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Department of Labor Statistics ("Index") based upon the published index value for January <br />of the year in which the adjustment is to be made; property management staff salaries; <br />premiums for property damage, liability and other insurance; utility service costs not paid for <br />directly or indirectly by tenants; maintenance and repair costs; fees for licenses and permits <br />required for the operation of the Project; organizational costs (e.g., annual fi-anchise tax <br />payments) and costs associated with accounting, tax preparation and legal fees of Borrower <br />incurred in the ordinary course of business; expenses for security services; advertising and <br />marketing costs; payment of deductibles in connection with casualty insurance claims not <br />paid from reserves; tenant services and activities; the amount of uninsured losses actually <br />replaced, repaired or restored and not paid from reserves; cash deposits into reserves for <br />capital replacements in an amount no more than $250 per unit per year or such greater <br />amount as reasonably required the holder of an Approved Senior Loan or by Borrower with <br />the written approval of City; partnership management fees payable to the general partner of <br />Developer in the maximum aggregate sum of $25,000 per year payable only during the first <br />15 years following issuance of a final certificate of occupancy for the Project; an asset <br />management fee not to exceed $5,000 per year, increasing by 3% per year annually after the <br />first five years (plus any accrued but unpaid amount for prior years) payable to the limited <br />partner of Developer only during the first l 5 years following issuance of a final certificate of <br />occupancy for the Project; any previously unpaid portion of the developer fee (without <br />interest) due in accordance with the Financing Plan approved by City as set forth in the OPA; <br />cash deposits into operating reserves in the amount (if any) required by the holder of an <br />Approved Senior Loan or reasonably required by Borrower and approved in writing by City; <br />payments to the Agency pursuant to the Agency Note; other ordinary and reasonable <br />operating expenses; and extraordinary operating costs approved in writing by the City. <br />Payments to Bon-ower, its partners or affiliates in excess of the limitations set forth in this <br />Section shall not be counted toward Annual Operating Expenses for the purpose of <br />calculating Surplus Cash. <br />1.2.4 EXCLUSIONS FROM ANNUAL OPERATING EXPENSES. Annual <br />Operating Expenses shall exclude the following: developer fees and interest on any deferred <br />developer fees (except as permitted pursuant to Section l 2.3); contributions to Project <br />operating reserves (except as permitted pursuant to Section l .2.3) ;debt service payments on <br />any loan which is not an Approved Senior Loan, including without limitation, unsecured <br />loans or loans secured by deeds of trust which are subordinate to the City Deed of Trust; <br />depreciation, amortization, depletion or other non-cash expenses; expenses paid for with <br />disbursements from any reserve account; distributions to partners; any amount paid to <br />Borrower, any general partner of Borrower, or any entity controlled by the persons or entities <br />in control of Bon~ower or any general partner of Borrower. Notwithstanding the foregoing <br />limitation regarding payments to Borrower and related parties, the following fees shall be <br />included in Annual Operating Expenses in accordance with the limitations set forth in Section <br />1.2.3 above even if paid to an affiliate of Borrower or a partner of Borrower: fees paid to a <br />property management agent or resident services agent, partnership management fees, and <br />asset management fees. <br />1.3 DUE ON SALE. The entire unpaid principal balance and all interest and other <br />sums accrued hereunder shall be due and payable upon the Transfer (as defined in Section 7.2 <br />of the OPA) absent City consent, of all or any part of the Project or the Property or any <br />interest therein other than a Transfer permitted without City consent pursuant to the OPA. <br />Without limiting the generality of the foregoing, this Note shall not be assumable without <br />City's prior written consent, which consent may be granted or denied in City's sole <br />9~ 661 I -4 <br />