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HomeMy WebLinkAbout1986-06-03; City Council; 7924-2; FIRST AMENDMENT TO MULTI-FAMILY HOUSING REVENUE BONDS, SERIES A OF 1985 (LA COSTA APARTMENT PROJECT)re Pi CIT~F CAWLSBAD - AGEN~ILL 2 s . , /*( -1 , r AB#7cj2ue+A CITY HOUSING REVENUE BONDS, SERIES MTG. 6/03/86 DEP = FIRST AMENDMENT TO MULTI-FAMILY DEPT. RED A OF 1985 (LA COSTA APARTMENT PROJECT) CITY RECOMMENDED ACTION: City Council adopt Resolution No. fCr/ approving an amendment to the Regulatory Agreement legal description for the La Costa Partners project site (LaCosta Apartments) ITEM EXPLANATION The City's multi-family Housing Revenue Bonds, Series A of 1985 (La Costa Apartments) were closed dated April 29, 1 Legal descriptions used for bond documents was that shown on the Tentative Map No. 84-7. Project Final Map No. 84-7 contained a different legal description which added one and one-half acres to the project. Approval of Resolution No. Fb-i! will amend legal descriptions contained in the various recorded documents to conform to the legal description used in the Final Map. A Council is asked to authorize the Mayor to execute the First Amendment to the Regulatory Agreement. FISCAL IMPACT None. EXHIBITS 1 - Resolution No. gGF" 2 - Letter from Stradling, Yocca, Carlson and Rauth dated April 23, 1986. z 0 .. 6 $ a z 0 3 0 r 1- * il ' * *' 1 II RESOLUTION NO. 8581 2 3 4 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIAf AUTHORIZING THE FIRST AMENDMENT TO THE REGULATORY AGREEMENT FOR LA COSTA APARTMENTS 5 WHEREAS, the City Council of the City of Carlsbad, 6 on April 29, 1985, for the purpose of financing a multi-f 9 A of 1985 (La Costa Apartments Project), which bonds were 8 of $15,920,000 of its multi-family Housing Revenue Bonds, 7 California adopted Resolution No. 7939 authorizing the is 10 residential rental project to be developed by La Costa Pe 11 a California general partnership; and, 12 WHEREAS, on December 17, 1985 a final tract map des 13 final map added approximately one and one-half acres fron 14 Carlsbad Tract 84-7 was recored relating to the Project, varies form the legal description used to describe the pr 17 WHEREAS, the legal description contained in the Fin 16 legal description co.ntaiiled in Tentative Map CT 84-7; &n 15 l8 i on the date of issuance of the Bonds; and 19 WHEREAS, the Developer and Security Pacific Nation? . 20 as issuer -of the letter of credit for the Bonds now desir 21 the legal description in all of the documents relating tc 22 NOW, THEREFORE BE IT RESOLVED by the City Council ( 28 Final Map. ' 27 Agreement and recorded documents to conform to those usec 26 WHEREAS, the amendments are necessary for the Regul 25 Agreement executed in connection with issuance of the Bor 24 Final Map as required by Section 9 (d) of the Reimbursemer 23 Bonds to reflect accurately the description contained in t P .. li * 0 .: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 l? 18 19 20 21 22 23 24 25 26 27 28 City of Carlsbad, California as follows: 1. That the above recitations are true and correct. 2. That the First Amendment to Regulatory Agreement ar Declaration of Restrictive Covenants, a copy of wh: attached hereto as Exhibit A and made a part hereoj approved. 3. That the Mayor is authorized to execute the amendme 4. The Council authorizes and approves the modificatic behalf of the City. legal description contained in the First Deed of TI the Second Deed of Trust (each as defined in the Ir of Trust dated April 1, 1985 executed in connectiol issuance of the Bonds) and in any ACC-1 statements documents recorded in connection with the issuance Bonds, as is necessary to conform such documents tc amended legal description set forth in the First Ar PASSED, APPROVED AND ADOPTED at a regular meeting ( City Council of the City of Carlsbad, California held on 3rd day of June 1986, by the following vote, to wit: AYES: Council Members Casler, Lewis, Kulchin, Chick and Per NOES: None ABSTAIN: None ABSENT : None ATTEST : + d-L MARY H. CASLER, Mayor (SEAL) /I// /I// //I/ /I// , -1 r: 0 e RECORDED AT THE REQUEST OF TRANsAMERfCA TITLE INSURANCE COMPANY RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: GIBSON, DUNN h CRUTCHER Suite 600 Newport Beach, CA 92660 Attn: Ken Wolfson, Esq. 800 Newport Center Drive (Space Above Line for Recorder's Use) FIRST AMENDMENT TO REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS THIS FIRST AMENDMENT is entered into as of the 2 *=SxSshxmm?s 1986 by and among the CITY OF CARLSBAD, CALIFORNIA (the "City") I THE BANK OF CALIFORNIA, N.A. (th l*Tmsteen) and LA COSTA PARTNERS, a California general partnership (the l*Developern) with reference to the follor facts : A. The parties hereto have entered into and cau: there' to be recorded that certain Regulatory Agreement an[ as Instrument No. 85-146610 in the Official Records of Sal County, California (the '"Regulatory Agreement"). against tL certain real property described on Exhibit A attached here (the "Property" ) . Declaration Of Restrictive Covanants recarded en April 29, B. The parties hereto desire to release that cer portion of the Property described'on Exhibit A attached he which is not described in Exhibit B attached hereto (the ' "Release. Parcel") from all of the covenants, conditions, restrictions, obligations and other requirements of the Regulatory Agreement and to terminate the Regulatory Agree with respect to the Release Parcel only and to substitute therefor the real property described in Exhibit B attached hereto. C. NOW, THEREFORE, the Regulatory Agreement is h amended as follows: 1. The Regulatory Agreement is hereby terminated rescinded with respect to the Release Parcel only. The Regulatory Agreement, and all of the covenants, conditions be void and of no further force or effect with respect to Release Parcel only. restrictions, obligations and other requirements thereof, 2. The Regulatory Agreement is hereby amended to delete therefrom the real property described in Exhibit A attached hereto which is not described in Exhibit B attach hereto and to substitute therefor the real prouerty descril Exhibit B attached hereto. 3. Except as amended hereby, the Regulatory Agree shall remain in full force and effect. WPN: 0951N -. ., 0 @ 41 All exhibits attached IW6fQ an by this Teff 5. This First Amendment may be executed in incorporated herein as though fully set forth herein. counterparts, each of which shall be an original but all c which shall constitute one and the same instrument. IN WITNESS WHEFEOF, this Regulatory Agreement has executed as of the day first above written. CITY OF CARLSBAD, CALIFORNIA Y5d-L Mayor ATTEST : City Clerk A. l- THE BANK OF CALIFORNIA, N.A. as Trustee By : Trust Officer LA COSTA PARTNERS, A CALIFORN: GENERAL PARTNERSHIP By: THE FERMANIAN FAMILY TRU! General Partner By: George A. Fermanian, Trustee under Declaratiol of Trust Asreement dated By: THE STONE FAHILY TRUST, General Partner By: Rodney F. Stone, as Trustee under Declaration of Trust Agreement dated , Septepber 1, 1983 "--. r A 7 -. .I e e STATE OF CALIFORNIA 1 COUNTY OF SAN DIEGO 1 ) 88. On this 6th day of June , 1986, bef02 notary public, personally appeared Mary H. Casler and Aletha L. Rautenkranz . , personally known to me or prov me on the basis of satisfactory evidence to be the person names are subscribed to this instrument as the Mayor and City Clerk, respectively, and acknowledged to me that the of Carlsbad executed it. WITNESS my hand and official seal. z SEAL1 Z)).o((()(~~*(O~**r*~..***~=88 . . -" *- L UREN R. KUNDn f OFnaAisur 3 1 NOTARY PUWC"CMlFokn* i UN DEW COUNTY $ - W Cmm Exa. Swl 27. 1909 I*.8*.******8.**888**880.*80~ 8 * : *I ,Nig%&FG STATE OF CALIFORNIA 1 . j SS. COUNTY OF &.Ad&! . ) On this 22ay of mu , ,1986, before notary public, personally appeared IF. M,=oy%/\ d personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subsc to this instrument as the Trust 0fficer.of the Bank of 'California, N.A., and acknowledged to me that The The Bank . California, N, A, executed it, WITNESS my hand and official seal. 1 SUI 3 ” e 1) L, STATE OF CALIFORNIA 1 COUNTY OF SfiU D)EBO 1 ) sa. On this fi day of Mac& , 1986, before notary public, personally ameared RODNEY P. STONE and GEO: FERHAkIk, personally known to me or proved to me on the b< of eatisfactory evidence to be the trustees of the General the general partnership that executed the within instrumen acknowledged to me that they executed the aame for the pur and consideration therein expressed, in the capacity there stated, and as the act and deed of said genaral partnershi accordance with a resolution of said general partnership. Partners of La Costa Partners, a California general partne: WITNESS my hand and official seal. Ism1 .. -> 0 e PI EXHIBIT A DESCRIPTION OF LAND Parcel 2 of Parcel Map 13524, in the City of Carlabad, county of San Diego, State of California, filc in the Ozzice of the County Recorder of Sari Diego Count! October 25, 1984, as File No. 84-403293 of Official Records. Excepting therefrom, all minerals, mineral rights, oil, oil rights, natural gas, natural gas rights petroleum, petroleum rights, other hydrocarbon substance geothermal steam, all underground water, and all product derived from any 02 the foregoing, in or under or which may be produced from the property which underlies a plar property together with the perpetual right of drilling, mining, exploring and operating therefor and storing in and removing the same from the property or any other la! including the right to whipstock or directionally drill and mine from lands other than the property, oil, water, or gas Wells, tunnels and shafts into, through or across tho subsurface of the property, and to bottom such whipstockad or directionally drilled wells, tunnels, and parallel to and 500 feet below the present surface of tl shafts under the beneath or beyond the exterior limits thereof, and to redrill, refunnel, equip, maintain, repair, deepen, and operate any such wells br mines, without, however, the right to drill, mine, store, explore, and operate through the surface or the upper fj hundred (.500) feet of the subsurface of the property; as . reserved to Daon Corporation in Grant.Deed.recorded October 29, 1984, Official Records, File/Page No. 84-407544. I F' e 0 EXHIBIT B Lots 1 through 4 inclusive of CARLSBAD TRACT NO. 84- City of Carlsbad, County of San Diego, State of Cali according to Map thereof No. 11391, filed in the Off the County Recorder of San Diego County, December 17 .. e 0 EXH STRADLING, YOCCA, CARLSON 8c RAUTH A PROFESSIONAL CORPORATION FRITZ R. STRADLlNG NICK E. YOCCA C. CRAIG CARLSON WILLIAM R. RAUTH 111 K. C. SCHAAF JOHN J. MURPHY RICHARD C. GOODMAN THOMAS P. CLARK, JR. BEN A. FRYDMAN DAVID R. MCEWEN PAUL Lo GALE RUDOLPH C. SHEPARD ROBERT J. KANE M. D. TALBOT BRUCE C. STUART DOUGLAS F. HIGHAM E. KURT YEAGER ROBERT J. WHALEN RO8ERT E. RICH PETER J. TENNYSON THOMAS A. PISTONE SCOTT E. MCCONNELL - *MEMBER OF DISTRICT OF COLUMBIA BAR ONLY RENA C. STONE ATTORNEYS AT LAW RANDALL J. SHERMAN BRUCEFEUCHTER 660 NEWPORT CENTER DRIVE, SUITE 1600 MARK J. HUEBSCH KIRK F. MALDONADO POST OFFICE BOX 7680 KAREN A. ELLIS, ELIZABETH C. GREEN PEG1 A. GROUNDWATER DONALD J. HAMMAN NEWPORT BEACH, CALIFORNIA 92660-6441 TELEPHONE (714) 640-7035 JOHN J. SWIGART, JR. NEILA R. BERNSTEIN TONY L. LOWE PAUL A. SCHMIDHAUSER CHRISTOPHER J. KILPATRICK NANCY RADER WHITEHEAD SYLVIA D. LAUTSCH LEWIS G. FELDMAN CLARK H. LIBENSON MARK W. DUVOlSlN ERNEST W. KLATTE 111 ANN D. CATRON LAWRENCE B. COHN LAWRENCE W. HORWITZ April 23, 1986 JOHN E. E OF (714) TEL v lid $3 I?& @ *-. 19986 CITY OF c Mr. Martin Orenyak City of Carlsbad 1200 Elm Avenue Carlsbad , California 92008 Building Qepartrnent Re: $15,920,000 City of Carlsbad, California Multifamily Housing Revenue Bonds, Series A of 1985 (La Costa Apartments Project) Dear Marty: I am enclosing a resolution and draft of the First Amendment to Regulatory Agreement approving an amendment to the legal description for the La Costa Partners project site. The legal description for Final Map No. 84-7, which was recorded or December 17, 1985, varies from the legal description contained in Tentative Map No. C.T.84-7 which was used in all of the documents on the bond closing date of April 29, 1985. Pursuant to Section 9(d) of the Reimbursement Agree- ment, the Bank is now requiring the Developer to amend the legz descriptions contained in the various recorded documents to conform to the legal description in the Final Map. The resolution approves the amendment to the legal description to conform to Final Map No. 84-7 and authorizes the Mayor and the City Clerk to execute the First Amendment to Regulatory Agreement. a e Mr. Martin Orenyak April 23, 1986 Page Two I would appreciate it if you could call me once you have reviewed this material to discuss when it might be able to be placed on agenda. Thanks for your help. Very truly yours, STRADLING, YOCCA, CARLSON & RAUTH -4% Robert J. Whalen RJW: pm Enclosures cc: Vincent Biondo (w/encl.) 0 e RESOLUTION NO. RESOLUTION OF THE CITY OF CARLSBAD, CALIFORNIA AUTHORIZING THE EXECUTION OF THE FIRST AMENDPBNT TO REGULATORY AGREEMENT ANI, DECLARATION OF RESTRICTIVE COVENANTS AND APPROVING CERTAIN RELATED DOCUMENTS May - , 1986 WHEREAS, the City of Carlsbad has heretofore adopted its Resolution No. 7939 authorizing the issuance of $15,920,0 of its Multifamily Housing Revenue Bonds, Series A of 1985 (L Costa Apartments Project) (the "Bonds"), which Bonds were issued on April 29, 1985 for the purpose of financing a multifamily residential rental project (the "Project") to be developed by La Costa Partners, a California general partnership (the "Developer") ; and WHEREAS, on December 17, 1985, a final tract map designated as "Carlsbad Tract No. 84-7" (the "Final Map") was recorded with the County Recorder for the County of San Diego relating to the Project, which Final Map approximate1 one and one-half acres from the legal description contained i Tentative Map No. C.T. 84-7; and ddd WHEREAS, the legal description contained in the Fina Map varies from the legal description used to describe the Project site on the date of issuance of the Bonds; and WHEREAS, the Developer and Security Pacific National Bank (the "Bank") as issuer of the letter of credit for the 0 e Bonds now desire to amend the legal description in all of the documents relating to the Bonds so as to reflect accurately tl: description contained in the Final Map, all as required by Section 9(d) of the Reimbursement Agreement executed in connection with the issuance of the Bonds; and WHEREAS, the amendments are necessary to cure a formi defect in the legal description contained in the Regulatory Agreement and the other recorded documents and the City Counc is desirous of approving the amendments; NOW, THEREFORE, BE IT RESOLVED by the City Council 0' the City of Carlsbad as follows: 1. The above recitals, and each of them, are true and correct. 2. The proposed form of the First Amendment to Regulato Agreement and Declaration of Restrictive Covenants (the "Firs Amendment") presented at this meeting is hereby approved as t form of said document to be used in connection with the amendment of the Regulatory Agreement. The Mayor and the Cit Clerk are hereby authorized and directed, for and in the name of the City, to execute such document in substantially the fo hereby approved, with such changes therein as said officers IT approve, such approval to be conclusively evidenced by the execution thereof. 3. The City further authorizes and approves the modification of the legal description contained in the First Deed of Trust and the Second Deed of Trust (each as defined j a -2- 1647k/2062-13 0 0 the Indenture of Trust dated as of April 1, 1985 executed in connection with the issuance of the Bonds) and in any UCC-1 statements or other documents recorded in connection with the issuance of the Bonds, as is necessary to conform such documents to the amended legal description set forth in the First Amendment. 4. If the Mayor is absent or otherwise unavailable to execute the First Amendment, then it may be executed by any other member of this City Council, and if the City Clerk is absent or unavailable to execute the First Amendment then it may be executed by any deputy clerk. 5. The officers of the City and the Director of Buildinc and Planning, or his designee, are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents (including, but not limited to, any certificate of acceptance for the First Deed of Trust) which they may deem necessary or advisable in order to amend the legal description for the Project, and otherwise to effectuate the purposes of this Resolution; and such actions previously taken by such officers are hereby ratified and confirmed. 6. This resolution shall take effect immediately upon i, adopt ion. -3- 1647k/2062-13 il, 0 PASSED, APPROVED and ADOPTED on this day of May 1986 by the following vote: AYES : NOES : ABSENT : -4- 1647k/2062-13 r) * FRITZ R. STRADLING NICK E. YOCCA WILLIAM R. RAUTH 111 C. CRAIG CARLSON K. C. SCHAAF JOHN J. MURPHY RICHARD C. GOODMAN THOMAS P. CLARK, JR. BEN *. FRYDMAN DAVID R. MCEWEN PAUL L. GALE RUDOLPH C, SHEPARD ROBERT J. KANE M. D. TALBOT DOUGLAS F. HIGHAM BRUCE C. STUART E. KURT YEAGER ROBERT J. WHALEN ROBERT E. RICH PETER J. TENNYSON THOMAS A. PISTONE SCOTT E. MCCONNELL - *ULMOCR OF DISTRICT OF coLuumIA OAR ONLY STRADLING, YOCCA, CARLSON 8c RAUTH A PROFESSIONAL CORPORATION RENA C. STONE ATTORNEYS AT LAW RANDALL J. SHERMAN BRUCEFEUCHTER KIRK F. MALDONAW KAREN A. ELLIS. ELIZABETH c. GREEN MARK J. nueascn 660 NEWPORT CENTER DRIVE, SUITE 1600 POST OFFICE BOX 7680 NEWPORT BEACH, CALIFORNIA 92660-6441 TELEPHONE (714) 640-7035 PEGI A. GROUNDWATER DONALD J. HAMMAN JOHN J. SWIGART, JR, NEILA R. BERNSTEIN PAUL A, SCHMIDHAUSER CHRISTOPHER J. KILPATRICK TONY L. LOWE LEWIS G. FELDMAN NANCY RADER WHITEHEAD CLARK H. LIBENSON SYLVIA D. LAUTSCH MARK W. DUVOISIN ERNEST W. KLATTE Ill May 28, 1986 ANN 0. CATRON LAWRENCE W. HORWITZ LAWRENCE e. COHN JOHN E T (71d Mr. Chris Salamone City of Carlsbad 1200 Elm Avenue Carlsbad, California 92008 Re: Amendment to Regulatory Agreement for La Costa Partners Project Dear Chris: Enclosed are five copies of the First Amendment to Regulatory Agreement and Declaration of Rest.rictive Covenants to be executed by the Mayor and the City Clerk, with their signatures being notarized. I would appreciate it if you could return the executee copies to me, along with an executed copy of the resolution adopted by the City Council in connection with this Amendment, at your earliest convenience as soon as possible following the Council's approval on June 3. Thanks for your help. Very truly yours, STRADLING, YOCCA, CARLSON & RAUTH Q3G- Robert J. Whalen hkZJ A&;. RJW: pm Enclosures &fib *- " f' A*_ .A) 5%%5w 76 &- b -I"T7- & " : I;/ , -74 .- c_ &- $73" .-+- 456. d&- & k-wy7 0, J i d" f. e f. RECORDED AT THE REQUEST OF TRANSAMERICA TITLE INSURANCE COMPANY RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: GIBSON, DUNN & CRUTCHER 800 Newport Center Drive Suite 600 Newport Beach, CA 92660 Attn: Xen Wolfson, Esq. (Space Above Line for Recorder's Use) FIRST AMENDMENT TO REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS THIS FIRST AM?NDMENT is entered into as of the 6th xlzq=xxI%x~asr4p~' 1986 by and among the CITY OF CARLSBAD, CALIFORNIA (the **City"), THE BANK OF CALIFORNIA, N.A. (the I9Trusteetf) and LA COSTA PARTNERS, a California general partnership (the tfDeveloper'g) with reference to .the fo1low.i facts: - A. The parties hereto have entered into and cause there to be recorded that certain Regulatory Agre'ement and Declaration of Restrictive Covenants recorded on April 29, as Instrument No. 85-146610 in the Official Records of San County, California (the 'IRegulatory Agreementn) against tha certain real property described on Exhibit.A attached heret (the nPropertytt) . B. The parties hereto desire to release that cert portion of the Property described on Exhibit A attached he1 which is not described in Exhibit B attached hereto (the ttRelease Parcel") from all of the covenants, conditions, restrictions, obligations and other requirements of the Regulatory Agreement and to terminate the Regulatory Agreen with respect to the Release Parcel only and to substitute therefor the real property described in Exhibit B attached hereto. C. NOW, THEREFORE, the Regulatory Agreement is hc amended as follows: 1. The Regulatory Agreement is hereby terminated rescinded with respect to the Release Parcel only. The Regulatory Agreement, and all of the covenants, conditions restrictions, obligations and other requirements thereof, I be void and of no further force or effect with respect to 3 Release Parcel only. 2, The Regulatary Agreement is hereby amended to delete therefrom the real property described in Exhibit A attached hereto which is not described in Exhibit B attach1 hereto and to substitute therefor the real property descril Exhibit B attached hereto. 3. Except as amended hereby, the Regulatory Agre shall remain in full force and effect. WPN: 0951N \ I * I 4. e e 4. All exhibits attached hereto are by this refers incorporated herein as though fully set forth herein. 5. This First Amendment.may be executed in counterparts, each of which shall be an original but all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, this Regulatory Agreement has k executed as of the day first above written. CITY OF CARLSBAD, CALIFORNIA Y$d*L Mayor ATTEST: .. City Clerk" THE BANK OF CALIFORNIA, N.A. as Trustee By: Trust Officer LA COSTA PARTNERS, A CALIFORNI, GENERAL PARTNERSHIP By: THE FERMANIAN FAMILY TRUS' General Partner By: George A. Fermanian, Trustee under Declaration of Trust Agreement dated September 1, 1983 1 - By: THE STONE FmLY TRUST, General Partner By: Rodney F. Stone, as Trustee under Declaration of Trust Agreement dated . S.eptepber 1, 1983 - ~ J---+(&L, I 2 i 4' e e 6. STATE OF CALIFORNIA 1 COUNTY OF SAN DIEGO 1 ) 85. on this 6th day of June , 1986, before : notary public, personally appeared Mary H. Casler and Aletha L. Rautenkranz , personally known to me or proved me on the basis of satisfactory evidence to be the persons ' names are subscribed to this instrument as the Mayor and th City Clerk, respectively, and acknowledged to me that the C of Carlsbad executed it. WITNESS my hand and official seal. [SEAL] ****+***.**** ***I.************ * OFFICIAL SEAL t * KAREN R. KUNDTZ $ : NOTARY S*k PULILlC-CAIIFOkNIA OIEGO COUNTY r 8 ******.+**++*+****+*********** MY C~mm t~. sot 27. I= t .. STATE OF CALIFORNIA 1 COUNTY OF J&,u &d&5CD 1 ) ss. On thi.s 22ay of #flu , 1986, before notary public, personally appeared 'e, /33t;of~~ personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscr to this instrument as the Trust Officer of the Bank of California, N.A., and acknowledged to me that The The Bank California, N.A. executed it. / WITNESS my hand and official Seal. & n- ""a ~dhq Public G/dkll/Ul KATE! %I\! DIANE HJRANO NOTARY W8LK - CdLfFOQNIA SAN F'?,V<Cl:~~ ~337~ Mg CC;TIT. ex+rr r!ll 19 *- [SEAL] ". - -~-..-- .". .+ &J( - -4 3 i i *r 0 0 STATE OF CALIFORNIA 1 COUNTY OF SOU DI€60 1 ) 88. On this B day of mu& , 1986, before n notary public, personally appeared RODNEY F. STONE and GEORC FERMANIAN, personally known to me or proved to me on the baz of satisfactory evidence to be the trustees of the General Partners of La Costa Partners, a California general partner: the general partnership that executed the within instrument acknawledged to me that they executed the sane for the purpc and consideration therein expressed, in the capacity therei~ stated, and as the act and deed of said general partnership accordance with a resolution of said general partnership. WITNESS my hand and official seal. A [ SEAL1 No%&?$ Public 4 1 ! 5 rl) e I. EXHIBIT A DESCRIPTION OF LAND Parcel 2 of Parcel Map 13524, in the City Of Carlsbad, County of San Diega, State of California, filed in the Office of the County Recorder of San Diego County, October 25/ 1984, as File No. 84-403293 of Official Records. Excepting therefrom, all minerals, mineral rights, oil, oil rights, natural gas, natural gas rights, petroleum, petroleum rights, other hydrocarbon substances, geothermal steam, all underground water, and all products derived from any Of the foregoing, in or under or which may be produced from the property which underlies a plane parallel to and 500 feet below the present surface of the property together with the perpetual right of drilling, mining, exploring and operating therefor and storing in and removing the same from the property or any other land including the right to whipstock or directionally drill and mine from lands other than the property, ail, water, 8r gas wells, tunnels and shafts into, through or across the subsurface of the property, and to bottom such whipstocked or directionally drilled wells, tunnels, and shafts under the beneath or beyond the exterior limits thereof, and to redrill, retunnel, equip, maintain, repair, deepen, and operate any such wells or mines, without, however, the right to drill, mine, store, explore, and operate through the surface or the upper fiv hundred (500) feet of the subsurface of the property: as reserved to Daon Corporation in Grant Deed recorded. October 29, 1984/ Official Records, File/Page No. 840407544. ! i a. e e EXHIBIT B Lots 1 through 4 inclusive of CARLSBAD TRACT NO. 84-7, : City of Carlsbad, County of San Diego, State of Califorr according to Map thereof No. 11391, filed in the Office the County Recorder of San Diego County, December 17, 15 ! I t b 4 e e. n ). WASHINGTON, 0. C. 200365857 I800 M STREET N. W. TELEPHONE 12021 4575300 TELEX 89-622 - 680 FIFTH AVENUE NEW YORK, NEW YORK 10019 TELEPHONE l2IPl 247-040 TELEX 127008 O'MELVENY & MYERS 400 SOUTH HOPE STREET LOS ANGELES, CALIFORNIA 90071-2899 LOS ANGELES. CALIFORNIA S TELEPHONE (213) 553-t 1800 CENTURY PARK TELEX 67-4097 610 NEWPORT CENTER NEWPORT BEACH. CALIFORNIA TELEPHONE (813) 669-6000 , - TELEX 674122 * 4997795 (DDD1 TELEPHONE (714) 760-9600 . (2 TELEX I7141 780-1397 IDDDI . d May 21st 1985 OUR FILE NUMEE 772,349-12 VIA FEDERAL EXPRESS Ms. Sybil Harrington Corporate Trust Department The Bank of California, N.A. 400 California Street San Francisco, California 94104 Re $15,920,000 City of Carlsbad, California Multifamily Housiny Revenue Bonds Series A of 1985 (La Costa Apartments) Dear Ms. Harrington: are the following original documents 1 fo ransac which were recorded on April 29, 1985 in the Official Records of the County Recorder of San Diego County, California ( "Official Records'' 1 : Enclosed herewith for you permanent files (a) First Deed of Trust and Assignment of Rent: dated as of April 1, 1985, by La Costa Partners, as Trustor, to Transamerica Titlc Insurance Company, a California corporatior as Trustee, for the benefit of the City of Carlsbad, California as Beneficiary; NO. 85-146611; recorded in the Official Records as Instrur (b) Memorandum of Assignment of First Deed of Trust and First Assignment of Rents and Leases, dated as of April 1, 1985, by the City of Carlsbad, California to The Bank of California, N.A.; recorded in the Official Records as Instrument No. 85-146613; i e e 5 Page 2 - Ms. Sybil Harrington - May 21, 1985 (c) First Assignment of Rents and Leases, dated as of April 1, 1985, by La Costa Partners, as Assignor to and for the benefi of the City of Carlsbad, California, as Beneficiary; recorded in the Official Recor as Instrument No. 85-146612; and (d) Fixture Filing, dated as of April 1, 1985 by La Costa Partners, as Debtor, to the City of Carlsbad, as Secured Party, with the Bank of California, N.A., as Assignee of Secured Party: recorded in the Official Records as Instrument No. 85-146616. Should you have any questions regarding the above documents for this transaction, please do not hesitz to call either myself or Arthur Mann of our office. & v ry +uly yours, Denny Ka asoff Legal Assistant DK/Pt Enclosures cc: Mr. Martin Orenyak / Robert J. Whalen, Esq. Mr. Charles R. Holmes Mr. Gene Watson M. Russell Kruse, Esq. RECEIVED MAY 2 3 1985 CITY .OF CARLSBAD Building Degaftment f -' > .). .,,. <. I .. e e#$- .. L;?lZ q 85-$46f3. 1- 1 e.', " ..., ... . i, 2 , . ;7 ..,,&e 5:) ; i L- -. j;; ' - OFFiC!+!L Rt,t[;;:'zi; Ci SA3 z(EC[; 03~5 1 y.~ MF85-212/A Recording requested by: KISS APR 29 &{ 11: TRANSAMERICA TITLE INSURANCE COMPANY Order No. 6001485 When recorded mail to: O'MELVENY & MYERS 400 South Hope Street Los Angeles, California 90071-2899 Attention: Marcia Ferris L VEI?,^4 L. - f; [; CcuNI'f ~{~~;~;j~~~~;; - (File No. 772,349-127) FIRST DEED OF TRUST AND ASSIGNMENT OF RENTS (CONSTRUCTION TRUST DEED) THIS FIRST DEED OF TRUST AND ASSIGNMENT OF RENTS (this "Deed of Trust") dated as of April 1, 1985, for reference pur- poses only, is made by LA COSTA PARTNERS ("Trustor"), owning title to the Premises (as hereinafter defined), whose principal place of business is 11300 Sorrento Valley Road, Suite 200, San Diego, California 92121, to TRANSAMERICA TITLE INSURANCE COMPANY, a California corporation, as Trustee ("Trustee"), whose address is 4355 Ruffin Road, San Diego, -California 92123, for the benefit of the CITY OF CARLSBAD, a municipal corporation '("Beneficiary"), whose address is 1200 Elm Avenue, Carlsbad, California 92008, Attn: City Minager. THIS DEED OF TRUST is given in connection with those certain Multifamily Housing Revenue Bonds, Series A of 1985 to be issued by Beneficiary in the aggregate principal amount of $15,920,000. Said bonds are to be issued under that certain indenture of Trust of even date herewith (the "Indenture") by and between Beneficiary and THE BANK OF CALIFORNIA, N.A., a national banking association, as trustee ("Bond Trustee"). The above-described bonds, together with any replacements therefor which may hereafter be issued pursuant to the Indenture, are hereinafter collectively referred to as the "Bonds". Pursuant to that certain Loan Agreement of even date here- with (the "Loan Agreement") by and among Beneficiary, Trustor and Bond Trustee, Beneficiary has agreed to loan to Trustor the .proceeds of the sale of the Bonds to enable Trustor to finance the development Loan Agreement (the "Project") on the real property described in Exhibit A attached hereto. The indebtedness of Trustor with respect to the repayment of the loaned proceeds of the Bonds is evidenced by that certain promissory note of even date herewith in the original principal amount of $15,920,000 (the "Note") made by Trustor payable to the order of Beneficiary. Pursuant to the Indenture, Beneficiary 'is assigning to Bond Trustee certain of Beneficiary's rights, interests, and benefits under the Loan Agreement together with the rights and interests of Beneficiary under, inter alia, the Note, this Deed of Trust, that certain First Assignment of Rents and Leases of even date herewith executed by Trustor, as assignor, in favor of Beneficiary, as of the multifamily residential rental housing project described in the " 772349-127/ARM/lSTDT/MFFORM/l 04/24/85 1 > , e I- "' 11213 a 7 .. assignee, and recorded concurrently herewith (the "First Assignment of Rents"), and that certain First Security Agreement of even date herewith executed by Trustor, as Debtor, and naming Beneficiary as Secured Party (the "First Security Agreement"). The Bonds are further secured by, and are payable from drawings upon, that certain irrevocable direct draw letter of credit in the amount of $16649,999 (the "Letter of Credit") to be issued by Security Pacific National Bank, a national banking association (the "Bank"), to Bond Trustee for the account of Trustor, pursuant to that certain Reimbursement Agreement of even date herewith by and between Trustor and the Bank (the "Reimbursement Agreement"). Under the Reimbursement Agreement, Trustor is obligated, inter alia, to reimburse the Bank for any amounts-paid by the Bank under the Letter of Credit. The obligations of Trustor to the Bank under the . Reimbursement Agreement are secured by, inter alia that certain Second Deed of Trust and Assignment of Rents (Construction Trust Deed) of even date herewith (the "Second Deed of Trust") executed by Trustor with. respect to the Project for the benefit of the .Bank. As used herein, the term "Letter of Credit" shall mean and include the Bank, as well as any other "Bank Letter of Credit" or "Substitute Letter of Credit" (as those terms are defined in the Indenture) that may be issued hereafter in replacement of the above-described letter of credit, in accordance with the terms of the Indenture, and the term "Bank" shall mean Security Pacific National Bank or such other entity that hereafter issues a Letter of Credit in replacement of the above-described letter of credit, in accordance with the terms of the . Indenture. " - " above-described letter of credit issued by Security Pacific National The information required by California Civil Code Q 3097(j) is as follows: 1. Name and address of CITY OF CARLSBAD the lender ("Bene- 1200 Elm Avenue ficiary" hereunder) : Carlsbad, California 92008 Attn: City Manager 2. Name and address of LA COSTA PARTNERS the owner of the real 11300 Sorrento Valley Road property described San Diego, California 92121 herein ("Trustor" hereunder) : 3. Legal description As set forth in Exhibit "A" of the property: . attached hereto. 4. Street address of South of La Costa Avenue between the property: Rancho Santa Fe Road and Mission Estancia in the city of Carlsbad, California FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt 772349-127/ARM/ISTDT/h4FFORM/l 04/24/85 c 7 > . e 1214 e 7-1. > and adequacy of which are hereby acknowledged, Trustor hereby irrevocably grants, transfers, sets over, conveys and assigns to Trustee, IN TRUST, WITH POWER OF SALE, for the benefit and security of Beneficiary, under and subject to the terms and conditions hereinafter set forth, all rights, titles, interests, estates, power and privileges that Trustor now has or may hereafter acquire in or to the following property and interests therein (collectively, the "Trust Estate") : THAT CERTAIN REAL PROPERTY in San Diego County, State of California, more particularly described on Exhibit .A attached hereto and incorporated herein by this reference (the "land"); TOGETHER WITH any and all buildings, landscaping and other improvements now or hereafter erected in or on the Land includ- ment, machinery, and other articles attached to said buildings and improvements (collectively, the "Improvements"), all of which shall be deemed and construed to be a part of the realty (the Land and the Improvements are sometimes collectively referred to herein as the "Premises") ; ing, without limitation, the fixtures, attachments, appliances, equip- TOGETHER WITH all interests, estates or other claims, both in law and in equity, which Trustor now has or may hereafter acquire in the Premises; TOGETHER WITH all easements, 'rights-of-way and rights now owned or hereafter acquired by Trustor used in connection with the Premises or the Project or as a means of access to either or both., including, without limiting the generality of the foregoing, all rights pursuant to any .trackage agreement and all rights to the nonexclusive use of common drive entries, and all tenements, hereditaments and appurtenances thereof and thereto, and ail water and water rights and shares of stock evidencing the same; TOGETHER WITH all right, title and interest now owned or hereafter acquired by Trustor in and to all options to purchase or lease the Premises or any portion thereof or interest therein, and any greater estate in the Premises now owned or hereafter acquired; TOGETHER WITH all oil and gas and other mineral rights in or pertaining to the Land, if any, and all royalty, leasehold and other rights of Trustor pertaining thereto; TOGETHER WITH all rents, issues, profits, royalties, income and other benefits derived from the Trust Estate (collectively, "Rents"), subject to the right, power and authority hereinafter given to Trustor (and, upon an Event of Default (as hereinafter defined), to Beneficiary) to collect and apply such Rents, and subject further to the terms and provisions of that certain First Assignment of Rents and Leases of even date herewith (the "First Assignment of Rents") exe- cuted by Trustor, as Assignor, in favor of Beneficiary, as assignee, and recorded concurrently herewith; 772349-127/ARM/1 STDT/MFFORM/l 04/24/85 3 e . * - 1215 e '* .? TOGETHER WITH all leasehold estates, right, title and interest of Trustor in and to all leases or subleases covering the Premises or the Project or any portion thereof or interest therein now or hereafter existing or entered into, and all right, title and interest of Trustor thereunder including, without limitation, all cash or securi- ty deposits, advance rentals, and deposits or payments of a similar nature (collectively referred to herein, together with all prepaid Rents and security deposits under all Leases (defined in Article II hereof), as "Deposits") ; TOGETHER WITH all rjght, title and interest now owned or hereafter acquired by Trustor in and to any land lying within the right-of-way of any street, open or proposed, adjoining the Land, and any and all sidewalks, alleys and strips and gores of land adjacent to or used in connection with the Land, Premises or Project; TOGETHER WITH all the estate, interest, right, title, other claim or demand, both in law and in equity, including claims or de- mands with respect to the proceeds of insurance in effect with respect thereto, which Trustor now has or may hereafter acquire in the Prem- ises, and any and all awards made for the taking by eminent domain, or by any proceeding or purchase in lieu thereof, of the whole or any part of the Trust Estate including, without limitation, any award resulting from a change of grade of streets and any award for sever- ance damages (collectively, "Proceeds"). FOR THE PURPOSE OF SECURING: (a) payment of the indebtedness evidenced by the Note together with interest thereon at a rate equal at all times to the inter- est rate established for the Bonds from time to time pursuant to the terms of the Indenture; (b) payment of all sums advanced by or on behalf of Trust- ee or Beneficiary to protect the Trust Estate, with interest thereon at a rate equal to the stated rate of interest on the Bonds (hereinafter referred to as the "Agreed Rate"), but in no event to exceed the maximum rate of interest, if any, permitted to be charged thereon by applicable law. (c) payment of all sums, with interest thereon at the Agreed Rate, that may become due and payable to or for the benefit of Beneficiary or Trustee pursuant to the terms hereof. This Deed of Trust, the Loan Agreement, the Note, the Indenture, the Regulatory Agreement, the First Assignment of Rents, the First Security Agreement, and any other deed of trust, mortgage, security agreement, guaranty or other instrument given to evidence or further secure the payment or performance of any obligation secured hereby are hereinafter sometimes collectively referred to as the "Loan Documents. " Beneficiary, Bond Trustee and the Bank are parties to that certain Intercreditor Agreement of even date herewith (the 772349-127/ARM/1 STDT/MFFORM/l 04/24/85 4 . ." - *. e '9 1216 5 "lntercreditor Agreement"), relating to the exercise by Beneficiary, Bond Trustee, and the Bank of certain rights, remedies and options under the Loan Documents, the Reimbursement Agreement, the Second Deed of Trust and related documents, all as more particularly de- scribed in said Intertrcditbr Agreement. TO PROTECT THE PREMISES AND THE SECURITY GRANTED BY THIS DEED OF TRUST, TRUSTOR HEREBY COVENANTS AND AGREES AS FOLLOWS: ARTICLE I COVENANTS AND AGREEMENTS OF TRUSTOR 1.01. Payment of Secured Obligations. Trustor shall pay when due: (i) the principal, interest, premium, if any, and all other amounts due to Beneficiary under the Note; (ii) the principal of and interest on any sum advanced in the future and secured by this Deed of Trust; and (iii) the principal of and interest on any other sum secured by this Deed of Trust. 1.02. Maintenance, Repair, Alterations. Trustor: (i) shall maintain, keep and preserve the Trust Estate in good condition and repair; (ii) shall not remove, demolish or substantially alter any of the Improvements (other than (A) repairs in the ordinary course of busi- ness of a non-structural nature which. serve to preserve or increase the value of the Premises and (B) alterations that are required by law), in whole or in part, without the prior written consent of Benefi- ciary; (iii) shall complete promptly and in a' good and workmanlike manner any Improvement which may be now or hereafter constructed on the Premises and promptly restore (unless expressly provided to the contrary in any other of the Loan Documents) in like manner any Improvement which may be damaged or destroyed thereon from any cause whatsoever, and pay when due all claims for labor performed and materials furnished therefor, whether or not Proceeds are available for such restoration; (iv) shall comply with all laws, ordinances, rules, regulations, covenants, conditions and restrictions now or hereafter affecting the Trust Estate or any part thereof or requiring not commit, suffer or permit any act to be done in, upon or to the Trust Estate or any part thereof in violation of any law, ordinance, rule, regulation or order; (vi) shall not commit or permit any waste or deterioration of the Trust Estate; (vii) shall keep and maintain abut- ting grounds, sidewalks, roads, parking and landscape areas in good and neat order and repair; (viii) will not take any action which, if taken (or fail to take any action which, if not taken), would materially increase in any way the risk of fire or other hazard occurring to or affecting the Premises or otherwise would impair the security of Bene- ficiary in the Trust Estate; (ix) shall comply with the provisions of all leases, if any, constituting a portion of the Trust Estate; (x) shall not abandon the Trust Estate or any portion thereof or leave the Premises unprotected, unguarded, vacant or deserted, provided, however, nothing in this clause (x) shall require the Trustor to protect or guard the Project more than a prudent operator would any alteration or improvement to be made thereon or thereto; (v) shall 772349-127/ARM/l STDT/MFFORM/l 04/24/85 5 .. I - ?- 1217 a 7 protect or guard a project similar to the Project under the same or similar conditions; (xi) shall not initiate, join in or consent to any change in any zoning ordinance, general plan, specific plan, private restrictive covenant or other public or private restriction limiting the uses which may be made of the Premises by Trustor or by the owner thereof; (xii) shall secure in a timely manner and maintain in full force and effect all permits necessary for the use, occupancy and operation of the Trust Estate; (xiii) shall not cause or permit any fixture or any article of personal property included in the Collateral (as defined in the First Security Agreement) to be'removed from the Premises without the prior written consent of Beneficiary unless the same shall have been replaced in the ordinary course of business by substantially equivalent property; and (xiv) except as otherwise prohibited or all other acts which may be reasonably necessary to protect and pre- serve the value of the Trust Estate and the rights of Trustee and Beneficiary with respect thereto. restricted by the Loan Documents, or any of them, shall do any and Trustor hereby agrees that Beneficiary may conduct from time to time during normal business hours, through representatives of its own choice, on-site inspections and observations of (1) the mainte- nance and repair of the Trust Estate, including a review of all mainte- nance and repair programs and practices and all reports and records, including the records of expenditures, relating thereto, and (2) such other facilities, practices and records of Trustor relating to the Prem- ises as Beneficiary deems to be necessary or appropriate in order to monitor Trustor's compliance with the provisions of this Section. -. 1.03. Required Insurance. (a) Trustor shall at all times provide, maintain, keep in full force and effect, at no expense to Trustee or Beneficiary, policies of insurance in such form and amounts, with such deductibles, and covering such casualties, risks, perils and liabilities as are required by the Loan Agreement, and issued by companies, associations or organizations reasonably satisfactory to Beneficiary. force and effect or cause to be provided, maintained, and kept in full (b) All policies of insurance required by the terms of this Deed of Trust or the Loan Agreement shall either have attached there- to a lender's loss, payable endorsement for the benefit of Beneficiary in form satisfactory to Beneficiary or shall name Beneficiary as additional insured and shall contain an endorsement or agreement by the insurer that any loss shall be payable in accordance with the terms of such policy notwithstanding any act or negligence of Trustor or any party holding under Trustor which might otherwise result in forfeiture of said insurance and the further agreement of the insurer waiving all rights of setoff, counterclaim and deduction against Trustor. (c) After the Improvements have been completed and until repayment of the Bonds and the satisfaction of all obligations of Trus- tor secured hereby, Trustor shall also provide from time to time at the written request of Beneficiary, but not more often than once annually, satisfactory evidence of the insurable value of the Premises. Such 772349-127/ARM/lSTDT/MFFORM/l 03/24/85 6 * .. 1218 0 3 evidence may be in the form of an insurance appraisal or valuation report prepared by an insurance company, agent or broker, profes- sional appraiser, architect, engineer or contractor approved by Benefi- appraisal or valuation report. ciary. Trustor shall bear the cost, if any, of such insurance 1.04. Delivery of Policies, Payment of Premiums. At Bene- ficiary's option, Trustor shall furnish Beneficiary with an original of all policies of insurance required hereunder or a certificate of insur- ance for each such required policy setting forth the coverage, the limits of liability, the deductibles, if any, the name of the carrier, the policy number, and the period of coverage, which certificates shall have been executed by authorized officials of the companies issuing such insurance, or by agents or attorneys-in-fact authorized to issue said certificates (in which event each such certificate shall be accom- panied by a notarized affidavit, agency agreement or power of attorney evidencing the authority of the signatory to issue such certificate on behalf of the insurer named therein). If Beneficiary consents, Trus- tor may provide any of the required insurance through blanket policies carried by Trustor and covering more than one location, or by policies procured by a tenant or other party holding under Trustor; provided, however, all such policies shall be in form and substance and issued by companies satisfactory to Beneficiary. At least thirty (30) days prior to the expiration of each required policy, Trustor shall deliver to Beneficiary evidence satisfactory to Beneficiary of the payment of premium and the renewal or replacement of such policy continuing insurance in .form as required by this Deed of Trust. All such po1.i- cies shall contain a provision that, ' notwithstanding any contrary agreement between Trustor and the insurance company, such policies will not be cancelled, allowed to lapse without renewal, surrendered or materially amended (which term shall include any reduction in the scope or limits of coverage) without at least thirty (30) days' prior written notice to Beneficiary. All consents and approvals of Benefi- ciary required by this Section shall be given or withheld in the rea- sonable discretion of Beneficiary. If Trustor fails to provide, maintain, keep in force or deliver to Beneficiary the policies of insur- ance required by this Deed of Trust or by any of the Loan Docu- ments, Beneficiary, upon written notice to Trustor, may (but shall have no obligation to) procure such insurance, or single interest insurance for such risks covering Beneficiary's interests, and Trustor will pay all premiums therefor promptly upon demand by Beneficiary; and until such payment is made by Trustor, the amount of all such premiums, together with interest thereon at the Agreed Rate, shall be secured by this Deed of Trust. 1.05. Casualties. Trustor shall give prompt written notice thereof to Beneficiary after the happening of any casualty to or in connection with the Trust Estate or any part thereof, whether or not covered by insurance. In the event of such casualty, the gross proceeds less all expenses (including attorneys' fees) incurred in the collection of such proceeds shall, subject to the provisions of the Loan Agreement, the Reimbursement Agreement and the Indenture, be payable to Beneficiary, and Trustor hereby authorizes and directs any affected insurance company to make payment of such proceeds in such 772349-127/ARM/lSTDT/MFFORM/l 04/24/85 7 0 *"t - . 12m a case directly to Beneficiary. If Trustor receives any proceeds of over such proceeds to Beneficiary. Beneficiary is hereby authorized sole discretion, as attorney-in-fact for Trustor, to make proof of loss, to appear in and prosecute any action arising from any policy or policies of insurance, and, upon the occurrence of an Event of Default hereunder, to settle, adjust or compromise, in good faith, any claim for loss, damage or destruction under any policy or policies of insurance; provided, however, prior to an Event of Default, Beneficiary shall not take any action authorized by this sentence without the prior written consent of Trustor. Trustor shall not settle, adjust or compromise, any claim for loss, damage or destruction of the Trust Estate or any part thereof under any policy or policies of insurance without the prior written consent of Beneficiary to such settlement, adjustment or compromise. In the event of any damage to or destruction of the Premises, all insurance proceeds shall be applied in accordance with the terms of the Loan Agreement, the Reimbursement Agreement and the Indenture. Except as provided in the Loan Agreement, ncthing herein contained shall be deemed to excuse Trustor from repairing or maintaining the Trust Estate as to the Trust Estate, regardless of whether or not there are insurance proceeds available to Trustor or whether any such proceeds' are sufficient in amount, and the application or release by Beneficiary of any insurance proceeds shall' not cure or waive any default or notice of default under -this Deed of Trust or invalidate any akt done pursuant to such notice. insurance resulting from such casualty, Trustor shall promptly pay and empowered by Trustor at Beneficiary's option and in Beneficiary's provided in Section 1.02 hereof or restoring all damage or destruction 1.06. Assignment of Policies Upon Foreclosure. In the event of foreclosure of this Deed of Trust or other transfer of title or - assignment of the Trust Estate in extinguishment, in whole or in part, of the debt secured hereby, all right, title and interest of Trustor in and to all policies of insurance required hereunder and any unearned premiums paid thereon shall, without further act, be assigned to and shall inure to the benefit of and pass to the successor in interest to Trustor or the purchaser or grantee of the Trust Estate, and Trustor hereby irrevocably appoints Beneficiary its lawful attorney-in-fact to execute an assignment thereof and any other document necessary to effect such transfer. The foregoing power of attorney is coupled with an interest and cannot be revoked. 1.07. Subrogation: Waiver of Offset. (a) Trustor waives any and all right to claim or recover against Beneficiary, its officers, employees, agents and representa- tives, for loss of or damage to Trustor, the Trust Estate, Trustor's property or the property of others under Trustor's control from any cause insured against or required to be insured against by the provi- sions of this Deed of Trust; provided, however, that this waiver of subrogation shall not be effective with respect to any policy of insur- ance permitted or required by this Deed of Trust if (i) such policy prohibits, or if coverage thereunder would be reduced as a result of, such waiver of subrogation and (ii) Trustor is unable to obtain from a 772349-127/ARM/lSTDT/MFFORM/l 04/24/85 8 e 1220 . . carrier issuing such insurance a policy that, by special endorsement or otherwise, permits such a waiver of subrogation. (b) Except as otherwise specifically provided herein, all sums payable by Trustor pursuant to this Deed of Trust shall be paid without notice, demand, counterclaim, setoff, deduction or defense and without abatement, suspension, deferment, diminution or reduction, and the obligations and liabilities of Trustor hereunder shall in no way be released, discharged or otherwise affected (except as expressly provided herein) by reason of: (i) any damage to or destruction of or any condemnation or similar taking of the Trust Estate or any part thereof; (ii) any restriction or prevention of or interference by any third party with any use of the Trust Estate or any part thereof; (iii) any title defect or encumbrance or any eviction from the Premises or any part thereof by title paramount or otherwise; (iv) any bank- tion, liquidation or other like proceeding relating to Beneficiary, or any action taken with respect to this Deed of Trust by any trustee or receiver of Beneficiary, or by any court, in any such proceeding; (v) .any claim which Trustor has or might have against Beneficiary; (vi) any default or failure on the part of Beneficiary to perform or comply with any of the terms hereof or of any other agreement with Trustor; or (vii) any other occurrence whatsoever, whether similar or dissimilar to the foregoing; whether or not Trustor shall have notice or knowledge of any of the foregoing. Except as expressly provided herein, Trustor waives all riahts now or hereafter conferred by stat- ute or otherwise to any abatement, suspension, deferment, diminution or reduction of any sum secured hereby and payable by Trustor. ruptcy, insolvency, reorganization, composition, adjustment, dissolu- 1.08. Taxes and Impositions. (a) Trustor shall pay, or cause to be paid prior to delinquency, all real property taxes and assessments, general and special, and all other taxes and assessments of any kind or nature whatsoever including, without limitation, non-governmental levies or assessments such as maintenance charges, levies or charges resulting from covenants, conditions and restrictions affecting the Trust Estate, which are assessed or imposed upon the Trust Estate, or upon Trustor as owner or operator of the Trust Estate, or become due and payable, and which create, may create or appear to create a lien upon the Trust Estate, or any part thereof, or upon any personal property, equipment or other facility used in the operation or maintenance there- of (all of the above hereinafter referred to, collectively, as "Imposi- tions"); provided, however, that if, by law, any such Imposition is payable, or may at the option of the taxpayer be paid, in installments, Trustor may pay the same or cause it to be paid, together with any accrued interest on the unpaid balance of such imposition, in install- ments as the same become due and before any fine, penalty, interest or cost may be added thereto for the nonpayment of any such install- ment and interest. (b) If at any time after the date hereof there shall be assessed or imposed (i) a tax or assessment on the Trust Estate in lieu of or in addition to the Impositions otherwise payable by Trustor 772349-127/ARM/lSTDT/MFFORM/l 04/24/85 9 @ . l2ia pursuant to Subsection 1.08 (a) hereof, or (ii) a license fee, tax or assessment imposed on Beneficiary and measured by or based in whole (or in part) upon the amount .of the outstanding Obligations secured hereby, then ali (or said part of) such taxes, assessments or fees shall be deemed to be included within the term "Impositions" as defined in subparagraph (a) hereof, and Trustor shall pay and discharge the same as herein provided with respect to the payment of Impositions. If Trustor fails to pay such impositions prior to delinquency or if Trustor is prohibited by law from paying such Impositions, Beneficiary may at its option declare all obligations secured hereby together with all accrued interest thereon, immediately due and payable. Anything to the contrary herein notwithstanding, Trustor shall have no obliga- tion to pay any franchise, estate, inheritance, income, excess profits or similar tax levied on Beneficiary or on the obligations secured hereby. (c) Subject to the provisions of Subsection 1.08 (d) and upon . request by Beneficiary, Trustor shall deliver to Beneficiary within thirty (30) days after the date upon which any such Imposition is due and payable by Trustor official receipts of the appropriate taxing authority, or other proof satisfactory to Beneficiary, evidencing the payment thereof. (d) Trustor shall have the right before any delinquency occurs to contest or object to the amount or validity of any such Imposition by appropriate legal proceedings, but this shall ,not be deemed or construed in any way as relieving, modifying or extending ' Trustor's covenant to pay any such Imposition at the time and in the manner provided herein unless Trustor has given prior written notice to Beneficiary of Trustor's intent to so contest or object to an Imposi- tion, and unless, at Beneficiary's sole option, (i) Trustor shall demon- strate to Beneficiary's satisfaction that the legal proceedings shall conclusively operate to prevent the sale of the Trust Estate, or any part thereof, to satisfy such Imposition prior to final determination of such proceedings; or (ii) Trustor shall furnish a good and' sufficient bond or surety as requested by and satisfactory to Beneficiary; or (iii) Trustor shall demonstrate to Beneficiary's satisfaction that Trus- tor has provided a good and sufficient undertaking as may be required or permitted by law to accomplish a stay of any such sale. (e) Trustor shall not suffer, permit or initiate the joint assessment of any real and personal property which may constitute all or a portion of the Trust Estate or suffer, permit or initiate any other procedure whereby the lien of the real property taxes and the lien of the personal property taxes shall be assessed, levied or charged to the Trust Estate as a single lien. (f) Trustor shall cause to be furnished to Beneficiary a tax reporting service, covering the Trust Estate, of a type and duration, and with a company, satisfactory to Beneficiary. 1.09. Utilities. Trustor shall pay or shall cause to be paid when due all utility charges which are incurred by Trustor for the benefit of the Trust Estate or which may become a charge or lien 772349-127/ARM/lSTDT/MFFORM/l 04/24/85 10 0 'I @22 .. against the Trust Estate for gas, electricity, water or sewer services furnished to the Trust Estate and all other assessments or charges of a similar nature, whether public or private, affecting or related to the assessments or charges are or may become liens thereon. Trust Estate or any portion thereof, whether or not such taxes, 1.10. Defense of Actions and Costs. Trustor, at no cost or expense to Beneficiary or Trustee, shall appear in and defend any action or proceeding purporting to affect the security hereof, the other Loan Documents, any additional or other security for the obliga- tions secured hereby, the interest of Beneficiary, or the rights, powers or duties of Beneficiary or Trustee hereunder. If Beneficiary and Trustee, or either of them, elects to become a party to such action or proceeding, or is made a party thereto or to any other action . or, proceeding, of whatever kind or nature, concerning the Loan Agreement, this Deed of Trust, any of the Loan Documents, the Trust Estate or any part thereof or interest therein, or the occupancy thereof, Trustor. shall: (i) indemnify, defend and hold Trustee and Beneficiary harmless from all liability, damage, cost and expense incurred by Trustee and Beneficiary, or either of them, by reason of and expenses, the fees of attorneys for Trustee and for Beneficiary, and other expenses, of whatever kind or nature, incurred by Trustee or Beneficiary, or either of them, as a result. of such action or pro- ceeding), whether or not such action or proceeding is prosecuted to judgment or decision; and (ii) upon written notice from Trustee or Beneficiary, assume the investigation and defense of said action or proceeding, including the em.ployment of counsel reasonably acceptable to Beneficiary and the payment of all expenses. Trustee or Bene- ficiary, as the case may be, shall have the right to employ separate counsel in any such action or proceeding and to participate in the defense thereof; but unless such separate counsel is employed with the approval and consent of the Trustor, or pursuant to a court order, Trustor shall not be required to pay the fees and expenses of such separate counsel. Notwithstanding the foregoing, however, this provision shall not require Trustor to indemnify Beneficiary or Trustee for any claims, costs, fees, expenses or liabilities arising from the gross negligence or willful misconduct of Beneficiary or Trustee. shall pay thereto an amount equal to Trustor's liability to such person under this Section, together with interest thereon from date of expenditure at the Agreed Rate; and until paid, such sums shall be secured hereby. said action or proceeding (including, without limitation, Trustee's fees Immediately upon demand therefor by Trustee or Beneficiary, Trustor 1.11, Actions by Beneficiary To Preserve Trust Estate. If Trustor fails to make any payment or to do any act as and in the manner provided in any of the Loan Documents, Beneficiary, and Trustee, and each of them, each in its own discretion, without obliga- tion so to do, without releasing Trustor from any obligation, and subject only to the notice and cure provisions of the Loan Agreement, may make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof. In connection therewith (without limiting their general and other powers, whether conferred herein, in another Loan Document or by law), Beneficiary 772349-127/ARM/lSTDT/MFFORM/l 04/24/85 11 e ,. 122# and Trustee, and each of them, shall have and are hereby given the right, but not the obligation: (i) to enter upon and take possession of the Trust Estate; (ii) to make additions, alterations, repairs and improvements to the Trust Estate which they or either of them may consider necessary or proper to keep the Trust Estate in good condi- tion and repair; (iii) to appear and participate in any action or pro- ceeding affecting or which may affect the security hereof or the rights or powers of Beneficiary or Trustee; (iv) to pay, purchase, contest or compromise any encumbrance, claim, charge, lien or debt which in the judgment of either may affect or appears to affect the security of this Deed of Trust or to be prior or superior hereto; and (v) in exercising such powers, to pay necessary expenses, including employment of counsel or other necessary or desirable consultants. Trustor shall, immediately upon demand therefor by Beneficiary pay to Beneficiary an amount equal to all costs and expenses incurred by it in connection with the exercise by Beneficiary of the foregoing rights including, without limitation, costs of evidence of title, court costs, appraisals., surveys and receiver's, Trustee's and attorneys' fees, costs and expenses (including, without limitation, the fees and expenses of attorneys for Trustee), whether or not an action is actually commenced in connection therewith, together with interest thereon from the date of such expenditures until Beneficiary has been repaid such amount at the Agreed Rate and, until paid, said sums shall be secured hereby. 1.12. Survival of Warranties. Trustor shall fully and faithfully satisfy and perform the obligations of Trustor contained in the Loan Documents, each agreement of Trustor incorporated by refer- ence therein or herein and each agreement the performance of which is secured hereby, and any modification or amendment thereof. All representations, warranties and covenants of Trustor contained in any such Loan Document or agreement between Trustor and Beneficiary shall survive the execution and delivery hereof and shall remain con- tinuing Obligations, warranties and representations of Trustor during any time when any portion of the obligations secured hereby remain outstanding. 1.13. Condemnation and Other Awards. Immediately upon its obtaining knowledge of the institution or the threatened institution of any proceeding for the condemnation or other taking for public or quasi-public use of the Trust Estate or any part thereof, or if the same be taken or damaged by reason of any public improvement or condemnation proceeding, or 'in any other manner, or should Trustor receive any notice or other information regarding such proceeding, action, taking or damage, Trustor shall promptly notify Trustee and Beneficiary of such fact. Trustor shall then, if requested by Benefi- ciary, file or defend its rights thereunder and prosecute the same with due diligence to its final disposition and shall cause any award or settlement to be paid over to Beneficiary for disposition pursuant to the terms of this Deed of Trust. If the Trust Estate or any part thereof is taken or diminished in value, or if a consent settlement is entered, by or under threat of such proceeding, all compensation, awards, damages, rights of action, proceeds and settlements payable to Trustor by virtue of its interest in. the Trust Estate (the "Condemna- tion Proceeds") shall be and hereby are assigned, transferred and set 772349-127/ARM/lSTDT/MFFORM/l 04/24/85 12 e *-9 - 924 -. over unto Beneficiary. Any such Condemnation Proceeds shall be first applied to reimburse Trustee and Beneficiary for all costs and expens- es, including reasonable attorneys' fees, incurred in connection with the collection of such award or settlement. The balance of such award or settlement shall be applied in accordance with the terms of the Loan Agreement, the Indenture and the Reimbursement Agreement, as applicable. Application or release of the Condemnation Proceeds as provided herein shall not cure or waive any default or notice of de- fault hereunder or invalidate any act done pursuant to such notice. 1.14. Additional Security. No other security now existing, or hereafter taken, to secure the obligations secured hereby nor the liability of any maker, surety, guarantor or endorser with respect to such obligations, or any of them, shall be impaired or affected by the execution of this Deed of Trust; and all additional security shall be taken, considered and held as cumulative. The taking of additional security, execution of partial releases of the security, or any exten- sion of the time of payment of the indebtedness shall not diminish the force, effect or lien of this Deed of Trust and shall not affect or impair the liability of any maker, surety, guarantor or endorser for the payment of said indebtedness. In the event Beneficiary at any time holds additional security for any of the obligations secured here- by, it may enforce the sale thereof or otherwise realize upon the same, at its option, either before, concurrently, or after a sale is made hereunder. 1.15. Inspections. Beneficiary, Trustee and the agents, representatives or workers of each of them, are authorized to enter at any reasonable time upon or in any part of the Trust Estate for the purpose of inspecting the same and for the purpose of performing any of the acts it is authorized to perform hereunder or under the terms of any of the Loan Documents. 1.16. Liens. Trustor shall pay and promptly discharge when due, at Trustor's cost and expense, all liens, encumbrances and charges upon the Trust Estate, or any part thereof or interest there- in; provided that the existence of any mechanic's, laborer's, materialman's,. supplier's or vendor's lien or right thereto shall not constitute a violation of this Section if payment is not yet due under the contract which is the foundation thereof and if such contract does not postpone payment for more than forty-five (45) days after the performance thereof. Trustor shall have the right to contest in good faith the validity of any such lien, encumbrance or charge, provided satisfactory to Beneficiary in such amounts as Beneficiary shall reason- ably require, but not more than one hundred fifty percent (150%) of the amount of the claim, and provided further that Trustor shall thereafter diligently proceed to cause such lien, encumbrance or charge to be removed and discharged. If Trustor shall fail either to remove and discharge any such lien, encumbrance or charge or to deposit security in accordance with the preceding sentence, if applica- ble, then, in addition to any other right or remedy of Beneficiary, Beneficiary may, but shall not be obligated to, discharge the same, without inquiring into the validity of such lien, encumbrance or charge Trustor shall first deposit with Beneficiary a bond or other security 772349-127/ARM/ISTDT/MFFORM/l 04/24/85 13 " e .r a1225 nor into the existence of any defense or offset thereto, either by paying the amount claimed to be due, or by procuring the discharge of such lien, encumbrance or charge by depositing in a court a bond or such manner as is or may be prescribed by law. Trustor shall, immediately upon demand therefor by Beneficiary, pay to Beneficiary an amount equal to all costs and expenses incurred by Beneficiary in connection with the exercise by Beneficiary of the foregoing right to discharge any such lien, encumbrance or charge, together with inter- est thereon from the date of such expenditure at the Agreed Rate, and, until paid, such sums shall be secured hereby. the amount claimed or otherwise giving security for such claim, or in 1.17. Beneficiary's Powers. Without affecting the liability of any other person liable for the payment of any obligation herein mentioned, and without affecting the lien or charge of this Deed of Trust upon any portion of the Trust Estate not then or theretofore released as security for the full amount of all unpaid obligations, Beneficiary may, from time to time and without notice (i) release any person so liable, (ii) extend the maturity or alter any of the terms of any such obligation, (iii) grant other indulgences, (iv) release or reconvey, or cause to be released or reconveyed at any time at Bene- ficiary's option any parce1,'portion or all of the Trust Estate, (v) take or release any other or additional security for any obligation herein mentioned, or (vi) make compositions or other arrangements with debtors in relation thereto. By accepting payment or performance of any obligation secured by this Deed of Trust after the payment or performance thereof is due or after the filing of a notice of default and election to sell, Beneficiary shall not have thereby waived its right to require prompt payment or performance, when due, of all other obligations secured hereby, or to declare a default for failure so to pay or perform, or to proceed with the sale under any notice of default and election to sell theretofore given by Beneficiary, or with respect to any unpaid balance of the indebtedness secured hereby. The acceptance by Beneficiary of any sum in an amount less than the sum then due shall not constitute a waiver of the obligation of Trustor to pay the entire sum then due. Trustor's failure to pay the entire sum then due shall continue to be a default, notwithstanding the acceptance of partial payment, and, until the entire sum then due shall have been paid, Beneficiary or Trustee shall at all times be entitled to declare a default and to exercise all the remedies herein conferred, and the right to proceed with a sale under any notice of default and election to sell shall in no way be impaired, whether or not such amounts are received prior or subsequent to such notice. No delay or omission of Trustee or Beneficiary in the exercise of any right or power hereunder shall impair such right or power or any other right or power - nor shall the same be construed to be a waiver of any de- fault or any acquiescence therein. 1.18. Other Instruments. Trustor shall punctually pay all amounts due and payable, and shall promptly and faithfully perform or observe each and every other obligation or condition to be performed or observed, under each deed of trust, mortgage or other lien or encumbrance, lease, sublease, declaration, covenant, condition, restriction, license, order or other instrument or agreement which 772349-127/ARM/lSTDT/MFFORMll 04/24/85 14 e- ' * #226 \ affects or appears to affect the Trust Estate, whether at law or in equity. ARTICLE I I ASSIGNMENT OF RENTS, ISSUES AND PROFITS 2.01. Assignment of Rents, Issues and Profits. Trustor Trust Estate and hereby gives to and confers upon Beneficiary the right, power and authority to collect- such Rents. Trustor irrevocably appoints Beneficiary its true and lawful attorney-in-fact, at the option of Beneficiary, at any time and from time'to time, to demand, receive and enforce payment, to give receipts, releases and satisfactions, and to sue, in its name or in the name of Trustor, for all such Rents, and apply the same to the obligations secured hereby; provided, however, that Trustor shall have the right to collect such Rents (but not more than one month in advance unless the written approval of Beneficiary has first been obtained), and to retain and enjoy the same, so long as an Event of Default shall not have occurred hereunder and be continu- ing. The assignment of the Rents in this Article II is intended to be an absolute assignment from Trustor to Beneficiary and not merely the passing of a security interest. The foregoing power of attorney is coupled with an interest and cannot be revoked. hereby assigns and transfers to Beneficiary all of the Rents of the 2.02.. Collection Upon Default. Upon the occurrence of an Event of Default hereunder, Beneficiary may, at any time without court, and without regard to the adequacy of any security for the obligations hereby secured, enter upon and take possession of the Trust Estate, or any part thereof, and, with or without taking posses- s-ion of the Trust Estate or any part thereof, in its own name sue for or otherwise collect such Rents (including those past due and unpaid, and all prepaid rents and all other monies which may have been or may hereafter be deposited with Trustor by any lessee or tenant of Trustor to secure the payment of any rent or for any services thereafter to be rendered by Trustor for any other obligation of any tenant to Trustor arising under any lease, and Trustor agrees that, upon the occurrence of any Event of Default hereunder, Trustor shall promptly deliver all such Rents and monies to Beneficiary), and Beneficiary may apply the same, less costs and expenses of operation and collection (including, without limitation, attorneys' fees whether or not suit is brought or prosecuted to judgment) to any indebtedness or obligation of Trustor secured hereby, and in such order as Beneficiary may determine notwithstanding that said indebtedness or the performance of said obligation may not then be due. The collection of such Rents, or the entering upon and taking possession of the Trust Estate, or the application thereof as aforesaid, shall not cure or waive any default or notice of default hereunder or invalidate any act done in response to such default or pursuant to such notice of default or be deemed or Estate or any portion thereof. .. notice, either in person, by agent or by a receiver appointed by a construed to make Beneficiary a mortgagee-in-possession of the Trust 2.03. Further Assignments. Upon demand of Beneficiary, Trustor shall, from time to time, execute and deliver to Beneficiary 772349-127/ARM/l STDT/MFFORM/l 04/24/85 15 a @..I 1227 recordable assignments of any or all leases, subleases, licenses and concession or other agreements (collectively, the "Leases") relating to, or affecting the use, occupancy or maintenance of, or services provided to, the Premises or now or hereafter affecting the Trust Estate or any portion thereof. Each such assignment shall be made by an instrument (herein, an "Assignment of Leases") in form and sub- stance satisfactory to Beneficiary; provided, however, that no such Assignment of Leases shall be construed as imposing upon Beneficiary any obligation with respect to the Leases or any of them. A default or other instrument so assigned to Beneficiary, by reason of which default the lessee or other party thereunder has the right to cancel such Lease or other instrument or to claim any diminution or offset against future Rents shall, at the option of Beneficiary, constitute a default hereunder, and Beneficiary shall have all the rights and reme- dies set forth herein as if such default had occurred hereunder; provided, however, any defaults under individual apartment leases that are not, either individually or in the aggregate, material to Beneficiary's security shall not be a default hereunder. Beneficiary may, at its option, exercise its rights hereunder or under any such Assignment of Leases, .and such exercise shall not constitute a waiver of any right hereunder or thereunder. All Leases (and all Rents and Deposits derived therefrom or associated therewith) to which any such Assignment of Leases refers and which are specifically described therein shall be controlled by the terms and provisions of said instrument to the extent, if at all, that the provisions of this Deed of rights and remedies of Beneficiary under any such Assignment of Leases and under this Deed of Trust shall be cumulative. The term "Assignment of Leases" shall include, but shall not be limited to, the First Assignment of Rents and Leases. by Trustor in the performance of any material covenant of any Lease Trust are inconsistent therewith. To the extent not inconsistent, all ARTICLE I I I REMEDIES UPON DEFAULT 3.01. Events of Default. Any of the following events shall be deemed to be an event of default ("Event of Default") hereunder: (a) the Trustor shall (i) fail to pay, when due, including any grace periods as provided in the Note or the Loan Agreement, the payment of any principal or interest on the Note or (ii) fail to pay, when due, any other sum secured hereby and such failure shall remain unremedied for ten (10) days; or (b) there shall occur a breach of or default under any other covenant, agreement or obligation of Trustor contained herein and such breach or default shall remain unremedied for ten (10) days, provided, however, any defaults under individual apartment leases that are not, either individually or in the aggregate, material to Beneficia- ry's security shall not be an Event of Default hereunder; or (c) there shall occur an "Event of Default," as that term is defined in the Loan Agreement or the Indenture; or 772349-127/ARM/l STDT/MFFORM/l 04/24/85 16 .. 0 , a 1228 (d) there shall occur an "Event of Default," as that term is defined in any of the other Loan Documents. 3.02. Acceleration Upon Default; Additional Remedies. Upon the occurrence of an Event of Default, Beneficiary may, at its option, declare all indebtedness and obligations secured hereby to be immediately due and payable without any presentment, demand, protest or notice of any kind; and whether or not Beneficiary exercises said option, Beneficiary may: (a) Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court and without regard to the adequacy of its security, enter upon and take possession of the Trust Estate, or any part thereof, in its own name or in the name of Trustee, and do any act which it deems necessary or desirable to preserve the value, marketability or rentability of the Trust Estate, or part thereof or interest therein, increase the income therefrom or protect the security hereof and, with or without taking possession of the Trust Estate, sue for or otherwise collect the Rents and expenses of operation and collection including, without limitation, attorneys' fees, upon any indebtedness secured hereby, all in such order as Beneficiary may determine. The entering upon and taking possession of the Trust Estate, the collection of such Rents, and the application thereof as aforesaid, shall not cure or waive any default or notice of default hereunder or invalidate any act done in response to such default or pursuant to such notice of default and, notwithstand- ing the continuance in possession by Trustee, Beneficiary or a receiv- er of all or any portion of the Trust Estate or the collection, receipt and application of any of the Rents thereby, the Trustee or Benefi- ciary shall be entitled to exercise every right provided for in any of - the Loan Documents or by law upon occurrence of any Event of De- fault, including the right to exercise the power of sale; including those past due and unpaid, and apply the same, less costs (b) Commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the cove- nants hereof; (cj Deliver to Trustee a written declaration of default and demand for sale, and a written notice of default and election to cause Trustor's interest in the Trust Estate to be sold, which notice the Trustee or Beneficiary shall cause to be. duly filed for record in the Official Records of the County in which the Land is located; or (dl Exercise all other rights and remedies provided herein, in any Loan Document or other document or agreement now or hereaf- ter securing all or any portion of the obligations secured hereby, or provided by law. 3.03. Foreclosure By Power of Sale. (a) Should Beneficiary elect to foreclose by exercise of the power of sale herein contained, Beneficiary shall notify Trustee and shall deposit with Trustee this Deed of Trust and the Loan Agreement 772349-127/ARM/lSTDT/MfFORM/l 04/24/85 17 ,, 0 0. 1229 c and such receipts and evidence of expenditures made and secured hereby as Trustee may require. (b) Upon receipt of such notice from Beneficiary, Trustee shall cause to be recorded, published and delivered to Trustor such Notice of Default and Election to Sell as is then required by law and by this Deed of Trust. Trustee shall, without demand on Trustor, after lapse of such time as may then be required by law and after recordation of such Notice of Default and after Notice of Sale having been given as required by law, sell the Trust Estate at the time and place of sale fixed by it in said Notice of Sale, either as a whole, or in separate lots or parcels or items and in such order as Beneficiary may direct Trustee so to do, at public auction to the highest bidder for cash in- lawful money of the United States payable at the time of good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matter or fact shall be conclusive proof of the truth- fulness thereof. Any person including, without limitation , Trustor, Trustee or Beneficiary may purchase at such sale, and Trustor hereby covenants to warrant and defend the title of such purchaser or purchasers. sale, Trustee shall deliver to such purchaser or purchasers thereof its (c) After deducting all costs, fees and expenses of Benefi- ciary and Trustee, including costs of evidence of title in connection with sale, Beneficiary shall a ply .the proceeds of sale in the following priority, to payment of (i) 4 irst, all sums expended under the terms hereof, not then repaid, with accrued interest at the Agreed Rate; (ii) second, all other sums. then secured hereby; and (iii) the remainder, if any, to the person .or persons legally entitled thereto. (d) Subject to California Civil Code Q 29249, Trustee may postpone sale of all or any portion of the Trust Estate by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement or subse- quently noticed sale, and without further notice make such sale at the time fixed by the last postponement, or may, in its discretion, give a new notice of sale. (e) A sale of less than the whole of the Trust Estate or any defective or irregular sale made hereunder shall not exhaust the power of sale provided for herein; and subsequent sales, may be made hereunder until all obligations secured hereby have been satisfied, or the entire Trust Estate sold, without defect or irregularity. . 3.04. Appointment of Receiver. if an Event of Default in this Deed of Trust shall have occurred and be continuins, Beneficiary, as a matter of right and without notice to Trustor or an'yone claiming under Trustor, and without regard to the then' value of the Trust Estate or the interest of Trustor therein, shall have the right to apply the Trust Estate, and Trustor hereby irrevocably consents to such appointment and waives notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of to any court having jurisdiction to appoint a receiver or receivers of 772349-127/ARM/lSTDT/MFFORM/l 04/24/85 18 -.1 0 @ 1230 Y receivers in like or similar cases and all the powers and duties of Beneficiary in case of entry as provided herein and shall continue as such and exercise all such powers until the date of confirmation of sale of the Trust Estate unless such receivership is sooner terminated. 3.05. Application of Funds After Default. Except as other- wise herein provided, uDon the occurrence of an Event of Default hereunder, Beneficiary may, at any time without notice, apply any or all sums or amounts received and held by Beneficiary to pay insurance Trust Estate, or as insurance or condemnation proceeds, and all other sums or amounts received by Beneficiary from or on account of Trus- tor or the Trust Estate, or otherwise, upon any indebtedness or obligation of Trustor secured hereby, in such manner and order as Beneficiary may elect, notwithstanding that said indebtedness or the performance of said obligation may not yet be due. The receipt, use or application of any such sum or amount shall not be construed to affect the maturity of any indebtedness secured by this Deed of Trust, or any of the rights or powers of Beneficiary or Trustee under the terms of the Loan Documents, or any of the obligations of Trustor or any guarantor under the, Loan Documents; or to cure or waive any default or notice of default under any of the Loan Documents; or to invalidate any act of Trustee or Beneficiary. premiums, Impositions, or either of them, or as rents or income of the 3.06. Costs of Enforcement. . If any Event of Default oc- curs, Beneficiary and Trustee, and each of them, may employ an attorney or attorneys to protect their rights hereunder. Trustor such attorneys and all other costs of enforcing the obligations secured hereby including, without limitation, recording fees, the expense of a Trustee's Sale Guarantee, Trustee's fees and expenses, receivers' fees and expenses, and all other expenses, of whatever kind or nature, incurred by Beneficiary and Trustee, and each of them, in connection with the enforcement of the obligations secured hereby, whether or not such enforcement includes the filing of a lawsuit. Until paid, such sums shall be secured hereby and shall bear interest, from date of expenditure, at the Agreed Rate. promises to pay to Beneficiary, on demand, the fees and expenses of 3.07. Remedies Not Exclusive. Trustee and Beneficiary, and each of them, shall be entitled to enforce payment and perfor- mance of any indebtedness or obligation secured hereby and to exer- cise all rights and powers under this Deed of Trust or under any Loan Document or other agreement or any law now or hereafter in force, notwithstanding some or all of the said indebtedness and obligations secured hereby may. now or hereafter be otherwise secured, whether otherwise. Neither the acceptance of this Deed of Trust nor its enforcement whether by court action or pursuant to the power of sale or other powers herein contained, shall prejudice or in any manner affect Trustee's or 6eneficiary's right to realize upon or enforce any other security now or hereafter held by Trustee or Beneficiary, it being agreed that Trustee and Beneficiary, and each of them, shall be entitled to enforce this Deed of Trust and any other security now or hereafter held by Beneficiary or Trustee in such order and manner as by guaranty, mortgage, deed of trust, pledge, lien, assignment or 772349-127/ARM/lSTDT/MFFORM/l 04/24/85 19 ., e 0-9 1231 + they may in their absolute discretion determine. No remedy herein conferred upon or reserved to Trustee or Beneficiary is intended to be exclusive of any other remedy herein or by taw provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any of the may be otherwise entitled may be exercised, concurrently or indepen- dently, from time to time and as often as may be deemed expedient by Trustee or Beneficiary, and either of them may pursue inconsistent remedies . Loan Documents to Trustee or Beneficiary or to which either of them 3.08. Request for Notice. Trustor hereby requests that a copy of any notice of default and a copy of any notice of sale hereun- der be mailed to it at the addresses specified for Trustor in Section 4.06 hereof. 3.09. Personal Property. It is the express understanding and intent of the parties hereto that upon the occurrence of an Event of Default hereunder, Beneficiary, in its sole discretion, may proceed under Article 9 of the California Uniform Commercial Code (the "Code") as to any personal property or fixtures, or may proceed as to both the real property and the personal property or fixtures in accordance with the provisions of this Deed of Trust and its rights and remedies in respect of the real property, as specifically permitted under Section 9501(4) of the Code, and treat both the real property and the personal property or fixtures as one parcel or package of security. ARTlCLE 1V MISCELLANEOUS COVENANTS AND AGREEMENTS 4.01. Amendments. This instrument cannot be waived, changed, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of any waiv- er, change, discharge or termination is sought. A copy of said in- strument shall be sent by said party to all other parties in the manner specified in Section 4.06 hereof. 4.02. Trustor's Waiver of Rights. Trustor waives, to the extent permitted by law, (i) the benefit of all laws now existing or sale of any portion of the Trust Estate, and, whether now existing or hereafter arising or created, (ii) all rights of redemption, valuation, appraisement, stay of execution, notice of election to mature or deciare due the whole of the secured indebtedness and marshaling in the event of foreclosure of the liens hereby created, and (iii) all rights and , remedies which Trustor may have or be able to assert by reason of the laws of the State of California pertaining to the rights and remedies of sureties; provided, however, nothing contained herein shall be deemed to be a waiver of Trustor's right under Sectiqn 2924c of the California Civil Code. that may hereafter be enacted providing for any appraisement before 772349-127/ARM/l STDT/MFFORM/l 04/24/85 20 .*' e e '-9 1232 4.03. Statements by Trustor. Trustor shall, within ten (10) days after notice thereof from Beneficiary, deliver to Beneficiary a written statement setting forth the amounts -then unpaid and secured by this Deed of Trust and stating whether any offset or defense exists against payment of such amounts. 4.04. Beneficiary Statements. For any statement or ac- counting requested by Trustor or any other entitled person pursuant to Section 2943 or Section 2954 of the California Civil Code or pursuant to any other provision of applicable law, or for any other document or \ instrument furnished to Trustor by Beneficiary, Beneficiary may charge the maximum amount permitted by law at the time of the re- quest therefor, or if there be no such maximum, then in accordance with Beneficiary's customary charges therefor or the actual cost to Beneficiary therefor, whichever is greater. 4.05. Reconveyance by Trustee. Upon written request of Beneficiary stating that ail sums and obligations secured hereby have been paid and fully performed, and upon surrender by Beneficiary of this Deed of Trust and the Note to Trustee for cancellation and reten- tion and upon payment by Trustor of Trustee's fees and the costs and expenses of executing and recording any requested reconveyance, Trustee shall reconvey to Trustor, or to the person or persons legally entitled thereto, without warranty, any portion of the Trust Estate then held hereunder. The recitals in any such reconveyance of any matter or fact shall be conclusive proof of .-the truthfulness thereof. The grantee in any such reconveyance may be described as "the person or persons legally entitled thereto." 4.06. Notices. Whenever Beneficiary, Trustor or Trustee shall desire to give or serve any notice, demand, request or other communication with respect to this Deed of Trust, each such notice, demand, request or other communication shall be in writing and shall be delivered by personal service or mailed by registered or certified other of the parties hereto at the address therefor set forth in the first paragraph of this Deed of Trust; provided, however, that copies of any such notice, demand, request or communication shall also be directed to such parties as are hereinafter set forth in this .Section. Such notice shall, if sent by mail in accordance with this Section, be deemed given two business days after deposit in the U.S. mail and if delivered by personal service, shall be effective only if and when received by addressee. Any party may at any time change its address for such notices by delivering or mailing to the other parties hereto, as aforesaid, a notice of such change. mail, postage prepaid, return receipt requested, addressed to such If to Trustor, Gibson, Dunn & Crutcher then also to: 800 Newport Center Drive, Suite 600 Newport Beach, California 92660 Attn: M. Russell Kruse, Jr. 4.07, Acceptance by Trustee, Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. 772349-127/ARM/lSTDT/MFFORM/l 04/24/85 21 4 * 0 ' t 1233 4 4.08. Captions. The captions or headings at the beginning of Articles, Sections and Subsections hereof are for the convenience of the parties, are not a part of this Deed of Trust, and shall not be used in construing it. 4.09. Invalidity of Certain Provisions. Every provision of this Deed of Trust is intended to be severable. In the event any term or provision hereof is declared to be illegal, invalid or unenforceable for any reason whatsoever by a court of competent jurisdiction, such illegality, invalidity or unenforceability shall not affect the balance of the terms and provisions hereof,. which terms and provisions shall remain binding and enforceable. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the debt, or if the lien is invalid or unenforceable as to any part of the Trust Estate, the unse- cured or partially secured portion of the debt shall be completely paid prior to the payment 'of the remaining and secured or partially secured portion of the debt, and all payments made on the debt, whether voluntary or under foreclosure or other enforcement action or proce- dure, shall be considered to have been firsf paid on and applied to the full payment of that portion of the debt which is not secured or fully secured by the lien of this Deed of Trust. 4.10. Subrogation. To the extent that proceeds of the Note are used, either directly or indirectly, to pay any outstanding lien, charge or prior encumbrance against the Trust Estate, Beneficiary shall be subrogated to any and all rights and liens held by any owner or holder of such outstanding liens, charges and prior encumbrances, irrespective of whether said liens, charges or encumbrances are released. 4.11. No Merger of Lease. Upon the foreclosure of the lien created by this Deed of Trust on the Trust Estate pursuant to the provisions hereof, any lease or sublease then existing and affecting all or any portion of the Trust Estate shall not be destroyed or terminat- ed by application of the law of merger or as a matter of law or as a result of such foreclosure unless Beneficiary or any purchaser at such foreclosure sale shall so elect. No act by or on behalf of Beneficiary or any such purchaser shall constitute a termination of any lease or sublease unless Beneficiary or such purchaser shall give written notice of such termination to such tenant or subtenant. If both the lessor's and lessee's estate under any lease or any portion thereof which constitutes a part of the Trust Estate shall at any time become vested in one owner, this Deed of Trust and the lien created hereby shall not be destroyed or terminated by application of the doctrine of merger unless Beneficiary so elects as evidenced by recording a written declaration so stating, and, unless and until Beneficiary so elects, Beneficiary shall continue to have and enjoy all of the rights and privileges of Beneficiary hereunder as to the separate estates. 4.12. Governing Law. This Deed of Trust shall be gov- erned by and construed in accordance with the laws of the State of California. 772349-127/ARM/l STDT/MFFORM/l 04/24/85 6- 73 " < 0 0 "Id 1234 4.13. Statute of Limitations. Except insofar as now or hereafter prohibited by law, the right to plead, use or assert any statute of limitations as a plea or defense or bar of any kind, or for any purpose, to any debt, demand or obligation secured or to be secured hereby, or to any complaint or other pleading or proceeding filed, instituted or maintained for the purpose of enforcing this Deed of Trust or any rights hereunder, is hereby waived by Trustor. 4.14. Joint and Several Obligations. Should this Deed of Trust be signed by more than one party, all obligations herein con- tained shall be deemed to be the joint and several obligations of each party executing this Deed of Trust. Any married person signing this Deed of Trust agrees that recourse may be had against community assets and against his or her separate property for the satisfaction of all obligations contained herein. 4.15. Interpretation. In this Deed of Trust the singular shall include the plural and the masculine shall include the feminine and neuter and vice versa, if the context so requires; and the word "person" shall include corporation, partnership or other form of association. 4.16. Completion of Construction. This Deed of Trust is a construction deed of trust within the meaning of California Commercial Code 8 9313. For the purpose of subdivision six (6) of said Section 9313, "completion of construction" shall not be deemed to have oc- curred until completion of all work, and installation or incorporation into the Improvements of all materials, for which sums secured hereby are disbursed. 4.17. Trust Irrevocable; No Offset. The Trust created hereby is irrevocable by Trustor. No offset or claim that Trustor now or may in the future have against Beneficiary shall relieve Trustor from paying the indebtedness or performing any other obligation contained herein or secured hereby. 4.18. Corrections. Trustor. shall, upon request of Benefi- ciary, promptly correct any defect, error or omission which may be discovered in the contents hereof or in the execution or acknowledge- ment hereof, and will execute, acknowledge and deliver such further instruments and do such further acts as may be necessary or as may be reasonably requested by Beneficiary to carry out more effectively the purposes hereof, to subject to the lien and security interest hereby created any of Trustor's properties, rights or interest covered or intended to be covered hereby, or to perfect and maintain such lien and security interest. 4.19. Further Assurances. Trustor, Beneficiary and Trustee agree to do or to cause to be done such further acts and things and to execute and deliver or to cause to be executed and delivered such additional assignments, agreements, powers and instru- ments, as any of them may reasonably require or deem advisable to keep valid and effective the charges and lien hereof, to carry into effect the purposes of this Deed of Trust or to better assure and 772349-127/ARM/lSTDT/MFFORM/l 04/24/85 23 .. \ @ 0 9 I235 .. confirm unto any of them their rights, powers and remedies hereun- fulfillment of each of the covenants herein contained concerning which a request for such evidence has been made. der; and, upon request by Beneficiary, shall supply evidence of 4.20. Execution of Instruments by Trustee. At any time, and from time to time, without liability therefor and without notice, upon written request of Beneficiary or Bank and presentation of this Deed of Trust and the Note secured hereby for endorsement, and without affecting the personal liability of any person for payment of the indebtedness or the performance of any other obligation secured hereby or the effect of this Deed of Trust upon the remainder of said Trust Estate, Trustee may (i) reconvey any part of said Trust Estate, (ii) consent in writing to the making of any map or plat thereof, (iii) join in granting any easement thereon, or (iv) join in any extension agreement, agreement subordinating the lien or charge hereof, or other agreement or instrument relating hereto or to the Trust Estate or any portion thereof. .. 4.21. Appointment of Successor Trustee. Trustee or any successor acting hereunder may resign and thereupon be discharged of the trusts' hereunder upon thirty (30) days' written notice to Benefi- ciary. Regardless of whether such resignation occurs, Beneficiary may, from time to time, substitute a successor or successors to any Trustee. named herein or acting hereunder in accordance with any statutory procedure for such substitution; or if Beneficiary, in its sole discretion, so elects, Beneficiary may substitute such successor or successors by recording in the office of the recorder of the county or counties where the Land is situated, an instrument executed by Bene- ficiary, and containing the name of the original Trustor, Trustee and Beneficiary hereunder, the book and page where this Deed of Trust is recorded and the name and address of the new Trustee, which instru- ment shall be conclusive proof of proper substitution of such successor Trustee or Trustees, who shall, without conveyance from the prede- cessor Trustee,, succeed to all its title, estate, rights, powers and duties hereunder. 4.22. Successors and Assigns. This Deed of Trust applies to, inures to the benefit of and binds Trustor and the heirs, legatees, devisees, administrators, personal representatives, executors and the successors and assigns thereof, Trustee and Beneficiary. As used herein, the term "Beneficiary" shall mean the owner and holder of the Note from time to time, 'whether or not named as Beneficiary herein; the term "Trustee" shall mean the trustee appointed hereunder from time to time, whether or not notice of such appointment is given; and the term "Trustor" shall mean the Trustor named herein and the successors-in-interest, if any, of said named Trustor in and to the Trust Estate or any part thereof. If there be more than one Trustor hereunder, their obligations shall be joint and several. 4.23. Priority. This Deed of Trust is intended to have and retain priority over all other liens and encumbrances upon the Trust Estate, excepting only: (i) such impositions as at the date hereof have, or by law gain, priority over the lien created hereby; (ii) 772349-127/ARM/lSTDT/MFFORM/l 04/24/85 24 r. * 0 +-I- . 1236 covenants, conditions, restrictions, easements, and rights of way which are of record or are disclosed of record and which affect the Trust Estate on the date hereof; (iii) the Regulatory Agreement; and (iv) Leases, liens, encumbrances and other matters as to which Bene- ficiary hereafter expressly subordinates the lien of this Deed of Trust by written instrument in recordable form. Under no circumstance shall Beneficiary be obligated or required to subordinate the lien hereof to any Lease, lien, encumbrance, covenant or other matter affecting the Trust Estate or any portion thereof. Beneficiary may, however, at Beneficiary's option, exercisable in its sole and absolute discretion, subordinate the lien of this Deed of Trust, in whole or in part, to any or all Leases, liens, encumbrances or other matters affecting all or any portion of the Trust Estate by executing and recording in the Office of the County Recorder of the County and State in which the Land is located, a unilateral declaration of such subordination specifying the Lease, lien, encumbrance or other matter or matters to which this Deed of Trust shall thereafter be subordinate. 4.24. Approvals by Beneficiary. So long as the Letter of Credit remains in effect, and so long as the Bank shall not be in default in the payment of any amount required to be paid pursuant to the terms of such Letter of Credit, Beneficiary shall be deemed to have approved, for the purposes of this Deed of Trust, any matters as to which Trustor is required hereunder to obtain Beneficiary's approval, provided that the same shall have been approved in writing by the Bank. The foregoing shall not be construed as relieving Trustor of the obligation to secure ,Beneficiary's approval of any matter for which such approval is required under the terms of the Loan Agreement or the Indenture. IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be executed by its duly authorized agents and representa- tives on q&g +?? , 1985. "Trustor" LA COSTA PARTNERS, a California general partnership By: Rodney F. Stone as Trustee for the Stone Family Trust, ck\derb>@ general partner 6-d h'us -pXi., &+e ., '\,-\ \ ,. : ' By: George A. Ferrnanian as Trustee for the Fermanian Family Trust, OdW&?l general partner Tb58-t- d .. ..- - . . " _." -- __ ___ -. Apt : .\ ;?,? .+- 2, ' ,* . .; ! : (,. :- _. ,, }.LL... - >-; . '. 772349-127/ARM/lSTDT/MFFORM/l 04/24/85 25 ,~ .. e 0 9 1231 ACKNOWLEDGMENT STATE OF CALIFORNIA 1 COUNTY OF dbSA-N6EI=ES ) G@.,qr. 5 5 1 ss 7/.+ On this :,?;: day of April, 1985, before me the under- signed, a notary public in and for said State, personally appeared Rodney F. Stone personally known to me or proved to me on the basis of satisfactory evidence to be the person who executed the within instrument as the trustee of the Stone Family Trust which executed the same as the general partner of La Costa Partners, a California general partnership, and he acknowledged to me that he executed the same as trustee of said trust, that said trust executed the same as a general partner of said partnership and that said partnership executed the same. WITNESS my hand and official seal. (/j$&&.h2? I- ,,. w*/uA “. iota”PubIic in and for said State [SEAL] m~mnn~(nm~nn~~-~~nnmgtl,ntlullllmn(”~,,~ OFFICIAL SEAL MICHELLE 1, STELLHPRN NOTA2Y PUSLIC-CALI~OR~~IA LO5 ANGELES COUNTY PRINCIPAL OFFICE IN “E - - - - - - - ‘i - - - - - - E Commission Expires Aug. 9, 1988 p ~UHI~~UIUH~IIIIII~~I~II~I~UII~U~U~~IIIUII~UH~ 772349-127/ARM/lSTDT/MFFORM/l 04/24/85 c' * e 0 . '..a 1234 I. ACKNOWLEDGMENT STATE OF CALIFORNIA 1 COUNTY OF ,k%A.NGft€$ ) (1"Rec 4 '6 1 ss &- On this &I day of April, 1985, before me the under- signed, a notary public in and for said State, personally appeared George A. Fermanian personally known to me or proved to me on the basis of satisfactory evidence to be the person who executed the within instrument as the trustee of the Fermanian Family Trust which executed the same as the general partner of La Costa Partners, a California general partnership, and he acknowledged to me that he executed the same as trustee of said trust, that said trust executed the same as a general partner of said partnership and that said partnership executed the same. WITNESS my hand and official seall Lfl&&&J!J fl&U$;?- Notary-Public in and for said State [SEAL] Ilm~WHwmW~lnI11Iul~n~llu~~ln~~ffl~~t~~~u~~~~~mn~ MICHELLE T. STELLHORN $ OFFlCtAL SEAL " - NOTARY PUELIC.CALIFORNIA i PRINCIPAL OFFICE IN z k-uII-"YIII~I.~~~~"~~~~~~~~~~~n~~~~~~~~~~~~~~~~~~~~m~~~~~~~~~~~~~~'~~~~~~~,~~~~~~~~~~ LOS ANGELES COUNTY t My Commission Expires Aug. 9, 1983 2 772349-127/ARM/lSTDT/MFFORM/l 03/24/85 e 0 .? 12: .. 1 EXHIBIT A DESCRIPTION OF LAND Parcel 2 of Parcel Map 13524, in the City of Carlsbad, County of San Diego, State of California, filed in the Office of the County Recorder of San Diego County, October 25, 1984, as File No. 84-403293 of Official Records. Excepting therefrom, all minerals, mineral rights, oil, oil other hydrocarbon substances, geothermal steam, all underground water, and all products derived from any of the foregoing, in or under or which may be produced from the property which underlies a plane parallel to and 500 feet below the present surface of the property together with the perpetual right of drilling, mining, exploring and operating therefor and storing in and removing the same from the property or any other land, including the right to whipstock or directionally drill and mine from lands other than the property, oil, water, or gas wells, tunnels and shafts into, through or across the subsurface of the property, and to bottom such whipstocked or directionally drilled wells., tunnels, and shafts under the beneath or . beyond the exterior limits thereof, and to redrill, retunnel, equip, maintain, repair, deepen, and operate any such wells or .mines, without, however, the right to drill, mine, store, explore, and operate through the surface or the upper five hundred (50) feet of the subsurface of the property; as reserved to Daon Corporation in Grant Deed recorded October 29, 1984, Official Records, File/Page No. rights, natural gas, natural gas rights, petroleum, petroleum rights, 84-407544. 772349-127/ARM/lSTDT/MFFORM/l 04/24/85 A- 1 - -. .. . I- o 0 *-# 12 CERTIFICATE OF ACCEPTANCE (California Government Code Section 27281) First Deed of Trust and Assignment of Rents (Construction Trust Deed) This is to certify that the interest in real proper. if any, conveyed or assigned by the foregoing First Deed of Trust and Assignment of Rents (Construction Trust Deed) datec as of April 1, 1985, from La Costa Partners, a California general partnership, to the City of Carlsbad, California, a municipal corporation ("Issuer"), is hereby accepted by the undersigned officer or agent on behalf of Issuer pursuant to authority conferred by resolution of Issuer adopted on March 19,' 1985, and Issuer consents to the recordation thereof by undersigned as its duly authorized officer or agent. Dated: &*/&J&25 /gY By: ;/, ,1( & &: ! ,k? t;t: LA Tit le : L.&Jc~ Q &-~&/&cAg L 6 -y "- I 0 e "s- 1 .. STATE OF CALIFORNIA 1 COUNTY OF ORANGE 1 1 ;K On this a! day of April. 1985. personally appeared --A 4 Martin Orenyak, the Director of Building and Planning of the City of Carlsbad, a municipal corporation organized and existing under the Constitution and laws of the State of California, known to me or proved to me on the basis of satisfactory evidence to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged tc me that he executed the same for the purposes and'consideratic therein expressed, in the capacity therein stated, as the act and deed of said public body. WITNESS my hand and fficial seal. [SEAL] L/@/&;y? I, &&&/&LA Nota'r-vublic - My Commission Expires : c/ h%!s, p&j- y / /ya r/;l/.Q$& 7 +&dP- g Print Name fflmR)1II(IM11IIIIMlII~m~lllllllllll~l~~nm~~n~~~~~~~n~~~~~~~~n~~~~~ - - - - - OFFiClAL SEAL - MICHELLE T. STELLHORN i ,NOTARY PUBLIC-CALIFORNIA g PRINCIPAL OFFICE IN z LOS ANGELES COUNTY. g E My Commission Expires Aug. 9, 1988 z ~~IIIw~lul~~lll~llw~lulllll~lll~ll~lll~llll~ll~lllu~lll~lllll~~~u~l~lll~lll~l~~ - I. .. - . a "1 1256 * 8S"P46@ / I" y y !,,\;:\,I l(-l,! l?i C1i-F :c:,:,i- f;:''C::<:> - '. ' '.I-.' '7 MF85-207/A ;F Sh,? ;;z;y; '';.,Lk , .,u.i; . v, * Recording Requested by: TRANSAMERICA TITLE INSURANCE COMPANY fSBS APR 29 wi i I Order no. 6001485 When Recorded Mail to: O'MELVENY E MYERS L jfEF'.:n L.;"; ; 6 CGUqi <{ ic;;-./:;;i; 400 South Hope Street Los Angeles, California 90071 -2899 Attention: Marcia Ferris (File No. 772,349-127) -m k MEMORANDUM OF ASSIGNMENT OF FIRST DEED OF TRUST AND FIRST ASSIGNMENT OF RENTS AND LEASES I LR THIS MEMORANDUM OF ASSIGNMENT OF FiRST DEED OF TRU: AND FIRST ASSIGNMENT OF RENTS AND LEASES (this "Assignment' dated as of April 1, 1985, for reference purposes only, is made by t CITY OF CARLSBAD, a municipal corporation ("Issuer"), to THE BANK ( CALIFORNIA, N. A. ,. a national ban king association ("Bond Trustee"), Trustee under that certain 1ndentur"e of Trust of even date herewith (t '"Indenture") by and between Issuer and Bond Trustee. FOR VALUE RECEIVED, Issuer hereby grants, assigns and tran fers to Bond Trustee, as Trustee under the Indenture, and subject to of the terms and provisions set forth in said Indenture, which terms a provisions are incorporated herein by this reference, the following: (i) all of Issuer's rights, titles and interests as Beneficiary u der that certain First Deed of Trust and Assignment of Rents (Constructi Trust Deed) of even date herewith (the "First Deed of Trust"), execut by LA COSTA PARTNERS, a California general partnership ("Developer' as Trustor, to TRANSAMERICA TITLE INSURANCE COMPANY, a Califorl corporation, as Trustee, for the benefit of Issuer, as Beneficiary, relati to that certain real property located in San Diego County, California, a described in Exhibit A attached hereto (the "Land"), and recorded conct rently herewith in the Official Records of said County, together with all Issuer's interest in all of the obligations and indebtedness secured by Si First Deed of Trust; and (ii) all of Issuer's rights, titles and interests under that cert; First Assignment of Rents and Leases of even date herewith relating to I Land (the "First Assignment of Rents"), executed by Developer, as assis or, in favor of Issuer, as assignee, and recorded concurrently herewith the above-described Official Records; In the event OF any conflict between the terms ot this Assignmt and any of the terms and provisions of the Indenture, the terms and pros sions of the Indenture shall prevail. 772349-127/ARM/MEMOR/MFFORM/I 04/13/85 1 f. ? “3 1257 e EXECUTED by Issuer on Y/?q , 1985. ” I ssuer” : CITY qy ,CARL;SBAD ; i~’”-;x. ,/”. By: ; -. :- .& .. 1 A Director of Building and 3lanning ATTEST; City Clerk 1 6- 772349-127/ARM/MEMOR/MFFORM/l 04/ 13/85 2 0 .a - 1258 0 STATE OF CALIFORNIA 1 COUNTY OF ORANGE 1 1 --EL On this 23 day of April, 1985, personally appeared Martin Orenyak, the Director of Building and Planning of the - City of Carisbad, a municipal corporation organized and existing under the Constitution and laws of the State of California, known to me or proved to me on the basis of satisfactory evidence to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged tc me that he executed the same for the purposes and consideratic therein expressed, in the capacity therein stated, as the act and deed of said public body. WITNESS my hand and official seal. ( /Tft ,$/9.+ ,< r /; +L ;.-,< 1 [SEAL) i <&i/L2+L/'.-~* ,I ~~~LC2q7Jd W Notary..Public My Commission Expires : ;?Jj&LkTrq /98!Y flhdeh 1 1 ,f- ,J$gL/+ec - - MlCHEtLE T. STELLHORN f t ,/ "Y $ Print Name ~~ml~~U~~~~~~nnn~~m~~~~~~~~~~~~~~nmn~~nu~~~~~~~~~u~~~~~~"~~ - - OFFICIAL SEAL E - - = - - x NOTARY PUnLfC.CALIFORNIA i a - PRiNCIPAL OFFICE IN 2 - - - - - tOS ANGELES COUNTY E g MY Commission Expires Aug. 9, 1988 P ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~u~~~~n~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~,,,,,,~~,,l,llll~lll,,,,,,,l,llll,~ " .- 0 c -9 1251) ACKNOWLEDGMENT STATE OF CALIFORNIA 1 COUNTY OF SAN DIEGO 1 1 ss On this #a day of April, 1985, personally appear HdETrnX. &~-FA/~L the City Clerk of the City of Carlsbad, a municil corporation organized and existing under the constitution and laws of 1 State of California, known to me or proved to me on the basis of satisfaci ry evidence to be the person and officer whose name is subscribed to i foregoing instrument, and acknowledged to me that she executed the si for the purposes and consideration therein expressed, in the capac therein stated, as the act and deed of said public body. WITNESS my hand and official seal. [SEAL] My Commission Expires: e 9,- I " nd for said State ?Ay/h- /gLizJ Bp J7e* 772349-127/ARM/MEMOR/MFFORM/l 04/ 13/85 4 . LI . *. .- a q26Q r. "a EXHIBIT A DESCRIPTION OF LAND Parcel 2 of Parcel Map 13524, in the City of Carlsbad, County San Diego, State of California, filed in the Office of the County Recorder San Diego County, October 25, 1984, as File No. 84-403293 of Offic Records. Excepting therefrom, all minerals, mineral rights, oil, oil righ natural gas, natural gas rights, petroleum, petroleum rights, ott hydrocarbon substances, geothermal steam, ail underground water, and products derived from any of the foregoing, in or under or which may produced from the property which underlies a plane parallel to and 500 f below the present surface of the property together with the perpetual ri! of drilling, mining, exploring and operating therefor and storing in B removing the same from the property or any other land, including the ri! to whipstock or directionally drill and mine from lands other than . property, oil, water, or gas wells, tunnels and shafts into, through across the subsurface of the property, and to bottom such whipstocked directionally drilled wells, .tunnels, and shafts under the beneath or beyc the exterior limits thereof, and to redrill, retunnel, equip, mainta repair, deepen, and operate any such wells or mines, without, howev the right to drill, mine, store, explore, and operate through the surface the upper five hundred (50) feet of the subsurface of the property; reserved to Daon Corporation in Grant Deed recorded October 29, 19 Official Records, Fiie/Page No. 84-407544. 772349-127/ARM/MEMOR/MFFORM/l 04/ 13/85 5 f .; .. e. 1242 e $5-<146f *. ,. I -. -~ L. MF85-212/A TRANSAMERICA TITLE INSURANCE COMPANY Order No: 6001485 When Recorded Mail To: 400 South Hope Street Los Angeles, California 90071 -2899 Attention : Marcia Ferris (File No: 772,349-127) Recording Requested By: O'Melveny & Myers I" :':..,\;!<;+; -. -,. . . E55 AQR 29 j$ 6: SA% ;:. :.i CF !-;:!;,:+;- :<: *.c 1;Ll :,:;L: .. 1. L" c-;: > I , i , I-i ++ !-..;-> : CO1J?r''i y Fr:.!..:: I L I, Li 3 FIRST ASSIGNMENT OF RENTS AND LEASES THIS FIRST ASSIGNMENT OF RENTS AND LEASES (t "Assignment") dated as of April 1, 1985, for reference purposes only, made by LA COSTA PARTNERS, a California general partnership ("i signor"), whose principal business address is 11300 Sorrento Val Road, Suite 200, San Diego, California 92121, to and for the benefit the CITY OF CARLSBAD, a municipal corporation ("Issuer"), wh address is 1200 Elm Avenue, Carlsbad, California 92008, Attention: C Manager, with reference to the following: RECITALS: """" A. Assignor is the owner .of that certain real property loc. ed in San Diego County, California, more particularly described Exhibit A attached hereto and incorporated herein by this reference (1 "Land"). As used herein, the term "Premises" shall mean the La1 together with any and all improvements now or hereafter constructed situated thereon, including the Project (as hereinafter defined). * 8. Pursuant to that certain Indenture of Trust of even d herewith (the "Indenture"), by and between Issuer and THE BANK CALIFORNIA, N.A., a national banking association, as trustee ("Bc Trustee"), and that certa-in Loan Agreement of even date herewith and among Assignor, Issuer and Bond Trustee (the "Loan Agreement Issuer has agreed to issue those certain Multifamily Housing Rever Bonds, Series A of 1985 (the "Bonds"), in the aggregate princi amount of $15,920,000, and to loan to Assignor the proceeds of sale such Bands to enable Assignor to finance the development on the L; of the multifamily residential rental housing project described in the L( Agreement (the "Project"). Such loan is evidenced by that cert promissory note of even date herewith in the original principal amount $15,920,000 (the "Note"), made by Assignor payable to the order Issuer, and is secured by, inter alia, that certain First Deed of Trl and Assignment of Rents (Construction Trust Deed) of even date he with (the "First Deed of Trust") executed by Assignor with respect the Project for the benefit of Issuer, and that certain First Secur Agreement of even date herewith executed by Assignor, as Debtor, z naming Issuer as Secured Party (the "First Security Agreement"). T Assignment,. the Loan Agreement, the Indenture, the Note, the Fi Deed of Trust, and any other deed of trust, mortgage, secur " 772349-127/ARM/lARAL/MFFORM/l 04/24/85 1 .. * e 1243. .* agreement, guaranty or other instrument given to evidence or furt' secure the payment or performance of any obligation secured by First Deed of Trust are sometimes hereinafter collectively referred to the "Loan Documents." Pursuant to the Indenture, Issuer will assign Bond Trustee certain of its rights and interests under the Loan Agr ment, together with its rights under the Note, this Assignment, First Deed of Trust, and the First Security Agreement. C. The Bonds are further secured by, and are payable f drawings upon, that certain irrevocable direct draw letter of credit the amount of $16,649,999 (the "Letter of Credit") to be issued Security Pacific National Bank, a national banking association ( "Bank"), to Bond Trustee for the account of Assignor, pursuant to t certain Reimbursement Agreement of even date herewith by and betw Assignor and the Bank (the "Reimbursement Agreement"). The obli tions of Assignor to the Bank under the Reimbursement Agreement secured by, inter alia, that certain Second Deed of Trust and Assi i'Second Deed of Trust"), executed by Assignor with respect to Project for the benefit of the Bank, and that certain Second Secul Agreement of even date herewith executed by Assignor, as Debtor, naming the Bank as Secured Party (the "Second Security Agreemen' As used herein, the term "Letter of Credit" shall mean and include above-described letter of credit issued by Security Pacific Natic Bank, as well as any other "Bank Letter of Credit" or "Substitute Le of Credit" (as those terms are defined in the Indenture) that may issued hereafter in replacement of the above-described letter of cre in accordance with the terms of the Indenture, and the term "Ba shall mean and include Security Pacific National Bank or such ot entity that hereafter issues a Letter of Credit in replacement of above-described letter of credit, in accordance with the terms of Indenture. ment of Rentnonstruction Trust Deed) of even date herewith ( D. As a condition precedent to the issuance by Issuer of Bonds, and the loan of the proceeds thereof to Assignor, Issuer required that Assignor execute, acknowledge and deliver this Assignrr to Issuer. NOW THEREFORE, with reference to the foregoing Reci incorporated herein and in consideration of the agreement of Issuer issue the Bonds and to loan the proceeds thereof to Assignor, and other good and valuable consideration, the receipt and adequacy which are hereby acknowledged, Assignor hereby covenants and agt as follows: 1. Assignment of Rents. Assignor does hereby presel sell, convey, assign, transfer and set over unto Issuer all of the come, rents, security deposits, revenues, issues, royalties, pro1 earnings, products and proceeds of the Premises including, witt limitation, all such Rents due or to become due under all Leases, hereinafter defined, (collectively, the "Rents") together with the ri! power and authority to collect the same; provided, however, that so I as no Event of Default shall exist hereunder, Assignor shall have 772349-127/ARM/lARAL/MFFORM/l 04/24/85 2 -- '9 e " ! llhh4 I .. right to collect all Rents and to retain, use and enjoy the same, exc that: (a) Assignor shall not collect or accept any Rents or ot payments more than 30 days in advance of the due date thert established in accordance with the terms of the Leases without prior written consent of Issuer; and (b) Assignor's authority under this Paragraph 1 to collect i retain such Rents shall terminate automatically upon the occurre of an Event of Default hereunder; it being understood and agreed that the assignment of Rents contail in this Paragraph is, and shall be construed to be, an absolute pres assignment from Assignor to Issuer and not merely the creation o security interest. 2. Assignment of Leases. Assignor also hereby preser assigns, conveys and transfers over to issuer all of Assignor's. ris title and interest i.n and to all leases, subleases, licenses, concessi and other agreements (collectively, together with all modificatio extensions and renewals t.hereof and all guaranties of the obligations any of the third parties thereto, the "Leases"), both written and c and those now existing and those hereafter created, that affect i portion of the- Premises or the right to use or occupy the same or t are related to incidental services rendered in connection with the u occupancy, maintenance or servicing of the Premises or any port thereof; provided, however, that until Issuer shall exercise its ri! hereunder upon an Event of Default and enter upon and take possess of the Premises: (a) nothing contained herein shall operate or be construed obligate Issuer to perform any of the terms, covenants or oblii tions made by or imposed on Assignor under or with respect to e of the Leases or otherwise to impose any obligation upon ISSI with respect to any of the Leases including, but not limited to, 2 obligation .arising out of any covenant of quiet enjoyment ther contained; and (b) this Assignment shall not operate to place upon ISSI any responsibility for the operation, control, care, management repair of the Premises or any portion thereof, it being understc and agreed by Assignor that the execution hereof by Assignor SI constitute conclusive evidence that all responsibility for the ope tion, control, care, management and repair of the Premises is ; shall be that of Assignor prior to each such actual entry and tak possession by Issuer as aforesaid. 3. Assignment of Awards. Assignor also hereby presen assigns and sets over to issuer any and all awards hereafter made any bankruptcy, insolvency or reorganization proceeding in any state federal court involving any of the parties to the Leases and any and payments made by such parties in lieu of rent or other sums under * Leases. Assignor hereby irrevocably appoints Issuer as its law 772349-127/ARM/lARAL/MFFORM/l 04/24/85 3 .* 0 * L I 01245 .. ! attorney-in-fact to appear in any such action and/or to collect any s award or payment. The foregoing power of attorney is coupled with interest and cannot be revoked. 4. Covenants, Representations and Warranties. With spect to each of the Leases and the Rents due or to become due the under, Assignor hereby covenants, represents and warrants to Iss that: (a) Assignor has (or, in the case of Leases hereafter mz shall have at the time-each such Lease is made) full right and 4 to assign its interest therein; (b) except for the assignments made in the First Deed Trust and the Second Deed of Trust and except for this Assignn and that certain Second Assignment of Rents and Leases, of e. date herewith, made by Assignor to and for the benefit of the B (the "Second Assignment of Rents"), and recorded concurref herewith, which Second Assignment of Rents is subject and sub dinate to this Assignment, no other assignment of any interesl any of the Leases or Rents has been made (or, in the case Leases hereafter made, shall have been made at the time each s .Lease is made); (c) no offsets, credits or defenses to the payment of obligation thereunder exist (or, in the case of Leases herea. made, shall then exist); (d) Assignor has not and will not collect Rents more thar days in advance of the due date therefor under the Leases or t respect to the Premises other than as required to be paid in vance by the terms of any of the Leases and will not do any which would destroy or impair the benefits or security of Assignment to Issuer; (e) upon completion of the Project, Assignor shall lease residential units of the Project using a standard rental agreemen' a form previously approved by Issuer; (f) Assignor will not, except in the ordinary course of bt ness and pursuant to Assignor's standard procedures with reg to such matters, hereafter cancel, surrender, modify or termir any of the Leases or exercise any option which might result in same or consent to the release of any party liable thereunder consent to the assignment or sublease of any party's interest the in; provided, however, that upon an Event of Default hereunc any such cancellation, surrender, termination, modification, exerc or consent shall not be made or given by Assignor without prior written consent of Issuer; and (9) Assignor shall promptly and faithfully observe, perf and discharge all of the obligations agreed to be performed by, imposed upon, Assignor under the Leases and shall give pro notice to issuer of any claim made by any other party thereto * 772349-127/ARM/lARAL/MFFORM/l 04/24/85 4 .. * Y 0 .I '1246 '. Assignor has failed to so observe, perform or discharge any of s obligations. 5. Events of Default. The occurrence of any of the folic ing shall be deemed to be an event of default ("Event of Defaul hereunder: ' (a) a default by Assignor of its covenants or obligatic under any of the Leases shall occur, unless fully cured by Assis or within any applicable grace or cure period contained there provided, however, that default under individual apartment lea that are not, either individually or in the aggregate, material Issuer's security, shall not be defaults under this subparagrz (a); (b) a default by Assignor in the performance of any cot nant, representation, warranty or agreement contained herein, such default continues for a period of five (5) days after writ notice thereof from Issuer, provided, however, that Assignor sf not be in default under this subparagraph (b) if (i) within s five-day period Assignor gives written notice to Issuer of Assi: or's intent to cure said default, and (ii) Assignor promptly c( mences to cure said default, and (iii) Assignor in fact cures s default within such time as Issuer deems, in its sole discretion, be reasonable; or (c) an "Event of Default," as that term is defined in the LI Agreement, the Indenture, the First Deed of Trust, or any of other Loan Documents. 6. Remedies Upon Default. Upon the occurrence of i Event of Default hereunder, Issuer, by its employees or agent may, its option, and is hereby authorized by Assignor to do any or all of following: enter upon, take possession of, manage and operate Premises and expend such sums as may be necessary or appropriate connection therewith; make, cancel, enforce or modify any of the Leas obtain and evict tenants: fix or modify Rents; perform all acts wh Issuer deems necessary or advisable in its sole discretion to protect benefits and security hereof; and, with or without taking possession the Premises, collect and, if necessary, sue for the Rents, includ those then past due and unpaid, in its own name or in the name Assignor; an.d apply and account for such Rents in accordance v Paragraph 7 hereof. Assignor agrees that it will facilitate in all reas able ways Issuer's collection of an,y of the Rents hereunder and furt authorizes Issuer, upon an Event of Default, to give written notice this Assignment, which may include a copy hereof, to any party to of the Leases. Such notice by Issuer may direct such party to sums due under the Leases to Issuer, and Assignor agrees that no s party, upon receipt of such notice, shall be obligated to make payment to Assignor and further that any such party shall be entitlec credit sums paid to Issuer against any sum then owed to Assignor un any such Lease. 772349-127/ARM/lARAL/MFFORM/l 04/24/85 5 9 0 5* 124'1 \ \. 7. Application of Rents. All Rents received by Iss pursuant to this Assignment shall, after payment of all proper chart and expenses including reasonable compensation to managing age selected and employed by Issuer, and after the accumulation of a rese to meet requisite future expenses in connection with the Premises, credited to amounts due and owing to Issuer by Assignor under terms of the Loan Documents, but the manner of the application of s net Rents and which items shall be credited shall be determined in sole discretion of Issuer. Issuer shall not be accountable for rn monies than it actually receives from the Premises; nor shall it be li: for any failure to collect Rents. Issuer shall make reasonable efforts collect Rents reserving, however, within its sole discretion, the righi determine the method of collection and the extent to which enforcem of collection of Rents shall be prosecuted, and Issuer's judgment v respect thereto shall be deemed conclusive and reasonable. Notwi standing the foregoing provisions of this Paragraph, in the event 1 Assignor shall reinstate its- obligations under the Loan Documents c( pletely and fully, then Issuer, as soon as reasonably practicable af demand in writing from Assignor, shall redeliver possession of Premises to Assignor unless and until an Event of Default has then thereafter occurs, at which time Issuer may at its option again t, possession of the Premises under the authority of this Assignment. 8. Release and Indemnity. Except for claims against iss of gross negligence or willful misconduct with respect thereto, Assig hereby releases all claims of any kind or nature against Issuer aris out of the management, operation or maintenance of the Premises sho Issuer elect to enter upon and assume the same upon an Event of Def: as aforesaid. In addition, Assignor hereby agrees to indemnify, defc against any and all losses, liabilities, obligations, damages, penalti claims, suits, proceedings, costs, and expenses, including, with l,imitation, the fees and expenses of attorneys, receivers, agents I brokers (collectively, "Liabilities"), howsoever and by whomever assf ed, arising out of or in any way connected with this Assignment or subject matter hereof; and all such Liabilities shall be deemed added the obligations and indebtedness secured , by the Loan Documer .Assignor shall not be obligated, however, to indemnify, defend or h harmless Issuer from and against any such Liabilities which are direc attributable to the issuer's gross negligence or willful misconduct. the event that any action or proceeding is brought against the Issuer any of its agents or employees, with respect to which indemnity may sought hereunder, the Assignor, upon written notice from the inderr fied party, shall assume the investigation and defense thereof, includ the employment of counsel reasonably acceptable to Issuer and payment of all expenses. The indemnified party shall have the righl employ separate counsel in any such action or proceeding and participate in the defense thereof: but unless such separate counse employed with the approval and consent of the Assignor, or pursuant a court order, the Assignor shall not be required to pay the fees expenses of such separate counsel. and hold harmless the Issuer, its agents and employees, from i 9. Remedies Not Exclusive. The receipt by Issuer of Rents pursuant to this Assignment after the institution of foreclos 772349- 127/A RM/ 1 A RA L/M FFO RM/ 1 04/24/85 6 I. e a 1248 . praceedings, either by court acCian or by the pr;vate pawer el s contained in any deed of trust now or hereafter securing the obligatic or indebtedness owed to issuer under the Loan Documents, shall cure an Event of Default or affect such proceedings or sale; nor st the receipt of this Assignment or any Rents pursuant hereto be deen to limit any right of Issuer under the Loan Documents. Issuer n then existing at law or in equity in such order and manner as Issuer, its sole discretion, shall determine. Any and all remedies herein cc ferred upon Issuer are cumulative with and not exclusive of any otl remedy conferred hereby or by law on Issuer, and the exercise of. i one remedy shall not preclude the exercise of any other. By exercis or failing to exercise any right hereunder or under any of the LC Documents, or any right conferred by law, Issuer shall not be deemed have waived default on the part of Assignor or to have released Assi! or from any of its obligations hereunder or thereunder, unless Iss has so stated in a written waiver or release addressed to Assignor at notice address provided for hereinafter. The waiver by Issuer of i default in the payment of any indebtedness or the performance of i other obligation by Assignor under the Loan Documents, or any of thl shall not be deemed to constitute a waiver by Issuer of any subsequ default. exercise its remedies under the Loan Documents or any other remr 10. Specific Assignments. This Assignment is intended Neverthele.ss, Assignor agrees to execute spec.ific assignments of Lease3 hereafter made or entered into affecting any portion of the Prc ises at any time on written demand of issuer. Furthermore, Assig . . agrees to deliver to issuer copies of all Leases as and when execut 11. Notices. Whenever any party desires to give or se any notice, demand or request with respect to this Assignment, e such communication shall be in writing and shall be delivered by pers al service or m.ailed by registered or certified mail, postage prep: return receipt requested, to the other party addressed as set forth the first paragraph hereof: provided, however, that copies of any SI notice, demand, request or communication shall also be directed to s parties as are hereinafter set forth in this Paragraph. Such comm cations shall, if sent by mail in accordance with this Section, be deel given two business days after deposit in the U. S. mail, and if delive by personal service, shall be effective only if and when received addressee. Any party hereto ma.y at any time change its address such communications by delivering or mailing to the other party hen as aforesaid, a notice of such change. cover all Leases now or hereafter created which affect the Prernis If to Assignor, then also to: Gibson, Dunn G Crutcher 800 Newport Center Drive, Suite 600 Newport Beach, California 92660 Attention: M. Russell Kruse, Jr. 772349-127/ARM/lARAL/MFFORM/l 04/24/85 7 Q 0 +. lZ4V 12. Effect of Entry. The parties hereto do not intend t an entry by Issuer, its agents or employees, upon the Premises un the terms of this Assignment shall cause Issuer to be deemed to bl party in possession in contemplation of the law, except at the optior Issuer. 13. Term of Assignment. This .Assignment shall remain in force and effect until the later of (a) the satisfaction of all obligations Assignor and payment in full of all indebtedness under the Loan Do ments together with the due recordation of the release or reconveya of the First Deed of Trust and any other deed of trust hereafter gi to secure the obligations. of Assignor under the Loan Documents or the expiration of any redemption period following any foreclosure of First Deed of Trust or any other deed of trust hereafter given to sec the obligations of Assignor under the Loan Documents, whether or any deficiency remains after any such foreclosure sale. 14. Successors and Assigns. The terms and provisions this Assignment shall be binding upon Assignor, its legal represen tives, successors and assigns and shall inure to the benefit of and b Issuer, its successors and assigns. The term "Assignor" shall be CI strued to include any one or more persons or parties who are now may hereafter be the holders of legal title to or the equity of redempl in the Premises or any portion thereof, and the term "Issuer" shall m the owner and -holder of the Note from time to time (including B( Trustee, to whom Issuer is assigning its rights and interest under Note and certain other Loan Documents concurrently with the execul hereof 1 . 15. Severability. Every provision of this Assignment intended to be severable. In the event any term or provision there01 declared to be illegal, invalid or unenforceable for any reason whatso er by a court of competent jurisdiction, such illegality, invaiidity unenforceability shall not affect the balance of the terms and provisi hereof, which terms and provisions shall remain bind.ing and enforceal 16. Approvals by Issuer. So long as the Letter of Crc remains in effect, and so long as the Bank shall not be in default in payment of any amount required to be paid pursuant to the terms such Letter of Credit, Issuer shall be deemed to have approved, for purposes of this Assignment, any matters as to which Assignor is quired hereunder to obtain Issuer's 'approval, provided that the Si shall have been approved in writing by the Bank. The foregoing SI not be construed as relieving Assignor of the obligation to secure Is er's approval of any matter for which Issuer's approval is requi under the terms of the Loan Agreement or the Indenture. 772349-127/ARM/lARAL/MFFORM/l 04/24/85 8 \ e 0 1258 1N WITNESS WHEREOF, Assignor has caused this Assignmc to be executed by - its duly authorized agents and representatives on ' 'Ji@Jay of <:;&u~' , 1985. "Assignor" LA COSTA PARTNERS, a California general partnership By: Rodney F. Stone as Trustee for the Stone Family Trust, udWM general partner 7P06b ctv A" -."> - ,sf " 9 ,, 2, >: :' i c k:-J-.[ '\, \.. '.\:<.->a ;; - " By: George A. Fermanian, as Trustee the Fermanian Family Trust, de-t general partner -Etus* ch.u : ~--'-"-p~ h" /" .*;\ ,xi ;, '; f ,:\ ! ; 'I .* ~,* , . 'Y ',. ',lL".- 1. . .. r . ., '. 1. :' .> 772349-127/ARM/lARAL/MFFORM/l 04/24/85 9 0 * 1251 ACKNOWLEDGMENT STATE OF CALIFORNIA 1 COUNTY OF L-q ) c':F*l&. 1 ss n +L On thisddl- day of April, 1985, before me the undersigne a notary public in and for said State, personally appeared Rodney Stone personally known to me or proved to me on the basis of satisfact ry evidence to be the person who. executed the within instrument as t trustee of the Stone Family Trust which executed the same as the gene al partner of La Costa Partners, a California general partnership, a he acknowledged to me that he executed the same as trustee of si trust, that said trust executed the same as a general partner of si partnership and that said partnership executed the same. - WITNESS my hand and official seal. Gh/ [[)f&yf,. - ?; r>: zj f I/! // >J)l .& /-/ Notai-v Pubtic in and for said St [SEAL] .<,= ~~lll~o~mllll~~rnlllllrn~~~n~~~un~~~~n~~~~~~~~~~~lm~~~ - - OFFICIAL SEAL MICHELLE f. STELLHORN z NOTARY PUBLIC .CALIFOitNiA g PRiNCIPAL OFFICE IN 5 LOS ANCELES COUNTY I ision Expires AW. 9, 1988 1 ,uuwll~lullu.l,IIII""""LL"""" 772349-127/ARM/lARAL/MFFORM/l 04/24/85 10 1. e. a -I 1252 ACKNOWLEDGMENT STATE OF CALIFORNIA 1 COUNTY OF .LOS-A”S ) ., 1 ss f-)] $. On this d@ - day of April, 1985, before me the undersign a notary public in and for said State, personally appeared George Fermanian personally known to ine or proved to me on the basis satisfactory evidence to be the person who executed the wit instrument as the trustee of the Fermanian Family Trust which execu the same as the general partner of La Costa Partners, a Califor general partnership, and he acknowledged to me that he executed same as trustee of said trust, that said trust executed the same a general partner of said partnership and that said partnership execu the same. WITNESS my hand and official seal. LLfl/@&? ;q p .I II I/ ,/I #y*LFb // ’ /i -J- j NotwPublic in and for said St [SEAL] ~II~I~~IIII~~IIIIIIIIII~UI~IIII~II~I~I~~I~I~INIIII~II~~I~HIIIUIIIIIIII~I~ g OFFiCiAL SEAL E - MICHELLE T. STELLiH0RT.I B s - NOTARY PUBLIC-CALIFORNIA f - - - - - - - - LOS ANGELES COUNTY z PRINCIPAL OFFICE IN 5 E My Commission Expires Aug. 9, 1988 z ~uIIII1ll~lll~~~llllllllullllllllllllllllullllulll~l~lllllllll~ll~lll~ll.llillllllll~ 772349-127/ARM/lARAL/MFFORM/l 04/24/85 11 - -- 0 0 7-8 1253 .* EXHlBlT A DESCRIPTION OF LAND Parcel 2 of Parcel Map 13524, in the City of Carlsbad, COUI of San Diego, State of California, filed in the Office of the COUI Recorder of San Diego County, October 25, 1984, as File No. 84-403 of Official Records. Excepting therefrom, all minerals, mineral rights, oil, rights, natural gas, natural gas rights, petroleum, petroleum righ and ail products derived from any of the foregoing, in or under which may be produced from the property which underlies a PI; parallel to and 500 feet below the present surface of the prope together with the perpetual right of drilling, mining, exploring ; operating therefor and storing in and removing the same from property or any other land, including the right to whipstock directionally drill and mine from lands other than the property, water, or gas wells, tunnels and shafts into, through or across subsurface of the. property, and to bottom such whipstocked directionally drilled wells, tunnels, and shafts under the beneath beyond the exterior limits thereof, and to redrill, retunnel, eqL maintain, repair, deepen, and operate any such wells or mines, witha however, the right to drill, mine, store, explore, and operate throt the surface or the upper five hundred (50) feet of the subsurface of property; as reserved to Daon Corporation in Grant Deed recorc October 29, 1984, Official Records, File/Page No. 84-407544. other hydrocarbon substances, geothermal steam, all underground wat 772349-127/ARM/lARAL/MFFORM/l 04/24/85 A-1 L. ' I. e s-.! 1254 CERTIFICATE OF ACCEPTANCE (California Government Code Section 27281) First Assignment of Rents and Leases This is to certify that the interest in real propert if any, conveyed or assigned by the foregoing First Assignmer of Rents and Leases dated as of April 1, 1985, from La Costa Partners, a California general partnership, to the City of Carlsbad, California, a muhicipal corporation ("Issuer"), is hereby accepted by the undersigned officer or agent on behalf of Issuer pursuant to authority conferred by resolution of Issuer adopted on March 19, 1985, and Issuer consents to the recordation thereof by the undersigned as its duly authorized officer or agent. I j F:,,.\ lli . q)&J~~; ;hqgr Dated: .I/., :: ,/ By : gi/ i&cLxd & ,./;&id Title: ,&LU&V -p . ... 6 @& - \ L- f i 4 ,... . ’. .L .. e 0 STATE OF CALIFORNIA 1 COUNTY OF ORANGE 1 1 *,.I 1255 On this :%%ay of April, 1985, personally appeared Martin Orenyak, the Director of Building and Planning of the city of Carlsbad, a municipal corporation organized and existing under the Constitution and laws of the State of California; known to me or proved to me on the basis of satisfactory evidence to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged tc me that he executed the same for the purposes and consideratic therein expressed, in the capacity therein stated, as the act and deed of said public body. - WITNESS my hand and official seal. I J- I: SEAL1 3L#jiy/ /E &;&Q /i’ .‘9 ,- g..&&$c Notar,cP*-lic My Commission Expires: 4Jd.+d 9 /72?Y fl);&d/fi 7, S#+d/’f+am IcJ iJ I/ Print Name f ~‘~-~~~~~~~ll~~llnll~~~l~ln~ll~~~llll~~,”~,,”“~~,~,,~”l”u~ - OFFlClAl SEAL i 2 g NOTARY PUBtlC-CALI;or?r~:A 3 - - PRINCtPAt OFFICE IN g - Los ANGELES COUNTY z - - - - - MICHELLE f. STELLHORN 1 - - - - - i MY Commission Expires Aug. 9, 1988 5 ~~~~~~~~~~~~IIIII~IIIIIIIIIIIU~IIIUI~~I~I~I~~~~~,~~~~~~~~~~~~~~,~~~,~~ I " 0 FI= FILI= 9,). 1 a5 -I_ c c/ &is FINANCING STATEMENT is presented for filing pursuant to the California Uniform Commercial Code. + 1. DEC ;OR &ST NAME FIRSlLlF AN INDIVIDUAL) 1 A. SOCIAL SECURITY OR I I 4. SECURED PARTY 4A. SOCIAL SECURITY hO.. F OR BAHR TRANSIT AID I N*ME CITY OF CARLSBAD, CALIFORNIA WAILlNQ ADcwss 1200 Elm Avenue, Attn: City Manager CITY Carlsbad STATE California ZlCCOOt 93008 5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL sEcumTr NO.. f 01 IAN1 TRAMSIT AM0 I MAME THE BANK OF CALIFORNIA, N.A., trustee MAILrNQADDRus 400 California Street, Attn: Corporate Trust Division cIw San Francisco STATCCalifarnia ZlCCODE9414C, 6. This FINANCING STATEMENT covers the following types or items of property (include description of real prope located and owner of record when required by instruction 4). Continued on Pages 2 through 4 For a description of the Collateral covered hereby, see Pages 2 and 3 hereof and Exhibit A attached hereto as Page 4 hereof. A portion of the Collateral covered hereby is or may become fixtures on the real property described in said Exhibit A. THIS FINANCING STATEMENT IS FILED AS A FILING AND IS TO BE RECORDED IN THE REAL ESTATE RECORDS OF WNTY, CALIFORNIA. 7B. DEBTOR(8) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH 7. KLJY i 7A* H ARE ALSO COVER- rJ1) O(2) D(3) mi41 PRODUCTS OF COLLATERAL INSTRUCTION S (0) ITEM: I " 8. CHECK M 1 0 DEWOR 1s A UTRANsMInING UTILIn- IN ACCORDANCE w1rn ucc i s1os (1) (n) IF APPLICABLE , I 9. DATE: . W Continued on page 5. as of April 1, 1985 SIGNATURL(5) OF DEBTORCS) LA COSTA PARTNERS TIP€ OR PRINT NAYEtS) OF DUTORO) )Continued on page 6. as of April 1, 1985 SICNANRZtS) OPSLEURED MRTl(lES) CITY OF CARLSBAD, CALIFORNIA TVCEOR PRlNTNAME(S) OF SECURED PARTYIIES) -. ,P NSa.AAFI?.fi T'T'F yyJyqqm a KkGUKIJlRki Ktr UIZ3 I CU 0 1 ~~ ~ ~~ lYAML TO "ELVENY & MYERS 1 ADDRESS 400 South Hope St. CITY Los Angeles, CA 90071-2899 - - - - - C 0 D L - 1 2 3 4 5 F I 7 8 9 - - 10. THIS SPACE FOR USE OF FI (DATE. TIME. FILE NUMEEI AND FILING OFFICER) 8S?l.46 I" .-,- :..t ~ #., i)t:[jfi; UFI-'(C:&i 1;: i OF' S,A,?.i airGiJ cot; 1985 AF8 29 AI VE?:l i. l.i' I COUNTY iifX L STATE z,p cooE L (772 , 349-1271 J Attn: Marcia Ferris 0 [E (1) FILING OFFICER COPY @ Approved by the Secretary of State FORM UCC-I-FILING FEE 53.00 . ... . .. , .. . ., . , -_ . .. , . . .. . , . . . . . .. . . .. . ..... .. ,. . . . . .. . . ~. . . Debtor: LA LWD-L~~ rml-lxana .* Page 2: Financinf) taternent dated as of April 1, I. - " Item. 6: Continue .w \ '-J 1306 Description of the Collateral 1. All rents, issues, profits, royalties, income and other bene- fits derived from the real property more particularly described on Exhibit A hereto (the "Land") or any and all buildings, landscaping and other improvements now or hereafter erected thereon including, without limitation, the fixtures, attachments, appliances, equipment, machinery, and other articles attached to said buildings and improve- ments (collectively, the "Improvements") (the Land together with the improvements being referred to herein, collectively, as the "Premises"); 2. All right, title and interest of Debtor in and to all leases or subleases affecting the Premises or any portion thereof or interest therein now or hereafter existing or entered into and all right, title and interest of Debtor thereunder including, without limitation, all cash or security deposits, advance rentals, prepaid rents, and depos- its of a similar nature; 3. All the estate, interest, right, title, other claim or demand, both in law and in equity, including claims or demands with respect to the proceeds of insurance in effect with respect thereto, which Debtor now has or may hereafter acquire in the Premises, and any and all awards made for the taking by eminent domain, or by any proceeding or purchase in lieu thereof, of the whole of any part of the Premises including, without limitation, any award resulting from a change of grade of streets and any award *for severance damages; 4. ' All personal property in which Debtor now owns or hereafter acquires an interest or right and which is attached or affixed to the Land or the improvements or used or useful in connection with the construction, renovation, operation, use, leasing, maintenance or occupancy of the Improvements, whether stored at the Premises or elsewhere, including, without limitation, all goods, supplies, equip- construction materials; ment, furniture, furnishings, fixtures, machinery, inventory and 5. All fees, income, rents, issues, profits, earnings, receipts, royalties and revenues which accrue from the items described in Clause 4 hereof or which may be received or receivable by Debtor from any hiring, using, letting, leasing, subhiring, subletting, or subleasing therefor; '6. All of Debtor's present and future rights to receive pay- ments of money, services or property with respect to or in connection with the Premises and the financing thereof, whether or not related to the sale and loan of the proceeds of the Bonds (defined in Clause 13), including, without limitation, rights to all deposits from tenants of the Premises, accounts receivable, deposit accounts, chattel paper, notes, drafts, securities, certificates of deposit, contract rights (including rights under all contracts relating to the construction, renovation or restoration of any of the Improvements or the financing thereof and all 772349-127/ARM/lSTSA/MFFORM/l 04/19/85 - . .. . . . ". .. . .. . . .. . . .., .. .. . -... Debtor: LA COSTA PARTNERS > Page 3: Pinancietatement dated as of April 1, . ,d e85 ?-J - -. Item. 6 L Continueu 1307 c rights under payment or performance bonds, warranties, and guaran- ties), books of account, instruments, general intangibles and princi- pal, interest and payments due on account of goods sold, services rendered, loans made or credit extended, together with all of Debtor's right, title and interest in all documents evidencing, securing or guaranteeing the same; 7. All other intangible property and rights relating to the Premises or the operation thereof, or used in connection therewith, including but not limited to all governmental permits relating to con- struction or other activities on the Premises, all names under or by which the Premises may at any time be operated or known, all rights to carry on business under any such name, or any variant thereof, all trade names and trademarks relating in any way to the Premises, good will in any way relating to the Premises, and all licenses and permits relating in any way to the Premises or its use, construction, occupan- cy, leasing, sale or operation; 8. All proceeds from the sale or disposition of any of the aforesaid Collateral; 9. Debtor's rights under all insurance policies covering the Premises or any of the aforesaid Collateral, -and all proceeds, loss payments and premium refunds payable regarding the same; 10. All water stock relating to the Premises; 11. All causes of action, claims, compensation, and recoveries for any damage to or condemnation or taking of the Premises or the aforesaid. Collateral, or for any conveyance in lieu thereof, whether direct ar consequential, or for any damage or injury to the Premises or the aforesaid Collateral; 12. All maps, plans, specifications, surveys, studies, reports, data and drawings and all contracts and agreements of Debtor relating thereto including, without limitation, architectural, structural, mechan- ical and engineering plans and specifications, studies, data and draw- ings prepared for or relating to the development of the Land or the construction, renovation or restoration of any of the Improvements or the extraction of minerals, sand, gravel or other valuable substances from the Land; and 13. All of Debtor's present and future rights in and to the proceeds of the sale of those certain Multifamily Housing Revenue Bonds, Series A of 1985 (the "Bonds") in aggregate principal amount of $15,920,000, issued by the City of Carlsbad, California ("Issuer") under that certain Indenture of Trust dated as of April 1, 1985, by and between Issuer and The Bank of California, a national banking association, as trustee ("Band Trustee"), and any other funds or amounts now or hereafter deposited with Bond Trustee or Security Pacific National Bank together with all earnings on such proceeds, funds and amounts, and all investments made with the same, including, without limitation,. deposit accounts, chattel paper, notes, checks, drafts, securities, certificates of deposit and instruments. 772349-127/ARM/lSTSA/MFFORM/l 04/19/85 .. I. . . .. .. ,. .,. . . . . . . .. . . .. ..: , , .. Debtor : LA COSTA PARTNERS Item 5: ContinueL e5 * - a . Page 4: Financietatement dated as of April 1, ,. -a I308 * EXHIBIT A DESCRIPTION OF LAND Parcel 2 of Parcel Map 13524, in the City of Carlsbad, County of San Diego, State of California, filed in the Office of the 84-403293 of Official Records. County Recorder of San Diego County, October 25, 1984, as File No. Excepting therefrom, all minerals, mineral rights, oil, oil rights, natural gas, natural gas rights, petroleum, petroleum rights, other hydrocarbon substances, geothermal steam, all underground water, and all products derived from any of the foregoing, in or under or which may be produced from the property which underlies a plane parallel to and 500 feet below the present surface of the property together with the perpetual right of drilling, mining, exploring and operating therefor and storing in and removing the same from the property or any other land, including the right to whipstock or directionally drill and mine from lands other than the property, oil, water, or gas wells, tunnels and shafts into, through or across the subsurface of the property, and to bottom such whipstocked or directionally drilled wells, tunnels, and shafts under the beneath or beyond the exterior limits thereof, and to redrill, retunnel, equip, maintain, repair, deepen, and operate any such- wells. or mines, without, however, the right to drill, mine, store, explore, and operate through the surface or the upper five hundred (50) feet of the subsurface of the ptoperty; as reserved to Daon Corporation in Grant Deed recorded October 29, 1984, Official Records, File/Page No. 84-407544. 772349-127/ARM/l STSA/MFFORM/l 04/ 19/85 A-1 ... .. ... . , ... :~,,. .. Debtor: LA COSTA PARTNERS v ~ Page 5: Financineanent dated as of April 1, <. .. : Item 9r Continued .* - r309 *-f - .. Y Webtor" . LA COSTA PARTNERS a California general partnership By: Rodney F, Stone as Trustee for . the Stone Family Trust, Gfid" .- bCt0 general partner l raf. o 4- .. ,, -7 -. \<, ,,;i,. .*?, ; ! ;yi*- * By: George A, Fermanian, as Trustee fo: the Fermanian Family Trust 8 uvlc!~' 1 general partner %A i +f i .. .. .. . .. . . . . . .. . . . . . . - , . . . . ..i , ., " Debtor : LA COSTA PARTNERS ,< . ' . c. - P,", * Page 6: Financ Statement dated as of April 1 85 t* .. . -r Item. 9: Continu '1) e' FA- 1310 ; $ I 1 "Secured Party" ATTEST : CIm OF CARLSBAD 4, ' " 4 ,,c; ,I By : .. i: \.: -_/a "J. ._ . . I :. ;\ :->, a 4 ni;ector of-Buildi=.anAlanl u City Clerk a. .. *. < 4 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: ROBERT J. WHALEN, ESP. STUDLING, YOCCA, CARLSON & RAUTH 660 Newport Center Drive, Suite 1600 Newort Beach, California 92660 ~ ~~ REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS By and Among t CITY OF CARLSBAD and r THE BANK OF CALIFORNIA, N.A., as Trustee and LA COSTA PARTNERS DATED AS OF APRIL 1, 1985 Relating to $15,920,000 CITY OF CARLSBAD, CALIFORNIA MULTIFAMILY HOUSING REVENUE BONDS SERIES A OF 1985 (LA COSTA APARTMENTS PROJECT) \ i \% t L Section 1 Section 2 Section 3 Section 4 Section 5 Section 6 Section 7 Section 9 Section 10 Section 11 Section 12 Section 13 Section 14 Section 15 Section 16 , Section 17 Section 18 Section 19 Section 20 Section 21 Section 22 Section 23 Section 24 Section 8 Exhibit A Exhibit B Exhibit C TABLE OF CONTENTS I Definitions and Interpretation. ..... Acquisition, Construction, Equipping and Completion of the Project ...... Residential Rental Property ....... Lower-Income Tenants. .......... Tax Exempt Status of the Bonds. ..... Modification of Special Tax Covenants . . Indemnification ............. Reliance. ................ Project in the City ........... Sale or Transfer of the Project ..... Term. .................. Covenants to Run with the Land. ..... Burden and Benefit. ........... Uniformity; Common Plan ......... Enforcement ............... Recording and Filing. .......... Attorneys' Fees and Trustee's Fees. - - - Governing Law .............. Amendments. ............... Notice .................. Developer Agreement ............ Severability. .............. Multiple Counterparts .......... Consideration .............. LEGAL DESCRIPTION CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE INCOME COMPUTATION AND CERTIFICATION * . REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS THIS REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (the "Regulatory Agreement") is made anc entered into as of April 1, 1985, by and among CITY OF CARLSBAD, a municipal corporation organized and existing undel the Constitution and laws of the State of California (togethe] with any successor to its rights, duties and obligations, the "City"), THE BANK OF CALIFORNIA, N.A., a national banking States authorized to accept and execute trusts of the type contemplated by the Indenture (as hereinafter defined), with its principal corporate trust office in San Francisco, California, as Trustee (the "Trustee"), and the LA COSTA association organized and existing under the laws of the Unite PARTNERS, a California general partnership (the "Developertt) - WITNESSETH: WHEREAS, the City has adopted a program to finance t: construction of multifamily rental housing pursuant to Chapte 7 of Part 5 of Division 31 of the Health and Safety Code of t: State of California (the "Act"); and WHEREAS, the City has complied with the notice requirements of Section 52097.5 of the Act; and WHEREAS, the City is a political subdivision (within the meaning of that term in the Regulations of the Department of Treasury and the rulings of the Internal Revenue Service Internal Revenue Code of 1954, as amended (the "Code"); and prescribed and promulgated pursuant to Section 103 of the WHEREAS, on March 19, 1985, the City Council of the City adopted a resolution (the "Resolution") authorizing the issuance of revenue bonds in connection with the multifamily rental housing project of the Developer; and WHEREAS, in furtherance of the purposes of the Act a the Resolution and as a part of the City's plan of financing residential housing, the City proposes to issue $15,920,000 aggregate principal amount of its revenue bonds designated "City of Carlsbad, California, Multifamily Housing Revenue Bonds, Series A of 1985 (La Costa Apartments Project)" (the "Bonds"), the proceeds of which will be loaned to the Develop which, in consideration of the Developer Loan, will cause to delivered to the Trustee a letter of credit (the "Bank Letter of Credit") in accordance with the terms of the Indenture, an * the Developer will use the proceeds of the Developer Loan to finance the cost of a 320-unit multifamily residential rental development (the "Project") to be located within the City and occupied partially (at least 20 percent of the units) by persons of low and moderate income within the meaning of Section 103(b)(12)(C) of the Code, all for the public purpose of providing decent, safe and sanitary housing; and WHEREAS, the aggregate principal amount of the Bonds to be issued together with the outstanding multifamily bonds the date of issuance of the Bonds will not exceed the maximum aggregate principal amount of Bonds issuable in the State in 1985 as set forth in the Act; and WHEREAS, the City, the Trustee and the Developer hav entered into a Loan Agreement, dated of even date herewith (t "Agreement"), providing for (i) the provision of the Bank Letter of Credit by the Developer and (ii) the terms and conditions under which the City will make the Developer Loan the Developer to finance the acquisition, construction and purchase of the Project; and WHEREAS, all things necessary to make the Bonds, whe issued as provided in the Indenture, the valid, binding, and legal special obligations of the City according to the import thereof, and to constitute the Indenture as a valid assignmen of the amounts pledged to the payment of the principal of, premium, if any, and interest on the Bonds have been done and performed, and the creation, execution, and delivery of the to the terms thereof, in all respects have been duly authorized; and Indenture and the execution and issuance of the Bonds, subjec WHEREAS, the Code and the regulations and rulings promulgated with respect thereto prescribe that the use and operation of the Project be restricted in certain respects ar in order to ensure that the Project will be constructed, used and operated in accordance with the Code, the City, the Trust and the Developer have determined to enter into this Regulatc Agreement in order to set forth certain terms and conditions relating to the acquisition, construction, equipping and operation of the Project. NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth herein, and other good i valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the City, the Trustee and the Developer hereby agree as follows: 04/22/85 3635p/2062/12 -2- L Section 1. Definitions and Interpretation. The following terms shall have the respective meanings assigned t them in this Section 1 unless the context in which they are used clearly requires otherwise: "Act" - Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California, as now in effect and as it may from time to time hereafter be amended c supplemented. "Adjusted Income" - The adjusted income of a person (together with the adjusted income of all persons of the age 18 years or older who intend to reside with such person in or residential unit) as calculated in the manner prescribed in Regulation Section 1.167(k)-3(b)(3) in effect as of the Bond Issuance Date. "Administration Agreement" - The agreement to be entered into by the City, the Developer and the Program Administrator on or prior to.the Completion Date, which shal: be substantially in the form attached to the Agreement as Exhibit E. "Affordable Rent" - A monthly rent which does not exceed 30 percent of one-twelth of the maximum adjusted annui income at which a household of appropriate size is deemed to a "lower income" family in the County of San Diego for pqrpo: of the leased housing program established under Section 8 of the United States Housing Act of 1937, as amended, based up01 the following appropriate household sizes for various types < residential units in the Project and assuming 80 percent as ( the percentage of median gross income which qualifies as "101 income" : Residential Unit No. of Persons in Family One Bedroom 2 Two Bedroom 4 "Agreement" - The Loan Agreement entered into as of even date herewith by the Developer, the Trustee and the Cit, pursuant to which the City will make the Developer Loan to t: Developer. "Area" - The San Diego, California Metropolitan Statistical Area. "Bank" - Security Pacific National Bank, a national banking association, acting as the issuer of the Bank Letter Credit, or the issuer of any Substitute Letter of Credit pursuant to the terms of Section 602 of the Indenture. 04/22/85 3635p/2062/12 -3- v "Bank Letter of Credit" - The letter of credit issued by Security Pacific National Bank to the Trustee for the benefit of the Bondholders or a Substitute Letter of Credit provided in accordance with the Indenture. "Bond Counsel" - An attorney or firm of attorneys, acceptable to the City and the Trustee, of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their before the highest court of any state of the United States of America or the District of Columbia. political subdivisions duly admitted to the practice Qf law "Bondholder" or "holder" or "owner" - When used with respect to the Bonds, the owner of a Bond then outstanding under the Indenture as shown on the registration books maintained by the Trustee pursuant to the Indenture. "Bond Issuance Date" - The 'date of the initial delivery of the Bonds, being April 26, 1985. "Bonds" - City of Carlsbad, California Multifamily Housing Revenue Bonds, Series A of 1985 (La Costa Apartments Project), issued in the aggregate original principal amount of $15,920,000. "Certificate of Continuing Program Compliance" - The Certificate to be filed by the Developer with the City, the Program Administrator and the Trustee which shall be substantially in the form attached hereto as Exhibit B. "City" - The City of Carlsbad, California. "Code" - The Internal Revenue Code of 1954, as amende prior to the date hereof and from time to time hereafter, or any successor statute thereto. "Completion Certificate" - The certificate of completion of the Project required to be delivered to the Cit: the Bank, the Program Administrator and the Trustee by the Developer pursuant to Section 2 of this Regulatory Agreement, which shall be substantially in the form attached to the Agreement as Exhibit D. "Completion Date" - The date of the completion of tht construction and equipping of the Project, as that date shall be certified as provided in Section 2 of this Regulatory Agreement. 04/22/85 3635p/2062/12 -4- 3 "Determination of Taxability" - The failure of the Bank to consent within forty-five (45) days to any amendment 1 the Indenture, the Loan Agreement or the Regulatory Agreement which in the written opinion of Bond Counsel is necessary to preserve the exemption from income taxation of interest on thc Bonds or the enactment of legislation, or a final judgment or order of a court of original jurisdiction, or a final order 0. any other court of competent jurisdiction, or a final ruling I decision of the Internal Revenue Service, an any such caze to the effect that the interest on the Bonds (other than interes on any Bond for any period during which such Bond is held by "substantial user" of any faci1i':y financed with the proceeds of the Bonds or a "related person,'' as such terms are used in tax purposes in the gross incomes of all recipients thereof subject to Federal income taxes. With respect to the foregoing, a judgment or order of a court or a ruling or decision of the Internal Revenue Service shall be considered final only if no appeal or action for judicial review has bee filed and the time for filing such appeal or action has expir "Developer" - La Costa Partners, a California genera Section 103(b) of the Code) is includable for Federal income partnership, and its successors and assigns, as owner of the Project. "Developer's Tax and No Arbitrage Certificate" - The Certificate of the Developer dated as of the Bond Issuance Da with respect to certain Project Costs, delivered to the City the Developer. "Developer Loan" - The mortgage loan made by the Cit to the Developer pursuant to the Agreement to provide financi for the Project. "Developer Note" - The promissory note executed by Developer in a principal amount equal to the principal amount of the Developer Loan. "First Deed of Trust" - Collectively, the First Deed of Trust and Assignment of Rents (Construction Trust Deed), t First Security Agreement and the First Assignment of Rents ar Leases relating to the Project, each dated as of April 1, 191 executed by the Developer granting a security interest in the Project to the City to secure the Developer's obligations unc the Developer Note. "Indenture" - The Indenture of Trust, dated as of April 1, 1985, between the City and the Trustee, pursuant to which the Bonds have been issued, and any indenture supplemental thereto. 04/22/85 3635p/2062/12 -5- * "Intercreditor Agreement" - The Intercreditor Agreement, dated as of April 1, 1985, among the Bank, the Citl and the Trustee. "Low and Moderate Units" - The dwelling units in the Project designated for occupancy by Lower-Income Tenants pursuant to Section 4(a) of this Regulatory Agreement. "Lower-Income Tenants" - Persons or families with an Adjusted Income which does not exceed 80 percent of the Media1 Income for the Area. In no event will the occupants of a dwelling unit be considered to be Lower-Income Tenants if all of such occupants are students (as defined in Section 151(e)(L of the Code), no one of whom is entitled to file a joint retu~ under Section 6013 of the Code. "Median Income for the Area" - The median income for the Area as most recently determined by the Secretary of - Housing and Urban Development under Section 8 of the United States Housing Act of 1937, as amended, or, if programs under Section 8 are terminated, median income for the Area determint under the method used by the Secretary prior to such termination. "Program Administrator" - The Trustee or an independent, certified public accountant selected by the Developer, or an apartment management firm, mortgage insurancf company or other business entity performing similar duties, independent of the Developer and acceptable to the City who shall enter into the Administration Agreement and act as the City's agent in enforcing the Developer's covenants hereunder and in assuring that the Developer complies with the requirements of this Regulatory Agreement. "Project" - The Project Facilities and the Project Site. "Project Costs" - To the extent authorized by the Coc and the Regulations, any and all costs incurred by the City 0: the Developer with respect to the acquisition of land and the construction and equipping, as the case may be, of the Projec' whether paid or incurred prior to or after the date of this Regulatory Agreement, including, without limitation, costs fo: site preparation, the planning of housing and improvements, tl acquisition of property, the removal or demolition of existinc structures, the construction and purchase of housing, related facilities and improvements, and all other work in connection therewith, and all costs of financing, including, without limitation, the cost of consultant, accounting and legal services, other expenses necessary or incident to determining the feasibility of the Project, contractors' and developers' 04/22/85 3635p/2062/12 -6- , overhead and supervisory fees and costs directly al;.>cable to incident to the Project and the financing thereof (including reimbursement to any municipality, county or entity for expenditures made, with the approval of the City, for the Project), interest accrued during construction and prior to tl Completion Date and all other costs approved by Bond Counsel. "Project Facilities" - The buildings, structures and other improvements to be constructed on the Project Site, and all fixtures and other property owned, leased or licensed by the Developer and located on, or used in connection with, sucl buildings, structures and other improvements. the Project, administrative and other expenses necessary or "Project Site" - The parcel or parcels of real property described in Exhibit ''Aft , which is attached hereto a1 by this reference incorporated herein, and all rights and appurtenances thereunto appertaining. "Qualified Project Casts" - The Project Costs (i) incurred after October 2, 1984, the date of the first officia: action by the City declaring its intent to issue Bonds for tht Project, (ii) which are chargeable to a capital account with respect to the Project for federal income tax and financial purposes, or would be so chargeable either with a proper election by the Developer or but for the proper election by tl Developer to deduct those amounts within the meaning of c Regulation 1.103-8(a)(l)(i); provided, however, that only tha. portion of the interest costs accrued during construction of the Project shall constitute a Qualified Project Cost as bear: the same ratio to all such interest as the Qualified Project Costs bear to all Project Costs, and, provided further, that interest accruing on the Developer Loan after the Completion Date shall not be a Qualified Project Cost; and, provided further, that Qualified Project Costs shall not include inter-company profits resulting from members of an affiliated group (within the meaning of Section 1504 of the Code) participating in the construction of the Project or payments received by an affiliated party due to early completion of thc Project (or any portion thereof).. "Qualified Project Period" - The period beginning on the later of (i) the first day on which at least 10 percent 0: the dwelling units in the Project are first occupied or (ii) the date on which the Bonds are issued and ending on the late: of (a) the date which is 10 years after the date on which at least 50 percent of the dwelling units in the Project are fir: occupied, (b) the date which is a Qualified Number of Days after the date on which any of the dwelling units in the 04/22/85 3635p/2062/12 -7- * . Project is first occupied, or (c) the date on which any assistance provided with respect to the Project under Section of the United States Housing Act of 1937 terminates. For purposes of clause (b), the term "Qualified Number of Days" means, with respect to the Bonds, 50 percent of the number of days comprising the term of the Bonds with the longest maturit "Regulations" - The Income Tax Regulations promulgatc or proposed by the Department of the Treasury pursuant to the Code from time to time. "Regulatory Agreement" - This Regulatory Agreement ar: Declaration of Restrictive Covenants. ''Trustee'' - The Bank of California, N.A., or any ?I Very Low Income Tenants" - Lower-Income Tenants who: SUCC~SSOT Trustee serving as such under the Indenture. Adjusted Income does not exceed 50 percent of median gross income for the San Diego, Cal.ifornia Metropolitan Statistical Area, as most recently determined by the United States Department of Housing and Urban Project. Unless the context clearly requires otherwise, as use in this Regulatory Agreement, words of the masculine, feminine or neuter gender shall be construed to include each other gender when appropriate and words of the singular number shall be construed to include the plural number, and vice versa, whe: appropriate. This Regulatory Agreement and all the terms and provisions hereof shall be construed to effectuate the purpose set forth herein and to sustain the validity hereof. The defined terms used in the preamble and recitals o this Regulatory Agreement have been included for convenience o reference only, and the meaning, construction and interpretati of all defined terms shall be determined by reference to this Section 1 notwithstanding any contrary definition in the preamble or recitals hereof. The titles and headings of the sections of this Regulatory Agreement have been inserted for convenience of reference only, and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof or be considered or given any effect in construing this Regulatory Agreement or any provisions hereof or in ascertaining intent, if any question of intent shall arise. Section 2. Acquisition, Construction, Equipping and Completion of the Project. The Developer hereby represents as of the date hereof, covenants and agrees as follows: 04/22/85 3635p/2062/12 -8- ? (a) The Developer has incurred, or will incur within six months after the Bond Issuance Date, a substantial binding obligation to commence the construction of the Project, pursuant to which the Developer is or will be obligated to expend at least the lesser of (i) 2-1/2% of the principal amount of the Developer Loan or (ii) $100,000. (b) The Developer's reasonable expectations respecting the total Project Costs and use of Bond proceeds ar accurately set forth in the Developer's Tax and No Arbitrage Certificate which has been delivered to the City and the Trustee. (c) The Developer will commence the acquisition, construction and equipping of the Project within six months of the Bond Issuance Date, and will proceed with due diligence tc complete the same. (d) The Developer reasonaljly expects to complete the construction and equipping of the Project and to expend the full amount of the proceeds of the Developer Loan for Project Costs before April 1, 1988. (e) The statements made in the various certificates delivered by the Developer to the City and/or the Trustee are true and correct. (f) The Developer will submit to the Trustee, oti or before the date of each disbursement on the Developer Loan, a Funding Requisition, which shall be substantially in the form set forth in Exhibit B to the Agreement, certifying that (i) the full amount of such disbursement will be applied to pay 01 to reimburse the Developer for the payment of Project Costs ar that, (ii) after taking into account the proposed disbursement the aggregate disbursements to date, other than disbursements applied to pay or to reimburse the Developer for the payment c the costs of issuing the Bonds as set forth in Section 305 of the 'Indenture, will have been applied to pay or to reimburse the Developer for the payment of Qualified Project Costs in ar amount equal to 92% or more of the aggregate disbursements on the Developer Loan, (iii) the Regulatory Agreement is in full force and effect, and (iv) less than 25 percent of the Developer Loan, exclusive of amounts applied to pay the costs of issuing the Bonds, has been disbursed to pay, or to reimburse the Developer for, payments for the cost of acquirir land, or any interest therein. (9) On the Completion Date, the Developer will submi to the City, the Program Administrator and the Trustee a 04/22/85 3635p/2062/12 -9- Completion Certificate, substantially in the form set forth 11 Exhibit D to the Agreement, containing the following certifications: (i) the statement of the Developer that the Project was substantially completed and ready and available f( occupancy as of a specified date; (ii) the Developer's statement, confirmed by the Trustee and the Bank, of the aggregate amount disbursed on the Developer Loan to the Developer prior to and upon the Completion Date; (iii) the Developer's certification that all of the amounts disbursed 01 the Developer Loan have been applied to pay or reimburse the Developer for the payment of Project Costs and that none of tl amounts disbursed on the Developer Loan have been applied to pay or reimburse any party for the payment of costs or expenst other than Project Costs; (iv) the Developer's certification that the Developer Loan has been applied to pay or reimburse the Developer for the payment of Qualified Project Costs in a1 amount equal to 92% or more or of the total amount disbursed ( the Developer Loan other than disbursements applied to pay or to reimburse the Developer for the payment of the costs of issuing the Bonds as set forth in Section 305 of the Indenturt and (v) the Developer's statement that less than 25 percent 0: cost of issuing the Bonds, was used to pay, or to reimburse tl Developer, for the cost of acquiring land, or any interest therein. the Developer Loan, exclusive of amounts applied to pay the (h) On or prior to the Completion Date, the Developer, the City and the Program Administrator shall execul the Administration Agreement and deliver the original execute( agreement to the Trustee. The failure of the Developer to deliver the Administration Agreement to the Trustee shall constitute a default under this Regulatory Agreement entitlin! the Trustee to exercise any of the enforcement remedies set forth in Section 16 hereof. (i) Money on deposit in any fund or account in connection with the Bonds, whether or not such money was derived from other sources, shall not be used by or under the direction of the Developer, in a manner which would cause the Bonds to be "arbitrage bonds'' within the meaning of Section 103(c) of the Code, and the Developer specifically agrees thai the investment of money in any such fund shall be restricted i may be necessary to prevent the Bonds from being "arbitrage bonds" under the Code. (j) The Developer (and any person related to it within the meaning of Section 103(b)(6)(C) of the Code) will not take or omit to take, as is applicable, any action if suc2 action or omission would in any way cause the proceeds from tf 04/22/85 3635p/2062/12 - 10- sale of the Bonds to be applied in a manner contrary to the requirements of the Indenture, the Agreement or this Replato] Agreement. Section 3. Residential Rental Property. The Developer hereby acknowledges and agrees that The Project is i be owned, managed and operated as a "residential rental project" (within the meaning of Treasury Regulation Section 1.103-8(b)(4)) for a term equal to the longer of (i) the term of the Bonds or (ii) the Qualified Project Period determined with respect to the Project. To that end, and for the term o this Regulatory Agreement, the Developer hereby represents, covenants, warrants and agrees as follows: (a) The Project will be constructed for the purpose of providing multifamily residential rental property, and the Developer shall own, manage and operate the Project as a project to provide multifamily residential rental property- comprised of a building or structure or several interrelated buildings or structures, together with any functionally relat and subordinate facilities, and no other facilities, in accordance with Section 103(b)(4)(A) of the Code and Section 1.103-8(b) of the Regulations, and in accordance with such requirements as may be imposed thereby on the Project from ti: to time. (b) All of the dwelling units in the Project will b similarly constructed units, and each dwelling unit in the Project will contain complete separate and distinct facilitie for living, sleeping, eating, cooking and sanitation for a single person or a family, including a sleeping area, bathing and sanitation facilities and cooking facilities equipped wit a cooking range, refrigerator and sink. (c) None of the dwelling units in the Project will any time be utilized on a transient basis, or will ever be us as a hotel, motel, dormitory, fraternity house, sorority hous rooming house, nursing home, hospital, sanitarium, rest home trailer court or park. (d) No part of the Project will at any time be owne or used as a cooperative housing corporation or a community apartment project or a stock cooperative. Other than obtaini and recording a condominium plan and map on the Project, and obtaining a white report from the California Department of Re Estate, the Developer shall not take any steps in connection with a conversion to such ownership or uses except with the prior written approving opinion of Bond Counsel acceptable to the City and the Trustee, that the interest on the Bonds will 04/22/85 3635p/2062/12 -11- not become taxable thereby. The final subdivision map to be recorded for the Project shall state the restriction against transferring individual condominium ownership interests in tht Project during the term of the Regulatory Agreement. (e) All of the dwelling units in the Project will bt available for rental on a continuous basis to members of the general public and the Developer shall not discriminate on thc basis of race, creed, color, sex, age or national origin in tl the employment or the application for employment of persons fc the operation and management of the Project; and the Develope: will not give preference to any particular class or group in renting the dwelling units in the Project, except to the exte~ that dwelling units are required to be leased or rented to Lower-Income Tenants or to be available for occupancy on a priority basis by Very Low Income Tenants as set forth in Section 4 below.. lease, use or occupancy of the Project or in connection with (f) The Low and Moderate Units will be intermingled with all other dwelling units in the Project and shall be of comparable quality and offer a range of sizes and number of bedrooms comparable to the other units in the Project. Tenan. in the Low and Moderate Units will have equal access and enjoyment to all common facilities of the Project. (4) The Project Site consists of a parcel or parcel: that are contiguous except for the interpasition of a road, street or stream, and all of the Project Facilities comprise i single geographically and functionally integrated project for residential rental property, as evidenced by the ownership, management, accounting and operation of the Project. (h) No unit in any building or structure in the Project which contains fewer than 5 units shall be occupied b: the Developer or any person related to or affiliated with the Developer, such as a resident manager or maintenance personne: (i) Within 30 days of the date on which 10% of the dwelling units in the Project are. occupied, the Developer sha: deliver a written notice to the City, the Program Administrator, the Bank and the Trustee specifying such date. Within 30 days after the date on which 50% of the dwelling units in the Project first are occupied, the Developer, the City and the Trustee shall execute and deliver a copy to the Program Administrator of a certificate identifying the beginning and ending dates of the Qualified Project Period as well as the date on which 50% of the dwelling units were firs. occupied. The Developer shall record a copy of such 04/22/85 3635p/2062/12 -12- certificate in the Office of the County Recorder of the County . of San Diego. Section 4. Lower-Income Tenants. Pursuant to the requirements of Section 103(b)(4)(A) of the Code and Section 52080 of the Act, the Developer hereby represents, warrants an covenants that throughout the Qualified Project Period; (a) Not less than twenty percent (20%) of the completed units in the Project shall be continuously occupied by Lower Income Tenants at an Affordable Rent. For this purpose, a unit occupied by a Lower-Income Tenant who at the commencement of the occupancy is a Lower-Income Tenant shall 1: treated as occupied by such an individual or family during their tenancy in such unit, even though they subsequently ceas to be a Lower-Income Tenant. Moreover, a unit previously occupied by a Lower-Income Tenant and then vacated shall be considered occupied by a Lower-Income Tenant until reoccupied, other than for a temporary period, at which time the charactel of the unit shall be redetermined. In no event shall such temporary period exceed thirty-one (31) days. (b) Upon the commencement of the Qualified Project Period, and on the first day of each month thereafter during advise the City, the Trustee, the Bank and the Program Administrator of the status of the occupancy of the Project b: delivering to such parties a Certificate of Continuing Prograr Compliance. the term of this Regulatory Agreement, the Developer shall (c) The Developer will obtain and maintain on file 2 Income Computation and Certification form from each Lower-Income Tenant, dated immediately prior to the initial occupancy of such Lower-Income Tenant in the Project, in substantially the form set forth in Exhibit C hereto, and wi1: provide such additional information as may be required in the future by the State of California, the City, the Program Administrator and by Section 103(b)(4)(A) of the Code and the Regulations, as the same may be amended from time to time, or in such other form and manner as may be required by applicablt rules, rulings, policies, procedures or other official the Department of the Treasury or the Internal Revenue Servicc with respect to obligations issued under Section 103(b)(4)(A) of the Code. A copy of each such income certification will bc attached to the monthly Certificate of Continuing Program Compliance filed with the Program Administrator pursuant to subsection (b). The Developer shall make a good faith effort to verify that the income provided by an applicant in an incol certification is accurate by taking one or more of the statements now or hereafter promulgated, proposed or made by 04/22/85 3635p/2062/12 -13- following steps as a part of the verification process: (1) obtaining a copy of a Lower-Income Tenant's federal income ta, return for the tax year immediately prior to the commencement of such Lower-Income Tenant's occupancy, (ii) obtaining an employer's verification of such Lower-Income Tenant's current income, or, (iii) if the Lower-Income Tenant is unemployed or if the tax return is unavailable, obtaining other satisfactor] evidence of income for such year. (d) The Developer will: (a) maintain a list of persons who have notified the Developer of their desire to rex a unit in the Project and who have Adjusted Incomes which woul qualify them as Very Low Income Tenants, and (b) offer to rent at least half of the Low and Moderate Income Units (subject tc the availability thereof at any time) on a priority basis to the persons on such list prior to offering to rent such units to any other persons and in choosing such Very Low Income Tenants shall use selection criteria no more burdensome than shall be applied to other prospective tenants. To fulfill it: obligation under this subparagraph (d), the Developer shall, 2 least 45 days prior to renting any unit in the Project, notif] the City Housing Authority in writing of the date on which it intends to start renting units; and when directed by the City (i) at least 30 days prior to renting any units in the Project mail notice to all persons currently on the list; and (ii) publish a notice of the availability of such units to qualific Very Low Income Tenants in a local newspaper designated by the City. Thereafter, throughout the Minimum Rental Period, upon receiving notice from a Lower-Income Tenant or a Very Low Income Tenant of such tenant's intent to vacate a Low and Moderate Unit, the Developer shall immediately mail a notice t the City Housing Authority stating the date on which such unit will be available for occupancy and the rent for such unit, ar shall mail notice to at least 5 persons on the list per unit coming vacant. The Developer agrees to make the units coming vacant available, on a priority basis, first to any Very Low Income Tenants who are Section 8 certificate holders or the reci.pients of another rent subsidy and second to other Very LC Income Tenants. Nothing contained in this Section shall require the Developer to offer to rent such units to such persons on terms and conditions which are more favorable than the terms and conditions on which such units will be offered t Lower Income Tenants generally. Provided that the Developer has complied with 'the foregoing to attract Very Low Income Tenants to the Project, nothing herein shall be construed as requiring the Developer to keep units vacant for occupancy by Very Low Income Tenants where no Very Low Income Tenants have applied for occupancy. 04/22/85 3635p/2062/12 - 14- (e) The Developer will maintain complete and accura. records pertaining to the Low and Moderate Units, and will permit any duly authorized representative of the City, the Program Administrator, the Trustee, the Bank, the Department ( the Treasury or the Internal Revenue Service to inspect the books and records of the Developer pertaining to the Project, including those records pertaining to the occupancy of the Lo1 and Moderate Units. (f) The Developer shall accept as tenants on the sal basis as all other prospective tenants, persons who are recipients of federal certificates for rent subsidies pursuans to the existing program under Section 8 of the United States Housing Act of 1937, or its successor. The Developer shall nc apply selection criteria to Section 8 certificate holders whic are more burdensome than criteria applied to any other prospective tenants. (9) The form of lease to be utilized by the Developc in renting any units in the Project to any person other than ( Section 8 tenant who is intended to qualify as a Lower-Income Tenant shall provide for termination of the lease and consent by such person to immediate eviction for failure to qualify ai a Lower-Income Tenant as a result of any material misrepresentation made by such person with respect to the Income Computation and Certification. , Section 5. Tax Exempt Status of the Bonds. The Developer and the City each hereby represents, warrants and agrees that: (a) it will not take or permit, or omit to take or cause to be taken, as is appropriate, any action that would adversely affect the exemption from federal income taxation 0: California personal income taxation of the interest on the Bonds and, if it should take or permit, or omit to take or cause to be taken, any such action, it will take all lawful actions necessary to rescind or correct such actions or omissions promptly upon obtaining knowledge thereof; (b) it will take such action or actions as may be necessary, in the written opinion of Bond Counsel filed with the City and the Trustee, to comply fully with all applicable rules, rulings, policies, procedures, Regulations or other official statements promulgated, proposed or made by the Department of the Treasury or the Internal Revenue Service pertaining to obligations issued under Section 103(b)(4)(A) 0: the Code; and 04/22/85 3635p/2062/12 -15- (c) it will file and/or record such documents and take such other steps as are necessary, in the written opinior of Bond Counsel filed with the City and the Trustee, in order to insure that the requirements and restrictions of this Regulatory Agreement will be binding upon all owners of the Project, including, but not limited to, the execution and recordation of this Regulatory Agreement in the real property records of the County of San Diego. The Developer hereby covenants to include the requirements anc restrictions contained in this Regulatory Agreement in any documents transferring any interest (other than a leasehold interest) in the Project to another person to the end that SUC transferee has notice of, and is bound by, such restrictions, and to obtain the agreement from any transferee to abide to a1 requirements and restrictions of this Regulatory Agreement. Section 6. Modification of Special Tax Covenants. The Developer, the Trustee and the City hereby agree as follob (a) To the extent any amendments to the Act, the Regulations or the Code shall, in the written opinion of Bond Counsel filed with the City, the Trustee and the Developer, impose requirements upon the ownership or operation of the Project more restrictive than those imposed by this Regulator) Agreement which must be complied with in order to maintain the exemption from taxation of interest on the Bonds, this ~ Regulatory Agreement shall be deemed to be automatically amended to impose such additional or more restrictive requirements. (b) To the extent any amendments to the Act, the Regulations or the Code shall, in the written opinion of Bond Counsel filed with the City, the Trustee and the Developer, impose requirements upon the ownership or operation of the Project less restrictive than imposed by this Regulatory Agreement, this Regulatory Agreement may be amended or modifie to provide such less restrictive requirements should the City, in its sole discretion, decide that such requirements should k made applicable to the Project. (c) The Developer, the City and, if applicable, the Trustee shall execute, deliver and, if applicable, file of record any and all documents and instruments, necessary to effectuate the intent of this Section 6, .and each of the Developer and the City hereby appoints the Trustee as its true and lawful attorney-in-fact to execute, deliver and, if applicable, file of record on behalf of the Developer or the City, as is applicable, any such document or instrument (in such form as may be approved in writing by Bond Counsel) if 04/22/85 3635p/2062/12 -16- b either the Developer or the City defaults in the performance that the Trustee shall take no action under this subsection ( without first notifying the Developer or the City, or each of them, as is applicable, unless directed in writing by the Cit: or the Developer, and without first providing the Developer o ' the City, or each of them, as is applicable, an opportunity tj comply with the requirements of this Section 6. its obligations under this subsection (c): provided, however, Section 7. Indemnification. The Developer hereb covenants and agrees that it shall indemnify and hold harmles the City, the Bank, the Trustee and their respective officers councilmembers, and employees from and against (i) any and al: claims by or on behalf of any person arising from any cause whatsoever in connection with the provision of tax-exempt financing for the Project or the making of the Developer Loan (ii) any and all claims arising from any act or omission of tl Developer or any of its agents, servants, employees or licensees, in connection with the Developer LQan or the Project; (iii) all reasonable costs, attorneys' fees of couns( selected by the indemnified party, expenses or liabilities incurred in connection with any such claim or proceeding brought thereon; provided, however, that this provision shall not require the Developer to indemnify the Trustee from any claims, costs, fees, expenses or liabilities arising from the negligence or willful misconduct of the Trustee. In the event that any action or proceeding is brought against the City., the Bank or the Trustee or any of their officers or employees, wit respect to which indemnity may be sought hereunder, the Developer, upon written notice from the indemnified party, shall assume the investigation and defense thereof, including the employment of counsel and the payment of all expenses. Th indemnified party shall have the right to employ separate counsel in any such action or proceeding and to participate in the defense thereof; but unless such separate counsel is employed with the approval and consent of the Developer, or to pay the fees and expenses of such separate Counsel. pursuant to a court order, the Developer shall not be required The Developer also shall pay and discharge and shall indemnify and hold harmless the City and the Trustee from (x) any lien or charge upon payments by the Developer to the City and the Trustee hereunder and (y) any taxes (including, withou limitation, all ad valorem taxes and sales taxes}, assessments impositions and other charges in respect of any portion of the Project. If any such claim is asserted, or any such lien or charge upon payments, or any such taxes, assessments, impositions or other charges, are sought to be imposed, the City or the Trustee shall give prompt notice to the Developer and the Developer shall have the sole right and duty to assume 04/22/85 3635p/2062/12 -17- + ' and will assume, the defense thereof, with full power to litigate, compromise or settle the same in its sole discretion. Notwithstanding the foregoing or any other provisions of this Regulatory Agreement, the Developer shall not be personally liable for amounts owing under the Developer Note, which constitutes a non-recourse obl.igation of the Developer. Section 8. Consideration. The City has issued tl Bonds to provide funds to make the Developer Loan to finance the Project, all for the purpose, among others, of inducing tf Developer to construct, equip and operate the Project. The Trustee has entered into the Indenture and assumed duties and obligations thereunder which facilitate the issuance of the City and the execution of the Indenture by the Trustee, the Developer has entered into this Regulatory Agreement and has agreed to restrict the uses to which this Project can be put c the terms and conditions set forth herein. Bonds. In consideration of the issuance of the Bonds by the Section 9. Reliance. The City, the Trustee and the Developer hereby recognize and agree that the representations by the City and the Developer and the covenant of the City, Trustee, and Developer set forth herein may be relied upon by all persons interested in the legality and validity of the Bonds, and in the exemption from federal incon taxation and California personal income taxation of the c interest on the Bonds. In performing their duties and obligations hereunder, the City and the Trustee may rely upon statements and certificates, or the absence thereof, of the Developer, Lower-Income Tenants and Very Low Income Tenants ar records of the Developer pertaining to the Project. In addition, the City and the Trustee may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the City or the Trustee hereunder in good faith ar in conformity with such opinion. In determining whether any default or lack of compliance by the Developer exists under this Regulatory Agreement, the Trustee shall not be required t conduct any investigation into or review of the operations or records of the Developer and may rely solely on any notice or certificate delivered to the Trustee by the Developer, the Program Administrator or the City with respect to the occurrence or absence of a default unless it actually knows, o in the exercise of reasonable care should have known from the face of such notice or certificate , that the notice or certificate is erroneous or misleading. the Program Administrator, and upon audits of the books and In accepting its Obligations hereunder, the Trustee acts soley as trustee for the benefit of the Bondholders and not in 04/22/05 3635p/2062/12 -10- its individual capacity, and all persons, including, without limitation, the City and the Developer, seeking payment from the Trustee for any liability arising by reason of the transactions contemplated hereby shall look only to such Trusi Estate for payment, except where such liability arises from tl negligence or willfull misconduct of the Trustee. Section 10. Project in the City. The Developer hereby represents and warrants that the Project will be locati lntirely within the territorial boundaries if the City. Section 11. Sale or Transfer of the Project. The Developer hereby covenants and agrees not to sell, transfer 0: otherwise dispose of the Project; or any portion thereof (otht than for individual tenant use as contemplated hereunder), without obtaining the prior written consent of the City, the Bank and the Trustee, which consent shall be deemed given up01 receipt by the City, the Bank and the Trustee of (i) reasonab evidence satisfactory to the City, the Bank and the Trustee that the Developer's purchaser or transferee has assumed in writing and to the satisfaction of the City, the Bank and the Trustee, the Developer's duties and obligations under this Regulatory Agreement; (ii) an opinion of counsel of the transferee that the transferee has duly assumed the obligatio: of the Developer under this Regulatory Agreement and that suc: obligations and this Regulatory Agreement are binding on the transferee; and (iii) an opinion of Bond Counsel acceptable tc affect the exemption from income taxation of interest on the Bonds. It is hereby expressly stipulated and agreed that any voluntary sale, transfer or other disposition of the Project : violation of this Section 11 shall be null, void and without effect, shall cause a reversion of title to the Developer, an( shall be ineffective to relieve the Developer of its obligations under this Regulatory Agreement. Nothing contain4 in this Section 11 shall affect any provision of any other document or instrument between the Developer and the Bank whic requires the Developer to obtain the consent of the Bank as a precondition to the voluntary sale, transfer or other disposition of the Project. the Trustee and the City that such transfer will not adversel: Section 12. Term. This Regulatory Agreement and all and several of the terms hereof shall become effective UD~ its execution and delivery and shall remain in full force anh effect for as long as any Bonds are outstanding under the Indenture but in any case at least for the Qualified Project Period, it being expressly agreed and understood that the provisions hereof are intended to survive the retirement of tl Bonds and expiration of the Indenture, the Agreement, the Developer Loan and the Developer Note. Notwithstanding any 04/22/85 3635p/2062/12 -19- other provisions of this Regulatory Agreement, this entire Regulatory Agreement, or any of the provisions or sections hereof, may be terminated upon agreement by the City, the Trustee, the Bank and the Developer if there shall have been received an opinion of Bond Counsel that such termination will not adversely affect the exemption from federal or State incorr taxation of the interest on the Bonds. The Developer shall provide notice of any termination of this Regulatory Agreement to the Bank. The terms of this Regulatory Agreement to the contrar notwithstanding, this Regulatory Agreement, and all and sever; of the terms hereof, shall terminate and be of no further forc and effect in the event of (i) a foreclosure or delivery of a deed in lieu of foreclosure whereby a third party shall take possession of the Project or involuntary non-compliance with the provisions of this Regulatory Agreement caused by fire, seizure, requisition, change in a federal law or an action of federal agency after the date hereof which prevents the City and the Trustee from enforcing the provisions hereof or condemnation or a similar event and (ii) the payment in full and retirement of the Bonds within a reasonable period thereafter; provided, however, that the preceding provisions c this sentence shall cease to apply and the restrictions contained herein shall be reinstated if, at any time subsequer to the termination of such provisions as the result of an ever described in (i) above, the Developer or any related person tc it (within the meaning of Section 1.103-10(e) ofathe Regulations) obtains an ownership interest in the Project for Federal income tax purposes. Upon the termination of the tern of this Regulatory Agreement, the parties hereto agree to execute, deliver and record appropriate instruments of release and discharge of the terms hereof; provided, however, that the execution and delivery of such instruments shall not be necessary or a prerequisite to the termination of this Regulatory Agreement in accordance with its terms. Section 13. Covenants to Run With the Land. The Developer hereby subjects the Project (including the Project in this Regulatory Agreement. The City, the Trustee and the Developer hereby declare their express intent that the covenants, reservations and restrictions set forth herein shal be deemed covenants running with the land and shall pass to ar be binding upon the Developer's successors in title to the Project; provided, however, that on the termination of this Regulatory Agreement said covenants, reservations and restrictions shall expire. Each and every contract, deed or other instrument hereafter executed covering or conveying the Project or any portion thereof shall conclusively be held to Site) to the covenants, reservations and restrictions set. fort 04/22/85 3635p/2062/12 -20- have been executed, delivered and accepted subject to such covenants, reservations and restrictions, regardless of whethl such covenants, reservations and restrictions are set forth i: such contract, deed or other instruments. Section 14. Burden and Benefit. The City, the Trustee and the Developer hereby declare their understanding and intent that the burden of the covenants set forth herein touch and concern the land in that the Developer's legal interest in the Project is rendered less valuable thereby. T City, the Trustee and the Developer hereby further declare their understanding and intent that the benefit of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Project by Lower-Inco Tenants, and by furthering the public purposes for which the Bonds were issued. Section 15. Uniformity; Common Plan. The covenants, reservations and restrictions hereof shall apply uniformly to the entire Project in order to establish and car out a common plan for the use, development and improvement of the Project Site. Section 16. Enforcement. If the Developer defaul in the performance or observance of any covenant, agreement c obligation of the Developer set forth in this Regulatory Agreement, and if such default remains uncured for a period c thirty days after notice thereof shall have been given by the City or the Trustee to the Developer and the Bank (provided that said period may be extended if the Developer has commenc to cure such default and is diligently pursuing such cure and delivers to the City and the Trustee an opinion of Bond CounE to the effect that such extension will not adversely affect t exemption from federal income taxation of interest on the Bonds), then the City or the Trustee, acting an its own behal or on behalf of the City, shall declare an "Event of Default" to have occurred hereunder, and, at its option, subject to tk: terms and conditions of the Intercreditor Agreement dated as April 1, 1985 among the City, the Trustee and the Bank, may take any one or more of the following steps: (i) by mandamus or other suit, action or proceeding at law or in equity, require the Develope to perform its obligations and covenants hereunder c enjoin any acts or things which may be unlawful or i violation of the rights of the City or the Trustee hereunder; (ii) have access to and inspect, examine and m; copies of all of the books and records of the Developer pertaining to the Project; 04/22/85 3635p/2062/12 -21- 4 (iii) take such other action at law or in equity a's may appear necessary or desirable to enforce the obligations, covenants and agreements of the DeveloF hereunder; or (iv) require the City to declare a default unde the Developer Loan and accelerate the indebtedness evidenced by the Developer Note, and thereafter exercise all other rights and remedies under the Agreement and proceed to redeem Bonds in accordance with the Indenture. The Trustee shall have the right, in accordance with this Section 16 and the provisions of the Indenture, without the consent, approval or knowledge of the City, to exercise any c all of the rights or remedies of the City hereunder; providec that prior to taking any such act the Trustee shall give the City reasonable written notice, which shall not be less than days in advance of its intended action. All ,fees, costs and expenses of the Trustee incurred in taking any action pursuar to this Section 16 shall be the sole responsiblity of the Developer. After the Indenture has been discharged, the City m; act on its own behalf to declare an "Event of Default" hereunder and to exercise any of the enforcement remedies set forth above to the same extent and with the same effect ds if taken by the Trustee. Notwithstanding any provision in this Regulatory Agreement, the liability of the Developer with respect to default in payment of the amounts owing under the Developer Note is limited as provided in Section 5.2 of the Agreement. Section 17. Recording and Filing. The Developer shall cause this Regulatory Agreement and all amendments and supplements hereto and thereto, to be recorded and filed in t real property records of the County of San Diego and in such other places as the City or the Trustee may reasonably request. The Developer shall pay all fees and charges incurr in connection with any such recording. Section 18. Attorneys' Fees and Trustee's Fees. the event that a party to this Regulatory Agreement brings ar action against any other party to this Regulatory Agreement k reason of the breach of any condition or covenant, representation or warranty in this Regulatory Agreement, or prevailing party in such action shall be entitled to recover otherwise arising out of this Regulatory Agreement, the c 04/22/85 3635p/2062/12 -22- ' from the other reasonable attorneys' fees to be fixed by the court which shall render a judgment, as well as the costs of suit . The Developer hereby covenants and agrees that on April 1, 1985, and each April 1 thereafter until the payment c the principal of, premium, if any, and interest on all of the Bonds and the discharge of the Indenture in accordance with it terms, it will pay to the Trustee, for deposit .into the Gener; Fund established pursuant to the Indenture, an amount equal tc the Trustee's Ordinary Expenses as those terms are defined in the Indenture and shall, on demand from the Trustee, pay any additional amounts needed by the Trustee to pay amounts owing pursuant to Sections 308 and 902 of the Indenture. Section 19. Governing Law. This Regulatory Agree- ment shall be governed by the laws of the State of California. The Trustee's rights, duties and obligations hereunder are governed in their entirety by the terms and provisions of the Indenture. Section 20. Amendments. This Regulatory Agreemenl shall be amended only by a written instrument executed by the parties hereto or their successors in title, and duly recordec in the real property records of the County of San Diego. The parties hereto acknowledge that, for so long as the Bonds are outstanding, the Bank is a third party beneficiary to this Regulatory Agreement, and that no amendment affecting the rights of the Bank may occur without the prior written consent of the Bank. Section 21. Notice. Any notice required to be given hereunder shall be made in writing and shall be given b: personal delivery, 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: City: Bank: City of Carlsbad 1200 Elm Avenue Carlsbad, California 92008 Attn: City Manager Security Pacific National Bank San Diego, California 92101 Attn: Department Head 1200 Third Avenue Trustee: The Bank of California, N.A. 400 California Street San Francisco, California 94104 Attn: Corporate Trust Department 04/22/85 3635p/2062/12 -23- Developer: La Costa Partners, a California genera partnership 11300 Sorrento Valley Road, Suite 200 San Diego, California 92121 Attn: Rodney F. Stone George A. Fermanian Notice shall be deemed given three business days after the receipt requested, or, if personally delivered, when received. date of mailing, by certified mail, postage prepaid, return Section 22. Developer Agreement. Prior to the execution of this Regulatory Agreement, the City and the Developer entered into a Developer Agreement, dated as of December 1, 1984. The City and the Developer hereby agree th: upon the execution of this Regulatory Agreement, the Develope2 Agreement shall be of no further force or effect and that thi: Regulatory Agreement shall constitute the sole agreement between the parties with respect to the restrictions regardin< the occupancy of the Project by Lower-Income Tenants or Very Low Income Tenants. Section 23. Severability. If any provision of th: Regulatory Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of tl remaining portions hereof shall not in any way be affected or impaired thereby. c Section 24. Multiple Counterparts. This Regulato~ Agreement may be simultaneously executed in multiple counterparts, all of which shall constitute one and the same instrument, and each of which shall be deemed to be an origin; IN WITNESS WHEREOF, the City, the Trustee and the Developer have executed this Regulatory Agreement by duly authorized representatives, all on the Bond Issuance Date. CITY OF CARLSBAD t ATTEST : By : %?!%e? Si @L?& dMalJ0r 04/22/85 3635p/2062/12 -24- THE BANK OF CALIFORNIA, N.A., as Trustee BY: " LA COSTA PARTNERS, a Californ General partnership By: THE FERMANIAN FAMILY TRU General Partner , By : q$@->\ '&A - A. Fermanian, Tr 9 e ~dec baht4 cwt Trwr&pmat: By: THE STONE FAMILY TRUST General Partner By : is-&- Rodney F. Stone, Tru 9- 1-83 ?fem4 hdGf &&&5h +A 7rvsr 04-22-85 3634p/2026-12 -25- , STATE OF CALIFORNIA I / / April, 1985, personally appeared KAREN R. STEVENS STATE OF CALIFORNIA COUNTY OF SAN DIEGO On this#* day of April, 1985, personally appeared /-74# x. &~&a/$%w& the City Clerk of the City of Carlsbad, a municipal corporation organized and existing under the Constitution and laws of the State of California, known to me or proved to me on the basis of satisfactory evidence to be t person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that she executed the same for the purposes and consideration therein expressed, in the capacity therein stated, as the act and deed of said public body. WITNESS my hand and official seal. [ SEAL ] F-J".-- Nota y Publi My Commission Expires: 9/&h- 4e2- 4. J7€6/.-J Print Name 04/22/85 3635p/2062/12 -26- STATE OF CALIFORNIA ) COUNTY OF ) 1 Gd,h X,rd On this JY day of April, 1985, personally appeared , of The Bank of California, N.A., a national banking association duly organized and existing under the la\ of the United States, known to me or proved to me on the basi of satisfactory evidence to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that such person executed the same for the purposes and consideration therein expressed, in the capacitl therein stated, and as the act and deed of said banking association. WITNESS my hand and official seal. [ SEAL] Notary hblic My Commission Expires: /Jb 7 \ 1.j i'dr LP ,tJ f /L, L{l (: 2 L- i. /,r . 5 u.p- [C{ ?-> " , ../ I I Print Name 'I 04/22/85 3635p/2062/12 -27- . STATE OF CALIFORNIA COUNTY OF ORANGE 1 1 1 On this 26th day of April, 1985, before me, the undersigned, a Notary Public in and for said State, personall appeared RODNEY F. STONE and GEORGE A. FEEWANIAN, known to me or proved to me on the basis of satisfactory evidence to be t trustees of the General Partners of La Costa Partners, a executed the within instrument, and acknowledged to me that they executed the same for the purposes and consideration therein expressed, in the capacity therein stated, and as the act and deed of said general partnership, in accordance with resolution of said general partnership. California general partnership, the general partnership that WITNESS my hand and official seal. .WL” Notary Pub1 ‘,c [SEAL] My Commission Expires: && q /qgr fl/‘[.h4k TS~~~~~ Prant Name 04-22-85 3635p/2026-12 . EXHIBIT A LEGAL DESCRIPTION All that certain real property situated in the City of Carlsbad, County of San Diego, State of California, described as follows: Parcel 2 of Parcel Map 13524, in the City of Carlsba County of San Diego, State of California, filed in the Office of the County Recorder of San Diego County, October 25, 1984, as File No. 84-403293 of Offical Records. Excepting therefrom, all minerals, mineral rights, oil, oil rights, natural gas, natural gas rights, petroleum, petroleum rights, other hydrocqrbon substances, geothermal steam, all underground water, and all products derived from i of the foregoing, in or under or which may be produced from 1 property which underlies a plane parallel to and 500 feet be: the present surface of the property together with the perpetl right of drilling, mining, exploring and operating therefor 2 storing in and removing the same from the property or any otl land, including the right to whipstock or directionally dril: and mine from lands other than the property, oil, water, ,or : wells, tunnels and shafts into, through or across the subsurface of the property, and to bottom such whipstocked 01 directionally drilled wells, tunnels and.shafts under the beneath or beyond the exterior limits thereof, and to redril: wells or mines, without, however, the right to drill, mine, store, explore, and operate through the surface or the upper five hundred (500) feet of the subsurface of the property: a! reserved to Daon Corporation in Grant Deed recorded October : 1984, Official Records, File/Page No. 84-407544. retunnel, equip, maintain, repair, deepen, and operate any si 04-2 2-85 3635p/2062-12 A-1 * EXHIBIT B CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE The undersigned, , being duly authorized to execute this certificate on behalf of La Costa Partners, a California general partnership (the "Developer"), hereby represents and warrants that: 1. He has read and is thoroughly familiar with the provisions of the various Developer Loan Documents associatec with the Developer's participation in the City of Carlsbad's (the "City") Multifamily Housing Revenue Bonds, Series A of 1985 (La Costa Apartments Project), such documents including (a) the Regulatory Agreement dated as of April 1, 1985 among the Developer, the City and The Bank of California, N.A. , (the "Trustee"); (b) the Loan Agreement dated as of April 1, 1985 among the Developer, the City and the Trustee; and (c) the Developer Note dated April -, 1985 betwee: the Developer and the City representing the Developer's obligation to repay the Developer Loan. L 2. As of the date of this certificate, the following percentages of completed residential units in the Project (i are occupied by Lower-Income Tenants (as such term is defines in the Regulatory Agreement) or (ii) are currently vacant an1 being held available for such occupancy and have been so he18 continuously since the date a Lower-Income Tenant vacated su unit; as indicated: Occupied by Lower-Income Tenants (including Very Low Income Tenants): % Unit Nos. Occupied by Very Low Income Tenants : % Unit Nos. Held vacant for occupancy continuously since last occupied by Lower-Income Tenant: % Unit Nos. 04/22/85 3635p/2062/12 B- 1 . 3. The Developer is not in default under the terms of t: Regulatory Agreement and, to the best knowledge of the Developer, no Determination of Taxability has occurred with respect to the Bonds. LA COSTA PARTNERS, a Californi general partnership By: Its: 04/22/85 3635p/2062/12 B-2 < EXilIBIT C INCOME COMTUTATION AND CERTIFICATION NOTE TO APARTMENT OWNER: This form is designed to assist you in computing Annual Income in accordance with the method set forth in the Department of Housing and Urban Development ("HUD") Regulations (24 CFR 813). You should make certain th this form is at all times up to date with the HUD Regulations All capitalized terms used herein shall have the meaning set forth in the Regulatory Agreement. Re: [Address of Apartment Building] I/We, the undersigned state that I/we have read and answered fully, frankly and personal'ly each of the following questions for all persons who are to occupy the unit being applied for in the above apartment project. Listed below are the names of all persons who intend to reside in the unit: 1. 2. 3. 4. Name of Members Relationship of the to Head of Social Security Pla Household Household &E Number g!E HEAD - - SPOUSE - - - - - - - - - - Income Computation 6. The total anticipated income, calculated in accordance wj this paragraph 6, of all persons over the age of 18 year2 listed above for the 12-month period beginning the date that I/we plan to move into a unit is $ Included in the total anticipated income listed above art (a) all wages and salaries, overtime pay, commissions, fees, tips and bonuses and other compensation for personal services,. before payroll deductions; 04/22/85 3635p/2062/12 c-1 (b) the net income from the operation of a business or profession or from the rental of real or personal property (without deducting expenditures for busines expansion or amortization of capital indebtedness or any allowances for depreciation of capital assets); (c) interest and dividends (including income from assets excluded below); (d) the full amount of periodic payments received from social security, annuities, insurance policies, re- tirement funds, pensions, disability or death benefi and other similar types of periodic receipts, including any lump sum payment for the delayed start of a periodic payment; (e) paymer,ts in lieu of earnings, such as unemployment a disability compensation, workmen's compensation and severance pay; (f) the maximum amount of public assistance available tc the above persons other than the amount of any assistance specifically designated for shelter and utilities; (9) periodic and determinable allowances, such as alimor and child support payments and regular contributions and gifts received from persons not residing in the dwelling; (h) all regular pay, special pay and allowances of a member of the Armed Forces (whether or not living ir the dwelling) who is the head of the household or spouse; and (i) any earned income tax credit to the extent that it exceeds income tax liability. Excluded from such anticipated income are: (a) casual, sporadic or irregular gifts; (b) amounts which are specifically for or in reimburseme of medical expenses; (c) lump sum additions to family assets, such as inheritances, insurance payments (including payment: under health and accident insurance and workmen's compensation), capital gains and settlement for personal or property losses; 04/22/85 3635p/2062/12 c-2 i (d) amounts of educational scholarships paid directly to the student or the educational institution, and amounts paid by the government to a veteran for use j meeting the costs of tuition, fees, books and equipment. Any amounts of such scholarships or payments to veterans not used for the above purposes are to be included in income; (e) hazardous duty pay to a household member who is away from home and exposed to hostile fire; (f) relocation payments under Title I1 of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970; (9) foster child care payments; (h) the value of coupon allotments for the purchase of food pursuant to the Food Stamp Act of 1977; (i) payments to volunteers under the Domestic Volunteer Service Act of 1973; (j) payments received under the Alaska Native Claims Settlement Act; (k) income derived from certain submarginal land of the United States that is held in trust for certain Indi tribes; (1) payments or allowances made under the Department of Health and Human Services' Low-Income Home Energy Assistance Program; (m) payments received from the Job Training Partnership Act; (n) income derived from the disposition of funds of the Grand River Band of Ottawa Indians; and (0) the first $2,000.00 of per capita shares received fr judgment funds awarded by the Indian Claims Commissi or the Court of Claims. 7. Do the persons whose income or contributions are included in item 6 above (a) have savings, stocks, bonds, equity in real propert1 or other form of capital investment (excluding the values of necessary items of personal property such furniture and automobiles and interests in Indian trust land) Yes No; or 04/22/85 3635p/2062/12 c-3 8 (b) have they disposed of any assets (other than at a foreclosure or bankruptcy sale) during the last two years at less than fair market value? Yes No. (c) If the answer to (a) or (b) above is yes, does the combined total value of all such assets owned or $5, OOO? Yes No disposed of by all such persons total more than (d) If the answer to (c) above is yes, state: (1) the amount of income expected to be derived fro such assets in the 12-month period beginning on the date of initial occupancy in the unit that you propose to rent: $ , and (2) the amount of such income, if any, that was included in item 6 above: $ (a) Are all of the individuals who propose to reside in the unit full-time students*? Yes No - *A full-time student is an individual enrolled as a full-time student during each of 5 calendar months during the calendar year in which occupancy of the unit begins at an educational organization which, normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of studer in attendance and is not an individual pursuing a full-time course of institutional on farm training under the supervision of an accredited agent of suck an educational organization or of a state or politic subdivision thereof. (b) If the answer to 8(a) is yes, is at least 1 of the proposed occupants of the unit a husband and wife entitled to file a joint federal income tax return? Yes NO 9 . Neither myself nor any other occupant of the unit I/we propose to rent is the owner of the rental housing projec in which the unit is located (hereinafter the "Owner"), k any family relationship to the Owner; or owns directly 01 indirectly any interest in the Owner. For purposes of tl paragraph, indirect ownership by an individual shall mear ownership by a family member, ownership by a corporation, partnership, estate or trust in proportion to the owners? or beneficial interest in such corporation, partnership, estate or trustee held by the individual or a family member; and ownership, direct or indirect, by a partner ( the individual. 04/22/85 3635p/2062/12 c-4 i 10. This certificate is made with the knowledge that it will relied upon by the Owner to determine maximum income for eligibility to occupy the unit; and I/we declare that all information set forth herein is true, correct and complet and based upon information I/we deem reliable and that th statement of total anticipated income contained in as the undersigned deemed necessary. paragraph 6 is reasonable and based upon such investigati 11. I/we will assist the Owner in obtaining any information c documents required to verify the statements made herein, including either an income verification from my/our prese employer(s) or copies of federal tax returns for the immediately preceding calendar year. 12. I/we acknowledge that I/we have been advised that the making of any misrepresentation or misstatement in this declaration will constitute a material breach of my/our agreement with the Owner to lease the unit and will entit the Owner to prevent or terminate my/our occupancy of the unit by institution of an action for ejection or other appropriate proceedings. I/we declare under penalty of perjury that the foregoing true and correct. Executed this day of in the Cit] of , California. Applicant Applicant [Signature of all persons over tl age of 18 years listed in number above required] 04/22/85 3635p/2062/12 c-5 b FOR COMPLETION BY APARTNENT OWNER ONLY: 1. Calculation of eligible income: a. Enter amount entered for entire household in 6 above: $ b. (1) If the answer to 7(c) above is yes, enter the total amount entered in 7(d)(l), subtract from that figure the amount entered in 7(d)(2) and enter the remaining balance ($ >; (2) Multiply the amount entered in 7jc) times the current passbook savings rate as determined by HUD to determine what the total annual earnings on the amount in 7(c) would be if invested in passbook savings ($ ), subtract from that figure the amount entered in 7(d)(2) and enter the remaining balance ($ 1; (3) Enter at right the greater of the amount calculated under (1) or (2) above : $ c. TOTAL ELIGIBLE INCOME (Line 1.a plus line l.b(3)): $ 2. The amount entered in 1.c: Qualifies the applicant(s) as a Lower-Income Tenant(s). Does not qualify the applicant(s) as a Lower-Incon Tenant(s). Qualifies the applicant(s) as a Very Low Income Tenant. 3. Number of apartment unit assigned: Bedroom Size: Rent: $ 04/22/85 3635p/2062/12 C-6 4 4. This apartment uRit [was/was not] last occupied for a per of 31 consecutive days by persons whose aggregate antici- pated annual income as certified in the above manner upon their initial occupancy of the apartment unit qualified them as Lower-Income Tenants. 5. Method used to verify applicant(s) income: Employer income verification. Copies of tax returns. Other ( 1 Manager 04/22/85 3635p/2062/12 C- 3 I INCOME VERIFICATION (for employed persons) The undersigned employee has applied for a rental unit locate in a project financed under The City of Carlsbad Multifamily Housing Progran? for persons of low and moderate income. Ever verified. Please indicate below the employee's current annua income from wages, overtime, bonuses, commissions or any othe form of compensation received on a regular basis. income statement of a prospective tenant must be stringently Annual wages Overtime Bonuses Commissions ~ Total current income I hereby certify that the statements above are true and , complete to the best of my knowledge. Signature Date Title I hereby grant you permission to disclose my income to determine my income eligibility for rental of an apartment of Carlsbad Multifamily Housing Program. in order that they may located in their project which has been financed under The Ci Signature Date Please send to: ~ ~~ 04/22/85 3635p/2062/12 C-8 1 3 9 3 T INCOME VERIFICATION (for self-employed persons) I hereby attach copies of my individual federal and state income tax returns for the immediately preceding calendar yea and eertify that the information shown in such income tax returns is true and complete to the best of my knowledge. - - Signature Date -. .. - C . s,u 1 . a5 ?: t: -<:. -.\ a :, ; cJ~. i F$P. , .. ,. .. A " I" -. -, - " -. _"" . I..._ ;h ::< i: .:: d : A )? IF. 2:. 2.. ,:-i I' ' .E;: ,." "_ " - ed 04/22F(85 3635p/E062/12 .tz c-9 =Ems I- sp 6"- fn 'Z 6 0 .= 0 m- Q) gs Q)*Z -.E= 5 sg%2 .- ;g:+ .=Y2 tu EaJ=u - Cn." Q) 'COM 0 f&l a* &=-ea Q,Ec E-- (u a 73z= E E Q,=S Ern5 b Q eE O&O, 0.E z-f - OEE9 0 Qo s .p Ea)Lc, pw!? e- K 9 *s 0 3 c - Q) 0.5 *Y=w maw- 0 oc s L 8 8 .2 .p .z"a:g =I 0.02- B -5 sa0 m @Qua fns MF ksggc., E a= 3 = ** 3 +I 332 QaLm .Eoofn 2za= L o= s 0 0 m.2 Eg g g =E oc CL'a .E: 5; QB Q, 0 Ea02 .- ggE5 % gz:g E E%= 2085 L = 1 .- s sea= a3 0 0 E 0 =s mama **=o sax M .2d oc 0 m,ar e e: E- E is: ,!&! E $2.- mgaG ;; '5 g .E *G z -- 'c1 0 m OZ2 ?i h - n 'L' B 'Z * .E 0 .E 0 m a =IC c Q,c Q, L b@brnO e 0 PRELIMINARY OFFICIAL STATEMENT DATED AFRHE IO, 1985 NEW ISSUE Moody's: (See "Rating" hers In the opinion of Bond Counsel, assuming compliance with certain covenants in the Indenture an Regulatory Agreement relating to the requirements of Section 203@)(4)(A) of the Internal Revenue Code of .,. a5 ..,,..I,.!-.. amended (the .... "Cg&') and the rfpiatfons promulgated thereunder, under existing statutes, re ula published rulings and judicial decisions, interest on the Bonds is exempt from all present federal income except for the interest on any Bond for any period during which such Bond is held by a "substantial user" fucilities~nanced with the QrOCeCdS ofthe Bonds or a "related person"as such terms are used in Section 103 of the Code. In addition, in the opinion of Bond Counsel, based upon ex;st;ng laws of the State of Calij interest on the Bonds is exempt from personal income taxes imposed by the State of California. See Exemption" herein. 8 $15,650,000 * CITY OF CARLSBAD, CALIFORNIA MULTIFAMILY HOUSING REVENUE BONDS SERIES A OF 1985 (La Costa Apartments Project) Dated: April 1,1985 Due: December 3 The Bonds will bear interest payable semiannually on June 1 and December 1 of each year commc June 1, 1985 in accordance with the Indenture. Interest is payable by check or draft of The Bs California, N.A., a national banking association, as trustee (the "Trustee"), mailed to the regi! owners of record appearing on the registration books kept by the Trustee as of the applicable recorl preceding each interest payment date. Principal of and premium, if any, on the Bonds is payable principal corporate trust office of the Trustee. The Bonds are to be delivered in fully registered form denominations of $5,000 or any integral multiples thereof. The Bonds are subject to redemptionpl maturity as described herein. The Bonds are special, limited obligations of the City of Carlsbad payable solely from Bond prc and income from the investment thereof and out of revenues, assets and funds pledged undl Indenture and from funds drawn by the Trustee under an irrevocable Letter of Credit to be issued SECURITY PACIFIC NATIONAL BANK The Letter of Credit will terminate on December 15,1996, or earlier under certain conditions des1 herein, and may be replaced by a Substitute Letter of Credit. Neither the faith and credit nor the taxing power of the City of Carlsbad, the State of Califor any political subdivision thereof is pledged to the payment of the principal of, premium, if a interest on the Bonds. The Bonds are not general obligations of the the City of Carlsbad. $15,650,000* -YO Bonds due December 1,1996 (Price -%, plus accrued interest) The Bonds are offered when, as and if issued and received by the Underwriters subject to the approv their legality by Stradling, Yocca, Carlson tiRauth, a Professional Corporation, Newport Beach, Californi Counsel. Certain legal matters will be passed upon for the underwriters by O'Melveny b Myers. It is antil that the Bonds will be available for delivery in Los Angeles, California on or about April __, 1985. Security Pacific Capital Markets Group Security Pacific National Bank Newman and Associates, Inc. PaineWe Incorp Dated: April -, 1985 *Subject to change e e No dealer, broker, salesperson or other person has been authorized by the Issuer or the Under- writers to give any information or to make any representations other than those contained herein in connection with the offering of the Bonds described herein and, if given or made, such othel information or representation must not be relied upon as having been authorized by the Issuer or the Underwriters. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Statements contained in this Offkial Statement which involve estimates, forecasts or matters of This Official Statement is not to be construed as a contract with the purchasers of the Bonds. opinion, whether or not expressly described as such herein, are intended solely as such and are not to be construed as representations of fact. The information set forth herein has been obtained from sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness, and is not to be construed as a represenation by the Issuer or the Underwriters. The Issuer has made no independent verification of the information contained herein. The information and expression of opinions herein are subject to change without notice, and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Issuer or any other parties described herein since the date hereof. TABLE OF CONTENTS Page Summary Statement ................................................................... ii Introduction .......................................................................... 1 SecurityfortheBonds .................................................................. 3 Pledge Under the Indenture ........................................................... 3 TheBonds ............................................................................ 6 DescriptionoftheBonds .............................................................. 6 Redemption ........................................................................ 6 Estimated Uses of Bond Proceeds ......................................................... 8 TheIssuer ............................................................................ 8 TheBank ............................................................................. 9 TheProject ........................................................................... 9 TheDeveloper ........................................................................ 10 Summaries of Certain Provisions of the Documents .......................................... 10 Definitions ......................................................................... 10 TheIndenture ....................................................................... 15 The Letter of Credit and Reimbursement Agreement . , .... , ................................ 4 TheLoanAgreement ................................................................. 25 The Regulatory Agreement ............................................................ 30 TaxExemption ........................................................................ 36 Certain Legal Matters .................................................................. 37 Absence of Litigation ................................................................... 37 Rating ............................................................................... 37 Underwriting ......................................................................... 37 Availability of Documents ............................................................... 38 Miscellaneous ......................................................................... 38 Appendix A - Proposed Form of Opinion of Bond Counsel ................................... A-1 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 0 e SUMMARY STATEMENT THIS SUMMARY STATEMENT IS SUBJECT IN ALL RESPECTS TO MORE COMPLETE INFORMATION IN THIS OF,FICIAL STATEMENT AND THE OFFER- ING C)F TBE 86H5!! T8 PoTBMTIAL INVESTORS IS MADE ONLY BY MEANS OF THE ENTIRE OFFICIAL STATEMENT, The Bonds: The Bonds are being issued by the City of Carlsbad, California for the purpose of financing the construction and development of a multifamily rental housing project. The Bonds will bear interest payable semiannually on June 1 and December 1 of each year, commencing June 1, 1985. Interest will be payable by check or draft of the Trustee mailed to the registered owners of the Bonds. Principal of and premium, if any, on the Bonds is payable at the principal corporate trust office of the Trustee upon registered form in the denominations of $5,000 or any integral multiples thereof. surrender of the Bonds. The Bonds will be issued in fully Redemption: The Bonds are subject to redemption at par upon (i) an event of default causing acceleration of the Bonds or the Developer Loan, including notice from the Bank that an event of default has occurred under the Reimbursement Agreement; (ii) the occurrence of a Determination of Taxability; (iii) the earlier of the completion of the Pro- ject or April 1, 1988, to the extent of Bond proceeds remaining in the Developer Loan Fund not used to pay Project Costs; (iv) under certain circumstances, in the event of damage to or destruction of the Project or the exercise of eminent domain to the extent of any compen- sation received; (v) failure or refusal of the Bank to honor any draw under the Letter of Credit or to reinstate the Letter of Credit in accordance with its terms; and (vi) in the event of the bankruptcy of the Bank or the unenforce- ability or expiration of the Letter of Credit unless a Substitute Letter of Credit has been provided. The Bonds are subject to redemption to the extent of optional prepayments on the Developer Note at a premium or at par as described herein on or after December 1, 1990. Security for the The Bonds are special, limited obligations of the Issuer Bonds: payable out of revenues derived from or in connection with the Loan Agreement by and among the Issuer, the Trustee and La Costa Partners, a California general partnership (the TIDeveloperll). The obligations of the (ii) 0 Developer to the Issuer will be secured by a First Deed of Trust granting a first lien security interest in the Project to the Issuer. Pursuant to an Indenture of Trust, the Issuer has pledged to the Trustee for the benefit of the owners of the Bonds its rights under the Loan Agreement secured by an irrevocable Letter of Credit issued in favor of the Trustee by Security Pacific National Bank. The be in an amount equal to the principal amount of Bonds outstanding plus one hundred eighty-six (186) days' interest at the Bond interest rate. The Letter of Credit will terminate on December 15, 1996, or earlier under certain conditions described herein. The Letter of Credit: The Trustee will draw upon the Letter of Credit BO make payments on the Developer Note in amounts which are sufficient to pay principal of and interest on the Bonds as the same shall become due, and to pay the redemption price (excluding the premium, if any) and interest due on any Bonds to be redeemed in accordance with the Inden- ture. Immediately following the application of any draw Credit will automatically be reinstated by the Bank to an amount equal to the principal amount of the Bonds then outstanding, plus one hundred eighty-six (186) days' inter- est thereon. The Bank will seek prompt reimbursement from the Developer of the full amount of each of the Trustee's draws on the Letter of Credit to the extent that the Developer's reimbursement obligations are not met by disbursements from certain of the funds and accounts held by the Trustee under the Indenture. Upon compliance with the provisions of the Indenture and the Reimburse- ment Agreement, the Developer may provide the Trustee with a Substitute Letter of Credit issued by a financial institution other than the Bank. and the First Deed of Trust. The Bonds are further Letter of Credit, issued on the Bond Issuance Date, will by the Trustee on the Letter of Credit, the Letter of The Bank: As of December 31, 1984, Security Pacific National Bank, issuer of the Letter of Credit, was the ninth largest commercial bank in the United States as measured by assets, with reported total assets of $40.2 billion, The Issuer: The Issuer is 8 municipal corporation duly organized and existing under the Constitution and laws of the State of California with authority to issue its bonds to provide funds to finance, among other things, construction and development of multifamily residential rental housing projects. (iii) e e The Project: The Project is a multifamily residential rental housing project which is to be built in the City of Carlsbad, California, by the Developer. Tax Exemption: In the opinion. of Stradling, Yocca, Carlson & Rauth, a Professional Corporation, interest on the Bonds is exempt personal income taxation to the extent described under the heading "Tax Exemption" herein. from federal income taxation und ijtate 9f California NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF ' THE CITY OF CARLSBAD, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS, THE BONDS ARE NOT GENERAL OBLIGATIONS OF THE CITY. (id e @ OFFICIAL STATEMENT $15,650,000* CITY OF CARLSBAD, CALIFORNIA MULTIFAMILY HOUSING REVENUE BONDS SERW A OF 1985 (La Costa Apartments Project) INTRODUCTION This Official Statement, which includes the cover page, Table of sale by the City of Carlsbad, California (the 711ssuer1r) of $15,650,000* aggregate principal amount of its Multifamily Housing Revenue Bonds, Series A of 1985 (La Costa Apartments Project) (the "Bonds"). The Issuer is a municipal corporation, duly organized and validly existing under the Constitution and laws of the State of California. Contents and Appendix, sets forth certain information relating to the issue and The Bonds are being issued under the authority of Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California (the "Actr7) and an authorizing resolution adopted by the City Council of the Issuer on March 19, 1985 (the "Bond Resolution"). The Bonds will be issued pursuant to and secured by an Indenture of Trust, dated as of April 1, 1985 (the trIndenturely), by and between the Issuer and The Bank of California, N.A., a national banking association, as trustee (the r'Trustee"). The Issuer will lend the proceeds of the sale of the Bonds to La Costa Partners, a California general partnership (the *'DeveloperTr) of which George A. Fermanian, as trustee for the Fermanian Family Trust and Rodney F. Stone, as trustee for the Stone Family Trust (the "Partners") are all of the general partners, under a Loan Agreement, dated as of April I, 1985 (the "Loan Agreement"), by and among the Issuer, the Developer and the Trustee. The Issuer's loan to the Developer (the "Developer Loan") will be used to finance the acquisition, construction, equipping and development by the De- veloper of a multifamily residential rental housing development, consisting of approximately 320 units (the r7Projectrr) to be located in the community of La Costa in the City of Carlsbad, California. The obligation of the Developer to repay the Developer Loan will be evidenced by a promissory note (the "Developer Note"). The Developer will execute a First Deed of Trust and Assignment of Rents, a First Assignment of Rents and Leases and a First Security Agreement with respect to the Project (collectively, the "First Deed of Trust9 securing its obligations under the Loan Agreement for the benefit and security of the Issuer and the owners of the Bonds. The obligations of the Developer to the Issuer and the o.wners of the Bonds are otherwise without recourse to other assets of the Developer or the Partners. Simultaneously with the closing of the Developer Loan, the Issuer will record a Regulatory Agreement and Declaration of Restrictive Covenants (the "Regulatory Agreement") which will apply to the *Subject to change. 1 e @ operation and occupancy of the Project and which, among other things, will require that at least twenty percent (20%) of the dwelling units in the Project be occupied at an Affordable Rent by families or individuals of low or moderate income, currently defined in Section 103(b)(l2)(C) of the Internal Revenue Code of 1954, as amended (the "Code"), as not more than eighty percent (80%) of the median gross income within the San Diego, California, Metropolitan Statistical Area. The Developer will enter into a Reimbursement Agreement, dated as of April 1, 1985 (the "Reimbursement Agreement"), with Security Pacific National Bank (the "BankTr) pursuant to which the Bank will issue, on or before the date of issuance of the Bonds, to the Trustee for the account of the Developer an irrevocable Letter of Credit in an amount equal to the principal amount of the Bonds plus one hundred eighty-six (186) days' interest thereon at the rate borne by the Bonds (the "Letter of Credit"), The Trustee will draw upon the Letter of Credit to meet the Developer's obligations to make payments on the Developer Note and to redeem Bonds in accordance with the terms of the Indenture. The Developer may provide the Trustee with a Substitute Letter of Credit issued by a financial institution other than the Bank upon compliance with the provisions of the Indenture and the Reimbursement Agreement, which provisions require, among other things, that such substitution will not result in a reduction of the rating on the Bonds and that all amounts owing the Bank will be paid to the Bank by the Developer prior to any such substitution. Draws under the Letter of Credit will be in amounts which are sufficient to pay the principal of and interest on the Bonds as the same shall become due or aFe redeemed- The Letter of Credit does not cover, and will not be drawn upon to pay, any premium required to be paid upon redemption of the Bonds. Any premium will be paid by the Trustee only from Seasoned Funds deposited by the Developer. The terms of the Letter of Credit and the obligations of the parties with respect thereto are set forth in the Reimbursement Agreement. The Developer will execute a Second Deed of Trust and Assignment of Rents, a Second Assignment of Rents and Leases and a Second Security Agreement with respect to the Project (collec- tively, the "Second Deed of Trust") securing its obligations to the Bank under the Reimbursement Agreement. Except to the extent provided in a Guaranty executed by George A. Fermanian and in a Guaranty executed by Rodney F. Stone, as individuals (collectively, the "Guaranty"), for the benefit of the Bank, and in the Reimbursement Agreement, the Developer's obligations to the Bank under the Reimbursement Agreement are without recourse to other assets of the Developer or the Partners. The Indenture requires the Trustee to draw on the Letter of Credit to meet the Developer's obligations to make payments (other than with respect to payments of premium, if any, which shall be made from Seasoned Funds) on the Developer Note and to redeem Bonds. Immediately following the application of any draw by the Trustee on the Letter of Credit, the Letter of Credit will automatically be reinstated by the Bank to an amount equal to the principal amount of the Bonds then outstanding, plus one hundred eighty-six (186) days' interest thereon. The Bank will seek prompt reimbursement from the Developer for the full amount of each of the Trustee's draws on the Letter of Credit, to the 2 0 0 extent that the Developer's reimbursement obligations are not met by disburse- ments from certain of the funds and accounts held by the Trustee under the Indenture. The Bonds are special, limited obligations of the Issuer and are not a lien or charge upon the funds or property of the Issuer, except as pledged under the Indenture. Neither the faith and credit nor the taxing power of the Issuer, the State of California or any political subdivision thereof is pledged to the payment of the principal oi, premium, !! any, or :nieresi on khe Bonds. Thb Bonds do not constitute an indebtedness or a loan of the credit of the Issuer or the State of California within the meaning of any constitutional or statutory provisions. The Bonds shall not be construed to create any moral obligation on the part of the Issuer, the State of California or any political subdivision thereof with respect to the payment thereof. t Brief descriptions of the security for the Bonds, the Bonds, the Issuer, the Bank, the Project and the Developer are included in this Official Statement together with summaries of the Indenture, the Loan Agreement and the Regulatory Agreement. Such descriptions do not purport to be comprehensive or definitive. All references herein to the Indenture, the Loan Agreement, the Reimbursement Agreement, the First Deed of Trust, the Second Deed of Trust and the Regulatory Agreement are qualified in their entirety by reference to such documents, and references herein to the Bonds and the Letter of Credit are qualified in their entirety by reference to the forms thereof included in the Indenture and the Reimbursement Agreement, respectively, and the information with respect thereto in the aforementioned documents, copies of all of which are available for inspection in the principal corporate trust office of the Trustee. Capitalized terms used herein shall have the meanings specified in the Indenture and the Loan Agreement, and summarized under the heading "Summaries of Certain Provisions of the Documents - Definitions." SECURITY FOR THE BONDS Pledge Under the Indenture The Bonds are special, limited obligations of the Issuer payable solely from and secured, to the extent and as provided in the Indenture, by a pledge of: (1) all rights of the Issuer (other than certain indemnification rights and rights to certain fees and expenses of the Issuer) in and to the Loan Agreement, the Developer Note, the First Deed of Trust and the Letter of Credit, including repayment of the Developer Loan and the right to pursue the remedies granted in the Loan Agreement and the First Deed of Trust upon the occurrence of an event of default under the Loan Agreement or the First Deed of Trust; (2) moneys held by the Trustee in the funds and accounts established under the Indenture (other than those set aside for payment of certain fees and expenses of the Issuer and the Trustee), including moneys held by the Trustee in the Debt Service Fund and the Developer Loan Fund; and (3) moneys drawn by the Trustee under the Letter of Credit. See "Summaries of Certain Provisions of the Documents - The Indenture." 3 ~ e e The Developer is obligated to pay to the Trustee the principal of, premium, if any, and interest on the Developer Loan at the times, in the manner and in the amounts provided in the Developer Note. Repayments by the Developer of the Developer Loan pursuant to the Loan Agreement are designed to permit the Issuer to provide sufficient moneys to the Trustee to make the payments when due of principal of, premium, if any, and interest on the Bonds, including the possible redemption of Bonds prior to maturity. The Developer will authorize and direct the Trustee to make draws on the Letter of Credit to the extent necessary to meet the Developer's obligations to pay the principal of and interest on the Developer Note when due. See "Summaries of Certain Provisions of the Documents - The Loan Agreement." The Letter of Credit and Reimbursement Agreement The Developer will enter into the Reimbursement Agreement with the Bank to provide for the issuance of the Letter of Credit. Pursuant to the Loan Agreement, the Developer will authorize and direct the Trustee to draw on the Letter of Credit to the extent necessary to meet its obligations to pay the principal of and interest on the Developer Note, other than for the payment of a redemption premium, if any. The Reimbursement Agreement provides that on or before the date of issuance of the Bonds, the Bank will issue a Letter of Credit to the Trustee in an amount equal to the principal amount of the Bonds together with one hundred eighty-six (186) days' interest thereon at the rate borne by the Bonds. The Letter of Credit may not be cancelled by the Bank for any reason, including the Developer's failure to pay any fees or other amounts payable under the Reimbursement Agreement. Subject to earlier termination as a result of the maturity or redemption of all outstanding Bonds, the Letter of Credit expires on December 15, 1996, At its option, the Developer may provide the Trustee with a Substitute Letter of Credit issued by a financial institution other than the Bank upon compliance with the provisions of the Indenture and the Reimbursement Agreement, which provisions require, among other things, that such substitution will not result in a reduction of the rating on the Bonds and that all amounts owing the Bank will be paid to the Bank by the Developer prior to such substitution. The Letter of Credit entitles, and the Indenture requires, the Trustee to draw upon the Letter of Credit on or before each Interest Payment Date in an amount sufficient to pay principal and interest due on the Bonds on such Interest Payment Date and at any time upon the occurrence of an event which, under the terms of the Indenture, requires the Trustee to redeem Bonds (other than with respect to the premium portion of optional prepayments made from Seasoned Funds), in an amount sufficient to pay the principal of and accrued interest due on the Bonds to be redeemed. The Letter of Credit does not cover, and will not the Bonds. Any such premium will be an obligation of the Developer under the Loan Agreement. See "The Bonds "Redemption." Immediately following the application of any draw by the Trustee on the Letter of Credit, the obligaltion of be drawn upon to pay, any premium required to be paid upon the redemption of 4 0 e the Bank under the Letter of Credit shall automatically be reinstated to an amount equal to the principal amount of the Bonds then outstanding plus one hundred eighty-six (1 86) days' interest thereon. Events of default under the Reimbursement Agreement include (1) failure of the Developer to cause the final subdivision map of the Project site to be recorded and a reissued policy of title insurance to be delivered to the Bank by August 1, 1985, or such later date as the Bank may agree to in its sole discretion; (2) material inaccuracies in any representation or warranty of the Developer contained therein; (3) failure of the Developer to pay when due any ob]j@tjofl3 under the Reimbursement Agreement; (4) failure of the Developer to perform or observe any other term or covenant contained in the Reimbursement Agreement; and (4) an event of default under the Indenture, the Loan Agreement or a material breach of any representation, warranty, covenant or obligation in the Guaranty, upon the expiration of any cure period provided for therein. Upon the occurrence of an event of default under the Reimbursement Agreement, the Bank may direct the Trustee to redeem all outstanding Bonds. See "THE BONDS - Redemption.I1 Pursuant to the Reimbursement Agreement, the Developer will agree to repay the Bank for the full amount of each draw under the Letter of Credit, except for amounts repaid by the Trustee from certain of the funds or accounts held by the Trustee pursuant to the Indenture. The Developer will agree to pay to the Bank at the time of delivery of the Letter of Credit an origination fee based on the principal amount of the Bonds and an annual Letter of Credit fee based on the amount available to be drawn under the Letter of Credit on such payment dates. The obligations of the Developer under the Reimbursement Agree- ment will be secured by the Second Deed of Trust on the Project executed by the Developer for the benefit and security of the Bank. Except to the extent provided in the Reimbursement Agreement and in the Guaranty, the Developer's payment obligations under the Reimbursement Agreement are non-recourse to other assets of the Developer or the Partners. In the event of an act of bankruptcy of the Bank, the Developer will have sixty (60) days to secure a Substitute Letter of Credit issued by a financial institution other than the Bank, which substitution will not result in a reduction of the rating on the Bonds. Subject to the same restrictions regarding the effect of the substitution of the Letter of Credit on the rating of the Bonds, the Developer will have thirty (30) days from a finding by the Trustee that the Letter of Credit is not enforceable to obtain a Substitute Letter of Credit. The Bank has the right to substitute itself for the Developer as obligor under the Loan Agreement and related documents, and as owner of the Project, by foreclosing on its Second Deed of Trust upon the occurrence and continuance of an event of default under the Reimbursement Agreement, including a failure by the Developer to pay to the Bank an amount sufficient to fully cash collateralize the Letter of Credit and any other amounts due under the Reimbursement Agreement upon the occurrence of an event of default there- under. Once such substitution has occurred, and so long as the Bonds are outstanding, the Bank may sell, transfer or otherwise dispose of the Project only in a transaction where the transferee provides a letter of credit in favor of the 5 0 a Trustee in form, substance and amount such that the rating on the Bonds will not be reduced thereby. THE BONDS Description of the Bonds The Bonds will be dated April 1, 1985, will mature on December 1, 1996, and will bear interest at the rate of % per annum throughout their term, payable semiannually on June 1 and December 1 of each year, commencing June 1, 1985, until maturity or redemption. The Bonds will bear interest from the Interest Payment Date next preceding the date of authentication thereof to which interest has been duly paid or provided for, unless authenticated prior to !!day 16, 1985, in which case interest will accrue from April 1, 1985, or unless authenticated between the Record Date for and the occurrence of the next Interest Payment Date, in which case interest will accrue from such Interest Payment Date. The Record Date is the fifteenth day of the month preceding an Interest Payment Date. Payment of principal and premium, if any, on the Bonds is payable only at the principal corporate trust office of the Trustee in San Francisco, California upon presentation of the Bonds. Interest on the Bonds is payable by check or draft mailed by the Trustee to the registered owners of record appearing on the registration books kept by the Trustee as of the applicable Record Date preceding each Interest Payment Date. The Bonds will - be issued in fully registered form in the denominations of $5,000 or any integral multiples thereof. Redemption The Bonds are subject to redemption prior to their maturiPy at a redemption price equal to the principal amount thereof, without premium, plus accrued interest to the date of redemption (1) in whole or in part, on the earlier of (a) the first Interest Payment Date for which notice of redemption can timely be given which occurs after completion of the Project, or (b) April 1, 1988 (unless a later date is established in accordance with the provisions of the Indenture), in either case from Bond proceeds and earnings thereon remaining in the Developer Loan Fund; (2) in whole, on the first date for which notice of redemption can timely be given, after the Trustee has accelerated the amount due with respect to the Bonds or the Developer Note, as the case may be, as the result of an event of default under the Indenture (including receipt of notice from the Bank that an event of default has occurred under the Reimbursement Agreement), the Loan Agreement or the Regulatory Agreement; (3) in whole, on failure or refusal of the Bank to honor any draw on the Letter of Credit or to reinstate the Letter of Credit in accordance with its terms or (b) if within sixty (60) days of an Act of Bankruptcy of the Bank, or within thirty (30) days of a determination by the Trustee that the Letter of Credit is unenforceable the Developer has not caused to be delivered to the Trustee a Substitute Letter of Credit satisfying the criteria set forth in the Indenture; (4) in whole, on the first the first date for which notice of redemption can timely be given, (a) upton the 6 a 0 date for which notice of redemption can timely be given, upon the occurrence of a Determination of Taxability; or (5) in whole or in part, on the first date for which notice of redemption can timely be given, under certain circumstances following the involuntary loss or substantial destruction of the Project as a result of certain unforeseen events. The Bonds are also subject to redemption from optional prepayments of the Developer Note on any Interest Payment Date on or after December 1, 1990, in whole or in part, at the following redemption prices (expressed as percentages of the principal amount to be redeemed), plus accrued interest to the date of redemption: Redemption Redemption Period Price December 1, 1990 and June l1 1991 102% December 1, 1991 and June 1, 1992 101.5% December 1, 1992 and June 1, 1993 101% December 1, 1993 and thereafter 100% Any premium payable on the Bonds upon redemption will be paid with Seasoned Funds, which are funds that have been provided by the Developer to the Trustee at least one hundred twenty-six (126) days prior to the date upon which the Trustee gives notice of redemption to the owners of the Bonds where no Act of Bankruptcy of the Developer has occurred during such one hundred twenty-six (126) day period. The Letter of Credit will be drawn upon to meet the Developer's obligation to pay principal of and accrued interest on the Developer Note, which amounts will be applied to redeem Bonds, but such draw will not include any premium payable thereon. Notice of redemption shall be given not less than ten (10) days nor more than thirty (30) days before the redemption date. The Trustee shall give notice of redemption by mail to each owner of the Bonds to be redeemed at such Bond owner's last address appearing; on the registration books of the Trustee, but neither failure to receive such mailed notice of redemption nor any defect in any notice so mailed shall affect the validity of proceedings for the redemption of any Bond. Bonds or portions thereof noticed for redemption shall cease to bear interest on the date fixed for redemption whether or not such Bonds are pre- sented and surrendered for payment on such date. If any Bond or portion thereof called for redemption is not paid. upon presentation and surrender thereof, such Bond or portion thereof shall continue to bear interest at the rate set forth thereon until paid. All or any portion of any Bond may be redeemed but only in a principal amount equal to an integral multiple of $5,000. In the event that less than all of the Bonds are to be redeemed, the Trustee shall select the Bonds to be redeemed by lot. Upon surrender to the Trustee of any Bond in a denomination greater than $5,000 to be redeemed only in part, the Issuer shall execute and the Trustee shall authenticate and deliver to the owner thereof, without charge, a 7 e 8 new Bond or Bonds of the same maturity and of any authorized denomination requested by such owner in an aggregate principal amount equal to the unredeemed portion of the Bond so surrendered. ESTIMATED USES OF BOND PROCEEDS* The estimated uses of Bond proceeds with respect to the Project are set forth below. Developer Loan Fund( 1 ) Cost of Issuance Fund(2) Underwriting Discount $ Total $ 15,650,000 *Subject to change. (1) Interest on the Bonds is capitalized, at least in part, prior to completion of the Project and will be paid from Bond proceeds deposited in the Developer Loan Fund. (2) Includes certain fees payable to the Bank. THE ISSUER The City of Carlsbad, California is a municipal corporation duly organized and validly existing under the Constitution and laws of the State of California. The City is authorized pursuant to Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California to finance the construction and development of multifamily housing of the type to be construc- ted by the Developer. THE BANK Security Pacific National Bank (the "Bank"), headquartered in Los Angeles, California, conducts a complete range of consumer, corporate, trust and international banking activities through over 600 offices throughout the 1871 and is the principal subsidiary of Security Pacific Corporation, a Delaware corporation organized in 1971 and registered as a bank holding company under the Bank Holding Company Act of 1956. State of California and facilities in foreign countries. The Bank was founded in As of December 31, 1984, Security Pacific National Bank was the ninth largest commercial bank in the United States and the second largest in California based on assets, and reported total assets of approximately $40.2 billion and total deposits of approximately $30.9 billion. 8 @ e Security Pacific Corporation is subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, and ac- cordingly files reports and other information with the Securities and Exchange Commission (the ~fCommission"). Such reports and information may be inspected and copied at certain offices of the Commission and copies may be obtained from the Public Reference Section of the Commission, Washington, D.C. 20549, at prescribed rates. They may also be inspected at the Headquarters Office, Security Pacific National Bank, Los Angeles, California. Copies of Security Pacific Corporation's Annual Report on Form 10-K for the year ended December 31, 1984, and all documents filed by Security Pacific Corporation with the Corn- mission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, after the date hereof and prior to the termination of the offering of the Bonds offered hereby are available at no charge to each person to whom this Official Statement is delivered. Written requests should be addressed to: Security Pacific Corporation, 333 South Hope Street, Los Angeles, California 90071 Attention: Jay S. Gould. - - "" - In addition to issuing the Letter of Credit, the Bank is serving as Q~I Underwriter of the Bonds and its parent, Security Pacific Corporation, may enter into an investment agreement with the Trustee pursuant to which certain funds held under the Indenture will be invested prior to their use, in accordance with the terms of the Indenture. See "Underwriting." THE PROJECT The Project will be a multifamily residential rental housing project consisting of approximately 320-units contained in 20 two-story buildings. The Project will be located on the southeast corner of La Costa Boulevard and Rancho Santa Fe Road. The Project will be in the community of La Costa in the south easterly portion of the City of Carlsbad, California. Twenty percent (20%) of the dwelling units will be reserved for occupancy at an Affordable Rent by individuals or families of low or moderate income. See "Summaries of Certain Provisions of the Documents - The Regulatory Agreement." The Project site consists of approximately twenty-two acres and the buildings will contain an aggregate of approximately 266,240 square feet of useable floor space divided as follows: Size Number - Plan (Square Feet) Of Units 1 Bedroom, 1 Bath 650 64 2 Bedroom, 1 Bath 81 0 64 2 Bedroom, 2 Bath 900 192 The Project will include two swimming pools, two jacuzzis, tennis courts, racquetball courts, club house, recreation rooms and two central laundry 9 e 0 facilities. The units will be equipped with such amenities as dishwashers, woodburning fireplaces, patios or balconies and carpets. Construction of the Project is scheduled to commence in April 1985. It is estimated that eonstruc- tion will be aornpleted in approximately twelve months. See "Security for the Bonds - The Letter of Credit and Reimbursement Agreement?'. Construction of the Project is contingent upon the receipt of certain required governmental approvals which have not yet been obtained by the Developer, including those related to the recording of a final subdivision map and the obtaining of necessary building permits. There can be no assurances that such governmental approvals will be obtained in a timely fashion or that, if received, they will not be subject to materially adverse conditions and will be obtained such that the Project can be constructed as planned. Failure to obtain such governmental approvals in a timely manner may result in redemption of the Bonds. See T'HE BONDS - Redemption." restrictions. The Developer believes that appropriate governmental approvals THE DEVELOPER The Developer, 1,a Costa Partners, a California general partnership, the general partners of which are George A. Fermanian, as trustee for the Fermanian Family Trust, and Rodney F. Stone, as trustee for the Stone Family Trust, has been recently formed for the purpose of acquiring, constructing and operating the Project and bas no previous operating history. The principal executive offices of the Developer are located at 11300 Sorrento Valley Road, Suite 200, San Diego, California 92122. Over the past nine years, George A. Fermanian and Rodney F. Stone, as principals and 100% shareholders of So Cal Development, Inc., a California corporation, have constructed 120 single-family residences in the City of Oceanside, California; 119 condominium units in the Cities of Rancho Bernardo, Tierrasanta and National City, California; and an office building in the City of San Diego. Also during this period, excluding the Project, George A. Fermanian and Rodney F. Stone have constructed a total of 1,540 multi-family residential rental housing units in the Cities of Rancho Bernardo, Tierrasanta, Oceanside, Pasadena and San Diego, California. SUMMARIES OF CERTAIN PROVISIONS OF THE DOCUMENTS The following are brief summaries of certain provisions of the primary legal documents pertaining to the issuance of the Bonds and the financing of the Project. These summaries do not purport to be comprehensive or definitive and are subject to all of the terms and provisions of the respective documents in their entirety to which reference is made for the detailed provisions thereof. See "Availability of Documents.fr Definitions The following definitions are of terms used in the Indenture, the Loan Agreement, the Regulatory Agreement and in this Official Statement: "Act?? means Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California, as now in effect and as it may from time to time be amended or supplemented. 10 e e "Act of Bankruptcy" means the filing of a petition in bankruptcy (or other commencement of a bankruptcy or similar proceeding) by or against the Developer, either of the Partners or any of the trustors of the Fermanian Family Trust or the Stone Family Trust, under any applicable bankruptcy, insolvency or similar law now or hereafter in effect. "Act of Bankruptcy of Bank" means that the Bank has become insolvent or has failed to pay its debts generally as such debts become due or has admitted in writing its inability to pay any of its indebtedness or has consented to or has petitioned or applied to any authority for the appointment of a receiver! liquidatorl trustee or similar official for itself or for all or any substantial part of its properties or assets, or that any such trustee, receiver, liquidator or similar official has been appointed or that insolvency, reorganiza- tion, arrangement or liquidation proceedings (or similar proceedings) have been instituted by or against the Rank. 4 "Adjusted Income" m.eans the adjusted income of a person (together with the adjusted income of all persons over the age of eighteen (18) who intend to reside with such person in one residential unit), as calculated in the manner prescribed in Treasury Regulation Section 1.167(k)-3(b)(3) as it shall be in effect as of the Bond Issuance Pate. "Affordable R.entr* means a monthly rent which does not exceed 30 percent of one-twelfth of the maximum adjusted annual income at which a household of appropriate size is deemed to be a Yower income" family in the County of San Diego for purposes of the leased housing program established under Section 8 of the United States Housing Act of 1937, as amended, based upon the following appropriate household sizes for various types of residential units in the Project and assuming 80 percent as the percentage of median gross income which qualifies as "lower incomer1: Residential Unit No. of Persons in Family One Bedroom 2 Two Bedroom 4 "Area" means the San Diego, California, Metropolitan Statistical Area. trBank" means Security Pacific National Bank, acting as issuer of the Letter of Credit, or the issuer of a Substitute Letter of Credit if one has been issued as provided in the Indenture. "Bond Counsel'' means an attorney or firm of attorneys, acceptable to the Issuer and the Trustee, of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions, duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia, WondholderT1 means the registered owner of any Bond. "Bond Issuance Daterr means the date of delivery of the Bonds. 11 0 a 1tBonds7t means the City of Carlsbad, California, Multifamily Housing Revenue Bonds, Series A of 1985 (La Costa Apartments Project) issued pursuant to the Indenture. llCodeTf means the Internal Revenue Code of 1954, as amended. "Completion Date" means the date of completion of the Project, as certified pursuant to the Regulatory Agreement. "Determination of Taxability" means (1) the failure of the Bank to consent within forty-five (45) days to any amendment to the Indenture, the Loan Agreement or the Regulatory Agreement which in the written opinion of Bond Counsel is necessary to preserve the exemption from income taxation of interest on the Bonds, or (2) the enactment of legislation, or a final judgment or order of a court of original jurisdiction, or a final order of any other court of competent jurisdiction, or a final ruling or decision of the Internal Revenue Service, in any such case to the effect that the interest on the Bonds (other than interest on any Bond for any period during which such Bond is held by a Ysubstantial user" of any facility financed with the proceeds of the Bonds or a "related person," as such terms are used in Section 103(b) of the Code) is includable for federal income tax purposes in the gross incomes of all recipients thereof subject to federal income taxes. With respect to clause (2) above, a judgment or order of a court or a ruling or decision of the Internal Revenue Service shall be considered final only if no appeal or action for judicial review has been filed and the time for filing such appeal or action has expired. "Developertf means La Costa Partners, a California general partner- ship, and any successors or assigns, as owner of the Project. 7tDeveloper Loan" means the mortgage loan originated by the Issuer to the Developer for the purpose of financing the acquisition, construction and development of the Project. "Developer Loan Documents" means the RegulatoPy Agreement, the Certificate of Continuing Program Compliance (from and after the date on which it is first required), the Loan Agreement, the Developer Note, the First Deed of Trust and the Letter of Credit. ??Developer Note" means the promissory note in a principal amount equal to the principal amount of the Developer Loan executed by the Developer in accordance with the terms of the Loan Agreement. tTGovernment Obligationst7 means direct, general obligations of the United States of America, or any obligations unconditionally guaranteed as to the payment of principal and interest by the full faith and credit of the United States of America. Wtercreditor Agreement" means the Intercreditor Agreement, dated as of April 1, 1985, among the Issuer, the Trustee and the Bank. 12 0 "Interest Payment Date" means June 1 and December 1 of each year, commencing June 1, 1985. "Issuer1' means the City of Carlsbad, California, as issuer of the Bonds. "Letter of Credit" means the Letter of Credit issued by the Bank pursuant to the Reimbursement Agreement (or a Substitute Letter of Credit) for the benefit of the Trustee. ''Loan Agreement" mean8 the Loan Agreement dated 8s of April 1, 1985 entered into by and among the Issuer, the Developer and the Trustee. "Lower-Income Tenants" means any persons or families with Adjusted Incomes which do not exceed eighty percent (80%) of the Median Income for the Area. In no event, however, will the occupants of a residential unit be considered to be Lower-Income Tenants if all the occupants are students (as defined in Section 151(e)(4) of the Code), no one of whom is entitled to file a joint income tax return under Section 6013 of the Code. "Median Income for the Area" means the median income for the Area 8s most recently determined by the Secretary of Housing and Urban Develop- ment under Section 8 of the United States Housing Act of 1937, as amended, or, if the programs under Section 8 are terminated, median income for the Area determined under the method used by the Secretary prior to such termination. "Permitted Investments1f means any of the following: (1) Government Obligations; (2) time or demand deposits in any United States bank or trust company whose obligations are rated in the highest rating category by a nationally recognized rating agency, having aggregate capital and surplus of at least $50,000,000 and authorized to accept deposits of public funds (including the banking departments of the Trustee and the Bank), which are secured at all times by bonds or other obligations which are authorized by law as security for public deposits; (3) obligations, participations or other instruments of, or issued by, Federal National Mortgage Association, or issued by a United States agency or a United States government enterprise; (4) evidences of indebtedness of corpora- tions authorized by the provisions of Section 1364 of the California Financial Code, provided such indebtedness is rated, or is on a parity with obligations that are rated, l*P-lll or "A-lT1 or better by a nationally recognized rating agency; (5) repurchase agreements secured by any of the obligations referred to in (2) or (3) above or bonds or obligations which are authorized by law as security for public deposits, provided that no proceeding under any applicable insolvency or reorgan- ization law has been commenced by or against the issuer of such bonds or obligations and provided further that such bonds or other obligations and the debt of the issuer of the repurchase agreement bear the highest rating assigned by a nationally recognized rating agency; and (6) promissory notes (or the investment agreements, if any) of a bank holding company whose obligations are rated Aa, without regard to plus or minus, or A-1, or higher, by a nationally recognized rating agency. 13 0 m rfProjectr' means the multifamily rental housing project, consisting of approximately 320 units, to be constructed by the Developer pursuant to the restrictions set forth in the Regulatory Agreement, all applicable governmental approvals and all zoning, environmental and other applicable laws and ordi- nances. "Project Costs" means, to the extent authorized by the Code, and the Treasury Regulations, any and all costs incurred by the Issuer or the Developer with respect to the acquisition of land and the construction and equipping, as the case may be, of the Project, whether paid or incurred prior to or after the date of execution of the Regulatory Agreement, including, without limitation, costs of property, the removal or demolition of existing structures, the construction and purchase of housing, related facilities and improvements, and aU other work in connection therewith, and all costs of financing, including, without limitation, the cost of consulting, accounting and legal services, other expenses necessary or incidental to determining the feasibility of the housing development, contractors' and the developers' overhead and supervisory fees and costs directly allocable to the Project, administrative and other expenses necessary or incidental to the Project and the financing thereof (including reimbursement to any municipality, county or other entity for expenditures made, with the approval of the Issuer, for the Project), interest accrued during construction and prior to the Completion Date of the Project and all other costs approved by Bond Counsel. for site preparation, the planning of housing and improvements, the acquisition "Qualified Project Costs" means Project Costs paid or incurred after October 2, 1984, which are chargeable to a capital account with respect to the Project for federal income tax and accounting purposes, or would be so chargeable either with a proper election by the Developer or but for a proper election by the Developer to deduct such costs; provided, however that only such portion of the interest costs accrued during construction of the Project shall constitute a Qualified Project Cost as bears the same ratio to all such interest as the Qualified Project Costs bear to all Project Costs; and provided further that interest accruing on the Developer Loan after the Completion Date shall not be a Qualified Project Cost and provided still further that Qualified Project Costs shall not include inter-company profits resulting from members of an affiliated group (within the meaning of Section 1504 of the Code) participating in the construction of the Project or payments received by an affiliated party due to early completion of the Project (or any portion thereof). "Qualified Project Period" means the period beginning on the later of (1) the first day on which at least ten percent (10%) of the dwelling units in the Project are first occupied or (2) the date on which the Bonds are issued, and ending on the later of (a) the date which is ten (10) years after the date on which at least fifty percent (50%) of the dwelling units in the Project are first occupied; (b) the date which is a Qualified Number of Days after the date on which any of the dwelling units in the Project is first occupied; or (e) the date on which any assistance provided with respect to the Project under Section 8 of the United States Housing Act of 1937 terminates. For the purposes of clause (b), the term "Qualified Number of Days" means, with respect to the Bonds, fifty 14 0 0 percent (50%) of the number of days comprising the term of the Bonds with the longest maturity. "Record Date" means the fifteenth day of the month immediately preceding any Interest Payment Date. "Seasoned Funds" means moneys deposited by the Developer with the Trustee as the premium portion of a prepayment on the Developer Loan, which moneys have been held by the Trustee for at least one hundred twenty-six (126) days prior to the date upon which notice of redemption of the Bonds is mailed, provided that no Act of Bankruptcy shall have occurred during such 126-day period after such moneys were deposited with the Trustee. During such 126-day period, the Trustee shall be entitled to rely on the Developer's failure to furnish the Trustee with a certificate to the effect that an Act of Bankruptcy has occurred as evidence that no Act of Bankruptcy has in fact occurred. "Substitute Letter of Credit" means an irrevocable letter of credit satisfying the criteria of the Indenture delivered by the Developer to the Trustee to replace the Letter of Credit issued by the Bank. "Treasury Regulations" or "Regulations" means the income tax regul- ations promulgated or proposed by the United States Department of the Treasury pursuant to the Code. Very Low Income Tenants" means Lower-Income Tenants whose Adjusted Income does not exceed fifty percent (50%) of the Median Income for the Area. Such terms as are not defined herein shall have the meanings assigned to them in the Developer Loan Documents. The Indenture Assignment and Security Pursuant to the Indenture, the Issuer will assign and pledge all of its rights under and grant a security interest to the Trustee for the benefit of the Bondholders in: (1) all revenues and other amounts received by the Issuer from or in connection with the Developer Loan (other than rights to certain fees and expenses of the Issuer paid thereunder) including any amounts obtained by the Issuer through the exercise of the remedies provided upon an event of default under the Developer Loan Documents; (2) the moneys held in the funds and accounts established under the Indenture, together with the investment earnings thereon; (3) the Issuer's rights and interest in the Loan Agreement (other than certain indemnification rights and rights to certain fees and expenses); and (4) any amounts realized under the Letter of Credit. The Trustee undertakes to perform only such duties as are specifically set forth in the Indenture and the Developer Loan Documents. 15 e 0 The Trustee may invest moneys on deposit in all funds and accounts only in Permitted Investments; provided that (1) amounts drawn on the Letter of Credit may be invested and reinvested by the Trustee, at the request of and as directed in writing by the Bank, only in Government Obligations maturing not more than thirty (30) days after the date on which they are acquired, and in repurchase agreements with the Bank secured by Government Obligations maturing not more than thirty (30) days after the date on which they are acquired, and (2) amounts in the Revenue Fund will not be invested in any instruments bearing a credit rating by Moody's Investors Service, Inc. of lesser quality than that of the Bank. All such investments will mature not later, nor, to the extent reasonably practicable, earlier, than the date such moneys or investment proceeds are required for the purposes of the respective funds and accounts. Moneys in all funds and accounts will be continuously invested and reinvested by the Trustee as provided in the Indenture until such time or times as the moneys are needed for the purposes for which they were deposited. Prior to the Completion Date and to the extent practicable, the Developer may provide the Trustee with written requests regarding specific Permitted Investments to be made with the moneys held in certain funds and accounts. The Trustee shall thereafter select the investments to be made with such moneys in accordance with prudent investment standards and the provisions of the Indenture. All investments will constitute a part of the fund or account from which the moneys used to acquire such investments were obtained. The Trustee will sell and reduce to cash a sufficient amount of investments in a fund or account whenever the cash balance therein is insufficient to pay the amounts required to be paid therefrom, The Trustee may transfer investments from any fund or account to any other fund or account in lieu of cash when required or permitted by the provisions of the Indenture. The Trustee will have no liability or responsibility for any loss resulting from any investment made in accordance with the provisions of the Indenture. Flow of Funds Funds and Accounts The Indenture creates the following funds and accounts of the Issuer which will be held by the Trustee: (a) the Developer Loan Fund; (b) the Cost of Issuance Fund; (e) the Revenue Fund, which shall include an Insurance Proceeds Account and a Seasoned Funds Account; (d) the Debt Service Fund, consisting of an Interest Account, a Principal Account and a Redemption Account; and (e) the General Fund. The following is a summary of these funds and accounts and their operation. Developer Loan Fund After making the required deposits into the Cost of Issuance Fund and the Interest Account of the Debt Service Fund, the Trustee will deposit Fund may be used during the construction period to reimburse the Bank for draws $ into the Developer Loan Fund. Amounts in the Developer Loan 16 0 0 on the Letter of Credit to pay interest and to redeem Bonds in accordance with the Indenture. Amounts in the Developer Loan Fund will also be available for disbursement to the Developer pursuant to the terms of the Loan A reement and the Indenture for Project Costs. During the construction period, earnings from the investment of moneys on deposit in the Developer Loan Fund shall be added to the Developer Loan Fund. 6 Cost of Issuance Fund The Trustee will deposit $ from the proceeds of the Bonds into the Cost of Issuance Fund. Amounts in the Cost of Issuance Fund will be applied to pay the costs of issuing the Bonds. Any moneys remaining in the Cost of Issuance Fund on the one hundred eightieth day following the issuance of the Bonds and determined by the Trustee not to be necessary for the payment of any expenses under the Indenture or costs of issuance of the Bonds will be transferred to the Developer Loan Fund. Revenue Fund The Trustee will deposit into the Revenue Fund all revenues and any of the Indenture, to the extent not required to be deposited in other funds and accounts. The Trustee will apply all moneys on deposit in the Revenue Fund which represent draws on the Letter of Credit, other than amounts representing prepayments of the Developer Note and accrued interest related thereto, on each scheduled Interest Payment Date on the Bonds, in the order of priority and for the purposes set forth below: other amounts received by the Trustee which are subject to the lien and pledge (a) First, to the Interest Account, an amount sufficient to pay the interest becoming due and payable on the Bonds on such date after taking into account any accrued interest deposited therein on the Bond Issuance Date and any investment earnings on such amount; and (b) Second, to the Principal Account, an amount sufficient to pay the principal of the Bonds maturing on such date, if any. Draws on the Letter of Credit deposited in the Revenue Fund representing prepayments and accrued interest related thereto will be immedi- ately applied as follows: (a) First, to the Interest Account, the accrued interest received with such prepayment; and (b) Second, to the Redemption Account, the balance of the prepay- ment, but not including any premium received as a part of such prepay- ment. All prepayment premiums paid by the Developer in connection with an optional prepayment of the Developer Note will be deposited in the Seasoned Funds Account and will not be commingled with the proceeds of any draws on the Letter of Credit. Moneys on deposit in the Seasoned Funds Account which 17 'e I) represent Seasoned Funds will be transferred to the Redemption Account and applied to pay the premium, if any, due upon the redemption of the Bonds. Any moneys remaining in the Seasoned Funds Account following a redemption of Bonds shall be immediately transferred to the General Fund. The Trustee shall deposit into the Insurance Proceeds Account insurance proceeds or other proceeds received by it in the event of an involuntary loss or a substantial destruction of all or any part of the Project. Moneys on deposit in the Insurance Proceeds Account shall be disbursed to the Developer for the restoration of the Project under the conditions specified in the Indenture and Reimbursement Agreement. Moneys not so disbursed will be applied to reimburse the Bank in the amount of any draw on the Letter of Credit to redeem Bonds as a result of such nondisbursernent. Debt Service Fund The Trustee will deposit into the Interest Account of the Debt Service Fund accrued interest received on the Bond Issuance Date and the amounts required to be so deposited from the Itevenue Fund. Moneys on deposit in the Interest Account will be applied solely to pay the interest on the Bonds as the same becomes due and payable. On each scheduled Interest Payment Date, for the Bonds and on each date fixed for redemption of the Bonds, the Trustee will remit to the registered owners of such Bonds, as of the respective Record Date for such payment, an amount from the Interest Account sufficient to pay the interest on the Bonds becoming due and payable on such date. The registered owner of any Bond will be the person or persons in whose name or names a Bond is registered on the registration books kept for that purpose by the Trustee in accordance with the terms of the Indenture. Except for a payment of defaulted interest, the Record Date with respect to any Interest Payment Date on the Bonds will be the fifteenth day of the month immediately preceding such Interest Payment Date. A special Record Date will be established with respect to any payment of defaulted interest by notice mailed to all registered owners of Bonds not less than fifteen (15) days prior to such special Record Date. The Trustee will deposit into the Principal Account of the Debt Service Fund the amounts required to be so deposited from the Revenue Fund. Moneys on deposit in the Principal Account will be applied solely to pay the principal of the Bonds as the same becomes due and payable at maturity. On each principal payment date for the Bonds, the Trustee will set aside and hold in trust, or remit to any paying agent to hold in trust, an amount from the Principal Account sufficient to pay the principal of the Bonds becoming due and payable on such date. The Trustee will deposit into the Redemption Account of the Debt Service Fund the amounts required to be so deposited from the Revenue Fund. Moneys on deposit in the Redemption Account will be applied solely to pay the principal and premium, if any, of the Bonds as the same become due and payable by redemption. On each date fixed for such redemption, the Trustee will set aside and hold in trust, or will remit to any paying agent to hold in trust, an amount from the Redemption Account sufficient to pay the principal of and premium, if any, on the Bonds becoming due and payable on such date. 18 0 e. General Fund The Trustee will deposit in the General Fund, from time to time, all amounts required to be so deposited from the Revenue Fund and amounts received from the Developer pursuant to the Loan Agreement. The Trustee will apply moneys on deposit in the General Fund solely for the purpose of paying rendered by the Trustee and any paying agent, including the cost of reasonable and necessary extraordinary expenses and services; and (ii) certain fees and expenses incurred by the Trustee in administering the Loan Agreement; (iii) the fees of the Program Administrator; and (iv) certain fees and expenses of the Issuer incurred under the Indenture. o€)@m!ating expenses, including (i) the cost of expenses incurred und services Final Balances Upon the deposit with the Trustee of moneys sufficient to pay all principal of, premium, if any, and interest on the Bonds, and upon satisfaction of all claims against the Issuer under the Indenture, including the payment of all fees, charges and expenses of the Issuer, the Trustee and any paying agent which are praperly due and payable under the Indenture, or upon the making of adequate provision for the payment of such amounts, all moneys remaining in all funds and accounts except moneys necessary to pay principal of, premium, if any, and interest on the Bonds, shall be remitted to the Bank for use as provided in the Reimbursement Agreement. Discharge of Lien of Indenture If the Issuer shall pay or cause to be paid, or there shall be otherwise paid or provisions for payment made to or for the owners of the Bonds, the principal, premium, if any, and interest due or to become due thereon at the times and in the manner stipulated therein, and if the Issuer shall perform and observe all of its covenants on the Bonds and in the Indenture, and shall pay or cause to be paid to the Trustee and any paying agent all sums of money due or to the lien, rights and interests created thereby, shall cease and become null and void (except as to any surviving rights of registration, transfer or exchange of Bonds), whereupon the Trustee shall cancel and discharge the Indenture, and re- lease, assign and deliver unto the Issuer any and all estate, right, title and interest in and to any and all rights assigned or pledged to the Trustee or otherwise subject to the Indenture, except moneys or securities held by the Trustee for the payment of the principal of, premium, if any, and interest on the Bonds. become due according to the provisions of the Indenture, then the Indenture and Any Bond or portions thereof in the principal amount of $5,000 or any integral multiple thereof shall, prior to the maturity or redemption date thereof, be deemed to be paid and defeased within the meaning of the Indenture when payment of the principal of and the applicable redemption premium, if any, on such Bond or portion thereof, plus interest thereon to the due date thereof (whether such due date be by reason of maturity or upon redemption as provided in the Indenture, or otherwise), either: 19 0 0 (1) shall have been made or caused to be made in accordance with the terms thereof; or (2) shall have been provided for by irrevocably depositing with the Trustee in trust, and irrevocably setting aside exclusively for such pay- ment: (a) moneys which shall be sufficient to make such payment when due; or (b) moneys and/or non-callable Government Obligations ma- turing as to principal and interest in such amounts and at such times as will be sufficient to insure the availability of sufficient moneys to make such payment, and all necessary and proper fees, compensation and expenses of the Trustee and any paying agent pertaining to the Bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of the Trustee and any paying agent. Moneys or Government Obligations deposited with the Trustee by the Developer shall be used to pay and defease Bonds only if they have been held by the Trustee for at least one hundred twenty-six (126) days prior to the date such moneys or Government Obligations are to be used to make payments on the Bonds; provided that no Act of Bankruptcy shall have occurred during such 126- day period. Notwithstanding the foregoing, no deposit under clause (2) above shall be deemed a payment of such Bond or portion thereof until: (a) proper notice of redemption shall have been previously given to the owner of such Bond, or portion thereof, or in the event that such Bonds are not by their terms subject to redemption at such time, the Issuer shall have given irrevocable instructions to the Trustee to mail a notice to such owners that the deposit required by clause (2) above has been made with the Trustee and that said Bond or portion thereof is deemed to have been paid and stating such maturity or redemption date or dates upon which moneys are to be available for the payment of the principal or redemption price, if applicable, on said Bond; or (b) the maturity of such Bond. At such time as a Bond or portion thereof shall be deemed to be paid, as aforesaid, it shall no longer be secured by or entitled to the benefits of the Indenture, except as to surviving rights described above and as to payment from such moneys or Government Obligations. Any moneys so deposited with the Trustee may at the direction of the Developer also be invested and reinvested in non-callable Government 20 0 0 Obligations maturingin the amountsandtimesassetforthaboveandallincomefrom all such Government Obligations which is not required for the payment of the Bonds and interest and premium, i! any, thereon with respect t6 WhIh SU@~ moneys shall have been so deposited, shall be deposited in the Debt Service Fund as and when realized and collected for use and application in the same manner as other moneys deposited in that fund. i All such moneys or Government Obligations so set aside and held in trust for the payment of Bonds (including interest and premium thereon, if any) shall be applied to and used solely for the payment of the particular Bonds moneys and Government Obligations have been so set aside in trust. Tax Covenants (including interest and premium thereon, if any) with respect to which such The Issuer covenants under the Indenture that it will not use or knowingly permit the use of any proceeds of Bonds or any other funds of the Issuer, directly or indirectly, to acquire any securities or obligations, and that it will not use or knowingly permit the use of any amounts received by the Issuer or the Trustee with respect to the Developer Loan in any manner, and will not take or permit to be taken any other action or actions, which would cause any Bond to be classified as an "arbitrage bond" within the meaning of Section 103(c) of the Code. D ef aults and R em edies Any of the following events constitutes an "event of default" under the Indenture: (1) default in the due and punctual payment of any installment of interest on any Bond when the same shall have become due and payable; (2) default in the due and punctual payment of the principal of or premium, if any, on any Bond when the same shall have become due and payable, whether at the stated maturity thereof or at maturity by declaration, or when called for redemption; (3) default on the part of the Issuer in the performance or observance of any other of the covenants, agreements or conditions con- tained in the Indenture or in the Bonds and failure to remedy the same after notice thereof pursuant to the Indenture; (4) receipt by the Trustee of written notice from the Bank that an event of default has occurred under the Reimbursement Agreement and requesting that the Trustee redeem the Bonds; or (5) acceleration of the Developer Loan or the occurrence of any other event of default pursuant to the Loan Agreement. 21 0 0 No default under clause (3) above shall constitute an event of default until written notice of such default shall be given to the Issuer and the Bondholders by the Trustee or by the owners of not less than twenty-five percent (25%) in aggregate principal amount of all Bonds outstanding, and the Issuer shall cause such default to be corrected, and shall not have corrected such default or caused such default to be corrected within the applicable period unless the Trustee shall agree to an extension of such time period or if the breach or failure is such that it cannot be corrected within the applicable period, corrective action is instituted by the Issuer within the applicable period and diligently pursued until the default is corrected. have had sixty (60) days after receipt of such notice to correct such default or Subject to the terms of the Intercreditor Agreement, upon the occurrence of an event of default specified above, the Trustee shall, except in the case of an event of default described in clause (3) above (which the Trustee determines will not have a material adverse effect on the security for or the exemption from federal income taxation of the interest on the Bonds) or in the case of an event of default described in clause (3) above other than one of the type described hereinabove, as to which the Trustee may, declare the principal of all Bonds then outstanding and the interest accrued thereon immediately due and payable, and such principal and interest shall thereupon become and be immediately due and payable. Upon such acceleration, the Trustee shall provide the Bondholders with a notice of redemption and shall draw money under the Letter of Credit as provided in the Indenture in an amount sufficient to redeem the Bonds (other than the amount of any redemption premium) on the date fixed for redemption of the Bonds. Immediately after the Bank honors the Trustee's request to draw upon the Letter of Credit, the Trustee shall transfer all moneys on deposit in all of the funds (except any amounts representing amounts drawn on the Letter of Credit and Seasoned Funds to be applied to such redemption or to pay certain expenses specified in the Indenture) to the Bank and shall pay the Bonds Out Of the proceeds of such drawing. Upon the occurrence df an event of default, the Trustee may pursue any available remedy at law or in equity to collect the moneys necessary to pay the redemption price of the Bonds. The above provisions are subject to the condition that if, within fifteen (15) days after the principal of all Bonds then outstanding shall have been so declared to be due and payable and prior to the Bank's honoring the Trustee's draw on the Letter of Credit, all arrears of interest upon such Bonds, and interest on overdue installments of interest (to the extent permitted by law), and the principal and redemption premium, if any, on all Bonds then outstanding which shall have become due and payable otherwise than by acceleration, and all other sums payable under the Indenture, except the principal of, and interest on, the Bonds which by such declaration shall become due and payable, shall have been paid by or on behalf of the Issuer, together with the reasonable expenses of the Trustee and of the owners of such Bonds including reasonable attorneys' fees paid or incurred, then and in every such case, but only upon receipt by the Trustee of the express prior written consent of the owners of a majority in principal amount of the Bonds then outstanding, the Trustee may waive the default and annul such declaration of maturity and its consequences, and such 22 0 0 waiver and annulment shall be binding upon all Bondholders. In the case of any such wajyer and r@$issjgnJ then and in every such case the Issuer, the Trustee and the Bondholders shall be restored to their former positions and rights under the Indenture, but no such waiver and rescission shall extend to any subsequent or other default, or impair any right consequent thereon. Notwithstanding the foregoing, the Trustee may not waive any default described in clause (4) above without the written consent of the Bank or any default with respect to a breach of a covenant with respect to the tax exempt statu of the Bonds. The owners of a majority in aggregate principal amount of Bonds then outstanding shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the method of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Indenture, provided that such direction shall not be otherwise than in accordance with the provisions of law and of the Indenture. Rights and Remedies of Bondholders No holder of any Bond shall have any right to institute any suit, action or proceeding at law or in equity for the enforcement of the Indenture unless (1) such holder shall have given the Trustee written notice of the occurrence of an event of default; (2) the owners of not less than twenty-five percent (25%) in aggregate principal amount of Bonds then outstanding shall have Indenture or to institute such action, suit or proceeding in its own name, (3) said owners shall have tendered to the Trustee indemnity as provided in the Indenture; and (4) the Trustee shall have thereafter failed or refused to exercise the powers granted, or to have instituted such action, suit or proceeding in its own name, for a period of sixty (60) days. made written request upon the Trustee to exercise the powers granted in the The above requirements are, in every case, conditions precedent to the exercise by any Bondholder of any remedy under the Indenture or under law. No one or more Bondholders shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the rights of any other Bondhol- ders, or to enforce any right under the Indenture or other applicable law with respect to the Bonds, except in the manner provided in the Indenture. All proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner provided in the Indenture and for the benefit and protection of all owners of Bonds outstanding. Nothing in the Indenture, however, affects or impairs the right of any Bondholder to enforce the payment of the principal of, premium if any and interest on any Bond at and after the maturity thereof, or the obligation of the Issuer to cause to be paid the principal of, premium, if any, and interest on each of the Bonds issued under the Indenture to the respective owners thereof at the time and place, from the sources and in the manner expressed in the Bonds and in the Indenture. Supplemental Indentures The Issuer and the Trustee may enter into indentures supplemental to the Indenture without the consent of, or notice to, the owners of the Bonds (but 23 a 0 with the written consent of the Bank, which consent shall not be unreasonably withheld) for any one or more of the following purposes: (1) To add to the covenants and agreements of the Issuer contained in the Indenture other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds, or to surrender any right or power reserved to or conferred upon the Issuer, provided that no such covenant, agreement, pledge, assignment or surrender shall materially adversely affect the interests of the Bondholders; (2) To make such provisions for the purpose of curing any ambi- guity, inconsistency or omission, or of curing or correcting any defective provision, contained in the Indenture, or in regard to matters or questions arising under the Indenture, as the Issuer may deem necessary or desirable and not inconsistent with the Indenture, and which shall not materially adversely affect the interests of the Bondholders; or (3) To modify, amend or supplement the Indenture in such manner as to permit the qualification of the Indenture under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Bondholders. Exclusive of supplemental indentures for the purposes set forth above, the owners of not less than sixty percent (60%) in aggregate principal amount of the Bonds then outstanding shall have the right, from time to time, to consent to and approve the execution by the Issuer and the Trustee of supplemental indentures for the purpose of modifying, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Indenture; provided, however, that no supplemental indenture shall without the consent of the holders of all Bonds then outstanding (1) extend the fixed maturity of the Bond, or reduce the amount of principal thereof or reduce the rate of interest thereon, or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof without the consent of the owner of each Bond so affected; or (2) reduce the percentage of Bonds the consent of the holders of which is required to effect any such modification or amendment; or (3) permit the creation of any lien on the Revenues and other assets pledged under the Indenture prior to or on a parity with the lien created by the Lndenture, or deprive the Bondholders of the lien created by the Indenture upon such Revenues and other assets (except as expressly provided in the Indenture) without the consent of all of the Owners of Bonds then outstanding. Notwithstanding the above, the Indenture may not be amended without the written consent of the Bank (which consent shall not be unreasonably withheld), unless, in the opinion of Bond Counsel, such amendment is necessary to preserve the exemption from income taxation of interest on the Bonds. No supplemental indenture which adversely affects any rights of the Developer in any manner not contemplated by the Developer Loan Documents 24 0 0 will become effective unless the Developer shall have consented to the execution and delivery thereof, Amendment of' Developer Loan Documents The Issuer and the Developer may, with the written consent of the Trustee and the Bank, which consent shall not be unreasonably withheld, but without the consent of or notice to the Bondholders, enter into any amendment, change or modification of the Developer Loan Documents as may be required (1) by the provisions of such Developer Loan Documents or the Indenture; (2) for the purpose of curing any ambiguity or formal defect of omission; (3) so as to add additional rights acquired in accordance with the provisions of such Developer Loan Documents; or (4) in connection with any other change therein which, in the reasonable judgment of the Trustee, is not to the prejudice of the Bondholders. The Issuer and the Trustee shall, without the consent of or notice to the Bondholders, but after notice to the Bank, enter into any amendment, change or modification of the Developer Loan Documents as may be necessary, in the opinion of Bond Counsel, to comply fully with all applicable rules, rulings, policies, procedures, regulations or other official statements promulgated or proposed by the Department of the Treasury of the Internal Revenue Service pertaining to obligations issued under Section 103(b)(4)(A) of the Code. Except for the amendments, changes or modifications provided above, neither the Issuer nor the Developer shall enter into any other amend- ment, change or modification of the Developer Loan Documents without the consent of the Bank and the mailing of notice and the written approval or consent of the holders of not less than sixty percent (60%) in aggregate principal amount of the Bonds at the time outstanding given and procured as provided in the Indenture; provided, however, that no such amendments, changes or modifi- cations shall permit or be construed as permitting (1) an extension of the time of the payment of any amounts payable under the Loan Agreement or the Letter of Credit, or (2) a reduction in the amount of any payment or in the total amount due under the Loan Agreement or the Letter of Credit without the consent of the holders of all of the Bonds then outstanding. The Issuer and the Trustee shall not enter into or consent to any amendment, change or modification to the Developer Loan Documents unless the Issuer has received an opinion of Bond Counsel to the effect that such federal income taxation and State of California personal income taxation. The Issuer and the Trustee may rely upon an opinion of Bond Counsel to the effect that any such proposed amendment, change or modification will comply with the provisions of the Indenture. The Loan Agreement The Developer Loan amendment will not impair the exemption of the interest on the Bonds from Pursuant to the Loan Agreement, the Issuer will lend to the Devel- oper, for its use in constructing the Project, the full amount of the Bond 25 0 0 proceeds, which shall constitute the Developer Loan. As security for its obligations under the Developer Note, prior to any disbursement of funds on the Developer Loan, the Developer will be required to deliver the Letter of Credit to the Trustee, and to deliver the First Deed of Trust to the Issuer for assignment to the Trustee for the benefit of the Bondholders. All rights of the Issuer under expenses and attorneys' fees), the Developer Note and the First Deed of Trust will be assigned to the Trustee under the Indenture for the benefit of the Bondholders. Repayment of the Developer Loan the Loan Agreement (except for certain indemnification rights and right!: to The Developer is obligated to pay to the Trustee principal of, premium, if any, and interest on the Developer Loan at the times, in the manner, in the amounts and at the rate of interest provided in the Developer Note and the Loan Agreement. The Developer will agree to make repayments on the Developer Note such that the Trustee will at all times have funds sufficient to pay the total amount of principal, premium, if any, and interest owing on the Bonds on any applicable Interest Payment Date, redemption date or principal payment date established under the Indenture. The Developer is obligated to repay the Developer Loan irrespective of any of set-off, recoupment or counterclaim it might otherwise have against the Issuer, the TTustee, the Bank or any other person. The Developer will not suspend, discontinue or reduce any therein. The Trustee is entitled under the Letter of Credit, and required under the Indenture, to satisfy the Developer's obligations to make principal and interest payments under the Developer Loan and the Developer Note by draws on the Letter of Credit. With certain exceptions, the Developer's obligations to the Issuer under the Developer Note, the Loan Agreement and the First Deed of Trust are without recourse to assets of the Developer or the Partners other than the Project. payments or terminate the Developer Loan for any cause, except as provided In the event the Developer shall fail to pay any amounts required to be paid under the Developer Note when due, any past due amount shall bear interest at the interest rate in effect on the Bonds as provided in the Loan Agreement until finally paid. Prepayments The Developer Note is subject to mandatory prepayment in whole or in part upon the occurrence of the events described below, in an amount equal to the outstanding principal amount thereof to be prepaid, together with accrued interest to the date fixed for redemption of the Bonds to be redeemed with such prepayment. The Trustee shall use any of such prepayment amounts to redeem Bonds in accordance with the Indenture. (1) On the earlier of the first Interest Payment Date subsequent to the completion of the Project selected by the Trustee to redeem Bonds or April 1, 1988, in either case in an amount equal to the amount remaining on 26 0 0 dpogjl in the Du~logsr bsan Fwd 8n 8usI-1 @la! p~o~ided_ Vxt such dm may be extended at the request of the Developer and the Bank and upon approval by the Issuer and upon receipt by the Issuer of an opinion by Bond Counsel that such extension will not adversely affect the exemption from income taxation of interest on the Bonds; (2) On the day selected by the Trustee to redeem Bonds after the Trustee has accelerated the amounts due with respect to the Bonds or the Developer Note, as the case may be, as a result of an event of default under the Indenture, the Loan Agreement or the Regulatory Agreement, in an amount equal to the then unpaid principal amount of the Developer Note; (3) On the day selected by the Trustee to redeem Bonds (a) after the Bank fails or refuses to honor a draw upon the Letter of Credit or to reinstate the Letter of Credit in accordance with its terms, or (b) within sixty (60) days of an Act of Bankruptcy of the Bank or within thirty (30) days of a determination by the Trustee that the Letter of Credit is not enforceable, if the Developer does not cause to be delivered to the Trustee a Substitute Letter of Credit satisfying the criteria set forth in the Indenture in an amount equal to the then unpaid principal amount of the Developer Note; (4) On the day selected by the Trustee to redeem Bonds, in the event of an involuntary loss or the substantial destruction of the Project as a result of unforeseen events (e.g., fire, seizure, requisition, change in a federal law or any action of a federal agency after the date of issuance of the Bonds which prevents the Issuer from enforcing the requirements of Section 1.103-8(b) of the Regulations, or condemnation) promptly upon receipt of insurance or other compensation or, if there are no such payments, promptly after the event giving rise to the involuntary loss or substantial destruction of the Project, in an amount equal to the then unpaid principal of the Developer Note. Notwithstanding the foregoing, the Developer Note will not have to be prepaid in such circumstances if, (i) within sixty (60) days of the event giving rise to the involuntary loss or Project can be restored within twelve (12) months to a condition permitting the conduct of normal business operations, and (ii) within sixty (60) days of receiving any amounts as a consequence of the loss or destruction, the Developer commences to use such amounts to reconstruct the Project pursuant to the terms of the Loan Agreement and the Indenture; destruction, the Developer notifies the Trustee and the Issuer that the (5) On the day selected by the Trustee to redeem Bonds after the Trustee has received written notice from the Bank that an event of default has occurred under the Reimbursement Agreement and requesting the Trustee to redeem the Bonds, in an amount equal to the then unpaid principal amount of the Developer Note; and 27 0 0 (6) On the day selected by the Trustee to redeem Bonds after the Trustee has received notice of a Determination of Taxability, in an amount equal to the then unpaid principal amount of the Developer Note, The Developer Note is also subject to optional prepayment, and the Bonds may be redeemed, in whole or in part on any Interest Payment Date on or after December 1, 1990, in any integral multiples of $5,000, at the following prepayment prices (expressed as a percentage of the principal amount to be prepaid), plus accrued interest to the date of prepayment: RedemDtion Period Redemption Price December 1, 1990 and June 1, 1991 102% December 1, 1991 and June 1, 1992 101.5% December 1, 1992 and June 1, 1993 101% December 1, 1993 and thereafter 100% The Letter of Credit will be drawn upon to pay principal and accrued interest with respect to the Bonds to be optionally redeemed but not to pay the redemption shall be paid with Seasoned.Funds, which are funds that have been deposited by the Developer with the Trustee at least one hundred twenty-six (126) days prior to the date upon which notice of redemption is given to the Bondholders by the Trustee. No optional prepayment shall occur if an Act of Bankruptcy occurs within the one hundred twenty-six (126) days period prior to such date. Cooperation in Enforcement of Regulatory Agreement premium payable thereon. Any premium payable on the Bonds upon optional The Developer will covenant under the Loan Agreement as follows: (1) To comply with all provisions of the Regulatory Agreement; (2) To advise the Issuer, the Trustee and the Bank in writing promptly upon learning of any default with respect to the covenants, obligations and agreements of the Developer set forth in the Regulatory Agreement; (3) Upon written direction by the Issuer or the Trustee, to cooper- ate fully and promptly with the Issuer and the Trustee in enforcing the terms and provisions of the Regulatory Agreement; (4) To file in accordance with the time limits established by the Regulatory Agreement all reports and certificates required thereunder; and (5) To enter into an Administration Agreement with a Program Administrator on or before the Completion Date of the Project. 28 0 0 Events of Default Each of the following i;s an event of default under the Loan Agreement! (1) The Developer shall fail to pay when due the amounts required to be paid under the Loan Agreement or the Developer Note when the same shall become due and payable, including a failure to repay any amounts which have been previously paid but are recovered, attached or enjoined pursuant to any insolvency, receivership, liquidation or similar proceedings; or (2) The Developer shall fail to perform or observe any of its covenants or agreements contained in the Loan Agreement, the Regulatory Agreement, the Developer Note or the First Deed of Trust, other than as specified in paragraph (1) above, and such failure shall continue for a pe- riod of thirty (30) days in the case of the Regulatory Agreement or sixty (60) days in the case of any other default (or such longer period as may be approved by Bond Counsel) after notice from the Trustee or the Issuer. Remedies Subject to the terms of the Intercreditor Agreement, the following remedial steps must be taken whenever an event of default has occurred and is continuing under the Loan Agreement, but only in the order indicated: (1) Immediately upon the occurrence of any event of default under the Loan Agreement, the Trustee shall declare all amounts due under the Loan Agreement and the Developer Note to be immediately due and payable; provided, however, that where the event of default is caused by the Developer's failure to comply with the provisions of the Regulatory Agreement, the amounts due under the Loan Agreement and the Developer sure proceedings under the Second Deed of Trust, and (b) the Issuer has received an opinion of Bond Counsel that the failure to accelerate the Developer Loan under such circumstances will not adversely affect the exemption from income taxation of interest on the Bonds; Note shall not be accelerated where (a) the Bank has commenced foreclo- (2) The Trustee shall, for and on behalf of the Issuer and the owners of the Bonds, seek recovery under the Letter of Credit in an amount sufficient to pay interest and principal amounts due or to become due with respect to the Developer's monetary obligations under the Developer Note as the result of such event of default; and (3) The Trustee and the Issuer, at the written request or consent of the Trustee, shall take whatever action at law or in equity as may appear necessary or desirable to collect the payments required to be made by the Developer under the Loan Agreement, or to enforce performance and observance of any obligation or agreement of the Developer under the Loan 29 0 0 Agreement, the Developer Note, the First Deed of Trust or the Regulatory Agreement, but in no event shall the Issuer be obligated to take any such action which in its opinion will or might cause it to expend time or money or otherwise incur liability unless and until a satisfactory indemnity bond has been furnished to it, Any amounts collected as payments made on the Developer Note and pursuant to the Loan Agreement, or applicable to such payments, and any other amounts which would be applicable to payment of principal of, premium, if any, and interest on the Bonds collected pursuant to action taken as a result of an event of default shall be used to redeem Bonds in accordance with the provisions of the Indenture, or, if the outstanding Bonds have been deemed paid in accordance with the provisions of the Indenture, shall be paid to the Bank in accordance with the terms of the Indenture. Upon payment in full of all amounts owing under the Indenture, including all fees and expenses of the Trustee and the Issuer, the Issuer shall transfer any remaining right, title or interest that it has in the Indenture, Loan Agreement, Developer Note and First Deed of Trust to the Bank. The Regulatory Agreement Construction of the Project Under the Regulatory Agreement, the Developer will be required to commence the construction and equipping of the Project within six (6) months of the Bond Issuance Date and must proceed with due diligence to complete the Project. The Developer will be required to warrant and represent that it expects to complete the Project prior to April 1, 1988. The Developer also will be required to agree that at least ninety-two percent (92%) of the proceeds of the Developer Loan will be applied to pay or reimburse the Developer for the payment of Qualified Project Costs and less than twenty-five percent (25%) of the amount initially deposited in the Developer Loan Fund established pursuant to the Indenture will be used to pay or reimburse the Developer for the cost of acquiring land unless otherwise approved by Bond Counsel. Residential Rental Property The Developer will be required to agree in the Regulatory Agreement that the Project is to be owned, managed and operated as a project for "residential rental property" as such term is defined in Section 103(b)(4)(A) of the Code for a term equal to the longer of the time any Bonds are outstanding or the Qualified Project Period. To that end, the Developer will be required to represent, warrant, covenant and agree as follows: (1) The Project will be constructed for the purpose of providing multifamily residential rental property, and will be owned, managed and operated as a project to provide multifamily residential rental property comprised of a building or structure or several interrelated buildings or 30 e 0 structures, together with any functionally related and subordinate facili- Code, Section 1.103-8(b) of the Regulations and the Act, and in accordance with such requirements as may be imposed on the Project from time to time. ties! and no other facilities! in aGGvrdance with ;Section 105(b)(+)(A) of the (2) All of the dwelling units in the Project will be similarly con- structed units, and each dwelling unit in the Project will contain complete, separate and distinct facilities for living, sleeping, eating, cooking and sanitation for a single person or a family, including a sleeping area, bathing and sanitation facilities and cooking facilities. (3) None of the dwelling 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, rest home or trailer court or park. (4) No part of the Project will at any time be owned by a co- operative housing corporation. Other than obtaining and recording a condominium plan and map on the Project and obtaining a white report from the California Department of Real Estate, the Developer shall not take any steps in connection with a conversion to such condominium ownership or uses, except with the prior written approving opinion of Bond Counsel that the interest on the Bonds will not become taxable thereby. (5) All of the dwelling units in the Project will be available for rental on a continuous basis to members of the general public, and no dwelling units in the Project, except to the extent that dwelling units are required to be leased or rented to Lower-Income Tenants or to be available for occupancy on a priority basis by Very Low Income Tenants. Dwelling units in the Project leased or rented to Lower-Income Tenants and Very Low Income Tenants will be intermingled with all other dwelling units and will be of comparable quality and offer a range of sizes and number of bedrooms comparable to those units which are available to other tenants. In addition, tenants residing in such units will have equal access to all common facilities of the Project. preference will be given to any particular class or group in renting the (6) The Project site consists of a parcel or parcels that are con- tiguous (except for the interposition of a road, street or stream) and all of the improvements will comprise a single geographically and functionally integrated project for residential rental property, as evidenced by the ownership, management, accounting and operation of the Project. (7) No unit in any building or structure in the Project which contains fewer than five (5) units may be occupied by the Developer or any persons related to or affiliated with the Developer such as resident managers or maintenance personnel. 31 e m (8) Within thirty (30) days after the date on which ten percent (10%) of the dwelling units in the Project are occupied, the Developer will prepare and submit to the Issuer, the Program Administrator and the after the date on which fifty percent (50%) of the dwelling units in the Project are first occupied, the Developer, the Issuer and the Trustee shall execute and deliver to the Program Administrator a certificate identifying the beginning and ending dates of the Qualified Project Period. Trustee a written notice identifying such date. Within thirty (30) days Lower-Income Tenants Pursuant to Section 103(b)(4)(A) of the Code, and Section 52080 of the Act, the Developer will be required to represent, warrant and covenant that throughout the Qualified Project Period: (1) Not less than twenty percent (20%) of the completed units in the Project shall be continuously occupied by Lower-Income Tenants at an Affordable Rent. The Developer shall advise the Issuer, the Trustee and the Program Administrator monthly of the status of the occupancy of the Project. A unit occupied by a tenant who at the commencement of occupancy qualified as a Lower-Income Tenant shall be treated as still occupied by a Lower-Income Tenant even though such tenant subsequently ceases to so qualify. A unit occupied by a Lower-Income Tenant shall be deemed, upon termination of such tenant's occupancy, to be continuously occupied by a Lower-Income Tenant until reoccupied, other than for a temporary period (not to exceed thirty-one (31) days), at which time the character of the unit will be redetermined. (2) The Developer will obtain and maintain on file income certifi- cations from each Lower-Income Tenant, dated immediately prior to the initial occupancy of such Lower-Income Tenant in the Project, in the form and containing such information as may be required by the State of California, the Issuer and Section 103(b)(12)(C) of the Code, as the same may be amended from time to time, or in such other form and manner as may be required by applicable rules, rulings, policies, procedures, Regula- tions or other official statements now or hereafter promulgated, proposed or made by the Department of Treasury or the Internal Revenue Service with respect to obligations issued under Section 103(b)(4)(A) of the Code. (3) The Developer will: (a) maintain a list of persons who have notified the Developer of their desires to rent a unit in the Project and who have Adjusted Incomes which would qualify them as Very Low Income Tenants, and (b) offer to rent at least half of the units required to be rented to Lower-Income Tenants (subject to the availability thereof at any time) on a priority basis to the persons on such list prior to offering to rent such units to any other persons; and in choosing such Very Low Income applied to other prospective tenants. To fulfill its obligations, the Developer shall be required to give certain notices as set forth in the Regulatory Agreement. Tenants shall use selection criteria no more burdensome than shall be 32 0 e (4) The Developer will maintain complete and accurate records pertajnjng lg lhg &y$~~@ units leased or rented to Lower-Income Tenantst and will permit any duly authorized representative of the Issuer, the Program Administrator, the Trustee, the Department of the Treasury or the Internal Revenue Service to inspect the books and records of the Developer pertaining to the Project, including records pertaining to the occupancy of the dwelling units by Lower-Income and Very Low Income Tenants. (6) The Developer shall accept as tenants on the same basis as all other prospective tenants, persons who are recipients of federal certifi- cates for rent subsidies pursuant to the existing program under Section 8 of the United States Housing Act of 1937, or its successor. The Developer shaU not apply selection criteria to Section 8 certificate holders that are more burdensome than criteria applied to all other prospective tenants. General Compliance with the Code The Developer and the Issuer will each warrant, represent and agree in the Regulatory Agreement that (1) they will not take or permit, or omit to take or cause to be taken, as is appropriate, any action that would adversely affect the exemption from federal or State of California income taxation of th.e interest on the Bonds and, if they should take or permit, or omit to take or cause to be taken, any such action, they will take all lawful actions necessary to rescind or correct such actions or omissions promptly upon obtaining knowledge thereof; (2) they will take such action or actions as may be necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, to comply fully with the Act, the Code and all applicable rules, rulings, policies, proce- dures, Regulations or other official statements promulgated, proposed or made by the Department of Treasury or the Internal Revenue Service pertaining to obligations issued under Section 103(b)(4)(A) of the Code; and (3) they will file of record such documents and take such other steps as are necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, to insure that the requirements and restrictions of the Regulatory Agreement will be binding upon all owners of the Project, including but not limited to the execution and recordation of the Regulatory Agreement in the appropriate real property records. iltodification of Special Tax Covenants The Developer, the Trustee and the Issuer will be required to agree in the Regulatory Agreement that: (1) to the extent any amendments to the Act, the Regulations or the Code will, in the written opinion of Bond Counsel filed with the Issuer, the Trustee and the Developer, impose requirements upon the ownership or operation of the Project more restrictive or less restrictive than those imposed by the Regulatory Agreement, the Regulatory Agreement will be deemed automatically amended to impose any more restrictive requirements, and, with respect to any less restrictive requirement, the Regulatory Agreement may be amended or modified in the discretion of the Issuer to provide any such 33 e 0 less restrictive requirements if approved by written opinion of Bond Counsel and (2) the Developer, the Issuer, and, if applicable, the Trustee will execute, deliver and, if applicable, file of record any and all documents and instruments necessary to effectuate the intent of the foregoing provision. The Developer and the Issuer will be required to appoint the Trustee as their true and lawful attorney-in-fact to execute, deliver and, if applicable, file of record on behalf of the Developer or the Issuer, as applicable, any such document or instrument (in Issuer fails so to do. The Trustee will take no such action, however, without first notifying the Developer or the Issuer, or each of them, as is applicable, of its intention to take such action, and providing the Developer or the Issuer, or both, as is applicable, an opportunity to comply with such requirements. Enforcement such form as may be approved by Bond Counsel) if either the Developer or the If the Developer defaults in the performance or observance of any covenant, agreement or obligation of the Developer set forth in the Regulatory Agreement and such default remains uncured for a period of thirty (30) days after notice thereof is given by the Issuer or the Trustee to the Developer (unless such period is extended as provided in the Regulatory Agreement), then the Issuer or the Trustee, acting on its own behalf or on behalf of the Issuer, will declare an event of default to have occurred under the Regulatory Agreement and, at its option, subject to the terms and provisions of the Intercreditor Agreement, may take any one or more of the following steps: (1) By mandamus or other suit, action or proceeding at law or in equity, require the Developer to perform its obligations under the Regula- tory Agreement, or enjoin any acts or things which may be unlawful or in violation of the rights of the Issuer or the Trustee thereunder; (2) Have access to, and inspect, examine and make copies of, all of the books and records of the Developer pertaining to the Project; (3) Take such action at law or in equity as may appear necessary or desirable to enforce the obligations, covenants and agreements of the Developer under the Regulatory Agreement; or (4) Require the Issuer to declare a default under the Developer Loan, to accelerate the indebtedness evidenced by the Developer Note, to proceed with foreclosure under the First Deed of Trust and to proceed to redeem Bonds in accordance with the Indenture. Under certain circumstances, the Trustee may exercise the rights or remedies of the Issuer under the Regulatory Agreement. Term The Regulatory Agreement will become effective upon its execution and delivery. Unless in the written opinion of Bond Counsel, filed with the Issuer 34 0 e and the Trustee, termination of the Regulatory Agreement at some earlier time will not adversely affect the exemption from federal income taxation and Agreement will remain in effect for as long as the Bonds 8re Outstanding under the Indenture, but, in any case, at least for a term and period equal to the Qualified Project Period, it being expressly agreed and understood that the provisions thereof are intended to survive the retirement of the Bonds and expiration of the Indenture, the Loan Agreement, the Developer Loan and the Developer Note. Notwithstanding the foregoing, the Regulatory Agreement shall terminate and be of no further force and effect in the event of (1) a foreclosure or the delivery of a deed in lieu of foreclosure whereby a third party takes possession of the Project, or involuntary non-compliance with the provisions of the Regulatory Agreement caused by fire, seizure, requisition, change in federal law or an action of a federal agency after the date of the Regulatory Agreement which prevents the Issuer and the Trustee from enforcing the requirements of the Regulatory Agreement, or condemnation or a similar event; and (2) the payment in full and retirement of the Bonds within a reasonable period thereafter; provided, however, that the preceding provisions of this sentence shall cease to apply and the restrictions contained in the Regulatory Agreement shall be reinstated if, at any time subsequent to the termination of such provisions as a result of a foreclosure or the delivery of a deed in lieu of foreclosure or similar event, the Developer or any related person (within the meaning of Section 1.103-10(e) of the Regulations) obtains an ownership interest in the Project for federal income tax purposes. Indemnification ~difs~ttia DMOUIIQ~ inmrn~ taxation of interest on the Bonds, the Regulatory Pursuant to the Regulatory Agreement, the Developer will be re- quired to indemnify, hold harmless and defend the Issuer and the Trustee and the respective officers, members, supervisors, directors, officials and employees and each of them from and against: (1) any and all claims arising from any act or omission of the Developer or any of its employees, agents or licensees, in connection with the Developer Loan or the Project; (2) any and all claims by or on behalf of any person arising from any cause whatsoever in connection with the provision of tax exempt financing for the Project or the making of the Developer Loan; and (3) all reasonable costs, attorneys' fees of counsel to the indemnified party! expenses or liabilities incurred in connection with any such claim or proceeding. The Developer will also be required to pay and discharge and to indemnify and hold harmless the Issuer and the Trustee from (1) any lien or charge upon payments by the Developer to the Issuer and the Trustee under the Regulatory Agreement and (2) any taxes (including, without limitation, all ad valorem taxes and sales taxes), assessments, impositions and other charges in respect of any portion of the Project. If any such claim is asserted, or any such lien or charge upon payments, or any such taxes, assessments, impositions or other charges, are sought to be imposed, then the Issuer or the Trustee shall give prompt notice to the Developer, and the Developer shall have the sole right and duty to assume, and will assume, the defense thereof, with full power to litigate, compromise or settle the same in its sole discretion. 35 0 e Covenants to Run With the Land The Developer will be required to subject the Project (including the real property upon which the Project is to be constructed) to the covenants, reservations and restrictions set forth in the Regulatory Agreement, and the Issuer, the Trustee and the Developer shall declare their express intent that the covenants, reservations and restrictions set forth in the Regulatory Agreement be deemed covenants running with the land and will pass to and be binding upon the Developer's successors in title to the Project so long as the Regulatory Agreement has not terminated. TAX EXEMPTION Section 103(b)(4)(A) of the Code provides that interest on certain governmental obligations substantially all of the proceeds of which are to be used to provide projects for "residential rental property" shall be exempt from federal income tax if at all times during the Qualified Project Period twenty percent (20%) or more of the completed units in each project (fifteen percent (1 5%) in the case of certain targeted area projects) are occupied by Lower- Income Tenants. On October 12, 1982, the United States Department of the Treasury issued regulations (the llRegulationsll) setting forth requirements for compliance with Section 103(b)(4)(A) of the Code. The Regulations require, among other things, that (1) the twenty percent (20%) requirement (or the fifteen percent (15%) requirement, as applicable) of Section 103(b)(4)(A) of the Code must be met on a continuous basis during the Qualified Project Period, and (2) during the longer of the Qualified Project Period or the remaining term of the obligations used to provide financing for the project, all of the units in the project must be rented or available for rental to the general public on a continuous basis. Under the Regulations, the failure to satisfy the foregoing re- quirements on a continuous basis or the failure to satisfy any of the other requirements of the Regulations will, unless corrected within a reasonable period of not less than sixty (60) days after such noncompliance is first discovered or would have been discovered by the exercise of reasonable diligence, cause loss of the tax-exempt status of the Bonds as of the date of their original issue, irrespective of the date such noncompliance actually occurred. The Issuer has established requirements, procedures and safeguards that it believes to be sufficient to insure compliance with the requirements of Section 103(b)(4)(A) of the Code and the Regulations with respect to the Project. Such requirements, procedures and safeguards are incorporated into the Loan Agreement, the Regulatory Agreement, the other Developer Loan Documents and the Indenture. Furthermore, the Issuer and the Trustee have each covenanted in the Indenture to follow and enforce such procedures to insure compliance with such requirements. 36 e e Assuming that the covenants set forth in the foregoing documents are complied with on a continuous basis, in the opinion of Stradling, Yocca, Carlson & Rauth, a Professional Corporation, Bond Counsel, interest on the Bonds is exempt from all federal income taxation under existing statutes, regulations, published rulings and judicial decisions. p;fo op:n!on !s expressed as io kh& exemption from federal income taxes of interest on any Bond for any period during which such Bond is held by a person who, within the meaning of Section 103(b)(l3) of the Code, is a "substantial user" of facilities financed with Bond proceeds, or a "related person". In addition, in the opinion of Bond Counsel, based upon existing laws the State of California, interest on the Bonds is exempt from personal income taxes imposed by the State of California. CERTATN LEGAL MATTERS Certain legal matters incident to the authorization, issuance, sale and delivery by the Issuer of the Bonds and with regard to the tax-exempt status of interest thereon under existing laws are subject to the approving opinion of Stradling, Yocca, Carlson & Rauth, A Professional Corporation, Bond Counsel. The form of opinion Bond Counsel proposes to render is attached as Appendix A hereto. Certain legal matters will be passed upon for the Underwriters by O'Melveny & Myers. ABSENCE OF LITIGATION There is no action, suit or proceeding known to be pending or threatened restraining or enjoining the execution or delivery of the Bonds, the Indenture, the Loan Agreement, the Developer Note, the First Deed of Trust, the Regulatory Agreement, the Letter of Credit or the Reimbursement Agreement or in any way contesting or affecting the validity of the foregoing or the Bond Resolution. RATING Moody's Investors Service has given the Bonds rating of Such rating reflects only the view of such organization and an explanation of the significance of the rating may be obtained from such organization as follows: Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007, (212) 553-0300. There is no assurance that the rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by the rating agency, if, in the judgment of such agency, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds. - UNDERWRITING The Bonds are being purchased by Security Pacific Capital Markets Group (Security Pacific National Bank), Newman and Associates, Inc. and Paine 37 e 0 Webber Incorporated (the rWnderwriters"). Security Pacific National Bank is also the issuer of the Letter of Credit. The Underwriters have agreed to purchase the Bonds from the Issuer for an aggregate purchase price of $ The purchase agreement relating to the Bonds provides that the Underwriters will purchase all of the Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the purchase agreement, the apDrOv81 of certain legal matters by counsel and certain other conditions. The Underwriters may offer and sell the Bonds to certain dealers and others at prices lower than the offering price stated on the cover page hereof. The offering prices may be changed from time to time by the Underwriters. AVAILABILITY OF DOCUMENTS Copies of the documents referred to in the section "Summaries of Certain Provisions of the Documents" are on file and available for inspection at the principal corporate trust office of the Trustee at 400 California Street, San Francisco, California 941 04, Attention: Corporate Trust Department. MISCELLANEOUS Included herein are brief summaries of certain documents and reports, which summaries do not purport to be complete or definitive, and reference is made to such documents and reports for full and complete statements of the contents thereof. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Issuer and the purchasers or owners of any of the Bonds. The execution and delivery of this Official Statement has been duly authorized by the Issuer. CITY OF CARLSBAD, CALIFORNIA BY Mayor 38 0 0 APPENDIX A PROPOSED FORM ON OPINION OF BOND COUNSEL (Closing Date) Honorable City Council City of Carlsbad Carlsbad, California Re City of Carlsbad, California, Multifamily Housing Revenue Bonds, Series A of 1985 (La Costa Apartments Project) Dear Councillors: We have examined certified copies of the proceedings of the City 6f Carlsbad, California (the lTCityT1), and other information and documents submit- ted to us relative to the issuance and sale by the City of its Multifamily Housing Revenue Bonds, Series A of 1985 (La Costa Apartments Project) in the aggregate principal amount of $15,650,000 (the lTBondslT). The Bonds have been issued pursuant to the authority contained in Chapter 7 of Part 5 of Division 31 of the Health and Safety Code of the State of California, a resolution of the City Council adopted on Marah 19, 1985 (the ~~ResalutionlT), and an indenture of trust dated as of April 1, 1985 (the "IndentureT1) by and between the Issuer and The Bank of California, N.A., as trustee (the TITrustee"). The repayment of the Bonds is secured in part by an irrevocable letter of credit (the "Letter of Credit") issued by Security Pacific National Bank (the l1Bankr1). We express no opinion as to the validity or enforceability of the Letter of Credit. The Bonds are dated April 1, 1985, mature on December 1, 1996 and bear interest from their date payable semiannually on June 1 and December 1 of each year commencing June 1, 1985 at the rate of % per annum (each such date being referred to herein as an "Interest Payment Date"). - Principal of, premium, if any, and interest on the Bonds are payable in lawful money of the United States of America which at the time of payment is legal tender for public and private debts. Payment of principal and premium, if any, shall be made at the principal corporate trust office of the Trustee in San Francisco, California; and payment of interest shall be made by check or draft mailed to the respective persons in whose names the Bonds are registered as of the close of business on the applicable record date preceding each Interest Payment Date. The Bonds are registered Bonds in the form set forth in the Indenture and will be subject to redemption prior to maturity at the times, upon the terms and subject to the conditions set forth in the Indenture. A- 1 0 0 Based upon our examination of all of the foregoing, and in reliance thereon, and on all matters of fact as we deem relevant under the CiYCUmStan- ces, and upon consideration of applicable laws, we are of the opinion that: (1) The City is a municipal corporation, duly organized and validly existing under the Constitution and laws of the State of California, with full power and authority to adopt the Resolution, to execute, deliver and perform the Bond Purchase Agreement dated April , 1985 (the 77Purchase Agreement") by and among the City, the Developerand the Underwriters listed therein; the Indenture; the Loan Agreement dated as of April 1, 1985 (the "Loan Agreement") among the City, the Trustee and the Developer; and the Regulatory Agreement and Declaration of Restrictive Covenants the Trustee and the Developer, to loan the proceeds from the sale of the Bonds to the Developer, and to issue, sell and deliver the Bonds. dated as of April 1, 1985 -(the "Regulatory Agreement") among the City, (2) The execution and delivery of the Indenture, the Purchase Agreement, the Loan Agreement and the Regulatory Agreement have been authorized by the City and, assuming proper authorization, execution and delivery by the respective other parties thereto, are legal, valid, binding and enforceable obligations of the City in accordance with their terms, except to the extent that enforceability may be limited by moratorium, bankruptcy, reorganization, insolvency, debt arrangement or other laws affecting creditors' rights generally and further subject to the exercise of judicial discretion in accordance with general principles of equity. (3) The Bonds have been duly and validly authorized by the City and are legal, valid, binding and enforceable special and limited obligations of the City, payable solely out of the revenues and receipts provided therefor have been fulfilled. The Bonds are enforceable in accordance with their terms and the terms of the Indenture, except to the extent that enforce- ability may be limited by moratorium, bankruptcy, reorganization, insol- vency and other similar laws affecting creditors? rights generally or the exercise of judicial discretion in accordance with general principles of equity. in the Indenture, and all conditions precedent to the delivery of the Bonds (4) The Indenture creates a valid express irrevocable trust under the laws of the State of California of the Trust Estate (as such term is defined in the Indenture) held or set aside under the Indenture, subject to the application thereof to the purposes and on the conditions permitted by the Indenture. (5) Assuming continuing compliance subsequent to the issuance of the Bonds with certain provisions of the Indenture and the Regulatory Agreement designed to meet the requirements of Section 103(b)(4)(A) of the Internal Revenue Code of 1954, as amended (the "Code"), including certain regulations issued pursuant to the Code, interest on the Bonds is exempt from federal income taxes under existing laws, rulings and judicial A-2 8 decisions, except on any Bond for any period during which it is held by a %ubstantial user'! of any project financed with the proceeds of the Bonds, or a "related person" within the meaning of those terms as used in Section iBtS(bj(1Sj of the eode. (6) Under existing laws, interest on the Bonds is exempt from personal income taxes of the State of California. Respectfully submitted, A-3