request disbursements until written notice of Borrower s revocation of such authority is received by Bank. 3.8 Disbursed Funds. Any disbursements of the Borrower Loan or Borrower s Funds held by Borrower shall be in trust for Bank and Borrower shall use and apply all disbursements of the Borrower Loan and Borrower s Funds solely for the purposes for which the funds have been disbursed in accordance with this Agreement. Bank is not obligated to monitor or control Borrower s use or application of such disbursements. Unless otherwise approved by Bank, all disbursements for Development construction costs shall be conditioned on Bank s receipt of an application for payment (each an Application for Payment ) that conforms to the requirements set forth in Annex Pledge and Assignment. Borrower hereby pledges, assigns and grants to Bank a security interest in the Borrower s Funds Account and the Operating Account (the Accounts ), all funds in said Accounts, all proceeds of said Accounts, all increases (including any interest) in said Accounts, and all additions to said Accounts. The security interest of Bank in said Accounts secures and shall secure payment and performance of all obligations of Borrower. Furthermore, Borrower represents and warrants to Bank that Borrower has not executed any security agreement, financing B-8

9 statement or notice covering said Accounts or any part thereof or any funds therein, except in favor of Bank. Borrower covenants with Bank that Borrower shall not execute any security agreement, financing statement or notice covering said Accounts or any part thereof or any funds therein, except to Bank, and Borrower shall keep said Accounts free from all liens, claims, security interests and encumbrances of any kind or nature whatsoever, except the security interest of Bank. Borrower shall indemnify and defend Bank against and hold Bank harmless from all claims, demands, liabilities, losses, damages, costs and expenses, including, without limitation, reasonable attorneys' fees and disbursements, arising out of or resulting from any lien, claim, security interest or encumbrance of any kind or nature whatsoever asserted in, to or against said Accounts or any part thereof or any funds therein by any person or entity (each a Person ) whatsoever, except the security interest of Bank. Upon the occurrence of any Event of Default under this Agreement and as long as any Event of Default exists, Bank shall have the right to exercise and enforce all of the rights and remedies of a secured party under the California Commercial Code, and Bank shall have the right to disburse all funds in said Accounts to Bank, which funds Bank shall have the right to use or apply to satisfy any obligations or liabilities of Borrower under the Loan Documents (including applying such funds to payment of the principal sum of the Borrower Loan or interest thereon) or to compensate Bank for any damage, loss, cost, expense and other detriment caused by or resulting from the Default, but no such use or application of such funds shall cure any Default. 4. INSURANCE Title Insurance. Borrower shall, at Borrower s expense, procure from a title insurer satisfactory to Bank an American Land Title Association Extended Loan Policy-2006 with ALTA Endorsement-Form 1 Coverage (Amended 2006) of title insurance ( Title Policy ), with any other endorsements or such other title insurance coverage Bank may require, insuring Bank, in an amount not less than the principal amount of the Borrower Loan, of the validity and enforceability and the first priority of the lien of the Deed of Trust upon the Development, including Borrower s leasehold interest in the Property and Borrower s interest in the Improvements, subject only to such matters of record and exceptions to coverage as are acceptable in writing by Bank. During the term of the Borrower Loan, Borrower shall, at Borrower s expense, procure and deliver to Bank such other endorsements as Bank may require. 4.1 General Requirements. All policies required by this section shall: B-9

10 (a) be issued by companies with a Best's Insurance Guide rating of at least B+ and duly qualified and authorized to do such business in the State of California and approved by Bank; (b) provide for severability of interests; (c) provide that an act or omission of one of the named insureds shall not reduce or avoid coverage to the other named insureds; (d) be subject to the approval of Bank as to the insuring companies, amount, deductibles, content and forms of policies and expiration dates; and (e) provide that it cannot be modified or canceled without ten (10) days prior written notice to Bank. 4.2 Property and Other Insurance. (a) Course of Construction. At all times during the course of construction Borrower shall procure, and thereafter maintain, a policy of builder s risk completed value property insurance, with a vandalism and malicious mischief endorsement and such other endorsements as Bank may require, in an amount acceptable to Bank. (b) Development All Risks. Borrower shall maintain insurance covering the Development against all risks of direct physical loss in an amount equal to the full replacement cost (the Replacement Cost ). (c) (d) Collateral All Risks. Borrower shall maintain insurance covering the Collateral against all risks of direct physical loss (excluding earthquake and flood to the extent such perils are customarily excluded from such insurance) in an amount equal to the Replacement Costs. Flood Coverage. If the Development or Collateral is subject to the Flood Disaster Protection Act of 1973 or other applicable legislation, Borrower shall secure flood insurance in the lesser of the following three items: (1) the amount available under the National Flood Disaster Protection Act of 1973, as amended; (2) the Replacement Cost; or (3) the Borrower Loan B-10

11 amount. (e) (f) (g) Other Property Coverage. Borrower shall maintain such other insurance including, but not limited to, earthquake insurance, terrorism insurance, business interruption insurance, extended period of indemnity provisions in any time- element coverages, insurance against loss arising out of the operation of building codes, and/or boiler and machinery insurance, and in such amounts, as may from time to time be reasonably required by Bank. Loss of Rents/Business Interruption Coverage. After completion of construction, Borrower shall maintain insurance covering the rental value (or comparable business interruption) of the Development insuring against all risks of loss (excluding earthquake and flood to the extent such perils are customarily excluded from such insurance) in an amount of not less than 100% of one year s rental value of the Development. Liability Insurance. i. Commercial Liability. Borrower shall procure, and thereafter maintain, a policy of comprehensive commercial general liability insurance on the occurrence policy form, with occurrence coverage trigger, or comprehensive general liability insurance, with the broad-form comprehensive general liability endorsement (or their equivalent), including, without limitation, contractual liability coverage and products and completed operations liability coverage, covering Borrower against any and all liability in connection with the Development (including, but not limited to, construction operations performed by or on behalf of Borrower and Borrower s indemnifications as set forth herein), in amounts of not less than $3,000,000.00, $3,000, per occurrence and $3,000, annual aggregate combined single limits for bodily injury liability and property damage liability, and $3,000, for personal injury liability. Said insurance shall provide that the insurance thereby provided to Bank shall be primary and that the insurer will not seek contribution from any other insurance available to Bank. A copy of said endorsement shall be attached to any insurance policy, binder, or certificate of insurance furnished to Bank in accordance with the provisions herein. ii. Other Liability Coverage. Borrower shall maintain such other liability insurance (including, but not limited to, automobile liability insurance, B-11

12 workers compensation and employer s liability insurance, environmental impairment liability insurance, and/or directors and officers liability insurance), and in such amounts, as may from time to time be reasonably required by Bank. (h) (i) (j) (k) Blanket Coverage. Bank may accept, in its sole discretion, blanket insurance policies in satisfaction of Borrower s obligations to provide insurance. Evidence of Coverage. Borrower shall furnish to Bank the original or a binder or a certificate (with a certified copy of the policy to be delivered to Bank upon Bank s request) of each policy required under this section and, at least thirty (30) days prior to expiration of any such policy, proof of issuance of a policy continuing in force the coverage provided by the expiring policy. In the event Borrower shall fail to maintain the insurance coverage required by this Exhibit B Bank may (but shall be under no obligation to) take out the required policies of insurance and pay the premiums on the same, or may make such repairs or replacements as are necessary and provide for payment thereof; and all amounts so advanced therefore by Bank shall become an additional obligation of Borrower to Bank, which amounts, together with interest thereon from the date of payment at the highest interest rate applicable to unpaid principal on the Borrower Note, Borrower agrees to pay within five (5) days of demand by Bank. Bank shall have the right, but not the obligation to pay any selfinsured retention deductible. Loss Payee Endorsement. All insurance required pursuant to this section shall (i) name Bank (or its designee) as mortgagee; and shall (ii) contain either a Mortgage-Clause Form 438BFUNS or its equivalent or a Loss Payee Form 49A or its equivalent, as appropriate. All insurance covering direct physical loss shall be written on a replacement-cost basis. All permanent coverage shall contain standard agreed-amount clauses applicable to replacement values of improvements, rental income, and other business interruption values, and endorsements for demolition costs and deleting same-site provisions. Borrower s general liability insurance policy shall not include any provision which requires that only Borrower may pay any deductible or self-insured retention as a condition precedent to coverage under said policy and shall expressly permit, but not require Bank to do so. Limits and Deductibles. Bank shall establish minimum deductibles and, if B-12

13 appropriate, minimum coverage requirements. Such limits and deductibles shall be set forth in an Agreement to Provide Insurance document prepared by Bank and executed by Borrower in connection with the Borrower Loan. (l) Forced Placed Insurance. Borrower acknowledges that if Bank purchases any required insurance because Borrower fails to procure such insurance, the insurance will provide limited protection against physical damage to the Collateral for the Borrower Loan, up to an amount equal to the lesser of (1) the unpaid balance of the Borrower Loan, excluding any unearned finance charges, or (2) the value of the collateral for the Borrower Loan; however, Borrower s equity in such collateral may not be insured. In addition, the insurance may not provide any public liability or property damage indemnification and may not meet the requirements of any financial responsibility laws. 5. CONSTRUCTION 5.1 Commencement. Borrower shall commence construction of the Improvements not later than October 7, Completion. Subject to any Force Majeure event described in Section 5.11, Borrower shall diligently prosecute construction of the Improvements continuously to completion and shall complete construction of the Improvements on or before the Initial Maturity Date set forth in Section B1 of this Exhibit B (the Construction Period ); provided that Advances for tenant improvements may be permitted following the expiration of the Construction Period, subject to all other terms and conditions of this Agreement and the other Loan Documents. Construction. Borrower shall construct the Improvements in a good and workmanlike manner in accordance with the Plans and Specifications and the recommendations of any soils or engineering report approved by Bank. In constructing the Improvements, Borrower shall comply with all applicable laws, ordinances, rules, regulations, building restrictions, recorded covenants and restrictions and requirements of all Governmental Authorities (the Requirements ). Borrower shall be solely responsible for all aspects of Borrower s business and conduct in connection with the Development, including the quality and suitability of the Plans and Specifications and B-13

14 their compliance with such requirements, the supervision of the work of construction, the qualifications, financial condition and performance of all architects, engineers, contractors, material suppliers, consultants and property managers, and the accuracy of all Applications for Payment and the proper application of all disbursements. Bank is not obligated to supervise, inspect, or inform Borrower or any third party of any aspect of the construction of the Improvements or any other matter referred to in this section. Any inspection or review by Bank is for Bank s benefit only, to determine whether Borrower is properly discharging its obligations to Bank, and may not be relied upon by Borrower or any third party. Bank owes no duty of care to Borrower or any third party to protect against, or to inform Borrower or any third party of, any negligent, faulty, inadequate, or defective design or construction of the Improvements. 5.3 Plans and Specifications. (a) (b) (c) Except as otherwise provided in this Agreement, Borrower shall not make any changes in the Plans and Specifications once approved by Bank without Bank s prior written consent, if such change: (i) constitutes a material change in the building material or equipment specifications, or in the architectural or structural design, value or quality of any of the Improvements; (ii) would result in a material cost increase (as determined by the Bank); or (iii) would materially and adversely affect the structural integrity, quality of building materials, or overall efficiency of operating systems of the Improvements. Without limiting the above, Bank agrees that Borrower may make minor changes in the Plans and Specifications without Bank s prior written consent, provided, that such changes do not violate any of the conditions specified herein. Borrower shall submit any proposed change in the Plans and Specifications to Bank at least ten (10) Business days prior to the commencement of construction relating to such proposed change whether or not such change is subject to Bank s consent. Requests for any change which requires consent shall be accompanied by working drawings and a written description of the proposed change, submitted on a change order form acceptable to Bank, signed by Borrower and, if required by Bank, also by the Architect and/or the Contractor. At Bank s option, Bank may require Borrower to provide: (i) evidence satisfactory to Bank of the cost and time necessary to complete the proposed change; (ii) a deposit in the amount of any increased costs as Borrower s Funds; and (iii) a complete set of as built Plans and Specifications for the completed Improvements. Borrower acknowledges that Bank s review of any changes and required consent B-14

15 may result in delays in construction and hereby consents to any such delays. (d) (e) Upon request and following completion of the Improvements, Borrower shall deliver to Bank within ten (10) days a set of final Plans and Specifications Borrower shall at all times maintain, for inspection by Bank, a full set of working drawings of the Improvements. 5.5 Construction Information; Inspections. Bank is expressly authorized to contact any contractor, subcontractor, or material supplier and, at all reasonable times, to enter the Development and inspect the Improvements and the work of construction in order to verify information disclosed pursuant to this section or for any other purpose. From time to time, and within ten (10) days after Bank s request, Borrower shall deliver to Bank: (a) (b) (c) (d) (e) A complete list stating (i) the name, address and telephone number of each contractor, subcontractor and material supplier to be employed or used for construction of the Improvements and (ii) the dollar amount, including changes, if any, of each contract and subcontract, and the portion thereof, if any, paid through the date of such list; Copies of each contract and subcontract identified in such list, including any changes thereto; A cost breakdown, in a form acceptable to Bank, setting forth the estimated total cost of constructing the Improvements, and that portion, if any, of each cost Item (i) which has been incurred and (ii) which has been paid, all as of the date of such cost breakdown; A construction progress schedule, in a form acceptable to Bank, showing the progress of construction and the estimated sequencing and completion time for uncompleted work, all as of the date of such schedule; and With respect to any item designated above which has been previously delivered, such update thereof as Bank may request. 5.6 Prohibited Contracts. Without Bank s prior consent, Borrower shall not contract for any materials, furnishings, equipment, fixtures or other parts or components of the B-15

16 Improvements, or other property for the use or occupancy of the Development or the Improvements, if any third party retains or purports to retain any interest (other than lien rights, if any, created by operation of law) in such items after their delivery to the Development. Borrower shall have five (5) days to effect the removal of any such retained interest. 5.7 Liens and Stop Notices. If a claim of lien is recorded affecting the Development or a bonded stop notice is served on Bank which affects the Borrower Loan or Borrower s Funds, Borrower shall, within twenty (20) days after such recording or service or within five (5) days after Bank s demand, whichever occurs first: (a) pay and discharge the same; (b) effect the release thereof by recording or delivering to Bank a surety bond in sufficient form and amount, but in any event no less than 125% of the lien or stop notice amount; or (c) provide Bank with other assurance that Bank deems, in its sole discretion, to be satisfactory for the payment of such lien or bonded stop notice and for the full and continuous protection of Bank from the effect of such lien or bonded stop notice. 5.8 Assessments and Community Facilities Districts. Without Bank s prior consent, Borrower shall not cause or suffer to become effective or otherwise consent to the formation of any assessment district or community facilities district which includes all or any part of the Property and Improvements pursuant to: (a) the Mello-Roos Community Facilities Act of 1982; (b) the Municipal Improvement Act of 1913; or (c) any other comparable or similar statute or regulation, nor shall Borrower cause or otherwise consent to the levying of special taxes or assessments against the Property and Improvements by any such assessment district or community facilities district. 5.9 Delay. Borrower shall promptly provide notice to Bank of any event causing delay or interruption of construction or the timely completion of construction. The notice shall specify the particular work delayed and the cause and period of each delay Surveys. If requested by Bank, Borrower shall deliver to Bank pursuant to its request and at Borrower s expense a survey of the Property in compliance with the current ALTA/ACSM Minimum Standard Detail Requirements certified and in form satisfactory to Bank. Any such survey shall be made and certified by a registered engineer or licensed surveyor Force Majeure. The time within which construction of the Improvements must be completed shall be extended for a period of time equal to the period of any delay directly affecting the construction work which is caused by fire, earthquake, inclement weather (but only to the extent it is significantly more severe in type or duration than typical for B-16

17 the location and time of year in which such inclement weather occurs), strike, lockout, acts of public enemy, riot, insurrection, or governmental regulation of the sale or transportation of materials, supplies or labor, but not to exceed sixty (60) days, provided Borrower furnishes Bank with written notice of any such delay within seven (7) days after the occurrence thereof Construction Contract. Borrower and the Contractor have entered or will enter into the Construction Contract pursuant to which the Contractor is to construct a portion of the Improvements. Borrower shall require or cause the Contractor to perform its duties in accordance with the Construction Contract and shall not amend, modify or terminate the duties of the Contractor under the Construction Contract without Bank s prior written consent, except as may be otherwise permitted herein Architect s Contract. Borrower and Architect have entered or will enter the Architect s Contract pursuant to which the Architect is to design the Improvements, prepare the Plans and Specifications, and supervise construction of the Improvements. Borrower shall require the Architect to perform in accordance with the Architect s Contract and shall not amend, modify or terminate the duties of the Architect under the Architect s Contract without Bank s prior written consent Contractors. Bank may, but shall not be obligated to, disapprove any contractor, subcontractor, or material supplier which Bank deems financially or otherwise unqualified. The absence of any such disapproval shall not constitute a representation of qualifications. B. CONVERSION TO PERMANENT LOAN. 1. Conversion Terms. Borrower may convert the Borrower Loan to a permanent loan and extend the maturity of the Borrower Loan from May 1, 2020 (the Initial Maturity Date ) to September 1, 2035, respectively (the "Permanent Maturity Date"), which is seventeen (17) years after the Closing Date. Borrower may request the extension option by delivering a written notice of the request to Bank (the "Conversion Notice"), which shall not be later than thirty (30) days prior to the then current maturity date. The date the Initial Maturity Date becomes the Permanent Maturity Date shall be known as the Conversion Date. The Conversion Notice shall be accompanied by any information Bank deems appropriate to require to allow Bank to certify that Borrower has met all of the B-17

18 conditions to the extension in question set forth herein. In addition, the Conversion Notice shall constitute a representation and warranty by Borrower to Bank that Borrower is in full compliance with all the conditions set forth in this provision and the documents supporting the Borrower Loan, including but not limited to the Authority Loan Agreement. Before the extension becomes effective, the following conditions shall be satisfied on or before the Conversion Date in a manner satisfactory to Bank in the exercise of its reasonable judgment: 1.1 The Borrower Loan shall have been paid down to an outstanding principal amount (the Permanent Loan Amount ) equal to the lesser of $2,440,000 or (b) the amount that would be sufficient to meet the Debt Service Test set forth in Section 1.9 below. 1.2 The Bank shall have received the permanent loan commitment fee equal to 1.00% of the Borrower Loan to be in effect following the Conversion Date (the Permanent Loan Commitment Fee ). 1.3 No Event of Default shall have occurred and be continuing and no other event shall have occurred and be continuing if the event, with notice or the passage of time or both, would be such an Event of Default. 1.4 Bank shall be satisfied that the Development has been well maintained and is in good condition and repair, except for any insured casualty, which is being repaired. 1.5 Bank shall be satisfied that the Improvements have been completed in a satisfactory manner in compliance with the terms of the Authority Loan Agreement, and Bank shall have received copies of the Notice of Completion and Final Notice of Occupancy for the Development. The Development shall have been ninety percent (90%) occupied and meets the Debt Service Test described in paragraph 1.9 below for a minimum of ninety (90) days prior to the Conversion Date. 1.6 Borrower shall have provided such title endorsements or title insurance as Bank may request to insure the continuing lien priority of the Deed of Trust. 1.7 Borrower shall have provided such financial information to Bank as Bank shall deem reasonably necessary to evaluate Borrower s financial condition as B-18

19 part of the conversion process. 1.8 Borrower shall satisfy the Debt Service Test for a minimum of ninety (90) consecutive days. The "Debt Service Test" will be deemed satisfied when and only when the annualized Net Operating Income (as defined below) from the Development pursuant to leases entered into in accordance with the Authority Loan Agreement, as determined by the Bank in its sole discretion, at any given time, is sufficient to pay One Hundred Fifteen percent (115%) of the annual principal and interest payable on a mortgage in the amount of the outstanding principal balance of the Borrower Loan at the time of the test, assuming a fixed interest rate equal to the Underwriting Rate, as defined below, on such test date. The Debt Service Test will also assume a thirty-five (35) year amortization of principal, as determined by the Bank; (ii) a 360-day year and (iii) that each month has 30 days. The Underwriting Rate is an assumed rate of 3.6% per annum. 1.9 To determine if Borrower has passed the Debt Service Test, Bank shall determine the cash receipts and cash disbursements to be used for the calculation in its reasonable judgment. For purposes of the Debt Service Test: (a) (b) "Net Operating Income" shall mean Gross Income less Operating Expenses. "Gross Income" shall mean the cash receipts for the last full calendar month just prior to the Initial Maturity Date, including without limitation, any subsidy payments received. (c) "Operating Expenses" shall mean the cash disbursements for the three (3) month period ending with the last full calendar month just prior to the Initial Maturity Date divided by three (3), but excluding disbursements for capital improvements Prior to the Conversion Date, Bank shall have received evidence of the post construction insurance required pursuant to Section 4 of this Exhibit B. 2. Prepayment Premium Terms Conversion/No Conversion. B-19

20 (a) (b) If the Conversion Date does not occur for any reason, the Borrower shall pay (i) an exit fee in the amount of one percent (1%) of the principal amount of the Borrower Loan, and (ii) if the Borrower prepays the Borrower Loan during the first 18 months following the Closing Date, a prepayment fee equal to (A) two percent (2%) of the principal of the Borrower Loan if such prepayment occurs during the first ten (10) months following the Closing Date or (B) one percent (1%) of the principal amount of the Borrower Loan if such prepayment occurs during the remaining seven (7) months following the Closing Date. If the Conversion has been brought to fruition, the Borrower Loan will be subject to a prepayment premium (the Prepayment Premium ), as further described below. 2.1 Prepayment Premium. Upon any event where the Borrower Note is fully or partially satisfied in any manner within the first five years following the Conversion Date, other than by making scheduled payments required hereunder or otherwise provided in the Loan Documents, whether voluntary or involuntary, prior to its Maturity Date (excluding the receipt of insurance or condemnation proceeds), including but not limited to, any payment after default, any payment after the Maturity Date is accelerated or payment by any sale under court order, trustee s sale or deed in lieu thereof, or payment by sale or other method under any bankruptcy or insolvency proceeding, Bank shall be entitled to the Prepayment Premium. Each prepayment of all or part of the Borrower Loan shall be accompanied by all interest accrued on the prepaid principal amount, plus the Prepayment Premium calculated as provided below. Bank shall submit a certificate to Borrower setting forth its determination of any Prepayment Premium, which shall be conclusive and binding in the absence of manifest error. A prepayment is a payment on the principal balance on a date earlier than the scheduled payment date. 2.2 Calculation of Prepayment Premium. The Prepayment Premium shall be equal to: (a) five percent (5.00%) of the principal balance if said payment is received during the first year following the Conversion Date; (b) four percent (4.00%) of the principal balance if said payment is received during the second year following the Conversion Date; B-20

21 (c) three percent (3.00%) of the principal balance if said payment is received during the third year following the Conversion Date; (d) two percent (2.00%) of the principal balance if said payment is received during the fourth year following the Conversion Date; or (e) one percent (1.00%) of the principal balance if said payment is received during the fifth year following the Conversion Date. 2.3 Notice of Prepayment. Borrower shall give Bank irrevocable written notice of Borrower's intention to make any prepayment, specifying the date and amount of the prepayment. The notice must be received by Bank at least five (5) Banking Days in advance of the prepayment. 2.4 Borrower's Waiver. By its signature below, Borrower expressly waives any right to prepay any portion of the Borrower Loan except on the express terms of this Section B(2.4) of Exhibit B. If the maturity of the Borrower Note is accelerated by reason of any Event of Default Borrower agrees that any tender to cure such default which does not include the Prepayment Premium shall constitute an evasion of the prepayment restrictions set forth in this agreement and shall be deemed a voluntary prepayment. Bank may require payment of the Prepayment Premium as a condition of accepting any such tender. The Prepayment Premium shall be included in the total indebtedness secured by the Deed of Trust for all purposes, including those in connection with a foreclosure sale under the Deed of Trust. Bank may include the amount of the Prepayment Premium in any credit bid Bank may make at a foreclosure sale. 2.5 Borrower's Acknowledgment. Borrower acknowledges that prepayment of the Borrower Loan may result in Bank's incurring additional costs, expenses and liabilities. Borrower therefore agrees to pay the Prepayment Premium described above, and further agrees that the Prepayment Premium represents a reasonable estimate of the prepayment costs, expenses and liabilities of Bank. By its signature below, Borrower acknowledges that Borrower is a knowledgeable business entity or person and fully understands the effect of the waiver contained in this Agreement. C. ADDITIONAL BORROWER COVENANTS B-21

22 1. Repayment. Borrower shall repay the Borrower Loan in accordance with its terms and the terms of this Authority Loan Agreement and the Borrower Note. 2. Location of Principal Business. Borrower shall promptly notify Bank of any change in location of its principal place of business. 3. Rights and Facilities to Do Business; Conduct of Business. Borrower shall preserve and maintain all rights, licenses, permits, franchises, and other authority necessary or advisable for the conduct of its operations; maintain its properties, equipment, and facilities in good order and repair, normal wear and tear excepted, and in compliance with all applicable federal, state and local laws (including any applicable seismic standards); and conduct business in compliance in all material respects with all applicable laws, rules, regulations, and other governmental requirements and without voluntary interruption; and, if applicable, maintain its corporate, partnership, or limited liability company existence under California law in good standing. 4. Expenses. Borrower shall pay to Bank, immediately upon written demand, all costs, and expenses incurred by Bank in connection with the Borrower Loan and the Loan Documents for the term of the Borrower Loan and the enforcement of Borrower s obligations under this Authority Loan Agreement and the other Loan Documents. Borrower agrees that Bank s costs and expenses shall include all appraisal fees, cost engineering, consulting and inspection fees, legal fees, accounting fees, environmental consultant fees, auditor fees, any title insurance premiums, and any survey costs. Borrower agrees that Bank shall have the right, at Bank s option and at Borrower s expense, (i) to require inspection of the Development by an Inspector prior to each disbursement, at least once each month during the course of construction of the Improvements (even though no disbursement is to be made for the month) and upon completion of the Improvements, and (ii) at any time and from time to time, to require the cost of the Development to be determined by a construction cost engineer or consultant. If any of the services described in this section are provided by an employee of Bank, Bank s costs and expenses for such services shall be calculated in accordance with Bank s standard charge for such services. 5. Performance of Other Obligations. Borrower shall comply with and timely B-22

23 perform all of the covenants, agreements, terms, and conditions under all instruments, agreements, or indentures between Borrower and third parties, if noncompliance or nonperformance could reasonably expect to have a Materially Adverse Effect; provided, however, Borrower may, at its expense, by appropriate legal proceedings initiated and conducted in good faith and with due diligence, contest the amount, validity, interpretation, or construction of such instruments, agreements, or indentures, provided that such actions or the result thereof do not otherwise conflict with or breach the obligations of Borrower under this Authority Loan Agreement or the Loan Documents. 6. Tax Service. As a condition to the Borrower Loan, Bank shall procure a tax service contract at Borrower s expense, covering the Development, for the life of the Borrower Loan, including but not limited to the initial contract and any amendments, extensions, or modifications thereto. 7. Subdivision Maps. Prior to recording any final map, parcel map, lot line adjustment or other subdivision map of any kind covering any portion of the Property (the Subdivision Map ), Borrower shall submit any such Subdivision Map to Bank for Bank s review and approval, which approval shall not be unreasonably withheld. Within ten (10) Banking Days after Bank s receipt of such Subdivision Map, Bank shall provide Borrower written notice if Bank disapproves of said Subdivision Map. Bank shall be deemed to have approved the Subdivision Map if such notice is not provided to Borrower. Within five (5) Banking Days after Bank s request, Borrower shall execute, acknowledge, and deliver to Bank such amendments to the Loan Documents as Bank may reasonably require to reflect the change in the legal description of the Property resulting from the recordation of any Subdivision Map. In connection with and promptly after the recordation of any amendment or other modification to the Deed of Trust recorded in connection with such amendments, Borrower shall deliver to Bank, at Borrower s expense, a title endorsement to the Title Policy in form and substance satisfactory to Bank insuring the continued first priority lien of the Deed of Trust. 8. Taxes, Charges and Liens. Borrower shall pay and discharge all taxes, assessments, fees and governmental charges, including, but not limited to, federal and state income taxes, employee withholding taxes and payroll taxes, upon or against Borrower or against its properties, income, or profits, before they become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith and by appropriate proceedings B-23