Loading...
HomeMy WebLinkAbout1999-04-12 City Council (10)City of Palo Alto City Manager’s Report TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT DATE:APRIL 12, 1999 CMR:194:99 SUBJECT:APPROVAL OF AGREEMENTS RELATED TO LOANS IN THE TOTAL AMOUNT OF $1,000,000 TO ASSIST IN THE ACQUISITION OF THE PALO ALTO GARDENS APARTMENTS AT 648 SAN ANTONIO ROAD REPORT IN BRIEF Last November, Council approved a $1 million loan to assist Mid-Peninsula Housing Coalition (MPHC) acquire the Palo. Alto Gardens Apartments. On March 15, 1999, a Budget Amendment Ordinance (BAO) was adopted to fund the loan on an interim basis to permit the transaction to close this fiscal year, as required by the purchase agreement and other funding. The permanent funding sources for the City’s loan will be decided by Council as part of the CDBG budget actions on May 10. The City funding represents about six percent of the project’s $16.7 million budget. The attached loan and regulatory agreements provide the City’s funding, as appropriated by the March 15 BAO, and establish conditions for disbursement of funds and the long-term restrictions on use of the property. Acquisition of the Palo Alto Gardens Apartments is scheduled for the last week of April. Sale of the project under the financing structure devised by MPHC will preserve the housing for the existing Section 8-assisted.residents and also maintain the entire project in the City’s inventory of affordable rental housing, subject to new 55Lyear affordability restrictions under a City regulatory agreement. As required by the City agreement, when vacancies occur, preference for occupancy will be given to holders of Section 8 assistance and project-based Section 8 contracts will be sought, if available. Without the availability of the Section 8 program, the occupancy of the project would otherwise gradually transition through attrition to low income households with incomes in the fifty to sixty percent of median income range. In anticipation of the possibility of a termination of the Section 8 program by the U. S. Department of Housing and Urban Development (HUD), special rent reserve funds will be created that would be utilized to keep rents affordableto the very-low incom~ tenants while meeting the project’s required loan payments and operating expenses during a transition period. CMR: 194:99 Page 1 of 7 RECOMMENDATION Staff recommends that the Council: Approve the attached Loan Agreement (with attached form of promissory note, deed of trust and security agreement) with the Mid-Peninsula Housing Corporation (MPHC) to provide a loan of $900,000 toward the acquisition of the land at the Palo Alto Gardens Apartments at 648 San Antonio Road. Approve the attached Loan Agreement (with attached form of promissory note, deed of trust and regulatory agreement) between the City of Palo Alto and MP Palo Alto Gardens Associates, a California Limited Partnership (the "Partnership") to provide a loan of $100,000 toward the acquisition of the improvements at the Palo Alto Gardens Apartments. Authorize the Mayor to execute the agreements, in substantially similar form, and direct the City Manager to administer the provisions of the agreements and to execute any other documents, including a subordination agreement to the bond documents, required to close the escrow for the acquisition of the property. BACKGROUND The 156-unit Palo Alto Gardens Apartments complex was developed for use as very-low income rentals in 1973 with HUD financing and a 20-year rental assistance contract, but without City assistance other than a rezoning to a Planned Community designation. In late 1997, the owners began converting the project to market rate rental housing as permitted by Federal rules and began renting vacant units to market tenants. The most recent information available, from January 1999, shows at least 13 units occupied by non-assisted tenants. In November 1998, MPHC entered into a purchase agreement for the property with the objective of preventing its conversion to market rentals. MPHC subsequently submitted an application for a City loan of $1 million to assist with the property’s $13 million purchase price. On November 23, 1998, Council adopted Resolution No. 7815 approving a $1 million loan commitment from the City’s Housing Development Funds. On March 15, 1999, Council approved a Budget Amendment Ordinance appropriating $1,000,000 in City Housing Reserve Funds for the loan. Council directed staff to prepare the funding agreement and other documents for Council action in April. Close of escrow is scheduled for April 29. DISCUSSION The financing plan used by MPHC last year to acquire the 149-unit Central Park Apartments in Mountain View (which also had the same ownership) is being replicated to acquire Palo Alto Gardens. The major funding source for the $16.7 million project is a 40-year, fixed rate $11,435,000 loan funded from tax-exempt bonds issued by the Association of Bay Area Governments (ABAG) Finance Authority for Nonprofit Corporations. The bond issue has received a Standard and Poor’s "A" rating. The other funding component is an equity CMR: 194:99 Page 2 of 7 contribution of approximately $3.8 million from the sale of Federal low income housing tax credits to the limited partner investor, Transamerica Occidental Life Insurance Company. This same tax credit investor was involved in the acquisition of the Sheridan Apartments. Due to Federal rules which limit the percentage of the bond proceeds that can be used to acquire land, the acquisition, financing and ownership of the land and the improvements will be structured separately. MPHC will acquire title to the land with City assistance. A partnership, MP Palo Alto Gardens Associates, has been formed to acquire the improvements using the bond proceeds, the tax credit contribution and a loan from MPHC of a portion of its developer fee. The general partner is a nonprofit affiliate of MPHC and Transamerica is the limited partner. The Partnership will lease the land from MPHC for a term of sixty years at an annual rent of about $265,000 per year payable from excess cash flow from operating the project. Because the land and the improvements will be separately owned, the City’s assistance is in the form of two separate loans, a $900,000 loan to MPHC to assist with land acquisition and a $100,000 loan to the Partnership to assist with its acquisition of the improvements. For this reason, there are two sets of City documents for this transaction. The City is providing some of its assistance directly to the Partnership in order to clearly establish the City’s right to regulate rents and occupancy of the units. The City will be subordinating its loans to the approximately $11.4 million loan funded by the bond proceeds. Both City loans are at three percent simple interest. The primary objectives of MPHC’s acquisition, and the City’s financial assistance, are to prevent the conversion of the units to market rentals and to ensure that the utmost efforts will .be made in future years to retain the Section 8 rental assistance. The City’s Regulatory Agreement requires the owner to give a preference to holders of Section 8 vouchers whenever vacancies occur and to seek Section 8 contract assistance for all units, if possible. It is expected that the project will gradually return to virtually one hundred percent Section 8 occupancy as the current market rate tenants move away. The project’s use, occupancy and rents will be controlled by a recorded regulatory agreement as required by the tax credit program with additional City restrictions on rents and occupancy included in a 55-year City regulatory agreement. Units not rented to Section 8 tenants must be rented to very-low or low income tenants. At least 31 of the project’s 156 units are restricted to occupancy by very-low income households with incomes below 50 percent of the County median income as defined by HUD. Monthly rents must not exceed 30 percent of 50 percent of the median income. Ninety-nine units are to be occupied by low-income households with incomes below 60 percent of the median income with rents based on 30 percent of monthly income. One unit will be set aside for a resident manager. Twenty-five of the units will not be restricted by the City in order to avoid relocation issues, but are still subject to the tax credit program rules. CMR: 194:99 Page 3 of 7 Similar to the Sheridan project, this project is expected to produce significant cash flow either with the Section 8 rent revenue or the maximum rents allowed by the tax credit program and the City’s regulatory agreement. This excess cash flow, after payment of operating expenses and debt service on the bond loan, is expected to be over $300,000 annually and will be used to pay the annual land lease rent payments owed by the Partnership to MPHC. The City’s $900,000 loan to MPHC will be repayable from these land lease revenues. However, the City has agreed to defer repayment of this loan until the rent reserve funds described below have been fully funded, which is projected to be in six and one-half years or by the end of 2005. Thereafter, excess cash flow would begin to repay the interest and principal on the loan. The terms of the note provide that excess cash flow will be split between the City and MPHC with the first $95,000, plus 50 percent of the amount over $95,000, being paid to the City to repay interest and then principal of the loan. The City’s loan could be fully repaid within five years or by the end of 2010. Payments on the $100,000 City loan to the Partnership are fully deferred until sale, transfer or refinancing of the project or the end of the loan’s 40-year term. Because there is no long term assurance of continued Section 8 assistance, a plan has been developed by MPHC, and approved by the bond.underwriter, to utilize the excess cash flow produced by the project to build up special reserve funds which would be used to cover operating losses the project would experience should HUD terminate the Section 8 program. By using the reserve funds to cover the expected operating losses during the transition period, the owner will be able to allow the tenants formerly assisted by Section 8 (whose incomes are typically extremely low) to remain in place at affordable rents. The majority of the Section 8 tenants cannot afford to pay more than $300 per month in rent. By comparison, monthly rents for low-income households under the tax credit rules are currently $909 per month for a one-bedroom unit. The provision of the reserve funds will allow the project to gradually transition to occupancy by households able to afford the rents permitted by the tax credit program through normal turnover. Once enough units have transitioned from occupancy by former Section 8 tenants to tax credit tenants so that the project’s revenues can cover operating expenses, replacement reserve deposits and debt service on the bond loan, then the rent reserve requirement terminates and any remaining unused fuiads will be disbursed to MPHC. Altemative scenarios were analyzed to.estimate the amount of funds necessary for operating subsidies during the transition period using assumptions about turnover rates, the estimated final interest rate on the bond loan, operating dosts, rent paying ability of the Section 8 tenants and other variables. The rent.reserve amount required as a condition of the bond financing will be in the range of $1.4 to $1.7 million. MPHC is still negotiating the exact amount, but it will be set prior to closing. In order to provide additional security for the project and the Section 8 tenants in the event of a more costly transition scenario, MPHC has agreed to the City’s request to fund and maintain a supplemental reserve of an additional $700,000 for a period of up to 15 years. With this additional reserve, the total rent reserves CMR: 194:99 Page 4 of 7 come closer to a worst case figure, however, there can be no guarantee that all Section 8 tenants.will be able to continue to live at the project for as long as they choose without some increases in rent following a termination of the Section 8 assistance program. RESOURCE IMPACT The total amount of the City’s two loans for the project is $1,000,000, as authorized by Budget Amendment Ordinance No. 4551, adopted by Council on March 15, 1999. The City’s loans will be funded on an interim basis from the following sources: Residential Housing In-Lieu Fund Inter fund Loan from the Commercial HoUsing In-Lieu Fund to the Residential Fund Total City Loans $275,000 $725,000 $1,000,000 The decision on the permanent funding components, including the amount of CDBG funds, will be made by Council on May 10 at the public hearing on the 1999-00 CDBG Action Plan and budget. Any CDBG funds allocated by Council for the project will be used to reimburse the Commercial Housing In-Lieu Fund for a portion of the $725,000 interfund loan. CDBG funds will not actually be available to the City until after the execution of the CDBG grant agreement with HUD, probably in late July. As discussed in CMR 172:99, staff recommends that $658,550 in FY 1999-00 CDBG funds be allocated to the Palo Alto Gardens project. The difference between the $725,000 interim loan from the Commercial Housing In-Lieu Fund and the CDBG allocation for the project will be repaid from outstanding fees due to the Residential Housing In-Lieu Fund from approved projects that will be completed during the next year. The interfund loan is expected to be completely repaid by the end of FY 1999-00. The total project costs for acquisition and rehabilitation are approximately $16.7 million or about $107,200 per unit. The City loans represents about six percent of the project’s total budget. The per Unit costs are lower than similar projects such as the Sheridan Apartments and Arastradero Park due to such factors as the cost efficiencies that can be achieved in larger real estate transactions, the physical condition of the buildings and the use of 60 percent of median income rents for underwriting the bond loan. The project budget and sources of funding are shown in .summary format as Attachment A. POLICY IMPLICATIONS This report does not represent any change to existing City policies and implements previous Council direction supporting the preservation of the Palo Alto Gardens Apartments through the acquisition sponsored by MPHC. TIMELINE On March 10, 1999, the State awarded a bond allocation for the project. The bonds must be issued and the purchase completed within 90 days of March 10th or the bond allocation will CMR: 194:99 Page 5 of 7 be lost. However, under the terms of its purchase contract, MPHC must acquire the property by May 31, 1999. The agreement with the tax credit investor also requires that MPHC proceed with the rehabilitation immediately after acquisition. The rehabilitation work will take approximately eight months and is planned for completion in December 1999. The major steps with key dates are summarized below: *Planned date to acquire property *Start rehabilitation work *Council decision on amount of CDBG funds for project .Purchase contract deadline to acquire property o Complete rehabilitation *Finalize cost audit and reporting April 29 May 1 May 10 May 31 December 1999 January 2000 ENVIRONMENTAL REVIEW The provision of financial assistance for the acquisition of the project is categorically exempt under Section 15301 of the California Environmental Quality Act (CEQA). Staff has determined that the provision Federal CDBG for the project is categorically excluded under Section 58.35 (a)(5) of the National Environmental Policy Act (NEPA) regulations. ATTACHMENTS Attachment A: Palo Alto Gardens Apartments Sources and Uses of Funds Budget Attachment B:Loan Agreement Between the City of Palo Alto and the Mid-Peninsula Housing Coalition and attached form of Promissory Note, Deed of Trust and Security Agreement Attachment C:Loan Agreement Between the City of Palo Alto and the MP Palo Alto Gardens Associates Limited Partnership with attached form of Promissory Note, Deed of Trust and Regulatory Agreement Prepared By: Catherine Siegel, Housing Coordinator DEPARTMENT HEAD REVIEW: Go Director of Planning and Community Environment CITY ~ON Assistant City Manager CMR: 194:99 Page 6 of 7 Mid-Peninsula Housing Coalition CDBG Citizen Advisory Committee Palo Alto Gardens Tenants Association CMR: 194:99 Page 7 of 7 Attachment A Palo Alto Gardens Apartments Combined Sources and Uses of Funds and Development Budget For Land and Improvements Sources of Permanent Funding ABAG Tax-Exempt Bond Funded Loan; 40 years at 5.50% (estimated) Transamerica Corporation; 4% Federal Housing Tax Credit Equity MPHC: Short-term developer fee loan MPHC: Developer equity City Land Loan: 40 years at 3.0% interest City Improvements Loan: 40 years at 3.0% interest $11,435,000 3,778,367 500,000 7,819 900,000 100,000 TOTAL SOURCES OF FUNDING $16,721,186 Uses of Permanent Funding Purchase Price Allocated to Land Purchase Price Allocated to Improvements & Fixtures Rehabilitation Construction & Contingency Construction Related Costs Permanent Financing, Tax Credits Other Transaction & Miscellaneous Costs Debt Service Reserve Fund Developer Fee $1,640,000 11,360,000 1,450,000 102,500 481,420 140,735 742,928 803,603 TOTAL USES OF FUNDS $16,721,186 Attachment B AGREEMENT BETWEEN THE CITY OF PALO ALTO AND MID-PENINSULA HOUSING COALITION TO LEND FUNDS FOR THE ACQUISITION OF LAND AT 648 SAN ANTONIO ROAD (PALO ALTO GARDENS APARTMENTS) THIS AGREEMENT ("Agreement") is made and entered into on April __, 1999 by and between the CITY OF PALO ALTO, a chartered city organized and existing under the constitution and laws of the State of California ("City"), and MID-PENINSULA HOUSING COALITION, a corporation organized and existing under the Nonprofit Corporation Law of the State of California, with offices at 658 Bair Island Road, Suite 300, Redwood City, California 94063 ("MPHC"), with reference to the following facts: WHEREAS, MPHC intends to purchase the land (but not the improvements thereon) located at 648 San Antonio Road, Palo Alto, Santa Clara County, California, and more particularly described on Exhibit "A" (the "Land"); WHEREAS, MP Palo Alto Gardens Associates, a California Limited Partnership (the "Partnership"), intends to purchase the improvements located on the Land containing 156 units of affordable housing (the "Improvements"); WHEREAS, following the acquisition of the Land, MPHC intends to lease the Land to the Partnership pursuant to a long-term land lease to facilitate the Partnership’s operation of the Improvements as an affordable rental housing project for low income households; the Improvements and the leasehold estate in the Land are sometimes referred to herein collectively as the "Property"; WHEREAS, the preservation of affordable rental housing occupied by very low income and low income households receiving federally funded rental assistance is an objective of the City’s Consolidated Plan and the Housing Element of the City’s Comprehensive Plan, and the Property has been specifically identified as a priority for preservation; WHEREAS, on March 15, 1998, the City Council adopted an amendment to the 1998-1999 Community Development Block Grant CCDBG") Annual Action Plan to add the acquisition and rehabilitation of the Property as a priority project for the use of CDBG housing development funds; and WHEREAS, the expenditure of funds for the acquisition of land for rental housing for low income households is an eligible activity under the CDBG program regulations; and WHEREAS, MPHC has applied to the City for a loan of $900,000 to assist with the cost of acquiring the Land; and ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 WHEREAS, on March 15, 1999, the City Council adopted Budget Amendment Ordinance No. 4551, appropriating $1,000,000 in City Housing Reserve Funds for the acquisition of the Property, of which amount $900,000 is for the acquisition of the Land; WHEREAS, the City is willing to make a loan of $900,000 to MPHC, provided thatMPHC will in turn concurrently acquire the Land and lease the Land to the Partnership and the Partnership will acquire and rehabilitate the Improvements and operate the Property as an affordable rental housing project for low income households; WHEREAS, the City intends initially to fund the loan to MPHC~ on an interim basis with funds from the City’s Housing Reserve Fund, with such funds to be replaced in part by CDBG funds; NOW, THEREFORE, in consideration of the following covenants, agreements, terms and conditions, the parties to this Agreement agree: SECTION 1 - DEFINITIONS The following terms as used in this Agreement shall have the respective meanings assigned to them in this Section 1, unless the context clearly indicates otherwise: "Account Institution" means the financial institution where the City Affordability Reserve Account has been established. "Additional Reserve Requirement" has the meaning set forth in the Indenture. "Agreement" means this "Agreement between the City of Palo Alto and Mid- Peninsula Housing Coalition to Lend Funds for the Acquisition of Land at 648 San Antonio Road (Palo Alto Gardens Apartments)." "Bonds" means ABAG Finance Authority for Nonprofit Corporations Multifamily Housing Revenue Bonds (Palo Alto Gardens Apartments), Series 1999A, in the approximate principal amount of $11,435,000, the proceeds of which are to be loaned to the Partnership to finance the acquisition of the Improvements by the Partnership; "Bond Deed of Trust" means a deed of trust on the Land, the Improvements and the leasehold estate in the Land in favor of Issuer, and assigned to Trustee, securing the obligation of Partnership to repay the loan of the proceeds of the Bonds. "CDBG" means the federal Community Development Block Grant Program, of which the City is an entitlement jurisdiction. ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 2 "City" means the City of Palo Alto, a chartered city organized and existing under the constitution and laws of the State of California. "City Affordability Reserve Account" means a segregated interest-bearing account established in MPHC’s name at a financial institution satisfactory to City, as further described in Section 5 of this Agreement. "City Reserve Requirement" means $700,000. "Deed of Trust" means the deed of trust granting City a lien on the Land securing payment of the Note, in form attached as Exhibit "C". "Former Section 8 Assisted Household" means a Very Low-Income Household living at the Property that had been receiving Section 8 Assistance while living at the Property, but is no longer receiving Section 8 Assistance from any Section 8 Assistance Program (or, in the case of reduction in the amounts provided by Section 8 Assistance, such a household that is receiving a reduced amount of Section 8 Assistance) due to a Termination of Section 8. "Ground Lease" means that certain ground lease of the Land between MPHC as lessor and the Partnership as lessee pursuant to which MPHC leases the Land to the Partnership at an annual rent of not less than $265,705 for a term of 60 years. "Ground Rent Payments" means payments of ground rent under the Ground Lease received by MPHC. "HUD" means the United States Department of Housing and Urban Development. "Indenture" means the Indenture of Trust entered into between Issuer and Trustee in connection with the issuance of the Bonds. "Issuer" means ABAG Finance Authority for Nonprofit Corporations, a joint exercise of powers authority organized and existing under the laws of the State of California. "Land" means the land (excluding the improvements thereon) commonly known as 648 San Antonio Road, Palo Alto, California, the legal description of which is set forth in Exhibit "A". "Land Lease, Affordability and Operating Reserve Fund" has the meaning set forth in the Indenture. "Loan Proceeds" means the sum of $900,000.00 to be advanced to MPHC in accordance with the terms and conditions of this Agreement at the time of the acquisition of the Land by MPHC. ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 3 "MPHC" means Mid-Peninsula Housing Coalition, a corporation duly organized and existing under the Nonprofit Corporation Law of the State of California. "MV Central" means MV Central Park Apartments, Inc., a California nonprofit public benefit corporation that is the general partner of the Partnership. "MP Preservation" means MP Preservation, Inc., a California nonprofit public benefit corporation. "MP Rent Reserve Fund" has the meaning set forth in the Indenture. "Note" means the promissory note in principal amount of $900,000 made by MPHC in favor of City, the form of which is attached hereto as Exhibit "B". "Notice of Security Interest" means a notice of security interest in the form attached hereto as Exhibit "E". "Partnership" means MP Palo Alto Gardens Associates, a California Limited Partnership, and its successors and assigns. "Property" has the meaning set forth in the Recitals to this Agreement. "Purchase Option" means the Purchase Option and Right of First Refusal Agreement between MPHC and Partnership pursuant to which MPHC has the right to purchase the Property from the Partnership under certain circumstances. "Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive Covenants for Palo Alto Gardens Apartments of even date herewith between the City and the Partnership. "Security Agreement" means a security agreement in form attached as Exhibit "D" granting the City a security interest in the funds in the City Affordability Reserve Account to secure payment of the Note and MPHC’s performance under this Agreement. amended. "Section 8" means Section 8 of the United States Housing Act of 1937, as "Section 8 Assistance" means rental assistance on behalf of households living at the Property provided pursuant to Section 8, whether indirectly pursuant to a Section 8 Housing Assistance Program Contract, or directly pursuant to tenant-based Section 8 vouchers and certificates. ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 "Section 8 Assisted Household" means a household living at the Project that is receiving Section 8 Assistance from any Section 8 Assistance Program. "Termination of Section 8" means the modification, expiration or other termination of a Section 8 Assistance Program which results in a reduction of the Property’s operating revenues such that the Property’s Project Revenues (as that term is used in the Regulatory Agreement) are insufficient to pay the reasonable and necessary expenses of operation, maintenance and repair of the Property, debt service and other required expenses identified in the Indenture. "Trustee" means U.S. Bank Trust, National Association. "Trustee-Administered Funds" means the MP Rent Reserve Fund and the Land Lease, Affordability and Operating Reserve Fund. "Very Low-Income Household" shall have the meaning set forth in the Regulatory Agreement. SECTION 2 - TERM OF AGREEMENT " 2.1 Term The term of this Agreement shall commence on the date of its execution by the parties, and shall remain in full force and effect for 40 years thereafter, unless earlier terminated as provided herein. SECTION 3 - LOAN OF FUNDS 3.1 Loan Amount 3.1.1 Subject to the terms and conditions of this Agreement, City shall advance to MPHC the sum of Nine Hundred Thousand and 00/100 Dollars ($900,000.00), to be used in accordance with the terms,’ covenants, provisions and conditions of this Agreement. MPHC shall execute and deliver a promissory note in favor of City (the "Note") in the form attached as Exhibit "B". The Note shall be secured by a Deed of Trust for the benefit of City in the form attached as Exhibit "C" and a Security Agreement in favor of City in the form attached as Exhibit "D". 3.1.2 If close of escrow for the acquisition of the Land by MPHC, and the Improvements by the Partnership, have not both occurred on or before June 15, 1999, the City will A:\I41489.WPD April 5, 1999 5 have no further obligation to fund the Loan, and this Agreement will be of no further force or effect. 3.2 Disbursement of Loan Proceeds MPHC has opened an escrow for the acquisition of the Land with First American Title Guaranty Company ("Title Company"), 1737 North First Street, San Jose, California 95112 under escrow number 515410 ("Escrow"). MPHC hereby irrevocably requests and directs City to deposit the Loan Proceeds directly in the Escrow, and City agrees that it will deposit the Loan Proceeds in Escrow prior to the acquisition of the Land by MPHC, together with instructions directing the Title Company that the Loan Proceeds shall only be disbursed concurrently with transfer of title to the Land to MPHC, provided that the Title Company is in a position to issue the policy of title insurance described in Section 3.3 below, and all of the requirements set forth in Section 3.4 have been satisfied. The Loan Proceeds delivered to the Escrow represent a portion of the approximately $1,674,056 purchase price of the Land; MPHC will deposit funds from other sources for the balance of the purchase price and closing costs. MPHC represents and warrants to City that its costs of acquiring the Land, and its sources of funds therefor, are substantially as set forth on Exhibit "F" attached hereto. 3.3 Title Insurance Concurrently with the close of Escrow, the Title Company shall issue an ALTA Extended Coverage Lenders Policy of title insurance, or other form of title insurance acceptable to City, for an amount not less than the actual purchase price of the Land, and insuring against any title defects except those expressly approved in writing by the City. The policy will insure MPHC’s right, title and interest in the Land and the lien of the Deed of Trust thereon, subordinate to no other liens of deeds of trust, mortgages, or other monetary encumbrances, with the exception of (a) a lien for property taxes and assessments not yet delinquent, and (b) the lien of the Bond Deed of Trust. 3.4 Additional Conditions to Disbursement City; In addition, the Loan Proceeds will not be disbursed until all of the following conditions have occurred: (a) MPHC has executed and delivered the Note and the Security Agreement to (b) -MPHC has executed and filed a financing statement on form UCC-1 with the office of the Secretary of State of California, and MPHC and the Account Institution have executed and delivered to City the Notice of Security Int,erest; (c) MPHC has executed and deposited the Deed of Trust in escrow; ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 6 (d) Title Company has recorded the Deed of Trust in the Official Records of Santa Clara County, and has issued the policy of title insurance described in Section 3.3 above. (e)The Partnership has acquired fee title to the Improvements; (f)MPHC and the Partnership have entered into the Ground Lease; (g) The Partnership has entered into a Regulatory Agreement governing the Improvements on terms satisfactory to the City in its sole discretion; and (h) Transamerica Occidental Life Insurance Company has executed and delivered a binding Standby Funding Agreement pursuant to which it is obligated to pay up to the Additional Reserve Requirement in the event of the Termination of Section 8, the terms and conditions of which shall be satisfactory to City. SECTION 4 - COVENANTS AND CONDITIONS 4.1 General As express conditions of receiving the loan of $900,000 in funds from City, MPHC agrees to enter into the Ground Lease with the Partnership and to cause the Partnership to rehabilitate or cause to be rehabilitated, the Property, in accordance with all applicable requirements and regulations of HUD and the CDBG Program, including those HUD regulations set forth in Part 570 of Title 24 of the Code of Federal Regulations ("CFR"), as amended. 4.2 Records and Reports MPHC shall maintain on a current basis complete records, including books of original entry, source documents supporting accounting transactions, service records, a general ledger, canceled checks, time sheets, and related documents and records to assure proper accounting of funds and performance of the terms of this Agreement. MPHC shall furnish any and all information and reports which may be required by City and/or HUD in connection with this Agreement. MPHC shall further permit access to its books, records and accounts by the representatives and employees of City and HUD during regular business hours, for the purpose of investigation or audit to ascertain compliance with all applicable laws, regulations, rules and orders and for the purpose of evaluating and monitoring MPHC’s compliance with the provisions of this Agreement. MPHC shall cause all such records to be retained by the Partnership and made available to City and HUD upon request for review or audit for a period of at least five (5) years following the expiration or termination of this Agreement. ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 7 4.3 Financial Audits ’ MPHC shall provide City, during the term of this Agreement, with copies of audited financial statements of MPHC, including any management letter comments on the adequacy of internal or operational controls, within one hundred fifty (150) days after the close of each fiscal year of MPHC. The audit covering the fiscal year in which the loan is provided to MPHC shall be conducted in accordance with OMB Circular A-133, as amended (implemented at 24 CFR Part 45). City reserves the right, during the term of this Agreement, to audit the records of MPHC, including the financial records supporting the aforementioned financial statements and other records and documents pertaining to the operations of MPHC. 4.4 Federal Assurances - CDBG Funds MPHC shall comply with the additional terms and conditions of this Agreement and the federal assurances as set forth in Exhibit "G". 4.5 Insurance MPHC shall obtain and maintain during the term of this Agreement, at the sole cost and expense of MPHC, insurance provided by responsible companies authorized to engage in the offering of insurance services in California in such amounts and against such risks as shall be satisfactory to City’s risk manager, including, without limitation, worker’s compensation, employer’s liability, commercial general liability, comprehensive automobile liability, personal injury and property damage insurance, as set forth in Exhibit "H", as appropriate, insuring against all liability of MPHC and its partners, directors, officers, employees, agents, and representatives arising out of or in connection with the acquisition and ownership of the Land or MPHC’s performance or nonperformance under this Agreement. 4.6 Conflict of Interest MPHC covenants that it shall comply with the provisions of 24 CFR 570.611, as amended, concerning conflicts of interest. Specifically, except for the use of CDBG funds to pay .salaries and other related administrative or personnel costs, no person who is an employee, agent, consultant, officer, or official of MPHC who exercises or has exercised any functions or responsibilities concerning the activities under this Agreement, or who is in a position to participate in a decision making process or gain inside information with regard to such activities, may obtain a personal or financial interest or benefit from such activity, or have an interest in any contract, subcontract, or agreement with respect thereto, or the proceeds thereunder, either for him or herself or for those with whom he or she has family or business ties, during his or her tenure or for one year thereafter. MPHC further covenants that it presently has no interest and shall not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 8 with the performance of the services hereunder. MPHC also covenants that, inthe performance of this Agreement, no subcontractor or person having such interest shall be employed by MPHC. In addition, MPHC certifies that no one who has or will have any financial interest under this Agreement is an officer or employee of City. 4.7 Assignment This Agreement shall not be assigned by MPHC without the express prior written consent of the City, in its sole and absolute discretion. Any assignment or attempted assignment shall be void and, at the sole discretion of the City, shall be deemed a material default of this Agreement by MPHC, and the outstanding balance of the Note may be declared by City to be immediately due and payable. 4.8 Corporate Status MPHC covenants and agrees to maintain its status as a corporation duly organized, validly existing, and in good standing under the Nonprofit Corporation Law of the State of California at all times during the term of this Agreement. 4.9 Breach In the event of any breach of this Section 4 or of any other covenant or restriction set forth in this Agreement, City shall have the right to exercise all of the rights and remedies available to it, and to maintain any action at. law or suits in equity or other real property proceedings, including, without limitation, specific performance, to enforce the covenants and restrictions and the curing of any breach or violation hereof. SECTION 5 - AFFORDABILITY RESERVES 5.1 Funding of Reserves MPHC wili cause the Partnership to make payments of ground rent to MPHC as and when required by the terms of the Ground Lease. MPHC agrees to use Ground Rent Payments for the following purposes only: (a) first, MPHC will deposit 100% of all Ground Rent Payments in a segregated interest-bearing account established in MPHC’s name with Trustee ( the "MP Rent Reserve Fund") until such time as the sum of the amounts in the MP Rent Reserve Fund and the Land Lease, Affordability and Operating Reserve Fund (collectively the "Trustee Administered Funds") equals the Additional Reserve Requirement; (b) thereafter, in the event the sum of the amounts in the Trustee-Administered Funds is at any time less than the Additional Reserve Requirement, MPHC will deposit 100% of all Ground Rent Payments in the MP Rent Reserve Fund until the sum of the amounts in the Trustee-Administered Funds has been restored to the Additional Reserve Requirement; (c) thereafter, MPHC will deposit 100% of all Ground Rent Payments in the City Affordability Reserve Account until such time as the amount in the City ::ODMA\PCDOCS\LOSANGELES\I41489\7 Apri! 5, 1999 9 Affordability Reserve Account equals ttie City Reserve Requirement; (d) thereafter, in the event the amount in the City Affordability Reserve Account is at any time less than the City Reserve Requirement, MPHC will deposit 100% of all Ground Rent Payments in the City Affordability Reserve Account until the amount in the City Affordability Reserve Account has been restored to the City Reserve Requirement; and (e) thereafter, MPHC will use Ground Rent payments to make payments to the City in accordance with the terms of the Note.until such time as the Note has been paid in full. 5.2 Purposes and Uses of Reserves The purpose of the Trustee-Administered Funds is to provide a source of funds in the event that, as a consequence of a Termination of Section 8, the gross revenues of the Property are not sufficient to pay the expenses of operating and maintaining the Property. The primary purpose of the City Affordability Reserve Account is to provide a further source of operating subsidies for the Property in the event of a Termination of Section 8, in addition to that provided by the Trustee-Administered Funds, to allow the Partnership to maintain ti~e rents charged to Former Section 8 Assisted Households and other Very Low-Income Households residing at the Property at levels sufficiently low so that these households could afford to continue to live at the Property. MPHC shall not have the right to use funds in the City Affordability Reserve Account for any other purpose without the prior written consent of the City, which the City may grant or deny in its sole discretion. However, upon written notification to City, MPHC may use the funds in the City Affordability Reserve Account to pay all or part of the purchase price of the Property in the event MPHC exercises its purchase rights under the Purchase Option. 5.3 Reserve Funds Administered by Trustee Funds in the MP Rent Reserve Fund will be administered by Trustee, together with the Land Lease, Affordability and Operating Reserve Fund, pursuant to the provisions of the Indenture; provided, however, in the event of the termination of the Indenture for any reason (including but not limited to payment in full or defeasance of the Bonds), MPHC agrees that, until such time as the City Affordability Reserve Account is terminated in accordance with Section 5.5 below, any funds in the MP Rent Reserve Fund (a) shall be held as reserves by a financial institution satisfactory to City, (b) shall be subject to a security interest in favor of City, and (c) shall be used only for the purposes for which funds in the City Affordability Reserve Account may be used, except with the prior written consent by City, which the City may grant or deny in its sole and absolute discretion. MPHC shall execute such security agreements and other instruments as are necessary to grant and perfect such security interest in favor of the City, including but not limited to a security agreement and a notice of security interest in the forms attached as Exhibits D and E (modified as appropriate to cover the MP Rent Reserve Fund and to reflect any changes in law as deemed appropriate by City), and a financing statement on form UCC-1. ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 I0 5.4 Maintenance of Ci.ty Affordabili .ty Reserve Account and Transfers of Funds to Partnership MPHC agrees that it will maintain in the City Affordability Reserve Account all Ground Rent Payments deposited therein, together with all interest earned thereon, and MPHC will not withdraw any funds from the City Affordability Reserve Account except for uses as expressly permitted herein. Notwithstanding the foregoing, MPHC may withdraw interest earnings from time to time, provided that the balance in the City Affordability Reserve Account is at no time reduced to less than the City Reserve Requirement. In the event of a Termination of Section 8, after the Trustee-Administered Funds have been fully disbursed, and/or to the extent the funds disbursed by the Trustee from the Trustee-Administered Funds are not sufficient, MPHC will make payments to the Partnership from the City Affordability Reserve Account in the amounts necessary to fund the operating losses of the Property in order to permit the Former Section 8 Assisted Households and other Very Low-Income Households to continue to live at the Property. MPHC will make such payments from the City Affordability Reserve Account (to the extent of funds in the City Affordability Reserve Account) until the Property is generating gross revenue (including any Section 8 Assistance payments) sufficient to pay the expenses of operating the Property (including debt service and other required expenses identified in the Indenture). 5.5 Termination of City Reserve Requirement and City Affordability Reserve Account Upon close of escrow for acquisition of the Property in the event of MPHC’s exercise of its option to purchase or its right of first refusal pursuant to the Purchase Option, or the expiration of the Purchase Option, whichever occurs first, the City Reserve Requirement will terminate; provided, however, the City Reserve Requirement will in no event terminate before December 13, 2013. To the extent that there are funds remaining in the City Affordability Reserve Fund, MPHC will pay to the City for application first to accrued, unpaid interest under the Note, and then to reduction of principal under the Note, an amount equal to the sum of $95,000 plus 50 % of the amount by which the amount in the City Affordability Reserve Account is greater than $95 ~000, and all funds remaining after such payment to the City shall be disbursed to MPHC; provided, however, if the Note has been paid in full then the City Affordability Reserve Account will be closed and the balance in the City Affordability Reserve Account shall be disbursed to MPHC. 5.6 Reporting Requirements Within one hundred twenty (120) days after the conclusion of each calendar year (and within ten (10) days after request by City at any other time, from time to time), MPHC will provide to City copies of records of all deposits and withdrawals from the City Affordability Reserve Account. If requested by the City, MPHC will cause each Account Institution to provide the City with duplicate copies of monthly or other periodic statements sent to MPHC; MPHC acknowledges and agrees that each Account Institution shall hold the funds in the City A:\I41489.WPD April 5, 1999 Affordability Reserve Account as a bailee for the City, and agrees to cause the Account Institution to execute any additional documents deemed necessary by the City to perfect the security interest of the City in the funds in the City Affordability Reserve Account, including but not limited to notice pursuant to Section 9302(1)(g)(ii) of the California Commercial Code. Without the limiting the generality of anything contained in Section 4.2 hereof, MPHC shall permit access to its books, records and accounts during normal business hours upon reasonable notice to representatives and employees of the City and HUD for the purpose of evaluating and monitoring MPHC’s compliance with the provisions of this Section 5.6. SECTION 6 - REPRESENTATIONS 6.1 Corporate Authority The making and performance by MPHC of this Agreement and the Note, Deed of Trust and Security Agreement have been duly authorized by all necessary corporate action and will not violate any provision of law or of its charter or bylaws, or result in the breach of or constitute a default or require any consent under any lien, charge, or encumbrance upon any property or assets of MPHC pursuant to any indenture or other agreement to which MPHC is a party or by which MPHC or its property may be bound. 6.2 Litigation There are no suits or proceedings pending or, to the knowledge of MPHC, threatened against or affecting MPHC which, if adversely determined, would have a material adverse effect on the financial condition or business of MPHC, and ’there are no proceedings pending or, to the knowledge of MPHC, threatened, against MPHC which would have a material adverse effect on the performance of this Agreement by MPHC. SECTION 7 - INDEMNITY MPHC agrees to protect, indemnify, defend and hold harmless City, its Council members, officers, agents and employees, from any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, caused by or arising out of MPHC’s or its officers’, agents’, subcontractors’ or employees’ negligent acts, errors or omissions, or willful misconduct, or conduct for which MPHC may be strictly liable in the performance of or failure to perform its obligations under this Agreement. SECTION 8 - DEFAULTS The City shall be permitted, upon written notice, to (a) immediately terminate its commitment to loan funds hereunder, and (b) declare the principal amount of the Note and all accrued unpaid interest thereon, to be immediately due and payable, whereupon the same shall ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 12 become immediately due and paya.ble, if any of the following events of default have occurred and have not been remedied: 8.1 MPHC makes a representation in this Agreement which shall prove to have been false in any material respect when made; or 8.2 MPHC shall default in the payment, when due, of any principal or interest under the Note or any other sums payable by MPHC under this Agreement; subject, however, to the provisions for notice and opportunity to cure set forth in Section 12 of the Note; or 8.3 MPHC shall default for a period of thirty (30) days (or if such default cannot be cured within 30 days despite MPHC’s prompt commencement and diligent prosecution of cure upon receiving notice, then such period shall be extended, but in no event beyond 90 days after notice) in the performance of any other non-financial obligation to be performed by MPHC under this Agreement; or 8.4 MPHC shall apply for or consent to the appointment of a receiver, trustee, or liquidator, or is unable, or admits in writing its inability to pay its debts as they fall due, or makes a general assignment for the benefit of its creditors, or is adjudicated a bankrupt or insolvent, or files a voluntary petition in bankruptcy; or 8.5 MPHC is subjected to the entry of an order, decree, or judgment approving the reorganization of MPHC, and such order, decree, or judgment is unstayed for a period of more than forty-five (45) days, or such period as may be permitted by law; 8.6 MV Central ceases to be the sole general partner of the Partnership, unless (a) MP Preservation succeeds MV Central as sole general partner of the Partnership, or (b) MV Central is removed by the limited partner of the Partnership as permitted by its limited partnership agreement and is replaced by a sole general partner satisfactory to City; or 8.7 MP Preservation ceases to be the sole general partner of the Partnership after succeeding MV Central as sole general partner of the Partnership, unless MP Preservation is removed by the limited partner of Partnership as permitted by its limited partnership agreement and replaced by a sole general partner satisfactory to City; or 8.8 MPHC amends the Ground Lease in a way that reduces the amount of rent payable thereunder, or in any other way delays the time when rent is required to be paid thereunder, without the written consent of City. ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 13 SECTION 9 - NOTICES Any notice which may be or is required to be given under this Agreement shall be deemed given on the second day following the date on which the same has been mailed by first class mail, postage prepaid, addressed as follows: If to City:City of Palo Alto 250 Hamilton Avenue Palo Alto, CA 94301 Attn: City Clerk With a copy to:Director of Planning & Community Environment City of Palo Alto 250 Hamilton Avenue Palo Alto, CA 94301 If to MPHC:Mid-Peninsula Housing Coalition 658 Bair Island Road, Suite 300 Redwood City, CA 94063 Attn: Executive Director SECTION 10 - MISCELLANEOUS 10.1 Neither the failure nor the delay on the part of the City to exercise any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. 10.2 Nothing contained in this Agreement is intended to, or shall be construed in any manner, as creating or establishing the relationship of employer and employee between the parties. MPHC shall at all times remain an independent contractor with respect to the services to be rendered or work to be performed, or both, under this Agreement. 10.3 The covenants, agreements, terms, and conditions of this Agreement shall inure to and be binding on the successors and assigns of the parties. Any provision of this Agreement which is characterized as a covenant or a condition shall be deemed both a covenant and a condition. 10.4 Any amendment to this Agreement shall be binding upon the parties, provided such amendment is set forth in a writing signed by the party to be charged. ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 14 10.5 This Agreement shall not be construed or deemed to be an agreement for the benefit of any third party, and no third party shall have any claim or right of action hereunder for any cause whatsoever. 10.6 If any provision of this Agreement shall be determined by a court of competent jurisdiction to be invalid, illegal, void, or unenforceable in any respect, the validity of all other provisions herein shall remain in full force and effect. 10.7 MPHC shall lack any authority or power to pledge the credit of the City or incur any obligation in the name of the City. 10.8 This Agreement constitutes the entire agreement of the parties concerning its subject matter, and there are no other oral or written agreements of the parties not incorporated in this Agreement. 10.9 The Agreement, the Note, and all related documents contemplated hereunder shall be deemed to be a contract made under the laws of the State of California, and for the purposes hereof shall be governed and construed by and in accordance with the laws of the State of California. 10.10 All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules which may, from time to time, be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and shall be deemed to be part of this Agreement. 10.11 This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. 10.12 The paragraph headings are not a part of this Agreement and shall have no effect upon the construction or interpretation of any part of this Agreement. ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 15 10.13 Each party and its counsel have reviewed this Agreement. Accordingly, the normal role of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the construction and interpretation hereof. IN WITNESS WHEREOF, the parties have executed this Agreement in Palo Alto, California on the date first above written. CITY OF PALO ALTO Mayor MID-PENINSULA HOUSING COALITION, a California non-profit public benefit corporation Name: Title: ATTEST:By: City Clerk Name: Title: SIGNATURES TO BE NOTARIZED APPROVED AS TO FORM: City Attorney APPROVED: City Manager Director of Administrative Services Director of Planning and Community Environment Insurance Review ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 I 6 STATE OF CALIFORNIA ) ) ) On ~ p ;, \ "q, ’~c[ q 7 , before me, the undersigned, a notary public in and for said County, personally appeared ~-¢>,-~,, M.),x;~ 9 tn ~:4t , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Comm. # I162538 NOTARY PUBLIC- CALIFORNIA San MaZeo CountyMy Comm. Expires Nov. 22, 2001 STATE OF CALIFORNIA ) ) COUNTY OF ~o,~ ~’k{*~O ) On ~,O~r~k -~,~/qq?., before me, the undersigned, a notary public in and for said County, persor~ally appeared ~,-~"~ C Co a K. , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 17 STATE OF CALIFORNIA COUNTY OF ) ) ) On , before me, the undersigned, a notary public in and for said County, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 ATTACHMENTS: Exhibit A: Exhibit B: Exhibit C: Exhibit D: Exhibit E: Exhibit F: Exhibit G: Exhibit H: Description of Property Form of Note Form of Deed of Trust Form of Security Agreement Form of Notice of Security Interest Land Acquisition Budget and Sources of Funds Federal Assurances With Respect to CDBG Funds Insurance Requirements ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 19 EXHIBIT A DESCRIPTION OF LAND PARCEL ONE: Real property in the City of Palo Alto, County of Santa Clara, State of California, described as follows: Parcel 1, as the same is delineated and so designated on the Parcel Map recorded July 7, 1972 in Book 304 of Maps, at page 21, Santa Clara County Records. APN 147-09-066 and 147-09-067 PARCEL TWO: All that certain real property situate in the City of Mountain View, County of Santa Clara, State of California, described as follows: All of Lots 1 and 2, in Block 1, as shown upon that certain Map entitled, "Tract No. 1215 Fairview", which Map was filed for record in the office of the Recorder of the County of Santa Clara, State of California on September 29, 1953 in Book 46 of Maps, at pages 10 and 11. APN 147-10-061 ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 20 EXHIBIT B FORM OF NOTE PROMISSORY NOTE (RESIDENTIAL HOUSING IN-LIEU FUNDS/ COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS) SECURED BY DEED OF TRUST AND ASSIGNMENT OF RENTS, AND ASSIGNMENT OF CITY AFFORDABILITY RESERVE ACCOUNT $ 900,000.00 Date: Palo Alto, California FOR VALUE RECEIVED, the undersigned, MID-PENINSULA HOUSING COALITION, a California non-profit public benefit corporation ("Maker"), hereby promises to pay to the CITY OF PALO ALTO ("Holder"), or order, at its Office of Revenue Collections, 250 Hamilton Avenue, Palo Alto, California, or at such other place as may be designated, in writing, by the Holder, the principal sum of Nine Hundred Thousand and 00/100 Dollars ($900,000.00) ("Loan Amount"), pursuant to the terms and conditions set forth in this Promissory Note ("Note"). The principal amount of this Note shall bear simple interest at the rate of three percent (3 %) per annum (the "Applicable Interest Rate"). ADDITIONAL TERMS AND CONDITIONS 1. This Note is made in connection with the agreement between Holder and Maker entitled "Agreement between the City of Palo Alto and Mid-Peninsula Housing Coalition to Lend Funds for the Acquisition of Land at 648 San Antonio Road" ("Loan Agreement"), pursuant to which Holder issued to Maker a portion of the funds used by Maker to acquire certain land (but not the improvements thereon) commonly known as 648 San Antonio Road, Palo Alto, California (the "Land"). Immediately following such acquisition, Maker will lease the Land to MP Palo Alto Gardens Associates, a California Limited Partnership of which MV Central Park Apartments, Inc., a California corporation affiliated with and controlled by Maker, is the general partner (the "Partnership") pursuant to a ground lease (the "Ground Lease"), and the Partnership will acquire, rehabilitate and operate on the Land a residential apartment project containing 155 affordable dwelling units and one manager’s unit (the "Project"). All terms, conditions, agreements and provisions, including the covenants, representations, and terms of default and remedies for default set forth in the Loan Agreement are incorporated herein by reference, and made a part hereof. 2. This Note evidences the obligation of the Maker to make full payment of the Loan Amount to the Holder, in accordance with the provisions of this Note and the Loan Agreement. Such funds are to be used solely by the Maker, together with funds obtained by Maker from other sources, to provide funding for the acquisition of the Land by Maker, as more fully described in the Loan Agreement. ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 3. This Note is secured by (a) a Deed of Trust and Assignment of Rents recorded against the Land (the "Deed Of Trust"), and (b) a security interest in the City Affordability Reserve Account that Maker is obligated to fund and maintain, as more particularly described in the Loan Agreement (the "City Affordability Reserve Account"), as set forth in the Security Agreement between Holder and Maker of even date herewith (the "Security Agreement"). 4. The term of this Note shall commence on the date set forth above, and, subject to the provisions of the Loan Agreement, shall expire or terminate on the date on which the Maker makes full payment of the principal sum of this Note. In no event shall full payment be made by the Maker later than forty (40) years from the date hereof. 5. Maker shall make a payment to Holder in the amount of the Annual Payment Amount (as defined below) on April 30 of each year (each April 30 being a "Payment Date") until such time as the entire amount of principal and interest hereunder has been paid in full. The Annual Payment Amount due on any Payment Date shall be based upon the amount of ground rent received by Maker under the Ground Lease for the last calendar year preceding the Payment Date (the "Measuring Year"), which is in turn based upon the amount of available surplus cash and the debt service coverage achieved by the Partnership for the Measuring Year. If the amount of ground rent received by Maker for a Measuring Year (provided that the Partnership was not in default by reason of nonpayment or underpayment of ground rent for such calendar year) is $95,000 or less, the Annual Payment Amount due on the following Payment Date will be equal to the total amount of ground rent received by Maker in respect of the Measuring Year; if the amount of ground rent received by Maker for a Measuring Year is greater than $95,000 (provided that the Partnership was not in default of its obligation to pay ground rent for such calendar year), the Annual Payment Amount will equal the sum of (a) $95,000 plus (b) 50% of the amount by which ground rent received by Maker for the Measuring Year exceeds $95,000. By way of example only, and not in limitation of the foregoing, if Partnership is obligated to pay and Maker receives ground rent for the year 2002 in the amount of $275,000, the Annual Payment Amount payable on April 30, 2003 will equal $185,000 ($95,000 plus 50% of $180,000). Notwithstanding the foregoing, in the event the Partnership is in default of its obligation to pay ground rent for any Measuring Year, the Annual Payment Amount will be based upon the total amount of the ground rent due for such Measuring Year, whether paid or unpaid in whole or in part, as if received in full by Maker. Notwithstanding anything in this Paragraph 5 to the contrary. Maker’s obligation to make payments of principal and interest to Holder shall be deferred until April 30 of the year following the calendar year during which the sum of the amounts in the MP Rent Reserve Fund, the Land Lease, Affordability and Operating Reserve Fund, and the City Affordability Reserve Account first equals the sum of the Additional Reserve Requirement and the City Reserve Requirement (as those terms are used in the Loan Agreement). Upon termination of the City Affordability Reserve Account, there will be immediately due and payable to Holder payment in the amount set forth in Section 5.5 of the Loan Agreement. Payments shall be credited first to any accrued but unpaid interest, then to current interest then due and owing, and then to principal. 6. The Maker shall deliver to the Holder within 150 days. of the close of each calendar year an annual audited financial statement. The Holder shall have the right during normal business hours upon reasonable notice to inspect and audit the Maker’s books and records concerning the A:\I41489.WPD April 5, 1999 2 obligation of the Partnership to pay ground rent under the Ground Lease. In the event any financial statement, or any inspection or audit of the Partnership’s books and records, discloses an underpayment of principal and/or interest hereunder, the amount underpaid will be due and payable within fifteen (15) days after demand therefor by the Holder. 7. At any time, and from time to time, the Maker may prepay to the Holder the principal sum of this Note, or any part thereof, without penalty. 8. The Maker and any other maker, co-maker, indorser, guarantor, and any other party to this Note (collectively, "Obligors"), and each of them: (i) waive notice of default (except as provided in Section 12), notice of acceleration, notice of nonpayment, presentment for payment, demand, protest, notice of demand, notice of protest, notice of nonpayment, and any other notice required to be given under the law to the Obligors; (ii) consent(s) to ~tny and all delays, extensions, renewals, or other modifications of this Note or waivers of any term hereof or release or discharge by the Holder of any of the Obligors or release, substitution, or failure to act by the Holder, from time to time, and agree(s) that no such action, failure to act, or failure to exercise any right or remedy on the part of the Holder shall in any manner affect or impair the obligations of any Obligor or be construed as a waiver by the Holder of, or otherwise affect, any of the Holder’s rights under this Note or the Loan Agreement, under any indorsement or guaranty of this Note; and (iii) (jointly and individually, if more than one) agree(s) to pay, on demand, any and all costs and expenses of collection of this Note or of any indorsement or any guaranty hereof, including attorney’s fees. No extension of time for payment of this Note or any portion thereof made by agreement of Holder with any person now or hereafter liable for the payment of this Note shall operate to release or discharge liability of Maker under this Note, either in whole or in part. 9. The pleading of any statute of limitations as a defense to any demand against the Maker is expressly waived by the Maker. 10. If any default is made hereunder, the Maker promises to pay the Holder’s reasonable attorneys’ fees and other related costs and expenses incurred by the Holder in connection with the enforcement of any rights of the Holder. The Holder’s right to such fees shall include, but not be limited to, its representation by staff attorneys of the Holder’s Office of the City Attorney, and such representation shall be valued at the customary and reasonable rates for private sector legal services. 11. The occurrence of any of the following shall constitute an event of default under this Note: (i) the Maker fails to pay any amount due hereunder within fifteen (15) days of its due date; or (ii) any other default by the Maker under this Note, or under the Deed of Trust, the Security Agreement, or the Loan Agreement after the expiration of any applicable cure period. Upon the occurrence of any event of default, or at any time thereafter, at the option of the Holder hereof, the entire unpaid principal and interest owing on this Note shall become immediately due and payable. This option may be exercised at any time following any such event, and the acceptance of one or more installments thereafter shall not constitute a waiver of such ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 3 option with respect to any subsequent event. The Holder’s failure in the exercise of any other right or remedy hereunder or under any agreement which secures the indebtedness or is related thereto shall not affect any right or remedy and no single or partial exercise of any such right to remedy shall preclude any further exercise thereof. If the outstanding unpaid principal balance of this Note is not paid within thirty (30) days of demand therefor, the Maker shall pay to the Holder in addition to interest at the Applicable Interest Rate,, interest equal to one percent (1%) of the unpaid principal amount, or the highest rate permitted by law, whichever is less, per calendar month, or fraction thereof. If this Note be reduced to judgment, such judgment shall bear the statutory interest rate on judgments. 12. The Holder shall not exercise any right or remedy provided for herein because of any default of the Maker unless, in the event of a monetary default, the Maker shall have failed to pay the outstanding sums within a period of thirty (30) calendar days after notice that payment was due. In the event of an uncured nonmonetary default, the Holder shall have first given written notice thereof to the Maker, and the Maker shall have failed to cure the nonmonetary default within a period of thirty (30) days after the giving of such notice of such default; provided that if the nonmonetary default cannot be cured within thirty (30) days and the Maker proceeds diligently and uses best efforts to cure such default until it shall be fully cured within no more than ninety (90) days after the giving of such notice, then the Holder shall not exercise any right or remedy provided for herein until such 90-day period shall expire; provided, however, the Holder shall not be required to give any such notice or allow any part of the grace period if the Maker shall have filed a petition in bankruptcy or for reorganization or a bill in equity or otherwise initiated proceedings for the appointment of a receiver of its assets, or if the Maker shall have made an assignment for the benefit of creditors, or if a receiver or trustee is appointed for the Maker and such appointment or such receivership is not terminated within forty-five (45) days of such appointment. With respect to any right to cure or cure period provided in this Section 12, performance of a cure by any affiliated entity or partner of the Maker shall have the same effect as would like performance by the Maker. 13. Any notice, demand, or other communication required hereunder shall not be deemed sufficiently given, unless sent by certified mail, postage prepaid, return receipt requested, or by.express delivery service or overnight courier service, to the principal office of the addressee, or at such other address as may be designated, in writing, from time to time: Holder:City of Palo Alto 250 Hamilton Avenue Palo Alto, California 94301 Attn: City Clerk Maker:Mid-Peninsula Housing Coalition 658 Bair Island Road, Suite 300 Redwood City, California 94063 Attn: Executive Director ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 4 The delivery shall be effective on the date shown on the delivery receipt or the date on which the delivery was refused. 14. This Note shall be nonrecourse against the Obligors. No judgment, or execution thereof, entered in any action, legal or equitable, on this Note shall be enforced directly against the Maker or any officer, director or employee of the Maker, but shall be enforced only against the collateral described in the Deed of Trust and the Security Agreement, and such other or further security as, from time to time, may be hypothecated for this Note. The foregoing limitation shall not be applicable in the event of (a)~fraud by the Maker or any material misrepresentation made by the Maker to the Holder in the Loan Agreement, this Note, the Deed of Trust, the Security Agreement, or any other document or instrument delivered in connection with the Loan, or (b) the sale or transfer or other conveyance or encumbrance of the Land, or any interest therein, without the Holder’s prior written consent, or (c) the sale or transfer or other conveyance or encumbrance of all or any part of the Partnership’s interest in the Project without the Holder’s prior written consent (except as expressly permitted under Section 8.6 or 8.7 of the Loan Agreement). Furthermore, the foregoing limitation shall not be applicable to the extent of any loss incurred by the Holder due to (a) misappropriation by the Maker or the Partnership of any rents (including, without limitation, the application of rents to other than operating expenses and debt service), security deposits, insurance or condemnation proceedings, or (b) the diversion or other misappropriation by Maker of any funds from the City Affordability Reserve Account. The Holder shall not in any way be prohibited from naming the Obligors, or any of them, or any person holding under or through them as parties to any actions, suit or other proceedings initiated by the Holder to foreclose or otherwise realize upon any other lien or security interest created under the Security Agreement, and further provided, however, that nothing in this Section 14 shall be deemed to prejudice the rights of the Holder to recover any funds or payments which were diverted or misappropriated by the Obligors, or any of them. 15. The covenants, agreements, terms, and conditions of this Note shall inure to, and shall be binding on, the successors and assigns of the Obligors. MID-PENINSULA HOUSING COALITION, a California non-profit public benefit corporation Name: .’:’/7~ d--~ Print :~/~ ~ #~c-~-,~7"/, .’~_%’ ~, ~(-¢_--. By: Title:107"¢ ~l(~"~t’-" ::ODMA\PCDOCS\LOSANGELES\I41489\7 April 5, 1999 5 EXHIBIT C RECORDING REQUESTED BY AND WHEN RECORDED, MAIL TO: City of Palo Alto Office of City Attorney 250 Hamilton Avenue Palo Alto, CA 94301 SPACE ABOVE THIS LINE FOR RECORDER’S USE DEED OF TRUST AND ASSIGNMENT OF RENTS (PALO ALTO GARDENS LAND LOAN) THIS DEED OF TRUST AND ASSIGNMENT OF RENTS made on , 1999, between MID-PENINSULA HOUSING COALITION, a California nonprofit public benefit corporation ("Trustor"), whose address is 658 Bait Island Road, Suite 300, Redwood City, California 94063, First American Title Guaranty Company, a California corporation ("Trustee"), whose address is 1737 North First Street, San Jose, California 95112, and THE CITY OF PALO ALTO ("Beneficiary"), whose address is 250 Hamilton Avenue, Palo Alto, California 94301, WITNESSETH: That Trustor IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS TO TRUSTEE IN TRUST, WITH POWER OF SALE, that real property and improvements in the City of Palo Alto, County of Santa Clara, State of California, described in Exhibit "A", attached hereto and made a part hereof by reference (~’Security" or "Property’;), TOGETHER WITH the r(nts, issues and profits thereof, SUBJECT, HOWEVER, to the right, power, and authority given to and conferred upon Beneficiary, by subdivision B of the fictitious deed of trust recorded in the office of the Recorder of the County of Santa Clara, in Book 5336 of Official Records, at Page 341, adopted and incorporated herein by reference and made a part hereof as if fully set forth herein, to collect and apply such rents, issues and profits, FOR THE PURPOSE OF SECURING payment of the indebtedness evidenced by that Promissory Note ("Note"), and any extensions or renewals thereof, in the principal amount of $900,000 executed by Trustor in favor of Beneficiary. TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR AGREES: 1. Fictitious Deed of Trust. By the execution and delivery of this Deed of Trust and the Note secured hereby, that the provisions of subdivisions A and B inclusive, of the fictitious deed of trust recorded in the office of the Recorder of the County of Santa Clara in Book 5336 of Official Records, at Page 341, hereby are adopted and incorporated herein and made a part hereof as fully as though set forth herein at length; that it will observe and perform said provisions; and that the references to property, obligations, and parties in said provisions shall be construed to refer to the property, obligations, and parties set forth in this Deed of Trust. 2. Prohibited Transfers. Trustor shall not, voluntarily or involuntarily or by operation of law, sell, transfer, lease, pledge, encumber, create a security interest in, or otherwise hypothecate or alienate all or any part of the Security, without Beneficiary’s prior written consent. The consent by Beneficiary to any sale, transfer, lease, pledge, encumbrance, creation of a security interest in, or other hypothecation of the Security shall not be deemed to constitute a novation or a consent to any further sale, transfer, lease, pledge, encumbrance, creation of a security interest in or other hypothecation. Beneficiary may, at its option, declare the indebtedness secured hereby immediately due and payable, without notice to Trustor or any other person or entity (except as provided herein), upon any such sale, transfer, lease, pledge, encumbrance, creation of a security interest in, or other hypothecation or alienation in violation hereof. Without the written consent of Beneficiary, no sale, transfer, lease, pledge, encumbrance, creation of a security interest in, or other hypothecation of the Security shall relieve or release Trustor from primary liability under this Deed of Trust or the Note, as the case may be. As used in this Section 2, the term "transfer" includes, without limitation, the following transactions: a.Any total or partial sale, assignment or conveyance, or creation of any trust or power, or any transfer in any other mode or form with respect to the Security or any part hereof or any interest herein, or any contract or agreement to do the same; b. The cumulative transfer of more than ten percent (10 %) of the capital stock, partnership profit and loss .interest, or other form of interest in Trustor; and assets of Trustor. Any merger, consolidation, sale or lease of all or substantially all of the 3. Due on Sale. In the event of default by Trustor under this Deed of Trust, or if the Property or any part thereof or any interest therein is sold, agreed to be sold, conveyed, alienated or refinanced by Trustor, or by the operation of law or otherwise, without the written consent of Beneficiary, all obligations secured by this instrument irrespective of the maturity dates expressed therein, at the option of Beneficiary hereof and without demand or notice shall immediately become due and payable. 4. Subordination. Beneficiary, for itself and its successors and assigns, covenants and agrees that all of its rights and powers under this Deed of Trust are subordinate and subject to the 2 rights of ABAG Finance Authority for Nonprofit Corporations under that certain Deed of Trust dated as of April 1, 1999 (the "Bond Deed of Trust"). Any default under the Bond Deed of Trust, or under any promissory note or other instrument secured thereby, shall constitute a default hereunder. 5. Notices. Trustor requests that a copy of any Notice of Default, and of any Notice of Sale hereunder, be mailed to it at its address hereinabove set forth, and that an additional copy of any such notice be mailed to the City of Palo Alto, Office of the City Clerk, 250 Hamilton Avenue, Fifth Floor, Palo Alto, California 94301. MID-PENINSULA HOUSING COALITION, a California non-profit public benefit corporation By: Name: Print: By: Name: Title: CERTIFICATE OF ACKNOWLEDGMENT (Civil Code § 1189) STATE OF CALIFORNIA COUNTY OF ) ) ) On , before me, the undersigned, a notary public in and for said County, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Notary Public in and for said County and State STATE OF CALIFORNIA COUNTY OF ) ) ) On , before me, the undersigned, a notary public in and for said County, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Notary Public in and for said County and State 4 EXHIBIT A Property Description for Palo Alto Gardens Apartments Palo Alto, California PARCEL ONE: Real property in the City of Palo Alto, County of Santa Clara, State of California, described as follows: Parcel 1, as the same is delineated and so designated on the Parcel Map recorded July 7, 1972 in Book 304 of Maps, at page 21, Santa Clara County Records. APN 147-09-066 and 147-09-067 PARCEL TWO: All that certain real property situate in the City of Mountain View, County of Santa Clara, State of California, described as follows: All of Lots 1 and 2; in Block 1, as shown upon that certain Map entitled, "Tract No. 1215 Fairview", which Map was filed for record in the office of the Recorder of the County of Santa Clara, State of California on September 29, 1953 in Book 46 of Maps, at pages 10 and 11. APN 147-10-061 ::ODMA\PCDOCS\LOSANGELES\ 146584\2 EXHIBIT D SECURITY AGREEMENT THIS SECURITY AGREEMENT ("Agreement"), is made and entered into as of the day of April m, 1999 by MID-PENINSULA HOUSING COALITION, a California nonprofit public benefit corporation ("Borrower"), for the benefit of THE CITY OF PALO ALTO ("Lender") with reference to the following facts: A. Borrower and Lender are the parties to an agreement of even date herewith entitled "Agreement Between the City of Palo Alto and Mid-Peninsula Housing Coalition to Lend Funds for the Acquisition of the Land at 648 San Antonio Road" (the "Loan Agreement"); B. As more particularly described in the Loan Agreement, Lender will lend to Borrower $900,000, the obligation to repay which is evidenced by a promissory note made by Borrower in principal amount of $900,000 of even date herewith (the "Note"); C. Pursuant to the Loan Agreement, Borrower has agreed to establish one or more segregated bank accounts with Citibank, N.A. ("Account Institution"), or with such other financial institutions as may be approved by Lender, and to deposit in such account or accounts funds to be used for the purpose of subsidizing rents of tenants of the Property in certain circumstances more particularly described in the Loan Agreement (collectively, the "Affordability Reserve Account"); D. Borrower hereby intends to grant to Lender a first priority security interest in the Affordability Reserve Account to secure Borrower’s obligations to Lender under the Note and the Loan Agreement. NOW, THEREFORE, to induce the Lender to make the loan to Borrower as contemplated under the Loan Agreement, and in consideration for the making of such loan, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. As used herein the term "Pledged Collateral" shall mean all right, title and interest of Borrower in and to the Affordability Reserve Account. 2.(a) As collateral security for the due payment and performance of all indebtedness and other liabilities and obligations, whether now existing or hereafter arising, of Borrower to Lender under or arising out of (i) this Agreement, and all instruments, agreements and documents, executed, issued and delivered pursuant to this Agreement, or (ii) the Note, including principal and interest thereon, or (iii) any subsequent promissory note by Borrower in favor of Lender that states that it is secured by the Pledged Collateral, or (iv) the Loan Agreement, and all instruments, agreements and documents, executed, issued and delivered pursuant thereto (all such indebtedness, liabilities and obligations described in (i), (ii), (iii) and (iv) above are hereinafter referred to collectively as the "Obligations"), Borrower hereby pledges and grants to Lender a first priority security interest in the Pledged Collateral. (b) All Pledged Collateral at any time delivered to the Lender shall be held by the Lender subject to the terms, covenants and conditions herein set forth. Neither the Lender, nor any member, manager, officer or employee of the Lender, shall be liable for any action taken or omitted to be taken by it or them relative to any of the Pledged Collateral except for its or their own gro.ss negligence or willful misconduct, and the Lender shall not be liable for any action or omission to act on the part of any agent appointed and selected by the Lender with reasonable care to act with respect to the Pledged Collateral (or any part thereof). The Lender shall be deemed to have exercised reasonable care in the custody and preservation of any Pledged Collateral if the Lender shall take such action for such purpose as Borrower may reasonably request in writing to the Lender, provided that the failure of the Lender to take any action requested by Borrower shall not, in and of itself, be deemed to constitute a failure on the part of the Lender to exercise reasonable care in respect of the custody and preservation of such Pledged Collateral or any part thereof. (c) As used herein, an "Event of Default" shall mean a default by Borrower in any of its Obligations (after any notice and/or opportunity to cure as may be provided in the agreement or other instrument giving rise to such Obligation); provided, however, that each of the following shall constitute a non-curable Event of Default hereunder: (i) the failure of Borrower to deposit funds in the Affordability Reserve Account as required by the Loan Agreement, or (ii) the use of funds in the Affordability Reserve Account for any purpose except as expressly permitted by the Loan Agreement. (d) . In the event any Event of Default shall occur and be continuing, the Lender shall have the right to require that any cash payable with respect to the Pledged Collateral be paid to the Lender, and applied as set forth in Paragraph 2(f) below; otherwise such payments may be received and retained by the Borrower. (e) In the event any Event of Default shall occur and be continuing, the Lender, without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of time and place of public or private sale, and the notice of repossession referred to below) to or upon any Borrower or any other person (all and each of which demands, advertisements and/or notices are, to the extent permitted by law, hereby expressly waived), may forthwith collect the Pledged Collateral not then in the possession of the Lender and sell the Pledged Collateral at public or private sale, at any exchange, broker’s board or at any of the Lender’s offices or elsewhere at such prices and on such terms as it or they may deem best, for cash or credit, with right to the Lender or any purchaser upon any such sale, whether public or private, to purchase, to the extent permitted by law, the Pledged Collateral so sold, free of any right or equity of redemption in the Borrower, which right or equity is hereby expressly waived and released to the extent permitted by law, and the Lender may be a purchaser -2- in such sale and the Lender (in its sole discretion) may apply the full unpaid principal amount of any of the Obligations against the purchase thereof. (f) The proceeds of any sale as aforesaid shall be applied in the order of priority indicated as follows: First, to the payment of all reasonable costs and expenses, fees, commissions and taxes at any time and from time to time incurred by the Lender under or in connection with the administration or enforcement of this Agreement, the Loan Agreement, or the Note (including, without limitation, the fees and expenses of counsel employed by the Lender in connection therewith); Second, to the payment of all interest at any time and from time to time owing by the Borrower under the Note; Third, to the payment of principal at any time and from time to time owing by the Borrower under the Note; Fourth, to the payment of (except such Obligations which shall have been paid pursuant to items First, Second and Third above) all other indebtedness and liabilities, whether absolute, fixed or contingent, at any time and from time to time owing by the Borrower under or in connection with the Note or any other obligation of Borrower to Lender, including, without limitation, all amounts at any time and from time to time owing by the Borrower to the Lender on account of fees, costs, commissions, expenses and taxes (including the actual fees and expenses of counsel); Proceeds"). Fifth, to the Borrower to the extent of any surplus proceeds ("Surplus (g) Unless otherwise required’by law, the Lender need not give more than ten (10) days" notice of the time and place of any public sale or of the time after which a private sale may take place and such notice shall be deemed to be reasonable notification of such matters. 3.(a) Borrower represents and warrants that: (i) This Agreement has been duly and validly authorized, executed and delivered by Borrower and, to the best knowledge of Borrower, constitutes the legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms except as enforcement may be limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights generally and by moratorium laws from time to time in effect and general equitable principles, whether applied by a court of equity or law; -3- (ii) Borrower is the direct beneficial owner of the Pledged Collateral hereby pledged; (iii) Borrower owns such Pledged Collateral free and clear of any pledge, mortgage, hypothecation, lien, charge, encumbrance or any security interest therein, except for the pledge and security interest granted to the Lender hereunder; (iv) This Agreement constitutes, creates and grants a valid first priority security interest in the Pledged Collateral hereby pledged by Borrower, subject to no prior security interest, lien, charge or encumbrance or to any agreement purporting to grant to any third party a security interest in the property or assets of such Borrower which would include the Pledged Collateral; (v) The pledge of the Pledged Collateral hereby pledged by Borrower does not violate any restriction on such transfer or encumbrance of such Pledged Collateral; and (vi) Borrower’s name and principal place of business are as indicated on the signature page hereof. Borrower shall notify Lender in writing of any change in its name or principal place of business not later than thirty days after the occurrence of any such change. (b) Borrower hereby covenants that, so long as the Obligations shall be outstanding and unpaid, in whole or in part, Borrower will not, without the prior written consent of the Lender, sell, convey or otherwise dispose (hereinafter, a "Transfer") of the Pledged Collateral or any interest therein, or create, incur or permit to exist any pledge, mortgage, lien, charge, encumbrance or any security interest whatsoever with respect to the Pledged Collateral other than that created hereby. (c)Borrower represents and warrants to Lender that it has established deposit account no. : with Account Institution as the Affordability Reserve Account, and covenants that it will not withdraw or transfer any funds from that account except in accordance with the provisions of the Loan Agreement, or establish any other Affordability Reserve Account without first obtaining the written consent of Lender; Lender will not unreasonably withhold such consent, which consent may be conditioned on (among other things) notice in writing being given to the organization with whom any Affordabilii~y Reserve Account is maintained in accordance with Section 9302(1)(g)(ii) of the California Commercial Code and/or any other actions required in order to perfect Lender’s security interest therein. 4.Borrower shall, at any time and from time to time upon the written request of the Lender, execute and deliver such further documents and do such further acts and things as the Lender may reasonably request to effect the purposes of this Agreement. Without limiting the generality of the foregoing, Borrower shall co-operate with Lender in giving notice in writing to Account Institution and any other organization with which any Affordability Reserve Account is -4- maintained and/or taking any other action required for the purpose of perfecting the security interest of Lender in the Affordability Reserve Account, and Borrower agrees to execute and file financing statements pursuant to the Uniform Commercial Code as the Lender may request from time to time to perfect the security interest granted hereby. 5.Borrower does hereby make, constitute and appoint the Lender, and any officer or agent of the Lender, with full power of substitution, as Borrower’s attorney-in-fact, with power, in its own name or in the name of Borrower, upon the occurrence and during the continuance of an Event of Default (but only after the Lender shall have delivered an Election Notice to such Borrower), to exercise all rights related to the Pledged Collateral, and generally to do (to the extent so permitted), at the Lender’s option, at any time or from time to time, all acts anal things which the Lender deems necessary to protect, preserve and realize upon the Pledged Collateral and the Lender’s security interest therein to effect the intent of this Agreement, all as fully and effectually as Borrower might or could do; and Borrower hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. This power of attorney shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall be outstanding. 6.(a) The Lender shall have no duties or responsibilities except those expressly set forth in this Agreement. Nothing in this Agreement expressed or implied is intended to or shall be so construed as to impose upon the Len~der any obligations in respect of this Agreement except as expressly set forth herein. (b) Neither the Lender nor any of its elected officials, employees or agents, shall be liable to Borrower for any action taken or omitted by it hereunder or in connection herewith, unless caused by its or their gross negligence or willful misconduct. The Lender shall not be responsible to Borrower for any recitals, statements, representations or warranties herein by Borrower, nor shall the Lender be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or the existence or possible existence of any Event of Default. , (c) The Lender shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to have been signed, sent or made by the Borrower, and, with respect to all matters pertaining to this Agreement and their duties hereunder, upon advice of counsel selected by it. (d) The Lender shall be entitled to exercise any and all of the rights granted hereunder irrespective of (i) the absence of any attempt to pursue or enforce any other rights or remedies available to Lender, (ii) the waiver or consent by the Lender with respect to any provision of any instrument evidencing any of the Obligations, or any part thereof, or any other agreement now or hereafter executed by the Borrower and delivered to the Lender, except to the extent that as a result of such waiver or consent, no Event of Default exists that allows Lender to take action hereunder, (iii) failure by the Lender to take any steps to perfect and -5- maintain its security interest in, or to preserve its rights to, any security or collateral for the Obligations, (iv) the Lender’s election, in any proceeding instituted under Chapter 11 of Title 11 of the United States Code (11 U.S.C. §101 et seq.) (the "Bankruptcy Code"), of the application of Section 1111(b)(2) of the Bankruptcy Code, (v) any borrowing or grant of a security interest by the Borrower, as debtor-in-possession, under Section 364 of the Bankruptcy Code, (vi) the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of Lender’s claim(s) for repayment of the Obligations, or (vii) any other circumstance which might otherwise constitute a legal or equitable discharge or defense of Borrower. 7.The rights and remedies herein provided, and provided in the Loan Agreement, the Note and in all other related documents, are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law including, without limitation, the rights and remedies of a secured party under the California Commercial Code. 8:This Agreement and the pledges and security interests created or granted hereby shall terminate on the date that the last Obligations shall have been fully paid and satisfied, at which time the Lender shall deliver (without recourse upon, or any warranty whatsoever by, the Lender), to the Borrower all Pledged Collateral pledged by them hereunder and related documents then in the custody or possession of the Lender and, if requested by Borrower, shall execute and deliver to Borrower for filing in each office in which any financing statement relative to the Pledged Collateral, or any part ~thereof, shall have been filed, a termination statement releasing the Lender’s security interest therein, and such other documents and instruments as Borrower may reasonably request, all without recourse upon, or warranty whatsoever by, the Lender, and at the cost and expense of Borrower. 9.This Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of the parties, hereto, provided, however, that the obligations of the Borrower under this Agreement may not be assigned or delegated. 10.’ BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY UNITED STATES FEDERAL OR CALIFORNIA STATE COURT SITTING IN THE STATE OF CALIFORNIA IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT TO SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH UNITED STATES FEDERAL OR CALIFORNIA COURT. BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY COURT IN OR OUT OF THE STATE OF CALIFORNIA BY THE DELIVERY OF COPIES OF SUCH PROCESS TO BORROWER AT ITS ADDRESS SPECIFIED ON THE SIGNATURE PAGE OF THIS AGREEMENT, OR BY CERTIFIED MAIL DIRECTED TO SUCH ADDRESS. BORROWER REPRESENTS AND WARRANTS THAT THE ADDRESS OF THE BORROWER SET FORTH BELOW BORROWER’S SIGNATURE IS THE TRUE AND -6- CORRECT ADDRESS OF BORROWER AND COVENANTSTO PROVIDE THE LENDER WITH PROMPT WRITTEN NOTICE OF ANY CHANGE IN ADDRESS. 11. THE BORROWER AND THE LENDER EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, .BETWEEN THE LENDER AND BORROWER ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED THERETO. BORROWER AND THE LENDER HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT EITHER OF THEM MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 12. Each provision of this Agreement is intended to be severable, and if any term or provision hereof is held to be illegal or invalid for any reason, such provision shall not affect the remainder hereof, and the parties shall promptly cooperate in good faith to modify this Agreement, so as to avoid any impairment of Lender’s security interest in the Pledged Collateral. 13. In connection with the exercise of its remedies under this Agreement, Lender may, upon the occurrence and during the continuance of an Event of Default (as defined in, and under, the Loan Agreement), obtain the appointment of a receiver or trustee to assume, upon receipt of all necessary judicial or other governmental authority, consents or approvals, control of or ownership of the Pledged Collateral. Such receiver or trustee shall have all rights and Powers provided to it by law or by court order or provided to Lender under this Agreement. 14. This Agreement shall be construed in accordance with the laws of the State of California without regard to principles of conflicts of laws. 15. This Agreement may be signed in counterparts with the same effect as if the signatures thereof and hereto were upon the same instrument. 16. Notwithstanding anything in this Security Agreement to the contrary, the provisions hereof are subordinate to all applicable HUD mortgage insurance and Section 8 regulations, related HUD administrative requirements and HUD/FHA loan documents. In the event of a conflict between the provisions of this Security Agreement and any applicable HUD mortgage insurance and Section 8 regulations, related HUD administrative requirements or HUD/FHA loan documents, the HUD mortgage Insurance and Section 8 regulations, related HUD administrative requirements or HUD/FHA loan documents shall govern and control, -7- IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed and delivered as of the day and year first above written. LENDER: THE CITY OF PALO ALTO By: June Fleming, City Manager BORROWER: MID-PENINSULA HOUSING COALITION, a California non-profit public benefit corporation By: Name: Print: By: Name: Title: Borrower’s address: 658 Bait Island Road, Suite 300 Redwood City, California 94063 ::ODMA\PCDOCS\LOSANGELES\146524\ 1 -8- EXHIBIT E NOTICE OF SECURITY INTEREST [date] Attention: RE: Mid-Peninsula Housing Coalition (the "Company") Ladies and Gentlemen: Written notice is hereby given to you by the City of Palo Alto (hereinafter referred to as "Secured Party") and the Company in accordance with Section 9302(1)(g)(ii) of the Uniform Commercial Code as in effect in the State of California that, pursuant to agreements entered into between Secured Party and the Company, Secured Party has a security interest in the following deposit account, together with all moneys and claims for money now or hereafter due and payable thereon or maintained therein (the "Account") and that such security interest shall continue until further written notice is given to you by Secured Party: Name in which Account is Maintained Branch in which Account is Maintained Account Number Mid-Peninsula Housing Coalition constitutes: This letter is your notification of the above described security interest and (a) an irrevocable authority, direction and instruction to you, if instructed in writing by Secured Party, to make no payment or remittance from, and to cease honoring all drafts, demands, requests and instructions made by the Company with respect to, the Account; (b) an irrevocable authority, direction and instruction to you, if instructed in writing by Secured Party of the occurrence of an event of default by the Company as to its obligations to Secured Party, to hold solely for the account of Secured Party all funds which may be on deposit in the Account at the time of such instruction and all funds thereafter deposited and remit to Secured Party, at the address set forth herein or at such other address as Secured Party may specify in writing, all amounts deposited in the account(s) or any of them or to hold all funds; (c) an irrevocable authority, direction and instruction to you, upon your receipt of any instruction from Secured Party pursuant to subparagraph (a) above, to recognize Secured Party as having sole control over the Account and the sole right to exercise rights and remedies with respect thereto; (d) authorization and direction to you to distribute to Secured Party copies of all statements with respect to the Account and to provide to Secured Party from time to time such further information about the Account as Secured Party may request; and (e) notification to you that the appointment, authority, instruction and direction herein contained are coupled with an interest and are in all respect irrevocable and without right of rescission or modification without the prior written consent of Secured Party. None of the foregoing is intended to preclude the Company from making . deposits to the Account or from otherwise dealing with the Account in the ordinary course of business, except as otherwise provided in subparagraph (a) above, unless and until you are given written notice by Secured Party of the type described in subparagraph (b) above. All notices and instructions permitted or required hereunder shall be in writing and shall be effective upon receipt by the applicable party at the address and to the attention of the person set forth below (or at such other address or to the attention of such other person as such party may specify by written notice to the other parties hereto). Nothing herein is intended to limit in any way your right to offset against any Account for any amount that may become due to you in connection with the operation of any Account, including without limitation, your right to process chargebacks for returned items, and collect in respect of overdrafts or fees and charges incurred in connection with the operation of any Account, provided that you hereby agree to release your banker’s lien upon the Account. The Company authorizes you to provide to Secured Party copies of all account statements for the Account from time to time as Secured Party may request, and to make available to Secured Party such other information, including information as to Account balances and Account activity, as Secured Party may request from time to time, without the requirement of notice to or the consent of the Company. This letter agreement is for the benefit of Secured Party and its successors and assigns and shall be binding on you and the Company and your respective successors and ::ODMA\PCDOCS\LOSANGELES\I46518\I assignE By your countersignature below, you accept the terms of this letter and acknowledge that you have received no notice of security interest in the Account (or similar instrument) in favor of any person other than Secured Party. Very truly yours, CITY OF PALO ALTO By: Name: Title: Address: 250 Hamilton Avenue Palo Alto, CA 94303-0862 MID-PENINSULA HOUSING COALITION By: Name: Title: Address: 658 Bair Island Road, Suite 300 Redwood City, California 94063 ACKNOWLEDGED AND AGREED TO AS OF THE DAY OF , By: Name: Title: Address: ::ODMA\PCDO£S\LOSANGELES\I46518\I EXHIBIT F Palo Alto Gardens Apartments Land Acquisition Budget & Source of Funds ,Sources of Permanem Funding City Land Loan: 40 years at 3.0% interest Partnership: One-Time Payment of Land Lease Rent at Acquisition TOTAL SOURCES OF FUNDING $900,000 774,056 $1,674,056 Uses of Permanent Funding Purchase Price Allocated to Land Closing Costs and Transfer Taxes TOTAL USES OF FUNDS $1,640,000 34,056 $1,674,056 EXHIBIT G FEDERAL ASSURANCES WITH RESPECT TO CDBG FUNDS MPHC agrees to comply with the requirements of 24 CFR Part 570 (the Housing and Urban Development regulations concerning Community Development Block Grants). MPHC also agrees to comply with all other applicable federal, state and local laws, regulations, and policies governing the funds provided under this Agreement. MPHC further agrees to utilize funds available under this Agreement to supplement rather than supplant funds otherwise available. (I) (2) (3) (4) (5) (6) (7) (8) MPHC hereby assures and certifies that: It possesses legal authority to receive federal grant funds and to carry out the proposed program(s) assisted thereby. Its governing body has duly acquainted itself with the funds application, including all understandings and.assurances contained therein, and directed and authorized the person identified as the official representative of MPHC to provide such additional information as may be required hereunder. It consents to accept the jurisdiction of the federal or California courts for the purpose of enforcement of its responsibilities imposed hereunder. The proposed program(s) has been developed so as to give maximum feasible priority to activities which will benefit low and moderate income persons. The receipt of any program income, as defined in 24 CFR 570.500(a), as amended, generated by the use of ’grant funds under this Agreement, will be recorded, reported and returned to City in accordance with 24 CFR 570.504, as amended. It will comply with the provisions set forth in 24 CFR 85.43 and 24 CFR 85.44 regarding the suspension or termination of a grant agreement for cause or convenience. ¯ It will maintain and retain all books, documents, papers, financial, or other records which are pertinent to the grant for a period of not less than three (3) years following the expiration of this Agreement. MPHC will allow City and the U.S. Department of Housing and Urban Development, through any authorized representatives, access to such documents, papers and records. If MPHC is a primarily religious entity, in connection with the provision of services required under this Agreement, MPHC agrees to comply with federal regulations specified in 24 CFR 570.200(j). MPHC further: Bo (a) (b) (c) (d) MPHC (1) (2) (3) (4) (5) (6) (7) will not discriminate against any employee or applicant for employment on the basis of religion and will not limit employment or give preference in employment to persons on the basis of religion; will not discriminate against any person applying for such services on the basis of religion and will not limit such services or give preference to persons on the basis of religion; will provide no religious instruction or counseling, conduct no religious worship or services, engage in no religious proselytizing, and exert no other religious influence in the provision of such services; and will ensure that the portion of MPHC’s facility used to provide the services shall contain no religious symbols or decorations, other than those permanently affixed to or are part of the structure. also hereby assures that it shall: Comply with the nondiscrimination provisions of public law 88- 352 (Title VI of the Civil Rights Act of 1964) and the fair housing provisions of public law 90-284 (Title VIII of the Civil Rights Act of 1968) and Executive Order 11063, as amended by Executive Order 12259, with respect to sale, lease or transfer of land acquired, cleared or improved with grant assistance. Comply with the provisions of Section 109 of Title I of the Housing and Community Development Act of 1974 which prohibit discrimination. Comply with the Fair Housing Act of 1989 (42 USC 3601-20) which prohibits discriminatory housing practices based on race, color, .religion, sex, ’national origin, disability or familial status. Comply with the Davis-Bacon Act, as amended, Federal Labor Standards provisions with respect to all construction contracts in excess of Two Thousand Dollars ($2,000), if applicable. Comply with the requirement of the Flood Disaster Protection Act of 1973 and the National Flood Insurance Act of 1968 applicable to acquisition or construction projects. Comply with the relocation and displacement requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended. Comply with provisions of Executive Order 11246, as amended by Executive Orders 11375 and 12086, on equal employment opportunities and affirmative action relative to employees and applicants and nonexempt contracts and subcontracts. (8)Comply with 42 USC 4831(b), and 24 CFR 570.608 and 24 CFR Part 35 of the HUD regulations, prohibiting the use of lead-based paint in the construction or rehabilitation of residential structures. (9) (10) Comply with the provisions of 24 CFR Part 24 which prohibit the utilization of debarred, suspended, or ineligible contractors or subrecipients.~ Comply with the uniform administrative requirements and cost principals of 24 CFR Part 85 and 0MB circulars A-87, A-110, A- 122, and A-128 and A-133 as they relate to the acceptance and use of federal funds by nonprofit organizations, and as otherwise may be required under 24 CFR 570.502, as amended. (11) (12) (13) (a) (b) Comply with the requirements of 24 CFR 85.36 and OMB circular A-110 with respect to conflict of interest, and as otherwise may be required under 24 CFR 570.611, as amended. Comply with the provisions of the Hatch Act which prohibit the use of federal funds for lobbying activities. Comply with Section 319 of public law 101-121, which generally prohibits recipients of federal contracts, grants or loans from using appropriated funds for lobbying the executive or the legislative branches of the federal’ government in connection with a specific contract, grant or loan. Accordingly, MPHC hereby certifies to the best of its knowledge and belief, that: No federal appropriated funds have been paid or will be paid, by or on behalf of MPHC, to anY person for influencing or attempting to influence an officer or employee of any agency, a Member. of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any federal contract, the making of any federal grant, the making of any federal loan, the entering into of any cooperative agreement, or the extension, continuation, renewal, amendment, or modification of any federal contract, grant, loan, or cooperative agreement; and If any funds other than federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this federal contract, grant, loan or cooperative agreement, MPHC shall complete and submit Standard Form-LLL, "Disclosure Form to Report Lobbying" in accordance with its instructions. (14) (15) (16) (17) (a) (b) Comply with the Age Discrimination Act of 1975, as amended, which states that no persons in the United States shall, on the basis of age, be denied the benefits of, or be subjected to discrimination under, any program or activity receiving federal financial assistance. Comply with Section 504 of the Rehabilitation Act of 1973, which prohibits discrimination against people with disabilities in any federally assisted program. Comply with the Americans with Disabilities Act of 1990, as amended, and implementing regulations when published. Transfer to City any remaining CDBG funds on hand at the time of expiration of this Agreement. In addition, MPHC shall ensure that any real property under MPHC’s control that was acquired or improved in whole or in part with CBBG funds in excess of $25,000 is either: used to meet one of the national objectives in 24 CFR 570.208 until five years after expiration of this Agreement, or for such longer period of time as determined appropriate hereunder by City; or disposed of in a manner which results in City being reimbursed in the amount of the then current fair market value of the property less any portion thereof attributable to expenditures of non-CDBG funds for acquisition of, or improvement to, the property. EXHIBIT H INSURANCE REQUIREMENTS 1. FIRE AND EXTENDED COVERAGE Insurance, to cover not less than One Hundred Percent (100 %) of the replacement cost of all insurable improvements within or upon the Property. Such policies shall include water damage and debris cleanup provisions. POLICY MINIMUM LIMITS OF LIABILITY 2. WORKERS’ COMPENSATION 3. COMPREHENSIVE AUTOMOBILE LIABILITY, including owned hired, and nonowned automobiles Statutory Bodily Injury Property Damage $5,000,000 ea person $5,000,000 ea occurrence 4. COMMERCIAL GENERAL LIABILITY, including products and completed operations, broad form contractual, and personal injury. Bodily Injury Property Damage $5,000,000 ea person $5,000,000 ea. occurrence $5,000,000 aggregate $5,000,000 ea occurrence Each insurance policy required by this Agreement shall contain the following clauses: "This insurance shall not be canceled, limited in scope of coverage or nonrenewed until after thirty (30) days written notice has been given to the: City of Palo Alto/Planning and Community Environment Department, P.O. Box 10250, Palo Alto, CA 94303." "All rights of subrogation are hereby waived against the City of Palo Alto and the members of the City Council and elective or appointive officers or employees, when acting within the scope of their employment or appointment." "The City of Palo Alto is added as an additional insured as respects operations of the named insured, but only as to work performed under this Agreement." "It is agreed that any insurance maintained by the City of Palo Alto will apply in excess of, and not contribute to, insurance provided by this policy." All insurance coverage required shall be provided through carriers with a BEST KEY RATING GUIDE rating of A:X or higher that are admitted to do business in the State of California. The certificate(s) of insurance evidencing such coverage shall be completed and executed by an authorized representative of the company providing insurance, and shall be filed with and approved by City’s risk manager. Attachment C AGREEMENT BETWEEN THE CITY OF PALO ALTO AND MPPALO ALTO GARDENS ASSOCIATES TO LEND FUNDS FOR THE ACQUISITION OF IMPROVEMENTS AT 648 SAN ANTONIO ROAD (PALO ALTO GARDENS APARTMENTS) THIS AGREEMENT ("Agreement") is made and entered into on April __, 1999 by and between the CITY OF PALO ALTO, a chartered city organized and existing under the constitution and laws of the State of California ("City"), and MP PALO ALTO GARDENS AssoCIATES, A CALIFORNIA LIMITED PARTNERSHIP, with offices at 658 Bair Island Road, Suite 300, Redwood City, California 94063 ("MPPAG"), with reference to the following facts: WHEREAS, MPPAG intends to lease certain land (but not the improvements thereon) located at 648 San Antonio Road, Palo Alto, Santa Clara County, California, and more particularly described on Exhibit "A" (the "Land"), and to purchase the improvements located on the Land containing 156 units of affordable housing known as Palo Alto Gardens Apartments (the "Improvements"); WHEREAS, following the acquisition of the Improvements MPPAG intends to operate the Improvements as an affordable rental housing project for low income households; WHEREAS, the preservation of affordable rental housing occupied by Very Low- Income Households and Low-Income Households receiving federally funded rental assistance is an objeciive of the City’s Consolidated Plan and the Housing Element of the City’s Comprehensive Plan, and Palo Alto Gardens Apartments has been specifically identified as a priority for preservation; and WHEREAS, on March 15, 1999, the City Council adopted an amendment to the 1998-1999 Community Development Block Grant ("CDBG"). Annual Action Plan to add the acquisition and rehabilitation of Palo Alto Gardens Apartments as a priority project for the use of CDBG housing dex~elopment funds; and WHEREAS, the expenditure of funds for acquisition of rental housing for low income households is an eligible activity under the CDBG program regulations; WHEREAS, MPPAG has applied to the City for a loan of $100,000 to assist with the cost of acquiring the Improvements; WHEREAS, on March 15, 1999, the City Council adopted Budget Amendment Ordinance No. 4551 appropriating $1,000,000 in City Housing Reserve Funds for the acquisition of Palo Alto Gardens Apartments, of which amount $100,000 is for the acquisition of the Improvements; ::ODMAkPCDOCSkLOSANGELES\143702\4 April 6, 1999 WHEREAS, the City is willing to make a loan of $100,000 to MPPAG, provided that MPPAG will acquire and rehabilitate the Improvements and operate Palo Alto Gardens Apartments as an affordable rental housing project for low income households and will enter into and record against the Improvements and its interest in the Land a Regulatory Agreement acceptable to the City; WHEREAS, the City intends initially to fund the loan to MPPAG on an interim basis with funds from the City’s Housing Reserve Fund, with such funds to be replaced in whole or in part by CDBG funds; NOW, THEREFORE, in consideration of the following covenants, agreements, terms and conditions, the parties to this Agreement agree: SECTION 1 - DEFINITIONS The following terms as used in this Agreement shall have the respective meanings assigned to them in this Section 1, unless the context clearly indicates otherwise: "Agreement" means this "Agreement between the City of Palo Alto and MP Palo Alto Gardens Associates to Lend Funds for the Acquisition of Improvements at 648 San Antonio Road (Palo Alto Gardens Apartments)." "Bond Deed of Trust" means a deed of trust on the Land, the Improvements and the leasehold estate in the Land for the benefit of ABAG Finance Authority for Nonprofit Corporations, and assigned to Trustee, securing the obligations of MPPAG to repay the Bond Loan. "Bond Loan" means the loan to MPPAG of the proceeds of the Bonds by ABAG Finance Authority for Nonprofit Corporations. , "Bonds" means ABAG Finance Authority for Nonprofit Corporations Multifamily Housing Revenue Bonds (Palo Alto Gardens Apartments), Series 1999A, in the approximate principal amount of $11,435,000, the proceeds of which are to be loaned to MPPAG to finance the acquisition of the Improvements by MPPAG. "CDBG" means the federal Community Development Block Grant Program, of which the City is an entitlement jurisdiction. "City" means the City of Palo Alto, a chartered city organized and existing under the constitution and laws of the State of California. "Ground Lease" means that certain ground lease of the Land between MPHC as lessor and MPPAG as lessee pursuant to which MPHC leases the Land to MPPAG at an annual base rent of not less than $265,705 for a term of 60 years. ::ODMAWCDOCSkLOSANGELES\143702\4 April 6, 1999 2 "HUD" means the United States Department of Housing and Urban Development. "Improvements Deed of Trust" means the deed of trust granting to City a lien on the Improvements and the lessee’s interest under the Ground Lease to secure MPPAG’s performance of its obligations hereunder, under the Improvements Note, and under the Regulatory Agreement, the form of which is attached hereto as Exhibit "C". "Improvements Deed of Trust Collateral" means the Improvements and the lessee’s interest under the Ground Lease. "Improvements Note" means the promissory note in principal amount of $100,000 made by MPPAG in favor of City, the form of which is attached hereto as Exhibit "B". "Land" means the land (excluding the improvements thereon) commonly known as 648 San Antonio Road, Palo Alto, California, more particularly described as set forth in Exhibit "A". "Loan Proceeds" means the sum of $100,000.00 to be advanced to MPPAG in accordance with the terms and conditions of this Agreement at the time of the acquisition of the Improvements by MPPAG. "Memorandum of Ground Lease" means a short form of the Ground Lease executed in recordable form by MPHC and MPPAG. "MPHC" means Mid-Peninsula Housing Coalition, a California nonprofit public benefit corporation that is the sponsor of the Project and an affiliate of MV Central Park Apartments, Inc., the general partner of MPPAG. "MV Central" means MV Central Park Apartments, Inc., a California nonprofit public benefit corporation that is the general partner of MPPAG. "MPPAG" means MY’ Palo Alto Gardens Associates, a California Limited Partnership. "MP Preservation" means MP Preservation, Inc., a California nonprofit public benefit corporation. "Project" means the acquisition and rehabilitation of the Improvements and the leasehold estate in the Land for the purpose of providing 155 rental housing units (plus a manager’s unit) which shall be offered for rent and occupied as provided in the Regulatory Agreement. "Property" means the affordable rental housing project located on the Land and including the Improvements, commonly known as Palo Alto Gardens Apartments. ::ODMAkPCDOCSkLOSANGELES\143702\4 April 6, 1999 3 "Regulatory Agreement" means a Regulatory Agreement regulating the use and occupancy of the Improvements in form attached as Exhibit "D." "Trustee" means U.S. Bank Trust, National Association. SECTION 2 - TERM OF AGREEMENT 2.1 Term The term of this Agreement shall commence on the date of its execution by the parties, and shall remain in full force and effect throughout the 40 year term of the Improvements Note until such time as the loan contemplated to be made hereunder has been repaid in full, unless earlier terminated as provided herein. SECTION 3 - LOAN OF FUNDS 3.1 Loan Amount 3.1.1 Subject to the terms and conditions of this Agreement, City shall advance to MPPAG the sum of One Hundred Thousand and 00/100 Dollars ($100,000.00), to be used in accordance with the terms, covenants, provisions and conditions of this Agreement. MPPAG shall execute and deliver the Improvements Note in favor of City in the form attached as Exhibit "B". The Improvements Note shall be secured by the Improvements Deed of Trust for the benefit of City in the form attached as Exhibit "C." 3.1.2 If close of escrow for the acquisition of the Improvements by MPPAG, and the acquisition of the Land by MPHC, have not both occurred on or before June 15, 1999, the City will have no further obligation to fund the Improvements Loan, and this Agreement will be of no further force or effect. , 3.2 Disbursement of Loan Proceeds MPPAG has opened an escrow for the acquisition of the Improvements with First American Title Guaranty Company ("Title Company"), 1737 North First Street, San Jose, California 95112 under escrow number 515410 ("Escrow"). MPPAG hereby irrevocably requests and directs City to deposit the Loan Proceeds directly in the Escrow, and City agrees that it will deposit the Loan Proceeds in Escrow prior to the acquisition of the Improvements by MPPAG, together with instructions directing the Title Company that the Loan Proceeds shall only be disbursed concurrently with transfer of title to the Improvements to MPPAG, provided that the Title Company is in a position to issue the policy of title insurance described in Section 3.3 below, and all of the requirements set forth in Section 3.4 have been satisfied. The Loan Proceeds delivered to the Escrow represent a portion of the approximately $11,360,000 purchase price of the Improvements; MPPAG will deposit funds from other sources for the balance of the purchase A:\143703.WPD April 7, 1999 4 price and closing costs. MPPAG represents and warrants to City that its costs of the Project, and its sources of funds therefor, are substantially as set forth on Exhibit "E" attached hereto. 3.3 Title Insurance Concurrently with the close of Escrow, the Title Company shall issue an ALTA Extended Coverage Lenders Policy of title insurance, or other form of title insurance acceptable to City, in the amount of $100,000 insuring the lienof the Improvements Deed of Trust on the Improvements Deed of Trust Collateral, and insuring that the lien of the Improvements Deed of Trust is subordinate to no other liens of deeds of trust, mortgages, or other monetary encumbrances, with the exception of a lien for property taxes and assessments not yet delinquent, and the lien of the Bond Deed of Trust. 3.4 Additional Conditions to Disbursement In addition, the Loan Proceeds will not be disbursed until all of the following conditions have occurred: A.MPPAG has executed and delivered the Improvements Note to City; B. MPPAG has executed and deposited in escrow the Improvements Deed of Trust and the Regulatory Agreement; C.MPPAG has acquired fee title to the Improvements; D.MPHC and MPPAG have executed the Ground Lease and a Memorandum of Ground Lease; E. Transamerica Occidental Life Insurance Company has executed a Standby Funding Agreement on terms satisfactory to City; and F. Title Company has recorded the Memorandum of Ground Lease, the Improvements Deed of Trust and the Regulatory Agreement in the Official Records of Santa Clara County, and has issued the policy of title insurance described in Section 3.3 above. SECTION 4 - COVENANTS AND CONDITIONS 4.1 General As express conditions of receiving the loan of $100,000 in funds from City, MPPAG agrees to acquire the Improvements and to rehabilitate or cause to be rehabilitated the Improvements in accordance with its application to City for funding and all applicable ::ODMA~CDOCSkLOSANGELES\I43702\4 April 6, 1999 5 requirements and regulations of HUD and the CDBG Program, including those HUD regulations set forth in Part 570 of Title 24 of the Code of Federal Regulations CCFR"), as amended. 4.2 Records and Reports MPPAG shall maintain on a current basis complete records, including books of original entry, source documents supporting accounting transactions, service records, a general ledger, canceled checks, time sheets, and related documents and records to assure proper accounting of funds and performance of the terms of this Agreement. MPPAG shall furnish any and all information and reports which may be required by City and/or HUD in connection with this Agreement. MPPAG shall further permit access to its books, records and accounts by the representatives and employees of City and HUD during regular business hours, for the purpose of investigation or audit to ascertain compliance with all applicable laws, regulations, rules and orders and for the purpose of evaluating and monitoring MPPAG’s compliance with the provisions of this Agreement and the Regulatory Agreement. MPPAG shall cause all such records to be retained and made available to City and HUD upon request for review or audit for a period of at least five (5) years following the expiration or termination of this Agreement. 4.3 Financial Audits MPPAG shall provide City, during the term of this Agreement, with copies of audited financial statements of MPPAG, including any management letter comments on the adequacy of internal or operational controls, within one hundred fifty (150) days after the close of each fiscal year of MPPAG. The audit covering the fiscal year in which the loan is provided to MPPAG shall be conducted in accordance with OMB Circular A-133, as amended (implemented at 24 CFR Part 45). City reserves the right, during the term of this Agreement, to audit the records of MPPAG, including the financial records supporting the aforementioned financial statements and other records and documents pertaining to the operations of MPPAG. 4.4 Federal Assurances - CDBG Funds MPPAG shall comply with the additional terms and conditions of this Agreement and the federal assurances as set forth in Exhibit "F". 4.5 Insurance MPPAG shall obtain and maintain, during the term of this Agreement, at the sole cost and expense of MPPAG, insurance provided by responsible companies authorized to engage in the offering of insurance services in California in such amounts and against such risks as shall be satisfactory to City’s risk manager, including, without limitation, worker’s compensation (to the extent required by law), employer’s liability, commercial general liability, comprehensive automobile liability, personal injury and property damage insurance, as set forth in Exhibit "G", as appropriate, insuring against all liability of MPPAG and its partners, directors, officers, ::ODMAWCDOCS~LOSANGELES\143702\4 Ap~ 6, 1999 employees, agents, and representatives arising out of or in connection with the acquisition and rehabilitation of the Property by MPPAG or MPPAG’s performance or nonperformance under this Agreement or the Regulatory Agreement. 4.6 Conflict of Interest MPPAG covenants that it shall comply with the provisions of 24 CFR 570.611, as amended, concerning conflicts of interest. Specifically, except for the use of CDBG funds to pay salaries and other related administrative or personnel costs, no person who is an employee, agent, consultant, officer, or official of MPPAG who exercises or has exercised any functions or responsibilities concerning the activities under this Agreement, or who is in a position to participate in a decision making process or gain inside information with regard to such activities, may obtain a personal or financial interest or benefit from such activity, or have an interest in any contract, subcontract, or agreement with respect thereto, or the proceeds thereunder, either for him or herself or for those with whom he or she has family or business ties, during his or her tenure or for one year thereafter. MPPAG further covenants that it presently has no interest and shall not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the services hereunder. MPPAG also covenants that, in the performance of this Agreement, no subcontractor or person having such interest shall be employed by MPPAG. In addition, MPPAG certifies that no one who has or will have any financial interest under this Agreement is an officer or employee of City. 4.7 Assignment This Agreement shall not be assigned by MPPAG (except for any assignment to MPHC or one of its affiliates) without the express prior written consent of the City, in its sole and absolute discretion. Any assignment or attempted assignment shall be void and, at the sole discretion of the City, shall be deemed a material default of this Agreement by MPPAG, and the outstanding balance of the Note may be declared by City to be immediately due and payable. 4.8 Corporate Status MPPAG covenants and agrees to maintain its status as a limited partnership duly organized, validly existing, and in good standing under the laws of the State of California at all times during the term of this Agreement. 4.9 Breach In the event of any breach of this Section 4 or of any other covenant or restriction set forth in this Agreement, City shall have the right (following any period of notice and/or opportunity to cure expressly provided for in this Agreement) to exercise all of the rights and A:\I43703.WPD April 7, 1999 7 remedies available to it, and to maintain any action at law or suits in equity or other real property proceedings, including, without limitation, specific performance, to enforce the covenants and restrictions and the curing of any breach or violation hereof. SECTION 5 - REPRESENTATIONS 5.1 Authority The making and performance by MPPAG of this Agreement, the Regulatory Agreement, and the Improvements Note and the Improvements Deed of Trust have been duly authorized by all necessary corporate and/or partnership action and will not violate any provision of law or of its limited partnership agreement or the charter or bylaws of its general partner, or result in the breach of, or constitute a default or require any consent under any lien, charge, or encumbrance upon any property or assets of MPPAG pursuant to any indenture or other agreement to which MPPAG is a party or by which MPPAG or its property may be bound. 5.2 Litigation There are no suits or proceedings pending or, to the knowledge of MPPAG, threatened against or affecting MPPAG which, if adversely determined, would have a material adverse effect on the financial condition or business of MPPAG, and there are no proceedings pending or, to the knowledge of MPPAG, threatened, against MPPAG which would have a material adverse effect on the performance of this Agreement by MPPAG. SECTION 6 - INDEMNITY MPPAG agrees to protect, indemnify, defend and hold harmless City, its Council members, officers, agents and employees, from any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, caused by or arising out of MPPAG’s, or its general partner’s, or its officers’, agents’, subcontractors’ or employees’ negligent acts, errors or omissions, or willful misconduct, or conduct for which MPPAG may be strictly liable in the performance of, or failure to perform, its obligations under this Agreement. SECTION 7 - DEFAULTS The City shall be permitted, upon written notice, to (1) immediately terminate its commitment to loan funds hereunder, or (-2) declare the principal amount of the Improvements Note and all accrued unpaid interest thereon, to be immediately due and payable, whereupon the same shall become immediately due and payable, if any of the following events of default have occurred and have not been remedied: ::ODMAWCDOCS~LOSANGELES\143702\4 April 6, 1999 7.1 MPPAG makes a representation in this Agreement which shall prove to have been false in any material respect when made; or 7.2 MPPAG shall default in the payment, when due, of any principal or interest under the Improvements Note or any other sums payable by MPPAG under this Agreement; subject, however, to the provisions for notice and opportunity to cure set forth in Section 10 of the Improvements Note; or 7.3 MPPAG shall default for a period of thirty (30) days after notice (or if such default cannot be cured within 30 days despite MPPAG’s prompt commencement and diligent prosecution of cure upon receiving notice, then such period shall be extended, but in no event beyond 90 days after notice) in the performance of any other non-financial obligation to be performed by MPPAG under this Agreement; or 7.4 MPPAG shall apply for or consent to the appointment of a receiver, trustee, or liquidator, or is unable, or admits in writing its inability to pay its debts as they fall due, or makes a general assignment for the benefit of its creditors, or is adjudicated a bankrupt or insolvent, or files a voluntary petition in bankruptcy; or 7.5 MPPAG is subjected to the entry of an order, decree, or judgment approving the reorganization of MPPAG, and such order, decree, or judgment is unstayed for a period of more than forty-five (45) days, or such period as may be permitted by law; or 7.6 All or any part of the Improvements Deed of Trust Collateral, or any interest therein, is sold, transferred, or otherwise conveyed, or encumbered, with the exception of a transfer of all of the Improvements Deed of Trust Collateral to MPHC; or 7.7 MV Central ceases to be the sole general partnerof MPPAG, unless (i) MP Preservation succeeds MV Central as sole general partner of MPPAG, or (ii) MV Central is removed by the.limited partner of MPPAG as permitted by its limited partnership agreement and replaced by a sole general partner satisfactory to the City; or 7.8 MP Preservation ceases to be the sole general partner of MPPAG after succeeding MP Central as sole general partner of MPPAG, unless MP Preservation is removed by the limited partner of MPPAG as permitted by its limited partnership agreement and replaced by a sole general partner satisfactory to City; or 7.9 MPPAG fails to make any payment of rent under the Ground Lease in full at the time when rent is required to be paid thereunder. ::ODMALPCDOCSLLOSANGELES\143702\4 April 6, 1999 9 Agreement which is characterized as a covenant or a condition shall be deemed both a covenant and a condition. 9.4 Any amendment to this Agreement shall be binding upon the parties, provided such amendment is set forth in a writing signed by the party to be charged. 9.5 This Agreement shall not be construed or deemed to be an agreement for the benefit of any third party, and no third party shall have any claim or right of action hereunder for any cause whatsoever. 9.6 If any provision of this Agreement shall be determined by a court of competent jurisdiction to be invalid, illegal, void, or unenforceable in any respect, the validity of all other provisions herein shall remain in full force and effect. 9.7 MPPAG shall lack any authority or power to pledge the credit of the City or incur any obligation in the name of the City. 9.8 This Agreement constitutes the entire agreement of the parties concerning its subject matter, and there are no other oral or written agreements of the parties not incorporated in this Agreement. 9.9 The Agreement, the Improvements Note, the Improvements Deed of Trust, and all related documents contemplated hereunder shall be deemed to be a contract made under the laws of the State of California, and for the purposes hereof shall be governed and construed by and in accordance with the laws of the State of California. 9.10 All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules which may, from time to time, be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and shall be deemed to be part of this Agreement. .’ .9.11 This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. 9.12 The paragraph headings are not a part of this Agreement and shall have no effect upon the construction or interpretation of any part of this Agreement. ::ODMAkPCDOCSkLOSANGELES\I43702\4 April 6, 1999 11 SECTION 8 - NOTICES Any notice which may be or is required to be given under this Agreement shall be deemed given on the second day following the date on which the same has been mailed by first class mail, postage prepaid, addressed as follows: If to City:City of Palo Alto 250 Hamilton Avenue Palo Alto, CA 94301 Attn: City Clerk With a copy to:Director of Planning & Community Environment City of Palo Alto 250 Hamilton Avenue Palo Alto, CA 94301 If to MPPAG:MP Palo Alto Gardens Associates 658 Bair Island Road, Suite 300 Redwood City, CA 94063 Attn: General Partner with a copy to:Transamerica Realty Services Incorporated 600 Montgomery Street, 16th Floor San Francisco, CA 94111 Attn: David W. Kunhardt SECTION 9 - MISCELLANEOUS 9.1 Neither the failure nor the delay on the part of the City to exercise any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. 9.2 Nothing contained in this Agreement is intended to, or shall be construed in any manner, as creating or establishing the relationship of employer and employee between the parties. MPPAG shall at all times remain an independent contractor with respect to the services to be rendered or work to be performed, or both, under this Agreement. 9.3 The covenants, agreements, terms, and conditions of this Agreement shall inure to and be binding on the successors and assigns of the parties. Any provision of this ::ODMAWCDOCSkLOSANGELES\143702\4 April 6, 1999 1 0 9.13 Each party and its counsel have reviewed this Agreement. Accordingly, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the construction and interpretation hereof. IN WITNESS WHEREOF, the parties have executed this Agreement in Palo Alto, California on the date first above written. CITY OF PALO ALTO Mayor ATTEST: City Clerk APPROVED AS TO FORM: City Manager Director of Administrative Services MP PALO ALTO GARDENS ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP, By MV CENTRAL PARK APARTMENTS, INC., a California non-profit public benefit corporation, Name: ~-~ ,~ Title:~ By: Name: Title: SIGNATURES TO BE NOTARIZED Director of Planning and Community Environment Insurance Review ::ODMA~PCDOCShLOSANGELES\I43702\4 April 6, 1999 12 STATE OF CALIFORNIA ) ) COUNTY OF @c.~v’, !~c-~.~.O ) On ~ ~c i ! ~, t (tcfc~ before me, the undersigneci, a notary public in and for said -County, personally appeared !"-- ~¢~,~t b~,,,~ ,~t~c( personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal, Comm,#1162538 NOTARY PUBLIC. CALIFORNIA San Mateo County 2001 STATE OF CALIFORNIA ) ) COUNTY OF @>-w/M,K~O ) On i’,~ ~ ’], f , before me, the undersigned, a otary public "n and for said County, personally appeared (rO-~’-\l C- Coo !/-, . personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. ::ODMAWCDOCSkLOSANGELES\143702\4 April 6, 1999 ’="Comm, # 1162538 U~NOTARY PUBLIC. CALIFORNIA~Snn Mateo County 13 ANNIKA HOLMBERG Comm, # 1162538 NOTARY PUBLIC. CALIFORNIA S~n Matzo County My Comm, Expires Nov. 22, 2001 STATE OF CALIFORNIA COUNTY OF ) ) ) On ., before me, the undersigned, a notary public in and for said County, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. ::ODMALPCDOCSkLOSANGELES\143702\4 April 6, 1999 14 ATTACHMENT S: Exhibit A: Exhibit B: Exhibit C: Exhibit D: Exhibit E: Exhibit F: Exhibit G: Description of Land Form of Improvements Note Form of Improvements Deed of Trust Form of Regulatory Agreement Improvements Acquisition Budget and Sources of Funds Federal Assurances With Respect to CDBG Funds Insurance Requirements ::ODMAkPCDOCSLLOSANGELES\143702\4 April 6, 1999 1 5 EXHIBIT A DESCRIPTION OF LAND PARCEL ONE: Real property in the City of Palo Alto, County of Santa Clara, State of California, described as follows: Parcel 1, as the same is delineated and so designated on the Parcel Map recorded July 7, 1972 in Book 304 of Maps, at page 21, Santa Clara County Records. APN 147-09-066 and 147-09-067 PARCEL TWO: All that certain real property situate in the City of Mountain View, County of Santa Clara, State of California, described as follows: All of Lots 1 and 2, in Block 1, as shown upon that certain Map entitled, "Tract No. 1215 Fairview", which Map was filed for record in the office of the Recorder of the County of Santa Clara, State 6f California on September 29, 1953 in Book 46 of Maps, at pages 10 and 11. APN 147-10-061 ::ODMAkPCDOCSkLOSANGELES\143702\4 April 6, 1999 16 EXHIBIT B FORM OF NOTE PROMISSORY NOTE (COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS) SECURED BY DEED OF TRUST AND ASSIGNMENT OF RENTS $100,000.00 Date: Palo Alto, California FOR VALUE RECEIVED, the undersigned, MP PALO ALTO GARDENS ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP ("Maker"), hereby promises to pay to the CITY OF PALO ALTO ("Holder"), or order, at its Office of Revenue Collections, 250 Hamilton Avenue, Palo Alto, California, or at such other place as may be designated, in writing, by the Holder, the principal sum of One Hundred Thousand and 00/100 Dollars ($100,000.00) ("Loan Amount"), together with accrued, unpaid interest thereon, on the fortieth anniversary of the date hereof, or sooner as herein provided. The principal amount of this Note shall bear simple interest at the rate of three percent (3%) per annum (the "Applicable Interest Rate"). ADDITIONAL TERMS AND CONDITIONS 1. This Note is made in connection with the agreement between Holder and Maker entitled "Agreement between the City of Palo Alto and MP Palo Alto Gardens Associates to Lend Funds for the Acquisition of Improvements at 648 San Antonio Road" ("Loan Agreement"), pursuant to whichHolder issued to Maker a portion of the funds used by Maker to acquire certain improvements (but not the underlying land) commonly known as 648 San Antonio Road, Palo Alto, California (the "Improvements"). Concurrently with such acquisition, Maker leased the underlying land pursuant to a ground lease (the "Ground Lease"), and will rehabilitate and operate thereon a residential apartment project containing 155 affordable dwelling units and one manager’s unit (the "Project"). Maker will lease and operate the Project in accordance with the terms and conditions of a Regulatory Agreement with City of even date herewith recorded against the Improvements (the "Regulatory Agreement"). All terms, conditions, agreements and provisions, including the covenants, representations, and terms of default and remedies for default set forth in the Loan Agreement are incorporated herein by reference, and made a part hereof. 2. This Note evidences the obligation of the Maker to make full payment of the Loan Amount to the Holder, in accordance with the provisions of this Note and the Loan Agreement. Such funds are to be used solely by the Maker, together with funds obtained by Maker from other sources, to provide funding for the acquisition of the Improvements by Maker, as more fully described in the Loan Agreement. ::ODMA@CDOCSkLOSANGELES\143702\4 April 6, 1999 3. This Note is secured by a Deed of Trust and Assignment of Rents recorded against the Improvements and the lessee’s interest under the Ground Lease (the "Deed of Trust"). 4. At any time, and from time to time, the Maker may prepay to the Holder the principal sum of this Note, or any part thereof, without penalty. 5. The Note shall become due and payable immediately, without notice or demand, in the event all or any part of the Improvements, or the leasehold interest under the Ground Lease, or any interest in either of them, or all or any.part of Maker’s interest in the Project, (a) is sold, transferred, or otherwise conveyed, with the exception of a transfer of the Project to MPHC or one of its affiliates, or (b) is further encumbered, with the exception of the Bond Deed of Trust (as defined in the Loan Agreement) recorded immediately prior to the recordation of the Deed of Trust. 6. The Maker and any other maker, co-maker, indorser, guarantor, and any other party to this Note (collectively, "Obligors"), and each of them: (i) waive notice of default (except as provided in Section 10) notice of acceleration, notice of nonpayment, presentment for payment, demand, protest, notice of demand, notice of protest, notice of nonpaYment, and any other notice required to be given under the law to the Obligors; (ii) consent(s) to any and all delays, extensions, renewals, or other modifications of this Note or waivers of any term hereof or release or discharge by the Holder of any of the Obligors or release, substitution, or failure to act by the Holder, from time to time, and agree(s) that no such action, failure to act, or failure to exercise any right or remedy on the pai-t of the Holder shall in any manner affect or impair the obligations of any Obligor or be construed as a waiver by the Holder of, or otherwise affect, any of the Holder’s rights under this Note or the Loan Agreement, under any indorsement or guaranty of this Note; and (iii) (jointly and individually, if more than one) agree(s) to pay, on demand, any and all costs and expenses of collection of this Note or of any indorsement or any guaranty hereof, including attorney’s fees. No extension of time for payment of this Note or any portion thereof made by agreement of Holder with any person now or hereafter liable for the payment of this Note shall operate to release or discharge liability of Maker under this Note, either in whole or in part. 7. The pleading of any statute of limitations as a defense to any demand against the Maker is expressly waived by the Maker. 8. If any default is made hereunder, the Maker promises to pay the Holder’s reasonable attorneys’ fees and other related costs and expenses incurred by the Holder in connection with the enforcement of any rights of the Holder. The Holder’s right to such fees shall include, but not be limited to, its representation by staff attorneys of the Holder’s Office of the City Attorney, and such representation shall be valued at the customary and reasonable rates for private sector legal services. 9. The occurrence of any of the following shall constitute an event of default under this Note: (i) the Maker fails to pay any amount due hereunder within fifteen (15) days of its due A:\I43703.WPD April7, 1999 2 date; or (ii) any default by the Maker under the Loan Agreement; or (iii) any default by Maker under the Deed of Trust or the Regulatory Agreement. Upon the occurrence of any event of default, or at any time thereafter, at the option of the Holder hereof, the entire unpaid principal and interest owing on this Note shall become immediately due and payable. This option may be exercised at any time following any such event, and the acceptance of one or more installments thereafter shall not constitute a waiver of such option with respect to any subsequent event. The Holder’s failure in the exercise of any other right or remedy hereunder or under any agreement which secures the indebtedness or is related thereto shall not affect any right or remedy and no single or partial exercise of any such right to remedy shall preclude any further exercise thereof. If the outstanding unpaid principal balance of this Note is not paid within thirty (30) days of demand therefor, the Maker shall pay to the Holder in addition to interest at the Applicable Interest Rate, interest equal to one percent (1%) of the unpaid principal amount, or the highest rate permitted by law, whichever is less, per calendar month, or fraction thereof. If this Note be reduced to judgment, such judgment shall bear the statutory interest rate on judgments. 10. The Holder shall not exercise any right or remedy provided for herein because of any default of the Maker unless, in the event of a monetary default, the Maker shall have failed to pay the outstanding sums within a period of thirty (30) calendar days ’after notice that payment was due. In the event of an uncured nonmonetary default, the Holder shall have first given written notice thereof to the Maker, and the Maker shall have failed to cure the nonmonetary default within a period of thirty (30) days after the giving of such notice of such default; provided that if the nonmonetary default cannot be cured within thirty (30) days and the Maker proceeds diligently and uses best efforts to cure such default until it shall be fully cured within no more than ninety (90) days after the giving of such notice, then the Holder shall not exercise any right or remedy provided for herein until such 90-day period shall expire; provided, however, the Holder shall not be required to give any such notice or allow any part of the grace period if the Maker shall have file, d a petition in bankruptcy or for reorganization or a bill in equity or otherwise initiated proceedings for the appointment of a receiver of its assets, or if the Maker shall have made an assignment for the benefit of creditors, or if a receiver or trustee is appointed for the Maker and such appointment or such receivership is not terminated within forty-five (45) days of such appointment. With regpect to any right to cure or cure period provided in this Section I0, performance of a cure by any affiliated entity or partner of the Maker shall have the same effect as would like performance by the Maker. 11, Any notice, demand, or other communication required hereunder shall not be deemed sufficiently given, unless sent by certified mail, postage prepaid, return receipt requested, or by express delivery service or overnight courier service, to the principal office of the addressee, or at such other address as may be designated, in writing, from time to time: Holder:City of Palo Alto ::ODMA\PCDOCSkLOSANGELES\143702\4 April 6, 1999 3 Maker: 250 Hamilton Avenue Palo Alto, California 94301 Attn: City Clerk MP Palo Alto Gardens Associates 658 Bait Island Road, Suite 300 Redwood City, California 94063 Attn: General Partner with a copy to:Transamerica Realty Services Incorporated 600 Montgomery Street, 16th Floor San Francisco, CA 94111 Attn: David W. Kunhardt The delivery shall be effective on the date shown on the delivery receipt or the date on which the delivery was refused. 12. This Note shall be nonrecourse against the Obligors. No judgment, or execution thereof, entered in any action, legal or equitable, on this Note shall be enforced directly against the Maker or any officer, director or employee of the Maker, but shall be enforced only against the collateral described in the Deed of Trust, and such other or further security as, from time to time, may be hypothecated for this Note. The foregoing limitation shall not be applicable in the event of (a) fraud by the Maker or any material misrepresentation made by the Maker to the Holder in the Loan Agreement, this Note, the Deed of Trust, or any other document or instrument delivered in connection with the Loan, or (b) the sale or transfer or other conveyance or encumbrance of the Improvements, or any interest therein, other than a sale or transfer to MPHC, without the Holder’s prior written consent, or (c) the sale or transfer or other conveyance or encumbrance of all or any part of Maker’s interest in the Project without the Holder’s prior written consent. Furthermore, the foregoing limitation shall not be applicable to the extent of any loss incurred by the Holder due to (a) misappropriation by the Maker of any rents (including, without limitation, the application of rents to other than operating expenses and debt service), security deposits, insurance or condemnation proceedings, or (b) the diversion or other ¯ misappropriation by Maker of any funds from any reserve account maintained in connection with the Project. The Holder shall not in any way be prohibited from naming the Obligors, or any of them, or any person holding under or through them as parties to any actions, suit or other proceedings initiated by the Holder to foreclose or otherwise realize upon any other lien or security interest created under the Deed of Trust, and further provided, however, that nothing in this Section 10 shall be deemed to prejudice the rights of the Holder to recover any funds or payments which were diverted or misappropriated by the Obligors, or any of them. ::ODMA~PCDOCSkLOSANGELES\143702\4 April 6, 1999 4 13. The covenants, agreements, terms, and conditions of this Note shall inure to, and shall be binding on, the successors and assigns of the Obligors. IMP PALO ALTO GARDENS ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP, By MV CENTRAL PARK APARTMENTS, INC., a California non-profit public benefit corporation, its general partner Title: ::ODMA~PCDOCSkLOSANGELES\143702\4 April 6, 1999 5 EXHIBIT C RECORDING REQUESTED BY AND WHEN RECORDED, MAIL TO: City of Palo Alto Office of City Attorney 250 Hamilton Avenue Palo Alto, CA 94301 SPACE ABOVE THIS LINE FOR RECORDER’S USE DEED OF TRUST AND ASSIGNMENT OF RENTS (PALO ALTO GARDENS IMPROVEMENTS LOAN) THIS DEED OF TRUST AND ASSIGNMENT OF RENTS made on , 1999, between MP PALO ALTO GARDENS ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP ("Trustor"), whose address is 658 Bait Island Road, Suite 300, Redwood City, California 94063, First American Title Guaranty Company, a California corporation ("Trustee"), whose address is 1737 North First Street, San Jose, California 95112, and THE CITY OF PALO ALTO ("Beneficiary"), whose address is 250 Hamilton Avenue, Palo Alto, California 94301, WITNESSETH: That Trustor-IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS TO TRUSTEE IN TRUST, WITH POWER OF SALE, that real property and improvements in the City of Palo Alto, County of Santa Clara, State of California, described in Exhibit "A", attached hereto and made a part hereof by reference ("Security" or "Property"), TOGETHER WITH the rents, issues and profits thereof, SUBJECT, HOWEVER, to the right, power, and authority given to and conferred upon Beneficiary, by subdivision B of the fictitious deed of trust recorded in the office of the Recorder of the County of Santa Clara, in Book 5336 of Official Records, at Page 341, adopted and incorporated herein by reference and made a part hereof as if fully set forth herein, to collect and apply such rents, issues and profits, FOR THE PURPOSE OF SECURING payment of the indebtedness evidenced by that Promissory Note ("Note"), and any extensions or renewals thereof, in theprincipal amount of $100,000 executed by Trustor in favor of Beneficiary. TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR AGREES: 1. Fictitious Deed of Trust. By the execution and delivery of this Deed of Trust and the Note secured hereby, that the provisions of subdivisions A and B inclusive, of the fictitious deed of trust recorded in the office of the Recorder of the County of Santa Clara in Book 5336 of Official Records, at Page 341, hereby are adopted and incorporated herein and made a part hereof as fully as though set forth herein at length; that it will observe and perform said provisions; and that the references to property, obligations, and parties in said provisions shall be construed to refer to the property, obligations, and parties set forth in this Deed of Trust. 2. Prohibited Transfers. Trustor shall not, voluntarily or involuntarily or by operation of law, sell, transfer, lease, pledge, encumber, create a security interest in, or otherwise hypothecate or alienate all or any part of the Security without Beneficiary’s prior written consent, with the exception of a transfer of all of the Security to Mid-Peninsula Housing Coalition, a California nonprofit public benefit corporation ("MPHC"). The consent by Beneficiary to any sale, transfer, lease, pledge, encumbrance, creation of a security interest in, or other hypothecation of the Security shall not be deemed to constitute a novation or a consent to any further sale, transfer, lease, pledge, encumbrance, creation of a security interest in or other hypothecation. Beneficiary may, at its option, declare the indebtedness secured hereby immediately due and payable, without notice to Trustor or any other person or entity (except as provided herein), upon any such sale, transfer, lease, pledge, encumbrance, creation of a security interest in, or other hypothecation or alienation in violation hereof. Without the written consent of Beneficiary, no sale, transfer, lease, pledge, encumbrance, creation of a security interest in, or other hypothecation of the Security shall relieve or release Trustor from primary liability under this Deed of Trust or the Note, as the case may be. As used in this Section 2, the term "transfer" includes, without limitation, the following transactions: a.Any total or partial sale, assignment or conveyance, or creation of any trust or power, or any transfer in any other mode or form with respect to the Security or any part hereof or any interest herein, or any contract or agreement tO do the same; b. The cumulative transfer of more than ten percent (10 %) of the capital stock, partnership profit and loss interest, or other form of interest in Trustor; and Co assets of Trustor. Any merger, consolidation, sale or lease of all or substantially all of the 3. Due on Sale. In the event of default by Trustor under this Deed of Trust, or if the Property or any part thereof or any interest therein is sold, agreed to be sold, conveyed, alienated or refinanced by Trustor, or by the operation of law or otherwise, without the written consent of Beneficiary (with the exception of a transfer of all of the Security to MPHC), all obligations secured by this instrument irrespective of the maturity dates expressed therein, at the option of Beneficiary hereof and without demand or notice shall immediately become due and payable. 2 4. Subordination. Beneficiary, for itself and its successors and assigns, covenants and agrees that all of its rights and powers under this Deed of Trust are subordinate and subject to the rights of ABAG Finance Authority for Nonprofit Corporations under that certain Deed of Trust dated as of April 1, 1999 (the "Bond Deed of Trust"). Any default under the Bond Deed of Trust, or under any promissory note or other instrument secured thereby, shall constitute a default hereunder. 5. Notices. Trustor requests that a copy of any Notice of Default, and of any Notice of Sale hereunder, be mailed to it at its address hereinabove set forth, and that an additional copy of any such notice be mailed to the City of Palo Alto, Office of the City Clerk, 250 Hamilton Avenue, Fifth Floor, Palo Alto, California 94301. 6. Rider. The contents of the two-page Rider to Deed of Trust attached hereto are incorporated herein by this reference. MP PALO ALTO GARDENS ASSOCIATES, A CALIFORNIA LIMITED PARTNERSHIP, By: MV CENTRAL PARK APARTMENTS, INC., a California non-profit public benefit corporation, its general partner By: Name: Title: Name: Title: By: CERTIFICATE OF ACKNOWLEDGMENT (Civil Code § 1189) STATE OF CALIFORNIA COUNTY OF ) ) ) On , before me, the undersigned, a notary public in and for said County, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Notary Public in and for said County and State STATE OF CALIFORNIA COUNTY OF ) ) ) On , before me, the undersigned, a notary public in and for said County, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Notary Public in and for said County and State 4 EXHIBIT A Property Description for Ground Leasehold Interest and Improvements Palo Alto Gardens Apartments Palo Alto, California That certain leasehold interest created under the Ground Lease between Mid-Peninsula Housing Coalition as lessor and MP Palo Alto Gardens Associates, a California limited partnership, as lessee, dated , 1999, and recorded in the Official Records of Santa Clara County, California as Instrument No. ~, together with all structures, buildings, and improvements of every kind or nature, and any and all replacements thereto, now or at any time in the future, located upon the following described property: PARCEL ONE: Real property in the City of Palo Alto, County of Santa Clara, State of California, described as follows: Parcel 1, as the same is delineated and so designated on the Parcel Map recorded July 7, 1972 in Book 304 of Maps, at page 21, Santa Clara County Records. APN 147-09-066 and 147-09-067 PARCEL TWO: All that certain real property situate in the City of Mountain View, County of Santa Clara, State of California, described as follows: All of Lots 1 and 2, in Block 1, as shown upon that certain Map entitled, "Tract No. 1215 Fairview", which Map was filed for record in the office of the Recorder of the County of Santa Clara, State of California on September 29, 1953 in Book 46 of Maps, at pages 10 and 11. / APN 147-10-061 5 RIDER TO DEED OF TRUST (Trustor: MP Palo Alto Gardens Associates; Beneficiary: City of Palo Alto) THIS RIDER TO DEED OF TRUST is made this. day of April, 1999, by and between MP Palo Alto Gardens Associates, a California Limited Partnership ("Trustor") and The City of Palo Alto ("Beneficiary") and is incorporated into and shall be deemed to amend and supplement the Promissory Note Secured by Deed of Trust and Assignment of Rents, and Deed of Trust and Assignment of Rents (together, the "Loan Documents"), which Loan Documents evidence the loan by Beneficiary to Trustor in the amount of $100,000 of even date herewith (.the "Loan"). The limited partner of Trustor (the "Limited Partner") shall have the right to cure any defaults of Trustor under the Loan Documents and Beneficiary agrees to accept cures tendered by Limited Partner within 30 days of Limited Partner’s receipt of written notice of such default, plus such additional time as is reasonably necessary to cure the default provided Limited Partner has commenced the cure within such 30 day period and is diligently prosecuting the cure, but in no event shall the cure period exceed 90 days. Beneficiary agrees that the Loan will not be in default and the Trustor will not be in breach of any of its obligations in connection therewith until after the expiration of all notice and cure periods provided to the Trustor and Limited Partner. A breach or default with respect to any representation or warranty made by Trustor shall only occur if the breach of such representation or warranty by Trustor materially adversely affects the Beneficiary’s security for the Loan or the use, operation or occupancy of the project. All insurance proceeds and the proceeds of any award or claim for damages, in connection with a condemnation or taking (collectively, the "Proceeds"), shall be applied to restore or repair of the Property, provided the Trustor reasonably determines that such restoration or repair is economically feasible and there is no default unrelated to the casualty or condemnation continuing after the expiration of applicable cure periods. If the Trustor determines that such restoration or repair is not economically feasible or if a default is continuing after expiration of all applicable cure periods, the Proceeds may be applied to the sums secured by the Deed of Trust, with the excess, if any, paid to the .Trustor. Beneficiary agrees that the following shall not be deemed a sale, transfer or conveyance allowing acceleration of the Loan and shall not be charged an assumption or transfer fee by Beneficiary: (i) the transfer of a limited partnership interest in Trustor to Limited Partner or any affiliate thereof, or the subsequent transfers of the Limited Partner interest; (ii) the removal of the general partner of the Trustor in accordance with the terms of Trustor’s limited partnership agreement, provided that the substitute general partner is reasonably acceptable to Beneficiary; (iii) residential leases to tenants entered into in the ordinary course of business; and (iv) the purchase of the Project by Beneficiary or its affiliate at the end of the 15-year compliance period. 6 Beneficiary acknowledges that Trustor will be entering into a regulatory agreement with the California Tax Credit Allocation Committee, and that in the event of foreclosure, the provisions of Internal Revenue Code Section 42(h)(6)(E)(ii) shall apply. END OF RIDER ::ODMA\PCDOCS\LOSANGELES\I46627\l 7 EXHIBIT D RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Palo Alto Office of the City Attorney 250 Hamilton Avenue Palo Alto, CA 94301 RECORDED WITHOUT CHARGE. GOVERNMENT CODE SECTIONS 6103, 27383 SPACE ABOVE THIS LINE FOR RECORDER’S USE REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS FOR PALO ALTO GARDENS APARTMENTS THIS REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS ("Regulatory Agreement") is made and entered into as of , 1999, by and between the City of Palo Alto, a chartered city organized and existing under the constitution and laws of the State of California ("City"), and MP Palo Alto Gardens Associates, a California Limited Partnership, with offices at 658 Bair Island Road, Suite 300, Redwood City, California 94063 ("MPPAG"); WITNESSETH: WHEREAS, MPPAG intends to acquire the improvements constituting the 156 unit rental apartment complex commonly known as Palo Alto Gardens Apartments located at 648 San Antonio Road, Palo Alto, California (the "Improvements") and concurrently to enter into a 60 ’year ground lease of the land thereunder; WHEREAS, MPPAG has requested that the City provide financial assistance for its intended acquisition of the Improvements; WHEREAS, at least one hundred thirty (130) units of the Improvements are currently occupied by households receiving federally funded rental assistance under the Section 8 program; ::ODMA\PCDOCS\LOSANGELES\143065\6 April 6, 1999 WHEREAS, the preservation of affordable, rental housing occupied by Very Low- Income and Low-Income Households receiving federally funded rental assistance is an objective of the City’s Consolidated Plan and the Housing Element of the City’s Comprehensive Plan, and Palo Alto Gardens Apartments has been specifically identified as a priority for preservation; WHEREAS, in order to preserve the existing use and occupancy of the Property, the City has agreed to provide financial assistance in the form of a loan to MPPAG to assist MPPAG in the acquisition of the Improvements (the "Improvements Loan"), provided that MPPAG agrees to operate the Property in accordance with the terms and conditions of this Regulatory Agreement; WHEREAS, the source of funds for the Improvements Loan is federal Community Development Block Grant funds, and the acquisition and preservation of existing rental housing for Low-Income Households and Very Low-Income Households is an eligible use of those funds; WHEREAS, as a further condition to making the Improvements Loan the City has required that MPPAG agree to provide notification to Section 8 Households as units become available for rental and take certain other actions in order to make units available to Section 8 Households; WHEREAS, as a further condition to making the Improvements Loan the City has required that certain reserves be established and funded by MPPAG and others, and that MPPAG agree to use the funds in such reserves to subsidize the rents paid by Section 8 Households in certain circumstances; WHEREAS, in consideration of the City’s making the Improvements Loan, MPPAG has agreed to observe and perform all of the terms and conditions set forth in this Regulatory Agreement for a period of fifty-five (55) years from the date on which this Regulatory Agreement is recorded in the Official Records of Santa Clara County, and in order tO ensure that the Improvements will be used and operated in accordance with certain restrictions concerning affordability, operation, and maintenance during such period, the parties wish to enter into this Regulatory Agreement; NOW THEREFORE, in consideration of the mutual promises and covenants ~nd terms, conditions and provisions set forth in this Regulatory Agreement and for other valuable consideration, the parties agree as follows: ::ODMA\PCDOCS\LOSANGELES\143065\6 2 April 6, 1999 Sidley & Austin 4/7/98 2:32: PAGE 002/14 RightFAX ARTICLE 1 -DEFINITIONS The following terms as used in this Regulatory Agreement shall have the respective meanings assigned to them in this Article 1, unless the context clearly indicates otherwise: "Additional Reserve Requirement" shall mean $1,460,000 (which amount is predicated on the interest rate on the Bonds being 5.379%; in the event the actual interest rate on the Bonds is greater or less than 5.379 %, the Additional Reserve Requirement shall be adjusted accordingly and the City and MPPAG will amend this Regulatory Agreement in writing, and City hereby authorizes City Manager to execute any such amendment on behalf of City). "Bond Loan" means the loan to MPPAG of the proceeds of the Bonds by Issuer, secured by a frrst lien deed of trust on the Land, the Improvements and the leasehold estate under the Ground Lease. "Bond Loan Agreement" means the Loan Agreement among Issuer, Trustee and MPPAG dated as of April 1, 1999 relating to the terms and conditions of the Bond Loan. "Bonds" means ABAG Finance Authority for Nonprofit Corporation Multifamily Housing Revenue Bonds (Palo Alto Gardens Apartments), ;Series 1999A, in the approximate principal amount of $11,435,000, the proceeds of which have been loaned to MPPAG to finance the acquisition of the Improvements by MPPAG. "CDBG" means the federal Community Development Block Grant Program of which the City is an entitlement jurisdiction. "City" means the City of Palo Alto, a chartered city organized and existing under the constitution and laws of the State of California. "City Affordabiliry Reserve Fund" is defined in Section 5.3. "Former Section 8 Assisted Household" means a Very Low-Income Household living at the Property that had been receiving Section 8 Assistance while living at the Property, but is no longer receiving Section 8 Assistance from any Section 8 Assistance Program (or is receiving a reduced amoum of Section 8 Assistance) due to a Termination of Section 8. "Ground Lease" means the ground lease of the Land between MPHC as lessor and MPPAG as lessee pursuant to which MPHC leases the Land to MPPAG for. a term of not less than sixty years. ::ODMA\PCDOCS~LOSANGELES\143065~7 -3- April 7, 1999 California. "Housing Authority" means the Housing Authority of the County of Santa Clara, "HAP Contract" means a Housing Assistance Payment contract with HUD or the Housing Authority for project-based Section 8 rental assistance. "HUD" means the United States Department of Housing and Urban Development. "Improvements" means the buildings, structures and other improvements located on the Land comprising the 156-unit rental apartment complex known as Palo Alto Gardens. "Improvements Loan" means the loan in the amount of $100,000 made to MPPAG by the City at the time of the acquisition of the Improvements by MPPAG referred to in the Recitals hereto. "Indenture" means the Indenture of Trust entered into between Issuer and Trustee in connection with the issuance of the Bonds. "Issuer" means the ABAG Finance Authority for Nonprofit Corporations, a joint exercise of power of authority organized and existing under the laws of the State of California. "Land" means the land (excluding the Improvements thereon) commonly known as 648 San Antonio Road, Palo Alto, California, and which is more particularly described in Exhibit A. "Low-Income Household" means a household with gross income that does not exceed 60 % of Median Income and which is otherwise a qualified Tenant under the Tax Credit Regulations. "Low-Income Units" means the Units which are occupied by Low-Income, Households. "Median Income" means the median income for households in Santa Clara County, State of California, as published from time to time by HUD in a manner consistent with the determination of median gross income under the Section 8 program. In the event that such income determinations are no longer published by HUD, or are not updated for a period of at least 18 months from the date of the previous publication, the City shall provide Owner with other income determinations that are reasonably similar with respect to methods of calculation contained in that previous HUD publication. ::ODMA\PCDOCS\LOSANGELES\143065\6 -4- April 6, 1999 5idley & AUStin 4/7/88 2:32: PAGE 003/lg RightFAX "MPItC" means the Mid-Peninsula Housing Coalition, a corporation duly organized and existing under the Nonprofit Corporation Law of the State of California. "MPPAG" means MP Paid Alto Gardens Associates, a California Limited Partnership. "Owner" means MPPAG or its successors, h~irs and assigns in which title to the Property is vested during the term of this Regulatory Agreement. "Project" means the acquisition and rehabilitation of the Property for the purpose of providing 155 rental housing units (plus a manager’s uni0 which shall be offered for rent and occupied as provided in this Regulatory Agreement. "Project Revenues" means the Property’s operating revenues from all sources, including rent paid by Tenants, miscellaneous income including laundry, interest on tenant security deposits, and late fees, and payments received from any Section 8 Assistance Program, but excluding funds from the Rent Reserve Fund or the City Affordability Reserve Fund. "Projected Reserve Distribution" means, for any year following a Termination of Section 8, the amount of the shortfall that Owner projects will need to be drawn from the Rent Reserve Fund and the City Affordability Reserve Fund, based on the methodology described in Exhibit "D" attached hereto. "Property" means the Land (including the leasehold estate interest in tl~e Land under tile Ground Lease) and the ImprovementS. "Regulatory Agreement" means this "Regulatory Agreement and Declaration of Restrictive Covenants for Palo Alto Gardens Apartments~. "Rent" means the sum total of all monthly paymehts to be made by the Tenant of a Unit for the following privileges: use and occupancy of the Unit and associated facilities, including parking; any separately charged fees or service charges assessed by Owner which are required of all Tenants, other than security deposits; and the cost of an adequate level of service Ibr utilities paid by the Tenant, as determined by the applicable utility allowance for the Units as set by the Housing Authority under the Section 8 program regulations. "Rent Reserve Fund" has the meaning set forth in Section 5.1. "Section 8" means Section 8 of the United States Housing Act of 1937 ("Act"), as amended. ::ODMA\PCDOCS\LOSANGELES\143065\7 5 April 7, 1999 "Section 8 Assistance" means rental assistance on behalf of households living at the Property provided pursuant to Section 8, whether indirectly pursuant to a Section 8 Housing Assistance Program contract, or directly pursuant to tenant-based Section 8 vouchers or certificates. "Section 8 Assistance Program" means a program funded by HUD that provides rental assistance on behalf of Low-Income Households, or a successor federal rental assistance program providing similar assistance. "Section 8 Assisted Household" means a household which holds a valid voucher or certificate under a Section 8 Assistance Program. "Tax Credit Regulations" means the laws, statutes, rules, regulations, notices and memoranda issued pursuant to the United States low-income housing credit (Section 42 of the Internal Revenue Code). "Tax Credit Regulatory Agreement" means the thirty (30) year regulatory agreement which will be recorded against the Improvements to secure compliance by MPPAG with the Tax Credit Regulations. "Tenants" (individually, "Tenant") means the occupants of the Project’s Units. "Termination of Section 8" means the modification, expiration or other termination of a Section 8 Assistance Program Which results in a reduction of Project Revenues such that Project Revenues are insufficient to pay the reasonable and necessary expenses of operation, maintenance and repair of the Project, debt service and other required expenses identified in the Indenture. "Trustee" means the U. S. Bank Trust, National Association. "Units" (individually, "Unit") means the one hundred fifty-five (155) units in the Property made available for rental to the general public. The one (1) apartment reserved for a residem manager is not a Unit under this Regulatory Agreement. "Very Low-Income Household" means a household with gross income that does not exceed 50 % of Median Income and which is otherwise a qualified Tenant under the Tax Credit Regulations. "Very Low-Income Units" means the Units which are required to be occupied by Very Low-Income Households. ::ODMA\PCDOCS\LOSANGELES\143065\6 -6- April 6, 1999 ARTICLE 2 - AFFORDABILITY COVENANTS 2.1 Use, Occupancy and Rent Restrictions MPPAG shall operate and maintain the Improvements as a rental housing complex for occupancy primarily by Very Low-Income Households and Low-Income Households. Without derogating the importance of MPPAG’s compliance with the other provisions of this Regulatory Agreement, MPPAG’s compliance with the provisions of this Article 2 is of particular importance to City and is one of the principal reasons for which City agreed to make the Improvements Loan to MPPAG. 2.1.1 Very Low-Income Units: (i) At all times during the term of this Regulatory Agreement, at ~east thirty-one (31) of the Units shall be rented and occupied by, or, if vacant, made available for rental and occupancy by, Very Low-Income Households, as certified according to Section 4.1 immediately prior to each Tenant’s initial occupancy and annually thereafter. (ii) Subject to Section 2.4 below, the maximum monthly Rent charged to each of the Tenants of the Very Low-Income Units shall not exceed the amount of Rent allowed under the Tax Credit Regulations, as published annually for Santa Clara County for 50 % of Median Income units based on the size of the actual unit. (iii) Owner may designate any thirty-one (31) of the Project’s one hundred and fifty-five (155) Units as the required Very Low-Income Units and may change the designated Very Low-Income Units from time to time, as vacancies occur and Tenant incomes and household composition changes. 2.1.2 Low-Income Units: (i) At all times during the term of this Regulatory Agreement at least ninety-nine (99) of the Units shall be rented and occupied by, or, if vacant, made available for rental and occupancy by Low-Income Households, as certified according to Section 4.1 immediately prior to each Tenant’s initial occupancy and annually thereafter. (ii) Subject to Section 2.4 below, the maximum monthly Rent charged to each of the Tenants of the Low-Income Units shall not exceed the amount of Rent allowed under the Tax Credit Regulations, as published annually for Santa Clara County for 60 % of Median Income units based on the size of the actual unit. ::ODMA\PCDOCS\LOSANGELES\143065\6 -7- April 6, 1999 2.1.3. Other Units: (i) The remaining twenty-five (25) Units are not required to comply with the rent and occupancy restrictions of this Section 2.1, but shall be subject to all of the other provisions of this Regulatory Agreement, including but not limited to Section 3.9 and Article 5. (ii) In accordance with CDBG regulations and the Federal Assurances with R~spect to CDBG Funds attached hereto as Exhibit "C", there shall be no displacement of any Section 8 Assisted Household that was residing in the Project as of August 27, 1998, as shown in the list of Tenants dated August 27, 1998 submitted with MPHC’s application for funding to the City, or that moved into the Project subsequent to August 27, 1998. 2.2 Units Occupied by Section 8 Assisted Households Units occupied by Section 8 Assisted Households shall be considered to be qualified Very Low or Low-Income Units based on each household’s annual income as certified pursuant to regulations and procedures of the Section 8 Assistance Program. Notwithstanding anything to the contrary contained in Section 2.1.1 or 2.1.2, and Section 2.6, the Rent for Units occupied by Section 8 ~ssisted Households shall be set pursuant to Section 8 regulations and procedures. 2.3 Noncompliance A failure by Owne~" to maintain the rent affordability and occupancy restrictions required by this Regulatory Agreement will constitute a default of this Regulatory Agreement subject to the notice and cure provisions of Section 8.10. The Project will comply with the affordability covenants, notwithstanding a temporary noncompliance with the provisions of this Article, if the noncompliance arises as a result of an increase in the income of any Tenant, and if the next vacancy is filled in accordance with this Regulatory Agreement. 2.4 Lease Provisions Owner shall include in the leases or rental agreements for all Units occupied by Very Low-Income or Low Income Households a provision which authorizes Owner to immediately terminate the tenancy of any Tenant, after Owner determines that one or more members of such Tenant’s household has misrepresented any fact material to the Tenant’s qualification for occupancy. Each lease or rental agreement shall provide that the Tenant is subject to the requirement for the execution of an annual income certification in accordance with Section 4.1 below, and that, if the Tenant’s income increases above the applicable income limits, such Tenant’s Rent may be increased. Owner and the City hereby acknowledge that Section 42(h)(6)(E)(ii) of the United States Internal Revenue Code, as amended, does not permit the eviction or termination of tenancy (other than for good cause) of an existing Tenant of any Low- ::ODMA\PCDOCS\LOSANGELES\143065\6 -8- April 6, 1999 Income Unit or any increase in the gross rent with respect to such Unit not otherwise permitted under Section 42 for a period of three (3) years after the date the Property on which such Unit is located is acquired by foreclosure or instrument in lieu of foreclosure. 2.5 Applicability of Tax Credit Regulations. All definitions, procedures and calculations related to the occupancy, determination of Rent and qualification of Tenants, and determination of Median Income for purposes of this Article 2 shall be determined according to the Tax Credit Regulations. In the event of a conflict between the provisions of Article 2 of this Regulatory Agreement and the Tax Credit Regulations, the Tax Credit Regulations shall prevail. SECTION 3 - COVENANTS AND CONDITIONS 3.1 General In consideration for receiving the Improvements Loan from City, MPPAG shall lease the Land pursuant to the Ground Lease and shall rehabilitate or cause to be rehabilitated the Improvements in accordance with the project description submitted by MPHC in its application for funding to City dated November 18, 1998 and with all applicable requirements and regulations of HUD and the CDBG Program, including those HUD regulations set forth in Part 570 of Title 24 of the Code of Federal Regulations ("CFR"), as amended. 3.2 Nontransient residential use No part of the Project shall be operated as transient housing; provided, however, the Project shall not be considered to be used on a transient basis merely because the Project or any of the Units is rented on a month-to-month basis. 3.3 Insurance Owner, at .its sole cost and expense, shall obtain and maintain during the term of this Regulatory Agreement, insurance with responsible companies authorized to engage" in the offering of insurance services in California in such amounts and against such risks as shall be satisfactory to the City’s risk manager, including, without limitation, workers’ compensation, employer’s liability, commercial general liability, comprehensive automobile liability, personal injury and property damage insurance, as appropriate, as set forth in Exhibit "B", as appropriate, insuring against all liability of Owner and its respective partners, directors, officers, employees, agents, and representatives arising out of or in connection with the Project, or Owner’s performance or non-performance under this Regulatory Agreement. Modifications of any insurance requirements set forth in Exhibit "B" shall be submitted, in writing, to the City for ::ODMA\PCDOCS\LOSANGELES\143065\6 -9- April 6, 1999 approval by the City’s risk manager. Any such modification shall receive the concurrence of the Office of City Attorney. Owner shall name the City as an additional insured on all policies of insurance required under the terms of other financing. 3.4 Taxes and assessments Owner shall pay all real and personal property taxes, assessments and charges and all franchise, income, employment, old age benefit, withholding, sales, and other taxes assessed against it, or payable by it, at such times and in such manner as to prevent any penalty from accruing, or any lien or charge from attaching to the Property; provided, however, that Owner shall have the right to contest in good faith, any such taxes, assessments, or charges. In the event Owner exercises its right to contest any tax, assessment, or charge against it, Owner, on the final determination of the proceeding or contest, shall immediately pay or discharge any decision or judgment rendered against it, together with all costs, charges and interest. 3.5 Maintenance Owner shall maintain the Property in good repair and working order, and in a manner consistent with the housing quality standards set forth in Section 882.109 (24 CFR Part 882 of the federal Section 8 Assistance Program regulations), and all applicable City ordinances. 3.6 Property inspections The City, HUD or their authorized representatives, shall have the right to make periodic on-site inspections of the Property and the Units during working hours. 3.7 Nondiscrimination 3.7.1 All of the Units shall be available for occupancy on a continuous basis to members of the general public in accordance with the affordability covenants of Article 2 and the preference for holders of Section 8 vouchers or certificates required by Section 3.9. There shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, age, familial status, sex, sexual orientation, marital status, national origin, ancestry, handicap, source of income or any other arbitrary discrimination based on personal characteristics, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of any Unit, nor shall Owner or any person claiming under or through Owner, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees of any Unit or in connection with the employment of persons for the construction, operation and management of any Unit. ::ODMA\PCDOCS\LOSANGELES\143065\6 - 10- April 6, 1999 3.7.2 Notwithstanding the nondiscrimination provisions of Section 3.7.1, and subject to State and Federal laws, Owner may limit occupancy of the one bedroom Units at the Property to elderly or disabled households as defined by HUD consistent with the occupancy of the Improvements since their construction in 1973. 3.8 Efforts to S.e.ek Section 8 Housing Assistance Payment Contrac.ts As a continuing obligation during the term of this Regulatory Agreement, and subject to Section 3.9.5 below, Owner shall, in good faith, undertake all actions as required and necessary to seek to obtain federal HAP Contracts for project-based Section 8 rental assistance as may be made available from HUD or from the Housing Authority from time to time. Owner shall seek the longest HAP Contract term available and shall seek such contract assistance for all eligible Units. In the event that any such HAP Contract is obtained and then later terminated by HUD for all, or a portion of, the Units, Owner shall continue to rent to all Tenants residing in the affected Units under the terms of any replacement or successor rental assistance program provided by HUD or the Housing Authority to the Tenants. 3.9 Preference for Occupancy of Units to Holders of Tenant-Based Section 8 Vouchers or Certificat.~ 3.9.1 MPPAG’s compliance with the provision of this Section 3.9 throughout the term of this Regulatory Agreement is of particular importance to City and is one of the principal reasons for which City agreed to make th(~ Improvements Loan to MPPAG; provided, however, the foregoing is not intended to derogate the importance of MPPAG’s compliance with the other provisions of this Regulatory Agreement. 3.9.2 Owner shall notify the Housing Authority in writing of vacancies of Units that are not subject to any HAP Contract promptly from time to time upon Owner’s receipt from a Tenant of a notice to vacate a Unit, or upon Owner’s actual knowledge of vacation of a Unit by a Tenant if no notice has been given by the Tenant. Owner shall give preference for occupancy of vacated Units to Section 8 Assisted Households for a period of 30 days from the date on which written notice of the vacancy is received by the Housing Authority. Owner shall cooperate with the Housing Authority in permitting inspections of the Units and in allowirtg a reasonable amount of time for Section 8 Assisted Households to execute rental agreements and to occupy the Units, If no Section 8 Assisted Houseltold meeting the Owner’s tenant selection criteria is available to rent a vacated Unit within the 30-day period, then Owner may offer rental of the Unit to a Very Low or Low-Income Household pursuant to Article 2.1.1 or 2.1.2 above. 3.9.3 Notwithstanding the 30-day preference for holders of Section 8 Assistance, in no case shall Owner be required to keep a Unit vacant without receipt of rent revenue for more than twenty-one (2I) days after its vacation by the prior Tenant, provided that Owner has given ::ODMA \PCDOCSkLOSANGELES~,I4306~7 ~idley ~ AUstin 4/7188 2:32: PAGE 005114 written notice to the Housing Authority of the vacancy of a Unit within fivc calendar days after receipt from a Tenant of notice to vacate a Unit, or Owner’s actual knowledge of vacation of a Unit, whichever occurred first, and has otherwise cooperated with the Housing Authority in permitting inspection of the Unit. 3.9.4 Owner may, at any time during the term of this Regulatory Agreement, as an alternative to offering vacated Units to Section 8 Assisted Households as described in Section 3.9.2, rent any Unit to a Very Low-Income Household whose annual income, as certified according to Section 4.1 itnmediately prior to such Tenant’s initial occupancy, does not exceed 40% of the Median Income and which is otherwise a qualified Tenant under the Tax Credit Regulations; provided, however, the monthly Rent charged to any such Tenant shall not exceed the amount of Rent allowed for 40% of Median Income units under the Tax Credit Regulations, as published annually for Santa Clara County, based on the size of the Tenant’s Unit. 3.9.5 If during the term of the Indenture, the Property’s proposed annual budget for any fiscal year demonstrates, based on the Property’s then current occupancy and the Property’s actual average annual turnover rate, that renting all Units expected to become available during the coming fiscal year to Section 8 Assisted Households could reasonably be expected to cause Project Revenues to fail to be sufficient to achieve a 1.40 debt coverage ratio, as such term is calculated in the Indenture, Owner shall have the right to suspend compliance with subsection 3.9.2 during the fiscal year in question, but only to the extent necessary to permit Projects Revenues to be sufficient to achieve a 1.40 debt coverage ratio. Owner shall promptly notify City in writing of its determination that it has the right to suspend compliance with subsection 3.9.2. Owner shall provide with its notification to City a copy of the Property’s adopted budget and the calculation described herein together with a certification that the suspension of subsection 3.9.2 was reasonably necessary to permit the Property to achieve a 1.40 debt coverage ratio. The right of Owner to suspend compliance with subsection 3.9.2 and 3.9.3 naust be established separately for each fiscal year. 3, 10 Selection Criteria for Applicants for Tenancy Owner will accept Section 8 Assisted Households as Tenants on the same basis as all other prospective tenants. Owner shall not apply selection criteria to Section 8 Assisted Households that are more burdensome than criteria applied to all other prospective tenants, nor shall Owner apply or permit the application of management policies or lease provisions that have the effect of precluding occupancy of Units by Section 8 Assisted Households. ARTICLE 4 - INCOME CERTIFICATION AND REPORTING 4.1 Income certification Owner will obtain, complete and maintain on file, immediately prior to initial occupancy and annually thereafter, an income certification from each Tenant renting any of the ::ODMA\PCDOCS\LOSANGELES\l,~3065\7 Very Low-Income and Low-Income Units, Owner shall make a good faith effort to verify that the income provided by an applicant, or occupying household, in an income certification is accurate in accordance with the Tax Credit Regulations. Copies of tenant income certifications shall be made available to the Cfly, including its designated representatives, and HUD upon request. 4.2 Reporting and provision of informati6n Owner will submit reports in a format and at a time specified by the City. The reports will contain such information as the City or HUD may then require to document compliance with the use and occupancy restrictions and other requirements of this Regulatory Agreement. The City, including its designated representatives, and HUD shall have the right to examine and make copies of all books, records or other documents of Owner which pertain to the Property or any Unit and Owner shall provide any information reasonably requested. Owner shall deliver to the City copies of all reports submitted to the California Tax Credit Allocation Committee and the Internal Revenue Service, as may be requested by the City. 4.3 Records Owner shall nuaimain complete, accurate and current records pertaining to the Property and the Units, and shall permit any duly authorized representative of the City or HUD to inspect records, including records pertaining to incomes and household sizes of Tenants’ households, and the rents and other charges for occupancy of the Units during business hours, All Tenants fists, applications and waiting lists relating to the Property shall at all times be kept separate and identifiable from any other business of Owner and shall be maintained as required by the City, in a reasonable condition for proper audit and subject to examination by representatives of the City or HUD. 4.4 Financial Audits Owner shall provide City, during the term of this Regulatory Agreement, with copies of audited financial statements of Owner, including any management letter comments on the adequacy of internal or operational controls, within one hundred fifty (150) days of the close of each fiscal year of the Property. The audit covering the fiscal year in which the proceeds of the Improvements Loan are disbursed to the Owner shall be conducted in accordance with OMB Circular A-133, as amended (implemented at 24 CFR Part 45). City reserves the right, during the term of this Regulatory Agreement, to audit the records, including the financial records supporting the aforementioned financial statements, and other records and documents pertaining to the operations of the Property. Except for (a) leases with the Tenants in the ordinary course of business, (b) transfer of a ninety-nine and nine-tenths percent (99.9%) limited partnership interest to one or ::ODMA\PCDOCS’~LOSANGELES\I43065\7 - 13- April 7, 1999 Sidley ~ Austin 4/7/89 2:32: PAGE 007/14 more entities controlled by the Transamerica Occidental Life Insurance Company, or (c) the exercise of an option or right of first refusal to acquire the Improvements by the general partner of MPPAG, or by MPHC, or by art affiliate of either of them, Owner shall not cause or permit any voluntary transfer, assignment or encumbrance of its interest in the Improvements or lease or permit a sublease of all or any part of the Improvements without first obtaining the City’s written consent. Any transfer, assignment, encumbrance, or lease without the City’s written consent’shall he voidable and, at the City’s election, shall constitute a breach of this Regulatory Agreement. No consent to any assignment, encumbrance or lease shall constitute a consent to any subsequent assignment, encumbrance or lease, or a waiver of any of the City’s rights under this Regulatory Agreement. ARTICLE 5: RENT RESERVE FUNDI TERMINATION OF SECTION8 5.1 Rent Reserve Fund Pursuant to the Indenture and the Bond Loan Agreement, Trustee will establish and administer a Rent Reserve Fund, the funds contained in which will be made available to Owner from time to time in the event of a Termination of Section 8 as more particularly described in the Indenture and the Bond Loan Agreement. The Rent Reserve Fund consists of a "Land Lease, Affordability and Operating Reserve Fund" funded by MPPAG from excess cash flow from the Project, and the "MP Rent Reserve" funded by MPHC from Ground Lease rent payments received by MPHC. MPPAG will deposit and apply the gross revenues from the Property strictly in accordance with Section 3.04 of the Bond Loan Agreement, including but not limited to clause Fourth thereof, which provides for MPPAG to make payments from time to time to the Trustee, for deposit by Trustee in the Land Lease, Affordability and Operating Reserve Fund. Until such time as the aggregate amount in the Rent Reserve Fund is equal to or greater than the Additional Reserve Requirement, the limited partner of MPPAG has guaranteed the payment of any difference between the amount in the Rent Reserve Fund and the amount of the Additional Reserve Requirement pursuant to a Standby Funding Agreement. 5.2 Condition of Improvements Loan City has provided the Improvements Loan to MPPAG in reliance on the protections provided to Section 8 Assisted Households and other Very Low-Income Households residing at the Property in the event of a Termination of Section 8 as set forth in this Article 5. Furthermore, City has agreed to allow MPPAG to defer repayment of the Improyements Loan in order to allow the Rent Reserve Fund to be funded by the earliest possible date. The provisions in the Indenture regarding the Rent Reserve Fund, the Additional Reserve Requirement and the Standby Funding Agreement are to be considered conditions and covenants of this Regulatory Agreement as if set forth in full herein. Although this Regulatory Agreement is entered into in connection with the making of the Improvements Loan, the obligations and agreements of MPPAG under this Regulatory Agreement (including those provisions of the Indenture and the Bond Loan Agreement incorporated herein) will survive the repayment of the Improvements Loan, whether at maturity or sooner. ::ODMAWCDOCS~LOSANGELES\143065\7 5.3 C[.ty Affordability. Reserve Fu, nd. In addition to its obligation to contribute to the MP Rent Reserve as described in Section 5.11 MPHC has agreed to fund a separate supplemental affordability reserve fund, to be held by a financial institution satisfactory to City, for the benefit of City (the "City Affordability Reserve Fund"). 5.4 Additional Agreelnents of Owner Following a Termination of Sectior~ 8 In the event of a Termination of Section 8, Owner shall use funds made available to it from the Rent Reserve Fund and/or the City Affordability Reserve to supplement Project Revenues in order to permit Former Section 8 Households and other Very Low-Income Households then residing at the Property to continue to reside at the Property for so long as each Tenant continues to qualify as a Very Section 8, Owner shah set Rents for all lowest possible amount consistent with the City Affordability Reserve, and (b) and debt service on the Bond Loan. To Low-Income Household. Following a Termination of Units occupied by Very Low-Income Households at the (a) the funds available from the Rent Reserve Fund and the amount of Project Revenues and operating expenses the extent possible, Very Low Income Households shall pay as Rent not more than the greater of the Rent paid by the Tenant immediately prior to the Termination of Section 8, or 30% of the Tenant’s monthly household income as certified according to Section 4.1. Following the end of the first calendar year of Owner during which a Termination of Section 8 occurred, and following the end of each calendar year thereafter, after receipt of the financial audit for the Project, Owner will provide to City a copy of the financial audit for the Project for the most recently completed calendar year and a certified rent roll tor the Project as of December 31 of the most recent calendar year. In the event (a) the sum of Project Revenues for the calendar year just ended, plus the Projected Reserve Distribution for the then- present calendar year, is less than (b) the sum of the Expenses for Operating and Maintaining the Project (as that term is defined in Section 3.04 of the Bond Loan Agreement, including reserves for replacement) for the calendar year just ended, plus the debt service expense of the Bonds for the then-present calendar year, then Owner will have the right to increase Rents for Very Low- Income Households by an amount not to exceed the amount that, when added to Project Revenues for the calendar year just ended, would cause sum (a) to equal sum (b); provided, however, in no event shall Owner increase the Rent charged for any Unit to an amount greater than permitted under Article 2 hereof. In no event will Owner terminate the tenancy of any Former Section 8 Household or other Very Low-Income Household in order to rent the Unit to a higher income household; however the Owner may offer such tenants the opportunity to move to other properties owned or managed by MPHC or its affdiates. Following a Termination of Section 8, Owner shall offer vacated Units to qualified households pursuant to the provisions of Article 2 hereof. 5.5 MPPAG’s compliance with the provision of this Article 5 is of particular importance to City and is one of the principal reasons for which City agreed to make the Improvements Loan to MPPAG; provided, however, the foregoing is not intended to derogate the importance of MPPAG’s compliance with the other provisions of this Regulatory Agreement. ::ODMA\PCDOCS\LOSANGELES\143~$\7 - 15- April 7, 1999 ARTICLE 6 - HUD REGULATIONS It is agreed and understood that the terms and conditions of this Regulatory Agreement are subject and subordinate to the provisions of the CDBG program regulations, and all applicable HUD administrative requirements. Owner shall perform all of its activities under this Regulatory Agreement in compliance with all federal laws and regulations described in Exhibit "C" Federal Assurances as applicable. In the event of any conflict between the provisions of this document and the provisions of any applicable laws, HUD regulations or related administrative requirements, then the laws, HUD regulations or related administrative requirements shall control. ARTICLE 7 - NOTICES All notices, consents, communications or transmittals required by this Regulatory Agreement shall be made, in writing, and shall be communicated by the United States mail, certified, return receipt requested or by express delivery with a delivery receipt, and shall be deemed given as of the date shown on the delivery receipt as the date of delivery or the date on which delivery was refused, and shall be addressed to the following addresses, or such other . address as either party may designate, from time to time, by written notice sent to the other party in like manner: To City: Copy to: To MPPAG or Owner: City of Palo Alto 250 Hamilton Avenue Palo Alto, CA 94301 Attn.: City Clerk Director of Planning & Community Environment City of Palo Alto 250 Hamilton Avenue Palo Alto, CA 94301 MP Palo Alto Gardens Associates c/o Mid-Peninsula Housing Coalition 658 Bair Island Road, Suite 300 Redwood City, CA 94063 Attn: General Partner Copy to:Transamerica Realty Services Incorporated 600 Montgomery Street, 16th Floor San Francisco, CA 94111 Attn: David W. Kunhardt ::ODMA\PCDOCS\LOSANGELES\143065\6 - 16- April 6, 1999 ARTICLE 8- MISCELLANEOUS PROVISIONS 8.1 Nothing contained in this Regulatory Agreement, nor any act of the City, shall be interpreted or construed as creating the relationship of third party beneficiary, limited or general partnership, joint venture, employer or employee, or principal and agent between the City and Owner or Owner’s agents, employees or contractors. Owner shall at all times be deemed an independent contractor and shall be wholly responsible for the manner in which it or its agents, or both, observe the covenants and conditions imposed on it by the terms of this Regulatory Agreement. Owner has and hereby retains the right to exercise full control of employment, direction, compensation and discharge’ of all persons assisting in the performance .of services recognized hereunder. Owner agrees to be solely responsible for its own acts and those of its officers, partners, employees, agents, contractors, subcontractors and representatives. 8.2 Neither the failure nor the delay on the part of the City to exercise any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. Any of the requirements of this Regulatory Agreement may be expressly waived by the City in writing, but no waiver by the City of any requirement of this Regulatory Agreement shall, or shall be deemed to, extend to or affect any other provision of this Regulatory Agreement. 8.3 Owner lacks any authority or power to pledge the credit of City or incur any obligation in the name of City. This Regulatory Agreement shall not be construed or deemed to be an agreement for the benefit of any third party, except as expressly provided, herein, and no third party shall have any claim or right of action hereunder for any cause whatsoever. 8.4 Any amendment to this Regulatory Agreement shall be binding upon the parties, provided such amendment is set forth in a writing signed by the parties, and duly recorded in the real property records of the County of Santa Clara, California. The city manager is authorized to execut~ any amendments to this Regulatory Agreement, and confer any consents or approvals that may be provided by the City. 8.5 The covenants, agreements, terms, and conditions of this Regulatory Agreement shall inure to and be binding on the successors and assigns of the parties. Any provision of this Regulatory Agreement which is characterized as a covenant or a condition shall be deemed both a covenant and a condition. If any provision of this Regulatory Agreement shall be determined by a court of competent jurisdiction to be invalid, illegal, void, or unenforceable in any respect, the validity of all other provisions herein shall remain in full force and effect. ::ODMA\PCDOCS\LOSANGELES\143065\6 - 17- April 6, 1999, 8.6 This Regulatory Agreement shall be deemed a contract made under the laws of the State of California, and for the purposes hereof shall be governed and construed by and in accordance with the laws of the State of California. All exhibits referred to in this Regulatory Agreement and any addenda, appendices, attachments, and schedules which may, from time to time, be referred to in any duly executed amendment hereto are by such reference incorporated in this Regulatory Agreement and shall be deemed to be part.hereof. This Regulatory Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. The paragraph headings are not a part of this Regulatory Agreement and shall have no effect upon the construction or interpretation of any part of this Regulatory Agreement. 8.7 In the event that suit is brought by either party, the parties agree that trial of such action shall be vested exclusively in the state court of California in the City of San Jose, County of Santa Clara, or in the United States District Court for the Northern District of California in the City of San Jose. The prevailing party in any action brought to enforce the terms of this Regulatory Agreement or arising out of this Regulatory Agreement may recover its reasonable costs and attorneys’ fees expended in connection with such an action from the other party. 8.8 The provisions of this Regulatory Agreement shall apply to the Improvements for the entire 55-year term hereof even if the Improvements Loan is paid in full prior to the end of said term. This Regulatory Agreement shall bind any successor, heir or assign of Owner, whether a change in interest occurs voluntarily or involuntarily, by operation of law or otherwise, except as expressly released by the City by a written amendment, signed by the City, and recorded in the Official Records of Santa Clara County. Owner acknowledges that the City has made the Improvements Loan on the condition that the provisions of this Regulatory Agreement shall apply to the Improvements for its entire 55-year term, and in consideration of this provision, and would not have done so otherwise. 8.9 The City and Owner hereby declare their express intent that the covenants and restrictions set forth in this Regulatory Agreement shall run with the land, and shall bind all successors in interest to the Improvements, provided, however, that on the expiration of the term of this Regulatory Agreement, the covenants and restrictions shall expire. Each and every contract, deed or other instrument hereafter executed covering or conveying the Improvements or any portion thereof shall be held conclusively to have been executed, delivered and accepted subject to such covenants and restrictions, regardless of whether such covenants or restrictions are set forth in such contract, deed or other instrument, unless the City expressly releases such conveyed portion of the Improvements from the requirements of this Regulatory Agreement. 8.10 If Owner fails to perform any obligation under this Regulatory Agreement, and fails to cure the default within 30 days after the City has notified Owner in writing of the ::ODMA\PCDOCS\LOSANGELES\143065\6 -18- April 6, 1999 default or, if the default cannot be cured within 30 days, fails to commence to cure promptly and thereafter diligently pursue such cure, the City shall have the right to enforce this Regulatory Agreement by any remedy provided by law or equity, including, but not limited to an action for specific performance to enforce the covenants and restrictions herein. 8.11 The City and Owner shall cause this Regulatory Agreement, and all amendments and supplements to it, to be, recorded in the Official Records of the County of Santa Clara. This Regulatory Agreement shall continue in effect for a term of fifty-five (55) years after the date of its recordation in the Official Records of the County of Santa Clara. IN WITNESS WHEREOF, the parties hereto have executed this Regulatory Agreement the day and year first above written. ATTEST:CITY OF PALO ALTO City Clerk APPROVED AS TO FORM: Mayor MP PALO ALTO GARDENS ASSOCIATES,A CALIFORNIA LIMITED PARTNERSHIP City Attorney APPROVED: City Manager Director of Administrative Services By: MV Central Park Apartments, Inc. Its General Partner By: Name: Fran Wagstaff Title: Executive Director By: Title: Director of Planning and Community Environment Insurance Review Taxpayer Identification No. need ID of Partnership #[.] SIGNATURES TO BE NOTARIZED ::ODMA\PCDOCS\LOSANGELES\143065\6 - 19- April 6, 1999 ATTACHMENTS: Exhibit "A": Legal Description of the Property Exhibit "B"’ Insurance Requirements Exhibit "C": Federal Assurances Exhibit "D"" Projected Reserve Distribution Methodology ::ODMA\PCDOCS\LOSANGELES\143065\6 - 20 - April 6, 1999 CERTIFICATE OF ACKNOWLEDGMENT (Civil Code § 1189) STATE OF ) ) SS. COUNTY OF ) On ,1999, before me,, a Notary Public in and for said County and State, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal, Signature of Notary Public STATE OF ) ) SSo COUNTY OF ) On ,1999, before me,, a Notary Public , in and for said County and State, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. STATE OF ) ) SS. Signature of Notary Public ::ODMA\PCDOCS\LOSANGELES\143065\6 -21 - April 6, 1999 COUNTY OF On , 1999; before me,, a Notary Public in and for said County and State, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature of Notary Public ::ODMA\PCDOCS\LOSANGELES\143065\6 - 22 - April 6, 1999 EXHIBIT A Property Description for Improvements and Ground Leasehold Interest 648 San Antonio Road. Palo Alto, California That certain leasehold interest created under the Ground Lease between Mid-Peninsula Housing Coalition as lessor and MP Alto Gardens Associates, a California limited partnership, as lessee, dated , 1999, and recorded in the Official Records of Santa Clara County, California as Instrument No. ~, together with all structures, buildings, and improvements of every kind or nature, and any and all replacements thereon, now or at any time in the future, located upon the following described property: PARCEL ONE: Real property in the City of Palo Alto, County of Santa Clara, State of California, described as follows: Parcel 1, as the same is delineated and so designated on the Parcel Map recorded July 7, 1972 in Book 304 of Maps, at page 21, Santa Clara County Records. APN 147-09-066 and 147-09-067 PARCEL TWO: All that certain real property situate in the City of Mountain View, County of Santa Clara, State of California, described as follows: All of Lots 1 and 2, in Block 1, as shown upon that certain Map entitled, "Tract No. 1215 Fairview", which Map was filed for record in the office of the Recorder of the County of Santa Clara, State of California on September 29, 1953 in Book 46 of Maps, at pages 10 and 11. APN 147-10-061 ::ODMA\PCDOCS\LOSANGELES\143065\6 - 23 - April 6, 1999 EXHIBIT B INSURANCE REQUIREMENTS 1. FIRE AND EXTENDED COVERAGE Insurance, to cover not less than One Hundred Percent (100 %) of the replacement cost of all insurable improvements within or upon the Property. Such policies shall include water damage and debris cleanup provisions. POLICY MINIMUM LIMITS OF LIABILITY 2. WORKERS’ COMPENSATION 3. COMPREHENSIVE AUTOMOBILE LIABILITY, including owned hired, and nonowned automobiles Statutory Bodily Injury Property Damage $5,000,000 ea person $5,000,000 ea occurrence 4. COMMERCIAL GENERAL LIABILITY, including products and completed operations, broad form contractual, and personal injury. Bodily Injury Property Damage $5,000,000 ea person $5,000,000 ea. occurrence $5,000,000 aggregate $5,000,000 ea occurrence Each insurance policy required by this Agreement shall contain the following clauses" "This insurance shall not be canceled, limited in scope of coverage or nonrenewed until after thirty (30) days written notice has been given to the: City of Palo Alto/Planning and Community Environment Department, P.O. Box 10250, Palo Alto, CA 94303." "All rights of subrogation are hereby waived against the City of Palo Alto and the members of the City Council and elective or appointive officers or employees, when acting within the scope of their employment or appointment." "The City of Palo Alto is added as an additional insured as respects operations of the named insured, but only as to work performed under this Agreement." "It is agreed that any insurance maintained by the City of Palo Alto will apply in excess of, and not contribute to, insurance provided by this policy." ::ODMA\PCDOCS\LOSANGELES\143065\6 - 24 - April 6, 1999 All insurance coverage required shall be provided through carriers with a BEST KEY RATING GUIDE rating of A:X or higher that are admitted to do business in the State of California. The certificate(s) of insurance evidencing such coverage shall be completed and executed by an authorized representative of the company providing insurance, and shall be filed with and approved by City’s risk manager. ::ODMA\PCDOCS\LOSANGELES\143065\6 - 25 - April 6, 1999 EXHIBIT C FEDERAL ASSURANCES WITH RESPECT TO CDBG FUNDS MPPAG agrees to comply with the requirements of24 CFR Part 570 (the Housing and Urban Development regulations concerning Community Development Block Grants). MPPAG also agrees to comply with all other applicable federal, state and local laws, regulations, and policies governing the funds provided under this Agreement. MPPAG further agrees to utilize funds available under this Agreement to supplement rather than supplant funds otherwise available. (1) (2) (3) (4) (5) (6) (7) (8) MPPAG hereby assures and certifies that: It possesses legal authority to receive federal grant funds and to carry out the proposed program(s) assisted thereby. Its governing body has duly acquainted itself with the funds application, including all understandings and assurances contained therein, and directed and authorized the person identified as the official representative of MPPAG to provide such additional information as may be required hereunder. It consents to accept the jurisdiction of the federal or California courts for the purpose of enforcement of its responsibilities imposed hereunder. The proposed program(s) has been developed so as to give maximum feasible priority to activities which will benefit low and moderate income persons. .The receipt of any program income, as defined in 24 CFR 570.500(a), as amended, generated bY the use of grant funds under this Agreement, will be recorded; reported and returned to City in accordance with 24 CFR 570.504, as amended. It will comply with the provisions set forth in 24 CFR 85.43 and 24 CFR 85.44 regarding the suspension or termination of a grant agreement for cause or convenience. It will maintain and retain all books, documents, papers, financial, or other records which are pertinent to the grant for a period of not less than three (3) years following the expiration of this Agreement. MPPAG will allow City and the U.S. Department of Housing and Urban Development, through any authorized representatives, access to such documents, papers and records. If MPPAG is a primarily religious entity, in connection with the provision of services required under this Agreement, MPPAG agrees to comply with federal regulations specified in 24 CFR 570.200(j). MPPAG further: ::ODMA\PCDOCS\LOSANGELES\143065\6 - 26 - April 6, 1999, Bo (a)will not discriminate against any employee or applicant for employment on the basis of religion and will not limit employment or give preference in employment to persons on the basis of religion; (b)will not discriminate against any person applying for such services on the basis of religion and will not limit such services or give preference to persons on the basis of religion; (c)will provide no religious instruction or counseling, conduct no religious worship or services, engage in no religious proselytizing, and exert no other religious influence in the provision of such services; and (d)will ensure that the portion of MPPAG’s facility used to provide the services shall contain no religious symbols or decorations, other than those permanently affixed to or are part of the structure. MPPAG also hereby assures that it shall: (1)Comply with the nondiscrimination provisions of public law 88- 352 (Title VI of the Civil Rights Act of 1964) and the fair housing provisions of public law 90-284 (Title VIII of the Civil Rights Act of 1968) and Executive Order 11063, as amended by Executive Order 12259, with respect to sale, lease or transfer of land acquired, cleared or improved with grant assistance. (2)Comply with the provisions of Section 109 of Title I of the Housing and Community Development Act of 1974 which prohibit discrimination. (3)Comply with the Fair Housing Act of 1989 (42 USC 3601-20) which prohibits discriminatory housing practices based on race, color, religion, sex, national origin, disability or familial status. (4)Comply with the Davis-Bacon Act, as amended, Federal Labor Standards provisions with respect to all construction contracts in excess of Two Thousand Dollars ($2,000), if applicable. (5)Comply with the requirement of the Flood Disaster Protection Act of 1973 and the National Flood Insurance Act of 1968 applicable to acquisition or construction projects. (6)Comply with the relocation and displacement requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended. ::ODMA\PCDOCS\LOSANGELES\143065\6 - 27 - April 6, 1999 (7)Comply with provisions of Executive Order 11246, as amended by Executive Orders 11375 and 12086, on equal employment opportunities and affirmative action relative to employees and applicants and nonexempt contracts and subcontracts. (8)Comply with 42 USC 4831(b), and 24 CFR 570.608 and 24 CFR Part 35 of the HUD regulations, prohibiting the use of lead-based paint in the construction or rehabilitation of residential structures. (9) (lO) Comply with the provisions of 24 CFR Part 24 which prohibit the utilization of debarred, suspended, or ineligible contractors or subrecipients. Comply with the uniform administrative requirements and cost principals of 24 CFR Part 85 and 0MB circulars A-87, A-110, A- 122, and A-128 and A-133 as they relate to the acceptance and use of federal funds by nonprofit organizations, and as otherwise may be required under 24 CFR 570.502, as amended. (11) (12) (13) (a) (b) Comply with the requirements of 24 CFR 85.36 and OMB circular A-110 with respect to conflict of interest, and as otherwise may be required under 24 CFR 570.611, as amended. Comply with the provisions of the Hatch Act which prohibit the use of federal, funds for lobbying activities. Comply with Section 319 of public law 101-121, which generally prohibits recipients of federal contracts, grants or loans from using appropriated funds for lobbying the executive or the legislative branches of the federal government in connection with a specific contract, grant or loan. Accordingly, MPPAG hereby certifies to the best of its knowledge and belief, that: No federal appropriated funds have been paid or will be paid, by or on behalf of MPPAG, to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any federal contract, the making of any federal grant, the making of any federal loan, the entering into of any cooperative agreement, or the extension, continuation, renewal, amendment, or modification of any federal contract, grant, loan, or cooperative agreement; and If any funds other than federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this ::ODMA\PCDOCS\LOSANGELES\143065\6 - 28 - April 6, 1999 (14) (15) (16) (17) (a) (b) federal contract, grant, loan or cooperative agreement, MPPAG shall complete and submit Standard Form-LLL, "Disclosure Form to Report Lobbying" in accordance with its instructions. Comply with the Age Discrimination Act of 1975, as amended, which states that no persons in the United States shall, on.the basis of age, be denied the benefits of, or be subjected to discrimination under, any program or activity receiving federal financial assistance. Comply with Section 504 of the Rehabilitation Act of 1973, which prohibits discrimination against people with disabilities in any federally assisted program. Comply with the Americans with Disabilities Act of 1990, as amended, and , implementing regulations when published. Transfer to City any remaining CDBG funds on hand at the time of expiration of this Agreement. In addition, MPPAG shall ensure that any real property under MPPAG’s control that was acquired or improved in whole or in part with CBBG funds in excess of $25,000 is either: used to meet one of the national objectives in 24 CFR 570.208 until five years after expiration of this Agreement, or for such longer period of time as determined appropriate hereunder by City; or disposed of in a manner which results in City being reimbursed in the amount of the then current fair market value of the property less any portion thereof attributable to expenditures of non-CDBG funds for acquisition of, or improvement to, the property. ::ODMA\PCDOCS\LOSANGELES\143065\6 - 29 - April 6, 1999 EXHIBIT E Palo Alto Gardens Apartments Sources and Uses of Funds for Improvements Sources of Permanent Funding ABAG Tax-Exempt Bond Funded Loan; 40 years at 5.50% (estimated) Transamerica Corporation; 4% Federal Housing Tax Credit Equity MPHC: Short-term developer fee loan MPHC: Developer equity City Improvements Loan: 40 years at 3.0% interest $11,435,000 3,778,367 500,000 7,819 100,000 TOTAL SOURCES OF FUNDING $15,821,186 Uses of Permanent Funding Purchase Price Allocated to Improvements & Fixtures Rehabilitation Construction & Contingency Construction Related Costs Permanent Financing, Tax Credits Other Transaction & Miscellaneous Costs One-Time Payment of Land Lease Rent at Acquisition Debt Service Reserve Fund Developer Fee 11,360,000 1,450,000 102,500 481,420 106,679 774,056 742,928 803,603 TOTAL USES OF FUNDS $15,821,186 EXHIBIT F FEDERAL ASSURANCES WITH RESPECT TO CDBG FUNDS MPPAG agrees to comply with the requirements of 24 CFR Part 570 (the Housing and Urban Development regulations concerning Community Development Block Grants). MPPAG also agrees to comply with all other applicable federal, state and local laws, regulations, and policies governing the funds provided under this Agreement. MPPAG further agrees to utilize funds available under this Agreement to supplement rather than supplant funds otherwise available. (1) (2) (3) (4) (5) (6) (7) (8) MPPAG hereby assures and certifies that: It possesses legal authority to receive federal grant funds and to carry out the proposed program(s) assisted thereby. Its governing body has duly acquainted itself with the funds application, including all understandings and assurances contained therein, and directed and authorized the person identified as the official representative of MPPAG to provide such additional information as may be required hereunder. It consents to accept the jurisdiction of the federal or California courts for the purpose of enforcement of its responsibilities imposed hereunder. The proposed program(s) has been developed so as to give maximum feasible priority to activities which will benefit low and moderate income persons. The receipt of any program income, as defined in 24 CFR 570.500(a), as amended, generated by the use of grant funds under this Agreement, will be recorded, reported and returned to City in accordance with 24 CFR 570.504, as amended. It will comply with the provisions set forth in 24 CFR 85.43 and 24 CFR 85.44 regarding the suspension or termination of a grant agreement for cause or convenience. It will maintain and retain all books, documents, papers, financial, or other records which are pertinent to the grant for a period of not less than three (3) years following the expiration of this Agreement. MPPAG will allow City and the U.S. Department of Housing and Urban Development, through any authorized representatives, access to such documents, papers and records. If MPPAG is a primarily religious entity, in connection with the provision of services required under this Agreement, MPPAG agrees to comply with federal regulations specified in 24 CFR 570.200(j). MPPAG further: (a)will not discriminate against any employee or applicant for employment on the basis of religion and will not limit employment or give preference in employment to persons on the basis of religion; (b)will not discriminate against any person applying for such services oh the basis of religion and will not limit such services or. give preference to persons on the basis of religion; (c)will provide no religious instruction or counseling, conduct no religious worship or services, engage in no religious proselytizing, and exert no other religious influence in the provision of such services; and (d)will ensure that the portion of MPPAG’s facility used to provide the services shall contain no religious symbols or decorations, other than those permanently affixed to or are part of the structure. B.MPPAG also hereby assures that it shall: (1)Comply with the nondiscrimination provisions of public law 88- 352 (Title VI of the Civil Rights Act of 1964) and the fair housing provisions of public law 90-284 (Title VIII of the Civil Rights Act of 1968) and Executive Order 11063, as amended by Executive Order 12259, with respect to sale, lease or transfer of land acquired, cleared or improved with grant assistance. (2)Comply with the provisions of Section 109 of Title I of the Housing and Community Development Act of 1974 which prohibit discrimination. (3)Comply with the Fair Housing Act of 1989 (42 USC 3601-20) which prohibits discriminatory housing practices based on race, color, religion, sex, national origin, disability or familial status. (4)Comply with the Davis-Bacon Act, as amended, Federal Labor Standards provisions with respect to all construction contracts in excess of Two Thousand Dollars ($2,000), if applicable. (5)Comply with the requirement of the Flood Disaster Protection Act of 1973 and the National Flood Insurance Act of 1968 applicable to acquisition or construction projects. (6)Comply with the relocation and displacement requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended, i (7)Comply with provisions of Executive Order 11246, as amended by Executive Orders 11375 and 12086, on equal employment opportunities and affirmative action relative to employees and applicants and nonexempt contracts and subcontracts. (8)Comply with 42 USC 4831(b), and 24 CFR 570.608 and 24 CFR Part 35 of the HUD regulations, prohibiting the use of lead-based paint in the construction or rehabilitation of residential structures. (9)Comply with the provisions of 24 CFR Part 24 which prohibit the utilization of debarred, suspended, or ineligible contractors or subrecipients. (10)Comply with the uniform administrative requirements and cost principals of 24 CFR Part 85 and 0MB circulars A-87, A-I10, A- 122, and A-128 and A-133 as they relate to the acceptance and use of federal funds by nonprofit organizations, and as otherwise may be required under 24 CFR 570.502, as amended. (11)Comply with the requirements of 24 CFR 85.36 and OMB circular A-110 with respect to conflict of interest, and as otherwise may be required under 24 CFR 570.611, as amended. (12)Comply with the provisions of the Hatch Act which prohibit the use of federal funds for lobbying activities. (13)Comply with Section 319 of public law 101-121, which generally prohibits recipients of federal contracts, grants or loans from using appropriated funds for lobbying the executive or the legislative branches of the federal government in connection with a specific contract, grant or loan. Accordingly, MPPAG hereby certifies to the best of its knowledge and belief, that: (a)No federal appropriated funds have been paid or will be paid, by or On behalf of MPPAG, to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any federal contract, the making of any federal grant, the making of any federal loan, the entering into of any cooperative agreement, or the extension, continuation, renewal, amendment, or modification of any federal contract, grant, loan, or cooperative agreement; and (b)If any funds other than federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this federal contract, grant, loan or cooperative agreement, MPPAG shall complete and submit Standard Form-LLL, "Disclosure Form to Report Lobbying" in accordance with its instructions, (14) (15) (16) (17) (a) (b) Comply with the Age Discrimination Act of 1975, as amended, which states that no persons in the United States shall, on the basis of age, be denied the benefits of, or be subjected to discrimination under, any program or activity receiving federal financial assistance. Comply with Section 504 of the Rehabilitation Act ~f 1973, which prohibits discrimination against people with disabilities in any federally assisted program. Comply with the Americans with Disabilities Act of 1990, as amended, and implementing regulations when published. Transfer to City any remaining CDBG funds on hand at the time of expiration of this Agreement. In addition, MPPAG shall ensure that any real property under MPPAG’s control that was acquired or improved in whole or in part with CBBG funds in excess of $25,000 is either: used to meet one of the national objectives in 24 CFR 570.208 until five years after expiration of this Agreement, or for such longer period of time as determined appropriate hereunder by City; or disposed of in a manner which results in City being reimbursed in the amount of the then current fair market value of the property less any portion thereof attributable to expenditures of non-CDBG funds for acquisition of, or improvement to, the property. EXHIBIT G INSURANCE REQUIREMENTS 1. FIRE AND EXTENDED COVERAGE Insurance, to cover not less than One Hundred Percent (100%) of the replacement cost df all insurable improvements within or upon the Property. Such policies shall include water damage and debris cleanup provisions. POLICY MINIMUM LIMITS OF LIABILITY 2. WORKERS’ COMPENSATION 3. COMPREHENSIVE AUTOMOBILE LIABILITY, including owned hired, and nonowned automobiles Statutory Bodily Injury Property Damage $5,000,000 ea person $5,000,000 ea occurrence 4. COMMERCIAL GENERAL LIABILITY, including products and completed operations, broad form contractual, and personal injury. Bodily Injury Property Damage $5,000,000 ea person $5,000,000 ea. occurrence $5,000,000 aggregate $5,000,000 ea occurrence Each insurance policy required by this Agreement shall contain the following clauses: "This insurance shall not be canceled, limited in scope of coverage or nonrenewed until after thirty (30) days written notice has been given to the: City of Palo Alto/Planning and Community Environment Department, P.O. Box 10250, Palo Alto, CA 94303." "All rights of subrogation are hereby waived against the City of Palo Alto and the members of the City Council and elective or appointive officers or employees, when acting within the scope of their employment or appointment." "The City of Palo Alto is added as an additional insured as respects operations of the named insured, but only as.to work performed under this Agreement." "It is agreed that any insurance maintained by the City of Palo Alto will apply in excess of, and not contribute to, insurance provided by this policy." All insurance coverage required shall be provided through carriers with a BEST KEY RATING GUIDE rating of A:X or higher that are admitted to do business in the State of California. The certificate(s) of insurance evidencing such coverage shall be completed and executed by an authorized representative of the company providing insurance, and shall be filed with and approved by City’s risk manager. EXHIBIT D ~ ~ w~..~ will make the foEowing calculations ~ng the ~ove iMo~ation f~ each cal~n~ y~ A. S~ ~e rent gene~d ~ Nos. 2, 3 and 4 above. ~is ~ ~ ~oj~t ~oss rental ~com¢ for ~ ~nt y~. B. S~ the ac~ vacancy for ~h¢ pre~o~ y¢~ .... , ~ ~ulfiply ~e ac~ ~caucy f~mr ~ ~es ~oss r~ ~come.) KepIacemeat Kesew~ Expom0 ~o. 6 abow). ~= result is ~e n~ op~g ~me. D. Sub, act ~e debt s~ ~o. 7 a~ve). ~e reset is ~e net ~come. E. If ~e ne~ ~com¢ ~ positive ~her¢ ~ uo ~wa~ sho~all, "’ ~ If net income ~ negativo, ~ ~ a sho~fall. " Page 2 of 2 EXHIBIT D PROJECTED RESERVE DISTRIBUTION METHODOLOGY Pursuam to the Indenture, there are also established (i)the Land Lease, Affordabili~0 and Operating Reserve Fund, (it) the Rent Reserve Fund and (iii) the MP Rent Reserve Fund (collectively, the "Additional Reserve Funds") to offset a decline in Oross Revenues due to the loss of Section 8 revenues available to the Project from HUD. The amount which must be on deposit or credited to the Additional Reserve Funds (defined as the "Additional Reserve Requirement") is initially $1,460,000". Under the Indenture and the Loan Agreement, the Borrower is obligated to recompute annually the Additional Reserve Requirement. The Borrower will use the following information in recomputing the Additional Reserve Requirement: 1. The number of units in the Project receiving Section 8 ~ssistance and the number of units in the Project not receiving Seetlon 8 assistance will be determined from the certified rent roll for the Project produced by the Borrower as of the end of the year to which the financial statements pertain. 2. The rental income generated by units in the Project occupied by tenants receiving Section 8 voucher or certificate subsidies ("non-qualified units") will be the tenants’ share of the rent collected during such year. The tenants’ share of the rent collected from Section 8 assisted units in the Project, divided by the number of Section 8 assisted units determined on number I above, divided by twelve is the monthly average tenant share of rent for non- qualified units. 3. The rental income generated by units in the Project occupied by tenants not receiving Seclion 8 assistance ("qualified units") will be the actual rent collected during such year from qualified units. ~t. Miscellaneous income (laundry, interest on deposits, late fees, etc.) will be the actual amount collected during such year. 5. For each fiscal year following the year to which the most recent irinancial statements pertain, a percentage of non-qualified units will be counted for purposes of the calculation as qualified units. The incremental number of non-qualified units counted as qualified units for each fiscal year following the year to which the most recent trmancial statemems pertain will be determined by multiplying a "turnover percentage" by the number of non-qualified units as of December 31 of the preceding year. The incremental number of new qualified units will accrue cumulatively to the number of qualified units assumed for the preceding year. For each year’s calculation, rental income for each qualified unit will be the maximttm allowable tax credit rental rate and rental income for each non-qualified unit will be the tenant portion of rental income as determined in number 2. above. The turnover percentage will be calculated by dividing the average number of units vacated and subsequently re-rented by any ~enant in the year preceding the calculating date by 155. Such turnover percentage will be held constant and applied in each of the succeeding years to non-qualified units until re-cast at the next calculation date, " ’ ~ (see Item F below). 6. The operating expenses for the project are the ~tigher of $3600 per unit per year or as defined in Section 3.04 of the Loan Agreement (intruding the Replacement Reserve expense) for the year to which the most recent financial statements pertain. 7. The debt service expenses will be the annual debt service for the current year and include scheduled principal and interest on the Bonds. Page 1 of 2’