02-043 Cupertino Community Services Loan (includes 1st amendment)ba-a~4~j
FIRST AMENDMENT TO 1:.0AN AGREEMENT
This First Amendment to Loan Agreement (this First Amendment") is made as of this
30th da of June, 2004, by and between the City of Cupertino, a municipal corporation (the
y
"City"), and Cupertino Community Services, Inc., a California nonprofit public benefit
corporation (the "Borrower") with reference to the following facts:
RECITALS
A. The City and the Borrower entered into that certain Loan Agreement dated as of
October 1, 2001 (the "L,oan Agreement") pursuant to which the City agreed to extend a loan to
the Borrower in the amount of Two Million Seven Hundred Five Thousand Dollars ($2,705,000)
(the "Loan") to support the Borrower's activities in the development of twenty-four (24) rental
units and approximately 4,500 square feet of office space on property located in the City of
Cupertino.
B. Capitalized terms not otherwise defined herein shall have the meaning ascribed to
them in the Loan Agreement.
C. Pursuant to the Loan Agreement, the Borrower agreed to make annual payments to
Lender from Surplus Cash to repay the Loan.
D. The Loan Agreement specified each July ls` as the Payment Date for the payment by
Borrower of Surplus Cash to the City.
E. The City and the Borrower wish to amend the time for the repayment of the Loan.
NOW THEREFORE, IN CONSIDERATION of the mutual agreements, obligations, and
representations contained herein and for good and valuable consideration, the receipt of which is
hereby acknowledged, the Borrower and the City hereby agree as follows:
1. Re~ayment of the Loan. The introductory paragraph of Section 2.7 Repayment of
Loan shall be deleted and replaced with the following:
"Subject to provisions of Section 2.7.(a), beginning on the December 1, 2004 and
continuing through each December 1st thereafter throughout the Term (each such December
1st is referred to as a "Payment Date"); annual payments shall be made to City by Borrower
in an amount equal to fifty percent (50%) of Surplus Cash (as defined below) only to the
extent that there exists Surplus Cash resulting from operation of the Development during the
twelve (12) month period beginning on July 1'` and ending on June 30`h immediately
preceding the applicable Payment Date. For the first payment only, the Borrower shall
calculate and pay fifty percent (50%) of Surplus Cash for the period April 1, 2003 through
June 30, 2003 and the period July 1, 2003 through June 30, 2004. Notwithstanding the
144\121 \178436.2
foregoing, any principal and interest remaining outstanding at the expiration of the Term
shall be forgiven by the City.
(a) Special Definitions. The following special definitions shall apply for
purposes of this Section 2.7:
(1) "Sur~lus Cash" in a particular twelve month period beginning on
July 15' and ending on June 30` shall mean the amount by which Gross Revenue (as defined
below) exceeds Annual Operating Expenses (as defined below).
(2) "Gross Revenue" with respect to a particular twelve month period
beginning on July 1s1 and ending on June 30`h shall mean all revenue, income, receipts, and
other consideration actually received from oper~ition and leasing of the Development. Gross
Revenue shall not include tenants' security deposits, loan proceeds, insurance proceeds,
capital contributions or similar advances.
~~
(3) "Annual Operating Expenses with respect to a particular twelve
month period beginning on July 1s` and ending on June 30`~ shall mean all expenses paid by
following costs reasonably and actually incurred for operation and maintenance of the
Development: property taxes and assessments imposed on the Development; debt service
currently due on anon-optional basis on loans associated with development of the
Development; debt service payments made to Lenders for Community Development pursuant
to that certain loan agreement dated as of April 11, 2003 by and between the Borrower and
Lenders for Community Development; property management fees and reimbursements in the
amount of Four Hundred Twenty Dollars ($420) per unit for the initial year and increased
annually thereafter at no more than the increase in the consumer price index for the San
Francisco Bay Area Metropolitan Area; premiums for property damage and liability
insurance; utility services not paid for directly by tenants, including water, sewer, and trash
collection; maintenance and repair; any annual license or certificate of occupancy fees
required for operation of the Development; security services; advertising and marketing; cash
deposited into reserves for capital replacement, of Development improvements in an amount
not to exceed reserve requirements imposed by the lender of the permanent loan or as
otherwise approved by the City; cash deposited into an operating reserve in an amount not to
exceed the amount required in connection with the permanent loan, or any greater amount
approved by the City; payment of any previously unpaid portion of a development fee; if
such fee has been approved by the City, required extraordinary operating costs; and other
ordinary and reasonable operating expenses not listed above."
2. No Other Changes Consistency. Notwithstanding any changes and deletions
contained herein, all other provisions of the Loan ~~greement remain the same. In the event of
any conflict between the terms of the Loan Agreement and this First Amendment, the terms of
this First Amendment shall govern.
144\121 \178436.2 2
,~
The Law Offices of ~ ~'
GOLDFARB & ~IPMAN
1300 Clay Street
Ninth Floor
City Center Plaza
Oakland
California 94612
December 19, 2001
M David Kroot
To
Lee C. Rosenthal
Ms. Carol Atwood
John T. Nagle Director of Administrative Services
Polly V. Marshall City of Cupertino
Lynn Hutchins 10300 Torre Avenue
Cupertino, CA 95014
Richard A. Judd
From
Karen M. Tiedemann
Danessa Miller, Project Coordinator
Thomas H. Webber
John T. Haygood RE
Dianne Jackson McLean Heart ~~f Cupertino
Michelle D. Brewer
Jennifer K. Bell Enclosed for your file are the original executed Promissory Note and Loan Agreement
for the City loan to Cupertino Community Services. The Deed of Trust and the
Carolyn A. Gold Regulatory Agreement will be returned to you by the Recorder's Office.
Robert C. Mills
Isabel L. Brown
Claudia J. Martin
William F. DiCamillo
Rafael Mandelman
Of Counsel
Barry R. Lipman
Steven H. Goldfarb
Oakland
510 836-6336
510 836-1035 FAX
San Francisco
415 788-6336
Los Angeles
213 627-6336
\\.ot
PROMISSORY NOTE
$2,705,000
Cupertino, California
October 1, 2001
FOR VALUE RECEIVED, Cupertino Community Services, Inc., a California nonprofit
public benefit corporation (the "Borrower"), whore address is 10185 North Stelling Road
Cupertino, California 95014, hereby promises to ~~ay to the order of the City of Cupertino, a
municipal corporation (the "City"), whose addres;~ is 10300 Torre Avenue Cupertino, California
95014, in the original principal amount equal to T'wo Million Seven Hundred Five Thousand
Dollars ($2,705,000), or so much thereof as may lie advanced by the City to the Borrower.
1. BORROWER'S OBLIGATION. This promissory note (the "Note") evidences the
Borrower's obligation to pay the City the principal amount of Two Million Seven Hundred Five
Thousand Dollars ($2,705,000) for the funds loaned to the Borrower by the City to finance
predevelopment, acquisition and construction activities (the "Loan").
2. INTEREST. The Loan shall bear no interest.
3. AMOUNT AND TIME OF PAYMEI\(T. The principal and all current and accrued
interest of the Loan shall be due and payable on the earlier of (a) fifty-five (55) years from the
date of this Note or (b) an Event of Default by Borrower which has not been cured as provided
for in the Loan Agreement of even date (the "Loan Agreement").
4. DEFINITIONS. Unless otherwise defined herein, all initially capitalized terms in this
Note shall have the definition ascribed to such term in the Loan Agreement. The following
terms are defined in the Loan Agreement and repc;ated here for convenience of reference:
(a) "Surplus Cash" in a particular calendar year shall mean the amount by which
Gross Revenue (as defined below) exceeds Annu~il Operating Expenses (as defined below).
(b) "Gross Revenue" with respect to a particular calendar year shall mean all
revenue, income, receipts, and other consideration actually received from operation and leasing
of the Development. Gross Revenue shall not include tenants' security deposits, loan proceeds,
insurance proceeds, capital contributions or simil~cr advances.
(c) "Annual Operating Expenses" •with respect to a particular calendar year shall
mean all expenses paid by following costs reason,rbly and actually incurred for operation and
maintenance of the Development: property taxes ~xnd assessments imposed on the Development;
debt service currently due on anon-optional basis (excluding debt service due from residual
receipts or surplus cash of the Development) on loans associated with development of the
Development; property management fees and reinnbursements in the amount of Four Hundred
Twenty Dollars ($420) per unit for the initial year and increased annually thereafter at no more
144\121 \119069.4
than the increase in the consumer price index for the San Francisco Bay Area Metropolitan Area;
premiums for property damage and liability insurance; utility services not paid for directly by
tenants, including water, sewer, and trash collection; maintenance and repair; any annual license
or certificate of occupancy fees required for oper<tion of the Development; security services;
advertising and marketing; cash deposited into re;~erves for capital replacements of Development
improvements in an amount not to exceed reserve- requirements imposed by the lender of the
permanent loan or as otherwise approved by the (',ity; cash deposited into an operating reserve in
an amount not to exceed the amount required in connection with the permanent loan, or any
greater amount approved by the City; payment of any previously unpaid portion of a
development fee; if such fee has been approved by the City, required extraordinary operating
costs; and other ordinary and reasonable operating; expenses not listed above.
5. PAYMENTS. Subject to provisions of Section 2.7.(a) of the Loan Agreement,
beginning on the second July 1, 2004, and continuing through each July 1st thereafter throughout
the Term (each such July 1st is referred to as a "Payment Date"); annual payments shall be made
to City by Borrower in an amount equal to fifty percent (50%) of Surplus Cash only to the extent
that there exists Surplus Cash resulting from operation of the Development during the calendar
year ending most nearly prior to the applicable Payment Date. Notwithstanding the foregoing,
any principal and interest remaining outstanding pit the expiration of the Term shall be forgiven
by the City.
6. PLACE AND MANNER OF PAYMENT. All amounts due and payable under this
Note are payable at the office of the City at the address set forth above, or at such other place as
the City may designate to the Borrower in writing, from time to time, in any coin or currency of
the United States which on the respective dates of~payment thereof shall be legal tender for the
payment of public and private debts.
7. APPLICATION OF PAYMENTS. Tl~e payments by Borrower shall be applied to
reduce the principal amount of the Loan.
8. DEFAULT AND ACCELERATION. This Note shall be secured by the Deed of
Trust. All covenants, conditions and agreements contained in the Deed of Trust and the Loan
Agreement are hereby made a part of this Note. Forrower agrees that the unpaid balance of the
then principal amount of this Note, shall, at the option of the City, become immediately due and
payable upon any Event of Default as defined in the Loan Agreement which has not been cured
pursuant to the Loan Agreement, including withoixt limitation the failure of Borrower to make
any payment when due. Upon any Event of Default, the City may exercise any other right or
remedy permitted under the Loan Agreement.
9. NO OFFSET. Borrower hereby waivers any rights of offset it now has or may
hereafter have against the City, its successors and assigns, and agrees to make the payments
called for herein in accordance with the terms of this Note.
10. WAIVERS. Presentment, notice of di;~honor, and protest are waived by all makers,
sureties, guarantors, and endorsers of this Note.
144\121 \119069.4
11. CONSENTS AND APPROVALS. A~ly consent or approval of the City required
under this Note shall not be unreasonably withheld.
12. NOTICES. Except as maybe otherwise specifically provided herein, any approval,
notice, direction, consent request or other action ley the City shall be in writing and maybe
communicated to the Borrower at the principal office of the Borrower set forth above, or at such
other place or places as the Borrower shall designate in writing, from time to time, for the receipt
of communications from the City.
13. BINDING UPON SUCCESSORS. All provisions of this Note shall be binding upon
and inure to the benefit of the heirs, administrators, executors, successors-in-interest, transferees,
and assigns of the Borrower and the City.
14. GOVERNING LAW. This Note shall be interpreted under and governed by the laws
of the State of California, except for those provisions relating to choice of law and those
provisions preempted by federal law.
15. SEVERABILITY. Every provision of~this Note is intended to be severable. If any
provision of this Note shall be held invalid, illegal, or unenforceable by a court of competent
jurisdiction, the validity, legality, and enforceability of the remaining provisions shall not in any
way be affected or impaired.
16. TIME. Time is of the essence in this dote.
17. ATTORNEYS' FEES AND COSTS. .[n the event any legal action is commenced to
interpret or to enforce the terms of this Note, the prevailing party in any such action shall be
entitled to recover all reasonable attorneys' fees acid costs incurred in such action.
18. WAIVER. Any waiver by the City ol~ any obligation in this Note must be in writing.
No waiver shall be implied from any failure of thc; City to take, or any delay or failure by the
City to take action on any breach or default by the: Borrower or to pursue any remedy allowed
under this Note or applicable law. Any extension of time granted to the Borrower to perform any
obligation under this Note shall not operate as a ~-aiver or release from any of its obligations
under this Note.
19. AMENDMENTS AND MODIFICAT:[ONS. Any amendments or modifications to
this Note must be in writing, and shall be made only if executed by both the Borrower and the
City.
20. NONRECOURSE. The City's sole recourse in the event of an Event of Default shall
be to the Property, except in the event of (i) fraud by the Borrower, (ii) any material
misrepresentation made by the Borrower to the City in connection with the Loan, (iii)
misappropriation bythe Trustor of any rents, security deposits, or insurance or condemnation
proceeds or (iv) commission of bad faith waste by the Borrower. The foregoing provisions shall
not prevent recourse to the collateral security for the loan or constitute a waiver, release or
discharge of or otherwise affect the obligation to lay, any indebtedness evidenced by this Note.
144\121\119069.4
TABLE OF CONTENTS
(continued)
Page
ARTICLE 1 DEFINITIONS ................................................................ 1
........................................
SECTION 1.1 "AGREEMENT" .................................................................................................... 1
SECTION 1.2 "ASSISTED UNIT" ............................................................................................... 1
SECTION 1.3 "BORROWER" ...................................................................................................... 2
SECTION 1.4 "BUDGET" ............................................................................................................ 2
SECTION 1.5 "CITY" ................................................................................................................... 2
SECTION 1.6 "DEED OF TRUST" .............................................................................................. 2
SECTION 1.7 "DEVELOPMENT" ............................................................................................... 2
SECTION 1.8 "LOAN" .................................................................................................................. 2
SECTION 1.9 "LOAN DOCUMENTS" ......................................................................................... 2
SECTION 1.10 "LOW INCOME HOUSEHOLD" ....................................................................... 2
SECTION 1.11 "NOTE" ................................................................................................................ 2
SECTION 1.12 "PAYMENT DATE" ............................................................................................ 2
SECTION 1.13 "PROPERTY" ...................................................................................................... 2
SECTION 1.14 "REGULATORY AGREEMEN'C" ...................................................................... 2
SECTION 1.15 "TERM" ................................................................................................................ 3
SECTION 1.16 "VERY LOW INCOME HOUSF;HOLD" ........................................................... 3
ARTICLE 2 TERMS OF LOAN ........................................................ 3
.........................................
SECTION 2.1 LOAN ..................................................................................................................... 3
SECTION 2.2 AMOUNT OF LOAN ............................................................................................ 3
SECTION 2.3 INTEREST ............................................................................................................. 3
SECTION 2.4 SECURITY ............................................................................................................ 3
SECTION 2.5 TERM OF LOAN ................................................................................................... 3
SECTION 2.6 USE OF FUNDS .................................................................................................... 3
SECTION 2.7 REPAYMENT OF THE LOAN ............................................................................ 3
SECTION 2.8 PREPAYMENT OF LOAN ................................................................................... 4
SECTION 2.9 SUBORDINATION OF DEED OF TRUST AND REGULATORY
AGREEMENT ............................................................................................................................ 4
ARTICLE 3 LOAN DISBURSEMENT ...................................................................................... 5
SECTION 3.1 DISBURSEMENT ................................................................................................. 5
SECTION 3.2 CONDITIONS PRECEDENT TO DISBURSEMENT ......................................... 5
SECTION 3.3 DISBURSEMENT OF LOAN PROCEEDS .......................................................... 5
ARTICLE 4 DEVELOPMENT ACTIVITIES .......................................................................... 5
SECTION 4.1 COMMENCEMENT OF CONSTRUCTION ....................................................... 6
SECTION 4.2 COMPLETION OF CONSTRUC"CION ................................................................ 6
SECTION 4.3 CONSTRUCTION RESPONSIBI]LITIES ............................................................. 6
SECTION 4.4 MAINTENANCE ................................................................................................... 6
ARTICLE 5 ONGOING OBLIGATIONS ................................................................................. 6
SECTION 5.1 APPLICABILITY .................................................................................................. 6
SECTION 5.2 AFFORDABILITY RESTRICTIONS AND TERM ............................................. 6
SECTION 5.3 TAX AND ASSESSMENTS ................................................................................. 6
144\121\117883.7
1
TABLE OF CONTENTS
(continued)
Page
SECTION S.4 MANAGEMENT AGENT; PERI~~DIC REPORTS ............................................. 7
ARTICLE 6 INDEMNITY AND INSURANCIC ........................................................................ 7
SECTION 6.1 INSURANCE COVERAGE .................................................................................. 7
SECTION 6.2 NON-LIABILITY OF OFFICIALS, EMPLOYEES AND AGENTS ............... .... 8
SECTION 6.3 INDEMNITY ..................................................................................................... .... 8
ARTICLE 7 DEFAULT ............................................................................................................ .... 8
SECTION 7.1 EVENTS OF DEFAULT ................................................................................... .... 8
SECTION 7.2 NOTICE OF DEFAULT AND OPPORTUNITY TO CURE ........................... .... 8
SECTION 7.3 CITY'S REMEDIES ........................................................................................... .... 8
SECTION 7.4 BORROWER'S REMEDIES ............................................................................. .... 9
ARTICLE 8 GENERAL PROVISIONS............. ..................................................................... .... 9
SECTION 8.1 RECORDS ......................................................................................................... .... 9
SECTION 8.2 NONDISCRIMINATION............. ..................................................................... .... 9
SECTION 8.3 GOVERNING LAW ........................................................................................... .... 9
SECTION 8.4 ATTORNEYS' FEES AND COS7'S .................................................................. .... 9
SECTION 8.5 TIME .................................................................................................................. .... 9
SECTION 8.6 CONSENTS AND APPROVALS ..................................................................... .. 10
SECTION 8.7 NOTICES, DEMANDS AND COMMUNICATIONS ..................................... .. 10
SECTION 8.8 BINDING UPON SUCCESSORS ..................................................................... .. 10
SECTION 8.9 RELATIONSHIP OF PARTIES ........................................................................ .. 10
SECTION 8.10 ASSIGNMENT AND ASSUMP'TION ............................................................ .. 10
SECTION 8.11 WAIVER .......................................................................................................... .. 10
SECTION 8.12 INTEGRATION ............................................................................................... .. 11
SECTION 8.13 AMENDMENTS AND MODIFICATIONS ................................................... .. 11
SECTION 8.14 SEVERABILITY ............................................................................................. .. 11
EXHIBIT A PROPERTY .................................................................................................. A-1
EXHIBIT B BUDGET ...................................................................................................... .B-1
EXHIBIT C PROMISSORY NOTE ................................................................................. .C-1
EXHIBIT D DEED OF TRUST ................................................................... D-1
EXHIBIT E REGULATORY AGREEMErfT ...................................................E-1
144\121\117883.7
I1
LOAN AGREEMENT
This Loan Agreement (this "Agreement") is made as of this 1St day of October, 2001, by
and between the City of Cupertino, a municipal a~rporation (the "City"), and Cupertino
Community Services, Inc., a California nonprofit public benefit corporation (the "Borrower")
with reference to the following facts:
RECITALS
A. The City wishes to promote the development of more affordable rental housing in
the Cupertino community and to provide a greater choice of housing opportunities for persons
and families of low income.
B. The Borrower proposes to ground lease from the County of Santa Clara County
Special Fire District a parcel of real property located in the City of Cupertino in Santa Clara as
more particularly described in the Exhibit A attached to this Agreement (the "Property").
C. The Borrower proposes to develop amixed-use project consisting of
approximately twenty-four (24) rental units and a~~proximately 4,500 square feet of office space
on the Property (the "Development").
D. The Borrower wishes to borrow from the City and the City wishes to extend to the
Borrower a loan in the amount of Two Million Seven Hundred Five Thousand Dollars
($2,705,000) to support the Borrower's activities in leasing and developing the Property.
NOW THEREFORE, IN CONSIDERATION of the mutual agreements, obligations, and
representations, and in further consideration for tree making of the Loan, the Borrower and the
City hereby agree as follows:
ARTICLE 1 DEFINITIONS
The following terms have the meanings and content set forth in this section wherever
used in this Agreement, attached Exhibits, or documents incorporated into this Agreement by
reference.
Section 1.1 "AGREEMENT" means this loan agreement entered into between the
City and the Borrower.
Section 1.2 "ASSISTED UNIT" mean: eleven (11) housing units on the Property
reserved for occupancy by a Very Low Income H~~usehold or Low Income Household.
144\121\117883.7
Section 1.3 "BORROWER" means Cupertino Community Services, Inc., a California
nonprofit public benefit corporation, and its authorized representatives, assigns, transferees, or
successors-in-interest thereto.
Section 1.4 "BUDGET" means that budget for the use of Loan proceeds attached as
Exhibit B to this Agreement.
Section 1.5 "CITY" means the City of Cupertino, a municipal corporation and its
authorized representatives, officers, officials, directors, employees, and agents.
Section 1.6 "DEED OF TRUST" means the deed of trust to be recorded against
Borrower's leasehold interest in the Property upon Borrower's subleasing of the Property
securing the Loan and naming the City as beneficiary a form of which is attached as Exhibit C.
Section 1.7 "DEVELOPMENT" means the lease of the Property and the development
of approximately twenty-four (24) units of rental ;housing, of which eleven units shall be
affordable to Very Low Income and Low Income Households according to the terms of this
Agreement.
Section 1.8 "LOAN" means the loan of funds provided by the City to the Borrower
pursuant to this Agreement.
Section 1.9 "LOAN DOCUMENTS" a.re collectively this Agreement, the Note, the
Deed of Trust, and the Regulatory Agreement, as they maybe amended, modified, or restated
from time to time, along with all exhibits and atta~~hments to these documents.
Section 1.10 "LOW INCOME HOUSEF[OLD" means a household whose annual
income does not exceed sixty percent (60%) of th~~ median income for the San Jose Metropolitan
Area as determined by HUD with adjustments for smaller and larger households.
Section 1.11 "NOTE" means that promissory note executed by the Borrower in favor
of the City evidencing the Loan in an original principal amount not to exceed Two Million Seven
Hundred Five Thousand Dollars ($2,705,000), a firm of which is attached as Exhibit D.
Section 1.12 "PAYMENT DATE" means the payment date specified in Section 2.7 of
this Agreement.
Section 1.13 "PROPERTY" means the Marcel of real property located in the City of
Cupertino leased by the Borrower, as more particularly described in Exhibit A attached to this
Agreement.
Section 1.14 "REGULATORY AGREEMENT" means the agreement to be executed
by the City and the Borrower and recorded against the Property upon the Borrower's acquisition
of the Property substantially in the form attached ;~s Exhibit E attached to the Agreement.
144\121\117883.7 2
Section 1.15 "TERM" means the term of the Loan as specified in Section 2.4.
Section 1.16 "VERY LOW INCOME HOUSEHOLD" means a household whose
annual income does not exceed fifty percent (50°/~) of the median income for the San Jose
Metropolitan Area as determined by HUD with adjustments for smaller and larger households.
ARTICLE 2 TEEMS OF LOAN
Section 2.1 LOAN. The City agrees to provide a nonrecourse loan of funds to the
Borrower under the terms and conditions of this Agreement.
Section 2.2 AMOUNT OF LOAN. On and subject to the terms and conditions of this
Agreement, the City agrees to make and the Borrower agrees to accept a loan in an amount not to
exceed Two Million Seven Hundred Five Thousand Dollars ($2,705,000) Million Eight Hundred
Thousand Dollars ($2,800,000) evidenced by the Note.
Section 2.3 INTEREST. The Loan shall not bear interest.
Section 2.4 SECURITY. Borrower sh<<ll secure its obligation to repay the Loan by
executing the Deed of Trust, in substantially the firm attached hereto as Exhibit C and recording
it as a lien against Borrower's leasehold interest ire the Property.
Section 2.5 TERM OF LOAN. The principal of the Loan and all accrued interest
thereon shall be due and payable on the earliest oil (a) fifty-five (55) years from the date of the
Note or (b) an Event of Default by the Borrower which has not been cured as provided for in this
Agreement.
Section 2.6 USE OF FUNDS. Loan praceeds maybe used only for the costs and in
the amount specified in the Budget, as well as any revisions to the Budget which are approved in
writing by the City. The Borrower may exceed the budgeted amount for each item in the Budget
in an amount not to exceed fifteen percent (15%), provided that the total Loan amount is not
exceeded. Changes in the Budget in excess of fifteen percent (15%) will require the prior written
consent of Lender. Failure of Lender to disapprove a change in the Budget within fifteen (15)
days following Lender's receipt of Borrower's written request shall be deemed approval of such
change by Lender.
Section 2.7 REPAYMENT OF THE LOAN. Subject to provisions of Section 2.7.(a),
beginning on the July 1, 2004 and continuing through each July 1st thereafter throughout the
Term (each such July 1st is referred to as a "Payrr~ent Date"); annual payments shall be made to
City by Borrower in an amount equal to fifty percent (50%) of Surplus Cash (as defined below)
only to the extent that there exists Surplus Cash resulting from operation of the Development
during the calendar year preceding the applicable Payment Date. Notwithstanding the foregoing,
any principal and interest remaining outstanding at the expiration of the Term shall be forgiven
by the City.
144\121\117883.7 3
(a) Special Definitions. The following special definitions shall apply for
purposes of this Section 2.7:
(1) "Surplus Cash" in a particular calendar year shall mean the amount
by which Gross Revenue (as defined below) exceeds Annual Operating Expenses (as defined
below).
(2) "Gross Revenue" with respect to a particular calendar year shall
mean all revenue, income, receipts, and other consideration actually received from operation and
leasing of the Development. Gross Revenue shall. not include tenants' security deposits, loan
proceeds, insurance proceeds, capital contributior.~s or similar advances.
(3) "Annual Operating Expenses" with respect to a particular calendar
year shall mean all expenses paid by following costs reasonably and actually incurred for
operation and maintenance of the Development: f~roperty taxes and assessments imposed on the
Development; debt service currently due on anon.-optional basis (excluding debt service due
from residual receipts or surplus cash of the Development) on loans associated with development
of the Development; property management fees a~~d reimbursements in the amount of Four
Hundred Twenty Dollars ($420) per unit for the initial year and increased annually thereafter at
no more than the increase in the consumer price i~idex for the San Francisco Bay Area
Metropolitan Area; premiums for property damage and liability insurance; utility services not
paid for directly by tenants, including water, sewer, and trash collection; maintenance and repair;
any annual license or certificate of occupancy fee; required for operation of the Development;
security services; advertising and marketing; cash deposited into reserves for capital
replacements of Development improvements in a~i amount not to exceed reserve requirements
imposed by the lender of the permanent loan or as. otherwise approved by the City; cash
deposited into an operating reserve in an amount riot to exceed the amount required in
connection with the permanent loan, or any greater amount approved by the City; payment of
any previously unpaid portion of a development fie; if such fee has been approved by the City,
required extraordinary operating costs; and other ~~rdinary and reasonable operating expenses not
listed above.
Section 2.8 PREPAYMENT OF LOArd. No prepayment penalty will be charged to
the Borrower for payment of all or any portion of the Loan amount prior to the end of the Loan
term described herein.
Section 2.9 SUBORDINATION OF DEED OF TRUST AND REGULATORY
AGREEMENT. The City agrees to subordinate the Deed of Trust and the Regulatory
Agreement to the construction and permanent bond loan made by the City as Issuer and
Cupertino National Bank as bond owner represenl:ative in an amount not to exceed One Million
Six Hundred Thousand Dollars ($1,600,000) and ;any regulatory agreements related to thereto.
144\121 \117883.7 4,
ARTICLE 3 LOAN DISBURSEMENT
Section 3.1 DISBURSEMENT. Disbursement of Loan proceeds shall not exceed Two
Million Seven Hundred Five Thousand Dollars ($2,705,000). The City must approve all requests
for payment prior to disbursement of Loan proceeds for payment of any costs incurred on the
Development.
Section 3.2 CONDITIONS PRECEDENT TO DISBURSEMENT. The City shall not
be obligated to make any disbursements of Loan proceeds or take any other action under the
Loan Documents unless the following conditions precedent are satisfied prior to the
disbursement for loan:
(a) The Borrower has executed and delivered to the City this Agreement and
the Note, the Deed of Trust and Regulatory Agree-ment;
(b) The Borrower has provided to the City a certificate of liability and
property insurance or copies of the insurance poli~~ies, which policy shall be approved by the
City Attorney; and
(c) Concurrently with the acquisition of the Property by the Borrower the City
shall receive an ALTA lender's policy of title insurance from a title insurance company approved
by the City in a form acceptable to the City;
(d) There exists no Event of D~;fault nor any act, failure, omission or
condition that would constitute an Event of Default.
Section 3.3 DISBURSEMENT OF LOAN PROCEEDS. The City shall approve all
requests for payment prior to disbursement of LOfln proceeds for payment of costs incurred on
the Development. The CDBG portion of the Loan shall be disbursed directly to the County of
Santa Clara County Special Fire District for as partial payment for the Borrower's rent for the
Property. The balance of the Loan shall be deposited in a controlled account with Cupertino
National Bank for disbursement to Borrower by Cupertino National Bank to fund construction
costs of the Development. Disbursements shall b~: made to Borrower within fourteen (14) days
following receipt by Cupertino National Bank of Borrower's disbursement request. Requests for
funds shall be made once a month unless the Borrower can show a need for a more frequent
disbursement of funds. Disbursement requests shall be accompanied by invoices or receipts
evidencing the costs incurred or expended by Borrower in the preceding month. At the request
of the City, the Borrower shall provide the City with satisfactory documentation evidencing the
payment of expenses previously funded by the City.
ARTICLE 4 DEVELOPMENT ACTIVITIES
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Section 4.1 COMMENCEMENT OF CONSTRUCTION. The Borrower shall
commence construction of the Development no later than the time specified in the ground lease
for the Property between the Borrower and County of Santa Clara County Special Fire District.
Section 4.2 COMPLETION OF CONSTRUCTION. The Borrower shall diligently
prosecute construction of the Development to completion, and shall complete construction of the
Development no later than twenty four (24) months following commencement of construction.
Borrower shall provide proof of completion as evidenced by the issuance of a certificate of
occupancy for the Development by the City.
Section 4.3 CONSTRUCTION RESPCINSIBILITIES. Borrower shall be solely
responsible for all aspects of Borrower's conduct yin connection with the Development, including,
but not limited to, the quality and suitability of thy; Development's plans and specifications, the
supervision of construction work, and the qualifications, financial condition, and performance of
all architects, engineers, contractors, subcontractors, suppliers, consultants, and property
managers.
Section 4.4 MAINTENANCE. The Borrower hereby agrees that, prior to completion
of the Development, the portions of the Property ~zndergoing construction shall be maintained in
a neat and orderly condition to the extent practicable and in accordance with industry health and
safety standards, and that, once the Development are completed, the Development shall be well
maintained by the Borrower as to both external and internal appearance of the units, the common
areas, and the open spaces. The Borrower shall rriaintain the Development in good repair and
working order, and in a neat, clean and orderly condition, including the walkways, driveways,
alleyways and landscaping, and from time to time make all necessary and proper repairs,
renewals, and replacements.
ARTICLE 5 ONGOING OBLIGATIONS
Section 5.1 APPLICABILITY. The conditions and obligations set forth in this Article
5 shall apply throughout the Term, unless a different period of applicability is specified for a
particular condition or obligation.
Section 5.2 AFFORDABILITY RESTRICTIONS AND TERM. The term of the
Regulatory Agreement shall begin on the date of recordation and shall end on that date which is
fifty-five (55) years following the date of recordation of the Regulatory Agreement. The
Assisted Units shall be maintained at the affordability levels as follows: five (5) Assisted Units
shall be occupied or held vacant and available for rental by Very Low Income Households and
six (6) Assisted Units shall be occupied or held v<<cant and available for rental by Low Income
Households. Borrower shall make a good faith effort to lease vacant units to eligible households
as soon as practicable. The maximum rent which maybe charged by Borrower for the Assisted
Units to be the rents set forth in the Regulatory Areement.
Section 5.3 TAX AND ASSESSMENT'S. Unless exempted from such payment, the
Borrower shall pay all real and personal property taxes, assessments and charges and all
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franchise, income, employment, old age benefit, withholding, sales, and other taxes assessed
against it, or payable by it, at such times and in such manner as to prevent any penalty from
accruing, or any line or charge from attaching to the Property; provided, however, that the
Borrower shall have the right to contest in good faith, any such taxes, assessments, or charges.
In the event the Borrower exercises its right to contest any tax, assessment, or charge against it,
the Borrower, on final determination of the proceeding or contest, shall immediately pay or
discharge any decision or judgment rendered against it, together with all costs, charges and
interest.
Section 5.4 MANAGEMENT AGENT; PERIODIC REPORTS.
(a) Management Agent. The Development shall at all times be managed by
an experienced management agent, with demonstrated ability to operate residential facilities like
the Development in a manner that will provide decent, safe, and sanitary housing. The City
approves Borrower as the initial management agent of the Development.
(b) Books, Records and Repotti:s. For purposes of such periodic reviews, the
Borrower shall make available to the City for inspection all books and records with respect to the
Development. Borrower shall provide its annual ;audit to the City within thirty (30) days
following the completion and acceptance of the audit by Borrower.
ARTICLE 6 INDEMNITY AND INSURANCE
Section 6.1 INSURANCE COVERAGE. The Borrower shall cause to have in full
force and effect during the term of the Loan, property insurance and public liability insurance, to
protect against loss from liability imposed by law for damages on account of bodily injury,
including death therefrom, suffered or alleged to lie suffered by any person or persons resulting
directly or indirectly from any acts of the Borrower. Such property damage and bodily injury
insurance shall also provide for and protect the City against incurring any legal cost in defending
claims for alleged loss. Such bodily injury and property damage insurance shall name the City
as additional insureds. Such bodily injury and property damage insurance shall be in the
following amounts: a general aggregate amount of not less than One Million Dollars
($1,000,000); not less than Five Hundred Thousand Dollars ($500,000) of bodily injury and
property damage insurance; provided, however, tl-e limitation on the amount of insurance shall
not limit the responsibility of the Borrower to indemnify the City or pay damages on account of
injury to persons or property resulting from the B~~rrower's activities or the activities of any other
person or persons for which the Borrower is otherwise responsible. The insurance limits shall be
increased every five (5) years as reasonably deemed appropriated by the City Attorney.
Upon the City's request during the term of the Loan, the Borrower shall provide
certificates of insurance, in form and with insurer; reasonably acceptable to the City, evidencing
compliance with the requirements of this Section, and shall provide complete copies of such
insurance policies naming the City as an addition<<1 insured.
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Section 6.2 NON-LIABILITY OF OFFICIALS, EMPLOYEES AND AGENTS. The
City shall not be personally liable to the Borrowe~° for any obligation created under the terms of
this Agreement except in the case of actual fraud or willful misconduct by such person.
Section 6.3 INDEMNITY. Except for the negligence or willful misconduct of the
City, the Borrower undertakes and agrees to defend, indemnify, and hold harmless the City from
and against all suits and causes of action, claims, losses, demands and expenses, including, but
not limited to, reasonable attorney's fees and cost:; of litigation, damage or liability of any nature
whatsoever, arising in any manner by reason of or incident to the performance of this Agreement
on the part of the Borrower or any contractor or subcontractor of the Borrower.
ARTICLE 7 DEFAULT
Section 7.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "Event of Default" under this ~~greement:
(a) the Borrower's failure to pa.y when due any sums payable under the Note
or any advances made by the City under the Deed of Trust or this Agreement; and
(b) the Borrower's failure to obtain and maintain the insurance coverage
required under this Agreement.
(c) Any substantial or continuc-us breach by Borrower of any material
obligations on Borrower imposed in the Loan Documents which may materially adversely effect
the City's security.
Section 7.2 NOTICE OF DEFAULT AND OPPORTUNITY TO CURE. For Events
of Default, the City shall give written notice to thf; Borrower of any Event of Default by
specifying: (a) the nature of the event or deficiency giving rise to the Default, (b) the action
required to cure the deficiency, if an action to curs: is possible, and (c) a date, which shall not be
less than thirty (30) days for any monetary default and sixty (60) days for nonmonetary default
from the date of receipt of the notice or the date the notice was refused, by which such action to
cure must be taken, or if a cure cannot be accomplished in sixty (60) days, a reasonable time
thereafter.
Section 7.3 CITY'S REMEDIES. Upo~~ the happening of an Event of Default by the
Borrower and a failure to cure said Event of Default within the time specified in the notice of
Event of Default (if a notice is required), the City's obligation to disburse Loan proceeds shall
terminate, and the City may also proceed with an~~ or all of the following remedies in any order
or combination the City may choose in its sole di~;cretion:
(a) Terminate this Agreement, in which event the entire principal amount
outstanding under the Note shall immediately become due and payable at the option of the City;
144\121\117883.7
(b) Pursue any other remedy allowed at law or in equity.
Section 7.4 BORROWER'S REMEDIES. Upon the fault or failure of the City to meet
any of its obligations under this Agreement, the B'~orrower may:
(a) Demand payment from the City of any sums due the Borrower; and/or
(b) Pursue any other remedy allowed at law or in equity.
ARTICLE 8 GENEF:AL PROVISIONS
Section 8.1 RECORDS. The Borrower shall be accountable to the City for all funds
disbursed to the Borrower pursuant to this Agreement. The Borrower agrees to maintain records
that accurately and fully show the date, amount, purpose, and payee of all expenditures drawn
from Loan funds, and to keep all invoices, receipts, and other documents related to expenditures
from said Loan funds for not less than three years after completion of the Development.
Section 8.2 NONDISCRIMINATION. The Borrower shall not discriminate or
segregate in the development, construction, use, enjoyment, occupancy, conveyance, lease,
sublease, or rental of any part of the Property on the basis of race, color, ancestry, national
origin, religion, sex, sexual preference, age, marital status, family status, source of income,
physical or mental disability, Acquired Immune Deficiency Syndrome (AIDS) or AIDS-related
conditions (ARC), or any other arbitrary basis. T11e Borrower shall otherwise comply with all
applicable local, state, and federal laws concerning discrimination in housing.
Section 8.3 NONRECOURSE. The City's sole recourse in the event of an Event of
Default shall be to the Property, except in the eve~lt of (i) fraud by the Borrower, (ii) any material
misrepresentation made by the Borrower to the City in connection with the Loan, (iii)
misappropriation by the Trustor of any rents, security deposits, or insurance or condemnation
proceeds or (iv) commission of bad faith waste by the Borrower. The foregoing provisions shall
not prevent recourse to the collateral security for the loan or constitute a waiver, release or
discharge of or otherwise affect the obligation to lay, any indebtedness evidenced by this Note.
Section 8.4 GOVERNING LAW. This Agreement shall be interpreted under and be
governed by the laws of the State of California, e~:cept for those provisions relating to choice of
law or those provisions preempted by federal law.
Section 8.5 ATTORNEYS' FEES ANl:~ COSTS. In the event any Event of Default or
any legal or administrative action is commenced to interpret or to enforce the terms of this
Agreement, the prevailing party in any such actio~l shall be entitled to recover all reasonable
attorneys' fees (which as to any party shall includf; the allocated reasonable costs for services of
any party's in-house counsel) and costs in such action.
Section 8.6 TIME. Time is of the essence in this Agreement.
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Section 8.7 CONSENTS AND APPRC>VALS. Any consent or approval of the City or
the Borrower required under this Agreement shall not be delayed or unreasonably withheld. Any
approval required under this Agreement shall be in writing and executed by an authorized
representative of the party granting the approval. Any request by Borrower for the City's consent
or approval shall be granted or denied by the City within ten (10) business days following the
City's receipt of such request or such request shal:~ be deemed approved.
Section 8.8 NOTICES, DEMANDS Al~TD COMMUNICATIONS. Formal notices,
demands and communications between the Borrower and the City shall be sufficiently given and
shall not be deemed given unless dispatched by re-gistered or certified mail, postage prepaid,
return receipt requested, or delivered personally, to the principal offices of the Borrower and the
City as follows:
CITY: City of Cupertino
10300 Torre Avenue
Cupertino, CA 95014
Attn: City Manager
BORROWER: Cupertino Community Services, Inc.
10185 North Stelling Road
Cupertino, CA 95014
Attn: Executive Director
with copy to:
BRIDGE Housing (:orporation
1 Hawthorne Street., Suite 400
San Francisco, CA 94105
Attn: President
Section 8.9 BINDING UPON SUCCE:iSORS. All provisions of this Agreement shall
be binding upon and inure to the benefit of the heirs, administrators, executors, successors-in-
interest, transferees, and assigns of each of the parties; provided, however, that this section does
not waive the prohibition on assignment of this Agreement by the Borrower without the City's
consent.
Section 8.10 RELATIONSHIP OF PARTIES. The relationship of the Borrower and
the City for this Development under this Agreement is and at all times shall remain solely that of
a debtor and a creditor, and shall not be construed as a joint venture, equity venture, partnership.
Section 8.11 ASSIGNMENT AND ASSUMPTION. Other than to an affiliate of the
Borrower or to a partnership of which an affiliate of the Borrower is the general partner, the
Borrower shall not assign any of its interests under this Agreement to any other party without the
prior written consent of the City. Any unauthorized assignment shall be void.
Section 8.12 WAIVER. Any waiver by the City or the Borrower of any obligation in
this Agreement must be in writing. No waiver will be implied from any delay or failure by the
144\121\117883.7 1 Q
City to take action on any breach or default of the Borrower or to pursue any remedy allowed
under this Agreement or under applicable law. Any extension of time granted to the Borrower to
perform any obligation under the Loan Documents shall not operate as a waiver or release from
any of its obligations under this Agreement. Consent by the City to any act or omission by the
Borrower shall not be construed to be a consent to any other or subsequent act or omission or to
waive the requirement for the City's written conse-nt to future waivers.
Section 8.13 INTEGRATION. This Agreement, including exhibits, shall constitute the
entire agreement of the parties and supersede any and all prior negotiations.
Section 8.14 AMENDMENTS AND MODIFICATIONS. Any amendments or
modifications to this Agreement must be in writing, and shall be made only if executed by both
the Borrower and the City.
Section 8.15 SEVERABILITY. Every I~rovision of this Agreement is intended to be
severable. If any provision of this Agreement shall beheld invalid, illegal, or unenforceable by a
court of competent jurisdiction, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired.
Section 8.16 COUNTERPARTS. This agreement maybe executed in counterparts,
each of which shall constitute an original document.
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