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Staff Report 312-08
City of Palo Alto City Manager’s Report TO: FROM: DATE: HONORABLE CITY COUNCIL CITY MANAGER AUGUST 4, 2008 13 DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT CMR: 312:08 SUBJECT:APPROVAL OF A LOAN AGREEMENT AND A REGULATORY AGREEMENT WITH FABIAN WAY ASSOCIATES, L. P. TO PROVIDE A DEVELOPMENT LOAN OF RESIDENTIAL HOUSING FUNDS IN THE AMOUNT OF $600,000 FOR A VERY LOW INCOME 56-UNIT SENIOR RENTAL HOUSING PROJECT AT 3895 FABIAN WAY RECOMMENDATION Staff recommends that the City Council: Approve the attached Loan Agreement for Fabian Way Senior Housing (Loan Agreement), with its attached form of promissory note and deed of trust, which authorizes a residual receipts loan of $600,000 for development costs; and Approve the attached Regulatory Agreement and Declaration of Restrictive Covenants for Fabian Way Senior Housing (Regulatory Agreement) regulating the use and occupancy of the Fabian Way senior housing project; and 3.Authorize the City Manager or designee to execute the Loan Agreement and the Regulatory Agreement in Substantially identical form; and Authorize the City Manager or designee to execute all other documents required to implement the Agreements, including escrow instructions and to approve all necessary subordination agreements and direct the City Manager or designee to administer the provisions of the Agreements. BACKGROUND The plarming entitlements for the Fabian Way senior affordable rental housing project were approved by the City as part of the private redevelopment of the 12 acres known as 901 San CMR: 312:08 Page 1 of 5 Antonio Road. The other projects, which are currently under construction, are: the adjoining 103- unit "Altaire" for-sale townhouses and the Campus for Jewish Life, which includes the 193-unit 899 East Charleston Road senior congregate care project. BRIDGE Housing Corporation, an experienced non-profit developer and manager of affordable housing with numerous projects throughout the Bay Area, is the sponsor and developer for the Fabian Way rental housing, which will provide 56-units of very low-income, rental apartments for seniors, including 20 units for extremely low-income, frail elderly with supportive services. Except for the resident manager’s unit, all of the apartments will be one-bedroom units with parking provided under easement agreements in the adjoining townhouse project’s garage. On June 2, Council adopted a resolution (CMR: 260:08) authorizing the issuance of tax-exempt bonds by the California Municipal Finance Authority (CMFA), which will be used to fund a construction period loan. BRIDGE expects to begin construction this fall or later in the year and to achieve full occupancy by the summer of 2010. DISCUSSION In order to meet housing needs for seniors with extremely low incomes, BRIDGE needed to secure deferred loans and equity funds for the entire estimated $22.3 million in project development costs. BRIDGE applied in two different rounds for HUD 202 funding, but was unsuccessful as the 202 program is extremely competitive. Last August, BRIDGE applied for the State’s Multifamily Housing Program (MHP) funding and received a commitment of $5.25 million in January. Other major sources of funding which have been committed include: a projected $5.8 million in equity from the sale of low income housing tax credits to a limited partner; a $1.5 million deferred loan from the County of Santa Clara County’s Office of Affordable Housing; and construction period funding from the Sobrato Fund, the Housing Trust of Santa Clara County and the CMFA bond loan mentioned above. The largest single source of funds for this project is the $7.3 million in equity being contributed by BUILD, the developer of the adjoining 103-unit townhome project. This payment was negotiated in-lieu of the provision of the normally required 15 percent Below Market Rate (BMR) program units. BUILD and BRIDGE proposed this alternative approach to satisfying the BMR Program requirement and the BMR agreement was approved by Council on September 26, 2006 at the time the planning entitlements were approved. Because BUILD’s BMR in-lieu payment had to be set prior to its project approval, the City required preparation of an independent economic analysis to determine the payment amount that would be equivalent to the provision of 16 for-sale BMR units within the development. The economic analysis determined that $7.3 million was the equivalent of 16 for-sale BMR units in the BUILD project. BRIDGE also requested a $600,000 development loan from the City to offset a portion of the costs of the remaining forty units so that the entire project could serve very low-income seniors. These funds were budgeted as part of the 2008-09 Council-adopted budget. The City loan will accrue interest up to a maximum of three percent simple interest annually based on the amount of surplus cash flow from the project’s operations. The State’s MHP regulations specify how any cash flow is apportioned among the permanent lenders; therefore, other than rather minimal payments of interest, regular repayment of the City loan is not anticipated, which is standard practice in local CMR: 312:08 Page 2 of 5 financing of this type of deeply affordable rental housing. In addition, tax credit program rules limit the accrual of substantial amounts of unpaid interest over time. As a result, the City loan terms specify that interest will be paid each year up to the maximum three percent simple interest rate, to the extent that there is sufficient cash flow; however, to the extent any year’s cash flow is insufficient to pay three percent interest, the unpaid interest will effectively be forgiven and, thus, will not increase the total amount due on the City loan. The total unpaid principal and interest on the City loan is due concurrently with the 55-year term of the MHP loan. Once the project is fully operational, the use and occupancy of the apartments will be controlled by multiple regulatory agreements from the various funding sources, with the most restrictive being the MHP program’s 55-year regulatory agreement and the City Regulatory Agreement. The City’s Regulatory Agreement will be recorded with the Deed of Trust securing the City’s Promissory Note as soon as possible after Council approval. As the other funding entities provide their financing to the project, the City will need to subordinate its loans and Regulatory Agreement to the loans and regulatory agreements of those entities. Staff is requesting that the City Manager or designee be authorized by Council to review and approve each of these subordination agreements in consultation with the City Attorneys office, at the appropriate time in order to avoid any delay in the progress of construction or the closing of the permanent funding after completion. Rents and Occupancy of the Apartments: In order to succeed in the competition for the State’s MHP funding, BRIDGE needed to emphasize housing for extremely low-income, senior households and to serve a substantial number of seniors with special needs. The rent categories and income limits with current 2008 rents are shown below; actual rents may change somewhat by the time the project is constructed and ready for occupancy due to changes in the County median income. Fabian Way Senior Housing - Description of Units and Rental Structure Occupancy Category &Number of 2008 Gross Rents 2008 1-Person Rent Formula1 Units One-Bedrooms Income Limits2 Extremely Low 25% of AMI 20 units3 $497 $18,575Income Extremely Low 30% of AMI 11 units $597 $22,290Income Very Low 40% of AMI 24 units $796 $29,720Income Total Restricted Units 55 Plus 1 Unit for a Resident Manager Total Units 56 Notes: 1) AMI means the Area Median Income for Santa Clara County, which equals $105,500 for a household of four persons as published on March 25, 2008. Initial rents and income limits are as published by State HCD for 2008. 2) The income limits shown assume a one-person household in a one-bedroom unit. CMR: 312:08 Page 3 of 5 3) Supportive Housing (S-I-I) Units must be set aside for households that are extremely low income (not over 25% of AMt) and eligible for the Multipurpose Senior Services Program (MSSP). MSSP eligible seniors are frail elderly, 65 years or older, and currently eligible for Medi-Cal. Supportive services must be provided to these residents. RESOURCE IMPACT The funds for the City’s $600,000 loan are budgeted in the Residential Housing Fund in the FY 2008-09 City Budget approved by Council on June 9, 2008. No General Fund monies are being used for this housing project. The financing package assembled by BRIDGE for development of the apartments is described below (figures are rounded, and some figures are still estimates). Permanent Sources of Funds for Development: []State Housing & Community Development - MHP Loan []Investor equity 4% - Low Income Housing Tax Credits (estimated) []General Partner Equity (Including the $7.3 million BUILD contribution) []Santa Clara County Office of Affordable Housing (May seek additional funds from County if available, depending on the outcome of the state tax credit application) []State of California Low Income Housing Tax Credits (estimated; application Submitted on July 24, 2008) [] City of Palo Alto: Residential Fund Loan [] BRIDGE: Deferred Developer Fee Total Project Funding Total Funding per Unit (56 units): $401,786 $5,250,000 $5,801,000 $7,500,000 $1,500,000 $1,500,000 $600,000 $349,000 $22,500,000 POLICY IMPLICATIONS The actions recommended in this report implement adopted City Housing Element policies and programs supporting the development of very low and low income housing. These 56-units will be counted towards the City’s housing production goals for the 2007 to 2014 Housing Element period. ENVIRONMENTAL REVIEW Council approval of this loan and the related financing and regulatory documents is not subject to the California Environmental Quality Act. The development of the BRIDGE senior housing was evaluated in a Final Environmental Impact Report (FEIR) certified by the City Council on September 26, 2006; the FEIR covered all of the 901 San Antonio Road projects. ATTACHMENTS A. Loan Agreement for Fabian Way Senior Housing (Loan Agreement), with its attached form of promissory note and deed of trust B.Regulatory Agreement and Declaration of Restrictive Covenants for Fabian Way Senior Housing CMR: 312:08 Page 4 of 5 PREPARED BY: CATHERINE SIEGEL, Advance Pl@ng Manager REVIEWED BY: CITY MANAGER APPROVAL: CURTIS WILLIAMS, Interim Director Planning and Community Environment KELLY MO ~R~U / STEV~/E~I~LIE Deputy City Managers cc:BRIDGE Housing Corporation CMR: 312:08 Page 5 of 5 ATTACHMENT A LOAN AGREEMENT FOR FABIAN WAY HOUSING (RESIDENTIAL HOUSING FUNDS) THIS LOAN AGREEMENT FOR FABIAN, WAY HOUSING ("Loan Agreement"), made and entered into as of ,2008, 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 FABIAN WAY ASSOCIATES, a California limited partnership, with offices at c/o BRIDGE Housing Corporation, 345 Spear Street, Suite 700, San Francisco, California 94105 ("Fabian Way LP" or "Partnership"), WHEREAS, on June 9, 2008, the City Council approved an ordinance adopting the Budget for fiscal year 2008-09 which included a reservation of $600,000 in Residential Housing Funds for the Fabian Way Senior Housing Project ("Project") for a loan to Fabian Way LP to assist in the construction of new rental housing for extremely low-lncome and very low-income senior households, which is the one of the purposes for which the revenues of the Residential Housing Fund are collected by the City; WHEREAS, the City Council approved Planned Community Ordinance Number 8644- 4917 on September 25, 2006 allowing construction of the Project, which includes 56-units of senior rental apartments on a one-half acre parcel, more particularly described,in the attached Exhibit A, (the "Site"); WHEREAS, in satisfaction of the City’s Below Market Rate (BMR) Program H-36 of the Housing Element of the Comprehensive Plan for the adjoining 103-unit ownership condominium development ("Altaire")at 901 San Antonio Road, Palo Alto, California, the City and the developer, BRIDGE Urban Landfill Development, LLC ("BUILD"), entered into a BMR letter agreement dated September 1, 2006, which required BUILD to sell the Site to BRIDGE and also provide $7,300,000 in funds for development costs, in-lieu ofproyiding the normally required fifteen percent inclusionary for-sale BMR units within the BUILD project. WHEREAS, the Partnership has acquired the Site fi’om BUILD and secured commitments of construction and permanent financing sufficient for construction and operation of the Project; WHEREAS, fifty-five (55) of the 56-units in the Project will be occupied by Extremely Low-Income and Very Low-Income households at affordable rents, Which will help the City meet its affordable housing production goals and the development of this type of rental housing together with supporti;ce services is a priority objective of the City’s Consolidated Plan and the Housing Element of the City’s Comprehensive Plan; WHEREAS, BRIDGE Housing Corporation ("Sponsor" or "BRIDGE") on behalf of the Pa .rmership applied for a City loan of $600,000 to finance a portion of the total Project costs with the loan funds to be made available for pre-construction and construction period expenses in conjunction with other financing commitments for construction and development funding for the Project; 080725 sya8260823 WHEREAS, pursuant to this Loan Agreement, Fabian Way LP wishes to borrow from the City and the City wishes to extend to Fabian Way LP a loan of up to Six Hundred Thousand Dollars ($600,000) in Residential Housing Funds (,flae Partnership Loan"). The Partnership Loan will be evidenced by a promissory note executed by Fabian Way LP in favor of the City and secured by a deed of trust. WHEREAS, Fabian Way LP has applied for construction financing, including an allocation of tax exempt bond authority of up to $13,100,000 (the "Bond Loan") and permanent financing including an award of $5,250,000 in Supportive Housing funds under the State’s Multifamily Housing Program (the "MHP Loan"); WHEREAS, the County of Santa Clara issued an allotment of Article 34 authority for the Project, under Measure A as approved by the voters in November 1998, to the City on September 5, 2006; and WHEREAS, in consideiation of the City’s making the Partnership Loan, Fabian Way LP has agreed to observe and perform all of the terms and conditions set forth in this Loan Agreement, and has agreed that the Project, including all 55 Restricted Units, will be subject to the terms and conditions set forth in the Regulatory Agreement and Declaration of Restrictive Covenants for Fabian Way Housing (the "Regulatory Agreement") being entered into by Fabian Way LP and City concurrently with this Loan Agreement; NOW THEREFORE, in consideration of the mutual promises and covenants and terms, conditions and provisions set forth in this Loan Agreement and for other valuable consideration, the parties agree as follows: ARTICLE 1 - DEFINITIONS. Capitalized terms used in this Loan Agreement without definitions shall have the respective meanings, if any, assigned to them in the Regulatory Agreement, unless the context clearly indicates otherwise. ARTICLE 2 - LOAN OF FUNDS; CONDITIONS TO FUNDING 2.1 Loan Amount. The City agrees to make the Partnership loan to Fabian Way LP in an aggregate principal amount ~ap to, but not to exceed, Six Hundred Thousand Dollars ($600,000), st~bject to the terms and conditions set forth in this Article 2. 2.2 Promissory_ Note. The obligation of Fabian Way LP to repay all amounts advanced by the City pursuant to this Loan Agreement shall be evidenced by a promissory note ("Note" or Partnership Note") in substantially the form set forth in Exhibit C, payable to the City of Palo Alto, and executed by duly authorized officers or representatives of Fabian Way LP. The Note will be due and payable in full on December 31,2011; provided, however, concurrent with the closing of the M!tP Loan, the maturity date of the Parmership Note will automatically extend to.the 55th anniversary of the date of recording of the MHP Loan and its related loan documents. Notwithstanding the foregoing, if the MHP Loan has not closed by December 31, 2011, and the 080725syn 8260823 2 City Manager of City determines ~hat such delay is due to one or m ore "acts of God" or other. causes beyond the control of the Partnership, City may extend the maturity date of the Partnership Note for a reasonable period equal to the amount of excusable delay, not to exceed twelve (t2) months. 2.3 Deed of Trust. It shall be a condition to the initial disbursement of loan proceeds that Fabian Way LP has executed a Deed of Trust against the Site (the "Deed of Trust") in substantially the form set forth in Exhibit D, in favor of the City as beneficiary, securing the obligations of Fabian Way LP under the Regulatory Agreement and the Note, and that the Deed of Trust has been recorded in the Official Records of Santa Clara Coun}y subject to no exceptions to title other than a lien for property taxes not yet due and payable, any permitted ¯ prior encumbrances identified in the Note, and such non-monetary exceptions as do not materially adversely affect the use of the Site for the Project and have been approved in writing .by the City. 2.4 Development of the Project. The Partnership shall construct the Project in accordance with the Site Plans and the specifications referenced by the building permits issued by the City; it being agreed that construction of the Project in accordance with all conditions of approval, and all terms hereof, is of the essence of this Loan Agreement in view of the need for Project within the City. In connection with such construction, the Partnership shall comply with all requirements &the City’s Municipal Code, and any and all applicable federal, state and local laws, rules and regulations. 2.5 Schedule of Performance and Progress Reports. 2.5.1 The Partnership shall begin and finish all construction and otherwise make its best efforts to complete other performance milestones within the times specified in the Schedule of Performance (attached as Exhibit G) or such reasonable extension of said dates as may be granted by the City. The Schedule of Performance is su.bject torevision ~om time tO time as mutually agreed upon in writing between the Partnership and the City. 2.5.2 During the period of construction, the Partnership shall submit to the City, from time to time written reports of the progress of the construction. The reports shall be in the same form and in the same detail as normally prepared for internal reports of the Partnership or for reports fi-om the Partnership’s general contractor to the Partnership. Partnership shall give. the City reasonable prior notice of, and the City shall be permitted to attend and participate in, meetings between the Partnership (including but not limited to its general contractor and its architect) and the construction lender regarding draws under the construction loan. 2.6 Rights of Access During Construction. For the purpose of assuring compliance with this Loan Agreement, representatives of the City shall have the reasonable right of access to the Property, without charges or fees, at normal construction hours during the period of construction for the purposes of inspecting the work being performed by the Partnership in constructing the Project. Such representatives shall comply with all safety rules and shall not interfere with or delay the construction of the Project. The City shall hold the Partnership harmless from any injury ordamages arising out of the activities of the City as referred to in this Section. 080725 syn 8260823 2.7 Disbursement of Fiands. 2.7.1 The proceeds of the Partnership Loan shall.be..disbursed from time to time as requested by the Parmership for construction and other development costs of the Project. All disbursements shall be made in accordance with the City’s policies and procedures. Partnership shall submit to the City for City’s review not more frequently than monthly wrltten requests for disbursements of loan proceeds to pay for expenses incurred by Partnership in accordance with a detailed development budget and disbursement schedule to be provided to the City prior to the initial disbursement request. Parmership covenants and agrees to provide to the City one or more copies of contracts, invoices, checks, negotiable instruments, receipts and other documentation acceptable to the City to verify the purpose and amount of each request for disbursement. For hard costs, Fabian Way LP shall submit with each disbursement application a written certification executed by the authorized representatives of the Partnership, the architect and the general contractor that (1) the services or construction’, work, or both, has been satisfactorily rendered dr:performed, (2) the costs have been paid, or will be paid, in accordance with the applicable contracts and subcontracts, and (3) all funds have been expended, or will be expended, on the behalf of and exclusively for the obligations of Fabian Way LP in connection with the Project. 2.7.2 The City and the Partnership shall use reasonable efforts to coordinate with the construction lender regarding the disbursement of funds for construction of the Project, including without limitation provisions designed to assure that (i) the funds advanced by the City will be used solely as described in this Section 2.7, and (ii) the aggregate amount of loan disbursements by all lenders (including without limitation the City) at the time of any disbursement does not exceed the value of the Project theretofore constructed and paid for. Partnership shall provide the City with its schedule, and any subsequent revisions, of estimated payments for construction period costs. City agrees that P~a’tnership may utilize the Partnership Loan for project development costs prior to the start of construction and disbursement of other construction period funds, including the proceeds &the Bond Loan. 2.7.3 The City has no obligation to approve disbursements at any time during which Partnership is in default under this Loan Agreement, or to, approve disbursements for disapproved or improperly documented expenses. 2.8 Escrow. 2.8.1 This transaction will be completed through an escrow with First American Title Company ("Title Company"), 1737 North First St, Suite 500, San Jose California 95112 ("Escrow"). The parties to this Loan Agreement will place all ftmds, .documents and other information, together with appropriate written escrow instructions, into the Escrow in order to fulfill the terms of this Loan Agreement. The Escrow shall not close until the Title Company is in a position to issue the policy of title insurance described in Section 2.9, and all of the requirements set forth in this Section 2 have been satisfied. 080725 syn 8260823 2.9 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 $600,000, and insuring City, as the holder of a fourthlien.deed of trust during the construction phase and then converting in to a third lien deed oft-rust at permanent financing, secured by the Project, against any title defects except those expressly approved in writing by the City. The policy will name the City as beneficiary and insure Partnership’s right, title and interest in the Project and the-City’s lien thereon and, promptly after the close of escrow, an original of said policy shall be delivered to City. 2.10 Additional Conditions to Closing Escrow. In addition, the funding of the Partnership Loan shall not occur until all of the following conditions have occurred or occur concurrently: (a)The Partnership has acquired title to the Site (b)Title Company has recorded the Deed of Trust and the l~egulatory Agreement in the Official Records of Santa Clara County, and has issued the policy of title insurance described in Section 2.9 above (c) The Partnership has submitted to the City, and the C.ity is hereby approving, the summary development budget attached hereto as Exhibit E, and the estimated construction and permanent source of funds schedule attached hereto as Exhibit F. The development budget may provide for a developer’s fee or a similar fee or fees (the "Developer Fee") so long as (i) the aggregate fees do not exceed $1,600,000; (ii) with at least $300,000 of such fees in the form of a deferred developer loan; (d) The Partnership shall agree to obligate a reputable and financially responsible general contractor .(the "General Contractor"), licensed in California and experienced in completing the type of Project contemplated by this Loan Agreement to commence and complete the development of the Project in accordance with this Loan Agreement, with the funds available for development of the Project, in a legally binding contract (the "Construction Contract"). The City hereby approves Segue Construction Inc., as the General Contractor. The Construction Contract shall be a guaranteed maximum cost contract insuring construction of the Project for a fixed price, subject to such reasonable adjustments as are customarily allowed with respeet to construction contracts. The Construction Contract shall provide for retention of at least 10 percent from each progress paytnent until the final payment and the final payment shall not be paid to the contractor until the occurrence of(i), (ii) or (iii), below: (i) The expiraion of 65 days from the date of recording by the Partnership, as owner, of aNotice of Completion for the applicable Project, which the Parmership agrees to record promptly withinthe times specified by law for the recording of such Notice; and the settlement and discharge of all liens and charges claimed by persons who supplied either labor or materials for the construction of such Project; or 080725 syn8260823 .5 (ii) The pogting of a bond, acceptable to the City in form and amount, insuring the Property and any interest therein against loss arising from any mechanics’, laborers’, materialmen’s or other like liens .filed against such real property; or (iii) Partnership shall have provided such other assurances as may be acceptable to the City, protecting the Property and any interest therein against loss arising from any mechanics’, laborers’, materialmen’s or other like liens filed against such real property. The Construction Contract shall require the contractor to warrant all work and materials for at least one year after issuance of a certificate of occupancy for the Project. (e) The City shall have received satisfactory evidence that the insurance required by Exhibit B of this Loan Agreement shall be in effect. 2.tl Condition to Commencement of Construction. The Partnership shall have provided to the City, prior to the commencement of construction of the Project, the following documents: (a)A fully-executed copy of the Construction Contract for the Project; and (b)A Performance Bond and a Labor and Material Payment Bond (in the form of AIA form A311 or A312), issued by a surety acceptable to the City in the City’s reasonable discretion, securing the faithful performance by the General Contractor of the completion of construction of the Project free of all liens and claims, within the time provided in the Schedule of Performance attached hereto. The construction bond shall be in an amount equal to one hundred percent (100%) of the Construction Contract, shall name the City as a co-obligee, and shall be issued by a company acceptable.to the City and listed in the current United States Treasury Department circular 570 and otherwise within the underwriting limits specified for that company in such circular. ARTICLE 3 - COVENANTS AND CONDITIONS 3.1 General In consideration for receiving the Partnership Loan from City, Fabian Way LP shall construct, or cause to be constructed, the Project upon the Site as described in the Site Plans. 3.2 Insurance Partnership, at its sole cost and expense, shall obtain and maintain during the term of this Loan 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 as required by " law, 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 Partnership and its respective partners, directors, officers, employees, agents, and representatives arising out of or in connection with the Projec.t, 080725 syn 8260823 or Partnership’s performance or n6n-performance nnder this Loan Agreement. Modifications of any insurance requirements set forth in Exhibit B shall be submitted, in writing, to the City for approval by the City’s risk manager. Any such modification shall receive the concurrence of the Office of City Attorney. Partnership shall name the City as an additional insured on all policies of insurance required under the terms of other financing. 3,3 Reporting and Provision of Information Partnership will submit reports in a format and at a time reasonably specified by the City. The reports will contain such information as the City may then require to document compliance with the use and occupancy restrictions and other requirements of the Regulatory Agreement. The City, including its designated representatives, shall have the right to examine and make copies of all books, records or other documents of Partnership which pertain to the Project or any Restricted Unit(s) and Partnership, upon reasonable notice, shall provide any information reasonably requested. Parmership shall deliver to the City copies of all reports submitted to the State’s Department of Housing and Community Development, the California Debt Limit Allocation Committee, the California Tax Credit Allocation Committee and the Internal Revenue Service, as may be requested by. the City. 3.4 Financial Audits Partnership shall provide City,. during the term of this Loan Agreement, with copies of audited financial statements of Partnership, including any management letter comments on the adequacy of internal or operational controls, within one hundred fifty (150) days of the dose of each fiscal year of the Partnership. City reserves the right, during the term of this Loan 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 Project. 3.5 Assignment or Transfer Except for the permitted transfers described under Section 4.5 of Regulatory Agreement, this Loan Agreement shall not be assigned by Fabian Way LP without the express prior written consent of the City, in its sole and discretion, such consent shall not be unreasonably withheld. Any assignment or attempted assignment shall be void and, at the sole discretion of the City, shall be deemed a material default of this Loan Agreement by Fabian Way LP, and the outstanding balance of the Note may be declared by City to be immediately due and payable. 3.6 Breach In the event of any breach of this Article 3 or of any other covenant or restriction set forth in this Loan Agreement, City shall have the right (following any period of notice and/or opportunity to cure expressly provided for in this Loan Agreement) 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. 3.7 " Indemnity_ 080725 syn8260823 ~7 Partnership 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 tbss, caused by or arising out of Partnership’s, its officers’, agents’, subcontractors’ or employees’ negligent acts, errors or omissions or willful misconduct, or conduct for which Partnership may be strictly liable in the performance of or failure to perform its obligations under this Loan Agreement. Nothing in this Section 3.7 shall be read to require the Partnership 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 City, its Council members, officers, agents and employees negligent acts, errors or omissions or willful misconduct, or conduct for which City may be strictly liable if/the performance of or failure to perform its obligations under this Loan Agreement. ARTICLE 4 - DEFAULT 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 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: 4.1 Partnership makes a representation in this Loan Agreement which shall prove to have been false in any material respect when made; or 4.2 Partnership fails to pay any amount due under the Partnership Note or any other sums payable by Partnership under this Agreement within fifteen (15) days of its due date; or 4.3 Partnership shall default for a period of thirty (30) days. (or if such default cannot be cured within 30 days despite Partnership’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 non-financial obligation to be performed by Parmership under this Loan Agreement; or 4.4 Partnership 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 creditorg, or is adjudicated a bankrupt or insolvent, or files a voluntary petition in bankruptcy; or 4.5 Partnership issubjected to the entry of an order,’decree, or judgment approving the reorganization of Partnership, 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 4.6 Partnership fails to comply with the covenants, terms and conditions of the Regulatory Agreement, including, without limitation, the failure of Partnership to abide by the use, occupancy and rent restrictions set forth in Section 2.1 and the other provisions of Article 2 of the Regulatory Agreement; or 080725 syn 8260823 4.7 Except as expressly otherwise provided in Section 4.5 of the Regulatory Agreement, Partnership causes or permits a sale, voluntary transfer, assignment or encumbrance of its ownership interest in the Project, or permits a sublease of all or any part of its interest without first obt.aining City,s written consent. Any such sale, transfer, assignment, encumbrance, or lease without the City’s written consent shall be voidable and, at the City’s election, shall constitute a breach of this Loan Agreement. No consent to any assignment,. encumbrance or lease shall constitute consent to any subsequent assignment, encumbrance or lease, or a waiver of any of the City’s rights under this Loan Agreement. ARTICLE 5 - NOTICES All notices, consents, communications or transmittals required by this Loan. Agreement shah be made, in writing, and shall be communicated by the United States mail, certified, return receipt requested or by express delivery or Overnight courier service with a delivery receipt, and shall be deemed given as of the date shown on the delivery receipt as the date &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: -. If to City:City of Palo Alto P.O. Box 10250 Palo Alto, CA 94303 Atm.: City Clerk with a copy to:Director of Planning & Community Environment City of Palo Alto P.O. Box 10250 Palo Alto, CA 94303 If to Partnership:Fabian Way Associates, e/o BRIDGE Housing Corporation 345 Spear Street, Suite 700 San Francisco, CA 94105-1673 Attn: Executive Vice President, Real Estate with a copy to LP Investor: At an address to be determined at a later date. ARTICLE 6 - MISCELLANEOUS PROVISIONS 6.1 Nothing contained in this Loan Agreement, nor any act of the City, shall be interpreted or construed as creating the relationship of third party beneficiary, limited or general parmership, joint v6nture, employer or employee, or principal and agent between the City, on the one hand, and Partnership, or Partnership’s agents, employees or contractors. Partnership shall at all times be deemed an independent contractor and shall be wholly responsible for the manner in which it or its respective agents, or both, observe the covenants and conditions .imposed on it 080725 syn8260823 bythe terms of this Loan Agreenient. Partnership has retained 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. Partnership agrees to be solely responsible for their own acts and those of their respective officers, partners, employees, agents, contractors, subcontractors and representatives. 6.2 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 thereo~" or the exercise of any other right, power, or privilege. Any of the requirements of this Loan Agreement may be expressly waived by the City in writing, but no waiver by the City of any requirement of this Loan Agreement shall, or shall be deemed to, extend to or affect any other provision .of this Loan Agreement. 6.3 Parmership lacks any authority or power to pledge the credit of City or inc.ur any ¯ obligation in the name of City. This Loan 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. 6.4 Any amendment to this Loan Agreement shall be binding upon the parties, provided such amendment is set forth in a writing signed by the parties. The city manager is authorized to execute any amendments to this Loan Agreement, and confer any consents or approvals that may be provided by the City. 6.5 The covenants, agreements, terms, and conditions of this Loan Agreement shall inure to and be binding on the successors and assigns of the parties. Any provision of this Loan Agreement which is characterized as a covenant or a condition shall be deemed both a covenant and a condition. If any provision of this Loan Agreement shall be determined by .a court of competent jurisdiction to be invalid, illegal, void, or unenforceable in any respect, the validity all other provisions herein shall remain in full force and effect. 6.6 This Loan 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 exhibit.s referred to in this Loan 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 Loan Agreement and shall be deemed to be part hereof. This Loan Agreement may be executed in any number of counterparts, each of which shall be an original, but al! 0fwhich together shall constitute one and the same instrument. The paragraph headings are not a part of this Loan Agreement and shall have no effect upon the construction or interpretation of any part of this Loan Agreement. 6.7 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 Loan Agreement or wising out of this Loan Agreement may recover its reasonable costs and attorneys’ fees expended in connection with such an action from the other party. 080725syn 8260823 10 6.8 The parties agree fhat they will take such further actions, and execute such further documents, as may be necessary or appropriate in order to carry out the purposes of this Loan Agreement. [Signatures on following page] 080725 syn 8260823 1] IN WITNESS WHEREOF, the parties hereto have executed this Loan Agreement for Fabian Way Housing as of the day and year first above written. ATTEST:CITY OF PALO ALTO, a chartered California municipal corporation , By: City Clerk Mayor APPROVED AS TO FORM: City Attorney APPROVED: FABIAN WAY ASSOCIATES, a California limited parmership By: BRIDGE Tower LLC, a California limited liability corporation, its general partner By: City Manager Director of Planning and Community Environment Director of Administrative Services By: Northpoint Housing, Inc., a California nonpri~fit public benefit corporation; its sole member Lydfa Tan, Vic~ President Taxpayer Ideritification No. ~’~ - O£ ~ g } ~ Insurance Review ATTACHMENTS: Exhibit A: Exhibit B: Exhibit C: Exhibit D: Exhibit E: Exhibit F: Exhibit G: Legal Description Insurance Requirements Form of Note Form of Deed of Trust Summary Project Development Budget Estimated Construction and Permanent Source of Funds Schedule of Performance 080725 syn 8260823 12 ACKNOWLEDGMENTS STATE OF CALIFORNIA COUNTY OF S&NTA CLAP_~- ) ) ) On ~.7"U[’~ 2~ / -l~o~" ,beforeme, ’ ~0rt.~e[c~r’(’xar,~, Notary Public, personally algpeared /- ~/~ ’~ c~ "-{-a~ ~~, proved to me on the basis of satisfactory evidence to be the’person(dfwhose narne(~ is/0r-e~subscribed to the within instrument and acknowledged to me that-he’ishe/t.befexecuted the same in Ms~er/thed-( authorized capacity(jesO, and that by hisCher/Jkvtr signature(s)" on the instrument the person/cs~, or the entity upon behalf of which the person(~)~cted, executed the instrument. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Commission # 1789872 Notary Public. Collfornla San Francisco County STATE OF CALIFORNIA COUNTY OF SANTA CLARA ) ) ) On , before me,., Notary Public, personally appeared ., proved to me on tlie basis of satisfactory evidence to be the person(s) whos9 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. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand .and official seal. Notary Public 080725 syn 8260823 13 EXHIBIT A LEGAL DESCRIPTION Real property in the City of Palo Alto, County of Santa Clara, State of California, described as follows: PARCEL ONE: LOT 1 OF THE MAP ENTI-FLED "TRACT NO. 9920,... BEING A SUBDIVISION OF PARCEL 1 AS SAID PARCEL IS SHOWN UPON THAT CERTAIN PARCEL MAP FILED FOR RECORD ON 3UNE 27, 2003, IN BOOK 762 OF MAPS AT PAGES 9 & 10, SANTA CLARA COUNTY RECORDS, LYING WITHIN THE CITY OF PALO ALTO, COUNTY OF SANTA CLARA, STATE OF CALIFORNIA", AND RECORDED AUGUST 7, 2007 IN BOOK 816, AT PAGES 53, 54 AND 55, AND CERTIFICATE OF CORRECTION DOCUMENT RECORDED DECEMBER 18, 2007 AS DOCUMENT NO. 19685839 OF OFFICIAL RECORDS OF SAID COUNTY. PARCEL TWO: TEMPORARY CONSTRUCTION EASEMENT AND TEMPORARY ACCESS EASEMENT AS CREATED BY AND OVER THE LAND DEFINED IN THAT CERTAIN DOCUMENT ENTITLED "TEMPORARY CONSTRUCTION EASEMENT AND INDEMNITY" RECORDED MARCH 3!, 2004, DOCUMENT NO. 17690197 OF OFFICIAL RECORDS. PARCEL THREE: THE LANDSCAPE EASEMENT (L.E.), AND PARKING EASEMENT AS SHOWN ON THAT CERTAIN MAP ENTITLED "TRACT NO. 9920r... BEING A SUBDIVISION OF PARCEL 1 AS SAID PARCEL IS SHOWN UPON THAT CERTAIN PARCEL MAP FILED FOR RECORD ON JUNE 27, 2003, IN BOOK 762 OF MAPS AT PAGES 9 & 10, SANTA CLARA COUNTY RECORDS, LYING WITHIN THE CITY OF PALO ALTO, COUNTY OF SANTA CLARA, STATE OF CALIFORNIA", AND RECORDED AUGUST 7, 2007 IN BOOK 816, AT PAGES 53~ 54 AND 55, ,SANTA CLARA COUNTY RECORDS. APN: 127-37-024 (Portion) 080725 syn 8260823 EXHIBIT B INSURANCE REQUIREMENTS 1. BUILDER’S RISK insurance, to cover the Project’s construction, with coverage limits in the total amount of all construction contracts covering the Project in connection with this Agreement. Such coverage shall remain in effect until the completion of the Project. 2. 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, a.t all times following completion of the Project. Such policies shall include water damage and debris cleanup provisions. POLICY MINIMUM LIMITS OF LIABILITY 3.WORKERS COMPENSATION Statutory 4. COMPREHENSIVE AUTOMOBILE Bodily Injury LIABILITY, including owned hired,, and nonowned automobiles Prbperty Damage $2,000,000-ea person $2,000,000 ea occurrence 5. COMMERCIAL GENERAL LIABILITY, including products and completed operations, broad form contractual, and personal injury. Bodily Injury Property Damage $2,000,000 ea person $2,000,000 ca. occurrence $2,000,000 aggregate $2,000,000 ea occurrence Each insurance policy required by this Agreement shall contain the following clauses: 1. This insurance shall not b.e canceled, limited in scope of coverage or nonrenewed until after thirty (30) days written notice has been given to the: City ofPalo Alto/Plarming and Community Environment Department, P.O. Box 10250, Palo Alto, CA 94303. 2. 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. 3. 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. 4. 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 carrie~s with a BEST KEY RATING GUIDE rating of A:VII or higher that are admitted or approved 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. B-I 080725 syn8260823 Client#: 23785 ACORD CERTiFiCATE OF PRODUCER IMA of Colorado, Inc. 1550 17th Street, Suite 600 Denver, CO 80202 303 534-4567 INSURED BRIDGE Housing Corporation 345 Spear St, Ste 700 San Francisco, CA 94105 COVERAGES BRIDHOU UABILITY INSURANCE 07/28/08DATE{MMmDr~) THIS CERTIFICATE IS ISSUED AS A MATTER OFINFORMATIONONLYAND CONFERS NO RIGHTSUPON THE CERTIFICATE HOLDER.THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDEDBY THE POLICIES BELOW, INSURERS AFFORDING COVERAGE INSURER A: Lexington Insurance Company INSURER B: INSURER C: NSURER D: INSURER E: THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. AGGREGATE LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. INSRLTR TYPE OF INSURANCE m GENERAL LIABILITY ----] CLAIMS MADE [~ OCCUR GEN’L AGGREGATE LIM IT APPLIES PER: ~ POLICY ~-~PRO-JECT ~-~ LOC ~UTOMOBILE LIABILITY I ANY AUTO ALL OWNED AUTOS SCHEDULED AUTOS HIRED AUTOS NON-OWNED AUTOS GARAGE LIABILITY ANY AUTO EXCESS LIABILITY ~ OCCUR ~] CLAIMS MADE DEDUCTIBLE RETENTION $ WORKERS COMPENSATION AND EMPLOYERS’ LIABILITY OTHER 6992550 POLICY NUMBER POLICY EFFECTIVEDATE (MM/DD/YYI 01/01/08 POLICY EXPIRATIONDATE (MM/DD/YY) 01/01/09 LIMITS EACH OCCURRENCE FIRE DAMAGE (Any one fire) MED EXP (Any one person) PERSONAL & ADV INJURY GENERAL AGGREGATE PRODUCTS -COMP/OP AGG COMBINED SINGLE LIMIT (Ea aocident) BODILY INJURY(Per person) BODILY INJURY(Per accident) PROPERTY DAMAGE(Per accident.) AUTO ONLY-EA ACCIDENT OTHER THAN EA ACC AUTO ONLY:AGG EACH OCCURRENCE AGGREGATE ~1,000,000 $1,000,000 $10,000 ~1,000,000 $2,000,000 sEXCLUDED $ $ $ $ $ $ $ ¯ $ WC STATU- I OTH-TORY LIMITSI ER E.L. EACH ACCIDENT $ E.L DISEASE -EA EMPLOYEE $ E.L, DISEASE - POLICY LIMIT $ DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLESIEXCLU~IONS ADDED BY ENDORSEMENT/SPECIAL PROVISIONS City of Paid Alto is included as Additional Insured on the General Liability Policy if required by written contract or agreement subject to the policy terms and conditions as respects: Named Insured: Fabian Way Associates, a California Limited Partnership Name of Property: Fabian Way Housing (See Attached Descriptions) CERTIFICATE HOLDER I I ADDITIONALINSURED~INSURERLE]-I’ER: -- City of PaiD Alto Planning and Community Environment Department PO Box 10250 Paid Alto, CA 94303 ACORD 25-S (7/97)1 of 3 #M369494 CANCELLATION SHOULD ANYOFTH E ABOVE DESCRIBED POLICIES BE C~d~CELLED BEFORE TH E EXPIRATION DArE THEREOF, THE ISSUING INSURER WILL ENDEAVOR TOMAIL3~0~DAYSWRITTEN NOTICETOTH E CERTIFICATE HOLDERNAMED TOTHE LEFT, BUTFAILURE TODOSOSHALL IM POSE NO OBLIGATION OR LIABILITYOF ANY KIND UPON THE INSURER,ITS AGENTS OR REPRESENTATIVES. AUTHORIZED REPRESENT, ATIVE ARE ® ACORD CORPORATION 1988 IMPORTANT If the certificate holder is an ADDITIONAL INSURED, the policy(ies)must be endorsed. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). DISCLAIMER The Certificate of Insurance on the reverse side of this form does not constitute a contract between the issuing insurer(s), authorized representative or producer, and the certificate holder, nor does it affirmatively or negatively amend, extend or alter the coverage afforded by the policies listed thereon. ACORD25-S(7/97)2 of 3 #M369494 DE$CF IPTIOhtS {Continued from Page 3895 Fabian Way, Palo Alto, CA 94303 A Waiver of Subrogation is provided in favor of City ot= Palo Alto and the members of the City Council and elective or :appointive officers or employees on the G~neral Liability Policy if required by written contract or agreement subject to the policy terms and conditions. This Insurance is Primary and Non-Contributory on the General Liability Policy subject to the policy terms and conditions. AMS 25.3 (07/97) 3 of 3 #M369494 CERT FICATE OF LiABiLiTY INSURANCE DATE,MM,DD 07/28/08ACORD, PRODUCER 0?26293 1-415-546-9300 Arthur J. Gallagher & Co. Insurance Brokers of California, Inc., License #0726293 One Market Plaza, Spear Tower - Suite 200 San Francisco, CA 94105 INSUREDBridge Housing Corporation Bridge Property Management 345 Spear Street Suite 700 San Francisco, CA 94105 COVERAGES THIS CERTIFICATE IS ISSUED AS A IVIATTER OF INFORMATION ONLY AND CONFERS NO RIGHTSUPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOESNOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDEDBY THE POLICIES BELOW. INSURERS AFFORDING COVERAGE INSURERA:Travelers Property Casualty Company o: ~NSURER£:Federal Ins CO INSURERC:Zenith Ins Co INSURER D: INSURER E: NAIC # 125674 20281 13269 THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH INSR LTR POLICIES, AGGREGATE LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. ~,DD’L NSRI3 TYPE OF INSURANCE POLICY NUMBER GENERAL LIABILITY COMMERCIAL GENERAL LIABIUTY ----1 CLAIMS MADE [~ OCCUR A c c GEN’L AGGREGATE LIMIT APPLIES PER: --~ POLICY ~-~PRO- JECT ~ LOC AUTOMOBILE LIABILITY X ANYAUTO ALL OWNED AUTOS SCHEDULED AUTOS ~ HIRED AUTOS X NON-OWNED AUTOS GARAGE LIABILITY ANYAUTO EXCESS/UMBRELLA LIABILITY-X OCCUR CLAIMS MADE DEDUCTIBLE X RETENTION $ Nil WORKERS.COMPENSATION AND EMPLOYERS’ LIABILITY ANY PROPRIETOPJPARTN EPJEXECUTIVE OFFICERJMEMBER EXCLUDED? If yes, descdbe under SPECIAL PROVISIONS below OTHER POLICY EFFECTIVEDATE IMM/DD/Y’~q BA435H825908 93631899 Z065173405 Z065173305 07/0z/08 02/01/08 io/14/o? 1o/14/o7 POLICY EXPIRATIONDATE IMM/DD/Y~q 07/01/09 Ol/Ol/O9 10/14/08 10/14/08 LIMITS EACH OCCURRENCE $ DAMAGE TO RENTED PREMISES (Ea occurence)$ MED EXP (Any one person)$ PERSONAL & ADV INJLJR¥$ GENERAL AGGREGATE $ PRODUCTS- COMP/OP AGG $ COMBINED SINGLE LIMIT $1,000 000(Ea accident)’ 8ODILY INJURY(Per person)$ BODILY INJURY (Per accidenI)$ PROPERTY DAMAGE (Per accident)$ AUTO ONLY - EA ACCIDENT $ OTHERTHAN EA ACC $ AUTO ONLY:AGG $ EACH OCCURRENCE $ 10,000,000 AGGREGATE $ 10,000,000 $ $ $ X I WC STATU- I OTH’iTORY LIMITS ER , E.L. EACH ACCIDENT $1,000, 000 E.L. DISEASE - EA EMPLOYEE $1,000, 000 E.L. DISEASE- POLtCY LIMIT $1,000,000 DEs~R~PT~~N~F~PERAT~~NS~L~~AT~~N~~~EH~~LES~E~~LUS~~NSADDEDBYEND~RSEMENT~~PE~~ALPR~~~S~~NS RE: Fabian Way Housing, 3895 Fabian Way, Palo Alto, CA 94303 Named Insured includes: Fabian Way Associates, a California Limited Partnership Additional Insured is provided on Auto Liability as their interests may appear on above referenced vehicle: City of Palo Alto Additional Insured is provided on Excess Liability only to the extent coverage is provided by primary General Liability: City of Palo Alto CERTIFICATE HOLDER CANCELLATION City of Palo Alto Planning and Community Environment Department P.O. Box 10250 Palo Alto, CA 94303 USA ACORD 25 (2001/08) jramos9410919 SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING INSURER WILL ENDEAVOR TO MAIL 3 0 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, BUT FAILURE TO DO SO SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND UPONTHE INSURER,ITS AGENTS OR REPRESENTATIVES. AUTHORIZED REPRESENTATIVE (~..~’-~::~ © ACORD CORPORATION 1988 IMPORTANT If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). DISCLAIMER The Certificate of Insurance on the reverse side of this form does not constitute a contract between the issuing insurer(s), authorized representative or producer, and the certificate holder, nor does it affirmatively or negatively amend, .extend or alter the coverage afforded by the policies listed thereon. ACORD 25 (2001/08) WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY BLANKET WAIVER OF OUR RIGHT TO RECOVER FROM OTHERS ENDORSEMENT -CALIFORNIA We have the right to recover our payments from anyone liable for an injury covered by this policy. We will not enforce our right against the person or organization for whom you perfoma work under a written contract that requires you to obtain this agreement from us. The additional premium for this endorsement shall be 2% of the California workers compensation premium otherwise due. Minimum Premium:$50 This endorsement changes the policy to which it is attached and is effective on the date issued unless otherwise stated. Endorsement Effective 10/]4/0 7 Insured BRIDGE HOUSING CORPORATION (A CORP) Policy No. Z065173405 Policy Period 10/24/07 To 1_0/14/08 Issued On 04/0J/08 At San Francisco, CA ZENITH INSURANCE COMPANY PRESIDENT WC-99-04-25 (Ed. 12-06) Endorsement No. 25 ACORD, EVIDENCE OF COMIMERCIAL PROPERTY NSURANCE THIS IS EVIDENCE THAT INSURANCE AS IDENTIFIED BELOW HAS BEEN ISSUED’, IS ’IN FORCE, AND CONVEYS ALL PRIVILEGES AFFORDED UNDER THE POLICY, PRODUCER NAME, CONTACT PHONE 1 - 415 - 5 4 6 - 9 3 0 0~_A/C. No. Ext):-PERSON AND ADDRESS FAX (NC, No):E-MAILADDRESS:Arthur J. Gallagher & Co.. Insurance Brokers of California,Inc., License #0726293 One Market Plaza, Spear Tower . Suite 200 San Francisco, CA 94105 CODE:~ SUB CODE: AGENCYCUSTOMER ID #: ]~AI~E.D INS.U.RED/~ND AD...DRESSridge nouszng uorporation iFabian Way Associates, a California Limited Partnership 345 Spear Street, Suite 700 San Franciscol CA 94105 i ADDITIONAL NAMED |NSURED(3) DATE (MM/DD/’f’(Y~ 07/28/08 THE RIGHTS AND COMPANY NAME AND ADDRESS LNAIC NO: 19437 LEXINGTON INS CO e~See attached for additional participating insurance carrier~* IFMULTIPLECOMPANIES, COMPLETESEPARATEFORMFOREACH LOANNUMBER POLICYNUMBER 1089633 EFFECTIVE DATE EXPIRATION DATE 07/01/08 07/01/11 THIS REPLACES PRIOR EVIDENCE DATED: CONTINUED UNTIL[~TERMINATEDIFC~ECKED PROPERTY INFORMATION IUse additional sheets if more space is required) LOCATION/DESCRIPTION3895 Fabian Way, Palo Alto, CA 94303 COVERAGE INFORMATION CAUSE OF LOSS FORM COMMERCIAL PROPERTY COVERAGE AMOUNT OF tNSUFL&NCE: BUSINESS INCOME / RENTAL VALUE BLANKET COVERAGE TERRORISM COVERAGE IS COVERAGE PROVIDED FOR "CERTIFIED ACTS" ONLY? IS COVERAGE A STAND ALONE POLICY? DOES COVERAGE INCLUDE DOMESTIC TERRORISM?x COVERAGE FOR MOLD x MOLD EXCLUSION (If "YES", specify organization’s form used)x REPLACEMENT COST x AGREED AMOUNT x COINSUFLANCE EQUIPMENT BREAKDOWN (If Applicable)x LAW AND ORDINANCE - Coverage for loss to undamaged portion of building x -Demolition Costs x - Incr. Cost of Construction x EARTHQUAKE (If Applicable) FLOOD (If Applicable) WIND / HAIL (tf Separate Policy)x PERMISSION TO WAIVE SUBROGATION PRIOR TO LOSS x $ 20,541,506 DED: ..... ~E8 NO x If YES,LIMIT:t Actual Loss Sustained x If YES, indicate amount of insuraEce on properties identified above: $ x Attach signed Disclosure Notice / DEC x If YES,SUB LIMIT:DED: x If YES,LIMIT;DED: If YES,SUB LIMIT:DED: If YES,LIMIT:DED: IfYES,% If YES,LIMIT: s eeremarks DED:~ If YES,LIMIT: 10,000,000 DED:1.0,000 If YES,LIMIT:1,000,000 DED:10,000 IfYES,LIMIT:1,000,000 DED:10,000 If YES,LIMIT:DED: If YES,LIMIT:DED: I(YES,LIMIT:DED: x x REMARKS - Including Special Conditions (Use additional sheets if more space is required) Included as Loss Payee per the language provided on the attached CP 1218 endorsement: City of Palo Alto # o( months: CANCELLATION THE POLICY IS SUBJECT TO THE PREMIUMS, FORMS, AND RULES IN EFFECT FOR EACH POLICY PERIOD. SHOULD THE POLICY BE TERMINATED, THE COMPANY WILL GIVE THE ADDITIONAL INTEREST IDENTIFIED BELOW 30 DAYS WRITTEN NOTICE, AND WILL SEND NOTIFICATION OF ANY CHANGES TO THE POLICY THAT WOULD AFFECT THAT INTEREST, IN ACCORDANCE WITH THE POLICY PROVISIONS OR AS REQUIRED BY LAW. ADDITIONAL INTEREST NAME AND ADDRESS LENDER SERVICING AGENT NAME AND ADDRESS City of Palo Alto Planning and Conununity Environment Department P.O.Box 10250 Palo Alto, CA 94303 ~_.~MORTGAGEE .~ADDITIONALINSUREDLOSS PAYEE ACORD 28 (2003/10) jramos 9407441 USA AUTHORIZED RE P RES E NTATIVE (~ ~.__~ © ACORD CORPORATION 2003 POLICY NUMBER: ~.o89~33 CONIMERCIAL PROPERTY CP 12 18 10 9i LOSS PAYABLE PROVISIONS This endorsement modifies insurance provided under the following: BUILDING AND PERSONAL PROPERTY COVERAGE FORM BUILDERS’ RISK COVERAGE FORM CONDOMINIUM ASSOCIATION COVERAGE FORM CONDOMINIUM COMMERCIAL UNIT-OWNERS COVERAGE FORM STANDARD PROPERTY POLICY Prem. No. Bldg. No SCHEDULE Loss Payee (Name & Address) Description of Property 3895 Fabian Way, Palo Alto, CA 94303 Loss Payable City of Palo Alto Planning and Community Environment Department P.O. Box 10250 Palo Alto, CA 94303 USA Lender’s Loss Payable Provisions Applicable Contract Of Sale A.When this endorsement is attached to the STANDARD PROPERTY POLICY CP 00 99 the term Coverage Part in this endorsement is replaced by the term Policy. The_ following is added to the LOSS PAYMENT Loss Condition, as indicated in the Declarations or by an "X" in the Schedule: B. LOSS PAYABLE For Covered Property in which both you and a Loss Payee shown in the Schedule or in the Declarations have an insurable interest, we will: ’ 1. Adjust losses, with you; and 2.Pay any claim for loss or damage jointly to you and the Loss Payee, as interests may appear. C. LENDER’S LOSS PAYABLE The Loss Payee shown in the Schedule or in the Declarations is a creditor, including a mortgageholder or trustee, whose interest in Covered Property is established by such written instruments as: a. Warehouse receipts; b. A contract for deed; c. Bills of lading; d. Financing statements; or e.Mortgages, deeds of trust, or security agreements. CP 12 18 10 91 Copyright, ISO Commercial 2.For Covered Property in which both you and a Loss Payee have an insurable interest: a. We will pay for covered loss or damage to each Loss Payee in their order of precedence, as interests may appear, b. The Loss Payee has the right to receive loss payment even if the Loss Payee has started foreclosure or similar action on the Covered Property. c. If we deny your claim because of your acts or because you have failed to comply with the terms of the Coverage Part, the Loss Payee will still have the right to receive Io.~s payment if the Loss Payee: (1) Pays any premium due under this Coverage Part at our request if you have failed to do so; (2)Submits a signed, sworn proof of loss within 60 days after receiving notice from us of your failure to do so; and (3) Has notified us of any change in ownership, occupancy or substantial change in risk known to the Loss Payee. All of the terms of this Coverage Part will then apply directly to the Loss Payee. Risk Services, Inc., 1990 If we pay the Loss Payee for any loss or damage and deny payment to you because of your acts or because you have failed to comply with the terms of t_his Coverage Part: (1)The Loss Payee’s rights will be transferred to us to the extent of the amount we pay; and (2) The Loss Payee’s rights to recover the full amount of the Loss Payee’s claim will not be impaired. At our option, we may pay to the Loss Payee the whole principal on the debt plus any accrued interest. In this event, you will pay your remaining debt to us. 3.If we cancel this policy, we will give written notice to the Loss Payee at least: a. 10 days before the effective date of cancellation if we cancel for your nonpayment of premium; or b. 30 days before the effective date of cancellation if we cancel for any other reason. 4.If we elect not to renew this policy, we will give written notice to the Loss Payee at least 10 days before the expiration date of this policy. D. CONTRACT OF SALE 1. The Loss Payee shown in the Schedule or in the Declarations is a person or organization you have entered a contract with for the sale of Covered Property. 2. For Covered Property in which both you and the Loss Payee have an insurable interest we will: a. Adjust losses with you; and b. Pay any claim for loss or damage jointly to you and the Loss Payee, as interests may appear: 3.The following is added to the OTHER INSURANCE Condition: For Covered Property that is the subject of a contract of sale, the word "you" includes the Loss Payee. CP 12 18 10 91 Copyright, Insurance Services Office, Inc., 1992 SUPPLEMENT TO CERTIFICATE OF NSURANCE NAME OF ~NSURED: Bridge Housing Corporation Fabian Way Associates, a California Limited Partnership DATE 07/28/08 AdditionalOescriptionofOperations/Remarksfrom Paqe 1: Equipment Breakdown Coverage Cold Testing ~uilders Risk Direct Damage: $15,801,687 Deductible: $10,000 5uilders Risk Soft Costs: $4,333,607 Deductible: 21 Days Loss of Rents: $406,212 Additionalln~rmation: **Additional Participating Insurance Carrier Illinois Union Insurance Company - Policy Number: I21114121001 Participation Lexington and Illinois Union each taking 50% or $10,270,753 part of ~$20,541,506~ Additional Coverage: Permission to occuy - 60 days from date of first building completion $500,000 Property in Transit $500,000 Property Stored at Temporary Locations $250,000 Fire Department Service & Extinguishing Expenses $250,000 Water Damage Caused by Sewer & Drain Backup~ $250,000 Trees, Plants! Shrubs - Per Occurrence: $5,000 Maximum Per Item $250,000 or 20% - Expediting Expense $i0,000,000 or 25% - Debris Removal $I00,000 Pollution & Contamination Cleanup & Decontamination $i0,000,000 Interior Water Damage $i00,000 Mold & Fungus Remediation $500,000 Broad Form Water Damage SUPP (05/04) EXHIBIT C FORM OF NOTE PROMISSORY NOTE FABIAN WAY HOUSING SECURED BY DEED OF TRUST AND ASSIGNMENT OF RENTS (RESIDENTIAL HOUSING FUNDS) $600,000 ., 2008 Palo Alto, California FOR VALUE RECEIVED, the undersigned, FABIAN WAY ASSOCIATES,. a California limited partnership ("Maker"), hereby promises to pay to the CITY OF PALO ALTO, a chartered California municipal corporation ("Holder"), or order, at 250 Hamilton Avenue, Palo Alto, California, or at such other place as may be designated in writing by the Holder from time to time, the principal sum of Six Hundred Thousand Dollars ($600,000) (the "Loan Amount"); or so much thereof as may be advanced by Holder from time to, time, together with interest on the outstanding principal balance from time to time at an annual rate of interest equal to the "Applicable Interest Rate" (as defined below), in accordance with the terms and conditions set forth in this Promissory Note ("Note"). ADDITIONAL TERMS AND CONDITIONS 1. This Note is made in connection with those certain agreements between Maker and Holder entitled "Regulatory Agreement and Declaration of Restrictive Covenants for Fabian Way Housing" ("Regulatory Agreement") and "Loan Agreement for Fabian Way Housing" ("Loan Agreement") and the development on certain real property commonly known as 3895 Fabian Way, Palo Alto, California (the "Site") by Maker of an 56 unit (including manager’s unit) apartment project designed for extremely low-income and very low-income families at affordable rents (the "Project"). All terms, conditions, agreements and provisions, including the covenants, representations, and terms of default and remedies for default, set forth in the Regulatory Agreement and the Loan Agreement are incorporated herein by reference, and made a part hereof. 2. This Note evidences the obligation of the Maker to make fuil payment of the Loan iAmount to the Holder, in accordance with the provisions of this Note, 3. This Note is .secured by a Deed of Trust, Assignment of Rents and Memorandum of Option executed by Maker for the benefit of the Holder and encumbering the Maker’s interest in the Project (the "Deed of Trust"). 4. This Note and the Deed of Trust securing this Note is, or will be, subordinate to one or more construction period loans made by: (a) the California Municipal Finance Authority ("CMFA") pursuant to the terms of a construction loan agreement between Maker and 8260823 C-1 ], as agent for CMFA (the "CMFA Bond Loan") in original principal amount of approximately $13,100,00; (b) Opportunity Fund ("Opportunity Fund") in the original amount of $2,169,575; and (d) Housing Trust of Santa Clara County ("HTF") in the original amount of $539,439. Following completion of construction and occupancy of the Project, this Note and the Deed of Trust securing this Note will be subordinate to: (a) one or more permanent loans in the aggregate original principal amount of $5,250,000 made pursuant to the Multi-Fami!y Housing Program ("MHP’) as contained in the California Code of Regulations Title 25, Division 1, Chapter 7, Subchapter 4, Sections 7300 - 7336, as amended from time to time, and administered by the California Department of Housing and Community Development (the "MHP Loan"), and (b) one or more permanent loans made by the County of Santa Clara in aggregate original principal amount of approximately $1,500,000 (the "Santa Clara County Loan"). The loans described in Exhibits F and E of the Loan Agreement are sometimes referred to as the "Approved Financing." 5. The term of this Note shall commence on the date set forth above and 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 concurrently with the expiration or earlier termination of the term of the Regulatory Agreement. 6.Payments; Interest; Maturity Date. (Capitalized terms used in this Section 6 without definitions shall have fllose definitions, if any, ascribed to them in the Regulatory Agreement.) 6.1 Annual payments on this Note shall be payable as described in this Section 6. Payments shall be credited first to current interest then due and owing, and then to principal. The entire outstanding principal balance of this Note, together with any other sums accrued hereunder, shall be payable in full on December 31,2011; provided, however, concurrent with the closing of the MHP Loan, the maturity date of this Note will automatically extend to the 55th anniversary of the date of recording of the MHP Loan and its related loan documents (as defined in Section 4). Notwithstanding the foregoing, if the MHP Loan has not closed by December 31, 2011, and the Ci~ Manager of City determines that such delay is due to one or more "acts of God" or other causes beyond the control of the P, armership, City may extend the maturity date of .the Partnership Note for a reasonable period equal to the amount of excusable delay, not to exceed twelve (12) months. Provided the maturity date of this Note is extended, no interest shall accrue during the period prior to the closing of the MHP Loan. 6.2 The "Applicable Interest Rate" for any fiscal year shall be determined on the date of payment of Holder’s Proportionate Share of Residual Receipts for such fiscal year, and shall be an annual simple interest rate equal to the lesser of (i) three percent (3.0%) or (ii) an annual ¯ percentage determined by dividing Holder’s Proportionate Share of Residual Receipts for that fiscal year, by the then unpaid principal balance under this Note. ¯ 6.3 Commencing on the May 1st following Project’s first full fiscal year of operations following the closing of the MHP Loan, and each anniversary thereafter during the term hereof, Maker. sha!l make payments to Holder in an amount equal to Holder’s Proportionate Share of C:2 8260823 fifty peicent (50%) of the net cash flow of the Project for the fiscal year most recently ended. No later than December 1st of each year during the term hereof beginning in the year following the year in which the MHP Loan closes, Maker shall provide to Holder Maker’s calculation of Residual Receipts for the previous fiscal year, accompanied by such supporting documentation as Holder may reasonably request, including without limitation an independent audit prepared for the Project by a certified public accountant. No later than December 1st of each year during the term hereof beginning in the year. following the year in which the MHP Loan closes, if requested by Holder, Maker shall provide to Holder a projected budget for the following calendar year, which shall include an estimate of Residual.Receipts. 6.3.1 Until such time as the regulatory agreement recorded in connection with the MHP Loan (the "MHP Regulatory Agreement") is no longer in effect, "Residual Receipts" will equal "Net Cash Flow" determined in accordance with the MHP Regulatory Agreement recorded against the Project, and "Holder’s Proportion~tte Share" shall mean the proportion of Net Cash Flow payable to Holder under the MHP Regulatory Agreement. However, in no event shall the annual payment due under this Note ever exceed the amount which would have been payable if the MHP Regulatory Agreement had not been in effect at the time of such payment. 6.3.2 After the MHP Regulatory Agreement is no longer in effect, "Residual Receipts" shall have the meaning set forth in Section 6.3.3 and "Holder’s Proportionate Share" shall mean a fraction, the numerator of which is the original principal amount of this Note, and the denominator of which is the sum of the original principal amounts of this Note and the MHP Loan and County Loan which are outstanding at the time of determination of Holder’s Proportionate Share. 6.3.3 After the MHP Regulatory Agreement is no longer in effect, "Residual Receipts" for a particular fiscal year shall mean the excess of Operating Revenues over annual Operating Expenses for the for such fiscal year. "Operating Revenues" shall mean all income derived from the Project, and shall include, without limitation: (1) rent (including rent on common space within the Project); (2) interest on reserves, unless such interest remains in the applicable reserve account; (3) receipts from laundry, parking, or other services for which a fee is charged; and (4) insurance proceeds or condemnation awards rec.eived by Maker after casualty’ to or condemnation of the Project. "Operating Expenses" shall mean all reasonable and actual costs and expenses of operating the Project, including without limitation: (1) debt service, reserves and other payments currently due or payable on a non-optional (to Maker) basis on all loans which have been approved by Holder and which are secured by deeds of trust encumbering the Project, including without limitation the MHP Loan and any administrative fee payable under the Santa Clara County Loan; (2) payments for supportive services to Project residents, including without limitation the salary of an on-site service coordinator and the commercially reasonable cost of providing any services required by any recorded regulatory agreement or related document; (3) payments of deferred developer fees; (4) for so long as the Project is owned by a limited partnership in which the limited partner is not an affiliate of the general parmer, a partnershii9 management fee payable to the generN partner of Maker, not exceeding $30,000 per year, increasing annually at a rate of 8260823 C-3 three percent (3.0%) per-year, or such greater amount as may fi’om time to time be approved by Holder in Holder’s sole discretion; (5) property management fees and reimbursements in amounts in accordance with industry standards for similar developments;. (6) property management staff salaries; (7) deposits to operating and replacement reserve accounts which are either (i) commercially reasonable, (ii) required under the loan documents of the Approved Financing, or (iii) required under the partnership agreement of the Maker, as amended at the time of admission of the investor limited partner; (8) costs of restoring the Project after damage, destruction or condemnation; (9) organizational costs (e.g., annual franchise tax payments) and costs associated with accounting, tax preparation and legal fees of Maker incurred in the ordinary course of business; and (10) any extraordinary costs or expenses approved by Holder. Notwithstanding. the foregoing, "Operating Expenses" shall not include the following items (or, to the extent that such items have been included in Operating Expenses, the following items shall be subtracted out; for example, if funds are withdrawn from operating reserves and spent on operating expenses, either those expenses would not be included in Operating Expenses or those expenses would be offset by a deduction for the amount withdrawn from reserves): (a) non-cash expenses, including without limitation, deprgciation; (b) funds expended from reserves, except to the extent such reserves have previously been included in Operating Revenue; (d) the initial cost of constructing the Project or any expansion or replacements thereof; (e) partnership management fees except as expressly permitted in this Section 6.3.3; and (f) any .penalties or interest .resulting from Maker’s failure to pay when due any sums that Maker is obligated to pay to third parties (e.g., penalties and interest for late payment of real property taxes). 7. Maker shall deliver to the Holder within 150 days of the close of each fiscal year of the Project an annual audited financial statement to confirm the amount of Residual Receipts. The Holder shall have the right to inspect and audit the Maker’s books and records concerning the calculation of Residual Receipts. In the event any audited financial statement provided by Maker, or any inspe.ction or audit of Maker’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 there for by the Holder; in the event of any overpaYment, the amount overpaid will be applied to the next payment due’hereunder. 8. 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. 9. Notwithstanding anything to the contrary contained in this Note; upon the completion of construction of the Project, the Maker shall prepare or cause to be prepared an independently audited cost certification and a final sources and uses of funds proforma, each in the form required by TCAC and MHP, documenting the actual Total Sources of Funds and Development Costs of the Project. 10. Except as provided for under Section 4.5 of the Regulatory Agreement, Maker shall not sell, agree to setl, convey, alienate, lease, sublease, encumber or refinance the Project or. 8260823 C-4 any interest therein without the written consent of Holder. If the Project, or any part thereof or any interest therein, is sold, agreed to be sold, conveyed, alienated, leased, subleased, encumbered or refinanced by Maker, or by operation of law or otherwise, with the exception of the permitted transfers under Section 4.5 of the Regulatory Agreement, without the written consent of Holder, all obligations of Maker hereunder, irrespective of the maturity date expressed herein, at the option of Maker shall immediately become due and payable. 11. The Maker and any other maker, co-maker, endorser, guarantor, and any other party to this Note (collectively, "Obligors"), and each of them: (i) are entitled to notice of default (including as provided in Section 14), notice of acceleration, notice of nonpayment, presentment for payment, demand, protest, notice of demand, notice of protest, notice of nonpayment, and all other notice required to be given under the law to the Obligors; (ii) consent(s) to reasonable 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 Regulatory Agreement, under any endorsement or guaranty of this Note; and (iii) (jointly and individually, if more than one) agree(s) to pay, on demand, reasonable costs and expenses of collection of this Note or of any endorsement 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. 12. In any action to enforce the terms of this Note, each party shall bear its own attorneys’ fees and other related costs and expenses incurred in connection with the enforcement of any rights or obligations under this Note. 13. The occurrence of any of the following shall c.onstitute 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 default by the Maker under any, other provision of this Note, or under the Deed of Trust or the Regulatory Agreement, following expiration of any applicable grace or 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 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 farther exercise thereof. 8260823 C-5 If the outstanding unpaidprincipa] balance of this Note is not paid within thirty (30) days of demand there for, 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. 14. 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 non.monetary 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 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 15, 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. 15. 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 with a delivery receipt, 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 Pal6 Alto P. O. Box 10250 Palo Alto, California 94303 Attention: City Clerk Maker:Fabian Way Associates c/o BRIDGE Housing Corporation 345 Spear Street, Suite 700 . San Francisco, California 94105-1673 Attention: Executive Vice President, Real Estate .The delivery shall be effective on the date shown on the delivery receipt or the date on which th,e delivery was refused. C-6 8260823 16. 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 in the Regulatory Agreement, the Loan Agreement, this Note or the Deed of Trust, or (b) the sale or transfer or other conveyance of all or any part of the 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, (b)waste caused by or permitted by the Maker to the s Project, or (c) the presence or release of any hazardous or toxic substances on or in the Project encumbered by the Deed of Trust. The Holder shall not in any way be prohibited from naming th~ 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 in the Project or in any other collateral given to secure the performance of the obligations of the Maker pursuant to this Note, and further provided, however, that nothing in this Section 17 shall be deemed to prejudice the rights of the Holder to recover any rents, condemnation or insurance proceeds, tenant security deposits or other similar funds or payments attributable the Project which were diverted or misappropriated by the Obligors, or any of them. 17. In the event of any conflict between the terms and conditions contained in this Note and the terms of the Loan Agreement or the Regulatory Agreement, the terms and conditions contained in this Note shall control. 18. The covenants, agreements~ terms, and conditions of this Note shall inure to, and shall be binding on, the successors and assigns of the Obligors. EXECUTED BY MAKER by its duly authorized representatives in Palo Alto, County of Santa Clara, State of California, on the date first above written. By: FABIAN WAY ASSOCIATES, a California limited partnership BRIDGE TOWER LLC, a California limited liability corporation, its general partner By:Northpoint Housing, Inc., a California nonprofit public benefit corporation, its sole member By: Lydia Tan,. Vice President Taxpayer Identification No. 8260823 C-7 EXHIBIT D FORM OF DEED OF TRUST DEED OF TRUST, ASSIGNMENT OF RENTS AND OPTION TO PURCHASE THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND MEMORANDUM OF OPTION, made on , 2008, between FABIAN WAY ASSOCIATES, a California limited partnership ("Trustor"), whose address is 345 Spear Street, Suite 700, San Francisco, California 94105-1673, FIRST AMERICAN TITLE INSURANCE" COMPANY, a California corporation ("Trustee"), whose address is 1737 North First St, Suite 500 San Jose, California 95112, and THE CITY OF PALO ALTO, a municipal corporation of the State of California ("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 arid made a part hereof as if fully set forth herein, to collect and apply such rents, issues and pr~ifits 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 $600,000 executed by Trustor in favor of Beneficiary, and the performance of the obligations of Trustor contained in those certain agreements between Trustor and Beneficiary entitled Regulatory Agreement and Declaration of Restrictive Covenants for Fabian Way Housing (the "Regulatory Agreement") and Loan Agreement for Fabian Way Housing (the "Loan Agreement"). TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR AGREES: 1. Fictitious Deed of Trnst. By the execution and delivery of this Deed of Trnst 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. D-I 080’725 ~yn g2601~23 2. Prohibited Transfers. With the exception of the permitted transfers described in Section 4.5 of the Regulatory Agreement, Tmstor 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 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 Iiability under this Deed of Trust, the Note, and/or the Agreement. 3. Due on Sale. ha the event of default by Trustor under the Note or this Deed of Trust, or (except as expressly permitted by the terms of the Note) 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 Befieficiary hereof shall immediately become due and payable upon declaration of notice of default. 4. City Option to Purchase. Trustor hereby grants to Beneficiary the right to purchase the Property, subject to the terms and conditions set forth in Section 8.2 of the Regulatory Agreement, which terms and conditions are incorporated herein by this reference as if fully set forth herein. FABIAN WAY ASSOCIATES, a California limited partnership By: BRIDGE Tower LLC, a California limited liability corporation, its general partner By:Northpoint Housing, Inc., a California nonprofit public benefit corporation, its sole member By: Lydia Tan, Vice President 080725 syn8260823 Taxpayef Identification No. D-2 EXHIBIT E Fabian Way Senior Housing Estimated Summary Project Development Budget (As of July 2"008) 1 Land Acquisition Costs (& Closing co.sts) 2 Other Site Related Costs 30ffsite Improvements 4 Hard Construction (incl. Site work, excavation, demolition) 5 Construction Contingency 6 Construction Loan: Interest, Insurance 7 Architecture & Engineering: (Incl. Environmental Studies; Soils, Testing) 8 City Impac~ Fees; Planning & Building Permits 9 Predevelopment & Construction (Legal, Title, Escrows, Bond Issuance) 10Permanent Financing: (Title, Escrow, Legal, TCAC Fees; Market Study, Consultant, Audit) $4,307,175 $c $200,00C $10,811,268 $955,125 $1,026,241 $1,147,80; $1,554,722 $469,438 $133,509 11 Marketing & Rent-Up 12Furnishings 13Soft Cost Contingency 14Replacement Reserves (I.nitial Funding) 15Developer Fee $200,000 $65,000 $15o,oo0 $0 $1,400,000 ~ 60 peratingReserve ,: .......$79,713 "OTAL ESTIMATED DEVELOPMENT BUDGET $22,500,000 144\ 185\576425.3 EXHIBIT F CONgTRUCTION SOURCES OF FUNDS [as of July 2008] Tax Exempt Bond Proceeds (estimated) Opportunity Fund (Sobrato Affordable Housing Fund) Housing Trust of Santa Clara County City of Palo Alto General Partner Equity Limited Partner Equity Total Estimated Construction Sources of Funds $10,533,842 $2,169,575 $539,439 $6OO,000 $7,300,000 $50,000 $21,192,856 PERMANENT SOURCES OF FUNDS [as of July 2008] State HCD: Multifamily Housing Program Loan Limited Partner Equity (estimated) General Partner Equity (including $7.3 Million BUILD contribution) Santa Clara County Office of Affordable Housing Loan Santa Clara County GUP Funds and / or State Tax Credits (proposed) City of Palo Alto: Residential Fund Loan Deferred Developer Fee Total Estimated Permanent Sources of Funds $5,250,000 $5,801,000 $7,500,000 $1,500,000 $1,500,000 $60O,00O $349,OO0 $22,500,000 144\185\576425.3 EXHIBIT G Fabian Way Senior Housing: Schedule of Performance As of June 20, 2008 Key Ci_ty Approvals: City Council Approval of Loan & RegulatOry Agreements (Scheduled for July l zi, 2008) Approval of Planned Community Zone (completed) Site Acquired Building Permit: First Building Permit to be Issued Construction Cost Estimating & Bidding: Final Construction Budget Established Execute Construction Contract(s) Construction Period: Notice to Proceed Issued Complete Site Excavation Begin Building Construction Complete Construction Financing: MHP Funding Committed Approval of TCAC 4% Tax Credit Reservati.o.n . Approval by CDLAC of Bond Allocation CMFA Issues Bonds Bond Loan Closing and Close All Other Corlstruction Loans Legal Deadline to Issue Bonds Complete Rent- up & Occupancy MHP Loan Closing TCAC issues INS Form 8609 (tax credits finalized) Final Equity Payment From Limited Partner July 14, 2008 September 25, 2006 August, 2007 September, 2008 August, 2008 September, 2008 October, 2008 October, 2008 October, 2008 September, 2008 January, 2008 October, 2008 October, 2008 October, 2008 October 2008 January, 2009 May, 2010 July, 2011 September, 2011 September, 2011 080725 syn 8260823 G-1 ATTACHMENT B 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 FABIAN WAY HOUSING, PALO ALTO THIS REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS FOR FABIAN WAY HOUSING ("Regulatory Agreement"), made and entered. into as of ., 2008, 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 FABIAN WAY ASSOCIATES, a California limited partnership, whose address is at c/o BRIDGE Housing Corporation, 345 Spear Street, Suite 700, San Francisco, California 94105 ("Fabian Way LP" or "Partnership"), WITNESSETH: WHEREAS, on June 9, 2008, the City Council approved an ordinance adopting the Budget for fiscal year 2008-09 which included a reservation of $600,000 in Residential Housing. Funds for the Fabian Way Housing Project ("Project") for a loan to Fabian Way LP t6 assist in the construction of new rental housing for extremely low-income and very low-income senior households, which is the one of the purposes for which the revenues of the Residential Housing Fund are colle, cted by the City; , WHEREAS, the City Council approved Planned Community Ordinance Number 8644-4917 on September 25, 2006 allowing construction of the Project, which includes 56-units of senior rental apartments on a one-half acre parcel, moreparticularly described in the attached Exhibit A, (the "Site"); WHEREAS, .in satisfaction of the City’s Below Market Rate (BMR) Program H-36 of the Housing Element of the Comprehensive Plan for the adjoining 103-unit ownership condominium development ("Altaire")at 901 San Antonio Rd, Palo Alto, California, the City and the developer, BRIDGE Urban Landfill Development, LLC (BUILD), entered into a BMR letter agreement dated September. 1, 2006, which required BUILD to sell the Site to BRIDGE and also provide $7,300,000 in funds for development costs, in-lieu of providing the normally required fifteen percent inclusi0nary for-sale BMR units within the BUILD project. 080725 syn 8260821 WHEREAS, the Partnership has acquired the Site from BUILD and secured commitments of construction and permanent financing sufficient for construction and operation of the Project; WHEREAS, fifty-five (55) of the 56-units in the Project will be occupied by Extremely Low-Income and Very Low-Income households at affordable rents, which will help the City meet its affordable housing production goals and the development of this type of rentalhousing together with supportive services is a priority objective of the City’s Consolidated Plan and the Housing Element of the City’s Comprehensive Plan; WHEREAS, BRIDGE Housing Corporation ("Sponsor" or "BRIDGE") on behalf of the Partnership applied for a City loan of $600,000 to finance a portion of the total Project costs (the "Partnership Loan") with the loan funds to be made available for pre-construction and construction period expenses in conjunction with other financing commitments for construction and development funding for the Project; WHEREAS, Fabian Way LP has applied for construction f’mancing, including an allocation of tax exempt bond authority of up to $13,100,000 (the "Bond Loan") and permanent financing including an award of $5,250,000 in Supportive Housing funds under the State’s Multifamily Housing Program (the "MHP Loan"); WHEREAS, the County of Santa Clara issued an allotment of Article 34 authority for the. Project, under Measure A as approved by the voters in November 1998, to the City on September 25, 2006; and WHEREAS, in consideration of the CitY’s making the Partnership Loan, Fabian Way LP has agreed to observe and perform all of the terms and conditions set forth in this Regulatory Agreement, and has agreed that the Project, including all 55 Restricted Units, will be subject to the terms and conditions set’forth in this Regulatory Agreement for a term of approximately fifty-eight (58) years, commencing on the date on which this Regulatory Agreemerit is recorded in the Official Records of Santa Clara CountY and expiring concurrently with the expiration of the last to expire of the MHP Regulatory Agreement, the Bond Regulatory Agreement and the TCAC Regulatory Agreement, and in order to ,ensure that the Project 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 and terms, conditions and provisions set forth in this Regulatory Agreement and for other valuable consideration, the parties agree as follows: 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: "Affordability Restrictions" means, the use, occupancy and rent restrictions set.forth in Article 2 hereof. 080725 syn 8260821 2 "BRIDGE Housing-Corporation" or "BRIDGE" means a California 501 (c) (3) nonprofit public benefit corporation. "Bond Loan" means a potential construction loan of up to appfoximately $13,100,000 for the Project funded by tax-exempt bonds issued by the California Municipal Finance Authority (CMFA). "Bond Loan Closing" means the initial funding made pursuant to the contemplated Bond Loan. ¯ "Bond Regulatory Agreement" means a regulatory agreement, including by reference any restrictions stated in a related staff report to CDLAC, which will be recorded against the Project at the closing of the contemplated Bond Loan and continue for a term of 55-years. "CDLAC" means the California Debt Limit Allocation Committee. "City" means the City of Palo Alto, California. "Developer" means Fabian Way LP. "Extremely Low-Income Household" means a household with gross income that does not exceed 30% of Area Median Income and which is otherwise a qualified Tenant under the MHP Program Regulations. "Extremely Low-Income Units" means the Units that are occupied by Extremely Low- Income Households. "Fabian Way LP" or "Partnership" means Fabian Way Associates, a California limited partnership. "Fiscal Year" means a calendar year during the term of this Regulatory Agreement; provided, however, the first Fiscal Year shall commence on the effective date of hereof and shall end on the next following December 31, and the last Fiscal Year shall be for the period from January 1 of that year through the end of the term of this Regulatory Agreement. "HUD" means the United States Department of Housing and Urban Development. "Land" means the real property currently known as 3895 Fabian Way, Palo Alto, California that comprises the Project site and more particularly described in the legal description attached hereto as Exhibit A. "LP Investor" means a limited investor to be determined. "Median Income" means the median income for households in Santa Clara County, State of California, as published by State HCD based on determinations from time to time by HUD. In the event that such income determinations are no longer determinedand published by HUD or State HCD, or are not updated for a period of at least 24 months from the date of the previous publication, the City shall provide Developer with other income determinations that are 080725 syn 8260821 reasonably similar with respect to methods of calculation contained in that previous State HCD publication. "MHP" means the Multi-Family Housing Program as Contained in the California Code of Regulations (CCR) Title 25, Division 1, Chapter 7, Subchapter 4, Sections 7300 -.7336, as amended from time to time, and administered by the California Department of Housing and Community Development. "MHP Regulatory Agreement" means the fifty-five (55) year regulatory agreement meeting the requirements of MHP to be recorded after completion of construction of the Project against the Property. "MHP Loan" means a residual receipts loan to the Partnership with a 55-year term at three percent simple interest in the amount of $5,250,000 as permanent financing for the Project. "Mortgagee" means a mortgagee of a mortgage, beneficiary of a deed of trust, or the secured party under any other financing device encumbering the Property. "BRIDGE Tower LLC" means BRIDGE Tower LLC, a California limited liability company and the sole general partner of the Partnership "Party" means any party to this Agreement. The "Parties" shall be all parties to this Agreement. "Partnership" means Fabian Way LP and any successor owner of the Property during the term of this Regulatory Agreement. "Partnership Loan" means the construction and permanent loan in the principal amount of $600,000 to be made to Fabian Way LP by the City for housing development costs. "Partnership Note" means the promissory note in the principal amount of $600,000 executed by Fabian LP evidencing the Partnership Loan. "Project" means the 56-units of rental housing and related functional areas that are used for rental housing operations, including but not limited to resident common and open spaces, lobby and access facilities, and easements for vehicular access and use of certain parking spaces in the adjoining underground parking garage of the Alt~ire. "Rent" means the sum total of all monthly payments.to be made by the Tenant of a Restricted Unit for the following privileges: use and occupancy of the Restricted Unit and associated facilities, including parking; any separately charged fees or service.charges assessed by Developer which are required of all Tenants, other than security deposits; and the cost of an adequate level of service for utilities paid by the Tenant, if any, as determined by the applicable utility allowance for the Units as set by the Housing Authority under the Section 8 program regulations. "Regulatory Agreement" or "Agreement" means this "Regulatory Agreement and Declaration of Restrictive Covenants for Fabian Way Housing". 080725 syn8260821 4 "Restricted Unit(s)z’ means any, or all, of the 55- apartment Units that are subject to the use, occupancy and rent restrictions of this Agreement. "Section 8" means Section 8 of the United States Housing Act of 1937 ("Act"), as amended. "Section 8 Assistance" means rental assistance on behalf of households occupying the Restricted Units provided pursuant to Section 8, whether indirectly pui’~uant 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 Very Low-Income.Households, or a successor federal rental assistance program providing similar assistance. "Section 8 Assisted Household" means a household that holds a valid voucher or certificate under a Section 8 Assistance Program. "Site" means the one-half acre parcel and easements for access, 56 parking spaces and in the adjoining underground parking garage, more particularly described in the attached Exhibit A "Site Plans" means the final site plans for the Project, and conditions of approval for Architectural Review (application file number 06PLN-00031), as approved by Resolution No. 8644 of the City Council on September 25, 2006, as may be subsequently modified with the approval of the City’s Director of Planning and Community Development. "HCD" means the Department of Housing and Community Development of the State of California. "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 !nternal Revenue Code). "TCAC" means the California Tax Credit Allocation Committee,or such other body or entity, that allocates Federal Low Income Housing Tax Credits in the State of California. "TCAC Regulatory Agreement" means the fifty~five (55) year regulatory agreement that will be recorded by the TCAC against the Property to secure compliance by Fabian Way LP with the Tax Credit Regulations. "Unit or Units" means one of the 56-apartment units in the Project. "Tenants" (individually, "Tenant") means the occupants of the Units. "Very Low-Income Household" means a household with gross income that does not exceed 40% of Median Income and which is otherwise a qualified Tenant under the MHP Program Regulations. 080725 syn8260821 .5 "Very Low-Income-Units" means the Units that are occupied by Very Low-Income Households. ARTICLE 2 - AFFORDABILITY COVENANTS 2.1 Use, Occupancy and Rent Restrictions ¯ The Project shall be used solely for the construction, operation and maintenance of 56- Units of multifamily rental housing with 55-Units subject to the affordability covenants of this Regulatory Agreement (the "Restricted Units") and with at least twenty (20) of the Restricted Units set aside for senior households that include a disabled senior with chronic health conditions and is eligible foi" theMultipurpose Senior Services Program. At all times during the term of this Regulatory Agreement, unless subsequently revised in a written amendment approved by the City, at least twenty-six (26) of the Units shall be made available to Extremely Low-Income Households with incomes at or below .twenty-five percent (25%) of AMI, at least four (4) of the Units shall be made available to Extremely Low-Income Households with incomes at or below thirty percent (30%) of AMI, and no more than twenty- five (25) of the Units shall be made available to Very-Low Income Households with incomes at or below forty percent (40%) of AMI at affordable rents as described herein. Without derogating the importance of compliance by Developer with the other provisions of this Regulatory Agreement, compliance by Developer with the provisionsof.this Article 2 is of particular importance to City and is one of the principal reasons for which City is willing to make the Partnership Loan to Developer. 2.1.1 Extremely Low-Income Units: At all times during the term of this ¯ Regulatory Agreement:~ (i) Thirty (30) Units, s.hall be rented and occupied by, or if vacant, made available for rental and occupancy by, Extremely Low-income Hous,,eholds, as more particularly described in Exhibit C and 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 Extremely Low-Income Units shall not exceed the amount of Rent allowed under the MHP Regulations, as published annually, based on the income categories as stated in Section 2.1 and the unit type. Rents currently in effect as of the date of this Agreement are shown in Exhibit C. (iii) Developer shall designate thirty (30) one-bedroom units as the required Extremely Low-Income Units and may change the actual, designated Extremely Low- Income Units from time to time, as vacancies occur and Tenant incomes and household composition change. Agreement: 080725 syn 8260821 2.1.2 Very_ Low-income Units:At all times during the term of this Regulatory (i) Twenty-five (25) Units, shall be rented and occupied by, or if vacant, made available for rental and occupancy by, Very Low-Inc0me 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 MHP Regulations, as published annually, based on the unit type. (iii) Developer shall designate twenty-five (25) one-bedroom units as the required Very Low-Inc0me Units and may change the actual, designated Very Low-Income Units from time to time, as vacancies occur and Tenant incomes and household composition change. 2.1.3 Manager’s Unit: The remaining one (1) Unit is no~ required to comply with the rent and occupancy restrictions of this Section 2.1 if it is occupied by a resident manager as a condition of employment. 2.2 Restricted Units Occupied by Section 8 Assisted Households Restricted Units occupied by Section 8 Assisted Households shall be considered to be qualified Extremely Low-Income or Very 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 this Article 2, the Rent for Restricted Units occupied by Section 8 Assisted Households shall be set pursuant to Section 8 regulations arid procedures. 2.3 Noncompliance A failure by Developer 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 Article 5. The Project will be deemed to be. in compliance 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 Developer shall include in the leases or rental agreementsfor all Restricted Units a provision which authorizes the lessor to immediately terminate the tenancy of any Tenant, after the lessor determines that one or more members of such Tenant’s household has misrepresented any fac~ 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. Developer and the ¯ City hereby acknowledge that Section 42(h)(6)(E)(ii) of the United States Internal Revenue 7 080725 syn 8260821 Code, as amended, does no~-permit the eviction or termination of tenancy (other than for good cause), of an existing Tenant of any Unit for which Developer has received an allocation of tax credits, 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 MHP Regulations and MHP Regulatory Agreement During the term that the MHP Regulatory Agreement is in effect, all definitions, procedures and calculations related to the use and occupancy of the Restricted Units and the qualification of Tenants including, without limitation, determination of Rent, Rent increases, household income limits, income certification procedures, tenant selection procedures and the designation of particular Restricted Units for each of the income categories as required by the MHP Regulatory Agreement shall be deemed to be in compliance with this Regulatory Agreement, for purposes of this Article 2. In the event of a conflict between the provisions of this Article 2 and the MHP Regulatory Agreement, the MHP Regulatory Agreement shall prevail. Developer shall comply with all other requirements of this Regulatory Agreement that are in addition to the MHP Regulatory Agreement. ARTICLE 3 - COVENANTS AND CONDITIONS 3.1 General In consideration for receiving the Partnership Loan from City, Fabian Way LP shall construct, or cause to be constructed, the Project upon the Land as described in the Site Plans. 3.2 Nontransient Residential Use None of the Units shall be operated as transient housing; pro,vided, however, the Units " shall not be considered to be used on a transient basis merely because any of the Units are rented on a month-to-month basis or rented under a transitional housing program; provided, however, every Tenant of a Restricted Unit shall initially occupy the Unit pursuant to a lease having a term of at least twelve months. ¯3.3 Insurance Developer, 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 as required by law, 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 Developer and its respective partners, directors, officers, employees, agents, and representatives arising out of or in connection with the Project, or Developer’s performance or non-performance under this Regulatory Agreement. 080725 syn8260821 Modifications of any insurance requirements set forth in Exhibit B shall be submitted, in writing, to the City for approval by the City’s risk manager. Any such modification shall receive the concurrence of the office of city Attorney. Developer 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 Developer 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 Project; provided, however, that Developer shall have the right to contest in good faith, any such taxes, assessments, or charges. In the event Developer exercises its right to, contest any tax, assessment, or charge against it, Developer, 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 Costs of Operation and Maintenance ThelDeveloper will be responsible for all costs o~" operating and maintaining the Project, including but not limited to taxes, insurance and utilities. Developer shall maintain the Project, in good repair and in a neat, clean and orderly conditions and in accordance with all applicable laws, rules, ordinances, orders and regulations of all federal, state, county, municipal, and other governmental agencies and bodies having or claiming jurisdiction and all their respective departments, bureaus, and officials, Developer shall not commit waste or permit deterioration of the Project, and shall make all repairs and replacements necessary to keep the Project in good condition and repair. 3.6 Property_ Inspections The City, or its authorized representatives, shall have the right to make periodic on-site inspections of the Project and the Units during working hours upon reasonable notice to Developer. 3.7 Budgets The Developer shall submit a copy of the Project’s annual operating budget to the City within 30 days of its adoption or, concurrently with its submittal of the annual operating budget prepared for MHP. Compliance with annual operating budget approvals under the MHP Regulatory Agreement shall be deemed approval under this Regulatory Agreement. 3.8 Replacement Reserves At all times following repayment of the Bond Loan, the Developer shall be required to maintain replacement reserves reasonably satisfactory to the City (provided, however, that any replacement reserve requirements satisfactory to both MHP and LP Investor will be deemed satisfactory to City). 080725 syn 8260821 3.9 Management- The Developer will be required to obtain the approval of the City, not to be unreasonably withheld, to the property manager of the Project and the identity of any replacement general partner for Fabian Way LP. BRIDGE Property Management Company will be the initial property manager and is hereby deemed we-apwoved. 3.10 Nondiscrimination All of the Restricted 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. There shall be no discrimination against or segregation of any person or group of pc?sons 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 Restricted Unit, nor shall Developer or any person claiming under or through Developer, 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 Restricted Unit or in connection with the employment of persons for the construction, operation and management of any Restricted Unit. For the purposes of this Agreement, the restriction of housing units for availability and occupancy by senior households is permitted so as to benefit senior households in compliance with all applicable laws. 3.11 Efforts to Seek Section 8 Housing Assistance Payment Contracts Prior to commencement of construction of the Project, Developer shall, in good faith, undertake all actions as required and necessary to seek to obtain Housing Assistance Payment Contracts for project-based Section 8 rental assistance as may be made available from HUD or from the Housing Authority. Developer shall seek the longest HAP Contract term available and shall seek such contract assistance for the twenty (20) units restricted under the Multipurpose Senior Services Program. Developer shall apply for and make other good faith efforts to renew any Section 8 contracts obtained. 3.12 Selection Criteria for Applicants for Tenancy with Section 8 Assistance Developer agrees to accept Section 8 Assisted Households as Tenants on th’e same basis as all other prospective tenants. Developer shall not apply selection criteria to Section 8 Assisted Households that are more burdensome than criteria applied to all other prospective tenants, nor shall Developer apply or permit the application of management policies or lease provisions that have the effect of precluding occupancy of Restricted Units by Section 8 Assisted Households. The Developer will use reasonable efforts to make the Restricted Units available to participants in the Section 8 tenant-based voucher program and other rent subsidy programs as may become available. 080725 syn8260821 10 3.13 Other Regulatory_ Agreements This Regulatory Agreement shall be subordinate to any regulatory restrictions of the TCAC Regulatory Agreement, the MHP Regulatory Agreement, the Bond Regulatory Agreement, and any regulatory agreements between Developer and the County of Santa Clara pursuant to its Affordable Housing Program and on customary terms as approved by the City. Compliance with the TCAC, MHP and/or Bond Regulatory Agreements shall be deemed compliance with this Regulatory Agreement to the extent the TCAC, MHP and/or Bond Regulatory Agreement is more restrictive than this Regulatory Agreement. In case of a direct conflict between this Regulatory Agreement and the TCAC, MHP and/or Bond Regulatory Agreements, the Developer shall comply with the TCAC, MHP and/or Bond Regulatory Agreement, as applicable; however, the Developer shall comply with all requirements of this Regulatory Agreement that are in addition to (rather than inconsistent with) requirements of the TCAC, MHP and Bond Regulatory Agreements. The City agrees that the provisions of Section 42 of the Internal Revenue Code and the related rules and regulations (including without limitation the provisions of the TCAC Regulatory Agreement) as to the methodologies and procedures for determining income and rents, including assumed household size, continued occupancy by households whose incomes exceed the eligible income limitations and the determination of eligible income and eligible rents supersede those in this Regulatory Agreement. ARTICLE 4 - INCOME CERTIFICATION AND REPORTING 4.1 Income Certification Developer 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 " Extremely L0w-Income and Very Low-Income Restricted Units. Developer shall make a good faith effort to verify that the income provided by an applicant, or occupying household, in an income certification is accurate and in accordance with the MHP Regulations. Copies of tenant income certifications shall be made available to, the City, including its designated representatives upon request. 4.2 Reporting and Provision of Information Developer will submit reports in a format and at a time specified by the City. The reports will contain such information as the City may then require in order to document compliance with the use and occupancy restrictions and other requirements of this Regulatory Agreement. The City, including its designated representatives, shall have the right to examine and make copies of all books, records or other documents of Developer which pertain to the Project or any Restricted Unit and Developer shall upon reasonable notice provide any information reasonably requested. Developer shall deliver to the City copies of all reports submitted to the State’s Department of ¯ Housing and Community Development, the Califomia Debt Limit Allocation Committee, the California Tax Credit Allocation Committee and the Internal Revenue Service, as may be requested by the City. 080725 syn826082I 11 4.3 Records Developer shall maintain complete, accurate and current records pertaining to the Project and the Restricted .Units, and shall permit any duly authorized representative of the City to inspect records, including records pertaining to incomes and household sizes of Tenants’ households, and the rents and other charges for occupancy of the Restricted Units during business hours upo~ reasonable notice. All Tenants lists, applications and waiting lists relating to the Project shall at all timesbe kept separate and identifiable from any other business of Developer and shall be maintained as required by the City, ina reasonable condition for proper audit and subject to examination by representatives of the City. 4.4 Financial Audits Developer shall provide City, during the term of this Regulatory Agreement, with copies of audited financial statements of Developer, including any management letter comments on the adequacy of internalor operational controls, within one hundred fifty (150) days of the close of each fiscal year of the Fabian Way LP. 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 Project. 4.5 Assignment or Transfer Except for (a) leases with the Tenants in the ordinary course of business, (b) transfer of up to a ninety-nine and ninety-nine one hundredths percent (99.99%) limited partnership interest in the Partnership to one or more entities controlled by LPInvestor, or (c) the execution or exercise of an option or right of first refusal to acquire the Project by the general partner of the Partnership, or by an affiliate of the general partner, Developer shall not cause or permit any voluntary transfer, assignment or encumbrance of its interest in theProject or lease or permit a sublease of all or any part of the Project without first obtaining the City’s written consent. Any transfer, assignment, encumbrance, or lease without the City’s written consent shall be voidable and, at the City’s election, shall constitute a breach of this Regulatory Agreement. No consent to any assignment, encumbrance or lease shall con, stitute a consent to any subsequent assignment, encumbrance or lease, or a waiver of any of the City’s rights under this Regulatory Agreement. The discharge or replacement of any general partner or amendment or modification or addition to the limited partnership agreement, or amendment, modification, or addition to the organizational documents of the general partner shall not constitute default under this Agreement. ARTICLE 5 - DEFAULT 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 Partnership Note 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: 5.1 Partnership makes a representation in this Agreement which shall prove to have been false in any material respect when made; or 12 080725 syn 8260821 5.2 Partnership fails to pay any amount due under the Partnership Note or any other sums payable by Partnership under this Agreement within fifteen (15) days of its due date; or 5.3 Partnership shall default for a period of thirty (30) days (or if such default cannot be cured within 30 days despite Partnership’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 non-financial obligation to be performed by Partnership under this Agreement; or 5.4 Partnership 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 5.5 Partnership is subjected to the entry of an order, decree, or judgrnent approving the.reorganization of Partnership, 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 5.6 Partnership fails to comply with the covenants, terms and conditions of this Agreement, including, without limitation, the failure of Partnership to abide by the use, occupancy and rent restrictions set forth in Section 2.1 and the other provisions of Article 2 of this Agreement, for a period of thirty (30) days (or if such default cannot be cured within 30 days despite Partnership’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); or 5.7 Except as expressly otherwise provided in Section 4.5 of this Agreement, if Partnership causes or permits a sale, voluntary transfer, assignment or encumbrance of its ownership interest in the Projedt, or permits a sublease of all or any part of its interest without first obtaining City’s written consent, any such sale, transfer, assignment, encumbrance, or lease without the City’s written consent shall be voidable and, at the City’s election, shall constitute a breach of this Agreement. No consent to any assignment, encumbrance or lease shall constitute consent to any subse~quent assignment, encumbrance or lease, or a waiver of any of the City’s rights under this Agreement. ARTICLE 6 ’- 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 partymay designate, from time to time, by written notice sent to the other party in like manner: 080725 syn8260821 13 To City:. Copy to: To Developer: City of Palo Alto P. O. Box 10250 Palo Alto, CA 94303 Attn.: City Clerk Director of Planning & Community Environment City of Palo Alto P. O. Box 10250 Palo Alto, CA 94303 Fabian Way Associates, c/o BRIDGE Housing Corporation 345 Spear Street, Suite 700 San Francisco, CA 94105-1673 Attn: Executive Vice President, Real Estate ARTICLE 7 - MISCELLANEOUS PROVISIONS 7.1 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, on the one hand, and Developer, or Developer’s agents, employees or contractors. Developer shall at all times be deemed an independent contractor and shall be wholly responsible for the manner in which it or its respective agents, or both, observe the covenants and conditions imposed on it by the terms of this Regulatory Agreement. Developer has retained 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. Developer agrees to be solely responsible for its own acts and those of its respective officers, partners, employees, agents, contractors, subcontractors and representatives. 7.2 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. 7.3 Developer 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. 080725 syn8260821 14 7.4 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 execute any amendments to this Regulatory Agreement, and confer any consents or approvals that may be provided by the City. 7.5 The covenants, agreements, terms, and conditions of this Regulatory Agreement ~hall 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. 7.6 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 a~aendment hereto are by such reference incorporated in this Regulatory Agreement and s.hall 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 par~ of this Regulatory Agreement and shall have no effect upon the construction or interpretation of any part of this Regulatory Agreement. 7.7 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. 7.8 The provisions of this Regulatory Agreement shall apply to the Project for the entire term hereof even if the Partnership Loan ;is paid in full prior to the end of said term. This Regulatory Agreement shall bind any successor, heir or assign of Developer, 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. Developer acknowledges that the City has made the Partnership Loan on the condition that the provisions of this Regulatory Agreement shall apply to the Project for its entire term, and in consid.eration of this provision, and would not have done so otherwise. 7.9 The City and Developer hereby declare their express intent that the covenants and restrictions set forth in this Regulatory Agreement shall run with the land, the interest of Developer in the Project, and shall bind all successors in interest to the Land and/or the Project, 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 Land and/or the Project or any portion thereof shall be held conclusively to hax~e been executed, delivered and accepted subject to such covenants 080725 syn8260821 15 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 Land and/or Project from the requirements of this Regulatory Agreement. 7.10 . If Developer fails to perform any obligation under this Regulatory Agreement, and fails to cure the default within the time periods set forth in Article 6, 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. 7.11 The rights of City under this Regulatory Agreement may be made subject to one or more subordination agreements between lenders with security interests in the Project and City; provided, however, Developer nor any of its respective affiliates is an intended beneficiary of, or has the right to enforce, any such subordination agreement, which may be t~rminated and/or the terms of which may be modified from time to time by any such lender and City, without the consent of, or notice to, Developer. 7.12 The parties agree that they will take such further actions, and execute such further documents, as may be necessary or appropriate in order to carry out the purposes of this Regulatory Agreement. ARTICLE 8 - TERM AND CITY OPTION TO PURCHASE 8.1 Initial Term The City and Developer 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. The term of this Regulatory Agreement shall commence on the date of its recordation and shall remain in full force and effect for an initial term of approximately fifty eight years (58) ("Initial Term") expiring concurrently with the expiration of the later to expire of the MHP Regulatory Agreement, the Bond Regulatory Agreement and related restrictions and the TCAC Regulatory Agreement. 8.2 Additional Term and City Option to Purchase. It is the intent of the City and Developer to extend the affordability covenants on the Restricted Units beyond the Initial Term for the longest time feasible, consistent with the requirements of other sources of financing for the Project. At the expiration of the Initial Term of this Agreement, the Developer agrees to record a covenant against the Project extending the affordability restrictions of Article 2 for an additional term of at least forty (40) years ("Additional Term"), or to enter into an agreement with the City or other public agency imposing new affordability restrictions on the Restricted Units reasonably acceptable to the City. In the event the Developer does not enter into an Additional Term of affordability restrictions at the Project upon expiration of the Initial Term of this Agreement, the Developer agrees to grant the City a twelve month (12) option to purchase the Project at that time for the greater of: (i) outstanding debt, or (ii) the fair market ("Fair Market Value"), value free and clear of all liens 080725 syn 8260821. 16 and encumbrances, other than those expressly approved by the City, for the express purpose of continuing to maintain the Project as an affordable housing resource. In the event the Developer does not enter into an Additional Term of affordability restrictions, Developer shall provide City with written notice of Developer’s intent not to impose new affordability restrictions, and the City’s twelve month option to purchase shall commence upon delivery of such written notice. The Fair Market Value shall be determined by a certified MAI or other qualified real estate appraiser mutually selected by the Parties. If possible, the appraisal shall be based upon the sales prices of comparable properties sold in the market are during the preceding three (3) month period. The cost of the appraisal shall be shared equally by both Parties. In the event that the Parties cannot agree on an appraiser each shall select a certified MAI appraiser or other qualified real estate appraiser within fifteen (15) days thereafter to determine the Fair Market Value. If one of the Parties does not identify its appraiser in writing to the other within such fifteen (15) day period, the lone appraiser shall determine the Fair Market Value, and that appraiser’s valuation shall be binding. Assuming both Parties timely designate an appraiser, the two appraisers then shall meet within fifteen (15) days to select a neutral third appraiser (the "Referee"). The initial two appraisers shall furnish the Parties with a written determination of the Fair Market Value within forty-five (45) days after their selection. If the two appraisals differ by less than fifteen percent (15%) of the lower of the two, the average of the two appraisals shall be the Fair Market Value, and shall be final and binding on the Parties. If the two appraisals differ by fifteen percent (15%) or more of the lower of the two, the Parties shall deliver copies of both appraisals to the Referee, and the Referee shall select, within thirty (30) days after receipt, the appraisal which he or she believes more accurately represents the Fair Market Value. The Fair Market Value set forth in the appraisal selected by the Referee shall be the Fair Market Value, and shall be final and binding on the Parties. The cost of each appraisal shall be paid by the Party for whom it is performed, and the cost of the Referee shall be shared equally. // // // // // // 080725 syn 8260821 17 !N WITNESS WHEREOF, the parties hereto have executed this Regulatory Agreement and Declaration of Restrictive Covenants for Fabian Way Housing as of the day and year first above written. FABIAN WAY ASSOCIATES, a California limited partnership By:BRIDGE Tower LLC, a California limited liability corporation, its general partner By:Northpoint Housing, Inc., a California nonprofit public benefit corporation, its sole member Lydia ~an,//Vig~/P~sitdeht’ Taxpayer Identification "No. ATTEST: \ CITY OF PALO ALTO, a chartered California municipal corporation City Clerk By: Mayor 01~0725 syn g260821 18 ACKNOWLEDGMENTS STATE OF CALIFORNIA ) COUNTY OF S-AN-TWL’~) On ,-J’o,t~, a_oo~",bef~r, eme,~-~e_./a.~---~r~-, Notary Public, personally appeared [.-] d~ a. ~a.,~ u , proved to me on the basis of satisfactory evidence to befhe person(~0"whose name(s) is/j~-e’subscribed to the within instrument and acknowle_.dged to me that ]~e-/she/tJ~ executed the same in,Mg/her/t, lae’i’~ authorized capacity0~, and that byJ~sTher/th..~ignature(~f’~ the instrument the person(W)~’, or the entity upon behalf of which the person(s-)’ficted, executed the instrument. . ] certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true dn~l correct. WITNESS my hand and official seal. Notary Public 080725 syn 8260821 19 STATE OF CALIFORNIA- COUNTY OF SANTA CLARA ) ) ) On ., before me,, Notary Public, personally appeared .., 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 eapaci.ty(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. :I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is tree and correct. WITNESS my hand and official seal. Notary Public 080725 syn 8260821 20 EXHIBIT A LEGAL DESCRIPTION Real property in the City of P.alo Alto, County of Santa Clara, State of California, described as follows: PARCEL ONE: LOT 1 OF THE MAP ENTITLED ’qPACT NO. 9920,... BEING A SUBDIVISION OF PARCEL 1 AS SAID PARCEL IS SHOWN UPON THAT CERTAIN PARCEL MAP FILED FOR RECORD ON JUNE 27, 2003, IN BOOK 762 OF MAPS AT PAGES 9 & 10, SANTA CLARA COUNTY RECORDS, LYING WITHIN THE CITY OF PALO ALTO, COUNTY OF SANTA CLARA, STATE OF CALIFORNIA", AND RECORDED AUGUST 7, 2007 IN BOOK 8:[6, AT PAGES 53, 54 AND 55, AND CERTIFICATE OF CORRECTION DOCUMENT RECORDED DECEMBER 18, 2007 AS DOCUMENT NO. 19685839 OF OFFICIAL RECORDS OF SAID COUNTY. PARCEL TWO: TEMPORARY CONSTRUCTION EASEMENT AND TEMPORARY ACCESS EASEMENT AS CREATED BY AND OVER THE LAND DEFINED IN THAT CERTAIN DOCUMENT ENTITLED "TEMPORARY CONSTRUL--IION EASEMENT AND INDEMNITY" RECORDED MARCH 31, 2004, DOCUMENT NO. 17690197 OF OFFICIAL RECORDS. PARCEL THREE: THE LANDSCAPE EASEMENT (L.E.), AND PARKING EASEMENT AS SHOWN ON THAT CERTAIN MAP ENTITLED "TRACT NO. 9920,... BEING A SUBDIVISION OF PARCEL 1 AS SAID PARCEL IS SHOWN UPON THAT CERTAIN PARCEL MAP FILED FOR RECORD ON JUNE 27, 2003, IN BOOK 762 OF MAPS AT PAGES 9 & 10, SANTA CLAPA COUNTY RECORDS, LYING WITHIN THE CITY OF PALO ALTO, COUNTY OF SANTA CLARA, STATE OF CALIFORNIA", AND RECORDED AUGUST 7, 2007 IN BOOK 816, AT PAGES 53, 54 AND 55, SANTA CLARA COUNTY RECORDS. APN: 127-37-024 (Portion) 080725 syn 8260823 A-1 EXHIBIT B INSURANCE REQUIREMENTS 1. BUILDER’S RISK insurance, to cover the Project’s construction, with coverage limits in the total amount of all construction contracts covering the Project in connection with this Agreement. Such coverage shall remain in effect until the completion of the Project. 2. 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, at all times following completion of the Project. Such policies shall include water damage and debris cleanup provisions. POLICY MINIMUM LIMITS OF LIABILITY 3. WORKERS COMPENSATION Statutory 4. COMPREHENSIVE AUTOMOBILE LIABILITY, including owned hired; and nonowned automobiles Bodily Injury Property Damage $2,000,000 ea person $2,000,000 ea occurrence 5. COMMERCIAL GENERAL LIABILITY, including products and completed operations, broad form contractual, and personal injury. Bodily Injury Property Damage $2,000,000 ea person $2,000,000 ca. occurrence $2,000,000 aggregate $2,000,000 ea occurrence Each insurance policy required by this Agreement shall contain the following clauses: 1. 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. 2. 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. 3. 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. 4. 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:VII or higher that are admitted or approved 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. 144\185k576420.3 B-1 Client#: 23785 ACOR# .CERTIFICATE OF PRODUCER IMA of Colorado, Inc. 1550 17th Street, Suite 600 Denver, CO 80202 303 534-4567 INSURED COVERAGES BRIDGE Housing Corporation 345 Spear St, Ste 700 San Francisco, CA 94105 BRIDHOU LiABiLiTY iNSURANCE I07/28/08DATE(MM’DD~YY) THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDEDBY THE POLICIES BELOW. INSURERS AFFORDING COVERAGE INSURER A: Lexington Insurance Company INSURER B: INSURER C: INSURER D: INSURER E: THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDiTiONS OF SUCH POLICIES. AGGREGATE LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. ~NSRLTR A TYPE OF INSURANCE GENERAL LIABILITY X COM M ERCIAL GENERAL UABILITY GEN’L AGGREGATE LIM IT APPLIES PE R: PRO- AUTOMOBILE LIABILITY ANY AUTO ALL OWNED AUTOS SCHEDULED AUTOS HIRED AUTOS NON-OWNED AUTOS GARAGE LIABILITY~ANY AUTO EXCESS LIABILITY ~ OCCUR [[~] CLAIMS MADE ~DEDUCTIBLE RETENTION WORKERS COMPENSATION AND EMPLOYERS’ LIABILITY OTHER 6992550 POLICY NUMBER POLICY EFFECTIVEDATE (MM/DDfYY) 01/01/08 =OLICY EXPIRATIONDATE (MM/DDf~ 01/01/09 LIMITS EACH OCCURRENCE FIRE DAMAGE (Any one fire) MED EXP (Any one person) PERSONAL & ADV INJURY GENERAL AGGREGATE PRODUCTS -COMP/OP AGG COMBINED S~NGLE LIMIT (Ea accident) BODILY INJURY(Per person)$ BODILY INJURY $(Per accident) PROPERTY DAMAGE(Per accident)$ AUTO ONLY-EA ACCIDENT OTHER THAN EA AC’C AUTO ONLY:AGG EACH OccURRENCE AGGREGATE el,000,000 $1,000,000 $10,000 ~1~000,000 $2,000,000 sEXCLUDED $ $ $ $ $ $ $ ¯ $ WC STATU-I OTH-TOP~y LIMITS I ER I E.L EACH ACCIDENT $ E.L DISEASE - EA EMPLOYEE $ E.L. DISEASE - POLICY LIMIT $ DESCRIPTION OF OPERATIONSILOCATIONSNEHICLESIEXCLU~IONS ADDED BY ENDORSEMENT/SPECIAL PROVISIONS City of PaiD Alto is included as Additional Insured on the General Liability Policy if required by written contract or agreement subject to the policy terms and conditions as respects: Named Insured: Fabian Way Associates, a California Limited Partnership Name of Property: Fabian Way Housing L!See Attached Descriptions) CERTIFICATE HOLDER I "l ADDmONALINSURED~INSURERLE-FfER: __ City of PaiD Alto Planning and Community Environment Department PO Box 10250 Palo Alto, CA 94303 ACORD 25-S (7!97)1 of 3 #M369494 CANCELLATION SHOULD ANYOFTHE AP, OVE DESC~JBED POLICIES BE C’A.NCELLED BEFOREQ’R E EXPIRATION DATE THEREOF, THE ISSUING INSURER WILL ENDEAVOR TO MAIL 30~DAYSWRI’I-I’EN NOTICETOTHE CERTIFICATE HOLDERNAMF--DTOTHELEFT, BUTFAILURE TODOSOSHALL IMPOSE NO OBLIGATION OR LIABILITYOF ANYK]ND UPON TH E INSURER,ITS AGENTS OR REPRESENTATIVES. AUTHORIZED REPRESENTATIVE ARE ® ACORD CORPORATION 1988 IMPORTANT If the certificate holder is an ADDITIONAL INSURED, the poticy(ies)must be endorsed. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). DISCLAIMER The Certificate of Insurance on the reverse side of this form does not constitute a contract between the issuing insurer(s), authorized representative or producer, and the certificate holder, nor does it affirmatively or negatively amend, extend or alter the coverage afforded by the policies listed thereon. ACORD 25-S (7/97)2 of 3 #M369494 DESCRiPTiONS (Continued from Page 3895 Fabian Way, PaiD Alto, CA 94303 A Waiver of Subrogation is provided in favor of City of Paid Alto and the members of the City Council and elective or appointive officers or employees on the General Liability Policy if required by written contract or agreement subject to the policy terms and conditions, This Insurance is Primary and Non-Contributory on the General LiabiJity Policy subject to the policy terms and conditions, AMS 25.3 (07/97) 3 of 3 #M369494 ACORD, "PRODUCER 0726293 1-415-546-9300 Arthur J. Gallagher & Co. Insurance Brokers of California, Inc., License #0726293 One Market Plaza, Spear Tower Suite 200 San Francisco, CA 94105 CERTiFiCATE OF LIABIUTY INSURANCE DATE,MM,OB 07/58/00 THIS CERTIFICATE IS ISSUED ’AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. INSURED Bridge Housing Corporation Bridge Property Management 345 Spear Street Suite 700 San Francisco, CA 94105 COVERAGES INSURERS AFFORDING COVERAGE INSURERA:Travelers Property Casualty Company oJ INSURERS:Federal Ins Co INSURERC:Zenith Ins Co INSURERD: INSURERE: NAIC # 256?4 20281 13269 THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED ORMAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES, AGGREGATE LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. HNSR ~DD’). POLICY EFFECTIVE’LTR INSR[TYPE OF INSURANCE POLICY NUMBER DATE IMM/DD/Y~q GENERAL LIABILITY COMMERCIAL GENERAL LIABILITY ----} CLAIMS MADE []OCCUR GEN’L AGGREGATE LIMIT APPLIES PER: ~ PRO-~ POLICY I I JECT LOC A AUTOMOBILE LIABILITY X ANYAUTO ALL OWNED AUTOS SCHEDULED AUTOS ~-- HIRED AUTOS ~--- NON-OWNED AUTOS GARAGE LIABILITY~ANYAUTO B EXCESS/U MBREL LA L’ABIU’FY X~ OCCUR [~ CLAIMS MADE X~ DEDUCTIBLERETENTION $ Nil C WORKERS COMPENSATION ANDEMPLOYERS’ LIABILITYCANY PROPRIETOR/PARTNER/EXECUTIVE OFFICER/MEMBER EXCLUDED? If yes, desc~be underSPEC AL PROV SIONS be ow OTHER BA435H825908 93631899 Z065173405 z065173305 o71o~Io8 o2/ollo8 10/14/07 10/14/07 POLICY EXPIRATIONDATE (MM/I)D/’t’YI 07/01/09 01/01/09 10/14/08 10114108 LIMITS EACH OCCURRENCE DAMAGE TO RENTED PREMISES Ea occurence~_~ $ MED EXP (Any one person)$ PERSONAL & ADV INJURY GENERAL AGGREGATE PRODUCTS - COMP/OP AGG COMBINED SINGLE LIMIT (Ea accident) $ $ $ $ OTH- ER BODILY INJURY(Per person) BODILY INJURY (Per accident) PROPERTY DAMAGE (Per accident) AUTO ONLY-EAACCIDENT OTHERTHAN EAACC AUTO ONLY:AGG EACHOCCURRENCE AGGREGATE xl WCSTATU-ITORy LIMITS E.L EACH ACCIDENT E.L DISEASE - EA EMPLOYEE E.L DISEASE - POLICY LIMIT $ $ $ $i,000,000 $ $ $ $ I0,000,000 I0,000,000 $1,000,000 $1,000,000 $1,000,000 DESc~PT~N~F~PERAT~NS~CAT~NS~EH~CLES~E~cLUs~NSADDEDBYEND~RsEMENT~sPEc~ALPR~v~S~NS RE: Fabian Way Housing, 3895 Fabian Way, Palo Alto, CA 94303 Named Insured includes: Fabian Way Associates, a California Limited Partnership Additional Insured is provided on Auto Liability as their interests may appear on above referenced vehicle: City of Palo Alto Additional Insured is provided on Excess Liability only to the extent coverage is provided by primary General Liability City of Palo Alto CERTIFICATE HOLDER City of Palo Alto Planning and Community Environment Department P.O. Box 10250 Palo Alto, CA 94303 USA ACORD 25 (2001/08) J ramos9410919 CANCELLATION SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING INSURER WILL ENDEAVOR TO MAIL 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, BUT FAILURE TO DO SO SHALL IMPOSE NO OBL’IGATION OR LIABILITY OF ANY KIND UPON THE INSURER, ITS AGENTS OR REPRESENTATIVES. AUTHORIZED REPRESENTATIVE (~_._~-’~::~ © ACORD CORPORATION 1988 iMPORTANT If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). DISCLAIMER The Certificate of Insurance on the reverse side of this form does not constitute a contract between the issuing insurer(s), authorized representative or producer, and the certificate holder, nor does it affirmatively or negatively amend,’-extend or alter the coverage afforded by the policies listed thereon. ACORD 25 (2001/08) WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY BLANKET WAIVER OF OUR RIGHT TO RECOVER FROM OTHERS ENDORSEMENT - CALIFORNIA We have the right to recover our payments from anyone liable for an injury covered by this policy. We will not enforce our right against the person or organization for whom you perfoma work under a written contract that requires you to obtain this agreement from us. The additional premium for this endorsement shall be 2 % of the California workers compensation premium otherwise due. Minimum Premium:$50 This endorsement changes the policy to which it is attached and is effective on the date issued unless otherwise stated. Endorsement Effective J0/14/07 Insured BRIDGE HOUSING CORPORATION (A CORP) Policy No. ZO65J 73405 Policy Period 10/j4/07 To 10/]4/08 Issued On 04/01/08 At San Francisco, CA ZENITH INSURANCE COMPANY PRESIDENT WC-99-04-25 (Ed. 12-06) Endorsement No. 25 ACORD,. EVIDENCE OF COMMERCIAL PROPIERTY NSURANCE THIS IS EVIDENCE THAT INSURANCE AS IDENTIFIED BELOW HAS BEEN ISSUED, IS IN FORCE, AND CONVEYS ALL PRIVILEGES AFFORDED UNDER THE POLICY. PRODUCER NAME, CONTACT PHONE l- 415 - 5 4 6 - 9 3 0 0PERSON AND ADDRESS j~/C. No. Ext):FAX(A/C, No):E-MAILADDRESS:Arthur J. Gallagher & Co. Insurance Brokers of California, Inc., License #0726293 One Market Plaza, Spear Tower Suite 200 S~an Francisco, CA 94105 CODE:I "SUB CODE:AGENCYCUSTOMER ID #: NAI~E~D INSURED ,~ND ADDRESSBrluge Houszng Corporation Fabian Way Associates, a California Limited Partnership 345 Spear Street, Suite 700 San Francisco, CA 94105 ADDITIONAL NAMED INSURED(S) cOMPANY NAME AND ADDRESS DATE (MM/DD/YYYY) 07128/08 THE RIGHTS AND INAIC NO: 19437 LEXINGTON INS CO ~*See attached for additional participating insurance carrier~* IF MULTIPLE COMPANIES, COMPLETE SEPARATE FORM FOR EACH LOAN NUMBER I POLICY NUMBER11089633 EFFECTIVE DATE EXPIRATION DATE ~ CONTINUED UNTI~. 07/01/08 07/01/11 I ! TERMINATED IF CHECKED’~HIS REPLACES PRIOR EVIDENCE DATED: PROPERTY INFORMATION (Use additional sheets if more space is required) LOCATION/DESCRIPTION3895 Fabian Way, Palo Alto, CA 94303 COVERAGE INFORMATION CAUSE OF LOSS FORM I IBAS,C I IBROAD IX[SPEO’AL COMMERCIAL PROPERTY COVERAGE AMOUNT OF INSURANCE: $ 20,5411506 YES NO BUSINESS INCOME / RENTAL VALUE x BLANKET COVERAGE x TERRORISM COVERAGE x IS COVERAGE PROVIDED FOR "CERTIFIED ACTS" ONLY?x IS COVERAGE A STAND ALONE POLICY?x DOES COVERAGE INCLUDE DOMESTIC TERRORISM?x COVERAGE FOR MOLD x MOLD EXCLUSION (If "YES", specify organization’s form used)x REPLACEMENT COST x AGREED AMOUNT x COINSURANCE x EQUIPMENT BREAKDOWN (If Applicable)x LAW AND ORDINANCE - Coverage for loss to undamaged portion of building x -Demolition Costs x - Incr. Cost of Construction x EARTHQUAKE (If Applicable)x FLOOD (If Applicable)x WIND / HAIL (If Separate Policy)x PERMISSION TO WAIVE SUBROGATION PRIOR TO LOSS x OTHER Builders Risk Policy DED: If YES, LIMIT: I I Actual Loss Sustained If YES, indicate amounl of insurance on properties identified above: $ Attach signed Disclosure Notice / DEC If YES,SUB LIMIT:DED: If YES,LIMIT:DED: If YES,SUB LIMIT:DED: If YES,LIMIT:DED: If YES,% If YES,LIMIT:seeremarks DED: IfYES,LIMIT:10,000,000 DED: !0,000 IfYES,LIMIT:1,000,000 DED: 10,000 IfYES,LIMIT:1,000,000 DED: 10,000 If YES,LIMIT:DED: If YES,LIMIT:DED: ~ If YES,LIMIT:DED: REMARKS - Including Special Conditions (Use additional sheets if more space is required) Included as Loss Payee per the language provided on the attached CP 1218 endorsement:City of Palo Alto # of months: CANCELLATION THE POLtCY IS SUBJECT TO THE PREMIUMS, FORMS, AND RULESIN EFFECT FOR EACH POLICY PERIOD. SHOULD THE POLICY BE TERMINATED, THE COMPANY WILL GIVE THE ADDITIONAL INTEREST IDENTIFIED BELOW3~0 DAYS WRITTEN NOTICE, AND WILL SEND NOTIFICATION OF ANY CHANGES TO THE POLICY THAT WOULD AFFECT THAT INTEREST, IN ACCORDANCE WITH THE POLICY PROVISIONS OR AS REQUIRED BY LAW. ADDITIONAL INTEREST NAME AND ADDRESS LENDER SERVICING AGENT NAME AND ADDRESS City of Palo Alto Planning and Community Environment Department P.O. Box 10250 Palo Alto, CA 94303 ~______~ MORTGAGEE ~ ADDITIONAL INSURED LOSS PAYEE ACORD 28 (2003110) ira.roDe9407441 USA AUTHORIZED REPRESENTATIVE © ACORD CORPORATION 2003 POLICY NUt~BER: 1089633 COMMERCIAL PROPERTY CP 12 18 10 91 LOSS PAYABLE PROVISIONS This endorsement modifies insurance provided under the following: BUILDING AND PERSONAL PROPERTY COVERAGE FORM BUILDERS’ RISK COVERAGE FORM CONDOMINIUM ASSOCIATION COVERAGE FORM CONDOMINIUM COMMERCIAL UNIT-OWNERS COVERAGE FORM STANDARD PROPERTY POLICY Bldg. No SCHEDULE Loss Payee (Name & Address) Description of Property 3895 Fabian Way, Palo Alto, CA 94303 Loss Payable City of Palo Alto Planning and Community Environment Department P.O, Box 10250 Palo Alto, CA 94303 USA Provisions Applicable Lender’s Loss Contract Payable Of Sale A.When this endorsement is attached to the STANDARD PROPERTY POLICY CP 00 99 the term Coverage Part in this endorsement is replaced by the term Policy. The following is added to the LOSS PAYMENT Loss Condition, as indicated in the Declarations or by an "X" in the Schedule: B. LOSS PAYABLE For Covered Property in which both you and a Loss Payee shown in the Schedule or in the Declarations have an insurable interest, we will: 1. Adjust losses with you; and 2.Pay any claim for loss or damage jointly to you and the Loss Payee, as interests may appear. C. LENDER’S LOSS PAYABLE 1. The Loss Payee shown in the Schedule or in the Declarations is a creditor, including a mortgageholder or trustee, whose interest in Covered Property is established by such written instruments as: a. Warehouse receipts; b. A contract for deed; c. Bills of lading; d. Financing statements; or e.Mortgages, deeds of trust, or security agreements. 2.For Covered Property in which both you and a Loss Payee have an insurable interest: a. We will pay for covered loss or damage to each Loss Payee in their order of precedence, as interests may appear. b. The Loss Payee has the right to receive loss payment even if the Loss Payee has started foreclosure or similar action on the Covered Property. c. If we deny your claim because of your acts or because you have failed to comply with the terms of the Coverage Part, the Loss Payee will still have the right to receive loss payment if the Loss Payee: (1) Pays any premium due under this Coverage Part at our request if you have failed to do so; (2}Submits a signed, sworn proof of loss within 60 days after receiving notice from us of your failure to do so; and (3) Has notified us of any change in ownership, occupancy or substantial change in risk known to the Loss Payee.- All of the terms of this Coverage Part will then apply directly to the Loss Payee. CP 12 18 10 91 Copyright, ISO Commercial Risk Services, Inc., !990 d. If we pay the Loss Payee for any loss or damage and deny payment to you because of your acts or because you have failed to comply with the terms of this Coverage Part: (’~)The Loss Payee’s rights will be transferred to us to the extent of the amount we pay; and (2)The Loss Payee’s rights to recover the full amount of the Loss Payee’s claim wilt not be impaired. At our option, we may pay to the Loss Payee the whole principal on the debt plus any accrued interest. In this event, you will pay your remaining debt to us. cancel this policy, we will give written to the Loss Payee at least: days before the effective date of cancellation if we cancel for your nonpayment of premium; or b. 30 days before the effective date of cancellation if we cancel for any other reason. 3.If we notice a. 10 4.If we elect not to renew this policy, we will give written notice to the Loss Payee at least 10 days before the expiration date of this po}icy. D. CONTRACT OF SALE -1. The Loss Payee shown in the Schedule or in the Declarations is a person or organization you have entered a contract with for the sate of Covered Property. 2. For Covered Property in which both you and the Loss Payee have an insurable interest we will: a. Adjust losses’with you; and b. Pay any claim for loss or damage jointly to you and the Loss Payee, as interests may appear: 3.The following is added to the OTHER INSURANCE Condition: For Covered Property that is the subject of a contract of sale, the word "you" includes the Loss Payee. CP 12 18 10 9t Copyright, Insurance Services Office, Inc., 1992 SUPPLEiVIEINT TO CERTIFICATE OF INSURANCE NAME OF INSURED: Bridge Housing Corporation Fabian Way Assqciates, a California Limited Partnership DATE 07/28/08 Additional Description of Operations/Remarks from Paqe 1 : Equipment Breakdown Coverage Cold Testing Builders Risk Direct Damage: $15,801,687 Deductible: $10,000 Builders Risk Soft Costs: $4,333,607 Deductible: 21 Days Loss of Rents: $406,212 Additional In~rmation: **Additional Participating Insurance Carrier Illinois Union Insurance Company - Policy Number: I21114121001 Participation Lexington and Illinois Union each taking 50% or $10,270,753 part of $20,541,506 Additional Coverage: Permission to occuy -60 days from date of first building completion $500,000 Property in Transit $500,000 Property Stored at Temporary Locations $250,000 Fire Department Service & Extinguishing Expenses $250,000 Water Damage Caused by Sewer & Drain Backup~ $250,000 Trees, Plants, Shrubs - Per Occurrence: $5,000 Maximt~m Per Item $250,000 or 20% - Expediting Expense $i0,000,000 or 25% - Debris Removal $I00,000 Pollution & Contamination Cleanup & Decontamination $10,000,000 Interior Water Damage $I00,000 Mold & Fungus Remediation $500,000 Broad Form Water Damage SUPP (05/04) EXHIBIT C RESTRICTED UNITS: RENTS, INCOME LIMIT AND OCCUPANCY REQUIREMENTS Fabian Way Senior Housing Initial Rents & Income Limits2 for 2008 Occupancy Category & Rent Formula1 Extremely Low Income Extremely Low Income Very .Low Income 25% of AMI ¯ 30% of AMI 40% of AMI3 Number of Units 26 units3 4 units " 25 units One Bedroom Unit 2008 Gross Rents $497 $597 $796 one Person 2008 Income Limits2 $18,575 $22,290 $29,720 Total Restricted Units None Resident Manager Total Units 55 1 unit 56 [Includes 20 Supportive Housing units for MSSP clients3] Notes: 1) AMI means the Area Median Income for Santa Clara County, which equals $105,500 for a household of four persons as published on March 25, 2008. Initial rents and income limits are as published by State HCD for 2008. 2) The income limits shown assume a one-person household in a one-bedroom unit. 3) Supportive Housing (SH) Units are the ,2,0 Restricted Units in the _P,,roject designated in the MHP Regulatory Agreement as Supportive Housing Units which requires that the Units be set aside for households that are extremely low income (not over 25% of AMI) and eligible for the Multipurpose Senior Services Program (MSSP). MSSP eligible seniors are frail elderly~ 65 years or older, and currently eligible for Medi-Cal. 080725 syn 8260821 C-1