HomeMy WebLinkAboutStaff Report 4.H 06/15/2015DATE: June 15, 2015
Agenda Item #4.H
TO: Honorable Mayor and Members of the City Council through City Manager
FROM: Sue Castellucci, Housing Coordinator '(4t G
SUBJECT: Resolution Approving a Loan Agreement with an Affiliate of the Burbank
Housing Development Corporation, Madrone Village 2 L. P., in Connection with
the Acquisition and Rehabilitation of Madrone Village, and Authorizing the City
Manager to Sign Documents Related to the Rehabilitation and Financing of the
Project.
RECOMMENDATION
It is recommended that the City Council adopt the attached Resolution Approving a Loan
Agreement with an Affiliate of the Burbank Housing Development Corporation, Madrone
Village 2 L. P., in connection with the Acquisition and Rehabilitation of Madrone Village, and
Authorizing the City Manager to Execute all documents related to the rehabilitation and
financing of the Project.
BACKGROUND
The Madrone Apartment project is an existing 23 -unit affordable housing rental apartment
facility, located at 712 Sycamore Lane. The project was built in 1989 and is a two -story garden
style building. The property has fifteen two - bedroom townhouses and seven three- bedroom
townhouses. The current project will include substantial rehabilitation to address replacement of
major building systems and will increase energy and water efficiency. This project was originally
financed with 9% tax credits and was subject to 30 -year affordability restrictions that will expire
in 2019. The acquisition, rehabilitation and refinancing of the Project will be financed with a
combination of 4% tax credits and tax - exempt bonds, and will be subject to affordability
restrictions for a term of 55 years commencing upon completion of the rehabilitation. Rents will
be restricted to households with incomes no greater than 60% of the area median income with an
average affordability of 55% of median income of the residents living at the property.
DISCUSSION
Madrone Village 2 L.P. will serve as the developer and the General Partner of the limited
partnership that will acquire, refinance and rehabilitate the Madrone Village Apartments. The
property is over 25 years old and is in need of rehabilitation to address deferred maintenance
issues. Funding for the rehabilitation will be with 4% tax credits and bonds. Although these
sources of financing will cover 90% of the cost of this project, there still is a gap in financing. A
new City of Petaluma loan will be needed to fill the gap in financing this rehabilitation. Cash
proceeds from the Park Lane re- syndication in the approximate amount of $800,000 are
recommended to be used to fund this gap. The term of the new loan would be 55 years and the
interest rate would be I% simple interest.
The City of Petaluma currently has a loan on the property with an outstanding principal balance
in the amount of approximately $356,000 which will need to be amended due to the new
partnership that will be created.. The term of the amended loan would be 55 years and the
interest rate would be approximately 2.3 %, depending upon the applicable federal rate at the time
of closing. The financial projections and figures will be refined and finalized prior to the closing
date.
There are several documents that need to be included in this transaction which include the
following:
• A Loan Agreement with the new partnership
• Promissory Notes for the amended existing Note and the new City loan
• Deeds of Trust
• Regulatory Agreement to specify the affordability restrictions
• Subordination Agreement with the first mortgage lender
The recommended resolution presented for the City Council's approval authorizes the City
Manager to execute all these documents and any necessary related documents.
FINANCIAL IMPACTS
This project fulfills the City Council's goals and priorities of the 2015 -2023 Housing Element
and the 2015 -2020 Consolidated Plan in preserving affordable housing in Petaluma. The loans
can be paid back using residual receipts from the property.
ATTACHMENTS
1. Resolution
(All loan documents listed below are in draft form and subject to changes)
2. Loan Agreement
3. Amended Promissory Note
4. New Promissory Note
5. Amended and New Deed of Trust
6. City Regulatory Agreement
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ATTACHMENT #I
RESOLUTION NO.
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA
APPROVING A LOAN AGREEMENT WITH AN AFFILIATE OF BURBANK
HOUSING CORPORATION IN CONNECTION WITH THE ACQUISITION AND
REHABILITATION OF MADRONE VILLAGE, AND AUTHORIZING THE CITY
MANAGER TO EXECUTE ALL DOCUMENTS RELATED TO THE
REHABILITATION AND FINANCING OF THE PROJECT
WHEREAS, the City previously provided financing to Burbank Housing Development
Corporation, a California nonprofit public benefit corporation ( "Burbank") to assist in the
development of Madrone Village, an affordable housing project consisting of 23 units of
multifamily housing (the "Project ") located at 712 Sycamore Lane; and
WHEREAS, Burbank or an affiliate of Burbank will serve as the general partner in
Madrone Village 2, L.P., a California limited partnership ( "Developer ") that intends to acquire,
refinance and rehabilitate the Project; and
WHEREAS, in connection with the refinancing of the Project, the term of affordability
will be extended for a term of 55 years commencing upon completion of the rehabilitation; and
WHEREAS, to ensure the financial feasibility of the Project, Burbank has requested that
the City (i) amend the existing note payable to the City to provide for an extension of the term, a
reduction of the interest rate, and an assignment to the Developer, and (ii) provide an.additional
loan in the approximate amount of $800,000 (the "New City Loan "); and
WHEREAS, the New City Loan will be funded with a portion of the sale proceeds of
the Park Lane Apartments that will be assigned to the City by an affiliate of Burbank; and
WHEREAS, proposed forms of the following documents (collectively, the "Loan
Documents ") have been provided to the City Council: a loan agreement; an amended version of
the existing City note; an amendment to the existing City deed of trust; a promissory note that
will evidence the Developer's obligation to repay the New City Loan; a Deed of Trust securing
repayment of the New City Loan; and an Affordable Housing Regulatory Agreement and
Declaration of Restrictive Covenants ( "Regulatory Agreement ") that will restrict the Project for
occupancy at affordable rents; and
WHEREAS, in connection with the rehabilitation of the Project, conventional lenders
will provide construction and permanent financing, and may require the subordination of certain
of the Loan Documents.
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hereby:
NOW THEREFORE BE IT RESOLVED that the City Council of the City of Petaluma
1. Finds that the modification of the existing City loan and the provision of the New
City Loan are necessary to make the Project financially feasible and affordable to
lower income households.
2. Approves the modification of the existing City Loan and the provision of the New
City Loan.
3. Approves the Loan Documents, and authorizes the City Manager or his designee to
execute and deliver each Loan Document to which the City is a party substantially in
the form provided for City Council review, with such modifications as may be
approved by the City Manager in consultation with the City Attorney, provided that
such modifications are consistent with the intent of this Resolution and do not
substantially increase the obligations or impair the rights of the City.
4. Agrees to subordinate the Regulatory Agreement and the deeds of trust executed or to
be executed in connection with the financing of the Project to the deeds of trust and
the regulatory agreements to be executed by Developer for the benefit of the Project
construction and permanent lenders, provided that the City is provided reasonable
protections including reasonable notice and cure rights in the event of a default under
the senior documents.
5. Authorizes and directs the City Manager and his designees to execute all documents
and to take all actions reasonably necessary to implement this Resolution and the
transactions described herein.
. PASSED AND ADOPTED AT A REGULAR MEETING OF THE CITY COUNCIL OF
THE CITY OF PETALUMA ON , 2015 BY THE FOLLOWING
VOTE:
AYES:
NOES:
ABSTAIN:
ABSENT:
ATTEST:
City Clerk
M
ATTACHMENT #2
AFFORDABLE HOUSING LOAN AGREEMENT
THIS AFFORDABLE HOUSING LOAN AGREEMENT (this "Agreement ") is entered
into effective as of June 1, 2015 ( "Effective Date ") by and between the City of St. Petaluma, a
municipal corporation ( "City ") and Madrone Village 2, L.P., a California limited partnership
( "Developer "). The City and the Developer are collectively referred to herein as the "Parties."
RECITALS
A. Pursuant to that certain Loan Agreement (the "Original Loan Agreement ")
dated as of August 18, 1988, and executed by and between the City and Burbank Housing
Development Corporation, a California nonprofit public benefit corporation ( "Burbank "), the
City agreed to provide funds to provide partial financing for the development of an affordable
multifamily residential development located in the City of Petaluma at 700 and 712 Sycamore
Lane, known as Sonoma County Assessor's Parcel Nos. 006 - 461 -034 and 006 - 461 -035, and
more particularly described in Exhibit A attached hereto and incorporated herein (the
"Property ").
B. Pursuant to the Original Loan Agreement, the City agreed to make a loan to
Burbank in the amount of Two Hundred Eighty -Nine Thousand, Nine Hundred Forty -Seven
($289,947) (the "Original City Loan "). The Original City Loan is evidenced by a Promissory
Note in the original principal amount of the Original City Loan, dated August 18, 1988, executed
by Burbank for the benefit of City, and subsequently amended to modify the maturity date
pursuant to that certain Modification Agreement dated as of June 23, 1999 and executed by City
and Burbank (as so amended, the "Original City Note "). Repayment of the Original City Note
is secured by a deed of trust dated August 18, 1988 and recorded in the Official Records on
August 25, 1988 as Instrument No. 88- 070712 (the "Original City Deed of Trust "). The
obligation to repay the Original City Loan has been assumed by Developer. The Original Loan
Agreement, the Original City Deed of Trust, and the Original City Note are referred to herein as
the "Original City Financing Documents."
C. Developer has acquired, or will acquire the Property and the 23 -unit multi - family
project located thereon (the "Project ") from Madrone Village Associates, a California limited
partnership ( "Madrone Associates ").
D. Developer intends to rehabilitate the Project using the proceeds of tax- exempt
bonds and equity contributions by Developer's limited partner(s) in connection with federal low -
income housing tax credits. In connection therewith, Developer proposes to extend the term of
affordability restrictions, and has requested that City modify the terms of the Original City
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Financing Documents to extend the maturity date, modify the interest rate, and modify certain
other terms.
E. The City has determined that Developer's acquisition of the Property and
rehabilitation of the Project, the modification to the terms of the original City financing, and the
provision of additional financing pursuant to the terms and conditions set forth herein, will be of
benefit to the City by improving and increasing the affordability of the community's stock of
affordable housing.
F. Concurrently with the execution of this Agreement, among other documents,
Developer will execute: an amended and restated promissory note in the amount of the existing
principal balance and accrued interest payable under the Original City Note, an additional
promissory note evidencing Developer's obligation to repay the additional funds to be provided
by City pursuant to this Agreement, an amended and restated deed of trust that will provide City
with a security interest in the Property and the Project to secure repayment of the amended and
restated note and the additional note, and an Affordable Housing Regulatory Agreement and
Declaration of Restrictive Covenants that will require Project rents to be affordable to very low -
and low- income households for a term of not less than fifty -five (55) years.
AGRF,F,MFNT
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the Parties agree as follows.
1. Assignment and Assumption. Pursuant to separate instrument(s), Developer has
assumed all rights and obligations of Burbank (including those previously assigned to and
assumed by Madrone Associates) arising under the Original City Financing Documents. City
hereby acknowledges its consent to such assignment and its consent to Developer's acquisition
of the Property and the Project.
2. Original Loan Proceeds. Developer and City each hereby acknowledge and agree that
prior to the Effective Date, City has disbursed all sums that City was obligated to provide
pursuant to the Original City Financing Documents.
3. Modification of Terms. City agrees to modify the terms of the Original City Loan to
provide that: (i) interest shall accrue at the Applicable Federal Rate for long -term debt as
published in the Federal Register for the month in which the closing for Developer's acquisition
of the Property occurs (the "Closing "); and (ii) the maturity date shall be extended to the date
(the "Maturity Date ") that is the earlier of (a) the fifty -fifth (55th) anniversary of the date upon
which City issues a final certificate of occupancy or equivalent for the Project, or (b) the fifty-
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seventh (57th) anniversary of the date of this Agreement. Developer's obligation to repay to
City the principal balance and accrued interest under the Original City Note shall be evidenced
by an Amended and Restated Secured Promissory Note (the "Amended Note ") that Developer
shall execute substantially in the form attached hereto as Exhibit B and deliver to City on the
Closing date. The Amended Note shall supersede in its entirety the Original City Note.
4. Additional Loan. Upon the terms and conditions and for the purposes set forth in this
Agreement, City agrees to provide a loan to Developer in an amount not to exceed [Seven
Hundred Fifty Thousand Dollars ($750,000] (the "Loan "). The Loan shall be evidenced by a
secured promissory note to be executed by Developer substantially in the form attached hereto as
Exhibit C (the "Additional Note "). The proceeds of the Loan shall be disbursed solely for the
purpose of funding acquisition of the Property and development of the Project.
5. Deed of Trust and Regulatory Agreement. Repayment of the Amended Note and the
Additional Note shall be secured by an Amended and Restated Deed of Trust, Security
Agreement and Fixture Filing (the "A &R Deed of Trust ") that will be executed by Developer
substantially in the form attached hereto as Exhibit D and recorded on the Closing date.
Developer shall execute an Affordable Housing Regulatory Agreement and Declaration of
Restrictive Covenants substantially in the form attached hereto as Exhibit E (the "Regulatory
Agreement ") that will require Project rents to be affordable to very low -, and low- income
households through the Maturity Date, and that will be recorded against the Property on the
Closing date. This Agreement, the Amended Note, the Additional Note, the A &R Deed of Trust,
and the Regulatory Agreement are collectively referred to herein as the "City Loan
Documents."
6. Cost Reimbursement. Developer will reimburse City for City's legal costs (including
outside counsel expense and the allocated cost of City's in -house counsel) incurred in connection
with City's preparation, review and execution of the documents associated with Developer's
acquisition and refinancing of the Property and the Project, including without limitation, this
Agreement and the documents referenced herein, in amount not to exceed Twenty -five Thousand
Dollars ($25,000). City shall provide a statement of all such costs, and Developer shall
reimburse City for such costs to City through escrow on the Closing date.
7. Developer Representations. Developer acknowledges that City shall rely upon
Developer's representations made herein notwithstanding any investigation made by or on behalf
of City. Developer hereby represents and warrants as follows:
(a) Organization. Developer is duly organized, validly existing, in good standing
under the laws of the State of California, and has the power and authority to carry out its
obligations under this Agreement. Developer's managing general partner is Madrone Village 2
LLC, a California limited liability company whose sole manager and member is Burbank
Housing Development Corporation, a California nonprofit public benefit corporation hat is duly
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organized, validly existing, and in good standing under the laws of the State of California, and
tax - exempt under Section 501(c)(3).of the Internal Revenue Code of 1986, as amended.
(b) Authority of Developer. Developer has full power and authority to execute and
deliver this Agreement and all other documents or instruments executed and delivered, or to be
executed and delivered, pursuant to or in connection with this Agreement, and to perform and
observe the terms and provisions of all of the above.
(c) Authority of Persons Executing Documents. This Agreement and all other
documents or instruments executed and delivered, or to be executed and delivered, pursuant to or
in connection with this Agreement, have been executed and delivered, or will be executed and
delivered, by persons who are duly authorized to execute and deliver the same for and on behalf
of Developer, and all actions required under Developer's organizational documents and
applicable governing law for the authorization, execution, delivery and performance of this
Agreement and all other documents or instruments executed and delivered, or to be executed and
delivered, pursuant to or in connection with this Agreement, have been duly taken or will have
been duly taken (to the extent such actions are required) as of the date of execution and delivery
of the above -named documents.
(d) Valid and Binding Agreements. This Agreement and all other documents or
instruments which have been executed and delivered or will be executed and delivered pursuant
to or in connection with this Agreement constitute or, if not yet executed or delivered, will when
so executed and delivered, constitute, legal, valid and binding obligations of Developer,
enforceable in accordance with their respective terms, subject to laws affecting creditors' rights
and principles of equity.
(e) No Breach of Law or Agreement. Neither the execution nor delivery of this
Agreement or any other documents or instruments executed and delivered, or to be executed or
delivered, pursuant to or in connection with this Agreement, nor the performance of any
provision, condition, covenant or other term hereof or thereof, will conflict with or result in a
breach of any statute, rule or regulation, or any judgment, decree or order of any court, board,
commission or agency binding on Developer, or any provision of the organizational documents
of Developer, or will conflict with or constitute a breach of or a default under any agreement to
which Developer is a party, or will result in the creation or imposition of any lien upon any
assets or property of Developer, other than liens established pursuant hereto.
(f) Pending Proceedings. Except as disclosed in writing to the City prior to execution
of this Agreement, Developer is not in violation under any law or regulation or under any order
of any court, board, commission or agency whatsoever, and, to the best knowledge of
Developer's principals, there are no claims, actions, suits or proceedings pending or, to the
knowledge of Developer's principals, threatened against or affecting Developer or the Property,
at law or in equity, before or by any court, board, commission or agency. Developer is not the
subject of a bankruptcy or insolvency proceeding.
8. Lender's Title Policy. It shall be a condition to Closing that North American Title
Company (or other title company approved by City) shall issue to City an A.L.T.A. Lender's
Policy of Title Insurance for the benefit and protection of City ( "Lender's Title Policy ") in the
aggregate amount of the Original City Note and the Amended Note, insuring that the lien of the
A &R Deed of Trust and the Regulatory Agreement are subject only to such title exceptions and
such other defects, liens, conditions, encumbrances, restrictions, easements and exceptions as
City may reasonably approve in writing and containing such endorsements as City may
reasonably require, with the cost of such Lender's Title Policy to be paid by Developer.
9. Construction/Rehabilitation Requirements.
9.1 The Project. The Project will include the rehabilitation of the multi - family
residential development currently existing on the Property.
9.2 Cost of Acquisition and Construction. Except as expressly set forth herein,
Developer shall be solely responsible for all direct and indirect costs and expenses incurred in
connection with the acquisition of the Property, including without limitation appraisal fees, title
reports and any environmental assessments Developer elects to undertake. Except as expressly
set forth herein, all costs of designing, and rehabilitating the Project and compliance with the
Conditions of Approval, shall be borne solely by Developer and shall not be an obligation of the
City.
9.3 Permits and Approvals; Payment of Fees, Cooperation. Developer acknowledges
that the execution of this Agreement by the City does not constitute City approval for the
purpose of the issuance of building permits, does not relieve Developer from the obligation to
apply for and to obtain from the City and all other agencies with jurisdiction over the Property,
all necessary approvals, entitlements, and permits for the rehabilitation of the Project (including
without limitation the approval of architectural plans, the issuance of any certificates regarding
historic resources required in connection with the development of the Property (if any), and the
approval of the Project in compliance with CEQA and if applicable, NEPA), nor does it limit in
any manner the discretion of the City or any other agency in the approval process. Developer
shall pay when due all customary and reasonable fees and charges in connection with the
processing of all applicable permits and approvals. Developer shall not commence . construction
work on the Project prior to issuance of building permits required for such work. City staff shall
work cooperatively with Developer to assist in coordinating the expeditious processing and
consideration of all permits, entitlements and approvals necessary for the rehabilitation and
operation of the Project as contemplated by this Agreement.
9.4 Design Review; Conditions of Approval. Developer shall rehabilitate the Project
in accordance with the terms and conditions of this Agreement and in compliance with the
approved site plan and design documents and the terms and conditions of all approvals,
entitlements and permits that the City or any other governmental body or agency with
jurisdiction over the Project or the Property has granted or issued as of the date hereof or may
hereafter grant or issue in connection with development of the Project, including without
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limitation, all mitigation measures imposed in connection with environmental review of the
Project and all conditions of approval imposed in connection with any entitlements, approvals or
permits (all of the foregoing approvals, entitlements, permits, mitigation measures and conditions
of approval are hereafter collectively referred to as the "Conditions of Approval ").
9.5 Fees. Developer shall be solely responsible for, and shall promptly pay when due,
all customary and usual fees and charges of City and all other agencies with jurisdiction over the
Property in connection with obtaining building permits and other approvals for the Project,
including without limitation, those related to the processing and consideration of amendments, if
any, to the current entitlements, any related approvals and permits, environmental review,
architectural review, historic review, and any subsequent approvals for the Project.
9.6 Construction Plans. Developer shall submit to City's Building Department
detailed construction plans for the Project (the "Construction Plans "). As used herein
"Construction Plans" means all construction documents upon which Developer and
Developer's contractors shall rely in rehabilitating the Project (including the landscaping,
parking, and common areas) and shall include, without limitation, the site development plan,
final architectural drawings, landscaping, exterior lighting and signage plans and specifications,
materials specifications, final elevations, and building plans and specifications.
9.7 Construction Pursuant to Plans. Developer shall rehabilitate the Project in
accordance with the approved Construction Plans, the Conditions of Approval, and all other
permits and approvals granted by the City pertaining to the Project. Developer shall comply with
all directions, rules and regulations of any fire marshal, health officer, building inspector or other
officer of every governmental agency having jurisdiction over the Property or the Project. Each
element of the work shall proceed only after procurement of each permit, license or other
authorization that may be required for such element by any governmental agency having
jurisdiction. All design and construction work on the Project shall be performed by licensed
contractors, engineers or architects, as applicable.
9.8 Change in Construction Plans. If Developer desires to make any material change
in the approved Construction Plans, Developer shall submit the proposed change in writing to the
City for its written approval, which approval shall not be unreasonably withheld or delayed if the
Construction Plans, as modified by any proposed change, conform to the requirements of this
Agreement and any approvals issued by the City after the Effective Date. Unless a proposed
change is approved by City within thirty (30) days, it shall be deemed rejected. If rejected, the
previously approved Construction Plans shall continue to remain in full force and effect. Any
change in the Construction Plans required in order to comply with applicable codes shall be
deemed approved, so long as such change does not substantially nor materially change the
architecture, design, function, use, or amenities of the Project as shown on the latest approved
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Construction Plans. Nothing in this Section is intended to or shall be deemed to modify the
City's standard plan review procedures.
9.9 Rights of Access. For the purpose of ensuring that the rehabilitation of the
Project is completed in compliance with this Agreement, Developer shall permit representatives
of the City to enter upon the Property following 24 hours written notice (except in the case of
emergency in which case such notice as may be practical under the circumstances shall be
provided).
9.10 City Disclaimer. Developer acknowledges that the City is under no obligation,
and the City neither undertakes nor assumes any responsibility or duty to Developer or to any
third party, to in any manner review, supervise, or inspect the progress of rehabilitation or the
operation of the Project. Developer and all third parties shall rely entirely upon its or their own
supervision and inspection in determining the quality and suitability of the materials and work,
the performance of architects, subcontractors, and material suppliers, and all other matters
relating to the rehabilitation and operation of the Project. Any review or inspection undertaken
by the City is solely for the purpose of determining whether Developer is properly discharging
its obligations under this Agreement, and shall not be relied upon by Developer or any third
party as a warranty or representation by the City as to the quality of the design or construction of
the Project or otherwise.
9.11 Defects in Plans. The City shall not be responsible to Developer or to any third
party for any defect in the Construction Plans or for any structural or other defect in any work
done pursuant to the Construction Plans. To the greatest extent allowed by law, Developer shall
indemnify, defend (with counsel approved by City) and hold harmless the Indemnitees from and
against all Claims arising out of, or relating to, or alleged to arise from or relate to defects in the
Construction Plans or defects in any work done pursuant to the Construction Plans whether or
not any insurance policies shall have been determined to be applicable to any such Claims.
Developer's indemnification obligations set forth in this Section shall survive the expiration or
earlier termination of this Agreement and the recordation of a Certificate of Completion.
Developer's indemnification obligations pursuant to this Section shall not extend to Claims
arising solely from the gross negligence or willful misconduct of the Indemnitees.
9.12 Certificate of Completion for Project. Promptly after completion of rehabilitation
of the Project, issuance of a final Certificate of Occupancy or equivalent by the City for the
Project, and the written request of Developer, the City will provide a certificate ( "Certificate of
Completion ") so certifying, provided that at the time such certificate is requested all applicable
work has been completed for the Project.. The Certificate of Completion shall be conclusive
evidence that Developer has satisfied its obligations regarding the development of the Project.
At Developer's option the Certificate of Completion shall be recorded in the Official Records.
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The Certificate of Completion shall not constitute evidence of compliance with or satisfaction of
any obligation of Developer to any holder of a deed of trust or mortgage securing money loaned
to finance the Project or any part thereof and shall not be deemed a notice of completion under
the California Civil Code, nor shall such Certificate provide evidence that Developer has
satisfied any obligation that survives the expiration of this Agreement.
9.13 Equal Opportunity. There shall be no discrimination on the basis of race, color,
religion, creed, sex, sexual orientation, marital status, ancestry or national origin in the hiring,
firing, promoting or demoting of any person engaged in construction work on the Property, and
Developer shall direct its contractors and subcontractors to refrain from discrimination on such
basis.
9.14 Prevailing Wage. If required by applicable federal and state law, Developer and
its contractors and agents shall comply with the federal Davis Bacon Act and implementing
regulations and with California Labor Code Section 1720 et seq. and the regulations adopted
pursuant thereto (all of the foregoing, collectively, "Prevailing Wage Laws "), and shall be
responsible for carrying out the requirements of such provisions. If applicable, Developer shall
submit to City a plan for monitoring payment of prevailing wages and shall implement such plan
at Developer's expense.
To the greatest extent allowed by law, Developer shall indemnify, defend (with counsel
reasonably approved by City) and hold the City and its elected and appointed officers, officials,
employees, agents, consultants, and contractors (collectively, the "Indemnitees ") harmless from
and against all liability, loss, cost, expense (including without limitation reasonable attorneys'
fees and costs of litigation), claim, demand, action, suit, judicial or administrative proceeding,
penalty, deficiency, fine, order, and damage (all of the foregoing collectively "Claims ") which
directly or indirectly, in whole or in part, are caused by, arise from, or relate to the payment or
requirement of payment of prevailing wages (including without limitation, all claims that may be
made by contractors, subcontractors or other third party claimants pursuant to Labor Code
Sections 1726 and 178 1) or the requirement of competitive bidding in connection with the
Project, the failure to comply with any state or federal labor laws, regulations or standards in
connection with this Agreement, including but not limited to the Prevailing Wage Laws, or any
negligent act or omission of Developer related to this Agreement with respect to the payment or
requirement of payment of prevailing wages or the requirement of competitive bidding, whether
or not any insurance policies shall have been determined to be applicable to any such Claims.
Developer's indemnification obligations set forth in this Section (i) shall survive the expiration
or earlier termination of this Agreement, and (ii) shall not extend to Claims arising solely from
the gross negligence or willful misconduct of the Indemnitees.
9.15 Compliance with Laws. Developer shall carry out and shall cause its contractors
to carry out the rehabilitation of the Project in conformity with all applicable federal, state and
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local laws, rules, ordinances and regulations, including without limitation, all applicable federal
and state labor laws and standards, Section 3 of the Housing and Community Development Act
of 1974, as amended (if applicable), applicable provisions of the California Public Contracts
Code (if any), the City zoning and development standards, building, plumbing, mechanical and
electrical codes, all other provisions of the City's Municipal Code, and all applicable disabled
and handicapped access requirements, including without limitation, the Americans with
Disabilities Act, 42 U.S.C. Section 12101, et seq., Government Code Section 4450, et seq.,
Government Code Section 11135, et seq., and the Unruh Civil Rights Act, Civil Code Section
51, et seq.. To the greatest extent allowed by law, Developer shall indemnify, defend (with
counsel reasonably approved by City) and hold harmless the Indemnitees from and against any
and all Claims arising from the breach of Developer's obligations set forth in this Section
whether or not any insurance policies shall have been determined.to be applicable to any such
Claims. Developer's indemnification obligations set forth in this Section (i) shall survive the
expiration or earlier termination of this Agreement, and (ii) shall not extend to Claims arising
solely from the gross negligence or willful misconduct of the Indemnitees.
9.16 Liens and Stop Notices. Until the later of the date of reconveyance of the Deed of
Trust or the expiration of the term of the Regulatory Agreement, Developer shall not allow to be
placed on the Property or any part thereof any lien or stop notice on account of materials
supplied to or labor performed on behalf of Developer. If a claim of a lien or stop notice is given
or recorded affecting the Project or the Property or any part thereof, Developer shall within
twenty (20) days of such recording or service: (a) pay and discharge (or cause to be paid and
discharged) the same; or (b) effect the release thereof by recording and delivering (or causing to
be recorded and delivered) to the party entitled thereto a surety bond in sufficient form and
amount; or (c) provide other assurance satisfactory to City that the claim of lien or stop notice
will be paid or discharged.
9.17 Right of City to Satisfy Liens on the Property. If Developer fails to satisfy or
discharge any lien or stop notice on the Property or any part thereof pursuant to and within the
time period set forth in Section 9.4 above, the City shall have the right, but not the obligation, to
satisfy any such liens or stop notices at Developer's expense and without further notice to
Developer and all sums advanced by City for such purpose shall be part of the indebtedness
secured by the Deed of Trust. In such event Developer shall be liable for and shall immediately
reimburse City for such paid lien or stop notice. Alternatively, the City may require Developer
to immediately deposit with City the amount necessary to satisfy such lien or claim pending
resolution thereof. The City may use such deposit to satisfy any claim or lien that is adversely
determined against Developer. Developer shall file a valid notice of cessation or notice of
completion upon cessation of construction work on the Property for a continuous period of thirty
(30) days or more, and shall take all other reasonable steps to forestall the assertion of claims or
liens against the Property. The City may (but has no obligation to) record any notices of
completion or cessation of labor, or any other notice that the City deems necessary or desirable
to protect its interest in the Property.
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9.18 Insurance. Developer shall maintain and shall cause its contractors to maintain all
applicable insurance coverage specified in Exhibit C to the Regulatory Agreement. City does
not and shall not waive any rights against Owner that it may have by reason of any indemnity
and hold harmless provision set forth in this Agreement because of the acceptance by City, or the
deposit with City by Owner, of any of the insurance policies Developer is required to obtain and
maintain as described in this Agreement or any of the other Loan Documents.
10. Use of the Property
10.1 Affordable Housing. Developer covenants and agrees for itself, its successors
and assigns that the Property and the Project will be subject to recorded covenants that will
restrict the Property for use as a multi - family residential project that is rented to Eligible
Households at Affordable Rents in accordance with the terms set forth in the Regulatory
Agreement. One (1) of the residential units in the Project shall be a manager's unit for which the
rent will not be restricted.
10.2 Relocation. Developer covenants that persons residing on the Property shall not
be displaced before suitable temporary replacement housing is available within the Project or
elsewhere. Developer shall ensure that all occupants of the Property receive all notices, benefits
and assistance to which they are entitled in accordance with California Relocation Assistance
Law (Government Code Section 7260 et seq.), all state and local regulations implementing such
law, and all other applicable local, state and federal laws and regulations (collectively
"Relocation Laws ") relating to the displacement and relocation of eligible persons as defined in
such Relocation Laws. Any and all costs incurred in connection with the temporary and/or
permanent displacement and/or relocation of occupants of the Property, including without
limitation payments to a relocation consultant, moving expenses, and payments for temporary
and permanent relocation benefits pursuant to Relocation Laws shall be paid by Developer. To
the greatest extent allowed by law, Developer shall indemnify, defend (with counsel approved by
City) and hold harmless the Indemnitees from and against any and all Claims arising in
connection with the breach of Developer's obligations set forth in this Section whether or not
any insurance policies shall have been determined to be applicable to any such Claims.
Developer's indemnification obligations set forth in this Section (i) shall survive the expiration
or earlier termination of this Agreement, and (ii) shall not extend to Claims arising solely from
the gross negligence or willful misconduct of the Indemnitees. Prior to displacement of any
tenant residing on the Property necessitated by the rehabilitation of the Project, Developer shall
obtain from each such tenant and deliver to City, a written waiver in form approved by City, that
provides that the tenant shall hold the Indemnitees harmless from and against any Claim arising
in connection with relocation of such tenant, including without limitation, any and all Claims
arising in connection with the length of time the tenant is required to reside in temporary housing
or in connection with the condition of trailers or other replacement housing provided to the
tenant.
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10.3 Maintenance. Developer shall at its own expense, maintain the Property and the
Pro j ect , including the landscaping and common areas in good physical condition , in good re p air,
and in decent, safe, sanitary, habitable and tenantable living conditions in conformity with all
applicable laws. Without limiting the foregoing, Developer agrees to maintain the Property and
the Project (including without limitation, landscaping, driveways, parking areas, and walkways)
in a condition free of all waste, nuisance, debris, unmaintained landscaping, graffiti, disrepair,
abandoned vehicles /appliances, and illegal activity, and shall take all reasonable steps to prevent
the same from occurring on the Property. Developer shall prevent and /or rectify any physical
deterioration of the Project and shall make all repairs, renewals and replacements necessary
to keep the Property and the Project in good condition and repair.
10.4 Taxes and Assessments. Developer shall pay all real and personal property taxes,
assessments and charges and all franchise, income, payroll, withholding, sales, and other taxes
assessed against the Property or the Project, at such times and in such manner as to prevent any
penalty from accruing, or any lien or charge from attaching to the Property or Project; provided,
however, Developer shall have the right to contest in good faith, any such taxes, assessments, or
charges. In the event the Developer exercises its right to contest any tax, assessment, or charge,
the Developer, on final determination of the proceeding or contest, shall immediately pay or
discharge any decision or judgment rendered against it, together with all costs, charges and
interest.
10.5 Obligation to Refrain from Discrimination. Developer shall not restrict the rental,
sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property or the Project,
or any portion thereof, on the basis of race, color, religion, creed, sex, sexual orientation,
disability, marital status, ancestry, or national origin of any person. Developer covenants for
itself and all persons claiming under or through it, and this Agreement is made and accepted
upon and subject to the condition that there shall be no discrimination against or segregation of
any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section
12955 of the Government Code, . as those bases are defined in Sections 12926, 12926. 1,
subdivision (m) and aaraua-oh (1) of subdivision (b) of Section 12955, and Section 12955.2 of
the Government Code in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment
of the Property or the Project, or part thereof, nor shall Developer or any person claiming under
or through Developer establish or permit any such practice or practices of discrimination or
segregation with reference to the selection, location, number, use or occupancy of tenants,
lessees, subtenants, sublessees or vendees in, of, or for the Property or Project, or part thereof.
Developer shall include such provision in all deeds, leases, contracts and other instruments
executed by Developer, and shall enforce the same diligently and in good faith.
All deeds, leases, and contracts pertaining to management of the Project, made or entered
into by Developer, its successors or assigns, as to any portion of the Property or the Project shall
contain the following language:
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(a) In Deeds, the following language shall appear.
"(1) Grantee herein covenants by and for itself, its successors and assigns, and all
persons claiming under or through it, that there shall be no discrimination against
or segregation of a person or of a group of persons on account of any basis listed
in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases
are defined in Sections 12926, 12926. 1, subdivision (m) and paragraph (11 of
subdivision (p) of Section 12955, and Section 12955.2 of the Government Code
in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the
property herein conveyed nor shall the grantee or any person claiming under or
through the grantee establish or permit any such practice or practices of
discrimination or segregation with reference to the selection, location, number,
use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the
property herein conveyed. The foregoing covenant shall run with the land.
"(2) Notwithstanding paragraph (1), with respect to familial status, paragraph
(1) shall not be construed to apply to housing for older persons, as defined in
Section 12955.9 of the Government Code. With respect to familial status, nothing
in paragraph (1) shall be construed to affect Sections 51 .2, 51.3, 51.4, 51.10
51.11 and 799.5 of the Civil Code, relating to housing for senior citizens.
Subdivision (d) of Section 51 and Section 1360 of the Civil Code and
subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall
apply to paragraph
kb),In Leases the following language shall appear:
"(1) The lessee herein covenants by and for the lessee and lessee's heirs, personal
representatives and assigns, and all persons claiming under the lessee or through
the lessee, that this lease is made subject to the condition that there shall be no
discrimination against or segregation of any person or of a group of persons on
account of race, color, creed, religion, sex, sexual orientation, marital status,
national origin, ancestry or disability in the leasing, subleasing, transferring, use,
occupancy, tenure or enjoyment of the property herein leased nor shall the lessee
or any person claiming under or through the lessee establish or permit any such
practice or practices of discrimination of segregation with reference to the
selection, location, number, use or occupancy of tenants, lessees, sublessees,
subtenants, or vendees in the property herein leased.
"(2) Notwithstanding paragraph (1), with respect to familial status, paragraph (1)
shall not be construed to apply to housing for older persons, as defined in Section
12955.9 of the Government Code. With respect to familial status, nothing in
paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11
and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision
(d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o),
and (p) of Section 12955 of the Government Code shall apply to paragraph (1)."
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(c) In Contracts pertaining to management of the Project, the following language, or
substantially similar language prohibiting discrimination and segregation shall appear:
"There shall be no discrimination against or segregation of any person or group of
persons on account of any basis listed in subdivision (a) or (d) of Section 12955
of the Government Code as those bases are defined in Sections 12926 12926.1
subdivision (m) and paragraph (1) of subdivision (n) of Section 12955, and
Section 12955.2 of the Government Code in the sale, lease, sublease, transfer,
use, occupancy, tenure or enjoyment of the property nor shall the transferee or
any person claiming under or through the transferee establish or permit any such
practice or practices of discrimination or segregation with reference to selection,
location, number, use or occupancy of tenants, lessee, subtenants, sublessees or
vendees of the land."
11. Environmental Matters.
11.1 Developer's Post - Closing Obligations. Developer hereby covenants and agrees
that:
(1) Developer shall not knowingly permit the Property or any portion thereof
to be a site for the use, generation, treatment, manufacture, storage, disposal or
transportation of Hazardous Material or otherwise knowingly permit the presence or
release of Hazardous Material in, on, under, about or from the Property with the
exception of limited amounts of cleaning supplies and other materials customarily used in
construction, rehabilitation, use or maintenance of residential properties similar in nature
to the Project, and used, stored and disposed of in compliance with Environmental Laws.
(2) Developer shall keep and maintain the Property and each portion thereof
in compliance with, and shall not cause or permit the Project or the Property or any
portion of either to be in violation of, any Environmental Laws.
(3) Upon receiving actual knowledge of the same, Developer shall
immediately advise City in writing of. (i) any and all enforcement, cleanup, removal or
other governmental or regulatory actions instituted, completed or threatened against the
Developer, or the Property pursuant to any applicable Environmental Laws; (ii) any and
all claims made or threatened by any third party against the Developer or the Property
relating to damage, contribution, cost recovery, compensation, loss or injury resulting
from any Hazardous Material; (iii) the presence or release of any Hazardous Material in,
on, under, about or from the Property; or (iv) Developer's discovery of any occurrence or
condition on any real property adjoining or in the vicinity of the Project classified as
"Border Zone Property" under the provisions of California Health and Safety Code,
Sections 25220 et seq., or any regulation adopted in connection therewith, that may in
any way affect the Property pursuant to any Environmental Laws or cause it or any part
thereof to be designated as Border Zone Property. The matters set forth in the foregoing
clauses (i) through (iv) are hereinafter referred to as "Hazardous Materials Claims ").
The City shall have the right to join and participate in, as a party if it so elects, any legal
proceedings or actions initiated in connection with any Hazardous Materials Claim.
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(4) Without the City's prior written consent, which shall not be unreasonably
withheld or delayed, Developer shall not take any remedial action in response to the
presence of any Hazardous Material in, on, under, or about the Property (other than in
emergency situations or as required by governmental agencies having jurisdiction in
which case the City agrees to provide its consent), nor enter into any settlement
agreement, consent decree, or other compromise in respect to any Hazardous Materials
Claim. City shall have the right to join and participate in, as a party if it so elects, any
legal proceedings or actions initiated in connection with any Hazardous Materials Claims
and to have its reasonable attorneys' fees in connection therewith paid by Developer.
11.2 Environmental Indemnity. To the greatest extent allowed by law, Developer shall
indemnify, defend (with counsel approved by City) and hold Indemnitees harmless from and
against all Claims resulting, arising, or based directly or indirectly in whole or in part, upon (i)
the presence, release, use, generation, discharge, storage or disposal of any Hazardous Material
on, under, in or about the Property, or the transportation of any such Hazardous Material to or
from, the Property, or (ii) the failure of Developer, Developer's employees, agents, contractors,
subcontractors, or any person acting on behalf of or as the invitee of any of the foregoing to
comply with Environmental Laws, unless caused by the City's active or passive negligence. The
foregoing indemnity shall further apply to any residual contamination in, on, .under or about the
Property or affecting any natural resources, and to any contamination of any property or natural
resources arising in connection with the generation, use, handling, treatment, storage, transport
or disposal of any such Hazardous Material, and irrespective of whether any of such activities
were or will be undertaken in accordance with Environmental Laws.
The provisions of this Section 11.2 shall be in addition to any and all other obligations
and liabilities that Developer may have under applicable law, and each Indemnitee shall be
entitled to indemnification under this Section without regard to whether City or that Indemnitee
has exercised any rights against the Property or any other security, pursued any rights against any
guarantor or other party, or pursued any other rights available under the City Documents or
applicable law. Developer's indemnification obligations set forth in this Section shall survive
the expiration or earlier termination of this Agreement and the recordation of a Certificate of
Completion. Developer's indemnification obligations pursuant to this Section shall not extend to
Claims arising solely from the gross negligence or willful misconduct of the Indemnitees.
11.3 Disclosure. Developer represents and warrants that except as disclosed to City in
writing, as of the date hereof to the current actual knowledge of Developer's principals: (i) the
Property is free and has always been free of Hazardous Materials and is not and has never been
in violation of any Hazardous Materials Law; (ii) there are no buried or partially buried storage
tanks located on the Property; (iii) Developer has received no notice, warning, notice of
violation, administrative complaint, judicial complaint, or other formal or informal notice
alleging that conditions on the Property are or have ever been in violation of any Hazardous
Materials Law or informing Developer that the Property is subject to investigation or inquiry
regarding Hazardous Materials on the Property or the potential violation of any Hazardous
on
Materials Law; (iv) there is no monitoring program required by the Environmental Protection
Agency or any other governmental agency concerning the Property; (v) no toxic or hazardous
chemicals, waste, or substances of any kind have ever been spilled, disposed of, or stored on,
under or at the Property, whether by accident, burying, drainage, or storage in containers, tanks,
holding areas, or any other means; (vi) the Property has never been used as a dump or landfill;
and (vii) Developer has disclosed to City all information, records, and studies in Developer's
possession or reasonably available to Developer relating to the Property concerning Hazardous
Materials.
Developer hereby acknowledges and agrees that (i) this Section is intended as the City's
written request for information (and the Developer's response) concerning the environmental
condition of the Property as required by California Code of Civil Procedure Section 726.5(d)(2),
and (ii) each representation and warranty in this Agreement or any of the other City Documents
(together with any indemnity applicable to a breach of any such representation and warranty)
with respect to the environmental condition of the property is intended by the City and the
Developer to be an "environmental provision" for purposes of California Code of Civil
Procedure Section 736.
11.4 City's Rights. In the event that any portion of the Property is determined to be
"environmentally impaired" (as that term is defined in California Code of Civil Procedure
Section 726.5(e)(3)) or to be an "affected parcel" (as that term is defined in California Code of
Civil Procedure Section 726.5(e)(1)), then, without otherwise limiting or in any way affecting the
City's or the Trustee's rights and remedies under the Deed of Trust, the City may elect to
exercise its rights under California Code of Civil Procedure Section 726.5(a) to (1) waive its lien
on such environmentally impaired or affected portion of the Property and (2) exercise (a) the
rights and remedies of an unsecured creditor, including reduction of its claim against the
Developer to judgment, and (b) any other rights and remedies permitted by law. For purposes of
determining the City's right to proceed as an unsecured creditor under California Code of Civil
Procedure Section 726.5(a), the Developer shall be deemed to have willfully permitted or
acquiesced in a release or threatened release of hazardous materials, within the meaning of
California Code of Civil Procedure Section 726.5(d)(1), if the release or threatened release of
hazardous materials was knowingly or negligently caused or contributed to by any lessee,
occupant, or user of any portion of the Property and the Developer knew or should have known
of the activity by such lessee, occupant, or user which caused or contributed to the release or
threatened release. All costs and expenses, including (but not limited to) reasonable attorneys'
fees, incurred by the City in connection with any action commenced under this paragraph,
including any action required by California Code of Civil Procedure Section 726.5(b) to
determine the degree to which the Property is environmentally impaired, plus interest thereon at
the default rate specified in the Note, until paid, shall be added to the indebtedness secured by
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the Deed of Trust and shall be due and payable to the City upon its demand made at any time
following the conclusion of such action.
11.5 No Limitation. Developer hereby acknowledges and agrees that Developer's
duties, obligations and liabilities under this Agreement are in no way limited or otherwise
affected by any information the City may have concerning the Property and /or the presence in,
on, under or about the Property of any Hazardous Material, whether the City obtained such
information from the Developer or from its own investigations.
11.6 Definitions.
11.6.1 "Hazardous Material" means any chemical, compound, material,
mixture, or substance that is now or may in the future be defined or listed in, or otherwise
classified pursuant to any Environmental Laws (defined below) as a "hazardous substance ",
"hazardous material ", "hazardous waste ", "extremely hazardous waste ", infectious waste ", toxic
substance ", toxic pollutant ", or any other formulation intended to define, list or classify
substances by reason of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, or toxicity. The term "hazardous material" shall also include asbestos or
asbestos - containing materials, radon, chrome and /or chromium, polychlorinated biphenyls,
petroleum, petroleum products or by- products, petroleum components, oil, mineral spirits,
natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable as fuel, perchlorate,
and methy tert butyl ether, whether or not defined as a hazardous waste or hazardous substance
in the Environmental Laws.
11.6.2 "Environmental Laws" means any and all federal, state and local statutes,
ordinances, orders, rules, regulations, guidance documents, judgments, governmental
authorizations or directives, or any other requirements of governmental authorities, as may
presently exist, or as may be amended or supplemented, or hereafter enacted, relating to the
presence, release, generation, use, handling, treatment, storage, transportation or disposal of
Hazardous Material, or the protection of the environment or human, plant or animal health,
including, without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986 (42 U.S.C. § 9601), the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Oil Pollution Act (33
U.S.C. § 2701 et seq.), the Emergency Planning and Community Right -to -Know Act (42 U.S.C.
§ 11001 et seq.), the Porter- Cologne Water Quality Control Act (Cal. Water Code § 13000 et
seq.), the Toxic Mold Protection Act (Cal. Health & Safety Code § 26100, et seq.), the Safe
Drinking Water and Toxic Enforcement Act of 1986 (Cal. Health & Safety Code § 25249.5 et
seq.), the Hazardous Waste Control Act (Cal. Health & Safety Code § 25100 et seq.), the
Hazardous Materials Release Response Plans & Inventory Act (Cal. Health & Safety Code
§ 25500 et seq.), and the Carpenter- Presley - Tanner Hazardous Substances Account Act (Cal.
Health and Safety Code, Section 25300 et seq.).
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12. Security Financing and Rights of MortLyaaees.
12.1 Mortgages and Deeds of Trust for Development. Mortgages and deeds of trust, or
any other reasonable security instrument are permitted to be placed upon the Property only for
the purpose of securing loans for the purpose of financing the acquisition of the Property, the
design and rehabilitation of the Project, and other expenditures reasonably necessary for the
rehabilitation of the Project pursuant to this Agreement. Developer shall not enter into any
conveyance for such financing that is not contemplated in the Project financing plan as submitted
to City, as such may be updated with City approval, without the prior written approval of the
Authorized Representative or his or her designee. As used herein, the terms "mortgage" and
"deed of trust" shall mean any security instrument used in financing real estate acquisition,
construction and land development.
12.2 Subordination. The City agrees that City will not withhold consent to reasonable
requests for subordination of the A &R Deed of Trust and the Regulatory Agreement to deeds of
trust provided for the benefit of lenders providing financing for the Project that are identified in
the approved Project financing plan as it may be updated with City approval, provided that the
instruments effecting such subordination include reasonable protections to the City in the event
of default, including without limitation, extended notice and cure rights and the rights set forth in
Section 12.6 below.
12.3 Holder Not Obligated to Construct. The holder of any mortgage or deed of trust
authorized by this Agreement shall not be obligated to complete rehabilitation of the Project or to
guarantee such completion. Nothing in this Agreement shall be deemed to permit or authorize
any such holder to devote the Property or any portion thereof to any uses, or to construct any
improvements thereon, other than those uses or improvements provided for or authorized by this
Agreement.
12.4 Notice of Default and Lender Right to Cure. Whenever City delivers any notice
of default hereunder, City shall concurrently deliver a copy of such notice to each holder of
record of any mortgage or deed of trust secured by the Property or the Project, provided that City
has been provided with the address for delivery of such notice. City shall have no liability to any
such holder for any failure by the City to provide such notice to such holder. Each such holder
shall have the right, but not the obligation, at its option, to cure or remedy any such default or
breach within the cure period provided to Developer extended by an additional sixty (60) days.
In the event that possession of the Property or the Project (or any portion thereof) is required to
effectuate such cure or remedy, the holder shall be deemed to have timely cured or remedied the
default if it commences the proceedings necessary to obtain possession of the Property or
Project, as applicable, within the applicable cure period, diligently pursues such proceedings to
completion, and after obtaining possession, diligently completes such cure or remedy. A holder
who chooses to exercise its right to cure or remedy a default or breach shall first notify City of its
intent to exercise such right prior to commencing to cure or remedy such default or breach.
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Nothing contained in this Agreement shall be deemed to permit or authorize such holder to
undertake or continue the rehabilitation of the Project (beyond the extent necessary to conserve
or protect the same) without first having expressly assumed in writing Developer's obligations to
City under this Agreement. The holder in that event must agree to complete, in the manner
provided in this Agreement, the Project and submit evidence reasonably satisfactory to City that
it has the development capability on staff or retainer and the financial capacity necessary to
perform such obligations. Any such holder properly completing the Project pursuant to this
Section shall assume all rights and obligations of Developer under this Agreement.
12.5 Failure of Holder to Complete Improvements. In any case where, six (6) months
after default by Developer in completion of rehabilitation of the Project, the holder of record of
any mortgage or deed of trust has not exercised its option to complete rehabilitation of the
Project, or having first exercised such option, has not proceeded diligently with such work, City
shall be afforded those rights against such holder that it would otherwise have against Developer
under this Agreement.
12.6 City Right to Cure Defaults. In the event of a breach or default by Developer
under a mortgage or deed of trust secured by the Property or the Project, City may cure the
default, without acceleration of the subject loan, following prior notice thereof to the holder of
such instrument and Developer. In such event, Developer shall be liable for, and City shall be
entitled to reimbursement from Developer for all costs and expenses incurred by City associated
with and attributable to the curing of the default or breach and such sum shall constitute a part of
the indebtedness secured by the Deed of Trust.
12.7 Holder to be Notified. Developer agrees to use best efforts to ensure that each
term contained herein dealing with security financing and rights of holders shall be either
inserted into the relevant deed of trust or mortgage or acknowledged and accepted in writing by
the holder prior to its creating any security right or interest in the Property or the Project.
12.8 Modifications to Agreement. City shall not unreasonably withhold its consent to
modifications of this Agreement requested by Project lenders or investors provided such
modifications do not alter City's substantive rights and obligations under this Agreement.
12.9 Estoppel Certificates. Either Party shall, at any time, and from time to time,
within fifteen (15) days after receipt of written request from the other Party, execute and deliver
to such Party a written statement certifying that, to the knowledge of the certifying Party: (i) this
Agreement is in full force and effect and a binding obligation of the Parties (if such be the case),
(ii) this Agreement has not been amended or modified, or if so amended, identifying the
amendments, and (iii) the requesting Party is not in default in the performance of its obligations
under this Agreement, or if in default, describing the nature of any such defaults.
13. Default and Remedies.
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13.1 Event of Default. The following events shall constitute an event of default on the
part of Developer hereunder ( "Event of Default "):
(a) Developer fails to complete rehabilitation of the Project within twenty -
four (24) months following the Closing date, or subject to force majeure, abandons or suspends
rehabilitation of the Project prior to completion for a period of thirty (3 0) days or more;
(b) Developer fails to pay when due the principal and interest (if any) payable
under the Note and such failure continues for ten (10) days after City notifies Developer thereof
in writing;
(c) A Transfer occurs, either voluntarily or involuntarily, in violation of the
Regulatory Agreement;
(d) Developer fails to maintain insurance as required pursuant to this
Agreement, and Developer fails to cure such default within five (5) days;
(e) Developer fails to pay prior to delinquency taxes or assessments due on
the Property or the Project or fails to pay when due any other charge that may result in a lien on
the Property or the Project, and Developer fails to cure such default within twenty (20) days of
the date of delinquency, but in all events prior to the date upon which the holder of any such lien
has the right to foreclose thereon;
(f) A default arises under any loan secured by a mortgage, deed of trust or
other security instrument recorded against the Property and remains uncured beyond any
applicable cure period such that the holder of such security instrument has the right to accelerate
repayment of such loan;
(g) Any representation or warranty contained in this Agreement or in any
application, financial statement, certificate or report submitted to the City in connection with this
Agreement proves to have been incorrect in any material and adverse respect when made and
continues to be materially adverse to the City;
(h) If, pursuant to or within the meaning of the United States Bankruptcy
Code or any other federal or state law relating to insolvency or relief of debtors ( "Bankruptcy
Law "), Developer or any general partner thereof (i) commences a voluntary case or proceeding;
(ii) consents to the entry of an order for relief against Developer or any general partner thereof in
an involuntary case; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator
or similar official for Developer or any general partner thereof; (iv) makes an assignment for the
benefit of its creditors; or (v) admits in writing its inability to pay its debts as they become due;
(i) A court of competent jurisdiction shall have made or entered any decree or
order (1) adjudging the Developer to be bankrupt or insolvent, (2) approving as properly filed a
23
petition seeking reorganization of the Developer or seeking any arrangement for Developer
under bankruptcy law or any other applicable debtor's relief law or statute of the United States
or any state or other jurisdiction, (3) appointing a receiver, trustee, liquidator, or assignee of the
Developer in bankruptcy or insolvency or for any of its properties, or (4) directing the winding
up or liquidation of the Developer, in each case if such decree, order, petition, or appointment is
not removed or rescinded within ninety (90) days;
0) Developer shall have assigned its assets for the benefit of its creditors
(other than pursuant to a mortgage loan) or suffered a sequestration or attachment of or execution
on any substantial part of its property, unless the property so assigned, sequestered, attached or
executed upon shall have been returned or released within ninety (90) days after such event
(unless a lesser time period is permitted for cure pursuant to paragraphs (h) or (i) above or
pursuant to. any other mortgage on the Property, in which event such lesser time period shall
apply under this subsection as well) or prior to any sooner sale pursuant to such sequestration,
attachment, or execution;
(k) The Developer shall have voluntarily suspended its business for a period
in excess of forty -five days for reasons other than Force Majeure, or Developer shall have been
dissolved or terminated;
(1) An event of default arises under any City Loan Document and remains
uncured beyond any applicable cure period; or
(m) Developer defaults in the performance of any term, provision, covenant or
agreement contained in this Agreement other than an obligation enumerated in this Section 13.1
and unless a shorter cure period is specified for such default, the default continues for ten (10)
days in the event of a monetary default or thirty (3 0) days in the event of a nonmonetary default
after the date upon which City shall have given written notice of the default to Developer;
provided however, if the default is of a nature that it cannot be cured within thirty (3 0) days, a
Event of Developer Default shall not arise hereunder if Developer commences to cure the default
within thirty (30) days and thereafter prosecutes the curing of such default with due diligence
and in good faith to completion.
13.2 Remedies. Upon the occurrence of an Event of Default and the expiration of any
applicable cure period, City shall have all remedies available to it under this Agreement or under
law or equity, including, but not limited to the following, and City may, at its election, without
notice to or demand upon Developer, except for notices or demands required by law or expressly
required pursuant to the City Loan Documents, exercise one or more of the following remedies:
(a) Accelerate and declare the balance of the Amended Note and/or the
Additional Note and interest accrued thereon immediately due and payable;
24
Documents;
(b) Seek specific performance to enforce the terms of the City Loan
(c) Foreclose on the Property pursuant to the A &R Deed of Trust;
(d) Pursue any and all other remedies available under this Agreement or under
law or equity to enforce the terms of the City Loan Documents and City's rights thereunder.
13.3 Remedies Cumulative; No Consequential Daman Except as otherwise
expressly stated in this Agreement, the rights and remedies of the Parties are cumulative, and the
exercise by either Party of one or more of such rights or remedies shall not preclude the exercise
by it, at the same or different time, of any other rights or remedies for the same or any other
default by the other Party. Notwithstanding anything to the contrary set forth herein, a Party's
right to recover damages in the event of a default shall be limited to actual damages and shall
exclude consequential damages.
13.4 Inaction Not a Waiver of Default. No failure or delay by either Party in asserting
any of its rights and remedies as to any default shall operate as a waiver of such default or of any
such rights or remedies, nor deprive either Party of its rights to institute and maintain any action
or proceeding which it may deem necessary to protect, assert or enforce any such rights or
remedies in the same or any subsequent default.
13.5 Rights of Limited Partners. Whenever City delivers any notice of default
hereunder, City shall concurrently deliver a copy of such notice to the limited partner(s) in
accordance with Section 14.2. The limited partner(s) shall have the same right as Developer to
cure or remedy any default hereunder within the cure period provided to Developer; provided
however, if the default is of such nature that the limited partners reasonably determine that it is
necessary to replace the general partner of Developer in order to cure such default, then the cure
period shall be extended by an additional sixty (60) days after the removal and replacement of
such general partner, provided that the limited partners have promptly commenced and diligently
proceeded with all requisite actions to effect such removal and replacement.
13.6 Indemnity. To the greatest extent allowed by law, Developer shall indemnify,
defend (with counsel reasonably approved by City) and hold the Indemnitees harmless from and
against any and all Claims arising directly or indirectly, in whole or in part, as a result of or in
connection with the development, rehabilitation, improvement, operation, ownership or
maintenance of the Project or the Property, or any part thereof by Developer or Developer's
contractors, subcontractors, agents, employees or any other party acting for or on behalf of
Developer, or otherwise arising out of or in connection with Developer's performance or failure
to perform under this Agreement, including without limitation, Claims arising or alleged to have
arisen in connection with any violation of Applicable Laws in connection with the development,
operation or management of the Project. Developer's indemnification obligations set forth in
this Section shall survive the expiration or earlier termination of this Agreement, and (ii) shall
25
not extend to Claims arising solely from the gross negligence or willful misconduct of the
Indemnitees.
14. Miscellaneous Provisions.
14.1 Enforced Delay; Extension of Times of Performance. The time for performance
of provisions of this Agreement by either party shall be extended for a period equal to the period
of any delay directly affecting the Project or this Agreement which is caused by war,
insurrection, strikes, lockouts, riots, floods, earthquakes, fires, casualties, acts of God, acts of a
public enemy, epidemics, quarantine restrictions, freight embargoes, lack of transportation, suits
filed by third parties concerning or arising out of this Agreement or unseasonable weather
conditions ( "Force Maj eure "). An extension of time for any of the above - specified causes will
be deemed granted only if written notice by the party claiming such extension is sent to the other
party within ten (10) calendar days from the commencement of the cause.
Times of performance under this Agreement may also be extended in writing by the
mutual agreement of Developer and City (acting in the discretion of the City's Authorized
Representative unless he or she determines in his or her discretion to refer such matter to the
City Council). City and Developer acknowledge that, notwithstanding any contrary provision of
this Agreement, adverse changes in economic conditions, either of the affected Party specifically
or the economy generally, changes in market conditions or demand, and /or inability to obtain
financing to complete the Project shall not constitute grounds of enforced delay pursuant to this
Section. Each Party expressly assumes the risk of such adverse economic or market changes
and/or financial inability, whether or not foreseeable as of the Effective Date.
14.2 Notices. Except as otherwise specified in this Agreement, all notices to be sent
pursuant to this Agreement or any other City Loan Document shall be made in writing, and sent
to the Parties at their respective addresses specified below or to such other address as a Party
may designate by written notice delivered to the other Parties in accordance with this Section.
All such notices shall be sent by: (i) personal delivery, in which case notice is effective upon
delivery; (ii) certified or registered mail, return receipt requested, in which case notice shall be
deemed delivered on receipt if delivery is confirmed by a return receipt; or (iii) nationally
recognized overnight courier, with charges prepaid or charged to the sender's account, in which
case notice is effective on delivery if delivery is confirmed by the delivery service.
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City: City of Petaluma
11 English Street
Petaluma, CA 94574
Attention:
Owner: Madrone Village 2, L.P.
With a copy to:
And with a copy to:
14.3 Attorneys' Fees. If either Party fails to perform any of its obligations under this
Agreement, or if any dispute arises between the Parties concerning the meaning or interpretation
of any provision hereof, then the prevailing Party in any proceeding in connection with such
dispute shall be entitled to the costs and expenses it incurs on account thereof and in enforcing or
establishing its rights hereunder, including, without limitation, court costs and reasonable
attorneys' fees and disbursements.
14.4 Waivers; Modification. No waiver of any breach of any covenant or provision of
this Agreement shall be deemed a waiver of any other covenant or provision hereof, and no
waiver shall be valid unless in writing and executed by the waiving Party. An extension of time
for performance of any obligation or act shall not be deemed an extension of the time for
performance of any other obligation or act, and no extension shall be valid unless in writing and
executed by the Party granting the extension. This Agreement may be amended or modified only
by a written instrument executed by the Parties.
27
14.5 Binding on Successors. Subject to the restrictions on Transfers set forth in the
Regulatory Agreement, this Agreement shall bind and inure to the benefit of the Parties and their
respective permitted successors and assigns. Any reference in this Agreement to a specifically
named Party shall be deemed to apply to any permitted successor and assign of such Party who
has acquired an interest in compliance with this Agreement or under law.
14.6 Survival. All representations made by Developer hereunder and all of
Developer's obligations to provide indemnity to the City and the other Indemnitees shall survive
the expiration or termination of this Agreement.
14.7 Headings, Interpretation; Statutory References. The section headings and
captions used herein are solely for convenience and shall not be used to interpret this Agreement.
The Parties acknowledge that this Agreement is the product of negotiation and compromise on
the part of both Parties, and the Parties agree, that since both Parties have participated in the
negotiation and drafting of this Agreement, this Agreement shall not be construed as if prepared
by one of the Parties, but rather according to its fair meaning as a whole, as if both Parties had
prepared it. All references in the City Loan Documents to particular statutes, regulations,
ordinances or resolutions of the United States, the State of California, or the City of Petaluma
shall be deemed to include the same statute, regulation, ordinance or resolution as hereafter
amended or renumbered, or if repealed, to such other provisions as may thereafter govern the
same subject.
14.8 Action or Approval. Whenever action and/or approval by City is required under
this Agreement, the City's City Manager or his or her designee may act on and /or approve such
matter unless specifically provided otherwise, or unless the City Manager determines in his or
her discretion that such action or approval requires referral to City Council for consideration.
14.9 Entire Agreement. This Agreement, including Exhibits A through E attached
hereto and incorporated herein by this reference, together with the other City Loan Documents
contains the entire agreement between the Parties with respect to the subject matter hereof, and
supersedes all prior written or oral agreements, understandings, representations or statements
between the Parties with respect to the subject matter hereof.
14.10 Severability. If any term, provision, or condition of this Agreement is held by a
court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement
shall continue in full force and effect unless an essential purpose of this Agreement is defeated
by such invalidity or unenforceability.
14.11 No Third Party Beneficiaries. Except as expressly set forth herein, nothing
contained in this Agreement is intended to or shall be deemed to confer upon any person, other
than the Parties and their respective successors and assigns, any rights or remedies hereunder.
14.1.2 Parties Not Co- Venturers; Independent Contractor; No Agency Relationship._
Nothing in this Agreement is intended to or shall establish the Parties as partners, co- venturers,
or principal and agent with one another. The relationship of Developer and City is and shall
remain solely that of a debtor and a creditor, and shall not be construed as a joint venture, equity
venture, partnership or any other relationship. City neither undertakes nor assumes any
responsibility or duty to Developer (except as expressly provided in this Agreement) or to any
third party with respect to the Project. Developer and its employees are not employees of City
but rather are, and shall always be considered independent contractors. Furthermore, Developer
and its employees shall at no time pretend to be or hold themselves out as employees or agents of
City. Except as City may specify in writing, Developer shall not have any authority to act as an
agent of City or to bind City to any obligation.
14.13 Time of the Essence-, Calculation of Time Periods. Time is of the essence for
each condition, term, obligation and provision of this Agreement. Unless otherwise specified, in
computing any period of time described in this Agreement, the day of the act or event after
which the designated period of time begins to run is not to be included and the last day of the
period so computed is to be included, unless such last day is not a business day, in which event
the period shall run until the next business day. The final day of any such period shall be
deemed to end at 5:00 p.m., local time at the Property. For purposes of this Agreement, a
"business day" means a day that is not a Saturday, Sunday, a federal holiday or a state holiday
under the laws of California.
14.14 Governing Law, Venue. This Agreement shall be governed by and, construed in
accordance with the laws of the State of California without regard to principles of conflicts of
laws. Any action to enforce or interpret this Agreement shall be filed and heard in the Superior
Court of Sonoma County, California or in the Federal District Court for the Northern District of
California.
14.15 Inspection of Books and Records. Upon request, Developer shall permit the City
to inspect at reasonable times and on a confidential basis those books, records and all other
documents of Developer necessary to determine Developer's compliance with the terms of this
Agreement.
14.16 Non - Liability of City Officials, Employees and Agents. No member, official,
employee or agent of the City shall be personally liable to the Developer in the event of any
default or breach by the City or for any amount which may become due to the Developer or its
successor or on any obligation under the terms of this Agreement.
14.17 Conflict of Interest.
(a) Except for approved eligible administrative or personnel costs, no person
described in subsection (b) below who exercises or has exercised any functions or
29
responsibilities with respect to the activities funded pursuant to this Agreement or who is in a
position to participate in a decision - making process or gain inside information with regard to
such activities, may obtain a personal or financial interest or benefit from the activity, or have an
interest in any contract, subcontract or agreement with respect thereto, or the proceeds
thereunder, either for themselves or those with whom they have family or business ties, during,
or at any time after, such person's tenure. The Developer shall exercise due diligence to ensure
that the prohibition in this Section is followed.
(b) In accordance with Government Code Section 1090 and the Political Reform Act,
Government Code Section 87100 et se ., no person who is a director, officer, partner, trustee or
employee or consultant of the Developer, or immediate family member of any of the preceding,
shall make or participate in a decision, made by the City or a City board, commission or
committee, if it is reasonably foreseeable that the decision will have a material effect on any
source of income, investment or interest in real property of that person or the Developer.
Interpretation of this Section shall be governed by the definitions and provisions used in the
Political Reform Act, Government Code Section 87100 et seq., its implementing regulations
manual and codes, and Government Code Section 1090.
14.18 Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be an original and all of which taken together shall constitute one instrument. The
signature page of any counterpart may be detached therefrom without impairing the legal effect
of the signature(s) thereon provided such signature page is attached to any other counterpart
identical thereto having additional signature pages executed by the other Party. Any executed
counterpart of this Agreement may be delivered to the other Party by facsimile and shall be
deemed as binding as if an originally signed counterpart was delivered.
SIGNATURES ON FOLLOWING PAGES.
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IN WITNESS WHEREOF, the Parties have entered into this Affordable Housing Loan
Agreement effective as of the date first written above.
CITY:
CITY OF PETALUMA, a municipal corporation
In
John C. Brown, City Manager
Approved as to form:
City Attorney
DEVELOPER:
MADRONE VILLAGE 2, L.P., a California limited partnership
By: Madrone Village 2, LLC, a California limited liability company
Its: General Partner
By: Burbank Housing Development Corporation, a California nonprofit public benefit
corporation, its sole member /manager
C
Print Name:
Title:
31
Exhibit A
LEGAL DESCRIPTION OF THE PROPERTY
The Land situated in the City of Petaluma, County of Sonoma, State of California described as
follows:
32
miti: wal
FORM OF AMENDED NOTE
(Attach form of Amended and Restated Note.)
Exhibit C
FORM OF ADDITIONAL NOTE
(Attach form of Additional Note.)
Exhibit D
FORM OF AMENDED AND RESTATED DEED OF TRUST
(Attach form of Deed of Trust.)
Exhibit E
FORM OF AFFORDABLE HOUSING REGULATORY AGREEMENT AND
DECLARATION OF COVENANTS
(Attach form of Regulatory Agreement.)
33
ATTACHMENT #3
AMENDED AND RESTATED SECURED PROMISSORY NOTE
( Madrone Village)
[$360,313] Petaluma, California
June 1, 2015
FOR VALUE RECEIVED, Madrone Village 2, L.P., a California limited partnership
( "Borrower "), promises to pay to the City of Petaluma, a municipal corporation (the "City "), in
lawful money of the United States of America, the principal sum of [Three Hundred Sixty
Thousand and Three Hundred Thirteen Dollars ($363,313] or so much thereof as may be
advanced by City pursuant to the Loan Agreement referred to below, together with interest on
the outstanding principal balance in accordance with the terms and conditions described herein.
Interest shall accrue on the principal balance of this Note outstanding from time to time at the rate of
[Two and 47 /100 percent (2.74 %)] 'simple interest per annum. Interest shall be calculated on the
basis of a year of 365 days, and charged for the actual number of days elapsed.
This Secured Promissory Note (this "Note ") has been executed and delivered pursuant to
and in accordance with an Affordable Housing Loan Agreement, dated as of the date hereof,
executed by and between City and Borrower (the "Loan Agreement "), and is subject to the
terms and conditions of the Loan Agreement, which is by this reference incorporated herein and
made a part hereof. Capitalized terms used but not defined herein shall have the meaning
ascribed to such terms in the Loan Agreement.
This Note amends and restates in its entirety that certain Promissory Note in the original
principal amount of Two Hundred Eighty -Nine Thousand, Nine Hundred Forty -Seven Dollars
($289,947) dated as of August 18, 1988 and executed by Borrower's predecessor in interest,
Burbank Housing Development Corporation, a California nonprofit corporation for the benefit of
City (the "Prior Note "). The original principal amount of this Note is equal to the sum of the
outstanding principal balance of the Prior Note together with interest accrued thereon as of the
date of this Note.
This Note is secured by an Amended and Restated Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing ( "Deed of Trust ") dated as of the date hereof, executed by
Borrower for the benefit of City and encumbering the property described therein. City shall be
entitled to the benefits of the security provided by the Deed of Trust and shall have the right to
enforce the covenants and agreements contained herein, in the Deed of Trust, the Loan
Agreement, and the other City Documents, including without limitation, that certain Affordable
Housing Regulatory Agreement and Declaration of Restrictive Covenants dated as of the date
hereof, executed by and between City and Borrower and recorded in the Official Records of
34
Sonoma County (the "Regulatory Agreement "). The rent restrictions and other requirements
set forth in the Regulatory Agreement shall remain effective for the full term of the Regulatory
Agreement and shall survive the repayment of this Note. The Loan Agreement, this Note, the
Amended Note, the Regulatory Agreement, and the Deed of Trust are collectively referred to
herein as the "City Documents."
PAYMENTS.
1.1 PAYMENT DATES; MATURITY DATE. Annual payments on this Note shall
be payable on a residual receipts basis with fifty percent (50 %) of all Surplus Cash (defined
below) payable to City toward principal and accrued interest. Payments shall be credited first to
any unpaid late charges and other costs and fees then due, then to accrued interest, and then to
principal. In no event shall any amount due under this Note become subject to any rights, offset,
deduction or counterclaim on the part of Borrower. The entire outstanding principal balance of
this Note, together with interest accrued thereon and all other sums accrued hereunder shall be
payable in full on the date (the "Maturity Date ") which is the earlier of (i) the fifty -fifth (55th)
anniversary of the date upon which the City issues a final certificate of occupancy or equivalent
for the Project, or (ii) the fifty- seventh (57th) anniversary of the date hereof, provided however,
the Maturity Date shall not be earlier than the date of expiration or termination of any Regulatory
Agreement recorded by the California Tax Credit Allocation Committee (TCAC) against the
Property in connection with an allocation of federal Low - Income Housing Tax Credits for the
Proj ect.
1.2 ANNUAL PAYMENTS FROM SURPLUS CASH. By no later than June 1 of
each year following the issuance of a final certificate of occupancy or equivalent for the Project,
Borrower shall pay to City fifty percent (50 %) of all Surplus Cash generated by the Project
during the previous calendar year to reduce the indebtedness owed under this Note.
No later than May 1 of each year following the issuance of a final certificate of
occupancy or equivalent for the Project, Borrower shall provide to City Borrower's calculation
of Surplus Cash for the previous calendar year, accompanied by such supporting documentation
as City may reasonably request, including without limitation, an independent audit prepared for
the Project by a certified public accountant in accordance with generally accepted accounting
principles. City shall have the right to inspect and audit Borrower's books and records
concerning the calculation of Surplus Cash, and to object within ninety (90) days from receipt of
Borrower's statement. Failure to timely object shall be deemed acceptance. If City does object,
City shall specify the reasons for disapproval. Borrower shall have thirty (30) days to reconcile
any disapproved item. If Borrower and City cannot agree on the amount of Surplus Cash, an
independent auditor mutually selected by Borrower and City shall resolve any disputed items.
The cost of the auditor shall be shared equally by Borrower and City.
35
No later than May 1 of each year following issuance of the final certificate of occupancy
or equivalent for the Project, Borrower shall provide to City a projected budget for the following
calendar year which shall include an estimate of Surplus Cash. City will review the proposed
budget and, if acceptable, approve it, which approval shall not be unreasonably withheld,
provided, however, if the proposed budget has not been rejected by City within 30 days of
receipt; City shall be deemed to have accepted the budget. If the budget is not acceptable, City
shall specify the reasons for disapproval. Once approved, any changes to the budget for
discretionary items that exceed ten percent (10 %) of the total budget shall require City's prior
written consent, which consent shall not be unreasonably withheld.
1.2.1 "Surplus Cash" shall mean for each calendar year during the term hereof,
the amount by which Gross Revenue (defined below) exceeds Annual Operating Expenses
(defined below) for the Project. Surplus Cash shall also include net cash proceeds realized from
any refinancing of the Project, less fees and closing costs reasonably incurred in connection with
such refinancing, and any City- approved uses of the net cash proceeds of the refinancing.
1.2.2 "Gross Revenue" shall mean for each calendar year during the term
hereof, all revenue, income, receipts and other consideration, actually received from the operation
and leasing of the Project. Gross Revenue shall include, but not be limited to: all rents, fees and
charges paid by tenants; Section 8 payments or other rental subsidy payments received for the
dwelling units; deposits forfeited by tenants; all cancellation fees, price index adjustments and
any other rental adjustments to leases or rental agreements; proceeds from vending and laundry
room machines; the proceeds of business interruption or similar insurance; the proceeds of
casualty insurance not required to be paid to the holders of Approved Senior Loans (provided
however, expenditure of such proceeds for repair or restoration of the Project shall be. included
within Annual Operating Expenses in the year of the expenditure); condemnation awards for a
taking of part or all of the Property or the Improvements for a temporary period; and the fair
market value of any goods or services provided to Borrower in consideration for the leasing or
other use of any part of the Project. Gross Revenue shall include any release of funds from
replacement and other reserve accounts to Borrower other than for costs associated with the
Project. Gross Revenue shall not include tenant security deposits, loan proceeds, capital
contributions or similar advances.
1.2.3 "Annual Operating Expenses" shall mean for each calendar year during
term hereof, the following costs reasonably and actually incurred for the operation and
maintenance of the Project to the extent that they are consistent with an annual independent audit
performed by a certified public accountant using generally accepted accounting principles:
property taxes and assessments; debt service currently due and payable on a non - optional basis
(excluding debt service due from residual receipts or surplus cash of the Project) on loans which
have been approved in writing by the City and which are secured by deeds of trust senior in
priority to the Deed of Trust ( "Approved Senior Loans "); a property management fee in the
36
amount equal to [nine percent (9 %)] of the Project's gross annual revenue; premiums for
property damage and liability insurance; utility service costs not paid for directly or indirectly by
tenants; maintenance and repair costs; fees for licenses and permits required for the operation of
the Project; expenses for security services; advertising and marketing costs; payment of
deductibles in connection with casualty insurance claims not paid from reserves; tenant services;
the amount of uninsured losses actually replaced, repaired or restored and not paid from reserves;
cash deposits into reserves for capital replacements in an amount no more than $500 per unit per
year or such greater amount as reasonably required by the holder of an Approved Senior Loan or
as required by a physical needs assessment prepared by a third -party selected or approved by
City and prepared at Borrower's expense; cash deposits into operating reserves in an amount
reasonably approved by the City or required by the holder of an Approved Senior Loan, but only
if the accumulated operating reserve does not exceed six (6) months'; projected Project operating
expenses; and other ordinary and reasonable operating expenses approved by City.
Commencing on the Project placed in service date, Annual Operating Expenses shall also include
a partnership management fees payable to the general partner of Borrower and an asset
management fee payable to the investor limited partner of Borrower, each payable only during
the first fifteen (15) years following the Closing Date, and jointly payable in the maximum
aggregate sum of $28,500 per year, increasing annually by the lesser of three percent (3 %) or the
increase in the Consumer Price Index -Urban (CPI -U) for the San Francisco - Oakland -San Jose,
California area over the prior year.
1.2.4 EXCLUSIONS FROM ANNUAL OPERATING EXPENSES. Annual
Operating Expenses shall exclude the following: developer fees and interest on any deferred
developer fees (except as permitted pursuant to Section 1.2.3); contributions to Project operating
or replacement reserves, except as provided in Section 1.2.3; debt service payments on any loan
which is not an Approved Senior Loan, including without limitation, unsecured loans or loans
secured by deeds of trust which are subordinate to the Deed of Trust; depreciation, amortization,
depletion and other non -cash expenses; expenses paid for with disbursements from any reserve
account; distributions to partners; any amount paid to Borrower, any general partner of
Borrower, or any entity controlled by the persons or entities in control of Borrower or any
general partner of Borrower. Notwithstanding the foregoing limitation regarding payments to
Borrower and related parties, the following fees shall be included in Annual Operating Expenses,
subject to applicable limitations set forth in Section 1.2.3 above, even if paid to Borrower, an
affiliate of Borrower, or a partner of Borrower: fees paid to a property management agent,
resident services agent, or social services agent; partnership management fees, asset management
fees, and subject to Section 1.2.5, repayment of cash advances by Borrower or its partners to
cover Project operating expense deficits or emergency cash needs of the Project. Payments to
Borrower, its partners or affiliates in excess of the limitations set forth in Section 1.2.3 shall not
be counted toward Annual Operating Expenses for the purpose of calculating Surplus Cash.
37
1.2.5 ADJUSTMENT TO OPERATING EXPENSES. Notwithstanding
anything to the contrary set forth herein, for the purpose of calculating Surplus Cash, Annual
Operating Expenses shall include: (a) the repayment of operating deficit loans provided by
Borrower's limited partner(s) provided however, interest payable on such loans may be included
in Annual Operating Expenses only in an amount equivalent to the lesser of (i) interest accrued at
the actual interest rate charged for the loan, or (ii) interest accrued at a rate equal to three percent
(3 %) in excess of the rate of interest most recently announced by Bank of America, N.A. (or its
successor bank) at its San Francisco office as its "prime rate ", and (b) the amount of any tax
credit adjustor that is required to be paid from Project cash flow.
1.3 Intentionally omitted.
1.4 DUE ON SALE. The entire unpaid principal balance and all interest and other
sums accrued hereunder shall be due and payable upon the Transfer (as defined in Section 8.1 of
the Regulatory Agreement) absent City consent, of all or any part of the Project or the Property
or any interest therein other than a Transfer permitted without City consent pursuant to the
Regulatory Agreement. Without limiting the generality of the foregoing, this Note shall not be
assumable without City's prior written consent, which consent may be granted or denied in
City's sole discretion.
1.5 PREPAYMENT. Borrower may, without premium or penalty, at any time and
from time to time, prepay all or any portion of the outstanding principal balance due under this
Note, provided that each such prepayment is accompanied by accrued interest on the amount of
principal prepaid calculated to the date of such prepayment. Prepayments shall be applied first to
any unpaid late charges and other costs and fees then due, then to accrued but unpaid interest,
and then to principal. The Regulatory Agreement shall remain in full force for the entire term
thereof regardless of any prepayment of this Note.
1.6 MANNER OF PAYMENT. All payments of principal and interest on this Note
shall be made to City at 11 English Street, Petaluma, CA 94952 or such other place as City shall
designate to Borrower in writing, or by wire transfer of immediately available funds to an
account designated by City in writing.
2. DEFAULTS AND REMEDIES.
2.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an event of default hereunder ( "Event of Default "):
(A) Borrower fails to pay when due the principal and interest payable hereunder and
such failure continues for ten (10) days after City notifies Borrower thereof in writing.
38
(B) Pursuant to or within the meaning of the United States Bankruptcy Code or any
other federal or state law relating to insolvency or relief of debtors (`Bankruptcy Law "),
Borrower or any general partner thereof (i) commences a voluntary case or proceeding; (ii)
consents to the entry of an order for relief against Borrower, or any general partner thereof, in an
involuntary case; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator or
similar official for Borrower. or any general partner thereof; (iv) makes an assignment for the
benefit of its creditors; or (v) admits in writing its inability to pay its debts as they become due.
(C) A court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (i) is for relief against Borrower or any general partner thereof in an involuntary case,
(ii) appoints a trustee, receiver, assignee, liquidator or similar official for Borrower, or any
general partner thereof, or substantially all of such entity's assets, (iii) orders the liquidation of
Borrower or any general partner thereof, or (iv) issues or levies a judgment, writ, warrant of
attachment or similar process against the Property or the Project, and in each case the order or
decree is not released, vacated, dismissed or fully bonded within ninety (90) days after its
issuance.
(D) The occurrence of a Transfer in violation of the Loan Agreement or the
Regulatory Agreement.
(E) A default arises under any debt instrument secured by a mortgage or deed of trust
on the Project or the Property and remains uncured beyond any applicable cure period such that
the holder of such instrument has the right to accelerate payment thereunder.
(F) Borrower fails to maintain insurance on the Property and the Project as required
pursuant to the City Documents and Borrower fails to cure such default within five (5), days.
(G) Subject to Borrower's right to contest the following charges pursuant to the City
Documents, if Borrower fails to pay taxes or assessments due on the Property or the Project or
fails to pay any other charge that may result in a lien on the Property or the Project, and
Borrower fails to cure such default within twenty (20) days, but in all events before the
imposition of any such tax or other lien.
(H) If any representation or warranty contained in any City Document, or any
certificate furnished in connection therewith, or in connection with any request for disbursement
of the proceeds of the Loan proves to have been false or misleading in any material adverse
respect when made and continues to be materially adverse to the City.
(I) An Event of Default shall have been declared under the Loan Agreement or any
other City Document, including without limitation, the Regulatory Agreement, and remains
uncured beyond the expiration of the applicable cure period.
2.2 REMEDIES. Upon the occurrence of an Event of Default hereunder, City may, at
its option (i) by written notice to Borrower, declare the entire unpaid principal balance of this
Note, together with all accrued interest thereon and all sums due hereunder, immediately due and
payable regardless of any prior forbearance, (ii) exercise any and all rights and remedies
available to it under applicable law, and (iii) exercise any and all rights and remedies available to
Wel
City under this Note and the other City Documents, including without limitation the right to
pursue foreclosure under the Deed of Trust. Borrower shall pay all reasonable costs and
expenses incurred by or on behalf of City including, without limitation, reasonable attorneys'
fees, incurred in connection with City's enforcement of this Note and the exercise of any or all of
its rights and remedies hereunder and all such sums shall be a part of the indebtedness secured by
the Deed of Trust. The rights and remedies of City under this Note shall be cumulative and not
alternative.
2.3 DEFAULT RATE. Upon the occurrence of an Event of Default, interest shall
automatically be increased without notice to the rate of the lesser of ten percent (10 %) per annum
or the maximum rate permitted by law (the "Default Rate "); provided however, if any payment
due hereunder is not paid when due, the Default Rate shall apply commencing upon the due date
for such payment. When Borrower is no longer in default, the Default Rate shall no longer
apply, and the interest rate shall once again be the rate specified in the first paragraph of this
Note. Notwithstanding the foregoing provisions, if the interest rate charged exceeds the
maximum legal rate of interest, the rate shall be the maximum rate permitted by law. The
imposition or acceptance of the Default Rate shall in no event constitute a waiver of a default
under this Note or prevent City from exercising any of its other rights or remedies.
2.4 LIMITED PARTNERS RIGHT TO CURE. Borrower's limited partners shall
have the right to cure any default of Borrower hereunder upon the same terms and conditions
afforded to Borrower. Any cure tendered by a limited partner shall be deemed to be a cure by
Borrower and shall be accepted or rejected on the same basis as if tendered by Borrower.
MISCELLANEOUS.
3.1 WAIVERS; AMENDMENTS; BORROWER'S WAIVERS. No waiver by City
of any right or remedy under this Note shall be effective unless in a writing signed by City.
Neither the failure nor any delay in exercising any right, power or privilege under this Note will
operate as a waiver of such right, power or privilege, and no single or partial exercise of any such
right, power or privilege by City will preclude any other or further exercise of such right, power
or privilege or the exercise of any other right, power or privilege. No waiver that may be given
by City will be applicable except in the specific instance for which it is given. No notice to or
demand on Borrower will be deemed to be a waiver of any obligation of Borrower or of the right
of City to take further action without notice or demand as provided in this Note. There shall be
no amendment to or modification of this Note except by written instrument executed by
Borrower and City.
To the maximum extent permitted by applicable law Borrower hereby waives
presentment, demand, protest, notices of dishonor and of protest and all defenses and.pleas on
the grounds of any extension or extensions of the time of payment or of any due date under this
Note, in whole or in part, whether before or after maturity and with or without notice.
.o]
3.2 NOTICES. Any notice required or permitted to be given hereunder shall be given
in accordance with Section 11.3 of the Loan Agreement.
3.3 SEVERABILITY. If any provision in this Note is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this Note will remain in full force
and effect. Any provision of this Note held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
3.4 GOVERNING LAW VENUE. This Note shall be governed by the laws of the
State of California without regard to principles of conflicts of laws. Any legal action filed in
connection with this Note shall be filed in the Superior Court of Sonoma County, California, or
in the Federal District Court for the Northern District of California.
3.5 PARTIES IN INTEREST. This Note shall bind Borrower and its successors and
assigns and shall accrue to the benefit of City and its successors and assigns.
3.6 SECTION HEADINGS CONSTRUCTION. The headings of Sections in this
Note are provided for convenience only and will not affect its construction or interpretation.
3.7 RELATIONSHIP OF THE PARTIES. The relationship of Borrower and City
under this Note is solely that of borrower and lender, and the loan evidenced by this Note and
secured by the Deed of Trust will in no manner make City the partner or joint venturer of
Borrower.
3.8 TIME IS OF THE ESSENCE. Time is of the essence with respect to every provision of
this Note.
3.9 NONRECOURSE. Except as expressly provided in this Section 3.9, neither Borrower
nor the general or limited partners of Borrower shall have personal liability for payment of
the principal of, or interest on, this Note, and the sole recourse of City with respect to the
payment of the principal of, and interest on, this Note shall be to the Project, the Property and
any other collateral held by City as security for this Note; provided however, nothing
contained in the foregoing limitation of liability shall:
(A) impair the enforcement against all such security for the Loan of all the rights and
remedies of the City under the Deed of Trust and any financing statements City files in connection
with the Loan as each of the foregoing may be amended, modified, or restated from time to time;
(B) impair the right of City to bring a foreclosure action, action for specific
performance or other appropriate action or proceeding to enable City to enforce and realize upon
the Deed of Trust, the interest in the Project and the Property created thereby and any other
collateral given to City in connection with the indebtedness evidenced hereby and to name the
Borrower as party defendant in any such action;
41
(C) be deemed in any way to impair the right of the City to assert the unpaid principal
amount of the Loan as a demand for money within the meaning of Section 431.70 of the
California Code of Civil Procedure or any successor provision thereto;
(D) constitute a waiver of any right which City may have under any bankruptcy law to
file a claim for the full amount of the indebtedness owed to City hereunder or to require that the
Project and the Property shall continue to secure all of the indebtedness owed to City hereunder
in accordance with this Note and the Deed of Trust; or
(E) limit or restrict the ability of City to seek or obtain a judgment against Borrower
to enforce against Borrower and its general partners to:
(1) recover under any provision of the City Documents that obligates Borrower to
indemnify City, or
(2) recover from Borrower and its general partners compensatory damages as well
as other costs and expenses incurred by City (including without limitation reasonable
attorneys' fees and expenses) arising as a result of the occurrence of any of the following:
(a) any fraud or intentional misrepresentation on the part of the Borrower,
or its general partners, or any officer, director or authorized representative of
Borrower or its general partners in connection with the request for or creation of
the Loan, or in any City Document, or in connection with any request for any
action or consent by City in connection with the Loan;
(b) any failure to maintain insurance on the Property and the Project as
required pursuant to the City Documents;
(c) failure to pay taxes, assessments or other charges which may become
liens on the Property or the Project;
(d) the presence of Hazardous Materials on the Property or other violation
of the Borrower's obligations under Section 6.6 of the Loan Agreement or Section
7.11 of the Deed of Trust (pertaining to environmental matters);
(e) the occurrence of any act or omission of Borrower that results in waste
to or of the Project or the Property and which has a material adverse effect on the
value of the Project or the Property;
(f) the material misapplication of the Loan proceeds;
42
(g) the removal or disposal of any personal property or fixtures or the
retention of rents, insurance proceeds, or condemnation awards in violation of the
Deed of Trust;
(h) the material misapplication of the proceeds of any insurance policy or
award resulting from condemnation or the exercise of the power of eminent
domain or by reason of damage, loss or destruction to any portion of the Project
or the Property; and
(i) the failure of Borrower to pay all amounts payable under this Note in
full if Borrower Transfers the Property in violation of the Loan Agreement or the
Regulatory Agreement.
IN WITNESS WHEREOF, Borrower has executed this Note as of the date first written above.
li1IMIi/
MADRONE VILLAGE 2, L.P., a California limited partnership
By: MADRONE VILLAGE 2 LLC, a California limited liability company
Its: General Partner
By:
Print Name:
Title:
43
SECURED PROMISSORY NOTE
( Madrone Village)
[$750,000]
ATTACHMENT #4
Petaluma, California
June 1, 2015
FOR VALUE RECEIVED, Madrone Village 2, L.P., a California limited partnership
( "Borrower "), promises to pay to the City of Petaluma, a municipal corporation (the "City "), in
lawful money of the United States of America, the principal sum of [Seven Hundred Fifty
Thousand Dollars ($750,000] or so much thereof as may be advanced by City pursuant to the
Loan Agreement referred to below, together with interest on the outstanding principal balance in
accordance with the terms and conditions described herein. Interest shall accrue on the principal
balance of this Note outstanding from time to time at the rate of [One and 79/100 percent (1.79 %)]
simple interest per annum. Interest shall be calculated on the basis of a year of 365 days, and
charged for the actual number of days elapsed.
This Secured Promissory Note (this "Note ") has been executed and delivered pursuant to
and in accordance with an Affordable Housing Loan Agreement, dated as of the date hereof,
executed by and between City and Borrower (the "Loan Agreement "), and is subject to the
terms and conditions of the Loan Agreement, which is by this reference incorporated herein and
made a part hereof. Capitalized terms used but not defined herein shall have the meaning
ascribed to such terms in the Loan Agreement.
This Note is secured by an Amended and Restated Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing ( "Deed of Trust ") dated as of the date hereof, executed by
Borrower for the benefit of City and encumbering the property described therein. City shall be
entitled to the benefits of the security provided by the Deed of Trust and shall have the right to
enforce the covenants and agreements contained herein, in the Deed of Trust, the Loan
Agreement, and the other City Documents, including without limitation, that certain Affordable
Housing Regulatory Agreement and Declaration of Restrictive Covenants dated as of the date
hereof, executed by and between City and Borrower and recorded in the Official Records of
Sonoma County (the "Regulatory Agreement "). The rent restrictions and other requirements
set forth in the Regulatory Agreement shall remain effective for the full term of the Regulatory
Agreement and shall survive the repayment of this Note. The Loan Agreement, this Note, the
Amended Note, the Regulatory Agreement, and the Deed of Trust are collectively referred to
herein as the "City Documents."
1. PAYMENTS.
..
1.1 PAYMENT DATES • MATURITY DATE. Annual payments on this Note shall
be payable on a residual receipts basis with fifty percent (50 %) of all Surplus Cash (defined
below) payable to City toward principal and accrued interest. Payments shall be credited first to
any unpaid late charges and other costs and fees then due, then to accrued interest, and then to
principal. In no event shall any amount due under this Note become subject to any rights, offset,
deduction or counterclaim on the part of Borrower. The entire outstanding principal balance of
this Note, together with interest accrued thereon and all other sums accrued hereunder shall be
payable in full on the date (the "Maturity Date ") which is the earlier of (i) the fifty -fifth (55th)
anniversary of the date upon which the City issues a final certificate of occupancy or equivalent
for the Project, or (ii) the fifty- seventh (57th) anniversary of the date hereof; provided however,
the Maturity Date shall not be earlier than the date of expiration or termination of any Regulatory
Agreement recorded by the California Tax Credit Allocation Committee (TCAC) against the
Property in connection with an allocation of federal Low - Income Housing Tax Credits for the
Project.
1.2 ANNUAL PAYMENTS FROM SURPLUS CASH. By no later than June 1 of
each year following the issuance of a final certificate of occupancy or equivalent for the Project,
Borrower shall pay to City fifty percent (50 %) of all Surplus Cash generated by the Project
during the previous calendar year to reduce the indebtedness owed under this Note.
No later than May 1 of each year following the issuance of a final certificate of
occupancy or equivalent for the Project, Borrower shall provide to City Borrower's calculation
of Surplus Cash for the previous calendar year, accompanied by such supporting documentation
as City may reasonably request, including without limitation, an independent audit prepared for
the Project by a certified public accountant in accordance with generally accepted accounting
principles. City shall have the right to inspect and audit Borrower's books and records
concerning the calculation of Surplus Cash, and to object within ninety (90) days from receipt of
Borrower's statement. Failure to timely object shall be deemed acceptance. If City does object,
City shall specify the reasons for disapproval. Borrower shall have thirty (30) days to reconcile
any disapproved item. If Borrower and City cannot agree on the amount of Surplus Cash, an
independent auditor mutually selected by Borrower and City shall resolve any disputed items.
The cost of the auditor shall be shared equally by Borrower and City.
No later than May 1 of each year following issuance of the final certificate of occupancy
or equivalent for the Project, Borrower shall provide to City a projected budget for the following
calendar year which shall include an estimate of Surplus Cash. City will review the proposed
budget and, if acceptable, approve it, which approval shall not be unreasonably withheld,
provided, however, if the proposed budget has not been rejected by City within 30 days of
receipt, City shall be deemed to have accepted the budget. If the budget is not acceptable, City
shall specify the reasons for disapproval. Once approved, any changes to the budget for
45
discretionary items that exceed ten percent (10 %) of the total budget shall require City's prior
written consent, which consent shall not be unreasonably withheld.
1.2.1 "Surplus Cash" shall mean for each calendar year during the term hereof,
the amount by which Gross Revenue (defined below) exceeds Annual Operating Expenses
(defined below) for the Project. Surplus Cash shall also include net cash proceeds realized from
any refinancing of the Project, less fees and closing costs reasonably incurred in connection with
such refinancing, and any City- approved uses of the net cash proceeds of the refinancing.
1.2.2 "Gross Revenue" shall mean for each calendar year during the term
hereof, all revenue, income, receipts and other consideration actually received from the operation
and leasing of the Project. Gross Revenue shall include, but not be limited to: all rents, fees and
charges paid by tenants; Section 8 payments or other rental subsidy payments received for the
dwelling units; deposits forfeited by tenants; all cancellation fees, price index adjustments and
any other rental adjustments to leases or rental agreements; proceeds from vending and laundry
room machines; the proceeds of business interruption or similar insurance; the proceeds of
casualty insurance not required to be paid to the holders of Approved Senior Loans (provided
however, expenditure of such proceeds for repair or restoration of the Project shall be included
within Annual Operating Expenses in the year of the expenditure); condemnation awards for a
taking of part or all of the Property or the Improvements for a temporary period; and the fair
market value of any goods or services provided to Borrower in consideration for the leasing or
other use of any part of the Project. Gross Revenue shall include any release of funds from
replacement and other reserve accounts to Borrower other than for costs associated with the
Project. Gross Revenue shall not include tenant security deposits, loan proceeds, capital
contributions or similar advances.
1.2.3 "Annual Operating Expenses" shall mean for each calendar year during
tern hereof, the following costs reasonably and actually incurred for the operation and
maintenance of the Project to the extent that they are consistent with an annual independent audit
performed by a certified public accountant using generally accepted accounting principles:
property taxes and assessments; debt service currently due and payable on a non - optional basis
(excluding debt service due from residual receipts or surplus cash of the Project) on loans which
have been approved in writing by the City and which are secured by deeds of trust senior in
priority to the Deed of Trust ( "Approved Senior Loans "); reasonable property management fees
and reimbursements not to exceed fees and reimbursements which are standard in the industry;
premiums for property damage and liability insurance; utility service costs not paid for directly
or indirectly by tenants; maintenance and repair costs; fees for licenses and permits required for
the operation of the Project; expenses for security services; advertising and marketing costs;
payment of deductibles in connection with casualty insurance claims not paid from reserves;
tenant services; the amount of uninsured losses actually replaced, repaired or restored and not
paid from reserves; cash deposits into reserves for capital replacements in an amount no more
iel
than $500 per unit per year or such greater amount as reasonably required by the holder of an
Approved Senior. Loan or as required by a physical needs assessment prepared by a third -party
selected or approved by City and prepared at Borrower's expense; cash deposits into operating
reserves in an amount reasonably approved by the City or required by the holder of an Approved
Senior Loan, but only if the accumulated operating reserve does not exceed six (6) months'
projected Project operating expenses; and other ordinary and reasonable operating expenses
approved by City. Commencing on the Project placed in service date, Annual Operating
Expenses shall also include a partnership management fees payable to the general partner of
Borrower and an asset management fee payable to the investor limited partner of Borrower, each
payable only during the first fifteen (15) years following the Closing Date, and jointly payable in
the maximum aggregate sum of $28,500 per year, increasing annually by the lesser of three
percent (3 %) or the increase in the Consumer Price Index -Urban (CPI -U) for the San Francisco-
Oakland -San Jose, California area over the prior year.
1.2.4 EXCLUSIONS FROM ANNUAL OPERATING EXPENSES. Annual
Operating Expenses shall exclude the following: developer fees and interest on any deferred
developer fees (except as permitted pursuant to Section 1.2.3); contributions to Project operating
or replacement reserves, except as provided in Section 1.2.3, debt service payments on any loan
which is not an Approved Senior Loan, including without limitation, unsecured loans or loans
secured by deeds of trust which are subordinate to the Deed of Trust; depreciation, amortization,
depletion and other non -cash expenses; expenses paid for with disbursements from any reserve
account; distributions to partners; any amount paid to Borrower, any general partner of
Borrower, or any entity controlled by the persons or entities in control of Borrower or any
general partner of Borrower. Notwithstanding the foregoing limitation regarding payments to
Borrower and related parties, the following fees shall be included in Annual Operating Expenses,
subject to applicable limitations set forth in Section 1.2.3 above, even if paid to Borrower,.an
affiliate of Borrower, or a partner of Borrower: fees paid to a property management agent,
resident services agent, or social services agent; partnership management fees, asset management
fees, and subject to Section 1.2.5, repayment of cash advances by Borrower or its partners to
cover Project operating expense deficits or emergency cash needs of the Project. Payments to
Borrower, its partners or affiliates in excess of the limitations set forth in Section 1.2.3 shall not
be counted toward Annual Operating Expenses for the purpose of calculating Surplus Cash.
1.2.5 ADJUSTMENT TO OPERATING EXPENSES. Notwithstanding
anything to the contrary set forth herein, for the purpose of calculating Surplus Cash, Annual
Operating Expenses shall include: (a) the repayment of operating deficit loans provided by
Borrower's limited partner(s) provided however, interest payable on such loans may be included
in Annual Operating Expenses only in an amount equivalent to the lesser of (i) interest accrued at
the actual interest rate charged for the loan, or, (ii) interest accrued at a rate equal to three percent
(3 %) in excess of the rate of interest most recently announced by Bank of America, N.A. (or its
successor bank) at its San Francisco office as its "prime rate ", and (b) the amount of any tax
credit adjustor that is required to be paid from Project cash flow.
47
1.3 Intentionally omitted.
1.4 DUE ON SALE. The entire unpaid principal balance and all interest and other
sums accrued hereunder shall be due and payable upon the Transfer (as defined in Section 8.1 of
the Regulatory Agreement) absent City consent, of all or any part of the Project or the Property
or any interest therein other than a Transfer permitted without City consent pursuant to the
Regulatory Agreement. Without limiting the generality of the foregoing, this Note shall not be
assumable without City's prior written consent, which consent may be granted or denied in
City's sole discretion.
1.5 PREPAYMENT. Borrower may, without premium or penalty, at any time and
from time to time, prepay all or any portion of the outstanding principal balance due under this
Note, provided that each such prepayment is accompanied by accrued interest on the amount of
principal prepaid calculated to the date of such prepayment. Prepayments shall be applied first to
any unpaid late charges and other costs and fees then due, then to accrued but unpaid interest,
and then to principal. The Regulatory Agreement shall remain in full force for the entire term
thereof regardless of any prepayment of this Note.
1.6 MANNER OF PAYMENT. All payments of principal and interest on this Note
shall be made to City at 11 English Street, Petaluma, CA 94952 or such other place as City shall
designate to Borrower in writing, or by wire transfer of immediately available funds to an
account designated by City in writing.
2. DEFAULTS AND REMEDIES.
2.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an event of default hereunder ( "Event of Default "):
(J) Borrower fails to pay when due the principal and interest payable hereunder and
such failure continues for ten (10) days after City notifies Borrower thereof in writing.
(K) Pursuant to or within the meaning of the United States Bankruptcy Code or any
other federal or state law relating to insolvency or relief of debtors ( "Bankruptcy Law "),
Borrower or any general partner thereof (i) commences a voluntary case or proceeding; (ii)
consents to the entry of an order for relief against Borrower, or any general partner thereof, in an
involuntary case; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator or
similar official for Borrower or any general partner thereof; (iv) makes an assignment for the
benefit of its creditors; or (v) admits in writing its inability to pay its debts as they become due.
(L) A court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (i) is for relief against Borrower or any general partner thereof in an involuntary case,
(ii) appoints a trustee, receiver, assignee, liquidator or similar official for Borrower, or any
48
general partner thereof, or substantially all of such entity's assets, (iii) orders the liquidation of
Borrower or any general partner thereof, or (iv) issues or levies a judgment, writ, warrant of
attachment or similar process against the Property or the Project, and in each case the order or
decree is not released, vacated, dismissed or fully bonded within ninety (90) days after its
issuance.
(M) The occurrence of a Transfer in violation of the Loan Agreement or the
Regulatory Agreement.
(N) A default arises under any debt instrument secured by a mortgage or deed of trust
on the Project or the Property and remains uncured beyond any applicable cure period such that
the holder of such instrument has the right to accelerate payment thereunder.
(0) Borrower fails to maintain insurance on the Property and the Project as required
pursuant to the City Documents and Borrower fails to cure such default within five (5) days.
(P) Subject to Borrower's right to contest the following charges pursuant to the City
Documents, if Borrower fails to pay taxes or assessments due on the Property or the Project or
fails to pay any other charge that may result in a lien on the Property or the Project, and
Borrower fails to cure such default within twenty (20) days, but in all events before the
imposition of any such tax or other lien.
(Q) If any representation or warranty contained in any City Document, or any
certificate furnished in connection therewith, or in connection with any request for disbursement
of the proceeds of the Loan proves to have been false or misleading in any material adverse
respect when made and continues to be materially adverse to the City.
(R) An Event of Default shall have been declared under the Loan Agreement or any
other City Document, including without limitation, the Regulatory Agreement, and remains
uncured beyond the expiration of the applicable cure period.
2.2 REMEDIES. Upon the occurrence of an Event of Default hereunder, City may, at
its option (i) by written notice to Borrower, declare the entire unpaid principal balance of this
Note, together with all accrued interest thereon and all sums due hereunder, immediately due and
payable regardless of any prior forbearance, (ii) exercise any and all rights and remedies
available to it under applicable law, and (iii) exercise any and all rights and remedies available to
City under this Note and the other City Documents, including without limitation the right to
pursue foreclosure under the Deed of Trust. Borrower shall pay all reasonable costs and
expenses incurred by or on behalf of City including, without limitation, reasonable attorneys'
fees, incurred in connection with City's enforcement of this Note and the exercise of any or all of
its rights and remedies hereunder and all such sums shall be a part of the indebtedness secured by
the Deed of Trust. The rights and remedies of City under this Note shall be cumulative and not
alternative.
2.3 DEFAULT RATE. Upon the occurrence of an Event of Default, interest shall
automatically be increased without notice to the rate of the lesser of ten percent (10 %) per annum
or the maximum rate permitted by law (the "Default Rate "); provided however, if any payment
due hereunder is not paid when due, the Default Rate shall apply commencing upon the due date
for such payment. When Borrower is no longer in default, the Default Rate shall no longer
apply, and the interest rate shall once again be the rate specified in the first paragraph of this
Note. Notwithstanding the foregoing provisions, if the interest rate charged exceeds the
maximum legal rate of interest, the rate shall be the maximum rate permitted by law. The
imposition or acceptance of the Default Rate shall in no event constitute a waiver of a default
under this Note or prevent City from exercising any of its other rights or remedies.
2.4 LIMITED PARTNERS RIGHT TO CURE. Borrower's limited partners shall
have the right to cure any default of Borrower hereunder upon the same terms and conditions
afforded to Borrower. Any cure tendered by a limited partner shall be deemed to be a cure by
Borrower and shall be accepted or rejected on the same basis as if tendered by Borrower.
MISCELLANEOUS.
3.1 WAIVERS; AMENDMENTS-, BORROWER'S WAIVERS. No waiver by City
of any right or remedy under this Note shall be effective unless in a writing signed by City.
Neither the failure nor any delay in exercising any right, power or privilege under this Note will
operate as a waiver of such right, power or privilege, and no single or partial exercise of any such
right, power or privilege by City will preclude any other or further exercise of such right, power
or privilege or the exercise of any other right, power or privilege. No waiver that may be given
by City will be applicable except in the specific instance for which it is given. No notice to or
demand on Borrower will be deemed to be a waiver of any obligation of Borrower or of the right
of City to take further action without notice or demand as provided in this Note. There shall be
no amendment to or modification of this Note except by written instrument executed by
Borrower and City.
To the maximum extent permitted by applicable law Borrower hereby waives
presentment, demand, protest, notices of dishonor and of protest and all defenses and pleas on
the grounds of any extension or extensions of the time of payment or of any due date under this
Note, in whole or in part, whether before or after maturity and with or without notice.
3.2 NOTICES. Any notice required or permitted to be given hereunder shall be given
in accordance with Section 11.3 of the Loan Agreement.
3.3 SEVERABILITY. If any provision in this Note is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this Note will remain in full force
and effect. Any provision of this Note held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
50
3.4 GOVERNING LAW; VENUE. This Note shall be governed by the laws of the
State of California without regard to principles of conflicts of laws. Any legal action filed in
connection with this Note shall be filed in the Superior Court of Sonoma County, California, or
in the Federal District Court for the Northern District of California.
3.5 PARTIES IN INTEREST, This Note shall bind Borrower and its successors and
assigns and shall accrue to the benefit of City and its successors and assigns.
3.6 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Note are provided for convenience only and will not affect its construction or interpretation.
3.7 RELATIONSHIP OF THE PARTIES. The relationship of Borrower and City
under this Note is solely that of borrower and lender, and the loan evidenced by this Note and
secured by the Deed of Trust will in no manner make City the partner or joint venturer of
Borrower.
3.8 TIME IS OF THE ESSENCE. Time is of the essence with respect to every provision of
this Note.
3.9 NONRECOURSE. Except as expressly provided in this Section 3.9, neither Borrower
nor the general or limited partners of Borrower shall have personal liability for payment of
the principal of, or interest on, this Note, and the sole recourse of City with respect to the
payment of the principal of, and interest on, this Note shall be to the Project, the Property and
any other collateral held by City as security for this Note; provided however, nothing
contained in the foregoing limitation of liability shall:
(A) impair the enforcement against all such security for the Loan of all the rights and
remedies of the City under the Deed of Trust and any financing statements City files in, connection
with the Loan as each of the foregoing may be amended, modified, or restated from time to time;
(B) impair the right of City to bring a foreclosure action, action for specific
performance or other appropriate action or proceeding to enable City to enforce and realize upon
the Deed of Trust, the interest in the Project and the Property created thereby and any other
collateral given to City in connection with the indebtedness evidenced hereby and to name the
Borrower as party defendant in any such action;
(C) be deemed in any way to impair the right of the City to assert the unpaid principal
amount of the Loan as a demand for money within the meaning of Section 431.70 of the
California Code of Civil Procedure or any successor provision thereto;
(D) constitute a waiver of any right which City may have under any bankruptcy law to
file a claim for the full amount of the indebtedness owed to City hereunder or to require that the
Project and the Property shall continue to secure all of the indebtedness owed to City hereunder
in accordance with this Note and the Deed of Trust; or
51
(E) limit or restrict the ability of City to seek or obtain a judgment against Borrower
to enforce against Borrower and its general partners to:
(1) recover under any provision of the City Documents that obligates Borrower to
indemnify City, or
(2) recover from Borrower and its general partners compensatory damages as well
as other costs and expenses incurred by City (including without limitation reasonable
attorneys' fees and expenses) arising as a result of the occurrence of any of the following:
(a) any fraud or intentional misrepresentation on the part of the Borrower,
or its general partners, or any officer, director or authorized representative of
Borrower or its general partners in connection with the request for or creation of
the Loan, or in any City Document, or in connection with any request for any
action or consent by City in connection with the Loan; ,
(b) any failure to maintain insurance on the Property and the Project as
required pursuant to the City Documents;
(c) failure to pay taxes, assessments or other charges which may become
liens on the Property or the Project;
(d) the presence of Hazardous Materials on the Property or other violation
of the Borrower's obligations under Section 6.6 of the Loan Agreement or Section
7.11 of the Deed of Trust (pertaining to environmental matters);
(e) the occurrence of any act or omission of Borrower that results in waste
to or of the Project or the Property and which has a material adverse effect on the
value of the Project or the Property;
(f) the material misapplication of the Loan proceeds;
(g) the removal or disposal of any personal property or fixtures or the
retention of rents, insurance proceeds, or condemnation awards in violation of the
Deed of Trust;
(h) the material misapplication of the proceeds of any insurance policy or
award resulting from condemnation or the exercise of the power of eminent
domain or by reason of damage, loss or destruction to any portion of the Project
or the Property; and
52
(i) the failure of Borrower to pay all amounts payable under this Note in
full if Borrower Transfers the Property in violation of the Loan Agreement or the
Regulatory Agreement.
IN WITNESS WHEREOF, Borrower has executed this Note as of the date first written above.
MADRONE VILLAGE 2, L.P., a California limited partnership
By: Madrone Village 2 LLC, a California limited liability company
Its: General Partner
By: Burbank Housing Development Corporation, a California nonprofit public benefit
corporation, its sole member /manager
to
Print Name:
Title:
53
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of Petaluma
11 English Street
Petaluma, CA 94952
Attn: City Manager
ATTACHMENT #5
(SPACE ABOVE THIS LINE RESERVED FOR RECORDER'S USE)
AMENDED AND RESTATED DEED OF TRUST, ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THIS AMENDED AND RESTATED DEED OF TRUST, ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING ( "Deed of Trust ") is made as of June 1,
2015, by Madrone Village 2, L.P., a California limited partnership ( "Trustor ") to North
American Title Company as trustee ( "Trustee "), for the benefit of the City of Petaluma, a
municipal corporation ( "Beneficiary ").
RECITALS
A. Trustor owns fee simple title to the land described in Exhibit A attached hereto
and incorporated herein by this reference (the "Land "). The Land is located in the City of
Petaluma, Sonoma County, California. Trustor intends to rehabilitate, own and operate an
affordable multifamily residential development on the Land (the "Project ")
B. Beneficiary and Trustor have entered into an Affordable Housing Loan .
Agreement dated as of the date hereof (the "Loan Agreement ") which documents the terms and
conditions pursuant to which Trustor will rehabilitate and operate the Project, and Trustor's
obligation to repay to Beneficiary certain financing provided by Beneficiary in connection with
the original construction of the improvements located on the Land and certain additional
financing Beneficiary will provide in connection with the rehabilitation of such improvements.
Trustor's obligation to repay such financing is evidenced by the following instruments: (i) an
Amended and Restated Secured Promissory Note dated as of the date hereof, in the original
principal amount of [Three Hundred Sixty Thousand, Three Hundred and Thirteen Dollars
($360,313] (the "Amended Note "), and (ii) a Secured Promissory Note dated as of the date
hereof, in the original principal amount of [Seven Hundred Fifty thousand Dollars ($750,000)]
54
(the "Additional Note "). The Amended Note and the Additional Note are collectively referred
to herein as the "Notes."
C. Trustor and Beneficiary have also executed an Affordable Housing Regulatory
Agreement and Declaration of Restrictive Covenants (the "Regulatory Agreement "), dated as
of the date hereof, and which will be recorded in the Official Records of Sonoma County
substantially concurrently herewith. Among other provisions, the Regulatory Agreement
requires the residential units in the Project to be rented to Eligible Households at Affordable
Rents (as defined in the Regulatory Agreement).
D. As a condition precedent to Beneficiary's agreement to modify certain terms of
the original financing and to provide certain additional financing, Beneficiary has required that
Trustor enter into this Deed of Trust and grant to Trustee for the benefit of Beneficiary, a lien
and security interest in the Property (defined below) to secure repayment of the Notes and
performance of Trustor's obligations under the Loan Documents (defined below).
E. This Deed of Trust is intended to amend and restate in its entirety that certain
Deed of Trust dated August 18, 1988 executed by Trustor's predecessor in interest for the benefit
of Beneficiary and recorded in the Official Records on August 25, 1988 as Instrument No. 88-
070712 (the "Original Deed of Trust ").
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, it is agreed as follows.
1. Grant in Trust. In consideration of the foregoing and for the purpose of securing payment
and performance of the Secured Obligations defined and described in Section 2, Trustor hereby
irrevocably and unconditionally grants, conveys, transfers and assigns to Trustee, in trust for the
benefit of Beneficiary, with power of sale and right of entry and possession, all estate, right, title
and interest which Trustor now has or may later acquire in and to the Land, and all of the
following, whether presently owned or hereafter acquired:
a. All buildings, structures, and improvements, now or hereafter located or
constructed on the Land ( "Improvements ");
b. All appurtenances, easements, rights of way, pipes, transmission lines or wires
and other rights used in connection with the Land or the Improvements or as a means of access
thereto, whether now or hereafter owned or constructed or placed upon or in the Land or
Improvements and all existing and future privileges, rights, franchises and tenements of the
Land, including all minerals, oils, gas and other commercially valuable substances which may be
in, under or produced from any part of the Land, and all water rights, rights of way, gores or
strips of land, and any land lying in the streets, ways, and alleys, open or proposed, in front of or
adjoining the Land and Improvements (collectively, "Appurtenances ");
55
C. All machinery, equipment, fixtures, goods and other personal property of the
Trustor, whether moveable or not, now owned or hereafter acquired by the Trustor and now or
hereafter located at or used in connection with the Land, the Improvements or Appurtenances,
and all improvements, restorations, replacements, repairs, additions or substitutions thereto
(collectively, "Equipment ");
d. All existing and future leases, subleases, licenses, and other agreements relating to
the use or occupancy of all or any portion of the Land or Improvements (collectively, "Leases "),
all amendments, extensions, renewals or modifications thereof, and all rent, royalties, or other
payments which may now or hereafter accrue or otherwise become payable thereunder to or for
the benefit of Trustor, including but not limited to security deposits (collectively, "Rents ");
e. All insurance proceeds and any other proceeds from the Land, Improvements,
Appurtenances, Equipment, Leases, and Rents, including without limitation, all deposits made
with or other security deposits given to utility companies, all claims or demands relating to
insurance awards which the Trustor now has or may hereafter acquire, including all advance
payments of insurance premiums made by Trustor, and all condemnation awards or payments
now or later made in connection with any condemnation or eminent domain proceeding
( "Proceeds ");
f. All revenues, income, rents, royalties, payments and profits produced by the
Land, Improvements, Appurtenances and Equipment, whether now owned or hereafter acquired
by Trustor ( "Gross Revenues ");
g. All architectural, structural and mechanical plans, specifications, design
documents and studies produced in connection with development of the Land and rehabilitation
of the Improvements (collectively, "Plans "); and
h. All interests and rights in any private or governmental grants, subsidies, loans or
other financing provided in connection with development of the Land and rehabilitation of the
Improvements (collectively, "Financing ").
All of the above - referenced interests of Trustor in the Land, Improvements, Appurtenances,
Equipment, Leases, Rents, Proceeds, Gross Revenues, Plans and Financing as hereby conveyed
to Trustee or made subject to the security interest herein described are collectively referred to
herein as the "Property."
2. Obligations Secured. This Deed of Trust is given for the purpose of securing payment
and performance of the following (collectively, the "Secured Obligations "): (i) all present and
future indebtedness evidenced by the Amended Note and the Additional Note and any
amendment of either, including principal, interest and all other amounts payable under the terms
of the Notes; (ii) all present and future obligations of Trustor to Beneficiary under the Loan
56
Documents (defined below); (iii) all additional present and future obligations of Trustor to
Beneficiary under any other agreement or instrument acknowledged by Trustor (whether existing
now or in the future) which states that it is or such obligations are, secured by this Deed of Trust;
(iv) all obligations of Trustor to Beneficiary under all modifications, supplements, amendments,
renewals, or extensions of any of the foregoing, whether evidenced by new or additional
documents; and (v) reimbursement of all amounts advanced by or on behalf of Beneficiary to
protect Beneficiary's interests under this Deed of Trust or any other Loan Document as such may
be modified, supplemented, amended, renewed or extended. The Notes, the Loan Agreement,
the Regulatory Agreement, and this Deed of Trust are hereinafter collectively referred to as the
"Loan Documents."
3. Assignment of Rents, Issues, and Profits. Trustor hereby irrevocably, absolutely,
presently and unconditionally assigns to Beneficiary the Rents, royalties, issues, profits, revenue,
income and proceeds of the Property. This is an absolute assignment and not an assignment for
security only. Beneficiary hereby confers upon Trustor a license to collect and retain such Rents,
royalties, issues, profits, revenue, income and proceeds as they become due and payable prior to
any Event of Default hereunder. Upon the occurrence of any such Event of Default, Beneficiary
may terminate such license without notice to or demand upon Trustor and without regard to the
adequacy of any security for the indebtedness hereby secured, and may either in person, by
agent, or by a receiver to be appointed by a court, enter upon and take possession of the Property
or any part thereof, and sue for or otherwise collect such rents, issues, and profits, including
those past due and unpaid, and apply the same, less costs and expenses of operation and
collection, including reasonable attorneys' fees, to any indebtedness secured hereby, and in such
order as Beneficiary may determine. Beneficiary's right to the rents, royalties, issues, profits,
revenue, income and proceeds of the Property does not depend upon whether or not Beneficiary
takes possession of the Property. The entering upon and taking possession of the Property, the
collection of such rents, issues, and profits, and the application thereof as aforesaid, shall not
cure or waive any default or notice of default hereunder or invalidate any act done pursuant to
such notice. If an Event of Default occurs while Beneficiary is in possession of all or part of the
Property and /or is collecting and applying Rents as permitted under this Deed of Trust,
Beneficiary, Trustee and any receiver shall nevertheless be entitled to exercise and invoke every
right and remedy afforded any of them under this Deed of Trust and at law or in equity,
including the right to exercise the power of sale granted hereunder. Regardless of whether or not
Beneficiary, in person or by agent, takes actual possession of the Land or the Improvements,
Beneficiary shall not be deemed to be a "mortgagee in possession," shall not be responsible for
performing any obligation of Trustor under any Lease, shall not be liable in any manner for the
Property, or the use, occupancy, enjoyment or operation of any part of it, and shall not be
responsible for any waste committed by Trustor, lessees or any third parties, or for dangerous or
defective condition of the Property or any negligence in the management, repair or control of the
Property. Absent Beneficiary's written consent, Trustor shall not accept prepayment of Rents for
any rental period exceeding one month.
57
4. Securily Agreement. Trustor intends this Deed of Trust to create a lien on the Property,
and an absolute assignment of the Rents and Leases; all in favor of Beneficiary. The parties
acknowledge that some of the Property may be determined under applicable law to be personal
property or fixtures. To the extent that any Property may be or be determined to be personal
property,'Trustor as debtor hereby grants to Beneficiary as secured party a security interest in all
such Property to secure payment and performance of the Secured Obligations. This Deed of
Trust constitutes a security agreement under the California Uniform Commercial Code, as
amended or recodified from time to time (the "UCC "), covering all such Property. To the extent
such Property is not real property encumbered by the lien granted above, and is not absolutely
assigned by the assignment set forth above, it is the intention of the parties that such Property
shall constitute "proceeds, products, offspring, rents, or profits" (as defined in and for the
purposes of Section 552(b) of the United States Bankruptcy Code, as such section may be
modified or supplemented) of the Land and Improvements.
5. Financing Statements. Pursuant to the UCC, Trustor, as debtor, hereby authorizes
Beneficiary, as secured party, to file such financing statements and amendments thereof and such
continuation statements with respect thereto as Beneficiary may deem appropriate to perfect and
preserve Beneficiary's security interest in the Property and Rents, without requiring. any signature
or further authorization by Trustor. If requested by Beneficiary, Trustor shall pay all fees and
costs that Beneficiary may incur in filing such documents in public offices and in obtaining such
record searches as Beneficiary may reasonably require. If any financing statement or other
document is filed in the records normally pertaining to personal property, that filing shall not be
construed as in any way derogating from or impairing this Deed of Trust or the rights or
obligations of the parties under it.
Everything used in connection with the Property and /or adapted for use therein and /or which is
described or reflected in this Deed of Trust is, and at all times and for all purposes and in all
proceedings both legal or equitable shall be regarded as part of the estate encumbered by this
Deed of Trust irrespective of whether (i) any such item is physically attached to the
Improvements, (ii) serial numbers are used for the better identification of certain equipment
items capable of being thus identified in a recital contained. herein or in any list filed with
Beneficiary, or (iii) any such item is referred to or reflected in any such financing statement so
filed at any time. Similarly, the mention in any such financing statement of (1) rights in or to the
proceeds of any fire and /or hazard insurance policy, or (2) any award in eminent domain
proceedings for a taking or for lessening of value, or (3) Trustor's interest as lessor in any present
or future lease or rights to income growing out of the use and/or occupancy of the property
conveyed hereby, whether pursuant to lease or otherwise, shall not be construed as in any way
altering any of the rights of Beneficiary as determined by this instrument or impugning the
priority of Beneficiary's lien granted hereby or by any other recorded document. Such mention
in any financing statement is declared to be solely for the protection of Beneficiary in the event
any court or judge shall at any time hold, with respect to the matters set forth in the foregoing
clauses (1), (2), and (3), that notice of Beneficiary's priority of interest is required in order to be
effective against a particular class of persons, including but not limited to the federal government
and any subdivisions or entity of the federal government.
6. Fixture Filing. This Deed of Trust is intended to be and constitutes a fixture filing
pursuant to the provisions of the UCC with respect to all of the Property constituting fixtures, is
being recorded as a fixture financing statement and filing under the UCC, and covers property,
goods and equipment which are or are to become fixtures related to the Land and the
Improvements. Trustor covenants and agrees that this Deed of Trust is to be filed in the real
estate records of Sonoma County and shall also operate from the date of such filing as a fixture
filing in accordance with Section 9502 and other applicable provisions of the UCC. This Deed
of Trust shall also be effective as a financing statement covering minerals or the like (including
oil and gas) and accounts subject to the UCC, as amended. Trustor shall be deemed to be the
"debtor" and Beneficiary shall be deemed to be the "secured party" for all purposes under the
UCC.
7. Trustor's Representations, Warranties and Covenants, Rights and Duties of the Parties.
7.1 Representations and Warranties. Trustor represents and warrants that: (i) Trustor
lawfully possesses and holds a fee simple interest in the Land and the Improvements, (ii) Trustor
has good and marketable title to all of the Property; (iii) other than as limited by the Loan
Documents, Trustor has the full and unlimited power, right and authority to encumber the
Property and assign the Rents; (iv) subject only to encumbrances of record and senior liens
permitted pursuant to the Loan Documents or otherwise approved in writing by Beneficiary
( "Permitted Encumbrances "), this Deed of Trust creates a valid lien on Trustor's entire interest
in the Property; (v) except with respect to Permitted Encumbrances, Trustor owns the Property
free and clear of all deeds of trust, mortgages, security agreements, reservations of title or
conditional sales contracts, (vi) there is no financing statement affecting the Property or any part
thereof on file in any public office other than as disclosed in writing to Beneficiary; and (vii) the
correct address of Trustor's chief executive office is specified in Section 10.2.
7.2 Condition of Property. Trustor represents and warrants that except as disclosed to
Beneficiary in writing, as of the date hereof. (i) Trustor has not received any notice from any
governmental authority of any threatened or pending zoning, building, fire, or health code
violation or violation of other governmental regulations concerning the Property that has not
previously been corrected, and except as disclosed to Beneficiary in writing, no condition on the
Land violates any health, safety, fire, environmental, sewage, building, or other federal, state or
local law, ordinance or regulation; (ii) except as disclosed to Beneficiary in writing, no contracts,
licenses, leases or commitments regarding the maintenance or use of the Property or allowing
any third party rights to use the Property are in force; (iii) except as disclosed to Beneficiary in
writing, there are no threatened or pending actions, suits, or administrative proceedings against
59
or affecting the Property or any portion thereof or the interest of Trustor in the Property; (iv)
there are no threatened or pending condemnation, eminent domain, or similar proceedings
affecting the Property or any portion thereof; (v) Trustor has not received any notice from any
insurer of defects of the Property which have not been corrected; (vi) there are no natural or
artificial conditions upon the Land or any part thereof that could result in a material and adverse
change in the condition of the Land; (vii) all information that Trustor has delivered to
Beneficiary, either directly or through Trustor's agents, is accurate and complete; and (viii)
Trustor or Trustor's agents have disclosed to Beneficiary all material facts concerning the
Property.
7.3 Authority. Trustor represents and warrants that this Deed of Trust and all other
documents delivered or to be delivered by Trustor in connection herewith: (a) have been duly
authorized, executed, and delivered by Trustor; (b) are binding obligations of Trustor; and (c) do
not violate the provisions of any agreement to which Trustor is a party or which affects the
Property. Trustor further represents and warrants that there are no pending, or to Trustor's
current actual knowledge, threatened actions or proceedings before any court or administrative
agency which may adversely affect Trustor's ownership of the Property.
7.4 Payment and Performance of Secured Obligations. Trustor shall promptly pay
r,
when due the principal and all interest due on the indebtedness evidenced by the Notes, and shall
promptly pay and perform all other obligations of Trustor arising in connection with the Secured
Obligations or the Loan Documents in accordance with the respective terms thereof.
7.5 Use of Loan Proceeds; Preservation and Maintenance of Property; Compliance
with Laws. Trustor covenants that it shall use the proceeds of the Loan (the "Loan Proceeds ")
solely for purposes authorized by the Loan Documents. Trustor covenants that it shall keep the
Land and Improvements in good repair and condition, and from time to time shall make
necessary repairs, renewals and replacements thereto so that the Property shall be preserved and
maintained. Trustor covenants to comply with all federal, state and local laws, regulations,
ordinances and rules applicable to the Property and the Project, including without limitation all
applicable requirements of state and local building codes and regulations, and all applicable
statutes and regulations relating to accessibility for.the disabled. Trustor shall not remove,
demolish or materially alter any Improvement without Beneficiary's consent, shall complete or
restore promptly and in good and workmanlike manner any building, fixture or other
improvement which may be constructed, damaged, or destroyed thereon, and shall pay when due
all claims for labor performed and materials furnished therefor. Trustor shall use the Land and
the Improvements solely for purposes authorized by the Loan Documents, shall not commit or
allow waste of the Property, and shall not commit or allow any act upon or use of the Property
which would violate any applicable law or order of any governmental authority, nor shall Trustor
bring on or keep any article on the Property or cause or allow any condition to exist thereon
E
which could invalidate or which would be prohibited by any insurance coverage required to be
maintained on the Property pursuant to the Loan Documents.
7.6 Restrictions on Conveyance and Encumbrance, Acceleration. It shall be an Event
of Default hereunder if the Property, any part thereof, or interest therein is sold, assigned,
conveyed, transferred, hypothecated, leased, licensed, or encumbered in violation of the Loan
Documents or if any other Transfer (as defined in the Loan Documents) occurs in violation of the
Loan Documents. If any such Transfer shall occur in violation of such requirements, without
limiting the provisions of Section 8 hereof, all obligations secured by this Deed of Trust,
irrespective of the maturity dates of such obligations, shall at the option of Beneficiary, and
without demand, immediately become due and payable, subject to any applicable cure period.
7.7 Inspections; Books and Records. Beneficiary and its agents and representatives
shall have the right at any reasonable time upon reasonable notice to enter upon the Land and
inspect the Property to ensure compliance with the Loan Documents. Trustor shall maintain
complete and accurate books of account and other records (including copies of supporting bills
and invoices) adequate to document the use of the Loan Proceeds and the operation of the
Property, together with copies of all written contracts, Leases and other instruments which affect
the Property. The books, records, contracts, Leases and other instruments shall be subject to
examination and inspection by Beneficiary at any reasonable time following two business days
prior notice.
7.8 Charges, Liens, Taxes and Assessments. Trustor shall pay before delinquency all
taxes, levies, assessments and other charges affecting the Property that are (or if not paid may
become) a lien on all or part of the Property. Trustor may, at Trustor's expense, contest the
validity or application of any tax, levy, assessment or charge affecting the Property by
appropriate legal proceedings promptly initiated and conducted in good faith and with due
diligence, provided that (i) Beneficiary is reasonably satisfied that neither the Property nor any
part thereof or interest therein will be in danger of being sold, forfeited, or lost as a result of such
contest, and (ii) Trustor shall have posted a bond or furnished other security as may reasonably
be required from time to time by Beneficiary; and provided further that Trustor shall timely
make any payment necessary to prevent a lien foreclosure, sale, forfeiture or loss of the Property.
7.9 Subrogation. Beneficiary shall be subrogated to the liens of all encumbrances,
whether released of record or not, which are discharged in whole or in part by Beneficiary in
accordance with this Deed of Trust.
7.10 Hazard, Liability and Workers' Compensation Insurance. At all times during the
term hereof, at Trustor's expense, Trustor shall keep the Improvements and personal property
now existing or hereafter located on the Property insured against loss by fire, vandalism and
malicious mischief by a policy of standard fire and extended all -risk insurance. The policy shall
be written on a full replacement value basis and shall name Beneficiary as loss payee as its
61
interest may appear. The full replacement value of the improvements to be insured shall be
determined by the company issuing the policy at the time the policy is initially obtained. Not
more frequently than once every two (2) years, either the Trustor or the Beneficiary shall have
the right to notify the other party that it elects to have the replacement value redetermined by the
insurance company. Subject to the rights of any senior lienholder, the proceeds collected under
any insurance policy may be applied by Beneficiary to any indebtedness secured hereby and in
such order as Beneficiary may determine, or at the option of Beneficiary, the entire amount so
collected or any part thereof may be released to Trustor; provided however, if Trustor is not in
default under the Loan Documents, the proceeds shall be released to Trustor to repair or rebuild
the Project. Such application or release shall not cure or waive any default or notice of default
hereunder or invalidate any act done pursuant to such notice. Notwithstanding anything to the
contrary set forth herein, provided that Trustor is not in default under any Loan Document,
Trustor shall be permitted to use the proceeds of insurance to rebuild the Improvements.
7. 10.1 Trustor shall at all times during the term hereof, maintain insurance
coverage in the amounts and in accordance with the requirements specified in the Loan
Documents, and shall otherwise comply with all requirements pertaining to insurance specified
in Article X of the Loan Agreement, the Regulatory Agreement, or this Deed of Trust.
7.10.2 Trustor shall file with Beneficiary prior to the commencement of the term
hereof, certificates (or such other proof as Beneficiary may require, including without limitation,
copies of the required insurance policies) evidencing each of the insurance policies and
endorsements thereto as required by this Section, and such certificates (or policies) shall provide
that at least thirty (30) days' prior written notice shall be provided to Beneficiary prior to the
expiration, cancellation or change in coverage under each such policy.
7.10.3 If any insurance policy required hereunder is canceled or the coverage
provided thereunder is reduced, Trustor shall, within five (5) days after receipt of written notice
of such cancellation or reduction in coverage, but in no event later than the effective date of
cancellation or reduction, file with Beneficiary a certificate showing that the required insurance
has been reinstated or provided through another insurance company or companies. Upon failure
to so file such certificate, Beneficiary may, without further notice and at its option, procure such
insurance coverage at Trustor's expense, and Trustor shall promptly reimburse Beneficiary for
such expense upon receipt of billing from Beneficiary.
7.10.4 The insurance policies required hereunder shall be issued by insurance
companies authorized to do business in the State of California with a financial rating of at least A
VII status as rated in the most recent edition of Best's Key Rating Guide. Each policy of
insurance shall contain an endorsement requiring the insurer to provide at least thirty (3 0) days
written notice to Beneficiary prior to change in coverage, cancellation or expiration thereof.
62
7.11 Hazardous Materials. Trustor represents and warrants that except as disclosed to
Beneficiary in writing, as of the date hereof to the current actual knowledge of Trustor: (i) the
Land is free and has always been free of Hazardous Materials (as defined below) and is not and
has never been in violation of any Environmental Law (as defined below); (ii) there are no buried
or partially buried storage tanks located on the Land; (iii) Trustor has received no notice,
warning, notice of violation, administrative complaint, judicial complaint, or other formal or
informal notice alleging that conditions on the Land are or have ever been in violation of any
Environmental Law or informing Trustor that the Land is subject to investigation or inquiry
regarding Hazardous Materials on the Land or the potential violation of any Environmental Law;
(iv) there is no monitoring program required by the Environmental Protection Agency or any
other governmental agency concerning the Land; (v) no toxic or hazardous chemicals, waste, or
substances of any kind have ever been spilled, disposed of, or stored on, under or at the Land,
whether by accident, burying, drainage, or storage in containers, tanks, holding areas, or any
other means; (vi) the Land has never been used as a dump or landfill; and (vii) Trustor has
disclosed to Beneficiary all information, records, and studies in Trustor's possession or
reasonably available to Trustor relating to the Land concerning Hazardous Materials.
Trustor shall not cause or permit any Hazardous Material (as defined below) to be brought
upon, kept, stored or used in, on, under, or about the Land by Trustor, its agents, employees,
contractors or invitees except for incidental supplies ordinarily used in connection with the
construction, rehabilitation, repair, and operation of residential developments and in compliance
with all applicable laws, and shall not cause any release of Hazardous Materials into, onto, under
or through the Land. If any Hazardous Material is discharged, released, dumped, or spilled in, on,
under, or about the Land and results in any contamination of the Land or adjacent property, or
otherwise results in the release or discharge of Hazardous Materials in, on, under or from the
Land, Trustor shall promptly take all actions at its sole expense as are necessary to comply with
all Environmental Laws (as defined below).
To the fullest extent permitted by law, Trustor shall indemnify, defend (with counsel
reasonably acceptable to Beneficiary), and hold Beneficiary and its elected and appointed
officials, officers, agents and employees (collectively, "Indemnitees ") harmless from and against
any and all loss, claim, liability, damage, demand, judgment, order, penalty, fine, injunctive or
other relief, cost, expense (including reasonable fees and expenses of attorneys, expert witnesses,
and other professionals advising or assisting Beneficiary), action, or cause of action (all of the
foregoing, hereafter individually "Claim" and collectively "Claims ") arising in connection with
the breach of Trustor's covenants and obligations set forth in this Section 7.11 or otherwise
arising in connection with the presence or release of Hazardous Materials in, on, under, or from
the Property. The foregoing indemnity includes, without limitation, all costs of investigation,
assessment, containment, removal, remediation of any kind, and disposal of Hazardous Materials,
all costs of determining whether the Land is in compliance with Environmental Laws, all costs
63
associated with bringing the Land into compliance with all applicable Environmental Laws, and
all costs associated with claims for damages or injury to persons, property, or natural resources.
Without limiting the generality of the foregoing, Trustor shall, at Trustor's own cost and
expense, do all of the following:
a. pay or satisfy any judgment or decree that may be entered against any Indemnitee
or Indemnitees in any legal or administrative proceeding incident to any matters against which
Indemnitees are entitled to be indemnified under this Deed of Trust;
b. reimburse Indemnitees for any expenses paid or incurred in connection with any
matters against which Indemnitees are entitled to be indemnified under this Deed of Trust; and
C. reimburse Indemnitees for any and all expenses, including without limitation out -
of- pocket expenses and fees of attorneys and expert witnesses, paid or incurred in connection
with the enforcement by Indemnitees of their rights under this Deed of Trust, or in monitoring
and participating in any legal or administrative proceeding.
Trustor's obligation to indemnify the Indemnitees shall not be limited or impaired by any
of the following, or by any failure of Trustor to receive notice of or consideration for any of the
following: (i) any amendment or modification of any Loan Document; (ii) any extensions of
time for performance required by any Loan Document; (iii) any provision in any of the Loan
Documents limiting Beneficiary's recourse to property securing the Secured Obligations, or
limiting the personal liability of Trustor, or any other party for payment of all or any part of the
Secured Obligations; (iv) the accuracy or inaccuracy of any representation and warranty made by
Trustor under this Deed of Trust or by Trustor or any other party under any Loan Document, (v)
the release of Trustor or any other person, by Beneficiary or by operation of law, from
performance of any obligation under any Loan Document; (vi) the release or substitution in
whole or in part of any security for the Secured Obligations; and (vii) Beneficiary's failure to
properly perfect any lien or security interest given as security for the Secured Obligations.
The provisions of this Section 7.11 shall be in addition to any and all other obligations
and liabilities that Trustor may have under applicable law, and each Indemnitee shall be entitled
to indemnification under this Section without regard to whether Beneficiary or that Indemnitee
has exercised any rights against the Property or any other security, pursued any rights against any
guarantor or other party, or pursued any other rights available under the Loan Documents or
applicable law. The obligations of Trustor to indemnify the Indemnitees under this Section shall
survive any repayment or discharge of the Secured Obligations, any foreclosure proceeding, any
foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of the
lien of this Deed of Trust.
M.
Without limiting any of the remedies provided in this Deed of Trust, Trustor
acknowledges and agrees that each of the provisions in this Section 7.11 is an environmental
provision (as defined in Section 736(f)(2) of the California Code of Civil Procedure) made by
Trustor relating to real property security (the "Environmental Provisions "), and that Trustor's
failure to comply with any of the Environmental Provisions will be a breach of contract that will
entitle Beneficiary to pursue the remedies provided by Section 736 of the California Code of
Civil Procedure ( "Section 736 ") for the recovery of damages and for the enforcement of the
Environmental Provisions. Pursuant to Section 736, Beneficiary's action for recovery of
damages or enforcement of the Environmental Provisions shall not constitute an action within
the meaning of Section 726(a) of the California Code of Civil Procedure or constitute a money
judgment for a deficiency or a deficiency judgment within the meaning of Sections 580a, 580b,
580d, or 726(b) of the California Code of Civil Procedure.
"Hazardous Materials" means any substance, material or waste which is or becomes
regulated by any federal, state or local governmental authority, and includes without limitation
(i) petroleum or oil or gas or any direct or indirect product or by- product thereof, (ii) asbestos
and any material containing asbestos; (iii) any substance, material or waste regulated by or listed
(directly or by reference) as a "hazardous substance ", "hazardous material ", "hazardous waste ",
"toxic waste ", "toxic pollutant ", "toxic substance ", "solid waste" or "pollutant or contaminant"
in or pursuant to, or similarly identified as hazardous to human health or the environment in or
pursuant to, the Toxic Substances Control Act [15 U.S.C. Section 2601, et seq.]; the
Comprehensive Environmental Response, Compensation and Liability Act [42 U.S.C. Section
9601, et seq.], the Hazardous Materials Transportation Authorization Act [49 U.S.C. Section
5101, et seq.], the Resource Conservation and Recovery Act [42 U.S.C. Section 6901, et seq.],
the Federal Water Pollution Control Act [33 U.S.C. Section 1251], the Clean Air Act.[42 U.S.C.
Section 7401, et seq.], the California Underground Storage of Hazardous Substances Act
[California Health and Safety Code Section 25280, et seq.], the California Hazardous Substances
Account Act [California Health and Safety Code Section 25300, et seq.], the California
Hazardous Waste Act [California Health and Safety Code Section 25100, et seq.], the California
Safe Drinking Water and Toxic Enforcement Act [California Health and Safety Code Section
25249.5, et seq.], and the Porter - Cologne Water Quality Control Act [California Water Code
Section 13000, et seq.], as they now exist or are hereafter amended, together with any regulations
promulgated thereunder; (iv) any substance, material or waste which is defined as such or
regulated by any "Superfund" or "Superlien" law, or any Environmental Law; or (v) any other
substance, material, chemical, waste or pollutant identified as hazardous or toxic and regulated
under any other federal, state or local environmental law, including without limitation, asbestos,
polychlorinated biphenyls, petroleum, natural gas and synthetic fuel products and by- products.
"Environmental Law" means all federal, state or local statutes, ordinances, rules,
regulations, orders, decrees, judgments or common law doctrines, and provisions and conditions
of permits, licenses and other operating authorizations regulating, or relating to, or imposing
65
liability or standards of conduct concerning (i) pollution or protection of the environment,
including natural resources ; (i•) ex p osure of persons, including employees and agents, to any
Hazardous Material (as defined above) or other products, raw materials, chemicals or other
substances; (iii) protection of the public health or welfare from the effects of by- products,
wastes, emissions, discharges or releases of chemical substances from industrial or commercial
activities; (iv) the manufacture, use or introduction into commerce of chemical substances,
including without limitation, their manufacture, formulation, labeling, distribution,
transportation, handling, storage and disposal; or (iv) the use, release or disposal, of toxic or
hazardous substances or Hazardous Materials or the remediation of air, surface waters,
groundwaters or soil, as now or may at any later time be in effect, including but not limited to the
Toxic Substances Control Act [15 U.S.C. 2601, et seq.]; the Comprehensive Environmental
Response, Compensation and Liability Act [42 U.S.C. Section 9601, et seq.], the Hazardous
Materials Transportation Authorization Act [49 U.S.C. Section 5101, et seq.], the Resource
Conservation and Recovery Act [42 U.S.C. 6901, et seq.], the Federal Water Pollution Control
Act [33 U.S.C. Section 1251], the Clean Air Act [42 U.S.C. Section 7401, et seq.], the California
Underground Storage of Hazardous Substances Act [California Health and Safety Code Section
25280, et seq.], the California Hazardous Substances Account Act [California Health and Safety
Code Section 25300, et seq.], the California Hazardous Waste Act [California Health and Safety
Code Section 25100, et seq.], the California Safe Drinking Water and Toxic Enforcement Act
[California Health and Safety Code Section 25249.5, et seq.], and the Porter- Cologne Water
Quality Control Act [California Water Code Section 13000, et seq.], as they now exist or are
hereafter amended, together with any regulations promulgated thereunder.
7.12 Notice of Claims; Defense of Security; Reimbursement of Costs.
a. Notice of Claims. Trustor shall provide written notice to Beneficiary of any
uninsured or partially uninsured loss affecting the Property through fire, theft, liability, or
property damage in excess of an aggregate of Fifty Thousand Dollars ($50,000) within three
business days of the occurrence of such loss. Trustor shall ensure that Beneficiary shall receive
timely notice of, and shall have a right to cure, any default under any other financing document
or other lien affecting the Property and shall use best efforts to ensure that provisions mandating
such notice and allowing such right to cure shall be included in all such documents. Within three
(3) business days of Trustor's receipt thereof, Trustor shall provide Beneficiary with a copy of
any notice of default Trustor receives in connection with any financing document secured by the
Property or any part thereof.
b. Defense of Security. At Trustor's sole expense, Trustor shall protect, preserve
and defend the Property and title to and right of possession of the Property, the security of this
Deed of Trust and the rights and powers of Beneficiary and Trustee created under it, against all
adverse claims.
..
C. Compensation; Reimbursement of Costs. Trustor agrees to pay all reasonable
fees, costs and expenses charged by Beneficiary or Trustee for any service that Beneficiary or
Trustee may render in connection with this Deed of Trust, including without limitation, fees and
expenses related to provision of a statement of obligations or related to a reconveyance. Trustor
further agrees to pay or reimburse Beneficiary for all costs, expenses and other advances which
may be incurred or made by Beneficiary or Trustee in any efforts to enforce any terms of this
Deed of Trust, including without limitation any rights or remedies afforded to Beneficiary or
Trustee or both of them under Sections 7.18 and 8.2, whether or not any lawsuit is filed, or in
defending any action or proceeding arising under or relating to this Deed of Trust, including
reasonable attorneys' fees and other legal costs, costs of any disposition of the Property under the
power of sale granted hereunder or any judicial foreclosure, and any cost of evidence of title.
d. Notice of Changes. Trustor shall give Beneficiary prior written notice of any
change in the address of Trustor and the location of any Property, including books and records
pertaining to the Property.
7.13 Indemnification. To the fullest extent permitted by law, Trustor shall indemnify,
defend (with counsel reasonably acceptable to Beneficiary), and hold harmless the Trustee and
the Indemnitees (as defined in Section 7.11) from and against all Claims arising directly or
indirectly in any manner in connection with or as a result of (a) any breach of Trustor's
covenants under any Loan Document, (b) any representation by Trustor in any Loan Document
which proves to be false or misleading in any material respect when made, (c) injury or death to
persons or damage to property or other loss occurring on the Land or in any improvement located
thereon, whether caused by the negligence or any other act or omission of Trustor or any other
person or by negligent, faulty, inadequate or defective design, building, construction or
maintenance or any other condition or otherwise, (d) any claim, demand or cause of action, or
any action or other proceeding, whether meritorious or not, brought or asserted against any
Indemnitee which relates to or arises out of the Property, or any Loan Document or any
transaction contemplated thereby, or any failure of Trustor to comply with all applicable state,
federal and local laws and regulations applicable to the Property, provided that no Indemnitee
shall be entitled to indemnification under this Section for matters caused by such Indemnitee's
sole 'gross negligence or willful misconduct. The obligations of Trustor under this Section
shall survive the repayment of the Loan and shall be secured by this Deed of Trust.
Notwithstanding any contrary provision contained herein, the obligations of Trustor under this
Section shall survive any foreclosure proceeding, any foreclosure sale, any delivery of a deed in
lieu of foreclosure, and any release or reconveyance of this Deed of Trust.
7.14. Limitation of Liability. Beneficiary shall not be directly or indirectly liable to
Trustor or any other person as a consequence of any of the following: (i) Beneficiary's exercise
of or failure to exercise any rights, remedies or powers granted to Beneficiary in this Deed of
Trust; (ii) Beneficiary's failure or refusal to perform or discharge any obligation or liability of
M
Trustor under any agreement related to the Property or under this Deed of Trust; (iii) any waste
committed by Trustor, the lessees of the Property or any third parties, or any dangerous or
defective condition of the Property; or (iv) any loss sustained by Trustor or any third party
resulting from any act or omission of Beneficiary in managing the Property after an Event of
Default, unless the loss is caused by the willful misconduct, gross negligence, or bad faith of
Beneficiary. Trustor hereby expressly waives and releases all liability of the types described in
this Section 7.14 and agrees that Trustor shall assert no claim related to any of the foregoing
against Beneficiary.
7.15 Insurance and Condemnation Proceeds. Subject to the rights of any senior
lienholders, any award of damages in connection with any condemnation for public use of, or
injury to the Property or any part thereof is hereby assigned and shall be paid to Beneficiary who
may apply such moneys to any indebtedness secured hereby in such order as Beneficiary may
determine, or at the option of Beneficiary the entire amount so collected or any part thereof may
be released to Trustor. Such application or release shall not cure or waive any default or notice of
default hereunder or invalidate any act done pursuant to such notice. Notwithstanding the
foregoing, so long as the value of Beneficiary's lien is not impaired, insurance and /or
condemnation proceeds may be used to repair and /or restore the Project.
7.16 Release, Extension, Modification. At any time and from time to time, without
liability therefor and without notice, upon written request of Beneficiary and presentation of this
Deed of Trust and the Notes for endorsement, Trustee may release or reconvey all or any part of
the Property, consent to the making of any map or plat of the Land or part thereof, join in
granting any easement or creating any restriction affecting the Property, or join in any extension
agreement or other agreement affecting the lien or charge hereof. At any time and from time to
time, without liability therefor and without notice, Beneficiary may (i) release any person liable
for payment of any Secured Obligation, (ii) extend the time for payment or otherwise alter the
terms of payment of any Secured Obligation; (iii) accept additional real or personal property of
any kind as security for any Secured Obligation, or (iv) substitute or release any property
securing the Secured Obligations.
7.17 Reconveyance. Upon written request of Beneficiary stating that all of the Secured
Obligations have been paid in full, and upon surrender of this Deed of Trust, and the Notes,
Trustee shall reconvey, without warranty, the Property or so much of it as is then held under this
Deed of Trust. The recitals in any reconveyance executed under this Deed of Trust of any
matters or facts shall be conclusive proof of the truthfulness thereof. Trustor shall pay all fees of
Trustee and all recordation fees related to such reconveyance.
7.18 Cure, Protection of Security. Either Beneficiary or Trustee may cure any breach
or default of Trustor if Trustor fails to do so in the time provided for cure, and if it chooses to do
so in connection with any such cure, Beneficiary or Trustee may also enter the Property and /or
.:
do any and all other things which it may in its sole discretion consider necessary and appropriate
to protect the security of this Deed of Trust. Such other things may include: appearing in and/or
defending any action or proceeding which purports to affect the security of, or the rights or
powers of Beneficiary or Trustee under, this Deed of Trust; paying, purchasing, contesting or
compromising any encumbrance, charge, lien or claim of lien which in Beneficiary's or
Trustee's sole judgment is or may be senior in priority to this Deed of Trust, such judgment of
Beneficiary or Trustee to be conclusive as among Beneficiary, Trustee and Trustor; obtaining
insurance and /or paying any premiums or charges for insurance required to be carried hereunder;
otherwise caring for and protecting any and all of the Property; and/or employing counsel,
accountants, contractors and other appropriate persons to assist Beneficiary or Trustee.
Beneficiary and Trustee may take any of the actions permitted under this Section 7.18 either with
or without giving notice, except for notices required under applicable law. Any amounts
disbursed by Beneficiary pursuant to this paragraph shall become additional indebtedness
secured by this Deed of Trust..
7.19 Limited Partners Right to Cure. Trustor's limited partners shall have the right to
cure any default of Trustor hereunder upon the same terms and conditions afforded to Trustor.
Provided that Beneficiary has been given written notice of the address for delivery of notices to
the limited partners, Beneficiary shall provide any notice of default hereunder to the limited
partners concurrently with the provision of such notice to Trustor.
Default and Remedies.
8.1 Events of Default. Trustor acknowledges and agrees that an Event of Default
shall occur under this Deed of Trust upon the occurrence of any one or more of the following
events.
a. Beneficiary's declaration of an Event of Default under any Loan
Document,.subject to the expiration of any applicable cure period set forth in such document;
b. Trustor fails to perform any monetary obligation which arises under this
Deed of Trust or any other Loan Document, and does not cure that failure within ten (10) days
following written notice from Beneficiary or Trustee;
C. If Trustor's interest in the Property or any part thereof is voluntarily or
involuntarily sold, transferred, leased, encumbered, or otherwise conveyed in violation of
Section 7.6 hereof or if any other Transfer occurs in violation of the Loan Documents and
Trustor fails to rescind such conveyance or otherwise cure such breach within the time period
specified in paragraph j below;
d. Trustor fails to maintain the insurance coverage required hereunder or
under the other Loan Documents, or otherwise fails to comply with the requirements of Section
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7. 10 hereof and Trustor fails to cure such default within the applicable time specified in Section
7.10;
e. Subject to Trustor's right to contest such charges as provided herein,
Trustor fails to pay taxes or assessments due on the Land or the Improvements or fails to pay
when due any other charge that may result in a lien on the Land or the Improvements, and
Trustor fails to cure such default within twenty (20) days of the date of delinquency, but in all
events prior to the date upon which the holder of any such tax or other lien has the right to
foreclose thereon.
f. Any representation or warranty of Trustor contained in or made in
connection with the execution and delivery of this Deed of Trust or in any certificate or
statement furnished pursuant hereto or in any other Loan Document proves to have been false or
misleading in any material adverse respect when made;
g. If, pursuant to or within the meaning of the United States Bankruptcy
Code or any other federal or state law relating to insolvency or relief of debtors (`Bankruptcy
Law "), Trustor or any general partner thereof (i) commences a voluntary case or proceeding; (ii)
consents to the entry of an order for relief against Trustor or any general partner thereof in an
involuntary case; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator or
similar official for Trustor or any general partner thereof; (iv) makes an assignment for the
benefit of its creditors; or (v) admits in writing its inability to pay its debts as they become due.
h. If a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (i) is for relief against Trustor or any general partner thereof in an
involuntary case, (ii) appoints a trustee, receiver, assignee, liquidator or similar official for
Trustor or any general partner thereof or substantially all of such entity's assets, (iii) orders the
liquidation of Trustor or any general partner thereof, or (iv) issues or levies a judgment, writ,
warrant of attachment or similar process against the Property or the Project or any part thereof,
and in each case the order or decree is not released, vacated, dismissed or fully bonded within 60
days after its issuance.
i. The holder of any other debt instrument secured by a mortgage or deed of
trust on the Property or part thereof declares an event of default thereunder and exercises a right
to declare all amounts due under that debt instrument immediately due and payable, subject to
the expiration of any applicable cure period set forth in such holder's documents; or
j. Trustor fails to perform any obligation arising under this Deed of Trust
other than one enumerated in this Section 8. 1, and does not cure that failure either within ten (10)
days after written notice from Beneficiary or Trustee in the event of a monetary default, or
within thirty (3 0) days after such written notice in the event of a nonmonetary default, provided
that in the case of a nonmonetary default that in Beneficiary's reasonable judgment cannot
70
reasonably be cured within thirty (30) days, an Event of Default shall not arise hereunder. if
Trustor commences to cure such default within thirty (3 0) days and thereafter prosecutes such
cure to completion with due diligence and in good faith and in no event later than sixty (60) days
following receipt of notice of default.
8.2 Remedies. Subject to the applicable notice and cure provisions set forth herein, at
any time after an Event of Default, Beneficiary and Trustee shall be entitled to invoke any and all
of the rights and remedies described below, and may exercise any one or more or all, of the
remedies set forth in any Loan Document, and any other remedy existing at law or in equity or
by statute. All of Beneficiary's rights and remedies shall be cumulative, and the exercise of any
one or more of them shall not constitute an election of remedies. Beneficiary shall be entitled to
collect all expenses incurred in pursuing the remedies provided hereunder, including without
limitation reasonable attorneys' fees and costs.
a. Acceleration. Beneficiary may declare any or all of the Secured
Obligations, including without limitation all sums payable under the Notes and this Deed of
Trust, to be due and payable immediately.
b. Receiver. Beneficiary may apply to any court of competent jurisdiction
for, and obtain appointment of, a receiver for the Property.
C. Entry. Beneficiary, in person, by agent or by court - appointed receiver,
may enter, take possession of, manage and operate all or any part of the Property, and may also
do any and all other things in connection with those actions that Beneficiary may in its sole
discretion consider necessary and appropriate to protect the security of this Deed of Trust. Such
other things may include: taking and-possessing copies of all of Trustor's or the then, owner's
books and records concerning the Property; entering into, enforcing, modifying, or canceling
Leases on such terms and conditions as Beneficiary may consider proper; obtaining and evicting
tenants; fixing or modifying Rents; collecting and receiving any payment of money owing to
Trustor; completing any unfinished construction; and/or contracting for and making repairs and
alterations. If Beneficiary so requests, Trustor shall assemble all of the Property that has been
removed from the Land and make all of it available to Beneficiary at the site of the Land. Trustor
hereby irrevocably constitutes and appoints Beneficiary as Trustor's attorney -in -fact to perform
such acts and execute such documents as Beneficiary in its sole discretion may consider to be
appropriate in connection with taking these measures, including endorsement of Trustor's name
on any instruments.
d. UCC Remedies. Beneficiary may exercise any or all of the remedies
granted to a secured party under the UCC.
e. Judicial Action. Beneficiary may bring an action in any court of
competent jurisdiction to foreclose this Deed of Trust in the manner provided by law for
71
foreclosure of mortgages on real property and/or to obtain specific enforcement of any of the
covenants or agreements of this Deed of Trust.
f. Power of Sale. Under the power of sale hereby granted, Beneficiary shall
have the discretionary right to cause some or all of the Property, including any Property which
constitutes personal property, to be sold or otherwise disposed of in any combination and in any
manner permitted by applicable law.
8.3 'Power of Sale. If Beneficiary elects to invoke the power of sale hereby granted,
Beneficiary shall execute or cause the Trustee to execute a written notice of such default and of
its election to cause the Property to be sold to satisfy the obligations hereof, and shall cause such
notice to be recorded in the office of the Recorder of each County wherein the Property or some
part thereof is situated as required by law and this Deed of Trust.
Prior to publication of the notice of sale, Beneficiary shall deliver to Trustee this Deed of
Trust and the Notes or other evidence of indebtedness which is secured hereby, together with a
written request for the Trustee to proceed with a sale of the Property, pursuant to the provisions
of law and this Deed of Trust.
Notice of sale having been given as then required by law, and not less than the time then
required by law having elapsed after recordation of such notice of default, Trustee, without
demand on Trustor, shall sell the Property at the time and place fixed by it in the notice of sale,
either as a whole or in separate parcels and in such order as it may determine, at public auction to
the highest bidder for cash in lawful money of the United States, payable at time of sale. Trustee
may, and at Beneficiary's request shall, postpone sale of all or any portion of the Property by
public announcement at such time and place of sale, and from time to time thereafter may
postpone such sale by public announcement at the time and place fixed by the preceding
postponement. Trustee shall deliver to the purchaser its deed conveying the property so sold, but
without any covenant or warranty, express or implied. The recitals in such deed of any matters
or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustor,
Trustee, or Beneficiary, may purchase at such sale.
After deducting all costs, fees, and expenses of Trustee and of the trust hereby created,
including reasonable attorneys' fees in connection with sale, Trustee shall apply the proceeds of
sale to payment of all sums advanced or expended by Beneficiary or Trustee under the terms
hereof and all outstanding sums then secured hereby, and the remainder, if any, to the person or
persons legally entitled thereto.
Without limiting the generality of the foregoing, Trustor acknowledges and agrees that
regardless of whether or not a default has occurred hereunder, if an Event of Default has
occurred under the Loan Documents, and if in connection with such Event of Default
Beneficiary exercises its right to foreclose on the Property, then: (i) Beneficiary shall be entitled
72
to declare all amounts due under the Notes immediately due and payable, and (ii) the proceeds of
any sale of the Property in connection with such foreclosure shall be used to pay all Secured
Obligations, including without limitation, the outstanding principal balance and all other
amounts due under the Notes.
At any foreclosure sale, any person, including Trustor, Trustee or Beneficiary, may bid
for and acquire the Property or any part of it to the extent permitted by then applicable law.
Instead of paying cash for such property, Beneficiary may settle for the purchase price by
crediting the sales price of the property against the following obligations:
a. First, the portion of the Secured Obligations attributable to the expenses of
sale, costs of any action and any other sums for which Trustor is obligated to pay or reimburse
Beneficiary or Trustee under Section 7.12(c); and
b. Second, the remaining balance of all other Secured Obligations in any
order and proportions as Beneficiary in its sole discretion may choose.
8.4 Trustor's Riyht to Reinstate. Notwithstanding Beneficiary's acceleration of the
sums secured by this Deed of Trust, Trustor shall have the right to have any proceedings begun
by Beneficiary to enforce this Deed of Trust discontinued at any time prior to five days before
sale of the Property pursuant to the power of sale contained in this Deed of Trust or at any time
prior to entry of a judgment enforcing this Deed of Trust if: (a) Trustor pays Beneficiary all sums
which would be then due under the Loan Documents if the Secured Obligations had no
acceleration provision; (b) Trustor cures all breaches of any other covenants or agreements of
Trustor contained in this Deed of Trust; (c) Trustor pays all reasonable expenses incurred by
Beneficiary and Trustee in enforcing the covenants and agreements of Trustor contained in this
Deed of Trust, and in enforcing Beneficiary's and Trustee's remedies as provided herein,
including, but not limited to, reasonable attorney's fees; and (d) Trustor takes such action as
Beneficiary may reasonably require to assure that the lien of this Deed of Trust, Beneficiary's
interest in the Property and Trustor's obligation to pay the sums secured by this Deed of Trust
shall continue unimpaired. Upon such payment and cure by Trustor, this Deed of Trust and the
obligations secured hereby shall remain in full force and effect as if no acceleration had
occurred.
9. Trustor's Waivers. To the fullest extent permitted by law, Trustor waives: (a) all statutes
of limitations as a defense to any action or proceeding brought against Trustor by Beneficiary;
(b) the benefit of all laws now existing or which may hereafter be enacted providing for any
appraisement, valuation, stay, extension, redemption or moratorium; (c) all rights of marshalling
in the event of foreclosure; and (d) all presentments, demands for performance, notices
of nonperformance, protests, notices of protest, notices of dishonor, notices of acceptance of this
73
Deed of Trust and of the existence, creation, or incurring of new or additional indebtedness, and
demands and notices of every kind.
10. Miscellaneous Provisions.
10.1 Additional Provisions. The Loan Documents grant further rights to Beneficiary
and contain further agreements and affirmative and negative covenants by Trustor which apply
to this Deed of Trust and the Property.
10.2 Notices. Trustor requests that a copy of notice of default and notice of sale be
mailed to Trustor at the address set forth below. That address is also the mailing address of
Trustor as debtor under the UCC. Beneficiary's address set forth below is the address for
Beneficiary as secured party under the UCC. Except for any notice required under applicable
law to be given in another manner, all notices to be sent pursuant to this Deed of Trust shall be
made in writing, and sent to the parties at their respective addresses specified below or to such
other address as a party may designate by written notice delivered to the other parties in
accordance with this Section. All such notices shall be sent by: (a) personal delivery, in which
case notice shall be deemed delivered upon receipt; (b) certified or registered mail, return receipt
requested, in which case notice shall be deemed delivered two (2) business days after deposit,
postage prepaid in the United States mail; or (c) nationally recognized overnight courier, in
which case notice shall be deemed delivered one (1) day after deposit with such courier.
TRUSTOR: Madrone Village 2, L.P.,
BENEFICIARY: City of Petaluma
11 English Street
Petaluma, CA 94952
Attn: City Manager
10.3 Binding on Successors. The terms, covenants and conditions of this Deed of
Trust shall be binding upon and inure to the benefit of the heirs, administrators, executors,
successors in interest, transferees, and assigns of the Trustor, Beneficiary and Trustee; provided
however this Section 10.3 does not waive the provisions of Section 7.6.
10.4 Substitution of Trustee. Beneficiary may from time to time or at any time
substitute a trustee or trustees to execute the trust hereby created, and when any such substitution
has been filed for record in the office of the Recorder of Sonoma County, it shall be conclusive
evidence of the appointment of such trustee or trustees, and such new trustee or trustees shall
succeed to all of the powers and duties of the Trustee named herein.
74
10.5 Attorneys' Fees and Costs. In any action or proceeding to foreclose this Deed of
Trust or to enforce any right of Beneficiary or of Trustee, Trustor shall pay to Beneficiary and
Trustee all costs of such action or proceeding, including reasonable attorneys' fees.
10.6 Governing Law; Severability, Interpretation. This Deed of Trust shall be
governed by the laws of the State of California without regard to principles of conflicts of laws.
Trustor agrees that any controversy arising under or in relation to this Deed of Trust shall be
litigated exclusively in the jurisdiction where the Land is located (the "Property Jurisdiction ").
The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall
have exclusive jurisdiction over all controversies which shall arise under or in relation to the
Loan Documents. Trustor irrevocably consents to service, jurisdiction, and venue of such courts
for any such litigation, and waives any other venue to which it might be entitled by virtue of
domicile, habitual residence or otherwise. If any provision of this Deed of Trust is held
unenforceable or void, that provision shall be deemed severable from the remaining provisions,
and shall in no way affect the validity of this Deed of Trust. The captions used in this Deed of
Trust are for convenience only and are not intended to affect the interpretation or construction of
the provisions herein contained. In this Deed of Trust, whenever the context so requires, the
singular number includes the plural.
10.7 Waiver, Modification and Amendment. Any waiver by Beneficiary of any
obligation of Trustor hereunder must be in writing, and no waiver shall be construed as a
continuing waiver. No waiver shall be implied from any delay or failure by Beneficiary or
Trustee to take action on account of any default of Trustor. Consent by Beneficiary or Trustee to
any act or omission by Trustor shall not be construed as a consent to any other or subsequent act
or omission or to waive the requirement for Beneficiary's or Trustee's consent to be obtained in
any future or other instance. No amendment to or modification of this Deed of Trust shall be
effective unless and until such amendment or modification is in writing, executed by Trustor and
Beneficiary. Without limiting the generality of the foregoing, Beneficiary's acceptance of
payment of any sum secured hereby after its due date shall not constitute a waiver by Beneficiary
of its right either to require prompt payment when due of all other sums so secured or to declare
default for failure so to pay.
10.8 Action by Beneficiary. Except as may be otherwise specifically provided herein,
whenever any approval, notice, direction, or consent by the Beneficiary is required or permitted
under this Agreement, such action shall be in writing, and such action may be given, made or
taken by Beneficiary's Executive Director or by any person who shall have been designated by
Beneficiary's Executive Director, without further approval by the governing board of
Beneficiary.
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10.9 Joint and Several Liability. If Trustor consists of more than one person or entity,
each shall be jointly and severally liable for the faithful performance of all of Trustor's
obligations under this Deed of Trust.
10.10 Time is of the Essence. Time is of the essence for each provision of this Deed of
Trust.
10.11 Partial Subordination to Extended Use Agreement. Trustor and the California
Tax Credit Allocation Committee may enter into a Regulatory Agreement (the "TCAC
Regulatory Agreement "), which constitutes the extended low- income housing commitment
described in Section 42(h)(6)(B) of the Internal Revenue Code of 1986, as amended (the
"Code "). In the event of a foreclosure of Beneficiary's interest under this Deed of Trust or
delivery by the Trustor of a deed in lieu thereof (collectively, a "Foreclosure "), the following
rule shall apply pursuant to Section 42(h)(6)(E)(ii) of the Code:
With respect to dwelling units that had been regulated by the TCAC Regulatory
Agreement, for a period of three (3) years following a Foreclosure: none of the
tenants occupying such units at the time of the Foreclosure may be evicted or
have their tenancy terminated other than for good cause, nor may any rent be
increased except as otherwise permitted under Section 42 of the Code.
.SIGNATURES ONFOLL0 WING PAGE.
76
IN WITNESS WHEREOF, Trustor has executed this Amended and Restated Deed of
Trust as of the date first written above.
TRUSTOR:
MADRONE VILLAGE 2, L.P., a California limited partnership
By: Madrone Village 2 LLC, a California limited liability company
Its: General Partner
By: Burbank Housing Development Corporation, a California nonprofit public benefit
corporation, its sole member /manager
C
Print Name:
Title:
SIGNATURES MUST BE NOTARIZED.
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ACKNOWLEDGMENT
A notary public or other officer completing this
certificate verifies only the identity of the
individual who signed the document to which this
certificate is attached, and not the truthfulness,
State of California )
ss
County of )
On , before
(Name of Notary)
notary public, personally appeared
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is /are
subscribed to the within instrument and acknowledged to me that he /she /they executed the same
in his /her /their authorized capacity(ies), and that by his/her /their signature(s) on the instrument
the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
(Notary Signature)
78
ACKNOWLEDGMENT
A notary public or other officer completing this
certificate verifies only the identity of the
individual who signed the document to which this
certificate is attached, and not the truthfulness,
State of California )
) ss
County of
On , before me, ,
(Name of Notary)
notary public, personally appeared
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is /are
subscribed to the within instrument and acknowledged to me that he /she /they executed the same
f in his /her /their authorized capacity(ies), and that by his /her /their signature(s) on the instrument
the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
(Notary Signature)
79
Exhibit A
LAND
The land situated in the County of Sonoma, City of Petaluma, State of California, described as
follows:
I
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of Petaluma
11 English Street
Petaluma, CA 94952
Attention:
EXEMPT FROM RECORDING FEES PER
GOVERNME
ATTACHMENT #6
Space above this line for Recorder's use.
AFFORDABLE HOUSING REGULATORY AGREEMENT
DECLARATION OF RESTRICTIVE COVENANTS
by and between
THE CITY OF PETALUMA
and
MADRONE VILLAGE 2, L.P.
This Affordable Housing Regulatory Agreement and Declaration of Restrictive
Covenants (this "Agreement ") is entered into effective as of June 1, 2015 ( "Effective Date ") by
and between the City of Petaluma, a municipal corporation ( "City ") and Madrone Village 2,
L.P., a California limited partnership ( "Owner "). The City and the Owner are collectively
referred to herein as the "Parties."
RECITALS
A. Owner is the owner of the real property located at 700 and 712 Sycamore Lane in
the City of Petaluma, Sonoma County, California, known as Sonoma County Assessor's Parcel
Nos. 006 - 461 -034 and 006 - 461 -035, and more particularly described in Exhibit A attached
hereto (the "Property ").
B. Owner intends to rehabilitate, own and operate an affordable housing
development on the Property consisting of twenty -three (23) apartments and related
improvements (collectively, the "Project ") in accordance with that certain Affordable Housing
Loan Agreement (the "Loan Agreement ") dated as of the date hereof and executed by and
between Owner and City. Capitalized terms used without definition herein shall have the
meaning ascribed to such terms in the Loan Agreement.
C. The Loan Agreement provides that the Restricted Units located on the Property
will be required to be available to Eligible Households at Affordable Rents (defined below) in
accordance with this' Agreement for a period of not less than 55 years.
D. Subject to the terms and conditions set forth in the Loan Agreement, City has
agreed to modify the terms of financing previously provided to Owner's predecessors in interest
in connection with the acquisition and development of the Project, and has agreed to provide
certain additional financing for the Project. As a condition to its agreement to make such
modifications and provide such financing, City requires the Property to be subject to the terms,
conditions and restrictions set forth herein. Pursuant to the Loan Agreement, Owner shall
execute and deliver to City an Amended and Restated Secured Promissory Note dated as of the
date hereof (the "Amended Note ") to evidence Owner's obligation to repay the loan originally
provided by City to Owner's predecessors in interest (the "Original Loan "), and shall execute
and deliver to City a Secured Promissory Note dated as of the date hereof (the "Additional
Note ") to evidence Owner's obligation to repay the additional funds advanced by City to Owner.
The Amended Note and the Additional Note shall be secured by an Amended and Restated Deed
of Trust, Assignment of Rents, Security Agreement and Fixture Filing that shall be dated as of
the date hereof and executed by Owner for the benefit of City (the "Deed of Trust "). The Deed
of Trust will be recorded in the Official Records of Sonoma County ( "Official Records ")
substantially concurrently herewith.
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E. The purpose of this Agreement is to satisfy the affordability requirements of the
City's affordable housing program and to regulate and restrict the occupancy and rents of the
Project's Restricted Units for the benefit of the Project occupants. The Parties intend the covenants set
forth in this Agreement to run with the land and to be binding upon Owner and Owner's successors
and assigns for the full term of this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing, and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows.
1. Definitions. The following terms have the meanings set forth in this Section wherever
used in this Agreement or the attached exhibits.
"Actual Household Size" means the actual number of persons in the applicable
household.
"Additional_ Note" is defined in Recital D.
"Adjusted for Family Size Appropriate for the Unit" shall be determined consistent
with Section 50052.5(h) of the California Health and Safety Code, subject to the application of
federal rules and regulations applicable to Project financing sources, including Section 42(g)(2)
of the Internal Revenue Code of 1986 as amended (or successor provision).
"Affordable Rent" means the following amounts, less a utility allowance and other fees
and charges required to be paid by tenants of the Project on a non - optional basis: (i) for units
that are restricted for rental to households with incomes of not more than fifty percent (50 %) of
AMI ( "50% Units "), a monthly rent that does not exceed one - twelfth of thirty percent (30 %) of
fifty percent (50 %) of Area Median Income, Adjusted for Family Size Appropriate for the Unit,
and (ii) for units that are restricted for rental to households with incomes of not more than sixty
percent (60 %) of AMI ( "60% Units "), a monthly rent that does not exceed one - twelfth of thirty
percent (30 %) of sixty percent (60 %) of Area Median Income, Adjusted for Family Size
Appropriate for the Unit.
"Amended Note" is defined in Recital D.
"Area Median Income" or "AMI" means the median income for Sonoma County,
California, adjusted for Actual Household Size, as determined by the U.S. Department of
Housing and Urban Development ( "HUD ") pursuant to Section 8 of the United States Housing
Act of 1937 and as published from time to time by the State of California Department of
Housing and Community Development ( "HCD ") in Section 6932 of Title 25 of the California
.,
Code of Regulations or successor provision published pursuant to California Health and
Safety Code Section 50093(c).
"City's Authorized Representative" means the City Manager of the City of
Petaluma.
"City Documents" means the Loan Agreement, the Amended Note, the Additional
Note, the Deed of Trust and this Agreement.
"Claims" is defined in Section 2.6.
"Deed of Trust" is defined in Recital D.
"Eligible Household" means a household for which gross household income upon initial
occupancy does not exceed the maximum income level for a Restricted Unit as specified in
Section 2.1 and Exhibit B.
"Indemnitees" is defined in Section 2.6.
"Loan Agreement" is defined in Recital B.
"Marketing and Management Plan" is defined in Section 6.5.
"Maximum Qualifying Income" is defined in Section 2.2.
"Notes" means, collectively, the Additional Note and the Amended Note.
"Original Loan" is defined in Recital D.
"Regulations" means Title 25 of the California Code of Regulations.
"Rent Restricted" is defined in Section 2.1.
"Restricted Unit" means a dwelling unit which is reserved for occupancy at an
Affordable Rent by Eligible Households of specified household income levels as set forth in
Sections 2.1 and 2.2 and Exhibit B.
2. Use and Affordability Restrictions. Owner hereby covenants and agrees, for itself and its
successors and assigns, that the Property shall be used solely for the operation of a multifamily
rental housing development in compliance with the Loan Agreement and the requirements set
forth herein. Owner represents and warrants that it has not entered into any agreement that would
restrict or compromise its ability to comply with the occupancy and affordability restrictions set
forth in this Agreement, and Owner covenants that it shall not enter into any agreement that is
inconsistent with such restrictions without the express written consent of City.
N
2.1 Affordability Requirements. For a term of fifty -five (55) years commencing upon
the date of City's issuance of a final certificate of occupancy or equivalent for the Project: (i)
not less than three (3) of the residential units in the Project shall be both Rent Restricted and
occupied (or if vacant, available for occupancy) by Eligible Households whose income is less
than or equal to fifty percent (50 %) of AMI; and (ii) not less than an additional nineteen (19) of
the residential units in the Project shall be both Rent Restricted and occupied (or if vacant,
available for occupancy) by Eligible Households whose income is less than or equal to sixty
percent (60 %) of AMI. One (1) of the residential units in the Project shall be a manager's unit
for which rent will not be restricted.
In the event that recertification of tenant incomes indicates that the number of Restricted
Units actually occupied by Eligible Households falls below the number reserved for each
income group as specified in this Section 2.1 and Exhibit B, Owner shall rectify the condition
by renting the next available dwelling unit(s) in the Project to Eligible Household(s) until the
required income mix is achieved. A dwelling unit shall qualify as "Rent Restricted" if the
gross rent charged for such unit does not exceed the Affordable Rent for the applicable
household income category as set forth in Exhibit B, subject to Section 2.2.
Notwithstanding anything to the contrary contained in this Agreement, if other Project
lenders, Project investors, or regulatory agencies restrict a greater number of units than
restricted by this Agreement or require stricter household income eligibility or affordability
requirements than those imposed hereby, the requirements of such other lenders, investors or
regulatory agencies shall prevail. Provided, further if the Project qualifies for federal tax
credits pursuant to Section 42 of the Internal Revenue Code of 1986, as amended, then a
dwelling unit shall qualify as Rent Restricted for purposes of this Agreement so long as the unit
complies with the regulations adopted by California Tax Credit Allocation Committee
( "TCAC ") for so long as the Property is subject to a TCAC extended use agreement.
2.2 Rents for Restricted Units-, Unit Sizes. Rents for Restricted Units shall be
limited to Affordable Rents for households of the applicable income limit in accordance with
Section 2.1 and Exhibit B. The Restricted Units shall be allocated among affordability
categories as set forth in Exhibit B. Notwithstanding the foregoing, no tenant qualifying for a
Restricted Unit shall be denied continued occupancy of a unit in the Project because, after
admission, such tenant's household income increases to exceed the qualifying limit for such
Restricted Unit. A household which at initial occupancy qualifies in a particular income
category shall be treated as continuing to be of such income category so long as the household's
gross income does not exceed one hundred forty percent (140 %) of the applicable income limit.
In the event the gross household income of a household that qualified at the applicable income
limit at initial occupancy exceeds the applicable income limit for a unit, that unit will continue
to be considered as satisfying the applicable income limit if the unit remains Rent- Restricted.
In the event a tenant's household income exceeds the limits specified in this Section, Owner
shall apply the rules applicable to the Project pursuant to Section 42 of the Internal Revenue
Code of 1986, as amended and the federal Regulations applicable thereto. In the event of
inconsistency between the provisions of this Section 2.2 and the rules applicable to the Project
in connection with low- income housing tax credits, the rules applicable pursuant to such
financing source shall prevail.
:.
2.3 Manager's Unit. One (1) dwelling unit in the Project may be used as resident
manager's unit, and shall be exempt from the occupancy and rent restrictions set forth in this
Agreement.
2.4 No Condominium Conversion. Owner shall not convert the Project to condominium
or cooperative ownership or sell condominium or cooperative rights to the Project or any part
thereof during the term of this Agreement.
2.5 Non - Discrimination, Compliance with Fair Housing.
2.5.1 Intentionally omitted.
2.5.2 Fair Housing. Owner shall comply with state and federal fair housing
laws in the marketing and rental of the units in the Project. Owner shall accept as tenants, on the
same basis as all other prospective tenants, persons who are recipients of federal certificates or
vouchers for rent subsidies pursuant to the existing Section 8 program or any successor thereto.
2.5.3 Non - Discrimination. Owner shall not restrict the rental, sale, lease,
sublease, transfer, use, occupancy, tenure or enjoyment of the Property, or any portion thereof,
on the basis of race, color, religion, creed, sex, sexual orientation, disability, marital status,
ancestry, or national origin of any person. Owner covenants for itself and all persons claiming
under or through it, and this Agreement is made and accepted upon and subject to the condition
that there shall be no discrimination against or segregation of any person or group of persons on
account of anv basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as
those bases are defined in Sections 12926, 12926. 1, subdivision (m) and paragraph (11 of
subdivision (p) of Section 12955, and Section 12955.2 of the Government Code in the sale,
lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property or part thereof, nor
shall Owner or any person claiming under or through Owner establish or permit any such
practice or practices of discrimination or segregation with reference to the selection, location,
number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in, of, or for the
Property or part thereof. Owner shall include such provision in all deeds, leases, contracts and
other instruments executed by Owner, and shall enforce the same diligently and in good faith.
All deeds, leases, and contracts pertaining to management of the Project, made or
entered into by Owner, its successors or assigns, as to any portion of the Property or the
Improvements shall contain the following language:
a 1 In Deeds the following language shall appear:
"Grantee herein covenants by and for itself, its successors and assigns, and all
persons claiming under or through it, that there shall be no discrimination against
or segregation of a person or of a group of persons on account of an basis listed
in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases
are defined in Sections 12926, 12926. 1, subdivision (m) and paragraph (1) of
subdivision (p) of Section 12955, and Section 12955.2 of the Government Code
in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the
property herein conveyed nor shall the grantee or any person claiming under or
through the grantee establish or permit any such practice or- practices of
discrimination or segregation with reference to the selection, location, number,
use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the
property herein conveyed. The foregoing covenant shall run with the land."
(2) Notwithstanding paragraph (1), with respect to familial status, paragraph
1) shall not be construed to apply to housing for older persons, as defined in
Section 12955.9 of the Government Code. With respect to familial status, nothing
in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10,
5 1. 11 and 799.5 of the Civil Code, relating to housing for senior citizens.
Subdivision (d) of Section 51 and Section 1360 of the Civil Code and
subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall
apply to paragraph U.
b 1 In Leases., the following language shall appear:
"The lessee herein covenants by and for the lessee and lessee's heirs, personal
representatives and assigns, and all persons claiming under the lessee or through
the lessee, that this lease is made subject to the condition that there shall be no
discrimination against or segregation of any person or of a group of persons on
account of race, color, creed, religion, sex, sexual orientation, marital status,
national origin, ancestry or disability in the leasing, subleasing, transferring, use,
occupancy, tenure or enjoyment of the property herein leased nor shall the lessee
or any person claiming under or through the lessee establish or permit any such
practice or practices of discrimination of segregation with reference to the
selection, location, number, use or occupancy of tenants, lessees, sublessees,
subtenants; or vendees in the property herein leased."
2) Notwithstanding paragraph (1), with respect to familial status, paragraph
1) shall not be construed to apply to housing for older persons, as defined in
Section 12955.9 of the Government Code. With respect to familial status, nothing
in paragraph (1) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10,
51.11 and 799.5 of the Civil Code, relating to housing for senior citizens.
Subdivision (d) of Section 51 and Section 1360 of the Civil Code and
subdivisions (n), Col. and (p) of Section 12955 of the Government Code shall
apply to paragraph U.
(c) In Contracts pertaining to management of the Project, the following
language, or substantially similar language prohibiting discrimination and
segregation shall appear:
F.M. .
"There shall be no discrimination against or segregation of any person or group of
persons on account of any basis listed in subdivision (al or (d) of Section 12955
of the Government Code, as those bases are defined in Sections 12926, 12926.1,
subdivision (m) and paragraph (1) of subdivision (n) of Section 12955, and
Section 12955.2 of the Government Code in the sale, lease, sublease, transfer,
use, occupancy, tenure or enjoyment of the property nor shall the transferee or
any person claiming under or through the transferee establish or permit any such
practice or practices of discrimination or segregation with reference to selection,
location, number, use or occupancy of tenants, lessee, subtenants, sublessees or
vendees of the land."
2.6 Relocation. Persons residing on the Property shall not be displaced before
suitable replacement housing is available. Owner shall ensure that all occupants of the Property
receive all notices, benefits and assistance to which they are entitled in accordance with
California Relocation Assistance Law (Government Code Section 7260 et seq.), all state and
local regulations implementing such law, and all other applicable local, state and federal laws
and regulations (collectively "Relocation Laws ") relating to the displacement and relocation of
eligible persons as defined in such Relocation Laws. All costs incurred in connection with the
temporary and /or permanent displacement and/or relocation of occupants of the Property,
including without limitation payments to a relocation consultant, moving expenses, and
payments for temporary and permanent relocation benefits pursuant to Relocation Laws shall be
paid by Owner. Prior to displacement of any tenant residing on the Property necessitated by the
rehabilitation of the Project, Developer shall obtain from each such tenant and deliver to City, a
written waiver in form approved by City, that provides that the tenant shall hold the Indemnitees
harmless from and against any Claim arising in connection with relocation of such tenant,
including without limitation, any and all Claims arising in connection with the length of time the
tenant is required to reside in temporary housing or in connection with the condition of trailers or
other replacement housing provided to the tenant.
Owner shall indemnify, defend (with counsel approved by City) and hold the City and its
elected and appointed officers, officials, employees, agents, consultants, contractors and
representatives (collectively, the "Indemnitees ") harmless from and against all liability, loss,
cost, expense (including without limitation attorneys' fees and costs of litigation), claim,
demand, action, suit, judicial or administrative proceeding, penalty, deficiency, fine, order, and
damage (all of the foregoing collectively "Claims ") arising from the breach of Owner's
obligations set forth in this Section whether or not any insurance policies shall have been
determined to be applicable to any such Claims. Owner's indemnification obligations set forth
in this Section (i) shall survive the expiration or earlier termination of this Agreement, and (ii)
shall not extend to Claims to the extent arising from the gross negligence or willful misconduct
of the Indemnitees. City does not and shall not waive any rights against Owner that it may have
by reason of any indemnity and hold harmless provision set forth in this Agreement because of
E-9211
the acceptance by City, or the deposit with City by Owner, of any of the insurance policies
described in this Agreement.
3. Reporting Requirements; Access to Information; Inspections; Annual Monitoring Fee.
3.1 Tenant Certification. Owner or Owner's authorized agent shall obtain from each
household prior to initial occupancy of each Restricted Unit, and on every anniversary thereafter,
a written certificate containing all of the following in such format and with such supporting
documentation as City may reasonably require:
(i) The identity of each household member; and
(ii) The total gross household income;
Owner shall retain such certificates for not less than five (5) years, and upon City's request, shall
provide copies of such certificates to City and make the originals available for City inspection.
3.2 Annual Report; Inspections. Following completion of rehabilitation of the
Project, by not later than May 1 of each year during the term of this Agreement, Owner shall
submit an annual report ( "Annual Report ") to the City in form satisfactory to City, together
with a certification that the Project is in compliance with the requirements of this Agreement.
The Annual Report shall, at a minimum, include the following information for each dwelling unit
in the Project: (i) unit number; (ii) number of bedrooms; (iii) current rent and other charges; (iv)
dates of any vacancies during the previous year; (v) number of people residing in the unit; (vi)
total gross household income of residents; (vii) documentation of source of household income;
and (viii) the information required by Section 3.1.
Owner shall include with the Annual Report, an income recertification for each
household, documentation verifying tenant eligibility, and such additional information as City
may reasonably request from time to time in order to demonstrate compliance with this
Agreement. The Annual Report shall conform to the format requested by City; provided
however, during such time that the Project is subject to a regulatory agreement restricting
occupancy and/or rents pursuant to requirements imposed in connection with the use of state or
federal low - income housing tax credits, Owner may satisfy the requirements of this Section that
pertain to tenant income certification and rents by providing City with a copy of compliance
reports required in connection with such financing.
In addition to the information described above, the Annual Report shall include the
following:
(i) A Project income and expense statement for the reporting period;
all
(ii) Proposed annual budget for the next fiscal year which sets forth Owner's
estimate of operating income, operating expenses and debt service for the year, amounts payable
to reserves and proposed rent adjustments;
(iii) A report on maintenance and other issues anticipated to affect the current
budget needs of the Project as well as the amount in the Project's reserve accounts and the
amount expected to be needed for major repairs or other needs during the new fiscal year;
(iv) Information on the status of the waiting list for units, including the number
of households on the list; and
(v) A financial audit of the books and records of the Project prepared in
accordance with generally accepted auditing standards by an independent certified public
accountant. City may require the audit to be accompanied by a supplemental report prepared in
accordance with City's requirements.
(vi) City may, from time to time request additional or different information,
and Owner shall promptly supply such information in the reports required hereunder.
3.3. Maintenance of Records.
3.3.1 Owner shall maintain all records regarding the rehabilitation of the Project
for five (5) years after final payment and all other pending matters are closed. Owner shall also
maintain tenant leases, income certifications and other matters related to the leasing of the
affordable units for a period of five (5) years after the final date of occupancy by the tenant.
3.3.2 Records must be kept accurate and up -to -date. City shall notify Owner of
any records it deems insufficient. Owner shall have fifteen (15) calendar days from such notice
to correct any specified deficiency in the records, or, if more than fifteen (15) days shall be
reasonably necessary to correct the deficiency, Owner shall begin to correct the deficiency within
fifteen (15) days and diligently pursue the correction of the deficiency as soon as reasonably
possible.
3.4 Access to Records, Inspections.
3.4.1 Owner shall provide City and its authorized agents and representatives
access to any books, documents, papers and records of the Project for the purpose of making
audits, examinations, excerpts and transcriptions.
3.4.2 With 48- hours' notice, during normal business hours and as often as may
-- be deemed necessary, City and its authorized agents and representatives shall be permitted access
91
to and the right to examine the Project and the Property and to interview tenants and employees
of the Project, for the purpose of verifying compliance with applicable regulations and
compliance with the conditions of this Agreement and the other City Documents.
3.5 Intentionally omitted.
4. Term of Agreement.
4.1 Term of Restrictions. This Agreement shall remain in effect through the fifty -fifth
(55th) anniversary of the City's issuance of a final certificate of occupancy or equivalent for the
Project. unless the term is extended by mutual agreement of the Parties.
4.2 Effectiveness Succeeds Conveyance of Property and Repayment of Loan. This
Agreement shall remain effective and fully binding for the full term hereof, as such may be
extended pursuant to Section 4. 1, regardless of (i) any sale, assignment, transfer, or conveyance of
the Property or the Project or any part thereof or interest therein, (ii) any payment, prepayment or
extinguishment of the Loan or either of the Notes, or (iii) any reconveyance of the Deed of Trust.
4.3 Reconveyance. Upon the termination of this Agreement, the Parties agree to
execute and record appropriate instruments to release and discharge this Agreement; provided,
however, the execution and recordation of such instruments shall not be necessary or a
prerequisite to the termination of this Agreement upon the expiration of the term as such may be
extended pursuant to Section 4.1.
5. Binding Upon Successors; Covenants to Run with the Land. Owner hereby subjects
its interest in the Property and the Project to the covenants and restrictions set forth in this
Agreement. The City and Owner hereby declare their express intent that the covenants and
restrictions set forth herein shall be deemed covenants running with the land and shall be binding
upon and inure to the benefit of the heirs, administrators, executors, successors in interest,
transferees, and assigns of Owner and City, regardless of any sale, assignment, conveyance or
transfer of the Property, the Project or any part thereof or interest therein. Any successor -in- interest
to Owner, including without limitation any purchaser, transferee or lessee of the Property or the.
Project (other than the tenants of the individual dwelling units within the Project) shall be subject
to all of the duties and obligations imposed hereby for the full term of this Agreement.. Each and
every contract, deed, ground lease or other instrument affecting or conveying the Property or the
Project or any part thereof, shall conclusively be held to have been executed, delivered and
accepted subject to the covenants, restrictions, duties and obligations set forth herein, regardless of
whether such covenants, restrictions, duties and obligations are set forth in such contract, deed,
ground lease or other instrument. If any such contract, deed, ground lease or other instrument has
been executed prior to the date hereof, Owner hereby covenants to obtain and deliver to City an
instrument in recordable form signed by the parties to such contract, deed, ground lease or other
92
instrument pursuant to which such parties acknowledge and accept this Agreement and agree to
be bound hereby.
Owner agrees for itself and for its successors that in the event that a court of competent
jurisdiction determines that the covenants herein do not run with the land, such covenants shall
be enforced as equitable servitudes against the Property and the Project in favor of City.
6. Property Management, Repair and Maintenance, Marketing.
6.1 Management Responsibilities. Owner shall be responsible for all management
functions with respect to the Property and the Project, including without limitation the
selection of tenants, certification and recertification of household income and eligibility,
evictions, collection of rents and deposits, maintenance, landscaping, routine and extraordinary
repairs, replacement of capital items, and security. City shall have no responsibility for
management or maintenance of the Property or the Project.
6.2 Management Entity. City shall have the right to review and approve the
qualifications of the management entity proposed by Owner for the Project, and shall have the
right to review and approve any agreement executed between Owner and the management entity,
which approval shall not be unreasonably withheld. The contracting of management services to
a management entity shall not relieve Owner of its primary responsibility for proper
performance of management duties. City hereby approves Burbank Housing Management
Corporation as the initial management entity for the Project. Any subsequent management entity
shall be subject to City review and approval, which shall not be unreasonably withheld or
delayed. Upon City determination and delivery of written notice to Owner that Owner has failed
to operate the Project in accordance with this Agreement, City may, subject to any applicable
cure period, require Owner to contract with a qualified management agent selected by City, to
operate the Project, or to make such other arrangements as City deems necessary to ensure
performance of the required functions.
6.3 Repair, Maintenance and Security. Throughout the term of this Agreement,
Owner shall at its own expense, maintain,the Property and the Project in good physical
condition, in good repair, and in decent, safe, sanitary, habitable and tenantable living conditions in
conformity with all applicable state, federal, and local laws, ordinances, codes, and regulations.
Without limiting the foregoing, Owner agrees to maintain the Project and the Property (including
without limitation, the residential units, common areas, meeting rooms, landscaping, driveways,
parking areas and walkways) in a condition free of all waste, nuisance, debris, unmaintained
landscaping, graffiti, disrepair, abandoned vehicles /appliances, and illegal activity, and shall take
all reasonable steps to prevent the same from occurring on the Property or at the Project. Owner
shall prevent and /or rectify any physical deterioration of the Property and the Project and
shall make all repairs, renewals and replacements necessary to keep the Property and the
improvements located thereon in good condition and repair. Owner shall provide adequate
security measures for the Project, including without limitation, the installation of adequate
lighting and deadbolt locks.
6.3.1 Additional Requirements. All construction and rehabilitation work and
professional services for the Project shall be performed by persons or entities licensed or
otherwise authorized to perform the applicable work or service in the State of California and
shall have a current City of Petaluma business license if required under local law. To the extent
allowed by state and federal laws, Owner shall limit the installation of satellite dish, antenna and
other such equipment to screened locations on the Property as approved by the City. Owner
shall diligently work to resolve complaints related to noise, parking, litter or other neighborhood
concerns.
6.4 City's Right to Perform Maintenance. In the event that Owner breaches any of the
covenants contained in Section 6.3, and such default continues for a period of ten (10) days after
written notice from City (with respect to graffiti, debris, and waste material) or thirty (30) days
after written notice from City (with respect to landscaping, building improvements and general
maintenance), then City, in addition to any other remedy it may have under this Agreement or at
law or in equity, shall have the right, but not the obligation, to enter upon the Property and
perform all acts and work necessary to protect, maintain, and preserve the improvements and the
landscaped areas on the Property. All costs expended by City in connection with the foregoing,
shall constitute an indebtedness secured by the Deed of Trust, and shall be paid by Owner to City.
upon demand. All such sums remaining unpaid thirty (30) days following delivery of City's
invoice therefor shall bear interest at the lesser of 10% per annum or the highest rate permitted by
applicable law. City shall have a lien against the Property for the amount of such unpaid sums
and shall have the right to record a Notice of Claim of Lien against the Property.
6.5 Marketing and Management Plan. Not later than ninety (90) days following
commencement of rehabilitation work on the Project, Owner shall submit for City review and
approval, a plan for marketing and managing the Property ( "Marketing and Management Plan"
or "Plan "). The Marketing and Management Plan shall address in detail how Owner plans to
market the Restricted Units to prospective Eligible Households in accordance with fair housing
laws and this Agreement, Owner's tenant selection criteria, and how Owner plans to certify the
eligibility of Eligible Households. The Plan shall also describe the management team and shall
address how the Owner and the management entity plan to manage and maintain the Property
and the Project. The Plan shall include the proposed management agreement and the form of
rental agreement that Owner proposes to enter into with Project tenants. Owner shall abide by
the terms of the Marketing and Management Plan in marketing, managing, and maintaining the
Property and the Project, and throughout the term of this Agreement, shall submit proposed
modifications to City for review and approval.
In addition to the foregoing, the Marketing and Management Plan shall address the
following:
(a) The actions to be taken by Owner to affirmatively market units in
compliance with fair housing laws and in compliance with City's policies and
procedures, including the policies described in Section 2.5 above;
(b) Criteria for determining tenant eligibility, including certification of
household income and size, and establishing reasonable occupancy standards (which
shall not exceed standards established by state and federal fair housing laws and state
housing and building codes) and procedures for screening prospective tenants, including
obtaining credit reports, unlawful detainer reports, landlord references and criminal
background investigations;
(c) A requirement that eligible tenants be selected based on order of
application, lottery or other reasonable method approved by City;
(d) A requirement that eligible applicants be notified of eligibility and be
provided an estimate regarding when a unit may be available;
(e) A requirement that ineligible applicants be notified of the reason for their
ineligibility;
(f) Specific procedures through which applicants deemed to be ineligible may
appeal this determination;
(g) Maintenance of a waiting list of eligible applicants;
(h) Specific procedures for obtaining documentation regarding prospective
tenants' incomes, as necessary, to certify that such income does not exceed income
limits;
(i) Specific procedures for certification and recertification of household
incomes and procedures for handling over - income tenants;
(j) A requirement that a written rental agreement (subject to City approval) be
executed with each eligible household selected to occupy a unit;
(k) A detailed listing of reasonable rules of conduct and occupancy which
shall be in writing, shall be consistent with federal and state law, and shall be provided to
each tenant upon occupancy;
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(1) A requirement that there be no storage on balconies and patios and that
tenants must keep all balconies, patios and other exterior areas neat, clean and clutter
free, including no clotheslines or laundry;
(m) A parking management plan which details, among other things, how
parking spaces will be assigned, how guest parking will be handled and how parking will
be managed to encourage tenants to use their assigned parking spaces;
(n) Procedures for maintenance and management of the Project;
(o) Procedures for dealing with tenant or neighborhood issues or concerns;
(p) Procedures for maintaining a reserve account, budgeting for maintenance
and repair needs as well as long -term rehabilitation needs and handling net cash flow; and
(q) Such other requirements and criteria/procedures as City may determine
appropriate.
6.6 Approval of Amendments. If City has not responded to any submission of the
Management and Marketing Plan, the proposed management entity, the proposed management
agreement, or a proposed amendment or change to any of the foregoing within sixty (60) days
following City's receipt of such plan, proposal, agreement or amendment, the plan, proposal,
agreement, or amendment shall be deemed approved by City.
6.7 Fees, Taxes, and Other Levies. Owner shall be responsible for payment of all fees,
assessments, taxes, charges, liens and levies applicable to the Property or the Project, including
without limitation possessory interest taxes, if applicable, imposed by any public entity, and shall
pay such charges prior to delinquency. However, Owner shall not be required to pay any such
charge so long as (a) Owner is contesting such charge in good faith and by appropriate
proceedings, (b) Owner maintains reserves adequate to pay any contested liabilities, and (c) on
final determination of the proceeding or contest, Owner immediately pays or discharges any
decision or judgment rendered against it, together with all costs, charges and interest. The
foregoing is not intended to impair Owner's ability to apply for any applicable exemption from
property taxes or other assessments and fees.
6.8 Insurance Coverage. Throughout the term of this Agreement Owner shall comply
with the insurance requirements set forth in Exhibit C, and shall, at Owner's expense, maintain in
full force and effect insurance coverage as specified in Exhibit C.
6.9 Property Damage or Destruction. If any part of the Project is damaged or
destroyed, Owner shall repair or restore the same, consistent with the occupancy and rent
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restriction requirements set forth in this Agreement. Such work shall be commenced as soon
as reasonably practicable after the damage or loss occurs and shall be completed within one
year thereafter or as soon as reasonably practicable, provided that insurance proceeds are
available to be applied to such repairs or restoration within such period and the repair or
restoration is financially feasible. During such time that lenders or low- income housing tax
credit investors providing financing for the Project impose requirements that differ from the
requirements of this Section the requirements of such lenders and investors shall prevail.
7. Recordation; Subordination. This Agreement shall be recorded in the Official Records of
Sonoma County. The City agrees that the City will not withhold consent to reasonable requests
for subordination of this Agreement to deeds of trust provided for the benefit of lenders
identified in the financing plan submitted to City for the Project, as such plan may be updated
with City approval, provided that the instruments effecting such subordination include
reasonable protections to the City in the event of default, including without limitation, extended
notice and cure rights.
Transfer and Encumbrance.
8.1 Restrictions on Transfer and Encumbrance. During the tern of this Agreement,
except as permitted pursuant to the Loan Agreement or this Agreement, Owner shall not directly
or indirectly, voluntarily, involuntarily or by operation of law make or attempt any total or partial
sale, transfer, conveyance, assignment or lease (collectively, "Transfer ") of the whole or any
part of the Property, the Project, or the improvements located on the Property, without the prior
written consent of the City, which approval shall not be unreasonably withheld. In addition,
prior to the expiration of the term of this Agreement, except as expressly permitted by this
Agreement or the Loan Agreement, Owner shall not undergo any significant change of
ownership without the prior written approval of City. For purposes of this Agreement, a
"significant change of ownership" shall mean a transfer of the beneficial interest of more than
twenty -five percent (25 %) in aggregate of the present ownership and /or control of Owner,
taking all transfers into account on a cumulative basis; provided however, neither the admission
of an investor limited partner, nor the transfer by the investor limited partner to subsequent
limited partners shall be restricted by this provision.
8.2 Permitted Transfers. Notwithstanding any contrary provision of the City
Documents, the prohibitions on Transfer set forth herein shall not be deemed to prevent: (i) the
granting of easements or permits to facilitate development of the Property; (ii) the dedication of
any property required pursuant to the Loan Agreement; (iii) the lease of individual dwelling units
to tenants for occupancy as their principal residence in accordance with this Agreement; (iv)
assignments creating security interests for the purpose of financing the acquisition, construction,
or permanent financing of the Project or the Property in accordance with the Loan Agreement, or
r Transfers directly resulting from the foreclosure of, or granting of a deed in lieu of foreclosure
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of, such a security interest; (v) a Transfer to a tax - exempt entity under the direct control of or
under common control with Burbank Housing Development Corporation, a California nonprofit
corporation ( "Burbank"); (vi) a Transfer to a limited partnership in which a tax- exempt affiliate
of Burbank is the managing general partner ( "Approved Partnership "); (vii) the admission of
limited partners and any transfer of limited partnership interests in accordance with Owner's, or
the Approved Partnership's, as applicable, agreement of limited partnership (the "Partnership
Agreement "); (viii) the removal of the general partner by the investor limited partner for cause
in accordance with the terms of the Partnership Agreement, provided that the replacement
general partner is an entity reasonably satisfactory to City; or (ix) the transfer of the general
partner's interest to a nonprofit entity that is tax - exempt under Section 501(c)(3) of the Internal
Revenue Code of 1986 as amended (or to an entity wholly -owned thereby), provided such
replacement general partner is reasonably satisfactory to City.
8.3 Requirements for Proposed Transfers. The City may, in the exercise of its sole
discretion, consent to a proposed Transfer of this Agreement, the Property, the Improvements or
part thereof if all of the following requirements are met (provided however, the requirements of
this Section 8.3 shall not apply to Transfers described in clauses (i), (ii), (iii), (iv), and (vii) of
Section 8.2, and solely with respect to the removal of the general partner by the investor limited
partner for a default under the Partnership Agreement, clause (viii) of Section 8.2, provided that
the provisions of this Section 8.3 shall apply to the selection of a replacement general partner in
the event of a removal of the general partner in accordance with clause (viii) of Section 8.2.
(i) The proposed transferee demonstrates to the City's satisfaction that it has
the qualifications, experience and financial resources necessary and adequate as may be
reasonably determined by the City to competently complete and manage the Project and to
otherwise fulfill the obligations undertaken by the Owner under this Agreement.
(ii) The Owner and the proposed transferee shall submit for City review and
approval all instruments and other legal documents proposed to effect any Transfer of all or any
part of or interest in the Property, the Improvements or this Agreement together with such
documentation of the proposed transferee's qualifications and development capacity as the City
may reasonably request.
(iii) The proposed transferee shall expressly assume all of the rights and
obligations of the Owner under this Agreement and the other City Documents arising after the
effective date of the Transfer and all obligations of Owner arising prior to the effective date of
the Transfer (unless Owner expressly remains responsible for such obligations) and shall agree to
be subject to and 'assume all of Owner's obligations pursuant to the Conditions of Approval and
all other conditions, and restrictions set forth in this Agreement.
(iv) The Transfer shall be effectuated pursuant to a written instrument
satisfactory to the City in form recordable in the Official Records.
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Consent to any proposed Transfer may be given by the City's Authorized Representative
unless the City's Authorized Representative, in his or her discretion, refers the matter of approval
to the City Council. If the City has not rejected a proposed Transfer or requested additional
information regarding a proposed Transfer in writing within forty -five (45) days following City's
receipt of written request by Owner, the proposed Transfer shall be deemed approved.
8.4 Effect of Transfer without City Consent. In the absence of specific written
agreement by the City, no Transfer of the Property or the Project shall be deemed to relieve the
Owner or any other party from any obligation under this Agreement. It shall be an Event of
Default hereunder entitling City to pursue remedies including without limitation, acceleration of
the Loan and /or foreclosure under the Deed of Trust if without the prior written approval of the
City, Owner assigns or Transfers this Agreement, the Improvements, or the Property in violation
of Section 8. This Section 8.4 shall not apply to Transfers described in clauses (i), (ii), (iii), (iv),
and (vii) of Section 8.2. and solely with respect to the removal of the general partner by the
investor limited partner for a default under the Partnership Agreement, clause (viii) of Section
8_2, provided that the provisions of this Section 8.3 shall apply to the selection of a replacement
general partner in the event of a removal of the general partner in accordance with clause (viii) of
Section 8.2.
8.5 Recovery of City Costs. Owner shall reimburse City for all City costs; including
but not limited to reasonable attorneys' fees, incurred in reviewing instruments and other legal
documents proposed to effect a Transfer under this Agreement and in reviewing the
qualifications and financial resources of a proposed successor, assignee, or transferee within ten
(10) days following City's delivery to Owner of an invoice detailing such costs.
8.6 Encumbrances. Owner agrees to use best efforts to ensure that all deeds of trust
or other security instruments and any applicable subordination agreement recorded against the
Property, the Project or part thereof for the benefit of a lender other than City ("Third-Party
Lender ") shall contain each of the following provisions: (i) Third -Party Lender shall use its best
efforts to provide to City a copy of any notice of default issued to Owner concurrently with
provision of such notice to Owner; (ii) City shall have the reasonable right, but not the
obligation, to cure any default by Owner within the same period of time provided to Owner for
such cure extended by an additional ninety (90) days; (iii) provided that City has cured any
default under Third -Party Lender's deed of trust and other loan documents, City shall have the
right to foreclose City's Deed of Trust and take title to the Project without acceleration of Third -
Parry Lender's debt; and (iv) City shall have the right to transfer the Project without acceleration
of Third -Party Lender's debt to a nonprofit corporation or other entity which shall own and
operate the Project as an affordable rental housing Project, subject to the prior written consent of
the Third -Party Lender. Owner agrees to provide to City a copy of any notice of default Owner
receives from any Third -Party Lender within three (3) business days following Owner's receipt
thereof.
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8.7 Mortgagee Protection. No violation of any provision contained herein shall defeat
or render invalid the lien of any mortgage or deed of trust made in good faith and for value upon
all or any portion of the Project or the Property, and the purchaser at any trustee's sale or
foreclosure sale shall not be liable for any violation of any provision hereof occurring prior to the
acquisition of title by such purchaser. Such purchaser shall be bound by and subject to this
Agreement from and after such trustee's sale or foreclosure sale. Promptly upon determining
that a violation of this Agreement has occurred, City shall give written notice to the holders of
record of any mortgages or deeds of trust encumbering the Project or the Property that such
violation has occurred.
9. Default and Remedies.
. 9.1 Events of Default. The occurrence of any one or more of the following events
shall constitute an event of default hereunder ( "Event of Default "):
(i) The occurrence of a Transfer in violation of Section 8 hereof;
(ii) Owner's failure to maintain insurance on the Property and the Project as
required hereunder, and the failure of Owner to cure such default within five (5) days;
(iii) Subject to Owner's right to contest the following charges, Owner's failure
to pay taxes or assessments due on the Property or the Project or failure to pay any other charge
that may result in a lien on the Property or the Project, and Owner's failure to cure such default
within twenty (20) days of delinquency, but in all events prior to the date upon which the holder
of any such lien has the right to foreclose thereon;
(iv) A default arises under any loan secured by a mortgage, deed of trust or
other security instrument recorded against the Property and remains uncured beyond any
applicable cure period such that the holder of such security instrument has the right to accelerate
repayment of such loan;
(v) A default arises under the Loan Agreement, either of the Notes, or the
Deed of Trust and remains uncured beyond the expiration of any applicable cure period;
(vi) Owner's default in the performance of any term, provision or covenant
under this Agreement (other than an obligation enumerated in this Section 9.1), and unless such
provision specifies a shorter cure period for such default, the continuation of such default for ten
(10) days in the event of a monetary default or thirty (3 0) days in the event of a non - monetary
default following the date upon which City shall have given written notice of the default to
Owner, or if the nature of any such non - monetary default is such that it cannot be cured within
thirty (3 0) days, Owner's failure to commence to cure the default within thirty (3 0) days and
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thereafter prosecute the curing of such default with due diligence and in good faith, but in no
event longer than ninety (90) days from receipt of the notice of default.
The limited partners of Owner shall have the right to cure any default of Owner
hereunder upon the same terms and conditions afforded to Owner. Provided that City has been
given written notice of the address for delivery of notices to the limited partners, City shall
provide any notice of default hereunder to the limited partners concurrently with the provision of
such notice to Owner.
9.2 Remedies. Upon the occurrence of an Event of Default and its continuation
beyond any applicable cure period, City may proceed with any of the following remedies:
(i) Bring an action for equitable relief seeking the specific.performance of the terms
and conditions of this Agreement, and /or enjoining, abating, or preventing any
violation of such terms and conditions, and /or seeking declaratory relief;
(ii) Accelerate and declare the balance of the Notes and interest accrued thereon
immediately due and payable and proceed with foreclosure under the Deed of
Trust;
(iii) For violations of obligations with respect to rents for Restricted Units, impose as
liquidated damages a charge in an amount equal to the actual amount collected in
excess of the Affordable Rent;
(iv) Pursue any other remedy allowed under the City Documents or at law or in
equity.
Each of the remedies provided herein is cumulative and not exclusive. The City may
exercise from time to time any rights and remedies available to it under applicable law or in
equity, in addition to, and not in lieu of, any rights and remedies expressly provided in this
Agreement.
10. Indemnity. Owner shall indemnify, defend (with counsel approved by City) and hold the
Indemnitees harmless from and against all Claims arising directly or indirectly, in whole or in
part, as a result of or in connection with Owner's rehabilitation, construction, management, or
operation of the Property and the Project or any failure to perform any obligation as and when
required by this Agreement. Owner's indemnification obligations under this Section 10 shall not
extend to Claims resulting solely from the gross negligence or willful misconduct of
Indemnitees. The provisions of this Section 10 shall survive-the expiration or earlier termination
of this Agreement. City does not and shall not waive any rights against Owner that it may have
by reason of any indemnity and hold harmless provision set forth in this Agreement because of
the acceptance by City, or the deposit with City by Owner, of any of the insurance policies
described in this Agreement.
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10.1 Terms Applicable to Indemnity Provisions. The terms set forth in this Section
10.1 shall apply to all provisions of this Agreement that pertain to Owner's obligations to
indemnify City and the other Indemnitees, including without limitation, Sections 2.6 and 10. In
connection with each such provision, all of the following shall apply:
(a) City does not and shall not waive any rights against Owner that it may have by
reason of any indemnity and hold harmless provision set forth in this Agreement because of the
acceptance by City, or the deposit with City by Owner, of any of the insurance policies described
in this Agreement.
(b) Owner's obligation to indemnify the Indemnitees shall not be limited or impaired
by any of the following: (i) any amendment or modification of any City Document; (ii) any
extensions of time for performance required by any City Document; (iii) any provision in any of
the City Documents limiting City's recourse to property securing the Secured Obligations (as
defined in the Deed of Trust), or limiting the personal liability of Owner, or any other party for
payment of all or any part of the indebtedness evidenced by the Notes; (iv) the accuracy or
inaccuracy of any representation and warranty made by Owner under this Agreement or by
Owner or any other party under any City Document, (v) the release of Owner or any other
person, by City or by operation of law, from performance of any obligation under any City
Document; (vi) the release or substitution in whole or in part of any security for repayment of the
indebtedness evidenced by the Notes; and (vii) City's failure to properly perfect any lien or
security interest given as security for repayment of the indebtedness evidenced by the Notes.
(c) The obligations of Owner to indemnify the Indemnitees shall survive any
repayment or discharge of the indebtedness evidenced by the Notes, any foreclosure proceeding,
any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of
the lien of the Deed of Trust.
11. Miscellaneous.
11.1 Amendments. This Agreement may be amended or modified only by a written
instrument signed by both Parties.
11.2 No Waiver. Any waiver by City of any term or provision of this Agreement must
be in writing. No waiver shall be implied from any delay or failure by City to take action on
any breach or default hereunder or to pursue any remedy allowed under this Agreement or
applicable law. No failure or delay by City at any time to require strict performance by Owner of
any provision of this Agreement or to exercise any election contained herein or any right, power
or remedy hereunder shall be construed as a waiver of any other provision or any succeeding
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breach of the same or any other provision hereof or a relinquishment for the future of such
election.
11.3 Notices. Except as otherwise specified herein, all notices to be sent pursuant to
this Agreement shall be made in writing, and sent to the Parties at their respective addresses
specified below or to such other address as a Party may designate by written notice delivered to
the other parties in accordance with this Section. All such notices shall be sent by: (i) personal
delivery, in which case notice is effective upon delivery; (ii) certified or registered mail, return
receipt requested, in which case notice shall be deemed delivered upon receipt if delivery is
confirmed by a return receipt; or (iii) nationally recognized overnight courier, with charges
prepaid or charged to the sender's account, in which case notice is effective on delivery if
delivery is confirmed by the delivery service.
City: City of Petaluma
11 English Street
Petaluma, CA 94574
Attention:
Owner: Madrone Village 2, L.P.
With a copy to:
And with a copy to:
11.4 Further Assurances. The Parties shall execute, acknowledge and deliver to the
other such other documents and instruments, and take such other actions, as either shall
reasonably request as may be necessary to carry out the intent of this Agreement.
11.5 Parties Not Co- Venturers; Independent Contractor, No Agency Relationship.
Nothing in this Agreement is intended to or shall establish the Parties as partners, co- venturers,
or principal and agent with one another. The relationship of Owner and City shall not be
construed as a joint venture, equity venture, partnership or any other relationship. City neither
undertakes nor assumes any responsibility or duty to Owner (except as expressly provided in this
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Agreement) or to any third party with respect to the Project. Owner and its employees are not
employees of City but rather are, and shall always be considered independent contractors.
Furthermore, Owner and its employees shall at no time pretend to be or hold themselves out as
employees or agents of City. Except as City may specify in writing, Owner shall not have any
authority to act as an agent of City or to bind City to any obligation.
11.6 Action by the City. Except as may be otherwise specifically provided herein,
whenever any approval, notice, direction, consent or request by the City is required or permitted
under this Agreement, such action shall be in writing, and such action may be given, made or
taken by the City's Authorized Representative or by any person who shall have been designated
by the City's Authorized Representative, without further approval by the City Council.
11.7 Non - Liability of City and City Officials, Employees and Agents. No member,
official, employee or agent of the City shall be personally liable to Owner or any successor in
interest, in the event of any default or breach by the City, or for any amount of money which
may become due to Owner or its successor or for any obligation of City under this Agreement.
11.8 Headings; Construction; Statutory References. The headings of the sections and
paragraphs of this Agreement are for convenience only and shall not be used to interpret this
Agreement. The language of this Agreement shall be construed as a whole according to its fair
meaning and not strictly for or against any Party. All references in this Agreement to particular
statutes, regulations, ordinances or resolutions of the United States, the State of California, or the
City of Petaluma shall be deemed to include the same statute, regulation, ordinance or resolution
as hereafter amended or renumbered, or if repealed, to such other provisions as may thereafter
govern the same subject.
11.9 Time is of the Essence. Time is of the essence in the performance of this
Agreement.
11.10 Governing Law; Venue. This Agreement shall be construed in accordance with
the laws of the State of California without regard to principles of conflicts of law. Any action to
enforce or interpret this Agreement shall be filed and heard in the Superior Court of Sonoma
County, California or in the Federal District Court for the Northern District of California.
11.11 Attorneys' Fees and Costs. If any legal or administrative action is brought to
interpret or enforce the terms of this Agreement, the prevailing party shall be entitled to recover all
reasonable attorneys' fees and costs incurred in such action.
11.12 Severability. If any provision of this Agreement is held invalid, illegal, or
unenforceable by a court of competent jurisdiction, the validity, legality, and enforceability of
the remaining provisions shall not be affected or impaired thereby.
11.13 Entire Agreement, Exhibits. This Agreement, together with the Loan Agreement,
the Notes and the Deed of Trust contains the entire agreement of Parties with respect to the
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subject matter hereof, and supersedes all prior oral or written agreements between the Parties
with respect thereto. Exhibits A through C, attached hereto are incorporated herein by this
reference.
11.14 Counterparts. This Agreement may be executed in multiple counterparts, each of
which shall be an original and all of which together shall constitute one agreement.
SIGNATURES ONFOLL0 WING PAGE(S).
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IN WITNESS WHEREOF, the Parties have executed this Affordable Housing
Regulatory Agreement and Declaration of Restrictive Covenants as of the date first written
above.
CITY:
CITY OF PETALUMA, a municipal corporation
By:
John C. Brown, City Manager
Attest:
By:
City Clerk
Approved as to form:
By:
City Attorney
1 1L► '
MADRONE VILLAGE 2, L.P., a California limited partnership
By: Madrone Village 2, LLC, a California limited liability company
Its: General Partner
By: Burbank Housing Development Corporation, a California nonprofit public benefit
corporation, its sole member /manager
By:
Print Name:
Title:
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SIGNATURES MUST BE NOTARIZED.
107
ACKNOWLEDGMENT
A notary public or other officer completing this
certificate verifies only the identity of the
individual who signed the document to which this
certificate is attached, and not the truthfulness,
State of California )
ss
County of )
On , before me, ,
(Name of Notary)
notary public, personally appeared
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is /are
subscribed to the within instrument and acknowledged to me that he /she /they executed the same
in his/her /their authorized capacity(ies), and that by his/her /their signature(s) on the instrument
the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
(Notary Signature)
f
1:
ACKNOWLEDGMENT
A notary public or other officer completing this
certificate verifies only the identity of the
individual who signed the document to which this
certificate is attached, and not the truthfulness,
State of California )
ss
County of )
On , before
(Name of Notary)
notary public, personally appeared
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is /are
subscribed to the within instrument and acknowledged to me that he /she /they executed the same
in his /her /their authorized capacity(ies), and that by his /her /their signature(s) on the instrument
the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
(Notary Signature)
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Exhibit A
PROPERTY
The real property situated in the City of Petaluma, County of Sonoma, State of California,
described as follows:
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Exhibit B
Number of Units by Unit Size and Targeted Area Median Income (AMI) Levels
Maximum
Household
Income
Very Low-
Income
(50% AMI)
60%
AMI
Sub-
Total
Mgr
Unit
Total
2- Bedroom
2
13
15
1
16
3- Bedroom
1
6
7
7
Total
3
19
22
1
23
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Exhibit C
INSURANCE REQUIREMENTS
Prior to initiating work on the Project and continuing through throughout the term of this
Agreement, Owner shall obtain and maintain the following policies of insurance:
(a) a commercial general liability policy in the amount of Two Million Dollars
($2,000,000) each occurrence, Two Million Dollars ($2,000,000) annual aggregate, together with
Three Million Dollars ($3,000,000) excess liability coverage, or such other policy limits as City
may require in its reasonable discretion, including coverage for bodily injury, property damage,
products, completed operations and contractual liability coverage. Such policy or policies shall
be written on an occurrence basis and shall name the Indemnitees as additional insureds.
(b) a comprehensive automobile liability coverage in the amount of Two Million
Dollars ($2,000,000), combined single limit including coverage for owned and non -owned
vehicles and shall furnish or cause to be furnished to City evidence satisfactory to City that
Owner and any contractor with whom Owner has contracted for the performance of work on the
Property or otherwise pursuant to this Agreement carries workers' compensation insurance as
required by law. Automobile liability policies shall name the Indemnitees as additional insureds.
(c) Owner shall furnish or cause to be furnished to City evidence satisfactory to City
that Owner and any contractor that has contracted for the performance of work on the Property or
otherwise pursuant to this Agreement carries statutory Workers' Compensation insurance and
Employer's Liability insurance in a minimum amount of One Million Dollars ($1,000,000) per
accident.
(d) Upon commencement of construction and continuing until issuance of a
Certificate of Completion, Owner and all contractors working on behalf of Owner shall maintain
a policy of builder's all -risk insurance in an amount not less than the full insurable cost of the
Project on a replacement cost basis naming City as loss payee.
(e) Upon completion of Project construction, Owner shall maintain property
insurance covering all risks of loss (other than earthquake), including flood (if required) for
100% of the replacement value of the Project with deductible, if any, in an amount acceptable to
City, naming City as loss payee.
(f) Companies writing the insurance required hereunder shall be licensed to do
business in the State of California. Insurance shall be placed with insurers with a current A.M.
Best's rating of no less than A: VII. The Commercial General Liability and comprehensive
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automobile policies required hereunder shall name the Indemnitees as additional insureds.
Builder's Risk and property insurance shall name City as loss payee as its interests may appear.
(g) Prior to commencement of rehabilitation or construction work, Owner shall
furnish City with certificates of insurance in form acceptable to City evidencing the required
insurance coverage and duly executed endorsements evidencing such additional insured status.
The certificates shall contain a statement of obligation on the part of the carrier to notify City of
any material adverse change, cancellation, termination or non - renewal of the coverage at least
thirty (30) days in advance of the effective date of any such material adverse change,
cancellation, termination or non - renewal.
The additional insured endorsements for the general liability coverage shall use
Insurance Services Office (ISO) Form No. CG 20 09 11 85 or CG 20 10 1185, or equivalent,
including (if used together) CG 2010 10 01 and CG 2037 10 01; but shall not use the following
forms: CG 20 10 10 93 or 03 94. Upon request by City's Risk Manager, Owner shall provide or
arrange for the insurer to provide within thirty (30) days of the request, certified copies of the
actual insurance policies or relevant portions thereof.
(h) If any insurance policy or coverage required hereunder is canceled or reduced,
Owner shall, within fifteen (15) days after receipt of notice of such cancellation or reduction in
coverage, but in no event later than the effective date of cancellation or reduction, file with City
a certificate showing that the required insurance has been reinstated or provided through another
insurance company or companies. Upon failure to so file such certificate, City may, without
further notice and at its option, procure such insurance coverage at Owner's expense, and Owner
shall promptly reimburse City for such expense upon receipt of billing from City.
(i) Coverage provided by Owner shall be primary insurance and shall not be
contributing with any insurance, or self - insurance maintained by City, and the policies shall so
provide. The insurance policies shall contain a waiver of subrogation for the benefit of the City.
Owner shall famish the required certificates and endorsements to City prior to the
commencement of rehabilitation or construction work on the Project, and shall provide City with
certified copies of the required insurance policies upon request of City.
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f (j) Deductibles/Retentions. Any deductibles or self - insured retentions shall be
declared to, and be subject to approval by, City's Risk Manager. At the option of and
upon request by City's Risk Manager if the Risk Manager determines that such
deductibles or retentions are unreasonably high, either the insurer shall reduce or
eliminate such deductibles or self - insurance retentions as respects the Indemnitees or
Owner shall procure a bond guaranteeing payment of losses and related investigations,
claims administration and defense expenses.
f
(k) Adjustments. The limits of the liability coverage and, if necessary, the terms and
conditions of insurance, shall be reasonably adjusted from time to time (not less than every five
(5) years after the Effective Date nor more than once in every three (3) year period) to address
changes in circumstances, including, but not limited to, changes in the purchasing power of the
dollar and the litigation climate in California. Within thirty (30) days following City's delivery
of written notice of any such adjustments, Owner shall provide City with amended or new
insurance certificates and endorsements evidencing compliance with such adjustments.
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