ASSIGNMENT OF RIGHT TO ENTER A REAL ESTATE PURCHASE AND SALE AGREEMENT

ASSIGNMENT OF RIGHT TO ENTER A REAL ESTATE PURCHASE AND SALE AGREEMENT TABLE OF CONTENTS ARTICLE 1. GENERAL PROVISIONS ......................................................................................................... 2 1.1. City of Issaquah. ................................................................................................................. 2 1.1.1. Major Development Review Team.............................................................................. 2 1.1.2. Meetings. .................................................................................................................... 2 1.1.3. City Fee Waivers ........................................................................................................ 2 1.1.4. Approval of Non-City Public Funding Application. .................................................. 3 1.1.5. The City‟s Assistance. ................................................................................................ 3 1.1.6. Designated Representatives. ....................................................................................... 3 Project Timeline. ................................................................................................................. 4 1.2. ARTICLE 2. DEVELOPMENT GUIDELINES............................................................................................... 4 2.1. 2.2. 2.3. 2.4. 2.5. 2.6. 2.7. 2.8. Development Guidelines. .................................................................................................... 4 Residential Unit Mix........................................................................................................... 4 Affordable Housing Covenants. .......................................................................................... 4 Design Guidelines. .............................................................................................................. 5 Infrastructure. ...................................................................................................................... 5 Open Space/Recreation Area............................................................................................... 5 Wetlands. ............................................................................................................................ 5 Stormwater Detention System. ............................................................................................ 5 ARTICLE 3. CONSTRUCTION OF HOUSING ............................................................................................. 5 3.1. 3.2. 3.3. Assignment of City‟s Rights. .............................................................................................. 5 Real Estate Purchase and Sale Agreement. ......................................................................... 6 Repurchase option............................................................................................................... 7 3.3.1. Option. ....................................................................................................................... 7 3.3.2. Option Period. ............................................................................................................ 7 3.3.3. Exercise of Option. .................................................................................................... 7 3.3.4. Option Price. .............................................................................................................. 7 3.3.5. Loans. ......................................................................................................................... 8 3.3.6. Master Developer‟s Option. ....................................................................................... 8 No Assignment of Developer‟s Rights. ............................................................................... 8 3.4. ARTICLE 4. COMMUNITY GOVERNANCE DOCUMENTS ..................................................................... 9 4.1. Covenants, Conditions and Restrictions. ............................................................................ 9 Page: 1 1/30/2009 ARTICLE 5. TERMINATION......................................................................................................................... 9 5.1. Term of Agreement. ............................................................................................................. 9 ARTICLE 6. MISCELLANEOUS PROVISIONS ........................................................................................... 9 6.1. 6.2. 6.3. 6.4. 6.5. 6.6. 6.7. 6.8. 6.9. 6.10. 6.11. 6.12. 6.13. 6.14. No Third Party Beneficiaries............................................................................................... 9 Default and Attorneys‟ Fees. ............................................................................................... 9 Time is of the Essence. ........................................................................................................ 9 Notices. ............................................................................................................................. 10 Integration; Amendment. ................................................................................................... 11 Waiver. .............................................................................................................................. 11 Binding Effect. .................................................................................................................. 11 Captions. ........................................................................................................................... 11 Cooperation....................................................................................................................... 11 Governing Law. ................................................................................................................. 11 Negotiation and Construction. .......................................................................................... 11 Indemnification. ................................................................................................................ 11 Insurance. .......................................................................................................................... 12 Exhibits. ............................................................................................................................ 13 Assignment of Right Division 54 ASSIGNMENT OF RIGHT TO ENTER A REAL ESTATE PURCHASE AND SALE AGREEMENT THIS Assignment of Right to Enter a Real Estate Purchase and Sale Agreement (“Agreement”) is made and entered into as of ___________, 2004, by and between SSHI, LLC (DBA D.R. HORTON), a Delaware limited liability company (“Developer”), and the CITY OF ISSAQUAH, a municipal corporation and political subdivision of the State of Washington (“City”), together with GrandGlacier LLC, a Washington limited liability company (“Master Developer”), the owner of the Property. RECITALS A. The real property (the “Property”) described in Exhibit A attached hereto that is the subject of this Agreement is commonly known as the “Issaquah Highlands Affordable Housing Site,” and is a portion of Division 33 of the Issaquah Highlands MPD, Issaquah, Washington, which is owned by Master Developer. B. Division 33 is currently zoned Urban Village, which allows 3 story multifamily buildings, as well as town homes or flats. C. The Property is part of Issaquah Highlands and is being made available pursuant to the terms and conditions of the Issaquah Highlands Annexation and Development Agreement (“Development Agreement”) by the Master Developer, Appendix R, which includes a provision for affordable housing. The Master Developer made the Property available to the City in March, 2004. D. In April 2001, a Request For Concept Proposals (“RFCP”), to purchase and develop the Property with affordable housing was issued by the City for the Property and other sites located in the Issaquah Highlands Urban Village. Developer submitted a proposal in response to the RFCP (“Developer‟s Response”) for the construction of multifamily affordable housing on the Property (the “Project”). Developer was selected by the City to be the lead developer of the Property by action of the City Council on ___________________, 2004. E. Pursuant to Section 10.1 of Appendix R of the Development Agreement, the City has the right to designate an Assignee of the City‟s right to purchase the Property. F. Developer, through its Members and their Development Team, is an experienced developer of homes in the Puget Sound area, and is a member of D.R. Horton, a publicly traded company comprised of many builders across the nation. G. The parties desire to enter into this Agreement in order to provide a mechanism for the City to perform its governmental review of the development of the Project, to insure that the Project is developed consistently with the Developer‟s Response Proposal and with the Development Agreement, including Appendix R, to provide a mechanism for the City to assign its rights to purchase the Property to Developer, to rescind its assignment or repurchase if the Project does not proceed in a timely manner, and to provide a means of cooperation between the City and Developer. Page: 1 1/30/2009 H. The City and Master Developer have implemented an affordable housing plan. The affordable housing plan acts as a guide for the development of affordable units, including those available to households making 80% or less of median income. In accordance with affordable housing plan, the Property has been set aside as a parcel for low income housing, as defined in the Development Agreement. NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein, and other valuable consideration, receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows: ARTICLE 1. GENERAL PROVISIONS 1.1. CITY OF ISSAQUAH. The Project is located within the Issaquah Highlands Urban Village, City of Issaquah. Consequently, the Developer must develop the Project in compliance with all applicable City ordinances, regulations and laws, in addition to all other applicable local, state, or federal statutes, regulations or laws, including the Development Agreement. The Developer will obtain all necessary permits from the City of Issaquah and other applicable jurisdictions. The City shall remain involved in the development of the Project through completion of the Project, as follows. 1.1.1. Major Development Review Team. Unless otherwise specified herein or unless the City determines otherwise, actions to be taken hereunder by the City (other than issuance of Building Permits) shall be by and through the Major Development Review Team (MDRT) of the Public Works Engineering Department of the City of Issaquah. 1.1.2. Meetings. Developer shall schedule regular quarterly meetings with the City and Master Developer to discuss the status of the Project, development issues, finance issues, permit issues, design issues and other issues concerning the Project. The City and Master Developer each shall designate a representative who will attend the quarterly meetings regarding the Project. The parties shall use good faith efforts to meet more frequently than quarterly, if necessary for the progress of the Project. 1.1.3. City Fee Waivers On September 17, 2001, Issaquah City Council passed Resolution #2001-17 waiving certain fees for development within the Urban Villages affordable to households making 80% or less of median income. In order for the Project to qualify for the fee waivers, whether for rent or for sale, the owner shall execute and record with the King County Office of Records a lien, covenant, or other contractual provision, as determined by the Responsible Official, against the property that ensures the proposed housing unit or development will continue to be used for low or moderate income housing and remain affordable to those households for a period of not less than thirty (30) years. If the project is a for sale project, the owner shall also record a Resale covenant against each individual unit that utilizes the waiver, which shall be in place Page: 2 1/30/2009 for a period of not less than thirty (30) years. The waiver of City fees does not waive any fees due under the Purchase and Sale Agreement (defined in Section 3.2 below). 1.1.4. Approval of Non-City Public Funding Application. In the event the Developer submits any capital funding applications for the Project from public funding sources, Developer shall submit the basic components of such funding applications to the City for review, with a copy to the Master Developer. The City shall review such applications to ensure consistency with the requirements of this Agreement and the proposal originally submitted to the City. If the City believes the applications do not comply, it shall advise the Developer of its concerns and shall suggest corrections to Developer. Developer shall address the City‟s concerns and resubmit any such funding applications for review and approval by the City. To ensure timely approvals by the City, Developer shall submit the basic components of all such applications (which may be in a preliminary or draft form) to the City not less than twenty-one (21) days prior to their anticipated submission to the funder. The City shall provide Developer with the City‟s comments within fourteen (14) days after receipt from Developer of such proposed applications and supporting materials. 1.1.5. The City’s Assistance. The City agrees to cooperate with Developer in all its efforts, as allowed by the Development Agreement, to obtain development permits for the Project contemplated for the Property, provided that nothing herein shall be deemed to create an agency or joint venture relationship between the parties. No officer, agent, or employee of the Developer shall be deemed an agent of the City for any purpose. 1.1.6. Designated Representatives. The City, Developer, and Master Developer shall each designate a representative to whom all communications related to the day-to-day development activities for the Project shall be directed. (Formal contract notices pursuant to this Agreement shall be made pursuant to Section 7.4 below.) The initial designated representatives are as follows, but either party may change its designated representatives by written notice to the other: CITY: Ryan Kohlmann MDRT City of Issaquah 1775 12th Avenue NW Issaquah WA, 98027 Tel: (425) 837-3427 Fax: (425) 837-3439 E-Mail: ryank@ci.issaquah.wa.us SSHI, LLC (dba D.R. Horton) Attention: Matt Farris 12931 126th Place NE Kirkland, WA 98034 Tel: (425) 821-3400 Fax: (425) 814-2638 E-Mail: mattf@staffordhomes.com DEVELOPER: Page: 3 1/30/2009 MASTER DEVELOPER Grand-Glacier LLC c/o Port Blakely Communities Attention: Tim Diller 1775 12th Avenue NW, Suite 101 Issaquah WA, 98027 Tel: (425) 391-4700 Fax: (425) 391-9028 E-mail: tdiller@portblakely.com 1.2. P ROJECT TIMELINE. Developer shall make timely submission of all permit applications and approvals for the Project. Developer shall develop the Project in compliance with the timeline attached hereto as EXHIBIT B. Development of the Project shall not materially vary from the timeline without prior written approval by the City and the Master Developer. The City and the Master Developer, however, recognizes that the Developer will need to apply for various agency loans and low Income Housing Tax Credits to fund the Project costs. The City and the Master Developer acknowledge that applications are competitive and that funding may not be granted on an initial application, notwithstanding that the application conforms to the response to the request for Conceptual Proposal. In such event, the timeline will be adjusted to encompass additional funding rounds. However, in no event shall the timeline be adjusted beyond the dates specified in Section 3.1 of this Agreement. ARTICLE 2. DEVELOPMENT GUIDELINES 2.1. DEVELOPMENT GUIDELINES. The City‟s approval of the Project shall be subject to the Project‟s compliance with all applicable provisions of the Development Agreement, including all applicable appendices of the Development Agreement. 2.2. RESIDENTIAL UNIT MIX. The Project shall include a minimum of forty (40) family for sale housing units available to households earning 80% or less of median income. 2.3. AFFORDABLE HOUSING COVENANTS. Prior to issuance of a construction permit, Developer shall cause an affordable housing covenant to be recorded against the Property in order to satisfy the affordability requirements as described in Section 2.2 above. The affordable housing covenant for the Project, which shall have a term of at least 30 years, shall be substantially in the form attached hereto as EXHIBIT C. Page: 4 1/30/2009 2.4. DESIGN GUIDELINES. The City‟s approval of the Project shall be subject to the Project‟s compliance with Appendix S, Urban Design Guidelines of the Development Agreement. Further, the Project shall obtain Architectural Review Committee approval under the Declaration of CCRs applicable to the Property. 2.5. INFRASTRUCTURE. Developer acknowledges that the City has not assumed any responsibility for construction of the infrastructure necessary for approval of the Project, including, without limitation, access roads, water, storm sewers, sanitary sewers, temporary erosion and sedimentation control. All necessary infrastructure shall comply with the requirements of the City of Issaquah and the Development Agreement. 2.6. OPEN SPACE/RECREATION AREA. Developer shall meet all applicable requirements of the Urban Design Guidelines and Appendix P (Landscaping Standards) of the Development Agreement related to the provisions of passive and active open space and landscaping. 2.7. WETLANDS. The Project shall meet all applicable wetland requirements of the Development Agreement, and in the event federal housing funds are awarded through the County and/or ARCH, the County‟s Housing Division requirements. In the event development of the Project potentially impacts any wetlands, Developer shall work with a wetland consultant to design and implement a wetlands mitigation plan satisfactory to the City of Issaquah and any Public Funders. 2.8. STORMWATER DETENTION SYSTEM. The Project shall comply with all applicable stormwater detention requirements of the Development Agreement. Furthermore, the stormwater drainage/detention system should hydrologically support any existing wetlands and minimize adverse impacts related to water quality. ARTICLE 3. CONSTRUCTION OF HOUSING 3.1. ASSIGNMENT OF CITY’S RIGHTS. As provided in Appendix R, Section 10.1 of the Development Agreement the City assigns to Developer the City‟s rights to purchase the Property pursuant to the Purchase and Sale Agreement (defined in Section 3.2 below). By entering this Agreement, Developer accepts assignment from the City of the City‟s rights under the Development Agreement. Any material failure of Developer to comply with this Agreement, or Developer‟s failure to proceed to develop the Project in accordance with the timeline attached hereto as EXHIBIT B (unless Developer has requested in writing the City‟s and Master Developer‟s approval to extend the dates in the timeline and has provided justification of the appropriateness of an extension), or default by Developer under the Purchase and Sale Agreement shall be a default by Developer under this Agreement. However, unless approved by the Page: 5 1/30/2009 City Council and the Master Developer, in no event shall revisions to the timeline in EXHIBIT B result in the start of construction extending beyond October 1, 2006. Developer shall have a reasonable time to cure defaults under this Agreement, so long as Developer is proceeding with diligence. In the event of a Default by the Developer of this Agreement or in the event the Developer does not enter into a Purchase and Sale Agreement with the Master Developer within 12 months of executing this Agreement, the City has the right to rescind the Developer‟s assignment of rights under this Agreement. “Default” shall mean the Developer‟s failure to cure a failure to perform under or comply with this Agreement within 30 days after written notice from the City or the Master Developer specifying the failure. In the event of Default by Developer of this Agreement after the Purchase and Sale Agreement has been entered into and before closing, the Purchase and Sale Agreement between the Developer and Master Developer will be terminated; or the City Council will have the right to assign its right to another developer and request approval from the Master Developer that the new assignee assume the role of the Developer under the Purchase and Sale Agreement, which approval by the Master Developer will not be unreasonably withheld. If the new assignee assumes the role of the Developer under the Purchase and Sale Agreement, the new assignee will be required to reimburse the Developer for any costs paid to the Master Developer under the Purchase and Sale Agreement. 3.2. REAL ESTATE P URCHASE AND SALE AGREEMENT. Within 12 months of executing the Agreement, the Developer shall enter into a Real Estate Purchase and Sale Agreement with the Master Developer using a form as determined by the Master Developer (the „Purchase and Sale Agreement‟). The Developer shall use its best efforts towards meeting the objective that the Property, as it is identified and described in the Purchase and Sale Agreement, meets all applicable requirements of the Development Agreement, including all applicable appendices of the Development Agreement. In particular, without limitation, the Developer shall use its best efforts towards meeting the objective that the Property is suitable for the construction of at least 40 units of Low Income affordable housing. Developer shall investigate the Property and the feasibility of the Project pursuant to the provisions of the Purchase and Sale Agreement. The City is not warranting or guaranteeing to Developer that the Property is suitable for development. To ensure that the objectives of the Development Agreement are achieved on the Property, the Purchase and Sale Agreement shall include the following provision: Developer acknowledges that the Master Developer has agreed to enter into this Purchase and Sale Agreement on the basis of the Developers proposal to develop the Project as proposed in the Assignment of Right to Enter into a Purchase and Sale Agreement between the Developer, the City, and Master Developer, dated _________, 2004 (“Assignment Agreement”). To ensure that the City‟s requirements as set forth in the Assignment Agreement for the Property are fulfilled, at Closing, the Developer and Master Developer will record a memorandum of the Assignment Agreement in the form attached as Exhibit D, to provide public notice of such development requirements and to allow the City to enforce the provisions of this Agreement. In addition, Developer and Master Developer acknowledge that prior to start of construction, an Affordable Housing Covenant substantially in the form of Exhibit C of the Assignment Agreement will be recorded against the Property as required under Section 2.3 of the Assignment Agreement. The Purchase and Sale Agreement will also include provisions acknowledging the City‟s right to terminate the Developer„s rights under the Purchase and Sale Agreement in the event the Developer is in Default under this Agreement, and the City‟s right to propose a substitute developer to assume the responsibilities of the Purchase and Sale Agreement. The Developer shall comply fully with both this Agreement and the Page: 6 1/30/2009 Purchase and Sale Agreement, but in the event of any conflict, the Purchase and Sale Agreement shall control. 3.3. REPURCHASE OPTION. 3.3.1. Option. After the purchase of the Property by the Developer, and to secure compliance with this Agreement, and ensure completion of the Project at the required affordability levels, upon Developer‟s default, the City shall have the right to terminate the Developer‟s rights under this Agreement and to purchase the Property or any lots or parcels created within the Property by the Developer (“Parcels”) on the terms described herein. For purposes of this Section 3.3, the term Parcels shall hereafter mean the Property or any legally conveyable portion of the Property. At Closing, Developer shall deliver to the City a Memorandum of Assignment of Purchase and Sale executed, notarized and in recordable form, in the form attached hereto as Exhibit D. (“Memorandum”) The Memorandum will place the public on notice of the City‟s option to repurchase and will be recorded immediately after the Deed conveying the Property to Developer is recorded. The City‟s right and option to repurchase shall not be subordinated to any lower priority liens or encumbrances without the express written consent of the City. If the City purchases the Property, then the Property shall continue to be bound by all the terms of the Purchase and Sale Agreement, and the City and any other subsequent owner of the Property or any Unsold Parcel shall comply with all terms of the Purchase and Sale Agreement, which shall be enforceable by the Master Developer. 3.3.2. Option Period. The City‟s option to purchase the Parcels shall commence on the date of Closing under the Purchase and Sale Agreement and shall expire on the date the residential dwelling units to be constructed on the Parcel in accordance with this Agreement are physically completed and either rented or sold to eligible households, as applicable. If necessary to clear title to any such Parcel after the Option has so expired, the City shall, upon expiration of the option as to a Parcel, execute and deliver to Developer a release of the City‟s option rights under this Section 3.4.2 to that Parcel in recordable form. 3.3.3. Exercise of Option. The City may only exercise its option under this Section 3.3 upon a Default by Developer under this Agreement which include, but are not limited to the occurrence of any one of the following events: (i) Developer fails, without reasonable excuse, to submit an application for administrative site development permit within 12 months of the date of execution of this Agreement; (ii) Developer fails to commence construction of buildings on the Property by October 2006; and (iii) Developer fails to substantially complete and rent or sell the housing required to be constructed to qualified residents within forty-eight months of the date of execution of this Agreement. 3.3.4. Option Price. For any Parcel subject to this Option, the City shall pay a sum (the “Option Price”) equal to the lesser of (a) “Developer Site Improvement Cost” which is equal to the pro rata portion (based on square footage) of the Purchase Price as defined in the Purchase and Sale Agreement, plus the pro rata portion of the Developer‟s Site Improvement Costs (as defined below); or (b) the ”As-Is Appraised Value” (as defined below). “Developer‟s Site Improvement Costs” shall constitute the total of the costs and fees incurred in connection with the development of the Property, including costs incurred in completing any site improvements for the Parcel. Developer shall be allowed to include Site Improvement Costs in the Option Price only to the extent Page: 7 1/30/2009 that Developer can provide reasonable documentation substantiating the expenditure of such costs on the Parcels which are subject to the repurchase option. The Developer Site Improvement costs shall not include any fees paid to the Developer or related party. “As-Is Appraised Value” is equal to the appraised value of the Parcel that accounts for the value of any improvements or costs incurred by the Developer. The Developer shall assign ownership to the City of any documents that are included in determining the Option Price. 3.3.5. Loans. The City, in its sole and absolute discretion, may agree to assume loans secured by the repurchased Parcel or to take title to the Parcel “subject to” such a loan. In these events, and to the extent that the City obtained a release of Developer from the obligation to repay such loan, the City shall receive a credit against the Option Price in the pro rata amount of the loan secured by the Parcel. 3.3.6. Master Developer’s Option. If the City does not exercise its option to repurchase the Property under this Agreement within 90 days after the Developer‟s Default, then the Master Developer may repurchase the Property under the terms of the Purchase and Sale Agreement and the City will then have no further repurchase rights. In that event, the repurchased Property shall be used to meet the Master Developer‟s obligations for affordable housing, as provided in Appendix R (Para 10) of the Development Agreement and the City shall have all of its rights under Appendix R. The period of time the Property was subject to the Purchase and Sale Agreement with the Developer shall not count towards the 5 year set aside period under Appendix R. However, should the City choose to repurchase the Property from the Developer due to an uncured default of either the terms of this Agreement or the Purchase and Sale Agreement with the Master Developer, then the City shall diligently pursue reassignment of the property to another developer. If construction has not commenced on the property, the City shall have five (5) years, minus the time the Property was a set aside by the Master Developer but not subject to a Purchase and Sale Agreement with the Master Developer, to secure a successor developer. If construction has started on the Property at the time of purchase, the City shall diligently pursue completion of the Property within 24 months of acquiring rights to the Property. Further, if the City does not assign the property to a successor developer, then the Master Developer shall have the option, to be exercised by delivering written notice to the City within 180 days of the end of the fifth (5th) year, to repurchase the Property from the City. The option price to be paid by the Master Developer to the City shall be the amount paid by the City when it acquired the Property from the Developer under Section 3.3.4, plus any costs paid by the City after it acquired the Property that otherwise would be defined as Developer‟s Site Improvement Costs under Section 3.3.4. Closing shall occur 30 days after the Master Developer‟s notice, and at any closing, the City shall convey the Property by statutory warranty deed and the parties shall pay equally all closing costs. Upon repurchase by the Master Developer from the City, the Property shall be used for affordable housing, as provided in Appendix R (Para 10) of the Development Agreement, unless the Master Developer has met, without use of the Property, the Master Developer‟s affordable housing requirements under Appendix R. 3.4. NO ASSIGNMENT OF DEVELOPER’S RIGHTS. The identity of Developer was a material consideration in the City‟s selection of Developer for the purchase and development of the Property. Therefore, Developer shall not convey the Property or its rights hereunder (except to an affiliated entity or to limited liability company of which Developer or an affiliated entity is one of the general partners) without the City‟s prior written approval, which approval may be denied or Page: 8 1/30/2009 conditioned in the City‟s reasonable discretion. In no event will the City approve an assignment which results in a financial gain to the Developer. ARTICLE 4. COMMUNITY GOVERNANCE DOCUMENTS 4.1. COVENANTS, CONDITIONS AND RESTRICTIONS. Upon its purchase of the Property, Developer shall comply with all obligations applicable to the Property, including, if applicable, homeowners association and any related Covenants, Conditions and Restrictions for the Issaquah Highlands Development. ARTICLE 5. TERMINATION 5.1. TERM OF AGREEMENT. This Agreement shall be effective as of the date hereof and shall expire with respect to the Property when a temporary certificate of occupancy has been issued for the Project and when the covenants described in Section 2.3 of this Agreement have been recorded against the Property, or any legally conveyable portion thereof. However, the indemnification provisions provided for in Section 6.12 shall survive termination or expiration of this Agreement. ARTICLE 6. MISCELLANEOUS PROVISIONS 6.1. NO THIRD P ARTY B ENEFICIARIES. This Agreement is made for the benefit of the parties hereto, and shall not create any rights in other persons. 6.2. DEFAULT AND ATTORNEYS’ F EES. In the event of default by either party to this Agreement, the non-defaulting party shall have the right to bring an action for specific performance, damages and any other remedies available to such party at law or in equity. In the event of any litigation hereunder, the Superior Court of King County, Washington, shall have the exclusive jurisdiction and venue. In the event either party brings an action to enforce this Agreement, the prevailing party of such action shall be entitled to recover from the other party all costs incurred in connection therewith, including reasonable attorneys‟ fees. 6.3. TIME IS OF THE ESSENCE. Time is of the essence in the performance of this Agreement. Page: 9 1/30/2009 6.4. NOTICES. Any and all formal notices required or permitted to be given under any of the provisions of this Agreement shall be in writing and shall be deemed to have been duly given upon receipt when personally delivered or sent by overnight courier or three days after deposit in the United States mail if by first class, certified or registered mail, return receipt requested. All notices shall be addressed to the parties at the addresses set forth below or at such other addresses as any parties may specify by notice to all other parties and given as provided herein: If to Developer: SSHI, L.L.C. (dba D.R. Horton) Attn: Matt Farris 12931 126th Place NE Kirkland, WA 98034 Tel (425) 821-3400 Fax (425) 814-2638 If to City: City of Issaquah, MDRT PO Box 1307 1775 12th Ave NW Issaquah, WA 98027-1307 Attn: Ryan Kohlmann Tel (425) 837-3427 Fax (425) 837-3439 Wayne Tanaka Ogden Murphy Wallace 2100 Westlake Center Tower 1601 5th Ave Seattle, WA 98101 Tel (206) 447-7000 Fax (206) 447-0215 Grand-Glacier LLC c/o Port Blakely Communities Attn: Tim Diller 1775 - 12th Ave. N.W., Suite 101 Issaquah, WA 98027 Tel: (425) 391-4700 Fax (425) 391-9028 Thomas A. Goeltz Davis Wright Tremaine 2600 Century Square 1501 Fourth Avenue Seattle, WA 98101 Tel: (206)628-7662 Fax: (206)903-3862 With a copy to: If to Master Developer: With a copy to: Page: 10 1/30/2009 6.5. INTEGRATION; AMENDMENT. This writing constitutes the entire agreement of the parties with respect to the subject matter hereof and may not be modified or amended except by a written agreement specifically referring to this Agreement and signed by all parties hereto. 6.6. WAIVER. No waiver of any breach or default hereunder shall be considered valid unless in writing and signed by the party giving such waiver, and no such waiver shall be deemed a waiver of any prior or subsequent breach or default. 6.7. B INDING EFFECT. Subject to Section 3.4 above, this Agreement shall be binding upon and inure to the benefit of each party hereto, its successors and assigns. 6.8. CAPTIONS. The captions of any articles, paragraphs or sections contained herein are for purposes of convenience only and are not intended to define or limit the contents of said articles, paragraphs or sections. 6.9. COOPERATION. The parties shall cooperate, shall take such further action and shall execute and deliver further documents as may be reasonably requested by the other party in order to carry out the provisions and purposes of this Agreement. 6.10. GOVERNING LAW. This Agreement and all amendments thereof shall be governed by and construed in accordance with the laws of the State of Washington applicable to contracts made and to be performed therein, without giving effect to its conflicts of law provisions. 6.11. NEGOTIATION AND CONSTRUCTION. This Agreement and each of its terms and provisions are deemed to have been explicitly negotiated between the parties, and the language in all parts of this Agreement will, in all cases, be construed according to its fair meaning and not strictly for or against either party. 6.12. INDEMNIFICATION. Developer shall indemnify and hold the City and the Master Developer and their respective agents, employees, and/or officers, harmless from and shall process and defend at its own expense any and all claims, demands, suits, at law or equity, actions, penalties, loss, damages, or costs, of whatsoever kind or nature, brought against the City or Master Developer arising out of, or in connection with, or incident to Developer‟s negligence or Developer‟s breach of this Agreement; provided, however, that if such claims are caused by or result from the concurrent negligence of the City or the Master Developer, or their respective agents, employees, and/or officers, this indemnity provision shall be valid and enforceable only to the extent of the negligence of Developer; and provided further, that nothing herein shall require Developer to hold Page: 11 1/30/2009 harmless or defend the City or the Master Developer, their respective agents, employees, and/or officers for damages or loss caused by the City‟s or the Master Developer‟s sole negligence. The Developer expressly agrees that the indemnification provided herein constitutes the Developer‟s waiver of immunity under Title 51 R.C.W., for the purposes of this Agreement; provided, however, that such waiver is applicable only as to this Agreement, only as to the other party to this Agreement, and only for the purpose of giving full force and effect to the indemnification obligations of each party as set forth in this section. This waiver has been mutually negotiated by the parties. The provisions of this section shall survive the expiration or termination of this Agreement. The City shall indemnify and hold Developer and the Master Developer and their respective agents, employees, directors and/or officers, harmless from and shall process and defend at its own expense any and all claims, demands, suits, at law or equity, actions, penalties, loss, damages, or costs, of whatsoever kind or nature, brought against Developer or Master Developer arising out of, or in connection with, or incident to the City‟s negligence or the City‟s breach of this Agreement; provided, however, that if such claims are caused by or result from the concurrent negligence of the Developer or the Master Developer, their respective agents, employees, directors and/or officers, this indemnity provision shall be valid and enforceable only to the extent of the negligence of the City; and provided further, that nothing herein shall require the City to hold harmless or defend Developer or the Master Developer, their respective agents, employees, directors and/or officers for damages or loss caused by Developer‟s of the Master Developer‟s sole negligence. The City expressly agrees that the indemnification provided herein constitutes the City‟s waiver of immunity under Title 51 R.C.W., for the purposes of this Agreement; provided, however, that such waiver is applicable only as to this Agreement, only as to the other party to this Agreement, and only for the purpose of giving full force and effect to the indemnification obligations of each party as set forth in this section. This waiver has been mutually negotiated by the parties. The provisions of this section shall survive the expiration or termination of this Agreement. The Master Developer shall indemnify and hold the City and Developer, and their respective agents, employees, directors and/or officers, harmless from and shall process and defend at its own expense any and all claims, demands, suits, at law or equity, actions, penalties, loss, damages, or costs, of whatsoever kind or nature, brought against the City or Developer arising out of, or in connection with, or incident to the Master Developer‟s negligence or the Master Developer‟s breach of this Agreement; provided, however, that if such claims are caused by or result from the concurrent negligence of the City or Developer, their respective agents, employees, directors and/or officers, this indemnity provision shall be valid and enforceable only to the extent of the negligence of the Master Developer; and provided further, that nothing herein shall require the Master Developer to hold harmless or defend the City or Developer, or their respective agents, employees, directors and/or officers for damages or loss caused by City‟s or Developer‟s sole negligence. The Master Developer expressly agrees that the indemnification provided herein constitutes the Master Developer‟s waiver of immunity under Title 51 R.C.W., for the purposes of this Agreement; provided, however, that such waiver is applicable only as to this Agreement, only as to the other party to this Agreement, and only for the purpose of giving full force and effect to the indemnification obligations of each party as set forth in this section. This waiver has been mutually negotiated by the parties. The provisions of this section shall survive the expiration or termination of this Agreement. 6.13. INSURANCE. As of the date of execution of the Purchase and Sale Agreement, the Developer shall procure and maintain for the duration of this Agreement insurance against claims for injuries to persons or damages to property which may arise from or in connection with the exercise of the rights, privileges and authority granted hereunder to the Developer, its agents, representatives, employees, or volunteers. The Developer shall provide an insurance certificate, together with an endorsement naming the City, its officers, elected officials, Page: 12 1/30/2009 agents, employees, representatives, engineers, consultants and volunteers as additional insureds, to the City for its inspection prior to the exercise of any rights granted pursuant to the terms of this Agreement, and such insurance certificate shall evidence: A. Comprehensive general liability insurance, written on an occurrence basis, with limits no less than: a. $1,000,000 per occurrence, $2,000,000 annual aggregate, for bodily injury or death to each person; $1,000,000 per occurrence, $2,000,000 annual aggregate, for property damage resulting from any one accident; $1,000,000 per occurrence, $2,000,000 annual aggregate, for all other types of liability. b. c. B. Automobile liability for owned, non-owned and hired vehicles with a limit of $1,000,000 for each person and $1,000,000 for each accident. Worker‟s compensation within statutory limits and employer‟s liability insurance with limits of not less than $1,000,000. Comprehensive for premises-operations, explosions and collapse hazard, underground hazard and products completed with limits of not less than $1,000,000. C. D. The liability insurance policies required by this section shall be maintained by the Developer throughout the term of this Agreement. Any deductibles or self-insured retentions must be declared to and approved by the City. Payments of deductibles and self-insured retentions shall be the sole responsibility of the Agency. The Developer‟s insurance shall contain a clause stating that coverage shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer‟s liability. The Developer‟s shall be primary insurance with respect to the City, its officers, officials, employees, agents, consultants and volunteers. Any insurance maintained by the City, its officers, official employees, consultants, agents and volunteers shall be in excess of the Developer‟s insurance and shall not contribute with it. In addition to the coverage requirement set forth above, each such insurance policy shall contain the following endorsement: “It is hereby understood and agreed that this policy may not be reduced or canceled nor the intention not to renew be stated until 45 days after receipt by the City, by registered mail, or a written notice addressed to the Planning Director of intent to cancel or not to renew.” Within 30 days after receipt by the City of said notice, and in no event later than 15 days prior to said cancellation or intent not to renew, the Developer shall obtain and furnish to the City replacement insurance policies meeting the requirements of this section. 6.14. EXHIBITS. The following Exhibits described herein and attached hereto are fully incorporated into this Agreement by this reference: Page: 13 1/30/2009 EXHIBIT A EXHIBIT B EXHIBIT C EXHIBIT D Legal Description Project Timeline Affordable Housing Covenant Memorandum of Assignment (signatures appear on next page) EXECUTED effective as of the date of the last signature below. DEVELOPER: SSHI, LLC (DBA D.R. HORTON), a Delaware limited liability company By_________________________________ Name: ______________________________ Title: Managing _______________________ Date: ____________________________ CITY: CITY OF ISSAQUAH By_________________________________ Name: ___________________________ Title: ____________________________ Date: ____________________________ APPROVED AS TO FORM: By _______________________________ City Attorney GRAND-GLACIER LLC, a Washington limited liability company By: Port Blakely Communities, Inc., its Manager By:_________________________________ Page: 14 1/30/2009 Judd Kirk, President Date: _______________________________ Page: 15 1/30/2009 EXHIBIT A Division 33 of the Final Plat of Issaquah Highlands Divisions 28-33, 35-48, 52, 80, 81, 86 and 87, according to Plat recorded in Volume 203 of Plats, pages 24 through 37, inclusive, records of King County, Washington. Assignment of Right Division 33 EXHIBIT B P ROJECT TIMELINE (to be included by Developer at time of execution) Assignment of Right Division 33 EXHIBIT C EXHIBIT ____ TO THE DEED DECLARATION OF AFFORDABLE HOUSING COVENANT FOR ISSAQUAH HIGHLANDS This Affordable Housing Covenant (Covenant) is made this ___ day of __________, 2004, by and among Grand-Glacier LLC, a Washington limited liability company (Developer), SSHI, LLC (DBA DR HORTON), a Delaware limited liability company ("Builder") and the City of Issaquah, a municipal corporation of the State of Washington ("City"). WITNESSETH: WHEREAS, the Developer is the owner and developer of certain real property located in the City of Issaquah being developed as a master planned community known as "Issaquah Highlands," formerly known as Grand Ridge, with urban residential development, commercial, retail and industrial uses. The Developer also own real property in unincorporated King County adjacent to the Project, which property is zoned rural residential and is being sold for residential purposes. WHEREAS, the Developer has entered into an agreement with the City (the 2-Party Agreement) regarding the annexation of a portion of Grand Ridge, n/k/a Issaquah Highlands, into the City and the development of the real property located in part in Issaquah, which agreement contains affordable housing requirements. The 2-Party Agreement was adopted by the Issaquah City Council on February 5, 1996 in Ordinance 2104, as amended from time to time. WHEREAS, the Developer has entered into an agreement with the City and King County (the 3-Party Agreement), regarding the annexation of certain Developer property by Issaquah and the development of the annexed property. The 3-Party Agreement was signed by the King County Executive pursuant to authority granted in Ordinance 12302 adopted by the Metropolitan King County Council on May 28, 1996. WHEREAS, the City of Issaquah adopted the Grand Ridge Affordable Housing Standards ("Development Standards") on December 16, 1996, in Ordinance 2142, as amended from time to time. The Development Standards shall also be known as the Issaquah Highlands Affordable Housing Standards. WHEREAS, pursuant to the 2-Party and 3-Party Agreements, thirty percent (30%) of the Project units shall be affordable residential units. Ten percent (10%) of the units will be affordable to Middle Income households; ten percent (10%) of the units will be affordable to Moderate Income households; and the Developer has the option to set aside land for ten percent (10%) of the units, which land will be used to provide affordable units to Low Income households if public funding is available, or the Developer may build the ten percent (10%) Low Income residential units. WHEREAS, the Builder has acquired portions of the Issaquah Highlands Project from the Developer and shall be building Affordable Units that are subject to this Covenant and the Development Standards. The real property subject to and against which this Affordable Housing Covenant is enforceable is described with particularity and shown on a map included in Exhibit A, and commonly referred to as Division 54 . Assignment of Right Division 33 WHEREAS, this Covenant is intended to implement the Development Standards and satisfy the 2-Party and 3-Party Agreements. NOW THEREFORE, in accordance with the Issaquah Highlands Affordable Housing Standards, and Issaquah Ordinance 2104, as amended, and King County Ordinance 12302, and in consideration of the mutual agreements contained herein and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows, and the Developer and Builder declare that all of the Issaquah Highlands lots and divisions against which this Affordable Housing Covenant is recorded are subject to this Covenant and shall hereafter be sold, held, rented, used and conveyed subject to this Covenant, which is intended to run with the land for the term set forth below. 1. DEFINITIONS. The terms in this Covenant shall have the same meaning as used in the 2-Party and 3-Party Agreements, except as revised herein. The terms are repeated here for reference, and supplemented to the extent terms were not defined in the 2-Party and 3-Party Agreements. 1.1. Affordable Units. Dwelling units for either rent or sale priced as affordable to either Low, Moderate, or Middle Income Households, as defined in Subsection 1.2 below. 1.2 Low, Moderate, and Middle Income Housing. Low, Moderate and Middle income housing are defined as the respective income level measured against the applicable percentage for median income in King County: (a) Low Income category means a household with a gross income less than or equal to 80% of median income; Moderate Income category means a household with a gross income less than or equal to 100% of median income; and Middle Income category means a household with a gross income less than or equal to 120% of median income. (b) (c) Income verification/eligibility standards are described in Section 6.1.3 below. Median income and affordable monthly housing payments based upon a percentage of such income shall be determined annually by the City using Seattle Metropolitan Statistical Area (MSA) median household income data provided annually by the U.S. Department of Housing and Urban Development (HUD) and indexed by household size using HUD guidelines. The most recent Median Income Levels for the Seattle MSA are attached as Exhibit B. If there comes a time when HUD no longer publishes median income figures for the Seattle MSA or income figures are not updated by HUD for a period of eighteen (18) months or more, the City may use or develop such other reasonable method as it may choose to determine the income for families in King County at the median annual income for King County, as adjusted for household size. 1.3 Grand Ridge Project. The Grand Ridge Project means the rural, urban and open space development and uses proposed for the property owned by the Developer, and the 47-acre Assignment of Right Division 33 park site owned by the City and adjoining the Developer property, with the development standards and other terms, standards and conditions set forth in the 3-Party Agreement. For purposes of these affordable housing standards, the "Project" is that portion of the Grand Ridge Project developed within the City and now known as "Issaquah Highlands." The affordable housing requirements of the 2-Party and 3-Party Agreements are expressly limited to the Issaquah Highlands development within the City, that is, the "Project." 1.4 Household Income. Household Income means all income from all household members over the age of 18 residing in the household.. Income consists of those items listed in Exhibit F, Certificate of Household Eligibility. Income of dependents who reside within a household for less than four (4) months of the year will not be counted toward household income. 1.5 Household Size. Household Size, for purposes of calculating rent levels (for rental units) and maximum initial sales prices (for 'for sale' units) only, means the average household size assumed for purposes of calculating Affordable Rents or Maximum Initial Sales as follows: UNIT TYPE AVERAGE HOUSEHOLD SIZE Studio 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom 1 Person 2 Persons 3 Persons 4 Persons 5 Persons These household size figures do not control, dictate or limit the actual household size for any given Affordable Unit. 1.6 Responsible Official. The Responsible Official for the City of Issaquah, which person shall perform the duties and obligations of the City as set forth in this Covenant, including the duties in Sections 4.3.2 and 6.1.1 below, shall be the City of Issaquah Public Works Director. 1.7 Start Date. The Start Date for marketing is that date on which on-site marketing of For Sale Affordable Units has begun. The Start Date shall start upon the date that (a) a brochure marketing Affordable Units to prospective buyers is available for distribution to the public; (b) floor plans for all Affordable Units are available for inspection by prospective buyers or renters; (c) a marketing facility is available on-site and is open for business; and (d) a building permit for an Affordable Housing unit has been issued by the City. The Builder shall notify the City in writing of the desired Start Date for each Phase. Such notification shall include copies of (a) and (b). Notification of the Start Date shall be sent to the City at least two weeks prior to the desired Start Date in order to provide the City the opportunity to visit the site to confirm compliance with items (c) and (d). The City shall be deemed to have approved the identified Start Date if no response is received from the City within 14 calendar days of receiving notification from the Builder. 2. BUILDER'S OBLIGATION TO PROVIDE AFFORDABLE UNITS. 2.1 Number of Affordable Units. The Builder agrees to provide forty (40) Affordable Units, Low Income Households. The Affordable Units will be provided as follows Assignment of Right Division 33 UNIT TYPE Low Income Total Total Units 40 40 2 Bedroom 28 3 Bedroom 12 If the City approves less dwelling units than assumed by the Builder and Developer in a separate purchase and sale agreement, the parties agree that the total number of Affordable Units required in this Section 2.1 may be adjusted accordingly. The parties agree to cooperate with each other and to sign any required amendments to this Covenant if an adjustment in Affordable Units being built is required as a result of either the City approving less dwelling units than anticipated or the Builder sells or rents more Affordable Units (as defined herein and in compliance with the terms of this Covenant) than otherwise required in this Section 2.1. 2.2 Location and Design of Affordable Ownership Units. The Affordable Low Income and Moderate Income Ownership Units shall be designated on a map of the platted lots on the Property which shall be submitted by the Builder to the City for review and approval within 30 days of execution of this Covenant. The Builder may propose to change the particular units dedicated for the Affordable Low and Moderate Income Ownership Units, so long as the Project still achieves the minimum mix of unit types described in Section 2.1. The Builder shall request in writing, City‟s approval of any proposed change to the units dedicated for the Affordable Ownership Units. The City will review the proposed changes and shall base its approval or disapproval of the proposed changes upon the criteria set forth in this section. The exterior designs of the Low Income Ownership units are to be compatible and comparable with the Moderate Income Ownership units. The interior finish of the Affordable Low Income Ownership Units shall at a minimum include standard features of entry-level market rate ownership housing and result in a totally finished and livable home. 2.3 Maximum Initial Sales or Rental Price. Unless otherwise provided for in this Covenant, the maximum initial sale prices shall be determined as of the date items a, b, c and d of the Start Date have been achieved. Affordable rent levels shall be established as set forth in Exhibit C attached hereto. 2.4 Housing mix allowed. The Project is located on a parcel identified as a land set-aside parcel as provided for in the 2-Party and 3-Party Development Agreement. Therefore, unless otherwise approved by the City, the required number of Affordable Units shall be provided as home ownership opportunities [RENTAL OPTION: SECTION 3 IS APPLICABLE TO AFFORDABLE UNITS FOR RENT] N/A 3. RENTAL OPTION FOR AFFORDABLE HOUSING UNITS. 3.1 Attached as Exhibit C are the specific provisions controlling Affordable housing units that are intended to be rental units. The provisions in Exhibit C include: maximum rents Assignment of Right Division 33 and the length of time rents must remain affordable, conversion of rental units from rental to for sale units, and subordination agreements. [HOME OWNERSHIP OPTION: SECTION 4 and 5 APPLIES TO "FOR SALE" AFFORDABLE UNITS ONLY] 4. HOMEOWNERSHIP AFFORDABILITY CRITERIA/ESTABLISHING MAXIMUM INITIAL SALES PRICE AND RESALE PROVISIONS 4.1 Maximum Initial Sales Price. The Maximum Initial Sales Price for "For Sale" Affordable Units shall be calculated using the following assumptions: a. Thirty percent (30%) of the Household's gross income is devoted to housing expenses, which includes mortgage principal and interest, mortgage insurance, real property taxes, and hazard insurance, and, if applicable, homeowner's dues and assessments; b. Households; c. Income Households; A ten percent (10%) down payment plus closing costs for Moderate and Middle A five percent (5%) down payment plus closing costs for Low Income d. A thirty (30) year fixed-rate mortgage at the 30-year fixed term interest rate posted on the website of the Federal Housing Finance Board (www.fhfb.gov), or the average thirty-year fixed term mortgage rate for King County as identified in the Seattle Times nearest to the date the maximum initial sales price is established, or as otherwise established in the Covenant. e. present quarterly homeowner dues, if applicable. If the homeowner's due at the time of Closing exceed the amount of the dues used to calculate the maximum sales price by more than 5%, the maximum sales price shall be recalculated using the homeowner's association dues amount at the time of Closing, in accordance with calculations shown in Exhibit D. f. Real property taxes at the tax rate for the City of Issaquah applicable at the time the maximum price is calculated. Attached as Exhibit D are sample calculations of the Maximum Sales Price for Affordable Units at the Low, Moderate and Middle Income Levels. 4.2 The Developer and Builder shall not be required to decrease the maximum initial sales price once established, except as provided in Section 4.1(e) above. 4.3 Resale Provisions. 4.3.1 When a public subsidy has been provided to enable Low, Moderate or Middle Income households to achieve home ownership at the Project, each deed for low, moderate and middle income residential units shall contain the resale, term, equity, recapture, and other provisions that are required as a condition of receiving the public funds. Assignment of Right Division 33 4.3.2 When no public subsidy has been provided to assist Low, Moderate and Middle Income households to purchase an Affordable Unit, deed provisions that restrict resale of Low, Moderate or Middle income housing units shall not be required unless the initial sale price for an Affordable Unit is Substantially Below Market Value. "Substantially Below Market Value" shall mean less than 90% of market value as determined below. Prior to the initial sale of Affordable Units, the Builder shall provide to the Responsible Official documentation showing the anticipated sales price(s) for a residential unit or group of units, and the market value of designated Affordable Units. The market value shall be determined by appraisal and submitted to the Responsible Official for review; provided, however, an appraisal is not required to establish market value of an Affordable Unit if Affordable Units are priced within ten percent (10%) of the list price or actual sales prices for comparable non-affordable housing units in the vicinity. If the final sale price for any Affordable Unit is less than 90% of market value, the deed for that Affordable Unit will incorporate a covenant restricting the sales price and resale of the Affordable Unit, which covenant shall be in a form substantially similar to Exhibit E attached and incorporated by reference. Buyers of Affordable units substantially below market value shall be required to execute a Resale Covenant (substantially similar to Exhibit E) at the time of closing. For example, if the value of market rate homes goes up 30% during the period an incomeeligible buyer owns the Affordable Unit sold substantially below market value, the maximum price of the Affordable Unit could increase is 30% from the maximum initial affordable sales price. The percentage increase in the market will be determined using the most recent Seattle Everett Real Estate Research Report or alternative comparable index for those census tracts that make up the Issaquah/Sammamish Plateau/Eastside area. At resale, a Substantially Below Market Value unit shall be offered to incomeeligible purchasers for a sixty (60) day period. Following expiration of the 60-day agreed initial sale and resale period, the Substantially Below Market Value unit may be sold to any purchaser, regardless of income level, but the sale price may not exceed the maximum allowable price and the resale restriction will remain in effect, as set forth in Exhibit E. 5. SALE OF AFFORDABLE UNITS. 5.1 Marketing of Affordable Units. All For Sale Affordable Units shall be marketed using an affirmative marketing plan, as required by Section 7 below. 5.2 Release of Affordable Units. The expected sales rate for the Project shall be eight (8) Affordable Ownership Units per month. A program that provides for the release of Affordable Ownership Units from marketing and sale only to an Income Eligible Household, meeting the income level identified first in Section 2.1 above, shall be established for the Project, as follows: 5.2.1 For a period of ninety (90) days from the Start Date or thirty (30) days from the date at which „model‟ units of the Affordable Ownership Units are furnished and open for inspection by prospective buyers, whichever is later (“Initial Marketing Period”), all Affordable Ownership Units shall be marketed and sold only to Income Eligible Households. If at the end of the Initial Marketing Period less than sixteen (16) Affordable Ownership Units have been sold to Income Eligible Households, the difference between sixteen (16) and the number of Affordable Ownership Units sold shall be released for sale to any buyer. In determining which Affordable Units will be released for sale to any buyer pursuant to Section 5.2.2 and 5.2.3, it will be based on the proportion of two and three bedroom units and the affordability level of Affordable Units that are available for sale and actually sold. Assignment of Right Division 33 5.2.2 At three (3) consecutive intervals starting from the day following the last day of the Initial Marketing Period, an additional eight (8) Affordable Ownership Units shall be added to the cumulative total of Affordable Ownership Units eligible for release pursuant to this provision. Each interval shall be a minimum of thirty (30) days and shall commence at the end of the previous interval. 5.2.3 At the end of each interval, the difference between the cumulative total of Affordable Ownership Units eligible for release and the cumulative total of actual sales of Affordable Ownership Units to Income Eligible Households shall be released for sale to any buyer. In no event, however, shall an individual Affordable Ownership unit be released for sale to a non-income eligible buyer prior to framing inspection sign off by the City for that unit. 5.3 No change to Maximum Initial Sale Price. If any Affordable Housing Units are sold during Phases 2 or 3, there will be no change in the maximum initial sales prices as calculated pursuant to Section 4 of this Covenant, except as required by Section 4.1(e). 5.4 Income verification. During Phase 1 and Phase 2 described in Section 5.2 above, the eligibility of any prospective buyer of an Affordable Unit shall be documented using a form substantially similar to the Certificate of Household Eligibility attached as Exhibit F, and prior to closing, submitted to the City for the City‟s approval of the prospective buyer‟s income eligibility. No income verification is required during Phase 3 described in Section 5.2 above. [SECTION 6 IS APPLICABLE TO RENTAL AND FOR SALE AFFORDABLE UNITS] 6. Reporting Requirements; Location of Affordable Housing 6.1 Annual Reports by Developer, and Reporting Required by Builders 6.1.1 During the residential build-out period of the Project, the Developer shall submit a report annually by March 15 documenting the affordable housing transactions in the development for the preceding calendar year. The report will pertain to all Affordable Units that are constructed and disposed in compliance with the affordable housing provisions of the 2-Party and 3Party Agreements. Each report will also include a tally of the number of residential units constructed in the entire Project at the time of reporting. The annual reports will provide a mechanism for the Developer to outline current issues that need to be resolved by the Developer independently, or in conjunction with the City, in order to successfully implement the affordable housing requirements. The reports should specify what actions the Developer intends to take in order to resolve any shortfall problems. The Responsible Official shall review and respond to the reports in a timely manner. Assignment of Right Division 33 6.1.2 Prior to the closing of each sales transaction of an Affordable Ownership Unit, the Builder shall submit to the City a copy of the purchase and sale agreement, and corresponding escrow information, to confirm that the sales price of the Affordable Ownership unit is consistent with the provisions of this Covenant. In Addition, the Builder shall file with the Developer by February 1 of each year a report regarding the Affordable Unit(s) built by the Builder, and the selling price or the rent being charged. Builder agrees to indemnify and hold the Developer harmless from all fees, penalties and costs of any nature incurred by the Developer, including attorney‟s fees, as a result of the Builder's failure to provide the required buildout statistics associated with the Builder's Affordable Unit construction. 6.1.3 The Developer and Builder shall maintain records relating to the sale or rental of affordable housing units. The records shall include copies of the Certificate of Household Eligibility forms for affordable housing rental units and for sale units, which forms shall be substantially similar to Exhibit F and G. 6.2 The City shall have the right to periodically inspect the books of the Developer and the Builder regarding compliance with the affordable housing eligibility requirements, with reasonable advance notice of the desire to inspect the books being provided. 6.3 In the event more Affordable Ownership Units than otherwise required pursuant to Section 2.1 of this Covenant are actually built and sold to approved Middle Income Households at prices consistent with Section 4.1 of this Covenant, the Developer and Builder shall receive credit against the remaining Affordable Unit requirements for Middle Income housing at Issaquah Highlands under the terms of the 2-Party and 3-Party Agreement. 7. Affirmative Marketing. 7.1 The Developer and Builder shall market all Affordable Units using an affirmative marketing program. An affirmative marketing plan means that the Developer or successor developer or Builder in good faith directs a portion of its advertising at populations and King County communities which are under-represented in the Eastside housing market such as ethnic and racial minorities, and workers earning 80% of median income or less. While marketing strategies will vary throughout the Project build out, affirmative marketing will be part of all marketing programs for affordable housing developments and the entities that will market the housing will solicit input from the City. Advertising will include publications accessible to minority, handicapped, and moderate income households in King County, and advertising shall comply with the federal Fair Housing Act. In addition, any organization or agency identified by King County or the City which provides referrals to affordable developments will be notified of housing opportunities at Issaquah Highlands. 7.2 The remedies the City is entitled to pursue to enforce the affirmative marketing obligations of this covenant are: an action for specific performance, declaratory judgment relief or injunctive relief. The City shall not be entitled to pursue an action for monetary damages of any kind. Administrative relief the City may pursue is to give written notice to the Developer or Builder that the City will not permit the phase out of income restriction provisions outlined in Sections 5.2 until an affirmative marketing program is implemented properly. The Developer or Builder may seek from the City approval of the affirmative marketing program proposed and the City agrees to review and Assignment of Right Division 33 comment on the submitted program. If the Developer or Builder follow the affirmative marketing program approved by the City, there shall be no remedies available to the City under this Section. 8. Estoppel Certificate. The City agrees, upon the request of the Developer or its successor in interest, to promptly execute and deliver to the Developer or its successor in interest or to any potential or actual purchase mortgagor or lienholder of Issaquah Highlands, a written certificate stating, if such is true, that the City has no knowledge of any violation or default by the Developer of any of the Covenants or conditions of this Covenant, or if there are such violations or defaults, the nature of the same. If no response is received within fourteen (14) days, the requested information regarding no default or violation by the Developer will be deemed confirmed. 9. Substitution of Parcels. With the written approval of the City, the Developer may substitute for a portion of the affordable housing obligations on the Covenant properties a like obligation on another parcel within the Project, all of which is presently owned by the Developer. The obligations of this Covenant shall apply to development of the substituted properties and will be made binding by the recording of an Affordable Housing Covenant by the Developer, the Builder and the City. In that event, that portion of the original Covenant properties being substituted shall be released from this Covenant, and the City and Builder agree to execute promptly upon the Developer's request an instrument in recordable form so stating. Any substitution of properties must continue to satisfy the requirement for mix of housing types, as provided in Sections 2.1 and 2.4. 10. Approval or Consent Not Unreasonably Withheld or Delayed. When the review and approval of a plan or report or other required document, or other consent, is sought by the Developer or Builder from the City pursuant to this Covenant, the approval or consent sought shall not be unreasonably withheld or delayed. 11. Binding on Successors and Assigns. 11.1 Binding. This Affordable Housing Covenant shall be binding upon and inure to the benefit of the successors and assigns of each Developer and Builder and upon the City. 11.2 Assignment/Successors. The parties acknowledge that development of the Project likely will involve the sale and assignment of portions of the Project to other persons who will own, develop and/or occupy portions of the Project and buildings thereon. The Developer shall have the right to assign or transfer all or any portion of the respective interests, rights or obligations under this Covenant or in the Project to other parties acquiring an interest or estate in all or any portion of the Project, including transfer of all interests through foreclosure (judicial or nonjudicial) or by deed in lieu of foreclosure. Consent by the City shall not be required for any transfer of rights pursuant to this Covenant or the Development Standards. Upon the transfer or assignment under this Section 11.2, where the transferee agrees to assume obligations hereunder pertaining to the Project property transferred or assigned, the transferee shall be entitled to all interests and rights and be subject to all obligations under the Development Standards and this Covenant pertaining to the property transferred or assigned, and the Developer shall be released of liability under the Development Standards and this Covenant for the property transferred or assigned, but shall retain liability for any breach which occurred prior to the transfer of rights to another party and for those portions of the Project still owned by the Developer. Assignment of Right Division 33 12. Reliance. In performing its duties and obligations hereunder, the City of Issaquah may rely upon statements and certificates of the Developer and Builder of affordable housing units, and upon the audits of the books and records of the Developer and Builder pertaining to occupancy and sales of Affordable Units for sale or rent. 13. Covenant Running with the Land. Except as otherwise provided herein, including in Section 5 (phase out of covenant) and Section 14 (termination), this Affordable Housing Covenant shall be deemed to run with the land and shall inure to the benefit of and is binding upon the parties and their successors and assigns. 14. Termination. The Developer and Builder hereby represent, warrant and covenant that they will cause this Agreement to be recorded in the real property records of King County, Washington. Except for the Affordable Low Income Units and the Affordable Moderate Income Units sold Substantially Below Market Value as provided in Section 4.3.2 herein, at least ten (10) days prior to the closing on an "for sale" Affordable Unit, the Developer or Builder may provide the City with written notice that the "for sale" unit is being sold at a price equal to or less than the Maximum Initial Sales Price, as calculated under Section 4 above. Unless the City objects to the Notice in writing prior to the closing date, the Developer or Builder may execute on behalf of the City and file at the time of Closing, or subsequent to closing, the Release of Affordable Housing Covenant in a form substantially similar to the Exhibit H. For purposes of executing the Affordable Housing Covenant Release, the Developer or Builder are authorized to execute said release as an agent of the City. The Builder or Developer shall pay all fees and charges associated with said recording of the Release of Affordable Housing Covenant. As it relates to Affordable Housing rental units, this Affordable Housing Covenant shall terminate as provided in Exhibit C. 15. Notices. All notices required under the Covenant shall be given to each party as the following addresses, or at such other address as my be designated in writing by any party: Grand-Glacier LLC c/o Port Blakely Communities 1775 12th Avenue NW, Suite 101 Issaquah, WA 98027 ATTN: Judd Kirk with Copy to: Port Blakely Tree Farms 1325 Fourth Avenue, 10th Floor Seattle, WA 98101 ATTN: James E. Warjone BUILDER: SSHI, LLC, (dba DR Horton) 12931 126th Place NE Kirkland, WA 98034 Telephone No.: 425-821-3400 Fax No. 425-814-2638 Attention: Matt Farris City of Issaquah: City of Issaquah Assignment of Right Division 33 1775 12th Avenue NW, First Floor Issaquah, WA 98027 ATTN: MDRT 16. Amendments to Covenant. This Covenant shall not be amended without the express written approval of the City, the Developer (or its successors and assigns with respect to the Project property in which the successor or assigns have an interest) and Builder. 17. Governing Law. This Covenant shall be governed by the laws of the State of Washington. In any provision of this Covenant shall for any reason be deemed invalid, illegal or unenforceable, then such provision or provision shall be deemed severable from the remainder, and the remainder of this Covenant shall remain in full force and effect. 18. No Joint Venture. Each of the parties hereto is acting independently and no Developer or joint venture between or among the parties shall be implied or deemed created by reason of the terms and conditions of this covenant. 19. forth. EXECUTED the day and year first written above. DEVELOPER: GRAND-GLACIER LLC, a Washington limited liability company By: Port Blakely Communities, Inc., a Washington corporation, its Manager By: _________________________________ Judd Kirk, President Exhibits. All exhibits attached hereto are incorporated by reference as if fully set BUILDER SSHI, LLC (DBA DR HORTON), a Delaware limited liability company ____________________________________ Print Name:___________________________ Its: _________________________________ CITY OF ISSAQUAH ____________________________________ By _________________________________ Its Mayor Assignment of Right Division 33 EXHIBITS: A: Legal Description of Covenant Property and map showing location B: 2003 Median Income Figures for Seattle Metropolitan Area C: Affordable Housing Covenant For Rental Units (N/A) D: Sample calculations of Maximum Initial Sale prices at each income level E: Issaquah Highlands Covenant Restricting Resale and City of Issaquah Option To Purchase F: Certificate of Household Eligibility. 'For Sale' Affordable Unit G: Certificate of Household Eligibility for Affordable Rental Units (N/A) H: Release of Affordable Housing Covenant Assignment of Right Division 33 STATE OF WASHINGTON COUNTY OF KING ) ) ss. ) On this ______ day of ___________, 2004 before me, the undersigned, a Notary Public in and for the state of Washington, duly commissioned and sworn, personally appeared ___________________ to me known to be the ___________________ of Port Blakely Communities, Inc, a Washington corporation, the corporation which is Manager of Grand-Glacier LLC, a Washington limited liability company that executed the foregoing instrument, and acknowledged the said instrument to be the free and voluntary act and deed of said corporation and limited liability company, for the uses and purposes therein mentioned, and on oath stated that he is authorized to execute the said instrument. IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day and year first above written. ___________________________________________ NOTARY PUBLIC in and for the State of Washington, residing at __________________________________ My appointment expires _______________________ Print Name _________________________________ STATE OF WASHINGTON COUNTY OF KING ) ) ss. ) On this _____ day of _______________, 2004, before me, a Notary Public in and for the State of Washington, personally appeared ________________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed this instrument, on oath stated that he/she was authorized to execute the instrument, and acknowledged it as the ____________________________ of , SSHI, LLC (DBA DR HORTON), a Delaware limited liability company to be the free and voluntary act and deed of said limited liability company for the uses and purposes mentioned in the instrument. IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day and year first above written. ___________________________________________ NOTARY PUBLIC in and for the State of Washington, residing at __________________________________ My appointment expires _______________________ Print Name _________________________________ Assignment of Right Division 33 STATE OF WASHINGTON COUNTY OF KING ) ) ss. ) On this _____ day of _______________, 2003, before me, a Notary Public in and for the State of Washington, personally appeared ___________________________________ personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed this instrument, on oath stated that he was authorized to execute the instrument, and acknowledged it as the MAYOR OF THE CITY OF ISSAQUAH to be the free and voluntary act and deed of said corporation for the uses and purposes mentioned in the instrument. IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day and year first above written. ___________________________________________ NOTARY PUBLIC in and for the State of Washington, residing at __________________________________ My appointment expires _______________________ Print Name _________________________________ Assignment of Right Division 33 EXHIBIT A "Covenant Property" Division 33 of the Final Plat of Issaquah Highlands Divisions 28-33, 35-48, 52, 80, 81, 86 and 87, according to Plat recorded in Volume 203 of Plats, pages 24 through 37, inclusive, records of King County, Washington. Assignment of Right Division 33 EXHIBIT B 2003 Median Income Levels for the Seattle Metropolitan Statistical Area as published by HUD Income level | Family size 80% 100% 120% 1 $43,624 $54,530 $65,436 2 $49,856 $62,320 $74,784 3 $56,088 $70,110 $84,132 4 $62,320 $77,900 $93,480 5 $67,306 $84,132 $100,958 Assignment of Right Division 33 EXHIBIT C AFFORDABLE HOUSING COVENANT FOR RENTAL UNITS [Not Applicable – and not attached] Assignment of Right Division 33 EXHIBIT D Assignment of Right Division 33 II. SAMPLE PRICES Sample Price of Affordable Home Affordable to Moderate Income Family (80% Median Income) 2004 Median Income Moderate Income: Family Size: Unit Size: Interest Rate: 6.00% 6.75% 6.80% 7.00% 7.25% 7.50% 7.75% 8.00% 8.50% 9.00% 10.00% $138,114 $129,506 $128,961 $126,814 $124,206 $121,680 $119,231 $116,859 $112,332 $108,078 $100,317 $158,862 $148,960 $148,333 $145,864 $142,864 $139,958 $137,142 $134,413 $129,206 $124,313 $115,386 $179,609 $168,414 $167,705 $164,913 $161,522 $158,236 $155,052 $151,967 $146,080 $140,548 $130,456 $200,356 $187,868 $187,077 $183,963 $180,180 $176,514 $172,963 $169,521 $162,954 $156,783 $145,525 $216,669 $203,164 $202,309 $198,941 $194,850 $190,886 $187,046 $183,324 $176,222 $169,548 $157,374 80% $77,900 5% 30% $120 $130 $140 $150 $160 30 1.09% 0.52% Studio $43,624 1 1 Bdrm $49,856 2 2 Bdrm $56,088 3 3 Bdrm $62,320 4 4 Bdrm $67,306 5 Assumptions: 1. Affordability Level = 2. Income guidelines based on 2003 Median Income = 2. Down Payment = 3. Monthly housing expense as percent of income = 4. Monthly Homeowners Dues/Insurance approximately: Studio = 1 Bdrm = 2 Bdrm = 3 Bdrm = 4 Bdrm = 5. Mortgage Term (years) = 6. Property Taxes as percent of home value = (using affordable price as basis for property taxes) 7. Monthly Mortgage Insurance (rate assumes 10% down payment) Assignment of Right Division 33 II. SAMPLE PRICES Sample Price of Affordable Home Affordable to Median Income Family (100% Median Income) 2004 Median Income Moderate Income: Family Size: Unit Size: Interest Rate: 6.00% 6.75% 6.80% 7.00% 7.25% 7.50% 7.75% 8.00% 8.50% 9.00% 10.00% $185,638 $174,148 $173,419 $170,552 $167,068 $163,692 $160,419 $157,248 $151,192 $145,500 $135,108 $213,224 $200,026 $199,190 $195,897 $191,895 $188,017 $184,258 $180,615 $173,660 $167,121 $155,186 $240,810 $225,905 $224,961 $221,241 $216,722 $212,342 $208,097 $203,982 $196,127 $188,743 $175,263 $268,396 $251,784 $250,731 $246,586 $241,549 $236,667 $231,936 $227,350 $218,595 $210,365 $195,340 $290,166 $272,207 $271,069 $266,587 $261,141 $255,864 $250,748 $245,791 $236,325 $227,428 $211,185 Studio $54,530 1 1 Bdrm $62,320 2 2 Bdrm $70,110 3 3 Bdrm $77,900 4 4 Bdrm $84,132 5 Assumptions: 1. Affordability Level = 2. Income guidelines based on 2003 Median Income = 2. Down Payment = 3. Monthly housing expense as percent of income = 4. Monthly Homeowners Dues/Insurance approximately: Studio = 1 Bdrm = 2 Bdrm = 3 Bdrm = 4 Bdrm = 5. Mortgage Term (years) = 6. Property Taxes as percent of home value = (using affordable price as basis for property taxes) 7. Monthly Mortgage Insurance (rate assumes 10% down payment) Assignment of Right Division 33 100% $77,900 10% 30% $120 $130 $140 $150 $160 30 1.09% 0.52% EXHIBIT E TO AFFORDABLE HOUSING COVENANT COVENANT RESTRICTING RESALE AND OPTION TO PURCHASE WHEN RECORDED, MAIL TO: City of ATTN: Document Title(s) (or transactions contained therein): Development Name Covenant Restricting Resale and Option to Purchase Reference Number(s) of Documents assigned or released: 1) Tax Id or parcel number Grantor(s) (Last name First, then first name and middle initial) City of ----------Grantee(s) (Last name first, then first name and middle initial) Buyer(s) Legal Description (Abbreviated:ie; lot, block, plat or section, township, range) Abbreviated Legal Description (Additional legal is on page 15 of document) Assignment of Right Division 33 DEVELOPMENT NAME COVENANT RESTRICTING RESALE AND OPTION TO PURCHASE Table of Contents SECTION 1. SECTION 2. SECTION 3. SECTION 4. SECTION 5. SECTION 6. SECTION 7. SECTION 8. SECTION 9. SECTION 10. SECTION 11. SECTION 12. SECTION 13. EXHIBIT A EXHIBIT B EXHIBIT C ELIGIBILITY REQUIREMENTS ................................................................................. 1 RIGHT OF FIRST REFUSAL ...................................................................................... 2 PROCEDURE FOR PURCHASE/RESALE ................................................................ 3 LIMITATION ON PURCHASE PRICE ....................................................................... 5 LIABILITIES ................................................................................................................. 8 RESTRICTION ON DISPOSITION OF PROPERTY.................................................. 8 TERMINATION OF RIGHT OF FIRST REFUSAL/COVENANT.............................. 9 DEFAULTS, REMEDIES, RESALE RESTRICTION ............................................... 10 DEFAULT MORTGAGES ......................................................................................... 10 INSURANCE/CONDEMNATION PROCEEDS ....................................................... 11 PRIORITY OF MORTGAGE ..................................................................................... 11 SUPERIORITY OF AGREEMENT............................................................................ 12 MISCELLANEOUS .................................................................................................... 13 Legal Description of Property ..................................................................................... 15 Purchase Price Determination Worksheet ................................................................... 16 Assumption Agreement ............................................................................................... 19 Assignment of Right Division 33 DEVELOPMENT NAME COVENANT RESTRICTING RESALE AND OPTION TO PURCHASE This COVENANT RESTRICTING RESALE AND OPTION TO PURCHASE (the "Covenant") is entered into and made effective as of this day of , 200 , by ("Owners") and their successors and assigns in interest for the purpose of implementing the City's goal of creating, preserving, maintaining and protecting housing in the City of (“City") for households of low and moderate incomes. The cooperation of the City and Developer Name ("Developer") allows the Property to be sold at less than full market price to households who would not otherwise be able to afford the Property. The City wishes to establish resale controls to provide for the continued availability of the Property to low and moderate income households. In consideration of the benefits received by the Owner, this Covenant shall govern and affect the Owners' right to sell, convey, encumber, transfer or dispose of in any way the Owners' interest in the real property described in Exhibit A attached hereto and incorporated herein by this reference ("Property"). Owner expressly acknowledges that this Covenant addresses a number of issues related to the purchase and resale of the Property, including without limitation that: (a) the Property must be occupied as the Buyer's principal residence [1.1]; (b) at the time of purchase, the combined maximum income for all household members cannot exceed Percent of Median % of the King County median income (adjusted for household size), unless modified by the City [1.3]; and (c) the resale price of the Property will be based on the initial price, plus an appreciation factor, plus the value of certain improvements, less deferred maintenance, if any [4.2.1,.2&.3]. SECTION 1. ELIGIBILITY REQUIREMENTS. An Owner must meet the following requirements and by acceptance of a deed or otherwise acquiring an interest in the Property hereby warrants as follows: 1.1 Principal Residence. Owner will occupy the Property as his or her principal residence for the term of this Covenant. 1.2 Leasing. During the term of this Covenant, the Owner shall not lease the Property; provided, that the Owner may lease the Property for a period of up to twelve (12) months in order to avoid hardships resulting from the Owner's employment transfer, reduction, termination or similar reasons, or resulting from separation, dissolution or similar domestic occurrences, or from the illness or disability of the Owner or Owner's dependents, or from similar reasons beyond the reasonable control of Owner; provided further, that a copy of any lease or rental agreement shall be provided to the City; and provided further, the City in the exercise of its reasonable discretion may extend said 12-month period. It is understood that the City's primary purpose is to provide the opportunity to acquire a personal residence and not rental investment property; any lease in violation of this Covenant is void ab initio. 1.3 Income Limitation. At the time of purchase, the combined maximum income for all household members of the Owner shall not exceed Percent of Median percent ( %) of the median yearly income adjusted for family size for a family in the Seattle Metropolitan Statistical Area (MSA) as published by HUD from time to time, or such higher income limit as the City may determine or pursuant to Section 3.2. In the event 1 such income determination is no longer published, or has not been updated for a period of at least eighteen (18) months, the City may use or develop such other reasonable method as it may choose in order to determine the income for families in King County at the median yearly income for King county adjusted for family size. 1.4 Household Size. The Owner's household at the time of purchase contains a minimum number of one member for a studio, 1-bedroom, or 2-bedroom unit; and a minimum number of two members for a 3-bedroom unit. SECTION 2. RIGHT OF FIRST REFUSAL. 2.1 City's Right. Owners hereby grant and give to the City a right of first refusal to purchase the Property and any improvements located thereon under conditions as hereinafter set forth. The City may designate a governmental or non-profit organization to exercise its right of first refusal, and the City or its designee may assign this right to an individual private buyer who meets the City's eligibility qualifications. After the exercise of said right by the City, its designee or assignee, in the manner as hereinafter prescribed, the City, its designee or assignee, may assign said right of first refusal to purchase to any substitute, individual or private buyer who meets the eligibility requirements and is approved by the City; provided, however, that such subsequent assignment shall not extend any time limits contained herein. Any transfer of title to the Property of any interest therein by the Owners, or any attempt thereof, in violation of these covenants shall be void ab initio. 2.2 Exception of FHA Loans. Not withstanding any provision in this Covenant to the contrary, the option granted by Section 2.1 shall not be exercised by the City when a deed of trust insured by the Federal Housing Administration, a division of HUD ("HUD/FHA"), is secured by the subject property, and 2.2.1 The Owners are undergoing consideration by HUD/FHA for assignment forbearance relief; or 2.2.2 Owners are undergoing consideration for relief under HUD's Temporary Mortgage Assistance Payment (TMAP) program. SECTION 3. PROCEDURE FOR PURCHASE/RESALE. 3.1 Notice. 3.1.1 Whenever the Owners no longer desire to own the Property, the Owners shall notify the City in writing to that effect. Such notice (the "Notice of Intent to Sell") shall be personally delivered or deposited in the United States Mail, postage prepaid, or by certified mail and addressed to the City, its designee or assignee. 3.1.2 The City, its designee or assignee, shall then have the right to exercise its first right to purchase said Property by delivery of written notice, by personal delivery or certified mail to the Owners at any time within sixty (60) days from the receipt by the City of such written notice from the Owners of their intent to sell or dispose of the Property. 3.2 City Not Elect to Purchase. If the City, its designee or assignee, does not exercise its right to purchase said Property, then the Owners may proceed to sell the Property without regard to the provisions of Section 1.3, Section 1.4 and Section 3.3, but otherwise in compliance with the remaining provisions of the Covenant. 2 3.2.1 Assumption Agreement. Prior to the close of escrow an assumption agreement (substantially in the form attached hereto as Exhibit C) shall be executed in a form acceptable to the City from the proposed purchaser under which the proposed purchaser shall assume the obligations and duties and agree to be bound by the provisions set forth in this Covenant. Notwithstanding the foregoing, even if said assumption agreement is not so executed and recorded, any person acquiring an interest in the Property from or through the Owners shall acquire such interest subject to and be bound by the provisions of the Covenant. 3.2.2 Establishing the Purchase Price. The purchase price shall be paid in cash at the close of escrow or as may be otherwise provided by mutual agreement to the Buyer and the Owners. The purchase price of the Property shall be fixed at the lower of the amounts as established by the following methods: a. Formula Value. The Formula derived from Sections 4.2.1, 4.2.2 and 4.2.3; or b. Current Market Value. The City, its designee or assignee, may have an appraisal of the Property prepared at its own expense by an MAI appraiser. The Owners may also have an appraisal prepared at their own expense by a different MAI appraiser for the same purpose. If the two appraisals show different value, the average of the two values shall be deemed and established as the value. 3.3 City Elects to Purchase. If the City, its designee or assignee, exercises its right to purchase said Property, then the following provisions of Section 3.3 shall apply: 3.3.1 Close of Escrow. Close of escrow for said purchase shall be within one hundred twenty (120) days of the City's receipt of Owner's Notice of Intent to Sell, unless such period is extended by the mutual agreement of the Owners and the City, its designee or assignee. 3.3.2 Closing Costs. Closing costs and title insurance shall be paid pursuant to the custom and practice in King County at the time of the opening of such escrow. The Owners shall bear the expense of providing a current written report of an inspector who is licensed as a Structural Pest Control Operator. All work recommended in said report to repair damage caused by infestation or infection of wood-destroying pests or organisms found and all work to correct conditions that caused such infestation or infection shall be done at the expense of the Owners. Any work to correct conditions usually deemed likely to lead to infestation or infection of wood-destroying pests or organisms, but where no evidence of infestation or infection is found with respect to such conditions, is not the responsibility of the Owners, and such work shall be done only if requested by the purchaser (the "Buyer") and then at the expense of the Buyer. The Buyer shall be responsible for payment of any assumption or pre-payment fees imposed by any lender by reason of the sale of Property. 3.3.3 Assumption Agreement. Prior to the close of escrow an assumption agreement (substantially in the form attached hereto as Exhibit C) shall be executed in a form acceptable to the City from the proposed purchaser under which the proposed purchaser shall assume the obligations and duties and agree to be bound by the provisions set forth in this Covenant. The recordation of the assumption agreement shall be a condition of the City's approval of the proposed Transfer. The Owner shall pay a reasonable assumption fee to the City and reimburse it for out of pocket costs to cover the costs of administering its rights and obligations under this Covenant. Notwithstanding the foregoing, even if said assumption agreement is not so executed and recorded, any person acquiring an interest in the Property from or through the Owners shall acquire such interest subject to and be bound by the provisions of the Covenant. 3 3.3.4 Establishing the Purchase Price. The purchase price shall be paid in cash at the close of escrow or as may be otherwise provided by mutual agreement to the Buyer and the Owners. The purchase price of the Property shall be fixed at the lower of the amounts as established by the following methods: a. Formula Value. The Formula derived from Sections 4.2.1, 4.2.2 and 4.2.3; or b. Current Market Value. The City, its designee or assignee, may have an appraisal of the Property prepared at its own expense by an MAI appraiser. The Owners may also have an appraisal prepared at their own expense by a different MAI appraiser for the same purpose. If the two appraisals show different value, the average of the two values shall be deemed and established as the value. SECTION 4. LIMITATION ON PURCHASE PRICE. 4.1 Initial Sale. The initial sale price of the Property will be Initial Sale Price. 4.2 Resales. After the initial sale, the resale purchase price of the Property shall be paid in cash at the close of escrow or as may be otherwise provided by mutual agreement of the Buyer and the Owner. Pursuant to Sections 3.2.2 (a) and 3.3.4 (a), the Formula Value shall be established as follows: 4.2.1 Formula Value. The "Formula Value" shall be derived from the Base Price of the Property. The "Base Price" is the original price paid by the Owners intending to sell the Property. The Formula Value shall be equal to the Base Price plus an "Appreciation Factor". The Appreciation Factor shall be based on the increase in Mean Sales Price (Single Family Residences) of East King County (Zip Codes 98004, 98005, 98006, 98007, 98008 ,98009, 98011, 98015, 98027, 98029, 98033, 98034, 98039, 98040, 98052, 98053, 98072, 98073, 98083) as published in the Seattle/Everett Real Estate Report by the Seattle-Everett Real Estate Committee. For this purpose, the Mean Sales Price (Single Family Residences) of East King County based on sales from July through June of the year prior to the date a recorded interest in the Property was first acquired by the Owners shall be compared with the Mean Sales Price (Single Family Residences) of East King County based on sales from July through June of the year prior to the date of receipt by the City of the Notice of Intent to Sell provided for under Section 3.1.1. The percentage increase in the Mean Sales, if any, shall be computed and the Base Price shall be increased by that percentage. In the event that the Seattle/Everett Real Estate Report no longer publishes Mean Sales Price information by zip code, the City shall determine the Mean Sales Price by a method similar to that used in the Seattle/Everett Real Estate Report. 4.2.2 Adjustments for Approved Improvement. In the event the Owner makes significant improvements to the Property, including replacing appliances and fixtures, the Formula Value can be adjusted to cover all or a portion of the incurred expenses if the conditions of this Section are met. This Section is not intended to restrict the Owner's rights to make improvements to the Property, nor does it waive the Owner of meeting any Homeowner's Association requirements. It is for the purposes of calculating adjustments to the Formula Value in the event of improvements. a. The purchase price, as calculated in Section 4.2.1 Formula Value, shall be increased by the value of any substantial structural or permanent, fixed improvements which cannot be removed without significant damage to the Property or significant or total loss of value of said improvement, and by the value of appliances, fixtures, or equipment purchased to replace appliances, fixtures, or equipment which were originally acquired as part of the Property by the Owners; provided however, that such price adjustment for replacement 4 appliances, fixtures, or equipment shall be allowed only when the expenditure was necessitated by the nonoperative or deteriorated condition of the original appliances, fixtures, or equipment. If at the time of replacement, the original appliances, fixtures, or equipment had in excess of twenty percent (20%) of its original estimated useful life remaining, the Owners shall show evidence, to the City's satisfaction that the actual condition of the appliances, fixtures, or equipment necessitated and warranted its replacement. No such price adjustment shall be made significantly in excess of the reasonable cost to replace the original appliances, fixtures, or equipment with new appliances, fixtures, or equipment of comparable quality as hereinafter provided. No such adjustment shall be made except for improvements, appliances, fixtures, or equipment made or installed by the Owners. b. No appliances, fixtures, improvement or equipment shall be deemed substantial unless the actual initial cost thereof the Owners exceeds one percent (1.0%) of the purchase price paid by the Owners for the Property provided that this minimum limitation shall not apply in either of the following situations: I. Where the expenditure was made for the replacement of the appliances, fixtures, or equipment which were originally acquired as part of the Property by the Owners; or, ii. Where the expenditure was made pursuant to a mandatory assessment levied by the homeowners' association for the development in which the Property is located, whether levied for improvements or maintenance to the Property, the common area, or related purposes. c. No adjustment shall be made for the cost of any appliances, fixtures, or equipment unless the Owners shall present to the City valid written documentation of the cost of said item. The value of such item by which the purchase price shall be adjusted shall be determined as follows: I. The value of any improvement, appliances, fixtures, or equipment, the original cost of which was less than Six Thousand Five Hundred Dollars ($6,500), shall be the depreciated value of the improvement appliances, fixtures, or equipment calculated in accordance with principles of straight-line depreciation applied to the original cost of the improvement, appliance, fixture, or equipment; and ii. The value of any improvement, appliance, fixture, or equipment, the original cost of which was Six Thousand Five Hundred Dollars ($6,500) or more shall be the appraised market value of the improvement, appliance, fixture, or equipment when considered as an addition or fixture the Property (i.e., the amount by which said improvement, appliance, fixture, or equipment enhances the market value of the Property at the time of sale. Said value shall be determined in the same manner as the market value of the Property in Section 3.3.4b above. iii. On January 1, 2004, and every two years thereafter, regardless of the date of execution or recordation of this covenant, the amount of Six Thousand Five Hundred Dollars ($6,500) referred to in paragraphs (I) and (ii) immediately above shall be automatically adjusted for the purpose of those paragraphs in the following manner: On each adjustment date, the Consumer Price Index for the Seattle area published by the U.S. Department of Labor, Bureau of Labor Statistics, shall be compared with the Index prevailing on the January 1, 2002. The percentage increase in the Index, if any, shall be computed and the sum of Six Thousand Five Hundred Dollars ($6,500) shall be increased in the same percentage. In no event shall the sum be reduced below Six Thousand Five Hundred Dollars ($6,500). 5 iv. No price adjustment will be made except upon presentation to the City of written documentation of all expenditures made by the Owners for which an adjustment is requested. d. The Purchase Price Determination Worksheet, provided as Exhibit B, shall be used to calculate the adjusted purchase price of the Property under Section 4.2.2 above. 4.2.3 Escrow for Deferred Maintenance. Once determined under Sections 4.2.1 and 4.2.2 above, the purchase price shall be adjusted by decreasing said price by an amount to compensate for deferred maintenance cost, if any, which amount shall be determined as follows: a. Upon receipt of the Notice of Intent to Sell, the City or its designee shall be entitled to inspect the Property. The City or its designee shall have an opportunity to determine: whether all plumbing, electrical, and heating systems are in working order; whether any violations of applicable building, plumbing, electric, fire, or housing codes exists; whether all appliances which were originally furnished to the Owner as part of the Property, or any replacement thereof, are in working order; whether walls, ceilings and floors are clear and free of holes or other defects (except for holes typical for picture hangers); whether doors, windows, screens and similar appurtenances are cracked, broken or torn; and whether carpets, drapes and similar features which were originally furnished to the Owner as part of the Property, or any replacement thereof are clean and free of holes; tears or defects; and when not maintained by the homeowners' association, whether the landscaping has been generally maintained. b. In the event deficiencies are noted, the Owner shall cure the deficiencies in a reasonable manner acceptable to the City or its designee within sixty (60) days of being notified of the results of the inspection, but in no event later than the close of escrow. At the option of the City or its designee escrow may be closed, title passed and monies paid to the Owner subject to the condition that such funds as are necessary to pay for curing such deficiencies (based upon written estimates obtained by the City or its designee) shall be separated from the monies due to the Owner and held by an escrow holder acceptable to the City or its designee of the purpose of curing such deficiencies. c. The City or its designee shall cause such deficiencies to be cured. Upon certification of completion of work by the City or its designee, escrow holder shall utilize such funds to pay for said work. Any remaining funds shall be paid to the Owners and thereupon, no other payment shall be due to the Owners. SECTION 5. LIABILITIES In no event shall the City become liable to the Owners, or become obligated in any manner, by reason of the assignment of its first right of refusal to purchase, or after such an assignment become in any way obligated or liable to the Owners for any failure of the City's designee or assignee to consummate a purchase of the Property or to comply with the terms of any purchase and sale agreement. SECTION 6. RESTRICTION ON DISPOSITION OF PROPERTY 6.1 City's Consent to Transfer. Until such time as the City's right to purchase is exercised, waived, or expired, the Property and any interest in title thereto shall not be sold, leased, rented, assigned, or otherwise transferred to any person or entity without express written consent of the City, or its designee or assignee, as applicable, which consent shall be consistent 6 with the City's goal of creating, preserving, maintaining, and protecting housing for low and moderate income households, and which consent shall not be unreasonably withheld or denied so long as the proposed transfer of an interest in the Property otherwise complies with this Covenant. This provision shall not prohibit the Owners' right to encumber their title to the Property for the sole purpose of securing financing; however, in the event of foreclosure or transfer by deed in lieu for foreclosure, the provisions of Section 2, Right of First Refusal, and Section 3.3, Procedure for Purchase, of this Covenant shall govern subject to the provisions of Section 11. 6.2 Dispositions Not Restricted. The following transfers of title or any interest therein are not subject to the right of first refusal provisions of this Covenant: transfer by gift, devise, or inheritance to grantee's spouse or issue; taking of title by surviving joint tenant; transfer of title to a spouse as part of a divorce or dissolution proceedings; and acquisition of title or interest therein in conjunction with marriage; provided, however, that the covenants and restrictions created herein shall continue to run with the title to said Property following any of said transfers. SECTION 7. TERMINATION OF RIGHT OF FIRST REFUSAL/COVENANT. 7.1 Duration of City's Purchase Rights. The provisions set forth in this Covenant shall be in effect for thirty (30) years from the date this Covenant was originally signed subject to the following: Upon the first sale to occur after thirty (30) years from the date of this agreement, any surplus of proceeds so distributed remaining after payment of encumbrances of said Property shall be distributed as follows: that portion of the surplus up to but not to exceed the net amount that the Owners would have received under the formula to purchase the Property on the date of sale pursuant to Section 3, shall be distributed to the Owners, and the balance of such surplus, if any, shall be distributed to the City or its successor or assignee in interest. 7.2 Termination of Covenant. Notwithstanding any provision in this Covenant to the contrary, all of the provisions of this Covenant shall terminate and have no further force and effect upon the occurrence of one of the following events: 7.2.1 Title to subject property is acquired by HUD/FHA, Veterans Administration ("VA"), Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC") or another party upon foreclosure of a deed of trust or mortgage insured, made or held by HUD/FHA, VA, FNMA, FHLMC or an institutional lender or an institutional investor which is neither a natural person nor directly or indirectly related to or affiliated with Owner or Owner's successors in interest. 7.2.2 Title to the subject property is acquired by HUD/FHA, VA, FNMA, FHLMC or another party by deed in lieu of foreclosure of a deed or trust or mortgage insured, made or held by HUD/FHA, VA, FNMA, FHLMC or an institutional lender or an institutional investor which is neither a natural person nor directly or indirectly related to or affiliated with Owner or Owner's successors in interest. 7.2.3 A deed of trust insured by HUD/FHA on the subject property is assigned to HUD/FHA. 7 Upon termination of the Covenant, on request of the then record owner of the fee title to the Property, the City shall execute, acknowledge and record a termination of the Covenant. SECTION 8. DEFAULTS, REMEDIES, RESALE RESTRICTIONS. 8.1 Default and Remedies. Upon violation of any of the provisions of this Covenant by Owner or Owner's proposed purchaser, the City may give written notice to Owner specifying the nature of the violation. If the violation is not corrected to the satisfaction of the City within a reasonable period of time, not longer than (30) days after the date the notice is mailed, or within such further time as the City determines is necessary to correct the violation, the City may declare a default under this Covenant. Upon the declaration of a default or if the Owner or Owner's proposed purchaser makes any misrepresentation in connection with receiving any benefits under this Covenant, the City may apply to a court of competent jurisdiction for specific performance of this Covenant, for an injunction prohibiting a proposed sale or transfer in violation of this Covenant, for a declaration that a transfer in violation of this Covenant is void, or for any such other relief at law or in equity as may be appropriate. 8.2 City's Option to Purchase. Notwithstanding, and in addition to, the remedies provided in Section 8.1, Owner hereby grants to the City, the option to purchase the Property effective upon the declaration of a default. Said option to purchase is given in consideration of the economic benefits received by Owner resulting from ownership of the Property made possible by the assistance of the City in developing the Property. SECTION 9. DEFAULT MORTGAGES 9.1 Notice of Default. The Owners covenant to cause to be filed for record in the Office of the Recorder of the King County a request for a copy of any notice of default and of any notice of sale under any deed of trust or mortgage with power of sale encumbering said Property pursuant to RCW 61.24.045. Such request shall specify that any such notice shall be mailed to the City. 9.2 City's Right to Purchase. Any notice of default and sale given to and received by the City shall constitute a Notice of Intent to Sell hereunder and the City, its designee or assignee, may exercise its right for first refusal prior to any trustee's sale, judicial foreclosure sale, or transfer by deed in lieu of foreclosure; provided, however, that time by which the City, its designee or assignee, may complete the purchase of the Property, shall be limited by the period of foreclosure prescribed in the RCW 61.12 or 61.24 and not the period allowed under Section 3 of this Covenant. In the event the Owners fail to file such request for notice, the City's right to purchase shall run from the date the City has actual knowledge of a sale or proposed sale, but the City's right to purchase shall not extend beyond the period of foreclosure prescribed in RCW 61.12 or 61.24 and a mortgagee's or trust deed beneficiary's rights of foreclosure shall not be affected. 9.3 Surplus if City not Purchase. 8 In the event the City elects not to exercise its right to purchase upon notice of default or sale, any surplus to which the Owners may be entitled shall be paid as follows: that portion of surplus (after payment of encumbrances), if any, up to but not exceeding the net amount that the Owners would have received after payment of encumbrances under the formula set forth above had the City exercised its right to purchase the Property on the date of the foreclosure sale, shall be paid to the Owners on the date of the foreclosure sale, and the balance of surplus, if any, shall be paid to the City or its successor assignee in interest. SECTION 10. INSURANCE/CONDEMNATION PROCEEDS. In the event that the Property is destroyed and insurance proceeds are distributed to the Owners instead of being used to rebuild, or if in the event of condemnation, or a dissolution of the homeowners' association and a liquidation and distribution of the associations' assets, any surplus of proceeds so distributed remaining after payment of encumbrances of said Property shall be distributed as follows: that portion of the surplus up to but not to exceed the net amount that the Owners would have received under the formula to purchase the property on the date of liquidation, shall be distributed to the Owners, and the balance of such surplus, if any, shall be distributed to the City or its successor or assignee in interest. SECTION 11. PRIORITY OF MORTGAGE. 11.1 Lender's Rights Not Impaired. Notwithstanding any provisions herein, this Covenant shall not diminish or affect the rights (including the legal rights to take action following a default under an obligation secured by the Property) of HUD/FHA, FNMA, FHLMC, VA or the holder of any other deed of trust or mortgage on Property made, held or insured by an institutional lender or an institutional investor which is neither a natural person nor directly or indirectly related to or affiliated with Owner or Owner's successors in interest. 11.2 Subordination. This Covenant shall be subordinate to any deed of trust or mortgage on the Property made, held or insured by HUD/FHA, VA, FNMA, FHLMC or other institutional lender or an institutional investor which is neither a natural person nor directly or indirectly related to or affiliated with Owner or Owner's successors in interest. Any party, and its successors and assigns, receiving title to the Property through a trustee's sale, judicial foreclosure sale or deed in lieu of foreclosure, of such deed of trust or mortgage, and any conveyance or transfer thereafter, shall receive title free and clear of the provisions of the Covenant. 11.3 Only Agreement. This Section 11 shall be the whole and only agreement necessary with regard to the subjection and subordination of the provisions of the Covenant to a mortgage or deed of trust referred to in Section 11.2 above. In furtherance of the foregoing, the provisions of Section 11 shall fully apply with respect to, (and for the benefit of the anyone holding, making, insuring or title insuring) mortgages and deeds of trust recorded subsequent to the recording of the Covenant without necessity of any other or further agreement of subordination being required. Notwithstanding the foregoing, the City and Owner shall execute and record such additional agreement as may reasonably be necessary to cause any Mortgagees ALTA Title Insurance Policy to insure that the Covenant is subordinate to any mortgage or deed of trust referred to in Section 11.2. 9 11.4 Intent of City and Owner. In accordance with the conditions hereof, the City and the Owner intentionally waive, relinquish, subject and subordinate the provisions of the Covenant together with all rights and privileges of the City thereunder in favor of the lien or charge of any mortgage or deed of trust referred to in Section 11.2 upon said Property and understand that in reliance upon, and in consideration of, this waiver, relinquishment, subjection and subordination, specific loans and advances will be or have been made and title insurance will be or has been issued and, as part and parcel thereof, specific monetary and other obligations have been entered into which would not have been made or entered into but for said reliance upon this waiver, relinquishment, subjection and subordination. SECTION 12. SUPERIORITY OF AGREEMENT. The Owner covenants that he or she has not, and will not, execute any other agreement with provisions contradictory to or in opposition to the provisions hereof except for documents executed pursuant to the requirements of the lenders with a security of interest in the Property superior to the position of the City and that, with the exception of the aforementioned lender documents, this Covenant is controlling as to the rights and obligations between and among Owner, the City and their respective successors. SECTION 13. MISCELLANEOUS. 13.1 Notice. All notices required herein shall be sent to the following addresses: CITY: City of Issaquah 1775 12th Avenue NW, First Floor Issaquah, WA 98027 ATTN: MDRT ARCH 16225 NE 87th St, Suite A-3 Redmond, WA 98052 DEVELOPER: OWNERS: To the mailing address of the Developer To the mailing address of the Property 13.2 Number/Gender. The use of the singular or plural and the masculine and feminine or neuter pronouns shall be construed as interchangeable and such correct pronouns when referring to a particular person, person, entity or entities shall be construed to have been used herein appropriately and correctly. 10 13.3 Applicable Law. This Covenant and the covenants, conditions and restrictions contained herein shall be construed under the laws of the State of Washington. References to statutes are construed to apply to later enactments on the same subject. 13.4 Owner's Acceptance. By execution of this Covenant and the acceptance of any interest in the Property, the Owner accepts and agrees to be bound by the covenants contained herein. 13.5 Invalid Provision. If any more of the provisions contained in this Covenant shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Covenant, and this Covenant shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 13.6 Successors and Assigns. Unless otherwise limited and/or indicated herein, this Covenant shall constitute covenants that run with the land, as provided by law, and shall be binding upon and inure to the benefit of all parties and all persons who shall be or shall become the owner of, or otherwise have an interest in, the Property. 13.7 Amendments. This Covenant may not be amended or terminated without the written consent of the City, unless otherwise specifically provided for in this Covenant. Dated as of the date first above written. OWNERS: _____________________________________ Buyer(s) 11 EXHIBIT A TO COVENANT RESTRICTING RESALE AND OPTION TO PURCHASE Description of Property 12 EXHIBIT B TO COVENANT RESTRICTING RESALE AND OPTION TO PURCHASE Purchase Price Determination Worksheet A. Original Purchase Price = $ Date of Purchase: Date of Notice of Intent to Sell: B. Percentage Increase 1) Mean Sales price closest to Date of Purchase = $ 2) Latest Mean Sales Price available on date of receipt by City of Notice of Intent to Sell = $ 3) Percentage increase/decrease = (B2 - B1) / B1 = 4) Increase in Value = A x B3 = $ C. Formula Value = A + B4 = $ % STOP HERE UNLESS YOU HAVE ADJUSTMENTS FOR IMPROVEMENTS OR REPLACED FIXTURES. D. Structural or Permanent Fixed Improvements. List all structural or permanent fixed improvements. 1. 2. 3. For each item, complete the following. Use additional sheets of paper for more than one improvement. 1) Type of Improvement: 2) Value of structural or permanent fixed improvements = $ 3) Does actual initial cost exceed 1% of original purchase price ($ ) Yes No 4) If yes, calculate adjustments to the Formula Value using Section D or E depending on original cost. Complete Section D for items costing less than $6,500 (or as adjusted by change in CPI). Complete Section E for items costing more than $6,500 (or as adjusted by change in CPI). 13 E. Current Improvement Value - original cost less than $6,500 (or as adjusted per CPI) 1) Improvement: Date of Improvement: 2) Original Cost = $ 3) a) Life expectancy of Improvement: b) Age of Improvement: 4) Current Improvement Value a) Original Cost - Depreciation = D2 - D2 (D3b/D3a) = $ F. Current Improvement Value - original cost greater than $6,500 (or as adjusted per CPI) 1) Improvement: Date of Improvement: 2) Original Cost = $ 3) Appraised market value as addition to the home: $ G. Appliance/Fixtures Replacement Values. List all replacement appliances, fixtures or equipment. 1. 2. 3. For each item, complete the following. Use additional sheets for more than one item. 1) Type of Replacement: Date of Replacement: 2) Original Cost = $ 3) a) Life expectancy of Replacement: b) Age of Replacement: years. years. . years. years. 14 4) Current Replacement Value a) Original Cost - Depreciation = G2 - G2 (G3b/G3a) = $ G. Adjusted Formula Value Formula Value [C] + Current Improvement Values [E4a + F3] + Appliance Replacement Value [G4a] $ $ $ ADJUSTED FORMULA VALUE $ Footnote: Calculation of Change in CPI (Consumer Price Index) or request information from Planning Department. 1) 2) 3) 4) 5) CPI for Seattle effective January 1, 2004 = Current CPI for Seattle = CPI Increase = #2 - #1 = Percentage Increase = #3/#1 = % $6,500 Adjusted per CPI change = 6500 + (6500 x #4) = $ Adjustment to be made bi-annually beginning January 1, 2004. 15 EXHIBIT C TO COVENANT RESTRICTING RESALE AND OPTION TO PURCHASE Owner's Assumption Agreement Reference is made to that certain Buyers Covenant Restricting Resale and Option to Purchase ("Covenant") entered into and made effective as of the day of , 199 , by ("Owners") and their successors and assigns in interest for the purpose of implementing the City's goal of creating, preserving, maintaining and protecting housing in the City of Issaquah ("City") for households of low and moderate incomes. Said Covenant governs and affects the Owners' right to sell, convey, encumber, transfer or dispose of in any way the Owners' interest in the real property described in Exhibit A attached hereto and incorporated herein by this reference ("Property"). The undersigned Owner has or intends to acquire an interest in the Property. Pursuant to Section 3.2.1 and Section 3.3.3 of said Covenant, and in order to obtain the City's approval of said Owner acquiring such interest in the Property, said Owner (on behalf of said Owner and said Owner's heir, successors and assigns) hereby assumes the obligations and duties and agrees to be bound by the provisions set forth in said Covenant. This Assumption Agreement made effective as of the day of ("Owners") supersedes the prior Assumption Agreement made effective as of the by ("Owners"). , 199 day of , by 199 Date as of the day of , 199 . OWNER: Buyer(s) 16 STATE OF WASHINGTON} } ss. COUNTY OF KING } On this day appeared before me , known to me to be the individual described in and who executed the attached instrument, and acknowledged to me that they signed the same as the free and voluntary act and deed, for the uses and purposes herein mentioned Given under my hand and official seal this day of of 199 . Notary Public in and for the State of Washington. My commission expires . 17 EXHIBIT A TO OWNER'S ASSUMPTION AGREEMENT Description of Property 18 EXHIBIT F CERTIFICATION OF HOUSEHOLD ELIGIBILITY I, , and I , , as applicants for the purchase of the following Affordable unit: Project:____________________________________________________________ Project Address: _____________________________________________________ Unit #: Number of Bedrooms: Household size *: Do hereby represent and warrant that the following Household information is true: , Age , Age , Age , Age , Age , Age My/Our household income from the attached computation is $ , and includes all income I/we received for the previous calendar year. Also attached is a copy of my/our Federal Tax Return and W-2s for the previous calendar year, as well as a pay-stub, etc, for the previous 1 month period. If you have verifiable knowledge that your current income or income prior to closing will be significantly higher or lower than the income you reported above, attach a letter clearly explaining your situation. The City may consider this information in determining your maximum income for eligibility. This affidavit is made with the knowledge that it will be relied upon by the City to determine maximum income for eligibility. I/We warrant that all information set forth in this Certification of Household Eligibility is true, correct and complete based upon information I/We deem reliable, and that the estimate contained in the preceding paragraph is reasonable and based upon such investigation as the undersigned deemed necessary. I/We acknowledge that I/we have been advised that the making of any misrepresentation or misstatement in this affidavit may disqualify you as an eligible buyer and/or constitute a default of the Covenant Restricting Sale of Below Market Rate Unit. I/We do hereby swear under penalty of perjury that the foregoing statements are true and correct. Applicant ___________________________ ____________________________ Mailing Address______________________ Date: _________________________ Applicant Phone (day)_______________________ Date: __________________________ INCOME COMPUTATION "Household income" includes all items listed below, from all household members over the age of 18. Income of dependents over 18, who reside in the unit for less than four (4) months of the year will not be counted toward household income. For the previous calendar year, indicate income received from the following sources: a) the full amount, before any payroll deductions, of wages, salaries, overtime pay, commissions, fees, tips, bonuses and other compensation for personal services, and payments in lieu of earnings, 19 such as unemployment and disability compensation, worker's compensation and severance pay and any earned income tax credit to the extent that it exceeds tax liability; a) __________ b) net income from operations of a business or profession or net income of any kind from real or personal property; b) __________ c) interest and dividends; c) __________ d) the full amount of periodic payments received from Social Security, pensions, retirement funds, annuities, insurance policies, disability or death benefits, alimony, child support, or any similar type of periodical payments, and any regular contributions or gifts from persons not residing in the unit; d) __________ e) public assistance payments; e) __________ f) regular and special allowances and pay of a member of the Armed Forces who is a spouse or head of the family. f) __________ TOTAL $ __________ (NOTE: The following are not considered income: occasional, infrequent gifts of money; one-time payments from insurance policies or an inheritance settlement; scholarships or student loans for tuition, fees or books; foster child care payments; the value of Food Stamp coupons; hazardous duty pay to a member of the Armed Forces; relocation payments; assistance received under the Low Income Home Energy Assistance Program or any similar program). Return to: ARCH - 16225 NE 87th St, Suite A-3, Redmond, WA 98052 * Do not include persons who will reside in the unit for less than four months of the year. EXHIBIT G Certificate of Household Eligibility Form for Affordable Housing Rental Units, which forms will be maintained by the Developer or Builder and used for reporting and record keeping purposes. [Not Applicable – not attached] EXHIBIT H AFTER RECORDING, RETURN TO: _____________________________________ _____________________________________ _____________________________________ RELEASE OF AFFORDABLE HOUSING COVENANT The Release of Affordable Housing Covenant is hereby executed and recorded by the CITY OF ISSAQUAH, a municipal corporation, as to the real property located in King County, Washington and described with specificity in Exhibit A (Property) attached hereto and incorporated by reference. RECITALS WHEREAS, the Property legally described in Exhibit A attached hereto is located in the City of Issaquah in a master planned development known as Issaquah Highlands; WHEREAS, the Property is subject to the terms and conditions of the Declaration of Affordable Housing Covenant for Issaquah Highlands dated the ___ day of _____________, 199___, and recorded under King County Recording No. ____________________________ (Covenant). The City of Issaquah is the Grantee under the Covenant; WHEREAS, the City has been provided notice that the terms of sale regarding Affordable Units have been met, and the City has not objected to the release of the Covenant, as provided in Paragraph 14 of the Covenant; NOW THEREFORE, pursuant to the Covenant, the City and Builder hereby acknowledge and agree that the Covenant has been complied with and the Covenant is hereby declared terminated, released, and of no further force or effect with respect to the Property. BUILDER ____________________________________________ By Its CITY OF ISSAQUAH, a Washington municipal corporation By ___________________________________________ Its Authorized Representative per the Covenant (§ 14) 1 Assignment of Right Division 33 STATE OF WASHINGTON COUNTY OF KING ) ) ss. ) On this _____ day of _______________, 2002, before me, a Notary Public in and for the State of Washington, personally appeared ________________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed this instrument, on oath stated that ______ was authorized to execute the instrument, and acknowledged it as the ____________________________ of _______________________ to be the free and voluntary act and deed of said corporation for the uses and purposes mentioned in the instrument. IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day and year first above written. ___________________________________________ NOTARY PUBLIC in and for the State of Washington, residing at __________________________________ My appointment expires _______________________ Print Name _________________________________ STATE OF WASHINGTON COUNTY OF KING ) ) ss. ) On this _____ day of _______________, 2002, before me, a Notary Public in and for the State of Washington, personally appeared ____________________________ personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed this instrument, on oath stated that he was authorized to execute the instrument, and acknowledged it as the authorized representative to be the free and voluntary act and deed of said municipal corporation for the uses and purposes mentioned in the instrument. IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day and year first above written. ___________________________________________ NOTARY PUBLIC in and for the State of Washington, residing at __________________________________ My appointment expires _______________________ Print Name _________________________________ Assignment of Right Division 33 EXHIBIT D MEMORANDUM OF ASSIGNMENT When recorded Return to City of Issaquah Attn: City Clerk P.O. Box 1307 Issaquah, WA 98027 MEMORANDUM OF ASSIGNMENT OF RIGHT TO ENTER A REAL ESTATE PURCHASE AND SALE AGREEMENT Grantor: ____________________________________________________ Grantee: ____________________________________________________ Legal Description (abbreviated: __________________________________ Assessor‟s Tax Parcel Identification No(s): _____________________________ THIS MEMORANDUM OF ASSIGNMENT OF PURCHASE AGREEMENT is dated this ____ day of _____________, 20__ by and between ___________________________ (“Developer”), and CITY OF ISSAQUAH, a municipal corporation and political subdivision of the State of Washington (“City”) 1. Agreement. This Memorandum is made with reference to that certain Assignment of Purchase Agreement between Developer and the City dated as of ________________, 20___. 2. Property. The property subject to the Assignment of Purchase Agreement is as described in Exhibit A attached hereto and incorporated herein by this reference (“Property”) 3. Nature of Agreement. The Assignment of Purchase Agreement governs development of the Property by Developer on terms and conditions set forth therein. The Assignment of Purchase Agreement also provides the City with an option to repurchase the Property or any parcels created within the Property on terms and conditions set forth therein. 4. Term. The term of the Assignment of Purchase Agreement commences upon the date of execution of said Agreement, and automatically expires as to a parcel within the Property when Developer has completed construction of the residential units to be constructed on such parcel in accordance with approved by the City pursuant to the Assignment of Purchase Agreement and such Units are sold or leased, as applicable. 5. Purpose of Memorandum. This Memorandum is recorded to give public notice of the Assignment of Purchase Agreement and in no way modifies or affects the terms and conditions of the Assignment of Purchase Agreement. Assignment of Right Division 33 EXECUTED the day and year first above written. DEVELOPER: By_________________________ Name:______________________ Title: _______________________ Assignment of Right Division 33