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Item 8.3 Senior Housing Loan
CI'TY CLERK AGENDA STATEMENT CITY COUNCIL MEETING DATE: February 3, 2004 SUBJECT: Approval of Loan, Promissory Note and Deed of Trust for Dublin Senior Housing and Authorization to Execute Documents Which Make the City's right to Repayment of this Loan Subordinate to Senior Lender. Report Prepared By: Julia Abdala, Housing Specialist ATTACHMENTS: 1. Loan Agreement and Promissory Note 2. Leasehold Deed of Trust. 3. Resolution Approving Loan Documents 4. Budget Change Form 5. July 1, 2003 Commitment Letter RECOMMENDATION:~ ~ 1. Adopt Resolution (Attachment 3) approving a loan agreement (Attachment 1) authorizing a loan in the mount of $2,248,248 to support construction of affordable housing in the Dublin Senior Housing Apartments to be constructed at 7606 Amador Valley Blvd., 2. Authorize the Mayor, Mayor Pro Tern or City Manager to sig~ the loan agreement in substantially the form attached, 3. Aul horize execution of related documents, including a sub ordination agreement pursuant to which the City's right to rep ~yment of the loan (but not the affordability restrictions) wil. be subordinate to the senior lender's rights, an.estoppel cev ificate and agreement and a reciprocal easement agreement, and 4. Approve a Budget Change form for $1,738,072, the difference between the amount used by Eden Housing, InC. under the Predevelopment Loan Agreement and the amount the !City has committed to fund toward the Dublin Senior HoUsing development. FINANCIAL STATEMENT: A loan in the amount of $2,248,248 (the "Loan") will be made to Dublin Ser~ior Limited Parmership, whose general partner is Eden Housing, Inc. ( Eden ) for the prows~on of at least 26 very low- income settlor units to be constructed as part of a 54-unit development at 7606 Amador Valley Blvd. The Loan Will be paid back to thel City in annual payments from residual receipts if the project generates surplus Cash after payment of approved expenses. The remaining balance of the Loan will be due in 55 years. The funds for the Loan will come from the Affordable Housing In- lieu Fee fund. A budget change (Attachment 3) will be needed, transferring a total of $1,738,072 for 2003-2004 Fiscal Year. $502,450.33 of the amount the City has committed for this project has already been disbursed as part of the City's previously approved predevelopment loan to Eden. At 5% interest as required under the Predevelopment Loan Agreement, the total Eden owes the City of Dublin is $510,176. This amount will be "rolled over" into the new loan balance. The balance of the Loan amount which has not already been disbursed ($1,738,072) will be transferred in the budget change form, indicated above. DESCRIPTION: On September 23, 2002 the City Council selected Eden to proceed with the development of affordable senior housing at the site of the former library. This site will also house the new senior center that will soon begin construction. Eden's proposed development of a 100% affordable senior project, using multiple sources of financing. After further negotiations with Eden, the City Council committed a total of $2,248,248 to assist in the development of affordable senior housing. The City of Dublin regulatory agreement will require the entire project to be rented to senior households, and requires 49% of the development, or 26 units to be affordable to seniors at 50% of median income or below. Eden secured an allocation of low-income housing tax credits for the project. In connection with use of the tax credits, Eden will execute a Tax Credit Allocation Committee ("TCAC") regulatory agreement which will require the entire project (with the exception of the manager's unit) to be affordable to very-low income households. The TCAC regulatory agreement will require 6 units to be affordable to households with incomes at or below 30% of the area median income, 8 units to be affordable to households with incomes at or below 45% of the area median 'and 39 units to be affordable to households with incomes at or below 50% of the area median. The affordability restrictions in both the TCAC and the City Affordable Housing Agreement have terms of 55 years. On February 4, 2003, the City Council approved a Predevelopment Loan Agreement with Eden for pre- construction work on the project. On October 21, 2003, after Eden was successful in receiving an allocation of low-incOme housing tax credits to provide financing for the project, the City Council amended the Predevelopment Loan to provide for additional funds to continue the predevelopment work. The total maximum allowed for predevelopment work is $594,560, of which $502,450.38 has been spent. Eden has formed the Dublin Senior Limited Partnership for the purpose of constructing and operating the project. In July 2003, the City Council authorized execution and delivery of a Commitment letter pursuant to which the City agreed to provide a construction/permanent loan, which, together with the funds advanced under the predevelopment loan, was authorized in the maximum principal amount of $2,248,248. At this time in order to meet the TCAC February 25, 2004 deadline, it is necessary to proceed with approval of the documentation for this loan, including the loan agreement, the promissory note, the leasehold deed of trust and related documents. The entitlements for this project were approved on May 20, 2003, and at this time the architect is working with the Building Division in order to finalize the plans and proceed to permit issuance prior to the TCAC deadline. A parcel map creating a 'separate parcel for the project has been submitted for recordation. The project will be financed in the following manner: 678158-3 ~ ~ 1. Citibank will provide a construction loan that will convert to a permanent loan once the project is completed. Citibank is the senior lender in this project. 2. Tax Credit Equity will provide permanent financing for this project. 3. City of Dublin $2,248,248 loan will be the junior loan for this project 4. Eden will apply for HOME funds from the County of Alameda in February. This funding source, if received, will provide additional financing and may enable Eden to make a payment to reduce the outstanding balance of the City loan. As a condition of providing financing, Citibank will require the City of Dublin to execute an Estoppel Agreement and a Subordination Agreement pursuant to which the City's right to receive payments from the project cash flow will be subordinate to Citibank's right. At the request of the City, Eden was successful in locating a lender that will allow the City's affordability restrictions and the fee title to the land to remain senior to the financing. Citibank has agreed to allow its lien to be subordinate to the City's rent restrictions (which provide that 26 units (49% of the total must remain affordable to very low-income seniors for 55 years) and to the City's ground lease. The fee title to the land will remain unencumbered, thus protecting the City's interest in the land in the event of a foreclosure. ANALYSIS Eden has asked for, and the City of Dublin has agreed to provide funding to assist in the construction of 54 senior units, at least 26 of which must remain affordable to very low-income seniors (62 years or older). The City's Loan Commitment letter, signed July 15, 2003, (Attachment 4) provides for up to $2,248,248 in funds to assist with the construction of this development. Review of Eden's most recent pro forma indicates that, upon completion of the project, there may be some excess money available, particularly if Eden is successful in obtaining HOME program or other funds for the project. Pursuant to TCAC guidelines, Eden's pro forma uses conservative estimates for expenses, and the project may generate surplus cash if, for example, the interest rate charged by Citibank is lower than estimated, or if Eden achieveslother cost savings. Following completion of construction and receipt of investor equity, Eden has agreed to pay down the City loan in the amount by which the financing sources exceeds development costs. In addition, for the purpose of making the foregoing calculation, Eden has agreed to defer $250,000 of its $1,200,000 developer £ee. The outstanding balance of the loan will be due in fifty- five (55) years; however, prior to that time, the City may receive payments in the form of residual receipts. Residual receipts refers to excess money available from a project after operating, debt service and reserve obligations have been met. Following negotiations with City of Dublin staff, Eden has agreed that for the purpose of calculating annual residual receipts, Eden will cap the amount allocated to the developer fee, partnership management fee, and asset management fee at a total of $30,000 per year. Sixty percent of the remaining residual receipts will be paid to the City as an annual payment toward the outstanding balance of the loan. All repayments of the Dublin Senior Housing loan will help provide financing for future affordable projects in the City. The documents that are involved in this financing are the following: 1. City of Dublin Affordable Housing Agreement (Regulatory Agreement) for the project. 2. City of Dublin Loan Agreement with Promissory Note and LeasehoM Deed of Trust. Both the City's deed of trust and the Citibank deed of trust will be secured by the improvements and by the partnership's leasehold interest in the property. The City's deed of trust will be subordinate to Citibank's deed of trust. 678158-3 3. Ground Lease of the land as described in a separate staff report. 4. Citibank Subordination Agreement which subordinates the City of Dublin's right to receive payment from the project to Citibank's senior loan. 5. Estoppel Certificate and Agreement, a certification by the City of Dublin that as of the date of the certificate there has been no default for the project, and that all necessary approvals have been issued. 6. Reciprocal Easement Agreement, pursuant to which parking, drainage and access easements will be provided for the benefit of the senior center parcel and the senior housing parcel. The attached resolution would authorize the City Manager or his designee to sign any documents that may be required for the closing, as long as such documents are in a form acceptable to the City Manager and City Attorney. Such authority is customary in such transactions given the number of documents and revisions that often continue until the day of loan closing. Construction is required to begin (building permits issued) by February 25, 2004, per TCAC regulations. The City loan funds Will not be disbursed until the construction documents are signed and the Citibank loan is closed, currently projected as February 18, 2004. The loan documents themselves contain the following information: 1. The loan mount ($2,248,248). 2. The loan terms and repayment schedule (55 year term, payment from residual receiptS). 3. The interest rate (3% simple interest). 4. The purpose for which the loan proceeds may be used. 5.. The documents that will be executed in connection with the loan agreement-,the Promissory ~i Note, the LeasehOld Deed of Trust and the Regulatory Agreement (each to be executed by Dublin Senior Limited Partnership). 6. Additional items the developer is required to deliver to the City in connection with the loans (for example, proof of liability insurance for the property). Disbursement of City Loan Funds City funds will be disbursed at the beginning of the development, upon City's receipt of reqUisitions itemizing what the money will be used for. CONCLUSION The loan agreement, promissory note and leasehold deed of trust for the Dublin Senior Apartments at 7606 Amador Valley Blvd. are provided as attachments to this Staff report. It is necessary for the City Council to authorize execution of these documents so that Eden may proceed to secure the remaining funding and begin construction of the project. The leasehold deed of trust, the Affordable Housing Agreement, and a Memorandum of the Ground Lease will be recorded together with the remaining financing documents at the closing, anticipated to be February 18, 2004. RECOMMENDATION: Staff recommends that the City Council adopt a Resolution approving a loan agreement authorizing a loan in the amount of $2,248,248 to support construction of affordable housing in the Dublin Senior Housing Apartments to be constructed at 7606 Amador Valley Blvd.; authorize the Mayor, Mayor Pro Tem or City Manager to sign the loan agreement in substantially the form attached; authorize execution of related documents, including a subordination agreement pursuant to which the City's right to repayment of the loan (but not the affordability restrictions) will be subordinate to the senior lender's rights, an estoppel 678158-3 ~ (7"20~ certificate and agreement and a reciprocal easement a~eement; and approve a Budget Change form for $1,738,072, the difference between the amount used by Eden Housing, Inc. under the Predevelopment Loan Agreement and the amount the City has committed to fund toward the Dublin Senior Housing development. 678158-3 LOAN AGREEMENT This Loan Agreement (this "Agreement" or this "Loan Agreement") is entered into effective as of February 1, 2004 ("Effective Date") by and among Dublin SeniOr Housing Partnership, a California limited partnership ("Borrower") and the City of Dublin, a municipal corporation ("City"). City and Borrower are hereinafter collectively referred to as the "Parties." RECITALS A. City is the owner of fee title to the unimproved land located at 7606 Amador Valley Boulevard in the City of Dublin, County of Alameda, and more particularly described in Exhibit A attached hereto (the "Property"). B. City invited several nonprofit organizations, including Eden Housing, Inc., a California nonprofit public benefit corporation ("Eden") to submit proposals for the development of affordable senior housing on the Property, and following consideration at public hearing, the Dublin City Council ("City Council") selected Eden to construct and operate on the Property, a 54-unit development for Iow-income senior households (the "Project"). C. In February 2003, the City Council adopted a resolution authorizing the provision of a loan to Eden to fund certain predevelopment expenses including site investigation, engineering and architectural services, and preparation of applications for construction and permanent financing for the Project. D. In June 2003, the City Council adopted a resolution authorizing the execution of an option agreement, allowing Eden or an affiliate of Eden to lease the Property for development of the Project at such time that Eden or its affiliate obtained commitments for Project financing. E. Eden is the general partner of Borrower, a limited partnership formed for the sole purpose of developing and operating affordable housing for Iow-income seniors. F. Eden and Borrower have requested, and City has agreed to provide a loan pursuant to the terms and conditions hereof (the "Loan") for the purpose of financing in part the construction of affordable units as part of the Project. G. The City has determined that development of the Project is in the interests of the health, Safety and welfare of the residents of the City, and that the Loan is necessary to make a portion of the Project affordable to very Iow-income senior households. The City has further determined that provision of the Loan by City to ATTACHMENT 1 Borrower for the purposes described herein is a qualified use of the City Inclusionary Zoning In-Lieu'Fee Fund which shall be used to fund the Loan. H. COncurrently herewith: (A) Borrower and City shall execute (i) a ground lease ("Ground Lease") pursuant to which City shall lease the Property to Borrower for a term of 99 years, (ii) a Reciprocal Easement Agreement ("Easement Agreement") pursuant t© which City and Borrower shall grant certain easements to each other to, facilitate development of the Project and the City's development of a senior center on the parcel adjacent to the Property, and (iii) an Affordable Housing Regulatory Agreement and Declaration of Restrictive Covenants ("Affordable Housing Regulatory Agreement" or "Regulatory Agreement") which restricts occupancy of the Project to senior households and which provides that no fewer than 49% of the~ dwelling units in the Project will remain affordable to very Iow-income seniors for a term of not less than 55 years; and (B) Borrower shall execute a promissory note ("Note") in the amount of the Loan and a Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing ("Deed of Trust") which shall provide City with a security interest in the Project and in Borrower's leasehold interest in the Property. This Agreement, the Affordable Housing Regulatory Agreement, the Note and the Deed of Trust are collectively hereinafter referred to as the "Loan Documents." The Ground Lease and the Easement Agreement are collectively referred to hereinafter as the "Additional Documents." I. Concurrently with, or shortly after the closing of the Loan, pursuant to the First Amended and Restated Partnership Agreement of Dublin Senior Limited Partnership, a California Limited Partnership, dated as of [February ,2004] (the .,Partnership Agreement"), Borrower intends to bring in AEGON USA Realty Advisors, Inc., and/or affiliates thereof or of AEGON U.S. Holding Corporation, a Delaware corporation, as an investor limited partner (the "Investor Limited Partner") and Transamerica Affordable Housing, Inc., a California corporation and/or affiliates thereof or of AEGON U.S. Holding Corporation, a Delaware corporation, as a special limited partner (the "Special Limited Partner") (collectively, including any successors or assigns, "Limited Partners"). NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows. ARTICLE I LOAN TERMS 1.1 LOAN AND NOTE. City agrees to loan to Borrower, and Borrower agrees to borrow from and repay to City, the sum of Two Million Two Hundred Forty-Eight Thousand, Two Hundred and Forty-Eight Dollars ($2,248,248) ("Principal") upon the terms and conditions and for the purposes set forth in this Agreement. The Loan shall be evidenced by the Note which shall be dated as of the Effective Date and executed by Borrower substantially in the form attached hereto as Exhibit C. Provided that Borrower ~7~ ~-~ 2 has complied with all cOnditions precedent to disbursement of the Loan set forth in Section 2.3, th~' Loan Proceeds shall be disbursed in accordance with Section 2.2 hereof. City shall have the option to terminate this Agreement, and shall have no obligation to fund the Loan if concurrently with the closing of the Loan Borrower does not close the Construction Loan (defined below) for the Project in an amount which, together with other sources of funding available to Borrower, is sufficient to fully finance construction of the Project. 1.2 INTEREST RATE; PAYMENT DATES; MATURITY DATE. Interest shall accrue on the outstanding principal balance of the Loan at the rate of three percen[ (3%) simple interest per annum, commencing upon the date upon which the first disbursement of Loan Proceeds is made pursuant to the terms hereof ("Initial Disbursement Date"). The entire outstanding principal balance of the Loan, together with interest accrued thereon shall be payable in full on the fifty-fifth (55th) anniversary of the Initial Disbursement Date (the "Maturity Date"). Commencing on June 1, 2006, and on the first day of each June during the term of the Note, Borrower shall pay to City sixty percent (60%) of the Surplus Cash generated by the Project during the previous calendar year (as defined in Section 1.2.1 of the Note) to reduce the outstanding indebtedness under the Note. Any payment not paid when due shall bear interest at a rate equal to ten percent (10%) per annum from the due date for such payment until such payment is paid in full. 1.3 SECURITY. As security for repayment of the Note, Borrower shall execute :the Deed of Trust in favor of City as beneficiary pursuant to which City Shall .be proVided a lien against Borrower's leasehold interest in the Property and in the improvements constructed bY Borrower thereon: The Deed of Trust shall be dated as of the Effective Date and shall be recorded in the official records of Alameda County. The Deed of Trust may be subOrdinated to a deed of trust for the benefit of Citibank 0Nest), FSB, a federal savings bank ("Citibank") securing repayment of Citibank's construction and Permanent loan for the Project ("Construction Loan") which shall be in the maximum principal amount of $7,644,911 during the construction phase, and which upon conversion to the permanent loan, shall be paid down to approximately $1,376,000 (or such greater amount approved by Citibank provided that the debt service coverage ratio is not less than 1.15 to 1, or as approved by City, which approval shall not be unreasonably withheld or delayed). 1.4 PREPAYMENT; ACCELERATION. (a) Prepayment. The Note or any portion of the outstanding principal balance due under the Note may be prepaid at any time and from time to time, without Penalty or premium. Any prepayment of principal must be accompanied by interest accrued but unpaid to the date of receipt of prepayment. Prepayments shall be applied first to accrued but unpaid interest and then to principal. Any such prepayment shall have no 676551-5 3 effect upon Borrower's obligations under the Affordable Housing Regulatory Agreement or the Ground Lease, each of which shall survive any such prepayment. (b) Due On Sale. Unless City agrees otherwise in writing, the entire unpaid principal balance and all interest and other sums accrued under the Note shall be d, ue and payable upon the Transfer (as defined in Section 7.1 of the Regulatory Agreement) absent City consent, of all or any part of the Project, any interest therein, or Borrower's interest in the Property, other than to Eden, a Controlled Affiliate of Eden (as defined in Section 7.2 of the Regulatory Agreement), or a limited partnership in which the general partner is Eden or a Controlled Affiliate of Eden, or otherwise upon the occurrence of a Transfer absent City consent other than a Transfer permitted pursuant to clauses (1) through (5) of Section 7.2 of the Regulatory Agreement. 1.5 NONRECOURSE Except as expressly provided in this Section 1.5, neither Borrower nor Borrower's partners, officers, directors, employees or agents shall have any direct or indirect personal liability for payment of the principal of, or interest on the Note, and the sole recourse of City with respect to the payment of the principal of, and interest on the Note shall be to the Project, Borrower's leasehold interest in the Property and any other collateral held by City as security for the Note; provided however, nothing contained in the foregoing limitation of liability shall: (A) impair the enforcement against all such security for the Loan of all the rights and remedies of the City under the Deed of Trust and any financing statements City files : ~ . in connection with the Loan, as each of the foregoing may be amended, modified, or '- restated from time to time; (B) impair the right of City to bring a foreclosure action, action for specific performance or other appropriate action or proceeding to enable City to enforce and realize upon the Deed of Trust, the interest in the Project created thereby and any other collateral given to City in connection with the indebtedness evidenced by the Note and to name the Borrower as party defendant in any such action; (C) be deemed in any way to impair the right of the City to assert the unpaid principal amount of the Loan as a demand for money within the meaning of Section 431.70 of the California Code of Civil Procedure or any successor provision thereto; (D) constitute a waiver of any right which City may have under any bankruptcy law to file a claim for the full amount of the indebtedness owed to City under the Note or to require that the Project shall continue to secure all of the indebtedness owed to City in accordance with the Note and the Deed of Trust; or (E) limit or restrict the ability of City to seek or obtain a judgment against Borrower to enforce against Borrower and its general partners to: 676551-5 4 (a) recover under SectiOns 4.8, 4.13.2 and 4.15 hereof (pertaining to Borrower's indemnification obligations), or (b) recover from Borrower and its general partner(s) comPensatory damages as well as other costs and expenses incurred by City (including without limitation attorney's fees and expenses) arising as a result of the occurrence of any of the following: (i) any fraud or material misrepresentation on the part of the Borrower, any general partner thereof, or any officer, director, or authorized representative of the Borrower or of any general partner thereof in connection with the request for or creation of the Loan, or in any Loan Document, or in connection with any request for any action or consent by City in connection with the Loan; (ii) any failure to maintain insurance on the Property and the Project as required pursuant to the Loan Documents; (iii) failure to pay taxes, assessments or other charges due on the Property or the Project; (iv) the presence of hazardous or toxic material or waste on the Property or other violation of the Borrower's obligations under Section 4.13 hereof, Section 6.10 of the Ground Lease, or Section 7.11 of the Deed of TrUst (pertaining to environmental matters); (v) the occurrence of any act or omission of Borrower that results in waste to or of the Project or the Property and which has a material adverse effect on the value of the Project or the Property; (vii) the removal or disposal of any personal property or fixtures in violation of the Deed of Trust; or (viii) the material misapplication of the proceeds of any insurance policy or award resulting from condemnation or the exercise of the power of eminent domain or by reason of damage, loss or destruction to any portion of the Project or the Property. 676551-5 5 ARTICLE II USE AND DISBURSEMENT OF PROCEEDS 2.1 USE OF PROCEEDS. Borrower shall use the proceeds of the Loan ("Loan Proceeds") Solely and exclusively to pay for hard and soft construction costs billed to Borrower by third-parties in connection with the design and construction of the Project and such other costs related to development of the Project as City may approve in writing. 2.2 DISBURSEMENT oF PROCEEDS. Upon satisfaction of the conditions set forth in Section 2.3, at close of escrow for the Construction Loan, provided that Borrower has provided City with a written requisition specifying the amount and use of the requested Loan Proceeds, accompanied by copies of bills and invoices from third parties and such other documentation as City may reasonably require, the initial disbursement of Loan Proceeds shall be disbursed into escrow for distribution to Borrower. Subsequent disburSements shall be made to Borrower no more than once per calendar month, upon City's receipt of written requisitions and supporting documentation as described in this Section. 2.3 CONDITIONS PRECEDENT TO DISBURSEMENT OF PROCEEDS. City's obligation to fund the Loan and disburse the proceeds thereof is conditioned upon the satisfaction of all of the following conditions: (a) Borrower's delivery to City of each of the following documents, fully- executed and acknowledged as appropriate: (i) the Ground Lease, (ii) a Memorandum of the Ground Lease ("Memorandum"), (iii) the Easement Agreement, (iv) the Affordable Housing Regulatory Agreement, (v) the Deed of Trust, (vi) the Note, and (vii) this Agreement; (b) The recordation of the Memorandum, the Easement Agreement and the Affordable Housing Regulatory Agreement against Borrower's interest in the Project and leasehold interest in the Property in the Official Records of Alameda County, subject only to Permitted Exceptions (as defined below), and the recordation of the Deed of Trust, subject only to Permitted Exceptions and such senior liens as permitted pursuant to Section 1.3 hereof; (c) Borrower's delivery to City of evidence reasonably satisfactory to City that Borrower has obtained all necessary permits (including without limitation, building permits), licenses, and approvals required to develop the Project, or that the receipt of such permits is sUbject only to such conditions as City Shall reasonably approve; (d) City shall have approved the final plans and specifications for the Project; (e) Borrower's delivery to City of evidence reasonably satisfactory to City that (a) Borrower has obtained funding commitments sufficient to fully fund the construction and permanent financing of the Project, and (b) the closing of the Construction Loan has occurred; (f) The issuance by an insurer satisfactory to City of a lender's titl'e policy ("Title Policy") for the benefit of City in the amount of the Loan, insuring that the lien of the Deed of Trust is subject only to such defects, liens, conditions, encumbrances, restrictions, easements and exceptions as City may reasonably approve in writing ("Permitted Exceptions") and containing such endorsements as City may reasonably require, with the cost of such Title Policy to be paid by Borrower; (g) Borrower's delivery to the City of evidence of insurance coverage in accordance with the requirements set forth in Exhibit B attached hereto; (h) If requested by City, submission to City of a management contract for the Project, and City's approval thereof as and to the extent set forth in the Affordable Housing Regulatory Agreement; (i) Borrower's delivery to City of each of the following: (A) for BorrOWer: (i) a copy of Borrower, s partnership agreement, certified by an officer'of Borrower's general partner, together with an LP-1, and if requested by City, a certificate of good standing indicating that Borrower is properly organized and authorized to do business in the State of California; and (ii) a certified resolution indicating that Borrower has authorized this transaction and that the persons executing Loan Documents and Additional Documents on Borrower's behalf have been duly authorized to do so; and (B) for Borrower's general partner (a) Articles of Incorporation, certified by the Secretary of State; (b) bylaws certified by the Secretary of the corporation; (c) Certificate of Good Standing issued by the Secretary of State; and (d) a resolution certified by the Secretary of the corporation indicating that the persons executing Loan Documents and Additional Documents on behalf of Borrower's general partner have been duly authorized to do so; (j) Borrower's delivery to City of all of the following: (a) a Project budget and operating pro forma; (b) construction contract; (c) performance bonds or other assurance of completion as described in Section 5.3.8 of the Ground Lease; and (d) copies of such other documents related to the development and financing of the Project as City may reasonably request; (k) No material adverse change as determined by City in its reasonable judgment shall have occurred in the financial or other condition of BorrQwer since the date of this Agreement; and (I) The outstanding balance payable under that certain Amended.and Restated Promissory Note dated as of October 21,2003, executed by Eden as 676551-5 7 Borrower for the benefit of City shall have been repaid in full no later than concurrently with the closing of the Loan. 2.4 NO OBLIGATION TO DISBURSE PROCEEDS UPON DEFAULT. Notwithstanding any other provision of this Agreement, the City shall have no obligation to disburse or authorize the disbursement of any portion of the Loan Proceeds following: (i) the failure of any of Borrower's representations and warranties to be true and correct in all material respects; or (ii) termination of this Agreement by mutual agreement of the Parties. ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS 3.1 Borrower makes the following representations, warranties and covenants: (a) LEGAL STATUS; AUTHORITY. Borrower is a limited partnership, duly organized, validly existing and in good standing under the laws of the State of California, has all requisite power and authority to lease the Property, develop, own, and operate the Project, to carry out its business as now conducted, and to execute, deliver and perform its obligations under the Loan Documents and the Additional Documents. (b) NO VIOLATION. The execution of the Loan Documents and Additional Documents and Borrower's performance thereunder do not and will not result in a breach of or constitute a default under any agreement, indenture or other instrument to which Borrower is a party or by which Borrower may be bound. (c) AUTHORIZATION. The Loan Documents and the Additional Documents and the transactions contemplated thereby have each been duly authorized by Borrower, and when executed and delivered will each constitute a valid and binding obligation of Borrower, enforceable in accordance with the respective terms thereof. (d) LITIGATION There are no pending or to Borrower's knowledge, threatened actions or proceedings before any court or administrative agency which may adversely affect the financial condition or operation of Borrower or Borrower's development and ownership of the Project. (e) ACCURACY OF FINANCIAL STATEMENTS; NO ADVERSE CHANGE. The financial statements heretofore delivered to City present fairly and accurately the financial condition of Borrower's general partner as of the date of such statements, and have been prepared in accordance with standard accounting practices, consistently applied. There has been no material adverse change since the date of the most recent 676551-5 financial statements provided to City in the financial condition, organization, operation, business prospects, fixed properties, or personnel of Borrower's general partner. (f) COMPLIANCE WITH LAWS. Borrower is in compliance in all material respects with all laws, rules, regulations, orders and decrees which are applicable to the Property and the Project or to Borrower in relation thereto, including without limitatiOn, all environmental, health and safety and employment laws. (g) DISCLOSURE. No representation or warranty made by Borrower in this Agreement or in the Loan Documents or Additional Documents contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein not misleading. There is no fact known to Borrower which has or might reasonably be anticipated to have a material adverse effect on the business, assets, financial condition of Borrower, or Borrower's ability to develop the Project on the Property which has not been disclosed to City in writing. ARTICLE IV AFFIRMATIVE COVENANTS 4.1 PUNCTUAL PAYMENT. Borrower covenants to punctually pay the interest on and principal of the Note at the times and place and in the manner specified in the Note. 4.2 PAYMENT OF OTHER INDEBTEDNESS. Borrower covenants to : .... ~ :~.~ punctually pay all charges, assessments, taxes and feeS related to the Pr°perty or the Project and to punctually pay the principal and interest due on any other indebtedness related to the Project or the Property now or hereafter at any time owed by the Borrower to the City or any other lender. 4.3 ACCOUNTING RECORDS; PROPERTY INSPECTION. Borrower covenants to maintain accurate books and records in accordance with standard accounting principles consistently applied, and permit the City, during business hours and upon reasonable notice to inspect, audit and examine such books and records with respect to the Project, the Property and the Loan, and to inspect the Property during normal business hours upon reasonable notice. 4.4 COMPLIANCE WITH LAWS. Borrower covenants to comply with all federal, state.and local laws, regulations, ordinances and rules applicable to the Property and the Project. Without limiting the generality of the foregoing, Borrower shall comply with all applicable requirements of state and local building codes and regulations, and all requirements applicable to compliance with the Americans with Disabilities Act ("ADA") or similar statutes and regulations relating to accessibility. 4.5 INSURANCE. Borrower shall maintain and keep in force at Borrower's expense, insurance coverage with respect to the Project and the Property in accordance with the requirements set forth in Exhibit B attached hereto and incorporated herein. 4.6 FACILITIES. Borrower shall keep the Property and the improvements located thereon, and the personal property used in Borrower's operations in good repair and condition, and from time to time make necessary repairs, renewals and replacements thereto so that the Property and the Project shall be preserved and maintained. During such time as may be applicable with respect to the Project, the foregoing shall be conducted in accordance with the standards required by Project' lenders or investors. 4.8 INDEMNIFICATION. Borrower shall indemnify, defend (with counsel reasonably acceptable to City), and hold harmless the City, and its elected and appointed officials, officers, agents, and employees (collectively the Indemnitees"), from and against, and shall pay on demand, any and all losses, liabilities, damages, costs, claims, demands, penalties, fines, orders, judgments, injunctive or other relief, expenses and charges (including reasonable attorney's fees and expenses) (collectively "Liabilities") arising directly or indirectly in any manner in connection with or as a result of (a) any breach of Borrower's covenants under the Loan Documents or Additional Documents, (b) any failure of Borrower's representations and warranties to be true and correct in all material respects when made, (c) injury or death to persons or damage to property or other loss occurring on the Property, whether caused by the negligence or any other act or omission of Borrower or any other person or by negligent, faulty, inadequate or defective design, building, construction or maintenance or any other condition or otherwise, or (d) any. claim, demand or cause of action, or any action or 0tl~er proceeding, whether meritorious or not, brought or asserted against any Indemnitee which relates to or arises out of the Property, the Project, the Loan, the Loan Documents, the Additional Documents (with the exception of Liabilities arising out of City's performance of or failure to perform City's maintenance and repair obligations specified in the Easement Agreement), or any transaction contemplated thereby, or any failure of Borrower to comply with all applicable state, federal and local laws and regulations, including without limitation, applicable provisions of the California Building Standards Code, or the ADA in connection with the construction or operation of the Project, provided that no Indemnitee shall be entitled to indemnification under this Section for matters caused by such Indemnitee's gross negligence or willful misconduct. The obligations of Borrower under this Section shall survive the making and repayment of the Loan and the expiration or termination of this Agreement and shall be secured by the Deed of Trust. Notwithstanding any contrary provision contained herein, the indemnity required to be provided hereunder shall not apply to Borrower's repayment obligations under the Note. Notwithstanding any contrary provision contained herein, the obligations of Borrower under this Section shall survive any foreclosure proceeding, any foreclosure sale, any delivery of a deed in lieu of foreclosure, and any release or reconveyance of the Deed of Trust. 4.9 NOTICE TO CITY. Within three business days after any of the following shall occur, Borrower shall provide written notice thereof to City: (1) the occurrence of 676551-5 10 any Event of Default hereunder of which Borrower acquires knowledge; (2) any change in name, identity, legal structure, business location, or address of Borrower; (3) any uninsured or partially uninsured loss affecting the Property or the Project through fire, theft, liability, or property damage in excess of an aggregate of Fifty Thousand Dollars ($50,000); and (4) Borrower's receipt of a notice of default under any mortgage or other financing document affecting the Property or the Project. Borrower shall use best efforts to ensure that City shall receive timely notice of, and shall have a right to cure, any Borrower default under any financing document affecting the Property or the Project and that provisions mandating such notice and allowing such right to cure shall be included in all such documents. Borrower shall record a Request for Notice of DefaUlt and Sale, and shall provide to City a copy of all notices of default that Borrower receives from the holder of any mortgage or other financing document affecting the Project or the Property. 4.10 TAXES AND OTHER LIABILITIES. Borrower shall pay and discharge when due any and all indebtedness, obligations, assessments, taxes, including federal and state payroll and income taxes which are the obligations of Borrower pursuant to the Ground Lease or otherwise, except those that Borrower may in good faith contest or as to which a bona fide dispute may arise, provided provision is make to the satisfaction of City for eventual payment thereof in the event that it is found that the same is an obligation of Borrower. 4.11 LITIGATION. Borrower shall provide written notice to City within three business days after Borrower acquires knowledge of any litigation pending or threatened against Borrower involving a claim exceeding Fifty Thousand Dollars :. ~:'.($50,000). 4.12 EXPENSES OF COLLECTION OR ENFORCEMENT. If at any time BOrrower defaults under any provision of the Loan Documents or Additional Documents, Borrower shall pay to the City in addition to any other sums that may be due to City, an amount equal to the costs and expenses (including without limitation, attorneys' fees and expenses) City incurs in connection with the collection, enforcement, or correction of the default, and such amounts shall be a part of the indebtedness secured by the Deed of Trust. 4.13 HAZARDOUS MATERIALS. 4.13.1 Covenants. Borrower shall not cause or permit any Hazardous Materials (as defined in the Ground Lease) to be brought upon, kept, stored or used in, on, or about the Property by Borrower, or the agents, employees, contractors or invitees of Borrower except for materials commonly used in the construction of the Project or in the operation of a residential rental project in compliance with all applicable laws, and shall not cause any release of Hazardous Materials into, onto, under or through the Property. If any Hazardous Material is discharged, released, dumped, or spilled in, on, under, or about the Property and results in any contamination of the Property or adjacent property, or otherwise results in the release or discharge of Hazardous 676551-5 1 1 Materials in, on, under or from the Property, Borrower shall promptly take all actions at Borrower's sole expense as are necessary to comply with all Environmental Laws (as defined in the Ground Lease). 4.13.2 Indemnification. Borrower shall indemnify, defend (with counSel reasonably acceptable to City), and hold the Indemnitees harmless from and against any and all loss, claim, liability, damage, demand, judgment, order, penalty, fine, injunctive or other relief, cost, expense (including reasonable fees and expenses of attorneys, expert witnesses, and other professionals advising or assisting the City), action, or cause of action, arising in connection with the breach of Borrower's covenants set forth in Section 4.13.1, or otherwise arising in connection with the actual or alleged release or presence of any Hazardous Materials on, under, in or about the Property, whether foreseeable or unforeseeable, regardless of the source of such release or when such release occurred or such presence is discovered. The foregoing indemnity includes, without limitation, all costs of investigation, assessment, containment, removal, remediation of any kind, and disposal of such Hazardous Materials, all coSts of determining whether the Property is in compliance with Environmental Laws, all costs associated with bringing the Property into compliance with all applicable Environmental Laws, and all costs associated with claims for damages or injury to persons, property, or natural resources. The indemnity described in this Section shall survive the making and repaYment of the Loan. During such time that City is the owner of improvements located at 7600 Amador Valley Boulevard (including without limitation, the senior center under construction as of the date hereof), the indemnity described in this Section shall not apply to the release of Hazardous Materials from such improvements. 4.14 NON-DISCRIMINATION. Borrower covenants by and for itself and for its successors and assigns that there shall be no discrimination against or segregation of a person or of a group of persons on account of race, color, religion, creed, sex, sexual orientation, marital status, familial status, ancestry or national origin in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Project, nor shall Borrower or any person claiming under or through Borrower 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 Project. The Parties acknowledge that occupancy of the Project shall be limited to senior households as described in Section 1.1 of the Affordable Housing Regulatory Agreement. 4.15 PREVAILING WAGES. The Parties acknowledge that Borrower intends the Project to be exempt from California Labor Code Section 1720 et seq. and the regulations adopted pursuant thereto ("Prevailing Wage Laws") by virtue of Labor Code Section 1720(d). If for any reason, the Prevailing Wage Laws are found to be applicable to the Project, Borrower and its contractors and subcontractors shall comply with such laws. Borrower shall, and hereby agrees to, unconditionally indemnify, reimburse, defend, protect and hold harmless City and its elective and appointive boards, commissions, officers, agents, attorneys, consultants and employees, from and against any and all claims, demands, suits and actions at law or in equity, and losses, 676551-5 12 liabilities, expenses, penalties, fineS, orders, judgments, injunctive or other relief, and costs and damages of every kind, nature and description (including but not limited to attorneys' fees and court costs, with counsel reasonably acceptable to City), and administrative, enforcement or judicial proceedings, whether known or unknown, and which directly or indirectly, in whole or in part, are caused by, arise from, or relate to, or are alleged to be caused by, arise from, or relate to, the payment or requirement of payment of prevailing wages or the requirement of competitive bidding in the construction of the Project, the failure to comply with any state or federal labor laws, regulations or standards in connection with this Agreement, including but not limited to the Prevailing Wage Laws, or any act or omission of City or Borrower related to this Agreement with respect to the payment or requirement of payment of prevailing wages or the requirement of competitive bidding, whether or not any insurance policies shall have been determined to be applicable to any such claims, demands, suits, actions, losses, liabilities, expenses, penalties, fines, orders, judgments, injunctive or other relief, costs, damages, or administrative, enforcement or judicial proceedings. It is further agreed that City does not, and shall not, waive any rights against Borrower which it may have by reason of this indemnity and hold harmless agreement because of the acceptance by City, or the deposit with City, of any of the insurance policies described in this Agreement. The representations, warranties and covenants contained in this Section shall survive the making and repayment of the Loan and the expiration or termination of this Agreement. All sums payable by Borrower to City pursuant to this Section shall constitute an indebtedness secured by the Deed of Trust. 4.16 Restrictions on Conveyance, Encumbrance. Borrower shall comply with the provisions of Articles XlV and XV of the Ground Lease and Section 7 of the Affordable Housing Regulatory Agreement (pertaining to restrictions upon the sale, transfer, encumbrance, and other conveyance of the Project, the Property, and interests therein and changes in identity of Borrower). ARTICLE V EVENTS OF DEFAULT The occurrence of any one or more of the following events shall constitute an event of default hereunder ("Event of Default"): (a) If Borrower fails to pay when due the principal and interest payable under the Note and such failure continues for twenty-five (25) days after City notifies Borrower thereof in writing. (b) If, pursuant to or within the meaning of the United States Bankruptcy Code or any other federal or state law relating to insolvency or relief of debtors ("Bankruptcy Law"), Borrower or any general partner thereof (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against Borrower or any general partner thereof in an involuntary case; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator or similar official for Borrower or any general partner thereof; (iv) makes an assignment for the benefit of its creditors; or (v) admits in writing its inability to pay its debts as they become due. 676551-5 1 3 (c) If a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against Borrower or any general partner thereof in an involuntary case, (ii) appoints a trustee, receiver, assignee, liquidator or similar official for Borrower or any general partner thereof or substantially all of such entity's assets, (iii) orders the liquidation of Borrower or any general partner thereof, or (iv) issues or levies a judgment, writ, warrant of attachment or similar process against the Property or the Project, and in each case the order or decree is not released, vacated, dismissed or fully bonded within 60 days after its issuance. (d) The occurrence of a Transfer in violation of Section 7 of the Regulatory Agreement and the failure of Borrower to rescind such Transfer within 30 days following written notice from City or such longer period as City may agree upon in writing. (e) If an event of default has been declared by the holder of any debt instrument secured by a mortgage or deed of trust on the Project or Borrower's interest in the Property and such holder exercises a right to declare all amounts due under that debt instrument immediately due and payable, subject to the expiration of any applicable cure period set forth in such holder's documents. (f) If the.Borrower fails to maintain insurance on the Property and the Project as required pursuant to the Loan Documents and Additional Documents, and Borrower fails to cure such default within 25 days. (g) Subject to Borrower's right to contest the following charges pursuant to the Loan Documents and Additional Documents, if the Borrower fails to pay taxes or assessments due on the Property or the Project or fails to pay any other charge that may result in a lien on the Property or the Project, and Borrower fails to cure such default within 25 days. (h) If any representation or warranty contained in the Loan Documents, Additional Documents, or any certificate furnished in connection with the foregoing or in Connection with any request for disbursement of Loan Proceeds proves to have been false or misleading in any material adverse respect when made. (i) If the Borrower defaults in the performance of any term, provision, covenant or agreement (other than an obligation enumerated in this Article V) contained in any Loan Document or Additional Document, and unless such document specifies a shorter cure period for such default, the default continues for twenty-five (25) days in the event of a monetary default or sixty (60) days in the event of a nonmonetary default after the date upon which City shall have given written notice of the default to Borrower' (or such longer time as City may agree upon in writing), provided that in each case. Borrower commences to cure the default within twenty-five (25) days and thereafter prosecutes the curing of such default with due diligence and in good faith. (j) If an Event of Default shall have been declared under any other Loan Document or Additional Document, subject to the expiration of any applicable cure period set forth in such documents. The Limited Partners shall have the right to cure any default of Borrower hereunder upon the same terms and conditions afforded to Borrower. Provided that City has been given written notice of the address for delivery of notices to the Limited Partners, City shall provide any notice of default hereunder to the Limited Partners concurrently with the provision of such notice to Borrower, and as to the Limited Partners, the cure periods specified herein shall commence upon the date of delivery of such notice in accordance with Section 7.1. ARTICLE VI REMEDIES 6.1 REMEDIES AND RIGHTS UPON DEFAULT. Upon the occurrence of an Event of Default and the expiration of any applicable cure period, City shall have all remedies available to it under law or equity, including, but not limited to the following, and City may, at its election, without notice to or demand upon Borrower, except for nOtices or demands required by law or expressly required pursuant to the Loan Documents, exercise one or more of the following remedies: a) Accelerate and declare the balance of the Note and interest accrued thereon immediately due and commence suit for collection thereof; b) Seek specific performance to enforce the terms of the Loan Documents and Additional Documents; c) Foreclose on the Project and Borrower's leasehold interest in the Property pursuant to the Deed of Trust; d) Pursue any and all other remedies available under law to enforce the terms of the Loan Documents and Additional Documents and City's rights thereunder, subject to the nonrecourse provisions set forth in the Note. 6.2 REMEDIES CUMULATIVE. Each of the remedies provided herein is cumulative and not exclusive of, and shall not prejudice any other remedy provided in any other Loan Document or Additional Document. The City may exercise from time to time any rights and remedies available to it under applicable law, in addition to, and not in lieu of, any rights and remedies expressly granted in this Agreement or in any other instrument or notice, demand or legal process of any kind, subject to the nonrecourse provisions set forth in the Note. ARTICLE VII MISCELLANEOUS 7.1 NOTICES. Except as otherwise specified in this Agreement, all notices to be sent pursuant to this Agreement shall be made in writing, and sent to the Parties at their respective addresses specified below or to such other address as a Party may designate by written notice delivered to the other Party in accordance with this Section. All such notices shall be sent by: (a) personal delivery, in which case notice shall be deemed delivered upon receipt; (b) certified or registered mail, return receipt requested, in which case notice shall be deemed delivered two (2) business days after deposit, postage prepaid in the United States mail; (c) nationally recognized overnight courier, in which case notice shall be deemed delivered one (1) day after deposit with such courier; or (d) facsimile transmission, in which case notice shall be deemed delivered on transmittal, provided that a transmission report is generated reflecting the accurate transmission thereof. City: City of Dublin Dublin, CA 100 Civic Plaza Dublin, California 94568 Attention: City Manager Facsimile: (925) 833-6651 Borrower: Dublin Senior Limited Partnership c/o Eden Housing, Inc., general partner 409 Jackson Street Hayward, CA 94544-1567 Attention: Executive Director Facsimile: (510) 582-6523 With copy to: (Investor Limited Partner) Peoples Benefit Life Insurance Company cio AEGON USA Realty Advisors, Inc. 400 West Market Street Louisville, KY 40202 Attn: Marsha Hicks, Counsel Facsimile: (502) 560-2207 With a copy to: 676551-5 16 AEGON USA Realty Advisors, Inc. 600 Montgomery Street, 16th Floor San Francisco, CA 94111 Attn: Christoph K. Gabler Facsimile: (415) 983-5558 With a copy to: Carl.e, Mackie, Power & Ross LLP 100 B Street, Suite 400 Santa Rosa, CA 95401 Attention: Richard W. Power, Esq. Facsimile" (707) 526-4707 If to the Special Limited Partner: cio Transamerica Affordable Housing, Inc. cio AEGON USA Realty Advisors, Inc. 600 Montgomery Street, 16th Floor San Francisco, CA 94111 Attn: David W. Kunhardt, Vice President - Community Investments Facsimile: (415) 983-5558 With copy to: (Leasehold Mortgagee) Citibank (West), F.S.B Facsimile: 7.2 COUNTERPARTS. This Agreement may be executed in multiple counterparts each of which shall be an original and all of which taken together shall constitute one and the same instrument. 7.3 SEVERABILITY. If any term, provision, covenant or condition 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 are materially altered or abridged by such invalidation, voiding or unenforceability. 7.4 LEGAL ACTIONS; ATTORNEYS' FEES. In the event any legal action is commenced to interpret or to enforce the terms of this Agreement or to collect damages as a result of any breach thereof, the Party prevailing in any such action shall be entitled to recover against the other Party all reasonable attorneys' fees and costs incurred in such action. 7.5 CAPTIONS; INTERPRETATION. The captions of the Sections and Articles of this Agreement are for convenience only and are not intended to affect the interpretation or construction of the provisions herein contained. The language of this Agreement shall be construed as a whole according to its fair meaning and not strictly for or against any Party. Time is of the essence in the performance of this Agreement. 7.6 FURTHER ASSURANCES. The Parties agree to execute, acknowledge and deliver to the other such other documents and instruments, and take such other actions, as either shall reasonably request as may be necessary to carry out the intent of this Agreement. 7.7 PARTIES NOT CO-VENTURERS. Nothing in this Agreement is intended to or shall establish the Parties as partners, co-venturers, or principal and agent with one another. 7.8 GOVERNING LAW; VENUE. This Agreement shall in all respects be construed and enforced in accordance with laws of the State of California without regard to principles of conflicts of laws. The Parties agree that all suits, actions or other proceedings, arising out of or related to this Agreement, the other Loan Documents or the Additional Documents shall be subject to litigation in courts having situs within California. 7.9 WAIVER; MODIFICATION AND AMENDMENT. No failure or delay on the part of the City in exercising any right, power, or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power, or remedy preclude any other or further exercise thereof or the exercise of any other right, power, or remedy hereunder. No modification or waiver of any provision of this Agreement, nor any consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in writing, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances. No amendment to or modification of this Agreement shall be effective unless and until such amendment or modification is in writing, properly approved in accordance with applicable procedures, and executed by the Parties. 7.10 ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns; provided however, this Agreement shall not be assignable by Borrower by operation of law or otherwise absent the express written consent of City, and any such assignment by operation of law or otherwise shall be void. 6765Sl-5 18 7.11 NO THIRD PARTY BENEFICIARIES. There shall be no third party beneficiaries to this Agreement. 7.12 ENTIRE AGREEMENT; EXHIBITS. This Agreement, together with the other Loan Documents and the Additional Documents, constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes any and all prior or contemporaneous oral or written agreements and negotiations between the Parties with respect thereto. All Exhibits attached hereto are incorporated herein by reference as though fully set forth herein. 7.13 SURVIVAL. All representations made by Borrower herein and the provisions of Sections 4.8, 4.13.2, 4.14, and 4.15 hereof shall survive the making and repayment of the Loan and the expiration or termination of this Agreement. The representations of Borrower made herein have been or will be relied upon by the City, notwithstanding any investigation made by the City or on its behalf. 7.14 CITY STATUS, Borrower recognizes and agrees that City is not a commercial lending institution, but a public agency exercising its authority to ProteCt the public health, safety and welfare. 7.15 ACTION BY THE CITY. Except as may be otherwise specifically provided herein, whenever any approval, notice, direction, or consent by the City is required or permitted under this Agreement, such action shall be in writing, and such action may be given, made or taken bY the City Manager or by any person who shall have been designated by the City Manager, without further approval by the City Council. City shall -use reasonable best efforts to respond to requests for any such approval, notice, · ' direction, or consent in a timely manner. In any approval, consent, or other determination by City required under any of the Loan Documents, City shall act reasonably and in good faith. 7.16 NON-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 to any of the foregoing in the event of any default or breach by the City, or for any amount of money which may become due to Borrower or Borrower's successor in interest or for any obligation of City under this Agreement. 7.17 RIGHT OF ACCESS. Borrower hereby grants to City and City's agents and employees the right, upon reasonable notice to Borrower of not less than two business days, to enter upon the Property and the Project for the purpose of inspecting, examining, surveying and reviewing the same. 7.18 PRORATION OF TAXES AND CLOSING COSTS. Taxes and assessments applicable to the Property shall be prorated between City and BorroWer as of the close of escrow. City shall pay the recordation costs (if any) applicable to 676551-5 19 recordation of the Loan Documents and Additional Documents. Real estate transfer taxes (if applicable) shall be paid by Borrower. 7.19 WAIVER OF TRIAL BY JURY. BORROWER AND CITY EACH (A) AGREE NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT BY A JURY, AND (B) WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL. SIGNATURES ON FOLLOWING PAGE. 676551-5 20 IN WITNESS WHEREOF, the Parties have each caused this Loan Agreement to be duly executed as of the date first written above. BORROWER Dublin Senior Limited Partnership, a California Limited Partnership By: Eden Housing, Inc., a California nonprofit public benefit corporation Its: General Partner By: Linda Mandolini, Executive Director CITY OF DUBLIN, a municipal corporation By: Richard C. Ambrose, City Manager Attest: City Clerk Approved as to form: Elizabeth H. Silver, City Attorney Exhibit A PROPERTY (Attach legal description.) ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE CITY OF DUBLIN, COUNTY OF ALAMEDA, STATE OF CALIFORNIA DESCRIBED AS FOLLOWS: LOT 2, AS SAID LOT IS SHOWN ON PARCEL MAP 8144, FILED FOR RECORD ON ., 2003, IN BOOK__ OF MAPS AT PAGES __ THROUGH ~ , INCLUSIVE, ALAMEDA COUNTY RECORDS. [7606 Amador Valley Blvd.] INSURANCE REQUIREMENTS Tenant, at its sole cost and expense, during the Term hereof shall keep and maintain the following policies of insurance: A. Property Insurance. Insurance for the risks of direct physical loss, with minimum coverage being the perils insured under the standard Causes of Loss - Special form (ISO Form CP 10 30) or its equivalent, covering all the Improvements, all fixtures, equipment and Personal Property, located on or in, or constituting a part of, the Land, in an amount equal to one hundred percent (100%) of the full replacement cost of all such property. The insurance shall (a) cover explosion of steam and pressure boilers and similar apparatus, if any, located at the Project, and (b) cover floods if the Land is in a Special Hazard Area, as determined by the Federal Emergency Management Agency or as shown on a National Flood Insurance Program flood map. The insurance required hereunder shall be in amounts sufficient to prevent Tenant from becoming a co-insurer under the terms of the applicable policies, with not more than a Thirty- five Thousand Dollars ($35,000) deductible (or such higher deductible approved by the Landlord, which approval shall not be unreasonably withheld) from the loss payable for any casualty. The policies of insurance carried in accordance with this Paragraph A shall contain a "replacement cost endorsement" and an "increased cost of construction endorsement." B. Liability Insurance. Commercial general liability insurance on an "occurrence basis" covering all claims with respect to injury or damage to persons or property occurring on, in or about the Land or the Improvements. At the commencement of the Term ofthe Lease, and at all .. times during the Term, the limits of liability under this Paragraph B shall be not less than Two Million Dollars ($2,000,000) combined single limit per occurrence, with a deductible no greater than Thirty-five Thousand Dollars ($35,000) or such higher deductible as may be approved by Landlord, which approval shall not be unreasonably withheld. Upon receipt of written demand from Landlord, Tenant shall increase the limits of liability insurance required hereunder to the amount required by any then-existing Leasehold Mortgagee or commensurate with that generally carried by a majority of owners of other comparable projects in Alameda County, but not greater than that required by any then-existing Leasehold Mortgagee. The insurance shall also include: (i) coverage against liability for bodily injury or property damage arising out of the use, by or on behalf of Tenant, of any owned, non-owned, leased or hired automotiVe equipment in the conduct of any and all operations called for under this Lease; (ii) premises and operations including, without limitation, bodily injury, personal injury, death or property damage occurring upon, in or about the Land or the Improvements on any elevators or any escalators therein and on, in or about the adjOining sidewalks, streets and passageways; (iii) broad form property damage liability; EXHIBIT B (iv) additional insured and primary insured endorsements protecting Landlord and Landlord's elected and appointed officials, officers, employees and agents; and (v) personal injury endorsement~ C. Worker's Compensation Insurance. Worker's compensation insurance, in the amount required under then applicable state law, covering Tenant's employees, if any, at work in or upon the Project, for not less than One Hundred Thousand Dollars ($100,000) per occurrence for all employees engaged in services or operations in connection with the Project or the Property.' Tenant shall require that any general construction contract entered into by' Tenant with regard to the initial development of the Improvements include a contractual undertaking by the general contractor to provide worker's compensation insurance for its employees engaged in · construction of the Improvements in an amount in compliance with applicable state law. D. Course of Construction Insurance. Course of construction insurance in the same amount as required in Paragraph A above for property insurance, covering all construction activities on the Land. E. General Insurance Provisions. All policies of insurance provided for in this Article shall be provided under valid and enforceable policies, in such forms and amounts as hereinbefore specified, issued by insurers licensed to do business in the State of California (or approved to do business in California and listed on the California Department of Insurance list of Eligible Surplus Lines Insurers or successor listing) and haVing a rating of A-/VIII or better in Best InsuranCe Guide or, if Best Insurance Guide is no longer in existence, a comparable rating from a comparable rating service. Prior to the Commencement Date and, thereafter, not less than thirty (30) days prior to the expiration date of each policy furnished pursuant to this Exhibit B, Tenant shall deliver to Landlord certificates evidencing the insurance required to be carded by Tenant under this Exhibit B. If requested by Landlord, Tenant shall deliver within fifteen (15) days following such request, certified, complete copies of the insurance policies required in this Lease. Insurance policies to be provided herein shall meet the following: (a) Each policy of insurance obtained pursuant to this Lease, other than worker's compensation insurance, shall contain endorsements which provide (i) a waiver by the insurer of the right of subrogation against Landlord, Tenant or any subtenant for negligence of any such person, (ii) a statement that the insurance shall not be invalidated should any insured waive in writing prior to the loss any or all right of recovery against any party for loss accruing to the property described in the insurance policy, and (iii) a provision that no act or omission of Tenant' which would otherwise result in forfeiture or reduction of the insurance therein provided shall affect or limit the obligation of the insurance company to pay the amount of any loss sustained. (b) By endorsements, Landlord and its elected and appointed officials, officer, employees and agents shall be named as additional insured, as appropriate, under the liability insurance required to be maintained by Tenant hereunder. (c) Each policy required hereunder shall inClude a Notice of Cancellation or Change in Coverage Endorsement which shall provide that such policy shall not be cancelled or 678740-1 materially changed without at least thirty (30) days' prior written notice by registered or certified mail to Landlord. (d) All insurance policies shall provide that there shall be no exclusion from coverage for cross liability among the listed insureds. (e) Any certificate of insurance applicable to course of construction insurance to be maintained shall be deposited with Landlord Prior to commencement of construction of any Improvements. (f) Each policy shall contain an endorsement that proves that the insurance applies separately to each insured that is seeking coverage or against whom a claim is made, except with respect to the limits of liability. (g) Each policy shall be written as a primary policy not contributing with and not in excess of coverage that Landlord may carry. (h) Each policy shall expressly provide that Landlord shall not be required to give notice of accidents or claims and that Landlord shall have no liability for premiums. (i) Notwithstanding any contrary provision of this Exhibit B, all insurance required to be carded by Tenant under this Exhibit B shall be in such amounts, with such additional coverages, and on such other terms as required by any Leasehold Mortgagee. F. Blanket Policies. Any insurance provided for in this Exhibit B may be placed by a policy or poiicies'6fblanket insurance; provided, however, that such policy or policies provide that the amount of the total insurance allocated to the Land shall be such as to furnish protection the equivalent of separate policies in the amounts herein required, and provided further that in all other respects any such policy or policies shall comply with the other provisions of this Lease. G. Waiver of Subrogation. To the extent permitted by law and the policies of insurance required to be maintained hereunder, and without affecting such insurance coverage, Landlord and Tenant each waive any right to recover against the other (a) damages for injury or death of persons, (b) damage to property, (c) damage to the Land or the Improvements or any part thereof, or (d) claims arising by reason of any of the foregoing, to the extent that such damages and/or claims are covered (and only to the extent of such coverage) by insurance actually carried by either Landlord or Tenant. This provision is intended to restrict each party (as permitted by law) to recover against insurance carriers to the extent of such coverage, and waive fully, and for the benefit of each, any rights and/or claims which might give rise to a right of subrogation in any insurance carrier. H. Compliance with Policy Requirements. Tenant shall observe and comply with the requirements of all policies of public liability, fire and other policies of insurance at any time in force with respect to the Project, and Tenant shall so perform and satisfy the requirements of the companies writing such policies that at all times companies of good standing shall be willing to write or to continue such insurance. 678740-1 I. Additional Insurance. Tenant shall maintain such additional amounts or types of insurance as shall be required by any then-existing Leasehold Mortgagee, and shall have the right to carry such additional insurance as Tenant may desire from time to time or as may be required by any Leasehold Mortgagee. 678740-1 SECURED PROMISSORY NOTE $ 2,248,248 Dublin, California February 1, 2004 FOR VALUE RECEIVED, Dublin Senior Limited Partnership, a California limited partnership ("Borrower"), promises to pay to the City of Dublin, a public body corporate and politic ("City"), in lawful money of the United States of America, the principal sum of Two Million Two Hundred Forty-Eight Thousand Two Hundred and Forty-Eight Dollars ($2,248,248) or so much thereof as may be advanced by City pursuant to the Loan Agreement referred to below, together with interest on the outstanding principal balance at a rate equal to three percent (3%) simple interest per annum, in accordance with the terms and conditions described herein. Interest shall accrue commencing upon the date of disbursement of the Loan Proceeds, and shall bl calculated on the basis of a year of 365 days, and charged for the actual number of days elapsed. This Secured Promissory Note (this "Note") has been executed and delivered pursuant to and in accordance with the terms and conditions of a Loan Agreement dated as of the date hereof by and between Borrower and City (the "Loan Agreement"), and is subject to the terms and conditions of the Loan Agreement, which are by this reference incorporated herein and made a part hereof. Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Loan Agreement. This Note is secured by a Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing ("Deed of Trust") dated as of the date hereof, executed by Borrower for the benefit of City and encumbering the property described therein. City shall be entitled to the benefits of the security provided by the Deed of Trust and shall have the right to enforce the covenants and agreements contained herein, in the Deed of Trust, the Loan Agreement, ttqe other Loan Documents and the Additional Documents. 1. PAYMENTS 1.1 PAYMENT DATES; MATURITY DATE. Annual payments on this Note shall be payable from Surplus Cash (defined below) as described in this Section 1. City shall credit payments made under this Note first to any unpaid late charges and other costs and fees then due, then to accrued but unpaid interest, and then to principal. The entire outstanding principal balance of this Note, together with interest accrued thereon and any other sums accrued hereunder shall be payable in full on the fifty-fifth (55th) anniversary of the date hereof ("Maturity Date"). 1.2 ANNUAL PAYMENTS FROM SURPLUS CASH. Commencing on June 1, 2006 and on the first day of each June during the term hereof, Borrower shall pay to City sixty percent (60%) of the Surplus Cash generated by the Project during the previous calendar year to reduce the indebtedness owed under this Note. No later than May 1 of each year during the term hereof beginning on May 1, 2006, EXHIBIT C Borrower shall provide to City Borrower's calculation of Surplus Cash for the previous calendar year, accompanied by such supporting documentation as City may reasonably request, including without limitation, an independent audit prepared for the Project by a certified public accountant. No later than November 1 of each , year during the term hereof beginning on November 1, 2005, if requested by City, Borrower shall provide to City a projected budget for the following calendar year which shall include an estimation of Surplus Cash. 1.211 "Surplus Cash" shall mean for each calendar year during the term hereof, the amount by which Gross Revenue (defined below) exceeds Annual Operating Expenses (defined below) for the Project. Surplus Cash shall also include net cash proceedS realized from any refinanCing of the Project, less fees and closing costs reasonably incurred in connection with such refinancing and any City-approved uses of the net cash proceeds of the refinancing. 1.2.2 "Gross Revenue" shall mean for each calendar year during the term hereof, all revenue, income, receipts and other consideration actually received by Borrower from the operation and leasing of the Project. Gross Revenue shall include, but not be limited to: all rents, fees and charges Paid by tenants or licensees; 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; proceeds from vending and laundry room machines; the proceeds of business interruption or similar insurance; and the fair market value of any goods or services provided to Borrower in consideration for the leasing or other use of any part of the Project. Gross Revenue shall include ~. ~. any release of funds from replacement and other reserve accounts to . Borrower other than for costs associated with the Project. 1.2.3 "Annual Operating Expenses" shall mean for each Calendar year during term hereof, the following costs reasonably and actually incurred for the operation and maintenance of the Project: property taxes and assessments; debt service, reserves and other payments currently due or payable on a non-optional (to Borrower) basis on all loans which have been approved by the City and which are secured by deeds of trust senior in priority to the City Deed of Trust ("Approved Senior Loans"); property management fees and reimbursements in amounts in accordance with industry standards for similar developments; property management staff salaries; premiums for property damage, liability and other insurance; utility services not paid for directly or indirectly by tenants; maintenance and repair; licenses and permits required for the operation of the Project; organizational costs (e.g., annual franchise tax payments) and costs associated with accounting, tax preparation and legal fees of Borrower incurred in .the ordinary course of business; security services; advertising and marketing; cash deposits into operating reserves and a reserve for tenant services; cash deposits into reserves for capital replacement of Project improvements in the maximum amount of the greater of the amount required by the holder of any Approved Senior Loan or the sum of $22,316 per year, increasing at 3.5% per year, or as reasonably required by Borrower with the written approval of City; 675299-6 2 reasonable fees, reimbursements and salaries for resident services and activities as reasonably required by Borrower; payment of deductibles in connection with casualty insurance claims not paid from reserves; the amount of uninsured losses actually replaced, repaired or restored; other ordinary and reasonable operating expenses; and extraordinary operating costs approved with the written consent of the City. in addition to the foregoing, for the purpose of calculating Surplus Cash, Annual Operating Expenses may include a total of $30,000 per calendar year allocated among the following three items: (i) payment of any previously unpaid portion of the developer fee due (without interest) to Eden Housing, Inc., a California nonprofit public benefit corporation ("Eden") provided that the cumulative amount of such fee does not exceed $1,200,000 (the "Approved Developer Fee"), (ii) a partnership management fee, and (iii) during the 15-year tax credit compliance period, an asset management fee equal to $5,000 per year. Borrower shall have discretion to annually allocate the $30,000 among the foregoing three items as Borrower shall determine. City acknowledges and agrees that as of the date hereof, the property management fee specified in Section 7.12 of the Partnership Agreement is in accordance with industry standards for similar developments. 1.2.4 EXCLUSIONS FROM ANNUAL OPERATING EXPENSES. Annual Operating Expenses shall exclude the following: debt service payments on any loan which is not an Approved Senior Loan, including without limitation, unsecured loans or loans secured by deeds of trust which are subordinate to the City Deed of Trust; depreciation, amortization, depletion or other non-cash expenses; expenses paid for with disbursements from any reserve account; distributions to partners; any amount paid to Borrower, any general partner of Borrower, or any entity controlled by the persons or entities in control of Borrower or any general partner of Borrower. Notwithstanding the foregoing limitation regarding payments to Borrower and related parties, the following fees shall be included in Annual Operating Expenses in accordance with the limitations set forth in Section 1.2.3 above even if paid to an affiliate of Borrower or a partner of Borrower: fees paid to a property management agent or resident services agent, the Approved Developer Fee, partnership management fees and asset management fees. 1.3 COST SAVINGS. Within ten (10) business days after Borrower's receipt of the investor's capital contribution following the issuance of the IRS Form 8609 for the Project, Borrower shall pay to the City as a reduction of the outstanding principal balance of this Note, a one-time payment in the amount of Excess Proceeds. "Excess Proceeds" shall mean the sum of all sources of financing received by Borrower for construction of the Project less the sum of actual uses as shown on the final cost certificate for the Project. For purposes of calculating Excess Proceeds: (i) Borrower shall defer receipt of at least $250,000 of the Approved Developer Fee, (ii) the operating reserve shall be funded in the amount of $97,000, and (iii) the reserve for tenant services shall be funded in the amount of $100,000 or such higher amount as City in its sole discretion may approve. City hereby approves the funding of the operating reserve and the reserve for tenant services in the foregoing amounts. 675299-6 3 1.4 DUE ON SALE. The entire unpaid principal balance and all interest ~ and other sums accrued hereunder shall be due and payable upon the Transfer (as defined in Section 7.1 of the Regulatory Agreement) absent City consent, of all or any part of the Project, any interest therein, or Borrower's interest in the Property, other than to Eden, a Controlled Affiliate of Eden (as defined in Section 7.2 of the Regulatory Agreement), or a limited partnership in which the general partner is Eden or a Controlled Affiliate of Eden, or otherwise upon the occurrence of a Transfer absent City consent other than a Transfer permitted pursuant to clauses (1) through (5) of Section 7.2 of the Regulatory Agreement. 1.5 PREPAYMENT. Borrower may, without premium or penalty, at any time and from time to time, prepay all or any portion of the outstanding principal balance due under this Note, provided that each such prepayment is accompanied by accrued interest on the amount of principal prepaid calculated to the date of such prepayment. Prepayments shall be applied first to any unpaid late charges and other costs and fees then due, then to accrued but unpaid interest, and then to principal. In no event shall any amount due under this Note become subject to any rights of offset, deduction or counterclaim on the part of Borrower. 1.6 MANNER OF PAYMENT. All payments of principal and interest on this Note shall be made to City at 100 Civic Plaza, Dublin, California 94568 or such other place as City shall designate to Borrower in writing, or by wire transfer of immediately available funds to an account designated by City in writing. 2. DEFAULTS 2.1. EVENTS OF DEFAULT. The occurrence of any one or more of the following events shall constitute an event of default hereunder ("Event of Default"): (a) If Borrower fails to pay when due the principal and interest payable hereunder and such failure continues for twenty-five (25) days after City notifies Borrower thereof in writing. (b) If, pursuant to or within the meaning of the United States Bankruptcy Code or any other federal or state law relating to insolvency or relief of debtors ("Bankruptcy Law"), Borrower or any general partner thereof (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against Borrower or any general partner thereof in an involuntary case; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator or similar official for Borrower or any general partner thereof; (iv) makes an assignment for the benefit of its creditors; or (v) admits in writing its inability to pay its debts as they become due. (c) If a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against Borrower or any general partner thereof in an involuntary case, (ii) appoints a trustee, receiver, assignee, liquidator or similar official for Borrower or any general partner thereof or substantially all of such entity's assets, (iii) orders the liquidation of Borrower or any general partner thereof, or (iv) issues or levies a judgment, writ, warrant of attachment or similar process against the Property or the Project, and in each case 675299-6 4 the order or decree is not released, vacated, dismissed or fully bonded within 60 days after its issuance. (d) The occurrence of a Transfer in violation of Section 7 of the Regulatory Agreement, and the failure of Borrower to rescind such Transfer within 30 days following written notice from City or such longer period as City may agree upon in writing. (e) If an event of default has been declared by the holder of any debt instrument secured by a mortgage or. deed of trust on the Project or Borrower's interest in the Property and such holder exercises a right to declare all amounts due under that'debt instrument immediately due and payable, subject to the expiration of any applicable cure period set forth in such holder's documents. (f) If the Borrower fails t° maintain insurance on the .Property and the Project as required pursuant to the Loan Documents and Additional Documents and Borrower fails to cure such default within 25 days. (g) Subject to Borrower's right to contest the following charges pursuant to the Loan Documents and Additional Documents, if the Borrower fails to pay taxes or assessments due on the Property or the Project or fails to pay any other charge that may result in a lien on the Property or the Project, and Borrower fails to cure such default within 25 days. (h) If any repreSentation or warranty contained in the Loan Documents, Additional Documents, or any certificate furnished in connection with the Loan Documents or the Additional Documents or in connection with any request for d!sbursemer~ O~.L0an proceeds proves to have.been false or misleading in any: .... material adverSe respect when made. (i) If the Borrower defaults in the performance of any term, provision, covenant or agreement (other than an obligation enumerated in this Section 2.1) contained in any Loan Document or Additional Document, and unless such document specifies a shorter cure period for such default, the default continues for twenty-five (25) days in the event of a monetary default or sixty (60) days in the event of a nonmonetary default after the date upon which City shall have given written notice of the default to Borrower (or such longer time as City may agree upon in writing), provided that in each case Borrower commences to cure the.default within twenty-five (25) days and thereafter prosecutes the curing of such default with due diligence and in good faith. (j) If an Event of Default shall have been declared under any other Loan Document o? Additional Document subject to the expiration or any applicable cure period set forth in such documents. 2.2. REMEDIES. Upon the occurrence of an Event of Default hereunder, subject to Section 3.9., City may, at its option (i) by written notice to Borrower, declare the entire unpaid principal balance of this Note, together with all accrued interest thereon and all sums due hereunder, immediately due and payable .regardless of any prior forbearance, (ii) exercise any and all rights and remedies available to it under applicable law, and (iii) exercise any and all rights and remedies 675299-6 5 available to City under this Note and the other Loan Documents and Additional DocumentS, including without limitation the right to pursue foreclosure under the Deed of Trust. Borrower shall pay all reasonable costs and expenses incurred by or on behalf of City including, without limitation, reasonable attorneys' fees, incurred in connection with City's enforcement of this Note and the exercise of any or all of its rights and remedies hereunder and all such sums shall be a part of the indebtedness secured by the Deed of Trust. 2,3. DEFAULT RATE. Upon the occurrence of an Event of Default, interest shall automatically be increased without notice to the rate of ten percent (1 0%) per annum (the "Default Rate"); provided however, if any payment due hereunder is not paid when due, the Default Rate shall apply commencing upon the due date for such payment. When Borrower is no longer in default, the Default Rate shall no longer apply, and the interest rate shall once again be the rate specified in the first paragraph of this Note. Notwithstanding the foregoing provisions, if the interest rate charged exceeds the maximum legal rate of interest, the rate shall be the maximum rate permitted by law. The imposition or acceptance of the Default Rate shall in no event constitute a waiver of a default under this Note or prevent City from exercising any of its other rights or remedies. 3. MISCELLANEOUS 3.1. WAIVER. The rights and remedies of City under this Note shall be cumulative and not alternative. No waiver by City of any right or remedy under this Note shall be effective unless in a writing signed by City. Neither the failure nor any delay in exercising any right, power or privilege under this Note will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such ~" ':::'~' ~.-~ ~.: ~:~: '.:right, power or Privilege bY CitY will preclude any other or fUrther exerCise.of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable law (a) no claim or right of City arising out of this Note can be discharged by City, in whole or in part, by a waiver or renunciation of the claim or right unless in a writing, signed by City; (b) no waiver that may be given by City will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on Borrower will be deemed to be a waiver of any obligation of Borrower or of the right of City to take further action without notice or demand as provided in this Note. Borrower hereby waives presentment, demand, protest, notices of dishonor and of protest and all defenses and pleas on the grounds of any extension or extensions of the time of payment or of any due date under this Note, in whole or in part, whether before or after maturity and with or without notice. 31'2. NOTICES. Any notice required or permitted to be given hereunder shall be given in accordance with Section 7.1 of the Loan Agreement. 3.3. SEVERABILITY. If any provision in this Note is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Note will remain in full force and effect. Any provision of this Note held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenfOrceable. 3.4 GOVERNING LAW. This Note shall be governed by the laws of the State of California without regard to principles of conflicts of laws. All persons and 675299-6 6 entities in any manner obligated under this Note consent to the jurisdiction of any federal or state court within California having proper venue. 3.5 PARTIES IN INTEREST. This Note shall bind Borrower and its successors and assigns and shall accrue to the benefit of City and its successors and assigns. 3.6 SECTIO~ HEADINGS, cONSTRUCTION. The headings of Sections in this Note are provided for convenience only and will not affect its construction or, interpretation. 3.7 RELATIONSHIP OF THE PARTIES. The relationship of Borrower and City under this Note is solely that of borrower and lender, and the loan evidenced by this Note and secured by the Deed of Trust will in no manner make City the partner or joint venturer of Borrower. 3.8 TIME IS OF THE ESSENCE. Time is of the essence with respect to every provision of this Note. 3.9 NONRECOURSE. Except as expressly provided in this Section 3.9, neither Borrower nor Borrower's partners, officers, directors, employees and agents shall have any direct or indirect personal liability for payment of the principal of, or interest on, this Note, and the sole recourse of City with respect to the payment of the principal of, and interest on, the Note shall be to the Project, Borrower's leasehold interest in the Property and any other collateral held by City as security for this Note; provided however, nothing contained in the foregoing limitation of liability shall: · , :,.~, ~.::. : -~ ?., (A) imPair the enforcement against all sUch security for the Loan of all the rightS and remedies of the City under the Deed of Trust and any financing statements City files in connection with the Loan as each of the foregoing may be amended, modified, or restated from time to time; (B) imPair the right of City to bring a foreclosure action, action for specific performance or other appropriate action or proceeding to enable City to enforce and realize upon the Deed of Trust, the interest in the Project created thereby and any other collateral given to City in connection with the indebtedness evidenced hereby and to name the Borrower as party defendant in any such action; (C) be deemed in any way to impair the right of the City to assert the unpaid ~. principal amount of the Loan as a demand for money within the meaning of Section 431.70 of the California Code of Civil Procedure or any successor provision thereto; (D) constitute a waiver of any right which City may have under any bankruptcy law to file a claim for the full amount of the indebtedness owed to City hereunder or to require that the Project shall continue to secure all of the indebtedness owed to City hereunder in accordance with this Note and the Deed of Trust; or (E) limit or restrict the ability of City to seek or obtain a judgment against Borrower to enforce against Borrower and its general partners to: 675299-6 7 (a) recover under Sections 4.8, 4.13.2 or 4.15 of the Loan Agreement (pertaining to Borrower's indemnification obligations), or (b) recover from Borrower and its general partner(s) compensatory damages as well as other costs and expenses incurred by City (including without limitation attorney's fees and expenses) arising as a result of the occurrence of any of the following: (i) any fraud or material misrepresentation on the part of the Borrower, any general partner thereof, or any officer, director or authorized representative of Borrower or of any general partner thereof in connection with the request for or creation of the Loan, or in any Loan Document, or in connection with any request for any action or consent by City in connection with the Loan; (ii) any failure to maintain insurance on the Property and the Project as required pursuant to the Loan Documents; (iii) failure to pay taxes, assessments or other charges due on the Property or the Project; (iv) the presence of hazardous or toxic material or waste on the Property or other violation of the Borrower's obligations under Section 4.13 of the Loan Agreement, Section 6.10 of the Ground Lease or Section 7.11 of the Deed of Trust (pertaining to environmental matters); (v) the occurrence of any act or omission of Borrower that results in waste to or of the Project or the Property and which has a material adverse effect on the value of the Project or the Property; (vi) the removal or disposal of any personal property or fixtures in violation of the Deed of Trust; or (vii) the material misapplication of the proceeds of any insurance policy or award resulting from condemnation or the exercise of the power of eminent domain or by reason of damage, loss or destruction to any portion of the Project or the Property. 4. WAIVER OF TRIAL BY JURY. BORROWER AND CITY EACH (A) AGREE NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT BY A JURY, AND (B) WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL ,BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL. Remainder of this page intentionally blank. 675299-6 IN WITNESS WHEREOF, Borrower has executed and delivered this Note as of the date first written above. BORROWER Dublin Senior Limited Partnership, a California Limited Partnership By: Eden Housing, Inc., a California nonprofit public benefit corporation Its: General Partner By: Linda Mandolini, Executive Director Approved as to form: City Attorney 675299-6 9 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Dublin 100 Civic Plaza Dublin, CA 94568 Attn: City Clerk EXEMPT FROM RECORDING FEES PER GOVERNMENT CODE §§6103, 27383 Space above this line for Record~r's use. LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING THIS LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING ("Deed of Trust") is made as of February 1, 2004, by Dublin Senior Limited Partnership, a California limited partnership ("Trustor") to North American Title Company, as trustee ("Trustee"), for the benefit of the City of Dublin, a municipal corporation ("Beneficiary"). RECITALS Beneficiary owns fee simple title to the real property described in Exhibit A attached hereto and incorporated herein by this reference (the "Land"). Beneficiary and Trustor have entered into a ground lease (the "Ground Lease") dated as of the date hereof, pursuant to which Beneficiary shall lease the Land to Trustor for a term of 99 years for the purpose of developing and operating a 54-unit affordable housing project for seniors (the "Project"). A memorandum of the Ground Lease shall be recorded in the official records of Alameda County concurrently herewith. Beneficiary and Trustor have entered into a loan agreement dated as of the date hereof (t. he "Loan Agreement") pursuant to which Beneficiary will loan to Trustor the sum of $2,248,248 (the "Loan") for the purpose of partially financing the Project. Trustor has issued to Beneficiary a secured promissory note dated as of the date hereof (the "Note") to evidence Trustor's obligation to repay the Loan. As a condition precedent to the making of the Loan, Beneficiary has required that Trustor enter into this Deed of Trust and grant to Trustee for the benefit of Beneficiary, a lien and security interest in the Project, in Trustor's leasehold interest in the Land, and in the Property (as hereafter defined) to secure repayment of the Note. Concurrently with, or shortly after the closing of the Loan, pursuant to the First Amended and Restated Partnership Agreement of Dublin Senior Limited Partnership, a California Limited Partnership, dated as of [February ,2004] (the "Partnership Agreement"), Trustor intends to bring in AEGON USA Realty Advisors, Inc., and/or affiliates thereof or of AEGON U.S. Holding Corporation, a Delaware corporation, as an investor limited partner (the "Investor Limited Partner") and Transamerica Affordable ATTACHMENT 2 Housing, Inc., a California corporation and/or affiliates thereof or of AEGON U.S. Holding Corporation, a Delaware corporation, as a special limited partner (the "Special Limited Partner") (collectively, including any successors or assigns, "Limited Partners"). NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is agreed as follows. 1. Grant in Trust Trusto[', in consideration of the foregoing and the indebtedness herein recited, hereby irrevocably and unconditionally grants, conveys, transfers and assigns to Trustee, in trust for the benefit of Beneficiary, with power of sale and right of entry and possession, all estate, right, title and interest which -I'rustor now has or may later acquire in and to the Land, including Trustor's leasehold estate in the Land and all of the following, Whether presently owned or hereafter acquired: a. All buildings, structures, and improvements, now or hereafter located or constructed on the Land ("ImproVements"); b. All appurtenances, easements, rights of way, pipes, transmission lines or Wires and other rights used in connection with the Land or the Improvements or as 'a means of access thereto, Whether now or hereafter owned or constructed or placed upon or in the Land or Improvements and all existing and future privi'leges, rights, franchises and tenements of the Land, including all minerals, oils, gas and other commercially valuable substances which may be in, under or produced from any part of the Land, and all water rights, rights of way, gores or strips of land, and any land lying in · the streets, ways, and alleys, open or proposed, in front of or adjoining the. Land and Improvements (collectively, "Appurtenances"); c. All machinery, equipment, fixtures, goods and other personal property of the TruStor, whether moveable or not, now owned or hereafter acquired by the Trustor and now or hereafter located at or used in connection with the Land, the Improvements or Appurtenances, and all improvements, restorations, replacements, repairs, additions or substitutions thereto (collectively, "Equipment"); d. All existing and future leases, subleases, licenses, and other agreements relating to the use or occupancy of all or any portion of the Land or Improvements (collectively, "Leases"), all amendments, extensiOns, renewals or modifications thereof, and all rent, royalties, or other payments which may now or hereafter accrue or otherwise become payable thereunder to or for the benefit of Trustor, including but not limited to security deposits (collectively, "Rents"); e. All insurance proceeds and any other proceeds from the Land, Improvements, Appurtenances, Equipment, Leases, and Rents, including without limitation, all deposits made with or other security deposits given to utility companies; all claims or demands relating to insurance awards which the Trustor now has or may hereafter acquire, including all advance payments of insurance premiums made by 677350-4 Trustor, and all condemnation awards or payments now or later made in connection with any condemnation or eminent domain proceeding ("Proceeds"); and f. All revenues, income, rents, royalties, payments and profits produced by the Land, Improvements, Appurtenances and Equipment, whether now owned or hereafter acquired by Trustor ("Gross Revenues"); All of the above-referenced interests of Trustor in the Land, Improvements, Appurtenances, Equipment, Leases, Rents, Proceeds and Gross Revenues as hereby conveyed to Trustee or made subject to the security interest herein described are collectively referred to herein as the "Property." 2. Obligations Secured. This Deed of Trust is given for the purpose of securing payment and performance of the following (the "Secured Obligations"): (i) all present and future indebtedness evidenced by the Note and any amendment thereof, including principal, interest and all other amounts payable under the terms of the Note; (ii) all present and future obligations of Trustor to Beneficiary under the Loan Documents and Additional Documents (each as defined below); (iii) all additional present and future obligations of Trustor to Beneficiary under any other agreement or instrument acknowledged by Trustor (whether existing now or in the future) which states that it is or such obligations are, secured by this Deed of Trust; (iv) all modifications, supplements, amendments, renewals, and extensions of any of the foregoing, whether evidenced by new or additional documents; and (v) reimbursement of all amounts advanced by or on behalf of Beneficiary to protect Beneficiary's interests under this Deed of Trust or any Loan Document or Additional Document. The Note, the. Loan Agreement, this Deed of Trust, and the Affordable Housing Regulatory Agreement and Declaration of Restrictive. Covenants ("Regulatory Agreement") dated as of the date hereof, :executed by and between Trustor and Beneficiary and recorded concurrently herewith are hereafter collectively referred to as the "Loan Documents." The Ground Lease and the Reciprocal Easement Agreement dated as of the date hereof and executed by and between Trustor and Beneficiary and recorded concurrently herewith ("Reciprocal Easement Agreement") are hereafter collectively referred to as the "Additional Documents." 3. Assignment of Rents, Issues, and Profits. Trustor hereby irrevocably, absolutely, presently and unconditionally assigns to Beneficiary the rents, royalties, issues,' profits, revenue, income and proceeds of the Property. This is an absolute assignment and not an assignment for security only. Beneficiary hereby confers upon Trustor a license to collect and retain such rents, royalties, issues, profits, revenue, income and proceeds as they become due and payable prior to any Event of Default hereunder. Upon the occurrence of any such Event of Default, Beneficiary may terminate such license without notice to or demand upon Trustor and without regard to the adequacy of any security for the indebtedness hereby secured, and may either in person, by agent, or by a receiver to be appointed by a court, enter upon and take possession of the Property or any part thereof, and sue for or otherwise collect such rents, issues, and profits, including those past due and unpaid, and apply the same, less costs and expenses, of 677350-4 3 operation and collection, including reasonable attorneys' fees, to any indebtedness secured hereby, and in such order as Beneficiary may determine. Beneficiary's right to the rents, royalties, issues, profits, revenue, income and proceeds of the Property does not depend upon whether or not Beneficiary takes possession of the Property. The entering upon and taking possession of the Property, the collection of such rents, issues, and profits, and the application thereof as aforesaid, shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. If an Event of Default occurs while Beneficiary is in possession of all or part of the Property and/or is collecting and applying Rents as permitted under this Deed of Trust, Beneficiary, Trustee and any receiver shall nevertheless be entitled to exercise and invoke every right and remedy afforded any of them under this Deed of Trust and at law or in equity, including the right to exercise the power of sale granted hereunder. So long as Beneficiary has not entered into actual possession of the Land and the Improvements, Beneficiary shall not be deemed to be a "mortgagee in possession," shall not be responsible for performing any obligation of Trustor under any Lease, shall not be liable in any manner for the Property, or the use, occupancy, enjoyment or Operation of any part of it, and unless due to the willful misconduct or gross negligence of Beneficiary, shall not be responsible for any dangerous or defective condition of the Property or any negligence in the management, repair or control of the Property; and in no event shall Beneficiary be responsible or liable for any of the foregoing arising prior to such time that Beneficiary takes actual possession of the Land and Improvements. Absent Beneficiary's written consent, Trustor shall not accept prepayment of Rents for any rental period exceeding two months. 4. Security Agreement. The parties intend for this Deed of Trust to create a lien on ::~:'.~ .the Property, and an absolute assignment of the Rents and LeaSes, all in favor of Beneficiary. The parties acknOwledge that some of the Property may be determined under applicable law to be personal property or fixtures. To the extent that any Property may be or be determined to be personal property, Trustor as debtor hereby grants to Beneficiary as secured party a security interest in all such Property to secure payment and performance of the Secured Obligations. This Deed of Trust constitutes a security agreement under the California Uniform Commercial Code, as amended or recodified from time to time (the "UCC"), covering all such Property. To the extent such Property is not real property encumbered by the lien granted above, and is not absolutely assigned by the assignment set forth above, it is the intention of the parties that such PropertY shall constitute "proceeds, products, offspring, rents, or Profits" (as defined in and for the purposes of Section 552(b) of the United States Bankruptcy Code, as such section may be modified or supplemented) of the Land and Improvements. The rights of Beneficiary under this Section 4 and under Sections 5 and 6 hereof are subject to the rights of all holders of any deeds of trust which are senior in priority to this Deed of Trust ("Senior Mortgagees"). 5. Financing Statements. Pursuant to the UCC, Trustor, as debtor, hereby authorizes Beneficiary, as secured party, to file such financing statements and amendments thereof and such continuation statements with respect thereto as Beneficiary may deem appropriate to perfect and preserve Beneficiary's security interest 677350-4 4 in such Property and Rents, without requiring any signature or further authorization by Trustor. If requested by Beneficiary, Trustor shall pay all fees and costs that Beneficiary may incur in filing such documents in public offices and in obtaining such record searches as Beneficiary may reasonably require. If any financing statement or other document is filed in the records normally pertaining to personal property, that filing shall not be construed as in any way derogating from or impairing this Deed of Trust or the rights or obligations of the parties under it. Everything used in connection with the Property and/or adapted for use therein and/or which is described or reflected in this Deed of Trust is, and at all times and for all purposes and in all proceedings both legal or equitable shall be regarded as part of the estate encumbered by this Deed of Trust irrespective of whether (i) any such item is physically attached to the Improvements, (ii) serial numbers are used for the better identification of certain equipment items capable of being thus identified in a recital contained herein or in any list filed with Beneficiary, or (iii) any such item is referred to or reflected in any such financing statement so filed at any time. Similarly, the mention in any such financing statement of (1) rights in or to the proceeds of any fire and/or hazard insurance policy,'or (2) any award in eminent domain proceedings for a taking or for lessening of value, or (3) Trustor's interest as lessor in any present or future lease or rights to income growing out of the use and/or occupancy of the property conveyed hereby, whether pursuant to lease or otherwise, shall not be construed as in any way altering any of the rights of Beneficiary as determined by this instrument or impugning the priority of Beneficiary's lien granted hereby or by any other recorded document. Such mention in any financing statement is declared to be solely for the protection of Beneficiary in the event any court or judge shall at any time hold, with respect to the matters set forth in the foregoing clauses (1), (2), and (3), that notice of Beneficiary's priority of interest is required in order to be effective against a particular class of persons, including but not limited to the federal government and any subdivisions or entity of the federal government. 6. Fixture Filinq. This Deed of Trust is intended to be and constitutes a fixture filing pursuant to the provisions of the UCC with respect to all of the Property constituting fixtures, is being recorded as a fixture financing statement and filing under the UCC, and covers .property, goods and equipment which are or are to become fixtures related to the Land and the Improvements. Trustor covenants and agrees that this Deed of Trust is to be filed in the real estate records of Alameda County and shall also operate from the date of such filing as a fixture filing in accordance with Section 9502 and other applicable provisions of the UCC. This Deed of Trust shall also be effective as a financing statement covering minerals or the like (including oil and gas) and accounts subject to the UCC, as amended. Trustor shall be deemed to be the "debtor" and Beneficiary shall be deemed to be the "secured party" for all purposes under the UCC. The full name of Trustor and the mailing address of Trustor are set forth in Section 10.2 of this Deed of Trust. 677350-4 5 7. Trustor's Representations, Warranties and Covenants; Rights and Duties of the Parties. 7.1 Representations and Warranties. Trustor represents and warrants that: (i) Trustor lawfully possesses and holds a leasehold interest in the Land pursuant to the Ground Lease, (ii) Trustor has or will have good title to all of the Property; (iii) Trustor has the full and unlimited partnership power, right and authority to encumber the Property and assign the Rents; (iv) subject only to encumbrances of record and senior liens permitted pursuant to the Loan Agreement or otherwise approved in writing by Beneficiary ("Permitted Encumbrances"), this Deed of Trust creates a valid monetary lien on Trustor's entire interest in the Property; (v) except with respect to Permitted Encumbrances, Trustor owns the Property free and clear of any deeds of trust, mortgages, security agreements, reservations of title or conditional sales contracts, (vi) other than those in favor of Senior Mortgagees approved by Beneficiary, there is no financing statement affecting the Property on file in any public office; and (vii) Trustor's chief executive office is located at the address specified in Section 10.2. Trustor further represents and warrants that this Deed of Trust and all other documents delivered or to be delivered by Trustor in connection herewith: (a) have been duly authorized, executed, and delivered by Trustor; (b) are binding obligations of Trustor; and (c) do not violate the provisions of any agreement to which Trustor is a party or which affects the Property. Trustor further represents and warrants that and that there are no pending, or to Trustor's knowledge, threatened actions or proceedings before any court or administrative agency which may adversely affect Trustor's ownership of the Property. 7.2 Payment and Performance of Secured Obligations. Trustor shall promptly pay and perform all obligations of Trustor arising in connection with the Secured Obligations in accordance with the respective terms thereof. 7.3 Preservation and Maintenance of Property; Compliance with Laws. Trustor shall keep the Land and Improvements in good repair and condition, and from time to time shall make necessary repairs, renewals and replacements thereto so that the Property shall be preserved and maintained. Trustor covenants to comply with all federal, state and local laws, regulations, ordinances and rules applicable to the Property. Trustor shall not remove, demolish or materially alter any Improvement without Beneficiary's consent, shall complete or restore promptly and in good and workmanlike manner (provided such restoration or repair is financially feasible) any building, fixture or other improvement which may be constructed, damaged, or destroyed thereon, and shall pay when due all claims for labor performed and materials furnished therefor. Trustor shall use the Land and Improvements solely for purposes authorized by the Loan Documents and Additional Documents, shall not commit or allow waste of the Property, and shall not commit or allow any act upon or use of the Property which would violate any applicable law or order of any governmental authority, nor shall Trustor bring on or keep any article on the Property or cause or allow any condition to exist thereon which could invalidate or which would be prohibited by any insurance 677350-4 6 coverage required to be maintained on the Property pursuant to the Loan Documents and the Ground Lease. 7.6 Restrictions on Conveyance and Encumbrance; Acceleration. It shall be an Event of Default hereunder if any Transfer (as defined in Section 7 of the Regulatory Agreement) of the Property, any part thereof, or interest therein occurs in violation of the requirements of the Loan Documents and Additional Documents. If any such Transfer shall occur in violation of such requirements, without limiting the provisions of Section 8 hereof, all obligations secured by this instrument, irrespective of the maturity dates expressed therein, at the option of Beneficiary, and without demand shall immediately become due and payable, subject to any applicable cure period. 7.7 Inspections; Books and Records. Beneficiary and its agents and repreSentatives shall have the right at any reasonable time upon reasonable notice to Trustor to enter upon and inspect the Property to ensure compliance with the Ground Lease and Regulatory Agreement. Trustor shall maintain complete and accurate books of account and other records (including copies of supporting bills and invoices) adequate to reflect the operation of the Property, and copies of all written contracts, Leases and other instruments which affect the Property. The books, records, contracts, Leases and other instruments shall be subject to examination and inspection at any reasonable time by Beneficiary following two business days prior notice. 7.8 Charges, Liens, Taxes and Assessments. Trustor shall pay before delinquency all taxes, levies, assessments and other charges affecting the Property. Trustor shall immediately discharge or cause to be discharged any lien on the Property (other than encumbrances approved by BenefiCiary as of the date hereof in writing) to which Beneficiary provides written objection. Trustor shall pay when due each obligation secured by or reducible to a lien, charge or encumbrance which now does or later may encumber or appear to encumber all or part of the Property or any interest in it, whether or not such lien, charge or encumbrance is or would be senior or subordinate to this Deed of Trust. Trustor shall not be required to pay any tax, levy, charge or assessment so long as its validity is being actively contested in good faith and by appropriate actions and/or proceedings. 7.9 Subrogation. Beneficiary shall be subrogated to the liens of all encumbrances, whether released of record or not, which are discharged in whole or in Part by Beneficiary in accordance with this Deed of Trust. 7.10 Hazard, Liability and Workers' Compensation Insurance. Atall times during the term hereof, Trustor shall at Trustor's expense, maintain insurance policies in accordance with the requirements set forth in the Regulatory Agreement. Trustor shall file with Beneficiary prior to the commencement of the term hereof, certificates evidencing each of the insurance policies required by this Section, and such certificates shall provide that at least thirty (30) days' prior written notice shall be provided to Beneficiary prior to the expiration, cancellation or change in coverage under each such policy. If any insuCance policy required hereunder is canceled or the coverage provided thereunder is reduced, Trustor shall, within twenty-five (25) days after receipt of written 677350-4 notice of such cancellation or reduction in coverage, but in no event later than the effective date of cancellation or reduction, file with Beneficiary a certificate showing' that the required insurance has been reinstated or provided through another insurance company or companies. Upon failure to so file such certificate, Beneficiary may, without further notice and at its option, procure such insurance coverage at Trustor's expense, and Trustor shall promptly reimburse Beneficiary for such expense upon receipt of billing from Beneficiary. 7.11 Hazardous Materials. Trustor shall not cause or permit any Hazardous Material (as defined in Section 6.10.2 of the Ground Lease) to be brought upon, kept, stored or used in, on, or about the Land by Trustor, its agents, employees, contractors or invitees except for incidental supplies ordinarily used in the construction and operation of the Project in compliance with all applicable laws, and shall not cause any release of Hazardous Materials into, onto, under or through the Land. If any Hazardous Material is discharged, releaSed, dumped, or spilled in, on, under, or about the Land and results in any contamination of the Land or adjacent property, or otherwise results in the release or discharge of Hazardous Materials in, on, under or from the Land, Trustor shall promptly take all actions at its sole expense as 'are necessary to comply with all Environmental Laws (as defined below). The obligations of Trustor under this Section 7.11 shall not apply to the release of Hazardous Materials as a result of the action or inaction of Beneficiary in connection with Beneficiary's obligations as set forth in the Reciprocal Easement Agreement. Trustor shall indemnify, defend (with counsel reasonably acceptable to Beneficiary), and hold Beneficiary and its elected and appointed officials, officers, agents and employees (collectively, "lndemnitees") harmless from and against any and all losS, claim, liability, damage, demand, judgment, order, penalty, fine, injunctive or other relief, cost, expense (including reasonable fees and expenses of attorneys, expert witnesses, and other professionals advising or assisting Beneficiary), action, or cause of action, arising in connection with the breach of Trustor's covenants and obligations set forth in this Section 7.11. The foregoing indemnity includes, Without limitation, all costs of investigation, assessment, containment,, removal, remediation of any kind, and disposal of Hazardous Materials, all costs of determining whether the Land is in compliance with Environmental Laws, all costs associated with bringing the Land into compliance with all applicable Environmental Laws, and all costs associated with claims for damages or injury to persons, property, or natural resources. 'Without limiting the generality of the foregoing, Trustor shall, at Trustor's own cost and expense, do all of the following: (i) pay or satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees in any legal or administrative proceeding incident to any matters against which Indemnitees are entitled to be indemnified under this Deed of Trust; (ii) reimburse Indemnitees for any expenses paid or incurred in connection 677350-4 8 with any matters against which Indemnitees are entitled to be indemnified under this Deed of Trust; and (iii) reimburse Indemnitees for any and all expenses, including without limitation out-of, pocket expenses and fees of attorneys and expert witnesses, paid or incurred in connection with the enforcement by Indemnitees of their rights under this Deed of Trust, or in monitoring and partiCipating in any legal or administrative proceeding. · Trustor's obligation to indemnify the Indemnitees shall not be limited or impaired by any of the following, or by any failure of Trustor to receive notice of or consideration for any of the following: (i) any amendment or modification of any Loan Document or Additional DocUment; (ii) any extensions of time for performance required by any Loan Document or Additional Document; (iii) any provision in any of the Loan Documents or Additional Documents limiting Beneficiary's recourse to property securing the Secured Obligations, or limiting the personal liability of Trustor, or any other party for payment of all or any part of the Secured Obligations; (iv) the accuracy or inaccuracy of any representation and Warranty made by Trustor under this Deed of Trust or by Trustor or any other party under any Loan Document, (v) the release of Trustor or any other person, by Beneficiary or by operation of law, from performance of any obligation under any LOan Document or Additional Document; (vi) the release or substitution in whole or in part of any security for the Secured Obligations; and (vii) Beneficiary's failure to properly perfect any lien or security interest given as security for the Secured Obligations. . ~ .... The provisions of this Section 7.11 shall be in addition to any and all other~ ~obligations and liabilities that Trustor may have under applicable law, and each . ~ ~. Indemnitee shall be entitled to indemnification under this Section without regard to whether Beneficiary or that Indemnitee has exercised any rights against the Property or any other security, pursued any rights against any guarantor or other party, or pursued any other rights available under the Loan Documents, the Additional Documents, or applicable law. The obligations of Trustor to indemnify the Indemnitees under this Section shall survive any repayment or discharge of the Secured Obligations, any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of the lien of this Deed of Trust. Without limiting any of the remedies provided in this Deed of Trust, Trustor acknowledges and agrees that each of the provisions in this Section 7.11 is an environmental provision (as defined in Section 736(0(2) of the California Code of Civil Procedure) made by Trustor relating to real property security (the "Environmental Provisions"), and that Trustor's failure to comply with any of the Environmental Provisions will be a breach of contract that will entitle Beneficiary to pursue the remedies provided by Section 736 of the California Code of Civil Procedure ("Section 736") for the recovery of damages and for the enforcement of the Environmental Provisions. Pursuant to Section 736, Beneficiary's action for recovery of damages or enforcement of the Environmental Provisions shall not constitute an action within the meaning of Section 726(a) of the California Code of Civil Procedure or constitute a 677350-4 9 money judgment for a deficiency or a deficiency judgment within the meaning of Sections 580a, 580b, 580d, or 726(b) of the California Code of Civil Procedure. "Environmental Law" means all federal, state or local statutes, ordinances, rules, regulations, orders, decrees, judgments or common law doctrines, and provisions and conditions of permits, licenses and other operating authorizations regulating, or relating to, or imposing liability or standards of conduct concerning (i) pollution or protection of the environment, including natural resources; (ii) exposure of persons, including employees and agents, to any Hazardous Material (as defined above) or other products, raw materials, chemicals or other substances; (iii) protection of the public health or welfare from the effects of by-products, wastes, emissions, discharges or releases of chemical substances from industrial or commercial activities; (iv) the manufacture, use or introduction into commerce of chemical subStances, including without limitation, their manufacture, formulation, labeling, distribution, transportation, handling, storage and disposal; or (iv) the use, release or disposal of toxic or hazardous substances or Hazardous Materials or the remediation of air, surface waters, groundwaters or soil, as now or may at any later time be in effect, inclUding but not limited to the Toxic Substances Control Act [15 U.S.C. 2601, et seq,]; the Comprehensive Environmental Response, Compensation and Liability Act [42 U.S.C. Section 9601, et seq.], the Hazardous Materials Transportation Authorization Act [49 U.S,C. Section 5101, et seq.], the Resource Conservation and Recovery Act [42 U.S.C. 6901, et seq.], the Federal Water Pollution Control Act [33 U.S.C. Section 1251], the Clean Air Act [42 U.S.C. Section 7401, et seq.], the California Underground Storage of Hazardous Substances Act [California Health and Safety Code Section 25280, et seq.], the California Hazardous Substances Account Act [California Health and Safety Code -' '~:: ~ sectiOn 25300, et Seq.], the California Hazardous Waste Act [California Health and safe~ C0de section 25100', et Seq.], the California Safe Drinking water and Toxic Enforcement Act [California Health and Safety Code Section 25249.5, et seq.], and the Porter-Cologne Water Quality COntrol Act [CalifOrnia Water Code Section 13000, et seq.], as they now exist or are hereafter amended, together with any regulations promulgated thereunder. 7.12 Notice of Claims; Defense of Security; Reimbursement of Costs. (a) Notice of Claims. Within three business days Trustor shall provide written notice to Beneficiary of any uninsured or partially uninsured loss affecting the Property through fire, theft, liability, or property damage in excess of an aggregate of Fifty Thousand Dollars ($50,000). Trustor shall use best efforts to ensure that Beneficiary shall receive timely notice of, and shall have a right to cure, any default under any other financing document or other lien affecting the Property and that provisions mandating such notice and allowing such right to cure shall be included in all such dOcuments, Within three business days of Trustor's receipt thereof, Trustor shall provide Beneficiary with a copy of any notice of default Trustor receives in connection with any financing document secured by the Project or Trustor's leasehold interest in the Land. (b) Defense of Security. At Trustor's sole expense, Trustor shall protect, 677350-4 lo preserve and defend the Property and title to and right of possession of the Property, the security of this Deed of Trust and the rights and powers of Beneficiary and Trustee created under it, against all adverse claims. (c) Compensation; Reimbursement of Costs. Trustor agrees to pay all reasonable fees, costs and expenses charged by Beneficiary or Trustee for any service that Beneficiary or Trustee may render in connection with this Deed of Trust, including without limitation, fees and expenses related to provision of a statement of obligations or related to a reconveyance. Trustor further agrees to pay or reimburse Beneficiary for all costs, expenses and other advances which may be incurred or made by Beneficiary or Trustee in any efforts to enforce any terms of this Deed of Trust, including any rights or remedies afforded to Beneficiary or Trustee or both of them under Section 8.2, whether or not any lawsuit is filed, or in defending any action or proceeding arising under or relating to this Deed of Trust, including reasonable attorneys' fees and other legal costs, costs of any disposition of the Property under the power of sale granted hereunder or any judicial foreclosure and any cost of evidence of title. (d) Notice of Chanqes. Trustor shall give Beneficiary prior written notice of any change in the location of its chief executive office, the location of any Property, including books and records pertaining to the Property, and its name or business structure. 7.13 Indemnification. .... (a) Trustor shall indemnify, defend (with counsel reasonably acceptable to ~ Benefiqiary), and hold harmless the Indemnitees (as defined in Section 7.11) from and against, and shall pay on demand, any and all losses, liabilities, damages, Costs, claims, demands, penalties, fines, orders, judgments, injunctive or other relief, expenses and charges (including reasonable attorney's fees and expenses) (all of the foregoing are collectively referred to as "Liabilities") arising directly or indirectly in any manner in connection with or as a result of (a) any breach of Trustor's covenants under any Loan Document or Additional Document, (b) any representation by Trustor in any Loan Document or Additional Document which proves to be false or misleading in any material respect when made, (c) injury or death to persons or damage to property or other loss occurring on the Land or in any improvement located thereon, whether caused by the negligence or any other act or omission of Trustor or any other person or by negligent, faulty, inadequate or defective design, building, construction or maintenance or any other condition or otherwise, (d) any claim, demand or cause of action, or any action or other proceeding, whether meritorious or not, brought or asserted against any Indemnitee which relates to or arises out of the Property, or any Loan Document or Additional Document or any transaction contemplated thereby, or any failure of Trustor to comply with all applicable state, federal and local laws and regulations applicable to the Property, provided that no Indemnitee shall be entitled to indemnification under this Section for matters caused by such Indemnitee's gross negligence or willful misConduct. The obligations of Trustor under this Section shall survive the repayment of the Loan and shall be secured by this Deed of Trust. Notwithstanding any contrary provision contained herein, the obligations of Trustor 677350-4 under this Section shall survive any foreclosure proceeding, any foreclosure sale, any delivery of a deed in lieu of foreclosure, and any release or reconveyance.of this Deed of Trust. For so long as Beneficiary is the owner of the improvements located adjacent to the Project (including without limitation the senior center under construction as of the date hereof) TrUstor's obligations under this paragraph shall not apply to Liabilities arising out of Beneficiary's performance of or failure to perform Beneficiary's obligations set forth in the Reciprocal Easement Agreement. (b) Limitation of Liability. Beneficiary shall not be directly or indirectly liable to TruStor or any other Person as a consequence of any of the following: (i) Beneficiary's exercise of or failure to exercise any rights, remedies or powers granted to Beneficiary in this Deed of Trust; (ii) Beneficiary's failure or refusal to perform or discharge any obligation or liability of Trustor under any agreement related to the Property or under this Deed of Trust; or (iii) any loss sustained by Trustor or any third party reSulting from any act or omission of Beneficiary in managing the Property after an Event of Default, unless the loss is caused by the 'willful misconduct, gross negligence, or bad faith of Beneficiary. Trustor hereby expressly waives and releases all liability of the types described in this Section 7.13(b), and agrees that Trustor shall assert no claim related to any of the foregoing against Beneficiary. 7.14 Insurance and Condemnation Proceeds. Proceeds of casualty insurance policies and condemnation awards shall be disbursed in accordance with and subject to the conditions set forth in the Ground Lease. 7.15 Release, Extension, Modification. At any time and from time to time, · ~ :Without liability therefor and without notice, upon written request of Beneficiary and ~' presentation of this Deed of Trust and the Note for endorsement, Trustee may release or reconvey all or any part of the Property, consent to the making of any map or plat of the Land or part thereof, join in granting any easement or creating any restriction affecting the Property, or join in any extension agreement or other agreement affecting the lien or charge hereof. At any time and from time to time, without liability therefor and without notice, Beneficiary may (i) release any person liable for payment of any Secured Obligation, (ii) extend the time for payment or otherwise alter the terms of payment of any Secured Obligation; (iii) accept additional real or personal property of any kind as security for any Secured Obligation, or (iv) substitute or release any property securing the Secured Obligations. 7.16 Reconveyance. Upon written request of Beneficiary stating that all of the Secured Obligations have been paid in full, and upon surrender of this Deed of Trust, and the Note, Trustee shall reconvey, without warranty, the Property or so much of it as is then held under this Deed of Trust. The recitals in any reconveyance executed under this Deed of Trust of any matters or facts shall be conclusive proof of the truthfulness thereof. Trustor shall pay all fees of Trustee and all recordation fees related to such reconveyance. 677350-4 12 8. Default and Remedies 8.1 Events of Default. Trustor acknowledges and agrees that an Event of Default shall occur under this Deed of Trust upon the occurrence of any one or more of the following events: (i) Beneficiary's declaration of an Event of Default under any Loan Document or Additional Document, subject to the expiration of any applicable cure period set forth in such documents; (ii) Trustor fails to perform any monetary obligation which arises under this Deed of Trust, and does not cure that failure within twenty-five (25) days following written notice from Beneficiary or Trustee; (iii) If Trustor's interest in the PropertYor any part'thereof is voluntarily or involuntarily sold, transferred, leased, encumbered, or otherwise conveyed in violation of Section 7.6 hereof or if any other Transfer (as defined in the Regulatory Agreement) occurs in violation of Section 7 of the Regulatory Agreement, and Trustor fails to rescind such action or Transfer within 30 days following written notice from Beneficiary or such longer period as Beneficiary may agree upon in writing; (iv) Trustor fails to maintain the insurance coverage required under the Regulatory Agreement or otherwise fails to comply with the requirements of Section 7.10 hereof and Trustor fails to cure such default within the time specified in Section 7.10; · - (v) Subject to Trustor's right to contest such charges as provided herein, Trustor fails to pay taxes or assessments due on the Land or the Project or fails to pay any other charge that may result in a lien on the Land or the Project, and Trustor fails to cure such default within 25 days. (vi) Any representation or warranty of Trustor contained in or made in connection with the execution and delivery of this Deed of Trust or in any certificate or statement furnished pursuant hereto or in any other Loan Document or Additional Document proves to have been false or misleading in any material adverse respect when made; (vii) If, pursuant to or within the meaning of the United States BankrUptcy Code or any other federal or state law relating to insolvency or relief of debtors ("Bankruptcy Law"), Trustor or any general partner thereof (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against Trustor or any general partner thereof in an involuntary case; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator or similar official for Trustor or any general partner thereof; (iv) makes an assignment for the benefit of its creditors; or (v) admits in writing its inability to pay its debts as they become due. 677350-4 Z3 (viii) If a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against Trustor or any general partner thereof in an involuntary case, (ii) appoints a trustee, receiver, assignee, liquidator or similar official for Trustor or any general partner thereof or substantially all of such entity's assetS, (iii) orders the liquidation of Trustor~ or any general partner thereof, or (iv) issues or levies a judgment, writ, warrant of attachment or similar process against the Property or the Project, and in each case the order or decree is not released, vacated, dismissed or fully bonded within 60 days after its issuance. (ix) The holder of any other debt instrument secured by a mortgage or deed of trust on the Property or part thereof declares an event of default thereunder and exercises a right to declare all amounts due under that debt instrument immediately due and payable, subject to the expiration of any applicable cure period set forth in such holder's documents; or (x) Trustor fails to perform any obligation arising under this Deed of Trust other than one enumerated in this Section 8.1, and does not cure that failure either within twenty-five (25) days ("Initial Cure Period") after written notice from Beneficiary or Trustee in the event of a monetary default, or within sixty (60) days after such written notice in the event of a nonmonetary default (or such longer time as Beneficiary may agree upon in writing), provided that Trustor commences to cure the default within the Initial Cure Period and thereafter prosecutes such cure with due diligence and in good faith. 8.2 Remedies. Subject to the applicable notice and cure provisions set forth herein, at any time after an Event of Default, Beneficiary and Trustee shall be entitled to invOke any and all 'of the rights and remedies desCribed below, and may exercise any one or more or all, of the remedies set forth in any Loan Document or Additional Document, and any other remedy existing at law or in equity or by statute; provided however, neither Trustor nor any of its general or limited partners shall have any personal liability for repayment of the Loan, and the sole recourse of Beneficiary under the Loan Documents for repayment of the Loan shall be the exercise of Beneficiary's rights against the Property and related security. All of Beneficiary's rights and remedies shall be cumulative, and the exercise of any one or more of them shall not constitute an election of remedies. Beneficiary shall be entitled to collect all expenses incurred in pursuing the remedies provided hereunder, including without limitation reasonable attorneys' fees and costs of title evidence. (a) Acceleration. Beneficiary may declare any or all of the Secured Obligations to be due and payable immediately. (b) Receiver. Beneficiary may apply to any court of competent jurisdiction for, and obtain appointment of, a receiver for the Property. (c) Entry. Beneficiary, in person, by agent or by court-appointed receiver, may enter, take possession of, manage and operate all or any part of the Property, and may also do anY and all other things in connection with those actions that 677350-4 14 Beneficiary may in its sole discretion consider necessary and appropriate to proteCt the security of this Deed of Trust. Such other things may include: taking and possessing copies of all of Trustor's or the then owner's books and records concerning the Property; entering into, enforcing, modifying, or canceling Leases on such terms and conditions as Beneficiary may consider proper; obtaining and evicting tenants; fixing or modifying Rents; collecting and receiving any payment of money owing to Trustor; completing any unfinished construction; and/or contracting for and making repairs and alterations. If Beneficiary so requests, Trustor shall assemble all of the Property that has been removed from the Land and make all of it available to Beneficiary at the site of the Land. Trustor hereby irrevocably constitutes and appoints Beneficiary as Trustor's attorney- in- fact to perform such acts and execute such documents as Beneficiary in its sole discretion may consider to be appropriate in connection with taking these measures, including endorsement of Trustor's name on any instruments. Regardless of any provision of this Deed of Trust, Beneficiary shall not be considered to have accepted any property other than cash or immediately available funds in satisfaction of anY obligation of Trustor to Beneficiary, unless Beneficiary has given express written notice of Beneficiary's election of that remedy in accordance with UCC Section 9621, as it may be amended or recodified from time to time. (d) Cure; Protection of Security. Either Beneficiary or Trustee may cure any breach or default of Trustor, and if it chooses to do so in connection with any such cure, Beneficiary or Trustee may also enter the Property and/or do any and all other things which it may in its sole discretion consider necessary and appropriate to protect the security of this Deed of Trust. Such other things may include: appearing in and/or defending any action or proceeding which purports to affect the security of, or the rights or powers of Beneficiary or Trustee under, this Deed of Trust; paying, purchasing, contesting or compromising any encumbrance, charge, lien or claim of lien which in Beneficiary's or Trustee's sole judgment is or may be senior in priority to this Deed of Trust, such judgment of Beneficiary or Trustee to be conclusive as among Beneficiary, Trustee and Trustor; obtaining insurance and/or paying any premiums or charges for insurance required to be carried hereunder; otherwise caring for and protecting any and all of the Property; and/or employing counsel, accountants, contractors and other appropriate persons to assist Beneficiary or Trustee. Beneficiary and Trustee may take any of the actions permitted under this Subsection 8.2(d) either with or without giving notice to any Person, except for notices required under applicable law. Any amounts disbursed by Beneficiary pursuant to this paragraph shall become additional indebtedness secured by this Deed of Trust. (e) UCC Remedies. Beneficiary may exercise any or all of the remedies granted to a secured party under the UCC. (f) Judicial Action. Beneficiary may bring an action in any court of competent jurisdiction to foreclose this instrument or to obtain specific enforcement of any of the covenants or agreements of this Deed of Trust. (g) Power of Sale. Under the power of sale hereby granted, Beneficiary shall have the discretionary right to cause some or all of the ProPerty, 677350-4 including any Property which constitutes personal property, to be sold or otherwise disposed of in any combination and in any manner permitted by applicable law. The Limited Partners shall have the right to cure any default of Trustor hereunder upon the same terms and conditions afforded to Trustor. Provided that Beneficiary has been given written notice of the addresS for delivery of notices to the Limited Partners, Beneficiary shall provide any notice of default hereunder to the Limited Partners concurrently with the provision of such notice to Trustor, and as to the Limited Partners, the cure periods specified herein shall commence upon the date of delivery of such notice in accordance with Section 10.2. 8.3 Power of Sale. If Beneficiary elects to invoke the power of sale hereby granted, Beneficiary shall execute or cause the Trustee to execute a written notice of such default and of its election to cause the Property to be sold to satisfy the obligations hereof, and shall cause such notice to be recorded in the office of the Recorder of each County wherein the Property or some part thereof is situated. Prior to publication of the notice of sale, Beneficiary shall deliver to Trustee this Deed of Trust and the Note or other evidence of indebtedness which is secured hereby, together with a written request for the Trustee to Proceed with a sale of the Property, pursuant to the provisions of law and this Deed of Trust. Notice of sale having been given as then required by law, and not less than the time then required by law having elapsed after recordation of such notice of default, Trustee, without demand on Trustor, shall sell the Property at the time and place fixed ::by itin the notice of sale, either as a whole or in separate parcels and in such order asit · may determine, at public auction to the highest bidder for cash in lawful money of the United States, payable at time of sale. Trustee may, and at Beneficiary's request shall, 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 may postpone such sale by public announcement at the time and place fixed by the preceding postponement. Trustee shall deliver to the purchaser its deed conveying the property So sold, but without any covenant or Warranty, express or implied. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustor, Trustee, or Beneficiary, may Purchase at such sale. After deducting all costs, fees, and expenses of Trustee and of the trust hereby created, including reasonable attorneys' fees in connection with Sale, Trustee shall apply the proceeds of sale to payment of all sums advanced or expended by Beneficiary or Trustee under the terms hereof and all outstanding sums then secured hereby, and the remainder, if any, to the person or persons legally entitled thereto. At any foreclosure sale, any person, including Trustor, Trustee or Beneficiary, may bid for and acquire the Property or' any part of it to the extent permitted by then applicable law. Instead of paying cash for such property, Beneficiary may settle for the purchase price by crediting the sales price of the property against the following obligations: 677350-4 ]~ (a) First, the portion of the Secured Obligations attributable to the expenses of sale, costs of any action and any other sums for which Trustor is obligated to pay or reimburse Beneficiary or Trustee under Section 7.12(c); and (b) Second, the remaining balance of all Other Secured Obligations in any order and proportions as Beneficiary in its sole discretion may choose. 8.4 Trustor's Right to Reinstate. Notwithstanding Beneficiary's acceleration of the sums secured by this Deed of Trust, Trustor shall have the right to have any proceedings begun by Beneficiary to enforce this Deed of Trust discontinued at any time prior to five days before sale of the Property pursuant to the power of sale contained in this Deed of Trust or at any time prior to entry of a judgment enforcing this Deed of Trust if: (a) Trustor pays Beneficiary all sums which would be then due under this Deed of Trust if the Secured Obligations had no acceleration provision; (b) TruStor cures all breaches of any other covenants or agreements of Trustor contained in this Deed of Trust; (c) Trustor pays all reasonable expenses incurred by Beneficiary and Trustee in enforcing the covenants and agreements of Trustor contained in this Deed of Trust, and in enforcing Beneficiary's and.Trustee's remedies as provided herein, including, but not limited to, reasonable attorney's fees; and (d) Trustor takes such action as Beneficiary may reasonably require to assure that the lien of this Deed of TruSt, Beneficiary's interest in the Property and Trustor's obligation to pay the sums secured by this Deed of Trust shall continue unimpaired. Upon such payment and cure by Trustor, this Deed of Trust and the obligations secured hereby shall remain in full force and effect as if no acceleration had occurred. Nothing contained in Sections 8.3 and 8.4 is intended to expand upon or limit the rights of Trustor and Beneficiary under ~ ,California!aw regarding Beneficiary's exercise of the power of sale Or Trustor's : · reinstatement rights. .: 9. Trustor's Waivers. To the fullest extent permitted by law, Trustor waives: (a) all statutes of limitations as a defense to any action or proceeding brought against Trustor by Beneficiary; (b) the benefit of all laws now existing or which may hereafter be enacted providing for any appraisement, valuation, stay, extension, redemption or moratorium; (c) all rights of marshalling in the event of foreclosure; and (d) all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of acceptance of this Deed of Trust and of the existence, creation, or incurring of new or additional indebtedness, and demands and notices of every kind. 10. Miscellaneous Provisions 10.1 Additional Provisions. The Loan Documents and Additional Documents grant further rights to Beneficiary and contain further agreements and affirmative and negative covenants by Trustor which apply to this Deed of Trust and the Property. 677350-4 Z? 10.2 Notices. Trustor requests that a copy of notice of default and notice of sale be mailed to Trustor at the address set forth below. That address is also the mailing address of Trustor as debtor under the UCC. Beneficiary's address set forth below is the address for Beneficiary as secured party under the UCC. Except for any notice required under applicable law to be given in another manner, all notices to be sent pursuant to this Deed of Trust shall be made in writing, and sent to the parties at their respective addresses specified below or to such other address as a party may designate by written notice delivered to the other parties in accordance with this Section. All such notices shall be sent by: (a) personal delivery, in which case notice shall be deemed delivered upon receipt; (b) certified or registered mail, return receipt requested, in which case notice shall be deemed delivered two (2) business days after deposit, postage prepaid in the United States mail; (c) nationally recognized overnight courier, in which case notice shall be deemed delivered one (1) day after deposit with such courier; or (d) facsimile transmission, in which case notice shall be deemed delivered on transmittal, provided that a transmission report is generated reflecting the accurate transmission thereof. Beneficiary:City of Dublin 100 Civic Plaza Dublin, California 94568 Attention: City Manager Facsimile: (925) 833-6651 Trustor: Dublin Senior Limited Partnership c/o Eden Housing, InC. 409 Jackson Street Hayward, CA 94544-1567 Attention: Executive Director Facsimile: (510) 582-6523 With copy to: (Investor Limited Partner) Peoples Benefit Life Insurance Company c/o AEGON USA Realty Advisors, Inc. 400 West Market Street Louisville, KY 40202 Attn: Marsha Hicks, Counsel Facsimile: (502) 560-2207 677350-4 18 With a copy to: AEGON USA Realty Advisors, Inc. 600 Montgomery Street, 16th Floor San Francisco, CA 94111 Attn: Christoph K. Gabler Facsimile: (415) 983-5558 With a copy to: Carle, Mackie, Power & Ross LLP 100 B Street, Suite 400 Santa Rosa, CA 95401 Attention: Richard W. Power, Esq. Facsimile" (707) 526-4707 If to the Special Limited Partner: cio Transamerica Affordable Housing, Inc. Cio AEGON USA Realty Advisors, Inc. 600 Montgomery Street, 16th Floor San Francisco, CA 94111 Attn: David W. Kunhardt, Vice President- Community Investments Facsimile: (415) 983-5558 Trustee: North American Title Company 21060 Redwood Road, Suite 110 Castro Valley, CA 94546 10.3 Successors and Assigns. The terms, covenants and conditions of this Deed of Trust shall be binding on and inure to the benefit of the heirs, successors, and assigns of the parties; provided however this Section 10.3 does not waive the provisions of Sections 7.6. 10.4 Substitution of Trustee. Beneficiary may from time to time or at any time substitute a trustee or trustees to execute the trust hereby created, and when any such substitution has been filed for record in the office of the Recorder of Alameda County, it shall be conclusive evidence of the appointment of such trustee or trustees, and such new trustee or trustees shall succeed to all of the powers and duties of the Trustee named herein. 10.5 Attorneys' Fees and Costs. In any action or proceeding to foreclose this Deed of Trust or to enforce any right of Beneficiary or of Trustee, Trustor shall pay to Beneficiary and Trustee all costs of such action or proceeding, including reasonable attorneys' fees. 677350-4 10.6 Governing Law; Severability; Interpretation. This Deed of Trust shall be governed by the laws of the State of California without regard to principles of confliCts of laws, Trustor agrees that any controversy ariSing under or in relation to this Deed of Trust shall be litigated exclusively in the jurisdiction where the Land is located (the "Property Jurisdiction"). The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to the Loan Documents. Trustor irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation, and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. If any provision of this Deed of Trust is held unenforceable or void, that provision shall be deemed severable from the remaining provisions, and shall in no way affect the validity of this Deed of Trust. The captions used in this Deed of Trust are for convenience only and are not intended to affect the interpretation or construction of the provisions herein contained. In this Deed of Trust, whenever the context so requires, the singular number includes the plural. 10.7 Waiver, Modification and Amendment. Each waiver by Beneficiary or 'Trustee must be in writing, and no waiver shall be construed as a continuing waiver. No waiver shall be implied from any delay or failure by Beneficiary or Trustee to take action on account of any default of Trustor. Consent by Beneficiary or Trustee to any act or omission by Trustor shall not be construed as a consent to any other or subsequent act or omission or to waive the requirement for Beneficiary's or Trustee's consent .to be obtained in any future or other instance. No amendment to or modification of this Deed of Trust shall be effective unless and until such amendment or modification is in writing, executed by Trustor and Beneficiary. Without limiting the generality of the foregoing, Beneficiary's acceptance of payment of any sum secured hereby after its due date shall not constitute a waiver by Beneficiary of its right either to require prompt payment when due of all other sums so secured or to declare default for failure so to pay. 10.8 Action By Beneficiary. Except as may be otherwise specifically provided herein, whenever any approval, notice, direction, or consent by the Beneficiary is required or permitted under this Agreement, such action shall be in writing, and such action may be given, made or taken by the City Manager or by any person who shall have been designated by the City Manager, without further approval by the City Council of the City of Dublin. Beneficiary shall use reasonable best efforts to respond to requests for any such approval, notice, direction, or consent in a timely manner. In any approval, consent, or other determination by Beneficiary required hereunder, Beneficiary shall act reasonably and in good faith. 10.9 Partial Subordination to Extended Use Aqreement. Beneficiary acknowledges that Trustor and the California Tax Credit Allocation Committee have or intend to enter into, Or concurrently with the execution and delivery of the Loan Documents are entering into, a Regulatory Agreement (the "TCAC Regulatory Agreement"), which constitutes the extended Iow-income housing commitment described in Section 42(h)(6)(B) of the Intemal Revenue Code, as amended (the "Code"). Beneficiary acknowledges and agrees that, in the event of a foreclosure of its interest under this Deed 677350-4 2O of Trust or delivery by the Trustor of a deed in lieu thereof (collectively, a "Foreclosure"), the following rule contained in Section 42(h)(6)(E)(ii) of the COde shall apply: For a period of three (3) years from the date of Foreclosure, with respect to any unit that had been regulated by the TCAC Regulatory Agreement, (i) none of the eligible tenants occupying those units at the time of Foreclosure may be evicted or their tenancy terminated (other than for good cause, including but not limited to, the tenants' ineligibility pursuant to regulations of the HOME Program or Section 42 of the Code), (ii) nor may any rent be increased except as otherwise permitted under Section 42 of the Code. SIGNA TUR£S ON FOLLOWING PAGE. 677350-4 IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the date first written above. DUBLIN SENIOR LIMITED PARTNERSHIP By: Eden Housing, Inc., a California nonprofit public benefit corporation Its: General Partner By: Linda Mandolini, Executive Director SIGNATURES MUST BE NOTARIZED. 677350-4 22 Exhibit A LAND (Attach legal description.) ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE CITY OF DUBLIN, COUNTY OF ALAMEDA, STATE OF CALIFORNIA DESCRIBED AS FOLLOWS: 677350-4 23 ACKNOWLEDGMENT State Of California ) ) SS. County of Alameda ) On before me, a Notary Public, personally appeared ., personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(is), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, 'executed-ed the instrument. WITNESS my hand and official seal. NOTARY PUBLIC 677350-4 24 CITY OF DUBLIN CERTIFICATE OF ACCEPTANCE (California Government Code 27281) This is to certify that the DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING dated as of February 1, 2004, executed by Dublin Senior Limited Partnership, a California limited partnership, to North American Title Company, as Trustee for the benefit of the City of Dublin, a municipal corporation, is accepted by the undersigned officer or agent on behalf of the City Council of the City of Dublin, pursuant to authority conferred by Resolution No. 24-87 of the Dublin City Council adopted on April 13, 1987, and the Beneficiary consents to recordation thereof by its duly authorized officer. Dated: By: Richard C. Ambrose City Manager Attest: 'City Clerk 677350-4 25 RESOLUTION NO. - 04 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN AUTHORIZING A LOAN TO DUBLIN SENIOR LIMITED PARTNERSHIP FOR AFFORDABLE SENIOR HOUSING WHEREAS, the City Council finds that there is a severe shortage in the City of Dublin of housing affordable to lower-income seniors; WHEREAS, development of affordable senior housing in close proximity to a senior center will serve a public purpose; 'WHEREAS, the City intends to develop a senior center at 7606 Amador Valley Boulevard (the "Senior Center"); WHEREAS, the City Council selected Eden Housing, Inc. ("Eden") to develop a 54-unit affordable senior housing project (the "Project") adjacent to the Senior Center; WHEREAS, Eden has formed Dublin Senior Limited Partnership, a California limited partnership (the "Partnership") for the purpose of developing and operating the Project, and Eden is the Partnership's general parmer; WHEREAS, Eden and the Partnership have received an allocation of Low-Income Housing Tax Credits and a loan commitment from Citibank (West) FSB, a federal savings bank ("Citibank") for construction and permanent financing for the Project; and WHEREAS, pursuant to a commitment letter dated July 15, 2003, the City has agreed to provide a loan for the Project in the maximum amount of $2,248,248 from the City's Inclusionary Zoning In Lieu Fee Fund in order to partially finance the development of affordable units within the Project. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin, a municipal corporation, authorizes the provision of a loan to the Partnership in the amount of Two Million Two Hundred Forty-Eight Thousand, Two Hundred and Forty-Eight Dollars ($2,248,248) ("Loan") for the purposes of providing construction and permanent financing for the Project, and approves a Budget Change allocating monies from the Inclusionary Zoning In Lieu Fee Fund to fimd the Loan. BE IT FURTHER RESOLVED, the City Council approves the Loan Agreement, the Secured Promissory Note, and the Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing ("Deed of Trust") and authorizes and directs the Mayor, the Mayor Pro Tern or the City Manager to execute the Loan Agreement substantially in the form attached hereto with such changes as may reasonably be necessary as approved by the City Manager and the City Attorney, and to undertake such further action as may be necessary and desirable to carry out the intent of this resolution, including without limitation, the execution of (i) an easement agreement providing certain parking, utility, access and drainage easements for the benefit of the Project and the Senior Center in accordance with the Parcel Map filed for the Project and Senior Center sites, and (ii) a Subordination Agreement and an Estoppel Agreement for the benefit of Citibank, pursuant to which the Deed of Trust will be subordinated to the Citibank deed of trust, and certain rights of the City, including the right to receive payments from Project cash flow, will be subordinated to the rights of Citibank. ATTACHMENT 3 PASSED, APPROVED, AND ADOPTED this 3th day of February 2004. AYESi NOES: ABSENT: ABSTAIN: Mayor ATTEST: City Clerk 678195-1 CITY OF 'DUBLIN C~NGE ~ ~: New Appropriations (City Council Approval Required): Budget Transfers: X From Unapproprimed Reserves Fund # From Budgeted Contingent Reserve (I080-799.000) From New Revenues Within Same Department Activity Between Departments (City Council Approval Required) Other Acm~t: , Ack.t: 380-50500-740-000 1,738,072 Nme: Nme: Account: A~o~t: Nme: Nme: Accost: Acc0~t: N~e: Nme: Account: Accost: Nme: :Nme: Account: Acc6~t: Nme: Nme: Accost: Accost: Nme: Nme: Accost: Accost: Nme: ' Nme: Ack.t: Accost: Nme: qame: Accost: Accost: To~ - To~ 1,738,072 lReason for Budget Change: This represents the additional funds due to ~den Housing for the loan on the Senior Affordable Housing. Project. Ci~ M~ager: Dine: Si~amre M~or: D~e: Si~amre Posted By: Date: ;~napse~ehp~mmon~o~sXbudget ch~ge fo~.xts I ATTACHMENT {i)TY O? DUBLIN 100 Civic Plaza, Dublin, California 94568 Website: http'.llwww, ci.dublin.ca.us July 15, 2003 Jeanne Peterson Executive Director California Tax Credit Allocation Committee 915 Capitol Mall, Room 485 P.O. Box 942809 Sacramento, CA 94209-0001 RE: FINANCIAL COMMITMENT TO EDEN HOUSING, INC. FOR DUBLIN SENIOR AFFORDABLE HOUSING AT 7606 AMADOR VALLEY BLVD., DUBLIN Dear Ms. Peterson: It is with pleasure that the City of Dublin provides this letter of support on behalf of Eden Housing, Inc.'s affordable senior development to be located at 7606 Amador Valley Blvd. in the City of Dublin. Eden Housing has been working diligently and has been successful in s~curing all entitlements to proceed with an affordable senior housing project with 54 units to be available to very low- and extremely low-income seniors. The depth of affordability and quality of the proposed development wilt significantly address the City's lack of affordable senior housing. The project will also greatly assist the City in meeting its goal of providing affordable rental housing to very low-income households. The Tri-Valley region, including Dublin recently completed a Human Services Needs Assessment. This study indicated that the Tri-Valley's senior population is the fastest growing age group in the region. Both Pleasanton and Dublin has seen their senior population grow by more than 70% between 1990-2000. As this segment of the population increases, so will their need for affordable housing. This site next to the new Dublin Senior Center, currently in development, would be the first dedicated affordable senior housing project in the City of Dublin. The units would all be available to very low- and extremely low-income seniors. This is important for the City. It is also important that any senior development be located close to amenities. This site is ideal, just a block away from a major market, and also less than a block from a Area Code (925) - City Manager 833-8650 - City Council 833-6650 · Personnel 833-6605 · Economic Development 833-6850 =inance 833-6640 · Public Works/Engineering 833-6630 o Parks & Community Services 833-6645 · Police 833-6670 Planning/Code Enforcement 833-6610 · Building Inspection 833-6620 · Fire Prevention Bureau 833z6606 Printed on Recycled Paper ATTACHMENT To: Jeanne Pet=son, Executive Director ~ California Tax Credit Allocation Committee SUBaECT: FINANCIAL COMMITMENT TO EDEN FOR DUBLIN SENIOR AFFORDABLE HOUSING July 15, 2003 Page 2 major shopping center, Dublin Place, at a bus stop for one of the major bus lines, as well as across the street from a local medical center. The City is very enthusiastic about this project and will provide a 99-year land lease for one dollar a year. At this time the City of Dublin has provided Eden Housing, Inc. with a Lease Option for the property as well as a predevelopment loan of $280,000 to work on this development. The City is also committing $2,248,24g as a residual receipts loan from the Affordable Housing In-Lieu Fee Funds toward this project. This is substantial from a small City with no Redevelopment Agency and limited avenues ~o receive affordable housing revenue. Because of these limited resources it is absolutely necessary m leverage our funds with mx credits. Once again, the City of Dublin offers full support of this development and full support of Eden Housing, Inc.'s application for tax credits from the California Tax Credit Allocation Committee. SiaeTerely, /I~net Lockhart kl~layor, City of Dublin