2012-242543CHICAI-70 TiT1.E CC
WHEN RECORDED PLEASE MAIL TO:
City of Encinitas
505 S. Vulcan Avenue
Encinitas, California 92024
Attn: Housing Administrator
AA
~9,, _ loo- 55
DOC p 2012-0242543
IIIIIIIIIIIIIII 111111111111111111111111111111111111111111111111111111111 III I
APR 25, 2012 3:57 PM
OFFICIAL RECORDS
SAN DIEGO COUNTY RECORDER'S OFFICE
Ernest J Dronenburg, Jr , COUNTY RECORDER
FEES 0.00 WAYS 2
119,83 PAGES: 24
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CITY OF ENCINITAS
MEMORANDUM OF RESTRICTIVE COVENANTS
AND REGULATORY AGREEMENT
This Regulatory Agreement, effective April A, 2012, is made and entered into by and between the City of Encinitas (the
"Lender"), and Iris Apartments CIC, LP, a California limited partnership (the "Borrower")
RECITALS
A. Borrower is about to become the owner of real property located in the City of Encinitas, County of San Diego, State of
California (hereinafter the "Property") described in Attachment A, which is attached hereto and made a part hereof
Borrower has applied to the Lender for financial assistance in order to acquire, construct and operate a twenty (20) unit
affordable multifamily housing project (hereinafter the "Project"). Lender has loaned to Borrower funds, a portion of which
funds are provided under the HOME Investment Partnerships Program ("HOME") (hereinafter the "Program"), with such
funds to be used for the acquisition, development and construction of the Project. Borrower agrees to be bound by this
Memorandum of Restrictive Covenants and Regulatory Agreement (hereinafter the "Regulatory Agreement") and all
applicable Program statutes, rules, and regulations and all agreements concerning the financial assistance provided by the
Lender
B Borrower may not engage in inherently religious activities, such as worship, religious instruction, or proselytization, as part
of the funding or services funded herein, nor may Borrower use these funds for the acquisition, construction, or rehabilitation
of such structures to the extent that these structures are used for inherently religious activities.
C The Project will be used exclusively by the owner entity for 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.
D As an inducement to the Lender to provide the financial assistance made available under the Program, the Borrower has
agreed to enter into this Regulatory Agreement and has consented to be regulated and restricted as provided herein. The
Loan Documents shall consist of this Regulatory Agreement, Development Agreement, the Promissory Note, the Deed of
Trust, the Security Agreement and the Financing Statement, among the parties hereto and executed simultaneously herewith.
All attachments and exhibits to this Regulatory Agreement which are referred to herein, are incorporated herein by reference.
E. All references to the Project in this Regulatory Agreement that apply to rents, reporting, and operating procedures shall apply
to all units of the Project under this Regulatory Agreement
NOW, THEREFORE, the parties hereto agree as follows:
AFFORDABILITY REQUIREMENTS
A. The Borrower, and such successors and assignees as the Lender shall approve in writing, shall utilize twenty (20) of
the twenty (20) units located on the Property solely for the purpose of providing affordable housing to low- and very low-
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Income persons as defined in 24 CFR § 92.2. One (1) three-bedroom unit will be reserved for occupancy by a resident
manager and will be restricted as an affordable housing unit. The Borrower, and such successors and assignees as the Lender
shall approve in writing, shall utilize no less than twenty (20) units located on the Property solely for the purpose of
providing affordable housing to low- and very low-income persons as defined in 24 CFR § 92.2 pursuant to the provisions of
this Regulatory Agreement (the "HOME Assisted Units") The following income restrictions apply to occupants of the
HOME Assisted Units:
Five (5) of the twenty (20) HOME Assisted Units (the "HIGH HOME Rent limit units"), comprised of three (3)
two-bedroom units and two (2) three-bedroom units, shall be occupied by low-income households whose gross
annual incomes, at the time of initial occupancy, do not exceed sixty percent (60%) of the Area Median Income
("AMP") for San Diego County, California, as calculated by the California Tax Credit Allocation Committee
("TCAC") Not less than fifteen (15) of the remaining HOME Assisted Units (the "LOW HOME Rent limit units"),
comprised of nine (9) two-bedroom and six (6) three-bedroom units shall be occupied by very low-income
households whose gross annual incomes, at the time of initial occupancy, do not exceed fifty percent (50%) of the
AMI for San Diego County, California, as calculated by the TCAC
Said covenant shall continue in effect in perpetuity Project completion is defined as the date that the household
characteristics of the HOME Assisted Units are entered into the Integrated Disbursement and Information System
maintained by HUD The Program statutory minimum Period of Affordability is twenty (20) years after the Project
completion date The Lender has imposed an extended Period of Affordability and a compliance period in
perpetuity, pursuant to the terms of this Regulatory Agreement.
B Notwithstanding the covenant in paragraph A above, upon foreclosure of the Program debt or transfer in lieu of
foreclosure, the Lender, at its sole discretion, may reduce the perpetual affordability period to the Program statutory
minimum Period of Affordability of twenty (20) years. Any reduction in the affordability period must be done in writing. If
the Period of Affordability is reduced, the five (5) HIGH HOME Rent limit units, as designated in paragraph A above, would
continue to be occupied by low-income households whose annual incomes do not exceed sixty percent (60%) of the AMI for
San Diego County, California. If the Period of Affordability is reduced, the rents charged for the fifteen (15) remaining
HOME Assisted Units, the LOW HOME Rent limit units as designated in paragraph A above, including the monthly
allowance for the utilities and services (excluding telephone) to be paid by the tenant, shall remain at the LOW HOME Rent
limit described below and be continually occupied by very low-Income households whose gross annual incomes, at the time
of initial occupancy, do not exceed fifty percent (50%) of the AMI for San Diego County, California. Income shall be
determined in accordance with 24 CFR Part 5, as defined at 24 CFR § 5 609 Said covenant shall continue in effect for the
Program statutory minimum Period of Affordability of twenty (20) years after the project completion.
C Unless otherwise approved by the Lender in writing, during the Project affordability period, the rents charged for all
HOME Assisted Units shall be as follows:
Rents charged for the HIGH HOME Rent limit units referenced in paragraph A above, including the monthly
allowance for the utilities and services (excluding telephone) to be paid by the tenant, shall not be more than the
applicable rents published by TCAC for households whose gross annual income, at the time of initial occupancy, is
sixty percent (60%) of AMI for San Diego County, California. The parties hereto agree that such restriction,
together with the restriction on such units described in paragraph A above, qualifies such units for designation as
"HIGH HOME" units under the Program.
Rents charged for the LOW HOME Rent limit units referenced in paragraph A above, including the monthly
allowance for the utilities and services (excluding telephone) to be paid by the tenant, shall not be more than the
applicable rents published by TCAC for households whose gross annual income, at the time of initial occupancy, is
fifty percent (50%) of AMI for San Diego County, California. The parties hereto agree that such restriction,
together with the restriction on such units described in paragraph A above, qualifies such units for designation as
"LOW HOME" units under the Program.
D Notwithstanding the covenant in paragraph C above, upon foreclosure or transfer in lieu of foreclosure, pursuant to
the HOME requirements at 24 CFR § 92.252(b), the Lender, at its sole discretion, may reduce the minimum Period of
Affordability to twenty (20) years. Any reduction in the affordability period must be done in writing. If the Period of
Affordability is reduced, the rents charged for not less fifteen (15) of the HOME Assisted Units, as designated in paragraph A
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above, including the monthly allowance for the utilities and services (excluding telephone) to be paid by the tenant, shall
remain at the LOW HOME Rent limit. Rent charged for the remaining five (5) HOME Assisted Units, as designated in
paragraph A above, shall not be more than the lesser of (1) the Section 8 Fair Market Rent for a comparable unit as
established by HUD under 24 CFR § 888 111, or (2) the rent established by HUD under 24 CFR § 92.252 for a unit occupied
by a family whose gross annual income is less than or equal to sixty percent (60%) of the Area Median Income (the "High
HOME Rent") Said covenant shall continue in effect for the statutory minimum Period of Affordability of twenty (20) years
after project completion.
E. There shall be no discrimination against, or segregation of, any person, or group of persons, on account of race,
color, religion, gender, national origin, age, disability or familial status in the sale, lease, sublease, transfer, use, occupancy,
tenure or enjoyment of the Property, and the Borrower (itself or any person claiming under or through Borrower) shall not
establish or permit any such practice or practices of discrimination, or segregation with reference to the selection, location,
number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees thereof or any portion thereof.
F The Borrower further covenants that it will carry out all of the provisions of the said Regulatory Agreement and that
all of said covenants set forth above and in the Regulatory Agreement shall run with the Property Except in the case of
foreclosure or transfer in lieu of foreclosure under Paragraphs B and D, the covenants in paragraphs A, C, and E above shall
continue in effect in perpetuity, and subject to any limitations of the Regulatory Agreement and the other covenants in the
Regulatory Agreement shall continue until the Regulatory Agreement expires or terminates according to its terms. The
Affordability Requirements apply without regard to the term of any loan or mortgage or the transfer of ownership.
G Notwithj standing the covenants in paragraphs A through D above, in the event that the income and rent restrictions
set forth above are less restrictive than those set forth in that certain Amended and Restated Affordable Housing Regulatory
Agreement, dated July 12, 2011, between the Lender and Shea Homes Limited Partnership (in its capacity as the prior owner
of the Property), recorded in the Official Records of San Diego County as Document # 2011-0350932, as the same may be
amended from time to time in accordance with its terms, then the more restrictive income and rent restrictions shall apply
COMPLIANCE WITH LAW
The Borrower agrees that at all times its acts regarding the Project shall be in conformity with all Program statutes, rules and
regulations, applicable policies and procedures of the California Department of Housing and Community Development; and
applicable local, state and federal laws and regulations, including Section 504 of the Rehabilitation Act of 1973 and The Fair
Housing Act.
TERM OF AGREEMENT
The term of this Regulatory Agreement shall continence on April ?q, 2012 and shall continue in perpetuity Project
completion is defined as the date that the household characteristics of the HOME Assisted Units are entered into the
Integrated Disbursement and Information System maintained by HUD
4 RENT SCHEDULE.
At the time of initial occupancy of the units and continuing throughout the term of this Regulatory Agreement, Borrower
shall charge only those rents permitted hereunder or approved by the Lender and which are established pursuant to Program
statutes and regulations. Subsequent increases or decreases in rent including special rent increases shall be charged only if
consistent with the Program statutes and regulations. Failure to observe this regulation shall be considered a material breach
of this Regulatory Agreement.
ELIGIBILITY FOR ADMISSION
An applicant is eligible for admission to a Project if he or she meets the requirements described in paragraphs 1, 6 and 7 of
this Regulatory Agreement.
OCCUPANCY STANDARDS
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An applicant may be eligible for admission to a Project if he or she meets the occupancy requirements of the Program
Regulations.
Maximum unit occupancy shall be according to the chart below
Two bedroom Three Bedroom
Maximum 4 6
RESIDENT SELECTION PROCEDURES
Borrower shall rent a housing unit in the Project to eligible residents in accordance with the Program Regulations and the
Management Plan approved by and on file with Lender Subject to applicable law and TCAC or other Project financing
requirements, wherever possible, applicants currently on the San Diego County Housing Authority Section 8 waiting list will
be given preference for available units.
LEASE AND OCCUPANCY PROCEDURES.
(a) Each eligible applicant selected to occupy a unit shall enter into a written occupancy agreement (hereinafter referred
to as a "lease") with the Borrower, the form of which shall have been approved by the Lender and which shall
contain those provisions as are required by the Program Regulations and this Regulatory Agreement. The 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 Borrower shall establish reasonable rules of conduct and occupancy that shall be consistent with local, state and
federal laws and the Program Regulations. The rules shall be in writing and shall be given to each resident. Except
as required by law, 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 statutes and regulations, and
the provisions of this Regulatory Agreement.
9 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 Borrower, posted in the management office of each
Project, and shown to applicant at the time the lease is signed.
10 TERMINATION OF LEASE.
(a) 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 and is in compliance with the
lease terms, the Borrower 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 Borrower must send the unused rent to the
resident's forwarding address within the time permitted under California law In the event the resident does not give
Borrower a forwarding address, Borrower shall hold the unused rent for six months and return it to the resident if the
resident picks it up or provides a forwarding address within six months. After six months, the rent is forfeited to the
Borrower
(b) The Borrower 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 Borrower concerning eligibility for the Project, or for
other good cause.
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(c) In order for the Borrower 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 Borrower shall give the resident a three (3) 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
Borrower 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.
11 BORROWER RESPONSIBILITIES.
Borrower shall provide administrative, fiscal, and management services, employ staff (or retain a management company) 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 statutes and 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.
12. ANNUAL OPERATING BUDGET
(a) The fiscal year for the Project shall be the same as the calendar year and commence on January of each year after
the initial period of occupancy, and conclude on December 31 of each year
(b) The Borrower will submit to the Lender a proposed operating budget for the Project ninety (90) days after
completion of the Project and at the beginning of each fiscal (calendar) year of the Project thereafter The proposed
operating budget shall set forth the anticipated Project income, 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 Lender, and all other expenses in the format required by the
Lender "Operating costs" are defined as all expenses associated with providing decent, safe, and sanitary housing at
the Project. Unless the Lender 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.
13 REQUIRED RESERVES
(a) At the time Borrower receives an award of permanent funding approved by the Lender, Borrower shall propose to
the Lender amounts of funding for a "Replacement Reserve Account" and, if applicable, 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 Lender
under the Program, provided that the amounts in any reserves established under the requirements of any loan
secured by the Project that is senior in priority to the loan evidenced by the Loan Documents shall be counted
toward the applicable reserve requirements set forth herein.
(b) To the extent that these accounts are required or deemed necessary by the Lender, initial deposits shall commence
no later than the end of the second month following the completion of construction, or such other date as the Lender
may designate in writing, and deposits shall be made in segregated interest-bearing accounts in the name of the
Borrower insured by an agency of the federal government or other comparable federal insurance program.
Consistent with the requirements of the funding agencies, Borrower 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 Lender if the Lender elects to impose such requirements. The Lender 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 that are reasonably
required to preserve the Project. Reserves from the operating reserve account may be utilized only to cover actual
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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.
14 USE OF INCOME FROM OPERATIONS
(a) The Borrower or Borrower's management agent shall promptly deposit all income generated by the Project, into a
segregated account established in the Borrower's name exclusively for the Project. There shall be no commingling of
Project funds with other funds controlled by the Borrower
(b) Withdrawals from the account 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 Borrower 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 Lender; (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 Lender; (5) deposits to
reserve accounts if applicable, (6) payments of deferred developer fee, (7) distributions to the Borrower or other
person or entity upon Lender approval only; or (8) as provided for in the Promissory Note.
(c) If other funding entities have differing requirements, the Lender may amend this paragraph in writing to be
consistent with those other requirements. In addition, the Borrower may depart from the foregoing priorities of
payment only upon the express prior written approval of the Lender
15 FINANCIAL ASSISTANCE
Borrower acknowledges that the Lender will not provide additional financial assistance to the Borrower in the form of
operational or capital subsidies for the Project. If Project Income, including those rents charged pursuant to Paragraph 4 of
this Regulatory Agreement, is insufficient to cover operating, maintenance, and capital costs, Borrower agrees to assume full
financial responsibility for the operating and maintenance of the Project throughout the term of this Agreement.
16 ACCOUNTING RECORDS
In a manner subject to Lender approval, Borrower shall maintain an accrual or modified accrual basis general ledger
accounting system that is posted monthly and that accurately and fully shows 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 Lender
inspection and audit.
17 MANAGEMENT AND MAINTENANCE
(a) Borrower is specifically responsible for all maintenance, repair, and management functions including, without
limitation, the following: selection of residents, occupancy standards, complaint and grievance proceedings,
evictions, collection of rents and security deposits, routine and extraordinary repairs, and replacement of capital
items. Borrower 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 described in 24 CFR § 982 401
(b) Borrower is responsible for operating the Project in accordance with the Management Plan to be developed by the
Borrower and which shall be subject to the written approval of the Lender (the "Management Plan") All
amendments to this Plan require prior written approval of the Lender The Management Plan shall include at least
the following:
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(i) detailed actions to be taken by Borrower 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;
(ii) specify reasonable criteria for determination of resident eligibility consistent with Paragraphs 5 and 6,
including occupancy standards outlined in the Program Regulations,
(iii) require that eligible residents be selected based on the order of application, lottery, or other reasonable
method approved by Lender;
(iv) require eligible applicants to be notified of eligibility and, based on turnover history, be notified of when a
unit may be available;
(v) require ineligible applicants to be notified in writing of the reason for their ineligibility;
(vi) specify procedures through which applicants deemed to be ineligible may appeal this determination,
(vii) require maintenance of a waiting list of eligible applicants,
(viii) prohibit discrimination against any prospective resident on the basis of race, religion, sex, age, disability,
marital status, or any other arbitrary factor in violation of any state, federal, or local law governing
discrimination in rental housing; and
(ix) address other selection issues provided for in the Program Regulations.
(c) Borrower, with the prior written approval of the Lender, 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
Borrower of responsibility for proper performance of these duties. Such a contract shall be subject to prior written
approval by the Lender and shall contain a provision allowing the Borrower to terminate the contract without
penalty upon 30 days' written notice Upon a determination by the Lender and written notice to the Borrower that
the management agent performing the functions required in subparagraphs (a) and (b) has failed to operate the
Project in accordance with this Regulatory Agreement and the approved Management Plan, the Borrower shall
exercise such right to termination forthwith and shall make immediate arrangements, which shall be subject to
Lender approval, for continuing performance of the functions required in subparagraphs (a) and (b)
(d) Upon a determination by the Lender and a thirty (30) day written notice to the Borrower that the Borrower has failed
to operate the Project in accordance with this Regulatory Agreement, the Lender may require the Borrower to
contract with a qualified management agent to operate the Project or to make such other arrangements as the Lender
deems necessary to ensure performance of the functions required in subparagraphs (a) and (b)
(e) Borrower 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 Lender, all obligations of this Regulatory
Agreement, and all applicable local, state and federal laws and regulations.
18 REPORTING REQUIREMENTS
The Borrower shall file with the Lender an annual report in a form approved by the Lender no later than 120 days after the
end of each fiscal year established for the Project. The report shall contain such information as the Lender may then require,
including, but not limited to, the following:
(a) An audit of the fiscal condition of the Project is required whenever the Lender provides financial assistance. This
includes a financial statement indicating surplus or deficits in operating and capital 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
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requirements of the Lender, certified by an independent certified public accountant licensed in California or other
accountant acceptable to the Lender
(b) In accordance with Office of Management and Budget OMB Circular A-133, any non-federal entity, including States,
Local Governments, and Non-Profit Organizations, that expend $500,000 or more in a year in Federal awards shall have
an A-133 single audit conducted for that year
(i) Borrower will provide written notification to the Lender of the results of the OMB Circular A-133 audit no
more than thirty days after the audit is completed.
(ii) In compliance with all Federal requirements, Borrower shall correct any deficiencies identified in OMB
Circular A-133 audits.
(c) Borrower's annual tax returns.
(d) Any substantial physical defects in the Project, including a description of any mayor repair or maintenance work
undertaken in the reporting year
(e) The occupancy of the Project indicating:
(i) Each tenant's annual income, family size and composition, race, length of tenancy, actual monthly rent
paid;
(ii) Records demonstrating the Borrower's efforts to comply with its Fair Housing Marketing and Equal
Opportunity Plan,
(iii) The number of residents actually occupying the project;
(iv) The number of assisted households earning at or below 50 percent of median income, and
(v) General management performance, including tenant relations and other relevant information.
(f) A description of any fiscal or program difficulties related to the operation of the Project consistent with the Program
requirements.
(g) Each such report shall be subject to the approval of the Lender
(h) At any time during the term of this Regulatory Agreement, the Lender 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 a minimum 48-hour request by the Lender, Borrower shall notify residents of
upcoming inspections of their units or records in accordance with California State law
(i) The Lender may perform or cause to be performed audits of any and all phases of the Borrower's activities related to
the Project. At the Lender's request, Borrower shall provide, at its own expense, an audit of the Project certified by
an independent certified public accountant.
The Lender may request any other information that it deems necessary to monitor compliance with requirements set
forth in the Loan Documents. Borrower shall promptly provide such information.
(k) Prior to the commitment of funds, the Borrower will submit to the Lender certified copies of. (i) its 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) records
showing compliance with relocation requirements, (v) conflict of interest statements; (vi) evidence of flood
insurance if applicable; and (vii) evidence that the Borrower, any subcontractor, agent, representative, or consultant
working on the Project is not debarred or suspended from participation in federal programs. In addition to the
annual report required above, if required by the Lender, the Borrower shall file with the Lender an operating report
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including such information as the Lender may reasonably require and submitted at intervals as directed by the
Lender, but in no case more often than on a monthly basis.
19 PROJECT RECORDS
The Borrower shall maintain the following records, if applicable to the Project, for a period consistent with the Program
Regulations.
(a) Records that demonstrate that the Project meets the property standards in Program Regulations,
(b) Records that demonstrate that the Project meets the requirements of Program Regulations for the required period of
affordability for each family assisted;
(c) Records that demonstrate compliance with the requirements of Program Regulations for tenant and participant
protections;
(d) Records that demonstrate compliance with the requirements in Program Regulations for affordable housing
including, but not limited to, rental housing production including the initial purchase price and appraised value (after
rehabilitation, if required) of the Project for each family assisted;
(e) Records that indicate whether the Project is mixed-income, mixed-use, or both in accordance with Program
Regulations,
(f) Records evidencing the guidelines adopted by the Lender and supporting the certification for the 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,
(g) Records documenting compliance with applicable federal, state and local equal opportunity and fair housing laws
including, if applicable
(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 Lender funds,
(2) 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 the Department's outreach programs 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 HOME funds, the amount of the contract or subcontract, and documentation of Borrower's affirmative
steps to assure that minority-business and women's business enterprises have an equal opportunity to
obtain or compete for contracts and subcontracts as sources of supplies, equipment, construction, and
services,
(4) Documentation of the actions the Borrower has taken to affirmatively further fair housing;
(5) Records indicating the affirmative marketing procedures and requirements under 24 CFR § 92.351,
(6) Records that demonstrate compliance with environmental review requirements in 24 CFR § 92.352 (and
part 58 of this title),
(h) Records that demonstrate compliance with the requirements regarding displacement, relocation, and real property
acquisition, including project occupancy lists identifying the name and address of all persons occupying the real
property, moving into the property, and occupying the property upon completion of the Project;
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(i) Records demonstrating compliance with federal and state labor requirements including contract provisions and
payroll records,
(j) Records concerning lead-based pamt;
(k) Records supporting requests for waivers of the conflict of interest prohibition;
(1) Records of certifications concerning debarment and suspension in 24 CFR part 24, and
(m) Records demonstrating compliance with flood insurance requirements as applicable
20. INSURANCE REQUIREMENTS
BORROWER'S INSURANCE
Borrower's insurance requirements under this provision are attached hereto as Attachment B, which terms are
incorporated herein.
CONTRACTOR'S INSURANCE
A. All building contractors utilized to carry out the Lender funded contract for property improvement, hereinafter the
"Contract", including the general contractor utilized to construct the project (the "Contractor") shall have a valid contractor's
license and within 10 working days prior to the inception of their contract with Borrower (Iris Apartments CIC, LP, a
California limited partnership) shall submit to Lender certificates of insurance and appropriate separate endorsements to the
actual insurance policy, evidencing that the contractor has obtained for the period of its contract with Borrower (the
"Contract") insurance in the following forms of coverage and minimum amounts specified from insurance carriers with an A.
M. Best rating of A VII and above.
(1) An occurrence policy of Commercial General Liability insurance insuring contractor against liability for
bodily injury, including death, personal injury or property damage arising out of all operations of the contractor during the
execution of the said contract of not less than One Million Dollars ($1,000,000) per occurrence. The Borrower and the
Lender, its officers, agents, employees, and volunteers shall be added as Additional Insured by separate endorsement to the
policy
(2) Unless contractor is a sole proprietorship, Statutory Workers' Compensation insurance along with
Employer's Liability of not less than One Million Dollars ($1,000,000)
(3) A Comprehensive Automobile Liability Insurance policy for bodily injury, including death, and property
damage which provides total limits of not less than one million dollars ($1,000,000) combined single limit per occurrence
and is applicable to all owned, non-owned and hired vehicles.
B All certificates of insurance provided by Contractor must evidence that the insurer providing the policy will give
City of Encinitas, 505 S Vulcan Avenue, Encinitas, California 92024, Attn. Housing Administrator, thirty (30) days' written
notice, at the address shown below in advance of any cancellation, lapse, reduction or other adverse change respecting such
insurance.
21 CERTAIN ACTS PROHIBITED
Borrower shall not make any sale, encumbrance, assignment or conveyance, or transfer in any other form, the Property or
Project or any part thereof or of any of its interest therein other than to admit one or more entities as limited partners of the
Borrower or in accordance with the terms of this Regulatory Agreement and the loan documents and shall not, without the
prior written approval of the Lender
(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 other than the employment of a property manager;
61994\4148097x4 10
11993
(c) Remodel, remove, add to, reconstruct or demolish any part of the Project or impair any real or personal property of
the Project other than routine maintenance or in the ordinary course of business without prior written approval by
the Lender;
(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 applicable law 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 Lender;
(f) Incur any liability or obligation in connection with the Project, contingent or otherwise;
(g) Enter into any contract or contracts for supervisory or managerial services except as permitted by this Regulatory
Agreement; or
(h) Invest any funds from the Project in any property, real or personal, except as authorized by this Regulatory
Agreement or by the Lender or deposit any such funds in a depository not authorized by this Regulatory Agreement
or approved by the Lender.
22. VIOLATION OF REGULATORY AGREEMENT BY THE BORROWER.
In the event of the material violation of any of the provisions of this Regulatory Agreement by the Borrower, the Lender shall
give written notice thereof to the Borrower of violation by specifying (a) the nature of the event or deficiency giving rise to
the violation (b) the action required to cure the deficiency, if any action to cure is possible and (c) a date, which shall not be
less than thirty (30) days from the mailing of the notice by which such action to cure must be accomplished or if such breach
is not reasonably susceptible of cure within such (30) day period, then within such additional time as is reasonably necessary
to cure such failure, provided Borrower has commenced cure within the initial thirty (30) day period and diligently pursues
such cure to completion. A copy of any notice of breach or default under this Agreement or any of the other Loan
Documents given to the Borrower by the Lender shall be delivered to the Borrower, c/o Chelsea Investment Corporation,
5993 Avenida Encinas, Suite 101, Carlsbad, CA 92008-4459, and Borrower's limited partner at the address set forth below in
Section 33 or such address as the limited partner provides to the Lender in a written notice, and Borrower's counsel at the
following addresses as and when such notice is given to the Borrower-
Odu & Associates
Attn. Nkechi Odu
250 S Pasadena Ave. #2082
Pasadena, CA 91105
Notwithstanding anything to the contrary contained in any of the Loan Documents, the Borrower's limited partner shall have
the right, but not the obligation, to cure defaults of the Borrower as set forth in this Section 22. The Lender agrees that the
Borrower shall not be considered to be in default or breach until the expiration of all notice and cure periods provided to the
Borrower and its limited partner. After the expiration of all applicable notice and cure periods as specified here, the Lender
may, without further 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 Lender may apply to any court, state or federal, for
specific performance 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
Borrower that the injury to the Lender ansing from a default under any of the terms of this Regulatory Agreement would be
irreparable and that it would be extremely difficult to ascertain the amount of compensation of the Lender which afford
adequate relief in light of the purposes and policies of the Program.
23 AMENDMENTS
61994\4148097v4 11
11994
This Regulatory Agreement shall not be altered or amended except by writing executed between the parties.
24 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
25 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
Borrower may not assign this Regulatory Agreement or any of its obligations hereunder, voluntarily or by operation of law,
without the prior approval of the Lender; provided, however, that the exercise by the General Partner of the Borrower of the
purchase option in the Partnership Agreement shall not be deemed to violate this Section. Borrower may not sell the
Property or assign this Regulatory Agreement without the express written consent of the Lender
26 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.
27. RECORDING AGREEMENT
This Regulatory Agreement and any amendments thereof, shall, at the expense of the Borrower, be acknowledged by each of
the parties and recorded or referenced in the official records of the county in which the Project is situated.
28 ELECTION OF REMEDIES
The remedies of the Lender 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 Lender of any one or more of its other remedies.
29 WAIVER
No waiver by the Lender 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
30 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.
31 GOVERNING LAW
This Regulatory Agreement shall be construed in accordance with and governed by the laws of the State of California.
32 OTHER FEDERAL REGULATIONS
Borrower agrees to carry out all activities in compliance with 24 CFR Parts 42, 58, 92, 570 and 574, the Housing and
Community Development Act of 1974, as amended, 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 (as amended), 11063 and 11593, the Uniform Relocation Assistance and
Real Property Acquisition Policies Act of 1970, as amended, OMB Circular A-122 and Attachments A, B, C, F, H, N and O;
OMB Circular A-133, the Archaeological and Historical Preservation Act of 1974, the Architectural Barriers Act of 1968,
the Hatch Act (5 U.S.C § 7321, et seq the Flood Disaster Protection Act of 1974, the Clean Air Act (42 U.S C Section
61994\4149097v4 12
11995
7401, et seq.) and the Federal Water Pollution Control Act, as amended (33 U.S C. Section 1251, et seq the Drug-Free
Workplace Act of 1988, San Diego County Board of Supervisors' Policy B-39a (Disabled Veterans Business Enterprise
Program); and Section 42 (h)(6)(E)(ii) of the Internal Revenue Code of 1989.
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.
Borrower:
Iris Apartments CIC, LP
c/o Chelsea Investment Corporation,
5993 Avenida Encinas Suite 101
Carlsbad, CA 92008-4459
Lender
City of Encinitas
505 S Vulcan Avenue
Encinitas, California 92024
Atm. Housing Administrator
Limited Partner
RJCHOF I- Iris Apartments CIC L.L.C.
c/o Raymond James Tax Credit Funds, Inc.
880 Carillon Parkway
St. Petersburg, Florida 33716
Attn: Ronald Diner, President
34. INDEMNIFICATION AND WAIVER.
(a) Borrower agrees to indemnify the Lender and its agents, employees, and officers (referred to in this paragraph 34 as
"Lender Parties"), and to hold the Lender Parties harmless from 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 Lender may incur as a direct or indirect consequences of (i) the making of the Program loan to Borrower,
(ii) Borrower's failure to perform any obligations as and when required by this Regulatory Agreement; (iii) any
failure at any time of any of Borrower's representations or warranties to be true and correct; (iv) any act or omission
by Borrower, any borrower, 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. Borrower shall pay immediately upon the Lender's
demand any amounts owing under this indemnity together with interest thereon from the date the indebtedness arises
until paid, at the rate of eight percent (8%) per annum. The duty of Borrower to indemnify and save harmless
includes the duties to defend as set forth in Section 2778 of the Civil Code. Borrower's duty to indemnify the
Lender shall survive the term of this Regulatory Agreement. Borrower shall indemnify and hold harmless the
Lender Parties regardless of the existence or degree of fault or negligence whether active or passive, primary or
secondary on the part of the Lender, the Lender or the Borrower or their respective agents, officers, employees,
contractors or subcontractors provided, however, that Borrower's duty to indemnify and hold harmless hereunder
shall not extend to liability arising (i) from sole negligence or willful misconduct of the Lender or its successors,
assigns or designees, (ii) following the satisfaction, discharge, release, assignment, termination or cancellation of the
Deed of Trust following the payment in full of the indebtedness secured by the Promissory Note or (iii) after the
actual dispossession from the Property of Borrower following foreclosure of the Deed of Trust or acquisition of the
Property by a deed in lieu of foreclosure.
(b) The Borrower waives and releases any and all rights to any types of express or implied indemnity against the Lender
Parties relative to this Agreement.
6199414148097v4 13
11996
(c) Borrower expressly waives the protections of Section 1542 of the Civil Code in relation to subparagraphs (a) and (b)
above.
[Signature Page Follows Immediately]
61994\4148097v4 14
11997
BORROWER:
IRIS APARTMENTS CIC, LP,
a California limited partnership
LENDER:
CITY OF ENCINITAS
By-
a CIC Iris Apartments, LLC, By
a California limited liability company, its Administrative
General Partner
By- Chelsea Investment Corporation, a California
corpora ion, its Manager
By- 1
Cheri Hoffman
President
By- Pacific Southwest Community Development Corporation,
a California nonprofit public benefit corporation, its
Managing General Part
By-
Robert Laing
Executive Director/Presid ~t
Gus Vina, City Manager
61994\4148097v4 1
11998
BORROWER:
IRIS APARTMENTS CIC, LP,
a California limited partnership
By CIC Iris Apartments, LLC,
a California limited liability company, its Administrative
General Partner
By' Chelsea Investment Corporation, a California
corporation, its Manager
By:
Cheri Hoffman
President
By' Pacific Southwest Community Development Corporation,
a California nonprofit public benefit corporation, its
Managing General Partner
By
Robert Laing
Executive Director/President
LENDER:
CITY OF ENCINITAS
By'
Gu ina, City anager
SEC A-T7 ~ ek E G
fJi%T.g~lrl~, l'LL.iIF=lC%~1C'
61994\4148097v4
11999
ACKNOWLEDGMENTS
61994\4148097v4
12000
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State of California
l
County of a 7
On
` befo me,
Date
Here Insert N e a
personally appeared and Title of the Officer
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who proved to me on the basis of satisfactory evidence to
be the persorr{>;j-whose name.(s) is/aro-subscribed to the
within instrument and acknowledged to me that
G. R. V "HERS he/sheftHey~ executed the same in his/herltlisix authorized
Commission # 1903166 capacity(, and that by his/herfe►r signature(s) on the
i -r' Notary Public - California > instrument the person(s), or the entity upon behalf of
z San Diego County which the person(s) acted, executed the instrument.
My Comm Expires Sep 6, 2014
I certify under PENALTY OF PERJURY under the laws
of the State of California that the foregoing paragraph is
true and correct.
WITNESS my nd and official eal
Signature
Place Notary Seal Above
Signature of Notary Public
OPTIONAL
Though the information below is not required by law, it may prove valuable to persons relying on the document
and could prevent fraudulent remo
val and reattachment of this form to another document.
Description of Attached Document
Title or Type of Document:
Document Date
Number of Pages:
Signer(s) Other Than Named Above:
Capacity(ies) Claimed by Signer(s)
Signer's Name.
Signer's Name-
E] Individual
❑ Individual
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❑ Trustee Top of th
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❑ Guardian or Conservator
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Signer Is Representing:
Signer Is Representing:
0 2007 National Notary Association- 9350 De Soto Ave., P.O. Box 2402 -Chatsworth, CA 91313-2402 - www.NationalNotaryorg Item #5907 Reorder Call Toll-Free 1-800-876-6827
12001
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
erer~r - - - - - - - - r- c~c~ crcr~cr- c c rcrer - - c~ - crc crc c c~e~e r~rrr n~ c~
State of California
County of
On
Date
personally appeared
G. R. N'THERS
Commission # 1903166
Z Notary Public - California z
z ' San Diego County
NIComm. Expires Sep 6, 2014
who proved to me on the basis of satisfactory evidence to
be the persoa(s) whose name(s) is/are-subscribed to the
within instrument and acknowledged to me that
Jhe/she/theey-Qxecuted the same in-lais/her/their authorized
capacity(-ies} and that by-#is/herA heir-signatur@(O-on the
instrument the person(s); or the entity upon behalf of
which the persop*s acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws
of the State of California that the foregoing paragraph is
true and correct.
Place Notary Seal Above
WITNESS mypan and ficial al
Signature
Signature of Notary Public
OPTIONAL
Though the information below is not required by law, it may prove valuable to persons relying on the document
and could prevent fraudulent removal and reattachment of this form to another document.
Description of Attached Document
Title or Type of Document:
Document Date
Signer(s) Other Than Named Above
Capacity(ies) Claimed by Signer(s)
Signer's Name-
0 Individual
❑ Corporate Officer - Title(s) _
❑ Partner - ❑ Limited ❑ General
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Signer Is Representing:
Top of thumb here
Number of Pages:
Signer's Name
❑ Individual
❑ Corporate Officer - Title(s)
❑ Partner - ❑ Limited ❑ General
❑ Attorney in Fact -
❑ Trustee Top of thumb here
❑ Guardian or Conservator
❑ Other
Signer Is Representing.
02007 National Notary Association - 9350 De Soto Ave., PO. Box 2402 -Chatsworth, CA 91313-2402 - www.NationalNotary.org Item #5907 Reorder Call Toll-Free 1-800-876-6827
12002
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State of California
County of 3t/j!'» U/ E A
I
On f4Pkil 1 ,?s -_.)0i _ before me, iL✓f )`-)CA /,)c r5 i A( Y 8/~
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Date Here Insert Name and Title of th Officer
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personally appeared
GINA FRANCES ZENNS
Commission #E 1878445
Notary Public - California Z
San Diego County M Comm. Expires Jan 29, 2014
Place Notary Seal Above
OPTIONAL
who proved to me on the basis of satisfactory evidence to
be the person(s) whose name(s) is/a;re subscribed to the
within instrument and acknowledged to me that
he/sheM,tey executed the same in his/4@4thok authorized
capacity(ies), and that by his/he#ftir signature(s) on the
instrument the person(s), or the entity upon behalf of
which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws
of the State of California that the foregoing paragraph is
true and correct.
WITNESS my hand and official seal
Signatur6_i.2 141 s ~c J [ yr
Signature of Notary Pu
Though the information below is not required by law, it may prove valuable to persons relying on the document
and could prevent fraudulent removal and reattachment of this form to another document.
Description of Attached Document
Title or Type of Document: jAjk1,,q Qtuil bF- (2 E5i f it ri - ~~14, lyr lJ ~ ~cp 7-~ ( ~ ~1Y►~x.
Document Date ~Ct ;_4- Number of Pages. 1 C~w,~
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Signer
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12003
ATTACHMENT A
PROPERTY DESCRIPTION
Real property in the City of Encinitas, County of San Diego, State of California, described as
follows.
Assessor's Parcel Number (APN): 265-100-55
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE COUNTY OF SAN
DIEGO, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS
LOT 1 OF CITY OF ENCINITAS T.M. 02-233, IN THE CITY OF ENCINITAS, COUNTY OF
SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 15501,
FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY,
JANUARY 5, 2007
61994\4148097v4
12004
ATTACHMENT B
INSURANCE REQUIREMENTS
A. Required General Liability Insurance Coverage. Borrower shall procure either Comprehensive General Liability
Insurance or Commercial General Liability Insurance in the amounts and form set forth below:
(1) Comprehensive General Liability Insurance. A policy of Comprehensive General Liability Insurance with a
combined single limit (CSL) per occurrence of $1,000,000 per occurrence; OR,
(2) Commercial General Liability Insurance. A policy of Commercial General Liability Insurance which provides
limits of
(a) General limit per Occurrence:
$2,000,000
(b) General limit Project Specific Aggregate:
$2,000,000
(c) Products/Completed Operations:
$2,000,000
(d) Personal & Advertising Injury limit:
$2,000,000
For either type of insurance, deductibles applying to liability coverages shall be declared to and approved by the Lender's
Risk Manager
(3) Required General Liability Policy Coverage. Any general liability policy provided by Borrower hereunder shall include
the following coverage-
(a) Premises and Operations
(b) Products/Completed Operations with limits of two million dollars ($2,000,000) per occurrence to be
maintained for a (3) three years following Acceptance of the work by the Lender
(c) Contractual Liability expressly including liability assumed under this Contract.
(d) Personal Injury Liability
(e) Independent Contractors' Liability
(f) Severability of Interest clause providing that the coverage applies separately to each insured, except with
respect to the limits of liability, and that an act or omission by one of the named insureds shall not reduce
or avoid coverage to the other named insureds.
(g) Explosion, Collapse & Underground Damage Hazards (X, C & U)
(4) Required Endorsements. For either type insurance, coverage shall include the following endorsements, copies of which
shall be provided to Lender-
(a) Additional Insured Endorsement. Any general liability policy provided by Borrower hereunder shall
contain an endorsement which applies its coverage to the Lender and the officers, agents, employees and
volunteers of the Lender, individually and collectively, as additional insureds.
(b) Pnmary Insurance Endorsement. The coverage afforded by the additional insured endorsement described
above shall apply as primary insurance, and any other insurance maintained by the Lender, or its officers,
agents, employees and volunteers, or any Lender self-funded program, shall be excess only and not
contributing with such coverage
(5) Form of General Liability Insurance Policies. All general liability policies shall be written to apply to all bodily injury,
including death, property damage, personal injury and other covered loss, however occasioned, occurring during the policy
term, and shall specifically insure the performance by Borrower of that part of the indemnity agreement contained herein
relating to liability for injury to or death of persons and damage to property If the coverage contains one or more aggregate
limits, a minimum of 50% of any such aggregate limit must remain available at all times; if over 50% of any aggregate limit
has been paid or reserved, Lender may require additional coverage to be purchased by Borrower to restore the required limits.
61994\4148097v4
12005
Borrower may combine primary, umbrella and as broad as possible excess liability coverage to achieve the total limits
indicated above. Any umbrella or excess liability policy shall include the Additional Insured Endorsement described above.
B Builder's Risk Insurance. Borrower shall provide Builder's Risk Insurance as follows
(1) Coverage shall be provided on an "all-risk" or special form basis (including the perils of earthquake and flood, unless
waived by the Lender).
(2) Coverage shall be provided on the work and materials which are the subject of these Loan Documents, whether in
process or manufacture or finished, including "in transit" coverage to the final agreed-upon destination of delivery, and
including loading and unloading operations, and such coverage shall be in force until the work and materials are accepted by
the Lender
(3) Lender shall be named as an additional insured and/or loss payee as its interest may appear at the time of loss.
(4) Coverage shall be in an amount no less than the full replacement value of the property at the time of loss.
(5) The deductible shall not exceed $10,000, or such amount that is commercially available, per occurrence and shall be
borne by the Borrower, except higher deductibles for earthquake and flood may be approved by the Lender
(6) Loss, if any, shall be adjustable with and payable to the Lender as trustee for all entities having an insurable interest,
except in such cases as may require payment of all or a proportion of such insurance to be made to a mortgagee as its interest
may appear
(7) If Borrower fails to maintain such insurance as is called for herein, the Lender, at its option, may order the
Borrower to suspend work at Borrower's expense until a new policy of insurance is in effect and on file with the Lender
C Comprehensive Automobile Liability Insurance. Borrower shall procure Comprehensive Automobile Liability Insurance
written for bodily injury, including death, and property damage, however occasioned, occurring during the policy term, in the
amount of not less than One Million Dollars ($1,000,000), combined single limit per occurrence, applicable to all owned,
non-owned and hired vehicles. This coverage shall include Contractual Liability
D Statutory Workers' Compensation and Employer's Liability Insurance. Unless Borrower is a sole proprietorship,
Borrower shall maintain a policy of California Workers' Compensation coverage in statutory amount and Employer's
Liability coverage for no less than one million dollars ($1,000,000) per occurrence for all employees of Borrower engaged in
services or operations under the Contract. Coverage shall include the following endorsements, copies of which shall be
provided to the Lender-
(1) Broad Form All-States endorsement
(2) Waiver of Subrogation endorsement
E. Professional Errors and Omissions Liability Insurance. If Borrower provides and/or engages the services of any type of
professional, including, but not limited to, engineers and architects, whose failure due to a mistake or deficiency in design,
formula, plan, specifications, advisory, technical or other services could result in liability, Borrower or Consultant shall obtain
professional errors and omissions liability insurance in an amount of not less than one million dollars ($1,000,000). If this policy
contains a self retained limit, it shall not be greater than Twenty Five Thousand Dollars ($25,000) per occurrence/event; if the
coverage contains one or more aggregate limits, a minimum of 50% of any such aggregate limit must remain available at all
times; if over 50% of any aggregate limit has been paid or reserved, Lender may require additional coverage to be purchased by
Consultant to restore the required limits. The policy shall include limited contractual liability coverage. This coverage shall be
maintained for a minimum of two (2) years following termination or completion of Borrower's work pursuant to the Agreement.
F Rental Income Insurance. Borrower shall obtain rental income insurance which shall assure Borrower of receiving the
minimum monthly rent from the time the Project is damaged or destroyed by a risk insured against by the standard fire policy
including all risk or special form perils, until such time as they are returned to a tenantable condition, with a minimum period of
coverage of one (1) year
61994\4148097v4 5
12006
G Policy Terms and General Provisions.
1 Certificates of Insurance. Borrower shall, as soon as practicable following the placement of insurance required hereunder, but
in no event later than the effective date of the Loan Documents, deliver to Lender certified copies of the actual insurance policies
specified herein, or certificates evidencing the same, together with appropriate separate endorsements thereto, evidencing that
Borrower has obtained such coverage for the period of the Loan Documents. Thereafter, copies of renewal policies, or
certificates and appropriate separate endorsements thereof, shall be delivered to Lender within thirty (30) days prior to the
expiration of the term of any policy required herein. Borrower shall permit Lender at all reasonable times to inspect any policies
of insurance of Borrower which Borrower has not delivered to Lender.
2. Claims Made Coverage If coverage is written on a "claims made" basis, the Certificate of Insurance shall clearly so state. In
addition to the coverage requirements specified above, such policy shall provide that:
(1) The policy retroactive date coincides with or precedes Borrower's commencement of work under the Loan Documents
(including subsequent policies purchased as renewals or replacements).
(2) Borrower will make every effort to maintain similar insurance during the required extended period of coverage following
expiration of the Loan Documents, including the requirement of adding all additional insureds.
(3) If insurance is terminated for any reason, Borrower shall purchase an extended reporting provision of at least two years to
report claims arising in connection with the Loan Documents.
(4) The policy allows for reporting of circumstances or incidents that might give rise to future claims
3 Waiver of Subrogation. The insurer shall waive all rights of recovery or subrogation against Lender, its agents, officers
and employees which might arise by reason of any payment under the policies. Borrower hereby waives all rights to
recovery against Lender on account of loss or damage occasioned to Borrower or others under Borrower's control to the
extent such loss or damage is insured against under any insurance policies which may be in force at the time of the loss or
damage
4 Notice of Cancellation or Change of Coverage All certificates of insurance provided by Borrower must evidence that the
insurer providing the policy will give Lender thirty (30) days' written notice, in advance of any cancellation, lapse, reduction
or other adverse change respecting such insurance.
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