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BACKGROUND The City currently ground leases a 3.59 acre site on the corner of Sunol Blvd., and Valley Avenue to BLP Partnership, Inc., a California nonprofit public benefit corporation affiliated with BRIDGE Housing, for the purpose of operating the 105-unit Parkview assisted living facility that provides 31 affordable rooms to seniors in need of assisted living. Project development and construction represents a ten year effort by residents, BRIDGE Housing, a citizen's task force and the City Council. When approved in 2005, it was assumed that permanent financing would be needed between three to seven years after the initial project funding. To that end, BRIDGE completed the permanent financing process in 2010. As an outcome of the permanent financing, it became apparent that it would be necessary to amend the City Loan Agreement and the Ground Lease to reflect changes made as part of the permanent financing process. A summary of some of the more notable changes detailed in the amendment is as follows: • Changes in the City Loan Agreement pertain to Section 2.3 only. No other sections have been amended. • The structure of the City's $2,490,000 loan remains the same. That is, BRIDGE will continue to make annual loan payments based on a 10% interest rate ($249,000 annually) from project surplus cash, which basically the money available after the project pays all its operating costs. If in any given year surplus cash is insufficient to pay the City loan, the payment will accrue to the following year. Any payments outstanding at the end of the 55-year ground lease will be forgiven. The loan is not amortized and therefore, a payment of principal is not anticipated. The current loan agreement also states that any unpaid loan payment during the first five years after certificate of occupancy (2005) will be forgiven and the City is not anticipating a loan payment from this period. We are however, anticipating that loan payments will begin for the year ending December 31, 2011. • The existing "waterfall" of surplus cash payments establishing the order in which surplus cash will be disbursed has been amended to reflect that BRIDGE has received full reimbursement for its $300,000 developer contribution thus negating the need for future waterfall payments; removal of the Management Incentive Bonus in favor of increasing the existing Asset Management Fee (the annual fee paid to Bridge for overseeing the development) from $10,000 to $25,000 annually, and removal of payments toward an Operating Reserve which was needed only during the first few years after project opening as a protection against revenue shortfalls. It also establishes that waterfall calculations will begin in October 2010. • The existing documents were unclear regarding funding a yet to be established affordability reserve that could be used to create additional project affordability. As a result, this matter was clarified and slightly amended to reflect that 72% of the final surplus cash after all other surplus cash payments are made would go to an affordability reserve (previously this was 80%), 20% would go to BRIDGE (this is unchanged) and 8% would go to BRIDGE for managing the affordability reserve and Page 2 of 3