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HomeMy WebLinkAboutCarlsbad Family Housing Partnership; 1999-01-08; (2). 4 AFFORDABLE HOUSING LOAN AGREEMENT (FINANCING AGREEMENT) THIS AFFORDABLE HOUSING LOAN AGREEMENT ("Agreement") is entered into as of January 8, 1999, among CARLSBAD FAMILY HOUSING PARTNERSHIP, a California limited partnership ("Borrower"), the CITY OF CARLSBAD, a municipal corporation ("City"). ARTICLE 1 Realtals 1.1 The Property. Continental Ranch Inc. ("Master DBveloper") owns that certain real property in the City of Carlsbad, County of San Diego, which is depicted as a portion of Village B on Exhibit A ("Land"). Village B is part of Master Developer's master-planned community known as "Rancho Carrillo", being one of the villages encompassed within Carlsbad Tract 97-02 ("CT 97-02"), as reflected on the approved tentative map therefor, "Tentative Map 13582". The Land does not now exist as one or more legally conveyable parcels, and will not be legally conveyable until recordation of the New Map (defined below). 1.2 Development Plan. The Land, as well as other real property owned by Master Developer adjacent thereto, has been and will be subjected to and developed in accordance with City zoning and use regulations designed to produce a planned community for the entire project known as "Rancho Carrillo". 1.3 Borrower Intends To Build Affordable Multi-Family Housing. The following additional agreements are being entered into: (a) Purchase Aqreement and Escrow hstructions. A Purchase Agreement and Escrow Instructions between Master Developer and Borrower dated for reference purposes February 26, 1998, has been entered into which, among other matters provides for Borrower to acquire the Land from Master Developer to permit Borrower to construct the first phase of the affordable housing units required by the Affordable Housing Agreement, which was executed and recorded by and between the City and the Master Developer on March 25, 1998, for the first phase of affordable housing requirements are referred to in this Agreement as the "Development", with Master Developer providing Borrower with purchase money financing to Borrower for its purchase of the Land. The Development improvements will consist of one hundred sixteen (1 16) affordable multi-family housing units, which shall be rented to low income households at affordable housing cost. 1.4 Reliance On Borrower. The development of the Rancho Carrillo master planned community is dependent upon fulfilling the City's affordable housing requirements pursuant to the Affordable Housing Agreement. Master Developer is relying on Borrower's strict compliance with each requirement of this Agreement and Borrower's performance under the Purchase Agreement and Escrow Rancho Carrillo Loan Agr.Fina1 1 01/14/99 Instructions, and should Borrower default in its performance, Master Developer would suffer substantial damages. Therefore, Master Developer carefully screened potential builders of affordable housing to whom Master Developer would be willing to sell the Land, and selected Borrower based on its reputation for honoring its contractual obligations and the express representations regarding its ability to perform under this Agreement and under the Purchase Agreement and Escrow Instructions. 1.5 Master Developer Financial Assistance to Borrower. The Master Developer desires to provide financial assistance to Borrower for development costs in the form of a loan for a total amount not to exceed One Million Two Hundred Ninety-Seven Thousand Nine Hundred Sixty-Seven Dollars ($1,297,967) (the "Master Developer Loan"). 1.6 City Financial Assistance to Borrower. The City desires to provide financial assistance to Borrower for development costs in the form of a loan for a total amount not to exceed One Million One Hundred Sixty Thousand Dollars ($1,160,000) (the "City Loan"). The City intends to fund the City Loan with City Housing Trust Fund monies. The funds utilized to fund the City Loan are not federal funds or the proceeds of a tax-exempt bond issue. The City is required by law to place restrictions on developments assisted with City Housing Trust Funds, ensuring that such developments remain affordable to low and moderate income households for the longest feasible time. 1.7 Additional Financial Assistance. The Interim Lender, the California Corporate Tax Credit Fund 111 (CCTCF),in its capacity as an independen1 lender and not as the Investment Limited Partner, will be providing an Interim Loan in the aggregate original principal amount of Five Hundred Twenty-Two Thousand Four Hundred Seventy Dollars ($522,470). The Investor Limited Partner (CCTCF) will be providing an Investor Loan of Two Hundred Eighty-Eight Thousand Four Hundred Fifty Dollars ($288,450) during the construction of the project. All loans described herein shall be repaid during the construction of the Project. ARTICLE 2 Definitions Unless the context otherwise indicates, the following shall have the meanings as set forth in this Article: 2.1 "Agreement" means this Affordable Housing Loan Agreement. 2.2 "Borrower" means Carlsbad Family Housing Partnership, a California limited partnership. 2.3 "Cash" means (i) currency, (ii) a check or checks currently dated, payable to Escrow Holder or order and honored upon presentation for payment, or (iii) funds wire-transferred or otherwise deposited into Escrow Holder's account at Escrow Holder's direction. Rancho Canillo Loan Agr.Fina1 2 01/14/99 2.4 "City" means the City of Carlsbad, California, a municipal corporation. 2.5 "City Loan" means the loan for an amount not to exceed One Million One Hundred Sixty Thousand Dollars ($1,160,000) by the City to Borrower, which loan is the subject of this Agreement. 2.6 "City Loan Deed of Trust" means the deed of trust to be placed on the Development, in substantially the form shown in Exhibit D attached hereto and incorporated herein, securing the City Note and naming the City as beneficiary. 2.7 "City Loan Documents" means the following documents evidencing the City Loan: (i) the City Note; (ii) the City Regulatory Agreement; (iii) the City Loan Deed of Trust; (iv) this Agreement. 2.8 "City Note" means the promissory note, in substantially the form shown in Exhibit C attached hereto and incorporated herein, in the principal amount of One Million One Hundred Sixty Thousand Dollars ($1,160,000), evidencing the City Loan. 2.9 "City Regulatory Agreement" means the City Regulatory Agreement in the form attached as Exhibit E to this Agreement to be recorded against the Land pursuant to Section 5.2 below. 2.10 "Close of Escrow" means the date that Master Developer's Grant Deed to Borrower for the Land is filed for record. 2.1 1 "Construction or Permanent Financing" means any of the following loans acquired by the Borrower for the purpose of financing the Improvements, in addition to the City Loan and the Master Developer Loan: 2.1 1.1 Union Bank of California constructlon loan in an amount not to exceed Seven Million Four Hundred Twelve Thousand Dollars ($7,412,000); 2.1 1.2 California Housing Finance Agency or other permanent loan(s) in the approximate total amount of Six Million Seven Hundred Fifty Thousand Dollars ($6,750,000) and a bridge loan of Nine Hundred Fifty Thousand ($950,000); 2.1 1.3 Any loans refinancing the above-described loans, exclusive of any "cash-out" refinance loans, and subject approval by the City. 2.1 2 "County" means the County of San Diego, State of California. 2.1 3 "Developer" means, collectively, Barone Galasso 81 Associates Incorporated, a Delaware corporation, and Housing Opportunities, Inc., a California nonprofit public benefit corporation, in their capacity as independent developers and not as general partners of Borrower. Rancho Carrillo Loan Agr.Fina1 3 01/14/99 . 2.14 "Development" means the Land and the Improvements to be constructed on the Land. 2.15 "Escrow Holder" means FIRST AMERICAN TITLE INSURANCE COMPANY, whose address is 41 1 Ivy Street, San Diego, California 92101. 2.16 "General and special real estate taxes" means all charges evidenced by the secured tax bill issued by the Tax Collector of the County, including, but not limited to, amounts allocated to (i) County or City general governmental purposes, (ii) bonded indebtedness of the County or City, (iii) bonded or other indebtedness and operating expenses of any school, college, sewer, water, irrigation, hospital, library, utility, county service, community facilities district or other district, and (iv) any other lawful purpose. 2.17 "Improvements" means the grading of the Land, the buildings and improvements to be constructed on the Land, including the Units, and the parking spaces and landscaping appurtenant to such buildings and improvements, in accordance with City Site Development Plan SDP 97-15, Rancho Carrillo Village B, Phase 1. 2.18 " Interim Loan" means, collectively, the loans to be made from The California Corporate Tax Credit Fund 111 to the Borrower in the aggregate original principal amount of Five Hundred Twenty-Two Thousand Four Hundred Seventy Dollars ($522,470). 2.19 "Investor Loan" means the loan from The Califofnia Corporate Tax Credit Fund 111 to the Borrower in the original principal amount of Two Hundred Eighty-Eight Thousand Four Hundred Fifty Dollars ($288.450). 2.20 "Land" means the real property on which the Borrower shall construct the Improvements, which real property is more particularly described in Exhibit A attached hereto and incorporated herein. 2.21 "Master Developer Loan" means a loan for an amount not to exceed One Million Two Hundred Ninety-Seven Thousand Nine Hundred Sixty-Seven Dollars ($1,297,967) by the Master Developer to Borrower, which loan is the subject of a separate Affordable Housing Development Agreement between Master Developer and Borrower (the "Master Developer Affordable Housing Development Agreement"). 2.22 "Master Developer Loan Deed of Trust" means the deed of trust to be placed on the Development, in substantially the form shown in Exhibit D attached to the Master Developer Affordable Housing Development Agreement and incorporated therein, securing the Master Developer Note and naming the Master Developer as beneficiary. 2.23 "Master Developer Loan Documents" means the following documents evidencing the Master Developer Loan: (i) the Master Developer Note; (ii) the Rancho Carrillo Loan Agr.Fina1 4 01/14/99 . Master Developer Loan Deed of Trust: (iii) the Master Developer Affordable Housing Development Agreement. 2.24 "Master Developer Note" means the promissory note, in substantially the form shown in Exhibit C attached to the Master Developer Affordable Housing Development Agreement and incorporated therein, in the principal amount of One Million Two Hundred Ninety-Seven Thousand Nine Hundred Sixty-Seven Dollars ($1,297,967). evidencing the Master Developer Loan. 2.25 "Master Devdopsr Purchase Money Cotin" means the loan for an amount equal to Three Million One Hundred Thirty-Two Thousand Dollars ($3,132,000) by the Master Developer to Borrower, for Borrower's purchase of the Land, which loan is the subject of the Purchase Agreement and Escrow Instructions between Master Developer as seller and Borrower as buyer. 2.26 "Master Developer Purchase Money Loan Deed of Trust" means the deed of trust to be placed on the Development, in the form provided for in the Purchase Agreement and Escrow Instructions, securing the Master Developer Purchase Money Note and naming the Master Developer as beneficiary. 2.27 "Master Developer Purchase Money Loan Documents" means the following documents evidencing the Master Developer Purchase Money Loan: (i) the Master Developer Purchase Money Note: (ii) the Master Developer Purchase Money Loan Deed of Trust; (iii) the Purchase Agreement and Escrow Instructions between Master Developer as seller and Borrower as buyer. 2.28 "Master Developer Purchase Money Note" means the promissory note, in substantially the form shown in Exhibit 6-1 attached to the Purchase Agreement and Escrow Instructions, in the principal amount of Three Million One Hundred Thirty-Two Thousand Dollars ($3.1 32,000). evidencing the Master Developer Purchase Money Loan. 2.29 "New Map" refers to the final subdivision map which will show the Property consisting of a separate legal lot or lots ladditional property within Village B may also, at Master Developer's discretion, be shown on the New Map). The New Map is being prepared by Master Developer, at Master Developer's sole cost and expense, and shall be submitted to City for signature and recording, at Master Developer's sole cost and expense. 2.30 "Parties" means the City, the Master Developer and the Borrower collectively: "Party" means one of the City, the Master Developer or the Borrower as the context indicates. 2.31 "Permanent Loan" means the loan(s) obtained by Borrower through programs administered by the California Housing Finance Agency ("CHFA") or other lender, described in Section 2.1 2.2 above. Rancho Carrillo Loan Agr.Fina1 5 01114199 2.32 "Term" means the term of the City Loan commencing on the date of disbursement of the City Loan and ending fifty-five (55) years following the date of issuance of a certificate of occupancy for all Units in the Development, but in no event later than January 1, 2056. 2.33 "Title Insurer" means FIRST AMERICAN TITLE INSURANCE COMPANY, whose address is 41 1 Ivy Street, San Diego, California 92101. 2.34 "Unit" means one of the one hundred sixteen (1 16) dwelling units located within the Development. AwrELE 3.' ' . Summary of Financing and &rower's Financing and Acquisition Obligations 3.1 Summary of Development Financing. Borrower's current sources and uses of funds summary for the Development is attached hereto as Exhibit B. Borrower contemplates a total project budget of approximately $14,938,000. Master Developer is providing financing for Borrower's acquisition of the Land with the Master Developer Purchase Money Note for $3,132,000 secured by the Master Developer Purchase Money Loan Deed of Trust as provided in the Purchase Agreement and Escrow Instructions. The Master Developer Purchase Money Loan Deed of Trust shall be subordinate to Borrower's Construction (not to exceed $7,412,000) or Permanent Financing ($6,750,000) and bridge loan of $950,000, to the City Loan Deed of Trust securing the City Loan to the Borrower. City shall loan to Borrower an amount equal to $10,000 for each Unit of multi-family housing in the Development, or a total of to $10.000 for each Unit of multi-family housing in the Development, or a total of $1,160,000, secured by the City Loan Deed of Trust which shall be subordinate to Borrower's Construction and Permanent Financing. Master Developer shall provide additional financing to Borrower, either by means of an equity contribution to Borrower or by the Master Developer Loan to Borrower which shall be subordinate to Borrower's Construction and Permanent Financing, to the City Loan to Borrower, and to the Master Developer Purchase Money Loan to Borrower for the Land. Borrower may apply for a Permanent Loan funded by bonds issued by the California Housing Finance Agency ("CHFA") in the approximate amount of $6,750,000 and a bridge loan of approximately $950,000 with a loan term not to exceed 36 months. Construction financing in an amount not to exceed $7,412,000 will be obtained by Borrower from Union Bank of California. Borrower will be eligible for tax credits for the Development from the California Tax Credit Allocation Committee ("TCAC") because of the CHFA Permanent Loan which will support an equity investment in Borrower by an investor limited partner in the amount of approximately $2,222,319. The borrower is also obtaining an Interim Loan in the aggregate original principal amount of Five Hundred Twenty-Two Thousand Four Hundred Seventy Dollars ($522,470) and an Investor Loan in the original principal amount of Two Hundred Eighty-Eight Thousand Four Hundred Fifty Dollars ($288,450). neither of which is secured by a Deed of Trust on the Land. 3.2 Borrower's Obligation to Apply For A Permanent Loan. Borrower has prepared and filed an application with CHFA or other permanent lender for a Rancho Canillo Loan Agr.Fina1 6 01/14/99 Permanent Loan contemplated by Borrower's budget for the Development, and has exercised its best efforts to diligently pursue such application, including, but not limited to, any necessary supplements or amendments thereto, to a final determination resulting in a commitment for the Permanent Loan. The City and Master Developer have cooperated with Borrower to the extent reasonably necessary by each in Borrower's pursuit of a Permanent Loan. 3.3 Borrower's Obligation to Satisfy Conditions of the Purchase Agreement and Escrow Instructions with Master Developer. Borrower shall exercise its best efforts to diligently pursue satisfaction of all conditions benefiting Borrower as Buyer under the Purchase Agreement and Escrow Instructions with Master Developer as Seller and to acquire fee title to the Land from Master Developer. ARTICLE 4 City Loan 4.1 Amount. The City hereby agrees to loan, and the Borrower hereby agrees to borrow, an amount not to exceed One Million One Hundred Sixty Thousand Dollars ($l,T60,000), subject to the terms and conditions set forth in this Agreement, and subject further to the terms and conditions set forth within the documents and instruments executed by the Borrower in connection with this transaction, including: (a) The City Note; (b) The City Regulatory Agreement; and (c) The City Loan Deed of Trust. 4.2 Interest. The outstanding principal amount of the City Loan shall accrue interest at three percent (3%) per annum, compounded annually. Upon the occurrence of an Event of Default, interest on the City Loan shall begin to accrue, as of the date of the Event of Default, and continuing until such time as the City Loan funds are repaid in full, at the default rate of ten percent (lo%), compounded annually, or the highest rate permitted by law. 4.3 Repayment. (a) Repayment of the city Loan shall be deferred during construction of the Improvements. Commencing on the date of recordation of the deed of trust securing the Permanent Loan, the outstanding principal and accrued interest on the City Loan shall be amortized over the next fifty-five (55) years of the Term such that equal payments of principal and interest (the "Amortized Payments") shall be due and payable on May 1 of each calendar year, commencing on the first May 1 following recordation of the deed of trust securing the Permanent Loan; provided however, that the Amortized Payments shall be due and payable only to the extent of seventy percent (70%) of Surplus Cash (as defined below) generated by the Development in the previous calendar year. Rancho Carrillo Loan Agr.Fina1 7 01/14/99 (b) "Surplus Cash" means, in a particular calendar year, the amount by which Gross Revenue (as defined below) exceeds Annual Operating Expenses (as defined below). (i) Gross Revenue. "Gross Revenue," with respect to a particular calendar year, shall mean all revenue, income, receipts, and other consideration actually received from operation and leasing of the Development. "Gross Revenue" shall include, but not be limited to: all rents, fees and charges paid by tenants, Section 8 payments or other rental subsidy payments received for the dwelling units, deposits forfeited by tenants, all cancellation fees, price index adjustments and any other rental adjustments to leases or rental agreements; proceeds from vending and laundry room machines; the proceeds of business interruption or similar insurance; the proceeds of casualty insurance to the extent not utilized to repair or rebuild the Development; condemnation awards for a taking of part or all of the Development for a temporary period, and the disbursement of any reserve accounts that have been reduced or eliminated. "Gross Revenue" shall also include the fair market value of any goods or services provided in consideration for the leasing or other use of any portion of the Development. "Gross Revenues" shall not include tenants' security deposits, loan proceeds, capital contributions or similar advances. (ii) Annual Operating Expenses. "Annual Operating Expenses," with respect to a particular calendar year, shall mean the following costs reasonably and actually incurred far operation and maintenance of the Development to the extent that they are consistent with an annual independent audit performed by a certified public accountant using generally accepted accounting principles: property and other taxes and assessments imposed on the Development; premiums for property damage and liability insurance; utility services not paid for directly by tenants, including but not limited to water, sewer, trash collection, gas and electricity; maintenance and repair including but not limited to pest control, landscaping and grounds maintenance, painting and decorating, cleaning, common systems repairs, general repairs, janitorial, supplies, and others; periodic payments to the Rancho Carrillo Master Association as provided in the Agreement Among Landowners Re: Use Restriction , Cost Sharing And Grant Of Non-Exclusive Easements entered into as of January 8, 1999 and recorded against The Land as described in Section 1.1 above; any annual license or certificate of occupancy fees required for operation of the Development; general administrative expenses including but not limited to advertising and marketing, security services and systems, and professional fees for legal, audit and accounting; property management fees and reimbursements including on-site manager and assistant manager expenses, not to exceed fees and reimbursements which are standard in the industry; deferred developer fee to Developer (in the amount set forth in Section 4.1 3 below); partnership management fees in an annual amount not to exceed $8,500; asset management fees in an annual amount not to exceed $8,500; cash deposited into a reserve for capital replacements of Development Rancho Carrillo Loan Agr.Fina1 8 01/14/99 improvements and an operating reserve in such reasonable amounts as are required by Development lenders and investors and approved by the City; repayment of loans from the general partner of Borrower to Borrower for operating or tax benefit deficits if approved by the City; and debt service payments (excluding debt service due from residual receipts or surplus cash of the Development) on financing for the Development senior in lien priority to the City loan and approved by the City. "Annual Operating Expenses" shall not include the following: depreciation, amortization, depletion or other non- cash expenses or any amount expended from a reserve account. (c) The City, Borrower and Master Developer agree that, before the City is repaid the City Loan from Surplus Cash and before the Master Developer is repaid the Master Developer 'Loan from Surplus Cash, Borrower shall pay the deferred developer fee to Developer. By including Developer's deferred developer fee as a component of Annual Operating Expenses, the parties intend to make the payment of such amount a priority so there will not be Surplus Cash until the Developer's deferred developer fee is paid in full. (d) If seventy percent (70%) of Surplus Cash in any year is less than the amount of the Amortized Payment due on May 1 of the following year, the difference between seventy percent (70%) of Surplus Cash and the Amortized Payment shall accrue with simple interest at three percent (3%) per annum, and shall be paid on the next May 1 when and to the extent Surplus Cash becomes available. All payments on the City Loan shall be applied first to accrued, but unpaid, amounts for prior years and then to the current Amortized Payment due, beginning with the earliest year for which an Amortized Payment accrued. (e) If seventy percent (70%) of Surplus Cash in any year exceeds the amount necessary to make the Amortized Payment due on May 1 of the following calendar year, plus any amounts due pursuant to subsection (dl above, such excess amount shall be paid to the City as prepayment of the City Loan. Such prepayment shall not reduce the amounts of subsequent Amortized Payments due, except to the extent that the City Loan is fully repaid. (f) Prepayment of the City Loan may also occur pursuant to Section 4.13 below. Such prepayment shall not reduce the amounts of subsequent Amortized Payments due, except to the extent the City Loan is fully repaid. (g) Any portion of the principal and interest on the City Loan not sooner paid shall be due and payable upon the earlier of: (i) the occurrence of an Event of Default hereunder; (ii) expiration of the Term; or (iii) sale or transfer of the Development other than a transfer described in Section 4.5 below. 4.4 Prepayment. Borrower may prepay the principal and any interest due the City under the City Note prior to or in advance of the time for payment thereof as provided in the City Note, without penalty; provided, however, that Borrower acknowledges that the provisions of the City Regulatory Agreement will be Rancho Carrillo Loan Agr.Fina1 9 01/14/99 applicable to the Development even though Borrower may have prepaid the City Note. 4.5 Assumption. In the event the Development is sold or transferred to the General Partners of Borrower or a nonprofit affiliate of the General Partners of Borrower, the City Loan shall be fully assumable by such transferee, subject to Section 10.16 below. The City Loan shall not be assumable by any other transferee without the prior written consent of the City. 4.6 Loan Disbursement. Upon satisfaction of the preconditions to disbursement set forth in Sections 5.1 and 5.2 below and pursuant to the disbursement procedures set forth in Sections 5.1 and 5.3 below, the City will disburse to Borrower the City Loan Amount. 4.7 Use of Loan Proceeds. Borrower shatl use City Loan Proceeds only to pay the costs of the items set forth in Exhibit B. 4.8 Security for Loan. The City Loan shall be secured by the City Loan Deed of Trust on Borrower's fee interest in the Land. The Borrower shall provide the City with a 1992 ALTA LP-10 Lender's Policy of title insurance in an amount equal to the City's loan, issued by Title Insurer, insuring the City Loan Deed of Trust as a lien against the Borrower's fee interest in the Land, subject only to the lien or liens of the Construction and Permanent Financing mortgages. The policy of title insurance shall not be subject to the Master Developer Loan, the Master Developer Purchase Money Loan, or any other financing which is subordinate to the City's Loan. 4.9 Approval of Additional Financing. The Borrower shall not place any encumbrances on the Land other than the Construction and Permanent Financing, the Master Developer Purchase Money Loan, and the Master Developer Loan, without the prior written consent of the City, which consent shall not be withheld unreasonably. 4.10 Subordination of City Loan Deed of Trust. The City agrees to subordinate the City Loan Deed of Trust to the liens of the deeds of trust securing the Construction or Permanent Financing. 4.1 1 Subordination of the City Regulatory Agreement. The City agrees that the City Manager shall subordinate the City Regulatory Agreement to the lien or encumbrance of any construction or permanent financing provided for the Development upon the finding of the City Manager that (i) an economically feasible loan is not reasonably available on comparable terms and conditions without subordination, and (ii) the mortgage to which the City Regulatory Agreement is being subordinated contains provisions reasonably designed to protect the City's interest in the event of default under such mortgage. The City agrees that the City Regulatory Agreement shall be subordinated to any federal or state governmental agency regulating the Development which requires that the City Regulatory Agreement be subordinate to such government agency's documents and liens. The Rancho Canillo Loan Agr.Fina1 10 01/14/99 City will execute subordination agreements in a form reasonably acceptable to the lending entity or government agency to subordinate the City Regulatory Agreement as provided in this Section. 4.1 2 Admission of investor Limited Partner. Borrower shall inform the City of the identity of its investor limited partner prior to the admission of the investor limited partner into the Borrower's partnership. The City hereby consents to the admission as investor limited partner of Boston Capital or any limited partnership in which Boston Capital is a general partner. Notwithstanding the foregoing or anything to the contrary contained herein, Borrower is under no obligation to admit Boston Capital or an affiliated partnership as its investor limited partner, nor is Borrower obligated to obtain the City's consent to a different investor limited partner. 4.13 Developer Fee; Use of Net Proceeds of PermaneM Financing. (a) For purposes of this Section 4.13, the term "Net Proceeds of Permanent Financing" shall mean the portion of the capital contributions of the investor limited partner of the Borrower and the proceeds of the Permanent Loan that are not required to repay the Union Bank of California construction loan and pay other costs of the Development (including but not limited to the funding of reserves, repayment of the Interim Loan and Investor Loan, and $300,000 of the Developer's developer fee). Borrower shall be permitted to pay to Developer a developer fee of Nine Hundred Three Thousand Dollars ($903,000). Subject to the terms and conditions set forth in the limited partnership agreement of Borrower and the development agreement between Borrower and Developer as regards solely the respective rights thereunder of Borrower and Developer, Developer shall be eligible to receive the first Two Hundred Thousand Dollars ($200,000) of the developer fee in installments during construction as approved by the Construction Financing lender, the City and the Master Developer, such approval not to be unreasonably withheld. Developer shall be eligible to receive an additional Four Hundred Seventy- Seven Thousand Two Hundred Fifty Dollars ($477,250) of the developer fee from Net Proceeds of Permanent Financing. The balance of the developer fee shall be paid first from Net Proceeds of Permanent Financing, and second from Gross Revenues as part of Annual Operating Expenses as provided in Section 4.3(b)(ii) above. (b) Subject to the terms and conditions set forth in the limited partnership agreement of Borrower and the' development agreement between Borrower and Developer as regards solely the respective rights thereunder of Borrower and Developer, the Net Proceeds of Permanent Financing and any distributable balances of reserve funds for the Development shall be used first to make payments to Borrower to the extent of a cumulative total of $677,250 of Developer's deferred developer fee, and after such payments, if there is any remaining balance of Net Proceeds of Permanent Financing or any distributable balances of reserve funds for the Development, the remaining balance or balances shall be paid one-half to the City as partial repayment of the City Loan, one-fourth to the Master Developer as partial repayment of the Master Developer Loan, and one- fourth to the Borrower, first for the payment of Developer's deferred developer fee and then, if available, for its general uses and purposes. Rancho Carrillo Loan Agr.Fina1 11 01/14/99 4.14 Reports and Accounting of Surplus Cash. (a) Audited Financial Statement. In connection with the annual repayment of the City Loan, the Borrower shall furnish to the City an audited statement duly certified by an independent firm of certified public accountants approved by the City, setting forth in reasonable detail the computation and amount of Surplus Cash during the preceding calendar year. (b) Books and Records. The Borrower shall keep and maintain at the Development, or elsewhere with the City's written consent, full, complete and appropriate books, records and accounts relating to the Development, including all such books, records and accounts necessary or prudent to evidence and substantiate in full detail Borrower's calculation of Surplus Cash. Books, records and accounts relating to Borrower's compliance with the terms, provisions, covenants and conditions of this Agreement shall be kept and maintained in accordance with generally accepted accounting principles consistently applied, and shall be consistent with requirements of this Agreement which provide for the calculation of Surplus Cash on a cash basis. All such books, records, and accounts shall be open to and available for inspection by the City upon three (3) days prior written notice, its auditors or other authorized representatives at reasonable intervals during normal business hours. Copies of all tax returns and other reports that Borrower may be required to furnish any governmental agency shall at all reasonable times be open for inspection by the City at the place that the books, records and accounts of the Borrower are kept. The Borrower shall preserve records on which any statement of Surplus Cash is based for a period of not less than five (5) years after such statement is rendered. ARTICLE 5 Disbursement of City Loan 5.1 Conditions Precedent to Disbursement of City Loan Proceeds. The City shall not disburse City Loan proceeds to the Borrower until all of the following conditions precedent are satisfied. (a) Budget. Borrower shall have submitted to the City and obtained City approval of a development budget for the Development, in the form attached as Exhibit B, and the City has determined that the undisbursed proceeds of the City Loan, together with other funds or firm commitments for funds that the Borrower has obtained in connection with the Development, are not less than the amount that the City determines is necessary to pay for the construction of the Development and to satisfy all of the covenants contained in this Agreement. (b) Partnership and General Partners' Authorizations; Good Standing. Borrower shall provide the City (i) with a certified copy of a partnership authorizing resolution, approving the City Loan and the Borrower's execution of all City Loan Documents, (ii) with certified copies of corporate authorizing resolutions of Borrower's corporate general partners, approving the City Loan and the general partner's execution on behalf of the Borrower of all City Loan Documents, and (iii) Rancho Canillo Loan Agr.Fina1 12 01/14/99 with evidence reasonably satisfactory to the City that the Borrower and each of its corporate general partners exist in good standing at the time of the proposed disbursement. (c) Purchase of Land. Borrower shall hold fee title to the Land pursuant to a Grant Deed from Master Developer which has been duly recorded in the Official Records of the County, or a Grant Deed is signed and deposited into escrow. (d) Close of Construction Loan. Borrower shall have closed the Construction Loan for the Development described in Section 2.1 1.1 above. (e) Permanent loan commitments. Borrower shall have received all permanent loan commitments including, but not limited to the Master Developer Loan and the Master Developer Purchase Money Loan. (f) Execution, Delivery and Recordation of City Loan Documents. Borrower shall have executed and delivered to the City the City Note, the City Deed of Trust, and the City Regulatory Agreement, and any other documents and instruments required to be executed and delivered, all in form and substance satisfactory to the City, and the City Deed of Trust and the City Regulatory Agreement shall have been recorded against Borrower's fee interest in the Land. (g) Insurance. Borrower shall have furnished the City with evidence of the insurance coverage required pursuant to Sections 8.4 and 8.5 below. (h) Construction Contracts. Prior to any disbursement for hard construction costs, the City has received and approved all contracts that the Borrower has entered or proposed to enter for construction of the Development. The City shall have seven (7) days from its receipt of a contract in which to give Borrower written notice of its approval or disapproval of a contract that Borrower has entered or proposes to enter for construction of the Development; if the City has not given written notice of disapproval of a contract within the seven (7) day period, the contract shall be deemed approved. 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. Each construction contract that the Borrower enters for construction of the Development shall provide that at least ten percent (1 0%) of the costs incurred shall be payable only upon completion of said contractor's construction and shall include the nondiscrimination language set forth in Section 8.13 below. (i) No Default. There shall exist no condition, event or act constituting an Event of Default (as hereinafter defined) hereunder or which, upon the giving of notice or the passage of time, or both, would constitute an Event of Default. Rancho Carrillo Loan Agr.Final 13 01/14/99 5.2 Procedure for Disbursement of Remaining Loan Proceeds. Upon satisfaction of the conditions set forth in Section 5.1 above, the City shall promptly disburse the City Loan proceeds to Borrower from time to time upon receipt of written requests from the Borrower: (a) reaffirming the accuracy as of the date of the disbursement request of Borrower's representations and warranties set forth in Article 7 below: (b) certifying that Borrower is not in default under the City Loan Documents or loan documents for other Approved Financing as described in Section 3.1 above; and (c) setting forth the proposed uses of funds consistent with Section 4.7 above, 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 construction of the Improvements. the written request must be accompanied by a certification by the architect for the Borrower that the work for which disbursement is requested has been completed (although the City reserves the right to inspect the Development and make an independent evaluation within five (5) days from receipt of the written request), and lien releases or mechanics' lien title insurance endorsements reasonably acceptable to the City. ARTICLE 6 Development of the Improvements 6.1 Commencement of Construction. Subject to Section 10.2 below, the Borrower hereby covenants and agrees to commence construction of the Development no later than sixty (60) days following the later of: (i) the date Borrower obtains fee title to the Land: or (ii) the date Borrower obtains the first building permit required for construction of the Development, but in no event later than five (5) business days following recordation of the City Loan Deed of Trust. 6.2 Completion of Construction. The Borrower hereby covenants and agrees to diligently prosecute to completion the construction of the Development within twelve (1 2) months from the date of commencement of construction, subject to Section 10.2 below. 6.3 Construction Pursuant to Plans. The Borrower shall construct the Improvements in accordance with the plans approved by the City in connection with issuance of the building permit(s1, and with the terms and conditions of all land use permits and approvals required by the City, including, but not limited to, Site DeveloDment Plan SDP 97-15. 6.4 Construction in Compliance with Law. Borrower shall cause all work performed in connection with the Development, including construction of the Improvements, to be performed in compliance with all governmental requirements, including (without limitation and where applicable) the following: (a) The prevailing wage provisions of Sections 1770 w. Of the California Labor Code and implementing rules and regulations, if applicable. Rancho Carrillo Loan Agr.Fina1 14 01/14/99 (b) All directions, rules, and regulations of any fire marshal, health officer, building inspector, or other officer of any governmental agency having 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 Borrower shall be responsible to the City and the Master Developer for the procurement and maintenance thereof, as may be required of the Borrower and all entities engaged in work on the Development. 6.5 Entry by the City. Upon 3 days prior written notice, Borrower shall permit the City, through its officers, agents, or employees, at all reasonable times to enter into the Development and inspect the work of construction to determine that the same is in conformity with the construction plans approved by the City. Borrower acknowledges that the City is under no obligation to supervise, inspect, or inform Borrower of the progress of construction, and Borrower shall not rely upon the City therefor. Any inspection by the City is entirely for its purposes in determining whether Borrower is in default under this Agreement and is not for the purpose of determining or informing Borrower of the quality or suitability of construction. Borrower shall rely entirely upon its own supervision and inspection in determining the quality and suitability of the materials and work, and the performance of architects, subcontractors, and material suppliers. 6.6 Equal Opportunity. During the construction of the Improvements there shall be no discrimination on the basis of race, color, creed, religion, sex, sexual orientation, marital status, national origin, ancestry, or handicap in the hiring, firing, promoting, or demoting of any person engaged in the construction work. 6.7 Mechanics Liens, Stop Notices, and Notices of Completion. (a) If any claim of lien is filed against the 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 Development, then the Borrower 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 Borrower fails to discharge any lien, encumbrance, charge, or claim in the manner required in Section 6.7(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 Borrower's expense. Alternately, the City may require the Borrower to immediately deposit with the City the amount necessary to satisfy such lien or claim and any costs, pending resolution thereof. The City shall use such deposit to satisfy any claim or lien that is adversely determined against the Borrower. Rancho Canillo Loan Agr.Fina1 15 01/14/99 (c) The Borrower shall file a valid notice of cessation or notice of completion upon cessation of construction on the Development for a continuous period of thirty (30) days or more, and take all other reasonable steps to forestall the assertion of claims of lien against the Development. The Borrower authorizes the City, but without any 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 respective interest in the Development. 6.8 Estoppel Certificate of Completion. When the Borrower has determined it has met its obligations under this Article 6, the Borrower may request that the City issue an Estoppel Certificate of Completion, in the form shown in Exhibit H. Within ten (IO) days of such a request, the City shall issue an Estoppel Certificate of Completion or shall provide the Borrower with a written explanation of its refusal to issue the Estoppel Certificate of Completion. If and when the Borrower has taken the specified measures or met the specified standards, the City shall issue an Estoppel Certificate of Completion. The Estoppel Certificate of Completion shall not be deemed .a notice of completion under the California Civil Code, nor shall it constitute evidence of compliance with or satisfaction of any obligation of the Borrower to any holder of a deed of trust securing money loaned to finance the Development. ARTICLE 7 Representations and Warranties of Borrower 7.1 Representations and Warranties. Borrower hereby repr'esents and warrants to the City as follows: (a) Organization. Borrower is duly formed, .validly existing and in good standing under the laws of the State of California and has the partnership power and partnership authority to own its property and carry on its business as now being conducted. (b) Authority of Borrower. Borrower has full partnership power and partnership 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, the City 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 who are duly authorized to execute and deliver the same for and on behalf of Borrower, and all actions required under Borrower's organizational documents and applicable governing law for the authorization, execution, delivery and performance of this Agreement, the City Loan Documents, Rancho Canillo Loan Agr.Fina1 16 01/14/99 and all other documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Agreement, have been duly taken. (d) Valid Binding Agreements. This Agreement, the City 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 Borrower. (e) Pending Proceedings. There are no claims, actions, suits or proceedings pending or, to the knowledge of Borrower, threatened against or affecting Borrower, either of the general partners of the Borrower, the General Partners or the Development, at law or in equity, before or by any court, board, commission or agency whatsoever which might, if determined adversely to Borrower, materially affect Borrower's ability to repay the City Loan or impair the security to be given to the City pursuant hereto. (f) Financial Statements. The financial statements of Borrower and Borrower's general partners and other financial data and information furnished by Borrower 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 Borrower and Borrower's general partners from that shown by such financial statements and other data and information. ARTICLE 8 Continuing Obligations of Borrower 8.1 Applicability. For the longer of the entire Term, of so'long as the City Note remains outstanding, the Borrower shall comply with the provisions of this Article 8. 8.2 Compliance wi% Loan Documents. Borrower shall comply with all the terms and provisions of the City Loan Documents. 8.3 Rental of Units. The Borrower shall comply with the occupancy and affordability restrictions for the rental of the Units,-as set forth in the City Regulatory Agreement and in any other regulatory agreementfs) required by Borrower's lenders. 8.4 Required Insurance Coverage. (a) Fire and Extended Coverage Endorsement. The Borrower shall during the Term keep the Development insured against loss or damage by a standard all risk policy in amounts not less than the replacement value of the Development, or should insurance in such amount not be reasonably and commercially available, such lesser amount as may be acceptable to the City. The amount of such insurance shall be adjusted by reappraisal of the Improvements by the insurer or its designee at least once every five (5) years during the Term, if requested by the City. If an all risk policy insuring the full replacement value of the Development is not reasonably and Rancho Canillo Loan Agr.Final 17 01/14/99 commercially available, the Borrower shall use best efforts to obtain and maintain an extended coverage endorsement that ensures the full replacement value of the Development as soon as such coverage becomes commercially and reasonably available. (b) Liability and Property Damage Insurance. During the Term, the Borrower shall keep in full force and effect a policy or policies of comprehensive general liability and property damage insurance against liability for bodily injury to or death of any person or property damage arising out of an occurrence on or about the Development. The limits of such insurance shall be not less than five million dollars ($5,000,000) combined single limit for bodily injury and property damage. The limits of the insurance shall be adjusted once every five (5) years if and as reasonably required by the City. (cl Workers' Compensation Insurance. The Borrower shall carry or cause to be carried workers' compensation insurance covering all persons employed by the Borrower in connection with the Development and with respect to whom death, bodily injury, or sickness insurance claims could be asserted against the Borrower or the City. (d) Builders' Risk Insurance. During the course of any alteration, construction or reconstruction, the cost of which exceeds one hundred thousand dollars ~6100,000). the Borrower shall provide or require any contractor to provide builders' risk insurance for not less than, in the event of new construction, the full insurable value of the Development or, in the event of alteration or reconstruction, the insurable value of the alteration or reconstruction, insuring the interests of the City, the Borrower and any contractors and subcontractors. 8.5 Insurance Policies and Premiums (a) All liability policies required by this Agreement shall name the City as an additional insured. Duplicate copies of such policies or certificates of such insurance shall be promptly furnished to the City. Ib) To the extent obtainable, any policy.of insurance shall provide that any change or cancellation of said policy must be made in writing and sent to the Borrower and the City at their respective principal offices at least thirty (30) days before the effective date of change or cancellation. 8.6 Proceeds of Insurance. All fire and standard risk or extended coverage (casualty) insurance proceeds shall be applied to the payment of the costs of repairing or rebuilding that part of the Development damaged or destroyed if (i) the Borrower agrees in writing within ninety (90) days after payment of the proceeds of insurance that such repair or rebuilding is economically feasible, and (ii) each lender of an outstanding Construction and Permanent Loan permits such repairing or rebuilding, provided that the extent of Borrower's obligation to restore the Development shall be limited to the amount of the insurance proceeds plus any deductible amount. If the Development is not repaired or rebuilt as provided in this Rancho Carrillo Loan Agr.Fina1 18 01/14/99 Section 8.6, all such proceeds shall be applied to repayment of outstanding loans including the City Loan, the Master Developer Purchase Money Loan and the Master Developer Loan, in the order of lien priority. 8.7 Taxes and Assessments. So long as Borrower owns the Development, Borrower shall pay all real and personal property taxes, assessments and charges and all franchise, income, unemployment, old age benefit, withholding, sales, and other taxes assessed against it, or payable by it, at such times and in such manner as to prevent any penalty from accruing, or any lien or charge from attaching to the Development; provided, however, that Borrower shall have the right to contest in good faith any such taxes, assessments, or charges. In the event Borrower exercises its right to contest any tax, assessment, or charge against it, Borrower, on final determination of the proceeding or contest, shall immediately pay or discharge any judgment rendered against it, together with all costs, charges, and interest. 8.8 Compliance with Laws. Borrower shall comply with all laws and regulations of the United States and of California and of any political subdivision thereof, or of any governmental authority which may be applicable to it or to its business, subject to Borrower's right to contest the validity or applicability of laws or regulations. 8.9 Changes. Borrower shall promptly notify the City in writing of any changes in the location of any place of business or material assets of the Borrower. 8.10 Notification of Litigation. Borrower shall promptly notify the City in writing of any litigation affecting the Borrower or the Development and of any claims or disputes that involve a material risk of litigation, which may materially adversely affect the City Loan. 8.1 1 Indemnity. Borrower shall defend, indemnify, save and hold the City, its council members, officers, employees, agents, and contractors, utilizing attorneys approved by the City, harmless from any and all claims, actions, demands, costs, expenses, and reasonable attorneys' fees, arising out of, attributable to, or otherwise occasioned, in whole or in part, by any act or omission of Borrower arising from or related to the Development, except to the extent such claim may arise from the gross negligence or willful misconduct of an indemnified party. Notwithstanding anything to the contrary contained herein, this Section 8.1 1 shall not operate to impose any personal liability on Borrower's partners for nonpayment of principal and interest under the City Note. 8.12 Hazardous Materials. (a) The Borrower shall keep and maintain the Development in compliance with, and shall not cause or permit the 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 or under the Development, including (but not limited to) soil and ground water conditions. The Borrower shall not use, generate, manufacture, store, or dispose of, on, under, or about the Development, Rancho Carrillo Loan Agr.Fina1 19 01/14/99 or transport to or from the 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 as "Hazardous Materials") except such of the foregoing as may be customarily and lawfully kept and used in and about multifamily residential property. (b) The Borrower 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 Borrower or the 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 Borrower or the 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 refelred to as "Hazardous Materials Claims"); and (iii) the Borrower's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Development that could cause the Development or any part thereof to be classified as "border-zone property" under California Health and Safety Code Sections 25220 a m. or corresponding regulations, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability, or use of the Development under any Hazardous Materials Law. (c) The Borrower shall permit the City to join and participate in, as a party if either so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials. The Borrower shall indemnify, defend (with counsel reasonably chosen by the City, at the option of the City), and hold harmless the City, and its council members, board members, officers, agents, and employees, from and against any loss, damage, cost, expense, or liability directly or indirectly arising out of or attributable to the use, generation, storage, retease, threatened release, discharge, disposal, or presence of Hazardous Materials on or under the Development, including (without limitation): (i) all foreseeable consequential damages; (ii) the costs of any required or necessary repair, cleanup, or detoxification of the Development and the preparation and implementation of any closure, remedial, or other required plans; and (iii) all reasmable costs and expenses incurred by the City, or 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. (d) Without the prior written consent of the City, which shall not be unreasonably withheld, the Borrower shall not take any remedial action in response to the presence of any Hazardous Materials on, under or about the 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 judgment, impair the value of the City's security hereunder; provided, however, that the City's Rancho Carrillo Loan Agr.Fina1 20 01/14/99 prior consent shall not be necessary in the event that the presence of Hazardous Materials on, under, or about the 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 Borrower shall notify the City as soon as practicable of any action so taken. The City 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) the Borrower will or may be subjected to civil or criminal sanctions or penalties if it fails to take a required action; (iii) the Borrower 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; or (iv) the action has been agreed to by the City. (e) The Borrower hereby acknowledges and agrees that (i) this Section 8.1 2 is intended as the City's written request for information land the Borrower's response) concerning the environmental condition of the 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 any such representation and warranty) with respect to the environmental condition of the Development is intended by the Parties to be an "environmental provision" for purposes of California Code of Civil Procedure Section 736. 8.13 Non-Discrimination. The Borrower covenants 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, sex, sexual orientation, marital status, ancestry or national origin in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Development, nor shall the Borrower or any person claiming under or through the Borrower establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenents, sublessees or vendees in the Development. The foregoing covenant shall run with the land and shall survive termination of this Agreement. 8.1 4 Records. (a) The Borrower shall maintain complete, accurate, and current records pertaining to the 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 residents of the Development. Such records shall include records regarding the occupancy and rent levels of the residential units in the Development, as well as records that accurately and fully show the date, amount, purpose, and payee of all expenditures drawn from City Loan funds. Such records shall also include all invoices, receipts, and other documents related to expenditures from the City Loan funds. Records must be kept accurate and current. Rancho Canillo Loan Agr.Fina1 21 01/14/99 (b) The City shall notify the Borrower of any records it deems insufficient. The Borrower shall have fifteen (15) calendar days after the receipt of such a notice to correct any deficiency in the records specified by the City in such notice, or if a period longer than fifteen (1 5) days is reasonably necessary to correct the deficiency, then the Borrower shall begin to correct the deficiency within fifteen (1 5) days and correct the deficiency as soon as reasonably possible. (c) The Borrower shall promptly comply with all requirements or conditions of the City Loan Documents relating to notices, extensions, and other events required to be reported or requested. The Borrower shall promptly supply, upon the request of the City, any and all information and documentation involving the Development. 8.1 5 Transfers. (a) For purposes of this Agreement, "Transfer" shall mean any sale, assignment, or transfer, whether voluntary or involuntary, of ti) any rights and/or duties under this Agreement, andlor (ii) any interest in the Development, including (but not limited to) a fee simple interest, a joint tenancy interest, a life estate, a general partner's partnership interest, a leasehold interest, a security interest, or an interest evidenced by a land contract by which possession of the Development is transferred and the Borrower retains title (excluding a grant of a purchase option or right of first refusal to a nonprofit general partner of Borrower). The term "Transfer" shall exclude the leasing of any single Unit in the Development to an occupant in compliance with the City Regulatory Agreement. [b) No Transfer shall be permitted without the prior written consent of the City and the Master Developer, which consents shell not be unreasonably withheld by the City provided that all of Borrower's obligations to the City are satisfied in their entirety upon the occurrence of the Transfer. Pursuant to Sections 4.3(9), the City Loan shall automatically accelerate and be due in full upon any unauthorized Transfer. (c) The City hereby approves any subsequent Transfer of the Development from the Borrower to the nonprofit, managing general partner and co- general partner of the Borrower, provided that the transferees expressly assume the obligations of the Borrower under this Agreement and the City Loan Documents, utilizing a form of assignment and assumption agreement approved by the City for its Loan Documents. (d) The City approves the grant of the security interests in the Development described in Section 2.1 1 [Construction or Permanent Financing], Section 2.19 [Master Developer Loan], and Section 2.23 [Master Developer Purchase Money Loan] above. Rancho Carrillo Loan Agr.Fina1 22 01/14/99 ARTICLE 9 Default and Remedies 9.1 Events of Default. Each of the following shall constitute an "Event of Default" by Borrower under this Agreement: (a) Failure to Construct. Subject to Section 10.2, failure of Borrower to commence construction or to construct all of the Development within the time set forth in Article 6 above. (b) I Failure to Make Payment. Failure to make prompt payments of the principal and interest on the City Note when due and such failure having continued uncured for thirty (30) days after receipt of written notice thereof by the Borrower from the City. (c) Breach of Covenants. failure by Borrower to duly perform, comply with, or observe any of the conditions, terms, or covenants of any of the City Loan Documents, and such failure having continued uncured for fifteen (15) days after receipt of written notice thereof by the Borrower from the City or, if the breach cannot be cured within fifteen (15) days, the Borrower shafl not be in breach so long as Borrower diligently undertakes to cure such breach within fifteen (15) days and completes cure within forty-five (45) days of receipt of notice; provided, however, that if a different period or notice requirement is specified under any other section of this Article 10, the specific provisions shall control, (dl Default Under Other Loans. Failure to make any payment or perform any of Borrower's covenants, agreements, or obligations set forth in the documents evidencing and securing the Construction and Permanent Financing loans, following expiration of all applicable notice and cure periods. (e) Insolvency. A court having jurisdiction shall have made or entered any decree or order (i) adjudging Borrower to be bankrupt or insolvent, (ii) approving as properly filed a petition seeking reorganization of Borrower or seeking any arrangement for Borrower 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 Borrower in bankruptcy or insolvency or for any of their properties, or (ivj directing the winding up or liquidation of Borrower, if any such decree or order described in clauses (i) to (iv), inclusive, shall have continued unstayed or undischarged for a period of forty-five (45) days: or Borrower 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 of Default in this paragraph shall act to accelerate automatically, without the need for any action by the City, the indebtedness evidenced by the City Note. The occurring of any of the events described in this subsection with respect to a general partner of the Borrower shall also constitute an Event of Default hereunder. Rancho Carrillo Loan Agr.Fina1 23 01/14/99 (f) Assignment: Attachment. Borrower or any general partner of Borrower shall have 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, unless the property so assigned, sequestered, attached or executed upon shall have been returned or released within forty-five (45) days after such event or prior to sooner sale pursuant to such sequestration, attachment, or execution. The occurrence of any of the events of default in this paragraph shall act to accelerate automatically, without the need for any action by the City, the indebtedness evidenced by the City Note. (g) Suspension: Termination. Borrower or any partner of Borrower shall have voluntarily suspended its busineis,or, if Borrower is a partnership, the partnership shall have been dissolved Or terminated, other than a technical termination of the partnership for tax purposes. (h) Liens on Devebpment. There shall be filed any claim of lien (other than liens approved in writing by the City) against the 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 the continued maintenance of said claim of lien or notices to withhold for a period of ten (10) days without discharge or satisfaction thereof or provision therefor satisfactory to the City. In the event that Borrower is diligently working to remove a claim of lien or to remove a notice to withhold proceeds and the City's interests under the City Loan Documents are not imminently threatened, the City shall not declare a default under this subsection. (i) Condemnation. The condemnation, seizure, or appropriation of all or the substantial part of the Land and the Development. (j) Unauthorized Transfer. Any Transfer other than as permitted by Article 8. (k) Representation or Warranty Incorrect. Any Borrower representation or warranty contained in this Agreement, or in any application, financial statement, certificate, or report submitted to the City in connection with any of the City Loan Documents, proving to have been incorrect in any material respect when made. 9.2 Limited Partner Cure Periods. (a) Notwithstanding anything to the contrary contained in this Agreement or the City Loan Documents, and in addition to any other cure provisions contained in this Agreement, the limited partner of the Borrower shall have the right but not the obligation to cure any defaults of the Borrower hereunder, and the City agrees to accept cures tendered by the limited partner on behalf of the Borrower within the cure periods described below: the limited partner of Borrower shall have the right to cure all monetary and non- monetary defaults within forty-five (45) days after receipt of notice thereof. However, if a default is non-monetary and is not reasonably capable of being cured within forty-five (45) days or if the limited partner notifies the City that it is in the process of removing the managing general partner of the Borrower (as such process Rancho Carrillo Loan Agr.Fina1 24 01/14/99 may be stayed by injunction, bankruptcy or similar proceedings), the limited partner shall have such additional time as is reasonably necessary, up to ninety (90) days from notice, to cure such default or remove the managing general partner, provided the limited partner has commenced and is diligently proceeding to cure such default or remove the managing general partner, as applicable (taking into account the effect of injunction, bankruptcy or similar proceedings). (b) If, after the time provided in Sections 9.1 and 9.2, Borrower or the limited partner has not cured the default, the City may, subject to Section 10.16 below, apply to any court, state or federal, for specific performance of this Agreement or an injunction against any violation of this Agreement, or any other remedies at law or in equity or any such other actions as shall be necessary or desirable so as to correct non-compliance with this Agreement. 9.3 Remedies. The occurrence of any Event of befault following the expiration of all applicable notice and cure periods 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, subject to Section 10.16 below, shall give the City the right to proceed with any and all remedies set forth in this Agreement, the City Loan, respectively, including but not limited to the following: (a) Acceleration of Note. The City shall have the right to cause all indebtedness of the Borrower to the, under this Agreement and respective City with any accrued interest thereon, to become immediately due and payable. The Borrower waives all right to presentment, demand, protest or notice of protest or dishonor. The City may each 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 Loan Deed of Trust. The Borrower shall be liable to pay the on demand all reasonable expenses, costs and fees (including, without limitation, reasonable attorney's fees and expenses) paid or incurred by the, in connection with the collection of their respective Loan and the preservation, maintenance, protection, sale, or other disposition of the security given for their respective Loan. (b) Specific Performance. The City shall have the right to mandamus or other suit, action or proceeding at law or in equity to require Borrower to perform its obligations and covenants under the City Loan, or to enjoin acts on things which may be unlawful or in violation of the provisions of the City Loan Documents. (c) Right to Cure at Borrower's Expense. Upon three (3) days prior written notice, the City shall have the right to cure any monetary default by Borrower under a loan other than their respective Loan. The Borrower agrees to reimburse the City for any funds advanced by the City to cure a monetary default by Borrower upon demand therefor, together with interest thereon at the rate of ten percent (10%) per annum from the date of expenditure until the date of reimbursement; provided, however, the obligations under this Rancho Canillo Loan Agr.Fina1 25 01/14/99 . Section 9.3(c) shall not result in personal liability to Borrower's partners if Borrower fails to reimburse any party pursuant to this Section 9.3(c). 9.4 Right of Contest. Borrower shall have the right to contest in good faith any claim, demand, levy, or assessment the assertion of which would constitute an Event of Default hereunder. Any such contest shall be prosecuted diligently and in a manner unprejudicial to the City or the rights of the City hereunder. 9.5 Remedies Cumulative. Subject to Section 10.16 below, no right, power, or remedy given to the City by the terms of this Agreement or the City Loan Documents, respectively, is intencted to be exclusive of any other right, power, or remedy; and each and every such right, power, or reniedy 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 Borrower 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. 9.6 Waiver of Terms and Conditions. The City Manager, or his designee, for the City may at his or her discretion waive in writing any of the terms and conditions of this Agreement for the benefit of the City, without the Borrower completing an amendment to this Agreement. No waiver of any default or breach by Borrower 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 Borrower 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 of the City, 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 its Loan Documents, unless in the exercise of any such right, power, or remedy all obligations of Borrower to City are paid and discharged in full. 9.7 Removal of Managing General Partner by Limited Partner. The City agrees that the removal of the managing general partner of the Borrower under this Agreement by the limited partner of Borrower pursuant to the terms of the Borrower's limited partnership agreement will not in and of itself constitute a default under any of the City Loan Documents or allow acceleration of the City Loan, as long as such removal does not materially affect construction of the Development. If any other entity becomes the managing general partner of Borrower, the limited partner shall obtain the approval of the City of such replacement managing general Rancho Carrillo Loan Agr.Fina1 26 01/14/99 partner within three (3) months thereafter, which approval shall not be unreasonably withheld or delayed. ARTICLE 10 Miscellaneous 10.1 Time. Time is of the essence in this Agreement. 10.2 Force Majeure. Performance by any Party hereunder shall not be deemed to be in default where defaults are due to war; insurrection; strikes; lock- outs; riots; floods; earthquakes; fires; casualties; acts of God; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; governmental restrictions or priority; litigation (including suits filed by third parties concerning or arising out of this Agreement); weather or soils conditions which, in the opinion of the Borrower's contractor, will necessitate delays; inability to secure necessary labor, materials or tools; delays of any contractor, sub-contractor or supplier; acts of the other Party; acts or failure to act of any public or governmental agency or entity (other than the acts or failure to act of the City); or any other causes (other than Borrower's inability to obtain financing for the Development) beyond the control or without the fault of the Party claiming an extension of time to perform. Times of performance under this Agreement may also be extended in writing by the City and the Borrower. 10.3 Notices. All notices, demands and communications between the Borrower, the Master Developer and the City shall be sufficiently given and shall not be deemed given unless dispatched by certified mail, postage prepaid, return receipt requested, or delivered by express delivery service with a delivery receipt, to the principal officers of the Borrower and the City as follows: Borrower: CARLSBAD FAMILY HOUSING PARTNERSHIP Barone Galasso and Associates, Inc. Attn: Michael B. Galasso 600 West Broadway, Suite 1070 San Diego, California 92101 With a Copy to: The California Corporate Tax Credit Fund 111 c/o Boston Capital Attn: Neal Opper One Boston Place, 21'' Floor Boston, MA 02108 CITY OF CARLSBAD Housing and Redevelopment Department Attn: Housing and Redevelopment Director 2965 Roosevelt Street, Suite B Carlsbad, California 92008-2389 City: Rancho Carrillo Loan Agr.Fina1 27 01/14/99 Such addresses may be changed by notice to the other Party given in the same manner as provided above. Notice shall be deemed to have been effective on 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 undelivered. 10.4 Financial Statements; Rights of Inspection. The Borrower shall deliver copies of its audited financial statements to the City annually promptly following completion of preparation of such statements. The City shall have the right, upon reasonable notice to Borrower, to inspect Borrower's books and records related to the Development. 10.5 No Third Parties Benefitted. Boston .Capital is the sole third party beneficiary of this Agreement with respect to Section 9.2 only, and no person or persons other than the Borrower, the City, and Boston Capital shall have any right of action hereon. 10.6 Actions. The City shall have the right to commence, appear in, or defend any action or proceeding purporting to affect the rights, duties, or liabilities of the Parties hereunder, or the disbursement of any proceeds of the City Loan. 10.7 Signs. The Borrower agrees that the City may place signs mutually satisfactory to the Borrower and the City upon the Development at locations selected by the Borrower and the City, advising of the financing of the Development by the City. The City may also announce such placement through press releases to newspapers and trade publications. 10.8 Successors and Assigns. The terins hereof shall be binding upon and inure to the benefit of the successors and assigns of the Parties hereto; provided, however, that no assignment of Borrower's rights hereunder shall be made, voluntarily or by operation of law, without the prior written consent of the City, and that any such assignment without such consents shall be void. 10.9 Construction of Words. Except where the context otherwise requires, words imparting the singular number shall include the plural number and vice versa, words imparting persons shall include firms, associations, partnerships and corporations, and words of either gender shall include the other gender. 10.10 Partial Invalidity. If any provision of this Agreement shall be declared invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions hereof shall not in any way be affected or impaired. 10.1 1 Governing Law. This Agreement, the City Loan Documents, and other instruments given pursuant hereto shall be construed in accordance with and be governed by the laws of the State of California. Rancho Carrillo Loan Agr.Fina1 28 01/14/99 10.12 Amendment. This Agreement may not be changed orally, but only by agreement in writing signed by the Borrower and the City. 10.13 Captions and Headings. Captions and headings in this Agreement are for convenience of reference only, and are not to be considered in construing the Agreement. 10.14 Action by the City. Except as may be otherwise specifically provided herein, whenever any approval, notice, direction, consent, request, or other action by the City is required or permitted under this Agreement, such action may be given, made, or taken by the City Manager, or by any person who shall have been designated in writing to the Borrower by the City Manager, without further approval by the City Council, and any such action shall be in writing. The City Manager is also hereby authorized to approve, on behalf of the City, requests by Borrower for reasonable extensions of time deadlines set forth in this Agreement. 10.1 5 Nonrecourse OMigation's on City Loan. Except as provided below, neither the Borrower nor any partner of the Borrower shall have any direct or indirect personal liability for payment of the principal of, or interest on, this City Note, the City Loan Agreement or the performance of the covenants of Borrower under the City Deed of Trust. The sole recourse of the City with respect to the principal of, or interest on, the City Note and defaults by Borrower in the performance of its covenants under the City Loan Agreement, and City Deed of Trust shall be to the property described in the City Deed of Trust; Provided, however, that nothing contained in the foregoing limitation of liability shall (a) limit or impair the enforcement against all such security for the City Note of all the rights and remedies of the City thereof, or (b) be deemed in any way to impair the right of the City thereof to assert the unpaid principal amount of the Note as demand for money within the meaning and intendment of Section 431.70 of the California Code of Civil procedure or any successor provisions thereto. The foregoing limitation of liability is intended to apply only to the obligation for the repayment of the principal of, and payment of interest on the Note and the performance of Trustor's obligations under the City 's Deed of Trust, except as hereafter se forth; nothing contained therein is intended to relieve the Borrower of its obligation to indemnify the City under Section 8.1 1 and 8.1 2(c) of the City Loan Agreement, or liability for (I) fraud or willful misrepresentation; (ii) the failure to pay taxes, assessments or other charges which may create liens on the Property that are payable or applicable prior to any foreclosure under the City Deed of Trust (to the full extent of such taxes, assessments or other charges); (iii) the fair market value of any personal property or fixtures removed or disposed of by Borrower other than in accordance with the City Deed of Trust; and (iv) the misapplication of any proceeds under any insurance policies or awards resulting from condemnation or the exercise of the power of eminent domain or by reason of damage, loss or destruction to any portion of the Property. 10.16 City Approvals and Consents. Except as otherwise expressly provided herein, in any approval, consent, or other determination by the City under the City Loan Documents, the City shall act reasonably, in good faith and without delay. Rancho Canillo Loan Agr.Fina1 29 01/14/99 10.1 7 Multiple Originals; Counterpart. This Agreement may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first written above. BORROWER: CARLSBAD FAMILY HOUSING PARTNERSHIP, a California limited partnership By: Housing Opportunities, Inc., a California nonprofit public benefit corporation, Manaaina General Partner " CITY OF CARLSEAD, a municipal APPROVED AS TO FORM: City Attorney Rancho Carrillo Loan Agr.Fina1 30 01/14/99 EXHIBIT A Legal Description of the Land Lot 207 of Carlsbad Tract 97-02 Rancho Carrillo Villages "A Through D" according to Map No. 13582 filed with the County Recorder of San Diego County on June 10, 1998. Rancho Carrillo Loan Agr.Fina1 31 01/14/99 EXHIBIT B Permitted Uses of Loan Proceeds (Borrower's Sources and Uses of Funds) Rancho Carrillo Loan Agr.Fina1 32 01/14/99 01/07_/99 THLI 18:04, FM 619 232 2127 BARONE GAUSS0 002 .. .. " .. .. .... - .. ... -2.:> - ' - .. L- 1' .. .. .. RANCHO CARRILLO APA.RTMENTS .. CHFAJXTAX EXEMPT BONDS .... SOURCES.AND USES SUMMARY. ' . .. .. , PERMANENT: . . , .. .. .. .. .. SOURCEOF FUNDS: .. .. ... ". PERWENT LOAN~S) -.CHFA .. TMCREMT EQUITY -.FEDERAL CONTINENTAL LAND COWTUIBUllON .. CONTINENTAL LOAN CINLOAN . ' ' SDGhE REFUND , DEFERRED DEVELOPER FEE ..... ... TOTAL SOURCES:. USES OF FUNDS: I PROJECT CMISULTANTS: .. .. ... ACQUIS~TIGN ... PEWITS AND FEES ,. CONSTRUCTIW, ' : DEVELOPMENT EXPENSES , . . FINANCING: TOTAL USES OF FUNDS .. FUNDINGOVERAGU(SHORTFALL) .. . ' . ~. . .. .. .. .. $0 ... .. .... .. . .. CONSTRUCTION: SOURCEOF FUNDS ,. ., , .. , .. .... ... .. .. .. .. , ,CONSTRUCTIONLOAN . ' fl,4il,SSO .. ,. , , .TAX CREDIT EWIM -.W% @ EONSTkUCTION 1,333,623 .~ CONTINENTAL IAND CONTRIBUTION ... .. 3,432,000 ,. CONTINENTAL LOh ,. 1,297,967 . : . CiNLOAN , '. I.1SO.WO .. 114,356A40 .. .... .. .. . ., . ' ' TOTALSOURCES .. .. .. .. .. ,. . . : ..... .. .. ., .. . ' USES OF FUNDS: ACQUISITIOH: . i .... U.139,M)O PROJECT CONSULTANTS: , . 411,500 .. .. .. .. . , PERMITSANDFEES t,215,420 .. . . CONSTRUCTION ' . ' 8,329,836 .. . DEVELOPMENT EXPENSES .. .608,800 '~~3,000deter~d(eeduAligoolu~"ucllon' .. .. .. , FINANCINO: . ' 729,985 .. .. - .. ', TOTAL USESOFFUNCiS: . : .. .. $14- . . .... .. FUNDINQ OVERAGU~SHORTFALL) ~. .. "_ . .. ($0) .. .. .. ~. RC -The kudget.wk4 .~ ., 12/24/98 09:38.AM Barone Galasso and Associates. Inc. ' . .. .. :. . .. .. .. .~ .. .... .. ,. ... . ,.: .. ,, 01/07/99 THC1 18:05 FA?( 619 232 2127 BARONE GAUSS0 - - 003 RANCHO wmuo APARTMENTS CHFA 4n TAX EXEMPT BONDS PAYIN SCHEDULE IMSE ONE: Site AcaulrmOn 6 New CwM~cfJorI ~~ ~ ~ I Comtruclial SOURCES: USES ~~~~~~~ ~ Union Bank Cay d Carlsbad Boston capita1 *I ~ 60% Continental Homer Purchase Rke Note Contlnsntal Homer Master Dev. Loan TOTAL SOURCES S14.335.040 TOTAL USES: S14SShma RC -The BudgcLwk4 01107199 0545 PM EXHIBIT C CITY NOTE $1 ,160,000 January 8, 1999 Carlsbad, California FOR VALUE RECEIVED, CARLSBAD FAMILY HOUSING PARTNERSHIP, a California Limited Partnership ("Borrower"), promises to pay to the City of Carlsbad ("City"), or order, the principal sum of One Million One Hundred Sixty Thousand Dollars ($1,160,000). or so much thereof as is advanced to Borrower by the City pursuant to Section 4.6 of the Loan Agreement (defined below), plus simple interest accruing at the rate of three percent (3%) per annum and subject to the default rate of interst described in Section 4.2 of the Loan Agreement. 1. Loan Aareement. This City Note is made pursuant to an Affordable Housing Loan Agreement dated as of January 8, 1999 (the "Loan Agreement") by and between the Borrower and the City, and as contemplated by a Regulatory Agreement to be executed by the Borrower and the City (the "City Regulatory Agreement"). 2. Term. The term of this City Note (the "Term"] shall commence on the date of this City Note and shall end fifty-five (55) years from the date of recordation of the deed of trust securing the Permanent Loan (as defined in the Loan Agreement) (the "Due Date"), but in no event later than January 1, 2056. 3. Amount and Time of Pavments. All amounts due under this City Note shall be due and payable as set forth in Section 4.3 of the Loan Agreement. 4. Preoavment. Borrower shall have the right at any time to prepay all or a portion of the principal and interest due under this City Note without any charge or penalty being made therefor. 5. Deed of Trust. This City Note is secured by a deed of trust of even date herewith (the "City Loan Deed of Trust"). 6. Acceleration. Upon the occurrence of a default under the Loan Agreement, City Regulatory Agreement or City Loan Deed of Trust, and expiration of all applicable notice and cure periods (an "Event of Default"), the City shall have the right to accelerate the Due Date of this City Note and declare all of the unpaid principal and accrued interest immediately due and payable. Any failure by the City to pursue its legal and equitable remedies upon an Event of Default shall not constitute a waiver of the City's right to declare an Event of Default and exercise all Rancho Canillo Promissory Note.Fina1 1 01/14/99 . of its rights under this City Note, the City Regulatory Agreement, the City Loan 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 principal and interest owed. 7. No Offset. Borrower hereby waives any rights of offset it now has or may hereafter have against the City, its successors and assigns. 8. Waiver: Attornevs' Fees. Borrower and any endorsers or guarantors of this City 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 City 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 City Note or agreement to pay the same, and jointly and severalty agree to pay all costs of collection when incurred, including reasonable attorneys' fees. If an action is instituted on this City 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. 9. Manner and Place of Pavment. All payments of principal and interest due under this City Note, as well as any additional payments set forth in the City Loan Deed of Trust, shall be payable in lawful money of the United States of America at the office of the City of Carlsbad, Housing and Redevelopment Department, 2965 Roosevelt Drive, Suite B, Carlsbad, California 92008, or such other address as the City may designate in writing. 10. Nonrecourse Obliaation. Except as provided below, neither the Borrower nor any partner of the Borrower shall have any direct or indirect personal liability for payment of the principal of, or interest on, this City Note, the City Loan Agreement or the performance of the covenants of Borrower under the City Deed of Trust. The sole recourse of the City with respect to the principal of, or interest on, the City Note and defaults by Borrower in the performance of its covenants under the City Loan Agreement, and City Deed of Trust shall be to the property described in the City Deed of Trust; Provided, however, that nothing contained in the foregoing limitation of liability shall (a) limit or impair the enforcement against all such security for the City Note of all the rights and remedies of the City thereof, or (bl be deemed in any way to impair the right of the City thereof to assert the unpaid principal amount of the Note as demand for money within the meaning and intendment of Section 431.70 of the California Code of Civil procedure or any successor provisions thereto. The foregoing limitation of liability is intended to apply only to the obligation for the repayment of the principal of, and payment of interest on the Note and the performance of Trustor's obligations under the City's Deed of Trust, except as hereafter se forth; nothing contained therein is intended to relieve the Borrower of its obligation to indemnify the City under Section 8.1 1 and 8.1 2 of the City Loan Agreement, or liability for (I) fraud or willful misrepresentation; (ii) the failure to pay taxes, assessments or other charges which may create liens on the Rancho Canillo Promissory Note.Fina1 2 01/14/99 Property that are payable or applicable prior to any foreclosure under the City Deed of Trust (to the full extent of such taxes, assessments or other charges): (iii) the fair market value of any personal property or fixtures removed or disposed of by Borrower other than in accordance with the City Deed of Trust: and (iv) the misapplication of any proceeds under any insurance policies or awards resulting from condemnation or the exercise of the power of eminent domain or by reason of damage, loss or destruction to any portion of the Property. BORROWER: CARLSBAD FAMILY HOUSING PARTNERSHIP, a California limited partnership By: Housing Opportunities, lnc., a California nonprofit public benefit corporation, Manaaina General Partner Bv: BaronnGalasso & Associates Inco'rporated, hrporation, Co-General Partner Rancho Canillo Promissory Note.Fina1 3 01/14/99