01-074 Cupertino Community ServicesQuint & Thimmig LLP
8127/01
9110101
INDENTURE OF TRUST
by and between the
CITY OF CUPERTINO
and
CUPERTINO NATIONAL BANK,
as Bondowner Representative
Dated as of October 1, 2001
Relating to:
City of Cupertino
Multifamily Housing Revenue Bonds
(Heart of Cupertino Project), Series 2001A
03028.01:J5548
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND GENERAL PROVISIONS
Section 1.01. Definitions ................................................................................................................. ......................................... 2
6
Section 1.02. Rules of Construction ............................................................................................... .........................................
ARTICLE II
THE BONDS
Section 2.01. Authorization ............................................................................................................ ......................................... 7
7
Section 2.02. Terms of Bonds ........................................................................................................ .........................................
7
Section 2.03. Payment of Bonds ................................................................................................... ..........................................
7
Section 2.04. Execution of Bonds ................................................................................................. ..........................................
8
Section 2.05. Transfer of Bonds .................................................................................................... ..........................................
8
Section 2.06. Bond Register .......................................................................................................... ..........................................
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
01
Section 3 Authentication and Delivery of the Bonds ............................................................... .......................................... 9
.
.
Section 3.02. Application of Proceeds of Bonds ........................................................................... .......................................... 9
9
Section 3.03. Program Fund ......................................................................................................... ..........................................
ARTICLE IV
REDEMPTION OF BONDS
Section 4.01. Circumstances of Redemption ............................................................................... .........................................11
11
Section 4.02. No Notice of Redemption ....................................................................................... .........................................
11
Section 4.03. Effect of Redemption .............................................................................................. .........................................
ARTICLE V
REVENUES
Section 5.01. Pledge of Revenues ................................................................................................. .......................................12
12
Section 5.02.
5
03 Bond Fund ................................................................................................................
.........................................................
s
tment of Mone
I .......................................
.......................................12
.
.
Section .....................................
y
nves 13
Section 5.04. Assignment to Bondowner Representative; Enforcement of Obligations ................. .......................................
ARTICLE VI
COVENANTS OF THE ISSUER
Section 6.01. Payment of Principal and Interest ........................................................................... ........................................14
14
Section 6.02. Paying Agents ......................................................................................................... ........................................
14
Section 6.03. Preservation of Revenues; Amendment of Documents .......................................... ........................................
Section 6.04. Compliance with Indenture ...................................................................................... ........................................14
Section 6.05. Further Assurances ................................................................................................. ........................................15
Section 6.06. No Arbitrage ............................................................................................................ ........................................15
15
Section 6.07. Limitation of Expenditure of Proceeds ..................................................................... ........................................
Section 6.08. Rebate of Excess Investment Earnings to United States ........................................ ........................................ 15
Section 6.09. Limitation on Issuance Costs .................................................................................. ........................................ 15
Section 6.10. Federal Guarantee Prohibition ................................................................................ ........................................ 15
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Section 6.11. Prohibited Facilities ........................................................................................................ ................................. 15
15
Section 6.12. Use Covenant ................................................................................................................. .................................
16
Section 6.13. Immunities and Limitations of Responsibility of Issuer ................................................... .................................
Section 6.14. Small Issuer Exemption from Bank Nondeductibility Restriction ................................... ..................................16
ARTICLE VII
DEFAULT
01.
Section 7 Events of Default; Acceleration; Waiver of Default ........................................................ .................................. 17
.
Section 7.02. Institution of Legal Proceedings by Bondowner Representative ................................... .................................. 18
Section 7.03. Application of Moneys Collected by Bondowner Representative .................................. .................................. 18
Section 7.04. Effect of Delay or Omission to Pursue Remedy ............................................................ .................................. 18
Section 7.05. Remedies Cumulative ................................................:.................................................. .................................. 19
19
Section 7.06. Covenant to Pay Bonds in Event of Default .................................................................. ..................................
Section 7.07. Bondowner Representative Appointed Agent for Bondholders ..................................... ..................................19
Section 7.08. Power of Bondowner Representative to Control Proceedings ...................................... .................................. 19
Section 7.09. Limitation on Bondholders' Right to Sue ....................................................................... .................................. 19
Section 7.10. Limitation of Liability to Revenues ................................................................................. .................................. 20
ARTICLE VIII
THE BONDOWNER REPRESENTATIVE AND AGENTS
Section 8.01. Duties, Immunities and Liabilities of Bondowner Representative ................................ .................................... 21
Section 8.02. Right of Bondowner Representative to Rely Upon Documents, Etc ............................ .................................... 23
Section 8.03. Bondowner Representative Not Responsible for Recitals ........................................... .................................... 23
Section 8.04. Intervention by Bondowner Representative ................................................................ .................................... 23
Section 8.05. Moneys Received by Bondowner Representative to be Held in Trust ........................ .................................... 24
Section 8.06. Compensation and Indemnification of Bondowner Representative and Agents ......... .................................... 24
Section 8.07. Qualifications of Bondowner Representative .............................................................. .................................... 24
Section 8.08. Merger or Consolidation of Bondowner Representative .............................................. .................................... 24
Section 8.09. Dealing in Bonds ......................................................................................................... .................................... 25
ARTICLE IX
MODIFICATION OF INDENTURE
Section 9.01. Modification of Indenture ............................................................................................ ..................................... 26
Section 9.02. Effect of Supplemental Indenture ............................................................................... ..................................... 26
Section 9.03. Opinion of Counsel as to Supplemental Indenture ..................................................... ..................................... 26
Section 9.04. Notation of Modification on Bonds; Preparation of New Bonds .................................. ..................................... 26
ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Indenture .................................................................................................................................... 28
Section 10.02. Discharge of Liability on Bonds ....................................................................................................................... 28
Section 10.03. Payment of Bonds after Discharge of Indenture ............................................................................................. 29
Section 10.04. Deposit of Money or Securities with Bondowner Representative .................................................................... 29
ARTICLE XI
MISCELLANEOUS
Section 11.01. Successors of Issuer ....................................................................................................................................... 30
Section 11.02. Limitation of Rights to Parties and Bondholders ............................................................................................. 30
Section 11.03. Waiver of Notice .............................................................................................................................................. 30
Section 11.04. Destruction of Bonds ....................................................................................................................................... 30
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Section 11.05. Separability of Invalid Provisions ...................................................... ............................................................... 30
Section 11.06. Notices ............................................................................................. ............................................................... 30
31
Section 11.07. Authorized Representatives ............................................................. ...............................................................
31
Section 11.08. Evidence of Rights of Bondholders .................................................. ...............................................................
Section 11.09. Waiver of Personal Liability .............................................................. ............................................................... 32
Section 11.10. Holidays ............................................................................................ ............................................................... 32
32
Section 11.11. Execution in Several Counterparts ................................................... ...............................................................
32
Section 11.12. Governing Law ................................................................................. ...............................................................
32
Section 11.13. Conflict with Trust Indenture Act of 1939 ......................................... ...............................................................
Section 11.14. Successors ....................................................................................... ............................................................... 32
32
Section 11.15. CUSIP Numbers ............................................................................... ...............................................................
EXHIBIT A FORM OF BOND
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INDENTURE OF TRUST
This Indenture of Trust, dated as of October 1, 2001 (this "Indenture"), is by and between the City of
Cupertino, a municipal corporation duly organized and existing under the laws of the State of California (herein
called the "Issuer'), and Cupertino National Bank, a national banking association organized under the laws of the
United States of America, and being qualified to accept and administer the trusts hereby created, as Bondowner
Representative (herein called the "Bondowner Representative").
WITNESSETH:
WHEREAS, the Issuer has determined to engage in a program of financing the acquisition and construction
of multifamily rental housing by a nonprofit organization exempt from federal income taxation under Section
501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code") pursuant to Chapter 8 of Part 5 of Division
31 of the Health and Safety Code of the State of California (the "Act"), and has determined to borrow money for such
purpose by the issuance of revenue bonds as authorized by the Act; and
WHEREAS, all conditions, things and acts required by the Act, and by all other laws of the State of
California, to exist, have happened and have been performed precedent to and in connection with the issuance of
the City of Cupertino Multifamily Housing Revenue Bonds (Heart of Cupertino Project), Series 2001A (the "Bonds")
exist, have happened, and have been performed in due time, form and manner as required by law, and the Issuer is
now duly authorized and empowered, pursuant to each and every requirement of law, to issue the Bonds for the
purpose, in the manner and upon the terms herein provided; and
WHEREAS, the Issuer has duly entered into a loan agreement (the "Agreement" or the "Loan Agreement")
with Cupertino Community Services (the "Borrower"), specifying the terms and conditions of the lending of the
proceeds of the Bonds (the "Loan") to the Borrower for the financing of 24 units of multifamily rental housing located
in the City of Cupertino, and the repayment by the Borrower of the Loan; and
WHEREAS, in order to provide for the authentication and delivery of the Bonds, to establish and declare
the terms and conditions upon which the Bonds are to be issued and secured and to secure the payment of the
principal thereof and of the interest and premium, if any, thereon, the Issuer has authorized the execution and
delivery of this Indenture; and
WHEREAS, all acts and proceedings required by law necessary to make the Bonds, when executed by the
Issuer, authenticated and delivered by the Bondowner Representative and duly issued, the valid, binding and legal
limited obligations of the Issuer, and to constitute this Indenture a valid and binding agreement for the uses and
purposes herein set forth, in accordance with its terms, have been done and taken; and the execution and delivery of
this Indenture have been in all respects duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the payment of the principal
of, and the interest and premium, if any, on, all Bonds at any time issued and outstanding under this Indenture,
according to their tenor, and to secure the performance and observance of all the covenants and conditions therein
and herein set forth, and to declare the terms and conditions upon and subject to which the Bonds are to be issued
and received, and for and in consideration of the premises and of the mutual covenants herein contained and of the
purchase and acceptance of the Bonds by the owners thereof, and for other valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the Issuer covenants and agrees with the Bondowner Representative,
for the equal and proportionate benefit of the respective registered owners from time to time of the Bonds, as
follows:
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ARTICLE I
DEFINITIONS AND GENERAL PROVISIONS
Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in this Section 1.01
shall, for all purposes of this Indenture and of the Loan Agreement and of any indenture supplemental hereto or
agreement supplemental thereto, have the meanings herein specified, as follows:
The term "Act" shall mean Chapter 8 of Part 5 of Division 31 of the Health and Safety Code of the State of
California, as in effect on the Closing Date.
The term "Administrator" shall mean the Issuer, or any substitute administrator appointed by the Issuer as
agent of the Issuer in the administration of the Regulatory Agreement.
The term "Agreement" or "Loan Agreement" shall mean the Loan Agreement, dated as of October 1,
2001, between the Issuer and the Borrower, pursuant to which the Issuer agrees to loan the proceeds of the Bonds
to the Borrower, as originally executed or as it may from time to time be supplemented or amended in accordance
with its terms.
The term "Authorized Amount" shall mean One Million Six Hundred Thousand Dollars ($1,600,000), the
authorized maximum principal amount of the Bonds.
The term "Authorized Borrower Representative" shall mean any person who at the time and from time to
time may be designated as such, by written certificate furnished to the Issuer and the Bondowner Representative
containing the specimen signature of such person and signed on behalf of the Borrower by the President of the
General Partner of the Borrower, which certificate may designate an altemate or alternates.
The term "Authorized Issuer Representative" shall mean the City Manager or the Director of
Administrative Services of the Issuer, or any other person designated to act in such capacity by a Certificate of the
Issuer ccntaining the specimen signature of any of such persons which cerkificate may designate an altemate or
alternates.
The term "Bond Counsel" shall mean (i) Quint & Thimmig LLP, or (ii) any attorney at law or other firm of
attorneys selected by the Issuer of nationally recognized standing in matters pertaining to the federal tax status of
interest on bonds issued by states and political subdivisions, and duly admitted to practice law before the highest
court of any state of the United States of America, but shall not include counsel for the Borrower.
The term "Bond Fund" shall mean the fund established pursuant to Section 5.02 hereof.
The term "Bondowner Representative" shall mean (a) initially, Cupertino National Bank, a national
banking association organized under the laws of the United States of America, or (b) any successor thereto as
provided in Section 8.07 or 8.08 hereof.
The term "Bonds" shall mean the City of Cupertino Multifamily Housing Revenue Bonds (Heart of
Cupertino Project), Series 2001 A, issued and outstanding hereunder.
The term "Bond Year" means the one-year period beginning on October _ in each year and ending
October _ in the following year, except that the first Bond Year shall begin on the Closing Date and end on October
_, 2002.
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The term "Borrower" shall mean Cupertino Community Services, and its successors and assigns under
the provisions of Section 6.2 of the Loan Agreement.
The term "Business Day" shall mean any day other than a Saturday, Sunday, legal holiday, day on which
banking institutions in the city in which the Bondowner Representative's Principal Office is located are authorized or
obligated by law or executive order to close.
The term "Certificate of the Issuer" shall mean a certificate of the Issuer signed by an Authorized Issuer
Representative.
The term "Certified Resolution" shall mean a copy of a resolution of the Issuer certified by the City Clerk
of the Issuer, to have been duly adopted by the Issuer and to be in full force and effect on the date of such
certification.
The term "Closing Date" shall mean October _, 2001, the date of initial delivery of the Bonds and funding
of the first $ [at least 50,001] principal amount of the Bonds and the Loan.
The term "Code" means the Internal Revenue Code of 1986 as in effect on the date of issuance of the
Bonds or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the date of
issuance of the Bonds, together with applicable proposed, temporary and final regulations promulgated, and
applicable official public guidance published, under the Code.
The term "Debt Service" means the scheduled amount of interest and amortization of principal payable on
the Bonds during the period of computation, excluding amounts scheduled during such period which relate to
principal which has been retired before the beginning of such period.
The term "Deed of Trust" shall mean the Deed of Trust, Assignment of Rents and Leases, Security
Agreement and Fixture Filing, executed by the Borrower in favor of the Issuer (and assigned by the Issuer to the
Bondowner Representative), for the purpose of securing the obligations of the Borrower under the Loan Agreement,
as such deed of trust may be originally executed or as from time to time supplemented and amended.
The term "Default Rate' means the interest rate then in effect on the Bonds plus five percent (5.0%).
The term "Development" means the 24 units of multifamily rental housing to be constructed by the
Borrower with a portion of the proceeds of the Bonds located in the City of Cupertino, including structures, buildings,
fixtures or equipment, as it may at any time exist, and any structures, buildings, fixtures or equipment acquired in
substitution for, as a renewal or replacement of, or a modification or improvement to, all or any part of such facilities,
and a fee interest in the land on which such housing is situated.
The term "Development Costs" has the meaning given such term in the Loan Agreement.
The term "Event of Default" as used herein other than with respect to defaults under the Loan Agreement
shall have the meaning specified in Section 7.01 hereof, and as used in the Loan Agreement shall have the meaning
specified in Section 7.01 thereof.
The term 'Fair Market Value means the price at which a willing buyer would purchase the investment from
a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase or sell the
investment becomes binding) if the investment is traded on an established securities market (within the meaning of
section 1273 of the Code) and, otherwise, the term "Fair Market Value" means the acquisition price in a bona fide
arm's length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in
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accordance with applicable regulations under the Code, (ii) the investment is an agreement with specifically
negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a
guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in
accordance with applicable regulations under the Code, (iii) the investment is a United States Treasury Obligation-
State Local Government Series that is acquired in accordance with applicable regulations of the United States
Bureau of Public Debt, or (iv) the investment is the Local Agency Investment Fund of the State of California but only
if at all times during which the investment is held its yield is reasonably expected to be equal to or greater than the
yield on a reasonably comparable direct obligation of the United States.
The term "Holder," "holder" or "Bondholder" or "owner" or "Bondowner" shall mean the person in
whose name any Bond is registered.
The term "Indenture" shall mean this Indenture of Trust, as originally executed or as it may from time to
time be supplemented, modified or amended by any supplemental indenture entered into pursuant to the provisions
hereof.
The term "Interest Payment Date" shall mean the first Business Day of each month, commencing
November 1, 2001.
The term "Investment Securities" shall mean any of the following (including any funds comprised of the
following, which may be funds maintained or managed by the Bondowner Representative and its affiliates), but only
to the extent that the same are acquired at Fair Market Value:
(a) United States Treasury notes, bonds, bills, or those for which the full faith and credit of the
United States, its agencies, its instrumentalities, or organizations created by an act of Congress, are
pledged for the payment of principal and interest (including State and Local Government Series);
(b) shares of an investment company (1) registered under the Federal Investment Company Act of
1940, whose shares are registered under the Federal Securities Act of 1933, (2) whose only investments
are in (i) securities described in the preceding clause (a), (ii) general obligation tax-exempt securities rated
A or better by the Rating Agency, or (iii) repurchase agreements or reverse repurchase agreements fully
collateralized by those securities if the repurchase agreements or reverse repurchase agreements are
entered into only with those primary reporting dealers to report to the Federal Reserve Bank of New York
and with the 100 largest United States commercial banks, and (3) which are rated Am or Am-g or better by
the Rating Agency;
(c) any security which is a general obligation of any state or any local government with taxing
powers which is rated A or better by the Rating Agency; or
(d) commercial paper issued by United States corporations or their Canadian subsidiaries that is
rated A-1 by the Rating Agency and matures in 270 days or less.
The term "Issuance Costs" means all costs and expenses of issuance of the Bonds, including, but not
limited to: (i) underwriters' discount and fees; (ii) counsel fees, including bond counsel and Borrower's counsel, as
well as any other specialized counsel fees incurred in connection with the issuance of the Bonds or the Loan; (iii) the
Issuer's fees and expenses incurred in connection with the issuance of the Bonds, including fees of any advisor to
the Issuer, and the Issuer administrative fee for processing the request of the Borrower to issue the Bonds; (iv)
Bondowner Representative's fees and Bondowner Representative's counsel fees; (v) paying agent's and certifying
and authenticating agent's fees related to issuance of the Bonds; (vi) accountant's fees related to issuance of the
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Bonds; (vii) publication costs associated with the financing proceedings; and (viii) costs of engineering and feasibility
studies necessary to the issuance of the Bonds.
The term "Issuer" shall mean the City of Cupertino, the issuer of the Bonds hereunder, and its successors
and assigns as provided in Section 11.01.
The term "Loan" shall mean the loan made by the Issuer to the Borrower pursuant to the Agreement for
the purpose of financing the acquisition and construction by the Borrower of the Development.
The term "Loan Agreement" shall mean the Agreement, as defined herein.
The term "Note" means the promissory note evidencing the Loan, in the form attached as Exhibit C to the
Loan Agreement.
The term "Opinion of Counsel" shall mean a written opinion of counsel, who may be counsel for the
Issuer, Bond Counsel or counsel for the Bondowner Representative.
The term "outstanding", when used as of any particular time with reference to Bonds, shall, subject to the
provisions of Section 11.08(e), mean all Bonds theretofore authenticated and delivered by the Bondowner
Representative under this Indenture except:
(a) Bonds theretofore canceled by the Bondowner Representative or surrendered to the
Bondowner Representative for cancellation;
(b) Bonds for the payment or redemption of which moneys or securities in the necessary amount
(as provided in Section 10.04) shall have theretofore been deposited- with the Bondowner Representative
(whether upon or prior to the maturity or the redemption date of such Bonds); and
(c) Bonds in lieu of or in substitution for which other Bonds shall have been authenticated and
delivered by the Bondowner Representative pursuant to the terms of Section 2.05.
The term "person" shall mean an individual, a corporation, a partnership, a trust, an unincorporated
organization or a government or any agency or political subdivision thereof.
The term "Principal Office" shall mean the principal office of the Bondowner Representative located at the
address set forth in Section 11.06 hereof, or at such other place as the Bondowner Representative shall designate
by notice given under said Section 11.06.
The term "Principal Payment Date" shall mean any date on which principal of the Loan is due and
payable under the Loan Agreement.
The term "Program Fund" shall mean the fund established pursuant to Section 3.03 hereof.
The term "Qualified Development Costs" has the meaning given such term in the Loan Agreement.
The term "Rating Agency" shall mean Standard & Poor's Ratings Group, a division of McGraw-Hill, or its
successors and assigns or, if such entity shall be dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, any other nationally recognized rating agency designated by the Issuer.
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The term "Regulations" means the Income Tax Regulations promulgated or proposed by the Department
of the Treasury pursuant to the Code from time to time or pursuant to any predecessor statute to the Code.
The term "Regulatory Agreement" shall mean the Regulatory Agreement and Declarations of Restrictive
Covenants of even date herewith, by and between the Issuer and the Borrower.
The term "Responsible Officer" of the Bondowner Representative shall mean any officer of the
Bondowner Representative assigned to administer its duties hereunder.
The term "Revenues" shall mean all amounts pledged hereunder to the payment of principal of, premium,
if any, and interest on the Bonds, consisting of any repayments of the Loan required or permitted to be made by the
Borrower pursuant to Section 5.1(a) of the Loan Agreement, but such term shall not include payments to the United
States, the Issuer, the Administrator or the Bondowner Representative pursuant to Sections 2.3, 2.4, 5.1(b), 5.1(d) or
7.4 of the Agreement or Sections 6.08 or 8.06 hereof or Sections 7 or 23 of the Regulatory Agreement.
The term "supplemental indenture" or "indenture supplemental hereto" shall mean any indenture
hereafter duly authorized and entered into between the Issuer and the Bondowner Representative in accordance
with the provisions of this Indenture.
The terms "Written Consent" "Written Demand" "Written Direction" "Written Election" "Written
> ,
Notice", "Written Order", "Written Request" and "Written Requisition" of the Issuer or the Borrower shall mean,
respectively, a written consent, demand, direction, election, notice, order, request or requisition signed on behalf of
the Issuer by an Authorized Issuer Representative, or on behalf of the Borrower by an Authorized Borrower
Representative.
Section 1.02. Rules of Construction. (a) The singular form of any word used herein, including the terms
defined in Section 1.01, shall include the plural, and vice versa, unless the context otherwise requires. The use
herein of a pronoun of any gender shall include correlative words of the other genders.
(b) All references herein to "Articles", "Sections" and other subdivisions hereof are to the corresponding
Articles, Sections or subdivisions of this Indenture as originally executed; and the words "herein", "hereof',
"hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article,
Section or subdivision hereof.
(c) The headings or titles of the several Articles and Sections hereof, and any table of contents appended
to copies hereof, shall be solely for convenience of reference and shall not affect the meaning, construction or effect
of this Indenture.
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ARTICLE II
THE BONDS
Section 2.01. Authorization. There are hereby authorized to be issued bonds of the Issuer designated as
"City of Cupertino Multifamily Housing Revenue Bonds (Heart of Cupertino Project), Series 2001 A" in the initial
aggregate principal amount of up to $1,600,000. No Bonds may be issued hereunder except in accordance with this
Article. The maximum aggregate principal amount of Bonds which may be issued and outstanding under this
Indenture shall not exceed the Authorized Amount.
Section 2.02. Terms of Bonds. The Bonds shall be in substantially the form set forth in Exhibit A hereto
with necessary or appropriate variations, omissions and insertions as permitted or required by this Indenture,
including any supplemental indenture.
The Bonds shall be issuable only as fully registered Bonds, without coupons, in the form of a single Bond in
the principal amount equal to the aggregate of the purchase price of the Bonds advanced from time to time by the
owner of the Bonds (which principal amount shall be, on the Closing Date, $ ). The Bonds shall be
dated the Closing Date, shall mature on October 1, 2031, shall bear interest at a rate of six and three eighths
percent (6.375%) per annum and shall be subject to redemption prior to maturity as provided in Article IV.
Each Bond shall bear interest from the date to which interest has been paid on the Bonds next preceding
the date of its authentication, unless it is authenticated as of an Interest Payment Date for which interest has been
paid, in which event it shall bear interest from such Interest Payment Date, or unless it is authenticated on or before
the first Interest Payment Date, in which event it shall bear interest from the Closing Date. Interest shall be
computed on the basis of a 360 day year comprised of twelve 30-day months.
Section 2.03. Payment of Bonds. Payment of the principal of and interest on any Bond shall be made in
lawful money of the United States to the person appearing on the Bond registration books of the Bondowner
Representative as the registered owner thereof on the applicable Interest Payment Date, such principal and interest
to be paid by check mailed on the Interest Payment Date by first class mail, postage prepaid, to the registered owner
at its address as it appears on such registration books, except that the Bondowner Representative may, at the
request of any registered owner of Bonds, make payments of principal and interest on such Bonds by wire transfer
to the account within the United States designated by such owner to the Bondowner Representative in writing, any
such designation to remain in effect until withdrawn in writing.
Section 2.04. Execution of Bonds. The Bonds shall be signed in the name and on behalf of the Issuer
with the manual or facsimile signature of its Mayor and the manual or facsimile signature of its City Clerk or other
authorized officer, under the seal of the Issuer. Such seal may be in the form of a facsimile of the Issuer's seal and
may be imprinted or impressed upon the Bonds. The Bonds shall then be delivered to the Bondowner
Representative for authentication by the Bondowner Representative. In case any officer who shall have signed any
of the Bonds shall cease to be such officer before the Bonds so signed shall have been authenticated or delivered
by the Bondowner Representative or issued by the Issuer, such Bonds may nevertheless be authenticated, delivered
and issued and, upon such authentication, delivery and issuance, shall be as binding upon the Issuer as though the
officers who signed the same had continued to be such officers of the Issuer. Also, any Bond may be signed on
behalf of the Issuer by such persons as on the actual date of the execution of such Bond shall be the proper officers
although on the nominal date of such Bond any such person shall not have been such officer.
Only such of the Bonds as shall bear thereon a certificate of authentication in the form set forth in Exhibit A,
manually executed by the Bondowner Representative, shall be valid or obligatory for any purpose or entitled to the
benefits of this Indenture and such certificate of the Bondowner Representative shall be conclusive evidence that the
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Bonds so authenticated have been duly authenticated and delivered hereunder and are entitled to the benefits of this
Indenture.
Section 2.05. Transfer of Bonds. Any Bond may, in accordance with the terms of this Indenture but in
any event subject to the prior written consent of the Issuer, be transferred upon the books of the Bondowner
Representative, required to be kept pursuant to the provisions of Section 2.06, by the person in whose name it is
registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation at the Principal
Office of the Bondowner Representative, accompanied by a written instrument of transfer in a form acceptable to the
Bondowner Representative, duly executed, and the written consent of the Issuer to such transfer. Bonds may not be
exchanged for smaller denominations. Whenever any Bond shall be surrendered for transfer, the Issuer shall
execute and the Bondowner Representative shall authenticate and deliver a new Bond.
The Bondowner Representative shall require the payment by the Bondholder requesting any such transfer
of any tax, fee or other governmental charge required to be paid with respect to such transfer, but any such transfer
shall otherwise be made without charge to the Bondholder requesting the same. The cost of printing any Bonds and
any services rendered or any expenses incurred by the Bondowner Representative in connection therewith shall be
paid by the Borrower.
Section 2.06. Bond Register. The Issuer hereby appoints the Bondowner Representative as registrar and
authenticating agent for the Bonds. The Bondowner Representative will keep or cause to be kept at its Principal
Office sufficient books for the transfer of the Bonds, which shall at all reasonable times upon reasonable notice be
open to inspection by the Issuer and the Borrower; and, upon presentation for such purpose, the Bondowner
Representative as registrar shall, under such reasonable regulations as it may prescribe, transfer or cause to be
transferred, on said books, Bonds as hereinbefore provided.
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ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
Section 3.01. Authentication and Delivery of the Bonds. Upon the execution and delivery of this
Indenture, the Issuer shall execute the Bonds and deliver them to the Bondowner Representative. Thereupon, and
upon satisfaction of the conditions set forth in this Section, and without any further action on the part of the Issuer,
the Bondowner Representative shall authenticate the Bonds in an aggregate principal amount not exceeding the
Authorized Amount, and shall deliver them pursuant to the Written Order of the Issuer hereinafter mentioned. Prior
to the authentication and delivery of any of the Bonds by the Bondowner Representative, there shall have been
delivered to the Bondowner Representative each of the following:
(i) a Certified Resolution authorizing issuance and sale of the Bonds and execution and delivery
by the Issuer of the Indenture, the Loan Agreement and the Regulatory Agreement;
(ii) original executed counterparts of this Indenture, the Loan Agreement, the Deed of Trust and
the Regulatory Agreement, and the original executed Note; and
(iii) a Written Order of the Issuer to the Bondowner Representative to authenticate and deliver the
Bonds as directed in such Written Order, upon payment to the Bondowner Representative, for the account
of the Issuer, of the initial advance of the principal of the Bonds by the Bond purchaser of $
Section 3.02. Application of Proceeds of Bonds. The proceeds received on the Closing Date by the
Issuer from the sale of the Bonds shall be deposited with the Bondowner Representative, who shall deposit such
proceeds in the Program Fund created pursuant to Section 3.03. The Bondowner Representative shall deposit any
future advances of the purchase price of the Bonds to the Program Fund.
Section 3.03. Program Fund. (a) There is hereby created and established with the Bondowner
Representative a fund which shall be designated the "Program Fund:" Upon the initial delivery of the Bonds, there
shall be deposited in the Program Fund the amount specified in Section 3.02. The Bondowner Representative shall
deposit any future advances of the purchase price of the Bonds to the Program Fund. Amounts deposited or held in
such fund shall be applied only as provided in this Section.
(b) The amount deposited in the Program Fund on the Closing Date shall be disbursed as follows:
$ shall be sent via wire transfer from the Bondowner Representative to (to pay a
portion of the costs of acquisition of the Development site), and $ shall be sent to the Bondowner in
respect of its fees and expenses related to the Bond financing.
(c) The Issuer hereby authorizes and directs the disbursement by the Bondowner Representative to the
Borrower of the remaining $ principal amount of the Bonds and any other amounts deposited from time
to time to the Program Fund upon compliance with the provisions of Section 3.4(b) of and Exhibit D to the Loan
Agreement. The Bondowner Representative shall provide monthly written reports to the Issuer indicating any
disbursements from the Program Fund during the preceding month, including the amount disbursed and the date of
disbursement.
(d) Neither the Bondowner Representative nor the Issuer shall be responsible for the application by the
Borrower of monies disbursed to the Borrower in accordance with this Section 3.03.
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(e) From and after October 1, 2003, no further advances of the purchase price, or disbursements of the
proceeds, of the Bonds shall occur.
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ARTICLE IV
REDEMPTION OF BONDS
Section 4.01. Circumstances of Redemption. The Bonds are subject to redemption upon the
circumstances, on the dates and at the prices set forth as follows:
(a) The Bonds shall be subject to redemption in whole or in part on any date, at a price equal to
the principal amount of Bonds to be redeemed plus interest accrued thereon to the date fixed for
redemption, without premium, upon prepayment of the Loan in whole or in part.
(b) The Bonds shall be subject to redemption in whole on any date at a price equal to the principal
amount of Bonds to be redeemed plus interest accrued thereon to the date fixed for redemption, without
premium, upon acceleration of the Loan in whole following an Event of Default (as defined in the Loan
Agreement).
(c) The Bonds shall be subject to redemption in whole or in part on any date at a price equal to
the principal amount thereof to be redeemed plus accrued interest to the redemption date from the
proceeds of any mandatory prepayment of the Loan under the terms of the Note or the Loan Agreement.
The Bondowner Representative is hereby authorized and directed, and hereby agrees, to fix the date for
any such redemption, and, if moneys provided from the sources contemplated by this Indenture and the Loan
Agreement are available, to redeem the Bonds so called on the date so fixed by the Bondowner Representative.
The Bondowner Representative shall give written notice of such redemption to the Issuer.
Section 4.02. No Notice of Redemption. No notice of redemption of the Bonds need be given.
Section 4.03. Effect of Redemption. Moneys for payment of the redemption price of Bonds being held by
the Bondowner Representative, the Bonds so called for redemption shall, on the redemption date selected by the
Bondowner Representative, become due and payable at the redemption price specified herein, interest can the
Bonds so called for redemption shall cease to accrue, said Bonds shall cease to be entitled to any lien, benefit or
security under this Indenture, and the holders of said Bonds shall have no rights in respect thereof except to receive
payment of the redemption price thereof.
All Bonds fully redeemed pursuant to the provisions of this Article IV shall be destroyed by the Bondowner
Representative, which shall thereupon deliver to the Issuer a certificate evidencing such destruction.
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ARTICLE V
REVENUES
Section 5.01. Pledge of Revenues. All of the Revenues are hereby irrevocably pledged to the punctual
payment of the principal of and interest on the Bonds. The Issuer also hereby transfers in trust, grants a security
interest in and assigns to the Bondowner Representative, for the benefit of the holders from time to time of the
Bonds all of its right, title and interest in (a) the Revenues, (b) amount on deposit in any fund or account created
hereunder or under the Loan Agreement and held by the Bondowner Representative, (c) the Deed of Trust, (d) the
Loan Agreement (except for the rights of the Issuer under Sections 2.3, 2.4, 5.1(b), 5.1(d) and 7.4 thereof), and (e)
the Note.
All Revenues and all amounts on deposit in the funds and accounts created hereunder or under the Loan
Agreement and held by the Bondowner Representative shall be held in trust for the benefit of the holders from time
to time of the Bonds, but shall nevertheless be disbursed, allocated and applied solely for the uses and purposes
hereinafter set forth in this Article V.
Neither the Issuer (or any member thereof) nor any person executing the Bonds is liable personally on the
Bonds or subject to any personal liability or accountability by reason of their issuance. The Bonds are limited
obligations of the Issuer and are not a debt, nor a pledge of the faith and credit, of the State of California or any of its
political subdivisions, and neither are they liable on the Bonds, nor are the Bonds payable out of any funds or
properties other than those of the Issuer pledged for the payment thereof. The Bonds do not constitute an
indebtedness within the meaning of any constitutional or statutory debt limitation. The issuance of the Bonds shall
not directly or indirectly or contingently obligate the State of Califomia or any political subdivision thereof to levy or to
pledge any form of taxation whatever therefor or to make any appropriation for their payment.
Section 5.02. Bond Fund. There is hereby created and established with the Bondowner Representative a
separate fund which shall be designated the "Bond Fund," which fund shall be applied only as provided in this
Section.
The Bondowner Representative shall deposit in the Bond Fund from time to time, upon receipt thereof, all
Revenues, including (i) income received from the investment of moneys on deposit in the Bond Fund, and (ii) any
other Revenues, including insurance proceeds, condemnation awards and other Loan payments or prepayments
received from or for the account of the Borrower. The Bondowner Representative shall provide notice to the Issuer,
at least monthly, of any amounts received by the Bondowner Representative which constitute Revenues or are
otherwise deposited to the Bond Fund, and of any failure by the Borrower to make timely payments on the Note.
Except as provided in Section 10.03, moneys in the Bond Fund shall be used solely for the payment of the
principal of and premium, if any, and interest on the Bonds as the same shall become due, whether at maturity or
upon redemption or acceleration or otherwise.
On each date on which principal of or interest on the Bonds is due and payable, the Bondowner
Representative shall pay such amount from the Bond Fund.
Section 5.03. Investment of Moneys. Except as otherwise provided in this Section, any moneys in any of
the funds and accounts to be established by the Bondowner Representative pursuant to this Indenture shall be
invested by the Bondowner Representative in Investment Securities selected and directed in writing by the Borrower,
with respect to which payments of principal thereof and interest thereon are scheduled or otherwise payable not later
than one day prior to the date on which it is estimated that such moneys will be required by the Bondowner
Representative. In the absence of such directions, the Bondowner Representative shall invest such monies in
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Investment Securities described in clause (b) of the definition thereof. The Bondowner Representative shall have no
liability or responsibility for any loss resulting from any investment made in accordance with this Section 5.06.
Except as otherwise provided in the next sentence, all investments of amounts deposited in any fund or
account created by or pursuant to this Indenture, or otherwise containing gross proceeds of the Bonds (within the
meaning of Section 148 of the Code) shall be acquired, disposed of, and valued (as of the date that valuation is
required by this Indenture or the Code) at Fair Market Value. Investments in funds or accounts (or portions thereof)
that are subject to a yield restriction under applicable provisions of the Code and (unless valuation is undertaken at
least annually) investments in the Debt Service Reserve Fund shall be valued at their present value (within the
meaning of Section 148 of the Code). The Bondowner Representative shall have no duty to determine Fair Market
Value or present value hereunder.
For the purpose of determining the amount in any fund or account, all Investment Securities credited to
such fund or account shall be valued at the lower of cost or par (which shall be measured exclusive of accrued
interest) after the first payment of interest following purchase.
Any interest, profit or loss on such investment of moneys in any fund or account shall be credited or
charged to the respective funds or accounts from which such investments are made. The Bondowner
Representative may sell or present for redemption any obligations so purchased whenever it shall be necessary in
order to provide moneys to meet any payment, and the Bondowner Representative shall not be liable or responsible
for any loss resulting from such sale or redemption.
The Bondowner Representative may make any and all investments permitted under this Section 5.06
through its own trust or banking department or any affiliate and may pay said department reasonable, customary
fees for placing such investments. The Bondowner Representative and its affiliates may act as principal, agent,
sponsor, advisor or depository with respect to Investment Securities under this Section 5.06.
The Issuer (and the Borrower by its execution of the Loan Agreement) acknowledges that to the extent
regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Issuer or the Borrower
the right to receive brokerage confirmations of security transactions as they occur, the Issuer and the Borrower will
not receive such confirmations to the extent permitted by law. The Bondowner Representative will furnish the
Borrower and the Issuer (to the extent requested by it) periodic cash transaction statements which include detail for
all investment transactions made by the Bondowner Representative hereunder.
Section 5.04. Assignment to Bondowner Representative; Enforcement of Obligations. The Issuer
hereby transfers, assigns and sets over~to the Bondowner Representative, for the benefit of the Bondholders, and
the Bondowner Representative hereby accepts, all of the Revenues, all moneys at any time held in the funds and
accounts established hereunder and any and all rights and privileges the Issuer has under the Agreement (except
for the Issuer's rights under Sections 2.3, 2.4, 5.1(b), 5.1(d) and 7.4 of the Agreement); and any Revenues which are
collected or received by the Issuer shall be deemed to be held, and to have been collected or received, by the Issuer
as the agent of the Bondowner Representative, and shall forthwith be paid by the Issuer to the Bondowner
Representative. Upon the occurrence of an Event of Default actually known to a Responsible Officer of the
Bondowner Representative, the Bondowner Representative also shall be entitled to take all steps, actions and
proceedings reasonably necessary in its judgment: (a) to enforce the terms, covenants and conditions of, and
preserve and protect the priority of its interest in and under, the Agreement and the Deed of Trust, and (b) to request
compliance with all covenants, agreements and conditions on the part of the Issuer contained in this Indenture with
respect to the Revenues.
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ARTICLE VI
COVENANTS OF THE ISSUER
Section 6.01. Payment of Principal and Interest. The Issuer shall punctually pay, but only out of
Revenues as herein provided, the principal and the interest (and premium, if any) to become due in respect of every
Bond issued hereunder at the times and places and in the manner provided herein and in the Bonds, according to
the true intent and meaning thereof. When and as paid in full, all Bonds shall be delivered to the Bondowner
Representative and shall forthwith be destroyed.
Section 6.02. Paying Agents. The Issuer, with the written approval of the Bondowner Representative,
may appoint and at all times have one or more paying agents in such place or places as the Issuer may designate,
for the payment of the principal of, and the interest (and premium, if any) on, the Bonds. It shall be the duty of the
Bondowner Representative to make such arrangements with any such paying agent as may be necessary and
feasible to assure, to the extent of the moneys held by the Bondowner Representative for such payment, the
availability of funds for the prompt payment of the principal of and interest and premium, if any, on the Bonds
presented at either place of payment. The paying agent initially appointed hereunder is the Bondowner
Representative.
Section 6.03. Preservation of Revenues; Amendment of Documents. The Issuer shall not take any
action to interfere with or impair the pledge and assignment hereunder of Revenues and the assignment to the
Bondowner Representative of rights of the Issuer under the Agreement and the Deed of Trust, or the Bondowner
Representative's enforcement of any rights hereunder or thereunder, shall not take any action to impair the validity
or enforceability of the Agreement or the Deed of Trust, and shall not waive any of its rights under or any other
provision of or permit any amendment of the Agreement or the Deed of Trust, without the prior written consent of the
Bondowner Representative provided that such consent of the Bondowner Representative shall not be required if the
Bondowner Representative shall have received an opinion of Bond Counsel to the effect that such amendment (a) is
required to preserve the exclusion of interest on the Bonds from gross income for federal income tax purposes or
compliance by the Bonds or the Development with the Act and the laws of the State of Califomia; or (b) will not
adversely affect the interests of the Bondhclders.
The Bondowner Representative may give such written consent, and may itself take any such action or
consent to a waiver of any provision of or an amendment or modification to or replacement of the Agreement, the
Deed of Trust, the Regulatory Agreement or any other document, instrument or agreement relating to the security for
the Bonds, only if (i) such action or such waiver, amendment, modification or replacement (a) is authorized or
required by the terms of this Indenture, the Agreement, the Deed of Trust or the Regulatory Agreement, or (b) will
not, based on an Opinion of Counsel furnished to the Bondowner Representative, materially adversely affect the
interests of the holders of the Bonds or result in any impairment of the security hereby given for the payment of the
Bonds, or (c) has first been approved by the written consent of the holders of the Bonds then outstanding; (ii) any
such action or such waiver, amendment, modification or replacement will not have the effect of extending the time
for payment or reducing the amount due and payable; and (iii) the Bondowner Representative shall have first
obtained an opinion of Bond Counsel to the effect that such action or such waiver, amendment, modification or
replacement will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax
purposes or conformance of the Bonds and the Development with the Act or the laws of the State of Califomia
relating to the Bonds.
Section 6.04. Compliance with Indenture. The Issuer shall not issue, or permit to be issued, any Bonds
secured or payable in any manner out of Revenues other than in accordance with the provisions of this Indenture; it
being understood that the Issuer reserves the right to issue obligations payable from and secured by sources other
than the Revenues and the assets assigned herein. The Issuer shall not suffer or permit any default to occur under
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this Indenture, but shall faithfully observe and perform all the covenants, conditions and requirements hereof. So
long as any Bonds are outstanding, the Issuer shall not create or suffer to be created any pledge, lien or charge of
any type whatsoever upon all or any part of the Revenues, other than the lien of this Indenture.
Section 6.05. Further Assurances. Whenever and so often as requested so to do by the Bondowner
Representative, the Issuer shall promptly execute and deliver or cause to be executed and delivered all such other
and further instruments, documents or assurances, and promptly do or cause to be done all such other and further
things, as may be necessary or reasonably required in order to further and more fully vest in the Bondowner
Representative and the Bondholders all of the rights, interests, powers, benefits, privileges and advantages
conferred or intended to be conferred upon them by this Indenture and to perfect and maintain as perfected such
rights, interests, powers, benefits, privileges and advantages.
Section 6.06. No Arbitrage. The Issuer shall not take, nor permit nor suffer to be taken by the Bondowner
Representative or otherwise, any action with respect to the gross proceeds of the Bonds which if such action had
been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of the
issuance of the Bonds would have caused the Bonds to be "arbitrage bonds" within the meaning of Section 148(a) of
the Code and Regulations promulgated thereunder.
Section 6.07. Limitation of Expenditure of Proceeds. The Issuer shall assure that not less than 97
percent of the face amount of the Bonds, plus premium (if any) paid on the purchase of the Bonds by the original
purchaser thereof from the Issuer, less original discount, are used for Qualified Development Costs.
Section 6.08. Rebate of Excess Investment Earnings to United States. The Issuer hereby covenants
to cause the Borrower to calculate or cause to be calculated excess investment eamings to the extent required by
Section 148(f) of the Code and the Bon-ower shall cause payment of an amount equal to excess investment eamings
to the United States in accordance with the Regulations, all at the sole expense of the Borrower.
Section 6.09. Limitation on Issuance Costs. The Issuer shall assure that, from the proceeds of the
Bonds received from the original purchaser thereof and investment earnings thereon, an amount not in excess of
two percent (2%) of the face amount of the Bonds shall be used to pay for, or provide for the payment of, Issuance
Costs. For this purpose, if the fees of such original purchaser are retained as a discount on the purchase of the
Bonds, such retention shall be deemed to be an expenditure of proceeds of the Bonds for said fees.
Section 6.10. Federal Guarantee Prohibition. The Issuer shall take no action nor permit nor suffer any
action to be taken if the result of the same would be to cause the Bonds to be "federally guaranteed" within the
meaning of Section 149(b) of the Code.
Section 6.11. Prohibited Facilities. No portion of the proceeds of the Bonds shall be used to provide any
airplane, skybox or other private luxury box, health club facility, facility primarily used for gambling, or store the
principal business of which is the sale of alcoholic beverages for consumption off premises. No portion of the
proceeds of the Bonds shall be used for an office unless the office is located on the premises of the facilities
constituting the Development and unless not more than a de minimus amount of the functions to be performed at
such office is not related to the day-to-day operations of the Development.
Section 6.12. Use Covenant. The Issuer shall not use or knowingly permit the use of any proceeds of
Bonds or any other funds of the Issuer, directly or indirectly, in any manner, and shall not take or permit to be taken
any other action or actions, which would result in any of the Bonds being treated as an obligation not described in
Section 145 of the Code by reason of such Bond not meeting the requirements of Section 145 of the Code.
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Section 6.13. Immunities and Limitations of Responsibility of Issuer. The Issuer shall be entitled to
the advice of counsel (who, except as otherwise provided, may be counsel for any Bondholder), and the Issuer shall
be wholly protected as to action taken or omitted in good faith in reliance on such advice. The Issuer may rely
conclusively on any communication or other document furnished to it hereunder and reasonably believed by it to be
genuine. The Issuer shall not be liable for any action (a) taken by it in good faith and reasonably believed by it to be
within its discretion or powers hereunder, or (b) in good faith omitted to be taken by it because such action was
reasonably believed to be beyond its discretion or powers hereunder, or (c) taken by it pursuant to any direction or
instruction by which it is governed hereunder, or (d) omitted to be taken by it by reason of the lack of any direction or
instruction required hereby for such action; nor shall it be responsible for the consequences of any error of judgment
reasonably made by it. The Issuer shall in no event be liable for the application or misapplication of funds or for
other acts or defaults by any person, except its own officers and employees. When any payment or consent or other
action by it is called for hereby, it may defer such action pending receipt of such evidence (if any) as it may require in
support thereof. The Issuer shall not be required to take any remedial action (other than the giving of notice) unless
indemnity in a form acceptable to the Issuer is furnished for any expense or liability to be incurred in connection with
such remedial action, other than liability for failure to meet the standards set forth in this Section. The Issuer shall
be entitled to reimbursement from the Borrower for its expenses reasonably incurred or advances reasonably made,
with interest at the rate of interest on the Bonds, in the exercise of its rights or the performance of its obligations
hereunder, to the extent that it acts without previously obtaining indemnity. No permissive right or power to act
which the Issuer may have shall be construed as a requirement to act; and no delay in the exercise of a right or
power shall affect its subsequent exercise of the right or power.
The Borrower has indemnified the Issuer against certain acts and events as set forth in Section 6.7 of the
Loan Agreement and Section 7 of the Regulatory Agreement. Such indemnities shall survive payment of the Bonds
and discharge of the Indenture.
Section 6.14. Small Issuer Exemption from Bank Nondeductibility Restriction. The Issuer hereby
designates the Bonds for purposes of paragraph (3) of section 265(b) of the Code and represents that not more than
$10,000,000 aggregate principal amount of obligations the interest on which is excludable (under section 103(a) of
the Code) from gross income for federal income tax purposes (excluding (i) private activity bonds, as defined in
section 141 of the Code, except qualified 501(c)(3) bonds as defined in section 145 of the Code, and (ii) current
refunding obligations to the extent the amount of the refunding obligation does not exceed the outstanding amount of
the refunded obligation), including the Bonds, has been or will be issued by the Issuer, including all subordinate
entities of the Issuer, during the calendar year 2001.
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ARTICLE VII
DEFAULT
Section 7.01. Events of Default; Acceleration; Waiver of Default. Each of the following events shall
constitute an "Event of Default" hereunder:
(a) failure to pay the principal of any Bond within ten (10) days of the date when and as the same
shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption,
by declaration or otherwise;
(b) failure to pay any installment of interest on any Bond within ten (10) days of the date when
such interest installment shall become due and payable;
(c) the occurrence of an Event of Default under the Loan Agreement; and
(d) failure by the Issuer to perform or observe any other of the covenants, agreements or
conditions on its part in this Indenture or in the Bonds contained, and the continuation of such failure for a
period of thirty (30) days after written notice thereof, specifying such default and requiring the same to be
remedied, shall have been given to the Issuer and the Borrower by the Bondowner Representative, or to
the Issuer, the Borrower and the Bondowner Representative by the holders of not less than twenty-five
percent (25%) in aggregate principal amount of the Bonds at the time outstanding.
No default specified in (d) above shall constitute an Event of Default unless the Issuer or the Borrower shall
have failed to correct such default within the applicable period; provided, however, that if the default shall be such
that it cannot be corrected within such period, it shall not constitute an Event of Default if corrective action is
instituted by the Issuer or the Borrower within the applicable period and diligently pursued until the default is
corrected not to exceed ninety (90) days (provided that a default by reason of nonpayment of Bondowner
Representative's fees and expenses may only be waived by the Bondowner Representative). With regard to any
alleged defau!± concerning which notice is given to the Borrower under the provisions of (d) above, the Issuer hereby
grants the Borrower full authority for the account of the Issuer to perform any covenant or obligation the non-
performance of which is alleged in said notice to constitute a default in the name and stead of the Issuer with full
power to do any and all things and acts to the same extent that the Issuer could do and perform any such things and
acts and with power of substitution.
During the continuance of an Event of Default described in (a), (b) or (c) above, unless the principal of all
the Bonds shall have already become due and payable, the Bondowner Representative may, and upon the
occurrence of any Event of Default specified in (a), (b) or (c) above or upon the written request of the owners of all of
the Bonds at the time outstanding in the case of an Event of Default described in (d) above, the Bondowner
Representative shall, by notice in writing to the Issuer, declare the principal of all the Bonds then outstanding, and
the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall
become and shall be immediately due and payable, anything in this Indenture or in the Bonds contained to the
contrary notwithstanding. Upon any such declaration of acceleration, the Bondowner Representative shall fix a date
for payment of the Bonds.
The preceding paragraph, however, is subject to the condition that if, at any time after the principal of the
Bonds shall have been so declared due and payable, and before any judgment or decree for the payment of the
moneys due shall have been obtained or entered as hereinafter provided, there shall have been deposited with the
Bondowner Representative a sum sufficient to pay all the principal of the Bonds matured or required to be redeemed
prior to such declaration and all matured installments of interest (if any) upon all the Bonds, with interest on such
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overdue installments of principal, and the reasonable fees and expenses of the Bondowner Representative, its
agents and counsel, and any and all other defaults actually known to a Responsible Officer of the Bondowner
Representative (other than in the payment of principal of and interest on the Bonds due and payable solely by
reason of such declaration) shall have been made good or cured to the satisfaction of the Bondowner
Representative or provision deemed by the Bondowner Representative to be adequate shall have been made
therefor, then, and in every such case, the holders of at least a majority in aggregate principal amount of the Bonds
then outstanding, by written notice to the Issuer and to the Bondowner Representative and with indemnification
satisfactory to the Bondowner Representative, may, on behalf of the holders of all the Bonds, rescind and annul
such declaration and its consequences and waive such default; but no such rescission, annulment or waiver shall
extend to or shall affect any subsequent default, or shall impair or exhaust any right or power consequent thereon.
Section 7.02. Institution of Legal Proceedings by Bondowner Representative. If one or more of the
Events of Default shall occur and be continuing, the Bondowner Representative in its discretion may, and upon the
written request of the holders of a majority in principal amount of the Bonds then outstanding and upon being
indemnified to its satisfaction therefor the Bondowner Representative shall, proceed to protect or enforce its rights or
the rights of the holders of Bonds under the Act or under this Indenture and the Agreement, by a suit in equity or
action at law, either for the specific performance of any covenant or agreement contained herein or therein, or in aid
of the execution of any power herein or therein granted, or by mandamus or other appropriate proceeding for the
enforcement of any other legal or equitable remedy as the Bondowner Representative shall deem most effectual in
support of any of its rights or duties hereunder; provided that any such request from the Bondholders shall not be in
conflict with any rule of law or with this Indenture, expose the Bondowner Representative to personal liability or be
unduly prejudicial to Bondholders not joining therein.
Section 7.03. Application of Moneys Collected by Bondowner Representative. Any moneys collected
by the Bondowner Representative pursuant to Section 7.02 shall be applied in the order following, at the date or
dates fixed by the Bondowner Representative and, in the case of distribution of such moneys on account of principal
(or premium, if any) or interest, upon presentation of the Bonds and stamping thereon the payment, if only partially
paid, and upon surrender thereof, if fully paid:
First: For payment of all amounts due to the Bondowner Representative under Section 8.06.
Second: For deposit in the Bond Fund to be applied to payment of the principal of all Bonds then
due and unpaid and interest thereon; ratably to the persons entitled thereto without discrimination or
preference.
Third: For payment of all other amounts due to any person hereunder or under the Loan
Agreement.
Section 7.04. Effect of Delay or Omission to Pursue Remedy. No delay or omission of the Bondowner
Representative or of any holder of Bonds to exercise any right or power arising from any default shall impair any
such right or power or shall be construed to be a waiver of any such default or acquiescence therein, and every
power and remedy given by this Article VII to the Bondowner Representative or to the holders of Bonds may be
exercised from time to time and as often as shall be deemed expedient. In case the Bondowner Representative
shall have proceeded to enforce any right under this Indenture, and such proceedings shall have been discontinued
or abandoned because of waiver or for any other reason, or shall have been determined adversely to the Bondowner
Representative, then and in every such case the Issuer, the Bondowner Representative and the holders of the
Bonds, severally and respectively, shall be restored to their former positions and rights hereunder in respect to the
trust estate; and all remedies, rights and powers of the Issuer, the Bondowner Representative and the holders of the
Bonds shall continue as though no such proceedings had been taken.
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Section 7.05. Remedies Cumulative. No remedy herein conferred upon or reserved to the Bondowner
Representative or to any holder of the Bonds is intended to be exclusive of any other remedy, but each and every
such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity.
Section 7.06. Covenant to Pay Bonds in Event of Default. The Issuer covenants that, upon the
happening of any Event of Default, the Issuer will pay to the Bondowner Representative upon demand, but only out
of Revenues, for the benefit of the holders of the Bonds, the whole amount then due and payable thereon (by
declaration or otherwise) for interest or for principal, or both, as the case may be, and all other sums which may be
due hereunder or secured hereby, including reasonable compensation to the Bondowner Representative, its agents
and counsel, and any expenses or liabilities incurred by the Bondowner Representative hereunder. In case the
Issuer shall fail to pay the same forthwith upon such demand, the Bondowner Representative, in its own name and
as Bondowner Representative of an express trust, and upon being indemnified to its satisfaction shall be entitled to
institute proceedings at law or in equity in any court of competent jurisdiction to recover judgment for the whole
amount due and unpaid, together with costs and reasonable attorneys' fees, subject, however, to the condition that
such judgment, if any, shall be limited to, and payable solely out of, Revenues and any other assets pledged,
transferred or assigned to the Bondowner Representative under Section 5.06 as herein provided and not otherwise.
The Bondowner Representative shall be entitled to recover such judgment as aforesaid, either before or after or
during the pendency of any proceedings for the enforcement of this Indenture, and the right of the Bondowner
Representative to recover such judgment shall not be affected by the exercise of any other right, power or remedy
for the enforcement of the provisions of this Indenture.
Section 7.07. Bondowner Representative Appointed Agent for Bondholders. The Bondowner
Representative is hereby appointed the agent of the holders of all Bonds outstanding hereunder for the purpose of
filing any claims relating to the Bonds.
Section 7.08. Power of Bondowner Representative to Control Proceedings. In the event that the
Bondowner Representative, upon the happening of an Event of Default, shall have taken any action, by judicial
proceedings or otherwise, pursuant to its duties hereunder, whether upon its own discretion or upon the written
request of the holders of a majority in principal amount of the Bonds then outstanding, it shall have full power, in the
exercise of its discretion for the best interests of the holders of the Bonds, with respect to the continuance,
discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the
Bondowner Representative shall not, unless there no longer continues an Event of Default hereunder, discontinue,
withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there
has been filed with it a written request signed by the holders of at least a majority in principal amount of the Bonds
outstanding hereunder opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such
litigation.
Section 7.09. Limitation on Bondholders' Right to Sue. No holder of any Bond issued hereunder shall
have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this
Indenture, unless (a) such holder shall have previously given to the Bondowner Representative written notice of the
occurrence of an Event of Default hereunder; (b) the holders of at least a majority in aggregate principal amount of
all the Bonds then outstanding shall have made written request upon the Bondowner Representative to exercise the
powers hereinbefore granted or to institute such action, suit or proceeding in its own name; (c) said holders shall
have tendered to the Bondowner Representative indemnity satisfactory to it against the costs, expenses and
liabilities to be incurred in compliance with such request; and (d) the Bondowner Representative shall have refused
or omitted to comply with such request for a period of thirty (30) days after such written request shall have been
received by, and said tender of indemnity shall have been made to, the Bondowner Representative.
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Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case,
to be conditions precedent to the exercise by any holder of Bonds of any remedy hereunder; it being understood and
intended that no one or more holders of Bonds shall have any right in any manner whatever by its or their action to
enforce any right under this Indenture, except in the manner herein provided, and that all proceedings at law or in
equity to enforce any provision of this Indenture shall be instituted, had and maintained in the manner herein
provided and for the equal benefit of all holders of the outstanding Bonds.
The right of any holder of any Bond to receive payment of the principal of (and premium, if any) and interest
on such Bond out of Revenues, as herein and therein provided, on and after the respective due dates expressed in
such Bond, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of such holder, notwithstanding the foregoing provisions of this Section
or any other provision of this Indenture.
Section 7.10. Limitation of Liability to Revenues. Notwithstanding anything in this Indenture contained,
the Issuer shall not be required to advance any moneys derived from the proceeds of taxes collected by the Issuer,
by the State of California or by any political subdivision thereof or from any source of income of any of the foregoing
other than the Revenues for any of the purposes mentioned in this Indenture, whether for the payment of the
principal of or interest on the Bonds or for any other purpose of this Indenture. The Bonds are limited obligations of
the Issuer, and are payable from and secured by the Revenues only.
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ARTICLE VIII
THE BONDOWNER REPRESENTATIVE AND AGENTS
Section 8.01. Duties, Immunities and Liabilities of Bondowner Representative. The Bondowner
Representative shall perform such duties and only such duties as are specifically set forth in this Indenture and no
additional covenants or duties of the Bondowner Representative shall be implied in this Indenture. The Bondowner
Representative shall, during the existence of any Event of Default (which has not been cured or waived), exercise
such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their
exercise, as reasonable persons familiar with such matters would exercise or use under similar circumstances in the
conduct of their own affairs.
No provision of this Indenture shall be construed to relieve the Bondowner Representative from liability for
its own negligent action or its own negligent failure to act, except that:
(a) the duties and obligations of the Bondowner Representative shall be determined solely by the
express provisions of this Indenture, the Bondowner Representative shall not be liable except for the
performance of such duties and obligations as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the Bondowner Representative; and in the
absence of bad faith on the part of the Bondowner Representative, the Bondowner Representative may
conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein,
upon any certificate or opinion furnished to the Bondowner Representative conforming to the requirements
of this Indenture;
(b) At all times, regardless of whether or not any Event of Default shall exist, (1) the Bondowner
Representative shall not be liable for any error of judgment made in good faith by a Responsible Officer or
officers or by any agent or attorney of the Bondowner Representative appointed with due care unless
(except as otherwise provided in Section 8.02(f)) the Bondowner Representative was negligent in
ascertaining the pertinent facts; and (2) the Bondowner Representative shall not be liable with respect to
any actior, taken or omitted to be taken by it in good faith in accordance with the direction of the Issuer.
accompanied by an opinion of Bond Counsel as provided herein or in accordance with the directions of the
holders of not less than a majority, or such other percentage as may be required hereunder, in aggregate
principal amount of the Bonds at the time outstanding relating to the time, method and place of conducting
any proceeding for any remedy available to the Bondowner Representative, or exercising any trust or power
conferred upon the Bondowner Representative under this Indenture;
(c) The Bondowner Representative shall not be required to take notice or be deemed to have
notice of (i) any default hereunder or under the Loan Agreement, except defaults under Section 7.01(a) or
(b) hereof, unless a Responsible Officer of the Bondowner Representative shall be specifically notified in
writing of such default by the Issuer or the owners of at least twenty-five percent (25%) in aggregate
principal amount of all Bonds then outstanding, or (ii) any default under the Regulatory Agreement unless a
Responsible Officer of the Bondowner Representative shall be specifically notified in writing of such default
by the Issuer;
(d) Before taking any action under Article VII hereof or this Section at the request or direction of
the Bondholders, the Bondowner Representative may require that a satisfactory indemnity bond be
furnished by the Bondholders, for the reimbursement of all expenses to which it may be put and to protect it
against all liability, except liability which is adjudicated to have resulted from its negligence or willful
misconduct in connection with any action so taken;
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(e) Upon any application or request by the Issuer to the Bondowner Representative to take any
action under any provision of this Indenture, the Issuer shall furnish to the Bondowner Representative a
Certificate of the Issuer stating that all conditions precedent, if any, provided for in this Indenture relating to
the proposed action have been complied with, and an Opinion of Counsel stating that in the opinion of such
Counsel all such conditions precedent, if any, have been complied with, except that in the case of any such
application or request as to which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no additional certificate or opinion need
be furnished;
(f) The Bondowner Representative may execute any of the powers hereunder or perform any
duties hereunder either directly or through agents or attorneys and the Bondowner Representative shall not
be responsible for any negligence or misconduct on the part of any agent or attorney appointed with due
care by it hereunder;
(g) Neither the Issuer nor the Borrower shall be deemed to be agents of the Bondowner
Representative for any purpose, and the Bondowner Representative shall not be liable for any
noncompliance of any of them in connection with their respective duties hereunder or in connection with the
transactions contemplated hereby;
(h) The Bondowner Representative shall be entitled to rely upon telephonic notice for all purposes
whatsoever so long as the Bondowner Representative reasonably believes such telephonic notice has
been given by a person authorized to give such notice;
(i) The immunities extended to the Bondowner Representative also extend to its directors,
officers, employees and agents;
(j) Under no circumstances shall the Bondowner Representative be liable in its individual capacity
for the obligations evidenced by the Bonds, it being the sole obligation of the Bondowner Representative to
administer, for the benefit of the Bondholders, the various funds and accounts established hereunder;
(k) No permissive power, right or remedy conferred upon the Bondowner Representative
hereunder shall be construed to impose a duty to exercise such power, right or remedy;
(I) The Bondowner Representative shall not be liable for any action taken or not taken by it in
accordance with the direction of a majority (or other percentage expressly provided for herein with respect
to a particular action) in aggregate principal amount of Bonds Outstanding related to the exercise of any
right, power or remedy available to the Bondowner Representative; and
(m) The Bondowner Representative shall have no duty to review any financial statements or
budgets filed with it by the Borrower under the Loan Agreement.
None of the provisions contained in this Indenture shall require the Bondowner Representative to expend or
risk its own funds or otherwise incur individual financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers. Whether or not therein expressly so provided, every provision of this
Indenture, the Loan Agreement, the Regulatory Agreement or any other document relating to the conduct, powers or
duties of, or affecting the liability of, or affording protection to, the Bondowner Representative shall be subject to the
provisions of this Article VIII.
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Section 8.02. Right of Bondowner Representative to Rely Upon Documents, Etc. Except as otherwise
provided in Section 8.01:
(a) The Bondowner Representative may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond or other paper or document believed by it to be genuine and to have been signed and
presented by the proper party or parties;
(b) Any consent, demand, direction, election, notice, order or request of the Issuer mentioned
herein shall be sufficiently evidenced by a Written Consent, Written Demand, Written Direction, Written
Election, Written Notice, Written Order or Written Request of the Issuer, and any resolution of the Issuer
may be evidenced to the Bondowner Representative by a Certified Resolution;
(c) The Bondowner Representative may consult with counsel (who may be counsel for the Issuer,
counsel for the Bondowner Representative or Bond Counsel) and the opinion of such counsel shall be full
and complete authorization and protection in respect of any action taken or suffered by it hereunder in good
faith and in accordance with the opinion of such counsel;
(d) Whenever in the administration of this Indenture the Bondowner Representative shall deem it
necessary or desirable that a matter be proved or established prior to taking or suffering any action
hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in
the absence of negligence or bad faith on the part of the Bondowner Representative, be deemed to be
conclusively proved and established by a Certificate of the Issuer; and such Certificate of the Issuer shall, in
the absence of negligence or bad faith on the part of the Bondowner Representative, be full warrant to the
Bondowner Representative for any action taken or suffered by it under the provisions of this Indenture upon
the faith thereof; and
(e) The Bondowner Representative shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document, but the Bondowner Representative, in its
discretion, may make such further inquiry or investigation into such facts or matters as it may see fit.
Section 8.03. Bondowner Representative Not Responsible for Recitals. The recitals contained herein
and in the Bonds shall be taken as the statements of the Issuer, and the Bondowner Representative assumes no
responsibility for the correctness of the same or for the correctness of the recitals in the Loan Agreement or the
Regulatory Agreement. The Bondowner Representative shall have no responsibility with respect to any information,
statement or recital in any offering memorandum or other disclosure material prepared or distributed with respect to
the Bonds. The Bondowner Representative makes no representations as to the value or condition of any assets
pledged or assigned as security for the Bonds, or as to the right, title or interest of the Issuer therein, or as to the
security provided thereby or by this Indenture, the Loan Agreement or the Deed of Trust, or as to the compliance of
the Development with the Act, or as to the tax-exempt status of the Bonds, or as to the technical or financial
feasibility of the Development, or as to the validity or sufficiency of this Indenture as an instrument of the Issuer or of
the Bonds as obligations of the Issuer. The Bondowner Representative shall not be accountable for the use or
application by the Issuer of any of the Bonds authenticated or delivered hereunder or of the use or application of the
proceeds of such Bonds by the Issuer or the Borrower or their agents.
Section 8.04. Intervention by Bondowner Representative. The Bondowner Representative may
intervene on behalf of the Bondholders in any judicial proceeding to which the Issuer is a party and which, in the
opinion of the Bondowner Representative and its counsel, has a substantial bearing on the interests of owners of the
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Bonds and, subject to the provisions of Section 8.01(4), shall do so if requested in writing by the owners of a majority
in aggregate principal amount of all Bonds then outstanding.
Section 8.05. Moneys Received by Bondowner Representative to be Held in Trust. All moneys
received by the Bondowner Representative shall, until used or applied as herein provided, be held in trust for the
purposes for which they were received, but need not be segregated from other funds except to the extent required
by law or as otherwise provided herein. The Bondowner Representative shall be under no liability for interest on any
moneys received by it hereunder except such as it may agree with the Issuer to pay thereon. Any moneys held by
the Bondowner Representative may be deposited by it in its banking department and invested in Investment
Securities.
Section 8.06. Compensation and Indemnification of Bondowner Representative and Agents. The
Borrower is required under the Loan Agreement: (1) to pay to the Bondowner Representative reasonable
compensation for all services rendered by it hereunder and under the other agreements related to the Bonds to
which it is a party; (2) except as otherwise expressly provided herein, to reimburse the Bondowner Representative
upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bondowner
Representative in accordance with any provision of this Indenture or other agreement related to the Bonds to which
the Bondowner Representative is a party or incurred in complying with any request made by the Issuer with respect
to the Bonds (including the reasonable compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be adjudicated by a court of competent
jurisdiction to be attributable in whole or in part to its negligence or bad faith; (3) to indemnify the Bondowner
Representative for, and to hold it harmless against, any loss, liability or expense incurred without negligence or
willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder or other agreement related hereto to which the Bondowner
Representative is a party; and (4) to indemnify the Bondowner Representative for any reasonable fees incurred
during a period of default hereunder. If any property, other than cash, shall at any time be held by the Bondowner
Representative subject to this Indenture, or any supplemental indenture, as security for the Bonds, the Bondowner
Representative, if and to the extent authorized by a receivership, bankruptcy or other court of competent jurisdiction
or by the instrument subjecting such property to the provisions of this Indenture as such security for the Bonds, shall
be entitled but not obligated to make advances for the purpose of preserving such property or of discharging tax
liens or other prior liens or encumbrances thereon. The rights of the Bondowner Representative to compensation for
services and to payment or reimbursement for expenses, disbursements, liabilities and advances shall have and is
hereby granted a lien and a security interest prior to the Bonds in respect of all property and funds held or collected
by the Bondowner Representative as such, except funds held in trust by the Bondowner Representative for the
benefit of the holders of particular Bonds, which amounts shall be held solely for the benefit of the Bondholders and
used only for the payment of principal of and premium, if any, and interest on the Bonds. The Bondowner
Representative's rights to immunities, indemnities and protection from liability hereunder and its rights to payment of
its fees and expenses shall survive its resignation or removal and final payment of the Bonds.
Section 8.07. Qualifications of Bondowner Representative. There shall at all times be a Bondowner
Representative hereunder which shall be a corporation or banking association organized and doing business under
the laws of the United States or of a state thereof. Any change in the Bondowner Representative shall be only at the
written request of the owners of all of the Bonds outstanding.
Section 8.08. Merger or Consolidation of Bondowner Representative. Any corporation or association
into which the Bondowner Representative may be merged or with which it may be consolidated, or any corporation
or association resulting from any merger or consolidation to which the Bondowner Representative shall be a party, or
any corporation or association succeeding to the corporate trust business of the Bondowner Representative, shall be
the successor of the Bondowner Representative hereunder without the execution or filing of any paper or any further
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act on the part of any of the parties hereto, anything herein to the contrary notwithstanding, provided that such
successor Bondowner Representative shall be eligible under the provisions of Section 8.07.
Section 8.09. Dealing in Bonds. The Bondowner Representative, in its individual capacity, may in good
faith buy, sell, own, hold and deal in any of the Bonds, and may join in any action which any Bondholder may be
entitled to take with like effect as if it did not act in any capacity hereunder. The Bondowner Representative in its
individual capacity, either as principal or agent, may also engage in or be interested in any financial or other
transaction with the Issuer, and may act as depository, Bondowner Representative or agent for any committee or
body of Bondholders secured hereby or other obligations of the Issuer as freely as if it did not act in any capacity
hereunder.
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ARTICLE IX
MODIFICATION OF INDENTURE
Section 9.01. Modification of Indenture. With the prior written consent of all of the holders of the Bonds
at the time outstanding, evidenced as provided in Section 11.08, the Issuer and the Bondowner Representative may
from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture; provided, however, that, except to the extent permitted by Section 9.01, no such
supplemental indenture shall reduce the aforesaid percentage of holders of Bonds whose consent is required for the
execution of such supplemental indentures. Upon receipt by the Bondowner Representative of a Certified
Resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Bondowner
Representative of evidence of the consent of Bondholders, as aforesaid, the Bondowner Representative shall join
with the Issuer in the execution of such supplemental indenture, unless (i) such supplemental indenture affects the
Bondowner Representative's own rights, duties or immunities under this Indenture or otherwise, in which case the
Bondowner Representative may in its discretion, but shall not be obligated to, enter into such supplemental
indenture; or (ii) such supplemental indenture affects the rights or obligations of the Borrower hereunder or under the
Loan Agreement, in which case the Bondowner Representative shall enter into such supplemental indenture only if
the Bondowner Representative has received the Borrower's written consent thereto.
It shall not be necessary for the consent of the Bondholders under this Section to approve the particular
form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance
thereof.
Promptly after the execution by the Issuer and the Bondowner Representative of any supplemental
indenture pursuant to the provisions of this Section, the Bondowner Representative shall give Bondholders, by first
class mail, a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the
Bondowner Representative to give such notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture. A copy of any supplemental indenture shall be sent by the
Eondowner Representative to the Rating Agency.
Section 9.02. Effect of Supplemental Indenture. Upon the execution of any supplemental indenture
pursuant to the provisions of this Article IX, this Indenture shall be and be deemed to be modified and amended in
accordance therewith, and the respective rights, duties and obligations under this Indenture of the Issuer, the
Bondowner Representative and all holders of outstanding Bonds shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be part of the terms and conditions of this Indenture for any and all
purposes.
Section 9.03. Opinion of Counsel as to Supplemental Indenture. Subject to the provisions of Section
8.01, the Bondowner Representative shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to the provisions of
this Article IX is authorized and permitted by this Indenture.
Section 9.04. Notation of Modification on Bonds; Preparation of New Bonds. Bonds authenticated
and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article IX may bear
a notation, in form approved by the Bondowner Representative and the Issuer as to any matter provided for in such
supplemental indenture, and if such supplemental indenture shall so provide, new Bonds, so modified as to conform,
in the opinion of the Bondowner Representative and the Issuer, to any modification of this Indenture contained in any
such supplemental indenture, may be prepared and authenticated by the Bondowner Representative and delivered
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without cost to the holders of the Bonds then outstanding, upon surrender for cancellation of such Bonds in equal
aggregate principal amounts.
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ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Indenture. If the entire indebtedness on all Bonds outstanding shall be paid
and discharged in any one or more of the following ways:
(a) by the payment of the principal of (including redemption premium, if any) and interest on all
Bonds outstanding; or
(b) by the deposit or credit to the account of the Bondowner Representative, in trust, at or before
maturity, of money or securities in the necessary amount (as provided in Section 10.04) to pay or redeem
Bonds outstanding, whether by redemption or otherwise; or
(c) by the delivery to the Bondowner Representative, for cancellation by it, of all Bonds
outstanding;
and if (i) all other sums payable hereunder by the Issuer shall be paid and discharged, (ii) the Borrower shall deliver
an opinion of counsel to the effect that (A) the defeasance collateral has been duly and validly assigned and
delivered to the Bondowner Representative for the benefit of the Bondowners and (B) the security interest of the
Bondowner Representative for the benefit of the Bondowners is a first priority perfected security interest, and (iii)
written confirmation from the Rating Agency that the defeasance will not result in a downgrade, withdrawal or
qualification of the rating then assigned to the Bonds; then and in that case this Indenture shall cease, terminate and
become null and void, except only as provided in Sections 2.03, 2.05, 6.08, 8.06 and 10.02 hereof, and thereupon
the Bondowner Representative shall, upon Written Request of the Issuer, and upon receipt by the Bondowner
Representative of a Certificate of the Issuer and an Opinion of Counsel, each stating that in the opinion of the
signers all conditions precedent to the satisfaction and discharge of this Indenture have been complied with,
forthwith execute proper instruments acknowledging satisfaction of and discharging this Indenture. The fees,
expenses and charges of the Bondowner Representative (including reasonable counsel fees) must be paid in order
±o effect such discharge. The satisfaction and disr_.harge of this Indenture shall be without prejudice to the rights of
the Bondowner Representative to charge and be reimbursed by the Borrower for any expenditures which it may
thereafter incur in connection herewith.
The Issuer or the Borrower may at any time surrender to the Bondowner Representative for cancellation by
it any Bonds previously authenticated and delivered which the Issuer or the Borrower lawfully may have acquired in
any manner whatsoever, and such Bonds upon such surrender and cancellation shall be deemed to be paid and
retired.
Section 10.02. Discharge of Liability on Bonds. Upon the deposit with the Bondowner Representative,
in trust, at or before maturity, of money or securities in the necessary amount (as provided in Section 10.04) to pay
or redeem outstanding Bonds (whether upon or prior to their maturity or the redemption date of such Bonds)
provided that, if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have
been given as in Article IV provided or provision satisfactory to the Bondowner Representative shall have been
made for the giving of such notice, and, in any event, notice thereof is given to the Rating Agency, all liability of the
Issuer in respect of such Bonds shall cease, terminate and be completely discharged, except only that thereafter the
holders thereof shall be entitled to payment by the Issuer, and the Issuer shall remain liable for such payment, but
only out of the money or securities deposited with the Bondowner Representative as aforesaid for their payment,
subject, however, to the provisions of Section 10.03.
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Section 10.03. Payment of Bonds after Discharge of Indenture. Notwithstanding any provisions of this
Indenture, any moneys deposited with the Bondowner Representative or any paying agent in trust for the payment of
the principal of, or interest or premium on, any Bonds remaining unclaimed for two (2) years after the principal of all
the outstanding Bonds has become due and payable (whether at maturity or upon call for redemption or by
declaration as provided in this Indenture), shall then be paid to the Issuer, and the holders of such Bonds shall
thereafter be entitled to look only to the Issuer for payment thereof, and only to the extent of the amount so paid to
the Issuer, and all liability of the Bondowner Representative or any paying agent with respect to such moneys shall
thereupon cease. In the event of the payment of any such moneys to the Issuer as aforesaid, the holders of the
Bonds in respect of which such moneys were deposited shall thereafter be deemed to be unsecured creditors of the
Issuer for amounts equivalent to the respective amounts deposited for the payment of such Bonds and so paid to the
Issuer (without interest thereon).
Section 10.04. Deposit of Money or Securities with Bondowner Representative. Whenever in this
Indenture it is provided or permitted that there be deposited with or credited to the account of or held intrust by the
Bondowner Representative money or securities in the necessary amount to pay or redeem any Bonds, the money or
securities so to be deposited or held shall be:
(a) lawful money of the United States of America in an amount equal to the principal amount of
such Bonds and all unpaid interest thereon to maturity, except that, in the case of Bonds which are to be
redeemed prior to maturity and in respect of which there shall have been furnished to the Bondowner
Representative proof satisfactory to it that notice of such redemption on a specified redemption date has
been duly given or provision satisfactory to the Bondowner Representative shall be made for such notice,
the amount so to be deposited or held shall be the principal amount of such Bonds and interest thereon to
the redemption date, together with the redemption premium, if any; or
(b) noncallable direct obligations of the United States of America or obligations which as to
principal and interest constitute full faith and credit obligations of the United States of America, in such
amounts and maturing at such times that the proceeds of said obligations received upon their respective
maturities and interest payment dates, without further reinvestment, will provide funds sufficient, in the
opinion of Bond Counsel or a nationally recognized firm of certified public accountants, to pay the principal,
premium, if any, and interest to maturity, or to the redemption date, as the case may be, with respect to all
of the Bonds to be paid or redeemed, as such principal, premium and interest become due; provided that
the Bondowner Representative shall have been irrevocably instructed by the Issuer to apply the proceeds
of said obligations to the payment of said principal, premium, if any, and interest with respect to such
Bonds.
The Bondowner Representative shall have a valid first priority perfected security interest in the moneys or
securities and all proceeds thereof and distribution thereon and any such securities shall be held in the name of the
Bondowner Representative for the benefit of the Bondowners.
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ARTICLE XI
MISCELLANEOUS
Section 11.01. Successors of Issuer. All the covenants, stipulations, promises and agreements in this
Indenture contained, by or on behalf of the Issuer, shall bind and inure to the benefit of its successors and assigns,
whether so expressed or not. If any of the powers or duties of the Issuer shall hereafter be transferred by any law of
the State of California, and if such transfer shall relate to any matter or thing permitted or required to be done under
this Indenture by the Issuer, then the body or official who shall succeed to such powers or duties shall act and be
obligated in the place and stead of the Issuer as in this Indenture provided.
Section 11.02. Limitation of Rights to Parties and Bondholders. Nothing in this Indenture or in the
Bonds expressed or implied is intended or shall be construed to give to any person other than the Issuer, the
Bondowner Representative, the Borrower and the holders of the Bonds issued hereunder any legal or equitable
right, remedy or claim under or in respect of this Indenture or any covenant, condition or provision therein or herein
contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive
benefit of the Issuer, the Bondowner Representative, the Borrower and the holders of the Bonds issued hereunder.
Section 11.03. Waiver of Notice. Whenever in this Indenture the giving of notice by mail or otherwise is
required, the giving of such notice may be waived in writing by the person entitled to receive such notice and in any
such case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
Section 11.04. Destruction of Bonds. Whenever in this Indenture provision is made for the cancellation
by the Bondowner Representative and the delivery to the Issuer of any Bonds, the Bondowner Representative shall,
in lieu of such cancellation and delivery, destroy such Bonds and deliver a certificate of such destruction to the
Issuer.
Section 11.05. Separability of Invalid Provisions. In case any one or more of the provisions contained
in this Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect;
such invalidity, illegality or unenforceability shall not affect any other provision of this Indenture, but this Indenture
shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein.
Section 11.06. Notices. It shall be sufficient service of any notice, request, demand or other paper on the
Issuer, the Bondowner Representative, the Rating Agency or the Borrower if the same shall, except as otherwise
provided herein, be duly mailed by first class mail, postage prepaid, or given by telephone or telecopier and
confirmed by such mail, and to the other parties as follows:
The Issuer: City of Cupertino
10300 Torre Avenue
Cupertino, Califomia 95014
Attention: Director of Administrative Services
Fax: (408) 777-3366
The Bondowner Representative: Cupertino National Bank
20230 Stevens Creek Boulevard
Cupertino, Califomia 95014
Attention: Ms. Roxanne Vane, Sr. Vice President
Fax: (408) 996-0657
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7-~3
The Borrower: Cupertino Community Services
10185 N. Stelling Road
Cupertino, California 95014
Fax: (408) 255-4714
The Issuer, the Bondowner Representative and the Borrower may, by notice given hereunder, designate
any further or different addresses to which subsequent notices, certificates or other communications shall be sent.
Section 11.07. Authorized Representatives. Whenever under the provisions of this Indenture the
approval of the Issuer or the Borrower is required for any action, and whenever the Issuer or the Borrower is required
to deliver any notice or other writing, such approval or such notice or other writing shall be given, respectively, on
behalf of the Issuer by the Authorized Issuer Representative or on behalf of the Borrower by the Authorized Borrower
Representative, and the Issuer, the Bondowner Representative and the Borrower shall be authorized to act on any
such approval or notice or other writing and neither party hereto nor the Borrower shall have any complaint against
the others as a result of any such action taken.
Section 11.08. Evidence of Rights of Bondholders. (a) Any request, consent or other instrument
required by this Indenture to be signed and executed by Bondholders may be in any number of concurrent writings
of substantially similar tenor and may be signed or executed by such Bondholders in person or by agent or agents
duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing
appointing any such agent, or of the ownership of any Bonds, shall be sufficient for any purpose of this Indenture
and shall be conclusive in favor of the Bondowner Representative and of the Issuer if made in the manner provided
in this Section.
(b) The fact and date of the execution by any person of any such request, consent or other instrument or
writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other
officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the
person signing such request, consent or other instrument or writing acknowledged to him the execution thereof.
(c) The ownership of Bonds shall be proved by the Bond register maintained pursuant to Section 2.06
hereof. The fact and the date of execution of any request, consent or other instrument and the amount and
distinguishing numbers of Bonds held by the person so executing such request, consent or other instrument may
also be proved in any other manner which the Bondowner Representative may deem sufficient. The Bondowner
Representative may nevertheless, in its discretion, require further proof in cases where it may deem further proof
desirable.
(d) Any request, consent or vote of the holder of any Bond shall bind every future holder of the same Bond
and the holder of any Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to
be done by the Bondowner Representative or the Issuer in pursuance of such request, consent or vote.
(e) In determining whether the holders of the requisite aggregate principal amount of Bonds have
concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds which are owned by the
Issuer or by any other direct or indirect obligor on the Bonds, or by any person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, the Issuer or any other direct or indirect obligor on the
Bonds, shall be disregarded and deemed not to be outstanding for the purpose of any such determination, provided
that, for the purpose of determining whether the Bondowner Representative shall be protected in relying on any such
demand, request, direction, consent or waiver, only Bonds which the Bondowner Representative knows to be so
owned shall be disregarded. Bonds so owned which have been pledged in good faith may be regarded as
outstanding for the purposes of this subsection (e) if the pledgee shall establish to the satisfaction of the Bondowner
Representative and the Issuer the pledgee's right to vote such Bonds and that the pledgee is not a person directly or
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indirectly controlling or controlled by, or under direct or indirect common control with, the Issuer or any other director
indirect obligor on the Bonds. In case of a dispute as to such right, any decision by the Bondowner Representative
taken upon the advice of counsel shall be full protection to the Bondowner Representative. Solely for purposes of
the limitation expressed in this paragraph (e), the Borrower shall be deemed to be an indirect obligor on the Bonds.
(f) In lieu of obtaining any demand, request, direction, consent or waiver in writing, the Bondowner
Representative may call and hold a meeting of the Bondholders upon such notice and in accordance with such rules
and regulations as the Bondowner Representative considers fair and reasonable for the purpose of obtaining any
such action.
Section 11.09. Waiver of Personal Liability. No officer, agent, member or employee of the Issuer, and
no officer, ofFcial, agent or employee of the State of Califomia or any department, board or agency of any of the
foregoing, shall be individually or personally liable for the payment of the principal of or premium or interest on the
Bonds or be subject to any personal liability or accountability by reason of the issuance thereof; but nothing herein
contained shall relieve any such person from the performance of any official duty provided by law or by this
Indenture.
Section 11.10. Holidays. If the date for making any payment or the last date for performance of any actor
the exercising of any right, as provided in this Indenture, is not a Business Day, such payment may be made or act
performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the
date provided therefor in this Indenture and, in the case of any payment, no interest shall accrue for the period from
and after such date.
Section 11.11. Execution in Several Counterparts. This Indenture may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such
counterparts shall together constitute but one and the same instrument.
Section 11.12. Governing Law. This Indenture shall be governed by and construed in accordance with
the laws of the State of California applicable to contracts made and performed in such State.
Section 11.13. Conflict with Trust Indenture Act of 1939. If this Indenture is qualified under the Trust
Indenture Act of 1939, as amended (the "39 Act") and any provision of the 39 Act which is required to be included in
this Indenture limits, qualifies or conflicts with another provision hereof which is required to be included in this
Indenture such required provision shall control.
Section 11.14. Successors. Whenever in this Indenture either the Issuer or the Bondowner
Representative is named or referred to, such reference shall be deemed to include the successors or assigns
thereof, and all the covenants and agreements in this Indenture contained by or on behalf of the Issuer or the
Bondowner Representative shall bind and inure to the benefit of the respective successors and assigns thereof
whether so expressed or not.
Section 11.15. CUSIP Numbers. Neither the Bondowner Representative nor the Issuer sha!I be liable for
any defect or inaccuracy in any CUSIP number that appears on any Bond or in any redemption notice. The
Bondowner Representative may, in its discretion, include in any redemption notice a statement to the effect that any
CUSIP number on the Bonds has been assigned by an independent service and are included in such notice solely
for the convenience of the Bondholders and that neither the Issuer nor the Bondowner Representative shall be liable
for any inaccuracies in such numbers.
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IN WITNESS WHEREOF, the CITY OF CUPERTINO has caused this Indenture to be signed in its name
and CUPERTINO NATIONAL BANK, in token of its acceptance of the trust created hereunder, has caused this
Indenture to be signed in its name, all as of the day and year first above written.
By:
03028.01:J5548
-33-
CITY OF CUPERTINO
City Manager
CUPERTINO NATIONAL BANK, as Bondowner
Representative
By:
Its:
~]-'~~
EXHIBIT A
FORM OF BOND
Up to $1,600,000.00
CITY OF CUPERTINO
MULTIFAMILY HOUSING REVENUE BOND
(HEART OF CUPERTINO PROJECT),
SERIES 2001A
REGISTERED OWNER: Cupertino National Bank
PRINCIPAL SUM: Up to ONE MILLION SIX HUNDRED THOUSAND DOLLARS
The City of Cupertino, a municipal corporation duly organized and existing under the laws of the State of
California (herein called the "Issuer"), for value received, hereby promises to pay (but only out of Revenues as
hereinafter provided) to the Registered Owner identified above or registered assigns, the sum of up to one million six
hundred thousand dollars ($1,600,000.00) together with interest on the unpaid Outstanding Balance (as hereinafter
defined) at the interest rate referred to below from October _, 2001 until the Issuer's obligation to pay the
Outstanding Balance shall be discharged. The Outstanding Balance shall mean the purchase price of the Bonds
(defined below) which has been advanced by the purchaser thereof under the Indenture described below, and has
not been repaid by the Issuer as of the date of calculation of the Outstanding Balance.
The principal Outstanding Balance of this Bond shall be due and payable on October 1, 2031. This Bond
shall bear interest at the rate of six and three-eighths percent (6.375%) per annum, with monthly payments of
principal and interest payable on the first business day of each muntii, commencing ~Jovember 1, 2001, in the
amount of $
In the event the Issuer fails to make the timely payment of any monthly payment, and such payment
remains unpaid for a period of ten (10) days subsequent to the established payment date, the Issuer shall pay
interest on the then Outstanding Balance at a default rate (the "Default Rate") equal to the interest rate then in effect
under this Bond plus five percent (5%) (solely from amounts received from the Borrower as late charges the Default
Rate under the Loan Agreement (as defined in the Indenture)).
This Bond is one of a duly authorized issue of bonds of the Issuer designated as "City of Cupertino
Multifamily Housing Revenue Bonds (Heart of Cupertino Project), Series 2001A" (herein called the "Bonds"), in the
initial aggregate principal amount of up to $1,600,000, authorized to be issued pursuant to Chapter 8 of Part 5 of
Division 31 of the Health and Safety Code of the State of California (herein called the "Act"), and issued under and
secured by an Indenture of Trust, dated as of October 1, 2001 (herein called the "Indenture"), between the Issuer
and Cupertino National Bank, as Bondowner Representative (the "Bondowner Representative"). Reference is
hereby made to the Indenture and all indentures supplemental thereto for a description of the rights thereunder of
the owners of the Bonds, of the nature and extent of the security, of the rights, duties and immunities of the
Bondowner Representative and of the rights and obligations of the Issuer thereunder, to all of the provisions of which
Indenture the holder of this Bond, by acceptance hereof, assents and agrees.
A-1
7- Y 7
THE BONDS AND THE INTEREST THEREON ARE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE
EXCLUSIVELY FROM REVENUES AND RECEIPTS UNDER THE AGREEMENT. THE BONDS DO NOT
CONSTITUTE A DEBT OF THE ISSUER, OR OF THE STATE OF CALIFORNIA, OR OF ANY POLITICAL
SUBDIVISION THEREOF, WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR
STATUTORY LIMITATION AND SHALL NEVER CONSTITUTE NOR GIVE RISE TO A PECUNIARY LIABILITY OF
THE ISSUER, OR OF THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF. THE BONDS
SHALL NOT CONSTITUTE A GENERAL OBLIGATION OF OR A CHARGE AGAINST THE GENERAL CREDIT OF
THE ISSUER, BUT SHALL BE A SPECIAL, LIMITED OBLIGATION OF THE ISSUER PAYABLE SOLELY FROM
THE SOURCES DESCRIBED IN THE INDENTURE, BUT NOT OTHERWISE. THE ISSUER HAS NO TAXING
POWER.
NO RECOURSE SHALL BE HAD FOR THE PAYMENT OF THE PRINCIPAL OF OR PREMIUM OR
INTEREST ON THIS BOND AGAINST ANY PAST, PRESENT OR FUTURE OFFICER, DIRECTOR, MEMBER,
EMPLOYEE OR AGENT OF THE ISSUER, OR OF ANY SUCCESSOR TO THE ISSUER, AS SUCH, EITHER
DIRECTLY OR THROUGH THE ISSUER OR ANY SUCCESSOR TO THE ISSUER, UNDER ANY RULE OF LAW
OR EQUITY, STATUTE OR CONSTITUTION OR BY THE ENFORCEMENT OF ANY ASSESSMENT OR PENALTY
OR OTHERWISE, AND ALL SUCH LIABILITY OF ANY SUCH OFFICERS, DIRECTORS, MEMBERS, EMPLOYEES
OR AGENTS, AS SUCH, IS HEREBY EXPRESSLY WAIVED AND RELEASED AS A CONDITION OF, AND
CONSIDERATION FOR, THE EXECUTION AND ISSUANCE OF THIS BOND.
The Bonds are limited obligations of the Issuer and, as and to the extent set forth in the Indenture, are
payable solely from, and secured by a pledge of and lien on, the Revenues (as that term is defined in the Indenture),
consisting primarily of amounts paid by Cupertino Community Services (the "Borrower") pursuant to a Loan
Agreement, dated as of October 1, 2001 (the "Loan Agreement"), between the Issuer and the Borrower, to finance
the acquisition and construction of a multifamily rental housing project owned by the Borrower in the City of
Cupertino.
The Bonds shall be subject to redemption prior to maturity, at a price equal to the principal amount of
Bonds to be redeemed plus interest accrued thereon to the date fixed for redemption, without premium (a) in whole
or in part on any date; (b) in whole following acceleration of the Loan upon the occurrence of an event of default
under the Loan Agreement; and (c) in whole or in part on any date from the proceeds of any mandatory prepayment
of the Loan under the terms of the Note or the Loan Agreement.
No notice of redemption of Bonds need be given to the registered owners of the Bonds, and the owner of
this Bond, by acceptance hereof, expressly waives any requirement for any notice of redemption.
If an Event of Default, as defined in the Indenture, shall occur, the principal of all Bonds may be declared
due and payable upon the conditions, in the manner and with the effect provided in the Indenture. The Indenture
provides that in certain events such declaration and its consequences may be rescinded by the holders of at least a
majority in aggregate principal amount of the Bonds then outstanding.
The Bonds are issuable only as fully registered Bonds without coupons in a single instrument.
This Bond is transferable by the registered owner hereof, in person, or by its attorney duly authorized in
writing, at the Principal Office of the Bondowner Representative, but only in the manner, subject to the limitations
(including the prior written consent of the Issuer to any such transfer) and upon payment of the charges provided in
the Indenture, and upon surrender and cancellation of this Bond. Upon such transfer a new fully registered Bond will
be issued to the transferee in exchange herefor. The Issuer and the Bondowner Representative may treat the
registered owner hereof as the absolute owner hereof for all purposes, and the Issuer and the Bondowner
Representative shall not be affected by any notice to the contrary.
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7- y8
The Indenture contains provisions permitting the Issuer and the Bondowner Representative to execute
supplemental indentures adding provisions to, or changing or eliminating any of the provisions of, the Indenture,
subject to the limitations set forth in the Indenture.
The Issuer hereby certifies that all of the conditions, things and acts required to exist, to have happened
and to have been performed precedent to and in the issuance of this Bond do exist, have happened and have been
performed in due time, form and manner as required by the Constitution and statutes of the State of Califomia
(including the Act) and that the amount of this Bond, together with all other indebtedness of the Issuer, does not
exceed any limit prescribed by the Constitution or statutes of the State of Califomia.
This Bond shall not be entitled to any benefit under the Indenture, or become valid or obligatory for any
purpose, until the certificate of authentication hereon endorsed shall have been manually signed by the Bondowner
Representative.
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IN WITNESS WHEREOF, the CITY OF CUPERTINO has caused this Bond to be executed in its name by
the manual or facsimile signature of its Mayor and its official seal to be impressed or printed hereon and attested by
the manual or facsimile signature of its City Clerk, all as of October _, 2001.
Attest:
By
City Clerk
CITY OF CUPERTINO
By
Mayor
FORM OF CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the within-mentioned Indenture and has been authenticated and
registered on this date:
CUPERTINO NATIONAL BANK, as Bondowner
Representative
By
A-4
Authorized Officer
7- 5a
FORM OF ASSIGNMENT
For value received, the undersigned do(es) hereby sell, assign and transfer unto
(Name, Address and Tax Identification or Social Security Number of Assignee)
the within Bond and do(es) hereby irrevocably constitute and appoint
attorney,
to transfer the same on the registration books of the Bondowner Representative, with full power of substitution in the
premises.
Dated:
Signature Guaranteed:
NOTICE: Signature(s) must be guaranteed by a eligible
guarantor.
NOTICE: The signature on this assignment must correspond
with the name(s) as written on the face of the within
Bond in every particular without alteration or
enlargement or any change whatsoever.
A-5
7~ 51
Quinl & Thimmig LLP
8/27101
snoro~
LOAN AGREEMENT
by and between the
CITY OF CUPERTINO
and
CUPERTINO COMMUNITY SERVICES
Dated as of October 1, 2001
relating to:
City of Cupertino
Multifamily Housing Revenue Bonds
(Heart of Cupertino Project), Series 2001A
03028.01:J5549
~-sa
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions .......................................................................................................................................................... 1
Section 1.2. Interpretation ..................................................................................................................................................... 4
Section 1.3. Recitals, Titles and Headings ............................................................................................................................ 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties of the Issuer .................................................................................................. 5
Section 2.2. Representations, Warranties and Covenants of the Borrower .......................................................................... 5
Section 2.3. Hazardous Waste Covenant ............................................................................................................................. 9
Section 2.4. Additional Environmental Matters ....................................................................................................................10
ARTICLE III
THE LOAN
Section 3.1. Closing of the Loan ......................................................................................................................................... 13
Section 3.2. Commitment to Execute the Note ................................................................................................................... 13
Section 3.3. Amount and Source of Loan ............................................................................................................................ 13
Section 3.4. Disbursement of Loan Proceeds ..................................................................................................................... 13
ARTICLE IV
LIMITED LIABILITY
Section 4.1. Limited Liability ................................................................................................................................................ 14
ARTICLE V
REPAYMENT OF THE LOAN
Section 5.1. Loan Repayment ............................................................................................................................................. 15
Section 5.2. Nature of the Borrower's Obligations .............................................................................................................. 15
Section 5.3. No Encumbrances ...........................................................................................................................................16
ARTICLE VI
FURTHER AGREEMENTS
Section 6.1. Successor to the Issuer ................................................................................................................................... 17
Section 6.2. Borrower Not to Dispose of Assets; Conditions Under Which Exceptions Permitted ...................................... 17
Section 6.3. Cooperation in Enforcement of Regulatory Agreement ................................................................................... 17
Section 6.4. Additional Instruments ..................................................................................................................................... 17
Section 6.5. Books and Records ......................................................................................................................................... 17
Section 6.6. Notice of Certain Events .................................................................................................................................. 17
Section 6.7. Indemnification of the Issuer and Bondowner Representative ........................................................................ 18
Section 6.8. Consent to Assignment ................................................................................................................................... 18
Section 6.9. Compliance with Usury Laws .......................................................................................................................... 18
Section 6.10. Title to the Development ................................................................................................................................. 18
Section 6.11. Payment of Taxes ........................................................................................................................................... 19
Section 6.12. No Untrue Statements ..................................................................................................................................... 19
Section 6.13. Insurance ........................................................................................................................................................ 19
Section 6.14. Tax Exempt Status of the Bonds ..................................................................................................................... 19
Section 6.15. Regulatory Agreement .................................................................................................................................... 20
7-53
Section 6.16. Useful Life ....................................................................................................................................................... 20
Section 6.17. Federal Guarantee Prohibition ........................................................................................................................ 21
Section 6.18. Prohibited Facilities ......................................................................................................................................... 21
Section 6.19. Completion of Improvements by Bondowner Representative ......................................................................... 21
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default ............................................................................................................................................. 22
Section 7.2. Notice of Default; Opportunity to Cure ............................................................................................................ 23
Section 7.3. Remedies ........................................................................................................................................................ 23
Section 7.4. Attorneys' Fees and Expenses ........................................................................................................................ 23
Section 7.5. No Remedy Exclusive ...............................................:..................................................................................... 23
Section 7.6. No Additional Waiver Implied by One Waiver ................................................................................................. 24
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Entire Agreement ............................................................................................................................................ 25
Section 8.2. Notices ............................................................................................................................................................ 25
Section 8.3. Assignments .................................................................................................................................................... 25
Section 8.4. Severability ...................................................................................................................................................... 25
Section 8.5. Execution of Counterparts ............................................................................................................................... 25
Section 8.6. Amendments, Changes and Modifications ...................................................................................................... 25
Section 8.7. Governing Law ................................................................................................................................................ 25
Section 8.8. Term of Agreement ......................................................................................................................................... 25
Section 8.9. Survival of Agreement ..................................................................................................................................... 25
Section 8.10. Binding Effect; Third Party Beneficiary ............................................................................................................ 25
EXHIBIT A INCOME COMPUTATION AND CERTIFICATION
EXHIBIT B CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE
EXHIBIT C NOTE
EXHIBIT D CONDITIONS TO DISBURSEMENT
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LOAN AGREEMENT
THIS LOAN AGREEMENT dated as of October 1, 2001 (the "Loan Agreement") is by and between the City
of Cupertino, a municipal corporation duly organized and existing pursuant to the laws of the State of Califomia
(together with any successor to its rights, duties and obligations, the "Issuer"), and Cupertino Community Services, a
California nonprofit public benefit corporation (the "Borrower").
For and, in consideration of the mutual agreements hereinafter contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions. The following words and terms as used in this Agreement shall have the following
meanings unless the context or use otherwise requires:
"Act" means Chapter 8 of Part 5 of Division 31 (commencing with Section 52100) of the Health and Safety
Code of the State of Califomia as now in effect and as it may from time to time hereafter be amended or
supplemented.
"Act of Bankruptcy" means the filing of a petition in bankruptcy (or other commencement of a bankruptcy or
similar proceeding) by or against the Borrower, or any guarantor of the Borrower, under any applicable bankruptcy,
insolvency or similar law now or hereafter in effect.
"Adjusted Income" has the meaning ascribed to such term in the Regulatory Agreement.
"Affiliated Party" has the meaning ascribed to such term in the Regulatory Agreement.
"Architecture Contract" mean the architect's contract dated , 2001 between the Borrower and
for the Development.
"Area" has the meaning ascribed to such term in the Regulatory Agreement.
"Bonds" means the City of Cupertino Multifamily Housing Revenue Bonds (Heart of Cupertino Project),
Series 2001A, issued and outstanding under the Indenture.
"Bondowner Representative" means Cupertino National Bank, in its capacity as the Bondowner
Representative under the Indenture.
"Borrower" means Cupertino Community Services, a Califomia nonprofit public benefit corporation, and its
successors and assigns.
"Borrower Representative" means the person or persons at the time duly designated by the Borrower to act
on behalf of the Borrower by written certificate furnished to the Issuer, containing the specimen signatures of such
person or persons and signed by the President of the General Partner of the Borrower. Such certificate may
designate an alternate or alternates.
7- 55
"Business Day" means any day other than a Saturday, a Sunday, or a day on which the Bondowner
Representative is closed.
"Certificate of Continuing Program Compliance" means the document in the form attached hereto as Exhibit
B.
"Code" means the Internal Revenue Code of 1986 as in effect on the date of issuance of the Bonds and
(except as otherwise referenced herein) as it may be amended, together with applicable temporary and final
regulations promulgated, and applicable official public guidance published, under the Code.
"Collateral" means all property and assets granted as collateral security for a loan, whether real or personal
property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form
of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel
mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien,
charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or
lien interest whatsoever, whether created by law, contract, or otherwise.
"Construction Contract" mean the contract dated 2001 between the Borrower and
,the general contractor for the Development (the "General Contractor"), and any subcontracts
with subcontractors, materialmen, laborers, or any other person or entity for performance of work on the
Development or the delivery of materials to the Development.
"County' means the County of Santa Clara, Califomia.
"Deed of Trust" means the Deed of Trust, Assignment of Rents and Leases, Security Agreement and
Fixture Filing executed by the Borrower and granting a security interest in the Development to the beneficiary
thereunder for the benefit of the Issuer to secure the Borrower's obligations under the Note.
"Development" means the residential rental facility to consist of 24 units of multifamily rental housing to be
located at 10114 and 10214 Vista Drive in the City of Cupertino, Califomia, to be owned and operated by the
Borrower on the site described in the Deed of Trust and Exhibit A to the Regulatory Agreement.
"Development Costs" means, to the extent authorized by the Act, the Code and the Regulations, any and all
costs and expenses incurred by the Borrower with respect to the acquisition, financing, construction and/or operation
of the Development, whether paid or incurred prior to or after the Closing Date, including, without limitation, costs for
the acquisition of property, the cost of consultant, accounting and legal services, appraisal costs, other expenses
necessary or incident to determining the feasibility of the Development, and administrative expenses, and interest on
the Loan.
"Development Documents" mean the Plans and Specifications, all studies, data and drawings relating to the
Development, whether prepared by or for the Borrower, the Construction Contract, the Architecture Contract, and all
other contracts and agreements relating to the Development or the construction of the improvements.
"Event of Default" means any of the events described as an event of default in Section 7.1 hereof.
"Fire District Deed of Trust" means the Deed of Trust, Assignment of Rents and Lease Security Agreement
and Fixture Filing executed by the Santa Clara County Fire District granting a security interest in its fee interest in
the Development to the Issuer.
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7-510
"Improvements" means all existing and future buildings, structures, facilities, fixtures, additions, and similar
construction with respect to the Development.
"Indenture" means the Indenture of Trust, dated as of October 1, 2001, between the Issuer and the
Bondowner Representative, as executed by the parties thereto and as thereafter amended in accordance with its
terms.
"Inducement Date" means October 1, 2001.
"Issuer" means the City of Cupertino, California, or its successors and assigns.
"Loan" means the mortgage loan originated hereunder by the Issuer to the Borrower in an amount up to one
million six hundred thousand dollars ($1,600,000) for the purpose of financing the Development.
"Loan Agreement" means this Loan Agreement, as amended and supplemented from time to time.
"Loan Documents" means this Loan Agreement, the Indenture, the Regulatory Agreement, the Note, the
Bonds, the Assignment Agreement, the Fire District Deed of Trust and the Deed of Trust.
"Low Income Tenants" has the meaning ascribed to such term in the Regulatory Agreement.
"Low Income Units" has the meaning ascribed to such term in the Regulatory Agreement.
"Median Income for the Area" has the meaning ascribed to such term in the Regulatory Agreement.
"Note" means the promissory note evidencing the Loan, executed by the Borrower and in the form attached
hereto as Exhibit C.
"Plans and Specifications" mean the plans and specifications for the Development which have been
submitted to and initialed by Bondowner Representative, together with such changes and additions as may be
approved by Bondowner Representative in writing.
"Qualified Development Costs" means costs of the Development paid or incurred following the date which is
60 days prior to the Inducement Date; provided that if any portion of the Development is being constructed by an
"affiliated party" (whether as a general contractor or a subcontractor), "Qualified Development Costs" shall include
only (a) the actual out-of-pocket costs incurred by such affiliated party in constructing the Development (or any
portion thereof), (b) any reasonable fees for supervisory services actually rendered by the affiliated party, and (c)
any overhead expenses incurred by the affiliated party that are directly attributable to the work performed on the
Development, and shall not include, for example, intercompany profits resulting from members of an affiliated group
(within the meaning of Section 1504 of the Code) participating in the construction of the Development or payments
received by such affiliated party due to early completion of the Development (or any portion thereof).
"Qualified Development Period" has the meaning ascribed to such term in the Regulatory Agreement.
"Regulations" means the income tax regulations promulgated by the United States Department of the
Treasury from time to time pursuant to the Code.
"Regulatory Agreement" means the Regulatory Agreement and Declaration of Restrictive Covenants dated
as of October 1, 2001, executed by the Issuer and the Borrower.
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"State" means the State of California.
"Very Low Income Tenants" has the meaning ascribed to such term in the Regulatory Agreement.
"Very Low Income Units" has the meaning ascribed to such term in the Regulatory Agreement.
Section 1.2. Interpretation. Unless the context clearly requires otherwise, words of masculine gender shall
be construed to include correlative words of the feminine and neuter genders and vice versa, and words of the
singular number shall be construed to include correlative words of the plural number and vice versa. This Loan
Agreement and all the terms and provisions hereof shall be construed to effectuate the purpose set forth herein and
to sustain the validity hereof.
Section 1.3. Recitals, Titles and Headings. The terms and phrases used in the recitals of this Loan
Agreement have been included for convenience of reference only, and the meaning, construction and interpretation
of all such terms and phrases for purposes of this Loan Agreement shall be determined by references to Section 1.1
hereof. The titles and headings of the articles and sections of this Loan Agreement have been inserted for
convenience of reference only and are not to be considered a part hereof, and shall not in any way modify or restrict
any of the terms or provisions hereof and shall never be considered or given any effect in construing this Loan
Agreement or any provision hereof or in ascertaining intent, if any question of intent should arise.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties of the Issuer. The Issuer represents, warrants and covenants
that:
(a) The Issuer is a municipal corporation duly organized and existing under the Constitution and
laws of the State.
(b) The Issuer has full legal right, power and authority under the laws of the State and has taken all
official actions necessary (i) to enter into this Loan Agreement, and the Indenture and the Regulatory
Agreement; (ii) to perform its obligations hereunder and thereunder; and (iii) to consummate all other
transactions on its part contemplated by this Loan Agreement, the Indenture and the Regulatory
Agreement.
(c) This Loan Agreement, the Indenture and the Regulatory Agreement have been duly executed
and delivered by the Issuer and constitute valid and binding obligations of the Issuer, enforceable against
the Issuer in accordance with their respective terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the rights of creditors generally.
(d) The execution and delivery of this Loan Agreement and the Indenture and the Regulatory
Agreement, the performance by the Issuer of its obligations hereunder and thereunder and the
consummation of the transactions on its part contemplated hereby and thereby, including, without limitation,
the loaning of the amounts herein set forth to the Borrower, do not violate any law, rule, regulation or
ordinance or any order, judgment or decree of any federal, state or local court, and do not conflict with, or
constitute a breach of, or a default under the terms and conditions of any agreement, instrument or
commitment to which the Issuer is a party or by which the Issuer or any of its property is bound.
(e) There is no action, suit, proceeding, inquiry or investigation served upon the Issuer or, to the
knowledge of the Issuer, threatened against the Issuer by or before any court, governmental agency or
public board or body which (i) affects or questions the existence or the territorial jurisdiction of the Issuer or
the title to office of any members of the governing body of the Issuer; (ii) affects or seeks to prohibit,
restrain or enjoin the execution and delivery of this Loan Agreement, the Regulatory Agreement, the
Indenture or the loaning of the amounts herein set forth to the Borrower; (iii) affects or questions the validity
or enforceability of this Loan Agreement, the Indenture or the Regulatory Agreement; or (iv) questions the
power or authority of the Issuer to carry out the transactions on its part contemplated by this Loan
Agreement, the Indenture or the Regulatory Agreement.
Section 2.2. Representations, Warranties and Covenants of the Borrower. The Borrower represents,
warrants and covenants that:
(a) The Borrower is a California nonprofit public benefit corporation, organized and existing under
the laws of the State, is in good standing in the State, is a corporation described in Section 501(c)(3) of the
Code and has full legal right, power and authority under the laws of the United States of America and the
State (i) to enter into this Loan Agreement and the other Loan Documents to which it is a party; (ii) to
perform its obligations hereunder and thereunder; and (iii) to consummate the transactions on its part
contemplated by the Loan Documents.
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(b) The Loan Documents to which it is a party have been duly executed and delivered by the
Borrower and constitute valid and binding obligations of the Borrower, enforceable in accordance with their
respective terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws or judicial decisions affecting the rights of creditors generally. Upon the execution and delivery
thereof, each of the Loan Documents to which it is a party will constitute valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws or judicial decisions affecting creditors' rights
generally and by judicial discretion in the exercise of equitable remedies.
(c) The execution and delivery of the Loan Documents to which it is a party, the performance by
the Borrower of its obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby will not violate the Borrower's organizational documents, or any law,
regulation, rule or ordinance or any order, judgment or decree of any federal, state or local court and do not
conflict with, or constitute a breach of, or a default under, any document, instrument or commitment to
which the Borrower is a party or by which the Borrower or any of its property is bound.
(d) There is no action, suit, proceeding, inquiry or investigation by or before any court,
governmental agency or public board or body pending or threatened against the Borrower which (i) affects
or seeks to prohibit, restrain or enjoin the loaning of the amounts set forth herein to the Borrower or the
execution and delivery of this Loan Agreement or the other Loan Documents, (ii) affects or questions the
validity or enforceability of this Loan Agreement or the other Loan Documents, (iii) questions the power or
authority of the Borrower to carry out the transactions contemplated by, or to perform its obligations under,
this Loan Agreement or the other Loan Documents to which it is a party, or the powers of the Borrower to
own, acquire, construct, equip or operate the Development.
(e) The Borrower is not in default under any document, instrument or commitment to which the
Borrower is a party or to which it or any of its property is subject which default would or could affect the
ability of the Borrower to carry out its obligations under this Loan Agreement or the other Loan Documents.
(f) Any certificate signed by a Borrower Representative and delivered pursuant to this Loan
Agreement or the other Loan Documents shall be deemed a representation and warranty by the Borrower
as to the statements made therein.
(g) The Development is located wholly within the City of Cupertino, Califomia.
(h) The Borrower will obtain all necessary certificates, approvals, permits and authorizations with
respect to the acquisition and construction of the Development from applicable local govemmental
agencies and agencies of the State of Califomia and the federal government.
(i) The Borrower shall make no changes to the Development or to the operation thereof which
would affect the qualification of the Development under the Act or impair the exclusion from gross income
for federal income tax purposes of the interest on the Bonds. The Borrower intends to utilize the
Development as multifamily rental housing during the Qualified Development Period.
(j) Not in excess of two percent (2%) of the proceeds of the Note will be used to pay costs of
issuance of the Note and/or the Bonds.
(k) The acquisition, construction and operation of the Development in the manner presently
contemplated and as described herein and in the Regulatory Agreement will not conflict with any zoning,
water or air pollution or other ordinance, order, law or regulation applicable thereto. The Borrower will
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cause the Development to be operated in all material respects in accordance with all applicable federal,
state and local laws or ordinances (including rules and regulations) relating to zoning, building, safety and
environmental quality.
(I) The Borrower acknowledges, represents and warrants that it understands the nature and
structure of the Development; that it is familiar with the provisions of all of the documents and instruments
relating to the financing of the Development to which it or the Issuer is a party or of which it is a beneficiary;
that it understands the risks inherent in such transactions, including without limitation the risk of loss of the
Development; and that it has not relied on the Issuer for any guidance or expertise in analyzing the financial
or other consequences of such financing transactions or otherwise relied on the Issuer in any manner
except to issue the Bonds in order to provide funds for the Loan.
(m) The Borrower intends to hold the Development for its own account, has no current plans to sell
and has not entered into any agreement to sell the Development.
(n) The Borrower has contacted all "related persons" thereof (within the meaning of Section 147(a)
of the Code); and none of them shall, at any time, pursuant to any arrangement, formal or informal, acquire
any interest in the Bonds.
(o) In the event the Loan proceeds and the other sources of funds for the Development identified
by the Borrower on the Closing Date are not sufficient to complete the acquisition and construction of the
Project and the payment of all costs of issuing the Bonds, the Borrower will (i) notify the Issuer in writing of
the amount of the shortfall, and (ii) furnish any additional moneys necessary to complete the acquisition and
construction of the Development.
(p) All of the proceeds from the Loan plus the income from the investment of the proceeds of the
Loan will be used to pay or reimburse the Borrower for Development Costs, and at least 97% of the
proceeds of the Loan will be used to pay or reimburse the Borrower for Qualified Development Costs. The
Borrower shall assure that the proceeds of the Loan are expended so as to cause the Bonds to satisfy the
applicable requirements of Section 145 of the Code.
(q) The estimated total cost of the financing of the acquisition and construction of the Development
is equal to or in excess of the principal amount of the Loan.
(r) The Borrower has not knowingly taken or permitted to be taken and will not knowingly take or
permit to be taken any action which would have the effect, directly or indirectly, of causing interest on any of
the Bonds to be included in the gross income of the owners thereof for purposes of federal income taxation.
(s) The Borrower covenants that it shall not take, or cause or direct the Bondowner Representative
to take, any action with respect to the proceeds of the Bonds which if such action had been reasonably
expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of
the Bonds would have caused the Bonds to be "arbitrage bonds" within the meaning of Section 148(a) of
the Code.
(t) All property financed with the proceeds of the Loan will be owned (as ownership is determined
for purposes of federal income taxation) by the Borrower, or by an organization described in section
501(c)(3) of the Code in furtherance of the exempt purpose of such organization, or by a governmental unit,
and any disposition of such property shall be subject to the requirements of Section 6.2 hereof.
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(u) The Borrower covenants to maintain its status as an organization described in Section
501(c)(3) of the Code and its exemption from federal income taxation under Section 501(a) of the Code.
(v) The Borrower is aware of the provisions of Section 150(b)(3) of the Code and covenants that
any use of the property financed with the proceeds of the Loan by other than an organization described in
Section 501(c)(3) of the Code or a governmental unit (as described in Section 145 of the Code) will not be
such as to cause the Borrower to violate the covenants contained in paragraphs (t) and (u) above.
(w) The Borrower has the full power and authority to own its properties and to transact the
business in which it is presently engaged or presently proposes to engage. The Borrower maintains an
office at 10185 N. Stelling Road, Cupertino, CA 95014. Unless the Borrower has designated otherwise in
writing, the principal office is the office at which the Borrower keeps its books and records including its
records concerning the Collateral. The Borrower will notify Bondowner Representative prior to any change
in the location of the Borrower's state of organization or any change in the Borrower's name. The Borrower
shall do all things necessary to preserve and to keep in full force and effect its existence, rights and
privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any
governmental or quasi-governmental authority or court applicable to the Borrower and the Borrower's
business activities.
(x) The Borrower has filed or recorded all documents or filings required by law relating to all
assumed business names used by the Borrower. Excluding the name of the Borrower, the following is a
complete list of all assumed business names under which the Borrower does business: None.
(y) Each of the Borrower's financial statements supplied to Bondowner Representative truly and
completely disclosed the Borrower's financial condition as of the date of the statement, and there has been
no material adverse change in the Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Bondowner Representative. The Borrower has no material contingent
obligations except as disclosed in such financial statements.
(z) Except as contemplated by this Agreement or as previously disclosed in the Borrower's
financial statements or in writing to Bondowner Representative and as accepted by Bondowner
Representative, and except for property tax liens for taxes not presently due and payable, the Borrower
owns and had good title to all of the Borrower's properties free and clear of all security interests, and has
not executed any security documents or financing statements relating to such properties. All of the
Borrower's properties are titled in Borrower's legal name, and the Borrower has not used, or filed a
financing statement under, any other name for at least the last five (5) years.
(aa) The Ground Lease is in full force and effect and there are no events of defaults or no events
have occurred that would become events of default with the passage of time or giving of notice or both
under the Ground Lease.
(bb) No litigation, claim, investigation, administrative proceeding or similar action (including those
for unpaid taxes) against the Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect the Borrower's financial condition or properties, other than litigation, claims,
or other events, if any, that have been disclosed to and acknowledged by Bondowner Representative in
writing.
(cc) To the best of the Borrower's knowledge, all of the Borrower's tax returns and reports that are
or were required to be filed, have been filed, and all taxes, assessments and other governmental charges
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have been paid in full, except those presently being or to be contested by the Borrower in good faith in the
ordinary course of business and for which adequate reserves have been provided.
(dd) Unless otherwise previously disclosed to Bondowner Representative in writing, the Borrower
has not entered into or granted any security agreements, or permitted the filing or attachment of any
security interests on or affecting any of the Collateral directly or indirectly securing repayment of the Loan
and Note, that would be prior or that may in any way be superior to Issuer's security interests and rights in
and to such Collateral.
(ee) The Borrower has, or on the date of first disbursement of Loan proceeds will have, good and
marketable title to the Collateral free and clear of all defects, liens, and encumbrances, excepting only liens
for taxes, assessments, or governmental charges or levies not yet delinquent or payable without penalty or
interest, and such liens and encumbrances as may be approved in writing by the Bondowner
Representative. The Development is contiguous to publicly dedicated streets, roads, or highways providing
access to the Development.
(ff) All utility services appropriate to the use of the Development after completion of construction
are available at the boundaries of the Development.
(gg) The Development is and will continue to be assessed and taxed as an independent parcel by
all governmental authorities.
(hh) The Borrower has examined and is familiar with all the easements, covenants, conditions,
restrictions, reservations, building laws, regulations, zoning ordinances, and federal, state, and local
requirements affecting the Development. The Development will at all times and in all respects conform to
and comply with the requirements of such easements, covenants, conditions, restrictions, reservations,
building laws, regulations, zoning ordinances, and federal, state, and local requirements.
Section 2.3. Hazardous Waste Covenant. In addition to and without limitation of any other representations,
warranties and covenants made by the Borrower under this Loan Agreement and under the Regulatory Agreement
and the Deed of Trust, the Borrower further represents, warrants and covenants that (a) the Borrower will not use
Hazardous Materials (as defined hereinafter) on, from, or affecting the Development (i) in any manner which violates
federal, state or local laws, ordinances, rules, or regulations goveming the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous Materials, or (ii) in a manner that would
create a material adverse effect on the Development, and that, (b) to the best of the Borrower's knowledge no prior
owner of the Development or any tenant, subtenant, prior tenant or prior subtenant has used Hazardous Materials
on, from, or affecting the Development (i) in any manner which violates Federal, state or local laws, ordinances,
rules, or regulations goveming the use, storage, treatment, transportation, manufacture, refinement, handling,
production or disposal of Hazardous Materials, or (ii) in a manner that would create a material adverse effect on the
Development. Without limiting the foregoing, the Borrower shall not cause or permit the Development or any part
thereof to be used to generate, manufacture, refine, transport, treat, store, handle, dispose, transfer, produce or
process Hazardous Materials, except in compliance with all applicable Federal, state and local laws or regulations,
nor shall the Borrower cause or knowingly permit, as a result of any intentional or unintentional act or omission on
the part of the Borrower or any tenant or subtenant, a release of Hazardous Materials on to the Development or on
to any other property in a manner which violates Federal, State, or local laws, ordinances, rules or regulations or in a
manner that would create a material adverse effect on the Development. The Borrower shall comply with and
require compliance by all tenants and subtenants with all applicable Federal, state and local laws, ordinances, rules
and regulations, and shall obtain and comply with, and require that all tenants and subtenants obtain and comply
with, any and all approvals, registrations or permits required thereunder. The Borrower shall conduct and complete
all investigations, studies, sampling, and testing, and all remedial, removal, and other action required by a
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governmental authority under an applicable statute or regulation to clean up and remove all Hazardous Materials,
on, from, or affecting the Development in accordance with all applicable Federal, state, and local laws, ordinances,
rules, and regulations. The Borrower shall defend, indemnify, and hold harmless the Issuer from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs, or expenses of whatever kind or nature,
known or unknown, contingent or otherwise, arising out of, or in any way related to, (a) the presence, disposal,
release, or threatened release of any Hazardous Materials which are on or from the Development which affect, the
soil, water, vegetation, buildings, personal property, persons, animals, or otherwise; (b) any personal injury
(including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous
Materials on or from the Development, and/or (c) any violation of laws, orders, regulations, requirements or demands
of government authorities, or written requirements of the Issuer, which are based upon or in any way related to such
Hazardous Materials including, without limitation, attorney and consultant fees, investigation and laboratory fees,
court costs, and litigation expenses, except only those directly arising from the gross negligence or willful
misconduct of the Issuer. In the event the Development is foreclosed upon, or a deed in lieu of foreclosure is
tendered, or this Loan Agreement is terminated, the Borrower shall deliver the Development in a manner and
condition that shall conform with all applicable Federal, state and local laws, ordinances, rules or regulations
affecting the Development related to Hazardous Materials. For the purposes of this paragraph, "Hazardous
Materials" includes, without limit, any flammable explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances, or related materials defined in the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Sections 9601, et seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 1801 et seq.), the Resource Conservation and Recovery Act,
as amended (42 U.S.C. Sections 9601 et seq.), and in the regulations promulgated pursuant thereto, or any other
federal, state or local environmental laws, ordinance, rule, or regulation. The provisions of this paragraph: (a) shall
be in addition to any and all other obligations and liabilities the Borrower may have to the Issuer at common law, and
(b) with respect to any liability or cost arising as a result of acts or omissions of the Borrower during the term of this
Loan Agreement, shall survive the termination of this Loan Agreement. This paragraph shall not obligate the
Borrower in any way with respect to any acts or omissions of any entity to which the Development is sold or
transferred in accordance with the provisions of Section 10 of the Regulatory Agreement or which are attributable
directly to the acts or omissions of the Issuer or the Bondowner Representative or their agents or assigns.
The indemnifications and protections set forth in this Section 2.3 (i) shall be extended, with respect to the
Issuer, to its members, directors, officers, employees, agents and servants and persons under the Issuer's control or
supervision, and (ii) shall be for the full and equal benefit of the Bondowner Representative, as assignee of the
Issuer under the Assignment Agreement.
Anything to the contrary in this Loan Agreement notwithstanding, the covenants of the Borrower contained
in this Section 2.3 shall remain in full force and effect after the termination of this Loan Agreement until the later of (i)
the expiration of the period stated in the applicable statute of limitations during which a claim or cause of action may
be brought and (ii) payment in full or the satisfaction of such claim or cause of action and of all expense and charges
incurred by the Issuer relating to the enforcement of the provisions herein specified.
For the purposes of this Section 2.3, the Borrower shall not be deemed an employee, agent or servant of
the Issuer or person under Issuer's control or supervision.
Section 2.4. Additional Environmental Matters. (a) The Borrower shall require in any management
agreement for the Development that the management company shall operate and maintain the Development in
material compliance with all applicable federal, state, regional, county or local laws, statutes, rules, regulations or
ordinances, concerning the environment, including, but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. Section 9601 et seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. Section
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6901 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.,
and the Clean Air Act of 1975, 42 U.S.C. Section 4321, and all rules, regulations and guidance documents
promulgated or published thereunder, and any state, regional, county or local statute, law, rule, regulation or
ordinance relating (i) to releases, discharges, emissions or disposal to air, water, land or ground water, (ii) to the
withdrawal or use of ground water, (iii) to the use, handling or disposal or polychlorinated biphenyls ("PCBs"),
asbestos or urea formaldehyde, (iv) to the treatment, storage, disposal or management of hazardous substances
(including, without limitation, petroleum, its derivatives, crude oil or any fraction thereof) and any other solid, liquid or
gaseous substance, exposure to which is prohibited, limited or regulated, or may or could pose a hazard to the
health and safety of the occupants of the Development or the property adjacent to or surrounding the Development,
(v) to the exposure of persons to toxic, hazardous or other controlled, prohibited or regulated substances or (vi) to
the transportation, storage, disposal, management or release of gaseous or liquid substances and any regulation,
order, injunction, judgment, declaration, notice or demand issued thereunder.
(b) The Borrower shall make best efforts to prevent the imposition of any liens or encumbrances against the
Development for the costs of any response, removal or remedial action or cleanup of Hazardous Materials.
(c) The Borrower covenants and agrees that it will not knowingly conduct or allow to be conducted any
business, operations or activity on the Development, or employ or use the Development to manufacture, treat, store
(except with respect to storage in the ordinary operation of the Development), or dispose of any Hazardous Materials
(including, without limitation, petroleum, its derivatives, crude oil or any fraction thereof), or any other substance the
disposal of which is prohibited, controlled or regulated under applicable law, or which poses a threat or nuisance to
safety, health or the environment, including, without limitation, any business, operation or activity which would bring
the Development within the ambit of, or otherwise violate, the Resource Conservation and Recovery Act of 1976, as
amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq., or cause or
knowingly allow to be caused, a release or threat of release, of a nondiminimis quantity of hazardous substances on
the Development as defined by, and within the ambit of, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. Section 9601 et seq., or any similar state, county, regional or local statute providing for financial
responsibility for cleanup for the release or threatened release of substances provided for thereunder.
(d) The Borrower covenants and agrees that it shall take all appropriate response action, including any
removal and remedial action, in the event of a release, emission, discharge or disposal of Hazardous Materials in,
on, under or about the Development for which the Borrower is liable under state, federal or local environmental rules
or regulations.
(e) The Borrower shall, as soon as practical and in any event within 15 days, notify the Issuer and the
Bondowner Representative of any written notice, letter, written citation, written order, written warning, written
complaint, written claim or written demand that (i) the Borrower or any tenant has violated, or is about to violate, any
federal, state, regional, county or local environmental, health or safety statute, law, rule, regulation, ordinance,
judgment or order; (ii) there has been a release, or there is a threat of release, of Hazardous Materials (including,
without limitation, petroleum, its derivatives, crude oil or any fraction thereof) from the Development; (iii) the
Borrower or any tenant may be or is liable, in whole or in part, for the costs of cleaning up, remediating, removing or
responding to a release of Hazardous Materials (including, without limitation, petroleum, its derivatives, crude oil or
any fraction thereof); or (iv) the Development is subject to a lien in favor of any governmental entity for any
environmental law, rule or regulation arising from or costs incurred by such governmental entity in response to a
release of a Hazardous Materials (including, without limitation, petroleum, its derivatives, crude oil or any fraction
thereof).
(f) During the period in which the Loan Agreement is in effect, the Borrower hereby grants, and will cause
any tenants to grant, to the Issuer and the Bondowner Representative, their respective agents, attorneys,
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employees, consultants and contractors an irrevocable license and authorization upon reasonable notice of not less
than 48 hours to enter upon and inspect the Development and perform such tests, including, without limitation,
subsurface testing, soils and ground water testing, and other tests which may physically invade the Development, as
the Issuer or the Bondowner Representative, in its respective reasonable discretion, determines are necessary to
protect the lien created by the Deed of Trust; provided that the party undertaking any such testing shall use
reasonable efforts to minimize any disruption in the operation of the Development. The provisions of this Section 2.4
shall be for the full and equal benefit of the Issuer, and of the Bondowner Representative as assignee of the Issuer
under the Assignment Agreement.
(g) The Borrower agrees to protect, defend, hold harmless and indemnify the Issuer and the Bondowner
Representative for, from, against and in respect of any and all claims, losses, liabilities, damages (whether special,
consequential or otherwise), settlements, penalties, interest and expenses (including any professional fees and
expenses) which may be suffered or incurred by it relating to, arising out of or resulting from or by reason of any and
all present or future liabilities or obligations under any current federal, state or local law (including common law), and
regulations, orders and decrees relating to pollution control, environmental protection, or any other type of claim
relating to the Development, with respect to: (i) the handling, storage, use, transportation or disposal of any
Hazardous Materials by the Borrower in or from the Development; (ii) the handling, storage, use, transportation or
disposal (whether or not known to the Borrower) of any Hazardous Materials, which Hazardous Materials was a
product, byproduct or otherwise resulted from operations conducted on the Development; or (iii) any intentional or
unintentional emission, discharge or release (whether or not known to the Borrower) of any Hazardous Materials into
or upon the air, surface water, ground water or land or any manufacturing, processing, distribution, use, treatment,
disposal, transport or handling of such Hazardous Materials. This paragraph shall not obligate the Borrower with
respect to any acts or omissions of any entity to whom the Development is sold or transferred in accordance with the
provisions of Section 10 of the Regulatory Agreement, or which are attributable directly to the acts or omissions of
the Issuer or the Bondowner Representative or their agents or assigns.
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ARTICLE III
THE LOAN
Section 3.1. Closing of the Loan. The closing of the Loan shall not occur until the following conditions are
met:
(a) the Issuer shall have received an original executed counterpart of this Loan Agreement, the
Note, the Regulatory Agreement, the Fire District Deed of Trust and the Deed of Trust, together with
evidence satisfactory to the Issuer of the recordation of the Regulatory Agreement and the Deed of Trust in
the official records of the County Recorder of the County, which may be by telephonic notice from a title
company; and
(b) no Event of Default nor any event which with the passage of time and/or the giving of notice
would constitute an Event of Default under this Loan Agreement shall have occurred as evidenced by a
certificate received from the Borrower.
Section 3.2. Commitment to Execute the Note. The Borrower agrees to execute and deliver the Note and
the Deed of Trust simultaneously with the execution of this Loan Agreement.
Section 3.3. Amount and Source of Loan. The Issuer hereby makes to the Borrower and agrees to fund,
and the Borrower hereby accepts from the Issuer, upon the terms and conditions set forth herein, the Loan and
agrees to have the proceeds of the Loan applied and disbursed in accordance with the provisions of this Loan
Agreement.
Section 3.4. Disbursement of Loan Proceeds. (a) The Issuer hereby authorizes and directs the funding and
disbursement of the first $ principal amount of the Loan on October _, 2001, subject to the condition
that the Regulatory Agreement and the Deed of Trust shall have been executed and signed by the Borrower and
duly recorded in the office records of the County Recorder of the County and the other Loan Documents have been
executed and delivery by the respective parties thereto. The Borrower hereby authorizes the Issuer to disburse on
the date of execution and delivery of Note the amount representing the first $ principal amount of Loan
to the Borrower as follows: (i) $ to Title Company to pay a portion of the cost of the
acquisition by the Borrower of the Development and title and escrow fees, and (ii) $ to the Bondowner to
pay the Bondowner's fee related to the financing.
(b) The Issuer hereby authorizes and directs the funding and disbursement of the remaining $
principal amount of the Loan, subject to the consent of the Bondowner Representative, which consent shall be given
upon the satisfaction of the applicable conditions set forth in Exhibit D hereto. Any disbursement of the remaining
principal amount of the Loan shall be used to pay or reimburse the Borrower for costs of construction of the
Development (including payment of interest on the Note during the period of construction of the Development). The
Issuer shall have no obligation to fund the remaining balance of the Loan unless and until the Bondowner
Representative has received satisfactory evidence that Borrower's funds or funds from other sources in an amount
equal to at least $ have been used to pay Development Costs. The Issuer shall have no obligation to
fund the remaining $ principal amount of the Loan if and to the extent that the Bondowner
Representative does not consent to and make such disbursement before , 2003.
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ARTICLE IV
LIMITED LIABILITY
Section 4.1. Limited Liability. All obligations and any liability of the Issuer incurred hereunder shall be
limited, special obligations of the Issuer, payable solely and only from amounts received from the Borrower pursuant
to this Loan Agreement. All obligations and any liability of the Issuer shall be further limited as provided in Sections
5.01, 6.13, 7.10 antl 11.09 of the Indenture.
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ARTICLE V
REPAYMENT OF THE LOAN
Section 5.1. Loan Repayment. (a) The Loan shall be evidenced by the Note which shall be executed by the
Borrower in the form attached hereto as Exhibit C. The Borrower agrees to pay to the Bondowner Representative,
the principal of and interest on the Loan at the times, in the manner, in the amount and at the rate of interest
provided in the Note and this Loan Agreement.
The Borrower shall have the right to prepay all or any portion of the Loan at any time, but only following
thirty (30) days prior written notice to the Bondowner Representative and the Issuer, at a prepayment price equal to
the principal of the Loan to be prepaid plus accrued interest thereon to the date of prepayment, plus a prepayment
premium fee (which shall be retained by the Bondowner Representative for its own account) equal to six (6) months'
interest on the principal amount being prepaid.
(b) The Borrower further agrees to pay all taxes and assessments, general or special, including, without
limitation, all ad valorem taxes, concerning or in any way related to the Development, or any part thereof, and any
other governmental charges and impositions whatsoever, foreseen or unforeseen, and all utility and other charges
and assessments with respect thereto; provided, however, that the Borrower reserves the right to contest in good
faith the legality of any tax or governmental charge concerning or in any way related to the Development. In
addition, the Borrower agrees to pay any loan fee, processing fee and all title, escrow, recording and closing costs
and expenses, any appraisal costs and all other reasonable fees and costs associated with or required in connection
with the Bonds, the Regulatory Agreement and Indenture; including but not limited to any such amounts described in
Section 8.06 of the Indenture.
(c) The Borrower hereby acknowledges and consents to the assignment by the Issuer to the Bondowner
Representative of its rights under this Loan Agreement (excepting only the Issuer's rights under Section 6.7, and the
Issuer's retained rights under Sections 2.3, 2.4, 5.1(b), 5.1(d) and 7.4 hereunder), and the appointment of the
Bondowner Representative as agent of the Issuer to collect the payments on the Loan, all as set forth in the
Indenture.
(d) The Borrower hereby agrees to pay the amounts described in Section 23 of the Regulatory Agreement.
Section 5.2. Nature of the Borrower's Obligations. The Borrower shall repay the Loan pursuant to the terms
of the Note irrespective of any rights of set-off, recoupment or counterclaim the Borrower might otherwise have
against the Issuer or any other person. The Borrower will not suspend, discontinue or reduce any such payment or
(except as expressly provided herein) terminate this Loan Agreement for any cause, including, without limiting the
generality of the foregoing, (i) any delay or interruption in the operation of the Development; (ii) the failure to obtain
any permit, order or action of any kind from any governmental agency relating to the Loan or the Development; (iii)
any event constituting force majeure; (iv) any acts or circumstances that may constitute commercial frustration of
purpose; (v) any change in the laws of the United States of America, the State or any political subdivision thereof; or
(vi) any failure of the Issuer or the Borrower to perform or observe any covenant whether expressed or implied, or to
discharge any duty, liability or obligation arising out of or connected with the Note; it being the intention of the parties
that, as long as the Note or any portion thereof remains outstanding and unpaid, the obligation of the Borrower to
repay the Loan and provide such moneys shall continue in all events. This Section 5.2 shall not be construed to
release the Borrower from any of its obligations hereunder, or, except as provided in this Section 5.2, to prevent or
restrict the Borrower from asserting any rights which it may have against the Issuer under the Note or the Deed of
Trust or under any provision of law or to prevent or restrict the Borrower, at its own cost and expense, from
prosecuting or defending any action or proceeding by or against the Issuer or the Bondowner Representative or
taking any other action to protect or secure its rights.
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Notwithstanding the foregoing, neither the officers or the directors of the Borrower shall be personally liable
for the amounts owing under the Note or the Deed of Trust; and the Issuer's remedies in the event of a default under
the Loan shall be limited to those remedies set forth in Section 7.3 hereof and the commencement of foreclosure
under the Deed of Trust and the exercise of the power of sale or other rights granted thereunder. Notwithstanding
the Indenture, no assignment by the Issuer of its rights hereunder shall preclude the Issuer from proceeding directly
against the Borrower in connection with the obligation of the Borrower to indemnify the Issuer under Section 6.7
hereof or Section 7 of the Regulatory Agreement or to make any payment to the Issuer required to be paid by the
Borrower pursuant to the provisions of Sections 2.3, 2.4, 5.1(b), 5.1(d) or 7.4 hereof. Nothing in this Section 5.3
shall prohibit the Borrower from contesting in good faith any lien (other than the lien of the Deed of Trust).
Section 5.3. No Encumbrances. The Borrower shall not create, permit, file or record against the
Development, without the prior written consent of the Bondowner Representative, any deed of trust lien or other lien,
inferior or superior to the lien of the Deed of Trust, other than the grants and loans which are expressly subordinated
to the Loan and liens for taxes not yet due and payable.
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ARTICLE VI
FURTHER AGREEMENTS
Section 6.1. Successor to the Issuer. The Issuer will at all times use its best efforts to maintain the powers,
functions, duties and obligations now reposed in it pursuant to law or assure the assumptions of its obligations
hereunder by any public trust or political subdivision succeeding to its powers.
Section 6.2. Borrower Not to Dispose of Assets; Conditions Under Which Exceptions Permitted. The
Borrower agrees that during the term of this Loan Agreement it will not dispose of all or substantially all of its assets
nor consolidate with nor merge into any entity unless (i) the Issuer and the Bondowner Representative shall consent
to the disposition, consolidation or merger, (ii) the acquirer of its assets or the entity with which it shall consolidate or
into which it shall merge shall be an individual or a corporation, partnership or other legal entity organized and
existing under the laws of the United States of America or one of the states of the United States of America and shall
be qualified and admitted to do business in the State; (iii) such acquiring or remaining entity shall assume in writing
all of the obligations of the Borrower under this Loan Agreement, the Regulatory Agreement, the Note and the Deed
of Trust; and (iv) such acquiring or remaining entity shall be in accordance with Section 2.2(t) hereof.
Section 6.3. Cooperation in Enforcement of Regulatory Agreement. The Borrower hereby covenants and
agrees as follows:
(a) to comply with all provisions of the Regulatory Agreement;
(b) to advise the Issuer in writing promptly upon teaming of any default with respect to the
covenants, obligations and agreements of the Borrower set forth in the Regulatory Agreement;
(c) upon written direction by the Issuer, to cooperate fully and promptly with the Issuer in enforcing
the terms and provisions of the Regulatory Agreement; and
(d) to file in accordance with the time limits established by the Regulatory Agreement all reports
and certificates required thereunder, and the Certification to the City Clerk of the Treasury required by
Section 4(b) of the Regulatory Agreement.
The Issuer shall not incur any liability in the event of any breach or violation of the Regulatory Agreement
by the Borrower, and the Borrower agrees to indemnify the Issuer from any claim or liability for such breach pursuant
to Section 6.7 hereof.
Section 6.4. Additional Instruments. The Borrower hereby covenants to execute and deliver such additional
instruments and to perform such additional acts as may be necessary, in the opinion of the Issuer, to cant' out the
intent of the Loan Documents or to perfect or give further assurances of any of the rights granted or provided for in
the Loan, the Deed of Trust and the Note.
Section 6.5. Books and Records. The Borrower hereby covenants to permit the Issuer and the Bondowner
Representative or their duly authorized representatives access during normal business hours to the books and
records of the Borrower pertaining to the Loan and the Development, and to make such books and records available
for audit and inspection, at reasonable times and under reasonable conditions to the Issuer, the Bondowner
Representative and their duly authorized representatives and at the sole expense of the Borrower.
Section 6.6. Notice of Certain Events. The Borrower hereby covenants to advise the Issuer and the
Bondowner Representative promptly in writing of the occurrence of any Event of Default hereunder or any event
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which, with the passage of time or service of notice, or both, would constitute an Event of Default hereunder,
specifying the nature and period of existence of such event and the actions being taken or proposed to be taken with
respect thereto. In addition, the Borrower hereby covenants to advise the Issuer and the Bondowner Representative
promptly in writing of the occurrence of any Act of Bankruptcy.
Section 6.7. Indemnification of the Issuer and Bondowner Representative. The Borrower hereby covenants
and agrees to indemnify, hold harmless and defend the Issuer, the Bondowner Representative and their officers,
members, supervisors, directors, officials, employees and any agents of the Issuer and each of them from and
against (i) any and all claims arising from any act or omission of the Borrower or any of its agents, servants,
employees or licensees, in connection with the Loan or the Development; (ii) the operation, use, occupancy,
maintenance, or ownership of the Development (including compliance with laws, ordinances and rules and
regulations of public authorities relating thereto); or (iii) any obligation or liability of the Issuer under the Americans
with Disabilities Act with respect to the Development or otherwise arising from the making of the Loan, including all
costs and fees actually incurred by the Issuer in any way arising from the making of the Loan or the making of the
Issuer Loan; and (iv) all reasonable costs, counsel fees, expenses or liabilities incurred in connection with any such
claim or proceeding brought thereon. In the event that any action or proceeding is brought against the Issuer, the
Bondowner Representative or any of its officers, members, supervisors, directors, officials or employees, with
respect to which indemnity may be sought hereunder, the Borrower, upon written notice from the indemnified party,
shall assume the investigation and defense thereof, including the employment of counsel selected by the
indemnified party and the payment of all expenses related thereto, with full power to litigate, compromise or settle
the same in consultation with the Issuer; provided that the Issuer shall have the right to review and approve or
disapprove any such compromise or settlement. Notwithstanding any transfer of the Development to another owner,
unless such transfer is in accordance with the provisions of Section 10 of the Regulatory Agreement, the Borrower
shall remain obligated to indemnify pursuant to this Section 6.7 if such subsequent owner fails to indemnify any party
entitled to be indemnified hereunder. Nothing in this paragraph shall obligate the Borrower for any claims,
obligations or liabilities attributable directly to the gross negligence or willful misconduct of the Bondowner
Representative or the Issuer.
Section 6.8. Consent to Assignment. The Issuer has made an assignment under the Indenture of all rights
and interest of the Issuer in and to this Loan Agreement (except its rights under Section 6.7, and its retained rights
under Sections 2.3, 2.4, 5.1(b) and 7.4 hereof), the Note and the Deed of Trust and the Bondowner Representative
is authorized to collect the payments by the Borrower on the Loan; and the Borrower hereby consents to all such
assignments and such appointment.
Section 6.9. Compliance with Usury Laws. Notwithstanding any other provision of this Loan Agreement, it
is agreed and understood that in no event shall this Loan Agreement, with respect to the Note or other instrument of
indebtedness, be construed as requiring the Borrower or any other person to pay interest and other costs or
considerations that constitute interest under any applicable law which are contracted for, charged or received
pursuant to this Loan Agreement in an amount in excess of the maximum amount of interest allowed under any
applicable law.
In the event of any acceleration of the payment of the principal amount of the Note or other evidence of
indebtedness, that portion of any interest payment in excess of the maximum legal rate of interest, if any, provided
for in this Loan Agreement or related documents shall be cancelled automatically as of the date of such acceleration,
or if theretofore paid, credited to the principal amount.
The provisions of this Section prevail over any other provision of this Loan Agreement.
Section 6.10. Title to the Development. The Borrower shall concurrently with the closing of the Loan have
fee title to the Development free and clear of any lien or encumbrance except for (i) liens for nondelinquent
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assessments and taxes not yet due or which are being contested in good faith by appropriate proceedings; (ii) the
Deed of Trust; (iii) a subordinate deed of trust securing a loan made by the City of Cupertino to the Borrower; (iv)
one or more subordinate deeds of trust securing a loan (other than the Loan) by the Issuer to the Borrower to
finance costs of the Development; (v) one or more subordinate deeds of trust securing loans from various other
governmental agencies and philanthropic organizations to finance costs of the Development in an aggregate amount
not to exceed $ ;and (vi) any other encumbrances approved by the Issuer and the Bondowner
Representative. Concurrently with the closing of the Loan, the Borrower shall cause to be delivered to the
Bondowner Representative one or more title policies, naming the Bondowner Representative as the insured, as its
interests may appear with endorsements specified in the Bondowner Representative's escrow instructions.
Section 6.11. Payment of Taxes. The Borrower has filed or caused to be filed all federal, state and local tax
returns or information returns which are required to be filed with respect to the Development and of which Borrower
has knowledge, and has paid or caused to be paid all taxes as shown on said returns or on any assessment
received by it, to the extent that such taxes have become due and payable other than those payable without penalty
or interest.
Section 6.12. No Untrue Statements. Neither this Loan Agreement nor any other document, certificate or
statement furnished to the Issuer or the Bondowner Representative by or on behalf of the Borrower, contains to the
best of the Borrower's knowledge any untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein and therein not misleading or incomplete as of the date hereof. It
is specifically understood by Borrower that all such statements, representations and warranties shall be deemed to
have been relied upon by the Issuer as an inducement to make the Loan, and by the Bondowner Representative as
an inducement to make the Issuer Loan, and that if any such statements, representations and warranties were
materially incorrect at the time they were made, the Issuer may consider any such misrepresentation or breach an
Event of Default.
Section 6.13. Insurance. The Borrower shall provide policies of property damage (fire, extended coverage,
vandalism and malicious mischief), loss of rent, public liability and worker's compensation insurance with respect to
the Development and the operation thereof issued by an insurer currently rated B/lll or better in Best's Insurance
Reports, inform and amounts satisfactory to the Bondowner Representative.
Section 6.14. Tax Exempt Status of the Bonds.
(a) It is the intention of the Issuer and the Borrower that interest on the Bonds shall be and remain
excludable from gross income for federal income taxation purposes, and to that end the covenants and
agreements of the Borrower in this Section 6.14 are for the benefit of the Bondowners and the Issuer.
(b) The Borrower covenants and agrees that it will not knowingly and willingly use or permit the
use of any of the funds provided by the Issuer hereunder or any other funds of the Borrower, directly or
indirectly, in such manner as would, or enter into, or allow any "related person" (as defined in Section
147(a)(2) of the Code) to enter into, any arrangement, formal or informal, for the purchase of the Bonds that
would, or take or omit to take any other action that would cause the Bonds to be "arbitrage bonds" within
the meaning of Section 148 of the Code or "federally guaranteed" within the meaning of Section 149(b) of
the Code and applicable regulations promulgated from time to time thereunder.
(c) In the event that at any time the Borrower is of the opinion or becomes otherwise aware that
for purposes of this Section 6.14 it is necessary to restrict or to limit the yield on the investment of any
moneys held under the Indenture or otherwise by the Bondowner Representative, the Borrower shall
determine the limitations and so instruct the Bondowner Representative in writing and cause the
Bondowner Representative to comply with those limitations under the Indenture.
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(d) The Borrower will take such action or actions as may be reasonably necessary in the opinion of
counsel to the Issuer, or of which it otherwise becomes aware, to fully comply with Section 148 of the Code.
(e) The Borrower further agrees that it shall not discriminate on the basis of race, creed, color, sex,
sexual preference, source of income (e.g. AFDC, SSI), physical disability, national origin or marital status in
the lease, use or occupancy of the Development or in connection with the employment or application for
employment of persons for the operation and management of the Development, to the extent required by
applicable State or federal law.
(f) The Borrower further warrants and covenants that it has not executed and will not execute any
other agreement, or any amendment or supplement to any.other agreement, with provisions contradictory
to, or in opposition to, the provisions, of this Loan Agreement and of the Regulatory Agreement, and that in
any event, the requirements of this Loan Agreement and the Regulatory Agreement are paramount and
controlling as to the rights and obligations herein set forth and supersede any other requirements in conflict
herewith and therewith.
(g) The Borrower shall not purchase, and shall use its best efforts to prevent any guarantor of the
Borrower from purchasing, pursuant to an arrangement, formal or informal, any Bonds.
(h) The Borrower will use due diligence to complete the construction of the Development and
reasonably expects to fully expend the portion of the Loan to be used to finance such construction for costs
of construction within three years of the date of this Loan Agreement.
(i) The Borrower further warrants and covenants that the portion of the Development financed with
the proceeds of the Loan will be used in activities that do not constitute an unrelated trade or business of
the Borrower.
(j) The Borrower will take such action or actions as necessary to ensure compliance with Sections
2.2(j), (n), (p), (r), (s), (t), (u) and (v) hereof.
(k) The Borrower will make timely payment of any rebate amount due to the federal government by
reason of any investment of the proceeds of the Note at a yield in excess of the yield on the Bonds.
Section 6.15. Regulatory Agreement. In order to maintain the exclusion from gross income under federal
tax law of interest on the Bonds and to assure compliance with the laws of the State of California and the Act, the
Borrower hereby agrees that it shall, concurrently with or before the execution and delivery of the Bonds, execute
and deliver and cause to be recorded the Regulatory Agreement.
The Borrower shall comply with every term of the Regulatory Agreement, and the Borrower hereby
acknowledges that in the event of a default under the Regulatory Agreement the Loan may be accelerated. The
Borrower agrees to cause any amendments to the Regulatory Agreement to be recorded in the appropriate official
public records. The books and records of the Borrower pertaining to the incomes of Very Low-Income Tenants
residing in the Development shall be open to inspection by any authorized representative of the Issuer and the
Bondowner Representative.
Section 6.16. Useful Life. The Borrower hereby represents and warrants that, within the meaning of
Section 147(a)(14) of the Code, the average maturity of the Bonds does not exceed 120 percent of the average
reasonably expected economic life of the facilities being financed with the proceeds of the Bonds.
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Section 6.17. Federal Guarantee Prohibition. The Borrower shall take no action, nor permit nor suffer any
action to be taken if the result of the same would
meaning of Section 149(b) of the Code.
be to cause the Bonds to be "federally guaranteed" within the
Section 6.18. Prohibited Facilities. The Borrower represents and warrants that no portion of the proceeds
of the Note shall be used to provide any airplane, skybox or other private luxury box, health club facility, facility
primarily used for gambling, or store the principal business of which is the sale of alcoholic beverages for
consumption off premises, and no portion of the proceeds of the Note shall be used for an office unless (i) the office
is located on the premises of the facilities constituting the Development and (ii) not more than a de minimus amount
of the functions to be performed at such office is not related to the day-to-day operations of the Development.
Section 6.19. Completion of Improvements by Bondowher Representative. If Bondowner Representative
takes possession of the Development, it may take any and all actions necessary in its judgment to complete
construction of the Improvements, including but not limited to making changes in the Plans and Specifications, work,
or materials and entering into, modifying or terminating any contractual arrangements, subject to Bondowner
Representative's right at any time to discontinue any work without liability. If Bondowner Representative elects to
complete the Improvements, it will not assume any liability to the Borrower or to any other person for completing the
Improvements or for the manner or quality of construction of the Improvements, and the Borrower expressly waives
any such liability. The Borrower irrevocably appoints Bondowner Representative as its attorney-in-fact, with full
power of substitution, to complete the Improvements, at Bondowner Representative's option, either in the Borrower's
name or in its own name. In any event, all sums expended by Bondowner Representative in completing the
construction of the Improvements will be considered to have been disbursed to the Borrower and will be secured by
the Collateral for the Loan. Any such sums that cause the principal amount of the Loan to exceed the face amount
of the Note will be considered to be an additional Loan to Borrower, bearing interest at the Note rate and being
secured by the Collateral. For these purposes, the Borrower assigns to Bondowner Representative all of its right,
title and interest in and to the Development Documents; however, Bondowner Representative will not have any
obligation under the Development Documents unless Bondowner Representative expressly hereafter agrees to
assume such obligations in writing. Bondowner Representative will have the right to exercise any rights of Borrower
under the Development Documents upon the occurrence of an Event of Default.
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default. Each of the following shall be an "Event of Default":
(a) The Borrower shall fail to pay when due the amounts required to be paid under this Loan
Agreement or the Note when the same shall become due and payable in accordance with the terms of this
Loan Agreement or the Note, including a failure to repay any amounts which have been previously paid but
are recovered, attached or enjoined pursuant to any insolvency, receivership, liquidation or similar
proceedings; or
(b) The Borrower shall fail to perform or observe any of its covenants or agreements contained in
this Loan Agreement, the Regulatory Agreement, the Note or the Deed of Trust, other than as specified in
paragraph (a) above, and such failure shall continue during and after the period specified in Section 7.2; or
(c) Any representation or warranty of the Borrower hereunder shall be determined by the
Bondowner Representative or the Issuer to have been false in any material respect when made; or
(d) If there is, in the sole determination of the Bondowner Representative, any material or adverse
change in the financial condition of the Borrower or a filing of a complaint for receivership against the
Borrower which is not dismissed within sixty (60) days of the filing date, or a filing of a voluntary petition for
bankruptcy or for a reorganization, or a filing of an involuntary petition for bankruptcy or for a reorganization
which is not dismissed within sixty (60) days of the filing date, or if the Borrower becomes insolvent or
makes a general assignment for the benefit of creditors or consents to the appointment of a receiver of all
or any of its assets, or voluntarily suspends its usual business; or
(e) the occurrence of an Event of Default under and as defined in the Indenture; or
(f) The Borrower defaults under any loan, extension of credit, security agreement, purchase or
sales agreement, or any other agreement, in favor of any creditor or person that may materially affect any
of the Borrower's property or the Borrower's ability to repay the Loan or perform its obligations under this
Agreement or any of the Loan Documents.
(g) This Agreement or any of the Loan Documents ceases to be in full force and effect (including
failure or any collateral document to create a valid and perfected security interest or lien) at any time and
for any reason.
(h) Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-
help, repossession or any other method, by any creditor of the Borrower or by any governmental agency
against any collateral securing the Loan. This includes a garnishment of any of the Borrower's accounts,
including deposit accounts, with Bondowner Representative. However, this Event of Default shall not apply
if there is a good faith dispute by the Borrower as to the validity or reasonableness of the claim which is the
basis of the creditor or forfeiture proceeding and if the Borrower gives Bondowner Representative written
notice of the creditor or forfeiture proceeding and deposits with Bondowner Representative monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined by Bondowner
Representative, in its sole discretion, as being an adequate reserve or bond for the dispute.
(i) The Improvements are not constructed in accordance with the Plans and Specifications or in
accordance with the terms of the Construction Contract.
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(j) Prior to the completion of construction of the Improvements and equipping of the Development,
the construction of the Improvements or the equipping of the Development is abandoned or work thereon
ceases for a period of more than ten (10) days for any reason, or the Improvements are not completed for
purposes of final payment to the General Contractor prior to , 2002, regardless of the reason
for the delay.
(k) Sale, transfer, hypothecation, assignment, or conveyance of the Development or any portion
thereof or interest therein by the Borrower without Bondowner Representative's prior written consent.
(I) All or any material portion of the Collateral is condemned, seized, or appropriated without
compensation, and the Borrower does not within thirty (30) days after such condemnation, seizure, or
appropriation, initiate and diligently prosecute appropriate action to contest in good faith the validity of such
condemnation, seizure, or appropriation.
Section 7.2. Notice of Default; Opportunity to Cure. No default under Section 7.1(a), (b), (c) or (e) hereof
shall constitute an Event of Default until:
(a) The Issuer or the Bondowner Representative, by registered or certified mail, shall give notice to
the Borrower of such default specifying the same and stating that such notice is a "Notice of Default"; and
(b) The Borrower shall have had 30 days (10 days with respect to a payment default) after receipt
of such notice to correct the default and shall not have con-ected it; provided, however, that if the default
stated in the notice is of such a nature that it cannot be corrected within 30 days (or 10 days with respect to
a payment default) and if the Borrower has not been given a notice of a similar default within the preceding
12 months, such default shall not constitute an Event of Default hereunder so long as (i) the Borrower
institutes corrective action within said 30 days (or 10 days, as applicable) and diligently pursues such action
until the default is corrected and such default is cured within 90 days, and (ii) in the opinion of Bond
Counsel to the Issuer, the failure to cure said default within 30 days (or 10 days, as applicable) will not
adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds.
Section 7.3. Remedies. Whenever any Event of Default under Section 7.1 hereof shall have happened and
be continuing, the Issuer and the Bondowner Representative may take whatever remedial steps as may be allowed
under the law, this Loan Agreement and the Deed of Trust.
Section 7.4. Attorneys' Fees and Expenses. If an Event of Default occurs and if the Issuer or the
Bondowner Representative should employ attomeys or incur expenses for the enforcement of any obligation or
agreement of the Borrower contained herein, the Borrower on demand will pay to the Issuer and/or the Bondowner
Representative the reasonable fees of such attomeys and the reasonable expenses so incurred, including court
appeals.
Section 7.5. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Issuer or the
Bondowner Representative is intended to be exclusive of any other available remedy or remedies, but each and
every such remedy shall be cumulative and shall be in addition to every other remedy given under this Loan
Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right
or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof,
but any such right and power may be exercised from time to time and as often as may be deemed expedient. In
order to entitle the Issuer or the Bondowner Representative to exercise any remedy reserved to either of them in this
Article VII, it shall not be necessary to give any notice, other than such notice as may be herein expressly required.
Such rights and remedies as are given the Issuer hereunder shall also extend to the Bondowner Representative, as
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assignee of the Issuer's interests in the Note, the Deed of Trust and this Loan Agreement, and the Bondowner
Representative, as assignee of the Issuer's interests in the Note, the Deed of Trust and this Loan Agreement shall
be deemed a third party beneficiary of all covenants and agreements herein contained.
Section 7.6. No Additional Waiver Implied by One Waiver. In the event any agreement or covenant
contained in this Loan Agreement should be breached by the Borrower and thereafter waived by the Issuer, such
waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach
hereunder including any other breach of the same agreement or covenant.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1. Entire Agreement. This Loan Agreement, the Note, the Regulatory Agreement and the Deed of
Trust constitute the entire agreement and supersede all prior agreements and understandings, both written and oral,
between the Issuer and the Borrower with respect to the subject matter hereof.
Section 8.2. Notices. All notices, certificates or other communications shall be in writing and shall be
sufficiently given and shall be deemed given on the second day following the date on which the same have been
personally delivered or mailed by first class mail postage prepaid, addressed as follows: if to the Issuer, to City of
Cupertino, 10300 Torre Avenue, Cupertino, Califomia 95014 Attention: Director of Administrative Services; if to the
Borrower, to Cupertino Community Services, 10185 N. Stelling Road, Cupertino, Califomia 95014; and if to the
Bondowner Representative, to Cupertino National Bank, 20230 Stevens Creek Boulevard, Cupertino, California
95014 Attention: Ms. Roxanne Vane, Sr. Vice President.
Section 8.3. Assignments. This Loan Agreement may not be assigned by any party without the prior written
consent of the other, except that the Issuer shall assign its rights under this Loan Agreement pursuant to the
Indenture, and except also that the Borrower may assign to any transferee its rights under this Loan Agreement as
provided by Section 6.2.
Section 8.4. Severability. If any provision of this Loan Agreement shall be held or deemed to be or shall, in
fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein
contained or render the same invalid, inoperative, or unenforceable to any extent whatever.
Section 8.5. Execution of Counterparts. This Loan Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and the same instrument.
Section 8.6. Amendments Changes and Modifications. Except as otherwise provided in this Loan
Agreement, subsequent to the issuance of the Note and prior to its payment in full (or provision for payment thereof
having been made in accordance with the provisions of the indenture), this Loan Agreement may not be effectively
amended, changed, modified, altered or terminated without the written consent of the parties hereto and the
Bondowner Representative.
Section 8.7. Governing Law. This Loan Agreement shall be governed exclusively by and construed in
accordance with the applicable laws of the State of Califomia.
Section 8.8. Term of Agreement. This Loan Agreement shall be in full force and effect from the date hereof
until such time as the Note shall have been fully paid or provision made for such payment. Time is of the essence in
this Loan Agreement.
Section 8.9. Survival of Agreement. All agreements, representations and warranties made herein shall
survive the making of the Loan.
Section 8.10. Binding Effect; Third Party Beneficiary. This Loan Agreement shall inure to the benefit of and
shall be binding upon the Issuer, the Borrower and their respective successors and assigns. The Bondowner
Representative is intended to be a third party beneficiary of this Loan Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Loan Agreement, all as of the date first
above written.
CITY OF CUPERTINO
By:
City Manager
CUPERTINO COMMUNITY SERVICES
By:
Its:
03028.01:J5549
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EXHIBIT A
INCOME COMPUTATION AND CERTIFICATION
NOTE TO APARTMENT OWNER: This form is designed to assist you in computing Annual Income in
accordance with the method set forth in the Department of Housing and Urban Development ("HUD") Regulations
(24 CFR 813). You should make certain that this form is at all times up to date with the HUD Regulations.
Re: Cupertino Community Services, Heart of Cupertino Project, 10114 and 10214 Vista Drive,
Cupertino, California
I/We, the undersigned state that I/we have read and answered fully, frankly and personally each of the
following questions for all persons who are to occupy the unit being applied for in the above apartment project.
Listed below are the names of all persons who intend to reside in the unit:
1. 2. 3. 4. 5.
Name of Members Relationship
of the to Head of Social Security Place of
Household Household Acme Number Employment
HEAD
SPOUSE
Income Computation
6. The total anticipated income, calculated in accordance with the provisions of this paragraph 6, of the
person listed above for the 12-month period beginning the date that I plan to move into a unit is $
Included in the total anticipated income listed above are:
(a) all wages and salaries, overtime pay, commissions, fees, tips and bonuses and other
compensation for personal services, before payroll deductions;
(b) the net income from the operation of a business or profession or from the rental of real or
personal property (without deducting expenditures for business expansion or amortization of capital
indebtedness or any allowance for depreciation of capital assets);
(c) interest and dividends (including income from assets excluded below);
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(d) the full amount of periodic payments received from social security, annuities, insurance
policies, retirement funds, pensions, disability or death benefits and other similar types of periodic receipts,
including any lump sum payment for the delayed start of a periodic payment;
(e) payments in lieu of earnings, such as unemployment and disability compensation, workmen's
compensation and severance pay;
(f) the maximum amount of public assistance available to the above persons other than the
amount of any assistance specifically designated for shelter and utilities;
(g) periodic and determinable allowances, such as alimony and child support payments and
regular contributions and gifts received from persons not residing in the dwelling;
(h) all regular pay, special pay and allowances of a member of the Armed Forces (whether or not
living in the dwelling) who is the head of the household or spouse; and
(i) any earned income tax credit to the extent that it exceeds income tax liability.
Excluded from such anticipated income are:
(a) casual, sporadic or irregular gifts;
(b) amounts which are specifically for or in reimbursement of medical expenses;
(c) lump sum additions to family assets, such as inheritances, insurance payments (including
payments under health and accident insurance and workmen's compensation), capital gains and settlement
for personal or property losses;
(d) amounts of educational scholarships paid directly to the student or the educational institution,
and amounts paid by the government to a veteran for use in meeting the costs of tuition, fees, books and
equipment. Any amounts of such scholarships or payments to veterans not used for the above purposes
are to be included in income;
(e) special pay to a household member who is away from home and exposed to hostile fire;
(f) relocation payments under Title II of the Uniform Relocation Assistance and Real Property
Acquisition Policies Law of 1970;
(g) foster child care payments;
1977;
(h) the value of coupon allotments for the purchase of food pursuant to the Food Stamp Law of
(i) payments to volunteers under the Domestic Volunteer Service Law of 1973;
(j) payments received under the Alaska Native Claims Settlement Law;
(k) income derived from certain submarginal land of the United States that is held in trust for
certain Indian tribes;
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(I) payments or allowances made under the Department of Health and Human Services' Low-
Income Home Energy Assistance Program;
(m) payments received from the Job Training Partnership Law;
(n) income derived from the disposition of funds of the Grand River Band of Ottawa Indians; and
(o) the first $2,000.00 of per capita shares received from judgment funds awarded by the Indian
Claims Commission or the Court of Claims.
7. Do the persons whose income or contributions are included in item 6 above:
(a) have savings, stocks, bonds, equity in real property or other form of capital investment
(excluding the values of necessary items of personal property such as furniture and automobiles and
interests in Indian trust land) Yes No ; or
(b) have they disposed of any assets (other than at a foreclosure or bankruptcy sale) during the
last two years at less than fair market value? Yes No
(c) If the answer to (a) or (b) above is yes, does the combined total value of all such assets owned
or disposed of by all such persons total more than $5,000?
Yes No ;
(d) If the answer to (c) above is yes, state:
(1) the amount of income expected to be derived from such assets in the 12-month period
beginning on the date of initial occupancy in the unit that you propose to rent: $ ,
and
(2) the amount of such income, if any, that was included in item 6 above: $
8. (a) Are all of the individuals who propose to reside in the unit full-time students*? Yes No
`A full-time student is an individual enrolled as a full-time student during each of 5 calendar
months during the calendar year in which occupancy of the unit begins at an educational organization
which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of
students in attendance and is not an individual pursuing afull-time course of institutional or farm training
under the supervision of an accredited agent of such an educational organization or of a state or political
subdivision thereof.
(b) If the answer to 8(a) is yes, is at least I of the proposed occupants of the unit a husband and
wife entitled to file a joint federal income tax return?
Yes No
9. Neither myself nor any other occupant of the unit I/we propose to rent is the owner of the rental housing
project in which the unit is located (hereinafter the "Owner"), has any family relationship to the Owner; or owns
directly or indirectly any interest in the Owner. For purposes of this paragraph, indirect ownership by an individual
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shall mean ownership by a family member, ownership by a corporation, partnership, estate or trust in proportion to
the ownership or beneficial interest in such corporation, partnership, estate or trustee held by the individual or a
family member; and ownership, direct or indirect, by a partner of the individual.
10. This certificate is made with the knowledge that it will be relied upon by the Owner to determine
maximum income for eligibility to occupy the unit; and I/we declare that all information set forth herein is true, correct
and complete and based upon information I/we deem reliable and that the statement of total anticipated income
contained in paragraph 6 is reasonable and based upon such investigation as the undersigned deemed necessary.
11. I/we will assist the Owner in obtaining any information or documents required to verify the statements
made herein, including either an income verification from my/our present employer(s) or copies of federal tax returns
for the immediately preceding calendar year.
12. I/we acknowledge that I/we have been advised that the making of any misrepresentation or
misstatement in this declaration will constitute a material breach of my/our agreement with the Owner to lease the
unit and will entitle the Owner to prevent or terminate mylour occupancy of the unit by institution of an action for
ejection or other appropriate proceedings.
I/we declare under penalty of perjury that the foregoing is true and correct.
Executed this day of in the City of , California.
Applicant
Applicant
[Signature of all persons over the age of 18 years listed in number 2 above required]
FOR COMPLETION BY FACILITY OWNER ONLY:
1, calculation of eligible income:
a. Enter amount entered for entire household in 6 above: $
b.(1) If answer to 7(c) above is yes, enter the total amount entered in 7(d)(1), subtract from that figure the
amount entered in 7(d)(2) and enter the remaining balance ($);
(2) Multiply the amount entered in 7(c) times the current passbook savings rate to determine what the total
annual earnings on the amount in 7(c) would be if invested in passbook savings ($ ), subtract from that
figure the amount entered in 7(d)(2) and enter the remaining balance ($ );
(3) Enter at right the greater of the amount calculated under (1) or (2) above: $ ;
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c. TOTAL ELIGIBLE INCOME
(Line 1.a plus line 1.b(3)): $_
2. The amount entered in 1.c:
Qualifies the applicant(s) as a Low Income Tenant(s).
Qualifies the applicant(s) as a Very Low Income Tenant(s).
Does not qualify the applicant(s) as a Low Income Tenant(s) or a Very Low Income
Tenant(s).
3. Number of unit assigned:
Bedroom Size: Rent: $
4. This unit [waslwas not] last occupied for a period of 31 consecutive days by persons whose aggregate
anticipated annual income as certified in the above manner upon their initial occupancy of the apartment unit
qualified them as Lower Income Tenants or Very Low Income Tenants, as applicable.
5. Method used to verify applicant(s) income:
Employer income verification.
Copies of tax returns.
Other ( )
Manager
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INCOME VERIFICATION
(for employed persons)
The undersigned employee has applied for a rental unit located in a development financed by a loan (the
"Loan") from the City of Cupertino. Every income statement of a prospective tenant must be stringently verified.
Please indicate below the employee's current annual income from wages, overtime, bonuses, commissions or any
other form of compensation received on a regular basis.
Annual wages Overtime Bonuses Commissions
Total current income
I hereby certify that the statements above are true and complete to the best of my knowledge.
Signature
Date Title
I hereby grant you permission to disclose my income to in order that they may determine my
income eligibility for rental of an apartment located in their project which has been financed under the Loan.
Signature
Please send to:
Date
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INCOME VERIFICATION
(for self-employed persons)
I hereby attach copies of my individual federal and state income tax returns for the immediately preceding
calendar year and certify that the information shown in such income tax returns is true and complete to the best of
my knowledge.
Signature
Date
A-7 ,7 ~ 7
EXHIBIT B
Period Covered
(Annual)
CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE
The undersigned, Cupertino Community Services (the "Borrower"), has read and is thoroughly familiar with
the provisions of the various loan documents associated with the Borrower's participation in the City of Cupertino's
(the "Issuer") Housing Program, such documents including:
1. The Regulatory Agreement and Declaration of Restrictive Covenants dated as of October 1, 2001
(the "Regulatory Agreement"), between the Borrower and the Issuer;
2. The Loan Agreement dated as of October 1, 2001 (the "Loan Agreement"), between the Borrower
and the Issuer; and
3. The Note dated October _, 2001 from the Borrower to the Issuer, and the Deed of Trust and the
Assignment of Rents and Leases (as such terms are defined in the Loan Agreement).
As of the date of this Certificate, the following percentages of completed residential units in the
Development (i) are occupied by Low Income Tenants or Very Low Income Tenants (as such terms are defined in
the Regulatory Agreement), as applicable, or (ii) are currently vacant and being held available for such occupancy
and have been so held continuously since the date a Low Income Tenant or a Very Low Income Tenant vacated
such unit; as indicated:
Total Units Completed:
Number of Units Occupied by
Low Income Tenants:
Percent of Total Units
Occupied by Low
Income Tenants:
Type of Units Occupied by
Low Income Tenants:
Unit Nos.
Rent Charged
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Number of Units Occupied by
Very Low Income Tenants: _
Percent of Total Units
Occupied by Very Low
Income Tenants:
Type of Units Occupied by
Very Low Income Tenants:
Unit Nos.
Rent Charged
Held vacant for occupancy
continuously since last
occupied by Very Low Income
Tenant or Low Income Tenant
Vacant Units
percent, Unit Nos.
percent, Unit Nos.
The undersigned hereby certifies that the Borrower is not in default under any of the terms and provisions of
the above mentioned documents.
CUPERTINO COMMUNITY SERVICES
By:
Its:
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EXHIBIT C
NOTE
Cupertino Community Services, a California nonprofit public benefit corporation (the "Borrower'),
acknowledges itself indebted and for value received hereby promises to pay to the order of the City of Cupertino (the
"Issuer"), or its successors and assigns, the sum of up to one million six hundred thousand dollars ($1,600,000),
together with interest on the advanced and unpaid Outstanding Balance (as hereinafter defined)at the interest rate
referred to below from October _, 2001 (the "Loan") until the Borrower's obligation to pay the Outstanding Balance
shall be discharged. The Outstanding Balance shall mean the principal balance of the Loan which has been
advanced by or on behalf of the Issuer under Section 3.4 of the Loan Agreement described below, and has not been
repaid by the Borrower to the Issuer as of the date of calculation of the Outstanding Balance.
This Note is issued to evidence the Loan by the Issuer to the Borrower and the obligation of the Borrower to
repay the same and shall be governed by and be payable in accordance with the terms and conditions of a Loan
Agreement (the "Loan Agreement"), dated as of October 1, 2001, between the Issuer and the Borrower pursuant to
which Issuer has made the Loan. This Note, together with the Loan Agreement, have been assigned by the Issuer
under the terms of an Indenture of Trust, dated as of October 1, 2001 (the "Indenture"), by and between the Issuer
and Cupertino National Bank (the "Bondowner Representative") for the benefit of the owners of the Issuer's
Multifamily Housing Revenue Bonds (Heart of Cupertino Project), Series 2001A. All payments on this Note shall be
made by the Borrower to the Bondowner Representative.
The Outstanding Balance of the Loan shall be due and payable in its entirety on October 1, 2031. This
Note shall bear interest at a of six and three eighths percent (6.375%) per annum. Monthly payments of principal
and interest on the Loan shall be payable on the first business day of each month, commencing November 1, 2001,
in an amount equal to $
The principal of this Note shall be subject to prepayment in full (i) upon the occurrence of an Event of
Default under and as defined in the Loan Agreement, and (ii) from the proceeds of any insurance maintained with
respect to the development financed with the proceeds of the Loan, to the extent required to be used to prepay the
Loan under the provisions of the Loan Agreement.
The Borrower shall have the right to prepay all or any portion of the principal of this Note at any time, but
only following thirty (30) days prior written notice to the Bondowner Representative and the Issuer, at a prepayment
price equal to the principal to be prepaid plus accrued interest thereon to the date of prepayment, plus a prepayment
premium fee (which shall be retained by the Bondowner Representative for its own account) equal to six (6) months'
interest on the principal amount being prepaid.
In the event the Borrower fails to make the timely payment of any monthly payment, and such payment
remains unpaid for a period of ten (10) days subsequent to the established payment date, the Borrower shall pay to
the Bondowner Representative interest on the then Outstanding Balance at a default rate (the "Default Rate") equal
to the interest rate then in effect under this Note plus five percent (5%).
THIS NOTE IS FURTHER SECURED BY A DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY
AGREEMENT AND FIXTURE FILING (THE "DEED OF TRUST") MADE BY THE BORROWER, AS TRUSTOR, FOR
THE BENEFIT OF THE ISSUER, AS BENEFICIARY, NAMING FIRST AMERICAN TITLE INSURANCE COMPANY
AS TRUSTEE THEREUNDER, AND DATED AS OF SEPTEMBER 1, 2001. THE ISSUER HAS ASSIGNED ITS
INTERESTS UNDER SAID DEED OF TRUST TO THE BONDOWNER REPRESENTATIVE.
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Should the Borrower agree to or actually sell, convey, transfer or dispose of the real property described in
the Deed of Trust securing the Loan or any part of it, or any interest in it, other than permitted encumbrances, as
described in the Loan Agreement, or upon the occurrence of an Event of Default under and as defined in the Loan
Agreement and the decision by the Bondowner Representative to accelerate the Loan, then all obligations secured
by this Note may be declared due and payable, as provided in the Loan Agreement.
All sums due hereunder shall be paid in lawful money of the United States of America. Interest shall be
computed on the basis of a 360-day year comprised of twelve 30-day months. All payments made hereunder shall
be credited first against unpaid late charges; the balance of each such payment next shall be credited against
accrued and previously unpaid interest; and the balance of each such payment shall be credited against principal,
and interest thereafter shall not accrue on the amount so credited to principal.
The Borrower, for itself and its legal representatives, successors, and assigns expressly waives demand,
notice of nonpayment, presentment for demand, presentment for the purpose of accelerating maturity, dishonor,
notice of dishonor, protest, notice of protest, notice, notice of maturity, and diligence in collection. The Borrower
agrees to pay all court costs and reasonable attorneys' fees if counsel is engaged to assist in the collection of this
Note after a default hereunder if any action is commenced to construe or enforce the terms of this Note.
Notwithstanding the foregoing, neither the officers or the directors of the Borrower shall be personally liable
for the amounts owing under this Note or the Deed of Trust; and the Issuer's remedies in the event of a default under
this Note shall be limited to those remedies set forth in the Loan Agreement and the commencement of foreclosure
under the Deed of Trust and the exercise of the power of sale or other rights granted thereunder.
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IN WITNESS WHEREOF, Cupertino Community Services, a Califomia non-profit public benefit corporation,
has caused this Note to be executed in its name and on its behalf all as of the day of October, 2001.
CUPERTINO COMMUNITY SERVICES,
a Califomia non-profit public benefit corporation
By:
Its:
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Endorsement to Bondowner Representative
Pay to the order of Cupertino National Bank, Bondowner Representative, without recourse.
Dated: October _, 2001
CITY OF CUPERTINO
By:
Its:
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EXHIBIT D
CONDITIONS TO DISBURSEMENT
CONDITIONS PRECEDENT TO EACH ADVANCE. Bondowner Representative's obligation to make the
initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment to
Bondowner Representative's satisfaction of all of the conditions set forth in this Agreement and in the Loan
Documents.
1.01 Special Conditions to Initial Advance. Refer to Development Cost Breakdown -Exhibit 2
attached hereto and made a part hereof.
1.02 Approval of Contractors, Subcontractors, and Materialmen. Bondowner Representative shall
have approved a list of all contractors employed in connection with the construction of the
Improvements, showing the name, address, and telephone number of each contractor, a general
description of the nature of the work to be done, the labor and materials to be supplied, the names
of materialmen, if known, and the approximate dollar value of the labor, work, or materials with
respect to each contractor or materialman. Bondowner Representative shall have the right to
communicate with any person to verify the facts disclosed by the list or by any application for any
Advance, or for any other purpose.
1.03 Plans, Specifications, and Permits. Bondowner Representative shall have received and
accepted a complete set of written Plans and Specifications setting forth all Improvements for the
Project, and Borrower shall have fumished to Bondowner Representative copies of all permits and
requisite approvals of any governmental body necessary for the construction and use of the
Development.
1.04 Architecture and Construction Contracts. Borrower shall have fumished inform and substance
satisfactory to Bondowner Representative an executed copy of the Architecture Contract and an
executed copy of the Construction Contract.
1.05 Related and Support Documents. Borrower shall provide to Bondowner Representative in form
satisfactory to Bondowner Representative all Loan Documents.
1.06 Budget and Schedule of Estimated Advances. Bondowner Representative shall have approved
detailed budget and cash flow projections of total Development costs and a schedule of the
estimated amount and time of disbursements of each Advance.
1.07 Borrower's Authorization. Borrower shall have provided in form and substance satisfactory to
Bondowner Representative properly certified resolutions, duly authorizing the consummation of the
Loan and duly authorizing the execution and delivery of this Agreement, the Note and the Loan
Documents. In addition, Borrower shall have provided such other resolutions, authorizations,
documents, opinions and instruments as Bondowner Representative or its counsel, in their sole
discretion, may require.
1.08 Bond. If requested by Bondowner Representative, Borrower shall have fumished a performance
and payment bond in an amount equal to 100% of the amount of the Construction Contract, as
D-1 -7 - 9
well as a materialmen's and mechanics' payment bond. With such riders and supplements as
Bondowner Representative may require, each in form and substance satisfactory to Bondowner
Representative, naming the General Contractor as principal and Bondowner Representative as an
additional obligee. Any required bonds and the contracts which they cover must be duly recorded
or filed in accordance with California Civil Code Section 3235, if required by Bondowner
Representative.
1.09 Appraisal. An appraisal shall be prepared for the Property, at Borrower's expense, which in form
and substance shall be satisfactory to Bondowner Representative, in Bondowner Representative's
sole discretion, including applicable regulatory requirements.
1.10 Plans and Specifications. If requested by Bondowner Representative, Borrower shall have
assigned to Bondowner Representative on Bondowner Representative's forms the Plans and
Specifications for the Development.
1.11 Environmental Report. Borrower shall have fumished to Bondowner Representative, at
Borrower's expense, an environmental report and certificate on the Property inform and substance
satisfactory to Bondowner Representative, prepared by an engineer or other expert satisfactory to
Bondowner Representative's stating that the Property complies with all applicable provisions and
requirements of Section 2.3 (concerning Hazardous Substances) of this Agreement.
1.12 Soil Report. If requested by Bondowner Representative, Borrower shall have furnished to
Bondowner Representative, at Borrower's expenses, a soil report for the Property in form and
substance satisfactory to Bondowner Representative, prepared by a registered engineer
satisfactory to Bondowner Representative stating that the Property is free from soil or other
geological conditions that would preclude its use or development as contemplated without extra
expense for precautionary, corrective or remedial measures.
1.13 Survey. If requested by Bondowner Representative, Borrower shall have fumished to Bondowner
Representative a survey of recent date, prepared and certified by a qualified surveyor and
providing that the Improvements, if constructed in accordance with the Plans and Specifications,
shall lie wholly within the boundaries of the Development without encroachment or violation of any
zoning ordinances, building codes or regulations, or setback requirements, together with such
other information as Bondowner Representative in its sole discretion may require.
1.14 Zoning. Borrower shall have fumished evidence satisfactory to Bondowner Representative that
the property on which the Development is located is duly and validly zoned for the construction,
maintenance, and operation of the Development.
1.15 Title Insurance. Borrower shall have provided to Bondowner Representative an ALTA
Bondowner Representative's extended coverage policy of title insurance with such endorsements
as Bondowner Representative may require, issued by a title insurance company acceptable to
Bondowner Representative and in a form, amount, and content satisfactory to Bondowner
Representative, insuring or agreeing to insure that Bondowner Representative's security
agreement or other security document on the Property is or will be upon recordation a valid first
lien on the Property free and clear of all defects, liens, encumbrances, and exceptions except
those as specifically accepted by Bondowner Representative in writing. If requested by
Bondowner Representative, Borrower shall provide to Bondowner Representative, at Borrower's
expense, a foundation endorsement (CLTA 102.5 or its equivalent) to the title policy upon the
completion of each foundation for the Improvements, showing no encroachments, and upon
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completion an endorsement, which insures the lien-free completion of the Improvements (CLTA
101 series, as required by Bondowner Representative). Specifically, Borrower shall provide to
Bondowner Representative the following title insurance endorsements: Modified 100, 101.2,
102.5, 111.5, 116 (maybe others].
1.16 Insurance. Unless waived by Bondowner Representative in writing, Borrower shall have delivered
to Bondowner Representative the following insurance policies or evidence thereof: (a) an all risks
course of construction insurance policy (builder's risk), with extended coverage covering the
Improvements issued in an amount and by a company acceptable to Bondowner Representative,
containing a loss payable or other endorsement satisfactory to Bondowner Representative insuring
Bondowner Representative as mortgagee, together with such other endorsements as may be
required by Bondowner Representative, including stipulations that coverages will not be cancelled
or diminished without at least (10) days prior written notice to Bondowner Representative; (b)
owners and General Contractor general liability insurance, public liability and workmen's
compensation insurance; (c) flood insurance if required by Bondowner Representative or
applicable law; and (d) all other insurance required by this Agreement or by the Loan Documents.
1.17 Workers' Compensation Coverage. Provide to Bondowner Representative proof of the General
Contractor's compliance with all applicable workers' compensation laws and regulations with
regard to all work performed on the Development.
1.18 Payment of Fees and Expenses. Borrower shall have paid to Bondowner Representative all
fees, charges, and other expenses which are then due and payable as specified in this Agreement
or any Related Document.
1.19 Satisfactory Construction. All work usually done at the stage of construction for which
disbursement is requested shall have been done in a good and workmanlike manner and all
materials and fixtures usually furnished and installed at that stage of construction shall have been
furnished and installed, all in compliance with the Plans and Specifications. Borrower shall also
have furnished to Bondowner Representative such proofs as Bondowner Representative may
require to establish the progress of the work, compliance with applicable laws, freedom of the
Property from liens, and the basis for the requested disbursement.
1.20 Certification. Borrower shall have fumished to Bondowner Representative a certification by an
engineer, architect, or other qualified inspector acceptable to Bondowner Representative that the
construction of the Improvements has complied and will continue to comply with all applicable
statutes, ordinances, codes, regulations, and similar requirements.
1.21 Lien Waivers. Borrower shall have obtained and attached to each application for an Advance,
including the Advance to cover final payment to the General Contractor, executed
acknowledgments of payments of all sums due and releases of mechanic's and materialmen's
liens, satisfactory to Bondowner Representative, from any party having lien rights, which
acknowledgments of payment and releases of liens shall cover all work, labor, equipment,
materials done, supplied, performed, or fumished prior to such application for an Advance.
1.22 No Event of Default. There shall not exist at the time of any Advance a condition which would
constitute an Event of Default under this Agreement or under any Related Document.
2. DISBURSEMENT OF LOAN FUNDS. The following provisions relate to the disbursement of funds from the
Program Fund and any Borrower's funds held by Bondowner Representative
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2.01 Application for Advances. Borrower shall apply for Advances from the Program Fund according
to the following disbursement schedule: Refer to Disbursement Schedule -Exhibit 1 attached
hereto and made a part hereof.
Each application shall be stated on a standard AIA payment request form or other form
approved by Bondowner Representative, executed by Borrower, and supported by such evidence
as Bondowner Representative shall reasonably require. Each application shall specify the portion
of such Advance to be funded from Loan proceeds and the portion to be funded from Borrower's
funds or other sources. Borrower shall apply only for disbursement with respect to work actually
done by the General Contractor and for materials and equipment actually incorporated into the
Development. Each application for an Advance shall be deemed a certification of Borrower that as
of the date of such application, all representations and warranties contained in the Agreement are
true and correct, and that Borrower is in compliance with all of the provisions of this Agreement.
2.02 Loan to Value. Unless waived by Bondowner Representative in writing, the ratio of the amount of
the Loan to the Value of the Property as completed shall not exceed 50.000%.
2.03 Payments. At the sole option of Bondowner Representative, Advances may be paid in the joint
names of Borrower and the General Contractor, subcontractor(s), or supplier(s) in payment of
sums due under the Construction Contract. At its sole option, Bondowner Representative may
directly pay the General Contractor and any subcontractors or other parties the sums due under
the Construction Contract. Borrower appoints Bondowner Representative as its attorney-in-fact to
make such payments. This power shall be deemed coupled with an interest, shall be irrevocable,
and shall survive an Event of Default under this Agreement.
2.04 Developmented Cost Overruns. If Bondowner Representative at any time determines in its sole
discretion that the amount of in the Program Fund, together with the unfunded portion of any
subordinate financings previously approved by Bondowner Representative, is insufficient, or will
be insufficient, to complete fully and to pay for the Development, then within ten (10) days after
receipt of a written request from Bondowner Representative, Borrower shall deposit in the Program
Fund an amount equal to the deficiency as determined by Bondowner Representative. The
judgment and determination of Bondowner Representative under this section shall be final and
conclusive. Any such amounts deposited by Borrower shall be disbursed prior to any Loan
proceeds.
2.05 Final Payment to General Contractor. Upon completion of the Development and fulfillment of
the Construction Contract to the satisfaction of Bondowner Representative and provided sufficient
Loan funds are available, Bondowner Representative shall make an Advance to cover the final
payment due to the General Contractor upon delivery to Bondowner Representative of
endorsements to the ALTA title insurance policy following the posting of the completion notice, as
provided under applicable law. Construction shall not be deemed complete for purposes of final
disbursement unless and until Bondowner Representative shall have received all of the following:
(1) Evidence satisfactory to Bondowner Representative that all work under the Construction
Contract requiring inspection by any governmental authority with jurisdiction has been
duly inspected and approved by such authority, that a certificate of occupancy has been
issued, and that all parties performing work have been paid, or will be paid, for such work;
D-4 7 _cj 7
(2) A certification by an engineer, architect, or other qualified inspector
acceptable to Bondowner Representative that the Improvements have been
completed substantially in accordance with the Plans and Specifications
and the Construction Contract, that direct connection has been made to all
utilities set forth in the Plans and Specifications, and that the Development
is ready for occupancy; and
(3) Acceptance of the completed Improvements by Bondowner Representative and
Borrower.
Notwithstanding any other provision of this Agreement to the contrary, Bondowner
Representative may retain up to 10.000% of the original Loan amount to be paid as the
final payment to the General Contractor upon satisfaction of the conditions set forth
above.
2.06 Construction Default. If Borrower fails in any respect to comply with the provisions of this
Agreement or if construction ceases before completion regardless of the reason, Bondowner
Representative, at its option, may refuse to make further Advances, may accelerate the
indebtedness under the terms of the Note, and without thereby impairing any of its rights, Powers,
or privileges, may enter into possession of the construction site and perform or cause to be
performed any and all work and labor necessary to complete the Improvements, substantially in
accordance with the Plans and Specifications.
2.07 Damage or Destruction. If any of the Collateral or Improvements is damaged or destroyed by
casualty of any nature, within sixty (60) days thereafter Borrower shall restore the Collateral and
Improvements to the condition in which they were before such damage or destruction with funds
other than those in the Program Fund. Bondowner Representative shall not be obligated to make
disbursements under this Agreement until such restoration has been accomplished.
2.08 Adequate Security. When any event occurs that Bondowner Representative determines may
e~~danger completion of the Development or the fulfillment of any condition or covenant in this
Agreement, Bondowner Representative may require Borrower to furnish, within ten (10) days after
delivery of a written request, adequate security to eliminate, reduce, or indemnify Bondowner
Representative against, such danger. In addition, upon such occurrence, Bondowner
Representative in its sole discretion may advance funds or agree to undertake to advance funds to
any party to eliminate, reduce, or indemnify Bondowner Representative against, such danger or to
complete the Development. All sums paid by Bondowner Representative pursuant to such
agreements or undertakings shall be for Borrowers account and shall be without prejudice to
Borrower's rights, if any, to receive such funds from the party to whom paid. All sums expanded
by Bondowner Representative in the exercise of its option to complete the Development shall be
payable to Bondowner Representative on demand together with interest from the date of the
Advance at the rate applicable to the Loan. In addition, any Advance of funds under this
Agreement, including without limitation direct disbursements to the General Contractor or other
parties in payment of sums due under the Construction Contract, shall be deemed to have been
expended by or on behalf of Borrower and to have been secured by the Deed of Trust and the Fire
District Deed of Trust.
3. CESSATION OF ADVANCES. Bondowner Representative shall have no obligation to make Loan
Advances or to disburse Loan proceeds if: (A) Borrower is in default under the terms of this Agreement or
any of the Loan Documents or any other agreement that Borrower has with Bondowner Representative; (B)
Borrower becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings,
D-5 7.98
or is adjudged a bankrupt; or (C) there occurs a material adverse change in Borrower's financial condition
or in the value of any Collateral securing any Loan.
4. LIMITATION OF RESPONSIBILITY. The making of any Advance by Bondowner Representative shall not
constitute or be interpreted as either (A) an approval or acceptance by Bondowner Representative of the
work done through the date of the Advance, or (B) a representation or Indemnity by Bondowner
Representative to any party against any deficiency or defect in the work oc against any breach of any
contract. Inspections and approvals of the Plans and Specifications, the Improvements, the workmanship
and materials used in the Improvements, and the exercise of any other right of inspection, approval, or
inquiry granted to Bondowner Representative in this Agreement are acknowledged to be solely for the
protection of Bondowner Representative's interests, and under no circumstances shall they be construed to
impose any responsibility or liability of any nature whatsoever on Bondowner Representative to any party.
Neither Borrower nor any contractor, subcontractor, materialman, laborer, or any other person shall rely, or
have any right to rely, upon Bondowner Representative's determination of the appropriateness of any
Advance. No disbursement or approval by Bondowner Representative shall constitute a representation by
Bondowner Representative as to the nature of the Development, its construction, or its intended use for
Borrower or for any other person, nor shall it constitute an indemnity by Bondowner Representative to
Borrower or to any other person against any deficiency or defects in the Development or against any
breach of any contract.
5. AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Bondowner Representative that, so
long as this Agreement remains in effect, Borrower will:
5.01 Notices of Claims and Litigation. Promptly inform Bondowner Representative in writing of (1) all
material adverse changes in Borrower's financial condition, and (2) all existing and all threatened
litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or
any guarantor which could materially affect the financial condition of Borrower.
5.02 Financial Records. Maintain its books and records and records in accordance with GAAP,
applied on a consistent basis, and permit Bondowner Representative to examine and audit
Borrower's books and records at all reasonable times.
5.03 Financial Statements. Furnish Bondowner Representative with such financial statements and
other related information at such frequencies and in such detail as Bondowner Representative
may reasonably request.
5.04 Additional Information. Furnish such additional information and statements, lists of assets and
liabilities, agings of receivables and payables, inventory schedules, budgets, forecasts, tax
returns, and other reports with respect to Borrowers financial condition and business operations
as Bondowner Representative may request from time to time.
5.05 Other Agreements. Comply with all terms and conditions of all other agreements, whether not or
hereafter existing, between Borrower and any other party and notify Bondowner Representative
immediately in writing of any default in connection with any other such agreements.
5.06 Insurance. Maintain fire and other risk insurance, public liability insurance, and such other
insurance as Bondowner Representative may require with respect to Borrower's properties and
operations, in form, amounts, coverages and with insurance companies acceptable to Bondowner
Representative. Borrower, upon request of Bondowner Representative, will deliver to Bondowner
Representative from time to time the policies or certificates of insurance in form satisfactory to
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Bondowner Representative, including stipulations that coverages will not be cancelled or
diminished without at least ten (10) days prior written notice to Bondowner Representative. Each
insurance policy also shall include an endorsement providing that coverage in favor of Bondowner
Representative will not be impaired in any way by any act, omission or default of Borrower or any
other person. In connection with all policies covering assets in which Bondowner Representative
holds or is offered a security interest for the Loan, Borrower will provide Bondowner
Representative with such Bondowner Representative's loss payable or other endorsements as
Bondowner Representative may require.
5.07 Insurance Reports. Furnish to Bondowner Representative, upon request of Bondowner
Representative, reports on each existing insurance policy showing such information as Bondowner
Representative may reasonably request, including without limitation the following: (1) the name of
the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the
then current property values on the basis of which insurance has been obtained, and the manner
of determining those values; and (6) the expiration date of the policy. In addition, upon request of
Bondowner Representative (however not more often than annually). Borrower will have an
independent appraiser satisfactory to Bondowner Representative determine, as applicable, the
actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid
by Borrower.
5.08 Loan Fees, Charges and Expenses. Whether or not the Development is completed, Borrower
also shall pay upon demand all out-of-pocket expenses incurred by Bondowner Representative in
connection with the preparation of loan documents and the making of the Loan, including, without
limitation, all closing costs, fees, and disbursements, all expenses of Bondowner Representative's
legal counsel, and all title examination fees, title insurance premiums, appraisal fees, survey costs,
required fees, inspection fees and filing and recording fees.
5.09 Loan Proceeds. Use the Loan funds solely for payment of bills and expenses directly related to
the Development.
5.10 Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations,
including without limitation all assessments, taxes, governmental charges, levies and liens, of
every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or
charge upon any of Borrower's properties, income, or profits.
5.11 Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions
set forth in this Agreement, in the Loan Documents, and in all other instruments and agreements
relating to the Development. Borrower shall notify Bondowner Representative immediately in
writing of any default in connection with any agreement.
5.12 Inspection. Permit employees or agent of Bondowner Representative at any reasonable time to
inspect any and all Collateral for the Loan and to examine or audit Borrower's books, accounts,
and records and to make copies and memoranda of Borrower's books, accounts, and records. If
Borrower now or at any time hereafter maintains any records (including without limitation computer
generated records and computer software programs for the generation of such records) in the
possession of a third party, Borrower, upon request of Bondowner Representative, shall notify
such party to permit Bondowner Representative free access to such records at all reasonable
times and to provide Bondowner Representative with copies of any records it may request, all at
Borrower's expense.
D-7
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5.13 Compliance Certificates. Unless waived in writing by Bondowner Representative, provide
Bondowner Representative at least annually, with a certificate executed by Borrower's chief
financial officer, or other officer or person acceptable to Bondowner Representative, certifying that
the representations and warranties set forth in this Agreement are true and correct as of the date
of the certificate and further certifying that, as of the date of the certificate, no Event of Default
exists under this Agreement or any of the other Loan Documents.
5.14 Construction of the Development. Commence construction of the Development no later than
October _, 2001, and cause the Improvements to be constructed and equipped in a diligent and
orderly manner and in strict accordance with the Plans and Specifications approved by Bondowner
Representative, the Construction Contract, and all applicable laws, ordinances, codes, regulations,
and rights of adjoining or concurrent property owners. Borrower agrees to complete the
Development for purposes of final payment to the General Contractor on or before March 1, 2003,
regardless of the reason for any delay.
5.15 Defects. Upon demand of Bondowner Representative, promptly correct any defect in the
Improvements or any departure from the Plans and Specifications not approved by Bondowner
Representative in writing before further work shall be done upon the portion of the Improvements
affected.
5.16 Development Claims and Litigation. Promptly inform Bondowner Representative of (1) all
material adverse changes in the financial condition of the General Contractor; (2) any litigation and
claims, actual or threatened, affecting the Development or the General Contractor, which could
materially affect the successful completion of the Development or the ability of the General
Contractor to complete the Development as agreed; and (3) any condition or event which
constitutes a breach or default under any of the Loan Documents or any contract related to the
Development.
5.17 Payment of Claims and Removal of Liens. (1) Cause all claims for labor done and materials
and services fumished in connection with the Improvements to be fully paid and discharged in a
timely manner, (2) diligently file or procure the filing of a valid notice of completion of the
Improvements, or such comparable document as may be permitted under applicable lien laws, (3)
diligently file or procure the filing of a notice of cessation, or such comparable document as may
be permitted under applicable lien laws, upon the happening of cessation of labor on the
Improvements for a continuous period of thirty (30) days or more, and (4) take all reasonable steps
necessary to remove all claims of liens against the Collateral, the Improvements or any part of the
Collateral or Improvements, or any rights or interests appurtenant to the Collateral or
Improvements. Upon Bondowner Representative's request Borrower shall make such demands or
claims upon or against laborers, materialmen, subcontractors, or other persons who have
furnished or claim to have fumished labor, services, or materials in connection with the
Improvements, which demands or claims shall under the laws of the State of Califomia require
diligent assertions of lien claims upon penalty of loss or waiver thereof. Borrower shall, within ten
(10) days after the filing of any claim of lien that is disputed or contested by Borrower, record or
cause the General Contractor for the construction of the Improvements to record in the appropriate
governmental office, a surety bond pursuant to Califomia law sufficient to release the claim of lien
and, within five (5) days of Bondowner Representative's demand, make suitable provision by
deposit of funds with Bondowner Representative in an amount satisfactory to Bondowner
Representative or by bond satisfactory to Bondowner Representative for the possibility that the
contest will be unsuccessful. If Borrower fails to remove any lien on the Collateral or
D-8
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Improvements or provide a bond or deposit pursuant to this provision, Bondowner Representative
may pay such lien, or may contest the validity of the lien, and Borrower shall pay all costs and
expenses of such contest, including Bondowner Representative's reasonable attomeys' fees.
5.18 Taxes and Claims. Pay and discharge when due all of Borrowers indebtedness, obligations, and
claims that, if unpaid, might become a lien or charge upon the Collateral or Improvements;
provided, however, that Borrower shall not be required to pay and discharge any such
indebtedness, obligation, or claim so long as (1) its legality shall be contested in good faith by
appropriate proceedings, (2) the indebtedness, obligation, or claim does not become alien or
charge upon the Collateral or Improvements, and (3) Borrower shall have established on its books
adequate reserves with respect to the amount contested in accordance with GAAP. If the
indebtedness, obligation, or claim does become a lien or charge upon the Collateral or
Improvements, Borrower shall remove the lien or charge as provided in the preceding paragraph.
5.19 Environmental Studies. Promptly conduct and complete, at Borrower's expense, all such
investigations, studies, samplings and testings as may be requested by Bondowner
Representative or any governmental authority relative to any substance, or any waste or bi-
product of any substance defined as toxic or a hazardous substance under applicable federal,
state, or local law, rule, regulation, order or directive, at or affecting any property or any facility
owned, leased or used by Borrower.
5.20 Additional Assurances. Make, execute and deliver to Bondowner Representative such
promissory notes, mortgages, deeds of trust, security agreements, assignments, financing
statements, instruments, documents and other agreements as Bondowner Representative or its
attomeys may reasonably request to evidence and secure the Loan and to perfect all Security
Interests in the Collateral and Improvements.
6. BONDOWNER REPRESENTATIVE'S EXPENDITURES. If any action or proceeding is commenced that
would materially affect Bondowner Representative's interest in the Collateral or if Borrower fails to comply
with any provision of this Agreement or any Loan Documents, including but not limited to Borrower's failure
to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement
or any Loan Documents, Bondowner Representative on Borrower's behalf may (but shall not be obligated
to) take any action that Bondowner Representative deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied
or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All
such expenditures incurred or paid by Bondowner Representative for such purposes will then bear interest
at the rate charged under the Note from the date incurred or paid by Bondowner Representative to the date
of repayment by Borrower. All such expenses will become a part of the indebtedness and, at Bondowner
Representative's option, will (A) be payable on demand; (B) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due during either (1) the term
of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon
payment which will be due and payable at the Note's maturity.
7. NEGATIVE COVENANTS. Borrower covenants and agrees with Bondowner Representative that while this
Agreement is in effect, Borrower shall not, without the prior written consent of Bondowner Representative:
7.01 Indebtedness and Liens. (1) Except for the subordinate loans and grants approved by
Bondowner Representative prior to the date of this Agreement and indebtedness to Bondowner
Representative contemplated by this Agreement, create, incur or assume indebtedness for
borrowed money, including capital leases, (2) sell, transfer, mortgage, assign, pledge, lease, grant
D-9 ~,~~~
a security interest in, or encumber any of Borrowers assets (except as allowed as Permitted
Liens), or (3) sell with recourse any of Borrower's accounts, except to Bondowner Representative.
7.02 Continuity of Operations. (1) Engage in any business activities substantially different than those
in which Borrower is presently engaged or (2) cease operations, liquidate, merge, transfer, acquire
or consolidate with any other entity, change its name, change the state of its incorporation,
dissolve or transfer or sell Collateral out of the ordinary course of business.
7.03 Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets (2)
purchase, create or acquire any interest in any other enterprise or entity, or (3) incur any obligation
as surety or guarantor other than in the ordinary course of business.
7.04 Modification of Contract. Make or permit to be made any modification of the Construction
Contract.
8. GENERAL DEVELOPMENT PROVISIONS. the following provisions relate to the construction and
completion of the Development:
8.01 Change Orders. All requests for changes in the Plans and Specifications, other than minor
changes involving no extra cost, must be in writing, signed by Borrower and the architect, and
delivered to Bondowner Representative for its approval. Borrower will not permit the performance
of any work pursuant to any change order or modification of the Construction Contract or any
subcontract without the written approval of Bondowner Representative. Borrower will obtain any
required permits or authorizations from governmental authorities having jurisdiction before
approving or requesting a new change order.
8.02 Purchase of Materials; Conditional Sales Contracts. No materials, equipment, fixtures, or
articles of personal property placed in or incorporated into the Development shall be purchased or
installed under any Security Agreement or other agreement whereby the seller reserves or
purports to reserve title or the right of removal of repossession, or the right to consider such items
as personal property after their incorporation into the Development, unless otherwise authorized
by Bondowner Representative in writing.
8.03 Bondowner Representative's Right of Entry and Inspection. Bondowner Representative and
its agents shall have at all times the right of entry and free access to the Property and the right to
inspect all work done, labor performed, and materials furnished with respect to the Development.
Bondowner Representative shall have unrestricted access to and the right to copy all records,
accounting books, contracts, subcontracts, bills, statements, vouchers, and supporting documents
of Borrower relating in any way to the Development.
8.04 Bondowner Representative's Right to Stop Work. If Bondowner Representative in good faith
determines that any work or materials do not conform to the approved Plans and Specifications or
sound building practices, or otherwise depart from any of the requirements of this Agreement,
Bondowner Representative may require the work to be stopped and withhold disbursements until
the matter is corrected. In such event, Borrower will promptly correct the work to Bondowner
Representative's satisfaction. No such action by Bondowner Representative will affect Borrowers
obligation to complete the Improvements on or before the Completion Date. Bondowner
Representative is under no duty to supervise or inspect the construction or examine any books
and records. Any inspection or examination by Bondowner Representative is for the sole purpose
of protecting Bondowner Representative's security and preserving Bondowner Representative's
D-10 -l_~v3
rights under this Agreement. No default of Borrower will be waived by any inspection by
Bondowner Representative. In no event will any inspection by Bondowner Representative be a
representation that there has been or will be compliance with the Plans and Specifications or that
the construction is free from defective materials or workmanship.
8.05 Indemnity. Borrower shall indemnify and hold Bondowner Representative harmless from any and
all claims asserted against Bondowner Representative or the Property by any person, entity, or
governmental body, or arising out of or in connection with the Property, Improvements, or
Development. Bondowner Representative shall be entitled to appear in any proceedings to defend
against such claims, and all costs and expenses, attomeys' fees incurred by Bondowner
Representative in connection with such defense shall be paid by Borrower to Bondowner
Representative. Bondowner Representative shall, in its sole discretion, be entitled to settle or
compromise any asserted claims against it, and such settlement shall be binding upon Borrower
for purposes of this indemnification. All amounts paid by Bondowner Representative under this
paragraph shall be secured by Bondowner Representative's security agreement or Deed of Trust,
if any, on the Development shall be deemed an additional principal Advance under the Loan,
payable upon demand, and shall bear interest at the rate applicable to the Loan.
8.06 Publicity. Bondowner Representative may display a sign at the construction site informing the
public that Bondowner Representative is the construction lender for the Development. Bondowner
Representative may obtain other publicity in connection with the Development through press
releases and participation inground-breaking and opening ceremonies and similar events.
8.07 Actions. Bondowner Representative shall have the right to commence, appear in, or defend any
action or proceeding purporting to affect the rights, duties, or liabilities of the parties to this
Agreement, or the disbursement of funds from the Program Fund. In connection with this right,
Bondowner Representative may incur and pay reasonable costs, expenses and attomeys' fees.
Borrower covenants to pay to Bondowner Representative on demand all such expenses, together
with interest from the date Bondowner Representative incurs the expense at the rate specified in
the Note, and Bondowner Representative is authorized to disburse funds from the Program Fund
for such purposes.
9. ADDITIONAL DOCUMENTS. Borrower shall provide Bondowner Representative with the following
additional documents:
9.01 Corporate Resolution. Borrower has provided or will provide Bondowner Representative with a
certified copy of resolutions properly adopted by Borrower's Board of Directors, and certified by
Borrower's corporate secretary, assistant secretary, or authorized officer, under which Borrower's
Board of Directors authorized one or more designated officers or employees to execute this
Agreement, the Note, the Deed of Trust and any and all Security Agreements directly or indirectly
securing repayment of the same, and to consummate the borrowings and other transactions as
contemplated under this Agreement, and to consent to the remedies following any default by
Borrower as provided in this Agreement and in any other Loan Documents.
9.02 Opinion of Counsel. Borrower has provided or will provide Bondowner Representative with an
opinion of Borrower's counsel certifying to and that: (1) Borrower's Note, the Deed of Trust, this
Agreement and the other Loan Documents constitute valid and binding obligations on Borrower's
part that are enforceable in accordance with their respective terms; (2) Borrower is validly existing
and in good standing; (3) Borrower has authority to enter into this Agreement and to consummate
the transactions contemplated under this Agreement; and (4) such other matters as may have
been requested by Bondowner Representative or by Bondowner Representative's counsel.
10. EXHIBIT "1" -DISBURSEMENT SCHEDULE. An exhibit, titled "Exhibit "1" -Disbursement Schedule," is
attached to this Agreement and by this reference is made a part of this Agreement just as if all the
provisions, terms and conditions of the Exhibit had been fully set forth in this Agreement.
11. EXHIBIT "2" -DEVELOPMENT COST BREAKDOWN. An exhibit, titled "Exhibit "2" -Development Cost
Breakdown," is attached to this Agreement and by this reference is made a part of this Agreement just as if
all the provisions, terms and conditions of the Exhibit had been fully set forth in this Agreement.
12. EXHIBIT "3" -CONSTRUCTION LOAN TRANSFER OF FUNDS. An exhibit, titled "Exhibit "3" -
Construction Loan Transfer of Funds," is attached to this Agreement and by this reference is made a part of
this Agreement just as if all the provisions, terms and conditions of the Exhibit had been fully set forth in this
Agreement.
13. EXHIBIT "4" -REQUEST FOR FUNDS. An exhibit, titled "Exhibit "4" -Request for Funds" is attached to
this Agreement and by this reference is made a part of this Agreement just as if all the provisions, terms
and conditions of the Exhibit had been fully set forth in this Agreement.
14. DEFINITIONS. The following capitalized terms shall have the following meanings:
14.01 Advance. The word "Advance" means a disbursement of funds from the Program Fund made, or
to be made, to Borrower or on Borrower's behalf on a line of credit or multiple advance basis under
the terms and conditions of this Agreement.
14.02 Agreement. The word "Agreement" means the Loan Agreement to which this Exhibit D -
Conditions to Disbursement is attached, as this Agreement may be amended or modified from
time to time, together with all exhibits and schedules attached to this Agreement from time to time.
14.03 Completion Date. The words "Completion Date" mean March 1, 2003.
14.04 Contractor. The word "Contractor" means Contractors name, the general contractor for the
Development.
14.05 Development. The word "Development" means the construction project as described in the
"Development Description" section of this Agreement.
14.06 GAAP. The word "GAAP" means generally accepted accounting principles.
14.07 Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the Note or Loan
Documents, including all principal and interest together with all other indebtedness and costs and
expenses for which Borrower is responsible under this Agreement or under any of the Loan
Documents.
14.08 Permitted Liens. The words "Permitted Liens" mean (1) liens and security interests securing
indebtedness owed by Borrower to Bondowner Representative; (2) liens for taxes, assessments,
or similar charges either not yet due or being contested in good faith; (3) liens of materialmen,
mechanics, warehousemen, or carvers, or other like liens arising in the ordinary course of
business and securing obligations which are not yet delinquent; (4) purchase money liens or
D-12 -7-105
purchase money security interests upon or in any properly acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the date of this Agreement or
permitted to be incurred under the paragraph of this Agreement titled "Indebtedness and Liens";
(5) liens and security interests which, as of the date of this Agreement, have been disclosed to and
approved by the Bondowner Representative in writing in an aggregate amount not to exceed
$ ;and (6) those liens and security interests which in the aggregate constitute an
immaterial and insignificant monetary amount with respect to the net value of Borrowers assets.
14.09 Security Agreement. The words "Security Agreement" mean and include without limitation any
agreements, promises, covenants, arrangements, understandings or other agreements, whether
created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security
Interest.
14.10 Security Interest. The words "Security Interest" mean, without limitation, any and all types of
collateral security, present and future, whether in the form of a lien, charge, encumbrance,
mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage,
collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended as a security device, or any
other security or lien interest whatsoever whether created by law, contract, or otherwise.
14.11 Value. The word "Value" means such amount or worth as defined and determined by Bondowner
Representative in its sole discretion unless agreed to the contrary by Bondowner Representative
in writing.
D-13 `7 -~ D(D
DISBURSEMENT SCHEDULE
(RESIDENTIAL)
(Exhibit 1)
Loan No.
THE LOAN PROCEEDS IN THE AMOUNT OF $1,600,000 PLUS BORROWER'S FUNDS IN THE AMOUNT OF
$ AGGREGATING $ SHALL BE DISBURSED AS FOLLOWS:
INITIAL DISBURSEMENT.
Bondowner Representative is hereby authorized and- directed to make Initial Disbursements for the
purposes, in the amounts, and to the persons indicated:
As anon-refundable Loan Fee to Bondowner Representative, the sum of $
2. Non-refundable Appraisal, Flood Search and Misc. fees to Bondowner Representative, the sum of
Legal fees and other closing costs, the sum of $
Net fund the full payment of Bank loan no. in the principal amount
$ plus interest in the approximate amount of $ (interest to )thereon.
Wire land advance in the approximate amount of $ directly to Old Republic Title
Company.
SUBSEQUENT DISBURSEMENTS.
The remainder of the Loan Proceeds and Borrower's Funds in the sum aggregate of $ plus
funds not disbursed as provided for in Section I hereof or less any additional funds disbursed as provided for in
Section I hereof, shall be disbursed inconformity with (i) the Agreement, and the following
A. Once a month, or as agreed upon by Bondowner Representative following commencement of
construction of the Improvements, Contractor shall submit to Borrower, a Draw Request showing the estimated cost
of labor performed on and materials incorporated into the Improvements, apro-rata portion of the General
Contractor's profit and that pro rata portion of overhead of General Contractor attributable to the construction of the
Improvements. Each such Draw Request shall show the portion of the Advance to be funded from Loan proceeds
and the portion to be funded from Borrower's funds or other sources. The original of such Draw Request, certified
true and correct by the General Contractor and approved by Borrower, shall be submitted to Bondowner
Representative for payment.
(i) Upon verification of the accuracy of the Draw Request by Bondowner Representative,
inspection of the Property and Improvements and payment of an inspection fee not to exceed $150 per
inspection, Bondowner Representative shall disburse to General Contractor, Borrower or subcontractors,
laborers and materialmen (at Bondowner Representative's option as to whom and the amounts payments
are made) 90% of the amount of the respective approved Draw Request but in no event shall the aggregate
of such payments (together with the initial Advance) exceed the sum of $1,440,000 except as provided for
by Borrower and accompanied by funds for the payment thereof. The final disbursement in the sum of
$160,000 funded previously for retentions shall be made upon compliance with the provision entitled Final
D-14 -j-ID7
Payment to General Contractor. At Bondowner Representative's option, the amount of the final
disbursement shall equal the difference between the amount specified in the Note, the Agreement and the
aggregate amounts previously disbursed. However, if the total amount expended to complete the
Development is less than the total projected costs of the Development as specified in the final cost
breakdown, the difference shall not be disbursed and the maximum principal amount stated in the Note
shall be deemed to be reduced by the amount of that difference.
(ii) All funds disbursed as provided above shall be immediately used to pay bills/invoices and
charges for labor, materials and other costs as specified above with regard to the Improvements and until
such bills are paid in full, the funds shall not be used for any other purpose.
(iii) Construction costs will be disbursed upon receipt of a payment request submitted on an
AIA payment request form or other form approved by Bondowner Representative signed by Borrower and
General Contractor.
B. The sum of $ (the interest reserve) shall be disbursed from time to time on the
interest payment date specified in the Note by the disbursing by Bondowner Representative of sufficient amounts to
pay interest due on the Note. If the amount remaining in the interest reserve is at any time insufficient to pay in full
the next estimated installment of interest due under the Note, Borrower shall remit the difference to Bondowner
Representative on or before the due date of such installment. When said sum has been completely disbursed,
Borrower shall make interest payments directly to Bondowner Representative in accordance with the terms of the
Note.
C. Upon receipt of a draw request for "Soft Costs" (Soft Cost to be defined as services and/or
expenses not subject to mechanics liens) signed by Borrower, accompanied by paid receipts for items represented
by the respective draw request and upon Bondowner Representative's verification of accuracy of the amount and
items reflected in the draw request so submitted, the sum of $ shall be disbursed in amounts and for the
purposes specified on the Supplement to Disbursement Schedule attached hereto and made a part hereof. Each
such draw request shall specify the portion of the Advance to be funded from Loan proceeds and the portion to be
funded from Borrower's funds or other sources.
III. AUTHORIZED SIGNERS.
Borrower authorizes either or to sign all Draw Requests and
other documents in connection with the administration of the Loan. Borrower represents and warrants to Bondowner
Representative that the following signatures are specimen signatures of the persons named in the preceding
sentence:
D-15 7 - ~ ag
THIS DISBURSEMENT SCHEDULE IS EXECUTED BY BORROWER AND BONDOWNER REPRESENTATIVE AS
OF THIS DAY OF , 2001.
BORROWER
BONDOWNER REPRESENTATIVE
CUPERTINO COMMUNITY SERVICES CUPERTINO NATIONAL BANK
By:
Title:
FOR ACCOUNTING PURPOSES ONLY:
MAKE DISBURSEMENTS UNDER II HEREOF T0:
By:
Title:
By Crediting DDA Account
At
D-16 ~ - X69
SUPPLEMENT TO DISBURSEMENT SCHEDULE
(additional soft costs)
~ A~ir~ T/'1TA1
BOND PROCEEDS
PROPERTY TAXES
TITLE & RECORDING FEES
PERMITS & FEES
LEGAL&INSURANCE
SITE INSPECTIONS
SOFT COST CONTINGENCY
TOTAL
[ADD OR DELETE ITEMS AS APPROPRIATE]
D-17
7-11d
DEVELOPMENT COST BREAKDOWN
(Exhibit 2)
LAND TOTAL BOND PROCEEDS
Site Acquisition $ $
CONSTRUCTION:
Demolition $ $
Bonded Site Improvements $ $
Direct Construction Cost $ $
Hard Cost Contingency $ $
Total Construction Cost $ $
INTEREST RESERVE:
Interest Reserve $ $
Interest Reserve Contingency $ $
Total Interest Reserve $ $
SOFT COST:
Appraisal & Environmental $ $
Property Taxes $ $
Title & Recording Fees $ $
Permits & Fees $ $
Legal & Insurance $ $
Site Inspection $ $
Loan Fee $ $
Soft Cost Contingency $ $
Total Soft Cost $ $
TOTAL LOAN AMOUNT $ $
D-18
~_~~ 1
CUPERTINO NATIONAL BANK
Construction Loan Transfer of Funds
(Exhibit 3)
Date:
Reallocation/Transfer No.:
Submitted w/Draw Request No.
Borrower: CUPERTINO COMMUNITY SERVICES
Development: HEART OF CUPERTINO
Address:10114 AND 10214 Vista Drive, Cupertino, California 95014
Pursuant to the Agreement, the undersigned hereby requests the following budgets be reallocated as follows:
LINE TRANSFER DOLLAR TRANSFER
ITEM N0. FROM AMOUNT TO
TOTAL
In order to induce Bondowner Representative to effect the changes, I/we certify that the work listed hereinabove has
been completed in full according to the plans and specifications. In addition, the work has been inspected and has
been paid in full both as to labor and/or materials. If I/we are transferring funds from any line item which is not
complete, I/we have attached documentation which shall verify the remaining funds are sufficient to cover all
residual balance of work. If no contingency funds are available, a check has been included to cover any shortfall.
Borrower:
D-19 -j - I r a
quint &Thimmig LLP
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
QUINT & THIMMIG LLP
One Embarcadero Center, Suite 2420
San Francisco, California 94111
Attention: Paul J. Thimmig, Esq.
REGULATORY AGREEMENT
AND DECLARATION OF RESTRICTIVE COVENANTS
by and between the
CITY OF CUPERTINO
and
CUPERTINO COMMUNITY SERVICES
Dated as of October 1, 2001
relating to:
City of Cupertino
Multifamily Housing Revenue Bonds
(Heart of Cupertino Project), Series 2001A
8!27101
9110/01
03028.01:J5551 ~_ ~r 3
TABLE OF CONTENTS
Section 1. Definitions and Interpretation .................................................................. .......................................................... 1
4
Section 2. Borrower Representations and Covenants ............................................. ..........................................................
5
:
Section 3. Residential Rental Property ..................................................................... ............................................
.............
7
Section 4. Very Low Income Tenants ....................................................................... ..........................................................
9
Section 5. Filings and Notifications ......................................................................... ...........................................................
9
Section 6. Modification of Covenants ...................................................................... ...........................................................
9
Section 7. Indemnification ....................................................................................... ...........................................................
10
Section 8. Consideration ......................................................................................... .........................................................
10
Section 9. Reliance ................................................................................................. .........................................................
10
Section 10. Sale or Transfer of the Development ..................................................... .........................................................
11
Section 11. Term ....................................................................................................... .........................................................
11
Section 12. Covenants to Run With the Land ........................................................... .........................................................
11
Section 13. Burden and Benefit .................................................................................
..........
Pl .........................................................
......................................................... 12
Section 14. an ............................................................
Uniformity, Common 12
Section 15. Enforcement ...........................................................................................
......................................
and Filin
di
R .........................................................
......................................................... 12
Section 16. g ........................................
ng
ecor 12
Section 17. Limited Liability ....................................................................................... .........................................................
12
Section 18. Governing Law ....................................................................................... .........................................................
12
Section 19. Amendments .......................................................................................... .........................................................
13
Section 20. Notice .................................................................................................... ..........................................................
13
Section 21. Severability ............................................................................................ ..........................................................
13
Section 22. Multiple Counterparts ............................................................................ ..........................................................
13
Section 23. Payment of Issuer Expenses ................................................................. ..........................................................
13
Section 24. Y ry ..........................................................................
Third Part Beneficia ..........................................................
EXHIBIT A -LEGAL DESCRIPTION OF LAND
EXHIBIT B -COMPLETION CERTIFICATE
EXHIBIT C -CERTIFICATE AS TO COMMENCEMENT OF QUALIFIED DEVELOPMENT PERIOD
~-i~ ~
REGULATORY AGREEMENT
AND
DECLARATION OF RESTRICTIVE COVENANTS
THIS REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (the
"Regulatory Agreement"), dated as of October 1, 2001, is by and between the City of Cupertino, a public body,
corporate and politic, organized and existing under the constitution and laws of the State of Califomia (together with
any successor to its rights, duties and obligations, the "Issuer"), and Cupertino Community Services, a Califomia
nonprofit public benefit corporation (the "Borrower"), as owner of the land described in Exhibit A attached hereto.
WITNESSETH:
WHEREAS, the Legislature of the State of Califomia enacted Chapter 8 of Part 5 of Division 31 of the
Health and Safety Code of the State of Califomia (the "Act") to authorize cities to issue bonds and make loans of the
proceeds thereof to nonprofit organizations exempt from federal income taxation under Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended (the "Code") to finance multifamily rental housing for families and
individuals of low and very low income; and
WHEREAS, on September 17, 2001, the Issuer adopted a resolution (the "Resolution") authorizing the
issuance of its City of Cupertino Multifamily Housing Revenue Bonds (Heart of Cupertino Project), Series 2001A in a
principal amount of not to exceed $1,600,000 (the "Bonds"), and a loan of the proceeds of the Bonds to the Borrower
(the "Loan"), and in connection with the financing of a portion of the costs of the acquisition and construction by the
Borrower of the residential rental facility to consist of 24 units of multifamily residential rental housing to be located
on Vista Drive at Stevens Creek Boulevard in the City of Cupertino, Califomia (the "Development"); and
WHEREAS, the Issuer and the Borrower have entered into a Loan Agreement, dated the date hereof (the
"Loan Agreement"), providing for the terms and conditions under which the Issuer wi!! make the Loan to the Borrower
to finance the Development; and
WHEREAS, the Act requires that the use and operation of the Development must be restricted in certain
respects and in order to ensure that the Development will be used and operated in accordance with the Act and the
Code, the Issuer and the Borrower have determined to enter into this Regulatory Agreement in order to set forth
certain terms and conditions relating to the operation of the Development.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth herein, and other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Issuer and the
Borrower hereby agree as follows:
Section 1. Definitions and Interpretation. When used herein, the following capitalized terms shall have the
respective meanings assigned to them in this Section 1 unless the context in which they are used clearly requires
otherwise:
"Act" -Chapter 8 of Part 5 of Division 31 (commencing with Section 52100) of the Health and Safety Code
of the State of California as now in effect and as it may from time to time hereafter be amended or supplemented.
"Adjusted Income" -The adjusted income of a person (together with the adjusted income of all persons of
the age of 18 years or older who intend to reside with such person in one residential unit) as calculated in the
?-115
manner prescribed pursuant to Section 8 of the United States Housing Act of 1937, or, if said Section 8 is
terminated, as prescribed pursuant to said Section 8 immediately prior to its termination or as otherwise required
under Section 142 of the Code and the Act.
"Affiliated Party" - (1) a person whose relationship with the Borrower would result in a disallowance of
losses under Section 267 or 707(b) of the Code, or (2) a Person who together with the Borrower are members of the
same controlled group of corporations (as defined in Section 1563(a) of the Code, except that "more than 50
percent" shall be substituted for "at least 80 percent" each place it appears therein), (3) a partnership and each of its
partners (and their spouses and minor children) whose relationship with the Borrower would result in a disallowance
of losses under Section 267 or 707(b) of the Code and (4) an S corporation and each of its shareholders (and their
spouses and minor children) whose relationship with the Borrower would result in a disallowance of losses under
Section 267 or 707(b) of the Code.
"Area" -The metropolitan statistical area in which the Development is located.
"Bondowner Representative" -The entity acting as "Bondowner Representative" under the Indenture,
initially being Cupertino National Bank.
"Bonds" -means the City of Cupertino Multifamily Housing Revenue Bonds (Heart of Cupertino Project),
Series 2001A, issued and outstanding under the Indenture.
"Borrower" -Cupertino Community Services or its successors or assigns.
"Closing Date" -October _, 2001, being the date on which the Loan was made.
"Code" -The Internal Revenue Code of 1986, as in effect on the date the Loan is made or (except as
otherwise referenced herein) as it may be amended to apply to obligations issued on the date Loan is made,
together with applicable temporary and final regulations promulgated, and applicable official public guidance
published, under the Code.
"Completion Certificate" -The certificate of completion of the Development required to be delivered to the
Issuer by the Borrower pursuant to Section 2(i) of this Regulatory Agreement, which shall be substantially in the form
attached to this Regulatory Agreement as Exhibit B.
"Completion Date" -The date of completion of the acquisition and construction of the Development, as that
date shall be certified as provided in Section 2(i) of this Regulatory Agreement.
"County" -The County of Santa Clara, California.
"Deed of Trust" -The Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture
Filing, executed by the Borrower and granting a security interest in the Development to the deed trustee for the
benefit of the Issuer to secure the Borrower's obligations under the Loan Agreement.
"Development" -The Development Facilities and the Development Site.
"Development Costs" -means, to the extent authorized by the Act, the Code and the Regulations, any and
all costs and expenses incurred by the Borrower with respect to the acquisition, financing, construction and/or
operation of the Development, whether paid or incurred prior to or after the Closing Date, including, without
limitation, costs for the acquisition of property, the cost of consultant, accounting and legal services, appraisal costs,
-2- 7-1 Ilo
other expenses necessary or incident to determining the feasibility of the Development, and administrative
expenses, and interest on the Loan.
"Development Facilities" -The buildings, structures and other improvements constructed on the
Development Site and financed in whole or in part with the proceeds of the Loan, and all fixtures and other property
owned by the Borrower and located on, or used in connection with, such buildings, structures and other
improvements. The Development Facilities do not include any facilities constructed on the Development Site that
are used for office or commercial purposes, and that are not financed with proceeds of the Loan.
"Development Site" -The parcel or parcels of real property described in Exhibit "A", which is attached
hereto and by this reference incorporated herein, and all rights and appurtenances thereunto appertaining.
"Indenture" -means the Indenture of Trust, dated as of October 1, 2001, between the Issuer and the
Bondowner Representative, as Bondowner Representative, as in effect on the Closing Date or thereafter amended
in accordance with its terms.
"Inducement Date" -October 1, 2001.
"Issue Date" -October _, 2001.
"Issuer" -The City of Cupertino, or its successors or assigns.
"Loan" -The loan made by the Issuer to the Borrower under the Loan Agreement to provide financing for
the Development.
"Loan Agreement" -The Loan Agreement entered into by the Borrower and the Issuer pursuant to which
the Issuer will make the Loan.
"Low Income Tenants" -Individuals or families with an Adjusted Income which does not exceed 80 percent
of the Median Income for the Area, adjusted for household size.
"Low Income Units" -The dwelling units in the Development designated for occupancy by Low Income
Tenants pursuant to Section 4(a) of this Regulatory Agreement.
"Median Income for the Area" -The median income for the Area as most recently determined by the City
Clerk of Treasury (which determination is required by Code Section 142(d)(2)(B) to be consistent with determinations
of area median gross income under Section 8 of the United States Housing Act of 1937, or, if such program is
terminated, under such program as in affect immediately before such termination).
"Note" -The promissory note executed by Borrower evidencing the Loan.
"Qualified Development Costs" -means costs of the Development paid or incurred following the date which
is 60 days prior to the Inducement Date; provided that if any portion of the Development is being constructed by an
"affiliated party" (whether as a general contractor or a subcontractor), "Qualified Development Costs" shall include
only (a) the actual out-of-pocket costs incurred by such affiliated party in constructing the Development (or any
portion thereof), (b) any reasonable fees for supervisory services actually rendered by the affiliated party, and (c)
any overhead expenses incurred by the affiliated party that are directly attributable to the work performed on the
Development, and shall not include, for example, intercompany profits resulting from members of an affiliated group
(within the meaning of Section 1504 of the Code) participating in the construction of the Development or payments
received by such affiliated party due to early completion of the Development (or any portion thereof).
-3- 7-~ 17
"Qualified Development Period" -The period beginning on the date on which ten percent (10%) of the units
in the Development are first occupied, and ending on the later of (a) the date which is 30 years after the date on
which at least fifty percent (50%) of the residential units in the Development are first occupied, (b) the date on which
any assistance provided with respect to the Development under Section 8 of the United States Housing Act of 1937
terminates, or (c) the date on which the Bonds are paid in full.
"Regulations" -The income tax regulations promulgated by the United States Department of the Treasury
pursuant to the Code from time to time.
"Regulatory Agreement" -This Regulatory Agreement and Declaration of Restrictive Covenants, together
with any amendments hereto or supplements hereof.
"State" -State of California.
"Very Low Income Tenants -Individuals or families with an Adjusted Income which does not exceed 50
percent of the Median Income for the Area, adjusted for household size.
"Very Low Income Units" -The dwelling units in the Development designated for occupancy by Very Low
Income Tenants pursuant to Section 4(a) of this Regulatory Agreement.
Unless the context clearly requires otherwise, as used in this Regulatory Agreement, words of the
masculine, feminine or neuter gender shall be construed to include each other gender when appropriate and words
of the singular number shalt be construed to include the plural number, and vice versa, when appropriate. This
Regulatory Agreement and all the terms and provisions hereof shall be construed to effectuate the purposes set
forth herein and to sustain the validity hereof.
The defined terms used in the preamble and recitals of this Regulatory Agreement have been included for
convenience of reference only, and the meaning, construction and interpretation of all defined terms shall be
determined by reference to this Section 1 notwithstanding any contrary definition in the preamble or recitals hereof.
The titles and headings of the sections of this Regulatory Agreement have been inserted for convenience of
reference only, and are not to be considered a part hereof and shall not in any way modify or restrict any of the
terms or provisions hereof or be considered or given any effect in construing this Regulatory Agreement or any
provisions hereof or in ascertaining intent, if any question of intent shall arise.
Section 2. Borrower Representations and Covenants. The Borrower hereby represents, as of the date
hereof, and covenants, warrants and agrees as follows:
(a) The statements made in the various certificates delivered by the Borrower to the Issuer on the
date the Loan was made are true and correct.
(b) The Borrower (and any person related to it within the meaning of Section 147(a)(2) of the
Code) will not take or omit to take, as is applicable, any action if such action or omission would in any way
cause the proceeds of the Loan to be applied in a manner contrary to the requirements of the Loan
Agreement or this Regulatory Agreement.
(c) It will not knowingly take or permit, or omit to take or cause to be taken, as is appropriate, any
action that would adversely affect the exclusion from gross income for federal income tax purposes or the
exemption from Califomia personal income taxation of the interest on the Bonds and, if it should take or
-4- 7_ ~~~
permit, or omit to take or cause to be taken, any such action, it will take all lawful actions necessary to
rescind or correct such actions or omissions promptly upon obtaining knowledge thereof.
(d) It will take such action or actions as may be necessary, in the written opinion of Bond Counsel
to the Issuer filed with the Issuer and the Borrower, to comply fully with the Act, the Code and all applicable
rules, rulings, policies, procedures, Regulations or other official statements promulgated, proposed or made
by the Department of the Treasury or the Internal Revenue Service to the extent necessary to maintain the
exclusion from gross income for federal income tax purposes of interest on the Bonds.
(e) The Borrower has incurred a substantial binding obligation to expend proceeds of the Loan
pursuant to which the Borrower is obligated to expend at least five percent (5%) of the maximum principal
amount of the Loan.
(f) The Borrower will proceed with due diligence to complete the construction of the Development
and the full expenditure of the proceeds of the Loan. The Borrower reasonably expects to complete the
acquisition and construction of the Development and to expend the full amount of the Loan for
Development Costs by October 1, 2001.
(g) The Borrower's reasonable expectations respecting the total expenditure of the proceeds of the
Loan have been accurately set forth in a certificate of the Borrower delivered on the Closing Date. At all
times, the aggregate disbursements of the proceeds of the Loan will have been applied to pay or to
reimburse the Borrower for the payment of Qualified Development Costs (as defined in the Loan
Agreement) in an amount equal to ninety-seven percent (97%) or more of such disbursements.
(h) The Borrower will not take or omit to take, as is applicable, any action if such action or
omission would in any way cause the proceeds from the Loan to be applied in a manner contrary to the
requirements of the Loan Agreement, this Regulatory Agreement, the Act or the Code.
(i) On the Completion Date, the Borrower will submit to the Issuer a duly executed and completed
Completion Certificate.
Q) On the date on which fifty percent (50%) of the units in the Development are first rented to
tenants, the Borrower will submit to the Issuer a duly executed and completed Certificate as to
Commencement of Qualified Development Period in the form of Exhibit C hereto.
Section 3. Residential Rental Propefi+. The Borrower hereby acknowledges and agrees that the
Development will be owned, managed and operated as a residential rental facility until the expiration of the Qualified
Development Period. To that end, and for the term of this Regulatory Agreement, the Borrower hereby represents,
as of the date hereof, and covenants, warrants and agrees as follows:
(a) The Development is being financed for the purpose of providing multifamily residential rental
property, and the Borrower shall own, manage and operate the Development as a Development to provide
multifamily residential rental property comprised of a building or structure or several interrelated buildings or
structures, together with any functionally related and subordinate facilities, and no other facilities, in
accordance with applicable provisions of the Act, Section 145 of the Code and the applicable Regulations
and in accordance with such requirements as may be imposed thereby on the Development from time to
time.
(b) No part of the Development will at any time be owned by a cooperative housing corporation,
nor shall the Borrower take any steps in connection with a conversion to such ownership or uses. Other
-5- 7 -119
than obtaining a final subdivision map on the Development and a Final Subdivision Public Report from the
California Department of Real Estate, the Borrower shall not take any steps in connection with a conversion
of the Development to a condominium ownership except with the prior written approving opinion of Bond
Counsel that the interest on the Bonds will not become taxable thereby under Section 103 of the Code.
(c) All of the dwelling units will be available for rental on a continuous basis to members of the
general public and the Borrower will not give preference to any particular class or group in renting the
dwelling units in the Development, except to the extent that a percentage of the dwelling units are required
to be leased or rented to Very Low Income Tenants or Low Income Tenants hereunder, or otherwise to the
extent required to comply with other agreements that provide for the rental of units in the Development for
persons or families of designated incomes.
(d) The Development Site consists of a parcel or parcels that are contiguous except for the
interposition of a road, street or stream, and all of the Development Facilities will comprise a single
geographically and functionally integrated Development for residential rental property, as evidenced by the
ownership, management, accounting and operation of the Development.
(e) The Borrower shall not discriminate on the basis of race, creed, color, sex, source of income
(e.g. AFDC, SSI), physical disability, age, national origin or marital status in the rental, lease, use or
occupancy of the Development or in connection with the employment or application for employment of
persons for the operation and management of the Development.
(f) None of the dwelling units in the Development will at any time be utilized on a transient basis, or
will ever be used as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, nursing
home, hospital, sanitarium, rest home, retirement house or trailer court or park.
(g) No dwelling unit in the Development shall be occupied by the Borrower. Notwithstanding the
foregoing, if the Development contain five or more dwelling units, this subsection shall not be construed to
prohibit occupancy of dwelling units by one or more resident managers or maintenance personnel any of
whom may be the Borrower; provided that the number of such managers or maintenance personnel is not
unreasonable given industry standards in the area for the number of dwelling units in the Development.
(h) The Borrower will use due diligence to complete the construction of the Development and
reasonably expects to fully expend the authorized principal amount of the Loan within three years of the
date of the Loan Agreement.
(i) All of the dwelling units in the Development will be similarly constructed, and each dwelling unit
in the Development will contain facilities for living, sleeping, eating, cooking and sanitation for a single
person or a family which are complete, separate and distinct from other dwelling units in the Development
and includes a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking
range, refrigerator and sink.
(j) None of the dwelling units in the Development will at any time be used on a transient basis and
the Borrower will not rent any of the units for a period of less than thirty (30) consecutive days, and none of
the dwelling units in the Development will at any time be leased or rented for use as a hotel, motel,
dormitory, fraternity house, sorority house, rooming house, hospital, nursing home, sanitarium, rest home or
trailer court or park.
(k) No part of the Development will at any time be owned or used by a cooperative housing
corporation. Other than filing a condominium map and a final subdivision map on the Development and
obtaining a Final Subdivision Public Report form the California Department of Real Estate, the Borrower
shall not take any steps in connection with a conversion of the Development to condominium ownership
during the Qualified Development Period.
(I) The Borrower will not sell dwelling units within the Development.
Section 4. Very Low Income Tenants. Pursuant to the requirements of the Act, the Borrower hereby
represents, as of the Closing Date, and warrants, covenants and agrees as follows:
(a) During the Qualified Development Period:
(1) Not less than ten percent (10%) of the completed units in the Development shall be
designated as Very Low Income Units and shall be continuously occupied or held vacant and
available for occupancy by Very Low Income Tenants, and not less than an additional ten percent
(10%) of the completed units in the Development shall be designated as Low Income Units and
shall be continuously occupied or held vacant and available for occupancy by Low Income
Tenants. All of the Very Low Income Units shall be generally distributed in terms of location and
number of bedrooms throughout the Development. The Very Low Income Units shall be of
comparable quality and offer a range of sizes and number of bedrooms comparable to those units
which are available to other tenants.
(2) The monthly rent paid by the persons occupying the Very Low Income Units
(excluding any supplemental rental assistance from the State, the federal government, or any
other public agency to those persons or on behalf of those units) shall not exceed one-twelfth of
the amount obtained by multiplying 30% times 50% of the Median Income for the Area, as
adjusted by the assumed household size set forth below of each such Very Low Income Unit.
Assumed Number of
Persons in Household
Size of Units fcr Affordable ! ~ni±s
Studio
One bedroom 2
Two bedrooms 3
Three bedrooms 4
Four bedrooms 5
Five or more bedrooms As determined by HUD
(3) Very Low Income Units shall remain available on a priority basis for occupancy by
Very Low Income Tenants. A unit occupied by a Very Low Income Tenant who at the
commencement of the occupancy is a Very Low Income Tenant shall be treated as occupied by a
Very Low Income Tenant until (i) a recertification of such tenant's income in accordance with
Section 4(c) below demonstrates that such tenant no longer qualifies as a Very Low Income
Tenant and (ii) thereafter any residential unit of comparable or smaller size in the Development is
occupied by a new resident other than a Very Low Income Tenant. Moreover, a unit previously
occupied by a Very Low Income Tenant and then vacated shall be considered occupied by a Very
Low Income Tenant until reoccupied, other than for a temporary period, at which time the
character of the unit shall be redetermined. In no event shall such temporary period exceed thirty-
one (31) days.
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(4) Low Income Units shall remain available on a priority basis for occupancy by Low
Income Tenants. A unit occupied by a Low Income Tenant who at the commencement of the
occupancy is a Low Income Tenant shall be treated as occupied by a Low Income Tenant until (i)
a recertification of such tenant's income in accordance with Section 4(c) below demonstrates that
such tenant no longer qualifies as a Low Income Tenant and (ii) thereafter any residential unit of
comparable or smaller size in the Development is occupied by a new resident other than a Low
Income Tenant. Moreover, a unit previously occupied by a Low Income Tenant and then vacated
shall be considered occupied by a Low Income Tenant until reoccupied, other than for a temporary
period, at which time the character of the unit shall be redetermined. In no event shall such
temporary period exceed thirty-one (31) days.
(b) Immediately prior to a Very Low Income Tenant's occupancy of a Very Low Income Unit, the
Borrower will obtain and maintain on file an Income Computation and Certification form (in substantially the
form set forth in Exhibit A to the Loan Agreement) from each Very Low Income Tenant occupying a Very
Low Income Unit, dated immediately prior to the initial occupancy of such Very Low Income Tenant in the
Development. Immediately prior to a Low Income Tenant's occupancy of a Low Income Unit, the Borrower
will obtain and maintain on file an Income Computation and Certification form (in substantially the form set
forth in Exhibit A to the Loan Agreement) from each Low Income Tenant occupying a Low Income Unit,
dated immediately prior to the initial occupancy of such Low Income Tenant in the Development. In
addition, the Borrower will provide such further information as may be required in the future by the State of
California, the Issuer, the Code and by the Act, as the same may be amended from time to time, or in such
other form and manner as may be required by applicable rules, rulings, policies, procedures or other official
statements now or hereafter promulgated, proposed or made by the State of California or the Internal
Revenue Service. The Borrower shall verify that the income provided by an applicant is accurate by taking
the following steps as a part of the verification process: (1) obtain a federal income tax return for the most
recent tax year, (2) obtain a written verification of income and employment from applicant's current
employer, (3) if an applicant is unemployed or did not file a tax return for the previous calendar year, obtain
other verification of such applicant's income satisfactory to the Issuer or (4) such other information as may
be requested by the Issuer.
(c) The Borrower will maintain complete and accurate records pertaining to the Very Low Income
Units and the Low Income Units, and will permit any duly authorized representative of the Issuer to inspect
the books and records of the Borrower pertaining to the Development, including those records pertaining to
the occupancy of the Very Low Income Units and the Low Income Units.
(d) The Borrower will prepare and submit to the Issuer, within thirty days after each anniversary of
the date hereof, a Certificate of Continuing Program Compliance in the form attached as Exhibit B to the
Loan Agreement executed by the Borrower stating (i) the percentage of the dwelling units of the
Development which were occupied or deemed occupied, pursuant to subsection (a) hereof, by Very Low
Income Tenants and Low Income Tenants during such period, and (ii) that either (A) no unremedied default
has occurred under this Regulatory Agreement or (B) a default has occurred, in which event the certificate
shall describe the nature of the default and set forth the measures being taken by the Borrower to remedy
such default.
(e) The Borrower shall accept as tenants on the same basis as all other prospective tenants,
persons who are recipients of federal certificates or vouchers for rent subsidies pursuant to the existing
program under Section 8 of the United States Housing Act of 1937, or its successor. The Borrower shall
not apply selection criteria to Section 8 certificate or voucher holders that are more burdensome than
criteria applied to all other prospective tenants and the Borrower shall not refuse to rent to any Very Low
Income Tenant or Low Income Tenant on the basis of household size as long as such household size does
-8-
7-r a a
not exceed two persons for a one bedroom unit, four persons for a two bedroom unit and six persons for a
three bedroom unit. The Borrower shall not collect any additional fees or payments from a Very Low
Income Tenant or Low Income Tenant except security deposits or other deposits required of all tenants and
food allowances, if any. The Borrower shall not collect security deposits or other deposits from Section 8
certificate or voucher holders in excess of that allowed under the Section 8 Program. The Borrower shall
not discriminate against Very Low Income Tenant or Low Income Tenant applicants on the basis of source
of income (i.e., AFDC or SSI), and the Borrower shall consider a prospective tenant's previous rent history
of at least one year as evidence of the ability to pay the applicable rent (ability to pay shall be demonstrated
if a Very Low Income Tenant or Low Income Tenant can show that the same percentage or more of the
tenant's income has been paid for rent in the pastas will be required to be paid for the rent applicable to the
Very Low Income Unit or Low Income Unit, as applicable, to be occupied provided that such Very Low
Income Tenant's or Low Income Tenant's expenses have not materially increased).
(f) Each lease pertaining to a Very Low Income Unit shall contain a provision to the effect that the
Borrower has relied on the income certification and supporting information supplied by the Very Low
Income Tenant in determining qualification for occupancy of the Very Low Income Unit, and that any
material misstatement in such certification (whether or not intentional) will be cause for immediate
termination of such lease. Each lease pertaining to a Low Income Unit shall contain a provision to the
effect that the Borrower has relied on the income certification and supporting information supplied by the
Low Income Tenant in determining qualification for occupancy of the Low Income Unit, and that any
material misstatement in such certification (whether or not intentional) will be cause for immediate
termination of such lease.
Section 5. Filings and Notifications. The Borrower hereby represents, as of the date hereof, and warrants,
covenants and agrees that it will file of record such documents and take such other steps as are necessary in order
to insure that the requirements and restrictions of this Regulatory Agreement will be binding upon all owners of the
Development, including, but not limited to, the execution and recordation of this Regulatory Agreement in the real
property records of the County.
The Borrower hereby covenants to include the requirements and restrictions contained in this Regulatory
Agreement in any document (other than the Deed of Trust, and in any leases to individual occupants of units in the
Development) transferring any interest in the Development to another person to the end that such transferee has
notice of, and is bound by, such restrictions, and to obtain the agreement from any transferee to abide by all
requirements and restrictions of this Regulatory Agreement.
Section 6. Modification of Covenants. The Borrower and the Issuer hereby agree as follows:
(a) To the extent any amendments to the Act or the Code shall impose requirements upon the
ownership or operation of the Development more restrictive than those imposed by this Regulatory
Agreement which must be complied with in order to meet the requirements of the Act and the Code, this
Regulatory Agreement shall be deemed to be automatically amended to impose such additional or more
restrictive requirements.
(b) The Borrower and the Issuer shall execute, deliver and, if applicable, file of record any and all
documents and instruments, necessary to effectuate the intent of this Section 6.
Section 7. Indemnification. The Borrower shall indemnify, hold harmless and defend the Issuer and its
officers, members, directors, officials, employees and any agents of the Issuer and each of them against all loss,
costs, damages, expenses, suits, judgments, actions and liabilities of whatever nature (including, without limitation,
attorneys' fees, litigation and court costs, amounts paid in settlement, and amounts paid to discharge judgments)
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directly or indirectly resulting from or arising out of or related to (a) the acquisition, construction, installation,
operation, use, occupancy, maintenance, or ownership of the Development and any related office or commercial
facilities in the buildings comprising the Development Facilities (including compliance with laws, ordinances and
rules and regulations of public authorities relating thereto); or (b) any written statements or representations with
respect to the Borrower or the Development made or given to the Issuer, by the Borrower or any of its directors,
officers, agents or employees, including, but not limited to, statements or representations of facts or financial
information. The Borrower also shall pay and discharge and shall indemnify and hold harmless the Issuer from (x)
any lien or charge upon payments by the Borrower to the Issuer hereunder or under the Loan Agreement and (y) any
taxes (including, without limitation, all ad valorem taxes and sales taxes), assessments, impositions and other
charges in respect of any portion of the Development. If any such claim is asserted, or any such lien or charge upon
payments, or any such taxes, assessments, impositions or other charges, are sought to be imposed, the Issuer shall
give prompt notice to the Borrower, and the Borrower shall have the duty to assume, and will assume, the defense
thereof, including the employment of counsel selected by the indemnified party and the payment of all expenses
related thereto, with full power to litigate, compromise or settle the same in consultation with the Issuer; provided that
the Issuer shall have the right to review and approve or disapprove any such compromise or settlement, and
provided further that the Issuer shall act reasonably in connection therewith. Nothing in this paragraph shall obligate
the Borrower for any claims, obligations or liabilities attributable directly to the gross negligence or willful misconduct
of the Issuer.
In addition thereto, the Borrower will pay upon demand all of the fees and expenses paid or incurred by the
Issuer in enforcing the provisions hereof.
Section 8. Consideration. The Issuer has made the Loan to provide funds to finance the Development, all
for the purpose, among others, of inducing the Borrower to operate the Development. In consideration of the
making of the Loan by the Issuer, the Borrower has entered into this Regulatory Agreement and has agreed to
restrict the uses to which the Development can be put on the terms and conditions set forth herein.
Section 9. Reliance. In performing their duties and obligations hereunder, the Issuer may rely upon
statements and certificates of the Borrower and Very Low Income Tenants, and upon audits of the books and
records of the Borrower pertaining to the Development. In addition, the Issuer may consult with counsel, and the
opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or
suffered by the Issuer hereunder in good faith and inconformity with such opinion.
Section 10. Sale or Transfer of the Development. The Borrower intends to hold the Development for its
own account, has no current plans to sell, transfer or otherwise dispose of the Development, and hereby covenants
and agrees not to sell, transfer or otherwise dispose of the Development, or any portion thereof (other than for
individual tenant use as contemplated hereunder), without obtaining the written prior consent of the Issuer which
consent shall be given in the reasonable discretion of the Issuer. Prior to giving consent, and in order for the
consent to be effective, the Issuer will require, among other things, receipt of (i) reasonable evidence satisfactory to
the Issuer that the Borrower's purchaser or transferee has assumed in writing and in full, the Borrower's duties and
obligations under this Regulatory Agreement, (ii) reasonable evidence satisfactory to the Issuer that such purchaser
or assignee is: (A) a governmental entity (other than the United States) or (B) a corporation described in section
501(c)(3) of the Code and that the ownership and operation of the Development will be in furtherance of the exempt
purposes of the purchaser or assignee and will not result in unrelated trade or business income of the purchaser or
assignee, (iii) an opinion of counsel of the transferee that the transferee has duly assumed the obligations of the
Borrower under this Regulatory Agreement and that such obligations and this Regulatory Agreement are binding on
the transferee, (iv) evidence acceptable to the Issuer that either (A) the purchaser or assignee has experience in the
ownership, operation and management of rental housing developments such as the Development without any record
of material violations of discrimination restrictions or other state or federal laws or regulations applicable to such
developments, or (B) the purchaser or assignee agrees to retain a property management firm with the experience
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and record described in subparagraph (A) above or if the purchaser or assignee does not have management
experience, the Issuer will have the right but not the duty to provide on-site management, and (v) no event of default
exists under the Loan Agreement. It is hereby expressly stipulated and agreed that any sale, transfer or other
disposition of the Development in violation of this Section 10 shall be null, void and without effect, shall cause a
reversion of title to the Borrower, shall be ineffective to relieve the Borrower of its obligations under this Regulatory
Agreement, and shall be subject to the provisions of the Deed of Trust. Not less than 20 days prior to consummating
any sale, transfer or disposition of any interest in the Development, the Borrower shalt deliver to the Issuer a notice
in writing explaining the nature of the proposed transfer.
Section 11. Term. Subject to the following paragraph of this Section 11, this Regulatory Agreement and all
and several of the terms hereof shall become effective upon its execution and delivery and shall remain in full force
and effect from the date hereof until the end of the Qualified Development Period, it being expressly agreed and
understood that the provisions hereof are intended to survive the Loan Agreement and the Note. Notwithstanding
any other provisions of this Regulatory Agreement to the contrary, this entire Regulatory Agreement, or any of the
provisions or sections hereof, may be terminated upon agreement by the Issuer and the Borrower subject to
compliance with any of the provisions contained in this Regulatory Agreement only if there shall have been received
an opinion of counsel that such termination will not adversely affect the exclusion from gross income for federal
income tax purposes or the exemption from State personal income taxation of the interest on the Bonds and will
otherwise not violate any provision of the Act.
The terms of this Regulatory Agreement to the contrary notwithstanding, this Regulatory Agreement, and all
and several of the terms hereof, shall terminate and be of no further force and effect in the event of a foreclosure or
delivery of a deed in lieu of foreclosure whereby a third party or the Bondowner Representative shall take
possession of the Development or involuntary non-compliance with the provisions of this Regulatory Agreement
caused by fire, seizure, requisition, change in a federal law or an action of a federal agency after the date hereof
which prevents the Issuer from enforcing the provisions hereof or condemnation or a similar event and the payment
in full of the Note and the Bonds within a reasonable period thereafter; provided, however, that the preceding
provisions of this sentence shall cease to apply and the restrictions contained herein shall be reinstated if, at any
time subsequent to the termination of such provisions as the result of the foreclosure or the delivery of a deed in lieu
of foreclosure or a similar event, the Borrower or any related person to it (within the meaning of Section 1.103-10(e)
of the Regulations) obtains an ownership interest in the Development for Federal income tax purposes. Upon the
termination of the terms of this Regulatory Agreement, the parties hereto agree to execute, deliver and record
appropriate instruments of release and discharge of the terms hereof; provided, however, that the execution and
delivery of such instruments shall not be necessary or a prerequisite to the termination of this Regulatory Agreement
in accordance with its terms.
Section 12. Covenants to Run With the Land. The Borrower hereby subjects the Development (including
the Development Site) to the covenants, reservations and restrictions set forth in this Regulatory Agreement. The
Issuer and the Borrower hereby declare their express intent that the covenants, reservations and restrictions set
forth herein shall be deemed covenants running with the land and shall pass to and be binding upon the Borrower's
successors in title to the Development; provided, however, that on the termination of this Regulatory Agreement said
covenants, reservations and restrictions shall expire. Each and every contract, deed or other instrument hereafter
executed covering or conveying the Development or any portion thereof shall conclusively be held to have been
executed, delivered and accepted subject to such covenants, reservations and restrictions, regardless of whether
such covenants, reservations and restrictions are set forth in such contract, deed or other instruments. No breach of
any of the provisions of this Regulatory Agreement shall defeat or render invalid the lien of a mortgage or deed of
trust made in good faith and for value encumbering the Development Site.
Section 13. Burden and Benefit. The Issuer and the Borrower hereby declare their understanding and
intent that the burden of the covenants set forth herein touch and concern the land in that the Borrower 's legal
7-ia~
interest in the Development is rendered less valuable thereby. The Issuer and the Borrower hereby further declare
their understanding and intent that the benefit of such covenants touch and concern the land by enhancing and
increasing the enjoyment and use of the Development by Low Income Tenants and Very Low Income Tenants, the
intended beneficiaries of such covenants, reservations and restrictions, and by furthering the public purposes for
which the Note was issued.
Section 14. Uniformity; Common Plan. The covenants, reservations and restrictions hereof shall apply
uniformly to the entire Development in order to establish and carry out a common plan for the use, development and
improvement of the Development Site.
Section 15. Enforcement. If the Borrower defaults in the performance or observance of any covenant,
agreement or obligation of the Borrower set forth in this Regulatory Agreement, and if such default remains uncured
for a period of 60 days after written notice thereof shall have been given by the Issuer or the Bondowner
Representative to the Borrower which identifies the nature of the default, then the Issuer acting on its own behalf
may declare an "Event of Default" to have occurred hereunder, and, at its option, may take any one or more of the
following steps:
(i) by mandamus or other suit, action or proceeding at law or in equity, require the Borrower to
perform its obligations and covenants hereunder or enjoin any acts or things which may be unlawful or in
violation of the rights of the Issuer or the Bondowner Representative hereunder;
(ii) have access to and inspect, examine and make copies of all of the books and records of the
Borrower pertaining to the Development;
(iii) take such other action at law or in equity as may appear necessary or desirable to enforce the
obligations, covenants and agreements of the Borrower hereunder; or
(iv) subject to the provisions of Article VII of the Loan Agreement, declare a default under the
Loan, and accelerate the indebtedness evidenced by the Note.
Notwithstanding anything herein to the contrary, the liability of the Borrower hereunder shall be limited as
provided in Section 5.2 of the Loan Agreement.
Section 16. Recording and Filing. The Borrower shall cause this Regulatory Agreement and all
amendments and supplements hereto to be recorded and filed in the real property records of the County and in such
other places as the Issuer may reasonably request. The Borrower shall pay all fees and charges incurred in
connection with any such recording.
Section 17. Limited Liability. All obligations and liabilities of the Issuer incurred hereunder shall be limited,
payable solely and only from amounts derived by the Issuer from the Loan or otherwise under the Loan Agreement.
Section 18. Governing Law. This Regulatory Agreement shall be governed by the laws of the State of
California.
Section 19. Amendments. Except as provided in Section 6(a) hereof, this Regulatory Agreement shall be
amended only by a written instrument executed by the parties hereto or their successors in title, and duly recorded in
the real property records of the County.
Section 20. Notice. All notices, certificates or other communications shall be sufficiently given and shall be
deemed given on the date personally delivered or on the second day following the date on which the same have
been mailed by first class mail, postage prepaid, addressed as follows:
Issuer: City of Cupertino
10300 Torre Avenue
Cupertino, Califomia 95014
Attention: Director of Administrative Services
Borrower: Cupertino Community Services
10185 N. Stelling Road
Cupertino, Califomia 95014
Bondowner Representative: As provided in Section 8.2 of the Loan Agreement
Any of the foregoing parties may, by notice given hereunder, designate any further or different addresses to
which subsequent notices, certificates, documents or other communications shall be sent.
Section 21. Severabilitv. If any provision of this Regulatory Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining portions hereof shall not in any way be
affected or impaired thereby.
Section 22. Multiple Counterparts. This Regulatory Agreement may be executed in multiple counterparts,
all of which shall constitute one and the same instrument, and each of which shall be deemed to be an original.
Section 23. Payment of Issuer Expenses. The Borrower hereby agrees to pay, promptly following receipt of
a written invoice therefor, all costs incurred by the Issuer (including Issuer staff time and a reasonable charge for
overhead expense) in connection with its activities under this Regulatory Agreement including, but no limited to,
monitoring compliance by the Borrower with the restrictions set forth in Section 4 hereof.
Section 24. Third Party Beneficiary. The parties to this Regulatory Agreement recognize and agree that the
terms of this Regulatory Agreement and the enforcement of those terms are entered into for the benefit of the Issuer
and the Bondowner Representative. The Bondowner Representative shall accordingly have contractual rights in this
Regulatory Agreement, and the Bondowner Representative shall be entitled (but not obligated) to enforce the terms
of this Regulatory Agreement in accordance with Section 15 hereof. In addition, the Bondowner Representative is
intended to be and shall be a third-party beneficiary of this Regulatory Agreement.
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IN WITNESS WHEREOF, the Issuer and the Borrower have executed this Regulatory Agreement by duly
authorized representatives, all as of the date first written hereinabove.
By:
03028.01:J5551
CITY OF CUPERTINO
City Manager
CUPERTINO COMMUNITY SERVICES,
a California non-profit public benefit corporation
By:
Its:
-14- 7-~ a8
STATE OF CALIFORNIA
COUNTY OF
On before me, 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(ies), and that by his/her/their signature(s) on
the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature of Notary (Seal)
7-~ a9
STATE OF CALIFORNIA
COUNTY OF
On before me, ,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(ies), and that by his/her/their signature(s) on the instrument
the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature of Notary (Seal)
~-/3a
EXHIBIT A
LEGAL DESCRIPTION OF LAND
The land referred to as the Development Site in this Regulatory Agreement is situated in the State of California,
County of Santa Clara, and is described as follows:
A-1
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EXHIBIT B
COMPLETION CERTIFICATE
The undersigned hereby certifies that the acquisition and construction of the Development was substantially
completed as of
CUPERTINO COMMUNITY SERVICES
The undersigned hereby certifies that:
By:
Its:
(1) the aggregate amount disbursed on the Loan to date is $
(2) all amounts disbursed on the Loan have been applied to pay or reimburse the undersigned for the
payment of Development Costs and none of the amounts disbursed on the Loan have been applied to pay or
reimburse any party for the payment of costs or expenses other than Development Costs;
(3) at least 97 percent of the amounts disbursed on the Loan have been applied to pay or reimburse the
Borrower for the payment of Qualified Development Costs (as that term is used in the Regulatory Agreement); and
(4) the Borrower is in compliance with the provisions of Section 6.14 of the Loan Agreement, dated as of
October 1, 2001, between the Borrower and the Issuer.
Capitalized terms used in this Completion Certificate have the meanings given such terms in tf-ie Regulatory
Agreement and Declaration of Restrictive Covenants, dated as of October 1, 2001, between Cupertino Community
Services and the City of Cupertino.
CUPERTINO COMMUNITY SERVICES
B-1
By:
Its:
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EXHIBIT C
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
City of Cupertino
1701 Robertson Road
Cupertino, California 95351-3536
Attn: Executive Director
CERTIFICATE AS TO COMMENCEMENT OF QUALIFIED DEVELOPMENT PERIOD
CITY OF CUPERTINO
MULTIFAMILY HOUSING REVENUE BONDS
(HEART OF CUPERTINO PROJECT),
SERIES 2001A
The undersigned, on behalf of Cupertino Community Services, hereby certifies that: (complete blank
information):
10% of the dwelling units in the Development financed in part from the proceeds of the captioned bonds
were first occupied on , 19
50% of the dwelling units in the Development financed in part from the proceeds of the captioned bonds
were first occupied on , 19_.
DATED: . 20
CUPERTINO COMMUNITY SERVICES
By:
Its:
Acknowledged:
CITY OF CUPERTINO
By:
Its:
C-1
7- r 3 3
AGREEMENT FOR BOND COUNSEL SERVICES
BY AND BETWEEN THE
CITY OF CUPERTINO
AND
QUINT &THIMMIG LLP, FOR BOND COUNSEL SERVICES IN
CONNECTION WITH MULTIFAMILY HOUSING BOND PROCEEDINGS
THIS AGREEMENT FOR BOND COUNSEL SERVICES (the "Agreement") is entered into this 1st day of
October, 2001, by and between the CITY OF CUPERTINO (the "Issuer") and QUINT &THIMMIG LLP, San
Francisco, California ("Attomeys").
WITNESSETH:
WHEREAS, the Issuer is considering the financing of the acquisition and construction of a multifamily rental
housing development to be located at 10114 and 10214 Vista Drive in the City of Cupertino (the "Project"), by means
of the issuance of Bonds of the Issuer (the "Bonds") to a local financial institution, and the lending of the proceeds of
Bonds to a nonprofit public benefit corporation that will acquire and develop the Project; and
WHEREAS, in connection with such financing the Issuer requires the advice and assistance of bond
counsel.
NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the
parties hereto do hereby agree as follows:
Section 1. Duties of Attorneys. Attomeys shall do, carry out and perform all of the following services as
are necessary for the issuance of the Bonds:
(a) Consultation and cooperation with the Issuer's staff and consultants including, its Director of
Administrative Services, and the City Attorney, and all other officers and employees of the Issuer, with the
financial institution that will purchase the Bonds, and any professional firms engaged by the Issuer with
respect to the issuance of the Bonds and assisting such persons in the formulation of a coordinated
financial and legal financing from the proceeds of the Bonds.
(b) Preparation of all legal proceedings deemed necessary or advisable by Attomeys for the
authorization, issuance and delivery of the Bonds; including preparation of (i) documentation required for
the issuance of the Bonds by the Issuer, including a resolution authorizing and directing the sale of the
Bonds, all documentation required to be executed by the Issuer in connection with the delivery of the Bonds
to the purchaser thereof, and all agreements providing collateral security for the Bonds except as may be
within the scope of responsibility of any attorneys representing other parties to the transaction, (ii)
necessary California Debt and Investment Advisory Commission filings and other reports and documents
required to be filed by the Issuer in connection with the issuance of the Bonds, (iii) certificates, requisitions,
receipts and other documents required in connection with the delivery of the Bonds to the original
purchaser thereof, and (iv) other proceedings of the Issuer incidental to or in connection with the issuance,
sale and delivery of the Bonds.
03028.01:J5547
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