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06-0502_MILLENNIUM HOUSING CORPORATION_Security AgreementThis Document was electronically recorded by RECORDING RECUUMD By First American Title -13 FIRST AMERICAN TITLE COMPANY NATIONAUCOMMERCIAL SERVICES Recorded in Official Records, Orange County COMMERCIAL/INDUSTRIAL DIVISION ran 9 DEED OFTtkDaLv..Clerk-Rec1ordperp • " RECORDING REQUESTED BY AND NO FEE WHEN RECORDED MAIL TO: ) 2006000368542 11:05am 06/01/06 119 30 D11 A36 A34 1.108 32 Francis J. Baum, Esq. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 ) Best Best & Krieger LLP ) P.O. Box 1028 ) Riverside, California 92502-1028 ) .70; 7 -!W -AlT This document is recorded for the benefit of the Independent Cities Lease Finance Authority, and the recording is fee -exempt under Section 27383 of the Government Code. DEED OF TRUST WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING THIS DEED OF TRUST WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (the "Deed of Trust") is made as . of June 1, 2006, by Millennium Housing Corporation, a California nonprofit public benefit corporation ("Trustor"), to First American Title Insurance Company ("Trustee"), for the benefit of the Union Bank of California, N.A., as Trustee under the Indenture referred to herein (the "Indenture Trustee" and `Beneficiary" hereunder), all as provided in the Indenture of Trust, dated as of May 1, 2006 (the "Indenture"), by and between the Indenture Trustee and Independent Cities Lease Finance Authority (the "Authority"). THIS DEED OF TRUST is given, inter alia, for the purpose of securing a loan (the "Loan") from Beneficiary (as assignee of the Authority) as lender to Trustor as borrower, the proceeds of which are to be used by Trustor for the acquisition of the San Juan Mobile Estates mobile home park located in City of San Juan Capistrano, County of Orange, State of California, more particularly described in Exhibit A attached hereto and by this reference incorporated herein (the "Land"). Immediately following the execution of the promissory note secured by this Deed of Trust (1) the Authority assigned its interest in such promissory note to Beneficiary and (2) the promissory note was secured by this Deed of Trust. FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt of which is hereby acknowledged, Trustor hereby irrevocably grants, transfers, conveys and assigns to Trustee, IN TRUST, WITH POWER OF SALE, for the benefit and security of Beneficiary, under and subject to the terms and conditions hereinafter set forth, the Land; TOGETHER WITH any and all buildings and improvements now or hereafter erected on • the Land including, without limitation, fixtures, tenements, attachments, appliances, equipment, building systems, machinery, and other articles now or hereafter attached to the buildings and RVPUB\FBAUM\709450.1 SD improvements (collectively, the "Improvements"), all of which shall be deemed and construed to be a part of the real property; provided however, the term "Improvements" as used in this Deed of Trust shall not include any mobile home coaches owned by any party other than Trustor to the extent such coaches are deemed to be Improvements at any time, either now or in the future. TOGETHER WITH all earnings, rents, issues, profits, revenue, royalties, income, proceeds and other benefits, including without limitation prepaid rents and security deposits (collectively, the "Rents') derived from any lease, sublease, license, franchise or concession or other agreement (collectively, the "Leases") now or hereafter affecting all or any portion of the Land, or the Improvements or the use or occupancy thereof, TOGETHER WITH all interests, estates or other claims, both in law and in equity, which Trustor now has or may hereafter acquire in the Land or the Improvements, including without limitation, all right, title and interest now owned or hereafter acquired by Trustor in and to any greater estate in the Land or the Improvements; TOGETHER WITH all easements, tenements, hereditaments, appurtenances, rights-of-way and rights now owned or hereafter acquired by Trustor used or useful in connection with the Land or as a means of access thereto, including, without limiting the generality of the foregoing, all development rights and credits, rights pursuant to any trackage agreement and all rights to the nonexclusive use of common drive entries, all oil and gas and other hydrocarbons and all other minerals and water and water rights and shares of stock evidencing the same; . TOGETHER WITH all leasehold estate, right, title and interest of Trustor in and to all leases, subleases, subtenancies, licenses, franchises, occupancy agreements and other agreements covering the Land, the Improvements or any portion thereof now or hereafter existing or entered into, and all right, title and interest of Trustor thereunder, including, without limitation, all cash or security deposits, prepaid or advance rentals, and deposits or payments of similar nature; • TOGETHER WITH all right, title and interest of Trustor, now owned or hereafter acquired in and to any land lying within the right-of-way of any street, open or proposed, adjoining the Land and any and all sidewalks, vaults, alloys and strips and gores of land adjacent to or used in connection with the Land; TOGETHER WITH all the estate, interest, right, title, other claim or demand, both in law and in equity, including claims or demands with respect to the proceeds of insurance in effect with respect to the Land, which Trustor now has or may hereafter acquire in the Land or the Improvements and any and all awards made for the taking by eminent domain, or by any proceeding of purchase in lieu thereof, of the whole or any part of the interests described in this Deed of Trust, including, without limitation, any awards resulting from a change of grade of streets and awards for severance damages. The entire estate, property and interest hereby conveyed to Trustee may hereafter be collectively referred to as the "Trust Estate." RVPUB\FBAUM\709450.1 2 FOR THE PURPOSE OF SECURING THE FOLLOWING OBLIGATIONS ("Secured Obligations"): (a) payment of indebtedness in the principal amount of $39,910,000 with interest thereon, evidenced by that certain Note dated June 1, 2006 and all modifications, extensions, renewals and replacements thereof (collectively, the "Note"), executed by Trustor pursuant to that certain Loan Agreement, dated as of May 1, 2006, by and among Authority, Trustor and Indenture Trustee and all supplements, amendments and modifications thereto and all extensions and renewals thereof (the "Loan Agreement'); (b) performance of every obligation, covenant or agreement of Trustor contained herein, in the Loan Agreement, in the Note, or in any other document, instrument or agreement executed and delivered by Trustor in connection with the Loan; (c) performance of every obligation, covenant and agreement of Trustor contained in any agreement now or hereafter executed by Trustor which recites that the obligations thereunder are secured by this Deed of Trust, including, without limitation payment of all other sums, with interest thereon, which may hereafter be loaned to Trustor, or its successors or assigns, by Beneficiary, or its successors or assigns, when evidenced by a promissory note or notes reciting that they are secured by this Deed of Trust; (d) compliance with and performance of each and every material provision of any declaration of covenants, conditions and restrictions pertaining to the Trust Estate or any portion thereof; and (e) payment and performance of all obligations of Trustor arising from any and all existing and future agreements with Beneficiary which may afford interest rate protection to all or part of the Loan, when such agreement recites that the obligations thereunder are secured by this Deed of Trust. All initially capitalized terms used herein which are defined in the Indenture or the Loan Agreement shall have the same meaning herein unless the context otherwise requires. TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR HEREBY COVENANTS AND AGREES AS FOLLOWS: ARTICLE 1 COVENANTS AND AGREEMENTS OF TRUSTOR 1.1 Payment of Secured Obligations. Trustor shall pay when due the principal of and the interest on the indebtedness evidenced by the Note; all charges, fees and other sums as provided in the Loan Documents; the principal of and interest on any future advances secured by this Deed of Trust; and the principal of and interest on any other indebtedness secured by this Deed of Trust. 1.2 Maintenance, Repair, Alterations. Trustor (a) shall keep the Land and the Improvements in good condition and repair; (b) shall not remove, demolish or substantially alter RVPUBTBAUM\709450.1 (other than as contemplated in the Loan Agreement) any of the Improvements except upon the prior written consent of Beneficiary; (c) shall complete promptly and in a good and workmanlike manner any Improvement which may be now or hereafter constructed on the Land and promptly restore in like manner any portion of the Improvements which may be damaged or destroyed thereon from any cause whatsoever, and pay when due all claims for labor performed and materials furnished therefor; (d) shall comply with all laws, ordinances, regulations, covenants, conditions and restrictions now or hereafter affecting the Trust Estate or any part thereof or requiring any alterations or improvements, including without limitation, all Hazardous Materials Laws, the Americans with Disabilities Act, Public Law 101-336 (the "ADA"), and the California Fair Housing Act of 1992; (e) shall not commit or permit any waste or deterioration of the Land or the Improvements; (f) shall not allow changes in the use for which all or any part of the Land or the Improvements were intended; (g) shall not initiate or acquiesce in a change in the zoning classification of the Land and the Improvements without Beneficiary's prior written consent; and (h) if requested by Beneficiary, shall provide for professional management of the Land and Improvements by a property manager satisfactory to Beneficiary pursuant to a management contract approved by Beneficiary in writing. 1.3 Required Insurance. (a) Trustor shall at all times provide, maintain and keep in force or cause to be provided, maintained and kept in force, at no expense to the Authority or the Indenture Trustee, policies of insurance in accordance with the terms of the Loan Agreement in form and amounts, providing for deductibles, and issued by companies, associations or organizations covering such casualties, risks, perils, liabilities and other hazards as required by the Loan Agreement. (b) Trustor shall not obtain separate insurance concurrent in form or contributing in the event of loss with that required to be maintained hereunder unless Beneficiary is included thereon under a standard, non-contributory mortgagee clause or endorsement acceptable to Beneficiary. Trustor shall immediately notify Beneficiary whenever any such separate insurance is obtained and shall promptly deliver to Beneficiary the original policy or policies of such insurance. (c) Within 90 days following the end of each fiscal year of Trustor, at the request of Authority or Beneficiary, Trustor at Trustor's expense shall furnish such evidence of replacement costs as the insurance carrier providing casualty insurance for the Improvements on the Land may require to determine, or which such carrier may provide in determining, the then replacement cost of the Improvements on the Land. 1.4 Delivery of Policies. Payment of Premiums. (a) All policies of insurance shall either have attached thereto a lender's loss payable endorsement for the benefit of Beneficiary in form satisfactory to Beneficiary or shall name Beneficiary as an additional insured, as required under the Loan Agreement. Trustor shall furnish Authority and Beneficiary with evidence of insurance issued by the applicable insurance company for each required policy setting forth the coverage, the limits of liability, the name of the carrier, the policy number and the period of coverage, and otherwise in form and substance as 0 provided in the Loan Agreement. At least 30 days prior to the expiration of each required policy, RVPUB\FBAUM\709450.1 4 Trustor shall deliver to Beneficiary evidence reasonably satisfactory to Authority of the payment G of premiums and the renewal or replacement of such policy continuing insurance in form as required by this Deed of Trust. All such policies shall contain a provision that, notwithstanding any contrary agreement between Trustor and the insurance company, such policies will not be canceled, terminated, allowed to lapse without renewal, surrendered or materially amended, which term shall include any reduction in the scope or limits of coverage, without at least 30 days' prior written notice to Beneficiary. (b) - hi the event Trustor fails to provide, maintain, keep in force or deliver to Beneficiary the policies of insurance required by this Deed of Trust or by the Loan Agreement, Authority may (but shall have no obligation to) procure such insurance or single -interest insurance for such risks covering Beneficiary's interest. Trustor will pay all premiums thereon and reimburse Authority for all amounts paid or incurred by it in connection therewith promptly upon demand by Authority and, until such payment and reimbursement is made by Trustor, the amount of all such premiums and amounts paid or incurred by Authority shall be added to the principal amount of the Loan. Trustor shall deposit with the Beneficiary an amount equal to the estimated aggregate annual insurance premiums on all policies of insurance required by the Loan Agreement or this Deed of Trust, all as contemplated under the Indenture. hi such event Trustor further agrees to cause all bills, statements or other documents relating to the foregoing insurance premiums to be sent or mailed directly to the Beneficiary. Upon receipt of such bills, statements or other documents evidencing that a premium for a required policy is then payable, and providing Trustor has deposited sufficient funds with the Beneficiary all as contemplated under the Indenture, the Beneficiary shall timely pay such amounts as may be due thereunder out of the funds so deposited with the Beneficiary. Notwithstanding the foregoing, nothing contained herein shall modify the obligation of Trustor set forth in Section 1.3 hereof to maintain and keep such insurance in force at all times. 1.5 Casualties; Insurance Proceeds. Trustor shall give prompt written notice thereof to Authority and Beneficiary after the happening of any casualty to or in connection with the Land, the Improvements, or any part thereof, whether or not covered by insurance. In the event of such casualty, all proceeds of insurance shall be payable to the Beneficiary, whether required by the Loan Documents or otherwise, and Trustor hereby authorizes and directs any affected insurance company to make payment of such proceeds directly to the Beneficiary, for the benefit of the Project. If Trustor receives any proceeds of insurance resulting from such casualty, whether required by the Loan Documents or otherwise, Trustor shall promptly pay over such proceeds to the Beneficiary. In the event of any damage or destruction of the Land or the Improvements, Beneficiary, at the written direction of Authority, shall apply all loss proceeds remaining after deduction of all expenses of collection and settlement thereof, including, without limitation, fees and expenses of attorneys and adjusters, to the restoration of the Improvements, but only as repairs or replacements are effected and continuing expenses become due and payable and provided all applicable conditions specified in the Loan Agreement with respect thereto have been satisfied. If any one or more of such conditions in the Loan Agreement have not been met, Beneficiary shall apply all loss proceeds, after deductions as herein provided, to the prepayment of the outstanding balance of the Note, together with all accrued interest thereon, notwithstanding that the outstanding balance may not be due and payable. Nothing herein contained shall be deemed to excuse Trustor from repairing or maintaining the Land and the Improvements as provided in Section 1.2 hereof or restoring all damage or destruction to the RVPUB\FBAUM\709450. ] 5 Land or the Improvements, regardless of whether or not there are insurance proceeds available to Trustor or whether any such proceeds are sufficient in amount, and the application or release by Beneficiary, at the written direction of Authority, of any insurance proceeds shall not cure or waive any Default or notice of default under this Deed of Trust or invalidate any act done pursuant to such notice. 1.6 Assignment of Policies Upon Foreclosure. In the event of foreclosure of this Deed of Trust or other transfer of title or assignment of the Trust Estate in extinguishment, in whole or in part, of the debt secured hereby, all right, title and interest of Trustor in and to all policies of insurance obtained by Trustor, whether required by the Loan Documents or otherwise, shall inure to the benefit of and pass to the successor in interest to Trustor or the purchaser or grantee of the Trust Estate. 1.7 Indemnification; Subrogation; Waiver of Offset. (a) If Beneficiary is made a party to any litigation concerning the Note, this Deed of Trust, any of the Loan Documents, the Trust Estate or any part thereof or interest therein, or the occupancy of the Land or the Improvements by Trustor, then Trustor shall indemnify, defend and hold Beneficiary harmless from all liability by reason of that litigation, including reasonable attorneys' fees and expenses incurred by Beneficiary as a result of any such litigation, whether or not any such litigation is prosecuted to judgment. Beneficiary may employ an attorney or attorneys selected by it to protect its rights hereunder, and Trustor shall pay to Beneficiary reasonable attorneys' fees and costs incurred by Beneficiary, whether or not an action is actually commenced against Trustor by reason of its breach. .,, (b) Trustor waives any and all right to claim or recover against Authority and Beneficiary, and their respective officers, employees, agents and representatives, for loss of or damage to Trustor, the Trust Estate, Trustor's property or the property of others under Trustor's control from any cause insured against or required to be insured against by the provisions of this Deed of Trust. (c) All sums payable by Trustor in accordance with the terms of this Deed of Trust or the Note shall be paid without notice, demand, counterclaim, setoff, deduction or defense and without abatement, suspension, deferment, diminution or reduction, and the obligations and liabilities of Trustor hereunder shall in no way be released, discharged or otherwise affected (except as expressly provided herein) by reason of: (i) any damage to or destruction of or any condemnation or similar taking of the Trust Estate or any part thereof; (ii) any restriction or prevention of or interference by any third party with any use of the Trust Estate or any part thereof, (iii) any title defect or encumbrance or any eviction from the Improvements or any part thereof by title paramount or otherwise; (iv) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to Beneficiary, or any action taken with respect to this Deed of Trust by any trustee or receiver of Beneficiary, or by any court, in any such proceeding; (v) any claim which Trustor has or might have against Beneficiary, which does not relate to the Loan; or (vi) any other occurrence whatsoever, whether similar or dissimilar to the foregoing; whether or not Trustor shall have notice or knowledge of any of the foregoing. Except as expressly provided herein and subject to any limitation thereon provided by law, Trustor waives all rights now or hereafter conferred by statute or otherwise to RVPUBTBAUM709450.1 6 any abatement, suspension, deferment, diminution or reduction of any sum secured hereby and payable by Trustor. 1.8 Taxes and Impositions. (a) As used herein, "Impositions" shall mean all real property taxes and assessments, general and special, and all other taxes and assessments of any kind or nature whatsoever, including, without limitation, nongovernmental levies or assessments such as maintenance charges, levies or charges resulting from covenants, conditions and restrictions affecting the Trust Estate, which are assessed or imposed upon the Trust Estate or any portion of it, or become due and payable, and which create, may create or appear to create a lien upon the Trust Estate, or any part thereof, or upon any person, property, equipment or other facility used in the operation or maintenance thereof, or any tax or assessment on the Trust Estate, or any part of it, in lieu thereof or in addition thereto, or any license fee, tax or assessment imposed on Beneficiary and measured by or based in whole or in part upon the amount of the outstanding obligations secured hereby. Trustor shall pay all Impositions prior to delinquency, all as contemplated in the Loan Agreement. Trustor shall deliver to the Beneficiary proof of the payment of the Impositions within 30 days after such Impositions are due. Trustor, at its expense, may contest, by appropriate proceedings conducted in good faith and with due diligence, the amount or validity, in whole or in part, of any Impositions, provided (i) Trustor shall have notified Authority and Beneficiary prior to the commencement of such proceedings, (ii) in the case of any unpaid Impositions, such proceedings shall suspend the collection thereof from Borrower, Beneficiary and the Trust Estate, and shall not constitute a presently enforceable lien against the Trust Estate during the pendency of such contest, (iii) neither the Trust Estate nor any part thereof nor any interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost, (iv) such proceedings shall not have an adverse effect on the lien or security interest created hereby or upon the enforcement of any provisions of the Loan Documents, and (v) if Authority or Beneficiary shall so require, Borrower shall have deposited with Beneficiary such security reasonably necessary for payment of the contested Impositions, with interest and penalties and Authority's and Beneficiary's expenses. (b) In the event of the enactment after the date hereof of any law, rule, ordinance, statute or regulation by the State of California or any political subdivision thereof deducting from the value of land for the purpose of taxation any lien thereon, or imposing upon Beneficiary the obligation to pay the whole or any part of the taxes or assessments or charges or liens herein required to be paid by Trustor, or changing in any way the laws relating to the taxation of deeds of trust or debts secured by this Deed of Trust or Beneficiary's interest in the Trust Estate, or any portion thereof, or the manner of collection of taxes, so as to adversely affect this Deed of Trust or the debt secured hereby, or the Beneficiary or its successors and assigns, then, and in any such event, Trustor, upon demand by Beneficiary, shall pay such taxes or assessments, or reimburse Beneficiary therefor; except that if, in the opinion of counsel for Beneficiary, (i) it might be unlawful to require Trustor to make such payment or (ii) the making of such payment might result in the imposition of interest beyond the maximum amount permitted by law, then, and in such event, Beneficiary may elect, by notice in writing given to Trustor, to declare all of the indebtedness secured hereby to be and become due and payable 60 days from the giving of such notice. RVPUB\FBAUM\709450.1 7 (c) If, by the laws of the United States of America, or of the State of California or any political subdivision thereof having jurisdiction over Trustor, Beneficiary or the Trust Estate or any portion thereof, any tax, assessment or other payment is due or becomes due in respect of the issuance of the Note or the recording of this Deed of Trust, Trustor covenants and agrees to pay each such tax, assessment or other payment in the manner required by any such law. Trustor further covenants to defend and hold harmless and agrees to indemnify Beneficiary, its successors or assigns, against any liability incurred by reason of the imposition of any tax, assessment or other payment on the issuance of the Note or the recording of this Deed of Trust. 1.9 Utilities. Trustor shall pay or shall cause to be paid when due all utility charges which are incurred by Trustor for the benefit of the Land or the Improvements and all other assessments or charges of a similar nature, whether or not such charges are or may become liens thereon. 1.10 Actions Affecting Trust Estate. Trustor shall promptly give Beneficiary written notice of and shall appear in and contest any action or proceeding purporting to affect any portion of the Trust Estate or the security hereof or the rights or powers of Beneficiary; and shall pay all costs and expenses, including the cost of evidence of title and attorneys' fees, in any such action or proceeding in which Beneficiary may appear. 1.11 Actions By Beneficiary to Preserve Trust Estate. If Trustor fails to make any payment or to do any act as and in the manner provided in any of the Loan Documents, Beneficiary, without obligation so to do, without releasing Trustor from any obligation, and without notice to or demand upon Trustor, may make or do the same in such manner and to such extent as it may deem necessary to protect the security hereof. In connection therewith (without limiting their general powers, whether conferred herein, in any other Loan Documents or by law), Beneficiary shall have and is hereby given the right, but not the obligation, (a) to enter upon and take possession of the Land and the Improvements; (b) to make additions, alterations, repairs and improvements to the Land and the Improvements which it may consider necessary or proper to keep the Land or the Improvements in good condition and repair; (c) to appear and participate in any action or proceeding affecting or which may affect the security hereof or the rights or powers of Beneficiary; (d) to pay, purchase, contest or compromise any encumbrance, claim, charge, lien or debt which in the judgment of either may affect or appears to affect the security of this Deed of Trust or be prior or superior hereto; and (e) in exercising such powers, to pay necessary expenses, including attorneys' fees and costs or other necessary or desirable consultants. Trustor shall, immediately upon demand therefor by Beneficiary, pay to Beneficiary an amount equal to all respective costs and expenses incurred by such party in connection with the exercise of the foregoing rights, including, without limitation, costs of evidence of title, court costs, appraisals, surveys and receiver's, trustee's and attorneys' fees. 1.12 Transfer of Trust Estate by Trustor. In the event of any Transfer (as defined below) of the Trust Estate, or any portion thereof or interest therein, which is not in accordance with Section 6.2 of the Loan Agreement, Authority shall have the absolute right at its option, without prior demand or notice, to declare all sums secured hereby immediately due and payable. Upon a permitted Transfer under Section 6.2 of the Loan Agreement, the transferee shall assume • all obligations hereunder and agree to be bound by all provisions contained herein. As used herein, the term "Transfer" means and includes the direct or indirect sale, transfer, conveyance, RVPUB\FBAUMV09450.1 8 assignment, or other alienation of the Trust Estate, or any portion thereof or interest therein, whether voluntary, involuntary, by operation of law or otherwise, the execution of any installment land sale contract, sales agreement or similar instrument affecting all or a portion of the Trust Estate, granting of an option to purchase any portion of or interest in the Trust Estate or any interest therein, or the lease of all or substantially all of the Land or of all or substantially all of the Improvements. "Transfer" shall not include the leasing of individual mobile home spaces acquired by Trustor on the Land so long as Trustor complies with the provisions of the Loan Agreement and the Regulatory Agreement relating to such leasing activity. 1.13 Survival of Warranties. All representations, warranties and covenants of Trustor made to Authority and Beneficiary in connection with the loan secured hereby or contained in the Loan Documents or incorporated by reference therein, shall survive the execution and delivery of this Deed of Trust and shall remain continuing obligations, warranties and representations of Trustor so long as any portion of the obligations secured by this Deed of Trust remains outstanding. 1.14 Eminent Domain. In the event that any proceeding or action be commenced for the taking of the Trust Estate, or any part thereof or interest therein, for public or quasi -public use under the power of eminent domain, condemnation or otherwise, or if the same be taken or damaged by reason of any public improvement or condemnation proceeding, or in any other manner, or should Trustor receive any notice or other information regarding such proceeding, action, taking or damage, Trustor shall give prompt written notice thereof to Beneficiary. Beneficiary shall be entitled at its option, without regard to the adequacy of its security, to commence, appear in and prosecute in its own name any such action or proceeding. Beneficiary shall also be entitled to make any compromise or settlement in connection with such taking or damage. All compensation, awards, damages, rights of action and proceeds awarded to Trustor by reason of any such taking or damage (the "Condemnation Proceeds") are hereby assigned to the Beneficiary, for the benefit of the Project, and Trustor agrees to execute such fiurther assignments of the Condemnation Proceeds as may be required under the Loan Agreement. The Beneficiary shall apply all or any of the proceeds it receives to its expenses in settling, prosecuting or defending any claim and may apply the balance to the Secured Obligations in the order and for such purposes as provided in the Loan Agreement. 1.15 Additional Security. No other security now existing, or hereafter taken, to secure the obligations secured hereby shall be impaired or affected by the execution of this Deed of Trust and all additional security shall be taken, considered and held as cumulative. The taking of additional security, execution of partial releases of the security, or any extension of the time of payment of the indebtedness shall not diminish the force, effect or lien of this Deed of Trust and shall not affect or impair the liability of any maker, surety or endorser for the payment of the indebtedness. In the event Beneficiary at any time holds additional security for any of the obligations secured hereby, it may enforce the sale thereof or otherwise realize upon the same, at its option, either before, concurrently, or after a sale is made hereunder. 1.16 Successors and Assigns. This Deed of Trust applies to, inures to the benefit of and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors and assigns. The term `Beneficiary" shall mean the holder of the Note, whether or not named as Beneficiary herein. In exercising any rights hereunder or taking any actions provided for herein, RVPUB\FBAUM\709450.1 9 ') Beneficiary may act through its employees, agents or independent contractors authorized by Beneficiary. 1.17 Inspections. Beneficiary, or its agents, representatives or workers, are authorized to enter at any reasonable time upon or in any part of the Land and the Improvements for the purpose of inspecting the same and for the purpose of performing any of the acts it is authorized to perform hereunder or under the terms of any of the Loan Documents. Without limiting the generality of the foregoing, Trustor agrees that Beneficiary will have the same right, power and authority to enter and inspect the Land and the Improvements as is granted to a secured lender under Section 2929.5 of the California Civil Code, and that Beneficiary will have the right to appoint a receiver to enforce this right to enter and inspect the Land and the Improvements to the extent such authority is provided under California law, including the authority given to a secured lender under Section 564(c) of the California Code of Civil Procedure. 1.18 Liens. Trustor shall pay and promptly discharge, at Trustor's cost and expense, all liens, encumbrances and charges ("Liens) upon the Trust Estate, or any part thereof or interest therein which liens have not been approved in writing by Beneficiary. If Trustor shall fail to remove and discharge any such lien, encumbrance or charge, then, in addition to any other right or remedy of Beneficiary, Beneficiary may, but shall not be obligated to, discharge the same, either by paying the amount claimed to be due, or by procuring the discharge of such lien, encumbrance or charge by depositing in a court a bond or the amount claimed or otherwise giving security for such claim, or by procuring such discharge in such manner as is or may be prescribed by law. Trustor shall, immediately upon demand therefor by Beneficiary, pay to Beneficiary an amount equal to all costs and expenses incurred by Beneficiary in connection with the exercise by Beneficiary of the foregoing right to discharge any such lien, encumbrance or charge, together with interest thereon from the date of such expenditure at the Default Rate. Trustor, at its expense, may contest, by appropriate proceedings conducted in good faith and with due diligence, the amount or validity, in whole or in part, of any Lien, provided (i) Trustor shall have notified Authority and Beneficiary prior to the commencement of such proceedings, (ii) in the case of any unpaid Lien, such proceedings shall suspend the collection thereof from Trustor, Beneficiary and the Trust Estate, and shall not constitute a presently enforceable lien against the Trust Estate during the pendency of such contest, (iii) neither the Trust Estate nor any part thereof nor any interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost, (iv) such proceedings shall not have an adverse effect on the lien or security interest created hereby or upon the enforcement of any provisions of the Loan Documents, and (v) if Authority or Beneficiary shall so require, Trustor shall have deposited with Beneficiary such security reasonably necessary for payment of the contested Lien, with interest and penalties and Authority's and Beneficiary's expenses. 1.19 Trustee's Powers. At any time, or from time to time, without liability therefor and without notice, upon written request of Beneficiary and presentation of this Deed of Trust and the Note secured hereby for endorsement, and without affecting the personal liability of any person for payment of the indebtedness secured hereby or the effect of this Deed of Trust upon the remainder of the Trust Estate, Trustee may (a) reconvey any part of the Trust Estate, (b) consent in writing to the making of any map or plat thereof, (c) join in granting any easement RVPUB\FBAUM\709450.1 10 thereon, or (d) join in any extension agreement or any agreement subordinating the lien or charge hereof. 1.20 Beneficiary's Powers. Without affecting the liability of any other person liable for the payment of any obligation herein mentioned, and without affecting the lien or charge of this Deed of Trust upon any portion of the Trust Estate not then or theretofore released as security for the full amount of all unpaid obligations, Beneficiary may, from time to time and without notice (a) release any person so liable, (b) extend the maturity or alter any of the terms of any such obligation, (c) grant other indulgences, (d) release or reconvey, or cause to be released or reconveyed at any time at Beneficiary's option any parcel, portion or all of the Trust Estate, (e) take or release any other or additional security for any obligation herein mentioned, or (f) make compositions or other arrangements with debtors in relation thereto. 1.21 Leasehold. If a leasehold estate constitutes a portion of the Trust Estate, Trustor agrees not to amend, change, terminate or modify such leasehold estate or any interest therein without the prior written consent of Beneficiary. Waiver of consent to one amendment, change, agreement or modification shall not be deemed to be a waiver of the right to require consent to other, future or successive amendments, changes, agreements or modifications. Trustor agrees to perform all obligations and agreements under the leasehold and shall not take any action or omit to take any action which would effect or permit the termination of the leasehold. Trustor agrees to promptly notify Beneficiary in writing with respect to any default or alleged default by any party thereto and to deliver to Beneficiary copies of all notices, demands, complaints or other communications received or given by Trustor with respect to any such default or alleged default. Beneficiary shall have the option to cure any such default and to perform any or all of Trustor's obligations thereunder. All sums expended by Beneficiary in curing any such default shall be secured hereby and shall be immediately due and payable without demand or notice. 1.22 Indemnity. In addition to any other indemnities to Beneficiary specifically provided for in this Deed of Trust, Trustor hereby indemnifies, and shall defend and save harmless, Beneficiary and its authorized representatives from and against any and all losses, liabilities, suits, obligations, fines, damages, penalties, claims, costs, charges and expenses, including, without limitation, architects', engineers' and attorneys' fees and all disbursements which may be imposed upon, incurred by or asserted against Beneficiary and its authorized representative by reason of. (a) the construction of any improvements on the Land, (b) any capital improvements, other work or things done in, on or about the Land or any part thereof, (c) any use, nonuse, misuse, possession, occupation, alteration, operation, maintenance or management of any portion of the Trust Estate or any part thereof or any street, drive, sidewalk, curb, passageway or space comprising a part thereof or adjacent thereto, (d) any negligence or willful act or omission on the part of Trustor and its agents, contractors, servants, employees, licensees or invitees, (e) any accident, injury (including death) or damage to any person or property occurring in, on or about the Land or any part thereof, (f) any lien or claim which may be alleged to have arisen on, against, or with respect to any portion of the Trust Estate under the laws of the local or state government or any other governmental or quasi -governmental authority or any liability asserted against Beneficiary with respect thereto, (g) any tax attributable to the execution, delivery, filing or recording of this Deed of Trust, the Note or the Loan Agreement, (h) any contest due to Trustor's actions or failure to act, permitted pursuant to the provisions of this Deed of Trust, (i) any Default under the Note, this Deed of Trust or the Loan Agreement, or RVPUB\FBAUM\709450.1 I I 0 ' 0) any claim by or liability to any contractor or subcontractor performing work or any party ` supplying materials in connection with the Land or the Improvements. ARTICLE 2 ASSIGNMENT OF LEASES AND RENTS 2.1 Assignment. Trustor hereby irrevocably assigns to Beneficiary all of Trustor's right, title and interest in, to and under: (a) all leases of the Land or any portion thereof, all licenses and agreements relating to the management, leasing or operation of the Land or any portion thereof, and all other agreements of any kind relating to the use or occupancy of the Land or any portion thereof, whether now existing or entered into after the date hereof ("Leases"); and (b) the Rents, including, without limitation, all amounts payable and all rights and benefits accruing to Trustor under the Leases. The term "Leases" shall also include all .guarantees of and security for the lessees' performance thereunder, and all amendments, extensions, renewals or modifications thereto which are permitted hereunder. This is a present and absolute assignment, not an assignment for security purposes only, and Beneficiary's right to the Leases and Land is not contingent upon, and may be exercised without possession of, the Land. 2.2 Grant Of License. Beneficiary confers upon Trustor a license ("License") to collect and retain the Rents as they become due and payable, until the occurrence of a Default (as hereinafter defined). Upon a Default, the License shall be automatically revoked and Beneficiary may collect and apply the Rents pursuant to Section 4.2, below, without notice and without taking possession of the Land. Trustor hereby irrevocably authorizes and directs the • lessees under the Leases to rely upon and comply with any notice or demand by Beneficiary for the payment to Beneficiary of any rental or other sums which may at any time become due under the Leases, or for the performance of any of the lessees' undertakings under the Leases, and the lessees shall have no right or duty to inquire as to whether any Default has actually occurred or is then existing hereunder. Trustor hereby relieves the lessees from any liability to Trustor by reason of relying upon and complying with any such notice or demand by Beneficiary. 2.3 Effect Of Assignment. The foregoing irrevocable Assignment shall not cause Beneficiary to be: (a) a mortgagee in possession; (b) responsible or liable for the control, care, management or repair of the Land or for performing any of the terms, agreements, undertakings, obligations, representations, warranties, covenants and conditions of the Leases; or (c) responsible or liable for any waste committed on the Land by the lessees under any of the Leases or any other parties; for any dangerous or defective condition of the Land; or for any negligence in the management, upkeep, repair or control of the Land resulting in loss or injury or death to any Lessee, licensee, employee, invitee or other person. Beneficiary shall not directly or indirectly be liable to Trustor or any other person as a consequence of. (i) the exercise or failure to exercise any of the rights, remedies or powers granted to Beneficiary hereunder; or (ii) the failure or refusal of Beneficiary to perform or discharge any obligation, duty or liability of Trustor arising under the Leases. 2.4 Representations And Warranties. Trustor represents and warrants that: (a) the Schedule of Leases attached hereto as Exhibit B attached hereto and incorporated herein by this reference is, as of the date hereof, a true, accurate and complete list of all Leases; (b) all existing Leases are in full force and effect and are enforceable in accordance with their respective terms, RVPUB\FBAUM\709450.1 12 and no breach or default, or event which would constitute a breach or default after notice or the passage of time, or both, exists under any existing Leases on the part of any party; (c) no rent or • other payment under any existing Lease has been paid by any lessee for more than one (1) month in advance; and (d) none of the lessor's interests under any of the Leases has been transferred or assigned. E 2.5 Covenants. Trustor covenants and agrees at Trustor's sole cost and expense to: (a) perform the obligations of lessor contained in the Leases; (b) exercise Trustor's best efforts to keep all portions of the Land that are currently subject to Leases leased at all times at rentals not less than the requirements under the Loan Agreement; and (c) execute and record such additional assignments of any Lease or specific subordinations of any Lease to the Deed of Trust, in form and substance acceptable to Authority, as Authority may request. Trustor shall not, without notice to the Oversight Agent: (i) execute any other assignment relating to any of the Leases; or (ii) subordinate or agree to subordinate any of the Leases to any other deed of trust or encumbrance. Any such attempted action in violation of the provisions of this Section 2.5 shall be null and void. 2.6 Estoppel Certificates. Within thirty (30) days after written request by Authority, Trustor shall deliver to Beneficiary and to any party designated by Authority an estoppel certificate executed by Trustor, in recordable form, certifying (if such be the case): (a) that the foregoing assignment and the Leases are in full force and effect; (b) the date of each lessee's most recent payment of rent; (c) that there are no defenses or offsets outstanding, or stating those claimed by Trustor or lessees under the foregoing assignment or the Leases, as the case may be; and (d) any other information reasonably requested by Authority. ARTICLE 3 SECURITY AGREEMENT AND FIXTURE FILING 3.1 Security Interest. Trustor hereby grants and assigns to Beneficiary a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Trustor now or at any time hereafter has any interest (collectively, the "Collateral"): (a) All personal property, including, without limitation, all goods, supplies, work in process, signs, equipment, furniture, furnishings, fixtures, machinery, inventory and construction materials which Trustor now or hereafter owns or in which Trustor now or hereafter acquires an interest or right, including, without limitation, those which are now or hereafter located on or affixed to the Land and/or Improvements (the Land and the Improvements shall hereafter be collectively referred to as the "Real Property") or used or useful in the operation, use or occupancy thereof or the construction of any improvements thereon, including, without limitation, any interest of Trustor in and to personal property which is leased or subject to any superior security interest, or which is being manufactured or assembled for later installation into the improvements to be located or constructed at the Real Property, wherever located, and all books, records, leases and other documents, of whatever kind or character, relating to the Real Property; RVPUB\P3AUM\709450.1 13 (b) All fees, income, rents, issues, profits, earnings, receipts, royalties and revenues which, after the date hereof and while any portion of the indebtedness secured hereby remains unpaid, may accrue from said goods, fixtures, furnishings, equipment and building materials or any part thereof or from the Real Property or any part thereof, or which may be received or receivable by Trustor from any hiring, using, letting, leasing, subhiring, subletting, or subleasing therefor; (c) All of Trustor's present and future rights to receive payments of money, services or property including, without limitation, rights to all deposits from tenants of the Real Property, accounts receivable, deposit accounts, chattel paper, documents, letters of credit, hedging or similar agreement, instruments, general intangibles and principal, interest and notes, drafts, contract rights (including, without limitation, all rights under any interest rate payments due on account of goods sold, services rendered, loans made or credit extended), together with title or interest in all documents evidencing or securing the same; (d) All other intangible property and rights relating to the Real Property or the operation thereof, or used in connection therewith, including but not limited to all governmental permits relating to construction or other activities on the Real Property, all names under or by which the Real Property may at any time be operated or known, all rights to carry on business under any such names, or any variant thereof, all trade names and trademarks relating in any way to the Real Property, good will in any way relating to the Real Property, and all licenses and permits relating in any way to, or to the operation j of, the Real Property; (e) All proceeds from sale or disposition of the aforesaid Collateral; (f) Trustor's rights under all insurance policies covering the Real Property or any of the aforesaid Collateral (whether or not required by the Loan Documents), and all proceeds, loss payments and premium refunds payable regarding the same; (g) All reserves, deferred payments, deposits, refunds, cost savings and payments of any kind relating to the construction of any Improvements on the Land; (h) All water stock relating to the Real Property or any portion of it; (i) All causes of action, claims, compensation and recoveries for any damage to or condemnation or taking of the Real Property or the aforesaid Collateral, or for any conveyance in lieu thereof, whether direct or consequential, or for any damage or injury to the Real Property or the aforesaid Collateral, or for any loss or diminution in value of the Real Property or the aforesaid Collateral; 0) All architectural, structural, mechanical and engineering plans and specifications prepared for construction of improvements or extraction of minerals from the Real Property and all studies, data and drawings relating thereto; and also all contracts and agreements of the Trustor relating to the aforesaid plans and specifications • or to the aforesaid studies, data and drawings or to the construction of improvements on or extraction of minerals or gravel from the property; RVPUBTBAUM\709450.1 14 (k) All Trustor's right, title and interest in any mobile home coaches owned by Trustor and situated on the Real Property, together with all proceeds from the sale or disposition of the aforesaid mobile home coach or coaches. Mobilehome coaches owned by Trustor and situated on the Real Property on the date hereof are listed on Exhibit C hereto. All terms used herein which are defined in the California Commercial Code shall have the same meanings when used herein, unless the context requires otherwise. As to all of the above described personal property which is or which hereafter becomes a "fixture" under applicable law, this Deed of Trust constitutes a fixture filing under Sections 9313 and 9402(6) of the California Uniform Commercial Code, as amended or recodified from time to time. 3.2 Representations and Warranties. Trustor represents and warrants that: (a) Trustor has, or will have, good title to the Collateral; (b) Trustor has not previously assigned or encumbered the Collateral and no financing statement covering any of the Collateral has been delivered to any other person or entity, and (c) Trustor's principal place of business is located at the address shown in Section 6.5. 3.3 Rights of Beneficiarv. In addition to Beneficiary's rights as a "Secured Party" under the California Uniform Commercial Code, as amended or recodified from time to time ("UCC"), Beneficiary may, but shall not be obligated to, at any time without notice and at the expense of Trustor: (a) give notice to any person of Beneficiary's rights hereunder and enforce such rights at law or in equity; (b) insure, protect, defend and preserve the Collateral or any rights or interests of Beneficiary therein; (c) inspect the Collateral; and (d) endorse, collect and receive any right to payment of money owing to Trustor under or from the Collateral. Notwithstanding the above, in no event shall Beneficiary be deemed to have accepted any property other than cash in satisfaction of any obligation of Trustor to Beneficiary unless Beneficiary shall make an express written election of said remedy under UCC § 9505, or other applicable law. 3.4 Rights of Beneficiary on Default. Upon the occurrence of a Default under this Deed of Trust, then in addition to all of Beneficiary's rights as a "Secured Party" under the UCC or otherwise at law: (a) Beneficiary may (i) upon written notice, require Trustor to assemble any or all of the Collateral and make it available to Beneficiary at a place designated by Beneficiary; (ii) without prior notice, enter upon the Real Property or other place where any of the Collateral may be located and take possession of, collect, sell, and dispose of any or all of the Collateral, and store the same at locations acceptable to Beneficiary at Trustor's expense; (iii) sell, assign and deliver at any place or in any lawful manner all or any part of the Collateral and bid and become purchaser of any such sales; and (b) Beneficiary may, for the account of Trustor and at Trustor's expense: (i) operate, use, consume, sell or dispose of the Collateral as Beneficiary deems appropriate for the purpose of performing any or all of the Secured Obligations; (ii) enter into any RVPUB\FBAUM\709450.1 15 agreement, compromise, or settlement, including insurance claims, which Beneficiary may deem desirable or proper with respect to any of the Collateral; and (iii) endorse and deliver evidences of title for, and receive, enforce and collect by legal action or otherwise, all indebtedness and obligations now or hereafter owing to Trustor in connection with or on account of any or all of the Collateral. Notwithstanding any other provision hereof, Beneficiary shall not be deemed to have accepted any property other than cash in satisfaction of any obligation of Trustor to Beneficiary unless Trustor shall make an express written election of said remedy under UCC § 9505, or other applicable law. 3.5 Power of Attomev. Trustor hereby irrevocably appoints Beneficiary as Trustor's attorney-in-fact (such agency being coupled with an interest), and as such attorney-in-fact Beneficiary may, without the obligation to do so, in Beneficiary's name, or in the name of Trustor, prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve any of Beneficiary's security interests and rights in or to any of the Collateral, and, upon a Default hereunder, take any other action required of Trustor; provided, however, that Beneficiary as such attorney-in-fact shall be accountable only for such ftmds as are actually received by Beneficiary. 3.6 Possession and Use of Collateral. Except as otherwise provided in this Section or other Loan Documents, so long as no Default exists under this Deed of Trust or any of the Loan Documents, Trustor may possess, use, move, transfer or dispose of any of the Collateral in the =j ordinary course of Trustor's business and in accordance with the Loan Agreement. ARTICLE 4 REMEDIES UPON DEFAULT 4.1 Events of Default. For all purposes hereof, the term "Default" shall mean (a) the failure of Trustor to make any payment of principal or interest on the Note or, at Beneficiary's option, to pay any other amount due hereunder or under the Note when the same is due and payable, whether at maturity, by acceleration or otherwise; (b) the failure of Trustor to perform any non -monetary obligation hereunder, or the failure to be true of any representation or warranty of Trustor contained herein, and the continuance of such failure for ten (10) days after notice, or within any longer grace period, if any allowed in the Loan Agreement for such failure, or (c) the existence of any default, including an Event of Default, as defined therein, under the Loan Agreement, subject to any cure or grace period allowed under the Loan Agreement. 4.2 Acceleration Upon Default, Additional Remedies. Upon the occurrence of a Default, Beneficiary may, at its option, declare all indebtedness secured hereby to be immediately due and payable without any presentment, demand, protest or notice of any kind. Thereafter Beneficiary may: (a) Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court and without regard to the adequacy of its security, enter upon and take possession of the Land or the Improvements, or any part thereof, in its own name or in the name of Trustee, and do any acts which it deems RVPUB\FBAUM\709450.1 16 necessary or desirable to preserve the value, marketability or rentability of any portion of the Trust Estate, including, without limitation (i) taking possession of Trustor's books and records, (ii) completing the rehabilitation of the Improvements, (iii) maintaining or repairing the Improvements or any other portion of the Trust Estate, (iv) increasing the income from the Trust Estate, with or without taking possession of the Land or the Improvements, (v) entering into, modifying, or enforcing any Leases, (vi) suing for or otherwise collecting the Rents or other amounts owing to Trustor, including those past due and unpaid, and (vii) applying the same, less costs and expenses of operation and collection including, without limitation, attorneys' fees, upon any indebtedness secured hereby, all in such order as Beneficiary may determine. The entering upon and taking possession of the Land or the Improvements, the collection of such Rents and the application thereof as provided above, shall not cure or waive any Default or notice of default hereunder; (b) Enforce all of the rights and remedies of an assignee for turnover of rents, issues and profits under Section 2938 of the California Civil Code, as such Section may be amended from time to time; (c) Commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof, (d) Deliver to Trustee a written declaration of default and demand for sale and a written notice of default and election to cause Trustor's interest in the Trust Estate to be .°� sold, which notice Trustee or Beneficiary shall cause to be duly filed of record in the Official Records of the County in which the Land is located; or (e) Exercise all other rights and remedies provided herein, in any Loan Document or other document or agreement now or hereafter securing all or any portion of the obligations secured hereby, or by law. 4.3 Foreclosure by Power of Sale. Should Beneficiary elect to foreclose by exercise of the power of sale herein contained, Beneficiary shall notify Trustee and shall deposit with Trustee this Deed of Trust and the Note and such receipts and evidence of expenditures made and secured hereby as Trustee may require. (a) Beneficiary or Trustee shall give such notice of default and election to sell as is then required by applicable law. Trustee shall, without demand on Trustor, after lapse of such time as may then be required by law and after recordation of such notice of default and after notice of sale having been given as required by law, sell the Trust Estate at the time and place of sale fixed by it in the notice of sale, either as a whole, or in separate lots or parcels or items as Beneficiary shall deem expedient, and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser or purchasers thereof a trustee's deed conveying the property so sold, which shall not contain any covenant or warranty, express or implied. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof Any person, 0 including, without limitation, Trustor, Trustee or Beneficiary, may purchase at such sale RVPU13\FBAUM\709450) 17 a and Beneficiary shall be entitled to pay the purchase price by crediting the purchase price of the property against the obligations secured hereby. Trustor hereby covenants to warrant and defend the title of such purchaser or purchasers. (b) After deducting all costs, fees and expenses of Trustee and of this trust, including costs of evidence of title in connection with sale, Trustee shall apply the proceeds of sale in the following priority, to payment of: (i) first, all sums expended under the terms hereof, not then repaid; (ii) second, all other sums then secured hereby; and (iii) the remainder, if any, to the person or persons legally entitled thereto. (c) Subject to California Civil Code § 2924(g), Trustee may postpone sale of all or any portion of the Trust Estate by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement or subsequently noticed sale, and without further notice make such sale at the time fixed by the last postponement, or may, in its discretion, give a new notice of sale. 4.4 Personal Property. Pursuant to Article 3 above, Trustor has executed and delivered to Beneficiary a Security Agreement with respect to certain Collateral described therein. Upon the occurrence of a Default, Beneficiary may proceed at its election, in any sequence: (a) to dispose of any Collateral separately from the sale of real property in accordance with Division 9 of the California Commercial Code or other applicable law; and (b) to dispose of some or all of the Trust Estate and the Collateral in any combination consisting of both real and personal property together in one or more sales to be held in accordance with the provisions of Section 9501(4) of the California Commercial Code. 4.5 Appointment of Receiver. Upon the occurrence of a Default hereunder, Beneficiary, as a matter of right and without notice to Trustor or anyone claiming under Trustor, and without regard to the then value of the Trust Estate or the adequacy for any security for the obligations then secured hereby, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers of the Trust Estate, and Trustor hereby irrevocably consents to such appointment and waives notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases and all the powers and duties of Beneficiary in case of entry as provided herein. 4.6 Remedies Not Exclusive. Trustee and Beneficiary, and each of them, shall be entitled to enforce payment and performance of any indebtedness or obligations secured hereby and to exercise all rights and powers under this Deed of Trust or under any Loan Document or other agreement or any laws now or hereafter in force, notwithstanding some or all of the indebtedness and obligations secured hereby may now or hereafter be otherwise secured, whether by mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither the acceptance of this Deed of Trust nor its enforcement whether by court action or pursuant to the power of sale or other powers herein contained, shall prejudice or in any manner affect Trustee's or Beneficiary's right to realize upon or enforce any other security now or hereafter held by Trustee or Beneficiary, it being agreed that Trustee and Beneficiary, and each of them, shall be entitled to enforce this Deed of Trust and any other security now or hereafter held by Beneficiary or Trustee in such order and manner as they or either of them may in their absolute discretion 0 determine. No remedy herein conferred upon or reserved to Trustee or Beneficiary is intended to RVPUB\FBAUM\709450.1 18 be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any of the Loan Documents to Trustee or Beneficiary or to which either of them may be otherwise entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by Trustee or Beneficiary and either of them may pursue inconsistent remedies. 4.7 Request for Notice. Trustor hereby requests a copy of any notice of default and that any notice of sale hereunder be mailed to it at the address set forth in Section 6.5 of this Deed of Trust. 4.8 Forbearance by Lender Not a Waiver. Any forbearance by Beneficiary in exercising any right or remedy hereunder, or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any right or remedy. The acceptance by Beneficiary of payment of any sum secured by this Deed of Trust after the due date of such payment shall not be a waiver of Beneficiary's right either to require prompt payment when due of all other sums so secured or to declare a Default for failure to make prompt payment. The procurement of insurance or the payment of taxes or other liens or charges by Beneficiary shall not be a waiver of Beneficiary's right to accelerate the maturity of the indebtedness secured by this Deed of Trust nor shall Beneficiary's receipt of any awards, proceeds or damages under this Deed of Trust operate to cure or waive any Default with respect to any payment secured by this Deed of Trust. • ARTICLE 5 HAZARDOUS MATERIALS 5.1 Special Representations And Warranties. Without in any way limiting the other representations and warranties set forth in this Deed of Trust, and after reasonable investigation and inquiry, Trustor hereby specially represents and warrants to the best of Trustor's knowledge as of the date of this Deed of Trust as follows: 5.2 Hazardous Materials. Except as previously disclosed to Beneficiary, to the best of Trustor's knowledge, the Real Property is not and has not been a site for the use, generation, manufacture, storage, treatment, release, threatened release, discharge, disposal, transportation or presence of any oil, flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, hazardous wastes, toxic or contaminated substances or similar materials, including, without limitation, any substances which are "hazardous substances," "hazardous wastes," "hazardous materials" or "toxic substances" under the Hazardous Materials Laws, as described below, and/or other applicable environmental laws, ordinances and regulations (collectively, the "Hazardous Materials"). "Hazardous Materials" shall not include commercially reasonable amounts of such materials used in the ordinary course of operation of the Real Property which are used and stored in accordance with all applicable environmental laws, ordinances and regulations. 5.3 Hazardous Materials Laws. The Real Property is in compliance with all laws, ordinances and regulations relating to Hazardous Materials ("Hazardous Materials Laws"), • including, without limitation: the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.; RVPUB\FBAUM\709450.1 19 the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 et seq.; the Comprehensive Environment Response, Compensation and Liability Act of 1980, as amended (including the Superfund Amendments and Reauthorization Act of 1986, "CERCLA"), 42 U.S.C. Section 9601 et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651, the Emergency Planning and Community Right -to -Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 300f et seq.; and all comparable state and local laws, laws of other jurisdictions or orders and regulations. 5.4 Hazardous Materials Claims. There are no claims or actions ("Hazardous Materials Claims") pending or threatened against Trustor or the Real Property by any governmental entity or agency or by any other person or entity relating to Hazardous Materials or pursuant to the Hazardous Materials Laws. 5.5 Border Zone Propertv. The Real Property has not been designated as Border Zone Property under the provisions of California Health and Safety Code, Sections 25220 et seq. and there has been no occurrence or condition on any real property adjoining or in the vicinity of the Real Property that could cause the Real Property or any part thereof to be designated as Border Zone Property. 5.6 Hazardous Materials Covenants. Trustor agrees as follows: (a) No Hazardous Activities. Trustor shall not cause or permit the Real Property to be used as a site for the use, generation, manufacture, storage, treatment, release, discharge, disposal, transportation or presence of any Hazardous Materials. (b) Compliance. Trustor shall comply and cause the Real Property to comply with all Hazardous Materials Laws. (c) Notices. Trustor shall immediately notify Beneficiary in writing of: (i) the discovery of any Hazardous Materials on, under or about the Real Property; (ii) any knowledge by Trustor that the Real Property does not comply with any Hazardous Materials Laws; (iii) any Hazardous Materials Claims; and (iv) the discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Real Property that could cause the Real Property or any part thereof to be designated as Border Zone Property. (d) Remedial Action. In response to the presence of any Hazardous Materials on, under or about the Real Property, Trustor shall immediately take, at Trustor `s sole expense, all remedial action required by any Hazardous Materials Laws or any judgment, consent decree, settlement or compromise in respect to any Hazardous Materials Claims. 5.7 Inspection By Beneficiary. Upon reasonable prior notice to Trustor, Beneficiary, its employees and agents, may from time to time (whether before or after the commencement of a rnonjudicial or judicial foreclosure proceeding) enter and inspect the Real Property for the purpose of determining the existence, location, nature and magnitude of any past or present RVPUB\FBAUM\709450.1 20 release or threatened release of any hazardous substance into, onto, beneath or from the Real Property. 5.8 Hazardous Materials Indemnitv. Trustor hereby agrees to defend, indemnify and hold harmless Beneficiary, its directors, officers, employees, agents, successors and assigns from and against any and all losses, damages, liabilities, claims, actions, judgments, court costs and legal or other expenses (including, without limitation, attorneys' fees and expenses) which Beneficiary may incur as a direct or indirect consequence of the use, generation, manufacture, storage, disposal, threatened disposal, transportation or presence of Hazardous Materials in, on, under or about the Real Property. Trustor shall immediately pay to Beneficiary upon demand any amounts owing under this indemnity, together with interest from the date the indebtedness arises until paid at the Default Rate. TRUSTOR'S DUTY AND OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD HARMLESS BENEFICIARY SHALL SURVIVE THE RELEASE, RECONVEYANCE OR PARTIAL RECONVEYANCE OF THIS DEED OF TRUST. 5.9 Legal Effect Of Section. Trustor and Beneficiary agree that: (a) this Article 5 is intended as Beneficiary's written request for information (and Trustor's response) concerning the environmental condition of the real property security as required by California Code of Civil Procedure §726.5; and (b) each provision in this Article (together with any indemnity applicable to a breach of any such provision) with respect to the environmental condition of the real property security is intended by Beneficiary and Trustor to be an "environmental provision" for purposes of California Code of Civil Procedure §736, and as such it is expressly understood that Trustor's duty to indemnify Beneficiary hereunder shall survive: (a) any judicial or non judicial foreclosure under this Deed of Trust, or transfer of the Real Property in lieu thereof, and (b) the release and reconveyance or cancellation of this Deed of Trust. ARTICLE 6 MISCELLANEOUS 6.1 Amendments. This instrument cannot be waived, changed, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of any waiver, change, discharge or termination is sought. 6.2 Trustor Waiver of Rights. Trustor waives to the extent permitted by law, (a) the benefit of all laws now existing or that may hereafter be enacted providing for any appraisement before sale of any portion of the Trust Estate, (b) all rights of redemption, valuation, appraisement, stay of execution, notice of election to mature or declare due the whole of the secured indebtedness and marshalling in the event of foreclosure of the liens hereby created, (c) all rights and remedies which Trustor may have or be able to assert by reason of the laws of the State of California pertaining to the rights and remedies of sureties, (d) the right to assert any statute of limitations as a bar to the enforcement of the lien of this Deed of Trust or to any action brought to enforce the Note or any other obligation secured by this Deed of Trust, and (e) any rights, legal or equitable, to require marshalling of assets or to require upon foreclosure sales in a particular order, including any rights under California Civil Code Sections 2899 and 3433. Beneficiary shall have the right to determine the order in which any or all of the Trust Estate shall be subjected to the remedies provided herein. Beneficiary shall have the right to determine the order in which any or all portions of the indebtedness secured hereby are satisfied from the RVPUB\rBAUM%709450.1 21 E proceeds realized upon the exercise of the remedies provided herein. Nothing contained herein shall be deemed to be a waiver of Trustor's rights under Section 2924(c) of the California Civil Code. 6.3 Statements by Trustor. Trustor shall, within 10 days after written notice thereof from Beneficiary, deliver to Beneficiary a written statement, fully acknowledged, stating the unpaid principal of and interest on the Note and any other amounts secured by this Deed of Trust and stating whether any offset, counterclaim or defense exists against such sums and the obligations of the Deed of Trust. 6.4 Loan Statement Fees. Trustor shall pay the amount demanded by Beneficiary or its authorized loan servicing agent for any statement regarding the obligations secured hereby; provided, however, that such amount may not exceed the maximum amount allowed by law at the time request for the statement is made. 6.5 Notices. All notices and demands given under the terms hereof shall be in writing and may be effected by personal delivery, including by any commercial courier or overnight delivery service, or by United States registered or certified mail, return receipt requested, with all postage and fees fully prepaid. Notices shall be effective upon receipt by the party being given notice, as indicated by the return receipt if mailed; except that if a party has relocated without providing the other party with its new address for service of notices, or if a party refuses delivery of a notice upon its tender, the notice shall be effective upon the attempt to serve the notice at the last address given for service of notices upon that party. Alternatively, notices may be served by y facsimile transmission, in which case service shall be deemed effective only upon receipt by the ,.,.« party serving the notice of telephonic or return facsimile transmission confirmation that the party to whom the notice is directed has received a complete and legible copy of the notice. Notices shall be addressed as follows: If to Trustee: First American Title Insurance Company #1 First American Way Santa Ana, California 92707 If to Trustor: Millennium Housing Corporation 660 Newport Center Drive, Suite 1020 Newport Beach, California 92660 Attn: George Turk If to Beneficiary: Union Bank of California, N.A. 350 California Street, I Ith Floor San Francisco, California 94104 Attn: Corporate Trust Department RVPU13\FBAUM\709450.1 22 If to Authority: Independent Cities Lease Finance Authority P.O. Box 1750 Palmdale, CA 93590-1750 Attention: Program Administrator Any address for service of notice on any party may be changed by that party serving a notice upon the other of the new address, except that any change of address to a post office box shall not be effective unless a street address is also specified for use in effectuating personal service. 6.6 Acceptance by Trustee. Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. 6.7 Captions. The captions or headings at the beginning of each Section hereof are for the convenience of the parties and are not a part of this Deed of Trust. 6.8 Invalidity of Certain Provisions. Every provision of this Deed of Trust is intended to be severable. In the event any term or provision hereof is declared to be illegal, invalid or unenforceable for any reason whatsoever by a court of competent jurisdiction, such illegality or invalidity shall not affect the balance of the terms and provisions hereof, which terms and provisions shall remain binding and enforceable. 6.9 Subrogation. To the extent that proceeds of the Note are used to pay any out standing lien, charge or prior encumbrance against the Trust Estate, such proceeds have been or t will be advanced by Beneficiary at Trustor's request and Beneficiary shall be subrogated to any and all rights and liens held by any Owner or holder of such outstanding liens, charges and prior encumbrances, irrespective of whether the liens, charges or encumbrances are released. 6.10 Attorneys' Fees. If the Note is not paid when due or if any Default occurs, Trustor promises to pay all costs of enforcement and collection, including but not limited to, reasonable attorneys' fees, whether or not such enforcement and collection includes the filing of a lawsuit. As used herein, the terms "attorneys' fees" or "attorneys' fees and costs" shall mean the fees and expenses of counsel to the parties hereto (including, without limitation, in-house counsel employed by Beneficiary) which may include printing, duplicating and other expenses, air freight charges, and fees billed for law clerks, paralegals and others not admitted to the bar but performing services under the supervision of an attorney. The terms "attorneys' fees" or "attorneys' fees and costs" shall also include, without limitation, all such fees and expenses incurred with respect to appeals, arbitrations and bankruptcy proceedings, and whether or not any action or proceeding is brought with respect to the matter for which said fees and expenses were incurred. 6.11 No Merger of Lease. If both the lessor's and lessee's estate under any lease or any portion thereof which now or hereafter constitutes a part of the Trust Estate shall at any time become vested in one Borrower, this Deed of Trust and the lien created hereby shall not be destroyed or terminated by application of the doctrine of merger unless Beneficiary so elects as evidenced by recording a written declaration so stating, and, unless and until Beneficiary so • elects, Beneficiary shall continue to have and enjoy all of the rights and privileges of Beneficiary 1ZVPU9\FBAUM\709450.1 23 • , as to the separate estates. In addition, upon the foreclosure of the lien created by this Deed of Trust on the Trust Estate pursuant to the provisions hereof, any leases or subleases then existing and affecting all or any portion of the Trust Estate shall not be destroyed or terminated by application of the law of merger or as a matter of law or as a result of such foreclosure unless Beneficiary or any purchaser at such foreclosure sale shall so elect. No act by or on behalf of Beneficiary or any such purchaser shall constitute a termination of any lease or sublease unless Beneficiary or such purchaser shall give written notice thereof to such tenant or subtenant. 6.12 Governing Law. This Deed of Trust shall be governed by and construed in accordance with the laws of the State of California. 6.13 Joint and Several Obligations. Should this Deed of Trust be signed by more than one party, all obligations herein contained shall be deemed to be the joint and several obligations of each party executing this Deed of Trust. Any marred person signing this Deed of Trust agrees that recourse may be had against community assets and against his or her separate property for the satisfaction of all obligations contained herein. 6.14 Interpretation. In this Deed of Trust the singular shall include the plural and the masculine shall include the feminine and neuter and vice versa, if the context so requires. 6.15 Reconveyance by Trustee. Upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of this Deed of Trust and the Note to Trustee for cancellation and retention and upon payment by Trustor of Trustee's fees, Trustee • , shall reconvey to Trustor, or to the person or persons legally entitled thereto, without warranty, any portion of the Trust Estate then held hereunder. The recitals in such reconveyance of any matters or facts shall be conclusive proof of the truthfulness thereof. The grantee in any reconveyance may be described as "the person or persons legally entitled thereto." Such grantee shall pay Trustee a reasonable fee and Trustee's costs incurred in so reconveying the Trust Estate. 6.16 Counterparts. This document may be executed and acknowledged in counterparts, all of which executed and acknowledged counterparts shall together constitute a single document. Signature and acknowledgment pages may be detached from the counterparts and attached to a single copy of this document to physically form one document, which may be recorded. 6.17 Nonforeign Entity. Section 1445 of the Internal Revenue Code of 1986, as amended (the "Code") and Sections 18805, 18815 and 26131, as applicable, of the California Revenue and Taxation Code ("CRTC") provide that a transferee of a U.S. real property interest must withhold tax, in the case of the Code, if the transferor is a foreign person, or if, in the case of the CRTC, the transferor is not a California resident. To inform Beneficiary that the withholding of tax will not be required in the event of the disposition of the Land or the Improvements, or any portion thereof or interest therein, pursuant to the terms of this Deed of Trust, Trustor hereby certifies, under penalty of perjury, that: (a) Trustor is not a foreign corporation, foreign partnership, foreign trust or foreign estate, as those terms are defined in the Code and the regulations promulgated thereunder; and (b) Trustor's U.S. employer identification . number is 33-0880696; and (c) Trustor's principal place of business is 660 Newport Center RVPUB\FBAUM\709450.1 24 Drive, Suite 1020, Newport Beach, California 92660. It is understood that Beneficiary may disclose the contents of this certification to the Internal Revenue Service and the California • Franchise Tax Board, and that any false statement contained herein could be punished by fine, imprisonment or both. Trustor covenants and agrees to execute such further certificates, which shall be signed under penalty of perjury, as Beneficiary shall reasonably require. The covenant set forth herein shall survive the foreclosure of the lien of this Deed of Trust or acceptance of a deed in lieu thereof. 6.18 Substitute Trustee. Beneficiary at any time and from time to time, by instrument in writing, may substitute and appoint a successor Trustee (either corporate or individual) to any Trustee named herein or previously substituted hereunder, which instrument when executed, acknowledged, and recorded in the Official Records of the Office of the Recorder of the County of Orange shall be conclusive proof of the proper substitution and appointment of each successor trustee or trustees, who shall then have all the title, powers, duties and rights of the predecessor Trustee, without the necessity of any conveyance from such predecessor. Trustee shall not be obligated to notify any party hereto of pending sale under any other deed of trust, or, unless brought by Trustee, or any action or proceeding in which Trustor, Beneficiary or Trustee shall be a party. 6.19 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY LAW, TRUSTOR AND BENEFICIARY EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS DEED OF TRUST OR ANY OTHER LOAN DOCUMENTS OR RELATING THERETO OR ARISING FROM THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THE • r LOAN AGREEMENT AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 6.20 Limitation on Liability. Beneficiary's recovery against Trustor shall be limited solely to the collateral given to Beneficiary as security for Trustor's performance under the Loan Documents. Such recovery shall not be a lien, or the basis of a claim of lien or levy or execution, against the general assets of the Trustor. Notwithstanding the foregoing, the Trustor and the general assets of the Trustor shall be fully liable to Beneficiary to the same extent that Trustor would be liable absent the foregoing limitation of this paragraph for damages and loss attributable to: (a) fraud or willful misrepresentation on the part of Trustor; (b) waste; (c) failure of the corporation to pay any income or other taxes, assessments or other charges attributable to Trustor which can create liens on any portion of the Land and the Improvements (to the full extent of any such taxes, assessments or other charges); or (d) any breach by Trustor of any covenant, representation or warranty under Article V of this Deed of Trust. hl addition, the limitations hereof shall not be deemed to limit: (i) any right Beneficiary might otherwise have to obtain injunctive relief against Trustor; (ii) any suit or action in connection with the preservation, enforcement or foreclosure of the liens, mortgages, assignments and security interests now or at any time hereafter securing the payment and performance of all obligations under this Deed of Trust or any of the Loan Documents; or (iii) the collection of amounts which may become owing or payable under or on account of insurance, condemnation awards or damages for other public actions or surety bonds maintained or provided by Trustor; provided however, that the assertion • by Beneficiary of any such right, suit, action or collection of amounts shall not result in a monetary claim upon the general assets of Trustor except as otherwise provided herein. RVPU13\FBAUM\709450.1 25 4 6.21 Nondiscrimination. The Trustor covenants by and for itself and its successors and assigns, and all persons claiming under or through it, and this Deed of Trust is made and accepted upon and subject to the condition that there shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises nor shall the lessee himself, or any person claiming under or through him or her, 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, sublessees, subtenants, or vendees in the premises described in this Deed of Trust. 6.22. Concerning the Beneficiary. To the extent the Beneficiary hereunder is Union Bank of California, N.A., as Indenture Trustee, or any successor thereto, all provisions of the Indenture relating to the rights, powers, privileges and protections of the Indenture Trustee thereunder shall apply with equal force and effect to all actions taken by the Indenture Trustee as Beneficiary in connection with this Deed of Trust. No duties or obligations shall be imposed upon Indenture Trustee as Beneficiary beyond those contained in the Indenture. It is understood and acknowledged that the Indenture Trustee as Beneficiary is not required to exercise any rights or discretion granted to it hereunder and all rights to consent, direct and approve matters granted herein to the Beneficiary are subject to the provisions of the lndenture and the rights afforded to the Indenture Trustee thereunder. The foregoing provision shall be binding upon and shall obligate the Trustor and any • '} successors or other transferees under this Deed of Trust. TRUSTOR ACKNOWLEDGES RECEIPT OF A TRUE COPY OF THIS DEED OF TRUST WITHOUT CHARGE. • TRUSTOR PLEASE NOTE: UPON THE OCCURRENCE OF A DEFAULT, CALIFORNIA PROCEDURE PERMITS TRUSTEE TO SELL THE TRUST ESTATE AT A SALE HELD WITHOUT SUPERVISION BY ANY COURT AFTER EXPIRATION OF A PERIOD PRESCRIBED BY LAW. UNLESS YOU PROVIDE AN ADDRESS FOR THE GIVING OF NOTICE, YOU MAY NOT BE ENTITLED TO NOTICE OF THE COMMENCEMENT OF ANY SALE PROCEEDINGS. BY EXECUTION OF THIS DEED OF TRUST, YOU CONSENT TO SUCH PROCEDURE. BENEFICIARY URGES YOU TO GIVE PROMPT NOTICE OF ANY CHANGE IN YOUR ADDRESS SO THAT YOU MAY RECEIVE PROMPTLY ANY NOTICE GIVEN PURSUANT TO THIS DEED OF TRUST. RVPUB\FBAUM\709450.1 26 IN WITNESS WHEREOF, Trustor has executed this Deed of Trust With Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing as of the day and year first above written. MILLENNIUM HOUSING CORPORATION By: *Gge rk RVPUB\FBAUM\709450.1 27 STATE OF CALIFORNIA ) ) ss. COUNTY OF RIVERSIDE ) On May 30, 2006, before me, Evelyn Corselli, A NOTARY PUBLIC, personally appeared GEORGE TURK [�] personally known to me OR ❑ proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature of Notary [SEAL] MM EVELYN CORSELLI COMM. #1623014 NOTARY PUBLIC - CALIFORNIA RIVER31DE COUNTY Comm. Etcpkee October 30, POOR i RV PUB\FBAUM1709450.1 EXHIBIT A LEGAL DESCRIPTION OF LAND PARCEL 3 OF PARCEL MAPS, IN THE CITY OF SAN JUAN CAPISTRANO, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 62, PAGE 19 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. SAID LAND IS ALSO BEING A PORTION OF THE FOLLOWING DESCRIBED PARCELS "A" AND "B" PARCEL A: BEING THOSE PORTIONS OF LOTS 60,61 AND 62 OF TRACT NO. 103, IN THE CITY OF SAN JUAN CAPISTRANO, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11, PAGES 29 THROUGH 33 OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS: BEGINNING AT A POINT IN THE NORTHWESTERLY LINE OF SAID LOT 61, LYING NORTH 210 40'07" EAST 4.78 FEET FROM THE WESTERLY CORNER OF SAID LOT 61; THENCE NORTH 89° 58' 18" EAST 564.75 FEET TO THE WESTERLY LINE OF THE -`' LAND DESCRIBED AS PARCEL 101, IN THE DEED TO THE ORANGE COUNTY FLOOD CONTROL DISTRICT, RECORDED JUNE 28, 1963 IN BOOK 6609, PAGE 371 OF OFFICIAL RECORDS OF SAID COUNTY; THENCE ALONG SAID WESTERLY LINE, SOUTH 30 04' 46" WEST 1045.00 FEET TO A POINT LYING NORTH 30 04' 46" EAST 583.39 FEET FROM THE SOUTHERLY LINE OF SAID LOT 62; THENCE SOUTH 89° 58' 18" WEST 548.34 FEET; THENCE NORTH 44° 01' 54" WEST 687.07 FEET TO THE NORTHWESTERLY LINE OF SAID LOT 62; THENCE ALONG SAID LAST MENTIONED NORTHWESTERLY LINE, NORTH 42° 14' 44" EAST 743.84 FEET TO THE NORTHEASTERLY LINE OF SAID LOT 62; THENCE ALONG SAID NORTHEASTERLY LINE, SOUTH 700 07'46" EAST 16.40 FEET TO SAID NORTHWESTERLY LINE OF LOT 61; THENCE ALONG SAID LAST MENTIONED NORTHWESTERLY LINE, NORTH 211 40' 07" EAST 4.78 FEET TO THE POINT OF BEGINNING. PARCEL B: BEING THOSE PORTIONS OF LOTS 60 AND 62 OF TRACT NO. 103, IN THE CITY OF SAN JUAN CAPISTRANO, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11, PAGES 29 THROUGH 33 OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF THE WESTERLY LINE OF THE LAND DESCRIBED AS PARCEL 101, IN THE DEED TO ORANGE COUNTY FLOOD CONTROL RVPUB\FBAUM\709450.1 A-1 DISTRICT, RECORDED JUNE 28, 1963 IN BOOK 6609, PAGE 371 OF OFFICIAL RECORDS OF SAID COUNTY, WITH THE SOUTHERLY LINE OF SAID LOT 62; THENCE ALONG SAID WESTERLY LINE, NORTH 3° 04' 46" EAST 583.39 FEET; THENCE SOUTH 890 58' 18" WEST 548.34 FEET; THENCE NORTH 44° 01' 54" WEST 687.07 FEET TO THE NORTHWESTERLY LINE OF SAID LOT 62; THENCE ALONG SAID NORTHWESTERLY LINE, SOUTH 42° 14'44" WEST 290.73 FEET AND SOUTH 36- 58' 16" WEST 302.19 FEET TO THE SOUTHWESTERLY LINE OF SAID LOT 62; THENCE ALONG SAID SOUTHWESTERLY LINE, SOUTH 440 01'54" EAST 862.34 FEET TO SAID SOUTHERLY LINE; THENCE ALONG SAID SOUTHERLY LINE, NORTH 89° 58' 18" EAST 772.38 FEET TO THE POINT OF BEGINNING. APN: 121-171-29 and 121-171-30 RVPUB\FBAUM\709450.1 A-2 • EXHIBIT B 1] SCHEDULE OF LEASES None. All tenants are month-to-month agreements. RVPUB\FBAUM\709450.1 B-1 EXHIBIT C SCHEDULE OF COACHES OWNED BY TRUSTOR Space No. 101 rental will be sold eventually 153 rental will be sold eventually 76 Employee Home 205 Employee Home RVPUB\FBAUM\709450.1 C-1 Coach License No. 261472XX/XXU S9143X/U GW20CALSC8931A/B S9769XX/XXU BEST BEST & KRIEGER LLP A CALIFORNIA WMRED WBILRY PARTN£RSMIP INCLUDING PROFE5510NAL CORPORAMON5 INDIAN WELLS LAWYERS SACRAMENTO (760) 568-261 1 3750 UNIVERSITY AVENUE (91 5) 325-4000 - POST OFFICE BOX 1028 - IRVINE RIVERSIDE, CALIFORNIA 92502-1028 SAN DIEGO (949) 263-2500 (951) 686-1450 (519) 525-1300 - (95 1) 586-3083 FAX - ONTARIO BBKLAW,COM WALNUT CREEK (909) 989-8584 (925) 977-3300 August 8, 2006 City of San Juan Capistrano 32400 Paseo Adelanto San Juan Capistrano, CA 92675 Attention: Cindy Russell Administrative Services Director Re: $29,660,000 Independent Cities Lease Finance Authority Mobile Home Park Revenue Bonds (San Juan Mobile Estates) Series 2006A and $9,765,000 Independent Cities Lease Finance Authority Mobile Home Park Subordinate Revenue Bonds (San Juan Mobile Estates) Series 2006B and $485,000 Independent Cities Lease Finance Authority Mobile Home Park Subordinate Revenue Bonds (San Juan Mobile Estates) Taxable Series 2006C Dear Cindy: Enclosed for your files please find originals of the following documents signed by the City of San Juan Capistrano: Associate Membership Agreement between Independent Cities Lease Finance Authority and the City of San Juan Capistrano Supplemental Regulatory Agreement and Declaration of Restrictive Covenants Administration and Oversight Agreement. Also enclosed are copies of following documents: - Indenture of Trust - Loan Agreement - Regulatory Agreement. - Deed of Trust Very truly yours, u'-'� /�aet4n Francis J. Baum of Best Best & Krieger LLP encls. RVPUBTBAUW718253.1 5/2/2006 E3 AGENDA REPORT TO: Dave Adams, City Manager FROM: Cindy Russell, Administrative Services Director SUBJECT: Consideration of an Associate Membership Agreement with the Independent Cities Lease Finance Authority (ICLFA) and the Issuance of Mobile Home Park Revenue Bonds by ICLFA to Finance the San Juan Mobile Estates Project (Millennium Housing Corporation) RECOMMENDATION: By Motion, 1. Adopt a resolution approving an Associate Membership Agreement with the Independent Cities Lease Finance Authority, a Supplemental Regulatory Agreement and an Administration and Oversight Agreement with respect to the San Juan Mobile Estates acquisition, and 2. Adopt a resolution approving the Issuance of Mobile Home Park Revenue Bonds by the Independent Cities Lease Finance Authority for the San Juan Mobile Estates acquisition. SITUATION: Summary and Recommendation: The residents of the San Juan Mobile Home Estates Mobile Home Park (the "Park Residents") have been working with Millennium Housing Corporation (Millennium), a California non-profit public benefit corporation to acquire the park from the current private owner. The Park Residents have determined that ownership by Millennium as opposed to a private owner will allow them among other things to have more control over the operations and management of their park. Additionally, Millennium has agreed that the City's Rent Control Ordinance would be the governing guideline for rent increases in this park for the term of the regulatory agreement which is 35 years. The Park Residents and Millennium have requested the City of San Juan Capistrano join a state-wide joint powers agency, the Independent Cities Lease Finance Authority (ICLFA) so that financing through the use of tax-exempt revenue bonds can be accomplished. These bonds would be issued by the ICLFA and the City would have no financial obligations or risk relating to the financing. Also, this financing would not have any affect on the City's future financings or ratings. This arrangement is similar to the Agenda Report Page 2 May 2, 2006 arrangement approved for the construction of the Seasons Apartment Complex by Kaufman & Broad in 1995. Staff recommends the City Council adopt a resolution approving an Associate Membership Agreement with the ICLFA, a Supplemental Regulatory Agreement and an Administration and Oversight Agreement with respect to the San Juan Mobile Estates acquisition and adopt a resolution approving the Issuance of Mobile Home Park Revenue Bonds by the ICLFA for the San Juan Mobile Estates acquisition. Background: In March 2005, George Turk of Millennium and his associate Pam Newcomb of Kinsell, Newcomb & deDios, Inc. (KN&D) submitted a proposal to City staff regarding the acquisition of San Juan Mobile Estates Mobile Home Park (SJME) by Millennium. Staff met with Millennium on May 10, 2005 to review their proposal. Their proposal is to acquire the park from the private property owner and manage the park through the non- profit corporation through the issuance of tax-exempt bonds. The initial proposal requested financial participation (up to $2 million of housing set-aside funds) by the Community Redevelopment Agency (the "Agency") along with the City facilitating a tax- exempt financing and providing a letter of condemnation to the property owner for tax purposes. Since the project did not provide any new affordable housing stock in our community, it did not provide any benefit to the community as a whole. Therefore, staff told Millennium that the neither the City nor the Agency were interested in participating financially in the project. Even though the Agency would not be participating financially, Millennium still requested that the City facilitate a tax-exempt financing and provide the letter of condemnation. In order to consider this request, City staff wanted to assure that the project was financially sound and that a majority of the Park Residents supported the acquisition. In November 2005, the City was contacted the Park Residents representative board (the "Board") requesting a meeting to discuss the acquisition. At that meeting, Millennium and the Board indicated that with the use of tax-exempt financing and a letter of condemnation to the property owner they would be able to put the project together. They requested the City take the necessary steps of joining ICLFA and authorizing the issuance of tax-exempt financing through ICLFA to facilitate their project. Although the City would have no financial obligation, it was agreed that a pro forma of the proposed project would be prepared and reviewed by the City's Financial Advisor, Fieldman, Rolapp & Associates (FRA) to determine if the project was financially viable over the long-term. FRA completed its evaluation and found the project to be financially viable, however City staff and FRA wanted to be sure that the Park Residents had sufficient information regarding the deal points prior to making their final decision. City staff and FRA met with the Board and Millennium to flush out a number of questions and issues concerning the project. Upon completion of these meetings, the City notified RESOLUTION NO. 06- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN JUAN CAPISTRANO, CALIFORNIA, APPROVING AN ASSOCIATE MEMBERSHIP AGREEMENT WITH THE INDEPENDENT CITIES LEASE FINANCE AUTHORITY, A SUPPLEMENTAL REGULATORY AGREEMENT AND AN ADMINISTRATION AND OVERSIGHT AGREEMENT WITH RESPECT TO THE SAN JUAN MOBILE ESTATES WHEREAS, certain cities of the State of California (collectively, the "Members") have entered into a Joint Powers Agreement Creating the Independent Cities Lease Finance Authority (the "Joint Powers Agreement'), establishing the Independent Cities Lease Finance Authority (the "Authority") and prescribing its purposes and powers, and providing, among other things, for associate members of the Authority (an "Associate Member'); WHEREAS, the Authority has been formed for the purpose, among others, of assisting its Members and Associate Members in the raising of capital to finance the capital improvement needs of Local Agencies (as defined in the Joint Powers Agreement), to provide for home mortgage financing with respect to those Members or Associate Members that are either a city or a county of the State of California, to provide financing in connection with the improvement, construction, acquisition, creation, rehabilitation and preservation of affordable housing within the boundaries of the Members and Associate Members, and to provide financing in accordance with the provisions of applicable law in connection with other projects and programs that are in the public interest and which benefit Members and Associate Members including making loans to tax-exempt organizations from the proceeds of mortgage revenue bonds to finance the acquisition of multi -family rental housing, including mobile home parks, under the provisions of Chapter 8 of Part 5 of Division 31 (commencing with Section 52100) of the Health and Safety Code; WHEREAS, the City of San Juan Capistrano (the "City") desires to become an Associate Member of the Authority as provided in the Associate Membership Agreement, in the form on file with the City Clerk; and WHEREAS, the Authority proposes to issue its Mobile Home Park Revenue Bonds 2006 Series A, 2006 Series B and 2006 Taxable Series C (the "Bonds"); and WHEREAS, the proceeds of the Bonds, if any are issued, will be loaned to Millennium Housing Corporation, a California nonprofit corporation (the "Owner") for the purpose of financing the acquisition and improvement of a 312 -space mobile home park known as the San Juan Mobile Estates located at 32302 Alipaz Street in the City (the "Project"); and ATTACHMENT WHEREAS, inconsideration of the Cityjoining the Authority, the Owner has agreed to enter into a Supplemental Regulatory Agreement and Declaration of Restrictive Covenants with the City (the "Supplemental Regulatory Agreement") providing for certain additional affordable housing requirements for the Project, which shall be administered pursuant to an Administration and Oversight Agreement, said Agreements being in the forms on file with the City Clerk; NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of San Juan Capistrano does hereby: Section 1. Approval of an Associate Membership Agreement (Exhibit A). This City Council hereby approves the City's membership in the Authority as an Associate Member and authorizes the Mayor or the Mayor Pro Tem to execute and the City Clerk to attest the Associate Membership Agreement, in substantially the form on file with the City Clerk, pursuant to which the City shall become an Associate Member of the Authority. The Mayor, Mayor Pro Tem, City Manager, City Clerk and any other officers of the City, are hereby authorized and directed to take all actions and do all things necessary or desirable hereunder with respect to the Associate Membership Agreement, including but not limited to, the execution and delivery of any an all agreements, certificates, instruments and other documents which they, or any of them, may deem necessary or desirable and not inconsistent with the purposes of this Resolution. Section 2. Approval of the Supplemental Regulatory Agreement (Exhibit B) and Administration and Oversight Agreement (Exhibit C). The form of the Supplemental Regulatory Agreement and Declaration of Restrictive Covenants (the "Supplemental Regulatory Agreement") by and between the City and the Owner presented to this meeting and imposing certain restrictions in the Project is hereby approved and any of the Mayor, Mayor Pro Tem or City Manager (each an "Authorized Officer') are, and each of them is, hereby authorized and directed, for and in the name and on behalf of the City, to execute the Supplemental Regulatory Agreement in substantially the form hereby approved, with such additions or changes therein as the Authorized Officer executing the same may approve, such approval to be conclusively evidenced by the execution and delivery thereof. Any of the Authorized Officers are hereby authorized and directed to cause the Supplemental Regulatory Agreement to be recorded in the real estate records of the County of Orange on a subordinate basis to the Regulatory Agreement and Deed of Trust relating to the Bonds. Any of the Authorized Officers are further authorized to and directed, for and in the name and on behalf of the City, to execute the Administration and Oversight Agreement by and among the City, the Authority, the Owner and the Oversight Agent named therein and relating to the administration of the Supplemental Regulatory Agreement and the Regulatory Agreement. Section 3. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. PASSED, APPROVED, AND ADOPTED this 2nd day of May 2006. DAVID M. SWERDLIN, MAYOR ATTEST: MARGARET R. MONAHAN, CITY CLERK ASSOCIATE MEMBERSHIP AGREEMENT by and between the INDEPENDENT CITIES LEASE FINANCE AUTHORITY and the CITY OF SAN JUAN CAPISTRANO THIS ASSOCIATE MEMBERSHIP AGREEMENT, dated as of May 1, 2006, by and between THE INDEPENDENT CITIES LEASE FINANCE AUTHORITY (the "Authority") and the CITY OF SAN JUAN CAPISTRANO, duly organized and existing under the laws of the State of California (the "City"); WITNESSETH: WHEREAS, certain cities of the State of California (collectively, the "Members") have entered into a Joint Powers Agreement Creating the Independent Cities Lease Finance Authority (the "Agreement'), establishing the Authority and prescribing its purposes and powers, and providing, among other things, for associate members of the Authority (an "Associate Member"); WHEREAS, the Authority has been formed for the purpose, among others, of assisting its Members and Associate Members in the raising of capital to finance the capital improvement needs of Local Agencies (as defined in the Joint Powers Agreement), to provide for home mortgage financing with respect to those Members or Associate Members that are either a city or a county of the State of California, to provide financing in connection with the improvement, construction, acquisition, creation, rehabilitation and preservation of affordable housing within the boundaties of the Members and Associate Members, and to provide financing in accordance with the provisions of applicable law in connection with other projects and programs that are in the public interest and which benefit Members and Associate Members including making loans to tax-exempt organizations from the proceeds of mortgage revenue bonds to finance the acquisition of multi -family rental housing, including mobilehome parks, under the provisions of Chapter 8 of Part 5 of Division 31 (commencing with Section 52100) of the Health and Safety Code (the "Nonprofit Financing Law"); WHEREAS, the City desires to become an Associate Member of the Authority; WHEREAS, the Board of Directors of the Authority has determined that the City should become an Associate Member of the Authority; NOW, THEREFORE, in consideration of the above premises and of the mutual promises herein contained, the Authority and the City do hereby agree as follows: Section I. Associate Member Status. The City is hereby made an Associate Member of the Authority for all purposes of the Agreement and the Bylaws of the Authority, the provisions RVPUBT13AUvn710435.1 1 EXHIBIT A of which are hereby incorporated herein by reference. From and after the date of execution and delivery of this Associate Membership Agreement by the City and the Authority, the City shall be and remain an Associate Member of the Authority. Section 2. Restrictions and Rights of the City. The City shall not have the right, as an Associate Member of the Authority, to vote on any action taken by the Board of Directors or by the Authority. In addition, no officer, employee or representative of the City shall have any right to become an officer or director of the Authority. Section 3. No Obligations of the City. The debts, liabilities and obligations of the Authority shall not be the debts, liabilities and obligations of the City. Section 4. Indemnification by Owner. The Authority shall ensure that the legal documents relating to any bonds issued to finance projects within the jurisdiction of the City shall provide that the owner of any such project shall indemnify, hold harmless and defend the City and each of its officers, officials, employees and agents from any and all loss, liability, fines, penalties, forfeitures, costs, expenses and damages (whether imposed by statute, in contract, tort or strict liability) incurred by the City and from any and all claims, demands and actions in law or equity (including attorney's fees and litigation expenses) arising or alleged to have arisen directly or indirectly out of performance by the City of this Agreement. Section 5. Execution of the Agreement. Execution of this Associate Membership Agreement shall satisfy the requirements of Article 27 of the Agreement and Article XI of the Bylaws of the Authority for participation by the City in all programs and other undertakings of the Authority, including, without limitation, any Home Mortgage Financing Program (as defined in the Agreement), any financing under the Nonprofit Financing Law, any undertaking to finance the acquisition, construction, installation and/or equipping of public capital improvements, and any other financing program. RVPURTBAUM1710435.1 2 IN WITNESS WHEREOF, the parties hereto have caused this Associate Membership Agreement to be executed and attested by their proper officers thereunto duly authorized, on the day and year fust set forth above. INDEPENDENT CITIES LEASE FINANCE AUTHORITY President Attest: Secretary CITY OF SAN JUAN CAPISTRANO M Attest: City Clerk 0XV98 31W-YANb&IP_k7111 Mayor RECORDING REQUESTED BY AND ) WHEN RECORDED RETURN TO: ) BEST BEST & KRIEGER LLP ) 3750 University Avenue, 3d Floor ) Riverside, CA 92501 ) Attention: Francis J. Baum, Esq. ) 1 [Space above for Recorder's use] SUPPLEMENTAL REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS By and Between the CITY OF SAN JUAN CAPISTRANO and MILLENNIUM HOUSING CORPORATION, as Owner Dated as of 1, 2006 EXHIBIT B RVPUBTRAUNC708986.1 TABLE OF CONTENTS Page Section 1. Definitions and Interpretation.................................................................... 1 Section 2. Membership in Authority; Rental Assistance Fund ................................... 3 Section 3. Project Requirements................................................................................. 4 Section 3A. Property Management and Maintenance................................................... 5 Section 4. Qualified Residents.................................................................................... 6 Section 5. Repair and Replacement Fund................................................................... 9 Section 6. Other Covenants......................................................................................... 9 Section7. Indemnification.......................................................................................... 9 Section 8. Consideration........................................................................................... 10 Section9. Reliance.................................................................................................... 10 Section 10. Sale or Transfer of the Project; Option to Purchase ................................ 10 Section11. Term......................................................................................................... 11 Section 12. Covenants to Run With the Land............................................................. 12 Section 13. Burden and Benefit.................................................................................. 12 Section 14. Uniformity; Common Plan ...................................................................... 12 Section 15. Enforcement............................................................................................. 12 Section 16. Recording and Filing................................................................................ 13 Section 17. Payment of Fees....................................................................................... 13 Section 1.8. Governing Law........................................................................................ 13 Section19. Amendments............................................................................................ 13 Section20. Notice.......................................................................................................13 Section 21. Severability.............................................................................................. 14 Section 22. Multiple Counterparts.............................................................................. 14 Section 23. Subordination........................................................................................... 14 EXHIBIT A - Legal Description................................................................................................. A-1 EXHIBIT B — Rental Control Ordinance.....................................................................................B-1 RVPUBT13AUM708986.1 -i_ THIS SUPPLEMENTAL REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (the "Regulatory Agreement"), made and entered into as of 1, 2006, by and between the City of San Juan Capistrano, a public body, corporate and politic (the "City"), and Millennium Housing Corporation, a California nonprofit corporation, as the owner of the property described in Exhibit A attached hereto (the "Owner"): Cra 11►i113.10M WHEREAS, the Owner is acquiring the property described on Exhibit A attached hereto and the improvements located thereon, consisting of a 312 -space mobile home park known as "San Juan Mobile Estates" (the "Project"), with a loan to it from the Independent Cities Lease Finance Authority (the "Authority") from the proceeds of the Authority's Mobile Home Park Revenue Bonds, Series A, Series B and Taxable Series C (collectively, the "Authority Bonds"); and WHEREAS, in connection with the issuance of the Authority Bonds, the Owner, the Authority and Union Bank of California, N.A., as trustee for the Authority Bonds (the "Authority Bond Trustee") have entered into a Regulatory Agreement and Declaration of Restrictive Covenants dated as of 1, 2006 (the "Authority Regulatory Agreement") which is being recorded in the real estate records of Orange County as a covenant running with the real property described in Exhibit A (the "Property"); and WHLREAS, in consideration of the City joining the Authority as an Associate Member in order to enable the Authority to provide financing to the Owner for the Project, the Owner and the City are entering into this Supplemental Regulatory Agreement and wish it to be recorded as a covenant running with the Property on a subordinate basis to the Authority Regulatory Agreement and the Deed of Trust referred to herein; NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth herein, and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the City and the Owner hereby agree as follows: Section 1. Definitions and Interpretation. The following terms shall have the respective meanings assigned to them in this Section 1 unless the context in which they are used clearly requires otherwise: "Adjusted Income" — The total anticipated annual income of all persons in a household, as calculated in accordance with 25 California Code of Regulations Section 6914 or pursuant to a successor State housing program that utilizes a reasonably similar method of calculation of adjusted income. In the event that no such program exists, the City shall provide the Owner with a reasonably similar method of calculation of adjusted income as provided in said Section 6914. "Administration Agreement'- The Administration and Oversight Agreement, dated as of _ 1, 2006, by and among the Authority, the City, the Owner and the Oversight Agent. "Area" - The Primary Metropolitan Statistical Area in which the Project is located. "Authority" - The Independent Cities Lease Finance Authority. RVPUBTBAUM1708986.1 "Authority Bonds" - Collectively, the Authority's Mobile Home Park Revenue Bonds (San Juan Mobile Estates) Series 2006A, Mobile Home Park Subordinate Revenue Bonds (San Juan Mobile Estates) Series 2006B and Mobile Home Park Subordinate Revenue Bonds (San Juan Mobile Estates) Taxable Series 2006C issued pursuant to an Indenture of Trust between the Authority and the Authority Bond Trustee and dated as of 1, 2006. "Authority Bond Trustee" - Union Bank of California, N.A., as trustee for the Authority Bonds. "Certificate of Continuing Program Compliance" - The certificate with respect to the Project to be filed by the Owner with the Authority, the City, the Oversight Agent and the Authority Bond Trustee which shall be substantially in the form attached to the Authority Regulatory Agreement as Exhibit C. "City" - The City of San Juan Capistrano. "County" - The County of Orange. "Deed of Trust" - The Deed of Trust defined in the Indenture. "Income Certification" - The Income Computation and Certification attached to the Authority Regulatory Agreement as Exhibit B. "Lower Income Residents" - An individual or family household that, on the later of: (i) the date of this Agreement, or (ii) the date of the Lower Income Resident's initial occupancy of the Park, has an Adjusted Income that does not exceed the qualifying limits for lower income households, adjusted for actual household size, as established and amended from time to time pursuant to Section 8 for the United States Housing Act of 1937, and as published by the State of California Department of Housing and Community Development. "Lower Income Spaces" - The spaces in the Project designated for occupancy by Lower Income Residents pursuant to Section 4(a) of this Supplemental Regulatory Agreement. "Median Income for the Area" - The median gross yearly income adjusted for household size for the Area, as published from time to time by the State. In the event that such income determinations are no longer published, or are not updated for a period of at least eighteen (18) months, the City shall provide the Owner with other income determinations which are reasonably similar with respect to methods of calculation to those previously published by the State. "Oversight Agent" - the Oversight Agent appointed under the Administration Agreement, which initially shall be Wolf & Company Inc. "Project Restriction Period" - The period ending 35 years from the execution date of this Supplemental Regulatory Agreement. "Qualified Residents" - means Very Low Income Residents and Lower Income Residents. "Qualified Space" - a Very Low Income Space or a Lower Income Space. RVPUBTRAUNA708986.1 2 "Rental Assistance Fund" - The fund by that name established pursuant to the Indenture and to be administered pursuant to Section 2(b) hereof. "Space" - A mobile home space within the Project upon which a mobile home may be placed "Very Low Income Residents" - Individuals or families with an Adjusted Income which does not exceed the qualifying limits for very low income households, adjusted for actual household size, as established and amended from time to time pursuant to Section 8 of the United States Housing Act of 1937, and as published by the State of California Department of Housing and Community Development. "Very Low Income Spaces" - The Spaces in the Project designated for occupancy by Very Low Income Residents pursuant to Section 4(a) of this Supplemental Regulatory Agreement. Such terms as are not defined herein shall have the meanings assigned to them in the Indenture. Unless the context clearly requires otherwise, as used in this Supplemental Regulatory Agreement, words of the masculine, feminine or neuter gender shall be construed to include each other gender when appropriate and words of the singular number shall be construed to include the plural number, and vice versa, when appropriate. This Supplemental Regulatory Agreement and all the terms and provisions hereof shall be construed to effectuate the purposes set forth herein and to sustain the validity hereof. The defined terms used in the preamble and recitals of this Supplemental Regulatory Agreement have been included for convenience of reference only, and the meaning, construction and interpretation of all defined terms shall be determined by reference to this Section 1 notwithstanding any contrary definition in the preamble or recitals hereof. The titles and headings of the sections of this Supplemental Regulatory Agreement have been inserted for convenience of reference only, and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof or be considered or given any effect in construing this Supplemental Regulatory Agreement or any provisions hereof or in ascertaining intent, if any question of intent shall arise. Section 2. Membership in Authority; Rental Assistance Fund. (a) City Membership in Authority. In consideration of the Borrower entering into this Supplemental Regulatory Agreement, the City has agreed to become an Associate Member of the Authority in order to enable the Authority to provide financing to the Owner for the Project. (b) Rental Assistance Fund. (i) The Owner shall establish with the Authority Bond Trustee the Rental Assistance Fund, which shall be held by the Authority Bond Trustee pursuant to Section 5.18 of the Indenture. After initial funding of the Rental Assistance Fund, the Owner shall thereafter fund additional deposits to the Rental Assistance Fund from moneys in the Surplus fund under the Indenture so as to maintain sufficient moneys in the Rental Assistance Fund to meet the Owner's obligations under this Section 2(b). (ii) The Owner is authorized to make monthly withdrawals and utilize moneys in the Rental Assistance Fund to provide a subsidy for rental payments to be made by tenants in the Project in the manner and in the amounts set forth as follows: RVPU13\FBAUN1\708986.1 (a) Upon close of escrow ("Close of Escrow"), initial space rent for each mobilehome space in the Project occupied by a resident at that time will be $805 per month (the "Rent Cap"). The Rent Cap for residents that do not currently rent space in the Project will be adjusted annually after the Close of Escrow to the rent permitted under the Rent Control Ordinance of the City of San Juan Capistrano (the "Rent Control Ordinance"). The Rent Cap for residents that currently rent space in the Project or rent space in the Project within seven days of the Close of Escrow ("Current Residents") shall remain at $805 per month until the second anniversary of the Close of Escrow, and shall thereafter be adjusted annually to the rent permitted under the Rent Control Ordinance (said amount, as adjusted from time to time, being referred to herein as the "Space Rent"). (b) Notwithstanding the Space Rent set forth in (a) above, every Current Resident will pay only that amount permitted as rent under the Rent Control Ordinance and any difference will be provided as assistance from the Rental Assistance Fund such that the total of the rent actually paid by such Current Resident, and the amount paid as rental assistance will equal the Space Rent. This rental subsidy for Current Residents will continue to be paid from the Rental Assistance Fund as long as the Current Resident resides in the Project. (c) All rental assistance will be contingent upon the Current Resident applicant's compliance with park rules, including the requirement to provide the Annual Income Certification needed for the Owner's compliance with the bond documents; failure to comply with park rules or the annual certification requirement, after written notice and the expiration of a reasonable cure period, may result in a suspension of the rental assistance, such suspension to continue until the Current Resident is again in compliance. (d) The Owner shall not seek to evict Current Residents who, while otherwise complying with park rules, cannot pay the subsidized rents; in such cases, the Owner shall use park surplus funds or the Rental Assistance Fund to reasonably further subsidize or defer a portion of the rent, depending upon individual circumstances, but the Owner shall not be obligated to subsidize or defer sums in excess of the amount that would reduce the rent payable by a Current Resident below the rent that would be payable by that Current Resident under the Rent Control Ordinance had the Owner never purchased the Project. Owner shall also assist any Current Resident brought to the Owner's attention by the City, to the extent such assistance will not prevent the Owner from meeting its other obligations under its various bond agreements. Section 3. Project Requirements. The Owner hereby represents, as of the date hereof, and covenants, warrants and agrees as follows: (a) The Project is being owned and operated for the purpose of providing residential rental housing, consisting of one mobile home Space for each household, together with related facilities. (b) All of the mobile homes in the Project will contain separate facilities for living, sleeping, eating, cooking and sanitation, including a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking range, refrigerator and sink. RVPUBTBAUW708986.1 4 (c) All of the Spaces will be available for rental on a continuous basis to members of the general public, and the Owner will not give preference to any particular class or group in renting the Spaces in the Project, except to the extent that Spaces are required to be leased or rented to Qualified Residents. (d) The Project comprises a single geographically and functionally integrated project for residential rental property, as evidenced by the ownership, management, accounting and operation of the Project. (e) There shall be no discrimination against or segregation of any person or group of persons on account of race, color, religion, age, sex, marital status, ancestry, national origin, source of income (e.g. AFDC or SSI) or disability in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Project nor shall the transferee or any person claiming under or through the transferee, 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 of the Project. (f) The Very Low Income Spaces and the Lower Income Spaces shall be intermingled with, and shall be of comparable quality to, all other Spaces in the Project. Tenants in all Spaces shall have equal access to and enjoyment of all common facilities of the Project. (g) In the aggregate, no more than two persons per bedroom, plus one person shall occupy any Space in the Project. For example, with respect to a two bedroom mobilehome, maximum occupancy shall be 5 persons. (h) The Owner will accept as tenants, on the same basis as all other prospective tenants, persons who are recipients of federal certificates for rent subsidies pursuant to the existing housing program under Section 8 of the United Stated Housing Act, or its successor. The Owner shall not apply selection criteria to Section 8 certificate or voucher holders that is more burdensome than criteria applied to all other prospective tenants, nor shall the Owner apply or permit the application of management policies or lease provisions with respect to the Project which have the effect of precluding occupancy of Spaces by such prospective tenants. (i) The Owner agrees to honor all existing lease agreements in effect on the date of the Agreement, including any provisions contained therein with respect to rent adjustments, or if requested by a tenant who is a party to such a lease agreement, to replace such lease agreement with a month-to-month lease arrangement, subject to the Rent Control Ordinance. Section 3A. Property Management and Maintenance. The following provisions shall apply during the term of this Supplemental Regulatory Agreement. (a) Management Responsibilities. The Owner is responsible for all management functions with respect to the Project including without limitation the selection of tenants, certification and recertification of household size and income, evictions, collection of rents and deposits, maintenance, landscaping, routine and extraordinary repairs, replacement of capital items, and security. The City shall not have responsibility over management of the Project. The Owner may delegate its duties under this Section 3A to a property management company. A resident manager shall also be required. In no instance shall the Owner delegate or forego its responsibility to manage and operate the Project in the manner set forth in this Supplemental Regulatory Agreement and the Loan Agreement. RVPUBIFBAUM 708986.1 5 (b) Management and Operation of Project. The Owner acknowledges that there exists a Residents Association for the Project and a governing board thereof (the "Resident Association Board"). The Owner agrees that the Resident Association Board may provide tenant comment and input to the Owner in the management and operation of the Project. The Owner or its representative or agent agrees to meet with any such Resident Association Board at least twice a year, or at such other frequency as agreed by the Resident Association Board and the Owner, to receive comments and recommendations with respect to Project operation and management. The Owner further agrees to provide regular reports (at least quarterly, or at such other intervals as agreed to by the Owner and the Resident Association Board) relating to the operation of the Project to the Resident Association Board. While the Resident Association Board shall have no decision-making authority with respect to the management and operation of the Project, the Owner agrees to use its best efforts to implement recommendations of the Resident Association Board that can reasonably be implemented by the Owner and that will not cause the Owner, in its reasonable judgment, to be unable to perform its obligations under this Agreement, the Authority Regulatory Agreement, the Loan Agreement and the Deed of Trust. The Owner further agrees that it shall not refuse any good -faith request by the Resident Association Board for the addition, deletion or amendment of a Project rule or regulation absent a good -faith, business reason for doing so. The Owner may request all residents of the Project to vote on any such addition, deletion or amendment. The Owner further agrees to review and take such action as it determines to be appropriate with respect to any documented complaints about Project management presented to it by the Resident Association Board. (c) Property Maintenance. The Owner agrees, for the entire Term of this Supplemental Regulatory Agreement, to maintain all common area interior and exterior improvements and common buildings on the Project (exclusive of the mobile homes and tenant spaces), including landscaping and common buildings on the Project in good condition and repair (and, as to landscaping, in a healthy condition) and in accordance with all applicable laws, rules, ordinances, orders and regulations of all federal, state, county, municipal, and other governmental agencies and bodies having or claiming jurisdiction and all their respective departments, bureaus, and officials. The City places prime importance on quality maintenance to ensure that all City -assisted affordable housing projects within the City are not allowed to deteriorate due to below-average maintenance. Section 4. Qualified Residents. The Owner hereby represents, as of the date hereof, and warrants, covenants and agrees as follows: (a) During the Project Requirement Period (a) not less than twenty percent (20%) of the Spaces in the Project shall be designated as Very Low Income Spaces and shall be continuously occupied by Very Low Income; and (b) not less than thirty percent (30%) of the Spaces in the Project shall be designated as Lower Income Spaces and shall be continuously occupied by Lower Income Residents. The monthly rent charged for one-half of the Very Low Income Spaces (i.e., 10% of the Spaces in the Project) shall be not greater than as follows: (A) where a Very Low Income Resident is both the registered and legal owner of the mobile home and is not making mortgage payments for the purchase of that mobile home, the total rental charge for occupancy of the Space (excluding a reasonable allowance for other related housing costs determined at the time of acquisition of the RVPU13\PBAUW08986.1 6 Project by the Owner and excluding any supplemental rental assistance from the State, the federal government, or any other public agency to the Very Low Income Resident, on behalf of the Space and the mobile home) shall not exceed one -twelfth of 30 percent of 50 percent of Median Income for the Area, adjusted for household size in the manner set forth below. (B) where a Very Low Income Resident is the registered owner of the mobile home and is making mortgage payments for the purchase of that mobile home, the total rental charge for occupancy of the Space (excluding any charges for utilities and storage and excluding any supplemental rental assistance from the State, the federal government, or any other public agency to the Very Low Income Resident, or on behalf of the Space and mobile home), shall not exceed one -twelfth of 15 percent of 50 percent, of Median Income for the Area, as adjusted for household size in the manner set forth below. (C) where a Very Low Income Resident rents both the mobile home and the Space occupied by the mobile home, the total rental payments paid by the Very Low Income Resident on the mobile home and the Space occupied by the mobile home (excluding any supplemental rental assistance from the State, the federal government, or any other public agency to that Very Low Resident or on behalf of that Space and mobile home) shall not exceed one -twelfth of 30 percent of 50 percent, of Median Income as established by the U.S. Department of Housing and Urban Development for the Area adjusted for household size in the manner set forth below. In adjusting rent for household size, it shall he assumed that two persons will occupy a single -wide mobilehome and three persons will occupy a multisecfional mobilehome; provided that if the multisectional mobilehome has three or more bedrooms, then it shall be assumed that four persons shall occupy a three-bedroom unit and five persons will occupy a four-bedroom unit. (b) In the event a recertification of the income of a Very Low Income Resident or a Lower Income Resident, as applicable, in accordance with Section 4(d) below demonstrates that such tenant no longer qualifies as a Very Low Income Resident or a Lower Income Resident, as applicable, the Space occupied by such tenant shall continue to be treated as a Very Low Income Space or a Lower Income Space, as applicable, unless and until any Space in the Project thereafter is occupied by a new tenant other than a Very Low Income Resident or a Lower Income Resident, as applicable. Moreover, a Space previously occupied by a Very Low Income Resident, a Lower Income Resident or a Moderate Income Resident, as applicable, and then vacated shall be considered occupied by a Qualified Resident until reoccupied, other than for a temporary period, at which time the character of the Space shall be redetermined. In no event shall such temporary period exceed thirty-one (3 1) days. Notwithstanding anything herein to the contrary, if at any time the number of Qualified Residents falls below the number required by subparagraph (a) (i) of this Section, the next available vacant Space shall be rented to a Qualified Resident. (c) Annually, the Owner will obtain and maintain on file an Income Certification form from each Qualified Resident occupying a Qualified Space, dated immediately prior to the initial occupancy of such Qualified Resident in the Project (or prior to the Closing Date in the case of existing Very Low Income Residents). In addition, the Owner will provide such further information as may be required in the future by the State of California, as requested by the City RVPUBTBAUvn708986.1 7 or the Oversight Agent. The Owner shall verify that the income provided by an applicant with respect to a Space to be occupied after the Closing Date is accurate by taking one or more of the following steps as a part of the verification process: (1) obtain a federal income tax return for the most recent tax year, (2) obtain a written verification of income and employment from applicant's current employer such as a current pay stub or W-2 form, (3) if an applicant is unemployed or did not file a tax return for the previous calendar year, obtain other verification of such applicant's income reasonably satisfactory to the Oversight Agent or (4) such other information as may be reasonably requested by the Oversight Agent. Within ten days of the last day of each calendar quarter during the term of this Regulatory Agreement commencing with the quarter ending 2006, the Owner shall advise the Oversight Agent or in the absence of a Oversight Agent, the City, of the status of the occupancy of the Project by delivering to the Oversight Agent a Certificate of Continuing Program Compliance; provided, however, with the prior written approval of the Oversight Agent or the City, as the case may be, such Certificate need be filed only semi-annually. Copies of the most recent Income Certifications for Qualified Residents commencing or continuing occupancy of a Qualified Space shall be made available to the City or Oversight Agent upon request. (d) Annually, the Owner shall recertify the income of the occupants of such Very Low Income Spaces and Lower Income Spaces, as applicable, by obtaining a completed Income Certification based upon the current income of each occupant of the unit. In the event the recertification demonstrates that such household's income exceeds 140% of the income at which such household would qualify as Very Low Income Residents or Lower Income Residents, as applicable, such household will no longer qualify as a Very Low Income Resident or a Lower Income Resident, as applicable, and the Owner either (i) will designate another qualifying Tenant and Space in the Project as a Very Low Income Resident or a Lower Income Resident, as applicable and a Very Low Income Space or a Lower Income Space, as applicable, respectively, or (ii) will rent the next available vacant Space to one or more Very Low Income Residents or Lower Income Residents, as applicable. (e) The Owner will maintain complete and accurate records pertaining to the Qualified Spaces, and will permit any duly authorized representative of the City or the Oversight Agent to inspect during normal business hours and with prior notice the books and records of the Owner pertaining to the Project, including those records pertaining to the occupancy of the Qualified Spaces. (f) Each lease or rental agreement pertaining to a Qualified Space occupied after the Closing Date shall contain a provision to the effect that the Owner has relied on the Income Certification and supporting information supplied by the Qualified Resident in determining qualification for occupancy of the Qualified Space, and that any material misstatement in such certification (whether or not intentional) may be cause for immediate termination of such lease. Each lease or rental agreement will also contain a provision that failure to cooperate with the annual recertification process reasonably instituted by the Owner pursuant to Section 4(d) above will disqualify the Space as a Qualified Space and provide grounds for termination of the lease. The Owner agrees to provide to the Oversight Agent and the City, a copy of the formof application and lease or rental agreement to be provided to prospective Qualified Residents and any amendments thereto. RVPUBTBAUPoA708986.1 8 (g) In the event, despite the Owner's exercise of best efforts to comply with the provisions of Section 4 of this Regulatory Agreement, the Owner shall have been out of compliance with any of the restrictions of Section 4 hereof relative to Qualified Residents, for a period in excess of six months, then at the sole option of the City the term of the Regulatory Agreement shall be automatically extended for the period of non-compliance upon written notice to the Owner and the Oversight Agent from the City, such extension to relate to the Qualified Spaces and Qualified Residents as to which such noncompliance relate. Section 5. Repair and Replacement Fund. The Owner agrees and covenants to cause to be established and maintained the Repair and Replacement Fund created by Section 5.3(7) of the Indenture and to be used and replenished as provided in Sections 5.13 and 5.7(h) of the Indenture and Section 6.22 of the Loan Agreement. Section 6. Other Covenants. (a) The Owner further covenants and agrees as follows: The Owner will comply with the provisions of Title 2, Chapter 2, Article 9 of the City Municipal Code relating to mobile home rent control (the "Rent Control Ordinance"), a copy of which Rent Control Ordinance is attached hereto as Exhibit B notwithstanding any legal challenges to the Rent Control Ordinance, and further agrees that it shall at all times abide by and follow the terms and provisions of the Rent Control Ordinance, and shall not in any manner challenge said provisions. (b) In the event the Owner requests any discretionary rental increases under the Rent Control ordinance, the Owner agrees not to appeal any decision of the City with respect to such request. (c) In the event the Rent Control Ordinance is determined in any legal proceeding to be invalid for any reason, the Owners agrees to continue to comply with the provisions of the Rent Control Ordinance as if it were still in effect. Section 7. Indemnification. The Owner shall indemnify, hold harmless and defend the City, the Oversight Agent and the Authority Bond Trustee and the respective officers, members, directors, officials and employees of each of them (the "indemnified party") against all loss, costs, damages, expenses, suits, judgments, actions and liabilities of whatever nature, joint and several (including, without limitation, attorneys' fees, litigation and court costs, amounts paid in settlement, and amounts paid to discharge judgments), directly or indirectly resulting from or arising out of or related to (a) the operation, use, occupancy, maintenance, or ownership of the Project (including compliance with laws, ordinances and rules and regulations of public authorities relating thereto); or (b) any written statements or representations with respect to the Owner the Project or the Authority Bonds made or given to the City, the Oversight Agent or the Authority Bond Trustee, by the Owner, or any of its agents or employees, including, but not limited to, statements or representations of facts or financial information; provided, however, the Owner shall not be obligated to indemnify the City, the Authority Bond Trustee or the Oversight Agent for damages caused by the gross negligence or willful misconduct of the City, the Authority Bond Trustee or the Oversight Agent. The Owner also shall pay and discharge and shall indemnify and hold harmless the City, the Oversight Agent and the Authority Bond Trustee from (x) any lien or charge upon payments by the Owner to the City and the Authority Bond Trustee hereunder and (y) any taxes (including, without limitation, all ad valorem taxes and sales taxes), assessments, impositions and other charges in respect of any portion of the Project. If any such claim is asserted, or any such lien or charge upon payments, or any such taxes, assessments, RVPUBTBAU1Vt7089861 9 impositions or other charges, are sought to be imposed, the City shall give prompt notice to the Owner, and the Owner shall have the sole right and duty to assume, and will assume, the defense thereof, including the employment of counsel selected by the indemnified parry and the payment of all reasonable expenses related thereto, with full power to litigate, compromise or settle the same in its sole discretion; provided, however, that the Owner shall have the right to review and approve or disapprove any such compromise or settlement, and provided further that any such approval shall not be unreasonably withheld. Section 8. Consideration. The City has agreed to become an Associate Member of the Authority for the purpose, among others, of inducing the Owner to own and operate the Project such that the Project shall contribute to the City's efforts to provide affordable housing to Qualified Residents in the City and to the satisfaction of the City's ongoing housing burden. In consideration of the City joining the Authority as an Associate Member in order to allow the Authority to provide financing to the Owner for the Project, the Owner has entered into this Supplemental Regulatory Agreement and has agreed to restrict the uses to which the Project can be put on the terms and conditions set forth herein. Section 9. Reliance. In performing its duties and obligations hereunder, the City may rely upon statements and certificates of the Owner and Qualified Residents, and upon audits of the books and records of the Owner pertaining to the Project. In addition, the City may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the City hereunder in good faith and in conformity with such opinion. Section 10. Sale or Transfer of the Project; Option to Purchase. (a) The Owner intends to hold the Project for its own account, has no current plans to sell, transfer or otherwise dispose of the Project, and hereby covenants and agrees not to sell, transfer or otherwise dispose of the Project, or any portion thereof (other than for individual tenant use as contemplated hereunder), without obtaining the prior written consent of the City and upon receipt by the City of (i) reasonable evidence satisfactory to the City that the Owner's purchaser or transferee has assumed in writing and in full, the Owner's duties and obligations under this Supplemental Regulatory Agreement, (ii) an opinion of counsel for the transferee that the transferee has duly assumed the obligations of the Owner under this Supplemental Regulatory Agreement, and that such obligations and this Supplemental Regulatory Agreement are binding on the transferee, (iii) the City receives evidence acceptable to the City that either (A) the transferee has experience in the ownership, operation and management of comparable projects without any record of material violations of discrimination restrictions or other state or federal laws or regulations applicable to such projects, or (B) the transferee agrees to retain a property management firm with the experience and record described in subparagraph (A) above and in either case, at its option, the City may cause the Oversight Agent to provide on-site training in program compliance if the City determines such training is necessary and (iv) the City receives evidence that the purchaser is a not for-profit organization. It is hereby expressly stipulated and agreed that any sale, transfer or other disposition of the Project in violation of this Section 10 shall be null, void and without effect, shall cause a reversion of title to the Owner, and shall be ineffective to relieve the Owner of its obligations under this Supplemental Regulatory Agreement. Not less than 30 days prior to consummating any sale, transfer or disposition of any interest in the Project, the Owner shall deliver to the City and the Oversight Agent a notice in writing explaining the nature of the proposed transfer. R VPUB\FBAUM\708986.1 to (b) Notwithstanding the provisions of Section 10(a) above, the Owner shall grant to the San Juan Capistrano Residents Association (the "Residents Association") an option to purchase the Project from the Owner under a written option agreement on the following general terms: (i) During the first 10 years following the Closing Date, the purchase price of the Project under said option shall be equal to $ plus the costs of any financing undertaken by the Residents Association to accomplish such purchase; (ii) After the first 10 years following the Closing Date, the purchase price of the Project shall be equal to $ plus the increase in the Consumer Price Index for the preceding year (beginning with year 11), together with the costs of any financing undertaken by the Residents Association to accomplish said purchase; (iii) The Residents Association shall pay, in addition to the purchase price set forth in (a) or (b) above, all costs, fees and expenses, including, but not limited to, title, escrow and all other closing costs, necessary to defease, prepay and redeem the Outstanding Bonds of the Authority and the transfer of ownership of the Project from the Owner to the Residents Association; and (iv) The Residents Association shall provide to the City, the Authority and the Owner an opinion of Bond Counsel to the effect that the exercise of said option and the purchase of the Project by the Residents Association and the defeasance of the Outstanding Authority Bonds will not in and of itself, cause interest on said Authority Bonds to be included in gross income for federal income tax purposes. (c) It is hereby expressly stipulated and agreed that any sale, transfer or other disposition of the Project in violation of this Section 10 shall be null, void and without effect, shall cause a reversion of title to the Owner, and shall be ineffective to relieve the Owner of its obligations under this Supplemental Regulatory Agreement. Not less than 30 days prior to consummating any sale, transfer or disposition of any interest in the Project, the Owner shall deliver to the City and the Oversight Agent a notice in writing explaining the nature of the proposed transfer. Section 11. Term. This Regulatory Agreement and all and several of the terms hereof shall become effective upon its execution and delivery and shall remain in full force and effect during the Project Restriction Period, it being expressly agreed and understood that the provisions hereof are intended to survive the retirement of the Authority Bonds. Notwithstanding any other provisions of this Regulatory Agreement to the contrary, this entire Supplemental Regulatory Agreement, or any of the provisions or sections hereof, may be terminated upon agreement by the City and the Owner. The terms of this Supplemental Regulatory Agreement to the contrary notwithstanding, this Supplemental Regulatory Agreement, and all and several of the terms hereof, shall terminate and be of no further force and effect in the event of (i) a foreclosure or delivery of a deed in lieu of foreclosure whereby the Authority Bondowners or a third party shall take possession of the Project, or (ii) involuntary non-compliance with the provisions of this Supplemental Regulatory Agreement caused by fire, seizure, requisition, change in a federal law or an action of a federal agency after the date hereof which prevents the City from enforcing the provisions hereof, or (iii) RVPUBIP13AU?,A708986.1 11 condemnation or a similar event and the payment in full and retirement of the Authority Bonds theretofore or within a reasonable period thereafter. Upon the termination of the terms of this Supplemental Regulatory Agreement, the parties hereto agree to execute, deliver and record appropriate instruments of release and discharge of the terms hereof, provided, however, that the execution and delivery of such instruments shall not be necessary or a prerequisite to the termination of this Supplemental Regulatory Agreement in accordance with its terms. Section 12. Covenants to Run With the Land. The Owner hereby subjects the Project (including the Project site) to the covenants, reservations and restrictions set forth in this Supplemental Regulatory Agreement. The City and the Owner hereby declare their express intent that the covenants, reservations and restrictions set forth herein shall be deemed covenants running with the land and shall pass to and be binding upon the Owner's successors in title to the Project; provided, however, that upon the termination of this Supplemental Regulatory Agreement said covenants, reservations and restrictions shall expire with the exception of the non-discrimination covenant of Section 3(e) which shall continue in perpetuity. Each and every contract, deed or other instrument hereafter executed covering or conveying the Project or any portion thereof shall conclusively be held to have been executed, delivered and accepted subject to such covenants, reservations and restrictions, regardless of whether such covenants, reservations and restrictions are set forth in such contract, deed or other instrument. Section 13. Burden and Benefit. The City and the Owner hereby declare their understanding and intent that the burden of the covenants set forth herein touch and concern the land in that the Owner's legal interest in the Project is rendered less valuable thereby. The City and the Owner hereby further declare their understanding and intent that the benefit of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Project by Qualified Residents, the intended beneficiaries of such covenants, reservations and restrictions. Section 14. Uniformity; Common Plan. The covenants, reservations and restrictions hereof shall apply uniformly to the entire Project in order to establish and carry out a common plan for the use, development and improvement of the Project. Section 15. Enforcement. If the Owner defaults in the performance or observance of any covenant, agreement or obligation of the Owner set forth in this Supplemental Regulatory Agreement, and if such default remains uncured for a period of 60 days after notice thereof shall have been given by the City to the Owner (provided, however, that the City may at its sole option extend such period and provided further, in the event any default relates to Section 4 hereof and the Owner is exercising best efforts to comply with such restrictions as determined by the City in its reasonable discretion, then the cure period described above shall be 6 months and shall be subject to the extension of the Project Restriction Period under Section 4(h) hereof), then the City shall declare an "Event of Default" to have occurred hereunder, and the City, at its option, may take any one or more of the following steps: (a) by mandamus or other suit, action or proceeding at law or in equity, require the Owner to perform its obligations and covenants hereunder or enjoin any acts or things which may be unlawful or in violation of the rights of the City hereunder; (b) have access to and inspect, examine and make copies of all of the books and records of the Owner pertaining to the Project; and RVPUBTBAUv1\708986.1 12 (c) take such other action at law or in equity as may appear necessary or desirable to enforce the obligations, covenants and agreements of the Owner hereunder. All fees, costs and expenses of the City and the Oversight Agent (including, without limitation, reasonable attorneys' fees) reasonably incurred in taking any action pursuant to this Section 15 shall be the sole responsibility of the Owner. Section 16. Recording and Filing. The Owner shall cause this Supplemental Regulatory Agreement and all amendments and supplements hereto, to be recorded and filed, after the recording of the Authority Regulatory Agreement and the Deed of Trust in the real property records of the County and in such other places as the may reasonably request. The Owner shall pay all fees and charges incurred in connection with any such recording. Section 17. Payment of Fees. In the event of a default hereunder by the Owner, the Owner shall pay to the City reasonable compensation for any services rendered by it hereunder and reimbursement for all expenses reasonably incurred by in connection with such default. Section 18. Governing Law. This Supplemental Regulatory Agreement shall be governed by the laws of the State of California. Section 19. Amendments. This Supplemental Regulatory Agreement shall be amended only by a written instrument executed by the parties hereto or their successors in title, and duly recorded in the real property records of the County. Section 20. Notice. All notices, certificates or other communications shall be sufficiently given and shall be deemed given on the date personally delivered or on the second day following the date on which the same have been mailed by certified mail, return receipt requested, postage prepaid, addressed as follows: City: City of San Juan Capistrano 32400 Paseo Adelanto San Juan Capistrano, CA 92675 Attn: City Manager Oversight Wolf & Company Inc. Agent: 5 Pembroke Lane Laguna Niguel, CA 92677 Attn: Wesley R. Wolf Owner: Millennium Housing Corporation 660 Newport Center Drive, Suite 1020 Newport Beach, CA 92660 Attn: George Turk Any of the foregoing parties may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, documents or other communications shall be sent. RVPUB\FBAUW08986.1 13 Section 21. Severability. If any provision of this Supplemental Regulatory Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions hereof shall not in any way be affected or impaired thereby. Section 22. Multiple Counterparts. This Supplemental Regulatory Agreement may be executed in multiple counterparts, all of which shall constitute one and the same instrument, and each of which shall be deemed to be an original. Section 23. Subordination. This Supplemental Regulatory Agreement and any amendments, modifications, renewals and extensions hereof shall at all times be a lien and charge on the Project and the real property described on Exhibit A hereto expressly and unconditionally subordinate to the lien and charge thereon of the Authority Regulatory Agreement and the Deed of Trust. RVPUBWBAU 0708986.1 14 IN WITNESS WHEREOF, the City and the Owner have executed this Supplemental Regulatory Agreement by duly authorized representatives, all as of the date first written hereinabove. CITY OF SAN JUAN CAPISTRANO By: _ Title: MILLENNIUM HOUSING CORPORATION, a California non-profit public benefit corporation Un President RVPUBTRAUM708986.1 15 STATE OF CALIFORNIA ) ) ss. COUNTY OF ) On 2006, before me, , personally appeared ❑ personally known to me OR ❑ proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature of Notary [SEAL] RVPUBTBAM708986.1 STATE OF CALIFORNIA ) ) ss. COUNTY OF ) On 2006, before me, , personally appeared ❑ personally known to me OR ❑ proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature of Notary [SEAL] R V PUB\FBAUMA708986.1 *Note to Article 9. TITLE 2. ADMINISTRATION CHAPTER -2 COMMISSIONS_ AND BOARDS *Note to Article 9. Page 1 of 1 * Article 9 entitled "Mobile Home Park Review Board", consisting of Sections 2-2.901 through 2-2,911, codified from Ordinance No. 380, as amended by Ordinance Nos. 386, 393, and 405, effective April 16, 1980, amended in its entirety by Ordinance No. 412, effective December 5, 1980. Article 9 entitled "Mobile Home Park Review Committee", consisting of Sections 2-2.901 through 2-2.909, as added by said Ordinance No. 412, as amended by Ordinance Nos. 423, effective May 5, 1981, 425, effective August 6, 1981, 427, effective July 21, 1981, and 430, effective October 1, 1981, repealed by Ordinance No. 439, effective November 3, 1981. Article 9 entitled "Mobile Home Park Review Committee", consisting of Sections 2-2.901 through 2- 2.906, as added by Ordinance No. 439, as amended by Ordinance Nos. 456, effective June 3, 1982, 492, effective September 6, 1983, 507, effective May 3, 1984, 526, effective January 3, 1985, 545, effective July 18, 1985, 602, 613, and 715, amended in its entirety by Ordinance No. 795, effective June 6, 1997. hnp://municipalcodes.lexisnexis.com/codes/sanivancai)/ DATA/TITLE02/CHAPTER 2 COM... 4/17/2006 Sec. 2-2.901. Findings. TITLE 2. ADMINISTRATION CHAPTER 2. COMMISSIO_NS_AND BOARDS Sec. 2-2.901. Findings. Page 1 of 1 The Council finds and determines that: (a) There is presently, within the City and the surrounding areas, a shortage of spaces for the location of mobile homes, resulting in a low vacancy rate and rising space rents. (b) Mobile home owners have invested substantial sums in their mobile homes and appurtenances. (c) Alternative sites for the relocation of mobile homes are difficult to find, and the moving and installation of mobile homes are expensive, with possibilities of damage to the units. The Council, accordingly, does find and declare that it is necessary to protect the residents of mobile homes from unreasonable space rent increases, recognizing the need of mobile home park owners to receive a fair, just, and reasonable return. (§ 1, Ord. 795) hnD://municiDalcodes.lexisnexis.com/codes/sanivancan/ DATA /TTTT,E02/CHAPTER 2 COM 4/17/ 006 Sec. 2-2.902. Definitions. TITLE 2._ADMINISTRATION CHAPTER 2. COMMISSIONS_ AND BOARDS Sec. 2-2.902, Definitions. For the purposes of this article, unless otherwise apparent from the context, certain words and phrases used in this article are defined as follows: Page 1 of I (a) "Assessment" shall mean the entire allocation of the cost of installing, improving, repairing, or maintaining any capital improvement benefiting the resident. (b) "Committee" shall mean the Housing Advisory Committee established under Title 2, Chapter 2, Article 2 of this Code. (c) "Consumer Price Index" shall mean the Consumer Price Index for all urban consumers (CPI -U) published for the Los Angeles -Long Beach -Anaheim area. (d) "Maximum allowable increase" shall mean the maximum allowable increase in mobile home space rent an owner may charge, unless a higher increase is approved by the City after a petition and hearing as provided in this article. The maximum allowable increase shall be provided in this subsection (d) and shall be determined by either of the following formulae an owner may choose to apply: (1) Take the operating expenses of the park for the twelve (12) month period immediately preceding the date upon which notification of any rent increase is to be made; multiply that sum by the percentage of increase in the CPI -U appearing in the latest published Consumer Price Index to arrive at the maximum allowable annual increase in rent for the entire park, and divide the number of units in the park to compute the maximum allowable annual rent increase (in dollars) for each space, or (2) Secure the percentage of annual increase in the CPI -U for the calendar year immediately preceding the one in which the rental adjustment is being made; multiply that figure by the rent to be adjusted to arrive at the maximum allowable rent increase percentage per year, and apply that product to each space rent. (3) Effective April 1, 1988, the maximum allowable increase for rental adjustments occurring under this subsection shall be based upon the percentage of annual rise in the CPI -U for the previous calendar year. Any rental increase occurring between October 1, 1987 and March 31, 1988 shall be subject to the maximum allowable increase computed with the annual rise of the CPI -U for the 1986 calendar year. (4) The percentage increase computed by either of the methods set forth in this subsection shall be applied to each space and shall not be applied to the park's mean rent. Moreover, there shall be no more than one increase in space rents within a park during any twelve (12) month period without the prior approval of the City. (5) The occurrence of a vacancy in either a space within a park or a mobile home unit on a space within a park shall not result in a space rental increase in excess of the percentage increase allowed once during any twelve (12) month period by this subsection, unless it results from a petition duly heard and approved pursuant to Section 2-2.903. (e) "Owner" shall mean the owner, lessor, or designated agent of a park. (f) "Park" shall mean a mobile home park which rents spaces for mobile home dwelling units. (g) "Rent" shall mean the consideration charged solely for the use and occupancy of a mobile home space in a park and shall not include any amount paid for the use of the mobile home dwelling unit or for facilities or amenities in a park, other than a mobile home space, or any other fees or charges regulated by a governmental agency and charged to residents on an actual usage and/or cost basis. (h) "Resident" shall mean any person entitled to occupy a mobile home dwelling unit pursuant to the ownership thereof or a rental or lease arrangement with the owner of the subject dwelling unit. (§ 1, Ord. 795) http://municii)alcodes.lexisnexis.com/codes/sanivancan/ DATA/TITLE02/CHAPTER 2 COM... 4/17/2006 Sec. 2-2.903. Petition and hearing process regarding rent increases. Page 1 of 3 TITLE 2. ADMINISTRATION CHAPTER 2. COMMISSIONS AND BOARDS Sec. 2-2.903. Petition and hearing process regarding rent increases. (a) Petition and hearing procedure. Upon the filing with the secretary of a written petition concerning a proposed or actual increase in rent filed by an owner or by residents who reside in and represent more than fifty (50) percent of the inhabited spaces within a park, excluding management, a hearing thereon shall be conducted by a Hearing Officer within sixty (60) calendar days, or as soon thereafter as is reasonably practicable, after the filing of the petition. In the event that the park owner has proposed a rent increase for one or more residents (e.g., based upon one year anniversary dates) but less than the total number of residents in the park, then only one hearing process shall be conducted by the same hearing officer where the rent increases proposed for all residents in the park for that year is based upon the same factual justification. Any such rent increase shall be subject to a protest petition when filed by a majority of total park residents. The filing of one petition protest shall be sufficient to place all similar rent increases for that year at issue under the hearing review process. The hearing shall be conducted only in the event the petition is filed with the secretary thirty (30) calendar days following the effective date of the rent increase which is the subject of the petition. The Hearing Officer shall be chosen and a hearing conducted in accordance with the Hearing Officer procedure established by the Council. (b) Purpose of hearings. At the hearing on such petition, the Hearing Officer shall conduct an investigation to determine if the rent increase in question exceeds the maximum allowable increase as defined in subsection (d) of Section 2-2.902 of this article. If the Hearing Officer concludes that the rent increase exceeds the maximum allowable increase, the Hearing Officer shall then continue the hearing by receiving all relevant evidence for the purpose of rendering findings and conclusions as to the propriety of the rent increase in accordance with the criteria set forth in subsection (g) of this section. The Hearing Officer may require either party to a hearing on the petition to provide any books, records, and papers deemed pertinent, in addition to that information previously set forth by the parties. (c) Hearing Officer recommendations. Within thirty (30) days after concluding the hearing, the Hearing Officer shall render written findings and conclusions as to the propriety of the rent increase to the Housing Advisory Committee. The Hearing Officer recommendations shall not be binding. (d) Committee reviews of Hearing Officer findings. The Housing Advisory Committee shall review the findings and conclusions of the Hearing Officer at its next available meeting. Its scope of review shall be limited to the written record consisting of the evidence received by the Hearing Officer, written arguments of the parties, findings of the Hearing Officer, other relevant matters as compiled by the secretary of the Committee, and additional oral or written arguments the parties may wish to make. However, the Committee shall not receive or consider any additional evidence. The Housing Advisory Committee shall give ten (10) days prior written notice of its meeting to the parties. (e) Council reviews. The Council shall review the findings of the Hearing Officer and the recommendations of the Housing Advisory Committee as soon as reasonably practicable. The Council shall not reopen the hearing held by the Hearing Officer for the purpose of receiving new evidence unless, in the discretion of the Council, it is necessary to do so. The Council may affirm, modify, or reverse the rent increase in question, but in no case require a reduction lower than the maximum allowable increase. The Council shall render written findings in support of its conclusions within thirty (30) days after its meeting, and the decision of the Council shall be final. (f) Return of excess rents collected. Any rent increases which are collected by an owner pursuant to an increase which is the subject of a petition for hearing, and which later is determined by the Council to exceed the maximum allowable increase, or such greater increase as the Council approves, shall be either returned to the residents or credited to future space rents, provided, however, no increase collected prior to December 5, 1980, shall be returned. (g) Criteria to be utilized in rent increase reviews. htti)://municiv)alcodes.lexisnexis.com/codes/sanjuancan/ DATA/TITLE02/CHAPTER 2 COM... 4/17/2006 Sec. 2-2.903. Petition and hearing process regarding rent increases. Page 2 of 3 (1) Purpose of reviews. The Hearing Officer, the Housing Advisory Committee, and the Council shall review the rent increase to determine whether the increase is, or is not, fair and reasonable. Such review shall be conducted by applying the nonexclusive criteria set forth in subsection (g)(2) of this section to the facts submitted to the Hearing Officer. (2) Nonexclusive criteria. The Hearing Officer, the Committee, and the Council shall consider all relevant factors, including, but not limited to, increased or decreased costs to the mobile home park owner attributable to utility rates, property taxes, insurance, advertising, governmental assessments, cost -of - living increases attributable to incidental services, normal repairs and maintenance, capital improvements, except those defined in subsection (h) of this section, the upgrading and addition of amenities for services, except as defined in subsection (h) of this section, and a fair rate of return on the property. (3) Fair rate of return on property criteria. The Council finds and declares that the following principles shall be applied in utilizing the fair rate of return on property standard as a criterion in the review process: (i) All the provisions of this article shall be applied with the overall purpose of eliminating the imposition of excessive rents while at the same time providing park owners with a just and reasonable return on property. (ii) The reasonableness of rent increases is not to be determined solely by the application of a fixed or mechanical accounting formula, such as "return on investment" or "return on market value" of the property; in particular, recent court decisions have discouraged the use of a "return on market value" test. (iii) The fair rate of return on property is but one of a number of nonexclusive factors to be taken into account in reviewing the fairness of rent incfeases; it is to be given weight, but not to dominate other relevant criteria in arriving at a final determination. (iv) The Hearing Officer, the Committee, and the Council shall impartially consider all relevant evidence in relation to the application of the nonexclusive criteria. The extent to which the criteria are considered in the review process, that is, the amount of weight given to any one of the several criteria, ultimately falls within the wisdom and best judgment of said three (3) bodies. (v) In conducting the entire process, guidance should be taken from leading California case law decisions dealing with rent control issues and in particular, rent control in mobile home parks. Such cases include: Birkenfeld v. City of Berkeley (1976), 17 C.3d 165, Gregory v. City of San Juan Capistrano (1983), 142 C.A.3d 8; Cotati Alliance for Better Housing v. Cotati (1983), 143 C.A.3d 296; Palisades Shores v. City of Los Angeles (1983), 143 C.A.3d 369: Oceanside Mobile Home Park Owners Association v. City of Oceanside (1984), 157 C.A.3d 887; and Carson Mobile Home Park Owners Association v. City of Carson (1983), 35 C.3d 184. (h) Rent increases and capital improvement upgrade costs. (1) Capital improvement upgrade costs. Only those capital improvement costs incurred to upgrade through additions, alterations or replacements, park facilities, assets, or amenities, shall not be recouped from residents through rent increases, or any other special assessment, unless the following procedure is first followed: (i) The park owner shall first inform by first-class mail all park residents of the exact nature, approximate cost, billing method, and billing duration of the proposed capital improvement upgrade by written notice. (ii) After allowing the residents a reasonable period of time (of not less than thirty (30) days) to consider whether the capital improvement cost is one the residents believe is necessary and desirable, the park owner shall then obtain formal written consent on a form approved by the City from a simple majority of the total number of residents in the park. The simple majority shall be calculated on the basis of one vote per coach space. (iii) The costs of the capital improvement upgrade shall be prorated and billed in a method mutually acceptable to the park owner and the residents. For the purposes of this subsection, "to upgrade' shall mean to raise to a substantially higher quality, or to substantially improve, the existing level of service. Examples of capital improvement upgrades include, but are not limited to, swimming pools, spas, tennis courts, clubhouses, clubhouse additions, fencing, children's play equipment, and other similar improvements. (2) Exceptions for governmentally mandated costs. Capital improvement upgrade costs incurred because of the application of current day Building Codes, such as, but not limited to, City Building Codes, Health and Safety Codes, and State, Federal, and Fire Codes, shall be exempted from the resident consent provision set forth in subsection (h)(1) of this section. The park owner shall obtain a written statement from the Building Official verifying that the subject capital improvement upgrade arose httn://munieinalcodes.lexisnexis.com/codes/sanivancan/ DATA,/TITLE02/CHAPTER 2 COM... 4/17/2006 Sec. 2-2.903. Petition and hearing process regarding rent increases. from the more stringent current day Building Code requirements before the exception set forth in this subsection may be utilized by the park owner. (i) Leasehold agreement exemptions. Notwithstanding any provision of this article to the contrary, leasehold agreements (that is, leases other than tenancies at will or month-to-month) entered into between mobile home park owners and their residents shall be exempted from the operation of the petition and hearing review process. (ii) Forms. The City Manager is authorized and directed to develop and require the completion of forms by interested parties at the time a petition is received by the secretary. Until such forms are completed to the satisfaction of the City Manager, or his designated representative, the petition and hearing process shall proceed no further. (§ 1, Ord. 795, as amended by § 1, Ord. 902) Page 3 of 3 http://municipalcodes.lexisnexis,corn/codes/sanjuancap/ DATA/TITLE02/CHAPTER 2 COM... 4/17/2006 Sec. 2-2.904. Hearing Officer costs: Fee reimbursement. TITLE 2_. ADMINISTRATION CHAPTER 2. COMMISSIONS AND BOARDS Sec. 2-2.904. Hearing Officer costs: Fee reimbursement. (a) Administrative fee. There is hereby instituted a One Thousand and no/100ths ($1,000.00) Dollar fee to be paid to the City for costs incurred in invoking the Hearing Officer procedure set forth in Section 2- 2.903. Page 1 of 1 (b) Five Hundred and no/100ths ($500.00) Dollar deposit. At the time the park residents file a petition in protest of a proposed increase, the petitioners shall simultaneously post a Five Hundred and no/100ths ($500.00) Dollar deposit with the Secretary to the Housing Advisory Committee. The Secretary shall find that the petition is incomplete if the Five Hundred and no/100ths ($500.00) Dollar deposit is not posted. Further, the statute of limitation period of thirty (30) days from the effective date of a rent increase shall continue to run in the event that the petition has been found to be incomplete. If the petition is in order and the deposit has been posted, the City shall promptly notify the park owner that the hearing procedure will be invoked and that the park owner shall, within ten (10) days of receipt of notice, post a Five Hundred and no/100ths ($500.00) Dollar deposit equal to the petitioners' deposit. Should the park owner not post the Five Hundred and no/100ths ($500.00) Dollar deposit within the ten (1 D) day time limit, the residents shall be under no legal obligation to pay the proposed rent increase. (c) Responsibility for payment of administrative fee. At the conclusion of the administrative hearing, the Hearing Officer, as a part of his responsibility to make findings, shall make a recommendation as to the percentage that each party is to pay in satisfying the One Thousand and no/100ths ($1,000.00) Dollar administrative fee. The City Council shall make a final decision regarding the Hearing Officer's determination based upon the final rent award. (d) Remedies for nonpayment of administrative fee. Should any party refuse to pay his portion of the required administrative fee, the City may pursue any civil remedy available, or in the alternative, refuse to process a future petition by the same petitioners. In the case of park owner nonpayment, park tenants shall not be obligated to pay proposed rent increases until the administrative fee debt has been satisfied. (§ 1, Ord. 795) http://municipalcodes.lexisnexis.com/codes/sanivancat)/ DATA/TITLE02/CHAPTER 2 COM... 4/17/2006 ADMINISTRATION AND OVERSIGHT AGREEMENT by and among INDEPENDENT CITIES LEASE FINANCE AUTHORITY and WOLF & COMPANY INC., as Oversight Agent and MILLENNIUM HOUSING OF CALIFORNIA, as Borrower and CITY OF SAN JUAN CAPISTRANO Dated as of Relating to: 1, 2006 Independent Cities Lease Finance Authority Mbbile Home Park Revenue Bonds (San Juan Mobile Estates) Series 2006A and Independent Cities Lease Finance Authority Mobile Home Park Subordinate Revenue Bonds (San Juan Mobile Estates) Series 2006B and Independent Cities Lease Finance Authority Mobile Home Park Subordinate Revenue Bonds (San Juan Mobile Estates) Taxable Series 2006C RVPUBIFBAUM709452.1 EXHIBIT C ADMINISTRATION AND OVERSIGHT AGREEMENT THIS ADMINISTRATION AND OVERSIGHT AGREEMENT (the "Administration Agreement") is made and entered into as of 1, 2006, by and among the INDEPENDENT CITIES LEASE FINANCE AUTHORITY a joint powers authority duly organized and existing under the laws of the State of California (the "Authority"), the CITY OF SAN JUAN CAPISTRANO, a public body corporate and politic duly organized and existing under the laws of the State of California (the "City"), MILLENNIUM HOUSING CORPORATION, a California nonprofit public benefit corporation (the "Borrower"), and WOLF & COMPANY INC. (the "Oversight Agent"). RECITALS: WHEREAS, to assist the Borrower in its acquisition of the San Juan Mobile Estates mobile home park located in the City of San Juan Capistrano (which is an associate member of the Authority) (the "Project"), the Authority has issued its Mobile Home Park Revenue Bonds (San Juan Mobile Estates) Series 2006A and its Mobile Home Park Subordinate Revenue Bonds (San Juan Mobile Estates) Series 2006B and its Mobile Home Park Subordinate Revenue Bonds (San Juan Mobile Estates) Taxable Series 2006C (collectively, the "Bonds") pursuant to an Indenture of Trust, dated as of 1, 2006 (the "Indenture"), by and between the Authority and Union Bank of California, N.A., as Trustee thereunder (the "Trustee"); and WHEREAS, the Authority has made a loan (the "Loan") of the proceeds of the Bonds to the Borrower, as provided in the Loan Agreement, dated as of 1, 2006 (the "Loan Agreement"), by and among the Authority, the Borrower and the Trustee, which agreement provides for certain oversight provisions relating to the management of the Project; and WHEREAS, the Authority has entered into a Regulatory Agreement and Declaration of Restrictive Covenants, dated as of 1, 2006 (the "Regulatory Agreement") with the Trustee and the Borrower, which agreement, among other things, sets forth certain restrictions applicable to the property being financed with the proceeds of the Loan, which restrictions are intended to assure continued compliance with the provisions of the Internal Revenue Code of 1986, as amended (the "Code"); and WHEREAS, the Authority desires to appoint Wolf & Company, Inc., as Oversight Agent under the Regulatory Agreement to monitor the income levels of the residents of the Qualified Spaces (as defined in the Regulatory Agreement) and as Oversight Agent under the Loan Agreement to carry out the duties of the Oversight Agent set forth in the Loan Agreement; and WHEREAS, the City and the Borrower have entered into a Supplemental Regulatory Agreement and Declaration of Restrictive Covenants dated as of 1, 2006 (the "Supplemental Regulatory Agreement") which provides, among other things, for certain additional affordability restrictions on the Project applicable to Qualified Residents and Qualified Spaces; and WHEREAS, the City desires that the Oversight Agent monitor the income levels of the residents of the Qualified Spaces for purposes of the Supplemental Regulatory Agreement; and RVPUETBAUM1709452.1 WHEREAS, Wolf & Company, Inc., represents that it has the necessary experience and expertise required to evaluate whether the Project complies with the requirements set forth in the Loan Agreement, the Regulatory Agreement and the Supplemental Regulatory Agreement. NOW, THEREFORE, in consideration of the premises and respective representations and covenants herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION I.I. Definitions of Terms. All capitalized terms used in this Administration Agreement and not otherwise defined herein shall have the respective meanings given to them in the Indenture and/or the Regulatory Agreement and/or the Supplemental Regulatory Agreement. 1.2. Article and Section Headings. The heading or titles of the several articles and sections hereof shall be solely for the convenience of reference and shall not affect the meaning, construction or effect of the provisions hereof. 1.3. Interpretation. The singular form of any word used herein, including terms defined in the Indenture and/or the Regulatory Agreement, shall include the plural and vice versa, if applicable. The use of a word of any gender shall include all genders, if applicable. ARTICLE II REPRESENTATIONS AND WARRANTIES 2.1. Representations of the Authority. The Authority makes the following representations: (a) It is a joint powers authority, duly organized and existing under the Constitution and laws of the State of California. (b) It has the power to enter into the transactions contemplated by this Administration Agreement and to cavy out its obligations hereunder and to consummate all other transactions on its part contemplated herein; and it has duly authorized the execution and delivery of this Administration Agreement. (c) The City of San Juan Capistrano is an associate member of the Authority. 2.2. Representations and Warranties of the Borrower. The Borrower makes the following representations and warranties: (a) It has power and authority to own its properties and carry on its business as now being conducted, and is duly qualified to do such business wherever such qualification is required, including the State of California. (b) It has the power to execute and deliver this Administration Agreement and to cavy out the transactions on its part contemplated hereby; and it has duly authorized the execution, delivery and performance of this Administration Agreement. RVI'MFBAUNC709452.1 (c) The Oversight Agent is independent from and not under the control of the Borrower, does not have any substantial interest, direct or indirect, in the Borrower, and is not an officer or employee of the Borrower. 2.3. Representations and Warranties of the Oversight Agent. The Oversight Agent makes the following representations and warranties: (a) It is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has the power and authority to carry on its business as now being conducted. (b) It has the power to execute and deliver this Administration Agreement and to carry out the transactions on its part contemplated hereby; and it has duly authorized the execution, delivery and performance of this Administration Agreement. (c) It is independent from and not under the control of the Borrower, does not have any substantial interest, direct or indirect, in the Borrower, and is not an officer or employee of the Borrower. (d) It has received copies of the Indenture, the Loan Agreement, the Regulatory Agreement and the Supplemental Regulatory Agreement, and it is familiar with the terms and conditions thereof as the same relate to the Code and the Act. ARTICLE III DUTIES AND COMPENSATION OF THE OVERSIGHT AGENT 3.1. Duties of Oversight Agent. Wolf & Company, Inc., is the initial Oversight Agent hereunder. This Section 3.1 applies to Wolf & Company, Inc., as Oversight Agent and to any successor Oversight Agent. In its capacity as Oversight Agent hereunder, for and on behalf of the Authority, the Oversight Agent will perform the following duties in a careful and timely manner, to the highest standards of its profession: (a) It will be familiar with and will give written notice to the Authority, the City, the Trustee and the Borrower within ten days of the publication by the Department of Housing and Urban Development of any change in: (i) The Median Income for the Area; and (ii) The maximum income at which households consisting of various numbers of persons may be determined to be Qualified Residents under the terms of the Regulatory Agreement and the Supplemental Regulatory Agreement; and (iii) The maximum allowable rents under each applicable provision of Section 4 of the Regulatory Agreement and Section 4 of the Supplemental Regulatory Agreement; and (iv) The maximum income at which households consisting of various numbers of persons may be determined to be Very Low Income Residents or Lower Income RVPUBTBALJM709452.1 3 Residents, under the terms of the Regulatory Agreement and the Supplemental Regulatory Agreement. (b) Promptly following its receipt thereof, it will review the Income Certifications, Certificates of Continuing Program Compliance, and all other reports and certificates furnished to it pursuant to the Regulatory Agreement and the Supplemental Regulatory Agreement in order to determine that each such document is complete and to verify the internal accuracy of the calculations, and conclusions with respect to such calculations, set forth therein, including the conclusion that the Qualified Spaces have been rented as specified by the terms of the Regulatory Agreement and the Supplemental Regulatory Agreement; and it will maintain such documents on file and open to the inspection by the Authority, the City, the Trustee and the Borrower during the term of the Regulatory Agreement and the Supplemental Regulatory Agreement. (c) Promptly upon receipt, it will review the form of application and lease with respect to the Qualified Spaces to verify compliance with the provisions of the Regulatory Agreement and the Supplemental Regulatory Agreement. (d) Promptly upon determining that any report or certificate submitted to it pursuant to the Regulatory Agreement and the Supplemental Regulatory Agreement is inaccurate or incomplete the Oversight Agent shall: (i) If the inaccuracy or lack of completeness does not cause the Project to cease to meet the qualifications set forth in Section 3 or 4 of the Regulatory Agreement, give notice of such inaccuracy or lack of completeness to the Borrower and direct the Borrower to correct or complete the same, as the case may be, within a 30 -day period, subject to extension in the sole discretion of the Oversight Agent; (ii) If the inaccuracy or lack of completeness is not corrected within thirty (30) days or if the inaccuracy or lack of completeness causes the Project to cease to meet the qualification set forth in Section 3 or 4 of the Regulatory Agreement immediately give written notice of said fact to the Authority, the Trustee and the Borrower; and (iii) If the inaccuracy or lack of completeness does not cause the Project to meet the requirements of Section 4 of the Supplemental Regulatory Agreement, give notice of such inaccuracy or lack of completeness to the Borrower and the City and direct the Borrower to correct and complete the same, as the case may be, within a 30 -day period, subject to extension in the sole discretion of the Oversight Agent. (e) (i) In the event that the Borrower fails to file with the Oversight Agent any report, certification (including, in particular, the certification to the Secretary of the Treasury required by Section 4(e) of the Regulatory Agreement) or other document required pursuant to the Regulatory Agreement within the time set forth in the Regulatory Agreement as applicable, the Oversight Agent shall immediately give written notice of that fact to the Authority, the Trustee, the City and the Borrower. (ii) In the event that the Borrower fails to file with the Oversight Agent any report, certification or other document required pursuant to the Supplemental Regulatory RVPUB\FBAUM\709452.1 4 Agreement within the time set forth in the Supplemental Regulatory Agreement, as applicable, the Oversight Agent shall immediately give written notice of that fact to the City and the Borrower. (f) On behalf of the Authority and the City, the Oversight Agent shall, at least annually and whenever requested by the Authority, audit the survey of the tenants of the Qualified Spaces with respect to income levels, household sizes and such other information as the Authority may specify, and all as further required under Section 4 of the Regulatory Agreement and Section 4 of the Supplemental Regulatory Agreement. Based on such information, the Authority shall determine compliance with the affordability requirements under the Act and the Code. In the event of any noncompliance the Oversight Agent shall notify the Authority and the City as to the nature and extent of the noncompliance and the Oversight Agent shall suggest alternatives for bringing the Qualified Spaces into compliance. (g) The Oversight Agent will perform on a timely basis all duties ascribed to the Oversight Agent in the Indenture, the Loan Agreement, the Regulatory Agreement and the Supplemental Regulatory Agreement, including without limitation the following: (i) annual review of the Borrower's financial statements, (ii) review the coverage calculation for release of surplus cashflow and report comments to the Borrower, the Authority and the City, (iii) review the final budget and forward comments to the Borrower, the Authority, (iv) physical inspection of the Project on a quarterly basis, including examination of the infrastructure, the clubhouse, and any other common areas, and (v) monthly confirmation report to the Authority, the City and any Bondholder requesting such information that the Trustee has received the monthly deposit in accordance with the approved budget and, in the event that the Trustee has not, to take such further steps as required by the Loan Agreement. 3.3. Compensation. For its services as the Oversight Agent, Wolf & Company, Inc. shall be paid $ at Bond Closing, and thereafter an annual fee of $ payable by the Borrower in equal quarterly installments commencing 15, 2007, as set forth in the Indenture. The fee of the Oversight Agent shall be paid to the Oversight Agent by the Trustee upon receipt by the Trustee of an invoice from the Oversight Agent. If the Oversight Agent provides services outside the scope of this Agreement; as requested in writing by the Authority, the compensation shall be paid at the then prevailing fee schedule of the Oversight Agent. ARTICLE IV TERM 4.1. Term of Agreement. Unless sooner terminated pursuant to the provisions of Sections 4.2 and 4.3 hereof, this Administration Agreement shall remain in full force and effect for the term of the Regulatory Agreement. 4.2. Termination. At its sole discretion, the Authority may terminate this Administration Agreement upon giving the Oversight Agent and the Borrower thirty (30) days written notice of its intention to do so. This Administration Agreement may be terminated in whole or in part only as to the services described in Section 3.1, whereupon a partial fee for the services not terminated will be agreed upon by the parties and memorialized in an amendment hereto. RVPUBTBAU 0709432.1 5 4.3. Resignation of Oversight Agent. With the written consent of the Authority, the Oversight Agent may resign from its position and terminate this Administration Agreement by giving the other parties hereto thirty (30) days written notice of its intention to do so. 4.4 Termination With Respect to Supplemental Regulatory Agreement. At its sole discretion, the City may terminate this Administration Agreement with respect to the Supplemental Regulatory Agreement upon giving the Oversight Agent and the Borrower thirty (30) days written notice of its intention to do so. ARTICLE V MISCELLANEOUS PROVISIONS 5.1. Execution in Counterparts. This Administration Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and such counterparts shall constitute but one and the same instrument. 5.2. Business Days. If any action is required to be taken hereunder on a date which falls on other than a Business Day, such action shall be taken on the next succeeding Business Day. 5.3. Governing Law. This Administration Agreement shall be construed in accordance with the laws of the State of California and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. 5.4. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when delivered or mailed by registered mail, postage prepaid, addressed to the appropriate Notice Address set forth in the Regulatory Agreement and the Supplemental Regulatory Agreement. The Notice Address of the Oversight Agent is: Wolf & Company Inc., 5 Pembroke Lane, Laguna Niguel, California 92677, Attention: Wesley R. Wolf. RVPUB\FBAUM\709452.1 6 IN WITNESS WHEREOF, the parties hereto have caused this Administration Agreement to be executed on their behalf by their duly authorized representatives, all as of the date hereinabove written. INDEPENDENT CITIES LEASE FINANCE AUTHORITY President CITY OF SAN JUAN CAPISTRANO MILLENNIUM HOUSING CORPORATION, a California nonprofit public benefit corporation President WOLF & COMPANY INC., as Oversight Agent Authorized Signatory RVPUBIFBAUM\709452.1 RESOLUTION NO. 06-05-02-05 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN JUAN CAPISTRANO, CALIFORNIA, APPROVING THE ISSUANCE OF MOBILE HOME PARK REVENUE BONDS BY THE INDEPENDENT CITIES LEASE FINANCE AUTHORITY FOR THE SAN JUAN MOBILE ESTATES WHEREAS, the Independent Cities Lease Finance Authority (the "Authority") is authorized pursuant to the provisions of California Health and Safety Code Section 52100 and the terms of the Joint Powers Agreement Creating the Independent Cities Lease Finance Authority (the "Authority'), to issue revenue bonds in accordance with Chapter 8 of Part 5 of Division 31 of the California Health and Safety Code for the purpose of financing multifamily rental housing projects, including mobile home parks; and WHEREAS, the City of San Juan Capistrano is joining the Authority as an associate member: and WHEREAS, Millennium Housing Corporation, a California nonprofit corporation ("Millennium") has requested that the Authority issue mobile home park revenue bonds in one or more series in an aggregate principal amount not to exceed $43,000,000 (the "Authority Bonds") for the purpose of providing financing for the acquisition of a 312 -unit mobile home park located at 32302 Alipaz Street, San Juan Capistrano, California, and known as San Juan Mobile Estates (the `Project'); and WHEREAS, the Project will be owned by Millennium, or a successor, assign or affiliate thereof (the "Owner"); and WHEREAS, the Authority Bonds will be qualified "private activity bonds' for purposes of the Internal Revenue Code of 1986 (the "Code"); and WHEREAS, pursuant to Section 147(f) of the Code, the proposed issuance of private activity bonds is required to be approved by the "applicable elected representative' of the governmental unit having jurisdiction over the area in which the facility financed by such bonds is to be located, after a public hearing held following reasonable public notice; and WHEREAS, the Project is located in the City of San Juan Capistrano (the "City') and the members of the City Council (this "City Council") are the applicable elected representatives of the City; and WHEREAS, there has been published, at least 14 days prior to the date hereof, in a newspaper of general circulation within the City, a notice that a public hearing regarding the proposed issuance of the Authority Bonds would be held on the date hereof; and SIP Page 1 of 2 05-02-2006 WHEREAS, such public hearing was conducted on said date by this City Council, at which time an opportunity was provided to interested parties to be heard with respect to the proposed issuance of the Authority Bonds and financing of the Project; and WHEREAS, it is intended that this resolution shall constitute the approval of the proposed issuance of the Authority Bonds required by Section 147(f) of the Code; NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of San Juan Capistrano does hereby: Section 1. Approval of Issuance of Authority Bonds. This City Council hereby approves the issuance of the Authority Bonds by the Authority. It is the purpose and intent of this City Council that this resolution constitutes approval of the Authority Bonds for the purposes of Section 147(f) of the Code. This City Council further finds that, based on information provided by the Owner, the financing of the Project by the Authority will result in savings in the costs of the Bond financing. Section 2. Effective Date. This resolution shall take effect iyx►rF7ediate on its passage. — ,/� n �� STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss. CITY OF SAN JUAN CAPISTRANO ) I, MARGARET R. MONAHAN, appointed City Clerk of the City of San Juan Capistrano, do hereby certify that the foregoing Resolution No. 06-05-02-05 was duly adopted by the City Council of the City of San Juan Capistrano at a Regular meeting thereof, held the 2°a day of May 2006, by the following vote: AYES: COUNCIL MEMBERS: Hart, Bathgate, Soto, Allevato, and Mayor Swerdlin NOES- : GA IL N�EMBER: None ABS N Chh IL/M/ EMBER: None Clerk Page 2 of 2 05-02-2006 SP San Juan Mobile Estates Residents Association 32302 Alipaz Street, San Juan Capistrano, CA 92675 Cindy Russell Administrative Services Director City of San Juan Capistrano 32400 Paseo Adelanto San Juan Capistrano, CA. 92675 RE: San Juan Mobile Estates Dear Ms. Russell: Apr'l\ Iq,znob The undersigned are the boardmembers of the San Juan Mobile Estates Residents Association. This letter shall confirm that we have reviewed the proposed acquisition of our community by Millennium Housing and that we are requesting that the City take the necessary steps to facilitate Millennium's purchase. Specifically, we ask the City to conduct the TEFRA Hearing, join the Independent Cities Lease Financing Authority, approve the resolutions needed for the bond issuance, and approve the Regulatory Agreement, Supplemental Regulatory Agreement, Oversight and Administrative Agreement, the Association Membership Agreement and any other items as discussed at our meeting with the bond underwriter and bond counsel last Thursday. We have reviewed these agreements and are very supportive of this transaction and the City's role as a facilitator. We appreciate the care and time taken by the City Staff and feel that the various agreements, as modified to reflect your suggested revisions, will lead to a strong transaction that will significantly benefit the park residents. Thanks again to the City Staff for helping make this exciting transaction happen. Very Truly yours, San Juan Mobile Estates Residents Association Board B an Bolton Chairman D Mi�II�gEj. Vice Chairman r' san Well Secretary Dennis Funaro Treasurer Deb(�, Deborah Shuler Bwalw �y eborah er enh ATTACHMENT 32400 PASEO ADEI-ANTO SAN JUAN CAPISTRANO, CA 92675 (949) 493-1171 (949) 493-1053 FAX WW14.Su19)Aa11capislrario. org MEMBERS OF THE CITY COUNCIL NOTIFICATION OF MEETINU-0-F POTENTIAL INTEREST OF THE SAN JUAN CAPISTRANO CITY COUNCIL SAM ALLEVATO DIANE BATHGATE WYATT HART JOE SOTO DAVID M. SWERDLIN The City Council of San Juan Capistrano will meet at 7:00 p.m. on May 2, 2006 in the City Council Chamber in City Hall, to consider: "Consideration of an Associate Membership Agreement with the Independent Cities Lease Finance Authority (ICLFA) and the Issuance of Mobile Home Park Revenue Bonds by ICLFA to Finance the San Juan Mobile Estates Project (Millennium Housing Corporation)" — Item No. E3. If you have specific thoughts or concerns regarding this item, you are encouraged to participate in this decision making process. You can communicate with the City Council through correspondence addressed to the Council and/or by attending the meeting and speaking to the Council during the public meeting. Correspondence related to this item must be received at the City Clerk's office by 5:00 p.m. on Monday, May 1, 2006 to allow time for the Council to consider its content. If you would like to speak at the meeting, please complete a yellow "Request to Speak" form found inside the entrance to the Council Chamber. This form is turned in at the staff table, just in front of the Council dais. You will be called to speak by the Mayor when the item is considered. You have received this notice at the request of the City staff member Cindy Russell, Administrative Services Director. You may contact that staff member at (949) 443-6301 with any questions. The agenda, including agenda reports, is available to you on our web site: www.sanauancapistrano.org. If you would like to subscribe to receive a notice when agendas are posted to the web site, please make that request by sending an e-mail to: council-agendas(r)sanivancapistrano.org. Meg Monahan, CMC City Clerk cc: Millennium Housing Corporation*; San Juan Mobile Estates Resident Association*; Independent Cities Lease Financing Authority*; Cindy Russell, Administrative Service Director; Cindy Russell, Administrative Services Director * Received staff report San Juan Capistrano: Presevving the Past to Enhance the Future 32400 PASEO ADELANTO I J.I A MEMBERS OF THE CICOUNCIL CITU COUNCIL SAN JUAN OAPISTRANO, CA 92675 �%SAM VATO (949) 493.1171 y Int DIANE SATHGATE (949) 493-1053 FAXl BIPBp SM(p 1961 WYATT HART Www sonjuancopisrrano. orf, 1776 JOE SOTO • • DAVID M. SWERDLIN May 3, 2006 NOTIFICATION OF ACTION BY THE CITY COUNCIL OF SAN JUAN CAPISTRANO On May 2, 2006 the City Council of San Juan Capistrano met regarding: "Consideration of an Associate Membership Agreement with the Independent Cities Lease Finance Authority (ICLFA) and the Issuance of Mobile Home Park Revenue Bonds by ICLFA to Finance the San Juan Mobile Estates Project (Millennium Housing Corporation)" Item No, E3. The following action was taken at the meeting: Resolution No. 06-05-02-04 adopted approving an Associate Membership Agreement with Independent Cities Lease Finance Authority, a supplemental Regulatory Agreement; and an Administrantion and Oversight Agreement with respect to the San Juan Mobile Estate acquistion by Millennium Housing Corporation; and Resolution no. 06-05- 02-05 adopted approving issuance of Moblie Home Park Revenue Bonds by the Independent Cities Lease finance Authority for the San Juan Mobile Estates acquistion: Hart/Soto, 5-0 The following documents are in the process of being executed: . If you have any questions regarding this action, please contact Cindy Russell, Administrative Services Director at 443-6301 for more detailed information. Thank you, Meg Monahan, CMC City Clerk Enclosed: Cc: Millennium Housing Corporation"; San Juan Mobile Estates Resident Association'; Independent Cities Lease Financing Authority'; Cindy Russell, Administrative Service Director San Juan Capistrano: Preserving the Past to Enhance the Future RESOLUTION NO. 06-05-02-04 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN JUAN CAPISTRANO, CALIFORNIA, APPROVING AN ASSOCIATE MEMBERSHIP AGREEMENT WITH THE INDEPENDENT CITIES LEASE FINANCE AUTHORITY, A SUPPLEMENTAL REGULATORY AGREEMENT AND AN ADMINISTRATION AND OVERSIGHT AGREEMENT WITH RESPECT TO THE SAN JUAN MOBILE ESTATES WHEREAS, certain cities of the State of California (collectively, the "Members") have entered into a Joint Powers Agreement Creating the Independent Cities Lease Finance Authority (the "Joint Powers Agreement'), establishing the Independent Cities Lease Finance Authority (the "Authority") and prescribing its purposes and powers, and providing, among other things, for associate members of the Authority (an "Associate Member"); WHEREAS, the Authority has beF ed for the purpose, among others, of assisting its Members and Associate M- raising of capital to finance the capital improvement needs of Local Ager ri the Joint Powers Agreement), to provide for home mortgage f; to those Members or Associate Members that are either a & (, alifornia, to provide financing in connection with the in, creation, rehabilitation and preservation of affordable I, as of the Members and Associate Members, and to provide fina. `7 lith the provisions of applicable law in connection with other projects tnat are in the public interest and which benefit Members and Associa. . rs including making loans to tax-exempt organizations from the proceeds of gage revenue bonds to finance the acquisition of multi -family rental housing, including mobile home parks, under the provisions of Chapter 8 of Part 5 of Division 31 (commencing with Section 52100) of the Health and Safety Code; WHEREAS, the City of San Juan Capistrano (the "City') desires to become an Associate Member of the Authority as provided in the Associate Membership Agreement, in the form on file with the City Clerk; and WHEREAS, the Authority proposes to issue its Mobile Home Park Revenue Bonds 2006 Series A, 2006 Series B and 2006 Taxable Series C (the 'Bonds"); and WHEREAS, the proceeds of the Bonds, if any are issued, will be loaned to Millennium Housing Corporation, a California nonprofit corporation (the "Owner") for the purpose of financing the acquisition and improvement of a 312 -space mobile home park known as the San Juan Mobile Estates located at 32302 Alipaz Street in the City (the 'Project'); and Page 1 of 3 05-02-2006 WHEREAS, inconsideration of the City joining the Authority, the Owner has agreed to enter into a Supplemental Regulatory Agreement and Declaration of Restrictive Covenants with the City (the "Supplemental Regulatory Agreement") providing for certain additional affordable housing requirements for the Project, which shall be administered pursuant to an Administration and Oversight Agreement, said Agreements being in the forms on file with the City Clerk; NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of San Juan Capistrano does hereby: Section 1. Approval of an Associate Membership Agreement (Exhibit A). This City Council hereby approves the City's membership in the Authority as an Associate Member and authorizes the Mayor or the Mayor Pro Tem to execute and the City Clerk to attest the Associate Membership Agreement, in substantially the form on file with the City Clerk, pursuant to which the City shall become an Associate Member of the Authority. The Mayor, Mayor Pro Tem, City Manager, City Clerk and any other officers of the City, are hereby authorized and directed to take all actions and do all things necessary or desirable hereunder with respect to the Associate Membership Agreement, including but not limited to, the execution and delivery of any an all agreements, certificates, instruments and other documents which they, or any of them, may deem necessary or desirable and not inconsistent with the purposes of this Resolution. Section 2. Approval of the Supplemental Regulatory Agreement (Exhibit B) and 4 Administration and Oversight Agreement (Exhibit C). The form of the Supplemental ! Regulatory Agreement and Declaration of Restrictive Covenants (the "Supplemental i Regulatory Agreement") by and between the City and the Owner presented to this meeting and imposing certain restrictions in the Project is hereby approved and any of the Mayor, Mayor Pro Tem or City Manager (each an "Authorized Officer") are, and each of them is, hereby authorized and directed, for and in the name and on behalf of the City, to execute the Supplemental Regulatory Agreement in substantially the form hereby approved, with such additions or changes therein as the Authorized Officer executing the same may approve, such approval to be conclusively evidenced by the execution and delivery thereof. Any of the Authorized Officers are hereby authorized and directed to cause the Supplemental -Regulatory Agreement to be recorded in the real estate records of the County of Orange on a subordinate basis to the Regulatory Agreement and Deed of Trust relating to the Bonds. Any of the Authorized Officers are further authorized to and directed, for and in the name and on behalf of the City, to execute the Administration and Oversight Agreement by and among the City, the Authority, the Owner and the Oversight Agent named therein and relating to the administration of the Supplemental Regulatory Agreement and the Regulatory Agreement. Section 3. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. Page 2 of 3 05-02-2006 M PASSED, APPROVED, AND ADOPTED this 2"d day of May 2006. / n VID M. SW5RDLtN, MAYOR CLERK STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss. CITY OF SAN JUAN CAPISTRANO ) I, MARGARET R. MONAHAN, appointed City Clerk of the City of San Juan Capistrano, do hereby certify that the foregoing Resolution No. 06-05-02-04 was duly adopted by the City Council of the City of San Juan Capistrano at a Regular meeting thereof, held the 2nd day of May 2006, by the following vote: AYES: COU CIL MBERS: Hart, Bathgate, Soto, Allevato, and Mayor Swerdlin NOES:O MBER: None ABO EMBER: None Page 3 of 3 05-02-2006 ASSOCIATE MEMBERSHIP AGREEMENT by and between the INDEPENDENT CITIES LEASE FINANCE AUTHORITY and the CITY OF SAN JUAN CAPISTRANO THIS ASSOCIATE MEMBERSHIP AGREEMENT, dated as of May 1, 2006, by and between THE INDEPENDENT CITIES LEASE FINANCE AUTHORITY (the "Authority") and the CITY OF SAN JUAN CAPISTRANO, duly organized and existing under the laws of the State of California (the "City"); WITNESSETH: WHEREAS, certain cities of the State of California (collectively, the "Members") have entered into a Joint Powers Agreement Creating the Independent Cities Lease Finance Authority (the "Agreement'), establishing the Authority and prescribing its purposes and powers, and providing, among other things, for associate members of the Authority (an "Associate Member"); WHEREAS, the Authority has been formed for the purpose, among others, of assisting its Members and Associate Members in the raising of capital to finance the capital improvement needs of Local Agencies (as defined in the Joint Powers Agreement), to provide for home mortgage financing with respect to those Members or Associate Members that are either a city or a county of the State of California, to provide financing in connection with the improvement, construction, acquisition, creation, rehabilitation and preservation of affordable housing within the boundaries of the Members and Associate Members, and to provide financing in accordance with the provisions of applicable law in connection with other projects and programs that are in the public interest and which benefit Members and Associate Members including making loans to tax-exempt organizations from the proceeds of mortgage revenue bonds to finance the acquisition of multi -family rental housing, including mobilehome parks, under the provisions of Chapter 8 of Part 5 of Division 31 (commencing with Section 52100) of the Health and Safety Code (the "Nonprofit Financing Law"); WHEREAS, the City desires to become an Associate Member of the Authority; WHEREAS, the Board of Directors of the Authority has determined that the City should become an Associate Member of the Authority; NOW, THEREFORE, in consideration of thee above premises and of the mutual promises herein contained, the Authority and the City do hereby agree as follows: Section 1. Associate Member Status. The City is hereby made an Associate Member of the Authority for all purposes of the Agreement and the Bylaws of the Authority, the provisions RVPUB\FBAUM\710435.1 I EXHIBIT A of which are hereby incorporated herein by reference. From and after the date of execution and delivery of this Associate Membership Agreement by the City and the Authority, the City shall be and remain an Associate Member of the Authority. Section 2. Restrictions and Rights of the City. The City shall not have the right, as an Associate Member of the Authority, to vote on any action taken by the Board of Directors or by the Authority. In addition, no officer, employee or representative of the City shall have any right to become an officer or director of the Authority. Section 3. No Obligations of the City. The debts, liabilities and obligations of the Authority shall not be the debts, liabilities and obligations of the City. Section 4. Indemnification by Owner. The Authority shall ensure that the legal documents relating to any bonds issued to.finance projects within the jurisdiction of the City shall provide that the owner of any such project shall indemnify, hold harmless and defend the City and each of its officers, officials, employees and agents from any and all loss, liability, fines, penalties, forfeitures, costs, expenses and damages (whether imposed by statute, in contract, tort or strict liability) incurred by the City and from any and all claims, demands and actions in law or equity (including attorney's fees and litigation expenses) arising or alleged to have,arisen directly or indirectly out of performance by the City of this Agreement. Section 5. Execution of the Agreement. Execution of this Associate Membership Agreement shall satisfy the requirements of Article 27 of the Agreement and Article XI of the Bylaws of the Authority for participation by the City in all programs and other undertakings of the Authority, including, without limitation, any Home Mortgage Financing Program (as defined in the Agreement), any financing under the Nonprofit Financing Law, any undertaking to finance the acquisition, construction, installation and/or equipping of public capital improvements, and any other financing program. RVPUB\FBAUM\710435.1 2 EXHIBIT A IN WITNESS WIiEREOF, the parties hereto have caused this Associate Membership Agreement to be executed and attested by their proper officers thereunto duly authorized, on the day and year first set forth above. Attest: Attest: Secretary City Clerk INDEPENDENT CITIES LEASE FINANCE AUTHORITY President CITY OF SAN JUAN CAPISTRANO Mayor RVPUB\FBAUM\710435.1 3 EXHIBIT A RECORDING REQUESTED BY AND ) WHEN RECORDED RETURN TO: ) BEST BEST & KRIEGER LLP ) 3750 University Avenue, 3rd Floor ) Riverside, CA 92501 ) Attention: Francis J. Baum, Esq. ) [Space above for Recorder's use] SUPPLEMENTAL REGULATORY AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS By and Between the CITY OF SAN JUAN CAPISTRANO MMS MILLENNIUM HOUSING CORPORATION, as Owner Dated as of 1, 2006 RVPUB\FBAUMV08996.1 EXHIBIT B THIS SUPPLEMENTAL REGULATORY AGREEMENT AND DECLARATION OF r RESTRICTIVE COVENANTS (the "Regulatory Agreement"), made and entered into as of 1, 2006, by and between the City of San Juan Capistrano, a public body, corporate and politic (the "City"), and Millennium Housing Corporation, a California nonprofit corporation, as the owner of the property described in Exhibit A attached hereto (the "Owner"): WITNESSETH: WHEREAS, the Owner is acquiring the property described on Exhibit A attached hereto and the improvements located thereon, consisting of a 312 -space mobile home park known as "San Juan Mobile Estates" (the "Project"), with a loan to it from the Independent Cities Lease Finance Authority (the "Authority") from the proceeds of the Authority's Mobile Home Park Revenue Bonds, Series A, Series B and Taxable Series C (collectively, the "Authority Bonds"); and WHEREAS, in connection with the issuance of the Authority Bonds, the Owner, the Authority and Union Bank of California, N.A., as trustee for the Authority Bonds (the "Authority Bond Trustee") have entered into a Regulatory Agreement and Declaration of Restrictive Covenants dated as of 1, 2006 (the "Authority Regulatory Agreement") which is being recorded in the real estate records of Orange County as a covenant running with the real property described in Exhibit A (the "Property"); and WHEREAS, in consideration of the City joining the Authority as an Associate Member in order to enable the Authority to provide financing to the Owner for the Project, the Owner and the City are entering into this Supplemental Regulatory Agreement and wish it to be recorded as a covenant running with the Property on a subordinate basis to the Authority Regulatory Agreement and the Deed of Trust referred to herein; NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth herein, and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the City and the Owner hereby agree as follows: Section 1. Definitions and Interpretation. The following terms shall have the respective mearlings assigned to them in this Section 1 unless the context in which they are used clearly requires otherwise: "Adjusted Income" — The total anticipated annual income of all persons in a household, as calculated in accordance with 25 California Code of Regulations Section 6914 or pursuant to a successor State housing program that utilizes a reasonably similar method of calculation of adjusted income. In the event that no such program exists, the City shall provide the Owner with a reasonably similar method of calculation of adjusted income as provided in said Section 6914. "Administration Agreement" - The Administration and Oversight Agreement, dated as of 1, 2006, by and among the Authority, the City, the Owner and the Oversight Agent. "Area"- The Primary Metropolitan Statistical Area in which the Project is located. "Authority" - The Independent Cities Lease Finance Authority. ' RVPUBTBAUM\708986.1 I "Authority Bonds" - Collectively, the Authority's Mobile Home Park Revenue Bonds (San Juan Mobile Estates) Series 2006A, Mobile Home Park Subordinate Revenue Bonds (San Juan Mobile Estates) Series 2006B and Mobile Home Park Subordinate Revenue Bonds (San Juan Mobile Estates) Taxable Series 2006C issued pursuant to an Indenture of Trust between the Authority and the Authority Bond Trustee and dated as of 1, 2006. "Authority Bond Trustee" - Union Bank of California, N.A., as trustee for the Authority "Certificate of Continuing Program Compliance" - The certificate with respect to the Project to be filed by the Owner with the Authority, the Authority Bond Trustee which shall be substantially in Regulatory Agreement as Exhibit C. "City" - The City of San Juan Capistrano. "County" - The County of Orange. City, the Oversight Agent and the the form attached to the Authority "Deed of Trust" - The Deed of Trust defined in the Indenture. "Income Certification" - The Income Computation and Certification attached to the Authority Regulatory Agreement as Exhibit B. "Lower Income Residents" - An individual or family household that, on the later of. (i) the date of this Agreement, or (ii) the date of the Lower Income Resident's initial occupancy of the Park, has an Adjusted Income that does not exceed the qualifying limits for lower income households, adjusted for actual household size, as established and amended from time to time pursuant to Section 8 for the United States Housing Act of 1937, and as published by the State of California Department of Housing and Community Development. "Lower Income Spaces" - The spaces in the Project designated for occupancy by Lower Income Residents pursuant to Section 4(a) of this Supplemental Regulatory Agreement. "Median Income for the Area" - The median gross yearly income adjusted for household size for the Area, as published from time to time by the State. In the event that such income determinations are no longer published, or are not updated for a period of at least eighteen (18) months, the City shall provide the Owner with other income determinations which are reasonably similar with respect to methods of calculation to those previously published by the State. "Oversight Agent" - the Oversight Agent appointed under the Administration Agreement, which initially shall be Wolf & Company Inc. "Project Restriction Period" - The period ending 35 years from the execution date of this Supplemental Regulatory Agreement. "Qualified Residents" - means Very Low Income Residents and Lower Income Residents. "Qualified Space" - a Very Low Income Space or a Lower Income Space. RVPUB\FBAUM\708986.1 2 "Rental Assistance Fund" - The fund by that name established pursuant to the Indenture and to be administered pursuant to Section 2(b) hereof. "Space" - A mobile home space within the Project upon which a mobile home may be placed. "Very Low Income Residents" - Individuals or families with an Adjusted Income which does not exceed the qualifying limits for very low income households, adjusted for actual household size, as established and amended from time to time pursuant to Section 8 of the United States Housing Act of 1937, and as published by the State of California Department of Housing and Community Development. "Very Low Income Spaces" - The Spaces in the Project designated for occupancy by Very Low Income Residents pursuant to Section 4(a) of this Supplemental Regulatory Agreement. Such terms as are not defined herein shall have the meanings assigned to them in the Indenture. Unless the context clearly requires otherwise, as used in this Supplemental Regulatory Agreement, words of the masculine, feminine or neuter gender shall be construed to include each other gender when appropriate and words of the singular number shall be construed to include the plural number, and vice versa, when appropriate. This Supplemental Regulatory Agreement and all the terms and provisions hereof shall be construed to effectuate the purposes set forth herein and to sustain the validity hereof. The defined terms used in the preamble and recitals of this Supplemental Regulatory Agreement have been included for convenience of reference only, and the meaning, construction and interpretation of all defined terms shall be determined by reference to this Section 1 notwithstanding any contrary definition in the preamble or recitals hereof. The titles and headings of the sections of this Supplemental Regulatory Agreement have been inserted for convenience of reference only, and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof or be considered or given any effect in construing this Supplemental Regulatory Agreement or any provisions hereof or in ascertaining intent, if any question of intent shall arise. Section 2. Membership in Authority; Rental Assistance Fund. (a) City Membership in Authority. In consideration of the Borrower entering into this Supplemental Regulatory Agreement, the City has agreed to become an Associate Member of the Authority in order to enable the Authority to provide financing to the Owner for the Project. (b) Rental Assistance Fund. (i) The Owner shall establish with the Authority Bond Trustee the Rental Assistance Fund, which shall be held by the Authority Bond Trustee pursuant to Section 5.18 of the Indenture. After initial funding of the Rental Assistance Fund, the Owner shall thereafter fund additional deposits to the Rental Assistance Fund from moneys in the Surplus fund under the Indenture so as to maintain sufficient moneys in the Rental Assistance Fund to meet the Owner's obligations under this Section 2(b). (ii) The Owner is authorized to make monthly withdrawals and utilize moneys in the Rental Assistance Fund to provide a subsidy for rental payments to be made by tenants in the Project in the manner and in the amounts set forth as follows: RVPus\FSAUM\709986.1 3 (a) Upon close of escrow ("Close of Escrow"), initial space rent for each mobilehome space in the Project occupied by a resident at that time will be $805 per month (the "Rent Cap"). The Rent Cap for residents that do not currently rent space in the Project will be adjusted annually after the Close of Escrow to the rent permitted under the Rent Control Ordinance of the City of San Juan Capistrano (the "Rent Control Ordinance"). The Rent Cap for residents that currently rent space in the Project or rent space in the Project within seven days of the Close of Escrow (`Current Residents") shall remain at $805 per month until the second anniversary of the Close of Escrow, and shall thereafter be adjusted annually to the rent permitted under the Rent Control Ordinance (said amount, as adjusted from time to time, being referred to herein as the "Space Rent"). (b) Notwithstanding the Space Rent set forth in (a) above, every Current Resident will pay only that amount permitted as rent under the Rent Control Ordinance and any difference will be provided as assistance from the Rental Assistance Fund such that the total of the rent actually paid by such Current Resident, and the amount paid as rental assistance will equal the Space Rent. This rental subsidy for Current Residents will continue to be paid from the Rental Assistance Fund as long as the Current Resident resides in the Project. (c) All rental assistance will be contingent upon the Current Resident applicant's compliance with park rules, including the requirement to provide the Annual Income Certification needed for the Owner's compliance with the bond documents; failure to comply with park rules or the annual certification requirement, after written notice and the expiration of a reasonable cure period, may result in a suspension of the rental assistance, such suspension to continue until the Current Resident is again in compliance. (d) The Owner shall not seek to evict Current Residents who, while otherwise complying with park rules, cannot pay the subsidized rents; in such cases, the Owner shall use park surplus funds or the Rental Assistance Fund to reasonably further subsidize or defer a portion of the rent, depending upon individual circumstances, but the Owner shall not be obligated to subsidize or defer sums in excess of the amount that would reduce the rent payable by a Current Resident below the rent that would be payable by that Current Resident under the Rent Control Ordinance had the Owner never purchased the Project. Owner shall also assist any Current Resident brought to the Owner's attention by the City, to the extent such assistance will not prevent the Owner from meeting its other obligations under its various bond agreements. Section 3. Project Requirements. The Owner hereby represents, as of the date hereof, and covenants, warrants and agrees as follows: (a) The Project is being owned and operated for the purpose of providing residential rental housing, consisting of one mobile home Space for each household, together with related facilities. (b) All of the mobile homes in the Project will contain separate facilities for living, sleeping, eating, cooking and sanitation, including a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking range, refrigerator and sink. RVPUB\FBAUM\708986.1 4 (c) All of the Spaces will be available for rental on a continuous basis to members of the general public, and the Owner will not give preference to any particular class or group in renting the Spaces in the Project, except to the extent that Spaces are required to be leased or rented to Qualified Residents. (d) The Project comprises a single geographically and functionally integrated project for residential rental property, as evidenced by the ownership, management, accounting and operation of the Project. (e) There shall be no discrimination against or segregation of any person or group of persons on account of race, color, religion, age, sex, marital status, ancestry, national origin, source of income (e.g. AFDC or SSI) or disability in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Project nor shall the transferee or any person claiming under or through the transferee, 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 of the Project. (f) The Very Low Income Spaces and the Lower Income Spaces shall be intermingled with, and shall be of comparable quality to, all other Spaces in the Project. Tenants in all Spaces shall have equal access to and enjoyment of all common facilities of the Project. (g) In the aggregate, no more than two persons per bedroom, plus one person shall occupy any Space in the Project. For example, with respect to a two bedroom mobilehome, maximum occupancy shall be 5 persons. (h) The Owner will accept as tenants, on the same basis as all other prospective tenants, persons who are recipients of federal certificates for rent subsidies pursuant to the existing housing program under Section 8 of the United Stated Housing Act, or its successor. The Owner shall not apply selection criteria to Section 8 certificate or voucher holders that is more burdensome than criteria applied to all other prospective tenants, nor shall the Owner apply or permit the application of management policies or lease provisions with respect to the Project which have the effect of precluding occupancy of Spaces by such prospective tenants. (i) The Owner agrees to honor all existing lease agreements in effect on the date of the Agreement, including any provisions contained therein with respect to rent adjustments, or if requested by a tenant who is a party to such a lease agreement, to replace such lease agreement with a month-to-month lease arrangement, subject to the Rent Control Ordinance. Section 3A. Property Management and Maintenance. The following provisions shall apply during the term of this Supplemental Regulatory Agreement. (a) Management Responsibilities. The Owner is responsible for all management functions with respect to the Project including without limitation the selection of tenants, certification and recertification of household size and income, evictions, collection of rents and deposits, maintenance, landscaping, routine and extraordinary repairs, replacement of capital items, and security. The City shall not have responsibility over management of the Project. The Owner may delegate its duties under this Section 3A to a property management company. A resident manager shall also be required. hi no instance shall the Owner delegate or forego its responsibility to manage and operate the Project in the manner set forth in this Supplemental Regulatory Agreement and the Loan Agreement. RVPUBTBAUM\708986.1 5 (b) Management and Operation of Project. The Owner acknowledges that there exists a Residents Association for the Project and a governing board thereof (the "Resident Association Board"). The Owner agrees that the Resident Association Board may provide tenant comment and input to the Owner in the management and operation of the Project. The Owner or its representative or agent agrees to meet with any such Resident Association Board at least twice a year, or at such other frequency as agreed by the Resident Association Board and the Owner, to receive comments and recommendations with respect to Project operation and management. The Owner further agrees to provide regular reports (at least quarterly, or at such other intervals as agreed to by the Owner and the Resident Association Board) relating to the operation of the Project to the Resident Association Board. While the Resident Association Board shall have no decision-making authority with respect to the management and operation of the Project, the Owner agrees to use its best efforts to implement recommendations of the Resident Association Board that can reasonably be implemented by the Owner and that will not cause the Owner, in its reasonable judgment, to be unable to perform its obligations under this Agreement, the Authority Regulatory Agreement, the Loan Agreement and the Deed of Trust. The Owner further agrees that it shall not refuse any good -faith request by the Resident Association Board for the addition, deletion or amendment of a Project rule or regulation absent a good -faith, business reason for doing so. The Owner may request all residents of the Project to vote on any such addition, deletion or amendment. The Owner further agrees to review and take such action as it determines to be appropriate with respect to any documented complaints about Project management presented to it by the Resident Association Board. (c) Property Maintenance. The Owner agrees, for the entire Term of this Supplemental Regulatory Agreement, to maintain all common area interior and exterior improvements and common buildings on the Project (exclusive of the mobile homes and tenant spaces), including landscaping and common buildings on the Project in good condition and repair (and, as to landscaping, in a healthy condition) and in accordance with all applicable laws, rules, ordinances, orders and regulations of all federal, state, county, municipal, and other governmental agencies and bodies having or claiming jurisdiction and all their respective departments, bureaus, and officials. The City places prime importance on quality maintenance to ensure that all City -assisted affordable housing projects within the City are not allowed to deteriorate due to below-average maintenance. - Section 4. Qualified Residents. The Owner hereby represents, as of the date hereof, and warrants, covenants and agrees as follows: (a) During the Project Requirement Period (a) not less than twenty percent (20%) of the Spaces in the Project shall be designated as Very Low Income Spaces and shall be continuously occupied by Very Low Income; and (b) not less than thirty percent (30%) of the Spaces in the Project shall be designated as Lower Income Spaces and shall be continuously occupied by Lower Income Residents. The monthly rent charged for one-half of the Very Low Income Spaces (i.e., 10% of the Spaces in the Project) shall be not greater than as follows: (A) where a Very Low Income Resident is both the registered and legal owner of the mobile home and is not making mortgage payments for the purchase of that mobile home, the total rental charge for occupancy of the Space (excluding a reasonable allowance for other related housing costs determined at the time of acquisition of the RVPUB\FBAUM\708986.1 6 Project by the Owner and excluding any supplemental rental assistance from the State, the federal government, or any other public agency to the Very Low Income Resident, on behalf of the Space and the mobile home) shall not exceed one -twelfth of 30 percent of 50 percent of Median Income for the Area, adjusted for household size in the manner set forth below. (B) where a Very Low Income Resident is the registered owner of the mobile home and is making mortgage payments for the purchase of that mobile home, the total rental charge for occupancy of the Space (excluding any charges for utilities and storage and excluding any supplemental rental assistance from the State, the federal government, or any other public agency to the Very Low Income Resident, or on behalf of the Space and mobile home), shall not exceed one -twelfth of 15 percent of 50 percent, of Median Income for the Area, as adjusted for household size in the manner set forth below. (C) where a Very Low Income Resident rents both the mobile home and the Space occupied by the mobile home, the total rental payments paid by the Very Low Income Resident on the mobile home and the Space occupied by the mobile home (excluding any supplemental rental assistance from the State, the federal government, or any other public agency to that Very Low Resident or on behalf of that Space and mobile home) shall not exceed one -twelfth of 30 percent of 50 percent, of Median Income as established by the U.S. Department of Housing and Urban Development for the Area adjusted for household size in the manner set forth below. In adjusting rent for household size, it shall be assumed that two persons will occupy a single -wide mobilehome and three persons will occupy a multisectional j mobilehome; provided that if the multisectional mobilehome has three or more bedrooms, then it shall be assumed that four persons shall occupy a three-bedroom unit and five persons will occupy a four-bedroom unit. (b) hi the event a recertification of the income of a Very Low Income Resident or a Lower Income Resident, as applicable, in accordance with Section 4(d) below demonstrates that such tenant no longer qualifies as a Very Low Income Resident or a Lower Income Resident, as applicable, the Space occupied by such tenant shall continue to be treated as a Very Low Income Space or a Lower Income Space, as applicable, unless and until any Space in the Project thereafter is occupied by a new tenant other than a Very Low Income Resident or a Lower Income Resident, as applicable. Moreover, a Space previously occupied by a Very Low Income Resident, a Lower Income Resident or a Moderate Income Resident, as applicable, and then vacated shall be considered occupied by a Qualified Resident until reoccupied, other than for a temporary period, at which time the character of the Space shall be redetermined. In no event shall such temporary period exceed thirty-one (3 1) days. Notwithstanding anything herein to the contrary, if at any time the number of Qualified Residents falls below the number required by subparagraph (a) (i) of this Section, the next available vacant Space shall be rented to a Qualified Resident. (c) Annually, the Owner will obtain and maintain on file an Income Certification form from each Qualified Resident occupying a Qualified Space, dated immediately prior to the initial occupancy of such Qualified Resident in the Project (or prior to the Closing Date in the _a case of existing Very Low Income Residents). In addition, the Owner will provide such further information as may be required in the future by the State of California, as requested by the City RVPUBTBAUM\708986.] 7 or the Oversight Agent. The Owner shall verify that the income provided by an applicant with respect to a Space to be occupied after the Closing Date is accurate by taking one or more of the following steps as a part of the verification process: (1) obtain a federal income tax return for the most recent tax year, (2) obtain a written verification of income and employment from applicant's current employer such as a current pay stub or W-2 form, (3) if an applicant is unemployed or did not file a tax return for the previous calendar year, obtain other verification of such applicant's income reasonably satisfactory to the Oversight Agent or (4) such other information as may be reasonably requested by the Oversight Agent. Within ten days of the last day of each calendar quarter during the term of this Regulatory Agreement commencing with the quarter ending 2006, the Owner shall advise the Oversight Agent or in the absence of a Oversight Agent, the City, of the status of the occupancy of the Project by delivering to the Oversight Agent a Certificate of Continuing Program Compliance; provided, however, with the prior written approval of the Oversight Agent or the City, as the case may be, such Certificate need be filed only semi-annually. Copies of the most recent Income Certifications for Qualified Residents commencing or continuing occupancy of a Qualified Space shall be made available to the City or Oversight Agent upon request. (d) Annually, the Owner shall recertify the income of the occupants of such Very Low Income Spaces and Lower Income Spaces, as applicable, by obtaining a completed Income Certification based upon the current income of each occupant of the unit. In the event the recertification demonstrates that such household's income exceeds 140% of the income at which such household would qualify as Very Low Income Residents or Lower Income Residents, as applicable, such household will no longer qualify as a Very Low Income Resident or a Lower Income Resident, as applicable, and the Owner either (i) will designate another qualifying Tenant and Space in the Project as a Very Low Income Resident or a Lower Income Resident, as applicable and a Very Low Income Space or a Lower Income Space, as applicable, respectively, or (ii) will rent the next available vacant Space to one or more Very Low Income Residents or Lower Income Residents, as applicable. (e) The Owner will maintain complete and accurate records pertaining to the Qualified Spaces, and will permit any duly authorized representative of the City or the Oversight Agent to inspect during normal business hours and with prior notice the books and records of the Owner pertaining to the Project, including those records pertaining to the occupancy of the Qualified Spaces. (f) Each lease or rental agreement pertaining to a Qualified Space occupied after the Closing Date shall contain a provision to the effect that the Owner has relied on the Income Certification and supporting information supplied by the Qualified Resident in determining qualification for occupancy of the Qualified Space, and that any material misstatement in such certification (whether or not intentional) may be cause for immediate termination of such lease. Each lease or rental agreement will also contain a provision that failure to cooperate with the annual recertification process reasonably instituted by the Owner pursuant to Section 4(d) above will disqualify the Space as a Qualified Space and provide grounds for termination of the lease. The Owner agrees to provide to the Oversight Agent and the City, a copy of the form of application and lease or rental agreement to be provided to prospective Qualified Residents and any amendments thereto. RVPUBTBAUW708986.1 8 (g) In the event, despite the Owner's exercise of best efforts to comply with the provisions of Section 4 of this Regulatory Agreement, the Owner shall have been out of compliance with any of the restrictions of Section 4 hereof relative to Qualified Residents, for a j period in excess of six months, then at the sole option of the City the term of the Regulatory Agreement shall be automatically extended for the period of non-compliance upon written notice ,to the Owner and the Oversight Agent from the City, such extension to relate to the Qualified Spaces and Qualified Residents as to which such noncompliance relate. Section 5. Repair and Replacement Fund. The Owner agrees and covenants to cause to be established and maintained the Repair and Replacement Fund created by Section 5.3(7) of the Indenture and to be used and replenished as provided in Sections 5.13 and 5.7(h) of the Indenture and Section 6.22 of the Loan Agreement. Section 6. Other Covenants. (a) The Owner further covenants and agrees as follows: The Owner will comply with the provisions of Title 2, Chapter 2, Article 9 of the City Municipal Code relating to mobile home rent control (the "Rent Control Ordinance"), a copy of which Rent Control Ordinance is attached hereto as Exhibit B notwithstanding any legal challenges to the Rent Control Ordinance, and further agrees that it shall at all times abide by and follow the terms and provisions of the Rent Control Ordinance, and shall not in any manner challenge said provisions. (b) In the event the Owner requests any discretionary rental increases under the Rent Control ordinance, the Owner agrees not to appeal any decision of the City with respect to such request. i (c) In the event the Rent Control Ordinance is determined in any legal proceeding to be invalid for any reason, the Owners agrees to continue to comply with the provisions of the Rent Control Ordinance as if it were still in effect. Section 7. Indemnification. The Owner shall indemnify, hold harmless and defend the City, the Oversight Agent and the Authority Bond Trustee and the respective officers, members, directors, officials and employees of each of them (the "indemnified party") against all loss, costs, damages, expenses, suits, judgments, actions and liabilities of whatever nature, joint and several (including, without limitation, attorneys' fees, litigation and court costs, amounts paid in settlement, and amounts paid to discharge judgments), directly or indirectly resulting from or arising out of or related to (a) the operation, use, occupancy, maintenance, or ownership of the Project (including compliance with laws, ordinances and rules and regulations of public authorities relating thereto); or (b) any written statements or representations with respect to the Owner the Project or the Authority Bonds made or given to the City, the Oversight Agent or the Authority Bond Trustee, by the Owner, or any of its agents or employees, including, but not limited to, statements or representations of facts or financial information; provided, however, the Owner shall not be obligated to indemnify the City, the Authority Bond Trustee or the Oversight Agent for damages caused by the gross negligence or willful misconduct of the City, the Authority Bond Trustee or the Oversight Agent. The Owner also shall pay and discharge and shall indemnify and hold harmless the City, the Oversight Agent and the Authority Bond Trustee from (x) any lien or charge upon payments by the Owner to the City and the Authority Bond Trustee hereunder and (y) any taxes (including, without limitation, all ad valorem taxes and sales J taxes), assessments, impositions and other charges in respect of any portion of the Project. If any such claim is asserted, or any such lien or charge upon payments, or any such taxes, assessments, RVPUB\FBAUM\708986.1 9 impositions or other charges, are sought to be imposed, the City shall give prompt notice to the Owner, and the Owner shall have the sole right and duty to assume, and will assume, the defense thereof, including the employment of counsel selected by the indemnified party and the payment of all reasonable expenses related thereto, with full power to litigate, compromise or settle the same in its sole discretion; provided, however, that the Owner shall have the right to review and approve or disapprove any such compromise or settlement, and provided further that any such approval shall not be unreasonably withheld. Section 8. Consideration. The City has agreed to become an Associate Member of the Authority for the purpose, among others, of inducing the Owner to own and operate the Project such that the Project shall contribute to the City's efforts to provide affordable housing to Qualified Residents in the City and to the satisfaction of the City's ongoing housing burden. In consideration of the City joining the Authority as an Associate Member in order to allow the Authority to provide financing to the Owner for the Project, the Owner has entered into this Supplemental Regulatory Agreement and has agreed to restrict the uses to which the Project can be put on the terms and conditions set forth herein. Section 9. Reliance. In performing its duties and obligations hereunder, the City may rely upon statements and certificates of the Owner and Qualified Residents, and upon audits of the books and records of the Owner pertaining to the Project. In addition, the City may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the City hereunder in good faith and in conformity with such opinion. Section 10. Sale or Transfer of the Project; Option to Purchase. (a) The Owner intends to hold the Project for its own account, has no current plans to sell, transfer or otherwise dispose of the Project, and hereby covenants and agrees not to sell, transfer or otherwise dispose of the Project, or any portion thereof (other than for individual tenant use as contemplated hereunder), without obtaining the prior written consent of the City and upon receipt by the City of (i) reasonable evidence satisfactory to the City that the Owner's purchaser or transferee has assumed in writing and in full, the Owner's duties and obligations under this Supplemental Regulatory Agreement, (ii) an opinion of counsel for the transferee that the transferee has duly assumed the obligations of the Owner under this Supplemental Regulatory Agreement, and that such obligations and this Supplemental Regulatory Agreement are binding on the transferee, (iii) the City receives evidence acceptable to the City that either (A) the transferee has experience in the ownership, operation and management of comparable projects without any record of material violations of discrimination restrictions or other state or federal laws or regulations applicable to such projects, or (B) the transferee agrees to retain a property management firm with the experience and record described in subparagraph (A) above and in either case, at its option, the City may cause the Oversight Agent to provide on-site training in program compliance if the City determines such training is necessary and (iv) the City receives evidence that the purchaser is a not for-profit organization. It is hereby expressly stipulated and agreed that any sale, transfer or other disposition of the Project in violation of this Section 10 shall be null, void and without effect, shall cause a reversion of title to the Owner, and shall be ineffective to relieve the Owner of its obligations under this Supplemental Regulatory Agreement. Not less than 30 days prior to consummating any sale, transfer or disposition of any interest in the Project, the Owner shall deliver to the City and the Oversight Agent a notice in writing explaining the nature of the proposed transfer. RVPUB\FBAUM\708986.1 10 (b) Notwithstanding the provisions of Section 10(a) above, the Owner shall grant to the San Juan Capistrano Residents Association (the "Residents Association") an option to purchase the Project from the Owner under a written option agreement on the following general terms: (i) During the first 10 years following the Closing Date, the purchase price of the Project under said option shall be equal to $ plus the costs of any financing undertaken by the Residents Association to accomplish such purchase; (ii) After the first 10 years following the Closing Date, the purchase price of the Project shall be equal to $ plus the increase in the Consumer Price Index for the preceding year (beginning with year 11), together with the costs of any financing undertaken by the Residents Association to accomplish said purchase; (iii) The Residents Association shall pay, in addition to the purchase price set forth in (a) or (b) above, all costs, fees and expenses, including, but not limited to, title, escrow and all other closing costs, necessary to defease, prepay and redeem the Outstanding Bonds of the Authority and the transfer of ownership of the Project from the Owner to the Residents Association; and (iv) The Residents Association shall provide to the City, the Authority and the Owner an opinion of Bond Counsel to the effect that the exercise of said option and the purchase of the Project by the Residents Association and the defeasance of the Outstanding Authority Bonds will not in and of itself, cause interest on said Authority Bonds to be included in gross income for federal income tax purposes. (c) It is hereby expressly stipulated and agreed that any sale, transfer or other disposition of the Project in violation of this Section 10 shall be null, void and without effect, shall cause a reversion of title to the Owner, and shall be ineffective to relieve the Owner of its obligations under this Supplemental Regulatory Agreement. Not less than 30 days prior to consummating any sale, transfer or disposition of any interest in the Project, the Owner shall deliver to the City and the Oversight Agent a notice in writing explaining the nature of the proposed transfer. Section 11. Term. This Regulatory Agreement and all and several of the terms hereof shall become effective upon its execution and delivery and shall remain in full force and effect during the Project Restriction Period, it being expressly agreed and understood that the provisions hereof are intended to survive the retirement of the Authority Bonds. Notwithstanding any other provisions of this Regulatory Agreement to the contrary, this entire Supplemental Regulatory Agreement, or any of the provisions or sections hereof, may be terminated upon agreement by the City and the Owner. The terms of this Supplemental Regulatory Agreement to the contrary notwithstanding, this Supplemental Regulatory Agreement, and all and several of the terms hereof, shall terminate and be of no further force and effect in the event of (i) a foreclosure or delivery of a deed in lieu of foreclosure whereby the Authority Bondowners or a third party shall take possession of the Project, or (ii) involuntary non-compliance with the provisions of this Supplemental Regulatory Agreement caused by fire, seizure, requisition, change in a federal law or an action of a federal agency after the date hereof which prevents the City from enforcing the provisions hereof, or (iii) RVPUB\FBAUM\708986.1 I I condemnation or a similar event and the payment in full and retirement of the Authority Bonds theretofore or within a reasonable period thereafter. Upon the termination of the terms of this Supplemental Regulatory Agreement, the parties hereto agree to execute, deliver and record appropriate instruments of release and discharge of the terms hereof, provided, however, that the execution and delivery of such instruments shall not be necessary or a prerequisite to the termination of this Supplemental Regulatory Agreement in accordance with its terms. Section 12. Covenants to Run With the Land. The Owner hereby subjects the Project (including the Project site) to the covenants, reservations and restrictions set forth irl this Supplemental Regulatory Agreement. The City and the Owner hereby declare their express intent that the covenants, reservations and restrictions set forth herein shall be deemed covenants running with the land and shall pass to and be binding upon the Owner's successors in title to the Project; provided, however, that upon the termination of this Supplemental Regulatory Agreement said covenants, reservations and restrictions shall expire with the exception of the non-discrimination covenant of Section 3(e) which shall continue in perpetuity. Each and every contract, deed or other instrument hereafter executed covering or conveying the Project or any portion thereof shall conclusively be held to have been executed, delivered and accepted subject to such covenants, reservations and restrictions, regardless of whether such covenants, reservations and restrictions are set forth in such contract, deed or other instrument. Section 13. Burden and Benefit. The City and the Owner hereby declare their understanding and intent that the burden of the covenants set forth herein touch and concern the land in that the Owner's legal interest in the Project is rendered less valuable thereby. The City and the Owner hereby further declare their understanding and intent that the benefit of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Project by Qualified Residents, the intended beneficiaries of such covenants, reservations and restrictions. Section 14. Uniformity; Common Plan. The covenants, reservations and restrictions hereof shall apply uniformly to the entire Project in order to establish and carry out a common plan for the use, development and improvement of the Project. Section 15. Enforcement. If the Owner defaults in the performance or observance of any covenant, agreement or obligation of the Owner set forth in this Supplemental Regulatory Agreement, and if such default remains uncured for a period of 60 days after notice thereof shall have been given by the City to the Owner (provided, however, that the City may at its sole option extend such period and provided further, in the event any default relates to Section 4 hereof and the Owner is exercising best efforts to comply with such restrictions as determined by the City in its reasonable discretion, then the cure period described above shall be 6 months and shall be subject to the extension of the Project Restriction Period under Section 4(h) hereof), then the City shall declare an "Event of Default" to have occurred hereunder, and the City, at its option, may take any one or more of the following steps: (a) by mandamus or other suit, action or proceeding at law or in equity, require the Owner to perform its obligations and covenants hereunder or enjoin any acts or things which may be unlawful or in violation of the rights of the City hereunder; (b) have access to and inspect, examine and make copies of all of the books and records of the Owner pertaining to the Project; and RVFUB\FBAUM\708986.1 12 (c) take such other action at law or in equity as may appear necessary or desirable to enforce the obligations, covenants and agreements of the Owner hereunder. All fees, costs and expenses of the City and the Oversight Agent (including, without limitation, reasonable attorneys' fees) reasonably incurred in taking any action pursuant to this Section 15 shall be the sole responsibility of the Owner. Section 16. Recording and Filing. The Owner shall cause this Supplemental Regulatory Agreement and all amendments and supplements hereto, to be recorded and filed, after the recording of the Authority Regulatory Agreement and the Deed of Trust in the real property records of the County and in such other places as the may reasonably request. The Owner shall pay all fees and charges incurred in connection with any such recording. Section 17. Payment of Fees. In the event of a default hereunder by the Owner, the Owner shall pay to the City reasonable compensation for any services rendered by it hereunder and reimbursement for all expenses reasonably incurred by in connection with such default. Section 18. Governing Law. This Supplemental Regulatory Agreement shall be governed by the laws of the State of California. Section 19. Amendments. This Supplemental Regulatory Agreement shall be amended only by a written instrument executed by the parties hereto or their successors in title, and duly recorded in the real property records of the County. Z i Section 20. Notice. All notices, certificates or other communications shall be sufficiently given and shall be deemed given on the date personally delivered or on the second day following the date on which the same have been mailed by certified mail, return receipt requested, postage prepaid, addressed as follows: City: City of San Juan Capistrano 32400 Paseo Adelanto San Juan Capistrano, CA 92675 Attn: City Manager Oversight Wolf & Company Inc. Agent: 5 Pembroke Lane Laguna Niguel, CA 92677 Attn: Wesley R. Wolf Owner: Millennium Housing Corporation 660 Newport Center Drive, Suite 1020 Newport Beach, CA 92660 Attn: George Turk Any of the foregoing parties may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, documents or other communications shall be sent. G RVPUB\FHAUM\708986.1 13 Section 21. Severability. If any provision of this Supplemental Regulatory Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions hereof shall not in any way be affected or impaired thereby. Section 22. Multiple Counterparts. This Supplemental Regulatory Agreement may be executed in multiple counterparts, all of which shall constitute one and the same instrument, and each of which shall be deemed to be an original. Section 23. Subordination. This Supplemental Regulatory Agreement and any amendments, modifications, renewals and extensions hereof shall at all times be a lien and charge on the Project and the real property described on Exhibit A hereto expressly and unconditionally subordinate to the lien and charge thereon of the Authority Regulatory Agreement and the Deed of Trust. RVPUBIFBAUM1708986.1 14 IN WITNESS WHEREOF, the City and the Owner have executed this Supplemental Regulatory Agreement by duly authorized representatives, all as of the date first written hereinabove. CITY OF SAN JUAN CAPISTRANO By: _ Title: MILLENNIUM HOUSING CORPORATION, a California non-profit public benefit corporation an President RVPU13\FBAUM\708986.1 15 STATE OF CALIFORNIA ) ) ss. COUNTY OF ) On 2006, before me, personally appeared ❑ personally known to me OR ❑ proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature of Notary [SEAL] RVPUBTBAUM\708986.1 STATE OF CALIFORNIA ) ss. COUNTY OF On 2006, before me, , personally appeared ❑ personally known to me OR ❑ proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature of Notary [SEAL] R V PUB\FBAUM\708986.1 TABLE OF CONTENTS Page Section 1. Definitions and interpretation.................................................................... 1 Section 2. Membership in Authority; Rental Assistance Fund ................................... 3 Section 3. Project Requirements................................................................................. 4 Section 3A. Property Management and Maintenance................................................... 5 Section 4. Qualified Residents.................................................................................... 6 Section 5. Repair and Replacement Fund................................................................... 9 Section 6. Other Covenants......................................................................................... 9 Section 7. Indemnification .......................................................................................... 9 Section 8. Consideration........................................................................................... 10 Section9. Reliance.................................................................................................... 10 Section 10. Sale or Transfer of the Project; Option to Purchase ................................ 10 Section11. Term......................................................................................................... 11 Section 12. Covenants to Run With the Land............................................................. 12 Section 13. Burden and Benefit.................................................................................. 12 Section 14. Uniformity; Common Plan ...................................................................... 12 Section 15. Enforcement............................................................................................. 12 Section 16. Recording and Filing................................................................................ 13 Section17. Payment of Fees....................................................................................... 13 Section 18. Governing Law........................................................................................ 13 Section 19. Amendments............................................................................................ 13 Section20. Notice....................................................................................................... 13 Section 21. Severability ........................................................................................ 14 Section 22. Multiple Counterparts.............................................................................. 14 Section 23. Subordination........................................................................................... 14 EXHIBIT A - Legal Description................................................................................................. A-1 EXHIBIT B — Rental Control Ordinance.....................................................................................B-1 RVPUB\FBAUM\708986.1 -i- ADMINISTRATION AND OVERSIGHT AGREEMENT by and among INDEPENDENT CITIES LEASE FINANCE AUTHORITY and WOLF & COMPANY INC., as Oversight Agent and MILLENNIUM HOUSING OF CALIFORNIA, as Borrower and CITY OF SAN JUAN CAPISTRANO Dated as of 1, 2006 Relating to: Independent Cities Lease Finance Authority Mobile Home Park Revenue Bonds (San Juan Mobile Estates) Series 2006A and Independent Cities Lease Finance Authority Mobile Home Park Subordinate Revenue Bonds (San Juan Mobile Estates) Series 2006B and Independent Cities Lease Finance Authority Mobile Home Park Subordinate Revenue Bonds (San Juan Mobile Estates) Taxable Series 2006C RvrUBTBAUM\709452.1 EXHIBIT C ADMINISTRATION AND OVERSIGHT AGREEMENT THIS ADMINISTRATION AND OVERSIGHT AGREEMENT (the "Administration Agreement') is made and entered into as of 1, 2006, by and among the INDEPENDENT CITIES LEASE FINANCE AUTHORITY a joint powers authority duly organized and existing under the laws of the State of California (the "Authority"), the CITY OF SAN JUAN CAPISTRANO, a public body corporate and politic duly organized and existing under the laws of the State of California (the "City"), MILLENNIUM HOUSING CORPORATION, a California nonprofit public benefit corporation (the "Borrower"), and WOLF & COMPANY INC. (the "Oversight Agent'). RECITALS: WHEREAS, to assist the Borrower in its acquisition of the San Juan Mobile Estates mobile home park located in the City of San Juan Capistrano (which is an associate member of the Authority) (the "Project'), the Authority has issued its Mobile Home Park Revenue Bonds (San Juan Mobile Estates) Series 2006A and its Mobile Home Park Subordinate Revenue Bonds (San Juan Mobile Estates) Series 2006B and its Mobile Home Park Subordinate Revenue Bonds (San Juan Mobile Estates) Taxable Series 2006C (collectively, the "Bonds") pursuant to an Indenture of Trust, dated as of 1, 2006 (the "Indenture"), by and between the Authority and Union Bank of California, N.A., as Trustee thereunder (the "Trustee"); and WHEREAS, the Authority has made a loan (the "Loan") of the proceeds of the Bonds to the Borrower, as provided in the Loan Agreement, dated as of 1, 2006 (the "Loan Agreement'), by and among the Authority, the Borrower and the Trustee, which agreement provides for certain oversight provisions relating to the management of the Project; and WHEREAS, the Authority has entered into a Regulatory Agreement and Declaration of Restrictive Covenants, dated as of 1, 2006 (the "Regulatory Agreement') with the Trustee and the Borrower, which agreement, among other things, sets forth certain restrictions applicable to the property being financed with the proceeds of the Loan, which restrictions are intended to assure continued compliance with the provisions of the Internal Revenue Code of 1986, as amended (the "Code"); and WHEREAS, the Authority desires to appoint Wolf & Company, Inc., as Oversight Agent under the Regulatory Agreement to monitor the income levels of the residents of the Qualified Spaces (as defined in the Regulatory Agreement) and as Oversight Agent under the Loan Agreement to carry out the duties of the Oversight Agent set forth in the Loan Agreement; and WHEREAS, the City and the Borrower have entered into a Supplemental Regulatory Agreement and Declaration of Restrictive Covenants dated as of 1, 2006 (the "Supplemental Regulatory Agreement") which provides, among other things, for certain additional affordability restrictions on the Project applicable to Qualified Residents and Qualified Spaces; and WHEREAS, the City desires that the Oversight Agent monitor the income levels of the residents of the Qualified Spaces for purposes of the Supplemental Regulatory Agreement; and RVPUB\FBAUM\709452.1 I WHEREAS, Wolf & Company, Inc., represents that it has the necessary experience and expertise required to evaluate whether the Project complies with the requirements set forth in the Loan Agreement, the Regulatory Agreement and the Supplemental Regulatory Agreement. NOW, THEREFORE, in consideration of the premises and respective representations and covenants herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION 1.1. Definitions of Terms. All capitalized terms used in this Administration Agreement and not otherwise defined herein shall have the respective meanings given to them in the Indenture and/or the Regulatory Agreement and/or the Supplemental Regulatory Agreement. 1.2. Article and Section Headings. The heading or titles of the several articles and sections hereof shall be solely for the convenience of reference and shall not affect the meaning, construction or effect of the provisions hereof. 1.3. hiterpretation. The singular form of any word used herein, including terms defined in the Indenture and/or the Regulatory Agreement, shall include the plural and vice versa, if applicable. The use of a word of any gender shall include all genders, if applicable. ARTICLE II REPRESENTATIONS AND WARRANTIES 2.1. Representations of the Authority. The Authority makes the following representations: (a) It is a joint powers authority, duly organized and existing under the Constitution and laws of the State of California. (b) It has the power to enter into the transactions contemplated by this Administration Agreement and to carry out its obligations hereunder and to consummate all other transactions on its part contemplated herein; and it has duly authorized the execution and delivery of this Administration Agreement. (c) The City of San Juan Capistrano is an associate member of the Authority. 2.2. Representations and Warranties of the Borrower. The Borrower makes the following representations and warranties: (a) It has power and authority to own its properties and carry on its business as now being conducted, and is duly qualified to do such business wherever such qualification is required, including the State of California. (b) It has the power to execute and deliver this Administration Agreement and to carry out the transactions on its part contemplated hereby; and it has duly authorized the execution, delivery and performance of this Administration Agreement. R VPUBTBAUMV09452. f 2 (c) The Oversight Agent is independent from and not under the control of the Borrower, does not have any substantial interest, direct or indirect, in the Borrower, and is not an officer or employee of the Borrower. 2.3. Representations and Warranties of the Oversight Agent. The Oversight Agent makes the following representations and warranties: (a) It is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has the power and authority to carry on its business as now being conducted. (b) It has the power to execute and deliver this Administration Agreement and to carry out the transactions on its part contemplated hereby; and it has duly authorized the execution, delivery and performance of this Administration Agreement. (c) It is independent from and not under the control of the Borrower, does not have any substantial interest, direct or indirect, in the Borrower, and is not an officer or employee of the Borrower. (d) It has received copies of the Indenture, the Loan Agreement, the Regulatory Agreement and the Supplemental Regulatory Agreement, and it is familiar with the terms and conditions thereof as the same relate to the Code and the Act. ARTICLE III DUTIES AND COMPENSATION OF THE OVERSIGHT AGENT 3.1. Duties of Oversight Agent. Wolf & Company, Inc., is the initial Oversight Agent hereunder. This Section 3.1 applies to Wolf & Company, Inc., as Oversight Agent and to any successor Oversight Agent. In its capacity as Oversight Agent hereunder, for and on behalf of the Authority, the Oversight Agent will perform the following duties in a careful and timely manner, to the highest standards of its profession: (a) It will be familiar with and will give written notice to the Authority, the City, the Trustee and the Borrower within ten days of the publication by the Department of Housing and Urban Development of any change in: (i) The Median Income for the Area; and (ii) The maximum income at which households consisting of various numbers of persons may be determined to be Qualified Residents under the terms of the Regulatory Agreement and the Supplemental Regulatory Agreement; and (iii) The maximum allowable rents under each applicable provision of Section 4 of the Regulatory Agreement and Section 4 of the Supplemental Regulatory Agreement; and (iv) The maximum income at which households consisting of various numbers of persons may be determined to be Very Low Income Residents or Lower Income RVpUBTBAUM\709452.1 3 Residents, under the terms of the Regulatory Agreement and the Supplemental Regulatory Agreement. (b) Promptly following its receipt thereof, it will review the Income Certifications, Certificates of Continuing Program Compliance, and all other reports and certificates furnished to it pursuant to the Regulatory Agreement and the Supplemental Regulatory Agreement in order to determine that each such document is complete and to verify the internal accuracy of the calculations, and conclusions with respect to such calculations, set forth therein, including the conclusion that the Qualified Spaces have been rented as specified by the terms of the Regulatory Agreement and the Supplemental Regulatory Agreement; and it will maintain such documents on file and open to the inspection by the Authority, the City, the Trustee and the Borrower during the term of the Regulatory Agreement and the Supplemental Regulatory Agreement. (c) Promptly upon receipt, it will review the form of application and lease with respect to the Qualified Spaces to verify compliance with the provisions of the Regulatory Agreement and the Supplemental Regulatory Agreement. (d) Promptly upon determining that any report or certificate submitted to it pursuant to the Regulatory Agreement and the Supplemental Regulatory Agreement is inaccurate or incomplete the Oversight Agent shall: (i) If the inaccuracy or lack of completeness does not cause the Project to cease to meet the qualifications set forth in Section 3 or 4 of the Regulatory Agreement, give notice of such inaccuracy or lack of completeness to the Borrower and direct the Borrower to correct or complete the same, as the case may be, within a 30 -day period, subject to extension in the sole discretion of the Oversight Agent; (ii) If the inaccuracy or lack of completeness is not corrected within thirty (30) days or if the inaccuracy or lack of completeness causes the Project to cease to meet the qualification set forth in Section 3 or 4 of the Regulatory Agreement immediately give written notice of said fact to the Authority, the Trustee and the Borrower; and (iii) If the inaccuracy or lack of completeness does not cause the Project to meet the requirements of Section 4 of the Supplemental Regulatory Agreement, give notice of such inaccuracy or lack of completeness to the Borrower and the City and direct the Borrower to correct and complete the same, as the case may be, within a 30 -day period, subject to extension in the sole discretion of the Oversight Agent. (e) (i) hi the event that the Borrower fails to file with the Oversight Agent any report, certification (including, in particular, the certification to the Secretary of the Treasury required by Section 4(e) of the Regulatory Agreement) or other document required pursuant to the Regulatory Agreement within the time set forth in the Regulatory Agreement as applicable, the Oversight Agent shall immediately give written notice of that fact to the Authority, the Trustee, the City and the Borrower. (ii) In the event that the Borrower fails to file with the Oversight Agent any report, certification or other document required pursuant to the Supplemental Regulatory RVPUB\FBAUM\709452.1 4 Agreement within the time set forth in the Supplemental Regulatory Agreement, as applicable, the Oversight Agent shall immediately give written notice of that fact to the City and the Borrower. (f) On behalf of the Authority and the City, the Oversight Agent shall, at least annually and whenever requested by the Authority, audit the survey of the tenants of the Qualified Spaces with respect to income levels, household sizes and such other information as the Authority may specify, and all as further required under Section 4 of the Regulatory Agreement and Section 4 of the Supplemental Regulatory Agreement. Based on such information, the Authority shall determine compliance with the affordability requirements under the Act and the Code. In the event of any noncompliance the Oversight Agent shall notify the Authority and the City as to the nature and extent of the noncompliance and the Oversight Agent shall suggest alternatives for bringing the Qualified Spaces into compliance. (g) The Oversight Agent will perform on a timely basis all duties ascribed to the Oversight Agent in the Indenture, the Loan Agreement, the Regulatory Agreement and the Supplemental Regulatory Agreement, including without limitation the following: (i) annual review of the Borrower's financial statements, (ii) review the coverage calculation for release of surplus cashflow and report comments to the Borrower, the Authority and the City, (iii) review the final budget and forward comments to the Borrower, the Authority, (iv) physical inspection of the Project on a quarterly basis, including examination of the infrastructure, the clubhouse, and any other common areas, and (v) monthly confirmation report to the Authority, the City and any Bondholder requesting such information that the Trustee has received the monthly deposit in accordance with the approved budget and, in the event that the Trustee has not, to take such further steps as required by the Loan Agreement. 3.3. Compensation. For its services as the Oversight Agent, Wolf & Company, Inc. shall be paid $ at Bond Closing, and thereafter an annual fee of $ payable by the Borrower in equal quarterly installments commencing 15, 2007, as set forth in the Indenture. The fee of the Oversight Agent shall be paid to the Oversight Agent by the Trustee upon receipt by the Trustee of an invoice from the Oversight Agent. If the Oversight Agent provides services outside the scope of this Agreement, as requested in writing by the Authority, the compensation shall be paid at the then prevailing fee schedule of the Oversight Agent. ARTICLE IV TERM 4.1. Term of Agreement. Unless sooner terminated pursuant to the provisions of Sections 4.2 and 4.3 hereof, this Administration Agreement shall remain in full force and effect for the term of the Regulatory Agreement. 4.2. Termination. At its sole discretion, the Authority may terminate this Administration Agreement upon giving the Oversight Agent and the Borrower thirty (30) days written notice of its intention to do so. This Administration Agreement may be terminated in whole or in part only as to the services described in Section 3. 1, whereupon a partial fee for the services not terminated will be agreed upon by the parties and memorialized in an amendment hereto. RVPUB\FBAUM\709452.1 5 4.3. Resignation of Oversight Agent. With the written consent of the Authority, the Oversight Agent may resign from its position and terminate this Administration Agreement by giving the other parties hereto thirty (30) days written notice of its intention to do so. 4.4 Termination With Respect to Supplemental Regulatory Agreement. At its sole discretion, the City may terminate this Administration Agreement with respect to the Supplemental Regulatory Agreement upon giving the Oversight Agent and the Borrower thirty (30) days written notice of its intention to do so. ARTICLE V MISCELLANEOUS PROVISIONS 5.1. Execution in Counterparts. This Administration Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and such counterparts shall constitute but one and the same instrument. 5.2. Business Days. If any action is required to be taken hereunder on a date which falls on other than a Business Day, such action shall be taken on the next succeeding Business Day. 5.3. Governing Law. This Administration Agreement shall be construed in accordance with the laws of the State of California and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. 5.4. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when delivered or mailed by registered mail, postage prepaid, addressed to the appropriate Notice Address set forth in the Regulatory Agreement and the Supplemental Regulatory Agreement. The Notice Address of the Oversight Agent is: Wolf & Company Inc., 5 Pembroke Lane, Laguna Niguel, California 92677, Attention: Wesley R. Wolf. RVPUB\FBAUM\709452.1 6 IN WITNESS WHEREOF, the parties hereto have caused this Administration Agreement to be executed on their behalf by their duly authorized representatives, all as of the date hereinabove written. INDEPENDENT CITIES LEASE FINANCE AUTHORITY By: President CITY OF SAN JUAN CAPISTRANO By: Title: MILLENNIUM HOUSING CORPORATION, a California nonprofit public benefit corporation By: President WOLF & COMPANY INC., as Oversight Agent By: Authorized Signatory RV PUB\FBAUM\709452.1 AFFIDAVIT OF PUBLICATION STATE OF CALIFORNIA, ) ) ss. County of Orange ) I am a citizen of the United States and a resident of the County aforesaid; I am over the age of eighteen years, and not a party to or interested in the above entitled matter. I am the principal clerk of the Capistrano Valley News, a newspaper that has been adjudged to be a newspaper of general circulation by the Superior Court of the County of Orange, State of California, on June 7, 1984, Case No. A-122949 in and for the City of San Juan Capistrano, County of Orange, State of California; that the notice, of which the annexed is a true printed copy, has been published in each regular and entire issue of said newspaper and not in any supplement thereof on the following dates, to wit: April 13, 2006 "I certify (or declare) under the penalty of perjury under the laws of the State of California that the foregoing is true and correct": Executed at Santa Ana, Orange County, California, on Date: April 13, 2006 Signature Capistrano Valley News 625 N. Grand Ave. Santa Ana, CA 92701 (714) 796-2209 PRODS UJI KATION HE VE 1006 MAY I I P 2: 2U CITY C _Ehl( SAN JUAN CAPISTRANO Proof of Publication of 1 NOTICE OF PUBLIC NEARING CRY OF SAN JUAN CAPISTRANO NOTICE IS NEREEY GIVEN, that on Me 2nd day of Meyy, 2006, at ]:00 P.M. in the City Council Cham- ber, 32400 Paseo Atleiento, San Juan Capistrano, Cal- ifornia, Me City Council will hold a public hearing on the following: CONSIDERATION OF THE ISSUANCE OF MOBl. OME PARK REVENUE BONDS BY THE INDEPENDENT CITIES LEASE FINANCE AUTHOIOTT TO FINANCE THE SAN JUAN MO- BILE ESTATES PROJECT (MILLENNIUM HOUSING CORPORATION) Pursuant M Section 147M of Me Internal Revenue Code of 1986, as amended Me CM Council will hear and consider information concerning the proposed is- suance by Me Independent Class Lease Finance Au- Mor9y nhe 'Auority') of its mobilahame park reve- nue bonds thin one or more sense in the aggregate pml- cl'pel amount of appmzimah,l, 543,OOF,000 (Me AUMOnWty Bands'?7 pursuant to Chapter 6 of Part 5 W Division 31 of the Caidomia Health and Safety Code. The proceeds from Me sale of such Authority Bands, i any are issued, are mended M be used to finance Me acquisition and renovation of a 312-unh mobilehome pork known as San Juan Mobile Estates located m 32302 Nlpaz Street, San Juan Capistrano, California 92615 (Me 'Project`). The project will be owned and operated by Millennium Housing Corpora- lion, a Celifomu non-profit corporation. proceeds of a , AURAorrty Bonds are expectetl to be used M make a loan to Millennium Housing Corporation, or a sub- cassm, assign or affiliate thereof, to finance the project. In order M facilitate Me issuance of Mase bonds the City of San Juan Capistrano will join the Aunorlty, as an associate member prior M the issuance of the Au - Manly Bonds. Those desiringg M be need in favor of, or oppositionto, Nis Item m'lI be given an opportunity M do so dur- ing such hearing. Written information pertaining b MIs aom must be submitted to the City Clerk by 5:00 %mp.m., on Monday. May 1, 2006 at 32400 Paseo lamo, San Juan Caotstrano, CA 92615. IndiNdu- als deeming to submit late written information at the meeting must orally request such notion. Forfurther information you may contact Cin Rus. sell, Administrative SeMCes Director m (949 443- 6301. /sl Mari R. Manahan MARGARET R. MONAHAN, CITU CLERK Publish Coostrano Valley News April 13, 2006 3-070 7026468 NOTICE OF TRANSMITTAL CAPISTRANO VALLEY NEWS Legal Publications CHARGE TO ACCOUNT NO. FOR PUBLICATION ON: DOCUMENT TO BE PUBLISHED: PROOF OF PUBLICATION AUTHORIZED BY: DATE: April 5, 0041125000 THURSDAY, April 13, 2006 NOTICE OF PUBLIC HEARING - Consideration of Issuance of Mobilehome Park Revenue Bonds by the Independent Cities Lease Finance Authority to Finance the Independent Cities Lease Finance Authority to Finance the San Juan Mobile estates Project (Millennium Housing Corporation) Please send to: City Clerk's Division, City Hall 32400 Paseo Adelanto San Juan Capistrano, CA 92675 (949)493-1171 Date of Public Hearing -05/02/06 Date notice published -04/13/06 Date affidavit received - (� Date notice posted in designated posting places (3) - 04/13/06 Date notice posted on property - n/a Date of mailing notice to interested parties - n/a Date notice transmitted to City Manager's Office -4/5/06 0 NOTICE OF PUBLIC HEARING CITY OF SAN JUAN CAPISTRANO NOTICE IS HEREBY GIVEN, that on the 2nd day of May, 2006, at 7:00 P.M. in the City Council Chamber, 32400 Paseo Adelanto, San Juan Capistrano, California, the City Council will hold a public hearing on the following: CONSIDERATION OF THE ISSUANCE OF MOBILEHOME PARK REVENUE BONDS BY THE INDEPENDENT CITIES LEASE FINANCE AUTHORITY TO FINANCE THE SAN JUAN MOBILE ESTATES PROJECT (MILLENNIUM HOUSING CORPORATION) Pursuant to Section 147(f) of the Internal Revenue Code of 1986, as amended the City Council will hear and consider information concerning the proposed issuance by the Independent Cities Lease Finance Authority (the "Authority') of its mobilehome park revenue bonds in one or more series in the aggregate principal amount of approximately $43,000,000 (the "Authority Bonds") pursuant to Chapter 8 of Part 5 of Division 31 of the California Health and Safety Code. The proceeds from the sale of such Authority Bonds, if any are issued, are intended to be used to finance the acquisition and renovation of a 312 -unit mobilehome park known as San Juan Mobile Estates located at 32302 Alipaz Street, San Juan Capistrano, California 92675 (the "Project'). The project will be owned and operated by Millennium Housing Corporation, a California non-profit corporation. Proceeds of the Authority Bonds are expected to be used to make a loan to Millennium Housing Corporation, or a successor, assign or affiliate thereof, to finance the Project. In order to facilitate the issuance of these bonds the City of San Juan Capistrano will join the Authority as an associate member prior to the issuance of the Authority Bonds. Those desiring to be heard in favor of, or opposition to, this item will be given an opportunity to do so during such hearing. Written information pertaining to this item must be submitted to the City Clerk by 5:00 p.m., on Monday, May 1, 2006 at 32400 Paseo Adelanto, San Juan Capistrano, CA 92675. Individuals desiring to submit late written information at the meeting must orally request such action. For further information you may contact Cindy Russell, Adnistrative Services Director at (949) 443-6301. 7 A a FOR OFFICE USE ONLY: STATE OF CALIFORNIA COUNTY OF ORANGE CITY OF SAN JUAN CAPISTRANO ) ss. AFFIDAVIT OF POSTING AND PUBLICATION I, MARGARET R. MONAHAN, declare that I am the duly appointed and qualified City Clerk of the City of San Juan Capistrano; that on April 13, 2006, 1 caused the above Notice to be posted in three (3) public places in the City of San Juan Capistrano, to wit: City Hall; Community Center Reception Area; Orange County Public Library AND, that on April 13, 2006, the above Notice was published in the Capistrano Valley News newspaper. Z� I declare under penalty City of San is true and correct. Capistrano, California