HomeMy WebLinkAboutFG Fountain Glen Seacliff Senior Apartments, LP - 2006-07-037-1
Council/Agency Meeting Held: 3T,6
Deferred/Continued to:
i CI
l Approved ❑ Conditionally Approved ❑ Denied
. C Cle 's Sig ature i'1 3
Council Meeting Date: 7/3/2006
Department ID Number: ED 06-23
CITY OF HUNTINGTON BEACH
REQUEST FOR REDEVELOPMENT AGENCY ACTION
SUBMITTED TO: HONORABLE CHAIR ND REDEVELQPMENT AGENCY MEMBERS
SUBMITTED BY: PENS P�CUETH-GRAFT, DPA, EXECUTIVE DIRECTOR
PREPARED BY: STANLEY SMALEWITZ, DEPUTY EXECUTIVE DIRECTOR
SUBJECT: APPROVAL OF THE SALE OF THE FOUNTAINS SENIOR APARTMENTS
FROM FOUNTAINS HUNTINGTON BEACH, LLC TO FG SEACLIFF
SENIOR APARTMENTS, LP
Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s)
Statement of Issue: Submitted for Agency consideration is a Consent, Assignment and
Assumption Agreement authorizing the sale and transfer of the Fountains Senior Apartments
(Attachment 1). FountainGlen Properties LLC (dba Fountains Huntington Beach, LLC),
owners of the 271-unit Fountains Senior Apartments located at 7181 Garden Glen Drive, is
requesting the Agency's approval to sell the Fountains complex to FG Seacliff Senior
Apartments, LP. Staff recommends approval of the sale and transfer of the property,
pursuant to Section 2.5 of the Agency's Owner Participation Agreement.
Funding Source: Not Applicable.
Recommended Action: Approve the Consent, Assignment and Assumption Agreement,
authorizing the sale and transfer of the Fountains Senior Apartments to FG Seacliff Senior
Apartments, LP.
Alternative Action(s): Do not approve the Consent, Assignment and Assumption
Agreement.
Riffim
E o i'
L-7
REQUEST FOR ACTION
MEETING DATE: 7/3/2006 DEPARTMENT ID NUMBER:ED 06-23
Analysis: In January of 2002, the Agency entered into an Owner Participation Agreement
(OPA) with FountainGlen Properties LLC (FountainGlen Properties LLC is using the name
Fountains Huntington Beach, LLC for their Huntington Beach project) to finance the
development of the senior citizen multifamily residential project known as the Fountains
Senior Apartments, located at 7181 Garden Glen Drive. The project was financed with a
$2,000,000 Housing Set Aside residual receipts loan, which requires that 30% of the 271
units be made affordable to very low and low-income tenants (55 very low-income units and
25 low-income units).
The owner has entered into escrow for the sale of the Fountains Senior Apartments to a new
partnership formed by the JPMorgan Strategic Property Fund. As required in the OPA, the
sale requires Agency approval. Furthermore, the OPA sets forth certain conditions of sale:
• The continued operation of the project shall comply with the provisions of the OPA
and Regulatory Agreement (see the OPA as Attachment 2 and the Regulatory
Agreement as Attachment 3);
• The purchaser shall be willing and capable of complying with the terms of the OPA
and Regulatory Agreement.
Documentation has been submitted by the owner and purchaser addressing the above
conditions of sale. Staff has reviewed the documentation and has determined that all the
conditions of sale have been satisfied. The Agency's economic consultant, Keyser Marston
Associates, has also reviewed the documentation and has determined that the owner and
purchaser have fulfilled the conditions imposed by the OPA.
Project Description
The Fountains Senior Apartments is a 271-unit senior citizen multifamily residential
development located near Main and Gothard, just behind the Seacliff Shopping Center. The
apartments are grouped into six buildings, along with a community recreation building for use
by all tenants. The complex also features a rose garden, barbeques, a heated pool and spa,
horseshoe pits, a putting green, and a croquet field. Very low-income tenants occupy 55
units (20%) and low-income tenants occupy 25 units (9%) of the total 271 apartments.
FG Senior Apartments, LP
The proposed purchaser is a limited partnership formed by the JPMorgan Strategic Property
Fund. The fund has been in place since 1970 and is maintained by JPMorgan Chase Bank
as a pension trust fund. According to information submitted to the Agency by the purchaser,
the fund has invested in more than 30,000 apartment units located throughout the United
States, many of which are subject to income and affordability restrictions.
G\Tern1RCA\RCA Fountains Sale.doc -2- 6/26/2006 2:39 PM
REQUEST FOR ACTION
MEETING DATE: 7/3/2006 DEPARTMENT ID NUMBERED 06-23
The purchaser is proposing to engage the current management team to continue managing
the project. This will provide continuity in the project's operation.
All financial commitments agreed to by the current owner will be assumed and agreed to by
the prospective new owner, including the obligation to reimburse the Agency in the event of
any default under the OPA. The security for such reimbursement will continue in place after
the transfer.
Staff recommends approval of the attached Consent, Assignment and Assumption
Agreement, authorizing the sale and transfer of the Fountains Senior Apartments to FG
Seacliff Senior Apartments, LP.
Environmental Status: Not applicable.
Attachment(s):
1. I Consent, Assignment and Assumption Agreement.
2. 2002 Owner Participation Agreement.
3. 2002 Regulatory Agreement.
4. 1 Site Map.
D:\Documents and Settings\KingT\Local Settings\Temporary Internet Files\OLK6B\RCA Fountains Sale.doc -3-
6/12/2006 8:23 AM
Consent, Assignment & Assumption
Agreement
.. Rn, , rded In Olrl4lal keeor0% Oradya CcunW
Tom Daly, Chrio-RKordar
IIIIIfS(NIIIlBi11dINHlpll 51.00
20060004676W 01:06pm 07/21/06
119 30 C34 A30 A3912
0.00 0.00 0.09 0.00 33.00 0.00 0.00 0.00
WHEN RECORDED MAIL
TO:
Goodwin Procter LLP
101 California Street, Suite 1850
San Francisco, CA 94111
Attention: Tuan A. Pham
space above this lien; for recorder's use
CONSENT, ASSIGNMENT AND ASSUMPTION AGREEMENT
This Consem, Assignment and Assumption Agreement (the Agreement") is made as of Ju1y03
2006, by the Redevelopment Agency of the City of Huntington Beach, a public body corporate
and politic ("RDA"), FGP-Seaclif& L.P., a Delaware limited partnership ("Seller') and FIG
Seacliff Senior Apartments, LP, a Delaware limited partnership ("Buyer").
RDA, Seller, and Buyer hereby agree as follows:
ARTICLE 1- Factual Background.
1.1 Seller, as successor -in -interest to Fountains Huntington Beach, LLC (the "Orighol
Borrower"), is obligated to RDA under the following documents (collectively, the
"Loan Documents'J, all of which are dated as of February 28, 2004, unless otherwise
indicated:
1.1.1 A Promissory Note (the "Note") in the original principal amount of $2,000,000
evidencing the loan (the "Loan") made by RDA to the Original Borrower in the
same amount;
1.1.2 A Subordinated Deed of Trust with Assignment of Rents (the "Deed of Trust"),
made by Original Borrower for the benefit of RDA, which secures the Note and
other obligations of Seller thereunder and under the Regulatory Agreement
(hereafter defined) and Owner Participation Agreement (hereafter defined), which
was recorded on February 28. 2004 as Instrument No. 2004000066548, in the
County Recorder's office of Orange County, California (the property affected by
the Deed of Trust and described therein is hereinafter collectively, called the
"Prwrty");
1.1.3 A Regulatory Agreement and Declaration of Covenants and Restrictions (the
"Regulatory Agreement!% between RDA and Original Borrower, which was
1
UB20u180os
ORANGE,CA Document: AG 2006.487669 Page 1 of 12
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recorded on February 28, 2004, as Instrument No. 2004000066549. in the County
Recorder's office of Orange County, California; and
1.1.4 Owner Participation Agreement, dated as of January 22, 2002 (the "Owner
Partidpadon Agreement!% between RDA and Original Borrower.
1.2 Seller has sold and conveyed the Property to Buyer, or soon will do so, and both parties
desire to obtain RDA's consent to such We and transfer.
1.3 RDA is willing to consent to the following requested actions (the "Requested Acdons'7:
(i) Seller's sale and transfer of the Property to Buyer; (ii) Buyer assuming all of Seller's
obligations under the Loan Documents first arising from and after the date hereof and (iii)
Seller's release from its obligations first arising under the Loan Documents from and
after the date hereof, all on the terms and conditions hereinafter set forth.
ARTICLE 2 - Conditions Precedent.
The following are conditions precedent to RDA's consent to the Requested Actions and the other
agreements and conditions under this Agreement. The Effective Date of this Agreement shall be
the date all of the following conditions precedent have been met to RDA's satisfaction:
2.1 Receipt and approval by RDA of the executed original of this Agreement, and
recordation of this Agreement or a memorandum thereof if requested by RDA in form
and content reasonably acceptable to RDA, Seller and Buyer; and
2.2 Receipt of copies of the gram deed and bill of sale for the sale of the Property from Seller
to Buyer.
ARTICLE 3 - Assignment.
Seller hereby irrevocably and unconditionally assigns and transfers to Buyer all of Seller's and
Original Borrower's right, title and interest in and to the Loan and under the Loan Documents.
ARTICLE 4 - Assumption.
Buyer henry assumes and agrees to pay when due all sums first becoming due or owing under
the Note and the other Loan Documents from and after the date hereof and assumes all
applicable liabilities and obligations of Seller under the Loan Documents first arising from and
after the date hereof. The execution of this Agmernent by Buyer shall be deemed its execution of
the Loan Documents.
ARTICLE S — Represeations, Warranties and Acknowledgements.
5.1 As a material inducement to RDA to enter into this Agreement and to consent to the
Requested Actions, Seller acknowledges, represents, warrants and agrees with RDA as follows:
2
LIB201/18003
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(a) Seller is a duly organized, validly existing limited partnership in good standing
under the laws of the State of Delaware and is qualified to transact business in the State of
California. The general partner of Seller has the power and authority to execute this Agreement
on behalf of and to duly bind Seller under this Agreement and the Loan Documents. The
execution and delivery of, and performance under, this Agreement and the Loan Documents by
Seller has been duly and properly authorized pursuant to all requisite company action and will
not (i) to Seller's actual knowledge, violate any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award presently in effect having applicability to
Seller or the certificate of limited partnership, partnership agreement or any otter organizational
document of Seller or (ii) result in a breach of or constitute or ease a default under any
indenture, agreement, lease or other instrument to which Seller is a party or, to Seller's actual
knowledge, by which the Property may be bound or affected-
(b) Seller has no intent to (i) file any voluntary petition under any Chapter of the
Bankruptcy Code, Title 11, U.S.C.A. ("Bankruptcy Code"), or in any manner to seek any
proceeding for relief, protection, reorganization, liquidation, dissolution or similar relief for
debtors ("Debtor Proceeding") under any local, state, federal or other insolvency law or laws
providing relief for debtors or (ii) directly or indirectly to cause any involuntary petition under
any Chapter of the Bankruptcy Code to be filed against Seller or any partners thereof or (iii)
directly or indirectly to cause the Property or any portion or any interest of Seller in the Property
to become the property of any bankrupt estate or the subject of any Debtor Proceeding.
(c) Seller does not currently have any other outstanding loans with RDA other than
the loan.
(d) Seller has no deferues, setoffs, claims, counterclaims or causes of action of any
kinder nature whatsoever against the RDA with respect to the Property, the Loan Documents or
the Loan. To the extent that Seller would be deemed to have any such defenses, setoffs, claims,
counterclaims or causes of action as of the date hereof, Seller knowingly waives and relinquishes
them
(e) To Seller's best knowledge, no event, fact or circumstance has occurred or failed
to occur which constitutes, or with the lapse or passage of time, giving of notice or both, could
constitute a default or Material Default (as defined in the Owner Participation Agreement) under
the Loan Documents.
5.2 As a material inducement to RDA to enter into this Agreement and to consent to the
Requested Actions, Buyer acknowledges, represents, warrants and agrees with RDA as follows:
(a) Buyer is a duly organized, validly existing limited partnership in good standing
under the laws of the State of Delaware and is qualified to transact business in the State of
California The general partner of Buyer has the power and authority to execute this Agreement
on behalf of and to duly bind Buyer under this Agreement and the Loan Documents. The
execution and delivery of, and performance under, this Agreement and the Loan Documents by
Buyer has been duly and properly authorized pursuant to all requisite company action and will
not (i) to Buyer's actual knowledge, violate any provision of any law, rule, regulation, order,
L18201/1800.3
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writ, judgment, injunction, decree, determination or award presently in effect having
applicability to Buyer or the certificate of limited partnership, partnership agreement or any other
organizational document of Buyer (and Buyer shall reasonably promptly correct any such
violation which is hereafter discovered) or (i) result in a breach of or constitute or cause a
default under any indentute, agreement, lease or other instrument to which Buyer is a party or, to
Buyer's actual knowledge, by which the Property may be bound or affected.
(b) Neither Buyer nor the general partner of Buyer has been a party to any Debtor
Proceeding within seven (7) years prior to the date of this Agreement
(c) The Loan Documents, from and after the date hereof, are valid and legally
binding obligations of Buyer, enforceable against Buyer in accordance with their terms subject to
bankruptcy, insolvency and similar laws of general applicability relating to or affecting creditor's
rights and to general principles of equity. To Buyer's actual knowledge, it currently has no
defenses, setoffs, claims, counterclaims or causes of action of any kind or nature whatsoever
against the RDA with respect to (i) the Loan and (ii) the Loan Documents. To the extent Buyer
would be deemed to have any such defenses, setoffs, claims, counterclaims or causes of action as
of the date hereof, Buyer knowingly waives and relinquishes them. Buyer acknowledges that it
has received copies of all the Loan Documents.
5.3 As a material inducement to Seller and Buyer to enter into this Agreement, RDA hereby
acknowledges, represents, warrants and agrees with Seller and Buyer as follows:
(a) The moan Documents are all of the documents and instruments evidencing,
securing or relating to the Loan.
(b) As of the date hereof, the outstanding principal balance of the Loan was
$1,933.200. The borrower's next payment under the Loan in die amount of 1.67% of the
principal amount of die Loan plus accrued interest is due on January 28, 2007. The maturity date
of the Note is January 28, 2064.
(c) The RDA has riot required a Capital Reserve Account to be established pursuant
to the previsions of the Owner Participation Agreement.
(d) All principal and interest payments through and including January 28, 2006 under
the Loan Documents have been paid in fall or waived by RDA. All other amounts due and
owing under the Loan Documents as of the date hereof have been paid in full or waived by RDA.
(e) Neither RDA nor the City of Huntington Beach has issued any written notices of
default to either Seller or Original Borrower and to the best of RDA's knowledge, as of the date
hereof, neither Seller nor Original Borrower is in default under any of the terms or provisions of
any of the Loan Documents.
ARTICLE 6 - Release of Seller.
Seller shall be released from any and all acts, omissions or events occurring or obligations
arising under the Loan Documents from and after the later of the Effective Date of this
Lr8201/1800.3
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Agreement or the transfer of title to the Property to Buyer (the "Release Date"), provided, that,
nothing in this sentence shall release Seller or Original Borrower from its obligations,
agreements, duties, liabilities, covenants and undertakings under the Loan Documents arising
from any ate, omissions or events occurring prior to the Release Date.
ARTICLE 7 - Confirmation of Seatrity Interest.
Nothing contained herein shall affect any lien or encumbrance created by any Loan Document or
the priority of that lien or encumbmuce. All assignments and transfers by Seib to Buyer are
subject to any security interest(s) held by RDA as security for the Loan.
ARTICLE 8 — Consent to R"uested Actions; Permitted Transfers
Subject to the terms and conditions hereof, RDA hereby consents to the Requested Actions and
waives its right of first mefusal under Section 2.5(b) of the Owner Participation Agreement in
connection therewith. In addition, notwithstanding anything to the contrary contained in the
Loan Documents, RDA hereby acknowledges and agrees that no notice to, or consent of, RDA
shall be required in connection with any tranfers of any direct or indirect interests in Buyer, so
long as in each case, either (i) the Commingled Pension Trust Fund (Strategic Property) of
JPMorgan Chase Bank, NA, or any successor or affiliated investment fund or (ii) any State
pension fund or similar entity advised or managed by J.P. Morgan Investment Management Inc.,
shall retain, directly or indirectly, ownership and/or control of the Property. RDA hereby waives
its right of first refusal under Section 2.5(b) of the Owner Participation Agreement with respect
to any of the transfers permitted under the preceding sentence.
ARTICLE 9 - Miscellaneous.
As of the Effective Date of this Agreement, this Agreement shall be one of the Loan Documents.
All capitalized terms used but not defined herein shall have the meanings given in the other Loan
Documents. All notices to be delivered under the Loan Documents to Buyer after the effective
date of this Agreement, shall be sent to: Buyer do J.P. Morgan Investment Management Inc.
1999 Avenue of the Stars, Suite 2600, Los Angeles, California 90067, Attention: Mr. Thomas
Hwang, Telephone (310) 860-7134, Facsimile (310) 860-7093, with a copy to Stmock &
Stroock & Lavan LLP,180 Maiden Lane, New York, New York 100384982, Attention: Steven
Moskowitz, Esq., Telephone (212) 806-5899. Facsimile (212) 806-6006. This Agreement shall
be interpreted, construed and enforced in accordance with the laws of the State of California.
The terms of this Agreement may not be may not be modified or amended in any manner other
than by a written agreement signed by the party to be charged therewith. This Agreement may
be executed in counterparts, each of which shall be an original and all of which counterparts
ntterparts
taken together shall constitute one and the same agreement.
Signature Pages Follow.
UB201/18003
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IN WITNESS THEREOF, Seller, Buyer and RDA have caused this Agreement to be duly
executed.
RDA:
REDEVELOPMENT AGENCY OF THE
CITY OF HUNTINGTON BEACH, a public
body corporate and politic
Gwc_ stt.•(.tCe.,,-
Chaimman
Agenc erk 61
AL PP�,.ER AS TO FORM:
r
4 Agency General sel-f
REVIEWED AND APPROVED:
Executive Director
INITIATED AP
OVED:
e
Deputy Executive Director
[signatures continued on following page]
LM201AS003
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CALIFOMIA ALL4101011POM
state of California
ss.
County of Owme
On J* 7, 2M before me, Robin Roberts ---
Daft Neese so ribaroaber(&G.. has tee,NMWnaln
personally appeared ---- Dave SU Mn
N-4" d
@Tpersonally known to me
❑ proved to me on the basis of story
evidence
to be the person(s) whose nun*) Wane
subscribed to the within instrument and
acknowledged to me that lhsr'slwfihey executed
the same in his,Ih wfteir authorized
cgwcity(iss), and that by hi&4uW wW
signaure(s) an the instrument the persah(e). or
the entity upon behalf of which the persons)
acted. executed the instrument
N I.SS my hand and ~ seat.
vbmN-' IstdAbo. 11 swr►arNowyrae
OPTIONAL
Though die ir+bmuffibn bobw 6 nor requked by &a% y may ware v*4* a to pwvM relying on Me dMmW9
and ooWMewN 6raud dwd nunowa l and mag s al" W of mis fomr ao a DOW doarment
Desertion of Attached Document
Title or Type of Document: Conaanr, Aasrgrrnwnt and Aaenrrrprlon N" n M*— FOP SOMW
Document We: July 7, 2006 Number of Pages: 7
Stgner(y Other Then Named Above: none
Capaeity(iee) Cloned by Ogner
Signer's Name: Daw Sullivan
❑ Individual rqP d vern� rest
9 Corpmeteolfim—Title(s): Chainnan
❑ Parbrer—❑ Limited ❑ General
0 Attorney in Fact
❑ : nmtee
❑ Guardian or Conservator
❑ Other:
$gner Is Representing: The RedevebpnHMAgeaey of We COW liu"naba Besot
e1MMWMW"R"p lotlden•�00e81bNy..P.Q eI�t1oZ.Clr�/eu4dlatilSi�@•wa aypryp-1 hCL*"V
eeee4c 4r �A+t�oaeaasp
ORANGE,CA Document: AG 2006.487669 Page 7 of 12
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DAwF�IA
State of CalNornia
County of Oreaire
on Jay 7, 2M before me, -- Robin Robes* --
pM ftMWd71bdFGffi a gW.-rwDes,UNNY PLW
personally appeared == a Joan L Rynn
NrmKa) dSipr�)
If personally known to me
❑ proved to me on the basis of satisfactory
evidence
to be the person(s) whose name(g) isim
subscribed to the within instrument and
scrnowkxW to me thatfieo'sheJE W executed
the some in thi&%rltheir authorized
capec ity(ies), and that by his/hedtheir
~ sW ture(s) on the instrument the person(s), or
� the entity upon behalf of which the person(*)
eaova� ., acted, exewted the instrument.
� 1RK b
.—MMESS m 4wnd and Offr W seat.
FbW Na.n ad AbM d"Owip pWa
OPTIONAL
hlwegh the adbneewn below Is nor me&" by hK it may 0" vahnabte fo pON" nNylnp on Me domamd
OW WWWPrawntr u n WOW AW nWaidsnenf of Mae *= to enoeeer do&*Wt
Descripdon of Attached Doaume d
Title at Type of Document- Ca,w K Ass%pn&W and 8!Fe gE agreement- FGP SaeCW
Document Date: Juiy7, 2W6 Number of papas: 7
Sipner(s) Otlfer Than Named Above: none
Capacity(las) Claimed by $IWW
Signer's Name: Joan 4Fimn
❑ It,11164 ual -
Tr Corporate Officer—Tida(s): A$emyCfw►k °Pa "'°
❑ partner—❑ Limited ❑ General
❑ Atlorney in Fad
❑ : neafee
❑ Guardian or Conservator
❑ ONW.
Signer is Repremiling: The Redeveloparwa yency of the City of M mUngton Boat+
OIMMWftWRftVIYf1 PA&Naaas nil+r or 714Pa�ta7ppMf,77
ORANGE,CA Document: AG 2006.487669 Page 8 of 12
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FGP-SEACLEFgK L.P.,
a Delaware limited partnership
By: Fountains Huntington Beach, LLC,
a Delaware limited liability company,
Its: General Partner
By: FountainGlen Properties, LLC,
a Delaware limited liability company,
Its: Sole Member
By:
Nam: dr-de -a .C. G�
Title: pees — C4--e
[signatures continued on following page]
UB201/1M.3
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State of (`,(� llAr n i a" §
County of
On Y before me t :%P'dldirl rii . WQ tG
�.1 insert na=Mid title of ot6d ffioerj
personally appeared.. n L.
personally known to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within inamment and aclmowledged to me that
heWwAhey executed the same in his/herhheir 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.
WITNESS in hand and official seal.
dhRGLYMM4 FtAl�t4
COAl L 01648M
SignatureOROWCOUNTY -pur omt� fi
My Commission Exlxtes: Felo. 19, ant o torah r>aa n zolo
(Seal)
State of
County of
On before me, ,
(here invert name and tide of the otncer)
personally appeared
personally known to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose namas) is/am subscribed to the within instrument and acknowledged to me that
hefshhchhey executed the same in h islher/dteir authorized capacity(ies), and that by hris/lerhheir
signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature
My Commission Expires:
(Seal)
us2oursaos
ORANGE,CA Document: AG 2006.487669 Page 10 of 12
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FG SEACLIFF SENIOR APARTMENTS, LP
By FG SEACUFF GP, LLC
Its General Partner
By. FG PORTFOLIO, LLC,
Its Sole Member
By FG Member, LLC,
Its Member
By Commingled Pension Trust Fund (Strategic
Property) of 7PMorgan Chase Bank, N.A., Its Sole
Member
By: JP LB , N.A, Its TrusteiyN s A SCtlw,t'e
Title: vice W r S (ot`-rl
By: FountainGlen Holdings LLC,
Its Member
By. FountainGlen Investors LLC,
Its Managing Member
By. I.P. Morgan Management Inc.,
Its r
By: rI
N . fop 6 { A Sc Rw— `+7
Title: Vtcc, pvxs(oenrl
LMMI/I&W.3
ORANGE,CA Document: AG 2006.487669 Page 11 of 12
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r; / _,r /
I M.
s . a/." l�
personally appeared
personally known to me (or pro to i
Persons) whose name(s) is/are subscribed to the within instrument and acknowledged to me that
be/shelthey executed the same in his/her/their authorized capacity(ies), and that by his/her/their
signatures) on the instrument the perso*), or the entity upon bebalf ofwhieh the persons)
acted, executed the instrument.
WITNESS my hand and official seal
Signature
My Commission EX ims:f1��
(Seal) 10. Canrn s tT �
1--0 nee • Caaioaro
tom MpMn Couralr
PM
On,� �//i�i . before me ,hs.3�'!L✓/ 2 /_ Y ' r ✓ �G4fyi
(here h mat Dame and ' of the offiotr)
personally appeared AO W C ji *- S: f<1 a22�7,-
personalty known to me (or proVed to me on the basis of saaisfactory a dence) to be the
person(s) whose name(s) islare subscribed to the within instrument and acknowledged to me that
be/she/they executed the same in histher/their authorized capacky(ies� and that by his/her/their
signature(s) on the instrument the persons), or the entity upon behalf of which the person(s)
acted, executed the instrument.
LI»111M.3
ORANGE,CA Document: AG 2006.487669
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trs�atoaaealta�rooul
Conraplan • 146""
(Seal) #*Caren M ' APrts,
Page 12 of 12
2002 Owner Participation Agreement
OWNER PARTICIPATION AGREEMENT
By and Between
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON
BEACH,
a public body, corporate and politic
and
FOUNTAINS HUNTINGTON BEACH, LLC,
a Delaware limited liability company
TABLE OF CONTENTS
Page
SECTION 1.
•DEFINITIONS
1
SECTION 2.
SUBJECT OF THIS AGREEMENT
5
2.1
Purpose of the Agreement
5
2.2
The Redevelopment Plan
6
2.3
Reserved
5
2.4
Term of Agreement
6
2.5
Prohibition Against Transfers; Rights of First Refusal
6
SECTION 3.
FINANCING AND OWNERSHIP OF THE SITE
8
3.1
Ownership of the Site
8
3.2
Agency Financial Assistance
8
3.3
Form of Agency Financial Assistance;
8
Purpose of Note and Security
3.4
Escrow
8
3.5
Agency's Condition to Closing
10
3.6
Participant's Conditions to Closing
10
3.7
Broker's Fees
11
3.8
Conventional Lender First Deed of Trust
11
3.9
Subordination Agreement(s)
11
3.10
Subordination to Other Financing
12
SECTION 4.
DEVELOPMENT OF THE SITE
12
4.1
General
12
4.2
Construction of the Project
11
4.3
Insurance
13
4.4
Indemnification
14
4.5
Hazardous Materials _
15
4.6
Security Financing; Right of Holders
15
SECTION 5.
USE OF THE SITE
16
5.1
No Inconsistent Uses
16
5.2
Regulatory Agreement
16
5.3
Relocation
16
5.4
Maintenance of the Site
16
5.5
Nondiscrimination
16
5.6
Form of Nondiscrimination and Nonsegregation Clauses
17
5.7
Effect and Duration of Covenants
17
5.8
Creation of Capital Reserve Accounts
18
5.9
Capital Reserves
18
5.10
Reserved
18
5.11
Financial Statements
18
i
5.12
Operation of Project
18
5.13
Lead -Based Paint
19
5.14
Barriers to the Disabled
19
SECTION 6. -DEFAULTS AND. REMEDIES
19
6.1
Participant Defaults
19
6.2
Agency Defaults
19
6.3
Notice of Default
20
6.4
Agency's Remedies
20
6.5
Participant's Remedies
20
6.6
Rights and Remedies are Cumulative
20
SECTION 7. GENERAL PROVISIONS
21
7.1
Participant's Warranties
21
7.2
Governing Law
21
7.3
Attorneys' Fees
21
7.4
Notices, Demands and Communications
22
Between Parties
7.5
Acceptance of Service of Process
22
7.6
Conflicts of Interest
22
7.7
Titles and Captions
22
7.8
Gender
22
7.9
Modifications
22
7.10
Merger of Prior Agreements and Understandings
23
7.11
No Third Parties Benefited
23
7.12
Assurances to Act in Good Faith
23
7.13
Warranty Against Payment of Consideration
23
for Agreement
7.14
Nonliability of Agency Officials and Employees
23
7.15
Interpretation
23
7.16
Counterparts
23
7.17
Severability
23
7.18
Extension of Times of Performance
23
7.19
Inspection of Books and Records
23
7.20
Waivers
24
SECTION 8. EXECUTION OF AGREEMENT; TIME FOR ACCEPTANCE
24
ii
Exhibits
Exhibit A
Legal Description
Exhibit B
Site Map
Exhibit C
Fannie Mae Subordination Agreement
Affordable Housing Form 4503
Exhibit D
Schedule of Performance
Exhibit E
Promissory Note
Exhibit F
Deed of Trust
Exhibit G
Regulatory Agreement
Exhibit H
Subordination Agreement
iii
OWNER PARTICIPATION AGREEMENT
THIS OWNERjPARTICIPATION AGREEMENT ("Agreement") is entered into as of
January 22 ,V ("Effective Date") by and between REDEVELOPMENT AGENCY
OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("Agency"),,
and FOUNTAINS HUNTINGTON BEACH, LLC, a Delaware limited liability company
("Participant").
RECITALS
A. Agency is a public body, corporate and politic, exercising governmental functions
and powers and organized and existing under the Community Redevelopment Law of the State
of California (California Health and Safety Code Section 33000 et seq.).
B. Participant is the owner of the "Site" (as such term is defined herein) and intends
to develop the "Project" (as such term is defined herein) on the Site in accordance with the terms
of this Agreement. "
C. Agency desires to meet its affordable housing goals pursuant to the California
Community Redevelopment Law by assisting Participant in the development of affordable
housing on the Site and to facilitate the continued affordability of 80 of the 271 total units on the
Site. After construction, the affordable units for Project shall be rented to tenants whose
household incomes do not exceed low income and very low income as defined by California law.
Agency's assistance shall be in the form of a loan in the amount of TWO MILLION DOLLARS
($2,000,000) to assist Participant in meeting the cost of providing and maintaining affordable
units on the Site.
D. Pursuant to the California Redevelopment Law, Agency has established a
Housing Set Aside Fund and has deposited therein certain tax revenues made available to the
Agency exclusively for the purpose of increasing and improving the community's supply of
affordable low and moderate income housing, including very low income housing ("Set Aside
Funds"). Agency's loan to Participant shall be funded from Set Aside Funds.
NOW, THEREFORE, in consideration of the promises and covenants contained herein,
the above recitals, and other good and valuable consideration, the receipt and sufficiency of
which are.hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
SECTION 1. DEFINITIONS
The following terms, as used in this Agreement, shall have the meanings given unless
expressly provided to the contrary:
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The term "Affordable Units" shall mean the eighty (80) dwelling units to be rented to
Eligible Tenants in the Project and subject to rent restrictions as set forth in the Regulatory
Agreement.
The term "Agency" shall mean the Redevelopment Agency of the City of Huntington
Beach, a public body, corporate and politic, having its offices at 2000 Main Street, Huntington
Beach, CA 92648, and any assignee of, or successor to, the rights, powers, and responsibilities of
Agency.
The term "Agency Deed of Trust" shall mean the Deed of Trust attached as Exhibit "F"
hereto.
The term "Agency Loan" shall mean the Agency's loan to Participant in the amount of
Two Million Dollars ($2,000,000) of Set Aside Funds, as evidenced by the Agency Note and
secured by the Agency Deed of Trust.
The term "Agreement" or any reference to this "Agreement" shall mean this Owner
Participation Agreement executed by and between Agency and Participant, including all exhibits
attached hereto, which exhibits are incorporated herein by this reference and all other documents
incorporated herein by reference.
The term "City" shall mean the City of Huntington Beach, a municipal corporation,
having its offices at 2000 Main Street, Huntington Beach, CA 92648.
The term "Confirming Appraisal Process" shall mean the process by which the Agency
promptly retains, at its cost, an MAI appraiser to estimate the value of the Site (including all
improvements thereon) in a second written appraisal. Upon completion of the second appraisal,
it shall be forwarded to both the Agency and the Participant for review. If the Participant agrees
with the value determined in the second appraisal, then that value shall be the Value for purposes
of this Agreement. If the second appraisal is deemed unacceptable by the Participant, then the
Participant shall so notify the Agency in writing within seven (7) calendar days of delivery of
said second appraisal to the Participant. The notice to the Agency shall describe the specific
objections of the Participant to the second appraisal. If the Agency and the second appraiser
agree to remedy the objections made by the Participant, or if the Participant fails to object to the
second appraisal in writing prior to the end of the seven-day period, then the second appraisal
shall stand and the value set forth therein shall be the Value for purposes of this Agreement. If
the Agency or the appraiser do not agree to remedy the objections made by the Participant, then
the Participant shall promptly retain a third MAI appraiser, at its cost, to estimate the value of the
subject property in a third written appraisal. The third appraisal shall be sent to both the
Participant and the Agency. Upon delivery of the third appraisal, the Agency and the Participant
shall promptly calculate the Value for purposes of this Agreement as the average value of the
two closest appraisals.
The term "Conventional Lender" shall mean one or more lenders of Participant's choice
providing funds for Participant's acquisition, construction, equipping or refinancing of the
Project as follows: (a) during the first ten (10) years following the Effective Date, in an amount
2
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not to exceed seventy-five percent (75%) of the Value of the Site; and (b) at anytime following
The tenth (l0'h) anniversary of the Effective Date, in an amount not to exceed eighty percent
(80%) of the Value of the Site.
The term "Conventional Loan" shall mean a loan from a Conventional Lender in
connection with the Project in which the participant grants a mortgage, deed of trust, or
otherwise conveys the Site as security for such loan.
The term "Days" shall mean calendar days and the statement of any time per' d herein
shall be calendar days and not working days, unless otherwise specified.
20 2
The term "Effective Date" shall mean the first day of the month, in the year 2 J
following the date the Agency's governing body approves this Agreement and authorizes its
Chairman to sign it; which date shall be inserted into the preamble of this Agreement.
The term "Eligible Tenant" shall mean any person entitled to rent a Unit as set forth in
the Regulatory Agreement.
The term "Executive Director" shall mean the individual duly appointed to the position
of Executive Director of the Agency, or authorized designee. Whenever an administrative action
is required by Agency to implement the terms of this Agreement, the Agency Executive Director,
or an authorized designee, shall have authority to act on behalf of Agency, except with respect to
matters reserved under California law wholly for Agency Board determination.
The term "First Deed of Trust" shall mean a deed of trust securing the Conventional
Loan.
The term "Force Majeure" shall mean any war; insurrection; strike; lock -out; labor
dispute; riot; flood; earthquake; fire; casualty; Act of God; act of the public enemy; epidemic;
quarantine; restriction; freight embargo; unavoidable lack of transportation; governmental
restriction; unusually severe weather; inability to secure necessary labor, materials, or tools;
delay of any contractor, subcontractor or supplier; economic or market conditions; lack of tenant
commitments or tenant changes; inability to secure satisfactory financing; act of the other party
including act or failure to act of City or any other public or governmental agency or entity
(except that any act or failure to act of City or Agency shall not excuse performance by Agency);
or any other cause beyond the control or without the fault of the party claiming an extension of
time to perform.
The term "Hazardous Materials" means any hazardous or toxic substances, materials,
wastes, pollutants, or contaminants, which are defined, regulated, or listed as "hazardous
substances," "hazardous wastes," "hazardous materials," "pollutants," "contaminants," or "toxic
substances," under federal or state environmental and health and safety laws and regulations,
including without limitation petroleum and petroleum byproducts, flammable explosives, area
formaldehyde insulation, radioactive materials, asbestos, and lead. Hazardous Materials do not
include substances that are used or consumed in the normal course of developing, operating, or
occupying a housing project, to the extent and degree that such substances are stored, used, and
3
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disposed of in the manner and in amounts that are consistent with normal practice and legal
standards.
The term "HUD" means the United States Department of Housing and Urban
Development. -
The term "Lease" means the lease or rental agreement entered into between Participant
and a tenant of a Unit in the Project.
The term "Low Income Households" shall mean a family or individual whose annual
income does not exceed eighty percent (80%) of the median income for the Orange County
Metropolitan Statistical Area (PMSA) as determined by HUD with adjustments for smaller and
larger families.
The term "Median Income" means the median income for the Orange County Primary
Metropolitan Statistical Area (PMSA), with adjustments for household size, as determined from
time to time by the U.S. Department of Housing and Urban Development (HUD) pursuant to the
United States Housing Act of 1937 as amended, or such other method of median income
calculation applicable to the City that HUD may hereafter adopt in connection with said Act.
The term "Note" shall mean that certain Promissory Note securing by that certain Deed
of Trust attached here to as Exhibit "E."
The term "Participant" shall mean Fountains Huntington Beach, LLC, a Delaware
limited liability company, whose address is 4220 Von Karman, Second Floor, Newport Beach,
CA 92660, or its successors or assigns.
The term "Project" shall mean generally the construction of 271 apartment units on the
Site and the subsequent rental of eighty (80) Units therein to Eligible Tenants, pursuant to the
procedures set forth herein and more particularly described in the Scope of Development.
The term "Regulatory Agreement" shall mean that certain Regulatory Agreement and
Declaration of Covenants and Restrictions attached hereto as Exhibit "G."
The term "Schedule of Performance" shall mean that certain schedule attached hereto as
Exhibit "D" setting forth the times upon which performance by the parties under this Agreement
is due.
The term "Set Aside Funds" shall mean the fund established by Agency pursuant to
California Redevelopment Law, wherein certain tax revenues have been deposited and made
available to the Agency exclusively for the purpose of increasing and improving the
community's supply of affordable low and moderate income housing, including very low income
housing.
4
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The term "Site" shall mean that certain real property located in the City of Huntington
Beach, County of Orange, State of California, Huntington Beach, California, and legally
described in Exhibit "A" and depicted on the Site Map, and all improvements thereon or thereto.
The term "Site Map" shall mean the map attached hereto as Exhibit `B" depicting the
location of the Site.
The term "Subordinated Deed of Trust' shall mean the form of Subordinated Deed of
Trust attached hereto as Exhibit "F."
The term "Subordination Agreement' shall mean the form of Subordination Agreement
attached hereto as Exhibit "H."
The term "Value" shall mean the fair market value of the Site (including all
improvements thereon) as determined by a duly qualified and licensed MAI real estate appraiser
in a report issued no later than six months prior to the date of determination. The Participant
shall select the appraiser and all fees and costs of the appraiser shall be borne by the Participant.
The appraisal report prepared by the appraiser shall be delivered to the Agency for its review. If
the appraisal is deemed unacceptable by the Agency, then the Agency shall so notify the
Participant in writing within seven (7) calendar days of delivery of said appraisal to the Agency.
The notice to the Participant shall describe the specific objections of the Agency to the appraisal.
If the Participant and the appraiser agree to remedy the objections made by the Agency, or if the
Agency fails to object to the appraisal in writing prior to the end of the seven-day period, then
the appraisal shall stand and the value set forth therein shall be the Value for purposes of this
Agreement. If the Participant or the appraiser do not agree to remedy the objections made by the
Agency, the Agency and the Participant shall, no later than five (5) calendar days after receipt of
the written objections, conduct the Confirming Appraisal Process, and the value determined
under said Confirming Appraisal Process shall be the Value for purposes of this Agreement.
The term "Very Low Income Households" shall mean a family or individual whose
annual income does not exceed fifty percent (50%) of the median income for the Orange County
Metropolitan Statistical Area as determined by HUD with adjustments for smaller and larger
families.
SECTION 2. SUBJECT OF THIS AGREEMENT
2.1 Purpose of the Agreement
(a) The purpose of this Agreement is to implement the Community
Redevelopment Law by providing the Agency Loan to assist Participant in the development of
affordable housing in the City of Huntington Beach, in the amount of Two Million Dollars
($2,000,000), as evidenced by the Note secured by the Agency Deed of Trust, which Agency
Loan is composed of Set Aside Funds.
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(b) This Agreement is intended to facilitate Participant's development of
affordable housing on the Site and maintain 80 Units at affordable levels for rental to Eligible
Tenants, as that term is defined herein. The Project pursuant to this Agreement and the
fulfillment generally of this Agreement are in the best interests of the City and the welfare of its
residents, and are irr accordance with the public purposes and provisions of applicable federal,
state, and local laws and requirements under which the Project has been undertaken and is being
assisted.
(c) The Project will be used and operated for not less than sixty (60) years as
rental housing, with 80 of the Units restricted to occupancy to Low Income Households and Very
Low Income Households in accordance with the Regulatory Agreement.
2.2. The Redevelopment Plan. This Agreement is made in accordance with the
Huntington Beach Redevelopment Project (the "Merged Redevelopment Project") which was
approved by adoption of Ordinance No. 3343 on December 16, 1996, and which merged together
four different, previously approved project areas. The Site is located inside of the Merged
Redevelopment Project. Agency intends this Agreement to meet its obligations pursuant to
Health and Safety Code Sections 33413, 33334.2 and 33413(b)(2)(A)(ii).
2.3 Reserved.
2.4 Term of Agreement. The term of this Agreement shall be for a period of sixty
(60) years or until the Agency Loan is paid, prepaid or converted to a grant in full, whichever
occurs later; with such period commencing on the Effective Date of this Agreement.
2.5 Prohibition Against Transfers; Right of First Refusal.
(a) The qualifications and identity of the Participant are of particular concern
to the Agency. It is because of those qualifications and identity that the Agency has entered into
this Agreement with the Participant. No voluntary or involuntary successor in interest of the
Participant shall acquire any rights or powers under this Agreement except as expressly set forth
in subparagraph (i) below or otherwise as set forth herein.
(b) Participant agrees that Participant shall not sell the Site during the term of
this Agreement, unless and until Participant has given to Agency notice in writing of its intent to
sell, specifying the identity of the prospective buyer and the price and terms of the contemplated
sale. Within ninety (90) days after Participant gives Agency written notice of Participant's intent
to sell, Agency shall have the right to purchase the Site at the same price and on the same terms
and conditions set forth in Participant's written notice of intent to sell. To exercise its option,
Agency must, within the same ninety day period, deposit in escrow with any escrow company in
Orange County, California, all moneys and instruments required by the terms of the offer to be
paid or delivered to Participant on close of escrow and shall also give Participant written notice
of the deposit. In the event Agency does not exercise the option to purchase in accordance with
the provisions of this Section, Participant may sell the Site to the third party making the offer on
the same terms and conditions set forth in that offer. If for any reason the Site is not sold to the
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party making the offer, Participant shall give Agency the same right to purchase the Site on
receiving any subsequent offer from any unrelated third party that is acceptable to Participant.
(c) Other than as set forth in paragraph (i) below, for the reasons cited above,
the Participant represents and agrees for itself and any successor in interest that without the prior
written approval of the Agency, there shall be no significant change in the ownership of the
Participant or in the relative proportions thereof, or with respect to the identity of the parties in
control of the Participant or the degree thereof, by any method or means.
(d) The Participant shall promptly notify the Agency of any and all changes
whatsoever in the identity of the parties in ownership and/or in control of the Participant or the
degree thereof, of which it or any of its officers have been notified or otherwise have knowledge
of information. Except for a transfer described in paragraph (i) below, this Agreement may be
terminated by the Agency and the Agency may exercise its remedies pursuant to the Note and
Agency Deed of Trust, if there is any significant change (voluntary or involuntary) in
membership, ownership, management or control, of the Participant (other than such changes
occasioned by the death or incapacity of any individual) without the written consent of the
Agency.
(e) Participant shall not, except as permitted by this Agreement, assign or
attempt to assign this Agreement or any right herein, nor make any total or partial sale, transfer,
conveyance or assignment of the whole or any part of the Site (referred to hereinafter as a
"Transfer"), without prior written approval of the Agency, except as expressly pennitted by this
Agreement including subparagraph (i) below. Consent to a Transfer shall not result in
acceleration of the Note. Any such proposed transferee shall have the qualifications and
financial responsibility necessary and adequate as may be reasonably determined by the Agency,
to fulfill the obligations undertaken in this Agreement by the Participant. Any such proposed
transferee, by instrument in writing satisfactory to the Agency and in form recordable among the
land records, for itself and its successors and assigns, and for the benefit of the Agency shall
expressly assume all of the obligations of the Participant under this Agreement and agree to be
subject to all conditions and restrictions applicable to the Participant in this Agreement. There
shall be submitted to the Agency for review all instruments and other legal documents proposed
to effect any such Transfer, and if approved by the Agency its approval shall be indicated to the
Participant in writing.
(f) In the absence of specific written agreement by the Agency, no
unauthorized Transfer, or approval thereof by the Agency, shall be deemed to relieve the
Participant or any other party from any obligations under this Agreement.
(g) Consent to any transfer shall not be deemed to be a waiver of the right to
require consent to future or successive transfers.
(h) The provisions of this Section 2.5 shall be of no force or effect as of the
expiration of the Regulatory Agreement.
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(i) The Agency acknowledges that the Participant is currently conducting a
corporate restructuring and that the Participant intends to transfer the Project to a new entity.
Accordingly, notwithstanding the foregoing or anything else in this Agreement to the contrary,
the Participant may Transfer the Site or the Project to (i) any affiliated entity or (ii) any other
entity that shares substantially the same management as the management of the Participant on the
Effective Date of this Agreement, without obtaining the consent of the Agency or otherwise
complying with paragraphs (a) through (h) of this Section 2.5.
SECTON 3. FINANCING AND OWNERSHIP OF THE SITE.
3.1 Ownership of the Site. As of the Effective Date of this Agreement, Participant is
the owner of the Site and as such Participant qualifies as an "owner -participant" within the
meaning of the Community Redevelopment Law (Health & Safety Code § 33000 et seq.).
3.2 Agency Financial Assistance. The Agency in accordance with the terms of this
Agreement, shall provide to Participant the Agency Loan. Upon Close of Escrow, the Agency
Loan shall be disbursed to Participant.
3.3 Form of Agency Financial Assistance; Purpose of Note and Security In the
event Participant is in Material Default of any of its obligations hereunder, including its
obligations under the Regulatory Agreement, the entire principal balance of the Agency Loan
including all accrued interest shall immediately become due and payable, and Agency shall have
the option to: (a) demand full payment of the principal balance of the Agency Loan including all
accrued interest; or (b) foreclose on the Site under the Agency Deed of Trust.
3.4 Escrow. This Agreement, once deposited in Escrow, shall constitute joint
escrow instructions of Agency and Participant. The Escrow agent, the First American Title
Company, is hereby empowered to act under the Agreement upon indicating its acceptance in
writing to Agency and Participant within five (5) days after receipt of this Agreement; provided,
however, that any undertaking by the Escrow agent of any of the acts or services set forth in this
Agreement shall constitute acceptance of the obligation to perform as Escrow agent under this
Agreement. Any amendment to the Escrow instructions contained herein shall be in writing and
signed by both Agency and Participant.
(a) Closing Date. On or before the date established in the Schedule of
Performance, the parties shall satisfy the conditions described in Sections 3.5 and 3.6 and
complete the Close of Escrow. If, for any reason, the Close of Escrow has not occurred by the
date provided therefor in the Schedule of Performance, either party may terminate this
Agreement, by providing written notice of termination to the other party, or may extend the date
scheduled for Close of Escrow with the consent of the other party.
(b) Delivery of Documents and Funds by Participant. On or before twelve
noon on the last business day prior to the scheduled Closing Date, Participant shall deposit or
cause to be deposited with the Escrow agent the following:
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(i) the Note, executed by Participant;
(ii) the Agency Deed of Trust, including the Rider thereto, executed
and acknowledged by Participant;
(iii) the Regulatory Agreement, executed and acknowledged by
Participant; and
(iv) All funds, other documents, and deposits Participant is required to
deposit with Escrow agent in order to close the Escrow and
disburse the funds to Participant.
(c) Delivery of Documents and Funds by Agency. On or before twelve
noon on the last business day prior to the scheduled Closing Date, Agency shall deposit or cause
to be deposited with the Escrow agent the following:
(i) the Agency Deed of Trust, including the Rider thereto, executed
and acknowledged by Agency;
(ii) the Regulatory Agreement, executed and acknowledged by
Participant; and
(iii) the proceeds of the Agency Loan.
(d) Recordation. Escrow agent is directed, on the Closing Date, to record
against the Site the following documents in the following order of priority: (i) the Agency Deed
of Trust; and (ii) the Regulatory Agreement. One or more Subordination Agreements, if required
to effectuate the proper priority of the deeds of trust of the Conventional Lenders and the
Agency, and the Regulatory Agreement, shall be recorded at the direction of Participant in
accordance with the terms of this Agreement.
(e) Escrow Agent Duties. The Escrow agent shall (i) record the documents as
provided in subparagraph (d); and (ii) at Closing, deliver the original Note to Agency and a
conformed copy of same to Participant, and upon recordation deliver to Agency the original of
the Agency Deed of Trust and the Regulatory Agreement and a conformed copy of each
document to Participant.
(f) Interest Bearing Accounts. Escrow agent shall hold all funds received in
an interest bearing account with the interest accrued paid at Closing to the party depositing such
funds.
(g) Title Insurance. Escrow agent shall deliver to Agency at Closing a
CLTA standard form lender's policy of title insurance, in the amount of the Agency Loan and
any Conventional Loans, issued by a title insurer acceptable to Agency, insuring in favor of
Agency the priority of the Agency Deed of Trust and Regulatory Agreement in accordance with
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the priority established by this Agreement. The cost of said policy shall be shared equally
between the parties.
3.5. Agency's Conditions to Closing. The Closing shall be conditioned and
contingent upon satisfaction, or Agency's waiver, of each of the following conditions precedent
(collectively, the "Agency's Conditions to Closing"):
(a) Participant has deposited in escrow all of the funds and instruments
required of it by this Agreement in order to close the Escrow;
(b) Escrow agent, at Closing, holds the Note, Deed of Trust, Regulatory
Agreement, and Title Insurance Policy.
(c) Participant shall deliver evidence acceptable to the Agency Executive
Director that Participant has obtained the insurance policies as required by Section 4.3 of this
Agreement.
(d) Participant shall deliver to the Agency a good standing certificate issued
by its state of organization indicating that Participant exists in good standing.
(e) The construction of the Project shall have been completed and no fewer
than twenty (20) of the Affordable Units shall have been rented to Eligible Tenants as described
in the Regulatory Agreement.
(f) The Agency shall determine that Participant is in full compliance with the
terms and conditions of this Agreement and all documents and instruments referred to herein or
executed by Participant in furtherance of this Agreement.
In the event any of the Agency's Conditions to Closing are not satisfied (or not
waived by Agency), and provided Agency has fully performed its obligations hereunder, Agency
may either a) cancel the Escrow and terminate this Agreement by delivering written notice to
Participant and the Escrow agent, or b) extend the Closing Date of Escrow by ten (10) calendar
days during which Participant may (at no cost to Agency) attempt to cure any unsatisfied
Agency's Conditions to Closing and notifies the Escrow agent of such cure. In the event the
Agency then determines the Agency's Conditions to Closing have been satisfied, and so notifies
the Escrow agent and the Participant, the Escrow agent shall close the Escrow.
In the event of termination pursuant to this Section, (i) the Escrow shall be
cancelled and any funds deposited by Participant or Agency shall be returned to it with any
accrued interest earned on such funds; (ii) Participant shall be responsible for any escrow
cancellation fees imposed by the Escrow agent; and (iii) this Agreement shall be terminated and
the parties hereto shall have no further rights or obligations hereunder.
3.6 Participant's Conditions To Closing. Participant's obligations to close Escrow
shall be conditioned and contingent upon satisfaction, or Participant's waiver, of each of the
following conditions precedent (collectively, the "Participant's Conditions to Closing"):
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(a) Agency has deposited in Escrow all of the funds and instruments required
of it by this Agreement in order to close the Escrow, including but not limited to the proceeds of
the Agency Loan described in Section 3.4(c), the Agency Deed of Trust, Regulatory Agreement,
and such Subordination Agreements as may be required to effect the priority required by this
Agreement.
(b) The Participant shall determine that Agency is in full compliance with the
terms and conditions of this Agreement and all documents and instruments referred to herein or
executed by Agency in furtherance of this Agreement.
In the event any of the Participant's Conditions to Closing are not satisfied (or not
waived by Participant), and provided Participant has fully performed its obligations hereunder,
Participant may either a) cancel the Escrow and terminate this Agreement by delivering written
notice to Agency and the Escrow agent, or b) extend the Closing Date of Escrow by ten (10)
calendar days during which Agency may (at no cost to Participant) attempt to cure any
unsatisfied Participant's Conditions to Closing and notifies the Escrow agent of such cure. In the
event the Participant then determines the Participant's Conditions to Closing have been satisfied,
and so notifies the Escrow agent and the Agency, the Escrow agent shall close the Escrow.
In the event of termination pursuant to this Section, (i) the Escrow shall be
cancelled and any funds deposited by Participant or Agency shall be returned to it with any
accrued interest earned on such funds; (ii) Agency shall be responsible for any escrow .
cancellation fees imposed by the Escrow agent; and (iii) this Agreement shall be terminated and
the parties hereto shall have no further rights or obligations hereunder.
3.7 Broker's Fees. Participant and Agency shall each indemnify, defend, and hold
harmless the other from any claims or damages for payment of any real estate commissions or
broker's fees or finder's fees arising out of the acts or representations of the other with respect to
any of the transactions contemplated by this Agreement.
3.8 Conventional Lender First Deed of Trust. Prior or subsequent to the Close of
Escrow, Participant may obtain a loan or loans from one or more Conventional Lenders to be
used in connection with the Project. Such loan or loans may be memorialized by a note and a
First Deed of Trust. During the first ten (10) years following the Effective Date, the total amount
of such loan or loans shall not exceed seventy-five percent (75%) of the Value of the Site. At any
time following the tenth (10th) anniversary of the Effective Date, such loan or loans shall not
exceed eighty percent (80%) of the Value of the Site. The Value of the Site shall be determined
by a duly qualified and licensed MAI real estate appraiser, whose fees, if any, shall be paid by
Participant. Agency shall have the right to review any appraisal or report produced by such
appraiser as set forth hereinabove and through the Confirming Appraisal Process.
3.9 Subordination A�greement(s). Pursuant to Section 33334.14 of the Health and
Safety Code, Agency is permitted to subordinate the Agency Deed of Trust and the Regulatory
Agreement to superior deeds of trust, regulatory agreements and other related documents
including but not limited to those required by the Conventional Lender, if certain findings are
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made and certain written commitments are obtained from such Conventional Lender. In
accordance with said Section 33334.14, the Agency hereby finds that no economically feasible
alternative method of financing the Project on substantially comparable terms and conditions
without subordination is reasonably available, and the Agency has obtained written commitments
to protect the Ageney's investment in the event of a default by Participant. Therefore, the
Agency hereby agrees to subordinate the Agency Deed of Trust and the Regulatory Agreement
to the Conventional Lender's First Deed of Trust and such other related documents as
Conventional Lender may require, in the amount of the Conventional Lender's First Deed of
Trust. If Participant desires to increase the amount of indebtedness above seventy-five percent
(75%) of the Value of the Site during the ten (10) year period following the Effective Date, or
above eighty percent (80%) following the tenth (1 Oth) anniversary of the Effective Date,
Participant may apply to the Agency to increase said indebtedness, which approval the Agency
shall not unreasonably withhold.
The priority of such deeds of trust shall be effected through the order of
recordation documents as set forth in Section 3.4(d). Such Subordination Agreement shall
provide for: (i) A right of the Agency to cure a default on the Conventional Lender's First
Deed(s) of Trust; (ii) A right of the Agency to negotiate with any lenders after notice of default
from the lender; (iii) An agreement that if prior to foreclosure of any lenders' loans, the Agency
takes title to the Site and cures the default on the loan, the lender will not exercise any right it
may have to accelerate the loan by reason of the transfer of title to the Agency; and (iv) A right
of the Agency to purchase the Site from the Participant at any time after an uncured event of
default on the loan. If a Subordination Agreement is required to effectuate the foregoing order of
priority, such agreement shall be generally in the form set forth as Exhibit H.
3.10 Subordination to Other Financing. Notwithstanding anything in this Agreement
to the contrary, in addition to the Agency Loan or any Conventional Loan, the Participant may
seek financing for some or all of the Project from Fannie Mae or Freddie Mac (each, a
"Lender"). In connection with any such Lender financing, the Agency shall execute and deliver
in substantially the form required by such Lender all necessary documents to allow the
Participant to obtain Lender financing, including, but not limited to a subordination agreement in
substantially the form of the Subordination Agreement For Affordable Housing (Form 4503), a
copy of which is attached hereto as Exhibit "C" (the "Lender Documents"). The Agency
acknowledges that the Lender's forms may include an agreement that subordinates the Agency
Loan and the Agency Deed of Trust to the Lender's security documents, and that the Agency
may be prohibited from exercising its foreclosure remedies set forth in the Agency Deed of Trust
in the event of a default by the Participant.
SECTION 4. DEVELOPMENT OF THE SITE.
4.1 General. The Project shall consist of the development of affordable housing
on the Site and the continued use of the Site as an affordable rental apartment complex in
accordance with this Agreement and the Regulatory Agreement.
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4.2 Construction of the Protect.
(a) Development of the Site. As completed, the Project shall comply with all
applicable laws and ordinances of all governmental authorities, including, without limitation, all
Federal Housing Quality Standards as set forth at Section 982.401 of Title 24 of the Code of
Federal Regulations. Construction must begin within 120 days following the Effective Date of
this Agreement. All Units must be developed no later than twenty-four (24) months from the
commencement of construction. This time period may be extended but only by written
agreement of the parties, which agreement shall be deemed a modification of this Agreement.
(b) Governmental Permits. Participant shall, at its own expense and
before commencement of construction or rehabilitation of any buildings, structures, or other
work of improvement upon the Site, secure or cause to be secured any and all permits and
approvals which may be required by any governmental agency affected by such construction,
development, or work to be performed by Participant, including but not limited to, necessary
building permits and all approvals required under the California Environmental Quality Act
("CEQA"). In constructing the Project, Participant shall comply with all applicable development
standards in City's Municipal Code and shall comply with all building code landscaping,
signage, and parking requirements (except as may be permitted through approved variances and
modifications).
(c) Agency Assistance. So long as Participant is not in Material Default of
any term or provision of this Agreement, Agency agrees to provide reasonable assistance to
Participant, at no cost to Agency, in the processing of Participant's submittals required under this
Agreement in order that Participant may obtain a final City action on such matters on or before
the date set forth in the Schedule of Performance; provided that Agency does not warrant or
represent that such approval shall be obtained.
(d) Cost of Construction. Participant shall bear all costs for the Project,
including, but not limited to any and all costs for preparing or obtaining the plans and permits,
environmental remediation, interim and permanent financing, broker's and leasing commissions,
and fees or charges for development and building, except as specifically provided herein.
(e) Project Schedule. Participant shall commence and complete the
construction of the Project within the times set forth in the Schedule of Performance.
4.3 Insurance. Participant shall procure and maintain, during the term of this
Agreement, at its sole cost and expense, until the date that Agency waives any such insurance
requirement or requirements, the following policies of insurance:
(a) Workers' Compensation Insurance. Pursuant to California Labor Code
Section 1861, Participant acknowledges awareness of Section 3700 et seq. of said code, which
requires every employer to be insured against liability for workers' compensation. Participant
covenants that it will comply with such laws and provisions prior to commencing any work of
construction or rehabilitation on the Site. Participant shall maintain such Workers'
Compensation Insurance in an amount not less than ONE HUNDRED THOUSAND DOLLARS
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($100,000.00) bodily injury, each occurrence, ONE HUNDRED THOUSAND DOLLARS
($100,000.00) bodily injury by disease, each employee, and TWO HUNDRED FIFTY
THOUSAND DOLLARS ($250,000.00) bodily injury by disease, policy limit, at all times
incident thereto, in forms and underwritten by insurance companies admitted in California, or if
not admitted in California then reasonably acceptable to Agency. Participant shall require all
subcontractors to provide such Workers' Compensation Insurance for all of the subcontractor's
employees. Participant shall furnish Agency with a certificate of waiver of subrogation under
the terms of the Workers' Compensation Insurance and Participant shall similarly require all
subcontractors to waive subrogation.
(b) General Liability Insurance. Participant shall carry general commercial
liability insurance, including coverage for bodily injury, property damage, products/completed
operations and blanket contractual liability in an amount not less than ONE MILLION
DOLLARS ($1,000,000.00), combined single limit. Such insurance shall also include
automotive bodily injury and property damage liability insurance. All such insurance shall be
provided by insurance companies admitted in California, or if not admitted in California, then
reasonably acceptable to Agency. Such insurance shall name the City and Agency and their
officers, agents, and employees acting in -their official capacity, as additional insureds pursuant to
a pre-1990 CG 20 10 1185 endorsement form. In the event of aggregate coverage, such limit
shall be no less than ONE MILLION DOLLARS ($1,000,000.00). Participant shall require its
insurer to waive its subrogation rights against Agency and shall provide certificates of insurance
evidencing same.
(c) Property Insurance. Participant shall obtain and maintain in force, a117'
perils (to include Fire, vandalism and, if available, earthquake protection) property insurance
with extended coverage endorsements thereon, on the Site, in an amount equal to the full
replacement costs and/or value thereof; this policy shall contain a replacement cost endorsement
naming Agency as the insured and shall not contain a coinsurance penalty provision. The policy
shall contain a special endorsement that such proceeds shall be used to repair or rebuild any
Units or other improvements situated on the Site so damaged or destroyed; and, if not so used,
such proceeds shall be paid to Agency. The proceeds of any such insurance payable to Agency
shall be used for rebuilding or repair as necessary to restore the site at the discretion of Agency.
The policy shall name Agency and City, their officers, agents and employees acting in their
official capacity as additional insureds.
(d) Certificate of Insurance; Additional Insured Endorsements. Prior to
Close of Escrow, Participant shall furnish to Agency certificates of insurance and additional
insured endorsements evidencing the foregoing insurance coverages as required by this
Agreement. Such certificates and endorsements shall be subject to the reasonable approval of
the City Attorney and shall provide the name and policy number of each carrier and policy and
shall state that the policy is currently in force and shall promise to provide that such policies will
not be cancelled without thirty (30) days prior written notice to Agency.
4.4 Indemnification. During the entire term of this Agreement, Participant
agrees to and shall protect, defend, indemnify and hold the Agency and City harmless from and
against all liability, loss, damage, cost or expenses (including reasonable attorneys' fees and
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court costs) arising from or as a result of (i) Participant's failure to perform any obligations as
and when required by this Agreement or any document referred to herein, and (ii) the death of
any person or any accident, injury loss, or damage whatsoever caused to any person or to the
property of any person which shall occur on the Site and which shall be directly or indirectly
caused by the acts of, or any errors or omissions of, the Participant or its officers, shareholders,
directors, members, agents, servants, employees, contractors, or invitees. Participant shall not be
responsible for, and the Agency shall protect, defend, hold harmless and indemnify Participant
against any liability, loss, damage, cost, or expense (including reasonable attorney's fees and
court costs) arising from or as a result of the active concurrent negligence, sole negligence or
sole willful misconduct of the Agency or the City or their respective members, officers, officials, .
employees, agents, representatives, servants, or contractors.
4.5 Hazardous Materials
(a) Inspection and Abatement. Participant shall inspect the Site for
Hazardous Materials in accordance with all Federal, state and local laws and regulations. Any
Hazardous Materials identified must be abated as part of the development of the Site.
(b) Indemnification. Participant, from and after the Close of Escrow, and
until a transfer, sale, or assignment of the Site upon which the following covenant shall then be
the obligation of the transferee, purchaser, or assignee, shall indemnify, defend, and hold
harmless Agency and City and their respective officers, employees, agents and representatives
(collectively, the "Indemnified Parties") from and against any and all liabilities (including
penalties, fines and monetary sanctions) arising from a violation of state or federal law pertaining
to (i) the storage of Hazardous Materials on the Site or (ii) contamination of the Site by a release
of Hazardous Materials. Participant, prior to the Closing Date, shall provide to Agency a copy of
any notices, orders, or reports concerning the presence of any Hazardous Materials on or
affecting the Site that is in Participant's possession.
4.6 Security Financing; Right of Holders
(a) Permitted Encumbrances. Participant, prior or subsequent to Close of
Escrow may enter into one or more Conventional Loans and execute one or more First Deeds of
Trust for the purpose of securing loans of funds without the consent of the Agency as follows:
(a) during the first ten (10) years following the Effective Date, in an amount not to exceed
seventy-five percent (75%) of the Value of the Site; and (b) at any time following the tenth (loth)
anniversary of the Effective Date, in an amount not to exceed eighty percent (80%) of the Value
of the Site, provided such conveyance (i) is for the purposes permitted herein and (ii) is given to
a financial or lending institution or other acceptable person or entity capable of performing or
causing to be performed Participant's obligations under this Agreement, including without
limitation a pension fund, insurance company, or real estate investment trust. If Participant
desires to increase the amount of indebtedness above seventy-five percent (75%) of the Value of
the Site during the ten (10) year period following the Effective Date, or above eighty percent
(80%) following the tenth (1 Oth) anniversary of the Effective Date, Participant may apply to the
Agency to increase said indebtedness, which approval the Agency shall not unreasonably
withhold.
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(b) Holder Not Obligated to Construct Improvements. The holder of any
mortgage or deed of trust or other security interest authorized by this Agreement shall in no way
be obligated by the provisions of this Agreement to construct or complete the improvements or
to guarantee such construction or completion; nor shall any covenant or any provision in the
Regulatory Agreement be construed to so obligate such holder.
(c) Notice of Default to Mortgage, Deed of Trust or Other Security Interest
Holders; Right to Cure. Whenever Agency shall deliver any notice or demand to
Participant with respect to any breach by Participant in completion of construction of the
improvements, Agency shall at the same time deliver a copy of such notice or demand to each
approved holder of record of any mortgage, deed of trust, or other security interest which has
previously requested such notice in writing. Each such holder shall (insofar as the rights of
Agency are concerned) have the right, at its option within ninety (90) days after the receipt of the
notice, to commence and thereafter to diligently proceed to cure or remedy such default and add
the cost thereof to the security interest debt and the lien on its security interest.
SECTION 5. USE OF THE SITE.
5.1 No Inconsistent Uses. Participant covenants and agrees, for itself, its successors,
its assigns, and every successor in interest to the Site, or any part thereof, that for the period
beginning on the Close of Escrow and ending on the expiration date of the Regulatory
Agreement, Participant and such successors shall not devote the Site to uses inconsistent with the
applicable zoning restrictions, this Agreement, and the Regulatory Agreement; provided that, in
the event of any inconsistency, the provisions of the Regulatory Agreement shall prevail over
this Agreement.
5.2 Regulatory Agreement. At the Close of Escrow the Regulatory Agreement
shall be recorded against the Site in the priority set forth in the Section 3.4(d).
5.3 Relocation. As the Project is new construction, no relocation of tenants living
on the Site as of the Effective Date of this Agreement is contemplated by the parties hereto or is
required to occur as a result of this Agreement.
5.4 Maintenance of the Site. After completion of the construction, all Units must
be maintained in compliance with Federal Housing Quality Standards (24 CFR § 982.401) and
other applicable state and local laws and codes. In addition, Participant shall maintain the Site in
accordance with the terms of the Regulatory Agreement. The Agency shall have the right at all
reasonable times to enter and inspect the Site in order to ensure compliance with the foregoing
requirements. In the event Participant fails to maintain the Site as required by this Section,
Participant shall, within thirty (30) days after Agency's notification or Participant's own
discovery of any deficiency, take all necessary steps to correct such deficiency.
5.5 Nondiscrimination. There shall be no discrimination against or segregation of
any person, or group of persons, on account of race, color, creed, religion, sex, sexual
orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use,
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occupancy, tenure or enjoyment of the Site, or any part thereof, or in the awarding of contracts
for the Project, nor shall Participant, or any person claiming under or through it, 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 of the Site; or any part thereof, or in the awarding of contracts for the Project.
Participant shall comply with all applicable federal, state and local
nondiscrimination, fair housing, and equal opportunity requirements. In addition, Participant
shall conduct affirmative marketing and minority outreach activities as required by Federal
regulations.
5.6 Form of Nondiscrimination and Nonseg_regation Clauses. The Participant shall
refrain from restricting the rental or lease of any of the Units on the property on the basis of race,
color, creed, religion, sex, sexual orientation, marital status, national origin or ancestry of any
person. All such leases or contracts shall contain or be subject to substantially the following
nondiscrimination or nonsegregation clause:
(a) In Leases: "The lessee herein covenants by and for himself, his heirs,
executors, administrators and assigns, and all persons claiming under or through him, and this
lease is made and accepted upon and subject to the following conditions:
That there shall be no discrimination against or segregation of any person or
group of persons, on account of race, color, creed, religion, sex, sexual orientation, marital status,
national origin or ancestry in the leasing, subleasing, transferring, use, occupancy, tenure or
enjoyment of the land or premises herein leased nor shall the lessee himself, or any person
claiming under or through him, 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, sublessees, subtenants, or vendees in the land or premises herein leased."
(b) In Contracts: "There shall be no discrimination against or segregation of
any person, or group of persons on account of race, color, creed, religion, sex, sexual orientation,
marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy,
tenure or enjoyment of the premises or land, nor shall the transferee himself or any person
claiming under or through him, establish or permit any such practice or practices of
discrimination or segregation with reference to the lessees, subtenants, sublessees or vendees of
the premises or land."
5.7 Effect and Duration of Covenants. The Participant has, concurrently with the
execution of this Agreement, executed in recordable form the Regulatory Agreement. Every
covenant and condition and restriction contained in the Regulatory Agreement shall remain in
effect for sixty (60) years from the Effective Date of this Agreement (regardless of whether the
Agency Loan has been repaid prior to the end of such 60-year period), except that the covenants
against discrimination set forth in Sections 5.5 and 5.6 shall remain in effect in perpetuity. If, at
the end of the 60-year period, an unpaid balance remains on the Agency Loan, Participant may
choose to do either of the following: (a) Participant may choose to continue to maintain the
covenants, conditions and restrictions imposed on the Site by the Regulatory Agreement, in
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which case the Agency shall not require repayment of the balance of the Agency Loan and such
Agency Loan shall not accrue any interest for the period during which said covenants, conditions
and restrictions are maintained; or (b) Participant may choose not to maintain the covenants,
conditions and restrictions imposed on the Site by the Regulatory Agreement, in which case the
entire remaining principal balance of the Agency Loan plus all accrued interest on the Agency
Loan shall immediately become due and payable.
5.8 Creation of Capital Reserve Accounts. No later than thirty (30) days after
the Close of Escrow, Participant shall create a "Capital Reserve Account." No later than thirty
(30) days after the Capital Reserve Account has been created, Participant shall provide to
Agency a pro forma statement concerning the account, for Agency's review and approval. At
any time thereafter during the term of this Agreement, Agency, on ten (10) days prior written
notice to Participant, may request that Participant submit to it updated, revised Capital Reserve
Account statement. Agency, at its own expense, may audit any updated, revised Capital Reserve
Account statement submitted to it by Participant.
5.9 Capital Reserves. Commencing on the date of the completion of the
construction of the Project, and every succeeding year during the term of this Agreement,
Participant shall deposit a minimum of One Hundred Fifty Dollars ($150.00) per Unit of
Participant's Net Operating Income into the Capital Reserve Account for maintenance repairs to
the Site. The Capital Reserve Account shall at all times be maintained at a level sufficient to
adequately fund the cost of all repairs and improvements to the Site and to maintain the Site in
compliance with the requirements of Section 5.4. Should Participant believe Project revenues to
be insufficient to permit Participant to make such a full deposit in any year, Participant may
appeal to the Agency to have the payment reduced, suspended, renegotiated, or forgiven.
Participant shall carry the burden of proof, in this regard. Agency shall have the unfettered
discretion to reduce, suspend, renegotiate, or forgive the payment based on the evidence
submitted by Participant.
5.10 Reserved.
5.11 Financial Statements. Commencing at the end of Participant's fiscal year
following the Close of Escrow, Participant shall submit to Agency, on a yearly basis, a true and
correct copy of Participant's audited financial statements for the Project clearly identifying the
status of the Project's operating reserve account and cash flow. Before such statements are
submitted to Agency, they should (but are not required to) be reviewed and certified by
Participant's governing board, if any. After receipt of Participant's audited financial statements
for the Project, Agency may, at its expense, request additional financial analyses from
Participant, or obtain a third party review of Participant's financial statements at Agency's
expense, for the Project to verify the accuracy of the deposits by Participant into the Capital
Reserve Account pursuant to Section 5.9.
5.12 Operation of Project. Participant shall operate and manage the Project in full
conformance with the terms of this Agreement and specifically the Regulatory Agreement. Not
later than sixty (60) days after Close of Escrow, Participant shall submit to Agency, for Agency's
review and approval, an annual budget outlining each proposed service to be offered by
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Participant in operating and managing the Project, and the anticipated cost of each such service.
The first such proposed budget shall cover the period from the Close of Escrow to the beginning
of the second year following the Close of Escrow. Not later than sixty (60) days after the
beginning of the second year following the Close of Escrow, and for every year thereafter during
this Agreement's term, Participant shall submit an annual, proposed budget to Agency, for the
latter's review and approval.
5.13 Lead -Based Paint. Participant shall ensure that it and its contractors and
subcontractors shall not use lead -based paint in the construction or maintenance of the Project.
Participant shall insert this provision in all contracts and subcontracts for work performed on the
Project which involve the application of paint.
5.14 Barriers to the Disabled. Participant shall ensure that the Project shall be
developed and the Property shall be maintained to comply with all applicable federal, state, and
local requirements for access for disabled persons.
SECTION 6. DEFAULTS AND REMEDIES.
6.1 Participant Defaults. The occurrence of any one or more of the following events
shall constitute a "Material Default" by Participant hereunder if, after receiving written notice
from Agency as provided in Section 6.3 below identifying such event, Participant fails to cure
said event within thirty (30) days from the receipt of said notice; provided that if such default is
not reasonably capable of being cured within thirty (30) days, Participant commences to cure
said event within thirty (30) days and diligently and in good faith continues to cure the event of
default, the Participant shall have such additional reasonable time to cure such default before the
default becomes a "Material Default":
(a) Participant fails to observe or perform any material term of this
Agreement or any agreement incorporated hereunder by reference within the time set forth in this
Agreement or any of the documents referred to herein; or
(b) Participant knowingly and intentionally makes or delivers to Agency any
statement, report, or certificate that is not true or correct in any material respect.
In no event shall Agency be precluded from exercising remedies if the default is
not cured within one hundred eighty (180) days, or Agency's rights under this Agreement
becomes or is about to become materially jeopardized by any failure to cure a default.
6.2 Agency Defaults. The occurrence of any one or more of the following events
shall constitute a "Material Default" by Agency hereunder if, after receiving written notice from
Participant as provided in Section 6.3 below identifying such event, Agency fails to cure said
event within thirty (30) days from the receipt of said notice; provided that if such default is not
reasonably capable of being cured within thirty (30) days, Agency commences to cure said event
within thirty (30) days and diligently and in good faith continues to cure the event of default, the
Agency shall have such additional reasonable time to cure such default before the default
becomes a "Material Default":
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(a) Agency fails to observe or perform any material term of this Agreement or
any agreement incorporated hereunder by reference within the time set forth in this Agreement or
any of the documents referred to herein; or
(b) Agency knowingly and intentionally makes or delivers to Participant any
statement, report, or certificate that is not true or correct in any material respect.
In no event shall Participant be precluded from exercising remedies, if the default
is not cured within one hundred eighty (180) days, or Participant's rights under this Agreement
becomes or is about to become materially jeopardized by any failure to cure a default.
6.3 Notice of Default. The non -defaulting party shall give written notice of any
default under Section 6.1 or 6.2 to the defaulting party, clearly specifying the default. Copies of
any notice of default given to the defaulting party shall also be given to any permitted lender
requesting such notice. Any failure or delay in giving such notice or in asserting any of either
party's rights and remedies as to any default shall not constitute a waiver of any default, nor shall
it change the time of default, nor shall it deprive either party of its rights to institute and maintain
any actions or proceedings which it may deem necessary to protect, assert or enforce any such
rights or remedies.
6.4 Agency's Remedies.
(a) The Agency, at its option, may terminate this Agreement prior to the Close
of Escrow in the event of any Material Default that the Participant fails to cure within the time
set forth in Section 6.1 (subject to the right of notice and expiration of applicable cure periods).
(b) Following the Close of Escrow, in the event of any Material Default, the
entire principal balance of the Agency Loan including all accrued interest shall immediately
become due and payable, and Agency shall have the option to: (a) demand full payment of the
principal balance of the Agency Loan including all accrued interest; (b) foreclose on the Site
under the Agency Deed of Trust.
6.5 Participant's Remedies. Upon a Material Default of this Agreement by
Agency, Participant may bring an action for specific performance of this Agreement or any term
or provision hereof, or may terminate this Agreement. Participant may not sue for monetary
damages.
6.6 Rights and Remedies are Cumulative. Except as otherwise expressly stated
in this Agreement, the rights and remedies of the parties hereto are cumulative, and the exercise
by any party of one or more of its rights or remedies shall not preclude the exercise by it, at the
same or different times, of any other rights or remedies for the same Material Default or any
other Material Default by another party.
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SECTION 7. GENERAL PROVISIONS
7.1 Warranties. Participant represents and warrants, as of the Effective Date, (1)
that it has access to professional advice and support to the extent necessary to enable Participant
to fully comply with the terms of this Agreement; (2) that it is duly organized, validly existing
and in good standing under the laws of the State of Delaware; (3) that it has the full power and
authority to undertake the Project and to execute this Agreement; (4) that the persons executing
and delivering this Agreement are authorized to execute and deliver such documents on behalf of
Participant; (5) except as disclosed to the Agency in writing, there are no actions or proceedings
pending or, to the best of the Participant's knowledge, threatened against the Participant before
any court or administrative agency in any way connected with the Site or the Project which could
adversely affect the Participant's ability to perform the activities contemplated hereunder; (6) to
the best of the Participant's knowledge neither this Agreement nor anything provided to be done
hereunder violates or shall violate any contract, agreement or instrument to which the Participant
is a party or which affects the Project or any part thereof, and (7) the Participant is not in
Material Default in respect of any of its obligations or liabilities pertaining to this Agreement,
nor is there any state of facts or circumstances or conditions or events which, after notice, lapse
of time, or both, would constitute or result in any such Material Default under this Agreement;
and (8) the Participant has not entered into any agreements which will adversely affect the title
(excluding Conventional Loans .or other Project related funding) to the Project or the
Participant's right to develop and use the Project as provided in this Agreement, and the
Participant will not enter into any such agreements after the date hereof.
Agency represents and warrants (1) that it has access to professional advice and. '
support to the extent necessary to enable Agency to fully comply with the terms of this
Agreement; (2) that it is duly organized, validly existing and in good standing under the laws of
the State of California; (3) that it has the full power and authority to make the Agency Loan and
to execute this Agreement; (4) that the persons executing and delivering this Agreement are
authorized to execute and deliver such documents on behalf of Agency; (5) except as disclosed
to the Participant in writing, there are no actions or proceedings pending or, to the best of the
Agency's knowledge, threatened against the Agency before any court or administrative agency
in any way connected with the Site or the Project which could adversely affect the Agency's
ability to perform the obligations contemplated hereunder; (6) to the best of the Agency's
knowledge neither this Agreement nor anything provided to be done hereunder violates or shall
violate any contract, agreement or instrument to which the Agency is a party or which affects the
Project or any part thereof; and (7) the Agency is not in Material Default in respect of any of its
obligations or liabilities pertaining to this Agreement, nor is there any state of facts or
circumstances or conditions or events which, after notice, lapse of time, or both, would constitute
or result in any such Material Default under this Agreement.
7.2 Governing Law. The laws of the State of California shall govern the
interpretation and enforcement of this Agreement.
7.3 Attorneys' Fees. In the event of litigation between the parties arising out of
this Agreement, each party shall bear its own attorneys' fees, and other costs. The prevailing
21
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12-27-01
party shall not be entitled to recover its attorney's fees and other costs from the non -prevailing
ply
7.4 Notices Demands and Communications Between the Parties. Formal
notices, demands, and communications between Agency and Participant shall be sufficiently
given if: (i) personally delivered; (ii) delivered by same day or overnight courier (acknowledged
by receipt showing date and time of delivery); or (iii) dispatched by registered or certified mail,
postage prepaid, return receipt requested, to the addresses set forth below:
If to Participant: Fountains Huntington Beach, LLC.
4220 Von Karman, Second Floor
Newport Beach, CA 92660
If to Agency: Redevelopment Agency of the
City of Huntington Beach
2000 Main Street
Huntington Beach, CA 92648
Attn: Executive Director
Notices personally delivered or delivered by courier shall be effective upon receipt or refusal to
accept delivery. Mailed notices shall be effective on the earlier of (i) receipt or refusal to accept
delivery, or (ii) noon on the second calendar day following deposit in the United States mail.
7.5 Acceptance of Service of Process. In the event that any legal action is
commenced by Participant against Agency, service of process on Agency shall be made by
personal service upon Executive Director or the Secretary of Agency, or in such other manner as
may be provided by law. In the event that any legal action is commenced by Agency against
Participant, service of process on Participant shall be made by in any manner provided by law,
and shall be valid whether made within or without the State of California.
7.6 Conflicts of Interest. No member, official, or employee of Agency shall have
any personal interest in this Agreement, nor participate in any decision relating to this
Agreement, that is in violation of any applicable law, regulation or ordinance.
7.7 Titles and Ca tp ions. Titles and captions are for convenience only and shall not
be construed to limit or extend the meaning of this Agreement.
7.8 Gender. As used in this Agreement, masculine, feminine or neuter gender
and the singular or plural number shall each be deemed to include the others wherever and
whenever the context so dictates.
7.9 Modifications. Any amendment, alteration, change, or modification of or to this
Agreement, in order to become effective, shall be made by written instrument or endorsement
thereon and in each such instance executed on behalf of each party hereto or such party's
successors or assigns, by their authorized representative(s).
22
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7.10 Merger of Prior Agreements and Understandings. This Agreement and all
documents incorporated herein contain the entire understanding among the parties hereto relating
to the transactions contemplated herein and all prior or contemporaneous agreements,
understandings, representations, and statements, oral or written, including but not limited to a
"Project Deal Points" Memorandum, if any, approved by Participant and the Agency and/or City
Council of the City of Huntington Beach, are merged herein and shall be of no further force or,
effect.
7.11 No Third Parties Benefited. This Agreement shall create no third -party
beneficiary rights or any other rights in favor of any persons, firms or corporations, except as
may be expressly stated in this Agreement. This Agreement is for the sole use and benefit of the
parties hereto or their authorized successors and assigns, and is not for the use or benefit of any
other person or entity.
7.12 Assurances to Act in Good Faith. Participant and Agency each agree to
execute all documents and instruments and to take all action, including timely depositing funds
as required hereby, and shall use their respective best efforts to perform their respective
obligations under this Agreement.
7.13 Warranty Against Payment of Consideration for Agreement. Except as
provided in this Agreement, Participant warrants that it has not paid or given, and will not pay or
give, any person any money or other consideration for obtaining this Agreement that is in
violation of any law.
7.14 Nonliability of Agency Officials and Employees. No member, official, or
employee of the Agency shall be personally liable to the Participant or any successor in interest,
in the event of any default or breach by the Agency or for any amount which may become due to
the Participant or to its successor, or on any obligations under the terms of this Agreement.
7.15 Interpretation. The terms of this Agreement shall be construed in accordance
with the meaning of the language used and shall not be construed for or against either party by
reason of the authorship of this Agreement or any other rule of construction which might
otherwise apply.
7.16. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall constitute one and the
same instrument.
7.17 Severability. Wherever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law. If, however, any
provision of this Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of this Agreement.
7.18. Extension of Times of Performance. Notwithstanding anything in this
Agreement to the contrary, in addition to the specific provisions of this Agreement, performance
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by either party -hereunder shall not be deemed to be in default during an event of Force Majeure.
An extension of time for an event of Force Majeure shall be limited to the period of such event,
and shall commence to run from the time of the commencement of the cause, provided notice by
the party claiming such extension is sent to the other party within sixty (60) days of the
commencement of the cause. In the event of such delay, the party delayed shall continue to
exercise reasonable diligence to minimize the period of delay. Times of performance under this
Agreement may also be extended by mutual written agreement by Agency and Participant. The
Executive Director of the Agency shall have the authority on behalf of Agency to approve such
extensions of time that do not exceed a cumulative total of one (1) year.
7.19 Inspection of Books and Records. The Agency or its designee has the right at
all reasonable times to inspect the books, records and/or other documents of the Participant
pertaining to the Site and/or the Project as pertinent to the purposes of this Agreement.
7.20 Waivers. The waiver by Agency or Participant of any term, covenant, or
condition herein contained shall not be a waiver of such term, covenant, or condition on any
subsequent breach.
SECTION 8. EXECUTION OF AGREEMENT; TIME FOR ACCEPTANCE
This Agreement consists of twenty-five (25) pages and eight (8) exhibits, labeled
Exhibits "A" through "H" inclusive, which constitute the entire understanding and agreement of
the parties.
This Agreement does not take effect until executed by the Participant and Agency. This
Agreement, when executed by the Participant and delivered to the Agency, must be authorized,
executed and delivered by the Agency within forty-five (45) days after the date of signature by
the Participant, or this Agreement may be terminated by the Participant on written notice to the
Agency.
The Agency Executive Director is hereby authorized and directed to take such other and
further actions, and sign such other and further agreements and documents on behalf of the
Agency as may be necessary or proper to effect the terms of the Owner Participation Agreement
on behalf of the Agency.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
Effective Date.
"PARTICIPANT" -
FOUNTAINS HUNTINGTON BEACH, LLC,
a Delaware limited liability company
By: FountainGlen Properties LLC,
A Delaware limited liability company
Its sole member
By:
Glenn L. Carpenter
President and Chief Executive Officer
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PDA/s: 2001 Agree: Fountains Huntington Beach: OPA
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"AGENCY"
REDEVELOPMENT AGENCY OF THE
CITY OF HUNTINGTON BEACH, a public
body corporate and politic
By:
Chairman
ATTEST:
� By: &4 c
Agency Clerk
APPROVED AS TO FORM:
r0�4 Agency General Counsel
REVIEWED AND APPROVED:
By: � ,—P -- ,
Execu ive Director
INITIAbep-fit-Y'Executive
AND APPROVED:
/&By:S `
Directoi
EXHIBIT A
Legal Description
[behind this page]
Legal Description
Page 1 of 1
CITY OF HUNTINCTON BEACH
LOT UNE ADJUSTMENT
LL 00. -- 02
• MAP
OWNERS EXISTING PARCELS PROPOSED PARCELS
AP NUMBER REFERENCE NUMBER
'SHEA VICKERS DEVELOPMENT I.I.C.- :02.3-010-27 PARCQ.' 1
VICTORIA WOODS -FESTIVAL, LLC 023-010=10 dt 023-010=27 PARCEL 1
EXHIMT "B" .
• l EGEND: - •
PROPOSED LOT UNES.
EXISTING. LOT UNES.
— =— — — RrMOVED LOT ONES.
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LEGAL. DESCRIPTION
IOWNERS EXISTING NUMBER REFOPOSED EREN E NUMb CELS R I
SN,EA PICKERS DEVELOPMENT LLC 02.3-010-27 PARCEL
MC70RL4 ri'OODS-FESTIVAL, LLC 023-010-10 do 023-010-27 PARCEL 2 .
PARCEL 2
BEGINNING -AT THE NORTHEAST CORNER OF SAID PARCEL 4, SAID POINT ALSO
BEING ON THE CENTERLINE OF MAIN STREET, 120.00 FEET WIDE -AS SHOWN ON
THAT CERTAIN CERTIFICATE OF COMPLIANCE NO. 96-3, RECORDED FEBRUARY 28,
1996 AS LNSTRUMENT. NO. 19960095324 OF OFFICIAL RECORDS; THENCE SOUTH
19°15'35 WEST -524.14 FEET ALONG SAID CENTERLINE OF SAID. MAIN STREET;
THENCE LEAVING' SAID CENTERLINE NORTH 89040'01" •WEST -63.43 FEET TO THE
WEST RIGHT 'OF WAY OF. MAIN STREET *AS . SHOWN ON SAID CERTIFICATE 'OF
COMPLIANCE; THENCE SOUTH 19*15'35" WEST 97.66 FEET ALONG SAID WEST RIO13T
OF WAY OF SAID MAIN STREET TO THE -MOST SOUTHERLY, CORNER OF' SAID
PARCEL 4; THENCE NORTH 76°57'53" WEST 243.09 FEET TO THE BEGINNING OF 'A
TANGENT CURVE, CONCAVE SOUTHERLY, 'HAVING A RADIUS OF 435.00• FEET;
THENCE SOUTHWESTERLY 298.45 FEET ALONG SAID CURVE -THROUGH A CENTRAL.
ANGLE OF -3901836" TO THE BEGINNING OF * A * REVERSE CURVE. CONCAVE
NORTHWESTERLY, HAVING A RADIUS OF 222.00-TEET, A RADIAL LINE TO SAID
POINT BEARS NORTH 26016'29" WEST; THENCE WESTERLY 60.04-FEET'ALONG- SAID
CURVE THROUGH A' CENTRAL ANGLE OF -15°29'43" TO THE BEGINNING OF A
COMPOUND CURVE, CONCAVE NORTHEASTERLY HAVING'A RADIUS OF 35.00F FEET.
A RADIAL LINE TO SAID POINT BEARS SOUTH 10*46'46" EAST; -THENCE NORTHERLY
61.58 FEET ALONG SAID CURVE THROUGH.A CENTRAL ANGLE OF 100°48'02" TO THE
WEST LINE OF' SAID PARCEL 4; THENCE NORTH .00°01' 16" EAST 204.41 FEET TO A
TANGENT CURVE CONCAVE SOUTHEASTERLY, HAVING A RADIUS OF 120.50 FEET;
THENCE NORTHEASTERLY - 151.37 FEET* ALONG SAID CURVE * THROUGH A CENTRAL
ANGLE OF 71°58'2791; THENCE NORTH 00°18'36" EAST 235.57 JEET TO THE
CENTERLME OF CLAY AVENUE AS SHOWN ON SAID CERTIFICATE -OF. COMPLIANCE;
THENCE SOUTH 89041'24" EAST 809.76 FEET- ALONG SAID CENTERLINE OF CLAY
AVENUE TO THE POINT OF BEGIITTNITIG.
PARCEL 2 CONTAINING 415,067 SQUARE FEET OF-§.529 ACRES, MORE OR LESS.
ALL AS SHOWN ON EXHIBIT "B" ATTACHED HERETO AND MA.D.£.A PART HEREOF.
SHEET 2 OF - 2
EXHIBIT B
Site Map
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Site Map
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EXHIBIT C
Fannie Mae Subordination Agreement
Affordable Housing Form 4503
Fannie Mae Subordination Agreement
Affordable Housing Form 4503
Page 1 of 1
day
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into this
of by and among (i) a
(the "Senior Lender"), (ii) , a
(the "Subordinate Lender"), and (iii)
(the "Borrower").
Recitals
A. The Senior Lender has made or is making a loan (the "First Mortgage Loan") to the
Borrower in the original principal amount of $ . The First Mortgage
Loan is or will be secured by a first mortgage lien (the "First Mortgage") on a multifamily housing
project located in , (the "Property"). The
Property is more fully described in Exhibit A attached hereto. The Borrower's obligation to repay
the First Mortgage Loan is evidenced by a Multifamily Note dated ,
(the "First Mortgage Note"), and is due in full on ,
B. The Borrower has requested the Senior Lender to permit the Subordinate Lender to
make a subordinate loan to Borrower in the amount of $ (the "Subordinate
Loan") and to secure the Subordinate Loan by, among other things, placing a mortgage lien against
the Property.
C. The Senior Lender has agreed to permit the Subordinate Lender to make the
Subordinate Loan and to place a subordinate mortgage lien against the Property subject to all of the
conditions contained in this Agreement.
D. The Senior Lender intends to sell, transfer and deliver the First Mortgage Note and
assign the First Mortgage to Fannie Mae.
NOW, THEREFORE, in order to induce the Senior Lender to permit the Subordinate
Lender to make the Subordinate Loan to the Borrower and to place a subordinate mortgage lien
against the Property, and in consideration thereof, the Senior Lender, the Subordinate Lender and
the Borrower agree as follows:
1. Definitions.
In addition to the terms defined in the Recitals to this Agreement, for purposes of this
Agreement the following terms have the respective meanings set forth below:
Fannie Mae Subordination Agreement -- Form 4503 10/98 (Page 1)
Affordable Housing
"Affiliate" means, when used with respect to a Person, any corporation, partnership,
joint venture, limited liability company, limited liability partnership, trust or individual
controlled by, under common control with, or which controls such Person (the term
"control" for these purposes shall mean the ability, whether by the ownership of shares or
other equity interests, by contract or otherwise, to elect a majority of the directors of a
corporation, to make management decisions on behalf of, or independently to select the
managing partner of, a partnership, or otherwise to have the power independently to remove
and then select a majority of those individuals exercising managerial authority over an
entity, and control shall be conclusively presumed in the case of the ownership of 50% or
more of the equity interests).
"Borrower" means the Person named as such in the. first paragraph of this
Agreement and any other Person (other than the Senior Lender) who acquires title to the
Property after the date of this Agreement.
"Business Day" means any day other than Saturday, Sunday or a day on which the
Senior Lender is not open for business.
"Default Notice" means: (a) a copy of the written notice from the Senior Lender to
the Borrower stating that a First Mortgage Loan Default has occurred under the First
Mortgage Loan; or (b) _ a copy of the written notice from the Subordinate Lender to the
Borrower stating that a Subordinate Loan Default has occurred under the Subordinate Loan.
Each Default Notice shall specify the default upon which such Default Notice is based.
"First Mortgage Loan Default" means the occurrence of [a default by the Borrower
in performing or observing any of the terms, covenants or conditions in the First Mortgage
Loan Documents to be performed or observed by it, which continues beyond any applicable
period provided in the First Mortgage Loan Documents for curing the default] [an "Event of
Default" as that term is defined in the First Mortgage Loan Documents].
"First Mortgage Loan Documents" means the First Mortgage Note and all other
documents evidencing, securing or otherwise executed and delivered in connection with the
First Mortgage Loan.
"Person" means an individual, estate, trust, partnership, corporation, limited liability
company, limited liability partnership, governmental department or agency or any other
entity which has the legal capacity to own property.
"Senior Lender" means the Person named as such in the first paragraph on page 1 of
this Agreement. When Fannie Mae or any other Person becomes the legal holder of the
First Mortgage Note, Fannie Mae or such other Person shall automatically become the
Senior Lender.
Fannie Mae Subordination Agreement -- Form 4503 10/98 (Page 2)
Affordable Housing
"Subordinate Lender" means the Person named as such in the first paragraph on
page 1 of this Agreement and any other Person who becomes the legal holder of the
Subordinate Note after the date of this Agreement.
"Subordinate Loan Default" means a default by the Borrower in performing or
observing any of the terms, covenants or conditions in the Subordinate Loan Documents to
be performed or observed by it, which continues beyond any applicable period provided in
the Subordinate Loan Documents for curing the default.
"Subordinate Loan Documents" means the Subordinate Note, the Subordinate
Mortgage, and all other documents evidencing, securing or otherwise executed and
delivered in connection with the Subordinate Loan.
"Subordinate Mortgage" means the mortgage or deed of trust encumbering the
Property as security for the Subordinate Loan, which the Subordinate Lender will cause to
be recorded among the applicable land records immediately before this Agreement.
"Subordinate Note" means the promissory note of even date herewith issued by the
Borrower to the Subordinate Lender, or order, to evidence the Subordinate Loan.
2. Permission to Place Mortgage Lien Against Property.
The Senior Lender agrees, notwithstanding the prohibition against inferior liens on the
Property contained in the First Mortgage Loan Documents and subject to the provisions of this
Agreement, to permit the Subordinate Lender to record the Subordinate Mortgage and other
recordable Subordinate Loan Documents against the Property (which are subordinate in all respects
to the lien of the First Mortgage) to secure the Borrower's obligation to repay the Subordinate Note
and all other obligations, indebtedness and liabilities of the Borrower to the Subordinate Lender
under and in connection with the Subordinate Loan. Such permission is subject to the condition
that each of the representations and warranties made by the Borrower and the Subordinate Lender in
Section 3 is true and correct on the date of this Agreement and on the date on which the proceeds of
the Subordinate Loan are disbursed to the Borrower. If any of the representations and warranties
made by the Borrower and the Subordinate Lender in Section 3 is not true and correct on both of
those dates, the provisions of the First Mortgage Loan Documents applicable to unpermitted liens
on the Property shall apply.
3. Borrower's and Subordinate Lender's Representations and Warranties.
The Borrower and the Subordinate Lender each makes the following representations and
warranties to the Senior Lender:
Fannie Mae Subordination Agreement -- Form 4503 10/98 (Page 3)
Affordable Housing
(a) Subordinate Note. The Subordinate Note contains the following provision:
The indebtedness evidenced by this Note is and shall be subordinate
in right of payment to the prior payment in full of the indebtedness
evidenced by a Multifamily Note of even date herewith in the original
principal amount of $ issued by
and payable to
("Senior Lender"), or order, to the
extent and in the manner provided in that certain Subordination Agreement
of even date herewith between the payee of this Note, and the Senior Lender
and (the "Subordination Agreement").
The Mortgage [Deed of Trust] securing this Note is and shall be subject and
subordinate in all respects to the liens, terms, covenants and conditions of
the Multifamily Mortgage [Deed of Trust] securing the Multifamily Note as
more fully set forth in the Subordination Agreement. The rights and
remedies of the payee and each subsequent holder of this Note under the
Mortgage [Deed of Trust] securing this Note are subject to the restrictions
and limitations set forth in the Subordination Agreement. Each subsequent
holder of this Note shall be deemed, by virtue of such holder's acquisition of
the Note, to have agreed to perform and observe all of the terms, covenants
and conditions to be performed or observed by the Subordinate Lender
under the Subordination Agreement.
(b) Relationship of Borrower to Subordinate Lender and Senior Lender.
The Subordinate Lender is not an Affiliate of the Borrower and is not in possession of any
facts which would lead it to believe that the Senior Lender is an Affiliate of the Borrower.
(c) Term. The term of the Subordinate Note does not end before the term of
the First Mortgage Note.
(d) Subordinate Loan Documents. The executed Subordinate Loan
Documents are substantially in the same forms as those submitted to, and approved by,
Fannie Mae prior to the date of this Agreement. Upon execution and delivery of the
Subordinate Loan Documents, Borrower shall deliver to Senior Lender an executed copy of
each of the Subordinate Loan Documents, certified to be true, correct and complete.
(e) Senior Loan Documents. The executed Senior Loan Documents are
substantially in the same forms as, when applicable, those submitted to, and approved by,
Fannie Mae prior to the date of this Agreement. Upon execution and delivery of the Senior
Loan Documents, Borrower shall deliver to Subordinate Lender an executed copy of each of
the Senior Loan Documents, certified to be true, correct and complete.
Fannie Mae Subordination Agreement -- Form 4503 10/98 (Page 4)
Affordable Housing
4. Terms of Subordination.
(a) - Agreement to Subordinate. The Senior Lender and the Subordinate
Lender agree that: (i) the indebtedness evidenced by the Subordinate Loan Documents is
and shall be subordinated in right of payment, to the extent and in the manner provided in
this Agreement to the prior payment in full of the indebtedness evidenced by the First
Mortgage Loan Documents, and (ii) the Subordinate Mortgage and the other Subordinate
Loan Documents are and shall be subject and subordinate in all respects to the liens, terms,
covenants and conditions of the First Mortgage and the other First Mortgage Loan
Documents and to all advances heretofore made or which may hereafter be made pursuant
to the First Mortgage and the other First Mortgage Loan Documents (including but not
limited to, all sums advanced for the purposes of (1) protecting or further securing the lien
of the First Mortgage, curing defaults by the Borrower under the First Mortgage Loan
Documents or for any other purpose expressly permitted by the First Mortgage, or (2)
constructing, renovating, repairing, furnishing, fixturing or equipping the Property).
(b) Subordination of Subrogation Rights. The Subordinate Lender agrees
that if, by reason of its payment of real estate taxes or other monetary obligations of the
Borrower, or by reason of its exercise of any other right or remedy under the Subordinate
Loan Documents, it acquires by right of subrogation or otherwise a lien on the Property
which (but for this subsection) would be senior to the lien of the First Mortgage, then, in
that event, such lien shall be subject and subordinate to the lien of the First Mortgage.
(c) Payments Before First Mortgage Loan Default. Until the Subordinate
Lender receives a Default Notice of a First Mortgage Loan Default from the Senior Lender,
the Subordinate Lender shall be entitled to retain for its own account all payments made
under or pursuant to the Subordinate Loan Documents.
(d) Payments After First Mortgage Loan Default. The Borrower agrees that,
after it receives notice (or otherwise acquires knowledge) of a First Mortgage Loan Default,
it will not make any payments under or pursuant to the Subordinate Loan Documents
(including but not limited to principal, interest, additional interest, late payment charges,
default interest, attorney's fees, or any other sums secured by the Subordinate Mortgage)
without the Senior Lender's prior written consent. The Subordinate Lender agrees that, after
it receives a Default Notice from the Senior Lender with written instructions directing the
Subordinate Lender not to accept payments from the Borrower on account of the
Subordinate Loan, it will not accept any payments under or pursuant to the Subordinate
Loan Documents (including but not limited to principal, interest, additional interest, late
payment charges, default interest, attorney's fees, or any other sums secured by the
Subordinate Mortgage) without the Senior Lender's prior written consent. If the
Subordinate Lender receives written notice from the Senior Lender that the First Mortgage
Loan Default which gave rise to the Subordinate Lender's obligation not to accept payments
Fannie Mae Subordination Agreement -- Form 4503 10/98 (Page 5)
Affordable Housing
has been cured, waived, or otherwise suspended by the Senior Lender, the restrictions on
payment to the Subordinate Lender in this Section 4 shall terminate, and the Senior Lender
shall have no right to any subsequent payments made to the Subordinate Lender by the
Borrower prior to the Subordinate Lender's receipt of a new Default Notice from the Senior
Lender in accordance with the provisions of this Section 4(d).
(e) Remitting Subordinate Loan Payments to Senior Lender. If, after the
Subordinate Lender receives a Default Notice from the Senior Lender in accordance with
subsection (d) above, the Subordinate Lender receives any payments under the Subordinate
Loan Documents, the Subordinate Lender agrees that such payment or other distribution
will be received and held in trust for the Senior Lender and unless the Senior Lender
otherwise notifies the Subordinate Lender in writing, will be promptly remitted, in kind to
the Senior Lender, properly endorsed to the Senior Lender, to be applied to the principal of,
interest on and other amounts due under the First Mortgage Loan Documents in accordance
with the provisions of the First Mortgage Loan Documents. By executing this Agreement,
the Borrower specifically authorizes the Subordinate Lender to endorse and remit any such
payments to the Senior Lender, and specifically waives any and all rights to have such
payments returned to the Borrower or credited against the Subordinate Loan. Borrower and
Senior Lender acknowledge and agree that payments received by the Subordinate Lender,
and remitted to the Senior Lender under this Section 4, shall not be applied or otherwise
credited against the Subordinate Loan, nor shall the tender of such payment to the Senior
Lender waive any Subordinate Loan Default which may arise from the inability of the
Subordinate Lender to retain such payment or apply such payment to the Subordinate Loan.
(f) Agreement Not to Commence Bankruptcy Proceeding. The Subordinate
Lender agrees that during the term of this Agreement it will not commence, or join with any
other creditor in commencing any bankruptcy reorganization, arrangement, insolvency or
liquidation proceedings with respect to the Borrower, without the Senior Lender's prior
written consent.
5. Default Under Subordinate Loan Documents.
(a) Notice of Default and Cure Rights. The Subordinate Lender shall deliver
to the Senior Lender a Default Notice within five Business Days in each case where the
Subordinate Lender has given a Default Notice to the Borrower. Failure of the Subordinate
Lender to send a Default Notice to the Senior Lender shall not prevent the exercise of the
Subordinate Lender's rights and remedies under the Subordinate Loan Documents, subject
to the provisions of this Agreement. The Senior Lender shall have the right, but not the
obligation, to cure any Subordinate Loan Default within 60 days following the date of such
notice; provided, however that the Subordinate Lender shall be entitled, during such 60-day
period, to continue to pursue its rights and remedies under the Subordinate Loan
Documents. All amounts paid by the Senior Lender in accordance with the First Mortgage
Fannie Mae Subordination Agreement -- Form 4503 10/98 (Page 6)
Affordable Housing
r
Loan Documents to cure a Subordinate Loan Default shall be deemed to have been
advanced by the Senior Lender pursuant to, and shall be secured by the lien of, the First
Mortgage. -
(b) Subordinate Lender's Exercise of Remedies After Notice to Senior
Lender. If a Subordinate Loan Default occurs and is continuing, the Subordinate Lender
agrees that, without the Senior Lender's prior written consent, it will not commence
foreclosure proceedings with respect to the Property under the Subordinate Loan
Documents or exercise any other rights or remedies it may have under the Subordinate Loan
Documents, including, but not limited to accelerating the Subordinate Loan, collecting
rents, appointing (or seeking the appointment of) a receiver or exercising any other rights or
remedies thereunder unless and until it has given the Senior Lender at least 60 days' prior
written notice; during such 60 day period, however, the Subordinate Lender shall be entitled
to exercise and enforce all other rights and remedies available to the Subordinate Lender
under the Subordinate Loan Documents and/or under applicable laws, including without
limitation, rights to enforce covenants and agreements of the Borrower relating to income,
rent, or affordability restrictions contained in the Land Use Restriction Agreement.
(c) Cross Default. The Borrower and the Subordinate Lender agree that a
Subordinate Loan Default shall constitute a First Mortgage Loan Default under the First
Mortgage Loan Documents and the Senior Lender shall have the right to exercise all rights
or remedies under the First Mortgage Loan Documents in the same manner as in the case of
any other First Mortgage Loan Default. If the Subordinate Lender notifies the Senior
Lender in writing that any Subordinate Loan Default of which the Senior Lender has
received a Default Notice has been cured or waived, as determined by the Subordinate
Lender in its sole discretion, then provided that Senior Lender has not conducted a sale of
the Property pursuant to its rights under the First Mortgage Loan Documents, any First
Mortgage Loan Default under the First Mortgage Loan Documents arising solely from such
Subordinate Loan Default shall be deemed cured, and the First Mortgage Loan shall be
reinstated, provided, however, that the Senior Lender shall not be required to return or
otherwise credit for the benefit of the Borrower any default rate interest or other default
related charges or payments received by the Senior Lender during such First Mortgage Loan
Default.
6. Default Under First Mortgage Loan Documents.
(a) Notice of Default and Cure Rights. The Senior Lender shall deliver to the
Subordinate Lender a Default Notice within five Business Days in each case where the
Senior Lender has given a Default Notice to the Borrower. Failure of the Senior Lender to
send a Default Notice to the Subordinate Lender shall not prevent the exercise of the Senior
Lender's rights and remedies under the Senior Loan Documents, subject to the provisions of
this Agreement. The Subordinate Lender shall have the right, but not the obligation, to cure
Fannie Mae Subordination Agreement -- Form 4503 10/98 (Page 7)
Affordable Housing
any such First Mortgage Loan Default within 60 days following the date of such notice;
provided, however, that the Senior Lender shall be entitled during such 60-day period to
continue to pursue its remedies under the First Mortgage Loan Documents. Subordinate
Lender may have up to 90 days from the date of the Default Notice to cure a non -monetary
default if during such 90-day period Subordinate Lender keeps current all payments
required by the First Mortgage Loan Documents. In the event that such a non -monetary
default creates an unacceptable level of risk relative to the Property, or Senior Lender's
secured position relative to the Property, as determined by Senior Lender in its sole
discretion, then Senior Lender may exercise during such 90-day period all available rights
and remedies to protect and preserve the Property and the rents, revenues and other
proceeds from the Property. All amounts paid by the Subordinate Lender to the Senior
Lender to cure a First Mortgage Loan Default shall be deemed to have been advanced by the
Subordinate Lender pursuant to, and shall be secured by the lien of, the Subordinate
Mortgage.
(b) Cross Default. The Subordinate Lender agrees that, notwithstanding any
contrary provision contained in the Subordinate Loan Documents, a First Mortgage Loan
Default shall not constitute a default under the Subordinate Loan Documents if no other
default occurred under the Subordinate Loan Documents until either (i) the Senior Lender
has accelerated the maturity of the First Mortgage Loan, or (ii) the Senior Lender has taken
affirmative action to exercise its rights under the First Mortgage to collect rent, to appoint
(or seek the appointment of) a receiver or to foreclose on (or to exercise a power of sale
contained in) the First Mortgage. At any time after a First Mortgage Loan Default is
determined to constitute a default under the Subordinate Loan Documents, the Subordinate
Lender shall be permitted to pursue its remedies for default under the Subordinate Loan
Documents, subject to the restrictions and limitations of this Agreement. If at any time the
Borrower cures any First Mortgage Loan Default to the satisfaction of the Senior Lender, as
evidenced by written notice from the Senior lender to the Subordinate Lender, any default
under the Subordinate Loan Documents arising from such First Mortgage Loan Default
shall be deemed cured and the Subordinate Loan shall be retroactively reinstated as if such
First Mortgage Loan Default had never occurred.
7. Conflict.
The Borrower, the Senior Lender and the Subordinate Lender each agrees that, in the event
of any conflict or inconsistency between the terms of the First Mortgage Loan Documents, the
Subordinate Loan Documents and the terms of this Agreement, the terms of this Agreement shall
govern and control solely as to the following: (a) the relative priority of the security interests of the
Senior Lender and the Subordinate Lender in the Property; (b) the timing of the exercise of
remedies by the Senior Lender and the Subordinate Lender under the First Mortgage and the
Subordinate Mortgage, respectively; and (c) solely as between the Senior Lender and the
Subordinate Lender, the notice requirements, cure rights, and the other rights and obligations which
Fannie Mae Subordination Agreement -- Form 4503 10/98 (Page 8)
. Affordable Housing
the Senior Lender and the Subordinate Lender have agreed to as expressly provided in this
Agreement. Borrower acknowledges that the terms and provisions of this Agreement shall not, and
shall not be deemed to: extend Borrower's time to cure any First Mortgage Loan Default or
Subordinate Loan Default, as the case may be; give the Borrower the right to notice of any First
Mortgage Loan Default or Subordinate Loan Default, as the case may be other than that, if any,
provided, respectively under the First Mortgage Loan Documents or the Subordinate Loan
Documents; or create any other right or benefit for Borrower as against Senior Lender or
Subordinate Lender.
8. Rights and Obligations of the Subordinate Lender Under the Subordinate
Loan Documents and of the Senior Lender under the First Mortgage Loan Documents.
Subject to each of the other terms of this Agreement, all of the following provisions shall
supersede any provisions of the Subordinate Loan Documents covering the same subject matter:
(a) Protection of Security Interest. The Subordinate Lender shall not, without
the prior written consent of the Senior Lender in each instance, take any action which has
the effect of increasing the indebtedness outstanding under, or secured by, the Subordinate
Loan Documents, except that the Subordinate Lender shall have the right to advance funds
to cure First Mortgage Loan Defaults pursuant to Section 6(a) above and advance funds
pursuant to the Subordinate Mortgage for the purpose of paying real estate taxes and
insurance premiums, making necessary repairs to the Property and curing other defaults by
the Borrower under the Subordinate Loan Documents.
(b) Condemnation or Casualty. In the event of. a taking or threatened taking
by condemnation or other exercise of eminent domain of all or a portion of the Property
(collectively, a "Taking"); or the occurrence of a fire or other casualty resulting in damage to
all or a portion of the Property (collectively, a "Casualty"), at any time or times when the
First Mortgage remains a lien on the Property the following provisions shall apply:
(1) The Subordinate Lender hereby agrees that its rights (under the
Subordinate Loan Documents or otherwise) to participate in any proceeding or
action relating to a Taking and/or a Casualty, or to participate or join in any
settlement of, or to adjust, any claims resulting from a Taking or a Casualty shall be
and remain subordinate in all respects to the Senior Lender's rights under the First
Mortgage Loan Documents with respect thereto, and the Subordinate Lender shall
be bound by any settlement or adjustment of a claim resulting from a Taking or a
Casualty made by the Senior Lender; provided, however, this subsection and/or
anything contained in this Agreement shall not limit the rights of the Subordinate
Lender to file any pleadings, documents, claims or notices with the appropriate court
with jurisdiction over the proposed Taking and/or Casualty; and
Fannie Mae Subordination Agreement -- Form 4503 10/98 (Page 9)
Affordable Housing
(2) all proceeds received or to be received on account of a Taking or a
Casualty, or both, shall be applied (either to payment of the costs and expenses of
repair and restoration or to payment of the First Mortgage Loan) in the manner
determined by the Senior Lender in its sole discretion; provided, however, that if the
Senior Lender elects to apply such proceeds to payment of the principal of, interest
on and other amounts payable under the First Mortgage Loan, any proceeds
remaining after the satisfaction in full of the principal of, interest on and other
amounts payable under the First Mortgage Loan shall be paid to, and may be applied
by, the Subordinate Lender in accordance with the applicable provisions of the
Subordinate Loan Documents, provided however, the Senior Lender agrees to
consult with the Subordinate Lender in determining the application of Casualty
proceeds, provided further however that in the event of any disagreement between
the Senior Lender and the Subordinate Lender over the application of Casualty
proceeds, the decision of the Senior Lender, in its sole discretion, shall prevail.
(c) No Modification of Subordinate Loan Documents. The Borrower and the
Subordinate Lender each agrees that, until the principal of, interest on and all other amounts
payable under the First Mortgage Loan Documents have been paid in full, it will not,
without the prior written consent of the Senior Lender in each instance, increase the amount
of the Subordinate Loan, increase the required payments due under the Subordinate Loan,
decrease the term of the Subordinate Loan, increase the interest rate on the Subordinate
Loan, or otherwise amend the Subordinate Loan terms in a manner that creates an adverse
effect upon the Senior Lender under the First Mortgage Loan Documents. Any unauthorized
amendment of the Subordinate Loan Documents or assignment of the Subordinate Lender's
interest in the Subordinate Loan without the Senior Lender's consent shall be void ab initio
and of no effect whatsoever.
9. Modification or Refinancing of First Mortgage Loan.
The Subordinate Lender consents to any agreement or arrangement in which the Senior
Lender waives, postpones, extends, reduces or modifies any provisions of the First Mortgage Loan
Documents, including any provision requiring the payment of money. Subordinate Lender further
agrees that its agreement to subordinate hereunder shall extend to any new mortgage debt which is
for the purpose of refinancing all or any part of the First Mortgage Loan (including reasonable and
necessary costs associated with the closing and/or the refinancing); and that all the terms and
covenants of this Agreement shall inure to the benefit of any holder of any such refinanced debt;
and that all references to the First Mortgage Loan, the First Mortgage Note, the First Mortgage, the
First Mortgage Loan Documents and Senior Lender shall mean, respectively, the refinance loan, the
refinance note, the mortgage securing the refinance note, all documents evidencing securing or
otherwise pertaining to the refinance note and the holder of the refinance note.
Fannie Mae Subordination Agreement -- Form 4503 10/98 (Page 10)
Affordable Housing
10. Default by the Subordinate Lender or Senior Lender.
If the Subordinate Lender or Senior Lender defaults in performing or observing any of the
terms, covenants or conditions to be performed or observed by it under this Agreement, the other,
non -defaulting lender shall have the right to all available legal and equitable relief.
11. Notices.
Each notice, request, demand, consent, approval or other communication (hereinafter in this
Section referred to collectively as "notices" and referred to singly as a "notice") which the Senior
Lender or the Subordinate Lender is required or permitted to give to the other party pursuant to this
Agreement shall be in writing and shall be deemed to have been duly and sufficiently given if: (a)
personally delivered with proof of delivery thereof (any notice so delivered shall be deemed to have
been received at the time so delivered); or (b) sent by Federal Express (or other similar national
overnight courier) designating early morning delivery (any notice so delivered shall be deemed to
have been received on the next Business Day following receipt by the courier); or (c) sent by United
States registered or certified mail, return receipt requested, postage prepaid, at a post office
regularly maintained by the United States Postal Service (any notice so sent shall be deemed to
have been received two days after mailing in the United States), addressed to the respective parties
as follows:
SENIOR LENDER:
Attention:
With a copy to:
Fannie Mae
Attention: Multifamily Operations - Asset Management
Drawer AM
3900 Wisconsin Avenue, N.W.
Washington, DC 20016
SUBORDINATE LENDER:
Fannie Mae Subordination Agreement -- Form 4503 10/98 (Page 11)
Affordable Housing
Attention:
Either party may, by notice given pursuant to this Section, change the person or persons and/or
address or addresses, or designate an additional person or persons or an additional address or
addresses for its notices, but notice of a change of address shall only be effective upon receipt.
13. General.
(a) Assignment/Successors. This Agreement shall be binding upon the
Borrower, the Senior Lender and the Subordinate Lender and shall inure to the benefit of
the respective legal successors and assigns of the Senior Lender and the Subordinate
Lender.
(b) No Partnership or Joint Venture. The Senior Lender's permission for the
placement of the Subordinate Loan Documents does not constitute the Senior Lender as a
joint venturer or partner of the Subordinate Lender. Neither party hereto shall hold itself out
as a partner, agent or Affiliate of the other party hereto.
(c) Senior Lender's and Subordinate Lender's Consent. Wherever the
Senior Lender's consent or approval is required by any provision of this Agreement, such
consent or approval may be granted or denied by the Senior Lender in its sole and absolute
discretion, unless otherwise expressly provided in this Agreement. Wherever the
Subordinate Lender's consent or approval is required by any provision of this Agreement,
such consent or approval may be granted or denied by the Subordinate Lender in its sole and
absolute discretion, unless otherwise expressly provided in this Agreement.
(d) Further Assurances. The Subordinate Lender, the Senior Lender and the
Borrower each agree, at the Borrower's expense, to execute and deliver all additional
instruments and/or documents reasonably required by any other party to this Agreement in
order to evidence that the Subordinate Mortgage is subordinate to the lien, covenants and
conditions of the First Mortgage, or to further evidence the intent of this Agreement.
(e) Amendment. This Agreement shall not be amended except by written
instrument signed by all parties hereto.
Fannie Mae Subordination Agreement -- Form 4503 10/98 (Page 12)
Affordable Housing
(f) Governing Law. This Agreement shall be governed by the laws of the
State in which the Property is located.
(g) Severable Provisions. If any provision of this Agreement shall be invalid
or unenforceable to any extent, then the other provisions of this Agreement, shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
(h) Term. The term of this Agreement shall commence on the date hereof and
shall continue until the earliest to occur of the following events: (i) the payment of all of the
principal of, interest on and other amounts payable under the First Mortgage Loan
Documents; (ii) the payment of all of the principal of, interest on and other amounts payable
under the Subordinate Loan Documents, other than by reason of payments which the
Subordinate Lender is obligated to remit to the Senior Lender pursuant to Section 4 hereof,
(iii) the acquisition by the Senior Lender of title to the Property pursuant to a foreclosure or
a deed in lieu of foreclosure of, or the exercise of a power of sale contained in, the First
Mortgage; or (iv) the acquisition by the Subordinate Lender of title to the Property pursuant
to a foreclosure or a deed in lieu of foreclosure of, or the exercise of a power of sale
contained in, the Subordinate Mortgage, but only if such acquisition of title does not violate
any of the terms of this Agreement.
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original for all purposes; provided,
however, that all such counterparts shall together constitute one and the same instrument.
Fannie Mae Subordination Agreement -- Form 4503 10/98 (Page 13)
Affordable Housing
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first written above.
SENIOR LENDER:
By: _
Name:
Title:
SUBORDINATE LENDER:
By:
Name:
Title:
BORROWER:
By:
Name:
Title:
[Jurats to be added]
Fannie Mae Subordination Agreement -- Form 4503 10/98 (Page 14)
Affordable Housing
EXHIBIT D
Schedule of Performance
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Schedule of Performance
Page 1 of 1
1. Delivery of First Units
2. Completion of All Units
EXHIBIT "D"
SCHEDULE OF PERFORMANCE
One (1) year after obtaining all building permits
Sixteen (16) months after obtaining all building permits
It is understood that this Schedule of Performance is subject to all of the terms and conditions of
the text of the Agreement. The Summary of the items performance in this Schedule of
Performance is not intended to supersede or modify the more complete description in the text; in
the event of any conflict or inconsistency between this Schedule of Performance and the text of
the Agreement, the text shall govern.
The time periods set forth in this Schedule of Performance may be altered or amended only by
written agreement signed by both the Participant and the Agency. The Executive Director of
Agency shall have the authority to approve extensions of time without action of the Board of
Directors of Agency, provided such extensions do not exceed a cumulative total of one (1) year.
Schedule of Performance
Page 1 of 1
EXHIBIT E
Promissory Note
[behind this page]
Promissory Note
Page 1 of 1
PROMISSORY NOTE
SECURED BY DEED OF TRUST WITH ASSIGNMENT
OF RENTS AND RIDER ATTACHED THERETO
DO NOT DESTROY THIS NOTE: When paid, this Note, with the Deed of Trust securing
same, must be surrendered to Trustee for cancellation before reconveyance will be made.
PROMISSORY NOTE SECURED BY DEED OF TRUST
Principal Loan Amount: $2,000,000
Interest: 5%
Note Date: , 200_
FOR VALUE RECEIVED, the undersigned ("Maker") hereby promises to pay to the order of
the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body
corporate and politic ("Holder"), at a place designated by Holder, the principal sum of TWO
MILLION DOLLARS ($2,000,000) at the rate of FIVE PERCENT (5%) simple interest, or such
lesser amount which shall from time to time be owing hereunder pursuant to the terms hereof,
pursuant to an Owner Participation Agreement (the "OPA") dated as of ,
2001 by and between Maker and Holder. The OPA is hereby incorporated by reference as
though fully set forth herein. Any capitalized terms not defined herein shall have the meanings
ascribed to them in the OPA. The obligation of the Maker to the Holder hereunder shall be
secured by a deed of trust made by the Maker encumbering the Site to be developed (the "Site")
pursuant to the OPA and the Deed of Trust and Assignment of Rents dated ,
200_9
executed by the Maker and recorded in the Recorder's Office of Orange County,
California on , as Document No. (the "Deed of
Trust"). The obligation of the Maker set forth in this Note is subject to acceleration as set forth
in the OPA. The OPA and the Deed of Trust are public records on file in the offices of the
Holder.
1. AgencyLoan. This Note evidences the obligation of the Maker to the Holder for
the repayment of funds loaned to the Maker by the Holder (the "Agency Loan") pursuant to the
OPA. The Maker shall not make any sale, assignment or conveyance, or transfer in any other
form, of the Site, or any part thereof, or interest therein without the express written consent of the
Holder except as set forth in the OPA.
2. Payment of Obligation. There shall be annual payments on the Note in the
amount of 1.67% of principal amount plus accrued interest thereon (each an "Annual Payment'),
commencing on the first anniversary of this Note, and every succeeding anniversary during the
term of the OPA. However, provided that thirty (30) calendar days prior to the then current
anniversary date Holder determines that Maker is not in Material Default under the OPA, Holder
shall provide notice to Maker not later than fifteen (15) calendar days prior to the anniversary
date that the then current year Annual Payment shall be waived, and the Maker shall have no
obligation to pay said Annual Payment to the Agency. The Deputy Executive Director of Holder
Promissory Note
Page 1 of 3
12/27/01
is hereby authorized to make such determination regarding Material Default and provide such
notice on behalf Holder.
Upon the total payment or waiver of Annual Payments on this Note as set forth above, Holder shall
mark this Note "PAID IN FULL" and shall deliver this Note to the Trustee of the Deed of Trust that
secures this Note for the Trustee's delivery to Maker in conjunction with the reconveyance of the
Deed of Trust.
3. No Prepayment. There shall be no prepayment of this Note. If, at the end of the 60-
year term of the OPA, an unpaid balance remains on this Note, Maker may choose to do either of
the following: (a) Maker may choose to continue to maintain the covenants, conditions and
restrictions imposed on the Site by the Regulatory Agreement, in which case the Holder shall not
require repayment of the balance of this Note and the Agency Loan shall not accrue any interest for
the period during which said covenants, conditions and restrictions are maintained; or (b) Maker
may choose not to maintain the covenants, conditions and restrictions imposed on the Site by the
Regulatory Agreement, in which case the entire remaining principal balance of the Agency Loan
plus all accrued interest on this Note, if any, shall immediately become due and payable.
4. Acceleration of Obligation. Upon the occurrence of a uncured Material Default of
Maker under this Note, the Deed of Trust or any obligation secured thereby (including the
obligations in the OPA and the Regulatory Agreement), or in any other instrument now or hereafter
securing the obligations evidenced hereby, then, Holder may, at its option, declare this Note and all
the obligations hereby evidenced that have not been forgiven, waived, and discharged pursuant to
Section 2 above, to be immediately due and payable and collectible then or thereafter as Holder may
elect, regardless of the date of maturity.
5. Default Interest. If any event occurs giving Holder the right to accelerate this Note
pursuant to Section 4 above, the entire unpaid and unforgiven principal owing hereunder shall, as of
the date of such acceleration, commence to accrue interest at a rate equal to two percentage points
above the reference rate published by Bank of America N.A., or the maximum non -usurious interest
rate permitted by law, whichever is less.
6. Collection Costs, Attorneys' Fees. If any attorney is engaged by Holder because of
any event of a Material Default under this Note or the Deed of Trust or to enforce any provision of
either instrument, whether or not suit is filed hereon, Holder shall bear its own attorney's fees and
costs.
7. Severability. The unenforceability or invalidity of any provision or provisions of
this Note as to any persons or circumstances shall not render that provision or those provisions
unenforceable or invalid as to any other provisions or circumstances, and all provisions hereof, in all
other respects, shall remain valid and enforceable.
8. Modifications. Neither this Note nor any term hereof may be waived, amended,
discharged, modified, changed or terminated orally; nor shall any waiver of any provision hereof be
effective except by an instrument in writing signed by Maker and Holder.
Promissory Note
Page 2 of 3
12/27ro 1
9. Usurv. Notwithstanding any provision in this Note, Deed of Trust or other
document securing same, the total liability for payment in the nature of interest shall not exceed the
limit now imposed by applicable laws of the State of California.
10. Governing Law. This Note has been executed and delivered by Maker in the State
of California and is to be governed and construed in accordance with the laws thereof.
IN WITNESS WHEREOF, Maker has executed this Note as of the date and year first above
written.
"MAKER"
FOUNTAINS HUNTINGTON BEACH, LLC,
a Delaware limited liability company
By: FountainGlen Properties LLC,
A Delaware limited liability company
Its sole member
By:
Glenn L. Carpenter, President and
Chief Executive Officer
Promissory Note
Page 3 of 3
12/27/01
EXHIBIT F
Subordinated Deed of Trust
[behind this page]
Order No.
Escrow No.
Loan No.
WHEN RECORDED MAIL TO:
Redevelopment Agency of the
City of Huntington Beach
2000 Main Street
Huntington Beach, CA 92648
Attn: Agency Secretary
SPACE ABOVE THIS LINE FOR RECORDER'S USE]
EXEMPT FROM RECORDING FEE PER GOV. CODE § 6103]
SUBORDINATED DEED OF TRUST
WITH ASSIGNMENT OF RENTS WITH RIDER ATTACHED HERETO
NOTICE: THIS SUBORDINATED DEED OF TRUST WITH ASSIGNMENT OF RENTS
WITH RIDER ATTACHED HERETO CONTAINS A SUBORDINATION CLAUSE WHICH
MAY RESULT IN YOUR SECURITY INTEREST IN THE PROPERTY BEING SUBJECT
TO A LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY
INSTRUMENT.
This DEED OF TRUST WITH ASSIGNMENT OF RENTS WITH RIDER ATTACHED
HERETO ("Deed of Trust'), made , 2001, between FOUNTAINS
HUNTINGTON BEACH, LLC, a Delaware limited liability company, herein called TRUSTOR,
whose address is 4220 Von Karman, Second Floor, Newport Beach, CA 92660; and
THE CITY OF HUNTINGTON BEACH, a California corporation, herein called TRUSTEE, and
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body,
corporate and politic, herein called BENEFICIARY,
WITNESSETH: That Trustor grants to Trustee in trust, with power of sale, that property in the
City of Huntington Beach, County of Orange, State of California, described as:
SEE EXHIBIT "A" ATTACHED HERETO
together with the rents, issues and profits thereof, subject, however, to the right, power and
authority hereinafter given to and conferred upon Beneficiary to collect and apply such rents,
issues and profits for the purpose of securing (1) payment of the sum of TWO MILLION
DOLLARS ($2,000,000.00) with interest thereon, according to the terms of that certain
promissory note of even date herewith made by Trustor, payable to order of Beneficiary, and
extensions or renewals thereof; (2) the performance of each agreement of Trustor incorporated
by reference or contained herein; and (3) payment of additional sums and interest thereon which
1
Subordinated Deed of Trust
PDA: 2001 Agree: Fountains Huntington Beach: Subordinated Deed of Trust
12-27-01
r
may hereafter be loaned to Trustor, or his successors or assigns, when evidenced by a promissory
note or notes reciting that they are secured by this Deed of Trust.
To protect the security of this Deed of Trust, and with respect to the property above described,
Trustor expressly makes each and all of the agreements, and adopts and agrees to perform and be
bound by each and all of the terms and provisions set forth in subdivision A, and it is mutually
agreed that each and all of the terms and provisions set forth in subdivision B of the fictitious
deed of trust recorded in Orange County September 17, 1964, and in all other counties
September 18, 1964, in the book and at the page of Official Records in the office of the county
recorder of the county where said property is located, noted below opposite the name of such
county, namely:
COUNTY
BOOK
PAGE
COUNTY
BOOK
PAGE
COUNTY
BOOK
PAGE
COUNTY
BOOK
PAGE
Alameda
1288
566
Kings
858
713
Placer
1028
379
Sierra
38
187
Alpine
3
130-31
Lake
437
110
Plumas
166
1307
Siskiyou
506
762
Amador
133
438
Lassen
192
367
Riverside
3778
347
Solano
1287
621
Butte
1330
513
Los Angeles
T-3878
874
Sacramento
5039
124
Sonoma
2067
427
Calaveras
185
338
Madera
911
136
San Benito
300
405
Stanislaus
1970
56
Colusa
323
391
Marin
1849
122
San Bernardino
6213
768
Sutter
655
585
Contra Costa
4684
1
Mariposa
90
453
San Francisco
A-804
596
Tehama
457
183
Del Norte
101
549
Mendocino
667
99
San Joaquin
2855
283
Trinity
108
595
El Dorado
704
635
Merced
1660
753
San Luis Obispo
1311
137
Tulare
2530
108
Fresno
5052
623
Modoc
191
93
San Mateo
4778
175
Tuolumne
177
160
Glenn
469
76
Mono
69
302
Santa Barbara
2065
881
Ventura
2607
237
Humboldt
801
83
Monterey
357
239
Santa Clara
6625
664
Yolo
769
16
Imperial
1189
701
Napa
704
742
Santa Cruz
1638
607
Yuba
398
693
Inyo
165
672
Nevada
363
94
Shasta
800
633
Kern
3756
690
Orange
7182
18
San Diego
SERIES 5 Book 1964,
Page 149774
shall inure to and bind the parties hereto, with respect to the property above described. Said
agreements, terms and provisions contained in said subdivisions A and B (identical in all counties,
and printed on pages 4, 5 and 6 hereof) are by the within reference thereto, incorporated herein and
made a part of this Deed of Trust for all purposes as fully as if set forth at length herein, and
Beneficiary may charge for a statement regarding the obligation secured hereby, provided the charge
therefor does not exceed the maximum allowed by law.
The undersigned Trustor requests that a copy of any notice of default and any notice of sale
hereunder be mailed to it at its address hereinbefore set forth.
NOTICE: THIS SUBORDINATED DEED OF TRUST WITH ASSIGNMENT OF RENTS WITH
RIDER ATTACHED HERETO CONTAINS A SUBORDINATION CLAUSE WHICH MAY
RESULT IN YOUR SECURITY INTEREST IN THE PROPERTY BEING SUBJECT TO A
LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY
INSTRUMENT.
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Signature of Trustor
FOUNTAINS HUNTINGTON BEACH, LLC,
A Delaware limited liability company
By: FountainGlen Properties LLC,
A Delaware limited liability company
Its sole member
By:
Glenn L. Carpenter
President and Chief Executive Officer
STATE OF CALIFORNIA )
COUNTY OF ORANGE )
On before me,
personally appeared
personally known to me (or 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.
WITNESS my hand and official seal.
Signature
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(This area for official notarial seal)
DO NOT RECORD
The following is a copy of Subdivisions A and B of the fictitious Deed of Trust recorded in each
county in California as stated in the foregoing Deed of Trust and incorporated by reference in said
Deed of Trust as being a part thereof as if set forth at length therein.
A. To protect the security of this Deed of Trust, Trustor agrees:
1) To keep said property in good condition and repair, not to remove or demolish any
building thereon; to complete or restore promptly and in a good and workmanlike manner any
building which may be constructed, damaged or destroyed thereon and to pay when due all claims
for labor performed and materials furnished therefor, to comply with all laws affecting said property
or requiring any alterations or improvements to be made thereon; not to commit or permit waste
thereof; not to commit, suffer or permit any act upon said property in violation of law; to cultivate,
irrigate, fertilize, fumigate, prune and do all other acts which from the character or use of said
property may be reasonably necessary, the specific enumerations herein not excluding the general.
2) To provide, maintain and deliver to Beneficiary fire insurance satisfactory to and with
loss payable to Beneficiary. The amount collected under any fire or other insurance policy may be
applied by Beneficiary upon 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. Such application or release shall not cure or waive any default or notice of
default hereunder to invalidate any act done pursuant to such notice.
3) To appear in and defend any action or proceeding purporting to affect the security
hereof or the rights or powers of Beneficiary or Trustee; and to pay all costs and expenses, including
cost of evidence of title and attorney's fees in a reasonable sum, in any such action or proceeding in
which Beneficiary or Trustee may appear, and in any suit brought by Beneficiary to foreclose this
Deed.
4) To pay: at least ten days before delinquency all taxes and assessments affecting said
property, including assessments on appurtenant water stock; when due, all encumbrances, charges
and liens, with interest, on said property or any part thereof, which appear to be prior or superior
hereto; all costs, fees and expenses of this Trust.
Should Trustor fail to make any payment or to do any act as herein provided, then
Beneficiary or Trustee, but without obligation so to do and without notice to or demand upon Trustor
and without releasing Trustor from any obligation hereof, may: make or do the same is such manner
and to such extent as either may deem necessary to protect the security hereof, Beneficiary or
Trustee being authorized to enter upon said property for such purposes; appear in and defend any
action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or
Trustee; pay, purchase, contest or compromise any encumbrance, charge or lien which in the
judgment of either appears to be prior or superior hereto; and, in exercising any such powers, pay
necessary expenses, employ counsel and pay his reasonable fees.
5) To pay immediately and without demand all sums so expended by Beneficiary or
Trustee, with interest from the date of expenditure at the amount allowed by law in effect at the date
hereof, and to pay for any statement provided for by law in effect at the date hereof regarding the
obligation secured hereby any amount demanded by the Beneficiary not to exceed the maximum
allowed by law at the time when said statement is demanded.
B. It is mutually agreed:
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1) That any award in connection with any condemnation for public use of or injury to
said property or any part thereof is hereby assigned and shall be paid to Beneficiary who may apply
or release such moneys received by him in the same manner and with the same effect as above
provided for disposition or proceeds of fire or other insurance.
2) That by accepting payment of any sum secured hereby after its due date, Beneficiary
does not waive his right either to require prompt payment when due of all other sums so.secured or
to declare default for failure so to pay.
3) That at any time or from time to time, without liability therefor and without notice,
upon written request of Beneficiary and presentation of this Deed and said note for endorsement, and
without affecting the personal liability of any person for payment of the indebtedness secured .
hereby, Trustee may: reconvey any part of said property; consent to the making of any map or plat
thereof; join in granting any easement thereon, or join in any extension agreement or any agreement
subordinating the lien or charge hereof.
4) That upon written request of Beneficiary stating that all sums secured hereby have
been paid, and upon surrender of this Deed and said note to Trustee for cancellation and retention or
other disposition as Trustee in its sole discretion may choose and upon payment of its fees, Trustee
shall reconvey, without warranty, the property then held hereunder. The recitals in such
reconveyance of any matters or facts shad be conclusive proof of the truthfulness thereof. The
Grantee in such reconveyance may be described as "the person or persons legally entitled thereto."
5) That as additional security, Trustor hereby gives to and confers upon Beneficiary the
right, power and authority, during the continuance of these trusts, to collect the rents, issues and
profits of said property, reserving unto Trustor the right, prior to any default by Trustor in payment
of any indebtedness secured hereby or in the performance of any agreement hereunder, to collect and
retain such rents, issues and profits as they become due and payable. Upon any such default,
Beneficiary may at any time without notice, either in person, by agent, or be a receiver to the
appointed by a court, and without regard to the adequacy of any security for the indebtedness hereby
secured, enter upon and take possession of said property or any part thereof, in his own name 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 attorney's fees, upon
any indebtedness secured hereby, and in such order as Beneficiary may determine. The entering
upon and taking possession of said property, the collecting 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.
6) That upon default by Trustor in payment of any indebtedness secured hereby or in the
performance of any agreement hereunder, Beneficiary may declare all sums secured hereby
immediately due and payable by delivery to Trustee of written declaration of default and demand for
sale and of written notice of default and of election to cause to be sold said property, which notice
Trustee shall cause to be filed for record. Beneficiary also shall deposit with Trustee this Deed, said
note and all documents evidencing expenditures secured hereby.
After the lapse of such time as may then be required by law following the recordation of said
notice of default, and notice of sale having been given as then required by law, Trustee, without
demand on Trustor, shall sell said property at the time and place fixed by it in said 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
postpone sale of all or any portion of said 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
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fixed by the preceding postponement. Trustee shall deliver to such 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 as hereinafter defined, may purchase at such sale.
After deducting all costs, fees and expenses of Trustee and this Trust, including cost of
evidence of title in connection with sale, Trustee shall apply the proceeds of sale to payment of: all
sums expended under the terms hereof, not then repaid, with accrued interest at the amount allowed
by law in effect at the date hereof; all other sums then secured hereby; and the remainder, if any, to
the person or persons legally entitled thereto.
7) Beneficiary, or any successor in ownership of any indebtedness secured hereby, may
from time to time, by instrument in writing, substitute a successor or successors to any Trustee
named herein or acting hereunder, which instrument, executed by the Beneficiary and duly
acknowledged and recorded in the office of the recorder of the county or counties where said
property is situated shall be conclusive proof of proper substitution of such successor Trustee or
Trustees, who shall, without conveyance from the Trustee predecessor, succeed to all its title, estate,
rights, powers and duties. Said instrument must contain the name of the original Trustor, Trustee
and Beneficiary hereunder, the book and page where this Deed is recorded and the name and address
of the new Trustee.
8) That this Deed applies to, inures to the benefit of, and binds all parties hereto, their
heirs, legatees, devisees, administrators, executors, successors and assigns. The term Beneficiary
shall mean the owner and holder, including pledges, of the note secured hereby, whether or not
named as Beneficiary herein. In this Deed, whenever the context so requires, the masculine gender
includes the feminine and/or neuter, and the singular number includes the plural.
9) That Trustee accepts this Trust when this Deed, duly executed and acknowledged, is
made a public record as provided by law. Trustee is not obligated to notify any party hereto of
pending sale under any other Deed of Trust or of any action or proceeding in which Trustor,
Beneficiary or Trustee shall be a party unless brought by Trustee.
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DO NOT RECORD REQUEST FOR FULL RECONVEYANCE
TO ,TRUSTEE:
The undersigned is the legal owner and holder of the note or notes of all indebtedness secured
by the foregoing Deed of Trust. Said note or notes, together with all other indebtedness secured by
said Deed of Trust, have been fully paid and satisfied; and you are hereby requested and directed, on
payment to you of any sums owing to you under the terms of said Deed of Trust, to cancel said note
or notes above mentioned, and all other evidences of indebtedness secured by said Deed of Trust
delivered to you herewith, together with the said Deed of Trust, and to reconvey, without warranty,
to the parties designated by the terms of said Deed of Trust, all the estate now held by you under the
same.
Dated
Please mail Deed of Trust,
Note and Reconveyance to
Do Not lose or destroy this Deed of Trust OR THE NOTE which it secures. Both must be
delivered to the Trustee for cancellation before reconveyance will be made.
7
Subordinated Deed of Trust
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DEED OF TRUST WITH ASSIGNMENT OF
RENTS WITH RIDER ATTACHED
CITY OF HUNTINGTON BEACH
A California municipal corporation
TRUSTEE
s
Subordinated Deed of Trust
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RIDER TO SUBORDINATED DEED OF TRUST WITH ASSIGNMENT OF RENTS
THIS RIDER TO SUBORDINATED DEED OF TRUST WITH RIDER ATTACHED
("Rider"), is made as of , 2001, by FOUNTAINS HUNTINGTON
BEACH, LLC, a Delaware limited liability company ("Trustor"), and REDEVELOPMENT
AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic
(`Beneficiary"), as follows:
1. Part of Deed of Trust. This Rider is made a part of that certain Subordinated Deed of
Trust With Assignment of Rents ("Deed of Trust"), of even date hereof, to which this Rider is
attached.
2. Conflict. In the event of any conflict between the terms of this Rider and the
terms of the Deed of Trust, the terms of this Rider shall control.
3. Priority; Subordination. Trustor and Beneficiary entered into that certain Owner
Participation Agreement, dated , 2001 (the "OPA"), pursuant to which
Beneficiary (named the "Agency" in the OPA) agreed to subordinate this Deed of Trust to the liens
of the deeds of trust identified in the OPA as the Conventional Lender's deeds of trust, and to such
other and further documents as may be required by such lenders, including but not limited to
regulatory agreements. The lien of this Deed of Trust therefore shall be junior and subordinate to the
lien of the foregoing listed deeds of trust and such other and further documents as such lenders may
require. Beneficiary agrees to execute such subordination agreements, in the forms attached as
Exhibits "C" or "H" to the OPA, as are necessary to effect such subordination of the lien of this Deed
of Trust.
4. Condemnation. Section B.1 of the Fictitious Deed of Trust incorporated into
the Deed of Trust shall be modified to provide that Beneficiary shall not be entitled to any awards or
damages payable directly or indirectly by reason of a condemnation or proposed condemnation
affecting all or any part of, or any interest in, the Property, brought by or pursuant to the direction of
Beneficiary or the City of Huntington Beach, California.
5. Default. The term "default" as used in the Deed of Trust shall mean a "Material
Default" as defined in the OPA.
IN WITNESS WHEREOF, Trustor and Beneficiary have executed this Rider to Subordinated
Deed of Trust With Assignment of Rents as of the date of Trustor's acknowledgement hereinbelow,
to be effective for all purposes as of the day and year first set forth above.
[end — signature page follows]
9
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"TRUSTOR"
FOUNTAINS HUNTINGTON BEACH, LLC,
A Delaware limited liability company
By: FountainGlen Properties LLC,
A Delaware limited liability company
Its sole member
By:
Glenn L. Carpenter
President and Chief Executive Officer
"BENEFICIARY"
REDEVELOPMENT AGENCY OF THE
CITY OF HUNTINGTON BEACH, a
public body corporate and politic
By:
Chairman
ATTEST:
By:
Agency Clerk
REVIEWED AND APPROVED
AS TO FORM:
By
Agency Counsel
l
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STATE OF CALIFORNIA
COUNTY OF ORANGE
On
appeared _
ss.
before me, , personally
personally known to me (or 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.
Witness my hand and official seal.
[SEAL]
STATE OF CALIFORNIA
COUNTY OF ORANGE
On
appeared _
ss.
before me,
Notary Public
personally
personally known to me (or 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.
Witness my hand and official seal.
Notary Public
[SEAL]
11
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EXHIBIT G
Regulatory Agreement
[behind this page]
FREE RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
REDEVELOPMENT AGENCY OF THE
CITY OF HUNTINGTON BEACH
2000 Main Street
Huntington Beach, CA 92648
Attn: Executive Director
(Space Above This Line for Recorder's Office Use Only)
(Exempt from Recording Fee per Gov. Code § 6103)
REGULATORY AGREEMENT AND
DECLARATION OF COVENANTS AND RESTRICTIONS
THIS REGULATORY AGREEMENT AND DECLARATION OF COVENANTS AND
RESTRICTIONS ("Agreement") is made and entered into this day of
12001, by and between REDEVELOPMENT AGENCY OF THE CITY OF
HUNTINGTON BEACH, a public body, corporate and politic ("Agency") and FOUNTAINS
HUNTINGTON BEACH, LLC, a Delaware limited liability company ("Participant").
RECITALS:
A. Agency and Participant have entered into that certain Owner Participation
Agreement, dated , 2001 (the "OPA"), concerning Participant's
development of that certain real property, owned in fee by Participant, more particularly
described in Attachment No. 1 attached hereto and incorporated by reference herein (the "Site").
The OPA describes the "Project" which generally consists of Participant's construction of 271
rental housing units, of which eighty (80) units shall be restricted for rental to elderly tenants of
low income and very low income, on the Site and subsequent management thereof as an
affordable rental housing complex. The OPA is hereby incorporated herein by this reference as
though fully set forth herein. Any capitalized terms not defined herein shall have the meanings
ascribed to such terms in the OPA.
B. Participant has executed that certain promissory note (the "Note") dated
, 2001, pursuant to which Agency has provided Participant with a loan in the
principal amount of TWO MILLION DOLLARS ($2,000,000) ("Loan Amount"). The Note is
secured by a Subordinated Deed of Trust With Assignment of Rents With Rider Attached dated
on or about the date of the Note.
C. Agency and Participant now desire to place restrictions upon the use and
operation of the Project, in order to ensure that the Project shall be operated continuously as an
affordable housing project available for rental in accordance with the terms set forth below for
the term of this Agreement.
Regulatory Agreement
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AGREEMENT:
NOW, THEREFORE, the Participant and Agency declare, covenant and agree, by and for
themselves, their heirs, executors, administrators and assigns, and all persons claiming under or
through them, that the Site, for the term of this Agreement, shall be held transferred,
encumbered, used, sold, conveyed, leased and occupied, subject to the covenants and restrictions
hereinafter set forth:
DEFINITIONS.
1.1 Affordable Rent. As used in this Agreement, the term "Affordable
Rent" shall mean rental rates not to exceed thirty percent (30%) times fifty percent (50%) of
median income for an Eligible Very Low Income Tenant, and rental rates not to exceed thirty
percent (30%) times eighty percent (80%) of median income for an Eligible Low Income Tenant.
1.2 Eligible Tenant. As used in this Agreement, the term "Eligible
Tenant" shall refer to persons who are a minimum of 55 years of age and who are Eligible Very
Low Income Tenants or Eligible Low Income Tenants, and who are eligible to rent a Unit.
1.3 Eligible Low Income Tenant. As used in this Agreement, the term
"Eligible Low Income Tenant" shall mean an Eligible Tenant whose annual income does not
exceed eighty percent (80%) of the median income for the Orange County Metropolitan
Statistical Area as determined by the U.S. Department of Housing and Urban Development
(HUD) with adjustments for smaller and larger families.
1.4 Eligible Very Low Income Tenant. As used in this Agreement, the term
"Eligible Very Low Income Tenant" shall mean an Eligible Tenant whose annual income does
not exceed fifty percent (50%) of the median income for the Orange County Metropolitan
Statistical Area as determined by the U.S. Department of Housing and Urban Development
(HUD) with adjustments for smaller and larger families.
1.5 Orange County Median Income. For purposes of this Agreement, the
term "Orange County Median Income" shall mean the median income for the Orange County
Primary Metropolitan Statistical Area, with adjustments for household size, as determined from
time to time by HUD pursuant to the United States Housing Act of 1937 as amended, or such
other method of median income calculation applicable to the City that HUD may hereafter adopt
in connection with said Act.
1.6 Unit and Units. As used in this Agreement, the term "Unit" shall
mean one of the eighty (80) rent restricted, affordable rental dwelling units in the Project, and the
term "Units" shall mean two or more of the eighty (80) rent restricted, affordable rental dwelling
units in the Project. The term "Unit" and "Units" shall be used as the context mandates and shall
be reasonably interpreted in light of the context in which the term appears.
1.7 Utility Allowance. As used in this Agreement, the term "Utility
Allowance" shall mean an allowance for utilities, including garbage collection, sewer, water,
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electricity, gas and other heating, cooking and refrigeration fuels, but shall not include telephone
service. In no event shall such Utility Allowance be less than the amount established by the
Orange County Housing Authority per Unit per month.
2. TERM OF AGREEMENT; RESIDENTIAL RENTAL PROPERTY. The
term of this Agreement shall be sixty (60) years from the Effective Date of the OPA. Participant
hereby agrees that the Project is to be owned, managed, and operated as a project for Eligible
Tenants for the term of this Agreement. To that end, and for the term of this Agreement, the
Participant hereby represents, covenants, warrants and agrees as follows:
2.1 Purpose. The Site has been acquired and the Project developed for
the purposes of providing Eligible Tenants affordable rental housing.
2.2 Facilities. All of the Units in the Project shall contain facilities
adequate for living, sleeping, eating, cooking and sanitation in accordance with all applicable
federal, state and local laws and codes.
2.3 Residential Use. None of the Units in the Project will at any time be
utilized on a transient basis or will ever be used as a hotel, motel, dormitory, fraternity house,
sorority house, rooming house, nursing home, hospital, sanitarium, or trailer court or park
without the Agency's prior written consent.
2.4. Maximum Occupancy. The maximum number of persons in a
household that may occupy any of the two -bedroom Units may not exceed five persons; the
maximum number of persons in a household that may occupy any of the one -bedroom Units may
not exceed two persons.
2.5 Conversion of Units. No part of the Project will at any time be owned by
a cooperative housing corporation nor shall the Participant take any steps in connection with the
conversion to such ownership or uses to condominiums, or to any other form of ownership,
without the prior written approval of Agency.
2.6 Preference to Eligible Tenants. All of the Units will be made
available for rental in accordance with the terms of this Agreement, and the Participant shall not
give preference to any particular class or group in renting the Units in the Project, except to the
extent that the Units are required to be leased or rented to Eligible Tenants and except as
provided in Section 3.3 below.
2.7 Liability of Participant. Participant and the management agent shall
not incur any liability under this Agreement as a result of fraud or negligent or intentional
misrepresentation by a tenant.
3. OCCUPANCY OF PROJECT BY ELIGIBLE TENANTS. Participant hereby
represents, warrants, and covenants as follows:
Regulatory Agreement
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RLS 00-626
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3.1 Income Restrictions. Except as expressly provided herein, throughout the
term of this Agreement, the eighty (80) rent restricted, affordable Units shall be rented only to
Eligible Low Income Tenants and Eligible Very Low Income Tenants as follows:
a. The eighty (80) rent restricted, affordable Units shall be comprised of sixty (60)
one -bedroom units and twenty (20) two -bedroom units.
b. Forty-one (41) of the sixty (60) one bedroom units shall be rented to Eligible Very
Low Income Tenants. Nineteen (19) of the sixty (60) one -bedroom units shall be rented to
Eligible Low Income Tenants.
C. Fourteen (14) of the twenty (20) two -bedroom units shall be rented to Eligible
Very Low Income Tenants. Six (6) of the twenty (20) two -bedroom units shall be rented to
Eligible Low Income Tenants.
3.2 Rental Rates. Monthly rents for the Units (including the Utility
Allowance, and excluding any supplemental rental assistance from the State of California, the
federal government or any other public agency) shall not exceed one -twelfth (1/12) of the
Affordable Rent adjusted for family size appropriate for the Unit. The rental rates for the Units
shall be adjusted annually based upon current updates of HUD income and rent standards. In no
event shall any of the Units be rented at a rate greater than the Affordable Rent applicable to the
particular Unit.
3.3 Occupancy By Eligible Tenant. A Unit occupied by an Eligible
Tenant at the time of this Agreement shall be treated as occupied by an Eligible Tenant until
such Unit is vacated. A Unit previously occupied by an Eligible Tenant and then vacated shall
be considered occupied by an Eligible Tenant until reoccupied, other than for a temporary
period, at which time the character of the Unit shall be redetermined. In no event shall such
temporary period exceed thirty-one (31) days.
If at any time a tenant's household income increases, resulting in
disqualification of such tenant as an Eligible Very Low Income Tenant, such tenant shall have a
period of ninety (90) days to relocate from the Site. The disqualified tenant shall be fully
responsible for the costs and expenses related to the relocation. Should such tenant face
extraordinary hardship in relocating from the Site, the tenant may submit a written appeal to the
Agency requesting an extension of the time period within which the tenant must relocate. Upon
receipt of the written appeal, the Agency Director of Economic Development in his sole
discretion may extend the relocation period for up to a maximum of ninety (90) additional days.
Pursuant to this Paragraph 3.3, Participant will at all times be deemed in compliance with this
Regulatory Agreement during such disqualified tenant's relocation period, as extended.
3.4 Income Computation. Immediately prior to a prospective Eligible
Tenant's occupancy of a Unit, Participant shall obtain and maintain on file an income
computation and certification form from each such prospective Eligible Tenant dated
immediately prior to the date of initial occupancy in a Unit by such prospective Eligible Tenant.
Participant shall use its best efforts to verify that the income information provided by an
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applicant is accurate by following the Agency Housing Rehabilitation Loan Program Policies
and Procedures and by taking one or more of the following steps as a part of the verification
process: (i) obtain two (2) pay stubs from the most recent pay periods; (ii) obtain a written
verification of income and employment from applicant's current employer; (iii) obtain an income
verification form from the Social Security Administration and/or California Department of
Social Services if the applicant receives assistance from either agency; (iv) if an applicant is
unemployed or did not file a tax return for the previous calendar year, obtain other verification of
such applicant's income as is reasonably satisfactory; or (v) obtain such other information as
may be reasonably required. Participant shall update the foregoing records annually and shall
provide copies of updated tenant eligibility records and monthly rental records to Agency for
review. Upon a review of such records, Agency may at its option and expense perform an
independent audit of the tenant eligibility records and monthly rental records to Agency for
review. Upon review of such records, Agency may at its option and expense perform an
independent audit of the tenant eligibility records in order to verify compliance with the income
and affordability requirements set forth herein. Participant shall retain the records described in
this Section for a period of three years after the date the respective records were created.
3.5 Rental Priority. Units shall be rented to Eligible Tenants on a first -
come, first -served basis; provided, however, that Participant may, in Participant's sole discretion,
maintain an "interest list" or "eligibility list" of potential tenants; provided, however, that
Participant shall not be liable to Agency or any person, firm, or entity in the event a Unit is
rented to a person who is not on any such list or is on such list but is listed lower than another
person on such list.
3.6 Renting Vacant Units. When a Unit becomes available as a result of a
tenant vacation, Participant shall rent the Unit to an Eligible Tenant in accordance with the
following procedure:
(a) First, Participant shall rent the Unit to persons who have been
displaced by Agency activities, pursuant to California Health and Safety Code Section 33411.3,
provided that Agency provides Participant with reasonable notice.
(b) Second, Participant shall rent any vacant Unit in the order of
priority as set forth in Section 3.5.
3.7 Maintenance of Records. Participant shall maintain complete and
accurate records pertaining to the Units, and shall permit any duly authorized representative of
the Agency to inspect the books and records of Participant pertaining to the Project including,
but not limited to, those records pertaining to tenant eligibility and occupancy of the Units.
Records pertaining to the Project and Units shall be retained for a period of five (5) years after
the termination of this Agreement; records pertaining to tenant and eligibility shall be retained
for the period set forth in Section 3.4.
3.8 Reliance on Tenant Representations: Each tenant lease shall contain a
provision to the effect that Participant has relied on the income certification and supporting
information supplied by the tenant in determining qualification for occupancy of a Unit, and that
5
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any material misstatement in such certification (whether or not intentional) will be cause for
immediate termination of such lease.
3.9 Conflicts. The rental priority provision set forth in Section 3.6 shall
apply only in the event, and to the extent, such provisions are not in conflict with any applicable
federal or state law or any regulatory agreement affecting the Project that is recorded in superior
priority to this Agreement.
4. MAINTENANCE
4.1 Maintenance Covenant. Participant agrees to maintain all interior
and exterior improvements, including landscaping, on the Site in good condition and repair (and,
as to landscaping, in a healthy condition), reasonable wear and tear excepted, and in accordance
with all applicable laws, rules, ordinances, orders, and regulations of all federal, state, county,
municipal, and other governmental agencies and bodies having or claiming jurisdiction
(including, but not limited to, Federal Housing Quality Standards as set forth in 24 C.F.R.
982.401). In addition, Participant shall keep the Site free from all graffiti and any accumulation
of debris or waste material. Participant shall make all repairs and replacements necessary to
keep the improvements in good condition and repair and shall promptly eliminate all graffiti and
replace dead and diseased plants and landscaping with comparable approved materials. The
maintenance covenant contained in this Section shall remain in effect for the term of this
Agreement.
4.2 Agency Rights. Agency shall have the right to enter upon the Site, to
inspect both the interiors and exteriors of the Site, upon seventy-two (72) hours notice to
Participant. Agency may perform or cause to be performed the maintenance necessary to cure
any default of these maintenance covenants and participant shall be liable for payment to Agency
for Agency's reasonable costs (excluding staff salaries and overhead and other similar costs) to
perform such required maintenance; provided, however, that Participant first be given written
notice by Agency of the actions required to cure any default, and Participant, after receipt of such
notice, shall have sixty (60) days to cure such defaults, but Participant shall not be deemed in
default of the foregoing maintenance covenant if such default cannot reasonably be cured within
the sixty (60) day period referenced above so long as Participant has commenced to cure such
default within the same sixty (60) day period and is diligently proceeding with the work to cure
such default. Notwithstanding the foregoing, if any property conditions are reasonably identified
by Agency after a property inspection attended by a representative of Participant that pose an
immediate danger to life or limb, Participant shall have three (3) days to effect corrections of
such condition(s) to Agency's reasonable satisfaction.
4.3 Annual Report. Participant covenants and agrees to submit to the
Agency an annual report (the "Annual Report") required by California Health and Safety Code
Section 33418. The Annual Report shall include for each Unit the rental rate and the income and
family size of the occupants, and shall also include the records described in Section 3.7 herein
and the audited financial statements described in Section 5.11 of the OPA. The income
information shall be supplied by the tenant in a certified statement on a form provided by the
Agency. The Participant shall submit the Annual Report on or before the end of the first
6
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calendar quarter of the year following the year covered by the Annual Report. The Participant
shall provide for the submission of such information in its leases with tenants. Agency shall not
charge Participant a fee for reviewing the Annual Report, or for Agency's or Participant's
compliance with Health and Safety Code § 33418.
4.4 Management Plan. Participant shall prepare, submit to Agency
Executive Director not less than one hundred twenty (120) calendar days prior to the date of
completion of the first Unit and maintain in effect a management plan in accordance with the
following ("Management Plan"):
(a) The Management Plan, including such amendments as may be
approved in writing by the Agency, shall remain in effect for the term of this Agreement.
Participant shall not amend the Management Plan or any of its components without the prior
written consent of the Agency. The components of the Management Plan shall include:
(1) Management Agent. The name and qualifications of the
proposed management agent. The Agency shall approve or disapprove the proposed
management agent in writing based on the experience and qualifications of the management
agent. The management agent shall have demonstrated experience in operating affordable
housing comparable to the Project.
(2) Management Program. A description of the proposed
management, maintenance, tenant selection and occupancy policies and procedures for the Units.
(3) Management Agreement. A copy of the proposed
management agreement specifying the amount of the management fee and the relationship and
division of responsibilities between Participant and management agent.
(4) Tenant Lease or Rental Agreement. A copy of the
proposed tenant lease or rental agreement to be used in renting the Units.
(5) Annual Operating Budget. Prior to the completion of
construction and annually thereafter not later than fifteen (15) days prior to the beginning of the
next fiscal year of the Project, Participant shall submit a projected operating budget to the
Agency Executive Director for review and approval.
The Agency shall not unreasonably withhold, condition or delay its
approval of any matter for which its approval is required hereunder, and such matter shall be
deemed approved unless the Agency provides to Participant its written disapproval within thirty
(30) days after receipt of a request for approval, provided Participant includes with its request, a
written notice, in capital letters, stating as follows:
NOTICE: PURSUANT TO SECTION 4.4 OF THE REGULATORY
AGREEMENT BETWEEN THE REDEVELOPMENT AGENCY OF
THE CITY OF HUNTINGTON BEACH AND FOUNTAINS
HUNTINGTON BEACH, LLC, FAILURE BY THE AGENCY TO
7
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APPROVE OR DISAPPROVE THE MATTER SUBMITTED WITH
THIS REQUEST WITHIN 30 DAYS SHALL BE DEEMED AN
APPROVAL.
Any disapproval shall be in writing and contain the Agency's reasons for
disapproval.
(b) Participant hereby covenants and agrees the Agency shall have the
right, at any time and from time to time, to give notice to Participant if the Agency determines
that the Project is not being managed or maintained in accordance with the Management Plan.
The Agency may require the Participant to change management practices or to terminate the
management agent and retain a different management agent, approved by the Agency. The
Agency agrees that prior to requiring the Participant to change its management agent or the
management practices the Agency shall informally consult with Participant, in an attempt to
resolve the dispute. If the Agency determines that such an attempt at informal resolution has
been unsuccessful, it shall give the Participant thirty (30) days written notice to change the
management agent or practice, as the case may be. If Participant fails to do as requested by the
Agency in the written notice, the Agency -may then require the immediate change of the
management practice or agent, as the case may be. The management agreement shall provide
that it is subject to termination by the Participant without penalty, upon thirty (30) days prior
written notice, at the direction of the Agency. Within ten (10) days following a direction of the
Agency to replace the management agent, the Participant shall select another management agent
or make other arrangements satisfactory to the Agency for continuing management of the
Project. The Participant shall notify the Agency upon leaning that there is a voluntary change in'
the management or control of the management agent, and, if the change is unsatisfactory to the
Agency, the Agency shall be entitled to require the Participant to change the management agent
in accordance with the terms of this paragraph.
5. ENFORCEMENT. In the event Participant defaults in the performance or
observance of any covenant, agreement or obligation of Participant pursuant to this Agreement,
and if such default remains uncured for a period of sixty (60) days after written notice thereof (or
such longer period as may apply to the specific alleged default) shall have been given by
Agency, or, in the event said default cannot be cured within said time period, Participant has
failed to commence to cure such default within said sixty (60) days and diligently prosecute said
cure to completion, then Agency shall declare an "Event of Default" to have occurred hereunder,
and, at its option, may take one or more of the following steps:
(a) By mandamus or other suit, action or proceeding at law or in equity,
require Participant to perform its obligations and covenants hereunder or enjoin any acts or
things which may be unlawful or in violation of this Agreement; or
(b) Take such other action at law or in equity as may appear necessary or
desirable to enforce the obligations, covenants and agreements of Participant hereunder,
including foreclosure pursuant to the OPA.
8
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Except as otherwise expressly stated in this Agreement, the rights and remedies of
the parties are cumulative, and the exercise by any party of one or more of its rights or remedies
shall not preclude the exercise by it, at the same or different times, of any other rights or
remedies for the same default or any other default by another party.
6. NONDISCRIMINATION. There shall be no discrimination against or
segregation of any person, or group of persons, on account of race, color, creed, religion, sex,
sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer,
use, occupancy, tenure or enjoyment of the Site, or any part thereof, or in the awarding of
contracts for the Project, nor shall Participant, or any person claiming under or through it,
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 of the Site, or any part thereof, or in the awarding of contracts for the Project (except as
permitted by this Agreement).
Participant shall comply with all applicable federal, state and local
nondiscrimination, fair housing, and equal opportunity requirements. In addition, Participant
shall conduct affirmative marketing and minority outreach activities as required by federal
regulations.
6.1 Form of Nondiscrimination and Nonsegregation Clauses. The
Participant shall refrain from restricting the rental, sale or lease of the Property on the basis of
race, color, creed, religion, sex, sexual orientation, marital status, national origin or ancestry of
any person. All such deeds, leases or contracts shall contain or be subject to substantially the
following nondiscrimination or nonsegregation clauses:
(a) In Deeds: "The grantee herein covenants by and for himself,
his heirs, executors, administrators and assigns, and all persons claiming under or through him,
that there shall be no discrimination against or segregation of, any persons or group of persons
on account of race, color, creed, religion, sex, sexual orientation, marital status, national origin or
ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land
herein conveyed, nor shall the grantee himself or any person claiming under or through him,
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 land herein conveyed. The foregoing covenants shall run with the land.
(b) In Leases: "The lessee herein covenants by and for himself, his
heirs, executors, administrators and assigns, and all persons claiming under or through him, and
this lease is made and accepted upon and subject to the following conditions:
That there shall be no discrimination against or segregation of any person
or group of persons, on account of race, color, creed, religion, sex, sexual orientation, marital
status, national origin or ancestry in the leasing, subleasing, transferring, use, occupancy, tenure
or enjoyment of the land herein leased nor shall the lessee himself, or any person claiming under
or through him, establish or permit any such practice or practices of discrimination or
0�
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Participant: Fountains Huntington Beach, LLC
4220 Von Karman, Second Floor
Newport Beach, CA 92660
Notices personally delivered or delivered by courier shall be effective upon receipt. Mailed
notices shall be effective on the earlier of receipt or Noon on the second calendar day following
deposit in the United States mail.
11. SEVERABILITY/WAIVER/INTEGRATION.
11.1 Severability. If any provision of this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining portions hereof shall
not in any way be affected or impaired thereby.
11.2 Waiver. A waiver by either party of the performance of any
covenant or condition herein shall not invalidate this Agreement nor shall it be considered a
waiver of any other covenants or conditions, nor shall the delay or forbearance by either party in
exercising any remedy or right be considered a waiver of, or an estoppel against, the later
exercise of such remedy or right.
11.3 Integration. This Agreement contains the entire Agreement between the
parties and neither party relies on any warranty or representation not contained in this
Agreement.
12. GOVERNING LAW. This Agreement shall be governed by the laws of the State
of California.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall constitute one original and all of which shall be one and the
same instrument.
IN WITNESS WHEREOF, the Agency and Participant have executed this Regulatory
Agreement and declaration of Covenants and Restrictions by duly authorized representatives on
the date first written hereinabove.
[end — signature page follows]
11
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"PARTICIPANT"
FOUNTAINS HUNTINGTON BEACH,
LLC, a Delaware limited liability company
By: FountainGlen Properties LLC,
A Delaware limited liability company
Its sole member
By:
Glenn L. Carpenter
President and Chief Executive Officer
"AGENCY"
REDEVELOPMENT AGENCY OF
THE CITY OF HUNTINGTON
BEACH, a public body corporate
and politic
Chairman
ATTEST:
By:
Agency Clerk
APPROVED AS TO FORM:
BY:
Agency General Counsel
REVIEWED AND APPROVED:
LIM
Executive Director
By: _-
Deputy Executive Director
12
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up
ATTACHMENT I
LEGAL DESCRIPTION OF SITE
Subordination Agreement
WHEN RECORDED RETURN TO:
FountainGlen Properties, LLC
4220 Von Karman, Second Floor
Newport Beach, CA 92660
Attn:
SUBORDINATION AGREEMENT
NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY
INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER
PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY
INSTRUMENTS.
THIS SUBORDINATION AGREEMENT ("Agreement") is entered into this day of
, 2001, by and among REDEVELOPMENT AGENCY OF THE CITY OF
HUNTINGTON BEACH, a public agency, corporate and politic (the "Agency"); FOUNTAINS
HUNTINGTON BEACH, LLC, a Delaware limited liability company ("Participant"); and
("Lender").
RECITALS:
A. Participant owns fee title to the real property described on Attachment No. "l"
(the "Property") attached hereto and incorporated herein by reference. The Agency and
Participant have entered into an Owner Participation Agreement dated as of
, 2001 (the "OPA"). Pursuant to the terms of the OPA, Participant has
executed a Note in favor of the Agency in the amount of TWO MILLION DOLLARS
($2,000,000.00) ("Agency Loan") to assist Participant in the development and maintenance of
the Property as an affordable housing complex. The Agency Loan is to be secured by a
Subordinated Deed of Trust With Assignment of Rents With Rider Attached encumbering the
Property (the "Agency Deed of Trust"). The OPA is hereby incorporated by reference as though
fully set forth herein. All capitalized terms not defined herein shall have the meanings ascribed
to them in the OPA.
B. Agency and Participant have also entered into that certain Regulatory Agreement
and Declaration of Covenants and Restrictions recorded against the Property ("Agency
Regulatory Agreement"), which Agency Regulatory Agreement contains, among other terms,
certain use restrictions affecting the Property.
Subordination Agreement
PDA: 2001 Agree: Fountains Huntington Beach: Subordination Agree
RLS 00-626
12-27-01
If Participant chooses to refinance the Lender Loan, and Agency approves the refinancing
as set forth in the OPA, Agency agrees to subordinate the Agency Deed of Trust and the Agency
Regulatory Agreement to the refinancing Lender's Deed of Trust under the same terms and
conditions as set forth in this Agreement and the OPA.
1.2. . Covenants of Agency. The Agency declares, agrees and acknowledges
that:
(a) The Agency consents to all provisions of the Lender Note and the
Lender Deed of Trust, and (ii) all provisions of the Lender Regulatory Agreement.
(b) To Agency's actual knowledge, there is no breach, event of default
or default existing under the Agency Deed of Trust or Agency Regulatory Agreement, or any
circumstances, event, omission or failure of condition which would constitute such a breach,
default or event of default after notice or lapse of time, or both.
2. Reliance by Lender and Agency. The Lender would not make the Lender
Loan and the Agency would not have agreed to subordinate the Agency Deed of Trust and
Agency Regulatory Agreement without this Subordination Agreement and each of the
undersigned understands that in reliance upon, and in consideration of; this waiver,
relinquishment and subordination, specific loans and advances are being and will be made and,
as part and parcel thereof, specific monetary and other obligations are being and will be entered
into which would not be made or entered into but for such reliance upon this waiver,
relinquishment and subordination.
3. Notice to Agency. In the event of a breach or default by Participant under the
terms of the Lender Deed of Trust, Lender shall provide the Agency with written notice of such
breach or default concurrently with providing such notice to Participant. Upon receipt of such
notice of breach or default, the parties hereto agree that Agency shall have each of the following
rights so long as either the Agency Regulatory Agreement or the Agency Deed of Trust
encumber any portion of the Property or interest therein:
(a) To cure the noticed default at any time prior to the foreclosure of the
Lender Deed of Trust or any lien under the Lender Regulatory Agreement. In connection
therewith, the Lender agrees that (i) in the event of a monetary default, the Lender shall not
foreclose Lender Deed of Trust or other lien prior to the date that is thirty (30) days after the date
that the Lender would otherwise be legally entitled to foreclose Lender Deed of Trust and (ii) in
the event of a nonmonetary default, the Lender shall not foreclose its Lender Deed of Trust or
other lien prior to the date specified above for monetary defaults; provided that if said
nonmonetary default is susceptible to being cured only when the Agency has obtained possession
of the Property, the Agency shall have as long as necessary to obtain possession of the Property
by either foreclosing the Agency Deed of Trust, and to cure the default, so long as the Agency
does so with reasonable and continuous diligence.
(b) To negotiate with the Lender regarding the noticed default at any time
prior to the foreclosure of the Lender Deed of Trust or other lien.
Subordination Agreement
PDA: 2001 Agree: Fountains Huntington Beach: Subordination Agree
RLS 00-626
12-27-01
(c) To negotiate with the Participant to purchase the Property from
Participant, subject to the Lender Deed of Trust without the consent of the holder of the Lender
Deed of Trust or enforcing party under the Lender Regulatory Agreement.
The Lender agrees that the exercise of any of the rights set forth in this Section by
Agency shall not give rise to any right on the part of the Lender to exercise any right to
accelerate the amounts due under the Lender Loan.
3.1 Foreclosure of Agency Deed of Trust. The Lender hereby agrees
that in the event that Agency forecloses the Agency Deed of Trust, said foreclosure shall not give
rise to any right on the part of the Lender to accelerate the amounts due on the Lender Loan.
3.2 Disbursements. Lender, in making disbursements of the proceeds of
the Lender Loan, is under no obligation or duty to, nor has Lender represented that it will, see to
the application of such proceeds by the person or persons to whom disbursements thereof are
made and any application or use of such proceeds for purposes other than those provided in the
documents evidencing and securing the Lender Loan shall not defeat the subordination herein
made in whole or in part.
4. Miscellaneous
4.1 Entire Agreement. This Subordination Agreement shall be the whole
and only agreement with regard to the matters set forth herein and shall supersede and cancel, .
but only insofar as would affect the priority between the Lender Deed of Trust and Lender
Regulatory Agreement on the one hand, and the Agency Deed of Trust and Agency Regulatory
Agreement on the other hand, any prior agreement as to such subordination including, but not
limited to, those provisions, if any contained in the Agency Deed of Trust and Agency
Regulatory Agreement, which provide for the subordination of the lien or charge thereof to
another deed or deeds of trust or to another mortgage or mortgages, upon the Property.
4.2 Successors and Assigns. This Subordination Agreement shall inure to
and bind the heirs, legatees, devisees, administrators, executors, successors and assigns of the
parties hereto.
4.3 California Law. This Subordination Agreement shall be construed
according to the laws of the State of California.
4.4 Severability. If any term, provision, condition or covenant of this
Agreement or the application thereof to any party or circumstances shall, to any extent, be held
invalid or unenforceable, the remainder of this instrument, or the application of such term,
provision, condition or covenant to persons or circumstances other than those as to whom or
which it is held invalid or unenforceable shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
4
Subordination Agreement
PDA: 2001 Agree: Fountains Huntington Beach: Subordination Agree
RLS 00-626
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4.5 Notice. Any notice, demand, request, consent, approval or
communication that any party desires or is required to give to another party or any other person
must be in writing and may be given by (i) personal delivery, (ii) by courier service that provides
a receipt showing date and time of delivery, or (iii) by registered or certified mail, return receipt
requested, postage prepaid. Notices shall be directed at the address of such party hereinafter set
forth, or such other address and to such other persons as the parties may hereafter designate.
Any such notice shall be deemed given upon receipt if by personal delivery or courier service, or
if by mail the earlier or (a) actual receipt or (b) forty-eight (48) hours after deposit in the United
States mail.
If to Agency: Redevelopment Agency of the City of Huntington Beach
2000 Main Street
Huntington Beach, CA 92648
Attention: Executive Director
If to Participant: Fountains Huntington Beach, LLC
4220 Von Karman, Second Floor
Newport Beach, CA 92660
Attention: Glenn L. Carpenter
If to Lender:
4.6 Attorney's Fees. In the event that any action, suit or other proceeding is
brought to enforce the obligations of this Agreement, each party shall bear its own costs and
expenses of suit, including attorneys' fees, expert witness fees and all costs incurred in each and
every such action, suit or other proceeding, including any and all appeals or petitions therefrom.
4.7 Counterparts. This Subordination Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which shall constitute one and the
same document.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY
INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY
THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENTS.
[end — signature pages follow]
Subordination Agreement
PDA: 2001 Agree: Fountains Huntington Beach: Subordination Agree
RLS 00-626
12-27-01
"AGENCY"
REDEVELOPMENT AGENCY OF THE
CITY OF HUNTINGTON BEACH
a public body, corporate and politic
By:
Chairman
ATTEST: REVIEWED AND APPROVED:
By: By:
Agency Clerk
REVIEWED AND APPROVED
AS TO FORM:
By:
Agency General Counsel p�
Executive Director
INITIATED AND APPROVED:
Un
Deputy Executive Director
"PARTICIPANT"
FOUNTAINS HUNTINGTON BEACH, LLC,
A Delaware limited liability company
By: FOUNTAINGLEN PROPERTIES, LLC,
A Delaware limited liability company
Its Sole Member
Glenn L. Carpenter
President and Chief Executive Officer
[signatures continued on following page]
6
Subordination Agreement
PDA: 2001 Agree: Fountains Huntington Beach: Subordination Agree
RLS 00-626
12-27-01
MODIU1,79
Its:
Subordination Agreement
PDA: 2001 Agree: Fountains Huntington Beach: Subordination Agree
RLS 00-626
12-27-01
ATTACHMENT I
LEGAL DESCRIPTION OF SITE
2002 Regulatory Agreement
This Document was electronically recorded by
First American Title B
FREE RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
REDEVELOPMENT AGENCY OF THE
CITY OF HUNTINGTON BEACH
Recorded in Official Records, County of Orange
Tom Daly, Clerk -Recorder
NO FEE
2004000066549 04:01 pm 01 /28/04
105 21 Al2 D02 16
2000 Main Street 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Huntington Beach, CA 92648
Attn: Executive Director
--I z2 s2 a 1 - Te
W"MNO RE"SM 9Y (Space Above This Line for Recorder's Office Use Only)
FIRSTAMERICAN THE COMPAW (Exempt from Recording Fee per Gov. Code § 6103)
tNV18=
REGULATORY AGREEMENT AND
DECLARATION OF COVENANTS AND RESTRICTIONS
THIS REGULATORY AGREEMENT AND DECLARATION OF COVENANTS AND
RESTRICTIONS ("Agreement") is made and entered into this Z'& O—day of
nuu %Jcw 2004, by and between REDEVELOPMENT AGENCY OF THE CITY OF
HUNTIN TON BEACH, a public body, corporate and politic ("Agency") and FOUNTAINS
HUNTINGTON BEACH, LLC, a Delaware limited liability company ("Participant").
RECITALS:
A. Agency and Participant have entered into that certain Owner Participation
Agreement, dated January 22, 2002 (the "OPA"), concerning Participant's development of that
certain real property, owned in fee by Participant, more particularly described in Attachment No.
1 attached hereto and incorporated by reference herein (the "Site"). The OPA describes the
"Project" which generally consists of Participant's construction of 271 rental housing units, of
which eighty (80.) units shall be restricted for rental to elderly tenants of low income and very
low income, on the Site and subsequent management thereof as an affordable rental housing
complex. The OPA is hereby incorporated herein by this reference as though fully set forth
herein. Any capitalized terms not defined herein shall have the meanings ascribed to such terms
in the OPA.
B. Participant has executed that certain promissory note (the "Note") dated
�w.,.c x Z,3 , 2004, pursuant to which Agency has provided Participant with a loan in the
principal amount of TWO MILLION DOLLARS ($2,000,000) ("Loan Amount"). The Note is
secured by a Subordinated Deed of Trust With Assignment of Rents With Rider Attached dated
on or about the date of the Note.
C. Agency and Participant now desire to place restrictions upon the use and
operation of the Project, in order to ensure that the Project shall be operated continuously as an
affordable housing project available for rental in accordance with the terms set forth below for
the term of this Agreement.
Regulatory Agreement
PDA: 2001 Agree: Fountains Huntington Beach: Regulatory Agree — Ex G — Revised #2
RLS 00-626
12-27-01
a
AGREEMENT:
NOW, THEREFORE, the Participant and Agency declare, covenant and agree, by and for
themselves, their heirs, executors, administrators and assigns, and all persons claiming under or
through them, that the Site, for the term of this Agreement, shall be held transferred,
encumbered, used, sold, conveyed, leased and occupied, subject to the covenants and restrictions
hereinafter set forth:
DEFINITIONS.
1.1 Affordable Rent. As used in this Agreement, the term "Affordable
Rent" shall mean rental rates not to exceed thirty percent (30%) times fifty percent (50%) of
median income for an Eligible Very Low Income Tenant, and rental rates not to exceed thirty
percent (30%) times eighty percent (80%) of median income for an Eligible Low Income Tenant.
1.2 Eligible Tenant. As used in this Agreement, the term "Eligible
Tenant" shall refer to persons who are a minimum of 55 years of age and who are Eligible Very
Low Income Tenants or Eligible Low Income Tenants, and who are eligible to rent a Unit.
1.3 Eligible Low Income Tenant. As used in this Agreement, the term
"Eligible Low Income Tenant" shall mean an Eligible Tenant whose annual income does not
exceed eighty percent (80%) of the median income for the Orange County Metropolitan
Statistical Area as determined by the U.S. Department of Housing and Urban Development
(HUD) with adjustments for smaller and larger families.
1.4 Eligible Very Low Income Tenant. As used in this Agreement, the term
"Eligible Very Low Income Tenant" shall mean an Eligible Tenant whose annual income does
not exceed fifty percent (50%) of the median income for the Orange County Metropolitan
Statistical Area as determined by the U.S. Department of Housing and Urban Development
(HUD) with adjustments for smaller and larger families.
1.5 Orange County Median Income. For purposes of this Agreement, the
term "Orange County Median Income" shall mean the median income for the Orange County
Primary Metropolitan Statistical Area, with adjustments for household size, as determined from
time to time by HUD pursuant to the United States Housing Act of 1937 as amended, or such
other method of median income calculation applicable to the City that HUD may hereafter adopt
in connection with said Act.
1.6 Unit and Units. As used in this Agreement, the term "Unit" shall
mean one of the eighty (80) rent restricted, affordable rental dwelling units in the Project, and the
term "Units" shall mean two or more of the eighty (80) rent restricted, affordable rental dwelling
units in the Project. The term "Unit" and "Units" shall be used as the context mandates and shall
be reasonably interpreted in light of the context in which the term appears.
1.7 Utility Allowance. As used in this Agreement, the term "Utility
Allowance" shall mean an allowance for utilities, including garbage collection, sewer, water;
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electricity, gas and other heating, cooking and refrigeration fuels, but shall not include telephone
service. In no event shall such Utility Allowance be less than the amount established by the
Orange County Housing Authority per Unit per month.
2. TERM OF AGREEMENT; RESIDENTIAL RENTAL PROPERTY. The
term of this Agreement shall be sixty (60) years from the Effective Date of the OPA. Participant
hereby agrees that the Project is to be owned, managed, and operated as a project for Eligible
Tenants for the term of this Agreement. To that end, and for the term of this Agreement, the
Participant hereby represents, covenants, warrants and agrees as follows:
2.1 P ose. The Site has been acquired and the Project developed for
the purposes of providing Eligible Tenants affordable rental housing.
2.2 Facilities. All of the Units in the Project shall contain facilities
adequate for living, sleeping, eating, cooking and sanitation in accordance with all applicable
federal, state and local laws and codes.
2.3 Residential Use. None of the Units in the Project will at any time be
utilized on a transient basis or will ever be used as a hotel, motel, dormitory, fraternity house,
sorority house, rooming house, nursing home, hospital, sanitarium, or trailer court or park
without the Agency's prior written consent.
2.4. Maximum Occupancy. The maximum number of persons in a
household that may occupy any of the two -bedroom Units may not exceed five persons; the
maximum number of persons in a household that may occupy any of the one -bedroom Units may
not exceed two persons.
2.5 Conversion of Units. No part of the Project will at any time be owned by
a cooperative housing corporation nor shall the Participant take any steps in connection with the
conversion to such ownership or uses to condominiums, or to any other form of ownership,
without the prior written approval of Agency.
2.6 Preference to Eligible Tenants. All of the Units will be made
available for rental in accordance with the terms of this Agreement, and the Participant shall not
give preference to any particular class or group in renting the Units in the Project, except to the
extent that the Units are required to be leased or rented to Eligible Tenants and except as
provided in Section 3.3 below.
2.7 Liability of Participant. Participant and the management agent shall
not incur any liability under this Agreement as a result of fraud or negligent or intentional
misrepresentation by a tenant.
3. OCCUPANCY OF PROJECT BY ELIGIBLE TENANTS. Participant hereby
represents, warrants, and covenants as follows:
0?
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3.1 Income Restrictions. Except as expressly provided herein, throughout the
term of this Agreement, the eighty (80) rent restricted, affordable Units shall be rented only to
Eligible Low Income Tenants and Eligible Very Low Income Tenants as follows:
a. The eighty (80) rent restricted, affordable Units shall be comprised of sixty (60)
one -bedroom units and twenty (20) two -bedroom units.
b. Forty-one (41) of the sixty (60) one bedroom units shall be rented to Eligible Very
Low Income Tenants. Nineteen (19) of the sixty (60) one -bedroom units shall be rented to
Eligible Low Income Tenants.
C. Fourteen (14) of the twenty (20) two -bedroom units shall be rented to Eligible
Very Low Income Tenants. Six (6) of the twenty (20) two -bedroom units shall be rented to
Eligible Low Income Tenants.
3.2 Rental Rates. Monthly rents for the Units (including the Utility
Allowance, and excluding any supplemental rental assistance from the State of California, the
federal government or any other public agency) shall not exceed one -twelfth (1/12) of the
Affordable Rent adjusted for family size appropriate for the Unit. The rental rates for the Units
shall be adjusted annually based upon current updates of HUD income and rent standards. In no
event shall any of the Units be rented at a rate greater than the Affordable Rent applicable to the
particular Unit.
3.3 Occupancy By Eligible Tenant. A Unit occupied by an Eligible
Tenant at the time of this Agreement shall be treated as occupied by an Eligible Tenant until
such Unit is vacated. A Unit previously occupied by an Eligible Tenant and then vacated shall
be considered occupied by an Eligible Tenant until reoccupied, other than for a temporary
period, at which time the character of the Unit shall be redetermined. In no event shall such
temporary period exceed thirty-one (31) days.
If at any time a tenant's household income increases, resulting in
disqualification of such tenant as an Eligible Very Low Income Tenant, such tenant shall have a
period of ninety (90) days to relocate from the Site. The disqualified tenant shall be fully
responsible for the costs and expenses related to the relocation. Should such tenant face
extraordinary hardship in relocating from the Site, the tenant may submit a written appeal to the
Agency requesting an extension of the time period within which the tenant must relocate. Upon
receipt of the written appeal, the Agency Director of Economic Development in his sole
discretion may extend the relocation period for up to a maximum of ninety (90) additional days.
Pursuant to this Paragraph 3.3, Participant will at all times be deemed in compliance with this
Regulatory Agreement during such disqualified tenant's relocation period, as extended.
3.4 Income Computation. Immediately prior to a prospective Eligible
Tenant's occupancy of a Unit, Participant shall obtain and maintain on file an income
computation and certification form from each such prospective Eligible Tenant dated
immediately prior to the date of initial occupancy in a Unit by such prospective Eligible Tenant.
Participant shall use its best efforts to verify that the income information provided by an
4
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applicant is accurate by following the Agency Housing Rehabilitation Loan Program Policies
and Procedures and by taking one or more of the following steps as a part of the verification
process: (i) obtain two (2) pay stubs from the most recent pay periods; (ii) obtain a written
verification of income and employment from applicant's current employer; (iii) obtain an income
verification form from the Social Security Administration and/or California Department of
Social Services if the applicant receives assistance from either agency; (iv) if an applicant is
unemployed or did not file a tax return for the previous calendar year, obtain other verification of
such applicant's income as is reasonably satisfactory; or (v) obtain such other information as
may be reasonably required. Participant shall update the foregoing records annually and shall
provide copies of updated tenant eligibility records and monthly rental records to Agency for
review. Upon a review of such records, Agency may at its option and expense perform an
independent audit of the tenant eligibility records and monthly rental records to Agency for
review. Upon review of such records, Agency may at its option and expense perform an
independent audit of the tenant eligibility records in order to verify compliance with the income
and affordability requirements set forth herein. Participant shall retain the records described in
this Section for a period of three years after the date the respective records were created.
3.5 Rental Priority. Units shall be rented to Eligible Tenants on a first -
come, first -served basis; provided, however, that Participant may, in Participant's sole discretion,
maintain an "interest list" or "eligibility list" of potential tenants; provided, however, that
Participant shall not be liable to Agency or any person, firm, or entity in the event a Unit is
rented to a person who is not on any such list or is on such list but is listed lower than another
person on such list.
3.6 Renting Vacant Units. When a Unit becomes available as a result of a
tenant vacation, Participant shall rent the Unit to an Eligible Tenant in accordance with the
following procedure:
(a) First, Participant shall rent the Unit to persons who have been
displaced by Agency activities, pursuant to California Health and Safety Code Section 33411.3,
provided that Agency provides Participant with reasonable notice.
(b) Second, Participant shall rent any vacant Unit in the order of
priority as set forth in Section 3.5.
3.7 Maintenance of Records. Participant shall maintain complete and
accurate records pertaining to the Units, and shall permit any duly authorized representative of
the Agency to inspect the books and records of Participant pertaining to the Project including,
but not limited to, those records pertaining to tenant eligibility and occupancy of the Units.
Records pertaining to the Project and Units shall be retained for a period of five (5) years after
the termination of this Agreement; records pertaining to tenant and eligibility shall be retained
for the period set forth in Section 3.4.
3.8 Reliance on Tenant Representations: Each tenant lease shall contain a
provision to the effect that Participant has relied on the income certification and supporting
information supplied by the tenant in determining qualification for occupancy of a Unit, and that
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any material misstatement in such certification (whether or not intentional) will be cause for
immediate termination of such lease.
3.9 Conflicts. The rental priority provision set forth in Section 3.6 shall
apply only in the event, and to the extent, such provisions are not in conflict with any applicable
federal or state law or any regulatory agreement affecting the Project that is recorded in superior
priority to this Agreement.
4. MAINTENANCE
4.1 Maintenance Covenant. Participant agrees to maintain all interior
and exterior improvements, including landscaping, on the Site in good condition and repair (and,
as to landscaping, in a healthy condition), reasonable wear and tear excepted, and in accordance
with all applicable laws, rules, ordinances, orders, and regulations of all federal, state, county,
municipal, and other governmental agencies and bodies having or claiming jurisdiction
(including, but not limited to, Federal Housing Quality Standards as set forth in 24 C.F.R.
982.401). In addition, Participant shall keep the Site free from all graffiti and any accumulation
of debris or waste material. Participant shall make all repairs and replacements necessary to
keep the improvements in good condition and repair and shall promptly eliminate all graffiti and
replace dead and diseased plants and landscaping with comparable approved materials. The
maintenance covenant contained in this Section shall remain in effect for the term of this
Agreement.
4.2 Agency Rights. Agency shall have the right to enter upon the Site to
inspect both the interiors and exteriors of the Site, upon seventy-two (72) hours notice to
Participant. Agency may perform or cause to be performed the maintenance necessary to cure
any default of these maintenance covenants and participant shall be liable for payment to Agency
for Agency's reasonable costs (excluding staff salaries and overhead and other similar costs) to
perform such required maintenance; provided, however, that Participant first be given written
notice by Agency of the actions required to cure any default, and Participant, after receipt of such
notice, shall have sixty (60) days to cure such defaults, but Participant shall not be deemed in
default of the foregoing maintenance covenant if such default cannot reasonably be cured within
the sixty (60) day period referenced above so long as Participant has commenced to cure such
default within the same sixty (60) day period and is diligently proceeding with the work to cure
such default. Notwithstanding the foregoing, if any property conditions are reasonably identified
by Agency after a property inspection attended by a representative of Participant that pose an
immediate danger to life or limb, Participant shall have three (3) days to effect corrections of
such condition(s) to Agency's reasonable satisfaction.
4.3 Annual Repo . Participant covenants and agrees to submit to the
Agency an annual report (the "Annual Report") required by California Health and Safety Code
Section 33418. The Annual Report shall include for each Unit the rental rate and the income and
family size of the occupants, and shall also include the records described in Section 3.7 herein
and the audited financial statements described in Section 5.11 of the OPA. The income
information shall be supplied by the tenant in a certified statement on a form provided by the
Agency. The Participant shall submit the Annual Report on or before the end of the first
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calendar quarter of the year following the year covered by the Annual Report. The Participant
shall provide for the submission of such information in its leases with tenants. Agency shall not
charge Participant a fee for reviewing the Annual Report, or for Agency's or Participant's
compliance with Health and Safety Code § 33418.
4.4 Management Plan. Participant shall prepare, submit to Agency
Executive Director not less than one hundred twenty (120) calendar days prior to the date of
completion of the first Unit and maintain in effect a management plan in accordance with the
following ("Management Plan"):
(a) The Management Plan, including such amendments as may be
approved in writing by the Agency, shall remain in effect for the term of this Agreement.
Participant shall not amend the Management Plan or any of its components without the prior
written consent of the Agency. The components of the Management Plan shall include:
(1) Management Agent. The name and qualifications of the
proposed management agent. The Agency shall approve or disapprove the proposed
management agent in writing based on the experience and qualifications of the management
agent. The management agent shall have demonstrated experience in operating affordable
housing comparable to the Project.
(2) Management Program. A description of the proposed
management, maintenance, tenant selection and occupancy policies and procedures for the Units.
(3) Management Agreement. A copy of the proposed
management agreement specifying the amount of the management fee and the relationship and
division of responsibilities between Participant and management agent.
(4) Tenant Lease or Rental Agreement. A copy of the
proposed tenant lease or rental agreement to be used in renting the Units.
(5) Annual Operating Budget. Prior to the completion of
construction and annually thereafter not later than fifteen (15) days prior to the beginning of the
next fiscal year of the Project, Participant shall submit a projected operating budget to the
Agency Executive Director for review and approval.
The Agency shall not unreasonably withhold, condition or delay its
approval of any matter for which its approval is required hereunder, and such matter shall be
deemed approved unless the Agency provides to Participant its written disapproval within thirty
(30) days after receipt of a request for approval, provided Participant includes with its request, a
written notice, in capital letters, stating as follows:
NOTICE: PURSUANT TO SECTION 4.4 OF THE REGULATORY
AGREEMENT BETWEEN THE REDEVELOPMENT AGENCY OF
THE CITY OF HUNTINGTON BEACH AND FOUNTAINS
HUNTINGTON BEACH, LLC, FAILURE BY THE AGENCY TO
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APPROVE OR DISAPPROVE THE MATTER SUBMITTED WITH
THIS REQUEST WITHIN 30 DAYS SHALL BE DEEMED AN
APPROVAL.
Any disapproval shall be in writing and contain the Agency's reasons for
disapproval.
(b) Participant hereby covenants and agrees the Agency shall have the
right, at any time and from time to time, to give notice to Participant if the Agency determines
that the Project is not being managed or maintained in accordance with the Management Plan.
The Agency may require the Participant to change management practices or to terminate the
management agent and retain a different management agent, approved by the Agency. The
Agency agrees that prior to requiring the Participant to change its management agent or the
management practices the Agency shall informally consult with Participant, in an attempt to
resolve the dispute. If the Agency determines that such an attempt at informal resolution has
been unsuccessful, it shall give the Participant thirty (30) days written notice to change the
management agent or practice, as the case may be. If Participant fails to do as requested by the
Agency in the written notice, the Agency may then require the immediate change of the
management practice or agent, as the case may be. The management agreement shall provide
that it is subject to termination by the Participant without penalty, upon thirty (30) days prior
written notice, at the direction of the Agency. Within ten (10) days following a direction of the
Agency to replace the management agent, the Participant shall select another management agent
or make other arrangements satisfactory to the Agency for continuing management of the
Project. The Participant shall notify the Agency upon leaning that there is a voluntary change in
the management or control of the management agent, and, if the change is unsatisfactory to the
Agency, the Agency shall be entitled to require the Participant to change the management agent
in accordance with the terms of this paragraph.
5. ENFORCEMENT. In the event Participant defaults in the performance or
observance of any covenant, agreement or obligation of Participant pursuant to this Agreement,
and if such default remains uncured for a period of sixty (60) days after written notice thereof (or
such longer period as may apply to the specific alleged default) shall have been given by
Agency, or, in the event said default cannot be cured within said time period, Participant has
failed to commence to cure such default within said sixty (60) days and diligently prosecute said
cure to completion, then Agency shall declare an "Event of Default" to have occurred hereunder,
and, at its option, may take one or more of the following steps:
(a) By mandamus or other suit, action or proceeding at law or in equity,
require Participant to perform its obligations and covenants hereunder or enjoin any acts or
things which may be unlawful or in violation of this Agreement; or
(b) Take such other action at law or inequity as may appear necessary or
desirable to enforce the obligations, covenants and agreements of Participant hereunder,
including foreclosure pursuant to the OPA.
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Except as otherwise expressly stated in this Agreement, the rights and remedies of
the parties are cumulative, and the exercise by any party of one or more of its rights or remedies
shall not preclude the exercise by it, at the same or different times, of any other rights or
remedies for the same default or any other default by another party.
6. NONDISCRIMINATION. There shall be no discrimination against or
segregation of any person, or group of persons, on account of race, color, creed, religion, sex,
sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer,
use, occupancy, tenure or enjoyment of the Site, or any part thereof, or in the awarding of
contracts for the Project, nor shall Participant, or any person claiming under or through it,
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 of the Site, or any part thereof, or in the awarding of contracts for the Project (except as
permitted by this Agreement).
. Participant shall comply with all applicable federal, state and local
nondiscrimination, fair housing, and equal opportunity requirements. In addition, Participant
shall conduct affirmative marketing and minority outreach activities as required by federal
regulations.
6.1 Form of Nondiscrimination and Nonsegregation Clauses. The
Participant shall refrain from restricting the rental, sale or lease of the Property on the basis of
race, color, creed, religion, sex, sexual orientation, marital status, national origin or ancestry of
any person. All such deeds, leases or contracts shall contain or be subject to substantially the
following nondiscrimination or nonsegregation clauses:
(a) In Deeds: "The grantee herein covenants by and for himself,
his heirs, executors, administrators and assigns, and all persons claiming under or through him,
that there shall be no discrimination against or segregation of, any persons or group of persons
on account of race, color, creed, religion, sex, sexual orientation, marital status, national origin or
ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land
herein conveyed, nor shall the grantee himself or any person claiming under or through him,
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 land herein conveyed. The foregoing covenants shall run with the land.
(b) In Leases: "The lessee herein covenants by and for himself, his
heirs, executors, administrators and assigns, and all persons claiming under or through him, and
this lease is made and accepted upon and subject to the following conditions:
That there shall be no discrimination against or segregation of any person
or group of persons, on account of race, color, creed, religion, sex, sexual orientation, marital
status, national origin or ancestry in the leasing, subleasing, transferring, use, occupancy, tenure
or enjoyment of the land herein leased nor shall the lessee himself, or any person claiming under
or through him, establish or permit any such practice or practices of discrimination or
9
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segregation with reference to the selection, location, number, use or occupancy, of tenants,
lessees, sublessees, subtenants, or vendees in the land herein leased.
(c) In Contracts: "There shall be no discrimination against or
segregation of any person, or group of persons on account of race, color, creed, religion, sex,
sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer,
use, occupancy, tenure or enjoyment of the land, nor shall the transferee himself or any person
claiming under or through him, establish or permit any such practice or practices of
discrimination or segregation with reference to the lessees, subtenants, sublessees or vendees of
the land."
7. COVENANTS TO RUN WITH THE LAND. Participant hereby subjects
the Site to the covenants, reservations, and restrictions set forth in this Agreement. Agency and
Participant hereby declare their express intent that all such covenants, reservations, and
restrictions shall be deemed covenants running with the land and shall pass to and be binding
upon the Participant's successors in title to the Site; provided, however, that on the termination
of this Agreement said covenants, reservations and restrictions shall expire, except the
nondiscrimination covenants contained in Section 6 and Section 6.1 shall remain in perpetuity.
All covenants without regard to technical classification or designation shall be binding for the
benefit of the Agency, and such covenants shall run in favor of the Agency for the entire term of
this Agreement, without regard to whether the Agency is or remains an owner of any land or
interest therein to which such covenants relate.
8. ATTORNEYS' FEES. In the event that a party to this Agreement brings an
action against the other party hereto by reason of the breach of any covenant in this Agreement,
or otherwise arising out of this Agreement, each party shall bear its own attorneys' fees, and the
prevailing party in such action shall not be entitled to recover from the other reasonable
attorneys' fees and costs. Attorneys' fees shall include attorneys' fees on any appeal, and in
addition, all other reasonable costs for investigating such action, including the conducting of
discovery, and expert witness fees.
9. AMENDMENTS. This Agreement shall be amended only by a written
instrument executed by the parties hereto or their successors in title, and duly recorded in the real
property records of the County of Orange.
10. NOTICE. Any notice required to be given hereunder shall be made in writing
and shall be given by (i) personal delivery, (ii) courier service that provides a receipt showing
date and time of delivery, or (iii) certified or registered mail, postage prepaid, return receipt
requested, at the addresses specified below, or at such other addresses as may be specified in
writing by the parties hereto:
Agency: Redevelopment Agency of the City of Huntington Beach
2000 Main Street
Huntington Beach, CA 92648
Attn: City Clerk
T
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RLS 00-626
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Participant: Fountains Huntington Beach, LLC
4220 Von Karman, Second Floor
Newport Beach, CA 92660
Notices personally delivered or delivered by courier shall be effective'upon receipt. Mailed
notices shall be effective on the earlier of receipt or Noon on the second calendar day following
deposit in the United States mail.
11. SEVERABILITY/WAIVER/INTEGRATION.
11.1 Severability. If any provision of this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining portions hereof shall
not in any way be affected or impaired thereby.
11.2 Waiver. A waiver by either party of the performance of any
covenant or condition herein shall not invalidate this Agreement nor shall it be considered a
waiver of any other covenants or conditions, nor shall the delay or forbearance by either party in
exercising any remedy or right be considered a waiver of, or an estoppel against, the later
exercise of such remedy or right.
11.3 Inte ation. This Agreement contains the entire Agreement between the
parties and neither party relies on any warranty or representation not contained in this
Agreement.
12. GOVERNING LAW. This Agreement shall be governed by the laws of the State
of California.
13. COUNTERPARTS. This Agreement. may be executed in any number of
counterparts, each of which shall constitute one original and all of which shall be one and the
same instrument.
IN WITNESS WHEREOF, the Agency and Participant have executed this Regulatory
Agreement and declaration of Covenants and Restrictions by duly authorized representatives on
the date first written hereinabove.
[end — signature page follows]
11
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"PARTICIPANT"
FOUNTAINS HUNTINGTON BEACH,
LLC, a Delaware limited liability company
By: FountainGlen Properties LLC,
A Delaware limited liability company
Its sole member
By:
Glenn L. Carpenter
President and Chief Executive Officer
"AGENCY"
REDEVELOPMENT AGENCY OF
THE CITY OF HUNTINGTON
BEACH, a public body corporate
and politic
By:
ai
ATTEST: �y
C/e rlC
-for -4y: Co n,e ,QrQc-kuay
Agency Clerk
APPROVED AS TO FORM:
y: 1M
Agency 'eneral Cour&I
REVIEW D AN /A�Aja7
By: c ' Executive Di
INITIATED AND APPROVED:
By: C
Deputy Executive Director
12
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PDA: 2001 Agree: Fountains Huntington Beach: Regulatory Agree — Ex G — Revised #2
RLS 00-626
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"PARTICIPANT"
FOUNTAINS HUNTINGTON BEACH,
LLC, a Delaware limited liability company
By: FountainGlen Properties LLC,
A Delaware limited liability company
Its sole member
By:
Glenn L. Carpenter
President and Chief Executive Officer
"AGENCY"
REDEVELOPMENT AGENCY OF
THE CITY OF HUNTINGTON
BEACH, a public body corporate
and politic
By:
Chairman
ATTEST:
By:
Agency Clerk
APPROVED AS TO FORM:
By:
Agency General Counsel
REVIEW D AN APP VE
By t UV
Executive Dire tore
INITIATED AND/APPROVED:
By:
_ &ud Deputy ExecutivE Director
12
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RLS 00-626
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CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State of California
County of
On t� .16J h f a " beZore me, k
personally appeared 1
-'J
r�ad�s
KELLYANDIC
Commission
L sionE 137289
Commission # 1372899 Z
z fl�a
Notary Public - California ;
Orange County
111 My Comm. Expires Sep 1, 2006
ss.
to be the person(s) whose name(s) i Van
subscribed to the within instrument
acknowledged to me that he/sh hey xecuted
the same in his/he heir authorized
capacity(ies), and that his/he eir
signature(s) on the instrument the person r
the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS ix hand and officialeal.
OPTIONAL
Though the information below is not required bylaw, it may prove valuable to persons relying on the document and could prevent
fraudulent removal and reattachment of this form to another document.
Description of Attached Document
Title or T pe of Document:
h2.GlQ M
Document Date:
Signer(s) Other Than Named Above:
Capacity(ies) Claimed by Signer
Signer's Name:
❑ Individual Top of thumb here
❑ Corporate Officer — Title(s):
❑ Partner — ❑ Limited ❑ General
❑ Attorney -in -Fact
❑ Trustee
❑ Guardian or Conservator
❑ Other:
Signer Is Representing:
0 1999 National Notary Association • 9350 De Soto Ave., P.O. Box 2402 • Chatsworth, CA 91313-2402 • www.nationainotary.org Prod. No. 5907 Reorder., Call Toll -Free 1.800-876-6827
5
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State of California
County of ss.
On l q, JZ4 , before me, 6-Vt& , M. U)hlr- Y»i ,
, ate _ Nalne and Tide of Officer (e.g., "J oe, Notary Public")
personally appeared 6/Cf% L
r-
CAROLYN M. WHANQ
U
COMM. #1325676
U
NOTARY PUBLIC -CALIFORNIA /0
"
ORANGE COUNTY .1
My Comm. Expires Oct. 16, 2005
Place Notary Seal Above
Xpersonally known to me
❑ proved to me on the basis of satisfactory
evidence
to be the person(d) whose name(4) islare
subscribed to the within instrument and
acknowledged to me that he/aheA*ey executed
the same in hisiheFAh r authorized
capacity(iae,g), and that by hisfherfteh
signatureK on the instrument the person(a), or
the entity upon behalf of which the personkd)
acted, executed the instrument.
WITNESS m hand and official seal.
ature of Notary Public
OPTIONAL
Though the information below is not required by law, it may prove valuable to persons relying on the document
and could prevent fraudulent removal and reattachment of this form to another document.
Description of Attached
Title or Type of Document:
Document Date:
Signer(s) Other Than Named Above:
Number of Pages: /3
Capacity(ies) Claimed by Signe
Signer's Name: _alery-) -tom
❑ Individual Top of thumb here
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9 Corporate Officer — Title(s): f�%E'�lAy lT 14z—o
❑ Partner — ❑ Limited ❑ General
❑ Attorney in Fact
❑ Trustee
❑ Guardian or Conservator
❑ Other:
Signer Is Representing: ------ rdW�l�%Y 1 �,✓1/CS
01997 National Notary Association - 9350 De Soto Ave., P.O. Box 2402 - Chatsworth, CA 91313-2402 Prod. No. 5907 Reorder. Call Toll -Free 1-800-876-6827
Real property in the City of Huntington Beach, County of Orange, State of California, described as
follows:
PARCEL A:
PARCEL 2, AS SHOWN ON EXHIBIT "B" ATTACHED TO LOT LINE ADJUSTMENT LL 00-02
RECORDED APRIL 25, 2000 AS INSTRUMENT NO. 00-213264 OF OFFICIAL RECORDS OF
ORANGE COUNTY, CALIFORNIA.
EXCEPT ALL MINERALS, OIL, GAS, PETROLEUM, OTHER HYDROCARBON SUBSTANCES AND ALL
UNDERGROUND WATER IN OR UNDER OR WHICH MAY BE PRODUCED FROM SAID LAND
WHICH UNDERLIES A PLANE PARALLEL TO AND 500 FEET BELOW THE PRESENT SURFACE OF
SAID LAND, FOR THE PURPOSE OF PROSPECTING FOR, THE EXPLORATION, DEVELOPMENT,
PRODUCTION, EXTRACTION AND TAKING OF SAID MINERALS, OIL, GAS, PETROLEUM, OTHER
HYDROCARBON SUBSTANCES AND WATER FROM SAID LAND BY MEANS OF MINES, WELLS,
DERRICKS AND/OR OTHER EQUIPMENT FROM SURFACE LOCATIONS ON ADJOINING OR
NEIGHBORING LAND OR LYING OUTSIDE OF THE ABOVE DESCRIBED LAND, IT BEING
UNDERSTOOD THAT THE OWNER OF SUCH MINERALS, OIL, GAS, PETROLEUM, OTHER
HYDROCARBON SUBSTANCES AND WATER, AS SET FORTH ABOVE, SHALL HAVE NO RIGHT TO
ENTER UPON THE SURFACE OF THE ABOVE DESCRIBED LAND NOR TO USE ANY OF THE SAID
LAND OR ANY PORTION THEREOF ABOVE SAID PLANE PARALLEL TO AND 500 FEET BELOW THE
PRESENT SURFACE OF THE SAID LAND FOR ANY PURPOSE WHATSOEVER, AS RESERVED BY
THE HUNTINGTON BEACH COMPANY, A CALIFORNIA CORPORATION, RECORDED OCTOBER 31,
1990 AS INSTRUMENT NO. 90-577992 OF OFFICIAL RECORDS.
ALSO EXCEPTING THEREFROM ALL RIGHTS TO WATER WITHIN, UNDERLYING OR PRODUCED
FROM THE LAND AND ADJOINING STREETS, ROADS AND HIGHWAYS AND THE USE AND
ENJOYMENT THEREOF, EXCLUDING ONLY THOSE RIGHTS TO SURFACE WATER THAT ARE NOT
ATTACHED TO OR A PART OF RIGHTS TO SUBSURFACE WATER, WITHOUT, HOWEVER, ANY
RIGHTS OF SURFACE ENTRY OTHER THAN THOSE SET FORTH IN CLAUSES (B) AND (C) OF THE
HEREINAFTER REFERRED TO GRANT DEEDS AS RESERVED BY PACIFIC COAST HOMES, A
CALIFORNIA CORPORATION IN THE GRANT DEEDS RECORDED MAY 9, 1996 AS INSTRUMENT
NOS. 96-234740 AND 96-234741, BOTH OF OFFICIAL RECORDS.
PARCEL B:
AN APPURTENANT, PERPETUAL AND EXCLUSIVE EASEMENTS FOR PEDESTRIAN INGRESS,
EGRESS AND ACCESS PURPOSES, AS SAID EASEMENTS ARE SET FORTH IN THAT CERTAIN
EASEMENT AGREEMENT RECORDED MARCH 19, 2002 AS INSTRUMENT NO. 02-226103 OF
OFFICIAL RECORDS OF ORANGE COUNTY, CALIFORNIA.
APN: 023-010-34
Site Map
ATTACHMENT 4 SITE MAP
Site Location
The Fountains at Seacliff, 7181 Garden Glen Drive
N
RCA ROUTING SHEET
INITIATING DEPARTMENT:
Economic Development Department
SUBJECT:
Approval of the Sale of the Fountains Senior
Apartments from Fountains Huntington Beach, LLC to
FG Seacliff Senior Apartments, LP
COUNCIL MEETING DATE:
I July 3, 2006
RCA ATTACHMENTS
STATUS
Ordinance (w/exhibits & legislative draft if applicable)
Attached
❑
Not Applicable
0
Resolution (w/exhibits & legislative draft if applicable)
Attached
❑
Not Applicable
Tract Map, Location Map and/or other Exhibits
Attached
Not Applicable
❑
Contract/Agreement (w/exhibits if applicable)
Attached
Not Applicable
(Signed in full by the City Attorne
Subleases, Third Party Agreements, etc,
Attached
Not Applicable
(Approved as to form b CityAttorne
Certificates of Insurance (Approved b the City Attome
( AP Y tY Y}
Attached
Not Applicable
Fiscal Impact Statement (Unbudget, over $5,000)
Attached
Not Applicable
Bonds (If applicable)
Attached
Not Applicable
Staff Report (If applicable)
Attached
Not Applicable
❑
Commission, Board or Committee Re ort If applicable
P ( Pp )
Attaches
Not Applicable
�
Findin
Findings/Conditions for Approval and/or Denial
9 PP
Attached
Not Applicable
Li
EXPLANATION FOR MISSING ATTACHMENTS
REVIEWED
RETURNED
FORWARDED
Administrative Staff
)
Assistant City Administrator initial
( )
City Administrator Initial
City Clerk
EXPLANATION FOR RETURN OF ITEM: