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2004-07-19 City Council (3)
City of Palo Alto City Manager’s Re TO:HONORABLE CITY COUNCIL FROM: DATE: CITY MANAGER JULY 19, 2004 DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT CMR: 332:04 SUBJECT:OPPORTUNITY CENTER OF THE MID-PENINSULA PROJECT AT 33 ENCINA AVENUE: 1) APPROVAL OF LOAN AND REGULATORY AGREEMENTS BETWEEN THE CITY OF PALO ALTO AND THE OPPORTUNITY CENTER ASSOCIATES L. P. TO PROVIDE A LOAN OF $750,000 IN PERMANENT CITY FUNDING FOR THE APARTMENTS DEVELOPMENT; 2) APPROVAL OF A LOAN AND REGULATORY AGREEMENT BETWEEN THE CITY OF PALO AND THE COMMUNITY WORKING GROUP, INC. TO PROVIDE A LOAN OF $1,280,000 FOR THE SERVICE CENTER PART OF THE PROJECT; 3) APPROVAL OF A NEW ACTIVITY IN THE FY 2004-05 COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) ANNUAL ACTION PLAN ALLOCATING OF UP TO $81,000 IN CDBG FUNDS FOR THE CITY’S COSTS OF RELOCATING HIGH VOLTAGE ELECTRIC LINES FROM THE PROJECT’S FRONTAGE RECOMMENDATION Staff recommends that the City Council: 1. o Approve the attached loan and regulatory agreements between the City of Palo Alto and Opportunity Center Associates L. P., which provides a $750~000 loan from the Residential Housing Fund for housing construction and restricts the use and occupancy of the residential units. Approve the attached loan and regulatory agreement between the City and the Community Working Group, Inc. (CWG), which provides a $1,280,000 loan of Community Development Block Grant .(CDBG) Funds for Service Center development and restricts the use of the Service Center portion of the project. Approve the attached forms of promissory notes and deeds of trust for each City loan. CMR: 332:04 Page 1 of 15 4.Authorize the Mayor to execute the attached loan and regulatory agreements in substantially similar form as approved by the City Attorney. 5.Authorize the City Manager to consent to the modification of the City’s existing deed of trust securing the $1,280,000 interim City predevelopment funding agreement and loan to the Housing Authority of Santa Clara County and CWG, and to authorize the close of escrow for the funding of the City’s construction and permanent loans to Opportunity Center Associates L.P. and CWG, upon satisfaction of all City conditions to funding. 6. Authorize the City Manager, after appro.val as to form by the City Attorney, to review, approve and execute subordination agreements of the City’s deeds of trust securing each loan to the construction and permanent funding and to subordinate the City’s regulatory agreement on the apartments to the requirements of other lenders and funding entities as described herein. 7. Direct the City Manager .to execute any other documents such as estoppel statements, escrow instructions and assignment agreements as required to close the escrows for both ~he construction and permanent project financing and to secure " the City’s interests in the project. 8. Approve the addition of a new CDBG-funded project in the Annual Action Plan for FY 2004-05 providing up to $81,000 in funding, to be transferred from the CDBG Housing Fund, which was previously set aside for the Opportunity Center and other housing developments, for the costs of relocating high voltage electric lines from the Opportunity Center project site frontage. BACKGROUND The Opportunity Center of the Mid-Peninsula, to be constructed at 33 Encina Avenue, will provide 89 units of housing over a 6,700 square foot day use and service center serving homeless adults and families and other very low-income housel-iolds who need affordable rents. Council approved Planned Community (PC) Ordinance 4782 in March 2003 permitting development of the project. All necessary financing for the $22 million development budget has now been secured. The project has broad support from public and private organizations with over $6 million raised by CWG from local foundations, businesses and individual donors. Of the private contributions raised by CWG, about $1.6 million will be used for development costs, about $2 million for interim funding for housing rent subsidies and about $2.5 to $3 million for an endowment for Service Center operating costs. Plans have recently been announced to continue the fundraising campaign with the goal of adding another $1 million to the Service Center endowment fund. A ceremonial groundbreaking was held on May 5th; however the actual start of construction is planned for early August. Council approval of the attached final City loan CMR: 332:04 Page 2 of 15 and regulatory agreements is a prerequisite to the start of construction. Council has previously committed $2,030,000 in funding to the Opportunity Center. $1,280,000 of City CDBG funds were loaned to the project sponsors for site acquisition and predevelopment costs under an interim funding and loan agreement approved by Council on July 22, 2002, with repayment due at the end of 2004, if construction is not underway under permanent City agreements. An additional $750,000 in Residential Housing Funds was committed to the project in March 2003 with Council adoption of Budget Amendment Ordinance Number 4780. The attached loan agreements would replace the interim agreement and provide a total of $2,030,000 in construction period and permanent City funding for the project, with the $1,280,000 in CDBG Funds allocated to CWG for the Services Center’s development costs and secured by the Service Center, and the $750,000 provided to the Opportunity Center Associates L. P. to be used for development of, and, secured by, the 89-ho.using units. DISCUSSION Occupancy and Rents for the Housing Units: Rent levels, income limits and tenant household types will be controlled by the rules of the major government funding programs that are being used for development costs and by the project’s PC District zoning regulations. The sponsors secured an award of $7.5 million in State funding under the Supportive Housing component of the Multifamily Housing Program (MHP). The MHP program places the most stringent controls on the rent and occupancy of the .housing, with all 88 affordable units required to be restricted to occupancy by very low- income households (one unit will be occupied by a resident manager and is not income restricted). 35 of the units will be available at rents affordable by persons on public assistance or earning very low wages. Section 8. rental assistance will be tied to 22 of the units under a 10-year contract from the Housing Authority. Due to federal rules for the Section 8 program, residents moving into these units must come from the Housing Authority’s waiting list. InnVision (the Service Center operator under contract to CWG) intends to work with its current"shelter and drop-in center clients to assist its clients in getting on the Section 8 waiting list and in improving their qualifications for housing. Up to 50 percent of the units may be used for a transitional housing program under the City’s regulatory agreement. Transitional housing typically offers homeless households housing at almost no charge together with intensive services. CWG intends to seek funding for this type of program from HUD and from private sources. However, until sufficient funding.is obtained, all 88 units will be operated as permanent housing. Table 1 below describes the different types of housing units, the eligibility restrictions and the maximum initial rents as required under the State’s rules for the MHP program and the City’s regulatory agreement. CMR: 332:04 Page 3 of 15 Rent Formula1 20% of 25% of AMI 35% of AMI Section 8 Very low or 45% of income AMI3 None Manager Total Units Table 1 Notes: Table 1 Opportunity Center Apartments - Unit Mix & Occupancy Restrictions Initial Rents & Income Limits for 2004 Number of Units,.Monthly Rents And Income Limits at Move-In2 Tenant SRO 1Bedroom 2 Bedrooms TotalUnits & Restrictions (Total SH Units)4 Extremely low income [See Note 4 for the 32 SH Units] 16 at $369 $14,860 for 1 3 at $395 $16,980 for 2 20 (11) 11 at $461 3 at $494 15 $18,575 for 1 $21,225 for 2 (7) 24 at $646 $26,005 for 1 5 at $692 $29,715 for 2 1 at $1,100 $38,205 for 2 1 13 1 at $475 $19;100 for 3 1 at $593 $23,875 for 3 2 at $831 $33,425 for 3 2 at $1,234 $42,975 for 3 6 19 at $834 $33,435 for 1 70 31 (14) 22 1 89 1) AMJ means the Area Median Income for Santa Clara CounO~, which currently equals $105,500, as published in February 2004. Initial rents and income limits are aspublished by State HCD for 2004. 2) The SRO units will be limited to one-person occupancy. The income limits shown assume a two-person family in a one-bedroom unit and a three-person household ina two-bedroom unit. 3) The 22 very low-income units will rent for the HUD approved Section 8 Fair Market Rent (FMR) or, if Section 8 becomes unavailable, at rents based on 45% of AMI (the Section 8 rent is expected to be higher and is shown in the table). Section 8 tenants will pay only 30% of their income for rent. Section 8 tenants are likely to have extremely low incomes, but the maximum income under the Section 8program is 50% of AML 4) SH Units are the 32 Restricted Units in the apartments designated in the MHP Regulatory Agreement as "Supportive Housing Units" which requires that these units be occupied by households that were homeless or at-risk of homelessness, and with at least one household member with a disability prior to occupying the unit. Supportive services are required to be provided to these tenants by the State’s MHP funding. CMR: 332:04 Page 4 of 15 Regulatory Agreement Provisions on the Apartments and Subordination of City’s A~reement: At the construction loan closing, the City will be required to subordinate its regulatory agreement for the apartments to the tax exempt bond financing regulatory agreement and its related restrictions. Even after the bond-financed construction loan is paid off, these regulatory provisions will continue in effect for 55 years. The bond financing affordability restrictions are less restrictive than the rent and occupancy restrictions shown above that the State and the City will be placing on theproject. The bond financing affordability restrictions require that 66 units (75 percent) be rented at affordable rents to very low-income households with incomes below 50 percent of median income and 22 units be affordable to low-income households with incomes below 60 percent of median. Additionally, for a 10-year period, the bond financing also requires the provision of training classes and emergency supportive services to the tenants of all 88 rent restricted units. With the close of the permanent funding, the MI-IP and tax credit regulatory agreements will be recorded and the City will also be required to subordinate to those agreements and to the $7.5 million MHP deed of trust. The MI-IP regulatory agreement is the most restrictive; it will cover all of the units for 55-years, restrict rents and occupancy as summarized in Table 1, and require the provision of Supportive services to tenants in 32 of the units. The City is requiring a 55-year regulatory agreement (the maximum term compatible with the provisions of the tax credit program rules), similar in content to the MHP restrictions, which will function as additional, back-up restrictions. In a side letter, both CWG and the Housing Authority will commit to extended 89-year affordability in the event either entity exercises its option to acquire limited partner’s ownership interest at the end of the 15-year tax credit compliance period. The City will also hold a back-up purchase option in the event that neither CWG nor the Housing Authority decides to take over the ownership. In addition, the site’s PC zone restricts all 88 units for occupancy by low and very low-income households at affordable rents. There will also be a 55 year regulatory agreement under the Low Income Housing Tax Credit program. This document is the least restrictive as it requires that just 40% of the units (36) be occupied by low-income households with incomes up to 60 percent of the median income at affordable rents. The HOME funds provided by both San Mateo ~nd Santa Clara Counties place regulatory controls on 11 units for 55 years. As a practical matter, unless the project goes into a financial or regulatory default and foreclosure, the owners will be maintaining compliance with the most restrictive State MHP affordability requirements, together with any provisions of the other agreements that supplement the MHP provisions. CMR: 332:04 Page 5 of 15 Ownership and Management: The CWG and the Housing Authority of Santa Clara County are the project’s joint sponsors and developers. However, the project will be owned by a limited partnership, named the Opportunity Center Associates L. P. (Partnership), that has been formed to facilitate the funding contributions of the tax credit limited partner. The limited partner investor is an affiliate of MMA Financial, LLC a major investor in tax credit housing projects. An estimated figure of approximately $7.3 million in tax credit equity is being used in the current budget projections. .Parcel Map for Lot Merger and Condominium Plan Recording: The site was assembled from three separate legal parcels known as 33, 39 and 45 Encina Avenue. The Director of Planning and Community Environment approved an application on February 5, 2004 to merge the three parcels into one single parcel to be known as 33 Encina Avenue. The project developers intend to record the parcel map and the condominium plan prior to the closing of the bond loan and the City’s newli~ans. Completing the parcel map process in advance will facilitate the very complex bond and construction loan closing. The City will be agreeing to modify its existing $1.28 million deed of trust, which is presently recorded against the 33 and 39 Encina Avenue parcels, to allow the lot merger and recording Of the condominium plan to occur. The security for the modified City deed of trust will be the new, single parcel encompassing the entire site. The City Manager will need to execute escrow instructions and other legal instruments to authorize these transactions. The buildings and improvements will be divided into three condominium units. The Partnership will own a unit consisting of the building shell, the four floors of housing, the two levels of underground parking, the front courtyard and portions of the ground floor that will be used for access to the housing and for housing-related services. Easements will be recorded to provide for use of the parking by the Service Center staff and visitors. CWG will own two units of the condominium, which will be composed of the single adult and family service centers located on the ground floor. Common areas will be owned in undivided fractional interests by the Partnership and CWG; recorded CC & R’s will address the maintenance responsibilities of the two owners. Opportunity Center HDC, Inc. (HDC Inc.), the non-profit general partner of the Partnership, will control and manage the housing portion of the project. HDC Inc. has a five member board of directors composed of three members appointed by the Housing Authority, one member representing CWG and the fifth member appointed by InnVision. CWG, through its own Board of Directors, will have control and overall responsibility for the management of the Service Center. InnVision will operate the Service Center space under a contract with the Partnership and CWG. That agreement will obligate InnVision to provide and contract with other service providers to offer on-site a broad array of CMR: 332:04 Page 6 of 15 social services to meet the needs of both the area’s homeless and the residents of the Opportunity Center apartments. A half-time service coordinator, funded by the housing portion of the project but employed by InnVision, will be assigned to working with the formerly homeless residents of the 32 supportive housing units. InnVision’s service programs will also assist mid-peninsula households that are threatened with loss of their housing due to financial problems or other emergencies. Service Center Pro~.ams: Services will be provided in two separate physical areas of the ground floor. All of the Services presently provided at the InnVision / Urban Ministry drop-in center locatedbehind the Red Cross will be moved to the Opportunity Center and expanded into a full day program. The new day center, .focusing on single adults, will be open to the public on a drop-in basis; it wilt offer personal hygiene facilities, lockers, a message center, hot breakfasts, snacks, a clothes closet, and information and referral. More intensive .services such as case management,, job skills training, screening .and referral for medical, mental health and substance abuse problems and money management will also be available to those seeking to stabilize their lives and move into housing. The Elsa Segovia Center, now located at the Clara Mateo shelter at the Menlo Park Veteran’s Administration hospital, will relocate and operate a family and children’s center in a separate wing of the ground floor. Services for families will be similar to those offered for single adults, but will emphasize the special needs of homeless women and children. Both service programs will offer guidance and counseling to currently homeless clients who are serious about securing housing to help these clients improve their chances of being able to meet a rental property owner’s application and screening requirements, including the requirements for residency in the Opportunity Center’s apartments. Clients will be offered assistance in documenting income, resolving credit problems and guidance through the rental housing application process. There will also be assistance in accessing the Section 8 program waiting list, so that clients have an opportunity to move into the 22 Section 8 assisted units in the project. The State and federal funding programs being used for a major portion of the development costs require that the Partnership develop and implement a written affirmative marketing program to rent the apartments in the project. This affirmative marketing program must be reviewed and. approved by both the State and HUD and follow their guidelines and standards. Together with the extensive funding from the two counties, this means that there will not be any specific allocations or preference for occupancy of the 89 housing units for Palo Alto residents, employees or homeless clients of agencies providing services in Palo Alto or at the center. However, the marketing CMR: 332:04 Page 7 of 15 program will include extensive outreach to the local homeless population and to clients of locaI service agencies. Funding for Relocation of High Voltage Electric Lines: During the final plan check reviews, it was determined that there are high voltage electrical lines located above the standard low Voltage lines on the poles in the public right of way along the Encina frontage of the site. The City had required as a standard project condition that electrical lines be placed underground and the developer had included funds in the construction budget for that work. However, it is unsafe to underground high voltage lines and, if left in their present location, they will be a serious safety hazard during .construction and occupancy. The tall construction equipment needed to build the structures would be hazardous to use near the lines and, once the project is completed, the Fire Department must be able to use its hook and ladder trucks to access the upper floors.in an emergency. City Utilities staff analyzed several options and related costs and concluded that relocating both the high voltage and distribution lines to the southern side of Encina is the most cost-effective solution with an estimated budget of about $200,000. Requiring the developer to bear the entire cost of this work would be a significant impact on the project’s budget because the budget includes only a total of $100,000 for all electrical utility and joint trench work. Therefore, staff proposes that the costs be shared, with some new funding from an additional allocation of CDBG funds, some from the Electric Fund and the remainder from the developer. Staff requests Council approval at this time for a new project within the previously adopted CDBG program for FY 2004-2005 to cover most of the costs of the high voltage electrical work through a transfer of up to $81,000 (about 40 percent of the $200,000 total costs) from the FY 2004-05 CDBG Housing Fund to the Electric Fund. This additional CDBG funding will not be provided to the Partnership or CWG and is not included in the City’s loans for the project; these funds will be expended directly by the City and will not be repaid by the developer. The Electric Fund will pay twenty-five percent of total costs (estimated at $45,000 to $50,000) from its capital improvement budget for FY 2004-05, similar to normal contributions made by the City for undergrounding programs. City utility workers will carry out the electrical work for the high voltage line relocation and an outside contractor will complete the rest of the work. The developer will reimburse the City for the remaining costs (estimated at $70,000) from the project’s construction budget. - The developer will still be responsible for the installation cost of underground electrical distribution lines across Encina to the project site and for the typical joint trench work and utility service connections on-site. The Electrical Engineering section of the Utility Department is preparing the plans and will manage the construction work. Work needs to proceed immediately to avoid delays in the Opportunity Center’s construction schedule. CMR: 332:04 Page 8 of 15 RESOURCE IMPACT The Opportunity Center will be financed with a complex mix of public and private sources from federal, State and local levels. Securing the development and operating funding for the Opportunity Center was an extremely difficult challenge for the Housing Authority and CWG. Due to the very low rents, the project will not be able to make payments on a permanent, long-term mortgage, so all funding, other than the bond- financed construction loan, had to be in the form of donations, grants, or long-term, deferred loans with flexible interest and payment terms. $22 million in permanent development funds had to be raised, plus funds for an operating reserve for the housing and an endowment for the Service Center. In addition, almost $11 million in loans are necessary for the construction period. Ten different entities are participating in funding the Opportunity Center together with numerous individual, business and faith~based donors~ The major sources of permanent funding include the State’s Supportive Housing component of its Multifamily Housing Program (MHP) at $7.5 million; over $7.3 million from the sale of the four percent Low Income Housing Tax Credits to a private investor; $2.5 million from the Santa Clara County Office of Affordable Housing; and the City’s $2.03 million. Other key funding contributors include the Housing Authority for $9.75 million in construction financing and 22 units of project-based Section 8 assistance; Union Bank as the bond purchaser and trustee (see below); $3.6 million in private foundation grants and individual donations raised by CWG for capital costs including a $2 million operating reserve fund for the housing; and an additional $1.35 million from the Housing Trust of Santa Clara County, HUD and the County of San Mateo. Summary of Construction Period Financing: The principal source of construction, period financing will be a $9.975 million construction loan funded by tax-exempt; variable interest rate bonds issued by the Housing Authority and privately placed with Union Bank. This structure provides a very cost effective source of construction debt with the estimated interest rate at three and one-half percent over the 24-month construction and rent-up period and bond issuance costs at about $200,000..The City does not assume any financial obligation or risk in connection with the bond issuance, The Housing Authority, in its role as the bond issuer, will bear all such risks and a default by the borrower would not affect the City’s credit or bond rating. The $9.1 million in remaining funds needed to complete construction is composed of $5.88 million in public funding from the two counties, the City, HUD and from the County Housing Trust, plus about $2.66 million in loans and $500,000 in equity from CWG, as shown in the table below. During the construction period, a first lien deed of trust for $9.975 million will be recorded against the property in favor of the Union Bank as the bond trustee. The City must subordinate its $2.03 million in loans to this CMR: 332:04 Page 9 of 15 construction loan. All the local public lenders funding (including the City’s) and the CWG funds are at-risk should there be a default or serious problems during construction and rent-up. The $7.5 million permanent loan from State HCD and most of the $7.3 million from the tax credit investor come into the project after construction is complete and full, stabilized occupancy of the housing units has been achieved and verified by audit to be in full compliance with the State and the tax credit program rules: Table 2 Construction Period Funding Source Housing Authority / Union Bank Santa Clara County: - Affordable Housing Fund - HOME Funds City of Palo Alto: - Residentia! Housing Fund - CDBG Funds Housing Trust of Santa Clara County San Mateo County: HUD (McKinney Act Capital Grant to CWG) Tax Credit Investor SUb-t0tal Public /Private Funders: Sponsor Funds from CWG: - CWG Construction Loan - CWG Construction & Bridge Loan -CWG Equity for Service Center TOTAL ALL SOURCES Housing $9,975,000 Sources and Amounts Service Center $1,000,000 $5OO,OOO $750,000 $1,000,000 Total $9,975,000 $2,500,000 $2,030;000 $1,280,000 $500,000 --$500,000 $450,000 --$450,000 $400,000 --$400,000 $100,000 -- $3,700,000 $2,280,000 $513,707 $2,793,707 $731,494 $i,933,221 $16,339,715 $100,000 $5,980,000 .$3,178,422 $19,133,422 Permanent. Financing Summary: After completion and full occupancy, the State’s $7.5 million loan and about five million dollars of the tax credit investor’s funds will close escrow, pay off the smaller ($713,494) CWG construction loan, the $9.975 million bond- financed construction loan and fund the developer fee. The permanent financing, for both the housing .and Service Center components, is shown in Attachment E, with the order of priority of each party’s deeds of trust. The City’s $750,000 housing loan, and the other government loans, will remain in place after the permanent funding comes in, but will be subordinated to the new first deed of trust that secures the State MHP funding. Description of City Funding for the Project: The Opportunity Center’s financing has been restructured due to welcome, but unanticipated, successes in winning higher funding than CMR: 332:04 Page 10 of 15 was previously estimated last July when Council approved the interim City loan agreement. The maj or changes are substantial increases in the State HCD award and the tax credit investor’s contribution, and a $2 million award from the County of Santa Clara’s Affordable Housing Program. In addition, due to CWG’s successful capital and endowment campaigns, there is now sufficient private funding to fully finish the interior of the Service Center, establish a well-capitalized operating reserve fund for the housing and setup a $2.5 to $3 million endowment for the operating costs of the Service Center. The principal objective of restructuring some of the local public funding was to transfer some of CWG’s private funding that had previously been allocated to Service Center development costs to the housing side of the project to fully fund the establishment of an operating rent reserve fund for the apartments. To accomplish this objective, over $2 million had to be identified in funding that was eligible for use for Service Center development costs. The solution suggested by the developer, and concurred in by City and County staff, was to utilize a combination of $1 million of the Santa Clara County funds together with the City’s $1.28 million of CDBG funds to replace some of CWG funds previously allocated to the Service Center. Although the City’s $1.28 million interim loan has already been expended for land acquisition and predevelopment, these funds will now be allocated in the final project development budget for Service Center development costs as shown in Attachment E-2. Staff supported this revision because development of a homeless service center is an eligible use under the CDBG regulations and the City’s CDBG funds will still indirectly assist the 89 housing units by freeing some of the private CWG funds to establish the housing’s operating reserve fund, a use that would be ineligible under CDBG regulations. City Loan for the Housing: Palo Alto’s commitment of $750,000 in Residential Housing Funds will continue to be used as originally intended for housing unit construction costs. While the $750,000 for the housing is being provided as an interest-bearing loan, repayment over the 55 years that the project is under the MHP program’s restrictions is expected to be minimal. This is due to the extremely low rents and the high operating costs of service-enriched housing serving primarily persons that have experienced homelessness, have disabilities or extremely low incomes. Also, any residual receipts available for loan repayments must be split proportionately between the City and the two counties that also are providing loans. The provisions of the City’s loan are described below: The terms of the City’s $750,000 housing loan are: []55-year loan term []Outstanding balance due at the end of the 55-year term []Maximum annual interest of three percent, not compounded CMR: 332:04 Page 11 of 15 []Actual interest rate will be calculated annually r.anging from zero to three percent based on the audited surplus cash flow from operations that is available to pay interest []Unpaid interest does not accumulate from year to year []Annual payments required only to the extent of residual receipts []Residual receipts for the payment of interest and principal, if any are available, are divided among the lenders proportionately to each lender’s share of the total project debt []City’s loan will be recorded in fourth position behind a total of $9 million in State and Santa Clara County loans. City Funding forthe Service Center: The City’s $1.28 million in CDBG funding for the Service Center will be secured with a deed of trust that will enforce an 89 year City regulatory agreement on the future use of the Center. The City deed of trust will be recorded against CWG’s condominium ownership interest in the project, but will be subordinated to Santa Clara County’s deed of trust securing its $1 million in Center funding because the County is providing more total funding for the entire project ($2.50 million), than the City ($2.03 million). No repayment of the City’s $1.28 million will be required, provided that compliance with the City’s regulatory agreement is maintained. After 89 years of compliance with the regulatory agreement, the City’s loan would convert to a grant and its deed of trust would be reconveyed. The City’s regulatory agreement requires that the Service Center space be used as a facility for the delivery of. services for homeless adults and families with children as eligible under the CDBG program and as described in the site’s PC zoning ordinance. Should the use be discontinued completely, substantially modified, or CWG’s ownership interest sold or transferred without the prior consent of the City, then the City’s funding would be subject to repayment, unless Council acted to waive the payment or amend the agreement. Council consent to a sale or transfer, or an amendment of the agreement to allow a change in use, would need to be consistent with the then-current CDBG regulations and the PC zoning for the site, which restricts the use of the ground floor to the provision of services such as counseling, training, childcare, and personal hygiene, primarily for lower income persons. The formula for calculating the repayment amount of the City’s CDBG loan is prescribed in the CDBG regulations on the funding of real property. The repayment amount would be the then-current fair market value of CWG’s combined ownership interests in the Service Center structure, the land and easement rights for access and parking, times the proportionate share that the City’s CDBG funds represent of the total original funding for CWG’s ownership interest. Based on the current project budget and planned CWG CMR: 332:04 Page 12 of 15 contribution to the Center’s costs, the City’s CDBG funding represents 45.8% of the total $2,793,707 in funding. The final percentage shares for each funding source for the Center will be calculated after completion of a post-construction cost audit. Capitalized Operating Reserve Fund for Housing: The larger $1.9 million CWG construction loan will initially capitalize an operating reserve for the hoi~sing project. Over the first five years of the housing project’s operations, the final payments from the tax credit investor will gradually replace CWG funds and repay its loan, then freeing up these CWG funds to supplement the Service Center endowment. Under the City’s regulatory agreements with CWG and the Partnership each entity has formally committed to funding the operating reserve with the full $1.9 million and to. utilizing the reserve on an ongoing basis to fund any operating deficits of the apartments. Establishing this reserve is a condition of the State MHP permanent loan, _the tax credit investor’s funds and the City because the project is likely to operate at a deficit" without these subsidies. The Operating Reserve will be held in a separate, dedicated account, under CWG name and administered by the Partnership. The earnings, and principal if needed, will be used only for the purpose of supplementing the annual rental revenue from the 89 housing units to the level necessary to meet all regular operating costs plus the salary of the part- time services coordinator, the required payments on the State loan and the annual deposits to replacement reserves and to pay the general partner a partnership management fee. The cash flow projections for the project indicate that it will require regular annual payments from the Operating Reserve, beginning with about $45,000 for the first year after completion and continuing to increase as time goes on. These projections are somewhat conservative and are based on assumptions that rents increase more slowly than operating costs, that overall vacancy and collection losses run about five percent of rents, and that rent revenues fully fund the housing service coordinator staff position. To augment the CWG Operating Reserve fund, any development cost savings (such as unused contingency funds), up to $500,000, will be deposited into a companion Operating Reserve fund held by the Partnership, to be drawn upon before the CWG-held reserve funds are utilized. Operating Costs of the Service Center and CWG Endowment Funds: CWG preliminary estimates of basic operating costs range from $40,000 to $75,000 per year for utilities, insurance, custodial, repairs and landscaping. By covering these regular ongoing operating costs from the endowment’s earnings, CWG expects to offer service providers space within the Center without the providers having to pay rent. Presently, CWG has raised sufficient funding for an initial endowment fund of $2.5 to $3 million, depending upon the final costs for equipment and furnishing of the interior. At this size, the CMR: 332:04 Page 13 of 15 endowment will generate about $100,000 to $120,000 annually in investment earnings. A campaign for a final one million addition to the fund is underway. CWG’s priorities for the endowment’s earnings, with the most emphasis on the firsttwo priorities, are: 1) operating expenses of the Center, 2) rent subsidies for persons with little or no income, 3) start-up costs for special program support services, and 4) other discretionary Service Center costs. CWG does not envision becoming an ongoing source of financial support for the operating budgets of the service providers utilizing space within the Center; these agencies will be expected to have sufficient resources of their own to run their programs. However, CWG would partner with these agencies, when appropriate, to assist them in accessing funding to implement or expand their programs. POLICY IMPLICATIONS The actions recommended in this report implement previous Council actions supporting the project, appropriating the housing funding and furthering the Council’s "Top Eive" priority for the development of affordable housing. These actions also implement the priorities of the City’s HUD Consolidated Plan for 2000 - 2005 for projects serving the needs of homeless and extremely low income households. TllV[ELINE Below is an updated list of key past and future milestones in the project schedule. Project conceived & CWG founded 33 & 39 Encina purchased with foundation grants Project expanded to include housing over a Service Center2000 Housing Authority joins the development team .~ Plans revised to include 45 Encina and provide 89-units Council approves $1.28 million in interim CDBG loan Control of entire site including 45 Encina achieved Planned Community zone adopted by Council and $750,000 in additional City housing funds approved State approves $7.5 million in MHP funding State approves tax-exempt bond allocation and tax credits City Council action on final financing agreements Building permit ready to issue Planned closing of construction funding and bond issuance Legal deadline to issue bonds Project under construction- 18 months August 2004 Complete Rent-up; Occupancy of Service Center Finalize permanent loans; Pay-off construction loans 1998-99 1999 ¯2001 2002 July 2002 August2002 March 3, 2003 December 2003 March - April 2004 July 19, 2004 Late July 2004 July 22, 2004 August 9, 2004 - January 2005 March 2006 April 2006 CMR: 332:04 Page 14 of 15 ENVIRONMENTAL REVIEW A federal environmental review under the National Environmental Policy Act (NEPA) covering the use of CDBG funds for the project was completed and approved by HUD on July 22, 2002. On March 3, 2003, the Council certified the Final Environmental Impact Report (FEIR) pursuant to the California Environmental Quality Act (CEQA) and approved the Planned Community zone change on the project. The Budget Amendment Ordinance appropriating the City’s $750,000 in Residential Housing Funds was also adopted on that date. ATTACHMENTS A) Loan Agreement For Opportunity Center Apartments with attached form of Note and Deed of Trust B) Regulatory. Agreement .and Declaration of Restrictive Covenants for Opportunity Center Apartments C) Loan and Regulatory Agreement and Declaration of Restrictive Covenants for Opportunity Center of the Mid-peninsula - A Service Center with attached form of Note and Deed of Trust D)Summary Development Budget E)Permanent Funding Sources & Terms for Residential & Service Center Portions of Project C~therine Siegel, Hou~ Cddrditiator DEPARTMENT HEAD REVIEW: Emslie Director of Planning and Community Environment CITY MANAGER APPROVAL: l~,mily Harrison Assistant City Manager Community Working Group, Inc. Housing Authority of the County of Santa Clara CMR: 332:04 Page 15 of 15 ATTACHMENT A LOAN AGREEMENT FOR OPPORTUNITY CENTER APARTMENTS THIS LOAN AGREEMENT FOR OPPORTUNITY CENTER APARTMENTS ("Apartments Loan Agreement"), made and entered into as of ,2004, 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 OPPORTUNITY CENTER ASSOCIATES L.P., a California limited partnership, with offices at c/o Housing Authority of the County of Santa Clara, 505 West JulianStreet, San Jose, California 95110 ("Opportunity LP" or "Partnership"), WITNES SETH: WHEREAS, pursuant to that certain Agreement To Fund Pre-Development, Site Acquisition and Pre-Construction Expenses for the Opportunity Center For the Mid-Peninsula, a Housing and Homeless Services Center among City, the Housing Authority of the County of Santa Clara (’;Housing Authority") and Community Working Group, Inc. ("CWG" and, collectively with Housing Authority, "Sponsors") dated July 22, 2002 (the "Interim Agreement"), City provided a loan (the "Interim Loan") to the Sponsors of $1,280,000 in Community Development Block Grant ("CDBG") funds for purposes of site acquisition and pre-. development costs and those funds will be expended by June 30, 2004 for CDBG eligible activities; WHEREAS, on March 3, 2003, the City Council approved a Budget Amendment Ordinance committing to provide $750,000 in Residential Housing Funds for the Apartments Project to support the construction of new rental housing for extremely low-income and very low-income households, which is the one of the primary purposes for which the revenues of the Residential Housing Fund are collected by the City; WHEREAS, the City Council approved Planned Community Ordinance Number 4782 on March 3, 2003 allowing construction of the Opportunity Center, which includes 89-units of rental housing, common areas and open space, a two-level underground parking garage and an approximately 6,700 square foot homeless services center (the "Project"); WHEREAS, the work described in Section 3 of the Interim Agreement has been performed in a timely and satisfactory manner and the covenants and conditions of Section 5 - Conversion to Long-Term Financing have been met, including the acquisition of clear title to the three parcels currently known as 33, 39 and 45 Encina Avenue (the "Land") that together comprise the Project site and commitments of construction and permanent financing sufficient for construction and operation of the Project have been obtained; WHEREAS, eighty-eight (88) of the 89-units in the Project will be occupied by Extremely Low-Income and Very Low-Income households at affordable rents and the construction this type of rental housing together with supportive services is a priority objective of the City’s Consolidated Plan and the Housing Element of the City’s Comprehensive Plan and will implement City and Countywide homeless assistance strategies; LAI 599163v4 WHEREAS, the Sponsors have requested that City replace the $1,280,000 Interim Loan. with a new loan in that mount to CWG to finance a portion of the total Project costs allocated to Se~!ee Center development costs and provide $750,000 in Residential Housing Funds as a loan (the "Partnership Loan") to Opportunity LP for housing construction in conjunction with other financing commitments for construction and development funding for the Project; WHEREAS, Opportunity LP has received sufficient binding commitments for construction financing, including an allocation of tax exempt bond authority that will fired a $9.975 million construction loan (the "Bond Loan") and permanent financing including an award of $7.5 million in Supportive Housing funds under the State’s Multifamily Housing Program (the "MHP Loan"); WHEREAS, pursuant to a separate agreement, the City is willing to make a new loan to CWG in the amount of $1,280,000 to assist CWG in satisfying its obligations to provide funding to the Partnership of the portion of the total Project development costs allocated to land, development and construction of the Service Center; WHEREAS, the County of Santa Clara issued an allotment of Article 34 authority, under Measure A as approved by the voters in November 1998, to the City on March 7, 2003 for 89- units of new construction rental housing as part of the Project; and WHEREAS, in consideration of the City’s making the Partnership Loan, Opportunity LP has agreed to observe and perform all of the terms and conditions set forth in this Apartments Loan Agreement, and has agreed that the Apartments Project will be subject to the terms and conditions set forth in the Regulatory Agreement and Declaration of Restrictive Covenants for Opportunity Center Apartments being entered into by Opportunity LP and City concurrently with this Apartments Loan Agreement (the "Apartments Regulatory Agreement") for a term of approximately fifty-five (55) years commencing of the date on which the Apartments Regulatory Agreement is recorded in the Official Records of Santa Clara County; NOW THEREFORE, in consideration of the mutual promises and covenants and terms, conditions and provisions set forth in this Apartments Loan Agreement and for other valuable consideration, the parties agree as follows: ARTICLE 1 - DEFINITIONS. Capitalized terms used in this Apartments Loan Agreement without definitions shall have the respective meanings; if any, assi~ed to them in the Apartments Regulatory Agreement~ unless the context clearly indicates othe~se: ARTICLE 2 - LOAN OF FUNDS; CONDITIONS TO FUNDING 2.1 Loan Amount. The City agrees to make a loan to Opportunity LP in an aggregate principal amount up to, but not to exceed, Seven Hundred Fifty Thousand Dollars ($750,000) (the "Partnership Loan"), subject to the terms and conditions set forth in this Article 2. 2.2 Promissory Note. The obligation of Opportunity LP to repay all amounts advanced by the City pursuant to this Agreement shall be evidenced by a promissory note ("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 Opportunity LP. The Note will be due 2 LAI 599163v4 and payable in full on September 1, 2007; provided, however, the maturity date of theNote will be extended by City to the 55t~ anniversary of the date of closing of the MHP Loan in the event that all of the following events have occurred prior to September 1, 2007: (a) the Improvements have been substantially completed and final certificates of occupancy have been issued for the Apartments Project and the Service Center; (b) CWG and the Partnership have entered into an Operating Deficit Funding Account Agreement consistent with the provisions of Article 6 of the Apartments Regulatory Agreement and otherwise satisfactory to City in its sole discretion (a "Deficit Account Agreement"), which Deficit Account Agreement shall, among other things, provide that City is a third party beneficiary thereof, and that it may not be modified without the consent of the City; and (c) the Sponsor Rent Reserve Account has been established pursuant to Article 6 of the Apartments Regulatory Agreement and the initial funding thereof has occurred at funding of the MHP Loan in the amount and as otherwise provided in Article 6 of the Apartments Regulatory Agreement. Notwithstanding the foregoing, if the conditions set forth in the preceding sentence in order for the maturity date of the Partnership Note to be extended have not been satisfied by September 1, 2007, and the City Manager of City determines that such delay is due to one or more "acts of God" or other causes beyond the control of the Partnership, City may extend the date by which such conditions must be satisfied for a reasonable period equal to the amount of excusable delay, not to exceed six months. 2.3 Deed of Trust. It shall be a condition to the initial disbursement of loan proceeds that Opportunity LP has executed a Deed of Trust against the Housing Estate (the "Deed of Trust") in substantially the form set forth in Exhibit D, in favor of the City as beneficiary, securing the obligations of Opportunity LP under the Apartments Regulatory Agreement and the Note, and that the Deed of Trust has been recorded in the Official Records of Santa Clara County 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 Land for the Apartments Project and have been approved in writing by the City. 2.4 Development of the Project. The Partnership shall construct the Improvements 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 Agreement in view of the need for Project within the City. In connection with such construction, the Partnership shall comply with all requirements of 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 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 subject to revision from 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 LAI 599163v4 same form and in the same detail as normally prepared for intemal reports of the Partnership or for reports from the Partnership’s general contractor to the Partnership. Partnership shall give the ~ity 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 Ri~’ats of Access During Construction. For the purpose of assuring compliance with this 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 improvements. 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 or damages arising out of the activities of the City as referred to in this Section. 2.7 Disbursement of Funds. 2.7.1 The proceeds of the Partnership Loan shall be disbursed from time to time after the Bond Loan Closing as requested by the Partnership for construction and other development costs of the Improvements. 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 written 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 start of construction. Partnership 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. Opportunity 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 or 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 Opportunity 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 Improvements, 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 Improvements 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 Partnership may utilize the Partnership Loan for project development costs prior to the disbursement of other construction funds, including the proceeds of 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 Agreement, or to approve disbursements for disapproved or improperly documented expenses. 4 LAI 599163v4 2.8 Escrow ..... 2.8.1 This transaction will be completed through an escrow with First American Titl~’Guaranty Company ("Title Company"), 1737 North First Street, Suite 100, San Jose, California 95112 ("Escrow"). The parties to this Agreement will place all funds, documents and other information, together with appropriate written escrow instructions, into the Escrow in order to fulfill the terms of this 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. 2.8.2 If the Bond Loan Closing and the recording of the parcel map have not both occurred on or before August 20, 2004, the City will have no further obligation to fund the Partnership loan in whole or in part, and this Apartments Loan Agreement will be of no further force or effect. 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 $750,000, and insuring City, as the holder of a fourth lien deed of trust on the Housing Estate, 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 Housing Estate 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 parcel map merging the three existing legal parcels into one parcel, and a Condominium Plan and a Declaration of Covenants, Conditions and Restrictions for the Project satisfactory to City, have been recorded in the Official Records of Santa Clara County (b) The Partnership has acquired title to the Housing Estate and CWG has acquired title to the Service Center Estate (c) Title Company has recorded the Deed of Trust and the CWG Deed of Trust and the Apartments Regulatory Agreement and the Service Center Regulatory Agreement in the Official Records of Santa Clara County, and has issued the policy of title insurance described in Section 2.9 above (d) CWG has deposited at least $2,800,000 of its funds into escrow representing the remaining net balance due to the Partnership for CWG’s contribution for a portion of the development costs of the Service Center, equity on behalf of Opportunity HDC and funding of two separate construction loans to the Partnership. 5 LAI 599163v4 (e) The Partnership shall have submitted to the City, and the City shall have approved, a fmal development budget including a detailed construction budget and a schedule of values/cost breakdown reasonably acceptable to the City, and a construction schedule satisfactory to the City, showing estimated dates of the initiation and completion of each major phase of the construction of the Project. 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 $2,200,000; (ii) not more than $200,000 of such fees shall be payable prior to the MHP loan closing; (f) Unless this condition is waived by the City’s City Manager, the Partnership shall have provided to the City a fully-executed copy of the construction contract (the "Construction Contract") for the Improvements, which Construction Contract shall obligate a reputable and financially responsible general contractor (the "General Contractor"), licensed in California and experienced in completing the type of improvements contemplated by this Agreement to commence and complete the development of the Project in accordance with this Agreement, with the funds available for development of the Project. 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 Improvements for a fixed price, subject to such reasonable adjustments as are customarily allowed with respect to construction contracts. ’ The Construction Contract shall provide for retention of at least 10 percent from each progress payment 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 expiration of 65 days from the date of recording by the Partnership, a~ owner, of a Notice of Completion for the applicable improvements, which the Partnership agrees to record promptly within the 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 improvements; or (ii) The posting 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 pr~operty; 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. (g) Unless this condition is waived by the City’s risk manager, the Partnership shall have secured and deposited with the City 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 Improvements free of all liens and claims, within the time provided in the Schedule of Performance attached hereto. The construction bond LA1 599163v4 6 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 thee current United States Treasury Department circular 570 and otherwise within the underwriting limits specified for that company in such circular. (h) The City shall have received satisfactory evidence that the insurance required by Exhibit B of this Agreement shall be in effect. (i) All conditions to the initial fundings of the Bond Loan and all other loans, the proceeds of which are needed to fund construction of the Project, have been satisfied, and the Bond Loan and all such other loans have closed escrow, or will close escrow concurrently. ARTICLE 3 -COVENANTS AND CONDITIONS 3.1 General In consideration for receiving the Partnership Loan from City, Opportunity LP shall construct, or cause to be constructed, the Improvements upon the Land 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 Apartments 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 Apartments Project, or Partnership’s performance or non-performance under this Apartments 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 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 Apartments 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 Apartments Project or any Restricted Unit and Partnership shall provide any information reasonably requested. Partnership shall deliver to the City copies of all reports submitted to the State’s Department of Housing and Community Development, the California Debt Limit LAI 599163v4 Allocation Committee, the California Tax Credit Allocation Committee and the Intemal Revenue Service, as may be requested by the City, 3.4 Financial Audits Partnership shall provide City, during the term of this Apartments 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 close of each fiscal year of the Partnership. City reserves the right, during the term of this Apartments 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 Aparan. ents Project. 3.5 Assignment or Transfer This Apartments Loan Agreement shall not be assigned by Opporttmity LP without the express prior written consent of the City, in its sole and absolute discretion. Any assignment or attempted assignment shall be void and, at the sole discretion of the City, shall be deemed a material default of this Apartments Loan Agreement by Opportunity 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 Agreement, City shall have the right (following any period of notice and/or opportunity to cure expressly provided for in this Agreement) to exercise all of the rights and 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 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 loss, 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 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 Agreement which shall prove to have been false in any material respect when made; or LAI 599163v4 4.2 Partnership shall default in the payment, when due, of any principal or interest under the Note or any other sums payable by Partnership under this Agreement; or 4.3 Partnership shall default for a period of thirty (30) days (or if such defauli 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 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 fqr the benefit of its creditors, or is adjudicated a bankrupt or insolvent, or files a voluntary petition in bankruptcy; or 4.5 Parmership is subjected 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 Apartments 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 Apartments Regulatory Agreement; or 4.7 Except as expressly otherwise provided in the Deed of Trust or Note, Partnership causes or permits a sale, voluntary transfer, assignment or encumbrance of its ownership interest in the Apartments Project, 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 subsequent assignment, encumbrance or lease, or a waiver of any of the City’s rights under this Agreement. ARTICLE 5 - NOTICES All notices, consents, communications or transmittals required by this Apartments Loan Agreement shall be made, in writing, and shall be commtmicated by the United States mail, certified, return receipt requested or by express delivery with a delivery receipt, and shall be deemed given as of the date shown on the delivery receipt as the date of delivery or the date on which delivery was refused, and shall be addressed to the following addresses, or such other address as either party may designate, from time to time, by written notice sent to the other party in like manner: If to City:City of Palo Alto P.O. Box 10250 Palo Alto, CA 94303 Attn.: City Clerk 9 LA1 599163v4 with a copy to: If to Partnership: Director of Planning & Community Environment City of Palo Alto P.O. Box 10250 Palo Alto, CA 94303 Opportunity Center Associates L.P. c/o Housing Authority of the County of Santa Clara 505 West Julian Street San Jose, CA 95110-2300 Attn: General Partner with a copy toLP Investor:MMA Financial TC Corp. 101 Arch Street, 13th Floor Boston, MA 02110 Attn: Asset Management Fax: 617-439-9978 ARTICLE 6 - MISCELLANEOUS PROVISIONS 6.1 Nothing contained in this Apartments Loan 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 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 by the terms of this Apartments Loan Agreement. Partnership has retained and hereby retains the fight 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 fight, 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 Apartments Loan Agreement may be expressly waived by the City in writing, but no waiver by the City of any requirement of this Apartments Loan Agreement shall, or shall be deemed to, extend to or affect any other provision of this Apartments Loan Agreement. 6.3 Partnership lacks any authority or power to pledge the credit of City or incur any obligation in the name of City. This Apartments 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 Apartments Loan Agreement shall be binding upon the parties, provided such amendment is set forth in a writing signed by the parties. The city 10 LA1 599163v4 manager is authorized to execute any amendments to this Apartments 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 Apartments Loan Agreement Shall inure to and be binding on the successors and assigns of the parties. Any provision of this Apartments 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 Apartments Loan 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. 6.6 This Apartments 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 exhibits referred to in this Apartments 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 Apartments Loan Agreement and shall be deemed to be part hereof. This Apartments Loan Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. The paragraph headings are not a part of this Apartments Loan Agreement and shall have no effect upon the construction or interpretation of any part of this Apartments 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 Apartments Loan Agreement or arising out of this Apartments Loan Agreement may recover its reasonable costs and attorneys’ fees expended in connection with such an action from the other party. 6.8 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 Apartments Loan Agreement. // // // // // // // 11 LAI 599163v4 IN WITNESS WHEREOF, the parties hereto have executed this Loan Agreement for Opportunity Center Apartments 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: By: City Manager Director of Planning and Community Environment OPPORTUNITY CENTER ASSOCIATES L.P., a California limited partnership By:Opportunity Center HDC, Inc., a California nonprofit public benefit corporation, Its General Partner ,,ql, Title: By: Title: Taxpayer Identification No. Director of Administrative Services Insurance Review ATTACHlVIENTS: Exhibit A: Exhibit B: Exhibit C: Exhibit D: Exhibit E: Exhibit F: Exhibit G: Legal Description of Housing Estate Insurance Requirements Form of Note Form of Deed of Trust Summary Project Development Budget Estimated Permanent Source of Funds Schedule of Performance LA1 599163v4 12 EXHIBIT A LEGAL DESCRIPTION OF THE HOUSING ESTATE LA1 599163v4 EXHIBIT 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 fgllowing 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 ea. 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 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. LAI 599163v4 EXHIBIT C:FORM OF NOTE PROMISSORY NOTE (RESIDENTIAL HOUSING FUNDS) SECURED BY DEED OF TRUST AND ASSIGNMENT OF RENTS (OPPORTUNITY CENTER APARTMENTS) $750,000 ,2004 Palo Alto, California FOR VALUE RECEIVED, the undersigned, OPPORTUNITY CENTER ASSOCIATES L.P., 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 Seven Hundred Fifty Thousand Dollars ($750,000) (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 Opporttmity Center Apartments" ("Apartments Regulatory Agreement") and "Loan Agreement for Opportunity Center Apartments" ("Apartments Loan Agreement") and the development on certain real property commonly known as 33 Encina Avenue, Palo Alto, California (the "Housing Estate") by Maker of an 89 unit (including manager’s unit) apartment project designed for extremely low-income and very low-income families at affordable rents ("Apartments Project"). All terms, conditions, agreements and provisions, including the covenants, representations, and terms of default and remedies for default, set forth in the Apartments Regulatory Agreement and the Apartments Loan Agreement are incorporated herein by reference, and made a part hereof. 2. This Note evidences the obligation of the Maker to make full payment of the Loan Amount to the Holder, in accordance with the provisions of this Note. 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 Housing Estate (the "Deed of Trust"). 4. This Note and the Deed of Trust securing this Note is, or will be, subordinate to (a) a construction loan in original principal amount of approximately $9,975,000 made by the Housing Authority of the County of Santa Clara ("HACSC") pursuant to the terms of a LAI 595387v4 construction loan agreement between Maker and Union Bank of California, N.A., as agent for HACSC (the "Housing Authority Loan’?)and (b) l~ans made by the County of Santa Clara ("Sfihta Clara County") of Affordable Housing Program funds in original principal amount of $1,000,000 and HOME funds in original amount of $500,000 (the "Santa Clara County Loans"). Following completion of construction of the Apartments Project, this Note and the Deed of Trust securing this Note will be subordinate to (a) one or more permanent loans in aggregate original principal amount of $7,500,000 (the "MHP Loan") made pursuant to the Multi-Family 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) the Santa Clara County Loans, and will be prior to permanent loans (c) made by Lenders for Community Development of funds from the Housing Trust of Santa Clara County in original principal amount of $500,000 (the "LCD HTF Loan"), and (d) from San Mateo County HOME and CDBG funds in original principal amount of $450,000 (the "San Mateo County Loan"). The loans described in this Section 4 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 Apartments Regulatory Agreement. 6.Payments; Interest; Maturity Date. 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 September 1, 2007; provided, however, the maturity date of this Note will be extended to the fifty-fifth (55th) anniversary of the date of closing of the MHP Loan (as defined in Section 4) in the event that all of the following events have occurred prior to September 1, 2007: (a) the Improvements have been substantially completed and final certificates of occupancy have been issued for the Apartments Project and the Service Center; (b) CWG and Maker have entered into an Operating Deficit Funding Account Agreement consistent with the provisions of Article 6 of the Apartments Regulatory Agreement and otherwise satisfactory to Holder in its sole discretion (a "Deficit Account Agreement"), which Deficit Account Agreement shall, among other things, provide that Holder is a third party beneficiary thereof, and that it may not be modified without the consent of Holder; and (c) the Sponsor Rent Reserve Account has been established pursuant to Article 6 of the Apartments Regulatory Agreement and the initial funding thereof has occurred at funding of the MHP Loan in the amount and as otherwise provided in Article 6 of the Apartments Regulatory Agreement. Notwithstanding the foregoing, if the conditions set forth in the preceding sentence in order for the maturity date of this Note to be extended have not been satisfied by September 1, 2007, and the City Manager of Holder determines that such delay is due to one or more "acts of God" or other causes beyond the control of CWG and the Maker, Holder may extend the date by which such conditions must be satisfied for a reasonable period equal to the amount of excusable delay, not to exceed six months. (Capitalized terms used in this Section 6.1 without definitions shall have those definitions, if any, ascribed to them in the Apartments Regulatory Agreement.) 2 LAI 595387v4 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 §hall be an annual simple interest rate equal to the lesser of (i) 3% 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 1 first following the closing of the MHP Loan, and each anniversary thereafter during the term hereof, Maker shall make payments to Holder in an amount equal to Holder’s Proportionate Share of Residual Receipts of the Apartments Project for the fiscal year most recently ended. No later than December 1 of each year during the term hereof beginning in 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 Apartments Project by a certified public accountant. No later than December 1 of each year during the term hereof beginning in 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 Apartments Project, and "Holder’s Proportionate Share" shall mean the proportion of Net Cash Flow payable to Holder under the MHP Regulatory Agreement; 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 have the meaning set forth in Section 6.3.2, provided, 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, "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. promissory notes evidencing the following loans which are outstanding at the time of determination of Holder’s Proportionate Share: MHP Loan, the Santa Clara County Loans, the San Mateo Cotmty Loan, and the LCD HTF Loan, 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 Apartments Project for such fiscal year. "Operating Revenues" shall mean all income derived from the Apartments Project, and shall include, without limitation: (1) rent (including rent on commercial or common space within the Apartments 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 received by Maker after casualty to or condemnation of the Apartments Project. ""Operating Expenses" shall mean all reasonable and actual costs and expenses of operating the Apartments Project, including without limitation: (1) 3 LAI 595387v4 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 enctiinbering the Housing Estate, including without limitation the MHP Loan and any administrative fee payable under the Santa Clara County Loans; (2) payments for supportive services to Apartments 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) for so long as the Housing Estate and the Apartments Project are owned by a limited partnership in which the limited partner is not an affiliate of the general partner, a partnership management fee payable to the general partner of Maker, not exceeding $20,000 per year, increasing annually at a rate of three and one-half percent (3 ½%) per year, or such greater amount as may from time to time be approved by Holder in Holder’s sole discretion; (4) property management fees and reimbursements in amounts in accordance with industry standards for similar developments (Holder acknowledges that a property management fee of $50/unit/month, increasing annually at a rate not to exceed the increase in the rate of the Consumer Price Index for the San Francisco-Oakland-San Jose area, commencing in the second full year that such a fee is charged, shall be deemed in accordance with industry standards); (5) property management staff salaries; (6) 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; (7) costs of restoring the Apartments Project after damage, destruction or condemnation; (8) 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 (9) 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, depreciation; (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 Apartments 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 Apartments 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 inspection 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 therefor by the Holder; in the event of any overpayment, the amount overpaid will be applied to the next payment due hereunder. 4 LAI 595387v4 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 Apartments Project and the Service Center, 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 Apartments Project and the Service Center. In the event the Sources of Funds, including the Loan Amount evidenced by this Note and all other loans and grants, the limited partner’s capital conla’ibution, and the general partner’s capital contribution that are available to pay such costs exceed the Total Development Costs of the Apartments Project(such excess, the "Excess Funds"), the Maker shall (a) deposit the Excess Funds (up to a maximum of $500,000) into an operating reserve account for the Apartments Project to be held by Maker, and (b) to the extent the amount of Excess Funds is greater than $500,000, use the balance of the Excess Funds to make mandatory prepayments of principal to Maker and the holders of the loans listed in Section 6.3.2 pro rata in proportion to the respective original principal amount of each loan. The Maker agrees to provide the Holder with such audited cost certification and the final proforma budget, to deposit the Excess Funds into an operating reserve account for the Apartments Project (as required above) and to make such mandatory prepayment of principal, at the later to occur of the payment in full of the Bond Loan or within twelve (12) months after the issuance of the fmal certificate of occupancy or equivalent City approval following completion of construction of the Apartments Project. For the purpose of this Section 9, "Total Development Costs of the Apartments Project" includes: all hard and soft development costs; a developer fee in an amount approved by MHP; all costs related to the tax credit syndication of the Apartments Project; audit costs; marketing costs; funding costs of any reserves required to be capitalized; all costs related to obtaining and closing all construction and permanent financing, and other documented costs. 10. Maker shall not sell, agree to sell, convey, alienate, lease, sublease, encumber or refinance the Apartments Project or any interest therein (excluding, however (a) encumbrances securing Maker’s obligations under the Housing Authority Loan, the MHP Loan, the Santa Clara County Loans, the LCD HTF Loan, and the San Mateo County Loan, (b) occupancy leases to qualified residents of the Apartments Project, (c) the lease of up to 2,000 square feet of the ground floor of the improvements at the Housing Estate to Community Working Group, Inc., a California non-profit public benefit corporation ("CWG"), and (d) the grant of a purchase option by Maker to CWG and/or to HACSC, or the exercise of any such purchase option by CWG or HACSC (collectively, the "Permitted Transfers")) without the written consent of Holder. If the Apartments 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, without the written consent of Holder, all obligations of Maker hereunder, irrespective of the maturity date expressed herein, at the option of Maker and without demand or notice, shall immediately become due and payable. 11. The Maker and any other maker, co-maker, indorser, guarantor, and any other party to this Note (collectively, "Obligors"), and each of them: (i) waive notice of default (except as provided in Section 14) notice of acceleration, notice of nonpayment, presentment for 5 LAI 595387v4 payment, demand, protest, notice of demand, notice of protest, notice of nonpayment, and any other notice required to be given under the law to the Obligors; (ii) consent(s)to any and all delays, extensions, renewals, or other modifications of this Note or waivers of any term hereof or release or discharge by the Holder of any of the Obligors or release, substitution, or failure to act by the Holder, from time to time, and agree(s) that no such action, failure to act, or failure to exercise any right or remedy on the 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 Apartments Regulatory Agreement, under any indorsement or guaranty of this Note; and (iii) (jointly and individually, if more than one) agree(s) to pay, on demand, any and all costs and expenses of collection of this Note or of any indorsement or any gu ~anty 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. The pleading of any statute of limitations as a defense to any demand against the Maker is expressly waived by the Maker. 13. If any default is made hereunder, the Maker promises to pay the Holder’s reasonable attorneys’ fees and other related costs and expenses incurred by the Holder in connection with the enforcement of any rights of the Holder. 14. The occurrence of any of the following shall constitute an event of default under this Note: (i) The Maker fails to pay any amount due hereunder within fifteen (15) days of its due date; or (ii) any default by the Maker under any other provision of this Note, or under the Deed of Trust or the Apartments Regulatory Agreement, following expiration of any applicable grace or 6ure 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 my ~er eXercise thereof. If the outstanding unpaid principal balance of this Note is not paid within thirty (30) days of demand therefor, the Maker shall pay to the Holder in addition to interest at the Applicable Interest Rate, interest equal to one percent (1%) of the unpaid principal amount, or the highest rate permitted by law, whichever is less, per calendar month, or fraction thereof. If this Note be reduced to judgment, such judgment shali bear the statutory interest rate on judgments. 15. 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 6 LAI 595387v4 was due. In the .event of an uncured.nonmonetary default, the Holder shall have first given written notice thereof to the Maker, and the Maker shall have failed to cure the nonmonetary defa’t~t within a period of thirty (30) days after the giving of such notice of such default; provided that if the nonmonetary default cannot be cured within thirty (30) days and the Maker proceeds diligently and uses best efforts to cure such default until it shall be fully cured within no more than ninety (90) days after the giving of such notice, then the Holder shall not exercise any right or remedy provided for herein until such 90-day period shall expire; provided, ¯ however, the Holder shall not be required to give any such notice or allow any part of the grace period if the Maker shall have filed a petition in bankruptcy or for reorganization or a bill in equity or otherwise initiated proceedings for the appointment of a receiver of its assets, or if the Maker shall have made an assignment for the benefit of creditors, or if a receiver or trustee is appointed for the Maker and such appointment or such receivership is not terminated within forty-five (45) days of such appointment. With respect to any right to cure or cure period provided in this Section 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. 16. Any notice, demand, or other communication required hereunder shall not be deemed sufficiently given, unless sent by certified mail, postage prepaid, return receipt requested, or by express delivery service or overnight courier service, to the principal office of the addressee, or at such other address as may be designated, in writing, from time to time: Holder:City of Palo Alto P. O. Box 10250 Palo Alto, California 94303 Attention: City Clerk Maker:Opportunity Center Associates L.P. c/o Housing Authority of the County of Santa Clara 505 West Julian Street San Jose, California 95110 Attention: General Partner The delivery shall be effective on the date shown on the delivery receipt or the date on which the delivery was refused. 17. 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 Apartments Regulatory Agreement, the Apartments 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 Housing Estate without the Holder’s prior written consent. Furthermore, the foregoing LAI 595387v4 limitation shall not be applicable to the extent of any loss incurred by the Holde~ 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 Apartments Project, or (c) the presence or release of any hazardous or toxic substances on or in the Housing Estate encumbered by the Deed of Trust. The Holder shall not in any way be prohibited from naming the Obligors, or any of them, or any person holding under or through them as parties to any actions, suit or other proceedings initiated by the Holder to foreclose or otherwise realize upon any other lien or security interest created in the Housing Estate, the Apartments 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 to the Housing Estate or the Apartments Project which were diverted or misappropriated by the Obligors, or any of them. 18. In the event of any conflict between the terms and conditions contained in this Note and the terms of the Apartments Loan Agreement or the Apartments Regulatory Agreement, the terms and conditions contained in this Note shall control. 19. 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 Califomia, on the date first above written. OPPORTUNITY CENTER ASSOCIATES L.P., a California limited partnership By:OPPORTUNITY CENTER HDC, INC., a California non-profit public benefit corporation, its general partner By: Name: Title: By: Name: Title: 8 LAI 595387v4 RECORDING REQUESTED BY AND WHEN RECORDED, MAIL TO: City of Palo Alto Office of City Attorney 250 Hamilton Avenue Palo Alto, CA 94301 This document is recorded for the benefit of the City of Palo Alto and is entitled to be recorded free of charge in accordance with Sections 6103 and 27383 of the Government Code EXHIBIT D: FORM OF DEED OF TRUST AND RIDER SPACE ABOVE THIS LINE FOR RECORDER’S USE DEED OF TRUST, ASSIGNMENT OF RENTS AND MEMORANDUM OF OPTION THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND MEMORANDUM OF OPTION, made on ,2004, between OPPORTUNITY CENTER ASSOCIATES L.P., a Califomia limited partnership ("Trustor"), whose address is 505 West Julian Street, San Jose, California 95110-2300, FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation ("Trustee"), whose address is 1737 North First Street, 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 Califomia, described in Exhibit "A", attached hereto and made a part hereof by reference ("Security" or "Property"), TOGETHER WITH the rents, issues and profits thereof, SUBJECT, HOWEVER, to the right, power, and authority given to and conferred upon Beneficiary, by subdivision B of the fictitious deed of trust recorded in the office of the Recorder of the County of Santa Clara, in Book 5336 of Official Records, at Page 341, adopted and incorporated herein by reference and made a part hereof as if fully set forth herein, to collect and apply such rents, issues and profits FOR THE PURPOSE OF SECURING payment of the indebtedness evidenced by that Promissory Note ("Note"), and any extensions or renewals thereof, in the principal amount of $750,000 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 LA1 596997v23 Regulatory Agreement and Declaration of Restrictive Covenants for Opportunity Center Apartments (the "ApartmentsRrgulatory Agreement") and Loan Agreement for Opportunity Center Apartments (~Apartments Loan Agreement"). TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR AGREES: 1. Fictitious Deed of Trust. By the execution and delivery of this Deed of Trust and the Note secured hereby, that the provisions of subdivisions A and B inclusive, of the fictitious deed of trust recorded in the office of the Recorder of the County of Santa Clara in Book 5336 of Official Records, at Page 341, hereby are adopted and incorporated herein and made a part hereof as fully as though set forth herein at length; that it will observe and perform said provisions; and that the references to property, obligations, and parties in said provisions shall be construed to refer to the property, obligations, and parties set forth in this Deed of Trust. 2. Prohibited Transfers. With the exception of the Permitted Transfers described in Section 10 of the Note, Trustor shall not, voltmtafily or involuntarily or by operation of law, sell, transfer, lease, pledge, encumber, create a security interest in, or otherwise hypothecate or alienate all or any part of the Security, without Beneficiary’s prior written consent. The consent by Beneficiary to any sale, transfer, lease, pledge, encumbrance, creation of a security interest in, or other hypothecation of the Security shall not be deemed to constitute a novation or a consent to any further sale, transfer, lease, pledge, encumbrance, creation of a security interest in or other hypothecation. Beneficiary may, at its option, declare the indebtedness secured hereby immediately due and payable, without notice to Trustor or any other person or entity, upon any such sale, transfer, lease, pledge, encumbrance, creation of a security interest in, or other hypothecation or alienation in violation hereof. Without the written consent of Beneficiary, no sale, transfer, lease, pledge, encumbrance, creation of a security interest in, or other hypothecation of the Security shall relieve or release Trustor from primary liability under this Deed of Trust, the Note, and/or the Agreement. As used in this Section 2, the term "transfer" includes, without limitation, the following transactions: a.Any total or partial sale, assignment or conveyance, or creation of any trust or power, or any transfer in any other mode or form with respect to the Security or any part hereof or any interest herein~ or any contract or agreement to do the same; b. The cumulative transfer of more than ten percent (10%) of the capital stock, partnership profit and loss interest, or other form of interest in Trustor; and Co assets of Trustor. Any merger, consolidation, sale or lease of all or substantially all of the 3. Due on Sale. In the event of default by Trustor under 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, orby the operation of law or otherwise, without the written consent of Beneficiary, all obligations secured by this instrument, irrespective of the maturity dates expressed therein, at the option of Beneficiary hereof and without demand or notice shall immediately become due and payable. 2 LAI 596997v23 4. Memorandum of Option. Trustor hereby grants to Beneficiary the right to purchase the Property on the terms and conditions set forth in Section 10.2 of the Apartments Regulatory Agreement, which terms and conditions are incorporated herein by this reference as if fully set forth herein.’ OPPORTUNITY CENTER ASSOCIATES L.P., a California limited partnership By:Opportunity Center HDC, Inc., a California nonprofit public benefit corporation, Its General Partner By: Name: Title: By: Name: Title: Taxpayer Identification No. 3 LAI 596997v23 DEED OF TRUST RIDER (Opportunity Center Apartments Loan) This Deed of Trust Rider (the "Rider") entered into as of ., 2004, by and between The City of Palo Alto ("Lender") and Opportunity Center Associates L.P., a California. limited partnership ("Borrower") is attached to and made a part of the Deed of Trust, Assignment of Rents and Memorandum of Option (~e "Deed of Trust") dated of even date herewith by Borrower, as trustor, in favor of Lender, as Beneficiary, and is for the benefit of the Borrower and the Limited Partners, as defined below. The Deed of Trust secures a loan in the original principal amount of $7~0,000 to Borrower (the "Loan") and encumbers certain real property located in the City of Palo Alto, County of Santa Clara, California (the "Property") upon which Borrower intends to construct a housing project for low income households (the "Project"). The parties hereto agree that the following covenants, terms, and conditions shall be part of and shall modify or supplement the Deed of Trust and the Promissory Note of even date herewith, and/or any other document(s) evidencing, securing, or governing the Loan (the "Loan Documents"): 1. Limited Partners. Lender acknowledges that the Borrower intends to admit as limited partners MMA Financial, LLC, an investor limited partner ("LP Investor") and , a "special" or "administrative" limited partner (collectively, including any successors or assigns, "Limited Partners") and obtain certain construction loan funds and permanent loan funds in order to achieve adequate capital to develop, own and operate the Project, for its intended purpose. Lender consents to the admission to the Borrower of the Limited Partners and the withdrawal of the initial limited partner. Notwithstanding anything to the contrary in the Loan Documents, the withdrawal of the initial limited partner from the Borrower and the admission of Limited Partners as substitute limited partners to the Borrower under the Limited Partnership Agreement of the Borrower, as amended and restated at the time of the admission of the Limited Partners (the "PartnerShip Agreement"), shall not constitute a prohibited transfer, or otherwise be a default, trader the Loan Documents, nor shall Lender have the right to accelerate the Loan based on such admission or withdrawal. 2. Nonrecourse Obligation. The Loan is a nonrecourse obligation of Borrower. Neither Borrower nor any of its general or limited partners, nor any other party shall have any personal liability for repayment of the Loan. The sole recourse of Lender under the Loan Documents for repayment of the Loan shall be the exercise of its rights against the Project and related security thereunder. 3. General Partner Change. The withdrawal, removal, and/or replacement of a general partner of the Borrower pursuant to the terms of the Partnership Agreement, as amended and restated at the time the Limited Partners are admitted (the "Amended Partnership Agreement"), shall not constitute a default under any of the Loan Documents, and any such actions shall not accelerate the maturity of the Loan, provided that Lender is given at least 60 days’ notice of Limited Partners’ intention to replace the general partner, and that the LA1 596926v2 replacement general partner is reasonably acceptable to Lender and is selected with reasonable promptness. 4. LP Investor’s Right to Transfer Interest. The transfer of up to ninety-nine and ninety-nine one hundredths percent (99.99%) of LP Investor’s interest in the Borrower to one or more entities controlled by LP Investor shall not constitute an event of default under the Loan Documents or allow acceleration of the note evidencing the Loan. 5. Monetary Default. Ifa monetary event of default occurs under the terms of any of the Loan Documents, prior to exercising any remedies thereunder Lender shall give each of the Limited Partners of the Borrower, as identified to Lender by written notice, simultaneous written notice of such default. Borrower shall have a period of seven (7) days after such notice is given within which to cure the default prior to exercise of remedies by Lender under the Loan Documents, or such longer period of time as may be specified in the Loan Documents. 6. Non-Monetary Default. If a non-monetary event of default occurs under the terms of any of the Loan Documents, prior to exercising any remedies thereunder Lender shall give Borrower and each of the Limited Partners of the Borrower, as identified to Lender in Paragraph 7 or by written notice, simultaneous written notice of such default. In addition to the cure periods given to Borrower, if any, the Limited Partners shall have an additional thirty (30) days to cure any default of the Borrower, or such longer period as may be reasonably necessary if the default is not curable within such thirty (30) day period, provided that Limited Partners are diligently proceeding with such cure. Lender shall accept cures of the default(s) by the Limited Partner within the cure periods, if any, provided in this Rider and California Civil Code Section 2924c(e). A Limited Partner shall be deemed to be diligently proceeding with the cure of defaults if it has commenced and is diligently proceeding to remove the General Partner as general partner of the Borrower pursuant to the Partnership Agreement, subject to any delays imposed by bankruptcy, injunction or similar proceeding which prevents Limited Partner from proceeding with such removal. Until the expiration of all cure periods provided to Limited Partner in the Loan Documents and this Paragraph 6, Lender shall not accelerate the Loan, exercise any remedies under the Loan Documents, charge a default rate of interest, be entitled to recover attorneys’ fees for collection efforts, or impose any impounds for insurance or taxes. 7. Notices. Lender shall give Limited Partner written notice of any default under Rider, and the cure periods contained in Paragraphs 5 and 6 above shall commence on the effective date of any such notice, atthe following address: Investor Limited Partner and Administrative [or "Special"] Limited Partner: Attention: Telephone: Telecopy: Any cure periods available to a Limited Partner, either as specified this Rider, shall commence upon the date of any such notice to the Limited Partner. 2 LA1 596926v2 8. Casualty, Condenmation, Etc. In the event of any fireor other casualty to the Project or eminent domain proceedings re~ulting in condemnation of the Project or any part thereof, Borrower shall have the right to rebuild the Project, and to use all available insurance or condemnation proceeds therefor, provided that (a) such proceeds are sufficient to keep the Loan in balance and rebuild the Project in a manner that provides adequate security to Lender for repayment of the Loan or if such proceeds are insufficient then Borrower shall have funded any deficiency, (b)Lender shall have the right to approve plans and specifications for any major rebuilding and the right to approve disbursements of insurance or condemnation proceeds for rebuilding under a construction escrow or similar arrangement, and (c) no material default then exists under the Loan Documents. If the casualty or condemnation affects only part of the Project and total rebuilding is infeasible, then proceeds may be used for partial rebuilding and partial repayment of the Loan in a manner that provides adequate security to Lender for repayment of the remaining balance of the Loan. 9. Lender Approvals, Etc. In any approval, consent, or other determination by Lender required under any of the Loan Documents, Lender shall act reasonably and in good faith. 10. Force Maieure. There shall be no default for construction or rehabilitation delays beyond the reasonable control of Borrower, provided that such delays do not exceed one hundred eighty (180) days, or such longer period of time as may be specified in the Loan Documents. 11. Purchase Rights. The execution and delivery of a purchase option and right of first refusal agreement granting the Community Working Group or the Housing Authority of the County of Santa Clara or affiliates of those entities (collectively, "Optionee~’) the right to purchase the Project after the fifteen-year tax credit compliance period shall not constitute a default under the Loan Documents or accelerate the maturity of the Loan thereunder. Any requisite consent of Lender to (a) the exercise of the rights under said purchase option and right of first refusal agreement by the project general partner or sponsor or its assignee, as applicable, identified therein, and to (b) the assumption without penalty of loan obligations by Optionee or its assignee, as applicable, and the release of Borrower from such obligations, shall not be unreasonably withheld. Subject to any such consent requirement, the exercise of rights under such agreement shall not constitute a default or accelerate maturity of the Loan. 12. Loan Assumption. If the purchase option and right of first refusal agreement described in Paragraph 11 is not exercised and the Project is sold subject to low-income housing use restrictions as contained in an existing regulatory agreement or other recorded covenant, any requisite consent of Lender to said sale, and to the assumption without penalty of loan obligations by the purchaser and the release of Borrower from such obligations, shall not be unreasonably withheld. 13. Lender Approvals, Etc. In any approval, consent, or other determination by Lender required under any of the Loan Documents, Lender shall act reasonably and in good faith. 14. Subordination to Senior Loans. Lender shall subordinate the Deed of Trust to deeds of trust securing promissory notes evidencing the "Housing Authority Loan," the "MHP 3 LAI 596926v2 Loan," and the "Santa Clara County Loans," as defined and more particularly described in, and on the terms set forth in, the promissory note evidencing the Loan, and such other financing as may.from time to time be approved by the Lender, subject to the Lender’s approval of subordination agreements evidencing such subordination and the Lender approval of the deeds of trust to which the Deed of Trust is to be subordinated. 15. Partial Subordination to Extended Use A~eement, Lender acknowledges that Borrower and the Califo~a Tax Credit Allocation have or intend to enter into, or concurrently with the execution and delivery of the Loan Documents are entering into, a Regulatory Agreement (the "Regulatory Agreement"), which constitutes the extended low-income housing commitment described in Section 42(h)(6)(B) of the Internal Revenue Code, as amended (the "Code"). Lender acknowledges and agrees that, in the event of a foreclosure of its interest under the Mortgage or delivery by the Borrower of a deed in lieu thereof (collectively, a "Foreclosure"), the following rule contained in Section 42(h)(6)(E)(ii) of the Code shall apply: For a period of three (3) years from the date of Foreclosure, with respect to any unit that had been regulated by the Regulatory Agreement, (i) none of the eligible tenants occupying those units at the time of Foreclosure may be evicted or their tenancy terminated (other than for good cause, including but not limited to, the tenants’ ineligibility pursuant to regulations issued with respect to Section 42 of the Code), (ii) nor may any rent be increased except as otherwise permitted under Section 42 of the Code. 16. Inconsistency. In the event of any inconsistency or conflict between the covenants, terms and conditions of any of the Loan Documents and this Rider, the covenants, terms and conditions of this Rider shall control. 17. Survival. Except to the extent expressly modified, supplemented or amended in this Rider, the Loan Documents remain in full force and effect. 4 LA1 596926v2 IN WITNESS WHEREOF, the undersigned have caused this Rider to be executed as of the date hereinabove stated. OPI~ORTUNITY CENTER ASSOCIATES L.P., a California limited partnership By:OPPORTUNITY CENTER HDC, INC., a California non-profit public benefit corporation, its general partner By: Name: Title: By: Name: Title: CITY OF PALO ALTO, a chartered California municipal corporation By: Name: Title: 5 LAI 596926v2 EXHIBIT Opportunity Center: Summary Project Development Budget (As of April 30, 2004) 1 Land Acquisition Costs (& Closing costs) 2 Relocation & Eminent Domain: (Legal, Goodwill, Appraisal, Relocation) 30ffsite Improvements 4 Hard Construction (incl. Site work, excavation, demolition) 5 Construction Contingency 6 Construction Loan: Interest, Insurance 7 Architecture & Engineering: (Incl. Environmental Studies; Soilsl Testing) 8 City Impact Fees; Planning & Building Permits 9 Predevelopment & Construction (Legal, Title, Escrows, Bond Issuance) 10Permanent Financing: (Title, Escrow, Legal, TCAC Fees; Market Study, Consultant, Audit) 11Marketing & Rent-Up 12Furnishings 13Fund Raising Costs (for endowments) 14Soft Cost Contingency 15Replacement Reserves (Initial Funding) 16Developer Fee $1,776,816 $282,905 $216,00C $12,994,787 $1,500,00C $402,950 $1,488,387 $290,020 $440,907 $177,434 $89,00C $308,00C $80,00C $83,063 Se $2,166,877 TOTAL DEVELOPMENT ,BUDGET- ENTIRE PROJECT DEVELOPMENT BUDGET FOR APARTMENTS PROJECT DEVELOPMENT BUDGET FOR SERVICE CENTER $22,297,146 $19,503,439 $2,793,707 LAI 599163v4 EXHIBIT F PERNANENT SOURCES OF FUNDS State HCD: Multifamily Homing Program Loan State HCD: NSSS Loan Limited Partner Equity (MMA Financial, LLC) (estimated) Santa Clara County Office of Affordable Housing Loan City of Palo Alto: Residential Fund Loan Lenders for Community Development (Housing Trust of Santa Clara County) County of San Mateo General Partner Equity (estimated) . (Includes $400,000 from CWG from HUD McKinney grant) Total Estimated Permanent Sources of Funds for Apartments Project $7,000,000 $500,000 $7,279,000 $1,500,000 $750,000 $500,000 $450,000 $1,524,439 $19,503,439 Santa Clara County Office of Affordable Housing City of Palo Alto: Community Development Block Grant Program CWG Equity (estimated) Total Estimated Source of Funds for Service Center Project TOTAL ESTIMATED SOURCES OF FUNDS FOR PROJECT $1,000,000 $1,280,000 $513,707 $2,793,707 $22,297,146 LAI 599163v4 EXHIBIT G Opportunity Center Project: Schedule of Performance As of June 30, 2004 Key City Approvals: City Council Approval of Permanent Loan & Regulatory Agreements (Scheduled for July 19, 2004) City Approval of Parcel Map for Lot Merger (completed) City Council Approval of Planned Community Zone (completed) Parcel Map & Condominium Plan to be Recorded: Building Permit: Building Permit Issued Constructiori Cost Estimating & Bidding: Final Construction Budget Established Execute Construction Contract(s) Construction Period: Notice to Proceed Issued Complete Site Excavation Complete Subgrade Parking Structure Begin Building Construction Complete Construction Financing: Approval of MHP Ftmding Approval of TCAC 4% Tax Credit Reservation Approval by CDLAC of Bond Allocation Housing Authority Issues Bond Bond Loan Closing and Close All Other Construction Loans Legal Deadline to Issue Bonds Complete Rent- up & Occupancy MHP Loan Closing (Repays Bond Loan & CWG Construction Loan A) TCAC issues IRS Form 8609 (tax credits finalized) Final Equity Payment From Limited Partner (Repays CWG Construction and Bridge Loan B) July 19, 2004 February 5, 2004 March 17, 2003 July 2004 August 2004 July 2004 August 2004 August 2004 November 2004 April 20O5 May 2005 October 2006 December 2003 March 17, 2004 April 21, 2004 August 2004 August 2004 August 9, 2004 January 2007 May 2007 May 2007 May 2012 LAI 599163v4 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 ATTACHMENT B SPACE ABOVE THIS LINE FOR RECORDER’S USE REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS FOR OPPORTUNITY CENTER APARTMENTS THIS REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS FOR OPPORTUNITY CENTER APARTMENTS ("Apartments Regulatory Agreement"), made and entered into as of ,2004, 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 OPPORTUNITY CENTER ASSOCIATES L.P., a California limited partnership, with offices at c/o Housing Authority of the County of Santa Clara 505 West Julian Street, San Jose, California 95110 ("Opportunity LP" or "Partnership"), WITNE S SETH: WHEREAS, pursuant to that certain Agreement To Fund Pre-Development, Site Acquisition and Pre-Construction Expenses for the Opportunity Center For the Mid-Peninsula, a Housing and Homeless Services Center among City, the Housing Authority of the County of Santa Clara ("Housing Authority") and Community Working Group, Inc. ("CWG" and, collectively with Housing Authority, "Sponsors") dated July 22, 2002 (the "Interim Agreement"), City provided a loan (the "Interim Loan") to the Sponsors of $1,280,000 in Community Development Block Grant ("CDBG") funds for purposes of site acquisition and pre- development costs and those funds will be expended by June 30, 2004 for CDBG eligible activities; WHEREAS, ,on March 3, 2003, the City Council approved a Budget Amendment Ordinance co~itting to provide $750,000 in Residential Housing Funds for the Apartments Project to support the construction of new rental housing for extremely low-income and very low-income households, which is the one of the primary purposes for which the revenues of the Residential Housing Fund are collected by the City; WHEREAS, the City Council approved Planned Community Ordinance Number 4782 on March 3, 2003 allowing construction of the Opportunity Center, which includes 89-units of rental housing, common areas and open space, a two-level underground parking garage and an approximately 6,700 square foot homeless services center (the "Project"); 1 LAI 595545v5 WHEREAS, the work described in Section 3 of the Interim Agreement has been performed in a timely and satisfactory manner and the covenants and conditions of Section 5 - Conyersion to Long-Term Financing have been met, including the acquisition of clear title to the three parcels currently known as 33, 39 and 45 Encina Avenue (the "Land") that together comprise the Project site and commitments of construction and permanent financing sufficient for construction and operation of the Project have been obtained; WHEREAS, eighty-eight (88) of the 89-units in the Project will be occupied by Extremely Low-Income and Very Low-Income households at affordable rents and the construction this type of rental housing together with supportive services is a priority objective of the City’s Consolidated Plan and the Housing Element of the City’s Comprehensive Plan and will implement City and Countywide homeless assistance strategies; WHEREAS, the Sponsors have requested that City replace the $1,280,000 Interim Loan with a new loan in that amount to CWG to finance a portion of the total Project costs allocated to Service Center development costs and provide $750,000 in Residential Housing Funds as a loan (the "Parmership Loan") to Opportunity LP for housing construction in conjunction with other financing commitments for construction and development funding for the Project; WHEREAS, Opportunity LP has received sufficient binding commitments for construction financing, including an allocation of tax exempt bond authority that will fund a $9.975 million construction loan (the "Bond Loan") and permanent financing including an award of $7.5 million in Supportive Housing funds under the State’s Multifamily Housing Program (the "MHP Loan"); WHEREAS, pursuant to a separate agreement, the City is willing to make a new loan to CWG in the amount of $1,280,000 to assist CWG in satisfying its obligations to provide funding to the Partnership of the portion of the total Project development costs allocated to land, development and construction of the Service Center; WHEREAS, the County of Santa Clara issued an allotment of Article 34 authority, under Measure A as approved by the voters in November 1998, to the City on March 7, 2003 for 89’ units of new construction rental housing as part of the Project; and WHEREAS, in consideration of the City’s making the Parmership Loan, Opportunity LP has agreed to observe and perform all of the terms and conditions set forth in this Apartments Regulatory Agreement, and has agreed that the Apartments Project will be subject to the terms and conditions set forth in this Apartments Regulatory Agreement for a term of approximately fifty-five (55) years, commencing of the date on which this Apartments Regulatory Agreement 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 Apartments 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 Apartments Regulatory Agreement. LAI 595545v5 2 NOW THEREFORE, in consideration of the mutual promises and covenants and terms, conditions and provisions set forth inthis Apartments Regulatory Agreement and for other valuable consideration, the .parties agree as follows:. ARTICLE 1 - DEFINITIONS. The following terms as used in this Apartments Regulatory Agreement shall have the respective meanings assigned to them in this Article 1, unless the context clearly indicates otherwise: ’!Apartments Project,’ means the 89-units of rental housing and related functional areas that are included within the Housing Estate and used for rental housing operations, including but not limited to resident common and open spaces, lobby and access facilities, accessory administrative areas for~ the apartments management and the underground parking garage. "Apartments Regulatory Agreement" or "Agreement" means this ".Regulatory Agreement and Declaration of Restrictive Covenants for Opportunity Center Apartments". "Affordability Restrictions" means the use, occupancy and rent restrictions set forth in Article 2 hereof. "Bond Loan" means a $9,975,000 construction loan for the Project funded by tax-exempt bonds issued by the Housing Authority. "Bond Loan Closing" means the initial funding made pursuant to the Bond Loan. "Bond Regulatory Agreement" means a regulatory agreement, including by reference the restrictions stated in the staff report to the CDLAC, which will be recorded against the Housing Estate at the construction loan closing and continue for a term of 55-years. "CDLAC" means the California Debt Limit Allocation Committee. "City" means the City of Palo Alto, Califomia. "Community Development Block Grant Program and Regulations" means the federal Community Development Block Grant Program, of which the City is an entitlement grantee, under Title I of the Housing and Community Development Act of 1974, as amended, and the implementing federal regulations at 24 CFR Part 570. "Condominium Plan" means the condominium plan for the Land recorded in the Official Records of Santa Clara County on ,2004 in Book __, at Page __ "Condominium Unit" means a condominium unit shown on the Condominium Plan. "CWG" means the Community Working Group, Inc. a California 501 (c) (3) nonprofit public benefit corporation that is the owner of the Service Center Estate and whose board of directors nominate one member to the board of directors of the general partner of the Partnership "Developer" means Opportunity LP. 3 LAI 595545v5 "Extremely Low-Income Household" means a household with gross income that does not exceed 35% of Area Median Income and whielris otherwise a qualified Tenant under the MHP Program Regulations. "Extremely Low-Income Units" means the Units that are occupied by Extremely Low- Income Households. "Fiscal Year" means a calendar year during the term of this Apartments 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 Apartments Regulatory Agreement. "HAP Contract" means the 10-year Housing Assistance Payment contract with HUD or the Housing Authority for 22-units of project-based Section 8 rental assistance and any future extensions of that contract. "Housing Authority" means the Housing Authority of the County of Santa Clara, California. "Housing Estate" means the Condominium Unit number 1 owned by the Opportunity LP and its undivided interest in the common areas, and any other interest in the Land owned by Opportunity LP, as more particularly described in Exhibit A. "HUD" means the United States Department of Housing and Urban Development. "Improvements" means the buildings, structures and other improvements substantially as shown in the Site Plans to b~ constructed on the Land comprising the 89-unit rental apartment complex, the 6,700 square foot Service Center, the underground parking garage, and common areas to be known as Opportunity Center Apartments and the Opportunity Center of the Mid- Peninsula as approved, subject to conditions, by the City’s Director of Planning and Community Environment. "Interim Agreement" means the Agreement Between the City of Palo Alto, The Housing Authority of the County of Santa Clara, and Community Working Group, Inc. To Fund Pre- Development, Site Acquisition and Pre-Construction Expenses for the Opportunity Center For the Mid-Peninsula, a Housing and Homeless Services Center on Encina Avenue, Palo Alto dated July 22, 2002. "Land" means the real property currently known as 33, 39 and 45 Encina Avenue, Palo Alto, California that together comprise the Project site. "LP Investor" means MMA Opportunity Center, LLC, a Delaware limited liability company. "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 determined and published by HUD or 4 LAI 595545v5 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 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 Commtmity 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 Apartments Project against the Housing Estate. "MHP Loan" means a residual receipts loan to the Partnership with a 55-year term at three percent simple interest in the amount of $7,000,000 as permanent financing for the Apartments 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 Housing Estate. "Opportunity HDC" Opportunity Center HDC Inc. a California nonprofit public benefit corporation and the sole general partner of the Partnership "Opportunity LP" or "Partnership" means Opportunity Center Associates L.P., a California limited partnership. "Party" means any party to this Agreement. The "Parties" shall be all parties to this Agreement. "Partnership" means Opportunity LP, and any successor owner of the Housing Estate during the term of this Apartments Regulatory Agreement. "Partnership Loan" means the construction and permanent loan in the principal amount of $750,000 to be made to Opportunity LP by the City for housing development costs. "Partnership Note" means the promissory note in the principal amount of $750,000 executed by Opportunity LP evidencing the Partnership Loan. "Project" means the all the Improvements including the Apartments Project and the Service Center, as constructed on the Land. "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 5 LAI 595545v5 utility allowance for the Units as set by the Housing Authority under the Section 8 program regulations. . ’ "Rented Area" (or "Lease of NSSS Space") means the lease of about 1,870 square feet of ground floor space within Condominium Unit 1 between Opportunity LP as lessor, CWG as lessee and InnVision as the initial sub-lessee for one dollar per year, which space is to be used to provide supportive services for the Tenants of 32 Restricted Units and the public in compliance with the MHP Regulatory Agreement .... "Restricted Unit(s)" means any or all of the 88- apartment Units that are subject to the use, occupancy and rent restrictions of this Agreement. "Section 8" me~s 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 pursuant to a Section 8 Housing Assistance Program contract, or directly pursuant to tenant-based Section 8 vouchers or certificates. "Section 8 Assistance Program" means a program funded by HUD that provides rental assistance on behalf of 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. "Service Center" means approximately 6,700 square feet of total interior and exterior space in the Project to be used for the operation of the service center pursuant to the Service Center Regulatory Agreement, including (1) the approximately 3,504 square feet ground floor space in the Project owned by CWG, which is composed of Condominium Units 2 and 3 and CWG’s undivided, one-seventh interest in the Common Area, as shown in the Condominium Plan; (2) the Rented Area which is approximately 1,870 square feet of ground floor space owned by the Partnership, constructed with funding from State HCD under its Non-residential Supportive Services Space (NSSS) program and leased to CWG at a rent of $1 per year; (3) spaces allocated to CWG’s use pursuant to the provisions of the CC&Rs, including specifically the 1,304 square foot covered Outdoor front courtyard; (4) six parking spaces in the underground garage; and (5) access easements to the building and its parking. "Service Center Regulatory Agreement" means the "Loan and Regulatory Agreement and Declaration of Restrictive Covenants for the Opportunity Center of the Mid-Peninsula - A Service Center" between the City and CWG. "Service Center Loan" means the construction and permanent loan in the principal amount of $1,280;000 to be made to CWG by City to be allocated to CWG’s development costs of the Service Center. 6 LA1 595545v5 "Site Plans". means the final site plans for the Project, and conditions of approval for Architectural Review (application file number 02-ARB-133), as approved by Resolution No. 8278 of the City Council on March 3, 2003, as may be subsequently modified with the approval of the City’s Director of Planning and Community Development. "State HCD" means the California Department of Housing and Community Development. "Tax Credit Regulations" means the laws, statutes, rules, regulations, notices and memoranda issued pursuant to the United States low-income housing credit (Section 42 of the Internal Revenue Code). "TCAC" mean~ 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 Housing Estate to secure compliance by Opportunity LP with the Tax Credit Regulations. "Unit or Units" means one of the 89’apartment units in the Apartments Project. "Tenants" (individually, "Tenant") means the occupants of the Units. "Very Low-Income Household" means a household with gross income that does not exceed 50% of Median Income and which is otherwise a qualified Tenant under the MHP Program Regulations. "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 Housing Estate shall be used solely for the construction, operation and maintenance of 89-Units of multifamily rental housing with 88-Units subject to the affordability covenants of this Apartments Regulatory Agreement (the "Restricted Units") and with up to 50% of the Restricted Units occupied as transitional housing, but in no event may any of the Restricted Units be occupied on a transient basis as defined in the Tax Credit Regulations. Every Tenant of a Restricted Unit will initially occupy the Unit pursuant to a lease having a term of at least six months. At all times during the term of this Apartments Regulatory Agreement,. unless subsequently revised in a written amendment approved by the City, at least twenty (20) of the Units shall be made available to Extremely Low-Income Households with incomes at or below twenty percent (20%) of AMI, at least fifteen (15) 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 thirty,one (31) of the Units shall be made available to Extremely-Low Income 7 LAI 595545v5 Households with incomes at or below thirty-five percent (35%) of AMI, and no more than twenty-two (22) of the Units shall be made available to Very-Low Income Households with into,m, es at or below fitty percent (50%) of AMI at affordable rents as described herein. Developer has secured a conditional commitment for a 10-year contract for project-based Section 8 rental assistance for a maximum of twenty-two (22) units. Developer may place households that qualify for the Section 8 assistance in any of the Restricted Units. Without derogating the importance of compliance by Developer with the other provisions of this Apartments Regulatory Agreement, compliance by Developer with the provisions of this Article 2 is of particular importance to City and is one of the principal reasons for which City is willing to make the P ~a~ership Loan to Developer and the Service Center Loan to CWG. 2.1.1 Extremely Low-Income Units: At all times during the term of this Apartments Regulatory Agreement: (i) Sixty-six (66) Units, shall be rented and occupied by, or if vacant, made available for rental and occupancy by, Extremely Low-Income Households, 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 fifty-one (51) single-room occupancy units, eleven (11) one-bedroom units, and four (4) two-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, provided that the same proportions of each unit type are maintained at each of the three Extremely Low-Income levels. (iv) Eleven (11) of the Restricted Units at 20% of AMI rents, seven (7) of the Res~cted Units at the 25% of AMI rents and fourteen (14) of the Restricted Units at 35% of AMI rents shall be rented and occupied by, or if vacant, made available for rental and occupancy by, single persons and households that prior to moving into the Unit were homeless or at-risk of homelessness with a disability, as those terms are defined in the MHP Regulations. 2.1.2 Very Low-Income Units: At all times during the term of this Apartments Regulatory Agreement: (i) Twenty,two (22) Units, shall be rented and occupied by, or if vacant, made available for rental and occupancy by, Very Low-Income Households, as certified according to Section 5.1 immediately prior to each Tenant’s initial occupancy and annually thereafter. 8 LAI 595545v5 (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 nineteen (19) single-room occupancy units, one (1) one-bedroom unit and two (2) two-bedroom units asthe required Very Low-Income 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, provided that the same proportions of each unit type are maintained. 2.1.3 Manager’s Unit: The remaining one (1) Unit is not 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 and procedures. 2.3 Noncompliance ............... A failure by Developer to maintain the rent affordability and occupancy restrictions required by this Apartments Regulatory Agreement will constitute a default of this Apartments Regulatory Agreement subject to the notice and cure provisions of Section 9.10. The Apartments 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 Apartments Regulatory Agreement. 2.4 Lease Provisions Developer shall include in the leases or rental agreements for 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 fact material to the Tenant’s qualification for occupancy. Each lease or rental agreement shall provide that the Tenant is subject to the requirement for the execution of an annual income certification in accordance with Section 5.1 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 Code, as amended, does not 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 9 LA1 595545v5 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. Applicability of MHP Regulations and MHP Regulator~ 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 Apartments 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 Apartments Regulatory Agreement that are in addition to the MHP Regulatory Agreement. ARTICLE 3 - INTENTIONALLY OMITTED ARTICLE 4 - COVENANTS AND CONDITIONS 4.1 General In consideration for receiving the Partnership Loan from City, Opportunity LP shall construct, or cause to be constructed, the Improvements upon the Land as described in the Site Plans. 4.2 Nontransient Residential Use None of the Units shall be operated as transient housing; provided, 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 six months. 4.3 Insurance Developer, at its sole cost and expense, shall obtain and maintain during the term of this Apartments 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 Apartments Project, or Developer’s performance or non-performance under this Apartments Regulatory Agreement. Modifications of any insurance requirements set forth in Exhibit B shall 10 LAI 595545v5 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. 4.4 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 Housing Estate;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 fight 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. 4.5 Costs of Operation and Maintenance The Developer will be responsible for all costs of operating and maintaining the Housing Estate, including but not limited to taxes, insurance and utilities. Developer shall maintain the Housing Estate, and in particular the Restricted Units in good repair and working order, and in a manner consistent with the housing quality standards set forth in Section 882.109 (24 CFR Part. 882 of the federal Section 8 Assistance Program regulations), and all applicable City ordinances. 4.6 Property Inspections The City, or its authorized representatives, shall have the right to make periodic on-site inspections of the Apartments Project and the Units during working hours upon reasonable notice to Developer. 4.7 Budgets The Developer shall submit a copy of the Apartment 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. 4.8 Replacement Reserves At all times following repayment of the Bond Loan, the Developer shall be required to maintain replacement reserves satisfactory to the City (provided, however, that any replacement reserve requirements satisfactory to both MHP and LP Investor will be deemed satisfactory to City). 4.9 Management 11 LA1 595545v5 The Developer will be required to obtain the approval of the City, not to be unreasonably withheld, to the property manager of the Apartments Project and the identity of any replacement gene,ral parmer for Oppommity HDC. 4.10 Nondiscrimination With the exception of Restricted Units that are subject to a HAP Contract, 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 persons on account of race, color, creed, religion, age, familial status, sex, sexual orientation, marital status, national origin, ancestry, handicap, source of income or any other arbitrary discrimination based on personal characteristics, in the l~asing, 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 ........ 4.11 Efforts to Seek Section 8 Housing Assistance Payment Contracts As a continuing obligation during the term of this Apartments Regulatory Agreement, Developer shall, in good faith, undertake all actions as required and necessary to seek to obtain HAP Contracts for project-based Section 8 rental assistance as may be made available from HUD or from the Housing Authority from time to time. Developer shall seek the longest HAP Contract term available and shall seek such contract assistance for all of the eighty-eight (88) Restricted Units. Developer shall apply for renewal of the initial Section 8 contract covering 22- Units if renewal is available from HUD and shall make good faith efforts to renew any other Section 8 contracts subsequently obtained. In the event that any such HAP Contract is obtained and then later terminated by HUD for all, or a portion of, the Restricted Units, Developer shall continue to rent to all Tenants residing in the affected Restricted Units under the terms of any replacement or successor rental assistance program provided by HUD or the Housing Authority to the Tenants. 4.12 Selection Criteria for Applicants for Tenancy with Section 8 Assistance 4.12.1 Developer agrees to accept Section 8 Assisted Households as Tenants on the 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. 4.12.2 City acknowledges that Developer is obligated to administer the initial HAP Contract for the 22-Units in compliance with applicable federal and Housing Authority 12 LA1 595545v5 regulations and procedures; including regulations that require that Tenants to be selected from a waiting list maintained by the Housing Authority. 4.13 Other Regulatory Agreements This Apartments 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 HOME Program on customary terms as approved by the City. Compliance with the TCAC, MHP and/or Bond Regulatory Agreements shall be deemed compliance with this Apartments Regulatory Agreement to the extent the TCAC, MHp and/or Bond Regulatory Agreement is more restrictive than this Apartments Regulatory Agreement. In case of a direct conflict between this Apartments 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 Intemal 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 Apartments Regulatory Agreement. ARTICLE 5 - INCOME CERTIFICATION AND REPORTING ¯ 5.1 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 Low-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. 5.2 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 to document compliance with the use and occupancy restrictions and other requirements of this Apartments 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 Apartments Project or any Restricted Unit and Developer shall 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 California Debt Limit Allocation LA1 595545v5 13 Committee, the California Tax Credit Allocation Committee and the Internal Revenue Service, as may be requested by the City. 5.3 Records Developer shall maintain complete, accurate and current records pertaining to the Apartments 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 upon reasonable notice. All Tenants lists, applications and waiting lists relating to the Apartments Project shall at all times be kept separate and identifiable from any other business of Developer and shall be maintained as required by the City, in a reasonable condition for proper audit and subject to examination by representatives of the City. 5.4 Financial Audits Developer shall provide City, during the term of this Apartments Regulatory Agreement, with copies of audited financial statements of Developer, including any management letter comments on the adequacy of internal or operational controls, within one hundred fifty (150) days of the close of each fiscal year of the Opportunity LP. City reserves the right, during the term of this Apartments 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 Apartments Project. 5.5 Assignment or Transfer Except for (a) leases with the Tenants in the ordinary course of business, (b) lease of the Rented Area (c) 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 LP Investor, or (d) the execution or exercise of an option or right of first refusal to acquire the Housing Estate by the Housing Authority, or by CWG, or by an affiliate of either of them, Developer shall not cause or permit any voluntary transfer, assignment or encumbrance of its interest in the Land, or lease (other than the lease of the Rented Area to CWG) or permit a sublease of all or any part of its interest in the Land without first obtaining City’s written consent, and Developer shall not cause or permit any voluntary transfer, assignment or encumbrance of its interest in the Housing Estate or lease or permit a sublease of all orany part of the Housing Estate 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 Apartments Regulatory Agreement. No consent to any assignment, encumbrance or lease shall constitute a consent to any subsequent assignment, encumbrance or lease, or a waiver of any of the City’s rights under this Apartments Regulatory Agreement. ARTICLE 6 - OPERATING DEFICIT RESERVE FUNDS 6.1 Funding of Operating Deficit Reserve Funds 6.1.1 Concurrently with the Bond Loan Closing, a construction loan of at least $1,900,000 will be made to the Partnership by CWG (the "Sponsor Loan") at zero percent 14 LAI 595545v5 interest. Partnership shall utilize equity contributions received-from the LP Investor to repay in full the Sponsor Loan beginning with a scheduled payment of One Hundred Thousand Dollars ($100,000) at funding of the MHP Loan, followed by five annual payments of approximately $100,000 each and a final payment of at least $1,400,000. The Sponsor Loan repayments will be deposited by CWG and maintained in a segregated, interest bearing reserve account (the "Sponsor Rent Reserve Account") in CWG’s name at a financial institution reasonably satisfactory to City (an "Account Institution"), and the funds held in the Sponsor Rent Reserve Account will be used only for purposes permitted in this Article 6i ¯6.1.2 As further described in Section 9 of the Partnership Note, Opportunity LP agrees to make a one-time deposit, up to a maximum of five hundred thousand dollars ($500,000), to establish and fund an operating deficit reserve to be held in the name of Opportunity LP in a segregated, interest-bearing account at an Account Institution(the "Partnership Rent Reserve Account") equal to the amount, if any, by which the final amount of the sources of funds available to Opportunity LP for development and construction of the Apartments Project exceed the final audited total development costs of the Apartments Project. The funds held in the Sponsor Rent Reserve Account will be used only for purposes permitted in this Article 6. 6.2 Purposes and Uses of Partnership and Sponsor Rent Reserve Accounts The primary purpose of the Partnership and Sponsor Rent Reserve Accounts is to provide a source of funds in the event that the gross rent revenues of the Restricted Units are not sufficient to pay the annual operating costs and other allowed payments as described in the Partnership Note. A secondary purpose of the Partnership and Sponsor Rent Reserve Accounts is to provide a further source of operating subsidies for the Restricted Units in the event of a termination of the Section 8 Housing Assistance, to allow the Partnership to maintain the rents charged to former Section 8 Assisted Households and other Tenants at levels sufficiently low so that these households could afford to continue to live in the Restricted Units. CWG and the Partnership shall not have the right to use funds in the Partnership and Sponsor Rent Reserve Accounts for any other purpose without the prior written consent of the City, which the City may grant or deny in its sole discretion. Opportunity LP shall utilize all amounts in the Partnership Rent Reserve Account in full prior to making withdrawals from the Sponsor Rent Reserve Account. 6.3 Partnership Maintenance of Sponsor Rent Reserve Account and Transfers of Funds to Partnership will not withdraw any funds from the Sponsor Rent Reserve Account except for uses as expressly permitted by this Article 6. Annually, or more frequently if necessary, providing that any separate Partnership Rent Reserve has been fully disbursed, and/or to the extent the funds disbursed by the Partnership from its Partnership Rent Reserve are not sufficient, CWG will make payments to the Partnership from the Sponsor Rent Reserve Account in the amounts necessary to fund the operating losses of the Reatricted Units. CWG will make such payments from the Sponsor Rent Reserve Account (to the extent of funds in the Sponsor Rent Reserve Account) for any year in which the Restricted Units are not sufficient generating gross revenue (including any Section 8 Assistance payments) to pay the expenses of operating 15 LA1 595545v5 the Apartments Project (including debt service and other required expenses as identified in the Partnership Note). City As Third Party Beneficiary CWG and Partnership shall enter into an Operating Deficit Account Funding Agreement consistent with the provisions of this Article 6 and otherwise satisfactory to City in its sole discretion, which agreement shall provide, among other things, that it may not be modified without the consent of the City, and that City is a third party beneficiary of the provisions thereof, with the fight to enforce the performance thereof, and such agreements or other instruments as are necessary to carry out the intentions of the parties set forth in this Article 6. 6.5 Reporting Requirements Within one hundred twenty (120) days after the conclusion of each calendar year (and within ten (10) days after request by City at any other time, from time to time), CWG and Partnership will provide to City copies of records of all deposits and withdrawals from the Partnership and Sponsor Rent Reserve Accounts. If requested by the City, CWG and Partnership will cause each Account Institution to provide the City with duplicate copies of monthly or other periodic statements. CWG, Partnership, and Opportunity HDC shall permit access to its books, records and accounts during normal business hours upon reasonable notice to representatives and employees of the City and HUD for the purpose of evaluating and monitoring compliance with the provisions of this Article 6. ARTICLE 7 , 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: 7.1 Partnership makes a representation in this Agreement which shall prove to have been false in any material respect when made; or 7.2 Partnership shall default in the payment, when due, of any principal or interest under the Partnership Note or any other sums payable by Partnership under this Agreement; or 7.3 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 7.4 Partnership shall apply for or consent to the appointment of a receiver, trustee, or liquidator, or is unable, or a~its in ~ting its inability to pay its debts as they fall due, or makes a general assi~ent for the benefit of its creditors, or is adjudicated a bankrupt or insolvent, or files a voluntary petition in bankruptcy; or 16 LAI 595545v5 7,5 Partnership is subjected tothe 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 7.6 " Partnership falls to comply with the covenants, terms and conditions of this Agreement, including, without limitation, the failure of Parmership 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, butin no event beyond 90 days after notice); or 7.7 Except as expressly otherwise provided in Section 5,5 and in the Partnership Note, Partnership causes or permits a sale, voluntary transfer, assignment or encumbrance of its ownership interest in the Apartments Project, 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 subsequent assignment, encumbrance or lease, or a waiver of any of the City’s rights under this Agreement. ARTICLE 8 - NOTICES All notices, consents, communications or transmittals required by this Apartments Regulatory Agreement shall be made, in writing, and shall be communicated by the United States mail, certified, return receipt requested or by express delivery with a delivery receipt, and shall be deemed given as of the date shown on the delivery receipt as the date of delivery or the date on which delivery was refused, and shall be addressed to the following addresses, or such other address as either party may designate, from time to time, by written notice sent to the other party in like manner: To City:City of Palo Alto P. O. Box 10250 Palo Alto, CA 94303 Attn.: City Clerk Copy to:Director of Planning & Community Environment City of Palo Alto P. O. Box 10250 Palo Alto, CA 94303 To Developer:Opportunity Center Associates L.P. c/o Housing Authority of the County of Santa Clara 505 West Julian Street San Jose, CA 95110-2300 Attn: General Partner 17 LAI 595545v5 Copy to LP Investor:c/o MMA Financial TC Corp. 101 Arch Street, 13th Floor Boston, MA 02110 Attn: Asset Management Fax: 617-439-9978 ARTICLE 9 - MISCELLANEOUS PROVISIONS 9.1 Nothing contained in this Apartments 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 Apartments 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. 9.2 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 Apartments Regulatory Agreement may be expressly waived by the City in writing, but no waiver by the City of any requirement of this Apartments Regulatory Agreement shall, or shall be deemed to, extend to or affect any other provision of this Apartments Regulatory Agreement. 9.3 Developer lacks any authority or power to pledge the credit of City or incur any obligation in the name of City. This Apartments 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. 9.4 Any amendment to this Apartments 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 Apartments Regulatory Agreement, and confer any consents or approvals that may be provided by the City. 9.5 The covenants, agreements, terms, and conditions of this Apartments Regulatory Agreement shall inure to and be binding on the successors and assigns of the parties. Any provision of this Apartments 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 Apartments Regulatory Agreement shall be determined by a court of competent jurisdiction to be invalid, 18 LA1 595545v5 illegal, void, or unenforceable in any respect, the validity of all other provisions herein shall remain in full force and effect.. 9.6 This Apartments 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 Apartments Regulatory Agreement and any addenda, appendices, attachments, and schedules which may, from time to time, be referred to in any duly executed amendment hereto are by such reference incorporated in this Apartments Regulatory Agreement and shall be deemed to be part hereof. This Apartments 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 instmment~ The paragraph headings are not a part of this Apartments Regulatory Agreement and shall have no effect upon the construction or interpretation of any part of this Apartments Regulatory Agreement. 9.7 In the event that suit is brought by either party, ~e 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 Apartments Regulatory Agreement or arising out of this Apartments RegulatOry Agreement may recover its reasonable costs and attorneys’ fees expended in connection with such an action from the other party. 9.8 The provisions of this Apartments Regulatory Agreement shall apply to the Housing Estate for the entire term hereof even if the Partnership Loan is paid in full prior to the end of said term. This Apartments 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 ApartmentsRegulatory Agreement shall apply to the Housing Estate for its entire term, and in consideration of this provision, and would not have done so otherwise. 9.9 The City and Developer hereby declare their express intent that the covenants and restrictions set forth in this Apartments Regulatory Agreement shall run with the land, the interest of Developer under the Housing Estate, and shall bind all successors in interest to the Land and/or the Housing Estate, provided, however, that on the expiration of the term of this Apartments 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 Housing Estate or any portion thereof shall be held conclusively to have been executed, delivered and accepted subject to such covenants and restrictions, regardless of whether such covenants or restrictions are set forth in such contract, deed or other instrument, unless the City expressly releases such conveyed portion of the Land and/or Housing Estate from the requirements of this Apartments Regulatory Agreement. 9.10 If Developer fails to perform any obligation under this Apartments Regulatory Agreement, and fails to cure the default within the time periods set forth in Article 7, the City 19 LA1 595545v5 shall have the right to enforce this Apartments 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. 9.11 The rights of City under this Apartments Regulatory Agreement may be made subject to one or more subordination agreements between lenders with security interests in the Housing Estate 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 terminated 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. 9.12 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 Apartments Regulatory Agreement. ARTICLE 10 - TERM AND CITY OPTION TO PURCHASE 10.1 Term. The City and Developer shall cause this Apartments 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 Apartments Regulatory Agreement shall commence on the date of its recordation and shall remain in full force and effect for a term of approximately 55-years 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. 10.2 City Option to Purchase. Developer hereby grants City an option to purchase and acquire the LP Investor’s ownership interest in the Housing Estate at the end of the 15-year compliance period pursuant to the Tax Credit Regulations on the same terms, price and conditions that are made available to CWG and the Housing Authority; provided, however, the option to purchase in favor of the City will be subordinate to the options to purchase in favor of CWG and the Housing Authority. This City option shall be incorporated into the LP Investor’s agreement with CWG and the Housing Authority. Developer shall promptly notify City in writing upon the occurrence of any and all of the following: (i) CWG or the Housing Authority exercises its option to purchase; (ii) any waiver by CWG or Housing Authority of its option right to purchase; and (iii) the expiration or other termination of the option right to purchase of CWG and/or the Housing Authority. City shall have four (4) months from the date on City receives written notice of the waiver, expiration or other termination of the option rights of CWG and the Housing Authority to notify Opportunity LP of its election and to exercise, in its sole discretion, its option to purchase, and six (6) additional months to close the transaction to purchase the Housing Estate. City may, in its sole discretion, designate an agent to exercise the option on its behalf or assign its option to any private, governmental or nonprofit entity, subject to the requirements of other applicable regulatory agreements and the terms of any loans secured by the Housing Estate. // // // 20 LA1 595545v5 IN WITNESS WHEREOF, the parties heretb have executed this Regulatory Agreement and Declaration of Restrictive Covenants for Opportunity Center Apartments as of the day and year first above written. ATTEST:CITY OF PALO ALTO, a chartered California municipal corporation City Clerk By: Mayor APPROVED AS TO FORM: OPPORTUNITY CENTER ASSOCIATES L.P., a California limited partnership City Attorney By: APPROVED: By:Bv: City Manager Director of Planning and Community Environment Director of Administrative Services ...... Insurance Review By: Opportunity Center HDC, Inc., a California nonprofit public benefit corporation, Its General Partner / Title: b! ~C~ ~]~’ . Title~ Taxpayer Identification No. ATTACHMENTS: Exhibit A: Exhibit B: Exhibit C: Legal Description of Housing Estate Insurance Requirements Restricted Units: Rents, Income Limit and Occupancy Requirements 21 LA1 595545v5 ACKNOWLEDGMENTS STATE OF CALIFORNIA ) Onthe t~’~’S day o~, in the year 2OO4, beforem~,~__i~ L~-~-,~ personally appeared ..... ~% ~-%’~3_ ~-. ~-~- +~[ a(~ , personally ~o~ to me or proved to me on the basis of satisfacto~ ~vid~nce to be the person(s) whose n~e(s) is/~e subscribed to the within ins~m~m ~d acknowledged to me that he/she/they executed ~e same in his/her/their authorized capacity(ies), ~d that by his~efftheir si~ature(s) on the ins~ment the person(s), or the entity upon [behalf o~ w~ch ~e person(s) acted, execmed the instrument. Witness my hand and official seal. (~0tary Public STATE OF CALIFO~A COUNTY OF ) ) ) On the ~ day of., in the year 2004, before me,, personally appeared ., personally known to me or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon [behalf of] wMch the person(s) acted, executed the instrument. Wimess my hand and official seal. Notary Public LA1 595545v5 22 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT Coun ~(i^personally ~~ersonally know~o me ~.~~ ,~,evidence ~, ~~ to be the person(~ whose name~)~e,~subscribed to the within instrument and ,~~ Notary ~u~Ic. Calllomla ~~cknowledged ~o me tha~e/t~ executed ~~ ~ MyComm.~mez~u~O,2OOTe capacity~,, and t~ ~y ~/~t/t~ir ~~ ~ .....~signature’~on the instrument the person~, ~,.the entity upon behalf of which the perso~ ,.~acted, executed the instrument. d a~ffi~., ’~;Place Nota~ Seal Above ¯,.;:~, OPTIONAL ~o e rh ugh th info mation below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Title or Type of~ocu~ent: Document Dat~ ~/~. Signer(s) Other Than Nam~ove: Signer’s Name: ~, ~orporate Officer- Title(s):,(h Top of thumb here .~:~ Partner- ~ Limited _--.’ General ’:*:~:,:::’.~i ,Li~~ Attorney in Fact <....~_ Trustee " ~:~ Guardian orConservator Iii ~ Other: :,:Signer Is Representing: © 1999 National Notary Association * 9350 De Soto Ave., P.O. Box 2402 ¯ Chalsworth, CA 91313-2402, www.nationalnotary.org Prod. No. 5907 Reorder. Call Toll.Free 1-800-876-6827 EXHIBIT A LEGAL DESCRIPTION OF THE HOUSING ESTATE LA1 595545v5 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. COMPREHENSWE 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 ea. 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 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. LAI 595545v5 EXHIBIT C Restricted Units: Rents, Income Limit and Occupancy Requirements Opportunity Center Apartments - Unit Mix & Occupancy Initial Rents & Income Limits for 2004 Number of Units, Monthly Rents and Income Limits at Move-In2 Rent Occupancy Studio One Two Total Units FormulaI Restrictions Bedroom Bedrooms & (Total SH Units)4 20% of AMI 25% of AMI 35% of AMI Section 8 or 45% of AMI3 None Notes: Extremely low income [See Note 4 for 32 SH Units] Very low income 16 at $369 $14,860 for 1 11 at $461 $18,575 for 1 3 at $395 $16,980 for 2 3 at $494 $21,225 for 1 at $475 $19,100 for 3 1 at $593 $23,875 for 3 20 (11) 15 (7)2 24 at $646 5 at $692 2 at $831 31 $26,005 for 1 $29,715 for 2 $33,425 for 3 (14) 2 at $1,234 $42,975 for 3 19 at $834 $33,435 for 1 1 at $1,100 $38,205 for 2 22 Resident Manager ---1 ....1 Total Units 70 13 6 89 1) AMI means the Area Median Income for Santa Clara County, which equals $105,500, as published in February 2004. Initial rents and income limits are as published by State HCD for 2004. 2) Studio units will be limited to one-person occupancy. The income limits shown assume a two-person family in a one-bedroom unit and a three-person household in a two- bedroom unit. 3) The 22 very low-income units will rent for the HUD approved Section 8 Fair Market Rent (FMR) or, if Section 8 becomes unavailable, at monthly rents that do not exceed 30% of 45% of AMI divided by 12 (the Section 8 rent is expected to be higher and is shown in the table). 4) SH Units are the 32 Restricted Units in the Apartments Project designated in the MHP Regulatory Agreement as "Supportive Housing Units" which requires that the Units be occupied by households that were homeless or at-risk of homelessness, and with at least one household member with a disability prior to occupying the Unit. Supportive services are required to be provided to these Tenants by MHP. LA1 595545v5 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 ATTACHMENT C SPACE ABOVE THIS LINE FOR RECORDER’S USE LOAN AND REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS FOR OPPORTUNITY CENTER OF THE MID- PENINSULA - A SERVICE CENTER THIS REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS FOR OPPORTUNITY CENTER OF THE MID-PENINSULA - A SERVICE CENTER ("Service Center Regulatory Agreement") made and entered into as of ,2004, by and between the CITY OF PALO ALTO, a chartered city organized and existing under the constitution and laws of the State of Califomia ("City"), and the COMMUNITY WORKING GROUP, INC., a California nonprofit public benefit corporation ("CWG"). WITNE S SETH: WHEREAS, pursuant to that certain Agreement To Fund Pre-Development, Site Acquisition and Pre-Construction Expenses for the Opportunity Center For the Mid-Peninsula, a Housing and Homeless Services Center among City, the Housing Authority of the County of Santa Clara ("Housing Authority") and CWG (together with Housing Authority, collectively "Sponsors") dated July 22, 2002 (the "Interim Agreement"), City provided an Interim Loan to the Sponsors of $1,280,000 in Community Development Block Grant ("CDBG") funds for purposes of site acquisition, relocation and limited pre-development costs and those funds have been substantially expended for CDBG eligible activities; WHEREAS, the City Council approved Planned Community Ordinance Number 4782 on March 3, 2003 allo~ng construction of the Opportunity Center, which includes 89-units of rental housing, common areas and open space, a two-level underground parking garage and an approximately 6,700 square foot homeless services center (the "Project"); WHEREAS, the Sponsors acquired title to the three parcels currently known as 33, 39 and 45 Encina Avenue (the "Land") that together comprise the Project site and have obtained commitments of construction and permanent financing sufficient for construction and operation of the Project; ..... LAI 595547v45 WHEREAS, the Project as a whole, and the homeless services center in particular, will meet several major 2000- 2005 Consolidated Plan goals and funding priorities for the CDBG prog,ram, specifically 1) providing permanent and transitional housing with on-site supportive services for the homeless, for households at-risk of homelessness, and for persons with disabilities~ special needs and extremely low incomes; 2) creating a day center for comprehensive homeless services; and 3) supporting the activities of non-profit organizations that provide supportive services to the homeless; WHEREAS, the development of the homeless services center in conjunction with the 89- unit housing project will implement City and Countywide homeless assistance strategies as stated in the Palo Alto Consolidated Plan and the Continuum of Care approach adopted by the Santa Clara County Collaborative on Housing and Homelessness of which the City is a member; WHEREAS, the acquisition of real property and the construction of public facilities for the homeless, are eligible activities under Section 570.201 (a) and (c) respectively of the CDBG regulations and the operation of the Service Center will meet the national objective of an activity benefiting low and moderate income persons by serving a limited clientele as described in Section 570.208 (a) (2) (A) of the CDBG program regulations; WHEREAS, the City is willing to make a new loan to CWG in the amount of $1,280,000 toward the Project development costs allocated to land for, and the development and construction of, the Service Center (the "Service Center Loan"), which loan would supersede and replace the Interim Loan; and WHEREAS, in consideration of the City’s making the Service Center Loan, CWG has agreed to observe and perform all of the terms and conditions set forth in this Service Center Regulatory Agreement, and has agreed that the Service Center will be subject to the terms and conditions set forth in this Service Center Regulatory Agreement for a term of 89 years commencing on the date on which this Service Center Regulatory Agreement is recorded in the Official Records of Santa Clara County, and in order to ensure that the Service Center would be used and operated in accordance with certain restrictions regarding operation and services provided during such period, the parties wish to enter into this Service Center Regulatory Agreement. NOW, THEREFORE, in consideration of the following covenants, agreements, terms and conditions, the parties hereto agree: ARTICLE 1 , DEFINITIONS. The following terms as used in this Agreement shall have the respective meanings assigned to them in this Article 1, unless the context clearly indicates otherwise: "Apartments Project" means the portion of the Project consisting of 89 units of rental housing and related functional areas to be constructed on the Land by the Partnership. "Apartments Regulatory Agreement" means the "Regulatory Agreement and Declaration of Restrictive Covenants for Opportunity Center Apartments" between the City and the Partnership. 2 LAI 595547v45 -? "Bond Loan" means.aS9,975,000 construction loan for the Project funded by tax-exempt bonds issued by the Housing Authority. "Bond Loan Closing" means the initial funding made pursuant to the Bond Loan. "Bond Regulatory Agreement" means a regulatory agreement, including by reference the restrictions stated in the staff report to the California Debt Limit Allocation Committee (CDLAC), which will be recorded against the Housing Estate at the construction loan closing and continue for a term of 55-years. "City" means the City of Palo Alto, California. "CDBG" means the federal Community Development Block Grant Program, of which the City is an entitlement grantee, under Title I of the Housing and Community Development Act of 1974, as amended, and the implementing federal regulations at 24 CFR Part 570. "Core Service Program" means the supportive services for single adults and families described in Section 2.1. "CWG" means the Community Working Group, Inc. a California 501 (c) (3) nonprofit public benefit corporation that is the owner of the Service Center Estate and whose board of directors nominate one member to the board of directors of the general partner of the Partnership. "Condominium Plan" means the condominium plan for the Land recorded in the Official Records of Santa Clara County on ,2004 in Book __., at Page "Condominium Unit" means a condominium unit shown on the Condominium Plan. "Fiscal Year" means a calendar year during the term of this 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 Agreement. "Housing Authority" means the Housing Authority of the County of Santa Clara, California. "Housing Estate" means the Condominium Unit number 1 owned by the Opportunity LP and its undivided interest in the common areas, and any other interest in the Land owned by Opportunity LP. "HUD" means the United States Department of Housing and Urban Development. "Improvements" means the buildings, structures and other improvements substantially as shown in the Site Plans to beconstmcted on the Land comprising the 89-unit rental apartment complex, the 6,700 square foot Service Center, the underground parking garage, and common areas to be known as Opportunity Center Apartments and the Opportunity Center of the Mid- 3 LA1 595547v45 Peninsula as approved, subject to conditions, by the City’s Director of Planning and Community Environment. "InnVision’, means InnVision: The Way Home,. a Califomia 501 (c) (3) nonprofit public benefit-corporation that will be the initial Service Center Manager under a management agreement with CWG. "Interim Agreement" means the Agreement Between the City of Palo Alto, The Housing Authority of the County of Santa Clara, and Community Working Group, Inc~ To Fund Pre- Development, Site Acquisition and Pre-Construction Expenses for the Opportunity Center For the Mid-Peninsula, a Housing and Homeless Services Center on Encina Avenue, Palo Alto, dated July 22, 2002. "Interim Loan" means the loan in the amount of $1,280,000, made to Sponsors by City pursuant to the Interim Agreement and evidenced by a Promissory Note dated July 22, 2002 executed by the Sponsors and secured by a Deed of Trust on portions of the Land recorded in the Official Records of Santa Clara County on November 13, 2002 as Instrument No. 16609907. "Land" means the real property currently known as 33, 39 and 45 Encina Avenue, Palo Alto, California that together comprise the Project site. "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 determined and 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 other income determinations that are 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 Apartments Project against the Housing Estate. "Opportunity LP" or "Partnership" means Opportunity Center Associates L.P., a California limited partnership. "Party" means any party to this Agreement. The "Parties" shall be all parties to this Agreement. "Partnership" means Opportunity LP, and any successor owner of the Housing Estate during the term of this Agreement. "Project" means all the Improvements, including the Apartments Project and the Service Center, as constructed on the Land 4 LA1 595547v45 "Rented Area"means the lease of about 1,870 square feet of ground floor space within Condominium Unit 1 between Opportunity LP as lessor, CWG as lessee and InnVision as the initial sub-lessee for one dollar per year, which space is to be used to provide supportive services for the Tenants of 32 Restricted Units and the public in compliance with the MHP Regulatory Agreement.~ "Restricted Unit(s)" means any or all of the 88- apartment Units that are subject to the use, occupancy and rent restrictions of the Apartments Regulatory Agreement. "Service Center" means approximately 6,700 square feet of total interior and exterior space in the Project to be used for the operation of the service center pursuant to this Service Center Regulatory Agreement, including (1) the approximately 3,504 square feet ground floor space in the Project owned by CWG, which is composed of Condominium Units 2 and3 and CWG’s undivided one-seventh interest in the Common Area, as shown in the Condominium Plan; (2) the Rented Area which is approximately 1,870 square feet of ground floor space owned by the Partnership, constructed with funding from State HCD under its Non-residential Supportive Services Space (NSSS) program and leased to CWG at a rent of $1 per year; (3) spaces allocated to CWG’s use pursuant to the provisions of the CC&Rs, including specifically the 1,304 square foot covered outdoor front courtyard; (4) six parking spaces in the underground garage; and (5) access easements to the building and its parking. "Service Center Estate" means the collective interests in the Service Center (whether fee, leasehold, easement, license, or otherwise) held by CWG. "Service Center Loan" means the loan in the principal amount of $1,280,000 provided by City to CWG under this Agreement concurrently with the execution of this Service Center Regulatory Agreement. "Service Center Deed of Trust" has the meaning set forth in Section 3.3. "Service Center Manager" an experienced and qualified organization specializing in the provision of homeless services selected by CWG to act as manager, service provider and services coordinator of the Service Center under a management agreement with CWG, subject to the approval of the Partnership. "Service Center Regulatory Agreement" means this "Loan and Regulatory Agreement and Declaration of Restrictive Covenants for Opportunity Center of the Mid-Peninsula- a Service Center". "Site Plans" means the final site plans for the Project, and conditions of approval for Architectural Review (application file number 02-ARB-133), as approved by Resolution No. 8278 of the City Council on March 3, 2003, as may be subsequently modified by the City’s Director of Planning and Community Development. "Sponsors" means, collectively, CWG and Housing Authorityi "State HCD" means the California Department of Housing and Community Development. 5 LAI 595547v45 "Tenants" (individually, "Tenant") means the occupants of the Restricted Units. "Very Low-Income Household" means.a household with gross income that does not exee’~d 50% of Median Income and which is otherwise a qualified Tenant under the MHP Program Regulations. ARTICLE 2 - USE,AND BENEFICIARY COVENANTS 2.1 Eligible Uses and Core Service Program At all times during the term of this Agreement the Service Center shall be operated as a facility for the provision of comprehensive and coordinated supportive services for homeless adults and families and for Very Low-Income Households that are considered at-risk of becoming homeless with two physically separated program components: a center for homeless adults that includes a drop-in day program, and a center for families with children (collectively, the "Core Service Program"). Provision of the Core Service Program is the primary mission of the Service Center and the purpose for its development. CWG may revise the service programs from time to time without approval of the City, including adding or removing specific services and still be in compliance with this Agreement provided that the Core Service Program continues to be provided as described herein. Typical services to be offered for adults will include, but are not limited to, a drop-in day program including personal hygiene facilities, lockers, message center, hot breakfasts, snacks, clothing and information and referral. More intensive services will be ’ made available to individuals seeking to stabilize their lives or to secure permanent housing; examples of these services include case management, job skills training, money management, screening and referral for medical, mental health and substance abuse problems and treatment. The family and children’s center will offer a similar level and variety of supportive services, but the services will be adapted as appropriate to the needs of children and parents. 2.2 Beneficiaries’ of Service Center Programs All supportive services shall be made available to the general public, but the primary geographical service area shall be the population of the mid-peninsul~ which is defined as southern San Mateo County and northern Santa Clara County~ At least fifty-one percent (51%) of the clients served shall be homeless, have a disability or be at-risk of homelessness as defined by HUD, or be residents of the Housing Units. The remaining clients shall be Very Low-Income adults and family households. 2.3 Supportive Service for Tenants of the Restricted Units Services shall be provided on-site to the greatest extent possible (or, if services cannot be provided on-site, off-site services shall coordinated by the Service Manager) to Tenants of the Restricted Units as required by the applicable State and federal regulatory agreements that apply to all or a portion of the Restricted Units. Specifically in accordance with a supportive services agreement to be entered into prior to recording of the MHP Regulatory Agreement, among the 6 LAI 595547v45 Partnership, CWG and Service Manager, supportive services shall be provided by the Service Center for the Tenants of the 32-units designated as permanent supportive housing under the ~ Regulatory Agreement and the 6-units of supportive housing funded by HUD. The six.. supportive housing units funded by HUD may be included in the total 32 supportive housing units designated under the MHP Regulatory Agreement. Additionally, services required by the Bond Regulatory Agreement, including emergency supportive services and general educational classes, will be made available to Tenants of all Restricted Units for a period of no less than the first ten (10) years of operation. 2.4 Noncompliance Without derogating the importance of compliance by CWG with the other provisions of this Agreement, compliance by CWG with the provisions of this Article 2 is of particular importance to City and is one of the principal reasons for which City is willing to make the Service Center Loan to CWG. A failure by CWG to operate the Service Center for the purposes described in this Article 2, including but not limited to the Core Service Program, will constitute a default of this Agreement. ARTICLE 3 - LOAN OF FUNDS 3.1 Replacement of Interim Loan with Service Center Loan; Purpose of City Loan; Loan Terms and Provisions 3.1.1 Pursuant to the terms and conditions of the Interim Agreement, City provided the Interim Loan to Sponsors in the sum of One Million Two Hundred and Eighty Thousand and 00/100 Dollars ($1,280,000.00) in CDBG funds for purposes such as site acquisition, relocation and limited pre-development costs. CWG represents to City that the entire balance of the Interim Loan funds has been expended for CDBG eligible activities in compliance with the terms of the Interim Agreement and agrees that as of the effective date of this Agreement, no funds remain undisbursed by City. 3.1.2 Pursuant to Section 5 (Conversion to Long-Term Financing) of the Interim Agreement, Sponsors have requested that, upon repayment of the Interim Loan, City deem the Interim Loan paid off and reconvey the Deed of Trust that secured the Interim Loan, and make a new loan to CWG (the "Service Center Loan") in the principal amount of $1,280,000, to be secured by a Deed of Trust (the "Service Center Deed of Trust") on the Service Center. The Service Center Loan shall be Used by CWG for the purpose of funding a portion of CWG’s allocated share of the development costs of the Service Center in accordance with the terms, covenants, provisions and conditions of this Agreement. CWG represents to City that the estimated costs, and sources and uses of funds, for the total development costs of the Service Center are as shown on Exhibit D. CWG agrees to contribute funds from other sources for the balance of the Service Center development costs and in the event that final costs of the Service Center exceed the estimated budget, CWG shall be responsible to pay all such excess costs without any further financial assistance from the City. 3.2 Promissory Note. The obligation of CWG to repay all amounts advanced by the City pursuant to this Agreement shall be evidenced by a promissory note ("Note") in 7 LAI 595547v45 substantially the form set forth in Exhibit E, payable to the City of Palo Alto, and executed by duly authorized officers or representatives of CWG. The Note will be due and payable in full on September 1, 2007;.]provided,. however, the maturity date of the Note will be extended, by City to the eighty-ninth (89l’~) anniversary of the date on which this Agreement is first recorded in the Official Recordsof Santa Clara County in the event that all of the following events have occurred prior to September 1, 2007: (a) the Improvements have been substantially completed and final certificates of occupancy have been issued for the housing portion of the Project and the Service Center; (b) CWG and the Partnership have entered into an Operating Deficit Funding Account Agreement consistent with the provisions of Article 6 of this Agreement and otherwise satisfactory to City in its sole discretion (a "Deficit Account Agreement"), which Deficit Account Agreement shall, among other things, provide that City is a third party beneficiary thereof, and that it may not be modified without the consent of the City; and (c) the Sponsor Rent Reserve Account has been established and funded in the amount and as otherwise provided in Article 6 of this Agreement. Notwithstanding the foregoing, if the conditions set forth in the preceding sentence in order for the maturity date of the Note to be extended have not been satisfied by September 1, 2007, and the City Manager of City determines that such delay is due to one or more "acts of God" or other causes beyond the control of CWG and the Partnership, City may extend the date by which such conditions must be satisfied for a reasonable period equal to the amount of excusable delay, not to exceed six months. 3.3 Deed of Trust. CWG shall execute a Deed of Trust (the "Service Center Deed of Trust") in substantially the form set forth in Exhibit F, in favor of the City as beneficiary, securing the obligations of CWG under this Agreement and the Note. The Service Center Deed of Trust shall be recorded in the Official Records of Santa Clara County against the Service Center Estate subject to no exceptions to title other than a lien for property taxes not yet due and payable, the Permitted Exceptions identified in the Note, and such non-monetary exceptions as do not materially adversely affect the use of the Land for the Project and have been approved in writing by the City. 3.4 Escrow 3.4.1 This transaction will be completed through an escrow with First American Title Guaranty Company ("Title Company"), 1737 North First Street, Suite 100, San Jose, California 95112 ("Escrow"). The parties to this Agreement will place all funds, documents and other information, together with appropriate written escrow instructions, into the Escrow in order to fulfill the terms of this Agreement. The Escrow shall not close until the Title Company is in a position to issue the policy of title insurance described in Section 3.5 below, and all of the requirements set forth in this Article 3 have been satisfied. 3.4.2 If the Bond Loan Closing and the recording of the parcel map have not both occurred on or before August 20, 2004, the City will have no further obligation to fund the Service Center Loan, and this Agreement will be of no fu~er force or effect. 3.5 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 8 LAI 595547v45 an amount not less than $1,280,000, and insuring City, as the holder of a third lien deed of trust subordinate to the first position lien of the Bond Loan deed of trust in the amount of $9,975;000 in fa, or of Union Bank of California and a second position lien in favor of the County of Santa Clara securing a construction and permanent loan in the amount of $1,000,000 on the Service Center Estate, against any title defects except those expressly approved in writing by the City. The policy will name the City as beneficiary and insure CWG’s right, title and interest in the Service Center Estate and the City’s lien thereon and, promptly after the close of escrow, an original of said policy shall be delivered to City. 3.6 Additional Conditions to Closing In addition, the close of Escrow shall not occur until all of the following conditions have occurred or occur concurrently: (a) Trust in escrow; CWG has executed and deposited the Note and the Service Center Deed of (b)CWG has executed and deposited this Agreement in escrow; (c)The parcel map merging the three existing legal parcels into one parcel, and the Condominium Plan and a Declaration of Covenants, Conditions and Restrictions for the Project satisfactory to City, have been recorded in the Official Records of Santa Clara County; (d) The Partnership has acquired title to the Housing Estate and CWG has acquired title to the Service Center Estate; (e) CWG shall have entered into construction or other agreements with the Partnership, pursuant to which the Partnership has agreed to construct the improvements required for the Service Center, on terms satisfactory to the City; (f) Title Company has recorded the Service Center Deed of Trust and this Agreement in the Official Records of Santa Clara County, and has issued the policy of title insurance described in Section 3.5 above; (g) CWG’has deposited at least $2,800,000 of its funds into escrow representing the remaining net balance due to the Partnership for CWG’s contribution for a portion of the development costs of the Service Center, equity on behalf of Opportunity HDC and funding of two separate construction loans to the Partnership; ............ (h) CWG has demonstrated to reasonable satisfaction of the City that there are sufficient funds for the construction of the Project, including the Service Center; and (i) All conditions to the initial fundings of the Bond Loan and all other loans, the proceeds of which are needed to fund construction of the Project, have been satisfied, and the Bond Loan and all such other loans have closed escrow, or will close escrow concurrently. 9 LA1 595547v45 3.7 City’s Beneficial Interest in Service Center 3.7.1 CWG will be the sole owner of the Service Center Estate, provided, however, that City and CWG will each hold a beneficial interest in the Service Center Estate, as provided herein. The City’s initial beneficial interest in the Service Center Estatewill be established as of the date on which the City performs the final inspection of the Service Center improvements by the City. The City’s beneficial interest in the Service Center Estate shall be based on the percentage that the principal amount of the Service Center Loan represents of the sum total of all development and construction costs of the Service Center, whether such costs are paid directly by CWG, or allocated to CWG by the Partnership from total Project costs. 3.7.2 The total development cost shall be determined based on the cost certification audit of the Project prepared for the Partnership after completion of construction. Total Service Center costs shall exclude any allocation of the Project’s developer fee, furniture, portable office equipment, and appliances, fixtures and built-in equipment, unless such improvements have a useful life of 10 years of more. Within 60 days of completion of the cost certification audit, CWG shall submit to City the completed statement in the format of the attached Exhibit G, together with Supporting documentation and CWG’s certification as to the final Service Center development and construction costs as defmed in this Agreement. In the event that CWG decides to sell or transfer ownership of the Service Center Estate without the prior consent of the City, or upon the occurrence of an Event of Default, the CWG Note will become due and payable. City will not unreasonably withhold consent to a transferee that agrees in writing to be bound by the terms and conditions of this Agreement and the Operating Deficit Account Funding Agreement referred to in Section 6.4, and demonstrates to the reasonable satisfaction of City that it is experienced in providing services to the homeless as required hereunder and capable of complying with the provisions of this Agreement and the Operating Deficit Account Funding Agreement. The amount due to City under the terms of the CWG Note shall be equal to the greater of the City’s beneficial interest in the Service Center Estate times the then current appraised fair market value of the Service Center Estate or the actual sales price. City may, at its election, have an appraisal prepared, in accordance with CDBG procedures, to establish the fair market value; CWG shall reimburse City for the cost of such appraisal. ARTICLE 4 TERM OF AG~EMENT The term of this Agreement shall commence on the date of its recordation in the Official Records of Santa Clara County and shall remain in full force and effect for 89 years thereafter, unless earlier terminated as provided herein. In the event CWG has fully complied with the terms of this Service Center Regulatory Agreement for the full term thereof, City shall forgive the obligation to repay the CWG Note, record a deed ofreconveyance to reconvey the CWG Deed of Trust and return the cancelled note to CWG, as more particularly described in the Service Center Note. 10 LAI 595547v45 ARTICLE 5 - COVENANTS AND CONDITIONS 5.1 Records and Reports CWG 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 documenting compliance with the use and beneficiary covenants and other requirements of this Agreement. CWG shall maintain on a current basis complete records, including books of original entry, source, documents supporting accounting transactions, service records, a general ledger, canceled checks, time sheets, and related documents and records to assure proper accounting of funds and performance of the terms of this Agreement. CWG shall furnish any and all information and reports that may be required by City and/or HUD in connection with this Agreement. CWG shall further permit access to its books, records and accounts by the representatives and employees of City and HUD during regular business hours, for the purpose of investigation or audit to ascertain compliance with all applicable laws, regulations, rules and orders and for the purpose of evaluating and monitoring CWG’s compliance with the provisions of this Agreement. CWG shall cause all such records to be retained by the Partnership and made available to City and HUD upon request for review or audit for a period of at least five (5) years following the expiration or termination of this Agreement. 5.2 Property Inspections The City, HUD or their authorized representatives, shall have the right to make periodic on-site inspections of the Service Center during working hours upon reasonable notice to CWG. 5.3 City Approval of Operating Budgets CWG shall submit a copy of the Service Center’s annual operating budget within 30 days of its adoption to the City. CWG shall be required to obtain the City’s approval, not to be unreasonably withheld, of the annual operating budget for the Service Center prior to its adoption, so long as the City notifies CWG at least 60 days prior to the commencement of a Fiscal Year that this requirement will apply for that Fiscal Year. 5.4 Operation and Management of Service Center ¯ CWG will be responsible for all costs of operating and maintaining the Service Center and Servi~ce Center Estate, including but not limited to taxes, insurance and utilities. CWG shall maintain the Service Center in good repair and working order, and in compliance all applicable City ordinances and building codes. City acknowledges that CWG intends to subcontract the operation and management of the Service Center. CWG is required to obtain the written approval of the City, not to be unreasonably withheld, to the operating management and service coordinator of the Service Center (the "Service Center Manager). The City hereby approves InnVision as the initial Service Center Manager. 11 LAI 595547v45 5.5 Services Funding Agreement and Cooperation to Seek Future Services Funding for Tenants- ’ Pursuant to services funding agreement to be entered into prior to recording of the MHP Regulatory Agreement between C~¢G, the Partnership and the Service Manager, CWG agrees to accept services funding from the Partnership and to provide services to the Tenants as required to meet the conditions of the other funding sources and regulatory agreements. CWG agrees cooperate with the Partnership to seek new funding, and to extend existing funding, for comprehensive supportive services for Tenants of all the Restricted Units throughout the term of this Agreement. 5.6 Financial Audits CWG shall provide City, during the term of this Agreement, with copies of audited financial statements of CWG, including any management letter comments on the adequacy of intemal or operational controls, within one hundred fifty (150) days after the close of each fiscal year of CWG. The audit covering the fiscal year in which the Service Center Loan is provided to CWG shah be conducted in accordance with OMB Circular A-133, as amended (implemented at 24 CFR Part 45). City reserves the right, during the term of this Agreement, to audit the records of CWG, including the financial records supporting the aforementioned financial statements and other records and documents pertaining to the operations of CWG including the operations of the Service Center. 5:7 Federal Assurances - CDBG Funds CWG shall comply with all applicable CDBG rules and regulations including the federal assurances as set forth in Exhibit C (for the purpose of which CWG shall be deemed a "Contractor". 5.8 Insurance CWG shall obtain and maintain during the term of this Agreement; at the sole cost and expense of CWG, insurance provided by resPonsible companies authorized to engage in the offering of insurance services in California in such amounts and against such risks as shall be satisfactory to City’s risk manager, including, without limitation, worker’s compensation, employer’s liability, commercial general liability, comprehensive automobile liability, personal injury and property damage insurance; asset forth in Exhibit B, as appropriate, insuring against all liability of CWG and its partners, directors, officers, employees, agents, and representatives arising out of or in connection with the acquisition and ownership of the Service Center Estate, the operation of the Service Center or CWG’s performance or nonperformance under this 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. CWG shall name the City as an additional insured on all policies of insurance required under the terms of other financing. 12 LA1 595547v45 5.9 Indemni _ty CWG agrees to protect, indemnify, defend and hold harmless City, its Council members, officers, agents and employees, from any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, caused by or arising out of CWG’s, its officers’, agents’, subcontractors’ or employees’ negligent acts, errors or omissions or willful misconduct, or conduct for which CWG may be strictly liable in the performance of or failure to perform its obligations under this Agreement. 5.9 Conflict of Interest CWG covenants that it shall comply with the provisions of 24 CFR 570.611, as amended, concerning conflicts of interest. Specifically, no person who is an employee, agent, consultant, officer, or official of CWG who exercises or has exercised any functions or responsibilities concerning the activities under this Agreement, or who is in a position to participate in a decision making process or gain inside information with regard to such activities, may obtain a personal or financial interest or benefit from such activity, or have an interest in any contract, subcontract, or agreement with .respect thereto, or the proceeds thereunder, either for him or herself or for those with whom he or she has family or business ties, during his or her tenure or for one year thereafter. CWG further covenants that it presently has no interest and shall not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the services hereunder. CWG also covenants that, in the performance of this Agreement, no subcontractor or person having such interest shall be employed by CWG. In addition, CWG certifies that no one who has or will have any financial interest under this Agreement is an officer or employee of City. 5.10 AssiRrmaent This Agreement shall not be assigned by CWG without the express prior written consent of the City, in its sole and absolute discretion; provided, however, City will not unreasonably withhold consent to a transferee that agrees in writing to be bound by the terms and conditions of this Agreement and the Operating Deficit Account Funding Agreement referred to in Section 6.4, and demonstrates to the reasonable satisfaction of City that it is experienced in providing services to the homeless as required hereunder and capable of complying with the provisions of this Agreement and the Operating Deficit Account Funding Agreement, Any assignment or attempted assignment without the consent of City shall be void and, at the sole discretion of the City, shall be deemed a material default of this Agreement by CWG, and the Note maybe declared by City to be immediately due and payable. 5.11 Corporate Status CWG covenants and agrees to maintain its status as a corporation duly organized, validly existing, and in good standing under the Nonprofit Corporation Law of the State of California at all times during the term of this Agreement. 13 LA1 595547v45 5.12 Breach In the event of any breach of this Section 5 or of any other covenant or restriction set fortffin this Agreement, City shall have the right to exercise all of the rights and remedies available to it, and to maintain any action at law or suits in equity or other real property proceedings, including, without limitation, specific performance, to enforce the covenants and restrictions and the curing of any breach or violation hereo£ 5.13 Nondiscrimination There shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, age, familial status, sex, sexual orientation, marital status, national o.rigin, ancestry, handicap, source of income or any other arbitrary discrimination based on personal characteristics, in the operation, use, occupancy, tenure, or enjoyment of the Service Center, nor shall CWG, or any person claiming under or through CWG, establish or permit any such practice or practices of discrimination or segregation with reference to the operation of the Service Center. 5.14 Program Income- CDBG Funds CDBG Program Income is defined under the laws and regulations governing the CDBG program, including the provisions set forth in 24 CFR 500 (a). CWG shall maintain audited accounting records for each of its fiscal years to determine the amount of CDBG Program Income remaining after the payment of the Service Center’s annual operating expenses and the funding of replacement and operating reserve accounts, if any, from the rental, use and operations of the Service Center Estate.~ CWG shall report and return all CDBG Program Income to City in accordance with CDBG and HUD laws and regulations, including, without limitation, those set forth in 24 CFR 570.504, as amended. Program Income paid to City shall be credited first to outstanding interest, if any, and then to the principal balance of the CWG Note. ARTICLE 6 - RESERVES AND ENDOWMENT FUNDS 6.1 Funding of Operating Deficit Reserve for Housing. Concurrently with the Bond Loan Closing, a construction loan of at least $1,900,000 will be made to the Partnership by CWG (the "Sponsor Loan,) at zero percent interest. Partnership shall utilize equity contributions received from its investors to repay in full the Sponsor Loan beginning with a scheduled payment of One Hundred Thousand Dollars ($100,000) at funding of the MHP Loan, followed by five annual payments of approximately $100,000 each and a final payment of at least $1,400,000. The Sponsor Loan repayments will be deposited by CWG and maintained in a segregated, interest beating reserve account (the "Sponsor Rent Reserve Account") in CWG’s name at a financial institution reasonably satisfactory to City (an "Account Institution"), and the funds held in the Sponsor Rent Reserve Account will be used only for purposes permitted in this Article 6. 6.2 Purposes and Uses of Sponsor Rent Reserve Account The primary purpose of the Sponsor Rent Reserve Account is to provide a source of funds in the event that the gross rent revenues of the Restricted Units are not sufficient to pay the 14 LAI 595547v45 annual operating costs and other allowed payments as described in the Partnership Note. A secondary purpose of the Sponsor Rent Reserve Account is to provide a further source of operating subsidies for the Restricted Units in the event of a termination of the Section 8 Housing Assistance Contract (as that term is defined in the Apartments Regulatory Agreement) to allow the Partnership to maintain the rents charged to former Section 8 Assisted Households and other Tenants at levels sufficiently low so that these households could afford to continue to live in the Restricted Units. Neither CWG nor the Partnership shall have the right to use funds in the Sponsor Rent Reserve Account for any other purpose without the prior written consent of the City, which the City may grant or deny in its Sole discretion. 6.3 Maintenance of Rent Reserve Account and Transfers of Funds to Partnership ....... CWG shall depbsit in the Sponsor Rent Reserve Account all repayments received of the Sponsor Loan, together with all interest earned thereon. Neither CWG nor the Partnership will withdraw any funds from the Sponsor Rent Reserve Account except for uses as expressly permitted by this Article 6. Annually, or more frequently if necessary, providing that any separate operating deficit reserves held by the Partnership have been fully disbursed, and/or to the extent the funds disbursed by the Partnership from its operating deficit reserves are not sufficient, CWG will make payments to the Partnership from the Sponsor Rent Reserve Account in the amounts necessary to fund the operating losses of the Restricted Units. CWG will make such payments from the Sponsor Rent Reserve Account (to the extent of funds in the Sponsor Rent Reserve Account) for any year in which the Restricted Units are not sufficient generating gross revenue (including any Section 8 Assistance payments) to pay the expenses of operating the Apartments Project (including debt service and other required expenses). 6.4 City As Third Party Beneficiary_ CWG and Partnership shall enter into an Operating Deficit Account Funding Agreement consistent with the provisions of this Article 6 and otherwise satisfactory to City in its sole discretion, which agreement shall provide, among other things, that it may not be modified without the consent of the City, and that City is a third party beneficiary of the provisions thereof, with the right to enforce the performance thereof, and such agreements or other instruments as are necessary to carry out the intentions of the parties set forth in this Article 6. 6.5 Reporting Requirements Within one hundred twenty (120) days after the conclusion of each calendar year (and within ten (10) days after request by City at any other time, from time to time), CWG and Partnership will provide to City copies of records of all deposits and withdrawals from the Partnership and Sponsor Rent Reserve Accounts. If requested by the City, CWG and Partnership will cause each Account Institution to provide the City with duplicate copies of monthly or other periodic statements. CWG, Partnership, and Opportunity HDC shall permit access to its books, records and accounts during normal business hours upon reasonable notice to representatives and employees of the City and HUD for the purpose of evaluating and monitoring compliance with the provisions of this Article 6. 15 LA1 595547v45 6.6 Service Center Endowment CWG shall establish at occupancy of the Service Center an endowment fund (the "SerVice Center Endowment") in the amount of at least $2,500,000. The Service Center Endowment will be under the sole control of CWG and its earnings will be used for the primary purpose of providing annual subsidies of the ongoing operating costs of the Service Center in order to allow social service providers to occupy the Service Center at low or no rental cost for use of the space. Other uses of the Service Center Endowment may be, but are not limited to, rent subsidies for persons unable to afford the lowest rents in the Restricted Units, special support services programs including services to transitional housing Tenants and capital repairs or replacements. ARTICLE 7 - 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: 7.1 CWG makes a representation in this Agreement which shall prove to have been false in any material respect when made; or 7.2 CWG shall default in the payment, when due, of any principal or interest under the CWG Note or any other sums payable by CWG under this Agreement; or 7.3 CWG shall default for a period of thirty (30) days (or if such default cannot be cured within 30 days despite CWG’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 CWG under this Agreement; or 7.4 CWG shall apply for or consent to the appointment of a receiver, trustee, or liquidator, or is unable, or admits in writing its inability to pay its debts as they fall due, or makes a general assignment for the benefit of its creditors, or is adjudicated a bankrupt or insolvent, or files a voluntary petition in bankruptcy; or 7.5 CWG is subjected to the entry of an order, decree, or judgment approving the reorganization of CWG, and such order, decree, or judgment is unstayed for a period of more than forty-five (45) days, or such period as may be permitted by law; or 7.6 CWG fails to comply with the covenants, terms and conditions of this Agreement, including, without limitation, the failure of CWG to abide by the use and beneficiary covenants and the Core Service Program set forth in Article 2 of this Agreement; or 7.7 CWG defaults under its agreement with one or more lenders, if any, or other agreement for financing of the Service Center, which may be secured by a deed of trust or any other encumbrance or lien which is senior in priority to the CWG Deed of Trust other than the Bond Loan; or 16 LAI 595547v45 7.8 CWG causes or permits a sale, voluntary transfer, assignment or encumbrance of its ownership interest in the Service Center Estate, orpermits a sublease of all or any part of its interest without first obtaining City’s written consent. Any 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 subsequent assignment, encumbrance or lease, or a waiver of any of the City’s rights under this Agreement. ARTICLE 8 - NOTICES All notices, consents, communications or transmittals required by this Agreement shall be made, in writing, and shall be communicated by the United States mail, certified, return receipt requested or by express delivery with a delivery receipt, and shall be deemed given as of the date shown on the delivery receipt as the date of delivery or the date on which delivery was refused, and shall be addressed to the following addresses, or such other address as either party may designate, from time to time, by written notice sent to the other party in like manner: To City: Copy to: 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 To CWG:Community Working Group, Inc. 555 Bryant Street, PMB 321 Palo Alto, CA 94301 Attn: President, Board of Directors ARTICLE 9 - MISCELLANEOUS PROVISIONS 9.1 Nothing contained in this 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 CWG, or CWG’s agents, employees or contractors. CWG 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 Agreement. CWG 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, CWG s agrees to be solely responsible for its own acts and those of its respective officers; partners, employees, agents, contractors, subcontractors and representatives, 17 LAI 595547v45 9.2 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 exergise of any fight, 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 Agreement may be expressly waived by the City in writing, but no waiver by the City of any requirement of this Agreement shall, or shall be deemed to, extend to or affect any other provision of this Agreement. . 9.3 CWG lacks any authority or power to pledge the credit of City or incur any obligation in the name of City. This 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. 9.4 Any amendment to this Agreement shall be binding upon the parties, provided such amendment is set forth in a writing signed by the 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 Agreement, and confer any consents or approvals that may be provided by the City. 9.5 The covenants, agreements, terms, and conditions of this Agreement shall inure to and be binding on the successors and assigns of the parties. Any provision of this Agreement which is characterized as a covenant or a condition shall be deemed both a covenant and a condition. If any provision of this Agreement shall be determined by a court of competent jurisdiction to be invalid, illegal, void, or unenforceable in any respect, the validity of all other provisions herein shall remain in full force and effect. 9.6 This 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 Agreement and any addenda, appendices, attachments, and schedules which may, from time to time, be referred to in any duly executedamendment hereto are by such reference incorporated in this Agreement and shall be deemed to be part hereof. This Agreement may be executed in any number of counterparts, each of which Shall be an original, but all of which together shall constitute one and the same instrument. The paragraph headings are not a part of this Agreement and shall have no effect upon the construction or interpretation of any part of this Agreement. 9.7 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 Agreement or arising out of this Agreement may recover its reasonable costs and attorneys’ fees expended in connection with such an action from the other party. 9.8 The provisions of this Agreement shall apply to the Service Center and the Service Center Estate for the entire term hereof, even if the Service Center Loan is paid in full prior to the end of said term. This Agreement shall bind any successor, heir or assign of CWG, whether a change in interest occurs voluntarily or involuntarily, by operation of law or otherwise, 18 LAI 595547v45 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. CWG acknowledges that the City has mad~ the Service Center Loan on the condition that the provisions of this Agreement shall apply to the Service Center and the Service Center Estate for its entireterm, and in consideration of this provision, and would not have done so otherwise. 9.9 The City and CWG hereby declare their express intent that the covenants and restrictions set forth in this Agreement shall run with the land and the interest of CWG in the Service Center Estate, and shall bind all successors in interest to the Service Center Estate, ...... provided, however, that on the expiration of the term of this Agreement, the covenants and restrictions shall expire. Each and every contract, deed or other instrument hereafter executed covering or conveying the Service Center Estate or any portion thereof shall be held conclusively to have been executed, delivered and accepted subject to such covenants and restrictions, regardless of whether such covenants or restrictions are set forth in such contract, deed or other instrument. 9.10 If CWG fails to perform any obligation under this Agreement, and fails to cure the default within 30 days after the City has notified CWG in writing of the default or, if the default cannot be cured within 30 days, fails to commence to cure promptly and thereafter diligently pursue such cure, the City shall have the right to enforce this 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. The rights of City under this Agreement may be made subject to one or more subordination agreements between lenders with security interests in the Service Center Estate and City; provided, however, CWG, nor its respective affiliates, if any, is an intended beneficiary of, or has the right to enforce, any such subordination agreements, which may be terminated 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, CWG. // // // // // // // 19 LAI 595547v45 IN WITNESS WHEREOF, the parties hereto have executed this Loan and Regulatory Agreement and Declaration of Restrictive Covenants for Opporttmity Center of the Mid- Peninsula - Service Center 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: Senior Assistant Cit-y Attorney APPROVED: By: City Manager COMMUNITY WORKING GROUP, INC.a Califo~/~profit ~]c benefit corporation Name: ~’2~ o ~oa Taxpayer Identification No. Director of Planning and Community Environment Director of Administrative Services Insurance Review ATTACHMENTS: Exhibit A: Exhibit B:’ Exhibit C: Exhibit D: Exhibit E: Exhibit F: Exhibit 0: Legal Description Insurance Requirements CDBG Pro~am Assurances Service Center: Estimated Development Budget and Sources of Funds Form of Note Form of Deed of Trust Methodology for Calculation of Beneficial Interests LA] 595547v45 ACKNOWLEDGMENTS STATE OF CALIFORNIA ) )COUNTYOF ) On the /-~ day of ~__~-*/ ,.., in the year 2004, before me, personally appe-~-ed ’ ,-d ~’,~P~V ~-, Ji~¢]~ , personally known to me or proved to me on the basis of satisfactor~ evidence to be the person~-) whose name(s-} is/are subscribed to the within instrument and acknowledged to me that heist~e/th~ executed the same in his&re-/their authorized capacity(4~’), and that by his/her/their signature(a) on the instrument the person(s), or the entity upon [behalf of] which the person(6") acted, executed the instrument. Wimess my hand and official seal. Notary Public STATE OF CALIFORNIA ) COLrNTY OF ~ ~._O ) ) Onthe dayof 3 l’,4 personally appeared D. ~~ , in the year 2004, before me, U~, ! ~3 ~ , /~ ca_ w-w’- , personally known to me or proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon [behalf of] which the person(s) acted, executed the instrument. Witness my hand and official seal. Notary Public LEGAL DESCRIPTION LAI 595547v45 EXHIBIT B INSURANCE REQUIREMENTS 1. FIRE AND EXTENDED COVERAGE Insurance, to cover not less than One Hundred Percent (100%) of the replacement cost of all insurable improvements within or upon the Service Center. Such policies shall include water damage and debris cleanup provisions. POLICY MINIMUM LIMITS OF LIABILITY 2. WORKERS COMPENSATION 3. COMPREHENSIVE AUTOMOBILE LIABILITY, including owned hired, and nonowned automobiles Statutory Bodily Injury Property Damage $1,000,000 ea person $1,000,000 ea occurrence 4. COMMERCIAL GENERAL LIABILITY, including products and completed operations, broad form contractual, and personal injury. Bodily Injury Property Damage $1,000,000 ea person $1,000,000 ea. occurrence $1,000,000 aggregate $1,000,000 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 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. LAI 595547v45 EXHIBIT C FEDERAL ASSURANCES WITH RESPECT TO CDBG FUNDS In providing the services and work set forth in the attached Agreement, Contractor agrees to comply with, adhere to, and take all necessary measures to effectuate, the following covenants and CDGB assurances: 1.Civil rights and non-discrimination laws. a.Title VI of the Civil Rights Act of 1964, as amended, and regulations issued pursuant to 24 CFR Part 1, which provides that no person in the United States shall on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be otherwise subjected to discrimination under any program or activity funded, in whole or in part, with federal financial assistance. - b.Title VIII of the Civil Rights Act of 1968, as amended, and implementing regulations when published, which provides for the administration of all programs and activities relating to housing and community development in a manner to affirmatively further fair housing. c.Section 109 of the Housing and Community Development Act of 1974, as amended, and regulations issued pursuant to 24 CFR Part 570, which provides that no person in the United States shall on the ground of race, color, national origin or sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under, any program or activity funded, in whole or in part, with federal financial assistance. d.Section 3 of the Housing and Urban Development Act of 1968, as amended, and regulations issued pursuant to 24 CFR Part 35, which requires that to the greatest extent feasible opportunities for training and employment be given to persons with low and moderate incomes residing in the Project area benefited by federal financial assistance, and contracts for work in connection with the Project shall be awarded to eligible business concerns which are located in, or owned in substantial part by persons residing in, the vicinity of the Project. e. Section 504 of the Rehabilitation Act of 1973, as amended, and implementing regulations when published. f. The Age Discrimination Act of 1975, as amended, and implementing regulations when published. g. The Americans with Disabilities Act of 1990, as amended;and implementing regulations when published. h. The "American Standard Specifications for Making Buildings and Facilities Accessible to and Usable by, the Physically Handicapped," Number A-117.1-R 1971, subject to the exceptions contained in 41 CFR § 101-19.604, which requires every building or LA1 595547v45 facility (other than a privately owned residential structural) designed, constructed, or altered with funds provided trader 24 CFR 570 to be accessible to persons with physical disabilities. i.The Housing and Community Development Act of 1977, as amended, and the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended, and the implementing regulations when published. The uniform administrative requirements (including the cost and procurement principles) set forth in 24 CFR Part 85 and OMB Circulars A-87, A-110, A-122, and A-133, which relate to the acceptance and use of federal funds by non-profit organizations, and which require an agency receiving in excess of $300,000 in federal financial assistance to obtain at its own expe~e an audit that complies with the requirements of OMB Circular A-133. k.Executive Order 11063 and regulations issued pursuant to 24 CFR Part 107, which provides for equal opportunity in housing and non-discrimination in the sale, leasing, rental or other disposition of housing built with federal financial assistance. 1.Executive Order 11246, as amended by Executive Order 11375 and Executive Order 12086, and regulations issuedpursuant to 24 CFR Part 130 and 41 CFR Part 60, which provide that no person shall be discriminated against on the basis of race, color, religion, -sex, or national origin in all phases of employment during the performance of federally-assisted construction contracts. Contractor further covenants with respect to the foregoing assurances that: A. In the sale, lease, rental, transfer or other disposition of any real property on which the Facility is located, Contractor shall include or cause to be included in any deed of trust, mortgage, indenture, or other instrument of legal encumbrance ("Encumbrance") a covenant running with the land, prohibiting discrimination upon the basis of race, color, religion, . sex, or national origin, in the sale, lease, rental, transfer or other disposition of such land or any improvements erected or to be erected thereon, and providing that Contractor and the United States of America (HUD) are beneficiaries of and entitled to enforce such covenant. B. Contractor shall take action to affirmatively further fair housing in the sale, lease, rental, transfer or other disposition of housing, the financing of housing, and the provision of brokerage services. (1) Contractor shall certify and agree that Contractor is under no contractual or other disability that would prevent Contractor from complying with these requirements. (2) Contractor shall send to each labor organization or workers’ representative with which Contractor has a collective bargaining agreement or other similar contract, if any, a notice advising such organization or representative of Contractor’s commitment under Section 3 of the Housing and Urban Development Act of 1968, as amended, and shall post copies of the notice in conspicuous places available to employees and applicants for employment or training. LA1 595547v45 C. Contractor covenants to take affirmative action to ensure fair treatment in all phases of employment, training, apprenticeships, promotion, demotion, and transfer, and recruitment or recruitment advertising. 2.Federal political and conflict of interest laws. a.The Anti-Racketeering Act (also known as the Copeland Anti- Racketeering Act), as amended, and regulations issued under 29 CFR Part 3, which prohibits kick-backs in construction work funded with federal financial assistance. b. The Hatch Political Activity Act, as amended, and implementing regulations when published, which prohib,its the use of federal funds for lobbying activities. Contractor further covenants that: A. Contractor will establish safeguards to prohibit employees from using their positions for a purpose that is or gives the appearance of being motivated by a desire for private gain for themselves or others, particularly those with whom they have family, business, or other ties. B. Contractor will not use the assistance provided under the Agreement in the payment of any bonus or commission for the purposes of obtaining HUD approval of the application for such assistance, or HUD approval of applications for additional assistance, or any other approval or concurrence of HUD required under this Agreement, Title 1 of the Housing and Community Development Act of 1974, as amended, or applicable HUD regulations. Reasonable fees or bona fide technical, consultant, managerial or other such services, other than actual solicitation, are not hereby prohibited if their costs are otherwise eligible as a CDGB Program cost. C. Contractor will not admit any member of or delegate to the Congress of the United States or any Resident Commissioner to any share or part of this Agreement or to allow any benefit to arise from the same. 3.Federal labor and employment laws. Contractor covenants that: A. Contractor will comply with all applicable federal labor laws, regulations, and standards which require contractors engaged under contracts for the construction, completion, or repair of any building or work financed, in whole or in part, with assistance provided under this Agreement, including all HUD requirements pertaining to such contracts and the applicable requirements of the regulations of the United States Department of Labor under 29 CFR Part 3, 29 CFR Part 5, and 29 CFR Part 5a, governing the payment of wages and the ratio of apprentices and trainees to journeymen. If state or local law wage rates are higher than those required under the federal regulations, nothing hereunder is intended to relieve Contractor of its obligation, if any, to require payment of the higher rates. Contractor shall cause or require to be inserted in full, in all such contracts subject to such regulations, provisions meeting the requirements of 29 CFR Part 5.5 and, for such contracts in excess of $10,000, 29 CFR Part 5a.3. No award of LAI 595547v45 contract covered under the Agreement shall be made to any contractor who is at the time ineligible to receive an award of contract under the applicable regulations of the United States Dep,,artment of Labor. 4.Environmental and energy laws. a.Section 1040a) of the Housing and Community Development Act of 1974, which prohibits the release or commitment of funds to any person, unless an appropriate environmental review has been conducted for the activity or program being funded, all other environmental requirements for the conduct of such activity or program have been satisfied, and all proper authorizations to proceed with such activity or program have been received from HU-D. b.Section 106 of the National Historic Preservation Act, as amended, Executive Order 11593, and implementing regulations when published, and the provisions of 16 U.S.C. § 469a-1, relating to the threat to pre-historical, historical, or archeological data by federal construction projects, when performing environmental assessments under the National Environmental Policy Act of 1969, as amended, and implementing.regulations when published. c. Section 114 of the Clean Air Act, as amended, and implementing regulations when published. d. Section 308 of the Water Pollution Control Act, as amended, and implementing regulations when published. e.The provisions of 24 CFR Part 35, as amended, which provides that no lead-based paints shall be used in construction or rehabilitation work performed under projects funded with federal financial assistance. f.The provisions of 24 CFR Part 39, as amended, which provides that the performance of rehabilitation work shall conform to HUD energy standards for cost- effectiveness. g. Executive Order 11296, as amended, and implementing regulations when published, which relates to the evaluation of flood hazards. h. Executive Order 11288, as amended, and implementing regulations when published, which relates to the prevention, control, and abatement of water pollution. Contractor further covenants that: A. Contractor’s Facility will not be included on the "List of Violating Facilities" issued by the United States Environmental Protection Agency (EPA) pursuant to 40 CFR § 15.20. B. Contractor will give prompt notice of any notification received from the Director, Office of Federal Activities, EPA, that the Facility is under consideration to be listed on the "List LAI 595547v45 of Violating Facilities." All nonexempt subcontracts concerning the Facility shall include the provisions of this paragraph. C. Contractor will cooperate fully in any federal enforcement actions instituted pursuant toapplicable statutes or .regulations. 5.Miscellaneous provisions. a.Contractor will give HUD and the United States Controller General through any authorized representatives access to and the right to examine all records, books, papers, or documents related to the receipt and use of CDGB grant funds under this Agreement. b.No officer, employee or agent of City who exercises any functions or responsibilities with respect to the services and work to be provided by Contractor pursuant to this Agreementduring his or her tenure or for one (1) year thereafter, shall have any interest, direct or indirect, in this Agreement or the proceeds thereof. LAI 595547v45 EXHIBIT D oo~oooo 00~0~0~ EXHIBIT E - FORM OF NOTE PROMISSORY NOTE (COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS) SECURED BY DEED OF TRUST AND ASSIGNMENT OF RENTS (OPPORTUNITY CENTER SERVICE CENTER) $1,280,000.00 Date:,2004 Palo Alto, California FOR VALUE RECEIVED, the undersigned, COMMUNITY WORKING GROUP, INC., a corporation organized under the Nonprofit Public Benefit Corporation Law of the State of California ("Maker"), hereby promises to pay to the CITY OF PALO ALTO ("Holder"), or order, at its Office of Revenue Collections, 250 Hamilton Avenue, Palo Alto, California, or at such other place as may be designated, in writing, by the Holder, the principal sum of One Million, Two Hundred Eighty Thousand and 00/100 Dollars ($1,280,000.00) (the "Loan Amount") together with accrued, unpaid interest thereon, on or before the Maturity Date (as defined herein), or sooner as herein provided; provided, however, the principal amount of this Note shall not bear interest, except as otherwise provided in Section 12 below. ADDITIONAL TERMS AND CONDITIONS 1. Concurrently with the execution of this Note, Maker is entering into, and causing to be recorded in the Official Records of Santa Clara County, that certain Loan and Regulatory Agreement and Declaration of Restrictive Covenants for Opportunity Center of the Mid- Peninsula--A Service Center (the "Regulatory Agreement"), pursuant to which Maker agrees to cause to construct and operate certain portions of the property commonly known as 33 Encina Avenue, Palo Alto, California (the "Property") as a facility for the provision of comprehensive and coordinated supportive services for homeless adults and families and for very low income households that are considered at risk of becoming homeless, as more particularly described in the Regulatory Agreement (the "Project") for a term of 89 years; all of the terms, conditions, agreements and provisions of the Regulatory Agreement, including the covenants, representations, and terms of default and remedies for default set forth therein, are incorporated herein by this reference and made a part hereof. Maker will have no obligation to make any payment hereunder, and no interest will accrue on the Loan Amount, for so long as Maker operates the Property in full compliance with the provisions of the Regulatory Agreement. 2. This Note evidences the obligation of the Maker to make full payment of the Loan Amount to the Holder, in accordance with and subject to the provisions of this Note. This Note is secured by a Deed of Trust and Assignments of Rents recorded against the Maker’s interests in the Property (the "Deed of Trust"). 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. 3, This Note and the Deed of Trust securing this Note is, or will be, subordinate to (a) a construction loan in original principal amount of approximately $9,975,000 made by the Housing Authority of the County of Santa Clara ("HACSC") pursuant to the terms of a construction loan agreement between Maker and Union Bank of California, N.A., as agent for HACSC, and (b) a loan of Affordable Housing Program funds made by the County of Santa Clar~ in original principal amount of $1,000,000. 4. " As used herein, the term "Maturity Date,, will mean September 1, 2007; provided, however, the Maturity Date will be extended to the eighty-ninth (89th)’ anniversary of the Commencement Date (as defined in Section 5 below) in the event that all of the following events have occurred prior to September 1, 2007: (a) the Improvements have been substantially completed and final certificates of occupancy have been issued for the housing portion of the Project and the Service Center; (c) the Holder, Maker and the Partnership have entered into an Operating Deficit Funding Account Agreement consistent with the provisions of Article 6 of the Regulatory Agreement and otherwise satisfactory to Holder in its sole discretion (a "Deficit Account Agreement"), which Deficit Account Agreement shall, among other things, provide that Holder is a third party beneficiary thereof, that it may not be modified without the consent of the Holder; and the Rent Reserve Account has been established and ~ded in the amount and as otherwise provided in Article 6 of the Regulatory Agreement. Notwithstanding the foregoing, if the conditions set forth in the preceding sentence in order for the Maturity Date to be extended have not been satisfied by September 1, 2007, and the City Manager of Holder determines that such delay is due to one or more "acts of God" or other causes beyond the control of Maker and the Partnership, Holder may extend the date by which such conditions must be satisfied for a reasonable period equal to the amount of excusable delay, not to exceed six months. (Capitalized terms used in this Section 6.1 without definitions shall have those definitions, if any, ascribed to them in the Regulatory Agreement.) 5. In the event Maker has at all times operated the Property in full compliance with the provisions of the Regulatory Agreement for a period of eighty-nine (89) years from the date on which the Regulatory Agreement is first recorded in the Official Records of Santa Clara County (the "Commencement Date") then, notwithstanding anything to the contrary contained herein, repayment of the Loan Amount will be deemed forgiven, and Holder will cause the ....... trustee under the Deed of Trust to reconvey the Deed of Trust to Maker and cancel the Note and Maker will have no further obligations hereunder. 6. This Note shall become due and payable immediately, without notice or demand, in the event all or anypart of the Property, or all or any part of Maker’s interest in the Project, (a) is sold, transferred, assigned or otherwise conveyed without the prior written consent of Holder, (b) is further encumbered without the prior ~tten consent of Holder, or (c) is used for any ..... purpose other than in compliance with the Re~latory Agreement; provided, however, in the event of the acceleration of this Note the amount payable to City hereunder shall not exceed City’s Proportionate Share (as defined below) multiplied by the greater of (a) the then current appraised fair market value of the Property, or (b) the actual amount of consideration received for the Property. Holder may, at its election, have an appraisal of the Property prepared, in accordance with regulations applicable to Holder’s Community Development Block Grant program, in order to establish such fair market value; the Holder’s cost of such appraisal shall be reimbursed by Maker. As used herein, the "City’s Proportionate Share" shall equal a fraction, the numerator of which is the amount of funding for development costs constituting the Project provided by Holder, and the denominator of which is the aggregate amount of funding for development costs constituting the Project provided by Maker, the County of Santa Clara, and 2 LAI 595347v3 Holder; as of the date hereof, City’s Proportionate Share is estimated to equal 45.8%, based upon a numerator equal to the Loan Amount of $1,280,000 and a denominator of $2,793,667; provided, however, the final amounts of the respective funding sources will be determined pursuant toa post-construction audit, described as follows. Upon completion of the construction of the Project, the Maker:shall’prepare or cause to be prepared an independently audited cost certification and a fmal sources and uses of funds pro forma, each in form reasonably required by Holder, documenting the actual total sources of funds and development costs of the Project. The Maker agrees to provide the Holder with such audited cost certification within twelve months after the issuance of the final certificate of occupancy or equivalent City approval following completion of construction of the Project. ..... 7. The Maker and any other maker, co-maker, endorser, guarantor, and any other party to this Note (collectively, "Obligors"), and each of them: (i) waive notice of default (except as provided in Section 13), notice of acceleration, notice of nonpayment, presentment for payment, demand, protest, notice of demand, notice of protest, notice of nonpayment, and any other notice required to be given under the law to the Obligors; (ii) consent to any and all delays, extensions, renewals, or other modifications of this Note or waivers of any term hereof or release or discharge by the Holder of any of the Obligors or release, substitution, or failure to act by the Holder, from time to time, and agree 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, or under any endorsement or guaranty of this Note; and (iii) jointly and severally agree to pay, on demand, any and all 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. 8. The pleading of any statute of limitations as a defense to any demand against the Maker is expressly waived by the Maker. 9. If any default is made hereunder, the Maker promises to pay the Holder’s reasonable attorneys’ fees and other related costs and expenses incurred by the Holder in connection with the enforcement of any rights of the Holder. The Holder’s right to such fees shall include, but not be limited to, its representation by staff attorneys of the Holder’s Office of the City Attorney, and such representation shall be valued at the customary and reasonable rates for private sector legal services. 10. The occurrence of any of the following shall constitute an event of default under this Note (an "Event of Default"): (i) the failure of Maker to pay any amount due hereunder within fifteen (15) days of its due date; or (ii) any default by the Maker under the Regulatory Agreement; or (iii) any default by Maker under the Deed of Trust. 11. 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 3 LAI 595347v3 become immediately due and payable. This option may be exercised at any time following any such Event of Default, and the acceptance of one or more installments thereafter shall not constitute a waiver of such option with respect to any subsequent Event of Default. The Holder’s failure to exercise any other right or remedy hereunder or under any agreement which secures the indebtedness or is related thereto shall not affect any fight or remedy and no single or partial exercise of any such right to remedy shall preclude any further exercise thereof. 12,Provided that no Event of Default occurs prior to the Maturity Date of this Note, the principal hereunder shall not bear interest; provided, however, in the event of any Event of Default, interest shall accrue on the Loan Amount from and after the date such default occurred until such default is cured at the rate often percent (10%) per annum. If this Note be reduced to judgment, such judgment shall bear the statutory interest rate on judgments, 13. 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 .sumswithin a period of thirty (30) calendar days after notice that payment was due. In the event of an uncured nonmonetary default, the Holder shall have first given written notice thereof to the Maker, and the Maker shall have failed to cure the nonmonetary default within a period of thirty (30) days after the giving of such notice of such default; provided that if the nonmonetary default cannot be cured within thirty (30) days and the Maker proceeds diligently and uses best efforts to cure such default until it shall be. fully cured within no more than ninety (90) days after the giving of such notice, then the Holder shall not exercise any right or remedy provided for herein until such 90-day period shall expire; provided, however, the Holder shall not be required to give any such notice or allow any part of the grace period if the Maker (or either of them) 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 (or either of them) shall have made an assigrunent for the benefit of creditors, or if a receiver or trustee is appointed for the Maker (or either of them) and such appointment or such receivership is not terminated within forty-five (45) days of such appointment. Nothing in this Section 13 shall affect the provisions of Section 12 providing for the accrual of interest in the event of an Event of Default. 14. Any notice, demand, or other communication required hereunder shall not be deemed sufficiently given, unless sent by certified mail, postage prepaid, return receipt requested, or by express delivery service or overnight courier service, to the principal office of the addressee, or at such other address as may be designated, in writing, from time to time: Holder:City of Palo Alto P. O. Box 10250 Palo Alto, California 94303 Attn: City Clerk LAI 595347v3 4 Maker:Community Working Group, Inc. 555 Bryant Street, PMB 321 Palo Alto, CA 94301 Attn: President, Board of Directors The delivery shall be effective on the date shown on the delivery receipt or the date on which the delivery was refused. 15, No judgment, or execution thereof, entered in any action, legal or equitable, on this Note shall be enforced directly against the Maker or any officer, director or employee of the Maker, but shall be enforced only against the collateral described in the Deed of Trust, and such other or further security as, from time to time, may be hypothecated for this Note. The foregoing limitation shall not be applicable in the event of (a) fraud by the Maker or any material misrepresentation made by the Maker to the Holder in the Regulatory Agreement, this Note, the Deed of Trust, or any other document or instrument delivered in connection with the Loan, or (b) the sale or transfer or other conveyance or encumbrance of the Property, or any interest therein, other than a sale or transfer, without the Holder’s prior written consent, or (c) the sale or transfer or ~other conveyance or encumbrance of all or any part of Maker’s interest in the Project without the Holder’s prior written consent. Furthermore, the foregoing limitation shall not be applicable to the extent of any loss incurred by the Holder due to (a) misappropriation by the Maker of any rents (including, without limitation, the application of rents to other than operating expenses and debt service), security deposits, insurance or condemnation proceedings, (b) the diversion or other misappropriation by Maker of any funds from any reserve account maintained in connection with the Project, or (c) the failure of Maker to comply with Maker’s obligations under the Regulatory Agreement. The Holder shall not in any way be prohibited from naming the Obligors, or any of them, or any person holding under or through them as parties to any actions, suit or other proceedings initiated by the Holder to foreclose or otherwise realize upon any other lien or security interest created under the Deed of Trust, and further provided, however, that nothing in this Section 15 shall be deemed to prejudice the rights of the Holder to recover any funds or payments which were diverted or misappropriated by the Obligors, or any of them. 16. The covenants, agreements, terms, and conditions of this Note shall inure to, and shall be binding on, the successors and assigns of the Obligors. // // // II II // 5 LAI 595347v3 EXECUTED BY MAKER by its duly authorized representatives in Palo Alto, County of Santa Clara, State of California, on the date first above written. COMMUNITY WORKING GROUP, INC., a California non-profit public benefit corporation By: Name: Title: By: Name: Title: Taxpayer Identification No. 6 LAI 595347v3 RE~ORDING REQUESTED BY AND WHEN RECORDED, MAIL TO: City of Palo Alto Office of City Attorney 250 Hamilton Avenue Palo Alto, CA 94301 This document is recorded for the benefit of the City of Palo Alto and is entitled to be recorded free of charge in accordance with Sections 6103 and 27383 of the Government Code EXHIBIT F FORM OF DEED OF TRUST SPACE ABOVE THIS LINE FOR RECORDER’S USE DEED OF TRUST AND ASSIGNMENT OF RENTS THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND MEMORANDUM OF OPTION, made on ,2004, between COMMUNITY WORKING GROUP, INC., a California nonprofit public benefit corporation ("Trustor"), whose address is 555 Bryant Street, PBM 321, Palo Alto, California 94301, FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation ("Trustee"), whose address is 1737 North First Street, 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 Califomia, described in Exhibit "A", attached hereto and made a part hereof by reference ("Security’, or "Property"), TOGETHER WITH the rents, issues and profits thereof, SUBJECT, HOWEVER, to the right, power, and authority given to and conferred upon Beneficiary, by subdivision B of the fictitious deed of trust recorded in the office of the Recorder of the County of Santa Clara, in Book 5336 of Official Records, at Page 341, adopted and incorporated herein by reference and made a part hereof as if fully set forth herein, to collect and apply such rents, issues and profits FOR THE PURPOSE OF SECURING payment of the indebtedness evidenced by that Promissory Note ("Note"), and any extensions or renewals thereof, in the principal amount of $1,280,000 executed by Trustor in favor of Beneficiary, and the performance of the obligations LAI 597028v12 of T~stor contained in that certain Loan and Regulatory Agreement and Declaration of Restrictive Covenants for Opportunity Center of the Mid-Peninsula--A Service Center (the "Regulatory Agreement"). TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR AGREES: 1.Fictitious Deed of Trust. By the execution and delivery of this Deed of Trust and the Note secured hereby, that the provisions of subdivisions A and B inclusive, of the fictitious deed of trust recorded in the office of the Recorder of the County of Santa Clara in Book 5336 of Official Records, at P~ge 341, hereby are adopted and incorporated herein and made a part hereof as fully as though set forth herein at length; that it will observe and perform said provisions; and that the references to property, obligations, and parties in said provisions shall be construed to refer to the property, obligations, and parties set forth in this Deed of Trust. 2. Prohibited Transfers. Trustor shall not, voluntarily or involuntarily or by operation of law, sell, transfer, lease, pledge, encumber, create a security interest in, or otherwise hypothecate or alienate all or any part of the Security, without Beneficiary’s prior written consent. The consent by Beneficiary to any sale, transfer, lease, pledge, encumbrance, creation of a security interest in, or other hypothecation of the Security shall not be deemed to constitute a novation or a consent to any further sale, transfer, lease, pledge, encumbrance, creation of a security interest in or other hypothecation. Beneficiary may, at its option, declare the indebtedness secured hereby immediately due and payable, without notice to Trustor or any other person or entity, upon any such sale, transfer, lease, pledge, encumbrance, creation of a security interest in, or other hypothecation or alienation in violation hereof. Without the written consent of Beneficiary, no sale, transfer, lease, pledge, encumbrance, creation of a security interest in, or other hypothecation of the Security shall relieve or release Trustor from primary liability under this Deed of Trust, the Note, and/or the Agreement. As used in this Section 2, the term "transfer" includes, without limitation, the following transactions: a.Any total or partial sale, assignment or conveyance, or creation of any trust or power, or any transfer in any other mode or form with respect to the Security or any part hereof or any interest herein, or any contract or agreement to do the same; b. The cumulative transfer of more than ten percent (10%) of the capital stock, partnership profit and loss interest, or other form of interest in Trustor; and Co assets of Trustor. Any merger, consolidation, sale or lease of all or substantially all of the 2 LAI 597028v12 3. Due on Sale. In 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, conveyedl alienated or refinanced by Trustor, or by the operation of law or otherwise, without the written consent of Beneficiary, all obligations secured by this instrument, irrespective of the maturity dates expressed therein, at the option of Beneficiary hereof and without demand or notice shall immediately become due and payable. COMMUNITY WORKING GROUP, INC., a Califomia nonprofit public benefit corporation By: Name: Title: By: Name: Title: Taxpayer Identification No. LAI 597028vi2 3 EXHIBIT G OPPORTUNITY CENTER OF THE MID-PENINSULA METHODOLOGY FOR CALCULATION OF BENEFICIAL INTERESTS (Sample Exhibit with Costs Based on April 30, 2004 Budget; To Be Completed using Final, Audited Costs as of Occupancy of the Service Center) I) Total Service Center Development Costs: Equal to the Sum Total of: A) Allocated Share of First Floor Shell & Land $428,641 B) Allocated Share of Underground Garage $569,632 C) Build-out of Interior Improvements $1,795,434 D) Portion of Partnership’s Unit 1 on the ground $426,892 floor of approximately 1,870 sf of space built with State HCD funds for the purpose of providing supportive services for residents of the Apartments Project. II) Initial Beneficial Interests: Total Service Center Development Costs (net of D above): $2,793,707 $3,220,599 100.00% A) City of Palo Alto Contribution: (CDBG Fund) B) County of Santa Clara (Affordable Housing Fund) C) CWG - Equity Funds $1,280,000 45.80% $!,000,000 35.88% $513,707 18.40% III) Adjustments for Capital Improvements: Initial beneficial interests of each party will be adjusted for capital improvements made to the Service Center during the term of this Agreement. The amount and source of funding for additional capital improvements must be verified. LA1 595547v45 ATTACHMENT D Opportunity Center = Total Project Budget Summary Development Budget (As of April 30, 2004) 1 Land Acquisition Costs (& Closing costs) 2 Relocation & Eminent Domain: (Legal, Goodwill, Appraisal, Relocation) 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 Impact Fees; Planning & Building Permits 9 Predevelopment & Construction (Legal, Title, Escrows, Bond Issuance) Permanent Financing: (Title, Escrow, Legal, TCAC Fees; Market Study, 10 Consultant, Audit) 11 Marketing & Rent-Up 12Furnishings 13Fund Raising Costs (for endowments) 14Soft Cost Contingency 15Replacement Reserves: (Initial Funding) 16Developer Fee ($775,000 to Housing Authority; Remainder to CWG) TOTAL DEVELOPMENT BUDGET- ENTIRE PROJECT TOTAL DEVELOPMENT BUDGET FOR HOUSING PORTION TOTAL DEVELOPMENT BUDGET FOR SERVICE CENTER $1,776,816 $282,905, $216,000 $12,994,787 $1,500,000 $402,950 $1,488,387 $290,020 $440,907 $177,434 $89,000 $308,000 $80,000 $83,063 $0 $2,166,877 $22,297,146 $19,503,439 $2,793,707 ATTACHMENT E-1 ATTACHMENT E-2