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Village Green Cottages - Resale Restriction Agreement1_ RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: DOCUMENT: 17491472 1 Fees Taxes Cop i es AMT PAID Pages: 30 No Fees City of Gilroy RDE # 101 7351. Rosanna Street BRENDA DAVIS 1 1 /25/2003 Gilroy, CA 95020 -6141 SANTA CI.ARA COUNTY RECORDER 3.23 PM Recorded at the request of Attn: City Clerk Fidelity National Title Ins NO FEE PER GOVERNMENT CODE SECTIONS 6103 AND 27383 RESALE RESTRICTION AGREEMENT And OPTION TO PURCHASE VILLAGE GREEN COTTAGES BELOW MARKET RATE HOMES This Resale Restriction Agreement and Option to Purchase (the "Agreement ") is entered into as of this `mil day of 2003, by and among the CITY OF GILROY, a municipal corporation (the "City "), and VILLAGE GREEN COTTAGES, LLC, a California limited liability company ( "Village Green'), and LUCIANO TOSTE, an unmarried man, the "Residence Owner" of Condominium UNIT NO. 39 in the Project, whose address is 1566 Bianca Way, Gilroy, California 95020. RECITALS A Village Green is the owner of that certain 39 -unit cottage home condominium. project located in Gilroy, California, more particularly known as the Village Green Cottages (Phase I) ( "Project "); B. The City has approved an affordable housing exemption under its Residential Development Ordinance ("RDO ") which authorized Village Green to develop the Project; C. Pursuant to such affordable housing exemption, Village Green is required to place certain restrictions on the sale of 37 of the 39 Residences in the Project, making it possible for Eligible Purchasers to purchase these Residences at prices less than their market value. The purchase of the Residences by Residence Owners will be financed in large part by a first mortgage loan (the "First Lender's Loan "); D. The First Lender's Loan will be secured by a deed of trust recorded in a first lien position on the Residences (the "First Lender's Deed of Trust "); -1 2 Res. Owner Initials- ..' 2 , E. In order to protect the City's and Village Green's interest in providing and maintaining affordable housing, Village Green has agreed to impose price restrictions, resale restrictions and other restrictions contained in this Agreement upon the Residences in the Project; F. Performance of the Residence Owner's obligations under this Agreement shall be secured upon sale of the homes by Village Green to Eligible Purchasers by deeds of trust recorded in a subordinate lien position (the "Regulatory Deed of Trust "), subordinate only to the lien securing the First Lender's Loan and additional liens securing additional purchase financing assistance, if any, made available to the purchasers of Residences ( "Purchase Money Subordinate Loans "); and G. The purpose of this Agreement is to place certain use and price resale restrictions on the Residences and reserve to the City an option to purchase the Residences under certain conditions. NOW, THEREFORE, in consideration of the benefits received by the Village Green, and the affordable housing exemption from the RDO for the Project approved by the City, the City, the Village Green, Residence Owner and their successors and assigns agree, as follows: 1. DEFINITIONS The following terms are specially defined for this Agreement and their definitions can be found in the sections indicated below: A. "Agreement" shall mean this Resale Restriction Agreement and Option to Purchase. B. "CHFA" shall mean the California Housing Finance Authority. C. "City" shall mean the City of Gilroy, a municipal corporation. D. "Closing Date" shall mean, with respect to a Residence Owner, the date such Residence Owner closes the purchase of their Residence, as evidenced by the recording date of the grant deed delivered to the Residence Owner. E. "CPI" means the Consumer Price Index for All Urban Consumers, Area: San Francisco - Oakland -San Jose, Item: Owners' Equivalent Rent of Primary Residence, Base Period: 1982 =100. F. "Date of This Agreement" shall mean the date first written above. G. "Developer" shall mean Village Green Cottages, LLC, a California limited liability company. Res. Owner Initials H. "Eligible Purchaser" shall mean a purchaser meeting the requirements of Section IOB below. I. "Eligible Transfer" shall mean a transfer of the Residence meeting the requirements of Section 10A below. J. "Fair Market Value" shall mean the value of the Residence as determined in accordance with Section 8 below. K. "FHA" shall mean the Federal Housing Administration of the United States Department of Housing and Urban Development. L. "FHLMC" or "Freddie Mac" shall mean the Federal Home Loan Mortgage Corporation. M. "First Lender" shall mean the holder of the note evidencing the First Lender's Loan. N. "First Lender's Loan" shall mean the fast priority loan to the Residence Owner for purchase of the Residence. , O. "FNMA" shall mean Fannie Mae, formerly the Federal National Mortgage Association. P. "HUD" shall mean the United States Department of Housing and Urban Development. Q. "Increased Base Price" shall mean the Increased Base Price as calculated in accordance with Section 11A below. R "Option" shall mean the City's option to purchase the Residence pursuant to Section 7 below. S. "Proposed Purchaser" shall mean the potential homebuyer proposed by the Village Green to purchase the Residence from the Village Green. T. "Purchase Money Subordinate Loans shall mean all purchase financing made to the Residence Owner at the time the Residence Owner purchases the Residence. U. "Regulatory Deed of Trust" shall mean the deed of trust securing the Regulatory Note and Residence Owners' obligations under this Agreement, and recorded against the Residence, subordinate only to the First Lender's Deed of Trust and any deed of trust securing a Purchase Money Subordinate Loan. V. "Regulatory Note" shall mean the promissory note evidencing the Residence Owner's obligation to pay the City a share of the appreciation in the value of the -3- Res. Owner Initials . i Residence upon Transfer under certain circumstances as more particularly described in Section 9. W. "Residence" shall mean that certain unit described in the first paragraph of this Agreement, which unit is one of the 37 affordable condominium units in the Village Green Cottages (Phase I) project that are subject to the terms of this Agreement. The "Residences" mean each one of said 37 affordable units that are located on those certain parcels of real property described in Exhibit "A" attached to and incorporated herein. The Village Green shall have the right to amend Exhibit "A" to reflect any changes to the Residence condominium unit numbers or otherwise as may be required to be consistent with any changes to the legal description of the Residences imposed by the California Department of Real Estate prior to sale of such Residence to a Residence Owner. X. "Residence Owner" shall mean the purchaser(s) of the Residence from Village Green identified in the opening paragraph of this Agreement and their successors and assigns. Y. "Sales Price" shall mean the maximum sales price that the Village Green or Residence Owner may receive for any transfer of the Residence, as calculated in accordance with Section 11 below. Z. "Senioe' shall mean a person who is 62 years of age or older. AA "Term" shall mean the term of this Agreement as defined in Section 2, below. BB. "Transfer" shall mean any sale, assignment or transfer, voluntary or involuntary, of any interest in the Residence, including, but not limited to, a fee simple interest, a joint tenancy interest, a life estate, a leasehold interest, or an interest evidenced by a land contract by which possession of the Residence is transferred and the Owner retains title, as further specified in Section 5 below. CC. "VA" shall mean the United States Department of Veterans Affairs. DD. "Value of Capital Improvements" shall mean the value of improvements made by the Residence Owner to the Residence, to be determined in accordance with Section 11B below, for purposes of calculating the Increased Base Price. EE. "Village Green Initial Sales Price" shall mean the maximum sales price for a particular Residence that the Village Green may sell that Residence to an Eligible Purchaser in accordance with Section S of this Agreement. 2. DESCRIPTION OF PROPERTY• TERM OF AGREEMENT This Agreement concerns generally the real property located at the Village Green Cottages (Phase I) condominium project situated at Hecker Pass in Gilroy, California, more fully -4 _�_ Res. Owner Initials, described in Exhibit "&' and specifically the Condominium Unit in said Project described in the opening paragraph of this Agreement. The Term of this Agreement shall be the period commencing as of the Date of This Agreement and expiring on the earlier of. (a) the date thirty (30) years after the Date of this Agreement or (b) the date on which the Regulatory Deed of Trust is released and reconveyed by the City in compliance with this Agreement. 3. RESIDENCE OWNER CERTIFICATIONS As a condition to the sale of a Residence to a Residence Owner, each Residence Owner shall certify that (a) the financial and other information previously provided by the Residence Owner to Village Green and/or the City and their agents in order to qualify to purchase the Residence is true and correct as of their Closing Date, (b) the Residence Owner does not own any other residential property as of their Closing Date, (c) the Residence Owner shall occupy the Residence as the Residence Owner's principal place of residence, (d) the Residence Owner is a Senior, and (e) the Residence Owner will fully cooperate with Village Green and the City in promptly providing all information requested by the Village Green or the City to assist in monitoring the Residence Owner's compliance with this Agreement. The Residence Owner shall be considered as occupying the Residence if the Residence Owner is living in the Residence for at least ten (10) months out of each calendar year. Notwithstanding the foregoing, if there is more than one Residence Owner of a Residence, so long as at least one of the Residence Owners qualifies to purchase the Residence under this Agreement, such Residence Owners shall not be disqualified from purchasing a Residence merely because the other Residence Owner or Owners is unable to make the above= listed certifications. For example, if a husband and wife are the Residence Owners and the husband is a Senior and otherwise qualified to purchase the Residence, but the wife is not a Senior, the husband and wife shall not be disqualified from purchasing a Residence. As another example, if a parent and child are the Residence Owners and the parent is a Senior and otherwise qualified to purchase a Residence, but the child is not a. Senior and owns his/her own separate home, the parent and child shall not be disqualified from purchasing a Residence. The foregoing is not intended to override the income qualifications for Eligible Purchasers under Section IOB(ia) below, it being understood and agreed that in the event of a conflict in the application of this Section 3 and Section 10B(iii) to a particular Residence Owner or Proposed Purchaser, the latter shall control. 4. LEASIN G Except as expressly provided in this Agreement, the Residence Owner shall not lease the Residence. Any lease in violation of this Agreement is prohibited, and shall constitute a default by the Residence Owner under this Agreement. Notwithstanding the foregoing, if due to death, devise or operation of law an Eligible Transfer is made to Residence Owner that is not a Senior, such Residence Owner may lease the Residence for a term not exceeding one (1) year to a person who is a Senior and who, but for being a tenant, would otherwise qualify as an Eligible Purchaser under Section IOB. -5- 7Res. Owner Initials;,_ 5. SALE RESTRICTIONS Any Transfer of the Residence will be subject to the provisions of this Agreement. Any Transfer without satisfaction of the provisions of this Agreement is prohibited. Transfers by gift, devise, or inheritance to an existing spouse who is also an obligor under the Purchase Money Subordinate Loan or to one or more children of the Residence Owner; by a Residence Owner to a spouse where the spouse becomes the co- owner of the Residence; as part of a marriage dissolution proceeding; or by the Residence Owner into an inter vivos trust in which the Residence Owner is the beneficiary shall not be considered a Transfer for the purposes of this Agreement; provided, however that the Residence Owner must provide notice of such intended transfer to the City pursuant to Section 6 of this Agreement. Village Green covenants and agrees to sell Residences in strict compliance with the following. Village Green shall sell Residences (i) under Eligible Transfers only; (ii) to Eligible Purchasers only; (iii) at sales prices not to exceed the Village Green Initial Sales Prices for particular Residences as set forth on Exhibit "B" attached hereto, increased by the percentage increase in the CPI computed from the first month that is after July 1, 2002 for which that index is published and to the last month for which that index is published which includes the Closing Date of the applicable Residence. Each Residence Owner covenants and agrees not to sell or otherwise Transfer their Residence except in strict accordance with the terms of this Agreement. 6 NnTrr� OF INTENDED TRANSFER. • TRANSFER TO ELIGIBLE PURCHASER NO= 1 it.a+ va +.. a asa a.+ In the event the Residence Owner intends to Transfer or vacate the Residence, the Residence Owner shall promptly notify the City in writing of such intent. The written notice shall be given in accordance with Section 24 of this Agreement at least one hundred and eighty (180) days prior to the actual date of the Transfer or vacation of the Residence. Following receipt of such notice, pursuant to Section 7 below, the City may notify prospective Eligible Purchasers of the Residence that the Residence is available for purchase, or the City may purchase the Residence in accordance with this Agreement. Notwithstanding the foregoing, should the Residence Owner state in its notice to the City that it intends to Transfer the Residence to an Eligible Purchaser and provide the City a written certification of the proposed transferee's qualification as an Eligible Purchaser in a form acceptable to the City, the Residence Owner may Transfer the Residence to such Eligible Purchaser, such Transfer being exempt from the City's Option and shared appreciation rights but subject, however, to the continuance of this Agreement, including the reinstatement of the City's Option and shared appreciation rights immediately following such Transfer. 7. PURCHASE OPTION Except as set forth in Section 6 above, the Residence Owner agrees that prior to any Transfer during the Term, the City shall have the option to purchase the Residence (the "Option "). During the first ten (10) years after the Residence Owner's Closing Date, the Option price shall be an amount equal to the lowest of. (1) the Fair Market Value of the Residence; (2) the offered sales price; or (3) the Increased Base Price, as adjusted by Section 11B, plus the amount of principal and accrued interest (if any) outstanding on any then outstanding Purchase -6- Res. Owner Initials Money Subordinate Loan. After ten (10) years have elapsed from the Residence Owner's Closing Date, the Option price shall be the lower of (1) the Fair Market Value of the Residence; or (2) the offered sales price. If the City decides to exercise its Option to purchase the Residence, it shall within sixty (60) days of receipt of the notice specified in Section 6 above, notify the Residence Owner in accordance with Section 24 below that it chooses to exercise the Option. If the City exercises the Option to purchase, it shall purchase the Residence within ninety (90) days of the date it gives notice that it will exercise the Option, at the price as set forth above in this section. The City may, instead of purchasing the Residence itself, assign its right to purchase the Residence to an Eligible Purchaser. If a Transfer occurs without compliance with Section 6 and this Section, the City may exercise its option under this Section at any time thereafter during the term of this Agreement. If the City does not exercise its Option or, after exercising the Option does not close its purchase of the Residence, within the required time periods described above, the City's Option with respect to that Residence shall terminate with respect to that Transfer only; and shall be reinstated immediately following the completion of that Transfer and continue until the end of the Term of this Agreement. 8. FAIR MARKET VALUE If it is necessary to determine the fair market value of the Residence or improvements to the Residence, fair market value shall be determined by a licensed MAI real estate appraiser selected in accordance with this Agreement. The appraisal shall be made by an independent residential appraiser selected by the Residence Owner from a list of licensed MAI appraisers established by the City and such appraisers shall also have been previously approved by FNMA, Freddie Mac or HUD and placed on the respective list of approved multi and single family housing appraisers. To the extent possible, the appraisal shall be based upon the sales prices of otherwise comparable unrestricted properties sold in the market area during the preceding three - month period. For purposes of calculating the Option exercise price under Section 7, fair market value shall be calculated taking into account a five percent (5 %) reduction from the otherwise expected sale price as an allowance for the real estate commission otherwise payable by the Residence Owner to a third party. The cost of the appraisal shall be borne by the Residence Owner. During the first ten (10) years after the Residence Owner's Closing Date, in the event that the Residence Owner has made capital improvements to the Residence which have individually cost more than One Thousand Dollars ($1,000) and can be documented to the appraiser and which have increased the value of the Residence, or if damage or deferred maintenance has occurred while the Residence Owner owned the Residence which has decreased the value of the Residence, the appraisal shall specifically determine the value of Capital Improvements as set forth in Section 11B or the adjustment for damage and deferred maintenance and shall state what the fair market value of the Residence would be without such adjustments. Nothing in this section shall preclude the Residence Owner and the City from establishing the fair market value of the Residence by mutual agreement in lieu of an appraisal pursuant to this section. -7- Res. Owner Initials 9. TRANSFER BY OWNE SHARED APPRECIATION AGREEMENT: REGULATORY DEED OF TRUST In the event the City does not exercise its Option to purchase pursuant to Section 7 above, the Option under this Agreement shall terminate only with respect to the Residence Owner's intended Transfer that gave rise to the notice provided in Section 6 and the City's corresponding Option, and the Owner may sell the Residence to a person of the Owner's choosing, subject, however, to the continuance of this Agreement, including the reinstatement of the City's Option rights immediately following such Transfer, and subject further, however, to Owner's agreement to share the appreciation in value of the Residence with the City as provided herein. It is understood and agreed that the Residence Owner should not receive a windfall benefit as a result of being given the - opportunity to purchase an affordable housing unit. Accordingly, in the event the (i) a Transfer cannot be or is not made to an Eligible Purchaser in accordance with Section 6 above, and (ii) the City cannot or does not exercise its Option to purchase pursuant to Section 7 above, then the Residence Owner shall share with the City any appreciation if the Residence Owner Transfers the Residence, or uses the Property, contrary to the terms of this Agreement. For purposes of this Agreement, "appreciation" shall mean the difference between the initial sales price paid by the Residence Owner for the Residence and the subsequent sales price for the Residence, minus sales costs, including excise tax, escrow fees, sales commissions and other customary charges. If a Transfer triggering the City's right to share in the appreciation does not involve a sale, then "appreciation shall mean the difference between the initial sales price paid by the Residence owner for the Residence and the fair market value of the Residence at the time of the Transfer, less the costs of Transfer, if any. If the Residence Owner Transfers the Residence during the term of this Agreement to someone other than an Eligible Purchaser, the Residence Owner shall pay the City that portion of the appreciation that exceeds the difference between the sales price (less costs of sale) and the initial purchase price paid the Residence Owner increased by the percentage increase in the CPI computed from the first month following the Residence Owner's date of purchase for which that index is published and continuing to the last month for which that index is published which includes the date of We of the applicable Residence. As used herein, the "date of purchase" and "date of sale" shall refer to the date the purchase or sale closed by way of a recorded deed; provided if the Transfer in question does not involve a recorded deed, then such terms shall refer to the date of the applicable Transfer document. For example, if the Residence Owner purchased its Residence in month 1 for $250,000, and then sold the Residence in month 20 for $400,000 (less $20,000 in sales costs) to a non- Eligible Purchaser and if the CPI increase from month 2 through 20 was 20 %, the City's share of the appreciation would be calculated as follows: Total Appreciation Sales Price, less sales costs Nfinus Purchase Price Equals Total Appreciation $400,000 - $20,000 $250,000 Res, Owner Initials City's Share of Appreciation Sales Price, less sales costs Minus Purchase Price plus CPI increase times Purchase Price Equals City's share of appreciation Residence Owner's Share of Appreciation Total Appreciation Minus City's Share of Appreciation Equals Residence Owner's Share of Appreciation $400,000 - $20,000 ($250,000+ 20% x $250,000) $130,000 0$1 0-000 Security for Payment/Second Deed of Trust. At the same time that a Residence Owner executes this Agreement and his /her deed, the Residence Owner shall execute a promissory note to secure the City's interest in the Residence (the "Regulatory Note"), and which Regulatory Note will provide for shared appreciation payments as established herein, the form of which is attached hereto as Exhibit "C" and is incorporated by reference. In addition, at such time the Residence Owner agrees to execute the Regulatory Deed of Trust to secure payment of the Regulatory Note, which is attached hereto as Exhibit "D" and is incorporated by reference - The Regulatory Deed of Trust shall be a lien on the Residence subordinate only to the lien securing the First Lender's Loan and any Purchase Money Subordinate Loans. The City may at its sole discretion subordinate its position for the purpose of facilitating the sale of the Residence. Additional Remedies of the City. If a Residence Owner breaches or does not perform any portion of his/her obligations under this Agreement, the Regulatory Note or the Regulatory Deed of Trust, the City may accelerate the amounts due thereunder by requiring the immediate payment in full of all amounts owing under this Agreement, the Regulatory Note and the Regulatory Deed of Trust. 10. ELIGIBLE TRANSFER A Transfer of the Residence that meets the requirements set forth in this Section 10 shall qualify as an approved Transfer to an Eligible Purchaser ( "Eligible Transfer "): A DISCLOSURES AND SUBMITTALS: The Residence Owner and the Proposed Purchaser shall provide the following to the City in writing: The name, address and telephone number of the Proposed Purchaser. Res. Owner Initials ii. A signed financial statement of the Proposed Purchaser in a form acceptable to the City and any other supporting documentation requested by the City. The financial information shall be used by the City to determine the income eligibility of the Proposed Purchaser. The proposed sales contract and all other related documents which shall set forth all the terms of the sale of the Residence. Said documents shall include at least the following terms: (a) The sales price; and (b) The price to be paid by the Proposed Purchaser for the Residence Owner's personal property, if any; for the services of the Residence Owner, if any; and any credits, allowances or other consideration, if any. iv. A written certification, from the Residence Owner and the Proposed Purchaser in a form acceptable to the City that the sale shall be closed in accordance with the terms of the sales contract and other documents submitted to and approved by the City. The certification shall also provide that the Proposed Purchaser or any other party has not paid and will not pay to the Residence Owner, and the Residence Owner has not received and will not receive from the Proposed Purchaser or any other party, money or other consideration, including personal property, in addition to what is set forth in the sales contract and documents submitted to the City. The written certification shall also include a provision that in the event a Transfer is made in violation of the terms of this Agreement or false or misleading statements are made in any documents or certification submitted to the City, the City shall have the right to file an action at law or in equity as may be appropriate or take any other appropriate remedial action, including without limitation foreclosure by the City of the Regulatory Deed of Trust. In any event, any costs, liabilities or obligations incurred by the Residence Owner and the Proposed Purchaser for the return of any moneys paid or received in violation of this Agreement or for any costs and legal expenses, shall be borne by the Residence Owner and/or the Proposed Purchaser and they shall hold the Village Green, the City and their respective members, directors, officers, agents and employees harmless and reimburse their expenses, legal fees and costs for any action they take in good faith in enforcing the terms of this Agreement. V. An executed copy of this Agreement, the Regulatory Note and the Regulatory Deed of Trust. The recordation of this Agreement and the Regulatory Deed of Trust shall be a condition of the City's approval of the proposed sale. The City may require Residence Owner and/or the Proposed Purchaser to pay a reasonable fee to reimburse the for out of -10- Res. Owner Initials pocket costs to cover the costs of administering their rights and obligations under this Agreement. vi. Upon the close of the proposed sale, certified copies of the recorded deed of trust and resale restriction agreement, a copy of the final sales contract, settlement statement, escrow instructions, and any other documents which the City may reasonably request. B. ELIGIBILITY OF PURCHASER: A Proposed Purchaser who meets the following requirements shall be an "Eligible Purchaser": L Each purchaser shall not own any other residential property as of their Closing Date unless otherwise provided under Section 3. ii. Each member of a Proposed Purchaser shall certify that at least one of the members is a Senior and that the household will occupy the Residence as one or more of the Senior household members' principal residence during the term of their ownership so long as this Agreement (or successor resale restriction agreement) is in effect, and that each household member will fully cooperate with the City in promptly providing all information requested by the City to assist in monitoring the Proposed Purchaser's compliance with the resale restriction agreement. The combined maximum income for all household members of the purchaser shall not exceed at the time of application or the time of purchase eighty percent (80 %) of the median yearly income, adjusted for household size, for a household in Santa Clara County, as published by the California Department of Housing and Community Development ( "HCD "). In the event such income determinations are no longer published by HCD, or are not updated for a period of at least eighteen (18) months, the income determinations shall be determined by HUD, and in the event HUD no longer publishes such income determinations, City shall provide other income determinations which are reasonably similar with respect to method of calculation to those previously published by HCD or HUD. C. ADMINISTRATIVE FEE: The Proposed Purchaser shall pay a reasonable Transfer fee to the City for the purpose of reimbursing the City for the costs of administering its rights and obligations under this Agreement. 11. DE ATION OF SALES PRICE The Village Green Initial Sales Prices shall be as provided in Section 5. The sales prices applicable under the City's Option rights shall be as provided in Section 7. The following provisions affect the Option prices as provided in Section 7. Res. Owner Initials A. INCREASED BASE PRICE. The Increased Base Price of the Residence means the original principal amount of the First Lender's Loan to the Residence Owner, not including any portion of the loan applicable to a premium on mortgage insurance plus the original amount of the Residence Owner's down payment, increased by the percentage increase in the CPI computed from the first month that includes or is after the Residence Owner's Closing Date for which that index is published, until the last month for which that index is published which is before or includes the date of receipt by the City of the notice to sell required by Section 6. B. ADJUSTED INCREASED BASE PRICE. The Increased Base Price shall also be adjusted for the Value of Capital Improvements. The "Value of Capital Improvements" shall mean the value of substantial structural or permanent fixed improvements which cannot be removed without substantial damage to the Residence or substantial or total loss of value of said improvements. No such valuation shall be made except for improvements: (i) made or installed by or under the direction of the Residence Owner; (ii) with an initial cost of One Thousand Dollars ($1,000) or more; (iii) which can be documented by the Residence Owner; and (iv) which are allowed (and approved if required) under any applicable homeowners or condominium owners association documents for the Project. The value of such improvements to be taken into account in calculation of the Increased Base Price shall be the appraised market value of the improvements when considered as additions or fixtures to the Residence (i.e., the amount by which said improvements enhance the market value of the Residence at the time of We or valuation). The adjustment to the Increased Base Price for such improvements shall be limited to the increase in value, and shall be determined by agreement of the City and the Residence Owner, or, in the event of a failure to agree, by appraisal pursuant to Section 8 of this Agreement. If, after being given notice of a proposed Transfer in compliance with this Agreement, the City declines to exercise its Option to acquire the Residence, this Agreement shall not restrict the maximum sales price for the proposed Transfer; provided, however, the City shall be entitled to its share of the appreciation as set forth in Section 9. 12. DEFAULTS AND REMEDIES Upon a violation of any of the provisions of this Agreement by the Residence Owner or the Proposed Purchaser, the City may give written notice to the Residence Owner specifying the nature of the violation. If the violation is not corrected to the satisfaction of the City within a reasonable period of time, not longer than thirty (30) days after the date the notice is effective in accordance with Section 24 below, or within such further time as the City determines is necessary to correct the violation, the City may declare a default under this Agreement. The City shall provide notice to the First Lender that a default has been declared under this Agreement. The notice to the First Lender shall indicate that the City may exercise the Option to purchase the Residence pursuant to Section 7 of this Agreement or may exercise the City's rights under the Regulatory Deed of Trust, including the right to foreclose. Upon the declaration of a default or if the Residence Owner or a Proposed Purchaser makes, or has made, any misrepresentation in connection with receiving any benefits under this Res. Owner Initials L- Agreement, the City may apply to a court of competent jurisdiction for such relief at law or in equity as may be appropriate. 13. NOTICE OF DEFAULT AND FORECLOSURE A request for notice of default and any notice of sale under any deed of trust or mortgage encumbering the Residence may be recorded by the City in the Office of the Recorder of Santa Clara County for the benefit of the City. The City may declare a default under this Agreement upon receipt of any notice given pursuant to Civil Code Section 2924b, and may exercise its rights as provided in, Section 12. In the event of default or foreclosure of such deed of trust or mortgage, the City shall have the same right as the Residence Owner to cure defaults and redeem the Residence prior to the foreclosure sale. Nothing herein shall be construed as creating any obligation of the City to cure any such default, nor shall this right to cure and redeem operate to extend any time limitations in the default provisions of the underlying deed of trust or mortgage. 14. NONLIABILITY OF VILLAGE GREEN AND THE CITY In no event shall Village Green or the City become in any way liable or obligated to the Residence Owner, any successor -in- interest to the Residence Owner or any other party by reason of the Option to purchase under Section 7 nor shall Village Green or the City be in any way obligated or liable to the Residence Owner, or any successor -in- interest to the Residence Owner or any other party for any failure to exercise the Option to purchase. Neither Village Green nor the City shall be liable, in damages or otherwise, to the other, or to any third party, for failure to preserve the affordability of the Residence. Both parties understand and acknowledge that market conditions, unforeseen or unusual circumstances, lack of funds or other factors may make it impossible to locate an Eligible Purchaser, exercise the Option to purchase, exercise rights under the Regulatory Deed of Trust or otherwise preserve the affordability of the Residence. Neither party shall have any obligation to act under this Agreement where the action in question would subject that party to any substantial risk of liability to a third party. 15. COVENANT RUNNING WITH LAND BINDING ON SUCCESSOR AND ASSIGNS This Agreement constitutes a covenant running with the land as to all Residences and shall bind, and the benefit hereof shall inure to, the Residence Owner, his or her heirs, legal representatives, executors, successors -in- interest and assigns, and to Village Green and the City and their respective successors and assigns. 16. SUPERIORITY OF AGREEMENT The Residence Owner covenants that the Residence Owner has not, and will not, execute any other agreement with provisions contradictory to or in opposition to the provisions of the Agreement, and that, in any event, this Agreement is controlling as to the rights and obligations between and among the Residence Owner, the City, Village Green, and their respective successors and assigns. 17. RIGHTS OF BENEFICIARIES UNDER DEEDS OF TRUSTS Notwithstanding any other provision of this Agreement, this Agreement shall not diminish or affect the rights of the First Lender under the First Lender's Deed of Trust, and the provisions of this Agreement shall -13- Res. Owner Initials be subordinate to the lien of the First Lender's Deed of Trust and shall not impair the rights of the First Lender, or such lender's assignee or successor -in- interest (including but not limited to HUD, FNMA, Freddie Mac, the VA, or CHFA) to exercise its remedies under the First Lender's Deed of Trust in the event of default under the First Lender's Deed of Trust by the Residence Owner. Such remedies under the First Lender's Deed of Trust include the right of foreclosure or acceptance of a deed or assignment in lieu of foreclosure. After such foreclosure or acceptance of a deed in lieu of foreclosure, this Agreement shall be forever terminated and shall have no further effect as to the Residence or any transferee thereafter; provided, however, if the holder of such First Lender's Deed of Trust acquired title to the Residence pursuant to a deed or assignment in lieu of foreclosure, this Agreement shall automatically terminate upon such acquisition of title, provided that (i) the City have been given written notice of default under such First Lender's Deed of Trust, and (ii) the City shall not have cured the default under such First Lender's Deed of Trust within a 30 -day period or such longer period as may be provided in such notice, or commenced to cure the default within such 30 -day or longer period and given its firm commitment to complete the cure in form and substance acceptable to the First Lender. 18. FIR ST LENDER PROTECTIONS This Agreement shall not diminish or affect the rights of FNMA, Freddie Mac, HUD, VA or CHFA as and if applicable, under the First Lender's Deed of Trust. All of the provisions of this Agreement shall terminate and have no further force and effect upon the occurrence of one of the following events: (i) title is acquired by FNMA, Freddie Mac, HUD, VA or CHFA upon foreclosure of a deed of trust or title is acquired by another party upon foreclosure of a deed of trust insured by HUD or guaranteed by VA; (ii) title is acquired by FNMA, Freddie Mac, HUD, VA or CHFA by a deed in lieu of foreclosure of a deed of trust or title is acquired by another party by a deed in lieu of foreclosure of a deed of trust insured by HUD or guaranteed by VA; or (iii) a deed of trust insured by HUD is assigned to HUD. 19. HUD FORBEARANCE RELIEF Notwithstanding other provisions of this Agreement, the Option shall not be exercised by the City when a deed of trust insured by HUD is secured by the Residence, and i. The Residence Owner is undergoing consideration by HUD for assignment of forbearance relief; or ii. The Residence Owner is undergoing consideration for relief under HUD's Temporary Mortgage Assistance Payment program. 20. INFORMATION The Residence Owner shall provide any information reasonably requested by the City in connection with the Residence. 21 ENTRY BY CITY The Residence Owner hereby grants to the City and its duly authorized representatives the right to enter the Residence at reasonable times and in a reasonable manner for purposes of inspecting the Residence to determine compliance with this Agreement. -14 Res. Owner Initials 22. INVALID PROVISIONS If any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained in this Agreement. 23. CONTROLLING LAW This Agreement shall be construed in accordance with and be governed by the laws of the State of California. 24. NOTICES Except for any notice required under applicable law to be given in another manner, all notices required in this Agreement shall be sent by certified mail, return receipt requested, or express delivery service with a delivery receipt, or personally delivered with a delivery receipt obtained and shall be deemed to be effective as of the date shown on the delivery receipt as the date of delivery, the date delivery was refused, or the date the notice was returned as undeliverable as follows: To the Residence Owner: At the address of the Residence. To the City: City of Gilroy 7351 Rosanna Street Gilroy, California 95020 Attn: City Administrator The parties may subsequently change addresses by providing written notice of the change in address to the other parties in accordance with this Section 24. 25. INTERPRETATION OF AGREEMENT The terms of this Agreement shall be interpreted so as to avoid speculation on the Residence and to insure to the maximum extent possible that the sales price and mortgage payment on this Residence remain affordable to Seniors of low and moderate income. Res. Owner Initials 26. ATTORNEYS' FEES If any action or proceeding is brought to enforce this Agreement or any provision of this Agreement or the Note or the Deed of Trust, the prevailing party shall be entitled to its attorneys' fees, all other expenses incurred in such enforcement and to the cost of such action- or proceeding. 27. COUNTERPARTS This Agreement may be executed in counterparts, each of which shall be considered an original. -16- Res. Owner initials 28. ENTIRE AGREEMENT This Agreement (along with the Regulatory Deed of Trust) sets forth the entire understanding and agreement of the City, Village Green and the Residence Owner and any amendment, alteration or interpretation of this Agreement must be in writing signed by the City, Village Green and the Residence Owner. 29. E3G] IBTTS Any exhibits referred to in this Agreement are incorporated by such reference. IN WITNESS WBEREOF, the parties have executed this Agreement on or as of the date first written above. CITY OF GILROY Title: P l ck r, () .P- r (Type Name and Title) VILLAGE GREEN COTTAGES, LLC By: Title: RESIDENCE OWNER: LUCIANO TOSTE STATE OF CALIFORNIA ) ) ss COUNTY OF Gars- ) On ax bpx ,° IZ4Q3. 2003, before me, 51 &1) ersonally appeared (or proveE to me on the basis of satisfactory evidence) to be the person(s) whose name(s) isAre subscribed to the within instrument and acknowledged to me that he/shehhe executed the same in hivl ogtheir authorized capacity(ies), and that by his4w0their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. sESS1ra r� oucc,�� -- Commbsion # 1418964 Notary Pubft • Calttomlo Banta tiara County MyCMM B#w May 19.2007 -17= / Res. Owner Initials 4 F1 e i� STATE OF CALIFORNIA ) ) ss COUNTY OF C_ckn't44- CO.- - JESSICA RAE RUGGER Co"wdulon * 1418964 %FNo" PubAc - CafUomlo Santa Clara County IMVCmm t3 pkw May 19.2007 `. kct 2003, before me, M�"�A~' , personally appeared cli N personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her /their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. A, S. MILLER Comm, 01352209 NOTARY PUBLIC. CALIFORNIA Yy Comm. Eapes Y►� Y 1�6 1006� STATE OF CALIFORNIA ) ) ss COUNTY OF: kHTA cLA-9-4 ) On N &Et'''1'sm Z-f , , 2003, before me, VA,1 f-, c I R K - 0EA)r5ol J­, personally appeared m*W ssR p yAKr1/ , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(sare subscribed to the within instrument and acknowledged to me that hel! hey executed the same in his he their authorized capacity(ies), and that by hisheir 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. �rl . -18- Res. Owner Initials• STATE OF CALIFORNIA ) ss COUNTY OF ) On , 2003, before me, , personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her /their authorized capacity(ies), and that by his/her /their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. -19- Res. Owner Initials EXHIBIT A Legal Description of the Residences All that certain Real Property in the City of Gilroy, County of Santa Clara, State of California, described as follows: Units 1 to 27, inclusive, 33 to 41, inclusive, and 76, as shown and described in the Condominium Plan for Phase 1 of the Village Green Cottages condominium project (together with any amendments thereto, collectively, the "Plan"), which Plan was recorded on July 29, 2002, as Instrument Number 16387891 in Official Records of Santa Clara County, California. The Iand underlying said Units in the Condominium Project includes all of Lots 4, 6, 7, 8, 9, 12 and 13 of Tract 9374, as shown upon the Subdivision Map filed in Book 745 of Maps, at Pages 13 through 17, recorded on November 26, 2001 as Document No. 15975553 in the Office of the County Recorder of Santa Clara County, California. Ili s Village Green Initial Sales Prices for Residences �_ Res. Owner Initials Village Green Cottages - Phase I Base Price Unit No. Plan Type Lot No. As of July, 2002 1 3 7 287,794 2 2 7 265,750 3 3R 7 287,794 4 1 8 206,967 5 3R 8 287,794 6 3R 8 287,794 7 2 13 265,750 8 3 13 2872794 9 1R 13 206,967 10 3 13 287,794 11 2 13 265,750 12 3R 13 287,794 13 3 8 287,794 14 2R 8 265,750 15 3R 8 287,794 16 2 7 265,750 17 3 7 287,794 18 3R 7 287,794 19 3R 6 287,794 20 2 6 265,750 21 3 6 287,794 22 3R 9 287,794 23 3R 9 287,794' 24 2 9 265,750 25 3R 12 287,794 26 2 12 265,750 27 3 12 287,794 33 2 12 265,750 34 3 12 287,794 35 2R 12 265,750 36 3 9 287,794 37 2R 9 265,750 38 3R 9 287,794 �_ Res. Owner Initials 39 1 6 206,967 40 3 6 287,794; 41 3R 6 287,794 76 1 4 206,967 37 4 Plan Type #1 11 Plan Type #2 22 Plan Type #3 Prices are subject to CPI increase in accordance with Section 5 of the Agreement. Res. Owner Initials EXHIBIT "C" Regulatory Note Promissory Note Village Green Cottages Below Market Rate Homes (DUE ON SALEfrRANSFER/DEFAULT) Date Unit No. FOR VALUE RECEIVED, the Maker below signed promises to pay to the order of the City of Gilroy (the "City "), at such address as it may designate to Maker from time to time, the sum in US funds of the City's share of appreciation ("Subsidy") as indicated and as adjusted pursuant to Section 9 of the Restriction Agreement and Option to Purchase signed by the Maker, the City and Village Green Cottages, LLC (the "Developer"), a copy of which is attached as Exhibit "A" and incorporated herein by this reference ( "Restriction Agreement"). 1. SUBSIDY AUTHORITY: The Subsidy evidenced by this Note is being made by the City pursuant to its Affordable Housing Program to assist income - qualified individuals to purchase homes through the City's Affordable Housing Program. The real property is located within the City of Gilroy, Santa Clara County, California ("Property"), and is legally described on the Deed of Trust which secures this Note, a copy of which is attached hereto as Exhibit "B" and incorporated herein by this reference ( "Deed of Trust "). 2. PAYMENTS: Provided the Maker complies with the terms of this Note, the Deed of Trust and the Restriction Agreement, the amount due and payable under this Note shall be deferred for a period of thirty (30) years from the date of this Note and shall be forgiven at the conclusion of the 30 -year period. The amount due and payable under this Note shall only be due and payable if one of the following events take place: a. The Property is sold, transferred or conveyed to any other party (this may include transfers as a result of death or marriage dissolution) who does not qualify as an Eligible Purchaser or who is not otherwise exempt under the Restriction Agreement before the end of thirty (30) years from the date of the Restriction Agreement. b. Maker breaches or defaults on the terms of the Restriction Agreement. c. Maker breaches or defaults on the terms of the Deed of Trust. Provided, however, that the City shall not have the right to receive the amount owed without providing Maker with at least thirty (30) days written notice following the event requiring payment, the duty to pay, and the right of Maker to cure within thirty (30) days of the date of such notice. If the Note payment is not otherwise required because of one of the foregoing events, payment of this Note shall be forgiven thirty (30) years from the date of the Restriction Agreement. If one of the circumstances described above occurs, this Note shall accelerate Exhibit "C" Page 1 Res. Owner Initials, Maker's obligation to repay and the Subsidy, as adjusted as provided in the Restriction Agreement, shall be due and payable in full. 3. DEFAULT INTEREST: This Note shall bear interest at the rate of six percent (6 %) per annum after default until such default is cured. 4. NOTICES: Unless applicable law requires a different method, any notice that must be given under this Note to Maker shall be given by delivering it or by mailing it by certified mail, postage prepaid, return receipt requested, to the address of the subject Property which is as follows ' or to such other address that Maker may designate to the City in writing. Any notice that must be given under this Note to the City shall be given by delivering it or by mailing it by certified mail, postage prepaid, return receipt requested, to the address of the City of Gilroy, , CA or to such other address that the City may designate to Maker in writing. 5. OBLIGATIONS OF PERSONS UNDER THIS NOTE: If more than one person signs this Note, each person is fully and personally obligated to keep all of the promises made in this Note, including the promise to pay the full amount owed. Any person who is a guarantor, surety, endorser of this Note is also obligated to do these things. Any person who takes over these obligations, including the obligations of a guarantor, surety, or endorser of this Note, is also obligated to keep all of the promises made in this Note. The City may enforce its rights under this Note against each person individually or against all of the individuals together. This means that any one of the individual signers of this Note may be required to pay all of the amounts owed under this Note. 6. WAIVERS: The Maker and any other person who has obligations under this Note waives the right of presentment and notice of dishonor. "Presentment" means the right to require the City to demand payment of amounts due. "Notice of Dishonor" means the right to require the City to give notice to other persons that amounts have not been paid. SECURITY: This Note and sums evidenced hereby are secured by a Deed of Trust on the Property. The Maker of this Note agrees to perform and comply with all of the agreements, terms and conditions of said Deed of Trust and other documents executed in conjunction with this Note, including the Restriction Agreement. If all or any part of the Property or any interest in it is sold or transferred without. the City's prior written consent, the City may, at its option, require immediate payment in full of all sums secured by the Deed of Trust. If the City exercises this option, the City shall give Maker and to any senior lienholders of record prior written. notice of acceleration. The notice shall provide a period of not less than thirty (30) days from the date the notice is delivered or mailed within which the Maker must pay all sums secured by the Deed of Trust or cure the default. If Maker fails to pay these sums or cure the default prior to the expiration of the period, the City may invoke any remedies permitted by the Deed of Trust without further notice or demand on the Maker. Exhibit "C" Page 2 Res. Owner WtWs;-AL — 7. ATTORNEY'S FEES: Should legal action be required to enforce or interpret any of the provisions of this Note, the substantially prevailing party shall be entitled to all costs and reasonable attorney's fees incurred in connection therewith from the non - prevailing party. 8. : Any action brought to enforce or interpret this Note may, at the option of the City, be brought in Santa Clara County, California. 9. CONFLICT OF PROVISIONS: In the event of a conflict in any of the provisions of this Note, the Deed of Trust, or the Restriction Agreement, the terms of the Restriction Agreement shall prevail over this Note and the Deed of Trust, and the Deed of Trust shall prevail over this Note. 10. GO—WRNING LAW: This Note shall be construed in accordance with the laws of the State of California. 11. ORAL AGREEMENTS: Oral agreements or oral commitments to loan money, extend credit, or to forbear from enforcing repayment of a debt are not enforceable under California Law. 12. NON - WAIVER: The failure of the City to insist on strict performance of any terms or provisions of this Note, the Deed of Trust or the Restriction Agreement, or its failure to exercise any option conferred under any of those instruments shall not be construed as a waiver or relinquishment of any such right or option. IN WITNESS WIIEREOF the Maker has executed this Note on the date written at the top of this Note, MAKER Exhibit "C" Page.3 J Res. Owner Initials. EXffiBIT "D" Regulatory Deed of Trust RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Gilroy 7351 Rosanna Street Gilroy, CA 95020 -6141 Attn: City Clerk NO FEE PER GOVERNMENT CODE SECTIONS 6103 AND 27383 DEED OF TRUST Village Green Cottages Below Market Rate Home No. THIS DEED OF TRUST is to be effective this day of between and , husband and wife, mailing address is as grantor ("Grantor"): mailing address is ("Trustee"); and the City of Gilroy, whose mailing California 95020 -6141, as Beneficiary ( "Beneficiary"). 200 whose ,CA _(insert title company name), whose as trustee address is 7351 Rosanna Street, Gilroy, GRANT. Grantor hereby bargains, sells and conveys to Trustee in Trust for the benefit of Beneficiary, with power of sale the real property located in the City of Gilroy, Santa Clara County, California, described on Exhibit ' attached hereto and incorporated herein by this reference. 1. OBLIGATIONS SECURED: This Deed of Trust is given for the purpose of securing all amounts due under the Promissory Note attached as Exhibit `B' and incorporated herein by this reference ("Note") and under the Resale Restriction Agreement and Option to Purchase attached hereto as Exhibit `C' and incorporated herein by this reference ("Restriction Agreement "), and all renewals, modifications and extensions of the Note and Restriction Agreement, and also such further sums as may be loaned by Beneficiary to Grantor, or any of their successors or assigns, and together with interest thereon at such rate as shall be agreed upon in said Restriction Agreement and Note. The amount due under the Note and Restriction Agreement is the City's share the appreciation of the Property as determined under Section 9 of the Restriction Agreement, and this amount may be adjusted as provided in the Restriction Agreement and the Note. This Deed of Trust secures performance of each term and condition of said Note and Restriction Agreement. If the Grantor complies with the terms of this Deed of Trust, the Exhibit "D" Page 1 -'� Res. Owner Iniu:ai Note, and the Restriction Agreement, the amount due and payable under the Note and Restriction Agreement shall be forgiven after thirty (30) years from the date of the Restriction Agreement. Payment under the Note and Restriction Agreement shall only become due and owing if one of the following events occur: a. The Property is sold, transferred or conveyed to any other party (this may include transfers as a result of death or marriage dissolution) who does not qualify as an Eligible Purchaser or who is not otherwise exempt under the Restriction Agreement before the end of thirty (30) years from the date of the Restriction Agreement. b. Grantor breaches or defaults on the terms of the Note or Restriction A egr ement: C. Grantor breaches or defaults on the terms of this Deed of Trust. Provided, however, that Beneficiary shall not have the right to receive the amount owed without providing Grantor with at least thirty (3Q) days written notice following the event requiring payment, the duty to pay, and the right of Grantor to cure within thirty (30) days of the date of the notice. In the event one of the events described above (items a to c) occur, all sums owing under the Note and the Restriction Agreement shall be due and payable in full. 2. PROTECTION OF SECURITY: To protect the security of this Deed of Trust; Grantor covenants and agrees: 2.1 To keep the Property in good condition and repair, to permit no waste thereof, to complete any building, structure or improvement thereon which may be damaged or destroyed; and to comply with all laws, ordinances, conditions and restrictions affecting the Property. 2.2 To pay before delinquent all lawful taxes and assessments upon the Property; to keep the Property free and clear of all other charges, liens, or encumbrances impairing the security of this Deed of Trust. 2.3 To keep all buildings now or hereafter on the Property continuously insured against loss by fire or other hazards in an amount not less than the replacement cost of the Property. The amount collected under any insurance policy may be applied upon any indebtedness hereby secured in such order as the Beneficiary shall determine. Such application by the Beneficiary shall not cause discontinuance if any proceedings to foreclose this Deed of Trust. In the event of foreclosure, and subject to the rights of the Beneficiary or beneficiaries of any senior deed of trust, all rights of Grantor in insurance policies then in force shall pass to the purchaser at the foreclosure sale. Exhibit "D" Page 2 Res. Owner Initials / 2.4 To defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee, and to pay all costs and expenses, including cost of title search and attorney's fees in a reasonable amount, in any such proceeding, and in any suit brought by Beneficiary to foreclose this Deed of Trust. 2.5 To pay all costs, fees and expenses in connection with this Deed of Trust, the Note and Restriction Agreement, including the expenses of the Trustee incurred in enforcing the obligation secured hereby and Trustee's and attorney's fees actually incurred, as provided by statute. 2.6 Should Grantor fail to pay when due any taxes, assessments, insurance premiums liens, encumbrances or other charges against the Property, Beneficiary may pay the same, and amount so paid shall be added to and become a part of the debt secured by this Deed of Trust. Provided further, that Beneficiary's payment of the foregoing is optional with Beneficiary and Grantor's failure to pay such amounts shall constitute a default under this Deed of Trust. 3. WARRANTIES: Without limitation to any warranties implied by law, Grantor warrants that Grantor has full power and authority to enter into this Deed of Trust and has good and marketable title to an indefeasible estate in fee simple to the real property subject to this Deed of Trust. Grantor does hereby and will forever warrant and defend title to the Property herein conveyed and defend title to the Property herein conveyed and defend the validity and priority of the lien of this Deed of Trust against the claims and demands of all persona and parties. Grantor covenants and agrees to appear in and defend any action on proceeding purporting to affect the security hereof, or the right or powers of the Beneficiary or Trustee. 4. GENERAL CONDITIONS: The parties hereto agree that: 4.1 In the event any portion of the Property is taken or damaged in an eminent domain proceeding, the entire amount of the award or such portion as may be necessary to fully satisfy this obligation secured hereby, shall be paid to Beneficiary to applied to said obligation. 4.2 By accepting payment of any sum secured hereby after its due date, Beneficiary does not waive its right to require prompt payment when due of all other sums so secured or to declare default for failure to so pay. 4.3 The Trustee shall reconvey all or any part of the Property covered by this Deed of Trust to the person entitled thereto on written request of the Grantor and the Beneficiary, or upon satisfaction of the obligations secured and written request for reconveyance made by the Beneficiary or the person entitled thereto. 4.4 Power of Sale. Upon default by Grantor without timely cure after written notice of thirty (30) days in the payment of any indebtedness secured hereby or in the performance of any agreement contained herein, all sums secured hereby shall Exhibit "D" Page 3 Res. Owner Initials . immediately become due and payable. In such event and upon written notice of Beneficiary, the Property shall be sold, in accordance with the laws of the State of California, at public auction to the highest bidder. Any person may bid at the Trustee's sale. Subject to the rights of the Beneficiary or beneficiaries of any senior deed of trust, the proceeds of the sale shall be applied as follows: (1) to the expense of the sale, including reasonable Trustee's fees and attorney's fee; (2) to the obligation secured by this Deed of Trust; (3) the surplus, if any, shall be distributed to the person or persons entitled thereto. 4.5 A Trustee shall deliver to the purchaser at the sale its deed, without warranty, which shall convey to the purchaser the interest in the property which Grantor had or had the power to convey at the time of the execution of this Deed of Trust, and such as Grantor may have acquired thereafter. Trustee's deed shall recite facts showing that the sales was conducted in compliance with all the requirements of law and of this Deed of Trust, which recital shall be prima facie evidence of such compliance and conclusive evidence thereof in favor of a bona fide purchaser for value. 4.6 The power of sale conferred by this Deed of Trust and by the laws of the State of California is not an exclusive remedy. Beneficiary may cause this Deed of Trust to be foreclosed as a mortgage. 4.7 Beneficiary may at any time appoint or discharge the Trustee. 4.8 This Deed of Trust applies to, inures to the benefit of, and binds all parties hereto and their successors and assigns. The terms "Grantor" "Trustee ", and "Beneficiary" include their successors and assigns. WITNESS the hand and seal of the Grantor on the day and year first above written. Exhibit "D" Page 4 Res. owner Initials,,. L. REQUEST FOR FULL RECONVEYANCE TO BE USED ONLY WHEN ALL OBLIGATIONS HAVE BEEN PAID AND ALL DUTIES PERFORMED UNDER THIS DEED OF TRUST. TO: TRUSTEE: The undersigned is the party entitled to the performance, benefits, duties, and payments under the Restriction Agreement between Grantor and Beneficiary which is secured by this Deed of Trust and other legal documents. The obligations thus secured have been fully paid, duties performed and satisfied, and you are hereby requested and directed, on payment to you of any sums owing to you under the terms of said Deed of Trust to cancel evidence of indebtedness secured by said Deed of Trust delivered to you with said Deed of Trust, and to reconvey, without warranty, to the parties designated by the terms of said Deed of Trust, all the estate now held by you hereunder. DATED: 1200 GRANTOR CITY OF GILROY Exhibit " D" Page 5 Res. Owner Initials���