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Staff Reporttawx pF MEETING DATE: 12/15/15 ITEM NO. r i COUNCIL AGENDA REPORT 8 6RtSS DATE: DECEMBER 8, 2015 TO: MAYOR AND TOWN COUNCIL FROM: ROBERT SCHULTZ, TOWN ATTORNE SUBJECT: ADOPT A RESOLUTION APPROVING A PURCHA E AND SALE AGREEMENT FOR THE REPURCHASE OF AN AFFORDABLE HOUSING UNIT SUBJECT TO AN EXISTING BELOW MARKET PRICE (BMP) FIRST RIGHT OF REFUSAL OPTION, LOCATED AT 108 SIERRA LINDA, LOS GATOS, CA, APN 407 -17 -035, AND AUTHORIZING THE TOWN MANAGER TO NEGOTIATE AND EXECUTE ALL AGREEMENTS AND DOCUMENTS NECESSARY AND APPROPRIATE TO EFFECTUATE THE PRESERVATION OF THE AFFORDABLE HOUSING UNIT RECOMMENDATION: Adopt a resolution approving a Purchase and Sale Agreement for the repurchase of an affordable housing unit subject to an existing Below Market Price (BMP) First Right of Refusal Option, located at 108 Sierra Linda, Los Gatos, CA, APN 407 -17 -035, and authorizing the Town Manager to negotiate and execute all agreements and documents necessary and appropriate to effectuate the preservation of the affordable housing unit (Attachment 1). BACKGROUND: The property, 108 Sierra Linda, is a 2- bedroom 1.5 -bath townhome that is listed in the Town's BMP Housing Program inventory and is subject to an existing first refusal right to purchase option in the Deed Restriction recorded in December 2007. The unit was originally purchased for $237,300. In June 2011, the Town provided a second mortgage loan (in the amount of $8,011.30) to the homeowner to prevent the foreclosure of the home. This loan directly paid off the homeowner's overdue Homeowner Association (HOA) dues. PREPARED BY: ROBERT SCH Town Attorney Reviewed by: Town Manager Assistant Town Manager � inance PAGE 2 MAYOR AND TOWN COUNCIL SUBJECT: 108 SIERRA LINDA DECEMBER 8, 2015 BACKGROUND (Cont'd): In July 2015, the Town was informed by the homeowner that the lender had recorded a Notice of Default and had initiated the formal foreclosure process for this property due to lack of payment. The Town notified the lender and the loan servicer that it intended to exercise the option to purchase in advance of any trustee sales proceedings and has requested a loan payoff demand calculation. Since July, staff has been researching potential alternatives to preserve the affordable housing unit, resolve the lender's foreclosure, and provide the homeowner with other housing options. On December 3, 2015, the Town opened an escrow account with Old Republic Title Company for the purchase and sale of the property. The escrow is scheduled to close on December 28, 2015. DISCUSSION: Adoption of the recommended resolution achieves three objectives: I) preserving of the affordable housing unit, 2) resolving foreclosure /repayment of lenders, and 3) providing the homeowner other options for housing. If the Town's does not exercise its option to preserve the affordable housing unit, the lender would foreclose on this unit on December 31, 2015 in order to recoup the investors' funds that were used to finance the property. If the foreclosure is completed as a Trustee Sale, the lender's loan would be repaid from the sales proceeds but the Town would be entitled to all excess proceeds after repayment of the first mortgage based on to the terms of the recorded Deed Restriction. This however, would also result in the loss of the affordable unit. Under the terms of the Purchase and Sale Agreement (Exhibit A to Attachment 1), the Town would repurchase the unit from the owner for $360,000. At Close of Escrow on December 28, 2015, the title company will disburse payments for the following items from the sales proceeds: • Repayment of first mortgage loan balance, penalties and interest (approximately $325,000) • Payment of HOA dues in arrears (approximately $27,000) • Payment of I" and 2 °a installment of property taxes (approximately $3,700) • Payment of title insurance and closing costs (approximately $4,000) In addition, the homeowner will be offered a move out incentive of $5,000 which can be used as a resource to obtain other housing in the County. The Town will work with Hello Housing, the new BMP Program contract administrator, to refurbish the unit and sell it to another qualified buyer at the earliest opportunity. PAGE 3 MAYOR AND TOWN COUNCIL SUBJECT: 108 SIERRA LINDA DECEMBER 8, 2015 CONCLUSION: Adoption of the resolution will allow the Town to achieve the objectives o£ 1) preservation of the affordable housing unit, 2) resolution of the foreclosure /repayment of lenders, and 3) providing the homeowner other options for housing. The prepared Purchase and Sale Agreement will allow staff to complete the repurchase of the BMP unit by December 28, 2015. Staff recommends adoption of the prepared resolution (Attachment 1). FISCAL IMPACT: The Town will expend approximately $360,000 from the BMP Housing In -lieu Fee Fund to repurchase this unit. Sufficient funds are available in the BMP Housing In -lieu Fee Fund for the acquisition and refurbishment expenses (approximately $10,000) and these expenditures will be partially reimbursed upon sale of the unit to another income qualified BMP buyer. Attachments: 1. Draft Resolution w/ Purchase and Sale Agreement and Joint Escrow Instructions RESOLUTION 2015- RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS APPROVING A PURCHASE AND SALE AGREEMENT FOR THE REPURCHASE OF AN AFFORDABLE HOUSING UNIT SUBJECT TO AN EXISTING BELOW MARKET PRICE (BMP) FIRST RIGHT OF REFUSAL OPTION, LOCATED AT 108 SIERRA LINDA, LOS GATOS, CA, APN 407 -17 -035, AND AUTHORIZING THE TOWN MANAGER TO NEGOTIATE AND EXECUTE ALL AGREEMENTS AND DOCUMENTS NECESSARY AND APPROPRIATE TO EFFECTUATE THE PRESERVATION OF THE AFFORDABLE HOUSING UNIT. WHEREAS, the Town of Los Gatos Zoning Ordinance Sections 29.10.3000 through 29.10.2040 establishes a Below Market Price (BMP) Housing Program to assist low and moderate income Los Gatos citizens purchase homes at prices below market value; and WHEREAS, the residential unit located at lo8 Sierra Linda was purchased as a BMP unit by the property owner through the BMP Housing Program for a reduced sales price that is affordable to lower income households; and WHEREAS, the BMP Housing Program requires as a condition of participation that a Deed Restriction with a First Right of Refusal Option for the Town to be able to repurchase units at a future designated sales price be recorded on the title record of BMP units; and WHEREAS, a Deed Restriction with a First Right of Refusal Option was recorded for this BMP unit on March 1, 2005; and WHEREAS, the Town was notified that the property is in foreclosure and will be sold at a foreclosure sale December 31, 2015; and WHEREAS, the Town has indicated it is exercising its First Right Option and purchasing the unit for the designated sales prices of $360,000; and ATTACHMENT 1 WHEREAS, this resolution provides for the acquisition of this BMP unit by the Town of Los Gatos and authorizes the Town Manager to negotiate and execute all agreements and documents necessary and appropriate to effectuate the preservation of the affordable housing unit. NOW, THEREFORE, BE IT RESOLVED, that Town Council of the Town of Los approves a Purchase and Sale Agreement and Joint Escrow Instructions for the purchase of the BMP unit at 108 Sierra Linda shown in Exhibit A. PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los Gatos, California, held on the 15th day of December 2015 by the following vote: COUNCIL MEMBERS: AYES: NAYS: ABSENT: ABSTAIN: SIGNED: ATTEST: MAYOR OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA CLERK ADMINISTRATOR OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA CLERK DEPARTMENT PURCHASE AND SALE AGREEMENT mH AND ORD JOINT ESCROW INSTRUCTIONSC -- -.-� -� RESO THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this "Agreement ") is dated for identification the 7th day of December, 2015, by and between MICHELLE L. SURANOFSKY, a single person, ('Buyer ") and TOWN OF LOS GATOS a California municipal co: individually as a 'Party" poration ( "Seller "). Buyer and Seller are sometimes referred to herein and collectively as the 'Parties." RECITALS A. Seller owns the real property located at 108 Sierra Linda, in the Town of Los Gatos (the "Town "), Santa Clara County ( "County "), California (APN 407 -17 -035), more fully described on Exhibit A ( "Legal Description of the Property "), attached hereto and incorporated herein by this reference (the 'Real Property "). B. Seller agrees to sell the Real Property to Buyer and Buyer agrees to Purchase the Property from Seller in accordance with the conditions set forth in the "Notice of Recorded Deed Restrictions and First Right of Refusal of the Town of Los Gatos" recorded on March 1, 2005 in the County of Santa Clara, Document No.1825674 and on all of the terms, covenants and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the foregoing recitals, the promises and covenants of the Parties in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which the Parties acknowledge, the Parties agree as follows: I. Definitions. Certain capitalized terns used in this Agreement have the meanings defined below: Closine means the date upon which a grant deed is recorded in the Official Records of the County, title to the Property is conveyed to Buyer subject only to the Permitted Exceptions, and possession of the Property is delivered to Buyer, in accordance with the terms of this Agreement. Closine Date shall be December 28, 2015 or such other date as may be mutually agreed to by Buyer and Seller in writing. Effective Date means the date upon which both Buyer and Seller have executed this Agreement, and Buyer has received either a copy or an original of this Agreement as so executed. Escrow means the escrow established pursuant to this Agreement through which the purchase and sale of the Property shall be consummated. -1- EXHIBIT A Escrow Cancellation Charges is defined in Section 10.2. Escrow Holder means Old Republic Title Company having an office at 438 N. Santa Cruz Avenue, Los Gatos, CA 95050. Hazardous Materials is defined in Section 11.6. Improvements means all improvements, structures, and fixtures situated on the Real Property, together with all of Seller's right, title and interest in all parking areas, landscaping, and other improvements, structures, and fixtures. Inspections is defined in Section 4.2. Obiections is defined in Section 4.2. Objection Election Notice is defined in Section 4.2. Objection Notice is defined in Section 4.2. Opening of Escrow is the date on which Escrow is opened under Section 3. Parties and Partv are defined in the first paragraph of this Agreement. Permitted Exceptions means general and special real property taxes and assessments, a lien not yet due and payable; any other liens, easements, encumbrances, covenants, conditions and restrictions of record which are not Disapproved Exceptions as described in Section 4.1 below, unless Buyer waives its disapproval of such Disapproved Exception(s); and any liens, easements, encumbrances, covenants, conditions or restrictions which are created under the signature of Buyer. Personal Propert y means all of Seller's interest in all equipment, furniture, furnishings, machinery, heating, plumbing, ventilation and air conditioning systems and equipment, carpet, tile, floor coverings, security devices, sprinkler systems, leasing files and records, keys, maintenance equipment and supplies and all other tangible personal property situated on the Real Property and used in connection therewith or with the Improvements, but excluding the items listed in Exhibit B attached hereto and incorporated herein by this reference, which items shall remain Seller's property, are not to be conveyed to Buyer under this Agreement, and may be removed from the Real Property by Seller. Propert v is defined in the Recitals to this Agreement. Purchase Price means Three Hundred and Sixty Thousand Dollars ($360,000). Rents means base rent, common area maintenance, parking, tax, insurance and other payments due and payable under any Lease for all or any portion of the Real Property -2- Improvements, together with all sales and other taxes thereon, and all other income generated by all or any portion of the Property. Seller is defined in the first paragraph of this Agreement. Title Company means Old Republic Title Company. Title Policy means a current CLTA owner's title insurance policy with such endorsements as Buyer may reasonably request, in amount equal to the Purchase Price, insuring fee title to the Property vested in Buyer, subject only to the Permitted Exceptions. 2. Purchase and Sale. Seller agrees to sell the Property to Buyer, and Buyer agrees to purchase the Property from Seller, on the terms and conditions set forth herein. 3. Escrow. An escrow account was opened by Town on December 2, 2015. Within two (2) days after the mutual execution of this Agreement by the Parties, the Parties shall deliver an executed copy of this Agreement to Escrow Holder. This Agreement shall constitute joint escrow instructions to Escrow Holder. The Parties shall execute such additional instructions not inconsistent with the provisions of this Agreement which may be reasonably required by Escrow Holder and shall be bound by Escrow Holder's general instructions; provided, however, that as between the Parties, if any conflict between the provisions of this Agreement and the provisions of Escrow Holder's general instructions exists or arises, then the provisions of this Agreement shall control Escrow Holder is designated the "real estate reporting person" for purposes of Section 6045 of the Internal Revenue Code of 1986, as amended, and Treasury Regulation 1.6045 -4, and any instructions or settlement statement prepared by Escrow Holder shall so provide. Escrow Holder shall be responsible for filing Form 1099 -S with the Internal Revenue Service. 4. Buyer's Inspections: Feasibility Investigations, Council Approval• Estoppel Certificates. 4.1 Title. (a) Upon execution of this Agreement by the Parties, Buyer, at its sole cost and expense, shall deliver to Seller and Buyer a current preliminary report ( "Preliminary Report") of title to the Real Property, issued by the Title Company, together with legible copies of all documents referenced therein as exceptions to title and a plot plan for the Real Property showing the locations of all the recorded easements. On or before December 15, 2015, Buyer shall notify Seller of Buyer's objections to title, if any. (b) Seller shall deliver title to the Property at Closing subject only to the Permitted Exceptions. Any exceptions to title shown on any supplement to the Preliminary Report that may be issued from time to time by the Title Company following December 15. 2015 shall be removed by Seller at or prior to Closing. -3- 4.2 Feasibility Study. Upon execution of this Agreement by the Parties, Seller shall, to the extent such items are in Seller's possession, promptly provide Buyer with any and all documentation with respect to any conditions that currently exist on the Property, if any, correspondence or other documents in Seller's possession that may be relevant to the condition of the Property, including, without limitation, correspondence or documents related in any manner to the current maintenance or repair of the Property, including construction warranties, indemnities, all studies, reports, agreements, documents, leases (including, without limitation, the Leases), surveys, engineering studies, geological reports, architect's drawings, plans, maps, building contracts, permits and entitlements in Seller's possession or control concerning the Property and its improvement and development (collectively, the "Feasibility Materials "), and Seller shall instruct its engineers, architects, surveyors, marketing consultants, tenants and other advisors, consultants and agents ( "Seller's Consultants "), if any, to share any information or knowledge they have concerning the Property with Buyer. Buyer and its agents may enter onto the Real Property to make such inspections, audits, feasibility studies, soil and engineering tests and surveys and other examinations thereof (collectively, "Inspections ") as Buyer deems reasonably necessary, provided that Buyer shall give at least seventy -two (72) hours prior notice to Seller of any intended entry onto the Real Property, and any such entry shall not unreasonably interfere with Seller's use of or activities on the Real Property. Buyer shall repair any damage to the Property resulting from such entry. However, Buyer's review and investigation of the Property shall not in any way preclude Buyer from relying on the representations and warranties made by Seller in this Agreement. On or before the Feasibility Date, Buyer shall notify Seller in writing of any objections (the "Objections ") Buyer has to the condition of the Property disclosed by the Inspections (the "Objection Notice "). Seller shall, within three (3) days after its receipt of the Objection Notice from Buyer, provide Buyer and Escrow Holder with written notice regarding whether Seller intends to, at Seller's cost, clear the Property of and/or resolve the Objections to Buyer's reasonable satisfaction. If Seller does not notify Buyer and Escrow Holder within said three (3) day period that Seller has arranged to have the Objections cleared from the Property or otherwise resolved to Buyer's reasonable satisfaction, Buyer shall have the right, but not the obligation, to remove the Objections and Seller shall cooperate with Buyer to have the Objections cleared. Seller shall be obligated and shall reimburse Buyer for any and all costs associated with the removal of the Objections at time of Closing and settlement of Escrow funds. 4.3 Access. Seller grants to Buyer and Buyer's agents, employees and consultants a nonexclusive license to enter upon the Property during business hours at times reasonably acceptable to Buyer and Seller on not less than seventy -two (72) hours prior notice to Seller, for the purpose of allowing Buyer to conduct whatever soil and engineering tests, feasibility studies, surveys and other examinations of the Property Buyer deems appropriate, provided that Buyer may not perform any intrusive, invasive or destructive testing of the Real Property without obtaining Seller's prior written consent, such consent not to be unreasonably withheld or delayed. 4.4 Town Council Approval. The Town Council shall approve this agreement. If documentation of the Town Council approval is not provided by December 17, 2015, the Town Council will deemed to have affirmatively rejected the purchase of the Property in accordance with the terms of this Agreement, in which event this Agreement shall automatically terminate. 5. Closing; Deposit of Purchase Price. 5.1 Subject to Buyer's right to terminate this Agreement in accordance with Section 4, the timely satisfaction of all of the Conditions to Closing set forth in Section 9, and the representations and warranties of Seller and Buyer herein being true as of the Closing Date, the Closing shall occur on the Closing Date. 5.2 Provided Seller has deposited all of the items required by Section 7 below no later than two (2) business days prior to the Closing Date, and provided the Title Company has confirmed to Buyer in writing that it is unconditionally prepared to issue the Title Policy to Buyer, subject only to the Permitted Exceptions, upon consummation of the Closing, on or before the Closing Date, Buyer shall deposit with Escrow Holder the Purchase Price and Buyer's share of closing costs and prorations as provided in Section 6 below, in immediately available funds. Escrow Holder shall hold all funds deposited by Buyer with it pursuant to this Agreement, including without limitation the Purchase Price if and when deposited in accordance with this section, in an interest - bearing account. 6. Closing Costs and Prorations. 6.1 Closing Costs. Buyer shall pay all closing costs as customary for Santa Clara County including but not limited to Title Insurance, Escrow Fees, and all other closing cost related to the transaction. 6.2 Property Taxes and Operating Expenses (a) Taxes and Assessments. All real estate taxes and assessments on the Property shall be paid by Buyer. (b) Operating Expenses. All utility service charges for electricity, heat and air conditioning service, other utilities, elevator maintenance, common area maintenance, taxes (other than real estate taxes), other expenses incurred in operating the Property that Seller customarily pays, and any other costs incurred in the ordinary course of business or the management and operation of the Property shall be prorated on an accrual basis. Seller shall pay all such expenses that accrue prior to vacating the Property. This obligation shall survive the Closing. Any utility security deposits to be refunded to Seller shall be obtained by Seller from the utility company, and Buyer shall make its own deposit with such companies. Seller will notify all utility companies servicing the Property of the sale of the Property to Buyer and will request that such companies send Seller a final bill for the period ending on the last day before vacating the Property. Buyer will notify the utility companies that all utility bills for the period commencing on the vacating of Property date are to be sent to Buyer. -5- 7. Deposits by Seller. No later than three (3) business days prior to the Closing Date, Seller shall deposit with Escrow Holder: a. A grant deed, on the Title Company's standard form, duly executed by Seller (the "Grant Deed "), acknowledged and in recordable form, subject only to the Permitted Exceptions. At Buyer's option, the Grant Deed may include an Assignment of Declarant's Rights. b. Seller's Nonforeign Affidavit in the form accepted by the Title Company, duly executed by Seller ( "Nonforeign Affidavit "). C. A Real Estate Withholding Exemption Certificate as required by California Revenue and Taxation Code (Form 593) ( "State Withholding Certificate "). d. Such other bills of sale, assignments and other instruments of transfer or conveyance as Buyer or Escrow Holder may reasonably request or as may be otherwise necessary to evidence and effect the sale, assignment, transfer, conveyance and delivery of the Property to Buyer. 8. Deposits by Buyer. Prior to the Closing, Buyer shall deposit with Escrow Holder the following: a. The Purchase Price in immediately available funds in accordance with Section 5. b. Such other instruments or documents as Escrow Holder may reasonably request or may be necessary to effect the sale, assignment, transfer, conveyance and delivery of the Property to Buyer. 9. Conditions to Closine. 9.1 Conditions to Buyer's Obligations. The Closing and Buyer's obligation to purchase the Property are subject to the satisfaction of the following conditions or Buyer's written waiver of such conditions on or before the Closing Date. Buyer may waive in writing any or all of such conditions in its sole and absolute discretion. (a) Buyer shall have timely delivered documentation of Town Council Approval. (b) Seller shall have performed all obligations to be performed by Seller pursuant to this Agreement prior to Closing. (c) Seller's representations and warranties set forth herein shall be true and correct as of the Closing. (d) The Title Company shall be committed to issue the Title Policy to Buyer effective as of the Closing Date. (e) Between the Effective Date and the Closing Date, there shall have been no material changes in the condition or status or fitness of the Real Property that would adversely affect Buyer's intended use of the Real Property. 9.2 Conditions to Seller's Obligations. Closing and Seller's obligation to consummate the transactions contemplated by this Agreement are subject to the satisfaction of the conditions that as of the Closing Date: (a) Buyer shall have performed all obligations to be performed by Buyer pursuant to this Agreement prior to Closing. (b) Buyer's representations and warranties set forth herein shall be true and correct as of the Closing. 10. Closing Covenants. 10.1 Escrow Holder's Actions. Upon the Closing Date, when Escrow Holder holds the items required to be deposited by Seller and Buyer as described above and Title Company is prepared to issue and deliver to Buyer the applicable Title Policy, Escrow Holder is instructed and authorized to (i) record the Grant Deed in the Office of the County Recorder of the County; (ii) record the Assignment of Declarant's Rights (if any, and if separate from the Grant Deed) in the Office of the County Recorder of the County; (iii) file a Real Estate Withholding Exemption Certificate, if required, with the State of California Franchise Tax Board or other taxing authority, (iv) pay any transfer taxes; (v) pay any outstanding amounts due to Homeowners Association, property taxes, or any other outstanding lien; (vi) instruct the County Recorder to return the Grant Deed to Buyer; (vii) disburse to Seller from the funds deposited into Escrow by Buyer the Purchase Price, if any exist; (viii) disburse from funds deposited by Buyer amounts toward payment of all other items chargeable to the account of Buyer hereunder, and disburse the balance of such funds, if any, to Buyer; (ix) deliver to Buyer the Nonforeign Affidavit; and (x) the Title Policy. 10.2 Escrow Cancellation Charges. If the Closing does not occur because of the default of a Party, the defaulting Party shall bear all Escrow Cancellation Charges. If the Closing does not occur for any reason other than the default of a Party, then Buyer and Seller shall each pay one half (1/2) of any Escrow Cancellation Charges. As used herein, "Escrow Cancellation Charges" means all fees, charges and expenses incurred by Escrow Holder or third parties engaged by Escrow Holder as well as all expenses related to the services of the Title Company in connection with the issuance of the Preliminary Report and other title matters. 10.3 Conveyance and Possession. Upon Closing, Seller shall (a) convey title to the Property to Buyer, subject only to the Permitted Exceptions; and (b) deliver exclusive possession of the Property to Buyer. In addition, in the event any claim is made by any prior owner, -7- mortgagee, developer, Tenant or other claimant against Seller or Buyer related in any way to Seller's right to convey the Property, Seller shall defend and indemnify Buyer. 10.4 Relocation Costs. In addition to any other rights, remedies and/or consideration provided for under this Agreement, Buyer has offered to pay to Seller a sum not to exceed $5,000 dollars to cover actual moving and relocation expenses ( "Reimbursable Relocation Costs ") in exchange for Buyer moving from and leaving the premises clear of all possessions prior to February 1, 2016. With the exception of the foregoing, Seller hereby waives its right to receive from Buyer, and releases Buyer from any and all obligation to pay, any other amounts under the California Relocation Assistance Law (California Government Code section 7260 et seq.) and /or Title 25 of the California Code of Regulations. As an express condition to the Buyer's obligation to pay Seller any Reimbursable Relocation Costs, Seller shall submit to Buyer the invoices for Seller's Reimbursable Relocation Costs, which invoices shall clearly document the specific expenses incurred by the Seller and shall otherwise be in a form reasonably acceptable to the Buyer. 11. Representations and Warranties of Seller. Seller makes the following representations and warranties to Buyer: 11.1 Seller owns the Real Property in fee simple absolute and has good and marketable title to the Real Property, subject to no liens, claims or encumbrances other than those disclosed in the Preliminary Report. Seller has not alienated, encumbered, transferred, optioned, leased, assigned, transferred or otherwise conveyed its interest or any portion of its interest in the Real Property or any portion thereof except as set forth in the Preliminary Report and as disclosed herein, nor has Seller entered into any agreement (other than this Agreement) so to do, unless such agreement(s) have been provided to Buyer in accordance with Section 4.2 above. 11.2 Other than as expressly disclosed to Buyer, Seller has made no oral or written commitments or representations to, or understandings or agreements with, any person, firm or entity, any adjoining property owner or any authority which would in any way be binding on Buyer or would interfere with Buyer's ability to develop and improve the Property, and Seller shall not make or enter into any such commitment, representations, understandings or agreements without Buyer's written consent. 11.3 The Seller's materials delivered to Buyer in connection with the purchase and sale of the Property are all of the documents, leases, or agreements affecting the Property in Seller's possession. 11.4 Except as disclosed to Buyer in writing, Seller has received no notice from any governmental body or agency or any other person or entity that: (a) asbestos - containing materials were installed or exposed in the Property through demolition, renovation or otherwise at any time during or prior to Seller's ownership of the Property; (b) electrical transformers or other equipment containing PCBs are or were located on the Property at any time during or prior to Seller's ownership of the Property; (c) storage tanks for gasoline, heating oil or diesel fuel or any other substances are or were located on or under the Property at any time during or prior to Ef Seller's ownership of the Property; and (d) materials regulated under any Federal, State or local law or regulation, as amended from time to time, as a toxic, hazardous, contaminated or similarly harmful or dangerous material or substance (including, without limitation, asbestos and radon) are or were located on, in or under the Property or have affected the Property or waters on or under the Property at any time during or prior to Seller's ownership of the Property. For the purposes of this Agreement, the term "Hazardous Materials" means any substance, product, waste or other material of any nature whatsoever which is or becomes listed, regulated or addressed pursuant to the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. Section 9601, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.; the Clean Water Act, 33 U.S.C. Section 1251 et seq.; and the California Hazardous Waste Control Act, Health & Safety Code Section 25100 et seq. 11.5 Seller has not received any written notice under the California Health and Safety Code or any other applicable local, State or Federal law regarding Hazardous Materials on, under or affecting the Property or requiring the removal of any Hazardous Materials from the Property. 11.6 Seller is not a "foreign person" within the meaning of IRC Section 1445. 11.7 Seller has not entered into any and there are no leases or other agreements relating to any portion of the Property; and no person, other than the Seller, has any right of possession to the Property or any part thereof. 11.8 Seller is an individual and has full capacity, right, power, and authority to enter into this Agreement and to perform its obligations hereunder, and the person(s) executing this Agreement on behalf of Seller have the right, power and authority to do so. 11.9 Except as disclosed in the Preliminary Report, Seller has received no written notice of any special assessments (whether from an assessment district, facilities district, or otherwise) against the Property being contemplated. 11.10 Seller has not received any notice from any of Seller's insurance carriers of any defects or inadequacies in the Property, or any portion thereof, which would adversely affect the insurability of the Property or the cost of any such insurance. There are no pending insurance claims by Seller with respect to any portion of the Real Property. 11.11 Seller is not bankrupt or insolvent under any applicable Federal or State standard, nor has Seller filed for protection or relief under any applicable bankruptcy or creditor protection statute nor has Seller been threatened by creditors with an involuntary application of any applicable bankruptcy or creditor protection statute. Seller is not entering into the transactions described in this Agreement with intent to defraud any creditor or to prefer the rights of one creditor over any other. Seller and Buyer have negotiated this Agreement at arms - length and the consideration to be paid represents fair value for the assets to be transferred. 11.12 There are no unrecorded leases, licenses or other possessory interests in the Real Property. In 11.13 Indemnity. Seller hereby agrees to indemnify, protect, defend and hold Buyer and the Property harmless from and against any damage, claim, liability or expense of any kind whatsoever (including, without limitation, reasonable attorney's fees and fees of expert witnesses) arising from or in connection with any breach of any of the foregoing representations and warranties of Seller and any other representations or warranties of Seller contained elsewhere in this Agreement. Such representations and warranties of Seller and any other representations and warranties of Seller contained elsewhere in this Agreement are true and correct on and as of the date of this Agreement and shall be true and correct on and as of the date of the Closing, and shall survive the Closing, without the necessity of a separate written certificate regarding the same. If after the date of this Agreement, but prior to the Close of Escrow, Buyer or Seller should learn, discover or become aware of any existing or new item, fact or circumstance which renders a representation or warranty of Seller set forth herein incorrect or untrue in any material respect (collectively, the "Representation Matter "), then the Party who has learned, discovered or become aware of such Representation Matter shall promptly give written notice thereof to the other Party. Any Representation Matter caused by deliberate acts of Seller or fraudulently made by Seller is a default by Seller. Regarding any other Representation Matter, Buyer shall have the right, in its sole discretion, to either (i) waive in writing and proceed to acquire the Property or the terms set forth in this Agreement hereunder, or (ii) terminate this Agreement, and the Deposit and any other amounts paid by Buyer to Seller or deposited into Escrow by Buyer shall be immediately returned to Buyer. Upon such termination, neither Party hereunder shall have any further obligations or liabilities under this Agreement except as specifically set forth herein. Seller's Knowledge Defined. The phrases "to Seller's actual knowledge" or "to the actual knowledge of Seller" as used in this Section 11 mean to the actual, present knowledge of Pastor Richard Grandquist and the current members of the Seller's Board of Directors, without any duty of further inquiry or investigation, and without the imputation to such individuals of the knowledge of any other person. Limitations. Any action against Seller based upon an alleged breach of Seller's representations and warranties herein must be filed within six (6) months after Seller relinquishes physical possession of the Real Property to Buyer, and failure to timely file any such action shall be deemed Buyer's waiver and release of any such action. AS -IS Conveyance. Buyer expressly acknowledges and agrees that, unless otherwise expressly set forth in this Agreement: (a) Buyer has made such independent examinations and inquiries as Buyer deems necessary and desirable with respect to the Property and the transaction contemplated by this Agreement; (d) Buyer is specifically purchasing the Property on an "AS -IS WITH ALL FAULTS BASIS" and is relying solely upon Buyer's own independent investigations, examinations and inquiries and the materials and information prepared by Buyer or by third parties at Buyer's request in determining that the Property and each portion thereof is suitable and adequate in all respects for any and all activities and uses which Buyer may elect to conduct thereon; (e) Seller is not making, has not made and expressly disclaims any representation, warranty or other assurance whatsoever with respect to the Property or any condition or feature thereof, (f) Buyer is fully acquainted with the nature and condition, in all -10- respects, of the Property, including the existence or availability of all permits and approvals from governmental authorities and the soil and geology thereof, and, (g) Buyer understands that Buyer will be assuming the entire risk of any and all potential uncertainties regarding the Property. Subject to Section 11. 1, Buyer specifically releases and waives any claim against or liability of Seller arising from, relating to or resulting from any law, rule, ordinance, regulation, notice, demand, order, citation, or other action or proposed action affecting the Property in any way issued or taken after the Seller relinquishes physical possession of the Real Property to Buyer by any governmental jurisdiction, political subdivision, agency or authority except, notwithstanding the foregoing or any other provision of this Agreement, Buyer does not waive any such claim or liability of Seller arising from, relating to or resulting from (x) any breach of any Seller agreement, covenant, representation, or warranty that is expressly made under this Agreement by Seller or (y) any other express obligation of Seller hereunder, including, without limitation, Seller's indemnity obligations set forth in this Section 11.15 above (collectively, a "Seller Obligation "), regardless of whether any such Seller Obligation also arises from, relates to, or results from any law, rule, ordinance, regulation, notice, demand, order, citation, or other action or proposed action affecting the Property in any way issued or taken after the Closing by any governmental jurisdiction, political subdivision, agency, or authority. The provisions of this Section 11.15 shall survive the Closing. No Additional Representations by Subject to, and except as specifically set forth in Section 11.1 above, neither Seller nor any of its agents, partners or employees has made and does not make any representations or warranties, whether oral or written, expressed or implied, with respect to: (i) any physical or environmental aspect or condition of the Property or any part thereof (including, without limitation, the presence of any hazardous materials); (ii) any dimension or specifications of the Property or any part thereof, including, without limitation, the square footage or rentable area of the improvements or the number or sufficiency of parking spaces on or about the Property; (iii) feasibility, desirability, suitability, habitability or convertibility of the Property and any part thereof into or for any particular use or purpose; (iv) the zoning, building or land use restrictions applicable to the Property or any part thereof, (v) soil, seismic or other geological conditions effecting the Property or any part thereof with any applicable laws, rules or regulations, including, without limitation, use permits, building codes, fire and safety codes and handicapped access codes and regulations (including, without limitation, the Americans With Disabilities Act); (vi) the truth, accuracy or completeness of any of the materials or documents delivered to Buyer except for documents prepared by Seller; (vii) the availability or unavailability of governmental, quasi - governmental or other permits, approvals, licenses, or entitlements, if any, in any way relating to the Property or any part thereof; (viii) the availability or unavailability of water, sewer, electric, telephone or other utility services, if any, for the Property or any part thereof; (ix) the operability, adequacy, state of repair or useful life of any fixture, equipment, machinery or other apparatus of the Property; (x) restrictions on hours of operation, parking, types of tenants and uses, signage, architectural and other limitations imposed by zoning, use permits and other restrictions effecting the Property; and (xi) any other matter of any nature whatsoever relating in any way to the Property or to any of the documents delivered by Seller to Buyer. All representations, warranties and covenants of Seller in this Agreement are made as of the date of this Agreement and as of the Closing and shall survive the Closing and the recordation of the Grant Deed. It shall be a material default -11- hereunder if Seller is unable to make such representations and warranties truthfully as of the Closing Date. 12. Representations and Warranties of Buyer. Buyer makes the following representations, warranties and covenants to Seller: 12.1 Buyer is a California municipal corporation duly organized, validly existing and in good standing under the laws of the State of California. Buyer has the right, power and authority to enter into this Agreement and to perform its obligations hereunder, and the person(s) executing this Agreement on behalf of Buyer have the right, power and authority to do so. 12.2 This Agreement constitutes the legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, moratorium and other principles relating to or limiting the rights of contracting parties generally. This Agreement does not violate any provision of any material agreement or document to which Buyer is a party or to which Buyer is bound. All representations and warranties of Buyer in this Agreement are made as of the date of this Agreement and as of the Closing, and shall survive the. Closing and the recordation of the Grant Deed. It shall be a material default hereunder if Buyer is unable to make such representations and warranties truthfully as of the Closing Date. 13. Notification by Seller of Certain Matters. During the period prior to the Closing Date, Seller shall promptly advise Buyer in writing of any material adverse change in the condition of the Property, any default by any Tenant under the terms of any of the Leases, the occurrence of any event or the discovery of any fact which would render any representation or warranty of Seller to Buyer in this Agreement, untrue or materially misleading, and any written notice or other communication from any third person alleging that the consent of such third person is or may be required in connection with the transactions contemplated by this Agreement. 14. Seller's Covenant Not to Further Encumber the Property. Seller shall not, directly or indirectly, alienate, encumber, transfer, option, lease, assign, sell, transfer or convey its interest or any portion of such interest in the Property or any portion thereof, modify, supplement or terminate any lease, or enter into any agreement to do so, so long as this Agreement is in force. Seller shall timely discharge, prior to the Closing, any and all obligations relating to work performed on or conducted at or materials delivered to Property from time to time by Seller, or at Seller's direction or on its behalf, in order to prevent the filing of any claim or mechanic's lien with respect to such work or materials. Without limiting the foregoing, from the opening of Escrow until the Close of Escrow, Seller shall not execute any new leases or amend, renew, terminate, or accept the surrender of any existing tenancy or approve any sublease or assignment of any lease (collectively, a "Lease Event ") without first obtaining Buyer's written consent to such Lease Event. -12- 15. Damage or Destruction. If any material damage or destruction to any of the Real Property occurs prior to Closing, Seller shall immediately give Buyer written notice of such damage or destruction, and Buyer shall have the option, exercisable within ten (10) days thereafter either to (i) terminate the Escrow, in which case Escrow Holder shall immediately return all documents, instruments and moneys to the Party which deposited same in respect of the Closing; or (ii) accept the Property in its condition at that time, and to receive an assignment of all of Seller's rights to any insurance proceeds payable by reason of such damage or destruction, with a commensurate reduction in the Purchase Price. If Buyer elects to proceed under Clause (ii) above, Seller shall not compromise, settle or adjust any such insurance claims without Buyer's prior written consent. For purposes hereof, "material damage or destruction" shall be deemed to be such damage or destruction that is reasonably estimated to cost more than five percent (5 %) of the Purchase Price to repair or restore. If damage or destruction to the Real Property occurs which is not material, Buyer shall accept the Property in its condition at that time, and shall receive an assignment of all of Seller's rights to any insurance proceeds payable by reason of such damage or destruction, without any reduction in the Purchase Price. 16. Condemnation. If prior to the Closing all or any portion of the Property is subject to an actual or threatened taking by a superior public authority, by the power of eminent domain or otherwise, Buyer shall have the right, exercisable by giving written notice to Seller within ten (10) business days after Buyer's receipt of written notice of such taking, either to (i) terminate Escrow, in which case Escrow Holder shall immediately return all documents, instruments and moneys to the Party which deposited same in respect of the Closing; or (ii) to accept the applicable portion of the Property in its then condition and to receive an assignment of all of Seller's rights to any condemnation award payable by reason of such taking. If Buyer elects to proceed under Clause (ii) above, Seller shall not compromise, settle or adjust any claims to such award without Buyer's prior written consent. 17. Remedies. 17.1 If Seller defaults hereunder or if the Closing does not occur by reason of Seller's default hereunder, and if such default is not cured within ten (10) business days after Buyer provides Seller with written notice of such default, then Buyer, at its option, may elect either (i) to maintain this Agreement in full force and effect and pursue any remedies to which Buyer may be entitled under this Agreement, at law and /or in equity; or (ii) to terminate this Agreement, and Buyer shall have the right to pursue an action for damages. 17.2 If Buyer defaults hereunder or if the Closing does not occur by reason of Buyer's default hereunder, and if such default is not cured within ten (10) days after Seller provides Buyer with written notice of such default, then Buyer, at its option, may elect to terminate this Agreement and pursue an action for damages, provided that under no circumstances shall Seller be entitled to a judgment for specific performance of this Agreement and the maximum damages recoverable against Buyer shall be the actual costs and expenses incurred by Seller in negotiating this Agreement, up to a maximum of Five Thousand Dollars ($5,000). The foregoing represents the exclusive rights and remedies available to Seller at law or in equity in the event of Buyer's default under or breach of this Agreement. Seller hereby waives any and all rights it may now or hereafter have to recover any other damages on account of -13- Buyer's breach, including, without limitation, loss of bargain, special, punitive, compensatory or consequential damages. 18. Miscellaneous. 18.1 Assignment. Seller shall not be entitled to assign this Agreement and its rights and obligations hereunder without obtaining Buyer's prior written consent, which consent will not be unreasonably withheld or delayed. Buyer shall be entitled to assign this Agreement and its rights and obligations hereunder without obtaining Seller's prior written consent, provided that Buyer shall not be released from its obligations hereunder by reason of such assignment or delegation without Seller's written consent. 18.2 No Modifications. No addition to or modification of any term or provision of this Agreement shall be effective unless set forth in writing and signed by both Seller and Buyer. 18.3 Construction of Agreement. Each Party and attorneys for each Party have participated in the drafting and preparation of this Agreement. Therefore, the provisions of this Agreement shall not be construed in favor of or against either Party, but shall be construed as if both Parties equally prepared this Agreement. 18.4 Headings. The paragraph headings herein are used only for the purpose of convenience only and shall not be deemed to limit the subject of the sections or paragraphs of this Agreement or to be considered in their construction. Unless otherwise specifically referring to another instrument or document, references to "Sections" and "Subsections" refer to the Sections and Subsections of this Agreement. 18.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 18.6 Time of the Essence. Time is of the essence of each and every provision of this Agreement. Unless business days are expressly provided for, all references to "days" herein shall refer to consecutive calendar days. If the Closing Date or any other date or time period provided for in this Agreement is or ends on a Saturday, Sunday or Federal, State or legal holiday, then such date shall automatically be extended to the next day which is not a Saturday, Sunday or Federal, State or legal holiday. 18.7 Successors and Assigns. Subject to the provisions of Section 18.1, all of the provisions of this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Parties. 18.8 Further Assurances. Each of the Parties shall execute and deliver any and all additional papers, documents and other assurances, and shall do any and all acts and things reasonably necessary in connection with the performance of their obligations hereunder and to carry out the intent of this Agreement. Without limiting the generality of the foregoing, Seller shall cooperate with Buyer by executing such documents and providing to Buyer or the appropriate regulatory agency such items as Buyer or the appropriate regulatory agency may -14- reasonably request, and Seller shall cooperate under any covenants, conditions and restrictions affecting the Property so as to facilitate Buyer's development of the Property, provided such cooperation entails no material additional cost or expense to Seller. 18.9 No Waiver. The waiver by one Party of the performance of any covenant, condition or promise, or of the time for performing any act, under this Agreement shall not invalidate this Agreement nor shall it be considered a waiver by such Party of any other covenant, condition or promise, or of the time for performing any other act required, under this Agreement. The exercise of any remedy provided in this Agreement shall not be a waiver of any remedy provided by law, and the provisions of this Agreement for any remedy shall not exclude any other remedies unless they are expressly excluded. 18.10 Severability. If any provision of this Agreement shall become illegal, null or void or against public policy, for any reason, or shall be held by any court of competent jurisdiction to be illegal, null or void or against public policy, the remaining provisions of this Agreement shall not be affected thereby and shall remain in force and effect to the full extent permissible by law. 18.11 Gender and Number. In this Agreement, the masculine, feminine and neuter genders and the singular and the plural include one another, unless the context requires otherwise. 18.12 Entire Agreement. This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter hereof and shall supersede all prior and contemporaneous agreements, representations, negotiations and understandings of the parties, oral or written. The foregoing sentence shall in no way affect the validity of any instrument executed by the Parties in the form of the exhibits attached to this Agreement. 18.13 Incorporation of Exhibits. All exhibits to this Agreement are incorporated herein by this reference. 18.14 Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same 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 except having additional signature pages executed by the other Party. Counterparts may be delivered by facsimile provided that original executed counterparts are delivered to the recipient on the next business day following the facsimile transmission. 18.15 Attorneys' Fees. If any action or proceeding is instituted to enforce or interpret any provision of this Agreement, the prevailing Party therein shall be entitled to recover its attorneys' fees and costs from the losing party. 18.16 Notices. Any notice to be given hereunder to either Party or to Escrow Holder shall be in writing and shall be given either by personal delivery (including express or courier -15- service), or by registered or certified mail, with return receipt requested, postage prepaid and addressed as follows: To Buyer: Community Development Director Town of Los Gatos 110 E. Main Street Los Gatos, CA 95030 To Seller: MICHELLE L. SURANOFSKY 108 Sierra Linda Los Gatos, CA 95030 Any Party may, by written notice to the others and to Escrow Holder, designate a different address which shall be substituted for the one specified above. Any such notice shall be deemed to have been delivered upon its receipt or upon the second attempt at delivery, as evidenced by the regular records of the person or entity attempting delivery. 18.17 Relationship of Parties. The Parties agree that their relationship is that of Seller and Buyer, respectively, and that nothing contained herein shall make either Party the fiduciary of the other for any purpose whatsoever, nor shall this Agreement be deemed to create any form of business organization between the Parties, including, without limitation, a joint venture or partnership, nor is either Party granted any right or authority to assume or create any obligation or responsibility on behalf of the other Party, nor shall either Party be in any way liable for any debt of the other. 18.18 Survival. The agreements, representations, covenants and warranties of the Parties contained herein shall survive the Closing and the delivery of the Grant Deed. 18.19 Real Estate Commissions. Seller represents and warrants that it has not retained the services of a real estate brokerage in the listing and sale of the Real Property. Seller shall be solely responsible for all fees and commissions if Seller has retained the services of a brokerage. Buyer represents and warrants that it has not engaged or used any real estate broker, agent or salesman in connection with the transaction contemplated by this Agreement. Buyer and Seller each agree that it will indemnify and hold the other Party harmless from and against any and all claims, losses, damages, costs or expenses (including attorneys' fees) of any kind or character arising out of or resulting from any agreement or arrangement with any other broker or finder in connection with this Agreement or the transactions contemplated by this Agreement. The foregoing indemnity will survive the expiration or termination of this Agreement. 18.20 Arbitration of Disputes. Except as otherwise provided in this Agreement, any controversy or dispute arising out of this Agreement or the interpretation of any of the provisions hereof shall be submitted to arbitration in Santa Clara County, California, under the commercial arbitration rules then obtaining of the American Arbitration Association. Any award or decision obtained from any such arbitration proceeding shall be final and binding on the Parties, and judgment upon any award thus obtained may be entered in any court having jurisdiction thereof. No action at law or in equity based upon any claim arising out of or related to this Agreement -16- shall be instituted in any court by any party hereto except (a) an action to compel arbitration pursuant to this section; or (b) an action to enforce an award obtained in an arbitration proceeding in accordance with this section. All notices relating to any arbitration shall be given as provided in this Agreement. 18.21 Conflict of Interest. No member, official or employee of Buyer shall have any personal interest, direct or indirect, in this Agreement, nor shall any such member, official or employee participate in any decision related to this Agreement which affects his/her personal interest or the interest of any corporation, partnership or association in which he /she is directly or indirectly interested. Seller warrants that Seller has not paid nor given and will not pay nor give any third person any money or any other consideration for obtaining this Agreement. IN WITNESS WHEREOF, this Agreement is executed by BUYER and by SELLER. Recommended by: aurel P Development Director APPROVED AS TO FORM: "BUYER ": TOWN OF LOS GATOS, a California municipal corporation By: L urel Prevetti, own Manager "SELLER ": MI( r By. Robert Schultz, Towl6omey Exhibits: Exhibit A: Legal Description of the Property Exhibit B: Excluded Items -17- ACCEPTANCE BY ESCROW HOLDER Old Republic Title Company hereby acknowledges that it has received a fully executed counterpart of the foregoing Agreement of Purchase and Sale of Real Property and Joint Escrow Instructions ( "Agreement ") and agrees to act as Escrow Holder under the Agreement and to be bound by and perform the terms thereof as such terms apply to Escrow Holder. OLD REPUBLIC TITLE COMPANY Dated: ! By: Its: A'* DO EXHIBIT A — OF THE PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS LEGAL DESCRIPTION OF THE PROPERTY The land referred to is situated in the County of Santa Clara, Town of Los Gatos, State of California, commonly known as Sierra Linda, Los Gatos California, Santa Clara Assessor's Parcel No. 407 -17 -035: ALL OF LOT 12 OF TRACT NO. 7927 ARROYO RINCONDA ACCORDING TO THE MAP THEREOF FILED FOR RECORD ON JUNE 22, 1982 IN BOOK 501 OF MAPS AT PAGE 35 AND 36, SANTA CLARA COUNTY RECORDS. EXCEPTING THEREFROM THE UNDERGROUND WATER RIGHTS WITHOUT RIGHTS OF SURFACE ENTRY AS CONVEYED TO SAN JOSE WATER WORKS, A CALIFORNIA CORPORATION, BY DEED RECORDED SEPTEMBER 17, 1982 IN BOOK H029, PAGE 217 OF OFFICIAL RECORDS. APN: 407 -17 -035 -19- EXHIBIT B - OF THE PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS EXCLUDED ITEMS -20-