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City of Palo Alto (ID # 3183) City Council Staff Report Report Type: Action ItemsMeeting Date: 11/19/2012 Summary Title: Maybell Ave. Acquisition Loan Request Title: Adoption of Budget Amendment Ordinance, Approval of a Loan to Palo Alto Housing Corporation in the Amount of $3,220,220, and Direction to Staff Regarding an Additional $2.6 Million Short Term Loan to Palo Alto Housing Corporation for the Acquisition of 567-595 Maybell Avenue for Purposes of Constructing a Below Market Rate Senior Housing Project (continued from November 13, 2012) From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the City Council: 1. Adopt the attached Budget Amendment Ordinance (BAO) increasing the Fiscal Year 2013 Grants and Subsidies budget of the Commercial Housing In-Lieu Fund by $400,000, transferring $720,220 from the Stanford University Medical Center (SUMC) Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing Fund to the Residential Housing In-Lieu Fund, and increasing the Grants and Subsidies budget of the Residential Housing In-Lieu Fund by $720,220; and 2. Approve and authorize the City Manager or designee to execute in substantially identical form the attached Acquisition and Development Agreement (ADA) (with attached form of promissory note, deed of trust and security agreement) with Palo Alto Housing Corporation (PAHC) to provide a loan of $3,220,220; and 3. Authorize the City Manager or designee to execute all other documents required to implement the Agreements, including escrow instructions and to approve all necessary subordination agreements and direct the City Manager or designee to administer the provisions of the Agreements; and 4. Provide direction to staff whether to authorize an additional, short term (2-3 year) loan to PAHC in the amount of $2,600,000, to be funded by the SUMC Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing Fund and, if so, to return with that loan agreement and budget amendment as a future Consent Calendar item. Executive Summary Council approval of the recommended actions will provide a $3,220,220 million loan from the City’s housing funds to Palo Alto Housing Corporation, Inc. (PAHC) for the acquisition of two parcels, located at 567-595 Maybell Avenue for the purpose of developing the site into a 60- unit affordable rental housing project for extremely-low and very-low and low income seniors and a 15-unit market rate single family residential subdivision. Staff is also requesting direction from Council whether to extend a separate $2.6 million short term (two to three year) loan from the City’s Stanford University Medical Center (SUMC) Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing Fund to complete funding for the purchase. Review of entitlements (zoning and site design) and site specific environmental review will occur subsequent to the land acquisition when an application is made and plans are developed for the project. Background On June 22, 2012, Palo Alto Housing Corporation (PAHC), entered into a purchase and sale agreement with Maybell Sambuceto Properties, LLC and Sambuceto Partners, A California Limited Partnership, to acquire the properties located at 567-595 Maybell Avenue for the purpose of developing an affordable housing project to be named the Maybell Orchard Apartments. Initially, PAHC approached the City seeking $6.5 million of financial assistance for the site acquisition. As project development costs were further refined, however, the final request amount was finalized at $5,820,220. Due to funding limitations of the City, PAHC now requests a long-term loan amount of approximately $3.2 million and a subsequent short-term loan of $2.6 million, with the possibility of converting the short term loan into a long-term loan if the City receives the same amount of new housing fees before the term expires. Discussion PAHC Purchase Agreement for Site The PAHC California Park Corporation and Maybell Sambuceto Properties, LLC and Sambuceto Partners, a California Limited Partnership, executed a purchase and sale agreement detailing the terms of the acquisition of both parcels, which include the following key provisions: Purchase price of $15,580,000 for the 2.46-acre parcel; Close of escrow, and transfer of title to PAHC must occur by November 30, 2012; Seller will pay all escrow fees, county transfer taxes and the cost of a ALTA title insurance policy; and Seller and Buyer split payment of the city transfer taxes. An appraisal was prepared by Hulberg & Associates, Inc., dated June 26, 2012. The appraised value for the property was estimated at $15,640,000. Project Site and Description The project site is comprised of two parcels (APN # 137-25-109 and -108) located at the corner of Maybell and Clemo Avenues. The combined lot size is approximately 107,422 sq. ft. (2.46 acres). The larger parcel (93,654 sq. ft.) and the smaller parcel (13,768 sq. ft.) are zoned RM15 and R2, respectively, as shown in Attachment A. Both parcels are within one-quarter of a mile from El Camino Real with access to VTA bus route 88. PAHC plans to subdivide the property and apply for rezoning of the 2.46-acre property. The affordable rental apartments would be on an one acre parcel and would include (59) 1- bedroom apartments and (1) 2-bedroom apartment for an onsite manager, common areas such as a community room with computer lab, laundry room, manager’s office, a resident services office, as well as outdoor common area space. The affordable apartments would have an average size of 600 square feet and be affordable to senior households earning 30-60% of the Area Median Income (AMI). The project would be designed to meet or exceed the City’s green point rating system. The market rate units would be located on the remaining 1.46 acres, running adjacent to the perimeter of the property, bordering Maybell and Clemo Avenues. The 15-unit subdivision would be fee simple lots of approximately 4,000 sq. ft. with residence sizes between 2,000 - 3,200 sq. ft. In order to avoid parking impacts on Maybell and Clemo Ave., garage parking would be provided at the rear of each unit, accessed by an alley in the interior of the lot. To provide equity for the senior affordable housing development, PAHC anticipates selling the subdivision to a developer once the entitlements have been obtained rather than constructing the units themselves and then selling the completed units. Surrounding Uses The project site is surrounded by the following land uses: West- Single Family residences North - Multifamily residences (Arastradero Park owned by PAHC) East- Multifamily residences (The Tan Plaza Continental) South- Briones Park $3,220,220 Long term Loan Agreement The proposed long term Loan Agreement details the terms of the City $3,220,220 loan, which will be evidenced by a Note and Deed of Trust secured by the property. The Note will bear simple interest at 3% per annum, and payments will be made from residual receipts over and above the project’s net operating income expenses and will be divided among other funding agencies based on the City’s proportionate share of its funding to total development costs. All City loan agreements also provide the City with remedies to recoup the loan if the developer defaults or the project does not otherwise move forward (such as securing sufficient financing for the development or not receiving the necessary land use entitlements by a certain date). The sources of funds to be used for the long term loan are as follows: Fund 233 (Residential Housing Fund) $1,000,000 Fund 234 (Commercial Housing Fund) $1,500,000 SUMC Funds $ 720,220 Total of Funds $3,220,220 Due to the deep affordability of the rents, it is not expected that cash flow will be sufficient to pay the annual interest in full. The proposed project will be affordable to extremely low and low income senior households, and the affordability restrictions will be in place for a minimum of 55 years after the issuance of a certificate of occupancy. Three key provisions of the City’s standard loan terms required modification to meet the requirements of two of the other lenders, LISC and LIIF. These modifications create some risk to the City because the proposed revised terms offer less protection for the City’s investment. First, the City proposed a consent provision that would give the City the right to approve any third party developer in order to ensure that the buyer has the capability and experience to construct high quality housing that conforms to the City’s rules, policies and ordinances. Although this is a relatively common provision, particularly given the amount of the City’s contribution and the fact that the City has a unique interest because the project will be constructed in our community, the other lenders refused to lend to PAHC if this provision is included in the City’s agreement. Instead, the parties agreed that PAHC would provide the City with 45 days notice prior to selling to a developer chosen by PAHC. This notice will give the City the opportunity to discuss concerns with PAHC, and the City and PAHC have a long history of working cooperatively, however, it is important to note that it provides the City with less protection and control than the original consent language. Second, the City’s forms included a provision that required the remainder parcel (where the senior housing will be built) to appraise at or above the value of the City’s loan before the market rate parcel could be sold. LISC and LIFF would not agree to any prerequisite for sale of the market rate parcel, and PAHC objected because it did not believe it would be possible to meet this condition. Based on PAHC’s experience with recent projects, market value decreases substantially once affordability conditions are placed on a property. Therefore, they believe it is likely that the remainder parcel will appraise for less than the value of the City’s loan. As an alternative to the appraisal, the City proposed requiring PAHC to provide proof of construction financing as a way to help ensure that the senior housing project would be constructed. However, PAHC also objected to that alternative because it can take several applications to be awarded the tax credit financing that they intend to use to finance construction, and they would like to sell the market rate parcel as soon as entitlements are approved. Because the parties could not find an acceptable compromise, this provision has been deleted from the agreement. However, not including such a provision creates a clear risk for the City that the collateral may not equal the value of the City’s loan. While staff believes that its standard loan provisions provide the best protections for the City’s investment, staff also recognizes the City’s longstanding commitment to affordable housing and history of successful partnerships with PAHC on affordable projects. It is up to the Council to decide whether that commitment outweighs the risks in this particular agreement. If the Council approves the agreement with these revisions, staff believes that there are a range of conditions that may be considered in the entitlement process to help ensure that the affordable portion of the project will be constructed. $2,600,000 Proposed Short Term Loan The PAHC requires a total of approximately $5.8 million in loans from the City to enhance the likelihood of obtaining needed State tax credits for the project. The City does not currently have sufficient funds available in the commercial and residential housing funds to lend the full amount. However, this project would be a permissible use of the SUMC funding. In addition, staff estimates that up to $6 million in funds will potentially be added to the City’s housing funds through fees anticipated over the next two years, including fees from recently approved development and depending on the outcome of pending litigation by one housing developer. Staff is therefore requesting direction from the Council on whether to extend a second loan to PAHC in the amount of $2,600,000. Staff proposes that this second loan would have a shorter term of 2 years, with an option of a 1-year extension. The interest rate would be 3% per annum with payments deferred for the term of the loan. Staff proposes to structure the funding for this short term loan effectively as an advance to the affordable housing fund from the SUMC Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing Fund. As various commercial and housing developments pay their affordable housing in-lieu fees over the next two-years, funding for those fees would be substituted for the SUMC funds, effectively replenishing the SUMC fund. The short-term loan likely will then be converted to a long-term loan and/or combined with the first long-term loan. An interim letter of credit will allow PAHC to make up the $2.6 million and close escrow on the purchase by November 30. If Council chooses not to move forward with the short-term loan, however, PAHC will need to find other funding to complete its financing needs, likely from private sources. It is important to note that if additional City funding (for a total of $5.8 million from the City) is not available before June of 2013, PAHC will likely have a much more difficult time obtaining the tax credits needed to finance the construction. Staff acknowledges that, while the loan should be paid back within 2-3 years, the City is likely to have other demands on the SUMC funds for infrastructure needs during this period, and that the loan for affordable housing may defer the availability of the full complement of SUMC funding for this period. This housing project, however, is a key opportunity to fulfill City housing goals with a project comprised of senior housing units expected to have little effect on traffic and school capacity. If the Council provides direction for staff to move forward with the $2.6 million loan, staff will prepare the required BAO and loan documents for consideration at the December 3, 2012 Council meeting. City Financial Commitment per Unit Developed The commitment of $5.8 million for 60 affordable housing units at this site provides a City contribution equivalent to approximately $100,000 per unit. For the two most recent City- funded new construction affordable housing projects, the City’s commitment was approximately $150,000 per unit for the Tree House Apartments at 488 W. Charleston Rd. and $400,000 per unit (including loans and land donation) for the 801 Alma family housing project. Rents and Occupancy of the Apartments In order to succeed in the competition for the State’s tax credit allocation, PAHC needs to emphasize housing for extremely low-income and very-low income households. The project’s proposed rent categories and income limits are shown below; actual rents may change somewhat by the time the project is constructed and ready for occupancy due to changes in the County median income. Maybell Housing Project – Description of Proposed Units and Rental Structure Rent As A Percent of Median Income 1-Bedroom Units Extremely Low Income (30% of AMI) 20 Very Low Income (45% of AMI) 6 Very Low Income (50% of AMI) 24 Low Income (60% of AMI) 9 Manager’s Unit 1 Total Units 60 Notes: AMI means the Area Median Income for Santa Clara County, which equals $105,000 for a household of four persons as published on February 1, 2012. Development Review Zoning and site plan review will be required subsequent to the PAHC purchase of the site and submittal of a development application. The process will include review by the Architectural Review Board, the Planning and Transportation Commission, and the City Council. On September 18, 2012, PAHC presented conceptual site and elevation plans for the proposed project to the City Council for comment and feedback. PAHC plans to incorporate responses to those comments when it submits an application for land use approvals. However, providing this loan does not commit the City to any particular course of action related to decisions on the land use entitlements and the agreement specifically states that the City retains full discretion to approve or disapprove the site-specific land use approvals. Resource Impacts The City currently has approximately $4.7 million in the Residential Housing In-Lieu Fund. Approximately $3.7 million, however, has been earmarked for other uses or cannot be spent until ongoing litigation is resolved, leaving approximately $1.0 million available for grants and subsidies. The Commercial Housing In-Lieu Fund balance is approximately $1.6 million, of which $1.1 million is allocated for grants and subsidies. The Stanford University Medical Center (SUMC) Fund provided $1,720,488 dedicated to affordable housing only. Council recently committed $1,000,000 of this dedicated payment to the Stevenson House rehabilitation, leaving $720,488 available. To fund the loan, staff proposes to use the budgeted $1,000,000 from the Residential Housing In-Lieu Fund, $1.5 million (of which $1.1 million is budgeted) from the Commercial Housing In- Lieu Fund and $720,220 from the SUMC Fund for the Maybell site acquisition. This requires a Budget Amendment Ordinance (BAO) to appropriate an additional $400,000 to the Grants and Subsidies budget of the Commercial Housing In-Lieu Fund and to appropriate and transfer $720,220 from the SUMC Fund to the Residential Housing In-Lieu Fund. The SUMC Funds will be transferred to the Residential Housing In-Lieu Fund to avoid making loans directly from the SUMC Fund. As part of the SUMC Development Agreement, SUMC agreed to pay approximately $44.3 million in public benefit funds. Of the $44.3 million, approximately $23.2 million has been earmarked for the SUMC Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing Fund. The City has received $20,800,333 in SUMC public benefit funds as of June 30, 2012 of which $7.7 million was deposited in the SUMC Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing Fund. The SUMC Parties will pay an additional $11.7M in public benefit funds upon issuance of the first hospital foundation permit, expected in early December 2012, of which another $7.7 million will be placed in the SUMC Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing Fund for a total of $15.4 million in the fund. An additional payment of $11.7M upon issuance of the first hospital occupancy permit, is expected in 2018 in which the final $7.7 million will be deposited into the Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing Fund. Sources for the Acquisition of the Parcel ACQUISITION FINANCING PRIOR TO MARKET RATE LAND SALE ACQUISITION SOURCES total - County Loan $ 2,759,780 LISC Loan $ 3,500,000 LIIF Loan $ 3,500,000 City Loan $ 3,220,220 Other funding (possible City loan) $ 2,600,000 total $ 15,580,000 PAHC estimates the overall development cost for the 60-unit Maybell project to be $21.1 million as shown below. MAYBELL ORCHARD SENIOR HOUSING DEVELOPMENT BUDGET ACQUISITION total per unit Financing for the development is expected from the following funding sources: Land $ 6,480,000 $ 108,000 Other Acquisition Costs $ 292,550 $ 4,876 Total Acquisition Costs $ 6,772,550 $ 112,876 HARD COSTS Construction/Rehabilitation $ 8,397,784 $ 139,963 Commercial Costs $ - $ - Site Work $ 650,000 $ 10,833 General Contractor O&P $ 827,850 $ 13,798 Total Hard Costs $ 9,875,634 $ 164,594 SOFT COSTS Architectural $ 603,671 $ 10,061 Survey & Engineering $ 325,000 $ 5,417 Construction Interest + Fees $ 798,628 $ 13,310 Financing & Syndication $ 150,439 $ 2,507 Local Permits and Fees $ 260,000 $ 4,333 Legal Fees $ 100,000 $ 1,667 Developer Fee $ 1,400,000 $ 23,333 $ - $ - Relocation $ - $ - Reserves $ 135,113 $ 2,252 Other Soft Costs $ 705,000 $ 11,750 Total Soft Costs $ 4,477,851 $ 74,631 TOTAL DEVELOPMENT COSTS $ 21,126,035 $ 352,101 MAYBELL ORCHARD SENIOR HOUSING FINANCING total per unit PERMANENT SOURCES - - Conventional Mortgage $ 1,228,000 $ 20,467 City Loan $ 3,220,220 $ 53,671 Tax Credit Investor Proceeds $ 11,318,034 $ 188,634 Policy Implications The actions recommended in this report implement the City’s adopted Housing Element policies and programs supporting the development of very low and extremely low income housing. Policy H-12 calls for encouraging, foster and preserve diverse housing opportunities for very low-, low- and moderate-income households. In addition, Policy H-18 supports housing that incorporates facilities and services to meet the health care, transit, or social service needs of households with special needs, including seniors and persons with disabilities. These 60 units will be counted towards the City’s housing production goals for the 2007 to 2014 Housing Element period. The proposed project is a 100% affordable housing development that will serve individuals who are earning 30 to 60 percent of the area wide median income. A large percentage of Palo Alto’s seniors are in this targeted income range. This population is underserved in the City and many cannot afford to pay market rate rents. State Housing Element law requires that localities provide for their “fair share” of the region’s housing need. The Association of Bay Area Governments (ABAG) determined that Palo Alto’s projected need for the period from January 1, 2007 – June 30, 2014 will be 2,860 units, of which 633 units are presently unmet need in the Very Low Income category. This project will also provide 20 of the 60 units to households below 35% of the AMI, considered Extremely Low Income, which will help the City address State requirements to assist in meeting housing needs of this population. Environmental Review By approving this acquisition loan agreement, the City has made no commitment to approve the project or any particular application for land use approvals on the property. The provision of financing for acquisition of the property is consistent with the land use element of the City’s Comprehensive plan and with the City’s affordable housing goals as outlined in the Housing Element of the Comprehensive Plan, and the approval of this agreement is within the scope of that program EIR and no new environmental review is required in that no specific plans for development of the property have been submitted that would create additional environmental impacts. Site-specific environmental review will be completed when an application for specific land use approvals is made and plans are developed for the project. Attachments: Attachment A: Budget Amendment Ordinance (DOCX) Attachment B: Loan Agreement (PDF) County SAHF loan $ 2,759,780 $ 45,996 Other Source (possible City loan) $ 2,600,000 $ 43,333 total $ 21,126,035 $ 352,101 Attachment C: City Council minutes of September 18, 2012 (PDF) Prepared By: Tim Wong, Senior Planner Department Head: Curtis Williams, Director City Manager Approval: ____________________________________ James Keene, City Manager ORDINANCE NO. ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING THE BUDGET FOR FISCAL YEAR 2013 TO PROVIDE ADDITIONAL APPROPRIATION OF $400,000 FROM THE COMMERCIAL HOUSING IN-LIEU FUND AND ADDITIONAL APPROPRIATION OF $720,220 FROM THE STANFORD UNIVERSITY MEDICAL CENTER (SUMC) INFRASTRUCTURE, SUSTAINABLE NEIGHBORHOODS AND COMMUNITIES, AND AFFODABLE HOUSING FUND TO BE LOANED TO PALO ALTO HOUSING CORPORATION FOR THE ACQUISITION OF TWO PARCELS The Council of the City of Palo Alto does ordain as follows: SECTION 1. The Council of the City of Palo Alto finds and determines as follows: A. Pursuant to the provisions of Section 12 of Article III of the Charter of the City of Palo Alto, the Council on June 18, 2012 did adopt a budget for Fiscal Year 2013; and B. The City desires to make a long-term loan to the Palo Alto Housing Corporation for the acquisition of two parcels, located at 567-595 Maybell Avenue for the purpose of developing the site into a 60-unit affordable rental housing project for extremely-low and very-low and low income seniors and a 15 unit market rate single family residential subdivision; and C. The loan totals Three Million Two Hundred Twenty Thousand Two Hundred Twenty Dollars ($3,220,220); and D. The 2011 Stanford University Medical Center (SUMC) Development Agreement provided funds for use in connection with infrastructure, sustainable neighborhoods and communities, and affordable housing; and E. Available balance in the Affordable Housing portion of the Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing Fund is Seven Hundred Twenty Thousand Four Hundred Eighty-eight dollars ($720,488); and F. One Million Dollars ($1,000,000) has already been appropriated by Council in the Residential Housing In-Lieu Fund; and G. One Million One Hundred Dollars ($1,100,000) has been appropriated by Council in the Commercial Housing In- Lieu Fund; and H. An additional appropriation of Four Hundred Thousand Dollars ($400,000) is needed for the Commercial Housing In-Lieu Fund; and I. An appropriation in the amount of Seven Hundred Twenty Thousand Two Hundred Twenty Dollars ($720,220) is needed for the SUMC Fund to be transferred to the Residential Housing In-Lieu Fund for the loan to Palo Alto Housing Corporation (PAHC); and J. A summary of the funding needed is shown in the table below Source of funds Already budgeted Needs appropriation Total to project Residential Housing In-Lieu $1,000,000 $0 $1,000,000 Commercial Housing In-Lieu $1,100,000 $400,000 $1,500,000 SUMC affordable housing only $720,220 $720,220 Total loan $3,220,220 ;and K. City Council authorization is needed to amend the Fiscal Year 2013 Operating Budget as hereinafter set forth. SECTION 2. The sum of Four Hundred Thousand Dollars ($400,000) is hereby appropriated to Grants and Subsidies in the Commercial Housing In-Lieu budget and the available balance of the Commercial Housing In-Lieu Fund is hereby reduced to Eighty-one Thousand Six Dollars ($81,006). SECTION 3. The sum of Seven Hundred Twenty Thousand Two Hundred Twenty Dollars ($720,220) is hereby appropriated to Grants and Subsidies in the Residential Housing In-Lieu Fund and the Affordable Housing portion of the SUMC Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing balance is reduced to Two Hundred Sixty-eight Dollars ($268) SECTION 4. As specified in Section 2.28.080(a) of the Palo Alto Municipal Code, a two-thirds vote of the City Council is required to adopt this ordinance. SECTION 5. As provided in Section 2.04.330 of the Palo Alto Municipal Code, this ordinance shall become effective upon adoption. SECTION 6. The Council of the City of Palo Alto hereby finds that amending the budget to provide the loan to PAHC this is not a project under the California Environmental Quality Act. By approving the acquisition loan agreement, the City has made no commitment to approve the project or any particular application for land use approvals on the property. The provision of financing for acquisition of the property is consistent with the land use element of the City’s Comprehensive plan and with the City’s affordable housing goals as outlined in the Housing Element of the Comprehensive Plan, and the approval of this agreement is within the scope of that program EIR and no new environmental review is required in that no specific plans for development of the property have been submitted that would create additional environmental impacts. Site-specific environmental review will be completed when an application for specific land use approvals is made and plans are developed for the project. INTRODUCED AND PASSED: AYES: NOES: ABSTENTIONS: ABSENT: ATTEST: APPROVED: __________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: ___________________________ City Manager __________________________ ___________________________ Senior Deputy City Attorney Director of Planning and Community Environment __________________________ Director of Administrative Services ACQUISITION AND DEVELOPMENT LOAN AGREEMENT AND OPTION TO PURCHASE by and between THE CITY OF PALO ALTO A Chartered City and Municipal Corporation and PALO ALTO HOUSING CORPORATION A California Non-Profit Public Benefit Corporation For the Real Property Located at: 567-595 Maybell Avenue (APN: 137-25-108, 137-25-109) Dated ,2012 TABLE OF CONTENTS ARTICLE 1 DEFINITIONS AND EXHIBITS 2 Section 1.1 Definitions ......................................................................................................... 2 Section 1.2 Exhibits~ ............................................................................................................ 6 ARTICLE 2 LOAN PROVISIONS 6 Section 2.1 LOaIl ................................................................................................................... 6 Section 2.2 Interest ............................................................................................................... 6 Section 2.3 Use of Funds ...................................................................................................... 7 Section 2.4 Security ............................................................................................................. 7 Section 2.5 Subordination .................................................................................................... 7 Section 2.6 Disbursement Requirements -Acquisition LOaIl ............................................. 9 Section 2.7 Subordination to Construction FinaIlcing ....................................................... 1 0 Section 2.8 Subordination to PennaIlent FinaIlcing ........................................................... 12 Section 2.9 Repayment of the City LOaIl ........................................................................... 12 Section 2.10 Non-Recourse ............................................................................................... 15 ARTICLE 3 PREDEVELOPMENT ACTIVITIES 15 Section 3.1 Predevelopment Activities .............................................................................. 15 Section 3.2 LaIld Use Approvals aIld CEQA Review ....................................................... .l6 Section 3.3 Tax Credit aIld Other FinaIlcing Applications ............................................... .l6 Section 3.4 FinaIlcing PlaIl ................ : ............................................................................... 17 Section 3.5 Building Permit ............................................................................................... 18 ARTICLE 4 ONGOING OBLIGATIONS 18 Section 4.1 Periodic Reports .............................................................................................. 18 Section 4.2 Information ..................................................................................................... 18 Section 4.3 Records ........................................................................................................... 18 Section 4.4 Audits ............................................................................................................... 18 Section 4.5 CompliaIlce with Laws; Prevailing W·ages ..................................................... 19 Section 4.6 Relocation ........................................................................................................ 19 Section 4.7 Hazardous Materials ....................................................................................... 20 Section 4.8 MaintenaIlce aIld Damage ............................................................................... 22 Section 4.9 MechaIlics Liens, Stop Notices, aIld Notices of Completion .......................... 23 Section 4.10 Fees and Taxes .............................................................................................. 23 Section 4.11 Notices .......................................................................................................... 24 Section 4.12 Non-Discrimination ...................................................................................... 24 Section 4.13 InsuraIlce Requirenlents ................................................................................ 24 Section 4.14 Transfer ......................................................................................................... 25 Section 4.15 Other Indebtedness and Liens ....................................................................... 26 Section 4.16 Use as Affordable Housing ........................................................................... 26 121115 sh 8262008 TABLE OF CONTENTS (continued) ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BORROWER 26 Section 5.1 Representations and Warranties ..................................................................... .26 Section 5.2 Survival of Representations and Warranties ................................................... 28 ARTICLE 6 TERMINATION, DEFAULT AND REMEDIES 28 Section 6~ 1 Tennination of Agreement. ............................................................................. 28 Section 6.2 Events of Default ............................................................................................ 29 Section 6.3 Remedies ......................................................................................................... 31 Section 6.4 Option to Purchase, Enter and Possess .............................................................. 31 Section 6.5 Right of Contest .............................................................................................. 32 Section 6.6 Remedies Cumulative .................................................................................... .33 ARTICLE 7 GENERAL PROVISIONS 33 Section 7.1 Agreement Coordination ................................................................................ .33 Section 7.2 Relationship of Parties ................................................................................... .33 Section 7.3 No Claims ........................................................................................................ 34 Section 7.4 Amendments ................................................................................................... 34 Section 7.5 Entire Understanding of the Parties ............................................................... .34 Section 7.6 hldemnification ............................................................................................... 34 Section 7.7 N on-Liability of CITY and CITY Officials, Employees and Agents ............. 34 Section 7.8 No Third Party Beneficiaries .......................................................................... 35 Section 7.9 Action by the CITY; Amendments ................................................................ .35 Section 7.10 Waivers .......................................................................................................... 35 Section 7.11 Notices, Demands and Communications ...................................................... 35 Section 7.12 Applicable Law and Venue ........................................................................... 36 Section 7.13 Parties Bound ................................................................................................ 36 Section 7.14 Attorneys' Fees .............................................................................................. 36 Section 7.15 Severability ............. ~ ..................................................................................... 37 Section 7 .16 Force Majeure ............................................................................................... 37 Section 7.17 Conflict of Interest. ....................................................................................... 37 Section 7.18 Time of Essence ............................................................................................ 3 8 Section 7.19 Title of Parts and Sections; Exhibits ............................................................ .38 Section 7.20 Multiple Originals; Counterpart .................................................................... 3 8 Section 7.21 Recording of Memo of Agreement. .............................................................. 38 Section 7.22 Further Actions ............................................................................................. 38 EXHIBIT A: Legal Description of the Property EXHIBIT B: Note EXHIBIT C: Deed of Trust EXHIBIT D: Estimated Project Costs and Sources of Funds EXHIBIT E: Schedule of Perfonnance EXHIBIT F: Assignment of Documents EXHIBIT G: Insurance Requirements 895\05\1232792.2 10/29/2012 ii ACQUISITION AND DEVELOPMENT LOAN AGREEMENT AND OPTION TO PURCHASE (Maybell Orchard Apartments, 567-595 Maybell Avenue, Palo Alto, California) This Acquisition and Development Loan AS!:eement and Option to Purchase (the -"Agreement") is made and entered into on 20) (the "Effective Date"), by and between the CITY OF PALO ALTO, a chartered city and a municipal corporation (the "CITY") and PALO ALTO HOUSING CORPORATION, a· California non-profit public benefit corporation, with offices at 725 Alma Street, Palo Alto, California 94301 (the "BORROWER"). RECITALS A. On June 22, 2012, BORROWER entered into a purchase and sale agreement with Maybell Sambuceto Properties, LLC, a California limited liability company, and Sambuceto Partners, a California limited partnership, to acquire the property located at 567-595 Maybell Ave., Palo Alto, California (the "Property") for a purchase price of Fifteen Million Five Hundred Eighty Thousand Dollars ($15,580,000) forthe purpose of developing an affordable rental housing project. A legal description of the Property is attached as Exhibit A. . B. BORROWER proposes to construct approximately sixty (60) residential rental units (the "Project") on a portion of the Property, of which fifty-nine (59) units would be affordable to low, very low, and extremely low income senior households earning between thirty percent (30%) and sixty percent (60%) of area median income as determined by the United States Department of Housing and Urban Development. BORROWER further desires to sell a portion of the Property totaling approximately 1.46 acres (the "Market-Rate Parcel") to a third party for construction of market-rate housing to reduce the acquisition and development costs related to the Proj ect. C. To secure the Property for possible use as affordable housing, BORROWER wishes to borrow' from the CITY and the CITY wishes to extend to the BORROWER a loan of Three Million Two Hundred Twenty Thousand Two Hundred Twenty Dollars ($3,220,220) (the "City Loan") to assist in the acquisition of the Property. The City Loan will be evidenced by a promissory note (the "Note", attached as Exhibit B) executed by the BORROWER in favor of the CITY and secured by a deed of trust recorded against the Property (the "Deed of Trust," attached as Exhibit C). The City Loan will be further secured by an Assignment of Documents as defined below. D. Through this Agreement, the City has made no commitment to approve the Project nor any particular application for Land Use Approvals (as defined below) on the Property, and site specific environmental review will be completed when such application is made and plans are developed for the Project. The provision of financing for acquisition of the Property, without commitment to any specific project, is consistent with the Land Use Element of the Comprehensive Plan and with the CITY's affordable housing goals as outlined in the Housing Element of the Comprehensive Plan. A program Environmental Impact Report on the CITY'S Comprehensive Plan was certified by the Palo Alto City Council on July 20, 1 121115 sh 8262008 1998. The approval of this Agreement is within the scope of that program EIR, and no new environmental document is required, in that no specific plans for development of the Property have been proposed that would create additional environmental impacts. E. CITY has established the Affordable Housing Fund for the purpose of providing loans to support the development of affordable rental housing. The expenditure of funds for site acquisition to secure a site for possible use as low income housing is an eligible activity under the CITY's Affordable Housing Fund Guidelines. There is a severe shortage of rental housing affordable to senior residents with extremely low, very low, and low incomes in Palo Alto and nearby areas. F. BORROWER and CITY desire to enter into this Agreement to establish certain terms and conditions relating to the City Loan. NOW, THEREFORE, in consideration of the mutual covenants and agreements specified herein, and subject to its terms and provisions, the parties to this Agreement hereby agree as follows. AGREEMENT The foregoing recitals are hereby incorporated by reference and made part of this Agreement. This Agreement is entered into to assist the BORROWER in the acquisition of the Property and the development of the Project, which consists of multifamily rental housing reserved for occupancy by extremely low, very low, and low income households. This Agreement sets forth the respective duties and responsibilities of CITY and BORROWER regarding the acquisition of the Property and financing for the development of the Project, establishes a schedule of perfomlance by BORROWER, and provides for a termination of this Agreement under certain conditions. ARTICLE 1 DEFINITIONS AND EXHIBITS Section 1.1 Definitions. The following capitalized terms have the meanings set forth in this Section 1.1 wherever used in this Agreement, unless otherwise provided: (a) "Agreement" is defined in the first paragraph of this Agreement. (b) "Annual Operating Expenses" is defined in Section 2.9 below. (c) "Approved Acquisition Financing" shall mean all of the following loans: 2 121115 sh 8262008 (1) Loan from the Local Initiatives Support Corporation ("LISC"), a New York not-for-profit corporation with its principal offices located at 501 Seventh Avenue, 7th Floor, New York, New York 10018, in the approximate amount of Four Million Dollars ($4,000,000) (including an interest reserve not to exceed Five Hundred Thousand Dollars ($500,000)), secured by a shared, first priority deed of trust on the Property (the "LISC Loan"); (2) Loan from the Low Income Investment Fund ("LIIF"), a California nonprofit public benefit corporation with offices located at 1 00 Pine Street, Suite 1800, San Francisco, California 94111, in the approximate amount of Four Million Dollars ($4,000,000) (including an interest reserve not to exceed Five Hundred Thousand Dollars ($500,000)), secured by a shared, first priority deed of trust on the Property (the "LIIF Loan"); (3) Loan from the County of Santa Clara in the approximate amount of Two Million Seven Hundred Fifty Nine Thousand Seven Hundred Eighty Dollars ($2,759,780) (the "County Loan"). (d) "Approved Construction Financing" shall mean the City Loan, the County Loan, and the following additional financing: (1) Tax Credit Investor Proceeds in the approximate amount of One Million One Hundred Thirty Two Thousand Dollars ($1,132,000); and (2) Construction Loan in the approximate amount of Ten Million One Hundred Sixty One Thousand Dollars ($10,161,000), on terms reasonably approved by the CITY. (e) "Approved Financing" means the Approved Acquisition Financing, the Approved Construction Financing, and/or the Approved Permanent Financing. (f) "Approved Permanent Financing" shall mean the City Loan, the County Loan, and the following additional financing: (1) Tax Credit Investor Proceeds in the approximate amount of Eleven Million Three Hundred Eighteen Thousand Dollars ($11,318,000); and (2) Conventional Mortgage in the approximate amount of One Million Two Hundred Twenty Eight Thousand Dollars ($1,228,000), on terms reasonable approved by the CITY. (g) "Assignment of Documents" is defined In Section 2.4. The form of the Assignment of Documents is attached hereto as Exhibit F. 3 121115 sh 8262008 (h) "BORROWER" is defined in the first paragraph of this Agreement. (i) "CEQA" means the California Environmental Quality Act, Public Resources Code Section 21000 et seq. G) "CITY" is defined in the first paragraph of this Agreement. (k) "City Council" means the City Council of the CITY. (1) "City Loan" is defined in paragraph C of the Recitals. The City Loan is more pru1icularly described in Section 2.1 below. (m) "City Manager" means the City Manager of the CITY or the City Manager's designee. (n) "Construction Bond" is defined in Section 2.7 below. (0) "Construction Closing" means the date upon which all financing necessary for the construction of the Project on the Property closes, and any deeds of trust related to such financing are recorded against the Property. (P) "Construction Contractor" is defined in Section 2.7 below. (q) "Deed of Trust" is defined in Recital C. The form of the Deed of Trust is attached hereto as Exhibit C. (r) "Default" has the meaning set forth in Section 6.2 below. (s) "Default Rate" has the meaning set forth in Section 2.2 below. (t) "Effective Date" is defined in the first paragraph of this Agreement. (u) "Financing Plan" has the meaning set forth in Section 3.4 below. (v) "Force Majeure" is defined in Section 7.16 below. (w) "General Contractor" is defined in Section 2.7 below. (x) "Gross Revenue" is defined in Section 2.9 below. (y) "Hazardous Materials" has the meaning set forth in Section 4.9 below. (z) "Hazardous Materials Claim" has the meaning set forth in Section 4.9 below. (aa) "Hazardous Materials Law" has the meaning set forth in Section 4.9 below. (bb) "Land Use Approvals" is defined in Section 3.2 below. 4 121115 sh 8262008 (cc) "Loan Documents" means this Agreement, the Note, the Deed of Trust, the Assignment of Documents, the Memo of Agreement, the Regulatory Agreement, and any other docunlent or agreement evidencing the City Loan. (dd) "Market-Rate Parcel" is defined in Recital B. (ee) "Memo of Agreement" means the Memorandum of Acquisition and Development Loan Agreement and Option to Purchase to be recorded against the Property upon acquisition by BORROWER. (ff) "Note" is defined in Recital C. The form of the Note is attached hereto as Exhibit B. (gg) "Notice of Exercise II has the meaning set forth in Section 6.4 below. (bb) "Option to Purchase" is defined in Sections 2.4 and 6.4 below. (ii) "Permanent Closing" means the date upon which all financing necessary for the operation of the Project on the Property c-loses, and any deeds of trust related to such financing are recorded against the Property. (jj) "Predevelopment Activities" means the activities to be performed by BORROWER during the Term, as further described in Article 3 below. (kk) "Project" is defined in Recital B. (11) "Project Budget" is the pro forma acquisition and construction budget for the Project, including sources and uses of funds, as approved by the CITY, and attached as Exhibit D. (mm) "Project Documents" are defined in Section 2.4(b) below. (nn) "Property" is defined in Recital A, and is more particularly described in the attached Exhibit A. (00) "Regulatory Agreenlent" means covenants entered into between the CITY and the BORROWER, to be recorded prior to Construction Closing, which requires that the Project, if approved by the CITY, be maintained and operated as housing affordable to extremely low, very low, and low-income households. (Pp) "Residual Receipts" are defined in Section 2.9 below. (qq) "Schedule of Performance" is defined in Section 3.1 below, and IS more particularly described in Exhibit E. 5 121115 sh 8262008 (rr) "Senior Lenders" are defined in Section 2.5 below. (ss) "Senior Loan" is defined in Section 2.5 below. (tt) "TCAC" means the California Tax Credit Allocation Committee. (uu) "Term" is defined in Section 2.9 below. (vv) "Termination Notice" is defined in Section 6.1 below. (ww) "Transfer" has the meaning set forth in Section 4.14 below. Section 1.2 Exhibits. The following exhibits are attached to this Agreement and incorporated into this Agreement by this reference: EXHIBIT A: Legal Description of the Property EXHIBIT B: Note EXHIBIT C: Deed of Trust EXHIBIT D: Estimated Project Costs and Sources of Funds EXHIBIT E: Schedule of Performance EXHIBIT F: Assignment of Documents EXHIBIT G: Insurance Requirements ARTICLE 2 LOAN PROVISIONS Section 2.1 Loan. Subject to satisfaction of the conditions set forth in Section 2.6, the CITY shall loan to the BORROWER the City Loan in the principal amount of Three Million Two Hundred Twenty Thousand Two Hundred Twenty Dollars ($3,220,220) for the purposes set forth in Section 2.3 of this Agreement. The obligation to repay the Loan shall be evidenced by the Note in the form attached hereto as Exhibit B. - Section 2.2 Interest. (a) Subject to the provisions of Section 2.2(b) below, the outstanding principal balance of the City Loan will bear simple interest at the rate of three percent (3%) per annum commencing with the date of the Permanent Closing. (b) In the event of a Default, interest on the City Loan will begin to accrue, as of the date of Default and continue until such time as the City Loan funds are repaid in full or the 6 121115 sh 8262008 Default is cured, at the default rate of the lesser of eight percent (8%) per annum, compoundeq annually (the "Default Rate") and the highest rate permitted by law. Section 2.3 Use of Funds. BORROWER shall use the City Loan to fund the acquisition and development of the Property. BORROWER shall not use the City Loan for any other purpose without the prior written consent of the CITY. < Section 2.4 Security. (a) Deed of Trust. The BORROWER shall secure its obligation to repay the City Loan, as evidenced by the Note, by executing the Deed of Trust, and recording it as a lien against the Property senior in lien priority to all other deeds of trust <recorded against the Property except the LIse Loan and the LIIF Loan. The BORROWER shall also cause or permit the Memo of Agreement to be recorded against the Property in a position superior to all other deeds of trust recorded against the Property except the LISC Loan and the LIIF Loan. (b) Assignment of Documents. As further consideration and security for the City Loan, the BORROWER hereby assigns to the CITY its rights and obligations with respect to certain agreements, plans, specifications, other documents, and approvals (the "Project Documents"), pursuant to an Assignment of Agreements, Plans and Specifications, and Approvals (the "Assignment of Documents"), substantially in the form set forth in the attached Exhibit F. The assignments set forth in the Assignment of Documents shall become effective immediately upon the occurrence of a Default (as defined below in Section 6.2) or upon termination as described in Section 6.1. The CITY shall not have any obligation under any contracts or agreements assigned pursuant to the Assignment of Documents until the CITY expressly agrees in writing to be bound by such contracts or agreements. Upon Default or termination, the CITY may use any of the foregoing assigned documents pursuant to the Assignment of Documents for any purpose for which the BORROWER could have used them for development of the Project, and the BORROWER shall cooperate with the CITY to implement the Assignment of Documents and shall immediately deposit with the CITY for the CITY'S use all Project Documents that are the subject of the Assignment of Documents. (c) Option to Purchase. As further consideration and security for the City Loan, BORROWER hereby grants and gives to the CITY a right to purchase all of BORROWER's right, title and interest in and to the Property upon Default on the terms set forth in Section 6.4 (the "Option to Purchase"). Section 2.5 Subordination. The Deed of Trust, Regulatory Agreement, and/or Memo of Agreement may (which includes the City's Option to Purchase), shall be subordinated to other loans approved by the CITY (in each case, a "Senior Loan"), but only on condition that all of the following conditions are satisfied. The LISC Loan and the LIIF Loan are considered a Senior Loan. 7 121115 sh 8262008 (a) Subordination to Construction Financing. The CITY shall subordinate the Deed of Trust, Regulatory Agreement, and/or Memo of Agreement to Senior Loans proposed for Construction. Closing if all of the conditions contained in Section 2.7 and in subsection (c) of this Section have been complied with. (b) Subordination to Permanent Financing. The City shall subordinate the Deed of Trust, Regulatory Agreement, and/ or Memo of Agreement to Senior Loans proposed for Permanent Closing if all of the conditions contained in Section 2.8 and in subsection (c) of this Section have been complied with. (c) Conditions Applicable to All Subordination Agreements. In addition to compliance with the requirements of subsection (a) or (b) above, all of the following conditions must be. satisfied in all agreements subordinating the CITY's Loan Documents: (1) All of the proceeds of the proposed Senior Loan, less any transaction costs, must be used to provide acquisition, construction, rehabilitation, and/or permanent financing for the Project; (2) The proposed lender (each, a "Senior Lender") must be a state or federally chartered financial institution, a nonprofit corporation or a public entity that is not affiliated with BORROWER or any of the BORROWER'S affiliates, other than as a depositor or a lender; (3) BORROWER must demonstrate to the CITY'S reasonable satisfaction that subordination of the Deed of Trust, Regulatory Agreement, and/or Memo of Agreement is necessary to secure adequate acquisition, construction, rehabilitation and/or permanent financing to ensure the operation of the Project, if approved, as affordable housing, as required by the Loan Documents. To satisfy this requirement, BORROWER nlust provide to the CITY, in addition to any other information reasonably required by the CITY, evidence demonstrating that the proposed amount of the Senior Loan is necessary to provide adequate acquisition, construction, rehabilitation and/or permanent financing to ensure the viability of the Project, and that adequate financing for the Project would not be available without the proposed subordination; (4) The subordination agreement(s) must be structured to minimize the risk that the Deed of Trust, Regulatory Agreement, and/or Memo of Agreement would be extinguished as a result of a foreclosure by the Senior Lender or other holder of the Senior Loan. To satisfy this requirement, the subordination agreement must provide the CITY with adequate rights to cure any defaults by BORROWER, including: (i) providing the CITY or its successor with copies of any notices of default at the same time and in the same manner as provided to BORROWER; and (ii) providing the CITY with a cure period of at least forty-five (45) days to cure any default; (5) No subordination may limit the effect of the Deed of Trust, Regulatory Agreement, and/or Memo of Agreement before a foreclosure, nor require consent of the holder of the Senior Loan to exercise of any remedies by the CITY under 8 121115 sh 8262008 the Loan Documents, except for limited standstill periods of up to ninety (90) days as required by the subordination agreements related to the LISC Loan and the LIIF Loan; (6) The subordination(s) described in this Section 2.5 may be effective only during the original term of the Senior Loan and any extension of its term or refinancing approved in writing by the CITY, except as otherwise provided in the subordination agreements related to the LISC Loan and the LIIF Loan. Upon a determination by the City Attorney that the conditions in this Section have been satisfied, the City Manager or hislher designee will be authorized to execute the approved subordination agreement without the necessity of any further action or approval. Section 2.6 Disbursement Requirenlents -Acquisition Loan. The CITY is not obligated to make any disbursement of the City Loan for the acquisition of the Property or take any other action under the Loan Documents unless all of the following conditions precedent are satisfied: (a) There exists no Default nor any act, failure, omission or condition that would constitute an event of Default under this Agreement, or under any other agreement between the CITY and the BORROWER; (b) BORROWER will close escrow and complete the acquisition of the Property on or before May 31, 2013. The City Manager may extend the date for close of escrow pursuant to Section 2.9(a); ( c) BORROWER has delivered to the CITY copies of all of BORROWER's organizational documents, a certificate of status for the BORROWER dated within thirty (30) days of the Effective Date, and a copy of a corporate authorizing resolution authorizing BORROWER's execution of the Loan Documents; (d) BORROWER has furnished the CITY with evidence of the insurance coverage meeting the requirements of Exhibit G (e) BORROWER has executed and delivered to the CITY the Loan Documents and any other instruments and policies required under the Loan Documents, except the Regulatory Agreement; (f) The Memo of Agreement and Deed of Trust have been, or will be concurrently with the acquisition of the Property, recorded against the Property in the Office of the Recorder of the County of Santa Clara in a lien position acceptable to the CITY; (g) The BORROWER and all Contractors, as defined in the Assignment of Documents, have executed and delivered to the CITY the Assignment of Documents in the form attached as Exhibit F; 9 121115 sh 8262008 (h) BORROWER has executed and delivered to the CITY all other documents, instruments, and policies required under the Loan Documents; (i) A title insurer reasonably acceptable to the CITY is unconditionally and irrevocably committed to issuing an ALTA Lender's Policy of insurance insuring the priority of the Memo of Agreement and Deed of Trust in the amount of the City Loan, subject only to such exceptions and exclusions as may be reasonably acceptable to the CITY, and containing such endorsements as the CITY may reasonably require; and G) The CITY has received a written draw request with complete documentation of acquisition expenses from the BORROWER, including all closing costs, demonstrating that the undi~bursed proceeds of the City Loan, together with other funds or firm commitments for funds that BORROWER has obtained in connection with the Property, are not less than the amount that the CITY determines is necessary to pay for acquisition of the Property. If CITY determines that the entire City Loan is not required to pay reasonable and necessary acquisition costs for the Property, CITY may disburse to BORROWER only those funds required to acquire the Property. (k) Following reconveyance of the LISC Loan and the LIIF Loan, if the entire City Loan was not required to pay reasonable and necessary acquisition costs for the Property, BORROWER may submit a written draw request to CITY to disburse the remaining portion of the City Loan for reasonable predevelopment expenses, such as architectural and engineering fees, upon presentation of signed contracts for such services. The City Manager may authorize disbursement of any remaining City Loan funds upon BORROWER's compliance with this subsection (k) and subsections (a). Section 2.7 Subordination to Construction Financing. The City shall not subordinate the Deed of Trust or Memo of Agreement to Senior Loans proposed for Construction Closing unless all of the conditions contained in Section 2.5 and in this Section have been complied with. (a) BORROWER has executed and delivered to the CITY the Regulatory Agreement, and the Regulatory Agreement has been, or will be concurrently with the Construction Closing, recorded against the Property in the Office of the Recorder of the County of Santa Clara in a lien position acceptable to the CITY. (b) BORROWER has submitted to the CITY, and CITY has approved, the Financing Plan as described in Section 3.4, denl0nstrating that the BORROWER holds sufficient funds and/or binding commitments for sufficient funds to complete the construction of the Project in accordance with the plans and specifications for the Project and to subsequently operate and maintain the Project. The development budget may provide for a developer's fee or a similar fee or· fees (the "Developer Fee") based on submittal of the Final Budget to the City. City nlust approve the Final Budget. (c) BORROWER has submitted to the CITY a fully executed copy of a legally binding contract for construction of the Project (the "Construction Contract") which obligates a 10 121115 sh 8262008 reputable and fmancially responsible general contractor (the "General Contractor"), licensed in California and experienced in completing the type of Project contemplated by this Agreement, to commence and complete the construction of the Project, with a guaranteed maximum fixed price consistent with the Final Construction and Permanent Financing Plan. The Construction Contract shall provide for construction of the Project at a guaranteed maximum 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 ten (10) percent from each progress payment until the final payment, and the final payment shall not be paid to the General Contractor until the occurrence of (1), (2) or (3), below: (1) The expiration of thirty (30) days if a Unconditional Waiver and Release has been issued by the General Contractor or the expiration of sixty-five (65) days from the date of recording by BORROWER, as owner, of a Notice of Completion for the Project, which BORROWER 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 Proj ect; or (2) 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' , materialmens' or other like liens filed against the Property; or (3) BORROWER 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', materialmens' or other like liens filed against the Property. (d) The Construction Contract shall require the General Contractor to warrant all work and materials for at least one year after issuance of a certificate of occupancy for the Project. ( e) The CITY shall have received satisfactory evidence that the insurance required by Exhibit G of this Agreement is in effect. (f) The CITY shall have received a Performance Bond and a Labor and Material Payment Bond (in the form of AlA form A311 or A312) (the "Construction Bond"), 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 the construction of the Project free of all liens and claims, within the time provided in the updated Schedule of Performance. The Construction Bond shall be in an amount equal to one hundred percent (100%) of the Construction Contract, shall name the CITY as a co-obligee, and shall be issued by a company acceptable to the CITY and listed in the current United States Treasury Department circular 570 and otherwise within the underwriting limits specified for that company in such circular. 11 121115 sh 8262008 Section 2.8 Subordination to Permanent Financing. The City shall not subordinate the Deed of Trust, Regulatory Agreement, and/or Memo of Agreement to Senior Loans proposed for Pemlanent Closing unless all of the conditions contained in Section 2.5 and in this Section have been complied with. (a) Construction of the Project has been completed, as evidenced by a certificate of occupancy or equivalent certification provided by the CITY and an architect's or engineer's certificate of completion. (b) A notice of completion has been timely recorded. (c) Either the lien period has expired and there are no unreleased mechanics' liens or stop notices; or lien releases have been recorded for all contractors, subcontractors and suppliers who provided labor or materials for the Project. Section 2.9 Repayment of the City Loan. (a) Term. The "Term" of this Agreement and the City Loan commences as of the Effective Date, and expires, unless sooner terminated in accordance with this Agreement or extended pursuant to this subsection, on the earlier of: (i) May 31, 2013, if the Property has not been acquired by BORROWER, or (ii) the date that is fifty-five (55) years after the date of the Permanent Closing. The City Manager may extend the date for acquisition of the Property by up to an additional six months if, in the City Manager's reasonable judgment, the BORROWER is likely to be able to acquire the Property within the extended period. (b) Due in FulL BORROWER shall pay all outstanding principal and accrued interest on the City Loan, in full, on the earliest to occur of (i) any Transfer not authorized by the CITY, (ii) a Default, (iii) on December 31, 2014 or any extension of that date if the Agreement is terminated pursuant to Section 6.1, and (iv) the expiration of the Term. The CITY and the BORROWER shall have the right, but not the obligation, to extend the period for repayment of the City Loan or to modify the terms of the City Loan, including the option to forgive the loan, if desirable to serve the purposes of this Agreement. (c) Annual Payments. No later than April 30th of each calendar year after Permanent Closing, the BORROWER shall make repayments of the City Loan for that prior calendar year based on the available amount of Residual Receipts (as defined below in subsection (c)(3». The CITY shall, in its reasonable discretion, share Residual Receipts proportionately with other lenders in proportion to their respective loan amounts to the Project. These payments shall be credited first against accrued interest and then against outstanding principal of the City Loan, and shall be accompanied by the BORROWER's report of Residual Receipts (including an independent auditor's report regarding the auditor's review of Gross Revenue and Annual Operating Expenses). The BORROWER shall provide the CITY with any documentation reasonably requested by the CITY to substantiate the BORROWER's determination of Residual Receipts. The following definitions shall apply for the purposes of this subsection (c): 12 121115 sh 8262008 (1) "Annual Operating Expenses", with respect to a particular calendar year during the Tenn, means the following costs reasonably and actually incurred for operation and maintenance of the Project to the extent that they are consistent with an annual independent audit perfonned by a certified public accountant using generally accepted accounting principles: property taxes and assessments imposed on the Project; debt service currently due on a non-optional basis (excluding debt service due from residual receipts or surplus cash of the Project) on pennanent loans that are Senior Loans or part of the Approved Financing; property management fees and reimbursements, excluding incentive management fees, not to exceed fees and reimbursements which are standard in the industry; premiums for property damage and liability insurance; utility services not paid for directly by tenants, including water, sewer, and trash collection; maintenance and repair; any annual license or certificate of occupancy fees required for operation of the Project; security services; advertising and marketing; cash deposited into reserves for capital replacements of the Project in the amount required by Senior Lenders, or if there are no Senior Lender requirements, an amount consistent with California Tax Credit Allocation Committee standards; cash deposited into an operating reserve for the Project in an amount required by Senior Lel).ders or the investor's limited partner, or if there are no Senior Lender or limited partner requirements, an amount consistent with California Tax Credit Allocation Committee standards; extraordinary operating costs specifically approved by the CITY; payments of deductibles in connection with casualty . insurance claims not nonnally paid from reserves, the amount of uninsured losses actually replaced, repaired or restored, and not nonnally paid from reserves; deferred BORROWER fees; and other ordinary and reasonable operating expenses approved by the CITY and not listed above. Annual Operating Expenses shall not include the following: depreciation, amortization, depletion or other non-cash expenses or any amounf expended from a reserve account. (2) "Gross Revenue," with respect to a particular calendar year during the Tenn, means all revenue, income, receipts, and other consideration actually received from operation and leasing of the Project. "Gross Revenue" shall include, but not be limited to: all rents, fees and charges paid by tenants, Section 8 payments or other rental subsidy payments received for the dwelling units, deposits forfeited by tenants, all cancellation fees, price index adjustments and any other rental adjustments to leases or rental agreements resulting in actual inconle; proceeds from vending and laundry room machines; the proceeds of business interruption or similar insurance; subject to the rights of Senior Lenders, the proceeds of casualty insurance to the extent not utilized to repair or rebuild the Project (or applied toward the cost of recovering such proceeds) and not payable to the Senior Lenders; and condemnation awards for a taking of part or all of the Project for a temporary period. "Gross Revenue" shall also include the fair market value of any goods or services provided in consideration for the leasing or other use of any portion of the Project. "Gross Revenue" shall not include tenants' security deposits, loan proceeds, capital contributions or similar advances. (3) "Residual Receipts", with respect to a particular calendar year during the Tenn, means the amount by which Gross Revenue (as defined above) exceeds Annual Operating Expenses (as defined above). 13 121115 sh 8262008 (d) Records Regarding Residual Receipts. In connection with the annual payments required by Section 2.9(c), within one hundred fifty (150) days of the end of the BORROWER's fiscal year, the BORROWER shall furnish to the CITY an audited statement duly certified by an independent firm of certified public accountants approved by the CITY, setting forth in reasonable detail the computation and amount of Residual Receipts during the preceding calendar year. (1) The BORROWER shall keep and maintain on the Property, or at its principal place of business, or elsewhere with the CITY's written consent, full, complete and appropriate books, records and accounts relating to the Project, including all such books, records and accounts necessary or prudent to evidence and substantiate in full detail the BORROWER's calculation of Residual Receipts. Books, records and accounts relating to the BORROWER's compliance with the terms, provisions, covenants and conditions of this Agreement shall be kept and maintained in accordance with generally accepted accounting principles consistently applied, and shall be consistent with requirements of this Agreement which provide for the calculation of Residual Receipts on a cash basis. All such books, records, and accounts shall be open to and available for inspection by the CITY, its auditors or other CITY authorized representatives at reasonable intervals during normal business hours. Copies of all tax returns and other reports that the BORROWER may be required to furnish any governmental agency shall at all reasonable times be open for inspection by the CITY at the place that the books, records and accounts of the BORROWER are kept. The BORROWER shall preserve records on which any statement of Residual Receipts is based for a period of not less than five (5) years after such statement is rendered, and for any period during which there is an audit undertaken pursuant to subsection (g) below then pending. (2) The receipt by the CITY of any statement pursuant to subsection (b) above or any payment by the BORROWER or acceptance by the CITY of any City Loan repayment for any period shall not bind the CITY as to the correctness of such statement or such paymen( Within three (3) years after the receipt of any such statement, the CITY or any designated agent or employee of the CITY at any time shall be entitled to audit the Residual Receipts and all books, records, and accounts pertaining thereto. Such audit shall be conducted during normal business hours at the principal place of business of the BORROWER and other places where records are kept. Immediately after the completion of an audit, the CITY shall deliver a copy of the results of such audit to the BORROWER. If it shall be determined as a result of such audit that there has been a deficiency in a City Loan repayment to the CITY, then such deficiency shall become immediately due and payable with interest at the non-default rate set forth in the Note (unless BORROWER's failure, refusal, or repeated failure to correctly calculate and/or submit the repayment constitutes an event of default, in which case interest shall be paid at the Default Rate), determined as of and accruing from the date that said payment should have been made. (e) Right to Prepay. BORROWER may prepay the City Loan at any time without premium or penalty. All prepayments shall be credited first applied to accrued interest and then 14 121115 sh 8262008 to outstanding principal. The Deed of Trust shall remain in effect for the entire Term to secure the Regulatory Agreement, when recorded. Section 2.10 Non-Recourse. Except as provided below, neither BORROWER, nor any partner of BORROWER, has any personal liability for payment of the principal of, and interest on, the City Loan. Following recordation of the Deed of Trust, the sole recourse of the CITY with respect to the principal of, or interest on, the Note will be to the property described in the Deed of Trust; provided, however, that nothing contained in the foregoing limitation of liability limits or impairs the enforcement of all the rights and remedies of the CITY against all such security for the Note, or impairs the right of CITY to assert the unpaid principal amount of the Note as demand for money within the meaning and intendment of Section 431.70 of the California Code of Civil Procedure or any successor provision thereto. The foregoing limitation of liability is intended to apply only to the obligation to repay the principal and interest on the Note. Except as hereafter set forth; nothing contained herein is intended to relieve BORROWER of its obligation to indemnify the CITY under Sections 4.5, 4.6, 4.7, and 7.6 of this Agreement, or liability for (i) loss or damage of any kind resulting from waste, fraud or willful misrepresentation; (ii) the failure to pay taxes, assessments or other charges which may create liens on the Property that are payable or applicable prior to any foreclosure under the Deed of Trust (to the full extent of such taxes, assessments or other charges); (iii) the fair market value of any personal property or fixtures removed or disposed of by BORROWER other than in accordance with the Deed of Trust; and (iv) the misappropriation of any proceeds under any insurance policies or awards resulting from condemnation or the exercise of the power of enlinent domain or by reason of damage, loss or destruction to any portion of the Property. ARTICLE 3 PREDEVELOPMENT ACTIVITIES Section 3.1 Predevelopment Activities. (a) This Article 3 sets forth various Predevelopment Activities that BORROWER shall seek diligently and in good faith to perform and achieve. (b) Exhibit E (the "Schedule of Performance") describes the tasks that must be completed and the dates proposed by BORROWER for their completion. The Schedule of Performance may be modified in writing by BORROWER and by the City Manager on behalf of the CITY without formal amendment of this Agreement. However, if the Construction Closing has not occurred by December 31,2014, subject to Force Majeure, the CITY may terminate this Agreement pursuant to Section 6.1 below as applicable, and exercise its remedies pursuant to this Agreement. (c) Sections 3.3, 3.4, and 3.5 apply only if CITY grants the Land Use Approvals for the Project as described in Section 3.2. 15 121115 sh 8262008 Section 3.2 Land Use Approvals and CEQA Review. (a) Within the time set forth in the Schedule of Performance, BORROWER shall submit to the CITY a complete application for all discretionary land use entitlements required from the CITY to construct the Project and to create the Market-Rate Parcel (the "Land Use Approvals"). (b) BORROWER shall exercise diligent good faith efforts to seek CITY approval of all Land Use Approvals within the time set forth in the Schedule of Performance, in accordance with all applicable legal requirements and procedures. (c) As part of its review of the Land Use Approvals, the CITY shall complete the environmental documents required for the Land_ Use Approvals. Nothing in this Agreement shall be construed to compel the CITY to approve or make any particular findings with respect to such environmental documents. The BORROWER shall reasonably assist the CITY in its determination by providing information about the Project as requested. (d) Nothing in this Agreement shall obligate the CITY to exercise its discretion regarding the Project in any particular manner. BORROWER acknowledges that execution of this . Agreement by the CITY does not constitute approval by the CITY of any Land Use Approvals or any required permits, applications, or -maps, and in no way limits the discretion of the CITY in the permit and approval process. BORROWER acknowledges that approval or disapproval of the Land Use Approvals following completion of the environmental review process is within the sole discretion of the CITY without limitation by or consideration of the terms of this Agreement; and that the CITY makes no representation regarding the ability or willingness of the CITY to approve the Land Use Approvals, including the creation of the Market-Rate Parcel, nor any representation regarding the imposition of any mitigation measures or other conditions of approval. The parties recognize that the CITY has the sole discretion and right to terminate this Agreement without fault or Default if CITY determines not to approve the Land Use Approvals for the Project. In addition, the BORROWER acknowledges that other local, state or federal agencies may require additional entitlements, including environmental review, and that any approval by the CITY does not bind any other local, state or federal agency. (e) If the CITY approves the Project following completion of the environmental review process and such approval is conditioned upon implementation of specified environnlental mitigation measures or other conditions of approval, the BORROWER shall be responsible for implementing such mitigation measures and conditions as part of the Project. Section 3.3 Tax Credit and Other Financing Applications. (a) BORROWER shall submit a timely and complete application to TCAC for a preliminary reservation of nine percent (9%) tax credits within the time set forth in the Schedule of Performance. 16 121115 sh 8262008 (b) If BORROWER is not successful in obtaining a reservation of tax credits from TCAC in its first application, BORROWER shall submit a second application. (c) BORROWER further agrees to seek construction and permanent funding for the Project from all available and appropriate sources to ensure that the Project will be financially feasible and will provide affordable rental housing for extremely low, very low, and low-income households. Section 3.4 Financing Plan. (a) The preliminary Project Budget is shown in Exhibit D. Within the time set forth in the Schedule of Performance BORROWER shall submit for CITY approval a Final Construction and Permanent Financing Plan (the "Financing Plan") containing the following: (1) An updated development budget showing a "sources and uses" breakdown of the costs of constructing the Project. (2) of the Project. An operating pro forma for the first thirty (30) years of operation (3) Copies of all required funding commitments for construction and permanent financing for the Project; or proposed funding, as applicable. (4) Any other information that is reasonably necessary for the CITY to determine that BORROWER has the financial capability to pay all costs of constructing and operating the Proj ect. (b) The CITY shall review the Financing Plan to determine if, in the CITY's reasonable judgment, BORROWER has the financial capability (taking into account all committed funds) to pay all realistically established costs of constructing and operating the Project. The CITY shall review the Financing Plan and shall either approve or disapprove the Financing Plan in writing within thirty (30) days of receipt. If disapproved, the CITY shall give specific reasons in writing for disapproval and the required revisions to the previously submitted Financing Plan. If the Financing Plan is disapproved, BORROWER shall resubmit, a revised Financing Plan within thirty (30) days of notification of disapproval. The CITY shall either approve or disapprove the submitted revised Financing Plan within thirty (30) days of the date such revised Financing Plan is received by the CITY. (c) BORROWER shall submit any material revision to an approved Financing Plan to the CITY for its review and approval. Any proposed revised Financing Plan shall be considered and approved or disapproved by the CITY in the same manner and according to the same timeframe set forth in subsection (b) above. 17 121115 sh 8262008 Section 3.5 Building Permit. (a) Within the time set forth in the Schedule of Performance BORROWER shall submit a complete application to the CITY for a building permit for the construction of the Project. (b) BORROWER shall exercise diligent good faith efforts to obtain the building permit for the Project within the time set forth in the Schedule of Performance. ARTICLE 4 ONGOING OBLIGATIONS Section 4.1 Periodic Reports. During the performance of the Predevelopnlent Activities set forth in Article 3, BORROWER shall on the first day of each month of the Term, and from time to time as reasonably requested by the CITY, provide the CITY with written progress reports regarding the status of the performance of the Predevelopment Activities. Section 4.2 Information. BORROWER shall provide any information reasonably requested by the CITY in connection with the ownership of t~e Property and performance of the Predevelopment Activities. Section 4.3 Records. BORROWER 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 accotmting of funds and performance of the terms of this Agreement. BORROWER shall furnish any and all information and reports which may be required by CITY in connection with this Agreement. BORROWER shall further pernlit access to its books, records and accounts by the representatives and employees of CITY during regular business hours, and with reasonable notice, 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 BORROWER's compliance with the provisions of this Agreement. All such records shall be retained by BORROWER and made available to CITY upon request for review or audit for a period of at least five (5) years following the expiration or termination of this Agreement. Section 4.4 Audits. BORROWER shall provide CITY, during the term of this Agreement, with copies of audited financial statements of BORROWER, including any management letter comments on the adequacy of internal or operational controls, within one hundred fifty (150) days of the close of 18 121115 sh 8262008 each fiscal year of the BORROWER. CITY reserves the right, during the term of this Loan Agreement, to audit the records, including the financial records supporting the aforementioned financial statements, and other records and documents pertaining to the operations of the Project. Section 4.5 Compliance with Laws: Prevailing Wages. (a) BORROWER shall comply with all applicable laws, ordinances, rules and regulations of federal, state, county or municipal governments or agencies now in force or that may be enacted hereafter, including (without limitation and where applicable) the prevailing wage provisions of Sections 1770 et seq., of the California Labor Code and implementing rules and regulations as set forth below, in owning the Property, performing the Predevelopment Activities, and constructing the Project on the Property. (b) This Agreement has been prepared with the intention that CITY assistance under this Agreement does not require payment of state prevailing wages in connection with construction work that is paid for in whole or in part out of public funds; provided, however, that nothing in this Agreement constitutes a representation or warranty by the CITY regarding the applicability of the provisions of Labor Code Section 1720 et seq., and the hiring of apprentices pursuant to Labor Code Sections 1777.5 et seq., to the City Loan or Approved Financing. To the extent applicable, BORROWER shall pay and shall cause the General Contractor and subcontractors to pay prevailing wages in connection with the construction of the Development, as those wages are determined pursuant to Labor Code Sections 1720 et seq., to employ apprentices as required by Labor Code Sections 1777.5 et seq., and the implementing regulations of the Department of Industrial relations ("DIR"). BORROWER shall and shall cause the consultants and contractors to comply with the other applicable provisions of Labor Code Sections 1720 et seq., 1777.5 et seq., and implementing regulations of the DIR. BORROWER shall cause the contractors to keep and retain such records as are necessary to determine if such prevailing wages have been paid as required pursuant to Labor Code Sections 1720 et seq., and apprentices have been employed are required by Labor Code Sections 1777.5 et seq. Copies of the currently applicable current per diem prevailing wages are available from DIR. (c) BORROWER shall indemnify, hold harmless and defend (with counsel reasonably acceptable to the CITY) the CITY against any claim for damages, compensation, fines, penalties or other amounts arising out of the failure or alleged failure of any person or entity (including BORROWER, its contractor and subcontractors) to pay prevailing wages as determined pursuant to Labor Code Sections 1720 et seq., to employ apprentices pursuant to Labor Code Sections 1777.5 et seq., and implementing regulations of the DIR or to comply with the other applicable provisions of Labor Code Sections 1720 et seq., 1777.5 seq., and the implementing regulations of the DIR in connection with the Predevelopment Activities or any other work undertaken or in connection with the Property. The requirements in this subsection (c) shall survive the repayment of the City Loan and the reconveyance of the Deed of Trust. Section 4.6 Relocation. If and to the extent that acquisition and development of the Property will result in the permanent or temporary displacement of persons or businesses entitled to relocation benefits, 19 121115 sh 8262008 then BORROWER shall comply with all applicable local, state, and federal statutes and regulations, (including without limitation the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended, California Government Code Section 7260 et seq., and accompanying regulations) with respect to preparation of a relocation plan, relocation planning, advisory assistance, and payment of monetary benefits. BORROWER shall be solely responsible for payment of any relocation benefits to any displaced persons and any other obligations associated with complying with such relocation laws. BORROWER shall indemnify, defend and hold harmless, (with counsel reasonably acceptable to the CITY), the CITY and its councilmembers, employees, agents, successors and assigns against any claim for damages, compensation, fines, penalties, relocation payments or other amounts and expenses (including reasonable attorneys' fees) arising out of the failure or alleged failure of any person or entity (including BORROWER, or the CITY) to satisfy relocation obligations related to the acquisition of the Property. This obligation to indemnify shall survive termination of this Agreement. Section 4.7 Hazardous Materials. (a) BORROWER shall keep and maintain the Property in compliance with, and shall not cause or permit the Property to be in violation of any Hazardous Materials Law (defined below), including but not limited to, soil and ground water conditions. BORROWER shall not, and shall not cause or permit the use, generation, manufacture, storage or disposal of on, under, or about the Property or transportation to or from the Property of (i) any substance, material, or waste that is petroleum, petroleum-related, or a petroleum by-product, asbestos or asbestos containing material, polychlorinated biphenyls, flammable, explosive, radioactive, freon gas, radon, or a pesticide, herbicide, or any other agricultural chemical, and (ii) any waste, substance or material defined as or included in the definition of "hazardous substances, II IIhazardous wastes," "hazardous materials," "toxic materials", "toxic waste", "toxic substances," or words of similar import under any Hazardous Materials Law (collectively referred to hereinafter as "Hazardous Materials"). BORROWER shall cause any persons who may come onto the Property to comply with the foregoing. Notwithstanding the foregoing, Hazardous Materials shall not include substances routinely used in the development and operations of housing in accordance with all applicable laws and regulations. (b) BORROWER shall immediately notify the CITY in writing if at any time it has any notice of (i) any and all enforcement, cleanup, removal or other governmental or regulatory ,actions instituted, completed or threatened against BORROWER or the Property pursuant to any applicable federal, state or local laws, ordinances, or regulations relating to any Hazardous Materials, health, industrial hygiene, environmental conditions, or the regulation or protection of the environment, and all amendments thereto as of this date and to be added in the future and any successor statute or rule or regulation promulgated thereto ("Hazardous Materials Law"); (ii) all claims made or threatened by any third party against BORROWER or the Property relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials (the matters set forth in clauses (i) and (ii) above are hereinafter referred to as "Hazardous Materials Claims"); and (iii) BORROWER's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to be classified as "border-zone property" under the provision of California Health and Safety Code, Sections 25220 et seq., or any regulation adopted in 20 121115 sh 8262008 accordance therewith, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use of the Property under any Hazardous Materials Law. (c) The CITY shall have the right to join and participate in, as a party if it so elects, and be represented by counsel of its own choice in, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims, and to have its reasonable attorneys' fees in connection therewith paid by BORROWER. (d) BORROWER shall indemnify and hold harmless the CITY and its councilmembers, directors, officers, employees, agents, successors and assigns from and against any loss, damage, cost, fine, penalty, judgment, award, settlement, expense or liability, directly or indirectly arising out of or attributable to: (i) any actual or past or present violation of any Hazardous Materials Law; (ii) any. Hazardous Materials Claim; (iii) any actual or past or present use, generation, manufacture, storage, release, threatened release, discharge, disposal, transportation, or presence of Hazardous Materials on, under, or about the Property; (iv) any investigation, cleanup, remediation, removal, or restoration work of site conditions of the Property relating to HazardQus Materials (whether on the Property or any other property); and (v) the breach of any representation of warranty by or covenant of BORROWER in this Section 4.9, and Section 5.1 (i). Such indemnity shall include, without limitation: (i) all consequential damages; (ii) the costs of any required or necessary investigation, repair, cleanup or detoxification of the Property and the preparation and implementation of any closure, remedial or other required plans; and (iii) all reasonable costs and expenses incurred by the CITY in connection with clauses (i) and (ii), including but not limited to reasonable attorneys' fees and consultant fees. This obligation to indemnify shall survive termination of this Agreement and shall not be diminished or affected in any respect as a result of any notice, disclosure, knowledge, if any, to or by the CITY of Hazardous Materials. ( e) Without the CITY's prior written consent, which shall not be unreasonably withheld, BORROWER shall not take any remedial action in response to the presence of any Hazardous Materials on, under or about the Property, nor enter into any settlement agreement, consent decree, or other compromise in respect to any claims made or threatened by any third party against BORROWER, any tenant, or the Property relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials, which remedial action, settlement, consent decree or compromise might, in the CITY's reasonable judgment, impair the value of the CITY's security hereunder; provided, however, that the CITY's prior consent shall not be necessary: (i) in relation to those remedial actions initiated by the sellers of the Property pursuant to SCCo Case No. 06S2W18L03s; and (ii) in the event that the presence of Hazardous Materials on, under, or about the Property either poses an immediate threat to the health, safety or welfare of any individual or is of such a nature that an immediate remedial response is necessary and it is not reasonably possible to obtain the CITY's consent before taking such action, provided that in such event BORROWER shall notify the CITY as soon as practicable of any action so taken. The CITY agrees not to withhold its consent, where such consent is required hereunder, if either (i) a particular remedial action is ordered by a court of competent jurisdiction, (ii) BORROWER will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required action; (iii) BORROWER establishes to the reasonable satisfaction of the CITY that there is no reasonable altenlative to such remedial action which 21 121 115 sh 8262008 would result in less impairment of the CITY's security hereunder; or (iv) the action has been agreed to by the CITY. (f) BORROWER hereby acknowledges and agrees that (i) this Section is intended as the CITY's written request for information (and BORROWER's response) concerning the environnlental condition of the Property as required by California Code of Civil Procedure Section 726.5, and (ii) each representation and warranty in this Agreement (together with any indemnity obligation applicable to a breach of any such representation and warranty) with respect to the environmental condition of the Property is intended by the Parties to be an "environmental provision" for purposes of California Code of Civil Procedure Section 736. (g) In the event that any portion of the Property is determined to be "environmentally· impaired" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(3» or to be an "affected parcel" (as that term is defined in California Code of Civil Procedure Section 726.5(e)(1», then, without otherwise limiting or in any way affecting the CITY's or the trustee's rights and remedies under the Deed of Trust, the CITY may elect to exercise its rights under California Code of Civil Procedure Section 726.5(a) to (i) waive its lien on such environmentally impaired or affected portion of the Property and (ii) exercise (1) the rights and remedies of an unsecured creditor, including reduction of its claim against BORROWER to judgnlent, and (2) any other rights and remedies permitted by law. For purposes of determining the CITY right to proceed as an unsecured creditor under California Code of Civil Procedure Section 726.5(a), BORROWER shall be deemed to have willfully permitted or acquiesced in a release or threatened release of Hazardous Materials, within the meaning of California Code of Civil Procedure Section 726.5( d)(l), if the release or threatened release of Hazardous Materials was knowingly or negligently caused or contributed to by any lessee, occupant, or user of any portion of the Property and BORROWER knew or should have known of the activity by such lessee, occupant, or user which caused or contributed to the release or threatened release. All costs and expenses, including (but not limited to) attorneys' fees, incurred by the CITY in connection with any action commenced under this paragraph, including any action required by California Code of Civil Procedure Section 726.5(b) to determine the degree to which the Property is environmentally impaired, plus interest thereon at the rate specified in the Note until paid, shall be added to the indebtedness secured by the Deed of Trust and shall be due and payable to the CITY upon its demand made at any time following the conclusion of such action. Section 4.8 Maintenance and Damage. (a) BORROWER shall maintain the Property and the Project in good repair and in a neat, clean and orderly condition. If there arises a condition in contravention of this requirement, and if BORROWER has not cured such condition within thirty (30) days after receiving a notice from the CITY of such a condition, then in addition to any other rights available to the CITY, the CITY shall have the right to perform all acts necessary to cure such condition, and to establish or enforce a lien or other encumbrance against the Property. (b) If any improvement constructed on the Property by BORROWER, now or in the future, is damaged or destroyed, then BORROWER shall, at its cost and expense, diligently undertake to repair or restore such improvement consistent with any plans and specifications 22 121115 sh 8262008 approved by the CITY. Such work or repair shall be commenced no later than the later of one hundred twenty (120) days, or such longer period approved by the CITY in writing, after the damage or loss occurs or thirty (30) days following receipt of the insurance proceeds, and shall be complete within one (1) year thereafter. Any insurance proceeds collected for such damage or destruction shall be applied to the cost of such repairs or restoration and, if such insurance proceeds shall be insufficient for such purpose, then BORROWER shall make up the deficiency. Section 4.9 Mechanics Liens, Stop Notices, and Notices of Completion. (a) If any claim of lien is filed against the Property or a stop notice affecting the City Loan is served on the CITY or any other lender or other third party in connection with the Development, then BORROWER shall, within thirty (30) days after such filing or service, either pay and fully discharge the lien or stop notice, effect the release of such lien or stop notice by delivering to the CITY a surety bond in sufficient form and anl0unt, or provide the CITY with other assurance satisfactory to the CITY that the claim of lien or stop notice will be paid or discharged. (b) If BORROWER fails to discharge any lien, encumbrance, charge, or claim in the manner required in this Section, then in addition to any other right or remedy, the CITY may (but shall be under no obligation to) discharge such lien, encumbrance, charge, or claim at BORROWER'S expense. Alternately, the CITY may require BORROWER to immediately deposit with the CITY the amount necessary to satisfy such lien or claim and any costs, pending resolution thereof. The CITY may use such deposit to satisfy any claim or lien that is adversely determined against BORROWER. ( c) BORROWER shall file a valid notice of cessation or notice of completion upon cessation of construction on the Development and take all other reasonable steps to forestall the assertion of claims of lien against the Property. BORROWER authorizes the CITY, but without any obligation, to record any notices of completion or cessation of labor, or any other notice that the CITY deems necessary or desirable to protect its interest in the Property. Section 4.10 Fees and Taxes. BORROWER shall be solely responsible for payment of all fees, assessments, taxes, charges, and· levies imposed by any public authority or utility company with respect to the Property or the Project to the extent owned by BORROWER, and shall pay such charges prior to delinquency. However, BORROWER shall not be required to pay and discharge any such charge so long as (a) the legality thereof is being contested diligently and in good faith and by appropriate proceedings, and (b) if requested by the CITY, BORROWER deposits with the CITY any funds or other forms of assurance that the CITY in good faith from time to time determines appropriate to protect the CITY from the consequences of the contest being unsuccessful. II II 23 121115 sh 8262008 Section 4.11 Notices. BORROWER shall notify the CITY promptly in writing of any and all of the following: (a) Any litigation known to BORROWER affecting BORROWER, or the Property and of any claims or disputes that involve a material risk of litigation; (b) Any written or oral communication BORROWER receives from any governmental, judicial, or legal authority giving notice of any claim or assertion that the Property or Project fails in any respect to comply with any applicable governmental law; (c) Any material adverse change in the physical condition of the Property (including any damage suffered as a result of fire, earthquakes, or floods); (d) Any material adverse change in BORROWER's financial condition, any material adverse change in BORROWER's operations, or any change in the management of BORROWER; (e) That any of the statenlents in Section 5.1(h) regarding Hazardous Materials are no longer accurate; (f) Any Default or event which, with the giving of notice or the passage of time or both, would constitute a Default; and (g) Any other circumstance, event, or occurrence that results in a material adverse change in BORROWER's ability to timely perform any of its obligations under any of the Loan Documents. Section 4.12 Non-Discrimination. BORROWER shall not discriminate or segregate in the ownership of the Property, and performance of the Predevelopment Activities, or operation or construction of the Project on the basis of race, color, creed, ancestry, national origin, religion, sex, sexual orientation, marital status, age, disability, medical condition, familial status, source of income or any other arbitrary basis. BORROWER shall otherwise comply with all applicable local, state, and federal laws concerning discrimination. Section 4.13 Insurance Requirements. BORROWER, at its sole cost and expense, shall obtain and nlaintain during the term of this Agreement, insurance provided by responsible companies authorized to engage in the offering of insurance services in California in such amounts and against such risks as shall be satisfactory to CITY'S risk manager, including, without limitation, worker's compensation, employer's liability, commercial general liability, comprehensive automobile liability, personal injury and property damage insurance, as appropriate, as set forth in Exhibit G, insuring against all liability of BORROWER and its directors, officers, employees, agents, and representatives arising out of or in connection with the acquisition, construction and development of the Project 24 121115 sh 8262008 or BORROWER'S performance or nonperformance under this Agreement. Section 4.14 Transfer. (a) For purposes of this Agreement, "Transfer" is any sale, assignment, or transfer, whether voluntary or involuntary, of (i) any rights andlor duties under this Agreement, and/or (ii) any interest in the Project, including (but not limited to) a fee simple interest, a joint tenancy interest, a life estate, a partnership interest, a leasehold interest, a security interest, or an interest evidenced by a land contract by which possession of the Project is transferred and the BORROWER retains title. "Transfer" shall exclude the leasing of any single unit in the Project to an occupant and the transfer of an easement interest in the Property for utility purposes. The City Manager or hislher designee is authorized to execute assignment and assumption agreements on behalf of the CITY to implement any approved Transfer. (b) CITY is entering into this Agreement based on the experience, skill, and ability to perform of BORROWER. The BORROWER recognizes that its qualifications and identity are of particular concern to the CITY, in view of: (i) the importance of affordable housing to the general welfare of the community; (ii) the reliance by the CITY upon the unique qualifications and ability of the BORROWER to ensure the quality of the affordability, use, operation, and maintenance of the proposed Project, if approved; (iii) the requirement that the Property be used for affordable housing; and (iv) BORROWER's representation that the Property is not to be acquired or used for speculation, but only for use by the BORROWER for affordable housing. (c) No Transfer not specifically authorized in this Section 4.14 shall be pernlitted without the prior written consent of the CITY, which the CITY may withhold in its sole discretion. The City Loan shall automatically accelerate and be due in full upon any Transfer made without the prior written consent of the CITY. (d) Sale of Market-Rate Parcel. (1) BORROWER desires to sell the portion of the Property identified as the Market-Rate Parcel to a third party (the "Third Party Buyer") for construction of market-rate housing in order to repay the LIIF Loan and the LISC Loan. (2) If BORROWER has received all required Land Use Approvals to create the Market-Rate Parcel, as described in Section 3.2 and proposes to sell the Market-Rate Parcel to a Third Party Buyer, BORROWER shall provide written notice to the CITY at least forty-five days (45) days prior to the consummation of any proposed sale of the Market-Rate Parcel to a Third Party Buyer. (3) If BORROWER has received all required Land Use Approvals to create the Market-Rate Parcel, as described in Section 3.2, CITY hereby approves the sale of the Market-Rate Parcel to a Third Party Buyer provided that: (i) the LISC Loan and the LIIF Loan shall be paid off and the deeds of trust for those loans reconveyed upon sale of the Market-Rate Parcel; and (ii) any proceeds from the sale of the Market Rate Parcel remaining after repayment of the LISC and LIFF loans shall either be used for the Project, if the CITY approves the Land Use Approvals for the Project; or for other 25 121115 sh 8262008 affordable housing purposes, if the City does not approve the Land Approvals for the Project. On the date of the sale of the Market-Rate Parcel in conformance with this subsection (d), CITY agrees to release the Memo of Agreement and reconvey the Deed of Trust from the Market-Rate Parcel. ( 4) The provisions of this subsection (d) apply only to sale of a fee title interest in the Market-Rate Parcel. All other Transfers are subject to the provisions of subsections (a), (b), (c), and (e) of this Section. (e) The CITY hereby approves the Transfer of this Agreement to a limited partnership, of which BORROWER or BORROWER's wholly controlled affiliate is the general partner. Section 4.15 Other Indebtedness and Liens. Except for the Approved Acquisition Financing, BORROWER shall not incur any indebtedness of any kind or encumber the Property with any liens without the prior written consent of the CITY. Section 4.16 Use as Affordable Housing In consideration for the City Loan to be provided to the BORROWER on below-market terms, the BORROWER hereby agrees to apply for the use of the Property as affordable housing and otherwise use its best good faith efforts to comply with the requirements of Article 3 of this Agreement. If the Project is approved, the use, occupancy and rent restrictions in the Regulatory Agreement shall be compatible with the restrictions of other Approved Financing. BORROWER's compliance with this Section 4.16 is of particular importance· to CITY and the main purpose of the .City Loan. If the Project is approved, the BORROWER shall record against the Property, prior to Construction Closing, the Regulatory Agreement. ARTICLES REPRESENTATIONS AND WARRANTIES OF BORROWER Section 5.1 Representations and Warranties. As a material inducement to the CITY's entry into this Agreement, BORROWER hereby represents and warrants to the CITY as follows and acknowledges, understands, and agrees that the representations and warranties set forth in this Article 5 are deemed to be continuing during all times when any portion of the City Loan remains outstanding: (a) Organization. BORROWER is duly organized, validly existing, and in good standing under the laws of the State of California and have the power and authority to own their property and carryon their business as now being conducted. (b) Authority of BORROWER. BORROWER has full power and authority to execute and deliver this Agreement and to make and accept the borrowings contemplated hereunder, to 26 121115 sh 8262008 execute and deliver the Loan Documents and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement, and to perform and observe the terms and provisions of all of the above. (c) Authority of Persons Executing Documents. This Agreement and the Loan Documents and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement have been executed and delivered by persons who are duly authorized to execute and deliver the same for and on behalf of BORROWER, and all actions required under BORROWER's 's organizational documents and applicable governing law for the authorization, execution, delivery and performance of this Agreement and the Loan Documents and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement, have been duly taken. (d) Valid Binding Agreements. This Agreement and the Loan Documents and all other documents or instruments which have been executed and delivered pursuant to or in connection with this Agreement constitute or, if not yet executed or delivered, will when so executed and delivered constitute, legal, valid and binding obligations of enforceable against it in accordance with their respective terms. (e) No Breach of Law or Agreement. Neither the execution nor delivery of this Agreement and the Loan Documents or of any other documents or instl1J.IDents executed and delivered, or to be executed or delivered, pursuant to this Agreement, nor the performance of any provision, condition, covenant or other term hereof or thereof, will conflict with or result in a breach of any statute, rule or regulation, or any judgment, decree or order of any court, board, commission or agency whatsoever binding on BORROWER, or any provision of the organizational documents of BORROWER, or will conflict with or constitute a breach of or a default under any agre.ement to which BORROWER is a party, or will result in the creation or imposition of any lien upon any assets or property of BORROWER, other than liens established pursuant hereto. (f) Pending Proceedings. BORROWER is not in default under any law or regulation or under any order of any court, board, commission or agency whatsoever, and there are no claims, actions, suits or proceedings pending or, to the knowledge of BORROWER, threatened against or affecting BORROWER or the Property, at law or in equity, before or by any court, board, commission or agency whatsoever which might, if determined adversely to BORROWER, materially affect BORROWER's ability to repay the City Loan or impair the security to be given to the CITY pursuant hereto. (g) Title to Land. At the time of recordation of the Deed of Trust, BORROWER will have good and marketable fee title to the Property and there will exist thereon or with respect thereto no mortgage, lien, pledge or other encumbrance of any character whatsoever other than liens for current real property taxes and assessments not yet due and payable, and liens in favor of the CITY or approved in writing by the CITY. (h) Hazardous Materials. To the best of BORROWER's knowledge, except as disclosed in writing by BORROWER to the CITY or in the following reports, prior to the date of 27 121115 sh 8262008 this Agreement (Phase I Environmental Site Assessment, dated July 2, 2012; Phase II Environmental Site Assessment, dated July20, 2012); (i) no Hazardous Material has been disposed of, stored on, discharged from, Or released to or from, or otherwise now exists in, on, under, or around, the Property, (ii) no aboveground or underground storage tanks are now or have ever been located on or under the Property, (iii) neither the Property, nor BORROWER, is in violation of any Hazardous Materials Law; and (iv) neither the Property, nor BORROWER, is subject to any existing, pending or threatened Hazardous Materials Claims. (i) Financial Statements. The financial statements of BORROWER and other financial data and information furnished by BORROWER to the CITY fairly present the information contained therein. As of the date of this Agreement, there has not been any adverse, material change in the financial condition of BORROWER from that shown by such financial statements and other data and information. G) Sufficient Funds. BORROWER holds sufficient funds and/or binding commitments for sufficient funds to conlplete the acquisition of the Property and perform the . Predevelopment Activities. (k) Taxes. BORROWER and its subsidiaries have filed all federal and other material tax returns and reports required to be filed, and have paid all federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their income or the Property otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with generally accepted accounting principles. There is no proposed tax assessment against BORROWER or any of its subsidiaries that could, if made, be reasonably expected to have a material adverse effect upon the Property, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of BORROWER and its subsidiaries, taken as, a whole, which would be expected to result in a material impairment of the ability of BORROWER to perform under any Loan Document to which it is a party, or a material adverse effect upon the legality, validity, binding effect or enforceability against BORROWER of any Loan Document. Section 5.2 Survival of Representations and Warranties. All representations and warranties of BORROWER shall survive the making of the City Loan and have been or will be relied on by the CITY notwithstanding any investigation made by the CITY. ARTICLE 6 TERMINATION, DEFAULT AND REMEDIES Section 6.1 Termination of Agreement. (a) Failure by the BORROWER to complete the Construction Closing and obtain all Land Use Approvals and building permits required to construct the Project by December 31, 2014, subject to Force Majeure, or CITY's determination not to approve the Land Use Approvals required for the Project, including creation of the Market-Rate Parcel, constitutes a basis for the 28 121115 sh 8262008 CITY to terminate this Agreement, subject to the conditions set forth in subsection (b) below. At BORROWER's request, CITY may, at its sole discretion, extend the time for perfonnance contained in this paragraph, provided that BORROWER demonstrates to CITY's reasonable satisfaction that BORROWER is likely to obtain financing and Land Use Approvals required to construct the Project within a reasonable period. (b) Upon the happening of the events described in subsection (a), the City may provide written notice to BORROWER of its intent to terminate this Agreement within one hundred twenty (120) days pursuant to this Section 6.1 (the "Termination Notice"). At its sole discretion, the Termination Notice may indicate CITY's intent to exercise the Option to Purchase pursuant to Section 6.4 provided that the Notice of Exercise is delivered to BORROWER concurrently with the Termination Notice. Upon the effective date of the Termination Notice, the outstanding principal balance of the Note shall be due and payable, and the CITY may exercise all rights pursuant to the Assignment of Documents; and this Agreement will terminate and neither party shall have any rights against or liability to the other pursuant to this Agreement except for the provisions that state they survive termination of this Agreement, and the applicable provisions of this Section 6.1, Section 6.4, and Section 6.5. Section 6.2 Events of Default. Upon the occurrence of Default, as defined in this Section, the CITY will give written notice to BORROWER. If the Default continues uncured for thirty (30) days after receipt of written notice thereof from the CITY to BORROWER or, if the breach cannot be cured within thirty (30) days, BORROWER is diligently undertakes to cure such breach within thirty (30) days but such breach remains uncured within ninety (90) days, then CITY may terminate this Agreement and exercise all remedies available at law or equity; provided, however, that if a different period or notice requirement is specified under any other provision of this Article 6, the specific provisions shall control. Each of the following shall constitute a "Default" by BORROWER under this Agreement: (a) Failure to Make Payment. Failure to repay the principal and any interest on the Loan within fifteen (15) days after receipt of written notice from the CITY that such payment is due pursuant to the Loan Documents. (b) Breach of Covenants. Failure of BORROWER to duly perform, comply with, or observe any of the conditions, terms, or covenants of any of the Loan Documents. (c) Default Under Other Loans. A default is declared under any other financing for the Project or acquisition of the Property by the lender of such financing, or BORROWER fails to make any payment or perform any of its other covenants, agreements, or obligations under any other agreement with respect to financing for the Project. After the expiration of any cure periods, the occurrence of any of the events of Default in this paragraph shall act to accelerate automatically, without the need for any action by the CITY, the indebtedness evidenced by the Note. 29 121115 sh 8262008 (d) Adverse Financial Condition. A material adverse change in BORROWER's financial condition, or an event or condition materially impairing BORROWER's intended use of the Property, or BORROWER's ability to repay the City Loan occurs. (e) Insolvency. A court-having jurisdiction shall have made or entered any decree or order (1) adjudging BORROWER to be bankrupt or insolvent, (2) approving as properly filed a petition seeking reorganization of BORROWER or seeking any arrangenlent for BORROWER under the bankruptcy law or any other applicable debtor's relief law or statute of the United States or any state or other jurisdiction, (3) appointing a receiver, trustee, liquidator, or assignee of BORROWER in bankruptcy or insolvency or for any of their properties, (4) directing the winding up or liquidation of BORROWER, if any such decree or order described in clauses (l) to (4), inclusive, shall have continued unstayed or undischarged for a period of ninety (90) days; or (5) BORROWER shall have admitted in writing its inability to pay its debts as they fall due or shall have voluntarily submitted to or filed a petition seeking any decree or order of the nature described in clauses (1) to (5), inclusive. The occurrence of any of the events of Default in this paragraph shall act to accelerate automatically, without the need for any action by the CITY, the indebtedness evidenced by the Note. (f) Assignment; Attachment. BORROWER shall have assigned its assets for the benefit of its creditors or suffered a sequestration or attachment of or execution on any substantial part of its property, unless the property so assigned, sequestered, attached or executed upon shall have been returned or released within ninety (90) days after such event or, if sooner, prior to sale pursuant to such sequestration, attachment, or execution. The occurrence of any of the events of default in this paragraph shall act to accelerate automatically, without the need for any action by the CITY, the indebtedness evidenced by the Note. (g) Suspension; Dissolution. BORROWER shall have voluntarily suspended its business or the dissolution of BORROWER. (h) Liens on Property and the Proj ect. There shall be filed any claim of lien (other . than liens approved in writing by the CITY) against the Project, the Property, or any part thereof, or any interest or right made appurtenant thereto, or the service of any notice to withhold proceeds of the City Loan and the continued maintenance of said claim of lien or notice to withhold for a period of twenty (20) days without discharge or satisfaction thereof or.provision therefor (including, without limitation, the posting of bonds) satisfactory to the CITY. (i) Condemnation. The condemnation, seizure, or appropriation of all or the substantial part of the Property and the Project, except that condemnation by the CITY shall cause the City Loan to accelerate but shall not be a Default. G) Unauthorized Transfer. Any Transfer other than as permitted by Section 4.14. (k) Representation or Warranty Incorrect. Any representation or warranty of BORROWER contained in this Agreement, or in any application, financial statement, certificate, or report submitted to the CITY in connection with any of the Loan Documents, proves to have been incorrect in any material and adverse respect when made. 30 121115 sh 8262008 (1) Applicability to General Partner. In the event BORROWER is a limited partnership or limited liability company, the occurrence of any of the events set foith in subsection (f), subsection (g), or subsection (h) in relation to the general partner of BORROWER. Section 6.3 Remedies. The occurrence of any Default hereunder following the expiration of all applicable notice and cure periods will, either at the option of the CITY or automatically where so specified, relieve the CITY of any obligation to nlake or continue the City Loan and shall give the CITY the right to proceed with any and all remedies set forth in this Agreement and the Loan Documents, subject to the terms of the subordination agreements related to the. LISC Loan and the LIIF Loan, including but not limited to the following: (a) Acceleration of Note. The CITY shall have the right to cause all indebtedness of BORROWER to the CITY under this Agreement and the Note, together with any accrued interest thereon, to become immediately due and payable. BORROWER waives all right to presentment, demand, protest or notice of protest or dishonor. The CITY may proceed to enforce payment of the indebtedness and to exercise any or all rights afforded to the CITY as a creditor and secured party under the law including the Uniform Commercial Code, including foreclosure under the Deed of Trust. BORROWER shall be liable to pay the CITY on demand all reasonable expenses, costs and fees (including, without limitation, reasonable attorney's fees and expenses) paid or incurred by the CITY in connection with the collection of the City Loan and the preservation, maintenance, protection, sale, or other disposition of the security given for the City Loan. (b ) Assignment of Documents. The CITY may exerCIse all rights under the Assignment of Documents. (c) Specific Performance. The CITY shall have the right to mandamus or other suit, action or proceeding at law or in equity to require BORROWER to perform its obligations and covenants under the Loan Documents or to enjoin acts or things which may be unlawful or in violation of the provisions of the Loan Documents. (d) Right to Cure at BORROWER's Expense. The CITY shall have the right (but not the obligation) to cure any monetary default by BORROWER under a loan other than the City Loan. BORROWER agrees to reimburse the CITY for any funds advanced by the CITY to cure a monetary default by BORROWER upon demand therefore, together with interest thereon from the date of expenditure until the date of reimbursement at the Default Rate. Section 6.4 Option to Purchase, Enter and Possess. (a) In consideration for the City Loan, BORROWER hereby grants the CITY the additional right at the CITY's option, to purchase, enter, and take possession of the Property with all improvements thereon (the "Option to Purchase") upon an uncured event of Default of 31 121115 sh 8262008 BORROWER or upon termination of this Agreement pursuant to Section 6.1. (b) If the CITY decides to exercise its Option to Purchase the CITY shall provide BORROWER, LISC, and LIIF with written notice of its intent to dp so (the "Notice of Exercise") within sixty (60) days of CITY's notice to BORROWER of an uncured event of Default pursuant to Section 6.2 above or concurrently with delivery of a Termination Notice pursuant to Section 6.1 above. The Notice of Exercise will include a date for closing which is the later to occur of the following: (1) not more than ninety (90) days after the date of the Notice of Exercise in the event of an uncured event of Default; (2) not more than ninety (90) days after the effective date of the Termination Notice; or (3) ten (10) days after BORROWER has done all acts and executed all documents required for close of escrow. (c) Upon the CITY's delivery of the Notice of Exercise, BORROWER and the CITY shall promptly open an escrow account. BORROWER shall execute, acknowledge, and deliver a grant deed in a form acceptable to the CITY transferring the Property to the CITY, subject only to the title exceptions that (1) existed at the time of BORROWER's acquisition of the Property, or (2) were created with the written consent of CITY or approved in writing by CITY or expressly contemplated or permitted by this Agreement. Closing costs and title insurance shall be paid by CITY and BORROWER pursuant to the custom and practice in the County of Santa Clara at the time of the opening of escrow, or as may be provided otherwise by mutual agreement. BORROWER agrees to do all acts and execute all documents necessary to enable the close of escrow and transfer of the Property to the City. The BORROWER shall also provide the CITY all documents to which the CITY is entitled pursuant to the Assignment of Documents upon the CITY's exercise of the Option to Purchase. (d) The purchase price of the Property under the Option to Purchase will be all amounts due under the City Loan. The CITY shall deem all outstanding amounts due on the City Loan paid in full upon close of escrow and delivery of all documents to which the CITY is entitled pursuant to the Assignment of Documents. The City acknowledges that it will take title to the Property subject to the liens of the deeds of trust in favor of the Senior Lenders and the terms and provisions of the documents evidencing the Senior Loans (except for any modification to such Senior Loan documents that require the approval of the City pursuant to the applicable subordination agreement and for which such approval was not obtained). (e) As used in this Section, the term "City Loan" includes any accrued interest as calculated pursuant to Section 2.2. (f) The granting of this Option to Purchase to the CITY shall not impair or limit the CITY's ability to exercise any other rights or remedies granted to the CITY in this Agreement. CITY may enforce this Section 6.4 by specific performance. Section 6.5 Right of Contest. BORROWER shall have the right to contest in good faith any claim, demand, levy, or assessment the assertion of which would constitute a Default hereunder. Any such contest shall 32 121115 sh 8262008 be prosecuted diligently and in a manner unprejudicial to the CITY or the rights of the CITY hereunder. Section 6.6 Renledies Cumulative. No right, power, or remedy given to the CITY by the terms of this Agreement or the Loan Documents is intended to be exclusive of any other right, power, or remedy; and each and every such right, power, or remedy shall be cumulative and in addition to every other right, power, or remedy given to the CITY by the terms of any such instrument, or by any statute or otherwise against BORROWER and any other person or entity. Neither the failure nor any delay on the part of the CITY to exercise any such rights and remedies shall operate as a waiver thereof, nor shall any single or partial exercise by the CITY of any such right ot remedy preclude any other or further exercise of such right or remedy, or any other right or remedy. ARTICLE 7 GENERAL PROVISIONS Section 7.1 Agreement Coordination (a) CITY's City Manager shall represent CITY for all purposes under this Agreement. CITY's Director of Planning and Community Environment is designated by the City Manager as the project manager, and his or her designee shall supervise the progress and execution of this Agreement. (b) The Executive Director of BORROWER shall represent BORROWER for all purposes under this Agreement and, as the project director for BORROWER, shall supervise the progress and execution of this Agreement. (c) Each party nlay change the party representing it by notice to the other party. Section 7.2 Relationship of Parties. Nothing contained in this Agreement shall be interpreted or understood by any of the parties, or by any third persons, as creating the relationship of employer and employee, principal and agent, limited or general partnership, or joint venture between the CITY and BORROWER or BORROWER's agents, employees or contractors, and BORROWER shall at all times be deemed an independent contractor and shall be wholly responsible for the manner in which it or its agents, or both, perform the services required of it by the terms of this Agreement. BORROWER has and retains the right to exercise full control of employment, direction, compensation, and discharge of all persons assisting in the performance of services under the Agreement. In regards to the development of the Project, BORROWER shall be solely responsible for all matters relating to payment of its employees, including compliance with Social Security, wit1:.lholding and all other laws and regulations governing such matters, and shall include requirements in each contract that contractors shall be solely responsible for similar matters relating to their employees. BORROWER agrees to be solely responsible for its own acts and those of its agents and employees. 33 121115 sh 8262008 Section 7.3 No Claims. Nothing contained in this Agreement shall create or justify any claim against the CITY, by any person BORROWER may have employed or with wliom BORROWER may have contracted relative to the purchase of materials, supplies or equipment, or the furnishing or the performance of any work or services with respect to the development of the Project, and BORROWER shall include similar requiremerits in any contracts entered into for the development of the Project. Section 7.4 Amendnlents. Any amendment to this Agreement shall be binding upon the parties, provided such amendment is set forth in a writing signed by the parties. The City Manager is authorized to execute any amendments to this Agreement after approval by the City Council and to confer any consents or approvals that may be provided by the City Manager pursuant to this Agreement. Section 7.5 Entire Understanding of the Parties. This Agreement constitutes the entire understanding and agreement of the Parties with respect to the City Loan. Section 7.6 Indemnification. Except as directly caused by the CITY's proven gross negligence or willful misconduct, BORROWER agrees to indemnify, protect, hold harmless and defend (by counsel reasonably satisfactory to the CITY) the CITY, and its council members, officers and employees, from all suits, actions, claims, causes of action, costs, demands, judgments and liens directly or indirectly arising out of or resulting from: (i) the making of the City Loan; (ii) BORROWER's performance or non-performance of its obligations under this Agreenlent; (iii) any act or· omission of BORROWER, any of its agents, employees, licensees, tenants, contractors, subcontractors or material suppliers, or other person or entity with respect to the City Loan or the Property (iv) the acquisition, ownership and maintenance of the Property; (v) the development, marketing, rental and operation of the Project, or (vi) any documents executed by BORROWER in connection with the Project. The provisions of this Section 7.6 shall survive the repayment and cancellation of the Note, the release and reconveyance of the Deed of Trust, and termination of this Agreement. Section 7.7 N on-Liability of CITY and CITY Officials, Employees and Agents. No member, official, employee or agent of the CITY shall be personally -liable to BORROWER, or any successor in interest, in the event of any Default or breach by the CITY, or for any amount which may become due to BORROWER or its successor or on any obligation under the terms of this Agreement. II 121115 sh 8262008 34 Section 7.8 No Third Party Beneficiaries. BORROWER 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, and no third party shall have any claim or right of action hereunder for any cause whatsoever. Section 7.9 Action by the CITY; Amendments. Except as may be otherwise specifically provided herein, whenever any approval, notice, direction, consent, request, extension of time, waiver of condition, termination, or other action by the CITY is required or permitted under this 'Agreement, such action may be given, made, or taken by the City Manager without further approval by the City Council, and any such action shall be in writing. Section 7.10 Waivers. Any waiver by the CITY of any obligation or condition in this Agreement must be in writing. No waiver will be implied from any delay or failure by the CITY to take action on any breach or Default of BORROWER or to pursue any remedy allowed under this Agreement or applicable law. Any extension of time granted to BORROWER to perform any obligation under this Agreement shall not operate as a waiver or release from any of its obligations under this Agreement. Consent by the CITY to any act or omission by BORROWER shall not be construed to be a consent to any other or subsequent act or omission or to waive the requirement for the CITY's written consent to future waivers. Section 7 .11 Notices, Demands and Communications. All notices, consents, communications or transmittals required by this Loan Agreement shall be made, in writing, and shall be communicated by the United States mail, certified, return receipt requested or by express delivery or overnight courier service with a delivery receipt, and shall be deemed given as of the date shown on the delivery receipt as the date 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: II II 121115 sh 8262008 CITY: City of Palo Alto Office of the City Clerk PO Box 10250 Palo Alto, CA 94303 35 With a copy to: City of Palo Alto Director, Department of Planning & Community Environment PO Box 10250 Palo Alto, CA 94303 BORROWER: Palo Alto Housing Corporation 725 Alma Street Palo Alto, CA 94301 Attn: Executive Director Such written notices, demands and communications may be sent in the same manner to such other addresses as the affected party may from time to time designate by mail as provided in this Section. Receipt shall be deemed to have occurred on the date shown on a written receipt for delivery or refusal of delivery. Section 7.12 Applicable Law and Venue. 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. 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. Section 7.13 Parties Bound. Except as otherwise limited herein, the provisions of this Agreement shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, legal representatives, successors and assigns. Any provision of this Loan Agreement which is characterized as a covenant or a condition shall be deemed both a covenant and a condition. This Agreement is intended to run with the land and shall bind BORROWER and its successors and assigns in the Property and the Project for the entire Term, and the benefit hereof shall inure to the benefit of the CITY and its successors and assigns. Section 7.14 Attorneys' Fees. If any lawsuit is commenced to enforce any of the terms of this Agreement, the prevailing party will have the right to recover its reasonable attorneys' fees and costs of suit from the other party. 36 121115 sh 8262008 Section 7.15 Severability. If any term of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions shall continue in full force and effect unless the rights and obligations of the parties have been materially altered or abridged by such invalidation, voiding or unenforceability. Section 7 .16 Force Maj eure. In addition to specific provisions of this Agreement, performance by either party shall not be deemed to be in default where delays or defaults are due to to war, insurrection, strikes, lock outs or other labor disturbances, one or more acts of a public enemy, war, riot, sabotage, blockade, embargo, floods, earthquakes, fires, quarantine restrictions, freight embargoes, lack of transportation, court order, delays or failures of performance by any governmental authority or utility company (other than the acts or failure to act of the CITY and so long as the party seeking the extension has adequately complied with the applicable processing requirements of such governmental authority or utility company), delays resulting from changes in any applicable laws, rules, regulations, ordinances or codes, or a change in the interpretation thereof by any governing body with jurisdiction, or any other cause (other than lack of funds of BORROWER or BORROWER's inability to finance the construction of the Project) beyond the reasonable control or without the fault of the party claiming an extension of time to perform or an inability of performance. An extension of time for any cause will be deemed granted if notice by the party claiming such extension is sent to the other within ten (l0) days from the commencement of the cause and the party granting the extension agrees to the extension in writing. In no event shall the CITY be required to agree to cumulative delays in excess of one hundred eighty (180) days. Section 7.1 7 Conflict of Interest. (a) Except for payment of salaries and administrative costs. no person who is an employee, agent, consultant, officer or official of BORROWER 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 any 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. (b) BORROWER 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. BORROWER also covenants that, in the performance of this Agreement, no subcontractor or person having such interest shall be employed by BORROWER. In addition, BORROWER certifies that no one who has or will have any financial interest under this Agreement is an officer or employee of CITY. II 37 121115 sh 8262008 Section 7.18 Time of Essence. Time is of the essence with respect to the performancy of each of the covenants and agreements contained in this Agreement. Section 7.19 Title of Parts and Sections; Exhibits. Any titles of the sections or subsections of this Agreement are inserted for convenience of reference only and shall be disregarded in interpreting any part of the Agreement's provisions. All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules which may, from time to time, be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and shall be deemed to be part hereof. Section 7.20 Multiple Originals; Counterpart. This Agreement may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts. Section 7.21 Recording of Memo of Agreement. The CITY and BORROWER shall cause the Memo of Agreement to be recorded against the Property in the Official Records of Santa Clara County. Section 7.22 Further Actions. 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 Agreement. II II II II II II II II II 38 121115 sh 8262008 WHEREFORE, this Agreement has been entered into by the undersigned as of the date first above written. APPROVED AS TO FORM: Senior Assistant City Attorney APPROVED: Director of Planning and Community Environment Risk Manager EXHIBITS: EXHIBIT A: Legal Description of the Property EXHIBIT B: Note EXHIBIT C: Deed of Trust CITY OF PALO ALTO, a chartered city and municipal corporation City Manager BORROWER: Palo Alto Housing Corporation, a California nonprofit public benefit corporation By: ______________________ ~ Candice R. Gonzalez Executive Vice President Taxpayer I.D. No. ____________ _ EXHIBIT D: Estimated Project Costs and Sources of Funds' EXHIBIT E: Schedule of Performance EXHIBIT F: Assignment of Documents EXHIBIT G: Insurance Requirements Loan Agreement . 39 Signature Page 895\05\1232792.2 10/29/2012 EXHIBIT A LEGAL DESCRIPTION OF THE PROPERTY Real property in the City of Palo Alto, County of Santa Clara, State of California, described as . follows: TRACT ONE: PARCEL ONE: PORTION OF LOT 10, AS. SHOWN UPON THAT CERTAIN MAP ENTITLED, "MAYBELL TRACT", WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, ON JUNE 19, 1905 IN BOOK K OF MAPS, AT PAGES 88 AND 89, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A HUB SET AT THE POINT OF INTERSECTION OF THE SOUTHEASTERLY LINE OF MAYBELL AVENUE WITH THE NORTHEASTERLY LINE OF 10, AS SAID AVENUE AND LOT ARE SHOWN UPON THE MAP ABOVE REFERRED TO, RUNNING THENCE SOUTH 28° 48' WEST ALONG THE SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE 145.00 FEET TO THE TRUE POINT OF BEGINNING OF THE FOLLOWING DESCRIBED PARCEL OF LAND; THENCE AT RIGHT ANGLES TO SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE, SOUTH 61° 12' EAST 65.00 FEET; THENCE RUNNING PARALLEL WITH SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE SOUTH 28° 48' WEST 111.00 FEET; THENCE NORTH 61° 12' WEST 65.00 FEET TO A POINT IN SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE; THENCE ALONG SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE NORTH 28° 48' EAST 111.00 FEET TO THE POINT OF BEGINNING. PARCEL TWO: PORTION OF LOT 10, AS SHOWN UPON THAT CERTAIN MAP ENTITLED, "MAYBELL TRACT", WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, ON JUNE 19, 1905 IN BOOK "K' OF MAPS, AT PAGES 88 AND 89, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE SOUTHEASTERLY LINE OF MAYBELL AVENUE, DISTANT THEREON S. 28° 48' W. 84.83 FEET FROM THE POINT OF INTERSECTION THEREOF WITH THE NORTHEASTERLY LINE OF LOT 10, AS SAID AVENUE AND LOT ARE SHOWN UPON THE MAP OF MAYBELL TRACT HEREINABOVE REFERRED TO; THENCE PARALLEL WITH SAID NORTHEASTERLY LINE OF LOT 10, S. 61° 14' 22" E. 80.74 FEET;· THENCE PARALLEL WITH SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE, S. 28° 48' W. 169.66 FEET; THENCE PARALLEL WITH SAID NORTHEASTERLY LINE OF LOT 10, N. 61° 14' 22" W. 15.74 FEET; THENCE PARALLEL WITH THE SOUTHEASTERLY LINE OF MAYBELL AVENUE N. 28° 48' E. 109.49 FEET; THENCE PARALLEL WITH SAID NORTHEASTERLY TINE OF LOT 10 N. 61° 14' 22" W. 65 FEET TO THE SOUTHEASTERLY LINE OF MAYBELL AVENUE; THENCE ALONG SAID SOUTHEASTERLY LINE, N. 28° 48' E. 60.17 FEET TO THE POINT OF BEGINNING. TRACTlWO: PARCEL ONE: PORTION OF LOT 10, AS SHOWN UPON THAT CERTAIN MAP ENTITLED, "MAYBELL TRACT", WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, ON JUNE 19, 1905 IN BOOK K OF MAPS, AT PAGES 88 AND 89, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A HUB SET AT THE POINT OF INTERSECTION OF THE SOUTHEASTERLY LINE OF MAYBELL AVENUE WITH THE NORTHEASTERLY LINE OF LOT 10, AS SAID AVENUE AND LOT ARE SHOWN UPON THE MAP ABOVE REFERRED TO; RUNNING THENCE SOUTH 28° 48' WEST ALONG THE SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE 339.32 FEET TO AN IRON PIPE SET AT THE INTERSECTION THEREOF WITH THE SOUTHWESTERLY LINE OF SAID LOT 10; RUNNING THENCE SOUTH 61° 12' EAST ALONG SAID LAST NAMED liNE 96.14 FEET TO AN IRON PIPE AT THE WESTERNMOST CORNER OF THAT CERTAIN 0.94 ACRE TRACT OF LAND DESCRIBED IN THE DEED FROM MARTHA A. CHRISTESON TO GEO M. ANTHONY, DATED MARCH 5, 1937 RECORDED MARCH 26, 1937 IN BOOK 814 OF OFFICIAL RECORDS, PAGE 434, SANTA CLARA COUNTY RECORDS; RUNNING THENCE NORTH 28° 48' EAST ALONG THE NORTHWESTERLY LINE OF SAID 0.94 ACRE TRACT 99.68 FEET TO AN IRON PIPE AT THE NORTHERNMOST CORNER THEREOF; RUNNING THENCE SOUTH 57° 27' 38" EAST ALONG THE NORTHEASTERLY LINE OF THE SAID 0.94 ACRE TRACT 221.17 FEET TO AN IRON PIPE; THENCE LEAVING SAID LAST NAMED LINE AND RUNNING NORTH 28° 48' EAST AND PARALLEL WITH THE SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE 254.14 FEET TO AN IRON PIPE SET ON THE SAID NORTHEASTERLY LINE OF LOT 10; RUNNING THENCE NORTH 61° 14' 22" WEST ALONG SAID LAST NAMED LINE 316.84 FEET TO THE POINT OF BEGINNING. CONTAINING APPROXIMATELY 2 ACRES, SURVEYED AND MONUMENTED IN JANUARY 1951 BY GEO S. NOLTE, CIVIL ENGINEER AND LAND SURVEYOR. EXCEPTING THEREFROM THAT CERTAIN PARCEL OF LAND DESCRIBED AS FOLLOWS: PORTION OF LOT 10, AS SHOWN UPON THAT CERTAIN MAP ENTITLED, "MAYBELL TRACT", WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, ON JUNE 19, 1905 IN BOOK K OF MAPS, AT PAGES 88 AND 89, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A HUB SET AT THE POINT OF INTERSECTION OF THE SOUTHEASTERLY LINE OF MAYBELL AVENUE WITH THE NORTHEASTERLY LINE OF LOT 10, AS SAID AVENUE AND LOT ARE SHOWN UPON THE MAP ABOVE REFERRED TO; RUNNING THENCE SOUTH 28° 48' WEST ALONG THE SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE 145.00 FEET TO THE TRUE POINT OF BEGINNING OF THE FOLLOWING DESCRIBED PARCEL OF LAND; THENCE AT RIGHT ANGLES, TO SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE, SOUTH 61° 12'. EAST 65.00 FEET; THENCE RUNNING PARALLEL WITH THE SOUTHEASTERLY LINE OF MAYBELL AVENUE SOUTH 28° 48' WEST 111.00 FEET; THENCE NORTH 61° 12' WEST 65.00 FEET TO A POINT IN SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE; THENCE ALONG SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE NORTH 28° 48' EAST 111.00 FEET TO THE TRUE POINT OF BEGINNING. ALSO EXCEPTING THEREFROM: PORTION OF LOT 10, AS SHOWN UPON THAT CERTAIN MAP ENTITLED, "MAYBELL TRACT", WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON JUNE 19, 1905 IN BOOK K OF MAPS, AT PAGES 88 AND 89, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE SOUTHEASTERLY LINE OF MAYBELL AVENUE, DISTANT THEREON S. 28° 48' W. 84.83 FEET FROM THE POINT OF INTERSECTION THEREOF WITH THE NORTHEASTERLY LINE OF LOT 10, AS SAID AVENUE AND LOT ARE SHOWN UPON THE MAP OF MAYBELL TRACT HEREINABOVE REFERRED TO; THENCE PARALLEL WITH SAID NORTHEASTERLY LINE OF LOT 10, S. 61° 14' 22" E. 80.74 FEET; THENCE PARALLEL WITH SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE, S. 28° 48' W. 169.66 FEET; THENCE PARALLEL WITH SAID NORTHEASTERLY LINE OF LOT 10, N. 61° 14' 22" W. 15.74 FEET; THENCE PARALLEL WITH THE SOUTHEASTERLY LINE OF MAYBELL AVENUE N. 28° 48' E. 109.49 FEET; THENCE PARALLEL WITH SAID NORTHEASTERLY TINE OF LOT 10 N. 61° 14' 22" W. 65 FEET TO THE SOUTHEASTERLY LINE OF MAYBELL AVENUE; THENCE ALONG SAID SOUTHEASTERLY LINE, N. 28° 48' E. 60.17 FEET TO THE POINT OF BEGINNING. ALSO EXCEPTING THEREFROM: PORTION OF LOT 10, MAP OF MAYBELL TRACT, FILED JUNE 19, 1905, BOOK K OF MAPS AT PAGE 88, SANTA CLARA COUNTY RECORDS, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE SOUTHEAST LINE OF MAYBELL AVENUE . AND THE NORTHEAST LINE OF CLEMO AVENUE, FORMERLY PARK AVENUE; THENCE FROM SAID POINT OF BEGINNING N. 280 48' E. ALONG SAID LINE OF MAYBELL AVENUE 13.00 FEET; THENCE LEAVING SAID LINE S. 61 0 12' E. 10.00 FEET; THENCE 5. 280 48' W 3.00 FEET; THENCE ON THE ARC OF A TANGENT CURVE TO THE LEFT WITH A RADIUS OF 10 FEET, THROUGH A CENTRAL ANGLE OF 900 , AN ARC DISTANCE OF 15.71 FEET TO SAID NORTHEASTERLY LINE OF CLEMO AVENUE; THENCE ALONG SAID LINE N. 610 12' W. 20.00 FEET TO THE POINT OF BEGINNING. PARCEL TWO: BEGINNING AT A POINT IN THE SOUTHWESTERLY LINE OF LOT 10, DISTANT THEREON N. 610 12' W. 271.16 FEET FROM THE MOST SOUTHERLY CORNER OF SAID LOT 10 IN THE NORTHWESTERLY LINE OF ARASTRADERO ROAD, AS SAID LOT AND ROAD ARE SHOWN UPON THE MAP OF MAYBELL TRACT HEREINAFTER REFERRED TO; THENCE LEAVING SAID SOUTHWESTERLY LINE AND RUNNING N. 280 48' E., 85.35 FEET, MORE OR LESS, TO A POINT IN THE NORTHEASTERLY LINE OF THAT CERTAIN 0.94 ACRE TRACT DESCRIBED IN THE DEED FROM MARTHA A. CHRISTESON TO GEORGE M. ANTHONY, DATED MARCH 5, 1937 AND RECORDED MARCH 26, 1937 IN BOOK 814 OF OFFICIAL RECORDS PAGE 434, SANTA CLARA COUNTY RECORDS; SAID POINT BEING THE MOST WESTERLY CORNER OF THAT CERTAIN PARCEL OF LAND DESCRIBED IN THE DEED FROM CURTIS DAY, ET UX, TO SCOBLE, INC., A CORPORATION DATED APRIL 29, 1958 AND RECORDED MAY 12, 1958 IN BOOK 4072 OF OFFICIAL RECORDS, PAGE 110, SANTA CLARA COUNTY RECORDS; THENCE RUNNING ALONG THE SAID NORTHEASTERLY LINE OF THE 0.94 ACRE PARCEL OF LAND N. 570 26' W. 221.17 FEET TO THE MOST NORTHERLY CORNER OF SAID 0.94 ACRE PARCEL; THENCE RUNNING ALONG THE NORTHWESTERLY LINE OF SAID 0.94 ACRE PARCEL, S. 280 48' W., 99.68 FEET TO THE MOST WESTERLY CORNER THEREOF; THENCE RUNNING ALONG THE SOUTHWESTERLY LINE OF THE SAID 0.94 ACRE PARCEL, SAID LINE ALSO BEING THE SAID SOUTHWESTERLY LINE OF LOT 10 HEREINABOVE REFERRED TO, S. 610 12' E., 220.70 FEET TO THE POINT OF BEGINNING, AND BEING A PORTION OF LOT 10, AS ,SHOWN UPON THAT CERTAIN MAP ENTITLED, "MAYBELL TRACT, MAYFIELD SANTA CLARA CO.", WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON LIME 19, 1905 IN BOOK "K" OF MAPS, PAGE 88 AND 89. APN: 137-25-108-00 and 137-25-109-00 $3,220,220.00 EXHIBITB PROMISSORY NOTE 567-595 Maybell Avenue, Palo Alto, CA (APNNos. 137-25-108,137-25-109) Palo Alto, California ____ ,2012 FOR VALlTE RECEIVED, the undersigned Palo Alto Housing Corporation, a California non profit public benefit corporation ("Borrower"), promises to pay to the order of the City of Palo Alto, a chartered city and municipal corporation ("City"), or order, the principal sum of Three Million Two Hundred Twenty Thousand Two Hundred Twenty Dollars ($3,220,220) plus interest thereon pursuant to Section 2 below. 1. Borrower's Obligation. This Note evidences Borrower's obligation to repay City the principal amount of Three Million Two Hundred Twenty Thousand Two Hundred Twenty Dollars ($3,220,220) plus interest for the funds loaned to Borrower by City to fmance the acquisition and. development of the Property pursuant to the Acquisition Loan Agreement and Option to Purchase between Borrower and City of even date herewith (the "Loan Agreement"). All capitalized terms used but not defined in this Note have the meanings set forth in the Loan Agreement. 2. Interest. (a) Subject to the provisions of subsection (b) below, this Note bears simple interest at a rate of three percent (3 %) per annum from the date of Permanent Closing until full repayment of all principal. (b) If a Default occurs, interest will accrue on all amounts due under this Note at the Default Rate until such Default is cured by Borrower or waived by City. 3. Term and Repayment Requirements. Principal and interest under this Note is due and payable as set forth in Section 2.9 of the Loan Agreement. The unpaid principal balance hereunder, together with accrued interest thereon, is due and payable no later than the date that is the earliest to occur of (i) any Transfer not authorized by the City, (ii) a Default, (iii) on December 31, 2014 or any extension of that date if the Agreement is terminated pursuant to Section 6.1 of the Loan Agreement, and (iv) the expiration of the Term, subject to extension pursuant to Section 2.9(b) of the Loan Agreement. 4. No Assumption. This Note is not assumable by the successors and assigns of Borrower without the prior written consent of City, except as provided in the Loan Agreement. 5. Security. This Note, with interest, is secured by the Deed of Trust. Upon execution, the D~ed of Trust will be recorded in the official records of Santa Clara County, 1 121115 sh 8262010 California. Upon recordation of the Deed of Trust, this Note will become nonrecourse to Borrower, pursuant to and except as provided in Section 2.10 of the Loan Agreement. The terms of the Deed of Trust are hereby incorporated into this Note and made a part hereof. 6. Terms of Payment. (a) Borrower shall make all payments due under this Note in currency of the United States of America to City at the Revenue Collections office of the City of Palo Alto, First Floor, 250 Hamilton Avenue, P. O. Box 10250, Palo Alto, CA 94303, or at such other place as City may from time to time designate. Except as otherwise set forth herein or in any other Loan Document, payments may be applied in such order and manner as City may determine in its sole and absolute discretion. (b) All payments on this Note are without· expense to City. Borrower shall pay all costs and expenses, including re-conveyance fees and reasonable attorney's fees of City, incurred in connection with the paynlent of this Note and the release of any security hereof. (c) Notwithstanding any other provision of this Note, or any instrument securing the obligations of Borrower under this Note, if, for any reason whatsoever, the payment of any sums by Borrower pursuant to the terms of this Note would result in the payment of interest that exceeds the amount that City may legally charge under the laws of the State of California, then the amount by which payments exceed the lawful interest rate will automatically be deducted from the principal balance owing on this Note, so that in no event is Borrower obligated under the terms of this Note to pay any interest that would exceed the lawful rate. (d) The obligations of Borrower under this Note are absolute and Borrower waives any and all rights to offset, deduct or withhold any payments or charges due under this Note for any reason whatsoever. 7. Default; Acceleration. (a) Upon the occurrence of a Default, the entire unpaid principal balance, together with all interest thereon, and together with all other sums then payable under this Note and the Deed of Trust will, at the option of City, become immediately due and payable without further demand. In addition to the right to accelerate the payment of this Note upon the occurrence of a Default, City shall have all rights and remedies described in "the other Loan Documents. (b) City's failure to exercise the remedy set forth in Subsection 7(a) above or any other remedy provided by law upon the occurrence of a Default does not constitute a waiver of the right to exercise any remedy at any subsequent time in respect to the same or any other Default. The acceptance by City of any paynlent that is less than the total of all amounts due and payable at the time of such payment does not constitute a waiver of the right to exercise any of the foregoing remedies or options at that time or at any subsequent time, or nullify any prior exercise of any such remedy or option, without the express consent of City, except as and to the extent otherwise provided by law. 2 121115 sh 8262010 8. Waivers. (a) Borrower hereby waives diligence, presentment, protest and demand, and notice of protest, notice of demand, notice of dishonor and notice of non-payment of this Note. Borrower expressly agrees that this Note or any payment hereunder may be extended fronl time to time, and that City may accept further security or release any security for this Note, all without in any way affecting the liability of Borrower. (b) Any extension of time for payment of this Note or any installment hereof made by agreement of City with any person now or hereafter liable for payment of this Note must not operate to release, discharge, modify, change or affect the original liability of Borrower under this Note, either in whole or in part. 9. Miscellaneous Provisions. (a) All notices to City or Borrower are to be given in the manner and at the addresses set forth in the Loan Agreement, or to such addresses as City and Borrower may therein designate. (b) Borrower promises to pay all costs and expenses, including reasonable attorney's fees, incurred by City in the enforcenlent of the provisions of this Note, regardless of whether suit is filed to seek enforcement. (c) This Note is governed by the laws of the State of California. (d) The times for the performance of any obligations hereunder are to be strictly construed, time being of the essence. ( e) This Note is one of the Loan Documents. This Note may not be modified except upon the written consent of the parties. (f) Every provision of this Note is intended to be severable. In the event any term or provision of this Note is declared by a cO\lrt of competent jurisdiction to be illegal, invalid or unenforceable for any reason whatsoever, such illegality, invalidity or unenforceability will not affect the balance of the terms and provision hereof, which ternlS and provisions will remain binding and enforceable, and this Note will be construed as if such illegal, invalid or unenforceable provision had not been contained herein. [signatures on following page} 3 121115 sh 8262010 IN WITNESS WHEREOF, Borrower is executing this Promissory Note as of the day and year first above written. PALO ALTO HOUSING CORPORATION, a California nonprofit public benefit corporation By: Candice R. Gonzalez Its: Executive Vice President 121115 sh 8262010 4 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Palo Alto Office of City Attorney 250 Hamilton Avenue Palo Alto, CA 94301 RECORDED WITHOUT CHARGE GOVERNMENT CODE §§ 6103,27383 EXHIBITC DEED OF TRUST WITH ASSIGNMENT OF RENTS, SECURITY AGREEMENT, AND FIXTURE FILING 567 -595 Maybell Avenue, Palo Alto, CA (APN Nos. 137-25-108, 137-25-109) THIS DEED OF TRUST WITH ASSIGNMENT OF RENTS, SECURITY AGREEMENT, AND FIXTURE FILING ("Deed of Trust") is made as of __ , 2012, by and anlong Palo Alto Housing Corporation,· a California nonprofit public benefit corporation ("Trustor"), First American Title Company, a California corporation ("Trustee"), and the City of Palo Alto, a municipal corporation ("Beneficiary"). FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt of which is hereby acknowledged, Trustor hereby irrevocably grants, transfers, conveys and assigns to Trustee, IN TRUST, WITH POWER OF SALE, for the benefit and security of Beneficiary, under and subject to the terms and conditions hereinafter set forth, Trustor's fee interest in the property located in the County of Santa Clara, State of California, that is described in the attached Exhibit A, incorporated herein by this reference (the "Property"). TOGETHER WITH all interest, estates or other claims, both in law and in equity which Trustor now has or may hereafter acquire in the Property and the rents; TOGETHER WITH all easements, rights-of-way and rights used in connection therewith or as a means of access thereto, including (without limiting the generality of the foregoing) all tenements, hereditaments and appurtenances thereof and thereto; TOGETHER WITH any and all buildings and improvements of every kind and description now or hereafter erected thereon, and all property of the Trustor now or hereafter affixed to or placed upon the Property; 121115 sh 8262009 1 TOGETHER WITH all building materials and equipment now or hereafter delivered to said property and intended to be installed therein; TOGETHER WITH all right, title and interest of Trustor, now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, adjoining the Property, and any and all sidewalks, alleys and strips and areas of land adjacent to or used iIi connection with the Property; TOGETHER WITH all estate, interest, right, title, other claim or demand, of every nature, in and to such property, including the Property, both in law and in equity, including, but not limited to, all deposits made with or other security given by Trustor to. utility companies, the proceeds from any or all of such property, including the Property, claims or demands with respect to the proceeds of insurance in effect with respect thereto, which Trustor now has or may hereafter acquire, any and all awards made for the taking by eminent domain or by any proceeding or purchase in lieu thereof of the whole or any part of such property, including without limitation, any awards resulting from a change of grade of streets and awards for severance damages to the extent Beneficiary has an interest in such awards for taking as provided in Section 4.1 herein; TOGETHER WITH all of Trustor's interest in all articles of personal property or fixtures now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the Property which are necessary to the complete and comfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, including all other goods and chattels and personal property as are ever used or furnished in operating a building, or the activities conducted therein, similar to the one herein described and referred to, and all renewals or replacements thereof or articles in substitution therefor, whether or not the same are, or will be, attached to said building or buildings in any manner; and TOGETHER WITH all of Trustor's interest in all building materials, fixtures, equipment, work in process and other personal property to be incorporated into the Property; all goods, materials, supplies, fixtures, equipment, machinery, furniture and furnishings, signs and other personal property now or hereafter appropriated for use on the Property, whether stored on the Property or elsewhere, and used or to be used in connection with the Property; all rents, issues and profits, and all inventory, accounts, accounts receivable, contract rights, general intangibles, chattel paper, instruments, documents, notes drafts, letters of credit, insurance policies, insurance and condemnation awards and proceeds, trade names, trademarks and service marks arising from or related to the Property and any business conducted thereon by Trustor; all replacements, additions, accessions and proceeds; and all books, records and files relating to any of the foregoing. All of the foregoing, together with the Property, is herein referred to as the "Security." To have and to hold the Security together with acquittances to the Trustee, its successors and assigns forever. FOR THE PURPOSE OF SECURING THE FOLLOWING OBLIGATIONS (the "Secured Obligations"): 121115 sh 8262009 2 A. Payment to Beneficiary of all sums at any time owing under or in connection with the Note (defined in Section 1.4 below) until paid or cancelled and any other amounts owing under the Loan Documents (defined in Section 1.3 below). Said principal and other payments are due and payable as provided in the Note or other Loan Documents, as applicable. The .Note and all its terms are incorporated herein by reference, and this conveyance secures any and all extensions thereof, however evidenced; B. Payment of any sums advanced by Beneficiary to protect the Security pursuant to the terms and provisions of this Deed of Trust following a breach of Trustor's obligation to advance said sums and the expiration of any applicable cure period, with interest thereon as provided herein; C. Performance of every obligation, covenant or agreement of Trustor contained herein and in the Loan Documents; and D. All modifications, extensions and renewals of any of the Secured Obligations (including without limitation, (i) modifications, extensions or renewals at a different rate of interest, or (ii) deferrals or accelerations of the required principal payment dates or interest payment dates or both, in whole or in part), however evidenced, whether or not any such modification, extension or renewal is evidenced by a new or additional promissory note or notes. AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES: ARTICLE 1 DEFINITIONS In addition to the terms defined elsewhere in this Deed of Trust, the following terms have the following meanings in this Deed of Trust. All capitalized terms used but not defined in this Deed of Trust have the meanings set forth in the Loan Agreement. Section 1.1 The term "Loan" means the loan made by the Beneficiary to the Trustor in the amount of Three Million Two Hundred Twenty Thousand Two Hundred Twenty Dollars ($3,220,220). Section 1.2 The term "Loan Agreement" means that certain Acquisition Loan Agreement and Option to Purchase between Trustor and Beneficiary, of even date herewith, as such may be amended from time to time, providing for the Beneficiary to loan to Trustor Three Million Two Hundred Twenty Thousand Two Hundred Twenty Dollars ($3,220,220). Section 1.3 The term "Loan Documents" means this Deed of Trust, the Note, the Loan Agreement, the Assignment of Documents, the Regulatory Agreement, and any other agreement or instrument given to evidence or further secure payment and perfQrmance of the Secured Obligations, the terms and conditions of which are incorporated herein by this reference. Section 1.4 The term "Note" means the Promissory Note in the principal amount of Three Million Two Hundred Twenty Thousand Two Hundred Twenty Dollars ($3,220,220) of 121115 sh 8262009 3 even date herewith, executed by Trustor in favor of the Beneficiary, as it may be amended or restated, the payment of which is secured by this Deed of Trust. (A copy of the Note is on file with the Beneficiary and terms and provisions of the Note are incorporated herein by reference.) Section 1.5 The term "Principal" means the amount required to be paid under the Note. ARTICLE 2 MAINTENANCE AND MODIFICATION OF THE PROPERTY AND SECURITY Section 2.1 Maintenance and Modification of the Property by Trustor. The Trustor agrees that at all times prior to full payment and performance of the Secured Obligations, the Trustor will, at the Trustor's own expense, maintain, preserve and keep the Security or cause the Security to be maintained and preserved in good condition. The Trustor will from time to time make or cause to be made all repairs, replacements and renewals deemed proper and necessary by it. The Beneficiary has no responsibility in any of these matters or for the making of improvements or additions to the Security. Trustor agrees to pay fully and discharge (or cause to be paid fully and discharged) all claims for labor done and for material and services furnished in connection with the Security, diligently to file or procure the filing of a valid notice of cessation upon the event of a cessation of labor on the work or construction on the Security for a continuous period of thfrty (30) days or more, and to take all other reasonable steps to forestall the assertion of claims of lien against the Security or any part thereof.· Trustor irrevocably appoints, designates and authorizes Beneficiary as its agent (said agency being coupled with an interest) with the authority, but without any obligation, to file for record any notices of completion or cessation of labor or any other notice that Beneficiary deems necessary or desirable to protect its interest in and to the Security or the Loan Documents; provided, however, that Beneficiary exercises its rights as agent of Trustor only in the event that Trustor fails to take, or fails to diligently continue to take, those actions as hereinbefore provided. . Upon demand by Beneficiary, Trustor shall make or cause to be made such demands or claims as Beneficiary specifies upon laborers, materialmen, subcontractors or other persons who . have furnished or claim to have furnished labor, services or materials in connection with the Security. Nothing herein contained requires Trustor to pay any clainls for labor, materials or services which Trustor in good faith disputes and is diligently contesting provided that Trustor shall, within thirty (30) days after the filing of any claim of lien, record in the Office of the Recorder of Santa Clara County, a surety bond in an amount 1 and 112 times the amount of such claim item to protect against a claim of lien. Section 2.2 Granting of Easements. Trustor may not grant easements, licenses, rights-of-way or other rights or privileges in the nature. of easements with respect to any property or rights included in the Security except those required or desirable for installation and maintenance of public utilities including, without 121115 sh 8262009 4 limitation, water, gas, electricity, sewer, cable, telephone and telegraph, or those required by law, and as approved, in writing, by Beneficiary. Section 2.3 Assignment of Rents. As part of the consideration for the indebtedness evidenced by the Note, Trustor hereby absolutely and unconditionally assigns and transfers to Beneficiary all the rents and revenues of the Property including those now due, past due, or to become due by virtue of any lease or other agreement for the occupancy or use of all or any part of the Property, regardless of to whom the rents and revenues of the Property are payable, subject to the rights of senior lenders. Trustor hereby authorizes Beneficiary or Beneficiary's agents to collect the aforesaid rents and revenues and hereby directs each tenant of the Property to pay such rents to Beneficiary or Beneficiary's agents; provided, however, that prior to written notice given by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents, Trustor shall collect and receive all rents and revenues of the Property as trustee for the benefit of Beneficiary and Trustor to apply the rents and revenues so collected to the Secured Obligations with the balance, so long as no such breach has occurred, to the account of Trustor, it being intended by Trustor and Beneficiary that this assignment of rents constitutes an absolute assignment and not an assignment for additional security only. Upon delivery of written notice by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents, and without the necessity of Beneficiary entering upon and taking and maintaining full control of the Property in person, by agent or by a court-appointed receiver, Beneficiary shall immediately be entitled to possession of all rents and revenues of the Property as specified in this Section 2.3 as the same becomes due and payable, including but not limited to, rents then due and unprud, and all such rents will immediately upon delivery of such notice be held by Trustor as trustee for the benefit of Beneficiary only; provided, however, that the written notice by Beneficiary to Trustor of the breach by Trustor contains a statement that Beneficiary exercises its rights to such rents. Trustor agrees that commencing upon delivery of such written notice of Trustor's breach by Beneficiary to Trustor, each tenant of the Property shall make such rents payable to and pay such rents to Beneficiary or Beneficiary's agents on Beneficiary'S written demand to each tenant therefor, delivered to each tenant personally, by mail or by delivering such demand to each rental unit, without any liability on the part of said tenant to inquire further . as to the existence of a default by Trustor. Trustor hereby covenants that, except to senior mortgage lenders, Trustor has not executed any prior assignment of said rents, that Trustor has not performed, and will not perfonn, any acts or has not executed and will not execute, any instrument which would prevent Beneficiary from exercising its rights under this Section 2.3, and that at the time of execution of this Deed of Trust, there has been no anticipation or prepayment of any of the rents of the Property for more than two (2) months prior to the due dates of such rents. Trustor covenants that Trustor will not hereafter collect or accept payn1ent of any rents of the Property more than two (2) months prior to the due dates of such rents. Trustor further covenant that Trustor will execute and deliver to Beneficiary such further assignments of rents and revenues of the Property as Beneficiary may from time to time request. Upon Trustor's breach of any covenant or agreement of Trustor in the Loan Documents, Beneficiary may in person, by agent or by a court-appointed receiver, regardless of the adequacy 121115 sh 8262009 5 of Beneficiary's security, enter upon and take and maintain full control of the Property in order to perform an acts necessary and appropriate for the operation and maintenance thereof including, but not linlited to, the execution, cancellation or modification of leases, the collection of all rents and revenues of the Property, the making of repairs to the Property and the execution or termination of contracts providing for the management or maintenance of the Property, all on such terms as are deemed best to protect the security of this Deed of Trust. In the event Beneficiary elects to seek the appointment of a receiver for the Property upon Trustor's breach of any covenant or agreement of Trustor in this Deed of Trust, Trustor hereby expressly consents to the appointment of such receiver. Beneficiary or the receiver will be entitled to receive a reasonable fee for so managing the Property. All rents and revenues collected subsequent to delivery of written notice by Beneficiary to Trustor of the breach by Trustor of any covenant or agreement of Trustor in the Loan Documents are to be applied first to the costs, if any, of taking control of and managing the Property and collecting the rents, including, but not limited to, attorney's fees, receiver's fees, premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies, taxes, assessments and other charges on the Property, and the costs of discharging any obligation or liability of Trustor as lessor or landlord of the Property and then to the sums secured by this deed of Trust. Beneficiary or the receiver is to have access to the books and records used in the operation and maintenance of the Property and will be liable to account only for those rents actually received. Beneficiary is not liable to Trustor, anyone claiming under or through Trustor or anyone having an interest in the Property by reason of anything done or left undone by Beneficiary under this Section 2.3. If the rents of the Property are not sufficient to meet the costs, if any, of taking control of and managing the Property and collecting the rents, any funds expended by Beneficiary for such purposes will become part of the Secured Obligations pursuant to Section 3.3 hereof. Unless Beneficiary and Trustor agree in writing to other terms of payment, such amounts are payable by Trustor to Beneficiary upon notice from Beneficiary to Trustor requesting payment thereof and will bear· interest from the date of disbursement at the rate stated in Section 3.3. If the Beneficiary or the receiver enters upon and takes and maintains control of the Property, neither that act nor any application of rents as provided herein will cure or waive any default under this Deed of Trust or invalidate any other right or remedy available to Beneficiary under applicable law or under this Deed of Trust. This assignment of rents of the Property will terminate at such time as this Deed of Trust ceases to secure the Secured Obligations. ARTICLE 3 TAXES AND INSURANCE; ADVANCES Section 3.1 Taxes, Other Governmental Charges and Utility Charges. Trustor shall pay, or cause to be paid, prior to the date of delinquency, all taxes, assessments, charges and levies imposed by any public authority or utility company that are or nlay become a lien affecting the Security or any part thereof; provided, however, that Trustor is not required to pay and discharge any such tax, assessment, charge or levy so long as (a) the 121115 sh 8262009 6 legality thereof is promptly and actively contested in good faith and by appropriate proceedings, and (b) Trustor maintains reserves adequate to pay any liabilities contested pursuant to this Section 3.1. With respect to taxes, special assessments or other similar governmental charges, Trustor shall pay such amount in full prior to the attachment of any lien therefor on any part of the Security; provided, however, if such taxes, assessments or charges can be paid in installments, Trustor may pay in such installments. Except as provided in clause (b) of the first sentence of this paragraph, the provisions of this Section 3.1 may not be construed to require that Trustor maintain a reserve account, escrow account, impound account or other similar account for the payment of future taxes, assessments, charges and levies. In the event that Trustor fails to pay any of the items required by this Section to be paid by Trustor, Beneficiary may (but is tmder no obligation to) pay the same, after the Beneficiary has notified the Trustor of such failure to pay and the Trustor fails to fully pay such items within seven (7) business days after receipt of such notice. Any amount so advanced therefor by Beneficiary, together with interest thereon from the date of such advance at the maximum rate permitted by law, will become part of the Secured Obligations secured hereby, and Trustor agrees to pay all such amounts. Section 3.2 Provisions Respecting Insurance. Trustor agrees to provide insurance conforming in all respects to that required under the Loan Documents during the course of construction and following completion, and at all times until all amounts secured by this Deed of Trust have been paid, all Secured Obligations secured hereunder have been fulfilled, and this Deed of Trust has been reconveyed. All such insurance policies and coverages are to be maintained at Trustor's sole cost and expense. Certificates of insurance for all of the above insurance policies, showing the same to be in full force and effect, are to be delivered to the Beneficiary upon demand therefor at any time prior to Trustor's satisfaction of the Secured Obligations. Section 3.3 Advances. In the event the Trustor fails to maintain the full insurance coverage required by this Deed of Trust or fails to keep the Security in accordance with the Loan Documents, the Beneficiary, after at least seven (7) days prior notice to Trustor, may (but is under no obligation to) (i) take out the required policies of insurance and pay the premiums on the same, and (ii) make any repairs or replacements that are necessary and provide for payment thereof. All amounts so advanced by the Beneficiary will become part of the Secured Obligations (together with interest as set forth below) and will be secured hereby, which amounts the Trustor agrees to pay on the demand of the Beneficiary, and if not so paid, will bear interest from the date of the advance at the lesser often percent (10%) per annum or the maximum rate permitted by law. II II II 121115 sh 8262009 7 II II 121115 sh 8262009 8 ARTICLE 4 DAMAGE, DESTRUCTION OR CONDEMNATION Section 4.1 Awards and Damages. Subject to the rights of senior lenders, all judgments, awards of damages, settlements and compensation made in connection with or in lieu of (1) the taking of all or any part of or any interest in the Property by or under assertion of the power of eminent domain, (2) any damage. to or destruction of the Property or any part thereof by insured casualty, and (3) any other injury or damage to all or any part of the Property (collectively, the "Funds") are hereby assigned to and are to be paid to the Beneficiary by a check made payable to the Beneficiary. The Beneficiary is authorized and empowered (but not required) to collect and receive any Funds and is authorized to apply them in whole or in part to any indebtedness or obligation secured hereby, in such order and manner as the Beneficiary determines at its sole option. The Beneficiary is entitled to settle and adjust all claims under insurance policies provided under this Deed of Trust and may deduct and retain from the proceeds of such insurance the amount of all expenses incurred by it in connection with any such settlement or adjustment. All or any part of the amounts so collected and recovered by the Beneficiary may be released to Trustor upon such conditions as the Beneficiary may impose for its disposition. Application of all or any part of the Funds collected and received by the Beneficiary or the release thereof will not cure or waive any default under this Deed of Trust. The rights of the Beneficiary under this Section 4.1 are subject to the rights of any senior mortgage lender. The Beneficiary shall release the Funds to Trustor to be used to reconstruct the improvenlents on the Property provided that Beneficiary reasonably determines that Trustor (taking into account the Funds) has sufficient funds to rebuild the improvements in substantially the form that existed prior to the casualty or condemnation. ARTICLES AGREEMENTS AFFECTING THE PROPERTY; FURTHER ASSURANCES; PAYMENT OF PRINCIPAL AND INTEREST Section 5.1 Other Agreements Affecting Property. The Trustor shall duly and punctually perform all terms, covenants, conditions and agreements binding upon it under the Loan Documents and any other agreement of any nature whatsoever now or hereafter involving or affecting the Security or any part thereof. Section 5.2 Agreement to Pay Attorneys' Fees and Expenses. In the event of any Event of Default (as defined in Section 7.1) hereunder, and if the Beneficiary employs attorneys or incurs other expenses for the collection of amounts due hereunder or the enforcement of performance or observance of an obligation or agreement on the part of the Trustor in this Deed of Trust, the Trustor agrees that it will, on demand therefor, pay to the Beneficiary the reasonable fees of such attorneys and such other reasonable expenses so incurred by the Beneficiary. Any such amounts paid by the Beneficiary will be added to the Secured Obligations, and will bear interest from the date such expenses are incurred at the lesser often percent (10%) per annum or the maximum rate permitted by law. 121115 sh 8262009 9 Section 5.3 Payment of the Principal. The Trustor shall pay to the Beneficiary the Principal and any other payments as set forth in the Note in the amounts and by the times set out therein. Section 5.4 Personal Property. To the maximum extent·permitted by law, the personal property subject to this Deed of Trust is deemed to be fixtures and part of the real property and this Deed of Trust constitutes a fixtures filing under the California Commercial Code. As to any personal property not deenled or permitted to be fixtures, this Deed of Trust constitutes a security agreement under the California Commercial Code. Section 5.5 Financing Statement. The Trustor shall execute and deliver to the Beneficiary such financing statements pursuant to the appropriate statutes, and any other documents or instruments as are required to convey to the Beneficiary a valid perfected security interest in the Security. The Trustor shall perform all acts that the Beneficiary reasonably requests so as to enable the Beneficiary to maintain a valid perfected security interest in the Security in order to secure the payment of the Note in accordance with its terms. The Beneficiary is authorized to file a copy of any such financing statement in any jurisdiction(s) as it deems appropriate from time to time in order to protect the security interest established pursuant to this instrument. Section 5.6 Operation of the Security. The Trustor shall operate the Security (and, in case of a transfer of a portion of the Security subject to this Deed of Trust, the transferee shall operate such portion of the Security) in full compliance with the Loan Documents. Section 5.7 Inspection of the Security. At any and all reasonable times upon seventy-two (72) hours' notice, the Beneficiary and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, may inspect the Security, without payment of charges or fees. Section 5.8 Nondiscrimination. The Trustor herein covenants by and for itself, its heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there will be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, age, sex, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Security, nor will the Trustor itself or any person claiming under or through it 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, subtenants, sublessees or vendees in the Security. The foregoing covenants run with the land. 121115 sh 8262009 10 ARTICLE 6 HAZARDOUS WASTE Trustor shall keep and maintain the Property in compliance with, and shall not cause or permit the Property to be in violation of any Hazardous Materials Law (defined below), including but not limited to, soil and ground water conditions. Trustor shall not, and shall not cause or permit the use, generation, manufacture, storage or disposal of on, under, or about the Property or transportation to or from the Property of (i) any substance, material, or waste that is petroleum, petroleum-related, or a petroleum by-product, asbestos or asbestos-containing material, polychlorinated biphenyls, flammable, explosive, radioactive, freon gas, radon, or a pesticide, herbicide, or any other agricultural chemical, and (ii) any waste, substance or material defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "toxic materials", "toxic waste", "toxic substances," or words of similar import under any Hazardous Materials Law (collectively referred to hereinafter as "Hazardous Materials"). Trustor shall cause any tenants and other persons who may come onto the Property to comply with the foregoing. Notwithstanding the foregoing, Hazardous Materials shall not include substances routinely used in the development and operations of housing in accordance with all applicable laws and regulations. Trustor shall immediately notify the Beneficiary in writing if at any time it has any notice of (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against Trustor, any tenant, or the Property pursuant to any applicable federal, state or local laws, ordinances, or regulations relating to any Hazardous Materials, health, industrial hygiene, environmental conditions, or the regulation or protection of the environment, and all amendments thereto as of this date and to be added in the future and any successor statute or rule or regulation promulgated thereto ("Hazardous Materials Law"); (ii) all claims made or threatened by any third party against Trustor, any tenant, or the Property relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials (the matters set forth in clauses (i) and (ii) above are hereinafter referred to as "Hazardous Materials Claims"); and (iii) Trustor's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to be classified as "border-zone property" under the provision of California Health and Safety Code, Sections 25220 et seq., or any regulation adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use of the Property under any Hazardous Materials Law. The Beneficiary shall have the right to join and participate in, as a party if it so elects, and be represented by counsel of its own choice in, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims, and to have its reasonable attorneys' fees in connection therewith paid by Trustor. Trustor shall indemnify and hold harmless the Beneficiary and its councilmernbers, directors, officers, employees, agents, successors and assigns from and against any loss, damage, cost, fine, penalty, judgment, award, settlement, expense or liability, directly or indirectly arising out of or attributable to: (i) any actual or past or present violation of any Hazardous Materials Law; (ii) any Hazardous Materials Claim; (iii) any actual or past or present use, generation, 121115 sh 8262009 11 manufacture, storage, release, threatened release, discharge, disposal, transportation, or presence of Hazardous Materials on, under, or about the Property; (iv) any investigation, cleanup, remediation, removal, or restoration work of site conditions of the Property relating to Hazardous Materials (whether on the Property or any oth~r property); and (v) the breach of any representation of warranty by or covenant of Trustor in this Article, and Section 5.l(h) of the Loan Agreement. Such indemnity shall include, without limitation: (i) all consequential damages; (ii) the costs of any required or necessary investigation, repair, cleanup or detoxification of the Property and the preparation and implementation of any closure, remedial or other required plans; and (iii) all reasonable costs and expenses incurred by the Beneficiary in connection with clauses (i) and (ii), including but not limited to reasonable attorneys' fees and consultant fees. This indenmification applies whether or not any government agency has issued a cleanup order. Losses, claims, costs, suits, liability, and expenses covered by this indemnification provision include, but are not limited to: (l) losses attributable to diminution in the value of the Property; (2) loss or restriction of use of rentable space on the Property; (3) adverse effect on the marketing of any rental space on the Property; and (4) penalties and fines levied by, and remedial or enforcement actions of any kind issued by any regulatory agency (including but not limited to the costs of any required testing, remediation, repair, removal, cleanup or detoxification of the Property and surrounding properties). This obligation to indemnify shall survive reconveyance of this Deed of Trust and shall not be diminished or affected in any respect as a result of any notice, disclosure, knowledge, if any, to or by the Beneficiary of Hazardous Materials. Without the Beneficiary's prior written consent, which shall not be unreasonably withheld, Trustor shall not take any remedial action in response to the presence of any Hazardous Materials on, under or about the Property, nor enter into any settlement agreement, consent decree, or other compromise in respect to any claims made or threatened by any third party against Trustor, any tenant, or the Property relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials, which renledial action, settlement, consent decree or compromise might, in the Beneficiary's reasonable jUdgment, impair the value of the Beneficiary's security hereunder; provided, however, that the Beneficiary's prior consent shall not be necessary: (i) in relation to those remedial actions initiated by the sellers of the Property pursuant to SCCo Case No. 06S2W18L03s; and (ii) in the event that the presence of Hazardous Materials on, under, or about the Property either poses an immediate threat to the health, safety or welfare of any individual or is of such a nature that an immediate remedial response is necessary and it is not reasonably possible to obtain the Beneficiary'S consent before taking such action, provided that in such event Trustor shall notify the Beneficiary as soon as practicable of any action so taken. The Beneficiary agrees not to withhold its consent, where such consent is required hereunder, if either (i) a particular remedial action is ordered by a court of competent jurisdiction, (ii) Trustor will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required action; (iii) Trustor establishes to the reasonable satisfaction of the Beneficiary that there is no reasonable alternative to such remedial action which would result in less impairment of the Beneficiary'S security hereunder; or (iv) the action has been agreed to by the Beneficiary. The Trustor hereby acknowledges and agrees that (i) this Article is intended as the Beneficiary's written request for information (and the Trustor's response) concerning the environmental condition of the Property as required by California Code of Civil Procedure Section 726.5, and (ii) each representation and warranty in this Deed of Trust or any of the other 121115 sh 8262009 12 Loan Documents (together with any indemnity applicable to a breach of any such representation and warranty) with respect to the environmental condition of the property is intended by the Beneficiary and the Trustor to be an "environmental provision" for purposes of California Code of Civil Procedure Section 736. In the event that any portion of the Property is determined to be "environmentally impaired" (as that term is defined in California Code of Civil Procedure Section 726.S(e)(3» or to be an "affected parcel" (as that term is defined in California Code of Civil Procedure Section 726.S(e)(1», then, without otherwise limiting or in any way affecting the Beneficiary's or the Trustee's rights and remedies under this Deed of Trust, the Beneficiary may elect to exercise its rights under California Code of Civil. Procedure Section 726.S(a) to (1) waive its lien on such environmentally impaired or affected portion of the Property and (2) exercise ( a) the rights and remedies of an unsecured creditor, including reduction of its claim against the Trustor to judgment, and (b) any other rights and remedies permitted by law. For purposes of determining the Beneficiary's right to proceed as an unsecured creditor under California Code of Civil Procedure Section 726.S(a), the Trustor will be deemed to have willfully permitted or acquiesced in a release or threatened release of hazardous materials, within the meaning of California Code of Civil Procedure Section 726.S( d)(l), if the release or threatened release of hazardous materials was knowingly or negligently caused or contributed to by any lessee, occupant, or user of any portion of the Property and the Trustor knew or should have known of the activity by such lessee, occupant, or user which caused or contributed to the release or threatened release. All costs and expenses, including (but not limited to) attorneys' fees, incurred by the Beneficiary in connection with any action commenced under this paragraph, including any action required by California Code of Civil Procedure Section 726.S(b) to determine the degree to which the Property is environmentally impaired, plus interest thereon at the default rate specified in the Loan Agreement until paid, will be added to the indebtedness secured by this Deed of Trust and will be due and payable to the Beneficiary upon its demand nlade at any time following the conclusion of such action. ARTICLE 7 EVENTS OF DEFAULT AND REMEDIES Section 7.1 Events of Default. Any of the events listed in Section 6.2 of the Loan Agreement as a "Default" also 'constitute an Event of Default under this Deed of Trust following the expiration of any applicable notice and cure periods (each an "Event of Default"), including, but not limited to failure to make any payment or observe or perform any of Trustor's covenants, agreements, or obligations under any Secured Obligations. Section 7.2 Acceleration of Maturity. If an Event of Default has occurred and is continuing; then at the option of the Beneficiary, the amount of any payment related to the Event of Default and all unpaid Secured Obligations are immediately due and payable, and no omission on the part of the Beneficiary to exercise such option when entitled to do so may be construed as a waiver of such right. 121115 sh 8262009 13 Section 7.3 The Beneficiary's Right to Enter and Take Possession. If an Event of Default has occurred and is continuing, the Beneficiary may: (a) Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its security, enter upon the Property and take possession thereof (or any part thereof) and of any of the Security, in its own name or in the name of Trustee, and do any acts that it deems necessary or desirable to preserve the value or marketability of the Property, or part thereof or interest therein, increase the income therefrom or protect the security thereof. The entering upon and taking possession of the Security will not cure or waive any Event of Default or Notice of Sale (as defined in Section 7.3(c), below) hereunder or invalidate any act done in response to such Event of Default or pursuant to such Notice of Sale, and, notwithstanding the continuance in possession of the Security, Beneficiary will be entitled to exercise every right provided for in this Deed of Trust, or by law upon occurrence of any Event of Default, including the right to exercise the power of sale; (b) Commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof; (c) Deliver to Trustee a written declaration of an Event of Default and demand for sale, and a written notice of default and election to cause Trustor's interest in the Security to be sold ("Notice of Sale"), which notice Trustee or Beneficiary shall cause to be duly filed for record in the Official Records of Santa Clara County; or (d) Exercise all other rights and remedies provided herein, in the instruments by which the Trustor acquires title to any Security, or in any other document or agreement now or hereafter evidencing, creating or securing the Secured Obligations. Section 7 .4 Foreclosure By Power of Sale. Should the Beneficiary elect to foreclose by exercise of the power of sale herein contained, the Beneficiary shall deliver to the Trustee the Notice of Sale and shall deposit with . Trustee this Deed of Trust which is secured hereby (and the deposit of which will be deemed to constitute evidence that the Secured Obligations are immediately due and payable), and such receipts and evidence of any expenditures made that are additionally secured hereby as Trustee may require. (a) Upon receipt of the Notice of Sale from the Beneficiary, Trustee shall cause to be recorded, published and delivered to Trustor such Notice of Sale as is then required by law and by this Deed of Trust. Trustee shall, without demand on Trustor, after the lapse of that amount of time as is then required by law and after recordation of such Notice of Sale as required by law, sell the Security, at the time and place of sale set forth in the Notice of Sale, whether as a whole or in separate lots or parcels or items, as Trustee deems expedient and in such order as it determines, unless specified otherwise by the Trustor according to California Civil Code Section 2924g(b), at public auction to the highest bidder, for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but 121115 sh 8262009 14 without any covenant or warranty, express or inlplied. The recitals in such deed or any matters of facts will be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Trustor, Trustee or Beneficiary, may purchase at such sale. (b) After deducting all reasonable costs, fees and expenses of Trustee, including costs of evidence of title in connection with such sale, Trustee shall apply the proceeds of sale to payment of: (i) the unpaid Principal amount of the Note; (ii) all other Secured Obligations owed to Beneficiary under the Loan Documents; (iii) all other sums then secured hereby; and (iv) the remainder, if any, to Trustor. ( c) Trustee may postpone sale of all or any portion of the Property by public announcement at such time and place of sale, and from time to time thereafter, and without further notice make such sale at the time fixed by the last postponement, or may, in its discretion, give a new Notice of Sale. Section 7.5 Receiver. If an Event of Default occurs and is continuing, Beneficiary, as a matter of right and without further notice to Trustor or anyone claiming under the Security, and without regard to the then value of the Security or the interest of Trustor therein, may apply to any court having jurisdiction to appoint a receiver or receivers of the Security (or a part thereof), and Trustor hereby irrevocably consents to such appointment and waives further notice of any application therefor. Any such receiver or receivers will have all the usual powers and duties of receivers in like or similar cases, and all the powers and duties of Beneficiary in case of entry as provided herein, and will continue as such and exercise all such powers until the date of confirmation of sale of the Security, unless such receivership is sooner terminated. Section 7.6 Remedies Cumulative. No right, power or renledy conferred upon or reserved to the Beneficiary by this Deed of Trust is intended to be exclusive of any other right, power or remedy, but each and every such right, power and remedy will be cumulative and concurrent and will be in addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity. Section 7.7 No Waiver. (a) No delay or omission of the Beneficiary to exercise any right, power or remedy accruing upon any Event of Default will exhaust or impair any such right, power or remedy, and may not be construed to be a waiver of any such Event of Default or acquiescence therein; and every right, power and remedy given by this Deed of Trust to the Beneficiary may be exercised from time to time and as often as may be deemed expeditious by the Beneficiary. Beneficiary'S express or implied consent to breach, or waiver of, any obligation of the Trustor hereunder will not be deemed or construed to be a consent to any subsequent breach, or further waiver, of such obligation or of any other obligations of the Trustor hereunder. Failure on the part of the Beneficiary to complain of any act or failure to act or to declare an Event of Default, irrespective of how long such failure continues, will not constitute a waiver by the Beneficiary of its right hereunder or impair any rights, power or remedies consequent on any Event of Default by the Trustor. 121115 sh 8262009 15 (b) If the Beneficiary (i) grants forbearance or an extension of time for the payment or performance of any Secured Obligation, (ii) takes other or additional security or the payment of any sums secured hereby, (iii) waives or does not exercise any right granted in the Loan Docwnents, (iv) releases any part of the Security from the lien of this Deed of Trust, or otherwise changes any of the terms, covenants, conditions or agreements in the Loan Documents, (v) consents to the granting of any easement or other right affecting the Security, or (vi) makes or consents to any agreement subordinating the lien hereof, any such act or omission will not release, discharge, modify, change or affect the original liability under this Deed of Trust, or any other obligation of the Trustor or any subsequent purchaser of the Security or any part thereof, or any maker, co-signer, endorser, surety or guarantor (unless expressly released); nor will any such act or omission preclude the Beneficiary from exercising any right, power or privilege herein granted or intended to be granted in any Event of Default then made or of any subsequent Event of Default, nor, except as otherwise expressly provided in an instrument or instruments executed by the Beneficiary, will the lien of this Deed of Trust be altered thereby. Section 7.8 Suits to Protect the Security. The Beneficiary has the power to ( a) institute and maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Security and the rights· of the Beneficiary as may be unlawful or any violation of this Deed of Trust, (b) preserve or protect its interest (as described in this Deed of Trust) in the Security, and (c) restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement for compliance with such enactment, rule or order would impair the Security thereunder or be prejudicial to the interest of the Beneficiary. Section 7.9 Trustee May File Proofs of Claim. In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or other proceedings affecting the Trustor, its creditors or its property, the Beneficiary, to the extent permitted by law, will be entitled to file such proofs of claim and other docwnents as may be necessary or advisable in order to have the claims of the Beneficiary allowed in such proceedings and for any additional amount that becomes due and payable by the Trustor hereunder after such date. Section 7.10 Waiver. The Trustor waives presentment, demand for payment, notice of dishonor, notice of protest and nonpayment, protest, notice of interest on interest and late charges, and diligence in taking any action to collect any Secured Obligations or in proceedings against the Security, in connection with the delivery, acceptance, performance, default, endorsement or guaranty of this Deed of Trust. 121115 sh 8262009 16 ARTICLE 8 MISCELLANEOUS Section 8.1 Amendments. This Deed of Trust cannot be waived, changed, discharged or terminated orally, but only by an instrument in writing signed by Beneficiary and Trustor. Section 8.2 Reconveyance by Trustee. Upon written request of Beneficiary stating that all Secured Obligations have been paid or forgiven, and all obligations under the Loan Documents have been performed in full, and upon surrender of this Deed of Trust to Trustee for cancellation and retention, and upon payment by Trustor of Trustee's reasonable fees, Trustee shall reconvey the Security to Trustor, or to the person or persons legally entitled thereto; provided that, City shall also reconvey the Security for the Market-Rate Parcel pursuant Section 4.14(d) of the Loan Agreement. Section 8.3 Notices. If at any time after the execution of this Deed of Trust it becomes necessary or convenient for one of the parties hereto to serve any notice, demand or communication upon the other party, such notice, demand or communication must be in writing and is to be served personally or by depositing the same in the registered United States mail, return receipt requested, postage prepaid and (1) if intended for Beneficiary is to be addressed to: City of Palo Alto Office of the City Clerk PO Box 10250 Palo Alto, CA 94303 With a copy to: City of Palo Alto Director, Department of Planning & Community Environment PO Box 10250 Palo Alto, CA 94303 and (2) if intended for Trustor is to be addressed to: Palo Alto Housing Corporation 725 Alma Street Palo Alto, CA 94301 Attn: Executive Director Any notice, demand or communication will be deemed given, received, made or communicated on the date personal delivery is effected or, if mailed in the manner herein specified, on the delivery date or date delivery is refused by the addressee, as shown on the return receipt. Either 121115 sh 8262009 17 party may change its address at any time by giving written notice of such change to Beneficiary or Trustor as the case may be, in the manner provided herein, at least ten (10) days prior to the date such change is desired to be effective. Section 8.4 Successors and Joint Trustors. Where an obligation created herein is binding upon Trustor, the obligation also applies to and binds any transferee or successors in interest. Where the terms of the Deed of Trust have the effect of creating an obligation of the Trustor and a transferee, such obligation will be deemed to be a joint and several obligation of the Trustor and such transferee. Where Trustor is more than one entity or person, all obligations of Trustor will be deemed to be a joint and several obligation qfeach and every entity and person comprising Trustor. Section 8.5 Captions. The captions or headings at the beginning of each Section hereof are for the convenience' of the parties and are not a part of this Deed of Trust. Section 8.6 Invalidity of Certain Provisions. Every provision of this Deed of Trust is intended to be severable. In the event any term or provision hereof is declared to be illegal or invalid for any reason whatsoever by a court or other body of competent jurisdiction, such illegality or invalidity will not affect the balance of the terms and provisions hereof, which terms and provisions will remain binding and enforceable. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the debt, or if the lien is invalid or unenforceable as to any part of the Security, the unsecured or partially secured portion of the debt, and all payments made on the debt, whether voluntary or under foreclosure or other enforcement action or procedure, will be considered to have been first paid or applied to the full payment of that portion of the debt that is not secured or partially secured by the lien of this Deed of Trust. Section 8.7 Governing Law. This Deed of Trust is governed by the'laws of the State of California. Section 8.8 Gender and Number. In this Deed of Trust the singular includes the plural and the masculine includes the feminine and neuter and vice versa, if the context so requires. Section 8.9 Deed of Trust. Mortgage. Any reference in this Deed of Trust to a mortgage also refers to a deed of trust and any reference to a deed of trust also refers to a mortgage. 121115 sh 8262009 18 Section 8.10 Actions. Trustor shall appear in and defend any action or proceeding purporting to affect the Security. Section 8.11 Substitution of Trustee. Beneficiary may from time to time substitute a successor or successors to any Trustee named herein or acting hereunder to execute this Trust. Upon -such appointment, and without conveyance to the successor trustee, the latter will be vested with all title, powers, and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and substitution is to be made by written instrument executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which, when duly recorded in the proper office of the county or counties in which the Property is situated, will be conclusive proof of proper appointment of the successor trustee. Section 8.12 Statute of Limitations. The pleading of any statute of linlitations as a defense to any and all obligations secured by this Deed of Trust is hereby waived to the full extent permissible by law. Section 8.13 Acceptance by Trustee. Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Except as otherwise provided by law, the Trustee is not obligated to notify any party hereto of a pending sale under this Deed of Trust or of any action or proceeding in which Trustor, Beneficiary, or Trustee is a party unless brought by Trustee. Section 8.14 Effect of Tax Credit Financing. Notwithstanding anything to the contrary contained herein or in any documents secured by this Deed of Trust or contained in any subordination agreement, the Beneficiary acknowledges and agrees that, if the Project is the subject of a regulatory agreement with the Califonlia Tax Credit Allocation Committee, in the event of a foreclosure or deed-in-lieu of foreclosure (collectively, "Foreclosure") with respect to the Property, the following rule contained in Section 42(h)(6)(E)(ii) of the Internal Revenue Code of 1986, as amended ("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 with the California Tax Credit Allocation Committee, (i) none of the tenants occupying those units at the time of Foreclosure may be evicted or their tenancy terminated (other than for good cause), (ii) nor may any rent be increased except as otherwise permitted under Section 42 of the Code. 121115 sh 8262009 19 IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year first above written. 121115 sh 8262009 PALO ALTO HOUSING CORPORATION, a California nonprofit public benefit corporation By: Candice R. Gonzalez Its: Executive Vice President 20 STATE OF CALIFORNIA COUNTY OF SANTA CLARA ) ) ) On _,2012, before nle, ,Notary Public, personally appeared, who proved to me on the basis of satisfactory evidence to be the person( s) whose name is subscribed to the within instrument and acknowledged to me that he/she/they executed the same in hislher/their authorized capacity, and that by hislher/their signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNES S my hand and official seal. Signature _____________ _ STATE OF CALIFORNIA COUNTY OF SANTA CLARA ) ) ) (seal) On _,2012, before me, ,Notary Public, personally appeared, who proved to me on the basis of satisfactory evidence to be the person( s) whose name is subscribed to the within instrument and acknowledged to me that he/she/they executed the sanle in hislher/their authorized capacity, and that by hislher/their signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. I certify UNDER PENALTY OF PERJlTRYunder the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature _____________ _ (seal) 121115 sh 8262009 EXHIBIT A LEGAL DESCRIPTION The land is situated in the State of California, County of Santa Clara, City of Palo Alto, and is described as follows: TRACT ONE: PARCEL ONE: PORTION OF LOT 10, AS SHOWN UPON THAT CERTAIN MAP ENTITLED, "MAYBELL TRACT", WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, ON JUNE 19, 1905 IN BOOK K OF MAPS, AT PAGES 88 AND 89, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A HUB SET AT THE POINT OF INTERSECTION OF THE SOUTHEASTERLY LINE OF MAYBELL AVENUE WITH THE NORTHEASTERLY LINE OF 10, AS SAID AVENUE AND LOT ARE SHOWN UPON THE MAP ABOVE REFERRED TO, RUNNING THENCE SOUTH 28° 48' WEST ALONG THE SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE 145.00 FEET TO THE TRUE POINT OF BEGINNING OF THE FOLLOWING DESCRIBED PARCEL OF LAND; THENCE AT RIGHT ANGLES TO SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE, SOUTH 61 ° 12' EAST 65.00 FEET; THENCE RUNNING PARALLEL WITH SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE SOUTH 28° 48' WEST 111.00 FEET; THENCE NORTH 61 ° 12' WEST 65.00 FEET TO A POINT IN SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE; THENCE ALONG SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE NORTH 28° 48' EAST 111.00 FEET TO THE POINT OF BEGINNING. PARCEL TWO: PORTION OF LOT 10, AS SHOWN UPON THAT CERTAIN MAP ENTn-LED, "MAYBELL TRACT", WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, ON JUNE 19, 1905 IN BOOK "K' OF MAPS, AT PAGES' 88 AND 89, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE SOUTHEASTERLY LINE OF MAYBELL AVENUE, DISTANT THEREON S. 28° 48' W. 84.83 FEET FROM THE POINT OF INTERSECTION THEREOF WITH THE NORTHEASTERLY LINE OF LOT 10, AS SAID AVENUE AND LOT ARE SHOWN UPON THE MAP OF MAYBELL TRACT HEREINABOVE REFERRED TO; THENCE PARALLEL WITH SAID NORTHEASTERLY LINE OF LOT 10, S. 61° 14' 22" E. 80.74 FEET; THENCE PARALLEL WITH SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE, S. 28° 48' W. 169.66 FEET; THENCE PARALLEL WITH SAID NORTHEASTERLY LINE OF LOT 10, N. 61° 14' 22" W. 15.74 FEET; THENCE PARALLEL WITH THE SOUTHEASTERLY LINE OF MAYBELL AVENUE N. 28° 48' E. 109.49 FEET; THENCE PARALLEL WITH SAID NORTHEASTERLY TINE OF LOT 10 N. 61° 14' 22" W. 65 FEET TO THE SOUTHEASTERLY LINE OF MAYBELL AVENUE; THENCE ALONG SAID SOUTHEASTERLY LINE, N. 28° 48' E. 60.17 FEET TO THE POINT OF BEGINNING. TRACTlWO: PARCEL ONE: PORTION OF LOT 10, AS SHOWN UPON THAT CERTAIN MAP ENTITLED, "MAYBELL TRACT", WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, ON JUNE 19, 1905 IN BOOK K OF MAPS, AT PAGES 88 AND 89, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A HUB SET AT THE POINT OF INTERSECTION OF THE SOUTHEASTERLY LINE OF MAYBELL AVENUE WITH THE NORTHEASTERLY LINE OF LOT 10, AS SAID AVENUE AND LOT ARE SHOWN UPON THE MAP ABOVE REFERRED TO; RUNNING THENCE SOUTH 28° 48' WEST ALONG THE SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE 339.32 FEET TO AN IRON PIPE SET AT THE INTERSECTION THEREOF WITH THE SOUTHWESTERLY LINE OF SAID LOT 10; RUNNING THENCE SOUTH 61 ° 12' EAST ALONG SAID LAST NAMED LINE 96. 14 FEET TO AN IRON PIPE AT THE WESTERNMOST CORNER OF THAT CERTAIN 0.94 ACRE TRACT OF LAND DESCRIBED IN THE DEED FROM MARTHA A. CHRISTESON TO GEO M. ANTHONY, DATED MARCH 5, 1937 RECORDED MARCH 26, 1937 IN BOOK 814 OF OFFICIAL RECORDS, PAGE 434, SANTA CLARA COUNTY RECORDS; RUNNING THENCE NORTH 28° 48' EAST ALONG THE NORTHWESTERLY LINE OF SAID 0.94 ACRE TRACT 99.68 FEET TO AN IRON PIPE AT THE NORTHERNMOST CORNER THEREOF; RUNNING THENCE SOUTH 57° 27' 38" EAST ALONG THE NORTHEASTERLY LINE OF THE SAID 0.94 ACRE TRACT 221.17 FEET TO AN IRON PIPE; THENCE LEAVING SAID LAST NAMED LINE AND RUNNING NORTH 28° 48' EAST AND PARALLEL WITH THE SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE 254.14 FEET TO AN IRON PIPE SET ON THE SAID NORTHEASTERLY LINE OF LOT 10; RUNNING THENCE NORTH 61° 14' 22" WEST ALONG SAID LAST NAMED LINE 316.84 FEET TO THE POINT OF BEGINNING. CONTAINING APPROXIMATELY 2 ACRES, SURVEYED AND MONUMENTED IN JANUARY 1951 BY GEO S. NOLTE, CIVIL ENGINEER AND LAND SURVEYOR. EXCEPTING THEREFROM THAT CERTAIN PARCEL OF LAND DESCRIBED AS FOLLOWS: PORTION OF LOT 10, AS SHOWN UPON THAT CERTAIN MAP ENTITLED, "MAYBELL TRACT", WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, ON JUNE 19, 1905 IN BOOK K OF MAPS, AT PAGES 88 AND 89, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A HUB SET AT THE POINT OF INTERSEerION OF THE SOUTHEASTERLY LINE OF MAYBELL AVENUE WITH THE NORTHEASTERLY LINE OF LOT 10, AS SAID AVENUE AND LOT ARE SHOWN UPON THE MAP ABOVE REFERRED TO; RUNNING THENCE SOUTH 28° 48' WEST ALONG THE SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE 145.00 FEET TO THE TRUE POINT OF BEGINNING OF THE . FOLLOWING DESCRIBED PARCEL OF LAND; THENCE AT RIGHT ANGLES, TO SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE, SOUTH 61° 12' EAST 65.00 FEET; THENCE RUNNING PARALLEL WITH THE SOUTHEASTERLY LINE OF MAYBELL AVENUE SOUTH 28° 48' WEST 111.00 FEET; THENCE NORTH 61 ° 12' WEST 65.00 FEET TO A POINT IN SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE; THENCEALONG SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE NORTH 28° 48' EAST 111.00 FEET TO THE TRUE POINT OF BEGINNING. ALSO EXCEPTING THEREFROM: PORTION OF LOT 10, AS SHOWN UPON THAT CERTAIN MAP ENTITLED, "MAYBELL TRAer", WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON JUNE 19, 1905 IN BOOK K OF MAPS, AT PAGES 88 AND 89, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE SOUTHEASTERLY LINE OF MAYBELL AVENUE, DISTANT THEREON S. 28° 48' W. 84.83 FEET FROM THE POINT OF INTERSEerION THEREOF WITH THE NORTHEASTERLY LINE OF LOT 10, AS SAID AVENUE AND LOT ARE SHOWN UPON THE MAP OF MAYBELL TRAer HEREINABOVE REFERRED TO; THENCE PARALLEL WITH SAID NORTHEASTERLY LINE OF LOT 10, S. 61° 14' 22" E. 80.74 FEET; THENCE PARALLEL WITH SAID SOUTHEASTERLY LINE OF MAYBELL AVENUE, S. 28° 48' W. 169.66 FEET; THENCE PARALLEL WITH SAID NORTHEASTERLY LINE OF LOT 10, N. 61° 14' 22" W. 15.74 FEET; THENCE PARALLEL WITH THE SOUTHEASTERLY LINE OF MAYBELL AVENUE N. 28° 48' E. 109.49 FEET; THENCE PARALLEL WITH SAID NORTHEASTERLY TINE OF LOT 10 N. 61° 14' 22" W. 65 FEET TO THE SOUTHEASTERLY LINE OF MAYBELL AVENUE; THENCE ALONG SAID SOUTHEASrERLY LINE, N. 28° 48' E. 60.17 FEET TO THE POINT OF BEGINNING. ALSO EXCEPT[NG THEREFROM: PORTION OF LOT 10, MAP OF MAYBELL TRAer, FILED JUNE 19, 1905, BOOK K OF MAPS AT PAGE 88, SANTA CLARA COUNTY RECORDS, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSEerION OF THE SOUTHEAST LINE OF MAYBELL AVENUE AND THE NORTHEAST LINE OF CLEMO AVENUE, FORMERLY PARK AVENUE; THENCE FROM SAID POINT OF BEGINNING N. 28° 48' E. ALONG SAID LINE OF MAYBELL AVENUE 13.00 FEET; THENCE LEAVING SAID LINE S. 61° 12' E. 10.00 FEET; THENCE 5.28° 48' W 3.00 FEET; THENCE ON THE ARC OF A TANGENT CURVE TO THE LEFT wrrH A RADIUS OF 10 FEET, THROUGH A CENTRAL ANGLE OF 90°, AN ARC DISTANCE OF 15.71 FEET TO SAID NORTHEASTERLY LINE OF CLEMO AVENUE; THENCE ALONG SAID LINE N. 61° 12' W. 20.00 FEET TO THE POINT OF BEGINNING. PARCEL TWO: BEGINNING AT A POINT IN THE SOUTHWESTERLY LINE OF LOT 10, DISTANT THEREON N. 61° 12' W. 271.16 FEET FROM THE MOST SOUTHERLY CORNER OF SAID LOT 10 IN THE NORTHWESTERLY LINE OF ARASTRADERO ROAD, AS SAID LOT AND ROAD ARE SHOWN UPON THE MAP OF MAYBELL TRACT HEREINAFTER REFERRED TO; THENCE LEAVING SAID SOUTHWESTERLY LINE AND RUNNING N. 28° 48' E., 85.35 FEET, MORE OR LESS, TO A POINT IN THE NORTHEASTERLY LINE OF THAT CERTAIN 0.94 ACRE TRACT DESCRIBED IN THE DEED FROM MARTHA A. CHRISTESON TO GEORGE M. ANTHONY, DATED MARCH 5, 1937 AND RECORDED MARCH 26, 1937 IN BOOK 814 OF OFFICIAL RECORDS PAGE 434, SANTA CLARA COUNTY RECORDS; SAID POINT BEING THE MOST WESTERLY CORNER OF THAT CERTAIN PARCEL OF LAND DESCRIBED IN THE DEED FROM CURTIS DAY, ET UX, TO SCOBLE, INC., A CORPORATION DATED APRIL 29, 1958 AND RECORDED.MAY 12, 1958 IN BOOK 4072 OF OFFICIAL RECORDS, PAGE 110, SANTA CLARA COUN1Y RECORDS; THENCE RUNNING ALONG THE SAID NORTHEASTERLY LINE OF THE 0.94 ACRE PARCEL OF LAND N. 57° 26' W. 221.17 FEET TO THE MOST NORTHERLY CORNER OF SAID 0.94 ACRE PARCEL; THENCE RUNNING ALONG THE NORTHWESTERLY LINE OF SAID 0.94 ACRE PARCEL, S. 28° 48' W., 99.68 FEET TO THE MOST WESTERLY CORNER THEREOF; THENCE RUNNING ALONG THE SOUTHWESTERLY LINE OF THE SAID 0.94 ACRE PARCEL, SAID LINE ALSO BEING THE SAID SOUTHWESTERLY LINE OF LOT 10 HEREINABOVE REFERRED TO, S. 61° 12' E., 220.70 FEET TO THE POINT OF BEGINNING, AND BEING A PORTION OF LOT 10, AS SHOWN UPON THAT CERTAIN MAP ENTITLED, "MAYBELL TRACT, MAYFIELD SANTA CLARA CO.", WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUN1Y OF SANTA CLARA, STATE OF CALIFORNIA ON LIME 19, 1905 IN BOOK "K" OF MAPS, PAGE 88 AND 89. APN: 137-25-108-00 and 137-25-109-00 EXHIBITD MAYBELL ORCHARD SOURCES AND USES: County Loan LISC Loan LIIF Loan City Loan Other Sources SOURCES PE~ANENTSOURCES Conventional Mortgage City Loan $ $ $ $ $ total $ Other Sources (possible City loan) Tax Credit Investor Proceeds County SAHF loan total $ $ $ $ $ $ $ $ $ total 2,759,780 3,500,000 3,500,000 3,220,220 2 15,580,000 1,228,000 3,220,220 2,600,000 11,318,034 2,759,780 2 $ $ $ $ $ $ $ $ $ Per Unit ·20,467 53,670 43,333 188,634 45,996 101 total 'pe~unit Land $ 6,480,000 $ 108,000 Other Costs $ 292,550 $ 4,876 Total Acquisition Costs '$ 6,772,550 $ 112,876 HARD COSTS ConstructionlRehabilitation $ 8,397,784 $ 139,963 Commercial Costs $ $ Site·Work $ 650,000 $ 10,833 General: Contractor O&P $ 827,850 $ 13,798 Total Hard Costs $ 9,875,634 $ 164,594 , SOFT COSTS Architectural $ 603,671 $ 10,061 Survey & Engineering $ 325,000 $ 5,417 Construction Interest + Fees $ 798,628 $ 13,310· Financing & Syn:dication $ 150,439 $ 2,507 Local Permits and Fees $ 260,000 $ 4,333 Legal Fees $ 100,000 $ 1,667 Developer Fee $ 1,400,000 $ 23,333 $ $ Relocation $ $ Reserves $ 135,113 $ 2,252 Other Soft Costs $ $ 11,750 . Total Soft Costs $ 4,477,851 $ 74,631 ' tOTA.L DEV COSTS $ 21,126,035 $ 352,101 19.PR()"FORMA Budget Line It_ GrOwth Year Year Year Year Year' Year Year Year Year Year Year Year Year Year Year Factor 1 2 3 4 5 6 7 8 , 10 11 12 13 14 15 INCOME: Tenant Payment or Underwriting llents 2.50% 592,188 606,993 6~168 637,122 653,665 670,006 686,757 703.925 721,524 739.562 758,051 m,002 ,796.427 ' 816,338 836.7~ Rent Subsidy,(Specify) ,2.50% 0 0 0' 0 0 0 0 0 0 '0 0 0 0 0 (] Other Income -(Laundry) 2.50% 2,880 2,952 3.026 3.101 3,119 3,258 3.340 3.423 3,509 3.597 3.1587 3,779 3.873 3.970 4,069 GROSS SCBEDULIID INCOME 595,0Ci8 -,945 625,1'3 648,823 fi56,844 ,673,265 6,.,,096 707,349 725,033 743,1S8 '161,737 '180,781 --82O,3OS 840,816 LESS: Vacancy Rate @ 5% (29,753) (30,497) (31,260) (32,041) (32,842) (33,663) (34,505) (35.367) (36.252) (37,158) (38,087) (39.039) (40,015) (41,015) (42,041) EFFECl1.VE GROSS INCOME 565,315 519,447 593,.934 608,78:2 624,ool 639,602 655,592 671,981 688,781 706,000 723,650 741,742 7Q),285 779,192 7_775 Operating Expenses 3.50% 329.820 341,364 353,311 3<iS,677 378,476 391,723 405,433 419.623 434,310 449,511 465.244 481,527 498.381 515.824 533.878 - Property Taxes and Assessments 3.50% 6,000 6,210 6.427 6,652 6,885 7.126 7,376 7,634 7,90l' 8,171 8.464 8.760 9,066 9.384 9,712 On-Site SupporIive ServioeCoordination 3.50% 42,000' 43.470 44,991 " 46,566 48,196, 4!J,883 51,629 53,436 55,306 57,242 59,245 61,319 63,465 65,686 67.985 : AHF Annual Fee @ 0.30% 8,279 8.279 8,279 8,279 8,279 8,279 8.279 8,279 8,279 8,279 ' 8,279 8,279' 8,279 8,279 8,279 Total Opera ..... Ezpeuses --399,323 413_ 427,17~ 441,836 457,011 477,716 -,912 505,796 523,209 541,231 559,_ 579,191 99,173 61'_ NET OPERATING INCOME: 179,216 180;125 180,924' 181,ti07 18:2,165 182,591 182;8'15 183,010' 182,985 182,'192 182,419 181,857 181,894 1BO,120 178,921 Replacement Reserve Deposits 30.000 30,000 30,000 ,30,000 30,000 30.000 30.000 30.000 30,000 30,000 30,000 30.000 30.090 30.000 30,000 0peraI:irig Reserve Deposits 0 0 0 0 o. 0 0 0 0 0 0 0' 0 0 0 Other Reserves: (Specify) 0 0 0 0 0 0 0 (:) 0 0 0 0 ,0 0 0 NEI' OPERA1'.ING ING'OME LESS 149,%16 1.50,125 150,924 151,6W 152.U:i5 152,591 152,875 153,010 152,985 152,792 152,41' 151,85'7 ~1,094 .150,120 148:,921 RESERVFS Permanent Loan 124.351 124,351 124,351 124,351 124,351 124,351 124,351 124,351 124.3~1 124,351 124.351 124,351 124,351 124.j51 124,351 Total Debt Service 124,351 124,351 124,351 i24,351 11.4,351 124,351 124,351 ~ l24,351 124,351 , 124,351 124,351 124,351 124,3S1 124,351 Cash Flow 24,865 25,774 26,573 ri,2!6' 27,8l4 28,240 28,524 28,65' 28,634 28;441 28,068 1t1_ 26,743 25,"9 24,570 IAIMt Management Fee 5,4)00 5,150 5,305 5,464 5,628 5,796 5,970 6,14' 6;334 6,S24 6,720 6,921: 7,12' 7,3'43 ,7,563 PartDenbip Fee 1',865 20,624 21,269 21,793 22,1tr1 .22.444 22,554 22,509 22,300 21,917 21,348 20_ 1',615 18,42(i 17PfY/ DEBT SERVICE COVERAGE: 1.20 1.21 1.21 1.22 1.22 1.23 1.23 1.23 1.23 1.23 1.23 1.22 1.22 1.21 1.20 EXHIBITE SCHEDULE OF PERFORMANCE This Schedule of Performance summarizes the schedule for various activities under the Acquisition and Development Loan Agreement and Option to Purchase (the "Agreement") to which this exhibit is attached. The description of items in this Schedule of Performance is meant to be descriptive only, and shall not be deemed to modify in any way the provisions of the Agreement to which such items relate. Whenever this Schedule of Performance requires the submission of plans or other documents at a specific time, such plans or other documents, as submitted, shall be complete and adequate for review by the CITY or other applicable governmental entity within the time set forth herein. Prior to the time set forth for each particular submission, BORROWER shall consult with CITY staff informally as necessary concerning such submission in order to assure that such submission will be complete and in a proper form within the time for submission set forth herein. As provided in Section 3.1 of this Agreement, this Schedule of Performance may be modified by agreement of the City Manager on behalf of the CITY and the BORROWER. Action 1.' Application -Land Use Approvals. BORROWER shall submit a complete application for the CITY Land Use Approvals, including CEQA review. 2. Receipt-Land Use Approvals. BORROWER shall obtain the CITY Land Use Approvals. 3. Application -Tax Credits. BORROWER shall submit an application to TCAC for a preliminary reservation of 9% tax credits. 4. Application -Building Permit. BORROWER shall .apply for a building permit from CITY. 5. Receipt -Tax Credits. BORROWER receives approval for tax credit allocation. 895\05\1235759.1 10/29/2012 F-7 Date By January 15, 2013. By July 1,2013. July 2013 (if Land Use Approvals are approved) September 15,2013 October 31, 2013 Action 6. Receipt -First Building Permit. BORROWER shall obtain the first building permit from City. 7. Submission -Final Construction and Permanent Financing Plan. BORROWER shall prepare and submit the Construction Financing Plan for CITY approval. 8. Construction Loan Closing. BORROWER shall satisfy all conditions in Section 2.7 and commence construction. 9. Permanent Loan Closing and Complete Rent-Up and Occupancy. 895\05\1235759.1 10/29/2012 F-8 Date October 31, 2013 Within 30 days after receipt of tax credit allocation from TCAC. November 31, 2013 to close construction loans. TCAC deadline to start construction April 2014. April 30, 2015. EXHIBITF ASSIGNMENT OF AGREEMENTS, PLANS AND SPECIFICATIONS, AND APPROVALS FOR VALUE RECEIVED, the undersigned, Palo Alto Housing Corporation, a California non-profit public benefit corporation (the "Borrower"), hereby assigns and transfers to the City of Palo Alto, a chartered city and a municipal corporation (the "City") (the "Assignment"), all of its right, title and interest in and to: (1) All architectural, design, engineering, and construction contracts and development agreements, and any and all amendments, modifications, supplements, addenda and general conditions thereto (collectively "Agreements"), heretofore or hereafter entered into by any Contractor (as de~ned below); (2) All written reports, studies, investigations, analyses, plans and specifications, shop drawings, working drawings, amendments, modifications, changes, supplements, general conditions, other documents, and addenda thereto (collectively "Plans and Specifications") heretofore or hereafter prepared by any Contractor (as defined below); and (3) All land use approvals, building permits, and other governmental approvals of any nature obtained for the Project (collectively, the "Governmental Approvals"). This Assignment is made pursuant to the terms of that Acquisition Loan Agreement and Option to Purchase, executed as of , entered into between the Borrower and the City (the "Loan Agreement"). Capitalized terms used but not defined in this Assignment shall have the meanings set forth in the Loan Agreement. The Property with respect to which the City has made the City Loan to the Borrower under the Loan Agreement is described in Exhibit A attached to this Assignment. For purposes of this Assignment, the term "Contractor" means any architect, construction contractor, engineer, consultant or other person or entity entering into Agreements with the Borrower or preparing Plans and Specifications for the Borrower with respect to the Project. The Borrower hereby irrevocably appoints the City as its attorney-in-fact (which agency is coupled with an interest) to, upon the occurrence of a Default or termination of the Loan Agreement as defined in Sections 6.1 and 6.2 of the Loan Agreement, demand, receive, and enforce any and all of the Borrower's rights with respect to the Plans and Specifications, Agreements, and Governmental Approvals, and perform any and all acts in the name of the Borrower or in the name of the City, as applicable, with the same force and effect as if performed by the Borrower in the absence of this Assignment. As further provided in Section 2.4 of the Loan Agreement, the City shall not have any obligation under any of the Agreements unless and until the City expressly agrees in writing to be bound by such Agreement(s). Upon the occurrence of a Default or termination of the Loan Agreement as defined in Sections 6.1 and 6.2 of the Loan Agreement, the City may use any of 895\05\1235759.1 10/2912012 F-9 the Agreements assumed by the City and any of the Plans and Specifications and Governmental Approvals for any purpose for which the Borrower could have used them for development of the Project; and the Borrower shall cooperate with the City to implement this Assignment and shall immediately deposit with the City all the Agreements, Plans and Specifications, and Governmental Approvals. The Borrower represents and warrants to the City that no previous assignment(s) of its rights or interest in or to the Plans and Specifications, Agreements, or Governmental Approvals has or have been nlade, and the Borrower agrees not to assign, sell, pledge, transfer, mortgage, or hypothecate its rights or interest therein (without prior written approval of the City Manager) so long as the City holds or retains any security interest under the Loan Agreement. This Assignment is made to secure: (1) payment to the City of all sums now or hereafter owing under the Note dated as of the date hereof made by the Borrower to the order of the City, and any and all additional advances, modifications, extensions, renewals and amendments thereof; and (2) payment and performance by the Borrower of all its obligations under the Loan Agreement. This Assignment shall terminate upon the Construction Closing. This Assignment shall be governed by the laws of the State of California, and the Borrower agrees that the Superior Court of the County of Santa Clara shall be the site and have jurisdiction for the filing and maintenance of any action arising hereunder and further agrees that the prevailing party in any such action shall be entitled, in addition to any other recovery, to reasonable attorneys' fees and costs. This Assignment shall be binding upon and inure to the benefit of the heirs, legal representatives, assigns, and successors-in-interest of the Borrower and City; provided, however, this shall not be construed and is not intended to waive the restrictions on assignment, sale, transfer, mortgage, pledge, hypothecation or encumbrance by the Borrower contained in the Loan Agreement. Exhibit A, the Architect's Consent, the Landscape Architect's Consent, and the Engineer's Consent are attached hereto and incorporated herein by reference. 895\05\1235759.1 . 10/29/2012 F-10 Executed by the Borrower on _____ '--, 2012. 895\05\1235759.1 10/29/2012 BORROWER: PALO ALTO HOUSING CORPORATION, a California nonprofit public benefit corporation By: Candice R. Gonzalez Its: Executive Vice President F-ll 895\05\1235759.1 10/29/2012 EXHIBIT A PROPERTY DESCRIPTION F-12 EXHIBITF ASSIGNMENT OF AGREEMENTS, PLANS AND SPECIFICATIONS, AND APPROVALS FOR VALUE RECEIVED, the undersigned, Palo Alto Housing Corporation, a California non-profit public benefit corporation (the "Borrower"), hereby assigns and transfers to the City of Palo Alto, a chartered city and a municipal corporation (the "City") (the "Assignment"), all of its right, title and interest in and to: (l) All architectural, design, engineering, and construction contracts and development agreements, and any and all amendments, modifications, supplements, addenda and general conditions thereto (collectively "Agreements"), heretofore or hereafter entered into by any Contractor (as defined below); (2) All written reports, studies, investigations, analyses, plans and specifications, shop drawings, working drawings, amendments, modifications, changes, supplements, general conditions, other documents, and addenda thereto (collectively "Plans and Specifications") heretofore or hereafter prepared by any Contractor (as defined below); and (3) All land use approvals, building permits, and other governmental approvals of any nature obtained for the Project (collectively, the "Governmental Approvals"). This Assignment is made pursuant to the terms of that Acquisition Loan Agreement and Option to Purchase, executed as of , entered into between the Borrower and the City (the "Loan Agreement"). Capitalized terms used but not defined in this Assignment shall have the meanings set forth in the Loan Agreement. The Property with respect to which the City has made the City Loan to the Borrower under the Loan Agreement is described in Exhibit A attached to this Assignment. For purposes of this Assignment, the term "Contractor" means any architect, construction contractor, engineer, consultant or other person or entity entering into Agreements with the Borrower or preparing Plans and Specifications for the Borrower with respect to the Project. The Borrower hereby irrevocably appoints the City as its attorney-in-fact (which agency is coupled with an interest) to, upon the occurrence of a Default or termination of the Loan Agreement as defmed in Sections 6.1 and 6.2 of the Loan Agreement, demand, receive, and enforce any and all of the Borrower's rights with respect to the Plans and Specifications, Agreements, and Governmental Approvals, and perform any and all acts in the name of the Borrower or in the name of the City, as applicable, with the same force and effect as if performed by the Borrower in the absence of this Assignment. As further provided in Section 2.4 of the Loan Agreement, the City shall not have any obligation under any of the Agreements unless and until the City expressly agrees in writing to be bound by such Agreement(s). Upon the occurrence of a Default or termination of the Loan Agreement as defined in Sections 6.1 and 6.2 of the Loan Agreement, the City may use any of 895\05\1235759.1 10/29/2012 F-1 ARCHITECT'S CONSENT The undersigned architect ("Architect")hereby consents to the foregoing Assignment of Agreements, Plans and Specifications, and Approvals ("Assignment"), of which this Architect's Consent ("Consent") is a part, and acknowledges that there presently exists no unpaid claims presently due to the Architect except as disclosed to the City arising out of the preparation and delivery of the Plans and Specification to the Borrower or the performance of the Architect's obligations under the Agreements, as the term "Agreements" is defined in the Assignment. Architect agrees that if, at any time, the City elects to undertake or cause the completion of construction of the Project on any of the Property, in accordance with the Plans and Specifications, and gives Architect written notice of such· election; then so long as the Architect has received, receives or continues to receive the compensations called for under the Agreements, the City may, at its option, use and rely on the Plans and Specifications for the purposes for which they were prepared, and Architect will continue to perfoml its obligations under the Agreements for the benefit and account of the City in the same manner as if performed for the benefit or account of the Borrower in the absence of this Assignment. The City may assign its rights pursuant to this paragraph to another development entity in its discretion. Architect further agrees that, in the event of a breach by the Borrower of the Agreements, or any agreement entered into with Architect in connection with the Plans and Specifications, so long as the Borrower's interest in the Agreements and Plans and Specifications is assigned to the City, Architect will give written notice to the City at the address shown below of such breach. The City shall have thirty (30) days from the receipt of such written notice of default to remedy or cure said default; provided, however, nothing herein shall require the City to cure said default or to undertake completion of construction of the Improvements. Architect warrants and represents that itlhe/she has no knowledge of any prior assignment(s) of any interest in either the Plans and Specifications or the Agreements. Except as otherwise defined herein, the terms used herein shall have the meanings given them in the Assignment or the Loan Agreement, as applicable. . Signature page City Promissory Note 895\05\1235826.1 10/2912012 13 Executed by the Architect on ______ , 2011. Address of City : City of Palo Alto Office of the City Clerk PO Box 10250 Palo Alto, CA 94303 Signature page City Promissory Note 895\05\1235826.1 10/29/2012 Address of Architect: By: _______________ _ Its: ------------------ 14 LANDSCAPE ARCHITECT'S CONSENT The undersigned landscape architect ("Landscape Architect") hereby consents to the foregoing Assignment of Agreements, Plans and Specifications, and Approvals ("Assignment"), of which this Landscape Architect's Consent ("Consent") is a part, and acknowledges that there presently exists no unpaid claims presently due to the Landscape Architect except as disclosed to the City arising out of the preparation and delivery of the Plans and Specification to the Borrower or the performance of the Landscape Architect's obligations under the Agreements, as the term "Agreements" is defined in the Assignment. Landscape Architect agrees that if, at any time, the City elects to undertake or cause the completion of construction of the Project on any of the Property, in accordance with the Plans and Specifications, and gives Landscape Architect written notice of such election; then so long as the Landscape Architect has .received, receives or continues to receive the compensations called for under the Agreements, the City may, at its option, use and rely on the Plans and Specifications for the purposes for which they were prepared, and Landscape Architect will continue to perform its obligations under the Agreements for the benefit and account of the City in the same manner as if performed for the benefit or account of the Borrower in the absence of this Assignment. The City may assign its rights pursuant to this paragraph to another development entity in its discretion. Landscape Architect further agrees that, in the event of a breach by the Borrower of the Agreements, or any agreement entered into with Landscape Architect in connection with the Plans and Specifications, so long as the Borrower's interest in the Agreements and Plans and Specifications is assigned to the City , Landscape Architect will give written notice to the City at the address shown below of such breach. The City shall have thirty (30) days from the receipt of such written notice of default to remedy or cure said default; provided, however, nothing herein shall require the City to cure said default or to undertake completion of construction of the Improvements. Landscape Architect warrants and represents that itlhe/she has no knowledge of any prior assignment(s) of any interest in either the Plans and Specifications or the Agreements. Except as otherwise defined herein, the terms used herein shall have the meanings given them in the Assignment or the Loan Agreement, as applicable. Signature page City Promissory Note 895\05\1235826.1 10/29/2012 15 Executed by the Landscape Architect on ______ , 2012. Address of City: City of Palo Alto Office of the City Clerk PO Box 10250 Palo Alto, CA 94303 Signature page City Promissory Note 895\05\1235826.1 10/29/2012 Address of Landscape Architect: By: _________ ~ ______________ ___ Its: ------------~----------------- 16 ENGINEER'S CONSENT The undersigned engineer ("Engineer") hereby consents to the foregoing Assignment of Agreements, Plans and Specifications, and Approvals ("Assignment"), of which this Engineer's Consent ("Consent") is a part, and acknowledges that there presently exists no unpaid claims presently due to the Engineer except as disclosed to the City arising out of the preparation and delivery of the Plans and Specification to the Borrower or the performance of the Engineer's obligations under the Agreements, as the term "Agreements" is defined in the Assignment. Engineer agrees that if, at any time, the City elects tounderfake or cause the completion of construction of the Project on any of the Property, in accordance with the Plans and Specifications, and gives Engineer written notice of such election; then so long as the Engineer has received, receives or continues to receive the compensations called for under the Agreements, the City may, at its option, use and rely on the Plans and Specifications for the purposes for which they were prepared, and Engineer will continue to perform its obligations under the Agreements for the benefit and account of the City in the same manner as if performed for the benefit or account of the Borrower in the absence of this Assignnlent. The City may assign its rights pursuant to this paragraph to another development entity in its discretion. Engineer further agrees that, in the event of a breach by the Borrower of the Agreements, or any agreement entered into with Engineer in connection with the Plans and Specifications, so long as the Borrower's interest in the Agreements and Plans and Specifications is assigned to the City, Engineer will give written notice to the City at the address shown below of such breach. The City shall have thirty (30) days from the receipt of such written notice of default to remedy or cure said default; provided, however, nothing herein shall require the City to cure said default or to undertake completion of construction of the Improvements. Engineer warrants and represents that itlhe/she has no knowledge of any prior assignment( s) of any interest in either the Plans and Specifications or the Agreements. Except as otherwise defined herein, the terms used herein shall have the nleanings given them in the Assignment or the Loan Agreement, as applicable. Signature page City Promissory Note 895\05\1235826.1 10129/2012 17 Executed by the Engineer on ______ , 2012 . Address of City: City of Palo Alto Office of the City Clerk PO Box 10250 Palo Alto, CA 94303 Signature page City Promissory Note 895\05\1235826.1 10129/2012 . Address of Engineer: By: __ ~ ________________________ ___ Its: ------------------------ 18 EXHIBIT G ACORD® CERTIFICATE OF LIABILITY INSURANCE I DATE (MM/DD/YYYY) ~ 10/10/2012 THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON·THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE .ISSLIING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER. IMPORTANT: If the certificate holder is an ADD!TIONAL INSURED, the policy(ies) must be endorsed. If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). PRODUCER 0726293 1-415-546-9300 CO.NTACT NAME: Arthur J. Gallagher & Co. rl18.Nio. Extl: I FAX Insurance Brokers of California, Inc., License #0726293 (AIC No): One Market Plaza, Spear Tower E·MAIL ADDRESS: Suite 200 INSURER(S) AFFORDING COVERAGE San Francisco, CA 94105 NAIC# INSURER A : PHILADELPHIA IND INS CO 18058 INSURED INSURER B: EVEREST NATL INS CO 10120 Palo Alto Housing Corporation INSURERC: 725 Alma Street INSURER D: Palo Alto, CA 94301 INSURERE: INSURERF: COVERAGES CERTIFICATE NUMBER: 29625283 REVISION NUMBER: THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. INSR TYPE OF INSURANCE ADDL SUBR l&~hl%~l 11&~M%~) LIMITS LTR INSR IWVD POLICY NUMBER A GENERAL LIABILITY PHPK843325 04/01/1~ 04/01/13 EACH OCCURRENCE $ 1,000,000 - PREMISES CEa o:;~nce) X COMMERCIAL GENERAL LIABILITY $ 300,000 -o CLAIMS·MADE ~ OCCUR -MED EXP (Anyone person) $15,000 PERSONAL & ADV INJURY $1,000,000 - GENERAL AGGREGATE $ 2,000,000 - GEN'L AGGREGATE LIMIT APPLIES PER: PRODUCTS -COM PlOP AGG $2,000,000 I POLICY n ~~8i rxl LOC $ A AUTOMOBILE LIABILITY PHPK843325 04/01/14 04/01/13 &~~~~~~t~INGLE LIMIT $1,000,000 - ANY AUTO I SODIL Y INJURY (Per person) $ ,..--ALL OWNED ~ SCHEDULED AUTOS AUTOS BODILY INJURY (Per aCCident) $ -~ NON-OWNED iP~~=;c~~;~~gAMAGE X HIRED AUTOS $ -AUTOS $ t.tJ U..,RELlA UAS M OCCUR PHUB377060 04/01/1~ 04/01/13 EACH ("\{"'(,lll:Iga::I\I('a:: $ 10,000,000 EXCESS LlAB CLAIMS.MADE AGGREGATE $ 10,000,000 OED I X j RETENTION $ 10, 000 04/01/13 ~I~.1¥sIJ3i't $ WORKERS COMPENSATION CA10001196121 04/01/1~ B AND EMPLOYERS' LIABILITY YIN ANY PROPRIETORIPARTNER/EXECUTIVE D N/A HACCIOENT $1,000,000 OFFICER/MEMBER EXCLUDED? (Mandatory in NH) E.L. DISEASE -EA FMPI nVFa:: $ 1,000,000 ~~s¢~~~~ 't:r~~PERATIONS below E.L. DISEASE· POLICY LIMIT $ 1,000,000 A Professional Liability PHPK843325 04/01/1 ... 04/01/13 Each Incident 1,000,000 I Aggregate 2,000,000 I DESCRIPTION OF OPERATIONS I LOCATIONS I VEHICLES (Attach ACORD 101, Additional Remarks Schedule, if more space is required) Re: Proof of Insurance regarding Maybell Purchase in November Certificate holder is named as additional insured. Insruance is primary. Policy has 60 days notice of cancellation and 10 days for non payment of premium CERTIFICATE HOLDER CANCELLATION SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE City of Palo Alto THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN Purchasing and Contract Admin. ACCORDANCE WITH THE POLICY PROVISIONS. P.O. Box 10250 AUTHORIZED REPRESENTATIVE Palo Alto, CA 94303 d~~· I USA © 1988-2010 ACORD CORPORATION. All fights reserved. ACORD 25 (2010/05) The ACORD name and logo are registered marks of ACORD cscreymour 29625283 POLICY NUMBER: PHPK843325 COMMERCIAL GENERAL LIABILITY CG 20 1811 85 THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. ADDITIONAL INSURED - MORTGAGEE, ASSIGNEE, OR RECEIVER This endorsement modifies insurance provided under the following: COMMERCIAL GENERAL LIABILITY COVERAGE PART SCHEDULE Name of Person or Organization: City of Palo Alto Designation of Premises: Purchasing and Contract Admin. P.O. Box 10250 Palo Alto, CA 94303 USA (If no entry appears above, information required to complete this endorsement will be shown in the Declarations as applicable' to this endorsement.) 1. WHO IS AN INSURED (Section II) is amended to include as an insured the person(s) or organization(s) shown in the Schedule but only with respect to their liability as mortgagee, assignee, or receiver and ariSing out of the ownership, maintenance, or use of the premises by you and shown in the Schedule. 2. This insurance does not apply to structural alterations, new construction and demolition operations performed by or for that person or organization. CG 201811 85 Copyright, Insurance Services Office, Inc., 1984 SUPPLEMENT TO CERTIFICATE OF I~SURANCE DATE 10/10/2012 NAME OF INSURED: Palo Alto Housing Corporation Additional Descri(2tion of O(2erationsiRemarks from Page 1 : Additional Information: SUpp (05/04) CITY OF PALO ALTO CITY COUNCIL MINUTES EXCERPT ATTACHMENT C Page 1 of 2 City Council Meeting September 18, 2012 Preliminary Review of Proposed Palo Alto Housing Corporation (PAHC) Affordable Senior Housing Development at 567-595 Maybell Avenue The Advance Planning Manager gave a brief overview of the potential use of the 567-595 Maybell Avenue property as an affordable housing site with 60 units of senior affordable rental housing targeted to very low income households and 15 market rate for-sale single family homes. He described how Staff was seeking feedback from the Council about the proposed development. He introduced Palo Alto Housing Corporation (PAHC) Executive Director Candice Gonzales and she gave a brief summary of PAHC’s history and the community need for this type of housing. Lauri Moffet-Fehlberg, the project architect, presented the initial design concepts for the project including its circulation and design components. Jessica De Wit, Sr. Project Manager described the anticipated financing for the proposed project, noting that PAHC has submitted a $6.5 million loan request with the City. The Council Members discussed the conceptual plans. Several Council Members commented on proposed circulation of the project and its impact on Maybell Avenue and Arastradero Road, particularly the nine single family dwellings that will use Maybell Avenue for ingress/egress. Other concerns were expressed regarding lack of public transit in the area, the “cookie cutter” design and forward facing garages of the residences, and the uniform parcel sizes and their compatibility with the surrounding neighborhoods. To insure that there would not be a future increase of density on the property, a number of Council Members preferred that PAHC submit a Planned Community zone change rather than a zone change to Multiple Family Residential, RM-40. Other comments included orienting the buildings to focus on a common open space, possibly including a community garden, and the proposed cost of the development. Herb Borock stated the Zoning Code had a process called pre-screening that protected the public and allowed the Council to provide non-binding comments to applicants. That process required the same public noticing as an application. The Council did not follow the pre-screening process the prior week for the Police Building. He explained his understanding of the pre-screening process. This proposed application and plans were available MINUTES EXCERPT Page 2 of 2 City Council Meeting Minutes Excerpt: 9/18/12 in time for the process to be followed. The Council should direct the City Manager to follow the proper procedure for pre-screening.