HomeMy WebLinkAbout1998-06-09; City Council; 14713; Cherry Tree WalkCITY OF CARLSBAD - AGElkiA BILL
AB# ly, 713 TITLE- REQUEST TO APPROVE A LOAN AGREEMENT DEPT. H
MT& k-y- sg BETWEEN THE CITY 0~ CARLSBAD AND CHERRY
TREE WALK, LLC., IN THE AMOUNT OF $453,600 TO C’Ty ATTY
eiE?I DEPT. H/RED ASSIST THE CONSTRUCTION OF 42 TOWNHOMES “TYMG -
AFFORDABLE TO LOW INCOME HOUSEHOLDS
RECOMMENDED ACTION: CT&
That the City Council ADOPT Resolution No. ‘? 8 c) @to APPROVE the “Loan Agreement”, “Developer
Promissory Note”, “Developer Deed of Trust and Security Agreement”, “Borrower Promissory Note”,
“Borrower Deed of Trust and Security Agreement”, and “Borrower Disclosure Statement” between the City
of Carlsbad and Cherry Tree Walk, LLC.
ITEM EXPLANATION:
Proiect Backuround
On October I, 1996, the City Council approved development of the Sambi Seaside Heights Affordable
Housing Project. Also on October 1” , the City Council Adopted Resolution No. 96-332 authorizing a
commitment of financial assistance in an amount not to exceed $453,600 ($10,800 per unit), to be paid
from the City’s Housing Trust Fund. The City’s assistance will be provided in the form of funds which are
first utilized for construction and then for deferred financing for the actual homebuyer. The City’s
assistance, along with the developer’s subsidy is structured as a silent second mortgage in favor of the
City. The silent second, and any contingent interest will be repaid to the City when the homebuyer sells or
transfers the property at a later date.
The affordable project consist of 42 two and three bedroom townhomes affordable for purchase to low
income households. The project is generally located east of Aviara parkway, north of Camino de Las
Ondas, and south of Flame Tree Lane, in the southwest quadrant of the City. The affordable housing
project will meet the master development’s inclusionary housing requirement.
Subsequent to the actions by the Council, the project owner, Sambi Seaside Heights, sold a portion of the
development to the Olson Company. As required by the Affordable Housing Agreement, staff has
approved the transfer of the affordable project to the new developer. The Olson Company is an
experienced developer of affordable, for-sale properties. The Olson Company has renamed the
affordable project “Cherry Tree Walk.”
Proiect Aareements
As a result of the previous actions taken by the Council to provide financial assistance, the City must now
enter into agreements with the developer to formalize the previously approved actions. Attached as
exhibits for the Council’s review are the following agreements and/or documents and instruments to be
executed in connection with the construction permanent financing loans for the Cherry Tree Affordable
Housing Project:
0 Developer Loan Agreement - this agreement outlines the terms of the loan to be provided by the
City of Carlsbad to Cherry Tree Walk, LLC., during construction of the Cherry Tree Walk
Affordable Housing Project. The maximum amount of the loan shall be $453,600. As each
individual home is sold, the developer will be credited with repayment of $10,800 of the City Loan.
0 Developer Promissory Note - this document is an instrument of implementation related to the
Loan Agreement described above. It is a “promise to pay” the City for the total amount of the
construction loan advanced to Cherry Tree Walk for the subject project. The note is secured by a
Deed of Trust.
Page 2
Developer Deed of Trust and Security Agreement - this document outlines the security for the
construction loan to be made by the City of Carlsbad to Cherry Tree Walk. The security provided
for the loan includes: 1) the owner’s fee interest in the property, 2) interest in all easement, right-of-
ways, and other rights used for access purposes, 3) all buildings and improvements of every kind
and description on the property, 4) interest in all building materials and equipment on property, and
5) interest in all personal property or fixtures on the property.
Borrower Promissory Note- this document offers the same security for the borrower’s loan as
outlined above for the City’s Developer Loan Agreement. In this agreement, the borrower is
promising to repay the seller carryback loan which includes the original City Loan of $10,800, all
developer subsidy, and any contingent interest upon sale or transfer of the property.
Borrower Deed of Trust and Security Agreement - this document outlines the security for the
loan between the City of Carlsbad and the individual property owner. The security provided for the
loan includes: 1) the owner’s interest in the property, 2) all buildings and improvements of every
kind and description on the property, and 3) interest in all personal property or fixtures on the
property.
Borrower Disclosure Statement - this document explains the major provisions of the Promissory
Note and Deed of Trust to help the borrower better understand the terms and conditions of said
documents.
Subordination of Citv Aareements
It is important to note that by approving the subject agreements, the Council is also agreeing to
subordinate the City’s loans and agreements to the lien of deeds of trust securing the Construction and
Permanent Financing provided by a private lender. The construction lender (Wells Fargo Bank) is
requiring that the City subordinate its loan and agreements to those of the Bank. The City has received
written commitments from Wells Fargo reasonably designed to protect the City’s investment in the event of
default. These protections include a notice of default to the City and a right of the City to cure the default.
The Borrowers Deed of Trust also provides for subordination to the first trust deed and the same
protections.
FISCAL IMPACT:
The financial assistance will be provided from the City of Carlsbad’s Housing Trust Fund. The $453,600
has been previously reserved and is available for the project. The Trust Fund has a current undesignated
fund balance of approximately $1.71 million. As stated above, the money will be in the form of a silent
second trust deed loan and will be repaid, along with the Developers subsidy and shared appreciation,
upon sale or transfer of each individual property.
EXHIBITS:
1. City Council Resolution No. 9 8 c / 76.
2. Loan Agreement, Developer Promissory Note, Developer Deed of Trust and Security Agreement,
Borrower Promissory Note, Borrower Deed of Trust and Security Agreement, and Borrower Disclosure
Statement.
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c1T.Y COUNCIL RESOLUTION NO. 98-176
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF CARLSBAD, CALIFORNIA, TO APPROVE A LOAN
AGREEMENT, DEVELOPER PROMISSORY NOTE,
DEVELOPER DEED OF TRUST AND SECURITY
AGREEMENT, BORROWER PROMISSORY NOTE,
BORROWER DEED OF TRUST AND SECURITY
AGREEMENT, AND BORROWER DISCLOSURE
STATEMENT BETWEEN THE CITY OF CARLSBAD AND
CHERRY TREE WALK, LLC., IN THE AMOUNT OF
$453,600 TO ASSIST THE CONSTRUCTION OF 42
TOWNHOMES AFFORDABLE TO LOW INCOME
HOUSEHOLDS.
APPLICANT: CHERRY TREE WALK, LLC.
CASE NO: SDP 92-06(A)/CT 92-02(A)
WHEREAS, the City of Carlsbad has identified a need to provide housing which is affordable
to low income households in a variety of different forms; and
WHEREAS, a project known as “Cherry Tree Walk” has been approved for construction which
will provide 42 for-sale townhomes on property generally located east of Aviara Parkway, north of
Camino de Las Ondas, and south of Flame Tree Lane which will provide housing affordable to low
income households; and
WHEREAS, on October 1, 1996, the City Council held a public meeting and determined that,
based upon the financial analysis of the project, City financial participation in the project is necessary,
appropriate and exceeded by the public benefit received by the City; and
WHEREAS, the affordability level and the unit mix of the proposed project are consistent with
the City of Carlsbad’s Housing Element objectives, Consolidated Plan, and Inclusionary Housing
Ordinance; and
WHEREAS, on June 9*, 1998, the City Council did hold a public meeting to consider a
request to approve loan documents for City financial assistance for the construction of said 42 for-sale
townhomes affordable to low income households and;
WHEREAS, at said public meeting, upon hearing and considering all testimony, if any, of all
persons designing to be heard, said Council considered all factors relating to said request:
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CC RESO. NO, 98-176
PAGE 2
NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council of the City of
Carlsbad, California, as follows:
1. The above recitations are true and correct.
2. The request for City financial assistance was previously approved by the City Council
at their October 1, 1996 meeting and as recorded in City Council Resolution No. 96-
332. The financial assistance has been determined to be consistent with the goals and
objectives of the City of Carlsbad’s Housing Element and Comprehensive Housing
Affordability Strategy, the Inclusionary Housing Ordinance, and the Carlsbad General
Plan.
3. The request for City financial assistance will assist the affordable housing developer to
construct a total of 42, two and three bedroom affordable townhomes. The project,
therefore, has the ability to effectively serve the City’s housing needs and priorities as
expressed in the Housing Element and the Consolidated Plan.
4. That based on the information provided within the City Council Staff Report, the
testimony presented during the public meeting of the City Council, the City Council
hereby APPROVES the loan agreement, Developer Promissory Note Developer Deed
of Trust and Security Agreement Borrower Promissory Note, Borrower Deed of Trust
and Security Agreement, and Borrower Disclosure Statement between the City of
Carlsbad and Cherry Tree Walk, LLC., in the amount of $453,600 to assist the
construction of 42 townhomes affordable to low income households.
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5. That the City Council recommends that the City Manager or his designee be authorized
to execute all documents related to provision of the City assistance, including but not
limited to a Loan Agreement, Note, and Deed of Trust, in substantially the form
presented to the City Council on June 9, 1998, and subject to review and approval by
the City Attorney.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the City Council of
the City of Carlsbad, California, held on the 9”’ day of June, 1998 by the following vote, to wit:
AYES: Council Members Lewis, Finnila, Nygaard, Kulchin and Hall
NOES: None
ABSENT: None
ABSTAIN: None
ATTEST:
JITYCLERI-6
(SEAL) -3-
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- EXHIBIT 2
LOAN AGREEMENT
BY AND BETWEEN
THE CITY OF CARLSBAD
and
CHERRY TREE WALK, LLC
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ARTICLE 1. DEFINITIONS AND EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2. LOAN PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.1
Section 2.2
Section 2.3
Section 2.4
Section 2.5
Section 2.6
Section 2.7
Section 2.8
Section 2.9
Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Use of Loan Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Disbursement of Loan Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Intercreditor Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Term and Repayment Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.10 Approval of Additional Financing. ............................................................. 8
ARTICLE 3. CONSTRUCTION OF THE DEVELOPMENT .................................................... .9
Section 3.1 Schedule of Performance. ............................................................................. 9
Section 3.2 Construction Pursuant to Plans and Laws ..................................................... 9
Section 3.3 Equal Opportunity.. ....................................................................................... 9
Section 3.4 Mechanics Liens, Stop Notices, and Notices of Completion.. .................... 10
ARTICLE 4. REQUIREMENTS DURING AND AFTER CONSTRUCTION.. ....................... 10
Section 4.1 Information. ................................................................................................ 10
Section 4.2 Records. ...................................................................................................... 10
Section 4.3 Inspections. ................................................................................................. 11
Section 4.4 Insurance. .................................................................................................... 11
Section 4.5 Hazardous Materials. .................................................................................. 12
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Section 4.6 Fees and Taxes.. .......................................................................................... 13
Section 4.7 Nondiscrimination ....................................................................................... 14
Section 4.8 Notice of Litigation.. ................................................................................... 14
Section 4.9 Transfers . .................................................................................................... 14
ARTICLE 5. DEFAULT ............................................................................................................. 15
Section 5.1 Events of Default. ....................................................................................... 15
Section 5.2 Remedies.. ................................................................................................... 17
Section 5.3 Remedies Cumulative. ................................................................................ 17
Section 5.4 Waiver of Terms and Conditions. ............................................................... 18
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF DEVELOPER.. .................... .18
Section 6.1 Representations and Warranties.. ................................................................ 18
ARTICLE 7. GENERAL PROVISIONS ................................................................................... .19
Section 7.1 Relationship of Parties ................................................................................ 19
Section 7.2 No Claims . .................................................................................................. 20
Section 7.3 Amendments . .............................................................................................. 20
Section 7.4 Indemnification ........................................................................................... 20
Section 7.5 Non-Liability of City Officials, Employees and Agents. ........................... 20
Section 7.6 No Third Party Beneficiaries . ..................................................................... 21
Section 7.7 Discretion Retained By City. ...................................................................... 21
Section 7.8 Notices, Demands and Communications . ................................................... 21
Section 7.9 Applicable Law. .......................................................................................... 21
Section 7.10 Parties Bound; Covenants Running with the Land. .................................. 22
Section 7.11 Attorneys’ Fees .......................................................................................... 22
Section 7.12 Severability. .............................................................................................. 22
Section 7.13 Force Majeure ........................................................................................... 22
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Section 7.14 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.15 Title of Parts and Sections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.16 Entire Understanding of the Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.17 Multiple Originals; Counterpart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.18 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
EXHIBIT A: Legal Description of the Affordable Development Property
EXHIBIT B: Form of the Developer Note
EXHIBIT C: Form of the Developer Deed of Trust
EXHIBIT D: Form of Eligible Buyer Note
EXHIBIT E: Form of Eligible Buyer Deed of Trust
EXHIBIT F: Form of Borrower Disclosure Statement
EXHIBIT G: Development Budget
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LOAN AGREEMENT
This Loan Agreement (the “Agreement”) is entered into as of ,1998,
by and between the City of Carlsbad, a municipal corporation (the “City”), and Cherry Tree
Walk, LLC, a limited liability company (the “Developer”), with reference to the following facts:
A. The Developer is the owner of certain real property in the City of Carlsbad, in the
County of San Diego, California described in Exhibit A attached hereto and incorporated herein
(the “Affordable Development Property”). An affiliate of Developer purchased the Affordable
Development Property from SAMBI Seaside Heights, L.L.C. (the “Master Developer”), and then
conveyed the Affordable Development Property to the Developer.
B. The Master Developer received approval from the City to construct 277 residential
housing units in the City, in a development known as SAMBI Seaside Heights (the “Master
Development”). In satisfaction of certain conditions of approval in connection with the City’s
approvals of the Master Development, the City and the Master Developer executed an
Affordable Housing Agreement Imposing Restrictions on Real Property dated as of November
11, 1996 (the “Original Affordable Housing Agreement”).
C. Pursuant to the Original Affordable Housing Agreement, the Master Developer
agreed to sell 42 of the housing units in the Master Development at affordable housing cost to
lower income households (the “Affordable Units”). The Master Developer further agreed to
carry back second mortgage financing on the Affordable Units in an amount equal to the
difference between the market rate purchase price of the Affordable Unit and the affordable price
of such unit, and to assign such second mortgage financing to the City. The Master Developer
intended to construct the Affordable Units in a discrete townhome development on the
Affordable Development Property.
D. Pursuant to the Original Affordable Housing Agreement, the City agreed to provide
financial assistance to the Master Developer for the Affordable Units in the form of a $453,600
construction loan (the “City Loan”), which represents a direct City subsidy amount of $10,800
per Affordable Unit. As more fully set forth herein, upon sale of each Affordable Unit to an
eligible lower income household in compliance with the Affordable Housing Agreement, and
execution of second mortgage loan documents by the homebuyer to the City in compliance with
the Affordable Housing Agreement, the City will credit the Master Developer with repayment of
$10,800 of the City Loan.
E. The Master Developer conveyed the Affordable Development Property to Plum
Tree Walk, LLC, which subsequently conveyed the Property to the Developer. Concurrently
with these conveyances, the Master Developer assigned the Affordable Housing Agreement to
Plum Tree Walk, LLC, which assigned the Affordable Housing Agreement to the Developer.
The City consented to these assignments and agreed to certain amendments to the Affordable
Housing Agreement pursuant to an Estoppel Certificate and Amendment to Affordable Housing
Agreement between the City and The Olson Company dated December 30,1997.
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F. The City intends to fund the City Loan with moneys from the City’s Housing Trust
Fund created pursuant to City Ordinance No. NS-232.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE 1. DEFINITIONS AND EXHIBITS
Section 1.1 Definitions.
The following capitalized terms shall have the following meanings in this Agreement:
(a) “Affordable Development” shall mean the Affordable Development
Property, the Affordable Units, and all landscaping, roads, parking spaces, and common area
appurtenant to such units.
(b) “Affordable Development Property” shall mean the property described in
Exhibit A on which the Affordable Development will be constructed.
(4 “Affordable Housing Agreement” shall mean the Affordable Housing
Agreement Imposing Restrictions on Real Property by and between the City and the Developer
dated November 11, 1996 and recorded against the Property as Document No. 1997-0045 12 in
the Official Records of San Diego County, as modified by the Estoppel Certificate and
Amendment to Affordable Housing Agreement between the City and The Olson Company dated
December 30, 1997.
(4 “Affordable Unit” shall mean a Unit sold to an Eligible Purchaser in
compliance with the Affordable Housing Agreement.
(e) “Agreement” shall mean this Loan Agreement.
“Bank” shall mean the maker of the Bank Loan.
(g) “Bank Loan” shall mean the construction loan obtained by the Developer
from a private institutional lender, to pay for costs of construction of the Affordable Units not
paid from the City Loan.
09 “Borrower Disclosure Statement” shall mean the borrower disclosure
statement to be signed by Eligible Buyers purchasing Units.
(9 “City” shall mean the City of Carlsbad, a municipal corporation.
(i) “City Loan” shall mean the loan for the amount of Four Hundred Fifty-
Three Thousand Six Hundred Dollars ($453,600) by the City to the Developer pursuant to this
Agreement.
(k) “CityHomebuyer Second Mortgage Loan” shall mean the carryback
financing provided by the Developer to Eligible purchasers and assigned by the Developer to the
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City. Each City/Homebuyer Second Mortgage Loan shall be evidenced by an Eligible Buyer
Note and secured by an Eligible Buyer Deed of Trust.
(1) “Default” shall have the meaning set forth in Section 5.1 below.
(m) “Developer Deed of Trust” shall mean the deed of trust to be placed on the
Affordable Development Property, in substantially the form shown in the attached Exhibit C,
securing the Developer Note and naming the City as beneficiary.
09 “Developer Note” shall mean the promissory note, in substantially the
form shown in the attached Exhibit B, in the principal amount of Four Hundred Fifty-Three
Thousand Six Hundred Dollars ($453,600), evidencing the City Loan.
(0) “Direct City Subsidy Amount” shall mean the $10,800 increment of the
City Loan attributable to each Affordable Unit.
CP) Affordable Unit.
“Eligible Buyer” shall mean a Lower Income Household purchasing an
(9) “Eligible Buyer Deed of Trust” shall mean the deed of trust held by the
City to secure payment of an Eligible Buyer Note executed and delivered to the City by the
Eligible Buyer of an Affordable Unit, in the form attached hereto as Exhibit E.
03 “Eligible Buyer Note” shall mean the promissory note, in the form
attached hereto as Exhibit D, executed and delivered to the City by an Eligible Buyer of a
Affordable Unit.
below. 6) “Hazardous Materials” shall have the meaning set forth in Section 4.5
4.5 below. (t) “Hazardous Materials Claim” shall have the meaning set forth in Section
below. 60 “Hazardous Materials Law” shall have the meaning set forth in Section 4.5
(9 “Intercreditor Agreement” shall mean the Intercreditor Agreement to be
entered into by and among the City, the Bank, and the Developer pursuant to Section 2.6 of this
Agreement.
(4 “Loan Documents” shall mean the following documents: (i) the
Developer Note; (ii) the Developer Deed of Trust; (iii) the Affordable Housing Agreement and
(iv) this Agreement.
(4 “Lower Income Household” shall mean a household with an annual
income, adjusted for actual household size, that is no greater than eighty percent (80%) of
Median Income.
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ra
(Y) “Median Income” shall mean the median gross yearly income for
households in San Diego County, California, as adjusted for household size, as published
periodically by the United States Department of Housing and Urban Development (“HUD”). In
the event such income determinations are no longer published by HUD, or are not updated for a
period of at least eighteen (18) months, the City shall provide the Developer with other income
determinations which are reasonably similar with respect to method of calculation to those
previously published by HUD.
(z) “Parties” shall mean the City and the Developer.
(aa) “Primary Affordability Subsidy” shall have the meaning set forth in
Section 2.4.2 of the Affordable Housing Agreement.
@W “Property” shall mean the property on which the Developer shall construct
the Improvements, as more particularly described in the attached Exhibit A.
(cc) “Schedule of Performance” shall mean the schedule of performance set
forth in Section 2.2 of the Affordable Housing Agreement.
W) “Term” shall mean the thirty-six (36) month term of the Loan,
commencing on the date of recordation of the Deed of Trust and continuing for thirty-six (36)
months thereafter.
W “Transfer” shall have the meaning set forth in Section 4.9 below.
WI “Unit” shall mean a housing unit located within the Affordable
Development.
Section 1.2 Exhibits.
The following exhibits are attached to this Agreement and incorporated into this
Agreement by this reference:
EXHIBIT A: Legal Description of the Affordable Development Property
EXHIBIT B: Form of the Developer Note
EXHIBIT C: Form of the Developer Deed of Trust
EXHIBIT D: Form of Eligible Buyer Note
EXHIBIT E: Form of Eligible Buyer Deed of Trust
EXHIBIT F: Form of Borrower Disclosure Statement
EXHIBIT G: Development Budget
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ARTICLE 2. LOAN PROVISIONS
Section 2.1 Loan.
The City shall loan to the Developer the Loan in the principal amount of Four Hundred
Fifty Three Thousand Six Hundred Dollars ($453,600) for the purposes set forth in Section 2.3
of this Agreement. The obligation of the Developer to repay the Loan shall be evidenced by the
Developer Note in substantially the form attached to this Agreement as Exhibit B.
Section 2.2 Interest.
The Loan shall not bear interest; provided, however, if a Default is declared by the City,
the Loan shall bear interest, commencing on the date of declaration of the Default, at the default
rate equal to the lesser of ten percent (lo%), compounded annually or the maximum rate
permitted by law.
Section 2.3 Use of Loan Fun&.
The Developer shall use the City Loan to pay for a portion of costs associated with
development of the Affordable Units, identified as City-funded costs in the budget attached
hereto as Exhibit G. The Developer shall not use the City Loan funds for any other purpose
without the prior written consent of the City.
Section 2.4 Security.
The Developer shall secure its obligation to repay the City Loan, as evidenced by the
Developer Note, by signing and delivering to the City the Developer Deed of Trust in
substantially the form attached to this Agreement as Exhibit C.
Section 2.5 Disbursement of Loan Proceeds.
(4 The City shall have no obligation to disburse any portion of the City Loan
unless the following conditions have been satisfied and continue to be satisfied:
(i) The Developer has signed and delivered to the City the Developer
Note in substantially the form attached to this Agreement as Exhibit B and the Developer Deed
of Trust in substantially the form attached to this Agreement as Exhibit C.
(ii) The Developer Deed of Trust has been recorded against the
Affordable Development Property in the Office of the Recorder of the County of San Diego.
(iii) A title insurer reasonably acceptable to the City is unconditionally
and irrevocably committed to issuing a CLTA Lender’s Policy of insurance insuring the priority
of the City Deed of Trust in the amount of the City Loan, subject only to such exceptions and
exclusions as may be reasonably acceptable to the City and containing such endorsements as the
1010\03\111527.2 5
City may reasonably require. The City agrees to accept the deed of trust securing the Bank Loan
as a prior exception to title.
(iv) The Developer has furnished the City with evidence of the
insurance coverage required pursuant to Section 4.4 below.
(3 The City has received a good standing certificate issued by the
California Secretary of State’s office indicating that the Developer exists in good standing at the
time of the proposed disbursement, as well as a copy of a resolution of the Borrower indicating
that Developer has duly authorized entry into and performance under this Agreement.
(vi) The Developer has certified in writing to the City that the City
Loan, together with the Bank Loan and any other financing obtained by the Developer, is
projected to be sufficient to pay all development costs of the Affordable Units.
(vii) The Developer (A) has received all general plan and zoning
approvals necessary to construct the Affordable Units, (B) has submitted to the City a proposed
final tract map for the Affordable Development which satisfies all tentative tract map conditions
and is reasonably acceptable to the City Engineer, together with all fees required therefor, and
(C) has submitted to the City all grading and improvement plans required for the Affordable
Development, in a form which is reasonably acceptable to the City Engineer, together with all
fees required therefore, and (D) has received from the City temporary or interim approval to
commence grading of the Affordable Development Property, and (E) has received approval of
building plans for the Affordable Development by the City Building and Safety Department,
pending pad certification for permit issuance.
(viii) The closing of the Bank Loan shall be completed and the City, the
Bank, and the Developer shall have executed an Intercreditor Agreement as provided in Section
2.6 below. Prior to such closing, the City and the Developer shall cooperate in good faith with
the Bank and shall make changes to the terms and conditions of this Agreement (including the
exhibits hereto) as the Bank may require, and which the Developer and the City Housing and
Community Development Director determine are reasonable.
(b) Upon satisfaction of the conditions set forth in Section 2.5(a) above the
City shall promptly, but in no event later than five (5) business days after receiving Developer’s
written request and any required documentation, disburse the City Loan proceeds to Developer
from time to time, but in no event more often than monthly. Disbursement requests shall include
a certified statement form Developer: (i) reaffirming the accuracy as of the date of the
disbursement request of Developer’s representations and warranties set forth in Article 6 below;
(ii) certifying that Borrower is not in default under the City Loan Documents or loan documents
for the Bank Loan; and (iii) setting forth the proposed uses of funds consistent with Section 2.3
and Bxhibit G, the amount of funds needed, and, where applicable, a copy of the bill or invoice
covering a cost incurred or to be incurred. When a disbursement is requested to pay any
contractor in connection with the Affordable Development, the written request must be
accompanied by certification by Developer that the work for which disbursement is requested
has been completed (although the City reserves the right to inspect the Affordable Development
1010\03\111527.2 6
and make an independent evaluation), and lien releases and/or mechanics lien title insurance
endorsements reasonably acceptable to the City. City Loan proceeds utilized for hard
construction costs of on-site improvements shall be subject to a retention of ten percent (lo%),
with retained proceeds to be released upon completion of the on-site improvements.
Section 2.6 Intercreditor Agreement.
As set forth in Section 2.5(a)(viii) above, the City, the Bank, and the Developer shall
enter into an Intercreditor Agreement as a condition of closing the City Loan. The Intercreditor
Agreement shall set forth any agreements between the parties regarding the following issues:
(a) the deposit of the City Loan proceeds with the Bank for disbursement by
the Bank, including the interest rate to be earned by the City on its funds prior to disbursement
by the Bank.
Q-9 the procedure for disbursement by the Bank of the City Loan proceeds,
including the order of disbursement of City Loan proceeds and Bank Loan proceeds.
(4 the provision to the City of notice of any default by Developer under the
Bank Loan documents, and the nature and extent of the City’s cure rights, including the right of
the City to foreclose on the City Deed of Trust, succeed to Developer under the Bank Loan (or
assign its right to do so to another developer), and complete the Affordable Units.
(4 the treatment of any undisbursed portion of City Loan proceeds in the
event of default by the Developer under the City Loan and/or the Bank Loan.
Section 2.7 Subordination.
The City shall execute such documents as may be necessary to subordinate the priority of
the City Deed of Trust to the lien of the deed of trust securing the Bank Loan. The subordination
documents shall provide the City with reasonably adequate notice and cure rights to enable the
City to avoid foreclosure of a senior deed of trust.
Section 2.8 Term and Repayment Schedule.
The Loan shall be repaid as follows:
(a) Upon sale of an Affordable Unit to an Eligible Buyer, the Developer shall
carry back second mortgage financing to the Eligible Buyer in an amount equal to the Primary
Affordability Subsidy for the Affordable Unit, as established pursuant to the Affordable Housing
Agreement. The Developer shall assign its interest in such second mortgage financing to the
City, and shall require that the Eligible Buyer sign, at close of escrow on the purchase of the
Affordable Unit, the Borrower Disclosure Statement and the Eligible Buyer Note and the
Eligible Buyer Deed of Trust for the benefit of the City. Upon the execution of the Borrower
Disclosure Statement, the Eligible Buyer Note and the Eligible Buyer Deed of Trust, and the
.
1010\03\111527.2 7
recordation of the Eligible Buyer Deed of Trust against the Affordable Unit, the City shall credit
the Developer with repayment of Ten Thousand Eight Hundred Dollars ($10,800) of the City
Loan. The City and the Developer acknowledge that the principal amount of the Eligible Buyer
Note to the City shall be equal to the Primary Affordability Subsidy, which includes the value to
the Eligible Purchaser of the City’s inclusionary housing restrictions pursuant to the Affordable
Housing Agreement and will therefore be greater in principal amount than the Direct City
Subsidy Amount of Ten Thousand Eight Hundred Dollars ($lO,SOO), but nevertheless agree that
only the Direct City Subsidy Amount of Ten Thousand Eight Hundred Dollars ($10,800) shall be
credited toward repayment of the City Loan.
@9 Upon the sooner of the date of expiration of the Term, the date of an
unauthorized Transfer of the Development, or Developer’s Transfer of the last Affordable Unit
still owned by the Developer, all principal remaining unpaid or uncredited shall be due and
payable.
(4 At the time of sale of an Affordable Unit to an Eligible Buyer, the City
shall execute a partial reconveyance of the Developer Deed of Trust to release the Affordable
Unit being sold from the lien of the Developer Deed of Trust. Upon the sale of all Affordable
Units in compliance with the Affordable Housing Agreement, the City shall entirely reconvey
the Developer Deed of Trust.
(4 The Developer may pay the principal and any interest due the City under
the Developer Note prior to or in advance of the time for payment thereof as provided in the
Developer Note, without penalty. However, the provisions of this Agreement and the Affordable
Housing Agreement will be applicable to the Affordable Development even though Developer
may have prepaid the Developer Note, including the requirement that a minimum of forty-two
(42) of the Units shall be sold to Eligible Buyers who execute City Second Mortgage Loan
documents.
Section 2.9 Assumption .
Subject to Section 4.9 below, the Developer Note shall not be assumable by successors
and assigns of Developer without the prior written consent of the City, which consent shall not
be withheld unreasonably.
Section 2.10 A_ _ Aof.
The Developer shall not place any additional encumbrances on the Affordable
Development Property without the prior written consent of the City, which consent shall not be
withheld unreasonably. The City consents to encumbrances in connection with the Bank Loan.
1010\03\111527.2
ARTICLE 3. CONSTRUCTION OF THE DEVELOPMENT
Section 3.1 Schedule of Performance.
The Developer shall develop the Affordable Development in compliance with the
Schedule of Performance.
Section 3.2 Construction Pursuant to Plans and Laws.
6-4 The Developer shall construct the Affordable Development in
conformance with the construction drawings approved by the City in connection with approval
of the building permits for the Affordable Development.
(b) The Developer shall cause all work performed in connection with the
Affordable Development to be performed in compliance with (i) all applicable laws, ordinances,
rules and regulations of federal, state, county or municipal governments or agencies now in force
or that may be enacted hereafter, and (ii) all directions, rules and regulations of any fire marshal,
health officer, building inspector, or other officer of every governmental agency now having or
hereafter acquiring jurisdiction. The work shall proceed only after procurement of each permit,
license, or other authorization that may be required by any governmental agency having
jurisdiction, and the Developer shall be responsible to the City for the procurement and
maintenance thereof, as may be required of the Developer and all entities engaged in work on the
Affordable Development.
6) All construction work and professional services shall be performed by
persons or entities licensed or otherwise authorized to perform the applicable construction work
or service in the State of California.
(d) The Developer shall be solely responsible for all aspects of the
Developer’s conduct in connection with the Affordable Development, including (but not limited
to) the quality and suitability of the construction drawings, the supervision of construction work,
and the qualifications, financial condition, and performance of all architects, engineers,
contractors, subcontractors, suppliers, consultants, and property managers. Any review or
inspection undertaken by the City with reference to the Affordable Development is solely for the
purpose of determining whether the Developer is properly discharging its obligations to the City,
and should not be relied upon by the Developer or by any third parties as a warranty or
representation by the City as to the quality of the design or construction of the Affordable
Development.
Section 3.3 Equal *porhu-&.
During the construction of the Affordable Development there shall be no discrimination
on the basis of race, color, creed, religion, age, disability, sex, sexual orientation, marital status,
national origin, or ancestry, in the hiring, firing, promoting, or demoting of any person engaged
in the construction work.
1010\03\111527.2 9
Section 3.4 Mechanics Liens. Stop Notices. and Notices of Completion.
(a) If any claim of lien is filed against the Affordable Development Property
or the Affordable Development or a stop notice affecting the City Loan is served on the City or
any other lender or other third party in connection with the Affordable Development, then the
Developer shall, within twenty (20) days after such filing or service, either pay and fully
discharge the lien or stop notice, effect the release of such lien or stop notice by delivering to the
City a surety bond in sufficient form and amount, or provide the City with other assurance
satisfactory to the City that the claim of lien or stop notice will be paid or discharged.
(b) If the Developer fails to discharge any lien, encumbrance, charge, or claim
in the manner required in Section 3.4(a), then in addition to any other right or remedy, the City
may (but shall be under no obligation to) discharge such lien, encumbrance, charge, or claim at
the Developer’s expense. Alternately, the City may require the Developer to immediately deposit
with the City the amount necessary to satisfy such lien or claim and any costs, pending resolution
thereof. The City may use such deposit to satisfy any claim or lien that is adversely determined
against the Developer. .
Cc) The Developer shall file a valid notice of cessation or notice of completion
upon cessation of construction on the Affordable Development for a continuous period of thirty
(30) days or more, and take all other reasonable steps to forestall the assertion of claims or lien
against the Affordable Development. The City may (but has no obligation to) record any notices
of completion or cessation of labor, or any other notice that the City deems necessary or
desirable to protect its interest in the Affordable Development.
ARTICLE 4. REQUIREMENTS DURING AND AFTER CONSTRUCTION
Section 4.1 Information.
The Developer shall promptly provide any information reasonably requested by the City
in connection with the Affordable Development.
Section 4.2 Records.
The Developer shall maintain complete, accurate, and current records pertaining to the
Affordable Development for a period of five (5) years after the creation of such records, and
shall permit any duly authorized representative of the City to inspect and copy records, including
records pertaining to income and household size of purchasers of the Affordable Units. Such
records shall include records regarding the occupancy and sales price of the Affordable Units, as
well as records that accurately and fully show the date, amount, purpose, and payee of all
expenditures drawn from Loan funds. Such records shall also include all invoices, receipts, and
other documents related to expenditures from the Loan funds. Records shall be maintained
accurately and shall be kept current.
1010\03\111527.2 10
Section 4.3 Inspections.
The Developer shall permit and facilitate, and shall require its contractors to permit and
facilitate, observation and inspection at the Affordable Development by the City and by public
authorities during reasonable business hours and upon reasonable advance notice for the
purposes of determining compliance with this Agreement.
Section 4.4 Insurance.
Throughout the period of Developer’s ownership of any portion of the Affordable
Development, Developer shall maintain the following insurance policies:
(4 Worker’s Compensation insurance, including Employer’s Liability
coverage, with limits not less than One Million Dollars ($l,OOO,OOO) each accident, if required
by law or if the Developer has employees.
04 Comprehensive General Liability insurance with limits not less than Five
Million Dollars ($5,000,000) each occurrence combined single limit for Bodily Injury and
Property Damage, including coverages for Contractual Liability, Personal Injury, Broadform
Property Damage, Products and Completed Operations.
(4 Comprehensive Automobile Liability insurance with limits not less than
One Million Dollars ($1 ,OOO,OOO) each occurrence combined single limit for Bodily Injury and
Property Damage, including coverages for owned, non-owned and hired vehicles, as applicable.
However, if the Developer does not own or lease vehicles for purposes of this Agreement, then
no automobile insurance shall be required.
69 Property insurance covering all Affordable Development real and personal
(non-expendable) property, in form appropriate for the nature of such property, covering all risks
of loss, including earthquake and flood (if the Affordable Development Property is located
within a flood zone), for 100% of the replacement value, with deductible, if any, acceptable to
the City, naming the City as a Loss Payee, as its interests may appear.
W The Developer shall cause any general contractor or agent working on the
Affordable Development under direct contract with the Developer to maintain insurance of the
types and in at least the minimum amounts described in Sections 4.4(a), (b) and (c), and shall
require that such insurance meet all of the general requirements of Sections 4.4(f), (g), and (h).
Liability and Comprehensive Automobile Liability insurance to be maintained by such general
contractor and agents pursuant to this subsection shall name as additional insureds the City, its
officers, agents, employees, and members of the City Council. The Developer shall cause the
conditions in this Section 4.4(e) to continue to be satisfied at all times after the disbursement of
any City Loan funds and before sale of all Affordable Units in compliance with the Affordable
Housing Agreement.
1010\03\111527.2 11
(fl The required insurance shall be provided under an occurrence form, and
Developer shall maintain such coverage continuously until all Affordable Units are sold.
(g) Comprehensive General Liability, Comprehensive Automobile Liability
and Property insurance policies shall be endorsed to name as additional insured the City and its
officers, agents, and employees, as well members of the City Council.
0 All policies and bonds shall be endorsed to provide thirty (30) days prior
written notice of cancellation, reduction in coverage, or intent not to renew to the address
established for notices to the City.
Section 4.5 Hazardous Materials.
(a) The Developer shall keep and maintain the Affordable Development in
compliance with, and shall not cause or permit the Affordable Development to be in violation of,
any federal, state or local laws, ordinances or regulations relating to industrial hygiene or to the
environmental conditions on, under or about the Affordable Development including, but not
limited to, soil and ground water conditions. The Developer shall not use, generate,
manufacture, store or dispose of on, under, or about the Affordable Development or transport to
or from the Affordable Development any flammable explosives, radioactive materials, hazardous
wastes, toxic substances or related materials, including without limitation, any substances
defined as or included in the definition of “hazardous substances, “hazardous wastes,”
“hazardous materials,” or “toxic substances” under any applicable federal or state laws or
regulations (collectively referred to hereinafter as “Hazardous Materials”) except such of the
foregoing as may be customarily kept and used in and about single family residential property.
04 The Developer shall immediately advise the City in writing if at any time
it receives written notice of(i) any and all enforcement, cleanup, removal or other governmental
or regulatory actions instituted, completed or threatened against the Developer or the Affordable
Development pursuant to any applicable federal, state or local laws, ordinances, or regulations
relating to any Hazardous Materials (“Hazardous Materials Law”); (ii) all claims made or
threatened by any third party against the Developer or the Affordable Development relating to
damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous
Materials (the matters set forth in clauses (i) and (ii) above are hereinafter referred to as
“Hazardous Materials Claims”); and (iii) the Developer’s discovery of any occurrence or
condition on any real property adjoining or in the vicinity of the Affordable Development that
could cause the Affordable Development or any part thereof to be classified as “border-zone
property” under California Health and Safety Code Sections 25220 et seq. or any regulation
adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership,
occupancy, transferability or use of the Affordable Development Property under any Hazardous
Materials Law.
(4 The City shall have the right to join and participate in, as a party if it so
elects, any legal proceedings or actions initiated in connection with any Hazardous Materials
Claims and to have its reasonable attorneys’ fees in connection therewith paid by the Developer.
The Developer shall indemnity, defend (with counsel reasonably chosen by the City, at the City’s
1010\03\111527.2 12
option), and hold harmless the City and its officers, councilmembers, employees, and agents
from and against any loss, damage, cost, expense, or liability directly or indirectly arising out of
or attributable to the use, generation, storage, release, threatened release, discharge, disposal, or
presence of Hazardous Materials on, under, or about the Affordable Development, including
(without limitation): (i) all foreseeable consequential damages; (ii) the costs of any required or
necessary repair, cleanup, or detoxification of the Affordable Development and the preparation
and implementation of any closure, remedial, or other required plans; and (iii) all reasonable
costs and expenses incurred by the City in connection with clauses (i) and (ii), including (but not
limited to) reasonable attorneys’ fees. This paragraph shall survive termination of this
Agreement.
(4 Without the City’s prior written consent, which shall not be unreasonably
withheld, the Developer shall not take any remedial action in response to the presence of any
Hazardous Materials on, under or about the Affordable Development, nor enter into any
settlement agreement, consent decree, or other compromise in respect to any Hazardous Material
Claims, which remedial action, settlement, consent decree or compromise might, in the City’s
reasonable judgement, impair the value of the City’s security hereunder. However, the City’s
prior consent shall not be necessary if the presence of Hazardous Materials on, under, or about
the Affordable Development either poses an immediate threat to the health, safety or welfare of
any individual, or is of such a nature that an immediate remedial response is necessary and it is
not reasonably possible to obtain the City’s consent before taking such action, provided that in
such event the Developer shall notify the City as soon as practicable of any action so taken. The
City shall not withhold its consent, where consent is required hereunder, if either (i) a particular
remedial action is ordered by a court of competent jurisdiction, (ii) the Developer will or may be
subjected to civil or criminal sanctions or penalties if it fails to take a required action; or (iii) the
Developer establishes to the reasonable satisfaction of the City that there is no reasonable
alternative to such remedial action which would result in less impairment of the City’s security
hereunder.
(4 The Developer acknowledges and agrees that (i) this Section 4.5 is
intended as the City’s written request for information (and the Developer’s response) concerning
the environmental condition of the Affordable Development as required by California Code of
Civil Procedure Section 726.5, and (ii) each representation and warranty in this Agreement
(together with any indemnity obligation applicable to a breach of or such representation and
warranty) with respect to the environmental condition of the Affordable Development is intended
by the Parties to be an “environmental provision” for purposes of California Code of Civil
Procedure Section 736.
Section 4.6 Fees and Taxes.
During the period of ownership of the Affordable Development by the Developer, the
Developer shall be solely responsible for payment of all fees, assessments, taxes, charges, and
levies imposed by any public authority or utility company with respect to the Development or
portion thereof owned by the Developer, and shall pay such charges prior to delinquency.
However, the Developer shall not be required to pay and discharge any such charge so long as
(a) the legality thereof is being contested diligently and in good faith and by appropriate
1010\03\111527.2 13
proceedings, and (b) if requested by the City, the Developer deposits with the City any funds or
other forms of assurance that the City in good faith from time to time determines appropriate to
protect the City from the consequences of the contest being unsuccessful.
Section 4.7 Nondiscrimination.
The Developer covenants by and for itself and its successors and assigns that there shall
be no discrimination against or segregation of a person or of a group of persons on account of
race, color, religion, creed, age, disability, sex, sexual orientation, marital status, ancestry or
national origin in the sale, transfer, use, occupancy, or enjoyment of any Affordable Unit, nor
shall the Developer or any person claiming under or through the Developer establish or permit
any such practice or practices of discrimination or segregation. The foregoing covenant shall run
with the land.
Section 4.8 Notice of l,&tion.
During the period of ownership of the Affordable Development by the Developer, the
Developer shall promptly notify the City in writing of any litigation affecting the Developer or
the Development and of any claims or disputes that involve a material risk of litigation.
Section 4.9 Transfers.
(4 The qualifications and identity of the Developer are of particular concern
to the City. It is because of those qualifications and identity that the City has entered into this
Agreement with the Developer. The City shall have no obligation to perform hereunder if any
voluntary or involuntary successor in interest of the Developer shall acquire any rights or powers
under this Agreement except as expressly set forth herein. The City may terminate this
Agreement upon the occurrence of a Transfer prohibited by subsection (b). The City shall
approve a proposed Transfer if the Developer is transferring the entire Property to the transferee
and the City reasonably determines that the proposed transferee possesses the qualifications,
development experience and financial capability necessary and adequate to fulfil1 the obligations
undertaken in this Agreement and the Affordable Housing Agreement by the Developer.
0-9 No Transfer shall be permitted prior to repayment of the City Loan in full
or prior to sale of all Affordable Units in compliance with the Affordable Housing Agreement
without the prior written consent of the City, which the City shall grant or withhold in
accordance with the standard set forth in subsection (d) above. Pursuant to Section 2.8(b) above,
the City Loan shall automatically accelerate and be due in full upon any Transfer for which prior
written City approval has not been obtained.
Cc) For purposes of this Agreement, “Transfer” shall mean, except as excluded
by the provisions of subsection (b), any sale, assignment, or transfer, whether voluntary or
involuntary, of(i) any rights and/or duties under this Agreement, and/or (ii) any interest in the
Development, including (but not limited to) a fee simple interest, a joint tenancy interest, a life
estate, a partnership interest, a leasehold interest, a security interest, or an interest evidenced by a
1010\03\111527.2 14
a3
land contract by which possession of the Affordable Development is transferred and the
Developer retains title.
Cd) The term “Transfer” shall exclude the following transfers that would
otherwise be Transfers under subsection (a):
(9 the assignment of this Agreement (and the transfer of the
Affordable Development) to a corporation controlled by the Developer, or to a partnership or
joint venture in which the Developer, or an entity controlled by the Developer, is a general
partner and is in control thereof;
(ii) the admission of additional new general or limited partners, or the
substitution or deletion of partners to any partnership or joint venture set forth in (i) above so
long as the Developer, or an entity controlled by the Developer, continues in control;
(iii) the granting of easements, licenses or permits to facilitate the
development of the Affordable Development;
(iv) the granting of any security interest in the Affordable Development
or other financing arrangement for the purposes of securing the Bank Loan or other financing or
the transfer of such security interests to another entity;
69 the transfer or conveyance of all or any portion of the Affordable
Development by foreclosure of a mortgage or deed of trust or by transfer in-lieu-of foreclosure
thereof, and a subsequent transfer or conveyance of all or any portion of the Development to a
third party transferee.
(vi) the sale or transfer of individual Units in the Affordable
Development to homebuyers in compliance with the Affordable Housing Agreement.
(4 In the absence of specific written agreement by the City, or except to a
transferee otherwise authorized in this Agreement (whereupon the transferor-assignor shall be
relieved of its obligations hereunder), no Transfer (whether authorized or unauthorized) shall be
deemed to relieve the Developer or any other party of any obligations under this Agreement.
ARTICLE 5. DEFAULT
Section 5.1 Events of Defa&.
Each of the following shall constitute a “Default” by Developer under this Agreement:
(a) Failure to Make Payment. Failure to make prompt payments of the
principal on the Developer Note when due;
1010\03\111527.2 15
(b) Breach of Covenan&. Failure by the Developer to duly perform, comply
with, or observe any of the conditions, terms, or covenants of any of the Loan Documents (other
than a monetary default as described in paragraph (a) above). If such a non-monetary event of
default occurs under the terms of the Loan Documents, unless automatic acceleration is provided
for hereunder, prior to exercising any remedies thereunder, the City shall give the Developer
written notice of such default and the Developer shall have thirty (30) days (unless an alternative
time period is specified hereunder, in which event such alternate cure period shall apply) to
effect a cure prior to exercise of remedies by the City.
(4 Insolvency. A court having jurisdiction shall have made or entered any
decree or order (i) adjudging the Developer to be bankrupt or insolvent, (ii) approving as
properly filed a petition seeking reorganization of the Developer or seeking any arrangement for
the Developer under the bankruptcy law or any other applicable debtor’s relief law or statute of
the United States or any state or other jurisdiction, (iii) appointing a receiver, trustee, liquidator,
or assignee of the Developer in bankruptcy or insolvency or for any of their properties, or (iv)
directing the winding up or liquidation of the Developer, or the Developer shall have admitted in
writing its inability to pay its debts as they fall due or shall have voluntarily submitted to or filed
a petition seeking any decree or order of the nature described in clauses (i) to (iv), inclusive. The
occurrence of any of the events described in clauses (i) to (iv) with regard to Developer’s
managing member shall also be a Default hereunder. The occurrence of any of the events of
Default in this Section 5.1(c) shall act to accelerate automatically, without the need for any
notice or action by the City, the indebtedness evidenced by the Developer Note.
(d) Assignment: Attachment. The Developer, by reason of a default under its
obligations to creditors, has assigned its assets for the benefit of its creditors or suffered a
sequestration or attachment of or execution on any substantial part of its property; provided that
Developer shall have sixty (60) days to cure any sequestration, attachment, or execution not
consented to by Developer. The occurrence of any of the events of Default in this Section 5.1 (d)
shall act to accelerate automatically, without the need for any notice or action by the City, the
indebtedness evidenced by the Developer Note.
(e) Suspension: Termination. The Developer shall have voluntarily
suspended its business or, if Developer is a partnership, the partnership shall have been dissolved
or terminated.
(0 Liens on the Development. There shall be filed any claim of lien (other
than the deed(s) of trust and other security instruments in connection with the Bank Loan lien
approved in writing by the City) against the Affordable Development or any part thereof, or any
interest or right made appurtenant thereto, or the service of any notice to withhold proceeds of
the City Loan, and such claim of lien or notices to withhold is maintained for a period of forty-
five (45) days without discharge or satisfaction thereof or provision therefor satisfactory to the
City.
(5s) Condemnation . The condemnation, seizure, or appropriation of all or, in
the opinion of the City, a substantial part of the Affordable Development.
1010\03\111527.2 16
(h) Defaults Under Other Loans. Any default declared by the lender under
any loan document related to the Bank Loan or other loan secured by the Affordable
Development Property, which default is not cured by the Developer following the expiration of
applicable notice and cure periods under the Bank Loan Documents or other loan document,
shall act to accelerate automatically, without the need for any notice or action by the City, the
indebtedness evidenced by the Developer Note.
(i) v. Any representation or warranty of Developer to
the City was materially incorrect when made.
Section 5.2 Remedies.
The occurrence of any Default will either at the option of the City, or automatically
where so specified, relieve the City of any obligation to make or continue the City Loan and shall
give the City the right to proceed with any and all remedies set forth in this Agreement and the
Loan Documents, including but not limited to the following:
(a) Acceleration of Develoner Note. The City shall have the right to cause all
indebtedness of the Developer to the City under this Agreement and the Developer Note to
become immediately due and payable, with interest accruing on the principal amount from the
date of acceleration to the date of repayment at an interest rate equal to the lesser of ten percent
(10%) or the maximum rate permitted by law. The Developer waives all right to presentment,
demand, protest or notice of protest or dishonor. The City may proceed to enforce payment of
the indebtedness and to exercise any or all rights afforded to the City as a creditor and secured
party under the law including the Uniform Commercial Code, including foreclosure under the
City Deed of Trust. The Developer shall be liable to pay the City on demand all expenses, costs
and fees (including, without limitation, attorney’s fees and expenses) paid or incurred by the City
in connection with the collection of the City Loan and the preservation, maintenance, protection,
sale, or other disposition of the security given for the Loan.
(b) S-e. The City shall have the right to mandamus or other
suit, action or proceeding at law or in equity to require the Developer to perform its obligations
and covenants under the Loan Documents or to enjoin acts on things which may be unlawful or
in violation of the provisions of the Loan Documents.
(c) Rirrht to Cure at the Developer’s Expense. The City shall have the right to
cure any monetary default by the Developer under a loan other than the City Loan. The
Developer shall reimburse the City for any funds advanced by the City to cure a monetary
default by Developer upon demand therefor, together with interest thereon at the rate of interest
equal to the rate of interest on the Bank Loan from the date of expenditure until the date of
reimbursement.
Section 5.3 Remedies Cumulative .
No right, power, or remedy given to the City by the terms of this Agreement or the Loan
Documents is intended to be exclusive of any other right, power, or remedy; and each and every
1010\03\111527.2 17
such right, power, or remedy shall be cumulative and in addition to every other right, power, or
remedy given to the City by the terms of any such instrument, or by any statute or otherwise
against the Developer and any other person. Neither the failure nor any delay on the part of the
City to exercise any such rights and remedies shall operate as a waiver thereof, nor shall any
single or partial exercise by the City of any such right or remedy preclude any other or further
exercise of such right or remedy, or any other right or remedy.
Section 5.4 Waiver of Terms and Conditions.
The City’s Housing and Redevelopment Director may at his or her discretion waive in
writing any of the obligations of the Developer under this Agreement, without the Developer
completing an amendment to this Agreement. No waiver of any default or breach by Developer
hereunder shall be implied from any omission by the City to take action on account of such
default if such default persists or is repeated, and no express waiver shall affect any default other
than the default specified in the waiver, and such waiver shall be operative only for the time and
to the extent therein stated. Waivers of any covenant, term, or condition contained herein shall
not be construed as a waiver of any subsequent breach of the same covenant, term, or condition.
The consent or approval by the City to or of any act by the Developer requiring further consent
or approval shall not be deemed to waive or render unnecessary the consent or approval to or of
any subsequent similar act. The exercise of any right, power, or remedy shall in no event
constitute a cure or a waiver of any default under this Agreement or the Loan Documents, nor
shall it invalidate any act done pursuant to notice of default, or prejudice the City in the exercise
of any right, power, or remedy hereunder or under the Loan Documents, unless in the exercise of
any such right, power, or remedy all obligations of the Developer to City are paid and discharged
in full.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF DEVELOPER
Section 6.1 Renresentations and Warranties.
Developer hereby represents and warrants to the City as follows:
(a) Oreanization. Developer is duly organized, validly existing and in good
standing under the laws of the State of California and has the power and authority to own its
property and carry on its business as now being conducted.
(b) Authority of Developer. Developer has full power and authority to
execute and deliver this Agreement and to make and accept the borrowings contemplated
hereunder, to execute and deliver the City Loan Documents and all other documents or
instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement,
and to perform and observe the terms and provisions of all of the above.
(c) Authority of Persons Executing Documents. This Agreement and the
Loan Documents and all other documents or instruments executed and delivered, or to be
executed and delivered, pursuant to this Agreement have been executed and delivered by persons
1010\03\111527.2 18
who are duly authorized to execute and deliver the same for and on behalf of Developer, and all
actions required under Developer’s organizational documents and applicable governing law for
the authorization, execution, delivery and performance of this Agreement and the Loan
Documents and all other documents or instruments executed and delivered, or to be executed and
delivered, pursuant to this Agreement, have been duly taken.
(4 Valid Binding APreements. This Agreement and the Loan Documents and
all other documents or instruments which have been executed and delivered pursuant to or in
connection with this Agreement constitute or, if not yet executed or delivered, will when so
executed and delivered constitute, legal, valid and binding obligations of Developer enforceable
against it in accordance with their respective terms.
(4 No. Neither the execution nor delivery of
this Agreement and the Loan Documents or of any other documents or instruments executed and
delivered, or to be executed or delivered, pursuant to this Agreement, nor the performance of any
provision, condition, covenant or other term hereof or thereof, will conflict with or result in a
breach of any statute, rule or regulation, or any judgment, decree or order of any court, board,
commission or agency whatsoever binding on Developer, or any provision of the organizational
documents of Developer, or will conflict with or constitute a breach of or a default under any
agreement to which Developer is a party, or will result in the creation or imposition of any lien
upon any assets or property of Developer, other than liens established pursuant hereto.
(0 Pending ProceedmgS. Developer is not in default under any law or
regulation or under any order of any court, board, commission or agency whatsoever, and there
are no claims, actions, suits or proceedings pending or, to the knowledge of Developer,
threatened against or affecting Developer or the Development, at law or in equity, before or by
any court, board, commission or agency whatsoever which might, if determined adversely to
Developer, materially affect Developer’s ability to repay the City Loan or impair the security to
be given to the City pursuant hereto.
(8) Financial Statements. The financial statements of Developer and other
financial data and information furnished by Developer to the City fairly present the information
contained therein. As of the date of this Agreement, there has not been any adverse, material
change in the financial condition of Developer from that shown by such financial statements and
other data and information.
0 Sufficient Fti . Developer holds sufficient funds and/or binding
commitments for sufficient funds to complete the construction of Affordable Development in
accordance with the plans and specifications approved by the City.
ARTICLE 7. GENERAL PROVISIONS
Section 7.1 Relationship of Parties.
Nothing contained in this Agreement shall be interpreted or understood by any of the
Parties, or by any third persons, as creating the relationship of employer and employee, principal
1010\03\111527.2 19
and agent, limited or general partnership, or joint venture between the City and the Developer or
its agents, employees or contractors, and the Developer shall at all times be deemed an
independent contractor and shall be wholly responsible for the manner in which it or its agents,
or both, perform the services required of it by the terms of this Agreement. The Developer has
and retains the right to exercise full control of employment, direction, compensation, and
discharge of all persons assisting in the performance of services under the Agreement. In regards
to the construction of the Improvements and sale of the Units, the Developer shall be solely
responsible for all matters relating to payment of its employees, including compliance with
Social Security, withholding, and all other laws and regulations governing such matters, and
shall include requirements in each contract that contractors shall be solely responsible for similar
matters relating to their employees. The Developer shall be solely responsible for its own acts
and those of its agents and employees.
Section 7.2 No Claims.
Nothing contained in this Agreement shall create or justify any claim against the City by
any person that the Developer may have employed or with whom the Developer may have
contracted relative to the purchase of materials, supplies or equipment, or the fnrnishing or the
performance of any work or services with respect to the construction or sale of the Affordable
Units, and the Developer shall include similar requirements in any contracts entered into for the
construction or sale of the Affordable Units.
Section 7.3 Amendments.
No alteration or variation of the terms of this Agreement shall be valid unless made in
writing by the Parties.
Section 7.4 Indemnification.
Developer shall indemnify, defend, and hold harmless (without limit as to amount) City
and its elected officials, officers, employees and agents in their official capacity (hereinafter
collectively referred to as “Indemnitees”), and any of them, from and against all loss, all risk of
loss and all damage (including expense and attorneys fees) sustained or incurred because of or by
reason of any and all claims, demands, suits, actions, judgments and executions for damages of
any and every kind and by whomever and whenever made of obtained, allegedly caused by,
arising out of or relating in any manner to Developer’s actions or defaults pursuant to this
Agreement, or construction of the Development and sale of any Units, and shall protect and
defend Indemnitees, and any of them with respect thereto. The provisions of this Section 7.4
shall survive the expiration of the Term of the termination of this Agreement.
Section 7.5 Non-Liabilitv of Citv Officials Emnlovees and Agents.
No member, official, employee or agent of the City shall be personally liable to the
Developer in the event of any default or breach by the City or for any amount which may
become due to the Developer or its successor or on any obligation under the terms of this
Agreement.
1010\03\111527.2 20
Section 7.6 . . No Third Party Beneficrarres.
There shall be no third party beneficiaries to this Agreement.
Section 7.7 Discretion Retained Ry City.
The City’s execution of this Agreement in no way limits the discretion of the City in the
permit and approval process in connection with the Development.
Section 7.8 Notices. Demands and Cornmunicatio~.
Formal notices, demands, and communications between the Parties shall be sufficiently
given if and shall not be deemed given unless dispatched by registered or certified mail, postage
prepaid, return receipt requested, or delivered by express delivery service, return receipt
requested, or delivered personally, to the principal office of the Parties as follows:
City:
City of Carlsbad
Housing and Community Development Department
2965 Roosevelt Street, Suite B
Carlsbad, CA 92008-2389
Attention: Housing and Redevelopment Director
Developer:
Cherry Tree Walk, LLC
c/o The Olson Company
3010 Old Ranch Parkway, Suite 400
Seal Beach, CA 90740-2750
Attention: Mark Buckland
Such written notices, demands and communications may be sent in the same manner to
such other addresses as the affected Party may from time to time designate by mail as provided
in this Section 7.8. Receipt shall be deemed to have occurred on the date shown on a written
receipt as the date of delivery or refusal of delivery (or attempted delivery if undeliverable).
Section 7.9 Applicable Law.
This Agreement shall be governed by California law.
1010\03\111527.2 21
30
Section 7.10 Parties Bound: Covenants RunninE with the Land.
Except as otherwise limited herein, the provisions of this Agreement shall be binding
upon and inure to the benefit of the Parties and their heirs, executors, administrators, legal
representatives, successors, and assigns. This Agreement is intended to run with the land and
shall bind the Developer and its successors and assigns in the Land and the Development for the
entire Term, and the benefit hereof shall inure to the benefit of the City and its successors and
assigns.
Section 7.11 Attorneys’ Fees.
If any lawsuit is commenced to enforce any of the terms of this Agreement, the prevailing
Party will have the right to recover its reasonable attorneys’ fees and costs of suit from the other
party-
Section 7.12 Severability.
If any term of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the provisions shall continue in full force and effect
unless the rights and obligations of the Parties have been materially altered or abridged by such
invalidation, voiding or unenforceability.
Section 7.13 Force Male=.
In addition to specific provisions of this Agreement, performance by either Party shall not
be deemed to be in default where delays or defaults are due to war; insurrection; strikes; lock-
outs; riots; floods; earthquakes; fires; quarantine restrictions; freight embargoes; lack of
transportation; third party lawsuit; or court order; or any other similar causes beyond the control _
or without the fault of the Party claiming an extension of time to perform (but not including any
inability by Developer to secure financing). An extension of time for any such cause shall be for
the period of the enforced delay and shall commence to run from the time of the commencement
of the cause. If, however, notice by the party claiming such extension is sent to the other party
more than thirty (30) days after the commencement of the cause, the period shall commence to
run only thirty (30) days prior to the giving of such notice.
Section 7.14 Approvals.
Whenever this Agreement calls for City approval, consent, or waiver, the written
approval, consent, or waiver of the City’s Housing and Redevelopment Director shall constitute
the approval, consent, or waiver of the City, without further authorization required from the City
Council. The City hereby authorizes the City’s Housing and Redevelopment Director to deliver
such approvals or consents as are required by this Agreement, or to waive requirements under
this Agreement, on behalf of the City.
1010\03\111527.2 22
31
Section 7.15 Title of Parts and Sections.
Any titles of the sections or subsections of this Agreement are inserted for convenience of
reference only and shall be disregarded in interpreting any part of the Agreement’s provisions.
Section 7.16 Entire I Jnderstanding of the Parties.
This Agreement constitutes the entire understanding and agreement of the Parties with
respect to the Loan.
Section 7.17 Multiple Orkinals; Counterpart.
This Agreement may be executed in multiple originals, each of which is deemed to be an
original, and may be signed in counterparts.
Section 7.18 Time of the Essence.
Time is of the essence in this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first
above written.
Developer:
CHERRY TREE WALK, LLC,
a California limited liability company
By The Olson Company, a California corporation,
its Manager
By:
Its:
City:
City of Carlsbad, a municipal corporation
1010\03\111527.2 23
STATE OF CALJFORNIA )
1 ss
COUNTY OF 1
On 9 199-, before me, the undersigned, a Notary Public, personally appeared
, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument, and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or
the entity upon behalf of which the person(s) acted, executed the instrument.
.
WITNESS my hand and official seal.
STATE OF CALIFORNIA )
1 ss
COUNTY OF 1
On , 199-, before me, the undersigned, a Notary Public, personally appeared
, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument, and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or
the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
1010\03\111527.2 25
33
EXHIBIT A
LEGAL DESCRIPTION OF THE AFFORDABLE DEVELOPMENT PROPERTY
1010\03\111527.2
EXHIBIT B
FORM OF THE DEVELOPER NOTE
1010\03\111527.2
3s
PROMISSORY NOTE
$453,600 Carlsbad, California
,199-
FOR VALUE RECEIVED, the undersigned Cherry Tree Walk, LLC, a California limited
liability company (the “Developer”), hereby promises to pay to the order of the City of Carlsbad,
a municipal corporation (the “Holder”), a principal amount equal to Four Hundred Fifty-Three
Thousand Six Hundred Dollars ($453,600), or so much thereof as is advanced by the Holder to
the Developer pursuant to the Loan Agreement between the Developer and the Holder dated as
of , 1998 (the “Agreement”). All capitalized terms not otherwise defined
in this Note shall have the meanings set forth in the Agreement.
1. . m The indebtedness evidenced by this Note
shall not bear interest; provided, however, if a default occurs hereunder, the principal amount of
this Note shall bear interest commencing on the date of default at the default rate equal to the
lesser of ten percent (lo%), compounded annually, or the maximum amount permitted by law.
The Note shall be due and payable at the times and in the manner set forth in Section 2.8 of the
Agreement.
2. . No Afmlmptlon, Except as provided in Section 4.9 of the Agreement, this
Note shall not be assumable by the successors and assigns of Developer without the prior written
consent of the City.
3. TennsofPavment.
a. All payments due under this Note shall be paid in currency of the
United States of America, which at the time of payment is lawful for the payment of public and
private debts.
b. All payments on this Note shall be paid to Holder at the Housing
and Community Development Department, City of Carlsbad, 2965 Roosevelt Street, Suite B,
Carlsbad, CA 92008, Attn: Housing and Redevelopment Director, or to such other place as the
Holder of this Note may from time to time designate.
C. All payments on this Note shall be without expense to the Holder,
and the Developer agrees to pay all costs and expenses, including re-conveyance fees and
reasonable attorney’s fees of the Holder, incurred in connection with the payment of this Note
and the release of any security hereof.
4. Acc&xzitbn . Upon the occurrence of a Default (as defined in the Loan
Agreement), the City shall have the right to accelerate the debt evidenced by this Note and
1010\03\111655.2 1
34
declare all of the unpaid principal and interest, if any, immediately due and payable. Upon the
occurrence of a Default, the outstanding portion of the principal shall bear interest at the rate of
the lesser of ten percent (lo%), compounded annually, and the highest rate permitted by law.
Any failure by the City to pursue its legal and equitable remedies upon Default shall not
constitute a waiver of the City’s right to declare a Default and exercise all of its rights under this
Note, the Deed of Trust, and the Loan Agreement. Nor shall acceptance by the City of any
payment provided for herein constitute a waiver of the City’s right to require prompt payment of
any remaining payment owed.
5. No Offset. The Developer hereby waives any rights of offset it now has or
may hereafter have against the City, its successors and assigns, and agrees to make the payments
called for herein in accordance with the terms of this Note and the Loan Agreement.
6. t Waivmvs Fees . Borrower, for itself, its heirs, legal
representatives, successors and assigns, respectively, waives diligence, presentment, protest, and
demand, and notice of protest, dishonor and non-payment of this Note, and expressly waives any
rights to be released by reason of any extension of time or change in terms of payment, or
change, alteration-or release of any security given for the payments hereof, and expressly waives
the right to plead any and all statutes of limitations as a defense to any demand on this Note or
agreement to pay the same, and agrees to pay all costs of collection when incurred, including
reasonable attorneys’ fees. If an action is instituted on this Note, the undersigned promises to
pay, in addition to the costs and disbursements allowed by law, such sum as a court may adjudge
reasonable as attorneys’ fees in such action.
Secu&y. This Note is secured by a Deed of Trust and Security Agreement
(the “DevelopezDeed of Trust”), of even date herewith, wherein the Developer is the Trustor and
the Holder is the Beneficiary, constituting a second priority lien against the Affordable
Development.
. . 8. -Prom
a. All notices to the Holder or the Developer shall be given in the
manner and at the addresses set froth in the Agreement, or to such addresses as the Holder and
the Developer may hereinafter designate.
b. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change, modification or
discharge is sought.
C. This Note shall be governed by and construed in accordance with
the laws of the State of California.
d. The times for the performance of any obligations hereunder shall
be strictly construed, time being of the essence.
1010\03\111655.2 2
37
e. This document, together with the other Loan Documents, contains
the entire agreement between the parties as to the City Loan. It may not be modified except
upon written consent of the parties.
Developer:
Cherry Tree Walk, LLC, a California limited
liability company
By The Olson Company, a California corporation,
its Manager
1010\03\111655.2 3
38
EXHIBIT C
FORM OF THE DEVELOPER DEED OF TRUST
1010\03\111527.2
39
RECORDING REQUESTED BY
AND WHEN RECORDED MALL TO:
City of Carlsbad
City Clerk’s Office
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Attention: City Clerk
No fee for recording pursuant to
Government Code Section 27383
DEED OF TRUST AND SECURITY AGREEMENT
THIS DEED OF TRUST AND SECURITY AGREEMENT (“Deed of Trust”) is made as
ofthis day of ,199-, by and among Cherry Tree Walk, LLC, a California
limited liability company (“Trustor”),
(“Trustee”), and the City of Carlsbad, a municipa’l~orporation
(“Beneficiary”).
FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein
recited and the trust herein created, the receipt of which is hereby acknowledged, Trustor hereby
irrevocably grants, transfers, 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, Trustor’s fee interest in the property located in the City of Carlsbad, County
of San Diego, State of California, that is described in the attached Exhibit A, incorporated herein
by this reference (the “Property”).
TOGETHER WITH all interest’ estates or other claims, both in law and in equity which
Trustor now has or may hereafter acquire in the Property and the rents;
TOGETHER WITH all easements, rights-of-way and rights used in connection therewith
or as a means of access thereto, including (without limiting the generality of the foregoing) all
tenements, hereditaments and appurtenances thereof and thereto;
TOGETHER WITH any and all buildings and improvements of every kind and
description now or hereafter erected thereon, and all property of the Trustor now or hereafter
affixed to or placed upon the Property;
TOGETHER WITH all building materials and equipment now or hereafter delivered to
said property and intended to be installed therein;
TOGETHER WITH all right, title and interest of Trustor, now owned or hereafter
acquired, in and to any land lying within the right-of-way of any street, open or proposed,
1010u)3\111661.2 1
1 In
adjoining the Property, and any and all sidewalks, alleys and strips and areas of land adjacent to
or used in connection with the Property;
TOGETHER WITH all estate, interest, right, title, other claim or demand, of every
nature, in and to such property, including the Property, both in law and in equity, including, but
not limited to, all deposits made with or other security given by Trustor to utility companies, the
proceeds from any or all of such property, including the Property, claims or demands with
respect to the proceeds of insurance in effect with respect thereto, which Trustor now has or may
hereafter acquire, 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 such property, including
without limitation, any awards resulting from a change of grade of streets and awards for
severance damages to the extent Beneficiary has an interest in such awards for taking as
provided in Paragraph 4.1 herein; and
TOGETHER WITH all of Trustor’s interest in all articles of personal property or fixtures
now or hereafter attached to or used in and about the building or buildings now erected or
hereafter to be erected on the Property which are necessary to the complete and comfortable use
and occupancy of such building or buildings for the purposes for which they were or are to be
erected, including all other goods and chattels and personal property as are ever used or
furnished in operating a building, or the activities conducted therein, similar to the one herein
described and referred to, and all renewals or replacements thereof or articles in,substitution
therefor, whether or not the same are, or shall be attached to said building or buildings in any
manner.
TOGETHER WITH all of Trustor’s interest in all building materials, fixtures, equipment,
work in process and other personal property to be incorporated into the Property; all goods,
materials, supplies, fixtures, equipment, machinery, furniture and furnishings, signs and other
personal property now or hereafter appropriated for use on the Property, whether stored on the
Property or elsewhere, and used or to be used in connection with the Property; all rents, issues
and profits, and all inventory, accounts, accounts receivable, contract rights, general intangibles,
chattel paper, instruments, documents, notes drafts, letters of credit, insurance policies, insurance
and condemnation awards and proceeds, trade names, trademarks and service marks arising from
or related to the Property and any business conducted thereon by Trustor; all replacements,
additions, accessions and proceeds; and all books, records and files relating to any of the
foregoing.
All of the foregoing, together with the Property, is herein referred to as the “Security.”
To have and to hold the Security together with acquittances to the Trustee, its successors and
assigns forever.
FOR THE PURPOSE OF SECURING
(4 Payment of just indebtedness of Trustor to Beneficiary as set forth in the Note
(defined in Article 1 below) until paid or cancelled. Said principal and other payments shall be
due and payable as provided in the Note. Said Note and all its terms are incorporated herein by
1010w3\111661.2 2
reference, and this conveyance shall secure any and all extensions thereof, however evidenced;
and
(b) Payment of any sums advanced by Beneficiary to protect the Security pursuant to
the terms and provisions of this Deed of Trust following a breach of Trustor’s obligation to
advance said sums and the expiration of any applicable cure period, with interest thereon as
provided herein; and
(c) Performance of every obligation, covenant or agreement of Trustor contained
herein and in the Loan Documents (defined in Section 1.2 below).
AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR
COVENANTS AND AGREES:
ARTICLE 1
DEFINITIONS
In addition to the terms defined elsewhere in this Deed of Trust, the following terms shall
have the following meanings in this Deed of Trust:
Section 1.1 The term “Affordable Housing Agreement” means that certain Affordable
Housing Agreement Imposing Restrictions on Real Property between SAMBI Seaside Heights
and Beneficiary dated November 11,1996 and recorded as Document No. 1997-0045 12 in the
Official Records of San Diego County, as modified by the Estoppel Certificate and Amendment
to Affordable Housing Agreement between the City and The Olson Company dated December
30, 1997.
Section 1.2 The term “Loan Agreement” means that certain Loan Agreement between
Trustor and Beneficiary, dated , 1998 providing for the Beneficiary to loan to the
Trustor Four Hundred Fifty Three Thousand Six Hundred Dollars ($453,600) for the
construction of improvements on the Property.
Section 1.3 The term “Loan Documents” means this Deed of Trust, the Note, the Loan
Agreement, and the Affordable Housing Agreement and any other debt, loan or security
instruments between Trustor and the Beneficiary relating to the Property.
Section 1.4 The term “Note” means the promissory note in the principal amount of
Four Hundred Fifty Three Thousand Six Hundred Dollars ($453,600) of even date herewith
executed by the Trustor in favor of the Beneficiary, the payment of which is secured by this
Deed of Trust. (A copy of the Note is on file with the Beneficiary and terms and provisions of
the Note is incorporated herein by reference.)
Section 1.5 The term “Principal” means all amounts (including interest) required to be
paid under the Note.
1010\03\111661.2 3
ARTICLE 2
MAINTENANCE AND MODIFICATION OF THE PROPERTY
AND SECURITY
Section 2.1 Maintenance and Modification of the Property by Trustor.
The Trustor agrees that at all times prior to full payment of the sum owed under the Note,
the Trustor will, at the Trustor’s own expense, maintain, preserve and keep the Security or cause
the Security to be maintained and preserved in good condition. The Trustor will from time to
time make or cause to be made all repairs, replacements and renewals deemed proper and
necessary by it. The Beneficiary shall have no responsibility in any of these matters or for the
making of improvements or additions to the Security.
Trustor agrees to pay fully and discharge (or cause to be paid fully and discharged) all
claims for labor done and for material and services furnished in connection with the Security,
diligently to file or procure the filing of a valid notice of cessation upon the event of a cessation
of labor on the work or construction on the Security for a continuous period of thirty (30) days or
more, and to take all other reasonable steps to forestall the assertion of claims of lien against the
Security of any part thereof. Trustor irrevocably appoints, designates and authorizes Beneficiary
as its agent (said agency being coupled with an interest) with the authority, but without any
obligation, to file for record any notices of completion or cessation of labor or any other notice
that Beneficiary deems necessary or desirable to protect its interest in and to the Security or the
Loan Documents; provided, however, that Beneficiary shall exercise its rights as agent of Trustor
only in the event that Trustor shall fail to take, or shall fail to diligently continue to take, those
actions as hereinbefore provided.
Upon demand by Beneficiary, Trustor shall make or cause to be made such demands or
claims as Beneficiary shall specify upon laborers, materiahnen, subcontractors or other persons
who.have furnished or claim to have furnished labor, services or materials in connection with the
Security. Nothing herein contained shall require Trustor to pay any claims for labor, materials or
services which Trustor in good faith disputes and is diligently contesting provided that Trustor
shall, within thirty (30) days after the filing of any claim of lien, record in the Office of the
Recorder of San Diego County, a surety bond in an amount 1 and l/2 times the amount of such
claim item to protect against a claim of lien.
Section 2.2 Granting of Easements.
Trustor may not grant easements, licenses, rights-of-way or other rights or privileges in
the nature of easements with respect to any property or rights included in the Security except
those required or desirable for installation and maintenance of public utilities including, without
limitation, water, gas, electricity, sewer, telephone and telegraph, or those required by law. As to
these exceptions, Beneficiary will grant and/or direct the Trustee to grant such easements.
1010\03\111661.2 4
-
ARTICLE 3
TAXES AND INSURANCE; ADVANCES
Section 3.1 Taxes, Other Governmental Charges and Utility Charges.
Trustor shall pay, or cause to be paid, at least fifteen (15) days prior to the date of
delinquency, all taxes, assessments, charges and levies imposed by any public authority or utility
company which are or may become a lien affecting the Security or any part thereof; provided,
however, that Trustor shall not be required to pay and discharge any such tax, assessment, charge
or levy so long as (a) the legality thereof shall be promptly and actively contested in good faith
and by appropriate proceedings, and (b) Trustor maintains reserves adequate to pay any liabilities
contested pursuant to this Section 3.1. With respect to taxes, special assessments or other similar
governmental charges, Trustor shall pay such amount in full prior to the attachment of any lien
therefor on any part of the Security; provided, however, if such taxes, assessments or charges
may be paid in installments, Trustor may pay in such installments. Except as provided in clause
(b) of the first sentence of this paragraph, the provisions of this Section 3.1 shall not be construed
to require that Trustor maintain a reserve account, escrow account, impound account or other
similar account for the payment of future taxes, assessments, charges and levies.
In the event that Trustor shall fail to pay any of the foregoing items required by this
Section to be paid by Trustor, Beneficiary may (but shall be under no obligation to) pay the
same, after the Beneficiary has notified the Trustor of such failure to pay and the Trustor fails to
fully pay such items within seven (7) business days after receipt of such notice. Any amount so
advanced therefor by Beneficiary, together with interest thereon fkom the date of such advance at
the maximum rate permitted by law, shall become an additional obligation of Trustor to the
Beneficiary and shall be secured hereby, and Trustor agrees to pay all such amounts.
Section 3.2 Provisions Respecting Insurance.
Trustor agrees to provide insurance conforming in all respects to that required under the
Loan Documents during the course of construction and following completion, and at all times
until all amounts secured by this Deed of Trust have been paid and all other obligations secured
hereunder fulfilled, and this Deed of Trust reconveyed.
All such insurance policies and cover-ages shall be maintained at Trustor’s sole cost and
expense. Certificates of insurance for all of the above insurance policies, showing the same to be
in fill force and effect, shall be delivered to the Beneficiary upon demand therefor at any time
prior to the Beneficiary’s receipt of the entire Principal and all amounts secured by this Deed of
Trust.
1010W3\111661.2 5
Section 3.3 Advances.
In the event the Trustor shall fail to maintain the full insurance coverage required by this
Deed of Trust or shall fail to keep the Security in accordance with the Loan Documents, the
Beneficiary, after at least seven (7) days prior notice to Beneficiary, may (but shall be under no
obligation to) take out the required policies of insurance and pay the premiums on the same or
may make such repairs or replacements as are necessary and provide for payment thereof; and all
amounts so advanced therefor by the Beneficiary shall become an additional obligation of the
Trustor to the Beneficiary (together with interest as set forth below) and shall be secured hereby,
which amounts the Trustor agrees to pay on the demand of the Beneficiary, and if not so paid,
shall bear interest from the date of the advance at the lesser of ten percent (10%) per annum or
the maximum rate permitted by law.
ARTICLE 4
DAMAGE, DESTRUCTION OR CONDEMNATION
Section 4.1 Awards and Damages.
All judgments, awards of damages, settlements and compensation made in connection
with or in lieu of (1) taking of all or any part of or any interest in the Property by or under
assertion of the power of eminent domain, (2) any damage to or destruction of the Property or in
any part thereof by insured casualty, and (3) any other injury or damage to all or any part of the
Property (“Funds”) are hereby assigned to and shall be paid to the Beneficiary by a check made
payable to the Beneficiary. The Beneficiary is author&d and empowered (but not required) to
collect and receive any funds and is authorized to apply them in whole or in part upon any
indebtedness or obligation secured hereby, in such order and manner as the Beneficiary shall
determine at its sole option. The Beneficiary shall be entitled to settle and adjust all claims under
insurance policies provided under this Deed of Trust and may deduct and retain from the
proceeds of such insurance the amount of all expenses incurred by it in connection with any such
settlement or adjustment. All or any part of the amounts so collected and recovered by the
Beneficiary may be released to Trustor upon such conditions as the Beneficiary may impose for
its disposition. Application of all or any part of the Funds collected and received by the
Beneficiary or the release thereof shall not cure or waive any default under this Deed of Trust.
The rights of the Beneficiary under this Section 4.1 are subject to the rights of any senior
mortgage lender.
ARTICLE 5
AGREEMENTS AFFECTING THE PROPERTY; FURTHER
ASSURANCES; PAYMENT OF PRINCIPAL AND INTEREST
Section 5.1 Other Agreements Affecting Property.
The Trustor shall duly and punctually perform all terms, covenants, conditions and
agreements binding upon it under the Loan Documents and any other agreement of any nature
whatsoever now or hereafter involving or affecting the Security or any part thereof.
1010\03\111661.2 6
Section 5.2 Agreement to Pay Attorneys’ Fees and Expenses.
In the event of any Event of Default (as defined below) hereunder, and if the Beneficiary
should employ attorneys or incur other expenses for the collection of amounts due or the
enforcement of performance or observance of an obligation or agreement on the part of the
Trustor in this Deed of Trust, the Trustor agrees that it will, on demand therefor, pay to the
Beneficiary the reasonable fees of such attorneys and such other reasonable expenses so incurred
by the Beneficiary; and any such amounts paid by the Beneficiary shall be added to the
indebtedness secured by the lien of this Deed of Trust, and shall bear interest from the date such
expenses are incurred at the lesser of ten percent (10%) per annum or the maximum rate
permitted by law.
Section 5.3 Payment of the Principal.
The Trustor shall pay to the Beneficiary the Principal and any other payments as set forth
in the Note in the amounts and by the times set out therein.
Section 5.4 Personal Property.
To the maximum extent permitted by law, the personal property subject to this Deed of
Trust shall be deemed to be fixtures and part of the real property and this Deed of Trust shall
constitute a fixtures filing under the California Commercial Code. As to any personal property
not deemed or permitted to be fixtures, this Deed of Trust shall constitute a security agreement
under the California Commercial Code.
Section 5.5 Financing Statement.
The Trustor shall execute and deliver to the Beneficiary such financing statements
pursuant to the appropriate statutes, and any other documents or instruments as are required to
convey to the Beneficiary a valid perfected security interest in the Security. The Trustor agrees
to perform all acts which the Beneficiary may reasonably request so as to enable the Beneficiary
to maintain such valid perfected security interest in the Security in order to secure the payment of
the Note in accordance with their terms. The Beneficiary is authorized to file a copy of any such
financing statement in any jurisdiction(s) as it shall deem appropriate from time to time in order
to protect the security interest established pursuant to this instrument.
Section 5.6 Operation of the Security.
The Trustor shall operate the Security (and, in case of a transfer of a portion of the
Security subject to this Deed of Trust, the transferee shall operate such portion of the Security) in
full compliance with the Loan Documents.
Section 5.7 Inspection of the Security.
1010\03\111661.2 7
At any and all reasonable times upon seventy-two (72) hours’ notice, the Beneficiary and
its duly authorized agents, attorneys, experts, engineers, accountants and representatives, shall
have the right, without payment of charges or fees, to inspect the Security.
Section 5.8 Nondiscrimination.
The Trustor herein covenants by and for itself, its heirs, executors, administrators, and
assigns, and all persons claiming under or through them, that there shall be no discrimination
against or segregation of, any person or group of persons on account of race, color, creed,
religion, age, sex, sexual orientation, marital status, national origin or ancestry in the sale,
transfer, use, occupancy, tenure or enjoyment of the Security, nor shall the Trustor itself or any
person claiming under or through it establish or permit any such practice or practices of
discrimination or segregation with reference to the selection, location, number, use or occupancy
of transferees or vendees in the Security. The foregoing covenants shall run with the land.
ARTICLE 6
HAZARDOUS WASTE
Trustor shall keep and maintain the Property in compliance with, and shall not cause or
permit the Property to be in violation of any federal, state or local laws, ordinances or regulations
relating to industrial hygiene or to the environmental conditions on, under or about the Property
including, but not limited to, soil and ground water conditions. Trustor shall not use, generate,
manufacture, store or dispose of on, under, or about the Property or transport to or from the
Property any flammable explosives, radioactive materials, hazardous wastes, toxic substances or
related materials, including without limitation, any substances defined as or included in the
definition of “hazardous substances,” hazardous wastes, ” “hazardous materials,” or “toxic
substances” under any applicable federal or state laws or regulations (collectively referred to
hereinafter as “Hazardous Materials”) except such of the foregoing as may be customarily kept
and used in and about multifamily residential property.
Trustor shall immediately advise Beneficiary in writing if at any time it receives written
notice of(i) any and all enforcement, cleanup, removal or other governmental or regulatory
actions instituted, completed or threatened against Trustor or the Property pursuant to any
applicable federal, state or local laws, ordinances, or regulations relating to any Hazardous
Materials, (“Hazardous Materials Law”); (ii) all claims made or threatened by any third party
against Trustor or the Property relating to damage, contribution, cost recovery compensation,
loss or injury resulting from any Hazardous Materials (the matters set forth in clauses (i) and (ii)
above hereinafter referred to a “Hazardous Materials Claims”); and (iii) Trustor’s discovery of
any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to be classified as “border-zone property” under the
provision of California Health and Safety Code, Sections 25220 et seq. or any regulation adopted
in accordance therewith, or to be otherwise subject to any restrictions on the ownership,
occupancy, transferability or use of the Property under any Hazardous Materials Law.
Beneficiary shall have the right to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims and to
1010\03\111661.2 8
have its reasonable attorneys’ fees in connection therewith paid by Trustor. Trustor shall
indemnify and hold harmless Beneficiary and its councilmembers, supervisors, directors,
officers, employees, agents, successors and assigns from and against any loss, damage, cost,
expense or liability directly or indirectly arising out of or attributable to the use, generation,
storage, release, threatened release, discharge, disposal, or presence of Hazardous Materials on,
under, or about the Property including without limitation: (a) all foreseeable consequential
damages; (b) the costs of any required or necessary repair, cleanup or detoxification of the
Property and the preparation and implementation of any closure, remedial or other required plans; and (c) all reasonable costs and expenses incurred by Beneficiary in connection with
clauses (a) and (b), including but not limited to reasonable attorneys’ fees.
Without Beneficiary’s prior written consent, which shall not be unreasonably withheld,
Trustor shall not take any remedial action in response to the presence of any Hazardous
Materials on, under or about the Property, nor enter into any settlement agreement, consent
decree, or other compromise in respect to any Hazardous Material Claims, which remedial
action, settlement, consent decree or compromise might, in Beneficiary’s reasonable judgement,
impair the value of the Beneficiary’s security hereunder; provided, however, that Beneficiary’s
prior consent shall not be necessary in the event that the presence of Hazardous Materials on,
under, or about the Property either poses an immediate threat to the health, safety or welfare of
any individual or is of such a nature that an immediate remedial response is necessary and it is
not reasonably possible to obtain Beneficiary’s consent before taking such action, provided that
in such event Trustor shall notify Beneficiary as soon as practicable of any action so taken.
Beneficiary agrees not to withhold its consent, where such consent is required hereunder, if
either (i) a particular remedial action is ordered by a court of competent jurisdiction, (ii) Trustor
will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required
action; (iii) Trustor establishes to the reasonable satisfaction of Beneficiary that there is no
reasonable alternative to such remedial action which would result in less impairment of
Beneficiary’s security hereunder; or (iv) the action has been agreed to by Beneficiary.
The Trustor hereby acknowledges and agrees that (i) this Article is intended as the ,
Beneficiary’s written request for information (and the Trustor’s response) concerning the
environmental condition of the Property as required by California Code of Civil Procedure
Section 726.5, and (ii) each representation and warranty in this Deed of Trust or any of the other
Loan Documents (together with any indemnity applicable to a breach of any such representation
and warranty) with respect to the environmental condition of the property is intended by the
Beneficiary and the Trustor to be an “environmental provision” for purposes of California Code
of Civil Procedure Section 736.
In the event that any portion of the Property is determined to be “environmentally
impaired” (as that term is defined in California Code of Civil Procedure Section 726.5(e)(3)) or
to be an “affected parcel” (as that term is defined in California Code of Civil Procedure Section
726.5(e)(l)), then, without otherwise limiting or in any way affecting the Beneficiary’s or the
Trustee’s rights and remedies under this Deed of Trust, the Beneficiary may elect to exercise its
rights under California Code of Civil Procedure Section 726.5(a) to (1) waive its lien on such
environmentally impaired or affected portion of the Property and (2) exercise (a) the rights and
remedies of an unsecured creditor, including reduction of its claim against the Trustor to
1010\03\111661.2 9
judgment, and (b) any other rights and remedies permitted by law. For purposes of determining
the Beneficiary’s right to proceed as an unsecured creditor under California Code of Civil
Procedure Section 726.5(a), the Trustor shall be deemed to have willfully permitted or
acquiesced in a release or threatened release of hazardous materials, within the meaning of
California Code of Civil Procedure Section 726.5(d)(l), if the release or threatened release of
hazardous materials was knowingly or negligently caused or contributed to by any lessee,
occupant, or user of any portion of the Property and the Trustor knew or should have known of
the activity by such lessee, occupant, or user which caused or contributed to the release or
threatened release. All costs and expenses, including (but not limited to) attorneys’ fees, incurred
by the Beneficiary in connection with any action commenced under this paragraph, including any
action required by California Code of Civil Procedure Section 726.5(b) to determine the degree
to which the Property is environmentally impaired, plus interest thereon at the rate specified in
the Note until paid, shall be added to the indebtedness secured by this Deed of Trust and shall be
due and payable to the Beneficiary upon its demand made at any time following the conclusion
of such action.
ARTICLE 7
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default.
The following shall constitute Events of Default following the expiration of any
applicable notice and cure periods: (1) failure to make any payment to be paid by Trustor under
the Loan Documents; (2) failure to observe or perform any of Trustor’s other covenants,
agreements or obligations under the Loan Documents, including, without limitation, the
provisions concerning discrimination; or (3) failure to make any payment or perform any of
Trustor’s other covenants, agreements, or obligations under any other debt instruments or ! regulatory agreement secured by the Property, which default shall not be cured within the times
and in the manner provided therein.
Section 7.2 Acceleration of Maturity.
If an Event of Default shall have occurred and be continuing, then at the option of the
Beneficiary, the amount of any payment related to the Event of Default and the unpaid Principal
of the Note shall immediately become due and payable, upon written notice by the Beneficiary to
the Trustor (or automatically where so specified in the Loan Documents), and no omission on the
part of the Beneficiary to exercise such option when entitled to do so shall be construed as a
waiver of such right.
Section 7.3 The Beneficiary’s Right to Enter and Take Possession.
If an Event of Default shall have occurred and be continuing, the 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 the
Security and take possession thereof (or any part thereof) and of any of the Security, in its own
1010\03\111661.2 10 47
name or in the name of Trustee, and do any acts which it deems necessary or desirable to
preserve the value or marketability of the Property, or part thereof or interest therein, increase the
income therefrom or protect the security thereof. The entering upon and taking possession of the
Security shall not cure or waive any Event of Default or Notice of Default (as defined below)
hereunder or invalidate any act done in response to such Default or pursuant to such Notice of
Default and, notwithstanding the continuance in possession of the Security, Beneficiary shall be
entitled to exercise every right provided for in this Deed of Trust, or by law upon occurrence of
any Event of Default, including the right to exercise the power of sale;
(b) Commence an action to foreclose this Deed of Trust as a mortgage, appoint a
receiver, or specifically enforce any of the covenants hereof;
(c) 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 Security to be sold (“Notice of
Default and Election to Sell”), which notice Trustee or Beneficiary shall cause to be duly filed
for record in the Official Records of San Diego County; or
(d) Exercise all other rights and remedies provided herein, in the instruments by which
the Trustor acquires title to any Security, or in any other document or agreement now or
hereafter evidencing, creating or securing all or any portion of the obligations secured hereby, or
provided by law. ,
Section 7.4 Foreclosure By Power of Sale.
Should the Beneficiary elect to foreclose by exercise of the power of sale herein
contained, the Beneficiary shall give notice to the Trustee (the “Notice of Sale”) and shall deposit
with Trustee this Deed of Trust which is secured hereby (and the deposit of which shall be
deemed to constitute evidence that the unpaid principal amount of the Note is immediately due
and payable), and such receipts and evidence of any expenditures made that are additionally
secured hereby as Trustee may require.
(a) Upon receipt of such notice f?om the Beneficiary, Trustee shall cause to be
recorded, published and delivered to Trustor such Notice of Default and Election to Sell as 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
Election to Sell and after Notice of Sale having been given as required by law, sell the Security,
at the time and place of sale fixed by it in said Notice of Sale, whether as a whole or in separate
lots or parcels or items as Trustee shall deem expedient and in such order as it may determine
unless specified otherwise by the Trustor according to California Civil Code Section 2924g(b), at
public auction to the highest bidder, for cash in lawful money of the United States payable at the
time of sale. Trustee shall deliver to such purchaser or purchasers thereof its 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 or any matters of facts shall be conclusive proof of the
truthfulness 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.
1010w3\111661.2 11
50
(b) After deducting all reasonable costs, fees and expenses of Trustee, including costs of
evidence of title in connection with such sale, Trustee shall apply the proceeds of sale to
payment of: (i) the unpaid Principal amount of the Note; (ii) all other amounts owed to
Beneficiary under the Loan Documents; (iii) all other sums then secured hereby; and (iv) the
remainder, if any, to Trustor.
(c) Trustee may postpone sale of all or any portion of the Property by public
announcement at such time and place of sale, and from time to time thereafter, 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.
Section 7.5 Receiver.
If an Event of Default shall have occurred and be continuing, Beneficiary, as a matter of
right and without further notice to Trustor or anyone claiming under the Security, and without
regard to the then value of the Security or the interest of Trustor therein, shall have the right to
apply to any court having jurisdiction to appoint a receiver or receivers of the Security (or a part
thereof), and Trustor hereby irrevocably consents to such appointment and waives further notice
of any application therefor. Any such receiver or receivers shall have all the usual powers and
duties of 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 Security, unless such receivership is sooner terminated.
Section 7.6 Remedies Cumulative.
No right, power or remedy conferred upon or reserved to the Beneficiary by this Deed of
Trust is intended to be exclusive of any other right, power or remedy, but each and every such
right, power and remedy shall be cumulative and concurrent and shall be in addition to any other
right, power and remedy given hereunder or now or hereafter existing at law or in equity.
Section 7.7 No Waiver.
(a) No delay or omission of the Beneficiary to exercise any right, power or remedy
accruing upon any Event of Default shall exhaust or impair any such right, power or remedy, or
shall be construed to be a waiver of any such Event of Default or acquiescence therein; and every
right, power and remedy given by this Deed of Trust to the Beneficiary may be exercised from
time to time and as otten as may be deemed expeditious by the Beneficiary. No consent or
waiver, expressed or implied, by the Beneficiary to or any breach by the Trustor in the
performance of the obligations hereunder shall be deemed or construed to be a consent to or
waiver of obligations of the Trustor hereunder. Failure on the part of the Beneficiary to
complain of any act or failure to act or to declare an Event of Default, irrespective of how long
such failure continues, shall not constitute a waiver by the Beneficiary of its right hereunder or
impair any rights, power or remedies consequent on any Event of Default by the Trustor.
1010W3\111661.2 12
SI
(b) If the Beneficiary (i) grants forbearance or an extension of time for the payment of
any sums secured hereby, (ii) takes other or additional security or the payment of any sums
secured hereby, (iii) waives or does not exercise any right granted in the Loan Documents, (iv)
releases any part of the Security from the lien of this Deed of Trust, or otherwise changes any of
the terms, covenants, conditions or agreements in the Loan Documents, (v) consents to the
granting of any easement or other right affecting the Security, or (iv) makes or consents to any
agreement subordinating the lien hereof, any such act or omission shall not release, discharge,
modify, change or affect the original liability under this Deed of Trust, or any other obligation of
the Trustor or any subsequent purchaser of the Security or any part thereof, or any maker, co-
signer, endorser, surety or guarantor (unless expressly released); nor shall any such act or
omission preclude the Beneficiary from exercising any right, power or privilege herein granted
or intended to be granted in any Event of Default then made or of any subsequent Event of
Default, nor, except as otherwise expressly provided in an instrument or instruments executed by
the Beneficiary shall the lien of this Deed of Trust be altered thereby.
Section 7.8 Suits to Protect the Security.
The Beneficiary shall have power to (a) institute and maintain such suits and proceedings
as it may deem expedient to prevent any impairment of the Security and the rights of the
Beneficiary as may be unlawful or any violation of this Deed of Trust, (b) preserve or protect its
interest (as described in this Deed of Trust) in the Security, and (c) restrain the enforcement of or
compliance with any legislation or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid, if the enforcement for compliance with such enactment,
rule or order would impair the Security thereunder or be prejudicial to the interest of the
Beneficiary.
Section 7.9 Trustee May File Proofs of Claim.
In the case of any receivership, insolvency, bankruptcy, reorganization, arrangement,. ,. I_,
adjustment, composition or other proceedings affecting the Trustor, its creditors or its property,
the Beneficiary, to the extent permitted by law, shall be entitled to file such proofs of claim and
other documents as may be necessary or advisable in order to have the claims of the Beneficiary
allowed in such proceedings and for any additional amount which may become due and payable
by the Trustor hereunder after such date.
Section 7.10 waiver.
The Trustor waives presentment, demand for payment, notice of dishonor, notice of
protest and nonpayment, protest, notice of interest on interest and late charges, and diligence in
taking any action to collect any sums owing under the Note or in proceedings against the
Security, in connection with the delivery, acceptance, performance, default, endorsement or
guaranty of this Deed of Trust.
1010U3\1116S1.2 13
ARTICLE 8
MISCELLANEOUS
Section 8.1 Amendments.
This instrument cannot be waived, changed, discharged or terminated orally, but only by
an instrument in writing signed by Beneficiary and Trustor.
Section 8.2 Reconveyance by Trustee.
Upon written request of Beneficiary stating that all sums secured hereby have been paid
or forgiven, and upon surrender of this Deed of Trust to Trustee for cancellation and retention,
and upon payment by Trustor of Trustee’s reasonable fees, Trustee shall reconvey the Security to
Trustor, or to the person or persons legally entitled thereto.
Section 8.3 Notices.
If -at any .time. after the execution of this Deed of Trust it shall become necessary or
convenient for one of the parties hereto to serve any notice, demand or communication upon the
other party, such notice, demand or communication shall be in writing and shall be served
personally or by depositing the same in the registered United States mail, return receipt
requested, postage prepaid and (1) if intended for Beneficiary shall be addressed to:
City of Carlsbad
Housing and Community Development Department
2965 Roosevelt Street
Carlsbad, CA 92008-2389
Attn: Housing and Redevelopment Director
and (2) if intended for Trustor shall be addressed to:
Cherry Tree Walk, LLC
c/o The Olson Company
3010 Old Ranch Parkway, Suite 400
Seal Beach, CA 90740-2750
Attn: Mark Buckland
Any notice, demand or communication shall be deemed given, received, made or communicated
on the date personal delivery is effected or, if mailed in the manner herein specified, on the
delivery date or date delivery is refused by the addressee, as shown on the return receipt. Either
party may change its address at any time by giving written notice of such change to Beneficiary
or Trustor as the case may be, in the manner provided herein, at least ten (10) days prior to the
date such change is desired to be effective.
1010W3\111661.2 14
53
Section 8.4 Successors and Joint Trustors.
Where an obligation is created herein binding upon Trustor, the obligation shall also
apply to and bind any transferee or successors in interest. Where the terms of the Deed of Trust
have the effect of creating an obligation of the Trustor and a transferee, such obligation shall be
deemed to be a joint and several obligation of the Trustor and such transferee. Where Trustor is
more than one entity or person, all obligations of Trustor shall be deemed to be a joint and
several obligation of each and every entity and person comprising Trustor.
Section 8.5 Captions.
The captions or headings at the beginning of each Section hereof are for the convenience
of the parties and are not a part of this Deed of Trust.
Section 8.6 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 or invalid for any reason whatsoever by a court or
other body of competent jurisdiction, such illegality or invalidity 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 Security, the unsecured or
partially secured portion of the debt, and all payments made on the debt, whether voluntary or
under foreclosure or other enforcement action or procedure, shall be considered to have been
first paid or applied to the full payment of that portion of the debt which is not secured or
partially secured by the lien of this Deed of Trust.
Section 8.7 Governing Law.
This Deed of Trust shall be governed by and construed in accordance with the laws of the
State of California.
Section 8.8 Gender and Number.
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.
Section 8.9 Deed of Trust, Mortgage.
Any reference in this Deed of Trust to a mortgage shall also refer to a deed of trust and
any reference to a deed of trust shall also refer to a mortgage.
Section 8.10 Actions.
Trustor agrees to appear in and defend any action or proceeding purporting to affect the Security.
1010\03\111661.2 15
Section 8.11 Substitution of Trustee.
Beneficiary may from time to time substitute a successor or successors to any Trustee
named herein or acting hereunder to execute this Trust. Upon such appointment, and without
conveyance to the successor trustee, the latter shall be vested with all title, powers, and duties
conferred upon any Trustee herein named or acting hereunder. Each such appointment and
substitution shall be made by written instrument executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which, when duly recorded in the proper office of the
county or counties in which the Property is situated, shall be conclusive proof of proper
appointment of the successor trustee.
Section 8.12 Statute of Limitations.
The pleading of any statute of limitations as a defense to any and all obligations secured
by this Deed of Trust is hereby waived to the full extent permissible by law.
Section 8.13 Acceptance by Trustee.
Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is
made public record as provided by law. Except as otherwise provided by law the Trustee is not
obligated to notify any party hereto of pending sale under this Deed of Trust or of any action of
proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee.
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and
year first above written.
TRUSTOR:
Cherry Tree Walk, LLC, a California limited
liability company
By The Olson Company, a California corporation,
its Manager
By:
Its:
1010\03\111661.2 16
STATE OF CALIFORNIA )
1 ss
COUNTY OF 1
on , before me, , personally
appeared , personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the
within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or
the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
.
1010\03\111661.2 17
EXHIBIT A
(Legal Description)
The land is situated in the State of California, City of Carlsbad, County of San Diego, and
is described as follows:
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EXHIBIT D
FORM OF ELIGIBLE BUYER NOTE
1010\03\111527.2
NOTICE TO BORROWER:
THIS NOTE IS NOT ASSUMABLE
CHERRY TREE WALK
$
PROMISSORY*NOTE
Secured by Deed of Trust
Carlsbad, California
,199-
FOR VALUE RECEIVED, the undersigned
(the “Borrower”) promises to pay to the City of Carlsbad, a
municipal corporation (the “City”), or order, at the Housing and Redevelopment Department,
2965 Roosevelt Street, Suite B, Carlsbad, California 92008, or such other place as the City may
designate in writing, the principal sum of $ , plus Contingent Interest calculated
pursuant to Section 3 below.
1. Purpose of Loan. Borrower is purchasing the Residence located at
in the City of Carlsbad. This Note evidences a seller carryback loan made
by the Seller of the Residence (the “Seller”) to the Borrower, and assigned by the Seller to the
City (the “City/Seller Loan”). The City/Seller Loan is in the amount determined by the City to
be necessary for the Borrower to afford to purchase the Residence making a reasonable
downpayment and using conventional first mortgage financing for the balance of the purchase
price not financed by the City/Seller Loan. The Seller made the City/Seller Loan to the
Borrower and assigned the City/Seller Loan to the City in fulfillment of certain inclusionary
housing obligations pursuant to City Ordinance No. NS-232 and an Affordable Housing
Agreement between the Sambi Seaside Heights, L.L.C. (Seller’s predecessor in interest) and the
City dated November 11,1996, as amended.
2. Definitions. The terms set forth in this Section shall have the following
meanings in this Note.
a. “Appreciation Amount” shall mean the amount calculated by
subtracting the total original purchase price of the Residence paid by the Borrower, which was
Dollars ($ ), from one of the following amounts, as applicable: (i) in
the event of a sale of the Residence, the amount received by the Borrower as the sale price of the
Residence, as certified by the Borrower pursuant to Section 13 below; or (ii) in the event of a
prepayment of this Note, a Transfer other than sale of the Residence, or in the event of a default,
the Fair Market Value of the Residence; or (iii) in the event a creditor acquires title to the
Residence through a deed in lieu of foreclosure, a trustee’s deed upon sale, or otherwise, the
amount paid for the Residence at a creditor’s sale of the Residence.
1010\03\111697.2
b. “Contingent Interest” shall mean the percentage of the
Appreciation Amount set out in Section 4.
C. “Fair Market Value” shall be determined by a real estate appraisal
made by an independent residential appraiser designated by the City. If possible, the appraisal
shall be based upon the sales prices of comparable properties sold in the market area during the
preceding three-month period. The cost of the appraisal shall be paid by the Borrower. Nothing
in this subparagraph shall preclude the Borrower and the City from establishing the Fair Market
Value of the Residence by mutual agreement in lieu of an appraisal.
d. “First Mortgage” shall mean the promissory note and deed of trust
evidencing and securing the first mortgage loan for the Residence.
e. “Residence” shall mean the housing unit and land encumbered by
the deed of trust executed in connection with this Note.
f. “Transfer” shall mean any sale, assignment or transfer, voluntary
or involuntary, of any interest in the Residence, including, but not limited to, a fee simple
interest, a joint tenancy interest, tenancy in common interest, a life estate, a leasehold interest, or
an interest evidenced by a land contract by which possession of the Residence is transferred and
the Borrower retains title. Any Transfer without satisfaction of the provisions of this Note is
prohibited. A transfer: (i) to an existing spouse who is also an obligor under the Note; (ii) by a
Borrower to a spouse where the spouse becomes the co-owner of the Residence; (iii) between
spouses as part of a marriage dissolution proceeding; (iv) to an existing spouse or child of the
Borrower by devise or inheritance following the death of the Borrower; (v) by the Borrower into
an inter vivos trust in which the Borrower is the beneficiary; or (vi) by deed of trust or
imposition of a lien subordinate to the Deed of Trust, shall not be considered a Transfer for the
purposes of this Note; provided, however, that the Borrower shall continue to occupy the
Residence as his or her principal place of residence and the Borrower shall provide written notice
of such transfer to the City pursuant to Section 14 below.
3. Security. This Note is secured by a second deed of trust dated the same
date as this Note (the “Deed of Trust”).
4. Continpent Interest. The Borrower shall pay contingent interest equal to
percent ( %) of the Appreciation Amount (the “Contingent Interest”). No interest
other than Contingent Interest shall be due hereunder. The Contingent Interest shall be paid to
the City at the time set forth in Section 7(b) below, unless forgiven by the City pursuant to
Section 7(c) below. Borrower acknowledges that the Contingent Interest percentage amount is
equal to the City/Seller Loan principal amount as a percentage of the total purchase price of the
Home paid by the Borrower at the time of purchase, multiplied by seventy-five one hundredths
(.75). Borrower acknowledges that this calculation of the percentage of the Appreciation
Amount due to the City as Contingent Interest includes a twenty-five percent (25%) discount to
Borrower to account for any capital improvements Borrower may make to the Residence.
1010\03\111697.2
5. The Term of this Note shall mean the period commencing on the Term.
date of this Note and expiring on the date fifteen (15) years thereafter.
6. Owner-Occunancv Required: Representations Regarding Income.
a. The Borrower is required to occupy the Residence as his or her
principal place of residence, and failure by the Borrower to comply with this requirement shall
be a default under this Note. The Borrower shall be considered as occupying the Residence if
the Borrower is living in the Residence for at least ten (10) months out of each calendar year.
The Borrower shall provide an annual written certification to the City that the Borrower is
occupying the Residence as his or her principal place of residence. The Borrower shall not lease
the Home to another party. Any lease of the Residence shall be a default under this Note.
b. Borrower hereby certifies that all income information previously
submitted to the Seller and/or the City is true and correct. Misrepresentation by Borrower of
income information provided to the Seller and/or the City shall be a default under this Note.
7. Repayment,
a. Repayment of the principal amount of this Note shall be deferred
for the first five years from the date of this Note. At the end of five (5) years, the Borrower shall
begin making monthly repayments of principal in the amount of Dollars
($ ) based on a ten (10) year principal repayment schedule and due and payable on the
first day of each calendar month commencing ,200-.
b. The total amount of the principal and any Contingent Interest owed
under this Note shall immediately become due and payable (i) in the event of a default by the
Borrower under this Note, the Deed of Trust, or the First Mortgage, (ii) on the date Transfer is
made whether voluntarily, involuntarily, or by operation of law and whether by deed, contract of
sale, gift, devise, bequest or otherwise, (iii) in the event Borrower ceases to occupy the
Residence as his or her principal place of residence; or (iv) at the end of the Term of this Note as
described above in Section 5. Failure to declare such amounts due shall not constitute a waiver
on the part of the City to declare them due in the event of a subsequent Transfer.
C. In the event, upon expiration of the Term, (i) no Transfer has
occurred, (ii) Borrower has repaid all principal pursuant to subsection (a) above, (iii) Borrower
continues to owner-occupy the Residence, and (iv) Borrower is not in default hereunder or under
the Deed of Trust, the City shall forgive repayment of all Contingent Interest due hereunder.
8. Late Payment Fees. If any payment due hereunder is not paid within five
(5) days from the date such becomes due, Borrower shall pay a reasonable late or collection
charge equal to five percent (5%) of the amount so unpaid. The City and Borrower agree that the
actual damages and costs sustained by the City due to the failure to make timely payments would
be extremely difficult to measure and that the charges specified in this paragraph represent a
reasonable estimate by Borrower and the City of a fair average compensation for such damages
and costs. such charges shall be paid by Borrower without prejudice to the right of the City to
1010\03\111697.2 3
collect any other amounts provided to be paid under this Note or the Deed of Trust or, with
respect to late payments, to declare a default.
9. Prepayments. The Borrower may prepay all or part of the balance due
under this Note including principal and Contingent Interest. In the event the entire amount of
principal due under this Note is prepaid, all Contingent Interest, calculated as of the date of
prepayment, shall also be due at the time of prepayment.
10. No Assumption of Note. The Borrower acknowledges that this Note is
given in connection with the purchase of property (the “Residence”) as part of a program of the
Agency to assist in the purchase of homes by lower income persons. Consequently, this Note is
not assumable by transferees of the Residence, but is due in full upon Transfer.
11. Maintenance: Taxes: Insurance. Borrower shall maintain the Residence in
good repair and in a neat, clean and orderly condition. Borrower shall promptly pay all property
taxes due on the Residence prior to any delinquency and shall comply with the insurance
requirements set forth in the Deed of Trust.
12. Refinance of First Mortgarre Loan. The outstanding principal and interest
on this Note shall not be due upon prepayment and refinance of the First Mortgage, and the Deed
of Trust shall be subordinated to the refinanced loan, provided that (i) such refinancing is
approved by the City, (ii) the amount refinanced does not exceed the outstanding principal
balance of the First Mortgage at the time of refinance plus reasonable costs of refinance, and (iii)
the refinance does not result in higher monthly payments on the First Mortgage Loan than were
due prior to the refinance.
13. Certification of Purchase Price on Transfer. Upon any sale of the
Residence, the Borrower shall submit to the City at least fifteen (15) days prior to the close of
escrow, a copy of the sales contract and a written declaration, under penalty of perjury, from the
Borrower and the proposed purchaser in a form acceptable to the City stating the gross sales
price of the Residence. The certification shall also provide that the proposed purchaser or any
other party has not paid and will not pay to the Borrower, and the Borrower has not received and
will not receive from the proposed purchaser or any other party, money or other consideration,
including personal property, in addition to what is set forth in the sales contract.
14. Notice to Citv of Transfers. Borrower shall provide the City with written
notice of any sale, assignment or transfer, voluntary or involuntary, of any interest in the
Residence, including, but not limited to, encumbrance of the Residence with a junior deed of
trust or transfer of the Residence to a spouse or trust. Borrower shall provide this notice to the
City no later than fifteen (15) days before the sale, assignment, or transfer occurs, except where
the transfer is by devise or inheritance after death of the Borrower in which event notice shall be
provided within thirty (30) days of the date of transfer.
1010\03\111697.2
15. Default.
a. The Borrower shall be in default under this Note if he or she is in
default under the First Mortgage following the expiration of First Mortgage cure periods, or if,
after the notice and cure period provided by the City to the Borrower pursuant to the notice and
cure provisions of the Deed of Trust, the Borrower (i) fails to pay any money when due under
this Note; (ii) breaches any representation or covenant made in this Note in any material respect;
or (iii) breaches any provision of the Deed of Trust.
b. Upon the Borrower’s breach of any covenant or agreement of the
Borrower in this Note or the Deed of Trust, including, but not limited to, the covenants to pay,
when due, any sums secured by the Deed of Trust, the City, prior to acceleration, will send, in
the manner set forth in Section 19, notice to the Borrower specifying: (1) the breach; (2) if the
breach is curable, the action required to cure such breach; (3) a date, not less than thirty (30) days
from the date the notice is effective, by which such breach, if curable, is to be cured and (4) if the
breach is curable, that failure to cure such breach on or before the date specified in the notice
may result in acceleration of the sums secured by the Deed of Trust and foreclosure by the City.
The notice will also inform the Borrower of the Borrower’s right to reinstate after acceleration
and the right to bring a court action to assert the nonexistence of default or any other defense of
the Borrower to acceleration and sale.
16. Acceleration. Upon the occurrence of a default under this Note, the Deed
of Trust, or the First Mortgage, the City shall have the right to declare the full amount of the
principal along with any Contingent Interest under this Note immediately due and payable. Any
failure by the City to pursue its legal and equitable remedies upon default shall not constitute a
waiver of the City’s right to declare a default and exercise all of its rights under this Note and the
Deed of Trust. Nor shall acceptance by the City of any payment provided for herein constitute a
waiver of the City’s right to require prompt payment of any remaining principal and interest
owed.
17. No Offset. The Borrower hereby waives any rights of offset it now has or
may later have against the City, its successors and assigns, and agrees to make the payments
called for in this Note in accordance with the terms of this Note.
18. Waiver: Attorney Fees and Costs. The Borrower and any endorsers or
guarantors of this Note, for themselves, their heirs, legal representatives, successors and assigns,
respectively, severally waive diligence, presentment, protest, and demand, and notice of protest,
dishonor and non-payment of this Note, and expressly waive any rights to be released by reason
of any extension of time or change in terms of payment, or change, alteration or release of any
security given for the payments hereof, and expressly waive the right to plead any and all statutes
of limitations as a defense to any demand on this Note or agreement to pay the same, and jointly
and severally agree to pay all costs of collection when incurred, including reasonable attorney
fees. If an action is instituted on this Note, the Borrower promises to pay, in addition to the costs
and disbursements allowed by law, such sum as a court may adjudge reasonable as attorneys’
fees in such action.
1010\03\111697.2
19. No Waiver by the City. No waiver of any breach, default or failure of
condition under the terms of this Note shall be implied from any failure of the City to take action
with respect to such breach, default or failure or from any previous waiver of any similar or
unrelated breach, default or failure.
20. Notica. All notices required in this Note shall be sent by certified mail,
return receipt requested, or express delivery service with a delivery receipt, or personally
delivered with a delivery receipt obtained and shall be deemed to be effective as of the date
shown on the delivery receipt as the date of delivery, the date delivery was refused, or the date
the notice was returned as undeliverable as follows:
To the Borrower:
At the address of the Residence.
To the City:
City of Carlsbad
Housing and Redevelopment Department
2965 Roosevelt Street, Suite B
Carlsbad, CA 92008-2389
Attention: Housing and Redevelopment Director
The parties may subsequently change addresses by providing written notice of the change
in address to the other parties in accordance with this Section 20.
21. Joint and Several Obligations. This Note is the joint and several
obligation of all makers, sureties, guarantors and endorsers, and shall be binding upon them and
their successors and assigns.
22. Nonliability for Ne@zence. Loss. or Damage. Borrower acknowledges,
understands and agrees that the relationship between Borrower and the City is solely that of
borrower and lender, and that the City does not undertake or assume any responsibility for or
duty to Borrower to select, review, inspect, supervise, pass judgment on, or inform Borrower of
the quality, adequacy or suitability of the Residence or any other matter. The City owes no duty
of care to protect Borrower against negligent, faulty, inadequate or defective building or
construction or any condition of the Residence and Borrower agrees that neither Borrower, or
Borrower’s heirs, successors or assigns shall ever claim, have or assert any right or action against
the City for any loss, damage or other matter arising out of or resulting from any condition of the
Residence and will hold the City harmless from any liability, loss or damage for these things.
23. Indemnity. Borrower agrees to defend, indemnify, and hold the City
harmless from all losses, damages, liabilities, claims, actions, judgments, costs, and reasonable
attorneys fees that the City may incur as a direct or indirect consequence of:
1010\03\111697.2 6
--
a. the making of the loan to Borrower;
b. Borrower’s failure to perform any obligations as and when required
by the Note or the Deed of Trust; of
C. the failure at any time of any of Borrower’s representations to the
Seller or the City to be true and correct.
24. Controlling J,aw. This Note shall be construed in accordance with and be
governed by the laws of the State of California.
25. Assignment by City. The City may assign its right to receive the proceeds
under this Note to any person and upon notice to the Borrower by the City all payments shall be
made to the assignee.
26. Invalid Provisions. If any one or more of the provisions contained in this
Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such
provision or provisions shall be deemed severable Ii-om the remaining provisions contained in
this Note, and this Note shall be construed as if such invalid, illegal or unenforceable provision
had never been contained in this Note.
27. me Agreement. This Note (along with the Deed of Trust) sets forth the
entire understanding and agreement of the City and the Borrower and any amendment, alteration
or interpretation of this Note must be in writing signed by both the City and the Borrower.
BORROWER
(Print Name)
(Print Name)
1010\03\111697.2
PROMISSORY NOTE
CITY OF CARLSBAD
ADMINISTRATIVE COVER SHEET
(Remove Upon Completion)
BLANK LINES: CHECKLIST
Amount of City Loan, p. 1, upper left
Date of Document, p. 1, upper right
Borrower’s Name, p. 1, first paragraph
Amount of City Loan, p. 1, first paragraph
Street Address of Residence, p. 1, Section 1
Original Purchase Price of Residence, p. 1,
Section 2(a)
Contingent Interest Percent, p. 2, Section 4
Monthly Repayment Amount, p. 3, Section 7(a)
Date Monthly Repayment Commences, p. 3, Section 7(a)
Signatures, p. 8
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TABLE OF CONTENTS
EXHIBIT E
1010\03\111527.2
EXHIBIT F
Form of Borrower Disclosure Statement
1010\03\111527.2
Recording Requested and
When Recorded Mail To:
City of Carlsbad
Housing and Redevelopment Department
2965 Roosevelt Street, Suite B
Carlsbad, CA 92008-2839
Attn: Housing and Redevelopment Director
Tree W&
NOTE TO BORROWER:
THIS DEED OF TRUST CONTAINS
PROVISIONS PROHIBITING ASSUMPTIONS
THIS DEED OF TRUST AND SECURITY AGREEMENT (“Deed of Trust”) made as of
this day of ,19-, among
(“Borrower”) as trustor, and
(“Trustee”), and the City of Carlsbad, a
municipal corporation (the “City”), as beneficiary.
The Borrower, in consideration of the promises herein recited and the trust herein
created, irrevocably grants, transfers, conveys and assigns to the Trustee, in trust, with power of
sale, the property located in the City of Carlsbad, State of California, described in the attached
Exhibit “A” (the “Property”).
TOGETHER with all the improvements now or hereafter erected on the property, and all
easements, rights, appurtenances, and all fixtures now or hereafter attached to the property, all of
which, including replacements and additions thereto, shall be deemed to be and remain a part of
the property covered by this Deed of Trust; and
TOGETHER with all articles of personal property or fixtures now or hereafter attached to
or used in and about the building or buildings now erected or hereaRer to be erected on the
Property which are necessary to the complete and comfortable use and occupancy of such
building or buildings for the purposes for which they were or are to be erected, including all
other goods and chattels and personal property as are ever used or furnished in operating a
building, or the activities conducted therein, similar to the one herein described and referred to,
and all renewals or replacements thereof or articles in substitution therefore, whether or not the
same are, or shall be attached to said building or buildings in any manner; and all of the
foregoing, together with the Property, is herein referred to as the “Security”;
1010\03\111715.1 1
To have and to hold the Security together with acquittances to the Trustee, its successors
and assigns forever;
TO SECURE to the City the repayment of the sums evidenced by a promissory note
executed by the Borrower to the City dated ,192 in the amount of
Dollars ($ ) (the “Note”);
TO SECURE to the City the payment of all other sums, with interest thereon, advanced
in accordance herewith to protect the security of this Deed of Trust; and the performance of the
covenants and agreements of the Borrower herein contained; and
TO SECURE the performance of any obligations of Borrower in any other agreements
with respect to the financing of the Property or the Security the failure of which would adversely
affect Beneficiary, whether or not Beneficiary is a party to such agreements.
BORROWER AND CITY COVENANT AND AGREE AS FOLLOWS:
1. .Borrowe&&&. That the Borrower is lawfully seized of the estate hereby
conveyed and has the right to grant and convey the Security, that other than this Deed of Trust,
the Security is encumbered only by that deed of trust executed by the Borrower in connection
with a loan made to the Borrower by or its successors and assigns
(the “First Lender”), dated , 19, executed by the Borrower in favor of First
Lender, and recorded in the County of San Diego on ) 19, and assigned
Recorder’s Serial No. (the “First Lender Deed of Trust”), securing a promissory note
executed by the Borrower in favor of the First Lender (“First Lender Note”), to assist in the
purchase of the Property. The Borrower agrees to warrant and defend generally the title to the
Security against all claims and demands, subject to any declarations, easements or restrictions
listed in a schedule of exceptions to coverage in any title insurance policy insuring the City’s
interest in the Security. (As used in this Deed of Trust, the term “First Lender” shall include all
successors and assigns of the First Lender.)
2. w of Joan. The Borrower will promptly repay, when due, the principal
and interest required by the Note. The Note contains the following provisions concerning
repayment of the loan under certain conditions:
No Ass& of Note . The Borrower acknowledges that this Note is given in
connection with the purchase of property (the “Residence”) as part of a program of the Agency to
assist in the purchase of homes by lower income persons. Consequently, this Note is not
assumable by transferees of the Residence, but is due in ml1 upon Transfer.
3. First Lender Jm. The Borrower will observe and perform all of the covenants
and agreements of the First Lender Note, First Lender Deed of Trust, and related First Lender
loan documents.
4. . er-Occuo~ . The Borrower shall occupy the Property as his or
her principal place of residence. The Borrower shall be considered as occupying the Property if
1010\03\111715.1 2
70
the Borrower is living in the unit for at least ten (10) months out of each calendar year. The
Borrower shall provide an annual written certification to the City that the Borrower is occupying
the Property as his or her principal place of residence.
5. . - Charges. . The Borrower will pay all taxes, assessments and other charges,
fines and impositions attributable to the Security which may attain a priority over this Deed of
Trust, by the Borrower making any payment, when due, directly to the payee thereof. The
Borrower will promptly furnish to the City all notices of amounts due under this paragraph, and
in the event the Borrower makes payment directly, the Borrower will promptly discharge any
lien which has priority over this Deed of Trust; provided, that the Borrower will not be required
to discharge the lien of the First Lender Deed of Trust or any other lien described in this
paragraph so long as the Borrower will agree in writing to the payment of the obligation secured
by such lien in a manner acceptable to the City, or will, in good faith, contest such lien by, or
defend enforcement of such lien in, legal proceedings which operate to prevent the enforcement
of the lien or forfeiture of the Security or any part thereof.
6. m. The Borrower will keep the Security insured by a standard fire
and extended coverage insurance policy in at least an amount equal to the replacement cost of the
Security, but in no event less than the amount necessary to prevent the Borrower from becoming
a co-insurer under the terms of the policy.
The insurance carrier providing this insurance shall be licensed to do business in the State
of California and be chosen by the Borrower subject to approval by the City; provided, that such
approval will not be withheld if the insurer is also approved by the First Lender, the Federal
Home Loan Mortgage Corporation, Fannie Mae, Freddie Mat, the United States Department of
Housing and Urban Development, the United States Department of Veterans Affairs, or
successors thereto.
All insurance policies and renewals thereof will be in a form acceptable to the City and
will include a standard mortgagee clause with standard lender’s endorsement in favor of the
holder of the First Lender Note and the City as their interests may appear and in a form
acceptable to the City. The City shall have the right to hold, or cause its designated agent to
hold, the policies and renewals thereof, and the Borrower shall promptly furnish to the City, or
its designated agent, the original insurance policies or certificates of insurance, all renewal
notices and all receipts of paid premiums. In the event of loss, the Borrower will give prompt
notice to the insurance carrier and the City or its designated agent. The City, or its designated
agent, may make proof of loss if not made promptly by the Borrower. The City shall receive
thirty days advance notice of cancellation of any insurance policies required under this section.
Unless the City and the Borrower otherwise agree in writing, insurance proceeds, subject
to the rights of the First Lender, will be applied to restoration or repair of the Security damaged,
provided such restoration or repair is economically feasible and the Security of this Deed of
Trust is not thereby impaired. If such restoration or repair is not economically feasible or if the
security of this Deed of Trust would be impaired, the insurance proceeds will be used, subject to
the rights of the First Lender, to repay the Note and all sums secured by this Deed of Trust, with
the excess, if any, paid to the Borrower. If the Security is abandoned by the Borrower, or if the
1010w3\111715.1 3
II
Borrower fails to respond to the City, or its designated agent, within thirty (30) days from the
date notice is mailed by either of them to the Borrower that the insurance carrier offers to settle a
claim for insurance benefits, the City, or its designated agent, is authorized, subject to the rights
of the First Lender, to collect and apply the insurance proceeds at the City’s option either to
restoration or repair of the Security or to repay the Note and all sums secured by this Deed of
Trust.
If the Security is acquired by the City, all right, title and interest of the Borrower in and to
any insurance policy and in and to the proceeds thereof resulting from damage to the Security
prior to the sale or acquisition will pass to the City to the extent of the sums secured by this Deed
of Trust immediately prior to such sale or acquisition subject to the rights of the First Lender.
7. . Preservation andce of Sfmrity . The Borrower will keep the Security
in good repair and will not commit waste or permit impairment or deterioration of the Security.
8. - t . Protection. If the Borrower fails to perform the covenants
and agreements contained in this Deed of Trust, the First Lender Note, the First Lender Deed of
Trust, or if any action or proceeding is commenced which materially affects the City’s interest in
the Security, including, but not limited to, default under the First Lender Deed of Trust, the First
Lender Note or any other deed of trust encumbering the Property, eminent domain, insolvency,
code enforcement, or arrangements or proceedings involving a bankrupt or decedent, then the
City, at the City’s option, upon notice to the Borrower, may make such appearances, disburse
such sums and take such action as it determines necessary to protect the City’s interest, including
but not limited to, disbursement of reasonable attorney’s fees and entry upon the Security to
make repairs.
Any amounts disbursed by the City pursuant to this paragraph, with interest thereon, will
become an indebtedness of the Borrower secured by this Deed of Trust. Unless the Borrower
and City agree in writing to other terms of payment, such amount will be payable upon notice
from the City to the Borrower requesting payment thereof, and will bear interest from the date of
disbursement at the lesser of ten percent (10%) or the highest rate permissible under applicable
law. Nothing contained in this paragraph will require the City to incur any expense or take any
action hereunder.
9. w. The City may make or cause to be made reasonable entries upon and
inspections of the Security; provided that the City will give the Borrower reasonable notice of
inspection.
10. t . a Waiver . Any forbearance by the City in exercising
any right or remedy will not be a waiver of the exercise of any such right or remedy.- The
procurement of insurance or the payment of taxes or other liens or charges by the City will not be
a waiver of the City’s right to accelerate the maturity of the indebtedness secured by this Deed of
Trust.
1010\03\111715.1 4
11. es C:umulat~e. All remedies provided in this Deed of Trust are distinct
and cumulative to any other right or remedy under this Deed of Trust or any other document, or
afforded by law or equity, and may be exercised concurrently, independently or successively.
12. Rod. The covenants and agreements herein contained
shall bind, and the rights hereunder shall inure to, the respective successors and assigns of the
City and the Borrower subject to the provisions of this Deed of Trust.
13. . . Joint & Several I&&&y . All covenants and agreements of the Borrower shall
be joint and several.
14. Notice. Except for any notice required under applicable law to be given in
another manner, all notices required in this Deed of Trust shall be sent by certified mail, return
receipt requested or express delivery service with a delivery receipt, or personally delivered with
a delivery receipt obtained,-and shall be deemed to be effective as of the date shown on the
delivery receipt as the date of delivery, the date delivery was refused, or the date the notice was
returned as undeliverable as follows:
To the Owner:
At the address of the Residence.
To the City:
City of Carlsbad
Housing and Redevelopment Department
2965 Roosevelt Street, Suite B
Carlsbad, CA 92008-2389
Attn: Housing and Redevelopment Director
The parties may subsequently change addresses by providing written notice of the change
in address to the other parties in accordance with this section.
15. Contrw Law. This Deed of Trust shall be construed in accordance with and
be governed by the laws of the State of California.
16. w Provi~. If any one or more of the provisions contained in this Deed of
Trust or the Note shall for any reason be held to be invalid, illegal or unenforceable in any
respect, then such provision or provisions shall be deemed severable from the remaining
provisions, and this Deed of Trust and the Note shall be construed as if such invalid, illegal or
unenforceable provision had never been contained in this Deed of Trust or the Note.
17. m. The captions and headings in this Deed of Trust are for convenience
only and are not to be used to interpret or define the provisions hereof.
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18. . Default. . Upon the Borrower’s breach of any covenant or agreement of
the Borrower in this Deed of Trust, including, but not limited to, the covenants to pay, when due,
any sums secured by this Deed of Trust, the City, prior to acceleration, will send, in the manner
set forth in Section 14 of this Deed of Trust, notice to the Borrower specifying: (1) the breach,
(2) if the breach is curable, the action required to cure such breach; (3) a date, not less than thirty
(30) days from the date the notice is effective as set forth in Section 14 of this Deed of Trust, by
which such breach, if curable, is to be cured; and (4) if the breach is curable, that failure to cure
such breach on or before the date specified in the notice may result in acceleration of the sums
secured by this Deed of Trust and sale of the Security. Notice shall be effective as of the date
shown on the delivery receipt as the date of delivery, the date delivery was refused or the date
the notice was returned as undeliverable. The notice will also inform the Borrower of the
Borrower’s right to reinstate after acceleration and the right to bring a court action to assert the
nonexistence of default or any other defence of the Borrower to acceleration and sale. If the
breach is not curable or is not cured on or before the date specified in the notice, the City, at the
City’s option, may: (a) declare all of the sums secured by this Deed of Trust to be immediately
due and payable without further demand and may invoke the power of sale and any other
remedies permitted by California law; (b) 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 the Security and take possession thereof (or any part thereof)
and of any of the Security, in its own name or in the name of the Trustee, and do any acts which
it deems necessary or desirable to preserve the value or marketability of the Security, or part
thereof or interest therein, increase the income therefrom or protect the security thereof. The
entering upon and taking possession of the Security shall not cure or waive any breach hereunder
or invalidate any act done in response to such breach and, notwithstanding the continuance in
possession of the Security, the City shall be entitled to exercise every right provided for in this
Deed of Trust, or by law upon occurrence of any uncured breach, including the right to exercise
the power of sale; (c) commence an action to foreclose this Deed of Trust as a mortgage, appoint
a receiver, or specifically enforce any of the covenants hereof; (d) deliver to the Trustee a written
declaration of default and demand for sale, pursuant to the provisions for notice of sale found at.,
California Civil Code Sections 2924, et seq., as amended from time to time; or (e) exercise all
other rights and remedies provided herein, in the instruments by which the Borrower acquires
title to any Security, or in any other document or agreement now or hereafter evidencing,
creating or securing all or any portion of the obligations secured hereby, or provided by law.
The City shall be entitled to collect all reasonable costs and expenses incurred in pursuing
the remedies provided in this paragraph, including, but not limited to, reasonable attorney’s fees.
19. Accebtia . Upon the occurrence of a default under the Note, this Deed of
Trust, the First Lender Note, or the First Lender Deed of Trust, the City shall have the right to
declare the till amount of the principal along with any interest under the Note immediately due
and payable. Any failure by the City to pursue its legal and equitable remedies upon default
shall not constitute a waiver of the City’s right to declare a default and exercise all of its rights
under the Note and this Deed of Trust. Nor shall acceptance by the City of any payment
provided for in the Note constitute a waiver of the City’s right to require prompt payment of any
remaining principal and interest owed.
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20. t - . wersR&rttom . Notwithstanding the City’s acceleration of the
sums secured by this Deed of Trust, the Borrower will have the right to have any proceedings
begun by the City to enforce this Deed of Trust discontinued at any time prior to five (5) days
before sale of the Security pursuant to the power of sale contained in this Deed of Trust or at any
time prior to entry of a judgment enforcing this Deed of Trust if: (a) the Borrower pays City all
sums, if any, which would be then due under this Deed of Trust and no acceleration under the
Note has occurred; (b) the Borrower cures all breaches of any other covenants or agreements of
the Borrower contained in this Deed of Trust; (c) the Borrower pays all reasonable expenses
incurred by City and the Trustee in enforcing the covenants and agreements of the Borrower
contained in this Deed of Trust, and in enforcing the City’s and the Trustee’s remedies, including,
but not limited to, reasonable attorney’s fees; and (d) the Borrower takes such action as City may
reasonably require to assure that the lien of this Deed of Trust, City’s interest in the Security and
the Borrower’s obligation to pay the sums secured by this Deed of Trust shall continue
unimpaired. Upon such payment and cure by the Borrower, this Deed of Trust and the
obligations secured hereby will remain in full force and effect as if no acceleration had occurred.
21. v. Upon payment or forgiveness of all sums secured by this Deed of
Trust, the City will request the Trustee to reconvey the Security and will surrender this Deed of
Trust and the Note to the Trustee. The Trustee will reconvey the Security without warranty and
without charge to the person or persons legally entitled thereto. Such person or persons will pay
all costs of recordation, if any.
22. &bstitute Trustee . The City, at the Cityk option, may from time to time remove
the Trustee and appoint a successor trustee to any trustee appointed hereunder. The successor
trustee will succeed to all the title, power and duties conferred upon the Trustee herein and by
applicable law.
23. . . . Subor- . Notwithstanding any other provision hereof,
the provisions of this Deed of Trust shall be subordinate to the lien of the First Lender Deed of
Trust and shall not impair the rights of the First Lender, or the First Lender’s successor or assign,
to exercise its remedies under the First Lender Deed of Trust in the event of default under the
First Lender Deed of Trust by the Borrower. Such remedies under the First Lender Deed of
Trust include the right of foreclosure or acceptance of a deed or assignment in lieu of
foreclosure. After such foreclosure or acceptance of a deed or assignment in lieu of foreclosure,
this Deed of Trust shall be forever terminated and shall have no further effect as to the Property
or any transferee thereafter; provided, however, if the holder of such First Lender Deed of Trust
acquired title to the Property pursuant to a deed or assignment in lieu of foreclosure, this Deed of
Trust shall automatically terminate upon such acquisition of title, provided that (i) the City has
been given written notice of default under such First Lender Deed of Trust and (ii) the City shall
not have cured or commenced to cure the default within such 30&y period and given its firm
commitment to complete the cure in the form and substance acceptable to the First Lender.
Borrower agrees to record any necessary documents to effect such termination, if applicable.
24. t mey s Fees . If any action or proceeding is brought to enforce this Deed of Trust
or any provision of this Deed of Trust or the Note, the prevailing party shall be entitled to its
attorney’s fees and the cost of such action or proceeding.
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IN WITNESS WHEREOF, the Borrower has executed this Deed Of Trust as of the date
first written above.
Borrower
(Print Name)
Borrower
(Print Name)
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EXHIBIT A
Property Description
9
STATE OF CATJFORNIA )
1 COUNTY OF SAN DIEGO “)
on , 199-, before me,, personally appeared , personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or
the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
STATE OF CALJF0FWl.A )
1 COUNTY OF SAN DIEGO “)
on ,199, before me,, personally appeared
2 personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or
the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
101oio3\111715.1 10 18
DEED OF TRUST AND SECURITY AGREEMENT
CITY OF CARLSBAD
ADMINISTRATIVE CHECKLIST
(Remove Upon Completion)
Date of Document, p. 1, first paragraph
Borrower’s Name, p. 1, first paragraph
Trustee’s Name, p. 1, first paragraph
Date and Amount of Promissory Note, p. 2, second full paragraph
First Lender’s Name, p. 2, Section 1
Date of First Lender’s Deed of Trust, p. 2, Section 1
Recording Information for First Lender’s Deed of Trust, p. 2, Section 1
Signatures, p. 9
Include Exhibit A, Property Description
Notary
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EXHIBIT G
Development Budget
(Showing sources and uses of funds)
.
1010\03\111527.2
BORROWER DISCLOSURE STATEMENT
FIRST-TIME HOMEBUYER CHERRY TREE WALK HOMEBUYER ASSISTANCE PROGRAM
The City of Carlsbad (the IlCity"), through its Inclusionary ng Ordinance, has required the developer of Cherry Tree Walk $11 the homes in the development to qualified households : terms that make the home affordable to you and the other lomebuyers. The City has also provided financial assistance le developer to assist in making the Cherry Tree Walk homes :dable. Your new home is affordable to you because the City :he developer are providing you with second mortgage Icing through the Cherry Tree Walk Homebuyer Assistance :am (the "Program") so that you will be able to buy your The City offers the Program in order to enable low income ?holds to own their own homes in Carlsbad.
As a condition of the financing, the City will require you -gn a Promissory Note and a Deed of Trust. The Deed of Trust
be recorded aaainst your property.
This Disclosure Statement explains the major provisions of Jromissory Note and the Deed of Trust to help you understand : requirements. You should, of course, read all of the City documents yourself and become completely familiar with 1
PRIMARY RESIDENCE AND LEASING YOUR HOME
Under the terms of the Promissory Note and Deed of Trust, louse you buy with the assistance of the City loan must be main place of residence. This means you must live in the : no less than 10 months out of each calendar year. Each you must certify in writing to the City that you are living )ur home as your main nlace of residence. In addition, vou )t lease your home. Ire considered to be immediately due and
Ii you fail to follow these provisions, in default, and the City may declare its payable.
TOTICES TO CITY
Numerical examples are included in this Disclosure Statement to help
3tter understand the concepts, terms, and provisions of your City loan.
3 be aware that these are simply to show how things work and that they ,t intended to represent your specific situation. If you follow along 1 calculator, you may not get exactly the same answers. Any differences robably due to how your calculator "rounds-off" numbers.
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1. Notice of Intent to Sell, Assiqn or Transfer. If you e to sell, assign or transfer your home or any partial est in your home, or if you record a mortgage or deed of against your home, you must let the City know in writing at fifteen (15) days prior to the sale, assignment, transfer, e recording of a mortgage.
2. Notice and Certification of Purchase Price. If you go 11 your home, at least fifteen (15) days before the sale s (close of escrow), you must give the City a copy of the contract and a written statement that declares, under ty of perjury, the gross sales price of the home. The en statement must be signed by both you (as seller) and the sed buyer. The written statement must also certify that the sed buyer, or any other party, has not paid and will not pay u money or any other consideration that is not set out in ales contract for the home. The statement must also certify you (as the seller) have not received and will not receive the proposed buyer, or anybody else, money or other deration that is not included in the sales contract.
3. Delivery of Required Notices. Any notice you must de to the City under the terms of the City loan documents be sent by certified mail, return receipt requested, or ss delivery service with a delivery receipt, or personally -ered with a delivery receipt obtained.
NTEREST ON THE CITY LOAN: "CONTINGENT INTEREST"
The City loan charges "contingent interest". The contingent -est represents the benefit you received from the City loan, lay generally be described as the percentage of the sales that the City loaned to you, with an adjustment or discount ed. The contingent interest on your loan is due immediately
0 You default under the City loan or the First Mortgage, or
l You sell or transfer title to your home, or 0 The end of the term of your loan is-reached, with exceptions (see section E. below)
The contingent interest on your City loan has three (3) : :
(1) Appreciation Amount;
(2) Contingent interest percentage; and
(3) Automatic 25% discount to account for any improvements you may make to the house.
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r- ? An example is used to show each of the three (3) parts and !ach would be calculated.
La 1 Your loan from the City is $18,200. The original sales price you paid for your home was $140,000. When you sell, the sales price is $173,600.
(1) Appreciation Amount. The appreciation amount is rally the difference between the original sales price you for the home and the price at which you sell it. For )le:
Price of House When You Sell:
Minus
$173,600
Price of House When You Bought: - $140,000
Appreciation Amount: $ 33,600
appreciation amount is calculated differently under certain lmstances. If you (a) prepay your City loan, or (b) transfer home by means other than selling it, or (c) are in default : the terms of the City loan, the appreciation amount will be red by using the Fair Market Value of the home (instead of Irice of house when you sell, as above). Fair Market Value le value of the home as determined by an independent iiser chosen by the City. If such an appraisal is necessary, :ost of the appraisal would be paid by you. If a creditor : title to your home, the appreciation amount will be figured :ing the amount paid for the home at the creditor's sale.
(2) Continqent Interest Percentage. The contingent :est percentage is the percentage of the sales price that the loaned to you. This percentage is figured by dividing the it of the City loan by the purchase price you paid for the Continuing with the example:
City Loan Amount: $ 18,200
Divided By
Price of House When You Bought: + $140,000
Contingent Interest Percentage 13%
(3) Automatic Discount For Possible Capital )vements. During the time that you live in your home, you lake improvements to it that will increase its value. For lie, you may put in a new central heating system or update Jathroom. To recognize the possibility that you have :ted in improvements which have contributed to an increase in : beyond the increase due to a rise in the general real :e market, the contingent interest on the City loan provides 1 25% discount. This discount is given automatically, even JU have not made any improvements. Continuing with the
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le, the discount for capital improvements reduces the ngent interest owed the City as follows:
Appreciation Amount: $ 33,600
Multiplied By
Contingent Interest
Multiplied By
Automatic Discount
Total Dollar Amount
Contingent Interest
The automatic capital
Percentage X .13
4,368
. x . 25
of Discount $ 1,092
$ 4,368
1,092
You Owe City $ 3,276
improvement discount shall be lated by the City as set out in the Promissory Note under .on 4. "Continqent Interest". The result is the same as with :alculation above. A mathematical step has been eliminated.
Appreciation Amount: $ 33,600
Multiplied By
Contingent Interest Percentage X
$ -
13
4,368
Automatic Discount Applied X .75
Contingent Interest You Owe City $ 3,276
PAYING BACK YOUR CITY LOAN
1. Making Required Payments of Principal After 5 Years
Your loan from the City is a "deferred" loan. This means you do not have to make payments on your loan until five (5) : have passed from the date of the Promissory Note. If you
or transfer your home within the first five years, though, ntire loan is due and payable.
At the beginning of the sixth (6th) year of your loan, you
have to start repaying it. You must make monthly payments Tincipal only. Principal is the amount loaned to you that is zd on the first page of your City loan Promissory Note. If, rer, at any time you sell, assign or transfer the home or if )reak the terms of the loan documents, both the principal and ngent interest owed on the loan will be immediately due and >le. The refinancing of your first mortgage loan does not Jer immediate payment of principal and contingent interest if
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-efinancing meets the terms of Promissory Note (as described ction F. below).
The required payments of principal are due on the first day tch calendar month and will be made in equal amounts so that City loan is paid off at the end of ten (10) years after nts begin. Example 2 below shows how this would work.
.e 2 You receive a City loan of $18,200. You sign and date the Promissory Note on May 31, 1998. You have lived in your home for 5 full years from the date of the Promissory Note. You start making payments of principal based on a payment schedule which would result in full repayment of principal in 10 years from the
time you started making payments (15 years from the date of the Promissory Note).
Date of Promissory Note: May 31, 1998
Payments of Principal to Begin: June 1, 2003 (5 years from date of Promissory Note)
Monthly Payments ($18,200 + 120 months): $151.66
Repayment of Principal Must Be Completed: June 1, 2013
If any required payment is not made within five (5) days the due date, then you will be charged a late fee of five nt (5%) of the amount of the late payment. If you fail to a required payment, the City may declare a default and the -e unpaid amount of principal and contingent interest would te immediately.
2. When You Sell Your Home
When you sell, transfer, or assign your home or any interest the principal and contingent interest owing is immediately ;hd payable. The only times when this is not the case is a transfer is to an existing husband or wife who signed the ssory Note, to a husband or wife who then becomes a co-owner le home, to a husband or wife as part of a marriage or a xe, or to an inter vivos trust in which you are the iiciary.
Example 3 shows the repayment process for the City loan when louse is sold.
:e 3 You have lived in your home for 8 full years and now must sell it because you received a promotion to a job in another state. You bought your home for $140,000. The City provided you with a loan of $18,200 to help you buy your house. You have been making the required payments of principal as required by your City loan. The sales price of your home is 173,600.
(a) Amount of Principal Left to Pay Upon Sale. Since you have been making the required payments of principal on the City
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loan for 3 years, you now owe less than tne $18,200 that is listed on your City Promissory Note. Your payments have equalled $151.66
per month. The total amount of principal you have paid is
$5,459.76:
Principal Payments Per Month
Principal Payments Per Year (X 12 months)
Principal Payments for 3 Years (X 3 years)
$ 151.66
1,819.92
5,459.76
Original Principal Amount of City Loan
Minus
$18,200.00
Total Amount of Principal Paid 5,459.76
Total Amount of Principal Owed City Upon Sale $12,740.24
lb) Amount of Contingent Interest Owed. To figure out the amount of contingent interest you owe the City, we need to
calculate the appreciation amount and the contingent interest
percentage, and then apply the automatic discount.
Calculatinu the Awreciation Amount
Sales Price of Your Home:
Price You Originally Paid:
Appreciation Amount
$173,600.00
$140,000.00
$ 33,600.OO
Calculating the Contincrent Interest Percentage
Your City Loan + Price You Originally Paid:
Contingent Interest Percentage
$18,200 + $140,000 = .13
= 13%
Calculatinq Contingent Interest Owed (With Discount Applied)
Appreciation Amount: $ 33,600.OO
Multiplied By X .13
Contingent Interest Percentage $ 4,368.OO
Multiplied By
Automatic Discount X .75
Contingent Interest Owed City $ 3,276.OO
Total You Owe City Upon Sale of the Home
Principal Owed: $ 12,740.24
Contingent Interest: $ 3.276.00
Total Owed $ 16,016.24
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POTENTIAL FORGIVENESS OF CONTINGENT INTEREST
Under the terms of the Promissory Note, the contingent -est on your loan is due at the end of the 15-year loan term. -er, you will not have to pay the contingent interest at the If the loan term if you meet u of the following conditions:
(1) You live in your home and there has been no sale or transfer during the entire 15 year term, and
(2) You have repaid all of the principal you owe the City,
and
(3) You are not in default under the City loan.
REFINANCING FIRST MORTGAGE LOAN
The Promissory Note allows you to refinance your first [age loan without triggering repayment of your City loan if iollowing conditions are met. The refinancing must be ved by the City. The amount received from the refinancing )e no more than the remaining principal amount of your first [age plus reasonable closing costs of the refinancing. The lance cannot result in higher monthly payments on the first rage loan than were due before the refinancing. If these .tions are not met, principal and contingent interest on your loan must be paid to the City when you refinance.
DEFAULT PROVISIONS
When you accept City loan assistance, you agree to meet all le conditions of all of the City loan documents. If you tte any provisions of the documents, you are considered to be !fault under your City loan. Also, if you default under the : mortgage loan, you would also be considered to be in lit under the City loan. If you do not correct the ttion, the City could require you to immediately repay the :ipal and contingent interest owing on the City loan. The
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could also go to court and get a court order to enforce the -sions of the City loan documents, which may result in a :losure on your home.
* * * * * * * * * * * * * *
Please sign the enclosed copy of this Borrower Disclosure :ment in the space provided below and return it to the City , Carlsbad, California.
I have read and understand the above Borrower Disclosure ?ment.
Signature of Borrower Dated:
Print Name of Borrower
Signature of Borrower Dated:
Print Name of Borrower
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