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2003-95439 RECORDED REQU EST OF First/lmerican Title RECORDING Pd~QUESTED BY AND WHEN RECORDED MAIL TO: 8507 CITY OF ENCINITAS COMMUNITY DEVELOPMENT DEPARTMENT 505 S. Vulcan Ave. Eneinitas, CA 92024 0RI$1NAL 000 -2003-00954, . ...... JAN 28, 2003 8:56 AM OFFIOIAL RECORDB 8AN DIEGO COUNTY RECORDER'80FFEE GEEGORY J. ~4ITN, COUNTY RE[tBDER FEE~: 0.00 ~Y: 2 I liilll lllll[l 11111111Illllllllllll 2~0~4~ This document is exempt from the payment of a recording tee pursuant to Government Code Section 6103~ (Space above this line for Recorder's use) DEED OF TRUST WITH ASSIGNMENT OF RENTS This Deed of Trust is made this lath day ofoanu~r? , 2003, by Cantebria Senior Homes, a California nonprofit public benefit corporation (the "Borrower), whose business address is 500 South Main St., Ste.. ! 10, Orange, CA 92868, to First American Title Company (the "Trustee"), whose business address is 41.1..Ivy St., San Diego, California 92101 in favor of the City of Encinitas, ("City"), whose principal office is at 505 S. Vulcan Ave., Encinitas, California 92024. l. BORROWER HEREBY IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS to Trustee in trust, with power of sale and right of entry and possession, all of Borrower's rights, title and interest now held or hereafter acquired in and to the following: (a) All of that certain real property located in the City of Eneinitas, State of California, described in Exhibit A (attached) which Exhibit is incorporated in this Deed of Trust by this reference; and (b) all buildings, and improvements now or hereafter erected thereon, and all appurtenmaces, easements, and articles of property now or hereafter affixed to, placed upon or used in connection with the property and owned by Borrower or in which Borrower has an interest, together with all additions to, substitutions for, changes in or replacements of the whole or any part of said articles of property (all of which real and personal property are sometimes ret'erred to as the ("Property"); all of which are hereby pledged and assigned, transferred, and set over unto Trustee, and for purposes of this Deed of Trust declared to be part of the realty. 2. BORROWER HEREBY ABSOLUTELY, UNCONDITIONALLY AND IRREVOCABLY ASSIGNS to the City all rents, royalties, issues, accounts and profits of or relating to the Property and all of Borrower's interest under all leases, subleases, rental agreements and other contracts and occupancy agreements relating to the use and possession of the property, for the purposes and upon the terms and conditions hereinafter set forth. This assignment is absolute, primary and direct and is not intended to be a separate or secondary CITY OF ENCINITAS/CANTEBPdA SENIOR HOMES- DI3EO OF TRUST Page I pledge, or other form of additional security, and no further ~ct or step is or shall be required of City to perfect this assignment. Notwithstanding the foregoing, the City confers upon the Borrower a license to collect and retain the rents, issues and profits of the Property as they become due and payable until an Event of Default (hereinafter defined), upon the occurrence of which said license shall be automatically revoked. This assignment shall not impose upon City any duty to cause the Property to produce rents nor shall the City be deemed to be a mortgagee in possession by reason thereof for any purpose. 3. THE ABOVE GRANT, TRANSFER, AND ASSIGNMENTS ARE FOR TIIE PURPOSE OF SECURING: (a) Payment of the indebtedness of the Borrower evidenced by a promissory note of even date herewith, in the face amount of Six-Hundred Fourteen Thousand_Dollars ($614,000) (the "Note"), together with interest on such indebtedness according to the terms of such Note, and any and ail amendments, modifications, extensions or renewals of the Note and the indebtedness and all other sums becoming due and payable to the City, or Trustee, pursuant to the terms of this Deed of Trust; (b) Payment of such additional indebtedness, when evidenced by a promissory note or notes reciting the same to be secured by this Deed of Trust, together with interest, as the City may advance to Borrower, or its successor in interest, from time to time and payment or performance of such other obligations as the then record owner of the Property may agree to pay or perform when evidenced by a promissory note or other instrument or agreement reciting that it is secured hereby; and (c) Performance and observance of all of the terms, covenants and conditions to be performed or observed by Borrower under any note, Deed of Trust, or other document or agreement relating to the project as described herein and in the CDBG Affordable Housing Agreement and Development Agreement which are incorporated herein and made part of this Deed of Trust. 4. TO PROTECT THE SECURITY OF THIS DEED OF TRUST, BORROWER AGREE S: 4.1 Maintenance of the Property. (a) To keep the Property in a decent, safe, sanitary, and tenantable condition and repair and permit no waste thereof; (b) not to commit or suffer to be done or exist on or about the Property any condition causing the Property to become less valuable; (e) not to construct any buildings and improvements on the Property, other than the buildings and improvements now or hereinafter located on the Property and which are listed in the Development Agreement; (d) to rebuild promptly any buildings or improvements on the Property that may become damaged or be destroyed while subject to the lien of this Deed of Trust; (e) to comply with all applicable laws or governmental regulations affecting the Property or requiring any alteration or improvement thereof, and not to suffer or permit any violations of any such laws, ordinances or governmental regulations, nor of any covenant, condition or restriction affecting the Property; (f) not to initiate or acquiesce in any change in any zoning or other land use or legal classification which affects any of the Property without the City's prior CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES- DEED OF TRUST Page 2 written consent; and (g) not to alter the use of all or any part of the Property without the prior written consent of the City. 4.2 Insurance. To keep the Property insured, with loss payable to the City, against loss or damage by fire and such other haT~rds, casualties and contingencies and by such companies, on such forms and in such amounts as the City may from time to time require, and to deliver the original of all such policies to the City, together with receipts satisfactory to the City at least thirty (30) days prior to the expiration of existing policies. Neither Trustee nor the City shall by reason of accepting, rejecting, approving or obtaining insurance incur any liability for the existence, nonexistence, form or legal sufficiency of such insurance, or solvency of any insurer for payment of losses. 4.3 Payment of Taxes and Utility. Charges. To pay, at least ten (10) days prior to delinquency, all taxes and assessments, both general and special, fines, penalties, levies and charges of every type or nature levied upon or assessed against any part of the Property or upon Tmstee's or the City's interest in the Property. 4.4 Escrow Deposits. At City's option and upon its demand, to pay to City on the day upon which installments of interest and/or principal are due under the Note, such mounts as City from time to time estimates as necessary to create and maintain a fund (the "Fund") from which to pay, before the same bacome due, the next maturing taxes, assessments, levies, charges and insurance premiums on or against the Property. Any excess accumulated in the Fund over the amount required for such purposes shall be held for future use or applied to any indebtedness or obligation hereby secured, or refunded to Borrower, at the City's option; any deficiency shall be made up by Borrower on written demand of City. City shall place the amounts in the Fund in an interest bearing account and shall credit the interest earned on such amounts to the Fund semiannually; provided that upon the Fund's termination any interest amount due shall not be payable sooner than six months from the date of the last payment credited to the Fund. Amounts in the Fund shall be released to Borrower for application to or shall be applied by City to payment of such taxes, assessments, levies, charges and insurance premiums, even though subsequent owners of the Property may benefit thereby; provided, however, that in the event of any default under tiffs Deed of Trust, all or any part of the Fund may be applied to any indebtedness or obligation hereby secured, in such order and manner as City may determine at its option. Borrower agrees that any conveyance of its interest in the Property shall have the effect of transferr/ng to the grantee of said conveyance all of Borrower's interest in and all its rights to the Fund without further act on the part of Borrower, and that in refunding ail or any part of the Fund, City may deal with whoever is represemed to be the owner of the Property. The collection by City, pursuant to the terms of tiffs paragraph, of monthly installments to cover taxes, assessments, levies, charges and insurance premiums :may be suspended or terminated by City at any time upon written notice sent to the owners of the Property, such collection being solely for the added protection and benefit of City and entailing no responsibility on City other than to apply sums actually received by it and to pay interest on sams held by it as provided in the Deed of Trust. CITY OF ENCINrrA$/CANTEBRIA SENIOR HOMES- DEED OF TRUST Page 3 4.5 payment and Discharge of Liens. Borrower will pay, when due, all Claims of every kind and nature wh/ch might or could become a lien on the Property or any part thereof of any kind or nature other than this Deed of Trust; provided, however, that the following are excepted from this prohibition: (a) liens for taxes and assessments which are not delinquent although by law are given the status of a lien, and Co) such of the above claims as are, and only during the time they are, being contested by Borrower in good faith and by appropriate legal proceedings. Borrower shall post security for the payment of these contested claims as may be requested by City. 4.6 Rights of City to Remedy Defaults. If Borrower defaults in payment of any tax, assessment, lien, claim, insurance premium, or any other proper charge in whole or in part, or defaults in the performance of any of the Loan Documents (as defined in the Development Agreement), City at any time and from time to time, with or without notice or demand upon Borrower, may make such payments or perform any such acts required of Borrower, to such extent and in any form or manner deemed expedient by City and pay any other sums, expenses and charges, including attorneys' fees, necessary to protect the Property and the lien of this Deed of Trust, without incurring any obligation so to do or releasing Borrower from any obligations and without waiving or curing any default. City shall be the sole judge of the validity, priority, and amount of any such tax, assessment, lien, premium, claim or charge so paid by it and the necessity for the performance by City of any such obligation which Borrower was required but failed to perform. City, at its option, shall be subrogated to any tax, assessment, lien, premium, claim or charge which it has paid under these provisions and any such subrogation rights shall be additional and cumulative security to those set forth in the Loan Documents. 4.7 Repayment to City, Upon City's payment of any tax, assessment, lien, claim, insurance premium or other charge which Borrower fails to pay or upon City performance of any obligation which Borrower fails to perform, all as set forth in paragraph 4.6 above, the amount so paid or the cost of performing any such obligation, together with other sums paid or incurred by City, including charges, expenses and reasonable attorneys' fees thereon from date of payment at the rate of eight percent (8%) per annum, shall be paid by Borrower to City upon written demand. The aggregate of all such amounts, including interest, shall be secured by the lien of this Deed of Trust. 4.8 Defense of ActiHns and Payment of Costs. Borrower will appear in and defend all actions and proceedings purporting to affect the Property or any right or power of City or Trustee hereunder, provided that City and Trustee, or either of them, may appear in and defend any such action or proceeding and City is authorized to pay, purchase or compromise on behalf of Borrower any lien or claim which in its judgment appears to or purports to affect the security of or to be superior to this Deed of Trust. Borrower will pay on demand all sums so expended and all charges~ expenses and attomeys' fees reasonably incurred, with interest from the date of expenditure at eight pement (8%) per annum. Borrower shall give City prompt written notice in writing of (a) the assertion of any claim, (b) the filing of an action or proceeding, (c) the occurrence of any damage to any of the Property, (d) any condemnation and (e) any other material nonmonetary default. CITY OF ENCINITAS/CANTEBR[A SENIOR hOMES - DEED OF TRUST Pa8* '* 5. IT IS MUTUALLY AGREED THAT: 5.1 Awards and Damages. All judgments, awards of damages, settlements and compensation made in connection with or in lieu of (a) taking of all or any part of or any interest in the Property by or under assertion of the power of eminent domain, (b) any other injury or damage to all or any part of the Property, are hereby assigned to and shall be paid to City. City is authorized and empowered (but not required) to collect and receive any such sums and is authorized to apply them in whole or in part upon any indebtedness or obligation secured hereby, in such order and entitled to settle and adjust all elalms under insurance policies provided under this Deed of Trust and may deduct and retain from the proceeds of such insurance the amount of all expenses incurred by it in connection with any such settlement or adjustment. All or any part of the amounts so collected and recovered by City may be released to Borrower upon such conditions as City may impose for its disposition. Application of all or any part of the amounts collected and received by City or the release thereof shall not cure or waive any default under this Deed of Trust. 5.2 Sales and Encumbrances Prohibited. Borrower shall not make any sale, assignment or conveyance, or transfer in any other form, nor any further pledge, encumbrance or mortgaging, of the Property, or any part thereof or of any of its interest therein, other than in accordance with the terms of the Loan Documents. 5.3 Sale or Forbearance. No sale of the Property, forbearance on the part of City or extension of the time for payment of the indebtedness hereby secured shall operate to release, discharge, waive, modify, change or affect the liability of Borrower either in whole or in part. 5.4 Late Payment. City's acceptance of late payment of any sum shall not constitute a waiver of its rights to require prompt payment when due of all other indebtedness, or to declare a default for any failure so to pay, or to proceed with foreclosure or sale for any other default then existing. City's acceptance of partial payment of any sum after default shall not cure such default or affect any notice of default unless City expressly revokes such notice of default in writing. 5.5 City's Rights to Release. Without affecting the liability of any person for payment of any indebtedness hereby secured (other than any person released pursuant hereto), including without limitation, any one or more endorsers or guarantors, and without affecting the lien hereof upon any of the Property not released pursuant hereto, at any time and from time to time without notice: (a) City may, at its sole discretion, (i) release any person now or hereafter liable for payment of any or all such indebtedness, (ii) extend the time for or agree to alter the terms of payment of any or all of such indebtedness, and (iii) release or accept additional security for such indebtedness, or subordinate the lien or charge hereof; and (b) Trustee, acting pursuant to the written request of City, may reconvey all or any part of the Property, consent to the making of any map or plat thereof, join in granting any easement thereon, or join in any such agreement of extension or subordination. 5.6 Reconveyance. Upon written request of City stating that all sums and obligations secured hereby have been discharged, or otherwise as requested in writing by City, and upon surrender of this Deed of Trust and the Note and any additional loan notes to Trustee for CITY OF ENCINITAS/CAN'I'EB KIA SENIOR HOMES- DEED OF TRUST Page 5 '! cancellation, and upon payment to Trustee of its fees and expense, Trustee shall reconvey, without warranty, the Property or that part thereof then held hereunder. The recitals in any reconveyance shall be conclusive proof of their truthfulness and the grantee in any such reconveyance may be described "as the person or persons legally entitled thereto." When the Property has been fully reconveyed, the last such reconveyance shall operate as a reassignment of all of the rents, royalties, issues, accounts and profits of the Property to the person or persons legally entitled thereto unless such reconveyance expressly provides to the contrary. 5,7 Even. t~. of Default. Any one or more of the following events shall constitute a default under this Deed of Trust: (a) Failure of the Borrower to pay the indebtedness secured hereby or any installment thereof, whether principal or interest, payable, whether at maturity or by acceleration or otherwise; or (b) failure of Borrower to observe or to perform any covenant and/or condition to be observed or performed by Borrower pursuant to the Loan Documents, 5.8 Acceleration and Sale. (a) Aecelaration. In the event of any default as set forth in paragraph 5.7 above, City, without demand on Borrower, may declare all sums hereby secured immediately due and payable by notice thereof to the Borrower or by executing and recording or by causing the Tmstee to execute and record a notice of default and election to cause the Property to be sold to satisfy the obligations secured hereby, or by the commencement of an appropriate action to foreclose this Deed of Trust or by any other appropriate manner; (b) Foreclosure Procedure. Whenever a notice of default and intent to sell is issued pursuant to Civil Code Section 2924, the City will follow the notice and hearing procedures established in Section 7938 Title 25, California Administrative Code in addition to other provisions of law. 5.9 Entry Possession and Receivership. In the event of any default hereunder and irrespective of whether City accelerates the maturity of all indebtedness secured hereby or files a notice of defhult hereunder, City at any time, without notice of demand or regard to the adequacy of any security for the indebtedness and obligations hereby secured, in person, or by any agent or employee, or by receiver appointed by court, may enter upon and take the possession of the Property or any part thereof and including the right to rent, lease, operate and maintain any part or all of the Property, and may sue for or otherwise collect and receive all rents, royalties, issues, accounts and profits thereof, including these past due as well as those accruing thereafter. Borrower hereby presently assigns to City, absolutely and regardless of possession of the Property, all rents and other monies now due or hereafter to become due under any lease or agreement or otherwise for the use of occupation of all or any part of the Property, now existing or hereafter made, reserving to Borrower such rents as they become due, but not otherwise. Borrower shall on demand execute such further assignments to City of any or all such leases, agreements, rems or monies as the City may require, and deliver to City a fully executed original of any or all such leases or agreements. City by any agent, employee or receiver, may also take possession of, and for these purposes use, any and all of Borrower's personal property contained in or on the Property and used by Borrower in the operation, rental or leasing thereof or any part thereof. The expense (including, bm not limited to, receivers' fees, attorneys' fees and agents' CITY OF ENCINITAS/CAIqTEBKIA SENIOR HOMES- DEED OF TRI,IST ['age 6 851.3 compensation) incurred by City pursuant to the power herein contained shall be secured hereby. City may bring or defend uny legal action in connection with the Property, as it may deem proper, and may, from time to time, make all necessary or proper repairs, replacements and alterations to the Property, as it may seem judicious, and may insure and reinsure the same, und may lease the property or any part or parts thereof in such parcels und for such periods and on such terms as it may seem fit, including leases for terms und for terms expiring after the maturity of the indebtedness hereby secured, and may terminate any lease for uny case which would entitle Borrower to terminate it. After deducting the expenses of managing and operating the same and all maintenance, repairs, replacements and alterations und all payments which may be made for taxes, assessments, liens, claims, insurance premiums, or other proper charges of the Property or any part and for agents employed by City to manage and operate the Property, City may apply any und all remaining funds to the payments of the indebtedness hereby secured in such order and proportion as City may determine. Neither application of said amounts to such indebtedness nor uny other action taken by City under this paragraph shall cure or waive uny default hereunder or nullify the affect of any such notice of default or invalidate any act done pursuant to such notice or any cause of action to foreclose this Deed of Trust. The right to enter and take possession of the Property, to manage and operate the same, and to collect the rents, issues and profits thereof, whether by a receiver or otherwise, shall be in addition to any other right to remedy hereunder or afforded by law, and may be exercised concurrently therewith or independently thereof. City shall be liable to account only for such rents, royalties, issues, accounts und profits actually received by it. This provision shall not apply as long as a deed of trust affecting the Project and the Property is help by the Secretary of the U.S. Department of Housing und Urban Development, including his successors and assigns (the "HUD Secretary'S), or a regulatory agreement and/or use agreement in favor of the HUD Secretary is still outstanding. 5.10 Attorneys' Fees, If Trustee or City shall be made parties to or shall intervene in any action or proceeding affecting the Property or the title thereto or the interest of Trustee or City under this Deed of Trust, or if City employs an attorney (including the Attorney General of the State of California) to collect any or all of the indebtedness hereby secured or to foreclose this Deed of Trust, or authorizes Trustee to act on its behalf, City shall be reimbursed by Borrower, immediately and without demand, for all reasonable costs, charges and attorneys' fees incurred by them or either of them in any such case whether or not a suit be commenced, und the same, together with interest thereon from the date of payment at the rate of eight percent (8%) per annum, shall be secured hereby as provided in paragraph 4.7. 5.11 Exercise of Remedi0.~ Delay. No exercise of any right or remedy herein contained or provided by law, and no delay by City or Trustee in exercising any such right or remedy hereunder shall operate as a waiver thereof or preclude the exemise thereof during the continuance of any default hereunder. 5.12 Trustee Substitution. The irrevocable power to appoint a substitute trustee or trustees hereunder is hereby expressly grunted to City to be exercised at any time hereafter, without specifying any reason therelbr by filing for record in the office where this Deed of Trust CITY OF ENCINITA~/CANTEBRIA SENIOR HOMES - DEED OF TRUST Page 7 is recorded a deed of appointment, and said power of appointment of successor trustee or trustees may be exercised as often as and whenever City deems advisable. The exercise of said power of appointment, no matter how often, shall not be deemed an exhaustion thereof, and upon recording of such deed or deeds of appointment, the trustee or trustees so appointed shall thereupon, without further act or deed of conveyance, succeed to and become fully vested with identically the same title and estate in and to the Property hereby conveyed and with all the fights, powers, trusts and duties of the predecessor in the trust hereunder, with the like effect as if originally named as trustee or as one of the trustees. 5.13 Remedies Cumulative. No remedy herein contained or conferred upon City or Trustee is intended to be exclusive of any other remedy or remedies afforded by law or by the terms hereof to the City or Trustee but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity. 5.14 Successors, Assigns, Gend~.r, Number. The covenants and agreements herein contained shall bind, and the benefit and advantages shall inure to, the respective heirs, executors, administrators, successors and assigns of the parties. Wherever used, the singular number shall include the plural, and the plural the singular, and the use of any gender shall be applicable to all genders. 5.15 Headings. The headings are inserted only for convenience of reference and in no way define, limit, or describe the scope or intent of this Deed of Trust, or of any particular provision thereof, or the proper construction thereo£ 5.16 Actions on Behalf of City. Except as is otherwise specifically provided herein, whenever any approval, notice, direction, consent, request or other action by City is required or permitted under this Deed of Trust such action shall be in writing. 5.17 Obligations....gf Borrower. If more than one person has executed this Deed of Trust as Borrower, the obligations of all such persons hereunder shall be joint and several. 5.18 Miscellaneous Provisions. (a) Beneficiar~ Slatement. City may charge a fee of fifty dollars ($50) for farnisking any statement required by California Civil Code Section 2943. (b) Severabilitw. If any provision of this Deed of Irust shall be invalid, illegal or unenfbrceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired, (c) Indemnification.. Borrower will indemnify and hold City, its officers and agents harmless against any and all losses, claims, demands, penalties and liabilities which City, its officers or agents may sustain or suffer by mason of anything done or omitted in good faith pursuant to or in connection with this Deed or Trust and not assert any claim against City, its officers or agents by reason of any action so taken or omitted. Borrower shall, at Borrower's CITY OF ENCllqlTAS/CANTEBIUA SENIOR HOMES - DEED OF TRUST Pagc 8 expense, defend, indemnify, save and hold expenses, damages (general, punitive or otherwise), causes of action (whether legal or equitable in nature) asserted by any person; firm, corporation or other entity arising out of this Deed of Trust and Borrower shall pay City upon demand all claims, judgments, damages, losses or expenses (including reasonable legal expense) incurred by City as a result of any legal action arising out of this Deed of Trust. (d) Offset. Borrower shall not under any circumstances fail or delay to perform (or resist the enforcement of) any of its obligations to City in connection with this Deed of Trust or any other contract, note or instrument executed by Borrower in favor of City because of any indebtedness or obligation of City which has not been confirmed in a final judgment of a court of competent jurisdiction (sustained on appeal, if any). against City, and Borrower hereby waives any such rights of set-off (or offse0 which it might otherwise have with respect to any such claims or causes of action against City or any such obligations or indebtedness of City, unless and until such right of set-off (or offset) is confirmed and liquidated by such final judgment. Borrower further waives any right which it might otherwise have (if any) to require a marshalling of any security of the City or to direct the order in which City pursues its rights or remedies with respect to any of its security. 5.19 HUD Required Provisions. Notwithstanding any other provisions in this Deed of Trust and so long as a mortgage affecting the Property is held by the Secretary of Housing and Urban Development, including any successors or assi~,ms (collectively, the "HUD Secretary"), or a regulatory agreement and/or use agreement in favor of the HUD Secretary is still outstanding, the fbllowing provisions shall apply: (a) HUD's Consent. The City shall not declare any default pursuant to the provisions of Paragraph 5.7 herein unless the City has received the prior written consent of the HUD Secretary. (b) Subordination. _The City's rights and powers under this Deed of Trust are subordinate and subject to the rights of the HUD Secretary under that certain Deed of Trust With Assignment of Rents (the "First Deed of Trust" delivered or to be delivered by the Borrower for the benefit of the HUD Secretary in connection with a Section 202 Program capital advance made or to be made in the amount of $3,687,900, or such other amount as approved by the HUD Secretary, and identified by the HUD Secretary as Project No. 129-EE021-WAH-NP; that certain Security Agreement executed or to be executed by and between the Borrower and the HUD Secretary; that certain Capital Advance Program Use Agreement (the "HUD Use Agreement") executed or to be executed by the Borrower and the HUD Secretary, and recorded or to be recorded in the Official Records of the County of San Diego (the "Official Records"); and that certain Capital Advance Program Regulatory Agreement (the "HUD Regulatory Agreement") executed or to be executed by the Borrower and the HUD Secretary, recorded or to be recorded in the Official Records and incorporated by reference in the First Deed of Trust. CITY OF ENCINITAS/CANTEBRIA SENIOR hOMES- DEED OF TRUST Pag~ 9 (c) Rights to Rents Collected. In the event of the appointment of a receiver or of the appointment of a receiver or of the appointment of the City as mortgagee-in-possession, in any action by the City or its successors or assigns, to foreclose the mortgage created by this Deed of Trust, no rents, revenue or other income of the project collected by the receiver or by the City, as mortgagee-in-possession, shall be utilized tbr the payment of interest, principal, or any other charge due and payable under this Deed of trust, except from residual receipts, if any, as that term is defined in the HUD Regulatory Agreement; and further, the receiver of City, as mortgagee-in-possession, shall operate the Project in accordance with all the provisions of the First Deed of Trust, HUD Use Agreement and the HUD Regulatory Agreement. (d) Deed-in-Lieu of Foreclosure. In the event the HUD Secretary acquires title to the Project by a deed-in-lieu of foreclosure, the lien of this Deed of Trust will automatically terminate subject to the conditions hereinafter described. The City may cure a default under the First Deed of Trust prior to conveyance by deed-in-lieu of foreclosure. The HUD Secretary shall give written notice to the City of proposed tender of title in the event the HUD Secretary decides to accept a deed-in-lieu of foreclosure. The HUD Secretary will only give such written notice if, at the time of the placing of the subordinate lien against the Project, the HUD Secretary receives a copy of any endorsement to the title policy of the Borrower or the City which indicates that (i) this Deed of Trust has been recorded and (ii) the HUD Secretary is required to give notice of any proposed election or tender of a deed-in-lieu of foreclosure. Such notice shall be given at the address stated herein or such other address as may subsequently, upon written notice to the HUD Secretary, be designated by the City as its legal business address. The City shall have thirty (30) days to cure the default after notice of intent to accept a deed-ln-lieu of foreclosure is mailed. Borrower's Notice to City. Notwithstanding the above requirements, in the event that Borrower contemplates executing a deed-in-lieu of foreclosure, Borrower shall first give the City thirty (30) days' prior written notice; provided, however, that the failure of the Borrower to give said notice shall have no effect on the right of the HUD Secretary to accept a deed-in-lieu of foreclosure. (t) No Amendments. This Deed of Trust, and in particular, this Paragraph 5.19, shall not be mended without prior written consent of the HUD Secretary. IN WITNESS WHEREOF, Borrower has executed this Deed of Trust on the day and year set forth above. Ifa mailing address is set forth opposite its signature below, and not otherwise, the Borrower shall be deemed to have requested that a copy of any notice of default and of.any notice of sale hereunder be mailed to it at such address. CITY OF ENCINITAS/CAN'I'E}IRIA S~NIOR HOME.g- DEED OF TRUST Page 10 8517 MAILING ADDRESS FOR NOTICES To Borrower: Cantebria Senior Homes 500 South Main St., Ste. 110 Orange, CA 92868 Attn: Regional Director To Beneficiary: City of Encinitas 505 S. Vulcan Ave. Eneinitas, CA 92024 SIGNATURE OF BORROWER Cantebria Senior Homes Amy Bayley, Sccr.~tary / ATTACH ACKNOWLEDGEMENTS HERE CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES - DEED OF TRUST Page 11 EXHIBIT A LEGAL DESCRIPTION The land referred to herein is situated in the State of California, County of San Diego, and described as follows: Lot 44 of amended map of City of Encinitas Map No. 13258, City of Encinitas, Tract No. 94- 066, Units I, II and III, in the City of Eneinitas, County of San Diego, State of California, according to map thereof No. 13333, filed in the office of the County Recorded of San Diego County, June 3, 1996. CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES- DEED OF 'I'RIOST Page 12 State of California ) County of San Francisco ) On this 14th day of January, 2003, before me, the undersigned, a notary public in and for said state, personally appeared Amy Bayley, RSM, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(e) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capaclty(ies) and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WIT,[qESS/~y hand and official seal. G. Hoshlyama (print name) 8484 RECORDED REQU'F. ST OF First Atttericatt Title RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: CITY OF ENCINITAS COMMUNITY DEVELOPMENT DEPT. 505 S. Vulcan Ave. Eneinitas, CA 92024 ORIGINAL DOC 003-0095438 JAN 28, 2003 OFFIOIAL $qN ~IEGOCXI~TYREtt]RIt'R'80FFIOE I]~[GORY J, 8NITH, ~l]t~[IY ~OORIIER FEEg: 0.00 I llll$ lllllll llllllllllllllllllll 20~3.00~3~435 , This document is exempt from the payment of a recording fee pursuant to Government Code Section 6103. Dated: 0i / 14,{ 2003 REGULATORY AGREEMENT This Regulatory Agreement (the "Regulatory Agreement") is made and entered into as of this i4uaday of January , 2003 by and between the City of Encinitas (hereinafter the "City"), and Cantebria Senior Homes (hereinafter the "Contractor"). RECITALS The Contractor or its affiliate, Cantebria Sen/or Housing (''Senior Housing"), is or is about to become the owner of real property (hereinafter the "Property") described in Attachment A attached hereto and made a part hereof. Contractor has applied to the City fbr financial assistance in order to develop and operate a "Housing Project" consisting of forty-four (44) units for very low income elderly persons, as defined by the U.S. Department of Housing and Urban Development ("HUD") under Section 202 of the Housing Act of 1959, as mended (the "Section 202 Program") (hereinafter the "Project"). That financial assistance will be provided by the Cit~, subject to the availability of funds and subject to the requirements of the specific source of funds utilized for the Project (hereinafter the"Program'). The Contractor agrees to be bound and to abide by all applicable Program statutes, rules, and regulations with applicable to the Project and the financial assistance provided by the City. The Housing Project will be used exclusively by the Contractor or Senior Housing tbr secular purposes and will be available to all persons regardless of religious affiliation. There will be no religious or membership criteria for tenants of the Project. CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES- RECiUI.ATORY AGREEMENT Page I 8485 NOW, 1. The Contractor and the City have entered into an Affordable Housing Agreement, dated o~/~4/ , ~003 (the "Affordable Housing Agreement") and a Development A,~eement dated 0~/~4/ ,2003 (the "Development Agreement"), regarding the Project and the financial assistance to be provided therefor. As an inducement to the City to provide the financial assistance made available under the Program, the Contractor has agreed to enter into this Regulatory Agreement and has consented to be regulated and restricted as provided herein. THEREFORE, the parties hereto agree as follows: RECITALS. The foregoing recitals, the Contractor's application package as approved by the City, and the Affordable Housing Agreement, Development Agreement and its other Exhibits are a part of this Regulatory Agreement. COMPLIANCE WITH LAW. The Contractor agrees that at all times its acts regarding the Project shall be in conformity with all provisions of the Program including the statutes, rules and regulations and such policies and procedures of the City pertaining thereto, as amended and in effect from time to time. The Contractor acknowledges that it is aware of such applicable statutes, rules and regulations, and that professional advice is available as necessary for the purpose of enabling the Contractor to fully comply with such statutes, rules and regulations. TERM OF AGREEMENT, The term of this Agreement shall coinmence on the date hereof and shall continue for at least 55 years from the date that the applicable state and/or local government agency certify the Project for occupancy. RENT SCHEDULE. At the time of initial occupancy, Contractor shall charge only those rents approved by the City and which are established pursuant to Program statutes and regulations (the "Rent Schedule"). Rents will provide guaranteed affordability to tenants, charging 30 percent of actual household income for total housing payment. Subsequent increases or decreases in rent including special rent increases, shall be charged only if consistent with the Program statutes and regulations. If, at any time during the period of this Agreement, Contractor fails to charge rent according to the Rent Schedule, Contractor will repay all City funds. Repayment will be due within 30 days from the date of a written notice of violation delivered by the City. A copy of the Rent Schedule in effect at the time of execution of this Regulatory Agreement is attached hereto as Attachment B and incorporated herein. CITY OF ENC[NITAS/CANTEBRIA SENIOR HOMES- REGULATORY AGREF, M ENT Paso 2 8486 Contractor agrees that the Rent Schedule, as attached hereto as Attachment B, and any and all amendments thereto, shall be construed as a deed restriction on the Property. ELIGIBILITY FOR ADMISSION. An applicant is eligible for admission to the Project lottery selaction process if he or she meets all of the following criteria: (a) The applicant meets the requirements of the HOME, CDBG and Section 202 Program regulations. (b) Contractor may determine that an applicant is not eligible for admission if, on the basis of substantial, factual evidence of that person's prior actions there is good cause to believe that the applicant will repeatedly fail to pay rent, will create a substantial threat to the health and safety of other residents, or will repeatedly breach material requirements of the lease. Unsubstantiated oral statements will not be deemed substantial factual evidence. (c) The above eligibility criteria shall be exclusive and no other factors shall be considered in determining eligibility of applicants. RESIDENT SELECTION PROCEDURES Contractor shall rent restricted housing units in the Project to eligible residents in accordance with the Program Regulations (as described in Attachment C) and the Management Plan approved by and on file with City pursuant to Paragraph 17 of this Regulatory Agreement. That Management Plan shall include at least the following: (a) detailed actions to be taken by Contractor to affirmatively market and rent all units in a manner which ensures equal access to all persons in any category protected by federal, state, or local laws governing discrimination, and without regard to any arbitrary factor; (b) specify reasonable criteria :for determination of resident eligibility; require that eligible residents be selected based on lottery method approved by the City; (d) require eligible applicants to be notified of eligibility and, based on turnover history, be notified of when a unit may be available; (e) require ineligible applicants to be notified in writing of the reason for their ineligibility; (f) specify procedures through which applicants deemed to be ineligible may appeal this determination; CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES- REOULATORY AOREEMENT. Page 3 I0. (g) require maintenance of a waiting list of eligible applicants; (h) prohibit discrimination against any prospective resident on the basis of race, religion, sex, disability, marital status, or any other arbitrary factor in violation of any state, federal, or local law governing discrimination in rental housing; and (i) address other selection issues provided for in the Program Regulations. LEASE AND OCCUPANCY PROCEDURES. (a) Each eligible applicant selected to occupy a unit shall enter into a written occupancy agreement or lease with the Contractor, the form of which shall have been approved by the City and which shall contain those provisions as are required by the Program Regulations and this Regulatory Agreement. The rental agreement or lease shall provide for good cause eviction and appeal and grievance procedures, all of which shall be in accordance with the Program Regulations. (b) The Contractor shall establish reasonable roles of conduct and occupancy, which shall be consistent with State and Federal law and the Program Regulations. The rules shall be in writing and shall be given to each resident. Any amendment shall be effective no less than 30 days after giving written notice thereof to each resident. (c) Leases and the landlord-tenant relationship shall be subject to California law, Program Regulations, and the provisions of this Regulatory Agreement. REPLACEMENT CHARGES. The charges to residents covering damages to the Project property attributable to the resident shall be made in accordance with a schedule of replacement costs which shall be adopted by the Contractor, posted in the management office of each Project, and shown to applicant at the time the lease is signed. TERMINATION OF LEASE. (a) The resident may end the lease at any time with a 30-day notice. Rent is only paid for the period the resident actually occupied the housing unit. Any unused rent shall be returned to the resident. If the resident gives at least a 30 day notice of intent to vacate the Project the Contractor must, on the day the resident moves out, return the unused rent to the resident. If the resident does not give at least 30 days notice of intent to leave, the Contractor has two (2) weeks within which to send the unused rent to the resident's forwarding address. In the event the resident does not give Contractor a forwarding address, Contractor shall hold the unused rent for six months and return it to the resident if the resident picks it up or CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES - REGULATORY AGREEMENT Page 4 (b) (c) 11. 12. provides a tbrwarding address within six months. After six months, the rent is forfeited to the Contractor. The Contractor may require the resident to move out if the resident has seriously or repeatedly violated important terms of the lease agreement such as not paying rent; causing serious interference with the rights of other residents; knowingly giving false statements of important facts to the Contractor concerning eligibility for the Project; or for other good cause. In order for the Contractor to begin termination of the lease, it must give the resident a written notice stating the reason(s) for termination and notifying the resident of the right to request a hearing as allowed under the grievance procedure. Requirements of the notice and hearing procedure are set forth in the Program Regulations. (d) If the resident has not paid rent, the Contractor shall give the resident a seven (7) day notice to either pay the rent or move out. If the resident's actions cause an immediate threat to the health and safety of the other residents, the Contractor shall give the resident a reasonable time to move out, but not less than three (3) days. (e) in all other cases, the resident shall be given at least 30 days notice to either comply with the terms of the lease or move out. CONTRACTOR RESPONSIBILITIES. Contractor shall provide administrative, fiscal, and management services, employ staff and purchase, rent, and use supplies and materials as needed to operate, maintain and protect each Project in accordance with this Regulatory Agreement and the Program Regulations. This shall include, but not be limited to, compliance with the grounds and procedures governing grievance hearings as set forth in the Program Regulations. In addition, grievance hearings, conferences, notices, and summaries pursuant to this Regulatory Agreement shall be in English or in the language of the majority of residents. ANNUAL OPERATING BUDGET. (a) The fiscal year for the Project shall commence on tlul¥ 1 of each year after the initial period of occupancy, and conclude on~lune30 of each year. (b) The Contractor will submit to the City a proposed operating budget for the Project not less than ninety (90) days subsequent to the completion of the Project and prior to the beginning of each fiscal year of the Project thereafter. The proposed operating budget shall set forth the anticipated Project income (the "Project Income") of the Project, including such payments as may be provided from the Program and other public and private sources, and a detailed estimate of all operating costs, capital improvements, deposits to all accounts required by the CITY OF ENCIN ['I'AS/CANTEBRIA SENIOR HOMES - REGULATORY AOKEEMENT page 8489 13. 14. City, and all other expenses in the format required by the City. Unless the City objects to the proposed budget within ten (10) days after submission of a complete proposed budget, such proposed operating budget shall be the operating budget for the fiscal year of the Project. REQUIRED RESERVES (a) At the time Contractor receives a Section 202 Program award of construction and permanent funding from HUD or another source approved by the City, Contractor shall propose to the City amounts of funding for a "Replacement Reserve Account" and an "Operating Reserve Account" and provide that information necessary to indicate the consistency of those accounts with all of the following: the requirements of the funding entity, the feasibility of the Project, and the requirements of the City under the Program. (b) To the extent that these accounts are required or deemed necessary by the City, initial deposits shall commence no later than the end of the second month following the completion of construction, or such other date as the City may designate in writing, and deposits shall be made in segregated interest-beating accounts in the name of the Contractor insured by an agency of the federal government or other comparable federal insurance program. Consistent with the requirements of the funding agencies, Contractor shall make monthly deposits from Project Income in amounts as specified in the initial and annual budgets. (c) Withdrawals from the accounts shall be made in a manner consistent with the requirements of the funding entities and the City, if the City elects to impose such requirements. The City may require its prior written approval of such withdrawals. Withdrawals from a replacement reserve account shall be made only for capital improvements such as replacing or repairing structural elements, furniture, fixtures or equipment of the Project which are reasonably required to preserve the Project. Reserves from the operating reserve account may be utilized only to cover actual and reasonable operating expenses in excess of the approved budget amount, or to compensate for vacancy and bad debt losses in the approved budget amount. (d) if other funding entities have differing requirements, the City may amend this paragraph in writing to be consistent with those other requirements. USE OF INCOME FROM OPERATIONS (a) The Contractor or Contractor's management agent shall promptly deposit all Project Income in a segregated account established in the Contractor's name exclusively for the Project. There shall be no commingling of Project funds with other funds controlled by the Contractor. CITY OF ~NCIIqlTAS/CANTEBRIA SENIOR hOMES- REGULATORY AOREEMENT Page 6 15. 16. 17. (b) 8490 Withdrawals from the Project Income accoum shall be made only in accordance with the provisions of this Regulatory Agreement and the approved annual operating budget, and shall be disbursed, applied or reserved and set aside for payment when due, in the following priority, to the extent available: (1) salaries, wages and other compensation due and payable to the employees or agents of the Contractor employed on site in connection with the maintenance, administration or operation of the Project, along with all .withholding taxes, insurance premiums, Social Security payments, and other payroll taxes or payments required in connection with such employee; (2) all charges incurred in the operation of the Project in connection with utilities, real estate taxes and assessments, and liability, fire and other hazard insurance; (3) payments of required interest, principal, impounds, fees and charges, if any on loans which are secured by the Property which have been approved by the City; (4) all other expenses incurred to cover operating costs, including the fee of the managing agent and any extraordinary expenses in accordance with the approved annual operating budget of the Project or as otherwise approved in advance by the City; (5) deposits to reserve accounts if applicable; and (6) distributions to the Contractor or other person or entity upon City approval only. (c) If other funding entities have differing requirements, the City may amend this paragraph in va'iting to be consistent with those other requirements. In addition, the Contractor may depart from the foregoing priorities of payment only upon the express prior written approval of the City. FINANCIAL ASSISTANCE Contractor acknowledges that the City will not provide additional financial assistance to the Contractor in the form of operational or Capital subsidies for the Project. If Project Income and annual HUD operational subsidies are insufficient to cover operating, maintenance, and capital costs, Contractor agrees to assume full financial responsibility for the operating and maintenance of the Project throughout the term of this Agreement. ACCOUNTING RECORDS In a manner subject to City approval, Contractor shall maintain an accrual or modified accrual basis general ledger accounting system that is posted monthly and that accurately and fully show all assets, liabilities, income and expenses of the Project. All records and books relating to this system shall be retained for not less than seven years and in such a manner as to ensure that the records are reasonably protected from destruction or tampering. All records shall be subject to City inspection and audit. MANAGEMENT AND MAINTENANCE, Contractor is specifically responsible tbr all maintenance, repair, and management functions including, without limitation, the following: selection of residents, occupancy standards, complaint and grievance proceedings, evictions, collection CITY OF ENCINrFAS/CANTEBRIA SENIOR HOMES- REGULATORY AGREEMENT Page 7 (b) (c) (d) (e) (t) 8491 of rents and security deposits, routine and extraordinary repairs, and replacement of capital items. Contractor shall maintain units and common areas in a safe and sanitary manner in accordance with local health, building, and housing codes; the Management Plan provided for in this Regulatory Agreement; and in accordance with applicable Housing Quality Standards. Contractor is responsible for operating the Project in accordance with the Management Plan developed by the Contractor as required by the City, and which is approved by and on file with the City (the "Management Plan"). All amendments to the Management Plan require prior written approval of the City. Contractor, with the prior written approval of the City, may contract with a management agent for the performance of the services or duties required in subparagraphs (a) and (b). However, such an arrangement does not relieve the Contractor of responsibility for proper performance of these duties. Contractor anticipates to contract with Mercy Management Services for property management. Such a contract shall be subject to prior written approval by the City and shall contain a provision allowing the Contractor to terminate the contract without penalty immediately upon written notice. Upon a determination by the City and written notice to the Contractor thereof, that the management agent perlbrming the functions required in subparagraphs (a) and (b) has tailed to operate the Project in accordance with this Regulatory Agreement and the approved Management Plan, the Contractor shall exercise such tight to termination forthwith and shall make immediate arrangements, which shall be subject to City approval, for continuing performance of the functions required in subparagraphs (a) and (b). Upon a determination by the City, and written notice to the Contractor thereof, that the Contractor has failed to operate the Project in accordance with this Regulatory Agreement, the City may require the Contractor to contract with a qualified management agent to operate the Project, or to make such other arrangements as the City deems necessary to ensure performance of the functions required in subparagraphs (a) and (b). Contractor agrees to assume full financial and management responsibility for all operating and maintenance costs, including all repairs, corrections and replacements necessary to maintain and preserve the Project in a safe and sanitary condition in accordance with standards prescribed by the City, all obligations of this Regulatory Agreement, and all applicable State laws and local ordinances. To the extent that a permanent lender or grantor imposes requirements that are substantially different than the City's, the City may agree to adopt those requirements or allow that entity to have primary responsibility for monitoring management and maintenance. CITY OF ENCrNTrAS/CANTEBPJ~ SENIOR HOMES- REGULATORY AOR~;EMENT Page 8 18. 8492 REPORTING REQUIREMENTS. The Contractor shall file with the City an annual report in a form approved by the City no later than 60 days after the end of each fiscal year established for the Project. The report shall contain such information as the City may then require, including, but not limited to, the following: (a) An audit of the fiscal condition of the Project is required whenever financial assistance is provided by the City. This includes a financial statement indicating surplus or deficits in operating accounts, a detailed itemized listing of income and expenses, and the amounts of any fiscal reserves, Such audit shall be prepared in accordance with the requirements of the City, certified by an independent certified public accountant licensed in California or other accountant acceptable to the City; (b) Any substantial physical defects in the Project, including a description of any major repair or maintenance work undertaken in the reporting year; (c) The occupancy of the Project indicating: each tenant's annual income, family size and composition, race, length of tenancy, actual monthly rent paid; (2) records demonstrating the contractor's etlbrts to comply with its Fair Housing Marketing and Equal Opportunity Plan; (3) the number of residents actually occupying the Project. (4) general management performance, including tenant relations and other relevant information; (d) A description of any fiscal or program difficulties related to the operation of the Project consistent with the Program requirements; (e) Each such report shall be subject to the approval of the City; (f) At any time during the term of this Regulatory Agreement, the City or its designee may enter and inspect the physical premises and inspect all accounting and resident records pertaining to the construction, development, or operation of the Project. Upon request by the City, Contractor shall notify residents of upcoming inspections of their units or records in accordance with State law; (g) The City may request any other information that it deems necessary to monitor compliance with requirements set forth in this Regulatory Agreement and the Affordable Housing Agreement or Development Agreement. Such information shall be provided promptly by the Contractor. CITY OF ENCIN I'I'AS/CAN'r ~BRIA SENIOR HOMES- REGULATORY AGREEMENT Page 9 8493 19. (h) Prior to the commitment of funds, the Contractor will submit to the City certified copies of: (i) Equal Opportunity and Fair Housing marketing plan; (ii) records demonstrating that the units meet or will meet all applicable property standards; (iii) certification that no layering of federal funds has or will occur; (iv) conflict of interest statements; (v) evidence of flood insurance; (vi) evidence that the contractor, any subcontractor, agent, representative, or consultant working on the Project is not debarred or suspended from participation in federal programs. (i) Prior to the disbursement of funds, the Contractor will provide City with: (i) evidence of actual costs incurred or costs to be incurred; (ii) an itemized Request For Payment; (iii) a certification that all funds requested will be spent in accordance with all federal requirements; (iv) and a final itemized development and operating budget for the Project. In addition to the annual report required above, if required by the City, the Contractor shall file with the City an operating report including such information as the City may reasonably require and submitted at intervals as directed by the City, but in no case more often than on a monthly basis. PROJECT RECORDS: The Contractor shall maintain for a period consistent with the Program Regulations the following records: (a) Records that demonstrate that each project meets the property standards in Program Regulations; Records that demonstrate that each rental housing project meets the requirements of Program Regulations for the required period of affordability. Records must be kept for each family assisted; (c) Records that demonstrate compliance with the requirements of Program Regulations for tenant and participant protections; (d) Records evidencing the guidelines adopted by the City and supporting the certification/hr each housing project that the combination of federal assistance to the Project is not any more than is necessary to provide affordable housing, as required by Program Regulations; (e) Equal oppommity and fair housing records containing: (1) Data on the extent to which each racial and ethnic group and single- headed households (by gender of household head) have applied for, participated in, or benefited from, any program or activity funded in whole or in part with City funds; CITY OF ENCINI'I'AS/CANTEBRiA SENIOR HOMES- REGUI_ATORY AGREEMENT Page 10 20. 21. (2) B494 Documentation of actions undertaken to meet the requirements of Section 3 of the Housing Development Act of 1968, as amended (12 U.S.C. 1701u); (3) Documentation and data on the steps taken to implement outreach to minority-owned and female-owned businesses including data indicating the racial/ethnic or gender character of each business entity receiving a contract or subcontract of $25,000 or more paid, or to be paid, with City funds; the amount of the contract or subcontract, and documentation of Contractor's affirmative steps to assure that minority-business and women's business enterprises have an equal oppormn/ty to obtain or compete for contracts and subcontracts as sources of supplies, equipment, construction, and services; (4) Documentation of the actions the Contractor has taken to affirmatively further fair housing; (5) Records demonstrating compliance with federal and state labor requirements including contract provisions payroll records, and certifications concerning debarment and suspension; HAZARD INSURANCE 'Ilae Contractor shall keep the Property and all improvements thereon insured by carriers at all times satisfactory to the City against loss, by fire, earthquake and such other hazards, casualties, liabilities and contingencies as the City may require and in such amounts and for such periods as the City shall require. All insurance policies and renewals thereof shall be issued by a carder and in a form acceptable to City. Property insurance policies shall name City as an additional loss payee. Insurance proceeds and condemnation awards for any loss to or taking of the Project shall be applied or utilized in a manner which ensures that County's and Program interests are reasonably fulfilled. CERTAIN ACTS PROHIBITED. The Contractor shall not make any sale, encumbrance, assignment or conveyance, or transfer in any other form, of the Property or Project or any part thereof or of any of its interest therein other than in accordance with the terms of this Regulatory Agreement and shall not, without the prior approval of the City: (a) Make any distribution not permitted by the terms of this Regulatory Agreement; (b) Assign or transfer any right to operate or manage the Project, except pursuant to Paragraph 17; CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES- REGULATORY AGREEMEIqT Page 11 22. (c) Remodel, remove, add to, reconstruct or demolish any part of the Project or impair any real or personal property of the Project without prior 'written approval by the City; (d) Require, as a condition of the occupancy or leasing of any dwelling unit in the Project, any consideration or deposit in excess of that permitted by the Program Regulations to guarantee the performance of the covenants of the lease. Any funds collected as security deposits shall be kept separate and apart from all other funds of the Project in a trust account with a depository insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, and shall be held and disbursed in accordance with California law and Paragraph 14 of this Regulatory Agreement. The balance of such account shall at all times equal or exceed the aggregate of all outstanding obligations under said account, plus accrued interest thereon; (e) Permit the use of the units in the Project for any purpose except that which was approved by the City; (f) Incur any liability or obligation in connection with the Project, contingent or otherwise; (g) Enter into any contract or contracts tbr supervisory or manager/al services except as permitted by this Regulatory Agreement; or (h) Invest any funds from the Project in any property, real or personal, except as author/zed by this Regulatory Agreement or by the City or deposit any such funds in a depository not authorized by this Regulatory A~eement or approved by the City. VIOLATION OF REGULATORY AGREEMENT BY THE CONTRACTOR. In the event of the violation of any of the provisions of this Regulatory Agreement by the Contractor, the City may give written notice thereof to the Contractor by registered or certified mail addressed to the Contractor at the address stated in this Regulatory Agreement, or to such other address as may have been designated by the Contractor, and if such violation is not corrected to the satisfaction of the City within thirty (30) days afier the date such notice is mailed (or within such further time as the City, in its sole discretion, may permi0, the City may, without further prior notice, declare in writing a default under this Regulatory Agreement effective on the date of such declaration of default, and upon any such declaration of default the City may apply to any court, State or Federal, for specific performance of this Regulatory Agreement; for an injunction against any violation by the Contractor of this Regulatory Agreement; for the appointment of a receiver to take over and operate the Project in accordance with the terms of this Regulatory Agreement; or for such other relief as may be appropriate, it being agreed by the Contractor that the injury to the City arising from a default under any of the terms of this Regulatory Agreement would be irreparable and that it would be CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES- REGUI,A'I'ORY AGREF, MI~N'I' Page 12 23. 24. 25. 26. 27~ extremely difficult to ascertain the amount of compensation of the City which would afford adequate relief, in light of the purposes and policies of the Program. AMENDMENT, This Regulatory Agxeement shall not be altered or amended except by writing executed between the parties. PARTIAL INVALIDITY. If any provision of this Regulatory Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby, except to the extent that the City determines, at its discretion, that the remaining provisions will not adequately protect the interests of the City or fulfill the purposes of this Regulatory Agreement. BINDING ON SUCCESSORS. This Regulatory Agreement shall bind, and the benefits thereof shall inure to, the respective parties hereto, their legal representatives, executors, administrators, successors in the office or interest, and assigns; provided, however, that the Contractor may not assign this Regulatory Agreement or any of its obligations hereunder, voluntarily or by operation of law, without the prior approval of the City~ Notwithstanding the foregoing, in accordance with Section 202 Program Regulations, it is the intention of the Contractor to assign all rights and interest in the property and Project to Senior Housing. Any such assignment shall include an assignment and assumption of the Affordable Housing Agreement, Development Agreement and this Regulatory Agreement unless new agreements are executed by Senior Honsing to replace those executed by the Contractor. All such assignments and assumptions shall be subject to approval by the City, which approval shall not be unreasonably withheld. GENDER. The use of the plural in this Regulatory Agreement shall include the singular and the singular shall include the plural; and the use of one gender shall be deemed to include all genders. RECORDING AGREEMENT. This Regulatory Agreement, and any amendments thereof, shall, at the expense of the Contractor, be acknowledged by each of the parties and recorded or referenced in the official records of the County of San Diego. Notwithstanding the foregoing, this Regulatory Agreement shall be executed and delivered to the City, but not recorded until Contractor has acquired title to the property. CITY OF ENCrNTfAS/CANTEI~RIA SENIOR IIOMES- REGULATORY AGREEMENT Page 13 28. 29. 30. 31. 32. ELECTION OF REMEDIES: EVENT OF DEFAULT. The remedies of the City hereunder or under any other instrument providing for or evidencing the financial assistance provided herein are cumulative, and the exercise of one or more of such remedies shall not be deemed an election of remedies and shall not preclude the exercise by the City of any one or more of its other remedies. WAIVER. No waiver by the City of any breach of or default under this Regulatory Agreement shall be deemed to be a waiver of any other or subsequent breach or default hereunder. CAPTIONS. The captions used in this Regulatory Agreement are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of the intent of this Regulatory Agreement. GOVERNING LAW. This Regulatory Agreement shall be construed in accordance with and governed by the laws of the State of Califomia. OTHER FEDERAL REGULATIONS. (a) General. Contractor agrees to carry out all activities in compliance with Title 24, Part 570 of the Code of Federal Regulations; the Housing and Community Development Act of 1974 as amended; Title 24, Subtitle A, Part 58 of the Code of Federal Regulations; Title VI of the Civil Rights Act of 1964; Title VIII of the Civil Rights Act of 1968; Section 109 of the Housing and Community Development Act of 1974; Section 3 of the Housing and Urban Development Act of 1968; Executive Orders 11246, 11063 and 11593; the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970; Title 24, Part 42 of the Code of Federal Regulations; OMB Circular A-122; the Archeological and Historical Preservation Act of 1974; the Architectural Barriers Act of 1968; the Hatch Act (Chapter 15 of Title 5, U.S.C.); the Flood Disaster Protection Act of 1974; the Clean Air Act (42 U:S.C. Section 1857 et seq.) and the Federal Water Pollution Control Act, as amended (33 U.S.C. Section 1251 et seq.); and the Drug-Free Workplace Act of 1988. (b) Section 202 Program. Notwithstanding any other provisions in this Regulatory Agreement and so long as a mortgage affecting the Project and the Property is held by the Secretary of Housing and Urban Development, including his successor and assigns (collectively the "HUD Secretary"), or a regulatory CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES - REOULATORY AGREEMENT Page 14 $495- agreement and/or use agreement in favor of the HUD Secretary is still outstanding, the following provisions shall apply: 0) All of thc provisions of this Regulatory Agreement shall be subject and subordinate to all applicable HUD mortgage and capital advance regulations and related administrative requirements under the Section 202 Program. In the event of any conflicts between the provisions of this Regulatory Agreement and the provisions of any applicable HUD regulations, related HUD administrative requirements or HUD capital advance documents, including, but not necessarily limited to, a Capital Advance Program Use Agreement, a Capital Advance Regulatory Agreement, a Deed of Trust with Assignment of Rents, a Security Agreement, a UCC-I, Financing Statement and a HUD Project Rental Assistance Contract (collectively, the "HUD Documents"), the HUD Regulations, related HUD administrative requirements and HUD documents shall govern and control. (ii) Enforeemem of the provisions of this Regulatory Agreement shall not result in any claim against the Project, the Section 202 Program capital advance proceeds, any reserve or deposit required by HUD in connection with the Section 202 Program transaction, or available residual receipts authorized for release by HUD and the non-Project assets of the Contractor. (iii)In the event that any of the restrictions on occupancy, use and rents described in this Regulatory Agreement at any time exceeds HUD's restrictions on occupancy, use and rents under the Section 202 Program, or otherwise affects the financial viability of the Project (i.e. impairing the Contractor's ability to sustain a level of income sufficient to meet all financial obligations of the Project, including HUD required escrows and Project operating reserves), as determined by HUD, then HUD reserves the fights to require the City to remove or void all or any portion of the occupancy, use and rent restrictions described in this Regulatory Agreement. In the absence of the City's compliance with a HUD request that the City remove or void the restrictions, then the City expressly recognizes the power of the HUD Secretary to take the appropriate action to unilaterally remove or void the restriction(s) and that HUD shall not have to look any further than this Regulatory Agreement containing the restriction(s) for the power to remove or void it/them. (iv)The City shall not declare a default under this Regulatory Agreement without the prior written consent of the HUD Secretary. (v) This Regulatory Agreement shall not be amended without the prior written consent of the HUD Secretary, which consent shall not be unreasonably withheld. CITY OF ENCINITAS/CANTEBRiA SENIOR HOMES- REGULATORY AOREEMENT Page 15 8499' 33. NOTICES. Written notices and other written communications by and between the parties hereto shall be addressed as follows unless and until a party hereto has in writing, communicated a different address to the other party hereto. CONTRACTOR City of Encinitas 505 S. Vulcan Ave. Encinitas, CA 92024 Attn: Housing & Grants Coordinator Cantebria Senior Homes 500 South Main St., Ste. 110 Orange, CA 92868 Attn: Regional Director 34. iNDEMNIFICATION AND WAIVER. (a) In addition to the provisions of the Affordable Housing Agreement and Development Agreement, Contractor agrees to indemnify the City and its agents, employees, and officers, and holds the City and its agents, employees and officers harmless t¥om, any losses, damages, liabilities, claims, actions, judgments, court costs, and legal or other expenses (including attorneys' fees) of every name, kind and description, which the City may incur as a direct or indirect consequences of (i) the making of the Program grant to Contractor, (ii) Contractor's failure to perform any obligations as and when required by this Regulatory Agreement, the Affordable Housing Agreement, or the Development Agreement; (iii) any failure at any time of any of Contractor's representations or warranties to be true and correct; (iv) any act or omission by Contractor, any contractor, subcontractor, material supplier, engineer, architect or other person or entity with respect to the Property or the construction, management, maintenance or operation of the Project; or (v) the presence of hazardous substances at the Project or on the Property. Contractor shall pay immediately upon the City's demand any amounts owing under this indemnity together with interest thereon from the date the indebtedness arises until paid, at the rate of five percent (5%) per aimum. The duty of Contractor to indemnify and save harmless includes the duties to defend as set forth in Section 2778 of the Civil Code; Contractor shall inderunify and hold harmless the City and its agents, officers, and employees as set forth herein regardless of the existence or degree of fault or negligence whether active or passive, primary or secondary, on the part of the City, the Contractor, or their respective agents, officers, employees, contractors, or subcontractors. Contractor's duty to indemnify the City shall survive the term of this Regulatory Agreement. (b) The Contractor waives and releases any and all rights to any types of express or implied indemnity against the City or its agents, officers, or employees. (c) Contractor expressly waives the protections of Section 1542 of the Civil Code in relation to subparagraphs (a) and (b) above. CITY OF ENCINITAS/CANTEeRIA SENIOR HOMES - REGIJLATORY AGREEMENT Page 16 (d) This provision shall not apply as long as a deed of trust affecting the Project and the Property is held by the Secretary of the U.S. Department of Housing and Urban Development, including his successors and assigns (the "HUD Secretary"), or a regulatory agreement and/or use agreement in favor of the HUD Secretary is still outstanding. IN WITNESS WHEREOF, Trustor has executed this Regulatory Agreement as of the day and year first above written. CONTRACTOR Cantebria Senior Homes By: ~ ~o~_ , ~ DATE: o:t /t4 /2003 Amy B~y*ley, ,~ecret~y u~"~ By: CITY City of Encinitas /l~ep'~L.~Mil~ler, City Manager DATE: o~A4/2003 -~y7 ............................ CITY OF ENCINITA~CANTEBRiA SENIOR HOMES- REGULATORY AGREEMENT Page (d) This provision shall not apply as long as a deed of trust affecting the Project ahd the Property is held by the Secretary of the U.S. Department of Housing and Urban Development, including his successors and assigns (the "HUD Secretary"), or a regulatory agreement and/or use agreement in favor of the HUD Secretary is still outstanding. IN WITNESS WHEREOF, Trustor has executed this Regulatory Agreement as of the day and year first above written. CONTRACTOR Cantebria Senior Homes By: DATE: / /2003 Amy Bayley, Secretary By: CITY City of Encinitas DATE: * /zt/2003 CrI'Y OF ENC[lqlTAS/(2ANTEBRIA SENIOR HOMES - REOULATOKY ACOILEEMENT Page 1 "/ 8502 ATTACHMENT A LEGAL DESCRIPTION The land referred to herein is situated in the State of California, County of San Diego, and described as lbllows: Lot 44 of amended map of City of Encinitas Map No. 13258, City of Encirdtas, Tract No. 94- 066, Units 1, II and III, in the City of Eneinitas, County of San Diego, State of California, according to map thereof No. 13333, filed in the office of the County Recorded of San Diego County, June 3, 1996. CITY OF ENCINITA,q/CANTEBRIA SENIOR HOMES- REGULATORY AGREEMENT Pagc 18 ATTACHMENT B RENT SCHEDULE 44 units will be ranted to very low income seniors at a guaranteed affordable price. Households will pay 30% of their income for rent according to HUD 202 Program Guidelines. Income eligibility will be based on 50% of the median income as adjusted for family size, as determined annually by HUD. CITY OF ENCINITAS/CANTEERIA gENIOR HOMES - REGULATORY AGREEMENT Page 19 85O4 ATTACHMENT C PROGRAM REGULATIONS Refer to Title 24 of the Code of Federal Regulations, Part 570-Community Development Block Grant Program Regulations and Part 92-HOME Investment Partnership. CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES- REOULATORY AGREEMENT Page 20 State of California ) ) SS. County of San Francisco ) On this 14th day of January, 2003, before me, the undersigned, a notary public in and for said state, personally appeared Amy Bayley, RSM, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies) and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. G, Hoshlyama (print name) CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California t ss. County of pareoeally appeared [Z...-'T~" /.--- ~l.~ ~ .~"Persenally known to me ~ proved to me an the basis of satisfactory evidence to be the person(~']' whose name(~"' is/a,*e" subscribed to the within instrument and acknowledged to me that he/~,,~/tbe~executed the same in his/her/J~-~' authorized capacity~;~'), and that by his/t~Ttbeh'~' eignature.(.~)~3n the instrument the person(s,);, or the entity upon behalf of which the person(~F' acted, executed the instrument. WITNESS my hand and official seal, Description of Attached Document ....... Title or Type of Document: ,.- _ Document Date: ,. Number of Pages: Signer(s) Other Than Named Above: .., Capacity(ies) Claimed /- Signer's Name: ....... q Individual / 2 Corporate~fficer-- Title(s): ~ Partner/q Limited r-: General r~ Attorcy-in-Fact uastee rdian or Conservator Other: Signer Is Representing:. i RECORDING REQUESTED BY: First American Title Insurance Company Escrow #182802 WHEN RECORDED MAIL TO: Mlchaud and Hoshlyama 414 Jackson Street, Suite 202 San Francisco, CA 94111 ORIGINAL SPACE ABOVE THIS LINE FOR RECORDER'S USE SUBORDINATION AGREEMENT (City of Enoinitaa) NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT OR INSTRUMENTS, THIS SUBORDINATION AGREEMENT, made as of this21ac day of January, 2003, by Cantebria Senior Homes, a California nonprofit public benefit corporation, owner of the land hereinafter described and hereinafter referred to as "Owner," and the City of Encinitas, present owner and holder of the deed of trust and note first hereinafter described and hereinafter referred to as "FleneficJary". WITNESSETH WHEREAS, aa Trustor. Owner executed that certain Deed of Trust With Assignment of Rents dated as of January .;[4 , 2003, to First American Title Insurance Company, as Trustee, in favor of Beneficiary (the "Deed of Trust"), covering certain real property described in Exhibit "A" attached hereto, to secure a Promissory Note dated of even date with the Deed of Trust in the sum of $614,000 (the "Note"), which Deed of Trust is being recorded concurrently herewith in the Official Records of the County Recorder of San Diego County, California (the "Official Records"); and WHEREAS, Owner and Beneficiary executed that certain Regulatory Agreement (the "Regulatory Agreement') dated January 3.4 , 2003. recorded concurrently herewilh in the Official Records; and WHEREAS, the Deed .of Trust, the Note and the Regulatory Agreement are sometimes hereafter referred to collectively as the "City Loan Documents"; and WHEREAS, Owner has executed, or is about to execute, a Deed of Trust and a Mortgage Note (the "Mortgage Note") in the sum of $3,687,900 dated January 1, 2003, in favor of the United States of America, acting by and through the Secretary of Housing and Urban Development, hereinafter referred to as "HUD," payable and upon the terms and conditions described therein, which Deed of Trust (the 'HUD Deed of Trust") is to be recorded concurrently herewith; and City Subordination to HUD 1 WHEREAS, in addition to the HUD Deed of Trust executed or to be executed in favor of HUD, Owner has executed, or le about to execute, with HUD a Capital Advance Program Use Agreement (the "Use Agreement") and a Capital Advance Program Regulatory Agreement (the "HUD Regulatory Agreement"), both of even date with the HUD Deed of Trust and Mortgage Note in favor of HUD and to be recorded concurrently herewith (the HUD Deed of Trust, Mortgage Note, Use Agreement and HUD Regulatory Agreement are sometimes hereafter collectively referred to as the "HUD Documents"); and WHEREAS, it Is a condition precedent to obtaining said financing (the "Capital Advance~) from HUD that the HUD Documents shall unconditionally be and remain at all times liens or charges upon the lend herein before described, prior end superior to the liens or charges of the City Loan Documents; and WHEREAS, HUD is willing to make the Capital Ac'vance provided the HUD Deed of Trust, Use Agreement and HUD Regulatory Agreement are liens or charges upon the above described property prior and superior to the liens and charges of the Deed of Trust and Regulatory Agreement in favor of Beneficiary, and provided that Beneficlar,j will specifically and unconditionally subordinate the liens or charges of the City Loan Documents in favor of Beneficiary to the liens or charges of the HUD Documents in favor of HUD; and WHEREAS, it is to the mutual benefit of the parties hereto that HUD make such Capital Advance to Owner; and Beneficiary is willing that the HUD Deed of Trust, Use Agreement and HUD Regulatory Agreement shall, when recorded, constitute liens or charges upon said land which are unconditionally prior end superior to the liens or charges of the Deed of Trust and Regulatory Agreement in favor of Beneficiary. NOW, THEREFORE, in consideration of the mutual benefits accruing to the parties hereto and other valuable consideration, the receipt and sufficiency of which consideration is hereby acknowledged, and Jn artier to induce HUD to make the Capital Advance above referred to, It is hereby declared, understood and agreed as follows; (1) That the HUD Deed of Trust securing the Mortgage Note in favor of HUD, and any renewals or extensions thereof, shall unconditionally be and remain at all times a lien or charge on the property therein described, prior and superior to the liens or charges of the Deed of Trust and Regulatory Agreement in favor of Beneficiary. (2) That the Use Agreement and HU~ Regulatory Agreement in favor of HUD, and any amendments thereof, shall each, unconditionally be and remain at ell times, a lien or charge on the property therein described, prior end superior to the liens or charges of the Deed of Trust and Regulatory Agreement in favor of Beneficiary. (3) That HUD would not make the Capital Advance without this subordination agreement. (4) That this agreement shall be the whole and only agreement with regard to the subordination of the liens or charges of the City Loan Documents in favor of Beneficiary to the liens or charges of the HUD Documents in favor of HUD and shall supersede and cancel, but only insofar as would affect the priority between the documents herein before specifically described, any prior agreements as to such subordination, Including, but not limited to, those provisions, if any, contained In the Deed of Trust and Regulatory Agreement in favor of Beneficiary or to another mortgage or mollgages. Beneficiary declares, agrees and acknowledges that; City Subordination to HUD 2 (a) It consents to (i) all provisions of the Mortgage Note and HUD Deed of Trust in favor of HUD above referred to (ii) all provisions of the Use Agreement and HUD Regulatory Agreement in favor of HUD above referred to and (iii) all agreements, including, but not limited to, any Capital Advance or escrow agreements, between Owner and HUD for the disbursement of the proceeds of HUD's Capital Advance; (b) HUD, in making disbursements pursuant to any such agreement, is under no obligation or duty to, nor has HUD represented that it will, see to the application of such proceeds by the person or persons to whom HUD disburses such proceeds and any application or use of such proceeds for purposes other than those provided for in such agreement or agreements shall not defeat the subordination herein made in whole or in part; (c) It intentionally and unconditionally subordinates the liens or charges of the Deed of Trust and Regulatory Agreement in favor of Beneficiary to the liens or charges upon said land of the HUD Documents in favor of HUD and understands that in reliance upon, and in consideration of this subordination, specific advances of funds are being and will be made and, as part and parcel thereof, specific monetary and other obligations are being and will be entered into which would not be made or entered into but for said reliance upon this subordination; and (d) An endorsement has been or will be placed upon the Note secured by the Deed of Trust in favor of Beneficiary indicating that the Deed of Trust has by this instrument been subordinated to the liens or charges of the HUD Documents. This agreement may be executed in counterparts, and if so executed, the counterparts when read together will constitute a single instrument that is binding on the parties hereto. IN VVITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their duly authorized official and to be made effective on and as of the day and year first above written. OWNER: Cantebria Senior Homes, a California nonprofit public benefit corporation Amy B~l~y ~ .] Title: Secretary/Treasurer BENEFICIARY: City of Encinitas City Subordination to HUD 3 County of ) On this · day of December 2002, before me, the undersigned, a no~ in and for seid_ state, p~rsonally appeared ~, personally known to me(or p~to me on the basis of satisfactory evidence) to be the person(s) whose n~scribed to the w.i~hin instrument and acknowledged to me that he/sh~ame in his/her/their authorized capacity(les) and that by his/herlth~~ mment hte person(s), or the entity upon behalf of which thee cuted the instrument. wITNESS my hand and official . ~print name) State of California ) · ) SS. County of ~,~"~l,~l~"~ ) On this [~ day of December, 2002, before me, the undersigned, a notary public in and for sa d state, personally appeared '~..~_,~_),Ll~,}l~l~l~*ll~'ersonally known to me (~ ^,, ~k,- ,-~ ~ '-',:;;,;;;.3; c-.-:~;:~-_ *~ to bt~ the person(e) whose name(~) is/a~e subscribed to the ~vit~in i~'l:~r~'and acl~nowl~~a~-;~y executed Jhe same in his/her/their authorized capacity(les) and thatby his/keakv~r signature/~) on the instrument the persorV~), or the entity upon behalf of which the person/~,~) acted, executed the instrument. VVI/T,[qES,~ my hand and official seal. ~,~atur~ ~,~illJjJ~ DEBORAH CERVONE~, or cot~. # ~332384 ~EY PUBLIC-CALEORNIA ~ SAN DIEC, O COUNTY ¢o~,t~ ,~. No¥. ~, ~oo~. City Subordination to HUD 4 State of California ) ) SS. County of Los Angeles ) On this ~.[5~ day of January 2003, before me, the undersigned, a notary public in and for said state, personally appeared Am_v Ba_vle~v. personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(les) and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WIT~I. Signature ~/ (print name) County of ) ~ On this _ day of December, 2002, before me, the undersi~, a notary public in and for said state, personally appeared .... , ......... ~ personally known to me (or proved to me on the basis of satisfactory evide~0r.,e~ to bethe person(s) whose name(s) is/are subscribed to the within instr~t and acknowledged to me that he/she/they executed the same in his/her/th...eh-"' authorized capacity(les) and that by his/her/their signature(s) on the instru~l~l:it the person(s), or the entity upon behalf of which the person(s) acted, ex~te~rthe instrument. ............. (print name) City Subordination to HUD 5 Exhibit "A" LEGAL DESCRIPTION The land referred to herein is situated in the State of California, County of San Diego, and is described as follows: Lot 44 of Amended Map of City of Encinitas Map No. 13258, City of Encinitas Tract No. 9 4 - 066, Units I, II and III, in the City of Enoinitas, County of San Diego, State of California, according to Map thereof NO. 13333, filed in the Office of the County Recorder of San Diego County, June 3, 1996. City Subordination to HUD 6 ORIGINAL CORPORATE RESOLUTION AUTHORIZING BORROWING TO: CITIBANK (WEST), FSB, a federal savinge bank RESOLVED: that any one of the follewing officers: Vel Au;~osttn% as Presideat~ a]3d Am7 BaT'le7, as ..... Sec~:et:a~:y/"~]:ees. (insert names and titles}, of this corporation, CANTEBRIA SENIOR HOMES, a California nonprofit public benefit corporation ("Borrower"), be, and they are hereby, authorized and empowered to act for and on behalf of and in the name of this corpOration and as its corporate act and deed as follows: To borrow money from CITIBANK(WEST), FSB, a federal savings bank ("Lender") and to assume any liabilities of any other person or entity to Lender, in such form and on such terms and conditions as shell be agreed upon by those authorized above and Lender, and sign and deliver such promissory notes and other evidences of indebtedness for money borrowed or advanced and/or for indebtedness assumed as Lender shall require; Borrower shall be bound to Lender by, and Lender may rely upon, any communication or act, including telephone communications, purporting fo be done by any partner, member, employee or agent of Borrower provided that Lender believes, in good faith, that the same is done by such person. To discount with Lender notes, acceptances and evidences of indebtedness payable to or due Borrower and to endorse the same and execute such contraots and instrUments for repayment thereof to Lender as Lender shall require, To mortgage, encumber, pledge, convey, granL assign, or otherwise transfer all or ahY part of Borrower's real or personal property for the purpose of securing the payment of any Of the promissory notes, contracts, instrUments · and other evidences of Indebtedness authorized hereby; and to enter into such agreements as Lender shall require to protect and preserve Lender's interest in such collateral; and fo execute and deliver to Lender suoh deeds of trust, mortgages, pledge agreements and/er other security agreements as Lender shall require, To perform all acts and execute and deliver all documents described above and all other contracts and instruments which Lender deems necessary or convenient fo accomplish the purposes of this certificate and/er to perfect or continue the dghts, remedies and security interests to be given to Lender hereunder, including without limitation, any modifications, renewals and/or extensions of any of Borrower's obligations to Lender, however evidenced; provided that the aggregate principal amount of all sums borrowed and credits established pursuant to this certificate shall not at any time exceed the sum of $176,000.00 outstanding and unpaid. BE IT FURTHER RESOLVED, that the authority hereby confen'ed shall be deemed retroactive, and any and all acts under the authority hereby conferred is In addition to that conferred by any other resolution heretofore or hereafter delivered to Lender and shall continue in full force and effect until Lender shall have received notice in writing, certified by the Secretary of this corporation, of the revocation hereof by a resolution duly adopted by the Board of Directors of this corporation. Any such revocation shall be effective only as to actions taken by this corporation subsequent to Lender's receipt of such notice. Loan No, 03.8096554 CERTIFICATION I, Aay Bayley . ., Secretary of Cantebrla Senior Homes, a corporation =teated and existing under the laws of the State of California, do hereby ce~fy and declare that the foregoing ia a full, true and correct copy of the resolutions duly passed and adopted by the Board of Directors of said corporation, by written consent of all Directors of said corporation or at a meeting of said Board duly and regularly called, noticed and held, at which meeting a quorum of the Board of Directors was present and voted in favor of said resolutions; that said resolutions are now in full force and effect; that there is no provision in the Articles of Incorporation or Bylaws of said corporation, or any shareholder agreement limiting the power of the Board of Directors of said corporation ta pass the foregoing resolutions and that such resolutions are in conformity with the provisions of said Articles of Incorporation and Bylaws; and that no approval by the shareholders of, or the outstanding shares of,.said corporation is required with respect to the matters which are the subjec~ of the foregoing resolutions. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal of said corporation this day of , 200 3 . Aa¥ Ba?le¥ }) [Sec~tary of Cantebrla Senior Homes, a California nonprofit public benefit corporation [Corporate Seal] [NOTE: THIS CERTIFICATION IS TO BE EXECUTED BY THE SECRETARY OR ASSISTANT SECRETARY OF THE CORPORATION AND SHOULD NOT BE EXECUTED BY THE SAME INDMDUAL EXECUTING THE OTHER LOAN DOCUMENTS] Loan No. 03-8096554 WILLIAM F. MICHAUD GARY HOSHIYAMA LAW OFFICES OF MICHAUD AND HOSHIYAMA A LAW CORPORA'~ON 414 Jackson Street, Suite 202 San Francisco, CA 94111 TEL: (415) 986-6422 FAX:(415) 986-2161 February 3, 2003 e-mail: michoshlaw@ aol,com ghoshlyama @ earthlink,net Amanda Mills Community Development Dept, City of Enclnltas 5O5 South Vulcan Avenue Enclnitas, CA 92024-3633 Re: Cantebria Sentor Homes Encinitas, CA Dear Amanda: Enclosed for the files of the City of Enclnitas are the following: 1) Copy of City of Encinitas loan documents checklist 2) Original Affordable Housing Agreement/Community Development Block Grant Loan Documents coversheet 3) ~ Affordable Housing Agreement dated January 14, 2003 between the City of Encinitas ("City") and Cantebria Senior Homes ("Cantebria") Orlainal Development Agreement dated January 14, 2003 between the City and Cantebria 5) ~ Promissory Note in the sum of $614,000 dated January 14, 2003 from Cantebria to the City 6) ~ copy of recorded Deed of Trust With Assignment of Rents dated January 14, 2003 from Cantebria to First American Title Company for the benefit of City 7) Certified copy of recorded Regulatory Agreement dated January 14, 2003 between City and Cantebria 8) ~ copy of recorded Subordination Agreement (City of Encinitas) dated January 21, 2003 between Cantebria and City in favor of HUD Page 2 I wish to thank you for your cooperation and patience during the last two months, It was a pleasure working with you, Please let me know If you have any questions regarding the documents I have enclosed. Encl, cc: Maury Ruano SECOI~ARY FINANCING City of Encinitas ($614,000) 1. Affordable Housing Agreement 2. Development Agreement 3. Promissory Note ($614,000) 4, Deed of Trust with Assignment of Rents 5. Regulatory Agreement 6. Subordination Agreement (to HUD) ORiGiNAL AFFORDABLE HOUSING AGREEMENT/ COMMUNITY DEVELOPMENT BLOCK GRANT LOAN DOCUMENTS by and between THE CITY OF ENCINITAS and CANTEBRIA SENIOR HOMES AFFORDABLE HOUSING AGREEMENT THIS AGREEMENT, made and entered into this 14th:day of Jan~':., 2003 , in the State of California by and between the City of Encinitas ("City") and Cantebria Senior Homes ("Contractor"). ..... The provisions on the following pages constitute a pan 0fthis agreement. WITNESS WHEREOF, this agreement has been executed by the parties hereto, upon the date first above written. ..... Ci;rY oF ENCINITAS (Auth~fizlc~qg[at u~e)-- -- Printed name and title of person signing CONTRACTOR Cantebfia Senior Homes By (Authorized signature) Printed name and title of pemon signing Kerry L. Miller City Manager Address 505 S. Vulcan Ave. Encinitas, CA 92024 Amy Bayley Secretary Address 500 South Mah~ St., Ste. 110, Orange, CA 92868 Contractor is responsible for all of its obligations imposed by law or this Agreement, including but not limited to supervising and managing the acquisition of the Property and development of the Housing Project in accordance with the Scope of Development set forth in Exhibit B and the Development Agreement (if applicable), and operating and maintaining the Housing Project in accordance with the Regulatory Agreement, all of which are attached hereto and made a part hereof, and also in accordance with the other contract documents and specifications for the Housing Project. Contractor agrees to perform all activities and complete all tasks on or before the dates delineated with each task or activity as outlined in Exhibit B "Scope of Development". All permits, plans, approvals, contracts, reviews, agreements, financing as well as all other necessary documentation must be completed within 12 months of the signing of this Agreement by the City. If the City determines, at any time, in its sole discretion that the Housing Project is no longer feasible, the City will require that all funds reserved, committed, or awarded to the Contractor be returned within thirty (30) days, The City shall notify Contractor of its decision concerning the continued feasibility of the Housing CITY OF ENCINITAS/CANIEBIUA SENIOR HOMES-AFFORDABLE HOUSINO AOREEMENT Page 1 Project within ten (10) working days after the review is completed. Contractor shall have the right to appeal this decision to the City Council. The total amount of this Agreement shall not exceed $614,000 and shall be expended in the manner prescribed, as set forth in Exhibit B, Scope of Development and Exhibit C, Construction Budget, both o£whlch are attached hereto and incorporated herein. As an inducement to the City to provide the financial assistance made available through this Agreement, Contractor has agreed to operate and maintain the Housing Project for 55 years, starting from the date of a Certificate of Occupancy, and pursuant to the rules and regulations imposed by applicable statutes and regulations. The Contractor's contribution to the Honsing Project assisted under this Agreement is in the form of in-kind staff time, a $10,000 capital investment, land donation and fee credits from the Carltas Company, and at least $3,687,900 in federal funding from the U.S. Department of Housing and Urban Development, pursuant to Section 202 of the Housing Act of 1959, as amended, (the L'Section 202 Program"). The Contractor agrees to comply with all income targeting and affordability requirements as follows: Forty-lbur (44) units shall be made affordable at and rented to very-low income seniors. One (1) unit will be used for on-site manager. In accordance with the Community Development Block Grant Program Rule, 24 CFR Part 570, the Contractor certifies that: Before committing any funds to a project, it will evaluate the Housing Project in accordance with the guidelines that it adopts for this purpose and will not invest any more CDBG funds in combination with other Federal assistance than is necessary to provide affordable housing; It will comply with the acquisition and relocation requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended; It will use CDBG funds pursuant to the Consolidated Plan approved by HUD and all requirements of 24 CFR Part 570; 4. It does and will continue to provide a drug-free workplace by: a. Publishing a statement notifying employees that the unlawful manufacture, distribution, dispensing, possession, or use of a controlled substance is prohibited in the grantee's workplace and specifying the actions that will be taken against employees for violation of such prohibition; CITY OF ENCINITAS/CANTEBRIA SEIqlOR ItOMES-AFFORDABLE HOUSING AGREEMENT Page 2 b. Establishing an ongoing drug-free awareness program to inform employees about the dangers of drug abuse in the workplace; the participating jurisdietion's policy of maintaiuing a drug-free workplace; any available drug counseling, rehabilitation, and employee assistance programs; and the penalties that may be imposed upon employees for drag abuse violations occurring in the workplace; making it a requirement that each employee to be engaged in the performance of the grant be given a copy of the statement required by paragraph "a."; notifying the employee in the statement required by paragraph "a." that, as a condition of employment under the grant, the employee will abide by the terms of the statement and notify the employer in writing of his or her conviction tbr a violation of a criminal drug statute occurring in the workplace no later than five calendar days after such conviction. Notifying the agency in writing, within ten calendar days after receiving notice under paragraph 4(a) from an employee or otherwise receiving actual notice of such conviction. Employers of convicted employees must provide notice, including position title, to every grant officer or other designee on whose grant activity the convicted employee was working, unless the Federal agency has designated a central point for the receipt of such notices. Notice shall include the identification number(s) of each affected grant. Taking one of the following actions, within 30 calendar days of receiving notice with respect to any employee who is so convicted: (a) Taking appropriate personnel, action against such an employee, up to and including termination, consistent with the requirements of the Rehabilitation Act of 1973, as amended; or (b) Requiring such employee to participate satisfactorily in a drug abuse assistance or rehabilitation program approved for such purposes by a Federal, State, or local health, law enforcement, or other appropriate agency, Making a good faith effort to continue to maintain a drug-free workplace through implementation of this paragraph; No Federal appropriated funds have been paid or will be paid, by or on behalf of it, to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress in connection with the awarding of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, er modification of any Federal contract, grant, loan, or cooperative agreement; If any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this Federal contract, grant, loan, or cooperative alg'eement, it will complete and submit Standard Form-LLL, "Disclosure Form to Report Lobbying," in accordance with its insmmtions; and CITY OF E~q'C INITA S/CANTEBRI A SENIOR HOMES-AFFORDABLE HOiJS[NG AGREEMENT Page 3 It will require that the language of paragraph (4) of this certification be included in the award documents for all subawards at all tiers (including subcontracts, subgrants, and contracts under grants, loans, and cooperative agreements) and that all subrecipients shall certify and disclose accordingly. Contractor agrees to comply with the applicable portions of: Title 24, Part 570 of the Code of Federal Regulations; the Housing and Community Development Act of 1974 as amended; Title 24, Subtitle A, Part 58 of the code of Federal Regulations; Title VI of the Civil Rights Act of 1964; Title VIII of the Civil Rights Act of 1968; Section 109 of the Housing and Commun/ty Development Act of 1974; Section 3 of the Housing and Urban Development Act of 1968; Executive Orders 11246, 11063 and 11593; the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970; Title 24, Part 42 of the code of Federal Regulations; OMB Circular A-122 and Attachments A, B, C, F, H, N and O; the Areheological and Historical Preservation Act of 1974; the Amhitectural Barriers Act of 1968; the Hatch Act (Chapter 15 of Title 5, U.S.C.); the Flood Disaster Protection Act of 1974; the Clean Air Act (42 U.S.C. Section 1857 et seq.) and the Federal Water Pollution Control Act, as amended (33 U.S.C. Section 1251 et seq.); and the Drug-Free Workplace Act of 1988. In accordance with the foregoing, the City and Contractor agree to undertake the activities provided for in this Agreement and that the following paragraphs 1 through 26 are incorporated as part of this Agreement. Contractor agrees that, at all times its acts regarding the development of the Housing Project and the use of funds provided herein, including the contributions prescribed by Paragraph H above, shall be in conformity with all provisions of the City, including the statutes, roles and regulations, and the policies and procedures of the City which are applicable thereto. Contractor shall ensure that development of the Housing Project shall comply with all requirements of the City and the Contract Documents and that it shall employ staff and purchase, rent, and use materials and services as needed in the performance of this Agreement in a matmar consistent with ail requirements of the City and the Contract Documents. In the event that the Contractor purchases materials or services in the performance of this Agreement, it shall do so in that manner required by the Contract Documents. In the event that the Contract Documents do not adequately establish standards for these activities, Contractor shall comply with all State and Federal requirements. Contractor shall maintain such records and accounts, including property, personnel and financial records, as are deemed necessary by the City and the Contract Documents, to insure a proper accounting of all City funds and other contributions, and shall 'retain the same for at least five years after the final payment under this Agreement. The City shall CITY OF ENCINITASdCANTEBRIA SENIOR HOMES-AFFORDAIILE IqOUSING AGREEMENT Page 4 have access to and the right to examine and audit all reports, records, books, papers, and other documents related to the Contractor's performance under this Agreement. If property costing less than $300.00 per item is properly acquired with City funds and is expected at the time of acquisition to be used indefinitely for the purpose for which it was purchased, title to such property shall vest in the Contractor at the time of acquisition. If property acquired with City funds has a cost of $300.00 or more per item, or is not expected at the time of acquisition to be used indefinitely for the purpose for which it was acquired, title to such property shall vest in Contractor with a first lien appropriately recorded in the name of the City of Eneinitas until receipt of construction and permanent financing. If property or improvements purchased under this Agreement is diverted to uses inconsistent with this Agreement, Contractor shall be liable to the City for the replacement value of such property or improvements. All real and personal propcmy and improvements shall be maintained and protected in accordance with City standards. Contractor shall carry out its responsibilities under this Agreement in accordance with the civil rights provisions of the Contract Documents and the State's Nondiscrimination Clause, as follows: During the performance of this contract, Contractor and its subcontractors shall not unlawfully discriminate against any employee or applicant for employment because of race, religion, color, national origin, ancestry, physical handicap, medical condition, marital status, age (over 40) or sex. Contractors and subcontractors shall insure that the evaluation and treatment of their employees and applicants for employment are free of such discrimination. Contractors and subeontractom shall comply with the provisions of the Fair Employment and Housing Act (Government Code Section 12900, et seq.) and the applicable regulations promulgated thereunder (California Code of Regulations, Title 2, Section 7285.0, et seq.). The applicable regulations of the Fair Employment and Housing Commission implementing Government Code Section 12990, set forth in Chapter 5 of Division 4 of Title 2 of the California Code of Regulations are incorporated into this contract by reference and made a part hereof as if set forth in' I'ull. Contractor and its subcontractors shall give wxitten notice of their obligation under this clause to labor organizations with which they have a collective bargaining or other agreement; and This Contractor shall include the nondiscrimination and compliance provisions of this clause in all subcontracts to perform work under the contract. Contractor shall include a provision in all subcontracts of $10,000 or more of City funds, that indicates that the contracting parties and all project related records will be subject to the examination of the City for a period of three years after the final payment under the contract. CITY OF ENCINITAS/CAN'I'b;B Ri A SENIOR HOMES -AFFORDABLE HOUSING AGREEMENT Page 10. 11. 12. 13. 14.¸ Contractor shall provide the City with written progress reports at the times and in the format required by the City. The City may, at its option, terminate this Agreement at any time upon giving 30 days advance notice in writing to Contractor in the maimer provided by law. In such event, Contractor agrees to use all reasonable efforts to mitigate expenses and obligations hereunder. In such event, the City shall pay Contractor for all satisfactory services rendered prior to such notice of termination; lbr all expenses incurred by Contractor prior to said termination which are not included in charges for services rendered prior to termination and which could not by reasonable efforts of Contractor have been avoided, but not in excess of contract maximum payable, in the event of termination pursuant to this paragraph, if Contractor has acquired real property or improvements thereto with City funds, the City may require Contractor to reimburse costs related to those expenditures to the extent necessary to ensure that the County's interests are fulfilled, In the event of any breach of this Agreement, the City may, without any prejudice to any of its other legal remedies, terminate this Agreement upon five days written notice to the Contractor. In such event, the City shall pay Contractor only the reasonable value of the services rendered as the same may be agreed upon by the parties or determined by a court of competent jurisdiction. In the event of termination pursuant to this paragraph, if Contractor has acquired real property or improvements thereto with City funds, the City may require Contractor to reimburse costs related to those expenditures to the extent necessary to ensure that the City's interests are fulfilled. No waiver of any breach of this Agreement shall be held to be a waiver of any other or subsequent breach. All remedies afforded in this Agreement shall be taken and construed as cumulative, that is, in addition to every other remedy provided therein or by law. The failure of the City to enforce at any time the provisions of this Agreement, or to require at any time performance by Contractor of any of the provisions, shall in no way be construed to be a waiver of such provision nor to afl~ct the validity of this Agreement or the fight of the City to enforce such provisions. Contractor shall submit any subcontracts over $5,000 that are proposed to be entered into to the City for its prior written approval before entering into same if those subcontracts are wholly or partially financed by City funds or contributions subject to this Agreement. Every such subcontract shall include or incorporate by reference all the relevant terms and conditions of this Agreement and its attachments in addition to other relevant terms and conditions. The Contractor shall procure all permits and licenses necessary to accomplish the work contemplated in this Agreement, and give all notices necessary and incident to the lawful prosecution of the work. The Contractor shall keep informed of, observe, comply with, and cause all of its agents and employees to observe and comply with all prevailing Federal, State, and local laws, and roles and regulations made pursuant to said Federal, State, and local laws, if any, which affect the conduct of the work of this Agreement. If CITY OF E~qCINITAS/CANTEBRIA SENIOR HOMES-AFFOKOABLE HOUSING AOREEMENT Page 6 any conflict arises between provisions of the plans and specifications and any such law referenced above, then the Contractor shall immediately notify the City in writing. 15. The City, promptly after receiving notice thereof, shall notify the Contractor in writing of the commencement of any claim, suit, or action against the City, its agents, officers or employees for which the Contractor must provide indemnification under this Agreement. To the extent permitted by law, the City shall authorize the Contractor or its insurer m defend such claims, suits, or actions, and shall provide it or its insurer, at the Contractor's expense, information and assistance both necessary and available for such defense. The failure of the City to give such notice, irfformation, authorization, or assistance, shall not relieve the Contractor of its indemnification obligation. The Contractor shall immediately notify the City of any claim or action against it which affects or may affect this Agreement, the terms and conditions hereunder, or the City, and shall take such action w/th respect to said claim or action which is consistent with the terms of this Agreement and the interests of the City. 16. This Agreement may be amended in writing upon the mutual written agxeement of both parties hereto; however, such amendment shall not take effect until approval by the City and shall not have retroactive effect. 17. Contractor may not transfer by assignment, subcontract, or novation the performance of this Agreement or any part thereof except with the prior written approval of the City as to each such assignment, subcontract, or novation. 18. Neither the City nor the Contractor shall be deemed to be in delhult in the performance of the terms of this Agreement if either party is prevented from performing the terms of this Agreement by causes beyond its control, including without being limited to: acts of God or the public enemy; interference, rulings or decisions by Municipal, Federal, State, or other governmental agencies, boards or commissions; any laws and/or regulations of such Municipal, State, Federal, or other goverrtmental bodies; or any catastrophe resulting from flood, fire, explosion, or other causes beyond the control of the defaulting party. If any of the stated contingencies occur, the delayed party shall immediately give the other parties written notice of the cause of delay. The delayed party shall use reasonable diligence to correct the cause of the delay, the party delayed shall immediately give the other parties written notice thereof and shall resume operations under this Agreement. 19. If any provision of this Agreement is held invalid by a court of competent jurisdiction, such invalidity shall not affect any other provision of this Agreement and the remainder of this Agreement shall remain in full force and effect unless, at the County's sole discretion, the invalid portion of the Agreement has a material effect on the interests of the City and the City, at its sole discretion, determines that the entire Agreement is therefore invalid. 20. Except as otherwise provided in this Agreement, any dispute arising under or relating to the performance of this Agreement, which is not disposed of by Agreement shall be decided by the Community Development Director, who shall reduce decisions to writing CITY OF ENCIN1TA~/CANTEBRIA SENIOR HOMES-AFFOR DABLE 1-1OIISING AGILEEMENT Page 7 21. 22. 23. in regard to the dispute and shall transmit a copy thereof to the Contractor. The decision of the Community Development Director shall be final and conclusive unless within thirty (30) days from the date of receipt of such copy, the Contractor transmits to the City a written appeal. Pending the final decision of the City Attorney, the Contractor shall proceed diligently with the performance of tkis Agreement and in accordance with the written decision of the Community Development Director, which is the subject of the Contractor's appeal. With regard to the development of the Housing Project, Contractor agrees to undertake and complete all responsibilities in the Contract Documents and Regulatory Agreement or any other documents which are prescribed as duties of "the City" if, and to the extent, they are delegated to Contractor by the City. In connection with the purchase of real property described in Exhibit A, the parties hereto acknowledge that said property will be owned by Cantebria Senior Homes, or its affiliate, Cantebria Senior Homes, and that after the development of said Housing Project, Contractor, or its affiliate, shall operate and maintain said Housing Project as prescribed in the Regulatory Agreement. If the Housing Project is owned by Cantebria Senior Homes, Contractor and Cantebria Senior Homes shall execute assignment and assumption agreements to this Agreement, the Regulatory Agreement, and such other Contract Documents, as the City deems necessary. Hazardous Substances - In implementing this Agreement, Contractor shall be responsible for performing those obligations required by the City related to hazardous substances as follows: For the purpose of this Agreement, "Hazardous Substance Laws" are all Local, State, and Federal environmental laws, ordinances, and regulations relating to any Hazardous Substance. Prior to the draw down of funds for acquisition of the Property or for the construction of improvements, or for the rehabilitation of existing property, the Contractor shall perform, or cause to be performed, a "Phase 1" environmental audit to determine the possible presence of Hazardous Substances on the Property and in any improvements thereon. For the completion of any environmental audits, hazardous substance removal plans, hazardous substance operations and maintenance plans, or other hazardous work done pursuant to this paragraph, the Contractor shall employ personnel with the training, experience, references, and insurance coverage that evidence an ability to competently complete the relevant task. It is fully understood that the City may, in its sole discretion, decline to release any funds for acquisition, construction, or rehabilitation work until all possible violations of Hazardous Substance have been resolved. The Contractor, or the consultant preparing the environmental audit shall provide a copy of the environmental audit for the City and shall provide a certification as to the accuracy of the environmental audit and the methodology employed in its preparation. Gl'l'¥ OF EIqCINITAS/CANTEBPd A SENIOR I-IOMES -AFFORDABI,F, FIOILqING AOREEMENT Page In the event the "Phase 1' environmental audit indicates the possible presence of Hazardous Substances as determined by the City, and the Contractor desires to proceed with the project, the Contractor shall determine if hazardous substances are actually present, and to what extent they are present. This "Phase 2" environmental audit may include: (1) testing underground storage tanks for content and integrity, (2) analyzing soil gas, (3) bulk soil sampling, (4) groundwater and surface water sampling, (5) analyzing local geology for potential chemical spill pathways and, (6) listing individual groundwater wells and subsurface water bodies that may be affected by a hazardous substance release. In the event that the City determined, based on the Phase II audit, that Hazardous Substances are actually present, the Contractor shall prepare and submit to the City a detailed plan it would be willing to follow to remove or mitigate these hazards in a manner which will result in full compliance with all applicable Hazardous Substance Laws. This plan shall include time frames, costs, sources of funds, necessary governmental approvals and any other relevant information related to the scope of the work needed to remove or mitigate the presence of Hazardous Substances. The City reserves the right to terminate this Agreement pursuant to paragraph 10 if it determines, in its sole discretion, that the additional risks and costs posed by the presence of Hazardous Substance would jeopardize the security for the loan, render the project impossible or financially infeasible, or present an undue risk of liability to the City. The City may waive or reduce any of the requirements in subparagraphs b and c if it determines that equivalent studies or plans have been completed or that other evidence satisfactory to the City exist which eliminates the necessity of undertaking any of the activities required by subparagraphs b and c of this paragraph 23. Upon the completion of an environmental audit, hazardous substance removal or any related work required under this paragraph, the Contractor shall certit¥ that the work has been appropriately completed. At all times the Contractor shall comply and cause all subcontractors, agents, or employees to comply with all Hazardous Substance Laws. The Contractor shall · immediately notify the City in writing of: (1) the discovery by the Contractor, or any of its subcontractors, agents or employees working with the Property, of any concentration or amount of HaTardous Substance on or under the Property requiring notice to be given to any governmental entity or agency under Hazardous Substance Laws. In the event of such a discovery, work shall be halted on any portion of the project that may result in violation of occupational health and safety regulations, in violations of public health regulations, in waste or increased costs of hazard removal or mitigation, or in exposing project residents to an urrreasouable risk of harm. Work may be resumed when CITY OF ENCINITAS/CANTEBRIA SENIOR UOMES-AI:FORDABLE HOUSING AGREEMENT Page 9 The City determines that appmprlate precautions are taken to avoid these results; (2) any knowledge by the Contractor or its subcontractors, agents or employees that the project does not comply with any Hazardous Substance Laws; (3) the receipt by the Contractor or its subcontractors, agents or employees of written notice of any legal actions or claims regarding Hazardous Substances affecting the project; and (4) the discovery by Contractor or its subcontractors, agents or employees, of any occurrence or condition on any real property located within 2,000 feet of the Property that could cause the Property or any part thereof to be designated as "border zone property" under the pmvlsions of Health and Safety Code Section 25220, et seq. in the event the Contractor or its subcontractors, agents or employees is not in compliance with all Hazardous Substance Laws, the Contractor shall attain compliance, or ensure compliance not more than thirty (30) days after Contractor's receipt of written notice by the City to do so. The Contractor hereby agrees to indemnify and hold the City harmless for any and all liability arising out of the presence of hazardous substances at the project during the longer of the term of this Agreement or the term of the Regulatory Agreement. Liability may be established by, among other forms of demands, a demand in the form of a judgement, a settlement, or an administrative order, and may include costs, fees, penalties, interest, and other costs related thereto. Whereas the purpose of this indemnity is to protect the City from harm, the County's rights to recover accrue as soon as the liability is incurred. "Any and all liability" includes, but is not limited to, liability for: (1) the clean-up of hazardous substances; (2) claims for contribution or apportionment of remedies and; (3) claims for physical or other damages to persons, property, or natural resources. The duty of the Contractor to indemnity and hold harmless includes the duty to defend. The Contractor's duties herein arise regardless of the existence or degree of fault or negligence, whether active or passive, on the part of the City. This provision shall not apply as long as a deed of trust affecting the Project and the Property is held by the Secretary of the U.S. Department of Housing and Urban Development, including his successors and assigns (the "HUD Secretary"), or a regulatory a~eement and/or use agreement in favor of the HUD Secretary is still outstanding. This subparagraph is in addition to any other indemnity provision of this Agreement and is not to be considered in any manner to supersede any other indenmity provision of this Agreement. CITY OF ENCINI'I'AS/CANTEBRIA SENIOR HOMES -AFFORDABLE HOUSING AGREEMENT Page 10 24. 25. The Contractor releases the City from any and all claims that the Contractor may currently or subsequently have against the City, arising out of the presence of hazardous substances at the Development. The Contractor expressly waives the protection of Civil Code Section 1542. This provision shall not apply as long as a deed of trust affecting the Project and the Property is held by the Secretary of the U.S. Department of Housing and Urban Development, including his successors and assigns (the "HUD Secretary"), or a regulatory agreement and/or use agreement in favor of the HUD Secretary is still outstanding. As additional consideration for receipt of City funds, the Contractor agrees to hold harmless and defend the City and its agents, officers and employees from and against any and all claims, actions, liabilities, loss, damage or injury, including any of the foregoing by way of indemnification or contribution, arising directly or indirectly out of Contractor's activity, performance, operation, acts, or omissions relating to the Contractor's duties, responsibilities and rights under the terms and conditions of this Agreement, whether or not such claims, actions, loss, damage or injuries result directly or indirectly from the sole, contributory, comparative, active, passive, primary or secondary negligence of the Contractor, and the Contractor shall defend, at its expense, including attorney fees, the City, its agents, officers and employees in any legal action based upon such claim actions, liabilities, loss, damage or injury. The provisions of this paragraph shall be subject to, and liimted by, any applicable provision of State law and shall be in addition to the provisions of paragraph 23(i). In addition, the provisions of this paragraph shall be subject to the rights of HUD, if any, under the Section 202 Program, and the restrictions therein with respect to the use of Project assets to satisfy the Contractor's, or Contractor's affiliate's, obligations hereunder. In implementing this Agreement and in accordance with the Public Contract Code unless precluded by Federal law, the Contractor shall be responsible for compliance with all conditions set forth in Scope of Development and for certain activities, including but not limited to: Reviewing, and preparing to the extent necessary, documents related to the acquisition of the Property; and preparing contracts for site development and construction; Preparation and oversight of bid process in accordance with State, City, and Federal requirements c. Enfoming bid and construction bond requirements; d. Ensuring compliance with prevailing wage requirements; CITY OF ENCINITAS/¢ANTEBRIA SENIOR HOMES-AFFORI)AItLE ROUSING AGREi~MEN'r Page ! 1 26. e. Supervising construction. The Contractor shall supervise and monitor the construction work by fulfilling or causing to be fulfilled, certain responsibilities, including, but not limited to, the following: 1) Act as clerk of the works to monitor the daily progress of construction and ensure compliance with all applicable codes and contract documents and specifications; 2) Notify construction contractor(s) in writing of the date for commencement of construction. Prior to the start of the construction, the contractor must schedule a preeonstruetion conference; 3) Review and approve requests for payments to construction contractor(s) for work satisfactorily completed in accordance with the terms of the contract for construction; 4) Maintain and retain all pertinent records related to the work including, but not limited to, inspection reports, request for payment documentation, change order requests, and prevailing wage verifications; and 5) Maintain books of record for receipt and disbursement of funds in accordance with the City, State, and federal requirements. f. Executing a management agreement between the management agency and the Contractor, which ensures that the Housing Project will be operated in a manner consistent with the Program and the Regulatory Agreement. In implementing this Agreement, the City shall be responsible for certain activities, including but not limited to the fullowing: a. Review and approve bids, bid award and the construction contract; b. Review and approve preliminary title reports and title policy; c. Approve all change orders prior to their implementation; and d. Approve all budget line item changes. CITY OF ENCINITAS/CANTEBKIA SENIOR I1OMES -AFFORDABLE }lOUSING AOREEMENT Page [2 EXHIBIT A LEGAL DESCRIPTION The land referred to herein is situated in the State of California, County of San Diego, and described as follows: Lot 44 of amended map of City of Encinitas Map No. 13258, City of Encinitas, Tract No. 94- 066, Units I, II and III, in the City of Eneinitas, County of San Diego, State of California, according to map thereof No. 13333, filed in the office of the County Recorded of San Diego County, June 3, 1996. CITY OF ENCINITAS/CANTEBlUA SENIOR HOMES-AFFORDABLE HOUSING AGREEMENT Page 13 EXHIBIT B SCOPE OF DEVELOPMENT I. OENERAL DESCRIPTION The Site is approximately 1.4 acres in size and is located at Via Cantebria on the Encinitas Ranch, Encinitas, California. DEVELOPMENT Developer shall construct 45 units that will consist of either two or three levels of living space. It is anticipated that 2,820 square feet of common space will be constructed. Forty-four of the units will consist of one bedroom and one bathroom. One unit will consist of two bedrooms and one bathroom, wlfich will be reserved for an on-sim manager. Building design will conform to the City of Encinitas zoning codes and design review guidelines. All of the improvements, including off-site improvements, as required by the City pursuant to the usual City building permit mquiremants will be provided by the developer, at its own cost and expense. III. DEVELOPMENT STANDARDS The improvements shall be designed and constructed and the Property shall be developed in accordance with the Encinltas Municipal Code. CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES-AFFORDABLi~ HOUSING AGREEMENT Page 14 EXIq/BIT C CONSTRUCTION BUDGET Deacrl tion Estimate HUD CIT~' Carltas Additional Fun~ln~l Difference Construction $ 3,380,404 $ ;].269,917 $ .... $ 99,48715 Cost Estlmat°r $ 4,000 $ 4,000 ' $ Lane-per appraisal $ ~ 035,000 $1,035,000 Architecture,Engineer $ 259,850 $ 51.9~0 $194,887 " $, 12,993 EnvironmentaJ(Phese I) $ 10,000 $ 10,000 ' $ Survey(ALTA) $ 10,000 , ~' '10,000 [ $ Soil~ (geotech rpt and monitoring) ' $ 5,000 $ 5,000 $ ~.coustlc Surve;/ ' $ 1,000 $ 1,000 Fees/Permits $ 421,405 $ 54.4'87 $ 366,918 building(struc./meci~/elec,/plmb) $ 6,600 Sewer(baSic fee+planchk+{nspection $ 185,750 water $ 41 806 traffic ~nd park fees $ 145,613 , flood control impact fees $ 16,466 planning, ftrelplan check and alarms $ 12,170 building permit $ 13,00Q .'i'nancial Consultant $ , ,'1 Taxes/InsuranCe $ 15,000 , $ 15,000 $ Le~sl $ .35,000 $ 10,000 $ 9,6261 $ 1,~,374i$ Tltle/Closir~l , $ 20,00(: $ 12,993 i~" 7,007 Appraisal $. 5,000 $ 5,000, $ Min. imum Cap[tallnvestment $ 10,000 .. $ 10,000 $. Coat Certification Audit $ 15,000 $ !51~00 ~.dmieistrative Fee $ 250,000 $ 125,000 $125,000 $ Rent-up/Marketing* $ 25,000 $ 25,000 $ Hard Cost Contin!~ency' $ 168,020 $ '" 118,020 50,000 $ 0 Furnishings/Fit-up, $ 601000 $ 601~0 TOTAL COST $. 5,709,67~ $ 3,687,900 $414,000 $1,035,00~ $. 572,779 $ 0 TOTAL COMMITTED $ $,135,900 $ 3,687,9.00 $414,000 $1,035,000 $ ,, ~,mount Remaining $ (57;2,779) $ $ .. $ $ (5~2,779) CITY OF ENCINITAS/CANTEBRiA SENIOR IIOMES-AFFORDABLI~ HOUSING AGREEMENT Page 15 DEVELOPMENT AGREEMENT This Development Agreement, dated as of 1/14d2003, (the 'Development Agreement"), is made and entered into by and between the City of Eneinitas, ("the City") and Cantebria Senior.Homes, ("the Contractor"). RECITALS The Contractor, or Contractor's affiliate, Cantebfia Senior Homes, is or will be the owner of, or holder of a fee estate in, the real property located at Lot 44 of the Encinitas Ranqh_, in the County of San Diego, State of California (the "Property') and more fully described in Attachment A, which is attached hereto and incorporated herein. The Contractor has proposed to develop, construct and operate on the Property an affordable senior housing project (the "Project"). The Project will consist of tbrt¥-five (45) units, of which ..fort3,-four (44) one bedroom units will be rented at a guaranteed affordable rate to ver~ low income seniors. The Project shall be fmanced and regulated in accordance with the application approved by the City and the roles and regulations governiag the applicable program(s) that funding was received from (hereinafter "Program"). The Contractor agrees to be bound and abide by all applicable statutes, rules and regulations applicable to the Project and the financial assistance provided by the City, and the Project shall be developed in accordance with the plans and specifications submitted by the Contractor and approved by the City as described in Attachment B, "Construction Description", and Attachment C, "Sources and Uses of Funds", each of which is attached hereto and incorporated herein, The acquisition, development and construction of the Project are to be financed in part by a loan from the City in a principal amount not to exceed $.. 614,000 (the "Loan"). In consideration of the City's commitment to make the Loan, the Contractor has entered into an Affordable Housing Agreement, dated ~, and has agreed to enter into this Development Agreement, with the City; and in consideration of said Loan, has entered or will enter into a Regulatory Agreement, dated as of the date hereof, with the City. In addition to the Loan from the City, the Contractor has received, or will receive, funds for the construction of the Project from the entities identified in the chart identified in Attachment C 'Sources and Uses of Funds'. All such funds shall be used, and secured, in the manner specified in Attachment C. NOW, TI-IEREFORE, the parties hereto agree as follows: GENERAL 1. Recitals. The foregoing recitals are part of this Development Agreement. 2. Definitions. l'he following definitions apply CITY OF ENCINrr.~CANTEBRIA SENIOR IIOMES ~ DEVELOPMENT AGREEMENT Page I (a) "Development" or "Construction' shall include uny site development, mitigation of hazardous substances, acquisition of land, or other activities financed by the Loan; (b) "City", as used herein, refers to the City of Eneinitas; (c) "Loan Documents", as used herein, means the Affordable Housing Agreement, the Regulatory Agreement, this Development Agreement, a Promissory Note, a Deed of Trust with Assignment of Rents, and any other instruments required by those agreements. Work Description. The Contractor shall cause the development and construction of the Project to be performed in an expeditious and professional manner, in accordance with Attachment B "Consmlction Desefiption" und Attachment C "Soumes and Use of Funds". Construction Schedule. The Contractor shall follow the construction schedule, including all pertinent events from transfer of ownership, if applicable, through and including occupancy, as set forth in Attachment B. Prior to the commencement of construction, Contractor shall schedule und conduct a preconstmction conference to be attended by representatives of the Contractor, all grant sources and lenders (including the City's designated construction inspector), the project architect, and the general contractor. Contractor shall notify the City's designated construction inspector by telephone of this preconstruction conference no later than seven (7) days prior to its occurrence. The Contractor shall notify the City's designated construction inspector by telephone no later than three (3) days prior to beginning work on each of the following construction phases: (a) site improvements - utilities; (b) fotmdations; (c) framing und roofing; and (d) final construction. Contractor shall also notify the City's designated construction inspector by telephone when the "punch list" items listed at final inspection have been completed. Term. This Development Agreement shall be effective on the date set forth above and, except for the obligation contained in Recital B hereof, shall terminate upon the earlier of the following: December 31~ 2005 or the first anniversary of the issuance to the Contractor of a Certificate of Completion and Certificate of Occupuncy for the Project by the State or Local building officials or State or Local jurisdiction, as may be applicable; this Agreement may be terminated sooner pursuant to Paragraph 24 hereof. CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES- DEVELOPMENT AGP~EE .MENT Page 2 Form of Documents. The form and substance of all documents, instruments and forms of evidence to be delivered to the City under the terms of any of the Loan Documents, including, but not limited to, the Plans and Specifications and the documents evidencing or securing the sources of funds specified in Attachment C, shall be subject to the City's approval and shall not be modified, superseded or terminated in any respect without the City's prior written approval. REPRESENTATIONS AND WARRANTIES Representations and Warranties. Contractor represents and warrants to the City as follows: (a) Organization. Contractor and Cantebria Senior Homes are each duly organized, validly existing and in good standing under the laws of the State of California and has the power and authority to own or lease the Property and carry on its business as now being conducted or contemplated. The copies of the documents evidencing the organization of Contractor and Cantebria Senior Homes delivered to the City are tree, complete, and correct copies of the originals, as amended to the date of this Development Agreement. (b) Authority of Contractor. Contractor has full power and authority to execute and deliver this Development Agreement, the other Loan Documents and all documents or insmaments executed and delivered, or to be executed and delivered, pursuant to this Development Agreement, and to perform and observe the terms and provisions of all of the above. (c) Authority of Persons Executing Documents. The Loan Documents and all documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Development Agreement, have been executed and delivered by persons who are duly authorized to execute and deliver the same for and on behalf of Contractor, and all actions required under Contractor's organizational documents and applicable governing law for the authorization, execution, delivery and performance of this Development Agreement, the other Loan Documents and all documents or instruments executed and delivered, or to be executed and delivered, pursuant to this Development Agreement, have been duly taken, (d) Valid Binding Agreements. The Loan Documents and all documents or instruments executed and delivered pursuant to or in connection with this Development Agreement constitute or, if not yet executed or delivered, will when so executed and delivered constitute, legal valid and binding obligations of Contractor enforceable against it in accordance with their respective terms. (e) No Breach of Law or Agreement. None of the execution or delivery of the Loan Documents or of any document or instrument executed and delivered, or to be executed or delivered, pursuant to this Development Agreement, or the CITY OF ENCI NI'I'AS/CANTEBRIA SENIOR HOMES- DEVELOPMENT AGREEMENT Page 3 (f) (g) (h) (i) performance of any provision, condition, covenant or other term hereof or thereof, will conflict with or result in a breach of any statute, role or regulation, or any judgement, decree or order of any court, board, commission, or agency whatsoever binding on Contractor or any provision of the organizational documents of Contractor, will conflict with or constitute a breach of or a default under any agreement to which Contractor is a party, or will result in the creation or imposition of any lien upon any assets or property of Contractor, other than liens approved by the City. Compliance with Laws; Consents and Approvals, The Project will comply with all applicable laws, ordinances, rules and regulations of Federal, State and Local governments and agencies having jurisdiction over either the Contractor, the Property or the Project and with all applicable directions, rules and regulations of the fire marshal, health officer, building inspector and other officers of any such government or agency. Except as specified in Attachment B, all permits, consents, permissions and licenses required by any Federal, State or Local government or agency to which Contractor, the Property or the Project is subject, which may be necessary in relation to this Development Agreement or the acquisition, development, conslruction or ownership operation of the Project, at or prior to, the commencement of construction have been obtained, and none of such consents, permissions and licenses are subject to appeal or to conditions which have not been met. Pending Proceedings. Contractor is not in default under any law or regulations or under any order of any court, board, commission or agency whatsoever, and there are no claims, actions, suits or proceedings pending or, to the knowledge of Contractor, threatened against or affecting Contractor, the Property or the Project, at law or in equity, before or by any court, board, commission or agency whatsoever which might, if determined adversely to Contractor, materially affect Contractor's ability to acquire, construct or develop the Project. Title. Upon disbursement of the Loan and recordation of the Regulatory Agreement, Contractor or Cantebria Senior Homes shall have title to the Property. The Regulatory Agreement shall remain in first position until permanent financing by HUD is recorded, If Cantebria Senior Homes acquires title to the Property, Contractor shall first obtain the consent of. the City. Such City consent shall require as a condition precedent, the execution and delivery to the City of assignment and assumption agreements to the Loan Documents that are acceptable in form and substance to the City. Adequacy of Loan, The mount of the Loan, together with any funds to be provided by the Contractor or to the Contractor from any other sources, is adequate to pay all costs incurred in connection with the acquisition and development of the Property. In addition, funds provided by Contractor and from CITY OF ENCINITAS/CANTEBRIA SENIOR IIOMES- DEVELOPMENT AOKEEMENT Page 4 other sources will be adequate to pay for the construction and development of the Project and to enable Contractor to satisfy the covenants contained in this Development Agreement. The costs set forth in the sources and uses charts in Attachment C are the anticipated costs of acquiring, constructing and developing the Project. 0) Payment of Taxes. All Federal, State, City and Municipal taxes required to be paid by the Contractor or on accoum of thc Property duc and payable as of the date of this Development Agreement have been paid in full as of such date. (k) Conflict of Interest. No person who is an employee, agent, consultant, officer, or elected official or appointed official of the Contractor and who exercise or have exercised any functions or responsibilities with respect to any activities assisted with any City funds, or who are in a position to participate in a decision making process or gain inside information with regard to these activities, may obtain a financial interest or benefit from a City or program assisted activity, or have an interest in any contract, subcontract or agreement with respect thereto, or the proceeds thereunder, either for themselves or those with whom they have family or business ties, during their tenure or one year themafier. ACQUISITION AND CONSTRUCTION Plans and Specifications/Change Orders. There shall be no change in the approved Plans and Specifications of the Project without the City's prior written approval. All change orders shall be submitted on a form acceptable to the City, signed by Contractor, the project architect and the general contractor; and shall be accompanied by working drawings, an itemized cost statement and a written narrative of the proposed change. To the extent the City determines that the proposed change shall result in increased cost of the Project, the Contractor shall provide satisfactory evidence that adequate funds are available for any such change. All profit associated with any change order shall not exceed 6.5 percent of the total amount of the change order. All overhead associated with any change order shall not exceed 6.5 pement of the total amount of the change order. Architect. For the performance of design and construction supervision work on the Project, Contractor agrees to use the Architect approved by the City prior to execution of a contract with the Architect. The City must approve any successor to or substitute for the Architect in writing. Contractor shall not terminate or amend that contract without written notice to the City. Contractor shall monitor and enforce the terms and conditions of that contract. 10. Contractors and Subcontractors. For the performance of any construction work on the Project, Contractor agrees to use the general contractor(s) approved by the City prior to execution of a conswaction contract. The City must approve any successor to or substitute for the general contractor(s) in writing. The Contractor hereby certifies that the general contractor(s) will be appropriately licensed by, and in good standing with, the California Contractors' State License Board and agrees that the Contractor shall only contract with CITY OF ENCRqlTAS/'CANTEBKiA SENIOR HOMES- DEVELOPMENT AGILEEMENT Page 11. 121 14. 15. general contractors, and shall ensure that the general contractor(s) and any successors thereto shall only contract with subcontractors which are so licensed. Construction Contract. The Contractor shall enter into a written contract with the general contractor(s) for the performance of the construction work as set forth in Paragraph 3 above. That contract shall not be entered into by the Contractor prior to receiving the City's written approval of the general contractor(s) and the form of the contract. The contract shall include any addendum required by the City which relate to the use of the City funds. Contractor shall not terminate or amend that construction contract without prior written notice to the City. Contractor shall monitor and enforce the terms and conditions of that contract. Construction Responsibilities. Contractor shall be solely responsible for all aspects of Contractor's business and conduct in connection with the Property and the Project including, but not limited to, the quality and suitability of the Plans and Specifications and the equipment and materials used in the construction of the Project; the supervision of the work of construction; the qualifications, financial condition and performance of all architects, engineers, contractors, and contractors of any tier; material suppliers; consultants; and property managers. In addition Contractor shall be solely responsible for the accuracy of all applications for payment and the proper application of all disbursements. The Contractor shall submit a Prevailing Wage Payment Plan to the City which shall specify the means by which the Contractor shall comply with the State prevailing wage law as set forth in Labor Code Section 1720, et seq and with all federal wage and labor standards. Purchase of Materials Under Title Retention Agreement. With respect to the Project, the Contractor shall not purchase or install or permit to be purchased or installed any materials, equipment, fixtures or other part of the Project under any agreements or arrangements wherein the supplier or seller reserves or purports to reserve the right to remove or to repossess any such items or to consider them personal property after their incorporation into the Project, unless authorized in writing by the City. Material Warranties. The Contractor shall procure from the general contractor all warranty documents, including warranties on appliances and on building components (such as the roof and siding), etc., and all service manuals and operating instructions pertaining to the Project. Inspections. (a) Authorized representatives and agents of thc City shall be permitted upon reasonable demand to inspect all work, materials, payrolls, personnel records, materials invoices and other relevant data pertaining to the Project, and shall have the fight of entry and full access to the Property and the Project. Based on the findings during any inspection, the City may issue correction notices or stop work orders. In all cases, the Contractor shall cause to be corrected any items noticed in CITY OF ENCIN1TAS/CAN3'EBRIA SENIOR HOMES- OEVELOPMENT AGREEMENT Page 6 16. 17. the correction notice or stop work order, and request a relnspection, prior to proceeding to the next phase of work. (b) The City shall not have any affirmative duty to make any inspection, to make any investigation, or to supervise or inform Contractor or any third party as to any aspect of the construction of the Project and shall not incur any liability for falling to do so. Any irmpection, investigation, or review undertaken by the City shall be solely to determine whether the Contractor is properly discharging its obligations to the City and may not be relied upon by Contractor or any third party to protect against, or to inform Contractor or any th/rd party of any negligent, faulty, inadequate, or defective design or construction of the Project. The fact that inspection, investigation or review of the design or construction of the Project may or may not have been made by the City shall not relieve the Contractor or the general contractor of any obligation that they may otherwise have to inspect the Project or to otherwise comply with the terms of this Development Agreement. Completion Certificate. Contractor shall submit to the City a Notice of Completion or Certificate of Occupancy for the Project upon the occurrence of all of the following: (a) completion of the acquisition, construction, and development of the Project in accordance with the Plans and Specifications as modified in accordance with the terms of this Development Agreement and acceptance thereof by the City; (b) compliance by Contractor with all applicable laws, ordinances, roles and regulations of State and Local governments, and all the terms and provisions of this Development Agreement; and (c) satisfaction of the conditions precedent to payment to, or on behalf of Contractor of the final disbursement of funds due and payable pursuant to this Agreement. DISBURSEMENT OF FUNDS Conditions Precedent to Disbursements, The City shall not be obligated to make the initial or any subsequent disbursements of proceeds of the Loan to Contractor or take any other action under the Loan Documents unless all of the following conditions are satisfied prior to the time of such action: there exists no Event of Default (as defined in Paragraph 23 hereof) hereunder or any default under any of the other Loan Documents, or event, omission or failure of condition which would constitute such a default or Event of Default after notice or lapse of time, or both; (b) the undisbursed Loan proceeds, including the roll-over Loan proceeds, and all sums (if any) to be provided by Contractor, and all sums (if any) shown in the CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES- DEVELOPMENT AOI~EMENT Pag* 7 (c) (d) (e) (g) (h) chart entitled "Sources and Uses of Funds" in Attachment C to be provided by other sources, shall at all times be not less than the amount which the City, in its sole judgement, determines necessary to: (i) pay all costs of acquisition and costs related thereto; (ii) pay all sums which may be payable under the Loan Documents during the term of this Development Agreement; and (iii) enable the Contractor to perform and satisfy all of the covenants of the Contractor contained in this Development Agreement; provided that if the City determines at any time that said funds are not sufficient for said purposes, the Contractor may satisfy this condition by depositing the amount of such deficiency in the account within seven (7) days of the City*s written demand or by providing evidence satisfactory to the City that Contractor has obtained a binding commitment from another entity which will provide funds to Contractor in such amounts and upon terms which are satisfactory to the City; the Contractor has executed and delivered to the City all Loan Documents, other documents, instruments, policies, and forms of evidence or other materials required under the terms of this Development Agreement or any of the other Loan Documents, all in form and substance satisfactory to the City; Each of the Deed of Trust and the Regulatory Agreement has been executed and delivered to the City with the understanding that upon acquisition of the Property by the Contractor or Cantebria Senior Homes they will be recorded in the Office of the County Recorder for the County of San Diego, and are not subordinate in priority to any documents unless subordination was agreed to in writing by the City; a letter of funding commitment from the U.S. Department of Housing and Urban Development has been received, in an amount not less than $3,687,900 and to the satisfaction of the City; the disbursement of funds shall be contingent upon the continued availability of funds; there shall be no unrelated mechanic's liens or stop notices in connection with the Project and Contractor shall have furnished to the City, if demanded by the City, full waivers of lien claims from the general contractor and all subcontractors and materials suppliers for all work performed and materials supplied to date; the Contractor shall have obtained for the City such endorsements to the Title Policy as described in Paragraph 19 as the City may require including but not limited to an endorsement that the Regulatory Agreement is prior to any liens, encumbrances, or matters of record affecting the Project except for those approved in writing by the City, and to any statutory lien for labor or material arising out of the Construction; CFFY OF ENCINITAS/CANTEBP, JA SENIOR UOMES ~ DEVELOPMENT AGREEMENT Page 8 (i) funds disbursed may only be for the amount needed for payment of actual eligible expenses. The amount requested must be limited to the amount needed as evidenced by actual invoices and/or signed statements of cost. 18. Final Disbursemem 19. (a) The final disbursement of the proceeds of the grant, without any withhold, shall be made upon the satisfactory accomplishmem of the requirements in this Development Agreement. (b) Contractor may reimburse its administrative costs in an amount up to $125,000 in accordance with Attachment C, "Sources and Uses of Funds", upon demonstrating to the City's satisfaction that it has incurred reasonable and necessary costs in this amount for administration of the project and accomplishment of the following items: (i) submission to the City of a Notice of Completion duly recorded by Contractor and a Certificate of Occupancy for the Project issued by the local government agency having jurisdiction over the project or any equivalent thereto acceptable to the City; (ii) submission to the City of all lien waivers required by the City or passage of the applicable statutory periods ~br filing mechanic and other similar liens; (iii) issuance of a certificate or certificates, each in form and substance satisfactory to the City, executed by Contractor, the general contractor, and the architect, either joimly or severally, each certifying that the Project has been completed in accordance with the Plans and Specifications; (iv) receipt by the City ora cost audit for the Project satisfactory to the City; and (v) compliance with all other applicable requirements of this Development Agreement and the Affordable Housing Agreement. Title Insurance. Upon acquisition of the Property by the Contractor or Cantebria Senior Homes, Contractor shall procure from a title insurer acceptable to the City a 1970 LP~10 ALTA Lender's Policy of Title Insurance (the "Title Policy"), with any endorsement the City may require, insuring the City of the validity and the priority of the liens of the Deed of Trust and the Regulatory Agreement upon the Property and Project, in the principal amount of the Loan, subject only to matters of record approved by the City in writing. During the term of this Agreement, Contractor shall procure and deliver to the City, within five (5) working days of the City's request, other endorsements to the Title Policy as the City may reasonably require. CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES - DEVELOPMENT AGREEMENT Page 9 20. 21. 22. Methods and Conditions of Payment. The City agrees to provide to or on behalf of the Contractor, Loan funds in the amount and in accordance with the manner, timing, and terms--including retention--as specified in this Development Agreement. All mounts paid to or on behalf of Contractor hereunder shall be considered payments subject to the Regulatory Agreement. (a) The City may, at its option and subject to the requirements of State law, deposit Loan proceeds into an interest-bearing escrow account approved by the City in those amounts necessary to cover actual acquisition costs, as determined by the City. Any and all interest earned on such advanced funds held in an escrow account shall be remitted to the City upon completion of the acquisition phase. Except as may otherwise be provided in this Development Agreamant or approved in writing by the City, all funds which are deposited by the City and by all other funding sources identified in Attachment C, shall be placed into an escrow account approved by the City, for disbursement pursuant to this Development Agreement. Liens and Stop Notices. If a claim of lien is recorded affecting the Property or Project, or a bonded stop notice is served upon the City which affects the Loan or the Contractors funds, Contractor shall, within twenty (20) days of such recording or service or within five (5) days of the City's demand (whichever last occurs): (i) pay and fully discharge the same; or (ii) effect the release thereof by recordings, or delivering to the City a surety bond in sufficient form and amount, or otherwise; or (iii) provide the City with other assurance which the City deems, in its sole discretion, to be satisfactory for the payment of such lien or bonded stop notice and for the full and continuous protection of the City from the effect of such lien or bonded stop notice. If Contractor has not received actual notice of the claim of lien or bonded stop notice prior to the City's demand, then the five (5) day period described above shall be extended to twenty (20) days. Contractor shall give the City prompt written notice of all known lien claims affecting the Property or Project. .Eligible Use of Funds. (a) Funds advanced to Contractor and roll-over funds shall be used only for payment of amounts set forth in the chart entitled "Sources and Uses of Funds" in Attachment C. (b) In addition, costs, to be eligible, must be reasonable and necessary for the completion of the Project. (c) CDBG funds may only be used to pay for construction costs as Contractor has proven to be a Community Based Development Organization (CBDO). Eligible CDBG expenses related to the development of the new housing project have been identified in Attachment C. CITY OF ENCINITAS/CANTEBRIA SENIOR HOM~$ -DEVELOPMENT AGREEMENT Page 10 23. DEFAULTS, REMEDIES AND ENFORCEMENT Events of Default. The occurrence of any of the following events shall constitute an "Event of Default" hereunder following notice to the Contractor by the City, specifying (1) the applicable event, (2) the action required to prevent such event becoming an Event of Default, and (3) a date, which shall be not less than fifteen (15) days after the date the notice is mailed to Contractor, by which such action must be taken: (a) Monetary. (i) Contractor's failure to deposit any of Contractor's funds as and when required by tiffs Development Agreement; (ii) Contractor's failure or inability to secure anticipated financing from parties other than the City as specified in Attachment C, regardless of fault of the Contractor, (iii) Contractors failure to use or apply Loan funds or other party's funds in the manner specified by, or consistent with the purposes of this Development Agreement and as specified in Attachment C; or (iv) the occurrence of an event of default under the terms of any of the grants or loans received from the £mancing sources specified in the sources and uses charts in Attachment C. (b) Construction; Use of Materials and Workmanship. (i) Contractor's failure to remedy any material deviation in the work of construction from the Plans and Specifications that occurred with thc City's approval or defective workmanship or materials in, or usc of defective workmanship or materials in constructing the Project in each case to the City's satisfaction, within ten (10) days of the City's written demand to do so; or (ii) Contractor's failure to complete construction and obtain a Certificate of Occupancy and Notice of Completion by December 31, 2002. ¢) Liens; Attachment, Condemnation; Encroachments. (i) the filing of any claim of lien against the Property or the Project, or any part thereof, or service on the City of any bonded stop notice relating to the Loan and the continuance of the claim for lien or bonded stop notice for twenty (20) days after Contractor receives actual notice thereof without discharge, satisfaction or provision for payment being made as provided for in Paragraph 24 thereof, (ii) the condemnation, seizure or appropriation of, or the occurrence of an uninsured casualty with respect to, any material portion of the Property or the Project, such materiality to be determined by the City in its sole and absolute discretion; (iii) the sequestration or attachment of, assignment by Contractor tbr the benefit of its creditors of, or any levy or execution upon, the Property, the Project, other contribution provided by Contractor under any of the Loan Documents, monies in accounts established for the deposit of operating income, or substantial portion of the other assets of Contractor, which is not released, expunged or dismissed prior to the earlier of sixty (60) days after sequestration, attachment or execution or the sale of the assets affected thereby, or (iv) any survey provided to the City upon a request for a disbursement of Loan funds shows encroachments which occurred without the written approval of the City which, in its sole discretion, the City requires to be CITY OF ENCINITAS/CANTEBRIA SENIOR HOM~SS - DEVELOPMIENT AGREEMEN'r Patg 11 (d) (e) (g) removed or corrected, and the failure to remove or correct any such encroachments within thirty (30) days after receipt of the survey. Performance of Obligations. Contractor's default under any of the other Loan Documents, or Contractor's failure to perform its obligations under this Development Al~B'eement and, in each case, the expiration of any time provided for the remedy of such failure. Representations and Warranties. (i) Any of Contractor's representations or warranties in any of the Loan Documents or any statements, certificates or schedules furnished by Contractor to the City, shall prove to have been untrue in any material respect when made or the Contractor shall have concealed any material fact from the City, (ii) any of the Contractor's representations or warranties in any of the Loan Documents or any statement, certificates or schedules furnished by Contractor to the City, other than representations, warranties, statements and certificates as to the financial condition of Contractor or any other person, shall cease to be tree and shall remain untrue for fifteen (15) days after notice of such change to Contractor by the City, or (iii) any material adverse change in the financial condition of Contractor or any other person or entity obligated in any manner to the City under the Loan Documents from the financial condition represented to the City as of the date of this Development Agreement. Voluntary Bankruptcy; Insolvency; Dissolution. Contractor's (i) filing ora petition for relief under any state or federal law regarding bankruptcy, reorganization or other relief to debtors; (ii) filing any pleading in any involuntary proceeding under any state or federal law regarding bankruptcy, reorganization or other relief to debtors which admits the jurisdiction of the court or the petition's material allegations regarding their insolvency; (iii) making a general assignment for the benefit of creditors; (iv) applying for, or the appointment of, a receiver, trustee, custodian or liquidator of any of thc above; (v) inability or admission in writing of inability to pay debts as they arc duc; or (vi) death, if an individual, or the filing by or against Contractor of a petition seeking its liquidation or dissolution or the commencement of any other procedure to liquidate or dissolve it. Involuntary Bankruptcy. Contractor's failure to effect a full dismissal of any involuntary (i) petition under any state or federal law regarding bankruptcy, reorganization or other relief to debtors; (ii) proceeding for the appointment of a receiver, trustee or liquidator of it or all or a material part of its assets, or (iii) petition or proceeding under other state or federal law regarding bankruptcy, reorganization or other relief to debtors that is filed against it or in any way restrains or limits it or the City regarding the Loan, the Property or the Project" in any event prior to the earlier of the entry of any order granting relief sought in the involuntary petition or proceeding, or sixty (60) days after the date of filing of the petition or beginning of the proceeding. CITY OF I~NCINITA S/CANTEBRIA SENIOR HOMES- DEVELOPMENT AGREEMENT Page 12 (h) General. Contractor's breach of any condition, covenant, warranty, promise or representation contained in this Development Agreement not otherwise resulting in an Event of Default hereunder and the continuance of such breach for a period of thirty (30) days after written notice thereof to Contractor to cure same. 24. Remedies upon an Event of Default. Upon the happening of an Event of Default the City's obligation to disburse proceeds of the Loan shall terminate and the City shall have the right to terminate this Development Agreement. All such disbursements shall be deemed to have been paid to the Contractor by the City. Any funds so advanced shall be paid to the City or its receiver by Contractor on demand, together with interest thereon at the rate of eight (8%) percent per annum from the date of expenditure. 25. Ri~ts Cumulati.v...e.~.No Waiver, All the City's rights and remedies provided in the Loan Documents, or granted by law or otherwise, are cumulative and may be exercised by the City at any time. No waiver shall be implied from any failure of the City to take, or any delay by the City in taking, action concerning any Event of Default or failure of condition under the Loan Documents, or from any previous waiver of any similar or unrelated Event of Default or failure of condition. Any waiver or approval under any of the Loan Documents must be in writing and shall be limited to its specific terms. 26. Attorneys' Fees; Enforcement. If any attorney, including the City of Encinites City Attorney, is engaged by the City to enforce, construe or defend any provision of any of the Loan Documents, or as a consequence of any Event of Default hereunder or default under any other Loan Document, with or without the filing of any legal action or proceeding, Contractor shall pay to the City, immediately upon receipt of the City's demand, the amount of all reasonable attorneys' fees and costs incurred by the City or the City in connection therewith, together with interest thereon from the date that such demand is received at the rate of eight (8%) percent per annum of interest. INDEMNIFICATION 27. Indemnification and Waiver. (a) Indemnification. Contractor agrees to indemnify the City and its agents, employees and officers against, and holds the City and its agents, employees and officers harmless from, any losses, damages, liabilities, claims, actions, judgments, court costs and legal or other expenses (including reasonable attomeys' fees), of every name, kind and description, which the City may incur as a direct or indirect consequence of: (i) the making of the Loan to the Contractor, except for violations of banking laws or regulations by the City; (ii) Contractor's failure to perform any obligations as and when required by this Development Agreement or any other Loan Document; (iii) any failure at any time of any of Contractor's representations or warranties to be mae and correct; (iv) any act or omission by Contractor, any contractor, subcontractor, material supplier, engineer, architect or other person or entity with respect to the Property or Project; or (v) the presence of hazardous substances (as defined in the CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES- DEVELOPMENT AGREEMENT 28. Standard Agreement) at the Project or on the Property. Contractor shall pay immediately upon the City's demand any amounts owing under this indemnity together with interest from the date of the demand until paid at the rate of eight percent (8%) per annum. The duty of the Contractor to indemnify and hold harmless includes the duties to defend as set forth in Section 2778 of the Civil COde. Contractor shall indemnify and hold harmless the City and its agents, officers and employees as set forth herein regardless of the existence or degree of fault or negligence whether active or passive, primary or secondary on the part of the City or the Contractor or their respective agents, officers, employees, contractors or subcontractors; provided, however, that Contractor's duty to indemnify and hold harmless hereunder shall not extend to liability arising from gross negligence or willful misconduct of the City. Contractor's duty to indemnify the City shall survive the term of this Development Agreement. However, this provision shall not apply as long as a deed of trust affecting the Project and the Property is held by the Secretary of the U.S. Department of Housing and Urban Development, including his successors and assigns (the "HUD Secretary"), or a regulatory agreement and/or use agreement in favor of the HUD Secretary is still outstanding. (b) Waiver and Release, The Contractor waives and releases any and all rights to any types of express or implied indemnity against the City or its agents, officers or employees. (c) Waiver. The Contractor expressly waives the protections of Section 1542 of the Civil Code in relation to subparagraphs (a) and (b) above. MISCELLANEOUS Further Assurances. At the City's request and at Contractor's expense, Contractor shall execute, acknowledge and deliver any other instrument and perform any other act necessary, desirable or proper (as determined by the City) to carry out the purpose of the Loan Documents or to perfect and preserve any liens created by the Loan Documents. 29. Notices. All written notices and demands under the Loan Documents shall be deemed served upon delivery or, if mailed, upon the date shown on the delivery receipt (or the date on which delivery was refused as shown on the delivery receipt) after deposit in United States Postal Service certified mail, postage prepaid, return receipt requested, or after delivery or attempted delivery by an express delivery service, and addressed to the address of Contractor or to the primary place of business or the mailing address of the City, as applicable, appearing below. Notice of change of address may be given in the same manner, provided Contractor's address shall be in the State of California or the state where Contractor's principal place of business is located, as represented to the City in the Loan Documents. 30. Amendments and Additional Agreements. This Agreement shall not be altered or amended except in writing executed by all parties. The Contractor agrees that any other CITY OF ENCINITAS/CANTEBRIA SENIOR I-IOMES- DEVELOPMENT AGILEEMENT Page 14 31. 32. 34. 35. 371 agreements entered into by the Contractor relating to the performance of this Agreement shall be subject to the written approval of the City. Books and Records. Contractor shall maintain complete books of accounts and other records for the Project and for the use of the Loan proceeds and other sources of funds during Project development including, but not limited to, records of preliminary notices, lien releases, invoices and receipts, and certificates of insurance pertaining to the general contractor and each subcontractor. These books and accounts shall be available for inspection and copying by the City upon reasonable notice to Contractor. No Third Parties Benefited. No person other than the City and Contractor, and their permitted successors and assigns or, in the case of the Regulatory Agreement, the tenants of the Project to the extent specified therein, shall have any right of action under any of the Loan Documents. Authority to File Notices. Contractor irrevocably appoints and authorizes the City, as Contractor's attorney-in-fact, which agency is coupled with an interest, to execute and record, on either of them, in the City's or Contractor's name, any notices, instruments or documents that the City deems appropriate to protect the City's interest under any of the Loan Documents. Actions. the City may commence, appear in or defend any action or proceeding purporting to affect the Property, Project, Loan Documents or the rights, duties or liabilities of Contractor or the City under the Loan Documents. In exercising this right, the City may incur or incur and pay reasonable costs and expenses including, wilhout limit, attorneys' fees and court costs and Contractor agrees to pay all such expenses so incurred and reimburse the City for any expense so paid. Relationship of Parties. The relationship of Contractor and the City under the Loan Documents is, and shall at all times remain, solely that of grantee and grantor. The City neither undertakes nor assumes any responsibility or duty to Contractor or to any third party with respect to the Property for the Project, except as expressly provided in the Loan Documents. Assi~ument of Loan Documents. Except as contemplated by Paragraph 7(h), Contractor shall not assign Contractor's interest, or any portion thereof, under any of the Loan Documents, or in any monies due or to become due thereunder, without the City's prior written consent. Notwithstanding the foregoing, any assignment made without the City's consent shall be void. Contractor recognizes that this is not an ordinary Loan and that the City would not make the Loan except in reliance on Contractor's expertise and reputation, the City's knowledge of Contractor, and the City's understanding that this Development Agreement is more in the nature of an agreement involving personal services than a standard grant where the City would rely on security which already exists. In this instance, the work funded has not been performed at the time of Loan approval and the City is relying on Contractor's expertise and prior experience to construct and develop the Project in accordance with the terms of the Loan Documents. As such any approval by CITY OF ENCINITAS/CANTEBRIA SENIOR tlOMES- DEVELOPMENT AGR. EEMF. IqT Pagc 15 37~ 38. 39. 40~ 41. 42. 43. the City of an assignment of any Loan Document shall be conditioned on the Contractor being the sponsor, parent or affiliate of the assignee. Restrictions on Transfer of Property, Proiect and Interest in Contractor. Except as contemplated by Paragraph 7(h), Contractor shall not assign, sell, transfer or convey any interest in the Contractor, the Property, or the Project, without the City's prior, written consent, the City acknowledges that it is Contractor's intent to obtain financing from th__e U.S. Department of Housing and Urban Development, which financing will be superior in priority to the City's interest and which financing requires that the owner of the Property and the Project be a single asset, single activity non-profit corporation that is sponsored by the Contractor. Contractor shall promptly notify the City of any such transfer to a HUD-required affiliate before such transfer occurs and obtain the City's consent in accordance with Paragraphs 7(h), 36 and this Paragraph 37, and shall provide the City with any documents respecting such transfer as the City may reasonably request. Provided however that Contractor, if Contractor is a limited partnership, may sell, assign, transfer or convey limited partnership interests without the prior approval of the City. ~. During the construction period the Contractor will place on the Property signs stating that the City is providing funding assistance through Community Development Block Grant Funds :for the Project. City's Agents. The City may designate an agent or independent contractor to exercise any of the City's rights under this Development Agreement and the other Loan Documents. Any reference to the City in this Development Agreement and the other Loan Documents shall include the City's agents, employees or independent contractors. Severability. If any provision of any Loan Document, including this Development Agreement, shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that portion shall be deemed severed from such Loan Document and the remaining parts shall remain in full force as though the invalid, illegal, or unenforceable portion had never been part of the said Loan Document. However, if the City in its sole discretion, determines that the invalid portion of such Loan Document has a material effect on the interests of the State and the City, the City may thereafter declare that entire Loan Document invalid and require the Contractor to enter into a new one. Heirs, Successors and As~igns~ The terms of this Development Agreement and the other Loan Documents shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties; provided however, that this Paragraph shall not waive the provisions of Paragraph 37. Time. Time is of the essence of each term of this Development Agreement and the other Loan Documents. Headings. All headings appearing in any of this Development Agreement and the other Loan Documents are for convenience only and shall be disregarded in construing this Development Agreement and the other Loan Documents. CITY OF ENCINITAS/CANTEBKIA SENIOR IlO/VIES - DEVELOPMENT AGREEMENT Page 16 44. 45. 46. 47. 48. Governing Law. This Development Agreement and the Loan Documents shall be governed by, and construed in accordance with, the laws of the State of California, except to the extent preempted by Federal laws. Contractor and all persons and entities in any manner obligated to the City under this Development Agreement and the other Loan Documents consent to the jurisdiction of any Federal or State Court within the State of California having proper venue and also consent to service of process by any means authorized by Caliibrnia or Federal law. Integration; Interpretation. This Development Agreement and the other Loan Documents contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated herein and supersedes all prior negotiations. No Loan Document shall be modified except by written instrument executed by all the parties thereto. Any reference in any of the Loan Documents to the Property or Project shall include all or any parts of the Property or Project. Any reference to Loan Documents herein and therein includes any amendments, renewals or extensions approved by the City. Joint and Several Liability. The liability of all persons and entities who are in any manner obligated under this Development Agreement and the other Loan Documents shall be joint and several. Incorporation. The following Attachments, all attached hereto, are hereby incorporated into this Agreement: Attachment A Legal Description Attachment B Construction Description Attachment C Sources and Uses of Funds HUD Required Provisions. Notwithstanding and other provision in this Development Agreement or in any other Loan Document, and so long as a mortgage affecting the Project and the Property is held by the Secretary of Housing and Urban Development (the "HUD Secretary'), or a regulatory agreement and/or use agreement in favor of the HUD Secretary is still outstanding, the follow'ms provisions shall apply: (a) All of the provisions of this Development Agreement and the other Loan Documents shall be subject and subordinate to all applicable HUD mortgage and capital advance regulations and related administrative requirements under Section 202 of the Housing Act of 1959, as amended (the "Section 202 Program"). In the event of any conflicts between the provisions of this Development Agreement or any other Loan Document and the provisions of any applicable HUD regulations, related HUD administrative requirements or HUD capital advance documents, including, but not necessarily limited to, a Capital Advance Program Use Agreement, a Capital Advance Program Regulatory Agreement, a Deed of Trust with Assignment of Rents, a Security Agreement, a UCC-i, Financing Statement and a HUD Project Rental Assistance Contract (collectively, the "HUD CITY OF ENC1NITA~CANTEBPdA SENIOR HOMES- DI~VELOPIvI~NT AGREEMENT Page 17 Documents"), the HUD regulations, related HUD administrative requirements and HUD Documents shall govern and control and this Development Agreement shall be deemed amended so as to comply with the applicable HUD Acts, regulations, related HUD administrative requirements and HUD Documents. (b) Enforcement of the provisions of this Development Agreement or any other Loan Document shall not result in any claim against the Project, the Section 202 Program capital advance proceeds, any reserve or deposit required by HUD in connection with the Section 202 Program transaction, or the rents or other income from the Project and the Property, other than available residual receipts authorized for release by HUD and the non-Project assets of the Contractor. (c) Compliance by the Contractor with HUD requirements will satisfy any similar requirements of the City in this Development Agreement and the other Loan Documents. No requirements by the City will be permitted which interfere with or conflict with the HUD requirements concerning the development or operation of the Project, or in any way jeopardize the continued operation of the Project on terms at least as favorable to existing future tenants as required under the Section 202 Program. (d) HUD approval of a transfer of physical assets (TPA) will constitute approval of the TPA by the City. (e) The City shall not declare a default under this Development Agreement or any other Loan Documents without prior written approval of the HUD Secretary. Notwithstanding anything in this Agreement to the conlxary, no amendment to this Agreement shall be effective 'without prior written approval of the Secretary of HUD. (g) Notwithstanding anything in this Agreement to the contrary, if the Secretary of HUD should acquire title to the site by foreclosure, deed in lieu of foreclosure, or otherwise, all covenants, conditions and restrictions shall terminate and be of nor force or effect. IN WITNESS WHEREOF, the City and Contractor have each caused this Development Agreement to be executed by its .duly authorized officer and to make same effective on the day and year first above written. CITY City of Encinitas CONTRACTOR Cantebria Sen/or Homes By: /~ ~/ j.~' . ~_ /K~rry~. ~iller, '~i¢ ~anager Amy Bayley, ~c~etar~r CITY OF ENCIN ITAS/CANTEBRIA SENIOR HOMES- DEVEI..OPMElqT AGREEMENT l~age t 8 CITY OF ENCINITAS/CAlqTEI~RIA SENIOR HOMES- DEVELOPMENT A~REEMENT Page 19 ATTACHMENT A LEGAL DESCRIPTION The land referred to herein is situated in the State of California, County of Sun Diego, and described as follows: Lot 44 of amended map of City of Encinitas Map No. 13258, City of Encinitas, Tract No. 94- 066, Un/ts I, II and III, in the City of En¢initas, County of San Diego, State of California, according to map thereof No. 13333, filed in the office of the County Recorded of San Diego County, June 3, 1996. CITY OF ENCiNITAS/CANTEBRIA SENIOR HOMES - DEVELOPMENT AGREEMF;NT Page 20 ATTACHMENT B CONSTRUCTION DESCRIPTION I. GENERAL DESCRIPTION The Site is approximately 1.4 acres in size and is located at Via Cantebria on the Enciuitas Ranch, Encinitas, California. II. DEVELOPMENT Developer shall construct 45 units that will consist of either two or three levels of living space, it is anticipated that 2,820 square feet of common space will be constructed. Forty-four of the units will consist of one bedroom and one batttroom. One unit will consist of two bedrooms and one bathroom, which will be reserved for an on-site manager. Building design will conform to the City of Encinitas zoning codes and design review kmidelines. All of the improvements, including off-site improvements, as required by the City pursuant to the usual City building permit requirements will be provided by the developer, at its own cost and expense. III. DEVELOPMENT STANDARDS The improvements shall be designed and constructed and the Property shall be developed in accordance with the Encinitas Municipal Code. CITY OF ENCINITAS/CANTEBKIA SENIOR IIOMES - DEVELOPMENT AGREEM EN'I- Page 21 ATTACHMENT C SOURCES AND USES OF FUNDS Description ......... . .......... Estimate HUD CITY '" Carltas .A. dditlonal'l;:~'~'~ln~lDifference Construction $ 3~360,404 $ 3,269,917 $ $ 90,487 $ ...... Cost Estimator $ 4,000 $ 4,000 $ Laq~;per appraisal $ 1,035,000 ........... $1,035,000 $.,, Architecture,Engineer $ 259,850 $ 51,970 .......... $194,887 $ 12~93 $ (0 ~nvironmental/P~ase I) ....... $,,, 10,000 $ 10,000 Survey(ALTA) $ 10,000 $ 10,000 ............ $ Soii~ (geotec. h,.rpt aed monifering} $ , .5.~0~0 $ 5,000 ,, $ AcoustiC,.$u~ve), $ .., 1,00~ $ 1,000, $ ....... Fees/Permits $ 421,405 $ 54.~8.,7 $ 366,916 buildin~(atruc.lmechlelec,/Plmb) ....... $ 6,600 .................. sewer(basic fee+planchk+!ns.~ection $ 185,750 .......... water $ 41,806 traffic and [~,,e. rk fees $ , , 1~;_5,~.613 .... ROOd Contr~l.,[mpact fees $ ,16,466 ...... planning.,fire(131sn check and alarms $ ,_. 12,170 ....... bulldln~l permit $ 13,000 ............... Financial Consultant $ $ Taxes/insurance ....... $ 151~3~)~3 "$ ........ 15,000 $ i.e~al........ ,._ $ ...... 35,000 $ 10,000 $.,,.,9,62~ ....... ,$ 15,374 $ Title/Closing $ 20,000 $ ...... 12,9931 $ 7,00'~ $ Appraisal $ 5,000 $ ?,. 5,000 $ Minimum Capltai'i~vestment $ 'I'0,000 ...... I $ 10,000 $ , Cost Certification Audit ,. $ 15,000 $ 1,~,0.,0..0_ $ Administrative Fee ......... $ 250,000 $ , 125,000 $125,000 $ Rent-up/Marketing* $ 25,000 $ ..... 25,000 $ Hard C(~,Contin~enc¥ .... $ .,, 168,020 $ 118,020 ......$ '~0,000 $ 0 Furntshlnc. ls/Fit-up $ 60,000 $ 60,000 $ TOTAL COST '" =$ S709679 ~ 3,687,'9'0'~)" '"~,;1~4,000$t,035,000 $ ...... 572,779 $ 0 TOTAL COMMi~T~=D $ ...... 5,136,900 $ 3,687,900 $414,000, $1.035,0,00 $ Amou~t"Remainin~ ....... $ (572,779) $ ...... $ $ $ (57~2,7791 CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES- DEVELOPMENT AGREEMENT Pag~ 22 PROMISSORY NOTE NOTICE TO BORROWER THIS DOCUMENT CONTAINS PROVISIONS RESTRICTING ASSUMPTIONS AND IS SECURED BY A DEED OF TRUST $614,000 January 1/~ ,2003 Encinitas, California FOR VALUE RECEIVED, the undersigned, Cantebria Senior Homes, a California nonprofit public benefit corporation with its principal office at 500 South Main St., Ste. 110, Orange, CA 92868, (the "Borrower"), hereby promises to pay to the City of Eneinitas (the "City"), or order, at 505 S. Vulcan Ave., Encinitas, CA 92024, a principal amount equal to Six- Hundred Fourteen Thousand Dollars ($614,000), or so much thereof as may be advanced by the City to the Borrower pursuant to a loan provided to Borrower under the Community Development Block Grant (CDBG) and HOME Programs, which is secured by a Deed of Trust with Assignment of Rents, an Affordable Housing Agreement, a Development Agreement, and a Regulatory Agreement, dated as of this date (collectively the "Loan Documents") between the Borrower and City. The terms and conditions of the Loan Documents are incorporated by reference herein. 1. Borrower's Obligation. This Note evidences the obligation of the Borrower to the City hereof for the repayment of funds loaned to the Borrower by City to partially finance the development of real property, appurtenances, improvements and fixtures thereon, described in the Loan Documents. 2. Prohibition Against Transfer of Interest. The Borrower shall not make any sale, assignment or conveyance or transfer in any other form, nor any further pledge, encumbrance or mortgaging of the Property or any part thereof or any of its interests therein, other than in accordance with the terms of the Loan Documents. 3. Payment of Indebtedness. a. The principal amount of the Loan, which shall bear no interest, will be due and payable, January 31, 2058 ("Maturity Date"). This Note may be prepaid in whole or in part at any time, and from time to time, without notice or penalty. b. Each full year, from the original execution date, of compliance with the Loan Documents, the loan mount shall be reduced by an amount equal to 1/55 (1.8%) of its original principal amount. It is anticipated that at Maturity Date the balance of this Note should be zero, and that all conditions agreed upon shall have been met. At that time, this Note will be forgiven and all restrictions against the Property will be reconveyed. 4. Place and Manner of Payment. All amounts due and payable under this Note and the other Loan Documents are payable at the principal office of the City set forth below, or at such CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES - PROMISSORY NOTE Pagc I other place or places as a subsequent holder (a "Holder") hereof may designate to the Borrower in writing from time to time, in any coin or currency of the United States of America, which on the respective dates of payment thereof shall be legal tender for the payment of public and private debts, and shall be immediately available funds (cashier's or certified check). 5. Late Charge. The Borrower agrees that it would be impracticable or extremely difficult to fix the actual damage to the City or Holder hereof in the event the Borrower shall be late in the making of any payment due hereunder, and that therefore in the event the Borrower shall fall to make any such payment within fifteen (15) days after the due date thereof, the City or Holder hereof, at its option and in addition to any other remedy hereunder, may impose on the Borrower, and the Borrower shall pay, a "late charge" of five percent (5%) of the amount of such delinquent payment. 6. Borrower's Waiver. To the extent permitted by law, the Borrower and any guarantor of this Note, or of the obligation represented by this Note, hereby waives (a) notlee of default or delinquency, (b) notice of acceleration, (c) notice of nonpayment, (d) notice of costs, expense and losses and interest therein, (e) notice of interest on interest and late charges, (f) diligence in taking any action to collect any sums owing under the Note or in proceeding against any of the rights and presentment fbr payment, demand, protest, and notices of dishonor and/or Protest; (g) the benefits of all waivable exemptions; and (h) all defenses and pleas on the Founds of any extension or extensions of the time of payment or of any due date under this Note, in whole or in part, whether before or after maturity and with or without notice. 7. Attorneys' Fees. The Borrower hereby agrees to pay all costs and expenses, including reasonable attorneys' fees, including any such fees paid to the City Attorney of the City of Encinitas which may be incurred by the City or Holder hereof in the enforcement of this Note, the Loan Documents or any term or provision of any thereof. This provision shall be construed in accordance with California Civil Code Section 1717. 8. De~.a..ult under other Loan Documents and Acceleration. All covenants, conditions, and agreements contained in the Loan Documents are hereby made a part of this Note. The Borrower agrees that the unpaid balance of the principal amount of this Note, shall, at the option of the City or Holder hereof, if so prov/ded in the Loan Documents executed by the Borrower, become immediately due and payable, and thereafter until paid bear interest at the rate of three percent (3%) per annum, upon the failure of the Borrower to make any payment hereunder as and when due, upon the failure of the Borrower to perform or observe any other term or provision of tiffs Note, or upon the occurrence of any event (whether termed default, event of default or similar term) wiffch under the terms of the Loan Documents shall entitle the City or Holder hereof to exercise fights or remedies thereunder. 9. Nonrecourse Obligation. Neither the Borrower nor any partner, officer, director, or stockholder of the Borrower shall have any direct or indirect personal liability for payment of the principal of, or interest on, this Note. The sole recourse o1' the City or Holder with respect to the principal of, or interest on, this Note shall be to the Property, real and/or personal, securing the indebtedness evidenced by the Note. No judgment, or execution thereon, entered in any action, legal or equitable, on this Note or the Deed of Trust securing this Note shall be enforced CITY OF ENCINITAS/CAN'FEBRI^ SENIOR HOMES- PROMISSORY NOTE Page 2 personally against the Borrower, or any partner, officer, director or stockholder of the Borrower, but shall be enfomed only against the Property described in the Loan Documents and such other or further security as, from time to time, may be hypothecated for this Note; provided, however, that nothing contained in the foregoing limitation of liability shall (a) limit or impair the endorsement against all such security for this Note of all the rights and remedies of the City or Holder hereof, or (b) be deemed in any way to impair the right of the City or Holder hereof to assert the unpaid principal mount of this Note as a demand for money within the meaning and intent of Section 431.70 of the California Code of Civil Procedure or any successor provision thereto. The fore~oin~ limitation of liability is intended to apvl¥ only to the obligation for the repayment of the principal of and payment of interest on this Note; nothing, ore,rained herein is intended to relieve, the Borrower or any successors thereto of liability for (a) fraud or willful misrepresentation; (b) the failure to pay taxes, assessments or other charges which may create liens on the real property described in the Loan Documents that are payable or applicable prior to any foreclosure under the Deed of Trust (to the full extent of such taxes, assessments or other charges); (c) the retention of any rental income or other income arising with respect to the Project collected by Borrower after the City or Holder has given any notice that Borrower is in default to the full extent of the rental income or other income retained and collected by Borrower after the giving of any such notice; (d) the fair market value as of the time of the giving of any notice referred to in subparagraph (c) above of any personal property removed or disposed of by Borrower other than in accordance with the Loan Documents after the giving of any notice referred to in subparagraph (c) above; and (e) 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 of any portion to the Project. 10. Governing Law. This Note shall be construed in accordance with and be governed by laws of the State of Caiifumia. 11. Time, Time is of the essence in this Note. 12. No Waiver by the City or Holc~. No waiver of any breach, default or failure of conditions under the terms of the Note or the Loan Documents or the obligations secured thereby shall be implied from any failure of the City or Holder to take, or any delay by the City or Holder in taking, action with respect to such breach, default, or failure from any previous waiver of any similar or unrelated breach, default or failure; and a waiver of any term of the Note or the Loan Documents or any of the obligations secured thereby must be made in writing and shall be limited to the express written terms of such waiver. 13. Notices. Except as may be otherwise specifically provided herein, any approval, notice, direction, consent, request or other action by the City or Holder or Borrower shall be in writing and may be communicated to the addressee designated herein, or at such other place or places as the Borrower or holder shall designate in writing. Notices required or permitted under the terms of this Note shall be given: CITY OF ENCINITAS/CANTEBRIA SENIOR HOMES - PROMISSORY NO'I'E Page 3 To To City: Cantebria Senior Homes 500 South Main St., Ste. 110 Orange, CA 92868 ...... City of Encinitas Community Development Dept. 505 S. Vulcan Ave. Encinitas, Ca. 92024 14. HUD Required Provisions Notwithstanding any other provision in this Note, so long as a mortgage affecting the Project and the Property is held by the Secretary of Housing and Urban Development (the "HUD Secretary"), or a regulatory agreement and/or use agreement in favor of the HUD Secretary is still outstanding, the following provisions shall apply: Any payments under this Note, including prepayments, shall be made only with (i) residual receipts, as that term is defined in the regulatory agreement between the Borrower and the HUD Secretary and executed in connection with the Property (the "HUD Regulatory Agreement"), and only after obtaining the prior written approval of the HUD Secretary, or (ii) funds which are separate and apart from the Project or the assets or income of the Project (except residual receipts as approved for disbursement by the HUD Secretary). Prepayments made from residual receipts may be made only after final closing of the HUD Section 202 Progrmn capital advance and only after the end of a semi- annual or annual fiscal period as approved by the HUD Secretary. In the event of a default under this Note, the City or Holder shall have no claim and will not later assert any claim for prepayment against the mortgaged Property, the Section 202 Program capital advance proceeds, any reserve or deposit required by HUD and deposited with the HUD Secretary or another in connection with the Section 202 Program capital advance transaction, or against the rents or other income from the Project and the Property, other than available residual receipts authorized by HUD and the non-Projeat assets of the Contractor. The City or Holder shall not declare a default under this Note unless it has received the prior written approval of the }IUD Secretary. Borrower Cantebria Senior Homes By: ,tr B y y, Sec t ' DATE:Ol /14 /2003 CITY OF ENCINITAS/CANTEItRIA SENIOR HOMES - PROMISSORY NOTE Page 4