The URL can be used to link to this page

Home My WebLink AboutAgenda Packet 1997/10/21 :"'1 Tuesday, October 21, 1997 6:00 p.m. C ,,_J ,'j thi:] ,':" (1 . Council Chambers ,. ';/'0/1\<>1'17 ~.,.h!UbliC Services Building Reoular Meetino of the Citv of Chula Vista Citv Council CALL TO ORDER 1. ROLL CALL: Council members Moot _' Padilla _, Rindone _, Salas _' and Mayor Horton _' 2. PLEDGE OF ALLEGIANCE TO THE FLAG. MOMENT OF SILENCE 3. APPROV AL OF MINUTES: October 7, 1997. 4. SPECIAL ORDERS OF THE DAY: a. Welcome and introduction of Peter C. Deddeh, Chief of the South Bay Branch of the District Attorney's Office. b. Friends of the Arts board member, Gloria Galbraith, will introduce Norman Burpee, Bonita Artists Potpourri, and the winners of their annual juried show. c. California Healthy Cities Project (CHCP) Recognition Award will be presented to tbe City by Gregory Shaffer and Joan Twiss of the project. The $25,000 grant award by Food For All and CHCP to the City will be to support community-based solutions to hunger. Students from the Chula Vista Junior High and Vista Square Elementary Schools presentation inviting Council to Community-Garden Dedication and Open House on Thursday, October 23, 1997, from 1:00 p.m. to 2:00 p.m. CONSENT CALENDAR (Itelll,' 5 through 10) The staff recommendations regarding the following items Listed under the Consent Calendar will be enacted by the Council by one motion without discussion unless a Councilmember, a member of the public, or City staff requests that the item be pulled for discussion. If you wish to speak on one of these items, please fill out a "Request to Speak Form" available in the lobby and submit it to the City Clerk prior to the meeting. Items pulled from the Consent Calendar will be discussed after Board and Commission Recommendations and Action Items. Items pulled by the public will be the first items of business. 5. WRITTEN COMMUNICATIONS: a. Letter from the City Attorney srnting that to the best of his know1edlle from observance of actions taken in Closed Session on 10/14/97 in which the City Attorney participated, that there were no actions taken which are required under the Brown Act to be reported. It is recommended that the letter be received and filed. Agenda -2- October 21, 1997 6.A. RESOLUTION 18797 APPROVING A DISPOSITION AND DEVELOPMENT AGREEMENT AND HOME PARTICIPATION AGREEMENT WITH SOUTH BAY COMMUNITY SERVICES FOR THE DEVELOPMENT OF AN EIGHTEEN (18) UNIT AFFORDABLE HOUSING PROJECT PROPOSED TO BE DEVELOPED AT OR AROUND 750 ADA STREET - On 3/18/97, Council approved a loan in the amount of $372,000 for South Bay Community Services to purchase 1.16 acres at 746 and 750 Ada Street from the City. This approval included an Amended and Restated Conveyance Agreement and Escrow Instructions with South Bay Community Services. Council also approved a loan to South Bay Community Services in the amount of $523,965 from HOME funds for the development of 18 apartments, subject to later approval of a Disposition and Development Agreement. Staff delayed negotiations on the Disposition and Development Agreement until South Bay Community Services learned if they were awarded tax credits. In August 1997 South Bay Community Services was awarded these tax credits. Staff recommends approval of the resolutions. (Director of Community Development) B. RESOLUTION 18798 APPROVING AN AMENDMENT TO THE AMENDED AND RESTATED CONVEYANCE AGREEMENT AND ESCROW INSTRUCTIONS TO DELETE REFERENCE TO THE REQUIREMENT FOR SOUTH BAY COMMUNITY SERVICES TO DEPOSIT $41,000 WITH THE CITY BEFORE PURCHASING THE LAND C. RESOLUTION 18799 APPROPRIATING FIVE HUNDRED AND TWENTY-THREE THOUSAND NINE HUNDRED AND SIXTY-FIVE DOLLARS ($523,965) FROM THE HOME PROGRAM AND THREE HUNDRED SEVENTY-TWO THOUSAND NINE HUNDRED AND FORTY DOLLARS ($372,940) FROM DISPOSITION PROCEEDS FROM THE SALE OF LAND AT OR AROUND 750 ADA STREET FOR THE DEVELOPMENT OF AN EIGHTEEN (18) UNIT AFFORDABLE HOUSING PROJECT - 4/5th's vote required. 7. RESOLUTION 18794 WAIVING THE BIDDING PROCESS AND AWARDING PURCHASE AGREEMENT TO CALIFORNIA TURF PRODUCTS FOR FOUR 84" RIDING LAWN MOWERS - The fiscal year 1997/98 Equipment Replacement Budget provides for the purchase of four 84" riding mowe". California Turf Products has agreed to sell the mowers (if available) to the City for $22,590 each plus tax ($24,341). The City purchased an identical mower from California Turf Products as part of the fiscal year 1996/97 Equipment Replacement program for $27,925 plus tax ($30,090). Waiving the hidding process and purchasing the mowers at the quoted price would provide significant savings for the City. Staff recommends approval of the resolution. (Director of Public Works and Director of Finance) Cuntinued from the meeting of 10/14/97. 8. RESOLUTION 18795 APPROPRIATING FUNDS, ACCEPTING BIDS AND AWARDING CONTRACT FOR THE CONSTRUCTION OF "OXFORD STREET IMPROVEMENTS FROM FOURTH A VENUE TO FIFTH A VENUE IN THE CITY (STL-229) - This project was originally funded during the fiscal year 1996/97 Capital Improvement Program budget process. The project was funded to improve pedestrian access, circulation, and alleviate a local drainage problem at mid-block. It is also part of the overall sidewalk safety program which provides for the construction of sidewalk facilities in the Montgomery area. Staff recommend. this item be continued to a later date. (Director of Public Works) 4/5th's vote required. Continued from the meeting of 10/14/97. Agenda -3- October 21, 1997 9. RESOLUTION 18800 AUTHORIZING THE MAYOR TO EXECUTE AN AMENDMENT TO THE COMMERCIAL INDUSTRIAL INCENTIVE AGREEMENT WITH SDG&E FOR THE IMPLEMENTATION OF A COMPREHENSIVE ENERGY RETROFIT PROGRAM - On 5/6/97, Council approved the Commercial Industrial Incentive Agreement. Phase III of the retrotit program included HV AC mechanical retrofits to six major city facilities based on a preliminary energy study. SDG&E project engineers have since conducted further studies during the technical specifications development, requiring design changes to the project. In addition, final bids received from the three SDG&E contractors were higher than anticipated. These two factors necessitate an amendment to the agreement. Staff recommends approval of the resolution. (Director of Puhlic Works) 10. REPORT ACCEPTING BIDS, AWARDING PURCHASE ORDER CONTRACT, AND APPROPRIATING FUNDS FOR PURCHASE OF ONE SEWER V AN AND PIPELINE INSPECTION SYSTEM - At the Council meeting on 9/23/97, staff recommended that Council award the bid for a new Sewer Pipeline Inspection System and van to P~rpoint, Inc. A representative from 3- T Equipment, a competing bidder, requested that Counci] award them the bid. Council directed that staff reevaluat~ the competing bids to determine if the bid should be awarded to 3-T Equipment. Staff has reexamined the bids and still recommends that the bid be awarded to Pearpoint, Inc. Staff recommends Council accept the report and approve the resolution awarding the contract to Pearpoint, Inc. (Director of Public Works and Director of Finance) Continued from the meeting of 9/23/97. RESOLUTION 18783 ACCEPTING BIDS, AWARDING PURCHASE ORDER CONTRACT AND APPROPRIATING FUNDS FOR PURCHASE OF ONE SEWER V AN AND PIPELINE INSPECTION SYSTEM - 4/5th's vote required, * * * END OF CONSENT CALENDAR * * * ORAL COMMUNICATIONS This is an opportunity for the general public to address the City Council on any subject matter within the Council's jurisdiction that is not an item on this agenda for public discussion. (State law, however, generally prohibits the City Councilfrom taking action on any issues not included on the posted agenda.) If you wish to address the Council on such a subject, please complete the "Request to Speak Under Oral Communications Fonn" available in the lobby and submit it to the City Clerk prior to the meeting. Those who wish to speak, please give your name and address for record purposes and follow up action. PUBLIC HEARINGS AND RELATED RESOLUTIONS AND ORDINANCES The following items have been advertised and/or posted as public hearings as required by law. If you wish to speak to any item, please fill out the "Request to Speak FornI" available in the lobby and submit it to the City Clerk prior to the meeting. 11. PUBLIC HEARING TO CONSIDER ADOPTION OF CITY COUNCIL PRIORITIES - Council previously had work sessions to discuss and develop City-wide priorities. On 9/] 1/97, Council completed a final review of the priorities and identified seven City-wide priorities. This meeting is schedukd to allow the puhlic to provide comment and input to Council regarding their proposed top seven priorities. A second hearing is scheduled for 10/28/97 to complete public testimony and then formally adopt the priorities. Staff recommends Council open the public hearing, take testimony on the seven priorities. and continue the public hearing to 10/28/97. (Budget Manager and Public Information Coordinator) Agenda -4- Odober 21, 1997 12. PUBLIC HEARING ISSUANCE OF MULTI-FAMILY HOUSING REVENUE REFUNDING BONDS - On 8/6/85. Council approved authorizing the sale of not-ta-exceed $24 million principal amount of multi-family housing revenue bonds (Eucalyptus Grove Project) 1985 Series. The actual bond was issued for $21,885,000, which enahled the developer, Morgan-Gardner Subdivision, to build the 376 unit multi-family housing complex at 67 East Flower Street. In March 1996, the property was sold to Wasatch Property Management, who an~ based in Logan. Utah. Staff recommends approval of the resolution. (Director of Community Development) RESOLUTION 18792 AUTHORIZING THE ISSUANCE OF MULTIFAMILY HOUSING REVENUE REFUNDING BONDS (EUCALYPTUS GROVE APARTMENTS), SERIES 1997 AND APPROVING CERTAIN ACTIONS RELATED THERETO BOARD AND COMMISSION RECOMMENDATIONS This is the time the City Council will consider items which have beenfonvarded to them for consideration by one of the City's Boards, Commissions, andlor Committees. None submitted. ACTION ITEMS The items listed in this section of the agenda are expected to elicit substantwl discussions and deliberations by the Council, staff, or members of the general public. The items will be considered individually by the Council and staffrecommerulations may in certain cases be presented in the alternative. Those who wish to speak, please fill out a "Request to Speak" form available in the lobby and submit it to the City Clerk prior to the meeting. None suhmitted. ITEMS PULLED FROM THE CONSENT CALENDAR This is the time the City Council will discuss items which have been removed from the Consent Calendar. Agenda items pulled at the request of the public will be considered prior to those pulled by Councilmembers, OTHER BUSINESS 13. CITY MANAGER'S REPORTCS) a. Scheduling of meetings. 14. MAYOR'S REPORTCS) a. Ratification of appointments: Child Care Commission - Helga Rindone (to fill vacancy created by Commissioner Pidgeon, whose term expired June 30. 1997); and Design Review Conunission - Peter Marlon (to fill vacancy created by Commissioner Kelly, whose tenn will expire June 30, 2001). Agenda -5- October 21, 1997 15. COUNCIL COMMENTS ADJOURNMENT The meeting will adjourn to (a closed se.ssion and thence to) the regular City Council meeting on October 28, 1997 at 6:00 p.m. in the City Council Chambers. A meeting of the Redevelopment Agency will be held immediately following the City Council meeting. U' , J t! ~~ C', ! -, ':~ C-:1 :: .:' ~YJ ~; e C t...';" ,; Tuesday, October 21, 1997 l',P "'j i'C~"7.~o;.:3 '0 6:00 p.m. an i t:..J~J~~.2Z~ ~:;C i - (immediately following the City Council Meeting) ,,: i:1 '. , Council Chambers Ptiblic Services Building . C.//'h...~." . -cr--~~" Citv of Chula Vista Citv Council CLOSED SESSION AGENDA Effective April 1, 1994, there have been new amendments to the Brown Act. Unless the City Attorney, the City Manager or the City Council states otherwise at this time, the Council will discuss and deliberate on the following items of business which are permitted by law to be the subject of a closed session discussion, and which the Council is advised should be discussed in closed session to best protect the interests of the City. The Council is required by law to return to open session, issue any reports of final action taken in closed session, and the votes taken. However, due to the typical length of time taken up by closed sessions, the videotaping will be terminated at this point in order to save costs so that the Council's return from closed session, reports oftinal action taken, and adjournment will not be videotaped. Nevertheless, the report of final action taken will be recorded in the minutes which will be available in the City Clerk's Office. 1. CONFERENCE WITH LEGAL COUNSEL REGARDING - Existin~ litigation pursuant to Government Code Section 54956.9 . City of Chula Vista v. The Fieldstone Company, et a!. . Jones Intercable v. City of Chula Vista. . Wolfe v. City of Chula Vista. CONFERENCE WITH REAL PROPERTY NEGOTIATOR - Pursuant to Government Code Section 54956.8 . Property: (1) Approximately 2.57 acres of property approximately located at the undeveloped southern end of 780 Bay Blvd., Chula Vista (APN 571-250-17); (2) Approximately 2 + /- acres of a portion of property located on the south side of Otay Valley Road at Maxwell Road, Chula Vista (APN 644-040-40); (3) Approximately 1.74 acres of property located at 130 Beyer Way, Chula Vista (APN 629-060-54); (4) Approximately 1.1 acres of property located at 1771 Fourth Avenue, Chula Vista (APN 629-060-74); and Negotiating parties: (l) City of Chula Vista (Chris Salomone) and Foster Properties: (2) City of Chula Vista (Chris Salomone) and Fred Borst; (3) City of Chula Vista (Chris Salomone) and Standard Plumbing and Industrial Supply; (4) City of Chula Vista (Chris Salomone) and Harold F. Dodds. Under negotiations: Purchase price and terms. Agenda/Closed Session -2- October 21, 1997 . Property: Approximately 72.5 acres of property located at the southwest quadrant of Otay Valley Road and Otay Rio Road, Chula Vista. Negotiating parties: City of Chula Vista (Chris Salomone), Los Alisos Company, and Universal Concerts, Inc. Under negotiation: Terms for modification of Ground Lease, Tri-Party Agreement, Sublease and/or Settlement Agreement for the above-described property proposed for development into a 20,000 seat amphitheater. CONFERENCE WITH LABOR NEGOTIATOR - Pursuant to Government Code Section 54957.6 . Agency negotiator: John Goss or designee for CVEA, WCE. POA. lAFF. Executive Management, Mid-Management, and Unrepresented. Employee organization: Chula Vista Employees Association (CVEA) and Western Council of Engineers (WCE), Police Officers Association (POA) and International Association of Fire Fighters (IAFF). Unrepresented employee: Executive Management, Mid-Management, and Unrepresented. 2. REPORT OF ACTIONS TAKEN IN CLOSED SESSION .'<;'-~.., .,::,......~"..,,' .~.. """.".'.",- C~,<:..\:.-' . . . ~ . ",:,,';II..I~:.; ,'. :"<x; .........0 <::":;'''',:./,.:~: AND Pt~a$ecome celebrate our 2 new ',; ...1......1 . .t d I 5;;ty..s:CnuO -communi 'j gar ens. ,y!!C;'Tbursday, October 23, 1997 Dedication begins at 1:00 p.m. 540 "'G'" Street Vista Square Elementary School South-East corner of the playground ( , Open House till 2:00 p.rn. In the Gardens at Chula Vista Junior High and Vista Square " :~ t:~~ "<-";,, For more information call Jenni.fer BartindaleWarb & Recreation) 691-5109 CargnJtoffinan (CV,Jr, Iiign) 691-5655 . ..~ peichler (Vlsta~ra) 422-8'374 , . '. . rC' ''', \ i , ! :..: , ~ \ , K'h",l!I!!!!A~,,*,'&'f!&__'W!K:X'~tU'k,__'l ~ ~ , i ~ ! \ ( , 1 ('I , , i i ! 'i , \ , \\ ! I m~lgme J cny in whiCh each fcSt dent (an hve a healthy. prouuctlve Ide m a clean, safe environment Imagine a city that supports all of its residents in their quest for personal satisfaction aou fulfillment. Imagine a city where government, industry and residents \vork together to achiLvl' common goals that support the well ocing of the c()mmu~ nity Finally. imagine a city where all individuals - reganJJess of race Of income - have equal access to ser- vices, resources and opportu- niUes. Transforming touay's city into that city is the vision of the:: intc::rnatiooal Healthy Cities movement. J(C ~~f4t6W' _It stnmgth. efl.S our ability to serve our resi. dents by sharing new ideas and tbe successful experi- ences of others. " Boh Bmtlett, Mayor, City of Munro Ilia . . . jidure /JeidtJ> <if aU CalifornIans. .. George Flores, MD., Health Officer, Sunoma c(Junzv . . InvohJing commum.. ty residents along with tbe public: and private sectors. .. Elibu Ham's, Mayor, Oakland Judy Chu, Former Mayor, Afonterey Park "Involvement in the Healthy Cities Project has allowed us to transform a theoretical concept of defining a healthy city into a concrete plan of action for creating a livable community...Ultimately, we can look back in ten years and see not only if we have become a healthy city, but also, perhaps, a model American city...The Healthy Cities process is a vehicle for getting there." -Philip Hawkey, City Manager, City of Pasadena "Healthy Cities provides us with a forum to participate in joint problem-solving for the common good. It is an excellent vehicle for citizen involvement and community participation." -George Caravalho, City Manager, City of Santa Clarita "When I first heard about the Healthy Cities Project, I realized that we as a city did many things that were already "healthy." The question was - how could we tie these activities together to become a Healthy City? By going through the process, we've learned how to open new doors throughout the community, allowing us to bring focus to issues important in San Ramon." -Patricia Boom, Councilwoman, City of San Ramon ~ CALIFORNIA HEALTHY CITIES PROJECT The California Healthy Cities Project is part of a growing international public health movement which focuses on the city and its total environment --including the physical surroundings, economic conditions, and social climate--as an arena for health promotion activities. The Project advocates that the public, private, and voluntary sectors work in concert with community residents to identify and address health priorities and related issues of livability. The development of responsive public policies, which preserve and promote individual and community health, is key to the Healthy Cities approach. California Healthy Cities: . utilize a collaborative, participatory approach to community improvement; . join a circle of individuals and municipal leaders who are actively involved in creating healthy cities; . receive staff support and programmatic resources to develop and implement programs and policies which address locally-identified priorities; and . gain access to consultants with expertise and municipal experience in problem-solving, community-based health promotion, and coalition building. Healthy City activities have included: . the advancement of community-wide strategies to create a "tobacco free city"; . the provision of adult literacy and English-as-a-Second Language programs to assist with living skills; . the development of a Quality of Life index that will gauge community livability against a number of quantifiable variables; and . the preservation of community open space along with the development of parklands and recreational amenities. L PURPOSE OF THE PROJECT . To encourage municipal leaders to adopt a broad definition of health, recognizing the contribution of education, living conditions, employment opportunities, and support services to individual and community well-being; . To promote a style of municipal governance that involves all sectors and which embraces ethnic and cultural diversity as part of a commitruent to full community participation; and . To foster collaborative community partnerships to identify and respond to health concerns and related issues of livability. II. BECOMING A CALIFORNIA HEALTHY CITY . Orientation Session . Periodically, the Project sponsors orientation sessions which cities interested in being considered for formal participation, are required to attend. This interactive session includes: . orientation to the Healthy Cities concept and the California model; . guidelines for the development and implementation of a local project; . suggestions for forming a steering committee which represents a variety of sectors within the community; . discussion of needs assessment techniques and tools; . explanation of the national health objectives, Healthy People Year 2000, and their application within cities; . suggestions for project topics and related implementation activities; and . assistance with identifying logical first steps for organizing a local Healthy Cities effort. Our vision is that every person in California can live a healthy, productive lift in a clean, saft environment. we accomplish this by working with local leaders to improve the quality of lift in California communities in order to meet the Healthy Peopk 2000 goals. What is a Healthy City? A Healthy City is one which promotes a positive physical environment, a vital economy, and a supportive social climate through: . broad participation in identifying needs, mobilizing community assets, planning and implementing solutions; . collaborative partnerships among public agencies, the private secror and community- based organizations ro optimize community resources; . programs, policies and plans ro promote and protect health and fosrer greater equity; and . ongoing monitoring and feedback on programs and policies to ensute quality and appropriateness. What is the California Healthy Cities Project? The California Healthy Cities Projecr is a resource for people like you who are working to create a healthier community where you live. Whether you are a public administrator, elected official, public health professional or other community leader, the California Healthy Cities Projecr can support you in improving your community's quality oflife. The Projecr works closely with ciries interested in undertaking an intensive community improvement effort through irs local programs component. All communities in California may request consul ration, information and resource brokerage. The multi-disciplinary staff includes persons with expertise in public health, public administration, community and organizational development, and communication. The Projecr works closely with local healrh districts, as well as regional and sratewide organizations to support Healthy Cities efforts throughout the state. The Project also sponsors Youth Takin' On Tobacco. How can California Healthy Cities help me make my community a better place to live? You can take advantage of these programs and services oflered by California Healthy Cities: . Educational programs to inspire and inform - Orientation sessions are conducred throughout the srate to familiarize local leaders with the Healthy Cities concept and to assisr them with getting organized. An annual conference is held fur parricipating cities. Participants represent all aspecrs of community life, &om elected officials, public administrarors and healthcare professionals, to educators, the fairh community, and many others. The Project also organizes and conducrs other educational programs and conferences on special topics. . Technical assistance and resource brokering to support and sustain - Consultation is provided via telephone or site visits to ciries initiating or maintaining Healthy Ciry programs. All cities, counry healrh departments, and communiry (over) . . Technical assistance and resource brokering to support and sustain - Consultation is provided via telephone or site visits to cities initiating or maintaining Healthy City programs. All cities, county health departments, and community repre- sentatives can receive information and assistance on request. The Project also brokers programmatic and financial resources. Linkages with public and private regional and statewide organizations have leveraged over $1.57 million and provided valuable professional resources for local Healthy City efforts in communities like yours. . Services and products to network and facilitate - Connections, the Healthy Cities' quarterly newsletter, keeps readers abreast of what other communities in rhe state are doing and new resources and learning opportunities. Other publications include Highlights, a semiannual bulletin of Healrhy Cities activities; Planning and Resource Guides; a Healthy Cities video; and the Community Compass, a community engage- ment process which assesses community life and develops action plans. Some of these are available at no COst-contact us for more information. . Opportunities to celebrate success - A Special Achievement Awards program is conducted ro recognize examples of policies and programs which improve community health and well-being. Participaring Healthy City programs may receive recognition on an annual basis. Where are California's Healthy Cities? Healthy City programs have been implemented in communities of all sizes, demographics and civic personaliries. They include the following cities: Arcata Baldwin Park Berkeley Cathedral City Chico Chino Hills Chula Vista Coachella Delano Duarte Escondido Glendale Glendora Long Beach Martinez Monterey Park Oakland Oceanside Palm Desert Palm Springs Pasadena Pittsburg Redlands Rohnert Park Roseville San Bernardino San Carlos San Francisco San Ramon Santa Clarita South El Monte Tulare Vacaville Vista West Hollywood West Sacramento How do I get more information? California Healthy Cities welcomes yout inquiries. Please contact: California Healthy Cities Project P.O. Box 942732, MS 675 Sacramento, CA 94234-7320 916-327-7017 (tel) 916-324-7763 (fax) U7e know that many factors influence community health and well-being- among them good schools, decent housing, safe streets, and a local economy which supports high levels of employment. Furthermore, we know that these factors are interrelated. Joan M. Twiss, Director The Project is being conducted by the Wesrern Consortium for Public Health under contract with the State Deparunent of Health Service.s, Contr~t No. 96-26044. mac\project informacion\one-pager (3/19/97) en w - I- o > ::E: I- ...J <t w ::E: <t Z a: o IL ~ <t o IL o w :::! IL o a: Q. <t f- ~ 0' 0:: 0.... (f) w 1= o ~ ~ w :r: ..::: ~ t2 6 " " _ c .2 0 s:: i::' .2 1:: ~~ 0 .c '0 ~ s:: ON ~ CC E g~ O.+-E; C r~ "Cwg - ~~ ~ ;CD =0 CD ~E _" E'~ ~ Coo C~ E ~- ~.Q _Om"- 1:: CD::::I oc.. a. ..c.-....- ~......- (ij CD ~~ O..c. 0 =5 'EO cc..e CD E '- <( ~~ C - Q) Ceo+:: c 0 E "E ~ li5 c I c Q..m ::::Img~ ~8 ~Eo~Ue ._O_C -.Qm .Q~~ 2cmg '--Ins .......m . O co 00.. c.!!2Q)'E (ij"c::;::; '~mgm ~ o~ ~o w.... 0 U..c. 0 m>Im 0::::10 CECDW -O!S=>E_:5.o:! oCL=>~" cEcE .;;Ec"=>EE woo-~'E'Ec~oc::::l~E .- ~~m_oo ooE""'oo ~EO oo.Q~wmoW""moWm c..c.w (l)~._......Qoom'2oo.Qw .... ~I>CJ)EE=~CLE>~E ~i~~IE~CL~IE=>Elc~8CL co(/.) _ _Q.c..ca....J:Q.- .....Q.- 0).... .uco..c.uooQ. oom..... ..c. ~~<(~~~~gEo~Q~'EoQO~IEo~~~~~~<(~E~~E~~ c ....mmm~ ww..... m.........~ cm-wmw~mo~""'O""'m ~._~m>CDCD>wOI>CD~O>CDEE~oga.a..,^I,^~>O~a..OEI c c CD I 0 . CD 0 0 0 c 0 CD ,,.., (.) UJ V.1 C OJ _ - c:: CD 0 0 =>=> _OOco~O oOUU=>o ~'~OwO=>O~=>ooUw EEen~ go~ eno .~ EoCJ)ol-~-E oEco ~ EE~E~~~ca.Q~~ca€ ~Eca~'2-~.Q~E~eE(l)m~.Q o ::::I::::I~~C::::lO~::::I::::I::::I ~8..c.ca>c> ::::1m -~::::Ic ooo~oo~omooool'~~OO _~_(l)_Oo~o.Qo.~m UU~~>>z~en>~~> u~~wenIenIU>~U>~~en c o ~ 2: CD ~ CD a: iii Cf' w a: <( VI :;) U o u.. z' <( is w :: -.,.... '" CD '" LO.CD ..... OOC\la) _ '" '" 'IHIHI> <( VI <t VI a: <( ~~ 'Cc _ CD CD 0> ~ m ~D.c. CD . . a>"'''' - a> a> a> a> - - ~ z :;) o u z o a w a: ~ CD i521~ "0 i::'"U -,,<(CD E ~ E ~o~ I~<( ~~~ t:"5t: o 00 ZenZ . W N iii 000 000 "''''... t.6 0)- C\j- _"'0 - > !:: u "'" ~ ~ CL>- c CD .$ .~ Qj ~"C"'" o - ~ ~ ~ CD <(!D!D CD'" 00 a>o oa>. "'- <lHI> 'E'E CD CD ~ ~ CD CD ac. , . "'''' a> a> a> a> -- CD "C 'w CD~ .~ ~ a:!D ~~ -t: => 0 bJz 00 00 "'0 "":0- "'.,. ~ (5 l'! "C CD 0 ~ 0 (51: UU o '" o ai '" "E CD ~ CD 0. .,. a> a> - o c '6 Ii; c ~ CD !D c '" en ~ "5 o en o o '" r-: '" ~ I o " E U '" - o N '" CD.,.'" -"'a> "'0 CD C">""":"": "''''''' "E CD ~ CD ~ C. 'E'E (0 Q) ~ 0) 8J Q) ";'0.0. a> , . a>...a> -a>CD a> a> -- . .,. a> a> - o C> .!J! o c ~ en ~ CD CD a; "C C> "00 C Q;c<( .~ Q; ~ a:~-, ~ "5 o en .cm.c - ~- ~'E~ o CD 0 enuen o o '" on '" - 000 000 a> CD"" (O-e\ici _ '" '" ~ W '> ~ :; ~ u .!!1 ~ 0 Q) oCt: co.52 eo o CD => UOO '" a> CD N '" c CD ~ CD ~ C. '" a> a> - C\j(OOO-q- '" ..... C"> (0 C">..... 0) 0) -q- (0 .....- It)- C"><o:;tC"><o:;t tf} 'EA- tf} tf} "E'E CD CD C!Jrl),-lt) Q)Q)O')O') 0.0.0,";' I I co 0') (0<<>0)0') 0')0).......... a> a> - - o C> .!J! o c ~ en en en enS ~~~~ ~ ~ ~u cc:gco <(<(<(= rl) CI) CI) c: 0000 ....J....J....JO ~ "5 o en .c.c.c.c ---t ~ :J ~ 0 oooz en en en o o '" ai o 0000 0000 Ooo<o:;too 00-"": a>""": 0""d"C\lC"> - .,. - o "C '6 c o o ~ W ~ o Q) eo eo N m 0 Q) Q) "C"C'::c c: c ~j'- Q) Q) C t --oeo (!)(!)~::;; "''''''' Oa>'" "'0'" e\i ",- C"i "''''''' 'E'E .,. CD CD 0) 8J 8J ~c.c. a> . , a>"'''' ~a> a> a> a> - - ~ 2 0 ~eoO) go"C .!J! <(CDO ~ E c o ~ eo ~<(en ~~~ '51:'5 000 enZen 000 000 ..."''<t ci e\i 00- "'...'" "'~ "'" Ii; CL CD ij)"C :!2 ~ c ~ CD '" c 'E32m o ~ 0 ::;;00 ~ => ~ c CD U o a> a> CD :5 .!11 CD " ::> o ~ ~ as "C . '" - '" ..... '" c CD ~ CD ~ C. o a> a> - CD "C 'w ~ CD > a: ~ "5 o CJ) o o '" C'i '" t: CD ~ CD o E '" CL "C Q) :J C ;; C o o CJi w i= o > :E: I- ...I <( W :E: <( Z a: o !:!: ...I <( o LL o W ...I u:: o a: n. <( ...; _ >. .-E; c: ~: :!:: c: (/) .=:: (1)-- 3.Q rJ) t5 ECo E-:;: '" <( Q.._ '" C ~5 ~~~ ~ ~ 5 c >,;. OUJ'c I~ _'~ E .2 ~j ~~ ~Ij l ~ j& E I 'c '0 ~ '5 <(0 _Eo 5 >_ 51?: ~ !i 5 (5 Yi a: _ 5 2 ~g~co C oc~c oc~~E~ mC~~ ~ ~a:~E~~E_~gE~IE_~E~~~i ffi~Eg_~cc .Q~.2~o~rJ)C~~rJ)~IDC rJ)~UJ~~ _NOO~Cm.QO ~=~~~~oom=~ooOEm.~rJ)~_=~ .Q~~~m _'- ~roE~~~~~roo~:;:UJ~E~~e~~ >~rne~~~E coG) 0> -cn~Q)I-C/)'U g. -00...._ .... _"'::::C/)_~'_:::IQ) zI2~Q)o~~I~~oo~c~~cI~Co~<CO~'U~ en~:::;"':~.::: >.'" >.C >.0'::: "'.2"': >.0 >.?.2.:::.2; >.00; ~UJ ~ -~_~~c~I:!::Q):!::~c~~~oO:!::u~c~=OI~w~ ~303~8303~3~8o.~~~83~.~8338o~oB ~E~E~,E~ErnE~I~~~E~~E~~~EE~~~~c oEmE-~ESE"'E~I~SEE'" E"'E EE~Sc-~ :~o:::lo~,~ooO~O~I'~OEoE~oEE.~ooooS~.Q >000> o~o<(oz ~ OUJ~OUJ OO~~UJI> ~ If) or UJ a: <( If) :J o o u. Z~I <( gJ - '" C - UJ () .... ::i:3!1 ~ ~~ <( E If) a: <( UJ ~ ~ Z :J o () z Q Cj UJ a: . UJ N iii ~ !::: () E '" rn '" ~ Q. .... '" '" - '" "0 'w ~ '" .2: a: ~ S o en o o - o .... rn C> C .'" c. en E m ~ "" o - on "" '" E '" rn '" ~ c. '" co '" - rn '" 0; C> C <( rn o -' ~ S o en o o "'. - "" - ro C '" "0 '" rn ro ~ N "" '" oi "" '" E '" rn '" ~ c. N '" '" - ro U) o o ~ E o o ~ 1:: o Z o o '" ,...: .... ~ '" ..0 rn =: ii: "" .... o ,...: "" '" E '" rn '" ~ c. . ..... '" '" - o C is 0; C ~ '" aJ C ro en ~ S o en o o .... o '" rn "0 C ro 'is '" a: .... '" o oi "" '" '" '" o '" '" - ro E o C o en ~ 1:: o Z o o "" cD "" -'" ~ ro ~ 1:: '" C ~ o a: '" .... '" 0> "" '" ""co.... """'- "''''.... t.O-.::t"M N"''''' '" '" '" E '" rn '" ~ c. 'E"E'E '" '" '" rn rn rn '" '" '" Ice a. . , , "" '" '" - '" '" "" '" '" '" '" '" '" --- ~ '" o '" CL o C 0 ~ ~ co 0 '0 c '" c ....mctl '" "" ~ aJ..:u. c c c '" '" '" en en en ~ 1:: o Z ~~~ -1::1:: '" 0 0 ~zz o o ..... ..... .... 000 000 NNO ~-cD<t:i "'NN - .... ~ .~ rn o a: o c 0 :c ~ m (J) .- s:::: .Q g ~ ~ '" '" ro ~ aJOu. c c c ro ro ro en en en ..... o '" M '" '" E '" rn '" ~ c. "" '" '" - '" U) o o ro ~ E o o ~ 1:: o Z o o "" on "" c o E ro a: c ro en o .... '" C\i '" '" ....'" .....CO 0'" ,....,-"'I:t- N N '" '" E '" rn '" ~ c. E '" "" rn '" ~ cc. '" , "'", -", '" - o '" '" - rn '" 0; C> C <( rn o -' rn '" I~ c '" <( ~ rn.!!! o '" -'~ ~ S o en ..c:~ SE o '" eno o o '" o - - 00 00 CON o-M" N"" .$ .~ (3 ro E '" en '" E o :;: [jj ~'" "5 m oS en~ '" ..... '" o .... '" "".... "'- "''''' <:'\foi ""N '" '" E '" rn '" ~ c. 1::'E '" '" rn rn '" '" ca. , '" '" '" - "'0 '" '" '" '" -- o c '" -0 en rn '" ~o; '" C> .- C 0<( C rn '" 0 en-, ~ 1:: o Z ~~ '5'5 00 en en o o "'. - .... 00 00 0>- "":C!J- ...."" ~ .;; ro o ro > !9w rn '" ;;:3: , , "8 ~ ~ -0 I CO '" CO oi N '" - '" 0.... .5t <0 0 ~c~ c...Q r-;- I'lIco<q- .~ U5 M == C\f...... o=<q-T""" >.~ '" R ~ ~ <( r-=. ttlC\lOC\l Q)~o('t) IC\I"E$ ttI<q-Q)T""" .- '" E '" Cx ~ o 0 ~ ~ca~ 8cien ~ E '" rn '" C '" '" '" - o -0 ~ ~ 1:: o Z .:: o <( ~ z o o z o i= <( :;: a: o u. ~ UJ a: o :;: a: o u. o o '" oi N o E '" E ~ o '" en U) '" :!: ~ A national award-winning newsletter VOLUME NINE NUMBER TWO. FALL 1997 EDITION Quality of Life Indicators Inform Pasadena Budget Process ith the adoption of its FY 1997-99 budget, the City of Pasadena became one of the first cities nationwide to craft an operating budget incor- porating community quality of life indicators. The City used the Quality of Life Indicators, developed in 1992 under the auspices of the California Healthy Cities Project, as the foundation for this innovative budget. In this effort, consensus was developed among community residents on 10 key areas considered to be critical to quality of life in Pasadena. The ten areas were: community safety, transpor- tation, recreation and open space, housing, arts and culture, economy and employment, environment, health, education, and alcohol, tobacco and other drugs. Although the City realized it could not be solely responsible for addressing each issue, it recognized its obligation to provide collaborative leadership in devising solutions with the many organizations and resources in the community. Once consensus wa..;; reached. the City's next challenge was to allocate resources to achieve the goals reflected by the indicators. Each city deprntment formulated measures linking their operations to key areas as appropriate. These measurements ultimately became the basis for a pelformance-based budget. The newly created budget allows the City Council, staff and residents to identify resources and assess the City's progress related to each indicator. Pasadena Receives Awards for Performance-Based Budget hilip A. Hawkey, City Manager, and the City of Pasadena received national awards for the City's efforts to improve organizational effectiveness. The prestigious futemational City and County Management Association Program Excellence A ward honored Pasadena's organizational effectiveness effort, initiated at a time of decreasing tax revenues and increasing service demands. The City streamlined bureaucracy, created a customer service hotline, and involved employees in decision-making and developing performance- based measures, resulting in a $2 million reduction in costs without reducing services. The Winston Crouch Award is given by the Los Angeles Metro Chapter of the American Society for Public Administration for "meritorious public service achievement or contribution to the quality of life in the Los Angeles metropolitan area." Mr. Hawkey was honored for transforming the culture of the City and preparing it for the 21 st century using tools such as performance-based budgeting. City Manager Phil Hawkey observed, "The City is committed to improving community quality of life and the performance of city government. The Quality of Life Index served as the framework for the City's first results-based budget, which focuses on describing the results the City Council and the community can expect for the dollars appropriated." For more information, contact Philip A. Hawkey at (818) 405-4333. >:' Project Receives National Award for Collaboration he California Healthy Cities Project is the proud recipient of the National Coalition Award, a joint award of the Centers for Disease Control and the Association of State and Territorial Directors of Health Promotion and Public Health Education. The Project received this award for its leadership in providing consultations to other states and communities in designing and implementing Healthy Cities programs and for the collaboration within California in developing the first and largest Healthy Cities Project in the nation. In 1996, the Project provided nearly 500 consultations statewide and assisted nearly 100 agencies and organizations outside CalifOnlla and internationally. The Project makes dozens of presentations annually to state, national and international audiences. Project Director Joan Twiss states, "We are thrilled to receive this national recognition fium CDC and ASTDHPPHE. We look forward to expanding our network of communities and continuing our liaison with the healthy cities movement nationally and internationally." Survey Finds Over Half of Teens Contribute as Volunteers A recent study conducted by the non-profit organization, INDEPENDENT SECTOR. shows 59 percent of American teens contri buted 2.4 billion hours of volunteer work in 1995. This work would be valued at $7. 7 billio/1 at mInImUm wage. Among the factors influencing teens to volunteer were: . Whether or not they were asked to volunteer. Teens were four times more likely to volunteer if asked. . Exposure to positive adult role models. Teens who observed a family member or someone they admired helping others were twice as likely to volunteer than those who did not. _..A..", g._CIty , III I! . Age at which volunteer activity began. Youth who first volunteered before age 14 were more likely to continue volunteering later in life. The findings indicate volunteering is best cultivated in childhood and in the early teen years. . Personal attributes and beliefs such as: compassion for people in need; a belief that if they helped others, others would help them; and viewing the work as an opportunity to contribute to a cause important to them. "Our survey findings evoke great optimism about the future of volun- teering in America," said Dr. Sara E. Melendez, President of INDEPENDENT SECTOR. "As adults and role models, National Civic League Names Fremont an All-America City 19')7 Fremont, California (population 187,000), was one of ten cities nationwide to receive the National Civic League (NCL) 1997 All-America City Award. This award recognizes communities for civic achievement and grassroots community problem-solving. "These ten All-America City Award winners show what citizens can do when they work together in a spirit of hope and realism to attack the tough circumstances facing their communities," said Senator Bill Bradley, NCL Chairman, "This is a results-oriented program that provides opportunities for community learning by transferring knowledge and success from people to people, neighborhood to neighborhood and community to community." Fremont was recognized for: . A Housing Scholarship Program encouraging heads of households on public assistance to get into job training and obtain gainful employ- ment. Participants receive greatly reduced rents during training and for up to five months after accepting employment. Over 90 percent of recipients have completed job training, and 100 of 104 families are able to pay market rents. . A Community Emergency Response Team (CERT) trains neighborhood, business and school teams in emergency preparedness, light search and rescue, emergency first aid, and other skills required to survive in the first 72 hours following a disaster. . A network of services support youth and address youth crime, gang participation, and drop-out rates, including preventive strategies, restitution programs and youth- driven programs directed at peers, Two California cities, Baldwin Park (a Healthy City) and Sacramento, as well as one California community, Camptonville, achieved finalist status in this competition. For more information about Fremont's accomplishments, contact lan Perkins, City Manager, at (510) 494-4800. ~ we have the obligation to encourage philanthropic activity among our youth--the future of our society," Teen volunteers benefit in the following ways: . Gain respect for others . Learn to get along with and relate to persons different from them . Develop leadership skills and a better understanding of good citizenship INDEPENDENT SECTOR is a national leadership forum with a mem- bership of 800 voluntary organizations, foundations and corporate giving programs. For more information, contact Cathy McFarlane at (202) 833-8121, or Rose Hector Erickson Mendoza at (202) 223-8100. ~ Women's Health Leadership Seeks Women Leaders The Women's Health Leadership Program (WHL) is currently recruiting for the 1998 program year. The overall goal of WHL is to improve the health and well-being of women in California. The program accomplishes this by building the leadership capacity of women who already make a difference in their communities and who have the desire to strengthen and build on their current work to achieve greater impact. WHL fosters learning across ethnic, cultural, educational and experiential lines and aims to enlarge the network of trained, ethnically diverse women who can speak on behalf of women's health. Selected women leaders must be able to commit to a year-long program consisting of a diverse set of required and optional activities ranging from trainings to community projects. WHL invites you and/or your colleagues to apply for the 1998 program year. The deadline for applications is October 23. 1997. Recruitment is statewide. For more information, contact WHL at (916) 498-6964.~ Page 2 . COllncctiollS . Fall '97 Convenience and Public Awareness Key to Increased Used Motor Oil Recovery n the United States, 42 percent of drivers change their own oiL and it is estimated that such drivers improperly dispose a/over J 87 million f!.al/ol1s (~r used motor oil per .vear. consistent message, and distributing educational hand-outs. Container distribution programs and the involvement of social organizations, schools and local businesses were also identitied as important to success. The Environmental Hazards Management Institute (EHMI), a nonprofit, nonpartisan environmental, health and safety, research and education group, recently completed a study of used motor oil collection programs in California and identified fac- tors which increase the success of such programs: . Convenience, including convenient drop-off sites, collection of used motor oil as part of regular curhside collection, and door-to-door collection of used oil upon request. . Effective public awareness approaches, induding using a variety of multimedia approaches, presenting a clear and The conclusions were based on interviews with 95 percent of California's 253 local used motor oil management program coordinators, as well as input trom educational consultants, re-refined oil industry . representatives, environmental groups, used oil equipment manufacturers, representatives of the California Integrated Waste Management Board, and other state environmental officials. For more information. contact Jennifer Kaufman, EHMI, 10 Newmarket Road, Durham, New Hampshire 03R24, (603) 868-1496..0:- Birth Defects Near Hazardous Waste Sites n the largest study of its type ever undertaken, the California Birth Defects Monitoring Program found that women living within one-quarter mile of an EP A Superfund site during the first trimester of pregnancy (when birth defects occur) were twice as likely to give birth to babies with neural tube defects and four times as likely to give birth to babies with serious heart defects. Women living more than one-quarter mile from a Superfund site during the first trimester were not found to be at higher risk. Many Superfund sites are military bases. Of the 105 Superfund sites in California, approximately 20 percent are military hases. For more information, contact the California Birth Defects Monitoring Program at (209) 224-2212..0:- Youth Takin' On Tobacco Grants Are Awarded he California Healthy Cities Project (using revenues generated by Proposition 99, the 1988 Tobacco Tax Initiative) recently awarded five Healthy Cities $33,000 each to engage youth in countering pro-tobacco influences. Engagement --- the active connection of youth to community as both recipient and doer --- is a prerequisite for success for the projects. Each of the following cities will undertake an evaluation to learn more about how to better involve youth in community activities. Chico will build on prior Healthy Kids 2000 work that identified protective factors which promote positive development. The project will be integrated into an after-school program to serve middle school students. The on-campus activities will allow junior high teens to make educated choices regarding tobacco use while spreading the message about staying tobacco free through service learning projects. Chula Vista will capitalize on its youths expressed desire to be mentors and positive role models for younger children. The project will revive the use of the Teells As Teachers model in after-school sites with non-classroom settings. Changes in the mentors' behavior toward pro-tobacco influences will be the focus of the evaluation. Escondido's project will target youth aged 6 through 17 in two predominantly low-income neighborhoods and will be integrated into the EYE Counseling and Crisis Services' mentoring/ tutoring after-school program. Youth will be matched with an Americorp member who serves as a tobacco-free mentor and who will work with them on tobacco-focused activities to promote making informed choices. One of the activities will be learning more about the Intemet through a process of developing a Spanish/English "Tobacco Awareness" webpage. Oceanside plans to create a healthier environment for its young athletes by developing youth leaders who will assess the sale of tobacco look-alike products at concession stands around recreation ball fields and develop strategies to address the issue. Additionally, youth will review tobacco policies of at least two city athletic leagues and make recommendations for changes. Vacaville's youth conceived of a Critical Choices Campaigll to promote personal responsibility. Through teams established at selected schools to work on school and community activities, the project will empower youth to design and implement a social marketing campaign that will influence community norms regarding the use of tobacco. .0:- Fall '97. COllllection,\' . POKe 3 Connections Connections I, th.e quanerly publication of the Caliiomla Healthy Citie, Project. The Project is conducted by th" Western Consortium for Public Heahh under contract with the State Department of Health Services, Contract Number 96-26044 The Project focuses on the city and its total envirunment including the physica! ,urroundings, economic cunditions, and social climate-as an arena for health promotion activiti"" The Project advocates that th" public, private, and vuluntary sector, work in concert with community residents to identify and addres, health priori tie;, and related issues oflivabi!ity. The development of respom,ivepublicpolicie"whichpre,erveandpromoteindividual and community h.ealth,iskeytothe Healthy Cities approach. We encoumge use of information from C,mnect;ans with the following citation: "From Can.lwct;ons, the quanerly new,Jetter ot the California Healthy Cities Projoxt."' Editor Vivian Look SpeciaJProjectsfAdministrative Service,Coordinator Design/EdiloriolAsslstal1t KeUyAllen ProjeclAssistam PmjectD;reClor JoanM,TwIss Californ.iaHeallhyCiliesProject Tel: (916) 327-70J7 Fax: (916) 324-7763 @ Western Consortium for Public Health, 1997 ('ollllcdioll.\' California Healthy Cities Project Mail Station 675 P.O. Box 942732 Sacramento, CA 94234-7320 1,\, ',I',,' 1/"',',,',,,,1,',"'" '/'1,'1,,'11,'" UI,ill,',' ",'("'1,1,,,'''' ,,'j",,',' II, ',', /1,',"""\1" EVENTS & RESOURCES The California Wellness Foundation/ University of California Wellness Lectures Throughout October, 1997 Free public lectures by University of California faculty. Topics include: StrategiesjiJr Reducing Youth Violence: Media, COl1vnunity f.md Policy; Community Participation, Empowemlent and Health: Development of a Wellness Guide for California; Occupational/njury Among California Migrant Hispanic Farm Workers: Fighting the Invisible Epidemic; The Relationship Between Economic Factors and Gang Violence in Lvs Angeles: Policy Considerations; Mandatory Reporting of Domestic Violence: What Do Patients and Physicians Think?; and Beyond Choice; Myths and Facts About Adjustments to Abortion. For more information, contact Zaida Ali at (510) 987-9320: hotline (510) 987-9108; Website: http://www.ucop.edu/ucophome/ healaffi'wellpgm. League of California Cities Annual Conference October 12-14,1997 San Francisco, California For more information, contact the League of California Cities at (510) 283-2113. National Civil: League I03rd Conference on Governaru:e; The Role of Philanthropy in Community Building October 24-25, 1997 Arlington, Virginia For more information, call 1-800-223-6004. Mid-Year Transforming Local Government Conference October 30-31,1997 San Jose, California For more information, contact Tracey Perkosky at (310) 543-5124, email: tigwest@earthlink.net. Putting Our Communities Back On Their Feet November 14-15, 1997 Los Angeles, California For more information, contact Sharon Sprowls at (916) 448-1198; e-mail: Igc.land@bbs.macnexus.org Substance Abuse Summit December 11-12, 1997 Escondido, California For more information, contact Linda Peek, City of Escondido, at OW) 432-4531. Californians Offer Their Views About Welfare Reform Presents survey results measuring attitudes of Californians on welfare reform. Single copies free. Contact the California Center for Health Improvement at (916) 646-2149, fax (916) 646-2151, e-mail: cchi@quiknet.com Community Empowerment Manual Outlines steps that communities can take to make a more livable community. For a copy, contact Partners for Livable Communities, 1429 21st Street, N.W.. Washington, D.C., phone (202) 887-5990, fax (202) 466-4845. Marketing Your Budget-Creative Ways to Engage Citizens in the Bottom Line By Dr. Frank Benest Learn how to win public support for tough budget choices, engage citizens in the budget process and make budget documents more citizen-friendly. Also included are examples, mini-case studies, tips and sample tools for marketing the local government budget. To order, contact Tracey Perkosky, Innovation Group West, at (310) 543-5124, email: tigwest@earthlink.net. Stories of Renewal: Community Building and the Future of Urban America Describes new and unusual partnerships to expand opportunities for inner city residents using community-building strategies. To order, contact Tbe Rockefeller Foundation/Compusis, P.O. Box 790, Mahwah, N.J. 07430, fax (201) 529-1129, web site: http:/www.rockfound.org/ renewal.html. Requests should clearly reference "Stories of Renewal" (Job #583). Tobacco-Free Policies: An Update Summarizes recent legal, legislative and regulatory developments, including the status of California's anti-tobacco strategy. Single copies free. Contact the California Center for Health Improvement at (916) 646-2149, e-mail: CCHlemail@aol.com. Paf,:l'.J . COUllce/ioll,\' . Fall '97 o Printed on Recycled Paper ~, ~ " ------ - Are you interested in joining the California Healthy Cities Project? The first step is to attend an orientation session, The next session is scheduled for Thursday, February 5, 1998, in Sacramento. Learn practical tips for initiating and sustaining programs and policies which contribute to healthier communities! The all- day session introduces the Healthy Cities model, provides a Project overview, and discusses ways to identify and involve key groups in planning, developing and implementing local programs. To help with recruit- ment and program activities,parlicipants receive a 200-page Resource Guide, , a videotape and brochures for community distrihuJion. A representative from a participating city will describe their experience and answer your questions. The registration fee includes all orientation materials, continental breakfast, lunch and refreshments. To register, mail the completed form with payment to Date: ~ Thursday, February 5, 1998 Time: 9:00 a.m. to 4:00 p.m. (Continental breakfast and reRrstration at 8:30 a.m.) Name: - - - - - ----- - - California Healthy Cities by Friday, January 9, 1998. We have strong interest in the upcoming session and recommend that you register soon. For more information, call Kelly Allen or Shari Miller at (916) 327-7017. . REGISTRATION FORM Place: TBD - Sacramento Title, Organization: Cost: $95.00 per person includes: . Resource Guide . Video Tape . Project Brochures . Continental Breakfast . Lunch . Afternoon Refreshments Address, City, Zip, Tel, Fax, Vegetarian Meal Requested, Yes 0 Please clip and mail this form, along with check to: California Healthy Cities Project February 1998 Orientation Session P.O. Box 942732, Mail Station 675 Sacramento, CA 94234-7320 (916) 327-7017 Components of the Session: . Orientation to the Healthy Cities concept and experiences from California communities . Suggestions for fonning a steering committee which represents a variety of community sectors ~ . Guidelines for the development and implementation of a local program No 0 ~ ~TTTTTTTTTTTTTTTTTTTTT~~ . . """ . .!'Y,A;; . TH( (ALTHf ITf: '^^ ~, ~... \ "'::po ~ ,.. .. ~ ," ~ ~ \ . ..'~ . ~ ~ ~ . i~"': . ." ~ ~ \:"~,,,,'1 , ~ ~". t ~ . , ~~. ~ ~,. ~ ~ ~;~zr~~ ~ .... ....".~,;> ~ ,..~;,.~..~,~: "'I11III ~ .,' '-:1": t ~ ~., " ~ l.A.l~~ AN IOU WHOS( TlM( IS RIGHT .....A..A..A.~ by Joan M. Twiss Most cities have a motto or a slogan. For instance, Manteca is "the family city" and Apple Valley promises "A Better Way of Ufe." California also has the world's garlic, apricot, and flower capitals, not to mention the artichoke center of the world. Within the last couple of years, however, ten California cities have also become known as "Healthy Cities." Why? These cities share a vision that the city of tomorrow must be a "healthy city" and they've made a commitment to make it happen. A healthy city? Some charge that the term itself is a nonsequitur, and grammarians wince. Yet it is an idea that has been found to be intrinsically understood and attractive. Agreement on the basic ingredients for a healthy city is easy. Clean air and water, food, shelter, safety, access to medical care, economic vitality, good transportation. and recreational space would head the list. Other qualities, however, like equity, civic participation, sustainability, access to the arts. and celebration of cultural heritage are also recognized as part of a healthful environment. The definition of the term. however, also includes the process for achieving these outcomes. Renewed ecological aware"ness, com- bined with a more holistic view of health, has spawned vocal constituencies for main. taining and enhancing the quality of life in our communities. There is a growing appreciation that education, employment opportunities, and the physical environ- ment are inextricably linked to health and social well-being. In cities across the coun- try, concerns about substance abuse and the need for quality child care and afford. able housing are being raised. Conse- quently, it is municipal policy makers who are being challenged to address these issues in order to restore the human infras- tructure of their communities. Joan M. Twiss is Project Director of the California Healthy Cities Project. WESTERN CIlY, OCTOBER 1991 The Healthy Cities model offers a new approach which conceptua1izes community health in its broadest sense, to include the physical environment, economic condi- tions. and the social climate within the city. The development of responsive public poli. cies, which preserve and promote individu- al and community health, is key to the Healthy Cities approach. Furthennore, solving the complex p~b- lems facing to day's communities will require full community participation. The public sector, businesses, community orga- nizations and residents must jointly define health priorities and work collaboratively to address agreed-upon concerns. About The California Project Since 1988, the California Healthy Cities Project has assisted cities and public health agencies with their efforts to put the Healthy Cities model into practice. The Sacrament<rbased Project is funded by the State Department of Health Services. The Western Consortium for Public Health, an 1 The Healthy City: An Idea Whose Time Is Right, Continued independent, non-profit corporation, man- ages the Project. The Consortium repre- sents the Schools of Public Health and Extension Divisions at the University of California, Berkeley and Los Angeles. Lela F. Folkers, Project Officer for the State. observes, "In a time of diminishing resources and expanding human needs, the Project has been effective in enlisting new partners for improving the public's health." California is the first and only state health agency in the country to fund a healthy cities program. The Project offers educational programs. technical consultation. and resource mate- rials to all cities throughout the state. In addition, the Project sponsors California Smoke-Free Cities in partnership with the League of California Cities, Americans for Nonsmokers' Rights, and the Health Officers Association of California. Cal- ifornia Smoke-Free Cities is a targeted approach to facilitate local development of tobacco control policies and programs. Eventually, the Project hopes to organize cities around other issues like substance abuse and injury control. As a first step in applying the Healthy Cities concept in California, the Project established a demonstration program. All cities were invited to apply. Each city deter- mined the direction of its initial effort, for which most used existing data. The local project is used as a way of introducing the proeess of Healthy Cities. Selection was based, primarily, on demonstrated commitment to the proposed project by elected officials, adntinistrators, and community groups. The focus of the project and the implementation strategies proposed - their replicability, feasibility, and creativity - were the other major selection criteria Ten cities, since designat. ed Charter Cities, currently participate. In a relatively short period of time - tenure in the Project ranges from eight month~ to two years - a number of measurable suc- cesses have been reported. Charter Cities California's ten Charter Healthy Cities range in size from 15,000 to 420,000 per- sons, many of which have multi-ethnic pop- ulations representative of the state's diver- sity. The varied nature of these communities encompasses a university town, a planned community, a major port city, and an urban village. Their incorporated land areas run the gamut from two to forty square miles, the latter resulting from the merger of four distinct communities. Dates of incorpora. tion range from 1858 to 1987. Spearheading local projects are an envi- 2 ronmental conservation manager, directors of public works, parks and recreation, and human services, environmental counsel. and health officers and administrators. Joseph Hafey, Executive Director of the Western Consortium, notes. 'The diversity within this group of cities highlights how universal these quality of life issues are in our communities and the broad application of the Healthy Cities approach." To date, the Charter Healthy Cities' efforts can be grouped under four major headings: outreach services. educational programs. environmental preservation, and the development of new methods to mea- sure and enhance quality of life. The Project accepts appl ications on an ongoing basis throughout the year, Participation in the Project be- gins with attendance at an orientation session. Subsequent steps include: 1 Passage of a city resolution that endorses participation in the Project and reflects commitment to the Healthy Cities concept; 2 Identification and recruitment of local steering committee members, representing a broad cross-section of the community; and 3 Submission of a project description and a one-year workpian, The next orientation session will be held on Monday, November 18 in Oakland, Call the Project at (916) 322-6851 for more details, Outreach Services In response to a measles epidemic in north- east Los Angeles County, the City of South El Monte has offered monthly immunization clinics since January of 1990. With cooper- ation from the County Health Department and through the volunteer efforts of school nurses, the free clinics are held during the evening at the city's senior center. Each month, at least 50 children receive immu- nizations, with most children receiving more than one inoculation. Targeted recruitment strategies have included posting notices, in Spanish, next to the disposable diapers in local markets, Connie McFall, the city's Director of Human Services, describes the outreach clinic as "a good example of a 'win- win' situation." City.sponsored screenings, held in con- junction with the Shriner's Hospital, referred 91 percent of all those examined for disabilities for further evaluation and LEAGUE OF CAUFORNIA CmES treatment. During the summer, the coun- ty's mobile van reached several hundred children for child health and disability pre- vention examinations at the city's lunch program sites. The City of Rohnert Park's Tobacco Free City Project aims to achieve significant reductions in youth and adult tobacco use. To do this, the city has effectively tapped into numerous resources within the com- munity - the county health departments. schools, non-profit organizations. and the business community - and utilized multi- ple channels to create a community-wide message which discourages tobacco use. A $150,000 grant to the city from the State Department of Health Services will be used to help small businesses develop policies and offer cessation services. The Chamber of Commerce has helped with promotional activities and will sponsor an awards program for business which go smoke-free. North Bay Health Resources Center's Stop Teenage Access to Tobacco Project (STAMP) conducted a survey in the city which showed that minors were successful in purchasing tobacco approximately 50 percent of the time, STAMP and the city's Public Safety Officers combined efforts to educate merchants regarding how to com- ply with the law. Teaming up with the sports community, coaches were asked to serve as non.smok- ing role models. Tobacco use was further discouraged by the mounting of a baseball field billboard, carrying a non-smoking theme and by discontinuing ballpark sales of tobacco "Iook-a-like" products. One of the more recent cities to join the Project, the City of West Hollywood, is nationally recognized for its commitment to human services. The city plans to develop a comprehensive guide for residents who may need to utilize long-tenn care services that will address the psycho-social, legal, and financial issues of long.term care. Increasing low--cost housing options within the city is also a priority. Plans are under- way to open the first Adult Day Health Care program in the State to serve both seniors and persons living with AIDS. Educational Programs All kinds of infonnational and educational activities, including presentations, classes, media campaigns, distribution of city publi- cations, sponsorship or participation in fairs, festivals, parades, and exhibits, have been conducted to raise awareness and bring about change for a variety of health matters in cities. Three years ago, the City of Duarte's strategic planning process pointed to a lack of readily available information on se1h"are and iocal health and wellness resources. Under its "Healthy Cities umbrella," the city has conducted a vari- ety of public information campaigns and successfully integrated a health message into several of its ongoing programs. In large part, new city dollars have not been required. Instead, these accomplishments have been achieved through linkages with state programs, vol- unteer efforts, and donations from the busi- ness commu- nity, which are strategies common to local Healthy Cities projects. Duarte was cho- sen to be the first city in the state to pilot The Wellness Guide. Developed by the University of California at Ber- keley and the Cal- ifornia Department of Mental Health, the illustrated, 80- page reference book provides informa- tion on how to stay well. It is written at a sixth-grade read. ing level and is also available in Spanish_ The local telephone company printed a companion mini- phone book of the names and phone numbers of over 200 community or- ganizations. An all-out com- munity effort result- ed in all 8,000 Duarte households receiving a free copy of the guide. Over 100 volunteers delivered guides. The first wave of evaluation results have found a guide re- tention of 90 percent; favorable marks for helpfulness; and more appropriate referrals being made. Duarte also incorporated a health promo- tion message in its free community calen- dars, Rose Bowl F1oa~ city picnic, and annu- al family wilderness day. Terry Fitzgerald, Environmental Counsel, reports, "There are lots of ways you can expand on the Healthy Cities concept. . _ without spending a lot of extra money and yet benefit a lot of people in the process." Citing a fundamental link between litera- cy and health, the City of Monterey Park has infused a health focus into its literacy program. Literacy for All of Monterey Park (lAMP) serves functionally illiterate adults as well as residents requiring tutoring in English-as-a-Second-Language. LAMP teaches more than 200 students to read, write, and speak English. The city's popula- tion is 65 percent Asian and 35 percent Hispanic. The majority of program partici- be greater intercultural understanding and appreciation. The completion of AM's Community Traffic Safety Questionnaire by program participants, has obtained informa- tion on traffic safety problems from popula- tions that would otherwise have not had an opportunity for input. The City of Palm Desert has a multi-year plan to address personal and community health and safety issues. The first goal was to reduce the number of automobile-related injuries by getting residents to "buckle up." This com- mitment gar- nered funds from the State Office of Traffic Safety for the hiring of part-time staff, data collection, and materials. After only one year, the city has experienced a 13 percent increase in seat belt usage_ Capitalizing on an ongoing county. wide traffic safety effort, the city fur- ther enlisted the cooperation of pri. vate businesses, hu- man service agen- cies, schooJs, law enforcement, and the county health department Among the many innova- tive strategies were worksite education programs for pri. vate employers, in- creased "buckle up' signage through- out the communi- ty, ami a safety belt pledge contest in conjunction with the high school senior prom. Local busi- nesses contributed prizes, including din. ners, limousine rides, and tuxedo rentals, as incentives to pledge. Purchased and donated promotional items were extreme- ly useful in maintaining awareness. With the seat belt program entering its maintenance phase, the water safety program has recently gotten underway. It aims to pre- vent drowning, near.drowning, and other water-related injuries, especially surrounding residential pools. Research has begun on the establishment of a tracking mechanism for water-related injuries and deaths. An estimated fifty percent or more of the world's population will live in cities at the turn of the century. The needs gen- erated by this rapid urbanization have resulted in strengthened alliances among leaders in public heakh, city management, and politics. The World Health Organization's Healthy Cities Project began in 1986, as a joint ini- tiative of the health promotion and environ- mental health programs in the European Regional Office. It was envisioned as a way to achieve their long-range goal of "Health for All," a strategy designed to enable all people to attain a level of health which allows them to lead Socially and economi- cally productive lives. The project has since evolved into an inter- national movement involving hundreds of cities worldwide. Barcelona, Munich, and Stockholm are three of the 30 European cities participating in the WHO Project_ Additionally, there are three international and seventeen national networks - includ- ing the United States and Australia, Provincial networks are operating in Quebec and Brkish Columbia_ "The growth of this project has been so startling that, were it a private company, it would be one of the business success sto- ries of the 19805," notes Dr. Ilona Kickbusch, Director, Lifestyles and Health, WHO Regional Office for Europe_ Valuable links can be made with an interna- tional community of cities responding to similar challenges. The Healthy Cities approach provides a common ground for exchange on a whole host of issues, including traffic, housing, tobacco, AIDS care, and mental health_ UNew sister city relationships are a natural outgrowth of the Healthy Cities move- ment,' notes Joan Twiss, Director of the California Project. The City of Palm Desert recently became a sister city with Osooyos, British Columbia, which, k was discovered, participates in that province's healthy com- munities network. For more information on the California Project or any other healthy cities programs, contact the Califomia Healthy Cities Project, Health Promotion Section, P.O. Box 942732, Sacramento, CA 94234-7320, (916) 322-6851 pants are recent immigrants. A close working partnership with staff from the Alhambra Health District has been mutually beneficial. Health department staff have developed a tobacco education series for lAMP. Jim Roberts, lAMP Coordinator, co-chairs a district tobacco control working group, contributing his perspective on how to reach special population. Class discussions have concentrated on health topics such as substance abuse, safe- ty, and nutrition_ Smoking cessation classes have been offered in both Mandarin and English. An anticipated benefit of the discus- sion component of the classes is expected to WESTERN Cm, OcrOBER 1991 3 . As a newly incorporated city, Santa Clarita has opportunities to create an ideal2Ist cenrury community. Open space preservation. acquisition. and access are on Santa Clarita's first- year Healthy Cities agenda. Two ini- tiatives have been undertaken to en- list community involvement. The first was the development of a long-range plan for the Santa Clara River. The resulting report commends the study as "an excep- tional example of the consensus process for developing master plans for major recreation and natu- ral resources within communities." Many of its components have been incorporated into the city's recently adopted general plan. A three-mile section of a trail system along the River's South Fork has been approved. The ~econd project 'has involved the development of hill- side and ridgeline standards. Jeff Kolin, Deputy City Manager, spealdng at the statewide Project confer- ence last May commented, "The Healthy Cities program matches up very closely with the type of philosophy and approach that OUT community is developing. We're putting a lot of thought into planning now for the future so that we can have the qual- ity of life that will allow us to he a healthy city in the Year 2000 and beyond." A successful waste management effort depends upon the cooperation and partici- pation of everyone in the community. In its second year of participation in the Project, the city of Arcata has utilized its Healthy Given the importance of education in the battle against AIDS, the City of Long Beach chose "AIDS in (ne Workplace" as its Healthy Cities project Programs were devel- oped to convey accurate information about AIDS and HIV transmission, as well as to al- leviate unwarranted fears about the disease. Specific activities included worksite sem~ inars for some of the largest city-based employers, including McDonnell Douglas and the Long Beach Unified School District. The city's new employee orientation now has an AIDS education compo- nent. Paycheck inserts, with in- formation on AIDS, were printed in English and Spanish and pro- vided to employers for distribu- tion. AIDS Week, held last March, included a fund-raising walk and a display of the Names Project AIDS Memorial Quilt at the Queen Mary. Environmental Preservation 4 Cities Steering Committee to develop the city's Integrated Waste Management Plan. (During year one, the city involved the committee and the community in the deter- mination of the architectural design of its community center.) Working closely with city staff, the Healthy Cities Committee has explored a full spectrum of potential program comp<r nents such as tiered rate structures, resi- dential and municipal composting, mobile ^ pplications for min>grants of $20,000 for single cities or $35,000 for cities working in partnership are due October 31 to the Caiifornia Smoke.Free Cities Program. The grants are aimed at helping cities become healthier communities by establishing environments in which tobacco use is not acceptable. California Smoke-Free Cities staff wi Ii be available for consultation, technical assistance, answers to all your questions at the League's Annual Conference. Office hours are scheduled for 1:304:30 on Monday, October 14, and from 9:00-5:00 on Tuesday, October 15, in the Carmel Room at the Hilton_ Califomia Smoke-Free Cities, sponsored by the California Healthy Cities Project, is a partnership of the League of Califomia Cities, Americans for Nonsmokers' Rights, and the Health OffIcers Association of Califomia. The State Depart- ment of Health Services augmented their grant to Smoke- Free Cities for the purpose of awarding the mini-grants. Requirements for the grants have been kept flexible to allow cities to address their own needs and to foster creative plans to discourage tobacCO use in local communities, and the application process is simple. Application forms are available from Anne Klink, Project Coordinator, (916) 322- 1528, or Joan Hogan at the League, (916) 444-5790. collection of household hazardous wastes, and incentives. The result of the Arcata pro- ject will be a blueprint for other communi- ties to comply with AB 939, the statewide mandate for waste stream reduction. Development Of New Methods To Measure And Enhance Quality Of Life While all of the previously mentioned pro- grams focus on one or more aspects of qual- ity of life, the City of Pasadena chose to tack- le the subject head on. A long-standing interest in this topic had fueled previous, al- LEAGUE OF CAUFORNlA CmES though unsuccessful, attempts to quantify Pasadena's livability. The Healthy Cities Project provided the impetus to delve anew . into this timely, but somewhat murky, sub- ject. The city rallied the involvement of mul- tiple interests within the City and obtained substantial donations from Kaiser Perma- nente and the Southern California Gas Company for their work on this project. The city's long-range goal is to produce a Quality of Life Index, or report card, which wi11 be issued annually to gauge Pasadena's physical, social, and eco- nomic wen-being. The city's per- formance in eleven key areas win be assessed. These include: arts and culture, children and youth, economic viability, environment, health, housing, public safety, recreation, schools and educa- tion, substance abuse and trans- portation. In the first phase of the Project, over 150 community mem- bers identified priority objectives in an alI-day exploratory forum. Sub- sequently, neighborhood associa- tions and community groups were asked for their reaction to the pro- posed priorities. The second phase has involved a technical advisory committee com~ prised of community leaders and subject matter experts from several educational institutions. The tasks of identifying appropriate measures and data - in terms of source, avail- ability, frequency with which it is col- lected, and geographical appropriate- ness - has begun. Ultimately, the Index will be used to prioritize health and human service needs within the city. City Manager Philip Hawkey explains, " . . . the Project has allowed us to transform a theo- retical concept of defining a healthy city into a concrete plan of action for creating a livable community." An Approach Any City Can Use Even though the ten Charter Healthy Cities may have been on the first wave of innova- tion, the Healthy Cities approach can work in any city. With vision, community partic- ipation, a commitment to put health - in its various forms - high on the city's agenda, and the energy to make it happen, any city can become a healthy city. In we1coming others, Duarte's Fitzgerald says, 1'here's a lot of value in becoming a healthy city and I would encourage other cities to just jump right in." . try Manuel Ontal, Jr mid Terry Fitzgerald I , BECOMES A HEALTHIER CITY Twenty years ago when the City of Duarte chose the motto "City of Health", no one expected that being a "healthy city" would become an international movement. Some might have even thought that a "healthy city" was a contradiction in terms. LEAGUE OF CAuFoRNIA Crm:s ......... ......... ~ "' .... G- U s.. V .- ...= - ~ v ::I:: < '" s.. ::1 ~ ~ ::E ~ o ~ ~ U ::1 ;S ~ t:: .- t: o 00 i 00 :: ~ 1Jj io. :(J c - .,g e ~ :::s ~:5! 0.":'0 ~~u~ ~]~i ui": ai iii In II) II) In en S 5 '1:i ~.g' ~ I;. .gJd G8. [g ~5~~ ~ 0 c&o~ ~13 ." 00~.3 ~~ ~E~~~'o ~zc .c~,,00.i3. ~ "'O..a::(j)''=:E~ Id~ o~aef;....r E ,E; .c ~ U "" 0._ Z u & 0 ~= (j) ~ g~5gsfg~U :;: .... &..0 Q ~..c rJJ rn z.€e.€e.€.€.€~ IIIU o.U o.UUU 8 ci ... N fIi ~ 011 011 011 011 011 ~ ~ z '" L&I .5 ] z :IE UJ <JJ 0 ~ .8 t: t; ~ ~ ~~8 ec:~ <1; ~ :t:8 ~8C:r/).s u ~>'9 -fa~~~~ ~ D:~~~~~.6c.[i c ~ 4::; 8"8 [) ~ ~OG ~ ~ ~ Iii 1: ~ ~"2.E! '"iJ :.: z .... +-' t:t:C co::I <l) -.B II:: z .9.c" 'a :;;; ijj '" 4 4 iJ 111: " :. '"' " II. ... en CQ ~ ,....j p., ~ :J:: II. ...". 11)1.0""<<10\0- COIOq)U)u)""r-- " ] .~ '" b .3 1: U 00 en ~ ] 1Jj :IE '~:c ~ ~ ~ ~ u ~~;at:: b() o '00 00 ~ 0 00 :5! It 0.0 -g ~ .~ 2 2 ;:::: 0 D.~u]~Ss~8 bOo.QctI:.a~t:l.;{J>. ~~.~~~~:s~ :::~Jj:i':i'::i!~d! Nri~.ncO"':cOo; ,...,...,..............."..,... ,,-s Jg] oo.c UI:Oci~'" ::J c c. o " 0 LLI 0 '&'-"0 Zb~~ ~ '0 5 ~ .J V "'0 ~ ~ -s B .~ III ~ r/) E! - e co:I OJ ::E =' 11)'"'0 o~J:: Uj3." ~ B !ij o 01 i; .c ]lf~~ en ~ 5 ~ ~ ~ .~ f; E 8 ~ ~ 'E 1Jj 0 > u V ~ <JJ '2 ~.g ~.~ ~ ~ ~ ct ...... "'0 U boO...s: Q,) "'0 C 0 C c % > =' V r/) 0 ._ r/) ....(jju >'0 00'.0 E C 5 c .J E.5 00 c: [; ~ ~ <JJ '.::I V <..c~~..g~;:Iu.a~..a L&I ~ ~..$ co:I 3"2 I./J:-= 'c:-= ::t g. c::.z~ c::r.n:€"5j"-5 1:O:.a....'OvQttI",o '"'0 c3i3~oe.3:;:d!1ii Iii ... N P).t ui 1/1 1/1 1/11/1 1/1 en " .. U --'9 !:! 0.. (JJ .J~~ ~ (/J f ~ ~.s ~ >vv;2:a ~~,*.E ~ ""''''00 II. ::I ::I.......... I-. I-. U U 0"'0 "'0 <J) :t : o<Jo<J J;-!:o .... '0 '0 v v ::::..r:::..r:::~~ ... 0 0 0 0 - U U 8 8 u:;::;;:",,,, oj .hi NNNN '" g; - ~ ~ u iii ~ ~ en -S 0 ~.~ ~ LIJ ~ <J) > ..8 ~ 0 LaI <J) ~ ft Q <JJ "'0 .... LIJ "'0 <J) 0 ~ ..I:: :.0.00.0 ctI Po >< '..=1 o Po <J) >< <J) ctI lit ~ (IJ I-. <J) 'IS i:: Z.:< 10! 0. 0" 1Jj 2J;j[j~~~~ en Po.p::l0028 ;. ~ .p .s J$ .f; 1D !:~~~..o~~ u<.c~oe~~ ui ui":GiIli N NNNN ~ ~ ~ ! ",< ,",00 ~~ ~ '" E '<iI$~ 5 ~~~~O:: ~13 >>5 -5c-s'S.... :. ~ '" ~ ' w~~~~ o ojri.; 1'11'11'11'11'1 en ~ Iii E -S ~ B ~(IJ 5 & > ~.~~ ~ & 0 - ..8 .~ ..8 5 0 5. t ~b~ Iii.c Iii is. '" Iii 4~"'O(IJ"'O &~S &~ .J " ~ ~~]]] ~i~~~ ~~.t i. .~~~ ~ LIJ~I-.<J)I-. ~ <J)O_I-. _~ (IJ~::I ~"'O]~] e (IJ~oEbOS I-.'C"'OC~ ~g~p,~$Poe.E~b~~&Be~~<J)~.~ en ~ ~ f:: ~ ::I -..:J Po ctI e <J) ~ 00 J..... p, [; <J) i75 ctI'C u s'[j o.'[j u ~l ~ ~ ~ ~ ~ ~ [i g (IJ ~ ::I .5 "'0 _..oz~z~ ~2~ .S~. 'O-..:J~~~e~ ~~~~~'~, ~~..o~~..o 'SE~"'O"'O=E ~'[j'~~'~~-..:J-..:J-..:J~..oo~' gi8~~~ctI II.Z~~~~~~~~oe~Jj",z1::;;:uu~~ uiui ,.: Gillio oj ri.;ui ui":aillio 1'11'1 1'1 I'II'I~~~ ~~~ ~~~~I/I b.c ~'s] co "E b ~ .s ~ .::! 6 =:] ;h ~ ~ ctI ~'3 ] ~.~ ~ c ~ 2 .~ .Q ~ ~ ~ .s === p ~ .;:::! ~ ~ C I'd C - .... ..0 .... C I-. ..... I'd .... 0";:1 (IJ <J) J= ctI _~ Q) ..... ctI U ~ C ~ .- '.0 ";:I Q)";:I:t 3=~Q)c~: ~::I~~ .::!~S~1i~ctI~Q) a~~~i~~~[i u:(IJ~.g~~.! ~:g e ~ ~ ~ .~ ~ t ~ ~ ~. ; ~ g .~ 8'S z ~ ~;3~ ~ ~ .5 j .~ ~ t1 ~ .~ :€ ~ g ~ ] ~ ;; o ctI 0....: > I-. C .S 8. ~ ~ ~._ ::s:: I'd J:: u 19 m'- (IJ ,...., v v ~ ill.... I-. U e ctI C -..:I t:: ..c:: ~ a U -I-......v .p~~U~U(IJ-t::"'O <J)~~"'O - e"'O"'O~<J) Po .Q)ctlctlO";:lV ~.~J.~~~~ ~'~'~~~co~~~~~I~.g~ ~~J~~~~J~I=~]]1' ~~~~8~(IJ ~~fl ~g~@'ci"'O~~~~ ._~~~~~U~~~~~~~~~ i.]~~~~E ~~~~~~:~j'~~~.~~~ .~~B~~~1~j'~'~~~'~]~ 5: I-. ~ ~ ctI ~ 0 & 9 & ~ ~(IJ c 00 ::.I o..s ~ Vu "u ~ ~ ~ ~ ~ r~ ~ ~ ~ ..s .... ~ 1:::: > ~ Po '::: g .... "'0 _ ~ U ~ - 0 <J) ctI ~ C ~ a ._ v '0 ~ ~ .... 5 "'0..... ~ '" ..... "'0 I-. 0 .... .~ ~!~~~~i~.i~~~~~~~~]i~~~~~~1~1~~~~l~i~~j~~ tS:'~~I::~i~~~13~~.c~I-'"'~","S~BZ:I:~~" 1~~-513S~.g~~ ::.I PoEctI.....::ctI~(IJ<J)(IJ~ ~"'OcQ)e '::S::"'O "'O~~~v1:i"'-:;~ u'..=1~ 0 ...s~v -B ~ ~ ~ ~ ~ ~.g 5J.g ~.~ I ~.~ s g .g ~ e;a .5 ~.s ~ ~ ~ ~ ~ .~ ~ 1: ~ ] ~ ~ ~ e'E ~~>.gve~<J)'~~~~u~2~.p(IJ~<J)t~3(IJv~~~~~~"".p~ctlte&~~ i!~iIJ]~fl]il~I]]JI~illl~8J~!liJI!8Iilil 00 ~ ~ ~ VI v t:..=! ~ E ~ ~ ~ .J~ 8~~ ~E ~ ~ ~C) ~&6'oE~'!J Q. ;g %2 <J)~e~~~~2~-a >~~ ~ ic~~'O.ot~~u~ t~~ '~R' ~0.~~~-a~~~~1~ u o~~~ ~ubU(lJl-.oeou I- q s.~ b:g ~ ~~.g s~ t: ~..s~;] C[_ooloo~"~~"uc"',E;>> B ~~ I-.~O<J)o.l-.~ctI_gV.p~~J$ E~' t:"'O UiiJ ,...~~,,~:.53 ~~ 0. ..0 w= ~g~~3<J)'~::.Io::.l~"'O~R ~~U~Do$~~Q~c3~Iii~~ Npj~uiuir.:aimO"'Npj ~ p p p ~ u II) 1:':.2 : g ~ a: 1!l 'E"'Q) g g2g..a a: "'0 ~ ~ ~ ~ b(I e ~ 1-....0 ~.3o.coE ~~i:t.g<J) ~ 1: 'E. 60<3 'iii Jd LIJ I-. I",i b ~"'O <J) E ~ ~ 'o.C ~ ~ Zctl~~~'O:E oo.ctI&(IJ~O ~~~~I~! III , , . , , , 1/1011"01(1\0 ......... N GI GI.-CU C GI cu u :S'cj:'QllCUE",,'- ......cJ~cu-g C4I-._ ,c1'!! 4IU)CU41 ... -!;04l"Q .,J~'E :S,C:c... CillO o(,)....cu G)=(,) 'allGlo;S-gEocu nr... -4I,CU) .. >-1:11 = > .. ca I!!cu:!::4IeQc::. CU:lU"''''EGI''' ~Q ~ (,)e: > e: . "'08.~7ii4l~!! € 0 :::: ><'1,) IS ~ 13 c ..~o 41 >>:j:O cu >>41 w_ 4I,C cu'c'c'" 3:UEc=E1;=:5.5 I- 0 cu 41 ill ,. C 041...._410 C'cCE-F.- :1._ ,... ~.~1!l~~~d.S~"'O~~b~ ~O<~~b"'OV~(IJ~ 1-."'O[i~c~oCbE~.5'd~ =~(IJ(IJ~'O~~~ ]i~~J~i~.-i::.l~ctI<J) ctI~~.~t"'O(IJ~~ e.....(IJ::.I~~b~U~Ooc~ E~o=vf::~ .00 ilI~f::ol-."'O.(IJ.u~<J)~~.90 ~~&iill.s~Us. ~l8~m~iis~t:~~~ ]"~OOo.~~.cuo'l~ 0..'- " >> ~ -B ., Iii iJ 1Jj ~ "-s '" ~ ~ " " 0." .- ~~~~~<<~~0~15~~ ~~~]~~~]~ ~ :€.~ 5:;; ~ ~ (IJ <J) ~ r ~ ~.~ 15 g Q 0 5 0 i.w ~ ~ '..=1 .cuu is..~ ,",.s >,,': ~!~;:, 8 00 8 >>f-'~ 1ii-5 '"' >>'i;; Iii ~ > ~ d: 1-,- "'0..... ;.:::I ~ "'<J) v ~ 0 (IJ a <J) v 0 - :~~~'~C~~~<J)~~~i ~~O~~~~~~~ .-1~t8~~~"'O~~~tt ~~~~~~~v<J)1 2 = [i .c'- f::::r: Q) U ~ e ~ ':' iiJ rJ"J (IJ a3 u r . .S g ~ ~ U I-.ctI~ ..c::1-.'- ~~o..... ._~ b~~~ = ctI .- :.:::f.:!:: <J) V ";:I ::.I co <J) Q) C ~ u ~ ~ V ::1.- ~ @ (IJ "'0 >....0 ::IE.-ctll-...c:: O<J)~~C V'5"'OOu 1-00.......::1 Qo"'OV~";:I.ScI-.O~;~ ~t.o >1-. ~-~'a~ ~~~?"'Ovv<J)~8"""'-....rctl~p,.E:> <J)~e(IJ ::.I~ ~~]ctl2~g~~~~5:~~Otc~~~Po~Ee"'O ~~~~~'~~~~1.s~g~~=~]1b~:.2~e~ ~.p~'i~~~ ~=~~~e~ ~~~G~~1:8.s "' i1 i <<: to ~ ... " " " -. ]f " o <.1 ~ " ~ ~ ~... ..,- - " .a 1;\ -.Ef " '- ,,0<; .1'i 1'> ~ to . "I~~ ~...O! ..,,,~ .....!;3a .~ ~- a..: ~.s -. " ~ ~..';! " ..s~ ;;: ~ .~.~ - ~ ~ ~~kI " " " t:S g ~ :!;:Q." <J) "' E u ;:; iii &: ~ u "' o "' ::0 " j The City Of Health, Continued City Steering Committee proposed to pub- lish a directory of these services. When funding became a concern, someone had the W1USUal idea of publishing the directory as part of the city's 1991 calendar, sent free to every household with the December newsletter. Local hospitals aod health care providers helped pay for the extra pages. The final project was a 32-page. bifingual, health aod wellness calendar. Each month highlighted a related theme. January, for instance, was dubbed "Self-Improvement Month" to take advantage of New Year's resolutions. Local places to lose weight, stop smoking, exercise and join a support group were listed. Other chapters empha- sized youth, senior citizen aod disabled pro- grams; mental health; alcohol and drug abuse; local health care facilities aod organi- zations. and schools and libraries. Emer- gency aod hotline phone numbers, such as poison control and child abuse, were print- ed in bold in the front City services, other government agencies and a transit map were also included. A non-scientific sUlVey reported residents frequently used the list- ings aod planned to keep the calendar for years to come. Phone calls to City Hall ask- ing for the same information decreased after the calendar was published. Another of Duarte's Healthy City Projects provided more generic health and weHoes5 advice to resi- dents. 10 the spring of 1990 Duarte was cho- sen to be the first field test for the Wellness Guide, ao 80-page booklet on how to stay healthy developed by the School of Public Health at University of California, Berkeley, aod the State Department of Mental Health. Duarte's interest in public health aod ethnic diversity made it ao ideal place to try out the Wellness Guide before the Guide is distribut- ed statewide. Local schools, businesses, service clubs aod churches publicized the Wellness Guide. More thao 100 volunteers helped distribute English aod Spanish versions. An extensive evaluation followed. Among the users of the Guide were a battered wife who found a shelter for herself aod her children aod ao inunigrant who accessed free pre-natal care. Duarte has several new Healthy City Projects in 1992. 'This spring, the city is pre- senting an AIDS education forum and co- hosting an AIDS play for teenagers. The city. Kiwaois Club, local hospital aod school district are jointly sponsoring a children's health fair. Duarte just received a $10,000 graot from the California Smoke-Free Cities Project aod Prop. 99 to do a public opinion survey on attitudes about smoking. "Every place you turn a new idea for a Healthy City Project pops up," summarized Mayor 1 oyce. who conceived of the AIDS forum while she was campaigning. "But if a city is really interested, it should join the California Healthy Cities Project That's last but not least on a list of things you can do to make yours a healthier city," she advised. To contact the California Healthy Cities Project write P.O. Box 942732. Sacramento, CA 94234-7320 or call (916) 322.{;8S1. For more information on Duarte's projects con- tact Terry Fitzgerald or Manuel Ontal at Duarte City Hall, 1600 Huntington Drive, Duarte, CA 91010, (818) 357-7931. . 16 LEAGUE OF CAliFORNIA CmES Each participant will receive extensive resource material. This information will assist with the development oflocal Healthy Cities efforts, recruitment of key community stakeholders, and promotion of the local project. Workshop materials include the Project's Healthy Cities Resource Guide, an introductory videotape, and informational brochures for community distribution. These tools have been designed based on the experiences of the Project's first ten Charter Cities. . Application . Application for formal Project participation begins with the successful completion of the following steps: . passage of a city council resolution that endorses participation in the California Healthy Cities Project and reflects commitment to the Healthy Cities concept; . identification and recruitment of local steering committee members; and . submission of a project description and workplan. It is expected that these steps will be taken within six months of the city representative's attendance at an orientation session. Project staff are available to provide consultation and assistance throughout the conceptualization and development of the application. At the request of interested cities, Project staff will meet with city officials, potential steering committee members, and community leaders prior to the submission of the application. . Requirements of Participation . California Healthy Cities agree to: . attend Project-sponsored regional and statewide meetings; . participate in the evaluation of the Project, both statewide and locally; and . share resources, strategies, and experiences with participants in other cities as well as the statewide Project. The designation of "California Healthy City" covers a one year period and will be renewable annually. Although participation in the Project usually begins with the design and implementation of a specific project, the process of creating a healthy city is envisioned to be an ongoing commitment to a collaborative, participatory style of governance. III. SUPPORTING HEAL THY CITY EFFORTS A variety of services accrue to cities that become participants. Among these are: . Staff Support - Project staff are available for telephone-assisted and on-site consul- tation; . Technical Assistance - The Project assists with implementation activities within the city *, e.g., technical consultation or assistance with activities such as coalition building or fundraising techniques; funds to print and distribute project information; or to employ a part-time student intern; . Program Resources- The Project provides acomprehensiveResourceGuide, a wide array of reference materials; and access to a computerized databas.e on Healthy Cities- type projects; . Leveraging Opportunities - The Project provides assistance to cities in their efforts to secure external resources for local projects; . Marketing - The Project furnishes camera-ready Project logo artwork, as well as a videotape on the Project, brochures, informational handouts, and promotional items to assist with local marketing and public relations efforts; and . Funded Travel- The Project funds travel by participating city representatives to the Project-sponsored annual meeting. * · subject to availability of statewide Project funds and the city's need IV. RECOGNIZING HEALTHY CITY ACHIEVEMENTS Annually, the Project will recognize the accomplishments of California Healthy Cities. Recognition will be given to cities for work in a variety of categories, including: . programmatic emphases . innovative strategies . creative partnerships . effective use of resources . related achievements consistent with the Healthy Cities philosophy, e.g. ordinances passed, changes in service delivery For additional information on becoming involved in the California Healthy Cities Project contact: California Healthy Cities Project P.O. Box 942732, Mail Stop 675 Sacramento, CA 94234-7320 (916) 327-7017 Fax (916) 324-7763 The California Healthy Cities Project ,~_~_~_~,___,~,,_,_,,_~__~_mm'~"~_'~'_'~'~~~__~~'_Q~~_'_m__~'_mm~_'~'u_m_~h"N~__~~_N_'__~_'~u The Healthy Cilie~ llHJClel, devd(}ped under the allspices of the \Xlorld HC311h Organiz;lli(J!1 and now in phKt' in hundreds of citie,-; acr(),ss the globe, pf()vidc.:s an integrJ.ted approach to enhancing the health of a city hy focusing on a process for community improvement. R.l'.sidcnt p:1rticipation in Jetennining IOGI! need" ;md identifying JSSL'ts, as well as uevis- ing and implementing solutions, i,'i the corner- stone of the Healthy {:itic,'i approach. The public and private .'it'ctlJrs (!frhL c()mmunity are als() villi rartncrs in this process. In Calif()rnia, tran.sbting the model into reality is the go;!l of the California Ht'J.lthy Citie." Pre Jiect. Since 1 L)HH, the Project has suppor!l'J California cities in exploring the many ways healthier l'nvironments can be created in uur state California's Healthy CitiL's are a diverse group of municipalities, Lirgl' and small, aft1uent and disadvanuged, located across thl' state. The l(Jca] hed]th concerns they address an: as diver;.;e as the character of the communities they serve. RepreSenLltive eff( nts include the creation of a community-v",.ide vision and plan for improving quality of life in the city grounded in the participation of residents from all walks of life; the provision of neighbtJrhood hased training in disaster preparednL'....;....;; the irnplementati(JO ()f injulY prevention programs, including bicycle helmet llsage and \vater safety; encollfagement of walking as a fitness activity through redesign of physical space within the city, such ;lS creation of a \vaik- ing trail and identification (jf siJe\valk pLtcement: the development of an educational campaign about AIDS targeted to husine,,,,;s and industry; and strengthening intergenerational honds and improving the inuependence of senior citi zens by creating opportunities f( Jr teen volun- teers to perrom1 helpful services for seniof.s. A high priority of lll;my ] Icalthy Cities initiatives i." the empowerment of residents whn--for reasons of poverty, low levels of education ()J" limited English language skills may previously havl' laL.ked the knowledge, skills and opportunity to improve their own health and vvell-being. This innovatiw, ....;tatewide effort reflects the pioneering leadership of the California DqHrtment of Health Sen. ices and the \X/estern Cons{)rtium fir Public Ikalth. The Con....;ortiU1l1, ;1l1 independent non profit uJrp{mlti(HL represents the Schu()1 of Puhlic Health and I Jnivcef.,-;ity Extension Division .1t the University of California, Berkeley, and the School of Puhlic ] ]calth and I 'niversity Extension Divisi( m at the l :niversily tJJ Calif()rnia, Lus Ange]es. It is also affiliated with the San Diego "\tate University ~ch()()1 of Public Health. The Consurtium brings the resources of multiple disci plines and university campuses to meet the diverse needs of California cities The California Healthy Citie.'.; Project assists cities by identifying external sources of funds and program rL\<;ources. sponsoring statevvide nmferences ;.wd regi( mal meetings. puhlishing the Omnectif illS nev..',...;]eIter and other resources, establishing linkages between persons with similar interests. dnd cunvL'ning state anu rcgi(maJ ()rganizati( ms to collaborate on resource-ellicient ,<.;olutinns to ]oca] challenges. ~ '~'>" Tu learn 1701(' Villa ci~l' call hCl1t:f/'t, C()nt{lct: c'cl!(jimtio Heallhv Cities Prowct P () flux 9)2732, +IS 6 ,') .'J'acmmenf(). C4 9"12,':V1- 7320 (()](j) 327-7()17 (016) 324- 77(J3 (EAX; ment$,mulexpmut.. Ing Ibose conImmIIty resources wbkb enable people to mutually support each other in per- forming aU the func- tions of Ufe and in developing to their maximum potential" T Hancuck and L nuh!. quoted inJ1k'H() lIealthy Citws Fapers, i\~J.l ~ CALIFl )RNJA HEALTHY CIT1[" PRl ')JEl:T Resolved by the Assembly of the State of California, That the Assembly of the State of California commends the California Healthy Cities for their C()mmitment to increasing thL' livahility of their com- munities and positively influencing the health status of local residents. House Resolution No. 6H August 29, 1990 California Healthy Cities Project POBox 942732, MS h"7'; Sacramento, CA 942~'i-7320 (')1()) 327-7()}7 (()}(l) 32+77()3 (FAXI 'c-: \\;'<,Slern C"n~"'li\Jtl1l<'l I'uhlk !kJltiL. I')'!I, This materia] j, h,,~ed "1'0" wurk MlpJ.'[1rtnl hy Ih" :>lale or- (:aillml1l", [kraI1Ilh-nt "I H""ltlJ .~"r\.'j"." under Cc',,(racl 1\0. '1(, ~(i(H'i " ~- -~/" October 16, 1997 SUBJECT: The Honorable Mayor and City council John D. Goss, city Manager~ city Council Meeting of October 21, 1997 TO: FROM: This will transmit the agenda and related materials for the regular city Council meeting of Tuesday, October 21, 1997. Comments regarding the written communications are as follows: 5a. This is a letter from the city Attorney stating that to the best of his knowledge from observance of actions taken in Closed Session on 10/14/97 in which the city Attorney participated, there were no actions taken which are required under the Brown Act to be reported. IT IS RECOMMENDED THAT THIS LETTER BE RECEIVED AND FILED. JDG:mab ~~~ ~~ ~~~~ ~~~~ CITY Of CHUlA VISTA OFFICE OF THE CITY ATTORNEY Date: October 15, 1997 To: The Honorable Mayor From: John M. Kaheny, city Attorney C10"ed~i~JCj Re: Report Regarding Actions Taken for the Meeting of 10/14/97 The City Council met in Closed Session to discuss Jones Intercable v. city of Chula Vista, Jaffee v. City of Chula vista and labor negotiations. The City Attorney hereby reports to the best of his knowledge from observance of actions taken in the Closed Session in which the City Attorney participated, that there were no reportable actions which are required under the Brown Act to be reported. JMK: 19k C:\lt\clossess.no ~~I 276 FOURTH AVENUE' CHULA VISTA. CALIFORNIA 91910 . (619) 691-5037 . FAX (619) 585-5612 '7~PosI~Pe:)d8d~ ITEM TITLE: a) SUBMITTED BY: REVIEWED BY: BACKGROUND: COUNCIL AGENDA STATEMENT b) Item t;:, Meeting Date 10/21197 RESOLUTION / ff? 97 APPROVING A OISPOSITION ANO DEVELOPMENT AGREEMENT AND HOME PARTICIPATION AGREEMENT WITH SOUTH BAY COMMUNITY SERVICES FOR THE OEVElOPMENT OF AN EIGHTEEN (18) UNIT AFFORDABLE HOUSING PROJECT PROPOSED TO BE DEVELOPED AT OR AROUND 750 ADA STREET RESOLUTION 18" 79 r APPROVING AN AMENDMENTTO THE AMENDED AND RESTATED CONVEYANCE AGREEMENT ANO ESCROW INSTRUCTIONS TO DELETE REFERENCE TO THE REQUIREMENT FOR SOUTH BAY COMMUNITY SERVICES TO DEPOSIT $41.000 WITH THE CITY BEFORE PURCHASING THE LAND RESOLUTION ) rzf7 99 APPROPRIATING FIVE HUNOREO ANO TWENTY THREE THOUSAND NINE HUNDRED AND SIXTY FIVE OOLLARS ($523,965) FROM THE HOME PROGRAM AND THREE HUNDRED SEVENTY TWO THOUSANO NINE HUNDRED ANO FORTY OOLLARS ($372.940) FROM DISPOSITION PROCEEDS FROM THE SALE OF LAND AT OR AROUNO 750 ADA STREET FOR THE OEVELOPMENT OF AN EIGHTEEN (18) UNIT AFFOROABLE HOUSING PROJECT Community Developm~nt Director{; S. C;~ ....." JG PzJ~ - V_ Y"JL ioU c) On March 18, 1997 the City Council approved the commitment for a $372.940 loan for South Bay Community Services to purchase land from the City. (See Attachment A) This approval included an Amended and Restated Conveyance Agreement and Escrow Instructions with South Bay Community Services. On March 18, 1997 the Council also approved the commitment for a loan to South Bay Community Services in the amount of $523,965 from HOME funds for the development of 18 townhomes and apartments, subject to later approval of a Disposition and Oevelopment Agreement. Staff delayed negotiations on the Disposition and Development Agreement until South Bay Community Services learned if they were awarded tax credits to help finance this project. In August 1997 South Bay Community Services was awarded these tax credits. Full funding for this project has now been secured. The funding sources include the Bank of America Community Development Bank, the Local Initiative Support Corporation (LIS C), Tax Credits Allocation Committee (TCAC), Federal Home Loan Bank Affordable Housing Program, and the City of Chula Vista. For t -! Page 2, Item _ Meeting Date 10-21-97 tax purposes, TCAC requires that 10% of TCAC defined development costs for this project must be spent by November 7, 1997, South Bay Community Services will meet the 10% requirement by buying the land from the City at a cost of $372,940. This TCAC requirement makes the Council's approval of the Disposition and Development Agreement a time sensitive issue. (See Attachment B) Previously the address was reported to be 746 and 750 Ada Street, which identifies the parcel of land the City currently owns and has designated for the development of townhomes and a child care facility. The address is being changed in this report and on the respective resolutions to reflect the portion of the land devoted to the townhomes, as opposed to the portion that will accommodate the child care facility. For reporting purposes, SBCS will purchase the land "at or around 750 Ada Street", however, the legal description of the property will detail the exact location. At this time the City will retain ownership of 746 Ada Street, at which a child care facility is proposed to be located. RECOMMENDATION: Council Approve 1) a Disposition and Development Agreement and HOME Participation Agreement with South Bay Community Services for the Development of an Eighteen (18) Unit Affordable Housing Project Proposed to be Developed at or around 750 Ada Street; 2) Approving an amendment to the Amended and Restated Conveyance Agreement and Escrow Instructions to delete reference to the requirement for South Bay Community Services to deposit $41.000 with the City before purchasing the land; and 3) Appropriating $523,965 from the HOME Program and $372.940 from disposition proceeds from the sale of land at or around 750 Ada Street for the development of an 18 unit affordable housing project. BOARDS/COMMISSIONS RECOMMENDATION: The Housing Advisory Commission recommended approval of the proposed project at its April 10, 1996 special meeting and again on February 26, 1997. The Child Care Commission also recommended approval of the project at its May 7, 1996 meeting. DISCUSSION: PROJECT DESCRIPTION The "Trolley Terrace Townhomes" ("HT") will consist of 14 three bedroom units and 4 two bedroom units, ten of which will be two story town homes and eight of which will be one story flats. (See Attachment C & D) Residents will pay a monthly rent that is affordable to families earning below 40% of the area median income, which is approximately $437 for a two bedroom and $505 for a three bedroom unit. "HT" is being designed as a limited Equity Cooperative (Co-op), This "Co-op" will be a separate nonprofit organization formed by the residents and will participate in the overall management and operation of the development once it is built. Residents will become members of the Co-op by purchasing a "share", which will serve as their equity in the Co-op. The formation of the limited Equity Co-op will allow the residents to be involved and concerned in the welfare of their neighborhood. t -c2- Page 3. Item _ Meeting Date 10-21-97 CHILOCARE CENTER In addition to building affordable housing, SBCS is making a strong effort to develop a child care center adjacent to the townhomes as a separate project. This center would provide affordable child care to approximately 80-100 children who will live either in the housing development next door or elsewhere in the surrounding neighborhood. This facility could also serve as a "children's community center" with homework assistance, tutoring, literacy training, gang prevention and intervention services, alcohol, drug, and AIDS education, and parenting classes. The key to developing this facility will be securing funding to build the center. A few providers have expressed interest in this project contingent upon funding. Staff and SBCS will be working diligently together to develop the child care facility. PROJECT FINANCING The proposed housing project will be financed through a variety of funding sources, including: a Bank of America Community Development Bank construction and permanent loan, local Initiative Support Corporation (USC) predevelopment loan, low Income Housing tax credits, Federal Home loan Bank Affordable Housing Program, and a City of Chula Vista Development loan and land loan. The total development cost is estimated at $2,600,000. (See Attachment E,F,G & H). In order to bring in over $1.5 million in tax credit investor equity, Trolley Terrace Townhomes will be initially owned by a limited partnership, in which South Bay Community Services will be the general partner, and the tax credit investor will be the limited partner. The Co.op will lease the property from the limited partnership and operate it for the 15 year tax credit period. When the partnership dissolves after 15 years, the Co-op will have the right to take over full and complete ownership of the complex, subject to approval of the City and other lenders. The party named in the Amended and Restated Conveyance Agreement and both loan commitments will be South Bay Community Services, however an assignment would be pre-approved to the limited partnership, proposed to be named T rolley Terrace T ownhomes limited Partnership. A limited partnership must be formed in order to receive tax credit proceeds. SBCS would be the general partner of the limited Partnership. A deposit of $41,000 is no longer being required of South Bay Community Services before purchasing the land. That provision was made previously at the request of SBCS in order to use it as a portion of their requirement from TCAC to spend 10% of the funds within a given amount of time. SBCS has reconsidered their approach to spend the 10% and now is buying the land from us instead. The Council is being requested to delete reference to a $41,000 deposit, because it no longer applies. The Amended and Restated Conveyance Agreement allows SBCS to take ownership of the portion of the property for the housing development separately from the day care, upon meeting certain conditions, including the approval of the DDA. c{-;J Page 4. Item _ Meeting Date 10-21-97 CITY OBLIGATIONS UNDER PROPOSED DISPOSITION AND DEVELOPMENT LOAN AGREEMENT The proposed Disposition and Development Agreement outlines the disposition of the property and financing of the project, escrow instructions, the development of the project, uses of the property, defaults, remedies, termination rights, and general provisions. Basically it would obligate the City to sell 1.21 acres of land at or around 750 Ada Street to SBeS and make two loans to SBeS toward the development of an 18 unit affordable housing project known as T rolley Terrace T ownhomes. These two loans are as follows: 1) A development loan for $523,965 from HOME funds for a 55 year term at 3% simple interest. payable from 75% of the residual receipts from operation of the complex. The lien will be subordinate to the Bank of America loan, and any other institutional liens approved by the City. Up to $120,000 will be advanced prior to the construction closing of the project for architectural work, environmental studies, engineering, and planning fees. The remainder of the loan funds, $403,965, will be made available during the construction and permanent financing periods. (In the March 18, 1997 report, $523,965 was committed toward this project, with $98,085 estimated to be used toward pre development expenses, leaving $425,880 for expenses during the construction phase. This adjustment has been made to reflect the updated budget.) and 2) A land purchase loan for $372,940, from disposition proceeds from the sale of the land, for a 55 year term at 3% simple interest. with payment from 75% of residual receipts which may be available after satisfaction of the City's development loan. The lien will be recorded in last position, after the Bank of America loan, the City's development loan, and any other institutional liens approved by the City. On March 18, 1997, $372,940 was committed toward this project for land acquisition. Council previously approved SBCS to purchase 1.16 acres of land for the housing development from the 1.81 acres available at 746 and 750 Ada Street. Given the need to have a minor lot adjustment made in order to accommodate 18 units, SBCS will now be buying 1.21 acres for the housing development. Staff does not consider this alteration to have any significant impact on the economic terms of the City's deal. The structure of the City acquisition loan has been modified from the way it was presented in the March 18, 1997 report in order to satisfy TCAC requirement to spend 10% of the TCAC defined development costs by November 7, 1997. The Local Initiative Support Corporation (USC) will be lending SBCS' $372,940 to purchase the land. This amount will be paid to the City at the close of escrow for the land deal. At construction loan closing, SBCS will pay USC back for the land with the same $372,940 paid to the City by USC and then SBCS will take out a loan with the City for the same amount. This is necessary according to the Internal Revenue Services to avoid any appearances on SBCS's part of noncommitment to the land purchased, which is inherent in seller financing. Thus the City acquisition loan becomes more of a construction loan, though it is still being used to buy the land. The substance of the deal is still the same as was described in March 1997, i.e. a land loan and development loan are being made to SBCS to the total t;-Lj Page 5. Item _ Meeting Date 10-21-97 sum of $896,905. The City retains an option right to reacquire the property at the lesser of its fair market value or the 103% times the purchase price in the event the construction loan fails to close (See Attachment I). City funds will be subordinate to the Bank of America Community Development (BACD) Construction Loan of approximately $920,000 during construction and only to the BACD's permanent financing of approximately $220,000 after construction. CITY RISKS/MITIGATION MEASURES UNDER THE PROPOSED DISPOSITION AND DEVELOPMENT LOAN AGREEMENT There are four areas of risk of which the Council needs to be cognizant: RISK ONE - SUBORDINATION OF LOANS: The City will need to subordinate its loans to the Bank of America Community Development's construction and permanent financing loans. MITIGATION MEASURES: . As a condition to subordinating its debt or its affordability covenants, the City shall obtain special notice and cure rights, and the option to purchase and/or assume SBCS's loans in order to continue the project. . A performance bond will be required from the project's general contractor with both the City and Agency listed as named beneficiaries. RISK TWO - REPAYMENT OF LOANS FROM RESIDUAL RECEIPTS: The City's loans will be paid back from 75% of the residual receipts (i.e. 75% of the net cash flow). MITIGATION MEASURES: . Once the developer's fee is paid, the City is entitled to receive seventy-five percent (75%) of the residual receipts with the other twenty-five percent (25%) going back into the project. TCAC allows the developer (SBCS) to be paid fifteen percent (15%) of total development costs. SBCS will collect only six percent (6%) of the total development costs for their developer's fee. SBCS is making every attempt to reduce costs and ensure repayment. . Property management fee is not to exceed what is customary and standard for affordable housing projects similar in size and scope to the Project, which is 5-6% of gross rental income. . There is a high demand for these units with a waiting list already established and the vacancy rate is expected to be low. Currently, Chula Vista's vacancy rate is at 2.4%. The revenue base should be very reliable. The Capital Replacement Reserve and the Operating Reserve are to be maintained at conventional rates. TCAC requirements on rental income are strict to assure steady cash flow. The operating costs are standard. The City has approved SBCS' selection of the property management firm, Cuatro Properties Inc., and if a problem occurs the City will be involved to assure proper handling. TCAC has strict management requirements which will only be met by a highly qualified firm. ~-~ Page 6, Item _ Meeting Date 10-21-97 RISK THREE - Early Release of Pre development Funds: The pre development funds will need to be released before the construction loan is closed. However, unlike the Rancho del Rey Cordova Village loan terms, the Trolley Terrace Townhomes' predevelopment funds are not being released before the tax credits are awarded. South Bay Community Services has already secured tax credits. This decreases the risk of lending funds that may not be recoverable. MITIGATION MEASURES: . Predevelopment funds will not be released until South Bay Community Services has purchased the land from the City for $372,940. If construction closing does not occur, the City will buy back the land for $372,940, which the City could then sell at a profit to a third party to reclaim the lost pre development funds. . The City will disburse predevelopment funds only on a reimbursement basis. . City staff has copies of funding commitments from the Bank of America Community Development Bank and from lISC. . The City predevelopment dollars will be used for architectural work, environmental studies, engineering, planning fees, legal expenses tax credit fees, appraisal, market study costs, and related "soft costs". If these dollars are spent and construction closing does not occur, SBCS will assign the City their rights to the architect's plans, which are valued at one hundred thousand dollars ($100,000). RISK FOUR - Developer Unable to Comolete Proiect South Bay Community Services must buy the land before construction closing in order to meet a TCAC requirement. If construction closing does not occur, the City will buy back the land. If construction closing does happen and the project is unexpectedly interrupted afterwards, the City could have an incomplete project. MITIGATION MEASURES: . The City must transfer land before construction closing, in order for South Bay Community Services to meet a TCAC rule to spend 10% of the TCAC defined development costs by November 7, 1997. If construction closing does not happen, the City will invoke a Buy Back Option to have South Bay Community Services sell the land back to the City. If construction closing does happen and the development is interrupted for some reason, the general contractor for the project has posted a performance bond naming the City as beneficiaries, and the City has received a commitment from TCAC. . SBCS's performance under the DDA will be secured by a second priority deed of trust on the property. . The City has cure rights enabling the City to hire someone else to complete the project. A performance bond on the general contractor would have been secured by this point which guarantees the completion of the general contractor's work. A new developer, preferably a non profit because of the special financing terms designed to match the current non profit status, would need to be brought into replace SBCS. Repayment of the loans will not have been further jeopardized at this ~-? Page 7. Item _ Meeting Date 10-21-97 point given the project gets completed. If the City is not be able to payoff the debt necessary to cure the loans, the City may lose the amount of monies advanced at the time. This would be left to the City's discretion at the time of such an event which allows the City a choice as to their course of action. . Certificate of current "Occurrence Made Insurance Policy" be given to the City. OTHER RISK MITIGATION MEASURES UNDER THE PROPOSED DISPOSITION AND DEVELOPMENT AGREEMENT . Before the City will fund the Non-Predevelopment Loan Dollars, the developer shall close escrow simultaneously with the Bank of America Community Development Bank, and shall have obtained a preliminary allocation of low-income housing tax credits from TCAC, and have met all the conditions contained in the Amended and Restated Conveyance Agreement. . As a condition to close of escrow, the developer shall submit to the City a certified copy of the construction contract between developer and general contractor for all of the improvements required to be constructed by the developer. The general contractor shall be approved by the City. . Ten percent (10%) of the construction costs will be set aside for a contingency. . In the event of "Gross Mismanagement" of the Project, City shall have the authority to require that such Gross Mismanagement cease immediately, and further to require the immediate replacement of the Property Manager. City shall provide written notice to Developer of an event of Gross Mismanagement and Developer shall have fifteen (15) days to cure such problem (or for such events of Gross Mismanagement that cannot be cured within 15 days, that Developer has commenced such cure within the 15 day period. . SBCS is required to maintain comprehensive general liability insurance on the project which names City as additional insureds. SBCS must also indemnify and hold harmless the City against any and all project liabilities. NEIGHBORHOOD CONCERNS Originally when this proposal was presented by Habitat for Humanity a community meeting was held with the residents, City officials, and the development team, which took place about two years ago. The residents were noticed and a small group gathered. The concept of the project was well received. In February 1997, City staff noticed the residents and business/property owners within 1000 feet radius around the subject property to invite them to participate in the March 18, 1997 Council meeting. A few residents called in response to this notice indicating support for the project and asking to be put on a waiting list. FISCAL IMPACT: On March 18, 1997 the City Council approved the City investment for the Trolley Terrace Townhome development to be for a total of $896,905 combining the cash allocation with the value of land. The loans will accrue interest at 3% per annum and is projected to be paid back out of the project's "residual receipts" or refinance proceeds. The current project pro forma projects that this will occur in approximately 55 years. ~-7 Page B. Item _ Meeting Date 10-21-97 The City will receive approximately $250,000 from the developer for payment of the permits and fees. As described above, there are risks involved in lending the funds. In summary, there are two worst case scenarios. First, if the development stops before construction loan closing, the means of recovering the City's one hundred and twenty thousand dollars ($120,000) of predevelopment funds is two fold. First. in the form of securing the rights of the architect plans, valued at one hundred thousand dollars. Second, the City will have the right to buy back the land, which it can then sell at a profit. Second, if the land has transferred to SBCS, construction has started, predevelopment dollars have all been spent and for some reason the development is stopped due to a breach of contract or some kind of default. In that case, the City has cure rights enabling the City to hire someone else to complete the project. A performance bond on the general contractor would have been secured by this point which guarantees the completion of the general contractor's work. A new developer, preferably a non profit because of the special financing terms designed to match the current non profit status, would need to be brought into replace SBCS. Repayment of the loans will not have been further jeopardized at this point given the project gets completed. However, at worst, if the City is not be able to payoff the debt necessary to cure the loans, the City may lose the amount of monies advanced at the time. This would be left to the City's discretion at the time of such an event which allows the City a choice as to their course of action. Despite these risks, staff feels the best possible security measures are in place in the Agreements to offset the likelihood of any problems. The mitigation measures described within this report are carefully structured to minimize any negative fiscal impact to the City. ATTACHMENTS A. Map B. Disposition and Development Agreement and HOME Participation Agreement with SBCS- (!()tf7- /~, C. Site Design ~~ D. Elevation Design ~V E. Sources and Uses Chart ~ F. Schedule of Performance ~(J G. Pre. Development Budget ~ H. Development Budget *' I . Option Agreement ~. t(7- I , 7 HSS) H:IHOMElCOMMDEV\STAFF.REP\10.21.97ITTTDOA (October 16, 1997)] f::~g/ RESOLUTION NO. /:5/9 ? RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING A DISPOSITION AND DEVELOPMENT AGREEMENT & HOME PARTICIPATION AGREEMENT WITH SOUTH BAY COMMUNITY SERVICES FOR THE DEVELOPMENT OF AN EIGHTEEN (18) UNIT AFFORDABLE HOUSING PROJECT PROPOSED TO BE DEVELOPED AT OR AROUND 750 ADA STREET WHEREAS, the City has previously approved the commitment of HOME funds to develop an 18 unit affordable housing project (Trolley Terrace Townhomes or "Project") to be located on 1.21 acres of land at or around 750 Ada Street; and WHEREAS, City staff has presented for City Council approval an Amended and Restated Conveyance Agreement which implements the sale of land from the City to South Bay Community Services (SBCS). the Project Developer; and WHEREAS, SBCS has obtained Low Income Housing Tax Credits ("LlTHTCs") toward the project with the California Tax Credit Allocation Committee under Section 42 of the Internal Revenue Code; WHEREAS, SBCS has obtained commitments from the following sources to fund the project: (1) Bank of America Community Development Bank Construction and Permanent Loan; (2) Local Initiative Support Corporation Development Loan; (3) Federal Home Loan Bank Affordable Housing Program Grant; (4) City of Chula Vista Development Loan; (5) City of Chula Vista Land Loan; and (6) a sale of LlTHTCs allocated by TCAC; and WHEREAS, the provision of affordable housing units like the Project is consistent with and called for by the City's General Plan Housing Element, the Comprehensive Housing Affordability Strategy, the federal HOME program, and California Health and Safety Code; and WHEREAS, the City wishes to provide SBCS with loans from federal HOME funds and from property disposition proceeds in order to partially finance the development of the Project; and WHEREAS, the City provision of funds to the Project will directly improve the City's supply of very low and low income housing; and WHEREAS, pursuant to Resolution 18310, City Council previously adopted Negative Declaration IS-93-07 and addendum thereto; therefore no further action under CEQA is required for this project; and WHEREAS, the proposed use of HOME program funds requires compliance with the National Environmental Policy Act (NEPA) and staff has completed the compliance process by filing required notices and preparing the required Environmental Assessment document and providing the required public review period for all NEPA related documents; and WHEREAS, the City has negotiated with SBCS the terms and conditions of a Disposition and Development Agreement/HOME Participation Agreement ("Development Agreement") which established the terms for the City loans to the Project, SBCS's obligations to ?/J ~/ develop and operate the Project, and which imposes affordability covenants on the Project property. NOW, THEREFORE, BE IT RESOLVED the City Council of the City of Chula Vista does hereby resolves as follows: 1 . Recitals True and Correct. The City finds and determines the recitals set forth above are true and correct to the best of its knowledge. 2. Approval of Aqreement. The City hereby approves the Development Agreement in substantially final form presented, with such minor changes as may be approved or required by the City Attorney, and hereby authorizes and directs the Mayor to execute same. A final form of the Agreement shall be kept on file with the City Clerk as Document No. (!e)'t7-16.Z-. 3. Directions to Staff. City staff is hereby authorized and directed to take any appropriate action consistent with the purposes of this Resolution, including, without limitation, preparing and approving final forms of all documents necessary to implement the terms of the Development Agreement, and executing related escrow instructions, all subject to final approval as to form by the City Attorney. Presented by Approved as to form by (~,S~ Chris Salomone Director of Community Development [(55) H:\HOME\COMMDEV\RESOS\tttdda (October 16, 1997 (11 :54am)] ~/1-;Z RESOLUTION NO. /8'/98" RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING AN AMENDMENT TO THE AMENDED AND RESTATED CONVEYANCE AGREEMENT AND ESCROW INSTRUCTIONS TO DELETE REFERENCE TO THE REQUIREMENT FOR SOUTH BAY COMMUNITY SERVICES TO DEPOSIT $41,000 WITH THE CITY BEFORE PURCHASING THE LAND WHEREAS, the City has previously approved the commitment of HOME funds to develop an 18 unit affordable housing project (Trolley Terrace Townhomes or "Project") to be located on 1.21 acres of land at or around 750 Ada Street; and WHEREAS, City staff has presented for City Council approval an Amended and Restated Conveyance Agreement ("Conveyance Agreement") which implements the sale of land from the City to South Bay Community Services (SBCS), the Project Developer; and WHEREAS, SBCS has obtained Low Income Housing Tax Credits ("LlTHTCs") toward the project with the California Tax Credit Allocation Committee under Section 42 of the Internal Revenue Code; WHEREAS, SBCS has obtained commitments from the following sources to fund the project: (1) Bank of America Community Development Bank Construction and Permanent Loan; (2) Local Initiative Support Corporation Development Loan; (3) Federal Home Loan Bank Affordable Housing Program Grant; (4) City of Chula Vista Development Loan; (5) City of Chula Vista Land Loan; and (6) a sale of LlTHTCs allocated by TCAC; and WHEREAS, the provision of affordable housing units like the Project is consistent with and called for by the City's General Plan Housing Element, the Comprehensive Housing Affordability Strategy, the federal HOME program, and California Health and Safety Code; and WHEREAS, the City wishes to provide SBCS with loans from federal HOME funds and from property disposition proceeds in order to partially finance the development of the Project; and WHEREAS, the City provision of funds to the Project will directly improve the City's supply of very low and low income housing; and WHEREAS, pursuant to Resolution 18310, City Council previously adopted Negative Declaration IS-93-07 and addendum thereto; therefore no further action under CEQA is required for this project; and WHEREAS, the proposed use of HOME program funds requires compliance with the National Environmental Policy Act (NEPA) and staff has completed the compliance process by filing required notices and preparing the required Environmental Assessment document and providing the required public review period for all NEPA related documents; and WHEREAS, the City has negotiated with SBCS the terms and conditions of a Disposition and Development Agreement/HOME Participation Agreement ("Development Agreement") which established the terms for the City loans to the Project, SBCS's obligations to develop and operate the Project, and which imposes afford ability covenants on the Project property. t: b'? 1 WHEREAS, in connection with the Development Agreement, City and SBCS have agreed to amend the Conveyance Agreement to delete the requirement for a deposit of $41,000 upon opening of escrow. NOW, THEREFORE, BE IT RESOLVED the City Council of the City of Chula Vista does hereby resolves as follows; 1. Recitals True and Correct. The City finds and determines the recitals set forth above are true and correct to the best of its knowledge. 2. Approval of an Amendment to the Convevance AQreement. The City hereby approves an amendment to the Conveyance Agreement to delete the $41,000 deposit requirement, directs staff to prepare the formal amendment implementing same, subject to approval as to form by the City Attorney, and hereby authorizes and directs the Mayor to execute such amendment. A final form of the amendment shall be kept on file, the City Clerk as Document No. ~ 3. Directions to Staff. City staff is hereby authorized and directed to take any appropriate action consistent with the purposes of this Resolution. Presented by Approved as to form by Ill" ~. ~, )1~--v<v*-- Chris Salomone Director of Community Development [(S5) H:\HOME\COMMDEV\RESOS\tttconv (October 16, 1997 (11 :51amH ~ !J "~ RESOLUTION NO. /3791 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROPRIATING FIVE HUNDRED AND TWENTY THREE THOUSAND NINE HUNDRED AND SIXTY FIVE DOLLARS ($523,965) FROM THE HOME PROGRAM AND THREE HUNDRED SEVENTY TWO THOUSAND NINE HUNDRED AND FORTY DOLLARS ($372,940) FROM DISPOSITION PROCEEDS FROM THE SALE OF LAND AT OR AROUND 750 ADA STREET FOR THE DEVELOPMENT OF AN EIGHTEEN (18) UNIT AFFORDABLE HOUSING PROJECT WHEREAS, the City has previously approved the commitment of HOME funds to develop an 18 unit affordable housing project (Trolley Terrace Townhomes or "Project") to be located on 1.21 acres of land at or around 750 Ada Street; and WHEREAS, the City of Chula Vista ("City") is in control of funds under the HOME Investment Partnership Program (42 U.S.C. Section 12741 et seq.) ("HOME Program Funds") which program is designed to provide assistance to affordable housing projects; and WHEREAS, City staff and South Bay Community Services (SBCS) have negotiated certain terms for the transfer of the Site by the City to SBCS as more specifically set forth in that certain Trolley Terrace Townhomes Amended and Restated Conveyance Agreement and Escrow Instruction between the SBCS and the City ("City/SBCS Conveyance Agreement"); and WHEREAS,SBCShasobtained Low Income Housing Tax Credits ("LlTHTCs") toward the project with the California Tax Credit Allocation Committee under Section 42 of the Internal Revenue Code; and WHEREAS, SBCS has obtained commitments from the following sources to fund the project: (1) Bank of America Community Development Bank Construction and Permanent Loan; (2) Local Initiative Support Corporation Development Loan; (3) Federal Home Loan Bank Affordable Housing Program Grant; (4) City of Chula Vista Development Loan; (5) City of Chula Vista Land Loan; and (6) a sale of LlTHTCs allocated by TCAC; and WHEREAS, the provision of affordable housing units like the Project is consistent with and called for by the City's General Plan Housing Element, the Comprehensive Housing Affordability Strategy, the federal HOME program, and California Health and Safety Code; and WHEREAS, the City wishes to provide SBCS with loans from federal HOME funds and from property disposition proceeds in order to partially finance the development of the Project; and WHEREAS, the City provision of funds to the Project will directly improve the City's supply of very low and low income housing; and WHEREAS, pursuant to Resolution 18310, City Council previously adopted Negative Declaration IS-93-07 and addendum thereto; therefore no further action under CEQA is required for this project; and bC~/ 'I WHEREAS, the proposed use of HOME program funds requires compliance with the National Environmental Policy Act (NEPA) and staff has completed the compliance process by filing required notices and preparing the required Environmental Assessment document and providing the required public review period for all NEPA related documents; and WHEREAS, the City has negotiated with SBCS the terms and conditions of a Disposition and Development Agreement/HOME Participation Agreement ("Development Agreement") which established the terms for the City loans to the Project, SBCS's obligations to develop and operate the Project, and which imposes affordability covenants on the Project property. NOW, THEREFORE, BE IT RESOLVED the City Council of the City of Chula Vista does hereby resolves as follows: 1 . Recitals True and Correct. The City finds and determines the recitals set forth above are true and correct to the best of its knowledge. 2. Appropriation. The City hereby appropriates Five Hundred Twenty-Three Thousand Nine Hundred Sixty-Five Dollars ($523,965) of HOME Program Funds and Three Hundred Seventy-Two Thousand Nine Hundred Forty Dollars ($372,940) from unanticipated proceeds from the sale of City property located at or around 750 Ada Street for purposes of funding City obligations pursuant to the Development Agreement for the Trolley Terrace Townhomes project. 3. Directions to Staff. City staff is hereby authorized and directed to take any appropriate action consistent with the purposes of this Resolution; and Presented by Approved as to form by r~~, )~~ Chris Salomone Director of Community Development [(ss) H:\HOME\COMMDEV\RESOS\ttt523 (October 16, 1997 !1 1 :52am)] & C -cA ATTACHMENT I \.1k~ ." " Recording Requested by and when DRAFT recorded return to: city of Chula vista 276 Fourth Avenue Chula vista, Ca. 91910 Attention: Director, community Development space Above this Line for Recorder's Use OPTION AGREEMENT THIS OPTION AGREEMENT ("Agreement") is made and executed as of this day of , 1997 (the "Effective Date"), by and between THE CITY OF CHULA VISTA, a chartered municipal corporation of the State of California, herein called "City", and SOUTH BAY COMMUNITY SERVICES, a California non-profit public benefit corporation, herein called Developer, with reference to the facts set forth below. RECITALS A. The city and Developer have entered into that certain Trolley Terrace Townhomes Disposition and Development Agreement/Home Participation Agreement dated October 21, 1997 (the "DDA"), the purpose of which was to effectuate the development of certain real property located at 750 Ada Street, Chula vista, california, as such property is more particularly described in Exhibit A attached hereto and incorporated herein by this reference (the "Property") into an eighteen (18) unit affordable housing project ("Project") as more particularly described therein. Capitalized terms not otherwise defined in this Agreement shall have the same meanings given thereto in the DDA. B. Under the terms of the DDA, as a material part of the consideration to city from Developer for city's agreement to sell the Property and loan monies for the development of the Project, Developer has agreed to grant the City an option to acquire the Property. This Agreement is entered into in order to document such grant of option and to more fully set forth the circumstances under which the option may be exercised. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, city and Developer hereby agree as set forth below. ~C-3 ARTICLE I. Grant of option Developer hereby grants to City an exclusive option (the "Option") to purchase the Property, on the terms and conditions set forth in this Agreement. ARTICLE II. Term of option; No Unapproved Liens. The term (the "Option Term") of the Option shall commence as of the Effective Date, and shall expire upon the closing of the "BACDB Construction Loan" and the satisfaction of any and all other terms and conditions precedent to the city's obligation to make the "city Construction Loan" pursuant to the DDA (collectively the "Construction Loan Closing Date"). Except as may be approved by City in its sole discretion, or as expressly contemplated by the DDA, Developer shall keep the Property free and clear of monetary liens throughout the Option Term, and liens which have the potential of becoming monetary liens. ARTICLE III. Exercise of option In the event that the Construction Loan closing Date does not occur by the date falling sixty (60) days after the date specified therefor in the DDA, city may exercise the Option at any time thereafter by delivering written notice (the "Notice of Election") to Developer to such effect. ARTICLE IV. Purchase Price In the event city exercises the Option, the purchase price ("Purchase Price) at which city shall be entitled to purchase the Option Property shall be the lesser of (a) the then fair market value of the Property; or (b) one hundred three percent 103% of the original "Purchase Price" under the DDA. ARTICLE V. Terms of Purchase 5.1 Purchase Price. If City exercises the Option, the City shall pay to Developer the Purchase Price calculated in accordance with Article IV above. 2 ~ ;;L--i 5.2 Escrow. If City has exercised the Option, then the provisions set forth below shall apply. Within five (5) days of delivery of the Notice of Exercise, pursuant to the provisions of Article I, above, the escrow ("Escrow") shall be opened by city with Chicago Title Insurance Company or another escrow selected by City ("Escrow Agent"). Escrow shall be deemed opened upon the delivery of this Agreement to Escrow Agent. City and Developer shall execute any additional escrow instructions required by Escrow Agent. 5.3 Ti tle. Developer shall cause fee title to the Property to be conveyed to city subject only to the following: (a) Non-Monetarv Existinq Exceptions. All non- monetary covenants, conditions, restrictions, easements, reservations, right and rights-of-way of record existing immediately after Developer obtained title to the Property pursuant to the DDA, including, without limitation, the Memorandum; (b) Non-Monetarv Development Encumbrances. Non- monetary encumbrances, such as easements or permit conditions, required by the City to facilitate the development of the project pursuant to the DDA; and (c) Taxes. Non-delinquent general, special and supplemental real property taxes, bonds and assessments of the nature and extent levied or assessed against the Property as of Developer's acquisition thereof or imposed in connection with the construction of off-site improvements contemplated by the DDA ("Taxes"). Developer shall cause to be reconveyed any and all monetary liens, including any imposed by the city itself pursuant to the DDA, in accordance with terms and conditions thereof. To the extent that all other exceptions are not, by virtue of the prior status of this Agreement, removed by exercise of the Option and conveyance of the Property to city, Developer shall pay such amounts and/or deliver to the Escrow Agent such indemnities as the Escrow Agent may require, in order to permit Escrow Agent to issue the title insurance described below. 5.4 Developer's Deliveries. within twenty (20) calendar days following the delivery of the Notice of Exercise, Developer shall deliver to Escrow Agent an executed and acknowledged grant deed (the "Grant Deed") for the Property conveying title to the Property to City or its assignee. 5.5 Close of Escrow. The close of Escrow ("Close of Escrow") shall occur no later than sixty (60) calendar days after delivery of City's Notice of Exercise ("Closing Date"). Escrow Agent shall close Escrow upon satisfaction of the following 3 ~t:C--~ conditions precedent: (a) Escrow Agent shall be able to issue, immediately upon recording the Grant Deed, a CLTA title insurance policy (together with such endorsements thereto as City may reasonably request), or, if requested by City, an ALTA form of title insurance policy. with liability in an amount specified by City insuring title subject only to the matters agreed upon pursuant to the provisions of section 5.3 above; and (b) City shall have deposited into Escrow, in cash, the Purchase Price. 5.6 Title Insurance; Closinq Costs. Developer shall pay the cost of the title insurance described above; provided that if city requests an ALTA policy of title insurance, the cost differential between said policy and the CLTA form shall be paid by City. City shall pay the cost of any title endorsements requested by it. Escrow Agent's standard transaction fee shall be borne fifty percent by each party. Developer shall be responsible for any transfer taxes. All other closing costs shall be borne as is customary in San Diego County. 5.7 Prorations. Taxes shall be prorated as of the Close of Escrow. ARTICLE VI. Assiqnment and Transfer of Warranties. Plans. Specifications and Insurance/Condemnation Proceeds In the event the Property is transferred to city, together with the delivery of the Grant Deed, Developer shall execute and deliver an assignment of warranties in a form prepared by City, assigning and transferring to City all warranties in which Developer may then have an interest relating to work, labor, skill or materials furnished in connection with the construction of any improvements on the Property, and of which City desires to take assignment. Also in the event of such transfer, Developer shall similarly execute and deliver an assignment of plans and specifications in a form prepared by City assigning and transferring to City all plans and specifications prepared by or for Developer relating to improvements on the Property or to adjacent lands of city, whether constructed or not, and of which City desires to take assignment. Additionally, Developer agrees to so execute and deliver a general assignment in favor of City assigning and transferring any architect's agreements, construction contracts, or other contracts or agreements entered into by Developer relating to the Property, and of which city desires to take assignment. Finally, Developer agrees that, in the event of 4 ~ ~C-~ such a transfer of the Property, any and all insurance and condemnation proceeds (and the rights thereto, to the extent not yet disbursed) shall be transferred and assigned to City concurrently with the Close of Escrow hereunder. Developer covenants that it shall in good faith take all actions reasonably necessary to ensure that the rights described in this Article VI are transferrable as set forth above without further cost or expense to City. ARTICLE VII. General provisions 7.1 Notice and Pavments. Any notice to be given or other document to be delivered by any party to the other or others hereunder, and any payments from city to Developer, shall be sufficiently given if personally delivered by hand and a receipt thereof is obtained or is refused to be given or if dispatched by registered or certified mail, postage prepaid, return receipt request, or by way of nationally recognized overnight mail delivery service (such as united Parcel Service or Federal Express), to the principal offices of the City and the Developer as set forth below. Such written notices, or other documents may be sent n the same manner to such other addresses as either party may from time to time designate by mal. Such notices, demands and communications shall be deemed given on receipt or rejection. Notices shall be sent: To Developer: South Bay Community Services 315 Fourth Avenue, suite E Chula Vista, Ca. 91910 Attn: Executive Director To city: The City of Chula vista 276 Fourth Avenue Chula vista, Ca. 91910 Attn: Director, Community Development 7.2 captions. The captions used herein are for convenience only and are not a part of this Agreement and do not in any way limit or amplify the terms and provisions hereof. 7.3 Governinq Law. This Agreement shall be governed by and constructed under the laws of the State of California. This Agreement shall be deemed made and entered into in San Diego County. 7.4 Time of the Essence. Time is of the essence of each 5 ~ &c-? and every provision of this Agreement. 7.5 Successors and Assiqns. All of the covenants and conditions of this Agreement shall inure to the benefit of and shall be binding upon the successors in interest of city and the successors, heirs, representatives and assigns of Developer. As used in the foregoing, "successors" shall refer both to the parties' interest in the Property and to the successors to all or substantially all of their assets and to their successors by merger or consolidation. 7.6 Attornevs' Fees. In the event of any conflict or dispute with respect to the interpretation or enforcement of any of the terms or provisions of this Agreement, the prevailing party shall be entitled to recover from the other party all of its costs and expenses incurred in connection therewith, including without limitation attorneys' fees. 7.7 Severability. In the event that any phrase, clause, sentence, paragraph, section, article or other portion of this Agreement shall become illegal, null or void or against public policy, for any reason, or shall be held by any court of competent jurisdiction to be illegal, null or void or against public policy, the remaining portions of this Agreement shall not be affected thereby and shall remain in full force and effect. 7.8 Gender and Number. In this Agreement (unless the context requires otherwise), the masculine, feminine and neuter genders and the singular and the plural include one another. 7.9 No Partnership or Joint Venture. City or Developer shall not, by virtue of this Agreement, in any way or for any reason be deemed to have become a partner of the other in the conduct of its business or otherwise, or a joint venturer. In addition, by virtue of this Agreement there shall not be deemed to have occurred a merger of any joint enterprise between City and Developer. 7.10 Entire Aqreement. This Agreement (together with the provisions of the DDA which are applicable hereto) constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof, and all prior and contemporaneous agreements, representations, negotiations and understandings of the parties hereto, oral or written, are hereby superseded and merged herein. The foregoing sentence shall in no way affect the validity of any other documents executed by City and Developer relating to the Property. 7.11 Authority. Each individual executing this Agreement on behalf of Developer represents and warrants that he is duly authorized to execute and deliver, and has the power to execute and deliver, this Agreement on behalf of Developer, that 6 ~&L-r the transaction contemplated hereby has been duly authorized by all requisi te action on the part of Developer, and that no other consents of any party shall be necessary to the consummation hereof. 7.12 Further Assurances. Developer agrees that it will, at its sole cost and expense, at any time and from time to time after the Close of Escrow, upon the request of City, execute, acknowledge and deliver all such further deeds, assignments, transfers, conveyances and assurances as may be reasonably required for the effective assignment, transferring, granting or conveying of all or any of the assets or property to be assigned, transferred, granted or conveyed to City as provided herein. Upon expiration of the Option for any reason whatsoever including, without limitation, the failure of city to exercise the Option prior to the expiration of the Option Term or the opening of the mortuary on the Property, the Option and this Agreement shall automatically expire and cease to be of any further force or effect and, at the request of either City or Developer, the other party shall take such steps and execute and acknowledge such documents as may be necessary to reflect the termination of the Option and this Agreement and expungement of the same as an encumbrance on title to the Property. 7.13 Further Assistance. If City exercises the option and purchases the Property, Developer: (i) waives any right to relocation assistance to an owner or business tenant pursuant to state law including, but not limited to, California Government Code sections 7260 through 7277, and (ii) further waives any claim for compensation for loss of or damage to goodwill against the city pursuant to California Code of civil Procedure section 1263.510. [NEXT PAGE IS SIGNATURE PAGE] 7 ~ t::C-<j SIGNATURE PAGE TO OPTION AGREEMENT IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. CITY: CITY OF CHULA VISTA, a chartered municipal corporation of the State of California By: Shirley Horton, Mayor ATTEST City Clerk APPROVED AS TO FORM BY John M. Kaheny City Attorney DEVELOPER: SOUTH BAY COMMUNITY SERVICES, anon-profit public benefit corporation By: Kathryn Lembo, Executive Director H: \ shared\attornev\ sbcs. opt 8 ~ hL-Iv I I I I roo' V) ~v mlJ'tdl I~p tll ':1{", s: JL/ I HH3V'ias O^18 I }.J<\'1B ATTACHMENT A ~~ D ~ . 1 5 o~o I~ ,;0 ,'" I~ ~';\,'i~ I ,n \ -' .., I -, \\ I ~a'i\r- '--! ~ ~~ D-~ i i L -, * n m i> x~ 1" ~ ~2 m % ;0 ~ ATTACHMENT B ~"'- " RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: IN SUBSTANTIALLY FINAL FORM FINAL FORM EXECUTED BY SOUTH BAY COMMUNITY SERVICES TO BE PRESENTED ON TUESDAY, 10/21/97 The city of Chula Vista 276 Fourth Avenue Chula Vista, CA 91910 Attn: Sherry Schott (SPACE ABOVE THIS LINE FOR RECORDER'S USE) TROLLEY TERRACE TOWNHOMES DISPOSITION AND DEVELOPMENT AGREEMENT/ HOME PROGRAM PARTICIPATION AGREEMENT by and among THE CITY OF CHULA VISTA, . a Municipal Corporation, and SOUTH BAY COMMUNITY SERVICES, a Non-Profit Public Benefit Corporation /3- ( RECITALS ARTICLE 1 DEFINITIONS TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ARTICLE 2 DISPOSITION OF THE PROPERTY AND FINANCING OF THE PROJECT 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.14 2.15 2.16 Z/17THA Disposition of Property . . . Exemption From Article XXXIV City Loan Commitment . . . . 2.3.1 The City Loan . . . . 2.3.2 The City Predeve10pment Loan Proceeds 2.3.3 The City LISC Loan Repayment Proceeds 2.3.4 The City Construction Loan Proceeds City Note and Deed of Trust . . . . . . . Funding of City Development Loan . . . . 2.5.1 City Predeve10pment Loan Proceeds 2.5.2 city LISC Loan Repayment Proceeds 2.5.3 city Construction Loan Proceeds Source of City Loan . . . HOME Requirements . . . . a. Use of the HOME Funds b. Affordability. . . . c. Project Requirements d. Housing Quality Standard e. Affirmative Marketing . . f. Records and Reports . . . g. Enforcement of Agreement h. Duration of Covenants Re HOME-Assisted units i. Monitoring . . . . . . . . Funding of Predevelopment Costs Third Party Funding Sources . 2.9.1 LISC Recoverable Grant 2.9.2 LISC Loan . . . . . 2.9.3 AHP Grant . . . . . . 2.9.4 BACDB Permanent Loan. City Loan Repayment Obligations Lien Priority, Title Insurance Subordination; Refinancing Developer's Evidence of Financial Capability Low Income Housing Tax Credit Program Developer Fee . . . . . . Inter-Creditor Agreement . . . . i~_~ "-'''''''''. paae 1 3 5 5 5 5 5 6 7 8 8 9 9 9 9 10 10 10 11 11 11 11 11 11 11 12 12 12 12 12 13 13 13 15 15 17 18 20 21 ARTICLE 4 DEVELOPMENT OF THE PROJECT . . . . . . . . 4.1 Work to be Performed . . . . . . 4.2 Development Project/Architectural 4.3 Final Construction Drawings. . . 4.4 Other City and Governmental Agency Permits and Approvals . . . . . Selection of General Contractor Hold Harmless . . . . . . . . . Further Indemnification of city Costs of Development . . . . . Schedule of Performance: Progress Grant of Easements . . . Compliance with Permits and Laws ARTICLE 3 ESCROW 3.1 3.2 3.3 3.4 3.5 3.6 3.7 4.5 4.6 4.7 4.8 4.9 4.10 4.11 Z/I7THA TABLE OF CONTENTS (Continued) . . . . . . . . . Opening of Escrow Close of Escrow . Recordation . . . Delivery of Documents Required From Developer and city ...... a. Developer's Obligations b. City's Obligations . . . Escrow Agent Duties . . . . . . . Conditions Precedent to Closing: Termination 3.6.1 Conditions Precedent to Developer's Obligations 3.6.2 Failure of Developer's Conditions: Termination 3.6.3 Conditions Precedent to City's Obligations . . . 3.6.4 Failure of City's Conditions: Termination Physical and Environmental Condition of the Property: Preliminary Work by Developer 3.7.1 Limit on Escrow Agent's Responsibility 3.7.2 "As Is" Conveyance. . . . . a. Soils, Topography, Etc. b. utilities, Schools, Etc. c. Districts . . . . . d. Planning and Zoning e. Development Fees . . f. Easements and Encroachments g. Other Matters Hazardous Materials Indemnity of City 3.7.3 3.7.4 . . . . . . Plans Reports . . . . ii ,8 -.J Paqe 21 21 22 23 23 23 23 24 25 25 25 25 26 27 27 27 27 27 27 27 27 27 27 28 28 28 28 29 29 30 30 31 31 32 32 33 33 TABLE OF CONTENTS (Continued) Paqe 4.12 Anti-discrimination During Construction. . 33 4.13 Right of Access. . . . . . . . . . . . . . 33 4.14 Prohibition Against Assignment and Transfer 34 4.15 Taxes, Assessments, Encumbrances, and Liens 36 4.16 Secured Financing; Right of Holders 36 4.16.1 Permitted Encumbrances 36 4.16.2 Holder Not Obligated to Construct Improvements 37 4.16.3 Notice of Default to Mortgage, Deed of Trust or Other Secured Instrument Holders; Right to Cure . . . . . 37 4.16.4 Right of City to Cure Mortgage, Deed of Trust, or Other Security Instrument Default 37 4.17 Right of City to satisfy Liens 38 4.18 Estoppels. . . . . . . . 38 4.19 certificate of Completion. . . 39 ARTICLE 5 USES OF THE PROPERTY . . . . 39 5.1 Use of the Property 39 5.1.1 General 39 5.1.2 Affordable Housing 40 5.1.3 Reports ... 42 5.1.4 Insurance . . . . 42 5.1.5 Repair of Damage. 43 a. obligation to Repair and Restore Damage Due to Casualty Covered by Insurance. 43 b. continued Operations . . . . . . . .. 44 c. Damage or Destruction Due to Cause Not Required to be Covered by Insurance 44 5.2 Marketing and Leasing of units . . . . . . .. 44 5.2.1 Lease Preference and Marketing Plan 44 a. Publicity Campaign Prior to Opening 45 b. Preference List For Initial Leasing and for Ongoing Leasing . . . . . 45 c. Required Noticing of Vacant Units 45 5.2.2 Rental Agreement . . . . . . . . . . 46 5.2.3 Remedy for Excessive Rental Charges 46 5.3 Maintenance of the Property 46 5.4 Property Management. . . . 47 5.4.1 Management Plan 47 5.4.2 Gross Mismanagement 48 5.4.3 Fees Paid to Developer 48 5.5 Capital Replacement Reserve. 49 5.6 Obligation to Refrain from Discrimination 49 Z/17THA Hi ,8-c/ TABLE OF CONTENTS (Continued) Paqe 5.7 Form of Nondiscrimination and Nonsegregation Clauses 5.8 Effect of Covenants. . . 5.9 Limited Equity Cooperative ARTICLE 6 DEFAULTS, 6.1 6.2 6.3 6.4 6.5 6.6 6.7 50 51 52 REMEDIES, AND TERMINATION Defaults - General . Termination . . . . . 6.2.1 Termination by City 6.2.2 Termination by Developer Legal Actions . . . . . . . 6.3.1 Institution of Legal Actions 6.3.2 Applicable Law. . . . . 6.3.3 Acceptance of Service of Process Action for Specific Performance . . Rights and Remedies are Cumulative Attorney's Fees . . . . . . . Plans, Drawings and Documents To Be Assigned to City . . . 53 53 54 54 54 55 55 55 55 56 56 56 56 ARTICLE 7 GENERAL PROVISIONS 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 7.9 7.10 7.11 7.12 7.13 Z/17THA . . . . . . . . . . . . . . 57 Notices, Demands, and Communications Between the Parties . . . . . . . . . Nonliability of City Officials and Employees: Conflicts of Interest Enforced Delay; Extension of Times of Performance . . . . . Inspection of Books and Records Interpretation . . . . . Entire Agreement, Waivers and Amendments Consent/Reasonableness Severability . . . . .. ...... Third Party Beneficiaries ...... Authority of Signators to Bind Principals Representations and Warranties Execution . . . . . . . Relationship of Parties . . . . 57 58 58 59 59 59 60 60 60 60 60 61 61 iv ~-~ DISPOSITION AND DEVELOPMENT AGREEMENT/HOME PROGRAM PARTICIPATION AGREEMENT THIS DISPOSITION AND DEVELOPMENT AGREEMENT/HOME PROGRAM PARTICIPATION AGREEMENT (the "Agreement") is entered into as of October 21, 1997, by and among the CITY OF CHULA VISTA, a municipal corporation ("City"), and SOUTH BAY COMMUNITY SERVICES, a California non-profit public benefit corporation ("Developer"), and all permitted successors and assigns pursuant to Section 4 .14 herein. RECITALS A. City is a municipal corporation, organized and existing under the laws of the State of California. B. Developer is a California non-profit public benefit corporation organized and existing under section 501(c) (3) of the Internal Revenue Code. C. city has been allocated funds from the united States Department of Housing and Urban Development ("HUD") pursuant to the federal government's HOME Investment Partnerships program (42 U.S.C. ~ 1274, et sea.) which can be used, subject to final HUD approval, for the purposes of funding certain City obligations under this Agreement in accordance with HOME regulations (24 C.F.R. ~ 92 et sea.). D. City owns that certain real property commonly known as 746 and 750 Ada Street, Chula Vista, California, as is more particularly described on Attachment "1" (the "Property"). E. city. and Developer have entered into an that certain Amended Conveyance Agreement and Escrow Instructions dated March 18, 1997 ("Conveyance Agreement") pursuant to which City has agreed to sell the Property to Developer, and Developer has agreed to buy the Property from city in accordance with the terms of the Conveyance Agreement. F. Developer intends to acquire the Property for the purposes of improving it with a multi-family residential project consisting of 18 units and providing housing affordable for low- income persons (the "Project"). G. Through the development and operation of the Project, city and Developer desire to provide low-income persons with affordable housing opportunities within the city in accordance with the housing element of the City General Plan. In order to accomplish this goal, the City desires to make a loan of HOME Program funds to Developer for the acquisition and development of Z/17THA -1- ~ ~~<3 the Project, subject to certain conditions designed to assure the implementation of the Project in accordance with the General Plan, state and federal law, HOME program regulations, and as otherwise provided herein. H. The development and operation of the Project pursuant to this Agreement, and the fulfillment generally of this Agreement, are in the vital and best interests of the City and the welfare of its residents, and in accordance with the public purposes and provisions of applicable federal, state, and local laws and requirements. I. City has received from HOD a written or oral release of the HOME Program funds to be used for the project. J. The Project accommodates several of the City's. Comprehensive Housing Plan Objectives, which are expressly noted in the Housing Element as priorities for the City. The objectives this Project serves are: (1) Achievement of a balanced residential community through integration of low and moderate income housing throughout the City, and the adequate dispersal of such housing to preclude establishment of specific low-income enclaves. The construction of the Project on the west side of Chula vista helps balance the new construction activity of affordable units on the east side of Chula vista. This development will improve the current condition of the Property and blend well into the neighboring community's single family home setting. (2) The provision of adequate rental housing opportunities and assistance to households with low and very low incomes, including those with special needs such as the elderly, handicapped, single-headed households, and large families. The Project will increase the supply of rental housing opportunities and will attempt to offer homeownership-like qualities through the organization of a cooperative, which is anticipated to be created and given ownership of the Project after fifteen years of its development. This Project will serve the special needs population of large families with very low incomes by providing three-bedroom units. This Project uses several implementing tools the city recommends in meeting this objective by facilitating the use of federal and state funding, including the participation of a non-profit community development corporation, and adjusting the land use permitted by utilizing the density bonus ordinance to maximize the number of units to built on the Property. WHEREFORE, baSed upon the foregoing recitals and in consideration of their mutual and prospective promises and subject to the terms and conditions hereinafter set forth, the parties do Z/17THA -2- ~i/)-r hereby agree as follows: ARTICLE 1 DEFINITIONS The following terms as used in this Agreement shall have the meanings given unless expressly provided to the contrary: 1..1 the same sea.) . "ADA" means Americans with Disabilities Act of 1990, as may be amended from time to time (42 U.S.C. S 12101, et 1.. 2 "certificate of ascribed in section 4.19 Certificate of Completion 9 to this Agreement. Completion" shall have the meaning of this Agreement. The form of the shall be as set forth in Attachment No. 1.. 3 "City" shall mean the City of Chula Vista, a municipal corporation, organized under the laws of the state of California and having its offices at 276 Fourth Avenue, Chula Vista, California 91910. 2.3. 1.. 4 "city Loan" shall have the meaning ascribed in Section 1.. 5 "City Note" shall mean the promissory note to be executed by Developer in the form set forth in Attachment No.2. 1.. 6 "City Trust Deed" shall mean that certain performance deed of trust, in the form attached hereto as Attachment No. 3 which secures Developer's obligations pursuant to the City Note, which shall be recorded in the order of priority set forth in this Agreement. 1. 7 "Conveyance Agreement" means that certain Amended Conveyance Agreement and Escrow Instructions dated March 18, 1997 entered into between City and Developer. 1.8 "Developer" means South Bay Community Services, a California nonprofit public benefit corporation organized and existing under section 501 (c) (3) of the Internal Revenue Code. The term "Developer" includes any legally permissible assignee or successor to the rights, powers, and responsibilities of Developer hereunder, in accordance with Section 4.14 of this Agreement. 1.9 "Developer Fee" shall have the meaning ascribed in Section 2.15. Z/17THA -3- ~ t,~~5 1.10 "Effective Date" means the date first appearing in this Agreement above, provided that all parties hereto have executed this Agreement as of that date, or within ten (10) business days thereafter. 1.11 "Effective Gross Rental Income" means all gross. rental income paid by tenants for occupancy of units of the Project and all rental subsidy payments for the Project made by governmental entities and private charitable entities; provided, however,'that Effective Gross Rental Income shall not include charitable contributions that do not subsidize or assist an occupant's rental payment for a unit. 1.12 "Grant Deed" means the instrument in the form set forth in Attachment No.9, pursuant to which title to the Property is to be conveyed to Developer by City in accordance with the terms and conditions of the Conveyance Agreement. 1.13 "Housing Coordinator" means the Housing Coordinator of the Community Development Department of the City of Chula Vista. 1.14 "Low Income Housing Tax Credit Program" shall have the meaning ascribed in Section 2.14 of this Agreement. 1.15 "Predevelopment Funds" shall have the meaning ascribed in Section 2.8. 1.16 "Project" shall have the meaning ascribed in section 4.1 of this Agreement. 1. 17 "proj ect Budget" means that certain budget referred to in section 2.13 of this Agreement and attached hereto as Attachment No.4, which is incorporated herein by this reference, which budget may not be materially changed without prior approval of the Housing Coordinator of. the Community Development Department of the city, which approval shall not be unreasonably withheld (a material change is a change that causes the total Project cost to increase or decrease by two percent (2%) or more from what is shown in Attachment NO.6) . 1.18 "Project Pro Forma" means that certain Project Pro Forma referred to in section 2.13 of this Agreement and attached hereto as Attachment No. 5 which is incorporated herein by this reference, which pro forma is a good faith projection. 1.19 "Property" means that certain real property located at 746 and 750 Ada Street in the city of Chula Vista, County of San Diego, State of California, as more particularly described on Attachment No.1. Zl17THA -4- ~t/1'-~ 1. 20 "Property Manager" means the property management company managing the Project, whether or not the Project is managed by Developer. The term Property Manager shall not mean the' on-site property manager. 1.21 "Residual Receipts" shall have the meaning ascribed in Section 2.l0(b). 1.22 "Restricted units" means to the residential units in the Project whose rent levels and occupancy are to be restricted as set forth in section 5.1.2 of this Agreement. 1.23 "Schedule of Performance" means that certain Schedule of Performance attached hereto as Attachment No.6. 1.24 "Title Insurer" means First American Title Insurance. Company, with offices at 411 Ivy Street, San Diego, California 92101. ARTICLE 2 DISPOSITION OF THE PROPERTY AND FINANCING OF THE PROJECT 2.1 Disposition of Propertv. Subject to the terms and conditions of this Agreement and the Conveyance Agreement, City shall convey the Property to Developer for a purchase price of Three Hundred Seventy Two Thousand Nine Hundred Forty Dollars ($372,940) (the "Purchase Price"). The Purchase Price shall be paid by Developer to city by deposit into escrow of cash in the full amount of the Purchase Price derived from a loan to be obtained by Developer from Local Initiative support Corporation (the "LISC Loan) as more particularly described in section 2.9.2. 2.2 Exemption From Article XXXIV. The Project is exempt from the requirements of Article XXXIV of the California Constitution, because it is housing that is intended for owner-occupancy defined by the State of California as including cooperative type structures. 2.3 city Loan Commitment. 2.3.1 The City Loan. City hereby commits to loan to Developer the total sum of $896,905 (the "City Loan") to be applied towards the acquisition and development of the Property. Developer's obligations under the City Loan shall be evidenced by a promissory note of Developer in the form attached hereto as Attachment 2 and incorporated herein by this reference (the "city Note"). The City Loan shall be funded in Z/17THA -5- ~ &/7~ ? three phases as follows: (i) $120,000 shall be made available to Developer for predevelopment costs (the "city Predevelopment Loan Proceeds") upon Close of Escrow (as defined below); (ii) 0$372,940 shall be deposited into the escrow established by Developer for the BACDB Construction Loan, as defined below, or a sub-escrow thereof (the "BACDB Construction Loan Escrow") to partially satisfy the LISC Loan, as defined below (the "City LISC Loan Repayment Proceeds"); and (iii) the remaining $403,965 in city Loan proceeds shall be made available to Developer upon closing of the BACD Construction Loan to partially fund construction and development of the Project (the "City Construction Loan Proceeds"). 2.3.2 The city Predevelopment Loan Proceeds. The following conditions must be fully satisfied as reasonably determined by the City in order to obligate the City to release the- City Predevelopment Loan Proceeds to Developer: a. Developer shall have received a preliminary allocation of low-income housing tax credits from the California Tax Credit Allocation committee in the amounts of $170,522 for annual federal credits and $591,406 for total California credits, or such lesser amounts as may be mutually agreed to by the parties. b. Developer shall have procured a written commitment for the issuance of the LISC Recoverable Grant in the amount of $50,000 in a form of commitment acceptable to City. c. Developer shall have procured a written commitment for the LISC Loan (as defined below) in the amount of $420,000, or such lesser amount as may be mutually agreed to by the parties, in a form of commitment acceptable to City. d. Developer shall have procured a written commitment for a construction loan from the Bank of America Communi ty Development Bank in an amount not less than $920,000 (the "BACDB Construction Loan") or such lesser amount as may be mutually agreed to by the parties, in a form of commitment acceptable to City. e. Developer shall duly execute (and acknowledge, if applicable) the City Note and the city Trust Deed, described below, and deliver the same to city or its designated agents. Z/17THA -6-~~i1 /~ f. All conditions contained in the Conveyance Agreement governing Developer's acquisition of the Property shall be fully satisfied or waived in accordance with the provisions thereof. g. Developer shall have acquired title to the Property from City in accordance with the conditions .,of the Conveyance Agreement. h. City shall have reviewed and approved, in its sole discretion, any and all loan documents, regulatory agreements or grant contracts to be executed by or otherwise to be binding upon City or Developer in connection with its acquisition of the Property, its development and operation of the Project and/or its financing thereof. i. Developer shall provide the City a resolution of its board of directors approving this Agreement and the related City Loan documents and authorizing Developer's executive director to execute this Agreement and the related city Loan documents on its behalf. 2.3.3 The citv LISC Loan Repavment Proceeds. The following conditions must be fully satisfied as reasonably determined by the City in order to obligate the city to release the City LISC Loan Repayment Proceeds upon closing of the BACDB Construction Loan. a. All conditions set forth in section 2.3.2 (a) through (i), inclusive, shall have been satisfied or waived in writing as reasonably determined by the city. b. All conditions governing the initial funding of the BACDB Construction Loan shall have been fully satisfied or waived in accordance with the BACDB Construction Loan documents. c. Developer shall have procured a Federal Home Loan Bank Affordable Housing Program grant (the "AHP Grant") through Bank of America Community Development Bank ("BACDB") in an amount not less than $39,018, or such lessor amount as may be mutually agreed to by the parties. d. Developer shall deposit into Loan Escrow, such additional (together with the city Proceeds) to fully satisfy the BACDB Construction funds as are necessary LISC Loan Repayment Developer's monetary Z/17THA -7- ~ t/9~1 obligations under the LISC Loan upon close of the BACDB Construction Loan, and LISC shall have deposited into escrow for recordation an executed reconveyance of the LISC Loan Deed of Trust. 2.3.4 The citv Construction Loan Proceeds. The following conditions must be fully satisfied as reasonably determined by the City in order to obligate the city to release the City Construction Loan Proceeds. a. All conditions set forth through (i), inclusive, through (d), inclusive, satisfied or waived in determined by the city. in Sections and section shall have writing, as 2.3.2 (a) 2.3.3 (a) been fully reasonably b. The LISC Loan Deed of Trust shall have been reconveyed. c. Developer shall have obtained Design Review Committee approval for the Project from the City. d. Developer shall have obtained density bonus approval for the Project from the City. e. Developer shall have entered into an owner participation agreement with the Redevelopment Agency of the city of Chula vista approving the Project. 2.4 citv Note and Deed of Trust. Developer's obligations to pay the City Loan shall be evidenced by a promissory note (the "city Note") in substantially the form of Attachment NO.2, except as otherwise approved by the City Attorney, and shall be subject to the terms and conditions contained therein. The City Note shall provide for simple interest at the rate of three (3%) percent per annum. Among other things, the City Note shall further provide that the city Note is non- recourse and that payments of principal and interest shall be made only from a fund consisting of seventy-five (75%) percent of the Residual Receipts (as defined below). The City Note shall be secured by a deed of trust (the "City Trust Deed") encumbering the Property as a second priority deed of trust in the form of Attachment No.3. The City Trust Deed shall further provide that the occurrence of any material breach or default under this Agreement shall constitute a "default" or "event of default" under the city Trust Deed. Prior to Close of Escrow, Developer shall execute and deliver to City the city Note and the city Trust Deed. The City Trust Deed shall be recorded with the Office of the County Recorder in accordance with City's instructions to Escrow. Z/17THA -8- . ~ b/~'l?) Developer shall be responsible for any and all of City's escrow, title and recording costs arising in connection with the City Loan, such costs to be paid by Developer through escrow. . 2.5 Fundinq of citv Development Loan. 2.5.1 citv Predevelopment Loan Proceeds. The use of the city Predevelopment Loan Proceeds by Developer shall be restricted to payments for architectural work, engineering, soils engineering, environmental studies, governmental fees and permits, and such other Predevelopment Costs (as defined below) which may be approved by City in the exercise of its reasonable discretion ("City Allowable Predevelopment Costs") The city Predevelopment Loan Proceeds shall be retained by city to be distributed to Developer upon Developer's application to the City for distributions of portions thereof, attributable to amounts owed for obligations incurred by Developer for City Allowable Predevelopment Costs. As a condition to City's obligation to make any distribution of City Predevelopment Loan Proceeds, Developer shall, if so requested, provide the Housing Coordinator, or such other individual as may be designated by the City, with (i) an invoice reflecting the City Allowable Predevelopment Costs describing the nature of the obligation and specifying the amount owed in connection therewith; and (ii) any other reasonable information, documentation or certifications requested by city to assure that the obligation has been incurred. Developer agrees that no City Predevelopment Loan Proceeds shall be utilized until such time as all proceeds of the LISC Recoverable Grant (as defined below) have been exhausted by Developer for Predevelopment Costs. 2.5.2 city LISC Loan Repavment Proceeds. Upon close of escrow of the BACDB Construction Loan, City shall deposit into escrow the $372,940 in City LISC Loan Repayment Proceeds to partially satisfy Developer's existing monetary obligation under the LISC Loan (the "LISC Repayment Obligations") . As a condition to City's obligations to deposit the LISC Loan Repayment Proceeds into Escrow, Developer shall deposit into the BACDB Construction Loan escrow such additional funds as are necessary to fully satisfy Developer's monetary obligations under the LISC Loan upon close of the BACDB Construction Loan. 2.5.3 city Construction Loan Proceeds. The $403,965 in City Construction Loan Proceeds shall be retained by city to be distributed to Developer upon Developer's application to the city for distributions of portions thereof attributable to amounts owed for obligations incurred by Developer in connection with the development of the Project as of the date of said application. As a condition to any distribution of City Construction Loan Proceeds, Developer shall, if so requested, Z/17THA -9- ~ ~/l ~// provide the City or its designee with (i) an invoice submitted by the contractor or subcontractor performing the work describing the work performed and specifying the amount owed in connection therewith; (ii) appropriate mechanic's lien releases in a form acceptable to the city if deemed necessary thereby, and (iii) any other reasonable information, documentation or certifications requested by city or its designee to assure that the obligation has been incurred. 2.6 Source of citv Loan. The source of the city Loan is funds to be obtained by city from HUD pursuant to the federal government's HOME Investment Partnerships Program (42 U.S.C. ~ 12741 et sea.). Pursuant to the HOME Investment Partnerships Program requirements, out of the total of eighteen (18) units in the Project, seven (7) three-bedroom units and two (2) two-bedroom units are being assisted with HOME Investment Partnerships Program funds (the "HOME-assisted units") and must meet all of the HOME Investment Partnerships Program requirements for the term of the afford ability restrictions on the units. The specific units to be designated HOME-assisted units may change from time to time in Developer's sole discretion, provided that the aggregate number and category of said units remains the same. 2.7 HOME Reauirements. Because the source of the city Loan is funds to be obtained by City from HUD pursuant to the federal government's HOME Program, Developer is required to construct and operate the proj ect in compliance with all requirements of the HOME Program and the HOME Regulations (24 C.F.R. ~ 92 et sea.), as said regulations may be amended or suspended from time to time. Not by way. of limitation of the foregoing, in compliance with 24 C.F.R. ~ 92.504(c), from the Effective Date of this Agreement through the end of the term that the HOME-assisted units are required to remain affordable pursuant to the HOME Regulations, Developer, as the operating entity, shall comply with all of the following requirements: a. Use of the HOME Funds. HOME funds shall be used only for eligible costs (see, e.g., 24 C.F.R. ~~ 92.206, 92.214) in accordance with the Project Budget and Project Pro Forma; all pre-construction and construction activities shall be completed within the times referenced in the Schedule of Performance attached hereto, as said times may be extended in accordance with section 4.9 and section 7.3. Z/17THA -10- ~~~~/~ Z/17THA b. Affordabilitv. The HOME-assisted units shall meet the affordability requirements of the HOME Regulations (24 C.F.R. ~ 92.252), the TCAC Regulatory Agreement (as defined below) or this Agreement, whichever is more restrictive, as more particularly set forth in section 5.1.2 herein. c. proiect Reauirements. Developer shall comply with all project requirements set forth in Sections 92.250-92.258 of the HOME Regulations, as applicable in accordance with the type of project assisted, or with the provisions of this Agreement, whichever requirements are more restrictive. d. Housinq Oualitv Standard. Developer shall maintain HOME-assisted units in compliance with applicable Housing Quality Standards and local housing code requirements or the provisions of this Agreement, whichever requirements are more restrictive. e. Affirmative Marketinq. Developer shall perform those affirmative marketing responsibilities set forth in 24 C.F.R. 9 92.351 or in the marketing plan described in sections 5.2.1 and 5.4.1 of this Agreement, whichever are more restrictive. f. Records and Reports. In addition to the other provisions of this Agreement, including without limitation section 5.1. 3 hereof, Developer shall provide to City all records and reports relating to the proj ect that may be reasonably requested by City in order to enable it to perform its record keeping and reporting obligations pursuant to Sections 92.508 and 92.509 of the HOME Regulations. g. Enforcement of Aqreement. In addition to the other provisions set forth herein, city shall have the authority to enforce Developer's obligation to comply with the HOME Investment Partnerships Program and the HOME Regulations as set forth in this Agreement. h. Duration of Covenants Re HOME-Assisted units. In accordance with 24 C.F.R. sections 92.252(e) and 92.504(c) (3) (ix), the covenants in this section 2.6 relating to Developer's compliance with the HOME Investment Partnerships Program and the HOME Regulations shall remain in effect for a period of at least twenty (20) years after project completion. -11- ~ rf/J-J;5 i. Moni torina. Not less than once every two years during the period covered by this Section 2.7, City may review Developer's activities and op"erations under this Agreement and Developer's compl iance with the requirements of the HOME Investment Partnerships Program and the HOME Regulations, including, but not limited to, Developer's compliance with the requirements of this Section 2.7. Such review may include an on-site inspection of the Project (including unit interiors). If such an on-site inspection of the Project is to be undertaken, City shall coordinate such inspection with Developer and/or the Property Manager. The monitoring required pursuant to this paragraph shall be in compliance with the requirements of 24 C.F.R. ~ 92.504(d). 2.8 Fundina of Predevelopment Costs. Developer shall advance to the Project all amounts necessary for predevelopment costs of the Project (the "Predevelopment Costs"), which Predevelopment Costs are estimated to be $200,000. The source of payment for the Predevelopment Costs is the $50,000 LISC Recoverable Grant (defined below), approximately $35,000 in proceeds from the LISC Loan, and the $120,000 City Predevelopment Loan Proceeds (collectively the "Predevelopment Funds"). Subject to the provisions of section 2.5.1 hereof, governing Developer's expenditure of City Predevelopment Loan Proceeds, Developer shall use the Predevelopment Funds for eligible predevelopment costs including architectural work, environmental studies, engineering, planning fees, legal expenses, tax credit fees, appraisal, market study costs, and related "soft costs" described in the Project Budget. 2.9 Third Partv Fundina Sources. 2.9.1 LISC Recoverable Grant. Developer has procured a non-interest bearing $50,000 recoverable grant from Local Initiative Support Corporation ("LISC") for Predevelopment Costs ("the LISC Recoverable Grant"). Developer shall pay the LISC Recoverable Grant be paid in full upon funding of take-out financing for the Project. 2.9.2 LISC Loan. Developer has obtained preliminary approval from LISC for a $420,000 loan to be applied towards the acquisition and development of the Property (the "LISC Loan"). The LISC Loan shall be evidenced by a promissory note (the "LISC Note") and secured by a first priority deed of trust (the "LISC Trust Deed"). A total of $372,940 of the LISC Loan Proceeds shall be used by Developer for Z/17THA -12- ~~'/1 /;/ acquisition of the Property at Close of Escrow. Approximately $35,000 of the LISC Loan Proceeds shall be applied by Developer to Predevelopment Costs. The balance of the LISC Loan Proceeds shall be utilized for repayment of interest. 2.9.3 AHP Grant. Developer has procured a $39,018 Federal Home Loan Bank Affordable Housing Program Grant (the "AHP Grant") through Bank of America Community Development Bank ("BACDB"), the proceeds of which shall be used for development of the Property. The AHP Grant shall be recoverable if the Property is sold, transferred, or assigned in a manner other than that which is permitted by the terms of this Agreement. If required by BACDB, the obligation to repay the AHP Grant shall be secured by a third priority deed of trust (the "AHP Trust Deed"), upon closing of the BACDB Construction Loan. 2.9.4 BACDB Permanent Loan. Developer anticipates that take-out financing for the BACDB Construction Loan will consist, in part, of a $220,000 permanent loan from Bank of America Community Development Bank (the "BACDB Permanent Loan"). 2.10 citv Loan Repavment Obliqations Payments under the City Loan shall be made as follows: a. Payment of principal and interest on the city Note shall be made, on an annual basis, out of a fund equal to seventy- five (75%) percent of the "Residual Receipts" (defined below) derived from the Property and/or the operation of the Project. Such amounts shall be paid on a priority basis to all other debt service on the Property except for the BACDB Permanent Loan, and the Deferred Developer Fee (as defined below), if any. Residual Receipts shall be calculated by Developer each and every year commencing with the first year anniversary of the issuance of the certificate of occupancy by the City. The seventy-five (75%) percent Residual Receipts payments, if any, shall be made on or before thirty (30) days after the later of (i) the first year anniversary of the issuance of the certificate of occupancy by the city or (ii) the first year anniversary of the date on which the Deferred Developer Fee, if any, has been paid in full, and on or before 30 days after each subsequent yearly anniversary of the applicable date thereafter. b. "Residual Receipts" is specifically defined as the rental income from the Project minus the reasonable "asset oriented" operating expenses for the same period. For purposes of this calculation, reasonable "asset oriented" operating expenses shall include any and all costs associated with operating the Property including, without limitation, debt service on the BACDB Zl17THA -13- ~ ti///D Permanent Loan, and LISC Recoverable Grant, a property management fee, a partnership management fee, salaries and benefits of an on- site manager, utilities, maintenance, insurance, property and other taxes, repairs, approved alterations, trash collection, reasonable legal fees, maintenance supplies, administrative overhead directly attributable to the Property, replenishment of capital reserves accounts included in Developer's approved budgets, such amount to be held in trust exclusively for use for capital improvements to the Property, and reasonable "asset oriented" operational reserves not to exceed at any time an amount equal to 5% of the upcoming year's Effective Gross Income, such amounts to be held in trust exclusively for use for the maintenance and preservation of the Property. For purposes of the foregoing definition of "Residual Receipts," any property management fee or partnership management fee which is paid to Developer shall at no time exceed an amount as is customary and standard for affordable housing projects similar. in size, scope and character to the Project. Notwithstanding the foregoing, for purposes of this calculation, reasonable operating expenses shall not include: (i) programmatic or other similar service oriented operating expenses, or (ii) principal and interest payments on any debt subordinate to the city Note or the Agency Note. c. The twenty-five (25%) percent of Residual Receipts remaining after the annual payments on the City Note shall be used by Developer only for costs and improvements related to the Property or services provided directly to the occupants of the Restricted units by Developer. d. Except as otherwise expressly provided hereunder, Developer's obligation to repay the City Loan shall be limited to Developer's annual payment of seventy-five (75%) percent of the Residual Receipts as described above for a period of fifty five (55) years following execution of the City Note (the "Conditional Maturity Date").. Upon the Conditional Maturity Date, City shall have the option, at any time, in its sole discretion, but after good faith discussions with Developer as to available options, upon ninety (90) days' written notice to Developer, to (a) declare all amounts owed under the city Note immediately due and payable, or (b) to require installment payments under the City Note based upon (i) a restated principal balance comprised, in the aggregate, of any and all outstanding principal and interest under the City Note existing as of the date of City election, (ii) a prospective interest rate per annum equal to the Prime Rate then in effect for Bank of America, San Diego office, or such other rate mutually agreed to by the city and Developer, and (iii) monthly installments of principal and interest paid over the course of an amortization schedule to be determined by the City in its sole discretion, not to be less than ten (10) years. In the event that City elects repayment approach (b), Developer agrees to execute an endorsement to the Note in favor of City reflecting the amended repayment terms described above. Z/17THA -14- ~ t4 ~/? e. Notwi thstanding the foregoing, in the event that Developer, or any successors thereto, materially breaches the terms of this Agreement, the city Note, or the city Trust, or triggers a due on sale, transfer or encumbrance provision set forth in the City Note or city Trust Deed, the city shall have the right in its sole discretion, to declare immediately due and payable all outstanding principal and interest due under the Note, or to pursue any and all other remedies provided, herein, under the Note or Trust Deed, or as otherwise provided at law or in equity. 2.11 Lien Priori tv. Title Insurance. As a condition to the obligations of city to fund the city Loan, there shall be no liens or encumbrances upon'the Property having priority over the city Trust Deed, other than: (a) the LISC Loan Trust Deed or the deed of trust securing the BACDB Construction Loan (the "BACDB Construction Loan Trust Deed"); and (b) those existing non-monetary encumbrances which are disclosed in title reports to be hereafter delivered by Developer to City and which have been expressly consented to by the City in writing. Such consent shall not be unreasonably withheld, subject to City's right to attach reasonable conditions thereto. Such priority shall be evidenced by an ALTA lender's insurance policy, including title endorsements reasonably requested by the city with combined liability equal to the amount of $896,905, or such other amount as may be mutually agreed to by the parties (the "Lender's Policy") to be issued to city by First American Title Company at Close of Escrow. Upon close of escrow on the BACDB Construction Loan, the Lender's Policy shall be replaced or appropriately endorsed to reflect the reconveyance of the LISC Loan Trust Deed and the recordation of the BACDB Construction Loan Trust Deed in a first priority position. 2.12 SUbordination; Refinancinq. city agrees to subordinate the city Trust Deed to any construction and permanent financing obtained by Developer to develop the Project thereon in an amount not to exceed the amounts listed in the Project Budget attached hereto as Attachment No.4, as well as any refinancing of said amount; provided, however, that: a. any such subordination shall be evidenced by a recorded subordination agreement containing such notice, cure, loan purchase or assumption and project purchase rights as may be reasonably required by the city in a form to be approved by the city Attorney, which approval shall not be unreasonably withheld; and b. during the period commencing on the Effective Date of this Agreement and ending on the earlier of (a) the date after which Developer or its successor has Z/1TTHA -15- ~ t/!//? Z/17THA d. repurchased the tax credit limited partners' interests in the partnership created for tax credit purposes, or (b) eighteen (18) years after.the date the City issues the certificate of occupancy for the Project, if any such refinance during such period results in an increase in the amount owing over the principal balance due at the time of refinancing, or otherwise a distribution of refinance proceeds, then an amount equal to the greater of the difference between the amount of the principal balance due at the time of the refinancing and the new principal balance upon the refinancing or such refinance proceeds ("Refinance Proceeds") shall, within six (6) months after such refinance, be used only to benefit the Project and prior to using the Refinance Proceeds for such permitted purpose Developer shall notify the City Manager of such refinance, the amount of the Refinance Proceeds, and the proposed use of the Refinance Proceeds to benefit the Project; and c. upon the repurchase of the tax credit partners' interest in the partnership, Developer agrees to exercise good faith efforts to explore the feasibility of refinancing the Project in order to provide proceeds to pay down any outstanding amounts owed under the city Loan. If such a refinance proves to be feasible on terms favorable to the Project, Developer shall exercise good faith efforts to proceed to close on such a refinance. If not feasible, Developer shall prepare a written report explaining such infeasibility to the city and Developer shall have no further obligations under this Section 2.12(c). during the period following the conclusion of the period described in subparagraph (b) immed~ately above, any such refinance that results 1n an increase in the amount owing over the principal balance due at the time of refinancing, or otherwise a distribution of refinance proceeds, shall be approved in advance by the City Manager and an amount equal to the greater of the difference between the amount of the principal balance due at the time of the refinancing and the new principal balance upon the refinancing or such refinance proceeds shall be paid to City to reduce the outstanding principal and accrued interest due on the City Note. -16-~ ~/J--/~ 2.13 Developer's Evidence of Financial Capability. The anticipated sources and uses of funds for acquisition of the Property and development of the Project are set forth in the Project Budget (Attachment No.4). The financial projections for the project are set forth in the project Pro Forma (Attachment No. 5) . Upon request but in no event later than the disbursement of the city Predevelopment Loan Proceeds, the city LISC Loan Repayment Proceeds, or the City Construction Loan Proceeds, as the case may be, Developer shall submit to the city Manager, evidence reasonably satisfactory to the city Manager that Developer has the financial capability necessary for the acquisition of the Property and the development of the Project thereon pursuant to this Agreement, the Project Budget, and the Project Pro Forma. Such evidence of. financial capability shall include the following: a. b. Z/17THA a copy of the commitment or commitments obtained by Developer for each of the sources of funds listed in the Project Budget to assist in financing the acquisition of the property and the construction of the Project, including both construction and take- out financing and the preliminary tax-credit reservations obtained by Developer. within the time set forth in the Schedule of Performance, Developer shall obtain the construction loan for the Project in an amount not less than that shown in the project Budget and, upon request, provide evidence to the city Manager that the construction loan is available for use in accordance with its terms. All copies of commitments submitted by Developer to city shall be deemed to be certified by Developer to be true and correct copies thereof. Each commitment for financing shall be in such form and content acceptable to the City Manager as reasonably evidencing a firm and executed, standard commitment, with only those conditions which are standard or typical for the lender involved for similar projects. c. evidence that Developer has received the entire $50,000 in proceeds of the LISC Recoverable Grant for Predevelopment Costs for the Project. if the total costs set forth in the project budget exceeds the amount of financing commitments received pursuant to Subparagraphs (a) and (b) above, such documentation reasonably satisfactory to the City Manager as is sufficient to demonstrate that Developer, from any source whatsoever, has adequate funds available and committed to cover -17- ~ ~/177' such difference. d. a copy of the construction contract. between Developer and its general contractor for all of the improvements required to be constructed by Developer hereunder, which shall be deemed to be certified by Developer to be a true and correct copy thereof. e. a corporate surety bond or bonds or other security instrument issued by a surety company with a Best's A-V rating or better, approved as to form, content, and company by the city Manager and the city Attorney with Developer's contractor or contractors as principal(s), in a penal sum not less than one hundred percent (100%) of the amount of the cost of. constructing the Project guaranteeing completion of construction and the payment of wages for services engaged and bills contracted for materials, supplies, and equipment used in the performance of the work, and protecting Developer and city from any liability, losses, or damages arising therefrom. Said bond(s) shall specifically name city as a named beneficiary. f. a true and correct copy of the TCAC Preliminary Reservation Letter and other verifiable documentation that Developer has received. If the Tax Credit Equity increases above the amount indicated on the Project Budget, that additional Tax Credit Equity shall be applied first to property improvements directly related to the Project, and second to funding eligible Project costs. Any remaining Tax Credit Equity shall be .applied to the reduction of the principal amount of the city Note. If the city Manager Director disapproves of evidence of financing, he or she shall do so by written notice to Developer stating the reasons for such disapproval. In such event, Developer shall promptly resubmit its evidence of financial capability not less than thirty (30) days after receipt of the city Manager's disapproval, the city Manager shall reconsider such resubmittal and the deadlines in the Schedule of Performance shall be extended accordingly. 2.14 Low Income Housinq Tax credit Proqram. Developer has applied for a preliminary reservation of tax credits from the low-income housing tax credit program authorized pursuant to Internal Revenue Code section 42, California Health and Safety Code Sections 50199.6-50199.19, Revenue and Taxation Code Z/17THA -18- ~ ~4/dt) sections 17057.5, 17058, 23610.4, and 23620.5, and applicable federal and State regulations such as 4 California Administrative Code sections 10300-10340 (collectively, the "Low Income Housing Tax Credit Program"). Developer's qualification for and participation in the Low Income Housing Tax Credit Program in accordance wi th the terms set forth in this Agreement is a condition to the performance of this Agreement by City, including without limitation the provision of the City Loan. City shall have no responsibility with respect to Developer's performance of its obligations under the Low Income Housing Tax Credit Program. City shall not do anything or fail to do anything it is required by law or this Agreement to do which will adversely affect Developer's performance of its Low Income Housing Tax Credit Program obligations. In order to assist City in performing its obligations and enforcing its rights under this Agreement (with respect to reviewing Developer's evidence of financing, ensuring the continued. affordability and maintenance of the Project units, and obtaining payments due under the Note), Developer agrees that upon City's request, Developer shall promptly submit, or make available to City, all of the following documents at such time as the same are submitted by Developer to the Tax Credit Allocation Committee or other applicable body or when such documents are received by Developer, as applicable (any documents submitted prior to the Effective Date of this Agreement shall also have been made available by Developer to City and reviewed by City, if so requested, prior to the Effective Date of this Agreement): (i) (ii) (iii) Zl17THA Complete copies of Developer's applications to the Tax Credit Allocation Committee for the preliminary reservation, final reservation, carryover allocation (if applicable), and placed-in-service credit award, and any amendments or modifications thereto (4 California Administrative Code ~~ 10325(b)-(e) and 10345). Complete copies of any correspondence or transmittals by the Tax Credit Allocation Committee to Developer notifying Developer regarding the action(s) taken with respect to any of the applications referred to in clause (i) . A complete copy of the regulatory agreement between the Tax Credit Allocation Committee (the "TCAC Regulatory Agreement") and Developer (4 California Administrative Code ~ 10340(c)). (As more fully discussed in section 5.1.2, should City be prevented by a final order of a court of competent jurisdiction, applicable and binding appellate opinion, or regulatory body with jurisdiction -19- ~ ~,4~c2/ from enforcing, for any reason, the affordability restrictions set forth in this Agreement, City shall be a thi<rd-party beneficiary under said agreement and shall have full authority to enforce any breach or defaul t by Developer thereunder in the same manner as though it were a breach or default under this Agreement.) (iv) Complete copies of all progress reports submitted by Developer to the Tax Credit Allocation Committee prior to the issuance of tax credit allocations (4 California Administrative Code 9 10340(d)) and the annual certifications and Project status Reports submitted by Developer to the Tax Credit. Allocation committee subsequent to the issuance of tax credit allocations (4 California Administrative Code 9 10340(e)). (v) Complete copies of all correspondence or transmittals from the Tax Allocation Credit Committee or other jurisdiction (such as the Internal Revenue Service) containing any notification regarding the Project's noncompliance with applicable provisions of the Low Income Housing Tax Credit Program. 2.15 Developer Fee. Developer shall be entitled to a developer fee, which includes general overhead and profit, in the amount of $160,000 (the "Developer Fee"). It is anticipated that the Developer Fee shall be paid to Developer as follows: $50,000 shall be paid to Developer upon. closing of the BACDB Construction Loan; $30,000 shall be paid to Developer 270 calendar days after closing of the BACDB Construction Loan; and $80,000 shall be paid to Developer upon the issuance by the city of the certificate of occupancy. It is expressly understood that the foregoing payment amounts are subject to adjustments based upon availability of funds. If for any reason there remains an unpaid balance of the Developer Fee after the issuance of the certificate of occupancy (the "Deferred Development Fee"), such Deferred Development Fee shall be evidenced by a promissory note executed in favor of Developer (the "Deferred Developer Fee Note"). Developer shall not be entitled to any interest on the Deferred Developer Fee. In the event there are any cost savings realized in the construction of the Project, all available funds attributable to such cost savings shall be applied to the Deferred Developer Fee upon closing of the BACDB Permanent Loan. Regular payments on the Deferred Developer Fee Note shall be made on an annual basis, out of one hundred (100%) percent of the Residual Receipts as defined and calculated in section 2.10.b. Z/17THA -20- ~ t/J/cJ~ Such amounts shall be paid to Developer on a priority basis to all other debt service on the Property except for the BACDB Pfirmanent Loan. Developer shall specifically be entitled to payment of the Deferred Developer Fee from one hundred (100%) percent of Residual Receipts, if any, before payment of the installment amounts due to City pursuant to the City Note. The Residual Receipts payments, if any, shall be paid to Developer on or before 30 days after the first year anniversary of the date on which the City issues the certificate of occupancy, and on or before 30 days after> each subsequent yearly anniversary of said date thereafter until the Deferred Developer Fee has been paid in full. Developer may record a deed of trust securing the Developer Fee Note, but such deed of trust shall be subordinate to the BACDB Construction Loan Trust Deed, the AHP Trust Deed, the City Trust Deed, the TCAC Regulatory Agreement, the LISC Loan Trust Deed, the deed of trust securing the BACDB Permanent Loan, and any other deeds of trust securing the> construction and permanent financing. 2.16 Inter-Creditor Aqreement. City agrees to timely execute an inter-creditor agreement in a form reasonably acceptable to the City and its legal counsel as may be required by Developer's construction lender or permanent lender. Developer agrees to cooperate with City in the negotiation of any such inter-creditor agreement upon such terms as are reasonably required by City. 2.17 Citv option Aqreement. On or before Close of Escrow, City and Developer shall enter into an option agreement (the "City Option Agreement") pursuant to which Developer shall grant to City an exclusive option to purchase the Property>. The option to be granted to City pursuant to the City option Agreement may only be exercised on or after May 31, 1998 in the event that the BACDB Construction Loan has not closed and all terms and conditions precedent to the City's obligation to fund the city Construction Loan Proceeds have not been satisfied or waived by said date, as such date may be extended by the mutual agreement of the parties. The option to be granted City pursuant to the city Option Agreement shall expire upon closing of the BACDB Construction Loan and the satisfaction or waiver of the terms and conditions precedent to the City's obligation to fund the City Construction Loan Proceeds. ARTICLE 3 ESCROW 3.1 Openinq of Escrow. Pursuant to the terms of the Conveyance Agreement, City and Developer have, or will cause to be opened, an escrow (the Z'17THA -21- ~ C::,~:-23 "Escrow") with First American Title Insurance Company (the "Escrow Agent") for the conveyance of the Property by City to De.veloper. The opening of the Escrow (the "Opening Date") shall be deemed to be the date that the Escrow Agent signs the "Consent of Escrow Holder" attached to the Conveyance Agreement. The Escrow Agent shall notify City and Developer in writing of the Opening Date promptly following the opening of Escrow. This Agreement together with the Conveyance Agreement, once deposi ted in Escrow, shall consti tute the j oint basic escrow instructions of the City and Developer. The City and Developer shall provide such additional escrow instructions as may be necessary for and consistent with this Agreement. Additionally, if the Escrow Agent so requires, City and Developer agree to execute the form of escrow instructions that Escrow Agent customarily requires in real property transactions of the type contemplated by' this Agreement. The Escrow Agent is hereby empowered to act under this Agreement, and upon indicating its acceptance of this section 3.1 in a writing delivered to City and Developer within five (5) business days after the opening Date, or as soon thereafter as may be practical, shall carry out its duty as Escrow Agent hereunder. In the event of any conflict or inconsistency between the Conveyance Agreement, any additional escrow instructions required by the Escrow Agent, and the provisions of this Agreement, the provisions of this Agreement shall supersede and control. Any amendment of the escrow instructions set forth or described herein shall be in writing and signed by City and Developer. At the time of any authorized amendment to the escrow instructions, the Escrow Agent shall agree, by signing below an appropriate statement on such an amendment, to carry out its duties as Escrow Agent under such an amendment. All communications from the Escrow Agent to city or Developer concerning the Escrow shall be in writing and directed to the addresses and in the manner established in Section 7. 1 of this Agreement for notices, demands, and communications between city and Developer. 3.2 Close of Escrow. Escrow Agent will close escrow on the conveyance of the Property to Developer by City and the city Loan (the "Closing Date") pursuant to the terms and conditions of the Conveyance Agreement and this Agreement. All proceeds of the City Loan shall be paid outside of Escrow. If Escrow Agent cannot close on or before the Closing Date set forth in the Conveyance Agreement, it will nevertheless close Escrow when all conditions have been satisfied or waived unless, after said Closing Date, and prior to the Close of Escrow, Escrow Agent receives a written notice to terminate the Escrow from a party who, at the time that notice is delivered, is not in default under the Agreement. Z/17THA -22- ~t:,~~c.2f/ 3.3 Recordation. Escrow Agent is directed, on the Closing Date, to record the following documents in the following order of priority: (1) the Grant Deed conveying the Property from city to Developer; (2) the LISC Trust Deed (3) the City Trust Deed; (4) the AHP Trust Deed (if any); (5) the City Option Agreement; and (6) all other documents (including without limitation any deeds of reconveyance) necessary for title to the Property to be conveyed to Developer in accordance with the Conveyance Agreement. Said recordation, and other applicable actions specified in this Agreement, shall occur when title to the Property can be vested in Developer pursuant to the Conveyance Agreement and all other conditions precedent to closing set forth in this Article 3 have been complied with or waived. 3.4 Deliverv of Documents Required From Developer and Citv.' a. Developer's Obliqations. Developer shall pay all escrow fees relating to the Escrow, the cost of any title insurance relating to the City Loan and all other transfer taxes, documentation and recording fees and charges. On or before 12: 00 Noon of the last business day prior to the Closing Date, Developer shall deposit or cause to be deposited with the Escrow Agent each of the following: (i) an executed and acknowledged (by Developer) City Trust Deed; (ii) an executed City Note; (iii) an executed and acknowledged city Option Agreement; (iv) any and all additional funds, instruments, or other documents required from Developer (executed and acknowledged if appropriate), as may be necessary in order for the Escrow Agent to comply with the terms of this Agreement; and (v) the following costs: (a) the Escrow Agent's fee; (b) recording and notary fees; and (c) any state, county, or city documentary stamps or transfer tax. b. Citv's Obliqations. City shall not be responsible for any escrow, title insurance or closing costs. On or before 12:00 Noon on the last business day prior to the Closing Date, city shall deposit or cause to be deposited with the Escrow Agent each of the following: Z/17THA -23- ~C:>J~_5 (i) an executed and acknowledged (by City) Grant Deed; and (ii) any and all additional instruments or documents required from city (executed and acknowledged, if appropriate), as may be necessary in order for the Escrow Agent to comply with the terms of this Agreement and the conveyance Agreement. 3.5 Escrow Aqent Duties. The Escrow Agent's duties hereunder shall be limi ted to implementation of Sections 3.1 to 3.6 of this Agreement, inclusive. In addition to any other actions the Escrow Agent is authorized or required to undertake pursuant to the provisions of this Agreement, the Escrow Agent is authorized to and shall: a. record the documents described in section 3.3 in the order of priority set forth in Section 3.3; b. buy, affix, and cancel any documentary stamps required by law, and pay any transfer tax required by law, as provided herein; c. pay and charge Developer for any fees, charges, and costs payable under the Escrow; d. disburse the $372,600 in proceeds from the LISC Loan to the city; e. deliver the documents to the parties entitled thereto when the conditions for this Escrow have been fulfilled by city and Developer; f. provide and deliver to Developer the Owner's Policy described in the conveyance Agreement; g. provide and deliver to city the Lender's Policy as described in the conveyance Agreement; h. perform such other duties as are set forth in the conveyance Agreement; and i. At Close of Escrow, deliver to city and Developer a copy of each document recorded. Z/17THA -24- ~ ~4 ~2~ 3.6 Conditions Precedent to Closinq: Termination. 3.6.1 Conditions Precedent to Developer's Obliqations. Developer's obligations to close the Escrow shall be subject to Developer's satisfaction or written and signed waiver of each of the following conditions precedent: a. All of the conditions of the Conveyance Agreement shall have been satisfied or waived; b. Escrow Agent holds and will deliver the instruments and funds, if any, Developer pursuant to this Agreement; to Developer accruing to and c. All representations and warranties by City in this. Agreement shall be true on and as of the Closing Date as though made at that time and all covenants of City which are required to be performed prior to the Closing Date shall have been performed by such date. 3.6.2 Failure of Developer's Conditions: Termination. The failure of any of Developer's conditions set forth in section 3.6.1 shall not be a bar to the close of the Escrow nor an excuse for Developer's complete performance under this Agreement if the failure of the condition is due in whole or in part to the fault of Developer. Developer shall cooperate with City and the Escrow Agent to attempt to satisfy each and every condition precedent to Developer's obligations hereunder. In the event, however, that Developer has fully performed its obligations under this Agreement but any of Developer's conditions is not satisfied or waived in a writing signed by Developer prior to the expiration of the applicable period for satisfaction or waiver, Developer may, in addition to asserting or claiming any other right or remedy Developer may have hereunder for City's breach or default hereunder, cancel the Escrow (if applicable) and terminate this Agreement. In the event Developer elects to cancel the Escrow and/or terminate this Agreement as provided herein, all documents and funds, if any, delivered by one party to the other party, or to the Escrow Agent, shall be returned to the party making delivery. 3.6.3 Conditions Precedent to citv's Obliqations. city's obligations to close the Escrow and convey the Property to Developer and fund the City Loan shall be subject to City's satisfaction or written and signed waiver, of each of the following conditions precedent ("City's Conditions Precedent"): a. All conditions of the Conveyance Agreement shall have been satisfied or waived; Zl17THA -25- ~?/1~r.l? b. At the Closing Date, a title company acceptable to City shall be irrevocably committed to ~ssue an ALTA lenders insurance policy, including title endorsements reasonably requested by the City, evidencing the lien priority of the City Trust Deed as set forth in section 2.11; c. Escrow Agent holds and will deliver to city the instruments and funds, if any, accruing to City pursuant to this Agreement; d. Developer shall have submitted to City the evidence of financial capability to develop the Project on the Property as required by section 2.13 of this Agreement, and obtained the City Manager's approval of same; e. All representations and warranties by Developer in this Agreement shall be true on and as of the Closing Date and on the date of any disbursement of proceeds under the City Loan as though made at that time and all covenants of Developer which are required to be performed prior to the Closing Date shall have been performed by such date; and f. Developer shall have submitted to city evidence that the contingency amount in the Project development budget is adequate to cover potential cost overruns as determined in City's sole discretion. 3.6.4 Failure of citv's Conditions: Termination. The failure of any of City's conditions set forth in Section 3.6.3 shall not be a bar to the close of the Escrow nor an excuse for city's complete performance under this Agreement if the failure of the condition is due in whole or in part to the fault of city. city shall cooperate with Developer and the Escrow Agent to attempt to satisfy each and every condition precedent to city's obligations hereunder. In the event, however, that City has fully performed its obligations under this Agreement but any of City's conditions are not satisfied or waived in a writing signed by City prior to the expiration of the applicable period for satisfaction or waiver, City may, in addition to asserting or claiming any other right or remedy city may have hereunder for Developer's breach or default hereunder, cancel the Escrow (if applicable) and terminate this Agreement. In the event city elects to cancel the Escrow and/or terminate this Agreement as provided herein, all documents and funds, if any, delivered by one party to the other party, or to the Escrow Agent, shall be returned to the party making delivery. Z/17THA -26-pr ;{Are2~ 3.7 Physical and Enyironmental Condition of the Property: Preliminary Work by Develoner. 3.7.1 Limit on Escrow Aqent's Responsibility. Escrow agent shall have no concern with, nor liability, nor responsibility for, the provisions of this section 3.7, or any subsection thereof. 3.7.2 "As Is" Conveyance. Except as otherwise set forth in this Agreement or the Conveyance Agreement, City is making absolutely no representations or warranties with respect to the Property, and Developer will accept the property, either express or implied. Developer waives right to any warranty applied by law. Developer is acquiring the- Property solely in reliance on representations and warranties made by third parties and/or Developer's own investigation, and Developer will accept the Property, and the matters relating to the Property listed below, in their present "as is" condition. The matters are: condition; prehistoric contamination wetlands. a. Soils. Topoqraphy. Etc. Soils and geological topography, area and configuration; archeological, and historic artifacts, remains and relics; by Hazardous Materials; endangered species and b. utilities. Schools. Etc. Availability of utilities, schools, public access, and fire and police protection. c. assessments of and assessment Districts. any and all districts. The status, special taxes and Mello-Roos Community Facility Districts d. Planninq.and Zoninq. Applicable planning, zoning and subdivision statutes, ordinances, regulations and permits. e. Development Fees. The character and amount of any fee or charge which must be paid by city to develop the Property. f. Easements and Encroachments. Any easement, license or encroachment which is not a matter of public record, whether or not visible upon inspection of the Property. g. Other Matters. Any other matter relating to the Property or to the development of the Property, including, but not limited to, value, feasibility, cost, governmental permissions, marketing and investment return, except as otherwise expressly provided in this Agreement. Z/17THA -27- ~ ~~ /,:27 3.7.3 Hazardous Materials. The term "Hazardous Materials" means any material or s'ubstance which is (i) defined as a "hazardous waste", "extremely hazardous waste", "restricted hazardous waste", "hazardous material", "hazardous substance", or any similar formation under or pursuant to any California statute or common law rule; (ii) petroleum and natural gas liquids as those terms are used in 9 109(14) of the Comprehensive Environmental Response, Compensation & Liability Act, 42 U.S.C. 9 6901, et seq. (41 U.S.C. 9 6903); (iii) asbestos; (iv) polychlorinated biphenyls; (v) designated as a "hazardous substance" pursuant to 9311 of the Clean Water Act, 33 U.S.C., 9 1251, et seq. (33 U.S.C. 9 1321) or listed pursuant to 9 307 of the Clean Water Act (33 U.S.C. 9 1317); (vi) defined as a "hazardous substance" pursuant to Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9 9601, et seq. (41- U.S.C. 9 9601). 3.7.4 Indemnity of city. As a material inducement to City, without which City would not have agreed to the terms set forth herein, Developer, for itself and its successors and assigns, hereby agrees to indemnify, defend and hold harmless City and each of the employees, agents, attorneys, successors and assigns of City ("Indemnified Parties"), from and against any and all present and future liability, losses, damages (including foreseeable or unforeseeable consequential damages), penalties, fines, forfeitures, response costs and expenses (including out-of-pocket litigation costs and reasonable attorneys' fees) directly or indirectly arising out of (i) the use, generation, storage, transportation, release, discharge or disposal of Hazardous Materials on or in the Property by Developer or the partners of Developer or its respective employees, contractors, subcontractors or agents, including, without limitation, the cost of any required or necessary repair, cleanup or detoxification and the preparation of any closure or other required plans; excluding, however, from Developer's indemnity any such liability, losses, damages (including foreseeable or unforeseeable consequential damages) penalties, fines, forfeitures, response costs and expenses (including out-of-pocket litigation costs and reasonable attorneys' fees) directly or indirectly arising out of the actions of City or its respective employees, contractors, subcontractors or agents. The indemnity obligation of this section 3.7.4 is not assignable. ARTICLE 4 DEVELOPMENT OF THE PROJECT 4.1 Work to be Performed Developer agrees to improve the Property with a multi-family residential project consisting of 18 units and operate the Project Z/17THA -28- ~~/I~3?: for occupation by low-income persons, subject to the terms of this Agreement, the Conveyance Agreement and the TCAC Regulatory Agreement (the "Project"). The Project shall consist of'fourteen three-bedroom units, and four two-bedroom units, a community room and other common area facilities in accordance with the Development Project/Architectural Plans (as defined below). In general, the Project shall be designed and constructed in a manner so as to be architecturally compatible with the existing neighborhood as well as functionally efficient in the areas of access, parking, and securi ty. The proj ect' s units and occupancy shall be restricted in accordance with the terms of this Agreement. Developer shall develop the Project in strict conformity with the permits and approvals referenced in sections 4.2 through 4.4 of this Agreement. If Developer desires to make any change in any development or building plans after the same have been approved, Developer shall submit the proposed change to the appropriate body for approval;. provided, however, that Developer may make minor, de minimis changes without city's consent. Developer shall be responsible for all construction and installation and for obtaining all the necessary permits. To the extent required by the city, all such work shall be completed in accordance with acquisition, development and management plans submitted to and approved by the city. 4.2 Development Proiect/Architectural Plans. within the times set forth in the Schedule of Performance, Developer shall prepare and submit to the City Design Review Committee for review and approval all development project and architectural plans and any related documents for the Project ("Development Project/Architectural Plans"), and Developer shall exercise reasonable diligence to obtain approval of same. The Development Project/Architectural Plans shall include the sizes, heights, and locations of all buildings; building elevations; construction materials; construction colors; site plan configuration/dimensions; parking; conceptual landscape plan; conceptual sprinkler plan; and lighting concept. 4.3 Final Construction Drawinqs. within the times set forth in the Schedule of Performance, Developer shall submit to city for review and approval a complete set of final construction drawings for the Project in strict conformity with the previously approved Development Project/Architectural Plans (the "Final Construction Drawings"), and Developer shall exercise reasonable diligence to obtain such approval. The Final Construction Drawings shall contain all information required to obtain all necessary building permits required for the Project. In the event city requires modifications or changes to the Final Construction Drawings, Developer shall make the necessary changes with reasonable diligence and resubmit to City. Z/17THA -29- ~td~J/ 4.4 Other citv and Governmental Aqencv Permits and Annrovals. Before commencement of construction of the Project, ~ut not a condition to close of escrow, Developer, using the Predevelopment Funds, shall secure or cause to be secured any and all permits which may be required by City, the Redevelopment Agency of the City of Chula Vista, or any other governmental agency having jurisdiction over the Property and the Project. City staff, at their discretion, shall provide reasonable assistance to Developer in securing these permits, at no cost to City; provided, however, the City does not represent or warrant that any such approvals shall be granted. Notwithstanding any other provisions of this Agreement, City's obligations hereunder shall be contingent and conditional upon Developer submitting and processing and City approving, as, necessary, all documentation and information required to comply with the California Environmental Quality Act (Division 13 commencing with section 2100 of the California Public Resources Code) and the National Environmental Policy Act (42 U.S.C. ~ 4321, et seq.). Developer shall comply with all environmental mitigation measures imposed as conditions of approval of the Project. Nothing herein is intended, nor shall it be construed, as a precommitment or prejudgment by City regarding the matters required to be considered as part of the environmental review for the Project. The parties acknowledge and agree that nothing in this Agreement is intended to, nor shall have the effect of, reducing the city's legal authority and obligations to consider approval or disapproval of any future agreements and other discretionary actions contemplated hereby in its sole and unfettered discretion. Developer agrees to waive any and all claims against the City and its respective agents, employees and representatives, arising from the city's election not to approve such contemplated agreements or actions and acknowledges and agrees any such election by the City shall not constitute a breach of this Agreement. 4.5 Selection of General Contractor. The parties acknowledge and agree that a general contractor for construction of the proj ect shall be selected by Developer pursuant to a negotiated bidding process, whereby Developer will identify and present requests for qualifications to three to five general contractors. Said general contractors identified by Developer will be provided with copies of the plans and schematics relating to the Project which have been presented to the City Design Review Committee and shall be requested to bid on the Project. The general contractor for the Project shall be selected based upon the bids submitted to Developer, the experience of the general contractors in constructing affordable housing proj ects similar in size and scope to the Project, and such other criteria as Developer shall deem appropriate. The general contractor shall Z/17THA -30- ~ ?>lrJ:l be approved by city, which approval shall not be unreasonably withheld. 4.6 Hold Harmless. Developer agrees to indemnify, protect, defend and hold harmless City, and City's officers, agents, emp~oyees, representatives and successors, from and against any and all claims, damages, actions, costs, demands, expenses or liability, including without limitation, attorneys' fees and court costs, which may arise from the direct or indirect actions or inactions of the Developer or those of its contractors, sUb-contractors, agents, employees or other persons acting on Developers' behalf which relate to the Property or Project. This hold harmless agreement applies, without limitation, to all damages and claims for damages suffered or alleged to have been suffered by reasons of the. operations referred to in this paragraph, regardless of whether or not the City prepared, supplied or approved plans or specifications, or both, for the Property or Project. This indemnity by Developer, and all other indemnities set forth herein shall survive any foreclosure of the Property by the City pursuant to the terms of the City Trust Deed. 4.7 Further Indemnification of city. It is understood and agreed that the parties hereto have entered this Agreement as a method of providing necessary assistance to Developer in connection with the development of low- income housing and development of the Property pursuant to all applicable laws and that by contributing public funds to assist in the accomplishment of such development, or by otherwise contributing or assisting with the accomplishment of such development, the City assumes no responsibility for insuring that the same is adequately undertaken (including, without limitation, the existence. and/or remediation of any hazardous or toxic substances on the Property) and as a material consideration to City for entering into this Agreement (and not by way of limiting the generality of section 4.6 above) Developer agrees to indemnify, protect, defend and hold harmless City and all City's representatives, officers, employees and their respective successors from and against any and all claims, damages, actions, demands, liabilities, obligations, expenses, losses or costs, including without limitation, attorneys' fees and court costs, which may arise or in any manner connected with the development of the Project pursuant to this Agreement; excluding, however, from Developer's indemnity any such liability, losses, damages (including foreseeable or unforeseeable consequential damages), penalties, fines, expenses (including out-of-pocket litigation costs and reasonable attorneys' fees) directly or indirectly arising out of the actions of city or its respective employees, contractors, subcontractors or agents. Z/17THA -31-~ ~4 J;J 4.8 Costs of Development. Subject to the terms, and conditions of this Agreement, Developer shall be responsIble for all costs of developing the Project, including but not limited to predevelopment costs incurred for items such as planning, design, engineering, and environmental remediation; all development and building fees; the cost incurred to demolish and clear any and all existing improvements, furnishings, fixtures, and equipment from the Property; costs for insurance and bonds (as required) ; costs for financing; preparation of the Property for construction; and all on-site construction costs. This Agreement does not require Developer to construct any off-site improvements. Developer shall be responsible for verifying the adequacy and availability of all utilities. If at any time during the course of the development of the Project, Developer exhausts fifty (50%) percent or more of the contingency amounts set forth in the Project Budget, City shall have the right, but not the obligation, to approve any additional cost overruns, which approval shall not be unreasonably withheld. 4.9 Schedule of Performance: Proqress Reports. Subject to section 7.3, Developer shall begin and complete all construction and development within the times specified in the Schedule of Performance. Once construction is commenced, it shall be continuously and diligently pursued to completion, and shall not be abandoned for more than fifteen (15) consecutive business days, except when due to causes beyond the control and without the fault of Developer, as set forth in section 7.3 of this Agreement. During the course of construction, and prior to city's issuance of its certification of occupancy for the Project, Developer shall keep City informed of the progress of construction on the Property and, if requested, shall provide city with monthly written progress reports and meet with city staff as appropriate. If requested, Developer shall furnish a construction schedule to City indicating completion dates for each portion of work showing progress toward completion of the Project. After completion of construction of the Project and within the time set forth in the Schedule of Performance, Developer shall provide the City Manager with a true and correct copy of the final cost certification submitted to TCAC concerning the construction of the Project on the Property. Developer shall provide additional cost information as may be reasonably requested by the city Manager to permit the City Manager to make such determinations as is reasonably required for City to verify Developer's conformance to this Agreement and approved project plans. Z/17THA -32- ~ C;:4/Jr 4.10 Grant of Easements. Developer shall grant to City all necessary and appropriate easements for development of public improvements and facilities which are consistent with the Project, including but not limited to easements for streets, rights of vehicular access, sidewalks, sewers, storm drains, water, and other utilities and improvements. city and the appropriate utility companies shall be permitted to obtain any necessary temporary easements as reasonably required by them. 4.11 Compliance with Permits and Laws. Developer and its contractors shall carry out the development of the Project and operation of the Project in conformity with all applicable laws, regulations, and rules of the governmental. agencies having jurisdiction, including without limitation all conditions and requirements of the HOME Investment Partnerships Program and HOME Regulations referred to in section 2.7; prevailing wage requirements, if any, the applicability of which is for Developer to determine, pursuant to federal and state law, including California Labor Code 9 1770 et seq.; all conditions and requirements imposed by the Low Income Housing Tax Credit Program; applicable labor standards; ADA requirements; applicable MBE/WBE regulations and City policies adopted pursuant to said federal standard regulations and requirements. 4.12 Anti-discrimination Durinq Construction. Developer, for itself and its successors and assigns, agrees that Developer will not discriminate against any employee or applicant for employment because of race, color, creed, religion, sex, marital status, ancestry, or national origin in connection with activities undertaken pursuant to this Agreement. 4.13 Riqht of Access. For the purpose of assuring compliance with this Agreement, representatives of City shall have the reasonable right of access to the Property, without charges or fees, at normal construction hours during the period of construction for the purposes of this Agreement, including but not limited to the inspection of the work being performed by Developer in constructing the Project. Such representatives of City shall be those who are so identified in writing by the City Manager. City shall each indemnify, defend, and hold harmless Developer and Developer's officers, employees, and agents from any damage caused or liability arising out of the sole negligence of City or its officers, officials, employees, volunteers, agents, or representatives in their exercise of this right of access; provided that it is understood that city does not by this Section 4.13 assume any responsibility or liability for a negligent inspection or failure to inspect. Any inspection by City Z/17THA -33- ~ ~43S- pursuant to this section shall be conducted so as not to interfere or impede the construction or operations of the Project. 4.14 Prohibition Aqainst Assiqnment and Transfer. The qualifications and identity of Developer are of particular concern to City. It is because of those qualifications and identity that City has entered into this Agreement with Developer. Accordingly, for a period of fifty-five (55) years from the Effective Date, (1) Developer, without City's prior written approval, shall not, whether voluntarily, involuntarily, or by operation of law, and except as permitted in this section 4.14, undergo any significant change in ownership or assign all or any part of this Agreement or any rights hereunder, and (2) Developer without City's prior written approval, shall not, whether voluntarily, involuntarily, or by operation of law, and except as permitted in this Section 4.14, assign all or any part of the Property or Project. Notwi thstanding the foregoing, the following shall not be considered a significant change in ownership or an assignment or transfer and shall not require city approval for purposes of this section 4.14: (i) (ii) (iii) (iv) ZI17THA Transfers to any entity or entities owned or controlled by Developer. Transfers to a non-profit public benefit corporation sponsored by Developer whose board of directors shall be comprised of five members, three (3) of which shall be designated by Developer and two (2) of which shall be designated by a tenant association to be organized by the occupants of the Project. Pending formation of the tenant association, Developer shall designate all directors, two (2) of which shall, if possible, be tenants of the Project. Transfers to any partnership formed by Developer pursuant to which Developer retains operational and managerial control (City acknowledges that Developer intends to assign this Agreement to a limited partnership, the managing general partner of which shall be Developer) and sale of such partnership interests to the general partner at the conclusion of the IS-year tax credit period. The conveyance or dedication of portions of the Property to the City or other appropriate governmental agency for the formation of an -34~ ~/J -J? assessment district, or the granting of easement or permits to facilitate the development of the Property. (v) A sale or transfer of some or all of Developer's interest in the Property to investors or syndicators or a sale or transfer of some or all of the investor's interest in the limited partnership by the investors or syndicators, or to a limited partnership of which Developer is a partner. (vi) The leasing of all or any part or parts of a building or structure. (vii) Transfers of property management responsibilities, provided, however, that Developer shall provide city thirty (30) days prior written notice of any such management change, and that this exception shall be limited to transfers to property managers with significant experience in managing projects similar to the project. (viii) Transfers to a limited equity cooperative established for the benefit of the residents of the Project in furtherance of the objectives identified in section 5.9. Any such assignee shall be subject to all terms and conditions of this Agreement, including, without limitation, all affordability restrictions concerning the occupancy of the property. Developer shall deliver written notice to city requesting approval of any assignment or transfer requiring City approval hereunder. Such notice shall be given prior to Developer entering into a formal written agreement with the proposed assignee. In considering whether it will grant approval to any assignment by Developer of its interest in the property or any portion thereof, which assignment requires City approval, Ci ty shall consider factors such as (i) the financial strength and capability of the proposed assignee to perform Developer's obligations hereunder and (ii) the proposed assignee's experience and expertise in the planning, financing, development, and operation of similar projects. No assignment, including assignments which do not require city approval hereunder, but excluding assignments for financing purposes, shall be effective unless and until the proposed assignee executes and delivers to city an agreement, in form satisfactory to the city Attorney, assuming the obligations of the assignor which -35- ~O t~~37 Z/17THA have been assigned. Thereafter, the assignor shall be relieved of all responsibility to City for performance of the obligations assumed by the assignee. No lender approved by City pursuant to Section 4.16 shall be required to execute an assumption agreement and such lender's rights and obligations hereunder shall be as set forth in Section 4.16. 4.15 Taxes. Assessments. Encumbrances. and Liens. Developer shall pay prior to delinquency all real estate taxes and assessments properly assessed and levied on the Property. until the date Developer is entitled to issuance by City of the Certificate of Completion for the Project, Developer shall not place or allow to be placed thereon any mortgage, trust deed, encumbrance, or lien (except mechanic's liens prior to suit to foreclose the same being filed) not authorized by this Agreement. Developer shall remove or have removed any levy or attachment made on the property, or assure the satisfaction thereof, wi thin a reasonable time, but in any event prior to a sale thereunder. Nothing herein contained shall be deemed to prohibit Developer from contesting the validity or amounts of any tax, assessment, encumbrance, or lien, nor to limit the remedies available to Developer in respect thereto. 4.16 Secured Financinq: Riqht of Holders. 4.16.1 Permitted Encumbrances. Mortgages, deeds of trust, conveyances, and leases-back or any other form of conveyance required for any reasonable method of financing are permitted before City's issuance of the Certificate of Completion, but only for the purpose of securing loans of funds to be used for the acquisition and development of the Property (including both construction and permanent financing and the LISC Loan), and any other expenditures necessary and appropriate to develop or lease the Property in accordance with this Agreement. Prior to City's issuance of the certificate of Completion for the Project, Developer shall not enter into any such conveyance for financing purposes without the prior written consent of the city Manager, which consent shall be given if such conveyance (i) is for the purposes permitted herein and (ii) is given to a financial or lending institution or other acceptable person or entity capable of performing or causing to be performed Developer's obligations under this Agreement, including without limitation entities owned or controlled by Developer, a pension fund, insurance company, or real estate investment trust. Any disapproval shall be in writing and state the reasons therefor. Failure of City to disapprove of such lender within thirty (30) days after notice to city, as Z/17THA -36-~ ~ij -J r applicable, shall be deemed approval of that specific request for consent. If, after and despite Developer's exercise of reasonable diligence to obtain City's approval, the City Manager disapproves the identity of Developer's proposed lender or the terms and conditions of the loan, Developer's time for commencement and completion of construction on the Project or such portion thereof which was to have been financed by such lender shall be extended under the Schedule of Performance for that period of time (not to exceed one hundred twenty (120) days) during which Developer is diligently proceeding to procure acceptable alternative financing and submit evidence of such financing to the City Manager. City further agree to amend the terms of this Agreement if requested by an approved lender, provided that city's rights and remedies are not adversely affected; provided, however, that the foregoing is not intended to restrict or limit City's legislative discretion. 4.16.2 Holder Not Obliqated to Construct Improvements. The holder of any mortgage or deed of trust or other security interest authorized by this Agreement shall in no way be obligated by the provisions of this Agreement to construct or complete the improvements or to guarantee such construction or completion; nor shall any covenant or any provision in the Grant Deed be construed to so obligate such holder; provided, however, that nothing in this Agreement shall be deemed or construed to permit or authorize any such holder (with the exception of the holder of any deed of trust securing the BACDB Construction Loan) to devote the Property or any part thereof to any uses, or to construct any improvements thereon, other than those uses or improvements provided for or authorized by this Agreement. 4.16.3 Notice of Default to Mortqaqe. Deed of Trust or Other Secured Instrument Holders; Riqht to Cure. Whenever City shall deliver any notice or demand to Developer with respect to any breach or default by Developer in completion of construction of the improvements, City shall at the same time deliver a copy of such notice or demand to each approved holder of record of any mortgage, deed of trust, or other security instrument which has previously requested such notice in writing. Each such holder shall (insofar as the rights of city are concerned) have the right, at its option within ninety (90) days after the receipt for the notice, to commence and thereafter to diligently proceed to cure or remedy such default and add the cost thereof to the security interest debt and the lien on its security interest. 4.16.4 Riqht of Citv to Cure Mortqaqe. Deed of Trust. or Other Securitv Instrument Default. In the event of a default or breach by Developer of a mortgage, deed of trust, or other security instrument or lease-back or conveyance for financing prior to the issuance by City of the Z/17THA -37- I}-# ~-4 -_7; Certificate of Completion for the Project, City may cure the default prior to completion of any foreclosure. In such event, City shall be entitled to reimbursement from Developer of all costs and expenses reasonably incurred by city in curing the default, which right of reimbursement shall be secured by a lien upon the Property to the extent of such costs and disbursements. Any such lien shall be subject to: (i) Any mortgage, deed of trust, or other security instrument or sale and lease-back or other conveyance for financing permitted by this Agreement; or (ii) Any rights or interests provided in this Agreement for the protection of the holders of such mortgages, deed of trust, or other. security instruments, the lessor under a sale and lease-back, or the grantee under such other conveyance for financing; provided that nothing herein shall be deemed to impose upon City any affirmative obligations (by the payment of money, construction, or otherwise) with respect to the Property in the event of its enforcement of its lien. 4.17 Riqht of citv to Satisfv Liens. Prior to the issuance by city of the certificate of Completion for the Project, and after Developer has had a reasonable time to challenge, cure, or satisfy any liens or encumbrances on the Property, city, after sixty (60) days prior written notice to Developer, shall have the right, but not the obligation, to satisfy any liens or encumbrances on the Property; provided, however, that nothing in this Agreement shall require Developer to payor make provision for the payment of any tax, assessment, lien, or charge so long as Developer in good faith shall contest the validity or amount thereof, and so long as such delay in payment shall not subject the Property to forfeiture or sale. 4.18 Estoppels. At the request of Developer or any holder of a mortgage or deed of trust, City shall, from time to time and upon the request of such holder, timely execute and deliver to Developer or such holder a written statement of City that no default or breach exists (or would exist with the passage of time, or giving of notice, or both) by Developer under this Agreement, if such be the case, and certifying as to whether or not Developer has at the date of such certification complied with any obligation of Developer hereunder as to which such holder may inquire. The form of any estoppel letter shall be prepared by the holder or Developer. Zl17THA -38~ ~/J -,/0 .. 4.19 Certificate of Completion. Upon Developer's satisfactory completion of construction of the Project, city shall furnish Developer with a Certificate of Completion upon written request therefor by Developer. Such certificate of Completion shall be in a form so as to permit recordation in the Office of the Recorder of the County of San Diego as set forth in Attachment No.7. The certificate of Completion shall be, and shall so state, a conclusive determination of satisfactory completion of the construction of the Project and of full compliance with the terms of this Agreement relating to such construction. After the date Developer is entitled to the issuance of the certificate of Completion, and notwithstanding any other provisions of this Agreement to the contrary, any party then owning or thereafter' purchasing, leasing, or otherwise acquiring any interest in the Property shall not (because of such ownership, purchase, lease, or acquisition) incur any obligation or liability under this Agreement for which such certificate of Completion is issued, except that such party shall be bound by the covenants contained in Sections 5.1 through 5.5 herein, inclusive, in accordance therewith. City shall not unreasonably withhold the Certificate of Completion. If city refuses or fails to furnish the certificate of Completion after written request from Developer, City shall, within fifteen (15) days after such written request, provide Developer with a written statement of the reasons City refused or failed to furnish such certificate of Completion. The statement shall also contain City's opinion of the action Developer must take to obtain such certificate of Completion. If the reason for such refusal is confined to the immediate availability of specific items or materials for landscaping, City shall issue its certificate of Completion upon the posting of cash deposit or an irrevocable letter of credit in favor of city in an amount representing the fair value of the work not yet completed and in a form reasonably acceptable to city's attorney. A certificate of Completion is not a notice of completion as referred to in California Civil Code section 3093. ARTICLE 5 USES OF THE PROPERTY 5.1 Use of the Property. 5.1.1 General. Developer covenants and agrees for itself and its successors and assigns to its interest in the Property that Developer and such successors and assigns shall devote the Property to uses consistent with the HOME Investment Partnerships Program and HOME Regulations Z/17THA -39- ~ ?4-(/ referred to in Section 2.7, the approved Development Project/Architectural Plans, the TCAC Regulatory Agreement, the City Trust Deed, and this Agreement, whichever is most res~rictive, for a period of fifty five (55) years from the effective date of the TCAC Regulatory Agreement. 5.1.2 Affordable Housinq. Developer covenants and agrees for itself and its successors and assigns to its interest in the Property that commencing upon the Developer's acquisition of the Property and continuing thereafter for a period of fifty-five (55) years from the effective date of the TCAC Regulatory Agreement, Developer and such successors and assigns shall devote seventeen (17) of the eighteen (18) residential units on the Property (hereinafter the "Restricted Units") to use as affordable rental housing in accordance with the terms of this Agreement (the remaining unit to be occupied by the on-site property manager), subject to the occupancy restrictions contained in this Section 5.1.2; provided, however, that seven (7) of the three-bedroom units and two (2) of the two-bedroom units shall also be subject to restrictions provided under the HOME Investment Partnerships Program and HOME Regulations discussed in section 2.6. During the period of time paragraph, occupancy and rental of restricted in accordance with the hereto as Attachment No.8. set forth in the preceding the Restricted units shall be Restricted unit Mix attached In determining income eligibility for a particular Restricted Unit, Developer shall be entitled to rely upon the documentation provided by the prospective tenant as required pursuant to the HOME Investment Partnerships Program procedures and the Low Income Housing Tax Credit Program procedures for determining household income eligibility and the verification and monitoring program required pursuant to sections 2.7 and 5.1.3. Developer shall not be required to do further investigations into the household income than are required pursuant to the HOME Investment Partnerships Program requirements, the Low Income Housing Tax Credit Program requirements, and the verification and monitoring program required pursuant to sections 2.7 and 5.1.3. Throughout this Agreement, wherever it is stated that Developer must comply with the affordability requirements and/or verify such compliance, Developer shall be entitled to rely upon the tenant documentation discussed in this paragraph. In addition to the foregoing, the lease agreement for each Restricted unit in the Project shall restrict occupancy of the Restricted Unit to a total of two (2) persons per bedroom. Any violation of such restrictions shall constitute a default by the tenant, unless such occupancy restriction is found invalid by a court of competent jurisdiction in a final non-appealable judgment Z/17THA -40- ~ 04-~2 in a lawsuit in which the Project's occupancy restriction is at- issue, or in an applicable and binding published appellate.opinion. Finally, with respect to the HOME-assisted units in the Project, for the period commencing upon completion of the Project and continuing thereafter for a period of at least twenty (20) years, the HOME-assisted units shall meet the affordability requirements set forth in Section 92.252 of the HOME Regulations (24 C.F.R. 9 92.252). If, after renting a Restricted unit, the household income increases above the income level permitted for the particular Restricted Unit, the household shall continue to be permitted to reside in such unit and the rent shall be adjusted as follows: (i) Except as provided in (ii) below, the household shall continue to be permitted to reside in such Restricted unit at the same rent. If, however, subsequent to such a household income increase, another unit in the complex designated for a higher household income level becomes vacant and the household whose income level has increased meets the income requirements for such more expensive uni t, the rent level designation for such household shall increase to this new level and the vacant unit shall be redesignated as a unit to be rented to households of the income level which was previously met by the household whose income has increased. (ii) If in any Home-assisted unit the household income increases to an amount over eighty percent (80%) of the median income for the MSA, that household's rent for the Restricted Unit shall increase to the lesser of (A) the amount payable by the tenant under State or local law or (B) thirty (30%) percent of the household's adjusted monthly income, as annually recertified by HUD, as more particularly described in the HOME Regulations at 24 C.F.R. 9 92.252. If the rent for a Restricted unit which would otherwise be designated for households earning forty (40%) percent or less of the median income for the MSA is increased pursuant to this paragraph (ii) , the next available higher income designated unit shall be redesignated as a Restricted unit for households earning forty (40%) percent or less of the median income for the MSA. If, pursuant to the Low Income Housing Tax Credits Program, rent for a Z/17THA ~ C:~ - (;J particular Restricted unit may not be increased as described in this paragraph (ii), the requirements of paragraphs (i) ahd (iii) shall continue to apply. (Ui) In no event, during the period covered by this Section 5.1.2, shall the rent for any Restricted unit in the Project exceed the "fair market rent" for comparable units in the area, as defined by the County of San Diego Housing Authority. In addition to the foregoing, Developer agrees to perform all of its obligations under the Regulatory Agreement between the Tax Credit Allocation Committee and Developer (4 California Code of Regulations 9 10340(c)). Should City be prevented by a final, non- appealable order of a court of competent jurisdiction in a lawsuit involving the Project, or by an applicable and binding published appellate opinion, or by a final, non-appealable order of a regulatory body having jurisdiction from enforcing, for any reason, the affordability restrictions set forth in this Agreement, then in such event City shall be a third-party beneficiary under the TCAC Regulatory Agreement and shall have full authority to enforce any breach or default by Developer under the TCAC Regulatory Agreement in the same manner as though it were a breach or default hereunder. without City's prior written consent, which consent may be withheld in City's sole and absolute discretion, Developer shall not consent to any amendment of or modification to the TCAC Regulatory Agreement which (i) shortens the term of the affordability restrictions on the units in the Project to a term of less than fifty-five (55) years or (ii) releases Developer from the requirement that the units be rented at affordable housing costs in accordance with the Residential unit Mix. 5.1.3 Reports. Developer, at its expense, shall submit, or cause the Property Manager to submit, to the appropriate entities any and all reports required to be submitted pursuant to the HOME Investment Partnership Program and HOME Regulations. 5.1.4 Insurance. within ten (10) days after the Developer's acquisition of the Property, Developer shall furnish to the city duplicate originals or appropriate certificates of insurance coverage evidencing that Developer has obtained, or cause to be obtained, insurance coverage with respect to the Property and Project in type, amount and from insurers with Best's A-V ratings or better, as are reasonably acceptable to City, naming the City and its officers, agents, employees, representatives and their respective successors, as named or additional insureds by appropriate endorsements. Such Z/17THA -42- ~ ?:~-;jr policy shall include, without limitation "all risk" property casualty insurance and comprehensive general liability insurance. Without limiting the generality of the foregoing, such poltcy shall also include coverage to insure Developer's indemnity obligations provided herein. Developer covenants and agrees for itself and its successors and assigns that Developer and such successors and assigns shall keep such policy in full force and effect until the date that is fifty five (55) years after the Effective Date. In addition to any other remedy which City may have hereunder for Developer's failure to procure, maintain, and/or pay for the insurance required herein, city may (but without any obligation to do so) at any time or from time to time, after thirty (30) days written notice to Developer, procure such insurance and pay the premiums therefor, in which event Developer shall immediately repay City all sums so paid by City together with interest thereon at the. rate of ten percent (10%) per annum or the maximum legal rate, whichever is less. 5.1.5 Repair of Damaqe. a. Obliqation to Repair and Restore Damaqe Due to Casualtv Covered bv Insurance. Subject to subparagraph (c) below, if the Project shall be totally or partially destroyed or rendered wholly or partly uninhabitable by fire or other casualty required to be insured against by Developer, Developer shall promptly proceed to obtain insurance proceeds and take all steps necessary to promptly and diligently commence the repair or replacement of the Project to sUbstantially the same condition as the Project is required to be maintained in pursuant to this Agreement, whether or not the insurance. proceeds are sufficient to cover the actual cost of repair, replacement, or restoration, and Developer shall complete the same as soon as possible thereafter so that the Project can continue to be operated and occupied as an affordable housing proj ect in accordance with this Agreement. Subj ect to Section 7.3, in no event shall the repair, replacement, or restoration period exceed one (1) year from the date Developer obtains insurance proceeds unless the city Manager, in his or her sole and absolute discretion, approves a longer period of time. City shall cooperate with Developer, at no expense to city, in obtaining any governmental permi ts required for the repair, replacement, or restoration. If, however, the then-existing laws of any other governmental agencies with jurisdiction over the Property do not permit the repair, replacement, or restoration, Developer may elect not to repair, replace, or restore the Project by giving notice to City (in which event Developer will be entitled to all insurance proceeds, subject to any outstanding lien obligations, but Developer shall be required to remove all debris from the Property) or Developer may reconstruct such other improvements on the Property as are consistent with applicable land use regulations and Z/17THA -43- ~ ~4~'i5 approved by the City and the other governmental agency or agencies with jurisdiction. b. Continued Operations. During any period of repair, Developer shall continue, or cause the continuation of, the operation of the housing complex on the Property to the extent reasonably practicable from the standpoint of prudent business management. c. Damaqe or Destruction Due to Cause Not Required to be Covered bv Insurance. If the improvements comprising the Project are completely destroyed or substantially damaged by a casualty for which Developer is not required to insure against (and has not insured against), then Developer shall not be required to repair, replace, or restore such improvements and may elect not to do so by providing city with written notice of election not to repair, replace, or restore within ninety (90) days after such substantial damage or destruction. In such event, Developer shall remove all debris from the Property. As used in this subparagraph (c), "substantial damage" caused by a casualty not required to be (and not) covered by insurance shall mean damage or destruction which is fifty percent (50%) or more of the replacement cost of the improvements comprising the Project. In the event Developer does not timely elect not to repair, replace, or restore the improvements as set forth in the first sentence of this subparagraph (c), Developer shall be conclusively deemed to have waived its right not to repair, replace, or restore the improvements and thereafter Developer shall promptly commence and complete the repair, replacement, or restoration of the damaged or destroyed improvements in accordance with subparagraphs (a) above and continue operation of the housing complex during the period of repair (if practicable) in accordance with subparagraph (b) above. 5.2 Marketinq and Leasinq of units. 5.2.1 Lease Preference and Marketinq Plan. The leasing preference provisions set forth in this section 5.2.1 shall apply only in the event, and to the extent, such provisions are not in conflict with applicable HUD Regulations, Internal Revenue Code provisions, IRS Regulations, the Low Income Tax Credit Program, or any other applicable law. Commencing upon the effective date of the TCAC Regulatory Agreement and continuing thereafter for a period of fifty-five (55) years, the Restricted Units shall be rented to eligible tenants in accordance with the following terms: Z/17THA -44- ~ ~/I-yt within the time set forth in the Schedule of Performance, Developer shall prepare and submit to the Housing Coordi~ator for approval, which approval shall not be unreasonably withheld, a marketing plan (the "Marketing Plan") for the leasing of the units. The Marketing Plan shall, to the extent permitted by law, include a program which requires that reasonable efforts be employed in providing a preference in the leasing of the units to individuals residing or working in the City of Chula vista who meet the eligibility requirements. To encourage the greatest possible opportunity for such residents of, or persons working in Chula vista, to lease the units Developer and city shall cooperate to communicate the availability of the units to the population of residents or persons working in Chula Vista who would be interested in leasing such units. To accomplish this goal, Developer and City shall each undertake the following activities: a. publicitv Campaiqn Prior to Openinq. The Marketing Plan to be submitted to the Housing Coordinator shall include and set forth a publicity campaign including but not limited to newspaper advertising and press releases. The publicity campaign may want to consider notices in appropriate foreign languages to reach the broadest section of the community. Developer shall execute the approved plan in a timely fashion to insure the greatest possible participation in the Project amongst persons residing or working in the city of Chula vista. b. Preference List For Initial Leasinq and for Onqoinq Leasinq. Developer, for both initial leasing of the units and thereafter for ongoing leasing, shall create and maintain a system to establish a list of eligible potential tenants, including those responding to Developer's Marketing Plan/publicity campaign. Developer shall contact those individuals on the list in the manner established by City and shall offer available units in the Project to such individuals in accordance with this Agreement. c. Required Noticinq of Vacant Units. Developer shall notify all of the following entities of any units which remain vacant for more than 30 days: i. Community Development Department City of Chula vista Attn: Housing Coordinator 276 Fourth Avenue Chula Vista, CA 91910 Z/17THA -45- ~ t!A -Y? ii. San Diego County Housing Authority 3989 RUffin Road San Diego, CA iii. and any other housing authority with jurisdiction in the city. 5.2.2 Rental Aqreement. The initial form rental agreement, and any changes to such form rental agreement, to be used by Developer shall be in compliance with all conditions imposed by the TCAC Regulatory Agreement and shall be approved by the Housing Coordinator, which approval shall not be unreasonably withheld, prior to the initial use for the lease form and, each time the form is changed, prior to the first use of the changed form. The Housing Coordinator shall approve or disapprove the rental agreement (or changes thereto, as applicable) within fifteen (15) days of Developer's submittal. The rental agreement shall provide that tenants may not have or keep on premises any pets (excluding fish, birds in cages, or other animals deemed by Developer to not disturb the other tenants or adjacent properties). 5.2.3 Remedv for Excessive Rental Charqes. In the event the actual rent collected by Developer for a Restricted unit is in excess of the maximum rent allowed for such Restricted unit in violation of this Agreement, the amount by which any actual rent collected for such Restricted Unit exceeds such maximum rent for such Restricted Unit shall be immediately remitted to City by Developer. Such amounts shall constitute liquidated damages to City as a result of Developer's breach of its covenants set forth in this Article 5, it being understood that, because of the nature of the effect of such breach, the actual damages to City as a result thereof would be impracticable or extremely difficult to ascertain. It is understood and agreed that the right of City to collect, or the actual collection by city of, such above- described amounts shall be in addition to any other remedies City may have against Developer as a result of the breach of such covenants, including, without limitation, rights of specific performance and the right to prove actual damages. 5.3 Maintenance of the Propertv. Developer agrees to maintain all the improvements on the Property shown on the approved plans referenced in Sections 4.2 (including without limitation any landscape and signage plans), as the same may be amended from time to time, in the condition as existing as of the. date of the certificate of occupancy (not including any temporary certificate of occupancy) issued by city for the Project, ordinary wear and tear excepted, and in accordance Z/17THA -46- ~ct-4-iY with the approved plans and permits and in compliance with all applicable laws, rules, ordinances, order, and regulations of all federal, state, county, municipal, and other governmental .agencies and bodies having or claiming jurisdiction and all their respective departments, bureaus, and officials. The city places prime importance on quality maintenance to protect their investment and to ensure that all City subsidized affordable housing projects are not allowed to deteriorate due to below-average maintenance. In addition, Developer shall keep the Property free from any accumulation of debris or waste material. The maintenance covenant contained in this Section 5.3 shall remain in effect for the term of the affordability restrictions set forth herein. In the event that Developer breaches any of the covenants contained in this section 5.3 and such default continues for a period of five (5) days after written notice from City (with respect to landscaping [except as may be caused by a government- imposed watering moratorium], graffiti, debris, waste material, and general maintenance) or thirty (30) days after written notice from City (with respect to building improvements), then city, in addition to whatever other remedy it may have at law or in equity, shall have the right to enter upon the Property and/or the open space area and perform or cause to be performed all such acts and work necessary to cure the default. Pursuant to such right of entry, City shall be permitted (but is not required) to enter upon the Property and perform all acts and work necessary to protect, maintain, and preserve the improvements and landscaped areas on the Property, and to attach a lien on the Property, or to assess the Property, in the amount of the expenditures arising from such acts and work of protection, maintenance, and preservation by City and/or costs of such cure, which amount shall be promptly paid by Developer to city, as applicable, upon demand. 5.4 Property Manaqement. 5.4.l Manaqement Plan. Within the time set forth in the Schedule of Performance, Developer shall obtain approval from the Housing Coordinator, which approval shall not be unreasonably withheld, of the property manager initially engaged by Developer to manage the Property. within the time set forth in the Schedule of Performance, Developer or its Property Manager shall also submit for the Housing Coordinator's review and approval, which approval shall not be unreasonably withheld, a management plan which ensures that the Property Manager will comply with the terms and intent of this Agreement in its operation of the Project. The Property Manager shall be required to retain an on-site manager for the Project at all times covered by this Agreement. Any amendments or modifications to such plan shall be approved in advance by the Housing Coordinator, which approval shall not be unreasonably Z/17THA -47~ 64 - f7 withheld. 5.4.2 Gross Mismanaqement. In the event of "Gross Mismanagement" (as that term is defined below) of the Project, City shall have the authority to require that such Gross Mismanagement cease immediately, and further to require the immediate replacement of the Property Manager. City shall provide written notice to Developer of an event of Gross Mismanagement and Developer shall have fifteen (15) days to cure such problem (or for such events of Gross Mismanagement that cannot be cured within 15 days, that Developer has commenced such cure within the IS-day period). For purposes of this Agreement, the term "Gross Mismanagement" shall mean management of the Project in a manner which violates the terms and/or intention of this Agreement to operate an affordable housing complex of the highest standard, and shall include, but is not limited to, the following: (i) Knowingly and willfully leasing Restricted Uni ts to tenants that exceed the prescribed income levels; (ii) Allowing the tenants in any of the Restricted units to exceed the prescribed occupancy levels without taking immediate action to stop such overcrowding; (iii) Under-funding the prescribed Replacement Reserve (Section 5.5); Capital (iv) Failure Property 5.3; to maintain the Project and the in the manner prescribed in Section (v) Failure to submit timely and/or adequate HOME Investment Partnerships Program reports as required in section 5.1.3 and/or any reports required in the TCAC Regulatory Agreement; (vi) Fraud or embezzlement of Project monies; and (viii) Failure to fully cooperate with the Chula vista Police Department in maintaining a crime free environment on the Property. 5.4.3 Fees Paid to Developer. Any property management fee or partnership management fee which is paid to Developer shall at no time exceed an amount as is customary and standard for affordable housing projects similar in Z/17THA -48- ~ ~LJ-5C size and scope to the Project. 5.5 Capital Replacement Reserve. Developer, shall, or shall cause the Property Manager to, annually set aside a minimum of four (4%) percent of the Effective Gross Rental Income, or such other amount as the parties may agree to in writing, into a separate interest-bearing trust account (the "Capital Replacement Reserve"). Funds in the Capital Replacement Reserve shall be used for capital replacements to the Project's fixtures and equipment which are normally capitalized under generally accepted accounting principles. Once the total amount of the Capital Replacement Reserve exceeds an amount which is one hundred and ten (110%) percent of that which is customary and standard for affordable housing projects similar in size, scope and character to the Project (the "Capital Replacement Reserve Minimum"), and is maintained at that level, Developer shall have no further obligation to fund the Capital Replacement Reserve in excess of the Capital Replacement Reserve Minimum. Funds in the Capital Replacement Reserve account may be distributed to Developer (or others) only after full payment of loan amounts due or only upon the prior written approval of the Housing Coordinator, which approval may be given or withheld in the Housing Coordinator's sole discretion. The non-availability of funds in the Capital Replacement Reserve does not in any manner relieve Developer of the obligation to undertake necessary capital repairs and improvements and to continue to maintain the Property in the manner prescribed in Section 5.3. 5.6 Obliqation to Refrain from Discrimination. Subject to the tenancy/occupation restrictions permitted by federal law as embodied in this Agreement, which may modify the following nondiscrimination clause, there shall be no discrimination against, or segregation of, any persons, or group of persons, on account of race, color, creed, religion, sex, marital status, ancestry, or national origin in the enjoyment of the Property, nor shall Developer itself, or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the Property or any portion thereof. Developer shall further comply with all the requirements of the ADA. Z/17THA -49- ~ ?~<p~_5 / 5.7 Form of Nondiscrimination and Nonseqreqation Clauses. Subject to the tenancy/occupancy restrictions permitted by federal law as embodied in this Agreement, which may modify the following nondiscrimination clauses, the following shall apply: Developer shall refrain from restricting the rental, sale, or lease of any portion of the Property, or contracts relating to the Property, on the basis of race, color, creed, religion, sex, marital status, ancestry, or national origin of any person and shall comply with all the requirements for the ADA. All such deeds, leases or contracts, including the Grant Deed conveying title to the Property to Developer, shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: a. In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, ancestry, or national origin in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the land herein conveyed, nor shall the grantee himself, or any persons claiming under or through him, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the land herein conveyed and further covenants that all such individuals and entities shall copy with all requirements of the Americans with Disabilities Act of 1990, as the same may be amended from time to time (42 U.S.C. 9 12101, et seq.). The foregoing covenants shall run with the land." b. In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him, and this lease is made and accepted upon and subject to the following conditions: 'That there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, ancestry, or national origin in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the land herein leased, nor shall the lessee himself, or any person claiming under or through him, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, sublessees, subtenants, or vendees in the land herein lease and the lease shall be carried out in compliance with all requirements of the Americans with Disabilities Act of 1990, as the same may be Z/17THA -50- ~ t::4-Sc2, amended from time to time (42 U.S.C. !i 12101, et seq.).'" c. In contracts: "There shall be no discriinination against or segregation of any persons or group of persons on account of race, color, creed, religion, sex, marital status, ancestry, or national o~igin in the sale, lease, transfer, use, occupancy, tenure, or enJoyment of land, nor shall the transferee himself, or any person claiming under or through him, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees of land and all such activities shall be conducted in compliance with all the requirements of the Americans with Disabilities Act of 1990, as the same may be amended from time to time (42 U.S.C. !i 12101, et seq.)." 5.8 Effect of Covenants. a. Unless sooner terminated by city as provided for herein, all covenants contained herein shall run with the land and shall be extinguished and of no further force and effect upon the fifty-fifth anniversary of the issuance of the certificate of occupancy by the City, with the exception of the non-discrimination and non-segregation covenants which shall run in perpetuity. The covenants established herein shall, without regard to technical classification and designation, be binding on the part of Developer and any successors and assigns to the Property or any part thereof, and the tenants, lessees, sublessees and occupants of the Property, for the benefit of and in favor of the Property and the city, its successors and assigns and any successor in interest thereto. City is deemed the beneficiary of such covenants for and in its own right and for the purposes of protecting the interest of the community and other parties, public or private, in whose favor and for whose benefit of such covenants running with the land have been provided, without regard to whether City has been, remained, or are owners of any particular land or interest therein. City shall have the right to unilaterally terminate the covenants at any time, (subject to the TCAC Regulatory Agreement) or, if such covenants are breached (subject to any cure rights provided herein) to exercise all rights and remedies and to maintain any actions or suits at law or in equity or other proper proceedings to enforce the curing of such breaches to which it or any other beneficiaries of this Agreement and the covenants may be entitled, including specific performance (it being recognized that the breach of such covenants cannot be adequately compensated by monetary damages), and any arid all remedies provided in the City Trust Deed and the City Notes including, without limitation, foreclosure proceedings against the Property. b. Without limiting the generality of the foregoing, in the event that there is a breach of the terms of this Agreement or any covenants provided herein, the City shall have the right, but Z/17THA -51- ~?'-f rS;J not the obligation, to take any and all actions the City deems necessary, to cure such breach, including, without limitation, taking possession of the Property for management and/or repair purposes, and to obtain reimbursement from Developer for any reasonable costs incurred by the city in the exercise of such remedy. Furthermore, Developer hereby covenants by and for itself, its successors and assigns and every person acquiring an interest in the Property, or any part thereof, that city and other public agencies at their sole risk and expense, shall have the right to enter the Property or any part thereof at all reasonable times and with as little interference as possible for the purposes of construction, reconstruction, maintenance, repair or service of any public improvements or public facilities located on the Property and to ensure compliance with the restrictions and covenants contained herein. Any such entry shall be made only after reasonable notice to Developer (provided, however, that entry to ensure compliance with any restrictions may be without notice to Developer) and, any damage or injury to the Property resulting from such entry shall be promptly repaired at the sole expense of the public agency responsible for the entry except to the extent any such damage or injury arises as a result of the negligence or willful misconduct of the Developer or its officers, employees, agents, invitees or contractors. c. No violation or breach of the covenants, conditions, restrictions, provisions or limitations contained in this Agreement shall defeat or render invalid or in any way impair the lien or charge of any mortgage, deed of trust or other financing or security instrument; provided, however, that any successor of Developer to the Property shall be bound by such remaining covenants, conditions, restrictions, limitations and provisions, whether such successor's title was acquired by foreclosure, deed in lieu of foreclosure, trustee's sale or otherwise. Failure to comply with the covenants, conditions, restrictions, provisions or the limitation contained in this Agreement shall constitute a material default hereunder permitting the City to exercise any of its rights or obligations provided hereunder, including, without limitation, those provided under the city Note, or the City Trust Deed, or otherwise provided at law or in equity. 5.9 Limited EQUitv Cooperative. It is the objective of the parties that the Project be designed and operated as a limited equity cooperative (the "Cooperative") . It is anticipated that the Cooperative will be organized as a separate non-profit organization formed on behalf of the residents of the Project who will be actively involved in the day-to-day activities of the Cooperative and the Project. The parties anticipate that the residents of the Project will acquire membership in the Cooperative by purchasing a "share" evidencing their interest in the Cooperative. It is anticipated that during the fifteen (15) year period following the issuance of the Z/17THA -52- ~ ;;/l-st certificate of occupancy by the City, the Cooperative will lease the Project from its initial owner. To the extent it is economically and legally feasible, the parties anticipate that upon the fifteenth anniversary of the issuance of the certificate of occupancy by the City, the Cooperative will be provided with an opportunity to purchase the Project. It is further anticipated that upon termination of residency, Cooperative members will be required to sell their Cooperative shares to the Cooperative or the successor residents. The Cooperative is intended to encourage residents to be actively involved in the Project and the general welfare of the surrounding neighborhood. In furtherance of this objective, Developer will assist the residents in establishing a volunteer board of directors comprised of Cooperative members to be assisted by volunteer committees, such as a safety/security committee, a membership committee, a landscape/maintenance committee, and a community relations/resident activities committee. Notwithstanding the foregoing, it is expressly acknowledged that there currently exists no operative documents establishing or governing the Cooperative and that any terms and conditions thereof are subject to feasibility and modification consistent with the goals stated herein. Nothing herein is intended to create any third party beneficiaries, and no person or entity other than city and Developer shall be authorized to enforce the provisions of this section 5.9. ARTICLE 6 DEFAULTS. REMEDIES. AND TERMINATION 6.1 Defaults - General. Subject to all of the extensions of time available in section 7.3, failure or delay by any party to perform any term or provision of this Agreement constitutes a default under this Agreement; however, the party shall not be deemed to be in default if (i) such party cures, corrects, or remedies such default within thirty (30) days after receipt of a notice specifying such failure or delay, or (ii) for such defaults that cannot reasonably be cured, corrected, or remedied within thirty (30) days, if such party commences to cure, correct, or remedy such failure or delay within thirty (30) days after receipt of a notice specifying such failure or delay, and diligently prosecutes such cure, correction or remedy to completion. The injured party shall give written notice of default to the party in default, specifying the default complained of by the injured party. Copies of any notice of default given to Developer shall also be delivered to any permitted lender requesting such notice. Except as provided in section 5.3 above or as required to protect against further damages, the injured party may not institute proceedings against the party in default until thirty (30) days after giving such notice. Except as otherwise expressly Z/17THA -53- ~ ;:4:g- provided in this Agreement, any failure or delay in giving such notice or in asserting any of its rights and remedies as to any default shall not constitute a waiver of any default, nor.shall it change the time of default, nor shall it deprive either party of its rights to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies. 6.2 Termination. 6.2.1 Termination by citv. Notwithstanding any other provision of this Agreement to the contrary, in the event that City is not in default under this Agreement, City shall have the right to terminate this Agreement upon written notice to the other parties if: (i) Developer commits. a material default hereunder and fails to cure said default within the time specified in section 6.1; or (ii) Developer fails to obtain the necessary approvals from the Tax Credit Allocation Committee for participation in the Low Income Housing Tax Credit Program under terms that will restrict seventeen (17) of the residential units in the Project for a minimum of fifty-five (55) years to occupancy by low income households at affordable rents, as reflected in the Restricted Unit Mix depicted on Attachment No.8; or (iii) Escrow has not closed on the conveyance of the Property to Developer on or before December 31, 1997, as such date may be extended by agreement of all the parties hereto in their sole and absolute discretion; or (iv) Developer shall have failed to commence construction of the Project pursuant to a valid building permit or permits and is not diligently proceeding with such construction on or before the time required in the Schedule of Performance and does not timely cure such default. In addition, in the event that Developer is guilty of an uncured materiCj.l default under this Agreement at the time City exercises its right under this Section 6.2 to terminate the Agreement, nothing in this Section 6.2 is intended or shall be interpreted as a limitation of any other legal or equitable rights to which City may be entitled. Upon the exercise of any right of termination pursuant to this Section 6.2.1, and subject to any rights of City under the city Trust Deed, any obligation of Developer relating to the City Predevelopment Loan Proceeds shall be forgiven by City. 6.2.2 Termination by Developer. Notwithstanding any other provision of this Agreement to the contrary, in the event that Developer is not in default under this Agreement, Developer shall have the right to terminate this Agreement, upon written notice to city if: (i) City commits a material default hereunder and fails to cure said default within Z/17THA -54- ~ ?4___~ the time specified in section 6.1; or (ii) Developer fails to obtain allocation of low-income housing tax credits in an amount not less than $170,522 in annual federal tax credits and 0$591,406 in total California tax credits, or such lesser amounts as may be mutually agreed to by the parties, from the California Tax Credit Allocation Committee by December 31, 1997. as such date may be extended by mutual agreement of the parties; or (iii) Escrow has not closed on the conveyance of the Property to Developer on or before December 31, 1997, as such date may be extended by agreement of all the parties hereto, in their sole and absolute discretion; or (iv) City fails to approve, after best efforts by Developer to obtain such approval, such permits as required to commence and complete construction of the Project on the site. In addition, in the event that city is guilty of an uncured material default under this Agreement at the time Developer, exercises its right under this Section 6.2 to terminate the Agreement, nothing in this section 6.2 is intended or shall be interpreted as a limitation of any other legal or equitable rights to which Developer may be entitled. 6.3 Leqal Actions. 6.3.1 Institution of Leqal Actions. In addition to any other rights or remedies, either party may institute legal action to cure, correct, or remedy any default, to recover damages for any default, or to obtain any other remedy consistent with the purposes of this Agreement. Such legal actions must be instituted and maintained in the Superior Court of the County of San Diego, State of California, or in any other appropriate court in that county. 6.3.2 Applicable Law. The laws of the State of California shall govern the interpretation and enforcement of this Agreement. 6.3.3 Acceptance of Service of Process. In the event that any legal action is commenced by Developer against City, service of process on City shall be made by personal serv~ce upon the city Manager or City Clerk, or in such other manner as may be provided by law. In the event that any legal action is commenced by City against Developer, service of process on Developer shall be made by personal service upon Developer or in such other manner as may be provided by law, and shall be valid whether made within or without the State of California. Z/17THA -55- ~ ~/lf? 6.4 Action for Specific Performance. If either the Developer or City defaults with regard fo any of the provisions of this Agreement, the non-defaulting party shall serve written notice of such default upon the defaulting party. If the default does not commence to be cured by the defaulting party within thirty (30) days after service of the notice of default, the non-defaulting party at its option may thereafter commence an action for specific performance of the terms of this Agreement pertaining to such default, subject to the provisions of Section 7.3 hereof. 6.5 Riqhts and Remedies are Cumulative. Except as otherwise expressly stated in this Agreement, the rights and remedies of the parties are cumulative, and the exercise. by either party of one or more of its rights or remedies shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the same default or any other default by the other party. 6.6 Attornev's Fees. If either party to this Agreement is required to initiate or defend litigation in any way connected with this Agreement, the prevailing party in such litigation, in addition to any other relief which may be granted, whether legal or equitable, shall be entitled to its actual and reasonable attorney's fees. If either party to this Agreement is required to initiate or defend litigation with a third party because of the violation of any term or provision of this Agreement by the other party, then the party so litigating shall be entitled to its actual and reasonable attorney's fees from the other party to this Agreement. Attorney's fees shall include attorney's fees on any appeal, and in addition a party entitled to attorney's fees shall be entitled to all other reasonable costs for investigating such action, retaining expert witnesses, taking depositions and discovery, and all other necessary costs incurred in such litigation. All such fees shall be deemed to have accrued on commencement of such action and shall be enforceable whether or not such action is prosecuted to judgment. The parties hereto acknowledge and agree that each such party shall bear its own legal costs incurred in connection with the negotiation, approval, and execution of this Agreement. 6.7 Plans. Drawinqs and Documents To Be Assiqned to citv. If this Agreement is terminated for any reason other than an uncured material default by City hereunder, Developer covenants to immediately assign and release to City any ownership rights and interest that Developer may have in any and all of the plans, ZI17THA -56- ~ ~4-:5~ drawings, and permits as have been prepared for the development of any portion of the Property prior to the termination; provided, however, that Developer does not covenant to convey the copyright or other ownership rights of third parties. ARTICLE 7 GENERAL PROVISIONS 7.1 Notices. Demands. and Communications Between the Parties. Formal notices, demands, and .communications between city, Agency, and Developer shall be g~ven either by (i) personal service, (ii) delivery by reputable document delivery service such as Federal Express that provides a receipt showing date and time of delivery, or (iii) mailing in the united states mail, certified mail, postage prepaid, return receipt requested, addressed to: To city: City of Chula vista 276 Fourth Avenue Chula Vista, CA 91910 Attn: City Manager with a copy to: city Attorney city of Chula vista 276 Fourth Avenue Chula Vista, CA 91910 Attn: Glen Googins, Esq. Community Development Department City of Chula vista 276 Fourth Avenue Chula vista, CA 91910 Attn: Housing Coordinator To Developer: South Bay Community services 315 Fourth Avenue, suite E Chula vista, CA 91910 Attn: Kathryn Lembo with copies to: Timothy A. Kuncz, Esq. GATTIS & KUNCZ, APC 2729 Fourth Avenue, suite 3 San Diego, CA 92103 South Bay Community Services 315 Fourth Avenue, suite E Chula vista, CA 91910 Attn: Ken Sauder Notices personally delivered or delivered by document delivery service shall be deemed effective upon receipt. Notices mailed Z/17THA -57- ~ b>9~5/ shall be deemed effective on the second business day following deposit in the United states mail. Such written notices, demands, and communications shall be sent in the same manner to su~h other addresses as either party may from time to time designate by mail. 7.2 Nonliabilitv of citv Officials and Emplovees: Conflicts of Interest. No member, official, employee, or contractor of city shall be personally liable to Developer in the event of any default or breach by City or for any amount which may become due to Developer or on any obligations under the terms of this Agreement. No member, official, employee, or agent of City shall have any direct or indirect interest in this Agreement nor participate in any decision relating to this Agreement which is prohibited by law. . 7.3 Enforced Delav; Extension of Times of Performance. In addition to specific provisions of this Agreement, and except as expressly set forth in section 6.2 and this section 7.3, performance by either party hereunder shall not be deemed to be in default and such party shall be entitled to an extension of time to perform its obligations hereunder where delays in performance are due to causes beyond the control and without the fault of such party, including as applicable: war; insurrection; strikes; lock- outs; riots; floods; earthquakes; fires; casualties; supernatural causes; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually severe weather; inability to secure necessary labor, materials or tools; delays of any contractor, subcontractor or supplies; acts of the other party; acts or the failure to act of City or any other public or governmental agency or entity (except that any act or failure to act of or by city shall not excuse performance by City). Notwi thstanding the foregoing, an extension of time under this Section 7.3 due to Developer's inability to secure satisfactory financing, interest rates, and market and economic conditions shall entitle Developer to an extension of time to perform not to exceed a cumulative total of six (6) months; provided, however that the six (6) month limit shall not apply to Developer's inability to sell the low income housing tax credits at an amount sufficient to yield approximately the Tax Credit Equity as shown on the Project Budget. In addition, nothing in this section 7.3 is intended or shall be interpreted to entitle Developer to an extension of time to close the escrow for acquisition of the Property or to delay commencement of construction of the Project. An extension of time for any cause permitted under this Section 7.3 shall be limited to the period of the enforced delay and shall commence to run from the time of the commencement of the cause, if notice by the party claiming such extension is sent to Z/17THA -58- ~~,~-~t7 the other party within thirty (30) days of knowledge of the commencement of the cause, or if no written notice is sent within thirty (30) days, from the date written notice is sent to the other party. Times of performance under this Agreement may be extended by mutual written agreement of City and Developer. 7.4 Inspection of Books and Records. city shall have the right at all reasonable times to inspect the books and records of Developer pertaining to the Property and the Project as pertinent to the purposes of this Agreement. Developer shall provide its books and records to City without reasonable delay upon no less than five (5) days prior written request by City. Developer shall maintain its books and records within the County of San Diego. City shall not request inspection for Developer's books and records more than once in any twelve (12) month period, unless City is required to obtain information in order to comply with reporting or other requirements of law herein, or City is required to verify information pursuant to the HOME Regulations. Developer shall have the right at all reasonable times to inspect the books and records of City pertaining to the Property and the Project as pertinent to the purposes of the Agreement. 7.5 Interpretation. The terms of this Agreement shall be construed in accordance with the meaning of the language used and shall not be construed for or against any party by reason of the authorship of this Agreement or any other rule of construction which might otherwise apply. The Section headings are for purposes of convenience only, and shall not be construed to limit or extend the meaning of this Agreement. 7.6 Entire Aqreement. Waivers and Amendments. This Agreement integrates all of the terms and conditions mentioned herein, or incidental hereto, and supersedes all negotiations and previous agreements between the parties with respect to all or any part of the subject matter hereof. All waivers of the provisions of this Agreement must be in writing and signed by the appropriate authorities of the party to be charged, and all amendments and modifications hereto must be in writing and signed by the appropriate authorities of City and Developer. Z/17THA -59- ~ ~ij-~/ 7.7 Consent/Reasonableness. Except when this Agreement specifically authorizes a "party to withhold its approval or consent in its sole and absolute discretion, when either city or Developer shall require the consent or approval of another party in fulfilling any agreement, covenant, provision, or condition contained in this Agreement, such consent or approval shall not be unreasonably withheld, conditioned, or delayed by the party from whom such consent or approval is sought. 7.8 Severabilitv. If any term, provision, covenant, or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of this Agreement shall not be affected thereby to the extent such remaining, provisions are not rendered impractical to perform taking into consideration the purposes of this Agreement. In the event that all or any portion of this Agreement is found to be unenforceable, this Agreement or that portion which is found to be unenforceable shall be deemed to be a statement of intention by the parties; and the parties further agree that in such event, and to the maximum extent permitted by law, they shall take all steps necessary to comply with such procedures or requirements as may be necessary in order to make valid this Agreement or that portion which is found to be unenforceable. 7.9 Third Partv Beneficiaries. Notwithstanding any other provision of this Agreement to the contrary nothing herein is intended to create any third party beneficiaries to this Agreement, and no person or entity other than City and Developer, and the permitted successors and assigns of each of them, shall be authorized to enforce the provisions of this Agreement. 7.10 Authoritv of Siqnators to Bind Principals. The persons executing this Agreement on behalf of their respective principals represent that they have been authorized to do so and that they thereby bind the principals to the terms and conditions of this Agreement. 7.11 Representations and Warranties. Developer and each person executing this Agreement on behalf of Developer represents and warrants that: (i) Developer is a non- profit public benefit corporation organized and existing under section 501(c) (3) of the Internal Revenue Code, in good standing, and authorized to do business and doing business in the County of San Diego; (ii) Developer has all requisite power and authority to carry out its business as now and whenever conducted and to enter Z/17THA -60- ~ t,4 -j-oZ, into and perform its obligations under this Agreement; (iii) by proper action of Developer, Developer's signatories have been duly authorized to execute and deliver this Agreement; (~v) the execution of this Agreement by Developer does not violate any provision of any other agreement to which Developer is a party; and (v) except as may be specifically set forth in this Agreement, no approvals or consents not heretofore obtained by Developer are necessary in connection with the execution of this Agreement by Developer or with the performance by Developer of its obligations hereunder. 7.12 Execution. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and such counterparts shall constitute one and the same instrument. 7.13 Relationship of Parties. It is understood that the contractual relationship between the City and Developer is such that Developer is an independent entity and not an agent or partner of City. Nothing in this Agreement shall constitute Developer as the agent or partner or representative of City for any purpose whatsoever. Z/17THA -61- ~ t{'d'-~3 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date specified herein. "CITY" CITY OF CHULA VISTA, a municipal corporation By: Mayor ATTEST: city Clerk [SIGNATURES CONTINUED ON NEXT PAGE] Z/17THA -62- ~ b/J-tr "DEVELOPER" SOUTH BAY COMMUNITY SERVICES, a non-profit public benefit corporation By: Executive Director [END OF SIGNATURES] Z/17THA -63- ~ b-1 ~0 I !I- I! I ~" ~, i1~ ~ ~ ..> ..> ..> ,,~ tJ tJ ~ ~ ~ g!5 :: :: ~ ~ <<IJ!3I~ ~ := :!! ~ .. . . '" W 0- '" 8 '" ~ '" '" '" . "1 :r !;1 -.: 8 ~ ~ , 0 .. ~ .... ~ ~ ::J .... ., v b i:i -.: -< .( ~ .( f2 .( '" -< '" ,'" ~:r:~ ~'" v .. " " (:) =>i"'" =>i"~ < ~ ~ '> =>0-< "1'" '" ~ 8:i~ 8<~ .. NN U ~o .... '" 8<0 ~ XX < V .. ~z ~~~ Ei~~ .. ",,, >- ","'- " ";!.J ~ v" w .... "z;;: . w_?:: kJ::::-?:: z E <' ~ ",0..> "'-..> "'-..> -< .." ....1- ~'" 0 .... '" w '" " =>i!jo " ..>f: '" z 0 ~ ~ " got; " <" .. " 10 i" < "'''''' 0 ~~ .. N~~ Z ~ 0- w w ~ ...J ?i P-. " - u ~ ; f- en ~ u if ... '" '" '" ... ~ -< o -< ~$ }1;ii~ . C.-I ATTA~C(, VJ ~ ::E o Ii) ~ ~ S::-.:fiJ OUt() f-<'~ ~;:z u~2 ~>~ ~<o ~....u ~::>>< f-<:I:<( U '" >- :r: ~ 5 .....J 0 .....J t() o ~ f-< '\ ; u ~ n / /_-~ " . It (" u ~j: {J " . .- \ . ; ~;.I , z o i=: < ;> W", ,..J::;; Wo !-<:r: ~~ e;g -::;; ~8 <", UQ vo'" !-<'" w", ~~ ~-I " ATTACHMENT D ~~ ~ ~ o - t=:" -< ~ :> :;! I.Q ;;; ...J .. I.Q ~ ~ ~ b ~ CJ ~ 9 5 J:Q UJ ~ ~ '" o .., p:: ~ z ~ ~<~ aU. ~ E-<<z ~~;:> U-::E <:>::E ~<o ~....u ~;:J;"-' E-<:r:-' f-- \.I.1 ;:> ,...j 0 ,...j '" a ~ E-< 9 ::J ~ b~ ~ ~ ~g :t ~<(jj~ j::i Xf::,6(,j~P::~O ~ ~l:)IJ,.,OI.U ~ zzgz" '" ;j~ Ei:e",o":t>i", ~ ~lI)z:Jlf:u~...J "'~~i~~~~ ~ nh~h~ s !;;xu ~ '" E E ::> Ulrn Cl)0J E5 o <:: ..I: ~ C .- ::LL o <:: I- 0 G>ii CJ .~ "'." ... <:: ... >- Qrn 1-- >.i3 CI) e =u e x I-~ <:: o x o ::;!~ VI " "i:: 0 .r:::d, .... 00",,"<r- >.iDCrifIJ aJCi5EE "COCO Q) 00 ~ ~ ~ '" ."." Co Q)Q) ~ rom Cl. OQ) ~ e t-.r::: t- VI ." <:: ::> LL - o VI Q) VI => ." <:: '" VI Q) " ~ ::> o rn or-a ..... ~ ...... ....... CD m......mN C\I- (0- cO 00- r-IDC'\IU) ct) C") m U) ~ N VI ." <:: ::> LL - o VI Q) VI => VI VI III 1;)_(1) o VI III UO;:l U_ "C"E.a:::S c:: co 0 0 ~Irnt- € VI EE~ ~ 0 Q) Q)~>- t-",o ~'" '#ff!. Q)"'''' rot--:~ a:: 0 0> ~ VI 0; " ." 'iij Q) a:: - o #- '" ..... LOC\lCOLOOOON..... "Eo:>m......c.c-v OLOCD :::1....._o_o_m_o>_ "I"""" ......_N OtOOmMC'\I NCO E""""C'\I(f')N..... ....-CO <(mN Lt)ct) LO_CQ ~'" VI ." <:: ::> LL - o VI Q) " ~ ::> o rn E '" ~ OJ ." Q) e c: Q.) Cl. '" LL ...J ~ OJ ~Q) c: c:: 0 a. _ ctI C:'- c: - 0 c: Octl~<'CfJ)-Q5 Go> ...JOOO"CQ)c: c c;....JI...JC:>t ca o +-' ctI:::1 OQ) CtI (/) s:: .- c:: Q) - LL a..:!:::: t: !S CD ::c.!!! '"'C "'C CD 2~ctI>>~~~D.. 1i)E"E~!5!Q5Q)Oni C::s...O:J:J_C:X_ OQ):t::..s:::J::Q.>Q)caO UCl.<(UUO(!)t-t- III .. !:! " o UI E-I ATTACHMENT E ~~ O>NCOr--- 'I"""""I""""OM ;<,:::r-mCON C::a-I.O-~o:i :JNI'---LO..... ~ ~ Q) Cl. or-a I"--- """......"1""""<0 _m"'l:tmN =:; N <co_ <( ~ N 2cnUJ (J)1i)Q) 00 VI Uu=> ~-g"E~~ II) ctI co 0 0 =>...JIrnt- COO> NO CO_ 'V_ 0> '" ....0> "'N o co O>_M_ co~ 0>..... CO ....._ ~ VI Q) E co e 01i)::J '- .- 0 LL>rn VI '" ~ "'-Q) <::::>.r::: ::>.r:::_ LLUO :!::::r-commcocor- -=;Ncoa..- OM -'N..........-r- ON Q5 c,fN'm-ci ~cO a.."I"""" NN co:! NCOLOOONr--- "Em......CO...a-OLOCO :Jo_o_C>>_m_.........-_"t oamMN NOJ ~~M~M u:;_~_ ~N E '" ~ OJ ." e <:: Cl. ~ OJ ~ <:: 0 C:'- c: - '- +-" ctI II) ctI (/) Q) c:: o O:J O"C c: Q) ....J ....J c: c:: _I ca:Ja;(/)E'" CQ)1i)LLa..:!:::: (/)~:C5:>--gQj Q)cactl ~s...a.. eE"E.!!:!.!!:!Q)U- ::JI-o:J:Jcx2 OQ)::t::.c:.c:Q.)coo rnCl.<(UU(!)t-t- - <:: => ~ Q) Cl. VI 'iij '" <= <( " Q) '0 ~ Cl. VI Q) " ~ ::> o rn rn w ::;: o :I: Z ~ o '" 1-- W :::J 0" oCt~ c:: u c::rn w- I- c: '" >- E we. ...J 0 ...J- o '" c::~ 1-0 ATTACHMENT F ~1I ~ ::;: ~ oCt ~ .. ::;: .:.:.~:.: .c 1% '" LL .M: f.~:-:::: c: .. -'.....- ..... ;@;: u Mt '" :.~,> 0 W~ :.~>: > 0 :M z .W - }M u .:<<.:<. 0 U[{ g rn " :&: :::J >>:">; oCt .:<<>:<. :~.:.:.>: 'S ..... c: :$ :::J :.:.,:. ..... :W' I~ @f.: ::~::::~: ::;: ;:::% !I :;::~:.:: ;:::::::-: :;::~::::. Ig tt ~r~ ~'%:;:: :;::~:.,; ;:;:;:;:;: oCt ~M :::::::::: .:;:;:;>" ~ ~I; @. III~ ':$>~ ::.:::~~ ~::~~ .>>."U _.w. ::::::~ ~:e .. Hf %lJM: ::;: .::::::', .c .~::~:. .~::~~ '" .::::~::. LL iN: :;:::.::> ::,;;;::,; :~:::;::. c: 1M :.;.>:.;. :<::~~. .. ~M ,::::,:' ;.:.>>: ..... ~m:. ;'.;:~;:;:: f- :.:.~>:. :.:.,:.: t~t >:.,>;. .>:.>>: U <<.:<. tlUr ::::~:::: .~;:::::; ~@: '" <.:<.:< ~m: .<.:-; 0 .<::::::;: >:.>>: ~# ilK ::M: w: ;W ,;;;:.,;;: :.:.>:.:. ..;.:<.;. f- > :8::>'" '::;:~;:' "".x .....,., :.::';;;:' ::;:;:;: 0 ::;;:~:. ":mi' " .x"':< .W :~M ~:::~ H:t '::;:::~' Z @,?, .~.:<.;. ..~~.;< m::~ t:::~: :-,:>;. :<.:-: ....~..> {~{ i~~ /; Mr :8::,:~ f:1tf .:~~~i t- - tM :<'Y.<' :.:.>~: ,:~% u ~~~ ~;,~ ~~ > 'm' Ml ::::~::~ 0 ~' ~-:.~ ~~~ ~~~ u ~~~>L } ,-, , , ,~ " S ~i~ S ~~ > g , , u, ,~~ -;:, u S S ~~ { '{jj .... - ~~Y. 0 u } Q) u, OJ U " V> . V> w > - c: OjI1'1 .. u ~ ~ 0 aJ} .c w ", U V> ", V> - OJ > Q) 0.. :-t .. 0 Q) ::;:) c: eo g 0 V> g V> '" > ~I~ '" E .. 0:: ~ ; c: ~ V> v>S 0 L g :~ ; ~ ~ c: '" Q) c: ~ ~ .8 .. 0 OJ > '(jj ~ 0 V> 0 E ::;: c: ~ Q) '" '(jj " 12 to - > > ~ u .. 1;) 'C .~ ~ "- oCt 0/5= l- V> !I 0 0.. c: - 0 I a; " V> :J_ Q) U " c: u I~ - IE ~ c: c: '" ~D <( ~ ~ m.- OJ ~ f~tS '" Q) .. ~ ~ 0 o 0 Q) , E ~ ~ - u Ig " o c: '" .- ~ - c: 11:' 0 0 I~ I~ .. ::;: u o I~ (,).2 g '" >~Q.) c:: ~ c: :;::; 0 Iz Ij 0 (; 0.. I~ 0 Q) :J g ~ Q.)(,)a.. 0 is .- 0 0 0 "'" c: '" to ~ :;::; 0 j~ g 'x E - o' ~ OJ (3 0 c: Q) c:: Q) .- V> a; a; c: '" > to :J ~ :!::: 0 c: Ig '" . V> :::J :J' 0.. .. ~ u:: :J .. > ::;: ::;: .- > > V> e '" 1:J :;::; E.::: Q) C::U.S: .!!! ~ 12 - "-, :!::: ~ .::: ~ E .(;; c: [I en :;::; .. _ E c: iij 1;5 Q) Q) U U c: to - to CD :: '" V> > <( c: -:;; " "'. E V> ._ 1:J " I~ .(;; <( oCt E :J '" :J c: c: .c c: c: f/) CD .- ~ ::= ~: ~ c: c: - 15 ~ u c: c: Q) 0 to '0 o ~ '" ~ . c: - 0 '" Q) .- ~ u 0 0 c:: "'_ :::J c: ",. Q) 0 ~ u u Q) u W iij m l- I- u:: LL 0.. enu u 0 oo..m oCt en w C> 0 en 0.. U U 0.. 0.. 0.. oCt 0 l- I- 0.. 0 '" '" co '" .... '" F-I ATTACHMENT G Jo.~ ~ Trolley Terrace Townhomes Pre Development Budget USI;S OF fUNDS Total Architecture - Desion 100,000 Phase I/Soils/Lot Ad.iUstment 4,750 Local Permits and Fees 45,170 LlSC Loan Interest 10,351 LeQal - Land Purchase/DDA 7,000 Title & Recordino - LlSC/Land 3,000 Land 372,940 ADDraisal 2,500 TCAC ADD/AlloclMonitorino Fees 18,642 Previous Exoenses 17,307 TCAC Consultant 5,018 Off-Site/Utilities Consultant 1,500 Continoencv 13%) 4790 Total Pre-Dev. Costs Minus Interest 582,617 TOTAL PREDEVELOPMENT COSTS 592,968 SPURc;es Pf fUNDS . LlSC Recoverable Grant 50,000 Chula Vista Predev Loan 120,000 LlSC Loan Draw 409,649 LlSC Interest 10,351 Cummulative LlSC Loan 420,000 TDtal Pre-DevelDDment Funds 590,000 (;.. - I Trolley Terrace Townhomes Development Budget Project Costs 090ct-97 Estimated P 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 2S 26 27 28 29 30 :>1 32 3:> 34 :>5 36 37 38 39 40 41 42 43 44 45 46 47 46 49 50 51 52 Cost tern roiect Cost CPU Land 372,940 20,719 Total Acquisition Costs 0 0 Construction Site Work On-Site Improvements 161,000 8,944 On-Site Landscape 51,082 2,838 Structures 822,150 45,675 General Requirements 15,513 862 Bond Premium 20,685 1,149 Contractor Overhead 0 0 Contractor Profit 82,739 4,597 Off-site improvements 100,000 5,556 Construction Contingency (10%) 113,248 6,292 Total New Construction Costs 1,366,417 75,912 Architecture - Design 100,000 5,556 Architecture - Supervision 10,000 556 Survey and Engineering 30,000 1,667 Phase I/Geotechnical/Lot Line 4,750 264 Construction Loan Interest 42,635 2,369 Previous Expense (Not in Basis) 17,307 962 Construction Loan Origination Fees 8,307 462 Construction Manager 35,000 1,944 Taxes 10,000 556 Insurance 7,000 389 Tille and Recording - Constr. Loan 3,000 167 Perm. Loan Origination Fees 3,338 185 Title and Recording Perm. Loan 3,000 167 Lender Legal Fees Pd By SBCS 6,500 361 Legal: Acquisition 7,000 389 Construction Closing 10,000 556 Permanent Closing 2,500 139 Organization of Partnership 5,000 278 Syndication 25,000 1,389 Appraisal 9,500 528 Operating Reserves 36,000 2,000 Construction Review 6,500 361 TCAC App/Alloc/Monitoring Fees 26,022 1,446 Environmental Audit 2,000 111 Local Permits and Fees 251,742 13,986 Marketing 1,000 56 LlSC Loan Interest 10,351 575 Furnishings 7,694 427 Other Accounting 12,000 667 Other - Coop Training Support 1,000 56 Title Recording Land 3,000 167 Soft Cost Contingency 26,764 1,487 Developer Overhead/Profit 160,000 8,889 Consultant Processing Agent Fees 10,000 556 Syndication Consulting 25,000 1,389 Project Adminstration 10,000 556 Total Soft Costs 928,910 51,606 Total Development Costs 2,668,267 148,237 ;-1-1 AlTACHMENT H ~~ EXHIBIT A Legal Description of Property [To be inserted] 9 .r -, COUNCIL AGENDA STATEMENT Item__7 Meeting Date 10/21/97 ITEM TITLE: Resolution /??Jiving the Bidding process and awarding Purchase Agreement to California Turf Products for four 84" riding lawn mowers. Director Of Public workS# Director of Finance ~\:.: REVIEWED BY: City ManagerJG.. \yv{~ ~ (4/5ths Vote: Yes_No-1L) The FY 1997-98 Equipment Replacemek)Budget provides for the purchase of four 84" riding mowers. California Turf Products has agreed to sell the mowers (if available) to the City for $22,590 each plus tax ($24,341). The City purchased an identical mower from California Turf Products as part of the FY 1996-97 Equipment Replacement program for $27,925 plus tax ($30,090). Waiving the bidding process and purchasing the mowers at the quoted price would provide significant savings for the City. SUBMITTED BY: RECOMMENDATION: Adopt the Resolution which will waive the bidding process and award the purchase agreement to California Turf Equipment for the purchase of four 84" riding mowers. BOARDS/COMMISSIONS RECOMMENDATION: Not Applicable DISCUSSION: On November 20, 1996, the Purchasing Agent opened bids for the purchase of two 48" and one 84" riding mowers. Ten bid packages were sent out with five bidders responding. At the City Council meeting on January 28, 1997, Council awarded the bid (the Agenda Statement from that meeting is attached) for the purchase of one 84" riding mower (a Toro Groundsmaster 3000-D, 4WD) to the lowest responsive bidder, California Turf Products. The price of the mower was $30,090. California Turf Products agreed to keep the same price for three months and agreed to perInit other Public Agencies to purchase at the same price, which some have done. As most of the sales for this particular mower are to golf courses, Toro recently changed the design on 1997 mowers to provide for a contour cutting deck. This flexible deck would be able to accommodate the mounds used in golf courses. All 1997 production models can accommodate the fastenings for either deck, but 1996 models cannot. Because of this, the Toro Company is offering 1996 production models (identical to the one purchased by the City last Fiscal Year) at reduced pricing. Through October 31, or until inventory is depleted, these mowers are available at $24,341. Should Council approve this Resolution tonight and no mowers are available, staff will bid the four mowers as usuaL The Purchasing Agent recommends waiving the bidding process since this bidder was the lowest responsive bidder on a recent bid and since the price is lower than that bid, this is the most cost effective way for the City to purchase the four 84" mowers in this year's budget. 7-/ Page 2. Item___ Meeting Date 10/21/97 Staff recommends waiving the bidding process since: . This price is $5,749 less than the last bid for each mower for a total savings of $22,996 and staff does not believe a cheaper price would result from bidding. . Since the price expires on October 31, time is not available to bid and take advantage of this offer. . The Fleet Manager reports that the mower received from the last bid has been dependable. . The City would have five large mowers of exactly the same type, which provides advantages for maintenance. Spare parts will be available throughout the life of the mowers. Toro will not end support with the model change. FISCAL IMPACT: $30,100 per mower for a total of $120,400 is available in the Equipment Replacement budget for purchase of the four mowers. The price, including sales ta.x, is $24,341 each for a total of $97,364. When the mowers are received, the mowers being replaced will be sold at auction. Over the first year or two, it is expected that the new mowers will cost less to maintain, which will be reflected in their rental rates. C:\WINWORD\BUDGET\A113MOWR.98 File #: 1320-S0-DC A TT ACHMENTS . Agenda statement from Council Meeting of January 28, 1997. i!-<>' . Letter from California Turf offering pricing on mowers C~ ~O"'-~ 7- c2- RESOLUTION NO. /?f?71 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA WAIVING THE BIDDING PROCESS AND AWARDING PURCHASE AGREEMENT TO CALIFORNIA TURF PRODUCTS FOR FOUR 84" RIDING LAWN MOWERS WHEREAS, on November 20, 1996, the Purchasing Agent opened bids for the purchase of two 48" and one 84" riding mowers; and WHEREAS, the city Council at its meeting of January 28, 1997 awarded the contract to the lowest responsive bidder, California Turf Products at a cost of $27,925 plus tax ($30,900) for the 84" riding mower (a Toro Groundsmaster 3000-D, 4WD); and WHEREAS, the FY 1997-98 Equipment Replacement Budget provides for the purchase of four 84" riding mowers; and WHEREAS, the Toro Company is offering 1996 production models (identical to the one purchased by the City last Fiscal Year) at reduced pricing through October 31, or until inventory is depleted, at $24,341; and WHEREAS, staff recommends that Council waive the bidding process because bidding is impractical or impossible for the following reasons: (1) The price quoted is $5,749 less than the last bid and staff does not believe a cheaper price would result from bidding. (2) Since the prices expires on October 31, time is not available to bid and take advantage of this offer. (3) The Fleet Manager reports that the mower received from the last bid has been dependable. (4) The City would have four large mowers of exactly the same type, which provides advantages for maintenance. Spare parts will be available throughout the life of the mowers. Toro will not end support with the model change. NOW, THEREFORE, BE IT RESOLVED the city Council of the city of Chula vista in accordance with section 2.56.070 of the Chula vista Municipal does hereby waive the bidding process for the reasons stated herein and award a Purchase Agreement to California Turf Products for four 84" riding lawn mowers in the amount of $97,364 including sales tax. John P. Lippitt, Public Works C:\rs\~ower.bid Director of Approved as to form by Jo~a~ k~y Presented by 73 - t - COUNCIL AGENDA STATEMEI' Item_If Meeting Date 01128/97 ITEM TITLE: Resolution /S' 5 {p 4ejecting non-responsive bid and accepting bid and awarding contract to Pacific Lawnmower for the purchase of two 48" riding lawn mowers; and rejecting non-responsive bids, accepting bids and awarding contract to California Turf for one 84" riding lawn mower. SUBMITTED BY: Director Of Public works,/!; r Director of Finance !tP REVIEWED BY: City Manager (4/5ths Vote: Yes_No---XJ On November 20, 1996, the Purchasing Agent accepted bids for the purchase of two 48" and one 84" riding mowers. For the 48" mowers, Pacific Lawnmower was the apparent second low bid, with a pre-tax price of 57,436.65. For the 84" mower, California Turf was the apparent fourth low bid with a pre-tax price of 527,925.00. However, due to non-responsiveness of the lower bidders to the advertised specifications, both of the firms were, in fact, the low bidders for the mowers. RECOMMENDATION: That Council award the contract to Pacific Lawnmower for the 48" riding lawn mowers and to California Turf for the 84" riding lawn mower. BOARDS/COMMISSIONS RECOMMENDATION: Not Applicable DISCUSSION: The FY96-97 equipment replacement budget provides for the purchase of two replacement small riding lawn mowers and one large riding lawnmower. Ten potential bidders were contacted and the bid was also advertised in the local newspaper. Two Chula Vista vendors were contacted and chose not to submit bids. Five bidders responded as follows, with the recommended item in bold: Biddat ! 48" Mower ! 84"lVI6wer 'California Turf ,p T L jNo Bid '$743665 1$27,925 IN B'd aCllc awnmower ! , 0 I ! ! C.R. Jaeschke i $ 6,494.00 * 532,250 ! IJacobsen iNo Bid $16,278' ! i i Bob Hicks i No Bid 522,633 ' I , , ,Bob Hicks (alternate) INo Bid 1$26,959' I , These items would appear to be lower than the recommended award items, but do not meet specs. The Fleet Manager, in coordination with the using department, prepares the specifications for all fleet equipment. These specifications are developed considering the operating needs of the using department as well as durability and ease of maintenance. For this particular bid, the bidders supplying the lowest bids did not meet specifications and were not selected. The reasons for the rejections are included in the narrative below. 7-1 - - Page 2, Item___ Meeting Date 01/28/97 The first low bid for the 48" mower, C.R. Jaeschke, requested exceptions to the specifications that would negatively affect the productivity of the mower. Steering and ground speed are not controlled by levers as specified, which adversely affect the quickness and agility of the mower. The cut grass discharge is not aided by an impeller as specified and therefore the amount of cut grass picked up by the mower is diminished. These exceptions were not accepted by the Fleet Manager and operating department. The first low bid for the 84" mower, Jacobsen, bid a mower that was smaller in size than the specifications. The cutting width was narrower and the engine horsepower was less. These exceptions were not accepted by the Fleet Manager and operating department. The second and third low bids, Howard Price Mowers, distributed by Bob Hicks Turf Equipment Co., Inc., were rejected by the Fleet Manager and operating department because they did not meet specs. One of the areas in which the specs were not met, was the Power Take Off (PTO) and clutch. The City currently has a two year old mower of the same type which has shown extremely poor performance. In these two years, the mower has been returned to the Bob Hicks facility in Anaheim at least ten times for repairs to the PTO and clutch, the same areas for which the bidder requested exceptions from the specifications. Ten is the number of times that can be documented by Equipment Maintenance. The mower has also been picked up directly from Parks Maintenance staff. These repairs have all been completed under warranty and have not cost the City directly. However, there have been administrative and operational costs when the mower was not available for service. In addition, the Howard Price Mowers do not have the capability to recycle the cut grass back into the turf as specified, which negatively affects the productivity of the mower and adds additional costs for turf nutrients. FISCAL IMPACT: Sufficient funds ($66,468) are provided in the FY96-97 equipment replacement budget for the purchase of the three mowers. The total amount including 7.75% sales tax is 546,115.17, which is 520,353 less than the budgeted estimate. C:\ WINWORD\BUDGET\Al13MWR.DOC ?-s n 13:11 ~l tilH bib DUtl~ '-',\L.l.I'UL\I~i,~ ..L~"~ ____.~__ ~__~ CALIFORNIA TIJRF September 25, 1997 Mr. Dave Beyers City ofChula Vista Public Works 707 F Street Chula Vista, Ca. 92012 Re: Toro Groundsmaster 3000-0 Dear Mr. Beyers: On November 20th, 1996, The City ofChula Vista purchased a Toro Groundsmaster 3000-0, 4WO with an 84 inch RecycJer Deck for the amount of$27,925.00. Approximately 60 per cent of our sales in the Groundsmaster series is in the golf market. Market demands showed that we needed to develop a contour deck to accommodate the mounding being used by more and more golf courses. In July Toro introduced the new 82 Contour Cutting Deck. However, because of changes in the connection anns between the traction unit and deck, only 1997 production can be used. Therefore, The Toro Company is offering 1996 production at reduced pricing. A Toro Groundsmaster 3000-0 4WO with a 84 inch RecycJer Deck is now being offered for $22,590. This special pricing is for the period of September 1st, 1997 through October 31 st, 1997 or until inventory is depleted. This special pricing offers The City of Chula Vista a rare opportunity to upgrade your current fleet at a considerable saving. If you have further questions, you may contact me at 676-6041. Sincerely, ~-- Tom Jones Commercial Sales lID o '6465 VIA ESPRILLO SAN DIEGO. CALIFORNIA 92127 (6191674-6700 o 955 BEACON STREET BREA. CAliFORNIA 92B21 (714) 990-1490 ?-~ o 79-253 COUNTRY CLUB DRIVE BERMUDA DLlNES. CALIFORNIA 9220 I (7601 360-8070 COUNCIL AGENDA STATEMENT ITEM TITLE: Item ~ Meeting Date 10/21/97 .~ Resolution ) 8'7 .9 --Appropriating funds, accepting bids and awarding contract for the construction of "Oxford Street Improvements from Fourth Avenue to Fifth Avenue in the City ofChula Vista, CA (STL229)" REVIEWED BY: Director of Public Works/ IW'. C;<y MM"f?1~' . SUBMITTED BY: It is recommended that this item be continued to a later date in order to clarify the availability of funds for the appropriation. agenda\orxford.cnt ~/ COUNCIL AGENDA STATEMENT Item 9 Meeting Date 10/21/97 ITEM TITLE: / '6' 'if C:;C1 Resolution Authorizing the Mayor to execute an amendment to the Commercial Industrial Incentive Agreement with SDG&E for implementation of a comprehensive energy retrofit program. SUBMITTED BY: Director of Public Work~C1.~/ REVIEWED BY: City ManageJ~ ~~ffis vote: Yes_NolO The City Council approved the Phase III Commercial Industrial Incentive Agreement at its May 6, 1997 meeting. Phase III of the retrofit program included H. V.A. C. mechanical retrofits to six major city facilities, based on a preliminary energy study. SDG&E project engineers have since conducted further studies during the technical specifications development, requiring design changes to the project. In addition, final bids received from the three SDG&E qualified contractors were higher than anticipated. These two factors necessitated an amendment to the agreement. RECOMMENDATION: That Council: 1) Adopt the resolution amending the Commercial Industrial Incentive Agreement with SDG&E for the implementation of a comprehensive energy retrofit program and 2) Authorize installation of a refrigerant vapor detection alarm and an automatic ventilation system for compliance of the Uniform Machinery Code 1994, as part of the Police Department building retrofit effort. BOARDS & COMMISSION RECOMMENDATION: Not applicable. DISCUSSION: The project changed from what was originally presented to Council, because of 2 major reasons. The first is that the original design as proposed by the City's consultant did not take into account some features that were discovered during the specification development. The second factor is that the San Diego based H.V.A.C. companies are very busy and consequently are not bidding as low as originally estimated. The Engineering design changes, along with unanticipated construction upgrade costs, affected the scope of work on all the original energy projects. The only project which still qualifies for the Commercial Industrial Incentive Program is the Police Department Chiller Replacement Project. At the Police Department, Engineering Design changes were made to replace the existing chilled water pump with two smaller energy efficient pumps with variable speed design motors. This design change resulted in a higher project cost, but was offset by increased annual energy savings and a higher incentive from SDG&E. Staff instructed SDG&E to proceed with this portion of the original agreement because if the project was not completed by December 31, 1997, the City would not receive the $22,114 in incentives from SDG&E. Although not a part of the energy program, the engineers recommended installation of a refrigerant vapor detection alarm and an automatic 9-/ Page 2, Item _ Meeting Date 10/21/97 ventilation system for the mechanical room. This would bring the City into compliance with the Uniform Machinery Code 1994. Upon further and more detailed engineering analysis, the Legislative Building, City Hall, Public Services Building, Norman Park Center, and the EI Dorado turned out to be not cost effective with over a 20-year payback period, of funds invested, based on energy savings. The Police Building retained its costlbenefit to the City, even with the further Engineering changes, and has a 4.8 year payback. The following table indicates the revised project proposals received from SDG&E. Revised Annual Energy Savings, SDG&E Incentives, and project payback. Also shown is 1 bid option for which SDG&E received bid proposals. Bid option #1 is for the installation of a refrigerant vapor detection alarm and an automatic ventilation system upgrade, which would bring the Police Department Mechanical Room into compliance with Uniform Mechanical Code 1994. REVISED ANNUAL ENERGY SAVINGS/PROJECT COST Facility Savings Annual Proj ect Incentive Net Projected (kwh/yr) Energy Cost Project Pay Back Cost Cost Savings Police 493,672 $26,570 $149,650 $22,114 $127,535 4.8 yr * City Hall 138,511 $11,774 $257,200 $8,254 $248,946 21.1 yr P.S.B. Legislative 6,214 $1,883 $44,375 $0 $44,375 23.6 yr N.P.C. 1,495 $425 $14,332 $399 $13,923 26.6 yr El Dorado 4,642 $1,346 $35,739 $0 $35,739 26.6 yr Building Option #1 N/A N/A $14,415 N/A $14,415 N/A Totals 677 ,098 $44,766 $573,636 $31,327 $542,098 12.1 yr * Project qualifies for Commercial Industrial Incentive Agreement. Although these projects were submitted to Council as Phase III of the Energy Retrofit Program, the majority of these facilities also have maintenance issues related to the age of the equipment that was recommended for replacement. The Police Department Chiller, which still qualifies for the Energy Program, is over 25 years of age and would have needed $24,000 in repairs to the existing condensers and compressors. Staff recommends Council approve expenditures for Option #1, the 9-d-. Page 3, Item _ Meeting Date 10/21/97 Refrigerant Vapor Detection Alarm and Automatic Ventilation System because it is a safety upgrade which should he done at the same time as the Chiller Replacement, at a cost of $14,415. Since acquiring the El Dorado Building, the Construction and Repair Stan has replaced 3 of the H.V.A.C. package units and 3 of the smaller split units. The remaining 14 H.V.A.C. units are hetween 12 to 18 years old and could be replaced by Construction Repair Staff through the minor C.!. P. process next fiscal year. By doing this project in-house, stan' would reduce the proposed hard dollar project cost from $35,739 to approximately $17,500. FISCAL IMPACT: The funding for this project is from the approved lease-purchase agreement of $306,000 for the original Commercial Industrial Incentive Agreement. The Amended Commercial Industrial Incentive Agreement is for a project cost of $137,536 and if the City upgrades the Automatic Refrigeration Ventilation System, an additional $14,415. The total project costs would be $151,951. The unused portion of the lease-purchase agreement proceeds, $154,049 ($306,000- $151,951), will be prepaid back to the lender in order to minimize interest costs. (ENRGRFTF CAG) 93 RESOLUTION NO. ;'sY~t9t7 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA AUTHORIZING THE MAYOR TO EXECUTE AN AMENDMENT TO THE COMMERCIAL INDUSTRIAL INCENTIVE AGREEMENT WITH SDG&E FOR IMPLEMENTATION OF A COMPREHENSIVE ENERGY RETROFIT PROGRAM WHEREAS, the City council approved Commercial Industrial Incentive Agreement at meeting; and the Phase its May 6, III 1997 WHEREAS, Phase III of the retrofit program included H.V.A.C. mechanical retrofits to six major city facilities, based on a preliminary energy study; and WHEREAS, SDG&E proj ect engineers have since conducted further studies during the technical specifications development, requiring design changes to the project; and WHEREAS, in addition, final bids received from the three SDG&E qualified contractors were higher than anticipated which necessitated an amendment to the agreement. NOW, THEREFORE, BE IT RESOLVED the City Council of the city of Chula vista does hereby approve and authorize the Mayor to execute an amendment to the Commercial Industrial Incentive Agreement with SDG&E for implementation of a comprehensive energy retrofit program, in substantially the form presented, with such minor modifications as may be required or approved by the City Attorney, a copy of which shall be kept on file in the office of the City Clerk as Document No. BE IT FURTHER RESOLVED that the city Council does hereby authorize installation of a refrigerant vapor detection alarm and an automatic ventilation system for compliance with the Uniform Machinery Code 1994, as part of the Police Department building retrofit effort. Presented by Approved as to form by John P. Lippitt, Director of Public Works C: \ rs\ retrofit. 3 9~r COUNCIL AGENDA STATEMENT Item_!. t7 Meeting Date 10/21/97 ITEM TITLE: A. Report On accepting bids, awarding purchase order contract, and appropriating funds for purchase of one sewer van and pipeline inspection system. B. Resolution 18783 Accepting bids, awarding purchase order contract, and appropriating funds for purchase of one sewer van and pipeline inspection system. SUBMITTED BY: Director Of Public WorkpJ7. REVIEWED BY: City Manager \8 ~Ci'Y\ I (4/5ths Vote: Yes~No_) V /"'7 At the City Council meeting on Septe er 23, 1997, staff recommended that Council award the bid for a new Sewer Pipeline Inspection System and van to Pearpoint, Inc. A sales person from 3-T Equipment, a competing bidder (whom staff declared non- responsive), requested that Council award them the bid. Council directed that staff reevaluate the competing bids to determine if single conductor is a material defect and better explain why staff came to that conclusion. Staff has reexamined the bids and still recommends that the bid be awarded to Pearpoint, Inc. RECOMMENDATION: That Council accept this report finding that Pearpoint, Inc. is the lowest responsive bidder and adopt Resolution 18783: Accepting bids, awarding purchase order contract, and appropriating funds for purchase of one sewer van and pipeline inspection system. BOARDS/COMMISSIONS RECOMMENDATION: Not Applicable DISCUSSION: For over a year-and-a-half, staff has been examining Sewer TV inspection systems in an effort to determine which would best meet the City's needs for a replacement for the City's nine year old system. During that time, the Public Works Supervisor (Mr. Dave McRoberts) in charge of the TV inspection crew has reviewed literature, observed demonstrations of competing products and talked to other agencies to obtain their feedback. The end products of this work were the specifications that were prepared for the system and the recommendation made to Council at the September 23, 1997, meeting. At the September 23 meeting, Mr. Rick Lewis, a Salesperson for 3-T Equipment, a distributor of RST1 Equipment, distributed a letter to staff and Council enumerating why Council should award the bid to 3-T rather than Pearpoint, Inc. The Agenda Statement from the 9/23/97 meeting is included as attachment A During the 9/23 meeting, staff indicated that once it was determined that a single conductor system was a material defect, staff did not continue to ensure that 3-T's bid was equivalent to Pearpoint and CUES in terms of software and operational capability. J Throughout this report, RST and 3- T will be used interchangeably. RST is the manufacturer of the equipment and 3-T is the distributor and, in this case, the organization that submitted the bid. J() .~/ Page 2, Item Meeting Date 10/21197 For example, the specifications required that the software with the inspection system do the following: "maintain database of underground assets, video events, camera footage; drive printer for reports and graphs; and exchange information with the City's GIS database." The original bid as submitted by 3-T did not include such software. In an effort to obtain the best deal for the City as possible, staff examined whether or not RST could meet the requirement. RST technical staff presented software that would minimally meet the specifications at no additional charge. This software would not, however, include video capture or graphical reports as do Pearpoint's and CUES' software. As was explained to the Mayor and Council at the 9/23 meeting, these are important features that the City requires. Since Mr. Lewis protested the bid at the September 23 meeting, staff has gone back to RST to get costs on those items necessary to make the systems more equivalent. All in all, Pearpoint still has the best software for Chula Vista's needs. The GIS Manager agrees with this assessment. The table below shows the costs of the three companies' products with: improved software and controller/video system for video capture (for RST); and improved controller system (as was explained for Pearpoint's bid in the 9/23 A1B) that permits direct use of the City's GIS on board the van for all three companies; and sales tax. As the table indicates, once these items are taken into consideration, the apparent low bidder is not 3-%, but CUES. Again, staff wishes to reiterate, both the use of single conductor (3- T) and a tracked transporter (CUES) are material defects to the bid and should not be accepted. Staff still strongly recommends that the bid be awarded to Pearpoint. However, should Council not agree, we believe CUES' tracked system is less of a problem than a single conductor system. Bidder Total including Sales Tax and upgrades 5ues Inc. $130,860 3- T Equipment $137,231 Pearpoint . , $157,790 , The figures in this table do not Ulat'ch the original A1l3 due to'the indusion of Sales Tax and the other iteUls men'tioned above. During the preparation of specifications and evaluation of the bids, staff found that salespeople usually try to place their products in the most favorable light. Because of that, staff did not make the major focus claims made by salespeople, but rather staff's knowledge and observations. That said, the remainder of this report will respond to assertions and claims made by Mr. Lewis at the September 23 meeting. The report will follow the organization of Mr. Lewis' letter of September 23, 1997, that he distributed to Council and is included with this report as Attachment B. In addition, Mr. Lewis made additional comments at the meeting. In many cases, staff responded to those comments at the September 23 meeting. Any comments that require a response will also be addressed in this report. The original Agenda Statement with the Resolution is included as Attachment A. to this Agenda Item and has not been modified. Staff still believes the assertion made in that Agenda Statement that RST's single conductor is a material defect to the specifications and therefore non responsive is correct. /v~~ Page 3, Item___ Meeting Date 10/21/97 1. It was not difficult for Pearpoint to meet the specification exactly because it is proprietary to Pearpoint. The specification even uses the name Pearpoint Flexiview TM. The Purchasing Agent addressed the use of Brand Names in bid specifications during the 9/23/97 meeting. 2. The information used to eliminate single conductor system is incorrect and it appears that the staff has been misinformed as to single conductor technology. The information used to eliminate single conductor systems was based, not on competing sales presentations, but on staff's own experience with the technology and discussions with other agencies using single conductor systems. RST has asserted that their system is much better than that used in our current CUES system. While that may be true, single conductor technology still carries all the power for the lights, crawler, and camera as well as the control and video signals on one wire. The handout provided by Mr. Lewis on single conductor systems and comments made by Mr. Lewis liken single conductor systems to cable television. This is not an apt analogy. Cable coax wires carry only signals for the television tuner. They do not also carry the power for the television, a VCR, and the cable tuner box as well as all the remote control signals for the television. In effect, this is exactly what single conductor systems do. It's the mix between all the power requirements for the entire system plus all the control signals and video signals that lead to the problems Chula Vista and others have experienced. To confirm this, staff discussed this with the City's Electronics Technicians who confirmed Sewer staff's understanding of the inherent problems. One amplification to the original explanation is that RST's control signals are sent as tones similar to a telephone. The video signals are sent as FM signals and, as has happened to us, one of 3-T's references indicated that their FM signal had gotten out of synch with the controller and had to be sent to the factory for repair. One other assertion made by Mr. Lewis and in the RST handout is that single conductor cable is lighter than multi-conductor cable. This is incorrect. RST's cable (as reported by RST's owner) weighs no Lb. per thousand feet whereas multi-conductor cable weighs 60 Lb. per thousand feet. While it's true that RST's cable has a breaking strength of 5400 pounds compared to multi-conductor having a breaking strength of 2200 pounds, putting 2200 pounds, much less 5400, on the cable while retrieving the camera could seriously damage the transporter and camera long before the cable parted. 3. We see no reason this council should take the sales promotion of R.S. Technical Services over the sales promotion of a multi-conductor system. The determination of which system is more reliable can only be determined by end users. We are submitting a list of single conductor users so the City can do it's own research. This list was provided with the bid, but none of the cities or contractors were contacted. Pearpoint does have a two page flyer (attachment C) that addresses the differences between single and multi-conductor, but staff did not use that / tJ.- 3 Page 4, Item___ Meeting Date 10/21/97 information. It was not used since Pearpoint would naturally prefer multi- conductor, which is what they sell, and because it stresses what they believe are inherent safety problems with single conductor. Since Chula Vista has used the technology for nine years and has not had safety problems, staff focused on the maintenance and operational experiences that we have had. Mr. Lewis also indicated that staff had not contacted any references supplied by 3-T. As indicated earlier, staff has been working on this replacement for over a year and had, in fact, contacted many of those references in October 1996. In fact, Joe Smith from the City of National City indicated in 1996 that while he was happy with the system, it had not been used very much. This seems to contradict what he said at the 9/23 meeting. In any event, staff largely used our own knowledge and observations to form our recommendations, since our experience was that references supplied by all of the companies were favorable. It hardly seems likely that a company would supply an unhappy customer as a reference. The City relied on other Cities as Cities and Contractors have very different needs in a Sewer TV inspection system. For example, Contractors do not need a City-wide database or have GIS systems. One other inference made by Mr. Lewis at the meeting was that current Pearpoint users such as the City of Long Beach would tell us that they were not happy with Pearpoint and that we should buy 3-T's system. We contacted the City of Long Beach in the past and recontacted them and discovered that they were very happy with their Pearpoint system and they strongly recommended that Chula Vista purchase Pearpoint. 4. During a June 1997 demonstration by RST, the operators stated they have never seen a Pearpoint system operate, even though the proprietary specification was out to bid. Where as R.S. TECHNICAL Services Inc. has provided 4 successful Mainline demonstration, One successful Storm Drain and One successful Lateral demonstration to the city of Chula Vista which resulted in the city of Chula Vista asking for specification and a quote for a R.S. T. system. The Public Works Supervisor in charge of the TV crew saw several demonstrations by RST, CUES, and Pearpoint. This supervisor did ask for RST specs just as he asked for specs from Pearpoint and CUES to ensure the specs the City issued covered all important areas and to ensure the City specified what it needed. 5. R.S. Technical Services Inc. is the only manufacture which has the confidence to provide a ONE year warranty including the light bulbs and other ware items you are being ask to purchase over and above the bid price. R.S. T. Also provides a free lifetime loaner camera for as long as you own your system. All three companies are now offering two year warranties instead of the one year required in the specs. While RST offers their warranty on light bulbs, staff does not believe light bulbs will be a major expense for Pearpoint or CUES. In fact, a more likely expense item for both CUES and RST is the pigtail connector to the crawler. Pearpoint uses a locking pin to pin connector that does not wear as much as the other two companies' pigtails. /(J- ;j Page 5, Item___ Meeting Date 10/21/97 The City of San Diego staff indicated that when they had needed a loaner for their lateral systems, a reliable working one was not available. In addition, staff would have asked that the operating budget be amended whichever Company received the bid due to the way the City's budget process works. Public Works Operations does not have the luxury of a fat budget that can absorb unforeseen expenses. As was indicated in Attachment A, if the funds are not required, they will not be spent. 6. $31,000.00 is a greater deal of money. Great care must be used to determine if there is a value in a higher price system. We submit that with unbiased research, customer satisfaction will be the greatest determining factor in deciding which system to purchase. The difference between the Pearpoint bid and that of CUES and 3-T is $26,930 and $20,559 respectively. Staff still believes that this difference is warranted by Pearpoint's operational and durability superiority. More importantly, as has been discussed in both this Agenda Statement and Attachment A, both CUES' (page 2 of attachment A) and RST's (page 3 of attachment A) bids had material defects and are non responsive 7. At the 9/23 meeting, Councilwoman Salis asked the following: Does National City have GIS? National City does not have GIS. Who set up the CUES demonstration equipment? CUES personnel set up their own equipment. Mr. Lewis implied that staff had been led astray by competing sales staffs, did not understand the differences between single and multi-conductor, and had not done a proper job of evaluating all the systems bid. This is not the case. Staff spent countless hours both in the preparation of the bid specifications and evaluation of the bids received. Staff recommends that Council find that a single conductor system and a tracked crawler are material defects and should not be accepted and that the bid be awarded to Pearpoint. FISCAL IMPACT: As stated on Attachment A. ~ ttachments A. Agenda Statement from 9/23/97. B. 3-T letter of September 23, 1997. C. Pearpoint Flyer on single vs. multi-conductor systems. C:\WINWORD\BUDGET\AI13Swrv.RPT File #: 1320-50-DC /1J'~3 RESOLUTION NO. 18783 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA ACCEPTING BIDS, AWARDING PURCHASE ORDER CONTRACT AND APPROPRIATING FUNDS FOR PURCHASE OF ONE SEWER VAN AND PIPELINE INSPECTION SYSTEM WHEREAS, on June 3, 1997, the following bids were received for the purchase of a Sewer Pipeline Inspection System and van: BIDDER SEWER VAN INSPECTION SYSTEM TOTAL Cues, Inc.* Lasher Auto Center Pearpoint 3-T Equipment Aries Industries Aries (alternate) $49,300 $49,000 $62,588 $33,825 $23,587 $28,950 $ 70,700 $118,250 $ 82,398 $ 79,887 $ 90,682 $ 90,682 $120,000 $167,250 $144,986 $113,712 $114,269 $119,632 *The Cues bid includes an additional $6,000 option for a van with a higher GVWR than was specified that is better able to support the weight of the equipment. The other bidders included the higher GVWR van as part of their bids. WHEREAS, all of the bidders had exceptions to the city's specifications; and WHEREAS, the apparent low bidder, 3-T Equipment, is a single conductor system and is therefore unacceptable; and WHEREAS, the system bid by the next apparent low bidder, Aries Industries, does not include an inclinometer or Sondes (radio locator system) as required by the bid; and WHEREAS, staff focused on the Cues and Pearpoint bids and requested additional demonstrations from both to evaluate their systems; and WHEREAS, staff recommends the Pearpoint system with an upgrade of the on board controller in the van so that it is compatible with the City's GIS system and they are the lowest responsive bidder; and WHEREAS, at the City Council meeting on September 23, 1997, staff recommended that Council award the bid for a new Sewer pipeline Inspection System and van to Pearpoint, Inc.; and WHEREAS, 3-T Equipment, a competing bidder (whom staff declared non-responsive) requested that Council award them the bid; and /0-:" )tJ-7 WHEREAS, Council directed that staff reevaluate the competing bids to determine if single conductor is a material defect and better explain why staff came to that conclusion; staff has reexmained the bids and still recommends that the bid be awarded to Pearpoint, Inc. NOW, THEREFORE, BE IT RESOLVED the City Council of the City of Chula vista does hereby accept the bids and award the purchase order contract for purchase of one sewer van and pipeline inspection system to Pearpoint in the amount of $144,986, plus applicable sales tax, for a total of $157,790. BE IT FURTHER RESOLVED that the amount of $32,540 be appropriated from Fund 221, Sale of Excess Capacity to the following accounts: $14,250 for the additional funds for the Pearpoint Equipment to the Equipment Replacement Fund, Account 705- 7050-5565; $16,290 for the computers, software and printer to Account 100-1460-5566; and $2,000 for the consumables to Account 100-1460-5368. BE IT FURTHER RESOLVED that the Purchasing Agent of the City of Chula vista is hereby authorized and directed to execute said purchase order contract for and on behalf of the city. Presented by Approved as to form by ~~-L~ John M. Kaheny, City Attorney John P. Lippitt, Director of Public Works C:\rs\pipeline.bid JO~~ COUNCIL AGENDA STATEMENT IteID-13 Meeting Date 09/23/97! File 1320-50-DC ITEM TITLE: / ~/ f3 Resolution Accepting bids, awarding purchase order contract, and appropriating funds for purchase of one sewer van and pipeline inspection system. Director Of Public Work ' ,~ Director of Finance f. SUBMITTED BY: REVIEWED BY: City Manager ~ ~; ./7 (4/5ths Vote: Yes~No_) On June 3, 1997, bids were opened foLJhe purchase of a Sewer Pipeline Inspection System and van. Twenty five bid packages were sent out with five bidders responding. None of the bidders are local companies. The lowest responsive bidder was Pearpoint, Inc. Pearpoint's bid was for $144,986 plus applicable sales tax. RECOMMENDATION: to Pearpoint, Inc. That Council authorize the appropriation and award the bid BOARDS/COMMISSIONS RECOMMENDA nON: Not Applicable DISCUSSION: The FY 1996-97 Equipment Replacement budget included $143,540 for the replacement of the City's existing (purchased in 1988) Sewer Pipeline Inspection System (TV inspection) and van. In preparation of drafting the specifications for the system, staff invited the better known companies to demonstrate their products. Staff used these demonstrations as well as a knowledge of the City's needs and experience with our current system to prepare the specifications for the new system. Bids were received on June 3, 1997. Although the specifications were very specific, it is understood in a bid such as this that exceptions will be allowed (so as to not unnecessarily exclude companies) as long as they meet the intent of the specifications and are not material. To ensure that any permitted exceptions would not affect performance and maintenance, an exhaustive evaluation was conducted by the Deputy Director of Public Works/Operations and his staff. Since it was apparent that the evaluation would not be completed and the contract awarded prior to the end of FY 1996-97, the funds for the purchase were reappropriated for FY 1997-98. The bids received are shown in the table below. The bids shown are as received, although the only bidders that met all material specifications were Pearpoint and Lasher Auto Center. This means that Pearpoint is the lowest responsive bidder. ~ /{7r'1 ATTACHMENT A Page 2, Item___ Meeting Date 09/23/97 Bidder Sewer Van , Inspection Total System ~ues Inc. * $49,300 $70,700 $120,000 Lasher Auto Center $49,000 $118,250 $167,250 Pearpoint $62,588 $82,398 $144,986 f3-T Equipment $33,825 $79,887 $113,712 V\ries Industries $23,587 $90,682 $114,269 V\ries (alternate) $28,950 $90,682 $119,632 * The Cues bid includes an additional $6,000 option for a van with a higher GVWR than was specified that is better able to support the weight of the equipment. The other bidders included the higher GVWR van as part of their bids. All of the bidders (except Pearpoint and Lasher Auto Center) had exceptions to the City's specifications. In some instances, the bidder agreed to change their bid to meet the specifications. In others, staff determined that the exceptions were not material and did not deviate from the intent of the specifications. The following discussion will only include those exceptions that staff has determined are material and do not comply with the intent of the specifications. The specifications requested a multi-conductor system with a wheeled transporter. The system bid by the apparent low bidder, 3-T Equipment, is a single conductor system and is therefore unacceptable as this is a material deficiency. An explanation of the two systems and their differences is attached. A single conductor system is similar to the City's current system manufactured by Cues, Inc. Many of the maintenance and operational problems with our current system are due to the nature of a single conductor system as opposed to a multi-conductor system. The system bid by the next apparent low bidder, Aries Industries, does not include an inclinometer or Sondes (radio locator system) as required by the qid. Both of these systems are very important and are material to the bid. An inclinometer is used to check that lines without water in them (storm drains during the dry season or new sewer lines) do not have sags and that lines have the proper rate of fall. The locator is used when the exact location of a line or sewer entry point (manhole) are not known. In addition, the lowest Aries bid did not include the type of van in the specifications and therefore the alternative bid would be the bid considered. Once 3-T and Aries were eliminated due to serious material deficiencies in their bids, staff focused on Cues and Pearpoint. Cues is the manufacturer of the City's current system. Our current Cues system is a single conductor rather than a multi-conductor system. Cues now makes both single and multi-conductor systems and bid a multi- conductor system as required in the specifications. Cues' transporter (the powered machine that carries the camera in the sewer pipe) is a tracked system with treads rather than wheels as required in the City's specifications. Staff specified wheels rather than treads because of our experience with operational and maintenance problems with our current system which has treads. Cues has, within the last year, ~ /d---/O Page 3, Item___ Meeting Date 09/23/97 introduced a new transporter that they call the "Shorty". This system is also a tracked system. They indicate that this transporter has several improvements over our older: system: o Because it is shorter, it is easier to maneuver in and out of sewer entry points and in small 6 inch lines. o The chain for the tracks (tread system) is now carbon steel as opposed to stainless steel and will not stretch out of shape nearly as quickly as the old one. o The sprocket includes a formerly patented system that helps prevent it from being clogged with grit and debris. o The cleats on the chain are now riveted to the chain in two places instead of just one, which helps them stay on longer. o The extenders used to operate the transporter in different sized lines are easier to change and help make the transporter more stable. Unfortunately, the "Shorty" has not been on the market long enough to get meaningful maintenance cost data. The Deputy Director of Public Works/Operations requested additional demonstrations from both Cues and Pearpoint to evaluate their systems. After those demonstrations, consultation with sewer and GIS staff, and checking references, the Deputy Director recommends that the City not accept the exception of a tracked system provided by Cues, find that Pearpoint is the lowest responsive bidder (meaning that they met the specifications) and award the contract to Pearpoint. The reasons for this are listed below: o During the Cues demonstration, staff believed that one of the lines to be inspected was a 12 inch line and Cues set up the transporter accordingly. At about the same point in the line, the transporter kept flipping over and had to be retrieved. It was discovered that two of the screws that hold the chain drive away from the transmission had come out and been chewed up by the sprocket. The sprocket also lost three teeth. The transporter was also switched to the configuration for a 10 inch line (which turned out to be the size of the line). After that, the demonstration proceeded as planned. Cues has indicated that having the transporter set up for 12 inch line placed the center of gravity of the transporter and camera above the center line of the pipe and caused the overturns. City staff isn't sure if it was that or the problem with the sprocket and screws. This problem demonstrated one of staff's concerns with tracked transporters. Because they have many more moving parts than wheeled transporters, more can go wrong or break. o During the demonstration, staff noted that the chain drive was very close to the transmission casing and had scrape marks that indicated that the chain was coming into contact with the housing. This could create problems in the chain drive and may have lead to the problem with the screws coming out. Cues has indicated that their normal practice (as is the City's) is to apply LocTite to the screws so they don't come out accidentally. o Discussions with references provided by both companies and other Cities' personnel that Chula Vista staff knows indicates that Pearpoint's system may be less expensive to maintain and not have as much down time. Staff believes that over an eight to ten year period (the expected life of the ~ /~.-// Page 4, Item___ Meeting Date 09/23/97 system), the lower maintenance costs and higher productivity will actually make Pearpoint less expensive to own and operate. Whether it will be the almost $25,000 difference in cost between the two is impossible to say. As indicated above, after an extensive evaluation and bid analysis period, staff recommends the Pearpoint system and believes that they are the lowest responsive bidder. Items that were not included in the bid were a notebook computer, a desk top computer and a color printer. The Purchasing Agent and GIS staff indicated that it would be more cost effective to purchase these items separately. Both computers will be very powerful, graphics machines with high storage capacity and Iomega Jazz drives so that the City's GIS maps can be loaded directly. The notebook will be used for data collection and GIS integration in the field and the Desk top computer by sewer supervisors and Department management to access both the new TV inspection software and GIS. This will allow department management staff to use these systems for both short and long range maintenance plaruling. None of the computers that Public Works Operations currently has are powerful enough for these systems. The printer is used to print reports and still pictures from inspections. Staff will order the computers, printer, and software as separate purchases that will not require Council approval. In addition, staff recommends an upgrade of the on board controller in the van so that it is compatible with the City's GIS system. This will consist of an Iomega Jazz drive, faster CPD, and larger hard drive. Also, since the Corporation Yard is not on the network, staff will purchase an Iomega Jazz drive for the GIS section so that GIS data can be transfered back and forth between GIS and the TV inspection computers. Another expense that was not originally contemplated is money to obtain original stocks of non-warranty comnsumables such as light bulbs, Flexi-links, cable, rollers, a-rings, and brushes. The division has $5,000 in their operating budget for maintenance of the current system, but much of that $5,000 may be spent by the time the new equipment is received. Staff believes.an additional $2,000 for original stocking purposes of non warranty consumables is also required. If these funds are appropriated, but not needed, they will not be spent. ALTERNATIVE FUEL Although requested as an option, only one bidder, 3-T, provided information on an alternative fuel vehicle. They pointed out that the need for certification would delay the van by two years as the State is two years behind on certification and would cost $6,500. In addition, the CNG fuel bottles would require redesign of the interior workspaces and CNG would require a separate Diesel fuelesupply for the generator. For these reasons, staff recommends against a CNG vehicle. 1>-4 J t1.- /.:2 Page 5, Item___ Meeting Date 09/23/97 FISCAL IMPACT: The FY 1997-98 Equipment Replacement budget includes $143,540 for replacement of the City's sewer TV inspection system and van. Staff knew that the total cost of the new system would be higher (but did not know the exact cost), but the $143,540 is the amount that the Sewer fund has put into the Equipment Replacement Fund for replacement of the current van and TV system over the years. Since staff was uncertain of the total amount required and believed it would be appropriate for one of the Sewer funds (as opposed to Equipment Replacement) to make up the difference, the intent was to request whatever additional appropriation might be required at the time the contract was awarded by Council. The cost of the bid by Pearpoint including sales tax is $156,230. The cost of upgrading the on board controller in the van is $1,560, therefore the entire contract amount to Pearpoint is $157,790. An additional $16,290 will be required for the computers, printer, and software. Staff also recommends an additional $2,000 for original stocking of consumables.. Therefore, the total cost of the entire system is $176,080. This will require an additional appropriation of $32,540 from Sewer Fund 221, Sale of Excess Capacity. It is recommended that the additional appropriation be made to the following accounts: $14,250 for the additional funds for the Pearpoint Equipment to the Equipment Replacement Fund, Account 705-7050-5565; $16,290 for the computers, software, and printer to Account 100-1460-5566; and $2,000 for the consumables to Account 100-1460-5368. All subsequent maintenance and operation costs will be funded by the Sewer Service Fund. Attachments . DIFFERENCES BETWEEN SINGLE CONDUCTOR AND MULTI-CONDUCTOR SEWER TV SYSTEMS c:\ WlNWORD\BUDGET\Al13Swrv.DOC ~ ItJ-1} DIFFERENCES BETWEEN SINGLE CONDUCTOR AND MULTI-CONDUCTOR SEWER TV SYSTEMS Single and multi-conductor refers to the number of wires within the cable that connects the transporter and TV camera to the control unit in the sewer van. Since every electrical circuit needs two wires to complete the circuit, a single conductor system actually has at least two wires, one larger one to carry power and control signals to the transporter, camera, and lights and a smaller one to complete the circuit and carry signals back to the control unit. A multi-conductor system has separate pairs of wires for power to the transporter, camera, and lights and other pairs for the control circuits for those same systems. In a single conductor system, all of the power to drive the transporter, camera, and lights travels along one large wire to the transporter. The transporter is the wheeled or tracked device that carries the TV camera and lights along the sewer or storm drain line being inspected. When the power reaches the transporter, it enters a power supply box that splits the power to the transporter, camera, and lights as appropriate. Because all of the power for all three devices is combined, this means a lot of voltage is traveling down the one wire. In addition, because of Ohms law of resistance, the power level has to be set high enough to overcome the resistance of the line at long runs of up to 1,000 feet. This is also true for multi-conductor systems, but because the voltage is split and not as high to start with, much less voltage is traveling down anyone wire. The same wire also carries control commands using frequency modulation. Because all of the power and control commands come into the power supply and are then distributed to the appropriate device, it is often difficult to diagnose problems when they do occur. For example, the camera may stop functioning properly. Because all the power and the control signals are being distributed by the power supply, it is difficult to determine exactly what needs to be done to fix the unit. A multi- conductor system, on the other hand, bas separate power and control signals on separate wires to the transporter. When these power and control signals reach the transporter, they enter and are sent to their devices on separate circuits. This makes it much easier to diagnose problems in the field. If the lights don't work, but everything else does, it's clear that the problem is somewhere in the lighting system. In addition, because the control signals are not carried in the power wires, they can be simple electrical signals and not FM signals. This makes them much less susceptible to getting slightly out of synch and creating problems. Our experience with our current single conductor system and its associated problems caused us to specify a multi-conductor system. Cues, the manufacturer of our current system, sells both single and multi-conductor systems. In the past, 60% of the systems they sold were multi-conductor, whereas 99% of its current sales are multi-conductor. Staff believes that the shift reflects the growing awareness of the problems inherent in single conductor systems. ~ /tJ--JY" 3T EQUIPMENT COMPANY, INC. SAFETY, PIPE INSPECTION A1'I'D SEWER i\IAINTENAI'"CE EQUIPMENT FOR THE I'ROFESSIONAl. City ofChuJa Vista City Council 2760 4th Street (hula Vista, Calif September 23,1997 Atm: City Council Subject: A ward of TV Sewer Inspection System 1. It was not difficult Il)r Pcarpoint to meet the specification exactly because ;t IS proprietary to Pearpoint The specification even uses the name Pcarpoint Flexiview TM 2. The information used to eliminate single conductor system is Incorrect and it appears that the stafI' has been misinformed as to single conductor tec.hnology 3 We see no reason this council should take the sales promotion of RS Technical SClvkes over the sales promotion of a multi-cDnductor system. The determination of which system is more reliable can only be determined by end users We are submitting a list of single conductor users so the City can do it's own research. This list was provided with the bid, but none of the cities or contractors were contacted. 4 During a June 1997 demonstration by RST, the operators stated they have never seen a Pearpoint system operate, even thought the proprietary specification was out to bid. Where as R.S TECHNICAL Services Inc. has provided 4 successfhl Mainline demonstration One successful Storm Drain and One succ.essful Lateral demonstration to the city of Chula Vista which resulted in the the city of Chula Vista asking for - - ~ specification and a quote for a R.S.T system. 5. RS Technical Selvices Inc. is the only manufacture which has the confidence to provide a ONE year warranty including the light bulbs and other ware items yuu are being ask to purchase over and above the bid price. R. S.T. also provides a free lifetime loaner camera for as long as you own your system 6. S 3] ,00000 is a greater deal of money. Great care must be used to determine if there is a value in a higher price system. We submit that with unbiased research, customer satisfaction will be the greatest determining fac.tor in deciding which system to purchase 7 We can supply a R S.T. system meeting or exceeding all of your performance re.quirernents /c//3 ATTACHMENT B P.O. BOX 750068, PET ALlil\IA. CA_ 94975-0068 (7U7) 543-8555 FAX (70i) 543.8558 8 Please review the attached pages reviewing Single Conductor verus Mulit-conductor.. Safe, single conductor technolo.gy, a COpy of the Cover letter of the bid, main line uses and push camera uses list I am available if yo.u have any question of 3T Equipment o.r R S T glad to. sit down and review all or part of the bid. Services We will be ~ereIY, RWLewis 3t Equipment -." jp'-/? . . . tcchTltml at v.'ww.rs-technicaLcorn Page J of2 Position Paper ~ Single Conductor vs Multi~collductor. I recently received a cal1 from a potential customer inquiring about Multi-conductor cable for Video PipeJine Inspection. This person sincerely stated that he wanted the latest in technology which he was told was multi-conductor. Sometimes I find myselffrustrated that sales people make these statements to customers. Both multi-conductor and single conductor work. Each has advantages and trade offs. But we never say "isn't our TV cable company great because it has wires for each channel?" No, modern cable technology uses a single piece of coax cable to run over 110 TV channels, multiple radio channels, digital feeds and can carry information back from the customer to the cable company. I designed and installed a computer network for our company. We now have over 30 work stations, each talking to the server and each other. All on one piece of coax cable. Obviously needing many wires to carry different information is a thing of the past or "low technology". A definition of low technology is "not the latest teclmology". Above, I stated each system has its advantages. Multi-conductor allows more electric current to travel , down the line because many heavy wires are used, The trade off is weight and friction. Larger cable meahs more surface and more friction. Lighter, stronger (5600 Ibs pulling strength) armored single conductor cable weighs less and takes less power to pull. With multi-conductor, the extra current available is used up by pulling a heavier weight. Try dragging several hundred feet of 1/4" rope and then ~ompare that to dragging the same amount of 1/2" rope. The difference in drag massive. . So, how do the engineers make single condutor work for a video inspection system? To answer that, let's look at the common AM radio An inexpensive AM radio has to be able to select a radio station iTom millions ofiTequencies. You can be listening to a station at 680khz on the dial and on another radio tune in 1050khz. The radio "tunes" to a single station and all the other stations do not interfere. Ifwe had to have a different radio to select each station, I think that might be considered IQW lech. Therefore if we need many wires to carry information and power to camera and tractor equipment, we must be luw lech. Just like radio, television and computer networks - camera power, control signals, ,'ideo information IInd data caD easily be carried on the same 11'0111, without one interfering with the other. Another silyipg I Lear is that multi.coi:rluctvr i> easier to service. "If my ligh~'5 dedt '.York I know which wires to check" As a s~r\,jc~ person foc year3, let me tell you thilt is not tn.!.,. Simple: troubl;;shooti"g te>chdcs isolate the pr.ob!tm quickly to II single milt. For iil~'!ince: 1'11" repol1cd pfOb!cm j~ "no picwre" The first qt:~5lion to v:.k is "are there lights?" Since the electrichy needed to power th~ CJ.mcra ar,d th~ lights gO/;5 down the S11!Ii1: wire, the fact that thf.' lights work im.n;;;diately eJimin'ik5 the cabl;~ f[Om bdog the prob!f;!n Tfpowcr is available for lights, the cabl\: and o,;onnections nmsl be :tHa.ct. Severol OtJiCf points n~0d discussion. Most muhi-conduclOr systems se:~d f~.W video from tJ-,;: calli;;:..'" to the conlrol unit via'! coax cab!" included with thll other couducwn:. At about! 000 th.t the vid~o s:gnill 11;;,5 droppcd e~lough to low re::olutio!\. -flie camera lImy Ve prod\!dli[l high n;soi;.:\ic.rl but thc picti)"C is poor becau3~ it is losl thIOU..-h the ()arJ!e. ~ /~~/7 ---------------------- ---.-;-; '", - . tech.l1tml at Www.rs-technicalcom Page 2 of2 Single conductor manufacturers have the engineering skills to change the raw video into a radio type signal which can travel over 2500 feet without deterioration. A little more complicated for the design engineer, but easier ror the user to troubleshoot and repair. Another item is ease of repair. Those experienced in video inspection reali;i!:c we cannot always have clean, perfect pipe to inspect. In fact, if the pipe was all clean and perfect, why would we need it inspected. We sometimes have to send our equipment into damaged areas where it can get stuck, bent and worn. Having a steel outer wrap on the coa.x keeps sharp edges from damaging the cable as happens with a soft outer jacket Sometimes connectors will have to be changed. A single conductor connector change in the field rarely takes morc than 30 minutes for even the most inexperienced user. Do not forget another definition of high tech, Engineered to be simpler for the user. Summary is easy. Single conductor is stronger, easier to service and uses the latest technology. Rich Stubbs J!J~/Y SINGLE CONDUCTOR VS MULTI.cONDUCTOR TECHNOLOGY BY ROD SL"TLIFF. CEO PAGE I OF 2 MAY 6, 1997 Single Conductor Technology versus Multi-Conductor Technology Single conductor systems have always been considered the cutting edge, or "Cadillac" of pipe inspection television equipment for the following reasons: The cable is sma11er normally 1/4' in diameter and stronger than any of the reinforced multi-conductor cable. Single conductor cable has breaking strength of5,600 lb. The typical multi-conductor cable has a breaking strength of 2,000 lb. or less. The single conductor is simple to maintain and end connectors can be replaced in a matter of minutes. Typically multi-conductor cable requires several hours of labor, and advanced technical skills to splice multiple wires; typically ten or mOre. The life expectancy of the single conductor cable has been proven to be at least t",ice that of any multi-conductor cable. Not only does single conductor cable cost less initially, its life expectancy is much longer, which saves the user substantial amounts of money. In the event of catastrophic damage to the RST single conductor cable, the camera and controller circuits automatically detect an overload and shut doivn instantaneously, thereby preventing any damage to the camera or controller. Competitors touting multi- conductor systems normally are unable to provide this k.ind of protection for their equipment. Because of the high current lighting ",ires. in a combined cable with 10'" voltage camera power and video sigual wires, full camera and controller protection is nearly impossible. People selling multj.conductor systems will tell you that single conductor technology unnecessarily complicates the electronic circuits ",ithin the camera and tractor, and that added sophistication of the electronic circuits is overcome by the use of multi-conductor cable. In the current age of electronic technology. the reliability of any added circuitry is far greater than the hassle of dealing v.ith the multi-conductor cable and its related complications. Just think that at home you had to run one coaxial cable to your TV set for each channel you wanted to view. This is the thinking of poop Ie who tout multi- conductor over single conductor. /P'~/( ~ - - . - - - - SINGLE CONDUCTOR V5 MULTI-<:ONDUCTOR TECHNOLOGY BY ROD SUTLIFF, CEO PAGE 2 OF 2 MAY 6.1997 THE RST OMNI-EYE CAMERA The RST Onmi-Eye Camera is considered the premium pan and tilt camera because of its proven superior performance by thousands of users. The Omni-Eye II camera includes features not offered by any other competitor. 1- Over 1,000 lumens of light radiated &om the head which tracks the viewing lens at all times. 2- An all stainless steel precision gear tram provides head .swing and rotation functions. 3- The head is fully suspended on precision ball bearings for smooth operation and long life expectancy. 4- Special high-tech seals are provided on both axes. These seals are designed to withstand pressures of 100 psi. 5- The camera circuitry is built using the latest surface moont technology to withstand the rigorous environment the camera will experience. 6- The camera incorporates a fully-isolated synchronized switching power supply which completely isolates and protects camera circuitry from external power surges. 7- The above mentioned power supply also provides fully regulated and limited power to the camera lighting making it impossible for the system operator to damage the lighting or camera circuits. An on-screen red bar alerts the operator that the voltage setting is too high. 8- An internal color bar calibration generator is provided mld can be turned on by the operator for system color calibration at any time. 9- The RST single conductors camera will withstand the application of 140 volts to any active connector pin without danJage to the internal camera circuits. 10- An added advantage with the RST single conductor system is that since there is only one wire and its return shield, trouble-shooting and repair in the field is greatly simplified. The consumer, by comparing these features with any multi-conductor camera offered by others, when considering a purchase, will find that the multi-conductor camera does not meet the rigid expectations RST requires. The RST camera system provides vastly superior technical and design features of electronic circuitry, anrl simplicity in operation. and repair and trouble-shooting. Because of the advanced features and system longevity, the RSr system may be slightly higher in price, initially, when compared with some multi-condlli.'tor units, buyers looking only at price may be misled by initial purchase price, Maintenance for multi-conductor systems quickly east up the small sayings that are sometimes seen at purchase. In the long run the RST system has been proven to be the best economical choice by owners and operators. /t:7,20 -------------------- ------------------------------- ------------------------------- --------- SAFE. SINGLE CONDUCTOR TECHNOLOGY Single conductor is a term which refers to the cable design used to connect the inspection camera and accessories to the control system. The central core of single conductor cable is constructed by wrapping copper strands around a single insulated wire. A plastic jacket is then extruded over this coaxial cable. Two layers of galvanized wire are contrahelically wrapped for strength, protection and grounding of the inner core. This produces a 1/4" cable with a braking strength of over 5,4000 pounds, which is capable of delivering over thirty TV stations to its viewers simultaneously. Though only one TV picture is being viewed when working with single conductor pipeline inspection cameras, the cable conductor is multi-tasked to deliver power (DC voltage), control signals to the camera, operate a transport vehicle or rotating camera and to light the subject matter. Because safety is an issue, it is important to know that the 80-120 volts needed to perform these functions is applied only to the center conductor. wire. There are three metallic layers and two insulation layers to cut through before an operator comes in contact with he voltage. This makes single conductor cable far safer than any other commercial heavy-duty extension cord. The camera and accessories are connected via a three-pin connection. Two pins provide a double ground. Single cQnductor cable, originally used with black/white systems, has been in use in the U.S. since approximately 1972. when color monitors were introduced, single conductor suffered a setback until technology improved camera sensitivity and lighting techniques. Today's higWy efficient electronic controls for pulling and sensitive systems are enhanced by the properties of single conductor cable (size, ruggedness, and light weight.) have proven higWy beneficial to inspection system operators, and do not compromise picture quality. Even more importantly, however, of the hundreds of systems in the field, we were unable to locate anyone who know of any injuries sustained ITom electric shock as the result of single conductor use. /v/c2/ 3T EQUIPMENT COMPANY, INC. SAFETY, PIPE INSPECTION AND SEWER MAINTENANCE EQUIPMENT FOR THE PROFESSIONAL City of Chula Vista Purchasing Division 276 Forth Ave Chula Vista, CA 91910 June 2, 1997. ATTN: Mr. John P. Coggins, C.P.M. Subject: Proposal for Closed Camera Television-Pipeline System Mr. Coggins, We are pleased to submit for your consideration a bid for a Closed Camera Television Pipeline System and a Mini Camera System. 3-T Equipment Company and R.S. Technical Services will offer a Closed Camera Television and Mini Camera System with the attached product specification, performance data, customer users list, and a detailed component list. R.S. Technical Services is a leader in the underground pipeline inspection field with a customer base across the United States. with today's technology, R S.T. has eliminated Multi-conductor cable and uses a Single Conductor feature that allows quick field repair, while still being able to accomplish all the requirements requested of today's Mainline Camera System. This system features pan and tilt, auto focus, auto iris, camera lighting as well as additional lighting for large lines up to 96" and beyond while still being able to operate the Standard Transporter as well as R.S.T. 's new Storm Tractor while only using a single conductor cable. This camera system is manufactured. supported, and serviced in Petaluma, California. If you like. 3-T Equipment will arrange a tour of R.S. Technical Services manufacturing plant and Corpora- tion headquarters. There is a One Year Warranty on components manufactured by R.S. Technical Services as well as a FREE LIFETIME LOANER CAMERA for the life of the camera system. 3-T Equipment Company has successfully demonstrated on four occasions to the City of Chula Vista the performance of the R.S. Technical System and it's capability to meet your needs. After revie.ing our proposal, if you have any questions or request a further demonstration please call me at (619) 560-5232. /1Yr'~ ~elY' Rick Lewis - P.O. BOX 750068. PET ALlIMA. CA. 9-f975-0068 (707) 5-f3-8555 FAX (7():) 5-f3-8558 3- T EQUIP .QMEANY,_IN c. SAFETY, PIPE INSPECTION AND SEWER MAlNTENA.c~CE EQUIP~fENT RST MAINLINE CAMERA OWNERS- PARTIAL LIST CITV OF REDWOOD CITY ROGER BE!\'DER 415-780-7470 COIINTY OF SAN MATEO VERNJONES 415-363-4] 45 .x. LEUCADIA CO \V AIER DISI. DENIS POLLAK 6]9-753.0155 EXT3010 LOS ANGELES CO SA N]T A TION DISTRICTS BILL ROmmS 3l0-638-] 161 CITY OF CERES BILL RIDDLE 209-538-3269 CITY OF SANTABARBARA MANUAL RAMERO 805-564-5413 CUCAMONGA CO WATER DISTRICT GEORGE CAL\1PO& 909-937-2S9} CARPINTERlA SANITARY DIST LOUIS BECKER 805-684-231 I) CITY OF BANOS RAY DESA 209-826-0280 UNION SA-NIT ARY DIST FRHI0NT ( TWO UNITS) ANDY MORRISON 510- 790-0199 CITY OF OAKLA..l'\D (THREE UNITS) RALPH GILLTBERT 5] 0-273-3846 CITY OF FRESNO ALFRED HINIOJOS 209-498-] 496 PLACER COliN'1 Y DAN MONTGOMERY 9)o.88(~-7203 COUNTY OF SONOMA RON ANDERSON 707-546-3377 CITY OF MERCED NICHOLAS PINHEY 209-385-6807 lUOLUM1'JE REGIONAL W D BOB HATCHER 209.53.2-9l07 CITY OF FORTUNA TOM COOKE 707 - 725-2665 t.J ^K OROVILLE P U D MIKE GLAZE 916-533-2000 CITY OF PETAUJMA BILL SP AUDINO 707 - 77&-4303 CITY OF I3EVERL Y HILLS K.T:.N GETTLER 310.285-2446 P.O.BOX 750068. PETALliMA, CA. 94975 (707} 543-8555-FAX (7~7)-543-85S8 I t7 '.~c2.3 MAINLINE USERS CONT. CITY OF BUENA PARK LLOYD BEACKER 7I4-5:!1-9900 CITY OF UPLAND MARTIN PASTUCHA 909-982-13 52 CITY OF CUCAMONGA GARY VAR-J'my * CITY OF NATIONAL CITY JOE SMITH ~ RAMONA MUNICI? AL WATER DIST. ERJ.'\IIEMUU=ORD COUNTY OF SONOMA WASTEWATER RON ANDERSOi'< 9\)9-989-2813 619-336-4360 619-789- LBO 707-527-3130 OJ/\.I VALLEY S. D. JOHN MATTINGLY 805-646-5548 CITY OF GLENDALE LARRY O'NEIL 818-548-3950 HAENDlGES" PLUt-.1BII\G. WHITTIER r..ARRV HAEN"IHGES 3 11)-698-8044 CITY OF INGELWOOD ED RINEHART .3] 0-412-5491 CITY OF FONT ANA CURTIS AARON 909-350-6760 INSlTUFORM SOUTHWEST JEFF REBEIO SANTA l'E SPRINGS ('UNITS} 310-946-0046 . ~ INSrrUFORM SOUTHWEST DAVE MUNOON CITY OF BERKELEY SHERMAN JACKSON 6-19-451-0977 415-644-6620 X CITY-OF ESCOJ\1)lDO ~ CITY OF EL CAJON ROTO ROOTER LA LUCKY BISHlli' 61 't- 74) -4&54 PAT JACKSON 619-441-1658 S~c.&..~'t'('.~,...ITo ~J\",,\ (5~",~) JAMES CACClOPO l'A \1t>.Ac.. ~SSIlj 2] 3-268-3344 qLb .~~ ..ftn5 C?'L t~~..s ~~'1 S'i.\NNbO... S 1 D-' . d-~" ~~~() P.O. BOX 750068, J'ETALUMA, CA. 94975 (707) 543-8555 FAX (707)-543-8558 III .~~ f 3- T EQUIPMEN~NY, INC. SAFETY, PIPE INSPECTION AND SHVER MAlNTENA..'I(('E EQIJIP:>'fENT PUSH CAMERA A!\TD MINI SYSTEMS INSITUFORM SOUTHWEST SANTA FE SPRINGS (4 UNITS) JEFF REBElO 310-946-0046 ';4 !>>.\J~ 'rl\\}Y"I ~ INSIllIFORl\'l S \V StHHA FE: 3f'KI)\:(j:SJ~1'1' Itf]:nO <0\01.- ~S 1 -()'(11 J 1 e-~46-Qej'16 ROTO-ROOTER, POMONA STAN MOORE 909-397-0567 ROTO-ROOTER, MISSION VElJO BILL BEAVER 714-380-4161 TA YLOR ENGINEERING, LOS ANGELES ROTO-ROOTER, TORRANCE TlMTAYLOR JOHN SHEILDS 310-320-5698 CITY OF LA VERNE CHARLJEFARREL 909-596-8741 DR ROOTER, LAGUNA BEACH RICK MOORE 800-496-5000 CIT\' OF ANAHEIM DOUG HERBERT 714-254-6~)40 EXl 6 J 45 NETWORK PLUMBING, COST A I\1ESA ROGER HOLMES 7I4-435.8!! 8 1 HE EARL PUJMBING. PLACENTIA STEVEN }''ELLESEN 714.524-4100 ORANGE COAST PLUM. SA:\'T A A..'\'A JOHN FL Yl\'N 714-953-111 ! CITY OF LOS BANOS GREG SOLIZ 209-827- 7034 ClTY OF ANGELS CAMP STEVE COLLINS 209-739-2412 ABC SERVICES CARROL SnTOS 916-448-3535 BROWN PLUMBING STEVE BROWN Q16.275-2977 P.O.BOX 750068. PETALVMA. CA. 94975 (707) 543.8555 FAX (707)-543-8558 /1) /Lr:;' CITY OF CERES BILL RIDDLE 209-538-3269 STEWART PLUMBING SKIP STEWART 805-964-Sb64 ~ CITY OF VISTA JA!\1ES GUSMAN 619-726-7944 -X EASTER}; M W D BRAIN AGNER 909-928-3777 EXT6290 ~ CITY OF POW A Y BRAD VOORHEES 619-679-54]9 ~ CITY OF SAN DIEGO( 3 UNITS) ROCKY KELLY 619-654-4467 ~ cnY OF CARLSBAD MWD JIM SMlTH 619- 438-2722 EXI 1]6 * CITY OF ESCOI\1DIDO LUCKY BISHOP 760- 741-4854 * CITY OF NA TlONAL CITY JOE SMITH 6]9-336-4360 ~ CITY OF III1PERAL BEACH JOHN DEHART 619-423-8311 EXl 5 * LEUCADIA COUNTY W.D. DENIS POLLAK 6]9-753-0]55 EXl 3010 ~ MCB CAMP PENDLETON MARK ENGSTROM 6]9725-4981 CAt. POLY SAN LUIS OBSIPO MARlO RIVERA 805-756-6114 JcJr 2? 3-T Y INC. SAFETY, PIPE INSPECTION AJ.'ID SEWER !\IAINTEl'ANCE EQUIPMENT CONTRACTORS IN SO CAl IIAENDlGES PLU!\1BING, WHITTIER LARRY HAENDlGES 310.69R.R044 INSlTUFORM SOUTHWEST JEFF REBELO SANTA FE SPRINGS ('lTNITS ) 310.946.0046 ABC SERVICES GRAHAM. HOLLY 714.693-8410 EMPIRE PIPE CLEANIKG LEROY THOMAS 714-639-8352 {}-UNFR WEST .:2 UNI tT CHRIS Matl:AMBELL HOUSTON & HARRrS d VA/IT! PAM HOUSTON S'\~~ ~~..,~,~ St.,~ ~i8.l~ rJ {j/.JlfS 310.437.1494 909-686-4241 ~s -q~S -<is% 13 P,O.BOX 750068, PETALPI\IA. CA. 9497:; (707) 54J.8555 FAX (707)-:;43-8:;:;8 /()/;2 ? ~~~c>\;s'f \)S~"J L\~ D~\'\~~ ~m~lNt.... 'S~t\\I\.~ . ~t ~q~ I -C1:,d-b ~~~\rJ~~ ~~~~ C?~-db~ -'1~l~ ~\c-C\:s\~~ 0~W\~'Nt.,. ~lC7\)a-~l -~Il~ L\::)~(,.., ~ ~~'\~ ~l0 ~ :SL\S' /tY,2i5 YV1~~ ~c.()C::.\ A (~\)Y"{\~ 7 ~~E ~R~YY\G ~~~j ~~~ Pip4Plin4PT4PI4Pvi/ion In/p4Pction Ig/t4Pml Infolmation Ih..t #00 I Single conductor versus other types of cable. The fact, the myth, and the DANGER! Weare often asked to quote on television inspection systems which use a "single conductor" cable instead of a "multi- conductor" cable. The benefits of the sin- gle conductor system are preswned to be a lower cable cost and longer cable life. The illusion that is created in the mind of the customer is literally one of a single copper conductor versus 15 or 20 wires in a bundle which is heavy, bulky, and costly. The latter was pos- sibly true in the early days of pipeline inspection equip- ment. It is not the case today. Generally, only four wires are required to ac- complish the task of powering the camera in a safe dov' 01 U... ,10,1.. cooduclo, 'V,I... 0'" 001 oy.., manner The single conductor cable has at least two conductors and, in many cases, three. Most sixth graders know electricity has to have a completed circuit comprising a supply and return. How many one-pin batteries have you seen? In other words, the cable forms a "coax" or a "triax". With the advent of tractors or transporters that actually work, it is possible to reduce setup and sur- veying times to a fraction of previous requirements. The use of such equipment adds substantially to the productivity of the organization. However, it is neces- sary to provide a power and control source. We have actually seen a single conductor system supplied with a separate cable to power the tractor! The days of single conductor systems are not over - not just because they cannot efficiently support new techniques for improved productivity but, primar- ily, for safety reasons. Increased OSHA power sug- gests that high voltage levels needed to supply equip- ment could represent a safety hazard in its own right. /?l/29 A recent specification from a city called for a single conductor cable system with a power supply to the camera and lightheads capable of providing 240 volts DC. We believe that this level of voltage on site could be lethal' The problem lies in the high res is- Ihi, l.y.1 01 YOno,. could b. 1..11101 tance of the very small conductors used in these single conductor cables. One of the smallest cables used by certain manu- facturers has, for instance, a loop resistance of 16.2 ohms for 1000 feet; 32.4 ohms for 2000 feet, If the camera worked on 24 volts and there was, for instance, 100 watts of lighting, we would draw 5 amps of power through the cable. If the system had 2000 feet of cable, commonly specified, the voltage drop across the cable would be calculated by multiplying resistance by current. (In the case of this example, 32.4 x 5 = 162 volts.) Therefore, to obtain the 24 volts required to power the camera and lights, we have to add 162 volts (cable loss) to the 24 volts required to power the camera. This equals 186 volts. If the bulb blows the voltage it I, c.,Iolalv ..oou,1I 10 kill '0....00.. present at the camera down the pipe, it is certainly enough to kill someone. When inspecting larger pipes, which require more illumination hence larger lamps, the voltage present at the camera and down the cable could increase to a staggering 348 volts for 200 watts oflighting! Consider the potential risk to the operator and your organization. ATTACHMENT C ~ea..R2Jot 'lpelln~T~I~yJ/ion In/p~cUon '1J"~ml Information Ih_t #00 I Th~ AIt~rnatjye. It ha.<; already been stated that single conductor systems have more than one conductor and, as such, are actually multi-conductor systems. Pearpoint manu- factures state-of-the-art products where the cable re- quirements are reduced a minimum safe level. Pearpoint uses the same two conductors to supply the camera and the lighting. The sensitivity of the camera is adjusted by the superior method of utiliz- ing an iris in the lens instead of just varying the light- ing. This has the additional benefit of improving the "depth of field"; a term usually associated with photog- '.arpolnt IlJ/t~ml .1. onllJ fo.r co.d.ctotl raphy. It means that more of the subject in view is in sharp focus contributing to the fine detail seen on Pear- point systems. Two additional conductors are used for trans- mitting the video back to the monitor and sending com- mands such as focus, iris, scan, and tractor speed in- formation to the camera in the pipe. The same two conductors are used to send other information back to the surface such as inclinometer angle, roll angle, packer pressure, and compass heading. A multi-conductor Pearpoint system uses only four conductors to achieve the same results as a single thll t.chniq.~ r~d.c~1 th~ pOlllbilltlj of .I~ctrlc Ihock conductor system with two of three conductors but in a safe way. For safety reasons, Pearpoint incorporates a "drain wire" in their cables. This ensures an earth bond between the inspectlOn vehicle and the in-pipe TV sys- tem. The bond ensures that any metal on the camera is always at the same voltage potential as the inspection truck; something that is nearly impossible to accomplish with a single conductor system. This technique reduces the possibility of electric shock and greatly adds to the safety factor of the Pear- point system. When a tractor is used, two additional con- ductors are utilized. After all, isn't it better to incorpo- rate the conductors in the cable rather than strap them to the outside of a so-called "single conductor" system? I hope this information sheet clarifies the differences between the systems and the safety hazards associated with certain types of equipment. For further information on Pearpoint inspection products please call us at the address below. Alan Sefton President ~Q:are2ln! 72055 Corporate Way Thousand Palms CA 92276 USA 760-343-7350 Fax 760-343-7351 Pearpoint House 47 Woolmer Way Bardon Hampshire GU35 9QE England 440 1420489901 Fax 44 0 1709836253 Visit our web site http://www.pearpoint.com Due to a policy of continued product development. Pearpoint reserves the right to alter or amend any published specification without notice. J/Jr 30 COUNCIL AGENDA STATEMENT Item I) Meeting o"t.. 1 O/21/rr7 ITEM TITLE: Public Hearing To consider adoption of City Council Priorities SUBMITTED BY: City Manager g Budget Manage~ ~ Public Information CoordinatLr (4/5ths Vote: Yes _ Nol) REVIEWED BY: The City Council previously had work sessions to discuss and develop city-wide priorities. On September 11, 1997, City Council completed a final review of the priorities and identified seven city-wide priorities. This meeting is scheduled to allow the public to provide comment and input to the City Council regarding their proposed top seven priorities. A second hearing is scheduled for the next City Council meeting (October 28, 1997) to complete public testimony and then formally adopt the priorities. RECOMMENDATION: That Council open the public hearing, take testimony on the seven priorities, continue the public hearing to October 28,1997 where further testimony may be received and then to formally adopt the seven city-wide priorities at the meeting on October 28, 1997. BOARDS/COMMISSIONS RECOMMENDATION: Not applicable. DISCUSSION: The City Council has had several work sessions to discuss the development of city-wide priorities. A list was identified of approximately 63 goals and sub-goals that the City Council believed to be the highest priority for completion. At the fmal work session each Council member selected their top 8 goals and from those selections the final 7 were identified. Through this process a total of six major goal areas were identified with sub-goals under each of these major headings. (See Attachment I) From this total list of approximately 63 different goals or projects, each Council member selected their top 8 priorities. By matching those selections Council identified 7 projects or goals which they agreed were the highest priority. The top seven (7) priorities identified are Bayfront, Downtown Revitalization, Broadway Revitalization, Otay Valley, Educational Center/Environmental Institute, SR-125 and Revenue Enhancement. //~/ Page 2, Item Meeting Date JOI? 1 fQ7 A brief description of each of these follows: RJlyfront Continue the redevelopment and replanning of the Bayfront Project Area to encourage and facilitate quality visitor-serving commercial, recreational and residential development for the undeveloped coastal related properties west of 1-5 between SR-54 and "L" Street. The redevelopment and replanning efforts are to include furthering the joint planning process with the San Diego Port Commission toward the collective goal of expanding the Bayfront Project Area boundaries to include the Port District properties adjacent to the Chula Vista Marina, extending "R" Street westerly to Marina Parkway and establishing the Chula Vista Bayfront as a resort destination. Ot~y V~l1ey Continue the redevelopment and replanning of the Otay Valley Road Project Area to encourage and facilitate quality commercial, entertainment, recreation and industrial development along the Otay Valley Road corridor between I-80S and the eastern and southern City limits. The redevelopment and replanning efforts are to capitalize and expand on the opportunities created by the Auto Park, MCA Amphitheater and White Water Canyon projects toward the goal of improving the image and character of the area. Third A venne - Downtown Continue the revitalization of the Town Centre I Downtown District along Third Avenue from "E" to "I" Street by encouraging and facilitating quality infill commercial and office development as well as attracting quality commercial tenants. The revitalization efforts are to include continued marketing, leasing, and image enhancement programs with the Downtown Business Association toward the goal of re-establishing the Downtown as the commercial-civic focus of the City. Rro~tiw~y Revit~1i7"tion Implement a focused revitalization effort along the Broadway commercial corridor to impede the proliferation of blighting influences and encourage quality commercial/retail development. The revitalization effort should include coordination with the Broadway Business Association and further the progress made with the Palomar Trolley Center, the auto dealership relocations, and the completed Broadway Street improvements. / /-c2.-. Page 3, Item Meeting Date 1 Of? 1/97 Hif:her F.rlllcation renter/Environmental Scien('.p.~ Tn~titllte Continue to advance the planning for a "Higher Education Center and Environmental Sciences Institute" concept to involve the establishment of a single campus which would house academic programs from San Diego State University, University of California at San Diego, and Southwestern Co1lege with emphasis in the areas of high technology and biotechnology, as we1l as environmental research and commerce. The planning efforts should include further definition of organizational structure, academic and research focus, as we1l as siting and financial issues. SR-1?'i Continue to support the construction of a Freeway/To1lroad to serve the eastern area north south traffic movement. The facility will be a 6 to 10 lane divided and contro1led access highway built to freeway standards beginning at I-90S in Otay Mesa and traversing north to SR-54. The project has regional funding in the amount of $70 million (approx) to pay for the San Miguel Connector (between SR-54 and San Miguel Rd.) It is important to keep political interest and support for the funding with State, Federal, and local elected officials. Improve rity Revenlle~ Ra~ Continue to focus on increasing the revenue base for basic City services, actively participate in lobbying efforts to "return" funds taken from the State, limit the use of one-time revenue sources, make progress toward the Council goal of an 8 % reserve, and generally ensure an improvement in the City's long term financial stability. PUBLIC NOTICE Since it is Council's intent to have their priorities confirmed by the community, the proposed goals are being approved over two Council sessions at a public hearing. In order to inform residents about the City Council's seven top priorities for the City and gamer public input, prior to this meeting staff has taken the fo1lowing actions: . Press Release: A press release was issued describing the seven priorities and publicizing these meetings. It was distributed to the media serving Chula Vista as we1l as the Chamber of Commerce, Downtown Business Association (DBA), Broadway Business Association (BBA) and Bonita Business & Professional Association (BB&PA). . Information notice on televised Council meetings: A short information notice was run about the priorities and the opportunity for public input at these meetings as part of the City Council meetings of Oct. 7 and 14 which were televised on Cox Communications and Chula Vista Cable. /F3 Page 4, Item Meeting Date Ion 1 fQ7 . "Chula Vista Quarterly": A story is planned for the next edition of the City's newsletter which will be published in late December/early January. This newsletter reaches virtually every household and business in the City. (Approximately 26,000 are mailed to Laidlaw single-family household customers and another 31,000 are directly mailed to multi-family dwelling units and businesses.) Ae!e!itional Options If the Council would like to take additional steps to publicize these priorities and/or to gain further community input, any or all of the following could be taken: 1. SeTVke C.ll1h presentation.: The Mayor and/or City Council members could be scheduled to give presentations to the major service organizations in Chula Vista including Rotary, Optimists and Kiwanis clubs. This could be accomplished with no additional budget costs. 2. Pllhlic.ity in other new.lette..: A press release could be submitted to other community organizations for publication in their newsletters including the Rancho del Rey and EastLake developments. (The Chamber, DBA, BBA and BB&PA have already received the release.) This could be accomplished at no additional costs. 3. Hoare! ane! C.ommi..ion memhe..: The Council could send a letter to each City board and commission detailing the identified priorities and asking each group to provide any input regarding these priorities to the Council. This could be accomplished at no additional budget costs. 4. C.ity weh .ite: Information about the priorities could be placed on the city's web site and any resident input could be E-mailed to the Mayor and Council. This could be accomplished at no additional cost. 5. E4rer: A flyer summarizing the Council's seven priorities could be developed and placed in the City's libraries, counters at City Hall and in other City facilities. This flyer could be designed with a section for community input. This could be accomplished at no additional budget costs. 6. SIITVey: A mail or phone survey could be taken of local residents to gain their input regarding the City's top priorities. This could not be accomplished with existing staff and depending on the method used and the size of the sample, could result in additional budget costs ranging from $5,000 to $25,000. Staff recommends that if a citizen survey is authorized that it also be designed to attain input regarding a broad range of City services. Because of budget cutbacks in the past several years, a formal citizen survey has not been conducted by the City since the late 1980s. JF-~ Page 5, Item Meeting Date 1 Of? 1 /97 ONGOING PROCESS The process recently completed by the City Council provided valuable direction to staff to establish a better plan for achieving these identified priorities. This direction will allow staff resources and time priorities to be focused on these main projects. All remaining projects on the list will be worked on within existing time and staffing constraints. In order to provide regular feedback to the Council on the status of these seven priorities and all other Council identified priorities, it is recommended that a semi-annual review be incorporated into the budget process. Annm~1 Prinrit1p.~ Wnrk~hnp Since the Council has identified the need for one workshop per month, it would be recommended that the September workshop be set aside for an annual review of the Council's priorities. This would set the tone, clarify any changing priorities to work plans so that they can then be incorporated into the beginning phase of the budget process. By having Council's direction and input prior to the department's budget development, it will ensure that the budget is prepared with that input in mind rather than adjusted later as a result of Council feedback. Hl1cifP.t Rf'vlPW Work ~p.s.s:inns. In addition to the annual workshop, it is critical that the priorities actually appear as part of the budget document. One way to do this, which fits well within the new budget format, is to incorporate these priorities into the "goals" of the City Council as listed with the Council's budget. Since "goals" are general in nature, these broad priorities would fit into the current structure very well. During the budget review work sessions in May, the Council may then take another look at the priorities and revise them as necessary. These two review periods will provide for semi-annual review of Council's priorities and incorporation of those priorities into the budget process. FISCAL IMPACT: The semi-annual review of the City Council's priorities will not create additional direct costs. If the Council desires to implement any of the additional options for public input, those costs identified would need to be included in the budget. In order to accomplish these proposed priorities, it may be necessary to reduce the prioritization of other projects or reallocate staff and other resources. Implementation plans and budgets to accomplish these priorities have yet to be developed by the impacted departments. Such items will be brought back to Council as appropriate, either within the current fiscal year or as part of the workshop process for the 1998-99 budget. H:\HOME\ADMIN\DA WN\CCPRIA.l13 ~ / j_o/S SUMMARY OF REMAINING COUNCIL PRIORITY GOALS: In order to be the best that the city of Chula vista can be in preparation for the twenty-first century, the following goal areas are proposed: . Insure Long-Term Financial Stability 1. Balance budget by: . reducing expenditures . reducing reliance on one-time revenues . continue to bring Redevelopment Agency out of the red 2. Implement three-year financial plan . investment policy . potential revenue streams . examine future needs 3. continue utilization of performance-based budgeting . establish measures/standards . how do we know when we "get there"? . Promote Economic Development 1. Attain four-star quality hotels/resorts within city limits 2. Review all franchise and other agreements a. SDG&E b. Cox Cable c. Laidlaw d. Electric utility Restructuring 3. Promote individual economic development projects a. IDEC b. School administration building relocation c. WERC d. EastLake Business Park e . BECA 4. Joint corporate yard . Promote Quality of Life Indicators 1. Air Quality - annual report required from Air Pollution 1 II ~ i> Control District on impact of growth on air quality. 2. Fiscal - annual report required to evaluate impacts of growth on city operations, capital improvements, and development impact fee revenues and expenditures. 3. Police - respond to 84% of the Priority I emergency calls within 7 minutes and maintain average responded time of 4.5 minutes. Respond to 62% of Priority II urgent calls within 7 minutes and maintain average response time of 7.0 minutes. 4. Fire/EMS - respond to calls within 7 minutes in 85% of the cases. 5. Schools - annual report required to evaluate school district's ability to accommodate new growth. 6. Library - provide 500 square feet of library space adequately equipped and staffed per 1,000 population. 7. Parks and Recreation - maintain 3 acres of nei9hborhood and community parkland with appropriate facil1ties per 1,000 residents east of Interstate 805, and continue to evaluate the quality and condition of the parks 8. Water - annual report from water service agencies on impact of growth and future water availability 9. Sewer - sewage flows and volumes shall not exceed City Engineering Standards. Annual report from metropolitan Sewer Authority on impact of growth on sewer capacity. 10. Drainage - storm flows and volume shall not exceed City Engineering Standards. Annual report reviewing performance of city's storm drain system. 11. Traffic - maintain Level of Service (LOS) "C" or better as measured by observed average travel speed on all signalized arterial streets, except, that during peak hours, an LOS "D" can occur for no more than any two hours of the day. Those signalized intersections west of Interstate 805 that do not meet the above standard may continue to operate at their 1991 LOS, but shall not worsen. 12. Higher Education - (has not been officially adopted by the city Council) 2 )/-7 . Evaluate and Assess Land Use and Planning 1. Process land use plans effectively and efficiently while implementing and protecting the C~ty's policy interests. 2. Review and update land use projects: A. Project Specific (1) Replanning EastLake III (2) San Miguel Ranch - next phase (3) Salt Creek Ranch (aka Rolling Hills Ranch) (4) Otay Ranch SPA I (including West Coast land change of ownership) (5) University (6) Lower Sweetwater Area Plan ( 7 ) Sunbow B. Area wide (1) DIF Update (2) Prepare Master Plans for Fire, Parks, and Library (3) Restudy Development Phasing Plan (4) Finalize Agreement with County for Preserve Owner Manager . Update Administrative Policies and Procedures 1. Look at incorporating performance-based budgeting process for budget planning - to be completed prior to July 1, 1997 2. Examine the benefits of multi-year or two-year budget process as an approach - to be completed prior to July 1, 1997 3. Examine a short-term Financial Plan as a possible benefit to the City - to be completed by January 1998 4. Staff review and recommend a pOlicy-review cycle (3 year, 4 year, whatever) - within next 3-4 months 5. Staff to develop systematic way to prioritize individual land use requests )/~:5' 6. Staff work on developing a long-term strategic economic development plan. . Promote and Influence Regional Issues Maintain a presence and/or achieve a role at meetings involving reg10nal issues which have potential impact on Chula vista (e.g. SANDAG, water, Trash, Brown Field, NAFTA, Jobs Training, Regional Library Bond, Regional Work/Force and Emplo~ers Center, MSCP, Sewer-wastewater, 905, Regional Trans1t issues, Welfare Reform Impacts). H:\HOME\ADMIN\DAWN\GOALS.A13 /j~9 ~ \\ :;if/) Public Hearing - To consider adoption of City Council Priorities, October 21, 1997 John Willett, 97 Montebello Street, Chula Vista, CA., 91910 Mayor Horton and council members, thank you for the opportunity to comment on the adoption of City Council Priorities First, my complements to staff for preparing a comprehensive presentation on establishing city- wide priority goals and sub-goals. During a Council Work Shop on January 9, 1997 discussing, "Establishing Chula Vista Council Priorities", the City Manager presented a list of 11 general categories of project operations for a total of 83 items of which 56 were considered priority #1, 19 were priority #2 and 8 were priority #3. In addition, the City Manager listed 8 goals posted on the wall broken down into some 31 sub-goals. Although not mentioned during the presentations here tonight, 1 believe the public should be made aware of the fact of that some the six major goals discussed here tonight were not only presented during the January 1997 Council Work Shop, but were discussed during the Chula Vista 2000 Task Force, who's function was to develop a plan for the city's future (Summary Report produced in April 1990) and the subsequent Chula Vista 21 Committee, whose report was published a year later. The long term value of the goals presented here tonight will demand the full commitment of the city council to provide leadership and direction, while others will demand public I private partnership co-operation. While I support the effort that has been expended to identify goal priority's, which are basically increasing the economics of the city, very little or no mention has been made to improving the "Montgomery Area". Thank you for the opportunity to speak before you. Repectfully, ~1h1ff.U. John Willett ITEM TITLE: SUBMITTED BY: REVIEWED BY: BACKGROUND: COUNCIL AGENDA STATEMENT Item / .7- Meeting Date 10/21/97 PUBLIC HEARING: REGARDING ISSUANCE OF MULTI-FAMILY HOUSING REVENUE REFUNDING BONDS RESOLUTION J JY7 5'..2. AUTHORIZING THE ISSUANCE OF MULTI-FAMILY HOUSING REVENUE REFUNDING BONDS (EUCALYPTUS GROVE APARTMENTS), SERIES 1997 AND APPROVING CERTAIN ACTIONS RElATED THERETO Community Development Dir:f\ (.S . City Manager0Gi ~~') (4/5ths Vote: Yesl No_I On August 6, 1985, the City Council approved Resolution 12123 authorizing the sale of not-to-exceed $24 million principal amount of multi-family housing revenue bonds (Eucalyptus Grove Project) 1985 Series. The actual bond was issued for $21,885,000, which enabled the developer, Morgan-Gardner Subdivision, to build the 376 unit multi-family housing complex at 67 East Flower Street in Chula Vista. In March 1996, the property was sold to Eucalyptus Grove Holdings LLC, an affiliate of Wasatch Property Management, who is based in Logan, Utah, at which time the project was transferred to it. The current credit enhancement term for the City issued revenue bond terminates on November 15, 1997. The owner was unable to obtain an extension of the credit enhancement. thus the bonds will be redeemed on November 3, 1997 unless a refinancing occurs. To refinance the project, the owner negotiated with General Electric Capital Corporation to buy refunding tax exempt bonds, based on the assumption the City will be willing to issue the bonds. Under the Trust Agreement (the document by which the 1985 bonds were issued and conditions set forth between the City, Issuer, and First Trust of California National Association, the Trustee), the bonds are due on November 1, 1997. November 1, 1997 is a Saturday thus the deadline is automatically carried over to Monday, November 3, 1997. Because the refinancing will benefit the project economically, the owner is seeking Council's approval to issue refunding bonds. At this time the currently outstanding $19,615,000 of multi-family housing bonds on the property will be redeemed on November 3, 1997. Because of this upcoming redemption, Wasatch Property Management has asked the City to issue bonds in the amount of $18,300,000, reflecting a difference of $1,315,000 from the amount redeemed because Wasatch is taking a portion of the debt service reserve fund to reduce the principal. The reissuance must occur by November 3, 1997, thus this item is time sensitive. This is the earliest we could present this item to Council because of the extensive negotiations involved and time required to prepare the documents. /.2 - / Page 2, Item _ Meeting Date 10/21/97 A Public Hearing is required by the Internal Revenue Code in order to authorize the issuance of the refunding bonds and Council must also adopt a resolution to authorize the execution of the necessary documents. The major documents under consideration are the Trust Indenture, the loan Agreement and the new Regulatory Agreement. The Trust Indenture sets forth the terms of the bonds. The Loan Agreement sets the terms upon which the borrower receives the money. The Regulatory Agreement sets forth the affordability conditions. These bonds are going to be purchased by General Electric Capital Corporation on a private placement basis and are not being sold to the public at this time. The bonds will be unrated. RECOMMENDATION: That the Council adopt the resolution to authorize the issuance of multi-family housing revenue refunding bonds (Eucalyptus Grove Apartments), Series 1997 and approve certain actions related thereto. BOARDSICOMMISSIONS RECOMMENDATION: On September 24, 1997, the Housing Advisory Committee voiced their support for the reissuance of the bonds if the affordability level of the rents were negotiated down to the HUD Fair Market Rents. DISCUSSION: The use of the City's tax.exempt status to issue bonds to developers of multi-family rental housing represents an attempt to improve the availability and affordability of rental housing in Chula Vista. Such bonds are a form of public-private partnership which gains importance as federal housing programs diminish and development costs make low income housing development problematical. In the City's Housing Element of the General Plan, the Affordable Housing Program designed to enhance Chula Vista' housing opportunities declares that, "Where practical, the City shall consider the use of tax-exempt mortgage revenue bonds for the purpose of underwriting a portion of the cost of low and moderate income housing." Used appropriately in pursuit of public good, tax-exempt multi-family bonds represent a tool to achieve such underwriting; underwriting made necessary by the gap between market rental rates and development costs. In order for a multi-family housing bond to attain and sustain federal tax-exempt status, the projects in the issue must meet certain federal requirements pertaining to the inclusion of low and moderate-income tenancy and the preservation of the project units as rentals. This tax-exempt instrument represents a subsidy to the development community, a subsidy from the federal treasury as a result of reduced tax revenues. Because that subsidy is a giving of public funds, the federal regulations address the provision of public good. It balances the need to make the subsidy effective and to deliver public benefit. Chanoes in Rent Restrictions For bonds that were originally issued before 1986, the minimum required public benefit is that 20% of the project's units be restricted to occupancy by low income households, defined as those with annual household incomes at or below 80% of area median income. This federal regulation does not address the need to restrict rents on these units, rather the only restriction is on who can rent the units. This perhaps was an );2 -.7- Page 3. Item _ Meeting Date 10/21197 oversight of the policy makers. Most jurisdictions have imposed rent restrictions on the 20% of income restricted units as well. In our 1985 Eucalyptus Grove issuance, the City of Chula Vista required that the 20% of income restricted units also have a rent restriction defined at 25% of 80% of area median income based on the assumed household count of one person for the studios, two persons for the one bedrooms, and four persons for the two bedrooms. This meant that 75 units (20% of the total 376 units) be restricted to families who earn 80% or less of the area median income at the following mix and rent levels for 1997: 9 39 27 Studio 1.Bedroom 2.Bedroom $566.67 $647.92 $810.41 Also in 1985, the City of Chula Vista had put income and rent restrictions on another 5% of the total units (19 units) to be occupied by moderate income households, defined as not to exceed 120% of the area median income, at 25% of the 120% in the following mix: 3 10 6 Studio 1-Bedroom 2.Bedroom $850.00 $971.87 $1,214.58 In 1985, the total restricted units were 25%, or 94 units, for low and moderate income families combined, which put us in compliance with the State Density Bonus Law at that time. With the proposed reissuance, the City of Chula Vista has the opportunity to renegotiate these rent restrictions. However, the federal requirement that 20% of the units be occupied by low income families (without defining rent levels or affordability) must still be met. Staff's desire is to go beyond these minimum requirements and get even lower rents and to apply the affordability restriction to a greater number of larger units than the current Regulatory Agreement requires. According to the San Diego County Apartment Association, the average rental rates in the City of Chula Vista and Bonita are as follows: Studio 1-Bedroom 2-Bedroom CHULA VISTA $493 $510 $628 BONITA Not available $668 $782 Compared to the 1997 market rate rents noted for Chula Vista and Bonita, the restricted rents for Eucalyptus Grove are currently at market rate and above. As the median incomes have increased and the real estate market has dropped, the 25% of 80% formula has become less reliable as a measure of affordability. In addition, the moderate income unit restrictions, set at 25% of 120% of AMI were not /.,,2 -3 Page 4. Item _ Meeting Date 10/21/97 serving the City well in giving any affordability beyond market rents and are not as needed as are the low income units. For these reasons, staff has negotiated with the owner to reset the terms on restricted units to better reflect a public benefit in today's economy. Staff is recommending to restrict 11.4% of the units, 43 two bedrooms, to a rent level equal to or below HUD published Fair Market Rents (FMR's), which are currently at $682 for a two bedroom. This gives the City the maximum number of the largest size units Eucalyptus Grove has available that the owner is willing to restrict at this level. Staff feels the FMR's are a better measuring tool to use than the formulas by which to restrict rents. The FMR's are calculated at 40% of the market rate rents. For San Diego County, the current FMR's are equivalent to 27% of 60% of area median income. Since FMR's set Section 8 rents and are a standard used for other programs, staff recommends to apply them to this project. Staff believes that the larger units should be restricted in order to meet the need of families as opposed to the smaller units. Thus staff is recommending, with the owner's approval, to restrict 43 two bedrooms at the FMR's. The new Regulatory Agreement will contain new rent limits and will amend the Housing Cooperation Agreement to be consistent with the new rent levels. For rents that could be increasing due to this change, 49 one bedrooms and 12 studios that are currently restricted at 25% of 80% of area median income are proposed to have the increases to market rate phased in over the next three years. Upon execution of the new bonds, a fifty dollar increase would be allowed, then, on the anniversary thereof for the next three years, a maximum of $50 would be allowed, as described below. CURRENT ANTICIPATED ANTICIPATED RESTRICTED Nov. 1997 APRIL 1999 RENTS MARKET RATES MARKET RATES SIZE $647.92 $735 $839 1 Bedroom $566.67 $646 $729 Studio CURRENT RESTRICTED RENTS Nov. 1997 Nov. 1998 Nov. 1999 Nov. 2000 SIZE $647.92 $698 $748 $798 $848 1 Bedroom $566.67 $617 $667 $717 $767 Studio /.2 ~'/ Page 5. Item _ Meeting Date 10/21/97 Bond Fees and Other Neootiated Terms The 1985 rent restrictions were contracted for the longer of 10 years after the date on which at least 188 of the dwelling units on the Real Property were first occupied or the life of the bond, which matures on November 1, 2007. The City is able to renegotiate the term of our rent restrictions at the time of reissuance. Staff is recommending to set the term for the rent restrictions on 43 two bedrooms at the longer of 15 years or the life of the bonds, which are expected to be paid off before they mature in 30 years. For example, if the bonds are paid off in three years, the 43 units will remain restricted for 15 years. If the bonds are paid off in 18 years, the restrictions on the 43 units will terminate in the 18th year when the bonds are paid off. The owner has agreed to this term. Typical in bond deals are the payment to the issuer for an origination fee. The industry standard average is for an amount between 1/8% .1/4% of the bond amount, which is equal to $22,875 . $45,750 for an $18,300,000 bond. If the owner decided to have the State, California Statewide Communities Development Authority, issue/reissue the bonds instead of the City, the origination fee for an A rated bond between $15,000,000 and $20,000,000 would be a set $42,500. Staff is recommending the origination fee be $45,750, which is 1/4% of the proposed $18,300,000 bond reissuance, at the maximum industry standard. The owner has agreed to this amount. Also typical are annual payments for administrative fees to the entity that will be monitoring the project for Regulation Agreement Compliance. The industry standard average is 1/8% of the bond amount, equal to 12 basis points or $22,875 a year. If the owner decided to have the State issue/reissue the bonds instead of the City, the administrative fee would be 1/4% of the bond amount, equal to 25 basis points or $45,750 a year. For an administrative fee greater than 12 basis points, the issuer has to prove to the Internal Revenue Service the expense of monitoring the contract requires the higher fee. Staff is recommending the administrative fee be 1/10% of the $18,300,000 bond, equal to 10 basis points or $18,300 a year slightly lower than the industry standard. This will be payable quarterly in arrears. Over fifteen years the cumulative total is $274,500. Staff was willing to take a lower than industry standard administrative fee in exchange for more two bedroom units to be restricted. Staff feels the $18,300 a year will cover the administrative costs of monitoring this project. The owner has agreed to this amount. In addition, as a safety precaution, staff recommends that the City of Chula Vista have the approval and termination rights over the developer's selection of the property management firm. The property manager/owner, Wasatch Properties, has an impeccable record, always filing their required reports to the City on time, keeping immaculate grounds, never a complaint by their tenants; however, if there is a change of ownership or management, staff would like to have an influence in the oversight of the management. Staff has felt frustrated by the inability to respond to tenants complaints at other properties that are tied to a Housing Cooperation Agreement with the City because such a condition was not written into the agreement. The owner has agreed to this request. /;2-;3 Page 6. Item _ Meeting Date 10/21/97 FISCAL IMPACT: All costs related to the issuance of an $18,300,000 bond is paid for from bond proceeds or profits. The bonds will be secured by the project and repaid by Wasatch Property Management and will not constitute a liability or obligation to the City. Some staff time costs will be associated with monitoring compliance with the Housing Cooperation Agreement and Regulatory Agreement. Those costs will be reimbursed from the annual administrative fee paid by the owner, which is $18,300 per year or $274,500 total over the 15 year period. Also the owner will pay the City $45,750 up front as an origination fee. ATTACHMENTS A . Trust Indenture lB. Loan Agreement C - Assignment and Transfer of Deed of Trust, Security Agreement and Fixture Filing and Collateral Documents "5 D - Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants ~ E - First Supplemental Indenture of Trust ~ other (55) H:\HOME\COMMDEV\STAFF.REP\10.21.97\EUCALYPTUS [October 16, 1997 (8:32am)] /;2, --- ~ RESOLUTION NO. /8'79-2, RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA AUTHORIZING THE ISSUANCE OF MULTIFAMILY HOUSING REVENUE REFUNDING BONDS (EUCALYPTUS GROVE APARTMENTS). SERIES 1997 AND APPROVING CERTAIN ACTIONS RELATED THERETO WHEREAS, the City of Chula Vista (the "City") has determined to engage in a multifamily rental housing revenue bond finance program (the "Program") pursuant to Chapter 7. Part 5 of Division 31 of the Health and Safety Code of the State of California (the" Act") for persons and families within the income limits established by the Act; and WHEREAS, the City Council of the City {the "City Council"" finds and determines that the Program complies with the Land Use Element and the Housing Element of the City's General Plan; and WHEREAS, the City has heretofore issued its $21,885,000 Multifamily Housing Revenue Bonds (Eucalyptus Grove Project). Series 1985 (the "Prior Bonds"). in order to finance the construction and acquisition of a 376-unit multifamily residential rental project (the "Project") that is owned by Eucalyptus Grove Holdings LLC, a Utah limited liability company {the "Borrower"}; and WHEREAS, the Borrower has requested the City to issue bonds to refund the Prior Bonds in order to extend the term of the tax-exempt financing for the Project and to lower the mortgage rate on the Project; and WHEREAS, the City has determined it to be in furtherance of the public interest and the goals of the Program to issue a series of bonds to be known as the City's Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Apartments). Series 1997 (the "Bonds") for the purpose of refunding the Prior Bonds; and WHEREAS, the City intends to issue the Bonds pursuant to the provisions of Article 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the "Refunding Law") which authorizes the City to issue the Bonds to refund the Prior Bonds; and WHEREAS, there has been duly published notice of a public hearing regarding the issuance of the Bonds in accordance with the requirement of Section 147(f) of the Internal Revenue Code of 1986, as amended; and WHEREAS, members of the City Council of the City are the applicable elected representatives to approve the issuance of the Bonds of the Project following the public hearing; and WHEREAS, the City Council of the City has conducted a public hearing regarding the Issuance of the Bonds to refinance the Project, has determined it to be in the public interest for the City to issue the Bonds and has approved the issuance of the Bonds by the City; and WHEREAS, all acts, conditions and things required by the Act and the Refunding /;2 ~? Law, and by all other laws of the State of California, to exist, to have happened and to have been performed precedent to and in connection with the issuance of the Bonds exist, have happened, and have been performed in regular and due time, form and manner as required by law, and the City is now duly authorized and empowered, pursuant to each and every requirement of law, to issue such Bonds for the Purpose, in the manner and upon the terms herein provided; NOW, THEREFORE, BE IT RESOLVED the City Council of the City of Chula Vista, as follows: 1 . The above recitals, and each of them are true and correct. 2. Based upon information available from the City, State of California and federal housing programs, it is hereby found and determined that the units to be reserved for lower income individuals and families in the Project are as set forth in the form of Regulatory Agreement hereinafter mentioned. 3. The proposed form of the Loan Agreement dated as of November 1, 1997 (the "Loan Agreement") by and between the City and the Borrower presented at this meeting is hereby approved and each of the Mayor, the City Clerk and the City Manager are hereby authorized and directed, for and in the name of the City, to execute the Loan Agreement with the parties thereto in substantially the form hereby approved, with such changes therein as the officer or officers executing the same may approve, such approval to be conclusively evidenced by the execution and delivery thereof. 4. The proposed form of Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants dated as of November 1, 1997 (the "Regulatory Agreement") by and among the City, the Borrower and First Trust of California, National Association, as Trustee, presented at this meeting is hereby approved and each of the Mayor, the City Manager and the City Clerk are hereby Authorized and directed, for and in the name of the City, to execute the Regulatory Agreement with the parties thereto in substantially the form hereby approved, with such changes therein as the officer or officers executing the same may approve, such approval to be conclusively evidenced by the execution and delivery thereof. Each of the foregoing officers are also authorized to execute amendments to that certain Housing Cooperation Agreement dated August 27, 1 985 to make the terms of such agreement consistent with the terms of the Regulatory Agreement. 5. The Bonds are hereby authorized to be sold and issued pursuant to the Refunding Law to General Electric Capital Corporation in an aggregate principal amount not to exceed $19,000,000 at a purchase price equal to the principal amount of the Bonds, and with a final maturity not later than November 1, 2027. The purposed for which the proceeds to the Bonds shall be expended are the making of the loan to the Borrower in accordance with the Loan Agreement thereby enabling the proceeds of the Bonds to be applied to refund the Prior Bonds. The City hereby approves the making of the loan pursuant to the Loan Agreement to the Borrower to refinance the Project. The adoption of this resolution constitutes an approval of the issuance of the Bonds for purposes of Section 147(f) of the Internal Revenue Code of 1986, as amended. 6. First Trust of California, National Association (the "Trustee") is hereby appointed as Trustee for the City and the owners of the Bonds with respect to the Bonds, with the duties and powers of such Trustee as set orth in the Trust Indenture (the "Indenture") between the City and the Trustee; provided, however, that the Mayor or the City Manager, or his designee, may approve the selection of another trustee meeting the criteria set forth in Article XII of the Indenture if such a substitution is deemed by the Mayor or the City Manager, or his designee, to J;) ~y be advisable to consummate the delivery of the Bonds in a timely and cost-efficient manner. The Trustee is hereby requested and directed to authenticate the Bonds by executing the Trustee's certificate of authentication and registration appearing thereon and to deliver the Bonds, when duly executed and authenticated, to the parties named in the Bond Purchase Contract in accordance with written instructions executed on behalf of the City by the City Manager, or his designee, which instructions said officer is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver to the Trustee. 7. The proposed form of the Indenture presented at this meeting is hereby approved and each of the Mayor, the City Manager and the City Clerk are hereby authorized and directed for and in the name and on behalf of the City to execute, acknowledge and deliver to the Trustee the Indenture in substantially said form, with such additions thereto and/or changes therein as the officer of officer executing the same may approve (consistent with the Bond Purchase Contract approved pursuant to this resolution), such approval to be conclusively evidenced by the execution and delivery thereof. (dfJ17 -I!~) 8. The form of the Bonds as set forth in the Indenture (as the Indenture may be modified pursuant to the preceding section hereof) is hereby approved. Each of the mayor, the City Manager and the City Clerk are hereby authorized and directed to execute by manual or facsimile signature, in the name and behalf of the City and under its seal, such Bonds in an aggregate principal amount not to exceed $19,000,000 in accordance with the Indenture. 9. The proposed form of Supplemental Indenture No.1 dated as of November 1, 1997 by and between the City and First Trust of California, National Association, as Trustee, which amends, in part, the Indenture of Trust for the Prior Bonds, presented at this meeting is hereby approved and each of the Mayor, the City Manager and the City Clerk are hereby authorized and directed for and in the name of the City, to execute such Supplemental Indenture No. 1 in substantially the form hereby approved, with such changes therein as the officer or officers executing the same may approve, such approval to be conclusively evidenced by the execution and delivery thereof. 10. The City Manager, or his designee, is hereby authorized and directed to execute one or more requisitions authorizing the Trustee, or any other duly appointed trustee under the aforesaid Indenture, to pay the costs of issuing the Bonds in accordance with the provisions of the Indenture. 11. The officers of the City are hereby authorized and directed, jointly and severally, to do any and all things to execute and deliver any and all documents (including, but not limited to, any investment agreements with respect to Bond proceeds and any endorsements of the mortgage note for the Project and assignments of the City's interest under the Loan Agreement, the Indenture and other documents securing the repayment of the Bonds) which they may deem necessary or advisable in order to consummate the issuance, sale and delivery of the Bonds, and otherwise to effectuate the purposes of this resolution; and such actions previously taken by such officers are thereby ratified and confirmed. Should the Mayor be unavailable to execute any of the documents specified above, then any other available member of the City Council is hereby authorized to sign such document on behalf of the City in the place of such officer. Any document authorized to be signed by the City Clerk may be signed by a duly appointed deputy clerk. All documents signed by the facsimile signature of any member of the City Council shall be deemed to constitute an original of such document. 12. If any section, paragraph or provision of this Resolution shall be held to be /.2 ~9 invalid or unenforceable for any reason, the invalidity or unenforceability of such section, paragraph or provision shall not affect any remaining provision s of this Resolution. 13. This Resolution shall take effect from and after its adoption. Presented by ~~ Chris Salomone Director of Community Development --- [(SS:ah) H:\HOME\COMMDEV\RESOS\EUCALYPTUS (October 15,1997 (10:34am)] /u2 ~/() Approved as to form by ohn M. Kaheny ~I)ey ..f-z:-....- ....1 'b <P7\. /2- GECC/Eucalyptus WG&M Draft 10/13/97 ATTACHMENT A TRUST INDENTURE DRAFT By and Between CITY OF CHULA VISTA, CALIFORNIA and FIRST TRUST NATIONAL ASSOCIATION as Trustee Dated as of November I, 1997 Relating to the issuance of $18,300,000 Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 11- ( MIFS02...:\RE\60\47660\1387\227\IND9197U.12B TRUST INDENTURE TABLE OF CONTENTS Page PARTIES .............................................................. . 1 PREAMBLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section I .1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 3 Section 1.2. Ownership of Bonds; Effect of Action by Bondholders . . . . . . . . . . . . . . . . . . . . .. 3 Section 1.3. Effect of Headings and Table of Contents ............................... 4 Section 1.4. Date of Indenture ................................................ 4 Section 1.5. Designation of Time for Performance .................................. 4 ARTICLE II GRANTING CLAUSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 5 ARTICLE III LIMITED LIABILITY Section 3.1. Source of Payment of Bonds and Other Obligations; Disclaimer of General Liability 7 Section 3.2. Officers, Directors, etc. Exempt from Individual Liability .................... 7 ARTICLE IV THE BONDS Section 4.1. Specific Title and Terms ........................................... 8 Section 4.2. Mandatory Tender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 10 Section 4.3. Form of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 12 Section 4.4. Execution, Authentication, Delivery and Dating .......................... 13 Section 4.5. Authentication and Delivery of the Bonds to the Original Purchaser . . . . . . . . . . .. 13 Section 4.6. Gross-Up Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 13 MIFS02. .:\RE\60\4766O\1387\227\1ND9197U.128 /I-OZ-. ARTICLE V REGISTRATION, EXCHANGE AND GENERAL PROVISIONS REGARDING THE BONDS Section 5.1. Registration, Transfer and Exchange .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 14 Section 5.2. Mutilated, Destroyed, Lost and Stolen Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . .. 15 Section 5.3. Payment of Interest on the Bonds. ................................... 15 Section 504. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 15 Section 5.5. Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 16 Section 5.6. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 16 ARTICLE VI REDEMPTION OF BONDS Section 6.1. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 17 Section 6.2. Mandatory Redemption ........................................... 17 Section 6.3. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 18 Section 604. Deposit of Redemption Price ....................................... 18 Section 6.5. Bonds Payable on Redemption Date .................................. 18 Section 6.6. Partial Redemption .............................................. 18 Section 6.7. Extraordinary Redemption ......................................... 19 Section 6.8. Bondholders' Election to Waive Redemption Upon Determination of Taxability 19 ARTICLE VII REDEMPTION OF PRIOR BONDS; APPLICATION OF PROCEEDS Section 7.1. Proceeds From Sale of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 21 Section 7.2. Creation of Bond Proceeds Fund .................................... 21 Section 7.3. Costs of Issuance Fund ........................................... 21 Section 704. Additional Funds ............................................... 22 ARTICLE VIII FUNDS Section 8.1. Bond Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 23 Section 8.2. Rebate Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 23 Section 8.3. Replacement Reserve Fund ........................................ 24 Section 804. Tax Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 26 Section 8.5. Debt Service Reserve Fund ........................................ 27 Section 8.6. Project Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 28 Section 8.7. Application of Special Funds Upon Event of Default ...................... 29 ii,A_~ MIFS02...:\RE\60\47660\1387\127\IND9197U.12B Section 8.8. Reserve Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 ARTICLE IX SECURITY FOR AND INVESTMENT OF SPECIAL FUNDS Section 9.1. Investment of Special Funds ....................................... 32 Section 9.2. Arbitrage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 32 Section 9.3. Application of Special Funds After Bonds Fully Paid ...................... 32 Section 9.4. Un surrendered Bonds ............................................ 33 ARTICLE X REPRESENTATIONS AND COVENANTS Section 10.1. General Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 34 Section 10.2. No Encumbrance on Trust Estate ................................... 34 Section 10.3. General Covenants ............................................. 35 Section 10.4. Concerning the Loan Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 35 Section 10.5. Inspection of Records ........................................... 35 Section 10.6. Advances by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 35 Section 10.7. Appointment of Successor Trustee .................................. 35 Section 10.8. Tax Exempt Status of Bonds ...................................... 35 Section 10.9. Performance by the Developer ..................................... 36 Section 10.10. Non-Arbitrage and Other Tax Covenants ............................. 36 Section 10.11. Public Approval of Bonds ....................................... 36 ARTICLE XI DEFAULT; REMEDIES Section 11.1. Events of Default .............................................. 37 Section 11.2. Acceleration of Maturity; Rescission and Annulment. . . . . . . . . . . . . . . . . . . . .. 38 Section 11.3. Application of Money Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 39 Section 11.4. Trustee May Enforce Claims without Possession of Bonds. . . . . . . . . . . . . . . . .. 39 Section 11.5. Limitation on Suits ............................................. 40 Section 11.6. Unconditional Right of Bondholders to Receive Principal, Premium and Interest .. 40 Section 11.7. Restoration of Positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 40 Section 11.8. Rights and Remedies Cumulative ................................... 40 Section 11.9. Delay or Omission Not Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 40 Section 11.1 O. Control by Bondholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 41 Section 11.11. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 41 Section 11.12. Remedies Under Loan Agreement or Note ...... . . . . . . . . . . . . . . . . . . . . .. 42 Section 11.13. Waiver of Appraisement and Other Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . .. 42 Section 11.14. Suits to Protect the Trust Estate ................................... 42 Section 11.15. Remedies Subject to Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 42 iii II-t/ MIFS02,.. :\RE\60\47660\ 1387\227\1ND9I91U .128 ARTICLE XII THE TRUSTEE Section 12.1. Certain Duties and Responsibilities of Trustee .......................... 43 Section 12.2. Notice of Potential Defaults ........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 44 Section 12.3. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 44 Section 12.4. Not Responsible for Recitals ...................................... 45 Section 12.5. May Hold Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 45 Section 12.6. Money Held in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 45 Section 12.7. Compensation and Reimbursement .................................. 46 Section 12.8. Trustee Required; Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 46 Section 12.9. Resignation and Removal; Appointment of Successor ........ . . . . . . . . . . . .. 46 Section 12.10. Acceptance of Appointment by Successor ............................ 47 Section 12.11. Merger, Conversion. Consolidation or Succession to Business .............. 48 Section 12.12. Requirements for Bondholder Consent and Instruction to the Trustee ......... 48 ARTICLE XIII SUPPLEMENTAL INDENTURES; AMENDMENT OF LOAN AGREEMENT AND LOAN DOCUMENTS Section 13.1. Supplemental Trust Indentures without Bondholders' Consent ............... 50 Section 13.2. Supplemental Trust Indentures with Bondholders' Consent ................. 51 Section 13.3. Supplemental Trust Indentures Part of Indenture . . . . . . . . . . . . . . . . . . . . . . . .. 52 Section 13.4. Discretion of Trustee to Execute Supplemental Trust Indenture .............. 52 Section 13.5. Consents and Opinions .......................................... 52 Section 13.6. Certificate of Developer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 52 Section 13.7. Notation of Modification on Bonds; Preparation of New Bonds .............. 53 Section 13.8. Amendments to Loan Agreement and Loan Documents Not Requiring Consent of Bondholders ............................................................ 53 Section 13.9. Amendments to Loan Agreement and Loan Documents Requiring Consent of Bondholders ............................................................ 54 Section 13.10. Consents and Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 55 Section 13.11. Certificate of Developer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 55 ARTICLE XIV DEFEASANCE Section 14.1. Payment of Indenture Indebtedness; Satisfaction and Discharge of Indenture 56 Section 14.2. Trust for Payment of Debt Service .................................. 56 ARTICLE XV MISCELLANEOUS IV ,A-~ MIFS02...:\RE\60\47660\1387\227\IND9197U .128 Section 15.1. Notices ..........................,.......................... 58 Section 15.2. Notice to Bondholders; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 60 Section 15.3. Successors and Assigns .......................................... 60 Section 15.4. Benefits of Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 60 Section 15.5. Certain Rights of GE Bondholder .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 60 Section 15.6. Proof of Execution of Writings and Ownership. . . . . . . . . . . . . . . . . . . . . . . . .. 61 Section 15.7. Legal Holidays ................................ . . . . . . . . . . . . . . .. 61 Section 15.8. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 61 Section 15.9. Severability .................................................. 61 Section 15.10. Execution in Several Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 61 Section 15.11. Nonrecourse Obligation of the Developer. . . . . . . . . . . . . . . . . . . . . . . . . . . .. 61 TESTIMONIUM ........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 59 SIGNATURES ......................................................... . 59 EXHIBIT A EXHIBIT B EXHIBIT C FORM OF BOND COSTS OF ISSUANCE REQUISITION REQUESTS FOR WITHDRAWALS FROM REPLACEMENT RESERVE FUND OR PROJECT FUND INVESTMENT LETTER EXHIBIT D v ,A-" MIFS02... :\RE\60\47660\l387\227\1ND9197U .128 TRUST INDENTURE THIS TRUST INDENTURE dated as of November I, 1997, is entered into by the CITY OF CHULA VISTA, CALIFORNIA, a public body corporate and politic and a political subdivision duly organized and existing under the laws of the State of California (the "Issuer"), and FIRST TRUST, NATIONAL ASSOCIATION, a national banking association, duly organized and existing under the laws of the United States of America, with its principal corporate trust office in Seattle, Washington, as ttustee (the "Trustee"). RECITALS: WHEREAS, the Issuer is a public body corporate and politic and a political subdivision duly organized and existing under the laws of the State of California with full and lawful power and authority to enter into this Indenture: WHEREAS, the Issuer has been empowered pursuant to Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California, as amended (the "Act"), among other things, to provide financing for dwelling units suitable for occupancy by persons or families of low or moderate income and to issue revenue bonds for the purpose of making mortgage loans with respect to qualified housing developments and to refund such revenue bonds: WHEREAS, the City Counsel of the Issuer has determined to engage in a program of making mortgage loans to owners of such multifamily rental housing pursuant to the Act, and has determined to borrow money for such purpose by the issuance of revenue bonds as authorized by the Act: WHEREAS, pursuant to and in accordance with the Act, the Issuer has heretofore entered into a Trust Indenture dated as of November I, 1985 between the Issuer and Security Pacific National Bank, as trustee (the "Prior Indenture"), pursuant to which the Issuer issued its Multifamily Housing Revenue Bonds (Eucalyptus Grove Project) Series 1985, in the original aggregate principal amount of $21,885,000 (the "Prior Bonds"), the proceeds of which were used to make a loan (the "Prior Loan") to Eucalyptus Grove International, a California Limited Partnership (the "Prior Developer"), to provide financing for a multifamily rental residential housing project (the "Project"), located within the City of Chula Vista, California to be occupied partially (at least 20 percent) by "individuals of low or moderate" income within the meaning of Section 103(b)(4)(A) of the Internal Revenue Code of 1954, as amended, for the public purpose of assisting persons of low and moderate income within the State of California to obtain decent, safe and sanitary housing: WHEREAS, on or about March 21, 1996, the Prior Developer, with the consent of the Issuer, conveyed the Project to Eucalyptus Grove Holdings, LLC, a Utah limited liability company (the "Developer") and the Developer assumed the obligations of the Prior Developer under the terms of the Prior Loan and the documents, instruments and agreements executed in connection therewith: A- 7 MIFS02...:\RE\60\47660\1387\227\1ND9197U.128 WHEREAS, at the Developer's request, pursuant to a resolution duly adopted on October 21, 1997 (the "Resolution"), the Issuer has agreed to. issue its Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project) Series 1997, in the original aggregate principal amount of $18,300,000 (the "Bonds"), for the purpose of providing funds to refund the Prior Bonds. At the Developer's request, in order to accomplish the prepayment and the redemption of the Prior Bonds as set forth above, the Issuer has agreed to issue the Bonds for the purpose of refinancing the Project, and providing for the redemption of the Prior Bonds; WHEREAS, simultaneously with the delivery of this Indenture, the Issuer and the Developer will enter into a Loan Agreement dated as of November I, 1997 (the "Loan Agreement"), whereby the Developer will agree to make loan payments at the times and in amounts sufficient to pay and redeem, and provide for the payment of the principal of, Unauthorized Prepayment Premium (as hereinafter defined), if any, Prepayment Premium (as hereinafter defined), if any, and Interest (as hereinafter defined) on the Bonds and to pay the Purchase Price (as hereinafter defined) thereof, when due, and to pay the fees and expenses of the Issuer and Trustee and any paying agent for the Bonds; WHEREAS, as evidence of its repayment obligation under the Loan Agreement, the Developer will execute and deliver its promissory note (the "Note") in the form required by the Loan Agreement; WHEREAS, the obligations of the Developer under the Loan Agreement will be secured, in part, by a lien on and security interest in the Project pursuant to a Deed of Trust, Security Agreement and Fixture Filing, an Assignment of Service Contracts, Warranties and Guaranties, an Assignment of Management Agreement, and an Assignment of Rents and Leases, each dated as of November I, 1997, made by the Developer in favor of the Issuer, as assigned to the Trustee for the benefit of the Bondholders (as hereinafter defined); WHEREAS, the Bonds shall constitute special and limited obligations of the Issuer payable solely out of the Trust Estate (as hereinafter defined); and WHEREAS, the execution and delivery of this Indenture and the issuance, execution and delivery of the Bonds have been in all respects duly and validly authorized by the Resolution. NOW, THEREFORE, THIS INDENTURE WITNESSETH: It is hereby covenanted and declared that the Bonds are to be authenticated and delivered and the property subject to this Indenture is to be held and applied by the Trustee, subject to the covenants, conditions and trusts hereinafter set forth, and the Issuer does hereby covenant and agree to and with the Trustee, for the benefit (except as otherwise expressly provided herein) of the Bondholders, as follows: 2 ,A--Y M[fS02..,:\RE\60\47660\1387\227\1ND9197U .128 ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) Capitalized tenns not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement. (b) The tenns defined in this Article have the meanings assigned to them in this Article. Singular tenns shall include the plural as well as the singular, and vice versa. (c) The definitions in the recitals to this instrument are for convenience only and shall not affect the construction of this instrument. (d) All accounting tenns not otherwise defined herein shall have the meanings assigned to them, and all computations herein provided for shall be made, in accordance with generally accepted accounting principles. All references herein to "generally accepted accounting principles" refer to such principles as they exist at the date of application thereof. (e) All references in this instrument to designated "Articles," "Sections" and other subdivisions are to the designated Articles, Sections and subdivisions of this instrument as originally executed. (f) The tenns "herein," "hereof' and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. (g) All references in this instrument to a separate instrument are to such separate instrument as the same may be amended or supplemented from time to time pursuant to the applicable provisions thereof. Section 1.2. Ownership of Bonds; Effect of Action by Bondholders. (a) The ownership of the Bonds shall be proved by the Bond Register. (b) Any request, demand, authorization, direction. notice, consent, waiver or other action by the Bondholders shall bind every future Bondholder and the Registered Owner of every Bond issued upon the transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Bonds. 3 /1- 9 MIFS02...;\RE\60\47660\1387\227\IND9197U.12B Section 1.3. Effect of Headings and Table of Contents. The Article and Section headings herein and in the Table of Contents are for convenience only and shall not affect the construction hereof. Section 1.4. Date of Indenture. The date of this Indenture is intended as and for a date for the convenient identification of this Indenture and is not intended to indicate that this Indenture was executed and delivered on said date. Section 1.5. Designation of Time for Performance. Except as otherwise expressly provided herein, any reference in this Indenture to the time of day shall mean the time of day in the city where the Trustee maintains its place of business for the performance of its obligations under this Indenture. [End of Article I] 4 11-10 MIFS02.. .;\RE\60\47660\1387\227\1ND9197U .128 ARTICLE II GRANTING CLAUSES To secure the payment of the principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on, and Purchase Price of, the Bonds and all other Indenture Indebtedness and the performance of the covenants herein and in the Bonds contained, and to declare the terms and conditions on which the Bonds are secured, and in consideration of the premises and of the purchase of the Bonds by the Bondholders, the Issuer by these presents does grant, bargain, sell, alien, remise, release, convey, assign, transfer, mortgage, hypothecate, pledge, set over and confirm to the Trustee, all and singular, the following described property: (a) All right, title and interest of the Issuer in, to and under the Loan Agreement and the Note, including, without limitation, all rents, revenues and receipts derived by the Issuer from Developer relating to the Project and including, without limitation, all Pledged Revenues, Basic Loan Payments and Additional Payments derived by the Issuer under and pursuant to and subject to the provisions of the Loan Agreement (except the Unassigned Issuer's Rights), provided that the pledge and assignment hereby made shall not impair or diminish the obligations of the Issuer under the provisions of the Loan Agreement. (b) All right, title and interest of the Issuer in, to and under, together with all rights, remedies, privileges and options pertaining to, the Loan Documents, including rights of a third party beneficiary, and all other payments, revenues and receipts derived by the Issuer under and pursuant to and subject to the provisions of the Loan Documents, except for the Unassigned Issuer's Rights. (c) All rights and interest of the Issuer under and pursuant to, together with all rights, remedies, privileges and options pertaining to, the Land Use Restriction Agreement including, but without limiting the generality of the foregoing, the present and continuing right to bring actions and proceedings under the Land Use Restriction Agreement or for the enforcement thereof and to do any and all things which the Issuer is or may be entitled to do thereunder. (d) Money and investments from time to time on deposit in, or forming a part of, the Bond Fund, the Tax Escrow Fund, the Replacement Reserve Fund, the Project Fund, the Debt Service Reserve Fund or any Additional Fund (but excluding the Rebate Fund), subject to the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein. (e) Any and all other real or personal property of every kind and nature or description, which may from time to time hereafter, by delivery or by writing of any kind, be subjected to the lien of this Indenture as additional security by the Issuer or anyone ~m its part or with its consent, or which pursuant to any of the provisions hereof or of the Loan Agreement may come into the possession or control of the Trustee or a receiver appointed pursuant to this Indenture; and the Trustee is hereby authorized to receive any and all such property as and for additional security for the Bonds and to hold and apply all such property subject to the terms hereof. 5 11- II MIFS02...:\RE\60\47660\1387\227\1ND9197U.12B TO HAVE AND TO HOLD all said property, rights and privileges of every kind and description, real, personal or mixed, hereby and hereafter (by supplemental indenture or otherwise) granted, bargained, sold, aliened, remised, released, conveyed, assigned, transferred, mortgaged, hypothecated, pledged, set over or confirmed as aforesaid, or intended, agreed or covenanted so to be, together with all the appurtenances thereto appertaining (said property, rights and privileges being herein collectively called the "Trust Estate") unto the Trustee and its successors and assigns forever; BUT IN TRUST, NEVERTHELESS, for the benefit and security of the Bondholders, as herein provided. [End of Article II] 6 A - I 2.... MIFS02...:\RE\60\47660\1387\227\IN09197U,128 ARTICLE III LIMITED LIABILITY Section 3.1. Source of Payment of Bonds and Other Obligations; Disclaimer of General Liability. (a) The Bonds, the Unauthorized Prepayment Premium, if any, the Prepayment Premium, if any, and Interest shall be special limited obligations of the Issuer payable exclusively out of the Trust Estate and are secured by a pledge and assignment of the Trust Estate to the Trustee in favor of the Bondholders, as provided in this Indenture. The Bonds and the Unauthorized Prepayment Premium, if any, the Prepayment Premium, if any, and Interest shall not constitute a debt or general obligation of the Issuer or the State of California, and are not payable in any manner by taxation, and the Bonds shall not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. (b) No provision, covenant or agreement contained in this Indenture or the Bonds, or any obligation herein or therein imposed upon the Issuer, or the breach thereof. shall constitute or give rise to or impose upon the Issuer a pecuniary liability or a charge upon its general credit. In making the agreements, provisions and covenants set forth in this Indenture, the Issuer has not obligated itself except with respect to the Project and the application of the payments, revenues and receipts therefrom as hereinabove provided. Section 3.2. Officers, Directors, etc. Exempt from Individual Liability. No recourse under or upon any covenant or agreement of this Indenture, or of the Bonds, or for any claim based thereon or otherwise in respect thereof, shall be had against any past, present or future elected or appointed official, officer, employee or agent of the Issuer or the governing body of the Issuer or the Trustee, or of any successor, either directly or through the Issuer or the Trustee, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the Bonds issued hereunder are limited and special obligations, and that no personal liability whatever shall attach to, or is or shall be incurred by, any elected or appointed official, officer, employee or agent of the Issuer or the governing body of the Issuer or the Trustee or any successor of either, or any of them, because of the issuance of the Bonds, or under or by reason of the covenants or agreements contained in this Indenture or in the Bonds or implied therefrom; provided, that the foregoing provisions of this Section 3.2 shall not apply to any independent professional. or firm of independent professionals, acting in any capacity. [End of Article III] MIFS02...:\RE\60\47660\1387\227\IND9197U .128 711_/~ ARTICLE IV THE BONDS Section 4.1. Specific Title and Terms. (a) The Bonds shall be entitled "Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997". The total principal amount of Bonds that may be issued hereunder is hereby expressly limited to $18,300,000. (b) The Bonds shall be issuable as a single series of registered bonds without coupons. Unless the Issuer shall direct otherwise, the Bonds shall be lettered "R" and shall be numbered consecutively from R-l upward. (c) The Bonds shall mature on November 1. 2027. (d) The Bonds shall be dated the Closing Date and shall bear Interest from such date, or the most recent date to which Interest has been paid or duly provided for, as set forth in this Article. (e) Interest shall be due and payable on the Bonds, in arrears, on each applicable Interest Payment Date. (I) While any Event of Default exists, Interest shall be payable on overdue principal on the Bonds and (to the extent legally enforceable) on any overdue installment ofInterest on the Bonds at the Default Rate. (g) The Issuer intends to conform strictly to the usury laws applicable to this Indenture and the Bonds and all agreements made in the Bonds, this Indenture and the Loan Documents are expressly limited so that in no event whatsoever shall the amount paid or agreed to be paid to the Bondholders as interest or other amounts paid for the use of money advanced or to be advanced hereunder exceed the highest lawful rate prescribed under any law which a court of competent jurisdiction may deem apphcable hereto. If, from any circumstances whatsoever, the fulfillment of any provision of the Bonds, this Indenture or the Loan Documents shall involve the payment of interest in excess of the limit prescribed by any law which a court of competent jurisdiction may deem applicable hereto, then, ipso facto, the obligation to pay Interest hereunder shall be reduced to the maximum limit prescribed by law; and if from any circumstances whatsoever, the Bondholders shall ever receive anything of value deemed interest, the amount of which would exceed the highest lawful rate, such amount as would be excessive interest shall be deemed to have been applied, as of the date of receipt by the Bondholders, to the reduction of the principal remaining unpaid hereunder and not to the payment of Interest, or if such excessive interest exceeds the unpaid principal balance, such excess shall be refunded to the Developer. This paragraph shall control every other provision of the Bonds, this Indenture and all Loan Documents. MIFS02...:\RE\60\47660\1387\227\1ND9197U.128 8 /I, It{ In detennining whether the amount of interest charged and paid might otherwise exceed the limit prescribed by law, the Issuer intends and agrees that (i) interest shall be computed upon the assumption that payments under the Loan Agreement and other Loan Documents will be paid according to the agreed tenns, and (ii) any sums of money which are taken into account in the calculation of Interest, even though paid at one time, shall be spread over the stated tenn of the Bonds. (h) Payments of principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on the Bonds shall be made on the applicable Bond Payment Dates to the Bondholders in immediately available funds at the address of each Bondholder as it appears on the Bond Register or at such other address as may be specified by such Bondholder. (i) (i) Commencing on December 31, 1998, and on the final Basic Loan Payment Date of each calendar year thereafter, there shall be deposited into the Replacement Reserve Fund an amount, if any, equal to the Replacement Reserve Requirement; provided, however, following the earliest to occur of (1) the purchase of the Bonds on the Mandatory Tender Date; or (2) payment of the Bonds in full, the Developer shall have no further obligation to make deposits into the Replacement Reserve Fund. (ii) Commencing on November 30, 1997, and on each Basic Loan Payment Date thereafter, there shall be deposited into the Tax Escrow Fund the amounts set forth in Section 3.4 of the Loan Agreement. (iii) (x) Commencing on November 30, 2002, and on each Basic Loan Payment Date thereafter, there shall be deposited into the Scheduled Sinking Payment Account of the Debt Service Reserve Fund the Scheduled Sinking Fund Payments, and (y) commencing on December 20, 1997, and on each Basic Loan Payment Date thereafter, there shall be deposited into the NCF Payment Account of the Debt Service Reserve Fund the NCF Reserve Payments, as provided in Section 2.16 of the Loan Agreement, and as provided in Section 8.5 hereof. (j) Coupon Interest shall be computed on the basis of a 360-day year, for the actual number of days elapsed in the period for which such Coupon Interest is payable. (k) In the event there is not paid any installment of principal, Unauthorized Prepayment Premium, if any, Purchase Price, Prepayment Premium, if any, or Interest required to be paid by the tenns of the Bonds and this Indenture, after the end of the fifth (5th) day following such failure to pay, the Trustee shall impose a Late Charge, in addition to any interest payable at the Default Rate on any such overdue payments, equal to the greater of (i) five percent (5%) per annum in excess of the Coupon Rate otherwise payable on the Loan or (ii) five percent (5%) of the past due amount notwithstanding the date on which such payment is actually paid to the Bondholders. Any Late Charge imposed by the Trustee in accordance with this Section shall be due and payable on demand on the sixth (6th) day following such failure to pay. Any such Late Charge shall not be deemed to be additional interest or a penalty, but shall be deemed to be liquidated damages because of the difficulty in computing the actual amount of damages in advance. If any such Late Charge is in excess of the amount permitted to be charged 9 MIFS02... "\RE\60\47660\ 1387\227\JND9197U .128 Ii ,/~ under applicable law, the Trustee, for the benefit of the Bondholders, shall be entitled to collect the Late Charge at the highest rate permitted by such law, and the Trustee shall be entitled to rely on the calculation of such amount by the GE Bondholder. Until any and all Late Charges and interest at the Default Rate earned after an Event of Default are paid in full, the amount thereof shall be added to the indebtedness secured by this Indenture. (I) All calculations with respect to payments ofInterest (including, without limitation, Coupon Interest, Gross-Up Amount and any Late Charges) shall be calculated by the GE Bondholder and shall be set forth in a written notice from the GE Bondholder to the Developer and the Trustee; provided, however, that in the event that none of the Bonds are held by a GE Bondholder, then the Trustee shall calculate such amounts. Deposits to the Tax Escrow Fund due hereunder shall be calculated by the GE Bondholder, as provided in Section 3.4 of the Loan Agreement, and shall be set forth in a written notice from the GE Bondholder to the Developer and the Trustee, and in the event that none of the Bonds are then held by a GE Bondholder, the Trustee shall calculate such amounts. Monthly deposits into the NCF Payment Account of the Debt Service Reserve Fund and annual deposits into the Replacement Reserve Fund shall be calculated by the Developer, as provided in Section 2.14 of the Loan Agreement, failing which, the GE Bondholder may calculate such amounts in its sole and absolute discretion, and in the event that none of the Bonds are then held by a GE Bondholder, the Trustee shall calculate such amounts. Section 4.2. Mandatory Tender. (a) At any time during the Initial Rate Period on or after the GECC Tender Commencement Date, the GE Bondholder or a Majority of Holders shall have the option to require the purchase of all of the Bonds at the Purchase Price in the manner set forth in this Section. To exercise such option, the GE Bondholder or a Majority of Holders shall deliver to the Trustee, with a copy to the Developer, a written notice (the "GECC Purchase Notice") stating (A) that all of the Outstanding Bonds are to be purchased and (B) the date upon which such Bonds are required to be purchased (the "Mandatory Tender Date") which date shall be not prior to the seventh (7th) day after the date of delivery of such GECC Purchase Notice to the Trustee and Developer. A GECC Purchase Notice shall be irrevocable and effective upon receipt by the Trustee. Not later than two (2) Business Days after receipt of the GECC Purchase Notice, the Trustee shall send to each Bondholder notice of the Mandatory Tender (the "Mandatory Tender Notice") which notice shall: (i) specify the Mandatory Tender Date; (ii) state that the Bonds must be delivered by the Bondholders to the Office of the Trustee on or prior to such Mandatory Tender Date, together with all necessary endorsements for transfer, and shall be purchased on such Mandatory Tender Date at a purchase price with respect to each Bond equal to the sum of (I) the outstanding Bond Principal of such Bond, (2) accrued and unpaid Interest thereon (including, without limitation, any Gross-Up Amount with respect to such Bond) to the Mandatory Tender Date, and (3) all other amounts due and payable to the Bondholders hereunder (collectively, the "Purchase Price"), and that any Bonds that are not so delivered to the 10 MIFS02 ..:\RE\60\47660\1387\227\1ND9197U.12B If-I' Trustee shall be deemed to have been tendered for purchase by the Bondholders and, provided that sufficient moneys have been deposited with the Trustee to pay the Purchase Price of the Bonds in full on the Mandatory Tender Date as provided herein, shall cease to accrue Interest from and after the Mandatory Tender Date (except for the Gross-Up Amount as provided in Section 4.6 hereof); and (iii) state that to the extent there has not been deposited with the Trustee sufficient moneys to pay the Purchase Price of the Bonds in full on the Mandatory Tender Date as provided herein, an Event of Default under this Indenture shall occur which may result in the acceleration of the Bonds. (b) Upon receipt of a GECC Purchase Notice, the Trustee shall give Immediate Notice of the Mandatory Tender to the Developer not later than 11:00 a.m. Trustee's Time, on the sixth (6th) calendar day immediately preceding the Mandatory Tender Date, of the principal amount of Bonds to be purchased pursuant to such GECC Purchase Notice and the Mandatory Tender Date specified therein. (c) Each Owner shall be required to tender its Bonds to the Trustee for purchase as provided herein and in the Mandatory Tender Notice, in whole, at a price equal to the Purchase Price on the Mandatory Tender Date. The Holder of any Bond shall tender such Bond to the Trustee for purchase hereunder, by delivering such Bond to the Trustee, at the Office of the Trustee, unless otherwise specified in the Mandatory Tender Notice, by not later than 10:30 a.m. Trustee's Time on the Mandatory Tender Date, endorsed in blank or accompanied by a blank bond power. To the extent sufficient moneys have been deposited with the Trustee to pay the full amount of the Purchase Price of the Bonds on the Mandatory Tender Date as provided herein, any Un surrendered Bonds shall be deemed to be tendered for purchase and purchased from the Holders thereof on the Mandatory Tender Date and the Holders thereof shall not be entitled to receive Interest on any such Unsurrendered Bond for any period on and after the Mandatory Tender Date (except for the Gross-Up Amount as provided in Section 4.6 hereof). (d) Not less than five (5) days prior to the Mandatory Tender Date, the Developer shall deliver to the Trustee a written certificate approved by the GE Bondholder setting forth the amount of Gross-Up Amount to be due on the Mandatory Tender Date, and the Trustee thereafter shall direct the Developer to irrevocably deposit or cause to be deposited in the Bond Fund an amount sufficient to pay, together with any other moneys on deposit in the Bond Fund. the Purchase Price of the Bonds tendered or deemed tendered for purchase on the Mandatory Tender Date. In the event the Developer does not deliver said certificate to the Trustee setting forth the amount of Gross-Up Amount due, the GE Bondholder shall provide such certificate to the Trustee not less than one (I) Business Day prior to the Mandatory Tender Date; provided, however, that in the event that none of the Bonds are held by a GE Bondholder, the Trustee shall retain at the expense of the Developer a firm of Independent certified public accountants to calculate the Gross-Up Amount due and payable on the Mandatory Tender Date. On the Mandatory Tender Date, the Trustee shall pay to each of the Bondholders an amount equal to the Purchase Price of its Bonds. II A-11 MIFS02 ...;\RE\60\47660\ 1387\227\IND9197U .128 (e) At least five (5) days prior to the Mandatory Tender Date, the Developer will appoint a remarketing agent for the Bonds (the "Remarketing Agent") and will notify the Issuer and the Trustee of such appointment in writing. The Developer will promptly enter into a written agreement with the Remarketing Agent in which, among other things, (i) the Remarketing Agent shall designate its principal office to the Developer, the Issuer and the Trustee, (ii) the Remarketing Agent shall agree to perform the duties and obligations imposed upon it hereunder, (iii) the Remarketing Agent shall agree to hold all money delivered to it hereunder in trust for the benefit of the Person which shall have so delivered such money until the Bonds to be purchased with such money shall have been delivered to or for the account of such Person, and (iv) the Developer and the Remarketing Agent shall agree upon the compensation to be paid to the Remarketing Agent by the Developer for remarketing the Bonds. (I) Not less than three (3) days prior to the Mandatory Tender Date, the Remarketing Agent shall determine and shall notify the Trustee and the Developer in writing of the interest rate to be in effect for the period beginning on the Mandatory Tender Date and ending upon the maturity of the Bonds, which would be the lowest rate that would, in the opinion of the Remarketing Agent, result in the Remarketing Agent being able to remarket the Bonds at par on the Mandatory Tender Date, taking into account relevant market conditions and credit rating factors as they exist on such date; provided that such interest rate may not exceed the highest interest rate permitted by law. From and after the Mandatory Tender Date, the interest rate so determined shall be the interest rate borne by the Bonds. The Remarketing Agent shall offer for sale and use its best efforts to remarket the Bonds tendered or deemed tendered for purchase pursuant to this Section 4.2 for delivery on the Mandatory Tender Date at a price of par. The proceeds of the sale of Bonds remarketed by the Remarketing Agent shall be delivered by the Remarketing Agent to the Trustee for deposit in the Bond Fund as provided in subsection (d) of this Section. The Remarketing Agent shall have no obligation under any circumstances to advance its own money in connection with the remarketing of Bonds hereunder. (g) Not later than the Business Day immediately preceding the Mandatory Tender Date, the Remarketing Agent shall provide the Trustee in writing with the names, addresses, tax identification numbers and all other information requested by the Trustee relating to the purchasers of Bonds which have been remarketed by the Remarketing Agent as of that time, and the Trustee shall prepare new Bonds (with appropriate changes, deletions and insertions) for each Bond purchased on the Mandatory Tender Date, shall register such new Bonds in the Bond Register in the name of the Persons identified by the Remarketing Agent as the purchasers thereof, and shall deliver such new Bonds to such purchasers. (h) Notwithstanding the foregoing or anything to the contrary contained herein, the Purchase Price for each of the Bonds Outstanding shall be due and payable to each of the Bondholders on the Mandatory Tender Date under all circumstances and regardless of whether or not the Remarketing Agent is successful in remarketing the Bonds as contemplated in this Section 4.2. Section 4.3. Form of Bonds. The Bonds and the certificate of authentication shall be substantially in the form set forth on Exhibit A attached hereto, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture. MIFS02...:\RE\60\47660\1387\227\1ND9197U.128 12 A _ I V Section 4.4. Execution, Authentication, Delivery and Dating. (a) The Bonds shall be executed on behalf of the Issuer by the manual or facsimile signature of its Mayor and attested by the manual or facsimile signature of the City Clerk of the Issuer and shall have the corporate seal of the Issuer affixed thereto or imprinted thereon. Bonds bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Issuer shall bind the Issuer. notwithstanding that such individuals or any of them shall have ceased to hold such offices prior to the authentication and delivery of the Bonds or shall not have held such offices at the date of the Bonds. (b) At any time and from time to time after the execution and delivery of this Indenture. the Issuer may deliver Bonds executed by the Issuer to the Trustee for authentication and the Trustee shall authenticate and deliver such Bonds as in this Indenture provided and not otherwise. (c) No Bonds shall be secured by, or be entitled to any lien, right or benefit under, this Indenture or be valid or obligatory for any purpose. unless there appears on such Bonds a certificate of authentication substantially in the form provided for herein, executed by the Trustee by manual signature, and such certificate upon any Bonds shall be conclusive evidence, and the only evidence, that such Bonds have been duly authenticated and delivered hereunder. Section 4.5. Authentication and Delivery of the Bonds to the Original Purchaser. Upon the execution and delivery of this Indenture, Bonds in the aggregate principal amount authorized in this Article shall be executed by the Issuer and delivered to the Trustee for authentication, and such Bonds shall thereupon be authenticated and delivered by the Trustee to the original purchasers thereof, upon order executed by an Authorized Issuer Representative. Section 4.6. Gross-Up Amount. In addition to all other rights and remedies to which it is entitled hereunder, under the Loan Agreement, under the Note and under applicable law, upon the occurrence of a Determination of Taxability, each current and former Bondholder, as applicable, shall be entitled to receive payment of the Gross-Up Amount relating to direct or indirect ownership of the Bonds during the Initial Rate Period. In addition, the Trustee shall be reimbursed by the Developer for its reasonable fees and expenses incurred in connection with any Determination of Taxability. [End of Article IV] 13 /1-" MIFS02...:\RE\60\47660\1387\227\1ND9197U.128 ARTICLE V REGISTRATION, EXCHANGE AND GENERAL PROVISIONS REGARDING THE BONDS Section 5.1. Registration, Transfer and Exchange. (a) The Issuer shall cause to be kept at the Office of the Trustee a register (the "Bond Register") in which. subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of the Bonds and registration of transfers of the Bonds entitled to be registered or transferred as herein provided. The Trustee is hereby appointed "Bond Registrar" for the purpose of registering and transferring the Bonds as herein provided. (b) Upon surrender for transfer of the Bonds at the Office of the Trustee, the Issuer shall execute. and the Trustee shall authenticate and deliver. in the name of the designated transferee or transferees. new Bonds of Authorized Denominations and of like principal amounts. (c) Any Bonds surrendered upon any exchange or transfer provided for in this Indenture shall be promptly cancelled by the Trustee. (d) Any Bonds issued upon any transfer or exchange of Bonds shall be the valid obligation of the Issuer and entitled to the same security and benefits under this Indenture as the Bonds surrendered upon such transfer or exchange. (e) Every Bond presented or surrendered for transfer or exchange shall contain, or be accompanied by, all necessary endorsements for transfer. (f) No service charge shall be made for any transfer or exchange of the Bonds. but the Issuer or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of the Bonds. Any such costs incurred on the Mandatory Tender Date as a result of any transfer or exchange of Bonds on that date shall be paid by the Developer. Thereafter, such sums shall be paid in every instance by the transferor or transferee of the Bonds. (g) The Issuer shall not be required (i) to transfer or exchange any Bonds during a period beginning at the opening of business fifteen (15) days before the day of the mailing of a notice of redemption of the Bonds and ending at the close of business on the day of such mailing, or (ii) to transfer or exchange any Bonds so selected for redemption, or (iii) to transfer or exchange any Bonds during a period beginning on the date notice of Mandatory Tender is given to the Bondholders and ending on the Mandatory Tender Date. (h) Without the prior written consent of the Issuer, the Bonds shall be transferable only to a Permitted Transferee who, in other than the case of a Permitted Transferee under clause (j) of such defined term, shall have delivered to the Trustee an Investment Letter in the form attached hereto as Exhibit D. The Bonds shall be fully transferable without the consent of the Developer. 14 /I-~ MIFS02....\RE\60\47660\1387\227\1ND9197U.128 (i) The Trustee shall provide to the Issuer a list of the Bondholders shown on the Bond Register within ten (10) days. from receipt of a written request for such a list from the Issuer. Section 5.2. Mutilated, Destroyed, Lost and Stolen Bonds. (a) If (i) any mutilated Bonds are surrendered to the Trustee, or the Issuer and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Bonds, and (ii) there is delivered to the Issuer and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Issuer or the Trustee that such Bonds have been acquired by a bona fide purchaser, the Issuer shall execute and upon its request the Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Bonds, new Bonds of like tenor and principal amount, bearing numbers not contemporaneously Outstanding. (b) Upon the issuance of any new Bonds under this Section, the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. (c) Every new Bond issued pursuant to this Section in lieu of any destroyed, lost or stolen Bonds shall constitute an original additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Bonds shall be at any time enforceable by anyone, and shall be entitled to all the security and benefits of this Indenture. (d) The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Bonds. Section 5.3. Payment of Interest on the Bonds. (a) Interest on the Bonds which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name the Bonds are registered at the close of business on the Record Date for such Interest Payment Date; provided that any Holder of a Bond or Bonds in an aggregate principal amount of not less than $1,000,000 may, by prior written instructions filed with the Paying Agent (which instructions shall remain in effect until revoked by subsequent written instructions), instruct that interest payments for any period be made by wire transfer to an account in the continental United States or other means acceptable to the Paying Agent. (b) Each Bond delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Bonds shall carry all the rights to Interest accrued and unpaid, and to accrue, which were carried by such other Bonds and each such Bond shall bear Interest from such date so that neither gain nor loss in Interest shall result from such transfer, exchange or substitution. Section 5.4. Persons Deemed Owners. The Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the person in whose name the Bonds are registered as the owner of the Bonds for 15 /1-01.( MIFS02...:\RE\60\47660\1387\227\JND9197U.128 the purpose of receiving payment of the principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on, and Purchase Price upon Mandatory Tender of, the Bonds and for all other purposes whatsoever whether or not the Bonds are overdue, and, to the extent permitted by law, neither the Issuer, the Trustee nor any such agent shall be affected by notice to the contrary. Section 5.5. Paying Agent. The principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on, and Purchase Price upon Mandatory Tender of, the Bonds shall, except as otherwise provided herein, be payable at the Office of the Trustee. The Trustee is hereby appointed as Paying Agent for the purpose of paying the principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on, and Purchase Price upon Mandatory Tender of, the Bonds on behalf of the Issuer. Section 5.6. Cancellation. Any Bonds surrendered for payment, redemption, transfer or exchange, shall be promptly cancelled and destroyed by the Trustee. No Bonds shall be authenticated in lieu of or in exchange for any Bonds cancelled as provided in this Section, except as expressly provided by this Indenture. [End of Article V] 16 A-~;J. MIFS02... :\RE\60\4 7660\ 13871227\lND9197U .128 ARTICLE VI REDEMPTION OF BONDS Section 6.1. Optional Redemption. Tlie Bonds may be redeemed at the option of the Developer, in whole, but not in part, on any Interest Payment Date on or after November I, 2002, at a redemption price, with respect to each Bond so called for redemption equal to the sum of (a) the outstanding Bond Principal of such Bond, (b) accrued and unpaid Interest thereon (including, without limitation, any Gross-Up Amount with respect to such Bond) to the date of redemption, (c) the Prepayment Premium, if any, and (d) all other amounts due and payable to the Bondholder hereunder (collectively, the "Redemption Price"), in each case with accrued Interest to the redemption date to be paid to the Registered Owner of each Bond as of the Record Date. The Developer may exercise such option by giving the Trustee and each GE Bondholder written notice of such exercise, not less than fifteen (IS) days prior to the proposed redemption date. Any such notice shall specify the date fixed for optional redemption and contain a certification by the Developer that all conditions precedent to such optional redemption have been (or will be, as of the optional redemption date) satisfied. The GE Bondholder shall deliver to the Trustee and to the Developer a written certificate setting forth the amount of accrued Interest and Prepayment Premium, if any, that will be due and payable as of the date fixed for optional redemption not less than five (5) days prior to the date set for such optional redemption. In addition to the Redemption Price, upon the occurrence of any Event of Default and the acceleration of the maturity of the Bonds prior to November I, 2002, if, at any time thereafter, payment is tendered in the amount necessary to satisfy the Developer Payment Obligations ("Unauthorized Prepayment"), the same shall constitute an evasion of the payment terms of the Bonds and shall be deemed to be an unauthorized voluntary prepayment thereunder, in which case such payment must include a premium (the "Unauthorized Prepayment Premium") equal to the product of (i) ten percent (10%) of the then unpaid Indenture Indebtedness, and (ii) the Unauthorized Prepayment Factor. No Unauthorized Prepayment Premium shall be due or payable upon any redemption of the Bonds on or after November 1,2002. On any date on which the Bonds are subject to optional redemption hereunder, the Bonds shall be subject to purchase in lieu of redemption and remarketing as contemplated by Section 4.2 above, as if such purchase in lieu of redemption date were a Mandatory Tender Date, based on a written election of purchase in lieu of redemption delivered by the Developer to the Trustee and Remarketing Agent on or prior to the scheduled optional redemption date. The purchase price for the Bonds purchased in lieu of redemption shall equal the amount that would have been payable to the Holders of the Bonds had the Bonds been optionally redeemed on the scheduled optional redemption date. On and after the date of such remarketing, the Bonds shall be subject to the terms and provisions of this Indenture as if they had been remarketed on a Mandatory Tender Date. Section 6.2. Mandatory Redemption. If a Determination of Taxability shall have occurred, the Bonds shall be subject to mandatory redemption and shall be redeemed in whole within the time provided herein, at a price equal to the 17 A-.l..:s MIFS02... :\RE\60\47660\ 1387\227\lND9197U .128 Redemption Price (including, without limitation, the Unauthorized Prepayment Premium, if any, and Gross-Up Amount payable with respect to each Bond so called for redemption). The Issuer agrees to cooperate fully with the Developer in taking any action required to effect mandatory redemption of the Bonds. Mandatory redemption of the Bonds occurring pursuant to this Section 6.2 shall occur on the earliest Business Day for which notice required by Section 6.3 hereof can be given. Section 6.3. Notice of Redemption. Not less than thirty (30) days (ten (10) days in the case of an optional redemption pursuant to Section 6.1 hereof) nor more than forty-five (45) days before the redemption date of the Bonds to be redeemed, the Trustee shall cause a notice of any such redemption signed by the Trustee to be mailed by first class mail (certified mail to any GE Bondholder). postage prepaid, to the Registered Owners of the Bonds. Such notice shall set forth the date fixed for redemption, the Redemption Price to be paid, and the distinctive numbers and letters of the Bonds to be redeemed and shall state that, on or prior to the date of redemption, the Issuer is required to cause there to be deposited with the Trustee sufficient funds to pay the Redemption Price of all Bonds so called for redemption on the date of redemption and shall state further whether or not the Trustee has received such funds as of the date of such notice. Section 6.4. Deposit of Redemption Price. Prior to any redemption date, the Developer shall deposit with the Trustee an amount of money sufficient to pay the Redemption Price of all of the Bonds to be redeemed on that date. Such money shall be held in trust for the benefit of the Persons entitled to such Redemption Price and shall not be deemed to be part of the Trust Estate. Section 6.5. Bonds Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Bonds or portions thereof designated for redemption shall become due and payable on the redemption date at the Redemption Price and from and after such date, unless the Issuer shall default in the payment of the Redemption Price, such Bonds or portions thereof shall cease to bear Interest from and after the redemption date (except for the Gross-Up Amount as provided in Section 4.6 hereof) whether or not such Bonds are presented and surrendered for payment on such date. If any Bond or portion thereof called for redemption is not so paid upon presentation and surrender thereof on the redemption date, such Bond or portion thereof shall continue to bear Interest at the rate or rates provided for thereon until paid and the Registered Owners thereof shall have all of the rights and be subject to the limitations set forth in Sections 1l.2 through 1l.15 hereof. Upon surrender of the Bonds for redemption in accordance with said notice, the Bonds shall be paid by the Trustee on behalf of the Issuer at the Redemption Price. Installments of Interest due on or prior to the redemption date shall be payable to the Registered Owners as of the relevant Record Dates, without surrender thereof, according to the terms of the Bonds and the provisions of Section 5.3 hereof. Section 6.6. Partial Redemption. In the event that a Bond subject to redemption pursuant to this Article VI is in a denomination larger than an Authorized Denomination, all or a portion of such Bond may be redeemed, but only in a principal amount such that the remaining principal amount of the Bond not so redeemed shall be an Authorized Denomination. Upon surrender of any Bond for redemption in part, the Issuer shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Developer, a new Bond or Bonds. in Authorized Denominations, equal to the unredeemed 18 A-.vI MlFS02.., :\RE\60\4 7660\ 1387\227\1ND9197U .128 portion of the Bond so surrendered. If less than all of the Bonds are called for redemption, the Bonds to be redeemed shall be selected by lot in such. manner as the Trustee in its discretion may determine, each Authorized Denomination being counted as one Bond for this purpose. Section 6.7. Extraordinary Redemption. The Bonds shall be subject to redemption and shall be redeemed in whole, or in part, as set forth below, upon the occurrence of any of the following conditions or events, on the earliest Business Day for which notice required by Section 6.3 hereof can be given, at a price equal to the principal amount of such Bonds or portion thereof so called for redemption, without Unauthorized Prepayment Premium or Prepayment Premium, plus Interest accrued thereon to the redemption date with the prior written consent of the GE Bondholder in accordance with Section 2.12 of the Loan Agreement, which written consent shall be delivered promptly to the Trustee: (a) the Bonds are subject to redemption in whole if the Project shall have been damaged or destroyed to the extent that it is not practicable or feasible to rebuild, repair or restore the damaged or destroyed property within the period and under the conditions described in the Loan Agreement following such event of damage or destruction; or (b) the Bonds are subject to redemption in whole if title to, or the use of, all or a substantial portion of the Project shall have been taken under the exercise of the power of eminent domain by any governmental authority with the result that the Developer is thereby prevented from carrying on its normal operation of the Project within the period and under the conditions described in the Loan Agreement; or (c) the Bonds are subject to redemption in whole or in part to the extent that insurance proceeds or proceeds of any condemnation award with respect to the Project are not applied to restoration of the Project in accordance with the provisions of the Loan Agreement; or (d) the Bonds are subject to redemption in whole if as a result of changes in the Constitution of the State, or of legislative or administrative action by the State or any political subdivision thereof, or by the United States, or by reason of any action instituted in any court, the Loan Agreement or the Note shall become void or unenforceable, or impossible of performance without unreasonable delay, or in any other way, by reason of such change of circumstances, unreasonable burdens or excessive liabilities are imposed on the Issuer. Section 6.8. Bondholders' Election to Waive Redemption Upon Determination of Taxability. In the event the Bonds are subject to mandatory redemption pursuant to Section 6.2 hereof on or before the tenth (10th) anniversary of the Closing, not later than thirty (30) days following the date of the Determination of Taxability, the Bondholders of all Bonds Outstanding may, by written notice to the Developer, the Trustee and the Issuer, elect to waive mandatory redemption and cause the Bonds to remain Outstanding. If the Bondholders elect to waive mandatory redemption and cause the Bonds to remain Outstanding following a Determination of Taxability, the Gross-Up Amount shall be paid in addition to all other interest payments due on the Bonds, as provided for herein, with all amounts payable through the date of election, as such amounts shall be certified in writing by the Bondholders to the Trustee, 19 /I-.l:;- MIFS02...:\RE\60\476f1J\1387\227\1ND9197U.12B payable immediately following the time the Bondholders make such an election, and thereafter with Gross- Up Amounts payable at the time of payment of Coupon Interest. After the Bondholders have made an election to continue the Loan Agreement and the Bonds in full force and effect, the rights, duties and obligations of the Trustee, the Issuer, the Developer and the Bondholders shall remain in full force and effect as set out in this Indenture. [End of Article VI] 20 /I,:ll, MIFS02...:\RE\60\47660\1387\227\lND9197U.128 ARTICLE VII REDEMPTION OF PRIOR BONDS; APPLICATION OF PROCEEDS Section 7.1. Proceeds From Sale of Bonds. Simultaneously with the issuance and delivery of the Bonds: (a) The proceeds derived from the sale of the Bonds in the amount of $18,300,000 shall be deposited in the Bond Proceeds Fund and used to refund the Prior Bonds; (b) Payments made pursuant to Section 2.8 of the Loan Agreement shall be deposited into the Costs of Issuance Fund: (c) $ of the moneys deposited into the Costs of Issuance Fund pursuant to subsection (b) above shall be immediately transferred to the Tax Escrow Fund; and (d) $ of the moneys deposited into the Costs of Issuance Fund pursuant to subsection (b) above shall be immediately transferred to the Project Fund. (e) Funds held in the "Debt Service Reserve Account" (as such term is defined in the Prior Indenture) held under the terms of the Prior Indenture shall be deposited as follows: (i) $ shall be deposited into the Cost of Issuance Fund; and (ii) $ shall be deposited into the Project Fund. Section 7.2. Creation of Bond Proceeds Fund. There is hereby created and established with the Trustee a fund to be designated "City of Chula Vista, California Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 Bond Proceeds Fund" (the "Bond Proceeds Fund"). On the date of the issuance of the Bonds, all moneys held in the Bond Proceeds Fund shall be applied as provided in Section 7.I(a) above. Section 7.3. Costs of Issuance Fund. There is hereby created and established with the Trustee a fund to be designated "City of Chula Vista, California Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 Costs of Issuance Fund" (the "Costs of Issuance Fund"). The Trustee shall deposit into the Costs of Issuance Fund the amount required by Section 7.1 (b) of this Indenture. Amounts in the Costs of Issuance Fund shall be disbursed by the Trustee as provided in Section 7.1 (c) and (d) hereof and thereafter only to pay Costs of Issuance upon receipt from the Developer of written notice in substantially the form attached as Exhibit B hereto of the amount to be paid, the payee name, an invoice for services rendered and the written consent of the GE Bondholder. Upon the earlier of the date which is forty-five (45) days following the Closing Date, or the receipt of written direction from the Developer, with the written consent of the GE Bondholder. the Trustee shall remit to or at the direction of the Developer all amounts remaining in the Costs of Issuance Fund (including investment proceeds) . 21 A-~-' MIFS02...:\RE\60\4766O\1387\227\IND9197U.128 Section 7.4. Additional Funds. The Trustee is hereby authorized to establish and create, from time to time, such other funds and accounts. as may be necessary for the deposit of moneys (including, without limitation, insurance proceeds and/or condemnation awards) received by the Trustee pursuant to the terms hereof and of the Deed of Trust Documents or any of the other Loan Documents (collectively, the "Additional Funds"). [End of Article VII] 22 MIFS02...:\RE\60\47660\1387\227\IND9197U.128 A-Ol..f' ARTICLE VIII FUNDS Section 8.1. Bond Fund. (a) There is hereby established a special trust fund which shall be designated "City of Chula Vista, California Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 Bond Fund" (the "Bond Fund"). The Trustee shall be the depository, custodian and disbursing agent for the Bond Fund. (b) There shall be deposited in the Bond Fund, as and when received: (i) all Basic Loan Payments and Additional Payments under the Note and Loan Agreement for the purpose of paying the principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on and Purchase Price upon Mandatory Tender of the Bonds, as applicable, (ii) all other money required to be deposited in the Bond Fund pursuant to the Loan Agreement or this Indenture, and (iii) all other money received by the Trustee when accompanied by directions that such money is to be deposited in the Bond Fund. (c) The Trustee is hereby authorized and directed to withdraw sufficient money from the Bond Fund to pay the principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on and Purchase Price upon Mandatory Tender of the Bonds as the same becomes due and payable, whether at maturity, by call for redemption, upon Mandatory Tender or otherwise. On each Bond Payment Date, money on deposit in the Bond Fund that was derived from any source shall be applied by the Trustee for the following purposes in the order of priority indicated: (i) First, the Trustee shall pay the principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on the Bonds due on the Bond Payment Date. and Purchase Price of the Bonds due on the Mandatory Tender Date. (ii) Second, the balance, if any, shall be retained in the Bond Fund. Section 8.2. Rebate Fund. (a) There is hereby established a special trust fund which shall be designated "City of Chula Vista, California Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 Rebate Fund" (the "Rebate Fund"). The Trustee shall be the depository, custodian and disbursing agent for the Rebate Fund. 23 11- 2.ti MIFS02...:\RE\60\47660\1387\227\lND9197U.128 (b) There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein as determined in accordance with Section 2.7(f) of the Loan Agreement and certified in writing by the Developer to the Trustee. Subject to the payment provisions provided in subsection (c) below, all amounts on deposit at any time in the Rebate Fund shall be held by the Trustee in trust, to the extent required to pay rebatable arbitrage to the United States of America, and neither the Developer, the Issuer, nor the Bondholders shall have any rights in or claim to such moneys. All amounts held in the Rebate Fund shall be governed by this Section. (c) The Trustee shall remit all rebate installments and a final rebate payment to the United States in accordance with written instructions received from the Developer or from any GE Bondholder (provided, however, no GE Bondholder shall be required to provide such written instructions), to the extent that the Developer fails to deliver such written instructions. The Trustee shall have no obligation to pay any amounts required to be rebated pursuant to this Section, other than from moneys held in the Rebate Fund or from other moneys provided to it by the Developer. Any moneys remaining in the Rebate Fund after redemption or payment at maturity of all of the Bonds and payment and satisfaction of any rebatable arbitrage, as certified in writing by the Developer to the Trustee, shall be withdrawn and paid to the Developer. The Trustee will retain such records with respect to the Rebate Fund as described in the [Non-Arbitrage Certificate] of the Issuer executed in connection with the issuance of the Bonds. (d) Notwithstanding any other provision of this Indenture, the obligation to pay rebatable arbitrage to the United States and to comply with all other requirements of this Section shall survive the defeasance or payment in full of the Bonds. (e) Notwithstanding anything else contained in this Indenture to the contrary, unless specifically agreed to in a separate written agreement, neither the Trustee nor any GE Bondholder shall be liable or responsible for any calculation or determination which may be required in connection with or for the purpose of complying with Section 148 of the Code of 1986 or any successor statute, or any regulation, ruling or other judicial or administrative interpretation thereof, including, without limitation, the calculation of amounts required to be paid to the United States of America or the determination of the maximum amount which may be invested in Nonpurpose Investments having a Yield higher than the Yield on the Bonds, and neither the Trustee nor any GE Bondholder shall be liable or responsible for monitoring compliance by the Developer or the Issuer with any of the requirements of Section 148 of the Code of 1986, or any applicable regulation, ruling or other judicial or administrative interpretation thereof, it being acknowledged and agreed that the obligations of the Trustee in this regard shall be limited to the receipt of funds for deposit in the Rebate Fund and the disbursement thereof pursuant to written instructions of the Developer, the GE Bondholder or the Issuer, as applicable, and the investment of moneys received by the Trustee pursuant to the written instructions of the Developer or the GE Bondholder, as applicable. Section 8,3, Replacement Reserve Fund. There is hereby created and established with the Trustee, as agent for the Bondholders, a fund to be designated "City of Chula Vista, California Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 Replacement Reserve Fund" (the "Replacement Reserve Fund"). There shall be paid into the Replacement Reserve Fund the amount specified in Section 4.l(i) of this Indenture. 24 MIFS02...:\RE\60\47660\1387\227\IND9197U.12B /I-~ Amounts on deposit in the Replacement Reserve Fund shall be used to pay the costs incurred for Capital Improvements or Replacements and for no other purpose except as expressly provided herein. The Developer shall be entitled to request disbursements from amounts on deposit in the Replacement Reserve Fund to pay directly or reimburse the Developer for expenditures made in respect of Capital Improvements or Replacements, to the extent that funds in the Replacement Reserve Fund are available and provided that, upon the GE Bondholder's request, each of the General Disbursement Conditions shall have been fully satisfied. Any request by the Developer for a withdrawal from the Replacement Reserve Fund shall be for a minimum disbursement amount of $5,000 and shall be submitted to the Trustee in writing in the form attached hereto as Exhibit C, which shall certify that the requirements of this Section have been satisfied, and following receipt of such request and provided that such request has been approved in writing by the GE Bondholder, the Trustee shall promptly disburse the amount requested as directed in the Developer's written request for disbursement; notwithstanding anything to the contrary contained herein, the Trustee shall make no disbursement from the Replacement Reserve Fund unless the written requisition therefor shall have been approved in writing by the GE Bondholder and, in addition, upon direction from the GE Bondholder, the Trustee shall make any such disbursements directly to the appropriate vendors. Requests for disbursements from the Replacement Reserve Fund shall not be submitted more frequently than once every month. Within thirty (30) days following the end of each calendar quarter, the Developer shall submit to the GE Bondholder, with a copy to the Trustee, a report (the "Capital Report") providing a description of all Capital Improvements or Replacements made during such calendar quarter and which shall certify that the requirements of this Section have been satisfied. The Capital Report shall contain, to the extent applicable, (a) a general description of the work done; (b) a general description of materials used and equipment or fixtures replaced; (c) copies of any contracts with contractors or subcontractors; (d) copies of invoices or receipts; and (e) for work performed by a maintenance crew or work force hired by or on behalf of the Developer, a labor distribution schedule, and shall contain a written certification by an Authorized Developer Representative as to the truth and accuracy of all matters contained therein. The GE Bondholder, or in the event that none of the Bonds are held by a GE Bondholder, a Majority of Holders, may require, in its sole discretion and at any time, that the Developer obtain and deliver to the Trustee and the GE Bondholder written waivers of liens or claims thereof from any contractor or subcontractor performing work at the Project. In the event that the Developer shall fail to submit the Capital Report to the GE Bondholder and Trustee within thirty (30) days following the end of any calendar quarter, no further disbursements shall be made from the Replacement Reserve Fund until the Developer shall have cured such default. Nothing contained herein shall prohibit the Developer from submitting the Capital Report more frequently than once each calendar quarter. Moneys deposited in the Replacement Reserve Fund shall be used and withdrawn by the Trustee to the extent other funds are not available therefor for the purpose of paying all outstanding Developer Payment Obligations, whether at maturity or redemption of the Bonds in full, or on the Mandatory Tender Date. Notwithstanding the foregoing, whenever and to the extent that moneys due to be paid pursuant to Sections 4.1 or 4.2 (but excluding payments required to be made pursuant to Section 4.1(i) hereof) of this Indenture are delinquent, the amount due pursuant to said Section shall, upon the written request and at the written direction of the GE Bondholder, be withdrawn from the Replacement Reserve Fund and paid by the Trustee to the Bondholders; provided, however, that the application of such funds shall not be 25 MIFSOL:\RE\60\4766O\1387\227\1ND9197U.128 A-..J.I deemed to cure any Event of Default caused by such failure to pay amounts due; and provided further that in the event that none of the Bonds are held by a GE Bondholder, then a Majority of Holders shall have the right to give such direction. Moneys in the Replacement Reserve Fund, and any investment eamings thereon, shall be invested pursuant to Section 9.1 hereof, either in obligations described in Section 103 of the Code of 1986, interest on which is not an item of tax preference for purposes of the federal alternative minimum tax, or at a Yield not in excess of the Yield on the Bonds, unless the Developer has obtained and delivered to the Trustee a ruling from the Internal Revenue Service or an Opinion of Counsel of nationally recognized expertise in matters relating to Section 148 of the Code of 1986 to the effect that an investment in obligations having a Yield in excess of the Yield on the Bonds will not adversely affect the exclusion from gross income of the Coupon Interest on the Bonds. After the date on which deposits in the Replacement Reserve Fund are no longer required to be maintained (which date shall not be prior to the Mandatory Tender Date), the Trustee shall, upon the Developer's written request therefor, distribute any balance remaining in the Replacement Reserve Fund to the Developer. Section 8.4. Tax Escrow Fund. There is hereby created and established with the Trustee, as agent for the Bondholders, a fund to be designated "City of Chula Vista, California Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 Tax Escrow Fund" (the "Tax Escrow Fund"). There shall be deposited into the Tax Escrow Fund on the Closing Date the amount specified in Section 7.1 (c) hereof; thereafter, the Developer shall deposit into the Tax Escrow Fund the amounts set forth in Section 2.13 of the Loan Agreement. So long as no Event of Default or Potential Default exists and is continuing, amounts on deposit in the Tax Escrow Fund shall be disbursed by the Trustee, upon the written request of the Developer or the GE Bondholder, for the payment of Real Estate Taxes prior to the date necessary to take advantage of any discount available in connection with the payment of such taxes and in the event no such discounts are available, prior to the date such taxes become delinquent or any penalties would be due, unless otherwise agreed to in writing by the GE Bondholder. All requests for withdrawal from the Tax Escrow Fund shall be prepared in writing by the Developer or the GE Bondholder and shall be submitted to the Trustee with a copy thereof to the GE Bondholder or the Developer, as applicable. A copy of the bill(s) for such Real Estate Taxes shall accompany each request for withdrawal. The Trustee shall make such disbursements promptly following the written request therefor by the Developer or the GE Bondholder. Moneys deposited in the Tax Escrow Fund shall be used and withdrawn by the Trustee to the extent other funds are not available for the purpose of paying all outstanding Developer Payment Obligations, whether at maturity or redemption of the Bonds in full, or on the Mandatory Tender Date. Notwithstanding the foregoing, whenever and to the extent that moneys due to be paid pursuant to Sections 4.1 or 4.2 (but excluding payments required to be made pursuant to Section 4.1(i) hereof) of this Indenture are delinquent, the amount due pursuant to said Section shall, upon the written request and at the written direction of the GE Bondholder, be withdrawn from the Tax Escrow Fund and paid by the Trustee to the Bondholders; provided, however, that the application of such funds shall not be deemed to cure any Event of Default caused by such failure to pay amounts due; and provided, further, that in the 26 MIFS02... :\RE\60\4 7660\ 1387\227\IND9197U .128 A-.3J.. event that none of the Bonds are held by a GE Bondholder, then a Majority of Holders shall have the right to give such direction. Moneys in the Tax Escrow Fund, and any investment earnings thereon, shall be invested pursuant to Section 9.1 hereof, either in obligations described in Section 103 of the Code of 1986, interest on which is not an item of tax preference for purposes of the federal alternative minimum tax, or at a Yield not in excess of the Yield on the Bonds, unless the Developer has obtained and delivered to the Trustee a ruling from the Internal Revenue Service or an Opinion of Counsel of nationally recognized expertise in matters relating to Section 148 of the Code of 1986 to the effect that an investment in obligations having a Yield in excess of the Yield on the Bonds will not adversely affect the exclusion from gross income of the Coupon Interest on the Bonds. After the date on which deposits in the Tax Escrow Fund are no longer required to be maintained (which date shall not be prior to the Mandatory Tender Date), the Trustee shall, upon the Developer's written request therefor, distribute any balance remaining in the Tax Escrow Fund to the Developer. Section 8.5. Debt Service Reserve Fund. There is hereby created and established with the Trustee, as agent for the Bondholders, a fund to be designated "City of Chula Vista, California Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 Debt Service Reserve Fund" (the "Debt Service Reserve Fund"). There is hereby created within the Debt Service Reserve Fund an account to be designated the "Scheduled Sinking Payment Account" and an account to be designated the "NCF Payment Account." All Scheduled Sinking Fund Payments made by the Developer pursuant to the terms of the Loan Agreement and all other amounts which, in accordance with the terms of the Loan Agreement, are to be deposited into the Scheduled Sinking Payment Account, shall be deposited into the Scheduled Sinking Payment Account. All NCF Reserve Payments made by the Developer pursuant to the terms of the Loan Agreement and all other amounts which, in accordance with the terms of the Loan Agreement, are to be deposited into the NCF Payment Account, shall be deposited into the NCF Payment Account. Provided that no Event of Default shall have occurred, on or before July I, 1998 the Trustee shall upon the written direction of the Developer, with written notice to each of the Bondholders, transfer all or any part of the moneys held by the Trustee in the NCF Payment Account of the Debt Service Reserve Fund into the Scheduled Sinking Payment Account of the Debt Service Reserve Fund. The transfer of moneys from the NCF Payment Account of the Debt Service Reserve Fund into the Scheduled Sinking Payment Account of the Debt Service Reserve Fund shall not be credited against, and shall in no way reduce, the amount of any Scheduled Sinking Fund Payment required to be deposited into the Scheduled Sinking Payment Account of the Debt Service Reserve Fund in accordance with the provisions of Section 2.16 of the Loan Agreement. Notwithstanding the foregoing, whenever and to the extent that moneys due to be paid pursuant to Sections 4.1 or 4.2 (but excluding payments required to be made pursuant to Section 4.I(i) hereof) of this Indenture are delinquent, the amount due pursuant to said Section shall, upon the written request and at the written direction of the GE Bondholder, be withdrawn from the Debt Service Reserve Fund and paid by the Trustee to the Bondholders; provided, however, that the application of such funds shall not be deemed to cure any Event of Default caused by such failure to pay amounts due; and provided, further, 27 A - 4..3 M[FS02... :\RE\60\47660\l387\227\1ND9197U .128 that in the event that none of the Bonds are held by a GE Bondholder, then a Majority of Holders shall have the right to give such direction. After the date on which deposits in the Debt Service Reserve Fund are no longer required to be maintained (which date shall not be prior to the Mandatory Tender Date), the Trustee shall, upon the Developer's written request therefor, consented to in writing by a Majority of Holders, distribute the balance remaining in the Debt Service Reserve Fund to the Developer. In addition, the Trustee shall disburse funds from the NCF Payment Account of the Debt Service Reserve Fund to the Developer as provided in Section 2.16( c) of the Loan Agreement only upon the prior written approval and direction of the GE Bondholder. Moneys deposited in the Debt Service Reserve Fund shall be used and withdrawn by the Trustee, with the consent of the GE Bondholder, to the extent other funds are not available therefor for the purpose of paying all outstanding Developer Payment Obligations, whether at maturity or redemption of the Bonds in full, or on the Mandatory Tender Date. Moneys in the Debt Service Reserve Fund, and any investment earnings thereon, shall be invested pursuant to Section 9.1 hereof, either in obligations described in Section 103 of the Code of 1986, interest on which is not an item of tax preference for purposes of the federal alternative minimum tax, or at a Yield not in excess of the Yield on the Bonds, unless the Developer has obtained and delivered to the Trustee a ruling from the Internal Revenue Service or an Opinion of Counsel of nationally recognized expertise in matters relating to Section 148 of the Code of 1986 to the effect that an investment in obligations having a Yield in excess of the Yield on the Bonds will not adversely affect the exclusion from gross income of the Coupon Interest on the Bonds. Provided that no Event of Default or Potential Default shall have occurred, the Developer shall have the right, exercisable from time to time to purchase, at its own expense and with funds other than borrowed funds or Operating Revenues, one or more Reserve Letters of Credit payable to the Trustee under the terms and conditions specified in Section 8.8 hereof, and to substitute such letters of credit for cash held in the Scheduled Sinking Payment Account of the Debt Service Reserve Fund. Upon receipt of any such letters of credit, together with the written approval of such letters of credit by the GE Bondholder, the Trustee shall release cash held in the Debt Service Reserve Fund to the Developer in the stated amount of such letters of credit in accordance with the terms of Section 8.8(a) hereof. After the date on which deposits in the Debt Service Reserve Fund are no longer required to be maintained (which date shall not be prior to the Mandatory Tender Date), the Trustee shall, upon the Developer's written request therefor, distribute any balance remaining in the Debt Service Reserve Fund to the Developer. Section 8.6. Project Fund. There is hereby created and established with the Trustee, as agent for the Bondholders, a fund to be designated "City of Chula Vista, California Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 Project Fund" (the "Project Fund"). An amount equal to $ shall be deposited into the Project Fund at Closing. Amounts on deposit in the Project Fund shall be used to pay Qualified Project Costs and for no other purpose except as expressly provided herein. The Developer shall be entitled to request one or more 28 MIFS02...:\RE\60\4766O\1387\227\1ND9197U.12B ,A..3J/ disbursements in an amount not less than $50,000 from amounts on deposit in the Project Fund to pay directly or to reimburse the Developer for expendirures made in respect of the Qualified Project Costs, to the extent that funds in the Project Fund are available and provided that, upon the GE Bondholder's request, each of the General Disbursement Conditions shall have been fully satisfied. The Developer's request for a withdrawal from the Project Fund shall be submitted to the Trustee in writing in the form attached hereto as Exhibit C, which shall certify that all requested disbursements shall be used to pay directly or to reimburse the Developer for expendirures made in respect of the Qualified Project Costs, that the requirements of this Section have been satisfied, and following receipt of such request and provided that such request has been approved in writing by the GE Bondholder, the Trustee shall promptly disburse the amount requested as directed in the Developer's written request for disbursement; notwithstanding anything to the contrary contained herein, the Trustee shall make no disbursement from the Project Fund unless the written requisition therefor shall have been approved in writing by the GE Bondholder and, in addition, upon direction from the GE Bondholder, the Trustee shall make any such disbursements directly to the appropriate vendor. Notwithstanding the foregoing, whenever and to the extent that moneys due to be paid pursuant to Sections 4.1 or 4.2 (but excluding payments required to be made pursuant to Section 4.10) hereof) of this Indenture are delinquent, the amount due pursuant to said Section shall, upon the written request and at the written direction of the GE Bondholder, be withdrawn from the Project Fund and paid by the Trustee to the Bondholders; provided, however, that the application of such funds shall not be deemed to cure any Event of Default caused by such failure to pay amounts due; and provided further that in the event that none of the Bonds are held by a GE Bondholder, then a Majority of Holders shall have the right to give such direction. Moneys in the Project Fund, and any investment earnings thereon, shall be invested pursuant to Section 9.1 hereof, either in obligations described in Section 103 of the Code of 1986, interest on which is not an item of tax preference for purposes of the federal alternative minimum tax, or at a Yield not in excess of the Yield on the Bonds, unless the Developer has obtained and delivered to the Trustee a ruling from the Internal Revenue Service or an Opinion of Counsel of nationally recognized expertise in matters relating to Section 148 of the Code of 1986 to the effect that investment in obligations having a Yield in excess of the Yield the Bonds will not adversely affect the exclusion from gross income of the Coupon Interest on the Bonds. Section 8.7. Application of Special Funds Upon Event of Default. Upon the occurrence of an Event of Default, the Trustee shall have the right, upon the written request and at the written direction of any GE Bondholder, to apply all monies in the Special Funds (except the Rebate Fund) towards any of the Developer Payment Obligations, in such order of priority as the GE Bondholder may direct in writing to the Trustee, in its sole and absolute discretion; provided, however, that in the event that none of the Bonds are held by a GE Bondholder, then a Majority of Holders shall have the right to give such direction. Section 8.8, Reserve Letters of Credit. (a) Provided that no Event of Default or Potential Default shall have occurred, Developer shall have the right, but not the obligation, to deliver to the Trustee a letter of credit (any such letter of credit being referred to herein as a "Reserve Letter of Credit"), which (i) shall be clean, unconditional, irrevocable, and transferable, (ii) shall be issued by a bank acceptable to the Trustee and the GE Bondholder in its sole and absolute discretion (each such bank being hereinafter 29 MIFS02...:\RE\60\47660\1387\227\1ND9197U.128 A....4~ referred to as a "Reserve Letter of Credit Issuer"), (iii) shall be in an amount equal to the amount then held in the Scheduled Sinking Payment Account of the Debt Service Reserve Fund, or such lesser amount as may be approved by the Trustee and the GE Bondholder in writing, (iv) shall have an expiration date no earlier than twelve (12) months from the date of its issuance, (v) shall be in form acceptable to the Trustee and the GE Bondholder and its counselimd shall provide that it may be drawn, in whole or in part, by presentation to the Reserve Letter of Credit Issuer of a sight draft in the appropriate amount identifying the letter of credit being drawn, and (vi) shall be accompanied by a certified copy of a resolution of the Reserve Letter of Credit Issuer naming the officer(s) empowered to bind the Reserve Letter of Credit Issuer on such Reserve Letter of Credit, which certified copy shall be manually signed by the corporate secretary of the Reserve Letter of Credit Issuer who shall also certify that as of the date of issue of the Reserve Letter of Credit, the officer(s) executing same was fully empowered to execute such Reserve Letter of Credit and to bind the Reserve Letter of Credit Issuer thereby and that said resolution continues to be in full force and effect. Within one Business Day after the receipt by Trustee of such Reserve Letter of Credit in form acceptable to the Trustee and the GE Bondholder, together with the written consent of the GE Bondholder therefor, the Trustee shall release to Developer from the Scheduled Sinking Payment Account of the Debt Service Reserve Fund an amount equal to the stated amount of such Reserve Letter of Credit delivered in exchange therefor. (b) At least thirty (30) days prior to the expiration date of a Reserve Letter of Credit, unless automatically renewed by such date, Developer shall furnish, or cause to be furnished, to the Trustee an extension thereof or a replacement letter of credit for such Reserve Letter of Credit, which replacement Reserve Letter of Credit (i) shall be unconditional, irrevocable, and transferable, (ii) shall be issued by the bank that issued the Reserve Letter of Credit being replaced or such other bank acceptable to the Trustee and the GE Bondholder in its sole and absolute discretion, (Hi) shall be in an amount equal to the undrawn balance of the Reserve Letter of Credit being replaced, (iv) shall have an expiration date no earlier than twelve (12) months from the date of its issuance, (v) shall be in form acceptable to the GE Bondholder and its counsel and shall provide that it may be drawn, in whole or in part, by presentation to the Reserve Letter of Credit Issuer of a sight draft in the appropriate amount identifying the letter of credit being drawn, and (vi) shall be accompanied by a certified copy of a resolution of the Reserve Letter of Credit Issuer naming the officer(s) empowered to bind the Reserve Letter of Credit Issuer on such replacement Reserve Letter of Credit, which certified copy shall be manually signed by the corporate secretary of the Reserve Letter of Credit Issuer who shall also certify that as of the date of issue of the replacement Reserve Letter of Credit, the officer(s) executing same was fully empowered to execute such replacement Reserve Letter of Credit and to bind the Reserve Letter of Credit Issuer thereby and that said resolution continues to be in full force and effect. Concurrently with the receipt of each replacement Reserve Letter of Credit in form acceptable to the Trustee and the GE Bondholder, the Trustee shall surrender the original of the Reserve Letter of Credit being replaced to the Reserve Letter of Credit Issuer. The foregoing replacement process shall continue with respect to each replacement Reserve Letter of Credit until the earlier of the Reserve Letter of Credit is drawn and paid in full. (c) The Trustee shall be entitled to draw upon a Reserve Letter of Credit, in whole, without notice to the Developer, if an Event of Default has occurred or in the event that the Developer has failed to deliver to the Trustee any extension of a Reserve Letter of Credit or any replacement Reserve Letter of Credit as and when required and in accordance with Section 8.8(b) hereof. In the event the Reserve Letter of Credit is drawn, then Trustee shall deposit any funds drawn thereunder into the Scheduled Sinking Payment Account of the Debt Service Reserve Fund. 30 MrFSOL:\RE\60\47660\ 1381\227\IND9197U .128 A., 4/1 (d) In the event that (i) the Reserve Letter of Credit Issuer shall become insolvent or (ii) the Trustee shall receive notice that the Reserve Letter of Credit Issuer no longer has a long-term credit rating in one of the three highest Rating Categories by either Rating Agency, then the Trustee shall draw down the entire amount of any Reserve Letter of Credit issued by such Reserve Letter of Credit Issuer and deposit such monies into the Scheduled Sinking Payment Account of the Debt Service Reserve Fund, unless the Developer shall cause to be delivered to the Trustee, on or before the 15th day following the Developer's receipt of notice from either the Trustee or the GE Bondholder of the occurrence of the events described in clauses (i) or (ii) of this subsection (d), a replacement Reserve Letter of Credit in accordance with the terms hereof. [End of Article VIII] M[FS02...:\RE\60\47660\1387\l27\JND9197U_128 31 ~-~7 ARTICLE IX SECURITY FOR AND INVESTMENT OF SPECIAL FUNDS Section 9.1. Investment of Special Funds. (a) Any money held as part of a Special Fund shall be invested or reinvested by the Trustee as directed in writing by the Developer, and consented to in writing by the GE Bondholder, in Qualified Investments. Following receipt by a Responsible Officer of a notice of an Event of Default, Loan Agreement Default or Potential Default, the Trustee shall invest and reinvest the money it holds as part of a Special Fund at the written (or oral, if promptly confirmed in writing) direction of the GE Bondholder; provided, however, that in the event that none of the Bonds are held by a GE Bondholder, then a Majority of Holders shall have the right to give such direction. Any investment made with money on deposit in a Special Fund shall be held by or under control of the Trustee and shall be deemed at all times a part of the Special Fund where such money was on deposit, and the interest and profits realized from such investment shall be credited to such Special Fund and any loss resulting from such investment shall be charged to such Special Fund. In the absence of the receipt of any investment instructions as provided herein, the Trustee may hold all money under its control uninvested. (b) Any investment of money in the Special Funds may be made by the Trustee through its own bond department, investment department or other commercial banking department providing investment services. (c) The Trustee shall have no liability or responsibility for any depreciation of the value of any investment made in accordance with the provisions of this Section or for any loss resulting from such investment or redemption, sale or maturity thereof. (d) Unless otherwise confirmed in writing, an account statement delivered by the Trustee to the Developer or the GE Bondholder, as the case may be, shall be deemed written confirmation by said party that the investment transactions identified therein accurately reflect the investment directions given to the Trustee by said party. unless said party notifies the Trustee in writing to the contrary within thirty (30) days of the date of receipt of such statement. Section 9.2. Arbitrage. The Trustee shall follow the written instructions of the Developer or, if an Event of Default, Loan Agreement Default or Potential Default exists, the GE Bondholder (or in the event that none of the Bonds are held by a GE Bondholder, a Majority of Holders), with respect to investments of the Special Funds as provided in Section 9. I hereof, but the Trustee shall not be responsible for (a) determining that any such investment complies with the arbitrage limitations imposed by Section 148 of the Code of 1986, or (b) calculating the amount of, or making payment of, any rebate due to the United States under Section I48(t) of the Code of 1986. Section 9.3. Application of Special Funds After Bonds Fully Paid. Upon final payment of all Indenture Indebtedness from any Special Funds available therefor, and upon satisfaction of all claims against the Issuer hereunder, including the payment of all fees, charges and expenses of the Trustee that are properly due and payable hereunder, or upon the making of adequate provision for the payment of MIFSOL:\RE\60\47660\1387\227\1ND9197U.128 32A_.J 8 such amounts, as pennitted hereby, and after payment of all amounts due the Issuer under the Loan Agreement and Note, including all fees, charges and expenses of the Issuer that are properly due and payable thereunder, any moneys remaining in all Special Funds shall be paid to the Developer. Section 9.4. Unsurrendered Bonds. Prior to each redemption date, the Trustee shall make provision for payment of the Bonds to be redeemed on such date by setting aside and holding in trust an amount from the Bond Fund or otherwise received by the Trustee sufficient to pay the principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on such Bonds. Upon presentation and surrender of any such Bond at the designated office of the Trustee on or after the date fixed for redemption, the Trustee shall pay the principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium. if any, and Interest on such Bond from the money set aside for such purpose. Moneys set aside by the Trustee in accordance with the provisions of the preceding paragraph shall be held by the Trustee, as a separate trust fund for the account of the respective Registered Owners of the Bonds to be redeemed; provided, however, that, subject to the applicable escheat laws of the State or any other state in the United States having or claiming jurisdiction over such funds, moneys so set aside remaining unclaimed by the Registered Owners of such Bonds for four years after the dates of redemption thereof shall be credited to the Bond Fund or, if no Bonds of such series shall then be Outstanding, shall be paid to the Developer upon written request therefor and thereafter the Registered Owners of such Bonds must look only to the Developer for payment of such amounts; provided, however, that before being required to make any such payment to the Developer, the Trustee shall have furnished such Bondholders with the notices required under Section 6.3 hereof and shall have sent to the Registered Owners of Bonds which have not been presented for payment a final notice upon the passing of four years which notice shall have brought no response for thirty (30) days. [End of Article IX] 33 A-~? MIFS02... :\RE\6Q\4766Q\ 1387\227\IND9197U .128 ARTICLE X REPRESENTATIONS AND COVENANTS Section 10.1. General Representations. The Issuer makes the following representations as the basis for the undertakings on its part herein contained: (a) It is a public body corporate and politic and a political subdivision duly organized and existing under the laws of the State of California and to its knowledge is not in default under any of the provisions contained in the Act or in the Constitution and statutory laws of the State. (b) Under the provisions of the Act. it has the power to consummate the transactions contemplated by the Loan Documents to which it is a party. (c) By proper corporate action, the Issuer has duly authorized the execution and delivery of the Loan Documents to which it is a party and the consummation of the transactions contemplated therein. (d) It has obtained all consents, approvals, authorizations and orders of governmental authorities that are required by the Act to be obtained by it as a condition to the issuance of the Bonds and the execution and delivery of the Loan Documents to which it is a party. (e) The execution and delivery by it of the Loan Documents to which it is a party and the consummation by it of the transactions contemplated therein will not conflict with, be in violation of, or result in a default under any agreement, instrument, order or judgment to which it is a party. (f) The Loan Documents to which it is a party constitute valid and binding special limited obligations on its part and are enforceable against it in accordance with the tenns of such instruments, except as enforcement thereof may be limited by (i) bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors' rights and (ii) general principles of equity, including the exercise of judicial discretion in appropriate cases. (g) encumbrance Documents. The Issuer has not created or permitted the creation of any mortgage, pledge, or security interest in the Trust Estate, except as contemplated by the Loan (h) There is no action, suit, proceeding, inquiry or investigation pending before any court or governmental authority, or overtly threatened in writing against it or its properties, that involves the consummation of the transactions contemplated by, or the validity or enforceability of, the Loan Documents. Section 10.2. No Encumbrance on Trust Estate. The Issuer will not knowingly create or pennit the creation of any mortgage, pledge, lien, charge or encumbrance of any kind on the Trust Estate or any part thereof prior to or on a parity with the lien of this Indenture. 34 A-elD MIFS02... :\RE\60\4 7660\ 138T\l27\1ND9I97U .128 Section 10.3. General Covenants. (a) Subject to the provisions of Article III of this Indenture. the Issuer will duly and punctually pay. or cause to be paid, the principal of, Unauthorized Repayment Premium, if any, Prepayment Premium. if any, and Interest on, and Purchase Price upon Mandatory Tender of, the Bonds as and when the same shall become due and will duly and punctually deposit, or cause to be deposited, in the Special Funds the amounts required to be deposited therein, all in accordance with the terms of the Bonds and this Indenture. (b) The Issuer will not extend or consent to the extension of the time for payment of principal of, Unauthorized Repayment Premium, if any, Prepayment Premium, if any, and Interest on, and Purchase Price upon Mandatory Tender of, the Bonds, unless such extension is consented to in writing by all of the Bondholders affected. Section 10.4. Concerning the Loan Agreement. (a) The Trustee, on behalf of the Issuer, may perform and observe any such agreement or covenant. all to the end that the Issuer's rights under the Loan Agreement may be unimpaired and free from default. (b) The Issuer will promptly notify in writing the Trustee and the GE Bondholder of the occurrence of any Loan Agreement Default or the occurrence of any Potential Default under the Loan Agreement, provided that the Issuer has written notice or is otherwise aware of such event. Section 10.5. Inspection of Records. The Issuer will at any and all times, upon the request of the Trustee or the GE Bondholder, afford and procure a reasonable opportunity for the Trustee and any GE Bondholder by their respective representatives to inspect the books, records, reports and other papers of the Issuer relating to the Project, if any, and to make copies therefrom. Section 10.6. Advances by Trustee. If the Issuer shall fail to perform any of its covenants in this Indenture (and such failure to perform shall not have been timely cured by the Developer), the Trustee may, but shall not be required, at any time and from time to time (after written notice to the Developer if no Loan Agreement Default or Potential Default shall exist under the Loan Agreement), to make advances to effect performance of any such covenant on behalf of the Issuer. Any money so advanced by the Trustee, together with interest at the Default Rate, shall be repaid (subject to the provisions of Article III of this Indenture) upon demand and such advances shall be secured under this Indenture prior to the Bonds. Section 10.7. Appointment of Successor Trustee. Whenever necessary to avoid or fill a vacancy in the office of the Trustee, the Issuer will appoint a successor Trustee in the manner provided in Article XII of this Indenture. Section 10.8. Tax Exempt Status of Bonds. The Issuer covenants and agrees that it will not knowingly take any action, or knowingly fail to take any action, if such action or failure to act would cause the Coupon Interest on the Bonds to become includable in the gross income of the recipients thereof 35 /1- ell MIFS02...;\RE\60\47660\1387\227\1ND9197U .128 for federal income tax purposes; provided, however, that if a Determination of Taxability occurs and the Bonds are redeemed in accordance with the applicable redemption provisions of the Bonds, any default by the Issuer in the performance or observance of the covenant contained in this Section shall not constitute an Event of Default under this Indenture. Section 10.9. Performance by the Developer. Without relieving the Issuer from the responsibility for performance and observance of the agreements and covenants required to be performed and observed by it hereunder, the Developer, on behalf of the Issuer, may perform any such agreement or covenant if no Loan Agreement Default or Potential Default under the Loan Agreement exists. Section 10.10. Non-Arbitrage and Other Tax Covenants. The Issuer hereby certifies, based solely upon the representations and warranties of the Developer to it as to all facts and estimates now known or reasonably expected to be in existence on the date the Bonds are delivered and paid for, that it reasonably expects that the proceeds of the Bonds will not be used in a manner that would cause the Bonds to be "arbitrage bonds" under Section 148 of the Code of 1986. Section 10.11. Public Approval of Bonds. The Issuer hereby certifies that the public approval requirements of Section 147(1) of the Code have been duly complied with and that a public hearing following due public notice was held in respect of the issuance of the Bonds and the underlying facilities refinanced by the Bonds on , 1997 being a date within one year of the date of issuance of the Bonds. the Code. The Issuer hereby further certifies that prior to the execution and delivery of this Trust Indenture, has approved the issue of Bonds within the meaning of Section 147(1) of the [End of Article X] 36 ,/J - c/;J. MlFS02... :\RE\60\4 766O\1387\227\1ND9197U .128 ARTICLE XI DEFAULT; REMEDIES Section 11.1. Events of Default. Anyone or more of the following shall constitute an event of default (an "Event of Default") under this Indenture (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) default in the payment of any Interest upon the Bonds after such Interest becomes due and payable; or (b) default in the payment of the principal of, Unauthorized Prepayment Premium, if any, or Prepayment Premium, if any, on the Bonds after such principal, Unauthorized Prepayment Premium, if any, or Prepayment Premium, if any, becomes due and payable, whether at its stated maturity, by declaration of acceleration or call for redemption or otherwise; or (c) failure to pay when due the Purchase Price of the Bonds tendered or deemed tendered for purchase pursuant to the Mandatory Tender provisions hereof on the Mandatory Tender Date; or (d) subject to Section 10.8 hereof, default in the performance or breach of any covenant or warranty of the Issuer in this Indenture (other than a covenant or warranty or default in the performance or breach of which is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of thirty (30) days after there has been given, by written notice as provided in Section 15.1 hereof, to the Issuer and the Developer by the Trustee or to the Issuer, the Developer and the Trustee by the GE Bondholder (or in the event that none of the Bonds are held by a GE Bondholder, by a Majority of Holders), a notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "notice of default" hereunder; provided that, so long as the Issuer has commenced to cure such failure to observe or perform within the thirty (30) day grace period and the subject matter of the default is not capable of cure within said thirty (30) day period and the Issuer is diligently pursuing such cure to the Trustee's satisfaction in its sole discretion, then the Issuer shall have an additional period of time as reasonably necessary (not to exceed thirty (30) days) within which to cure such default; or (e) the occurrence of a Loan Agreement Default, an event of default under the Deed of Trust, or a default or event of default under any other Loan Document and the expiration of the applicable grace period or notice and cure period, if any, specified therein; or (I) if the Issuer shall have applied for or consented to the appointment of a receiver, trustee, or liquidator of all or a substantial part of its assets; admitted in writing the inability to pay its debts as they mature; made a general assignment for the benefit of creditors; been the subject of an order for relief under the Federal Bankruptcy Code, or been adjudicated a bankrupt, or filed a petition or an answer seeking reorganization, liquidation or any arrangement with creditors or taken advantage of any insolvency law, or submitted an answer admitting the material 37 /1- t/3 MIFS02... :\RE\6Q\4766O\1387\227\IND9197U .128 allegations of a petition in bankruptcy, reorganization, liquidation or insolvency proceedings; or an order, judgment or decree shall have been entered, without the application, approval or consent of the Issuer, by any court of competent jurisdiction approving a petition seeking reorganization of the Issuer or appointing a receiver, trustee or liquidator of a substantial part of its assets and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) consecutive days; or filed a voluntary petition in bankruptcy or failed to remove an involuntary petition in bankruptcy filed against it within sixty (60) days of the filing thereof; or (g) the occurrence of a Determination of Taxability subject to waiver pursuant to Section 6.8 hereof. Section 11.2. Acceleration of Maturity; Rescission and Annulment. (a) Subject to the provisions of Section 11.10 of this Indenture, upon the occurrence of an Event of Default under Section 11.1 hereof, then and in every such case, the Trustee may and, at the written request of the GE Bondholder (or in the event that none of the Bonds are held by a GE Bondholder, a Majority of Holders), shall declare the principal of all the Bonds and the Interest accrued thereon to be immediately due and payable, by notice to the Issuer and the Developer and upon any such declaration, all principal of, Unauthorized Repayment Premium, if any, Prepayment Premium, if any, and Interest on the Bonds shall become immediately due and payable. (b) At any time after such a declaration of acceleration has been made pursuant to subsection (a) of this Section, the GE Bondholder (or in the event that none of the Bonds are held by a GE Bondholder, a Majority of Holders) may, by written notice to the Issuer and the Trustee, rescind and annul such declaration and its consequences if (i) there has been deposited with the Trustee a sum sufficient to pay (I) all overdue installments of Interest on the Bonds, (2) the principal of, or Prepayment Premium, if any, on the Bonds which has become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in the Bonds, (3) to the extent that payment of such interest is lawful, interest upon overdue installments of Interest at the rate or rates prescribed therefor in the Bonds, and (4) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (ii) all Events of Default, other than the non-payment of the principal of the Bonds which have become due solely by such declaration of acceleration, have been cured or have been waived in writing as provided in Section 11.11. 38 /I-tic{ MIFS02... :\RE\60W 7660\1387\227\JND9197U .128 No such rescission and annulment shall affect any subsequent default or impair any right consequent thereon. Section 11.3. Application of Money Collected. (a) Any money collected by the Trustee pursuant to this Article and any other sums then held by the Trustee as part of the Trust Estate, shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, or Interest on, the Bonds, upon presentation of the Bonds and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: (i) hereunder; First: To the payment of all amounts due the Trustee and the Issuer (ii) Second: To the payment of the whole amount then due and unpaid upon the Bonds for principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on, the Bonds, in respect of which or for the benefit of which such money has been collected, with interest (to the extent that such interest has been collected by the Trustee or a sum sufficient therefor has been so collected and payment thereof is legally enforceable at the respective rate or rates prescribed therefor in the Bonds) on overdue principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and on overdue installments of Interest on the Bonds at the Default Rate; and in case such proceeds shall be insufficient to pay in full the whole amount so due and unpaid upon the Bonds, then to the payment of such principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on, the Bonds, without any preference or priority, ratably according to the aggregate amount so due; provided, however, that in the event all of the outstanding Bonds are then held by one or more GE Bondholders, the amounts paid in respect of the outstanding principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on the Bonds, shall be applied in such order of priority as may be prescribed by the GE Bondholder in its sole and absolute discretion; (iii) Third: To the payment of any and all other amounts due under the Loan Documents; and (iv) Fourth: The payment of the remainder, if any, to the Developer or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. Section 11.4, Trustee May Enforce Claims without Possession of Bonds. All rights of action and claims under this Indenture or the Bonds may be prosecuted and enforced by the Trustee without the possession of the Bonds or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, 39 A-tis MIFS02...:\RE\60\47660\1387\221\IN09197U .128 disbursements and advances of the Trustee, its agents and counsel, be for the benefit of the Bondholders in respect of which such judgment has been recovered. Section 11.5. Limitation on Suits. Subject to the provisions of Section 11.1 0 of this Indenture, no Bondholder shall have any right to institute any proceeding, judicial or otherwise, under or with respect to this Indenture, or for the appointment of a receiver or trustee or for any other remedy hereunder. unless (a) such Bondholder previously has given written notice to the Trustee of a continuing Event of Default; (b) such Bondholder shall have made request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; and (c) such Bondholder (either alone or together with other Bondholders) has offered to the Trustee in writing reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and the Trustee has thereafter failed or refused to exercise remedies hereunder. Section 11.6. Unconditional Right of Bondholders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, other than those set forth in Article III hereof, to the contrary, the Bondholders shall have the right which is absolute and unconditional to receive payment of the principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, Purchase Price and Interest on the Bonds on the maturity date expressed in the Bonds (or, in the case of redemption or Mandatory Tender, on the redemption date or Mandatory Tender Date, respectively) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the written consent of all of the Bondholders. Section 11.7. Restoration of Positions. If the Trustee or any of the Bondholders shall have instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee or to the Bondholders, then and in every such case the Issuer, the Trustee and the Bondholders shall, subject to any determination in such proceeding, be restored to their former positions hereunder, and thereafter all rights and remedies of the Issuer, the Trustee and the Bondholders shall continue as though no such proceeding had been instituted, Section 11.8. Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Trustee or to the Bondholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 11.9. Delay or Omission Not Waiver. No delay or omission of the Trustee or of the Bondholders to exercise any right or remedy accruing upon an Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every 40 ,A-c/ro MIFS02...:\RE\60\47660\1387\227\1ND9197U.12B right and remedy given by this Article or by law to the Trustee or to the Bondholders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Bondholders, as the case may be. Section 11.10. Control by Bondholders. The Bondholders shall have the right, during the continuance of an Event of Default, (a) to require the Trustee to proceed to enforce this Indenture and the Loan Documents, either by judicial proceedings for the enforcement of the payment of the Bonds or otherwise, and (b) to direct in writing the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee hereunder, provided that (i) Indenture, such direction shall not be In conflict with any rule of law or this (ii) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and (iii) the Bondholders shall have offered in writing to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred by the Trustee in compliance with such request. Notwithstanding the foregoing or anything to the contrary contained in this Indenture, in the Loan Agreement or in any of the other Loan Documents, during any period that any of the Bonds are held by a GE Bondholder, the Trustee shall not exercise any of its rights or remedies under this Article XI or otherwise hereunder or under any of the other Loan Documents as a result of the occurrence of an Event of Default hereunder, a Loan Agreement Default under the Loan Agreement, a default or an event of default under the Deed of Trust or any default or event of default under any of the other Loan Documents, unless and until instructed in writing by the GE Bondholder to do so and shall in such event exercise such rights and remedies as so instructed by the GE Bondholder provided that the GE Bondholder shall have offered to the Trustee in writing indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities to be incurred by the Trustee in compliance with any such instructions. Section 11.11. Waiver of Past Defaults. Before any judgment or decree for payment of money due has been obtained by the Trustee, the GE Bondholder (or in the event that none of the Bonds are held by a GE Bondholder, a Majority of Holders) may, by written notice to the Trustee, the Issuer and the Developer, waive any past default hereunder or under the Loan Agreement and its consequences except for default in obligations due the Issuer pursuant to or under the Unassigned Issuer's Rights. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture and the Loan Agreement; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. 41 MIFS02...:\RE\60\47660\1387\227\JND9197U.12B /1-41 Section 11.12. Remedies Under Loan Agreement or Note. The Trustee shall have the right, in its own name or on behalf of the Issuer, to declare any default and exercise any remedies under the Loan Agreement or the Note. Any money collected by the Trustee pursuant to the exercise of any remedies under the Loan Agreement or the Note shall be applied as provided in Section 11.3 of this Indenture. Section 11.13. Waiver of Appraisement and Other Laws. (a) To the extent permitted by law, the Issuer will not at any time insist upon, plead, claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or redemption law now or hereafter in force, in order to prevent or hinder the enforcement of this Indenture; and the Issuer, for itself and all who may claim under it, so far as it or they now or hereafter may lawfully do so, hereby waives the benefit of all such laws. The Issuer, for itself and all who may claim under it, waives, to the extent that it may lawfully do so, all right to have the property in the Trust Estate marshalled upon any enforcement hereof. (b) If any law in this Section referred to and now in force, of which the Issuer or its successor or successors might take advantage despite this Section, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the contract herein contained or to preclude the application of this Section. Section 11.14. Suits to Protect the Trust Estate. Subject to the provisions of Section 11.10 hereof, the Trustee shall have power to institute and to maintain such proceedings as it may deem expedient to prevent any impairment of the Trust Estate by any acts which may be unlawful or in violation of this Indenture and to protect its interests and the interests of the Bondholders in the Trust Estate and in the rents, issues, profits, revenues and other income arising therefrom, including power to institute and maintain proceedings to restrain the enforcement of or compliance with any governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order would impair the security hereunder or be prejudicial to the interests of the Bondholders or the Trustee. The Trustee shall provide written notice to each GE Bondholder of the institution of any such proceedings. Section 11.15. Remedies Subject to Applicable Law. All rights, remedies and powers provided by this Article may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law in the premises, and all the provisions of this Article are intended to be subject to all applicable mandatory provisions of law which may be controlling in the premises and to be limited to the extent necessary so that they will not render this Indenture invalid, unenforceable or not entitled to be recorded, registered or filed under the provisions of any applicable law. [End of Article XI] 42 MIFS02...:\RE\60\47660\1387\227\IND9I97U.128 /1- '-It ARTICLE XII THE TRUSTEE Section 12.1. Certain Duties and Responsibilities of Trustee. (a) Except during the continuance of an Event of Default, (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of negligence or bad faith on its part. the Trustee may conclusively rely. as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) If an Event of Default exists, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and subject to Section l2.I(c)(iii) hereof, use the same degree of care and skill in their exercise. as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act. or its own misconduct. except that (i) this subsection shall not be construed to limit the effect of subsection (a) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the GE Bondholder (or in the event that none of the Bonds are held by a GE Bondholder, a Majority of Holders) relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and (iv) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have 43 MIFSOL:\RE\60\47660\1387\227\IND9197U.128 /1-44 reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability. is not reasonably assured to it. (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. As long as the Bonds remain Outstanding, the Trustee agrees to perform all ministerial duties and obligations of the Issuer under this Indenture and the Loan Agreement, and accepts the duty to review the [Compliance Certificate] (as such term is defined in the Land Use Restriction Agreement) to determine, in reliance upon the Developer's written certifications, if the [Compliance Certificate] complies with the Land Use Restriction Agreement and to notify the Developer, the GE Bondholder and the Issuer with respect to noncompliance. The Trustee shall be entitled to rely upon the accuracy of the reports submitted to it. The Issuer shall have no responsibility for reviewing any [Compliance Certificate] or for monitoring or insuring in any way the compliance of the Developer with the terms of the Loan Agreement or of any applicable law. Section 12.2. Notice of Potential Defaults. Upon the occurrence of any Potential Default hereunder and provided that the Trustee is aware of or has been made aware of the existence of such Potential Default, immediately with respect to any GE Bondholder and within thirty (30) days with respect to any other Bondholder, the Trustee shall transmit by mail to the Bondholders as their names and addresses appear in the Bond Register, notice of such Potential Default hereunder known to the Trustee pursuant to Section 12.3(g) hereof, unless such Potential Default shall have been cured or waived. Section 12.3. Certain Rights of Trustee. Except as otherwise provided in Section 12.1 hereof: (a) subject to Section 12.1(a)(ii) hereof, the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order. bond, debenture, coupon or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Issuer mentioned herein shall be sufficiently evidenced by a certificate or order executed by an Authorized Issuer Representative; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon a certificate executed by an Authorized Issuer Representative or an Authorized Developer Representative, as appropriate; (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of the Bondholders pursuant to this Indenture, unless the Bondholders shall have offered to the Trustee in writing security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction, provided, that nothing contained in 44 A-~() MIFS02...:\RE\60\47660\1387\227\lND9197U.128 this subparagraph (d) shall be construed to require such security or indemnity for the performance by the Trustee of its obligations under Article VIII and Section 9.2 hereof; (e) the Trustee 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. coupon or other paper or document but the Trustee. in its discretion. may make such further inquiry or investigation into such facts or matters as it may see fit. and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books and records of the Issuer. if any, and of the Developer. in either case personally or by agent or attorney; (f) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or Degligence on the part of any agent or attorney appointed with due care by it hereunder; and (g) the Trustee shall not be required to take notice or be deemed to have notice of any Event of Default hereunder except for Events of Default specified in subsections (a), (b) or (c) of Section 11.1 hereof and except for any Loan Agreement Default resulting from the Developer's failure to timely deposit any amounts required to be deposited into the Replacement Reserve Fund. Debt Service Reserve Fund or the Tax Escrow Fund, and then only as to payment of principal of and Interest on the Bonds. the payment of Purchase Price on a Mandatory Tender Date, and the deposit of funds required to be deposited into the Replacement Reserve Fund, the Debt Service Reserve Fund or the Tax Escrow Fund, unless a Responsible Officer of the Trustee shall be specifically notified in writing of such Event of Default by the Issuer or by any Bondholder, and all notices or other instruments required by this Indenture to be delivered to the Trustee, must, in order to be effective. be delivered in writing to a Responsible Officer in the Corporate Trust Department of the Trustee at the Office of the Trustee, and in the absence of such written notice so delivered the Trustee may conclusively assume there is no Event of Default as aforesaid. Section 12.4. Not Responsible for Recitals. The recitals contained herein and in the Bonds, except the certificate of authentication on the Bonds. shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the value or condition of the Trust Estate or any part thereof, or as to the title of the Issuer thereto or as to the security afforded thereby or hereby, or as to the validity or sufficiency of this Indenture or of the Bonds. Section 12.5. May Hold Bonds. The Trustee in its individual or any other capacity may become the owner or pledgee of the Bonds and may otherwise deal with the Issuer and the Developer with the same rights it would have if it were not Trustee. Section 12.6. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise provided in Article IX hereof. 45 II-~-I MIFS02...:\RE\60\47660\1387\227\1ND9197U.128 Section 12.7. Compensation and Reimbursement. (a) Subject to the provisions of Article III hereof, the Issuer agrees (i) to pay to the Trustee from time to time, but only to the extent of the special and limited funds available therefor, or otherwise paid by the Developer, as provided in this Indenture, reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and (ii) except as otherwise expressly provided herein, to reimburse the Trustee, but only to the extent of the special and limited funds available therefor, or otherwise paid by the Developer, as provided in this Indenture, upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to the Trustee's negligence or misconduct. (b) As security for the performance of the obligations of the Issuer under this Section, the Trustee shall be secured under this Indenture by a lien prior to the Bonds, and for the payment of such compensation, expenses, reimbursements and indemnity the Trustee shall have the right to use and apply any money held by it as a part of the Trust Estate. Section 12.8. Trustee Required; Eligibility. Any Successor Trustee shall at all times be a trust company, a banking corporation or a national banking association with the authority to accept trusts in the State and either (a) have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition, (b) be a wholly-owned subsidiary of a bank holding company, or a wholly-owned subsidiary of a company that is a wholly-owned subsidiary of a bank holding company, having a combined capital surplus of at least $50,000,000 as set forth in its most recent published annual report of condition, have at least $500,000,000 of trust assets under management and have a combined capital surplus of at least $2,000,000 as set forth in its most recent published annual report of condition, or (c) is otherwise acceptable to the GE Bondholder in its sole and absolute discretion during the Initial Rate Period. Section 12.9. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 12.10 hereof, (b) The Trustee may resign at any time by giving written notice thereof to the Issuer and the GE Bondholder. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within thirty (30) days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. 46 ,A-S".:J. MIFS02...:\RE\60\47660\13S7\227\1ND9197U 128 (c) The Trustee may be removed at any time by the GE Bondholder (or in the event that none of the Bonds are held by a GE Bondholder, by a Majority of Holders) or the Issuer by written notice delivered to the Trustee, the Issuer or the Bondholders, as applicable, and the Developer; provided, however, that the Trustee shall be paid all amounts due it before its removal by the Bondholders or the Issuer. (d) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Trustee for any cause, the Issuer, by a resolution of its governing body, shall promptly appoint a successor Trustee; provided, however, that during any period the Bonds are held by a GE Bondholder, the GE Bondholder shall have consented to the appointment of such successor Trustee. In case all or substantially all of the Trust Estate shall be in the possession of a receiver or trustee lawfully appointed, such receiver or trustee may similarly appoint a successor to fill such vacancy until a new Trustee shall be so appointed by the Issuer. If, within one (I) year after such resignation, removal or incapability or the occurrence of such vacancy, the Issuer has failed to so appoint a successor Trustee, then a successor Trustee shall be appointed by act of the GE Bondholder (or in the event that none of the Bonds are held by a GE Bondholder, by act of a Majority of Holders) delivered to the Issuer, the Developer and the retiring Trustee, and the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by such receiver or trustee. If no successor Trustee shall have been so appointed by the Issuer, the GE Bondholder or a Majority of Holders and accepted appointment in the manner hereinafter provided, any Bondholder may petition any court of competent jurisdiction for the appointment of a successor Trustee. (e) The Issuer shall give written notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing notice of such event by first-class mail, postage prepaid, to the Bondholders as their names and addresses appear in the Bond Register. Each notice shall include the name of the successor Trustee and the address of the Office of the successor Trustee. Section 12.10. Acceptance of Appointment by Successor. (a) Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the estates, properties, rights, powers, trusts and duties of the retiring Trustee; notwithstanding the foregoing, on request of the Issuer or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument conveying and transferring to such successor Trustee upon the trusts herein expressed all the estates, properties, rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject nevertheless to its lien, if any, provided for in Section l2.7(b) hereof. Upon request of any such successor Trustee, the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such estates, properties, rights, powers and trusts. 47 MIFS02 ..:\RE\60\41660\138i1227\1ND9I97U.128 A-S.3 (b) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article, to the extent operative. Section 12.11. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated. or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, to the extent operative. without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case the Bonds shall have been authenticated, but not delivered, by the Trustee then in office. any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Bonds so authenticated with the same effect as if such successor Trustee had itself authenticated the Bonds. Section 12.12. Requirements for Bondholder Consent and Instruction to the Trustee. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents except the provisions of Article XIII hereof regarding the consent or approval of all Bondholders to any supplement or amendment to this Indenture, the Loan Agreement, the Note or to any of the other Loan Documents, the following provisions shall govern and control with respect to any consents, determinations, elections, approvals, waivers, acceptances, satisfactions or expression of opinion of or the taking of any discretionary act or the giving of any instructions or the taking of actions by the GE Bondholder or the Bondholders hereunder or under any of the other Loan Documents. (a) Concurrently with the issuance of the Bonds. GECC as the initial purchaser of all of the Bonds shall designate in writing in a certificate to be delivered to the Trustee. one or more Bondholder Representatives who shall have the authority to bind the GE Bondholder for all purposes hereunder and under each of the other Loan Documents, including, without limitation, for purposes of exercising the rights of the GE Bondholder under Section 15.5 hereof. The Trustee shall be entitled to rely upon the acts of any such Bondholder Representative as binding upon the GE Bondholder. (b) In the event that all or any portion of the Bonds are transferred by GECC to any other Person (other than an Affiliate of GECC) prior to the Mandatory Tender Date, then all GE Bondholders shall unanimously designate GECC or any other single GE Bondholder to act on behalf of all such GE Bondholders (the "Designated GE Bondholder") and such Designated GE Bondholder shall designate in writing in a certificate to be delivered to the Trustee, one or more Bondholder Representatives who shall have the authority to bind such Designated GE Bondholder for all purposes hereunder and under each of the other Loan Documents, including, without limitation, for purposes of exercising the rights of the GE Bondholder under Section 15.5 hereof. During such period, the Trustee shall be entitled to rely upon the acts of any such Bondholder Representative as binding upon the Designated GE Bondholder and shall be entitled to rely upon the acts of the Designated GE Bondholder as binding upon all GE Bondholders until such time as the Trustee has received written notice signed by all GE Bondholders that a new Designated GE Bondholder has been appointed and/or has received written notice from the Designated GE Bondholder changing the designation of the Bondholder Representative(s). Whenever all Bonds 48 /1- ~-V MIFS02... :\RE\60\47660\J 387\227\1ND9197U .128 are held by GECC and/or its Affiliates, GECC shall be the Designated GE Bondholder and it shall designate in writing in a certificate to be delivered to the Trustee one or more Bondholder Representatives. (c) Until the Trustee receives written notice signed by all GE Bondholders that a new Designated GE Bondholder has been appointed the Bondholder Representatives appointed pursuant to the provisions of subsection (a) hereof or Designated GE Bondholder appointed pursuant to the provisions of subsection (b) hereof and the Bondholder Representatives appointed thereby, shall continue to act in such capacities and the Trustee shall continue to rely on the actions of such Bondholder Representatives as binding upon the Designated GE Bondholder and the GE Bondholder for all purposes hereunder and under each of the Loan Documents. (d) Except as otherwise specifically provided herein, any provision of this Indenture regarding the consent, approval, designation, direction or action of "GE Bondholder" shall be of no force or effect whatsoever, and the requirement or provision for such consent, approval, designation, direction or action of the "GE Bondholder" shall be deemed deleted on and after the date of purchase of all of the Outstanding Bonds in connection with a Mandatory Tender Date. [End of Article XII] 49 MIFS02..,;\RE\60\4766O\1387\227\1ND9197U.128 A-S'S' ARTICLE XIII SUPPLEMENTAL INDENTURES; AMENDMENT OF LOAN AGREEMENT AND LOAN DOCUMENTS Section 13.1. Supplemental Trust Indentures without Bondholders' Consent. The Issuer and the Trustee from time to time and at any time may enter into such trust indentures supplemental hereto, without the consent of any Bondholders (except the GE Bondholder during the Initial Rate Period), but only with the consent of the GE Bondholder during the Initial Rate Period and otherwise subject to Section 13.5 hereof, as are necessary or desirable to: (a) cure any ambiguity or fonnal defect or omission, correct or supplement any provision herein or in any supplemental trust indenture that may be inconsistent with any other provision herein or in any supplemental trust indenture, or make any other provisions with respect to matters or questions arising under this Indenture or in any supplemental trust indenture that shall not be inconsistent with the provisions of this Indenture or in any supplemental trust indenture, or (b) grant to or confer upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the Bondholders or the Trustee, or (c) amend any of the provisions of this Indenture to the extent required to pennit compliance by the Issuer with Section 103 of the Code of 1954 or Section 103 and Sections 141 through 150 of the Code of 1986, as applicable, to the extent such amendment is not contrary to such Sections of the Code, or (d) add to the covenants and agreements of the Issuer in this Indenture other covenants and agreements thereafter to be observed by the Issuer or to surrender any right or power herein reserved to or conferred upon the Issuer, or (e) make any other change herein which, in the opinIOn of the Trustee, IS not materially adverse to the interests of the Bondholders of the Bonds, or ([) amend, alter, modify or supplement this Indenture in a manner required in connection with the establishment of a book-entry system for the registration of the Bonds; provided, however, that no such supplemental trust indenture referred to in clauses (a), (b), (c), (d), (e), or ([) above shall be executed which, in the judgment of the Trustee, materially adversely affects the interests of the Bondholders. In making such determination, the Trustee may rely in good faith upon the advice of counsel including, without limitation, the advice of Bond Counsel, provided that the Trustee may not take any action in conflict with the provisions of this Indenture. Immediately after the execution of any supplemental trust indenture for any of the purposes of this Section, the Trustee shall cause a notice of the proposed execution of such supplemental trust indenture to be mailed, postage prepaid, to Bondholders. Such notice shall briefly set forth the nature of the 50 MIFS02... :\RE\60\4 7660\ 1387\227\1ND9197U, 128 A-~ proposed supplemental trust indenture and shall state that copies thereof are on file at the designated office of the Trustee for inspection by Bondholders. A failure on the part of the Trustee to mail the notice required by this Section shall not affect the validity of such supplemental trust indenture. Section 13.2. Supplemental Trust Indentures with Bondholders' Consent. Except as otherwise provided in Section 13.1 hereof, subject to the terms and provisions contained in this Section and Section 13.3 hereof, a Majority of the Holders shall have the right, from time to time, anything contained in this Indenture to the contrary notwithstanding, to consent to and approve the execution by the Issuer and the Trustee. of such trust indenture or trust indentures supplemental hereto as shall be deemed necessary or desirable by the Issuer or the Developer or, during the Initial Rate Period, the GE Bondholder for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture or in any supplemental trust indenture; provided. however. that nothing herein contained shall permit. or be construed as permitting, without the consent of the Bondholders of all of the Bonds affected by such supplement, (a) an extension in the payment of any principal or Redemption Price of or Interest on or any other amount payable under or with respect to any Bond issued hereunder, or (b) a reduction in the principal amount or Redemption Price of or any other amount payable under or with respect to any Bond, or the rate of Interest on any Bond. or (c) the creation of a lien upon or pledge of the money or other assets pledged to the payment of the Bonds hereunder, or the release of any such assets from the lien of this Indenture, or (d) a preference or priority of any Bond or Bonds over any other Bond or Bonds, or (e) a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental trust indenture or to any amendment, change or modification to the Loan Documents as provided in Section 13.8 or 13.9 hereof, or (f) an extension or reduction in the payment of any other amount payable on or in connection with any Bond issued hereunder. Nothing herein contained, however, shall be construed as making necessary the approval of Bondholders (other than the GE Bondholders during the Initial Rate Period) of the execution of any supplemental trust indenture authorized in Section 13.1 hereof. If at any time the Issuer or the Developer shall request the Trustee to enter into a supplemental trust indenture for any of the purposes of this Section, the Trustee shall, at the expense of the Developer. cause notice of the proposed execution of such supplemental trust indenture to be mailed, postage prepaid, to the Developer and to Bondholders. Such notice shall briefly set forth the nature of the proposed supplemental trust indenture and shall state that copies thereof are on file at the designated office of the Trustee for inspection by Bondholders and by the Developer. The Trustee shall not, however, be subject to any liability to any Bondholders by reason of its failure to mail the notice required by this Section 13.2, and any such failure shall not affect the validity of such supplemental trust indenture when consented to and approved as provided in this Section. Whenever. at any time within one year after the date of mailing of such notice, the Issuer delivers to the Trustee an instrument or instruments in writing purporting to be executed by a Majority of Holders, which instrument or instruments shall refer to the proposed supplemental trust indenture described in such notice and shall specifically consent to and approve the execution thereof in substantially the form of the copy thereof referred to in such notice, thereupon but not otherwise, the Trustee may. subject to the provisions of the first paragraph of this Section 13.2. execute such supplemental trust indenture in substantially such form. 51 M[FS02...:\RE\60\47660\1]87\227\1ND9197U.128 A-S7 Subject to the provisions of the first paragraph of this Section 13.2, if not less than the Majority of Holders, at the time of the execution of such supplemental trust indenture, shall have consented to and approved the execution thereof as herein provided, no Bondholder shall have any right to object to the execution of such supplemental trust indenture, or to object to any of the terms and provisions contained therein or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Issuer from executing the same or from taking any action pursuant to the provisions thereof. Section 13.3. Supplemental Trust Indentures Part of Indenture. Any supplemental trust indenture executed in accordance with the provisions of this Article shall thereafter form a part of this Indenture, and all of the terms and conditions contained in any such supplemental trust indenture as to any provision authorized to be contained therein shall be and shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes. 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 Trustee and Bondholders of Bonds then Outstanding shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such modifications and amendments. Express reference to any supplemental trust indenture may be made in the text of any Bonds authenticated after the execution of such supplemental trust indenture, if deemed necessary or desirable by the Trustee. Section 13.4. Discretion of Trustee to Execute Supplemental Trust Indenture. Except as directed by the GE Bondholder during the Initial Rate Period. the Trustee shall not be under any responsibility or liability to the Issuer or to any Bondholder or to anyone whomsoever for its refusal in good faith to enter into any supplemental trust indenture if such supplemental trust indenture is deemed by it to be contrary to the provisions of this Article or if the Trustee has received a written Opinion of Counsel that such supplemental trust indenture is contrary to law or materially adverse to the rights of the Bondholders of the Bonds. Section 13.5. Consents and Opinions. Anything herein to the contrary notwithstanding, any supplemental indenture permitted under this Article XIII shall not become effective unless and until the Developer, and the GE Bondholder during the Initial Rate Period, shall have approved the same in writing, each in its sole discretion. Notwithstanding anything to the contrary contained in Article XI, the Trustee shall not be required to enter into or consent to any such supplemental indenture if, in the sole judgment of the Trustee, its duties. obligations, liabilities, indemnities, protections or rights will be materially adversely affected hereunder or thereunder. No supplemental indenture shall be effective until the Issuer, the Developer, the Trustee, and the GE Bondholder during the Initial Rate Period, shall have received a Favorable Tax Opinion of Bond Counsel. The Trustee and the Issuer shall be entitled to receive, at the expense of the Developer, an opinion of any counsel approved by the Trustee and the Issuer that any such proposed supplemental trust indenture complies with the provisions of this Indenture, and that it is authorized, under the provisions of this Article. to join in the execution of such supplemental trust indenture. Section 13.6. Certificate of Developer. In connection with any supplement to the Indenture requested by the Developer, the Trustee and the Issuer may obtain and shall be fully protected in relying upon a certificate of the Developer to the effect that, as of the date of such certificate, the Developer and 52 MIFS02...:\RE\60\4 76f:i)\ 1387\227\JND9197U .128 /1- ~-r Project are in compliance with all requirements of the Loan Agreement, the Land Use Restriction and all other Loan Documents to which the Developer is a party (with such exceptions as shall be acceptable to the Issuer in its reasonable discretion). Section 13.7. 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 may bear a notation, in form approved by the Trustee 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 Trustee and the Issuer, to any modification of this Indenture contained in any such supplemental indenture, may be prepared by the Issuer, at the expense of the Developer, authenticated by the Trustee and delivered without cost to the Bondholders of the Bonds then Outstanding, upon surrender for cancellation of such Bonds in equal aggregate principal amounts. Section 13.8. Amendments to Loan Agreement and Loan Documents Not Requiring Consent of Bondholders. The Issuer shall not consent to any amendment, change or modification of the Loan Agreement or any other Loan Document (other than the Indenture) without the prior written consent of the Trustee and the GE Bondholder. The Issuer and the Trustee may, without the consent of or notice to the Bondholders (except the GE Bondholder during the Initial Rate Period), but only with the consent of the GE Bondholder during the Initial Rate Period, and otherwise subject to Section 13.10 hereof, consent to any amendment, change or modification of any of the above-mentioned documents as are necessary or desirable to: (a) cure any ambiguity or formal defect or omission, correct or supplement any provision in the Loan Agreement or any other Loan Document (other than the Indenture) or in any supplement to such documents that may be inconsistent with any other provision in any of such documents, or make any other provisions with respect to matters or questions arising under such documents that shall not be inconsistent with the provisions of the Loan Agreement or any other Loan Document (other than the Indenture), or (b) grant to or confer upon the Trustee for the benefit of the Bondholders any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the Bondholders or the Trustee, or (c) amend any of the provisions of the Loan Agreement or any other Loan Document (other than the Indenture) to the extent required to permit compliance by the Issuer with Section 103 of the Code of 1954 or Section 103 and Sections 141 through 150 of the Code of 1986, as applicable, to the extent such amendment is not contrary to such Sections of the Code, or (d) add to the covenants and agreements of the Issuer in the Loan Agreement or any other Loan Document (other than the Indenture), other covenants and agreements thereafter to be observed by the Issuer or to surrender any right or power therein reserved to or conferred upon the Issuer, or 53 MIFS02... :\RE\60\47660\ 1387\227\1ND9197U .128 A~~~ (e) make any other change in the Loan Agreement or any other Loan Document (other than the Indenture) which, in the opinion of the Trustee, is not materially adverse to the interests of the Bondholders of the Bonds, or (f) amend, alter, modify or supplement the Loan Agreement or any other Loan Document (other than the Indenture) in a manner required in connection with the establishment of a book-entry system for the registration of the Bonds, or (g) conform to any supplements or amendments to the Indenture permitted under Section 13.1 above; provided, however, that no such amendment, change or modification to the above referenced documents as provided in clauses (a), (b), (c), (d), (e), (f) or (g) shall be executed which, in the opinion of the Trustee, materially adversely affects the interests of the Bondholders. Before the Issuer shall execute any amendment or modification, there shall have been filed with the Trustee and the Issuer, and with the GE Bondholder during the Initial Rate Period, an Opinion of Counsel stating that such amendment or modification (i) is authorized or permitted by this Indenture and complies with its terms, (ii) if the Issuer is a party to such Loan Document, will be valid and binding upon the Issuer in accordance with its terms after its execution by the Issuer and the Trustee, and (iii) will comply with the Act and will not, in and of itself, impair the exclusion from gross income of Coupon Interest on the Bonds for federal income tax purposes. In determining whether any amendment or other modification to any of the above-referenced documents materially adversely affects the interests of the Bondholders, the Trustee and the Issuer may rely upon an Opinion of Counsel acceptable to them. Section 13.9. Amendments to Loan Agreement and Loan Documents Requiring Consent of Bondholders. Except for the amendments, changes or modifications corresponding to those provided in Section 13.8 hereof, neither the Issuer nor the Trustee shall consent to any other amendment. change or modification of the Loan Agreement or Loan Documents (other than the Indenture) without the consent of the Bondholders of not less than the Majority of Holders; provided, however, that nothing herein shall permit or be construed as permitting, without the consent of the Bondholders of all of the Bonds, (a) an extension of the time of payment of any amounts payable under the Note, the Loan Agreement or the Bonds, or (b) a reduction in the amount of any payment to be made with respect to the Note, the Loan Agreement, or the Bonds, or the rate of Interest on the Note or any Bond, or (c) the creation of a lien upon or pledge of the money or other assets pledged to the payment of the Note, Loan Agreement or the Bonds hereunder, or the release of any such assets from the lien of this Indenture, or (d) a preference or priority of any Bond or Bonds over any other Bond or Bonds, or (e) a reduction in the aggregate principal amount of the Bonds required for consent to any such amendment, change or modification as provided herein, or (f) an extension or reduction in the payment of any other amount payable on or in connection with the Note, the Loan Agreement or any Bond issued hereunder. If at any time the Issuer or the Developer requests consent to any such proposed amendment, change or modification of any of such documents, other than an amendment, change, or modification permitted by Section 13.8 hereof, the Trustee shall, at the expense of the Developer, cause notice of such proposed amendment, change or modification to be mailed, postage prepaid, to Bondholders. Such notice shall briefly set forth the nature of such proposed amendment, change or modification and shall state that copies of the amendment to such document embodying the same are on file at the designated office of the Trustee for inspection by Bondholders. Tbe Trustee shall not, however, be subject to any liability to any Bondholders by reason 54 MIFS02... :\RE\60\4766O\1387\227\1ND9197U .12B A-"o of its failure to mail the notice required by this Section, and any such failure shall not affect the validity of such supplement or amendment to such document when consented to and approved as provided in this Section. Whenever, at any time within one year after the date of mailing such notice, the Issuer delivers to the Trustee an instrument or instruments in writing purporting to be executed by the Bondholders of not less than the Majority of Holders, which instrument or instruments shall refer to the proposed amendment or supplement to the document described in such notice and shall specifically consent to and approve the execution thereof in substantially the form of the copy thereof referred to in such notice, thereupon but not otherwise, the Issuer may execute such amendment in substantially the form on file as provided above, without liability or responsibility to any Bondholder of any Bond, whether or not such Bondholder has consented thereto. Section 13.10. Consents and Opinions. Anything herein to the contrary notwithstanding, any amendment, change or modification to the Loan Agreement or any other Loan Document (other than the Indenture) permitted under this Article XIII shall not become effective unless and until the Developer, and the GE Bondholder during the Initial Rate Period, shall have approved the same in writing, each in its sole discretion. Notwithstanding anything to the contrary contained in Article XI, the Trustee shall not be required to enter into or consent to any such amendment, change or modification if, in the sole judgment of the Trustee, its duties, obligations, liabilities, indemnities, protections or rights will be materially adversely affected hereunder or thereunder. Before the Issuer shall execute or consent to any amendment, change or modification to the Loan Agreement or any other Loan Document (other than the Indenture), there shall have been filed with the Issuer and the Trustee (i) a Favorable Tax Opinion of Bond Counsel, and (ii) an Opinion of Counsel stating that such amendment, change or modification (I) complies with the Act and is authorized or permitted by this Indenture and complies with its terms; and (2) will be valid and binding upon the Issuer in accordance with its terms after its execution by the Issuer and the other parties thereto. Section 13.11. Certificate of Developer. In connection with any amendment, change or modification to the Loan Agreement or any other Loan Document (other than the Indenture) requested by the Developer, the Trustee and the Issuer may obtain and shall be fully protected in relying upon a certificate of the Developer to the effect that, as of the date of such certificate, the Developer and Project are in compliance with all requirements of the Loan Agreement, the Land Use Restriction Agreement and all other Loan Documents to which the Developer is a party (with such exceptions as shall be acceptable to the Issuer in its reasonable discretion). [End of Article XIII] 55 MIFS02...:\RE\60\47660\1387\127\IND9197U.128 /I-t-f ARTICLE XIV DEFEASANCE Section 14.1. Payment of Indenture Indebtedness; Satisfaction and Discharge of Indenture. Whenever all Indenture Indebtedness has been fully paid and the Bonds are no longer Outstanding. then (a) this Indenture and the lien. rights and interests created hereby shall cease, determine and become null and void (except as to any surviving rights of transfer or exchange of the Bonds herein or therein provided for) and (b) the Trustee shall. upon the request of an Authorized Developer Representative, execute and deliver a termination statement and such instruments of satisfaction and discharge as may be necessary and pay, assign. transfer and deliver to the Developer or upon the order of the Developer. all cash and securities then held by it hereunder as a part of the Trust Estate. Section 14.2. Trust for Payment of Debt Service. (a) With the prior written consent of any GE Bondholder. the Issuer may provide for the payment of any of the Bonds by establishing a trust for such purpose with the Trustee and depositing therein cash and/or Government Obligations which (assuming the due and punctual payment of the principal of and interest on such Government Obligations. but without reinvestment) will provide funds sufficient to pay the Debt Service on the Bonds as the same becomes due and payable until the maturity or redemption of the Bonds; provided. however. that (i) such Government Obligations must not be subject to redemption prior to their respective maturities at the option of the issuer of such Government Obligations. (ii) if the Bonds are to be redeemed prior to their maturity. either (i) the Trustee shall receive evidence that irrevocable written notice of such redemption has been given in accordance with the provisions of this Indenture and the Bonds or (ii) the Issuer shall confer on the Trustee irrevocable written authority for the giving of such notice on behalf of the Issuer, (iii) prior to the establishment of such trust the Issuer and the Trustee must receive (i) an Opinion of Counsel stating in effect that upon the occurrence of an Act of Bankruptcy. money and investments in such trust will not be recoverable from the Trustee or the Bondholders under provisions of the Federal Bankruptcy Code relating to voidable preferences and (ii) a Favorable Tax Opinion. and (iv) prior to the establishment of such trust. the Trustee must receive a report by an Independent certified public accountant stating in effect that the principal and interest payments on the Government Obligations in such trust. without reinvestment. together with the cash initially deposited therein, will be sufficient to make the required payments from such trust. 56 MIFS02... :\RE\60\4 7660\ 1387\227\JND9197U .128 fi- " L (b) Cash and/or Government Obligations deposited with the Trustee pursuant to this Section shall not be a part of the Tru~t Estate but shall constitute a separate, irrevocable trust fund for the benefit of the Bondholders to be paid from such fund. Such cash and the principal and interest payable on such Government Obligations shall be applied by the Trustee solely to the payment of Debt Service on the Bonds. [End of Article XIV] 57 MIFS02.. .:\RE\60\47660\1387\227\1ND9197U .128 /1- '.3 ARTICLE XV MISCELLANEOUS Section 15.1. Notices. (a) All notices, demands. requests and other communications required or permitted to be given by any provision of this Indenture shall be in writing and sent by first class, regular, registered or certified mail. commercial overnight delivery service, overnight courier, telegraph, telex, telecopier or facsimile transmission, air or other courier, or hand delivery, to the party to be notified addressed as follows: If to the Issuer: City of Chula Vista, California 276 Fourth Avenue Chula Vista, CA 91910 Attention: Community Development Director Telecopier: (619) 585-5698 If to the Trustee: First Trust National Association 601 Union Street Suite 2120 Seattle. W A 98101 Attention: Carol Nelson/Alicia Estrada Telecopier: (206) 461-4175 With respect to payment or tender of Bonds, if to the Trustee: First Trust National Association 180 East 5th Street SI. Paul, Minnesota 55101 If to the Developer: Eucalyptus Grove Holdings, LLC 399 North Main Suite 200 Logan, Utah 84321 Attention: Tony R. Johnson Telecopier: (801) 755-2045 58 MIFS02...:\RE\60\4766O\1387\227\IND9197U.12B If -, rf With a copy to: Kulak Rock The Omaha Building 1650 Farnam Omaha, NE Attention: Jerre Tritsch, Esq. Telecopier: (402) 346-1148 If to GECC or GE Bondholder: General Electric Capital Corporation 18300 Yon Karman Avenue Suite 700 Irvine, California 92612 Attention: Regional Manager Telecopier: (714) 477-0904 With copies to: General Electric Capital Corporation Commercial Real Estate 292 Long Ridge Road Stamford, CT 06927 Attention: Legal Department Telecopier: (203) 357-6768 and Weil, Gotshal & Manges LLP 701 Brickell Avenue Suite 2100 Miami, Florida 33131 Attention: Richard A. Morrison, Esq. Telecopier: (305) 374-7159 59 MIFS02.. .:\RE\60\47660\ 1387\227\IND9197U .128 ~.. ~S' Any such notice, demand, request or communication shall be deemed to have been given and received for all purposes under this Indenture: (i) three (3) Business Days after the same is deposited in any official depository or receptacle of the United States Postal Service first class, or, if applicable, certified mail, return receipt requested, postage prepaid; (ii) on the date of transmission when delivered by telecopier or facsimile transmission, telex, telegraph or other telecommunication device (provided receipt is confirmed and such notice is promptly confirmed by notice given by some other means described herein); (iii) on the next Business Day after the same is deposited with a nationally recognized overnight delivery service that guarantees overnight delivery; and (iv) on the date of actual delivery to such party by any other means; provided, however, if the day such notice, demand, request or communication shall be deemed to have been given and received as aforesaid is not a Business Day, such notice, demand, request or communication shall be deemed to have been given and received on the next Business Day. Any party to this Indenture may change such party's address for the purpose of notice, demands, requests and communications required or permitted under this Indenture by providing written notice of such change of address to all of the parties by written notice as provided herein. (b) Where this Indenture provides for giving of notice to the Trustee, such notice shall also be given to any GE Bondholder. Section 15.2. Notice to Bondholders; Waiver. (a) Where this Indenture provides for giving of notice to the Bondholders of any event, such notice must (unless otherwise herein expressly provided) be in writing and mailed, first-class postage prepaid, to the Bondholders, at the addresses of the Bondholders as they appear in the Bond Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. (b) Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Bondholders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Section 15.3. Successors and Assigns. All covenants and agreements in this Indenture by the Issuer shall bind its successors and assigns, whether so expressed or not. Section 15.4. Benefits of Indenture. Nothing in this Indenture or in the Bonds, expressed or implied, shall give to any person, other than the parties hereto and their successors hereunder, the Bondholders and the Developer, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 15.5. Certain Rights of GE Bondholder. Prior to the purchase of the Bonds in connection with a Mandatory Tender Date, whenever this Indenture requires the consent, determination, election, approval, waiver, acceptance, satisfaction or expression of opinion of, or the taking of any discretionary act by, the Trustee (all of the foregoing being referred to as "Consent" in this Section 15.5), 60 A-'" MIFS02 ...:\RE\60\4 76<<J\ 1387\227\JND9197U .128 the right, power, privilege and option of the Trustee to withhold or grant its Consent shall be deemed to be the right, power, privilege and option of the GE Bondholders to withhold or grant such Consent, and the Trustee shall have no responsibility for any action or inaction with respect thereto, except as may be otherwise set forth in this Indenture. Section 15.6. Proof of Execution of Writings and Ownership. Any instrument provided in this Indenture to be signed or executed by the Registered Owners of all or any portion of the Bonds may be in any number of writings of similar tenor and may be signed or executed by such Registered Owners in person or by their duly authorized representatives. Proof of the execution of any such instrument, or of the writing appointing any such agent, or of the ownership of any Bonds, shall be sufficient for any of the purposes of this Indenture and shall be conclusive in favor of the Issuer and the Trustee with respect to any actions taken by either under such instruments if: (a) the fact and date of the execution by any person of any such instrument is proved by (i) a certificate of any officer of any jurisdiction who by law has power to take acknowledgments of deeds within such jurisdiction, to the effect that the person signing such instrument acknowledged before him the execution thereof, or (ii) an affidavit of a witness of such execution; and (b) Registrar. the ownership of any Bonds is proved by the registration books kept by the Bond Section 15.7. Legal Holidays. In any case in which the date of payment of Interest or the principal of the Bonds or the date fixed for redemption of any Bonds or the date on which any other act is to be performed pursuant to this Indenture shall be a day that is not a Business Day, then payment of principal or Interest or such act need not be made on such date but may be made on the next succeeding Business Day, and such later payment or such act shall have the same force and effect as if made on the date of payment or the date fixed for redemption or the date fixed for such act, and no additional interest shall accrue for the period after such date and prior to the date of payment. Section 15.8. Governing Law. This Indenture shall be governed in all respects, including validity, interpretation and effect, by, and shall be enforceable in accordance with, the laws of the State. Section 15.9. Severability. If any provision of this Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions shall not in any way be affected or impaired. In case any covenant, stipulation, obligation or agreement contained in the Bonds or in this Indenture shall for any reason be held to be usurious or in violation of law, then such covenant, stipulation, obligation or agreement shall be deemed to be the covenant, stipulation, obligation or agreement of the Issuer or the Trustee only to the full extent permitted by law. Section 15.10. Execution in Several Counterparts. This Indenture may be contemporaneously executed in several counterparts, all of which shall constitute one and the same instrument and each of which shall be, and shall be deemed to be, an original. Section 15.11. Nonrecourse Obligation of the Developer. Except as otherwise provided in the Loan Agreement, the obligations of the Developer under this Indenture are without recourse to the 61 ,19 _ " 7 MIFS02...:\RE\60\4766O\1387\221\IND9191U.12B Developer's members, and the provisions of Section 12.1 of the Loan Agreement are by this reference incorporated herein. [End of Article XV] 62 11-''1 MIFS02... :\RE\60\4 76<<J\ 1387\227\lN D9197U .128 IN WITNESS WHEREOF, the Issuer and the Trustee have caused this instrument to be duly executed, and their respective corporate seals to be hereunto affixed and attested. CITY OF CHULA VISTA, CALIFORNIA (SEAL) By: Name: Title: Attest: Name: Title: FIRST TRUST NATIONAL ASSOCIATION, as Trustee (SEAL) By: Name: Title: Attest: Name: Title: 63 A-''i MIFS02...:\RE\60\47660\l387\227\1ND9197U.12B EXHIBIT A FORM OF BOND 11- 70 MIFS02... :\RE\60\47660\l387\227\1ND9197U .128 [FORM OF BOND] No. R- CITY OF CHULA VISTA, CALIFORNIA Multifamily Housing Revenue Refunding Bond, (Eucalyptus Grove Project), Series 1997 Maturitv Date November 1, 2027 Dated Date November 3, 1997 Interest Rate Coupon Rate as provided herein. CITY OF CHULA VISTA, CALIFORNIA, a public body corporate and politic and a political subdivision duly organized and existing under the laws of the State of California (the "Issuer," which term includes any successor thereto under the Indenture hereinafter referred to), for value received, hereby promises to pay by check or draft mailed to the Registered Owner named below or registered assigns or by wire transfer to the account of the Registered Owner as provided herein, (but solely and only from the sources specified in the Indenture hereinafter referred to) to [ ] or registered assigns, the principal sum of [ ] on the Maturity Date specified above (unless this Bond shall have been previously called for redemption and payment of the redemption price shall have been made or duly provided for) in lawful money of the United States of America, and to pay Interest thereon in like lawful money from the Dated Date of the Bonds, or the most recent date to which Interest has been paid or duly provided for, until the payment of such principal sum has been made or discharged as provided in the Indenture. Initially capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in that certain Trust Indenture dated as of November 1, 1997 (the "Indenture"), by and between the Issuer and First Trust National Association, a national banking association with its principal corporate trust office in Seattle, Washington, as trustee (the "Trustee," which term includes any successor trustee under the Indenture) and that certain Loan Agreement dated as of November PAGE 1 OF 16 PAGE BOND,A-" I MIFS02...:\RE\60\47660\1387\2341\BND0137M.230 1, 1997 (the "Loan Agreement"), by and between the Issuer and Eucalyptus Grove Holdings, LLC, a Utah limited liability company (the "Developer"). While an Event of Default exists, interest shall be payable (but solely and only from the sources specified in the Indenture) on overdue principal on this Bond and (to the extent legally enforceable) on any overdue installment of Interest on this Bond at the per annum rate of interest equal to the lesser of (a) the maximum rate of interest allowed by applicable law and (b) five percent (5%) per annum in excess of the Coupon Rate, with monthly compounding (computed on the basis of a 360-day year for the actual number of days elapsed) (the "Default Rate"). In addition, in the event there is not paid any installment of principal, Unauthorized Prepayment Premium, if any, Purchase Price, Prepayment Premium, if any, or Interest required to be paid by the terms of this Bond and the Indenture, after the end of the fifth (5th) day following such failure to pay, in addition to any interest payable at the Default Rate on any such overdue payments, a Late Charge equal to the greater of (a) five percent (5%) per annum in excess of the Coupon Rate otherwise payable on the Loan or (b) five percent (5%) of the past due amount shall be paid to the Registered Owner notwithstanding the date on which such payment is actually paid to the Registered Owner. Any Late Charge imposed by the Trustee in accordance with this paragraph shall be due and payable on demand on the sixth (6th) day following such failure to pay. Interest shall be due and payable in arrears, on each applicable Interest Payment Date. Interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the person in whose name this Bond is registered at the close of business on the Record Date for such Interest Payment Date. Payment of Interest on and principal and Purchase Price of this Bond on any Interest Payment Date shall be made by check or draft mailed by the Trustee to the Bondholder at its address appearing in the Bond Register maintained by the Bond Registrar; provided, however, that any Holder of a Bond or Bonds in an aggregate principal amount of not less than $1,000,000 may, by prior written instructions filed with the Paying Agent (which instructions shall remain in effect until revoked by subsequent written instructions), instruct that interest payments for any period be made by wire transfer to an account in the continental United States or other means acceptable to the Paying Agent. Such payment by check or draft shall be deemed timely made if so mailed on the Interest Payment Date (or if such Interest Payment Date is not a Business Day, on the Business Day next following such Interest Payment Date). Payment of the principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and payment of accrued Interest on this Bond upon redemption PAGE 2 OF 16 PAGE BOND A-7;J.. MIFS02...:\RE\60\47660\1387\2341\BND0137M.230 may be made upon surrender of this Bond at the Office of the Trustee. All such payments shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for such payment of public and private debts. This Bond is one of a duly authorized issue of bonds of the Issuer, aggregating $18,300,000 in principal amount, designated "Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 (the "Bonds") and issued under and pursuant to the Indenture. The Bonds are special limited obligations of the Issuer payable from and secured by the lien of the Indenture and the other security pledged thereby, including certain funds and accounts created pursuant thereto. The Bonds are issued for the purpose of providing funds to refund the Issuer's Multifamily Housing Revenue Bonds (Eucalyptus Grove Project) Series 1985, which were originally issued in the original aggregate principal amount of $21,885,000 for the purpose of providing funds to finance the cost of purchasing, constructing and installing a multifamily residential rental housing project located within the jurisdiction of the Issuer (the "Project"). Pursuant to the Loan Agreement, the Issuer has loaned the proceeds of the Bonds to Developer and the Developer has agreed to make loan payments to the Issuer at times and in amounts sufficient to provide for payment when due of principal, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest (collectively referred to as "Debt Service") on and Purchase Price upon Mandatory Tender of the Bonds. Pursuant to the Indenture and the Assignment and Transfer of Deed of Trust, Security Agreement and Fixture Filing and Other Collateral Documents dated as of November 1, 1997, made by the Issuer in favor of the Trustee, the Issuer has assigned and pledged to the Trustee all the Issuer's rights under the Loan Agreement, except for the Unassigned Issuer's Rights. THE PRINCIPAL, UNAUTHORIZED PREPAYMENT PREMIUM, IF ANY, PREPAYMENT PREMIUM, IF ANY, AND INTEREST ON THE BONDS ARE PAYABLE SOLELY AND ONLY FROM THE SPECIAL FUNDS AND OTHER SOURCES PLEDGED FOR THEIR BENEFIT PURSUANT TO THE INDENTURE. THE BONDS AND THE INTEREST THEREON AND UNAUTHORIZED PREPAYMENT PREMIUM, IF ANY, AND PREPAYMENT PREMIUM, IF ANY, DO NOT REPRESENT OR CONSTITUTE AN INDEBTEDNESS OF THE ISSUER OR THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION OF THE STATE OF CALIFORNIA WITHIN THE MEANING OF THE PROVISIONS OF THE CONSTITUTION OR STATUTES OF THE STATE OF CALIFORNIA OR A PLEDGE OF THE GOOD FAITH AND CREDIT OF THE ISSUER, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF. THE BONDS ARE A LIMITED AND SPECIAL OBLIGATION OF THE ISSUER PAYABLE SOLELY AND ONLY OUT OF PAYMENTS BY THE DEVELOPER PURSUANT TO THE LOAN AGREEMENT AND THE NOTE, AND FROM CERTAIN OTHER COLLATERAL PLEDGED THEREUNDER. THE BONDS ARE NOT A LIEN OR CHARGE UPON THE FUNDS OR PROPERTY OF THE ISSUER, EXCEPT TO THE PAGE 3 OF 16 PAGE BOND 11-73 MIFS02...:\RE\60\47660\1387\2341\BND0137M.230 EXTENT OF THE AFOREMENTIONED. NO RECOURSE SHALL BE HAD FOR THE PAYMENT OF PRINCIPAL, UNAUTHORIZED PREPAYMENT PREMIUM, IF ANY, PREPAYMENT PREMIUM, IF ANY, OR REDEMPTION PRICE OR INTEREST ON THIS BOND AGAINST ANY ELECTED OR APPOINTED OFFICER, OFFICIAL OR AGENT OF THE ISSUER. Copies of the Indenture and the Loan Agreement are on file at the Office of the Trustee, and reference is hereby made to such instruments for a description of the properties mortgaged, pledged and assigned, the nature and extent of the security, the respective rights thereunder of the Bondholders, the Trustee, the Issuer and the Developer, and the terms upon which the Bonds are, and are to be, authenticated and delivered. Reference is hereby made to the Indenture and the Loan Documents, copies of which are on file with the Trustee, with respect to the nature and extent of the rights, duties and obligations of the Issuer, the Trustee, the Developer, and the Bondholders. The Holder, by its acceptance of this Bond, is deemed to have agreed and consented to the terms and provisions of the foregoing documents. The abbreviated statement in this Bond of the provisions governing interest, redemption, security and all other matters is subject in all respects to the complete statement of such terms in the foregoing documents. Interest The Bonds shall earn interest as follows: (i) Coupon Interest, plus (ii) Gross-Up Amount. As provided in the Indenture, all calculations with respect to payments of Interest (including, without limitation, Coupon Interest, Gross-Up Amount and any Late Charges) shall be calculated by the GE Bondholder and shall be set forth in a written notice from the GE Bondholder to the Developer and the Trustee; provided, however, that in the event that none of the Bonds are held by a GE Bondholder then the Trustee shall calculate such amounts. The Issuer intends to conform strictly to the usury laws applicable to the Indenture and the Bonds and all agreements made in the Bonds, the Indenture and the Loan Documents are expressly limited so that in no event whatsoever shall the amount paid or agreed to be paid to the Bondholders as interest or other amounts paid for the use of money advanced or to be advanced hereunder exceed the highest lawful rate prescribed under any law which a court of competent jurisdiction may deem applicable hereto. If, from any circumstances whatsoever, the fulfillment of any provision of the Bonds, the Indenture or the Loan Documents shall involve the payment of interest in excess of the limit prescribed by any law which a court of competent jurisdiction may deem applicable hereto, then, ipso facto, the obligation to pay Interest hereunder shall be reduced to the maximum limit prescribed by law; and if from any circumstances whatsoever, the PAGE 4 OF 16 PAGE BOND ,11-74 MIFS02...;\RE\60\47660\1387\2341\BND0137M.230 Bondholders shall ever receive anything of value deemed interest, the amount of which would exceed the highest lawful rate, such amount as would be excessive interest shall be deemed to have been applied, as of the date of receipt by the Bondholders, to the reduction of the principal remaining unpaid hereunder and not to the payment of Interest, or if such excessive interest exceeds the unpaid principal balance, such excess shall be refunded to the Developer. This paragraph shall control every other provision of the Bonds, the Indenture and all Loan Documents. In determining whether the amount of interest charged and paid might otherwise exceed the limit prescribed by law, the Issuer intends and agrees that (i) interest shall be computed upon the assumption that payments under the Loan Agreement and other Loan Documents will be paid according to the agreed terms, and (ii) any sums of money which are taken into account in the calculation of Interest, even though paid at one time, shall be spread over the stated term of the Bonds. Coupon Interest shall be computed on the basis of a 360-day year for the actual number of days elapsed in the period for which such Coupon Interest is payable. In addition to all other rights and remedies to which it is entitled under the Indenture, under the Loan Agreement, under the Note and under applicable law, upon the occurrence of a Determination of Taxability, each current and former Bondholder, as applicable, shall be entitled to receive payment of the Gross-Up Amount relating to direct or indirect ownership of the Bonds during the Initial Rate Period. In addition, the Trustee shall be reimbursed by the Developer for its reasonable fees and expenses incurred in connection with any Determination of Taxabil i ty . Mandatorv Tender A. At any time during the Initial Rate Period on or after the GECC Tender Commencement Date, the GE Bondholder or a Majority of Holders shall have the option to require the purchase of all of the Bonds at the Purchase Price and in the manner set forth herein. To exercise such option, the GE Bondholder or a Majority of the Holders shall deliver to the Trustee, with a copy to the Developer, a written notice (the "GECC Purchase Notice") stating (i) that all of the Outstanding Bonds are to be purchased and (ii) the date upon which such Bonds are required to be purchased (the "Mandatory Tender Date"), which date shall be not prior to the seventh (7th) day after the date of delivery of such GECC Purchase Notice to the Trustee and Developer. A GECC Purchase Notice shall be irrevocable and effective upon receipt by the Trustee. Not later than two (2) PAGE 5 OF 16 PAGE BOND ;4-1S'" MIFS02. . . ; \RE\60\47660\1387\2341 \BND0137M. 230 Business Days after receipt of the GECC Purchase Notice, the Trustee shall send to each Bondholder notice of the Mandatory Tender (the "Mandatory Tender Notice") which notice shall: 1. specify the Mandatory Tender Date; 2. state that the Bonds must be delivered by the Bondholders to the Office of the Trustee on or prior to such Mandatory Tender Date, together with all necessary endorsements for transfer, and shall be purchased on such Mandatory Tender Date at a purchase price with respect to each Bond equal to the sum of (a) the outstanding Bond Principal of such Bond, (b) accrued and unpaid Interest thereon (including, without limitation, any Gross-Up Amount with respect to such Bond) to the Mandatory Tender Date and (c) all other amounts due and payable to the Bondholders under the Indenture (collectively, the "Purchase Price"), and that any Bonds that are not so delivered to the Trustee shall be deemed to have been tendered for purchase by the Bondholders and, provided that sufficient moneys have been deposited with the Trustee to pay the Purchase Price of the Bonds in full on the Mandatory Tender Date as provided in the Indenture, shall cease to accrue Interest from and after the Mandatory Tender Date (except for the Gross-Up Amount as provided in Section 4.6 of the Indenture); and 3. state that to the extent there has not been deposited with the Trustee sufficient moneys to pay the Purchase Price of the Bonds in full on the Mandatory Tender Date as provided in the Indenture, an Event of Default under the Indenture shall occur which may result in the acceleration of the Bonds. B. Upon receipt of a GECC Purchase Notice, the Trustee shall give Immediate Notice of the Mandatory Tender to the Developer not later than 11:00 a.m., Trustee's Time, on the sixth (6th) calendar day immediately preceding the Mandatory Tender Date, of the principal amount of the Bonds to be purchased pursuant to such GECC Purchase Notice and the Mandatory Tender Date specified therein. C. Each Owner shall be required to tender its Bonds to the Trustee for purchase as provided in the Indenture and in the Mandatory Tender Notice, in whole, at a price equal to the Purchase Price on the Mandatory Tender PAGE 6 OF 16 PAGE BOND JI- 7' MIFS02...:\RE\60\47660\1387\2341\BND0137M.230 Date. The Holder of any Bond shall tender such Bond to the Trustee for purchase under the Indenture, by delivering such Bond to the Trustee, at the Office of the Trustee, unless otherwise specified in the Mandatory Tender Notice, by not later than 10:30 a.m., Trustee's Time on the Mandatory Tender Date, endorsed in blank or accompanied by a blank bond power. To the extent sufficient moneys have been deposited with the Trustee to pay the full amount of the Purchase Price of the Bonds on the Mandatory Tender Date as provided in the Indenture, any Unsurrendered Bonds shall be deemed to be tendered for purchase and purchased from the Holders thereof on the Mandatory Tender Date and the Holders thereof shall not be entitled to receive Interest on any such Unsurrendered Bond for any period on and after the Mandatory Tender Date (except for the Gross-Up Amount as provided in Section 4.6 of the Indenture) . D. Not less than five (5) days prior to the Mandatory Tender Date, the Developer shall deliver to the Trustee a written certificate approved by the GE Bondholder setting forth the amount of Gross-Up Amount to be due on the Mandatory Tender Date, and the Trustee thereafter shall direct the Developer to irrevocably deposit or cause to be deposited in the Bond Fund an amount sufficient to pay, together with any other moneys on deposit in the Bond Fund, the Purchase Price of the Bonds tendered or deemed tendered for purchase on the Mandatory Tender Date. In the event the Developer does not deliver said certificate to the Trustee setting forth the amount of the Gross-Up Amount due, the GE Bondholder shall provide such certificate to the Trustee not less than one (1) Business Day prior to the Mandatory Tender Date; provided, however, that in the event that none of the Bonds are held by a GE Bondholder, the Trustee shall calculate the Gross-Up Amount due and payable on the Mandatory Tender Date. On the Mandatory Tender Date, the Trustee shall pay to each of the Bondholders an amount equal to the Purchase Price of its Bonds. E. At least five (5) days prior to the Mandatory Tender Date, the Developer will appoint a remarketing agent for the Bonds (the "Remarketing Agent") and will notify the Issuer and the Trustee of such appointment in writing. The Developer will promptly enter into a written agreement with the Remarketing Agent in which, among other things, (i) the Remarketing Agent shall designate its principal office to the Developer, the Issuer and the Trustee, (ii) the Remarketing Agent shall agree to perform the duties and obligations PAGE 7 OF 16 PAGE BOND 11-11 MIFS02...:\RE\60\47660\1387\2341\BND0137M.230 imposed upon it under the Indenture, (iii) the Remarketing Agent shall agree to hold all money delivered to it under the Indenture in trust for the benefit of the PerSOn which shall have so delivered such money until the Bonds to be purchased with such money shall have been delivered to or for the account of such Person, and (iv) the Developer and the Remarketing Agent shall agree upon the compensation to be paid to the Remarketing Agent by the Developer for remarketing the Bonds. F. Not less than three (3) days prior to the Mandatory Tender Date, the Remarketing Agent shall determine and shall notify the Trustee and the Developer in writing of the interest rate to be in effect for the period beginning on the Mandatory Tender Date and ending upon the maturity of the Bonds, which would be the lowest rate that would, in the opinion of the Remarketing Agent, result in the Remarketing Agent being able to remarket the Bonds at par on the Mandatory Tender Date, taking into account relevant market conditions and credit rating factors as they exist On such date; provided that such interest rate may not exceed the highest interest rate permitted by law. From and after the Mandatory Tender Date, the interest rate so determined shall be the interest rate borne by the Bonds. The Remarketing Agent shall offer for sale and use its best efforts to remarket the Bonds tendered or deemed tendered for purchase pursuant to Section 4.2 of the Indenture for delivery on the Mandatory Tender Date at a price of par. The proceeds of the sale of Bonds remarketed by the Remarketing Agent shall be delivered by the Remarketing Agent to the Trustee for deposit in the Bond Fund as provided in Section 4.2(d) of the Indenture. The Remarketing Agent shall have nO obligation under any circumstances to advance its own money in connection with the remarketing of Bonds under the Indenture. G. Not later than the Business Day immediately preceding the Mandatory Tender Date, the Remarketing Agent shall provide the Trustee in writing with the names, addresses, tax identification numbers and all other information requested by the Trustee relating to the purchasers of Bonds which have been remarketed by the Remarketing Agent as of that time, and the Trustee shall prepare new Bonds (with appropriate changes, deletions and insertions) for each Bond purchased On the Mandatory Tender Date, shall register such new Bonds in the Bond Register in the name of the PerSOns identified by the Remarketing Agent as the purchasers PAGE 8 OF 16 PAGE BOND A-78' MIFS02...:\RE\60\47660\1387\2341\BND0137M.230 thereof, and shall deliver such new Bonds to such purchasers. H. Notwithstanding the foregoing or anything to the contrary contained herein, the Purchase Price for each of the Bonds Outstanding shall be due and payable to each of the Bondholders on the Mandatory Tender Date under all circumstances and regardless of whether or not the Remarketing Agent is successful in remarketing the Bonds as contemplated in this paragraph. Redemption In the manner and with the effect provided in the Indenture, the Bonds will be subject to redemption prior to maturity as follows: ODtional Redemption. The Bonds may be redeemed at the option of the Developer, in whole, but not in part, on any Interest Payment Date on or after November 1, 2002, at a redemption price, with respect to each Bond so called for redemption equal to the sum of (i) the outstanding Bond Principal of such Bond, (ii) accrued and unpaid Interest thereon (including, without limitation, any Gross-Up Amount with respect to such Bond) to the date of redemption, (iii) the Prepayment Premium, if any, and (iv) all other amounts due and payable to the Bondholder under the Indenture (collectively, the "Redemption Price"), in each case with accrued Interest to the redemption date to be paid to the Registered Owner of each Bond as of the Record Date. The Developer may exercise such option by giving the Trustee and each GE Bondholder written notice of such exercise, not less than fifteen (15) days prior to the proposed redemption date. Any such notice shall specify the date fixed for optional redemption and contain a certification by the Developer that all conditions precedent to such optional redemption have been (or will be, as of the optional redemption date) satisfied. The GE Bondholder shall deliver to the Trustee and to the Developer a written certificate setting forth the amount of accrued Interest and Prepayment Premium, if any, that will be due and payable as of the date fixed for optional redemption not less than five (5) days prior to the date set for such optional redemption. In addition to the Redemption Price, upon the occurrence of any Event of Default and the acceleration of the maturity of the Bonds prior to November 1, 2002, if, at any time thereafter, payment is tendered in the amount necessary to satisfy the Developer Payment Obligations ("Unauthorized Prepayment"), the same shall constitute an evasion of the payment terms of the Bonds and shall be deemed to be an PAGE 9 OF 16 PAGE BOND 11- 7' MIFS02...:\RE\60\47660\1387\2341\BND0137M.230 unauthorized voluntary prepayment thereunder, in which case such payment must include a premium (the "Unauthorized Prepayment Premium") equal to the product of (i) ten percent (10%) of the then unpaid Indenture Indebtedness and (ii) the Unauthorized Prepayment Factor. No Unauthorized Prepayment Premium shall be due or payable upon any redemption of the Bonds on or after November 1, 2002. On any date on which the Bonds are subject to optional redemption under the Indenture, the Bonds shall be subject to purchase in lieu of redemption and remarketing as contemplated by Section 4.2 of the Indenture, as if such purchase in lieu of redemption date were a Mandatory Tender Date, based on a written election of purchase in lieu of redemption delivered by the Developer to the Trustee and Remarketing Agent on or prior to the scheduled optional redemption date. The purchase price for the Bonds purchased in lieu of redemption shall equal the amount that would have been payable to the Holders of the Bonds had the Bonds been optionally redeemed on the scheduled optional redemption date. On and after the date of such remarketing, the Bonds shall be subject to the terms and provisions of the Indenture as if they had been remarketed on a Mandatory Tender Date. Mandatory Redemption. If a Determination of Taxability shall have occurred, the Bonds shall be subject to mandatory redemption and shall be redeemed in whole within the time provided herein, at a price equal to the Redemption Price (including, without limitation, the Unauthorized Prepayment Premium, if any, and Gross-Up Amount payable with respect to each Bond so called for redemption) . The Issuer agrees to cooperate fully with the Developer in taking any action required to effect mandatory redemption of the Bonds. Mandatory redemption of the Bonds occurring as a result of a Determination of Taxability shall occur on the earliest Business Day for which notice required by Section 6.3 of the Indenture can be given. In the event the Bonds are subject to mandatory redemption as a result of the occurrence of a Determination of Taxability on or before the tenth (10th) anniversary of the Closing, not later than thirty (30) days following the date of the Determination of Taxability the Bondholders of all Bonds Outstanding may, by written notice to the Developer, the Trustee and the Issuer, elect to waive mandatory redemption and cause the Bonds to remain Outstanding. PAGE 10 OF 16 PAGE BOND ~-~() MIFSD2...:\RE\60\47660\1387\2341\BND0137M.230 If the Bondholders elect to waive mandatory redemption and cause the Bonds to remain Outstanding following a Determination of Taxability, the Gross-Up Amount shall be paid in addition to all other interest payments due on the Bonds, as provided for in the Indenture, with all amounts payable through the date of election, as such amounts shall be certified in writing by the Bondholders to the Trustee, payable immediately following the time the Bondholders made such an election, and thereafter with Gross-Up Amounts payable at the time of payment of Coupon Interest. After the Bondholders have made an election to continue the Loan Agreement and the Bonds in full force and effect, the rights, duties and obligations of the Trustee, the Issuer, the Developer and the Bondholders shall remain in full force and effect as set out in the Indenture. Extraordinary Redemption. The Bonds shall be subject to redemption and shall be redeemed in whole, or in part, as set forth below, upon the occurrence of any of the following conditions or events, on the earliest Business Day for which notice required by Section 6.3 of the Indenture can be given, at a price equal to the principal amount of such Bonds or portion thereof so called for redemption, without Unauthorized Prepayment Premium or Prepayment Premium, plus Interest accrued thereon to the redemption date with the prior written consent of the GE Bondholder in accordance with Section 2.12 of the Loan Agreement, which written consent shall be delivered promptly to the Trustee: (a) the Bonds are subject to redemption in whole if the Project shall have been damaged or destroyed to the extent that it is not practicable or feasible to rebuild, repair or restore the damaged or destroyed property within the period and under the conditions described in the Loan Agreement following such event of damage or destruction; or (b) the Bonds are subject to redemption in whole if title to, or the use of, all or a substantial portion of the Project shall have been taken under the exercise of the power of eminent domain by any governmental authority with the result that the Developer is thereby prevented from carrying on its normal operation of the Project within the period and under the conditions described in the Loan Agreement; or (c) the Bonds are subject to redemption in whole or in part to the extent that insurance proceeds or proceeds of any condemnation award with respect to the Project are not applied to restoration of the Project in accordance with the provisions of the Loan Agreement; or PAGE 11 OF 16 PAGE BOND A- f I MIFS02...:\RE\60\47660\1387\2341\BND0137M.230 (d) the Bonds are subject to redemption in whole if as a result of changes in the Constitution of the State of California, or of legislative or administrative action by the State of California or any political subdivision thereof, or by the United States, or by reason of any action instituted in any court, the Loan Agreement or the Note shall become void or unenforceable, or impossible of performance without unreasonable delay, or in any other way, by reason of such change of circumstances, unreasonable burdens or excessive liabilities are imposed on the Issuer. In the event that a Bond subject to redemption pursuant to Article VI of the Indenture is in a denomination larger than an Authorized Denomination, all or a portion of such Bond may be redeemed, but only in a principal amount such that the remaining principal amount of the Bond not so redeemed shall be an Authorized Denomination. Upon surrender of any Bond for redemption in part, the Issuer shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Developer, a new Bond or Bonds, in Authorized Denominations, equal to the unredeemed portion of the Bond so surrendered. If less than all of the Bonds are called for redemption, the Bonds to be redeemed shall be selected by lot in such manner as the Trustee in its discretion may determine, each Authorized Denomination being counted as one Bond for this purpose. Any redemption shall be made upon not less than thirty (30) days' (ten (10) days in the case of an optional redemption pursuant to Section 6.1 of the Indenture) nor more than forty-five (45) days' notice in the manner and upon the terms and conditions provided in the Indenture. If an "Event of Default," as defined in the Indenture, shall occur, the principal of the Bonds may become or be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture, the Loan Agreement and the other Loan Documents may be modified or amended only to the extent and in the circumstances permitted by the Indenture. The Indenture contains provisions, under certain circumstances, permitting the GE Bondholder (or in the event that none of the Bonds are held by a GE Bondholder, a Majority of Holders) by written notice to the Trustee, the Issuer and the Developer to waive certain past defaults under the Indenture and the Loan Agreement and their consequences. The Holder of this Bond shall have no right to enforce the provisions of the Indenture, or to institute any ac.tion to enforce the covenants therein, or to take any action with respect PAGE 12 OF 16 PAGE BOND A -8-:l MIFS02...:\RE\60\47660\1387\2341\BND0137M.230 to any default thereunder, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, this Bond is transferable (but, without the prior written consent of the Issuer, only to a Permitted Transferee) on the Bond Register maintained at the Office of the Trustee, upon surrender of this Bond for transfer at such office, together with all necessary endorsements for transfer, and thereupon one new Bond of the same maturity, of an Authorized Denomination and for a like principal amount, will be issued to the designated transferee. As provided in the Indenture and subject to certain limitations therein set forth, the Bonds are exchangeable for other Bonds of Authorized Denominations and of like principal amounts, as requested by the Bondholders surrendering the same. No service charge shall be made for any transfer or exchange hereinbefore referred to, but the Issuer or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the person in whose name this Bond is registered as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Bond is overdue, and neither the Issuer, the Trustee nor any agent shall be affected by notice to the contrary. No covenant or agreement contained in this Bond or the Indenture shall be deemed to be a covenant or agreement of any past, present or future elected or appointed official, officer, agent or employee of the Issuer or the governing body of the Issuer or the Trustee, and none of the foregoing shall be liable personally on this Bond or be subject to any personal liability by reason of the issuance of this Bond, or by reason of the covenants and agreements contained in the Indenture or in this Bond or implied therefrom. It is hereby certified, recited and declared that all acts, conditions and things required to exist, happen and be performed precedent to and in the execution and delivery of the Indenture and issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law. Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Bond shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. PAGE 13 OF 16 PAGE BOND If - V!I MIFS02...:\RE\60\47660\1387\2341\BND0137M.230 IN WITNESS WHEREOF, the City of Chula Vista, California has caused this Bond to be duly executed in its name on its behalf by the manual or facsimile signature of its Mayor and attested by the manual or facsimile signature of its City Clerk and its official seal to be affixed hereto or imprinted hereon, and has caused this Bond to be dated the Dated Date. CITY OF CHULA VISTA, CALIFORNIA By: Mayor (SEAL) ATTEST: City Clerk PAGE 14 OF 16 PAGE BOND ~-J?~ MIFS02... :\RE\60\47660\1387\2341\BND0137M.230 Certificate of Authentication This Bond is one of a series of Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 referred to in the within-mentioned Indenture. Date of authentication: FIRST TRUST NATIONAL ASSOCIATION, as Trustee By: Authorized Officer PAGE 15 OF 16 PAGE BOND A - ~r MIFS02...:\RE\60\47660\1387\2341\BND0137M.230 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-mentioned registered Bond and hereby irrevocably constitute(s) and appoint(s) as agent, to transfer the same on the books of the Trustee with full power of substitution in the premises. Dated: Signature Guaranteed By: (Name of Institution) By: Title: NOTICE: Signature(s) must be guaranteed by an eligible guarantor institution. NOTICE: The signature(s) 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. PAGE 16 OF 16 PAGE BOND ~-1?' MIFS02...:\RE\60\47660\1387\2341\BND0137M.230 EXIDBIT B COSTS OF ISSUANCE REQUISITION Requisition No. [CLOSING DATE] [TRUSTEE] Re: $18,300,000 City of Chula Vista, California Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 The undersigned, Authorized Representative of Eucalyptus Grove Holdings, LLC (the "Developer"), hereby certifies to you that he is authorized and empowered to submit this requisition to you and that attached hereto as Schedule A is a schedule of issuance costs incurred in connection with the issuance and sale of the Bonds, including the names and addresses of the payees and the specific amounts payable to each such payee, and that to the best of the undersigned's information and belief, such amounts are true and correct. This requisition is being delivered to you in accordance with that certain Trust Indenture (the "Indenture") pursuant to which the Bonds were issued dated as of November I, 1997. You are hereby instructed to withdraw from the Costs of Issuance Fund created under the Indenture the amounts shown across from each payee listed on Schedule A hereto and pay such amounts to each such payee by check delivered by first class mail or by such other means as is acceptable to you and any such payee. Very truly yours, EUCALYPTUS GROVE HOLDINGS, LLC By Name Title Approved by: GENERAL ELECTRIC CAPITAL CORPORATION By Authorized Signatory MIFS02...:\RE\60\47660\l387\227\IND9197U.12B ,A- Y1 EXIDBIT C REQUESTS FOR WITHDRAWALS FROM REPLACEMENT RESERVE FUND OR PROJECT FUND $ No. ,19_ [TRUSTEE] Ladies and Gentlemen: On behalf of Eucalyptus Grove Holdings, LLC (the "Developer"), we hereby requisition from the funds representing the proceeds of the sale of the City of Chula Vista, California $18,300,000 Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 (the "Bonds"), issued by the City of Chula Vista, California (the "Issuer"), which funds are held by you in the [Replacement Reserve Fund] [Project Fund] established in accordance with Section [8.3] [8.6] of the Trust Indenture, dated as of November 1, 1997 (the "Indenture"), between the Issuer and you, the sum of $ to be paid to the person or persons indicated below: Amount Pavee Address We hereby certify as follows: (a) that the payment is due, is a proper charge against the [Replacement Reserve Fund] [Project Fund], [each obligation paid or payable in connection with a withdraw from the Project Fund is a proper Qualified Project Cost in compliance with the terms of the Indenture] and has not been the basis for any previous withdrawal from the [Replacement Reserve Fund] [Project Fund]; and MIFS02,..:\RE\60\47660\l387\227\JND9197U.128 A-ft (b) that the withdrawal from the [Replacement Reserve Fund] [Project Fund] is being used to pay the costs incurred for Capital Improvements or Replacements and for no other purpose except as expressly provided in Section [8.3] [8.6] of the Indenture, and that the requirements of Section [8.3] [8.6] of the Indenture are met. Authorized Developer Representative Approved: GENERAL ELECTRIC CAPITAL CORPORA nON By: MlFS02....\RE\60\47660\1387\227\IND9197U.I2B ,A -19 EXHIBIT D INVESTMENT LETTER City of Chula Vista, California Chula Vista, California [TRUSTEE] Re: $18,300,000 City of Chula Vista, California Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 (the "Bonds") Gentlemen: The undersigned, being duly authorized to act for and to bind the Purchaser hereinafter defined, on behalf of (the "Purchaser"), hereby represents and warrants to you, in connection with its purchase of the Bonds identified above, as follows: I. The Purchaser understands and acknowledges that without the prior written consent of the Issuer (as hereinafter defined), the Bonds may be sold, transferred or otherwise disposed of only to a Permitted Transferee (as defined in that certain Loan Agreement dated as of November I, 1997 (the "Loan Agreement") by and between Eucalyptus Grove Holdings, LLC, a Utah limited liability company (the "Developer") and the City of Chula Vista, California (the "Issuer")). 2. The Purchaser hereby expressly waives any right to receive any information from the Issuer and hereby irrevocably releases and relieves the Issuer and its agents and representatives of any liability for failure to provide such information. The Purchaser understands that the holders of the Bonds have no right to demand payment from the Issuer for any sums other than those limited rights described in the Bonds and the Indenture (as defined in the Loan Agreement). 3. The individual executing this Investment Letter has been duly authorized to execute and deliver this Investment Letter on behalf of the Purchaser. Proof of such authorization is attached hereto. 4. Neither the Issuer, its commissioners, nor any of its officers, employees or agents will have responsibility to the Purchaser for the accuracy or completeness of information obtained by the Purchaser from any source regarding the Project (as defined in the Loan Agreement), the Issuer, the Developer, or their assets, businesses, circumstances, financial condition, or regarding the Bonds, the provision for payment thereof, or the sufficiency of any security therefor. The Purchaser has assumed responsibility for obtaining such information and making such review as the Purchaser has deemed necessary or desirable in connection with its decision to purchase the Bonds. 5. The purchaser certifies that it is a Permitted Transferee. MIFS02...:\RE\60\47660\1387\227\IND9197U.12B A~90 6. The Purchaser has based its decision to invest in the Bonds solely on its own investigation, including, without limitation, its review of such documents, records, reports, financial statements, and other information concerning the Developer and the Project and its discussions with representatives of the Developer. The Purchaser is duly and validly organized under the laws of its jurisdiction of incorporation or organization, and it can bear the economic risk of the purchase of the Bonds (including the total loss of its investment) and has such knowledge and experience in business and financial matters, including analysis of the purchase of similar investments, as to be capable of evaluating the merits and risks of an investment in the Bonds. 7. The Purchaser acknowledges and understands that you and any Trustee acting under the Indenture are relying and will continue to rely on the statements made herein. corporation a By Name Title MIFS02... :\RE\60\4 7660\ 1387\227\JND9197U .128 /1-91 ~/~ GECC/Eucalyptus WG&M Draft 10/13/97 ATIACHMENT B LOAN AGREEMENT by and between CITY OF CHULA VISTA, CALIFORNIA and EUCAL YPTIJS GROVE HOLDINGS, LLC Dated as of November I, 1997 Relating to $18,300,000 Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 The interest of the City of Chula Vista, California ("Issuer") in this Loan Agreement has been pledged and assigned to First Trust National Association, as Trustee (the "Trustee"), under that certain Trust Indenture dated as of even date herewith, by and between the Issuer and the Trustee. /3 -I MIFS02...:\RE\60\47660\1387\227\AGR9197L.25B LOAN AGREEMENT TABLE OF CONTENTS This Table of Contents is not a part of the Loan Agreement and is for convenience only. The captions herein are of no legal effect and do not vary the meaning or legal effect of any part of the Loan Agreement. Page PARTIES .............................................................. 1 PREAMBLES ........................................................... I ARTICLE I CERTAIN DEFINmONS Section 1.1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 2 ARTICLE II LOAN TERMS Section 2.1. Sale of Bonds ...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 29 Section 2.2. Loan of Bond Proceeds ..................................... 29 Section 2.3. Issuance of Bonds ......................................... 29 Section 2.4. Disbursements; Investment of Moneys in Funds .................... 30 Section 2.5. Delivery of Note ........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 30 Section 2.6. Basic Loan Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 30 Section 2.7. Additional Payments ....................................... 31 Section 2.8. Deposit by Developer in Costs of Issuance Fund . . . . . . . . . . . . . . . . . . .. 32 Section 2.9. Overdue Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 32 Section 2.10. Obligations of the Developer Absolute and Unconditional ............ 32 Section 2.12. Extraordinary Redemption of Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . .. 33 Section 2.13. Deposits to Reserve Funds .................................. 34 Section 2.14. Calculation of Interest Payments and Deposits to Reserve Funds . . . . . . .. 34 Section 2.15. Payment of Bonds ........................................ 34 Section 2.16. Deposits into Debt Service Reserve Fund .... . . . . . . . . . . . . . . . . . . .. 35 ARTICLE III INSURANCE. CONDEMNATION, AND IMPOUNDS l3-d MIFS02... :\RE\60\4766O\ 1387\227\AGR9197L.258 Section 3.1. Insurance ............................................... 36 Section 3.2. Use and Application of Insurance Proceeds ....................... 37 Section 3.3. Condemnation Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 38 Section 3.4. Impounds .... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 38 ARTICLE IV ENVIRONMENTAL MA TfERS ....................................... . 39 ARTICLE V LEASING MA TfERS Section 5.1. Representations and Warranties on Leases ........................ 39 Section 5.2. Standard Lease Fonn; Approval Rights .......................... 39 Section 5.3. Covenants............................................... 40 ARTICLE VI REPRESENTATIONS AND WARRANTIES Section 6.1. Representations by the Issuer ................................. 40 Section 6.2. Representations, Warranties and Covenants by the Developer . . . . . . . . . .. 41 Section 6.3. General Tax Representations, Warranties and Covenants of Developer. . . .. 45 Section 6.4. Residential Rental Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 46 Section 6.5. Tax Exemption ........................................... 47 Section 6.6. Covenant with Bondholders .................................. 47 Section 6.7. Approval of the Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 47 ARTICLE VII FINANCIAL REPORTING Section 7.1. Financial Statements ....................................... 47 Section 7.2. Accounting Principles ...................................... 48 Section 7.3. Other Infonnation ......................................... 48 Section 7.4. Annual Budget and Annual Business Plan ........................ 48 Section 7.5. Audits ................................................. 50 ARTICLE VIII COVENANTS Section 8.1. Due on Sale and Encumbrance; Transfers of Interests ................ 50 Section 8.2. Taxes; Charges ........................................... 51 Section 8.3. Control and Management .................................... 51 11 ,S -.3 MIFS02..,:\RE\60\47660\1387\127\AGR9197L.25B Section 8A. Operation; Maintenance; Inspection . . , . . . . . . . . . . . . . . . . . . . . . . . . .. 51 Section 8.5. Taxes on Security ......................................... 52 Section 8.6. Legal Existence; Etc ,...................................... 52 Section 8.7. Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 52 Section 8.9. Further Assurances ........................................ 53 Section 8.1 O. Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 53 Section 8.11. Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 53 Section 8.12. Indemnification .......................................... 53 Section 8.13. No Warranty of Condition or Suitability by the Issuer; Exculpation and Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 53 Section 8.14. Issuer's and Trustee's Right of Access to the Project . . . . . . . . . . . . . . .. 54 Section 8.15. Arbitrage Covenant ....................................... 54 Section 8.16. Tax Exempt Status of the Bonds .............................. 54 Section 8.17. Determination of Taxability ................................. 54 ARTICLE IX EVENTS OF DEFAULT Section 9.1. Payments ............................................... 55 Section 9.2. Insurance ............................................... 55 Section 9.3. Sale, Encumbrance, Etc ..................................... 55 Section 9.4. Occupation of the Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 55 Section 9.5. Covenants............................................... 55 Section 9.6. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 56 Section 9.7. Other Encumbrances ....................................... 56 Section 9.8. Involuntary Bankruptcy or Other Proceeding. . . . . . . . . . . . . . . . . . . . . .. 56 Section 9.9. Voluntary Petitions ........................................ 56 Section 9.10. Invalidity .............................................. 56 Section 9.11. Other Debt ............................................. 56 Section 9.12. Permits................................................ 56 Section 9.13. Mortgaged Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 57 Section 9.14. Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 57 Section 9.15. Disposition of Assets ...................................... 57 Section 9.16. Other Events of Default .................................... 57 ARTICLE X REMEDIES Section 10.1. Remedies - Insolvency Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 57 Section 10.2. Remedies - Other Events ................................... 58 Section 10.3. GE Bondholder's and Trustee's Right to Perform the Obligations ....... 58 Section lOA. Survival of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 59 Section 10.5. Trustee's Exercise of the Issuer's Remedies ...................... 59 Section 10.6. Exercise of Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 59 iii 4 1/ ~-7 MIFS02...:\RE\60\47660\1387\227\AGR9197L.258 ARTICLE XI MISCELLANEOUS Section 11.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 59 Section 11.2. Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 61 Section 11.3. Limitation on Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 61 Section 11.4. Invalid Provisions ........................................ 62 Section 11 .5. Reimbursement of Expenses ................................. 62 Section 11.6. Approvals; Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 62 Section 11.7. Issuer Shall Not Unreasonably Withhold Consents and Approvals . . . . . .. 63 Section 11 .8. Compliance with Rule 15c2-12 ............................... 63 Section 11.9. Issuer, Trustee and Bondholder Not in Control; No Partnership . . . . . . . .. 65 Section 11.1 O. Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 65 Section 11.11. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 65 Section 11.12. Waivers .............................................. 65 Section 11.13. Cumulative Rights ....................................... 65 Section 11.14. Singular and Plural. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 65 Section 11.15. Phrases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 66 Section 11.16. Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 66 Section J 1.17. Titles of Articles, Sections and Subsections . . . . . . . . . . . . . . . . . . . . .. 66 Section 11.18. Survival .............................................. 66 SECTION 11.19. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 66 Section 11.20. Waiver of Punitive or Consequential Damages ................... 66 Section 11.21. Governing Law ......................................... 67 Section 11.22. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 67 Section 11.23. Counterparts ........................................... 67 Section 11.24. References to GE Bondholder ............................... 67 Section 11.25. Release............................................... 67 Section 11.26. No Defenses ........................................... 67 Section 11.27. Assignments to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 68 Section 11.28. Obligation to Pay Taxes ................................... 68 Section 11.29. Promotional Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 68 ARTICLE XII LIMITATIONS ON LIABILITY Section 12.1. Limitations on Liability .................................... 68 Section 12.2. Limitation on Liability of GE Bondholder's Officers, Employees, Etc .... 69 SIGNATURES ........................................................... 68 iv 13-S;- MIFS02...;\RE\60\4766O\1387\227\AGR9197L.25B LOAN AGREEMENT THIS LOAN AGREEMENT (this "Agreement") is entered into as of November 1. 1997 by and between the CITY OF CHULA VISTA, CALIFORNIA, a municipal corporation and a political subdivision duly organized and existing under the laws of the State of California (the "Issuer"), and EUCALYPTUS GROVE HOLDINGS, LLC, a Utah limited liability company (the "Developer"). WITNESSETH: WHEREAS, the Issuer is a municipal corporation and politic and a political subdivision duly organized and existing under the laws of the State of California with full and lawful power and authority to enter into this Agreement; WHEREAS, the Issuer has been empowered pursuant to Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California, as amended (the "Act"), among other things, to provide financing for dwelling units suitable for occupancy by persons or families of low or moderate income and to issue revenue bonds for the purpose of making mortgage loans with respect to qualified housing developments and to refund such revenue bonds; WHEREAS, the City Council of the Issuer has determined to engage in a program of making mortgage loans to owners of such multifamily rental housing pursuant to the Act, and has determined to borrow money for such purpose by the issuance of revenue bonds as authorized by the Act; WHEREAS, pursuant to and in accordance with the Act, the Issuer has heretofore entered into a Trust Indenture dated as of November I, 1985 between the Issuer and Security Pacific National Bank, as trustee (the "Prior Indenture"), pursuant to which the Issuer issued its Multifamily Housing Revenue Bonds (Eucalyptus Grove Project) Series 1985, in the original aggregate principal amount of $21,885,000 (the "Prior Bonds"), the proceeds of which were used to make a loan (the "Prior Loan") to Eucalyptus Grove International, a California limited partnership (the "Prior Developer"), to provide financing for a multifamily rental residential housing project (the "Project"), located within the City of Chula Vista, California to be occupied partially (at least 20 percent) by "individuals of low or moderate" income within the meaning of Section 103(b)(4)(A) of the Internal Revenue Code of 1954, as amended, for the public purpose of assisting persons of low and moderate income within the State of California to obtain decent, safe and sanitary housing; WHEREAS, on or about March 21, 1996, 1996, the Prior Developer, with the consent of the Issuer, conveyed the Project to the Developer and the Developer assumed the obligations of the Prior Developer under the terms of the Prior Loan and the documents, instruments and agreements executed in connection therewith; WHEREAS, at the Developer's request, pursuant to a resolution duly adopted on October 21, 1997 (the "Resolution"), the Issuer has agreed to issue its Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997, in the original aggregate principal amount of $18,300,000 (the ~-~ MIFS02.. :\RE\60\47660\ 1387\227\AGR9197L.2SB "Bonds") pursuant to the provisions of Article II of Chapter 3 of Part I of Division 2 of Title 5 of the Government Code of the State of California. (the "Refunding Law"), for the purpose of providing funds to refund the Prior Bonds and to enter into this Agreement, which, among other things, provides for the Developer to make payments at the times and in amounts necessary to pay and redeem, and provide for the payment of the principal of, Unauthorized Prepayment Premium (as hereinafter defined), if any, Prepayment Premium (as hereinafter defined), if any, and Interest (as hereinafter defined) on the Bonds, and to pay the Purchase Price (as hereinafter defined) thereof and to pay the fees and expenses of the Issuer and Trustee (as hereinafter defined) and any paying agent for the Bonds; WHEREAS, pursuant to the Resolution, the Issuer has entered into a Trust Indenture of even date herewith (the "Indenture"), with First Trust National Association for the purpose of issuing and securing the Bonds, as therein provided, and authorizing the Issuer to enter into this Agreement with the Developer in consideration of loan payments to be made by the Developer in such amounts as shall be sufficient to pay the principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on the Bonds and to pay the Purchase Price thereof; and WHEREAS, as evidence of its repayment obligations under this Agreement, the Developer will execute and deliver its promissory note (the "Note") in the form required by this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual representations, covenants and agreements herein contained, the Issuer and the Developer do hereby represent, covenant and agree as follows: ARTICLE I CERTAIN DEFINITIONS Section 1,1. Certain Definitions. As used herein, the following terms have the meanings indicated: "Act" shall mean Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California, as amended, as now in effect and as it may from time to time hereafter be amended or supplemented. "Act of Bankruptcy" shall mean the filing of a petition in bankruptcy (or any other commencement of a bankruptcy or similar proceeding) by or against the Issuer, the Developer or any Developer Affiliate under any applicable bankruptcy, insolvency, reorganization, or similar law, now or hereafter in effect. "Additional Funds" shall have the meaning set forth in Section 7.4 of the Indenture. "Additional Payments" shall mean the Additional Payments payable pursuant to Section 2.7 of this Agreement. "Adjusted Net Operating Income" shall mean the amount by which Adjusted Operating Revenues exceed Adjusted Operating Expenses. 2,IJ-7 MIFSOL:\RE\60\4766O\1387\227\AGR9197L.2SB "Adjusted Operating Expenses" shall mean Operating Expenses as determined and adjusted by the GE Bondholder in accordance with GECC's then current audit policies and procedures. "Adjusted Operating Revenues" shall mean Operating Revenues as determined and adjusted by the GE Bondholder in accordance with GECC's.then current audit policies and procedures. "Affiliate" of any specified Person shall mean any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by agreement, contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agreement" or "Loan Agreement" shall mean this Agreement, as amended from time to time. "Annual Budget" shall have the meaning set forth in Section 7.4 hereof. "Annual Business Plan" shall have the meaning set forth in Section 7.4 hereof. "Annualized Adjusted Net Operating Income" shall mean, to the extent that the period of calculation of the Adjusted Net Operating Income is less than twelve (12) months, the Adjusted Net Operating Income multiplied by (a) two, if such calculation is based upon a six-month or semi-annual period, or (b) such other number as may be necessary to annualize the Adjusted Net Operating Income. "Approving Opinion" shall mean a written opinion of Bond Counselor Determination Counsel addressed to the Issuer and the Trustee, dated as of the date of delivery of such opinion, to the effect that (a) in the opinion of Bond Counselor Determination Counsel, as applicable, Coupon Interest on the Bonds, other than Coupon Interest received by a recipient during the period that such recipient was or is a "substantial user" of the Project within the meaning of the Code of I 954 or a Related Person thereto is excludable from the gross income of the recipients thereof for federal income tax purposes under Section 103 of the Code of 1954; or (b) in the opinion of Bond Counselor Determination Counsel, as applicable, given the facts at issue and the law as it currently exists with regard to the Bonds, Coupon Interest on the Bonds, other than Coupon Interest received by a recipient during the period that such recipient was or is a "substantial user" of the Project within the meaning of the Code of 1954 or a Related Person thereto is excludable from the gross income of the recipient thereof for federal income tax purposes under Section 103 of the Code of 1954 assuming all facts not at issue are as they existed on the date of original issuance of the Bonds; provided further, that except as otherwise approved by the GE Bondholder in the exercise of its sole discretion, such written opinion of Bond Counselor Determination Counsel shall not contain any qualification or assumption that was not contained in the original opinion of Bond Counsel delivered on the Closing Date with respect to the Bonds. "Assignment Agreement" shall mean that certain Assignment and Transfer of Deed of Trust, Security Agreement and Fixture Filing and Other Collateral Documents, dated the Closing Date, from the Issuer to the Trustee. 3 ~-f MIFS02... :\RE\60W 7660\1 387\227\AGR9197L.25B "Assignment of Contracts" shall mean that certain Assignment of Contracts, Warranties, Pennits, Licenses, Etc. with respect to the Project, dated as of even date herewith, executed by the Developer, as assignor, to and for the benefit of the Issuer, as assignee, as assigned to the Trustee for the benefit of the Bondholders pursuant to the Indenture and the Assignment Agreement, as hereafter modified or amended. "Assignment of Leases" shall mean that certain Assignment of Rents and Leases with respect to the Project, dated as of even date herewith, executed by the Developer, as assignor, to and for the benefit of the Issuer, as assignee, as assigned to the Trustee for the benefit of the Bondholders pursuant to the Indenture and the Assignment Agreement, as hereafter modified or amended. "Assignment of Management Agreement" shall mean that certain Assignment of Management Agreement with respect to the Project, dated as of even date herewith, executed by the Developer, as assignor, and the Manager to and for the benefit of the Issuer, as assignee, as assigned to the Trustee for the benefit of the Bondholders pursuant to the Indenture and the Assignment Agreement, as hereafter modified or amended. "Authorized Denomination" shall mean $100,000 and any multiple of $.0 I in excess thereof. "Authorized Developer Representative" shall mean the President of the Developer or a person at the time designated and authorized to act on behalf of the Developer by a written certificate furnished to the Issuer, the GE Bondholder and the Trustee containing the specimen signature of such person and signed on behalf of the Developer by its board of directors, which certificate may designate one or more alternates. "Authorized Issuer Representative" shall mean the City Manager of the Issuer, or such other person at the time designated to act on behalf of the Issuer as evidenced by a written certificate furnished to the Developer, the GE Bondholder and the Trustee containing the specimen signature of such person and signed on behalf of the Issuer by its Mayor or City Manager. Such certificate may designate an alternate or alternates, each of whom shall be entitled to perfonn all duties of the Authorized Issuer Representative. "Basic Loan Payment Date" shall mean one (I) Business Day prior to each Bond Payment Date commencing one (I) Business Day prior to December I, 1997, or any other date on which the Bonds are redeemed or paid, whether at the scheduled maturity or upon the acceleration of the maturity thereof. "Basic Loan Payments" shall mean the Basic Loan Payments payable pursuant to Section 2.6 of this Agreement. "Bond Counsel" shall mean Stradling. Y occa, Carlson & Rauth. a Professional Corporation, or any other attorney or finn of attorneys designated by the Issuer and approved by the GE Bondholder having a national reputation for skill in connection with the authorization and issuance of municipal obligations in the State of California and under Sections 103 and 141-150 of the Code. "Bond Fund" shall mean the fund by that name created pursuant to Section 8.1 of the Indenture. 4 ~-9 MIFSOL:\RE\60\47660\1387\227\AGR9197L25B "Bond Payment Date" shall mean each date on which Debt Service is payable on the Bonds including, without limitation, each Interest Payment Date and each Principal Payment Date (including any date fixed for redemption, by reason of acceleration or otherwise, or Mandatory Tender of the Bonds). "Bond Principal" shall mean the entire outstanding principal amount of the Bonds as of the date upon which such determination shall be made. "Bond Proceeds Fund" shall mean the fund by that name created pursuant to Section 7.2 of the Indenture. "Bond Register" shall have the meaning set forth in Section 5.I(a) of the Indenture. "Bond Registrar" shall mean the agent of the Issuer appointed as such pursuant to Section 5.1 of the Indenture for the purpose of registering and transferring the Bonds. "Bondholder Representative" shall mean one or more persons who are designated by the GE Bondholder or Designated GE Bondholder to act on behalf of the GE Bondholder for purposes of exercising the rights of the GE Bondholder under the Indenture, this Agreement and each of the other Loan Documents including, without limitation, those rights more particularly described in Section 15.5 of the Indenture. "Bondholders" or "Registered Owners" or "Holders" when used with respect to the Bonds shall mean the GE Bondholder or any other Person or Persons in whose name or names the Bonds are registered in the Bond Register. "Bonds" shall mean the bonds authenticated and delivered pursuant to the Indenture. "Business Day" shall mean a day other than a Saturday, a Sunday, or a legal holiday on which national banks located in the State of California or any city where the Trustee maintains its place of business for performance of its obligations under the Indenture are not open for general banking business. "Capital Improvements or Replacements" shall mean those improvements related to the Project which are properly capitalized under generally accepted accounting principles, or any capital repairs, maintenance or replacements related to the Project, including, without limitation, the Immediate Repairs, and including further, any exterior painting, parking lot repair, sidewalk or patio repairs, roof repairs, siding repairs, swimming pool repairs and the repair or replacement of carpets, appliances, heating or air conditioning units, drapes, wallpaper and other equipment used in connection with the operation and maintenance of the Project, but only to the extent that such capital improvements or replacements have been either (a) approved in writing by the GE Bondholder prior to expenditure by virtue of its approval of the Annual Budget, (b) constitute emergency needs not to exceed $25,000 per occurrence; provided, however, no more than $25,000 in the aggregate may be used for emergency needs until approval by the GE Bondholder, which approval shall not be unreasonably withheld, of any previous amounts expended for emergency needs, or (c) are otherwise approved by the GE Bondholder in writing. "Capital Proceeds" shall mean the proceeds received by the Developer upon any of the following events: (a) any sale or other disposition of any part of (but not all) or any interest in the Project, 5 IE -10 MIFS02... :\RE\60\4 7660\ 1387\227\AGR9197L.258 including, without limitation, any sale of any air, easement or mutual use rights (but nothing herein shall waive the prohibition on transfer contained herein or in the Deed of Trust), and which proceeds are applied to reduce the Bond Principal, (b) any insurance proceeds paid to the Developer in respect of the Project to the extent not required to repair or restore the Project (but nothing herein shall waive the Issuer's right hereunder to apply the insurance proceeds pursuant to the terms hereof), and which proceeds are applied to reduce the Bond Principal, but excluding any insurance proceeds specifically paid to reimburse the Developer for loss of business revenue or rental income with respect to the Project, (c) any condemnation proceeds received by Developer for the taking of any part of (but not all) or any interest in the Project to the extent not required to repair or restore the Project (but nothing herein shall waive Issuer's right hereunder to apply the condemnation award pursuant to the terms hereof) and which proceeds are applied to reduce the Bond Principal, but excluding any condemnation proceeds specifically paid to reimburse the Developer for loss of business revenue or rental income with respect to the Project; in each case (i.e., clauses (a) through (c) of this definition, inclusive) less the total of all reasonable expenses incurred by Developer in connection with the receipt or collection of any such proceeds and all amounts applied for the repair, restoration or improvement of the Project. "Capital Report" shall have the meaning set forth in Section 8.3 of the Indenture. "Cash on Cash Return" shall mean the ratio, expressed as a percentage, of (a) the sum of (i) Annualized Adjusted Net Operating Income based upon Adjusted Net Operating Income for the three (3) consecutive calendar months immediately preceding the date of calculation of such ratio plus (ii) interest payable by the Developer with respect to the Conventional Loan for the three consecutive calendar months immediately preceding the date of calculation of such ratio, to (b) (i) the sum of the Bond Principal and the outstanding principal amount of the Conventional Loan, less (ii) the amount on deposit in the Scheduled Sinking Payment Account of the Debt Service Reserve Fund, all as of the date of calculation of such ratio. "Closing" shall mean the consummation of the transactions contemplated by this Agreement, the Indenture and each of the other Loan Documents including, without limitation, the issuance and delivery of the Bonds and purchase of same by GECC and/or its Affiliates. "Closing Date" shall mean November 3, 1997. "Code" shall mean, collectively, the Code of 1954 and the Code of 1986. "Code of 1954" shall mean the Internal Revenue Code of 1954, as amended (but not including any amendments made by the Tax Reform Act of 1986), and the regulations, rulings and proclamations promulgated or proposed thereunder. "Code of 1986" shall mean the Internal Revenue Code of 1986, as amended, and the regulations, rulings and proclamations promulgated or proposed thereunder. "Compliance Certificate" shall mean a Certificate of Continuing Program Compliance in the form attached to the Land Use Restriction Agreement as Exhibit C thereto. 6 4-11 MIFSOL:\RE\60\47660\1387\227\AGR9197L.25B "Comprehensive Statement" shall mean a description of the scope of work to be incorporated in a Capital Improvement or Replacement including, without limitation, plans and specifications for the work, renderings, if applicable, and other material infonnation respecting the Capital Improvement or Replacement as may be requested by any GE Bondholder (including, without limitation, copies of construction contracts). "Contractual Obligation" of a person means any debt or equity security issued by that person, and any indenture, mortgage, deed of trust, undertaking, instrument or agreement (written or oral) to which such person is a party or by which it is bound, or to which it or any of its assets is subject. "Conventional Loan" shall mean the loan evidenced by the Conventional Note. "Conventional Loan Documents" shall mean, collectively, the Conventional Note, the Conventional Loan Agreement, the Second Deed of Trust Documents and any other note, mortgage, deed of trust, security agreement, assignment, certificate, affidavit, guaranty, indemnity, financing statement, instrument, document or agreement executed and delivered by the Developer or any other party which evidences, secures or otherwise relates to the Conventional Loan and/or the obligations of the Developer under the Conventional Note or the Conventional Loan Documents, as hereafter modified and/or amended. "Conventional Loan Agreement" shall mean that certain Loan Agreement dated the Closing Date by and between the Developer and General Electric Capital Corporation, a New York corporation, with respect to the Conventional Loan, as hereafter modified and/or amended. "Conventional Note" shall mean that certain Promissory Note dated the Closing Date made by the Developer and payable to the order of General Electric Capital Corporation, a New York corporation, in the original principal amount of up to, but not more than, $1,000,000, which note is secured by the Second Deed of Trust, as hereafter modified and/or amended. "Costs of Issuance" shall mean the fees, costs, expenses and other charges incurred in connection with the issuance of the Bonds, the negotiation and preparation of the Indenture and each of the other Loan Documents and shall include, but shall not be limited to, the following: (a) counsel fees (including Bond Counsel, Issuer's counsel, Trustee's counsel, Developer's counsel to the extent the Developer's counsel services are for legal services relating to the issuance of the Bonds, and GECC's counsel to the extent that GECC's counsel's services are for legal services relating to the issuance of the Bonds); (b) placement agent and financial advisor fees incurred in connection with the issuance of the Bonds; (c) Issuer and Trustee fees and expenses incurred in connection with the issuance of the Bonds; (d) paying agent and certifying and authenticating agent fees and expenses related to issuance of the Bonds; (e) printing costs (for the Bonds and of any preliminary and final offering materials); (f) any recording fees; (g) costs incurred in connection with the required public notices generally and costs of the public hearing; and (h) any commitment fees and/or other fees and costs payable to GECC in connection with its purchase of the Bonds. "Costs of Issuance Fund" shall mean the fund by that name created pursuant to Section 7.3 of the Indenture. 7 ,<B -I.:t MIFS02... .\RE\60\47660\ 1387\227\AGR9197L.2SB "Coupon Interest" shall mean interest from the Dated Date of the Bonds, or the most recent date to which Coupon Interest has been paid, on the unpaid Bond Principal at a rate per annum equal to the Coupon Rate; provided that, beginning on the Mandatory Tender Date, if any, until the maturity of the Bonds, Coupon Interest shall mean interest at the rate per annum determined in accordance with Section 4.2(f) of the Indenture. "Coupon Rate" shall mean (a) prior to the remarketing of the Bonds pursuant to Section 4.2(t) of the Indenture, (i) during the period prior to July I, 1998, a fixed rate of interest equal to _% per annum', (ii) during the period on and after July I, 1998, a fixed rate of interest equal to equal to _ % per annum'; provided that if on May I, 1998 or the first day of any calendar month thereafter until and including July I, 1998, the NCF Financial Tests shall have been satisfied and provided that the Developer shall have provided the GE Bondholder with evidence of such satisfaction acceptable to the GE Bondholder and the Trustee shall have received the written concurrence of the GE Bondholder that the NCF Tests have been satisfied following the GE Bondholder's review and audit of the Developer's calculations with respect thereto and provided that no Event of Default, Loan Agreement Default shall have occurred, then for the remainder of such period prior to the remarketing of the Bonds pursuant to Section 4.2(t) of the Indenture, the Coupon Rate shall be a fixed rate of interest equal to _%3 per annum, and (b) on and after the date of remarketing of the Bonds pursuant to Section 4.2(t) of the Indenture, the rate established pursuant to Section 4.2(t) of the Indenture in connection with such remarketing, and (c) at any time while an Event of Default or Loan Agreement Default exists, the Default Rate. The Coupon Rate shall be computed on the basis of a fraction, the denominator of which is three hundred sixty (360) and the numerator of which is the actual number of days elapsed in the period for which such Coupon Interest is payable. "Date of Official Action" shall mean the date on which the Issuer adopted an inducement resolution declaring its intent to issue obligations to provide original financing for the Project with the proceeds of the Prior Bonds. "Dated Date" shall mean November I, 1997. "Debt" shall mean, for any Person, without duplication: (a) all indebtedness of such Person for borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase price of property for which such Person or its assets is liable, (b) all unfunded amounts under a loan agreement, letter of credit, or other credit facility for which such Person would be liable, if such amounts were advanced under the credit facility, (c) all amounts required to be paid by such Person as a guaranteed payment to partners or a preferred or special dividend, including any mandatory redemption of shares or interests, (d) all indebtedness guaranteed by such Person, directly or indirectly, (e) all obligations under leases that constitute capital leases for which such Person is liable, and (f) all obligations of such Person under interest rate swaps, caps, floors, collars and other interest hedge agreements, in each case whether such , 100 basis points in excess of 80% of the 10 year Treasury Rate as of the Closing Date. The actual rate will be determined at closing by GECC. 2 A fixed rate of interest II basis points in excess of the initial rate established by GECC at Closing. 3 A fixed rate of interest equal to the initial fixed rate established by GECC on the Closing Date. 8 ~-/~ MIFS02... :\RE\60\4 7660\ 1387\227\AGR9197L.258 Person is liable contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person otherwise assures a creditor against loss. "Debt Service" shall mean the aggregate principal, Interest and any other payments due on the Bonds, together with all Scheduled Sinking Fund Payments required to be made pursuant to the Indenture and all other fees, charges and amounts due under the Indenture, but exclusive of any payments required to be made to any escrow or reserve fund under the Indenture or any other Loan Document other than Scheduled Sinking Fund Payments required to be made into the Debt Service Reserve Fund. "Debt Service Coverage Ratio" shall mean, for the period of time for which a calculation is being made, (a) the sum of (i) Annualized Adjusted Net Operating Income during such calculation period and (ii) interest payable by the Developer with respect to the Conventional Loan during such calculation period, divided by (b) the sum of (i) Debt Service payable during such calculation period and (ii) the principal and interest payable on the Conventional Note during such period. "Debt Service Reserve Fund" shall mean the fund by that name created pursuant to Section 8.5 of the Indenture. "Deed of Trust" shall mean the Deed of Trust, Security Agreement and Fixture Filing, dated as of even date herewith, made by the Developer in favor of , as trustee for the benefit of the Issuer, as beneficiary, as assigned to the Trustee pursuant to the Indenture and the Assignment Agreement, as hereafter modified or amended. "Deed of Trust Documents" shall mean, collectively, the Deed of Trust, the Assignment of Leases, the Assignment of Contracts, the Assignment of Management Agreement and any financing statements, security agreements or other mortgages, assignments, documents or instruments securing the Loan or any other obligations of the Developer under the Loan Agreement or the Note, as hereafter modified or amended. "DefaulJ Rate" shall mean the per annum rate of interest equal to the lesser of (a) the maximum rate of interest allowed by applicable law, and (b) five percent (5%) per annum in excess of the Coupon Rate, with monthly compounding (computed on the basis of a 360-day year for the actual number of days elapsed). "Designated GE Bondholder" shall have the meaning assigned to such term in Section 12.12(b) of the Indenture. "Determination Counsel" shall mean a firm of attorneys of nationally recognized standing in matters pertaining to the validity of and tax-exempt nature of interest on bonds issued by states and their political subdivisions, designated by the Issuer and acceptable to the GE Bondholder in its sole and absolute discretion. "Determination of Taxability" shall mean a determination that the Coupon Interest on the Bonds does not qualify as interest which is excludable from gross income of the recipient thereof for federal income tax purposes under Section 103 of the Code of 1954 ("Exempt Interest") for any reason other than that a recipient is or was a "substantial user" of the Project within the meaning of the Code of 1954 or 9 ~ -IV MIFS02... :\RE\60\4766O\1387\227\AGR9197L.2SB Related Person thereto, which detennination shall be deemed to have been made upon the first to occur of any of the following: (a) (i) the Trustee and the Developer receive written notice from the Trustee or the GE Bondholder to the effect that facts relating to the Developer or the Project, or any federal tax law or regulation, has changed or any public or private final ruling, technical advice memorandum or any other written communication by the Internal Revenue Service has been issued, or any final ruling or decision of a court of competent jurisdiction has been rendered or any other matter has come to the attention of the GE Bondholder, in any such case, which may adversely affect the excludability of the Exempt Interest; and thereafter (ii) Bond Counsel is notified either by the Trustee or the GE Bondholder in writing, with a copy to the Developer and the Issuer, or by the Developer, with a copy to the Trustee, the Issuer and the GE Bondholder, that Bond Counsel is requested to deliver an updated Approving Opinion of Bond Counsel during the forty-five (45) day period after receipt of the request and is assured as to the payment of its fees and expenses for such services; and (iii) within forty-five (45) days after such notice has been received by Bond Counsel, either (A) the Trustee, the Issuer and the Developer have received written communication from Bond Counsel to the effect that, based upon an analysis of the facts and applicable law, it is unable to render an updated Approving Opinion of Bond Counsel, or (B) in the event that Bond Counsel has not delivered an updated Approving Opinion of Bond Counselor the written communication in accordance with clause (a)(iii)(A), the Trustee, the Issuer and the Developer have not received an Approving Opinion of Determination Counsel; or (b) the Developer or the GE Bondholder receives written notice from the Trustee that the Trustee has been notified by the Internal Revenue Service, or has been advised by the Issuer, the Developer or any Bondholder or fonner Bondholder that the Internal Revenue Service has issued a notice of deficiency or similar notice which asserts that Coupon Interest on the Bonds does not qualify as Exempt Interest; or (c) the Issuer, any Bondholder or fonner Bondholder is notified that the Internal Revenue Service has issued a notice of deficiency or similar notice which asserts that Coupon Interest on the Bonds does not qualify as Exempt Interest. "Developer" shall mean Eucalyptus Grove Holdings, LLC, a limited liability company organized under the laws of the State of Utah, until a successor shall have succeeded to the rights and obligations of the Developer under this Agreement, and thereafter "Developer" shall mean such successor. "Developer Affiliate" shall mean (a) any corporation in which the Developer or any partner, shareholder, director, officer, member, or manager of the Developer directly or indirectly owns or controls more than ten percent (10%) of the beneficial interest, (b) any partnership, joint venture or limited liability company in which the Developer or any partner, shareholder, director, officer, member, or manager of the Developer is a partner, joint venturer or member, (c) any trust in which the Developer or any partner, shareholder, director, officer, member or manager of the Developer is a trustee or beneficiary, (d) any entity of any type which is directly or indirectly owned or controlled by the Developer or any partner, shareholder, director, officer, member or manager of the Developer, (e) any partner, shareholder, director, officer, member, manager or employee of the Developer, (f) any Person related by birth, adoption or marriage to any partner, shareholder, director, officer, member, manager, or employee of the Developer, or (g) the Developer and any Developer Party. "Developer Fault Event" shall mean the occurrence of a Determination of Taxability arising in whole or in part, directly or indirectly, as a result of the failure by the Developer, any prior owner of the Project or the property manager of the Project, if any, or their respective officers, employees, agents or servants to fully comply with the requirements of the Code, including, without limitation, the failure to comply with the Prior Land Use Restriction Agreement or the Land Use Restriction Agreement. 10 ~ -/ S' MIFS02... :\RE\60\47660\ 1387\227\AGR9197L.25B "Developer Party" shall mean Dell Loy Hansen, any member or manager of the Developer, any general partner in any partnership that is or controls, directly or indirectly, a member or manager of the Developer, and any other person or entity that controls, directly or indirectly, the Developer or any member or manager thereof or any interest therein. "Developer Payment Obligations" shall mean all payment obligations of the Developer under the Note, Loan Agreement and each of the other Loan Documents. "Environmental Indemnity Agreement" shall mean the Environmental Indemnity Agreement, dated as of even date herewith, made by the Developer in favor of the Issuer, the Trustee and GECC, as hereafter modified or amended. "Event of Default" shall mean any of the events described in Article XI of the Indenture. An Event of Default shall "exist" if an Event of Default shall have occurred and be continuing. "Excess Investment Earnings" shall mean an amount equal to the sum of (a) the excess of (i) the amount earned on all Nonpurpose Investments (other than investments attributable to an excess described in this subparagraph), over (ii) the amount that would have been earned if such Nonpurpose Investments were invested at a rate equal to the Yield on the Bonds, plus (b) any income attributable to the excess described in (a) above. "Favorable Tax Opinion" shall mean an Opinion of Counsel stating in effect that the proposed action, together with any other changes with respect to the Bonds made or to be made in connection with such action, waiver or failure to act, will not cause Coupon Interest on the Bonds to become includable for federal income tax purposes in the gross income of the recipients thereof. "Federal Bankruptcy Code" shall mean Title II of the United States Code, Section 101 et seq., as now in effect or as hereafter amended. "Federal Low Income Tenants" shall have the meaning set forth in the Land Use Restriction Agreement. "Financing Participants" shall mean, collectively, the Issuer, the Developer, the Trustee, the Bond Registrar, the Paying Agent and any GE Bondholder. "GE Bondholder" shall mean, prior to the purchase of all Outstanding Bonds in connection with a Mandatory Tender Date, (a) GECC, to the extent that GECC is the Registered Owner of all Bonds, or (b) collectively, GECC and/or one or more Affiliates of GECC and/or any Permitted Transferee or Permitted Transferees, to the extent that GECC and/or such Affiliate or Affiliates of GECC and/or such Permitted Transferee or Permitted Transferees, together, are the Registered Owners of all Bonds. "GECC" shall mean General Electric Capital Corporation, a New York corporation, together with its successors and assigns. "GECC Purchase Date" shall mean the date on which the Bonds are purchased in accordance with Section 4.2 of the Indenture. II ,d -I' MIFS02... :\RE\60\47660\ 1387\227\AGR 9197L.258 "GECC Purchase Notice" shall have the meaning set forth in Section 4.2(a) of the Indenture. "GECC Tender Commencement Date" shall mean November I, 2007. "General Disbursement Conditions" shall mean all of the following: (a) Developer shall have delivered to the GE Bondholder and the GE Bondholder shall have approved a Comprehensive Statement for the applicable Capital Improvements or Replacements; (b) all work with respect to the applicable Capital Improvement or Replacement shall have been performed in a manner reasonably satisfactory to the GE Bondholder and, if required by the GE Bondholder, an engineer selected by the GE Bondholder; (c) Developer shall have furnished the GE Bondholder with such draw request forms and other collateral documentation (including, without limitation, title endorsements, lien waivers, detailed cost breakdowns, payment schedules, copies of bills or statements evidencing costs and copies of paid receipts), respecting any requested disbursement as the GE Bondholder may reasonably request from time to time; (d) no Event of Default, Loan Agreement Default or Potential Default shall have occurred; (e) no portion of the Project shall have suffered any damage by fire or other casualty that is not being repaired in the ordinary course of business pursuant to the provisions of the Deed of Trust; (I) no condemnation or adverse zoning or usage change shall have been commenced with respect to the Project, or any portion thereof, and Developer shall not have any knowledge of any authority taking affirmative steps to condemn, adversely zone or change the usage of the Project, or any portion thereof; (g) there has been no material adverse change in the ability of Developer to pay the Developer Payment Obligations as it or they become due or of Developer to perform its obligations under any of the Loan Documents as such obligations become due; and (h) no law, regulation, ordinance, moratorium, injunction proceeding, restriction or similar matter shall have been enacted or adopted by any federal, state or local government or any board, authority, commission, agency or department asserting jurisdiction over the Project if the result of such law, regulation, ordinance, moratorium, injunction proceeding, restriction or like matter would have the effect in the GE Bondholder's reasonable judgment of materially and adversely affecting the use of the Project as a residential apartment project. "Government Obligations" shall mean noncallable, nonprepayable (a) direct, general obligations of the United States of America, or (b) any obligations unconditionally guaranteed as to the full and timely payment of all amounts due thereunder by the full faith and credit of the United States of America (including obligations held in book-entry form), but specifically excluding any mutual funds or unit investment trusts invested in such obligations. "Gross Proceeds" shall mean the aggregate of: (a) the net amount (after payment of all expenses of issuing the Bonds) of Bond proceeds received by the Issuer as a result of the sale of the Bonds; (b) proceeds; all amounts received by the Issuer as a result of the investment of the Bond (c) any amounts held in any Special Fund to the extent that the Issuer reasonably expects to use the amounts in such Special Fund to pay principal of, Prepayment Premium (if any), Unauthorized Prepayment Premium (if any), or Interest on the Bonds; and 12 J6 -11 MIFSOL:\RE\60\4766O\1387\227\AGR9197L.25B (d) any securities or obligations pledged by the Issuer or by the Developer as security for the payment of principal of, Prepayment Premium (if any), Unauthorized Prepayment Premium (if any), or Interest on the Bonds. "Gross-Up Amount" shall mean an amount of damages incurred by each Bondholder or former Bondholder or any other person having a beneficial interest in the Bonds, and in the case of a GE Bondholder in an amount as determined by such GE Bondholder and communicated in writing to the Trustee, equal to the sum of: (a) an amount derived according to the following formula: I + A - (I + A) l-R where "I" equals the amount of Coupon Interest paid or accrued on the Bonds during the Inclusion Period, "A" equals any amounts included in subparagraphs (b) and (c) below which are not deductible for federal income tax purposes and the amounts paid in reimbursement for which are includable or to be included by the Bondholder or former Bondholder or other person having a beneficial interest in the Bonds in its gross income for federal income tax purposes, and "R" equals the weighted average (weighted over the time of the Inclusion Period) of the highest marginal federal corporate income tax rates during the Inclusion Period, plus (b) if a Developer Fault Event shall have occurred, the amount of any interest or penalties which are payable by the Bondholder or former Bondholder or other person having a beneficial interest in the Bonds to any taxing authority as a result of a Determination of Taxability, plus (c) if a Developer Fault Event shall have occurred, the costs and expenses incurred by the Bondholder or former Bondholder or other person having a beneficial interest in the Bonds in connection with any Determination of Taxability. "Holders" shall have the meaning set forth in the definition of "Bondholders." "Immediate Notice" shall mean notice given as promptly as reasonably practicable by telephone, telecopy, telegraph or other electronic means, promptly confirmed in writing. "Immediate Repairs" shall mean those Capital Improvements or Replacements more particularly described on Exhibit C attached hereto and made a part hereof. "Improvements" shall mean the improvements constructed on the Land and which consist, in part, of a multifamily residential rental housing project consisting of 376 apartment units, all furnishings and fixtures, other appropriate amenities and facilities, landscaping and parking for not less than the minimum number of automobiles required by law, other on-site and off-site improvements relating thereto, including curbs, landscaping and underground utilities. 13 A -/~ MlFS02... :\RE\60\47660\l387\227\AGR9197L.258 "Inclusion Period" shall mean, with respect to each Bondholder or former Bondholder or any other person having a beneficial interest in the Bonds, (a) the period beginning on the earlier of (i) the earliest date from which Coupon Interest paid in respect of a Bond or any portion thereof held or formerly held by or for the benefit of the respective Bondholder or former Bondholder or other person having a beneficial interest in the Bonds is determined to be includable for federal income tax purposes in the gross income of the recipient thereof as provided in the definition of a Determination of Taxability as the result, directly or indirectly, in whole or in part, of any Developer Fault Event, and (ii) the later of the date (A) that the Developer receives written notice of the occurrence of any Determination of Taxability, or (B) upon which such Bondholder or former Bondholder or other person having a beneficial interest in the Bonds acquired its Bonds or its interest therein and (b) ending upon the earlier of the date of the redemption or purchase of such Bond. "Indenture" shall mean the Trust Indenture, dated as of even date herewith, by and between the Issuer and the Trustee, as it may from time to time be supplemented, modified or amended by one or more indentures or other instruments supplemental thereto entered into pursuant to the applicable provisions thereof. "Indenture Indebtedness" shall mean all indebtedness of the Issuer at any time secured by the Indenture, including without limitation (a) all principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on the Bonds and (b) all reasonable and proper fees, charges and expenses of the Trustee for services performed and expenses incurred under the Indenture. "Independent", when used with respect to any person, shall mean a person who (a) is in fact independent, (b) does not have any direct financial interest or any material indirect financial interest in any Financing Participant or in any obligor with respect to the Bonds or in any Affiliate of any Financing Participant or of any such obligor, and (c) is not connected with any Financing Participant or any such obligor as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. "Initial Rate Period" shall mean the period commencing on the Closing Date and ending on the day immediately preceding the earlier of (a) the GECC Purchase Date, or (b) the date of maturity of the Bonds (by acceleration, by redemption or otherwise), and, as applicable, with respect to any of the dates specified in (a) or (b), there occurs a simultaneous change in Coupon Interest on the Bonds under the terms and provisions of this Indenture. "Inspecting Engineer" shall mean a firm of Independent engineers and/or architects selected by the Developer to perform an inspection of the Project and approved by any GE Bondholder. "Interest" shall mean, collectively, Coupon Interest, Gross-Up Amount and any other interest, including, without limitation, any Late Charge and any interest accrued at the Default Rate, due and payable with respect to the Bonds under the terms of the Indenture. "Interest Payment Date" shall mean any date on which an installment of Interest (including, without limitation, Coupon Interest and Gross-Up Amount) and/or other charges is due and payable as provided herein and in the Bonds, and shall mean, with respect to: (a) Coupon Interest, the first day of each month, commencing December I, 1997, until payment in full of the Bonds; (b) Gross-Up Amount, 14 ~-I' MIFS02... :\RE\60\47660\1387\227\AGR9197L.258 the date established for redemption of the Bonds pursuant to Section 6.2 of the Indenture following the occurrence of any Determination of Taxability, and on any Interest Payment Date described in subsection (a) above occurring on or after the date of any Determination of Taxability; and (c) Late Charge and any other interest due and payable with respect to the Bonds, as provided in the Indenture. Notwithstanding any of the foregoing to the coiltrary, each of the following shall be considered to be Interest Payment Dates with respect to any accrued Interest with respect to the Bonds: the Mandatory Tender Date and any date on which there shall be an optional or mandatory redemption of the Bonds. "Investment Letter" shall mean a letter in substantially the form attached to the Indenture as Exhibit D, with only such changes therein as may be approved by the Issuer in its sole discretion. "Issuer" shall mean the City of Chula Vista, California, a public body corporate and politic and a political subdivision of the State of California, and its successors and assigns. "Land" shall mean the parcel of real property located in the City of Chula Vista, California on which the Improvements have been constructed, as more particularly described in Exhibit B attached hereto. "Land Use Restriction Agreement" shall mean that certain Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants, dated as of even date herewith, by and among the Issuer, the Trustee, and the Developer and encumbering the Project, as hereafter amended or modified. "Late Charge" shall mean the amount due and payable as a late charge on overdue payments pursuant to Section 4.1 (k) of the Indenture. "Legal Requirements" applicable to any property or person means (a) all decisions, statutes, ordinances, rulings, directions, rules, regulations, orders, writs, decrees, injunctions, permits, certificates, or other requirements of any court or other governmental or public entity in any way applicable to or affecting such property or such person or its business, operations, or assets, (b) all such person's bylaws and articles of incorporation or partnership, limited partnership, joint venture, trust or other form of business association agreement, and (c) all other Contractual Obligations of any nature applicable to or affecting such property or such person. As to the Project such term includes, without limitation, all legal requirements relating to acquisition, development, ownership, use, occupancy, possession, operation, maintenance, alteration and repair of the Project, as well as all related permits, easements, covenants, restrictions and similar items. "Lien" shall mean any interest, or claim thereof, in the Project securing an obligation owed to, or a claim by, any Person other than the owner of the Project, whether such interest is based on common law, statute or contract, including the lien or security interest arising from a deed of trust, mortgage, assignment, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. The term "Lien" shall include reservations, exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting the Project. "Loan" shall mean the mortgage loan made by the Issuer to the Developer in the aggregate principal amount of $18,300,000, as evidenced by the Note. 15 ,a -;).t) MIFS02... :\RE\60\47660\ 1387\l.27\AGR9197L.258 "Loan Agreement" shall have the meaning set forth in the definition of "Agreement". "Loan Agreement Default" shall have the meaning set forth in Article IX hereof. A Loan Agreement Default shall "exist" if a Loan Agreement Default shall have occurred and be continuing. "Loan Documents" shall mean, collectively, the Indenture, the Bonds, the Assignment Agreement, the Loan Agreement, the Note, the Deed of Trust, the Assignment of Leases, the Assignment of Contracts, the Assignment of Management Agreement, the Environmental Indemnity Agreement, the Land Use Restriction Agreement, the Option and Sale Agreement, any Uniform Commercial Code financing statements filed in connection with the Loan, and all other documents, instruments, agreements and certificates evidencing, securing, governing or otherwise pertaining to the Loan or the Bonds or otherwise executed and delivered by or on behalf of the Developer or any other party in connection with the Loan or the Bonds or any of the foregoing documents, together with all amendments, modifications, renewals, substitutions and replacements of or to any of the foregoing. "Loan Years" shall mean the period between the Closing Date and October 31, 1998 for the first Loan Year and the period between each succeeding November I and October 31, with the final Loan Year consisting of the period from November I to the Maturity Date. "Lower-Income Tenant" shall have the meaning assigned to such term in the Land Use Restriction Agreement. "Majority of Holders" shall mean the Holders of more than 50% of the aggregate principal amount of all Outstanding Bonds. "Make Whole Breakage Amount" shall mean (x) the sum of the Present Value (as defined below) on the date of prepayment of each Monthly Interest Shortfall (as defined below) for the period from the date of calculation through the GECC Tender Commencement Date discounted at the monthly Replacement Treasury Yield (as defined below) divided by (y) I minus the highest marginal federal corporate income tax rate. The Monthly Interest Shortfall is calculated for each monthly payment date as follows: I. The positive difference, if any, of the Treasury Rate determined as of the Closing Date less the Replacement Treasury Yield, plus the Break Contract Fee (as defined below) of 20 basis points; 2. Divided by 12; 3. prepayment. Multiplied by the outstanding principal balance of the loan on the date of The Present Value is then determined by discounting each Monthly Interest Shortfall at the Replacement Treasury Yield divided by 12. 16 /j-.2.1 MlFS02... :\RE\60\4 7660\1387\?27\AGR9197L.258 FOR EXAMPLE: If a loan with a Treasury Rate of 6% were prepaid with 24 months remaining in the term, at a time when the two-year Replacement Treasury Yield was 5%, and the outstanding loan balance was $10,000,000.00, then: Treasury Rate .0600 Less the Replacement Treasury Yield -.0500 =.0100 Plus the Break Contract Fee +.0020 Equals the rate difference =.0120 Divided by 12 ~12 Equals the monthly rate difference = .0010 Times the principal balance x$IO,OOO,OOO Equals the Monthly Interest Shortfall =$10,000.00 The Present Value of each Monthly Interest Shortfall ($10,000) discounted at the monthly Replacement Treasury Yield (5% divided by 12 or .4167%) equals $227,938. Assuming the highest marginal federal corporate income tax rate was 40%, this amount would be divided by 0.60 to equal $379,897. The Break Contract Fee shall be 20 basis points at all times. As used herein the term "Replacement Treasury Yield" shall mean the rate of interest equal to the product of (x) yield to maturity of the most recently issued U.S. Treasury Security as quoted in The Wall Street Journal on the prepayment date and (y) I minus the highest marginal federal corporate income tax rate. If the remaining term is less than one year, the Replacement Treasury Yield will be calculated using the yield for U.S. Treasury Securities with a one-year maturity. If the remaining term is I-Year, 2- Year, etc., then the Replacement Treasury Yield will be calculated using the yield for Treasury Securities with a maturity equaling the remaining term. If the remaining term is longer than one year but does not equal one of the maturities being quoted, then the Replacement Treasury Yield will be calculated using the yield for Treasury Securities with a maturity closest to the remaining term. If The Wall Street Journal (i) quotes more than one such rate, the highest of such quotes shall apply, or (ii) ceases to publish such quotes, the yields to maturity of U.S. Treasury Securities shall be determined from such financial reporting service or source as the GE Bondholder shall determine. "Manager"shall mean Wasatch Residential, Inc., or any successor management company employed by the Developer and approved by the GE Bondholder in accordance with the terms of the Deed of Trust, the Loan Agreement or any of the other Loan Documents. 17 ,d -.:l.:J.. MIFS02... :\RE\60\47660\ 1387\227\AGR9197L.2SB "Mandatory Tender" shall mean the tender of the Bonds by the Bondholders for purchase on the Mandatory Tender Date as more particularly. described in Section 4.2 of the Indenture. "Mandatory Tender Date" shall have the meaning set forth in Section 4.2(a) of the Indenture. "Mandatory Tender Notice" shall have the meaning set forth in Section 4.2(a) of the Indenture. "Maturity Date" shall mean the earlier of (A) November I, 2027, or (B) any earlier date on which the entire Bond Principal, accrued and unpaid Interest (including any Gross-Up Amount), Prepayment Premium, if any, and Unauthorized Prepayment Premium, if any, are required to be paid in full, by acceleration or otherwise, under this Agreement or any of the other Loan Documents. "Moody's" shall mean Moody's Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, Moody's shall be deemed to refer to any other nationally recognized securities rating agency designated by the Developer, with the consent of the GE Bondholder. "NCF Financial Tests" shall have the meaning set forth in Section 2.16 hereof. "NCF Funds" shall have the meaning set forth in Section 2.16 hereof. "NCF Payment Account" shall mean the account in the Debt Service Reserve Fund created pursuant to and so designated in Section 8.5 of the Indenture "NCF Reserve Payments" shall have the meaning set forth in Section 2.16 hereof. "Net Cash Flow" shall mean, with respect to any period for which such calculation shall be made, the Net Operating Income for such period, less Debt Service for such period. "Net Operating Income" shall mean, with respect to any period for which such calculation shall be made, the amount by which Operating Revenues for such period exceed Operating Expenses for such period. "Nonpurpose Investment" shall mean any investment property (as defined in Section 148(b) of the Code of 1986) which is acquired with the Gross Proceeds of the Bonds and which is not acquired to carry out the governmental purpose of the Bonds. "Note" shall mean the Promissory Note, dated the Closing Date, in the principal amount of $18,300,000 made by the Developer to the order of the Issuer (and endorsed by the Issuer, without recourse, to the Trustee), evidencing the Loan. "Office of the Trustee" shall mean the office of the Trustee for delivery of notices and other documents, as specified pursuant to Section 15.1 of the Indenture. 18 ~ -.2~ MIFS02...:\RE\60\47660\1387\227\AGR9197L25B "Operating Expenses" shall mean, without duplication, with respect to any month, calendar quarter, semi-annual or any other period for which such calculation shall be made, all reasonable and necessary expenses incurred by the Developer in the ordinary course of operating, owning, managing, leasing and maintaining the Project which are directly associated with the Project for the applicable period, including, without limitation, (a) costs incurred in connection with any Capital Improvements or Replacements (to the extent not paid from the Replacement Reserve Fund or the Project Fund), (b) Real Estate Taxes actually paid by Developer or any amounts deposited by the Developer into the Tax Escrow Fund, (c) insurance premiums, (d) utility expenses, (e) supply costs, (f) advertising expenses, (g) management fees not in excess of three (3%) percent of Operating Revenues actually collected for the applicable month, calendar quarter, semi-annual or other period (exclusive, however, of any expense pass-throughs and any rents attributable to model units or employee units), (h) reasonable leasing commissions paid in connection with tenant leases, (i) fees paid to the Trustee or the Issuer, (j) annual Developer audit fees paid to Independent accountants in an amount reasonably approved by the Developer and the GE Bondholder, (k) any and all amounts deposited by the Developer into the Replacement Reserve Fund (other than from the proceeds of the Bonds or the Conventional Loan) and (I) interest payable by the Developer with respect to the Conventional Loan and any other Debt approved by the GE Bondholder. Notwithstanding the foregoing or anything to the contrary contained herein, "Operating Expenses" shall not include (i) any costs incurred by Developer in connection with the issuance of the Bonds and the closing of the transactions contemplated by the Indenture, the Loan Agreement and the other Loan Documents or any cost (other than as set forth in subsection (I) above) incurred by the Developer in connection with the Conventional Loan (including, without limitation, any legal or other professional fees and costs), (ii) the amount of any Debt Service or any principal, interest or other amounts paid under any other notes, mortgages or loans relating to the Project (other than interest payable on the Conventional Loan or any other Debt approved by the GE Bondholder); (iii) any non-cash charges such as depreciation and amortization; (iv) the costs of any other capital or non-capital improvements or repairs made to the Project, other than those included in subparagraph (a) above; (v) any cost, payment or expense, whether included in Operating Expenses or otherwise, to the extent paid with the proceeds of the Bonds or pursuant to or under the terms of the Loan Agreement, the Indenture or any of the other Loan Documents, including any Late Charges or penalties, or with the proceeds of the Conventional Loan or pursuant to or under the terms of the Conventional Note or the Second Deed of Trust; (vi) Developer's federal, state or local income tax; (vii) any taxes, insurance or other items paid from sums held in the Tax Escrow Fund or any other fund or account established under the terms of the Indenture; (viii) any expenses, commissions, charges or other amounts paid to a Developer Affiliate or any employee, agent or independent contractor of any Developer Affiliate except for the management fee and other fees described in clause (g) above and except as otherwise approved by the GE Bondholder in its sole and absolute discretion; (ix) any expenses or costs paid directly or indirectly through the use of any insurance or condemnation proceeds, other than insurance proceeds or condemnation awards specifically paid to reimburse Developer for loss of business or rental income; (x) any cost or expense relating to any period prior to the Closing Date; (xi) the costs of any items paid for or reimbursed to Developer out of funds in the Replacement Reserve Fund or Project Fund; (xii) any expenses related to or incurred in connection with an event which could result in Developer receiving Capital Proceeds; (xiii) any late charges, penalties or other such fees paid with respect to any utilities, trade payables or other accounts payable of the Developer; (xiv) any refunds of security deposits made to tenants of the Project; (xv) any general or administrative expenditures of the Developer not, in the reasonable discretion of the GE Bondholder, attributable to the Project; and (xvi) any amount paid or deposited by Developer into any account of the Debt Service Reserve Fund. Notwithstanding anything to the contrary contained herein, the term 19 ~ -.:Lt{ MIFS02...:\RE\60\4 7660\ 1387\227\AGR9197L.25B "Operating Expenses" shall not include any of the foregoing items to the extent paid directly or reimbursed by a tenant of Developer or any other third party. "Operating Revenues" shall mean, without duplication, for the applicable month, calendar quarter, semi-annual or any other period for which such. calculation shall be made, the sum of all gross rental receipts and all other income, proceeds, receipts and revenues generated by and from the use and operation of the Project in respect of all or any part thereof, including, but not limited to, base rental income, pass-through charges, late charges, vending machine income, laundry income, percentage rents, increases in rent based upon increases in the consumer price index (or other inflation factor), parking income and receipts, any non-refundable pet deposits or fees, any forfeited or non-refundable security deposits, prepaid rent, rental and charges for space occupancy, storage income, insurance proceeds or condemnation awards paid to reimburse Developer for loss of business or rental income, any insurance proceeds or condemnation awards in excess of the portion thereof used to restore, repair or replace the Project, any property tax refunds applicable to the period on and after the Closing Date, interest earned on any accounts into which any of the foregoing revenues are deposited, but exclusive of (a) any proceeds of the Bonds or the Conventional Loan, (b) any Capital Proceeds, (c) any refundable security deposits, unearned portion of any prepaid rent, and any other refundable items (provided, however, that, at such time as security deposits or other refundable items have been forfeited or earned, such items shall become part of Operating Revenues), and all interest earned on any accounts into which any of the foregoing revenues are deposited to the extent such interest is refundable, and (d) any interest earned on any amounts in any Special Funds to the extent that such interest is added to and becomes a part of the principal of such Special Fund. Operating Revenues shall be determined in accordance with the accrual method of accounting. "Opinion of Counsel" shall mean an opinion from an attorney or firm of attorneys, acceptable to the Issuer and the GE Bondholder, with experience in the matters to be covered in the opinion. "Option and Sale Agreement" shall mean that certain Option and Sale Agreement dated the Closing Date between the Developer and General Electric Capital Corporation. "Option and Sale Documents" shall mean the Option and Sale Agreement, the Third Deed of Trust and the Third Assignment of Rents and Leases and any financing statements, security agreements or other mortgages, deeds of trust, assignments, documents, or instruments securing the obligations of the Developer under the Option and Sale Agreement, as hereinafter modified or amended. "Original Trustee" shall mean First Trust of California, National Association, as successor to Security Pacific National Bank, as the original trustee under the Prior Indenture. "Outstanding" or "Bonds Outstanding" when used with reference to the Bonds, shall mean, as of a particular date, all Bonds theretofore authenticated and delivered under the Indenture except: (a) Bonds theretofore cancelled or required to be cancelled by the Trustee or delivered to the Trustee for cancellation; (b) Bonds which are deemed to have been paid in accordance with the Indenture; 20 ~"2.S" MIFS02... :\RE\60\47660\1387\227\AGR9197L.25B (c) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered pursuant to the Indenture; and (d) Bonds not tendered when required under the provisions of the Indenture which are deemed tendered. In determining whether the Registered Owners of a reqUisIte aggregate principal amount of Outstanding Bonds have concurred in any request, demand, authorization, direction, notice, consent or waiver under the provisions of the Indenture, this Agreement or any other Loan Document, Bonds which are owned by or held for the account of the Developer, the Issuer or any other obligor on the Bonds, or any affiliate of anyone of said entities (for the purpose of this definition an "affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person) shall be disregarded and deemed not to be Outstanding hereunder for the purpose of any such determination; provided. however, that the Trustee shall not be deemed to have knowledge that any Bond is owned by the Developer, the Issuer or any such obligor or affiliate unless the Issuer or the Developer is the Registered Owner or the Trustee has received written notice that any other Registered Owner is such an obliger or affiliate. For purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly. whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. Notwithstanding the foregoing, Bonds so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Bonds and that the pledgee is not a Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Developer, the Issuer or any other obligor on the Bonds. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. "Paying Agent" shall mean the Trustee and any other person authorized by the Issuer to pay Debt Service on the Bonds on behalf of the Issuer. "Permitted Encumbrances" shall mean those matters set forth on Schedule B, Exceptions on , as endorsed through the Closing Date. "Permitted Liens" shall mean the following encumbrances: (i) Liens for taxes or assessments or other governmental charges or levies, either not yet due and payable or to the extent that nonpayment thereof is expressly permitted by the terms of the Deed of Trust or this Agreement; (ii) pledges or deposits securing obligations under workers' compensation, unemployment insurance, social security or public liability laws or similar legislation incurred in the ordinary course of business; (iii) pledges or deposits securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which the Developer is a party as lessee made in the ordinary course of business; (iv) statutory Liens of landlords and workers'. mechanic's, suppliers', carriers', warehousemen's or other similar Liens arising in the ordinary course of business, in amounts not to exceed $50.000 in the aggregate, and securing indebtedness not yet due and payable or to the extent that nonpayment thereof is expressly permitted by the terms of the Deed of Trust or this Agreement; (v) zoning restrictions, easements, licenses. or other restrictions on the use of real property or other minor irregularities in title (including leasehold title) thereto existing as of the date hereof so long as the same do not impair the use, value or marketability of such real property, 21 ~-.2I.- MIFS02... :\RE\60\47660\ 1387\l27\AGR9197L.258 leases or leasehold estates; (vi) Pennitted Encumbrances, and (vii) such other Liens as shall be approved by the Trustee and the GE Bondholder in their sole and absolute discretion. "Permitted Transferee" shall mean (a) a bank as defined in Section 3(a)(2) of the Securities Act of 1933, as amended (" 1933 Act"), or a savings and loan association or other institution as defined in Section 3(a)(5)(a) of the 1933 Act whether acting in its individual or fiduciary capacity; or (b) a broker or dealer registered pursuant to Section IS of the Securities Exchange Act of 1934, as amended ("1934 Act"); or (c) an insurance company as defined in Section 2(13) of the 1934 Act; or (d) an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of the Investment Company Act of 1940; or (e) a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; or (f) a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees, if investment decisions are made by a plan fiduciary which is a bank, savings and loan association, insurance company, or registered investment advisor and the plan establishes fiduciary principles the same as or similar to those contained in Sections 404-407 of Title I of the Employee Retirement Income Security Act of 1974; or (g) an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 ("ERISA") if investment decisions are made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, with investment decisions made solely by persons that are Accredited Investors, as defined in Rule SOl of the 1933 Act ("Accredited Investors"); or (h) an Accredited Investor but not including any individual; or (i) any entity directly or indirectly controlled ("control," in the case of a trust or other entity, meaning operating control in the ordinary course of business), by GECC, and either (A) in which all interests (other than those owned by GECC or entities controlled by GECC) are owned by Accredited Investors but not including any individual or Qualified Institutional Buyers, as defined in Rule 144A under the 1933 Act, or are rated in one of the three highest Rating Categories by either of the Rating Agencies, or (B) such entity or trust has or will have, as of the date such Bonds are purchased, total assets of not less than $100,000,000 or investments having a principal balance of not less than $100,000,000; or (j) GECC or any "related person" thereto within the meaning of the Code of 1986, as amended; or (k) the owner of the Project or a person or entity which controls, is controlled by, or is under common control with the owner of the Project; or (1) any other person or entity approved in writing by the Issuer. "Person" shall mean any individual, corporation, partnership, joint venture, association, joint stock company, trust, trustee, estate, limited liability company, unincorporated organization, real estate investment trust, government or any agency or political subdivision thereof, or any other form of entity. "Pledged Revenues" shall mean the amounts pledged under the Indenture to the payment of principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on the Bonds, consisting of the following: (a) all income, revenues, proceeds and other amounts to which the Issuer is entitled, derived from or in connection with the Project and the Loan Documents, including all Basic Loan Payments and Additional Payments due under this Agreement and the Note and all amounts obtained through the exercise of the remedies provided in the Loan Documents, subject to limitations on such rights contained therein upon the occurrence of an event of default thereunder and all receipts of the Trustee credited under the provisions of the Indenture against said amounts payable, and (b) moneys held 22 ~-:J.? MIFS02... :\RE\60\4766O\ 1387\l27\AGR9197L.258 in the Special Funds, together with investment earnings thereon (except any amounts on deposit in the Rebate Fund). "Potential Default" shall mean any event or condition which, with the giving of notice, the passage of time, or both, would constitute an Event of Default or a Loan Agreement Default. "Prepayment Premium" shall mean an amount equal to the Make Whole Breakage Amount. "Principal Payment Date" shall mean the maturity date or redemption date (including as a result of acceleration) of any Bond. "Prior Bonds" shall mean the Issuer's Multifamily Housing Revenue Bonds (Eucalyptus Grove Project) Series 1985, which were issued in the original aggregate principal amount of $21,885,000. "Prior Developer" shall mean Eucalyptus Grove International, a California limited partnership. "Prior Indenture" shall mean that certain Trust Indenture dated as of November 1,1985 between the Issuer and the Original Trustee, as heretofore supplemented or amended, pursuant to which the Prior Bonds were issued and secured. "Prior Land Use Restriction Agreement" shall mean that certain Regulatory Agreement and Declaration of Restrictive Covenants dated as of November I, 1985 among the Issuer, the Prior Developer and the Original Trustee and recorded on November 15, 1985 as Document No. 85-430278 in the Official Records of San Diego County, California. "Prior Loan Agreement" shall mean that certain Loan Agreement dated as of November I, 1985 between the Prior Developer and the Issuer, as heretofore amended and/or modified. "Prior Deed of Trust" shall mean the Deed of Trust, Assignment of Rents and Security Agreement (Construction Deed of Trust) dated as of November I, 1985, from the Prior Developer to Commonwealth Land Title Insurance Company for the benefit of the Issuer and Continental Casualty Company, and recorded on November 15, 1985 as Document No. 85-430279 in the Official Records of San Diego County, California, as heretofore assigned, modified and/or amended. "Project" shall mean the Land and the Improvements. "Project Fund" shall mean the fund by that name created pursuant to Section 8.6 of the Indenture. "Purchase Price" shall have the meaning set forth in Section 4.2(a) of the Indenture. "Qualified Investments" shall mean anyone or more of the following investments, if and to the extent the same are then legal investments under the applicable laws of the State of California for moneys proposed to be invested therein: 23 ,.d-.:Li' MIFS02...:\RE\60\47660\ 1387\227\AGR9191L.258 (a) Bonds or other obligations of the State of California or bonds or other obligations the principal and interest of which are guaranteed by the State of California. (b) Government Obligations; (c) Obligations of agencies of the United States government issued by the Federal Land Bank, the Federal Home Loan Bank, Federal Intermediate Credit Bank, the Bank for Cooperatives, the Federal Financing Bank, the Farm Credit System, the Federal Home Loan Mortgage Corporation (including participation certificates), the Export Bank of the United States, the Federal National Mortgage Association, the Government National Mortgage Association, or any agency or instrumentality of the government of the United States of America which shall be established for the purpose of acquiring the obligations of any of the foregoing; (d) Bonds or other obligations issued by any public housing agency or municipality in the United States, which bonds or obligations are fully secured as to the payment of both principal and interest by a pledge of annual contributions under an annual contributions contract or contracts with the United States government, or project notes issued by any public housing agency, urban renewal agency, or municipality in the United States and fully secured as to payment of both principal and interest by a requisition, loan, or payment agreement with the United States government; (e) Certificates of deposit of any banks having a combined capital, surplus and undivided profits of $10,000,000, the deposits of which are insured by the Federal Deposit Insurance Corporation or any successor agency (the "FDIC"), including the certificates of deposit of any bank, savings and loan association, or building and loan association acting as depository, custodian, or trustee for any such bond proceeds; provided, however, that the portion of such certificates of deposit in excess of the amount insured by the FDIC, if any such excess exists, shall be secured by deposit with the Federal Reserve Bank, or with any bank, of one or more of the following securities in an aggregate principal amount equal at least to the amount of such excess: (i) Direct and general obligations of the State of California or of any county or municipality in the State of California. (ii) Government Obligations; (iii) Obligations of agencies of the United States government included In subparagraph (c) of this paragraph; or (iv) Bonds, obligations, or project notes of public housing agencies, urban renewal agencies, or municipalities included in subparagraph (d) of this paragraph; (f) A tax-exempt money market fund rated in one of the three highest rating categories available from a nationally recognized rating service; (g) Interest-bearing time deposits, repurchase agreements, reverse repurchase agreements, rate guarantee agreements, or other similar banking arrangements with a bank or trust 24 ~ -.1.., MIFS02... :\RE\60\47660\ 1387\227\AGR9197L.258 company having capital and surplus aggregating at least $50,000,000 or with any government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York having capital aggregating at least $50,000,000 or with any corporation which is subject to registration with the Board of Governors of the Federal Reserve System pursuant to the requirements of the Bank Holding Company Act of 1956, provided that each such interest-hearing time deposit, repurchase agreement, reverse repurchase agreement, rate guarantee agreement, or other similar banking arrangement shall permit the moneys so placed to be available for use at the time provided with respect to the investment or reinvestment of such moneys; (h) Government Obligations, the interest on which is exempt from federal income taxation under Section 103 of the Code and which is not an item of tax preference for purposes of federal alternative minimum tax and which are rated in one of the three highest rating categories available from a nationally recognized rating service; (i) Any and all other obligations of investment grade quality having a credit rating from a nationally recognized rating service of at least one of the three highest rating categories available and having a nationally recognized market, including, but not limited to, collateralized mortgage obligations, owner trusts offering collateralized mortgage obligations, guaranteed investment contracts offered by any firm, agency, business, governmental unit, bank, insurance company, corporation chartered by the United States Congress, or other entity, real estate mortgage investment conduits, mortgage obligations, mortgage pools, and pass-through securities; and (j) any other investments which in the Opinion of Counsel are authorized by the laws of the State of California. Any investment listed above- which represents investment of amounts in any Special Fund or account within any Special Fund either shall not have a maturity in excess of ninety-one (91) days or shall he subject to tender at the option of the holder thereof to the issuer of any such investment or its designated agent for redemption or purchase at not less than par value at least as frequently as every seven (7) days until maturity, earlier redemption or purchase by such issuer or designated agent. "Qualified Project Costs" means those costs and items of expense described on Schedule _ of the Tax Certificate paid or incurred by or on hehalf of the Developer or the Issuer on or after November 3,1997. "Qualified Project Period" shall have the meanmg set forth m the Land Use Restriction Agreement. "Qualified Tenants" means Lower-Income Tenants as such term is defined in the Land Use Restriction Agreement. "Rating Agency" means S&P or Moody's. "Rating Agent" means at any time any Rating Agency then rating the Bonds, or any of them, at the request of the GE Bondholder during the Initial Rate Period or the Developer thereafter. 25 ~- 3-D MIFS02... :\RE\60\47660\ 1387\227\AGR9197L.258 "Rating Category" or "Rating Categories" means one or more of the generic rating categories of a Rating Agency, without regard to any refinement or gradation of such rating category or categories by a numerical modifier, plus or minus sign or otherwise. "Real Estate Taxes" shall mean all general and specific taxes and assessments, levied or assessed against the Project, or any part thereof. "Rebate Fund" shall mean the fund by that name created pursuant to Section 8.2 of the Indenture. "Record Date" shall mean the Business Day immediately prior to any Interest Payment Date. "Redemption Price" shall have the meaning set forth in Section 6.1 of the Indenture. "Registered Owners" shall have the meaning set forth in the definition of "Bondholders". "Regulations" shall mean with respect to the Code, the relevant regulations and proposed regulations thereunder or any relevant successor provision to such regulations and proposed regulations. "Related Person" shall mean a "related person" within the meaning of Section 103(b)(13) of the Code of 1954 and Regulations Section \.103-l0(e). "Remarketing Agent" shall have the meaning set forth in Section 4.2(e) of the Indenture. "Repayment Date" shall mean the earliest to occur of (a) the GECC Purchase Date, or (b) the day immediately following the end of the Initial Rate Period which is the date of maturity of the Bonds (whether by acceleration or otherwise), the date of redemption of the Bonds, or the date of purchase, or purchase in lieu of redemption, of the Bonds. "Replacement Rese",e Fund" shall mean the fund by that name created pursuant to Section 8.3 of the Indenture. "Replacement Rese",e Requirement" shall mean the amount remaining, if any, after deducting (a) the sum of all expenditures by the Developer for Capital Improvements or Replacements to the Project during the preceding Loan Year which were not paid with disbursements from the Replacement Reserve Fund or Project Fund, from (b) the product obtained by multiplying $200 by the existing number of apartment units in the Project. "Resolution" shall mean the resolution of the Issuer authorizing the execution and delivery of this Agreement, the Indenture and the issuance of the Bonds. "Responsible Officer" shall mean, when used with respect to the Trustee, any corporate trust officer or assistant corporate trust officer or any other officer of the Trustee within its corporate trust department located at the Office of the Trustee customarily performing functions similar to those performed by any of the above designated officers, and it also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. 26 ~..31 MIFS02... :\RE\60\4766O\1387\227\AGR9197L.2SB "S&P" shall mean Standard & Poor's Ratings Services, a division of The McGraw-Hili Companies, Inc., a corporation organized and existing under the laws of the State of New Y ark, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S & P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Developer, with the consent of the GE Bondholder. "Scheduled Sinking Fund Payment" shall have the meaning set forth in Section 2.16 hereof. "Scheduled Sinking Payment Account" shall mean the account in the Debt Service Reserve Fund created pursuant to Section 8.5 of the Indenture. "Second Assignment of Contracts" shall mean that certain Second Assignment of Contracts, Warranties, Permits, Licenses, Etc., dated as of November I, 1997, executed by the Developer in favor of GECC, as the same may be amended from time to time. "Second Assignment of Management Agreement" shall mean that certain Second Assignment of Management Agreement with respect to the Project, dated as of even date herewith, executed by the Developer, as assignor, and the Manager to and for the benefit of GECC, as assignee, as hereafter modified or amended. "Second Assignment of Rents" shall mean that certain Second Assignment of Rents and Leases, dated as of November I, 1997, executed by the Developer in favor of General Electric Capital Corporation, a New York corporation, encumbering the Project, as the same may be amended from time to time. "Second Deed of Trust" shall mean that certain Second Deed of Trust, Security Agreement and Fixture Filing, dated as of November 1,1997, made by the Developer in favor of as trustee for the benefit of General Electric Capital Corporation, a New York corporation, as beneficiary, granting a second lien security interest in, among other things, the land, buildings and equipment comprising the Project, as the same may be amended from time to time. "Second Deed of Trust Documents" shall mean, collectively, the Second Deed of Trust, the Second Assignment of Leases, the Second Assignment of Contracts, the Second Assignment of Management Agreement, and any financing statements, security agreements or other mortgages, deeds of trust, assignments, documents or instruments securing the obligations of the Developer under the Conventional Loan Documents, as hereafter modified or amended. "Single Purpose Entity" shall mean a Person (other than an individual, a government, or any agency or political subdivision thereot), which exists solely for the purpose of owning the Project, conducts business only in its own name, does not engage in any business or have any assets unrelated to the Project, does not have any indebtedness other than as permitted by this Agreement, maintains its own separate books, records, and accounts (with no commingling of assets), files its own tax returns, does not enter into any agreements with any of its Affiliates except upon terms and conditions that would be available on an arms-length basis with non-Affiliates, holds itself out as being a Person separate and apart from any other Person, maintains adequate capital for the normal obligations reasonably foreseeable in businesses similar to its own and in light of its contemplated business operations, and observes corporate 27 ~. ZJ. MIFS02... :\RE\60\4 766O\1387\227\AGR9197L.258 . and partnership formalities independent of any other entity, and which otherwise constitutes a single purpose entity as determined by the GE Bondholder. "Special Funds" shall mean the Bond Fund, the Tax Escrow Fund, the Debt Service Reserve Fund, the Replacement Reserve Fund, the Project Fund and any other fund or account established pursuant to the Indenture, including any Additional Funds, but excluding, however, the Rebate Fund. "State" shall mean the State of California. "Tax Certificate" shall mean that certain Tax Certificate, dated as of November I, 1997, executed by the Issuer and the Developer with respect to the issuance of the Bonds, as the same may be amended and supplemented from time to time. "Tax Escrow Fund" shall mean the fund by that name created pursuant to Section 8.4 of the Indenture. "Tax Reform Act of 1986" shall mean the Tax Reform Act of 1986, as amended. "Third Assignment of Rents" shall mean that certain Third Assignment of Rents and Leases, dated as of November I, 1997, executed by the Developer in favor of General Electric Capital Corporation, a New York corporation, encumbering the Project, as the same may be amended from time to time. "Third Deed of Trust" shall mean that certain Third Deed of Trust, Security Agreement and Fixture Filing, dated as of November I, 1997, executed by the Developer in favor of , as trustee for the benefit of General Electric Capital Corporation, a New York corporation, as beneficiary, granting a lien security interest in, among other things, the land, buildings and equipment comprising the Project, as the same may be amended from time to time. "Treasury Rate" shall mean the yield to maturity of the most recently issued ten (10) year U.S. Treasury Security as quoted in The Wall Street Journal on the Closing Date. If the Closing Date is not a Business Day, then the quote shall be obtained on the Business Day immediately preceding the Closing Date. If The Wall Street Journal (a) quotes more than one such ten (10) year U.S. Treasury Security, the highest of such quotes shall apply, or (b) ceases to publish such quotes, the ten (10) year U.S. Treasury Security shall be determined from such substitute financial reporting service or source as GECC in its discretion shall determine. "Trust Estate" shall mean the Trust Estate described in the granting clauses of the Indenture. "Trustee" shall mean First Trust, National Association, a national banking association, with its principal place of business in Seattle, Washington, until a successor Trustee shall have become such pursuant to the applicable provisions of the Indenture, and thereafter "Trustee" shall mean such successor. "Trustee's Time" shall mean, as of the date each such determination shall be made, the local time in the city in which the principal corporate trust office of the Trustee is located. 28 "d. 3 a M[FS02...:\RE\60\47660\1387\227\AGR9197L.2SB "Unassigned Issuer's Rights" shall mean the Issuer's rights to reimbursement and payment of its costs and expenses and rebatable arbitrage under Section 2.7 of this Agreement, its rights of access under Section 8.14 hereof, its rights to indemnification under Section 8.12 hereof, its rights to receive notices, reports and other statements and its rights to consent to certain matters, as provided in the Indenture. "Unauthorized Prepayment" shall have the meaning assigned to such tenn in Section 6.1 of the Indenture. "Unauthorized Prepayment Factor" shall mean a number detennined by dividing (a) the total number of days from and including the date of any Unauthorized Prepayment to, but not including, November I, 2002, by (b) 365. "Unauthorized Prepayment Premium" shall have the meaning assigned to such tenn in Section 6.1 of the Indenture. "Unsurrendered Bond" shall mean a Bond which is deemed purchased pursuant to the Mandatory Tender provisions of the Indenture, but which has not been presented to the Trustee by the Holder thereof. "Yield" shall mean yield as defined in Section 148(h) of the Code of 1986 and any regulations promulgated thereunder. ARTICLE II LOAN TERMS Section 2.1. Sale of Bonds. Simultaneously with the delivery of this Agreement the Issuer shall issue the Bonds pursuant to the Indenture. Section 2.2. Loan of Bond Proceeds. Upon the issuance of the Bonds, the Issuer shall be deemed to have made the Loan to the Developer for the purpose of refunding the Prior Bonds. The Developer hereby accepts the Loan and instructs the Issuer to apply the proceeds of the Bonds in the manner set forth in Section 7.1 of the Indenture. Section 2.3. Issuance of Bonds. (a) In order to provide funds for the refunding of the Prior Bonds, the Issuer agrees that it will, in accordance with the Refunding Law, issue, sell and cause to be delivered to the purchasers thereof, the Bonds. The proceeds of the sale of the Bonds shall be paid over to the Trustee for the account of the Issuer. The Trustee shall promptly deposit the proceeds of the sale of the Bonds as provided in the Indenture, to be used and applied to currently refund the Prior Bonds as hereinafter provided in this Article and in the Indenture. (b) The Issuer and the Developer expressly reserve the right to enter into, to the extent pennitted by law, an agreement or agreements other than this Agreement with respect to the 29 ,8 - a,y MIFS02...:\RE\60\4766O\1387\227\AGR9197L258 issuance by the Issuer, under an indenture or indentures other than the Indenture, of obligations to provide funds to refund all or any principal amount of the Bonds. Section 2.4. Disbursements; Investment of Moneys in Funds. Moneys in the Costs of Issuance Fund shall be disbursed by the Trustee in accordance with instructions received from the Issuer, as approved by the Developer and the GE Bondholder. Except as otherwise provided in the Indenture and to the extent permitted by law, any moneys held as a part of the Special Funds under the Indenture shall be invested or reinvested by the Trustee, at the written direction of the Developer and as consented to by the GE Bondholder, in Qualified Investments in accordance with the provisions of the Indenture. The Issuer and the Developer hereby covenant that they shall not cause the investment and reinvestment and the use of the proceeds of the Bonds to be such that, after taking into account reasonable expectations at the time of delivery of and payment for the Bonds, the Bonds will constitute arbitrage bonds under Section 148 of the Code of 1986. Section 2.5. Delivery of Note. Simultaneously with the delivery of this Agreement, the Developer shall deliver to the Trustee, as assignee of the Issuer, its Note in the form contained in Exhibit A attached hereto and made a part hereof, duly executed by the Developer. Section 2.6. Basic Loan Payments. (a) The Developer covenants and agrees to make loan payments (collectively, the "Basic Loan Payments") to the Trustee at the Office of the Trustee, for the account of the Issuer, for deposit in the Bond Fund, in immediately available funds, during normal business hours on or before 10:00 a.m. Trustee's Time, on each Basic Loan Payment Date, which shall be in an amount which, together with other moneys then on deposit in the Bond Fund and available for the payment of principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on the Bonds on any such payment date, shall be equal to the sum of: (i) the amount of the principal of the Bonds due and payable on the next or then-existing Bond Payment Date upon acceleration, redemption prior to maturity or otherwise; (ii) the amount of Interest on the Bonds due and payable on the next Bond Payment Date; (iii) the amount of Unauthorized Prepayment Premium, if any, and Prepayment Premium, if any, due and payable on the Bonds on the next or then-existing Bond Payment Date; (iv) all Late Charges due and payable under the terms of the Indenture on any date such amounts are so due and payable. (b) Except for such interest of the Developer as may hereafter arise pursuant to Section 9.4 of the Indenture, the Developer and the Issuer each acknowledge that neither the Developer nor the Issuer has any interest in any moneys deposited in the Special Funds 30 ~_ 3S' MIFS02....\RE\60\47660\1387\227\AGR9197L.258 established under the tenns of the Indenture (except the Rebate Fund) and such Special Funds shall be in the custody of and held by the Trustee in trust for the benefit of the Bondholders. (c) The Developer covenants and agrees to pay to the Trustee at the Office of the Trustee, for the account of the Issuer, for deposit in the Bond Fund, in immediately available funds, during nonnal business hours on or before 10:00 a.m. Trustee's Time on each date that any Bonds are required to be purchased pursuant to Article IV of the Indenture, an amount which, together with other moneys then on deposit in the Bond Fund and available for the payment of Purchase Price of such Bonds on any such date, shall be equal to the Purchase Price of any Bonds required to be purchased pursuant to Article IV of the Indenture on the date such purchase is required; and (d) To the extent not otherwise paid pursuant to this Section 2.6 or Section 2.7 hereof, on or before any Bond Payment Date or any other date that any payment of Interest, Prepayment Premium, if any, Unauthorized Prepayment Premium, if any, or principal, or Redemption Price, or Purchase Price or any other amount that is required to be paid in respect of the Bonds pursuant to the Indenture, until the principal of, Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, and Interest on the Bonds and all other amounts due with respect to the Bonds shall have been fully paid or provision for the payment thereof shall have been made in accordance with the Indenture, the Developer hereby agrees to pay to the Trustee, in immediately available funds, a sum which, together with moneys available for such payment in the Bond Fund, will enable the Trustee to pay the amount payable on such date as Purchase Price or Redemption Price or principal (whether at maturity or upon redemption or acceleration or otherwise) or Unauthorized Prepayment Premium, if any, Prepayment Premium, if any, or Interest on the Bonds or any other amount due with respect to the Bonds as provided in the Indenture. Section 2.7. Additional Payments. The Developer shall pay on demand (except as otherwise provided below) to the Issuer or the Trustee, as the case may be, as additional payments (the" Additional Payments") the following amounts: (a) all fees, charges, costs, advances, indemnities and expenses, including agent and counsel fees, of the Trustee incurred under the Indenture, as and when the same become due; (b) all Costs of Issuance and fees, charges and expenses, including agent and counsel fees, incurred in connection with the issuance of the Bonds, as and when the same become due; (c) all costs incident to the payment of the principal of, Prepayment Premium, if any, Unauthorized Prepayment Premium, if any, and Interest on the Bonds, and Redemption Price and Purchase Price and any other amount required to be paid in respect of the Bonds, as the same become due and payable, including all costs and expenses in connection with the call, redemption and payment of Bonds, including attorneys' fees and costs; (d) all fees, charges, costs, advances, indemnities and expenses, including agent and counsel fees, of the Issuer incurred by the Issuer in connection with the perfonnance of its obligations under the Loan Documents, including, without limitation, the Issuer's Fee as provided under the tenns of the Land Use Restriction Agreement, as and when the same shall become due; 31 .t8 - 3-(, MlFS02...:\RE\60\4766O\1387\227\AGR9197L25B (e) all expenses incurred in connection with the enforcement of any rights under this Agreement, the Land Use Restriction Agreement or the Indenture by the Issuer, the Trustee or the Bondholders; (f) to the Trustee, all costs related to the calculation of Excess Investment Earnings and amounts rebatable to the United States of America (including the charges of the individual or firm retained to perform such calculations) and, to the extent moneys in the Rebate Fund are insufficient, all amounts required to be rebated to the United States of America; and (g) all other payments of whatever nature which the Developer has agreed to payor assume under the provisions of this Agreement, the Indenture or any other Loan Document, including, without limitation, deposits required to be made by the Developer pursuant to Section 2.13 hereof. Section 2.8. Deposit by Developer in Costs of Issuance Fund. The Developer shall deposit or shall cause to be deposited with the Trustee, as a condition to the issuance of the Bonds, $ _ for deposit to the Costs of Issuance Fund as provided in the Indenture. Section 2.9. Overdue Payments. Any overdue Additional Payment shall bear interest from the date due until paid at the Default Rate. There shall be imposed as a late charge on any overdue Basic Loan Payment or any other payment due pursuant to the terms of Section 2.6 hereof, the Late Charge as provided in the Indenture, which shall be paid by the Developer to the Trustee for the account of the Issuer. While any Event of Default or Loan Agreement Default exists, the entire Loan, regardless of whether or not the Loan shall have been accelerated, shall bear interest at the Default Rate. Section 2.10. Obligations of the Developer Absolute and Unconditional. (a) Subject to the provision of Section 12.1 hereof, the obligations of the Developer under this Agreement and the Note to make Basic Loan Payments and Additional Payments on or before the date the same become due, and to perform all of its other obligations, covenants and agreements hereunder shall be absolute and unconditional, and shall be paid or performed without notice or demand, and without abatement, deduction, set-off, counterclaim, recoupment or defense or any right of termination or cancellation arising from any circumstance whatsoever, whether now existing or hereafter arising, and irrespective of whether the Developer's title to the Project or to any part thereof is defective or nonexistent, and notwithstanding any damage to, loss, theft or destruction of the Project or any part thereof, any failure of consideration or frustration of commercial purpose, the taking by eminent domain of title to or of the right of temporary use of all or any part of the Project, legal curtailment of the Developer's use thereof, the eviction or constructive eviction of the Developer, any change in the tax or other laws of the United States of America, the State of California or any political subdivision thereof, any change in the Issuer's legal organization or status, or any default of the Issuer or Trustee hereunder, under the Indenture or under any other Loan Document, and regardless of the invalidity of any action of the Issuer, and regardless of the invalidity of any portion of this Agreement, and the Developer hereby waives the application to it of the provisions of any statute or other law now or hereafter in effect contrary to any of its obligations, covenants or agreements under this Agreement or which releases or purports to release the Developer therefrom. 32 ,d - 3 7 MIFS02,.. :\RE\60\47660\ 1387\227\AGR9197L.25B (b) Nothing in this Agreement shall be construed to release the Issuer from the performance of any agreement on its part herein contained and notwithstanding a failure of the Issuer to so perform, the Developer shall be unconditionally and absolutely obligated to perform fully all of its obligations, agreements and covenants under this Agreement (including, without limitation, the Developer's obligation to pay Basic Loan Payments, Purchase Price and Additional Payments and the other amounts payable pursuant to Sections 2.6 and 2.7 hereof) for the benefit of the Bondholders. The Developer may, however, at its own cost and expense and in its own name or in the name of the Issuer, prosecute or defend any action or proceeding or take any other action involving third persons which the Developer deems reasonably necessary in order to secure or protect its right of possession, occupancy and use hereunder, and in such event the Issuer hereby agrees to cooperate fully with the Developer and to take all action necessary to effect the substitution of the Developer for the Issuer in any such action or proceeding if the Developer shall so request. Section 2,11. Optional Prepayment of Note. On or after November I, 2002, the Developer shall have the option, exercisable by written notice to the Trustee and the GE Bondholder given at least fifteen (15) days prior to the proposed prepayment date, to prepay the Note in whole (but not in part) for the purpose of redeeming all, but not less than all, Bonds Outstanding on the date of such prepayment. In connection with any such proposed prepayment, the Developer shall deposit with the Trustee by 10:00 a.m. Trustee Time on the date of prepayment an amount equal to the Redemption Price of all Bonds Outstanding plus any Additional Payments due and payable hereunder through the date of prepayment and the Developer shall deliver such certifications and shall satisfy such conditions as set forth in Section 6.1 of the Indenture with respect to the optional redemption of all Bonds Outstanding. On or prior to any date of scheduled prepayment of the Note, the Developer may elect, by written notice to the Trustee and the Remarketing Agent, to have the Bonds purchased in lieu of redemption pursuant to Section 6.1 of the Indenture, in which case the Note shall not be prepaid, the Bonds shall be remarketed as contemplated in Section 4.2 of the Indenture as if the purchase in lieu of redemption date were a Mandatory Tender Date, and the remarketed Bonds and Loan shall remain outstanding under the terms and provisions of the Indenture and this Agreement as if the purchase in lieu of redemption date were a Mandatory Tender Date. Section 2.12, Extraordinary Redemption of Bonds. Upon the occurrence of any event or condition described in Section 6.7 of the Indenture and with the written consent of the GE Bondholder, the Developer shall prepay the outstanding principal balance of the Note in whole or in part, as applicable to the condition or event described in Section 6.7 of the Indenture, without Unauthorized Prepayment Premium or Prepayment Premium, plus accrued Interest, for the purpose of redeeming Bonds as provided in Section 6.7 of the Indenture, such prepayment to occur on the date fixed by the Trustee for redemption of the Bonds in accordance with the terms of the Indenture. Developer shall deposit funds with respect to such prepayment with the Trustee by no later than 10:00 a.m. Trustee Time on the date fixed by the Trustee for redemption of the Bonds pursuant to Section 6.7 of the Indenture, which date shall be communicated in writing to the Issuer, the Bondholders and the Developer. 33 ~ - 3 f MIFS02...:\RE\60\47660\1387\227\AGR9197L25B In the event of any prepayment of the Note pursuant to this Section and a corresponding redemption of Bonds under Section 6.7 of the Indenture, the Developer shall be required to pay, on the redemption date, accrued Interest (including any Gross-Up Amount) on the principal balance of the Bonds being redeemed to the date fixed by the Trustee for such redemption. Section 2.13. Deposits to Reserve Funds. Commencing on December 31, 1998 and annually thereafter on the final Basic Loan Payment Date of each calendar year thereafter, the Developer shall deposit with the Trustee the Replacement Reserve Requirement pursuant to Section 8.3 of the Indenture. Commencing on November 30 and on each Basic Loan Payment Date thereafter, the Developer shall deposit with the Trustee the amounts required to be deposited into the Tax Escrow Fund pursuant to Section 8.4 of the Indenture and the amounts required to be deposited into the Debt Service Reserve Fund pursuant to Section 2.16 hereof and Section 8.5 of the Indenture. All moneys deposited by the Developer with the Trustee for further deposit into the Replacement Reserve Fund, the Tax Escrow Fund and the Debt Service Reserve Fund shall be disbursed as provided herein or in the Indenture. Section 2.14. Calculation of Interest Payments and Deposits to Reserve Funds. Calculation of all Interest payments (including, without limitation, any Gross-Up Amount) shall be made by the GE Bondholder, or after purchase of all Bonds in connection with a Mandatory Tender Date, by the Trustee, as provided and in accordance with Section 4.1(1) of the Indenture. Deposits with respect to the Tax Escrow Fund shall be calculated by the GE Bondholder in accordance with Section 3.4 hereof. Deposits with respect to the Debt Service Reserve Fund and Replacement Reserve Fund shall be calculated by the Developer subject to the audit, review and approval of the GE Bondholder. In the event and to the extent that the GE Bondholder, pursuant to the terms hereof, shall determine at any time that there exists a deficiency in amounts previously paid with respect to deposits to the Replacement Reserve Fund or the Debt Service Reserve Fund, such deficiency in amounts previously paid shall be immediately due and payable hereunder. To the extent a review and audit is, in the GE Bondholder's discretion, necessary to verify the Developer's computation of any of the Developer's calculations of any amount related to the Project, the Note or the Bonds, such audit and review by the GE Bondholder shall be conducted at the Developer's expense. Notwithstanding anything to the contrary contained herein or in the Indenture, the calculation by the GE Bondholder of any Gross-Up Amount shall be conclusive and binding upon the Developer and the Developer shall not be entitled to review any of the GE Bondholder's (or any other Bondholder's) tax returns, audit results or other confidential information used in calculating the Gross-Up Amount or otherwise relevant to such calculation. Section 2.15. Payment of Bonds. The parties hereto agree (a) that the payments of Basic Loan Payments and the other amounts payable pursuant to the terms of Section 2.6 hereof are designed to provide the Issuer and the Trustee funds adequate in amount to pay all principal of, Prepayment Premium, if any, Unauthorized Prepayment Premium, if any, and Interest accruing on the Bonds and to pay the Purchase Price thereof as the same become due and payable, (b) that to the extent that the payments of Basic Loan Payments and the other amounts payable pursuant to the terms of Section 2.6 hereof are not sufficient to provide the Issuer and the Trustee with funds sufficient for the purposes aforesaid, the Developer shall be obligated to pay, and it does hereby covenant and agree to pay, upon demand therefor, as Additional Payments, such further sums of money, in cash, as may from time to time be required for such purposes, and (c) that if after the principal of, Prepayment Premium, if any, Unauthorized Prepayment Premium, if any, and Interest on the Bonds and all costs incident to the payment of the Bonds have been paid in full, the Trustee or the Issuer holds unexpended funds received in accordance with the 34 ,lJ - a, MIFS02...:\RE\60\4766Q\ 1387\227\AGR 9197L.2.58 tenns hereof, such unexpended funds shall, after payment therefrom of all sums then due and owing by the Developer under the tenns of this Agreement, and except as otherwise provided in this Agreement and the Indenture, become the absolute property of and be paid over forthwith to the Developer. Section 2.16. Deposits into Debt Service Reserve Fund. (a) Commencing on November 1, 2002 and on the first day of each calendar month thereafter during the Initial Rate Period, the Developer shall deposit into the Scheduled Sinking Payment Account of the Debt Service Reserve Fund the amount remaining, if any, after deducting (i) the amount of the monthly amortization payment actually made by the Developer on such date as a principal payment on the Conventional Loan pursuant to Section 2.3 of the Conventional Loan Agreement, from (ii) $18,500 (each, a "Scheduled Sinking Fund Payment" and collectively, the "Scheduled Sinking Fund Payments"). (b) In addition to the Scheduled Sinking Fund Payments, on or prior to December 20, 1997 and on or prior to the 20th day of each succeeding calendar month thereafter during the Initial Rate Period, the Developer shall remit to the Trustee for deposit into the NCF Payment Account of the Debt Service Reserve Fund 100% of all Net Cash Flow from the Project for the previous calendar month (each, an "NCF Reserve Payment" and collectively, the "NCF Reserve Payments"). (c) If on May I, 1998 or the first day of any calendar month thereafter, the NCF Financial Tests shall have been satisfied for the six consecutive calendar month period immediately preceding the date of such calculation and provided that the Developer shall have provided the GE Bondholder with evidence of such satisfaction acceptable to the GE Bondholder and upon concurrence by the GE Bondholder that the NCF Financial Tests have been satisfied for the six consecutive calendar month period immediately preceding the date of such calculation following the GE Bondholder's review and audit of the Developer's calculations with respect thereto and provided that no Event of Default, Loan Agreement Default or Potential Default shall have occurred, the Developer shall be entitled to the receipt of all amounts then contained in the NCF Payment Account of the Debt Service Reserve Fund (the "NCF Funds"). In the event that the Developer shall be entitled to a disbursement of any NCF Funds as provided in this Section 2.16(c), the Developer may submit a written request for such disbursement to the Trustee and the GE Bondholder and provided that such requested disbursement shall have been approved in writing by the GE Bondholder, the Trustee shall promptly disburse the NCF Funds, or portion thereof as may be approved by the GE Bondholder, to the Developer. The Developer shall provide the GE Bondholder with such calculations, financial statements and infonnation as may be deemed necessary or desirable by the GE Bondholder for the purpose of verifying or confirming whether the NCF Financial Tests have been satisfied for such periods. Notwithstanding the foregoing or anything to the contrary contained herein, under no circumstances shall the Developer be entitled to a disbursement of funds in the Scheduled Sinking Payment Account of the Debt Service Reserve Fund. (d) The "NCF Financial Tests", as such tenn is used herein, shall be deemed to have been satisfied on the date such calculation shall be made if both (i) the Debt Service Coverage Ratio for the six consecutive calendar month period immediately preceding the date such 35 J3 - ,",0 MIFS02... :\RE\60\47660\ 1387\227\AGR9197L.258 calculation is made is equal to or greater than 1.30, and (ii) the Cash on Cash Return for such preceding six consecutive calendar month period is equal to or greater than eleven (II %) percent. ARTICLE III INSURANCE, CONDEMNATION, AND IMPOUNDS Section 3.1. Insurance. The Developer shall maintain insurance as follows: (a) Casualty; Business Interruption. The Developer shall keep the Project insured against damage by fire and the other hazards covered by a standard extended coverage and all-risk insurance policy for the full insurable value thereof (without reduction for depreciation or co-insurance), and shall maintain such other casualty insurance as reasonably required by the GE Bondholder. The Developer shall keep the Project insured against loss by flood if the Project is located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968 (and any successor act thereto) in an amount at least equal to the lesser of (i) Bond Principal or (ii) the maximum limit of coverage available under said act. The Developer shall maintain use and occupancy insurance covering, as applicable, rental income or business interruption, with coverage in an amount not less than twelve (12) months anticipated gross rental income or gross business earnings, as applicable in each case, attributable to the Project. The Developer shall not maintain any separate or additional insurance which is contributing in the event of loss unless it is properly endorsed and otherwise satisfactory to the GE Bondholder in all respects. The proceeds of insurance paid on account of any damage or destruction to the Project shall be paid to the Trustee to be applied as provided in Section 3.2 hereof. (b) Liability. The Developer shall maintain (i) commercial general liability insurance with respect to the Project providing for limits of liability of not less than $5,000,000 for both injury to or death of a person and for proper damage per occurrence, and (ii) other liability insurance as reasonably required by the GE Bondholder. (c) Form and Quality. All insurance policies shall be endorsed in form and substance acceptable to the GE Bondholder to name the Issuer, the Trustee and the GE Bondholder as additional insureds, loss payees or mortgagees thereunder, as their respective interests may appear, with loss payable to the Trustee and the GE Bondholder, as their interests may appear, without contribution, under a standard New York (or local equivalent) mortgagee clause. All such insurance policies and endorsements shall be fully paid for and contain such provisions and expiration dates and be in such form and issued by such insurance companies licensed to do business in the State of California, with a rating of "A-X" or better as established by Best's Rating Guide (or an equivalent rating approved in writing by the GE Bondholder). Each policy shall provide that such policy may not be cancelled or materially changed except upon thirty (30) days' prior written notice of intention of non-renewal, cancellation or material change to the GE Bondholder and the Issuer and that no act or thing done by the Developer shall invalidate any policy as against the Issuer, the Trustee and the GE Bondholder. If the Developer fails to 36 ~-c/I MlFS02... :\RE\60\4766O\ 1387\227\AGR9197L.258 maintain insurance in compliance with this Section 3.1, the Trustee, the Issuer or the GE Bondholder may obtain such insurance and pay the premium therefor and the Developer shall, on demand, reimburse the Trustee, the Issuer or the GE Bondholder, as applicable, for all expenses incurred in connection therewith. The Developer shall assign the policies or proofs of insurance to the Trustee, in such manner and form that the Trustee and its successors and assigns shall at all times have and hold the same as security for the payment of the Bonds. The Developer shall deliver copies of all original policies certified to the GE Bondholder (and upon request therefore, the Trustee) by the insurance company or authorized agent as being true copies, together with the endorsements required hereunder. The proceeds of insurance policies coming into the possession of the Trustee shall not be deemed trust funds of the Developer, and the Trustee shall be entitled to apply such proceeds as provided herein and in the Indenture. (d) Adjustments. The Developer shall give immediate written notice of any loss to the insurance carrier and to the Trustee, the Issuer and the GE Bondholder. The Developer hereby irrevocably authorizes and empowers the GE Bondholder during the Initial Rate Period, and the Trustee thereafter, as attomeys-in-fact for the Developer coupled with an interest, to make proof of loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom the Trustee's or the GE Bondholder's expenses incurred in the collection of such proceeds. Nothing contained in this Section 3.l(d), however, shall require the GE Bondholder or the Trustee to incur any expense or take any action hereunder. Section 3.2. Use and Application of Insurance Proceeds. The Trustee shall apply insurance proceeds to costs of restoring the Project or payment of the Bond Principal as follows: (a) if the loss is less than or equal to $50,000, the Trustee shall apply the insurance proceeds to the restoration of the Project provided (i) no Event of Default, Loan Agreement Default or Potential Default exists, and (ii) the Developer promptly commences and is diligently pursuing restoration of the Project; (b) if the loss exceeds $50,000 but is not more than 10% of the replacement value of the Improvements (for projects containing multiple phases or stand alone structures, such calculation to be based on the damaged phase or structure, not the project as a whole), the Trustee shall apply the insurance proceeds to the restoration of the Project provided that at all times during such restoration (i) no Event of Default, Loan Agreement Default or Potential Default exists; (ii) the GE Bondholder determines that there are sufficient funds available to restore and repair the Project to a condition approved by the GE Bondholder; (iii) the GE Bondholder determines that the Net Operating Income of the Project during restoration will be sufficient to pay Debt Service; (iv) the GE Bondholder determines that for the l2-month period following the completion of any such restoration, the Debt Service Coverage Ratio will be at least 1.30 and the Cash on Cash Return will be at least eleven (II %); (v) the GE Bondholder determines that restoration and repair of the Project to a condition approved by the GE Bondholder will be completed within six months after the date of loss or casualty and in any event ninety (90) days prior to the GECC Tender Commencement Date; and (vi) the Developer promptly commences and is diligently pursuing restoration of the Project; 37 ,(3 - 4 ~ MIFS02... :\RE\60\4 7660\ 1387\227\AGR9197L.2SB (c) if the conditions set forth above are not satisfied or the loss exceeds the amount and percentage specified in Subsection 3.2(b) above, in the GE Bondholder's sole discretion, the GE Bondholder may direct the Trustee to apply any insurance proceeds it receives to the repayment of the Loan pursuant to Section 2.12 hereof or allow all or a portion of such proceeds to be used for the restoration of the Project; and (d) insurance proceeds applied to restoration will be disbursed on receipt by the GE Bondholder during the Initial Rate Period, and thereafter, by the Trustee of satisfactory plans and specifications, contracts and subcontracts, schedules, budgets, lien waivers and architects' certificates. and otherwise in accordance with prudent commercial construction lending practices for construction loan advances, including, as applicable, the General Disbursement Conditions. Section 3.3, Condemnation Awards. The Developer shall immediately notify the Trustee, the Issuer and the GE Bondholder of the institution of any proceeding for the condemnation or other taking of the Project or any portion thereof. The Issuer, the GE Bondholder and the Trustee may participate in any such proceeding and the Developer will deliver to the Trustee and the GE Bondholder. as applicable, all instruments necessary or required to permit such participation. Without the prior consent of the GE Bondholder, the Developer, the Trustee and the Issuer (i) shall not agree to any compensation or award, and (ii) shall not take any action or fail to take any action which would cause the compensation to be determined. All awards and compensation for the taking or purchase in lieu of condemnation of the Project or any part thereof are hereby assigned to and shall be paid to the Trustee. The Developer authorizes the Trustee to collect and receive such awards and compensation, to give proper receipts and acquittances therefor, and in the GE Bondholder's sole discretion to apply the same toward the redemption of the Bonds pursuant to Section 6.7 of the Indenture, notwithstanding that the Bond Principal may not then be due and payable, or to the restoration of the Project. The Developer, upon request by the Trustee or the GE Bondholder, shall execute all instruments requested to confirm the assignment of the awards and compensation to the Trustee, free and clear of all liens, charges or encumbrances. Section 3.4. Impounds. Prior to the purchase of all Bonds in connection with a Mandatory Tender Date, the Developer shall deposit with the Trustee, monthly, one-twelfth (l/12th) of the annual charges for ground or other rent, if any, and Real Estate Taxes and similar charges relating to the Project. On or before the Closing Date, the Developer shall deposit with the Trustee a sum of money which together with the monthly installments will be sufficient to make each of such payments thirty (30) days prior to the date any delinquency or penalty becomes due with respect to such payments. Deposits shall be made on the basis of the GE Bondholder's estimate from time to time of the charges for the current year (after giving effect to any reassessment or, at the GE Bondholder's election, on the basis of the charges for the prior year, with adjustments when the charges are fixed for the then current year). All funds so deposited shall be held by the Trustee in the Tax Escrow Fund pursuant to Section 8.4 of the Indenture. The Developer hereby grants to the Trustee a security interest in all funds so deposited with the Trustee for the purpose of securing the Bonds. Upon the occurrence of an Event of Default or Loan Agreement Default, the funds deposited may be applied in payment of the charges for which such funds have been deposited, or to the payment of the Bonds or any other charges affecting the security of the Bondholders, as the GE Bondholder may elect, but no such application shall be deemed to have been made by operation of law or otherwise until actually made by the Trustee. The Developer shall furnish the Trustee and the GE Bondholder with bills for the charges for which such deposits are required at least thirty (30) days prior to the date on which the charges first become payable. If at any time the amount 38 -'3-43 MIFS02...:\RE\60\47660\1387\227\AGR9197L.25B on deposit with the Trustee, together with amounts to be deposited by the Developer before such charges are payable, is insufficient to pay such charges, the Developer shall deposit any deficiency with the Trustee immediately upon demand. The Trustee shall pay such charges when the amount on deposit with the Trustee is sufficient to pay such charges and the Trustee has received a bill for such charges. ARTICLE IV ENVIRONMENTAL MATTERS The terms, covenants and provisions of the Environmental Indemnity Agreement are incorporated herein by reference as though fully set forth herein. ARTICLE V LEASING MATTERS Section 5.1. Representations and Warranties on Leases. The Developer represents and warrants to the Issuer with respect to leases of the Project that: (a) the rent roll delivered to the Issuer and GECC as of the Closing Date (the "Rent Roll") is true and correct, and the leases are valid and in full force and effect; (b) the leases (including amendments) are in writing, and there are no oral agreements with respect thereto; (c) the copies of the leases delivered to the Issuer and GECC as of the Closing Date are true and complete; (d) to the Developer's knowledge, neither the landlord nor any tenant is in default under any of the leases; (e) the Developer has no knowledge of any notice of termination or default with respect to any lease; (f) the Developer has not assigned or pledged any of the leases, the rents or any interests therein except to the Issuer pursuant to the terms of the Loan Documents; (g) except as set forth in the Rent Roll, no tenant or other party has an option to purchase all or any portion of the Project; (h) no tenant has the right to terminate its lease prior to expiration of the stated term of such lease; and (i) no tenant has prepaid more than one month's rent in advance (except for bona fide security deposits not in excess of an amount equal to two months' rent). Section 5.2. Standard Lease Form; Approval Rights. All leases and other rental arrangements shall in all respects be approved by the GE Bondholder and shall be on a standard lease form approved by the GE Bondholder with no material modifications (except as approved by the GE Bondholder). The Developer shall hold, in trust, all tenant security deposits in a segregated account, and, to the extent required by applicable law, shall not commingle any such funds with any other funds of the Developer. Within ten (10) days after the GE Bondholder's request, the Developer shall furnish to the GE Bondholder a statement of all tenant security deposits, and copies of all leases not previously delivered to the GE Bondholder, certified by the Developer as being true and correct. Section 5.3. Covenants. The Developer (a) shall perform the obligations which the Developer is required to perform under the leases; (b) shall enforce the obligations to be performed by the tenants; (c) shall promptly furnish to the GE Bondholder any notice of default or termination received by the Developer from any tenant outside of the ordinary course of business and any notice of default or termination given by the Developer to any tenant outside the ordinary course of business; (d) shall not 39 ~ - vcf MIFS02... :\RE\60\4 7660\ 1387\227\AGR9197L.258 collect any rents for more than thirty (30) days in advance of the time when the same shall become due, except for bona fide security deposits not in excess of an amount equal to two months' rent; (e) shall not enter into any ground lease or master lease of any part of the Project; (f) shall not further assign or encumber any lease; (g) shall not, except with the GE Bondholder's prior written consent, cancel or accept surrender or termination of any lease outside the ordinary course of business and consistent with prudent property management practices; and (h) shall not, except with the GE Bondholder's prior written consent, modify or amend any lease (except for minor modifications and amendments entered into in the ordinary course of business, consistent with prudent property management practices, not affecting the economic terms of the lease), and, to the extent allowable under applicable law, any action in violation of clauses (e), (f), (g), and (h) of this Section 5.3 shall be void at the election of the GE Bondholder. ARTICLE VI REPRESENTATIONS AND WARRANTIES Section 6,1. Representations by the Issuer. The Issuer makes the following representations as the basis for the undertakings on its part herein contained; (a) The Issuer is a municipal corporation and a political subdivision of the State of California. Pursuant to the Resolution, the Issuer has authorized the execution and delivery of this Agreement and the Indenture. (b) The Issuer has found and determined that the loan of the proceeds 'of the Bonds to the Developer under the terms of this Agreement will enable the Developer to refinance the Project in furtherance of the public purposes of the Act. (c) The Issuer has complied with all of the provisions of the Constitution and laws of the State of California, including the Act and the Refunding Law, and has full power and authority to consummate all transactions contemplated by this Agreement, the Bonds and the Indenture and any and all other agreements relating thereto. (d) To accomplish the foregoing, the Issuer expects to issue the Bonds on the terms and basis set forth in the Indenture and expects to use the proceeds thereof as specified therein and herein. Section 6,2, Representations, Warranties and Covenants by the Developer. The Developer makes the following representations, warranties and covenants as the basis for the undertakings on its part herein contained; (a) The Developer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Utah, and is in compliance with all legal requirements applicable to doing business in the State of California and is under no legal disability. The Developer is not a "foreign person" within the meaning of ~ 1445(f)(3) of the Code of 1986. 40 A -if~ MIFS02... :\RE\6Q\4 7660\ 1 J87\227\AGR9197L.2SB (b) The Developer has lawful power and authority to enter into this Agreement and each of the Loan Documents to which it is a party and to carry out its obligations hereunder and thereunder, and has duly authorized the execution, delivery and performance hereof and thereof. (c) The execution and delivery of this Agreement and each of the other Loan Documents to which the Developer is a party, and the performance or compliance with the terms and conditions of this Agreement and such other Loan Documents by the Developer will not conflict with or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, any mortgage, deed of trust, lease or other agreement or instrument to which the Developer is a party or by which it or any of its property is bound, or the Developer's [operational agreement] or any order, rule or regulation applicable to the Developer or any of its property of any court or governmental body, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Developer under the terms of any instrument or agreement to which the Developer is a party. (d) The Loan Documents to which the Developer is a party constitute the legal, valid and binding obligations of the Developer, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, or similar laws generally affecting the enforcement of creditors' rights. (e) (i) The financial statements delivered by or on behalf of the Developer or any other Developer Party are true and correct with no significant change since the date of preparation. Except as disclosed in such financial statements, there are no liabilities (fixed or contingent) affecting the Project, the Developer or any Developer Party. Except as disclosed in such financial statements, there is no litigation, administrative proceeding, investigation or other legal action (including any proceeding under any state or federal bankruptcy or insolvency law) pending or, to the knowledge of the Developer, threatened, against the Project, the Developer or any Developer Party which if adversely determined could have a material adverse effect on such party, the Project or the Developer's obligations under the Loan Documents. (ii) Neither the Developer nor any Developer Party is contemplating either the filing of a petition by it under state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of its assets or property, and neither the Developer nor any Developer Party has knowledge of any Person contemplating the filing of any such petition against it. (f) The Project is comprised of one or more parcels, each of which constitutes a separate tax lot and none of which constitutes a portion of any other tax lot. There are no pending or, to the best of the Developer's knowledge, proposed, special or other assessments for public improvements or otherwise affecting the Project, nor are there any contemplated improvements to the Project that may result in such special or other assessments. (g) Neither the Developer nor any Developer Party is a party to any agreement or instrument or subject to any court order, injunction, permit, or restriction which might adversely affect the Project or the business, operations, or condition (financial or otherwise) of the 41 13 -c/~ MIFS02... :\RE\6Q\47660\J 387\227\AGR9197L.25B Developer or any Developer Party. Neither the Developer nor any Developer Party is in violation of any agreement which violation would have an adverse effect on the Project, the Developer, or any Developer Party or Developer's or any Developer Party's business, properties, or assets, operations or condition, financial or otherwise. (h) (i) The Developer and each Developer Party have all requISIte licenses, permits, franchises, qualifications, certificates of occupancy or other governmental authorizations to own, lease and operate the Project and carry on its business, and the Project is in compliance with all applicable Legal Requirements and is free of structural defects, and all building systems contained therein are in good working order, subject to ordinary wear and tear. All governmental or regulatory orders, consents, permits, authorizations and approvals required for execution, delivery and performance of this Loan Agreement and the other Loan Documents have been obtained. No additional governmental or regulatory actions, filings or registration and no approvals, authorizations or consents of any trustee or holder of any indebtedness or obligation of the Developer or any member or manager thereof or any other person including, without limitation, any bondholder, are required for the due execution, delivery and performance by the Developer of this Loan Agreement or the other Loan Documents. The Project does not constitute, in whole or in part, a legally non-conforming use under applicable Legal Requirements; (ii) No condemnation has been commenced or, to the Developer's knowledge, is contemplated with respect to all or any portion of the Project or for the relocation of roadways providing access to the Project; and (iii) The Project has adequate rights of access to public ways and is served by adequate water, sewer, sanitary sewer and storm drain facilities. All public utilities necessary or convenient to the full use and enjoyment of the Project are located in the public right-of-way abutting the Project, and all such utilities are connected so as to serve the Project without passing over other property, except to the extent such other property is subject to a perpetual easement for such utility benefitting the Project. All roads necessary for the full utilization of the Project for its current purpose have been completed and dedicated to public use and accepted by all governmental authorities. (iv) There is no moratorium or like governmental order in effect with respect to the Project and to the best of the knowledge and information of the Developer, no such moratorium or similar ordinance is now contemplated. (i) The Developer's principal place of business and chief executive offices are located at the address stated in Section 11.1 hereof. U) The Developer has not established any pension plan for employees which would cause the Developer to be subject to the Employee Retirement Income Security Act of 1974, as amended. 42 ~-"7 MIFS02...:\RE\60\4 7660\ 1387\227\AGR9197L.25B (k) No part of the proceeds of the Loan will be used for purchasing or acquiring any "margin stock" within the meaning of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System. (I) The Developer and each Developer Party have filed (or have obtained effective extensions for filing) all federal, state and local tax returns required to be filed and have paid or made adequate provision for the payment of all federal, state and local taxes, charges and assessments payable by the Developer and each Developer Party, respectively, including, without limitation, the Information Return for Private Activity Bond Issues required under the Code. (m) Giving effect to the Loan, the fair saleable value of the Developer's assets exceeds and will, immediately following the making of the Loan, exceed the Developer's total liabilities, including, without limitation, subordinated, unliquidated, disputed and contingent liabilities. The fair saleable value of the Developer's assets is and will, immediately following the making of the Loan, be greater than the Developer's probable liabilities, including the maximum amount of its contingent liabilities on its Debts as such Debts become absolute and matured, and the Developer's assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. The Developer does not intend to, and does not believe that it will, incur Debts and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such Debts as they mature (taking into account the timing and amounts of cash to be received by the Developer and the amounts to be payable on or in respect of obligations of the Developer). (n) No statement of fact made by or on behalf of the Developer or any Developer Party in this Agreement or in any of the other Loan Documents contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading. There is no fact presently known to the Developer which has not been disclosed to the Issuer, the Trustee and GECC, as the sole initial Bondholder, which adversely affects, nor as far as the Developer can foresee, might adversely affect, the Project or the business, operations or condition (financial or otherwise) of the Developer or any Developer Party. (0) The Developer is and has at all times since its formation been a Single Purpose Entity and will remain a Single Purpose Entity throughout the term of the Loan. (p) The issuance of the Bonds to refund the Prior Bonds will further the public purposes of the Act. (q) The proceeds from the sale of the Bonds will be delivered to the Trustee and will be used, together with other funds of the Developer, only to provide funds to currently refund the Prior Bonds as provided in the Indenture to the extent permitted by the Act, the Refunding Law and the Code, and will not be used to provide working capital for the Developer or any subsidiary or affiliate thereof. (r) The Developer will fully and faithfully perform all the duties and obligations which the Issuer has covenanted and agreed in the Indenture to cause the Developer to perform and any duties and obligations which the Developer is required in the Indenture to perform. The 43 /J-cf~ MIFS02...:\RE\60\4766O\1387\227\AGR9197L25B foregoing will not apply to any duty or undertaking of the Issuer which by its nature cannot be delegated or assigned. (s) The Project is located wholly within the geographical area in which the Issuer is authorized to finance projects pursuant to the Act. (t) Any certificate signed by an Authorized Developer Representative and delivered pursuant to this Agreement or the Indenture will be deemed to be a representation and warranty of the Developer as to the statements made therein. (u) As of the date furnished, all information previously provided by the Developer to the Issuer, the Trustee and/or the GE Bondholder with respect to the Project was and is valid and accurate and all representations heretofore made by the Developer to the Issuer and/or in the Prior Loan Agreement and the Prior Land Use Restriction Agreement are incorporated herein as if herein set forth in full and are hereby reaffirmed and ratified. (v) The Developer is knowledgeable and experienced in the operation of apartment facilities of the magnitude and nature the Developer has undertaken and will continue to undertake in connection with the Project. (w) The Developer has made and will make during the term of the Loan all filings which the Developer is obligated to make with, and has obtained and will obtain during the term of the Loan all approvals and consents which it is obligated to obtain from, all federal, state and local regulatory agencies having jurisdiction to the extent, if any, required by applicable laws and regulations to be made or to be obtained in connection with the Project, the execution and delivery by the Developer of the Loan Documents to which it is a party, the transactions contemplated thereunder, and the performance by the Developer of the Developer's obligations thereunder. (x) The Developer will execute and deliver such additional instruments and perform such additional acts as may be necessary, in the opinion of the Issuer, to carry out the intent hereof and of the other Loan Documents or to perfect or give further assurances of any of the rights granted or provided for herein or in the other Loan Documents. (y) The Developer will advise the Issuer, the Trustee and the GE Bondholder promptly in writing of the occurrence of any default or any Potential 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. (z) No consent, authorization or approval, except such consents, authorizations or approvals as have been obtained prior to or at the time of execution and delivery of this Agreement and the other Loan Documents to which the Developer is party from any governmental, public or quasi-public body or authority of the United States, the State of California, the State of Utah or of any department or subdivision of any thereof, is necessary for the due execution and delivery by the Developer of this Agreement and the other Loan Documents to which it is a party. 44 ~ - c/er MlFS02... :\RE\60\47660\1387\227\AGR 9197L.25B (aa) The Developer is the sole owner of, and has good and marketable title to, the fee interest in the Project and all other real and personal property described in the Loan Documents, free from any Lien, security interest or encumbrance of any kind whatsoever, excepting only the Permitted Encumbrances. Section 6.3. General Tax Representations, Warranties and Covenants of Developer. The Developer further represents, warrants and covenants as follows: (a) No proceeds of the Prior Bonds were used, directly or indirectly, for the acquiSltlon of land (or an interest therein) to be used for farming purposes and less than twenty-five percent (25%) of the proceeds of the Prior Bonds were used (directly or indirectly) for the acquisition of land (or an interest therein) within the meaning of Section 103(b)(16) of the Code of 1954. (b) Ninety percent (90%) or more of the expenditures for costs of the Project made from proceeds of the Prior Bonds are or were, for federal income tax purposes, chargeable to the capital account of the Developer or would be so chargeable either with a proper election by the Developer under the Code of 1954 or but for a proper election to deduct any such costs. (c) The costs of the acquisition, construction and installation of the Project were incurred subsequent to the Date of Official Action. (d) At all times from and after the issuance of the Prior Bonds, either the Developer or the Prior Developer has operated the Project in accordance with the requirements of the Code of 1954 for tax-exempt obligations and the Prior Land Use Restriction Agreement. The Developer presently intends to use or operate the Project in a manner consistent with the Land Use Restriction Agreement and presently intends to use or operate, and will use and operate, the Project in accordance with the terms of the Land Use Restriction Agreement and knows of no reason why the Project will not be so operated. If in the future there is a cessation of that operation, the Developer will use the Developer's best efforts to resume that operation or accomplish an alternate use by the Developer or others which will be consistent with the Act and the tax-exempt status of the Bonds; provided that there shall have been delivered to the Issuer, the Trustee, the Developer and the GE Bondholder an Approving Opinion stating that such alternate use will not adversely affect the exclusion of the Coupon Interest on the Bonds from the gross income of the recipients thereof for federal income tax purposes. Neither the Developer nor the Prior Developer is now and has ever been in default under the Prior Land Use Restriction Agreement. (e) The weighted average maturity of the Bonds, calculated in accordance with the requirements of Section 147(b) of the Code of 1986, is less than 120% of the remaining average reasonably expected economic life of the Project, calculated in accordance with the requirements of Section 147(b) of the Code of 1986. (f) No proceeds of the Bonds shall be invested in federally insured deposits or accounts except as part of a bona fide debt service fund or a reasonably required reserve fund. 45 ~ - S"'O MIFS02.. .:\RE\60\47660\ 1387\227\AGR9197L.2SB (g) The Developer will not make or permit any use, and will not direct the Trustee to make any investment or use of the proceeds of any of the Bonds, which would cause any of the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code of 1986 and the Regulations thereunder as the same may be applicable to the Bonds at the time of such action, investment or use and agrees to take and cause the Issuer and Trustee to take all actions required to comply with the provisions of Section 148 of the Code of 1986. (h) For the purpose of determining the Qualified Project Period, ten percent (10%) of the units in the Project were first occupied in the month of [MONTH] and fifty percent (50%) of the units in the Project were first occupied in the month of [MONTH]. (i) Promptly after first becoming aware of any Determination of Taxability, written notice will be given by the Developer to the Issuer, the Trustee and each GE Bondholder. Section 6.4. Residential Rental Project. The Developer hereby warrants and represents: (a) That the Project has at all times prior to the Closing Date and will continue to be owned, managed and operated as a "residential rental property" as such phrase is utilized in Section 103(b)(4)(A) of the Code of 1954. To that end, the Developer hereby represents and warrants that it and the Prior Developer have at all times complied with the terms and conditions of the Prior Land Use Restriction Agreement governing the Prior Bonds; and represents, covenants and agrees that it will comply with the terms, conditions and provisions of the Land Use Restriction Agreement; (b) The Developer will permit any duly authorized representative of the Issuer, the Trustee, the Department of the Treasury or the Internal Revenue Service and any GE Bondholder to inspect the books and records of the Developer pertaining to the incomes of Federal Lower-Income Tenants residing in the Project upon reasonable notice and at reasonable times; and (c) The Developer will immediately notify the Trustee and any GE Bondholder if at any time the dwelling units in the Project are not occupied or available for occupancy as provided above, and the Developer will prepare and submit to the Trustee and any GE Bondholder, on the date of delivery of the Bonds to the initial purchasers thereof and not later than the tenth (10th) day of each month thereafter, a Compliance Certificate executed by the Developer stating the number of dwelling units of the Project which, as of the last date of the immediately preceding month, were occupied by Lower-Income Tenants, to which the Developer will attach an Income Computation and Certification (the form of which is attached as Exhibit B to the Land Use Restriction Agreement) for each Lower-Income Tenant whose initial occupancy commenced during the period from the date of the prior Compliance Certificate to the date of the current Compliance Certificate; Section 6.5. Tax Exemption. The Developer hereby covenants, represents and agrees as follows: The Developer will not knowingly take or permit any action that would adversely affect the exclusion of the Coupon Interest on the Bonds from the gross income of the recipients thereof for federal income tax purposes and, if it should take or permit any such action, the Developer 46 ,(J - $"1 MIFS02... :\RE\60\4 7660\ 1381'\l21\AGR9197L,258 will take all lawful actions that it can take to rescind such action promptly upon having knowledge thereof and the Developer will take such action or actions, including amendment of this Agreement, the Deed of Trust and the Land Use Restriction Agreement, as may be necessary, in the opinion of Bond Counsel, to comply fully with all applicable rules, rulings, policies, procedures, regulations or other official statements promulgated or proposed by the Department of the Treasury or the Internal Revenue Service applicable to the Bonds or affecting the Project. No proceeds of the Prior Bonds have been applied to payor reimburse, directly or indirectly, the cost of acquisition of any property the first use of which did not occur with the Prior Developer. No proceeds of the Prior Bonds have been applied to payor reimburse any person for any cost of providing an airplane, skybox or other private luxury box, any health club facility, any facility used primarily for gambling or any store the principal business of which is the sale of alcoholic beverages for consumption off premises. Acquisition and construction of the Project was completed and all units in the Project were available for occupancy no later than [OCCUPATION DA TEl The total cost of acquisition of the Project was at least equal to the sum of the original proceeds of the Prior Bonds and the investment earnings thereon. Section 6.6. Covenant with Bondholders. The Issuer and the Developer agree that this Agreement is executed and delivered in part to induce the purchase by others of the Bonds and, accordingly, all covenants and agreements of the Issuer and the Developer contained in this Agreement are hereby declared to be for the benefit of the Trustee and the Holders of the Bonds from time to time. Section 6.7. Approval of the Indenture. By its execution and delivery of this Agreement, the Developer approves the form and substance of the Indenture and the execution thereof by the Issuer and the Trustee and agrees to carry out the responsibilities and duties specified in the Indenture to be carried out by the Developer. ARTICLE VII FINANCIAL REPORTING Section 7.1. Financial Statements. (a) Monthly Reports. Within fifteen (15) days after the end of each calendar month, the Developer shall furnish to the Trustee and the GE Bondholder a current (as of the calendar month just ended) balance sheet, a detailed operating statement (showing monthly activity and year-to date) stating Operating Revenues, Operating Expenses, Net Operating Income and Net Cash Flow for the calendar month just ended, a general ledger, an updated rent roll, and, as requested by the GE Bondholder, a written statement setting forth any variance from the Annual Budget, copies of bank statements and bank reconciliations and other documentation supporting the information disclosed in the most recent financial statements. (b) Quarterly Reports. Within thirty (30) days after the end of each calendar quarter, the Developer shall furnish to the Trustee and the GE Bondholder a detailed operating statement (showing quarterly activity and year-to-date) stating Operating Revenues, Operating Expenses, Net Operating Income and Net Cash Flow for the calendar quarter just ended. 47 ~-s;J.. MIFS02... :\RE\60\47660\1 387\227\AGR9 197L.25B (c) Annual Reports. Within ninety (90) days after the end of each fiscal year of the Developer's operation of the Project, the Developer shall furnish to the Trustee and the GE Bondholder a current (as of the end of such fiscal year) balance sheet. a detailed operating statement stating Operating Revenues, Operating Expenses, Net Operating Income and Net Cash Flow for each of the Developer and the Project, and, if required by the GE Bondholder, prepared on a review basis and certified by an Independent public accountant satisfactory to the GE Bondholder. (d) Certification; Supporting Documentation. Each such financial statement shall be in scope and detail satisfactory to the GE Bondholder and certified by the chief financial representative of the Developer. Section 7.2. Accounting Principles. All financial statements shall be prepared in accordance with generally accepted accounting principles consistently applied from year to year. Section 7.3. Other Information. The Developer shall deliver to the GE Bondholder. the Trustee and the Issuer such additional information regarding the Developer, its subsidiaries. its business, any Developer Party. and the Project within 30 days after the GE Bondholder's, the Trustee' s. or the Issuer's request therefor. Section 7.4. Annual Budget and Annual Business Plan. (a) The Developer has submitted and the GE Bondholder has approved the projections and operating budget for the Project covering the remainder of calendar year 1997 and calendar year 1998 attached hereto as Exhibit E (this and any other budget hereinafter approved by the GE Bondholder for any subsequent calendar year and which is in effect during the applicable period is referred to as the" Annual Budget"). The Developer will operate the Project only in accordance with the Annual Budget then in effect, and any deviation of more than ten (10%) percent in any major category of the Annual Budget, any deviation of more than ten (10%) percent in any item for Capital Improvements or Capital Replacements, and any deviation of more than ten (10%) percent in the overall Annual Budget, will require the written approval of the GE Bondholder which consent may be arbitrarily withheld. In no event shall the Annual Budget be changed or modified without the prior written consent of the GE Bondholder. (b) On or prior to December I, 1998 and each December I thereafter. the Developer shall submit to the GE Bondholder for its prior written approval, which approval may be withheld in the GE Bondholder's sole and absolute discretion, the following items with respect to the use and operation of the Project during the following calendar year (collectively, the" Annual Business Plan"): (i) the Annual Budget which shall include among other things, an operating budget, and a budget for all Capital Improvements and Capital Replacements; Oi) a description of the marketing strategy for the Project; (iii) budgets, strategies, plans, and other information, if any, delivered to Developer by the Manager; and (iv) any other matters reasonably requested by the GE Bondholder with respect to the Developer or the Project. The Developer will furnish the GE Bondholder with the Annual Business Plan for approval no later than December I of each calendar year. The GE Bondholder's approval or disapproval (which disapproval must be accompanied by a statement of the reasons therefor) of the Annual Business Plan shall be given 48 ~-S3 MlFS02... :\RE\60\4 7660\ 13871127\AGR9197L.258 in the GE Bondholder's sole discretion within thirty (30) days after receipt thereof from the Developer, and if the GE Bondholder neither approves or disapproves a proposed Annual Business Plan nor requests additional information in connection therewith within such thirty (30) day period, then such Annual Business Plan will be deemed approved. If the GE Bondholder rejects a proposed Annual Business Plan or requests additional information from the Developer, then the GE Bondholder will provide the Developer with written notice thereof and the Developer will submit a revised proposed Annual Business Plan or such information within twenty (20) days of receipt of such rejection or request, and the GE Bondholder shall thereafter have twenty (20) days to approve or disapprove the revised proposed Annual Business Plan. If the Developer's proposed Annual Business Plan for a given year has not been approved by January I of such year, then the Annual Business Plan in effect for the immediately preceding year will be the effective Annual Business Plan for the current year or portion thereof until a new Annual Business Plan is approved by the GE Bondholder, provided that during such period prior to the approval of a new Annual Business Plan by the GE Bondholder, an interim Annual Budget shall be used which shall consist of (i) for line items with respect to which there is no dispute between the Developer and the GE Bondholder, the interim Annual Budget shall contain the amounts of such undisputed line items, and (ii) for all disputed line items, the amounts shall be (x) in the case of revenues, the greater of the amounts for such line items set forth in the approved Annual Budget for the prior year and the actual revenues received for the previous year, and (y) in the case of expenses, the expenses set forth in the approved Annual Budget for the prior year if the revenues in the interim Annual Budget are based on revenues in the approved Annual Budget for the prior year, or the actual expenses for the prior year if the revenues in the interim Annual Budget are based on the actual expenses for the previous year, except that the actual expenses for any increases in taxes and insurance premiums shall be reflected in the interim Annual Budget. In the event that no new Annual Business Plan is approved by the GE Bondholder on or before April I of any year, then an independent third-party property manager shall be selected by the GE Bondholder which shall be reasonably acceptable to the Developer, and such manager shall propose and approve an Annual Business Plan for such current year. The Developer will operate the Project only in accordance with the Annual Business Plan then in effect, and any deviation of more than ten (10%) percent in any major category of the Annual Budget then in effect, any deviation of more than ten (10%) percent in any item for Capital Improvements or Capital Replacements in the Annual Budget then in effect, and any deviation of more than ten (10%) percent in the overall Annual Budget then in effect, will require the prior written consent of the GE Bondholder which consent may be arbitrarily withheld. The Developer shall not expend any funds other than in accordance with the Annual Business Plan and the Annual Budget as provided herein, subject to deviation as provided in the preceding sentence. The inclusion of the reference to the Annual Budget and the Annual Business Plan in this Agreement is not, and shall not be deemed to be, for the benefit of any contractor or materialman and no contractor or materialman shall rely thereon or shall be deemed or considered to be a third party beneficiary of any of the provisions of this Agreement. (c) Neither the Issuer nor the Trustee shall have any right or obligation to review or approve the Annual Business Plan. Section 7.5. Audits. The GE Bondholder shall have the right, from time to time, to choose and appoint a firm of professionals to perform financial audits of the Developer and the Project as it deems 49 ~-:rl MIFS02...:\RE\60\47660\l387\227\AGR 9197L.2SB necessary, at Developer's expense; provided that the Developer shall not be required to pay for more than one such audit per calendar year pursuant to the terms of this Section 7.5. The Developer shall permit the GE Bondholder to examine such records, books and papers of the Developer which reflect upon its financial condition and the income and expenses relative to the Project. ARTICLE VIII COVENANTS The Developer covenants and agrees with the Issuer as follows: Section 8.1. Due on Sale and Encumbrance; Transfers of Interests. Without the prior written consent of the GE Bondholder, (a) neither the Developer nor any member of the Developer nor any other Person having an ownership or beneficial interest in the Developer or any member thereof shall (i) directly or indirectly sell, transfer, convey, mortgage, pledge, or assign any interest in the Project or any part thereof (including, without limitation, any membership or any other ownership interest in the Developer); (ii) further encumber, alienate, grant a Lien on or grant any other interest in the Project or any part thereof (including, without limitation, any membership or other ownership interest in the Developer), except for the Lien created pursuant to the Second Deed of Trust Documents and the Option and Sale Documents, whether voluntarily or involuntarily, by operation of law or otherwise; or (iii) enter into any easement or other agreement granting rights in or restricting the use or development of the Project; (b) no new member having the ability to control the affairs of the Developer shall be admitted to or created in the Developer (nor shall any member withdraw from the Developer), and no change in the Developer's organizational documents shall be effected; and (c) no transfer shall be permitted which would cause Dell Loy Hansen to own less than thirty-two percent (32%) of the beneficial interest in the Developer and the Project. (d) Dell Loy Hansen (i) acting alone, has the sole power to direct the operations and business affairs and policies of the Developer, (ii) owns the controlling interest in the Developer, (iii) has not transferred, conveyed, assigned or encumbered such interests or entered into any agreement with any other person or entity with respect thereto or with respect to the exercise thereof except as provided in the Loan Documents, the Conventional Loan Documents and the Option and Sale Documents, and (iv) will not transfer, convey, assign or encumber such interests or enter into any agreement with any other person or entity with respect thereto or with respect to the exercise thereof. As used in this Section 8.1, "transfer" shall include the sale, transfer, conveyance, mortgage, pledge, or assignment of the legal or beneficial ownership of (a) the Project, (b) any partnership interest in any member of the Developer that is a partnership, and (c) any voting stock in any member of the Developer 50 ~-~- MIFS02... :\RE\60\4 7660\1 387\l27\AGR 9197L.2SB that is a corporation; "transfer" shall not include the leasing of individual units within the Project so long as the Developer complies with the provisions of the Loan Documents relating to such leasing activity. Section 8.2. Taxes; Charges. The Developer shall pay before any fine, penalty, interest or cost may be added thereto, and shall not enter into any agreement to defer, any Real Estate Taxes, franchise taxes and charges, and other governmental charges that may become a Lien upon the Project or become payable during the term of the Loan, and will promptly furnish the Issuer, and the GE Bondholder with evidence of such payment; however, the Developer's compliance with Section 3.4 of this Agreement relating to impounds for taxes and assessments shall, with respect to payment of such taxes and assessments, be deemed compliance with this Section 8.2. The Developer shall not suffer or permit the joint assessment of the Project with any other real property constituting a separate tax lot or with any other real or personal property. The Developer shall pay when due all claims and demands of mechanics, materialmen, laborers and others which, if unpaid, might result in a Lien on the Project; however, the Developer may contest the validity of such claims and demands so long as (a) the Developer notifies the Trustee and the GE Bondholder that it intends to contest such claim or demand, (b) the Developer provides the Issuer, the Trustee and the GE Bondholder with an indemnity, bond or other security satisfactory to the Trustee, the Issuer and the GE Bondholder (including an endorsement to the title insurance policy insuring against such claim or demand) assuring the discharge of the Developer's obligations for such claims and demands, including interest and penalties, and (c) the Developer is diligently contesting the same by appropriate legal proceedings in good faith and at its own expense and concludes such contest prior to the tenth (10th) day preceding the earlier to occur of the Mandatory Tender Date, the Maturity Date or the date on which the Project is scheduled to be sold for non-payment. Section 8.3. Control and Management. There shall be no change in the day-to-day control and management of the Developer or the Developer's members without the prior written consent of the GE Bondholder. The Developer shall not terminate or replace the Manager or appoint a new Manager or terminate or amend the management agreement for the Project without the GE Bondholder's prior written approval. Any change in ownership or control of the Manager shall be cause for the GE Bondholder to re-approve such Manager and management agreement. Each Manager shall hold and maintain all necessary licenses, certifications and permits required by law. The Developer shall fully perform all of its covenants, agreements and obligations under the management agreement. Section 8.4. Operation; Maintenance; Inspection. The Developer shall observe and comply with all Legal Requirements applicable to the Developer and the Project, including, without limitation, all Legal Requirements with respect to the Developer's ownership, use and operation of the Project. The Developer shall maintain the Project in good condition and promptly repair any damage or casualty. The Developer has obtained and examined, or will obtain and examine in a timely fashion, all Legal Requirements affecting the Developer and the Project. There exist no current violations of any Legal Requirements with respect to the Developer or the Project. The Developer shall permit the Issuer, the Trustee, the GE Bondholder and their agents, representatives and employees, upon reasonable prior notice to the Developer, to inspect the Project and conduct such environmental and engineering studies as the GE Bondholder may require, provided such inspections and studies do not materially interfere with the use and operation of the Project. 51 ~ -~-r. MIFS02...:\R.E\60\4766O\1387\227\AGR9197L258 Section 8.5. Taxes on Security. The Developer shall pay all taxes, charges, filing, registration and recording fees, excises and levies payable with respect to the Note or the Liens created or secured by the Loan Documents, other than any income, franchise and doing business taxes imposed on the Issuer. If there shall be enacted any law (a) deducting the Loan from the value of the Project for the purpose of taxation, (b) affecting any Lien on the Project, or (c) changing existing laws of taxation of mortgages, deeds of trust, security deeds, or debts secured by real property, or changing the manner of collecting any such taxes, the Developer shall promptly pay to the Trustee, on demand, all taxes, costs and charges for which the Trustee, the Issuer or the Bondholder may be liable as a result thereof; however, if such payment would be prohibited by law, or would render the Loan usurious, then instead of collecting such payment, the GE Bondholder may direct the Trustee to declare all amounts owing under the Loan Documents to be immediately due and payable. Section 8.6. Legal Existence; Etc. The Developer shall preserve and keep in full force and effect its existence as a Single Purpose Entity, entity status, franchises, rights and privileges under the laws of the state of its formation. and all qualifications, licenses and permits applicable to the ownership, use and operation of the Project. Each member of the Developer shall preserve and keep in full force and effect its existence as an entity, franchises, rights and privileges under the laws of the state of its formation, and all qualifications, licenses and permits applicable to the conduct of its business. Neither the Developer nor any member of the Developer shall wind up, liquidate, dissolve, reorganize, merge, or consolidate with or into, or convey, sell, assign, transfer, lease, or otherwise dispose of all or substantially all of its assets, or acquire all or substantially all of the assets of the business of any Person, or permit any subsidiary or Developer Affiliate to do so. The Developer and each member of the Developer shall conduct business only in its own name and shall not change its name, identity, or organizational structure, or the location of its chief executive office or principal place of business unless the Developer (a) shall have obtained the prior written consent of the GE Bondholder to such change, and (b) shall have taken all actions necessary or requested by the GE Bondholder to file or amend any financing statement or continuation statement to assure perfection and continuation of perfection of security interests under the Loan Documents. The Developer shall maintain its separateness as an entity, including maintaining separate books, records, and accounts and observing corporate and partnership formalities independent of any other entity, shall pay its obligations with its own funds and shall not commingle funds or assets with those of any other entity. Section 8.7. Affiliate Transactions. Without the prior written consent of the GE Bondholder, the Developer shall not engage in any transaction affecting the Project with an Affiliate of the Developer. Section 8.8. Limitation on Other Debt. The Developer (and each member of the Developer) shall not, without the prior written consent of the GE Bondholder, incur any Debt other than the Loan and the Conventional Loan and customary trade payables which are payable, and shall be paid, within thirty (30) days of when incurred. Section 8.9. Further Assurances. The Developer shall promptly (a) cure any defects in the execution and delivery of the Loan Documents, and (b) execute and deliver, or cause to be executed and delivered, all such other documents, agreements and instruments as the GE Bondholder may reasonably request to further evidence and more fully describe the collateral for the Loan, to correct any omissions in the Loan Documents, to perfect, protect or preserve any Liens created under any of the Loan 52 13 - 57 MIFS02... :\RE\60\4 7660\ 1387\227\AGR 9197L.258 Documents, or to make any recordings, file any notices, or obtain any consents, as may be necessary or appropriate in connection therewith. Section 8.10. Estoppel Certificates. The Developer, within ten (10) days after request therefor, shall furnish to the Issuer, the Trustee, and GE Bondholder a written statement, duly acknowledged, setting forth the Bond Principal, the tenns of payment of the Bonds, the date to which Interest has been paid, and such other matters as the GE Bondholder may reasonably request. Section 8.11. Notice of Certain Events. The Developer shall promptly notify the Issuer, the Trustee and the GE Bondholder of (a) any Potential Default, Event of Default or Loan Agreement Default, together with a detailed statement of the steps being taken to cure such Potential Default, Event of Default or Loan Agreement Default; (b) any notice of default received by the Developer under other obligations relating to the Project or otherwise material to the Developer's business; and (c) any threatened or pending legal, judicial or regulatory proceedings, including any dispute between the Developer and any governmental authority, affecting the Developer or the Project. Section 8.12. Indemnification. The Developer shall indemnify, defend and hold the Issuer, the Trustee and the GE Bondholder hannless from and against any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever, including the reasonable fees and actual expenses of their counsel, in connection with (a) any inspection, review or testing of or with respect to the Project, (b) any investigative, administrative, mediation, arbitration, or judicial proceeding, whether or not the Issuer, the Trustee or the GE Bondholder is designated a party thereto, commenced or threatened at any time (including after the repayment of the Note and the Conventional Note) in any way related to the execution, delivery or perfonnance of any Loan Document or to the Project, the Bonds or the Prior Bonds, (c) any proceeding instituted by any Person claiming a Lien, and (d) any brokerage commissions or finder's fees claimed by any broker or other party in connection with the Bonds, the Project, or any of the transactions contemplated in the Loan Documents, the Conventional Loan Documents or Option and Sale Documents, including those arising from the joint, concurrent, or comparative negligence of the Issuer, the Trustee or the GE Bondholder, except to the extent any of the foregoing is caused solely by the Issuer, the Trustee or the GE Bondholder's gross negligence or willful misconduct. Section 8.13. No Warranty of Condition or Suitability by the Issuer; Exculpation and Indemnification. The Issuer makes no warranty, either express or implied, as to the condition of the Project or that it will be suitable for the Developer's purposes or needs. The Developer releases the Trustee, the Issuer, the GE Bondholder and any other Bondholder from, and agrees that the Trustee, the Issuer, the GE Bondholder and any other Bondholder shall not be liable for and agrees to hold the Issuer, the Trustee, the GE Bondholder and any other Bondholder harmless against, any loss or damage to property or any injury to or death of any person that may be occasioned by any cause whatsoever pertaining to the Project or the use thereof. Section 8.14. Issuer's and Trustee's Right of Access to the Project. The Developer agrees that the Issuer, the Trustee, any GE Bondholder and their duly authorized agents, attorneys, experts, engineers, accountants and representatives shall have the right, at all reasonable times during business hours and upon reasonable notice, to enter onto the Land (a) to examine, test and inspect the Project without material interference or prejudice to the Developer's operations and (b) to perfonn such work in and about the 53 4 -:if' MIFS02... :\RE\60\4 7660\ 1 387\227\AGR9I 97L.258 Project made necessary by reason of the Developer's default under any of the provIsIOns of this Agreement. The Issuer, the Trustee and any GE Bondholder and their duly authorized agents, attorneys, accountants and representatives shall also be permitted, at all reasonable times during business hours, to examine the books and records of the Developer with respect to the Project or otherwise. Section 8.1S. Arbitrage Covenant. The Developer covenants and agrees that it will not make or cause or permit to be made, whether by the Trustee or otherwise, any use of the proceeds of the Bonds which, if such use had been reasonably expected on the date of issuance of the Bonds, would have caused the Bonds to be arbitrage bonds within the meaning of Section 148 of the Code of 1986. The Developer further covenants and agrees that it will comply with and will take all action reasonably required to insure that the Trustee complies with all applicable requirements of said Section 148 and the rules and regulations of the United States Treasury Department thereunder for so long as any of the Bonds, including Interest thereon and any applicable Prepayment Premium, Unauthorized Prepayment Premium, remain Outstanding and unpaid. The Developer agrees that it will cooperate in the appointment of an individual or firm having expertise in calculations related to Excess Investment Earnings and rebatable amounts and agrees that all rebate calculations will be performed by such an individual or firm and that the Developer will pay all costs associated therewith. Section 8.16. Tax Exempt Status of the Bonds. The Developer covenants that it will not take or omit to take any action nor permit any action to be taken or omitted which would cause the Coupon Interest on the Bonds to become includable in the gross income of the recipients thereof for federal income tax purposes under then current law, provided, that the Developer shall not be deemed to have violated this covenant solely due to the fact that Coupon Interest on any of the Bonds becomes taxable to a person who is a "substantial user" of the Project or a Related Person thereto. Section 8.17. Determination of Taxability. Subject to Section 12.1 below, the Developer shall at all times indemnify and hold harmless the Issuer and the Bondholders against and from any and all claims, suits, actions, debts, damages, costs, losses, liabilities, obligations, judgments, charges, and expenses of any nature whatsoever suffered or incurred by the Issuer and/or Bondholders under or on account of any additional tax, interest, penalties and other addition to tax owed by such Bondholders or any beneficiary of any Bondholder. Subject to Section 12.1 below, nothing contained in this Section shall be deemed to conflict with those provisions, if any, of any Loan Document relating to the Determination of Taxability, or Gross-Up Amount and the Developer's obligation to pay any and all amounts due thereunder as a result thereof. ARTICLE IX EVENTS OF DEFAULT Each of the following shall constitute an "event of default" or "default" hereunder and under the Loan (each, a "Loan Agreement Default"): 54 4-S'? MIFSOL:\RE\60\4766O\1387\227\AGR9197L2SB Section 9.1. Payments. (a) Failure by or on behalf of the Developer to pay any Basic Loan Payment or Additional Payment on the date such payment is due; or (b) Failure by or on behalf of the Developer to pay the Purchase Price of Bonds tendered for purchase pursuant to the terms of the Indenture; or (c) Failure by or on behalf of the Developer to pay when due any amount (other than as provided in subsections (a) or (b) above) required to be paid under this Agreement, the Note, the Deed of Trust or any of the other Loan Documents, 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. Section 9.2, Insurance. The Developer's failure to maintain insurance as required under Section 3.1 of this Agreement. Section 9.3. Sale, Encumbrance, Etc. The sale, transfer, conveyance, pledge, mortgage or assignment of any part or all of the Project, or any interest therein, or of any interest in the Developer, in violation of Section 8.1 of this Agreement. Section 9.4. Occupation of the Project. The Developer shall vacate or abandon the Project, or shall have been ejected from the Project or any portion thereof by reason of a defect in title to the Project, and the same shall remain uncured and unoccupied for a period of fifteen (15) days. Section 9.5. Covenants. The Developer's failure to perform or observe any of the agreements and covenants contained in this Agreement or in any of the other Loan Documents (other than payments under Section 9.1 hereof, insurance requirements under Section 9.2 hereof, and transfers and encumbrances under Section 9.3 hereof), and the continuance of such failure for ten (10) days after notice by the Issuer, the GE Bondholder or the Trustee to the Developer; however, subject to any shorter period for curing any failure by the Developer as specified in any of the other Loan Documents, the Developer shall have an additional thirty (30) days to cure such failure if (a) such failure does not involve the failure to make payments on a monetary obligation; (b) such failure cannot reasonably be cured within ten (10) days; (c) the Developer is diligently undertaking to cure such default, and (d) the Developer has provided the Trustee and the GE Bondholder with security reasonably satisfactory to the Trustee and the GE Bondholder against any interruption of payment or impairment of collateral as a result of such continuing failure. The notice and cure provisions of this Section 9.5 do not apply to the Events of Default described in Sections 9.6, 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13, 9.14, 9.15 or 9.16 hereof. Section 9,6. Representations and Warranties. Any representation or warranty made in any Loan Document proves to be untrue in any material respect when made or deemed made. Section 9.7. Other Encumbrances. The existence of any Lien on the Project or any part thereof or interest therein other than Permitted Liens. 55 ~-G:,O MlFS02 '" :\RE\60\4 7660\ 1381\227\AGR9197L.25B Section 9.8. Involuntary Bankruptcy or Other Proceeding. Commencement of an involuntary case or other proceeding against the Developer, any Developer Party or any other Person having an ownership or security interest in the Project (each, a "Bankruptcy Party") which seeks liquidation, reorganization or other relief with respect to it or its debts or other liabilities under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeks the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any of its property, and such involuntary case or other proceeding shall remain undismissed or un stayed for a period of 60 days; or an order for relief against a Bankruptcy Party shall be entered in any such case under the Federal Bankruptcy Code. Section 9.9. Voluntary Petitions. Commencement by a Bankruptcy Party of a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its Debts or other liabilities under any bankruptcy, insolvency or other similar law or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official for it or any of its property, or consent by a Bankruptcy Party to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or the making by a Bankruptcy Party of a general assignment for the benefit of creditors, or the failure by a Bankruptcy Party, or the admission by a Bankruptcy Party in writing of its inability, to pay its debts generally as they become due, or any action by a Bankruptcy Party to authorize or effect any of the foregoing. Section 9.10. Invalidity. (a) Any (i) payment obligation of the Developer under the Note, this Loan Agreement or any of the other Loan Documents, or (ii) provision of this Loan Agreement or any of the other Loan Documents, shall at any time for any reason cease to be valid and binding on the Developer in accordance with its terms, (b) the validity or enforceability of the Note, this Loan Agreement or any of the other Loan Documents shall be contested or denied by the Developer or any governmental authority, or (c) any security interest created under the Deed of Trust or any of the Deed of Trust Documents shall cease to be a valid and perfected Lien on any of the collateral purported to be covered thereby or such Lien shall cease to be a validly perfected first priority Lien. Section 9.11. Other Debt. The Developer shall (a) fail to make any payment of any Debt in excess of $100,000 when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt (unless any such Debt is being contested in good faith and with due diligence), or (b) otherwise breach any agreement or instrument relating to any Debt, where the effect of such breach is to accelerate, or to permit the acceleration of, the maturity of any Debt in an aggregate principal amount in excess of $100,000. Section 9.12. Permits. The Developer shall fail to keep in force and effect any permit, license, consent or approval required under this Loan Agreement, unless this default is timely cured to the reasonable satisfaction of the GE Bondholder. Section 9.13. Mortgaged Property. Any of the Mortgaged Property, as defined in the Deed of Trust, or any other material amount of assets of the Developer shall be attached, seized, levied upon or subjected to a writ or distress warrant, or come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors of the Developer; or any person other than the Developer shall apply for the appointment of a receiver, trustee or custodian for any of the Mortgaged Property that has a cartying value on the books of the Developer of $100,000 in the aggregate or any other material amount 56 ~ _~ I MIFS02...:\RE\60\47660\1387\227\AGR9191L2SB of assets of the Developer and such action shall remain undismissed for a period of 60 days; or the Developer shall have concealed, removed or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them or made or suffered a transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or other similar law; or the Developer shall have made any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid. Section 9.14. Judgments. Any final, unappealable and uninsured money judgment or judgments in the aggregate sum of $100,000 or more shall be rendered against the Developer, or any of its assets, or any writ or warrant of attachment, or similar process shall be entered or filed against the Developer or any of its assets, and such judgment, writ, warrant or process shall remain unsatisfied, unsettled, unvacated, unbonded and un stayed for a period of 60 days or in any event later than five Business Days prior to the date of any proposed sale thereunder. Section 9.15. Disposition of Assets. The transfer, sale, exchange, or disposition of any portion of the assets of the Developer except for full and fair consideration and except in the ordinary course of business and in accordance with the Annual Business Plan. Section 9.16. Other Events of Default. The occurrence of a default or "Event of Default" as defined in any of the other Loan Documents, Option and Sale Documents or Conventional Loan Documents, Notwithstanding anything to the contrary contained herein, (a) neither the notice nor grace periods described in Section 9.5 hereof shall have any applicability to any of the other Loan Agreement Defaults described in this Article IX, (b) in no event shall any of the notice and/or grace periods provided for in this Article IX or in any of the other Loan Documents be considered to be in addition to any other notice or grace period provided therein, and (c) any applicable notice or grace period shall run concurrently with and not in addition to any other notice or grace period to which the Developer shall be entitled either hereunder or under any of the other Loan Documents. ARTICLE X REMEDIES Section 10.1. Remedies. Insolvency Events. Upon the occurrence of any Loan Agreement Default described in Section 9.8 or 9.9 hereof, all amounts due under the Note and each of the other Loan Documents immediately shall become due and payable, all without written notice and without presentment, demand, protest, notice of protest or dishonor, notice of intent to accelerate the maturity thereof, notice of acceleration of the maturity thereof, or any other notice of default of any kind, all of which are hereby expressly waived by the Developer; however, if the Bankruptcy Party under Section 9.8 or 9.9 is other than the Developer, then all amounts due under the Note and each of the other Loan Documents shall become immediately due and payable at the GE Bondholder's election, in the GE Bondholder's sole discretion. 57 ,d -~d-- MIFS02... :\RE\60\4 76<<J\ 1387\227\AGR9197L.25B Section 10.2. Remedies. Other Events. Except as set forth in Section 10.1 hereof, upon the occurrence of any Loan Agreement Default. the Trustee on behalf of the Issuer, shall, at the written direction of the GE Bondholder prior to the purchase of all Outstanding Bonds in connection with a Mandatory Tender Date, and after such time at the request of a Majority of Holders (subject. however, to any restrictions against acceleration of maturity of the Bonds or termination of this Agreement set forth in the Indenture) (a) by written notice to the Developer, declare the entire principal of and all unpaid Interest accrued and all other amounts due on the Note to the date of such declaration to be immediately due and payable and upon any such declaration, all amounts unpaid under the Note and/or this Agreement shall thereupon become forthwith due and payable in an amount sufficient to pay the principal of, Unauthorized Prepayment Premium. if any, Prepayment Premium. if any, and Interest on and all other amounts due on the Bonds, without presentment, demand, protest, notice of protest or dishonor, notice of intent to accelerate the maturity thereof, notice of acceleration of the maturity thereof, or other notice of default of any kind, all of which are hereby expressly waived by the Developer, (b) terminate the obligation, if any, of the Trustee to advance or the GE Bondholder to approve the advance of amounts hereunder or under the Indenture or any of the other Loan Documents, and (c) exercise all rights and remedies therefor under the Loan Documents and at law or in equity. Section 10.3. GE Bondholder's and Trustee's Right to Perform the Obligations. If the Developer shall fail, refuse or neglect to make any payment or perform any act required by the Loan Documents, then while any Loan Agreement Default exists, and without notice to or demand upon the Developer and without waiving or releasing any other right, remedy or recourse the Trustee or the GE Bondholder may have because of such Loan Agreement Default, the Trustee or the GE Bondholder may (but shall not be obligated to) make such payment or perform such act for the account of and at the expense of the Developer, and shall have the right to enter upon the Project for such purpose and to take all such action thereon and with respect to the Project as it may deem necessary or appropriate. If the Trustee or the GE Bondholder shall elect to pay any sum due with reference to the Project, the Trustee or the GE Bondholder may do so in reliance on any bill, statement or assessment procured from the appropriate governmental authority or other issuer thereof without inquiring into the accuracy or. validity thereof. Similarly, in making any payments to protect the security intended to be created by the Loan Documents, the Trustee or the GE Bondholder shall not be bound to inquire into the validity of any apparent or threatened adverse title, lien, encumbrance, claim or charge before making an advance for the purpose of preventing or removing the same. The Developer shall indemnify, defend and hold the Trustee, the Issuer and the GE Bondholder harmless from and against any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever, including attorneys' fees, incurred or accruing by reason of any acts performed by the Trustee, the Issuer, or the GE Bondholder pursuant to the provisions of this Section 10.3, including those arising from the joint, concurrent, or comparative negligence of the Trustee, the Issuer, or the GE Bondholder, except as a result of the Trustee's, the Issuer's, or the GE Bondholder's gross negligence or willful misconduct. All sums paid by the Trustee or the GE Bondholder pursuant to this Section 10.3, and all other sums expended by the Trustee or the GE Bondholder to which either shall be entitled to be indemnified, together with interest thereon at the Default Rate from the date of such payment or expenditure until paid, shall constitute additions to all amounts payable with respect to the Bonds, shall be secured by the Loan Documents and shall be paid by the Developer to the Trustee or the GE Bondholder upon demand. 58 ,8 -'3 MIFS02... :\RE\60\4 76<<A 138 7\227\AGR9197L.258 Section 10.4. Survival of Obligations. The Developer covenants and agrees with the Issuer, the Trustee, and the Bondholders that its obligations under this Agreement shall survive the cancellation and termination of this Agreement, for any cause, and that the Developer will continue to pay the Basic Loan Payments, Additional Payments and all other amounts provided in Article II hereof, and perform all other obligations provided for in this Agreement, all at the time or times provided in this Agreement. Section 10.5. Trustee's Exercise of the Issuer's Remedies. Whenever any Loan Agreement Default shall have occurred and be continuing, the Trustee may, but except as otherwise provided in the Indenture shall not be obliged to, exercise any or all of the rights of the Issuer under this Article, upon notice as required of the Issuer unless the Issuer has already given the required notice. In addition, the Trustee shall have available to it all of the remedies prescribed by the Indenture. Section 10.6. Exercise of Remedies. Notwithstanding anything contained in this Agreement to the contrary, during the period that all of the Outstanding Bonds are owned by the GE Bondholder, the Trustee shall not exercise any of its rights or remedies under this Article X or otherwise hereunder or under the Indenture or any of the other Loan Documents as a result of the occurrence of a Loan Agreement Default hereunder, or any Event of Default under the Indenture or event of default under any of the other Loan Documents, unless and until instructed by the GE Bondholder in writing to do so, and in such event shall, subject to the Trustee's right to reasonable indemnification as provided in Section 12.3(d) of the Indenture, exercise such rights and remedies as so instructed by the GE Bondholder. ARTICLE XI MISCELLANEOUS Section 11.1. Notices. (a) Any notice required or permitted to be given under this Agreement shall be in writing and either shall be mailed by certified mail, postage prepaid, return receipt requested. or sent by overnight air courier service, or personally delivered to a representative of the receiving party, or sent by telecopy (provided an identical notice is also sent simultaneously by mail, overnight courier, or personal delivery as otherwise provided in this Section 11.1). All such communications shall be mailed, sent or delivered, addressed to the party for whom it is intended at its address set forth below. If to the Issuer: City of Chula Vista, California 276 Fourth A venue Chula Vista, CA 91910 Attention: Community Development Director Telecopier: (619) 585-5698 59 ~ -~ct MIFS02... :\RE\60\47660\ 1381\227\AGR 9197L.25B If to the Trustee: If to the Developer: With a copy to: If to GECC or GE Bondholder: With copies to: MIFS02... :\RE\60\4 7660\ 1387'1227\AGR9197L_25B First Trust National Association 601 Union Street Suite 2120 Seattle, WA 98101 Attention: Carol Nelson Telecopier: (206) 461-4175 Eucalyptus Grove Holdings, LLC 399 North Main Suite 200 Logan UT 84321 Attention: Tony R. Johnson Telecopier: (801) 755-2045 Kutak Rock The Omaha Building 1650 Farnam Omaha, NE Attention: Jerre Tritsch, Esq. Telecopier: (402) 346-1148 General Electric Capital Corporation 18300 Yon Karman Avenue Suite 700 Irvine, California 92612 Attention: Regional Manager Telecopier: (714) 477-0904 General Electric Capital Corporation Commercial Real Estate 292 Long Ridge Road Stamford, CT 06927 Attention: Legal Department Telecopier: (203) 357-6768 and Weil, Gotshal & Manges LLP 70 I Brickell Avenue Suite 2100 Miami, Florida 33131 Attention: Richard A. Morrison, Esq. Telecopier: (305) 374-7159 60 ~-~~ Any communication so addressed and mailed shall be deemed to be given on the earliest of (i) when actually delivered, (ii) on the first Business Day after deposit with an overnight air courier service, or (iii) on the third Business Day after deposit in the United States mail, postage prepaid, in each case to the address of the intended addressee, and any communication so delivered in person shall be deemed to be given when receipted for by, or actually received by, the Issuer or the Developer, the Trustee, or the Bondholder as the case may be. If given by telecopy, a notice shall be deemed given and received when the telecopy is transmitted to the party's telecopy number specified above, and confirmation of complete receipt is received by the transmitting party during normal business hours or on the next Business Day if not confirmed during normal business hours, and an identical notice is also sent simultaneously by mail, overnight courier, or personal delivery as otherwise provided in this Section 11.1. Any party may designate a change of address by written notice to the other parties by giving at least ten (10) days prior written notice of such change of address. (b) When this Agreement provides for giving of notice to the Issuer or the Trustee, such notice shall also be given to the GE Bondholder. When this Agreement provides for the giving of notice to or requesting the consent of the GE Bondholder, copies of such notice and any such request for consent shall be given to the Issuer and the Trustee. Section 11.2. Amendments and Waivers. No amendment or waiver of any provision of the Loan Documents shall be effective unless in writing and signed by the party against whom enforcement is sought and consented to in writing by the GE Bondholder through the GECC Purchase Date, or all of the Bondholders thereafter. Section 11.3. Limitation on Interest. It is the intention of the parties hereto to conform strictly to applicable usury laws. Accordingly, all agreements between the Developer and the Issuer with respect to the Loan are hereby expressly limited so that in no event, whether by reason of acceleration of maturity or otherwise, shall the amount paid or agreed to be paid to the Issuer or charged by the Issuer for the use, forbearance or detention of the money to be lent hereunder or otherwise, exceed the maximum amount allowed by law. If the Loan would be usurious under applicable law (including the laws of the State of California and the laws of the United States of America), then, notwithstanding anything to the contrary in the Loan Documents: (a) the aggregate of all consideration which constitutes interest under applicable law that is contracted for, taken, reserved, charged or received under the Loan Documents shall under no circumstances exceed the maximum amount of interest allowed by applicable law, and any excess shall be credited on the Note and the Bonds by the holder thereof (or, if the Note and the Bonds have been paid in full, refunded to the Developer); and (b) if maturity is accelerated by reason of an election by the Issuer or the GE Bondholder, or in the event of any prepayment, then any consideration which constitutes interest may not include more than the maximum amount allowed by applicable law. In such case, excess interest, if any, provided for in the Loan Documents or otherwise, to the extent permitted by applicable law, shall be amortized, prorated, allocated and spread from the date of advance until payment in full so that the actual rate of interest is uniform through the term hereof. If such amortization, proration, allocation and spreading is not permitted under applicable law, then such excess interest shall be cancelled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited on the Note (or, if the Note and the Bonds have been paid in full, refunded to the Developer). Tbe terms and provisions of this Section 11.3 shall control and supersede every other provision of the Loan Documents. 61 ~ -"~ MIFS02... :\RE\60\47660\ 1387\227\AGR9197L.258 The Loan Documents are contracts made under and shall be construed in accordance with and governed by the laws of the State of California, except that if at any time the laws of the United States of America permit the Issuer to contract for, take, reserve, charge or receive a higher rate of interest than is allowed by the laws of the State of California (whether such federal laws directly so provide or refer to the law of any state), then such federal laws shall to such. extent govern as to the rate of interest which the Issuer may contract for, take, reserve, charge or receive under the Loan Documents. Section 11.4. Invalid Provisions. If any provision of any Loan Document is held to be illegal, invalid or unenforceable, such provision shall be fully severable; the Loan Documents shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part thereof; the remaining provisions thereof shall remain in full effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance therefrom; and in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as a part of such Loan Document a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible to be legal, valid and enforceable. Section 11.5. Reimbursement of Expenses. The Developer shall pay all expenses incurred by the Issuer, the Trustee and the GE Bondholder in connection with the Bonds, including fees and expenses of the Issuer's, the Trustee's or the GE Bondholder's attorneys, environmental, engineering and other consultants, and fees, charges or taxes for the recording or filing of Loan Documents. The Developer shall pay all expenses of the Issuer, the Trustee and the GE Bondholder in connection with the issuance or administration of the Bonds, including audit costs, inspection fees, settlement of condemnation and casualty awards, and premiums for title insurance and endorsements thereto. The Developer shall, upon request, promptly reimburse the Issuer, the Trustee and the GE Bondholder for all amounts expended, advanced or incurred by the Issuer, the Trustee and the GE Bondholder to collect the Note, or to enforce the rights of the Issuer, the Trustee and the GE Bondholder under this Agreement or any other Loan Document, or to defend or assert the rights and claims of the Issuer, the Trustee and the GE Bondholder under the Loan Documents or with respect to the Project (by litigation or other proceedings), which amounts will include all court costs, attorneys' fees and expenses, fees of auditors and accountants, and investigation expenses as may be incurred by the Issuer, the Trustee and the GE Bondholder in connection with any such matters (whether or not litigation is instituted), together with interest at the Default Rate on each such amount from the date of disbursement until the date of reimbursement to the Issuer, the Trustee and the GE Bondholder, all of which shall constitute part of the Loan and shall be secured by the Loan Documents. Section 11.6. Approvals; Third Parties. The approval rights retained or exercised by the Issuer, the Trustee and the GE Bondholder with respect to leases, contracts, plans, studies and other matters shall not be deemed or construed as a determination that the Issuer, the Trustee and the GE Bondholder have passed on the adequacy thereof for any other purpose and may not be relied upon by the Developer or any other Person. This Agreement is for the sole and exclusive use of the Issuer, the Trustee, the Bondholders and the Developer and may not be enforced, nor relied upon, by any Person other than the Issuer, the Trustee, the Bondholders and the Developer. All conditions of the obligations of the Issuer hereunder, including the obligation to make advances, are imposed solely and exclusively for the benefit of the Developer, and no other Person shall have standing to require satisfaction of such conditions or be entitled to assume that the Issuer will refuse to make advances in the absence of strict compliance with any or all of such conditions, and no other Person shall, under any circumstances, be deemed to be a 62 ~-" MIFS02...:\RE\60\4766O\ 1387\l27\AGR9197L.2SB beneficiary of such conditions, any and all of which may be freely waived in whole or in part by the Issuer at any time in the Issuer's sole discretion. Section 11.7. Issuer Shall Not Unreasonably Withhold Consents and Approvals. Wherever in this Agreement it is provided that the Issuer or the Trustee shall, mayor must give its approval or consent, or execute supplemental agreements or schedules, the Issuer or the Trustee shall not unreasonably, arbitrarily or unnecessarily withhold, delay or refuse to give such approvals or consents or delay or refuse to execute such supplemental agreements or schedules. Section 11.8. Compliance with Rule lSc2-12. Furnishing of Information Generally. The Developer hereby agrees at the Developer's sole cost and expense to provide such information to such parties or entities as shall be necessary for compliance with Rule 15c2-12 of the Securities Exchange Act of 1934, as amended (the "Rule"), and all other applicable federal and state securities laws, rules, and regulations, and with copies in each instance to the Issuer, the Trustee and, during the Initial Rate Period, the GE Bondholder. Continuing Disclosure Undertaking. The Developer hereby agrees, in accordance with the provisions of the Rule, to provide or cause to be provided, to each nationally recognized municipal securities information repository ("NRMSIR") designated by the Securities and Exchange Commission (the "Commission") in accordance with the Rule, and to the Municipal Advisory Council of the State or any other entity designated by the State as a state information depository ("SID"), the following annual financial information and operating data (the "Annual Information"), commencing with the fiscal year ended December 31, 1997: the audited general purpose financial statements of the Developer pertaining to the Project utilizing generally accepted accounting principles, except as may be modified from time to time and described in such financial statements. The information described in the preceding paragraph will be available on or before October 15th of each year for the preceding fiscal year and will be made available, in addition to the NRMSIR' s and the SID, to each Holder of Bonds who requests such information. If audited financial statements are not available by the said October 15th of any year, then the Developer will make available unaudited financial statements. The audited financial statements are generally available within six months of the end of the fiscal year of the Developer. The Developer agrees to provide or cause to be provided, in a timely manner, to (i) each NRMSIR or to the Municipal Securities Rulemaking Board ("MSRB") and (ii) the SID, notice of the occurrence of any of the following events with respect to the Bonds, if material: (A) principal and interest payment delinquencies; (B) non-payment related defaults; (C) unscheduled draws on debt service reserves reflecting financial difficulties; (D) unscheduled draws on credit enhancements reflecting financial difficulties; (E) substitution of credit or liquidity providers, or their failure to perform; 63 ~ -,,~ MIFS02.. .:\RE\60\47660\ 1387\227\AGR9197L.25B (F) adverse tax opinions or events affecting the tax-exempt status of the Bonds; (G) modifications to rights of Holders of the Bonds; (H) bond calls; (I) defeasance; (J) release, substitution, or sale of any security securing repayment of the Bonds; and (K) rating changes, if any. The Developer agrees to provide or cause to be provided, in a timely manner, to (i) each NRMSIR or to the MSRB and (ii) the SID, notice of its failure to provide the Annual Information with respect to itself on or prior to the date set forth in the second paragraph of this subsection. The obligations of the Developer hereunder shall remain in effect only so long as the Bonds are Outstanding. The Developer reserves the right to terminate its obligation to provide the Annual Information and notices of material events, as set forth above, if and when no "obligated person," within the meaning of the Rule, continues to be required to comply with the Rule. The Developer agrees that its undertaking pursuant to the Rule set forth in this Section is intended to be for the benefit of the Holders of the Bonds and shall be enforceable by the Authority, the Trustee or any Holder of the Bonds; provided, however, that, the right of the Issuer, the Trustee or any such Holder to enforce the provisions of this undertaking shall be limited to a right of the Holder, or the Trustee or the Issuer to obtain specific enforcement of the Developer's obligations hereunder and any failure by the Developer to comply with the provisions of this undertaking shall not be a default hereunder with respect to the Bonds. Notwithstanding the foregoing, the NRMSIRs to which information shall be provided shall include those NRMSIRs approved by the Commission prior to the issuance of the Bonds. In the event the Commission approves any additional NRMSIRs after the date of issuance of the Bonds, the Developer shall, if the Developer is notified of such additional NRMSIRs, provide such information to the additional NRMSIRs. Failure to provide information to any new NRMSIR whose status as a NRMSIR is unknown to the Developer shall not constitute a breach of the foregoing covenant. Additionally, the requirements imposed hereby do not necessitate the preparation of any separate annual report addressing only the Bonds. The above requirements may be met by the filing of a general annual information statement of the Developer, provided such report includes all of the required information and is available by October 15. Additionally, the Developer may incorporate any information provided in any prior filing with each NRMSIR or included in any final official statement or private placement memorandum of the Developer provided such final official statement or private placement memorandum is filed with the MSRB. The Developer reserves the right to modify from time to time the specific types of information provided or the format of the presentation of such information, to the extent necessary or appropriate in 64 ~-,q MIFS02... :\RE\60\47660\1387\227\AGR 9197L.25B the judgment of the Developer; provided that, the Developer agrees that any such modification will be done in a manner consistent with the Rule. Section 11.9. Issuer, Trustee and Bondholder Not in Control; No Partnership. None of the covenants or other provisions contained in this Agreement shall, or shall be deemed to, give the Issuer, the Trustee or the Bondholders the right or power to exercise control over the affairs or management of the Developer, the power of the Issuer, the Trustee and the Bondholders being limited to the rights to exercise the remedies referred to in the Loan Documents. The relationship between the Developer and the Issuer, the Trustee or the Bondholders is, and at all times shall remain, solely that of debtor and creditor. No covenant or provision of the Loan Documents is intended, nor shall it be deemed or construed, to create a partnership, joint venture, agency or common interest in profits or income between the Developer and the Issuer, the Trustee, or any Bondholder or to create an equity in the Project in the Issuer. the Trustee or any Bondholder. Neither the Issuer, the Trustee nor any Bondholder undertakes or assumes any responsibility or duty to the Developer or to any other person with respect to the Project or the Loan, except as expressly provided in the Loan Documents; and notwithstanding any other provision of the Loan Documents: (a) neither the Trustee, the Issuer nor any Bondholder are nor shall any of them be construed as, a partner, joint venturer, alter ego, manager, controlling person or other business associate or participant of any kind of the Developer or its stockholders, members, or partners and none of the Issuer, the Trustee or any Bondholder intend to ever assume such status; (b) neither the Issuer, the Trustee, nor any Bondholder shall be liable for any Debts, expenses or losses incurred or sustained by the Developer; and (c) neither the Issuer, the Trustee, nor any Bondholder shall be deemed responsible for or a participant in any acts, omissions or decisions of the Developer or its stockholders, members, or partners. The Issuer, the Trustee, the Bondholders and the Developer disclaim any intention to create any partnership, joint venture, agency or common interest in profits or income among or between any of them, or to create an equity in the Project in the Issuer, the Trustee or any Bondholder, or any sharing of liabilities, losses, costs or expenses. Section 11.10. Time of the Essence. Time is of the essence with respect to this Agreement. Section 11.11. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Issuer, the Trustee, the Bondholders and the Developer and the respective successors and assigns of the Issuer, the Trustee, the Bondholders and the Developer, provided that neither the Developer nor any other Developer Party shall, without the prior written consent of the GE Bondholder, assign any rights, duties or obligations hereunder. Section 11.12. Waivers. No course of dealing on the part of the Issuer, the Trustee or any Bondholder, their officers, employees, consultants or agents, nor any failure or delay by the Issuer, the Trustee or any Bondholder with respect to exercising any right, power or privilege of the Issuer, the Trustee or any Bondholder under any of the Loan Documents, shall operate as a waiver thereof. Section 11.13. Cumulative Rights. Rights and remedies of the Issuer, the Trustee and any Bondholders under the Loan Documents shall be cumulative, and the exercise or partial exercise of any such right or remedy shall not preclude the exercise of any other right or remedy. Section 11.14. Singular and Plural. Words used in this Agreement and the other Loan Documents in the singular, where the context so permits, shall be deemed to include the plural and vice 65 ~-?O MIFS02...:\RE\6Q\4766Q\ 1387\227\AGR9197L.2SB versa. The definitions of words in the singular in this Agreement and the other Loan Documents shall apply to such words when used in the plural where the context so permits and vice versa. Section 11.15. Phrases. When used in this Agreement and the other Loan Documents, the phrase "including" shall mean "including, but not limited to," the phrase "satisfactory to the GE Bondholder" shall mean "in form and substance satisfactory to the GE Bondholder in all respects," the phrase "with the GE Bondholder's consent" or "with the GE Bondholder's approval" shall mean such consent or approval at the GE Bondholder's discretion, and the phrase "acceptable to the GE Bondholder" shall mean "acceptable to the GE Bondholder at the GE Bondholder's sole discretion." Section 11.16. Exhibits and Schedules. The exhibits and schedules attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein. Section 11.17. Titles of Articles, Sections and Subsections. All titles or headings to articles, sections, subsections or other divisions of this Agreement and the other Loan Documents or the exhibits hereto and thereto are only for the convenience of the parties and shall not be construed to have any effect or meaning with respect to the other content of such articles, sections, subsections or other divisions, such other content being controlling as to the agreement between the parties hereto. Section 11.18. Survival. All of the representations, warranties, covenants, agreements and indemnities made by the Developer hereunder and under the other Loan Documents shall survive the repayment in full of the Bonds and the release of the liens evidencing or securing the payment on the Bonds, and shall survive the transfer (by sale, foreclosure, conveyance in lieu of foreclosure or otherwise) of any or all right, title and interest in and to the Project to any party, whether or not an Affiliate of the Developer. SECTION 11.19. WAIVER OF JURY TRiAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE ISSUER AND THE DEVELOPER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR IN RESPECT OF ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF EITHER PARTY OR ARISING OUT OF ANY EXERCISE BY ANY PARTY OF ITS RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS OR IN ANY WAY RELATING TO THE LOAN, THE BONDS OR THE PROJECT (INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO ANY ACTION TO RESCIND OR CANCEL TIDS AGREEMENT, AND WITH RESPECT TO ANY CLAIM OR DEFENSE ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). TIDS WAIVER OF JURY TRIAL IS A MATERIAL INDUCEMENT FOR THE ISSUER TO ENTER THIS AGREEMENT. Section 11.20. Waiver of Punitive or Consequential Damages. Neither the Issuer nor the Developer shall be responsible or liable to each other or to any other Person for any punitive, exemplary or consequential damages which may be alleged as a result of the Loan or the transaction contemplated hereby, including any breach or other default by any party hereto. 66 ~- ?I MIFS02...;\RE\60\4 7660\ 1387\227\AGR9197L.2SB Section 11.21. Governing Law. The Loan Documents are being executed and delivered, and are intended to be performed, in the State of California, and the laws of the State of California and of the United States of America, without regard to the principles of conflicts of laws, shall govern the rights and duties of the parties hereto and the validity, construction, enforcement and interpretation of the Loan Documents, except to the extent otherwise expressly specified in any of the Loan Documents. Section 11.22. Entire Agreement. This Agreement and the other Loan Documents embody the entire agreement and understanding among the Issuer, the Trustee, the Bondholders and the Developer and supersede all prior agreements and understandings between or among such parties relating to the subject matter hereof and thereof. Accordingly, the Loan Documents may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties. Section 11.23. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall constitute an original, but all of which shall constitute one document. Section 11.24. References to GE Bondholder. (a) With respect to any provision of this Agreement requiring or providing for the consent, approval, designation, direction, or action of "GE Bondholder", the act of the Bondholder Representative shall be binding on the Designated GE Bondholder and each and every person or entity constituting a GE Bondholder as contemplated in Section 12.12 of the Indenture. (b) Any provision of this Agreement regarding the consent, approval, designation, direction, or action of "GE Bondholder" shall be of no force or effect whatsoever and the requirement or provision for such consent, approval, designation, direction. or action of "GE Bondholder" shall be deemed deleted. on and after the purchase of all Outstanding Bonds in connection with a Mandatory Tender Date in accordance with the terms of the Indenture. Section 11.25. Release. The Developer hereby acknowledges that it is executing this Agreement and each of the Loan Documents to which it is a party as its own voluntary act free from duress and undue influence. The Developer hereby unconditionally and irrevocably forever releases. acquits and discharges the Issuer, each GE Bondholder and their respective officers, directors, employees, counsel, agents and servants from any and all claims, demands or causes of action that it may have against any of them for the acts of any of the foregoing parties in connection with the Prior Bonds, the Prior Loan Agreement, the Prior Land Use Restriction Agreement and any of the documents, instruments and agreements executed in connection therewith. Section 11.26. No Defenses. The Developer hereby acknowledges. confirms and warrants to the Issuer, the Trustee and the GE Bondholder that as of the date hereof it has absolutely no defenses, claims, rights of set-off or counterclaims under, arising out of, or in connection with, this Agreement, the Note. the Loan Documents. or against any of the indebtedness evidenced or secured hereby or thereby or under any other documents executed in connection therewith or relating thereto. any and all of which the Developer hereby expressly waives. 67 ~~7:L MIFS02.. :\RE\60\4766O\1387\227\AGR9197L.25B Section 11.27. Assignments to Trustee. It is understood and agreed that all right, title and interest of the Issuer in and to this Agreement (other than amounts payable to the Issuer directly for its own purposes under Sections 2.7(d), 2.7(e), 8.12 and 10.3 hereof and any other Unassigned Issuer's Rights) are to be pledged and assigned by the Issuer to the Trustee in trust as security for the Bonds under and pursuant to the Indenture. The Developer consents to such pledge and assignment. The Issuer directs the Developer, and the Developer agrees, to payor cause to be paid to the Trustee at its corporate trust office listed in Section 11.1 hereof, all payments so assigned pursuant to this Section and all Trustee's expenses. Section 11.28. Obligation to Pay Taxes. It is the obligation of the Developer to pay any real estate transfer taxes imposed on any transfer of the Project or any portion thereof or interest therein, unless paid by the purchaser thereof. Section 11.29. Promotional Materials. Developer authorizes the GE Bondholder to issue press releases, advertisements and other promotional materials in connection with the GE Bondholder's own promotional and marketing activities, and describing the Bonds and the Loan in general terms or in detail and the GE Bondholder's participation in the transaction. All references to the GE Bondholder contained in any press release, advertisement or promotional material issued by Developer shall be approved in writing by the GE Bondholder in advance of issuance. ARTICLE XII LIMITATIONS ON LIABILITY Section 12.1. Limitations on Liability. Except as provided below, the Developer shall not be personally liable for amounts due under the Loan Documents. The Developer shall be personally liable for any deficiency, loss or damage suffered by the Issuer, the Trustee or the Bondholders because of: (a) the Developer's commission of a criminal act, (b) the failure to comply with provisions of the Loan Documents prohibiting the sale, transfer or encumbrance of the Project, any other collateral, or any direct or indirect ownership interest in the Developer; (c) the misapplication by the Developer or any Developer Party of any funds derived from the Project, including security deposits, insurance proceeds and condemnation awards; (d) the fraud or misrepresentation by the Developer or any Developer Party made in or in connection with the Loan Documents or the Loan; (e) the Developer's collection of rents more than one month in advance or entering into or modifying leases, or receipt of monies by the Developer or any Developer Party in connection with the modification of any leases, in violation of this Agreement or any of the other Loan Documents; (f) the Developer's failure to apply proceeds of rents or any other payments in respect of the leases and other income of the Project or any other collateral to the costs of maintenance and operation of the Project and to the payment of taxes, lien claims, insurance premiums, Debt Service and other amounts due under the Loan Documents; (g) the Developer's intentional interference with the Issuer's, the Trustee's or the Bondholders' exercise of rights under the Assignment of Leases; (h) the Developer's failure to maintain insurance as required by this Agreement or to pay any taxes or assessments affecting the Project; (i) damage or destruction to the Project caused by the acts or omissions of the Developer, its agents, employees, or contractors; (j) the Developer's obligations with respect to environmental matters pursuant to the Environmental Indemnity Agreement; (k) the Developer's failure to pay for any loss, liability or expense (including attomeys' fees and expenses) incurred by the Issuer, the Trustee or the Bondholders arising out of any claim or allegation made by the Developer, its 68 $-78 MIFS02... :\RE\60\4 7660\ 138 7\227\AGR9197L.258 successors or assigns, or any creditor of the Developer, that this Agreement or the transactions contemplated by the Loan Documents establish a joint venture, partnership or other similar arrangement between the Developer and the Issuer, the Trustee or the Bondholders; (I) any brokerage commission or finder's fees claimed in connection with the transactions contemplated by the Loan Documents; (m) the past, current or future sale or offering for sale. of any interest in the Developer, including, without limitation, liability under any applicable securities or blue sky laws; (n) obligations with respect to a Determination of Taxability following a Developer Fault Event (including, but not limited to, any Gross- Up Amount); (0) Developer's failure to timely renew any letter of credit issued or delivered in connection with the Loan Documents; or (p) a determination that the Bonds are invalid for any reason. None of the foregoing limitations on the personal liability of the Developer for amounts due under the Loan Documents shall in any way impair the validity of the indebtedness evidenced thereby or the validity of the indebtedness secured by the Deed of Trust Documents or the lien on or security interest in the collateral or the right of the secured party to enforce the lien or security interest or other interest in the collateral or any part thereof after default by Developer. Further, none of the foregoing limitations on the personal liability of the Developer shall modify, diminish or discharge the personal liability of any guarantor or indemnitor of the Developer's obligations hereunder. Nothing herein shall be deemed to be a waiver of any right which the Issuer, the Trustee or any Bondholders may have under Sections 506(a), 506(b), llll(b) or any other provision of the United States Bankruptcy Code, as such sections may be amended, or corresponding or superseding sections of the Bankruptcy Amendments and Federal Judgeship Act of 1984, to file a claim for the full amount due to the Issuer, the Trustee or the Bondholders under the Loan Documents or to require that all collateral shall continue to secure the amounts due under the Loan Documents. Section 12,2, Limitation on Liability of GE Bondholder's Officers, Employees, Etc. Any obligation or liability whatsoever of the GE Bondholder which may arise at any time under this Agreement or any other Loan Document shall be satisfied, if at all, out of the GE Bondholder's assets only. No such obligation or liability shall be personally binding upon, nor shall resort for the enforcement thereof be had to, the property of any of the GE Bondholder's shareholders, directors, officers, employees or agents, regardless of whether such obligation or liability is in the nature of contract, tort or otherwise, EXECUTED as of the date first written above. CITY OF CHULA VISTA, CALIFORNIA By: Name: Title: 69 ;g - 7Y MIFS02... :\RE\60\4766O\1387\227\AGR9197L.258 EUCALYPTUS GROVE HOLDINGS, LLC, a Utah limited liability company By: Name: Title: 70 ~-7r MIFS02... :\RE\60\47660\1387\127\AGR9191L.25B PREPARED BY AND AFTER RECORDING RETURN TO: ~/~ GECC/Eucalyptus WGM DRAFT 10/13/97 Richard A. Morrison, Esq. Weil, Gotshal & Manges LLP 701 Brickell Avenue, Suite 2100 Miami, Florida 33131 ATTACHMENT C STATE OF COUNTY OF ASSIGNMENT AND TRANSFER OF DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING AND OTHER COLLATERAL DOCUMENTS FOR AND IN CONSIDERATION of the sum of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are herewith acknowledged, the undersigned, CITY OF CHULA VISTA, CALIFORNIA, public body corporate and politic (the "Issuer"), does hereby convey, transfer, assign and pledge, IN TRUST, unto First Trust National Association, a national banking association duly organized and existing under the laws of the United States of America with its principal place of business in Seattle, Washington (the "Trustee"), as trustee under a certain Trust Indenture dated as of November I, 1997 between Issuer and Trustee (the "Indenture"), all of Issuer's rights, title and interest in and to that certain Deed of Trust, Security Agreement and Fixture Filing dated as of November I, 1997 (hereinafter referred to as the "Deed of Trust"), from Eucalyptus Grove Holdings, LLC, a Utah limited liability company ("the Developer"), to [Deed of Trust Trustee] for the benefit of the Issuer, to be recorded contemporaneously herewith in the of County, California; that certain Assignment of Rents and Leases dated as of November I, 1997 from the Developer to the Issuer, to be recorded contemporaneously herewith in the of County, California; that certain Assignment of Contracts, Warranties, Permits, Licenses, Etc., dated as of November I, 1997 from the Developer to the Issuer; and that certain Assignment of Management Agreement dated as of November I, 1997 among the Developer, [MANAGER], as manager, and the Issuer, all relating to certain real property lying and being within the County of , California, more particularly described in Exhibit "A" attached hereto and made a part hereof, including, but not limited to, all of Issuer's estate, right, title and interest in, to and under any of the Mortgaged Property (as defined in the Deed of Trust), which Deed of Trust is incorporated herein by reference as is fully set forth herein. This Assignment and Transfer is made pursuant to the provisions of the Indenture as further security for the payment of the Issuer's Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 in the principal amount of $18,300,000. [Remainder of page intentionally left blank] C-I MWS02...:\RE\60\47660\l387\227\ASG9217R.08B IN WITNESS WHEREOF, the undersigned Issuer has executed this instrument through its duly authorized officers as of this I st day of November, 1997. WITNESSES: CITY OF CHULA VISTA, CALIFORNIA (SEAL) By: Name: Title: Attest: By: Name: Title: STATE OF CALIFORNIA ) COUNTY OF ) On , 1997 before me, , a Notary Public in and for said State, personally appeared, , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. (SEAL) (Notary Public Signature) 2 C -;l MIFS02...:\RE\60\47660\1387\227\ASG9217R.08B EXHIBIT "A" Leesl Description L C-,3 MIFS02... :\RE\60\4 7660\1387\227\ASG9217R.088 .. PROOF OF PUBLlLATION (2015.5 C.C.P.) STATE OF CALIFORNIA, County of San Diego: I am a citizen of the United States and a resident of the County aforesaid; I am over the age of eighteen years, and not a party to or interested in the above- entitled matter. I am the principal clerk of the printer of the STAR-NEWS, a newspaper of general circulation, pub- lished ONCE WEEKLY in the city of Chula Vista and the South Bay Judicial District, County of San Diego, which newspaper has been adjudged a news- paper of general circulation by the Superior Court of the Cou'nty of San Diego, State of California, under the date of April 23, 1951, Case Number 182529; that the notice, of which the annexed is a printed copy (set in type not smaller than nonpareil), has been published in each regular and entire issue of said newspaper and not in any supplement thereof on the following dates, to-wit: 10/4 all in the year 1997 I certify (or declare) under penalty of perjury that the foregoing is true and correct. Dated at Chula Vista, California 91910 this 4th October 19 97 , - day of This space ,_ ,or the County Clerk's filing stamp CV #9871 Proof of Publicaton of: ---~---------------------------------------------- Public Notice -------------------------------------------------- c.-q PUBLIC NOTICE CITY OF CHUlA VISTA NOTICE OF PUBLIC HEARING .' REGARDING ISSUANCE OF IoIJlTlFAMllY HOUSING REVENUE REFUNDING BONDS NOTICE IS HEREBY Gf VEN thaI, at its regular meeting to be held al 6:00 p.m. on Tuesday, October 21,1997, at the City Council Chambers of the City of Cnula Vista located a1 276 Fourth Avenue, Chula Vista, California 91910, 1he City Council of the City of Chula Vista win conduct a ~blic hearing as requited bj Sec. tion 147(0 of the ~ternaJ Revenue t:ode of 1986, as amendsd, at which It will hear and consider informa- tion concerning the issuance by \he City 01 the Chula Vista (1he "CityTol bonds {the "Bonds1 to refinance a 376-unit multifamily rental housing pro~1 known as "Eucalyptus Grove" located on approximately 18 aO'9S at 67 Flower Street,. Chula Vista, California (the ''Projectj. The Project is currenlly owned and _oper- ated by EucalyptUs Grow Holdings, llC. a Utah lim- ited liability company. The City prol?D5es 10 is~ue the Bonds tn an aggregate principal amount not to ex- ceed $20,IlOO,000. At least 20 percent of the rental units in the Project are required II be available lor occupancy t1f persons or families whose income does not exceed 80 percent of the median income for the San Diego, California - Primary MetropOlitan Statistical Area at affordable rents to be es- tablished bi the City. . All PERSONS HAVING ANY INFORMATION REl. EVANT TO THE PRO. POSED 'ISSUANCE - OF THE BONDS DESCRIBED ASOVE ARE HEREBY IN- VITED TO APPEAR AT THE TIME AND PLACE MENTIONED ABOVE TO PRESENT SUCH INFOR. MATION TO THE' CITY COUNCIL':;'.,;"", '. For _furth8r~'inlormation. contec1 Sheri Schol\ Com. munity Development Specia- lisl 01 the City. al (619) 585-Sm Beveriy' AUtheiet . CityClerkolthe City olCII\lli! VISta CV0987f Ibi4197 ATTACHMENT D ~G"" 1:1- RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: ) ) ) ) ) ) ) DRAFT Robert]. Whalen, Esq. Stradling, Yocca, Carlson & Rauth 660 Newport Center Drive, Suite 1600 Newport Beach, California 92660 [Space above for Recorder's use.] AMENDED AND RESTATED REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS by and among CITY OF CHULA VISTA and FIRST TRUST NATIONAL ASSOCIATION, as Trustee and EUCALYPTUS GROVE HOLDINGS, LLC, a Utah limited liability company Dated as of November 1, 1997 Relating to $18,300,000 CITY OF CHULA VISTA MUL TIF AMIL Y HOUSING REVENUE REFUNDING BONDS (EUCALYPTUS GROVE PROJECT) SERIES 1997 526703.3\24036.0002 D-I Section 1. Section 2. Section 3. Section 4. Section 5. Section 6. Section 7. Section 8. Section 9. Section 10. Section 11. Section 12. Section 13. Section 14. Section 15. Section 16. Section 17. Section 18. Section 19. Section 20. Section 21. Section 22. Section 23. Section 24. Section 25. Signatures EXHIBIT A EXHIBIT B EXHIBIT C 526703.3\24036.0002 TABLE OF CONTENTS Page Definitions and Interpretation Construction, Equipping and Completion of the Project Residential Rental Property Lower-Income Tenants Tax Exempt Status of the Bonds Modification of Special Tax Covenants Indemnification Consideration Reliance Project Location Sale or Transfer of the Project Term Covenants to Run With the Land Burden and Benefit Uniformity; Common Plan Enforcement Recording and Filing The Trustee Attorneys' Fees, Trustee's Fees and Issuer's Fees Governing Law Amendments Notice Severability Multiple Counterparts Superseding of Prior Regulatory Agreement; Continuance of Housing Cooperation Agreement 1 6 6 8 9 10 10 12 12 12 12 13 14 14 14 14 15 16 16 17 17 17 17 17 17 19 DESCRIPTION OF PROJECT SITE INCOME COMPUTATION AND CERTIFICATION CERTIFICATION OF CONTINUING PROGRAM COMPLIANCE A-I B-1 C-l D -;;.. AMENDED AND RESTATED REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS THIS AMENDED AND RESTATED REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (the "Regulatory Agreement") is made and entered into as of November 1, 1997, by and among the CITY OF CHULA VISTA, a municipal corporation and a political subdivision of the State of California (the "Issuer"), FIRST TRUST NATIONAL ASSOCIATION, a national banking association duly organized and existing under and by virtue of the laws of the United States of America and authorized to accept and execute trusts of the type contemplated by the Indenture (as hereinafter defined), as trustee (the "Trustee"), and EUCALYPTUS GROVE HOLDINGS, LLC, a Utah limited liability company (the "Owner"). and amends and restates in its entirety that certain Regulatory Agreement and Declaration of Restrictive Covenants dated as of November 1. 1985, by and among the Issuer, Security Pacific National Bank, as trustee, and Eucalyptus Grove International. a California Limited Partnership and recorded in the Official Records of the County of San Diego on November 15, 1985 as Instrument No. 85-430278 (the "Prior Regulatory Agreement"). WIT N E SSE T H: WHEREAS, the Issuer proposes to issue its Multifamily Housing Revenue Refunding Bonds, (Eucalyptus Grove Project) Series 1997 (the "Bonds ") pursuant to and in compliance with Article 11 of Chapter 3 of Part I of Division 2 of Title 5 of the Government Code of the State of California, the proceeds of which will be utilized to refund the Issuer's Multifamily Housing Revenue Bonds (Eucalyptus Grove Project), Series 1985 (the "Prior Bonds") and enable the Owner to refinance a 376-unit multifamily rental housing project known as the ~Eucalyptus Grove Apartments" and located on the site described in Exhibit A attached hereto (the "Project"); and WHEREAS, in order to assure the Issuer and the owners of the Bonds that interest on the Bonds will be excluded from gross income for federal income tax purposes, and to satisfy the public purposes for which the Bonds are authorized to be issued under the Refunding Law, and to satisfy the purposes of the Issuer in determining to issue the Bonds, certain limits on the occupancy of units in the Project need to be established and certain other requirements need to be met; NOW, THEREFORE, in consideration of the issuance of the Bonds by the Issuer and the mutual covenants and undertakings set forth herein, and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Issuer, the Trustee and the Owner hereby agree as follows: Section 1. Definitions and Interoretation. The following terms shall have the respective meanings assigned to them in this Section 1 unless the context in which they are used clearly requires otherwise: 526703.3\24036.0002 -1- D-.3 "Act" - Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State. "Adjusted Income" - The adjusted income of a person (together with the adjusted income of all persons the age of 18 years or older who intend to reside with such person in one residential unit) as calculated in the manner prescribed in Regulation Section 1.103-8. "Administrator" - The Issuer or such other entity as is designated as such by the Issuer for purposes of monitoring the Owner's compliance with this Agreement. "Affiliated Party" - (1) a Person whose relationship with the Owner would result in a disallowance of losses under Section 267 or 707(b) of the Code or (2) a Person who together with the Owner 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 Owner 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 Owner would result in a disallowance of losses under Section 267 or 707(b) of the Code. "Affordable Rent" - A monthly rent which for a unit does not exceed the fair market rent for a unit with the same number of bedrooms as established by the United States Department of Housing and Urban Development. In the event the United States Department of Housing and Urban Development ceases to establish fair market rents, then the rent shall be set at a monthly rent which does not exceed 26.5 percent of one-twelfth of 60 percent of the Median Income for the Area. The above rent shall not include any adjustment for utility costs related to telephone, cable and electric, which shall be paid by the tenants in addition to the rent for the unit. The Owner shall provide the Issuer, the Administrator and each affected tenant with written notification of any rent increases in such units at least sixty (60) days prior to the effective date of the rent increase. "Area" - The San Diego, California Metropolitan Statistical Area. "Bond Counsel" - An attorney at law or a firm of attorneys acceptable to the Issuer of nationally recognized standing in matters pertaining to the tax exempt nature of interest on bonds issued by states and their political subdivisions, duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia. "Bondholder" or "holder" or "owner" - When used with respect to one or more of the Bonds, the owner of a Bond then outstanding under the Indenture as shown on the registry maintained by the Trustee pursuant to the Indenture. "Bonds" - The City of Chula Vista Multifamily Housing Revenue Refunding Bonds (Eucalyptus Grove Project), Series 1997 to be issued under and secured by the Indenture. "Certification of Continuing Program Compliance" - The Certificate to be filed by the Owner pursuant to Section 4 of this Regulatory Agreement in substantially the form attached hereto as Exhibit C. 526703.3\24036.0002 -2- j) - V "Closing Date" - The date of the delivery of the Bonds, being November 3, 1997. "Code" - The Internal Revenue Code of 1954, as amended (herein the" 1954 Code") and the Internal Revenue Code of 1986, as amended (herein the "1986 Code"), in each case to the extent made applicable to matters relating to the Bonds and the Project by Section 1313(a) of the Tax Reform Act of 1986, and with respect to a specific section thereof such reference shall be deemed to include (a) the applicable regulations promulgated or proposed under such section or any previous corresponding section, (b) any successor provision of similar import hereafter enacted, (c) any corresponding provision of any subsequent Internal Revenue Code and (d) the applicable regulations promulgated or proposed under the provisions described in (b) and (c). "Completion Date" - The date of substantial completion of the Project. "GECC" - General Electric Capital Corporation, a New York corporation, and its successors and assigns. "Income Certification" - The income certification form to be completed by all Lower-Income Tenants, which shall be substantially in the form attached hereto as Exhibit B. "Indenture" - The Trust Indenture, dated as of November 1,1997, between the Issuer and the Trustee, pursuant to which the Bonds are issued. "Issuer Fee" - The sum of $18,300 payable in arrears in quarterly installments on each February I, May I, August 1 and November I. "Loan Agreement" - The Loan Agreement dated as of November I, 1997 by and between the Issuer and the Owner, as it may be amended from time to time. "Lower-Income Tenant" - A household whose Adjusted Income immediately prior to occupying a unit does not exceed 80 percent of the Median Income for the Area, adjusted for actual household size. For this purpose, the occupants of a unit shall not be considered to be of lower income if all of such occupants are students (as defined in Section 151(e)(4) of the Code), no one of whom is entitled to file a joint return under Section 6013 of the Code. "Lower-Income Units" - The dwelling units in the Project to be rented by, or held available for occupancy for, Lower-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 Secretary of Housing and Urban Development under Section 8 of the United States Housing Act of 1937, as amended, or if programs under Section 8 are terminated, median income for the Area determined under the method used by the Secretary prior to such termination. "Mortgage" - That certain Deed of Trust, Security Agreement and Fixture Filing (together with all riders thereto) securing the Mortgage Note, executed by the Owner with respect to the Project, as it may be amended, restated, supplemented or otherwise modified from time to time. 526703.3\24036.0002 -3- D-~ "Mortgage Loan" - The loan made by the Issuer to the Owner pursuant to the terms and provisions of the Loan Agreement. "Mortgage Note" - That certain multifamily note (together with all addenda thereto and as modified to reflect the terms of the Mortgage Loan) executed by the Owner in favor of the Issuer, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Owner" - Eucalyptus Grove Holdings, LLC, a Utah limited liability company. "Owner's Tax Certificate" - A certificate of the Owner with respect to compliance by the Owner with certain provisions of the Code delivered to the Issuer by the Owner on the Closing Date. "Prior Bonds" - The Issuer's Multifamily Housing Revenue Bonds (Eucalyptus Grove Apartment), Series 1985. "Prior Loan" - The mortgage loan made to the Owner in connection with the Prior Bonds. "Prior Regulatory Agreement" - The Regulatory Agreement and Declaration of Restrictive Covenants dated as of November 1,1985, by and among the Issuer, Security Pacific National Bank, as Trustee, and Eucalyptus Grove International, a California Limited Partnership. "Program" - The Issuer's multifamily rental housing bond program pursuant to which the Issuer provides financing for multifamily rental housing projects such as the Project. "Project" - The Project Facilities and the Project Site. "Project Costs" - To the extent authorized by the Code, the Regulations and the Act, any and all costs incurred by the Issuer or the Owner with respect to the acquisition, construction and equipping, as the case may be, of the Project, including, without limitation, costs for site preparation, the planning of housing and improvements, the acquisition of property, the removal or demolition of existing structures, the construction of housing, related facilities and improvements, and all other work in connection therewith, and all costs of financing, including, without limitation, the cost of consultant, accounting and legal services, other expenses necessary or incident to determining the feasibility of the Project, contractor's and developer's overhead and supervision fees and costs directly allocable to the Project, administrative and other expenses necessary or incident to the Project and the financing thereof (including reimbursement to any municipality, county or entity for expenditures made, with the approval of the Issuer, for the Project), any costs of issuance paid by the Owner with respect to the Prior Bonds, interest accrued during construction of the Project and prior to the Completion Date and all other costs approved by Bond Counsel. "Project Facilities" - The buildings, structures and other improvements constructed on the Project Site, and all fixtures and other property owned by the Owner and located on, or used in connection with, such buildings, structures and other improvements. 526703.3\24036.0002 -4- D-fo "Project Site" - The parcel or parcels of real property described in Exhibit A, and all rights and appurtenances thereunto appertaining. "Qualified Project Costs" - The Project Costs incurred after April 24, 1984, which are chargeable to a capital account with respect to the Project for federal income tax and financial accounting purposes, or would be so chargeable either with a proper election by the Owner or but for the proper election by the Owner to deduct those amounts within the meaning of Regulation 1.103-8(a)(1)(ii); provided, however, that only that portion of the interest costs accrued during construction of the Project shall constitute a Qualified Project Cost as bears the same ratio to all such interest as the Qualified Project Costs bear to all Project Costs; and provided further that interest accrued on the Prior Loan shall cease to be a Qualified Project Cost on the Completion Date; and provided still further that if any portion of the Project was constructed by an Affiliated Party (whether as a general contractor or a subcontractor), "Qualified Project Costs" shall include only the actual out-of-pocket costs incurred by such Affiliated Party in constructing the Project (or any portion thereof), 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 Project or payments received by such Affiliated Party due to early completion of the Project (or any portion thereof). "Qualified Project Period" - The period beginning on the first day on which at least 10 percent of the dwelling units in the Project are first occupied, and ending on the later of (a) the date which is 10 years after the first day on which at least 50 percent of the dwelling units in the Project are first occupied, or (b) the date which is a qualified number of days after the date on which any of the dwelling units in the Project is first occupied, or (c) the date on which any assistance provided with respect to the Project under Section 8 of the United States Housing Act of 1937 terminates, or (d) the date on which the Bonds are no longer outstanding, or (e) November 1, 2012. For purposes of clause (b), the term "qualified number of days" means, with respect to the Bonds, 50 percent of the number of days comprising the term from the date of issuance of the bonds that were refunded by the Prior Bonds until final maturity of the Bonds (including any refunding bonds). "Refunding Law" - Article 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State. "Regulations" - The Income Tax Regulations from time to time promulgated or proposed by the Department of the Treasury pursuant to the Code. "Regulatory Agreement" - This Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants, as it may be amended from time to time. "Trustee" - First Trust National Association, and its successors and any other corporation or association resulting from or surviving any consolidation or merger to which it or its successors may be a party and any successor trustee at any time serving as successor trustee under the Indenture. 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 shall be construed to include the 526703.3\24036.0002 -5- .D-7 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. Capitalized terms used in this Regulatory Agreement and not defined herein shall have the meaning assigned to such terms in Section 1. I of the Indenture. Section 2. Construction. Eauiooinl! and Comoletion of the Proiect. The Owner hereby represents, covenants and agrees as follows: (a) The construction and equipping of the Project has been completed. (b) The total Project Costs and the Qualified Project Costs are accurately set forth in the Owner's Tax Certificate which has been delivered to the Issuer and the Trustee. (c) At all times during the Qualified Project Period, the Project has been in continual compliance with the provisions of the Prior Regulatory Agreement relating to Section 103(b)(4)(A) of the 1954 Code. (d) The statements, representations, covenants and warranties made in the Loan Agreement and in the various certificates delivered by the Owner to the Issuer and the Trustee and are true and correct and are incorporated by reference herein. (e) Money on deposit in any fund or account in connection with the Bonds, whether or not such money was derived from other sources, shall not be used by or under the direction of the Owner, in a manner which would cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code, and the Owner specifically agrees that the investment of money in any such fund shall be restricted as may be necessary to prevent the Bonds from being "arbitrage bonds" under the Code. (f) The Owner and any Affiliated Party will not purchase and hold any Bonds pursuant to any arrangement, formal or informal, and will not take or omit to take, as is applicable, any other action if such action or omission would in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to the requirements of the Indenture, the Loan Agreement or this Regulatory Agreement. Section 3. Residential Rental Prooerty. The Owner hereby acknowledges and agrees that the Project is to be owned, managed and operated in the same manner as a project for "residential rental property" (within the meaning of Section 103(b)(4)(A) of the 1954 Code) for a 526703.3\24036.0002 -6- D-i term equal to the Qualified Project Period. To that end, the Owner hereby represents, covenants, warrants and agrees as follows: (a) The Project has been constructed for the purpose of providing multifamily residential rental property. The Owner shall own, manage and operate the Project as a project 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 Section 1 03(b)( 4 )(A) of the 1954 Code, Section I .103-8(b) of the Regulations, and the provisions of the Act, and in accordance with such requirements as may be imposed thereby on the Project from time to time. (b) All of the dwelling units in the Project are and will continue to be similarly constructed units, and each dwelling unit in the Project does and will continue to contain complete separate and distinct facilities for living, sleeping, eating, cooking and sanitation for a single person or a family, including a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking range, refrigerator and sink. (c) None of the dwelling units in the Project has been or 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 or trailer court or park. (d) No part of the Project has been or will at any time be owned or used as a condominium or by a cooperative housing corporation, nor shall the Owner take any steps in connection with a conversion to such ownership or use. The Owner may file a subdivision map for condominium purposes, may record a condominium declaration and a condominium plan, and may deed out title to one unit and have title thereto quitclaimed back to the Owner, in order to perfect the condominium regime. Other than the foregoing, the Owner shall not take any steps in connection with a conversion of the Project 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, and in no event shall any unit in the Project be sold as a condominium unit during the term of this Regulatory Agreement. (e) All of the dwelling units in the Project have been and will be available for rental on a continuous basis to members of the general public; and the Owner will not give preference to any particular class or group in renting the dwelling units in the Project, except to the extent that dwelling units are required to be leased or rented to Lower-Income Tenants as described in Section 4 hereof. The Owner specifically agrees that it will not deny any person the opportunity to reside in the Project because such person is blind, visually handicapped, deaf or otherwise physically disabled or because of such person's gender, race, color, religion, ancestry or national origin. (f) The Project Site consists of a parcel or parcels that are contiguous except for the interposition of a road, street or stream, and all of the Project Facilities comprise a single geographically and functionally integrated project for residential rental property, as evidenced by the ownership, management, accounting and operation of the Project. 526703.3\24036.0002 -7- D - 9 (g) No dwelling unit in any building or structure in the Project which contains fewer than 5 units shall be occupied by the Owner or an Affiliated Party; provided, however, that if a building in the Project contains five or more dwelling units, this subsection shall not be construed to prohibit occupancy of such dwelling units by one or more resident managers or maintenance personnel, any of whom may be the Owner. Section 4. Lower-Income Tenants. Pursuant to the requirements of Section 103(b)(4)(A) of the 1954 Code, the Act and Issuer policy, the Owner hereby represents, warrants and covenants that throughout the Qualified Project Period: (a) Not less than 20 percent of the completed units in the Project shall be continuously occupied by Lower-Income Tenants. Not less than forty-three (43) two-bedroom units shall be occupied by Lower-Income Tenants at an Affordable Rent. For purposes of satisfying the occupancy requirement set forth above, a unit occupied by a person or family who at the commencement of their occupancy qualified as a Lower-Income Tenant shall be treated as occupied by a Lower-Income Tenant until reoccupied. A unit occupied by a Lower-Income Tenant shall be deemed, upon the termination of such tenant's occupancy, to be continuously occupied by a Lower-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 31 days. The Lower Income Units have been and will continue to be intermingled with all other dwelling units in the Project and shall be of a quality comparable, and offer a range of sizes and number of bedrooms proportionate, to those units which are available to other tenants. Tenants in the Lower Income Units have had and will continue to have equal access and enjoyment to all common facilities of the Project. Because the Affordable Rent provisions described above differ from those currently in effect for the Project, it will be necessary to phase in the requirements. To the extent that less than 43 units are occupied by Lower-Income Tenants on the Closing Date, the Owner shall rent any two-bedroom units that are vacant or that become vacant only to Lower-Income Tenants until 43 two-bedroom units are occupied by Lower-Income Tenants at an Affordable Rent. For any existing Lower-Income Tenants in a two-bedroom unit, the Affordable Rent shall become effective immediately. (b) The Owner shall obtain, complete and maintain on file Income Certifications from each Lower-Income Tenant and Very Low Income Tenant, dated immediately prior to the initial occupancy of such tenant in the Project, in substantially the form set forth in Exhibit B to this Regulatory Agreement and shall provide such additional information as may be required in the future by the State of California, the Issuer and by Section 103(b)(l2)(C) of the 1954 Code, 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, Regulations or other official statements now or hereafter promulgated, proposed or made by the Department of the Treasury or the Internal Revenue Service with respect to obligations issued under Section 103(b)(4)(A) of the 1954 Code. A copy of each such Income Certification shall be attached to the monthly report filed with the Issuer and the Administrator pursuant to paragraph (e) of this Section 4. The Owner shall make a good faith effort to verify that the income provided by an applicant in an Income Certification is accurate by taking one or more of the following steps as a part of the verification process: (I) obtain a pay stub for the most recent pay period, (2) obtain an income tax return for the most recent tax year, (3) conduct a TRW or similar search, (4) obtain an income verification from the 52(,70331240360002 -8- D _ I 0 applicant's current employer, (5) obtain an income verification from the Social Security Administration and/or the California Department of Social Services if the applicant receives assistance from either of such agencies, or (6) if the applicant is unemployed and does not have an income tax return, obtain another form of independent verification. (c) The Owner will maintain complete and accurate records pertaining to the Lower-Income Units, and will, upon reasonable notice, permit any duly authorized representative of the Issuer, the Trustee or the Administrator to inspect the books and records of the Owner pertaining to the occupancy of the Lower-Income Units. (d) The Owner will prepare and submit to the Issuer, the Trustee and the Administrator monthly throughout the Qualified Project Period a Certification of Continuing Program Compliance, executed by the Owner, stating: (i) the percentage of the dwelling units of the Project which were occupied or held available for occupancy, pursuant to subsection (a) hereof, by Lower-Income Tenants and the rents charged for each such unit, and (ii) that either (A) that no unremedied default has occurred under this Regulatory Agreement, or (B) that 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 Owner to remedy such default. On each May 1 and November 1, the Owner will prepare and submit to the Issuer a Semi-Annual Report in the form set forth in Exhibit o hereto. (e) The Owner shall accept as tenants on the same basis as all other prospective tenants, persons who are recipients of federal certificates for rent subsidies pursuant to the existing program under Section 8 of the United States Housing Act of 1937, or its successor. The Owner shall not apply selection criteria to Section 8 certificate holders that is more burdensome than criteria applied to all other prospective tenants. In the event of the vacancy or anticipated vacancy of a Lower-Income Unit, the Owner will give the Issuer and the Administrator seven days' advance notice prior to renting such unit to assure that priority is given in renting such unit to application from Section 8 certificate-holders referred to the Owner by the Issuer. (f) The form of lease to be utilized by the Owner in renting any units in the Project to any person other than a Section 8 tenant who is intended to qualify as a Lower-Income Tenant shall provide for termination of the lease and consent by such person to immediate eviction for failure to qualify as a Lower-Income Tenant as a result of any material misrepresentation made by such person with respect to the Income Certification. Section 5. Tax ExemDt Status of the Bonds. The Owner and the Issuer, as applicable, each hereby represents, warrants and agrees that: (a) The Owner and the Issuer 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 exemption from California personal income taxation of the interest on the Bonds or the exclusion from gross income for federal income tax purposes of interest on the Bonds, and, if either of them should take or permit, or omit to take or cause to be taken, any such action, it will take all lawful actions necessary to rescind or correct any of its actions or omissions promptly upon obtaining knowledge thereof; 526703.3\24036.0002 -9- i)-II (b) The Owner and the Issuer will take such action or actions as may be necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, to comply fully with 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 pertaining to obligations issued under Section 103(b)(4)(A) of the 1954 Code and the Tax Reform Act of 1986; and (c) The Owner and the Issuer, at the Owner's expense, will file of record such documents and take such other steps as are necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, in order to insure that the requirements and restrictions of this Regulatory Agreement will be binding upon all owners of the Project and their successors in interest, including, but not limited to, the execution and recordation of this Regulatory Agreement in the real property records of the City of Riverside, Section 6, Modification of Soecial Tax Covenants, The Owner, the Trustee and the Issuer hereby agree as follows: (a) To the extent any amendments to the Act, the Regulations or the Code, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, impose requirements upon the ownership or operation of the Project more restrictive than those imposed by this Regulatory Agreement, this Regulatory Agreement shall be deemed to be automatically amended to impose such additional or more restrictive requirements, (b) To the extent that the Act, the Regulations or the Code, or any amendments thereto, shall, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, impose requirements upon the ownership or operation of the Project less restrictive than imposed by this Regulatory Agreement, this Regulatory Agreement may be amended or modified to conform in whole or in part to such changed requirements should the Issuer, in its sole discretion, decide that such requirements should be made applicable to the Project. (c) The Owner, the Issuer and, if applicable, the Trustee shall execute, deliver and, if applicable, file of record any and all documents and instruments, necessary to effectuate the intent of this Section 6, and each of the Owner and the Issuer hereby appoints the Trustee as its true and lawful attorney-in-fact to execute, deliver and, if applicable, file of record on behalf of the Owner or the Issuer, as is applicable, any such document or instrument (in such form as may be approved in writing by Bond Counsel) if the Owner or the Issuer defaults in the performance of its obligations under this subsection (c); provided, however, that the Trustee shall take no action under this subsection (c) without first notifying the Owner and the Issuer, and without first providing the Owner or the Issuer, or both, as is applicable, an opportunity to comply with the requirements of this Section 6, Nothing in this subsection (c) shall be construed to allow the Trustee to execute an amendment to this Regulatory Agreement on behalf of the Issuer, Section 7, Indemnification, The Owner hereby releases the Issuer and its officers and employees from, and covenants and agrees to indemnify, hold harmless and defend the Issuer, the Trustee and their respective officers, members, directors, officials, agents and employees and each of them (each an "indemnified party") from and against, (a) any and all claims, joint or several, by or on behalf of any person arising from any cause whatsoever in connection with transactions contemplated hereby or otherwise in connection with the Project, the 526703.3\24036.0002 -10- D _I ~ Bonds, the Prior Bonds or the execution or amendment of any document relating thereto; (b) any and all claims, joint or several, arising from any cause whatsoever in connection with the approval of refinancing for the Project or the making of the Mortgage Loan; (c) any and all claims, joint or several, arising from any act or omission of the Owner or any of its agents, servants, employees or licensees, in connection with the Mortgage Loan or the Project; (d) all reasonable costs, counsel fees, expenses or liabilities incurred in connection with any such claim, or proceeding brought thereon; (e) any and all claims arising in connection with the issuance and sale, resale or remarketing of any Bonds or any certifications or representations made by any person other than the Issuer or the party seeking indemnification in connection therewith and the carrying out by the Owner of any of the transactions contemplated by the Bonds, the Indenture, the Loan Agreement and this Regulatory Agreement; Cf) any and all claims arising in connection with the operations of the Project, or the conditions, environmental or otherwise, occupancy, use, possession, conduct or management of work done in or about, or from the planning, design, acquisition, installation or construction of, the Project or any part thereof; and (g) any and all losses, claims, damages, liabilities or expenses, joint or several, arising out of or connected with the Trustee's acceptance or administration of the trusts created by the Indenture and the exercise of its powers or duties thereunder or under the Loan Agreement, this Regulatory Agreement or any other agreements in connection therewith to which it is a party; except (i) in the case of the foregoing indemnification of the Trustee or any of its officers, members, directors, officials and employees, to the extent such damages are caused by the negligence or willful misconduct of such person; or (ii) in the case of the foregoing indemnification of the Issuer or any of its officers, members, directors, officials and employees, to the extent such damages are caused by the gross negligence or willful misconduct of such person. In the event that any action or proceeding is brought against any indemnified party with respect to which indemnity may be sought hereunder, the Owner, upon written notice from the indemnified party, shall assume the investigation and defense thereof, including the employment of counsel selected by the Owner, subject to the approval of the indemnified party in such party's sole discretion, and shall assume the payment of all expenses related thereto, with full power to litigate, compromise or settle the same in its sole discretion; Drovided that the Issuer or the Trustee shall have the right to review and approve or disapprove any such compromise or settlement. Each indemnified party shall have the right to employ separate counsel in any such action or proceeding and participate in the investigation and defense thereof, and the Owner shall pay the reasonable fees and expenses of such separate counsel; Drovided, however, that unless such separate counsel is employed with the approval of the Owner, which approval shall not be unreasonably withheld, the Owner shall not be required to pay the fees and expenses of such separate counsel. The Owner also shall pay and discharge and shall indemnify and hold harmless the Issuer, the Administrator and the Trustee from (i) any lien or charge upon payments by the Owner to the Issuer, the Administrator and the Trustee hereunder and (Ii) any taxes (including, without limitation, all ad valorem taxes and sales taxes), assessments, impositions and other charges in respect of any portion of the Project. 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, the Administrator or the Trustee shall give prompt notice to the Owner and the Owner shall have the sole right and duty to assume, and will assume, the defense thereof, with full power to litigate, compromise or settle the same in its sole discretion. 526703.3\24036.0002 -11- ./)-13 In addition to the foregoing, subject to Section 19 hereof, the Owner will pay upon demand all of the fees and expenses, including attorneys' fees, paid or incurred by the Trustee, the Issuer or the Administrator in enforcing the provisions hereof. The provisions of this Section 7 shall survive the term of the Bonds and this Regulatory Agreement or the resignation or removal of the Trustee. The obligations of the Owner under this Section are independent of any other contractual obligation of the Owner to provide indemnity to the parties named herein or otherwise, and the obligation of the Owner to provide indemnity hereunder shall not be interpreted, construed or limited in light of any other separate indemnification obligation of the Owner. Any indemnified party shall be entitled simultaneously to seek indemnity under this Section and any other provision under which it is entitled to indemnity. Section 8. Consideration. The Issuer has issued the Bonds to provide funds to refinance the Project, all for the purpose, among others, of inducing the Owner to continue to operate the Project in a manner to benefit Lower-Income Tenants. In consideration of the issuance of the Bonds by the Issuer, the Owner has entered into this Regulatory Agreement and has agreed to restrict the uses to which the Project may be put on the terms and conditions set forth herein. Section 9. Reliance. The Issuer and the Owner hereby recognize and agree that the representations and covenants set forth herein may be relied upon by all persons interested in the legality and validity of the Bonds, in the exemption from California personal income taxes of interest on the Bonds and in the exclusion from gross income for federal income tax purposes of interest on the Bonds. In performing their duties and obligations under this Regulatory Agreement, the Issuer, the Administrator and the Trustee may rely upon statements and certificates of the Owner and Lower-Income Tenants, and upon audits of the books and records of the Owner pertaining to occupancy of the Project. In addition, the Issuer, the Administrator and the Trustee 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, the Administrator or the Trustee under this Regulatory Agreement in good faith and in conformity with such opinion; provided, however, that if there are conflicting opinions among the counsel selected by such parties, the opinion of Bond Counsel shall govern the interpretation and enforcement of this Regulatory Agreement. In determining whether any default or lack of compliance by the Owner exists under this Regulatory Agreement, the Trustee shall not be required to conduct any investigation into or review of the operations or records of the Owner and may rely solely upon any written notice or certificate delivered to the Trustee by the Owner or the Issuer with respect to the occurrence or absence of a default, unless the Trustee knows that the notice or certificate is erroneous or misleading. Section 10. Proiect Location. The Owner hereby represents and warrants that the Project is located entirely within the incorporated area of the Issuer. Section 11. Sale or Transfer of the Proiect. The Owner hereby covenants and agrees not to sell, transfer or otherwise dispose of the Project, or any portion thereof (other than for individual tenant use as contemplated hereunder), without obtaining the prior written consent of the Issuer, which consent shall be given as promptly as practicable following (A) the receipt by the Issuer and the Trustee of evidence acceptable to the Issuer that the Owner is not in default 526703.3\24036.0002 -12- D -I" hereunder or under the Loan Agreement (which may be evidenced by a Certificate of Continuing Program Compliance) or the purchaser or assignee undertakes to cure any defaults of the Owner to the reasonable satisfaction of the Issuer; (B) the execution by the purchaser or assignee of any document requested by the Issuer or the Trustee with respect to the assumption of the Owner's obligations under this Regulatory Agreement and the Loan Agreement, including, without limitation, an instrument of assumption hereof, and delivery to the Issuer and the Trustee of an opinion of such purchaser's or assignee's counsel to the effect that each such document and this Regulatory Agreement are valid, binding and enforceable obligations of such purchaser or assignee; (C) receipt by the Issuer and the Trustee of an opinion of Bond Counsel addressed to the Issuer and the Trustee to the effect that any such sale, transfer or other disposition will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds; and (D) receipt by the Issuer and the Trustee of all fees then currently due and payable to the Issuer and the Trustee. It is hereby expressly stipulated and agreed that any sale, transfer or other disposition of the Project in violation of this Section 11 shall be null, void and without effect, shall cause a reversion of title to the Owner, and shall be ineffective to relieve the Owner of its obligations under this Regulatory Agreement. Nothing contained in this Section 11 shall affect any provision of the Mortgage or any other document or instrument to which the Owner is a party which requires the Owner to obtain the consent of the holder of the Mortgage Note or any other provision as a precondition to sale, transfer or other disposition of the Project or which gives the holder of the Mortgage Note the right to accelerate the maturity of the Mortgage Loan, or to take some other similar action with respect to the Mortgage Loan, upon the sale, transfer or other disposition of the Project. Nothing contained in this Section 11 shall affect the right of the Trustee or its designee to foreclose on the Project or accept a deed in lieu thereof. Section 12. Term. 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 for the Qualified Project Period, it being expressly agreed and understood that the provisions hereof are intended to survive the retirement of the Bonds and expiration of the Indenture, the Mortgage Note and the Mortgage. Notwithstanding any other provisions of this Regulatory Agreement, this entire Regulatory Agreement, or any of the provisions or sections hereof, may be terminated upon agreement by the Issuer and the Owner if there shall have been received by the Issuer and the Trustee an opinion of Bond Counsel that such termination will not adversely affect the exclusion from gross income for federal income tax purposes or exemption from California personal income taxation of the interest on the Bonds; provided, however, that the Issuer has bargained for and obtained the Owner's agreement herein to terms and conditions not related to the exclusion from gross income of interest on the Bonds and any decision by the Issuer to terminate some or all of such provisions shall be in the sole discretion of the Issuer. The Owner shall provide notice of any termination of this Regulatory Agreement to the Trustee. The terms of this Regulatory Agreement to the contrary notwithstanding, this Regulatory Agreement, and each and all of the terms hereof, shall terminate and be of no further force and effect in the event of an involuntary noncompliance with the provisions of this Regulatory Agreement caused by foreclosure of the lien of the Mortgage or delivery of a deed in lieu of foreclosure, fire, seizure, requisition, change in a federal law, or an action of a federal agency after the Closing Date which prevents the Issuer and the Trustee from enforcing the provisions of this Regulatory Agreement, or condemnation or a similar event, but only if within a reasonable period thereafter Bonds are paid in full and retired; provided, however, that the preceding 526703.3\24036.0002 -13- D -/~ 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 of the lien of the Mortgage or the delivery of a deed in lieu of foreclosure or a similar event, the Owner or any Affiliated Party obtains an interest in the Project which constitutes an ownership interest therein for federal income tax purposes. Upon the termination of all and several 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 13. Covenants to Run With the Land. The Owner hereby subjects the Project (including the Project Site) to the covenants, reservations and restrictions set forth in this Regulatory Agreement. The Issuer and the Owner 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 Owner's successors in title to the Project; 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 Project 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. Section 14. Burden and Benefit. The Issuer and the Owner hereby declare their understanding and intent that the burden of the covenants set forth herein touch and concern the land in that the Owner's legal interest in the Project is rendered less valuable thereby. The Issuer and the Owner 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 Project by Lower-Income Tenants, the intended beneficiaries of such covenants, reservations and restrictions, and by furthering the public purposes for which the Bonds were issued. Section 15. Uniformity: Common Plan. The covenants, reservations and restrictions hereof shall apply uniformly to the entire Project in order to establish and carry out a common plan for the use, development and improvement of the Project Site. Section 16. Enforcement. If the Owner defaults in the performance or observance of any covenant, agreement or obligation of the Owner set forth in this Regulatory Agreement and if such default remains uncured for a period of 30 days after written notice thereof shall have been given by the Issuer or the Trustee to the Owner (or for a period of 60 days after such notice if such default is curable but requires acts to be done or conditions to be remedied which, by their nature, cannot be done or remedied within such 30-day period, and if the Owner commences the same within such 30-day period and thereafter diligently and continuously prosecutes the same to completion within such 60-day period or for any shorter period of time as may be required in an opinion of Bond Counsel to assure compliance with Section 103(b)(4)(A) of the 1954 Code), then the Issuer or the Trustee, upon notice of such an event of default, acting on its own behalf or on behalf of the Issuer, shall declare an "Event of Default" to have occurred hereunder, and shall provide written notice thereof to the Owner and, at its option, may take any one or more of the following steps: 526703.3\24036.0002 -14- D-I(. (i) by mandamus or other suit, action or proceeding at law or in equity, require the Owner 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 Trustee hereunder; (ii) have access to and inspect, examine and make copies of all of the books and records of the Owner pertaining to the Project; or (iii) take such other action at law or in equity as may be reasonably necessary to enforce the obligations, covenants and agreements of the Owner hereunder. The Owner hereby grants to the Issuer the option, upon the Owner's default under this Regulatory Agreement, for the Qualified Project Period to lease up to twenty percent (20 %) of the units in the Project for a rental of $1.00 per unit per year for the purpose of subleasing such units to Lower-Income Tenants, but only to the extent necessary to comply with the provisions of Section 4. The Issuer shall make diligent effort to rent Lower-Income Units to Lower-Income Tenants for an Affordable Rent. Any rental paid under any such sublease shall be paid to the Owner after the Issuer has been reimbursed for any expenses incurred in connection with such sublease, provided that, if the Issuer has notice that the Owner is in default under the Loan Agreement, after the Issuer has been reimbursed for any expenses incurred in connection with such sublease, such rental shall be paid to the Trustee. The Owner hereby agrees that specific enforcement of the Owner's agreements contained herein is the only means by which the Issuer may fully obtain the benefits of such agreements made by the Owner herein, and the Owner therefore agrees to the imposition of the remedy of specific performance against it in the case of any Event of Default by the Owner hereunder. The Trustee shall have the right, in accordance with this Section 16 and the provisions of the Indenture, upon notice to but without the consent or approval of the Issuer, to exercise any or all of the rights or remedies of the Issuer hereunder. All fees, costs and expenses of the Trustee and the Issuer incurred in taking any action pursuant to this Section 16 as a result of a default by Owner shall be paid by the Owner and shall be the sole responsibility of the Owner. After the Indenture has been discharged, or if the Trustee fails to act upon the occurrence of an Event of Default, the Issuer may act on its own behalf to declare an Event of Default to have occurred and to take anyone or more of the steps specified hereinabove to the same extent and with the same effect as if taken by the Trustee. The rights of the Trustee under this Section are in addition to all rights conferred upon the Trustee under the Indenture and in no way limit those rights. Section 17. Recordin!! and Filin!!. (a) The Owner shall cause this Regulatory Agreement and all amendments and supplements hereto and thereto, to be recorded and filed in the real property records of the County 526703.3\24036.0002 -15- D -/7 of San Diego and in such other places as the Issuer or the Trustee may reasonably request. The Owner shall pay all fees and charges incurred in connection with any such recording. (b) The Owner and the Issuer will file of record such other documents and take such other steps as are necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, in order to insure that the requirements and restrictions of this Regulatory Agreement will be binding upon all owners of the Project. (c) The Owner hereby covenants to include or reference the requirements and restrictions contained in this Regulatory Agreement in any documents transferring any interest in the Project 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 18. The Trustee. The Trustee shall act as specifically provided herein and in the Indenture. The Trustee shall have no duty to act with respect to enforcement of the Owner's performance hereunder. The Trustee may, if so requested by the Issuer, act as the agent of and on behalf of the Issuer, and any act required to be performed by the Issuer as herein provided shall be deemed taken if such act is performed by the Trustee. In connection with any such performance, however, the Trustee is acting solely as Trustee under the Indenture, and not in its individual capacity, and all provisions of the Indenture relating to the rights, privileges, powers and protections of the Trustee, including without limitation those set forth in Article XII thereof, shall apply with equal force and effect to all actions taken (or omitted to be taken) by the Trustee in connection with this Regulatory Agreement. Neither the Trustee nor any of its officers, directors, agents or employees shall be liable for any action taken or omitted to be taken by it hereunder or in connection herewith except for its or their own negligence or willful misconduct. The Trustee may consult with legal counsel selected by it (the reasonable fees of which counsel shall be paid by the Owner) and any action taken or suffered by it reasonably and in good faith in accordance with the opinion of such counsel shall be full justification and protection to it. The Trustee may at all times assume compliance with this Regulatory Agreement unless otherwise notified in writing by or on behalf of the Issuer, or unless it has actual knowledge of noncompliance. After the date on which no Bonds remain outstanding as provided in the Indenture, the Trustee shall no longer have any duties or obligations under this Regulatory Agreement, and all references to the Trustee herein shall be deemed references to the Issuer. Section 19. Attorneys' Fees and Issuer's Fees. In the event that a party to this Regulatory Agreement brings an action against any other party to this Regulatory Agreement by reason of the breach of any condition or covenant, representation or warranty in this Regulatory Agreement, or otherwise arising out of this Regulatory Agreement, the prevailing party in such action shall be entitled to recover from the other reasonable attorney's fees to be fixed by the court which shall render a judgment, as well as the costs of suit. The Owner shall pay to the Issuer the Issuer's Fee when and as it becomes due. 526703.3\24036.0002 -16- I> -Iff Section 20. Governinl! Law. This Regulatory Agreement shall be governed by the laws of the State of California. The Trustee's rights, duties and obligations hereunder are governed in their entirety by the terms and provisions of the Indenture. Section 21. Amendments. This Regulatory Agreement shall be amended 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 of San Diego. Any amendment to this Regulatory Agreement shall be accompanied by an opinion of Bond Counsel to the effect that such amendment will not cause the interest on the Bonds to become taxable to the owners thereof. Copies of any amendments shall be provided to the Administrator. Section 22. Notice. Any notice or certificate required to be given hereunder shall be given by certified or registered mail, postage prepaid, return receipt requested, at the addresses specified below, or at such other addresses as may be specified in writing by the parties hereto: Issuer: Trustee: Owner: City of Chula Vista 276 Fourth Avenue Chula Vista, California 91910 Attention: City Manager First Trust National Association Two Union Square 601 Union Street, Suite 2120 Seattle, Washington 98101 Attention: Corporate Trust Department Eucalyptus Grove Holdings, LLC, a Utah limited liability company c/o Wasatch Acquisitions, LLC 399 North Main, Suite 200 Logan, Utah 84321 Attention: Dell Loy Hansen Notice shall be deemed given three (3) business days after the date of mailing. Section 23. Severability. 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 24. Multiole Counteroarts. This Regulatory Agreement may be simultaneously 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 25. Suoersedinl! of Prior Rel!ulatory Al!reement. Upon recordation of this Regulatory Agreement in the office of the San Diego County Recorder, the Prior Regulatory 526703.3\24036.0002 -17- .1>-1' Agreement shall be deemed to have been completely amended and restated by the terms hereof and the provisions of the Prior Regulatory Agreement shall be of no further force and effect. 526703.3\24036.0002 -18- D-~o IN WITNESS WHEREOF, the Issuer, the Trustee and the Owner have caused this Regulatory Agreement to be duly executed as of the date first written above. CITY OF CHULA VISTA By: Its: City Manager ATTEST: By: Its: City Clerk FIRST TRUST NATIONAL ASSOCIATION, as Trustee By: Its: Authorized Officer EUCALYPTUS GROVE HOLDINGS, LLC, a Utah limited liability company By: Evans Withycombe Residential, L.P., a Delaware limited partnership By: Name: Title: 52fi703.3\24036.0002 -19- D-~( EXHIBIT A LEGAL DESCRIPTION OF PROJECT SITE 526703.3\24036.0002 A-I D-~~ EXHIBIT B INCOME COMPUTATION AND CERTIFICATION NOTE TO APARTMENT Developer: 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. All capitalized terms used herein shall have the meaning set forth in the Regulatory Agreement. Re: [Address of Apartment Building] 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. Name of Members of the Household 2. 3. 4. 5. Relationship to Head of Household Social Security Number Age Place of Employment HEAD SPOUSE 5 2(i 703.3\24036.0002 B-1 D -.;1.3 Income ComDutation 6. The total anticipated income, calculated in accordance with this paragraph 6, of all persons (except children under 18 years) listed above for the 12-month period beginning the earlier of the date that I/we plan to move into a unit or sign a lease for 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 allowances for depreciation of capital assets except for straight line depreciation as provided in Internal Revenue Service regulations); any withdrawal of cash or assets from the operation of a business or profession will be included in income except to the extent the withdrawal is reimbursed of cash or assets invested in the operation by the family; (c) interest and dividends (including income from assets included below and other net income from real or personal property); (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 plus the maximum amount that the public assistance agency could in fact allow 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; and (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 (or other persons whose dependents are residing in the unit). Excluded from such anticipated income are: (a) casual, sporadic or irregular gifts; (b) amounts which are specifically for or in reimbursement of medical expenses; 526703.3\24036.0002 B-2 1> - ;J.. tf (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) hazardous duty pay to a household member in the Armed Forces who is away from home and exposed to hostile fire; (I) amounts received under training programs funded by HUD; (g) foster child care payments; (h) amounts received by a Disabled (as defined below) person that are disregarded for a limited time for purposes of Supplemental Security Income eligibility and benefits because they are set aside for use under a Plan to Attain Self-Sufficiency; (i) income of a live-in aide; (j) amounts received by a participant in other publicly assisted programs which are specifically for or in reimbursement of out-of-pocket expenses incurred and which are made solely to allow participation in a specific program; (k) reparation payments paid by a foreign government pursuant to claims filed under the laws of that government by persons who were persecuted during the Nazi era; (I) amounts specifically excluded by any other federal statute from consideration as income for purposes of determining eligibility or benefits under a category of assistance programs that includes assistance under the United States Housing Act of 1937; (m) amounts received under training programs funded by HUD; (n) for each dependent (a member of the household (excluding foster children) other than family head or spouse, who is under 18 years of age or is a Disabled person (person who is under a disability as defined in Section 223 of the Social Security Act or who has developmental disability as defined in Section 102(7) of the Developmental Disability Assistance and Bill of Rights Act) or Handicapped person (a person having a physical or mental impairment that is expected to be of a long-continued and indefinite duration, substantially impedes his or her ability to live independently, and is of such a nature that such ability could be improved by more suitable housing conditions) or is a full-time student. (0) for any family whose head or spouse (or sole member) is an Elderly (at least 62 years of age), Disabled, or Handicapped person. (p) for any family that is not an Elderly Family (a family whose head or spouse (or sole member) is an Elderly, Disabled, or Handicapped person), but has a Handicapped or 526703.3\24036.0002 B-3 o -;J.~ Disabled member other than the head of household or spouse, Handicapped Assistance Expenses (reasonable expenses that are anticipated during the period for which annual income is computed for attendant care and auxiliary apparatus for a Handicapped or Disabled family member and that are necessary for the family member to be employed provided the expenses are not paid to the family or reimbursed) in excess of 3 percent of annual income but this allowance may not exceed the employment income received by family members who are 18 years of age or older as a result of the assistance to the Handicapped or Disabled person. (q) for any family whose head or spouse (or sole member) is an Elderly, Disabled, or Handicapped person, that has no Handicapped Assistance Expenses, an allowance for those medical expenses that are anticipated during the period for which annual income is computed not covered by insurance ("Medical Expenses ") equal to the amount by which the medical expenses exceed 3 % of annual income. (r) for any family whose head or spouse (or sole member) is an Elderly, Disabled, or Handicapped person, that has Handicapped Assistance Expenses greater than or equal to 3 % of annual income, an allowance for Handicapped Assistance Expenses in excess of 3 % of annual income (but the allowance may not exceed the employment income received by family members who are 18 years of age or older as a result of the assistance to the Handicapped or Disabled person), plus an allowance for Medical Expenses equal to the family's Medical Expenses. (s) for any family whose head or spouse (or sole member) is an Elderly, Disabled or Handicapped person, that has Handicapped Assistance Expenses that are less than 3 % of annual income, an allowance for combined Handicapped Assistance Expenses and Medical Expenses that is equal to the amount by which the sum of these expenses exceeds 3 % of annual income. (t) amounts anticipated to be paid by the family for the care of children under 13 years of age during the period for which annual income is computed but only where such care is necessary to enable a family member to be gainfully employed or to further education and only to the extent such amounts are not reimbursed; the amount deducted shall reflect reasonable charges for child care and, in the case of child care necessary to permit employment, the amount deducted shall not exceed the amount of income received from such employment. (u) in the case of families assisted by Indian housing authorities, the greater of child care expenses (as described in (t) above), or excessive travel expenses, not to exceed $25 per family per week for employment or education related travel. I. 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 526703.3\24036.0002 8-4 D-~(" (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 combined total value of all such assets: $ (2) 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 (3) 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 or is an individual pursuing a full-time course of institutional on 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 2 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 IIwe propose to rent is the owner of the rental housing project in which the unit is located (hereinafter the "Borrower"), has any family relationship to the Borrower; or owns directly or indirectly any interest in the Borrower. For purposes of this paragraph, indirect ownership by an individual 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 Borrower to determine maximum income for eligibility to occupy the unit; and IIwe declare that all information set forth herein is true, correct and complete and based upon information IIwe 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. 526703.3\24036.0002 B-5 l:> - ~1 11. I/we will assist the Borrower in obtaining any information or documents required to verify the statements made herein, including either an income verification from my lour 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 lour agreement with the Borrower to lease the unit and will entitle the Borrower to prevent or terminate my lour 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 Chula Vista, California. Applicant Applicant [Signature of all persons (except children under the age of 18 years) listed in number 2 above required] 526703.3\24036.0002 B-6 D-~f FOR COMPLETION BY APARTMENT BORROWER ONLY: 1. Calculation of eligible income: a. Enter amount entered for entire household in 6 above: $ b. (1) If the answer to 7(c) above is yes, enter the total amount entered in 7(d)(2), subtract from that figure the amount entered in 7(d)(3) and enter the remaining balance ($ ); (2) Multiply the amount entered in 7(d)(1) times the current passbook savings rate as determined by HUD to determine what the total annual earnings on the amount in 7(d)(1) would be if invested in passbook savings ($ ), subtract from that figure the amount entered in 7(d)(3) and enter the remaining balance ($ ); (3) Enter at right the greater of the amount calculated under (1) or (2) above: $ c. TOTAL ELIGIBLE INCOME (Line I.a plus line I.b(3)): $ 2. The amount entered in l.c: Qualifies the applicant(s) as a Lower Income Tenant(s) Does not qualify the applicant(s) as a Lower Income Tenant(s). 3. Number of apartment unit assigned: Bedroom Size: 4. This apartment unit [was/was not] last occupied for a period of 31 or more 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. 526703.3\24036.0002 B-7 f)..~' 5. Method used to verify applicant(s) income: 526703.3\24036.0002 Employer income verification. Copies of tax returns. Other ( ) 8-8 Manager ()-3,0 INCOME VERIFICATION (for emoloved oersons) The undersigned employee has applied for a rental unit located in a project financed under the City of Chula Vista Housing Program for persons of lower income. 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 Other Income 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 City of Chula Vista Housing Program. Signature Date Please send to: 526703.3\24036.0002 B-9 D -3 f INCOME VERIFICA nON (for self-emDloved Dersons) 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 526703.:m4036.0002 B-IO D-3~ EXHIBIT C CERTIFICATION OF CONTINUING PROGRAM COMPLIANCE The undersigned, being fTitlel of fOwnerl , (the "Owner") has read and is thoroughly familiar with the provisions of the various Mortgage Loan Documents associated with the Owner's participation in the City of Chula Vista, (the "Issuer") Multifamily Housing Program, such documents including: 1. The Amended and Restated Regulatory Agreement and Declaration of Restrictive Covenants dated as of November 1, 1997 among the Owner, the Issuer and First Trust National Association (the "Trustee"). 2. The Mortgage dated as of November 1,1997 between the Owner and the trustee named therein. 3. The Mortgage Note dated as of November 1, 1997 between the Owner and the Issuer and representing the Owner's obligation to repay the Mortgage Loan. 4. As of the date of this certificate, the following percentages of completed residential units in the Project (i) are occupied by Lower-Income Tenants (as such terms is defined in the Regulatory Agreement) or (ii) are currently vacant and being held available for such occupancy and have been so held continuously since the date a Lower-Income Tenant vacated such unit; as indicated: Studio 1 Bdrm. 2 Bdrm. Total Occupied by Lower-Income Tenants: % Unit Nos.: Held vacant for occupancy continuously since last occupied by Lower-Income Tenant % Unit Nos.: Total Number of Lower-Income Units: % Unit Nos.: 526703.3\24036.0002 C-I D-3~ 5. The following rents are being charged for the Lower-Income Units listed in 4 above: Rent Studio One Bedroom Two Bedroom The undersigned hereby certifies that the Owner is not in default under any of the terms and provisions of the above documents, and no event has occurred which, with the passage of time, would constitute a default thereunder, with the exception of the following [state actions being taken to remedy default]: EUCALYPTUS GROVE HOLDINGS, LLC, a Utah limited liability company By: Name: Title: 52670J.J\24036.000Z C-2 f)-~c( EXHIBIT B SEMIANNUAL REPORT PROJECT NAME: PROJECT ADDRESS: NAME OF PERSON COMPLETING FORM: PHONE NUMBER: SENIOR TOTAL PROJECTS - MONTHLY ONE BDRM MONTHLY NAME OF NUMBER OF HOUSEHOLD OCCUPANT IS SIZE RENT HOUSEHOLD OCCUPANTS INCOME 60 YEARS+ 526703.3124036.0002 D-j ])- 3S- SEMIANNUAL REPORT OWNER'S CERTIFICATION I am the owner or owner's representative for an affordable housing development in the City of Chula Vista, which is bound by a Housing Agreement with the City. I certify under penalty of perjury that the attached rent roll for affordable units at my project is true and correct to the best of my knowledge and complies with the terms and conditions stipulated in the Affordable Housing Agreement, or any agreement that implements the same, with the City of Chula Vista. Name: Title: Signature: Date: 526703.3\24036.0002 D-2 J) - 3.,(, CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT STATE OF CALIFORNIA ss. COUNTY OF ORANGE On , before me, , Notary Public, (Print Name of Notary Public) personally appeared o personally known to me -or- o proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/ar 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 t instrument. WITNESS my hand and official seal. Signature Of Notary OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER o Individual o Corporate Officer DESCRIPTION OF ATTACHED DOCUMENT Title Or Type Of Document Title(s) 0 Partner(s) 0 Limited 0 General 0 Attorney-In-Fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Number Of Pages Date Of Document Signer is representing: Name Of Person(s) Or Entity(ies) Signer(s) Other Than Named Above 526703.3\24036.0002 D-37 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) 55. COUNTY OF ORANGE ) On , before me, , Notary Public, (Print Name of Notary Public) personally appeared , D personally known to me -or- D 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 OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT D Individual D Corporate Officer Title(s) Title Or Type Of Document D Partner(s) D Limited D General D Attorney-In-Fact Number Of Pages D Trustee(s) D Guardian/Conservator D Other: Date Of Document Signer is representing: Name Of Person(s) Or Entity(ies) Signer(s) Other Than Named Above 526703.3\24036.0002 f) - 3g CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) 55. COUNTY OF ORANGE ) On , before me, , Notary Public, (Print Name of Notary Public) personally appeared , D personally known to me -or- D 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 OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT D Individual D Corporate Officer Till.(s) Title Or Type Of Document D Partner(s) D Limited D General D Attorney-In-Fact Number Of Pages D Trustee(s) D Guardian/Conservator D Other: Signer is representing: Date Of Document Name Of Person(s) Or Entity(ies) Signer(s) Other Than Named Above 5 2b 703.3\24036.0002 f) - .39 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT STATE OF CALIFORNIA ss. COUNTY OF ORANGE On , before me, , Notary Public, (Print Name of Notary Public) personally appeared o personally known to me -or- o 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 OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER o Individual o Corporate Officer DESCRIPTION OF ATTACHED DOCUMENT Title Or Type Of Document Title(s) 0 Partner(s) 0 Limited 0 General 0 Attorney-In-Fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Number Of Pages Date Of Document Signer is representing: Name Of Person(s) Or Entity(ies) Signer(s) Other Than Named Above 526703.3\24036.0002 D - '10 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) 55. ) COUNTY OF ORANGE On , before me, , Notary Public, (Print Name of Notary Public) personally appeared o personally known to me -or- o proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/ar 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 t instrument. WITNESS my hand and official seal. SIgnature Of Notary OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER o Individual o Corporate Officer DESCRIPTION OF ATTACHED DOCUMENT Title Or Type Of Document Tille(s) 0 Partner(s) 0 Limited 0 General 0 Attorney-In-Fact 0 Trustee(s) 0 Guardian/Conservator 0 Other: Number Of Pages Date Of Document Signer is representing: Name Of Person(s) Or Entity(ies) Signer(s) Other Than Named Above 526703.3\24036.0002 t:> -'It 526730.1\24036.0002 FIRST SUPPLEMENTAL INDENTURE OF TRUST By and Between CITY OF CHULA VISTA, CALIFORNIA and FIRST TRUST OF CALIFORNIA, NATIONAL ASSOCIATION as Trustee Dated as of November 1,1997 $21,885,000 CITY OF CHULA VISTA, CALIFORNIA MULTIFAMILY HOUSING REVENUE BONDS, (EUCALYPTUS GROVE PROJECT) E -I ATTACHMENT E ~/~ THIS FIRST SUPPLEMENTAL INDENTURE OF TRUST (this "Supplement"), dated as of November I, 1997, by and between the City of Chula Vista, California, a municipal corporation, duly organized and operating under the Constitution and laws of the State of California (the "City"), and First Trust of California, National Association, as successor to Security Pacific National Bank, as trustee (the "Trustee"), amends the terms of the Indenture (defined below). RECITALS: A. The Bonds have been issued pursuant to the Indenture of Trust entered into by and between the City and the Trustee dated as of November I, 1985 (the "Original Indenture"). All capitalized terms not otherwise defined herein shall have the meaning given to them in the Original Indenture. B. Pursuant to the terms of the Original Indenture, Continental Casualty Company, an Illinois insurance company (the "Credit Instrument Obligor"), has delivered its surety bond to the Trustee to secure the repayment of the Bonds. C. On March _, 1996, Eucalyptus Grove Holdings LLC, a Utah limited liability company (the "Developer") acquired the Project and assumed the obligations of Eucalyptus Grove International, a California Limited Partnership, under the documents relating to the Bonds with the consent of the City, the Trustee and the Credit Instrument Obligor. D. Because the DeveloPer has not delivered to the Trustee a written commitment for an Alternate Qualified Credit Instrument by September 15, 1997 as required by Section 2.02(e) of the Original Indenture, the Bonds are subject to redemption on November I, 1997 pursuant to Section 6.01(c)(ii) of the Indenture; and E. The Developer has requested that Section 13.01 of the Original Indenture be amended in part to permit the immediate release of the Qualified Credit Instrument on November I, 1997 following the redemption of the Bonds; and F. The Trustee and the City have been furnished with an opinion of Counsel to the effect that the amendment to Section 13.01 is of the type that may be made without the consent of the Bondholders pursuant to Section 11.01 of the Original Indenture and the Trustee has determined that the amendment is not to the prejudice of the Trustee. G. The Credit Instrument Obligor and the Developer have consented to this Supplement. H. The City and the Trustee have received an opinion of Bond Counsel to the effect that the execution and delivery of this Supplement will not impair the exclusion of the interest on the Bonds from gross income for federal income tax purposes and the exemption of interest on the Bonds from State of California personal income taxation. NOW, THEREFORE, the parties hereto agree as follows: 526730.1 \24036.0002 -1- ~..~ Section 1. Each of the above recitals is true and correct. Section 2. Section 13.01(e). Section 1301 of the Original Indenture is amended by deleting therefrom Section 3. Except as expressly modified in Section 2 above, all of the provisions of the Original Indenture shall remain in full force and effect. SectIOn 4. This Supplement 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. IN WITNESS WHEREOF, the City and the Trustee have caused this First Supplemental Indenture of Trust to be executed on their behalf by their duly authorized officers, all as of the day and year first written above. CITY OF CHULA VISTA, CALIFORNIA By: City Manager FIRST TRUST OF CALIFORNIA, NATIONAL ASSOCIATION, as successor-in-interest to Security Pacific National Bank, as Trustee By: Authorized Officer 526730.1 \24036.0002 -2- E-3 Pursuant to Sections 11.01(b) and 11.03 of the Original Indenture, the Credit Instrument Obligor and the Developer hereby consent to the provisions contained in this First Supplemental Indenture of Trust. CONTINENTAL CASUALTY COMPANY, an Illinois insurance company By: Name: Title: EUCALYPTUS GROVE HOLDINGS, LLC, a Utah limited liability company By: Dell Loy Hansen, President 526730.1 \24036.0002 -3- E-t/