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09 Staff Report - 20 Dittos LanetpW H ,c T 'PW AGENCY AGENDA REPORT rp~~ 05 s cAt DATE: SEPTEMBER 16, 2009 MEETING DATE: 9121/2009 ITEM NO: TO: CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY FROM: GREG LARSON, EXECUTIVE DIRECTOR SUBJECT: 20 DITTOS LANE A. STAFF RECOMMENDS THAT THE AGENCY BOARD ADOPT RESOLUTION APPROVING TWO RELATED AGREEMENTS THAT WOULD FACILITATE AN EFFORT TO ACQUIRE AND REDEVELOP THE APPROXIMATELY 1.58-ACRE PARCEL AT 20 DITTOS LANE B. AUTHORIZE A BUDGET ADJUSTMENT TO THE FY 2009110 OPERATING AND CAPITAL BUDGET IN THE AMOUNT OF $3,500,000 FOR ESTIMATED COSTS RELATED TO THE ACQUISITION OF THE PROPERTY LOCATED AT 20 DITTOS LANE, FUNDED BY AVAILABLE FUND BALANCE IN THE TOWN OF LOS GATOS REDEVELOPMENT AGENCY'S LOW AND MODERATE HOUSING FUND RECOMMENDATION: 1. Staff recommends that the Agency Board adopt resolution approving two related agreements that would facilitate an effort to acquire and redevelop the approximately 1.58-acre parcel at 20 Dittos Lane 2. Authorize a budget adjustment to the FY 2009/10 Operating and Capital budget in the amount of $3,500,000 for estimated costs related to the acquisition of the property located at 20 Dittos Lane, funded by available fund balance in the Town of Los Gatos Redevelopment Agency's Low and Moderate Housing Fund BACKGROUND: Late last year, ROEM Development Corporation approached Town staff indicating an interest in developing affordable housing in Los Gatos. In April 2009, ROEM Development Corporation PREPARED BY: BUD LORTZ Deputy Town Manager BL:pg N:tMGR1.AdminWorkFi1&2009 Council Reportsl9-21-09 Dittos Lane.doc Reviewed by Assistant Town Manager/Deputy Director awn Attorney/General Counsel Clerk Administrator/Secretary Finance Community Development PAGE 2 CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: 20 DITTOS LANE SEPTEMBER t6,2009 BACKGROUND: (continued) submitted a Statement of Qualifications and a Development Proposal for potential affordable apartments at 20 Dittos Lane. Since that time staff has held extensive discussions with ROEM and the Town Council to determine the feasibility of the proposal. Initial development proposal is available for review at the Clerk department. ROEM initially requested a loan of $5,333,000 (4.0% - 33 year) from the Los Gatos Redevelopment Agency. Funding would come from the Agency's Affordable Housing Fund. Staff has not yet had an opportunity to conduct a detailed analysis of the terms of the loan or the financing structure described in the proposal nor have the terms of the loan been negotiated. A subsidy of approximately $200,000/unit to create affordable housing in Los Gatos is-considered reasonable and appropriate. DISCUSSION Staff has prepared two related agreements that would facilitate acquisition and redevelopment in the Central Los Gatos Redevelopment Project Area for use consistent with the Town's General Plan and the Redevelopment Plan for the Project Area. Subject to future planning and approvals as discussed below, acquisition for eventual redevelopment of the Property would help to eliminate current blighting conditions on the site and in the Project Area and would provide an opportunity to develop an appropriate number of low and moderate income affordable housing units for the benefit of the community and in satisfaction of various Community Redevelopment Law affordable housing requirements. The two agreements presented for consideration by the Redevelopment Agency Board are described below and include an Assignment and Assumption Agreement (Assignment Agreement) and an Exclusive Right To Negotiate Agreement (ERNA). Assignment Agreement: ROEM has entered into a purchase and sale agreement (Purchase Agreement) with the Property's owner, Mr. Nicholas Gera, to acquire the Property for $3.1 million by December 31, 2009. To date, ROEM has made $50,000 of deposits toward the purchase price. Pursuant to the proposed Assignment Agreement, ROEM would assign to the Redevelopment Agency its rights to acquire the Property under the Purchase Agreement. The Agency would become the buyer of the Property in accordance with the Purchase Agreement, and would make an additional deposit toward the purchase price in late September and pay the balance of the purchase price at closing prior to December 31. As detailed in the Assignment Agreement, the Agency's obligation to become the buyer is conditioned upon the Agency review and satisfaction with the results of the following due diligence reports indicating that the Property is reasonably suited for future redevelopment: a Phase 1 Environmental Site Assessment, a building inspection, a title report, and a relocation budget estimate of the costs to relocate the three households currently occupying the Property. If the Agency is satisfied with these reports and makes the Assignment Agreement effective, then it would reimburse ROEM for its $50,000 prior deposits to the Property seller, and would proceed PAGE 3 CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: ADOPT RESOLUTION APPROVING THE PURCHASE AGREEMENTS FOR PROPERTY LOCATED AT 20 DITTOS LANE SEPTEMBER 16, 2009 DISCUSSION (continued): to purchase the Property under the terms of the Purchase Agreement. The Agency would purchase the Property using funds from its Low and Moderate Income (20% Set Aside) Fund in order to reserve the site for an appropriate residential development, subject to further planning activities and approvals as described below. ERNA: The proposed ERNA would be entered into between the Agency and a controlled affiliate of ROEM, Dittos Lane Family Housing, L.P. (ROEM Affiliate). The ERNA would establish a 270-day period in which the parties would negotiate exclusively with each other to seek agreement on the terms of a disposition and development agreement (DDA), under which the Agency would convey the Property to the ROEM Affiliate, and the ROEM Affiliate would design, construct and operate an agreed upon development on the Property (Development). The DDA to be negotiated during the ERNA period would establish, among other matters: (1) the nature, scope and conceptual design of the Development to be constructed on the Property by the ROEM Affiliate, including standards, requirements and schedules for timely and high quality design, construction and operation of the Development, and the number and affordability levels for the affordable residential units in the Development; (2) the pre-conditions (firm financing commitments, development entitlements, executed construction contract, etc.) that the ROEM Affiliate must satisfy to assure the Agency, prior to the Agency's obligation to convey the Property to the ROEM Affiliate, that it is ready, willing and able to construct and operate the Development in accordance with the DDA; and (3) the purchase price-to be paid by the ROEM Affiliate for the Property and any financially justified Agency monetary assistance to the Development. During the ERNA period, Town/Agency staff and the ROEM Affiliate would seek to prepare mutually acceptable conceptual designs and a workable financing plan for the Development. Also during the ERNA period, the Agency would prepare the appropriate environmental review document in accordance with the California Environmental Quality Act (CEQA) to evaluate the potential environmental effects of the development of the Development under the DDA. If staff and the ROEM Affiliate succeed in negotiating the terms of a DDA, the DDA would be presented to the Agency Board for consideration at a duly noticed public hearing, along with the accompanying CEQA document and a Community Redevelopment Law-mandated financial report that evaluates the necessity and appropriateness of the proposed purchase price and any Agency financial assistance in order to enable a financially feasible project. If the DDA is approved by the Agency Board, then ROEM would proceed to prepare detailed plans and specifications, seek all necessary Town and other development permits and approvals, and seek formal financial commitments for the Development. During this period between execution of the DDA and the Agency's obligation to convey the property, the Town would conduct its nonnal development review process to further shape the Development's design and to determine whether to grant the necessary Town land use approvals. Execution of the DDA would not limit in any way the Town's normal land use approval authority over the Property. PAGE 4 CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: ADOPT RESOLUTION APPROVING THE PURCHASE AGREEMENTS FOR PROPERTY LOCATED AT 20 DITTOS LANE SEPTEMBER 16, 2009 DISCUSSION (continued): If at the end of the ERNA period, the Agency Board does not approve a DDA, then the ERNA obligations to the ROEM Affiliate would terminate and the Agency would be free to seek other means to develop the Property, including soliciting interest in redeveloping the Property from the broader development community. CONCLUSION Because ROEM has invested considerable time and effort in evaluating development options for the Property, staff believes that it would be most efficient and effective first to seek to negotiate a DDA for the Property with the ROEM Affiliate, while gaining control of the Property for future redevelopment using other means if an acceptable DDA is not reached with the ROEM Affiliate. ENVIRONMENTAL ASSESSMENT: Approval of the Agreement of Purchase will not result in the immediate transfer or redevelopment of the property and does not have the potential to result in a direct or reasonably foreseeable physical change in the environment. The details regarding subsequent redevelopment of the property are currently unknown and will not be clear until the Town applies for approval of the necessary land use approval, at which time the Town will evaluate the impact, if any, of the project on the environment. FISCAL IMPACT: Funding the acquisition of this property is available in the Town's Redevelopment Agency's Low and Moderate Housing Fund. The current unrestricted balance of this fiend as of August 31, 2009 of approximately $6.9 million, all of which is available for appropriation. Attachment: Resolution of the Los Gatos Redevelopment Agency Approving Assignment and Assumption Agreement and Exclusive Right to Negotiate Agreement for Acquisition of and Eventual Development of 20 Dittos Lane Distribution: Nick Gera - 19630 Sky Oaks Way, Los Gatos, CA 95030 ROEM - 1650 Lafayette St., Santa Clara, CA 95050 RESOLUTION NO. RESOLUTION OF THE BOARD OF DIRECTORS OF THE LOS GATOS REDEVELOPMENT AGENCY APPROVING ASSIGNMENT AND ASSUMPTION AGREEMENT AND EXCLUSIVE RIGHT TO NEGOTIATE -AGREEMENT FOR ACQUISITION OF AND EVENTUAL DEVELOPMENT OF 20 DITTOS LANE (APN 529-29-034) WHEREAS: A. On March 13, 2009, ROEM Development Corporation, a developer of affordable housing, hereafter referred to as "ROEM," entered into an Agreement for Purchase and Sale of Real Property and Escrow Instructions, hereafter referred to as the "Purchase Agreement," regarding 20 Dittos Lane, (APN 529-29-034), hereafter referred to as the "Property." ROEM desires to develop an affordable housing project on the Property. B. The Property is approximately 1.58 acres in size, is located in the Central Los Gatos Redevelopment Project Area, has a General Plan designation of Medium Density Residential, is Zoned R-ID, and is currently used as rental housing, including residential units. The Property is owned by Nicholas Gera, who offered it for sale on the open market. C. In April 2008 the Town's Redevelopment Agency was approached by ROEM regarding possible development of affordable housing on the Property. ROEM subsequently offered to assign the Purchase Agreement to the Agency so long as the Agency enters into an agreement granting ROEM an exclusive right to negotiate with the Agency regarding the development of the Property. D. The proposed use of the project would be consistent with the Town's General Plan and the Redevelopment Plan for the Project Area. Subject to future planning and approvals, acquisition for eventual redevelopment of the Property would help to eliminate current blighting conditions in the Project Area and would provide an opportunity to develop an appropriate number of low and moderate income affordable housing units for the benefit of the community and in satisfaction of various Community Redevelopment Law affordable housing requirements. E. The Board of Directors of the Agency wishes to acquire the Property for purposes of developing affordable housing consistent with the General Plan, Zoning and the Central Los Gatos Redevelopment Project Area Plan. F. The proposed Assignment and Assumption Agreement regarding the Purchase Agreement, and the proposed Exclusive Right to Negotiate Agreement are attached hereto as Exhibits "A and B," respectively and incorporated herein by this reference. N:\F MGR\AdminwoikFiles12009 Council Reportsl9-21-09 20 Dittos Ln Resolution.doc Page 1 of 2 RESOLVED: The Assignment and Assumption Agreement and Exclusive Right to Negotiate Agreement are approved and the Executive Director is hereby authorized to execute the agreements in substantially the form of Exhibits "A and B" hereto. PASSED AND ADOPTED at a regular meeting of the Town Council/Agency Board of Directors of the Town of Los Gatos/Los Gatos Redevelopment Agency, California held on the day of , 20, by the following vote: DIRECTORS: AYES: NAYS: ABSENT: ABSTAIN: SIGNED: CHAIRMAN OF THE BOARD OF DIRECTORS OF THE LOS GATOS REDEVELOPMENT AGENCY LOS GATOS, CALIFORNIA ATTEST: CLERK ADMINISTRATOR LOS GATOS, CALIFORNIA NAMGR\AdminWorkFiles12009 Council Reportsl9-21-09 20 Dittos Ln Resolution.doc Page 2 of 2 FINAL ASSIGNMENT AND ASSUMPTION OF AGREEMENT FOR PURCHASE AND SALE AND ESCROW INSTRUCTION THIS ASSIGNMENT AND ASSUMPTION OF AGREEMENT FOR PURCHASE AND SALE AND ESCROW INSTRUCTIONS (this "Agreement"), is made and entered into as of September 21, 2009, by and between ROEM DEVELOPMENT CORPORATION, a California corporation ("Assignor"), and the REDEVELOPMENT AGENCY OF THE TOWN OF LOS GATOS; a public body corporate and politic ("Assignee"). RECITALS A. Assignor, as Buyer, and Nicholas Gera, an individual as Seller, have entered into that certain Agreement for Purchase and Sale of Real Property and Escrow Instructions, dated as of March 23, 2009, as amended by that certain Addendum to Agreement for Purchase and Sale of Real Property and Escrow Instructions, dated June 25 and June 29, 2009, and that certain Second Addendum to Agreement for Purchase and Sale of Real Property and Escrow Instructions, dated August 27 and August 28, 2009, and as may be subsequently amended in the manner set forth in Section 5 below (the "Purchase Agreement"), regarding certain improved real property located at 20 Dittos Lane, Los Gatos, California, and more particularly described in Exhibit A to the Purchase Agreement. Capitalized terms used but not defined in this Agreement shall have the meanings given in the Purchase Agreement. B. Assignor and Assignee desire to evidence the assignment of the interest of "Buyer" under the Purchase Agreement by Assignor to Assignee, and the assumption by Assignee of all of the obligations of Assignor under the Purchase Agreement, except as otherwise provided in this Agreement. NOW, THEREFORE, in consideration of the Recitals, the promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: I . Assignment. Subject to satisfaction of the conditions set forth in Section 3 below, Assignor hereby assigns to Assignee all of the right, title and interest of the "Buyer" under the Purchase Agreement and (1) all of the right, title and interest of Assignor in and to the Purchase Agreement, including, without limitation, Assignor's interest in the Deposits and the Reports, and (2) any claim, right, demand or remedy that Assignor may now or hereafter have or be entitled to on account of the Purchase Agreement or the negotiations leading thereto. 2. Ass_ sLim tp ion. Subject to satisfaction of the conditions set forth in Section 3 below, Assignee hereby assumes all of Assignor's obligations under the Purchase Agreement, whether such obligations first arise or accrue before or after the date of this Agreement, and Assignee agrees that it shall be bound by the terms and provisions of the Purchase Agreement; provided, however, that Assignor shall remain responsible for any obligations of Buyer accruing pursuant to Section 3.4 of the Purchase Agreement resulting from entry on the Property by Assignor or Assignor's agents, employees, and contractors. 1 M:1MGR\AdminWorkPiles%Confidenti1119-21-09 Dittos Agrcement.DOC EXHIBIT A 3. Conditions to Effectiveness. The terms of this Agreement and the assignment and assumption of rights, interests and obligations contemplated hereby shall become effective only upon satisfaction of all of the following conditions: a. Assignor (at its sole cost) shall have delivered to Assignee, by not later than September 22, 2009, (1) the Reports received by Seller pursuant to Section 3.1.1 of the Purchase Agreement, and (2) a Phase I Environmental Site Assessment for the Property prepared by a licensed consultant reasonably acceptable to Assignee, and Assignee shall have determined in its sole discretion, based on the Phase I Environmental Site Assessment, an inspection of the residential units on the Property by a Town of Los Gatos ("Town") building inspector, and other information available to Assignee, that the Property is in physical condition acceptable to Assignee, such that the Assignee is prepared to provide a Feasibility Approval Notice pursuant to Section 3.1.2 of the Purchase Agreement; b. Assignee shall have. prepared such studies as it deems appropriate (at its sole cost) and shall have determined in its sole discretion that the potential costs of relocation of occupants of the Property under any applicable federal and state relocation requirements is acceptable to Assignee; C. Assignor shall have provided a Preliminary Title Report for the Property and a description of all liens, easements, encumbrances, covenants, conditions, and restrictions that Assignor has accepted or is deemed to have accepted as Permitted Exceptions pursuant to Section 3.2.4 of the Purchase Agreement, and Assignee shall have determined in its sole discretion that the condition of title to the Property to which the Property will be subject at the Close of Escrow is acceptable to Assignee; and d. Assignor shall have provided Seller's approval of Assignor's rights under the Purchase Agreement to Assignee pursuant to Section 8.12 of the Purchase Agreement, in form acceptable to Assignee in its sole discretion, e. An affiliate of Assignor and Assignee shall have executed and delivered to each other an Exclusive Right to Negotiate Agreement in form and content reasonably satisfactory to Assignor. The conditions set forth in subsections a., b., c. and d. above are for the benefit of Assignee and may be waived only by Assignee. The condition set forth in subsection e. above is for the benefit of Assignor and may be waived only by Assignor. In order to enable Assignee to consider satisfaction of the conditions set forth in subsections a., b., c., and d. above, Assignor shall arrange with Seller for reasonable and timely access to the Property and its occupants by Assignee, the Town, and their respective agents and consultants. After consulting with Assignor with respect to the condition set forth in subsection e. above, and if such be the case, Assignee shall provide written notice to Assignor (the "Effectiveness Notice") of the satisfaction of all conditions set forth in this Section 3 (or waiver thereof by the benefited party) and the effectiveness of the terms of this Agreement 2 1151%01\736885.4 promptly following satisfaction of all conditions but no later than 5:00 p.m. local time on September 25, 2009. If all conditions set forth in this Section 3 have not been satisfied (or waived by the benefited party) by 5:00 p.m. local time on September 25, 2009, then this Agreement shall not take effect, unless the parties agree otherwise in writing. 4. Notification to Seller. Promptly following receipt of the Effectiveness Notice, Assignor shall formally notify Seller of the assignment contemplated by this Agreement. 5. Amendment of Purchase Agreement. Assignor shall not cause and permit a further amendment of the Purchase Agreement without the prior written consent of Assignee, which shall not be unreasonably withheld, conditioned, or delayed. Assignee shall not cause and permit a further amendment of the Purchase Agreement effectuating one or more of the following without the prior written consent of Assignor, which shall not be unreasonably withheld, conditioned, or delayed: an increase in the Purchase Price; a change in the physical condition in which the Property will be transferred to Assignor; a change in the condition of title in which the Property will be transferred to Assignor; or another change that would materially impair the redevelopment potential of the Property. 6. Reimbursement of Deposits. Within five (5) business days after delivery of the Effectiveness Notice, Assignee shall reimburse to Assignor the amount of Fifty Thousand Dollars ($50,000), which constitutes the amount of the Deposits made by Assignor pursuant to the Purchase Agreement. Assignee shall have no other monetary obligation to Assignor under this Agreement. 7. Countemarts. This Agreement may be executed in any number of counterparts, provided each of the parties hereto executes at least one counterpart; each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. 8. Entire A eement. This Agreement constitutes the entire agreement among the parties pertaining to the assignment of the Purchase Agreement from Assignor to Assignee as of the date hereof and supersedes all prior and contemporaneous agreements and understandings of the parties in connection therewith. No representation, warranty, covenant, agreement or condition not expressed in this Agreement shall be binding upon the parties to this Agreement. 9. Attorney's Fees. If it becomes necessary for either party to file a suit to enforce this Agreement or any provisions contained in this Agreement, or to seek damages for a breach, the prevailing party shall be entitled to recover, in addition to all other remedies or damages, reasonable attorney's fees and costs incurred in such suit. 10. Authority. Each party represents and warrants to the other that the signatory below has full authority to execute this Agreement on behalf of such party, and that this Agreement constitutes the valid and binding obligation of such party. 3 1 B A01\736885.4 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. ASSIGNOR: ROEM DEVELOPMENT CORPORATION, a California corporation By: By: Jonathan Emami Vice President Marcus Griffin Chief Financial Officer and Treasurer ASSIGNEE: REDEVELOPMENT AGENCY OF THE APPROVED AS TO FORM: TOWN OF LOS GATOS, a public body, corporate and politic By: By: Orry Korb Greg Larson Agency Counsel Executive Director 4 11511011736885.4 FINAL EXCLUSIVE RIGHT TO NEGOTIATE AGREEMENT (20 DITTOS LANE DEVELOPMENT) This Exclusive Right To Negotiate Agreement (this "Agreement") is entered into as of September 21, 2009 (the "Effective Date"), by and between the Redevelopment Agency of the Town of Los Gatos, a public body, corporate and politic (the "Agency"), and Dittos Lane Family Housing, L.P., a California limited partnership (the "Developer"). The Agency and the Developer (sometimes collectively referred to as the "parties") have entered into this Agreement on the basis of the following facts: RECITALS A. The Town Council (the "Town Council") of the Town of Los Gatos (the "Town") has adopted and the Agency is responsible for implementation of the Redevelopment Plan for the Central Los Gatos Redevelopment Project (the Redevelopment Plan") to redevelop the Central Los Gatos Redevelopment Project Area (the "Project Area"), consistent with the policies and standards of the Redevelopment Plan and the General Plan of the Town (the "General Plan"). The goals for the Redevelopment Plan include alleviation of blighting conditions and the provision of affordable housing in the Project Area. B. Roem Development Corporation ("Buyer") has entered into a purchase and sale agreement (the "Purchase Agreement") for the acquisition of an approximately 1.58-acre property located at 20 Dittos Lane (APN 529-29-034) within the Project Area, and more particularly described in the attached Exhibit A (the "Property"). C. In turn, the Buyer and the Agency have entered into an assignment and assumption agreement (the "Assignment Agreement"), dated as of September 21, 2009, whereby the Developer has assigned and the Agency has assumed (subject to satisfaction of specified conditions) the rights of the "Buyer" under the Purchase Agreement, giving the Agency the right and obligation to purchase the Property in accordance with the Purchase Agreement. D. The Agency desires to cause development on the Property of a residential development, including an appropriate mix of affordable housing units, consistent with the requirements of the Redevelopment Plan, the General Plan, and the California Community Redevelopment Law (the "Project"). E. The development of the Project in the Project Area will further the Agency's goals of providing affordable housing- and will assist in ameliorating blighting influences in the Project Area. E. The purpose of this Agreement is to establish procedures and standards for the negotiation by the Agency and the Developer of a disposition and development agreement (a "DDA") pursuant to which the Agency would convey the Property to the Developer and the Developer would develop, own and operate the Project on the Property. As more fully set forth N:11V1GRIAdminWorkFiles%Confidentia119-21-09 Dittos AgreemmtIDOC EXHIBIT 13 in Section 3.1, the Developer acknowledges and agrees that this Agreement in itself does not grant the Developer the right to develop the Project, nor does it obligate the Developer to any activities or costs to develop the Project, except for the actions and negotiations contemplated by this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties mutually agree as follows: ARTICLE 1. EXCLUSIVE NEGOTIATIONS RIGHT Section 1.1 Good Faith Negotiations. The Agency and the Developer shall negotiate diligently and in good faith, during the Negotiating Period described in Section 1.2, the terms of a DDA for the development of the Project on the Property. During the Negotiating Period, the parties shall use good faith efforts to accomplish the respective tasks outlined in Article 2 to facilitate the negotiation of a mutually satisfactory DDA. Among the issues to be addressed in the negotiations are the purchase price for the Property, appropriate number of affordable units and affordability levels, design, parking and aesthetic considerations of the Project (including appropriate means of access), the development schedule for the Project, responsibilities for relocation of existing occupants of the Property, financing of the Project, marketing and management of the Project, and the provision of public improvements related to the Project. The amount, timing, method, source and other terms of any Agency financial assistance toward development of the Project shall be determined through the negotiating process for the DDA. Section 1.2 Negotiating Period. Subject to earlier termination pursuant to specific provisions of this Agreement, the negotiating period (the "Negotiating Period") under this Agreement shall be two hundred seventy (270) days, commencing on the Effective Date (as set forth in the Opening Paragraph of this Agreement). The Negotiating Period may be extended or modified by formal amendment of this Agreement approved by the Agency Board and executed by the Executive Director on behalf of the Agency and the Developer. If, despite their respective diligent good faith efforts, the parties are unable to reach agreement and execute and deliver a DDA by the expiration of the Negotiating Period, then this Agreement shall terminate and neither party shall have any further rights or obligations under this Agreement; except that the provisions of Sections 1.4 (regarding refunding of the Deposit and any interest earned thereon to the Developer), 3.3 and 3.5 shall survive any termination. If a DDA is executed by the Agency and the Developer then, upon such execution, this Agreement shall terminate, and all rights and obligations of the parties shall be as set forth in the executed DDA. 2 N:IMGRIAdminWorkF'iles%Confidentia119-21-09 Dittos AgreementIDOC In addition to termination of this Agreement as described above, if the assignment of the Developer's rights as "Buyer" under the Purchase Agreement does not become effective due to a failure to timely satisfy one or more of the conditions set forth in Section 3 of the Assignment Agreement, then either party may terminate this Agreement by written notice to the other party. Upon such termination, neither party shall have any further rights or obligations under this Agreement, except that the provisions of Section 1.4 (regarding refunding of the Deposit and any interest earned thereon to the Developer), 3.3 and 3.5 shall survive such termination. Section 1.3 Exclusive Negotiations. During the Negotiating Period, the Agency shall not negotiate with any entity,, other than the Developer, regarding development of the Property, or solicit or entertain bids or proposals to do so. Section 1.4 Good Faith Deposit. In consideration for this Agreement, the Developer shall, concurrently with the execution of this Agreement by the Agency, provide to the Agency a cash deposit of Twenty-Five Thousand Dollars ($25,000) (the "Deposit"). During the term of this Agreement, the Agency shall invest the Deposit for purposes of earning interest thereon. If this Agreement is terminated without execution of a DDA other than as the result of the occurrence of an uncured Developer's default pursuant to Section 3.6, the Deposit and any interest earned thereon shall be refunded promptly to the Developer. If this Agreement is terminated by the Agency due to the occurrence of an uncured Developer's default, the Deposit and any interest earned thereon shall be retained by the Agency, as more fully provided in Section 3.6. If performance of this Agreement results in execution of a DDA, the disposition of the Deposit and any interest earned thereon shall be as set forth in the DDA. Section 1.5 Identification of Developer Representatives and Development Team. (a) Negotiating Representatives. The Developer's representatives to negotiate the DDA with the Agency are Jonathan Emami and Marcus Griffin. The Developer's negotiating representatives may be changed by written notice to the Agency. (b) Development Team. The parties' acknowledge that the identity and quality of the Developer's team for the Project is important to the completion of the tasks set forth in Article 2 below, and in seeking to negotiate a mutually acceptable DDA. The following shall constitute initial members of the Developer's team for the Project:. Architect KTGY Legal Counsel Cox, Castle & Nicholson LLP As part of the Preliminary Proposal submitted pursuant to Section 2.3, the Developer shall_identify and seek Agency approval of its proposed civil engineer for the Project, which approval shall not be unreasonably withheld, conditioned or delayed. The architect and legal counsel identified above and the civil engineer approved. in accordance with Section 2.3 N:\MC;RIAdminWorlcFiles\Confdentia119-21-09 Dittos AgreementIDOC shall comprise the "Development Team" for the Project. The Developer may replace one or more members of the Development Team upon receipt of Agency approval, which approval shall not be unreasonably withheld, conditioned or delayed. Section 1.6 Identification of Agency Representatives. The Agency's representatives to negotiate the DDA with the Developer are Bud Lortz and Greg Larson. Greg Larson, as Agency Executive Director, has ultimate Agency staff authority to make decisions related to this Agreement that can be made at the staff level, and to make staff recommendations to the Agency Board in connection with decisions related to this Agreement to be made at the Agency Board level. The Agency's negotiating representatives may be changed by written notice to the Developer. ARTICLE 2. NEGOTIATION TASKS AND DDA PROVISIONS Section 2.1 Overview: ERNA Schedule. To facilitate negotiation of the DDA, the parties shall use reasonable good faith efforts to accomplish the tasks set forth in this Article 2 within the specific times set forth in the milestone schedule set forth in the attached Exhibit B (the "ERNA Schedule"), and within an overall timeframe that will support negotiation and execution of a mutually acceptable DDA prior to the expiration of the Negotiating Period. The ERNA Schedule may be modified from time to time (including modification of dates for completion of specified actions and/or addition of further actions) without formal amendment of this Agreement by written document executed by the Developer and the Agency Executive Director or the Executive Director's designee; provided, however, in no event shall the overall duration of the Negotiating Period by modified other than by formal amendment of this Agreement approved by the Agency Board in accordance with Section 1.2. In addition, Section 2.2 sets forth certain general terms that the parties intend to incorporate in any mutually acceptable DDA. Section 2.2 Certain DDA Provisions. The parties acknowledge and agree that any mutually acceptable DDA shall contain provisions to the following effect: (a) Physical Condition. The physical condition in which the Agency conveys the Property to the Developer (provided the Developer is otherwise entitled to such conveyance under the terms of the DDA) will be the same physical condition in which the Agency receives the Property pursuant to the Purchase Agreement, namely "AS IS, WITH ALL FAULTS", as further described in Sections 4.2.3 and 4.3 of the Purchase Agreement; provided, however, that the Agency may, in its sole discretion after obtaining the prior written consent of Developer, which consent shall not be unreasonably withheld, conditioned or delayed, remove any physical improvements currently located on the Property. (b) Title Condition. The condition of title (including liens, easements, encumbrances, covenants, conditions, and restrictions) in which the Agency conveys the Property to the Developer will be the same condition in which the Agency receives the Property pursuant to the Purchase Agreement. 4 N:WGItkAdminWorkFileslConfidentiatl9-21-09 Dittos AgreementIDOC (c) Reports. At the time of conveyance of the Property by the Agency to the Developer, the Agency shall assign, by instrument reasonably acceptable to the Developer, the Agency's rights, title and interest in and to the Reports (as defined in the Purchase Agreement), which rights, title and interest have previously been assigned by the Buyer to the Agency pursuant to the Assignment Agreement. Section 2.3 Preliminary Proposal; Proposed Term Sheet. Within the time set forth in the ERNA Schedule, the Developer shall prepare and submit to the Agency a preliminary proposal (the "Preliminary Proposal") that contains the elements set forth in the attached Exhibit C. The design components of the Preliminary Proposal shall serve as the basis for the Initial Community Workshop (as defined and described in Section 2.5 below) and for input by the Agency Board. During the course of preparation of the Preliminary Proposal, the Developer and the applicable members of the Development Team shall confer with and consider in good faith the input of Agency staff regarding the scope and content of the Preliminary Proposal. Within the time set forth in the ERNA Schedule, Agency staff shall provide the Developer with: (a) formal comments regarding the Preliminary Proposal, taking into account the input received at the Initial Community Meeting and from the Agency Board, as well as the technical input from the Agency's consultants for the Project; (b) a proposed term sheet (the "Proposed Term Sheet") containing proposed business and financial terms as a starting point for negotiation of the DDA; and (c) approval or disapproval of the proposed civil engineer and landscape . architect for the Development Team, for which the Agency's approval shall not be unreasonably withheld. Section 2.4 Refined Proposal. Within the time set forth in the ERNA Schedule, the Developer shall submit a refined proposal for the Project (the "Refined Proposal"). The Refined Proposal shall: (a) be a focused refinement of Preliminary Proposal; (b) contain the elements set forth in the attached Exhibit D; and (c) take into account the results of the Initial Community Workshop and any Agency Board comments regarding the Preliminary Proposal, the comments of Agency staff and consultants regarding the Preliminary Proposal, the Developer's response to the Proposed Term Sheet, and the negotiations to date. The design elements of the Refined Proposal shall serve as the basis for the Second Community Workshop (as defined in Section 2.5 below). During the course of preparation of the Refined Proposal, the Developer and the applicable members of the Development Team shall confer with and consider in good faith the input of Agency staff regarding the scope and content of the Refined Proposal. To facilitate preparation of the Refined Proposal, the Agency shall convene a meeting or meetings between the Developer and knowledgeable representatives of the Town departments that would review any formal development application for the Project, to obtain input from such representatives of 5 N:1iVMGRUdminWorkFilcs\Con£dentia114-21-09 Dittos Agreement2.DOC illustrative types of general Town development standards and conditions that would typically apply to projects of a scope and nature similar to the proposed Project. Within the time set forth in the ERNA Schedule, Agency staff shall provide the Developer with formal comments regarding the Refined Proposal, taking into account the input received at the Second Community Workshop and from the Agency Board, as well as the technical input from the Agency's consultants for the Project. The Refined Proposal and the Agency's comments thereon shall serve as the basis for further negotiations of the DDA. Section 2.5 Community En a ement. The Agency and Developer shall confer and seek agreement on an appropriate strategy to obtain input from community members regarding both the Preliminary Proposal and the Refined Proposal. At a minimum, the Developer shall take the lead in noticing and conducting an initial public workshop (the "Initial Conu-nunity Workshop") to solicit community input following submittal of the Preliminary Proposal in accordance with Section 2.3 and within the time set forth in the ERNA Schedule, and a second public workshop (the "Second Community Workshop") to solicit community input following submittal of the Refined Proposal in accordance with Section 2.4 and within the time set forth in the ERNA Schedule. The Initial Community Workshop and the Second Community Workshop shall be noticed to all property owners and occupants in the vicinity of the Property. Section 2.6 Purchase Price for the Property; Agency Financial Contribution. The Agency and the Developer shall seek to agree upon the purchase price for the Property, and the nature, timing and amount of any Agency financial contribution to the Project. The Agency and the Developer shall seek to agree upon a purchase price and any Agency financial contribution based on an "open book" pro forma financial analysis of the Project, using the financial information contained in the Preliminary Proposal and the Refined Proposal, as well as analysis of such financial information by Agency staff and consultants, and other relevant information. It is the parties' intent that any mutually acceptable Agency financial contribution to be included in a DDA shall be in a form or forms authorized for funding by the Agency pursuant to the California Community Redevelopment Law. The proposed purchase price shall be subject to confirmation and refinement pursuant to the formal reuse valuation and the noticed hearing and Town Council finding process to be conducted in accordance with Health and Safety Code Section 33433, as further described in Section 2.9 below. Section 2.7 Reports; Treatment of Documents Upon Termination. (a) Reports. Unless otherwise waived by the Agency, the Developer shall provide the Agency with copies of all reports, studies, analyses, plans, correspondence and similar documents, but excluding financial or confidential or proprietary information, prepared or commissioned by the Developer with respect to this Agreement and the Project, promptly upon their completion. While desiring to preserve its rights with respect to treatment of certain. information on a confidential or proprietary basis, the Developer acknowledges that the Agency will need sufficient, detailed information about the proposed Project (including, without limitation the financial information to be contained in the Preliminary Proposal (as further 6 N:1MGR1AdminworkPileslCon£dentiall9-21-09 Dittos AgreementIDOC provided in Exhibit C) and the Refined Proposal (as further provided in Exhibit D)) to make informed decisions about the content and approval of the DDA. The Agency will work with the Developer to maintain the confidentiality of proprietary information subject to the requirements imposed on the Agency by the Public Records Act (Government Code Section 6253 et seq.). The Developer acknowledges that the Agency may share information provided by the Developer of a financial and potential proprietary nature with third party consultants and Agency Boardmembers as part of the negotiation and decision making process, it being understood that such third party consultants and Agency Boardmembers shall be under the same requirements and standards as set forth above in this subsection (a). (b) Treatment of Documents Upon Termination. If this Agreement is terminated without the execution of a DDA, the Agency shall return to the Developer any information submitted by the Developer under this Agreement (and the Agency may, at its cost, prepare and maintain copies of such information). Section 2.8 CEQA Review. Within the time set forth in the ERNA Schedule, the Agency (in consultation with the Town) shall determine the type of documentation required pursuant to CEQA for the processing of the DDA and the land use entitlements for the Project, and shall specify in writing the type and scope of any such CEQA documentation (the "CEQA Document"), the identity of the proposed preparer of the CEQA Document (consultant or staff), and the not-to-exceed budget for preparation of the CEQA Document (the "Budget"). The Developer shall reasonably assist the Agency in its determination by providing information about the Project, as requested. The Agency shall seek and consider in good faith the Developer's input regarding the need for and scope of any CEQA Document, and the proposed preparer of and Budget for any such CEQA Document. The Agency may, from time to time, make reasonable modifications to the Budget upon prior consultation with the Developer and good faith consideration of the Developer's input regarding such Budget modifications. The Agency (in cooperation with the Town) shall cause preparation of the CEQA Document as promptly as possible consistent with satisfaction of state and local CEQA guidelines for the preparation of the CEQA Document. So long as the Developer and the Agency staff have otherwise concurred upon the terms of a proposed DDA for presentation to the Agency Board and the Town Council, the parties shall cooperate in good faith to establish any reasonably necessary modifications to the ERNA Schedule and any reasonably necessary extension to the Negotiating Period in accordance with Section 1.2 to accommodate the time necessary to complete the CEQA Document for consideration by the Agency Board and the Town Council in connection with their consideration of approval of a DDA. The Developer shall pay the Agency's reasonable costs of preparation of the CEQA Document consistent with the Budget. Concurrently with the closing and funding of Developer's pre-development financing or construction financing for the Property, and provided that the Agency shall have submitted one or more invoices approved for payment by the Agency in connection with preparation of the CEQA Document, the Developer shall pay to the Agency the invoiced amount(s) up to the aggregate not-to-exceed amount set forth in the Budget. Section 2.9 Section 33433 Report. If the Developer and Agency staff concur upon the terms of a proposed DDA for presentation to the Agency Board and the Town Council, the 7 N:1MGR\Adminworkl~iles\Confidentiall9-21-09 Dittos Agreement2.DOC Agency shall prepare the necessary documentation pursuant to Section 33433(a)(2)(B) of the California Health and Safety Code (the "Section 33433 Report") to be submitted to the Agency Board and the Town Council in conjunction with the Agency's and the Town Council's consideration of any DDA that results from negotiations pursuant to this Agreement. The Section 33433 report shall contain the estimated value of the Property determined at its highest and best use under the Redevelopment Plan and the estimated value of the Property determined at the use and with the conditions, covenants and development costs required pursuant to the proposed DDA. Section 2.10 Replacement Housing Plan. The Agency shall be responsible for preparing and presenting for consideration of approval by the Agency Board a replacement housing plan (the "Replacement Housing Plan") with respect to any low and moderate income residential units on the Property that may be removed from the community's affordable housing stock as a result of the Project if the DDA is approved and implemented. The Replacement Housing Plan shall be prepared and presented for consideration of approval in the manner and within the time set forth in Health and Safety Code Section 33413.5. The parties contemplate that the Replacement Housing Plan will designate affordable residential units in the Project (if the DDA is approved) to serve as the replacement housing units for any low and moderate income residential units currently on the Property that are removed. Nothing in this Agreement shall constitute a representation, warranty, or covenant by the Agency that it will approve any particular form of Replacement Housing Plan. Section 2.11 Progress Reports. From time to time as reasonably agreed upon by the parties, each party shall make oral or written progress reports advising the other party on studies being made and matters being evaluated by the reporting party with respect to this Agreement and the Project. ARTICLE 3. GENERAL PROVISIONS Section 3.1 _Limitation on Effect of Agreement. This Agreement shall not obligate either the Agency or the Developer to enter into a DDA or to enter into any particular DDA. By execution of this Agreement, the Agency is not committing itself to or agreeing to undertake any conveyance, disposition, or use of the Property. Execution of this Agreement by the Agency is merely an agreement to conduct a period of exclusive negotiations in accordance with the terms hereof, reserving for subsequent Agency and Town Council action the final discretion and approval regarding the execution of a DDA and all proceedings and decisions in connection therewith. Any DDA resulting from negotiations pursuant to this Agreement shall become effective only if and after such DDA has been considered and approved by the Agency Board and, if required by law, the Town Council, following conduct of all legally required procedures, and executed by duly authorized representatives of the Agency and the Developer. Until and unless a DDA is signed by the Developer, approved by the Agency Board, and executed by the Agency, no agreement drafts, actions, deliverables or communications arising from the performance of this Agreement shall impose any legally binding obligation on either party to enter into or support entering into a DDA or be used as evidence of any oral or implied agreement by either party to enter into any other legally binding document. S N:1MGR1AdminWorkFiles\Confidentiall9-21-09 Dittos AgreementIDOC Section 3.2 Notices. Formal notices, demands and communications between the Agency and the Developer shall be sufficiently given if, and shall not be deemed given unless, dispatched by certified mail, postage prepaid, return receipt requested, or sent by express delivery or overnight courier service, to the office of the parties shown as follows, or such other address as the parties may designate in writing from time to time: Agency: Redevelopment Agency of the Town of Los Gatos Town Hall 101 E. Main Street Los Gatos, CA 95030 Phone: (408) 354-6867 Attention: Bud Lortz Developer: Dittos Lane Family Housing, L.P. ROEM Development Corporation 1650 Lafayette Street Santa Clara, CA 95050 Phone: (408) 984-5600, Attention: Jonathan Emami With a copy to: Cox, Castle & Nicholson LLP 555 California Street, 10th Floor San Francisco, CA 94104-1513 Phone: (415)262-5175 Attention: Stephen Ryan & Lisa Weil Such written notices, demands and communications shall be effective on the date shown on the delivery receipt as the date delivered or the date on which delivery was refused. Section 3.3 Waiver of Lis Pendens. It is expressly understood and agreed by the parties that no lis pendens shall be filed against any portion of the Property with respect to this Agreement or any dispute or act arising from it. Section 3.4 Costs and EXpenses. Each party shall be responsible for its owns costs and expenses in connection with any activities and negotiations undertaken in connection with this Agreement, and the performance of each party's obligations under this Agreement. As further provided in Section 2.8, the Developer shall pay the costs of preparation of the CEQA Document. Section 3.5 No Commissions. The Agency shall not be liable for any real estate commissions or brokerage fees that may arise from this Agreement or any DDA that may result from this Agreement. The Agency represents that it has engaged no broker, agent or finder in connection with this transaction, and the Developer shall defend and hold the Agency harmless from any claims by any broker, agent or finder retained by the Developer. Section 3.6 Defaults and Remedies. 9 1`1:1MGRIAdminworkFileslConfidentia119-21-09 Dittos Agreement2.DOC (a) Default. Failure by a party to negotiate in good faith as provided in this Agreement, failure by a party to meet a deadline for performance of an action as set forth in this Agreement (with particular reference to Exhibit B, the ERNA Schedule), or failure by a party to observe any other material provision of this Agreement shall constitute an event of default hereunder. The non-defaulting party shall give written notice of a default to the defaulting party, specifying the nature of the default and the required action to cure the default. If a default remains uncured ten (10) days after receipt by the defaulting party of such notice, the non-defaulting party may exercise the remedies set forth in subsection (b). (b) Remedies. In the event. of an uncured default by the Agency, the Developer's sole remedy shall be to terminate this Agreement, upon which termination the Developer shall be entitled to the return of the Deposit and any interest earned thereon. Following such termination and the return of the Deposit and any interest earned thereon, neither party shall have any further right, remedy or obligation under this Agreement; provided, however, that the Developer's obligations pursuant to Sections 3.3 and 3.5 shall survive such termination. In the event of an uncured default by the Developer, the Agency's sole remedy shall be to terminate this Agreement and to retain the Deposit and any interest earned thereon. Following such termination, neither party shall have any right, remedy or obligation under this Agreement; provided, however, that the Developer's obligation pursuant to Sections 3.3 and 3.5 shall survive such termination. Except as expressly provided above, neither party shall have any liability to the other for damages or otherwise for any default, nor shall either party have any other claims with respect to performance under this Agreement. Each party specifically waives and releases any such rights or claims they may otherwise have at law or in equity. The parties agree that, based.upon the circumstances now existing, both known and unknown, it would be impractical or extremely difficult to establish the damages to the non-defaulting party by reason of a default by the defaulting party. Therefore, it would be reasonable at the termination of this Agreement pursuant to this subsection (b) to award the non- defaulting party "liquidated damages" equal to the Deposit (or, where the Developer is the non- defaulting party, return of the Deposit) plus all accrued interest as the sole and exclusive remedy of the non-defaulting party. Section 3.7 Attorneys' Fees. The prevailing party in any action to enforce this Agreement shall be entitled to recover attorneys' fees and costs from the other party. Section 3.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Section 3.9 Entire Agreement. This Agreement constitutes the entire agreement of the parties regarding the subject matters of this Agreement. 10 N:1MGR1Ad€ninWorkFileslConfidentiall9-21-09 Dittos Agreement2.DOC Section 3.10 Assigrim The Developer may not transfer or assign any or all of its rights or obligations under this Agreement without the Agency's prior written approval. Any such attempted transfer or assignment in violation of the preceding sentence shall be void. Section 3.11 No Third Party Beneficiaries. This Agreement is made and entered into solely for the benefit of the Agency and the Developer and no other person shall have any right of action under or by reason of this Agreement. Section 3.12 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same agreement. Section 3.13 Actions By The Ageric . Except with respect to the ultimate approval of the DDA and the making of any statutorily required findings in connection with DDA approval (which ultimate approval and statutory findings may be made exclusively by the Agency Board and the Town Council), whenever this Agreement calls for or permits the approval, consent, authorization or waiver of the Agency, the approval, consent, authorization, or waiver of the Agency Executive Director or the Executive Director's designee shall constitute the approval, consent, authorization or waiver of the Agency without further action of the Agency Board. Section 3.14 Authority. Each party represents and warrants to the other that the signatory below has full authority to execute this Agreement on behalf of such party, and that this Agreement constitutes the valid and binding obligation of such party. 11 N:1MGR1AdminWorkFiles\Contidentiall9-21-09 Dittos AgreemenfIDOC IN WITNESS WHEREOF, this Agreement has been executed, in triplicate, by the parties on the date first above written. APPROVED AS TO FORM: DEVELOPER: DI T T OS LANE FAMILY HOUSING, L.P., a California limited partnership By: Name: Title: By: Name: Title: AGENCY: REDEVELOPMENT AGENCY OF THE TOWN OF LOS GATOS, a public body corporate and politic By: By: Orry Korb, Agency Counsel I L5 M [1737087.4 12 Greg Larson, Executive Director EXHIBIT A LEGAL DESCRIPTION OF THE PROPERTY The Property referred to in the Agreement to which this Exhibit A is attached is situated in the State of California, County of Santa Clara, Town of Los Gatos and is described as follows: BEGINNING at a point in the Easterly line of Wilcox Street (formerly Swain's Lane), distant thereon 3 chains and 4 links Southerly from the Southerly line of Main Street; running thence Southerly along said Easterly line of Wilcox Street, 120 feet to the North fine of a road; thence along the Northerly line of said Road, S. 80 1/20 W. 27 links; thence S. 2 1/4° E. 15 links; thence along the Southerly line of College Avenue (also called Jones Road) S. 75° 5'W. 3 chains and 36 1/2' links; S. 14 1/20 E. 42 links and S. 77 1/2" W. 2 chains and 84 links to a stake marked "C10", standing in the Westerly fence line of said College Avenue (or Jones Road); thence along said Westerly fence line S. 25 1/20 W. 2 chains and 56 links to a stake marked "D.1" and "L.M.C.1", thence along said Westerly line of said College Avenue or Jones Road (also known as Wilcox Lane or Road), S. 341 30'W. 1 chain and 4 links to a 4" x 4" post marked "W.C.C.12", standing in the Northeasterly line of the 2 acre tract of land conveyed by Francis S. Spencer, Trustee, to Edward Ditto by Deed dated March 21, 1882 and recorded in Book 69 of Deeds, page 491; thence along said last named line S. 31145' E. 30 feet, more or less, to the intersection with the most Easterly line of said Wilcox Lane or Road (or College Avenue or Jones Road); thence Southwesterly along said line of said Wilcox Lane or Road to its intersection with the line between said above mentioned 2 acre tract formerly of Edward Ditto and the 6.20 acre tract of land conveyed by said Francis E. Spencer, Trustee to James L. Woodard, by Deed dated November 22, 1881 and recorded in Book 62 of Deeds, page 143; thence along and beyond said last mentioned line N. 34° 15'W. 260 feet, more or less, to a 4" x 4" fence post marked "D10", standing in the fence in the Northerly line of the Old Flume reservation of the Los Gatos Manufacturing Company; thence along said fence line N. 84° 40' E. 1 chains and 33 links to a V' x 4" fence post marked "D9", N. 76° 20' E. 241/2 links to a 4P x 4" fence post marked "D8", N. 680 20' E. 49 1/2 links to a 4" x 4" fence post marked "D7, N. 610 E. 49 links to a 4" x 4" fence post marked "D6", N. 570 E. 73 links to a 4" x 4" fence post marked "D5", and N. 69° E. 24 links to a 4" x T' fence post marked "D4"; thence along the Northerly line of said old flume reservation, N. 74° E..23 links to a stake marked "D3" standing in the Northerly line of said old flume reservation; thence S. 310 45' E. 8 feet to a 4`.' x 4" stake standing in the Southerly line of said old flume reservation of the Los Gatos Manufacturing Company and at the Northernmost corner of said 2 acre tract of land formerly of Edward Ditto, thence along said Southerly line of said old Plum reservation N. 43° 45' E. 97 1/2 links to a stake marked "D2" and "L.M.C.2", standing in the said Southerly line of said old flume reservation; thence N. 43 3/4° E. 3 chains 72 1/2 links to a stake in a mound marked "C14", standing in the Northerly line of Ditto's Lane; thence along the Northerly line of said Lane N. 60 1/2° E. 84 links, N. 76 1/21 E. 1 chains and 45 links and N. 73 1/41 E. 3 chains and 98 links to a point in the said Easterly line of Wilcox Street; and thence Southerly along said Easterly line of Wilcox Street, 35 links to the point of beginning, being a portion of the Rancho Rinconada de Los Gatos. Exceptint therefrom all that portion thereof which lies on the Southerlyside of said Southerly line of said Wilcox Lane or Road, (or College Avenue or Jones Road). ALSO EXCEPRING THEREFROM that portion described in the Deed from Grace M. Crim to Town of Los Gatos, A Municipal Corporation, dated June 17, 1938, Recorded June 23, 1938 in Book 878 of Official Records, Page 524, as follows: Beginning at a point in the Westerly line of Wilcox Street, from which the Northeasterly corner of that certain tract deeded to Grace M. Crim by Sarah c. Crim by Deed dated August 8, 1928 and Recorded in Book 414 Official Records, Page 462, bears North 4° 47' West 69.80 feet along the Westerly line of Wilcox Street and running thence along a curve to the right having a radius of 69.30 feet through an.arc, the course and distance of the chord being South 35° 09' West 88.96 feet to a point on the Northerly line of College Avenue (or Jones Road); and running thence along the Northerly ine of College Avenue, North 75° 05' East 39.80 feet; thence North 211 15' West 9.90 feet and North 80130' East 17.82 feet to a point on the Westerly line of Wilcox Street, and running thence along the Westerly line of Wilcox Street, North 40 47' West 50.20 feet to the point of begeinning, being a portion of the above mentioned tract deeded to Grace M. Crim. EXCEPTING THEREFROM that portion thereof conveyed by Sophia C. Skendzel to State of California, by Deed dated June 7, 1954 and recorded August 9, 1954 in Book 2933 of Official Records, page 648, Recorder's File No. 997130, described as follows, to wit: A-1 115110[ 1737087.4 B(HIBIT "A" (continued) Title No. 09-98204756-B-MC Locate No. CAC 17743-7743-2982-0098204756 COMMENCING at the most Westerly corner of that certain parcel of land described in the Deed to Sophia C. .Skendzel, recorded September 12, 1952 in Book 2486, at page 15, Official Records of Santa Clara County, being on the property line common to the lands now or formerly of Sophia C. Skendzel and of San Jose Water Works, a corporation; thence along said common property line S. 330 20' 15" E. 21.12 feet to the property line common to the lands now or formerly of Sophia C. Skendzel and of Louis Casalegno; thence along last said common property line S. 33° 20' 15" E. 14.15 feet; thence N. 520 50'45" E. 57.09 feet to the property line common to the lands now or formerly of Sophia C. Skendzel and of Lino Spediaccl, et al; thence along lastsaid common property line S. 851 34' 45" W. 65.08 feet to the point of commencement. ALSO EXCEPTING THEREFROM that portion thereof, described as follows: BEGINNING at a point in the Easterly line of Wilcox Street (formerly Swain's Lane) distant thereon 3 chains and 4 links Southerly from the Southerly line of Main Street; thence along said Easterly line of Wilcox Street, S. 3° 11' E. 120.00 feet to the North line of a road; thence along the Northerly line of said road, S. 800 30' W. 17.82 feet; thence S. 21 15' E. 9,90 feet; thence along the Southerly line of College Avenue (also formerly called Jones Road); S. 750 05' W. 222.09 feet, thence running S. 141 30' E. 27.72 feet; thence S. 770 30' W. 147.48 feet; thence running N. 350 47' 05" W. 126.41 feet to a point in the Northerly line of Ditto's Lane, thence along the Northerly line of said Lane and the Easterly prolongation thereof N. 430 45' E. 60.67 feet; N. 600 30' E. 55.44 feet, N. 76° 30' E. 95.70 feet and N. 731 15' E. 262.68 feet to a point in the Easterly line of Wilcox Street; thence along said Easterly line S. 30 11' E. 23.10 feet to the point of beginning, being a portion of the Rancho Rinconada de Los Gatos. ALSO EXCEPTING THEREFROM that portion thereof conveyed by Heman D. Childs, et ux, to John Siracusa, et ux, by Deed dated December 30, 1963 and recorded April 24, 1964 in Book 6476 of Official Records, at page 281, described as follows, to wit. BEGINNING at the most Westerly corner of that certain parcel of land described in the Deed from Heman D. Childs, et ux, to First Baptist Church of Los Gatos, Inc., a California corporation, dated June 12, 1961 and recorded June 30, 1961 in Book 5216 of Official Records, at page 42, Santa Clara County Records; running thence along the Southwesterly line of said parcel of land, S. 3611 38' 08" E. 79.95 feet to the point of intersection thereof with the existing Northwesterly line of College Avenue; running thence along said Northwesterly line of College Avenue S. 69° 00'22" W. 11.27 feet to an angle point therein; thence running still along the Northerly line of said College Avenue, S. 24° 38' 57" W. 175.00 feet; thence leaving said line and running N. 18° 39' 14" W. 143.51 feet to a point in the Southeasterly line of that certain 1.329 acre parcel of land conveyed by Edward C. Bocci, et ux, to State of California, by Deed dated June 10, 1954 and recorded September 21, 1954 in Book 2963 of Official Records, at.page 416, Santa Clara County Records; thence running along said last named line, N. 41° 50' E. 122.50 feet to the point of beginning and being a portion of the Rancho Rinconada de Los Gatos, APN. 529-29-034 A-2 11511011737087.4 EXHIBIT B ERNA SCHEDULE This ERNA Schedule summarizes the schedule for various activities under the Exclusive Right to Negotiate Agreement (the "Agreement") to which this exhibit is attached. The description of items in this ERNA Schedule is meant to be descriptive only, and shall not be deemed to modify in any way the provisions of the Agreement to which such items relate. Section references herein to the Agreement are intended merely as an aid in relating this ERNA Schedule to other provisions of the Agreement and shall not be deemed to have any substantive effect. Whenever this ERNA Schedule requires the submission of plans or other documents at a specific time, such plans or other documents, as submitted, shall be complete and adequate for review by the Agency within the time set forth herein. Prior to the time set forth for each particular submission, the Developer shall consult with Agency staff informally as necessary concerning such submission in order to assure that such submission will be complete and in a proper form within the time for submission set forth herein. Time periods expressed in days in this ERNA Schedule refer to calendar days. This ERNA Schedule may be modified as provided in Section 2.1 of the Agreement. DATE ACTION Within 30 days after the The Developer shall submit the Preliminary Proposal to the Effective Date Agency. (Section 2.3) Within 14 days after submittal The Developer shall conduct the Initial Community of the Preliminary Proposal Workshop. (Section 2.3 and 2.5) Within 30 days after submittal The Agency shall provide the Developer with written of the Preliminary Proposal comments on the Preliminary Proposal (including a Proposed Term Sheet). (Section 2.3) Within 60 days after the The Developer shall submit the Refined Proposal to the Agency provides written Agency. (Section 2.4) comments on the Preliminary Proposal Within 7 days following The Developer shall conduct the Second Community submittal of the Refined Workshop. (Sections 2.4 and 2.5) Proposal Within 30 days after receipt of The Agency shall provide the Developer with written the Refined Proposal comments on the Refined Proposal. (Section 2.4) B-1 11511011737087.4 DATE ACTION At the time the Agency The Agency shall advise the Developer regarding the provides written comments on preparation of any CEQA Document and the Budget for such the Preliminary Proposal CEQA Document. The Agency shall commence preparation of any required CEQA Document. (Section 2.8) 270 days after the Effective Expiration of the Negotiating Period, unless extended in Date accordance with Section 1.2. B-2 1151\0i\737087.4 EXHIBIT C PRELIMINARY PROPOSAL CONTENTS The Preliminary Proposal referred to in Section 23 of this Agreement shall include the following elements: 1. Conceptual Site Plan, A conceptual site plan including building footprints with square footages, designation of uses, location/number of parking spaces (including handicapped spaces), points of ingress and egress, physical connections to adjacent areas, etc. 2. Photo Montage of Design Concepts. A photo montage of developments of a similar design character and quality to. that envisioned for the Project, showing illustrative examples of: building types; massing; building articulation; exterior and interior design features, materials and quality; parking and public space features and quality; and other physical characteristics that are envisioned for the Project. The photo montage shall be sufficiently detailed and shall be an accurate representation of the proposed physical development quality of the Project in relation to the estimated total development cost amounts shown in the conceptual development pro-forma described in Item 5 below. 3. Written Project Description. A narrative description of the preliminary building/development program including: a) the type, scale (building height), size, uses, and quality level (including preliminary outline specifications, sample materials for facade treatment, etc.) of the proposed development; b) amount/allocation of on-site parking; c) proposed project amenities and features; and d) the proposed role requested of the Agency, if any. 4. Affordable Housing Units. A description of the number, income affordability levels, and unit types (e.g., number of bedrooms) for the proposed affordable residential units in the Project. 5. Conceptual Project Pro-forma. A development pro-forma that includes estimated land, relocation, predevelopment, direct construction (building, on-site and off-site improvements), indirect and financing costs, projected revenues, and estimated operation costs, based on the physical design features and quality described in Elements 1-3 above. b. Financing Plan. A preliminary financing plan, consistent with the Conceptual Pro-forma described in Element 5 above, that identifies proposed sources/uses of fiends including estimated debt, equity, and Agency assistance if required (nature, amount, and justifications) for the Project, and that describes investor's proposed rate of return. The proposed sources of debt and equity need not identify specific lenders or equity sources, but shall instead include a discussion of the types of debt and equity that the Developer believes may be accessed for the Project, as well as the Developer's approach and timing for obtaining such debt and equity. 7. Proposed Schedule of Performance. A preliminary schedule that reflects a reasonable timeline for development of the Project once a DDA has been approved, including C-1 1151\01\737087.4 predevelopment activities (e.g., procurement of entitlements and permits, financing, construction plans and contract, etc.), commencement of construction, and completion of construction. 8. Development Team Member. The identity and professional information about the civil engineer proposed to join the Development Team, as further discussed in Section 1.5. C-2 11511011737087.4 EXHIBIT D REFINED PROPOSAL CONTENTS The Refined Proposal referred to in Section 2.4 of this Agreement shall include the following elements as a refinement of the Preliminary Proposal, and taking into account the results of the Initial Community Workshop and any Agency Board comments regarding the Preliminary Proposal, the comments of Agency staff and consultants regarding the Preliminary Proposal, and the negotiations to date. 1. Engineered Site Plan. An engineered site plan including building footprints with square footages, designation of uses, location/number of parking spaces (including handicapped spaces), footprints for streets, and open spaces, points of ingress and egress, physical connections to adjacent areas, etc. 2. Conceptual Elevations. Illustrative examples of building exterior elevations with details of building features, qualities and articulations. 3. Written Project Description. As a refinement to Element 3 of the Preliminary Proposal, a revised and updated narrative description of the building/development program including: a) the type, scale (building height), size, uses, and quality level (including preliminary outline specifications, sample materials for facade treatment, etc.) of the proposed development; b) amount/allocation of on-site parking; and c) proposed project amenities and features. 4. Affordable Housing Units. As a refinement to Element 4 of the Preliminary Proposal, a revised and updated description of the overall proposed affordable residential unit strategy for the proposed Project including; a) the number, affordability levels, and unit types (e.g., number of bedrooms) for the proposed affordable rental units; and b) the proposed approach that would be used to attract/secure qualified resident households for the affordable units. 5. Detailed Project Pro-forma. As a refinement to Element 5 of the Preliminary Proposal, a refined and updated development pro-forma that takes into account the information from Elements 1-4 above, and includes estimated land, relocation, predevelopment, direct construction (building, tenant improvements, on-site and off-site improvements), indirect and financing costs, projected revenues and estimated operation costs. 6. Financing Plan. As a refinement to Element 6 of the Preliminary Proposal, a refined and updated financing plan, consistent with the Detailed Pro-forma described in Element 5 above, that identifies proposed sources/uses of funds including estimated debt, equity, and Agency assistance if required (nature, amount, and justifications) for the Project, describes investor's proposed rate of return, and includes letters of interest from qualified prospective debt and equity providers that the Developer has done business with before and who have expressed interest, or who are likely to have interest, in the providing capital for the Project. 7. Proposed Schedule of Performance. As a refinement to Element 7 of the Preliminary Proposal, a refined and updated schedule that reflects a reasonable timeline for development of the Project once a DDA has been approved, including predevelopment activities, commencement of construction, and completion of construction. 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