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Encumbrance Amount") of any refinancing permitted by this section shall not exceed an amount equal to ninety percent (90%) of the Base Resale Price calculated as provided in Section 11, as modified by this section. The Permitted Encumbrance Amount shall be the Base Resale Price calculated as if the City has received notification of an Option Event on the earlier of (a) the date on which the deed of trust or mortgage securing the refinancing indebtedness is filed for record in the Office of the recorder of the County of Alameda, or (b) the date the City receives Notice of Intent to Transfer pursuant to Section 6(a) above. 18. Subordination, This Agreement and the Promissory Note shall be secured by a deed of trust on the Property (the "City Deed of Trust"). The City Deed of Trust shall be subordinate to the liens of the senior deeds of trust to be recorded against the Property, and any deed of trust held by the California Housing Finance Agency." 19. Obligation of Owner After Option Abandonment. If the City records a notice of abandonment of the Option, then the Property maybe sold by Owner to a third party without restriction as to price; however, upon such sale, Owner shall pay to City an amount ("City's Share") equal to eighty-five percent (85%) of the difference between (a) the actual sales price net of reasonable and customary real estate commissions paid (such commissions not to exceed six percent (6%) of the actual sales price), and (b) the Adjusted Resale Price. The City's Share shall be paid to the City upon dose of escrow on the sale of the Property, or upon execution of a contract of sale, whichever shall first occur. Owner shall not receive any proceeds from the sale unless and until the City has been paid the full amount of the City's Share. 20. Limits on Liability. In no event shall the City become liable or obligated in any manner to Owner by reason of the assignment of this Agreement or the Option, nor shall City be in any way liable or obligated to Owner for any failure of the City's assignee to consummate a purchase of the Property or to comply with the terms of this Agreement or the Option, or any escrow instructions or agreement for the purchase of the Property. 21. Insurance Proceeds and Condemnation Award. In the event the Property is destroyed and insurance proceeds are distributed to Owner instead of being used to rebuild the Property, or, in the event of condemnation, if the proceeds thereof are distributed to Owner, any surplus of proceeds remaining after payment of the senior liens and encumbrances on the Property shall be distributed as follows: that portion of the surplus up to, but not to exceed, the net amount Owner would have received pursuant to Section 10 had the City exercised its Option on the date of the destruction of condemnation valuation date shall be distributed to Owner, and the balance of such surplus, if any, shall be distributed to the City. 22. Effective Date. The rights and obligations of the City and Owner set forth in this Agreement shall be effective upon the date (the "Recording Date') this Agreement is filed for record in the Office of the Recorder of Alameda County. 23. Tenn of Option. The restrictions contained herein shall continue for a period of forty-five (45) years from the Recording Date. 24. Notices. Except as otherwise specified in this Agreement, all notices required to be sent pursuant to this Agreement shall be made by personal delivery or by deposit in the United States mail, first-class, postage prepaid, and shall be deemed to have been delivered and received on the date of personal delivery or five (5) days after deposit in the mail, if sent to the following address: City: City of San Leandro 835 E. 14th Street San Leandro, California 94577 Attn: Tom Liao, Deputy Community Development Director Tel: 510-577-6004 Fax: 510-577-6007 Owner: Junda Chen & Ka Ki Ng 730 Fargo Ave #1 San Leandro, CA 94579 25. Attomevs' Fees. If either party initiates legal proceedings to interpret or enforce its rights under this Agreement, the prevailing party in such action shall be entitled to an award of reasonable attorneys' fees and costs in additions to any other recovery to which it is entitled under this Agreement. 783016-1