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HomeMy WebLinkAbout2009-08-26 e-packet~~xs~ SI'E~: IAL 1VIEETING -~~ ~' ~~:~L~TLG~I~LI<T~ AGEN~~>~ ~I CITY OF SOUTH SAl~ FP.ANCI SCO `~L ~ .O. L~vY ?11 `City Hail, 4v0 Grand Aven~~c) South San Francisco, California 9403 ~:Ivetin ~ to be held at: ~~ ~ 1NICIP A I: SEI?~TIC'ES 13UII~DING CONIM~TNITY ROOM 3 3 ~' uZOYO DI?IV~ S(>Url'H .SAN FIZANCISCC>, CA ~vJ~DNESDAY, ri~GIJST 26, 2009 6:30 I'.M. NOTICE IS HEREBY GIVEN, pursuant to Section 54556 of the Oovermnent Code of the C ~ (~' j'fn i., .~,~1,.,~n1r~ + ~ ~ ~.f 4L.o (~'j ~.tj, C!,,, L'ro ~~cr~~ ~ ~11 L,r.1.r1 Mate o~ ~a:~~.;rn~_:, the Rede~.,_~r_::.,n~ Age,~cy :;~ t~~:: ~ ty o So ~;:.~= ~.:~n„1~:,~ rvl:~ i,~:,a a Sl;eci~~ i ivleeting on Wednesday, she 2.6`'' day of August, %~%9; at 6: i0 p.m., ire tl-~e ivlunicip~.tl Services B»ildir~g, Community 1{00~~~, 33 Al-~~oyo Drive, So„th San. Francisco, aiifornia. Purpose of the meeting: l . .Call to Order. 2. Roll Cali. 3. Public Comments - comme~~ts are lir~zited to items on the Special Meeting Agenda. 4. Resolution approving a loan for the remodel and expansion of Buon Gusto Ristorante in an amount not to exceed X650,000 and authorizing the Executive Director to execute the loan documents. 5 . Adj ou>nment. n J City o~~outh,' an Francisco °~}~s=~~~ Redevelo meat A enc o ~ p g y Sta Re ort c9 tiA LIFOR~ DATE: August 26, 2009 TO: Redevelopment Agency Board FROM: Marty Van Duyn, Assistant Executive Director SUBJECT: RESOLUTION APPROVING A LOAN FOR THE EXPANSION OF BUON GUSTO RISTORANTE IN AN AMOUNT NOT TO EXCEED $650,000 AND AUTHORIZING THE EXECUTIVE DIRECTOR TO EXECUTE THE LOAN DOCUMENTS RECOMMENDATION It is recommended that the Redevelopment Agency Board adopt the attached Resolution approving a loan for the expansion of Buon Gusto Ristorante in an amount not to exceed $650,000 and authorizing the Executive Director to execute the loan documents. BACKGROUND/DISCUSSION Buon Gusto Ristorante, located at 224 Grand Avenue, has been one of the City's finest restaurants since 1988. Buon Gusto is located in the heart of the Historic Downtown District (HDD) and at the center of current public and private revitalization efforts. Recent new businesses like Luminous Day Spa, Peet's Coffee and Ben Tre have added to the increasing popularity of the Downtown, drawing people throughout the Peninsula to our local business district. Buon Gusto's expansion will significantly enhance the area's renaissance. The proposed project is made possible by an agreement reached with the adjacent property owner, the Giffra Family Trust, allowing Buon Gusto to expand into their currently vacant tenant space. Mid Peninsula Housing Coalition owns the building the restaurant occupies and has also agreed to allow the expansion by virtue of a communicating opening between the two properties. Both property owners require that in the event the restaurant (or future tenant) reverts to separate tenant spaces, the communicating opening will be closed per the Building Code and at the restaurant owner's expense. The expansion will provide Buon Gusto with twice the seating capacity, a full service bar, new state of the art kitchen, and disabled accessible restrooms. The City's Design Review Board has approved the proposed design and the construction drawings have been submitted for building plan check. Buon Gusto anticipates construction beginning immediately in an attempt to capitalize on this year's holiday season. Staff Report Subject: Loan of $650,000 for Expansion of Buon Gusto Ristorante Page 2 The Design Review Board and Planning Division focused attention on trash collection and the loading area for deliveries, requiring the project to provide a higher standard beyond what is typical for Fourth Lane. The project is required to provide stand alone capabilities for both trash collection and the loading area, in the event future changes result in separate tenant spaces. Further, Buon Gusto is required to provide a second and separate trash enclosure from the one which currently exists; an interim loading area and a permanent loading area, both of which will park delivery trucks completely off Fourth Lane. The Fire Marshal is requiring fire suppression systems to be integrated into the existing and expansion areas. The requirement for the existing restaurant is in excess of minimum Building Code mandates. While the existing restaurant space is not being remodeled~new fire sprinkler systems are mandated for the entire project to maximize fire protection. These requirements are adding over $200,000 to the project costs, including sprinkler and fire alarm systems. FUNDING The cost of the expansion was estimated earlier in the year to be $350,000. Recent projections, accounting for increased structural recommendations, have brought the construction estimate to $400,000. The fire suppression requirements bring the total budget to $650,000. Redevelopment Agency funds have been set aside in the current year's CIP budget for this remodel which has been anticipated for several months. The increase in the projected budget can also be funded within the current year's budget with funds targeted specifically for projects of this nature. The loan to the business owners will have simple interest of four (4%) percent, be amortized over 35 years and will be secured by the lease and leasehold improvements. The monthly payments on the promissory note will be $3,000 per month. Based on past performance and historical cash receipts, Buon Gusto believes it will be manageable to meet the monthly repayment of the loan. CONCLUSION This project is in keeping with the Downtown Revitalization Strategy the Agency Board approved earlier this year to improve the economic vitality and enhance the character of the district. The expansion of this restaurant compliments other improvements in the HDD, including Bronstein's Music and Di Napoli, and :preserves a building with historic character. Staff recommends that the Redevelopment Agency Board adopt the attached Resolution approving a loan for the expansion of Buon Gusto Ristorante in an amount not to exceed $650,000 and authorizing the Executive Director to execute the loan documents. taff Report Subject: Loan of $650,000 for F;xpansion of Buon Gusto Ristorante Page 3 Marty Van Duyn Assistant Executive Director BMN:MVD:NF Attachment: Resolution Owner Participation Agreement Promissory Note Deed of Trust Exhibit 1-Color Rendering Exhibit 1-Floor Plan Layout °~, `j Approved: _<< ~ C• M. Nagel Executive Director (ZESOLUTION NO REDEVELOPMENT AGENCY, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA A RESOLUTION APPROVING THE EXECUTION OF AN OWNER PARTICIPATION AND LOAN AGREEMENT WITH BUON GUSTO RISTORANTE, APPROVING THE PROVISION OF A LOAN FOR THE REHABILITATION OF THE PROPERTY LOCATED AT 222-224 GRAND AVENUE, AND AUTHORIZING THE EXECUTION OF DOCUMENTS IN CONNECTION WITH SUCH FINANCING WHEREAS, the Redevelopment Agency of the City of South San Francisco ("Agency") is a redevelopment agency existing pursuant to the Community Redevelopment Law, California Health and Safety Code Section 33000, et seq. (the "CRL"), and pursuant to the authority granted thereunder, has the responsibility to carry out the Redevelopment Plan (the "Redevelopment Plan") for the Downtown/Central Redevelopment Project Area (the "Project Area"); WHEREAS, the Agency operates a commercial rehabilitation loan program pursuant to which the Agency provides financing for the rehabilitation of buildings located within the Project Area; WHEREAS, Buon Gusto Ristorante, ("Borrower") leases the property located in the Project Area at 222-224 Grand Avenue, and known as San Mateo County Assessor's Parcel No. 012-315-120 (the "Property"), and Borrower has applied to Agency for financing in order to rehabilitate and improve the Property (the "Project"); WHEREAS, the Project will be of benefit to the Project Area because it will improve the streetscape appearance of the Property, permit Borrower to expand Borrower's restaurant, and provide increased job and economic development opportunities; WHEREAS, the terms and conditions for the rehabilitation of the Property and the financing of the Project are more particularly described in a proposed Owner Participation and Loan Agreement (the "OPA") between Agency and Borrower, copies of which have been provided to the Agency; WHEREAS, the proposed Agency financing for the Project includes a loan in the amount of Six Hundred Fifty Thousand Dollars ($650,000) (the "Loan"); WHEREAS, the Project would be infeasible without the Loan; and WHEREAS, Borrower anal Agency staff have negotiated the terms and conditions of (i) a Secured Promissory Note (the "Note") that provides for repayment of the Loan 1246558-] - 1 - over athirty-five (35) year term; and (ii) a Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (the "Deed of Trust") pursuant to which the Agency will be provided a security interest in Borrower's leasehold interest in the Property to secure repayment of the Loan. NOW, THEREFORE, BE IT RESOLVED by the Redevelopment Agency of the City of South San Francisco that it hereby: 1. Finds that the rehabilitation of the Property in accordance with the OPA and the provision of the Loan for the Prc-ject will be of benefit to the Project Area, will further the goals of the Redevelopment Plan, and will be consistent with the implementation plan adopted in connection therewith. 2. Approves the provision of the Loan pursuant to the terms and conditions set forth in the OPA. 3. Approves the OPA, the Note, and the Deed of Trust; authorizes the Executive Director or his designee to execute and deliver the OPA and the Memorandum of the OPA substantially in the form on file with the Agency Secretary; and authorizes the recordation of a Memorandum of the OPA in the Official Records of San Mateo County. 4. Authorizes the Executive Director or his designee to execute and deliver such other instruments and to take such other actions as necessary to carry out the intent of this Resolution. I hereby certify that the foregoing Resolution was regularly introduced and adopted by the Redevelopment .Agency of the City of South San Francisco at a meeting held on the _ day of , 2009 by the following vote: AYES: NOES: ABSTAIN: ABSENT: ATTEST: Agency Secretary 1246558-1 - 2 - OWNER PARTICIPATION AND LOAN AGREEMENT (Commercial Rehabilitation Loan Program) by and between THE REDEVELOPMENT AGENCY OF THE CITY OF SOUTH SAN FRANCISCO and BUON GUSTO RISTORANTE A CALIFORNIA CORPORATION 2009 -3- Exhibits A Legal Description of Property B Financing Plan C Form of Memorandum of Owner Participation Agreement D Form of Certificate of Completion E Form of Promissory Note F Form of Deed of Trust 1246539-2 -4- THIS OWNER PARTICIPATION AND LOAN AGREEMENT (this "Agreement") is entered into effective as of , 2009 ("Effective Date") by and between the Redevelopment Agency of the City of South San Francisco, a public body, corporate, and politic ("Agency") and Buon Gusto Ristorante, a California corporation ("Borrower"). Agency and Borrower are hereinafter collectively referred to as the "Parties." RECITALS A. Borrower leases the real property located at 224 Grand Avenue in the City of South San Francisco ("City"), and known as San Mateo County Assessor's Parcel No. 012-315- 120 as more particularly described in Exhibit A attached hereto (the "Property") and the improvements thereon ("Improvements"). The Property is located within the Downtown Project Area ("Project Area") established pursuant to the redevelopment plan adopted in 1989 by the City Council of the City of San. Francisco ("City Council") by Ordinance No. 1056-89 (as subsequently amended, the "Redevelopment Plan"). B. Agency operates a Commercial Rehabilitation Loan Program (the "Program") pursuant to which the Agency provides loans for the rehabilitation of buildings located within the Project Area. C. Borrower has proposed to rehabilitate the Improvements in order to, among other improvements, rehabilitate the building exterior, add the existing adjacent retail space to the existing restaurant, make tenant improvements to the interior space, install new furnishings and equipment, and make improvements to the building facade (all of the foregoing, collectively, the "Project"). D. The owner of the Property has consented to the Project and the improvement of the Property as set forth in this Agreement. E. Borrower has requested, and Agency has agreed to provide, a loan (the "Loan") to Borrower pursuant to the terms and conditions set forth herein for the purpose of providing partial financing for the Project. F. The purpose of this Agreement is to effectuate the Redevelopment Plan by providing for the rehabilitation of the Property as more particularly set forth herein. The Agency has determined that (i) rehabilitation of the Property pursuant to this Agreement is consistent with the Redevelopment Plan and the Implementation Plan for the Project Area, will be of benefit to the Project Area, and will fiarther the goals of the Redevelopment Plan by improving the streetscape appearance of the Improvements, and by providing increased job and economic development opportunities, and (ii) the Loan is necessary to make the Project economically feasible. G. A material inducement to the Agency to enter into this Agreement is the agreement by Borrower to rehabilitate the Property within the time periods specified herein and in accordance with the provisions hereof, and the Agency would be unwilling to enter into this Agreement in the absence of an enforceable commitment by Borrower to complete the Project in accordance with such provisions and within such time periods. 1246539-2 3 -5- H. In connection with this Agreement: (i) Borrower shall execute a secured promissory note (the "Note") in the amount of the Loan and a Leasehold Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing ("Deed of Trust") which shall provide Agency with a security interest in Borrower's leasehold interest in the Property and the Improvements. This Agreement, the Note, and the Deed of Trust are collectively hereinafter referred to as the "Agency Documents." NOW, THEREFORE, in consideration of the mutual covenants contained herein and good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows. ARTICLE I DEFINITIONS 1. Definitions. The following terms shall have the meanings set forth in the Sections referenced below whenever used in this Agreement and the Exhibits attached hereto. Additional terms are defined in the Recitals and text of this Agreement. 1.1 "Agency Documents" is defined in Recital H. 1.2 "Certificate of Completion" is defined in Section 3.15. 1.3 "City" is defined in Recital A. 1.4 "City Council" is defined in Recital A. ] .5 "Claims" is de:Ened in Section 3.17. 1.6 "Closing Date" is defined in Section 4.1. 1.7 "Conditions of Approval" is defined in Section 3.2. 1.8 "Construction Plans" is defined in Section 3.11. 1.9 "Deed of Trust" is defined in Recital H. 1.10 "Environmental Laws" is defined in Section 8.4. 1.11 "Financing Plan" is defined in Section 3.7. 1.12 "Hazardous Materials" is defined in Section 8.3. 1.13 "Improvements" is defined in Recital A. 1.14 "Indemnitees" is defined in Section 3.17. 1. ] 5 "Loan'' is defined in Section 4.1. 1246539-2 4 -6- 1.16 "Note" is defined in Section 4.1. 1.17 "Official Records" means the Official Records of San Mateo County. 1.18 "Permitted Eg.eeptions" is defined in Section 4.5. 1.19 "Project" is defined in Recital C and further described in Section 3.2. 1.20 "Title Policy" is defined in Section 4.5. 1.21 "Transfer" is defined in Section 4.7. ARTICLE II REPRESENTATIONS; EFFECTIVE DATE AND TERM 2.1 Borrower's Representations. Borrower represents and warrants to Agency as follows, and Borrower covenants that until the expiration or earlier termination of this Agreement, upon learning of any fact or condition which would cause any of the warranties and representations in this Section 2.1 not to be true, Borrower shall immediately give written notice of such fact or condition to Agency. Borrower acknowledges that Agency shall rely upon Borrower's representations made herein notwithstanding any investigation made by or on behalf of Agency. (i) Authority; General Partner. Borrower is a corporation, duly organized and in good standing under the laws of the State of California. Borrower has the full right, power and authority to undertake all obligations of Borrower as provided herein, and the execution, performance and delivery of this Agreement by Borrower has been duly authorized by all requisite actions. The persons executing this Agreement on behalf of Borrower have been duly authorized to do so. This Agreement and the other Agency Documents constitute valid and binding obligations of Borrower, enforceable in accordance with their respective terms. (ii) No Conflict. Borrower's execution, delivery and performance of its obligations under this Agreement wil}. not constitute a default or a breach under any contract, agreement or order to which Borrower is a party or by which it is bound. (iii) No Liti atg ion or Other Proceeding. No litigation or other proceeding (whether administrative or otherwise) is outstanding or has been threatened which would prevent, hinder or delay the ability of Borrower to perform its obligations under this Agreement. (iv) No Borrower $ankruptcy_ Borrower is not the subject of a bankruptcy or insolvency proceeding. (v) Property Owner's Consent. The Property is owned by Mid-Peninsula Coalition Belle Haven, Inc., an individual (the "Landlord"). Borrower has obtained the consent of Landlord and all other parties whose consent is required for: (i) the construction of the Project, (ii) the recordation of the Deed of Trust and the Memorandum; and (iii) the execution and recordation of a memorandum of the Lease (defined below). 1246539-2 5 - 7 - (vi) Leasehold Interest; Borrower's Covenant to Extend Lease. Borrower has provided to Agency a correct and complete copy of Borrower's lease for the Property together with all amendments thereto (collectively, the "Lease"). The Lease is in full force and effect. The term of the Lease expires on Borrower has the right under the Lease to execute this Agreement and the Deed of Trust. No default under the Lease remains uncured, nor has any event occurred which, with the passage of time or service of notice or both, would constitute such a default. No circumstances exist which would permit the Landlord to terminate the Lease. Borrower has three options to extend the term of the Lease, each for a period of (~ years (the "Options"). No circumstances exist that would cause any of the Options to expire or be terminated. Iorrower covenants that for so long as the Loan remains outstanding, Borrower will exercise each of the Options, and Borrower acknowledges that failure to do so or to otherwise extend the term of the Lease shall constitute a default hereunder, permitting Agency to accelerate the Note and exercise Agency's remedies under this Agreement, the Note and the Deed of Trust. Borrower covenants to execute and to obtain Landlord's signature on a memorandum of the Lf;ase that will be recorded in the Official Records. Borrower agrees that for so long as the Loan remains outstanding, the fee title to the Property shall not merge with the leasehold interest in the Lease, notwithstanding any union of such estates in the Landlord, Borrower, or any third party. Borrower agrees that if Borrower becomes the fee owner of the Property, the Def;d of Trust shall automatically be a lien on such Property. 2.2 Effective Date; Memorandum. The obligations of Borrower and Agency hereunder shall be effective as of the Effective Date. Concurrently with the execution of this Agreement, the Parties shall execute a Memorandum of this Agreement substantially in the form attached hereto as Exhibit C which shall be recorded in the Official Records ("Memorandum"). ARTICLE III DEVELOPMENT OF THE PROJECT 3.1 The Property. Borrower represents and warrants that as of the Effective Date: (i) Borrower possesses a leasehold interest in the Property and the Improvements, (ii) the owner of the Property has consented to the Project; and (iii) to Borrower's knowledge, the Property is subject to no covenant, condition, restriction or agreement that would prevent the development of the Project in accordance with this Agreement. If at any time the foregoing statements become untrue, the Agency shall have the right to terminate this Agreement upon written notice to Borrower. 3.2 Scope of Development. Borrower shall rehabilitate the Property in accordance with the terms and conditions of this Agreement and in compliance with the terms and conditions of all approvals, entitlements and permits that the City or any other governmental body or agency with jurisdiction over the Project or the Property has granted or issued as of the date hereof or may hereafter grant or issue in connection with the Project, including without limitation, all mitigation measures imposed in connection with environmental review of the Project (if any), all requirements related to preservation of historic resources (if applicable), and all conditions of approval imposed in connection with any entitlements, approvals or permits (all of the foregoing approvals, entitlements, permits, mitigation measures and conditions of approval are hereafter collectively referred to as the "Conditions of Approval"). 1246539-2 -$- The Project will consist of the rehabilitation of the Property, including without limitation, the improvement of the exterior of the building, add the existing adjacent retail space to the existing restaurant, make tenant improvements to the interior space, install new furnishings and equipment, and make improvements to the building facade. 3.3 Reserved. 3.4 Pro~e~ ct Approvals. Borrower acknowledges and agrees that execution of this Agreement by Agency does not constitute approval for the purpose of the issuance of building permits for the Project, does not limit in any manner the discretion of City in such approval process, and does not relieve Borrower from the obligation to apply for and obtain all necessary entitlements, approvals, and permits for the Project, including without limitation, the approval of architectural plans, the issuance of an;y certificates regarding historic resources required in connection with the Project (if any), and the completion of any required environmental review. Borrower covenants that it shall- (i) obtain all necessary permits and approvals which may be required by Agency, City, or any other governmental agency having jurisdiction over the Project or the Property, (ii) comply with all Conditions of Approval, (iii) comply with all mitigation measures imposed in connection with any environmental review of the Project, and (iv) not commence construction work on the Project prior to issuance of building permits required for such work. Agency staff shall work cooperatively with Borrower to assist in coordinating the expeditious processing and consideration of all permits, entitlements and approvals necessary for development of the Project. 3.5 Fees. Borrower shall lie solely responsible for, and shall promptly pay when due, all customary and usual fees and charges of City in connection with obtaining building permits and other approvals for the Project, including without limitation, those related to the processing and consideration of amendments, if ~~ny, to the current entitlements, any related approvals and permits, environmental review, design review, architectural review, historic review, and any subsequent approvals for the Project or the development of the Property. 3.6 Cost of Construction. Except as expressly set forth herein, Borrower shall be solely responsible for all direct and indirect costs and expenses incurred in connection with the design, development and construction of the Project and compliance with the Conditions of Approval, including without limitation the installation and construction of all off-site or on-site improvements required by City in connection therewith, and none of such costs and expenses shall be the obligation of the Agency or the City. 3.7 Financing Plan. Borrower has submitted to Agency, and Agency hereby approves a plan for financing the Project (hereinafter, "Financing Plan"), indicating all sources of funds necessary to pay, when due, the estimated costs of construction, including hard and soft construction costs. Borrower represents and warrants that all such funds have been firmly committed by Borrower, equity investors or lending institutions, subject only to commercially reasonable conditions. The Financing Plan is attached hereto as Exhibit B. 1246539-2 '~ -9- 3.8 Development Schedule. Borrower shall commence and complete construction of the Project and shall satisfy all other obligations of Borrower under this Agreement within the time periods set forth herein, as such time periods may be extended upon the mutual written consent of the Parties. Subject to force majeure, Borrower shall commence construction of the Project not later than one (1) month following the Effective Date, and Borrower shall diligently prosecute to completion the Project in order to allow City to issue a final certificate of occupancy within six (6) months following commencement of construction work. Subject to force majeure, Borrower's failure to commence or ccmplete construction of the Project in accordance with the time periods specified in this Section :3.8 foregoing shall be a Borrower Event of Default hereunder. 3.9 Rights of Access. For the purpose of ensuring that the Project is developed in compliance with this Agreement, Borrower shall permit representatives of the Agency and the City to enter upon the Property to inspect the Project following 24 hours written notice (except in the case of emergency in which case such notice as may be practical under the circumstances shall be provided). 3.10 Agency Disclaimer. Borrower acknowledges that the Agency and City are under no obligation, and neither Agency nor City undertakes or assumes any responsibility or duty to Borrower or to any third party, to in any manner review, supervise, or inspect the progress of construction or the operation of the Project. Borrower and all third parties shall rely entirely upon its or their own supervision and inspection in determining the quality and suitability of the materials and work, the performance of architects, subcontractors, and material suppliers, and all other matters relating to the construction and operation of the Project. Any review or inspection undertaken by the Agency or the City is solely for the purpose of determining whether Borrower is properly discharging its obligations under this Agreement, and shall not be relied upon by Borrower or any third party as a warranty or representation by the Agency or the City as to the quality of the design or construction c-f the Improvements or otherwise. 3.11 Construction Plans. Borrower shall submit to City's Building Department detailed construction plans for the Prc-ject (the "Construction Plans"). As used herein "Construction Plans" means all construction documents upon which Borrower and Borrower's contractors shall rely in constructing the Project (including, as applicable, landscaping, parking, pedestrian access and common areas) and shall include, without limitation the following as applicable to the Project: the site development plan, final architectural drawings, landscaping, exterior lighting and signage plans and specifications, materials specifications, final elevations, and building plans and specifications. The Construction Plans shall be based upon the scope of development set forth herein and upon the approvals issued by the Agency and the City for the Project, and shall not materially deviate therefrom without the express written consent of Agency and City. Provided that the Construction Plans are consistent with the requirements of this Agreement, approval of the Construction Plans by City shall be deemed approval thereof by Agency. 3.12 Construction Pursuant to Plans. Borrower shall complete the Project in accordance with the approved Construction Plans, the Conditions of Approval, and all other permits and approvals granted by the City and/or the Agency pertaining to the Project. Borrower shall comply with all directions, rules and regulations of any fire marshal, health officer, building 1246539-2 8 -10- inspector or other officer of every governmental agency having jurisdiction over the Property or the Project. Each element of the work shall proceed only after procurement of each permit, license or other authorization that may be required for such element by any governmental agency having jurisdiction. All design and construction work on the Project shall be performed by licensed contractors, engineers or architects, as applicable. 3.13 Change in Construction Plans. If Borrower desires to make any material change in the approved Construction Plans, Borrower shall submit the proposed change in writing to the Agency and City for their written approval, which approval shall not be unreasonably withheld or delayed if the Construction Plans, as modified by any proposed change, conform to the requirements of this Agreement and any approvals issued by Agency or City after the Effective Date. Unless a proposed change is approved by Agency within thirty (30) days, it shall be deemed rejected. If rejected, the previously approved Construction Plans shall continue to remain in full force and effect. Any change in the Construction Plans required in order to comply with applicable codes shall be deemed approved, so long as such change does not substantially nor materially change the architecture, design, function, use, or amenities of the Project as shown on the latest approved Construction Plans. Approval of changes to the Construction Plans by City shall be df;emed approval thereof by Agency. Nothing in this Section is intended to or shall be deemed to modify the City's standard plan review procedures. 3.14 Defects in Plans. Neither Agency nor City shall be responsible to Borrower or to any third party for any defect in the Construction Plans or for any structural or other defect in any work done pursuant to the Construction Plans. Borrower shall indemnify, defend (with counsel approved by Agency) and hold harmless the Indemnitees from and against all Claims arising out of, or relating to, or alleged to arise from or relate to defects in the Construction Plans or defects in any work done pursuant to the Construction Plans whether or not any insurance policies shall have been determined to be applicable to any such Claims. Borrower's indemnification obligations set forth in this Section shall survive the expiration or earlier termination of this Agreement and the recordation of a Certificate of Completion. It is further agreed that Agency and City do not, and shall not, waive any rights against Borrower which they may have by reason of this indemnity and hold harmless agreement because of the acceptance by Agency, or Borrower's deposit with Agency of any of the insurance policies described in this Agreement. Borrower's indemnification obligations pursuant to this Section shall not extend to Claims arising due to the gross negligence or willful misconduct of the Indemnitees. 3.15 Certificate of Completion for Project. Promptly after completion of the Project, issuance of a final Certificate of Occupancy by the City and the written request of Borrower, the Agency will provide an instrument ("Certificate of Completion") so certifying, provided that at the time such. certificate is requested all applicable components of the Project have been completed. The Certificate of Completion shall be conclusive evidence that Borrower has satisfied its obligations regarding the :Project. The Certificate of Completion shall be issued substantially in the form attached hereto as Exhibit D, and at Borrower's option, shall be recorded in the Official Records. The Certificate of Completion shall not constitute evidence of compliance with or satisfaction of any obligation of Borrower to any holder of a deed of trust or mortgage securing money loaned to finance the Project or any part thereof and shall not be deemed a notice of completion under the California 1246539-2 C~ -11- Civil Code, nor shall such Certificate provide evidence that Borrower has satisfied any obligation that survives the expiration of this Agreement. 3.16 Equal Opportunity. During the construction of the Project, there shall be no discrimination on the basis of race, color, religion, creed, sex, sexual orientation, marital status, ancestry or national origin in the hirir.-g, firing, promoting or demoting of any person engaged in construction of the Project, and Borrower shall direct its contractors and subcontractors to refrain from discrimination on such basis. 3.17 Prevailing_Wa eg Requirements. To the full extent required by all applicable state and federal laws, rules and regulations, if any, Borrower and its contractors and agents shall comply with California Labor Code Section 1720 et seq. and the regulations adopted pursuant thereto ("Prevailing Wage Laws"), and shall be responsible for carrying out the requirements of such provisions. If applicable, Borrower shall submit to Agency a plan for monitoring payment of prevailing wages and shall implement such plan at Borrower's expense. Borrower shall indemnify, defend (with counsel approved by Agency) and hold the Agency, the City, and their respectivc; elected and appointed officers, officials, employees, agents, consultants, and contractors (collectively, the "Indemnitees") harmless from and against all liability, loss, cost, expense (including without limitation attorneys' fees and costs of litigation), claim, demand, action, suit, judicial or administrative proceeding, penalty, deficiency, fine, order, and damage (all of the foregoing collectively "Claims") which directly or indirectly, in whole or in part, are caused by, arise in connection with, result from, relate to, or are alleged to be caused by, arise in connection with, or relate to, the payment or requirement of payment of prevailing wages (including without limitation, all claims that may be made by contractors, subcontractors or other third party claimants pursuant to Labor Code Sections 1726 and 1781) or the requirement of competitive bidding in the construction of the Project, the failure to comply with any state or federal labor laws, regulations or standards in connection with this Agreement, including but not limited to the Prevailing Wage Laws, or any act or omission of Borrower related to this Agreement with respect to the payment or requirement of payment of prevailing wages or the requirement of competitive bidding, whether or not any insurance policies shall have been determined to be applicable to any such Claims. It is further agreed that Agency and City do not and shall not waive any rights against Borrower which they may have by reason of this indemnity and hold harmless agreement because of the acceptance by Agency, or Borrower's deposit with Agency of a.ny of the insurance policies described in this Agreement. The provisions of this Section 3.17 shall survive the expiration or earlier termination of this Agreement and the issuance of a Certificate of Completion for the Project. Borrower's indemnification obligations set forth in this Section shall not apply to Claims arising from the gross negligence or willful misconduct of the Indemnitees. 3.18 Compliance with Laves. Borrower shall carry out and shall cause its contractors to carry out the construction of the Project in conformity with all applicable federal, state and local laws, rules, ordinances and regulations, including without limitation, all applicable federal and state labor laws and standards, the City zoning and development standards, building, plumbing, mechanical and electrical codes, all other provisions of the City's Municipal Code, and all applicable disabled and handicapped access requirements, including without limitation; the Americans with Disabilities Act, 42 U.S.C. Section 12101, et seq., Government Code Section 1246539-2 ] -12- 4450, et seq., Government Code Section 11 l 35, et seg., and the Unruh Civil Rights Act, Civil Code Section 51, et seq.. Borrower shall indemnify, defend (with counsel approved by Agency) and hold harmless the Indemnitees from and against any and all Claims arising in connection with the breach of Borrower's obligations set forth in this Section whether or not any insurance policies shall have been determined to be applicable to any such Claims. It is further agreed that Agency and City do not and shall not waive any rights against Borrower which they may have by reason of this indemnity and hold harmless agreement because of the acceptance by Agency, or Borrower's deposit with Agency of any of the insurance policies described in this Agreement. Borrower's indemnification obligations set forth in this Section shall not apply to Claims arising from the gross negligence or willful misconduct of the Indemnitees. Borrower's defense and indemnification obligations set forth in this Section 3.18 shall survive the expiration or earlier termination of this Agreement and the issuance of a Certificate of Completion for the Project. 3.19 Liens and Stop Notices. Prior to the reconveyance of the Deed of Trust, Borrower shall not allow any lien or stop notice on account of materials supplied to or labor performed on behalf of Borrower to be recorded against Borrower's leasehold interest in the Property or any portion thereof. If a claim of a lien or stop notice is given or recorded affecting the Project, Borrower shall within twenty (20) days of such recording or service: (a) pay and discharge (or cause to be paid and discharged) the same; or (b) effect the release thereof by recording and delivering (or causing to be recorded and delivered) to the party entitled thereto a surety bond in sufficient form and amount; or (c) provide other assurance satisfactory to Agency that the claim of lien or stop notice will be paid or discharged. 3.20 Ri hg t of Agency to Satisfy Liens on the Property. If Borrower fails to satisfy or discharge any lien or stop notice on the Property pursuant to and within the time period set forth in Section 3.19 above, the Agency shall have the right, but not the obligation, to satisfy any such liens or stop notices at Borrower's expense and without further notice to Borrower and all sums advanced by Agency for such purpose shall be part of the indebtedness secured by the Deed of Trust. In such event Borrower shall 1>e liable for and shall immediately reimburse Agency for such paid lien or stop notice. Alternatively, the Agency may require Borrower to immediately deposit with Agency the amount necessary to satisfy such lien or claim pending resolution thereof. The Agency may use such deposit to satisfy any claim or lien that is adversely determined against Borrower. Borrawer shall file a valid notice of cessation or notice of completion upon cessation of construction of the Project for a continuous period of thirty (30) days or more, and shall take all other reasonable steps to forestall the assertion of claims or liens against the Property or the Project. T'he Agency may (but has no obligation to) record any notices of completion or cessation of labor, or any other notice that the Agency deems necessary or desirable to protect its interest in the Property and the Project. 3.21 Performance and Payment Bonds. Prior to commencement of construction work on the Project, Borrower shall cause its general contractor to deliver to the Agency copies of payment bond(s) and performance bond(s) issued by a reputable insurance company licensed to do business in California; each in a penal sum of not less than one hundred percent (100%) of the scheduled cost of construction of the Project. The bonds shall name the Agency and the City as co-obligees. In lieu of such performance and payment bonds, su>;ject to Agency's approval of the form and substance ] 246539-2 11 -13- thereof, Borrower may submit evidence satisfactory to the Agency of the contractor's ability to commence and complete construction. of the Project in the form of an irrevocable letter of credit, pledge of cash deposit, certificate of deposit, or other marketable securities held by a broker or other financial institution, with signature authority of the Agency required for any withdrawal, or a completion guaranty in a form and from a guarantor acceptable to Agency. Such evidence must be submitted to Agency in approvable form in sufficient time to allow for Agency's review and approval prior to the scheduled construction start date. 3.22 Insurance Requirements. Borrower shall maintain and shall cause its contractors to maintain all applicable insurance coverage specified in Article X. ARTICLE IV AGENCY FINANCIAL ASSISTANCE 4.1 Loan and Note. Agency agrees to provide a loan to Borrower in the principal amount of Six Hundred Fifty Thousand Dollars ($650,000) (the "Loan") upon the terms and conditions and for the purposes set forth in this Agreement. The Loan shall be evidenced by a Secured Promissory Note in the amount of the Loan (the "Note") dated as of the date of closing (the "Closing Date") and executed by Borrower substantially in the form attached hereto as Exhibit E. The Note shall be secured by a Leasehold Deed of Trust with Assignment of Rents, Security Agreement and Fixture Filing (the "Deed of Trust") executed by Borrower as Trustor for the benefit of Agency substantially in the form attached hereto as Exhibit F. 4.2 Interest Rate; Pant: Dates; Maturity The outstanding principal balance of the Note will bear interest at four percent (4%) simple annual interest commencing July 1, 2010. No interest shall accrue prior to July 1, 2010. Monthly payments shall be due and payable in accordance with the terms set forth. in the Note. Commencing upon August 1, 2010 (the "First Payment Date"), and on the first (1 S') day of each calendar month thereafter, Borrower shall make monthly payments of combined principal and interest until the entire indebtedness evidence hereby is fully paid, except that all remaining indebtedness, if not sooner paid, shall be due and payable upon the Maturity Date (defined below). The. entire outstanding principal balance of the Loan together with accrued interest and all other sums due under the Agency Documents shall be payable in full ors the earlier of (i) the thirty-fifth (35'") anniversary of the Effective Date, or (ii) the date upon which the Lease terminates. Notwithstanding the foregoing, the Agency shall have the right to accelerate the maturity date and declare all sums payable under the Note immediately due and payable upon the occurrence of a Borrower Event of Default, including without limitation, Borrower's failure to commence or complete construction of the Project within the times periods specified in Section 3.8. 4.3 Security. As security :for repayment of the Note, Borrower shall execute the Deed of Trust in favor of Agency as beneficiary pursuant to which Agency shall be provided a lien against Borrower's leasehold interest in the Property and the Improvements. The Deed of Trust shall be dated as of the Closing Date, shall be substantially in the form attached hereto as Exhibit F, and shall be recorded in the Official Records on the Closing Date. The Deed of Trust may be subordinated only to the Permitted Exceptions and such liens and encumbrances as Agency shall approve in writing. 1246539-2 12 -14- 4.4 Use and Disbursement of Proceeds. Borrower shall use the proceeds of the Loan (the "Loan Proceeds") solely and exclusively to pay for costs billed to Borrower by third parties in connection with the design and construction of the Project and such other costs related to the Project as Agency may approve in writing. Provided that Borrower has complied with all conditions precedent to disbursement of the Loan set forth in Section 4.5 and has provided Agency with a written requisition specifying the amount and use of the requested Loan Proceeds, accompanied by copies of evidence of payment of bills and invoices from third parties and such other documentation as Agency may reasonably require, the initial disbursement of Loan Proceeds shall be disbursed to Borrower. Subsequent disbursements shall be made no more than once per calendar month, upon Agenc;y's receipt of written requisitions and supporting documentation. 4.5 Conditions to Disbursement of Loan Proceeds. Agency's obligation to fund t]le Loan and disburse the Loan Proceeds is conditioned upon the satisfaction (or Agency's waiver) of all of the following conditions: (i) Borrower's exf;cution and delivery to Agency of this Agreement, the Note, the Deed of Trust, and the Memorandum. (ii) Recordation of~ the Memorandum and the Deed of Trust in the Official Records. (iii) The issuance by an insurer satisfactory to Agency of an A.L.T.A. lender's policy of title insurance ("Title Policy") for the benefit of Agency in the amount of the Loan, insuring that the lien of the Deed of Trust is subject only to exceptions number through identified in that certain Preliminary Report (Order No. ) issued by Title Company and dated , 2009 (provided that taxes and assessrnents are paid current as of the closing date), and such other defects, liens, conditions, encumbrances, restrictions, easements and exceptions as Agency may approve in writing (collectively, the "Permitted Exceptions") and containing such endorsements as Agency may reasonably require, with the cost of such Title Policy to be paid by Borrower. The cost of the Title Policy shall be paid by Borrower. (iv) Borrower's deaivery to Agency of each of the following: (i) certificate of good standing, certified by the Secretary of State indicating that Borrower is properly organized and authorized to do business in the `.Mate of California, (ii) a certified resolution indicating that Borrower has authorized this transaction and that the persons executing the Agency Documents on behalf of Borrower have been duly authorized to do so, and (iii) certified copy of Borrower's articles of incorporation and bylaws. (v) Borrower's delivery to the Agency of evidence of property and liability insurance coverage in accordance with the requirements set forth in Article X. (vi) Borrower's delivery to Agency of evidence reasonable satisfactory to Agency that there are no mechanics' liens or stop notices related to the Property or the Project, 1246539-2 13 -15- and Borrower's provision to Agency of full waivers or releases of lien clams if required by Agency. (vii) No material adverse change as determined by Agency in its reasonable judgment shall have occurred in the condition of the Property or in the financial or other condition of Borrower since the date of this Agreement. (viii) Borrower's delivery to Agency of evidence satisfactory to Agency that Borrower has obtained all necessary entitlements, permits (including without limitation building permits), licenses, and approvals required to develop the Project, or that the receipt of such permits is subject only to such conditions as Agency shall reasonably approve. (ix) Borrower's delivery to Agency and Agency approval of: (i) performance bonds or other assurance of completion reasonably acceptable to Agency pursuant to the requirements set forth in Section 3.2'l ;and (iii) construction schedule for the Project. (x) Agency approval of the Project budget and Financing Plan. (xi) All other sources of financing for the Project shall have closed or shall close concurrently with Agency's initial disbursement of Loan Proceeds, and Borrower shall have delivered to Agency evidence reasonably satisfactory to Agency that Borrower has secured binding financing commitments for all Project costs. (xii) Agency's receipt of a written requisition from Borrower specifying the amount and use of the requested funds, accompanied by copies of third-party invoices, evidence of Borrower's payment for services rendered in connection with the Project, and such other documentation as Agency shall reasonably require. 4.6 No Obligation to Disburse Proceeds Upon Default. Notwithstanding any other provision of this Agreement, the Agency shall have no obligation to disburse or authorize the disbursement of any portion of the Loan Proceeds following: (i) the failure of any of Borrower's representations and warranties made in this Agreement or in connection with the Loan to be true and correct in all material respects; (ii) the termination of this Agreement by mutual agreement of the Parties; (iii) Transfer of Borrower's interest in the Property or Improvements without Agency consent pursuant to Section 4.7; (iv) the occurrence; of a Borrower Event of Default under any Agency Document which remains uncured bt~yond any applicable cure period, or the existence of any condition, event or act which upon the giving of notice or the passage of time or both would constitute a Borrower Event of Default under any Agency Document. 4.7 Prepayment; Acceleration; Limitations on Assi ng_ment. 1246539-2 14 -16- (a) Prepay Borrower shall have the right to prepay the Loan at any time and from time to time, without penalty or premium, provided that any prepayment of principal must be accompanied by interest accrued but unpaid to the date of prepayment. Prepayments shall be applied first to accrued but unpaid interest and then to principal. In no event shall any amount due under the Note become subject to any rights of offset, deduction or counterclaim on the part of Borrower. (b) Due On Sale or Encumbrance. Unless Agency agrees otherwise in writing, the entire unpaid principal balance and all interest and other sums accrued under the Note shall be due and payable upon the Transfer, absent the prior written consent of Agency, of all or any part of Borrower's interest in the Property or Improvements except as otherwise permitted pursuant to this Agreement., "Transfer'' shall include any assignment, hypothecation, mortgage, pledge, encumbrance or conveyance of Borrower's interest in the Property or the Improvements. (c) Limitations on Assignment. Borrower and its principals have represented that they possess the necessary expertise, skill and ability to carry out the Project pursuant to this Agreement. The qualifications, experience, financial capacity and expertise of Borrower and its principals are of particular concern to Agency. It is because of these qualifications, experience, financial capacity and expertise that the Agency has entered into this Agreement with Borrower. No voluntary or involuntary successor, assignee or transferee of Borrower shall acquire any rights under this Agreement absent the advance written consent of Agency, and Agency shall have no obligation to make disburserrients of Loan Proceeds in the event of a Transfer absent such written consent. ARTICLE V US:E OF THE PROPERTY 5.1 Use. Borrower covenants and agrees for itself and its successors and assigns that the Property shall be used for a retail establishment in compliance with all applicable City zoning and use restrictions. 5.2 Maintenance. Borrower shall at its own expense, maintain the Property, the Improvements and related landscaping and common areas in good physical condition, in good repair, and in decent, safe, sanitary, habitable and tenantable living conditions in conformity with all applicable state, federal, and local laws, ordinances, codes; and regulations. Without limiting the foregoing, Borrower agrees to maintain the Property and the Improvements (including without limitation, the residential units, common areas, landscaping, driveways, parking areas, and walkways) in a condition free of .all waste, nuisance, debris, unmaintained landscaping, graffiti, disrepair, abandoned vehicles/appliances, and illegal activity, and shall take all reasonable steps to prevent the same from occurring on the Property or the Improvements. Borrower shall prevent and/or rectify any physical deterioration of the Property and the Improvements and shall make all repairs, renewals and replacements necessary to keep the Property and Improvements in good condition and repair. Borrower shall provide adequate security services for occupants of the Project. 1246539-2 15 -17- 5.3 Taxes and Assessments. Borrower shall pay all real and personal property taxes, assessments and charges and all franchise, income, payroll, withholding, sales, and other taxes assessed against the Property and payable by Borrower, at such times and in such manner as to prevent any penalty from accruing, or any lien or charge from attaching to the Property; provided, however, that Borrower shall have the right to contest in good faith, any such taxes, assessments, or charges. In the event the Borrower exercises its right to contest any tax, assessment, or charge, the Borrower, on final determination of the proceeding or contest, shall immediately pay or discharge any decision or judgment rendered against it, together with all costs, charges and interest. 5.4 Obligation to Refrain i_rom Discrimination. Borrower shall not restrict the rental, sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, or any portion thereof on the basis of race, color, religion, creed, sex, sexual orientation, disability, marital status, ancestry, or national origin of any person. Borrower covenants for itself and all persons claiming under or through it, and this Agreement is made and accepted upon and subject to the condition that there shall be no discrimination against or segregation of any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property or part thereof, nor shall Borrower or any person claiming under or through Borrower establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in, of, or for the Property or :part thereof. Borrower shall include such provision in all deeds, leases, contracts and other instruments executed by Borrower, and shall enforce the same diligently and in good faith. All deeds, leases or contracts made or entered into by Borrower, its successors or assigns, as to any portion of the Property or the Improvements shall contain the following language: (a) In Deeds, the following language shall appear: "(1) Grantee herein covenants by and for itself, its successors and assigns, and all persons claiming under or through it, that there shall be no discrimination against or segregation of a person or of a group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the property herein conveyed nor shall the grantee or any person claiming under or through the grantee establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tf~nants, lessees, subtenants, sublessees or vendees in the property herein conveyed. The foregoing covenant shall run with the land. "(2) Notwithstanding paragraph (1), with respect to familial status, paragraph (l) shall not be construed to apply to housing for older persons, as defined in ] 246539-2 16 -18- Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11 and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o), a:nd (p) of Section 12955 of the Government Code shall apply to paragraph (1)." (b) In Leases, the following language shall appear: "(1) The lessee herein covenants by and for the lessee and lessee's heirs, personal representatives and assigns, and all persons claiming under the lessee or through the lessee, that this lease is made subject to the condition that there shall be no discrimination against or segregation of any person or of a group of persons on account of race, color, creed, religion, sex, sexual orientation, marital status, national origin, ancestry or disability in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the property herein leased nor shall the lessee or any person claiming under or through the lessee establish or permit any such practice or practices old discrimination of segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, sublessees, subtenants, or vendees in the property herein leased. "(2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1) shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11 and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall apply to paragraph (1)." (c) In Contracts, the following language shall appear: "There shall be no discrimination against or segregation of any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and p~~ragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the; Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenurE; or enjoyment of the property nor shall the transferee or any person claiming under or through the transferee establish or permit any such practice or practices o:f discrimination or segregation with reference to selection, location, number, use or occupancy of tenants, lessee, subtenants, sublessees or vendees of the land." ARTICLE VI [Reserved.] 1246539-2 1'~ -19- ARTICLE VII [Reserved.] ARTICLE VIII ENVIRONMENTAL MATTERS 8.l No Agency Liability; Borrower's Covenants. Neither Agency nor City shall be responsible for the cost of any soil, groundwater or other environmental remediation or other response activities for any Hazardous Materials existing or occurring on the Property or any portion thereof, and Borrower shall be: solely responsible for all actions and costs associated with any such activities required for the development of the Project, the Property, or any portion thereof. Upon receipt of any notice regarding the presence, release or discharge of Hazardous Materials in, on or under the Property., or any portion thereof, Borrower (as long as Borrower owns the property which is the subject of such notice) agrees to timely initiate and diligently pursue and complete all appropriate response, remediation and removal actions for the presence, release or discharge of such Hazardous Materials within such deadlines as specified by applicable Environmental Laws. Borrower hereby covenants and agrees that: (i) Borrower shall not knowingly permit the Property, the Improvements or any portion of either to be a site for the use, generation, treatment, manufacture, storage; disposal or transportation of Hazardous Materials or otherwise knowingly permit the presence or release of Hazardous Materials in, on, under, about or from the Property or Improvements with the exception of cleaning supplies and other materials customarily used in construction, operation or maintenance of residential property acid any commercial uses developed as part of the Project, and used, stored and disposed of in compliance with Hazardous Materials Laws, and (ii) Borrower shall keep and maintain the Property and Improvements and each portion thereof in compliance with, and shall not cause or permit the Property or Improvements or any portion of either to be in violation of, any Hazardous Materials Laws. 8.2 Environmental Indemnification. Borrower shall indemnify, defend (with counsel approved by Agency) and hold the Indemnitees harmless from and against any and all Claims including without limitation any expenses associated with the investigation, assessment, monitoring, response, removal, treatment, abatement or remediation of Hazardous Materials and administrative, enforcement or judicial proceedings resulting, arising, or based directly or indirectly in whole or in part, upon (i) the presence, release, use, generation, discharge, storage or disposal or the alleged presence, release, discharge, storage or disposal of any Hazardous Materials on, under, in or about, or the transportation of any such Hazardous Materials to or from, the Property, or (ii) the failure oaf Borrower, Borrower's employees, agents, contractors, subcontractors; or any person acting o~n behalf of any of the foregoing to comply with Hazardous Materials Laws or the covenants set forth in Section 8.1. The foregoing indemnity shall further apply to any residual contamination ire, on, under or about the Property or affecting any natural resources, and to any contamination of any property or natural resources arising in connection with the generation, use, handling, treatment, storage, transport or disposal of any such Hazardous Materials, and irrespective of whether any of such activities were or will be 1246539-2 1 8 _20_ undertaken in accordance with Hazardous Materials Laws. The provisions of this Section 8.2 shall survive the issuance of a Certificate of Completion for the Project and the expiration or earlier termination of this Agreement. 8.2.1 No Limitation. Borrower hereby acknowledges and agrees that Borrower's duties, obligations and liabilities under this Agreement, including, without limitation, under Section 8.2 above, are in no way limited or otherwise affected by any information the Agency or the City may have concerning the Property and/or the presence in, on, under or about the Property of any Hazardous Materials, whether the Agency or the City obtained such information from the Borrower or from its own investigations. It is further agreed that Agency and City do not and shall not waive any rights against Borrower that they may have by reason of this indemnity and hold harmless agreement because of the acceptance by Agency, or the deposit with Agency by Borrower, of any of the insurance policies described in this Agreement. 8.3 Hazardous Materials. As used herein, the term "Hazardous Materials" means any substance, material or waste which is or becomes regulated by any federal, state or local governmental authority, and includes without limitation (i) petroleum or oil or gas or any direct or indirect product or by-product thelreof; (ii) asbestos and any material containing asbestos; (iii) any substance, material or waste regulated by or listed (directly or by reference) as a "hazardous substance", "hazardous material", "hazardous waste", "toxic waste'', "toxic pollutant", "toxic substance", "solid waste" or "pollutant or contaminant" in or pursuant to, or similarly identified as hazardous to human health or the environment in or pursuant to, the Toxic Substances Control Act [15 U.S.C. Section 2601, et seq.]; the Comprehensive Environmental Response, Compensation and Liability Act [42 U.S.C. Section 9601, et seg.], the Hazardous Materials Transportation Authorization Act [45- U.S.C. Section S l Ol , et seg.], the Resource Conservation and Recovery Act [42 U.S.C. Section 6901, et seg.], the Federal Water Pollution Control Act [33 U.S.C. Section 1251 ], the Clean Air ,Act [42 U.S.C. Section 7401, et seg.], the California Underground Storage of Hazardous Substances Act [California Health and Safety Code Section 25280, et seg.], the California Hazardous Substances Account Act [California Health and Safety Code Section 25300, et seq.], the California Hazardous Waste Act [California Health and Safety Code Section 25100, et seg.], the California Safe Drinking Water and Toxic Enforcement Act [California Health and Safety Code Section 25249.5, et seg.], and the Porter-Cologne Water Quality Control Act [California Water Code Section 13000, et seg.], as they now exist or are hereafter amended, together with any regulations promulgated thereunder; (iv) any substance, material or waste which is defined as such or regulated by any "Superfund" or "Superlien" law, or any Environmental Law; or (v) an.y other substance, material, chemical, waste or pollutant identified as hazardous or toxic and regulated under any other federal, state or local environmental law; including without limitation, asbestos, polychlorinated biphenyls, petroleum, natural gas and synthetic fuel products and by-products. 8.4 Environmental Laws. As used herein, the term "Environmental Laws" means all federal, state or local statutes, ordinances, rules, regulations, orders; decrees, judgments or common law doctrines, and provisions and conditions of permits, licenses and other operating authorizations regulating, or relating ~to, or imposing liability or standards of conduct concerning (i) pollution or protection of the environment, including natural resources; (ii) exposure of persons, including employees and agf:nts, to Hazardous Materials (as defined above) or other products, raw materials, chemicals or other substances; (iii) protection of the public health or 1246539-2 19 -21- welfare from the effects of by-products, wastes, emissions, discharges or releases of chemical substances from industrial or commercial activities; (iv) the manufacture, use or introduction into commerce of chemical substances, including without limitation, their manufacture, formulation, labeling, distribution, transportation, handling, storage and disposal; or (iv) the use, release or disposal of toxic or hazardous substances or Hazardous Materials or the remediation of air, surface waters, groundwaters or soil, as now or may at any later time be in effect, including but not limited to the Toxic Substances Control Act [15 U.S.C. Section 2601, et seq.]; the Comprehensive Environmental Response, Compensation and Liability Act [42 U.S.C. Section 9601, et seg.], the Hazardous Materiz~ls Transportation Authorization Act [49 U.S.C. Section 5101, et seg.], the Resource Conservation and Recovery Act [42 U.S.C. Section 6901, et seg.], the Federal Water Pollution Control Act [33 U.S.C. Section 1251], the Clean Air Act [42 U.S.C. Section 7401, et seg.], the California Underground Storage of Hazardous Substances Act [California Health and Safety Code Section 25280, et seq.], the California Hazardous Substances Account Act [California Health and `.safety Code Section 25300, et seq.], the California Hazardous Waste Act [California Health and Safety Code Section 25100, et seq.], the California Safe Drinking Water and Toxic Enforcement Act [California Health and Safety Code Section 25249.5, et seg.], and the Porter-Cologne Water Quality Control Act [California Water Code Section 13000, et seq.], as each of th~° foregoing now exist or are hereafter amended, together with any regulations promulgated thereunder. ARTICLE IX DEFAULTS, REMEDIES AND TERMINATION 9.1 Borrower Event of Default. The following events shall constitute an event of default on the part of Borrower ("Borrower Event of Default"): (a) Borrower fails, to commence or complete construction of the Project within the times set forth in Section 3.8, or subject to force majeure, abandons or suspends construction of the Project prior to completion for a period of sixty (60) days or more; (b) Borrower fails> to pay when due the principal and interest (if any) payable under the Note and such failure continues for ten (10) days after Agency notifies Borrower thereof in writing; (c) [Reserved.] (d) Borrower fails to maintain insurance on the Property and the Project as required pursuant to this Agreement., and Borrower fails to cure such default within ten (10) days; (e) Subject to Borrower's right to contest the following charges pursuant to Section 5.3, if Borrower fails to pay prior to delinquency taxes or assessments due on the Property or the Improvements or faills to pay when due any other charge that may result in a lien on the Property or the Improvements, and Borrower fails to cure such default within thirty (30) days of date of delinquency, but in all events upon the imposition of any such tax or other lien; l 246539-2 20 _22_ (~ A default arises under any loan secured by a mortgage, deed of trust or other security instrument recorded against Borrower's interest in the Property or the Improvements and remains uncured 1r-eyond any applicable cure period such that the holder of such security instrument has the right to accelerate repayment of such loan; (g) Any representation or warranty contained in this Agreement or in any application, financial statement, certi:f'icate or report submitted to the Agency or the City in connection with this Agreement or Borrower's request for the Loan proves to have been incorrect in any material and adverse respect when made and continues to be materially adverse to the Agency or the City; (h) If, pursuant to or within the meaning of the United States Bankruptcy Code or any other federal or state law relating to insolvency or relief of debtors ("Bankruptcy Law"), Borrower or any general partner thereof (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order i_or relief against Borrower or any general partner thereof in an involuntary case; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator or similar official for Borrower or any general partner thereof; (iv) makes an assignment for the benefit of its creditors; or (v) admits in writing its inability to pay its debts as they become due; (i) A court of competent jurisdiction shall have made or entered any decree or order (1) adjudging the Borrower to lbe bankrupt or insolvent, (2) approving as properly filed a petition seeking reorganization of thf; Borrower or seeking any arrangement for Borrower under bankruptcy law or any other applicable debtor's relief law or statute of the United States or any state or other jurisdiction, (3) appointing a receiver, trustee, liquidator, or assignee of the Borrower in bankruptcy or insolvency or for any of its properties, or (4) directing the winding up or liquidation of the Borrower; (j) Borrower shall have assigned its assets for the benefit of its creditors (other than pursuant to a mortgage loan) or suffered a sequestration or attachment of or execution on any substantial part of its property, unless the property so assigned, sequestered, attached or executed upon shall have been returned or released within sixty (60) days after such event (unless a lesser time period is permitted for cure under any other mortgage on the Property, in which event such lesser time period shall apply under this subsection as well) or prior to any sooner sale pursuant to such sequestration, attachment, or execution; (k) The Borrower shall have voluntarily suspended its business or Borrower shall have been dissolved or terminated; (l) An event of default arises under any Agency Document and remains uncured beyond any applicable cure period; (m) Borrower defaults in the performance of any term, provision, covenant or agreement contained in this Agreement other than an obligation enumerated in this Section 9.1 and unless a shorter cure period is specified for such default, the default continues for ten (10) days in the event of a monetary default or thirty (30) days in the event of a nonmonetary default after the date upon which Agency shall have given written notice of the default to Borrower; provided however, if the default is of a nature that it cannot be cured within thirty (30) days, a 1246539-2 21 -23- Borrower Event of Default shall not arise hereunder if Borrower commences to cure the default within thirty (30) days and thereafter prosecutes the curing of such default with due diligence and in good faith to completion and in no event later than ninety (90) days after receipt of nonce of the default; or (n) A default arises under the Lease and remains uncured beyond any applicable cure period such that the Landlord has the right to terminate the Lease. 9.2 Agency Default. An f;vent of default on the part of Agency ("Event of Agency Default") shall arise hereunder if Agency fails to keep, observe, or perform any of its covenants, duties, or obligations under this Agreement, and the default continues for a period of thirty (30) days after written notice thereof from Borrower to Agency, or in the case of a default which cannot with due diligence be cured within thirty (30) days, Agency fails to commence to cure the default within thirty (30) days of such notice and thereafter fails to prosecute the curing of such default with due diligence and in goc-d faith to completion. 9.3 Agency's Remedies and Rights Upon an Event of Borrower Default. Upon the occurrence of a Borrower Event of Default and the expiration of any applicable cure period, Agency shall have all remedies available to it under this Agreement or under law or equity, including, but not limited to the following, and Agency may, at its election, without notice to or demand upon Borrower, except for r-otices or demands required by law or expressly required pursuant to the Agency Documents, exercise one or more of the following remedies: (a) Accelerate and declare the balance of the Note and interest accrued thereon immediately due and payable; (b) Seek specific performance to enforce the terms of the Agency Documents; (c) Foreclose on the Property pursuant to the Deed of Trust; (d) Pursue any ar-d all other remedies available under this Agreement or under law or equity to enforce the terms oiF the Agency Documents and Agency's rights thereunder. 9.4 Borrower's Remedies Upon an Event of Agency Default. Upon the occurrence of an Agency Event of Default, in addition to pursuing any other remedy allowed at law or in equity or otherwise provided in this Agreement, Borrower may bring an action for equitable relief seeking the specific performance of the terms and conditions of this Agreement, and/or enjoining, abating, or preventing any violation of such terms and conditions, and/or seeking to obtain any other remedy consistent with the purpose of this Agreement, and may pursue any and all other remedies available under this Agreement or under law or equity to enforce the terms of the Agency Documents and Borrower's rights thereunder. 9.5 Remedies Cumulative; No Consequential Dama~,es. 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 such rights or remedies shall not preclude the exercise by it, at the same or different time, of any other rights or remedies for the same or any other default by the other Party. Notwithstanding anything to the contrary set forth herein, a Party's 1246539-2 22 -24- right to recover damages in the event of a default shall be limited to actual damages and shall exclude consequential damages. 9.6 Inaction Not a Waiver of Default. No failure or delay by either Party in asserting any of its rights and remedies as to any default shall operate as a waiver of such default or of any such rights or remedies, nor deprive either Party of its rights to institute and maintain any action or proceeding which it may deem necessary to protect, assert or enforce any such rights or remedies in the same or any subsequent default. ARTICLE X INDEMNITY AND INSURANCE. 10.1 Indemnity. Borrower shall indemnify, defend (with counsel approved by Agency) and hold Indemnitees harmless from and against any and all Claims, including without limitation, Claims arising directly or indirectly, in whole or in part, as a result of or in connection with Borrower's or Borrower's contractors, subcontractors, agents or employees development, construction, improvement, operation, ownership or maintenance of the Property or the Improvements, or any part thereof or otherwise arising out of or in connection with Borrower's performance under this Agreement. Borrower's indemnification obligations under this Section 10.1 shall not extend to Claims resulting solely from the gross negligence or willful misconduct of Indemnitees. The provisions of this Section 10.1 shall survive the issuance of a Certificate of Completion for the Project and the expiration or earlier termination of this Agreement. It is further agreed that Agency and City do not and shall not waive any rights against Borrower that they may have by reason of this indemnity and hold harmless agreement because of the acceptance by Agency, or the deposit with Agency by Borrower, of any of the insurance policies described in this Agreement. 10.2 Liability and Workers Compensation Insurance. (a) Borrower and all contractors working on behalf of Borrower on the Project shall maintain a commercial general liability policy in the amount of One Million Dollars ($1,000,000) each occurrence, Two Million Dollars ($2,000,000) annual aggregate, together with Three Million Dollars ($3,000,000) excess liability coverage, or such other policy limits as Agency may require in its reasonable~dliscretion, including coverage for bodily injury, property damage, products, completed operations and contractual liability coverage. Such policy or policies shall be written on an occurrence basis and shall name the Indemnitees as additional insureds. (b) Borrower and all contractors working on behalf of Borrower shall maintain a comprehensive automobile liability coverage in the amount of One Million Dollars ($1,000,000), combined single limit including coverage for owned and non-owned vehicles and shall furnish or cause to be furnished to Agency evidence satisfactory to Agency that Borrower and any contractor with whom Borrower has contracted for the performance of work on the Property or otherwise pursuant to this Agreement carries workers' compensation insurance as required by law. Automobile liability policies shall name the Indemnitees as additional insureds. 1246539-2 23 -25- (c) Upon comment;ement of construction work and continuing until issuance of a Certificate of Completion, Borrower and all contractors working on behalf of Borrower shall maintain a policy of builder's all-risk insurance in an amount not less than the full insurable cost of the Project on a replacement cost basis naming Agency as loss payee. (d) Borrower shall maintain property insurance covering all risks of loss (other than earthquake), including flood (if required) for 100% of the replacement value of the Project with deductible, if any, in an amount acceptable to Agency, naming Agency as loss payee. (e) Companies writing the insurance required hereunder shall be licensed to do business in the State of California. Insurance shall be placed with insurers with a current A.M: Best's rating of no less than A: VII. The Commercial General Liability and comprehensive automobile policies required hereunder shall name the Indemnitees as additional insureds. Builder's Risk and property insurance shall name Agency and City as loss payees as their interests may appear. (f) Prior to commencement of construction work, Borrower shall furnish Agency with certificates of insurance iin form acceptable to Agency evidencing the required insurance coverage and duly executed endorsements evidencing such additional insured status. The certificates shall contain a statemc;nt of obligation on the part of the carrier to notify City and Agency of any material adverse change, cancellation, termination or non-renewal of the coverage at least thirty (30) days in advance of the effective date of any such material adverse change; cancellation, termination or non-renewal. (g) If any insurance policy or coverage required hereunder is canceled or reduced, Borrower shall, within fifteen (15) days after receipt of notice of such cancellation or reduction in coverage, but in no event later than the effective date of cancellation or reduction, file with Agency and City a certificate showing that the required insurance has been reinstated or provided through another insurance company or companies. Upon failure to so file such certificate, Agency or City may, without further notice and at its option, procure such insurance coverage at Borrower's expense, and Borrower shall promptly reimburse Agency or City for such expense upon receipt of billing from Agency or City. (h) Coverage provided by Borrower shall be primary insurance and shall not be contributing with any insurance, or self-insurance maintained by Agency or City, and the policies shall so provide. The insurance policies shall contain a waiver of subrogation for the benefit of the City and Agency. Borrower shall furnish the required certificates and endorsements to Agency prior to the commencement of construction of the Project, and shall provide Agency with certified copies of the required insurance policies upon request of Agency. ARTICLE XI MISCELLANEOUS PROVISIONS 11.1 No Brokers. Each Partv warrants and represents to the other that no person or entity can properly claim a right to a real estate commission, brokerage fee, finder's fee, or other compensation with respect to the transactions contemplated by this Agreement. Each Party 1246539-2 24 -26- agrees to defend, indemnify and hold :harmless the other Party from any claims, expenses, costs or liabilities arising in connection with a breach of this warranty and representation. The terms of this Section shall survive the expiration or earlier termination of this Agreement. 11.2 Enforced Delay; Extension of Times of Performance. Subject to the limitations set forth below, performance by either Party shall not be deemed to be in default, and all performance and other dates specified in this Agreement shall be extended where delays are due to: war, insurrection, strikes, lockouts;, riots, floods, earthquakes, fires, casualties, acts of God, acts of the public enemy, epidemics, quarantine restrictions, freight embargoes, governmental restrictions or priority, litigation, inclulding court delays, unusually severe weather, acts or omissions of the other Party, acts or failures to act of the City or any other public or governmental agency or entity (other than the acts or failures to act of Agency which shall not excuse performance by Agency), or arty other cause beyond the affected Party's reasonable control. An extension of time for any such cause shall be for 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 the other Party within thirty (30) days of the commencement of the cause and such extension is not rejected in writing by the other Party within ten (10) days of receipt of the notice. Neither Party shall unreasonably withhold consent to an extension of time pursuant to this Section. Times of performance under this Agreement may also be extended in writing by the mutual agreement of Borrower and A€;ency (acting in the discretion of its Executive Director unless he or she determines in his or hoer discretion to refer such matter to the governing board of the Agency). Agency and Borrower acknowledge that adverse changes in economic conditions, either of the affected Party specifically or the economy generally, changes in market conditions or demand, and/or inability to obtain financing to complete the work of Improvements shall not constitute grounds of enforced delay pursuant to this Section. Each Party expressly assumes the risk of such adverse economic or market changes and/or financial inability, whether or not foreseeable as of the Effective Date. 11.3 Notices. Except as otherwise specified in this Agreement, all notices to be sent pursuant to this Agreement shall be made in writing, and sent to the Parties at their respective addresses specified below or to such ol:her address as a Party may designate by written notice delivered to the other Parties in accordance with this Section. All such notices shall be sent by: (i) personal delivery, in which case notice is effective upon delivery; (ii) certified or registered mail, return receipt requested, in which case notice shall be deemed delivered on receipt if~ delivery is confirmed by a return receipt; (iii) nationally recognized overnight courier, with charges prepaid or charged to the sender's account, in which case notice is effective on delivery if delivery is confirmed by the delivery service; (iv) facsimile transmission, in which case notice shall be deemed delivered upon transmittal, provided that (a) a duplicate copy of the notice is promptly delivered by first- class or certified mail or by overnight delivery, or (b) a transmission report is generated 1246539-2 25 _2~_ reflecting the accurate transmission thf;reof. Any notice given by facsimile shall be considered to have been received on the next busilness day if it is received after 5:00 p.m. recipient's time or on a nonbusiness day. Agency: Redevelopment Agency of the City of South San Francisco 400 Grand Avenue South San Franc;isco, CA 94080 Attention: Executive Director Facsimile: (650) 829-6623 Borrower: Buon Gusto Ristorante, Inc. 202 Grand Avenue South San Franc;isco, CA 94080 Attention: Carmelo Lacolino and Vincenzo Vecchiola Phone: (650) 742-9776 11.4 Attorneys' Fees. If either Party fails to perform any of its obligations under this Agreement, or if any dispute arises between the Parties concerning the meaning or interpretation of any provision hereof, then the prevailing Party in any proceeding in connection with such dispute shall be entitled to the costs arnd expenses it incurs on account thereof and in enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorneys' fees and disbursements. 11.5 Waivers; Modification. No waiver of any breach of any covenant or provision of this Agreement shall be deemed a waiver of any other covenant or provision hereof, and no waiver shall be valid unless in writing and executed by the waiving Party. An extension of time for performance of any obligation or act shall not be deemed an extension of the time for performance of any other obligation or act, and no extension shall be valid unless in writing and executed by the Party granting the extension. This Agreement may be amended or modified only by a written instrument executed by the Parties. 11.6 Binding on Successors. Subject to the limitations set forth in Section 4.7, this Agreement shall bind and inure to the lbenefit of the Parties and their respective permitted successors and assigns. Any reference in this Agreement to a specifically named Party shall be deemed to apply to any permitted successor and assign of such Party who has acquired an interest in compliance with this Agreement or under law. 11.7 Survival. All representations made by Borrower hereunder and Borrower's obligations pursuant to Sections 3.14, 3.17, 3.18, 8.2, 10.1, 11.1, and 11.18 shall survive the expiration or termination of this Agreement and the issuance and recordation of a Certificate of Completion. 11.8 Construction. The section headings and captions used herein are solely for convenience and shall not be used to interpret this Agreement. The Parties acknowledge that this Agreement is the product of negotiation and compromise on the part of both Parties, and the Parties agree, that since both Parties have participated in the negotiation and drafting of this 1246539-2 26 _28_ Agreement, this Agreement shall not lie construed as if prepared by one of the Parties, but rather according to its fair meaning as a whole, as if both Parties had prepared it. 11.9 Action or Approval. V~~henever action and/or approval by Agency is required under this Agreement, Agency's Executive Director or his or her designee may act on and/or approve such matter unless specifically provided otherwise, or unless the Executive Director determines in his or her discretion that such action or approval requires referral to Agency's Board for consideration. 11.10 Entire Agreement. This Agreement, including Exhibits A through F attached hereto and incorporated herein by this reference, together with the other Agency Documents contains the entire agreement between the Parties with respect to the subject matter hereof, and supersedes all prior written or oral agreements, understandings, representations or statements between the Parties with respect to the subject matter hereof. 11.11 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be an original and all o:f which taken together shall constitute one instrument. The signature page of any counterpart may be detached therefrom without impairing the legal effect of the signature(s) thereon provided such signature page is attached to any other counterpart identical thereto having additional signature pages executed by the other Party. Any executed counterpart of this Agreement may be delivered to the other Party by facsimile and shall be deemed as binding as if an originally signed counterpart was delivered. 11.12 Severability. If any term, provision, or condition of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall continue in full force and effect ]unless an essential purpose of this Agreement is defeated by such invalidity or unenforceability. 11.13 No Third Party Beneficiaries. Nothing contained in this Agreement is intended to or shall be deemed to confer upon any person, other than the Parties and their respective successors and assigns, any rights or remedies hereunder. 11.14 Parties Not Co-Venturers. Nothing in this Agreement is intended to or shall establish the Parties as partners, co-venturers, or principal and agent with one another. . 11.15 Non-Liability of Officials, Employees and A eg nts. No officer, official employee or agent of Agency or City shall be personally liable to Borrower or its successors in interest in the event of any default or breach by .Agency or for any amount which may become due to Borrower or its successors in interest pursuant to this Agreement. 11.16 Time of the Essence; Calculation of Time Periods. Time is of the essence for each condition, term, obligation and provision of this Agreement. Unless otherwise specified, in computing any period of time described in this Agreement, the day of the act or event after which the designated period of time begins to run is not to be included and the last day of the period so computed is to be included, unless such last day is not a business day, in which event the period shall run until the next busiiness day. The final day of any such period shall be deemed to end at 5:00 p.m., local time: at the Property. For purposes of this Agreement, a 1246539-2 2'~ -29- "business day" means a day that is not a Saturday, Sunday, a federal holiday or a state holiday under the laws of California. 11.17 Governing Law; Venue;. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to principles of conflicts of laws. Any action to enforce or interpret this Agreement shall be filed in the Superior Court of San Mateo County, California or in the Federal District Court for the Northern District of California. 1 l .l 8 General Indemnification. Borrower shall indemnify, defend (with counsel approved by Agency) and hold harmless Indemnitees from all Claims (including without limitation, reasonable attorneys' fees) arising in connection with any claim, action or proceeding to attack, set aside, void, or annul any approval by the City or the Agency or any of its agencies, departments, commissions, agents, officers, employees or legislative body concerning the Project or this Agreement. The Agency will promptly notify Borrower of any such claim, action or proceeding, and will cooperate fully irl the defense. The Agency and City may, within the unlimited discretion of each, participate in the defense of any such claim, action or proceeding, and if the Agency or City chooses to do so, Borrower shall reimburse Agency and City for reasonable attorneys' fees and expensE;s incurred. SIGNATURES ON FOLLOWING PAGE. 1246.539-2 2 g -30- IN WITNESS WHEREOF, thf; Parties have entered into this Agreement effective as of the date first written above. AGENCY REDEVELOPMENT AGENCY OF THE CITY OF SOUTH SAN FRANCISCO, A PUBLIC BODY CORPORATE AND POLITIC By: Name: Title: ATTEST: By: Agency Secretary APPROVED AS TO FORM: By: Agency Counsel BORROWER BUON GUSTO RISTORANTE, INC., a California corporation By: Print Name: Title: By: Print Name: Title: 1246539-2 2,9 -31- ]246539-2 3 Q -32- Exhibit A LEGAL DESCRIPTION OF PROPERTY (Attach legal description.) Exhibit B FINANCING PLAN (Attach Project Financing Plan.) F.xhihit C' FORM OF MEMORANDUM OF OWNER PARTICIPATION AGREEMENT (Attach form of Memorandum.) Exhibit D FORM OF CERTIFICATE OF COMPLETION (Attach form of Certificate.) Exhibit E FORM OF PROMISSORY NOTE (Attache form of Promissory Note.) Exhibit F FORM OF LEASEHOLD DEED OF TRUST (Attach form of Leasehold Deed of Trust.) 1246539-2 31 -33- SECURED PROMISSORY NOTE $650,000 South San Francisco, California 2009 FOR VALUE RECEIVED, Buon Gusto Ristorante, a California corporation ("Borrower") promises to pay to thE~ Redevelopment Agency of the City of South San Francisco, a public body, corporate and politic ("Agency"), in lawful money of the United States of America, the principal sum of Six Hundred Fifty Thousand Dollars ($650,000), or so much thereof as may be advanced by Agency pursuant to the Owner Participation and Loan Agreement referred to below, together with interest on the outstanding principal balance in accordance with the terms and conditions described herein. This Secured Promissory Note (this "Note") has been executed and delivered pursuant to an Owner Participation and Loan Agreement dated as of the date hereof by and between Borrower and Agency (the "Loan Agreement"), and is subject to the terms and conditions of the Loan Agreement, which are by this reference incorporated herein and made a part hereof. Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Loan Agreement. This Note is secured by a Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing ("Deed of Trust") dated as of the date hereof, executed by Borrower for the benefit of Agency and encumbering Borrower's leasehold interest in the property described ti-ierein. Agency shall be entitled to the benefits of the security provided by the Deed of Trust and shall have the right to enforce the covenants and agreements contained herein, in the Deed of Trust, and the Loan Agreement. 1. INTEREST RATE; REPAYMENT. Interest shall accrue on the outstanding principal balance of this Note at they rate of four percent (4%) simple interest per annum, commencing upon July 1, 2010. Interest shall be calculated on the basis of a year of 365 days, and charged for the actual number of days elapsed. No interest shall accrue prior to July 1, 2010.] 2. PAYMENT DATES; MATURITY DATE. Commencing upon August 1, 2010 (the "First Payment Date"), and on the first (1St) day of each calendar month thereafter, Borrower shall make monthly payments of combined principal and interest until the entire indebtedness evidenced hereby is fully paid, except that all remaining indebtedness, if not sooner paid, shall be due and payable upon the Maturity Date (defined below). The amount of the monthly payments to be paid beginning on the First Payment Date will be an amount equal to the payment necessary to fully amortize the principal amount of this Note, together with interest at the interest rate specified in Section 1 above over a 420 month period. The entire outstanding principal balance of this Note, together with accrued interest and all other sums accrued hereunder shall be payable in full on the earlier of (i) trie thirty-fifth (35tt') anniversary of the date of this Note -34- (the "Maturity Date"), or (ii) the date that the Lease terminates. Payments shall be credited first to any unpaid late charges and other costs and fees then due, then to accrued interest, and then to principal. In no event shall any amount due under this Note become subject to any rights, offset, deduction or counterclaim on the part of Borrower. 3. DUE ON TRANSFER OR DEFAULT. The entire unpaid principal balance and all sums accrued hereunder shall be immediately due and payable upon the Transfer (as defined in Section 4.7 of the Loan Agreement) absent Agency consent, of all or any part of Borrower's interest in the Property or the Improvements, or any interest therein, or upon the occurrence of an Event of` Default under the Loan Agreement, the Deed of Trust or this Note, subject to the expiration of any applicable cure period. Without limiting the generality of the foregoing, this Note shall not be assumable without Agency's prior written consent, which consent may be granted or denied in Agency's sole discretion. 4. PREPAYMENT. Borrower may, without premium or penalty, at any time and from time to time, prepay all or any portion of the outstanding principal balance due under this Note. Prepayments shall be applied first to any unpaid late charges and other costs and fees then due, there to accrued but unpaid interest, and then to principal. 5. MANNER OF PAYMENT. A,II payments on this Note shall be made to Agency at 400 Grand Avenue, South San Francisco, CA 94080 or such other place as Agency shall designate to Borrower in writing, or by wire transfer of immediately available funds to an account designated by Agency in writing. 6. EVENTS OF DEFAULT. The occurrence of any one or more of the following events shall constitute an event of default hereunder ("Event of Default"): (a) Borrower fails to pay when due the principal and interest payable hereunder and such failure continues for ten (10) days after Agency notifies Borrower thereof in writing. (b) Borrower fails to maintain insurance on the Property and the Project as required pursuant to the Agency Documents and Borrower fails to cure such default within 10 days. (c) Pursuant to or within 1:he meaning of the United States Bankruptcy Code or any other federal or state law relating to insolvency or relief of debtors ("Bankruptcy Law"), Borrower or any general partner thereof (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against Borrower or any general partner thereof in an involuntary case; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator or similar official for Borrower or any general partner thereof; (iv) makes an assignment for the benefit of its creditors; or (v) admits in writing its inability to pay its debts as they become due. 1246545-2 2 -35- (d) A court of competent ,jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against Borrower or any general partner thereof in an involuntary case, (ii) appoints a trustee, receiver, assignee, liquidator or similar official for Borrower or any general partner thereof or substantially all of such entity's assets, (iii) orders the liquidation of Borrower or any general partner thereof, or (iv) issues or levies a judgment, writ, warrant of attachment or similar process against the Property or the Project, and in each case the order or decree is not released, vacated, dismissed or fully bonded within 60 days after its issuance. (e) Borrower shall have assigned its assets for the benefit of its creditors (other than pursuant to a mortgage loan) or suffered a sequestration or attachment of or execution on any substantial part of its property, unless the property so assigned, sequestered, attached or executed upon shall have been returned or released within sixty (60) days after such event (unless a lesser time period is permitted for cure under any other mortgage on the Property, in which event such lesser time period shall apply under this subsection as well) or prior to any sooner sale pursuant to such sequestration, attachment, or execution; (f) Borrower shall have voluntarily suspended its business or Borrower shall have been dissolved or terminated; (g) A default arises under any debt instrument secured by a mortgage or deed of trust on Borrower's leasehold interest in the Property and remains uncured beyond any applicable cure period such that the holder of such instrument has the right to accelerate payment thereunder. (h) Subject to Borrower's right to contest the following charges pursuant to the Agency Documents, if Borrower fails to pay prior to delinquency taxes or assessments due on the Property or the Project or fails to pay when due any other charge that may result in a lien on the Property or the Project, and Borrower fails to cure such default within thirty (30) days of date of delinquency, but in all events upon the imposition of any such tax or other lien. (i) Any representation or warranty contained in this Agreement or any application, financial statement, certificate or report furnished in connection with the Loan or in connection with any request for disbursement of Loan Proceeds proves to have been false or misleading in any material adverse respect when made. (j) Borrower defaults in the performance of any term, provision, covenant or agreement (other than an obligatior- enumerated in this Section 6 contained in this Note, the Loan Agreement, or the C-eed of Trust, and unless such document specifies a different cure period for such default, the default continues for ten (10) days in the event of a monetary default or thirty (30) days in the event of a nonmonetary default after the date upon which Agency shhall have given written notice of the default to Borrower (or such longer time as Agency may agree upon in writing), provided that in 1246545-2 3 -36- each case Borrower commences tc- cure the default within thirty (30) days and thereafter prosecutes the curing of such default with due diligence and in good faith. (k) A default arises underr the Lease and remains uncured beyond any applicable cure period such that thE~ Landlord has the right to terminate the Lease. 7. REMEDIES. Upon the occurrence of an Event of Default hereunder, Agency may, at its option (i) by written notice to Borrower, declare the entire unpaid principal balance of this Note, together with all accrued interest thereon and all sums due hereunder, immediately due and payable regardless of any prior forbearance, (ii) exercise any and all rights and remedies available to it under applicable law, and (iii) exercise any and all rights and remedies available to Agency under this Note and the other Agency Documents, including without limitation the right to pursue foreclosure under the Deed of Trust. Borrower shall pay all reasonable costs and expenses incurred by or on behalf of Agency iincluding, without limitation, reasonable attorneys' fees, incurred in connection with Agency's enforcement of this Note and the exercise of any or all of its rights and remedies hereunder and all such sums shall be a part of the indebtedness secured by the Deed of Trust. 8. DEFAULT RATE. Upon the occurrence of an Event of Default, interest shall automatically be increased without notice to the rate of ten percent (10%) per annum (the "Default Rate"); provided howE~ver, if any payment due hereunder is not paid when due, the Default Rate shall apply commencing upon the due date for such payment. When Borrower is no longer in default, the Default Rate shall no longer apply, and the interest rate shall once again be thE~ rate specified in the first paragraph of this Note. Notwithstanding the foregoing provisions, if the interest rate charged exceeds the maximum legal rate of interest, the rate shall be the maximum rate permitted by law. The imposition or acceptance of the Default Rate shall in no event constitute a waiver of a default under this Note or prevent Agency from exercising any of its other rights or remedies Reserved. 9. MISCELLANEOUS 9.1 WAIVER. The rights and remedies of Agency under this Note shall be cumulative and not alternative. No waiver by Agency of any right or remedy under this Note shall be effective unless in a v~rriting signed by Agency. Neither the failure nor any delay in exercising any right, power or privilege under this Note will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege by Agency will preclude any other or further exercise of such right, power or privilege or the exercise o1~ any other right, power or privilege. To the maximum extent permitted by applicable law (a) no claim or right of Agency arising out of this Note can be discharged by Agency, in whole or in part, by a waiver or renunciation of the claim or right unless in a writing, signed by Agency; (b) no waiver that may be given by Agency will bey applicable except in the specific instance for which it is given; and (c) no notice to or demand on Borrower will be deemed to be a waiver of ]246545-2 4 -37- any obligation of Borrower or of the right of Agency to take further action without notice or demand as provided in this Note. Borrower hereby waives presentment, demand, protest, notices of dishonor and of protest and all defenses and pleas on the grounds of any extension or extensions of the time of payment or of any due date under this Note, in whole or in part, whether before or after maturity and with or without notice. 9.2 NOTICES. Any noticE~ required or permitted to be given hereunder shall be given in accordance with Section 11.3 of the Loan Agreement. 9.3 SEVERABILITY. If ar,y provision in this Note is held invalid or unenforceable by any court of com~-etent jurisdiction, the other provisions of this Note will remain in full force and effect. Any provision of this Note held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 9.4 GOVERNING LAW; VENUE. This Note shall be governed by the laws of the State of California without regard to principles of conflicts of laws. All persons and entities in any manner obligated under this Note consent to the jurisdiction of any federal or state court having in the jurisdiction in which the Property is located (the "Property Jurisdiction"). Borrower agrees that any controversy arising under or in relation to the Note or any other Loan Document shall be litigated exclusively in the Property Jurisdiction. The state anti federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to the Note and any other Loan Document. Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. 9.5 PARTIES IN INTEREST. This Note shall bind Borrower and its successors and assigns and shall accrue to the benefit of Agency and its successors and assigns. 9.6 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this Note are provided for convenience only and will not affect its construction or interpretation. 9.7 RELATIONSHIP OF THE PARTIES. The relationship of Borrower and Agency under this Note is solely that of borrower and lender, and the loan evidenced by this Note and secured by the Deed of Trust will in no manner make Agency the partner or joint venturer of Borrower. 9.8 TIME IS OF THE ESSENCE. Time is of the essence with respect to every provision of this Note. 1246545-2 5 -38- 9.9 JOINT AND SEVERAL OBLIGATION. If Borrower consists of two or more individuals, the obligations of such individuals hereunder shall be joint and several. IN WITNESS WHEREOF, Borrower has executed and delivered this Note as of the date first written above. BORROWER Buon Gusto Ristorante, a California Corporation By: Vincenzo Vecchiola By: Carmelo Lacolino 1246545-2 6 -39- RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Redevelopment Agency of the City of South San Francisco 400 Grand Avenue South San Francisco, CA 94080 Attn: Executive Director EXEMPT FROM RECORDING FEES PER GOVERNMENT CODE §§6103, 27383 Space above this line for Recorders use. LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING THIS LEASEHOLD DEED OF TR~~UST WITH ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING ("Deed of Trust") is made as of , 2009 by Buon Gusto Ristorante, a California corporation ("Trustor") to Title Company as trustee ("Trustee'''), for the benefit of the Redevelopment Agency of the City of South San Francisco, a public body, corporate, and politic ("Beneficiary"). RECITALS A. Mid-Peninsula Belle Haven, Inc. ("Owner") owns fee simple title to the land described in Exhibit A attached herelto and incorporated herein by this reference (the "Land"). The Land is located within the Downtown Redevelopment Project Area ("Project Area"). Owner and Trustor have entered into a lease dated as of (the "Lease") pursuant to which Trustor leases the Land and the Improvements for the purposes of operating Trustor's business. B. Trustor intends to rehabilitate the improvements located on the Land (the "Project"). C. Beneficiary and Trustor have entered into an Owner Participation and Loan Agreement dated as of the date hereof (the "OPA") pursuant to which Beneficiary is providing a loan to Trustor in the amount of Six Hundred Fifty Thousand Dollars ($650,000) (the "Loan") for the purpose of partially financing; the Project. Trustor has issued to Beneficiary a secured promissory note dated as of the date hereof (the "Note") to evidence Trustor's obligation to repay the Loan. A Memorandum of the OPA will be recorded in the Official Records of San Mateo County concurrently herewith. C. As a condition precedent to the making of the Loan, Beneficiary has required that Trustor enter into this Deed of Trust and grant to Trustee for the benefit of Beneficiary, a lien and security interest in Trustor's lea:;ehold interest in the Land and the Property (defined below) to secure repayment of the Note and performance of Trustor's obligations under the OPA. -40- NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is agreed as follows. 1. Grant in Trust. In consideration of the foregoing and for the purpose of securing payment and performance of the Secured Obligations defined and described in Section 2, Trustor hereby irrevocably and unconditionally grants, conveys, transfers and assigns to Trustee, in trust for the benefit of Beneficiary, with power of~ sale and right of entry and possession, all estate, right, title and interest which Trustor now has o:r may later acquire in and to the Land, and all of the following, whether presently owned or hereafter acquired: a. All buildings, structures, and improvements, now or hereafter located or constructed on the Land ("Improvements"); b. All appurtenances, easements, rights of way, pipes, transmission lines or wires and other rights used in connection with the Land or the Improvements or as a means of access thereto, whether now or hereafter owned or constructed or placed upon or in the Land or Improvements and all existing and future privileges, rights, franchises and tenements of the Land, including all minerals, oils, gas and other commercially valuable substances which may be in, under or produced from any part of the Land, and all water rights, rights of way, gores or strips of land, and any land lying in the streets, ways, and alleys, open or proposed, in front of or adjoining the Land and Improvements (collectively, "Appurtenances''); c. All machinery, equipment, fixtures, goods and other personal property of the Trustor, whether moveable or not, now owned or hereafter acquired by the Trustor and now or hereafter located at or used in connection with the Land, the Improvements or Appurtenances, and all improvements, restorations, rc;placements, repairs, additions or substitutions thereto (collectively, "Equipment"); d. All existing and future; leases, subleases, licenses, and other agreements relating to the use or occupancy of all or any portion of the Land or Improvements (collectively, "Leases"), all amendments, extensions, renewal:; or modifications thereof, and all rent, royalties, or other payments which may now or hereafter accrue or otherwise become payable thereunder to or for the benefit of Trustor, including but riot limited to security deposits (collectively, "Rents"); e. All insurance proceeds and any other proceeds from the Land, Improvements, Appurtenances, Equipment, Leases, and Rents, including without limitation; all deposits made with or other security deposits given 'to utility companies, all claims or demands relating to insurance awards which the Trustor now has or may hereafter acquire, including all advance payments of insurance premiums made by Trustor, and all condemnation awards or payments now or later made in connection with any condemnation or eminent domain proceeding ("Proceeds"); f. All revenues, income, rents, royalties; payments and profits produced by the Land, Improvements, Appurtenances and Equipment, whether now owned or hereafter acquired by Trustor ("Gross Revenues"); 1246546-2 ~ -41- g. All architectural, structural and mechanical plans, specifications, design documents and studies produced in connection with development of the Land and construction of the Improvements (collectively, "Plans"); and h. All interests and rights in any private or governmental grants, subsidies, loans or other financing provided in connection with development of the Land and construction of the Improvements (collectively, "Financing"). All of the above-referenced interests of Trustor in the Land, Improvements, Appurtenances, Equipment, Leases, Rents, Proceeds, Gross Revenues, Plans and Financing as hereby conveyed to Trustee or made subject to the security interest herein described are collectively referred to herein as the "Property.'' 2. Obligations Secured. This Deed of Trust is given for the purpose of securing payment and performance of the following (collectively, the "Secured Obligations"): (i) all present and future indebtedness evidenced by the Note and any amendment thereof, including principal, interest and all other amounts payable under the terms of the Note; (ii) all present and future obligations of Trustor to Beneficiary under the Loan Documents (defined below); (iii) all additional present and future obligations of Trustor to Beneficiary under any other agreement or instrument acknowledged by Trustor (whether existing now or in the future) which states that it is or such obligations are, secured by this Deed of Trust; (iv) all obligations of Trustor to Beneficiary under all modifications, supplements, amendments, renewals, or extensions of any of the foregoing, whether evidenced by new or additional documents; and (v) reimbursement of all amounts advanced by or on behalf of Beneficiary to protect Beneficiary's interests under this Deed of Trust or any other Loan Document as such may be modified, supplemented, amended, renewed or extended. The Note, the OPA, and this Deed of Trust are hereafter collectively referred to as the "Loan Documents." 3. Assignment of Rents, Issues, and Profits. Trustor hereby irrevocably, absolutely, presently and unconditionally assigns to Beneficiary the Rents, royalties, issues, profits, revenue, income and proceeds of the Property., This is an absolute assignment and not an assignment for security only. Beneficiary hereby confers upon Trustor a license to collect and retain such Rents, royalties, issues, profits, revenue, income and proceeds as they become due and payable prior to any Event of Default hereunder. Upon the occurrence of any such Event of Default, Beneficiary may terminate such license without notice to or demand upon Trustor and without regard to the adequacy of any security for the indebtedness hereby secured, and may either in person, by agent, or by a receiver to be appointed by a court, enter upon and take possession of the Property or any part thereof, and sue for or otherwise collect such rents, issues, and profits, including those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including reasonable attorneys' fees, to any indebtedness secured hereby, and in such order as Beneficiary may determine. Beneficiary's right to the rents, royalties, issues, profits, revenue, income and proceeds of the Property does not depend upon whether or not Beneficiary takes possession of the Property. The entering upon and taking possession of the Property, the collection of such rents, issues, and profits, and the application thereof as aforesaid, shall not cure or waive any default or notice o:f default hereunder or invalidate any act done pursuant to such notice. If an Event of Default occurs while Beneficiary is in possession of all or part of the Property and/or is collecting and applying Rents as permitted under this Deed of Trust, 1246546-2 ~ -42- Beneficiary, Trustee and any receiver shall nevertheless be entitled to exercise and invoke every right and remedy afforded any of theirs under this Deed of Trust and at law or in equity, including the right to exercise the po~~ver of sale granted hereunder. Regardless of whether or not Beneficiary, in person or by agent, takes actual possession of the Land or the Improvements, Beneficiary shall not be deemed to be a "mortgagee in possession," shall not be responsible for performing any obligation of Trustor under any Lease, shall not be liable in any manner for the Property, or the use, occupancy, enjoyment or operation of any part of it, and shall not be responsible for any waste committed by Trustor, lessees or any third parties, or for dangerous or defective condition of the Property or• any negligence in the management, repair or control of the Property. Absent Beneficiary's written consent, Trustor shall not accept prepayment of Rents for any rental period exceeding one month. 4. Security Agreement. The parties intend for this Deed of Trust to create a lien on the Property, and an absolute assignment of the Rents and Leases, all in favor of Beneficiary. The parties acknowledge that some of the Property may be determined under applicable law to be personal property or fixtures. To the extent that any Property may be or be determined to be personal property, Trustor as debtor hereby grants to Beneficiary as secured party a security interest in all such Property to secure payment and performance of the Secured Obligations. This Deed of Trust constitutes a security agreement under the California Uniform Commercial Code, as amended or recodified from time too time (the "UCC"), covering all such Property. To the extent such Property is not real property encumbered by the lien granted above, and is not absolutely assigned by the assignment set forth above, it is the intention of the parties that such Property shall constitute "proceeds, products, offspring, rents, or profits" (as defined in and for the purposes of Section 552(b) of the United States Bankruptcy Code, as such section may be modified or supplemented) of the Land and Improvements. 5. Financing Statements. Pursuant to the UCC, Trustor, as debtor, hereby authorizes Beneficiary, as secured party, to file such financing statements and amendments thereof and such continuation statements with respect thereto as Beneficiary may deem appropriate to perfect and preserve Beneficiary's security interest in the Property and Rents, without requiring any signature or further authorization by Trustor. If requested by Beneficiary, Trustor shall pay all fees and costs that Beneficiary may incur in filing such documents in public offices and in obtaining such record searches as Beneficiary may r~°asonably require. If any financing statement or other document is filed in the records normally pertaining to personal property, that filing shall not be construed as in any way derogating from or impairing this Deed of Trust or the rights or obligations of the parties under it. Everything used in connection with tlhe Property and/or adapted for use therein and/or which is described or reflected in this Deed of Trust is, and at all times and for all purposes and in all proceedings both legal or equitable shall be regarded as part of the estate encumbered by this Deed of Trust irrespective of whether (i) any such item is physically attached to the Improvements, (ii) serial numbers arf; used for the better identification of certain equipment items capable of being thus identified in a recital contained herein or in any list filed with Beneficiary, or (iii) any such item is referred to or reflected in any such financing statement so filed at any time. Similarly, the mention in any such financing statement of (1) rights in or to the proceeds of any fire and/or hazard in:>urance policy, or (2) any award in eminent domain proceedings for a taking or for lessening of value, or (3) Trustor's interest as lessor in any present 1246546-2 ~ -43- or future lease or rights to income growing out of the use and/or occupancy of the property conveyed hereby, whether pursuant to lease or otherwise, shall not be construed as in any way altering any of the rights of Beneficiary as determined by this instrument or impugning the priority of Beneficiary's lien granted hereby or by any other recorded document. Such mention in any financing statement is declared to be solely for the protection of Beneficiary in the event any court or judge shall at any time hold, with respect to the matters set forth in the foregoing clauses (1), (2), and (3), that notice of Beneficiary's priority of interest is required in order to be effective against a particular class of persons, including but not limited to the federal government and any subdivisions or entity of the federal government. 6. Fixture Filing. This Deed of Trust is intended to be and constitutes a fixture filing pursuant to the provisions of the UCC with respect to all of the Property constituting fixtures, is being recorded as a fixture financing statement and filing under the UCC, and covers property, goods and equipment which are or are to become fixtures related to the Land and the Improvements. Trustor covenants and agrees that this Deed of Trust is to be filed in the real estate records of San Mateo County and shall also operate from the date of such filing as a fixture filing in accordance with Section 9502 and other applicable provisions of the UCC. This Deed of Trust shall also be effective as a financing statement covering minerals or the like (including oil and gas) and accounts subject to the UCC, as amended. Trustor shall be deemed to be the "debtor" and Beneficiary shall be deemed to be the "secured party" for all purposes under the UCC. 7. Trustor's Representations, Warranties and Covenants; Rights and Duties of the Parties. 7.1 Representations and Warranties. Trustor represents and warrants that: (i) Trustor lawfully possesses and holds a leasehold interest in the Land and the Improvements, (ii) Trustor has a leasehold interest in all of the Property; (iii) other than as limited by the Loan Documents, Trustor has the full and unlimited power, right and authority to encumber Trustor's interests in the Property with this Deed of Trust ;and assign the Rents as contemplated herein; (iv) subject only to encumbrances of record and senior liens permitted pursuant to the Loan Documents or otherwise approved in writing by Beneficiary ("Permitted Encumbrances"), this Deed of Trust creates a valid lien on Trustor's entire interest in the Property; (v) except with respect to Permitted Encumbrances, Trustor holds a leasehold in the Land and the Improvements pursuant to the Lease free and clear of all deeds of trust, mortgages, security agreements, reservations of title or conditional sales contracts, (vi) there is no financing statement affecting the Property on file in any public office other than as disclosed in writing to Beneficiary; and (vii) the correct address of Trustor's chief executive office is specified in Section 10.2. 7.2 Condition of Property. Trustor represents and warrants that except as disclosed to Beneficiary in writing, as of the date hereof: (i) Trustor has not received nor is Trustor aware that Owner has received any notice from any governmental authority of any threatened or pending zoning, building, fire, or health code violation or violation of other governmental regulations concerning the Property that has not previously been corrected; (ii) to Trustor's knowledge, no condition on the Lancl violates any health, safety, fire, environmental, sewage, building, or other federal, state or local law, ordinance or regulation; (iii) to Trustor's knowledge, no contracts, licenses, leases or commitments regarding the maintenance or use of the Property or allowing any third party rights to use the Property are in force; (iv) to Trustor's knowledge, 1246546-2 ~ -44- there are no threatened or pending actions, suits, or administrative proceedings against or affecting the Property or any portion thereof or the interest of Trustor in the Property; (v) to Trustor's knowledge, there are no threatened or pending condemnation, eminent domain, or similar proceedings affecting the Property or any portion thereof; (vi) Trustor has not received any notice from any insurer of defects of the Property which have not been corrected; (vii) to Trustor's knowledge, there are no natural or artificial conditions upon the Land or any part thereof that could result in a material and adverse change in the condition of the Land; (viii) all information that Trustor has delivered to Beneficiary, either directly or through Trustor's agents, is accurate and complete; and (ix) Trustor or Trustor's agents have disclosed to Beneficiary all material facts concerning the Property. 7.3 Authority. Trustor represents and warrants that this Deed of Trust and all other documents delivered or to be delivered by Trustor in connection herewith: (a) have been duly authorized, executed, and delivered by Trustor; (b) are binding obligations of Trustor; and (c) do not violate the provisions of any agreement to which Trustor is a party or which affects the Property. Trustor further represents and warrants that there are no pending, or to Trustor's knowledge, threatened actions or proceedings before any court or administrative agency which may adversely affect Trustor's ownership of the Property. 7.4 Payment and Performance of Secured Obli atg ions. Trustor shall promptly pay when due the principal and any interest due on the indebtedness evidenced by the Note, and shall promptly pay and perform all other obligations of Trustor arising in connection with the Secured Obligations or the Loan Documents i:n accordance with the respective terms thereof. 7.5 Use of Loan Proceeds,; Preservation and Maintenance of Property; Compliance with Laws. Trustor covenants that it shall use the proceeds of the Loan ("Loan Proceeds") solely for purposes authorized by the Loan Documents. Trustor covenants that it shall keep the Land and Improvements in good repair and condition, and from time to time shall make necessary repairs, renewals and replacements thereto so that the Property shall be preserved and maintained. Trustor covenants that it shall comply with all federal, state and local laws, regulations, ordinances and rules applicable to the Property and the Project, including without limitation all applicable requirements of state and local building codes and regulations, and all applicable statutes and regulations rellating to accessibility for the disabled. Trustor shall not remove, demolish or materially alter .any Improvement without Beneficiary's consent, shall complete or restore promptly and in €;ood and workmanlike manner any building, fixture or other improvement which may be constructed, damaged, or destroyed thereon, and shall pay when due all claims for labor performed and materials furnished therefor. Trustor shall use the Land and the Improvements solely for purposes authorized by the Loan Documents, shall not commit or allow waste of the Property, and shall not commit or allow any act upon or use of the Property which would violate any applicable law or order of any governmental authority, nor shall Trustor bring on or keep any article on the Property or cause or allow any condition to exist thereon which could invalidate or which would be prohibited by any insurance coverage required to be maintained on the Property pursuant 'to the Loan Documents. 7.6 Reserved. 1246546-2 h -45- 7.7 Inspections; Books and Records. Beneficiary and its agents and representatives shall have the right at any reasonable time upon reasonable notice to enter upon the Land and inspect the Property to ensure compliance with the Loan Documents. Trustor shall maintain complete and accurate books of account and other records (including copies of supporting bills and invoices) adequate to document t:he use of the Loan Proceeds and the operation of the Property, together with copies of all written contracts, Leases and other instruments which affect the Property. The books, records, contracts, Leases and other instruments shall be subject to examination and inspection by Beneficiary at any reasonable time following two business days prior notice. 7.8 Charges, Liens, Taxes and Assessments. Trustor shall pay before delinquency all taxes, levies, assessments and other charges affecting the Property that are (or if not paid may become) a lien on all or part of the Property. Trustor may, at Trustor's expense, contest the validity or application of any tax, levy, assessment or charge affecting the Property by appropriate legal proceedings promptly initiated and conducted in good faith and with due diligence, provided that (i) Beneficiary is reasonably satisfied that neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, or lost as a result of such contest, and (ii) Trustor shall have posted a bond or furnished other security as may reasonably be required from time to time by Beneficiary; and provided further that Trustor shall timely make any payment necessary to prevent a lien foreclosure, sale, forfeiture or loss of the Property. 7.9 Subro ag tion. Beneficiary shall be subrogated to the liens of all encumbrances, whether released of record or not, which are discharged in whole or in part by Beneficiary in accordance with this Deed of Trust. 7.10 Hazard, Liability and `~1Vorkers' Compensation Insurance. At all times during the term hereof, at Trustor's expense, Trustor shall keep the Improvements and personal property now existing or hereafter located on the Property insured against loss by fire, vandalism and malicious mischief by a policy of standard fire and extended all-risk insurance. The policy shall be written on a full replacement valuE; basis and shall name Beneficiary as loss payee as its interest may appear. The full replacement value of the improvements to be insured shall be determined by the company issuing the policy at the time the policy is initially obtained. Not more frequently than once every two (2) years, either the Trustor or the Beneficiary shall have the right to notify the other party that it elects to have the replacement value redetermined by the insurance company. Subject to the rights of any senior lienholder, the proceeds collected under any insurance policy may be applied lby Beneficiary to any indebtedness secured hereby and in such order as Beneficiary may deterrr-ine, or at the option of Beneficiary, the entire amount so collected or any part thereof may be released to Trustor. Such application or release shall not cure or waive any default or notice of~ default hereunder or invalidate any act done pursuant to such notice. Notwithstanding anything to the contrary set forth herein, provided that Trustor is not in default under any Loan Document, Trustor shall be permitted to use the proceeds of insurance to rebuild the Improvements. 7.10.1 Trustor shall at all times during the term hereof, maintain a comprehensive general liability insurance policy in an amount not less than One Million Dollars ($1,000,000) each occurrence, Two Million Dollars ($2,000,000) annual aggregate, together with Three Million Dollars ($3,000,000) excess liability coverage or such other policy limits as Agency 1246546-2 ~ -46- may require in its reasonable discretion, including coverage for bodily injury, property damage, products, completed operations and contractual liability coverage. Such policy or policies shall be written on an occurrence basis and shall name the Beneficiary as an additional insured. Trustor shall maintain workers' compensation insurance as required by law. 7.10.2 Trustor shall file with Beneficiary prior to the commencement of the term hereof, certificates (or such other proof as Beneficiary may require, including without limitation, copies of the required insurance policies) evidencing each of the insurance policies and endorsements thereto as required by this Section, and such certificates (or policies) shall provide that at least thirty (30) days' prior written notice shall be provided to Beneficiary prior to the expiration, cancellation or change in coverage under each such policy. 7.10.3 If any insurance policy required hereunder is canceled or the coverage provided thereunder is reduced, Trustor shall, within fifteen. (15) days after receipt of written notice of such cancellation or reduction in coverage, but in no event later than the effective date of cancellation or reduction, file with Beneficiary a certificate showing that the required insurance has been reinstated or provided through another insurance company or companies. Upon failure to so file such certificate, Beneficiary may, without further notice and at its option, procure such insurance coverage at Trustor's expense, and Trustor shall promptly reimburse Beneficiary for such expense upon receipt of billing from Beneficiary. 7.10.4 The insurance policies required hereunder shall be issued by insurance companies authorized to do business iin the State of California with a financial rating of at least A VII status as rated in the most recent edition of Best's Key Rating Guide. Each policy of insurance shall contain an endorsement requiring the insurer to provide at least 30 days written notice to Beneficiary prior to change yin coverage, cancellation or expiration thereof. If any insurance policy required pursuant to the Loan Documents is canceled or the coverage provided thereunder is reduced, Trustor shall, within ten (10) days after receipt of written notice of such cancellation or reduction in coverage, but in no event later than the effective date of cancellation or reduction, file with Beneficiary a certificate showing that the required insurance has been reinstated or provided through another insurance company or companies. Upon failure to so file such certificate, Beneficiary may, without further notice and at its option, procure such insurance coverage at Trustor's expense, and Trustor shall promptly reimburse Beneficiary for such expense upon receipt of billing from leneficiary. 7.11 Hazardous Materials. "Trustor represents and warrants that except as disclosed to Beneficiary in writing, as of the date hereof to the best knowledge of Trustor: (i) the Land is free and has always been free of Hazardous Materials (as defined below) and is not and has never been in violation of any Enviro:rimental Law (as defined below); (ii) there are no buried or partially buried storage tanks located on the Land; (iii) Trustor has received no notice, warning, notice of violation, administrative complaint, judicial complaint, or other formal or informal notice alleging that conditions on the Land are or have ever been in violation of any Environmental Law or informing Trustor that the Land is subject to investigation or inquiry regarding Hazardous Materials on the; Land or the potential violation of any Environmental Law; (iv) there is no monitoring program required by the Environmental Protection Agency or any other governmental agency concerning the Land; (v) no toxic or hazardous chemicals, waste, or substances of any kind have ever been spilled, disposed of, or stored on, under or at the Land, 1246546-2 R -47- whether by accident, burying, drainage, or storage in containers, tanks, holding areas, or any other means; (vi) the Land has never been used as a dump or landfill; and (vii) Trustor has disclosed to Beneficiary all information, records, and studies in Trustor's possession or reasonably available to Trustor relating to the Land concerning Hazardous Materials. Trustor shall not cause or penmit any Hazardous Material (as defined below) to be brought upon, kept, stored or used in, on, under, or about the Land by Trustor, its agents, employees, contractors or invitees except for incidental supplies ordinarily used in connection with the construction, rehabilitation, repair, and operation of commercial developments and in compliance with all applicable laws, and shall not cause any release of Hazardous Materials into, onto, under or through the Land. If any Hazardous Material is discharged, released, dumped, or spilled in, on, under, or about the Land and results in any contamination of the Land or adjacent property, or otherwise results in the release or discharge of Hazardous Materials in, on, under or from the Land, Trustor shall promptly take all actions at its sole expense as are necessary to comply with all Environmental Laws (as defined below). Trustor shall indemnify, defend (with counsel reasonably acceptable to Beneficiary), and hold Beneficiary and its elected and appointed officials, officers, agents and employees (collectively, "Indemnitees") harmless from and against any and all loss, claim, liability, damage, demand, judgment, order, penalty, fine, injunctive or other relief, cost, expense (including reasonable fees and expenses of attorneys, expert witnesses, and other professionals advising or assisting Beneficiary), action, or cause of action (all of the foregoing, hereafter individually "Claim" and collectively "Claims") arising in connection with the breach of Trustor's covenants and obligations set forth in this Section 7.11 or otherwise arising in connection with the presence or release of Hazardous Materials in, on, under, or from the Property. The foregoing indemnity includes, without limitation, all costs of investigation, assessment, containment, removal, remediation of any kind, and disposal of Hazardous Materials, all costs of determining whether the Land is in compliance with Environmental Laws, all costs associated with bringing the Land into compliance with all applicable Environmental Laws, and all costs associated with claims for damages or injury to persons, property, or natural resources. Without limiting the generality of the foregoing, Trustor shall, at Trustor's own cost and expense, do all of the following: a. pay or satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees in any legal or administrative proceeding incident to any matters against which Indemnitees are entitled to be indemnified under this Deed of Trust; b. reimburse Indemnitees for any expenses paid or incurred in connection with any matters against which Indemnitees arf: entitled to be indemnified under this Deed of Trust; and c. reimburse Indemnitees, for any and all expenses, including without limitation out- of-pocket expenses and fees of attorneys and expert witnesses, paid or incurred in connection with the enforcement by Indemnitees of their rights under this Deed of Trust, or in monitoring and participating in any legal or administrative proceeding. 1246546-2 -48- Trustor's obligation to indemnify the Indemnitees shall not be limited or impaired by any of the following, or by any failure of Trustor to receive notice of or consideration for any of the following: (i) any amendment or modification of any Loan Document; (ii) any extensions of time for performance required by any Loan Document; (iii) any provision in any of the Loan Documents limiting Beneficiary's recourse to property securing the Secured Obligations, or limiting the personal liability of Trustor, or any other party for payment of all or any part of the Secured Obligations; (iv) the accuracy or inaccuracy of any representation and warranty made by Trustor under this Deed of Trust or by Trustor or any other party under any Loan Document, (v) the release of Trustor or any other person, by Beneficiary or by operation of law, from performance of any obligation under any Loan Document; (vi) the release or substitution in whole or in part of any security for the Secured Obligations; and (vii) Beneficiary's failure to properly perfect any lien or security interest given as security for the Secured Obligations. The provisions of this Section 7.11 shall be in addition to any and all other obligations and liabilities that Trustor may have under applicable law, and each Indemnitee shall be entitled to indemnification under this Section without regard to whether Beneficiary or that Indemnitee has exercised any rights against the Property or any other security, pursued any rights against any guarantor or other party, or pursued any other rights available under the Loan Documents or applicable law. The obligations of Trustor to indemnify the Indemnitees under this Section shall survive any repayment or discharge of the Secured Obligations, any foreclosure proceeding, any foreclosure sale, any delivery of any Bleed in lieu of foreclosure, and any release of record of the lien of this Deed of Trust. Without limiting any of the remedies provided in this Deed of Trust, Trustor acknowledges and agrees that each of the provisions in this Section 7. l 1 is an environmental provision (as defined in Section 736(f)(2) of the California Code of Civil Procedure) made by Trustor relating to real property security (the "Environmental Provisions"), and that Trustor's failure to comply with any of the Environmental Provisions will be a breach of contract that will entitle Beneficiary to pursue the remedies provided by Section 736 of the California Code of Civil Procedure ("Section 736") for the recovery of damages and for the enforcement of the Environmental Provisions. Pursuant to Section 736, Beneficiary's action for recovery of damages or enforcement of the Environmental Provisions shall not constitute an action within the meaning of Section 726(a) of the California Code of Civil Procedure or constitute a money judgment for a deficiency or a deficiency judgment within the meaning of Sections 580a, 580b, 580d, or 726(b) of the California Code of Civil Procedure. "Hazardous Materials" means any substance, material or waste which is or becomes regulated by any federal, state or local. governmental authority, and includes without limitation (i) petroleum or oil or gas or any direct or indirect product or by-product thereof; (ii) asbestos and any material containing asbestos; (iii) any substance, material or waste regulated by or listed (directly or by reference) as a "hazardous substance", "hazardous material", "hazardous waste", "toxic waste", "toxic pollutant", "toxic;, substance", "solid waste" or "pollutant or contaminant" in or pursuant to, or similarly identified as hazardous to human health or the environment in or pursuant to, the Toxic Substances Cor.~trol Act [15 U.S.C. Section 2601, et seq.]; the Comprehensive Environmental Response, Compensation and Liability Act [42 U.S.C. Section 9601, et seq.], the Hazardous Materials Transportation Authorization Act [49 U.S.C. Section 5101, et seq.), the Resource Conserval:ion and Recovery Act [42 U.S.C. Section 6901, et seg.], 1246546-2 ~ n -49- the Federal Water Pollution Control Act [33 U.S.C. Section 1251 ], the Clean Air Act [42 U.S.C. Section 7401, et seg.], the California Underground Storage of Hazardous Substances Act [California Health and Safety Code Section 25280, et seg.], the California Hazardous Substances Account Act [California Health and Safety Code Section 25300, et seq.], the California Hazardous Waste Act [California Health and Safety Code Section 25100, et seg.], the California Safe Drinking Water and Toxic Enforcement Act [California Health and Safety Code Section 25249.5, et seg.], and the Porter-Cologne Water Quality Control Act [California Water Code Section 13000, et seq.], as they now exist or are hereafter amended, together with any regulations promulgated thereunder; (iv) any substance, material or waste which is defined as such or regulated by any "Superfund" or "Su~>erlien" law, or any Environmental Law; or (v) any other substance, material, chemical, waste c-r pollutant identified as hazardous or toxic and regulated under any other federal, state or local environmental law, including without limitation, asbestos, polychlorinated biphenyls, petroleum., natural gas and synthetic fuel products and by-products. "Environmental Law" means all federal, state or local statutes, ordinances, rules, regulations, orders, decrees, judgments or common law doctrines, and provisions and conditions of permits, licenses and other operating authorizations regulating, or relating to, or imposing liability or standards of conduct concerning (i) pollution or protection of the environment, including natural resources; (ii) exposure of persons, including employees and agents, to any Hazardous Material (as defined above.) or other products, raw materials, chemicals or other substances; (iii) protection of the public health or welfare from the effects of by-products, wastes, emissions, discharges or releases of chemical substances from industrial or commercial activities; (iv) the manufacture, use or' introduction into commerce of chemical substances, including without limitation, their manufacture, formulation, labeling, distribution, transportation, handling, storage and disposal; or (iv) the use, release or disposal of toxic or hazardous substances or Hazardous Materials or the remediation of air, surface waters, groundwaters or soil, as now or may ait any later time be in effect, including but not limited to the Toxic Substances Control Act [ 15 U.S.C. 2601, et seq.]; the Comprehensive Environmental Response, Compensation and Liability Act [42 U.S.C. Section 9601, et seq.], the Hazardous Materials Transportation Authorization Act [49 U.S.C. Section 5101, et seq.], the Resource Conservation and Recovery Act [42 t1.S.C. 6901, et seq.], the Federal Water Pollution Control Act [33 U.S.C. Section 1251 ], the Clean Air Act [42 U.S.C. Section 7401, et seq.], the California Underground Storage of Hazardous Substances Act [California Health and Safety Code Section 25280, et seq.], the California Hazardous Substances Account Act [California Health and Safety Code Section 25300, et seq.], the California Hazardous Waste Act [California Health and Safety Code Section 25100, et seq.], the California Safe Drinking Water and Toxic Enforcement Act [California Health anal Safety Code Section 25249.5, et seq.], and the Porter-Cologne Water Quality Control Act [California Water Code Section 13000, et seq.], as they now exist or are hereafter amended, together with any regulations promulgated thereunder. 7.12 Notice of Claims; Defense of Security; Reimbursement of Costs. a. Notice of Claims. Trustor shall provide written notice to Beneficiary of any uninsured or partially uninsured loss affecting the Property through fire, theft, liability, or property damage in excess of an aggrf;gate of Fifty Thousand Dollars ($50;000) within three business days of the occurrence of such loss. Trustor shall ensure that Beneficiary shall receive timely notice of, and shall have a right to cure, any default under any other financing document 1246546-2 > > -50- or other lien affecting the Property and shall use best efforts to ensure that provisions mandating such notice and allowing such right to cure shall be included in all such documents. Within three business days of Trustor's receipt thereof, Trustor shall provide Beneficiary with a copy of any notice of default Trustor receives in connection with any financing document secured by the Property or any part thereof. b. Defense of Security. ~~t Trustor's sole expense, Trustor shall protect, preserve and defend the Property and Trustor's interest in and right of possession. of the Property, the security of this Deed of Trust and the rights and powers of Beneficiary and Trustee created under it, against all adverse claims. c. Compensation; Reimbursement of Costs. Trustor agrees to pay all reasonable fees, costs and expenses charged by Beneficiary or Trustee for any service that Beneficiary or Trustee may render in connection with this Deed of Trust, including without limitation, fees and expenses related to provision of a stal:ement of obligations or related to a reconveyance. Trustor further agrees to pay or reimburse Beneficiary for all costs, expenses and other advances which may be incurred or made by Beneficiary or Trustee in any efforts to enforce any terms of this Deed of Trust, including without limitation any rights or remedies afforded to Beneficiary or Trustee or both of them under Sections 7.1$ and 8.2, whether or not any lawsuit is filed, or in defending any action or proceeding arising under or relating to this Deed of Trust, including reasonable attorneys' fees and other legal costs, costs of any disposition of the Property under the power of sale granted hereunder or arty judicial foreclosure, and any cost of evidence of title. d. Notice of Changes. Trustor shall give Beneficiary prior written notice of any change in the address of Trustor and the location of any property, including books and records pertaining to the Property. 7.13 Indemnification. Trustor shall indemnify, defend (with counsel reasonably acceptable to Beneficiary), and hold harmless the Trustee and the Indemnitees (as defined in Section 7.11) from and against all Claims arising directly or indirectly in any manner in connection with•or as a result of (a) a:ny breach of Trustor's covenants under any Loan Document, (b) any representation by Trustor in any Loan Document which proves to be false or misleading in any material respect when made, (c) injury or death to persons or damage to property or other loss occurring on the Land or in any improvement located thereon, whether caused by the negligence or any other act or omission of Trustor or any other person or by negligent, faulty, inadequate or defective design, building, construction or maintenance or any other condition or otherwise, (d) any claim, demand or cause of action, or any action or other proceeding, whether meritorious or not, brought or asserted against any Indemnitee which relates to or arises out of the Property, or any Loan Document or any transaction contemplated thereby, or any failure of Trustor to comply with all applicable state, federal and local laws and regulations applicable to the Property, provided that no Indemnitee shall. be entitled to indemnification under this Section fo:r matters caused by such Indemnitee's gross negligence or willful misconduct. The obligations of Trustor under this Section shall survive the repayment of the Loan and shall be secured by this Deed of Trust. Notwithstanding any contrary provision contained herein, the obligations of Trustor under this Section shall survive any foreclosure proceeding, any foreclosure sale, any delivery of a deed in lieu of foreclosure, and any release or reconveyance of this Deed of Trust. 1246546-2 ~ ~ -51- 7.14. Limitation of Liability. Beneficiary shall not be directly or indirectly liable to Trustor or any other person as a consequence of any of the following: (i) Beneficiary's exercise of or failure to exercise any rights, remedies or powers granted to Beneficiary in this Deed of Trust; (ii) Beneficiary's failure or refusal to perform or discharge any obligation or liability of Trustor under any agreement related to the Property or under this Deed of Trust; (iii) any waste committed by Trustor, the lessees of the Property or any third parties, or any dangerous or defective condition of the Property; or (iv) any loss sustained by Trustor or any third party resulting from any act or omission of Beneficiary in managing the Property after an Event of Default, unless the loss is caused by the willful misconduct, gross negligence, or bad faith of Beneficiary. Trustor hereby expressly waives and releases all liability of the types described in this Section 7.14 and agrees that Trustor shall assert no claim related to any of the foregoing against Beneficiary. 7.15 Insurance and Condemnation Proceeds. Subject to the rights of any senior lienholders, any award of damages ire connection with any condemnation for public use of, or injury to the Property or any part thereof is hereby assigned and shall be paid to Beneficiary who may apply such moneys to any indebtedness secured hereby in such order as Beneficiary may determine, or at the option of Beneficiary the entire amount so collected or any part thereof may be released to Trustor. Such application or release shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. Notwithstanding the foregoing, so long as the value of Beneficiary's lien is not impaired, insurance and/or condemnation proceeds may be used to repair and/or restore the Improvements. 7.16 Release, Extension, Modification. At any time and from time to time, without liability therefor and without notice, upon written request of Beneficiary and presentation of this Deed of Trust and the Note for endorsement, Trustee may release or reconvey all or any part of the Property, consent to the making of any map or plat of the Land or part thereof, join in granting any easement or creating any restriction affecting the Property, or join in any extension agreement or other agreement affecting the lien or charge hereof. At any time and from time to time, without liability therefor and without notice, Beneficiary may (i) release any person liable for payment of any Secured Obligation, (ii) extend the time for payment or otherwise alter the terms of payment of any Secured Obligation; (iii) accept additional real or personal property of any kind as security for any Secured Obligation, or (iv) substitute or release any property securing the Secured Obligations. 7.17 Reconveyance. Upon. written request of Beneficiary stating that all of the Secured Obligations have been paid in full, a~ld upon surrender of this Deed of Trust, and the Note, Trustee shall reconvey, without warranty, the Property or so much of it as is then held under this Deed of Trust. The recitals in any reconveyance executed under this Deed of Trust of any matters or facts shall be conclusive proof of the truthfulness thereof. Trustor shall pay all fees of Trustee and all recordation fees related to such reconveyance. 7.18 Cure; Protection of Securit .Either Beneficiary or Trustee may cure any breach or default of Trustor, and if it chooses to do so in connection with any such cure, Beneficiary or Trustee may also enter the Property and/or do any and all other things which it may in its sole discretion consider necessary and appropriate to protect the security of this Deed of Trust. Such other things may include: appearing rn and/or defending any action or proceeding which purports 1246546-2 ~ ~ -52- to affect the security of, or the rights or powers of Beneficiary or Trustee under, this Deed of Trust; paying, purchasing, contesting or compromising any encumbrance, charge, lien or claim of lien which in Beneficiary's or Tru;stee's sole judgment is or may be senior in priority to this Deed of Trust, such judgment of Beneficiary or Trustee to be conclusive as among Beneficiary, Trustee and Trustor; obtaining insurance and/or paying any premiums or charges for insurance required to be carried hereunder; otherwise caring for and protecting any and all of the Property; and/or employing counsel, accountants, contractors and other appropriate persons to assist Beneficiary or Trustee. Beneficiary and Trustee may take any of the actions permitted under this Section 7.18 either with or without giving notice, except for notices required under applicable law. Any amounts disbursed by Beneficiary pursuant to this paragraph shall become additional indebtedness secured by this Deed of~ Trust. 8. Default and Remedies. 8.1 Events of Default. Trustor acknowledges and agrees that an Event of Default shall occur under this Deed of Trust ~~pon the occurrence of any one or more of the following events: a. Beneficiary's declaration of an Event of Default under any Loan Document, subject to the expiration of any applicable cure period set forth in such document; b. Trustor fails to perform any monetary obligation which arises under this Deed of Trust, and does not cure that failure within ten (10) days following written notice from Beneficiary or Trustee; c. [Reserved.] d. Trustor fails to maintain the insurance coverage required hereunder or otherwise fails to comply with the requirements of Section 7.10 hereof and Trustor fails to cure such default within the time specified in Section 7.10; e. Subject to Trustor's right to contest such charges as provided herein, Trustor fails to pay taxes or assessments due on the Land or the Improvements or fails to pay any other charge that may result in a lien on the Land or the Improvements, and Trustor fails to cure such default within 10 days; f. Any representation or warranty of Trustor contained in or made in connection with the execution and delivery of this Deed of Trust or in any certificate or statement furnished pursuant hereto or in any other Loan Document proves to have been false or misleading in any material adverse respect when made; g. If, pursuant to or within the meaning of the United States Bankruptcy Code or any other federal or state law relating to insolvency or relief of debtors ("Bankruptcy Law"), Trustor or any general partner thereof (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against Trustor or any general partner thereof in an involuntary case; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator or similar official for Trustor or any general partner thereof; (iv) makes an assignment for the benefit of its creditors; or (v) admits in writing its inability to pay its debts as they become due; 1246546-2 is -53- h. If a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against Trustor or any general partner thereof in an involuntary case, (ii) appoints a trustee, receiver, assignee, liquidator or similar official for Trustor or any general partner thereof or substantially all of such entity's assets, (iii) orders the liquidation of Trustor or any general partner thereof, or (iv) issues or levies a judgment, writ, warrant of attachment or similar process against the Property or the Project, and in each case the order or decree is not released, vacated, dismissed or fully bonded within 60 days after its issuance; i. The holder of any other debt instrument secured by a mortgage or deed of trust on the Property or part thereof declares an event of default thereunder and exercises a right to declare all amounts due under that. debt instrument immediately due and payable, subject to the expiration of any applicable cure period set forth in such holder's documents; j. Trustor fails to perform any obligation arising under this Deed of Trust other than one enumerated in this Section 8.1, anal does not cure that failure either within ten (10) days after written notice from Beneficiary or Trustee in the event of a monetary default, or within thirty (30) days after such written notice in the event of a nonmonetary default, provided that in the case of a nonmonetary default that in Beneficiary's reasonable judgment cannot reasonably be cured within thirty (30) days, an Event of Default shall not arise hereunder if Trustor commences to cure such def~iult within thirty (30) days and thereafter prosecutes such cure to completion with due diligence and in good faith and in no event later than sixty (60) days following receipt of notice of default; or k. A default arises under the Lease and remains uncured beyond any applicable cure period such that the landlord has the right to terminate the Lease. 8.2 Remedies. Subject to the applicable notice and cure provisions set forth herein, at any time after an Event of Default, Beneficiary and Trustee shall be entitled to invoke any and all of the rights and remedies described below, and may exercise any one or more or all, of the remedies set forth in any Loan Document, and any other remedy existing at law or in equity or by statute. All of Beneficiary's rights and remedies shall be cumulative, and the exercise of any one or more of them shall not constitute an election of remedies. Beneficiary shall be entitled to collect all expenses incurred in pursuing the remedies provided hereunder, including without limitation reasonable attorneys' fees and costs. a. Acceleration. Beneficiary may declare any or all of the Secured Obligations, including without limitation all sums payable under the Note and this Deed of Trust, to be due and payable immediately. b. Receiver. Beneficiary may apply to any court of competent jurisdiction for, and obtain appointment of, a receiver for the Property. c. Entry. Beneficiary, in person, by agent or by court-appointed receiver, may enter, take possession of, manage and operate all or any part of the Property, and may also do any and all other things in connection with those actions that Beneficiary may in its sole discretion consider necessary and appropriate to protect the security of this Deed of Trust. Such 1246546-2 ~ ~ -54- other things may include: taking and possessing copies of all of Trustor's or the then owner's books and records concerning the Property; entering into, enforcing, modifying, or canceling Leases on such terms and conditions as Beneficiary may consider proper; obtaining and evicting tenants; fixing or modifying Rents; collecting and receiving any payment of money owing to Trustor; completing any unfinished construction; and/or contracting for and making repairs and alterations. If Beneficiary so requests, Trustor shall assemble all of the Property that has been removed from the Land and make all of it available to Beneficiary at the site of the Land. Trustor hereby irrevocably constitutes and appoints Beneficiary as Trustor's attorney-in-fact to perform such acts and execute such documents as Beneficiary in its sole discretion may consider to be appropriate in connection with taking. these measures, including endorsement of Trustor's name on any instruments. d. UCC Remedies. Beneficiary may exercise any or all of the remedies granted to a secured party under the tJCC. e. Judicial Action. Beneficiary may bring an action in any court of competent jurisdiction to foreclose this Deed of Trust in the manner provided by law for foreclosure of mortgages on real property and/or to obtain specific enforcement of any of the covenants or agreements of this Deed. of Trust. f. Power of Sale. Under the power of sale hereby granted, Beneficiary shall have the discretionary right to cause Nome or all of the Property, including any Property which constitutes personal property, to be sold or otherwise disposed of in any combination and in any manner permitted by applicable law. 8.3 Power of Sale. If Beneficiary elects to invoke the power of sale hereby granted, Beneficiary shall execute or cause thf; Trustee to execute a written notice of such default and of its election to cause the Property to be sold to satisfy the obligations hereof, and shall cause such notice to be recorded in the office of the Recorder of each County wherein the Property or some part thereof is situated as required by law and this Deed of Trust. Prior to publication of the notice of sale, Beneficiary shall deliver to Trustee this Deed of Trust and the Note or other evidence of indebtedness which is secured hereby, together with a written request for the Trustee to proceed with a sale of the Property, pursuant to the provisions of law and this Deed of Trust. Notice of sale having been given as then required by law, and not less than the time then required by law having elapsed after :recordation of such notice of default, Trustee, without demand on Trustor, shall sell the Property at the time and place fixed by it in the notice of sale, either as a whole or in separate parcels and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States, payable at time of sale. Trustee may, and at Beneficiary's request shall, postpone sale of all or any portion of the Property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement at the time and place fixed by the preceding postponement. Trustee shall deliver to the purchaser its deed conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustor, Trustee, or Beneficiary, may purchase at such sale. 1246546-2 ~ ~ -55- After deducting all costs, fees, and expenses of Trustee and of the trust hereby created, including reasonable attorneys' fees in connection with sale, Trustee shall apply the proceeds of sale to payment of all sums advanced or expended by Beneficiary or Trustee under the terms hereof and all outstanding sums then secured hereby, and the remainder, if any, to the person or persons legally entitled thereto. Without limiting the generality of the foregoing, Trustor acknowledges and agrees that regardless of whether or not a default has occurred hereunder, if an Event of Default has occurred under the Loan Documents, and if in connection with such Event of Default Beneficiary exercises its right to foreclose on the Property, then: (i) Beneficiary shall be entitled to declare all amounts due under the Note immediately due and payable, and (ii) the proceeds of any sale of the Property in connection with such foreclosure shall be used to pay all Secured Obligations, including without limitation, the outstanding principal balance and all other amounts due under the Note. At any foreclosure sale, any person, including Trustor, Trustee or Beneficiary, may bid for and acquire the Property or any pert of it to the extent permitted by then applicable law. Instead of paying cash for such property, Beneficiary may settle for the purchase price by crediting the sales price of the property against the following obligations: a. First, the portion of the Secured Obligations attributable to the expenses of sale, costs of any action and any other sums for which Trustor is obligated to pay or reimburse Beneficiary or Trustee under Section 7.12 c ;and b. Second, the rernaining balance of all other Secured Obligations in any order and proportions as Beneficiary in its sole discretion may choose. 8.4 Trustoe's Right to Reinstate. Notwithstanding Beneficiary's acceleration of the sums secured by this Deed of Trust, Trustor shall have the right to have any proceedings begun by Beneficiary to enforce this Deed of Trust discontinued at any time prior to five days before sale of the Property pursuant to the power of sale contained in this Deed of Trust or at any time prior to entry of a judgment enforcing this Deed of Trust if: (a) Trustor pays Beneficiary all sums which would be then due under the Loan Documents if the Secured Obligations had no acceleration provision; (b) Trustor cures all breaches of any other covenants or agreements of Trustor contained in this Deed of Trust; (c) Trustor pays all reasonable expenses incurred by Beneficiary and Trustee in enforcing the covenants and agreements of Trustor contained in this Deed of Trust, and in enforcing Beneficiary's and Trustee's remedies as provided herein, including, but not limited to, reasonable attorney's fees; and (d) Trustor takes such action as Beneficiary may reasonably require to assure that the lien of this Deed of Trust, Beneficiary's interest in the Property and Trustor's obligation to pay the sums secured by this Deed of Trust shall continue unimpaired. Upon such payment and cure by Trustor, this Deed of Trust and the obligations secured hereby shall rem~iin in full force and effect as if no acceleration had occurred. 9. Trustor's Waivers. To the fullest extent permitted by law, Trustor waives: (a) all statutes of limitations as a defense to any action or proceeding brought against Trustor by Beneficiary; (b) the benefit of all laws now existing or which may hereafter be enacted providing 1246546-2 - 56- for any appraisement, valuation, stay, extension, redemption or moratorium; (c) all rights of marshalling in the event of foreclosure; and (d) all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of acceptance of this Deed of Trust and of the existence, creation, or incurring of new or additional indebtedness, and demands and notices of every kind. 10. Miscellaneous Provisions. 10.1 Additional Provisions. The Loan Documents grant further rights to Beneficiary and contain further agreements and affirmative and negative covenants by Trustor which apply to this Deed of Trust and the Property. 10.2 Notices. Trustor requests that a copy of notice of default and notice of sale be mailed to Trustor at the address set forth below. That address is also the mailing address of Trustor as debtor under the UCC. Be:neficiary's address set forth below is the address for Beneficiary as secured party under the UCC. Except for any notice required under applicable law to be given in another manner, all notices to be sent pursuant to this Deed of Trust shall be made in writing, and sent to the parties at their respective addresses specified below or to such other address as a party may designate by written notice delivered to the other parties in accordance with this Section. All such notices shall be sent by: a. personal delivery, in which case notice shall be deemed delivered upon receipt; b. certified or registered mail, return receipt requested, in which case notice shall be deemed delivered two (2) business days after deposit, postage prepaid in the United States mail; c. nationally recognized overnight courier, in which case notice shall be deemed delivered one (1) day after deposit with such courier; or d. facsimile transmission, in which case notice shall be deemed delivered on transmittal, provided that a transmission report is generated reflecting the accurate transmission thereof. ~ ~ - Beneficiary: Redevelopment Agency of the City of South San Francisco 400 Grand Avenue South San Francisco, CA 94080 Attention: Executive Director Trustor: Buon Gusto Ristorante 224 Grand Avenue South San Francisco, CA 94080 Attention: Carmelo Lacolino and Vincenzo Vecchiola 1246546-2 i R - 57 - Trustee: Amerinational Title Company Attn: Ana Luna 10.3 Binding on Successors. The terms, covenants and conditions of this Deed of Trust shall be binding upon and inure to the benefit of the heirs, administrators, executors, successors in interest, transferees, and assigns of the Trustor, Beneficiary and Trustee; provided however this Section 10.3 does not waive any provision of the Loan Documents imposing restrictions on transfer. 10.4 Substitution of Trustee. Beneficiary may from time to time or at any time substitute a trustee or trustees to execute the trust hereby created, and when any such substitution has been filed for record in the office of the Recorder of San Mateo County, it shall be conclusive evidence of the appointment of such trustee or trustees, and such new trustee or trustees shall succeed to all of the powers and duties of the Trustee named herein. 10.5 Attorneys' Fees and Costs. In any action or proceeding to foreclose this Deed of Trust or to enforce any right of Beneficiary or of Trustee, Trustor shall pay to Beneficiary and Trustee all costs of such action or proceeding, including reasonable attorneys' fees. 10.6 Governing Law; Severability; lnterpretation. This Deed of Trust shall be governed by the laws of the State of California without regard to principles of conflicts of laws. Trustor agrees that any controversy arising under or in relation to this Deed of Trust shall be litigated exclusively in the jurisdiction where the Land is located (the "Property Jurisdiction"). The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to the Loan Documents. Trustor irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation, and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. If any provision of this Deed of Trust is held unenforceable or void, that provision shall be deemed severable from the remaining provisions, and shall in no way affect the validity of this Deed of Trust. The captions used in this Deed of Trust are for convenience only and are not intended to affect the interpretation or construction of the provisions herein contained. In this Deed of Trust, whenever the context so requires, the singular number includes the plural. 10.7 Waiver, Modification. and Amendment. Any waiver by Beneficiary of any obligation of Trustor hereunder must be in writing, and no waiver shall be construed as a continuing waiver. No waiver shall be implied from any delay or failure by Beneficiary or Trustee to take action on account of any default of Trustor. Consent by Beneficiary or Trustee to any act or omission by Trustor shall not be construed as a consent to any other or subsequent act or omission or to waive the requiremf;nt for Beneficiary's or Trustee's consent to be obtained in any future or other instance. No amendment to or modification of this Deed of Trust shall be effective unless and until such amendment or modification is in writing, executed by Trustor and Beneficiary. Without limiting the generality of the foregoing, Beneficiary's acceptance of payment of any sum secured hereby after its due date shall not constitute a waiver by Beneficiary 1246546-2 ~~ -58- of its right either to require prompt payment when due of all other sums so secured or to declare default for failure so to pay. 10.8 Action b~Beneficiary. Except as may be otherwise specifically provided herein, whenever any approval, notice, direction, or consent by the Beneficiary is required or permitted under this Agreement, such action shall be in writing, and such action may be given, made or taken by Beneficiary's Executive Director or by any person who shall have been designated by Beneficiary's Executive Director, without further approval by the governing board of Beneficiary. Beneficiary shall use re~~sonable best efforts to respond to requests for any such approval, notice, direction, or consent. in a timely manner. In any approval, consent, or other determination by Beneficiary required hereunder, Beneficiary shall act reasonably and in good faith. 10.9 Joint and Several Liability. If Trustor consists of more than one person or entity, each shall be jointly and severally liable for the faithful performance of all of Trustor's obligations under this Deed of Trust. 10.10 Time is of the Essence. Time is of the essence for each provision of this Deed of Trust. 11. Leasehold Mortgagee Provisions. The provisions of this Section 11 shall apply in the event that, and so long as, any portion of the Property consists of Trustor's interest as tenant under the Lease defined and described in Recital A. As used in this Section 11, the term "Lease" means the Lease and any extension, renewal or replacement thereof. The lien of this Deed of Trust shall encumber all of T'rustor's rights and interests under and in connection with the Lease, including without limitation renewal and extension rights, options to expand, and purchase options (all of which rights shall be collectively referred to herein as the "Leasehold"). 1 l .1 Trustor shall timely perform its obligations in connection with the Lease. Trustor specifically acknowledges Beneficiary's right, while any default by Trustor under the Lease remains uncured, to perform the defaulted obligations and take all other actions which Beneficiary reasonably deems necessary to protect its interests with respect thereto, and Trustor hereby irrevocably appoints Beneficiary its true and lawful attorney- in- fact in its name or otherwise to execute all documents, and perform all other acts, which Beneficiary reasonably deems necessary to preserve its or Trustor's rights with respect to the Leasehold. 11.2 Trustor shall not, without Beneficiary's prior written consent, modify, or cause or permit the termination of, the Lease, or waive or in any way release the landlord under the Lease of any obligation or condition. 11.3 Trustor shall notify Beneficiary promptly in writing of (i) the occurrence of any material default by the landlord under the Lease and (ii) the receipt by Trustor of any notice claiming the occurrence of any defau:it by Trustor under the Lease or the occurrence of any event which, with the passage of time or thf; giving of notice or both, would constitute a default by Trustor under the Lease (and Trustor shall also promptly deliver a copy of any such notice to Beneficiary). 1246 -j46-2 ~~ -59- 11.4 Unless Beneficiary otherwise consents in writing, so long as any Secured Obligation remains outstanding, neither the fee title to, nor any other estate or interest in, the Property subject to the Lease shall merge with any Leasehold, notwithstanding the union of such estates in the landlord or the tenant or in a third party. Any acquisition of the landlord's interest in the Lease by Trustor or any affiliate of Trustor shall be accomplished in such a manner as to avoid a merger of the interests of landlord and tenant unless Beneficiary consents to such merger in writing. 11.5 If Trustor acquires fee title to any portion of the real property subject to the Lease, this Deed of Trust shall automatically be a lien on such fee title. 11.6 Trustor shall not subordinate the Lease or Leasehold to any deed of trust or other encumbrance of, or lien on, any interest in the real property subject to such Leasehold without the prior written consent of Beneficiary. Any such subordination without such consent shall, at Beneficiary's option, be void. 11.7 All subleases entered into by Trustor with respect to all or any portion of the Property (and all existing subleases modified by Trustor) shall provide that such subleases are subordinate to the lien of this Deed of Trust and any modifications of this Deed of Trust and the Secured Obligations and that, if Beneficiary forecloses under this Deed of Trust or enters into a new lease with the landlord under the Lease pursuant to the provisions for a new lease, if any, contained in the applicable Lease or iri any other document or agreement, the subtenant shall attorn to Beneficiary or its assignee and the sublease shall remain in full force and effect in accordance with its terms notwithstanding the termination of the Lease. 11.8 Trustor shall exercise any option or right to renew or extend the term of the Lease at least six months prior to the date of termination of any such option or right, shall give immediate written notice thereof to Beneficiary, and shall execute, deliver and record any documents requested by Beneficiary to evidence the lien of this Deed of Trust on such extended or renewed lease term. If Trustor fails to exercise any such option or right as required herein, Beneficiary may exercise the option or right as Trustor's agent and attorney-in- fact pursuant to this Deed of Trust, or in Beneficiary's own name or in the name of and on behalf of a nominee of Beneficiary, as Beneficiary chooses in its absolute discretion. 11.9 Trustor hereby specifically assigns to Beneficiary, as security for the Secured Obligations, all prepaid rents and security deposits and all other security which the landlord under the Lease holds for the performance of Trustor's obligations thereunder. 11.10 Reserved.' 11.11 Promptly upon demand by Beneficiary, Trustor shall use reasonable efforts to obtain from the landlord. under the Ground Lease and furnish to Beneficiary an estoppel certificate of such landlord stating the date through which rent has been paid, whether or not there are any defaults, and the specific; nature of any claimed defaults. 11.12 Trustor shall notify Beneficiary promptly in writing of any request by either party 1246546-2 ~ ~ -60- to the Lease for arbitration, appraisal or other proceedings relating to the Lease and of the institution of any such proceeding, anti shall promptly deliver to Beneficiary a copy of all determinations in any such proceeding. Beneficiary shall have the right, following written notice to Trustor, to participate in any such proceeding in association with Trustor or on its own behalf as an interested party. Trustor shall notify Beneficiary promptly in writing of the institution of any legal proceeding involving obligations under the Lease, and Beneficiary may intervene in any such legal proceeding and be made a party. Trustor shall promptly provide Beneficiary with a copy of any decision rendered in connection with any such proceeding. 11.13 To the extent permitted by law, the price payable by Trustor or any other party in the exercise of the right of redemption, if any, from any sale under, or decree of foreclosure of, this Deed of Trust shall include all rents and other amounts paid and other sums advanced by Beneficiary on behalf of Trustor as the tenant under the Ground Leases. 11.14 In addition to all other Events of Default described in this Deed of Trust, the occurrence of any of the following shall be an Event of Default hereunder: (a) A material breach or default by Trustor under the Lease, subject to any applicable cure period; or (b) The occurrence of any event or circumstance which gives the landlord under the Lease a right to terminate the Lease. 11.15 As used in this Deed of 'Trust, the "Bankruptcy Code" shall mean 11 U.S.C. §§ 101, et seq., as modified and/or recodified from time to time. Notwithstanding anything to the contrary contained herein with respect: to the Lease: (a) The lien of this Deed of Trust attaches to all of Trustor's rights under Subsection 365(h) of the Bankruptcy Code, including without limitation any and all elections to be made thereunder, any and all rights under the Lease which Trustor is entitled to retain pursuant to 11 U.S.C. § 365(h)(1)(A)(ii) in the event of a rejection under the Bankruptcy Code of such Lease by the landlord thereunder (or any trustee thereof), and any and all rights of offset under or as described in 11 U.S.C. § 365(h)(1)(B). (b) Trustor acknowledges and agrees that, as the beneficiary under this Deed of Trust and by operation of 11 U.S.C. §365(h)(1)(D), Beneficiary has, and until this Deed of Trust has been fully reconveyed continuously shall have, whether before or after any default under any of the Secured Obligations or the taking of any action to enforce any of Beneficiary's rights and remedies under this Deed of Trust or any foreclosure sale hereunder, the complete, unfettered and exclusive right, in its sole and absolute discretion, to elect (the "365(h) Election") whether (i) any Lease that has been rejected under the Bankruptcy Code by the landlord thereunder (or any trustee therefor) shall be treated as terminated under 11 U.S.C. §365(h}(1)(A)(i), or (ii) the rights under such Lease that are in or appurtenant to the real property, as described in 11 U.S.C. §365(h)(1)(A)(ii), should be retained pursuant to that subsection. To the extent that, notwithstanding the preceding sentence and 11 U.S.C. §365(h)(1)(D), Trustor now or at any time in the future has any right to make, or to participate in 1246546-2 ~~ -61- or otherwise in any manner affect the making of, the 365(h) election with respect to any Lease, Trustor hereby absolutely assigns and conveys to Beneficiary any and all such rights, and all of Trustor's right, title, and interest therein, which may be used and exercised by Beneficiary completely, exclusively, and without any restriction whatsoever, in Beneficiary's sole and absolute discretion, whether before or .after any default upon any of the Secured Obligations, the taking of any action to enforce any of Beneficiary's rights and remedies under this Deed of Trust, or any foreclosure sale hereunder. Trustor hereby unconditionally and irrevocably appoints Beneficiary as its attorney- in- fact to f~xercise Trustor's right, if any, to make, or participate in or otherwise in any matter affect the making of, the 365(h) Election with respect to any Lease. Trustor shall not in any manner impede or interfere with any action taken by Beneficiary and, at the request of Beneficiary, Trustor shall take or join in the taking of any action to make, or participate in or otherwise in any manner affect the making of, the 365(h) Election with respect to any Lease, in such manner as Beneficiary determines in its sole and absolute discretion. Unless and until instructed to do so by Beneficiary (as determined by Beneficiary in its sole and absolute discretion), Trustor shall not 1:ake any action to make, or participate in or otherwise in any manner affect the making of, the 365(h) Election with respect to any Lease, including in particular, but without limitation, any election to treat any Lease as terminated. Beneficiary shall have no obligation whatsoever to Trustor or any other person or entity in connection with the making of the 365(h) Election with respect to any Lease or any instruction by Beneficiary to Trustor given, withheld or delayed in respect thereof, nor shall Beneficiary have any liability to Trustor or any other person or entity arising from any of the same. (c) As security for 1:he Secured Obligations, Trustor hereby irrevocably assigns to Beneficiary all of Trustor's rights to damages arising from any rejection by any landlord (or any trustee thereof) of any Lease under the Bankruptcy Code. Beneficiary and Trustor shall proceed jointly or in the name of Trustor in respect of any claim or proceeding relating to the rejection of any Lease, including without limitation the right to file and prosecute any proofs of claim, complaints, motions and other documents in any case in respect of such landlord under the Bankruptcy Code. '.Phis assignment shall continue in effect until all of the Secured Obligations have been satisfied in full. Any amounts received by Beneficiary or Trustor as damages arising from the rejection of any Lease as aforesaid shall be applied first to all costs reasonably incurred by Beneficiary (including attorneys' fees) in connection with this subsection (c) and then in accordance with other applicable provisions of this Deed of Trust. (d) If, pursuant to the Bankruptcy Code, Trustor seeks to offset against the rent reserved in any Lease the amount of any damages caused by the nonperformance of the landlord's obligations after the rejection by the landlord (or any trustee thereof) of such Lease, Trustor shall, prior to effecting such offset, notify Beneficiary in writing of its intent to do so, setting forth the amounts proposed to ~be offset and, in the event that Beneficiary objects, Trustor shall not effect any offset of the amounts to which Beneficiary objects. If Beneficiary fails to object within 10 days following receipt of such notice, Trustor may offset the amounts set forth in Trustor's notice. (e) If any legal proceeding is commenced with respect to any Lease in connection with any case under the B~mkruptcy Code, Beneficiary and Trustor shall cooperatively conduct any such proceeding with counsel reasonably agreed upon between 1246546-2 ~~ -62- Trustor and Beneficiary. Trustor shall., upon demand, pay to Beneficiary all costs (including attorneys' fees) reasonably incurred by Beneficiary in connection with any such proceeding. (f) Trustor shall immediately notify Beneficiary orally upon learning of any filing by or against any landlord under any Lease of a petition under the Bankruptcy Code. Trustor shall thereafter promptly give written notice of such filing to Beneficiary, setting forth any information available to Trustor with respect to the date of such filing, the court in which such petition was filed, and the relief sought therein. Trustor shall promptly deliver to Beneficiary all notices, pleadings and other documents received by Trustor in connection with any such proceeding. 1 l .16 No maintenance, repair or other obligation of Trustor hereunder which relates to the "Property" shall apply to any Leasehold with respect to which the applicable Lease imposes such obligation on the landlord so long as (a) Trustor does not own the landlord's interest; (b) such landlord is performing such obligation in accordance with the terms of such Lease; and (c) the Lease has not been rejected by the landlord (or any trustee thereof) under the Bankruptcy Code. 11.17 Trustor shall promptly notify the landlord in writing, in accordance with Section 25359.7 of the California Health and Safety Code and any successor and/or similar statutes (and shall simultaneously notify Beneficiary in writing), in the event that Trustor knows or has cause to believe that any Hazardous Substance has come to be located on or beneath the property leased under the Lease. 11.18 The generality of the provisions of this Deed of Trust shall not be limited by any provision of this Section 11 that sets forth particular obligations of Trustor as the tenant under the Ground Leases. 11.19 Trustor hereby represents and warrants to Beneficiary, with respect to the Lease described in Recital A above (the "Current Lease"), as follows: (a) The Current Lease is in full force and effect; (b) Trustor owns the entire tenant's interest under the Current Lease and has the right under the Current Lease to execute this Deed of Trust; and (c) no default under the Current Lease remains uncured, nor has any event occurred which, with the passage of time or service of notice or both, would constitute such a default. SIGNATURES ON FOLLOWING PAGE. 1246546-2 ~~ -63- IN WITNESS WI~REOF, Trustor has executed this Deed of Trust as of the date first written above. TRUSTOR: Buon Gusto Ristorante, a California Corporation By: Vincenzo Vecchiola By: Carmelo Lacolino Its: Owner SIGNATURES MZIST BE NOTARIZED. 1246546-2 ~~ -64- STATE OF CALIFORNIA COUNTY OF SAN MATEO On , 20_, before me, _ , (here insert name and title of the officer), personally appeared ,who 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. 1 certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature _ (Seal) STATE OF CALIFORNIA COUNTY OF SAN MATEO On , 20__, before me, _ , (here insert name and title of the officer), personally appeared ,who 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. l certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. 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