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Item 8.5 Dublin Sr Ranch Loans
File # CI'TY CLERK AGENDA STATEMENT CITY COUNCIL MEETING DATE: December 2, 2003 SUBJECT: Approval of Loans, Promissory Notes and Deed of Trust for Fairway Family Apartments and Dublin Ranch Senior Apartments and Authorization to Execute Documents Which Make the City's right to Payment from the Apartment Projects and its Regulatory Agreement Subordinate to Senior Lenders for the Projects Report Prepared By: Julia Abdala, Housing Specialist ATTACHMENTS: 1. Loan Agreements, promissory notes and deed of trust. 2. Resolution Approving Loans for Fairway Family Apartments and Dublin Ranch Senior Apartments 3. Budget Change Form 4. Collateral Property Map 5. July 1; 2003 Commitment Letters RECOMMENDATION: ~.,O 0~//Adopt Resolution (Attachment 2) approving two loan agreements (Attachment 1) in the amount of $2,250,000 each, to support construction of affordable housing in the Fairway Family Apartments and Dublin Ranch Senior Apartment_s developments, authorize the,15dl_ ayor, Mayor Pro Tem or City Manager'to sign the loan agreementg~in ~substantially the form attached, and authorizing the City Manager or designee to sign other documents pursuant to which the City's right to receive payment from project cash flow and the City's regulatory agreement (Affordable Housing Agreement) will be subordinate to senior lenders for the two projects. FINANCIAL STATEMENT: Two loans in the amount of $2,250,000 each will be made, one to Fairway Family Community, L.P., whose general partner is Charter Properties, and one to Dublin Ranch Senior Apartments, L.P., whose general partner is KL Acquisition Management, LLC, for the provision of low-, very low- and moderate-income units at the Fairway Family Apartments and Dublin Ranch Senior Apartments. The total $415 million will come from the Affordable Housing In- lieu Fee fund. A budget change (Attachment 3) will be needed, transferring a total of $4.5 million for 2003-2004 Fiscal Year. The loans will be paid back to the City in three equal installments, together with 3% simple interest on the 4th, 5th, and 6th anniversaries of the date the loan funds are disbursed. DESCRIPTION: F:~Documents from old computer,Agreements & StaffRpts\CC Staff Report Fairway Loan Approvals. Libby III.DOC i c>O~..~ ITEM NO. At the July 1, 2003 City Council meeting, the City Council conducted a public hearing for PA 03-010, Fairway Ranch Affordable Housing Community, approved the Site Development Review and Density ' Bonus, approved four Development Agreements for the various projects on the site and provided a loan commitment for two loans, each. loan not to exceed $2,250,000 to assist with the development of affordable housing in the family apartment project and in the senior apartment project. California Statewide Communities Development Authority (CSCDA) has received approval from the California Debt Limit Allocation Committee (CDLAC) to issue multifamily tax-exempt bonds to provide some of the financing for the family apartment project and the senior apartment project. Total development cost is anticipated to be approximately $60 million for the family project and $57 million for the senior project. It is anticipated that the bonds will be sold mid-December. The City loan documents will need to be executed by the bond closing date. These two projects are financed with the following structure: ConStruction financing monitored through Bank of America with (i) City of Dublin loans (ii) Tax Credit Equity, (iii) KSC Affordable Housing Investment Fund, LLC loans, (iv) taxable bonds, and (v)' tax-exempt bonds. Permanent Financing with (i) taxable bonds, (ii) tax-exempt bonds, (iii) KSC Affordable Housing Investment Funds, LLC, (iv) tax credit equity, and (v) GMAC financing (Fannie Mae) The documents that are involved for this financing structure follow: 1. City of Dublin Affordable Housing Agreements (Regulatory Agreements) for both projects. City of Dublin Covenants, Conditions and Restrictions (CC&R) for both projects (provides that obligation to provide affordable housing is binding on landowner and successors in interest for 55 years). · 3. City of Dublin Loan Agreements with Secured Promissory Notes for both projects and Deed of Trust on collateral property (known as Area H of Dublin Ranch; see Attachment 4). · City of Dublin Subordination Agreement for collateralproperty, with KSC Affordable Housing Investment Fund, LLC (will provide that the KSC lien on the collateral property is unconditionally subordinate to the City lien). City of Dublin Environmental Indemnity Agreements for the project properties and the collateral property (indemnify the City of Dublin in the event of a breach of environmental matters on the project properties and the collateral property). Assignments of Development Agreements and Acknowledgement of Covenants, Conditions and Restrictions for both projects (an agreement whereby the property owners (Chang Su-o-Lin and Hong Lien Lin) and newly created partnership entities' [Multifamily Project - Fairway Family Community, L.P and Senior Project - Dublin Ranch Senior Apartments, L.P.] agree that the conditions in the Development Agreements and CC&Rs are binding on the partnership entities created to construct the two projects). 7. Bank of America Reimbursement Agreements, between the Bank and the Borrowers for both projects (Bank of America will be the construction monitor and will be in charge of disbursing 2 City funds for hard costs and the KSC loan proceeds and authorizing the bond trustee to disburse the bond proceeds). KSC Subordination Agreements, for both projects (subordinates the City of Dublin's right to receive payment from the project's cash flow to KSC's right to 75% of cash flow remaining after payment of the senior loans). o Fannie Mae Subordinations, for both projects (subordinates the City of Dublin's regulatory agreement (Affordable Housing Agreements) to the rights of Fannie Mae, the permanent lender and provides that during any default under the Fannie Mae loan, the City of Dublin cannot collect fUnds from the Borrowers). 10. Fannie Mae Estoppel Certificates, for both projects (a Certification by the City of Dublin that as of the date of the certificate there has been no default under the development agreements for either project, and that all necessary approvals have been issued). 11. Bank of America Subordinations, for both projects (subordinates the City of Dublin's regulatory agreement (Affordable Housing Agreements) to the rights of Bank of America, the construction lender and provides that during any default under the Bank of America loan, the City of Dublin cannot collect funds from the Borrowers). 12. Bank of America Estoppel Certificates, for both projects (a certification by of the City of Dublin that as of the date of the certificate there has been no default under the development agreements for either project, and that all necessary approvals have been issued). 13. Borrowers Closing Certificates, for both projects (updates and reaffirms the partnership representations as of the loan disbursement date). 14. General Partner Closing Certificates, for both projects (updates and reaffirms the general parmer representations as of the loan disbursement date). As a condition to providing financing, the construction and permanent lenders for the projects will require the City of Dublin to execute subordination agreements pursuant to which (i) the City's right to receive payments from project cash flow on the two projects is subordinate to the rights of the senior lenders [see //8 above], and (ii) the City's Affordable Housing Regulatory Agreements are subordinate to the liens on the project property which secure repayment of the senior loans [see ## 9 and 11 above], However, the Declaration of Covenants, Conditions and Restrictions (CC&R), which imposes affordability restrictions, will remain in first position, so that in the event of foreclosure by a senior lender, the affordability requiremehts will remain effective [see #6 above]. In addition, the City's lien on the collateral property will be a first lien, providing the City with a source of security in the event the City loans are not repaid. The City loan agreements provide limitation on the degree to which any other lien may be placed on the collateral property. The City will require any other lender proposing to record a deed of trust on the collateral property to execute a subordination agreement pursuant to which that lender's rights are subordinate to the rights of the City with respect to the collateral property [see #4 above]. The attached resolution would authorize the City Manager or his designee to sign any such documents that are required as part of the bond closing as long as such documents are in a form acceptable to the City Manager and City Attorney. Sueh authority is customary in such transactions given the number of documents and revisiOns that often continue until the day before the bond closing. The date that construction will begin will depend on when the construction plans are completed and approved and permits issued; the developer estimates that this will be in April or May of 2004. The City loan funds will not be disbursed until all the conditions to disbursement of the bond proceeds have been satisfied [see #7 above]. These include the City requirements, which, are listed in the loan agreements, and the requirements of the construction lender (Bank of America), and include, among other conditions, the approval of final plans and specifications and the issuance of building permits. ANALYSIS The developers of Fairway Ranch have asked for, and the City of Dublin has agreed to provide funding to assist in the construction of 535 affordable units in the senior and family rental housing developments in Fairway Ranch. The City Council agreed on July 1, 2003 to provide up to $2,250,000 in the form of loans for the senior and family projects for a total of $4,500,000. (Attachment 5.) The City Attorney has prepared loan agreements for each project that now need to be executed. The loan documents include: (i) a loan agreement for each project, (ii) a promissory note for each project, and (iii) a deed of trust which will be recorded on collateral property located southwest of the project sites (Attachment 1). (See # 3 above.) The deed of trust will provide security for the repayment of the loans. The intent of utilizing separate collateral property is to provide greater assurance that the City loans are repaid irrespective of the cash flow of the two developments. Staff estimates that the value of the collateral property is well in excess of three times the amount of the City loans. The loan documents provide that the City of Dublin will receive payment on each of the loans in three equal installments, together with accrued interest, on the 4th, 5th, and 6th anniversaries of the date of disbursement of the loan funds. The full amount of the loan together with 3% simple interest will return to the City of Dublin by the 6th anniversary of the disbursement date. 1. 2. 3. 4. 5. 6. Both loans were crafted to provide some gap financing for Fairway Family Apartments and Dublin Ranch Senior Apartments, during the initial lease-up period. The terms of the loans include the following: The loan amounts ($2,250,000) The loan terms and repayment schedule (1/3 pay back in years 4, 5 and 6) The interest rate (3% simple interest) The purpose fOr which the loan proceeds may be used (construction costs only) Description of the collateral property that will secure the loans The documents that will be executed in connection with the loan agreements themselves are the Promissory Notes [executed by the partnerships that will develop the two projects] and the Deed of Trust for the collateral property [executed by the owners of the collateral property] 7. Description of the Declaration of Covenants, ConditiOns and Restrictions (CC&R) and the Regulatory Agreements (Affordable Housing Agreements) for the two projects which will require the very low-, low-, and moderate-income units remain affordable at their respective levels for 55 years 8. Additional items the developer is required to deliver to the City in connection with the loans ' (for example, proof of liability insurance on the collateral property) Collateral Property The City of Dublin will hold a first lien on a collateral property, referred to as Area H of Dublin Ranch, to serve as security for repayment of the loans. If, for some reason, the City of Dublin does not receive payment as promised in the Promissory Notes, the City has the option to foreclose on the collateral property. This property comprises 66.39 acres owned by Chang Su-O Lin, Hong Lien Lin and Hong Yao Lin. The parcel number is 985-0009-015, and the property is situated just south of Dublin Blvd across 4 from the new Dublin Ranch Villages (Attachment 4). It is currently a vacant parcel with general plan designations of general commercial and campus office use. Disbursement of City Loan Funds Bank of America is providing a letter of credit to both projects during the construction period, and will be monitoring the progress of construction and the use of bond proceeds and the City loan proceeds. The full $2,250,000 per loan will be disbursed to Bank of America when all conditions to disbursement of the bond proceeds have been satisfied. Bank of America will enter into an agreement for disbursement of the City loan funds, which will provide that the City funds may only be used for hard Construction costs [see #7 above]. The developer will be utilizing other sources of funds for soft costs such as permit fees and architectural design. The City loan funds will be disbursed in advance of disbursement of bond proceeds, but only at such time that all of the City's and the bank's conditions to disbursement have been satisfied. CONCLUSION The loan agreements, promissory notes and deed of trust for the Fairway Family Apartments and Dublin Ranch Senior Apartments are provided as attachments to this Staff report. It is necessary for the City Council to authorize execution of these documents so that the bond sale can close with financing as currently structured and the project can utilize the multifamily tax-eXempt bonds that were allocated for these two Fairway Ranch projects. The deed of trust and the Affordable Housing Agreement will be recorded together with the bond documents following the bond closing, anticipated to be mid-December. RECOMMENDATION: Staff recommends the Council adoiot a Resolution (Attachment 2) approving two loan agreements (Attachment 1) in the amount of $2,250,000 each, to support construction of affordable housing in the Fairway Family Apartments and Dublin Ranch Senior Apartments developments, authorizing and directing the Mayor, Mayor Pro Tem or City Manager to sign ~he loan agreements in substantially the form attached, and authorizing the City Manager or designee to sign other documents pursuant to which the City's right to receive payment from project cash flow and the City's regulatory agreement (Affordable Housing Agreement) will be subordinate to senior lenders for the two projects. LOAN AGREEMENT Senior Housing' Component This Loan Agreement (this "Agreement" or this "Loan Agreement") is entered into effective as of December 1,2003 ("Effective Date") by and among Dublin Ranch Senior Apartments, L.P., a California limited partnership ("Borrower"), the City of Dublin, a municipal corporation ("City"), and Chang Su-O-Lin (an individual also known as Jennifer Lin), Hong Lien Lin (an individual also known as Frederic Lin) and Hong Yao Lin (an individual also known as Kevin Lin). Chang Su-O-Lin, Hong Lien Lin and Hong Yao Lin are hereinafter collectively referred to as the "Collateral Property Owners." Borrower, City and the Collateral Property Owners are hereinafter collectively referred to as the "Parties." RECITALS A. Borrower has proposed to construct a senior multifamily housing development ("Project") on the property ("Property") described-in Exhibit A attached hereto pursuant to the terms of (i) that certain Master Development Agreement between the City of Dublin and the Lin Family for the Dublin Ranch Project (Areas A, B, C, D, E, F, G and H) dated as of May 18, 1999 and recorded on July 8, 1999 as document number 99251790 in the Official Records of Alameda County, which agreement was supplemented by document number 00335772 recorded on November 13, 2000 in the Official Records of Alameda County (as so supplemented, referred to hereinafter as the "Master Development Agreement"), (ii) that certain Development Agreement dated as of July 15, 2003 for Dublin Ranch Area B - Fairway Ranch ("Fairway Ranch Development Agreement") and (iii) that certain Development Agreement dated as of July 15, 2003, for the Property. The foregoing agreements are collectively hereinafter referred to as the "Development Agreements." B. Borrower has requested, and pursuant to a loan commitment dated as of July 1, 2003 ("Loan Commitment"), 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 housing units that will be developed as part of the Project. C. The City has determined that the 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-, Iow- and moderate-income senior households. The City has further determined that provision of the Loan by City to 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. D. Concurrently with the execution of this Agreement, Borrower and Chang Su-O-Lin and Hong Lien Lin (collectively "Landowners") shall execute and deliver to City a regulatory agreement ("Affordable Housing Regulatory Agreement") pursuant to which certain units in the Project shall be re.stricted for occupancy by very Iow-, Iow- and moderate-income senior households at affordable rents for not less than 55 years. A~'I'ACHMENT 1 E. Pursuant to this Loan Agreement, Borrower shall execute and Collateral Property Owners shall acknowledge, a promissory note payable to City which shall be secured by a deed of trust ("Deed of Trust") pursuant to which City shall receive a security interest in the real property (the "Collateral Property") owned by Collateral Property Owners, commonly known as Parcel 9 of Tract 7148, Dublin, California, and more particularly described in Exhibit B. 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 Fifty Thousand Dollars ($2,250,000) ("Principal") upon the terms and conditions and for the purposes set forth in this Agreement. The Loan shall be evidenced by a secured promissory note ("Note") which shall be dated as of the Effective Date and executed by Borrower and acknowledged by Collateral Property Owners. Provided that Borrower and Collateral Property Owners, as applicable, have each complied with all conditions precedent to disbursement of the Loan set forth in Section 2.3, the Loan proceeds shall be disbursed in accordance with Section 2.2 hereof. By their execution of this Agreement, Borrower and Collateral Property Owners each hereby approve the terms and conditions of the Note, which shall be executed subStantially in the form attached hereto as Exhibit D. City shall have the option to terminate this Agreement, and shall have no obligation to fund the Loan if: (a) tax-exempt bonds for the Project (the "Bonds") are not issued prior to December 31,2003, or (b) the proceeds of the Bonds are not available for disbursement for Project construction prior to June 30, 2004, unless such disbursement date is extended by written agreement of Borrower and City. 1.2 INTEREST RATE; PAYMENT DATES; MATURITY DATE. Interest shall accrue on the outstanding principal balance of the Loan at the rate of three pement (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"). No payments shall be due on the Loan during the first three years following the Initial Disbursement Date. The Loan (or so much of it as has been disbursed) shall be payable in three equal installments of principal, together with interest accrued thereon, which installments shall be due on the 4th, 5th, and 6th anniversaries of the Initial Disbursement Date (i.e. the anniversaries of the Initial Disbursement Date occurring in the 48th month, the 60th month and the 72nd month following the Initial Disbursement Date). The entire outstanding principal balance of the Loan, together with interest accrued thereon shall be payable in full on the sixth anniversary of the Initial Disbursement Date (the "Maturity Date"). Any installment of 628528-13 2 principal or interest not paid when due shall bear~nterest at a rate equal to ten percent (10%) per annum from the due date for such installment until the date such installment is paid in full. 1.3 SECURITY. As security for repayment of the Note, Collateral Property Owners shall execute a deed of trust ("Deed of Trust") in favor of City as beneficiary pursuant to which City shall be provided a first lien against the Collateral Property. The Deed of Trust shall be dated as of the Effective Date and shall be recorded in the official records of Alameda County. The Collateral Property shall be subject to no mortgage, lien or claim other than liens for which the City has provided written consent and which: (a) are subordinate to the Deed of Trust, (b) secure repayment of obligations incurred solely in connection with the financing of the Project or the multifamily housing project proposed to be developed adjacent to the Property as described in the Fairway Ranch Development Agreement, or other purposes approved by City, (c) require notice to the City in the event of default, and (d) do not in the aggregate together with all other outstanding liens result in encumbrance of the Collateral Property in excess of 60% of its fair market value as reasonably determined by City. Collateral Property Owners may request a substitution o.f other real property located within the City of Dublin for the Collateral Property, provided that: (i) in City's reasonable determination, the fair market value of such substitute collateral is at least three times the value of the outstanding balance of all obligations payable to City to be secured thereby; (ii) Collateral Property Owners pay all reasonable expenses City incurs in connection with City's review and investigation of the condition and value of such property, including without limitation the cost of environmental assessment, title investigation, and appraisal expenses; (iii) the lien securing the obligations payable to City will be a first lien on such property; (iv) any subordinate liens on such property meet the requirements of clauses (b) and (c) of the first paragraph of this Section 1.3 and will not in the aggregate together with all other outstanding liens result in encumbrance of such collateral in excess of 60% of its fair market value as reasonably determined by City; (v) the proposed substitute collateral is otherwise in all respects acceptable to City in the exercise of City's reasonable discretion; and (vi) City provides written consent to such substitution. If Collateral Property Owners seek to subdivide the Collateral Property,. they may request a partial reconveyance of the Deed of Trust, which City may grant in the exercise of City's reasonable discretion, provided that the remaining collateral is of sufficient value in City's reasonable judgment, to meet the requirement set forth in Section 3.2(g) and is otherwise in all respects acceptable to City in the exercise of City's reasonable discretion. 1.4 PREPAYMENT; ACCELERATION. (a) 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. 628528-13 3 Any p~repayment 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 effect upon the term of the Affordable Housing Regulatory Agreement or the effectiveness of the Environmental Indemnity Agreement or the Collateral Property Environmental Indemnity Agreement (each as defined below) all of which shall survive any such prepayment. (b) Notwithstanding any contrary provision contained in this Agreement, and regardless of whether or not a default has occurred hereunder or under the Note, if an Event of Default has occurred under the Family Housing Note or the Family Housing Loan Agreement (each as defined in the Deed of Trust) and if in connection with such Event of Default, City exercises its right to foreclose on the Collateral Property pursuant to the Deed of Trust, then: (i) City shall be entitled to declare all amounts due under the Note immediately due and payable, and (ii) the proceeds of any sale of the Collateral Property in connection with such foreclosure shall be used to pay all Secured Obligations (as defined in the Deed of Trust), including without limitation, the outstanding principal balance and all other amounts due under the Note. 1.5 NONRECOURSE. Except as provided in this SectiOn, neither Borrower, Borrower's constituent partners, nor Collateral Property Owners shall have direct or indirect personal liability for payment of the principal of, or interest on, the Loan, and the sole recourse of the City with respect to the payment of principal of and interest on the Loan shall be to the Collateral Property and any other collateral held by City as security for this Note; provided, however, that nothing contained in the foregoing limitation of liability shall: (A).constitute a waiver, release or impairment of any obligation evidenced or secured by the Note, this Loan Agreement or the Deed of Trust or otherwise limit or impair the enforcement against all such security for the Loan of all the rights and remedies of the City under the Loan Commitment, this Agreement, the Affordable Housing Regulatory Agreement, the Deed of Trust, and the Note, as each may be amended, modified, or restated from time to time (collectively the "Loan Documents"); (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 Collateral Property created thereby and any other collateral given to City in connection with the Loan hereby and to name the Collateral Property Owners as party defendants 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; 628528-13 4 (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 Collateral Property shall continue to secure all of the indebtedness owed to City hereunder in accordance with this Note and the Deed of Trust; (E) limit or restrict the ability of the City to seek or obtain a judgment against Borrower to enforce against Borrower and its general partners to: (a) recover under Sections 4.8.1,4.13.3, or 4.16 hereof, (b) recover under the Environmental Indemnity Agreement (described in Section 4.13.3.) executed in connection herewith, (c) Reserved. (d) 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 Borrower, any general partner of Borrower, or any officer, director, member, employee or agent of Borrower or of any general partner of Borrower in connection with the request for or creation of the Loan, or in any Loan Document, or in connection with any request for disbursement of the Loan proceeds, (ii) any failure to maintain insurance on the Property as required pursuant to the Loan Documents, (iii) failure to pay taxes or assessments due on the Property or the Project, or (iv) the presence of hazardous or toxic material or waste on the Property or other violation of Borrower's obligations under Section 4.13.2 hereof; or (F) limit or restrict the ability of City to seek or obtain a judgment against Collateral Property Owners to: (a) recover under the Collateral Property Environmental Indemnity Agreement (described in Section 4.13.4) executed in cOnnection herewith, 625528-13 5 (b) Reserved. (c) recover from Collateral Property Owners compensatory damages as well as other costs and expenses incurred by City (including without limitation attorneys' 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 any Collateral Property Owner or on the part of any authorized employee or agent of any Collateral Property Owner 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 relation to the Deed of Trust or the Collateral Property, (ii) any matters for which any Collateral Property Owner has agreed to provide indemnification under Section 4.8.2 or 4.13.4 hereof and the documents referenced therein, (iii) failure to maintain insurance on the Collateral Property as required pursuant to the Loan Documents, (iv) failUre to pay taxes or assessments due on the Collateral Property, (v) breach of the restrictions against conveyance or further encumbrance of the Collateral Property, (vi) the occurrence of any act or omission of Collateral Property Owners that results in waste to or of the Collateral Property and which has a material adverse effect on the value of the Collateral Property or the security for the Loan, or (vii) the presence of hazardous or toxic material or waste on the Collateral Property or other violation of Collateral Property Owners' obligations under Section 4.13.2 hereof or Section 7.11 of the Deed of Trust (pertaining to environmental matters). Provided that all requirements of Section 1.3 have been satisfied and a subordination agreement in form satisfactory to City has been recorded, the recordation of the following deeds of trust against the Collateral Property shall not be considered a breach under Section 1.5(F)(c)(v): (a) deed of trust for the benefit of KSC Affordable Housing Investment Fund, LLC, a California limited liability company CKSC") to secure repayment of a note in the maximum principal amount of $6,500,000 payable by Borrower to KSC, and (b) deed of trust for the benefit of KSC to secure repayment of a 628528-13 6 note in the maximum principal amount of $4,500,000 payable to KSC by Fairway Family Community, L.P., a California limited partnership. Upon the occurrence of any of the events described in Section (h) of Article V, or if any Collateral Property OWner or any duly authorized person acting on behalf of any Collateral Property Owner (i) attempts to prevent or delay the foreclosure of the Deed of Trust following a default resulting from the failure to make any payment due to Holder on any obligation secured by the Collateral Property, or (ii) claims that any Loan Document is invalid or unenforceable and such claim will have the'effect of preventing or delaying such foreclosure, then, notwithstanding the limitation of liability in this Section, the Partnership, its general partners, and the Collateral Property Owners shall be fully personally liable for payment of all sums due hereunder, and Holder's recourse to the personal assets of Obligor, its general partners, and the Collateral Property Owners shall not be limited in any way by the provisions of this Section 1.5. ARTICLE II USE AND DISBURSEMENT OF PROCEEDS 2.1 USE OF PROCEEDS. The proceeds of the loan ("Loan Proceeds") shall be used solely and exclusively to pay for hard construction costs billed to Borrower by third-parties in connection with the construction of the Project. 2.2 DISBURSEMENT OF PROCEEDS. Upon satisfaction of the conditions set forth in Sections 1.1 and 2.3, the City shall disburse the Loan Proceeds to Bank of America, N.A., a national banking association ("Construction Lender") for disbursement for Project construction costs in accordance with an intercreditor agreement to be executed by and between City and Construction Lender. 2.3 CONDITIONS PRECEDENT TO DISBURSEMENT OF PROCEEDS. The Parties acknowledge and agree that notwithstanding anything to the contrary contained herein or in the Loan Documents, City shall have no obligation to disburse the proceeds of the Loan prior to the time that the proceeds of the Bonds are available to be disbursed for Project construction in accordance with the Construction Lender's requirements; provided however, if (a) all conditions set forth in this Section 2.3 have either been satisfied or waived in writing by City, and (b) all of the Construction Lender's preconditions to disbursement of the proceeds of the Bonds have been satisfied, City shall authorize disbursement of the Loan proceeds prior to disbursement of the Bond proceeds in accordance with Sections 2.1 and 2.2. City's obligation to fund the Loan and disburse the proceeds thereof is conditioned upon: (a) Borrower's receipt of final commitments for all financing necessary for the Project (including without limitation, credit enhancements to be provided during and after construction of the Project), (b) compliance with all 628528-13 7 requirements bf the Loan Commitment (except those that have been waived in writing by City), and (c) the satisfaction of all of the following conditions: (i) Borrower's delivery to City of the fully-executed CC&Rs (as defined in the Loan Commitment) and the recordation of the CC&Rs against the Property in the Official Records of Alameda County, subordinate to no liens, interests, leases or encumbrances; (ii) Borrower's delivery to City and the recordation in the Official Records of Alameda County, of a fully-executed instrument in for~ acceptable to City pursuant to which Borrower acknowledges the CC&Rs, agrees to be bound thereby, and Borrower and Landowners agree to subordinate the ground lease executed by and among Landowners and BorrOwer for the Property to the CC&Rs; (iii) Borrower's execution and delivery to the City of this Agreement, the Note, and the Affordable Housing Regulatory Agreement and recordation of the Affordable Housing Regulatory Agreement against the Property, sUbordinate to no liens, interests, leases or encumbrances other than as expressly permitted pursuant to the terms thereof or pursuant to any subordination agreement executed by City; (iv) Collateral Property Owners' delivery to the City of the fully-executed Deed of Trust, recordation of the Deed of Trust as a first lien against the Collateral Property, and Collateral Prbperty Owners' delivery to the City of a fully-executed subordination agreement pursuant to which the KSC deed of trust to be recorded against the Collateral Property is subordinated to the Deed of Trust; (v) Delivery to the City of fully-executed originals of each of the following: (a) the Environmental Indemnity Agreement, and (b) the Collateral Property Environmental Indemnity Agreement; (vi) Borrower's delivery to City of evidence reasonably satisfactory to City that Borrower has obtained all necessary permits (including without limitation, building permits), licenses, approvals and financing required to develop the Project; (vii) Borrower's submission to City and City's approval of the final plans and specifications for the Project; (viii) 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, (b) the proceeds of the Bonds are available to be disbursed for Project construction, and (c) the closing and funding of construction financing for the Project has occurred; (ix) The issuance by an insurer satisfactory to City of a CLTA lender's title policy ("Title Policy") for the benefit of City in the amount of all obligations payable to 628528-13 8 City to be secured by the Collateral Property, insuring that the'lien bf 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 require; (x) Borrower's payment of all expenses incurred by City in connection with the Loan, including without limitation, reasonable fees of City's legal counsel and financial adviSor, all Closing and escrow costs incurred in connection with the Loan, the cost of the Title Policy and any survey City is required to obtain in connection therewith, and escrow and recording fees related to the transaction contemplated hereby;- (xi) Borrower's delivery to the City of evidence of insurance coverage in the form and in such amounts as may be reasonably required by City as, and to the extent set forth in the Affordable Housing Regulatory Agreement; (xii) Collateral Property Owners' delivery to the City of evidence of insurance coverage in the form and in such amounts as may be reasonably required by City as, and to the extent set forth herein or in the Deed of Trust; (xiii) Borrower's compliance with all provisions of the Affordable Housing Regulatory Agreement, including without limitation, submission to City of a marketing and management plan and a management contract, and City's approval thereof as and to the extent set forth in the Affordable Housing Regulatory Agreement; (xiv) Borrower's delivery to City of each of the following: (A) for Borrower (i) a certified copy of Borrower's partnership agreement together with a Certificate of Good Standing and LP-1 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 Organization, certified by the Secretary of State; (b) operating agreement certified by the Manager/Managing Member of the company; (c) Certificate of Good Standing issued by the Secreta ,ry of State; and (d) certified resolution indicating that Borrower's general partner has authorized this transaction and that the persons executing Loan Documents and Additional Documents on behalf of Borrower's general partner have been duly authorized to do so; (xv) Borrower's delivery to City of an opinion of counsel in form and substance satisfactory to City which shall provide that Borrower and Borrower's general partner are duly organized, validly existing and authorized to do business in the State of California, and that the CC&Rs, the Environmental Indemnity Agreement, and the Collateral Property Environmental Indemnity Agreement (collectively the "Additional Documents") and each of the Loan Documents has been duly authorized and 628528-13 9 executed and-when delivered shall be the binding obligations of the signatories to such documents, enforceable in accordance with their respective terms; (xvi) Borrower's delivery to City of all of the following: (a) a Project budget and operating pro forma (as described in Paragraphs 11 (b) and 1 l(e) of the Loan Commitment; (b) environmental reports for the Property and the Collateral Property (as described in Paragraph 1 l(d) of the Loan Commitment; (c) construction contract and payment and performance bonds (as described in Paragraph 11 (i) of the Loan Commitment; and (d) a copy of the fully-executed ground lease for the Property; (xvii) The representations and warranties made by Borrower, Borrower's general partner, and Collateral Property Owners in this Agreement, in the Loan Documents and in the Additional Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of disbursement of the Loan proceeds, and the delivery by Borrower, Borrower's general partner, and Collateral Property Owners of certificates reaffirming such representations and warranties; and (xviii) No material adverse change as determined by City in its reasonable judgment shall have occurred in the financial or other condition of Borrower, the Property, or the Collateral Property since the date of this Agreement. 2.4 NO OBLIGATION TO DISBU'RSE 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 or Collateral Property Owners' 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 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 to which Borrower is a party. (b) NO VIOLATION. The execution of the Loan Documents and Additional Documents to which Borrower is a party 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 to which Borrower is a party 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) NO SUBORDINATION. Unless otherwise acknowledged or agreed to by City in writing, the CC&Rs are not subordinate to any lien, lease or other interest in the Property and the obligations of Borrower under the Affordable Housing Regulatory Agreement are not subordinated to any other obligations of Borrower or any other obligor. (f) ACCURACY OF FINANCIAL STATEMENTS; NO ADVERSE CHANGE. The financial statements heretofore delivered to City present fairly and accurately the financial condition of Borrower, and have been prepared in accordance with standard accounting practices, consistently applied. Borrower certifies that there has been no adverse change since the date of the most recent financial statements Borrower has provided to City in Borrower's financial condition, organization, operation, business prospects, fixed properties, or personnel. (g) 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 or to Borrower in relation thereto, including without limitation, all environmental, health and safety and employment laws. (h) DISCLOSURE. No representation or warranty made by Borrower in this Agreement or in the Loan Documents or Additional Documents to which Borrower is a party 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 wdting. 628528-13 11 3.2 .Collateral Propbrty Owners make the following representations, warranties and covenants: (a) NO VIOLATION. The execution of the Loan Documents and Additional Documents to which Collateral Property Owners are a party and Collateral Property Owners' 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 Collateral Property Owners are a party or by which Collateral Property Owners may be bound. (b) AUTHORIZATION. The Loan Documents and the Additional Documents to which Collateral Property Owners are a party, when executed and delivered, will each constitute a valid and binding obligation of Collateral Property Owners, enforceable in accordance with the respective terms thereof. (c) LITIGATION. There are no pending, or to Collateral Property Owners' knowledge, threatened actions or proceedings before any court or administrative agency which may adversely affect any Collateral Property Owner's ownership of the Collateral Property other than those heretofore disclosed to City in writing. (d) NO SUBORDINATION. Upon its recordation, the Deed of Trust will constitute a first lien on the Collateral Property, subject only to Permitted Exceptions or liens approved by City pursuant to Section 1.3. (e) COMPLIANCE WITH LAWS. Collateral Property Owners are in compliance in all material respects with all laws, rules, regulations, orders and decrees which are applicable to the Collateral Property, including without limitation, all environmental, health and safety and employment laws. (f). DISCLOSURE. No representation or warranty made by Collateral Property Owners in this Agreement or in the Loan Documents or Additional Documents to which Collateral Property Owners are a party contains any untrue statement of a material fact or omits to state any matedal fact necessary to make the statements therein not misleading. There is no fact known to any Collateral Property Owner which has or might reasonably be anticipated to have a material adverse effect on the value of the Collateral Property which has not been disclosed to City in writing. (g) COLLATERAL PROPERTY. Collateral Property Owners are the owners in fee simple of the Collateral Property, and the fair 'market value of the Collateral Property as of the date hereof is no less than $13.5 million. 628528-13 12 ARTICLE IV AFFIRMATIVE COVENANTS 4.1 PUNCTUAL PAYMENT. Borrower covenants to punctually pay the interest 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 the principal and interest due on any other indebtedness related to the Project or the Property now or hereafter at any time awed by the Borrower to the City or any other lender. Until the Loan is repaid in full and all indebtedness secured by the Deed of Trust is discharged, Collateral Property Owners covenant to punctually pay all charges, assessments, taxes and fees related to the Collateral Property. 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 and the Loan, and to inspect the Property during normal business hours upon reasonable notice. Collateral Property Owners cOvenant to allow the City to inspect the Collateral 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, including without limitation the California Building Standards Code (California Code of Regulations, Title 24), and all requirements applicable to compliance with the Americans with Disabilities Act ("ADA") or similar statutes and regulations relating to accessibility. Collateral Property Owners covenant to comply with all federal, state and local laws, regulations, ordinances and rules applicable to the Collateral Property. 4.5 INSURANCE. Borrower shall maintain and keep in force at Borrower's expense, with respect to the Project and the Property, insurance of the types and in amounts customarily carried by property owners similar to Borrower as and to the extent required pursuant to the Affordable Housing Regulatory Agreement. Collateral Property Owners shall maintain and keep in force at their expense, with respect.to the Collateral Property, insurance of the types and in amounts customarily carried by similar property owners for similar property, including but not limited to fire, liability, property damage, and worker's compensation, provided by companies in form and in amounts satisfactory to City with the City named as "Loss Payee" and "Additional Insured." Without limiting the generality of the foregoing, Collateral Property Owners shall at all times maintain the following policies of insurance: 628528-13 13 (a) property "all'risk" insurance -covering the full replacement value of the improvements located on the Collateral Property, containing a ffull replacement cost" endorsement, and naming the City as "loss payee"; (b) commercial general liability insurance in favor of Collateral Property Owner (and naming the City as an additional insured) in an aggregate amount not less than $5,000,000, combined single limit (or such greater amount as may be specified by the City from time to time); (c) Comprehensive Automobile Liability insurance with limits not less than $1,000,000 each occurrence (and naming the City as additional insured); and (d) such other insurance as may be required by applicable laws (including worker's compensation and employer's liability insurance) or as the. City may reasonably require from time to time. All insurance policies shall be in form and substance and issued by insurers reasonably satisfactory to the City, and shall .contain such deductibles and such indorsement as the City may reasonably require. Upon request by the City from time to time, Collateral Property Owners shall deliver to the City originals or copies of all such insurance policies and certificates evidencing such policies. 4.6 CERTIFICATES OF INSURANCE. For each of Collateral Property Owners' insurance policies, Collateral Property Owners shall provide to City within ten (10) days following execution of this Agreement, but in no event later than the initial disbursement of Loan Proceeds, a certificate of insurance and an endorsement which provides that no cancellation, major change in coverage or expiration will be effective during the term of this Agreement without 30 days written notice to the City prior to'the effective date of such cancellation, change in coverage or expiration. 4.7 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 tax credit investors. Collateral Prope.rty Owners shall keep the Collateral Property and the improvements located thereon, in good repair and condition, and from time to time make necessary repairs, renewals and replacements thereto so that the Collateral Property shall be preserved and maintained. 4.8 INDEMNIFICATION. 4.8.1 Borrower. 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 Inderffnite~s"), 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 representation by Borrower 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 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, (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, the Project, the Loan, the Loan Documents, the Additional Documents, 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 solely caused by such !ndemnitee'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. 4.8.2 Collateral Property Owners. Collateral Property Owners shall indemnify, defend (with counsel reasonably acceptable to City), and hold harmless the Indemnitees from and against, and shall payon demand, any and all Liabilities arising directly or indirectly in any manner in connection with or as a result of (a) any breach of Collateral Property Owners' covenants under any of the Loan Documents or Additional Documents, (b) any representation by Collateral Property Owners 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 Collateral Property, whether caused by the negligence or any other act or omission of Collateral Property Owners 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 Collateral Property, or any Loan Document or Additional Document relating to the Collateral Property or any transaction contemplated thereby, or any failure of Collateral Property Owners to comply with all applicable state, federal and local laws and 628528-13 15 regulations applicable to t~e Cbllateral Property, provided that no Indemnitee shall be entitled to indemnification under this Section for matters solely caused by Such Indemnitee's gross negligence or willful misconduct. The obligations of Collateral Property Owners 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 obligations of Collateral Property Owners 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 any Event of Default hereunder of which Borrower acquires knowle~lge; (2) any change in name, identity, legal structure, business location, or address of Borrower; or (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 Twenty Five Thousand Dollars ($25,000). Borrower shall ensure that City shall receive timely notice of, and shall have a right to cure, any Borrower 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 after any of the following shall occur, Collateral Property Owners shall provide written notice thereof to City: (1) the occurrence of any Event of Default hereunder of which any Collateral Property Owner acquires knowledge; (2) any change in name, identity, legal structure, business location, or address of Collateral Property Owners;or (3) any uninsured or partially uninsured Ioss affecting the Collateral Property through fire, theft, liability, or property damage in excess of an aggregate of Twenty Five Thousand Dollars ($25,000). Collateral Property Owners shall ensure that City shall receive timely notice of, and shall have a right to cure, any Collateral Property Owner default under any other financing document or other lien affecting the Collateral Property and that provisions mandating such notice and allowing such right to cure shall be included in all such documents. 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, 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. Collateral Property Owners 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 Collateral Property Owners in relation to the Collateral Property, except those that Collateral Property Owners may in good faith contest or as to which a bona fide dispute may arise, provided provision is make to the 628528-13 16 satisfaction of City for eventual payment thereof in the event that it is found tha-t'the~ same is an obligatiOn of Collateral Property Owners. 4.11 LITIGATION. Borrower shall provide wdtten notice to City within three business days after Borrower acquires knowledge of any litigation pending or threatened against Borrower involving a claim exceeding Twenty Five Thousand Dollars ($25,000). Collateral Property Owners shall provide written notice to City within three business days after Collateral Property Owners acquire knowledge of any litigation pending or threatened against any Collateral Property Owner involving a claim ' exceeding Twenty Five Thousand Dollars ($25,000). 4.12 EXPENSES OF COLLECTION OR ENFORCEMENT. (a) 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, correction, or waiver of the default, and such amounts shall be a part of the indebtedness secured by the Deed of Trust. (b) If at any time Collateral Property Owners default under any provision of the Loan Documents or Additional Documents, Collateral Property Owners 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, correction, or waiver 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 Representations and Warranties. (a) Borrower hereby represents and warrants that except as disclosed in writing to City, as of the Effective Date to the best knowledge of Borrower (which for this purpose is defined to be the best knowledge of Borrower's general partner and the principal(s) thereof): (i) the Property is free and has always been free of Hazardous Materials (as defined in Exhibit C) and is not and has never been in violation of any Environmental Law (as defined in Exhibit C); (ii) there are no buried or partially buded storage tanks located on the Property; (iii) no notice, warning, notice of violation, administrative complaint, judicial complaint, or other formal or informal notice has been issued alleging that conditions on the Property are or have ever been in violation of any Environmental Law or that the Property is subject to investigation or inquiry regarding Hazardous Materials thereon or the potential violation of any Environmental Law; (iv) there is no monitoring program required by the Environmental Protection Agency or any other governmental agency concerning the Property; (v) no toxic or hazardous chemicals, waste, or substances of any kind have ever been spilled, disposed of, or stored on, under or at the Property; whether by accident, burying, drainage, or storage in containers, tanks, holding areas, or any other means; (vi) the Property has never been used as a dump or landfill; (vii) Borrower has disclosed to City all information, records, and studies in possession of Borrower or reasonably available to Borrower relating to the Property concerning Hazardous Materials; (viii) no notice from anY governmental authority has been issued regarding any threatened or pending zoning, building, fire, or health code violation or violation of other governmental regulations concerning the Property that has not been corrected, and no condition on the Property violates any health, safety, fire, environmental, sewage, building, or other federal, state or local law, ordinance or regulation; (ix) no contracts, licenses, leases or commitments regarding the maintenance or use of the Property or allowing any third party rights to use the Property are in force; (x) there are no threatened or pending actions, suits, or administrative proceedings against or affecting the Property or any portion thereof or the interest of Borrower in the Property; (xi) there are no threatened or pending condemnation, eminent domain, or similar proceedings affecting the Property or any portion thereof; (xii) no insurer has issued a notice of defects of the Property which have not been corrected; (xiii) there are no natural or artificial conditions upon the'Property or any part thereof that could result in a material and adverse change in the condition of the Property; (xiv) all information that Borrower has delivered to City either directly or through Borrower's agents, is accurate and complete; and (xv) Borrower or Borrower's agents have disclosed to City all material facts concerning the Property. (b) Collateral Property Owners hereby represent and warrant that except as disclosed in writing to City, as of the Effective Date to the best knowledge of Collateral Property Owners: (i) the Collateral Property is free and has always been free of Hazardous Materials and is not and has never been in violation of any Environmental Law; (ii) there are no buried or partially buried storage tanks located on the Collateral Property; (iii) no Collateral Property Owner has received a notice, warning, notice of violation, administrative complaint, judicial complaint, or other formal or informal notice alleging that conditions on the Collateral Property are or have ever been in violation of any Environmental Law or informing any Collateral Property Owner that the Collateral Property is subject to investigation or inquiry regarding Hazardous Materials thereon or the potential violation of any Environmental Law; (iv) there is no monitoring program required by the Environmental Protection Agency or any other governmental agency concerning the Collateral Property; (v) no toxic or hazardous chemicals, waste, or substances of any kind have ever been spilled, disposed of, or stored on, under or at the Collateral Property, whether by accident, burying, drainage, or storage in containers, tanks, holding areas, or any other means; (vi) the Collateral Property has never been used as a dump or landfill; (vii) Collateral Rroperty Owners have disclosed to City all information, records, and studies in possession of any Collateral Property Owner or reasonably available to any COllateral Property Owner relating to the Collateral Property concerning Hazardous Materials; (viii) no Collateral Property Owner has received a notice from any governmental authority of any threatened or pending zoning, building, fire, or health code violation or violation of other governmental regulations concerning the Collateral Property that has not previously been corrected, and no condition on the Collateral Property violates any health, safety, fire, environmental, sewage, building'; other federal, state or local law, ordinance or regulation; (ix) no contracts, licenses, leases or commitments regarding the maintenance or use of the Collateral Property or allowing any third party rights to use the Collateral Property are in force; (x) there are no threatened or pending actions, suits, or administrative proceedings against or affecting the Collateral Property or any portion thereof or the interest of any Collateral Property Owner in the Collateral Property; (xi) there are no threatened or pending condemnation, eminent domain, or similar proceedings affecting the Collateral Property or any portion thereof; (xii) no Collateral Property Owner has received a notice from any insurer of defects of the Collateral Property which have not been corrected; (xiii) there are no natural or artificial conditions upon the Collateral Property or any Part thereof that could result in a material and adverse change in the condition, of the Collateral Property; (xiv) all information that any Collateral Property Owner has delivered to City either directly or through an agent, is accurate and complete; and (xv) Collateral Property Owners or Collateral Property Owners' agents have disclosed to City all material facts concerning the Collateral Property. 4.13.2 Covenants. Borrower shall not cause or permit any Hazardous Materials 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 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. Collateral Property Owners shall not cause or permit any Hazardous Materials to be brought upon, kept, stored or used in, on, or about the Collateral Property by Collateral Property Owners, or the agents, employees, contractors or invitees of Collateral Property Owners except for incidental supplies ordinarily used in the course and scope of lndemnitors' operations on the Collateral Property in compliance with all applicable laws, and shall not cause any release of Hazardous Materials into, onto, under or through the Collateral Property. If any Hazardous Material is discharged, released, dumped, or spilled in, on, under, or about the Collateral Property and results in any contamination of the Collateral Property or adjacent property, or otherwise results in the release or discharge of Hazardous Materials in, on, under or from the Collateral Property, Collateral Property Owners shall promptly take all actions at Collateral Property Owners' sole expense as are necessary to comply with all Environmental Laws. 4.13.3 Borrower's 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 4.13.2, 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, shall be secured by the Deed of Trust, and shall be set forth in a separate unsecured agreement ("Environmental Indemnity Agreement") executed by Borrower for the benefit of City. 4.13.4 Collateral Property Owners' Indemnification. Collateral Property Owners shall indemnify, defend (with counsel reasonably acceptable to City) and hold the Indemnitees harmless from and against any and all loss, claim, liability, demand, judgment, order, penalty, fine, damage, 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 Collateral Property Owners' covenants set forth in Section 4.13.2, or otherwise arising in connection with the actual or alleged release or presence of any Hazardous Materials on, under, in or about the Collateral 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 Collateral Property is in compliance with Envi~-onmental Laws, all costs associated with bdnging the Collateral 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, shall be secured by the Deed of Trust, and shall be set forth in a separate unsecured agreement ("Collateral Property Environmental Indemnity Agreement")executed by Collateral Property Owners for the benefit of City. 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, 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 628525~13 20 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 Eligible Senior Households as defined in the Affordable Housing RegUlatory Agreement. 4.15 MANDATORY LANGUAGE IN ALL SUBSEQUENT DEEDS, LEASES AND CONTRACTS. All deeds, leases or contracts made or entered into by Borrower, its successors or assigns, as to any portion of the Project shall contain therein the following language: (a) In Deeds: "Grantee herein covenants by and for itself, 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, creed, religion, sex, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property herein conveyed nor shall the grantee or any person claiming under or through the grantee 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 property herein conveyed. The foregoing covenant shall run with the land." (b) In Leases: "The lessee herein covenants by and for the lessee and lessee's heirs, personal representatives and assigns and all persons claiming under the lessee or through the lessee that this-lease is made subject to the condition that there shall be no discrimination against or segregation'of any person or of a group .of persons on account of race, color, creed, religion, sex, marital status, national origin or ancestry in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the land herein leased nor shall the lessee or any person claiming under or through the lessee establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, sublessees, subtenants, or vendees in the land herein leased." (c) In Contracts: "There shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, madtal status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property nor shall the transferee or any person claiming under or through the transferee establish or permit any such practice or practices of discrimination or segregation~witWreference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the land." 4.16 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, and their respective successors and assigns, from and against any and all claims, demands, suits and actions at law or in equity, and losses, 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. ARTICLE V EVENTS OF DEFAULT An Event of Default shall occur hereunder if any of the following shall occur: 628528-13 22 (a) MISUSE OF FUNDS. The use of any of the Loan Proceeds other than for the purposes authorized pursuant to Section 2.1 of this Agreement. (b) ENCUMBRANCE, SALE, OR LEASE OF THE PROPERTY OR COLLATERAL PROPERTY. The voluntary or involuntary sale, assignment, conveyance, transfer, hypothecation, lease, license or encumbrance of (i) the Property in violation of the Affordable Housing Regulatory Agreement, or (ii) the Collateral Property (or any part thereof or interest therein) without the prior written consent of City or otherwise in violation of Section 1.3 hereof. (c) NON-PAYMENT OF LOAN. Any payment due under the Note is unpaid when due, and such default remains uncured for thirty (30) days. (d) INCORRECT REPRESENTATION OR WARRANTY. Any representation or warranty contained in, or made in connection with the execution and delivery of this Agreement, or in any certificate or statement furnished pursuant hereto, shall prove to have been incorrect when made in any material respect. (e) DEFAULT IN COVENANTS. Borrower defaults in the performance of any term, provision, covenant or agreement (other than an obligation enumerated in this Article V) contained in this Loan Agreement or in any other Loan Document or Additional Document to which Borrower is a party, and unless such document specifies a shorter cure period for such default, the default continues for thirty (30) days after the earlier of the date upon which (1) such default becomes known to Borrower's general partner or principal thereof, or (2) City shall have given written notice of the default to the defaulting party. Any Collateral Property Owner defaults in the performance of term, provision, covenant or agreement (other than an obligation enumerated in this Article V) contained in this Loan Agreement or in any other Loan Document or Additional Document to which Collateral Property Owners are a party, and unless such document specifies a shorter cure period for such default, the default continues for thirty (30) days after the earlier of the date upon which (1) such default becomes known to any Collateral Property Owner, or (2) City shall have given written notice of the default to the defaulting party. (f) Reserved. (g) INSURANCE; TAXES. Borrower or Collateral Property Owners fail to maintain insurance as required by the Loan Documents or fail to pay taxes and assessments when due on their respective property. (h) INSOLVENCY. 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 (a "Bankruptcy Law"): (A) Borrower, any general partner of Borrower, or any Collateral Property Owner: (i) commences a voluntary case or proceeding, (ii) consents to the entry of an order for relief against Borrower, any general partner of Borrower, or 628528-13 23 any Collateral Property Owner in an involu~tarYcase, (iii) applies for or consents to the appointment of a trustee, receiver, assignee, liquidator or similar official, (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; or (B) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (a) is for relief against Borrower, any general partner of Borrower, or any Collateral Property Owner in an involuntary case, (b) appoints a trustee, receiver, assignee, liquidator or similar official for Borrower, any general partner of Borrower, or any Collateral Property Owner or substantially all of Borrower's, any general partner of Borrower's, or any Collateral Property Owner's assets, (c) orders the liquidation of Borrower or any general partner of Borrower, or (d) issues or levies a judgment, writ, warrant of attachment or similar process against the Property, the Collateral Property or any other property of Borrower, any general partner of Borrower, or any Collateral Property Owner, and in each case the order or decree is not released, vacated, dismissed or fully bonded within 60 days after its issuance. (i) JUDGMENTS. If any final judgment for the payment of money that is not fully covered by liability insurance is rendered against Borrower or any Collateral Property Owner and is not discharged within thirty (30) days, or if execution of such judgment is stayed pending appeal but is affirmed on such appeal, such judgment is not discharged within thirty (30) days following such affirmation. (j) DEFAULT ON LOANS SECURED BY PROJECT OR COLLATERAL PROPERTY. A default has been declared by any lender under any loan secured by a deed of trust on the Property or the Collateral Property and such default remains uncured beyond the expiration of any applicable cure period. (k) ACCELERATION OF DEBT SECURED BY COLLATERAL PROPERTY. The holder of any debt instrument secured by a mortgage or deed of trust on the Collateral Property exercises a right to declare all amounts due and payable under that debt instrument immediately due and payable. (I) BREACH OF OBLIGATIONS. If the Partnership or Collateral Property Owners, as applicable, breach any obligation related to any matter for which the Partnership or Collateral Property Owners have agreed to provide indemnification pursuant to Section 4.8, 4.13, or 4.16 hereof. 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 or any Collateral Property Owner, 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 Collateral 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 dghts thereunder. 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 °ther 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. 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. 628528-13 25 City: Borrower: City of Dublin -- ~ Dublin, CA 100 Civic Center Drive Dublin, California 94568 Attention: City Manager Dublin Ranch Senior Apartments, L.P. c/o Charter Properties 4690'Chabot Drive, Suite 100 Pleasanton, CA 94588 Attention: James Tong Collateral Property Owners: Cl~ang Su-O-Lin, Hong Lien Lin and Hong Yao Lin cio Charter Properties 4690 Chabot Drive, Suite 100 Pleasanton, CA 94588 Attention: James Tong 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 628528-~3 26 -'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 tc~ principles of conflicts of laws. The Parties agree that, subject to the City's sole and absolute election, 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. Borrower and Collateral Property Owners hereby consent and submit to the jurisdiction of any local, state or federal court located 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 or Collateral Property Owners 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 or any COllateral Property Owners in any case shall entitle the Borrower or Collateral Property Owners 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 or Collateral Property Owners, either 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. 7.11 NO THIRD PARTY BENEFICIARIES. There shall be no third party beneficiaries to this Agreement. 628528-13 27 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 or Collateral Property Owners hereunder and the provisions of Sections 4.8, 4.13, 4.14, 4.15 and 4.16 hereof shall survive the making and repayment of the Loan and the expiration or termination of this Agreement. The representations of Borrower and Collateral Property 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 and Collateral Property Owners recognize and agree that City is not a commercial lending institution, but a public agency exercising its authority to protect the public health, safety and welfare. Any duties or obligations which a commercial lending institution may have to Borrower or Collateral Property Owners shall not apply to this transaction except as set forth herein and in the Loan Documents. 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 within 30 business days following receipt of written request therefor. 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, .any Collateral Property Owner, 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 any Collateral Property Owner or successor in interest to any of the foregoing or for any obligation of City under this Agreement. 7.17 RIGHT OF ACCESS. Borrower and Collateral Property Owners hereby grant to City and City's agents and employees the right, upon reasonable notice to Borrower, to enter upon the Collateral Property and the Property for the purpose of inspecting, examining, surveying and reviewing the same. - IN WITNESS WHEREOF, the Parties have each caused this Loan Agreement to be duly executed as of the date first written above. DUBLIN RANCH SEklIOR APARTMENTS, L.P., a California limited partnership By: KL Acquisition Management, LLC, a California limited liability company Its: General Partner By: Hong Yao Lin Its: Member COLLATERAL PROPERTY OWNERS Chang Su-O-Lin Hong Lien Lin Hong Yao Lin CITY OF DUBLIN, a municipal corporation By: Print name: Its: APPROVED AS TO FORM: City Attorney Exhibit A PROPERTY (Senior Housing Site.) ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE CITY OF DUBLIN, COUNTY OF ALAMEDA, STATE OF CALIFORNIA DESCRIBED AS FOLLOWS: LOT 1, AS SAID LOT IS SHOWN ON THE MAP OF TRACT 7453, FILED FOR RECORD ON NOVEMBER 24, 2003, IN BOOK 273 OF MAPS AT PAGES 52 THROUGH 56, INCLUSIVE, ALAMEDA COUNTY RECORDS. 628528-13 30 Exhibit B COLLATERAL PROPERTY ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE CITY OF DUBLIN, COUNTY OF ALAMEDA, STATE OF CALIFORNIA DESCRIBED AS FOLLOWS: PARCEL 9, AS SAID PARCEL IS SHOWN ON THE MAP OF TRACT 7148, FILED FOR RECORD ON FEBRUARY 14, 2001, IN BOOK 257 OF MAPS AT PAGES 3 THROUGH 7, INCLUSIVE, ALAMEDA COUNTY RECORDS. APN 985-0009-015 .Exhibit DEFINITIONS OF HAZARDOUS MATERIALS; ENVIRONMENTAL LAWS "Hazardous Materials" means any substance, material or waste which is or becomes regulated by any federal, state or local governmental authority, and includes without limitation (i) petroleum or oil or- gas or any direct or indirect product or by-product thereof; (ii) asbestos and any material containing asbestos; (iii) any substance, material or waste regulated by or listed (directly or by reference) as a "hazardous substance", "hazardous material", "hazardous waste", "toxic waste", "toxic pollutant", "toxic substance", "solid waste" or "pollutant or contaminant" in or pursuant to, or similarly identified as hazardous to human health or the environment in or pursuant 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 Safety Code 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; (iv) any substance, material or waste which is defined as such or regulated by any "Superfund" or "Superlien" law, or any Environmental Law; or (v) any other substance, material, chemical, waste or pollutant identified as hazardous or toxic and regulated under any other federal, state or local environmental law, including without limitation, asbestos, polychlorinated biphenyls, petroleum, natural gas and synthetic fuel products and by-products. "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 Hazardous Materials (as defined above) or other products, raw materials, chemicals or other substances; (iii) protection of the public health or welfare from the effects of byproducts, 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 ma~"at ~ny 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 Safety Code 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. Exhibit D Form of Promissory Note (Attach form of Note.) SECURED PROMISSORY NOTE $2,250,000 Dublin, California December 1,2003 FOR VALUE RECEIVED, Dublin Ranch Senior ApartmentS, L.P., a California limited partnership (hereafter the "Partnership" or the "Obligor") promises to pay to the order of the City of Dublin, a public body corporate and politic ("Holder"), in lawful money of the United States of America, the principal sum of Two Million Two Hundred Fifty Thousand Dollars ($2,250,000) or so much thereof as may be advanced by Holder 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 the manner provided below. Interest shall accrue commencing on the Initiat Disbursement Date and shall be calculated on the basis of a year of 365 days and charged for the actual number of days elapsed. This Note has been executed and delivered pursuant to and in accordance with the terms and conditions of a Loan Agreement (the "Loan Agreement"), dated as of the date hereof, by and among the Partnership, Chang Su-O-Lin (an individual also known as Jennifer Lin), Hong Lien Lin (an individual also known as Frederic Lin), Hong Yao Lin (an individual also known as Kevin Lin) and Holder, and is subject to the terms and conditions of the Loan Agreement, which are, by this reference, incorporated herein and made a part hereof. Chang Su~O-Lin, Hong Lien Lin and Hong Yao Lin are hereinafter referred to collectively as the "Collateral Property Owners". Capitalized terms used in this Note without definition shall have the meanings ascribed to such terms in the Loan Agreement. This Secured Promissory Note (this "Note") is secured by a Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (the "Deed of Trust") dated as of the date hereof, executed by the Collateral Property Owners collectively as Trustor for the benefit of Holder as beneficiary, and encumbering the real property described therein (the "Collateral Property"). Holder 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, and in the Loan Agreement. 1. PAYMENTS. 1.1. pAyMENT DATES; MATURITY DATE. This Note shall be repaid in three equal installments of principal, together with interest accrued thereon, th th th which installments shall be due on the 4 , 5 and 6 anniversaries of the Initial Disbursement Date (i.e. the anniversaries of the Initial Disbursement Date occurring in the 48th month, the 60th month and the 72nd month following the Initial Disbursement Date). The entire outstanding principal balance, together with interest accrued thereon, and any late charges or other sums accrued hereunder shall be payable in full on the 6th anniversary of the Initial Disbursement Date (the "Maturity Date"). Any installment of principal or interest not paid when due shall bear interest 65~s?s-s 1 at a rate equal to ten percent (10%) per annum from the due date for such installment until the date such installment is paid in full. 1.2. PREPAYMENT. Th-i~ N6te or any portion of the outstanding principal balance due under this Note, may be prepaid without premium or penalty, at any time and from time to time, provided that each such payment is accompanied by payment of interest accrued 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 dght of offset, deduction or counterclaim. 1.3. MANNER OF PAYMENT. All payments of principal and interest on this Note shall be made by certified or bank cashier's check payable to Holder at 100 Civic Plaza; Dublin, California 94568 or at such other place as Holder may designate in writing, or by wire transfer of immediately available funds to an account designated by Holder in writing. 1.4. ACCELERATION. Notwithstanding any contrary provision contained in this Note, and regardless of whether or not a default has occurred hereunder or under the Loan Agreement, if an Event of Default has occurred under the Family Housing Note or the Family Housing Loan Agreement (each as defined in the Deed of Trust) and if in connection with such Event of Default, Holder exercises its right to foreclose on the Collateral Property pursuant to the Deed of Trust, then: (i) Holder shall be entitled to declare all amounts due under this Note immediately due and payable, and (ii) the proceeds of any sale of the Collateral Property in connection with such foreclosure shall be used to pay all Secured Obligations (as defined in the Deed of Trust), including without limitation, the outstanding principal balance and all other amounts due under this Note. 2. DEFAULTS; REMEDIES. 2.1. EVENTS OF DEFAULT. The occurrence of any one or more of the following shall constitute an event of default hereunder ("Event of Default"): (a) If any installment of principal and interest payable hereunder is not paid when due and such failure continues for thirty (30) days following the due date for such payment. (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 (a "Bankruptcy Law"): (1) the Partnership or any general partner thereof consents to the appointment of a trustee, receiver, assignee, liquidator or similar official for the Partnership or any general partner thereof, or (2) the Partnership, any general partner thereof, or any Collateral Property Owner (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against such person or entity in an 'involuntary case; (iii) makes an assignment for the benefit of such person's or entity's creditors; or (iv) admits in writing the inability to pay such person's or entity's debts as they become due. 651575-5 (c) If a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against the Partnership, any general partner thereof, or any Collateral Property Owner in an involuntary case, (ii) appoints a trustee, ~'eceiver, assignee, liquidator or similar official for the Partnership or substantially all of the Partnership's assets, (iii) orders the liquidation of the Partnership, or (iv) issues or levies a judgment, writ, warrant of attachment or similar process against the Property, the Project, or the Collateral Property; and in each case the order or decree is not released, vacated, dismissed or fully bonded within 60 days after its issuance. (d) If the Collateral Property, or any part thereof or interest therein is sold, transferred, conveyed, assigned, hypothecated, encumbered, rented, leased or licensed without prior written consent of Holder or otherwise in violation of the Loan Agreement. (e) If any holder of any debt instrument secured by a mortgage or deed of trust on the Collateral Property exercises a right to declare all amounts due under that debt instrument immediately due and payable. (f) If the Partnership (i) fails to maintain insurance on the Property as required pursuant to the Loan Agreement; (ii) fails to pay taxes or assessments due on the Property; (iii) breaches the restrictions against conveyance or further encumbrance of the Project or the Property; (iv) misapplies the Loan proceeds in violation of the Loan Agreement; (v) engages in any act or omission that results in waste to or of the Property and which has a material adverse effect on the value of the Property, the Project, or the Par[nership's ability to meet its financial obligations in connection therewith, or (vi) breaches any obligation with respect to the presence or use of hazardous or toxic material or waste on the Property. (g) If any representation or warranty contained in the Loan Agreement or other Loan Documents (as defined in the Loan Agreement) or made in connection with the execution and delivery of this Note or in connection with any request for disbursement of Loan proceeds proves to be false or misleading in any material respect when made. (h) If the Partnership or Collateral Property Owners, as applicable, breach any obligation related to any matter for which the Partnership or Collateral Property Owners have agreed to provide indemnification pursuant to Section 1.5, 4.8, 4.13 or 4.16 of the .Loan Agreement and the documents referenced therein. (i) If the Partnership 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 (each as defined in the Loan Agreement) to which the Partnership is a party, and unless such document specifies a shorter cure period for such default, the default continues for thirty (30) days after the earlier of the date upon which (1) such default becomes known to Obligor's general partner or 651575-5 principal thereof, or (2) Holder shall have given written notice of the default to the defaulting party. (j) If any Collateral P-~ope'rty Owner 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 to which such Collateral Property Owner is a party, and unleSs such document specifies a shorter cure period for such default, the default continues for thirty (30) days after the earlier of the date upon which (1) such default becomes knOwn to any Collateral Property Owner, or (2) Holder shall have given written notice of the default to the defaulting party. 2.2. NOTICE BY OBLIGOR. Obligor shall notify Holder in wdting within five days after the occurrence of any Event of Default of which Obligor acquires knowledge. Collateral Property Owners shall notify Holder in writing within five days after the occurrence of any Event of Default concerning the Collateral Property or arising in connection with Collateral Property Owners' obligations pursuant to this Note, the Loan Agreement or the Deed of Trust. 2.3. REMEDIES. Upon the occurrence of an Event of Default hereunderl Holder may, at its option: (i) by written notice to Obligor and Collateral Property Owners, 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 available to Holder pursuant to this Note, the Loan Agreement or the Deed of TrUst, including without limitation, the right to foreclose on the Collateral Property. Obligor shall pay all reasonable costs and expenses, including, without limitation, reasonable attorneys' fees incurred by or on behalf of Holder i.~ connection with Holder'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. 2.4. DEFAULT RATE OF INTEREST. Upon the occurrence of an Event of Default hereunder which remains uncured beyond the expiration of any applicable cure period, interest, shall automatically be increased without notice to the rate of ten percent (10%) per annum (the "Default Rate"). The imposition or acceptance of the Default Rate shall in no event constitute a waiver of any default under this Note or prevent Holder from exercising any right or remedy hereunder. Notwithstanding the foregoing, if any payment due hereunder is not paid when due, the Default Rate shall apply beginning on the due date for such payment. 3. LIMITATION ON PERSONAL LIABILITY. Except as provided in this Section, neither Obligor, its constituent partners, nor Collateral Property Owners shall have direct or indirect personal liability for payment of the principal of, or interest on, this Note, and the sole recourse of Holder with respect to the payment of principal of and interest on this Note shall be to the Collateral Property and any other collateral held by Holder as security for this Note; provided, however, that nothing contained in the foregoing limitation of liability shall: 651575-5 (A) constitute a waiver, release or impairment of any obligation evidenced or secured by this Note, the Loan Agreement or the Deed of Trust or otherwise limit, or impair the enforcement against all such security for the Loan of all the rights and remedies of the Holder under the Loan Documents (as defined in the Loan Agreement), as each may be amended, modified, or restated from time to time; (B) impair the dght of Holder to bring a foreclosure action, action for specific performance or other appropriate action or proceeding to enable Holder to enforce and realize upon the Deed of Trust, the interest in the Collateral Property created thereby and any other collateral given to Holder in connection with the indebtedness evidenced hereby and to name the Collateral Property Owners as party defendants in any such action; (C) be deemed in any way to impair the dght of the Holder 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 Holder may have under any bankruptcy law to file a claim for the full amount of the indebtedness owed to Holder hereunder or to require that the Collateral Property shall continue to secure' all of the indebtedness owed to Holder hereunder in accordance with this Note and the Deed of Trust; (E) limit or restrict the ability of Holder to seek or obtain a judgment against Obligor to enforce against Obligor and its general partners to: (a) recover under Sections 4.8.1, 4.13.3, or 4.16 of the Loan Agreement, (b) recover under the Environmental Indemnity Agreement (as described in Section 4.13.3 of the Loan Agreement), (c) recover from Obligor and its general partner(s) compensatory damages as well as other costs and expenses incurred by Holder (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 Partnership, any general partner of the Partnership, or any officer, director, member, employee or agent of the Partnership or of any general partner of the Partnership in connection with the request for or creation of the Loan, or in any Loan Document, or in connection with any request for disbursement of the Loan proceeds, (ii) any failure to maintain insurance on. the Property as required pursuant to the Loan-Agreement; 651575-5 (iii)failure to pay taxes or assessments 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 Partnership's obligations under Section 4.13.2 of the Loan Agreement; or (F) limit or restrict the ability of the Holder to seek or obtain a judgment against Collateral Property Owners to: (a) recover under the Collateral Property Environmental Indemnity Agreement (described in Section 4.13.4 of the Loan Agreement), (b) Reserved. (c) recover from Collateral Property Owners compensatory damages as well as other costS and expenses incurred by Holder (including without limitation attorneys' 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 any Collateral Property Owner or on the part of any authorized employee or agent of any Collateral Property Owner 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 Holder in relation to the Deed of Trust or the Collateral Property, (ii) any matters for which any Collateral ProPerty Owner has agreed to provide indemnification under Section 4.8.2 or 4.13.4 of the Loan Agreement and the documents referenced therein, (iii) failure to maintain insurance on the Collateral Property as required pursuant to the Loan Documents, (iv) failure to pay taxes or assessments due on the Collateral Property, (v) breach of the restrictions against conveyance or further encumbrance of the Collateral Property, (vi) the occurrence of any act or omission of Collateral Property Owners that results in waste to or of the Collateral Property and which has a material adverse effect on the value of the Collateral Property or the security for the Loan, or (vii) the presence of hazardous or toxic material or waste on the Collateral Property or other violation of Collateral Property Owners' obligations under Section 4.13.2 of the Loan 651575-5 Agreement or Section 7.11 of the Deed of Trust (pertaining to environmental matters). Upon the occurrence of any of the events described in Section 2.1(b) or (c). or if any Collateral Property Owner or any duly authorized person acting on behalf of any Collateral Property Owner (i) attempts to prevent or delay the foreclosure of the Deed of Trust following a default resulting from the failure to make any payment due to Holder on any obligation secured by the Collateral Property, or (ii) claims that any Loan Document is invalid or unenforceable and such claim will have the effect of preventing or delaying such foreclosure, then, notwithstanding the limitation of liability in this Section, the Partnership, its general partners, and the Collateral Property Owners shall be fully personally liable for payment of all sums due hereunder, and Holder's recourse to the personal assets of Obligor, its general partners, and the Collateral Property Owners shall not be limited in any way by the provisions of this Section 3. 4. MISCELLANEOUS 4.1 WAIVER. The rights and remedies of Holder under this Note shall be cumulative and not alternative. No waiver by Holder of any right or remedy under this Note shall be effective unless in a writing signed by Holder. Neither the failure nor any delay in exercising any right, power or privilege under this Note will operate as a waiver thereof, and no single or partial exercise of any such right, power or privilege by Holder will preclude any other or further exercise thereof or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable law (a) no claim or right of Holder arising out of this Note can be discharged by Holder, in whole or in part, by a waiver or renunciation of the claim or right unless in a writing, signed by Holder; (b) no waiver that may be given by Holder will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on Obligor or Collateral Property Owners will be deemed to be a waiver of any obligation of Obligor or Collateral Property Owners or of the right of Holder to take further action without notice or demand as provided in this Note. Obligor and Collateral Property Owners hereby waive presentment, demand, protest and notice of dishonor and protest. 4.2 NOTICES. Any notice required or permitted to be given hereunder shall be given in accordance with Section 7.1 of the Loan Agreement. 4.3 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. 4.4 GOVERNING LAW; VENUE. This Note shall be governed by the laws of the State of California without regard to principles of conflicts Of laws. All persons and entities in any manner obligated under this Note' consent to the jurisdiction of any federal or state court within California having proper venue. 651575-5 4.5 PARTIES IN INTEREST. This Note shall.bind Obligor and its successors and assigns, and shall accrue to the benefit of Holder and its successors and assigns. 4.6 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this Note are provided for convenience only and will not affect its construction or interpretation. All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Note unless otherwise specified. All words used in this Note will be ~;onstrued to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the words "hereof" and "hereunder" and similar references refer to this Note in its entirety and not to any specific section or subsection hereof. 4.7 RELATIONSHIP OF THE PARTIES. The loan evidenced by this Note and secured by the Deed of Trust will in no manner make Holder the partner or joint venturer of Obligor or any Collateral Property Owner. 4.8 TIME IS OF THE ESSENCE. Time is Of the essence with respect to every provision of this Note. 651575-5 IN WITNESS WHEREOF, Obligor has executed and delivered this Note as of the date first written above. Obligor Dublin Ranch Senior Apartments, L.P., a California limited partnership By: KL Acquisition Management, LLC, a California limited liability company Its: General Partner By:. Hong Yao Lin Its: Member Collateral Property Owners hereby acknowledge the terms and conditions of the foregoing Secured Promissory Note and the execution and delivery thereof by Dublin Ranch Senior Apartments, L.P., a California limited partnership. Collateral Property Owners Chang Su-O-Lin Hong Yao Lin Hong Lien Lin 651575-5 LOAN AGREEMENT Multi-Family Housing Component This Loan Agreement (this "Agreement" or this "Loan Agreement") is entered into effective as of December 1,2003 ("Effective Date") by and among 'Fairway Family Community, L.P., a California limited partnership ("Borrower"), the City of Dublin, a municipal corporation ("City"), and Chang Su-O-Lin (an individual also known as Jennifer Lin), Hong Lien Lin (an individual also known as Frederic Lin) and Hong Yao Lin (an individual also known as Kevin Lin). Chang Su-O-Lin, Hong Lien Lin and Hong Yao Lin are hereinafter collectively referred to as the "Collateral Property Owners." Borrower, City and the Collateral Property Owners are hereinafter collectively referred to as the "Parties." RECITALS A. Borrower has proposed to construct a multifamily housing development ("Project") on the property ("Property") described in Exhibit A attached hereto pursuant to the terms of (i) that certain Master Development Agreement between the City of Dublin and the Lin Family for the Dublin Ranch Project (Areas'A, B, C, D, E, F, G and H) dated as of May 18, 1999 and recorded on July 8, 1999 as document number 99251790 in the Official Records of Alameda County, which agreement was supplemented by document number 00335772 recorded on November 13, 2000 in the Official Records of Alameda County (as so supplemented, referred to hereinafter as the "Master Development Agreement"), (ii) that certain Development Agreement dated as of July 15, 2003 for Dublin Ranch Area B - Fairway Ranch ("Fairway Ranch Development Agreement") and (iii) that certain Development Agreement dated as of July 15, 2003, for the' Property. The foregoing agreements are collectively hereinafter referred to as the "DeVelopment Agreements." B. Borrower has requested, and pursuant to a loan commitment dated as of July 1, 2003 ("Loan Commitment"), 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 housing units that will be developed as part of the Project. C, The City has determined that the 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-, Iow- and moderate-income households. The City has further determined that provision of the Loan by City to 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. D. Concurrently with the execution of this Agreement, Borrower and Chang Su-O-Lin and Hong Lien Lin (collectively "Landowners") shall execute and deliver to City a regulatory agreement ("Affordable Housing Regulatory Agreement") pursuant to which certain units in the Project shall be restricted for occupancy by very Iow-, Iow- and moderate-income households at affordable rents for not less than 55 years. E. Pursuant to this Loan Agreement, Borrower shall execute and Collateral Property Owners shall acknowledge, a promissory note payable to City which shall be secured by a deed of trust ("Deed of Trust") pursuant to which City shall receive a security interest in the real property (the "Collateral Property") owned by Collateral Property Owners, commonly known as Parcel 9 of Tract 7148, Dublin, California, and more particularly described in Exhibit B. 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 Fifty Thousand Dollars ($2,250,000) ("Principal") upon the terms and conditions and for the purposes set forth in this Agreement. The Loan shall be evidenced by a secured promissory note ("Note") which shall be dated as of the Effective Date and executed by Borrower and acknowledged by Collateral Property Owners. Provided that Borrower and Collateral Property Owners, as applicable, have each Complied with all conditions precedent to disbursement of the Loan set forth in Section 2.3, the Loan proceeds shall be disbursed in accordance with Section 2.2 hereof. By their execution of this Agreement, Borrower and Collateral Property Owners each hereby approve the terms and conditions of the Note, which shall be executed Substantially in the form attached hereto as Exhibit D. City shall have the option to terminate this Agreement, and shall have no obligation to fund the Loan if: (a) tax-exempt bonds for the Project (the "Bonds") are not issued pdor to December 31, 2003, or (b) the proceeds of the Bonds are not available for disbursement for Project construction prior to June 30, 2004, unless such disbursement date is extended by written agreement of Borrower and City. 1.2 INTEREST RATE; PAYMENT DATES; MATURITY DATE. Interest shall accrue on the outstanding principal balance of the Loan at the rate of three percent (3%) simple intere!~t per annum, commencing upon the date upon which the first disbursement of Loan proceeds is made pursuant to the terms hereof ("Initial Disbursement Date"). No payments shall be due on the Loan during the first three years following the Initial Disbursement Date. The Loan (or so much of it as has been disbursed) shall be payable in three equal installments of principal, together with interest accrued thereon, which installments shall be due on the' 4th, 5th, and 6th anniversaries of the Initial Disbursement Date (i.e. the anniversaries of the Initial Disbursement Date occurring in the 48th month, the 60th month and the 72nd month following the Initial Disbursement Date). The entire outstanding principal balance, of the Loan, together with interest accrued thereon shall be 'payable in full on the sixth anniversary of the Initial Disbursement Date (the "Maturity Date"). Any installment of 672897-1 2 principal or interesth'ot paid when due shall bear interest at a rate equal to ten percent (10%) per annum from the due date for such installment until the date such installment is paid in full. 1.3 SECURITY. As security for repayment of the Note, Collateral Property Owners shall execute.a deed of trust ("Deed of Trust") in favor of City as beneficiary pursuant to which City shall be provided a first lien against the Collateral Property. The Deed of Trust shall be dated as of the Effective Date and shall be recorded in the official records of Alameda County. The Collateral Property shall be subject to no mortgage, lien or claim other than liens for which the City has provided written consent and which: (a) are subordinate to the Deed of Trust, (b) secure repayment of obligations incurred solely in connection with the financing of the Project or the senior housing project proposed to be developed adjacent to the Property as described in the Fairway Ranch Development Agreement, or other purposes approved by City, (c) require notice to the City in the event of default, and (d) do not in the aggregate together with all other outstanding liens result in encumbrance of the Collateral Property in excess of 60% of its fair market value as reasonably determined by City. Collateral Property'Owners may request a substitution of other real property located within the City of Dublin for the Collateral Property, provided that: (i) in City's reasonable determination, the fair market value of such substitute collateral is at least three times the value of the outstanding balance of all obligations payable to City to be secured thereby; (ii) Collateral Property Owners pay all reasonable expenses City incurs in connection with City's review and investigation of the condition and value of such property, including without limitation the cost of environmental assessment, title investigation, and appraisal expenses; (iii) the lien securing the obligations payable to City will be a first lien on such property; (iv) any subordinate liens on such property meet the requirements of clauses (b) and (c) of the first paragraph of this Section 1.3 and Will not in the aggregate together with all other outstanding liens result in encumbrance of such collateral in excess of 60% of its fair market value as reasonably determined by City; (v) the proposed substitute collateral is otherwise in all respects acceptable to City in the exercise of City's reasonable discretion; and (vi) City provides written consent to such substitution. If Collateral Property Owners seek to subdivide the Collateral Property, they may request a partial reconveyance of the Deed of Trust, which City may grant in the exercise of City's reasonable discretion, provided that the remaining collateral is of sufficient value in City's reasonable judgment, to meet the requirement set forth in Section 3.2(g) and is otherwise in all respects acceptable to City in the exercise of City's reasonable discretion. 1.4 PREPAYMENT; ACCELERATION. (a) 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. 672897-1 3 Any prepayment of principal must be accompanied by interest accrued b-bt ur~paid 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 effect upon the term of the Affordable Housing Regulatory Agreement or the effectiveness of the Environmental Indemnity Agreement or the Collateral Property Environmental Indemnity Agreement (each as defined below) all of which shall survive any such prepayment. (b) Notwithstanding any contrary provision contained in this Agreement, and regardless of whether or not a default has occurred hereunder or under the Note, if an Event of Default has occurred under the Senior Housing Note or the Senior Housing Loan Agreement (each as defined in the Deed of Trust) and if in connection with such Event of Default, City exercises its right to foreclose on the Collateral Property pursuant to the Deed of Trust, then: (i) City shall be entitled to declare all amounts due under the Note immediately due and payable, and (ii) the proceeds of any-sale of the Collateral Property in connection with such foreclosure shall be used to pay all Secured Obligations (as defined in the Deed of Trust), including without limitation, the outstanding principal balance and all other amounts due under the Note. 1.5 NONRECOURSE. Except as provided in this Section, neither Borrower, Borrower's constituent partners, nor Collateral Property Owners shall have direct or indirect personal liability for payment of the principal of, or interest on, the Loan, and the sole recourse of the City with respect to the payment of principal of and interest on the Loan shall be to the Collateral Property and any other collateral held by City as security for this Note; provided, however, that nothing contained in the foregoing limitation of liability shall: (A) constitute a waiver, release or impairment of any obligation evidenced or secured by the Note, this Loan Agreement or the Deed of Trust or'otherwise limit or impair the enforcement against all such security for the Loan of all the rights and remedies of the City under the Loan Commitment, this Agreement, the Affordable Housing Regulatory Agreement, the Deed of Trust, and the Note, as each may be amended, modified, or restated from time to time (collectively the "Loan Documents"); (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 Collateral Property created thereby and any other collateral given to City in connection with the Loan hereby and to name the Collateral Property Owners as party defendants 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 dght 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 Collateral Property Shall continue to secure all of the indebtedness owed to City hereunder in accordance with this Note and the Deed of Trust; (E) limit or restrict the ability of the City to seek or obtain a judgment against Borrower to enforce against Borrower and its general partners to: (a) recover under Sections 4.8.1,4.13.3, or 4.16 hereof, (b) recover under the Environmental Indemnity Agreement (described in Section 4.13.3.) executed in connection herewith, (c) Reserved. (d) 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 Borrower, any general partner of Borrower, or any officer, director, member, employee or agent of Borrower or of any general partner of Borrower in connection with the request for or creation of the Loan, or in any Loan Document, or in connection with any request for disbursement of the Loan proceeds, (ii) any failure to maintain insurance on the Property as required pursuant to the Loan Documents, (iii) failure to pay taxes or assessments due on the Property or the Project, or (iv) the presence of hazardous or toxic material or waste on the Property or other violation of Borrower's obligations under Section 4.13.2 hereof; or (F) limit or restrict the ability of City to seek or obtain a judgment against Collateral Property Owners to: (a) recover under the Collateral Property Environmental Indemnity Agreement (described in Section 4.13.4) executed in,connection herewith, (b) Reserved. 672897-1 5 (c) recover from Collateral Property Owners compensatory damages as well as other costs and expenses incurred by City (including without limitation attorneys' 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 any Collateral Property Owner or on the part of any authorized employee or agent of any Collateral Property Owner 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 relation to the Deed of Trust or the Collateral Property, (ii) any matters for which any Collateral Property Owner has agreed to provide indemnification under Section 4.8.2 or 4.13.4 hereof and the documents referenced therein, (iii) failure to maintain insurance on the Collateral Property as required pursuant to the Loan Documents, (iv) failure to pay taxes or assessments due on the Collateral Property, (v) breach of the restrictions against conveyance or further encumbrance of the Collateral Property, (vi) the occurrence of any act or omission of Collateral Property OWners that results in waste to or of the Collateral Property and which has a material adverse effect on the value of the Collateral Property or the security for the Loan, or (vii) the presence of hazardous or toxic material or waste on the Collateral Property or other violation of Collateral Property Owners' obligations under Section 4.13.2 hereof or Section.7.11 of the Deed of Trust (pertaining to environmental matters). Provided that all requirements of Section 1.3 have been satisfied and a subordination agreement in form satisfactory to City has been recorded, the recordation of the following deeds of trust against the Collateral Property shall not be considered a breach under Section 1.5(F)(c)(v): (a) deed of trust for the benefit of KSC Affordable Housing Investment Fund, LLC, a California limited liability company ("KSC") to secure repayment of a note in the maximum principal amount of $6,500,000 payable by Dublin Ranch Senior Apartments, L.P., a California limited partnership to KSC, and (b) deed of 672897-1 6 trust for the benefit of KSC to §ecure repayment of a note in the maximum principal amount of $4,500,000 payable to KSC by Borrower. Upon the occurrence, of any of the events described in Section (h) of Article V, or if any Collateral Property Owner or any duly authorized person acting on behalf of any Collateral Property Owner (i) attempts to prevent or delay the foreclosure of the Deed of Trust following a default resulting from the failure to make any paYment due to Holder on any obligation secured by the Collateral Property, or (ii) claims that any Loan Document is invalid or unenforceable and such claim will have the effect of preventing or delaying such forecloSure, then, notwithstanding the limitation of liability in this Section, the Partnership, its general partners, and the Collateral Property Owners shall be fully personally liable for payment of all sums due hereunder, and Holder's recourse to the personal assets of Obligor, its general partners, and the Collateral Property Owners shall not be limited in any way by the provisions of this Section 1.5. ARTICLE II USE AND DISBURSEMENT OF PROCEEDS 2.1 USE OF PROCEEDS. The proceeds of the loan ("Loan Proceeds") shall be used solely and exclusively to pay for hard construction costs billed to Borrower by third-parties in connection with the construction of the' Project. 2.2 DISBURSEMENT OF PROCEEDS. Upon satisfaction of the conditions set forth in Sections 1.1 and 2.3, the City shall disburse the Loan Proceeds to Bank of America, N.A., a national banking association ("Construction Lender") for disbursement for Project construction costs in accordance with an intercreditor agreement to be executed by and between City and Construction Lender. 2.3 CONDITIONS PRECEDENT TO DISBURSEMENT OF PROCEEDS. The Parties acknowledge and agree that notwithstanding anything to the contrary contained herein or in the Loan Documents, City shall have no obligation to disburse the proceeds of the Loan prior to the time that the proceeds of the Bonds are available to be disbursed for Project construction in accordance with the Construction Lender's requirements; provided however, if (a) all conditions set forth in this Section 2.3 have either been satisfied' or waived in writing by City, and (b) all of the Construction Lender's preconditions to disbursement of the proceeds of the Bonds have been satisfied, City shall authorize disbursement of the Loan proceeds prior to disbursement of the Bond proceeds in accordance with Sections 2.1 and 2.2. City's obligation to fund the Loan and disburse the proceeds thereof is conditioned upon: (a) Borrower's receipt of final commitments for all financing necessary for .the Project (including without limitation, credit enhancements to be provided during and after construction of the Project), (b) compliance with all 672897-1 7 requirements of the Loan Commitment (except those that have been waived in writi~ng by City), and (c) the satisfaction of all of the following conditions: (i) Borrower's delivery to City of the fully-executed CC&Rs (as defined in the Loan Commitment) and the recordation of the CC&Rs against the Property in the Official Records of Alameda County, subordinate to no liens, interests, leases or encumbrances; (ii) Borrower's delivery to City and the recordation in the Official Records of Alameda County, of a fully-executed instrument in form acceptable to City pursuant to which Borrower acknowledges the CC&Rs, agrees to be bound thereby, and Borrower and Landowners agree to subordinate the ground lease executed by and among Landowners and Borrower for the Property to the CC&Rs; (iii) Borrower's execution and delivery to the City of this Agreement, the Note, and the Affordable Housing Regulatory Agreement and recordation of the Affordable Housing Regulatory Agreement against the Property, subordinate to no liens, interests, leases or encumbrances other than as expressly permitted pursuant to the terms thereof or pursuant to any subordination agreement executed by City; (iv) Collateral Property Owners' delivery to the City of the fully-executed Deed of Trust, recordation of the Deed of Trust as a first lien against the Collateral Property, and Collateral Property Owners' delivery to the City'of a fully-executed subordination agreement pursuant to which the KSC deed of trust to be recorded against the Collateral Property is subordinated to the Deed of Trust; (v) Delivery to the City of fully-executed originals of each of the following: (a) the Environmental Indemnity Agreement, and (b) the Collateral Property Environmental Indemnity Agreement; (vi) Borrower's delivery to City of evidence reasonably satisfactory to City that Borrower has obtained all necessary permits (including without limitation, building permits), licenses, approvals and financing required to develop the Project; (vii) Borrower's submission to City and City's approval of the final plans and specifications for the Project; (viii) 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, (b) the proceeds of the Bonds are available to be disbursed for Project construction, and (c) the closing and funding of Construction financing for the Project has occUrred; (ix) The issuance by an insurer satisfactory to City of a CLTA lender's title policy ("Title Policy") for the benefit of City in the amount of all obligations payable to 67289%1 City to be secured by the Collateral Prdperty, 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 require; (x) Borrower's payment of all expenses incurred by City in connection with the Loan, including without limitation, reasonable fees of City's legal counsel and financial advisor, all closing and escrow costs incurred in connection with the Loan, the cost of the Title Policy and any survey City is required to obtain in connection therewith, and escrow and recording fees related to the transaction contemplated hereby; (xi) Borrower's delivery to the City of evidence of insurance coverage in the form and in such amounts as may be reasonably required by City as, and to the extent set forth in the Affordable Housing Regulatory Agreement; (xii) Collateral Property Owners' delivery to the City of evidence of insurance coverage in the form and in such amounts as may be reasonably required by City as, and to the extent set forth herein or in the Deed of Trust; (xiii) Borrower's compliance with all provisions of the Affordable Housing Regulatory Agreement, including without limitation, submission to City of a marketing and management plan and a management contract, and City's approval thereof as and to the extent set forth in the Affordable Housing Regulatory Agreement; (xiv) Borrower's delivery to City of each of the following: (A) for Borrower (i) a certified copy of Borrower's partnership agreement together with a Certificate of Good Standing and LP-1 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 company; (c) Certificate of Good Standing issued by the Secretary of State; and (d) certified resolution indicating that Borrower's general partner has authorized this transaction and that the persons executing LOan Documents and Additional Documents on behalf of Borrower's general partner have been duly authorized to do so; (xv) Borrower's delivery to City of an opinion of counsel in form and substance satisfactory to City which shall provide that Borrower and Borrower's general partner are duly organized, ~/alidly existing and authorized to do business in the State of. California, and that the CC&Rs, the Environmental Indemnity Agreement, and the Collateral Property Environmental Indemnity Agreement (collectively the "Additional Documents") and each of the Loan Documents has been duly authorized and executed and when delivered shall be the binding obligations of the signatories to such documents, enforceable in accordance with their respective terms; 672897-1 9 (xvi) Borrower's delivery to City of all of the following: (a) a Project budget and operating pro forma (as described in Paragraphs 1 l(b) and 1 l(e) of the Loan Commitment; (b) environmental reports for the Property and the Collateral Property (as described in Paragraph 1 l(d) of the Loan Commitment; (c) construction contract and payment and performance bonds (as described in Paragraph 11 (i) of the Loan Commitment; and (d) a copy of the fully-executed ground lease for the Property; (xvii) The representations and warranties made by Borrower, Borrower's general partner, and Collateral Property Owners in this Agreement, in the Loan Documents and in the Additional Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of disbursement of the Loan Proceeds, and the delivery by Borrower, Borrower's general partner, and Collateral Property Owners of certificates reaffirming such representations and warranties; and (xviii) No material adverse change as determined by City in its reasonable judgment shall have occurred in the financial or other conditiOn of Borrower, the Property, or the Collateral Property since the date of this Agreement. 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 or Collateral Property Owners' 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 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 to which Borrower is a party. 672897-1 10 (b) NO VIOLATION. The ex~ecutbn of the Loan Documents and Additional Documents to which Borrower is a party 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 to which Borrower is a party and the transact, ions 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) NO SUBORDINATION. Unless otherwise acknowledged or agreed to by City in writing, the CC&Rs are not subordinate to any lien, lease or other interest in the Property and the obligations of Borrower under the Affordable Housing Regulatory Agreement are not subordinated to any other obligations of Borrower or any other obligor. (f) ACCURACY OF FINANCIAL STATEMENTS; NO ADVERSE CHANGE. The financial statements heretofore delivered to City present fairly and accurately the financial condition of Borrower, and have been prepared in accordance with standard accounting practices, consistently applied. Borrower certifies that there has been no adverse change since the date of the most recent financial statements Borrower has provided to City in Borrower's financial condition, organization, operation, business prospects, fixed properties, or personnel. (g) 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 or to Borrower in relation thereto, including without limitation, all environmental, health and safety and employment laws. (h) DISCLOSURE. No representation or warranty made by Borrower in this Agreement or in the Loan Documents or Additional Documents to which Borrower is a party 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 matedal 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. 3.2 Collateral Property Owners make the following representations, warranties and cove na nts: 672897-1 1 1 (a) NO VIOLATION. The execution of the Loan Documents and Additional Documents to which Collateral Property Owners are a party and Collateral Property Owners' 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 Collateral Property Owners are a party or by which Collateral Property Owners may be bound. (b) AUTHORIZATION. The Loan Documents and the Additional Documents to which Collateral Property Owners are a party, when executed and delivered, will each constitute a valid and binding Obligation of Collateral Property Owners, enforceable in accordance with the respective terms thereof. (c) LITIGATION. There are no pending, or to Collateral:Property Owners' knowledge, threatened actions or proceedings before any court or administrative agency which may adversely affect any Collateral Property Owner's ownership of the Collateral Property other than those heretofore disclosed to City in writing. (d) NO SUBORDINATION. Upon its recordation, the Deed of Trust will constitute a first lien on the Collateral Property, subject only to Permitted Exceptions or liens approved by City pursuant to Section 1.3. (e) COMPLIANCE WITH LAWS. Collateral Property Owners are in compliance in all material respects with all laws, rules, regulations, orders and decrees which are applicable to the Collateral Property, including without limitation, all environmental, health and safety and employment laws. (f) DISCLOSURE. No representation, or warranty made by Collateral Property Owners in this Agreement or in the Loan Documents or Additional Documents to which Collateral Property Owners are a party 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 any Collateral Property Owner which has or might reasonably be anticipated to have a material adverse effect on the value of the Collateral Property which has not been disclosed to City in writing. (g) COLLATERAL PROPERTY. Collateral Property Owners are the owners in fee simple of the Collateral Property, and the fair market value of the Collateral Property as of the date hereof is no less than $13.5 million. ARTICLE IV AFFIRMATIVE COVENANTS 4.1 PUNCTUAL PAYMENT. Borrower covenants to punctually pay the interest and principal of the Note at the times and place and in the manner specified in the Note. 672897-I 12 4.2 PAYMENT OF OTHER INDEBTEDNESS. Borrower covenants 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. Until the Loan is repaid in full and all indebtedness secured by the Deed of Trust is discharged, Collateral Property Owners covenant to punctually pay all charges, assessments, taxes and fees related to the Collateral Property. 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 and the Loan, and to inspect the Property during normal business hours upon reasonable notice. Collateral Property Owners covenant to allow the City to inspect the Collateral 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, including without limitation the California Building Standards Code (California Code of Regulations, Title 24), and all requirements applicable to compliance with the Americans with Disabilities Act ("ADA") or similar statutes and regulations relating to accessibility. Collateral Property Owners covenant to comply with all federal, state and local laws, regulations, ordinances and rules applicable to the Collateral Property. 4.5 INSURANCE. Borrower shall maintain and keep in force at Borrower's expense, with respect to the Project and the Property, insurance of the types and in amounts customarily carried by property owners similar to Borrower as and to the extent required pursuant to the Affordable Housing Regulatory Agreement. Collateral Property Owners shall maintain and keep in force at their expense, with respect to the Collateral Property, insurance of the types and in amounts customarily carried by similar property owners for similar property, including but not limited.to fire, liability, property damage, and worker's compensation, provided by companies in form and in amounts satisfactory to City with the City named as "Loss Payee" and "Additional Insured." Without limiting the generality of the foregoing, Collateral Property Owners shall at all times maintain the following policies of insurance: (a) property "all risk" insurance covering the full replacement value of the improvements located on the Collateral Property, containing a '¥ull replacement cost" endorsement, and naming the City as "loss payee"; (b) commercial general liability insurance in favor of Collateral Property Owner (and naming the City as an additional insured) in an aggregate amount not less than 672897-1 13 '- $5,000,000, combined single limit (or such greater amount as may be specified by the City from time to time); (c) Comprehensive Automobile Liability insurance with limits not less than $1,000,000 each occurrence (and naming the City as additional insured); and (d) such other insurance as may be required by applicable laws (including worker's compensation and employer's liability insurance') or as the City may reasonably require from time to time. All insurance policies shall be in form and substance and issued by insurers reasonably satiSfactory to the City, and shall contain such deductibles and such indorsement as the City may reasonably require. Upon request by the City from time to time, Collateral Property Owners shall deliver to the City originals or copies of all such insurance policies and certificates evidencing such policies. 4.6 CERTIFICATES OF INSURANCE. For each of Collateral Property Owners' insurance policies, Collateral Property Owners shall provide to City within ten (10) days following execution of this Agreement, but in no event later than the initial disbursement of Loan Proceeds, a certificate of insurance and an endorsement which provides that no cancellation, major change in coverage or expiration will be effective during the term of this Agreement without 30 days written notice to the City prior to the effective date of such cancellation, change in coverage or expiration. 4.7 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 tax credit investors. Collateral Property Owners shall keep the Collateral Property and the improvements located thereon, in good repair and condition, and from time to time make necessary repairs, renewals and replacements thereto so that the Collateral Property shall be preserved and maintained. 4.8 INDEMNIFICATION. 4.8.1 Borrower. 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 672897-I 14 Documents, (b) any representation by Borrowed'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 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, (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, the Project, the Loan, the Loan Documents, the Additional Documents, 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 solely 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. 4.8.2 Collateral Property Owners. Collateral Property Owners shall indemnify, defend (with counsel reasonably acceptable to City), and hold harmless the Indemnitees from and against, and shall pay on demand, any and all Liabilities arising directly or indirectly in any manner in connection with or as a result of (a) any breach of Collateral Property Owners' covenants under any of the Loan Documents or Additional Documents, (b) any representation by Collateral Property Owners 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 Collateral Property, whether caused by the negligence or any other act or omission of Collateral Property Owners 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 Collateral Property, or any Loan Document or AdditiOnal Document relating to the Collateral Property or any transaction contemplated thereby, or any failure of Collateral Property Owners to comply with all applicable state, federal and local laws and regulations applicable to the Collateral Property, provided that no Indemnitee shall be entitled to indemnification under this Section for matters solely caused by such Indemnitee's gross negligence or willful misconduct. The obligations of Collateral Property Owners 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 obligations of 672897-1 15 Collateral PropertY Owners 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 any Event of Default hereunder of which Borrower acquires knowledge; (2) any change in name, identity, legal structure, business location, or address of Borrower; or (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 Twenty Five Thousand Dollars ($25,000). Borrower shall ensure that City shall receive timely notice of, and shall have a right to cure, any Borrower 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 after any of the following shall occur, Collateral Property Owners shall provide written notice thereof to City: (1) the occurrence of any Event of Default hereunder of which any Collateral Property Owner acquires knowledge; (2) any change in name, identity, legal structure, business location, or address of Collateral Property Owners; or (3) any uninsured or partially uninsured loss affecting the Collateral Property through fire, theft, liability, or property damage in excess of an aggregate of Twenty Five Thousand Dollars ($25,000). Collateral Property Owners shall ensure that City shall receive timely notice of, and shall have a right to cure, any Collateral Property Owner default under any other financing document or other lien affecting the Collateral Property and that provisions mandating such notice and allowing such right to cure Shall be included in all such documents. 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, 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. Collateral Property Owners 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 Collateral Property Owners in relation to the Collateral Property, except those that Collateral Property Owners 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 Collateral Property. Owners. 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 Twenty Five Thousand Dollars ($25,000). Collateral Property Owners shall provicTe written notice to City within three business days after Collateral Property Owners acquire knowledge of any litigation pending or threatened against any Collateral Property Owner involving a claim exceeding Twenty Five Thousand Dollars ($25,000). 4.12 EXPENSES OF COLLECTION OR ENFORCEMENT. (a) 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, correction, or waiver of the default, and such amounts shall be a part of the indebtedness secured by the Deed of TrUst. (b) If at any time Collateral Property Owners default under any provision of the Loan Documents or Additional Documents, Collateral Property Owners 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, correction, or waiver 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 Representations and Warranties. (a) Borrower hereby represents and warrants that except as disclosed in writing to City, as of the Effective Date to the best knowledge of Borrower (which for this purpose is defined to be the best knowledge of Borrower's general partner and the principal(s) thereof): (i) the Property is free and has always been free of Hazardous Materials (as defined in Exhibit C) and is not and has never been in violation of any Environmental Law (as defined in Exhibit C); (ii) there are no buried or partially buried storage tanks located on the Property; (iii) no notice, warning, notice of violation, administrative complaint, judicial complaint, or other formal or informal notice has been issued alleging that conditions on the Property are or have ever been in violation of any Environmental Law or that the Property is subject to investigation or inquiry regarding Hazardous Materials thereon or the potential violation of any Environmental Law; (iv) there is no monitoring program required by the Environmental Protection Agency or any other governmental agency concerning the PropertY; (v) no toxic or hazardous chemicals, waste, or substances of any kind have ever been spilled, disposed of, or stored on, under or at the Property, whether by accident, burying, drainage, or storage in containers, tanks, holding areas, or any other means; (vi) the Property has never been used as a dump or landfill; (vii) Borrower has disclosed to City all information, records, and studies in possession of Borrower or reasonably available to Borrower relating to the Property concerning Hazardous Materials; (viii) no notice from any governmental authority has been issued regarding any threatened or pending zoning, 672897-1 17 budding, fire, or health code violation or violation of other governmental regulations concerning the Property that has not been corrected, and no condition on the Property violates any health, safety, fire, environmental, sewage, building, or other federal, state or local law, ordinance or regulation; (ix) no contracts, liCenses, leases or commitments regarding the maintenance or use of the Property or allowing any third party rights to use the Property are in force; (x) there are no threatened or pending actions, suits, or administrative proceedings against or affecting the Property or any portion thereof or the interest of Borrower in the Property; (xi) there are no threatened or pending condemnation, eminent domain, or similar proceedings affecting the Property or any portion thereof; (xii) no insurer has issued a notice of defects of the Property which have not been corrected; (xiii) there are no natural or artificial conditions upon the Property or any part thereof that could result in a material and adverse change in the condition of the Property; (xiv) all information that Borrower has delivered to City either directly or through Borrower's agents, is accurate and complete; and (xv) Borrower or Borrower's agents have disclosed to City all material facts concerning the Property. (b) Collateral Property Owners hereby represent and warrant that except as disclosed in writing to City, as of the Effective Date to the best knowledge of Collateral Property Owners: (i) the Collateral Property is free and has always been free of Hazardous Materials and is not and has never been in violation of any Environmental Law; (ii) there are no buried or partially buried storage tanks located on the Collateral Property; (iii) no Collateral Property Owner has received a notice, warning, notice of violation, administrative complaint, judicial complaint, or other formal or informal notice alleging that conditions on the Collateral Property are or have ever been in violation of any Environmental Law or informing any Collateral Property Owner that the Collateral Property is subject to investigation or inquiry regarding Hazardous Materials thereon or the potential violation of any Environmental Law; (iv) there is no monitoring program required by the Environmental Protection Agency or any other goVernmental agency concerning the Collateral Property; (v) no toxic or hazardous chemicals, waste, or substances of any kind have ever been spilled, disposed of, or stored on, under or at the Collateral PropertY, whether by accident, burying, drainage, or storage in containers, tanks, holding areas, or any other means; (vi) the Collateral Property has never been used as a dump or landfill; (vii) Collateral Property Owners have disclosed to City all information, records, and studies in possession of any Collateral Property Owner or reasonably available to any Collateral Property Owner relating to the Collateral Property concerning Hazardous Materials; (viii) no Collateral Property Owner has received a notice from any governmental authority of any threatened or pending zoning, building, fire, or health code violation or violation of other governmental regulations concerning the Collateral Property that has not previously been corrected, and no condition on the Collateral Property violates any health, safety, fire, environmental, sewage, building, or other federal, state or local law, ordinance or regulation; (ix) no contracts, licenses, leases or commitments regarding the maintenance or use of the Collateral Property or allowing any third party rights to use the Collateral Property are in force; (x) there are no threatened or pending actions, suits, or administrative proceedings against or affecting the Collateral Property or any portion thereof or the interest of any Collateral Property 672897-1 18 Owner in the Collateral Property; (xi) there are no threa-tene~l or pending condemnation, eminent domain, or similar proceedings affecting the Collateral Property or any portion thereof; (xii) no Collateral Property Owner has received a notice from any insurer of defects of the Collateral Property which have not been corrected; (xiii) there are no natural or artificial conditions upon the Collateral Property or any part thereof that could result in a material and adverse change in the condition of the Collateral Property; (xiv) all information that any Collateral Property Owner has delivered to City either directly or through an agent, is accurate and complete; and (xv) Collateral Property Owners or Collateral Property Owners' agents have disclosed to City all material facts concerning the Collateral Property. 4.13.2 Covenants. Borrower shall not cause or permit any Hazardous Materials 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 inthe 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 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. Collateral Property Owners shall not cause or permit any Hazardous Materials to be brought upon, kept, stored or used in, on, or about the Collateral Property by Collateral Property Owners, or the agents, employees, contractors or invitees of Collateral Property Owners except for incidental supplies ordinarily used in the course and scope of Indemnitors' operations on the Collateral Property in compliance with all applicable laws, and shall not cause any release of Hazardous Materials into, onto, under or through the Collateral Property. If any Hazardous Material is discharged, released, dumped, or spilled in, on, under, or about the Collateral Property and results in any contamination of the Collateral Property or adjacent property, or otherwise results in the release or discharge of Hazardous Materials in, on, under or from the Collateral Property, Collateral Property Owners shall promptly take all actions at Collateral Property Owners' sole expense as are necessary to comply with all Environmental Laws. 4.13.3 Borrower's 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 4.13.2, or otherwise arising in connection with the actual or alleged release or presence of any Hazardous Materials on, under, in or about the Property, 672897-1 19 wheth~'r for~eseeable 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 indemnitYdescribed in this Section shall survive the making and repayment of the Loan, shall be secured by the Deed of Trust, and shall be set forth in a separate unsecured agreement ("Environmental Indemnity Agreement") executed by Borrower for the benefit of City. 4.13.4 Collateral Property Owners' Indemnification. Collateral Property Owners shall indemnify, defend (with counsel reasonably acceptable to City) and hold the Indemnitees harmless from and against any and all loss, claim, liability, demand, judgment, order, penalty, fine, damage, 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 Collateral Property Owners' covenants set forth in Section 4.13.2, or otherwise arising in connection with the actual or alleged release or presence of any Hazardous Materials on, under, in or about the Collateral 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 Collateral Property is in compliance with Environmental Laws, all costs associated with bringing the Collateral 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, shall be secured by the Deed of Trust, and shall be set forth in a separate unsecured agreement ("Collateral Property Environmental Indemnity Agreement") executed by Collateral Property Owners for the benefit of City. 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, 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. 4.15 MANDATORY LANGUAGE IN ALL SUBSEQUENT DEEDS, .LEASES AND CONTRACTS. All deeds, leases or contracts made or entered 'into by Borrower, 672897-1 20 its successors or assigns, as to any portion of the Project sh'all contain therein the following language: (a) In Deeds: "Grantee herein covenants by and for itself, 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, creed, religion, sex, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property herein conveyed nor shall the grantee or any person claiming under or through the grantee 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 property herein conveyed. The foregoing covenant shall run with the land." (b) In Leases: "The lessee herein covenants by and for the lessee and lessee's heirs, personal representatives and assigns and all persons claiming under the lessee or through the lessee that this lease is made subject to the condition that there shall be no discrimination against or segregation of any person or of a group of persons on account of race, color, creed, religion, sex, marital status, national origin or ancestry in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the land herein leased nor shall the lessee or any person claiming under or through the lessee establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, sublessees, subtenants, or vendees in the land herein leased." (c) In Contracts: "There shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property nor shall the transferee or any person claiming under or through the transferee 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 of the land." 4.16 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 67289%1 21 applicable t'o thb 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, and their respective successors and assigns, from and against any and all claims, demands, suits and actions at law or in equity, and losses, 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, liabilitie§, 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. ARTICLE V EVENTS OF DEFAULT An Event of Default shall occur hereunder if any of the following shall occur: (a) MISUSE OF FUNDS. The use of any of the Loan Proceeds other than for the purposes authorized pursuant to Section 2.1 of this Agreement. (b) ENCUMBRANCE, SALE, OR LEASE OF THE PROPERTY OR COLLATERAL PROPERTY. The voluntary or involuntary sale, assignment, conveyance, transfer, hypothecation, lease, license or encumbrance of (i) the Property in violation of the Affordable Housing Regulatory Agreement, or (ii) the Collateral Property (or any part thereof or interest therein) without the prior written consent of City or otherwise in violation of Section 1.3 hereof. 672897-1 22 (c) NON-PAYMENT OF LOAN. Any payment due under the Note is unpaid when due, and such default remains uncured for thirty (30) days. (d) INCORRECT REPRESENTATION OR WARRANTY. Any representation or warranty contained in, or made in connection with the execution and delivery of this Agreement, or in any certificate or statement furnished pursuant hereto, shall prove to have been incorrect when made in any matedal reSpect. (e) DEFAULT IN COVENANTS. Borrower defaults in the performance of any term, provision, covenant or agreement (other than an obligation enumerated in this Article V) contained in this Loan Agreement or in any other Loan Document or Additional Document to which Borrower is a party, and unless such document specifies a shorter cure period fOr such default, the default continues for thirty (30) days after.the earlier of the date upon which (1) such default becomes known to Borrower's general partner or principal thereof, or (2) City shall have given written notice of the default to the defaulting party. Any Collateral Property Owner defaults in the performance of term, provision, covenant or agreement (other than an obligation enumerated in this Article V) contained in this Loan Agreement or in any other Loan Document or Additional Document to which Collateral Property Owners are a party, and unless such document specifies a shorter cure period for such default, the default continues for thirty (30) days after the earlier of the date upon which (1) such default becomes known to any Collateral Property Owner, or (2) City shall have given written notice of the default to the defaulting party. (f) Reserved. (g) INSURANCE; TAXES. Borrower or Collateral Property Owners fail to maintain insurance as required by the Loan Documents or fail to pay taxes and assessments when due on their respective property. (h) INSOLVENCY. 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 (a "Bankruptcy Law"): (A) Borrower, any general partner of Borrower, or any Collateral Property Owner: (i) commences a voluntary case or proceeding, (ii) consents to the entry of an order for relief against Borrower, any general partner of Borrower, or any Collateral Property Owner in an involuntary case, (iii) applies for or consents to the appointment of a trustee, receiver, assignee, liquidator or similar official, (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; or (B) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (a) is for relief against Borrower, any general partner of Borrower, or any Collateral Property Owner in an involuntary case, (b) appoints a trustee, receiver, assignee, liquidator or similar official for Borrower, any general partner of Borrower, or any Collateral Property Owner or substantially all of Borrower's, any general partner of Borrower's, or any Collateral Property Owner's 672897-1 23 assets, (c) ord6'rs the liquidation of Borrower or any.general partner of Borrower, or(d) issues or levies a judgment, writ, warrant of attachment or similar process against the Property, the Collateral Property or any other property of Borrower, anY general partner of Borrower, or any Collateral Property Owner, and in each case the order or decree is not released, vacated, dismissed or fully bonded within 60 days after its issuance. (i) JUDGMENTS. If any final judgment for the payment of money that is not fully covered by liability insurance is rendered against Borrower or any Collateral Property Owner and is not discharged within thirty (30) days, or if execution of such judgment is stayed pending appeal but is affirmed on such appeal, such judgment is not discharged within thirty (30) days following such affirmation. (j) DEFAULT ON LOANS SECURED BY PROJECT OR COLLATERAL PROPERTY. A default has been declared by any lender under any loan secured by a deed of trust on the Property or the Collateral Property and such default remains uncured beyond the expiration of any applicable cure period. (k) ACCELERATION OF DEBT SECURED BY COLLATERAL PROPERTY. The holder of any debt instrument secured by a mortgage or deed of trust on the Collateral Property exercises a right to declare all amounts due and payable under that debt instrument immediately due and payable. (I) BREACH OF OBLIGATIONS. If the Partnership or Collateral Property Owners, as applicable, breach any obligation related to any matter for which the Partnership or Collateral Property Owners have agreed to provide indemnification pursuant to Section 4.8, 4.13, or 4.16 hereof. 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 or any Collateral Property Owner, 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 Collateral Property pursuant to the Dbed bf 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. 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. 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 Center Drive Dublin, California 94568 Attention: City Manager 672897-1 25 Borro-'wer: - Fairway Family Community, L.P. c/o Charter Properties 4690 Chabot Drive, Suite 100 Pteasanton, CA 94588 Attention: James Tong Collateral Property Owners: Chang Su-O-Lin, Hong Lien Lin and Hong Yao Lin c/o Charter Properties 4690 Chabot Drive, Suite 100 Pleasanton, CA 94588 Attention: James Tong 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 abddged 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. 672897-1 26 7.7 PARTIES NOT CO-VENTURERS. Nothing in this Agreem~ent i§ 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, subject to the City's sole and absolute election, 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. Borrower and Collateral Property Owners hereby consent and submit to the jurisdiction of any local, state or federal court located 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 or Collateral Property Owners 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 or any Collateral Property Owners in any case shall entitle the Borrower or Collateral Property Owners 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 or Collateral Property Owners, either 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. 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. 672897-1 27 7.13 SURVIVAT~. All representations made by Borrower or Collateral Property Owners hereunder and the provisions of Sections 4.8, 4.13, 4.14, 4.15 and 4.16 hereof shall survive the making and repayment of the Loan and the expiration or termination of this Agreement. The representations of Borrower and Collateral Property 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 and Collateral Property Owners recognize and agree that City is not a commercial lending institution, but a public agency exercising its authority to protect the public health, safety and welfare. Any duties or obligations which a commercial lending institution may have to Borrower or Collateral Property Owners shall not apply to this transaction except as set forth herein and in the Loan Documents. 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 within 30 business days following receipt of written request therefor. 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, any Collateral Property Owner, 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 any Collateral Property Owner or successor in interest to any of the foregoing or for any obligation of City under this Agreement. 7.17 RIGHT OF ACCESS. Borrower and Collateral Property Owners hereby grant to City and City's agents and employees the right, upon reasonable notice to Borrower, to enter upon the COllateral Property and the Property for the purpose of inspecting, examining, Surveying and reviewing the same. 672897-1 28 IN WITNESS WHEREOF, the Parties have each caused this Loan A~'reement to be duly executed as of the date first written above. FAIRWAY FAMILY COMMUNITY, L.P., a California limited partnership By: James Tong, Inc., a California corporation, doing business as Charter Properties, its General Partner By: James Tong, President COLLATERAL PROPERTY OWNERS Chang Su-O-Lin Hong Lien Lin Hong Yao Lin CITY OF DUBLIN, a municipal corporation By: Print name: Its: APPROVED AS TO FORM: City Attorney 672897-1 29 Exhibit A PROPERTY (Multi-Family Housing Site.) 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 THE MAP OF TRACT 7453, FILED FOR RECORD ON NOVEMBER 24, 2003, IN BOOK 273 OF MAPS AT PAGES 52 THROUGH 56, INCLUSIVE, ALAMEDA COUNTY RECORDS. 67259%1 30 Exhibit B COLLATERAL PROPERTY ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE CITY OF DUBLIN, COUNTY OF ALAMEDA, STATE OF CALIFORNIA DESCRIBED AS FOLLOWS: PARCEL 9, AS SAID PARCEL IS SHOWN ON THE MAP OF TRACT 7148, FILED FOR RECORD ON FEBRUARY 14, 2001, IN BOOK 257 OF MAPS AT PAGES 3 THROUGH 7, INCLUSIVE, ALAMEDA COUNTY RECORDS. APN 985-0009-015 Exhibit C DEFINITIONS OF HAZARDOUS MATERIALS; ENVIRONMENTAL LAWS "Hazardous Materials" means any substance, material or waste which is or becomes regulated by any federal, state or local governmental authority, and includes without limitation (i) petroleum or oil or gas or any direct or indirect product or by-product thereof; (ii) asbestos and any material containing asbestos; (iii) any substance, material or waste regulated by or listed (directly or by reference) as a "hazardous substance", "hazardous material", "hazardouS waste", "toxic waste", "toxic pollutant", "toxic substance", "solid waste" or "pollutant or contaminant" in or pursuant to, or similarly identified as hazardous to human health or the environment in or pursuant 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 Safety Code 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; (iv) any substance, material or waste which is defined as such or regulated by any "Superfund" or "Superlien" law, or any' Environmental Law; or (v) any other substance, material, chemical, waste or pollutant identified as hazardous or toxic and regulated Under any other federal, state or local environmental law, including without limitation, asbestos, polychlorinated biphenyls, petroleum, natural gas and synthetic fuel products and by-products: "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 ito, 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 Hazardous _Materials (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; (i~)) 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 672897.1 32 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 Safety Code Section 25100, et seq.], the California Safe Drinking Water and Toxic Enforcement Act ICalifornia 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. 672897-1 33 Exhibit D Form of Promissory Note (Attach form of Note.) 672897-I 34 · SECURED PROMISSORY NOTE $2,250,000' Dublin, California December 1,2003 FOR VALUE RECEIVED, Fairway F~mily Community, L.P., a California limited partnership (hereafter the "Partnership" or the "Obligor") promises to pay to the order of the City of Dublin, a public body corporate and politic ("Holder"), in lawful money of the United States of America, the principal sum of Two Million Two Hundred Fifty Thousand Dollars ($2,250,000) or so much thereof as may be advanced by Holder 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 the manner provided below. Interest shall accrue commencing on the Initial Disbursement Date ahd shall be calculated on the basis of a year of 365 days and charged for the actual number of days elapsed. This Note has been executed and delivered pursuant to and in accordance with the terms and conditions of a Loan Agreement (the"'Loan Agreement"), dated as of the date hereof, by and among the Partnership, Chang Su-O-Lin (an individual also known as Jennifer Lin), Hong Lien Lin (an individual also known as Frederic Lin), Hong Yao Lin (an individual also known as Kevin Lin) and Holder, and is subject to the term~ and conditions of the Loan Agreement, which are, by this reference, inCOrporated herein and made a part hereof. Chang Su-O-Lin, Hong Lien Lin and Hong Yao Lin are hereinafter referred to colleCtively as the "Collateral Property Owners". Capitalized terms used in this Note without definition shall have the meanings ascribed to such terms in the Loan Agreement. This Secured Promissory Note (this "Note") is secured by a Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (the "Deed of Trust") dated as of the date hereof, executed by the Collateral Property Owners collectively as Trustor for the benefit of Holder as beneficiary, and encumbering the real property described therein (the "Collateral Property"). Holder 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, and in the Loan Agreement. 1. PAYMENTS. 1.1. PAYMENT DATES; MATURITY DATE. This Note shall be repaid in three equal installments of principal, together with interest accrued thereon, whiCh installments shall be due on the 4th, 5th and 6th anniversaries of the Initial ' Disbursement Date (i.e. the anniversaries of the Initial Disbursement Date occurring in the 48th month, the 60th month and the 72nd month following the Initial Disbursement Date). The entire outstanding principal balance, together with interest accrued thereon, and any late charges or other sums accrued here.under shall be payable in full on the 6th anniversary of the Initial Disbursement Date (the "Maturity Date"). Any installment of principal or interest not paid when due shall bear interest 672911-1 at a rate equal to ten percent (10%) per annum from the due date for such installment until the date such installment is paid in full. 1.2. PREPAYMENT. This Note or any portion of the outst~'ndifig principal balance due under this Note, may be prepaid without premium or penalty, at any time and from time to time, provided that each such payment is accompanied by payment of interest accrued 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 right of offset, deduction or counterclaim. 1.3. MANNER OF PAYMENT. All payments of principal and interest on this Note shall be made by certified or bank cashier's check payable to Holder at 100 Civic Plaza, Dublin, California 94568 or at such other place as Holder may designate in writing, or by wire transfer of immediately available funds to an account designated by Holder in writing. 1.4. ACCELERATION. Notwithstanding any contrary provision contained in this' Note, and regardless of whether or not a default has occurred hereunder or under the Loan Agreement, if an Event of Default has occurred under the Senior Housing Note or the Senior Housing Loan Agreement (each as defined in the Deed of Trust) and if in connection with such Event of Default, Holder exercises its right to foreclose on the Collateral Property pursuant to the Deed of Trust, then: (i) Holder shall be entitled to declare all amounts due under this Note immediately due and payable, and (ii) the proceeds of any sale of the Collateral Property in connection with such foreclosure shall be used to pay all Secured Obligations (as defined in the Deed of Trust), including without limitation, the outstanding principal balance and all other amounts due under this Note. 2. DEFAULTS; REMEDIES. 2.1. EVENTS OF DEFAULT. The occurrence of any one or more of the following shall constitute an event of default hereunder ("Event of Default"): (a) If any installment of principal and interest payable hereunder is not paid when due and such failure continues for thirty (30) days following the due date for such payment. (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 (a "Bankruptcy Law"): (1) the Partnership or any general - partner thereof consents to the appointment of a trustee, receiver, assignee, liquidator or similar official for the Partnership or any general partner thereof, or (2) the Partnership, any general partner thereof, or any Collateral Property Owner (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against such person or entity in an involuntary case; (iii) makes an assignment for the benefit of such person's or entity's creditors; or (iv) admits in writing the inability to pay such person's or entity's debts as they become due. 672911-1 (c) If a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against the Partnership, any general partn_e.er the. reof, or any Collateral Property Owner in an involuntary case, (ii) appoints a trustee, receiver, assignee, liquidator or similar official for the Partnership or substantially all of the Partnership's assets, (iii) orders the liquidation of the Partnership, or (iv) issues or levies a judgment, writ, warrant of attachment or similar process against the Property, the Project, or the Collateral Property; and in each case the order or decree is not released, vacated, dismissed or fully bonded within 60 days after its issuance. (d) If the Collateral Property, or any part thereof or interest therein is sold, transferred, conveyed, assigned, hypothecated, encumbered, rented, leased or licensed without prior written consent of Holder or otherwise in violation of the Loan Agreement. (e) If any holder of any debt instrument secured by a mortgage or deed of trust on the Collateral Property exercises a right to declare all amounts due under that debt instrument immediately due and payable. (f) If the Partnership (i) fails to maintain insurance on the Property as required pursuant to the Loan Agreement; (ii) fails to pay taxes or assessments due on the Property; (iii) breaches the restrictions against conveyance or further encumbrance of the Project or the Property; (iv) misapplies the Loan proceeds in violation of the Loan Agreement; (v) engages in any act or omission that results in waste to or of the Property and which has a material adverse effect on the value of the Property, the Project, or the Partnership's ability to meet its financial obligations in connection therewith, or (vi) breaches any obligation with respect to the presence or use of hazardous or toxic material or waste on the Property. (g) If any representation or warranty contained in the Loan Agreement or other Loan Documents (as defined in the Loan Agreement) or made in connection with the execution and delivery of this Note or in connection with any request for disbursement of Loan proceeds proves to be false or misleading in any material respect When made. (h) If the Partnership or Collateral Property Owners, as applicable, breach any obligation related to any matter for which the Partnership or Collateral Property Owners have agreed to provide indemnification pursuant to Section 1.5, 4.8, 4.13 or 4.16 of the Loan Agreement and the documents referenced therein. (i) If the Partnership 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 (each as defined in the Loan Agreement) to which the Partnership is a party, and unless such document specifies a shorter cure period for such default, the default continues for thirty (30) days after the earlier of the date upon which (1) such default becomes known to Obligor's general partner or 672911-1 principal thereof, or (2) Holder shall have given written notice of the default to the defaulting party. (j) If any Collateral Property Owner 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 to which such Collateral Property Owner is a party, and unless such document specifies a shorter cure period for such default, the default continues for thirty (30) days after the earlier of the date upon which (1) such default becomes known to any Collateral Property Owner, or .(2) Holder shall have given written notice of the default to the defaulting party. 2.2. NOTICE BY OBLIGOR. Obligor shall notify Holder in writing within five days after the occurrence of any Event of Default of which Obligor acquires knowledge. Collateral Property Owners shall notify Holder in writing within five days after the occurrence of any Event of Default concerning the Collateral Property or arising in connection with Collateral Property Owners' obligations pursuant to this Note, the Loan Agreement or the Deed of Trust. 2.3. REMEDIES. Upon the occurrence of an Event of Default hereunder, Holder may, at its option: (i) by written notice to Obligor and Collateral Property Owners, 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 available to Holder pursuant to this Note, the Loan Agreement or the Deed of Trust, including without limitation, the right to foreclose on the Collateral Property. Obligor shall pay all reasonable costs and expenses, including, without limitation, reasonable attorneys' fees incurred by or on behalf of Holder in connection with Holder'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. 2.4. DEFAULT RATE OF INTEREST. Upon the occurrence of an Event of Default hereunder which remains uncured beyond the expiration of any applicable cure period, interest shall automatically be increased without notice to the rate of ten percent (10%) per annum (the "Default Rate"). The imposition or acceptance of the Default Rate shall in no event constitute a waiver of any default under this Note or prevent Holder from exercising any right or remedy hereunder. Notwithstanding the foregoing, if any payment due hereunder is not paid when due, the Default Rate shall apply beginning on the due date for such payment. 3. LIMITATION ON PERSONAL LIABILITY. Except as provided in this Section, neither Obligor, its constituent partners, nor Collateral Property Owners shall have direct or indirect personal liability for payment of the principal of, or interest on, this Note, and the sole recourse of Holder with respect to the payment of principal of and interest on this Note shall be to the Collateral Property and any other collateral held by Holder as security for this Note; provided, however, that nothing contained in the foregoing limitation of liability shall: 672911-1 (A) constitute a waiver, release, or impairment of any obligation evidenced or secured by this Note, the Loan_. Agreement or the Deed of Trust or otherwise limit or impair the enforcement against all such security for the Loan of all the rights and remedies of the Holder under the Loan Documents (as defined in the Loan Agreement), as each may be amended, modified, or restated from time to time; (B) impair the dght of Holder to bring a foreclosure action, action for specific performance or other appropriate action or proceeding to enable Holder to enforce and realize upon the Deed of Trust, the interest in the Collateral Property created thereby and any other collateral given to Holder in connection with the indebtedness evidenced hereby and to name the Collateral Property Owners as party defendants in any such action; (C) be deemed in any way to impair the right of the Holder 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 Holder' may have under any bankruptcy law to file a claim for the full amount of the indebtedness owed to Holder hereunder or to require that the Collateral Property shall continue to secure all of the indebtedness owed to Holder hereunder in accordance with this Note and the Deed of Trust; (E) limit or restrict the ability of Holder to seek or obtain a judgment against Obligor to enforce against Obligor and its general partners to: (a) recover under Sections 4.8.1,4.13.3, or 4.16 of the Loan Agreement, (b) recover under the Environmental Indemnity Agreement (as described in Section 4.13.3 of the Loan Agreement), (c) recover from Obligor and its general partner(s) compensatory damages as well as other costs and expenses incurred by Holder (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 Partnership, any general partner of the Partnership, or any officer, director, member, employee or agent of the Partnership or of any general partner of the Partnership in connection with the request for or creation of the Loan, or in any Loan Document, or in connection with any request for disbursement of the Loan proceeds, (ii) any failure to maintain insurance on the Property as required pursuant to the Loan Agreement; 672911-1 (iii) failure to pay taxes or assessments due on the Property or the Project; (iv) the presence of hazardous or toxic material or waste on th-~ Property or other violation of the Partnership's obligations under Section 4.13.2 of the Loan Agreement; or (F) limit or i'estrict the ability of the Holder to seek or obtain a judgment against Collateral Property Owners to: (a) recover under the Collateral Property Environmental Indemnity Agreement (described in Section 4.13.4 of the Loan Agreement), (b) Reserved. (c) recover from Collateral Property Owners compensatory damages as well as other costs and expenses incurred by Holder (including without limitation attorneys' 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 any Collateral Property Owner or on the part of any authorized employee or agent of any Collateral Property Owner 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 conse6t by Holder in relation to the Deed of Trust or the Collateral Property, (ii) any matters for which any Collateral Property Owner has agreed to provide indemnification Under Section 4.8.2 or 4.13.4 of the Loan Agreement and the documents referenced therein, (iii) failure to maintain insurance on the Collateral Property as required pursuant to the Loan Documents, (iv) failure to pay taxes or assessments due on the Collateral Property, (v) breach of the restrictions against conveyance or further encumbrance of the Collateral Property, (vi) the occurrence of any act or omission of Collateral Property Owners that results in waste to or of the Collateral Property and which has a matedal adverse effect on the value of the Collateral Property or the security for the Loan, or (vii) the presence of hazardous or toxic material or waste on the Collateral Property or other violation of Collateral Property Owners' obligations under Section 4.13.2 of the Loan 672911-1 Agreement or Section 7.11 of the Deed of Trust (pertaining to environmental matters). Upon the occurrence of any of the events described in Section 2.1(b) or (c), or if any Collateral Property Owner or any duly authorized person acting on behalf of any Collateral Property Owner (i) attempts to prevent or delay the foreclosure of the Deed of Trust following a default resulting from the failure to make any payment due to Holder on any obligation secured by the Collateral Property, or (ii) claims that any Loan Document is invalid or unenforceable and such claim will have the effect of preventing or delaying such foreclosure, then, notwithstanding the limitation of liability in this Section, the Partnership, its general partners, and the Collateral Property Owners Shall be fully personally liable for payment of all sums due hereunder, and Holder's recourse to the personal assets of Obligor, its general partners, and the Collateral Property Owners shall not be limited in any way by the provisions of this SeCtion 3. 4. MISCELLANEOUS 4.1 WAIVER. The rights and remedies Of Holder under this Note shall be oumulative and not alternative. No waiver by Holder of any right or remedy under this Note shall be effective unless in a writing signed by Holder. Neither the failure nor any delay in exercising any right, power or privilege under this Note will operate as a waiver thereof, and no single or partial exercise of any such right, power or privilege by Holder will preclude any other or further exercise thereof or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable law (a) no claim or right of Holder arising out of this Note can be discharged by Holder, in whole or in part, by a waiver or renunciation of the claim or right unless in a wdting, signed by Holder; (b) no waiver that may be given by Holder will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on Obligor or Collateral Property Owners will be deemed to be a waiver of any obligation of Obligor or Collateral Property Owners or of the right of Holder to take further action without notice or demand as provided in this Note. Obligor and Collateral Property Owners hereby waive presentment, demand, protest and notice of dishonor and protest. 4.2 NOTICES. Any notice required or permitted to be given hereunder shall be given in accordance with Section 7.1 of the Loan Agreement. 4.3 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. 4.4 GOVERNING LAW; VENUE. This Note shall be governed by the laws of the State of California without regard to principles of conflicts of laws. All persons and entities in any manner obligated under'this Note consent to the jurisdiction of any federal or state court within California having proper venue. 672911-1 4.5 PARTIES IN INTEREST. This Note shall bind Obligor and its successors and assigns, and shall accrue to the benefit of Holder and its successors and assigns. 4.6 - SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this Note are provided for convenience only and will not affect its construction or interpretation. All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Note unless otherwise specified. All words used in this Note will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the words "hereof" and "hereunder" and similar references refer to this Note in its entirety and not to any specific section or subsection hereof. 4.7 RELATIONSHIP OF THE PARTIES. The loan evidenced by this Note and secured by the Deed of Trust will in no manner make Holder the partner or joint venturer of Obligor or any Collateral Property Owner. 4.8 TIME IS OF THE ESSENCE. Time is of the essence with respect to every provision of this Note. 672911-1 IN WITNESS WHEREOF, Obligor has executed and delivered this Note as of the date first written above. OBLIGOR Fairway Family Community, L.P., a California limited partnership By: James Tong, Inc., a California corporation doing business as Charter Properties Its: General Partner By: James Tong, President Collateral Property Owners hereby acknowledge the terms and conditions of the foregoing Secured Promissory Note and the execution and delivery thereof by Fairway Family Community, L.P., a California limited partnership. Collateral Property Owners Chang Su-O-Lin Hong Yao Lin Hong Lien Lin 672911-1 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Dublin 100 Civic Plaza Dublin, CA 94568 Attn: City Clerk DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING THIS DEED OF TRUST, ASSI.GNMENT OF RENTS, SECURITY AGREEMENT, AND FIXTURE FILING ("Deed of Trust") is made as of December 1,2003, by Chang Su,O-Lin (an individual also known as Jennifer Lin), Hong Lien Lin (an individual also known as Frederic Lin) and Hong Yao Lin (an individual also known as Kevin Lin) to First American Title Company, as trustee ("Trustee"), for the benefit of the City of Dublin, a municipal corporation ("Beneficiary"). Chang Su-O-Lin, Hong Lien Lin and Hong Yao Lin are hereinafter collectively referred to as "Trustor". WHEREAS, Beneficiary, Trustor and Dublin Ranch Senior Apartments, .L.P., a California limited partnership ("Senior Housing Borrower") have entered into that certain Loan Agreement (Senior Housing Component) dated as of the date hereof (the "Senior Housing Loan Agreement") pursuant to which Beneficiary has loaned to Senior Housing Borrower the sum of $2,250,000 (the "Senior Housing Loan"), and Senior Housing Borrower has issued to Beneficiary its Secured Promissory Note dated as of the date hereof ("Senior Housing Note") to secure repayment of the Senior Housing Loan; WHEREAS, Beneficiary, Trustor and Fairway Family Community, L.P., a California limited partnership ("Family Housing Borrower") have entered into that certain Loan Agreement (Multi-Family Housing Component) dated as of the date hereof (the "Family Housing LOan Agreement") pursuant to which Beneficiary has loaned to Family Housing Borrower the sum of $2,250,000 (the "Family Housing Loan"), and Family Housing Borrower has issued to Beneficiary its Secured Promissory Note dated as of the date hereof ("Family Rousing Note") to secure repayment of the Family Housing Loan; WHEREAS, Trustor owns fee simple title to the real property described in Exhibit A attached hereto; and. WHEREAS, Trustor has a direct or indirect ownership in the property that will be developed with the Senior Housing Loan and with the Multi-Family Housing Loan and/or will otherwise derive a material financial benefit from the funding of the Senior Housing Loan and the Multi-Family Housing Loan; 67O676-3 WHEREAS, as a condition precedent to the. making of the Senior Housing Loan and the Family Housing Loan, Beneficiary has required that Trustor enter into this Deed of Trust and grant to Trustee for the benefit of Beneficiary, a first priority lien and security interest in the Property as hereinafter defined. 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 ' Trustor, 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 Trustor now has or may later acquire in and to that certain real property ("Land") located in Alameda County, State of California and more particularly described in Exhibit A attached hereto and incorporated herein by this reference, together with 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 privileges, 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 (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"); 670676-3 2 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 - 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 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 Senior Housing Note and any amendment thereof, including principal, interest and all other amounts payable under the terms of the Senior Housing Note; (ii) all present and future indebtedness evidenced by the Family Housing Note and any amendment thereof, including principal, interest and all other amounts payable under the terms of the Family Housing Note; (iii) all present and future obligations of Trustor to Beneficiary under the Loan Documents (as defined below); (iv) all present and future obligations of the Senior Housing Borrower under the Loan Documents to which Senior Housing Borrower is a party; (v) all present and future obligations of the Family Housing Borrower under the Loan Documents to which Family Housing Borrower is a party; (vi) all additional present and future obligations of Trustor, Senior Housing Borrower or Family Housing Borrower 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; (vii) all modifications, supplements, amendments, renewals, and extensions of any of the foregoing, whether evidenced by new or additional documents; and (viii) reimbursement of all amounts advanced by or on behalf of Beneficiary to protect Beneficiary's interests under this Deed of Trust. The Senior Housing Note, the Family Housing Note, the Senior Housing Loan Agreement, the Family HoUsing Loan Agreement, this Deed of Trust, and the loan commitment letters issued by Beneficiary dated as of July 1,2003 regarding the Senior Housing Loan and the Family Housing Loan ("Loan Commitments") are hereafter collectively referred to as the "Loan 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 670676-3 3 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 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. Regardless of whether or not Beneficiary, in person or by agent, takes actual possession of the Land and Improvements, Beneficiary shall not be deemed to be a "mortgagee in possession," shall not be responsible for performing any obligation of the lessor 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 solely 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. 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. 5. Financinq 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 670676-3 4 appropriate to perfect and preserve Beneficiary's security intereSt in such Property and Rents, without requiring any signature or further authorization by Trustor. 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 never 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 real 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 tothe proceeds off 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) Trust°r'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 never 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. 670676-3 5 7. Trustor's Representations, Warranties and Covenants; Rights and Duties of the Parties. 7.1 Ownership of Property. Trustor represents and warrants that Trustor is lawfully seized of the estate hereby conveyed, has the right to grant and convey the Property, that this Deed of Trust creates a valid first priority monetary lien on Trustor's entire interest in the Property, subject only to encumbrances of record. Trustor warrants and will defend generally the title to the Property against all claims and demands, subject to encumbrances of record. Trustor represents and warrants that (i)Trustor Owns fee simple title to the Land, (ii) subject only to encumbrances of record, the Land is free and clear of any deeds of trust, mortgages, security agreements, reServations of title or conditional sales contracts, and (iii) there is no financing statement affecting the Property on file in any public office. 7.2 Condition of Property. Trustor represents and warrants that except as disclosed to Beneficiary in writing, as of the date hereof to the best knowledge of Trustor: (i) Trustor has not received any notice from any governmental authority of any threatened or pending zoning, building, fire, or health code violation or violation of other governmental regulations concerning the Land that has not previously been corrected, and no condition on the Land violates any health, safety, fire, enVironmental, sewage, building, or other federal, state or local law, ordinance or regulation; (ii) no contracts, licenses, leases or commitments regarding the maintenance or use of the Property or allowing any third party rights to use the Property are in force; (iii) there are no threatened or pending actions, suits, or administrative proceedings against or affecting the Property or any portion thereof or the interest of Trustor in the Property; (iv) there are no threatened or pending condemnation, eminent domain, or similar proceedings affecting the Land or any portion thereof; (v) Trustor has not received any notice from any insurer of defects of the Property which have not been corrected; (vi) there are no natural or artificial conditions upon the Land or any part thereof that could result in a material and adverse change in the condition of the Land; (vii) all information that Trustor has delivered to Beneficiary, either directly or through Trustor's agents, is accurate and complete; and (viii) TrustOr or Trustor's agents have disclosed to Beneficiary all material facts concerning the Property. 7.3 Authority. 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. 7.4 Payment and Performance of Secured Obliqations. Trustor shall promptly pay and perform all obligations of Trustor arising in connection with the Secured Obligations in accordance with the respective terms of each such Secured Obligation. 670676-3 6 7.5 Preservation and Maintenance of Property; Compliance with Laws. Trustor shall keep the Land and improvements located thereon in good repair and condition, and from time to time 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. 7.6 Restrictions on Conveyance. and Encumbrance; Acceleration. It shall be an Event of Default hereunder if the Property, any part thereof, or interest therein is sold, assigned, conveyed, transferred, hypothecated, leased, licensed or encumbered without the prior written consent of Beneficiary or otherwise in violation of the requirements of the Loan Documents, including without limitation, the provisions of Section 1.3 of the Family Housing Loan Agreement and Section 1.3 of the Senior Housing Loan Agreement. If any of the foregoing shall occur, or if Trustor agrees to sell, assign, convey, transfer, hypothecate, lease, license, or encumber the Property, or any part thereof, whether voluntarily or involuntarily, by operation of law or otherwise without the prior written consent of Beneficiary or otherwise in violation of the Loan Documents, 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. 7.7 Inspections. 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. 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 provide 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. 7.10Jl At all times during the term hereof, TrUstor shall keep the improvements and personal property now existing or hereafter erected on the Property insured against loss by fire, vandalism and malicious mischief by a policy of standard 670676-3 fire and extended all-risk insurance. The policy shall be written on a full replacement value basis and shall name Beneficiary as loss payee. The full replacement value of the improvements to be insured shall be determined by the company issuing the policy at the time the policy is initially obtained. Not more frequently than once every two (2) years, either the Trustor or the Beneficiary shall have the right to notify the other party that it elects to have the replacement value redetermined by the insurance company. The proceeds collected under any insurance policy may be applied by BenefiCiary to any indebtedness secured hereby and in such order as Beneficiary may determine, or at the option of Beneficiary, the entire amount so collected or any part thereof may be released to Trustor. Such application or release shall not cure. or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. 7.10.2 Trustor shall at all times during the term hereof, maintain a comprehensive general liability insurance policy in an amount not less than $5,000,000, per occurrence, combined single limit. Such policy shall name the Beneficiary as additional insured. Trustor shall maintain workers' compensation insurance as required by law. 7.10.3 Trustor shall file with Beneficiary prior to the commencement of the term I~ereof, 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. 7.10.4 If any insurance policy required hereunder is canceled or the coverage provided thereunder is reduced, Trustor shall, within fifteen (15) days after receipt of written 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. 7.10.5 The insurance policies required hereunder shall be issued by insurance companies authorized to do business in the State of California with a financial rating of at least A VII status as rated in the most recent edition of Best's Key Rating Guide. Each policy of insurance shall contain an endorsement requiring the insurer to provide at least 30 days written notice to Beneficiary prior to change in coverage, cancellation or expiration thereof. 7.11 Hazardous Materials. Trustor represents and warrants that except as disclosed to BenefiCiary in writing, as of the date hereof to the best knowledge of Trustor: (i) the Land is free and has always been free of Hazardous Materials (as defined below) and is not and has 670676-3 8 never been in violation of any Environmental Law (as defined below); (ii) there are no buried or partially buried storage tanks located on the Land; (iii) Trustor has received no notice, warning, notice of violation, administrative complaint, judicial complaint, or other formal or informal notice alleging that conditions on the Land are or have ever been in violation of any Environmental Law or informing Trustor that the Land is subject to investigation or inquiry regarding Hazardous Materials on the Land or the potential violation of any Environmental Law; (iv) there is no monitoring program required by the Environmental Protection Agency or any other governmental agency concerning the Land; (v) no toxic or hazardous chemicals, waste, or substances of any kind have ever been spilled, disposed of, or stored on, under or at the Land, whether by accident, burying, drainage, or storage in containers, tanks, holding areas, or any other means; (vi) the Land has never been used aS a dump or landfill; and (vii) Trustor has disclosed to Beneficiary all information, records, and studies in Trustor's possession or reasonably available to Trustor relating to the Land concerning Hazardous Materials. Trustor shall not cause or permit any Hazardous Materials 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 course and scope of Trustor's operations on the Land 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. Trustor hereby releases and waives any and all claims against Beneficiary for indemnity or contribution in the event that Trustor becomes liable for any cost or obligated to undertake any action pursuant to any Hazardous Material Claim (as defined in the Environmental Indemnity Agreement dated as of the date hereof and executed by Trustor for the benefit of Beneficiary "Environmental Indemnity Agreement") or any Environmental Law. 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 breach of Trustor's representations and warranties set forth in Section 4.13.1 (b) of the Family Housing Loan Agreement, Section 4.13.1 (b) of the Senior Housing Loan Agreement, and Section 7.11 hereof, or otherwise 'arising in connection with the actual or alleged Release (as defined in the Environmental Indemnity Agreement) or presence of any Hazardous Materials on, under, in or about the Land, 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, 670676-3 9 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) ~'eimburse Indemnitees for any expenses paid or incurred in connection 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; (ii) any extensions of time for performance required by any Loan Document; (iii) any provision in any of the Loan Documents limiting Beneficiary's recourse to property securing the Secured Obligations, or limiting the personal liability of Senior Housing Borrower, Family Housing .Borrower, 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 Senior Housing Borrower, Family Housing Borrower, or any other person, by Beneficiary or by operation of law, from performance of any obligation under any Loan 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 or applicable law. The obligations of Trustor to indemnify the Indemnitees.under this Section shall survive any repayment 670676-3 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(f)(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 '/'36") 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 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. "Hazardous Material" means any substance, material or waste which is or becomes regulated by any federal, state or local governmental authority, and includes without limitation (i) petroleum or oil or. gas or any direct or indirect product or by- product thereof; (ii) asbestos and any material containing asbestos; (iii) any substance, material or waste regulated by or listed (directly or by reference) as a "hazardous substance", "hazardous material", "hazardous waste", "toxic waste", "toxic pollutant", "toxic substance", "solid waste" or "pollutant or contaminant" in or pursuant to, or similarly identified as hazardous to human health or the environment in or pursuant 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 Safety Code 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; (iv) any substance, material or waste which is defined as such or regulated by any "Superfund" or "Superlien" law, or any Environmental Law; or (v) any other substance, material, chemical, waste or pollutant identified as hazardous or toxic and regulated under any other federal, state or local environmental law, including without limitation, asbestos, polychlorinated biphenyls, petroleum, natural gas and synthetic fuel products and by-products. "Environmental Law" means all federal, state or local statutes, ordinances, 670676-3 z~ 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 Safety Code 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 after any of the following shall occur, Trustor shall provide written notice thereof to Beneficiary: (1) the occurrence of any Event of Default hereunder of which Trustor acquires knowledge; (2) any change in name, identity, legal structure, business location, or address of Trustor; or (3) any uninsured or partially uninsured loss affecting the Property through fire, theft, liability, or property damage in excess of an aggregate of Twenty Five Thousand Dollars ($25,000). Trustor shall 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. (b) Defense of Security. At Trustor's sole expense, Trustor shall protect, 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. 670676-3 (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. 7.13 Indemnification. (a) Trustor shall indemnify, defend (with counsel reasonably acceptable to Beneficiary), and hold harmless the Indemnitees (as defined in Section 7.1 1)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 of the Loan Documents, (b) any representation by Trustor 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, whethe¢ 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 anylndemnitee which relates to or arises out of the Property, or any Loan 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 solely caused by such Indemnitee's gross negligence or willful misconduct. The obligations of Trustor under this Section shall survive the repayment of the Senior Housing Loan and the Family Housing Loan and shall be secured by this Deed of Trust. Notwithstanding any contra~ provision contained herein, the obligations of Trustor..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. (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 670676-3 z3 /§0 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 or bad faith of Beneficiary. Trustor hereby expressly waives and releases all liability of the types described above, and agrees that Trustor shall assert no claim related to any of the foregoing against Beneficiary. 7.14 Condemnation Awards. Any award of damages in connection with any condemnation for public use of or injury to the Property or any part thereof is hereby assigned to, and shall be paid to Beneficiary, who may apply such moneys to any indebtedness secured hereby and in such order as Beneficiary may determine, or at option of Beneficiary the entire amount so collected or any part thereof may be released to Trustor. Such application or release shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. 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, the Senior Housing Note, and the Family Housing 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 ali recordation fees related to such reconveyance. 7.17 Right to Cure. Should Trustor fail to make any payment or do any act as herein provided, then Beneficiary or Trustee, but without obligation to do so and without notice to or demand upon Trustor and without releasing Trustor from any obligation 670676-3 14 /91 hereof, may do any of the following: (i) make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof, Beneficiary or Trustee being authorized to enter upon the Property for such purposes; (ii) appear in, commence, and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; (iii) pay, purchase, contest, or compromise any encumbrance, charge, or lien which in the judgment of either appears to be prior or superior hereto; and (iv) in exercising any such powers, or in enforcing this Deed of Trust by judicial foreclosure, pay necessary expenses, employ counsel, and pay reasonable attorneys' fees. Any amounts disbursed by Beneficiary pursuant to this paragraph shall become additional indebtedness secured by this Deed of Trust. 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) An Event of Default under the Senior Housing Note or Senior Housing Loan Agreement; (ii) 'An Event of Default under the Family Housing Note or the Family Housing Loan Agreement; (iii) Trustor fails to perform any obligation to pay money which arises under this Deed of Trust, and does not cure that failure within five (5) days following written notice from Beneficiary or Trustee; (iv) Trustor violates any provision of Section 7.6 pertaining to restrictions on sale, transfer, lease, or encumbrance of the Property; (v) Section 7.10~ Trustor fails to maintain the insurance coverage required under (vi) Trustor fails to comply with the requirements of Section 7.8 (Charges, Liens, Taxes and Assessments); (vii) 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 proves to have been false or misleading in any material respect when made; (viii) A default has been declared by any lender under any loan or other obligation secured by a deed of trust on the Property or part thereof, and such default remains uncured beyond the expiration of any applicable cure period; (ix) The holder of any other debt instrument secured by a mortgage or 670676-3 15 deed of trust on the Property or part thereof exercises a right to declare all amounts due and payable under that debt instrument immediately due and payable; (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 thirty (30) days ("Initial Cure Period") after written notice from Beneficiary or Trustee, or within ninety (90) days after such written notice, provided that Trustor commences within the Initial Cure Period and diligently continues to cure the failure, and Beneficiary, exercising reasonable judgment, determines that the cure cannot reasonably be completed at or before expiration of the Initial Cure Period; or (xi) A default other than one enumerated in this Section 8.1 occurs under any of the Secured Obligations and continues beyond the expiration of any applicable cure period. 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 ail of the rights and remedies described below, and may exercise any one or more or all, of the remedies set forth in the Senior Housing Loan Agreement, Family Housing Loan Agreement, Senior Housing Note or Family Housing Note, and any other remedy existing at law or in equity or by statute. All of the foregoing 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 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 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. 670.676-3 16 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. (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, 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. 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, 670676-3 17 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 it in the notice of sale, either as a whole or in separate parcels and in such order as it 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 cost of evidence of title and 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. Without limiting the generality of the foregoing, Trustor acknowledges and agrees that regardless of whether or not a default has occurred hereunder, if an Event of Default has occurred under one or more of the Senior Housing Note, the Family Housing Note, the Senior Housing Loan Agreement, or the Family Housing Loan Agreement, and if in connection with such Event of Default, Beneficiary exercises its right to foreclose on the, Property, then: (i)'Beneficiary shall be entitled to declare all amounts due under the Senior Housing Note and the Family Housing Note immediately due and payable, and (ii) the proceeds of any sale of the Property in connection with such foreclosure shall be used to pay all Secured Obligations, including without limitation, the outstanding principal balance and all other amounts due under the Senior Housing Note and under the Family Housing Note. 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: (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 670676-3 Z8 (b) Second, the remaining balance of all other Secured Obligations in any order and proportions as Beneficiary in its sole discretion may choose. 8.5 Trustor's Riqht 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. 9. Non-Borrower Trustor. 9.1 Definitions. As used in this Section 9, "Third Party Secured Obligation" means any Secured Obligation that is required to be performed by Senior Housing Borrower or by Family Housing Borrower. 9.2 Rights of Beneficiary. Trustor authorizes Beneficiary to perform any or all of the following acts at any time in its sole and absolute discretion, all without notice to Trustor and without affecting Beneficiary's rights or Trustor's obligations under this Deed of Trust: (a) Beneficiary may alter any terms of any Third Party Secured Obligation, including renewing, compromising, extending or accelerating, or otherwise changing the time for payment of, or increasing or decreasing the rate of interest on, any Third Party Secured Obligation; (b) Beneficiary may take and hold security for any Third Party Secured Obligation, accept additional or substituted security for that obligation, and subordinate, exchange, enforce, waive, release, compromise, fail to perfect, and sell or otherwise dispose of any such security; (c) Beneficiary may direct the order and manner of any sale of all or any part of any security now or later to be held for any Third Party Secured Obligation, and Beneficiary may also bid at any such sale and may apply all or any part of any Third 6'70676-3 19 Party Secured Obligation against the amount so bid; (d) Beneficiary may apply any payments or recoveries .from Senior Housing Borrower, Family Housing Borrower, Trustor, or any other source, and any proceeds of any security, to Third Party Secured Obligations in the manner, order, and priority Beneficiary may elect, in its sole and absolute discretion, whether that obligation is secured by this Deed of Trust or not at the time of the application; (e) Beneficiary may release Senior Housing Borrower and/or Family Housing Borrower of its liability for any Third Party Secured Obligation or any part of it; (f) Beneficiary may substitute, add, or release any one or more guarantors or endorsers; and - (g) In addition to the Third Party Secured Obligation, Beneficiary may extend other credit to Senior Housing Borrower or Family Housing Borrower, and may take and hold security for the credit so extended, whether or not such security is also security for the Third Party Secured Obligation, all without affecting Beneficiary's rights or Trustor's liability under this Deed of Trust. 9.3 Deed of Trust to be Absolute. Trustor expressly agrees that until the Secured Obligations are paid and performed in full, and each and every term, covenant, and condition of this Deed of Trust is fully performed, Trustor will not' be released by or because of: (a) Any act or event that might otherwise discharge, reduce, limit, or modify Trustor's obligations under this Deed of Trust; (b) Any waiver, extension, modification, forbearance, delay, or other act or omission of Beneficiary, or its failure to proceed promptly or otherwise as against Senior Housing Borrower, Family Housing Borrower, Trustor, or any security; (c) Any'action, omission, or circumstance that might increase the likelihood Trustor may be called upon to perform under this Deed of Trust or that might affect the rights or remedies of Trustor against Senior Housing Borrower or Family Housing Borrower; (d) Senior Housing Borrower or Family Housing Borrower becoming insolvent or subject to any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships and as a result thereof some or all of the Third Party Secured Obligation being terminated, rejected, discharged, modified or abrogated; (e) Any dealings occurring at any time between Senior Housing Borrower or Family Housing Borrower and Beneficiary, whether relating to the Third Party Secured Obligation or otherwise; or 670676-3 20 (f) Any action of Beneficiary described in Section 9.2 above. Trustor hereby acknowledges that absent this Section 9.3, Trustor might have a defense to the enforcement of this Deed of Trust as a result of one or more of the foregoing acts, omissions, agreements, waivers or matters. Trustor hereby expressly waives and surrenders any defense to its liability under this Deed of Trust based upon any of such acts, omissions, agreements, waivers, or matters. It is the express purpose and intent of this Deed of Trust that the obligations of Trustor under this Deed of Trust are and shall be absolute, unconditional and irrevocable. 9.4 Trustor's Waivers. Trustorwaives: (a) All statutes of limitations as a defense to any action or proceeding brought against Trustor by Beneficiary, to the fullest extent permitted by law; (b) Any right it may have to require Beneficiary to proceed against Senior Housing Borrower or Family Housing Borrower or any other party, proceed against or exhaust any security held from Senior Housing Borrower or Family Housing Borrower or any other party, or pursue any other remedy in Beneficiary's power to pursue; (c) To the extent permitted by applicable law, the benefit of all laws now existing or which may hereafter be enacted providing for any appraisement, valuation, stay, extension, redemption or moratorium; (d) All rights of marshalling in the event of foreclosure; (e) Any defense based on any claim that Trustor's obligations exceed or are more burdensome that those of Senior Housing Borrower or Family Housing Borrower; (f) Any defense based on: (i) any legal disability of Senior Housing Borrower or Family Housing Borrower, (ii) any release, discharge, modification, impairment, or limitation of the liability of Senior Housing Borrower or Family Housing Borrower to Beneficiary from any cause, whether consented to by Beneficiary or arising by operation of law or from any voluntary or involuntary proceeding under the United StateS Bankruptcy Code or any other federal or state law relating to insolvency or relief of debtors ("Insolvency Proceeding") or (iii) any rejection, disallowance or disaffirmance of the Third Party Secured Obligation, or any part of it, or any · security held for it, in any Insolvency Proceeding; (g) Any defense based on any action taken or omitted by Beneficiary in any Insolvency Proceeding involving Senior Housing Borrower or Family Housing, 'including without limitation, filing, defending, settling or obtaining a judgment or order on any proof of claim or any adversary proceeding, making any election to have Beneficiary's claim allowed as being secured, partially secured or unsecured, including any election under 11 U.S.C. Section 111 l(b), seeking relief from the automatic stay or 670676-3 21 adequate protection, inCluding submitting an apPraisal 'of any security, voting to reject or accept or failing to vote on any reorganization plan, making any extension of credit by BeneficiarY to Senior Housing Borrower or Family Housing in any Insolvency Proceeding, and the taking and holding by Beneficiary of any security for any such extension of credit, whether or not such security is also security for the Third Party Secured Obligation; (h) 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; (i) Any defense based on or arising out of any defense that Senior Housing Borrower or Family Housing Borrower may have to the payment or performance of the Third Party Secured Obligation or any part of it; and (j) Any defense based on or arising out of any action of Beneficiary described in Sections 9.2 or 9.3 above. 9.5 Waivers of Subrogation and Other Riqhts and Defenses. (a) The obligations of Trustor hereunder are independent of the obligations of SeniOr Housing Borrower and Family Housing Borrower, and a separate action or actions may be brought against Trustor whether or not action or suit is brought against Senior Housing Borrower or Family Housing Borrower or either of them is joined in any such action or actions. At the option of Beneficiary, Trustor may be joined in any action or proceeding commenced by Beneficiary against Senior Housing Borrower or Family Housing Borrower in connection with or based on the Third Party Secured Obligation or any security for such obligation, and recoverY may be had against Trustor in such action or proceeding without any requirement that Beneficiary first assert, prosecute or exhaust any remedy or claim against Senior Housing Borrower or Family Housing Borrower. (b) Upon a default by Senior Housing Borrower or Family Housing Borrower, Beneficiary, in its sole and absolute discretion, without prior notice to or consent of Trustor, may elect to: (i) foreclose either judicially or nonjudicially against any real or personal property security it may hold for the Third Party Secured Obligation, other than the Property hereby encumbered, (ii) accept a transfer of any such security in lieu of foreclosure, (iii) compromise or adjust the Third Party Secured Obligation or any part of it or make any other accommodation with Senior Housing Borrower or Family Housing Borrower or Trustor, or (iv) exercise any other remedy against Senior Housing Borrower or Family Housing Borrower or any security other than the Property hereby encumbered. With respect to security other than the Property hereby encumbered, no such action by Beneficiary will release or limit the liability of Trustor, who will remain liable under this Deed of Trust after the action, even if the effect of the action is to deprive Trustor of any subrogation rights, rights of indemnity, or other rights to collect 670676-3 22 reimbursement from Senior Housing Borrower or Family Housing Borrower for any sums paid to Beneficiary, whether contractual or arising by operation 'of law or otherwise. After any foreclosure or deed in lieu of foreclosure of any real or personal property pledged to secure the Third Party Secured Obligation, Trustor shall under no circumstances be deemed to have any right, title, interest or claim in or to such property, whether it is held by Beneficiary or any third party. (c) Regardless of whether Beneficiary may have recovered against Trustor, Trustor hereby waives: (i) all rights of subrogation, all rights of indemnity, and any other rights to collect reimbursement or contribution from Senior Housing Borrower or Family Housing Borrower or any other party for any recovery by Beneficiary against Trustor, whether contractual or arising by Operation of law (including the United States Bankruptcy Code or any successor or similar statute) or otherwise (collectively, "Reimbursement Rights"), (ii) all rights to enforce any remedy that Beneficiary may have against Senior Housing Borrower or Family Housing Borrower, and (iii) all rights to participate in any security now or later to be held by Beneficiary for the Third. Party Secured Obligation. To the extent Trustor'S waiver of Reimbursement Rights is found by a court of competent jurisdiction to be void or voidable for any reason, any Reimbursement Rights Trustor may have against Senior Housing Borrower or Family Housing Borrower or any collateral or security shall be junior and subordinate to any rights Beneficiary may have against Senior Housing Borrower or Family Housing Borrower and to all right, title, and interest Beneficiary may have in any such collateral or security. If any amount should be paid to Trustor on account of any Reimbursement Rights at any time when the Third Party Secured Obligation has not been paid in full, such amount shall be held in trust for Beneficiary and shall immediately be paid over to Beneficiary to be credited and applied against the Third Party Secured Obligation, whether matured or unmatured, in accordance with the terms of the Loan Documents. The covenants and waivers of Trustor set forth in this subsection 9.5 shall be effective until the Third Party Secured Obligation has been paid and performed in full and are made solely for the benefit of Beneficiary. (d) Trustor waives all rights and defenses that Trustor may have because the Third Party Secured Obligation may be secured by real property other than the Property hereby encumbered. This means, among other things: (i) Beneficiary may collect from Trustor (including enforcing this Deed .of Trust against Trustor) without first foreclosing on any real or personal property collateral pledged by Senior Housing Borrower or Family Housing Borrower; (ii) If Beneficiary forecloses on any real property collateral pledged by Senior Housing Borrower or Family Housing Borrower: (A) The amount of the Third Party Secured Obligation may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is.worth more than the sale price. 67O676-3 23 (B) Beneficiary may collect from Trustor (including enforcing this Deed of Trust against Trustor) even if Beneficiary, by foreclosing on the real property collateral pledged by Senior Housing Borrower or Family Housing Borrower, has destroyed any right Trustor may have to collect from Senior Housing Borrower or Family Housing Borrower. This subsection 9.5 is an unconditional and irrevocable waiver of any rights and defenses Trustor may have because the Third Party Secured Obligation may be secured by real property other than the Property hereby encumbered. These rights and defenses include, but are not limited to, any rightS or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure. (e) Without limiting the generality of the foregoing subsection 9.5, Trustor understands and acknowledges that if Beneficiary forecloses judicially or nonjudicially against any real property securing the Third Party Secured Obligation other than the Property hereby encumbered, that foreclosure could impair or destroy any ability that Trustor may have to seek reimbursement, contribution or indemnification from Senior Housing Borrower or Family Housing Borrower or others based on any Reimbursement Right Trustor may have for any recovery by Beneficiary under this Deed of Trust. Trustor further understands and acknowledges that in the absence of this Section 9.5, sUch potential impairment or destruction of Trustor's rights, if any, may entitle Trustor to assert a defense to this Deed of Trust based on Section 580d of the California Code of Civil Procedure as interpreted in Union Bank v: Gradsky, 265 CaI.App.2d 40 (1968). By executing thiS Deed of Trust, Trustor freely, irrevocably and unconditionally: (i) waives and relinquishes that defense and agrees that Trustor will be fully liable under this Deed of Trust even though Beneficiary may foreclose judicially or nonjudically against any real property security for the Third Party Secured Obligation other than the Property; (ii) agrees that Trustor will not assert that defense in any action or proceeding which Beneficiary may commence to enforce this Deed of Trust; (iii) . acknowledges and agrees that the rights and defenses waived by Trustor under this Deed of Trust include any right or defense that Trustor may have or be entitled to assert based upon .or arising out of any one or more of Sections 580a, 580b, 580d Or 726 of the California Code of Civil Procedure or Section 2848 of the California Civil 'Code; and (iv) acknowledges and agrees that Beneficiary is relying on this waiver in extending credit to Senior Housing Borrower and Family Housing Borrower in the form of the Third Party Secured Obligation, and that this waiver is a material part of the consideration which Beneficiary is receiving for extending such credit to Senior Housing Borrower and Family Housing Borrower. (f) Trustor waives all rights and defenses arising out of an election of remedies by Beneficiary, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Trustor's rights of subrogation and reimbursement against Senior Housing Borrower and Family Housing Borrower by operation of SectiOn 580d of the California Code of Civil Procedure or otherwise. 670676-3 24 (g) Trustor waives Trustor's rights of subrogation and reimbursement, including (i) any defenses Trustor may have by reason of an election of remedies by Beneficiary, and (ii) any rights or defenses Trustor may have by reason of protection afforded to Senior Housing Borrower or Family Housing Borrower with respect to the Third Party Secured Obligation pursuant to the anti-deficiency or other laws of California limiting or discharging Senior Housing Borrower or Family Housing Borrower's obligations, including Sections 580a, 580b, 580d or 726 of the California Code of Civil Procedure. - (h) Trustor waives any rights, defenses and benefits that may be derived from Sections 2787 to 2855, inclusive, of the California Civil Code or comparable provisions of the laws of any other jurisdiction and further waives all other suretyship defenses Trustor would otherwise have under the laws of California or any ot'her jurisdiction. (i) Trustor waives any right to a fair value hearing under California Code of Civil Procedure Section 580a, or any similar law, to determine the size of any deficiency owing (for which Trustor would be liable hereunder) following a nonjudicial foreclosure sale of anY property other than the Property hereby encumbered. (j) No provisiOn or waiver in this Deed of Trust shall be construed as limiting the generality of any other provision or waiver contained in this Deed of Trust. All of the waivers contained herein are irrevocable and unconditional and are intentionally and freely made by Trustor. 9.6 Revival and Reinstatement. If Beneficiary is required to pay, return, or restore to Senior Housing BOrrower or Family Housing Borrower, or any other person, any amounts previously paid on the Third Party Secured Obligation because of any Insolvency Proceeding of Senior Housing Borrower or Family Housing Borrower, any stop notice, or any other reason, the obligations of Trustor will be reinstated and revived, and the rights of Beneficiary will continue with regard to such amounts, all as though they had never been paid, and this Deed of Trust shall continue to be effective or be reinstated, as the case may be. 9.7 Information Reqardin.q Borrower. Trustor represents that: (a) Beneficiary has made no representation to Trustor as to the creditworthiness of Senior Housing Borrower or Family Housing Borrower, and (b) no oral promises, assurances, representations or warranties have been made by or on behalf of Beneficiary to induce Trustor to execute and deliver this Deed of Trust. Trustor has received and approved copies of all other requested Loan Documents. Before signing' this Deed of Trust, Trustor investigated the financial condition and business operations of Senior Housing Borrower and Family Housing Borrower and any other matters Trustor deemed appropriate to assure itself of Senior Housing Borrower and Family Housing Borrower's ability to discharge its obligations in connection with the Third Party Secured Obligation. Trustor assumes full responsibility for that due diligence, as well as for keeping informed 670676-3 25 of all matters that may affect Senior Housing Borrower's and Family Housing Borrower's ability to pay and perform their respective obligations to Beneficiary. Beneficiary has no duty to disclose to Trustor any information that Beneficiary may have or receive aboUt Senior Housing Borrower's or Family Housing Borrower's financial condition or business operations, or any other circumstances bearing on Senior Housing Borrower or Family Housing Borrower's ability to perform. 9.8 Miscellaneous. Trustor acknowledges that Trustor has had adequate opportunity to carefully read this Deed of Trust and to consult with an attorney of Trustor's choice prior to signing it. No consent, approval or authorization of or notice to any person or entity is required in connection with Trustor's execution of and obligations under this Deed of Trust. No course of prior dealing, usage of trade, parol or extrinsic evidence of any nature may be used to supplement, modify or vary any of the terms hereof. 10. Miscellaneous Provisions 10.1 Additional Provisions. The Loan 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. 10.2 Notices. Trustor requests that a copy of notice of default and notice of sale be mailed t© 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 670676-3 26 100 Civic Center Drive Dublin, California 94568 Attention: City Manager Trustor: Chang Su-O-Lin, Hong Lien Lin and Hong Yao Lin c/o Charter Properties 4690 Chabot Drive, Suite 100 Pleasanton, CA 94588 Attention: James Tong Trustee: First American Title Company Attention: 10.3 Successors and Assiqns. 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. 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 lawsl 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 670676-3 27 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 Joint and Several Liability. If Trustor consists of. more than one person, each shall be jointly and severally liable for the faithful performance of all of Trustor's obligations under this Deed of Trust. '10.9 Counterparts. This Deed of Trust may be executed in counterparts, each fof which shall be an original and all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the date first written above. Chang Su-O-Lin Hong Yao Lin Hong Lien Lin SIGNATURES MUST BE NOTARIZED. 670676-3 28 Exhibit A Land ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE CITY OF DUBLIN, COUNTY OF ALAMEDA, STATE OF CALIFORNIA DESCRIBED AS FOLLOWS: PARCEL 9, AS SAID PARCEL IS SHOWN ON THE MAP OF TRACT 7148, FILED FOR RECORD ON FEBRUARY 14, 2001, IN BOOK 257 OF MAPS AT PAGES 3 THROUGH 7, INCLUSIVE, ALAMEDA COUNTY RECORDS. APN 985-0009-015 670676-3 29 ACKNOWLEDGMENT State of California ) ) SS. County of Alame;da ) 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 670676-3 3O RESOLUTION NO. - 03 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN APPROVING TWO LOANS FOR FAIRWAY RANCH AND AUTHORIZING EXECUTION OF LOAN DOCUMENTS WHEREAS, the City Council finds that there is a severe shortage of housing affordable to lower- income households in the City of Dublin; and WHEREAS, the development of affordable housing in the City of Dublin will serve a public purpose; and WHEREAS, the Fairway Ranch project will provide 162 affordable units in excess of the affordable units required for the site; and WHEREAS, the Fairway Ranch development, which includes both Fairway Family Apartments and Dublin Ranch Senior Apartment has received an allocation of multifamily tax-exempt bonds to provide financing for both projects; and WHEREAS, the City of Dublin has provided a commitment to provide a loan of up to $2,250,000 for the Fairway Family Apartments from the Inclusionary Housing In Lieu Fund; and WHEREAS, the City of Dublin has provided a commitment to provide a loan of up to $2,250,000 for the Dublin Ranch Senior Apartments from the Inclusionary Housing In Lieu Fund; and. WHEREAS, the City of Dublin has decided that it would be advantageous to secure both City loans with collateral property, separate from the Fairway Ranch development; and WHEREAS, as a condition to providing financing for the developments, the construction and permanent lenders will require the City to subordinate its Affordable Housing Regulatory Agreements and its fight to receive payment from project cash flow to the rights of such lenders; and WHEREAS, repayment of the City's loans will be secured by a first lien on separate collateral property; and WHEREAS, a Declaration of Covenants, Conditions and Restrictions imposing affordability restrictions will be recorded against the projects in a position senior to the construction and permanent lender liens. NOW, THEREFORE, BE iT RESOLVED that the City Council of the City of Dublin, a Municipal Corporation, approves the Loan Agreements, Promissory Notes and Deed of Trust for the Fairway Family Apartments and Dublin Ranch Senior Apartments attached to the Agenda Statement for December 2, '2003. ATTACHMENT 2 FURTHER RESOLVED, that the City Council authorizes and directs the Mayor, the Mayor Pro Tempore or the City Manager to sign the foregoing agreements substantially in the form attached to the Agenda Statement which accompanied this Resolution. The Council ~rther authorizes the City Manager or his designee 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 subordination agreements and such other certificates and documents as may be necessary to effectuate the transactions contemplated hereby as such agreements, certificates and documents may be approved by the City Manager and City Attorney. PASSED, APPROVED, AND ADOPTED this 2nd day of December 2003. AYES: NOES: ABSENT: ABSTAIN: ATTEST: Mayor City Clerk G:~PA//L2003\03-010 Faiv0va,v Ranch'~CC-Reports for Loan Docs'~Resolution. Fairway Loan Approval. Libby. DOC CITY OF DUBLIN BUDGET CHANGE FORM New Appropriations (Ci.tl~0uncil AplXov~l~eqmred): X l~om Unappropriated Reserves From New Revenues CHANGE FORM #: Budget Transfers: From Budgeted Contingent Reserve (1080-799.000) Within Same Department Activity Between Departments (City Council Approval Required) Other AI~rorOa0le Housing e'una - Housing Name: Name: Programs-Fairway Family Apts 2,250,000 Account: Account: 380-50500-740-000 Affordable Housing Fund - Housing Name: Name: Programs-Dublin Ranch Senior Apts 2,250,000 Account: Account: 380-50500-740-000 Name: Name: Account: Acc. ount: Name: Name: Account: Account: Name: Name: Account: Account: Name: Name: ~,ccount: Account: Name: Name: ~_ccount: Account; Total - Total 4,500,000 Reason for Budget Change: City entering into two loans'toward the development of two affordable housing projects. All funds are ant c pated to be disbursed in FY 2003-2004 Signature City Manager: Signature Date: Mayor: Date: Signature Posted By: Signature Date: ATTACHMENT 3 budget change form.for loans 1 of 1 '~SSOR ' S 98B/15 g86/15 988/18 986/19 ~ASON DRIVE ~~-- 986/IT pARI~SAY 986/IT MAP 985 SOUTH RANCHO ,SAN RAMON (J.M.AMADOR] 'RANCHO SANTA RITA (J.YOUNTZ] :m TR. 7 I48 ~/~-~ ~'~ .TR.6959 IT ~Rmv^y .. . O UBL 1 N BOULEVARD 41 ~ INTERSTATE 4-^LA~$8o 580' Description: Alameda, CA Assessor MaP 985.9 Page: ~ of 2 Order: 6~ 2074 Comment: 4O COLLATERAL' PROPERTY ATTACHMENT 4 CITY OF DUBLIN 100 Civic Plaza_ Dublin, Cs~lifornia 94568 Website: http://www, ci,dublin.ca.us July 1, 2003 RE: Fairway Ranch- Multi-Family Housing (Dublin Ranch) Dear Chang Su-O-Lin and Hong Lien Lin: When accepted by Chang Su,O-Lin (also known as Jennifer Lin) and Hong Lien Lin (also known as Frederic Lin) (collectively "Owners") this letter (hereafter "Commitment" or "Commitment Letter"), the terms of which were approved by the City Council of the City of Dublin, California ("City") by Resolution No. 149-03 adopted July I, 2003, shall constitute the commitment of City to make a loan (the "Loan") from City's Inclusionary Zoning In-Lieu Fee Fund in the amount and subject to the terms, conditions, and provisions set forth herein. 1. Borrower, Manager/General Partner; Assignment. Subject to Paragraph 16 hereof, Owners shall be permitted to assign their rights hereunder to Fairway Family Community, L.P., a limited partnership to be organized under the laws of the State of California (hereafter "Fairway Multi- Family Partnership") for the purpose of developing the Multi-Family Housing Project (as defined below). The general partner of Fairway Multi-Family Partnership shall be Charter Properties, a California corporation. Prior to the assignment described in this Paragraph, the term "Borrower" as used herein shall mean the Owners. Following such assignment, 'the term "Borrower" as used herein shall m~an Fairway Multi-Family Partnership, and the term "General Partner" as used herein shall mean the general parmer of Fairway Multi-Family Partnership. 2. Loan Amount. The amount of the Loan shall be Two Million Two Hundred and Fifty Thousand Dollars ($2,250,000). 3. Loan Term. The Loan shall be for a term of six (6) years commencing on the date of first disbursement of the Loan ("Initial Disbursement Date"). 4. Repayment. The Loan will be repaid in three equal installments of principal, together with interest accrued thereon, on the 4th, 5th and 6th anniversary of the Initial Disbursement Date. 5.. Interest Rate. Three percent (3%) simple interest per annum shall accrue on the outstanding principal balance of the Loan. 6. ' Prepayment. The Loan may be prepaid in whole or in part without penalty or premium. The effectiveness of the Affordable Housing Regulatory Agreement and the CC&Rs (each as described below) shall survive any such prepayment. Area Code (925) - City Manager 833-6650 · City Council 833-6650 · Personnel 833-6605 · Economic Development 833-6650 Finance 833-6640 · Public Works/Engineering 833-6630 - Parks & Community Services 833-6645 · Police 833-6670 647196-3 Planning/Code Enforcement 833-6610 · Building inspection 833-6620 · Fire Prevention Bureau 833-6606 Printed on Recycled Paper ATTACHMENT 5 7. Use of Proceeds. The Loan proceeds shall be used exclusively to pay for third-party construction costs Borrower incurs to construct very low-, low- and moderate-income units constructed as part of'the multi-family housing development (hereafter referred to as the "Multi- Family Housing Project") that Borrower shall develop on the property (the "Property") that is the subject of that certain Development Agreement - Fairway Ranch Multi-Family Housing Component dated as of July 15, 2003, with an Effective Date of August 15, 2003, and executed by and between City and Owners or their successor(s) in interest (the "Multi-Family Housing Development Agreement"). 8. Collateral. The Loan shall be secured by a first deed of trust (the "Deed of Trust") on Certain real property (the "Collateral Property") commonly known as Parcel 9 of Tract 7148, Dublin, California, together with improvements that may be constructed thereon and all equipment, personal property and fixtures that may be located thereon. The Collateral Property is owned by Chang Su-O-Lin, Hong Lien Lin and Hong Yao Lin, each of whom shall execute the Deed of Trust. The Deed of Trust shall also secure any loan the City may provide in connection with the development of senior housing ("Senior Housing Project") on the property that is the subject of that certain Development Agreement ~ Fairway Ranch Senior Housing Component dated as of July 15, 2003, with an Effective Date of August 15, .2003, and executed by and between City and Owners or their successor(s) in interest. The Collateral Property shall be subject to no mortgage, lien or claim other than liens for which the City has provided written consent and which: ~ (a) are subordinate to the Deed of Trust, (b) secure repayment of obligations incurred solely in connection with the .financing of the Multi- Family Housing Project, the Senior Housing Project or other purposes approved bY City, (c) require notice to the City in the event of default, and (d) do not in the aggregate together with all other outstanding liens result i~. e..ncumbrance of the Collateral PrOperty in ~xcess of 60% of its fair market value. Borrower may provide substitute collateral reasonably acceptable to City in the form of real property located within the City of Dublin, provided that: (i) in City's reasonable determination, the fair market value of such substitute collateral is at least three times the value of the outstanding balance of Borrower's obligations to City to be secured thereby; (ii) Borrower pays all reasonable expenses City incurs in connection with City's review and investigation of the condition and value of such property; (iii) City's lien securing Borrower's obligations is a first lien on Such property; and (iv) any subordinate liens on such property meet the requirements of the second paragraph of this Paragraph 8. 9. Limitation of Liability, The Loan shall be non-recourse as to payment of principal and interest; Borrower's obligation to repay the Loan shall be secured by the Collateral Property. 10. Documents. City's commitment to make the Loan described in this Commitment Letter is subject to the condition that Borrower and Chang Su-O-Lin, Hong Lien Lin and Hong Yao Lin (collectively hereafter, the "Lins" or the "Indemnitors"), as applicable, shall duly execute, acknowledge and deliver to City all documents required to evidence and secure repayment of the Loan, which documents shall be in form and substance satisfactory to the City Manager and the City Attorney, and which shall include, without limitation, the following documents (collectively, the "Loan Documents"): 647196-3 2 (a) a Development Agreement for Dublin Ranch Area B, executed by City and by Owners or their successor(s) in interest as owner of Dublin Ranch Area B ("Development Agreement- Fairway Ranch") which shall describe the conditions of development for such property, including conditions related to compliance with City's Inclusionary Zoning Ordinance and the phasing of development for such property; (b) the Multi-Family Housing Development Agreement, executed by City and by Owners or their successor(s) in interest as owner of the Property, which shall describe the conditions of development for the Property including conditions relating to compliance with City's Inclusionary Zoning Ordinance, and which shall be assigned to Borrower prior to the closing of the Loan ("Closing"); (c) an Affordable Housing Regulatory Agreement, executed by Owners and Borrower, which shall provide that of the units developed within the Multi-Family Housing Project, 63 shall be made available at affordable rents to verv low-income households, 90 shall be made av~iable at affordable rents to low-income households, and 90 shall be made.available at affbrdable rev_ts to moderate-income households (collectively the "Affordability Restrictions"). The Affordable Housing Regulatory Agreement shall be recorded against the Property, shall be binding upon Owners' and Borrower's successors in interest for a term of 55 years, and shall not be subordinated to any interest, lien, lease, ground lease or mortgage recorded against the Property other than the CC&R' s, the Development Agreement-Fairway Ranch, the Multi-Family Housing DeYelopment Agr'~ement, and thc Master Development Agreement between City and ~he Lira:...t.;::~r the Dublin Ranch Project (Areas A, B~ C, D, E, F, G and H) ("Master Development Agreeme~,~t'); provided however, if CC&Rs (as described below) are recorded against the Property re. accordance with all conditions described in subparagraph (d) of this Paragraph 10, lhe A:fTfordable Housing Regulatory Agreement may be subordinated to the interests and rights of senior lenders providing financing for the Multi-Family Housing Project in a manner customary for a Fmmie Mae or Freddie Mac credit enhanced tax-exempt bond transaction, if so required; (d) a Declaration of Covenants, Conditions and Restrictions ( CC&Rs , which shall impose the Affordability Restrictions, executed by the owner(s) of the Property for the benefit of City. The CC&Rs: (i) shall be recorded against the Property, (ii) shall be binding upon Owners' and Borrower's successors in interest for a term of 55 years, (iii) shall provide that City shall have the fight to enforce the provisions thereof, (iv) shall provide that any amendments thereto or rescission thereof shall require the consent of City, and (v) shall not be subordinated to any other interest, lien, lease, ground lease or mortgage recorded against the Property other than the Development Agreement-Fairway Ranch, the Multi-Family 'Housing Development Agreement, and the Master Development Agreement; (e) a Loan Agreement, executed by City and Borrower, and approved by the Lins as owners of the Collateral Property, which shall describe the conditions under which the Loan proceeds may be disbursed consistent with the terms of this Commitment Letter; (f) a Promissory Note in the amount of the Loan, executed by Borrower; 647196-3 3 (e) a Loan Agreement, executed by City and Borrower, and approved by the Lins as owners of the Collateral Property, which shall describe the conditions under which the Loan proceeds may be disbursed consistent with the terms of this Commitment Letter; (f) a Promissory Note in the amount of the Loan, executed by Borrower; (g) a Deed of Trust, executed by the Lins as owners of the Collateral Property, which shall secure repayment of the Loan and which shall be recorded as a first lien on the Collateral Property;' (h) an Environmental Indemnity Agreement, executed by the Borrower and the Indemnitors, which shall provide for the indemnification of City against all claims, costs, expenses, and liability arising in connection with the presence of hazardous materials on the Collateral Property or the Property or the violation of any environmental law, nde or regulation applicable thereto; (i) a General Indemnity Agreement, executed by Borrower and the Indemnitors, which shall provide for the indemnification of City against all claims, costs, expenses, and liability arising in connection with the breach of Borrower's or the Indemnitors' representations, warranties and covenants (other than Borrower's payment obligations) made in connection with the Loan. The terms and scope of the General Indemnity Agreement shall be comparable to that required by other lenders or investors providing f'mancing to the Senior Housing Project. 11. Additional Deliveries. City's obligation to make the Loan is subject to the condition that City shall have received each of the following, in form 'and substance satisfactory to City no later than 30 days prior to Closing unless otherwise specified herein: (a) Evidence of Funding. Evidence of funding commitments sufficient to fully finance the construction and permanent financing of the Senior Housing Project. (b) Senior Housing Proiect Budget. Borrower shall deliver to City a budget for development Of the Senior Housing Project ("Senior Housing Project Budget")which shall show all sources and uses of funds for construction and permanent financing of the Senior Housing Project. (c) Appraisal. At Borrower's expense, if City so elects, City may select and engage an appraiser to provide a valuation of the Collateral Property or any substitute collateral proposed by Borrower. (d) Environmental Reports. Borrower shall deliver to City a Phase I environmental report for (i) the Property, and (ii) the Collateral Property. If su~ch environmental reports are not 'satisfactory to City, City may request further environmental testing to be conducted at Borrower's expense, or may terminate this Commitment. (e) Financial statements. Borrower shall furnish to City operating pro formas for the Senior Housing Project in such form and detail as City reasonably requests. 63310%7 4 ("Title Insurance Commitment"). The Title Insurance Commitment will be issued by a title insurer approved by City. On the Closing Date, BOrrower will provide to City a title insurance policy issued pursuant to the Title Insurance Commitment. (g) ReserVed. (h) Plans and Specifications; Building Permits; Licenses. Borrower shall provide a complete set of the final plans and specifications for the Multi-Family Housing Project fOr approval by City, and Borrower shall obtain all building permits and other approvals necessary for the Multi-Family Housing Project. Borrower shall provide evidence to City that all gOvernmental permits and approvals required for the Multi-Family Housing Project have been Obtained from the appropriate agencies. " (i) Construction Contract; Bonds. Borrower will provide City with a guaranteed maximum price general construction contract in an amount no greater than the amount indicated by the Multi-Family Housing Project Budget, together with payment and performance bonds with a dual obligee rider in favor of City. The general contractor, the form and content of the general contract and the form and content of the bonds must be acceptable to:City. (J) Ground Lease. Borrower shall provide to City a copy of the ground lease for the Property, executed by and between Borrower as lessee and the owner(s) of the Property as lessor. (k) Insurance. City shall be named as an additional insured on all insurance policies required by lenders or investors providing financing for the MultirFamily Housing Project, and all such policies shall provide that City will receive not less than thirty (30) days' written notice prior to cancellation. .... (1) Management Contract and Management Firm. Borrower shall provide a copy of the proposed management contract for the Multi-Family Housing Project together with such information about the proposed management firm, including without limitation a description of the management firm's experience with Similar projects, 'staffing and qualifications, as. City may reasonably request. The management contract shall describe the serVices to be provided by the management firm, including without limitation, marketing, tenant qualification and certification, maintenance and repairs. (m) Marketing and Management Plan. Borrower shall provide City with a copy of a proposed marketing and management plan for the Multi-Family Housing Project which shall address how Borrower proposes to (1) manage and maintain the Multi-Family Housing Project, (2) market the affordable units in the Multi-Family Housing Project to eligible households in acCordance with the selection criteria specified in the City's Inclusionary Zoning Regulations, and (3) certify the eligibility of eligible households. (n) , Authorizations; Good Standing. Borrower shall provide City with the following: For Borrower: (i) a certified copy of Borrower's partnership agreement together with a Certificate of Good Standing and LP-1 indicating that Borrower is properly organized and 647196-3 5 authorized to do business in the State of California; (ii) a certified resolution indicating that Borrower has authorized this transaction and that the persons executing the Loan Documents on Borrower's behalf have been duly authorized to do so. If Borrower is organized in a form other than a limited partnership, Borrower shall provide counterpart organizational documents and certificates applicable to such organizational form. For Borrower's General Partner: (i) Articles of Incorporation certified by the Secretary of State; (ii) bylaws certified by the Secretary of the corporation; (iii) Certificate of Good Standing issued by the Secretary of State; (iv) certified resolution indicating that the General Partner has authorized this transaction and that the persons executing the Loan Documents on the General Partner's behalf have been duly authorized to do so. If Borrower is organized in:.a form other than a limited partnership, or if Borrower's General Partner is organized in a form other than a corporation, Borrower shall provide counterpart organizational documents and certificates applicable to such organizational forms. (o) Legal Opinion. Borrower shall provide. City with an opinion of B0rrower's counsel which shall provide that Borrower and Borrower's General Parmer are duly organized, validly existing and authorized to do business in the State of California, that each of the Loan Documents has been duly authorized and executed and when delivered shall be the binding obligations of the owners of the Property, the Borrower and/or the Indemnitors, as applicable, enforceable in accordance with their respective terms. 12. Adverse Change. This Commitment is made in reliance on information provided by or on behalf of Owners, Borrower, Borrower's General Partner, and the Indemnitors. Each such party hereby represents and warrants that such information is accurate"and complete in all material respects, tf any information which has been or is hereafter supplied to City in connection with the Loan, the Collateral Property or the Multi-Family Housing Project becomes inaccurate or incomplete in any material respect, Borrower or Owners shall immediately notify City in writing prior to the Closing Date. City's obligation to close the Loan is conditioned on the absence of any material adverse change in the financial condition or prospects of Borrower, Borrower's General Partner, or the Indemnitors or the condition of the Collateral Property. 13. Expiration Date. This Commitment shall be considered accepted by Borrower upon delivery to the City of a signed original of this letter. The executed Commitment Letter shall, be delivered to the City no later than September t, 2003, or this COmmitment Letter will be null and void. This Commitment and City's obligation to fund the Loan shall expire on December 31, 2005, if Borrower has not received an allocation for the issuance of tax-exempt bonds for the Multi- Family Housing Project by such date. 14. Closing Date. The Loan shall close and be funded simultaneously with or following the closing for and funding of construction financing for the Multi-Family Housing Project, the issuance of tax-exempt bonds for the Multi-Family Housing Project, and 'the pay-in of equity contributions from the tax credit investors pursuant to the approved Multi-Family Housing Project Budget. The Loan must be closed on or before the deadline established by the California Debt Limit Allocation Committee for issuance of tax-exempt bonds for the Multi-Family Housing Project or such later date as mutually agreed upon by City and Borrower; provided 647196-3 6 however, in no event shall the closing date for the loan ("Closing Date") occur later than the earlier of (i)six months following such deadline, or (ii) June 30, 2006. If the Closing Date does not occur prior to the earlier of such dates, City's obligations under this Commitment will terminate automatically and without notice. 15. Entire Agreement. This Commitment, together with the Loan Documents, constitutes the entire agreement between City and Borrower with respect to the subject matter hereof, and no prior discussions, correspondence or documents will be considered to vary or explain the terms of this Commitment. All conditions and requirements set forth in this Commitment are material to City, and except as specified herein, must be satisfied by Borrower prior to the Closing Date. 16. Assignment; Amendment. Neither this Commitment'nor the Loan proceeds may be assigned without City's prior written consent, and without such consent there will be no right to designate a payee of the Loan proceeds. Any attempt at assignment without such consent, will be void. This Commitment cannot be amended orally, but only by an instrument in writing signed by the party against whom enforcement of any change is sought. 17. Waive~:s. City, in its sole discretion, may waive, in writing, certain Commitment conditions; however, waiver of any condition or requirement shall not be construed as waiver of any other provision(s) of this Commitment. 18. Default. Failure by Borrower to fully comply with all of the Commitment conditions within the times herein required will constitute a default by Borrower hereunder and, unless waived by City in writing, will automatically cause this Commitment to terminate. In no event will inaction by City be deemed a waiver of any requirement hereunder or any default by Borrower. City reserves the right to cancel this Commitment in the event of any material misrepresentation made in any information furnished to City by or on behalf of Owners, Borrower, Borrower's General Partner or the Indemnitors. 19. Property Inspection. Borrower agrees that, until such time as the Loan is paid in full, City shall have the right to inspect the Multi-Family Housing Project, the Property'and the Collateral Property at any time upon reasonable notice. 20. Bankruptcy/Insolvency. In the event of bankruptcy or insolvency of Borrower, Borrower's General Partner, or any Indemnitor, whether voluntarily or involuntarily, this. Commitment shall terminate. 21. Legal Actions. Owners, Borrower, Borrower's General Partner and the Indemnitors hereby represent and warrant that there is no litigation, prosecution, investigation, or proceeding of any nature whatsoever now pending or overtly threatened in writing against Owners; Borrower, Borrower's General Partner, or any Indemnitor that seeks.to affect the enforceability of any of the Loan Documents or is likely to adversely affect the ability of BorroWer to pay and perform the obligations of Borrower to City thereunder or the ability of any Indemnltor to perform its obligations thereunder. 647196-3 7 22. Property; Collateral Property. Owners hereby represent and warrant that they are the owners in fee simple of the Property and that they have all due authority to execute the CC&Rs which shall be recorded against the Property subject to no prior claim, lien or interest. The Lins hereby represent and warrant that they are the owners in fee simple of the Collateral Property, that such property has a fair market value of at least $13.5 million, and that they have authority to execute the Deed of Trust which shall be a first lien on the Collateral Property. 23. Costs. Owners or Borrower shall be responsible for all costs of Closing including, but not limited to title insurance, recording fees, escrow fees, the cost of appraisals, surveys and other items Borrower is required to deliver to City hereunder. Whether or not the Loan is closed, all exPenses incurred by City in connection with the Loan, including without limitation, reasonable expenses of City's legal counsel and f'mancial advisor, shall be paid by Borrower or the Indemnitors. 24. Liability. No member, officer, agent, or employee of City shall be liable personally concerning any matters arising out of or in relation to the undertaking or obligations set forth in this Commitment Letter. Dated as of this 1st day of July, 2003. ,J(;l~Oa;orL°ckhart Approved ~ to Form: City Attorney Attest:' . O e~k 647196-3 8 The attached Loan Commitment Letter dated as of July 1, 2003, executed by the City of Dublin for the Fairway Ranch Multi-Family Housing Project (Dublin Ranch) is hereby accepted. Dated: ,~"J'(~.~ /'/0,2003. BORROWER FAIRWAY FAMILY COMMUNITY, L.P., a California limited parmership By: Its: CHAR/TE~ General1 Pa PROPERTIES, a California corporation :her J~JL 1 ~ 200~ DUBLIN PLANNING 647196-3 9 CITY OF DUBLIN 100 Civic Plaza. Dublin, California 94568 WebsJte: http://www, ci.dublin.ca.us July 1, 2003 RE: Fairway Ranch - Senior Housing (Dublin Ranch) Dear Chang Su-O-Lin and Hong Lien Lin: When accepted by Chang Su-O-Lin (also known as Jen~_ifer Lin) and Hong Lien Lin (also known as Frederic Lin) (collectively "Owners"), this letter (hereafter "Commitment" or "Commitment Letter"), the terms of which were lpproved by the City Council of the City of Dublin, California ("City") by Resolution No. 149-03 adopted July 1, 2003, shall constitute the commitment of City to make a loan (the "Loan") from City's Inclusionary Zoning In-Lieu Fee Fund in the amount and subject to the terms, conditions, and provisions set forth herein. 1. Borrower, Manager/General Partner; Assignment. Subject to Paragraph 16 hereof, Owners shall be permitted to assign thei'r rights hereunder to Dublin Ranch Senior Apartments, L.P., a limited partnership to be organized under the laws of the State of California (hereafter "Dublin Ranch Senior Project Partnership") for the purpose of developing the Senior Housing Project (as defined below). The general panner of Dublin Ranch Senior Project Partnership shall be KL Acquisition Management, LLC, a California limited liability company, whose managing member is Hong Yao Lin. Prior to the assignment described in this Paragraph, the term "Borrower" as used herein shall mean the Owners. Following such assignment, the term "Borrower" as used herein shall mean Dublin Ranch Senior Project Partnership, and the term "General Partner" as used herein shall mean the general partner of Dublin Ranch Senior Project Partnership. 2. Loan Amount. The amount of the Loan shall be Two Million Two Hundred and Fifty Thousand Dollars ($2,250,000). 3. Loan Term. The Loan shall be for a term of six (6) years commencing on the date of first disbursement of the Loan ("Initial Disbursement Date"). 4. Repayment. The Loan will be repaid in three.equal installments of principal, together with interest accrued thereon, on the 4th, 5th and 6th anniversary of the Initial Disbursement Date. 5. Interest Rate. Three percent (3%) simple interest per annum shall accrue on the outstanding principal balance of the Loan. Area Code (925) - City Manager 833-6650 - City Council 833-6650 - Personnel 833-6605 . Economic Development 833-6650 Finance 833-6640 · Public Works/Engineering 833-6630 - Parks & Community Services 833-6645 · Police 833-6670 63310?-7 Planning/Code Enforcement 833-6610 · Building lnl~pection 833-6620 - Fire PreventiOn Bureau 833-6606 Printed on Recycled Paper 6. P~.pavment. The Loan may be prepaid in whole or in part without penalty or premiu.m~ The effectiveness of the Affordable Housing Regulatory' Agreement and the CC&Rs (each as described below) shall survive any such prepayment. 7~ Use of Proceeds. The Loan proceeds shall be used exclusively to pay for third-party construction costs Borrower incurs to construct very low-, low- and moderate-income units constructed as part of the senior housing development (hereafter referred to as the "'Senior Hoasing Project") that Borrower shall develop on the property (the "Property") that is the subject of that certain Development Agreement- Fairway Ranch Senior Housing Component dated as of July 15, 2003, with an Effective Date of August 15, 2003, and executed by and between City and Owners or their successor(s) in interest (the "Senior Housing Development Agreement'% 8. Collateral. The Loan shall be secured by a first deed of trust (the "Deed of Trust'S) on certain real property (the "Collateral ProperS') commonly known, as Parcel 9 of Tract 7 t 48, Dublin, California, together with improvements that may be constructed thereon and all equipment~ personal property and fixtures that may be located thereon~ The Collateral Property is owned by Chang Su-O-Lin, Hong Lien Lin and Hong Yao Lin. each of whom shall execute lhe Deed of Trust. The Deed of Trust shall also secure any loan the City may provide in connection with the development of nmlti-family housing ("Multi-Family Project") on the property thal is the subject of that certain Development Agreemenx - Fairway Ranc. h Mu!t.i.. F.~w?.ity' Gomponertt dated as of July 15, 2003; with an Effective Date of August '[ 5.2003. and .~..,,tw~en City and OYuaers or their succ .... or~o) ir~ toreros{. exe<;uted by and :~ ..... '~° r~, ' Thc CcH~?~t.era! Pre, perry shall be subject to no mortgage, lien or claim other thar~ ~iens for which the Cityi[nas provided writ.len consent and which: (a) are subordinate to the Deed of Trusl~ (b) secure -repayment of cbligmions incurred solely in connection with the financing of the Senior Housing Project, the Multi-Family Project or other purposes approved by City, (c) reqmre notice 'to One City in the event of default, and (d) do not in the aggregate 'toge~er with all other outstanding liens result in encumbrance of the Collateral Property in excess of 60% of its ihir market vol'ac, Borrower may provide substitute collateral reasonably acceptable to City in.the form of real property located within the City of Dublin, provided that: ti) in City's reasonable determination. the ±htr market value of such substitute collateral is at least three times the value of the outstanding balance of Borrower's obligations to City to be secured thereby; (ii) Borrower pays ali reasonable expenses City incurs in connection with City's review and investigation oft he condition and value of such property; (iii) City's li en securing Borrower's obligations is a first lien on such property; and (iv) any subordinate liens on such property meet the requirements of due second paragraph of this Paragraph 8. 9. Limitation of Liability. The Loan shall be non-recourse as to payment of principal and interest; Borrower's obligation to repay the Loan shall be secured by the Collateral Property. 10. Documents. City's commitment to make the Loan described in this Commitment Letter is subiect to the condition that Borrower and.Chang Su-O-Lin, Hong Lien Lin and Hong Yao Lin (coilectively hereafter, the "Lins" or the "Indemnitors"), as applicable, shall duly execute, 633107-7 2 acknowledge and deliver to City all documents required to evidence and secure repayment of the Loan, which documents shall be in form and substance satisfactory to the City Manager and the City Attorney, and which shall include, without limitation, the following documents (collectively, the "Loan Documents"): (a) a Development Agreement for Dublin Ranch Area B, executed by City and by Owners or their successor(s) in interest as owner of Dublin Ranch Area B ("Development Agreement- Fairway Ranch") which shall describe the conditions of development for such Property, including conditions related to compliance with City's Inclusionary Zoning Ordinance and the phasing of development for such property; (b) the Senior Housing Development Agreement, executed by City and by Owners or their successor(s) in interest as owner of the Property, which shall describe the conditions of development for the Property including conditions relating to compliance with City's Inclusionary Zoning Ordinance, and which shall be assigned to Borrower prior to the closing of the Loan ("Closing"); (c) an Affordable Housing Regulatory Agreement, executed by Owners and Borrower, which shall provide that of the units developed within the Senior Housing Project, 64 shall be made available at affordable rents to very low-income households, 97 shall be made available at affordable rents to low-income households, and 131 shall be made available at affordable rents to moderate-income households (collectively the "Affordability Restrictions"). The Affordable Housing Regulatory Agreement shall be recorded against the Property,. shall be binding upon O~vners' and Borrower's successors in interest for a term of 55 years, and shall not be' subord~.~mted t° any interest, lien, lease, ground..lease or mortgage recorded against the Property other than the CC&R's, the Development Agreement-Fairway 'Ranch, the Senior Housing Development Agreement, and the Master Development Agreement between City and the Lins for the Dublin Ranch Project (Areas A, B, C, D, E, F, G and H) ("MaSter Development Agreement"); provided however, if CC&Rs (as described below) are recorded against the Property in accordance with all conditions desCribed in subparagraph (d) of this Paragraph 10, the Affordable Housing Regulatory Agreement may be subordinated to the interestS and rights of senior lenders providing financing for the Senior Housing Project in a manner customary for a Fannie Mae or Freddie Mac credit enhanced tax-exempt bond transaction if so require& (d) a Declaration of Covenants, Conditions and Restrictions ("CC&Rs") which Shall impose the Affordability Restrictions, executed by the owner(s) of the Property for the benefit of City. The CC&Rs: (i) shall be recorded against the Property, (ii) shall be binding upon Owners' and Borrower's successors in interest for a term of 55 years, (iii) shall provide that Cityshall have the right to enforce the provisions thereof, (iv) shall provide that any amendments :thereto or 'resciSsion thereof shall require the consent of City, and (v) shall not be subordinated to any other interest~ lien, lease, ground lease or mortgage recorded against the Property other than the Development Agreement-Fairway Ranch, the Senior Housing Development Agreement, and the Master Development Agreement; 633107~,7 3 (e) a Loan Agreement,i executed by City and Borrower, and approved by the Lins as ovmers of the Collateral Property, which shall describe the conditions under which the Loan proceeds may be disbursed cOnsistent with the terms of this Commitment Letter; (f) a Promissory 'Note in the amount of the Loan, executed by Borrower; (g) a Deed of Trust, executed by the Lins as owners of the Collateral Property, which shall secure repayment of the Loan and which shall be recorded as a first lien On the Collateral Property; (h) an EnVironmental I~ndenmity Agreement, executed by the Borrower and the tndemnitors, which shall provide for the indemnification of City against all claims, costs, expenses, and liability arising in connection with the presence of hazardous materials on the Collateral Property or the Property or the violation of any environmental law, rule or regulation applicable thereto; (i) a General Indemnity Agreement, executed by Borrower and the Indemnitors, which shall provide for the indemnification of City against all claims, costs, expenses, and liability ah sing in connection with the breach of Borrower's or the Indemnitors' representations, warranties and covenants (other than Borrower's payment obligations) made in. connection with tt~e ~oan. The ten~s and scope of the General Indemnity Agreement shall be comparat:le To that required by (;thor lenders or investors providing financing to the Senior Housing Projecr~ Additional Deliveries. City's ob!Sgation m make the Loan'is subject 'to the condition that C?.-7~' :.:n.a:~ have received each of the following, in form and substa~.ce sa. tisfu~tory to ,.try no later t!xv*.?. 3:0 Yzlas~s prior to Closing unless other~vise specified herein: (a) Evidence of Funding. Evidence of funding commitments sufficient to fully finance the construction and permanent financing of the Senior Housing Project. (b) Senior Housing .Prqiect Budg_¢5~ Borrower shall deliver to City a budget for development of the Senior Housing Project ("Senior Housing Project Budget") which shall show all sources and uses of funds for construction and permanent financing of the Senior Housing Project~ (c) A__p_t2raisal. At Borrower's expense, if City so elects, City may select and engage an appraiser to provide a valuation of the Collateral Property or any substitute collateral proposed by Borrower. (d) Environmental Reports. Borrower shall deliver to City a Phase I environmental report Ibr (i) the Property, and (ii) the Collateral Property. If such environmental reports are not satisfactory to City, City may request further environmental testing to be conducted at Borrower's expense, or may terminate this Commitmem (e) Financial Statements. Borrower shall furnish to City operating pro formas for the Senior Housing Project in such form and detail as City reasonably .requests. 633107-'~ 4 (f) Title Insurance. Borrower shall provide tc City a commitment to issue a CLTA Lender's title insurance policy in the full amount of the Loan (together with all' other Obligations secured by the Deed of Trust) in form and substance acceptable to City, insuring 'that the lien of the Deed of Trust, when recorded against the Collateral Property, shall be subject to only such exceptions as approved by City and which shall include such endorsements as requested by City ("Title Insurance Commitment") The Title Insurance Commitment will be issued by a title insurer approved by City. On the Closing Date, Borrower will provide to City a title insurance policy issued pursuant to the Title Insurance Commitment. (g) Reserved. (h) Plans and Specifications: Building Permits: Licenses. Borrower shall provide a complete se~: of the final plans and specifications for the Senior Housing Pmiect for approval by City, arid Borrower shall Obtain all building permits and other approvals necessary for the Senior Housing Project. Borrower shall provide evidence to City that all goverm'nental permits and approvals required for the Senior Housing Project have been obtained from the appropriate age~cies~ ~([) Construction Contract: Bonds. Borrower will provide City with a guaranteed maxi m~m price general construction contract in an amount no greater than the amom'tt i~'~dicated by tb, e.'.:Se:r~,4or Housing Project Budget~ together with pas,znent and perfom~ance bonds with a dual .v~,i.i:gee rider in favor of City. The general contractor, the fbrm and content of' the gener~i r:o-ntract m~d 1!~e fbrm and content o~'ti:~.e bonds must be acceptable to City. :~(j) Ground Lr, ase. Borrower shall provide to City a copy of the ground lease !hr ihe Property, executed by m2d between Borrower as lessee and the owner(s) of the Property as lessor. (k) insurance. C, ity shall be named as an additional insured on all insurance policies required by lenders or investors providing financing for the Senior Housing Project, and all such policies shall provide 1.hat City will recei, ve not less than thirty (30) days; written notice prior to c~celtation. (i) Management Contract and Management Firm. Borrower shall provide a copy of the. proposed management contract.for the Senior Ht,~using Project together with such inibrmation abo't~1 t~he proposed management finn, including without limitation'a desc:dpfion of the management firm's experience with similar projects, staffing and qualifications, as City may reasonably request. The management contract shall describe the services to be provided by the maumgemenr firm, including without limitation, marketing, tenant qualification and certification, n~aintenanc~ a.n.d repairs. (m) Marketing and Management Plan. Borrower shall provide City with a copy of a proposed marketing and management plan for the Senior Housing Project which shall address how Borrower proposes to (1) manage and maintain the Senior Housing Project, (2) market the al'fordable units in the Senior Housing Project 'to eligible households in accordance with the 633107~? 5 selection criteria specified in the City's inclusionary Zoning Regulations, and (3) certify the eligibility .of eligible senior households, (n) Authorizations; Good Standing. Borrower shall provide City with the following: For Borrower: (i) a certified copy of Borrower's partnership agreement together with a Certificate of Good Standing and LP-1 indicating that Borrower is properly organized and authorized to do business in the State of California; (ii) a certified resolution indicating that Borrower has authorized this la:ansaction and that the persons executing the Loan Documents on Borrower's behalf have been duly authorized to do so. If Borrower is organized in a form other than a limited partnership, Borrower shall provide counterpart organizational documents and certificates applicable to such organizational form. For Borrower's General Partner: (i) Certificate of FormatiorffArticles of Organization certified by the Secretary 6f State; (ii) operating agreement certified by the Manager/Managing Member of the company; (iii) Certificate of Good Standing issued by the Secretary of State; (iv) certified resolution indicating that the General Parmer has authorized this transaction and that the pemons executing the Loan Documents on the General Partner's behalf have been duty authorized to do so. If Borrower is organized in a form other than a limited partnership, or if Borrower's General Partner is organized in a form other than a limited liability company, Borrower shall provide counte~art organizational documents and certificates applicable to such organ:~zational forms. (o) l~ega! Opinion. Borrower shall provide City with an opinion of Borrower's counsel which :shall provide that' Borrower and Borrower's General Parmer are duly organ/zed, validly existing m~d authorized to do business in the State of. California, that each of the Loan Documents has been duly authorized and executed and when delivered shall be the binding obligations of the owners of the Property, Borrower anc[/or the Indemnitors, as applicable, enforceable in accordance with their respective terms. t2. Adverse Change. This Commitment is made in reliance on information provided by or on behal£ of Owners, Borrower, Borrower's General Partner, and the ln. de:mnitors. Each such party hereby represents and warrants that such information is accurate and complete in all material respects. If any information which has been or is hereafter supplied to City in connection with the Loan, the Collateral Property or the Senior Housing Project becomes inaccurate or incomplete in any material respect, Borrower or Owners shall immediatelyinotify City in writing prior to the Closing Date. City's obligation to close the Loan is conditioned on the absence of any material adverse change in the financial condition or prospects of Borrower; Borrower's General Partner, or the Indemnitors or the condition of the Collateral Property. 13. Expiration D'ate. This Commitment shall be considered accepted by Borrower upon delivery to the City of a signed original of this letter. The executed Commitment Letter shall be delivered to the City no later than September 1, 2003, or this Commitment Letter will be null and void. This Commitment and City's obligation m fund the Loan shall expire on December 31,2005, if Borrower has not received an allocation for the issuance of tax-exempt bor/ds for the Senior Housing Project by such date. 633107-7 6 14. Closine Date. The Loan shall close and be funded simultaneously with or following the closing for and funding of construction financing for the Senior Housing Project, the issuance of tax-exempt bonds for the Senior Housing Project, and the pay-in of equity contributions from the tax credit investors pursuant to the approved Senior Housing Project Budget. The Loan must be. closed on or before the deadline established by the California Debt Limit Allocation Committee for is3uance of tax-exempt bonds for the Senior Housing Project or such later date as mutually agreed upon by City and Borrower; provided however, in no event shall the closing date for the loan ("Closing Date") occur later than the earlier of (i) six months following such deadline, or (ii) June 30, 2006. If the Closing Date does not occur prior to the earlier of such dates, City's obligations m~der this Commitment will terminate atttomaticatty and without notice. 15. Entire Agreement. This Colmnitment, together with the Loan Documents, constitutes the entire agreement between City and Borrower With respect to the subject matter hereof, and no prior discussions, correspondence or documents will be considered to vary or explain the terms of this Commitment. All conditions and requirements set forth in this Commitment are material to City, and except as specified herein, must be satisfied by Borrower prior to the Closing Date. 16, Assignment; Amendment. Neither this Commitment nor the Loan proceeds may be assigned without City's prior written consent, and without such consent there will be no right to designate a payee, c,f the Loan proceeds. Any attempt at assignment without such consent will be void, This Conunitment cannot be amended orally, but only by an instrument in writing signed by the party against whom enforcement of any change is sought. t 7. Waivers. City, in its sole discretion, may waive, in writing, certain Commitment conditions; however, waiver of any condition or requirement shall not be construed as waiver of any other provision(s) of this Commitment. 18. Default. Failure by Borrower to fully comply with all of the Commitment conditions within the times herein required will constitute a default by Borrower hereunder and, unless waived by City in writing, will automatically cause this Commitment to terminate. In no event will inaction by City be deemed a waiver of any requirement hereunder or any default by Borrower. City reserves the right to cancel this Conm~itment in the event of any material misrepresentation made in any information furnished to City by or on behalf of Owners, Borrower, Borrower's General Partner or the lndernnitors. 19. Property Inspection. Borrower agrees that, until such time as the Loan is paid in full City shall have the right to inspect the Senior Housing Project, the Property and the Collateral Property at any time upon reasonable notice. 20. Bankruptcy/Insolvency. In the event of bankruptcy or insolvency of Borrower, Borrower's General Partner, or any Indemnitor, whether voluntarily or involuntarily, this Corrm~itment shall terminate. 21. Legal Actions. Owners, Borrower, Borrower's General Partner and the Indemnitors.hereby represent and warrant that there is no litigation~ prosecution, investigation, or proceeding of any 633107-7 7 nature whatsoever now pending or overtly threatened in writing against OWners, Borrower, Owners, Borrower's General Partner, or any Indemnitor that seeks to affect the enforceability of any of the Loan Documents or is likely to adversely affect the ability of Borrower to pay and perform the obligations of Borrower to City thereunder or the ability of any Indemnitor to perform its obligations thereunder. 221 Property; Collateral Property. Owners hereby represent and warrant that they are the owners in fee simple of the Property and that they have all due authority to execute the CC&Rs which shall be recorded against the Property subject to no prior claim, lien or interest. The Lins hereby represent and warrant that they are the owners in fee simple of the Collateral Property, that such property has a fair market value of at least $13.5 million, and that they have authority to execute the Deed of Trust which shall be a first lien on the Collateral Property. 23. Costs. Owr~.ers or Borrower shall be responsible for all costs of Closing including, but not li. mited to title insurance, recOrding fees, escrow fees~ the cost of appraisals, surveys and other items Borrower is required to deliver to City hereunder. Whether or not the Loan is closed, all expenses incurred by City in connection with the Loan, including without limitation, reasonable expenses of. City's legal counsel and financial advisor, shall be paid byBorrower or'the Indemnitors. 24. Liability. No member, officer, agent, or employee of City shall be liable personally conce~ming any matters arising out of or in relation to the undertaking or obligations set forth in this Cemmitment Letter. Date&as of this Ist clay of J'uly, 2003. CITY O~U'BLIN By: .... ~,~z~~ .~y~Oc~a~ Approved as to Form: City Attorney Attest: q~ CiW Clerk 633107-7 8 The attached Loan Commitment Letter dated as of July 1, 2003, executed by the City of Dublin for the Fairway Ranch Senior Housing Project (Dublin Ranch) is hereby accepted. BORROWER DUBLIN RANCH SENIOR APARTMENTS, L.P., a California limited partnership. By: Its: KL Acquisitio/n~anagement, LLC, a Califo/m/~ limited liability company General P..~r ~ ' __~~ .... Its: Managing Member GENERAL Pp. RTNER KL A~3~'~n M/m~gement, LLC~~a~imited liability company / I:Iong Y~i~ - Its: Managing Member DUBLIN PLANNING 633107-7 9