06-0502_MILLENNIUM HOUSING CORPORATION_Loan Agreement LOAN AGREEMENT
by and among the
INDEPENDENT CITIES LEASE FINANCE AUTHORITY
as Authority
and
UNION BANK OF CALIFORNIA, N.A.,
as Trustee
and
MILLENNIUM HOUSING CORPORATION,
as Borrower
Dated as of May 1, 2006
Relating to:
Relating to:
$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
RVPURTBAUM\709429.1 v1
TABLE OF CONTENTS
Page
''. ARTICLE 1
DEFINITIONS AND INTERPRETATION
Section1.1 Definitions........................................................................................................ 1
Section 1.2 Interpretation.................................................................................................... 2
Section 1.3 Recitals, Titles and Headings........................................................................... 2
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations of the Authority..................................................................... 3
Section 2.2 Representations,Warranties and Covenants of the Borrower.........................4
ARTICLE 3
ISSUANCE OF THE BONDS
Section 3.1 Agreement to Issue Bonds............................................................................... 6
Section 3.2 Delivery of the Bonds and Closing of the Loan .............................................. 6
Section 3.3 Commitment to Execute the Note.................................................................... 6
Section 3.4 Limited Liability..............................................................................................6
Section3.5 The Trustee..................................................................................................... 7
Section 3.6 Borrower Accepts Obligations......................................................................... 7
ARTICLE 4
THE LOAN
Section 4.1 Amount and Source of Loan............................................................................ 7
ARTICLE 5
REPAYMENT OF THE LOAN
Section 5.1 Loan Repayment.............................................................................................. 7
Section 5.2 Authority Annual Fee .................................................................................... 10
Section 5.3 Nature of the Borrower's Obligations............................................................ 10
Section 5.4 Extraordinary Mandatory Prepayment of the Note........................................ 10
Section 5.5 Optional Prepayment of Note........................................................................ 11
Section 5.6 Prepayment of Note From Mandatory Sinking Account Payments
(Series A Bonds)............................................................................................ 11
Section 5.7 Targeted Mandatory Sinking Account Payments (Subordinate Bonds)........ 11
ARTICLE 6
FURTHER AGREEMENTS
Section 6.1 Successor to the Authority............................................................................. 12
Section 6.2 Borrower Not to Dispose of Assets; Conditions Under Which
Exceptions Permitted..................................................................................... 12
Section 6.3 Cooperation In Enforcement of Regulatory Agreement................................ 12
Section 6.4 Tax Status of Bonds....................................................................................... 13
RVPUB\FBAUM\709429.1 _i_
TABLE OF CONTENTS
(continued)
Page
Section 6.5 Additional Instruments................................................................................... 14
Section 6.6 Books and Records; Annual Budget; Project Manager................................. 14
Section 6.7 Notice of Certain Events................................................................................ 16
Section 6.8 Indemnification of the Authority, the Oversight Agent and the Trustee....... 16
Section 6.9 Consent to Assignment.................................................................................. 16
Section 6.10 Compliance With Usury Laws....................................................................... 16
Section 6.11 Title to the Project.......................................................................................... 17
Section 6.12 Operation of the Project................................................................................. 17
Section 6.13 No Untrue Statements.................................................................................... 17
Section 6.14 Useful Life..................................................................................................... 17
Section 6.15 Continuing Disclosure ................................................................................... 17
Section 6.16 Minimum Rents; Coverage Requirement Certificate ............I....................... 18
Section 6.17 Public Liabilities and Workers' Compensation Insurance............................. 18
Section 6.18 Casualty Insurance......................................................................................... 19
Section 6.19 Rental Interruption Insurance ........................................................................ 19
Section 6.20 Recordation; Title Insurance.......................................................................... 20
Section 6.21 Insurance Net Proceeds; Form of Policies..................................................... 20
Section 6.22 Repair and Replacement................................................................................ 21
Section 6.23 Other Debt, No Recourse Debt; Other Limitations on Borrower.................. 22
Section 6.24 Intentionally Omitted..................................................................................... 24
Section 6.25 Replenishment of Series A Bonds Debt Service Reserve Fund .................... 24
Section 6.26 Replenishment of Subordinate Bonds Debt Service Reserve Fund............... 24
Section 6.27 Project Management Agreements.................................................................. 24
' Section 6.28 Operating Fund .............................................................................................. 24
Section 6.29 Rental Assistance Fund.................................................................................. 24
Section 6.30 Additional Representations and Warranties of the Borrower........................ 25
Section 6.31 Property Tax-Exemption................................................................................27
Section 6.32 Operating Reserve Fund ................................................................................ 27
ARTICLE 7
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default........................................................................................... 27
Section 7.2 Notice of Default; Opportunity to Cure......................................................... 28
Section7.3 Remedies........................................................................................................ 28
Section 7.4 Attorneys' Fees and Expenses....................................................................... 29
Section 7.5 No Remedy Exclusive.................................................................................... 29
Section 7.6 No Additional Waiver Implied by One Waiver............................................. 30
ARTICLE 8
MISCELLANEOUS
Section 8.1 Entire Agreement........................................................................................... 30
Section8.2 Notices ........................................................................................................... 30
Section 8.3 Assignments................................................................................................... 30
Section8.4 Severability.................................................................................................... 30
Section 8.5 Execution of Counterparts ............................................................................. 31
Section 8.6 Amendments, Changes and Modifications.................................................... 31
RVPUB\FBAUM\709429.1 -ii-
TABLE OF CONTENTS
(continued)
Page
Section8.7 Governing Law ......................... .................................................................... 31
Section8.8 Term of Agreement........................................................................................ 31
Section 8.9 Survival of Agreement................................................................................... 31
Section 8.10 Survival of Rights.......................................................................................... 31
Section8.11 Recordation.................................................................................................... 31
Section 8.12 Authority as Beneficiary................................ .......................................... .... 31
AppendixA Note ..............................................................................................................A-1
AppendixB Deed of Trust.................................................................................................B-I
Appendix C List Of Improvements And Scheduled Replacements...................................0-1
RV PU8TB AU W 09429.1
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement'), dated as of May 1, 2006, is by and
among the Independent Cities Lease Finance Authority, a joint powers authority organized and
existing under the laws of the State of California (the "Authority"), Millennium Housing
Corporation, a California nonprofit public benefit corporation (the "Borrower"), Union Bank of
California, N.A., a national banking association, as trustee(the "Trustee").
For and in consideration of the mutual agreements hereinafter contained, the parties
hereto agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions. The following words and terms as used in this Agreement
shall have the following meanings. In addition, the capitalized terms used but not defined in this
Agreement shall have the meanings specified in the Indenture and the Regulatory Agreement, as
they may be supplemented or amended from time to time.
"Act of Bankruptcy" means any proceeding instituted under Title 11 of the United States
Code, entitled "Bankruptcy" as in effect now and in the future, or any successor statute, or other
applicable insolvency law by or against the Borrower.
"Administration Agreement" means the Administration Agreement dated as of the date
hereof among the Borrower, the Authority, the City and the Oversight Agent.
"Authority Annual Fee" shall have the meaning set forth in the Regulatory Agreement.
"City"means the City of San Juan Capistrano.
"Coverage Requirement Certificate" means the certificate filed by the Borrower as
required by Section 6.16 hereof.
"Event of Default" means any of the events described as an event of default in
Section 7.1 hereof.
"Indenture" means the Indenture of Trust, dated as of the date hereof, by and between the
Authority and the Trustee.
"Net Operating Revenues" means Operating Revenues, less the Operation and
Maintenance Costs during such fiscal year or period and less the amount to be held by the
Borrower pursuant to Section 6.29 hereof.
"Other Borrower Obligations" means the Borrower's obligations (i) under the Loan
Agreement dated November 1, 2001, among the Borrower, the California Mobilehome Park
Financing Authority ("CMHPFA"), and Union Bank of California, N.A., as Trustee relating to
the Rancho Vallecitos Mobilehome Park in San Marcos, California; (ii) under the Loan
Agreement dated May 1, 2002, among the Borrower, the City of Palm Springs, and Union Bank
of California, N.A., as Trustee, relating to the Sahara Mobilehome Park in Palm Springs,
California; (iii) under the Loan Agreement dated March 1, 2003 among the Borrower, CMHPFA
and Union Bank of California, N.A., as trustee, relating to the Palomar Estates East and West
RVPUB\FBAUM\709429.1 I
• Mobilehome Park; (iv)the Loan Agreement dated April 1, 2003 among the Borrower, the City of
La Verne and Union Bank of California, N.A., as trustee, relating to the Copacabana
Mobilehome Park; and (v) the Loan Agreement dated September 1, 2003 among the Borrower,
the Authority and Union Bank of California, N.A.; as trustee, relating to the Rancho Feliz
Mobilehome Park.
"Operating Revenues" means, for any fiscal year or other period, all rents, income,
receipts and other revenues derived by the Borrower arising from the operation of the Project,
including rental income from mobile home spaces, determined in accordance with Generally
Accepted Accounting Principles, interest earnings in funds held by the Trustee and all other
money howsoever derived by the Borrower from the operation of the Project or arising from the
Project,but not including resident security deposits.
"Operation and Maintenance Costs" means, for any fiscal year or other period, the
reasonable and necessary costs and expenses of operating the common areas of the Project and of
managing and repairing and other expenses necessary to maintain and preserve the common
areas of the Project in good repair and working order, calculated in accordance with Generally
Accepted Accounting Principles, including but not limited to (a)utility services supplied to the
common areas of the Project, which may include, without limitation, janitor service, security,
power, gas, telephone, light, heating, water and all other utility services, (b) compensation to the
management agent, salaries and wages of employees, payments to employee retirement systems,
fees of auditors, accountants, attorneys or engineers, (c) monthly deposits to the Repair and
Replacement Fund pursuant to Section 5.70) of the Indenture, and (d) all other reasonable and
necessary costs of the Borrower or charges required to be paid by it related to the operation and
maintenance of the common areas of the Project, including, but not limited to, costs of insurance
and property taxes, if any, but excluding in all cases (i) depreciation, replacement and
obsolescence charges or reserves therefor, (ii) amortization of intangibles or other bookkeeping
entries of a similar nature, (iii) costs of capital additions, replacements, betterments, extensions
or improvements to the common areas of the Project, which under Generally Accepted
Accounting Principles are chargeable to a capital account or to a reserve for depreciation,
(iv)debt service on the Loan, (v)the amount deposited in the Administration Fund, and
(vi) expenses paid from the Operating Reserve Fund, Repair and Replacement Fund, Surplus
Fund or other Project reserves.
"Project Manager" means the manager of the Project under a management agreement
entered into by the Borrower and such Project Manager.
"Supplemental Regulatory Agreement" means the Supplemental Regulatory Agreement
and Declaration of Restrictive Covenants between the City and the Borrower and dated as of
May 1, 2006.
Section 1.2 Interpretation. Unless the context clearly requires otherwise, words of
masculine gender shall be construed to include correlative words of the feminine and neuter
genders and vice versa, and words of the singular number shall be construed to include
correlative words of the plural number and vice versa. This Agreement and all the terms and
provisions hereof shall be construed to effectuate the purpose set forth herein and to sustain the
validity hereof.
Section 1.3 Recitals, Titles and Headings. The terms and phrases used in the recitals
of this Agreement have been included for convenience of reference only, and the meaning,
RVPUB\FBAUM\709429.1 2
construction and interpretation of all such terms and phrases for purposes of this Agreement shall
be determined by references to Section 1.1 hereof. The titles and headings of the articles and
sections of this 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 and shall never be considered or given any effect in construing this Agreement
or any provision hereof or in ascertaining intent, if any question of intent should arise.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations of the Authority. The Authority makes the following
representations:
(a) The Authority is a joint powers authority, duly organized and existing under the
Constitution and laws of the State.
(b) The Authority has full legal right, power and authority under the laws of the State
and has taken all official actions necessary (i) to enter into this Agreement, the Regulatory
Agreement and the Indenture, (ii)to issue, execute and deliver the Bonds, (iii) to perform its
obligations hereunder and thereunder and (iv)to consummate all other transactions on its part
contemplated by this Agreement and such other documents, including, without limitation, the
loaning of the proceeds of the Bonds to the Borrower.
(c) This Agreement has been duly executed and delivered by the Authority and
constitutes a valid and binding obligation of the Authority, enforceable against the Authority in
accordance with its terms, except as limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the rights of creditors generally and equitable
principals. Upon the execution and delivery thereof, the Regulatory Agreement, the Indenture
and the Bonds will constitute valid and binding obligations of the Authority, enforceable against
the Authority in accordance with their respective terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors
generally and equitable principals.
(d) The execution and delivery of this Agreement, the Regulatory Agreement, and
the Indenture, the issuance, execution and delivery of the Bonds, the performance by the
Authority of its obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the loaning of the proceeds of
the Bonds to the Borrower, do not violate any law, rule, regulation or ordinance or any order,
judgment or decree of any federal, state or local court by which the Authority is bound, and do
not conflict with, or constitute a breach of, or a default under the terms and conditions of any
Agreement, instrument or commitment to which the Authority is a party or by which the
Authority or any of its property is bound.
(e) There is no action, suit, proceeding, inquiry or investigation pending or, to the
knowledge of the Authority, threatened against the Authority by or before any court,
governmental agency or public board or body which (i) questions the existence or the territorial
jurisdiction of the Authority or the title to office of any member of the Authority, (ii) seeks to
prohibit, restrain or enjoin the execution and delivery of this Agreement, the Regulatory
Agreement or the Indenture, the issuance, execution or delivery of the Bonds or the loaning of
the proceeds of the Bonds to the Borrower; (iii) questions the validity or enforceability of this
RVPUB\FBAUM\709429.1 3
Agreement, the Regulatory Agreement, the Indenture, or the Bonds; (iv) questions the exclusion
' from gross income for federal income tax purposes of interest on the Bonds; or (v)questions the
power or authority of the Authority to carry out the transactions contemplated by this
Agreement, the Indenture, the Regulatory Agreement, or the Bonds.
(f) The Authority has determined that the financing of the Project and the issuance of
the Bonds to obtain moneys to carry out the purposes of the Project will serve the public interest
and will further the purposes of the Act.
Section 2.2 Representations, Warranties and Covenants of the Borrower. The
Borrower as of the date hereof, represents, warrants and covenants that:
(a) The Borrower is a California nonprofit public benefit corporation duly formed
under the laws of the State with full legal right, power and authority (i) to own its properties and
assets and to carry on its business as now being conducted, (ii) to enter into this Agreement, the
Regulatory Agreement, the Note, the Deed of Trust, the Supplemental Regulatory Agreement,
the Administration Agreement and the Continuing Disclosure Agreement, (iii) to be bound by
the terms of this Agreement and the Indenture to the extent that they apply to the Loan, (iv) to
perform its obligations hereunder and thereunder and (v) to consummate the transactions
contemplated by this Agreement, the Indenture, the Regulatory Agreement, the Note, the Deed
of Trust, the Supplemental Regulatory Agreement, the Administration Agreement and the
Continuing Disclosure Agreement.
(b) (i) The Borrower is qualified as an organization described in Section 501(c)(3) of
the Code and has received a Determination Letter (the "Determination Letter") from the Internal
Revenue Service to the effect that it is an organization described in Section 501(c)(3) of the
Code; (ii) the Determination Letter has not been modified, limited or revoked; (iii) the Borrower
is in compliance with all terms, limitations and conditions, if any, contained in its Determination
Letter; (iv) the facts and circumstances which form the basis of the Determination Letter as
represented to the Internal Revenue Service continue substantially to exist, and the Borrower is
exempt from federal income taxes under Section 501(a) of the Code.
(c) The Borrower is a corporation (i) organized and operated exclusively for
educational or charitable purposes and not for pecuniary profit; and (ii) no part of the net
earnings of the Borrower inures to the benefit of any person or private individual, all within the
meaning, respectively, of Section 3(a)(4) of the Securities act of 1933, as amended, and of
Section 12(g)(2)(d) of the Securities Exchange Act of 1934, as amended.
(d) The Borrower will maintain its status as an organization described in Section
501(c)(3) of the Code and its exemption from federal income taxation under Section 501(a) of
the Code.
(e) All property financed with the proceeds of the Bonds at all times will be owned
(as ownership is determined for purposes of federal income taxation) by the Borrower, or by an
organization described in Section 501(c)(3) of the Code and operated in such a manner as to not
constitute an unrelated trade or business of such organization or by a governmental unit (as
described in Section 145 of the Code). The Borrower agrees to limit any use of the Project
(other than by tenants or owners as contemplated by the Regulatory Agreement) by other than
(i) an organization described in Section 501(c)(3) of the Code in a manner so as to not constitute
an unrelated trade or business of such organization or (ii) a governmental unit described in
RVPUB\FBAUM\709429.1 4
Section 145 of the Code to no more than the allocable portion of the overall cost of the Project
not paid from the proceeds of the Bonds, or pursuant to an agreement which complies with the
requirements of Revenue Procedure 97-13, as the same are now in effect or as later modified.
(f) This Agreement has been duly executed and delivered by the Borrower and
constitutes a valid and binding obligation of the Borrower, enforceable in accordance with its
terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws or judicial decisions affecting the rights of creditors generally. Upon the execution and
delivery thereof, the Regulatory Agreement, the Note, the Deed of Trust, the Administration
Agreement, and the Continuing Disclosure Agreement, will constitute valid and binding
obligations of the Borrower, enforceable in accordance with their terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws or judicial decisions
affecting creditors' rights generally and by judicial discretion in the exercise of equitable
remedies.
(g) The execution and delivery of this Agreement, the Regulatory Agreement, the
Note, the Deed of Trust, the Supplemental Regulatory Agreement, the Administration
Agreement, and the Continuing Disclosure Agreement, the performance by the Borrower of its
obligations hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby will not violate any law, regulation, rule or ordinance or any order,judgment
or decree of any federal, state or local court and do not conflict with, or constitute a breach of, or
a default under, any document, instrument or commitment to which the Borrower is a party or by
which the Borrower or any of its property is bound.
! (h) The Borrower has not been served with and, to the knowledge of the Borrower
there is no action, suit, proceeding, inquiry or investigation by or before any court, governmental
agency or public board or body pending or threatened against the Borrower which (i) affects or
seeks to prohibit, restrain or enjoin the issuance, sale or delivery of the Bonds or the loaning of
the proceeds of the Bonds to the Borrower or the execution and delivery of this Agreement, the
Indenture, the Regulatory Agreement, the Continuing Disclosure Agreement, the Supplemental
Regulatory Agreement, the Administration Agreement, the Note or the Deed of Trust, (ii) affects
or questions the validity or enforceability of this Agreement, the Bonds, the Indenture, the
Regulatory Agreement, the Note, the Administration Agreement, the continuing Disclosure
Agreement or the Deed of Trust, (iii) questions the exclusion from gross income for federal
income tax purposes of interest on the Bonds, or (iv) questions the power or authority of the
Borrower to carry out the transactions contemplated by, or to perform its obligations under, this
Agreement, the Regulatory Agreement, the Indenture, the Continuing Disclosure Agreement, the
Note, the Deed of Trust, the Supplemental Regulatory Agreement, the Administration
Agreement or the powers of the Borrower to own and operate the Project.
(i) The Borrower is not in default under any document, instrument or commitment to
which the Borrower is a party or to which it or any of its property is subject which default would
or could affect the ability of the Borrower to carry out its obligations under this Agreement, the
Regulatory Agreement, the Supplemental Regulatory Agreement, the Administration Agreement,
the Deed of Trust, the Note or the Continuing Disclosure Agreement.
0) The Borrower has filed or caused to be filed all federal, state and local tax returns,
which are required to be filed, and has paid or caused to be paid all taxes as shown on said
returns or on any assessment received by it, to the extent that such taxes have become due.
RVPUB\PBAUM\709429.1 5
(k) Any certificate signed by the Borrower or a Borrower Representative and
delivered pursuant to this Agreement, the Regulatory Agreement, the Continuing Disclosure
Agreement, the Indenture, the Administration Agreement, the Supplemental Regulatory
Agreement, the Note or the Deed of Trust shall be deemed a representation and warranty by the
Borrower as to the statements made therein.
(1) All consents, approvals, authorizations, orders or filings of or with any court or
governmental agency or body, if any, required for the execution, delivery and performance of
this Agreement, the Regulatory Agreement, the Continuing Disclosure Agreement, the
Administration Agreement, the Supplemental Regulatory Agreement, the Note and the Deed of
Trust by the Borrower have been obtained or made.
ARTICLE 3
ISSUANCE OF THE BONDS
Section 3.1 Agreement to Issue Bonds. In order to provide funds for the purpose of
making the Loan, the Authority agrees that it will use its best efforts to sell the Bonds and cause
them to be delivered to the initial purchasers thereof and deposit the proceeds thereof with the
Trustee for application in accordance with Section 5.4 of the Indenture.
Section 3.2 Delivery of the Bonds and Closing of the Loan. The delivery of the Bonds
and the closing of the Loan shall not occur until the following conditions, in addition to those
required by Section 2.2 of the Indenture, are met:
(a) the Trustee shall have received an original executed counterpart of this
Agreement, the Note, the Continuing Disclosure Agreement, the Regulatory Agreement, the
Supplemental Regulatory Agreement and the Deed of Trust, together with evidence satisfactory
to the Trustee (which may be telephonic notice from the title company submitting such
documents for recordation) of the recordation of the Regulatory Agreement, the Supplemental
Regulatory Agreement and the Deed of Trust in the Office of the County Recorder for Orange
County;
(b) no Event of Default nor any event which with the passage of time and/or the
giving of notice would constitute an Event of Default under this Agreement shall have occurred
as evidenced by a certificate received from the Borrower; and
(c) all legal matters incident to the transactions contemplated by this Agreement shall
be concluded to the reasonable satisfaction of Bond Counsel.
Section 3.3 Commitment to Execute the Note. The Borrower agrees to execute and
deliver the Note simultaneously with the execution of this Agreement.
Section 3.4 Limited Liability.
(a) All obligations of the Authority incurred hereunder shall be special obligations of
the Authority, payable solely and only from the Trust Estate. The Bonds, and the interest
• thereon, do not constitute a debt, liability, general or moral obligation or pledge of the faith or
loan of the credit of the Authority, the state or any other political subdivision of the state, within
the meaning of any constitutional or statutory limitation or provision. Neither the faith and credit
nor the taxing power of the State or any political subdivision thereof(including the Authority) is
RVPUB\FBAUM\709429.1 6
pledged to the payment of the principal of or premium, if any, or interest on the Bonds or any
other costs incident thereto. The Authority's liability hereunder is further limited to the extent
set forth in Section 14.3 of the Indenture.
(b) Neither the Borrower's directors, officers, employees and agents, nor any of its
other affiliates, has or is intended to have any liabilities, with the exception for any liability
arising as the result of fraud or misappropriation of funds by the Borrower, under or in respect of
this Loan Agreement, the Indenture of Trust, the Continuing Disclosure Agreement, the Note,
the Deed of Trust, the Regulatory Agreement or any of the other documents or transactions
contemplated by any of them.
Section 3.5 The Trustee. The Trustee acts hereunder solely as trustee for the benefit
of the registered Bondowners and not in its individual capacity. The Trustee shall perform such
acts as specifically and expressly provided herein and in the Indenture; provided, however, that
the Trustee shall not do anything which is not permitted by the Indenture. The Trustee may act
as the agent of and on behalf of the Authority and any act required to be performed by the
Authority as herein provided shall be deemed taken if such act is performed by the Trustee.
Neither the Trustee nor any of its officers, directors or employees shall be liable for any action
taken or omitted to be taken by it hereunder or in connection herewith except for its or their own
negligence or willful misconduct. The Trustee may consult with legal counsel selected by it (the
reasonable fees of which counsel shall be paid by the Borrower) and any action taken or suffered
by it in good faith in accordance with the opinion of such counsel shall be full justification and
protection to it. The rights of the Trustee to rely on documents, the manner in which it may
prove or establish a matter and the scope of its liabilities and protections shall be as set forth in
Article VIII of the Indenture.
Section 3.6 Borrower Accepts Obligations. The Borrower acknowledges, by
execution of this Agreement, that it has read and approved the Indenture and hereby agrees to all
of the terms and provisions of the Indenture and accepts each of its obligations expressed or
implied thereunder.
ARTICLE 4
THE LOAN
Section 4.1 Amount and Source of Loan. The Authority hereby makes to the
Borrower and agrees to fund, and the Borrower hereby accepts from the Authority, upon the
terms and conditions set forth herein and in the Indenture, the Loan in an amount equal to the
principal amount of the Bonds and agrees that the proceeds of the Loan shall be applied and
disbursed in accordance with the Indenture and the written instructions of the Authority provided
to the Trustee on the Closing Date and when the Trustee acknowledges receipt of the proceeds of
the Bonds and the conditions specified in Section 3.2 hereof and in Section 2.2 of the Indenture
have been satisfied.
ARTICLE 5
REPAYMENT OF THE LOAN
• Section 5.1 Loan Repayment. The Loan shall be evidenced by the Note which shall
be executed by the Borrower in the form attached hereto as Exhibit A. The Borrower agrees to
pay to the Trustee, on behalf of the Authority, the principal of, premium (if any) and interest on
the Loan at the times, in the manner, in the amount and at the rates of interest provided in the
RVPUB\FeAUM\709429.1 7
Note and this Agreement. To secure its obligations to repay the Loan, the Borrower will grant
4 1 the Authority a security interest in the Project pursuant to the terms of the Deed of Trust and will` take all actions necessary to perfect such security interest. In order to satisfy its obligations
under this Section 5.1 and Section 5.2, the Borrower agrees to pay to the Trustee not later than
the thirteenth (13th) day of each month, commencing July 13, 2006, all budgeted Net Operating
Revenues from the prior month, and not otherwise remitted in the prior month. Any budgeted
Net Operating Revenues received by the Borrower after the 13th day of each month shall be
transferred to the Trustee on the 13th day of the immediately following calendar month.
To secure its obligations hereunder, the Borrower hereby pledges the Operating Revenues
(including the Revenues) to the Trustee, as assignee of the Authority hereunder. The Borrower
shall provide to the Authority and the Trustee the name, location and account numbers of any
accounts into which Operating Revenues will be deposited and will provide appropriate notice to
the applicable financial institution of the security interest therein of the Trustee on behalf of the
Bondholders. Notwithstanding the foregoing, so long as the Borrower has Net Operating
Revenues that are at least equal to said month's portion of items (a) through (i) of Section 5.7 of
the Indenture, then the Borrower may retain from Net Operating Revenues for such month the
Administration Fee for such month.
(a) The Borrower agrees to pay, in repayment of the Loan, all budgeted Net
Operating Revenues for the immediately preceding calendar month resulting from operating the
Project to the Trustee for the account of the Authority until the principal of, premium(if any) and
interest on the Bonds shall have been paid or provision for payment shall have been made in
accordance with the Indenture, in federal or other immediately available funds at the corporate
trust office designated by the Trustee, on the fifteenth (15th) day of each month to cause the
Trustee to pay the amount equal to (i)the interest on the Bonds which will become due on each
Interest Payment Date and (ii) the principal of and redemption premium, if any, on the Bonds
which will become due (whether at maturity, by prior redemption or otherwise) on each Interest
Payment Date. The Borrower may remit such funds net of accrued interest on investments on
the funds and accounts held under the Indenture. In addition, the Borrower agrees to repay the
principal of the Loan, plus interest accrued thereon until the date fixed for redemption of the
Bonds to be redeemed with such repayment, in the amounts and at the times specified in Section
5.3 hereof.
In the event the Net Operating Revenues deposited with the Trustee in any two
consecutive month period are less than 90% of the amount set forth in the annual budget
described in Section 6.6 hereof, the Borrower shall, concurrently with its transfer of the amount
to the Trustee, provide notice of a written explanation for the variance to the Authority and the
Oversight Agent and, upon written request of the Oversight Agent, the Borrower shall submit a
written report within 30 days with recommendations to the Authority and the Oversight Agent
with respect to the ability of the Borrower and its recommendations as to how to stay within the
amounts contemplated in the final annual budget. The Oversight Agent shall review the
Borrower's written recommendations and submit any comments to the Borrower. The Oversight
Agent shall notify the Authority in the event the Borrower shall not comply substantially with
the recommendations submitted by the Borrower (and as commented on by the Oversight
• Agent). In such event, the Authority, based on such advice as it may deem appropriate, may
direct the Borrower to remove the manager of the Project(the "Project Manager") and approve a
new Project Manager acceptable to the Authority.
RVPUB\FBAUM\709429.1 8
In the event the Net Operating Revenues deposited in the succeeding month are less than
90% of the amount set forth in the annual budget, then the Oversight Agent shall notify the
Authority and the Trustee and, thereafter: (a) upon written order of the Authority determined in
its discretion based on the advice of the Oversight Agent and such other information as the
Authority may determine to be appropriate, all Operating Revenues of the Project shall be
deposited with and held by the Trustee and the Trustee shall deposit the budgeted Operation and
Maintenance Costs, as contemplated in the annual budget, as directed in writing by the Authority
or the Oversight Agent on behalf of the Authority, in a depository account to be established by
the Trustee for the benefit of the Borrower's operation and maintenance of the Project; and
(b)the Authority,based on such advice of the Oversight Agent as it may deem appropriate, shall
have the right to direct the Borrower to remove the Project Manager and approve a new Project
Manager acceptable to the Authority. Upon receipt by the Trustee of a certificate from the
Oversight Agent which certifies that Net Operating Revenues in a subsequent month are either
(i) at least equal to 90% or more of the amount set forth in the annual budget described in
Section 6.6 hereof or (ii) equal or greater than the amount needed to make all payments on the
Bonds for the immediately preceding month, the Trustee shall no longer be required to hold the
Operating Revenues as set forth in this Section 5.1(a) and shall take all necessary action to
transfer the Operating Revenues to another financial institution as directed in writing by the
Borrower.
(b) The Borrower further agrees to pay or cause to be paid all taxes and assessments,
general or special, including, without limitation, all ad valorem taxes, concerning or in any way
related to the Project, or any part thereof, and any other governmental charges and impositions
whatsoever, foreseen or unforeseen, and all utility and other charges and assessments; provided,
however, that the Borrower reserves the right to contest in good faith the legality of any tax or
governmental charge concerning or in any way related to the Project.
(c) The Borrower further agrees to timely pay the premiums or other amounts
required to be paid to maintain the insurance required by Sections 6.18, 6.19 and 6.20 hereof.
(d) The Borrower further agrees to pay, until the principal of and interest on all
Outstanding Bonds shall have been fully paid, to the Trustee for deposit in the accounts of the
Administration Fund established by the Indenture such amounts as the Trustee may from time to
time request for deposit into the General Account of the Administration Fund the fees and
ordinary expenses of the Trustee and the Paying Agent, the annual fees and expenses of the
Oversight Agent as provided in the Administration Agreement, and into the Borrower
Administration Fee Account of the Administration Fund the Borrower Administration Fee, all as
provided in the Indenture; provided that the Trustee fees and expenses incurred in connection
with the enforcement of the Regulatory Agreement and reasonable compensation or
reimbursement for extraordinary services, indemnification, and expenses of the Trustee, as
required by Section 8.5 of the Indenture shall be paid upon demand of the Trustee. The
Borrower agrees to pay the cost of any rebate analyst in connection with the calculation of rebate
(within the meaning of Section 148(f) of the Code) and to pay to the Trustee all amounts
required to be remitted to the United States.
(e) The Borrower agrees to the establishment of the Repair and Replacement Fund
into which the Trustee shall deposit $1,000,000 of the proceeds of the Bonds on the Closing
Date. Thereafter, there shall be deposited into the Repair and Replacement Fund the amounts
required by Section 5.7(h) of the Indenture. Moneys on deposit in the Repair and Replacement
RVPUB\FBAUM\709429.1 9
Fund shall be disbursed as provided in Section 5.13 of the Indenture and Section 6.22 of this
Agreement.
(f) The Borrower agrees to the establishment of the Operating Reserve Fund to be
funded and used as provided in Section 5.19 of the Indenture.
(g) The Borrower agrees to the establishment of the Surplus Fund into which all
remaining Net Operating Revenues will be deposited.
Section 5.2 Authority Annual Fee. The Borrower agrees to pay the Authority Annual
Fee to the Authority pursuant to the terms of the Regulatory Agreement.
Section 5.3 Nature of the Borrower's Obligations. The Borrower shall repay the Loan
pursuant to the terms of the Note irrespective of any rights of set off, recoupment or
counterclaim the Borrower might otherwise have against the Authority, the Trustee or any other
person. The Borrower will not suspend, discontinue or reduce any such payment or (except as
expressly provided herein) terminate this Agreement for any cause, including, without limiting
the generality of the foregoing, (i) any delay or interruption in the operation of the Project;
(ii) the failure to obtain any permit, order or action of any kind from any governmental agency
relating to the Loan or the Project; (iii) any event constituting force majeure; (iv) any acts or
circumstances that may constitute commercial frustration of purpose; (v) the termination of this
Agreement; (vi) any change in the laws of the United States of America, the state or any political
subdivision thereof; or (vii) any failure of the Authority to perform or observe any covenant
whether expressed or implied, or to discharge any duty, liability or obligation arising out of or
connected with the Note, this Loan Agreement, the Regulatory Agreement or any other contract
with the Borrower; it being the intention of the parties that, as long as the Note or any portion
thereof remains outstanding and unpaid, the obligation of the Borrower to repay the Loan and
provide such moneys shall continue in all events. This Section 5.3 shall not be construed to
release the Authority from any of its obligations hereunder, the Trustee from any of its
obligations under the Indenture, or, except as provided in this Section 5.3, to prevent or restrict
the Authority from asserting any rights which it may have against the Borrower under the Note
or the Deed of Trust or under any provision of law or to prevent or restrict the Borrower, at its
own cost and expense, from prosecuting or defending any action or proceeding by or against the
Authority or the Trustee or taking any other action to protect or secure its rights.
Section 5.4 Extraordinary Mandatory Prepayment of the Note. The Note is subject to
extraordinary mandatory prepayment in whole or in part, at a price equal to 100% of the
principal amount thereof to be prepaid, together with accrued interest, if any, to the date fixed for
redemption of the Bonds to be redeemed with such prepayment as follows:
(a) On the day selected by the Trustee for redemption of the Bonds after the Trustee
has accelerated the amounts due with respect to the Bonds or the Note, as the case may be, as a
result of an Event of Default under, and as defined in, the Indenture or this Agreement, in an
amount equal to the then unpaid principal amount of the Note;
(b) On the day selected by the Trustee for redemption of the Bonds in the event of an
involuntary loss or the substantial destruction of the Project as a result of unforeseen events (e.g.,
fire, seizure, requisition, change in a federal law or an action of a federal agency after the date of
issuance of the Bonds which prevents the Authority from enforcing the requirements of Section
1.103 8(b) of the regulations, or condemnation), upon receipt of Net Proceeds or, if there are to
RVPUB\FBAUM\709429.1 10
be no such payments, after the event giving rise to the involuntary loss or substantial destruction
's of the Project, in an amount equal to the then unpaid principal amount of the Note.
Notwithstanding the foregoing, the Note will not have to be prepaid in whole in such
circumstances if (i) within 90 days of the event giving rise to the loss or destruction, the
Borrower notifies the Trustee and the Authority in writing, that the Project can be restored within
18 months to a condition permitting the conduct of normal business operations; (ii) within 180
days of the event giving rise to such taking, loss or destruction, the Borrower commences to use
such amounts to reconstruct the Project pursuant to the terms of this Agreement and the
Indenture; and (iii) such amounts are disbursed for the restoration of the Project within 18
months after the date of the notice from the Borrower referred to in clause (i) hereof, but, rather,
the Note shall be prepaid, in part, to the extent of undisbursed funds on deposit in the
Redemption Fund created pursuant to the Indenture at the expiration of the period described in
(iv) above unless such period is extended with the consent of the Authority and receipt by the
Trustee of an opinion of Bond Counsel to the effect that such extension will not result in interest
on the Bonds becoming includable in the gross income of the recipients thereof for federal
income tax purposes; provided, however, that prepayment in whole shall be immediately due and
payable if in the written opinion of Bond Counsel filed with the Authority, the Borrower and the
Trustee a failure to make such prepayment will cause interest on the Bonds to be includable in
gross income for federal income tax purposes;
If the required principal amount of any prepayment in part pursuant to this Section 5.4
shall not be an authorized denomination of the Bonds to be redeemed with such prepayment,
then the required principal amount of such prepayment shall be deemed to be the next greater
• integral multiple of an authorized denomination of the Bonds to be redeemed therewith, and any
interest due with such prepayment shall be calculated using such higher amount.
The Trustee shall deposit and use prepayments of the Note pursuant to this Section and
Section 5.5 in accordance with the Indenture.
In the event of a partial prepayment of the Note, pursuant to this Section or Section 5.5,
the principal amount of the Borrower's obligation under the Note shall be reduced by the
principal amount of Bonds to be redeemed with the proceeds of such prepayment.
Section 5.5 Optional Prepayment of Note. The Borrower, at its option, may prepay
the Note, in whole or in part on any date that Bonds are permitted to be optionally redeemed
pursuant to Section 4.1(b) of the Indenture, following written notice of the Borrower's intention
to do so as provided hereinbelow, in authorized denominations and, at the redemption prices
specified by Section 4.1(b) of the Indenture. The Borrower shall give 30 days written notice to
the Authority and the Trustee of the principal amount to be optionally prepaid and the amount of
the premium, if any.
Section 5.6 Proavment of Note From Mandatory Sinking Account Payments
(Series A Bonds). The Note is also subject to mandatory prepayment in part at the principal
amount thereof (without prepayment penalty), plus accrued interest thereon from mandatory
sinking account payments on the dates and in the amounts with respect to mandatory sinking
fund redemption of the Series A Term Bonds set forth in Section 4.01(a)(i) of the Indenture.
• Section 5.7 Targeted Mandatory Sinking Account Payments (Subordinate Bonds).
The Note is also subject to targeted mandatory prepayment from Subordinate Residual Revenues
available for such payment at the targeted Mandatory Sinking Account Payments (without
RVPU13\FBAUMV09429.1 I I
"r4 prepayment penalty) on the dates and in the amounts with respect tot Targeted Mandatory
�- Sinking Fund redemption with respect to the Subordinate Bonds set forth in Section 4.01(a)(ii)of
the Indenture.
ARTICLE 6
FURTHER AGREEMENTS
Section 6.1 Successor to the Authority. The Authority shall at all times use its best
efforts to maintain the powers, functions, duties and obligations now reposed in it pursuant to
law or assure the assumptions of its obligations hereunder by any public trust or political
subdivision succeeding to its powers.
Section 6.2 Borrower Not to Dispose of Assets; Conditions Under Which Exceptions
Permitted.
(a) The Borrower agrees that during the term of this Agreement it will not dispose of
all or substantially all of its assets nor consolidate with nor merge into any entity unless: (i) the
acquirer of its assets or the entity with which it shall consolidate or into which it shall merge
shall be (A) an organization described in Section 501(c)(3) of the Code that agrees to operate the
Project in a manner that does not constitute an unrelated trade or business of such organization or
a governmental unit(as described in Section 145 of the Code) or (B) an entity that will not, in the
opinion of Bond Counsel, adversely affect the exclusion of interest on the Bonds from the gross
incomes of owners of the Bonds for purposes of federal income taxation and is permissible under
State law; (ii) such acquiring or remaining entity shall assume in writing all of the obligations of
the Borrower under this Agreement, the Regulatory Agreement, the Supplemental Regulatory
Agreement, the Continuing Disclosure Agreement, the Note and the Deed of Trust; (iii) the
Authority, after having consulted with such counsel or advisor as deemed by the Authority to be
necessary shall have consented in writing to such transfer, such consent not to be unreasonably
withheld; and (iv) the written instrument or instruments evidencing such assumption are
provided to the Trustee and the Authority. hi addition to the requirements set forth herein, the
Borrower shall have the right to sell the Project in accordance with and subject to the provisions
of Section 10 of the Supplemental Regulatory Agreement.
(b) In no event shall the Borrower sell the Project for an amount that, when added to
the amount of all moneys held in the funds and accounts established under the Indenture that are
legally available to redeem Outstanding Series A Bonds, is less than the sum of one-hundred
percent (100%) of the Outstanding principal amount of the Series A Bonds plus accrued interest,
unless the Borrower obtains and provides to the Trustee the written consent to such sale of one-
hundred percent (100%) of the Owners of the Outstanding Series A Bonds. This Section 6.2(b)
shall not be amended without the written approval of one-hundred percent (100%) of the Owners
of the Outstanding Series A Bonds. Notice of such proposed sale shall be provided to S&P if
S&P is then rating the Series A Bonds.
Section 6.3 Cooperation In Enforcement of Regulatory Agreement. The Borrower
hereby covenants and agrees as follows:
r (a) to comply with all provisions of the Regulatory Agreement;
RVP1JB\FBAUM\709429.1 12
. (b) to advise the Authority, the Trustee and the Oversight Agent in writing promptly
upon learning of any default with respect to the covenants, obligations and agreements of the
Borrower set forth in the Regulatory Agreement;
(c) upon written direction by the Authority, the Oversight Agent or the Trustee, to
cooperate fully and promptly with the Authority, the Oversight Agent and the Trustee in
enforcing the terms and provisions of the Regulatory Agreement; and
(d) to file in accordance with the time limits established by the Regulatory Agreement
all reports and certificates required thereunder.
Neither the Trustee nor the Authority shall incur any liability in the event of any breach
or violation of the Regulatory Agreement by the Borrower, and the Borrower agrees to
indemnify and hold harmless the Authority and the Trustee from any claim or liability,joint or
several, for such breach pursuant to Section 6.8 hereof.
Section 6.4 Tax Status of Bonds. The Borrower hereby covenants, represents and
agrees as follows:
(a) the Borrower has not knowingly taken and will not knowingly take or permit to be
taken any action that would have the effect, directly or indirectly, of causing interest on any of
the Bonds (other than the Series C Bonds) to be included in gross income for federal income tax
purposes and, if it should take or permit to be taken any such action, the Borrower shall take all
• lawful actions that it can take to rescind such action promptly upon having knowledge thereof,
(b) the Borrower will take such action or actions, including amending the Loan, the
Note, and the Deed of Trust as may be reasonably necessary in the opinion of Bond Counsel, to
comply fully with all applicable rules, rulings, policies, procedures, regulations or other official
statements promulgated or proposed by the United States Department of the Treasury or the
Internal Revenue Service under Section 145 of the Code which are applicable to the Bonds;
(c) the Borrower will take no action or permit or suffer to be taken any action the
result of which would cause the Bonds to be "federally guaranteed" within the meaning of
Section 149(b) of the Code;
(d) no portion of the proceeds of the Bonds shall be used to provide any airplane,
skybox or other private luxury box, facility primarily used for gambling, or store the principal
business of which is the sale of alcoholic beverages for consumption off premises;
(e) the Borrower is aware of the provisions of Section 150(b)(3) of the Code and
covenants that any use of the Project by other than an organization described in Section
501(c)(3) of the Code or a governmental unit (as described in Section 145 of the Code) will not
be such as to cause the Borrower to violate the covenant contained in Section 2.2(e) hereof;
(f) the Borrower covenants and agrees that it will not use or permit the use of any of
the funds provided by the Authority hereunder or any other funds of the Borrower, directly or
• indirectly, or direct the Trustee to invest any funds held by it hereunder or under the Indenture, in
such manner as would, or enter into, or allow any "related person" (as defined in Section
147(a)(2) of the Code) to enter into, any arrangement, formal or informal, for the purchase of the
Bonds that would, or take or omit to take any other action that would cause any Bond to be an
RVPUB\PBAUM\709429.1 13
"arbitrage bond"within the meaning of Section 148 of the Code or"federally guaranteed"within
the meaning of Section 149(b) of the Code and applicable regulations promulgated from time to
time thereunder;
(g) in the event that at any time the Borrower is of the opinion or becomes otherwise
aware that for purposes of this Section 6.4 or Section 7.13 of the Indenture it is necessary to
restrict or to limit the yield on the investment of any moneys held by the Trustee under the
Indenture, the Borrower shall determine the limitations and so instruct the Trustee in writing
(with a copy to the Authority) and cause the Trustee to comply with those limitations under the
Indenture;
(h) the Borrower will take such action or actions as may be reasonably necessary in
the opinion of Bond Counsel, or of which it otherwise becomes aware, to comply fully with
Section 148 of the Code;
(i) the Borrower will take such action or actions as necessary to ensure compliance
with Sections 7.13 and 7.14 of the Indenture; and
6) the Borrower shall not, pursuant to an arrangement, formal or informal, purchase
Bonds in an amount related to the amount of the Loan.
The Authority covenants that it will not knowingly take or knowingly permit to be taken
any action which will cause interest on the Bonds (other than the Series C Bonds) to become
includable in gross income for federal income tax purposes; provided that none of the covenants
• .t and agreements herein contained shall require any of the Borrower, the Trustee or the Authority
to enter an appearance or intervene in any administrative, legislative or judicial proceeding in
connection with any changes in applicable laws, rules or regulations or in connection with any
decisions of any court or administrative agency or other governmental body affecting the
exclusion from gross income for federal income tax purposes of interest on the Bonds (other than
the Series C Bonds); and provided further that the Authority's responsibility under this paragraph
shall be limited to actions within its control and to only such actions as are permitted or required
to be undertaken under the terms of the Indenture, this Agreement or the Regulatory Agreement.
Section 6.5 Additional Instruments. The Borrower hereby covenants to execute and
deliver such additional instruments and to perform such additional acts as may be necessary, in
the opinion of the Authority or the Trustee, to carry out the intent of the Loan, the Note, or to
perfect or give further assurances of any of the rights granted or provided for in the Loan and the
Note, including the filing of any continuation statements in connection with UCC statements
delivered and filed at closing from the Borrower in favor of the Trustee.
Section 6.6 Books and Records: Annual Budget; Project Manager.
(a) The Borrower hereby covenants to permit the Authority, the Oversight Agent, the
Program Administrator and the Trustee (who shall have no duty to audit or inspect), or their duly
authorized representatives, access to the books and records of the Borrower pertaining to the
Loan and the Project during normal business hours and upon prior notice, and to make such
• books and records available for audit and inspection to the Authority, the Oversight Agent, the
Trustee and their duly authorized representatives at reasonable times and under reasonable
conditions.
RVPUB\FBAUM\709429.1 14
(b) Prior to the delivery date and at least 60 days prior to the beginning of each fiscal
year of the Borrower, the Borrower shall prepare an annual budget and submit such budget for
approval by the Authority and the Oversight Agent. Such annual budget shall provide for Net
Operating Revenues, including projected interest income on the Series A Bonds Debt Service
Reserve Fund and Subordinate Bonds Debt Service Reserve Fund, at least equal to (i) 1.30 times
scheduled debt service on the Series A Bonds in such fiscal year, (ii) 1.10 times the sum of
(A) the aggregate scheduled debt service on the Series A Bonds and the Subordinate Bonds in
such fiscal year, and (B) the annual fees of the Trustee and the Oversight Agent for such fiscal
year, (iii) amounts necessary to replenish the amount on deposit in the Repair and Replacement
Fund to the amount required by Section 5.76) of the Indenture, (iv) amounts necessary to
replenish any withdrawal from the Series A Debt Service Reserve Fund and Subordinate Bonds
Debt Service Reserve Fund, and (v) an amount sufficient to pay the Authority Annual Fee and
the fees and expenses of the Fiduciaries. Within 20 days of receiving such annual budget, the
Authority, and the Oversight Agent shall provide comments (not inconsistent with the
requirements of this Agreement and the Regulatory Agreement), if any (including any suggested
changes acceptable to the Oversight Agent), in writing to the Borrower. The Borrower shall
attempt in good faith to address comments and concerns of the Authority in its final budget. The
Borrower shall prepare a revised annual budget and provide such revised budget to the Authority
and the Oversight Agent for their review and comment. The Borrower shall provide a copy of
the final annual budget to the Authority and the Oversight Agent prior to the beginning of the
Borrower's fiscal year. In the event the annual budget as adopted does not provide for the
coverage set forth in the second sentence of this paragraph (b), then in the case of a failure to
meet the coverage requirement set forth in subsection (i) of said sentence, the Owners of a
majority in Outstanding Principal Amount of the Series A Bonds each shall have the right, in
addition to all other rights provided under this Loan Agreement and the Indenture, to direct the
Borrower to remove the Project Manager and appoint a Project Manager acceptable to the
Authority and such Owners.
(c) Within 20 days after the last day of each quarter, the Borrower shall prepare a
statement for the immediately preceding quarter for review by the Authority and the Oversight
Agent, which shall include statement of income, balance sheet, cashflow, budget variances,
occupancy rates, rental activity and rental rates for the Project.
(d) Within 60 days after the last day of each fiscal year of the Borrower, the Borrower
shall provide a certificate to the Authority and the Oversight Agent that the Borrower has made a
review of its activities during the preceding fiscal year for the purpose of determining whether or
not the Borrower has complied with all of the terms, provisions and conditions of this
Agreement, the Regulatory Agreement and the Deed of Trust and shall certify that the Borrower
has kept, observed, performed and fulfilled each and every covenant, provision and condition of
this Agreement, the Regulatory Agreement and the Deed of Trust on its part to be performed and
is not in default in the performance or observance of any of the terms, covenants, provisions or
conditions hereof or thereof, or if the Borrower shall be in default then such certificate shall
specify all such defaults and the nature thereof. All affordability restrictions required under the
Regulatory Agreement shall be subject to review by the Oversight Agent and the Authority.
(e) The Borrower agrees that Bond holders, upon written request, may request and
receive information on the Project and the Borrower, including audited financial statements,
from the Oversight Agent.
RVPUBTBAUM\709429.1 15
Section 6.7 Notice of Certain Events. The Borrower hereby covenants to advise the
Authority, the Oversight Agent and the Trustee promptly in writing of the occurrence of any
Event of Default hereunder or any event which, with the passage of time or service of notice, or
both, would constitute an Event of Default hereunder, specifying the nature and period of
existence of such event and the actions being taken or proposed to be taken with respect thereto.
In addition, the Borrower hereby covenants to advise the Authority, the Oversight Agent and the
Trustee promptly in writing of the occurrence of any default under the Loan or of the occurrence
of an Act of Bankruptcy.
Section 6.8 Indemnification of the Authority, the Oversight Agent and the Trustee.
The Borrower hereby covenants and agrees to indemnify, hold harmless and defend the
Authority, the Oversight Agent, the Trustee and their respective officers, members, directors,
officials and employees and each of them (each, an "Indemnified Party") from and against
(i) any and all threats of a claim, claims, losses, damages, liabilities, joint or several, by or on
behalf of any person arising from any cause whatsoever in connection with the issuance of the
Bonds or the making of the Loan; (ii) any and all threats of a claim, claims, losses, damages,
liabilities,joint or several, arising from any act or omission of the Borrower or any of its agents,
servants, employees or licensees, in connection with the Bonds, the Loan or the Project; (iii) all
reasonable costs, counsel fees, expenses or liabilities incurred in connection with any such claim
or proceeding brought thereon; (iv) any and all threats of a claim, claims, losses, damages,
liabilities,joint or several arising from the presence on, under or about, or the release from, the
Project or the property of any substances, materials or wastes which are or which become
regulated or classified as hazardous or toxic under state, federal or local law; and (v) any and all
losses, claims, damages, liabilities or expenses,joint or several, arising out of or connected with
the Trustee's acceptance or administration of the trusts created by the Indenture and its exercise
of powers or duties thereunder, or under this Agreement, the Regulatory Agreement or any other
agreements in connection therewith to which it is a party, except as to the respective parties to
the extent any of the foregoing are caused by the respective negligence or willful misconduct of
the Trustee, the Oversight Agent or the Authority or any of their respective officers, members,
directors, officials and employees. In the event that any action or proceeding is brought against
the Authority, the Oversight Agent or the Trustee or any of their respective officers, members,
directors, officials or employees, with respect to which indemnity may be sought hereunder, the
Borrower, upon written notice from the Indemnified Party, shall assume the investigation and
defense thereof, including the employment of counsel selected by the Indemnified Party and
reasonably acceptable to the Borrower and the payment of all reasonable expenses related
thereto, with full power to litigate, compromise or settle the same; provided that the Authority,
the Oversight Agent and the Trustee, as the case may be, shall have the right to review and
approve or disapprove any such compromise or settlement, such approval shall not be
unreasonably withheld.
Section 6.9 Consent to Assignment. The Authority has made an assignment to the
Trustee under the Indenture for the benefit of the Owners of the Bonds of all rights and interest
of the Authority in and to this Agreement (except its rights under Sections 6.6, 6.8 and 7.4
hereof), the Note, and the Deed of Trust; and the Borrower hereby consents to all such
assignments.
Section 6.10 Compliance With Usury Laws. Notwithstanding any other provision of
this Agreement, it is agreed and understood that in no event shall this Agreement, with respect to
the Note or other instrument of indebtedness, be construed as requiring the Borrower or any
RVPUB\FBAUM\709429.1 16
,. other person to pay interest and other costs or considerations that constitute interest under any
applicable law of the State which are contracted for, charged or received pursuant to this
Agreement in an amount in excess of the maximum amount of interest allowed under any
applicable law of the State.
In the event of any acceleration of the payment of the principal amount of the Note or
other evidence of indebtedness, that portion of any interest payment in excess of the maximum
legal rate of interest, if any, provided for in this Agreement or related documents shall be
canceled automatically as of the date of such acceleration, or if theretofore paid, credited to the
principal amount. The provisions of this section prevail over any other provision of this
Agreement.
Section 6.11 Title to the Project. The Borrower has fee title to the Project free and clear
of any lien or encumbrance except for (i) liens for nondelinquent assessments and taxes not yet
due or which are being contested in good faith by appropriate proceedings; (ii) the Regulatory
Agreement; (iii) the Deed of Trust; and (iv) the Supplemental Regulatory Agreement. On or
prior to the closing date as required by Section 6.20, the Borrower shall cause to be delivered to
the Trustee and the Authority one or more ALTA title policies, insuring the lien interests of the
Authority and the Trustee as the insureds, as their respective interests may appear under the Deed
of Trust.
Section 6.12 Operation of the Project. The operation of the Project in the manner
contemplated on the Closing Date and as described herein does not conflict with any zoning,
water or air pollution or other ordinance, order, law or regulation applicable thereto; the
i Borrower will cause the Project to be operated in accordance with all applicable federal, state
and local laws or ordinances (including rules and regulations) relating to zoning, building, safety,
and environmental quality and will obtain and maintain in effect any licenses, permits, franchises
or other governmental authorizations necessary for the operation of the Project.
Section 6.13 No Untrue Statements. Neither this Agreement nor any other document,
certificate or statement furnished to the Trustee or the Authority by or on behalf of the Borrower,
contains to the best of its knowledge any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and therein not
misleading or incomplete as of the date thereof and as of the Closing Date. It is specifically
understood by Borrower that all such statements,representations and warranties shall be deemed
to have been relied upon by the Authority as an inducement to make the Loan and that if any
such statements, representations and warranties were materially incorrect at the time they were
made or as of the Closing Date, the Authority may consider any such misrepresentation or breach
an Event of Default.
Section 6.14 Useful Life. Within the meaning of Section 147(b) of the Code, the
average maturity of the Bonds does not exceed 120 percent of the average reasonably expected
remaining economic life of the Project.
Section 6.15 Continuing Disclosure. The Borrower hereby covenants and agrees that it
will comply with and carry out all of the provisions of the Continuing Disclosure Agreement.
Notwithstanding any other provision of this Agreement, failure of the Borrower to comply with
the continuing Disclosure Agreement shall not be considered an Event of Default under the
Indenture or the Loan Agreement; however, the Trustee may (and, at the request of any
participating underwriter (as defined in the Continuing Disclosure Agreement), or the holders of
RVPUB\FBAUM\709429.1 17
at least 25% in aggregate principal amount of outstanding Bonds, subject to payment of its fees
and expenses, including reasonable attorneys' fees, shall) or any bondholder may, take such
actions as may be necessary and appropriate, including seeking specific performance by court
order,to cause the Borrower to comply with its obligations under this Section 6.15.
Section 6.16 Minimum Rents; Coverage Requirement Certificate. The Borrower shall,
at all times while any of the Bonds remain outstanding, fix, prescribe and collect rents, fees and
charges in connection with the Project, so as to yield (i) Net Operating Revenues including any
earnings on the Series A Bonds Debt Service Reserve Fund for the immediately preceding 12
month period that will result in a Coverage Ratio at least equal to 1.30 (rounded up to the nearest
hundredth) with respect to the Series A Bonds debt service and (ii) Net Operating Revenues,
including any earnings on the Series A Bonds Debt Service Reserve Fund and Subordinate
Bonds Debt Service Reserve Fund in the immediately preceding 12-month period, which will
result in a Coverage Ratio of at least 1.10 (rounded up to the nearest hundredth) with respect to
the aggregate of the Series A Bonds and the Subordinate Bonds debt service. The Borrower
shall file with the Authority, the Oversight Agent, the Trustee and S&P (if S&P is then rating the
Series A Bonds), a Coverage Requirement Certificate demonstrating compliance with this
Section 6.16: (i) within 60 days of the last day of the first six months of each fiscal year based on
unaudited financial statements, and (ii) within 100 days of the last day of each fiscal year
beginning with fiscal year 2007 based on audited financial statements. In the event such
coverage requirements are not satisfied, then the Authority shall have the right to direct the
Borrower to remove and replace the Project Manager in the same manner as set forth in Section
6.6(b) hereof. The Borrower acknowledges that it is aware of the provisions of Title 2, Chapter
` 2, Article 9 of the City's Municipal Code in existence on the Closing Date with respect to rent
increases and that the Borrower and the Project are subject to said provisions.
Section 6.17 Public Liabilities and Workers' Compensation Insurance.
(a) Public Liability Insurance. The Borrower shall maintain or cause to be
maintained so long as Bonds are Outstanding under the Indenture, a commercial general liability
coverage, including products, completed operations, contractual, bodily injury, personal injury,
and property damage in the amount of at least Five Million Dollars ($5,000,000) combined
single limits, naming the Authority, the Trustee and their officers, officials, employees,
volunteers, agents, and representatives as additional insureds. All such insurance (i) shall be
primary insurance and not contributory with any other insurance with the Authority, the Trustee
or their officers, officials, employees, volunteers, agents, or representatives may have; (ii) shall
contain no special limitations on the scope of protection afforded to the Authority, the Trustee
and their officers, officials, employees, volunteers, agents, and representatives; (iii) shall be "per
occurrence" rather than "claims made" insurance (in the event the Borrower is unable to obtain
such policy, or believes that such policy's premium is not reasonable, the Borrower shall submit
proof of such contention to the Authority, upon which event the Authority may, after review of
such information, authorize a"claims made"policy for the Project); (iv) shall apply separately to
each insured against whom claim is made or suit is brought, except with respect to the limits of
the insurer's liability; (v) shall provide that the policy will not be canceled or limited in scope by
the insurer or the Borrower's contractor unless there is a minimum of thirty (30) days prior
• written notice by certified mail, return receipt requested to the Authority and Oversight Agent;
(vi) shall be written by an insurer with a Best rating of not less than B+ (and if the Series A
bonds are then rate by S&P, at least "BBB-" by S&P); and (vii) shall be endorsed to state that
any failure to comply with the reporting provisions of the policies shall not affect coverage
RVPUB\FBAUM\709429.1 18
. , provided to the Authority and its officers, officials, employees, volunteers, agents, and
representatives.
None of the above described policies shall include a deductible or self insured retention
amount of more than Ten Thousand Dollars ($10,000) unless approved in writing by an
authorized representative of the Authority upon the advice of the Oversight Agent.
Such insurance may be maintained as part of or in conjunction with any other insurance
coverage carried by the Borrower. The Net Proceeds of such liability insurance shall be applied
by the Borrower toward extinguishment or satisfaction of the liability with respect to which the
Net Proceeds of such insurance shall have been paid.
(b) Workers' Compensation Insurance. The Borrower shall maintain or cause to be
maintained to the extent required by law so long as Bonds are Outstanding under the Indenture,
workers' compensation insurance, including Employer's Liability Coverage, with limits not less
than $1,000,000 per accident, issued by a responsible carrier authorized under the laws of the
State to insure employers against liability for compensation under the Labor Code of the State, or
any act enacted as an amendment or supplement thereto or in lieu thereof, such workers'
compensation insurance to cover all persons (if any) employed by the Borrower in connection
with the Project and to cover full liability for compensation under such act. Such insurance shall
be endorsed to include a waiver of subrogation rights against the Authority and its officers,
officials, employees, volunteers, agents and representatives, and notice of cancellation as
described in (v) under Section 6.17(a) above. Such insurance shall be underwritten by California
• ` licensed insurers with Best ratings of not less than B+ (and if the Series A Bonds are then rated
by S&P, at least "BBB-" by S&P). Such insurance may be maintained as part of or in
conjunction with any other insurance coverage carried by the Borrower.
Section 6.18 Casualty Insurance, The Borrower shall procure and maintain, or cause to
be procured and maintained, so long as Bonds are Outstanding under the Indenture, all risk
property and casualty insurance against loss or damage to the Improvements located on the
Project, in an amount at least equal to one hundred percent (100%) of the replacement value of
the Improvements. Such insurance shall, as nearly as practicable, cover loss or damage by
explosion, windstorm, riot, aircraft, vehicle damage, smoke, fire and such other hazards
(excluding earthquake and flood coverage) as are normally covered by such insurance. Such
insurance shall be subject to such deductibles as are customarily maintained by municipalities
with respect to works and properties of like character, but in any case shall not exceed $100,000.
Such insurance may be maintained as a part of or in conjunction with any other insurance
coverage carred by the Borrower. Any insurer providing such insurance must be rated at least
"B+"by A.M. Best (and if any Series A Bonds are then rated by S&P, at least "BBB-"by S&P).
Such insurance shall be reviewed by an independent insurance consultant retained by the
Borrower at least once every other year, and shall be maintained as recommended by the
consultant as customarily obtained by similarly situated entities. The Net Proceeds of such
insurance shall be applied as provided in Section 7.9 of the Indenture. Any such insurance
policy shall provide that it shall not be changed, modified, amended or cancelled without at least
30 days written notice to the Borrower and the Trustee.
Section 6.19 Rental Interruption Insurance. The Borrower shall procure and maintain,
or cause to be procured and maintained, so long as Bonds are Outstanding under the Indenture,
rental interruption or use and occupancy insurance to cover the Borrower's loss, total or partial,
of payments for the Loans resulting from the loss, total or partial, of the use of the Improvements
RVPUB\FBAUM\709429.1 19
• located on the Project as a result of any of the hazards covered in the insurance required by
Section 6.18, in an amount at least equal to the sums of(i) Maximum Annual Debt Service on
the Bonds and (ii)budgeted Operation and Maintenance Costs coming due and payable during
the current Fiscal Year; provided, however, that with respect to budgeted Operation and
Maintenance Costs, in the first Fiscal Year such amount shall be as agreed to by the Borrower
and the Oversight Agent and that in any future Fiscal Year such amount shall be the greater of
the budgeted Operation and Maintenance Costs or the prior Fiscal Year's actual Operation and
Maintenance Costs. Such insurance may be maintained as part of or in conjunction with any
other insurance coverage carried by the Borrower. Any insurer providing such insurance must
be rated at least `B+" by A.M. Best (and if any Series A Bonds are then rated by S&P, at least
"BBB-" by S&P). The Net Proceeds of such insurance, if any, shall be paid to the Trustee and
deposited in the Series A Bonds Debt Service Fund, and shall be credited towards the payment of
the Bonds as the same become due and payable. Any such insurance policy shall provide that it
shall not be changed, modified, amended or cancelled without at least 30 days written notice to
the Borrower and the Trustee.
Section 6.20 Recordation; Title Insurance. On or before the Closing Date the Borrower
shall, at its expense, (a) cause the Deed of Trust, to be recorded in the Office of the Orange
County Recorder, and (b) obtain an ALTA title insurance policy naming the Trustee as its
interests may appear under the Deed of Trust and insuring the Borrower's fee simple title to the
Project, subject only to Permitted Encumbrances, in an amount at least equal to the aggregate
principal amount of the Bonds. All Net Proceeds received under any such title insurance policy
shall be deposited with the Trustee, as assignee of the Borrower under the Indenture, and applied
• `' as set forth in Section 7.9 of the Indenture. The following shall be true with respect to such
policy: (i) the policy is in full force and effect, (ii) the policy is assignable to and will inure to the
benefit of the duly authorized and qualified transferee (subject to recordation of assignment of
mortgage) without the consent or any notification to the insurer, (iii) the premium for such policy
was paid in full, (iv) such policy is issued by a title insurance company licensed to issue policies
in the state in which the related mortgaged property is located, (v) no claims have been made
under any title insurance policy and no other action has been taken that would materially impair
such policy and (vi) such policy contains no exclusions for any of the following circumstances,
or it affirmatively insures (unless the related mortgage property is located in a jurisdiction where
such affirmative insurance in not available,) (a) that the related mortgaged property has access to
a public road, and (b) that the area shown on the survey, reviewed or prepared in connection with
the origination of the related mortgage loan, is the same as the property legally described in the
related mortgage.
Section 6.21 Insurance Net Proceeds; Form of Policies. Each policy of insurance
maintained pursuant to Sections 6.18, 6.19 and 6.20 shall name the Trustee as mortgagee and
loss payee so as to provide that all proceeds thereunder shall be payable to the Trustee. The
Borrower shall pay or cause to be paid when due the premiums for all insurance policies required
by this Indenture. All such policies shall provide that the Trustee shall be given thirty(30) days'
prior notice of each expiration, and intended cancellation thereof or reduction of the coverage
provided thereby. The Trustee shall not be responsible for the sufficiency, adequacy or amount
of any insurance herein required and shall be fully protected in accepting payment on account of
. such insurance or any adjustment, compromise or settlement of any loss. The Borrower shall
cause to be delivered to the Trustee, the Authority and the Oversight Agent annually, no later
than August 5th each year, a certificate stating that all of the insurance policies required by this
Agreement are in full force and effect and that the Trustee has been named as mortgagee and loss
RVPUB\FBAUM\709429.1 20
payee in all policies required to be maintained under Sections 6.18 and 6.19. Failure to comply
with the above requirements shall constitute an Event of Default hereunder.
Section 6.22 Repair and Replacement.
(a) The Borrower agrees to cause to be performed a preliminary inspection by a
consultant experienced in mobilehome parks, selected by the Borrower and approved by the
Authority, which approval shall not be unreasonably withheld, of the Project at such time or
times as the Oversight Agent but in any event no less frequently than once very five (5) years as
provided in subsection (e) below may reasonably determine to be necessary based on
information with respect to the Project available to the Oversight Agent, and if it is determined
that further inspection is needed after a preliminary inspection, such further inspection,providing
a report of a licensed contractor qualified to do the type of work proposed to be performed, to
identify any repairs, replacements or capital improvements required to maintain the Project as a
safe and sanitary mobile home park in accordance with the requirements of this Agreement, the
Regulatory Agreement and all associated agreements. Any such inspections shall be at the
expense of the Borrower. All such repairs, replacements or capital improvements and costs of
inspections shall be paid from moneys on deposit in the Repair and Replacement Fund to the
extent of the monies deposited in such Fund.
(b) In the event that expenses are incurred, or in the opinion of the Borrower ought
properly be incurred for replacement or additional improvements on the Project, for other capital
facilities which may be of direct or indirect benefit to the Project which are not identified in a
report of a licensed contractor qualified to do the type of work proposed to be performed
(pursuant to Section 6.22(a) herein), beyond ordinary and necessary maintenance and repairs
which are paid as part of the Operation and Maintenance Expenses, the Borrower shall submit to
the Oversight Agent a request for payment or reimbursement of such costs. The request shall
(a) identify the total amount of such costs to be paid pursuant to such requisition, including all
items of cost in such details as may be available to the Borrower, (b) state with respect to such
disbursement (i) the amount to be disbursed for payment of such costs, and (ii)that each item of
costs identified therein has been properly incurred and has not been the basis of any previous
disbursement; and (c) to be accompanied by an invoice, if any. Upon approval by the Oversight
Agent of such a request from the Borrower, the Oversight Agent shall submit or cause to be
submitted the request to the Trustee pursuant to the Indenture for payment of such costs from the
Repair and Replacement Fund.
(c) Moneys deposited in the Repair and Replacement Fund on the Closing Date shall
be applied to pay for or reimburse the Borrower for initial improvements, if any, to the Project as
set forth in Exhibit C hereto, as said Exhibit C may be amended from time to time with the
approval of the Borrower and the Oversight Agent, or as described in the preceding paragraph
(b). Moneys deposited in the Repair and Replacement Fund pursuant to Section 5.7 of the
Indenture may be used for an expense described in the preceding subsection (b).
(d) With respect to each expenditure from the Repair and Replacement Fund, the
Borrower shall file a requisition with the Oversight Agent. The requisition shall (a) identify the
total amount of such costs to be paid pursuant to such requisition, including all items of cost in
such details as may be available to the Borrower, (b) state with respect to such disbursement
(i) the amount to be disbursed for payment of such costs, and (ii) that each item of costs
identified therein has been properly incurred and has not been the basis of any previous
disbursement; and (c)to be accompanied by an invoice, if any. Upon approval by the Oversight
RV PUB\FBAUM\709429.1 21
Agent of such a requisition from the Borrower, the Oversight Agent shall submit or cause to be
submitted the requisition to the Trustee pursuant to the Indenture for payment of such costs from
the Repair and Replacement Fund.
(e) On or about the fifth anniversary of the Closing Date and on or about each fifth
year thereafter, the Borrower shall cause an updated report with respect to the physical needs of
the Project (the "Updated Physical Assessment Report") to be prepared by a qualified
professional approval by the Oversight Agent and a copy of said Updated Physical Assessment
Report shall be filed with the Oversight Agent and the Authority. Thereafter, to the extent
specified in the Updated Physical Assessment Report, the Borrower shall cause to be deposited
into the Repair and Replacement Fund pursuant to Section 5.70) of the Indenture the amount
specified in said Updated Physical Assessment Report.
(f) Moneys in the Repair and Replacement Fund may also be used, if necessary as
determined by the Borrower and the Oversight Agent, to make payments for debt service on the
Bonds.
Section 6.23 Other Debt, No Recourse Debt: Other Limitations on Borrower
(A) The Borrower represents, covenants and warrants that:
(a) Other than the Loan and the Other Borrower Obligations, there are no
other debt obligations of the Borrower with a maturity of greater than one year.
`i (b) The Borrower is not a debtor, guarantor or otherwise an obligor under any
loan arrangement, promissory note or other evidence of indebtedness that is a recourse
obligation against the Borrower.
(c) The Borrower shall not incur any recourse debt nor shall the Borrower act
as guarantor or enter into any other arrangement if by doing so would subject the
Borrower to recourse liability.
(d) The Borrower shall not incur any long term debt payable from Operating
Revenues (other than the Loan) and unless the actual Net Operating Revenues for each of
the two most recent fiscal years are at least equal to (i) 1.30 times the maximum annual
debt service on the Series A Bonds, and (ii) 1.10 times the maximum annual debt service
on the Series A Bonds and the Subordinate Bonds, plus, in each case, the proposed
additional long term debt.
(B) The Borrower further represents, covenants and warrants that:
(a) The Borrower will not engage in any business or activity other than those
necessary for or incidental to its ownership and operation of the Project and the
ownership and operation of other mobile home park projects.
(b) The unanimous consent of the directors of the Borrower shall be required
to (i) file, consent to the filing of, or join in any filing of, a bankruptcy or insolvency
petition or otherwise institute insolvency proceedings; (ii) dissolve, liquidate, consolidate,
merge, or sell all or substantially all of the assets of the Borrower; (iii) engage in any
RVPUB\FBAUM\709429.1 22
other business activity other than described in (a) above; or (iv) amend the articles of
incorporation of the Borrower.
(C) The Borrower further covenants:
(i) To maintain books and records separate from any other person or entity;
(ii) To maintain its accounts separate from those of any other person or entity;
(iii) Not to commingle assets with those of any other entity;
(iv) To conduct its own business in its own name;
(v) To maintain separate financial statements;
(vi) To pay its own liabilities out of its own funds;
(vii) To observe all corporate formalities and other formalities required by its
articles and bylaws;
(viii) To maintain an arm's-length relationship with its affiliates, if any;
(ix) To pay the salaries of its own employees and maintain a sufficient number
of employees in light of its contemplated business operations;
s (x) Not to guarantee or become obligated for the debts of any other entity or
hold out its credit as being available to satisfy the obligations of others;
(xi) Not to acquire obligations or securities of its members, directors, or
employees;
(xii) To allocate fairly and reasonably any overhead for shared office space;
(xiii) To use separate stationery, invoices, and checks;
(xiv) Not to pledge its assets for the benefit of any other entity or make any
loans or advances to any entity;
(xv) To hold itself out as a separate entity;
(xvi) To correct any known misunderstanding regarding its separate identity;
and
(xvii) To maintain adequate capital in light of its contemplated business
operations.
(D) The Borrower also makes the following representations and warranties:
(a) There is no proceeding threatened or pending for the total or partial
condemnation, appropriation, or recapture of any material portion of the Project that
would materially affect the Borrower's performance under the Loan Agreement, Deed of
RVPUB\FBAUM\709429.1 23
Trust, Regulatory Agreement or Supplemental Regulatory Agreement, or the use, value,
or operation of the Project.
(b) The Project is (a) free and clear of any damage that would materially and
adversely affect the use or value of the Project as security for the Loan, (b) in good repair
and condition so as not to materially and adversely affect the use or value of the Project
as security for the Loan, and (c) all building systems contained therein are in good
working order so as not to materially and adversely affect the use or value of the Project
as security for the Loan.
(c) The Project constitutes one or more separate tax parcels.
Section 6.24 Intentionally Omitted.
Section 6.25 Replenishment of Series A Bonds Debt Service Reserve Fund. The
Borrower agrees to make payments sufficient to restore the Series A Bonds Debt Service
Reserve Fund to the Series A Bonds Debt Service Reserve Fund Requirement (a) in 12
consecutive equal monthly installments beginning in the month following any withdrawal from
the Series A Bonds Debt Service Reserve Fund which causes the amount therein to be less than
the Series A Bonds Debt Service Reserve Fund Requirement, or (b) in four consecutive equal
monthly installments beginning in the month following any calculation of the value of the
Series A Bonds Debt Service Reserve Fund at an amount less than the Series A Bonds Debt
Service Reserve Fund Requirement.
• Section 6.26 Replenishment of Subordinate Bonds Debt Service Reserve Fund. The
Borrower agrees to make payments as soon as possible to restore the Subordinate Bonds Debt
Service Reserve Fund to the Subordinate Bonds Debt Service Reserve Fund Requirement, such
moneys for such purpose to come from available moneys in the Surplus Fund.
Section 6.27 Project Management Agreements. Any Project management agreement
shall permit the Borrower to remove the Project Manager (without penalty) for nonperformance
or if the Borrower fails to meet the rate covenant in Section 6.16 hereof (unless it could be
established that causes outside the operator's control were causing the rate covenant violation).
If the Borrower removes the Project Manager, the Borrower, shall promptly appoint a
replacement Project Manager acceptable to the Oversight Agent and the Authority, and pending
such appointment, may act as Project Manager on a temporary basis.
Section 6.28 Operating Fund. The Borrower shall have an operating cash balance for
the Project equal to at least 15 days of annual budgeted Operation and Maintenance Costs as of
the Closing Date and as of the last day of each fiscal year (such cash balance shall be exclusive
of any amounts in the funds and accounts held by the Trustee or funds representing resident
security deposits).
Section 6.29 Rental Assistance Fund.
(a) The Borrower shall establish with the Trustee the Rental Assistance Fund, which
shall be held by the Trustee pursuant to Section 5.18 of the Indenture. The Rental Assistance
Fund shall be placed in an interest bearing account selected by the Trustee. Signature of the
Borrower shall be required for withdrawal of any funds from the Rental Assistance Fund.
RVPUB\FBAUM\709429.1 24
.r Moneys in the Rental Assistance Fund shall not be pledged to repayment of the Bonds and none
of the Bondowners, the Trustee or the Authority shall have any claim to such moneys.
(b) The Borrower is authorized to make monthly withdrawals and utilize moneys in
the Rental Assistance Fund to provide a subsidy for rental payments (the "Subsidy Payments") to
be made by Residents in the Project. The amounts of the Subsidy Payments and the Residents in
the Project who from time to time are to be beneficiaries of such Subsidy Payments shall be
determined by the Borrower in its reasonable discretion in accordance with the provisions of the
Supplemental Regulatory Agreement,provided that in any event written information with respect
to all Subsidy Payments shall be regularly provided by the Trustee to the Authority and the
Oversight Agent at least quarterly.
(c) Moneys in the Rental Assistance Fund shall be used and applied by the Borrower
in accordance with the terms and provisions of Section 2(b) of the Supplemental Regulatory
Agreement.
Section 6.30 Additional Representations and Warranties of the Borrower. The
Borrower may make the following representations and warranties:
(a) No Litigation. There are no pending actions, suits or proceedings, arbitrations or
governmental investigations against the Project, an adverse outcome of which would materially
affect the Borrower's performance under this Loan Agreement, the Deed of Trust, the
Regulatory Agreement or the Supplemental Regulatory Agreement (collectively, the
"Transaction Documents");
k
(b) Title. The Borrower has good and marketable fee simple title to the Property and
good title to the personal property constituting a part of the Project, subject to no liens, charges
or encumbrances other than the Permitted Encumbrances;
(c) Permitted Encumbrances. The Permitted Encumbrances do not and will not
materially and adversely affect (1)the ability of the Borrower to pay in full the principal and
interest on the Loan in a timely manner or (2) the use of the Project for the use currently being
made thereof, the operation of the Project as currently being operated or the value of the Project;
(d) First Lien. Upon the execution by the Borrower and the recording of the Deed of
Trust, and upon the execution and filing of any required UCC-1 financing statements or
amendments thereto, the Trustee will have a valid first lien on the Property and a valid security
interest in the personal property constituting a part of the Project subject to no liens, charges or
encumbrances other than the Permitted Encumbrances;
(e) ERISA. The Borrower has made and shall continue to make all required
contributions to all employee benefit plans, if any, and the Borrower has no knowledge of any
material liability which has been incurred by the Borrower which remains unsatisfied for any
taxes or penalties with respect to any employee benefit plan or any multi-employer plan, and
each such plan has been administered in compliance with its terms and the applicable provisions
of ERISA and any other federal or state law;
. (f) Contingent Liabilities. The Borrower has no known material contingent
liabilities;
RVPUB\FBAUM\709429.1 25
(g) No Other Obligations. The Borrower has no material financial obligation under
any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Borrower is a party or by which the Borrower or the Project is otherwise bound, other
than obligations incurred in the ordinary course of the operation of the Project and other than the
Other Borrower Obligations and the obligations under the Loan, the Deed of Trust, the
Regulatory Agreement,the Agency Loan and the Supplemental Regulatory Agreement.
(h) No Other Debt. Other than debt financing for the Other Borrower Obligations,
the Borrower has not borrowed or received other debt financing that has not been heretofore
repaid in full;
(i) Fraudulent Conveyance. The Borrower (1)has not entered into the transaction
contemplated by this Agreement or any Transaction Document with the actual intent to hinder,
delay, or defraud any creditor and (2) received reasonably equivalent value in exchange for its
obligations under the Transaction Documents. Giving effect to the transactions contemplated by
the Transaction Documents, the fair saleable value of the Borrower's assets exceeds and will,
immediately following the execution and delivery of the Transaction Documents, exceed the
Borrower's total liabilities, including, without limitation, subordinated, unliquidated, disputed or
contingent liabilities. The fair saleable value of the Borrower's assets is and will, immediately
following the execution and delivery of the Transaction Documents, be greater than the
Borrower's probable liabilities, including the maximum amount of its contingent liabilities or its
debts as such debts become absolute and matured. The Borrower's assets do not and,
immediately following the execution and delivery of the Transaction Documents will not,
• '; constitute unreasonably small capital to carry out its business as conducted or proposed to be
conducted. The Borrower does not intend to, and does not believe that it will, incur debts and
liabilities (including, without limitation, contingent liabilities and other commitments) beyond its
ability to pay such debts as they mature (taking into account the timing and amounts to be
payable on or in respect of obligations of the Borrower);
0) Investment Company Act. The Borrower is not (1) an "investment company" or
a company "controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended; (2) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of either a "holding company" or a "subsidiary company"
within the meaning of the Public Utility Holding Company Act of 1934, as amended; or
(3) subject to any other federal or state law or regulation which purports to restrict or regulate its
ability to borrow money;
(k) Access/Utilities. The Project has adequate rights of access to public ways and is
served by adequate water, sewer, sanitary sewer and storm drain facilities. All public utilities
necessary to the continued use and enjoyment of the Project as presently used and enjoyed are
located in the public right-of-way abutting the Project, and all such utilities are connected so as
to serve the Project without passing over other property. All roads necessary for the full
utilization of the Project for its current purpose have been completed and dedicated to public use
and accepted by all governmental authorities or are the subject to access easements for the
benefit of the Project;
• (1) Special Assessments. Except as disclosed in the title insurance policy relating to
the Property, there are no pending or, to the knowledge of the Borrower, proposed special or
other assessments for public improvements or otherwise affecting the Property, nor, to the
RVPUB\FBAUM\709429.1 26
knowledge of the Borrower, are there any contemplated improvements to the Property that may
result in such special or other assessments;
(m) Flood Zone. The Property is not located in a flood hazard area as defined by the
Federal Insurance Administration; and
(n) Misstatements of Fact. No statement of fact made by the Borrower in the
Transaction Documents contains any untrue statement of a material fact or omits to state any
material fact necessary to make statements contained herein or therein not misleading. There is
no fact presently known to the Borrower which has not been disclosed which adversely affects,
nor as far as the Borrower can foresee, might adversely affect the business, operations or
condition (financial or otherwise) of the Borrower.
Section 6.31 Property Tax-Exemption. The Borrower covenants to timely apply and re-
apply for, and pursue,property tax-exemption for all qualifying spaces in the Project.
Section 6.32 Operating Reserve Fund. The Borrower agrees to the establishment and
operation of the Operating Reserve Fund as set forth in Section 5.19 of the Indenture.
ARTICLE 7
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default. Each of the following shall be an"Event of Default":
(a) The Borrower shall fail to pay when due the amounts required to be paid under
this Agreement or the Note when the same shall become due and payable in accordance with the
terms of this Agreement or the Note, including a failure to repay any amounts which have been
previously paid but are recovered, attached or enjoined pursuant to any insolvency, receivership,
liquidation or similar proceedings; or
(b) The Borrower shall fail to perform or observe any of its covenants or agreements
contained in this Agreement, the Regulatory Agreement, the Indenture, the Note or the Deed of
Trust, other than as specified in paragraph (a) above, and such failure shall continue during and
after the period specified in Section 7.2;
(c) Any representation or warranty of the Borrower shall be determined by the
Trustee or the Authority to have been false in any material respect when made;
(d) The Borrower shall generally not pay its debts as they become due, or shall admit
in writing its inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors or shall institute any proceeding or voluntary case seeking to adjudicate it a
bankrupt or insolvent or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief or protection of debtors, or seeking the entry
of an order for relief or the appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property; or the Borrower shall take any action to authorize
any of the actions described above in this paragraph (d), or any proceeding shall be instituted
against the Borrower seeking to adjudicate it a bankrupt or insolvent or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or relief or protection of
RVPUBTBAUM\709429.1 27
debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its property, and, if such
proceeding is being contested by the Borrower in good faith, such proceeding shall remain
undismissed or unstayed for a period of 60 days; or
(e) An event of default shall have occurred under Section 11.1 of the Indenture and
the Series A Bonds shall have been declared due and payable pursuant to Section 11.2 of the
Indenture.
Section 7.2 Notice of Default; Opportunity to Cure. No default under Section 7.1(b)
hereof shall constitute an Event of Default until:
(a) The Trustee, by registered or certified mail, shall give notice to the Borrower
(with a copy to the Authority and S&P if S&P is then rating the Series A Bonds) of such default
specifying the same and stating that such notice is a"Notice of Default"; and
(b) The Borrower shall have 60 days after receipt of such notice to correct the default
and shall not have corrected it; provided, however, that if the default stated in the notice is of
such a nature that it cannot be corrected within 60 days, such default shall not constitute an Event
of Default hereunder so long as (i) the Borrower institutes corrective action within said 60 days
and diligently pursues such action until the default is corrected, and (ii) in the opinion of Bond
Counsel, the failure to cure said default within 60 days will not adversely affect the exclusion
from gross income for federal income tax purposes of interest on the Bonds.
Section 7.3 Remedies. Whenever any Event of Default under Section 7.1 hereof shall
have happened and be continuing, the following remedial steps shall be taken, subject to the
provisions of Section 7.15 of the Indenture:
(a) Immediately upon the occurrence of any Event of Default under Section 7.1 the
Trustee shall declare all amounts due under this Agreement and the Note to be immediately due
and payable; provided, however, that in the case of an Event of Default described in (b), (c) or
(d) of Section 7.1 hereof, the amounts due under this Agreement and the Note shall not be
accelerated unless the Trustee receives either (i) written notice from the Authority to accelerate
the Loan and declare all amounts due under this Agreement and the Note or (ii) an opinion of
Bond Counsel that the failure to accelerate the Loan under such circumstances will adversely
affect the exclusion from gross income for federal income tax purposes of interest on the Bonds;
provided, however, as is set forth in the Indenture, if any Series A Bonds are Outstanding and
there has been no default with respect to the Series A Bonds under the Indenture, the Subordinate
Bonds shall not be subject to acceleration;
(b) Subject to the provisions of the Indenture (including Article 8 thereof) and
Section 5.4 hereof, the Trustee shall take whatever action at law or in equity may appear
necessary or desirable to collect the payments required to be made by the Borrower under this
Agreement, the Deed of Trust, and the Note, or to enforce performance and observance of any
obligation or agreement of the Borrower under this Agreement, the Note, the Deed of Trust or
the Regulatory Agreement, but in no event shall the Trustee be obligated to take any such action
which in its opinion will or might cause it to expend time or money or otherwise incur liability
unless and until an indemnity bond satisfactory to it has been furnished to it;
RVPUB\FBAUM\709429.1 28
(c) The Authority may, upon consultation with the Oversight Agent, terminate the
Project Manager and shall upon the recommendation of the Oversight Agent or such other advice
as the Authority deems appropriate, select a new Project Manager;
(d) Upon an Event of Default hereunder, either the Authority may operate and
administer, or cause to be operated and administered, the Project in the place and stead of the
Borrower and in the manner required by the terms and provisions of the Regulatory Agreement.
In so doing, the Authority or such party as it may appoint to operate and administer the Project,
to the extent it may have moneys available hereunder for such purposes, shall complete the
rehabilitation and equipping of any incomplete component of the Project to be funded with
proceeds of the Bonds, and shall pay from the Operating Revenues received with respect to such
Project (to the extent available) the Loan repayments and Fees and Charges, if any, which the
Borrower was obligated to pay pursuant to the terms and provisions of this Loan Agreement and
the Deed of Trust. The Trustee or other depository shall be authorized to pay the Authority or its
designee as directed by an Officer's Certificate any moneys on deposit in the Project Fund to the
extent that the Authority shall certify in writing that such moneys are required by the Authority
or its designee to pay any items that would have been included in the Cost of Project had the
Authority or its designee not acquired the same.
(e) The Authority may, upon the recommendation of the Oversight Agent or such
other advice as it may deem appropriate, commence foreclosure proceedings as set forth in
Section 7.10 of the Indenture;
(f) Upon an Event of Default and continuing until at least one year after all Events of
Default have been cured, all Operating Revenues then on hand and thereafter received by the
Borrower or otherwise shall be delivered to the Trustee, for deposit to a depository account for
the benefit of the Bond Owners to be applied by the Trustee first to the payment of debt service
on the Series A Bonds, then to the debt service on the Subordinate Bonds, and then to the
payment of reasonable and necessary Operation and Maintenance Costs, with any remaining
amounts used as provided in Section 5.7 of the Indenture.
Any amounts collected as payments made on the Note and pursuant to Article 5 hereof,
or applicable to such payments, and any other amounts which would be applicable to payment of
principal of, premium, if any, and interest on the Bonds collected pursuant to action taken under
this Section shall be applied in accordance with the provisions of the Indenture. Upon payment
in full of all amounts owing under the Indenture, including all fees and expenses of the Trustee,
the Oversight Agent and the Authority, the Authority and the Trustee shall transfer any
remaining right, title or interest that each has in the Indenture, this Agreement, the Note and the
Deed of Trust to the Borrower, except any rights to receive payment of fees and expenses and to
be indemnified, as provided for herein and in the Indenture.
Section 7.4 Attorneys' Fees and Expenses. If an Event of Default occurs and if the
Authority or the Trustee should employ attorneys or incur expenses for the enforcement of any
obligation or agreement of the Borrower contained herein, the Borrower on demand will pay to
the Authority or the Trustee the reasonable fees of such attorneys and the reasonable expenses so
incurred, including court appeals.
Section 7.5 No Remedy Exclusive. No remedy herein conferred upon or reserved to
the Authority or the Trustee is intended to be exclusive of any other available remedy or
remedies, but each and every such remedy shall be cumulative and shall be in addition to every
RVPUB\F9AUM\709429.1 29
,4 other remedy given under this Agreement or now or hereafter existing at law or in equity or by
statute. No delay or omission to exercise any right or power accruing upon any default shall
impair any such right or power or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time and as often as may be deemed expedient. In
order to entitle the Authority or the Trustee to exercise any remedy reserved to either of them in
this Article 7, it shall not be necessary to give any notice, other than such notice as may be herein
expressly required. Such rights and remedies as are given the Authority hereunder shall also
extend to the Owners of the Bonds, and the Owners of the Bonds shall be deemed third party
beneficiaries of all covenants and agreements herein contained.
Section 7.6 No Additional Waiver Implied by One Waiver. In the event any
agreement or covenant contained in this Agreement should be breached by the Borrower and
thereafter waived by the Authority or the Trustee, such waiver shall be limited to the particular
breach so waived and shall not be deemed to waive any other breach hereunder including any
other breach of the same agreement or covenant.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Entire Agreement. This Agreement, the Note, the Indenture, the
Regulatory Agreement, the Supplemental Regulatory Agreement, the Continuing Disclosure
Agreement, the Administration Agreement and the Deed of Trust, constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral, between the
Authority and the Borrower with respect to the subject matter hereof.
Section 8.2 Notices. All notices, certificates or other communications shall be in
writing and shall be sufficiently given and shall be deemed given on the second day following
the date on which the same have been personally delivered or mailed by first class mail, postage
prepaid, addressed as follows: to the Authority, to Independent Cities Lease Finance Authority,
Post Office Box 1750, Palmdale, California 93590-1750, Attention: Program Administrator; if to
the Borrower, to Millennium Housing Corporation, 660 Newport Center Drive, Suite 1020,
Newport Beach, CA 92660, Attention: George Turk; if to the Trustee, to Union Bank of
California, N.A., 350 California Street, I Ith Floor, San Francisco, California 94104, Attention:
Corporate Trust Department. A duplicate copy of each notice, certificate or other
communication given hereunder shall also be given to each of the above. All other documents
required to be submitted to any of the foregoing parties shall also be submitted to such party at
its address set forth above. 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.
Section 8.3 Assignments. This Agreement may not be assigned by any party without
the prior written consent of the other, which consent shall not be unreasonably withheld, except
that the Authority shall assign to the Trustee its rights under this Agreement and may assign its
rights under this Agreement as provided in Section 7.3, the Trustee may assign its rights and
duties to a successor trustee pursuant to Section 8.7 or 8.8 of the Indenture and the Borrower
may assign its rights under this Agreement as provided by Section 6.2 hereof.
. Section 8.4 Severability. If any provision of this Agreement shall be held or deemed
to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other
RVPUB\FBAUM\709429.1 30
provision or provisions herein contained or render the same invalid, inoperative, or
unenforceable to any extent whatever.
Section 8.5 Execution of Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the
same instrument.
Section 8.6 Amendments, Changes and Modifications. Except as otherwise provided
in this Agreement or in the Indenture, subsequent to the issuance of the Bonds and prior to their
payment in full (or provision for payment thereof having been made in accordance with the
provisions of the Indenture), this Agreement may not be effectively amended, changed,
modified, altered or terminated without the written consent of all parties hereto.
Section 8.7 Governing Law. This Agreement shall be governed exclusively by and
construed in accordance with the applicable laws of the State.
Section 8.8 Term of Agreement. This Agreement shall be in full force and effect from
the date hereof until such time as all Bonds shall have been fully paid or provision made for such
payment pursuant to the Indenture, whichever shall be earlier. Time is of the essence in this
Agreement.
Section 8.9 Survival of Agreement. All agreements, representations and warranties
made herein shall survive the making of the Loan.
• Section 8.10 Survival of Rights. The Trustee's rights to indemnification and to the
payment of fees and expenses properly owing under the Indenture, the Regulatory Agreement or
hereunder shall survive its resignation or removal and final payment or defeasance of the Bonds,
all as provided in Article VIII of the Indenture. The Authority's rights to indemnification and
the Authority's rights to the payment of its expenses properly owing under the Indenture, the
Regulatory Agreement or hereunder and the fees and expenses of the Oversight Agent, shall
survive the final payment or defeasance of the Bonds.
Section 8.11 Recordation. The Borrower covenants that it will cause the Regulatory
Agreement, the Deed of Trust, and any financing statement and all supplements thereto and any
other such instruments as may from time to time be required to,be kept, recorded and filed in
such a manner and in such places as may be required by law in order to fully preserve and
protect the security of the Owners of the Bonds and the rights of the Authority and the Trustee
under the Regulatory Agreement, and the Deed of Trust.
Section 8.12 Authority as Beneficiary. So long as any Bonds are Outstanding and the
Note has not been paid-in-full the Authority shall be intended as a third party beneficiary of this
Agreement.
RVPUB\FBAUM\709429.1 31
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, all as of the
date first above written.
INDEPENDENT CITIES LEASE FINANCE
AUTHORITY
President
By:
Program A"Armator
UNION BANK OF CALIFORNIA, N.A., as
Trustee
By: „
Authorized Officer
MILLENNIUM HOUSING CORPORATION, a
California nonprofit public benefit corporation
B •
President
RVPUB\FBAUM\709429.1 32
EXHIBIT A
NOTE
$39,910,000 June 1, 2006
MILLENNIUM HOUSING CORPORATION, a California nonprofit public benefit
corporation (the `Borrower"), hereby PROMISES TO PAY TO THE ORDER OF THE
INDEPENDENT CITIES LEASE FINANCE AUTHORITY (the "Authority"), a California joint
powers authority duly organized and existing under the laws of the State of California, the
principal sum of$39,910,000 together with interest from the date hereof on the unpaid principal
balance owing hereunder at the rates set forth below per annum This note (the "Note") is issued,
executed and delivered pursuant to that certain Loan Agreement, dated as of May 1, 2006 (the
"Loan Agreement"), by and among the Borrower, the Authority and UNION BANK OF
CALIFORNIA, N.A., as trustee (the "Trustee"). All capitalized terms in the Loan Agreement or
in the Indenture of Trust, dated as of May 1, 2006 (the "Indenture"), by and between the
Authority and the Trustee.
A portion of the principal amount of this Note reflecting the principal amount of the
Series A Bonds issued and delivered under the Indenture ($29,660,000) shall be due and payable
on May and November 15 in the years and in the amounts, and shall bear interest at the rates as
follows:
`i $29,660,000 Series A Bonds
Principal Maturity Interest
Amount Date Rate
$2,535,000.00 11/15/2012 5.000%
225,000.00 05/15/2013 4.350%
230,000.00 11/15/2013 4.350%
235,000.00 05/15/2014 4.400%
1,255,000.00 11/15/2016 5.000%
1,415,000.00 05/15/2019 4.750%
1,260,000.00 05/15/2021 4.750%
2,230,000.00 05/15/2026 4.875%
1,500,000.00 05/15/2026 5.000%
4,765,000.00 05/15/2031 5.000%
14,010,000.00 05/15/2041 5.125%
In addition, the remaining portion of this Note in the amount of$10,250,000 representing
the principal amount of the Series B Bonds and the Series C Bonds issued and delivered under
the Indenture, shall be due and payable on May 15 in the years and in the amounts, and shall bear
interest at the rates as follows, but only to the extent of Subordinate Residual Revenues available
for such payment:
RVPUB\FBAUM\709429.1 A-1
SERIES B BONDS
Principal Maturity Interest
Amount Date Rate
$230,000.00 05/15/2008 4.250%
475,000.00 05/15/2012 4.850%
580,000.00 05/15/2016 5.125%
905,000.00 05/15/2021 5.350%
1,190,000.00 05/15/2026 5.450%
1,560,000.00 05/15/2031 5.550%
4,825,000.00 05/15/2041 5.850%
SERIES C BONDS
Principal Maturity Interest
Amount Date Rate
$485,000 05/15/2016 7.750%
In the event that Subordinate Residual Revenues are not sufficient to pay the accrued
interest due and payable on the Subordinate Bonds (being the Series B Bonds and the Series C
Bonds) on an Interest Payment Date, such unpaid interest shall be deferred for payment on the
following Interest Payment Date. Nonpayment of Interest on this Note representing the interest
portion of payments with respect to the Subordinate Bonds on any Interest Payment Date due to
insufficient Subordinate Residual Revenues, shall not be an Event of Default under the Loan
Agreement.
Interest on this Note shall be computed on the basis of a 360-day year consisting of
twelve 30-day months, payable on May 15 and November 15 of each year, commencing
November 15, 2006.
In order to satisfy its obligations hereunder, the Borrower agrees to pay to the Trustee not
later than the thirteenth (13th) day of each month, commencing July 13, 2006, all Net Operating
Revenues.
All payments on this Note shall be made in lawful money of the United States of America
at the principal corporate trust office of the Trustee. All sums paid hereon shall be applied first
to the satisfaction of interest due and the balance to the unpaid principal owing hereunder, and
shall be applied in accordance with the terns of the Loan Agreement.
Immediately following the execution hereof the Authority's interest in this Note will be
assigned to Union Bank of California, N.A., as Trustee, and concurrently therewith, this Note
will be secured by a Deed of Trust ("Deed of Trust") of even date herewith, executed by the
Borrower in favor of Authority's assignee, Union Bank of California,N.A., as Trustee.
This Note is subject to extraordinary mandatory prepayment in the following principal
amounts,plus interest accrued to the date fixed by the Trustee for redemption of the Bonds to be
redeemed with such prepayment:
(a) On the day selected by the Trustee for redemption of the Bonds after the Trustee
has accelerated the Amounts due with respect to the Loan or this Note, as the case may be, as a
result of an Event of Default under, and as defined in, the Indenture or the Loan Agreement, in
RVPUB\FBAUM\709429.1 A-2
an amount equal to the then unpaid principal amount of this Note, plus accrued interest to the
date of redemption of the Bonds;
(b) On the day selected by the Trustee for the redemption of the Bonds in the event of
an involuntary loss or the substantial destruction of the Project as a result of unforeseen events
(e.g., fire, seizure, requisition, change in a federal law or an action of a federal agency after the
date of issuance of the Bonds which prevents the Agency from enforcing the requirements of
Section 1.103-8(b) of the Regulations, or condemnation), upon receipt of insurance or other
compensation or, if there are to be no such payments, after the event giving rise to the
involuntary loss or substantial destruction of the Project, in an amount equal to the then unpaid
principal amount of this Note. Notwithstanding the foregoing, this Note will not have to be
prepaid in whole in such circumstances if(i) within 90 days of the event giving rise to the loss or
destruction, the Borrower notifies the Trustee and the Authority, in writing, that the Project can
be restored within 18 months to a condition permitting the conduct of normal business
operations; (ii) within 180 days of the event giving rise to such taking, loss or destruction, the
Borrower commences to use such amounts to reconstruct the Project pursuant to the terms of the
Loan Agreement and the Indenture;and (iii) such amounts are disbursed for the restoration of the
Project within 18 months after the date of the notice from the Borrower referred to in clause (i)
hereof, but, rather, this Note shall be prepaid, in part, to the extent of undisbursed funds on
deposit in the Redemption Fund created pursuant to the Indenture at the expiration of the period
described in (iii) above unless such period is extended with the consent of the authority and an
opinion of Bond Counsel is received the Trustee to the effect that such extension will not result
in interest on the Bonds becoming includable in the gross income of the recipients thereof for
. federal income tax purposes; provided, however, that such prepayment in whole shall be
immediately due and payable if in the written opinion of Bond Counsel filed with the Authority,
the Borrower and the Trustee a failure to make such prepayment will cause interest on the Bonds
to be included in gross income for federal income tax purposes;
If the required principal amount of any prepayment in part pursuant to Sections 5.4 and
5.5 of the Loan Agreement shall not be an Authorized Denomination of the Bonds to be
redeemed with such prepayment, then the required principal amount of such prepayment shall be
deemed to be the next greater integral multiple of an Authorized Denomination of the Bonds to
be redeemed therewith, and any interest due with such prepayment shall be calculated using such
higher amount.
The Trustee shall deposit and use prepayments of this Note pursuant to Sections 5.4 and
5.5 of the Loan Agreement in accordance with the Indenture.
In the event of a partial prepayment of this Note, pursuant to Section 5.4 or 5.5 of the
Loan Agreement, the principal amount of the Borrower's obligation under this Note shall be
reduced by the principal amount of Bonds to be redeemed with the proceeds of such prepayment.
The Borrower, at its option, may prepay this Note, in whole or in part of any date that
Bonds are permitted to be optionally redeemed pursuant to Section 4.1(b) of the Indenture
following written notice of the Borrower's intention to do so as provided below, in Authorized
Denominations, at the times and redemption prices permitted by such Section 4.1(b) of the
Indenture.
RVPUB\FBAUM\709429.1 A-3
This Note is also subject to mandatory sinking fund prepayment with respect to the
Series A Bonds (without premium), by application of mandatory sinking account payments as
follows:
Series A Bonds Maturing on November 15,2012
Sinking Fund Redemption Date Principal Amount
(May 15 and November 15) To Be Redeemed
11/15/2006 $225,000.00
05/15/2007 165,000.00
11/15/2007 170,000.00
05/15/2008 175,000.00
11/15/2008 180,000.00
05/15/2009 185,000.00
11/15/2009 190,000.00
05/15/2010 195,000.00
11/15/2010 200,000.00
05/15/2011 205,000.00
11/15/2011 210,000.00
05/15/2012 215,000.00
11/15/2012 (maturity) 220,000.00
Series A Bonds Maturing on November 15, 2016
6
Sinking Fund Redemption Date Principal Amount
(May 15 and November 15) To Be Redeemed
11/15/2014 $240,000.00
05/15/2015 245,000.00
11/15/2015 250,000.00
05/15/2016 255,000.00
11/15/2016 (maturity) 265,000.00
Series A Bonds Maturing on May 15,2019
Sinking Fund Redemption Date Principal Amount
(May 15 and November 15) To Be Redeemed
05/15/2017 $270,000.00
11/15/2017 275,000.00
05/15/2018 285,000.00
11/15/2018 290,000.00
05/15/2019 (maturity) 295,000.00
•
RVPUB\FBAUM\709429.1 A-4
Series A Bonds Maturing on May 15, 2021
Sinking Fund Redemption Date Principal Amount
(May 15 and November 15) To Be Redeemed
11/15/2019 $305,000.00
05/15/2020 310,000.00
11/15/2020 320,000.00
05/15/2021 (maturity) 325,000.00
4.875% Series A Bonds Maturing on May 15,2026
Sinking Fund Redemption Date Principal Amount
(May 15 and November 15) To Be Redeemed
11/15/2021 $200,000.00
05/15/2022 205,000.00
11/15/2022 210,000.00
05/15/2023 215,000.00
11/15/2023 220,000.00
05/15/2024 225,000.00
11/15/2024 230,000.00
05/15/2025 235,000.00
11/15/2025 245,000.00
05/15/2026 (maturity) 245,000.00
5.000% Series A Bonds Maturing on May 15, 2026
Sinking Fund Redemption Date Principal Amount
(May 15 and November 15) To Be Redeemed
11/15/2021 $135,000.00
05/15/2022 135,000.00
11/15/2022 140,000.00
05/15/2023 145,000.00
11/15/2023 150,000.00
05/15/2024 150,000.00
11/15/2024 155,000.00
05/15/2025 160,000.00
11/15/2025 160,000.00
05/15/2026 (maturity) 170,000.00
•
RVPUB\FBAUM\709429.1 A-5
Series A Bonds Maturing on May 15, 2031
Sinking Fund Redemption Date Principal Amount
(May 15 and November 15) To Be Redeemed
11/15/2026 $425,000.00
05/15/2027 435,000.00
11/15/2027 445,000.00
05/15/2028 460,000.00
11/15/2028 470,000.00
05/15/2029 480,000.00
11/15/2029 495,000.00
05/15/2030 505,000.00
11/15/2030 520,000.00
05/15/2031 (maturity) 530,000.00
Series A Bonds Maturing on May 15, 2041
Sinking Fund Redemption Date Principal Amount
(May 15 and November 15) To Be Redeemed
11/15/2031 $545,000.00
05/15/2032 560,000.00
11/15/2032 575,000.00
05/15/2033 590,000.00
11/15/2033 605,000.00
05/15/2034 620,000.00
11/15/2034 635,000.00
05/15/2035 650,000.00
11/15/2035 665,000.00
05/15/2036 685,000.00
11/15/2036 700,000.00
05/15/2037 720,000.00
11/15/2037 740,000.00
05/15/2038 755,000.00
11/15/2038 775,000.00
05/15/2039 795,000.00
11/15/2039 815,000.00
05/15/2040 840,000.00
11/15/2040 860,000.00
05/15/2041 (maturity) 880,000.00
In addition, this Note is subject to Targeted Mandatory Sinking Fund Prepayment with
respect to the Series B Bonds and the Series C Bonds (without premium) on the May 15 and
• November 15 in the years and in the amounts set forth below, but only to the extent that
Subordinate Residual Prepayments are available for such purpose:
RVPUB\FBAUM\709429.1 A-6
SERIES B BONDS
Series B Term Bonds May 15, 2008
Date Targeted Sinking
(May 15 and November 15) Fund Amount
11/15/2006 $75,000.00
05/15/2007 50,000.00
11/15/2007 50,000.00
05/15/2008 55,000.00
11/15/2008 (maturity) 55,000.00
Series B Term Bonds Maturing May 15,2012
Date Targeted Sinking
(May 15 and November 15) Fund Amount
05/15/2009 $55,000.00
11/15/2009 55,000.00
05/15/2010 60,000.00
11/15/2010 60,000.00
05/15/2011 60,000.00
11/15/2011 65,000.00
05/15/2012 (maturity) 65,000.00
Series B Term Bonds Maturing May 15, 2016
Date Targeted Sinking
(Mav 15 and November 15) Fund Amount
11/15/2012 $65,000.00
05/15/2013 70,000.00
11/15/2013 70,000.00
05/15/2014 70,000.00
11/15/2014 75,000.00
05/15/2015 75,000.00
11/15/2015 75,000.00
05/15/2016 (maturity) 80,000.00
Series B Term Bonds Maturing May 15, 2021
Date Targeted Sinking
(May 15 and November 15) Fund Amount
11/15/2016 $80,000.00
05/15/2017 85,000.00
11/15/2017 85,000.00
05/15/2018 85,000.00
11/15/2018 90,000.00
05/15/2019 90,000.00
11/15/2019 95,000.00
05/15/2020 95,000.00
11/15/2020 100,000.00
05/15/2021 (maturity) 100,000.00
RVPUB\FBAUM\709429.1 A-7
Series B Term Bonds Maturing May 15, 2026
Date Targeted Sinking
(May 15 and November 15) Fund Amount
11/15/2021 $105,000.00
05/15/2022 110,000.00
11/15/2022 110,000.00
05/15/2023 115,000.00
11/15/2023 115,000.00
05/15/2024 120,000.00
11/15/2024 125,000.00
05/15/2025 125,000.00
11/15/2025 130,000.00
05/15/2026 (maturity) 135,000.00
Series B Term Bonds Maturing May 15, 2031
Date Targeted Sinking
(May 15 and November 15) Fund Amount
11/15/2026 $140,000.00
05/15/2027 140,000.00
11/15/2027 145,000.00
05/15/2028 150,000.00
11/15/2028 155,000.00
- 05/15/2029 160,000.00
11/15/2029 160,000.00
05/15/2030 165,000.00
11/15/2030 170,000.00
05/15/2031 (maturity) 175,000.00
RVPUB\FBAUM\709429.1 A-8
Series B Term Bonds Maturing May 15, 2041
Date Targeted Sinking
(May 15 and November 15) Fund Amount
11/15/2031 $180,000.00
05/15/2032 185,000.00
11/15/2032 190,000.00
05/15/2033 195,000.00
11/15/2033 205,000.00
05/15/2034 210,000.00
11/15/2034 215,000.00
05/15/2035 220,000.00
11/15/2035 230,000.00
05/15/2036 235,000.00
11/15/2036 240,000.00
05/15/2037 250,000.00
11/15/2037 255,000.00
05/15/2038 265,000.00
11/15/2038 270,000.00
05/15/2039 280,000.00
11/15/2039 285,000.00
05/15/2040 295,000.00
11/15/2040 305,000.00
05/15/2041 (maturity) 315,000.00
SERIES C BONDS
Series C Term Bonds Maturing May 15,2016
Date Targeted Sinking
(May 15 and November 15) Fund Amount
11/15/2006 $20,000.00
05/15/2007 15,000.00
11/15/2007 20,000.00
05/15/2008 20,000.00
11/15/2008 20,000.00
05/15/2009 20,000.00
11/15/2009 20,000.00
05/15/2010 20,000.00
11/15/2010 20,000.00
05/15/2011 25,000.00
11/15/2011 25,000.00
05/15/2012 25,000.00
11/15/2012 25,000.00
05/15/2013 25,000.00
11/15/2013 30,000.00
05/15/2014 30,000.00
11/15/2014 30,000.00
05/15/2015 30,000.00
11/15/2015 30,000.00
05/15/2016 35,000.00
RVPUB\PBAUM\709429.1 A-9
All amounts due under the Note shall be immediately due and payable following an
Event of Default under the Loan Agreement, in accordance with and subject to the provisions of
Section 7.3(a) of the Loan Agreement.
If default is made in the payment of the principal of or any installation of interest on this
Note and the same is placed in the hands of an attorney for collection, or if suit is filed hereon, or
proceedings are had in bankruptcy, probate, receivership, reorganization, arrangement or other
judicial proceedings for the establishment or collection of any amount called for hereunder, or
any amount payable or to be payable hereunder is collected through any such proceedings, the
Borrower agrees to pay to the holder hereof all reasonable costs of collection, including
reasonable attorneys fees.
The Borrower expressly waives demand and presentment for payment, notice of
nonpayment, protest, notice of protest, notice of dishonor, brining of suit, and diligence in taking
any action to collect any amounts called for hereunder and in the handling of properties, rights or
collateral at any time existing in connection herewith.
No previous waiver and no failure or delay by Authority in acting with respect to the
terms of this Note or the Deed of Trust shall constitute a waiver of any breach, default, or failure
of condition under this Note, the Deed of Trust or the obligations secured thereby. A waiver of
any term of this Note, the Deed of Trust or of any of the obligations secured thereby must be
made in writing and shall be limited to the express written terms of such waiver. In the event of
• any inconsistencies between the terms of this Note and the terms of any other document related
to the loan evidenced by this Note, the terms of this Note shall prevail.
The Deed of Trust contains the following provision:
"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, Trustee 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,
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
RVPUB\PBAUM\709429.1 A-10
provisions of the Loan Agreement and the Regulatory Agreement
relating to such leasing activity."
This Note has been issued pursuant to the Loan Agreement and is entitled to the benefit
and security thereof. Reference is hereby made to the Loan Agreement for provisions relating to
the acceleration of the indebtedness evidenced hereby upon the occurrence of certain events
stated therein, and for all other relevant purposes. Time is of the essence of each and every
provision hereof. This Note has been issued, executed and delivered in the State of California
and shall be governed by and construed in accordance with the laws of the State of California,
except to the extent that the laws of the United States of America may prevail.
4
•
RVPUB\FBAUM\709429.1 A-11
• ", This Note shall be construed to be a nonrecourse obligation of the Borrower. Neither the
Borrower's directors, officers, employees and agents, nor any of its other affiliates, has or is
intended to have any liabilities, except for any liability arising as the result of Fraud or
misappropriation of funds, under or in respect of this Note, the Loan Agreement, the Indenture of
Trust, the Continuing Disclosure Agreement, the Deed of Trust, the Regulatory Agreement or
any other document or transaction contemplated by the foregoing.
MILLENNIUM HOUSING CORPORATION, a
California non-profit public benefit corporation
By:
President
•
RVPUBTDAUMV09429.1 A-12
' ENDORSEMENT TO NOTE, dated June 1, 2006, in the principal amount of
$39,910,000 made by Millennium Housing Corporation payable to the order of INDEPENDENT
CITIES LEASE FINANCE AUTHORITY.
PAY TO THE ORDER OF UNION BANK OF CALIFORNIA,N.A., as Trustee, without
recourse.
Date: June 1, 2006 INDEPENDENT CITIES LEASE FINANCE
AUTHORITY
By:
Program Administrator
RVPUB\FBAUM\709429.1 A-13
EXHIBIT C
LIST OF R PROVEMENTS
AND SCHEDULED REPLACEMENTS
IMMEDIATE MID-TERM LONG TERM
YEAR YEARS YEARS
DESCRIPTION ( 1 ) ( 2 to 10) ( 11 to 35)
Sites:
1. Asphalt double slurry sealing $ 8,500.00 $ 24,500.00
2. Asphalt repaving,resurfacing $185,00D.00 $236,000.00
3. Improved street lighting $ 8,500.00
4. Electrical system replaced(all spaces) $930,000.00
5. Repair trash wood gates $ 1,500.00 $ 5,000.00
6. PM on Electrical(pedestals) $ 62,000.00 $ 85,000.00
7. Water system isolation valves(replace) $ 46,500.00
8. Water install new ball valves(all spaces) $ 18,800.00
9. Hydro-jetting sewer minor remediations $ 5,000.00 $ 15,000.00 $ 30,000.00
10. Gas system compliance(CP O&M) $ 4,000.00 $ 6,000.00 $ 12,000.00
Buildings:
11. Wood fences, property block walls $ 17,000.00 $ 25,000.00
. 12. Pool equipment,plumbing&heating $ 5,500.00 $ 9,500.00
13. Bldg,interior improvements $ 10,800.00 $ 13,000.00
14. Repainting all interiors(clubhouse) $ 5,000.00 $ 9,000.00 $ 15,000.00
15. Laundry building renovations $ 3,500.00 $ 5,000.00
16. Repainting all exterior buildings $ 6,500.00 $ 9,000.00
TOTAL ESTIMATED COST(YEAR 11 $70,600.00
TOTAL ESTIMATED COST(YEAR 2-10) : $ 347,500.00
TOTAL ESTIMATED COST(YEAR 11-35) : $1,399,000.00
RVPUB\PBAUM\709429.1 C-)
BEST BEST & KRIEGER LLP
A CALIFORNIA LIMR£D LIABILITY PARTNERSHIP INCLUDING PROFE55IONAL CORPORATIONS
INDIAN WEI I R LAWYERS 5ACRAMENTO
(750) 588-251 1 3750 UNIVERSITY AVENUE IQ 16) 325-4000
- P05T OFFICE BOX 1 028 -
IRVINE RIVER5IDE, CALIFORNIA 9250Z-1028 SAN DIEGO
(949) 253.2500 (951) 585-1450 (519) 525-1300
- (95 1)585-3083 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,
cam'
Francis J. Baum
of Best Best &Krieger LLP
encls.
RVPUB\FBAUM\718253.1
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
Agenda Report
Page 3 May 2, 2006
the Board that they should meet, review all the deal points and documents and notify
the City regarding their decision to move forward. Should the Park Residents wish to
move forward with the acquisition through Millennium, City staff would prepare the
appropriate documents for consideration by the City Council. On March 31, 2006, the
City received notification that the parties wished to move forward with the acquisition.
Their letter dated April 19, 2006 confirming this request is provided as Attachment 3
Indeoendent Cities Lease Financing Authority
The ICLFA is an unaffiliated joint powers authority (JPA), which is an independent
governmental entity made up of several cities and counties. ICLFA was created in 1988
for the purpose of providing funds to cities for equipment purchases, capital projects
and other acquisitions. ICLFA is authorized to 1) provide funding to governmental
entities for the purpose of financing equipment and capital improvements; 2) provide
down payment and closing cost assistance to qualified homebuyers; 3) finance the
purchase of multifamily residential projects; 4) finance the purchase of manufactured
home communities (including acquisition by 501(c) (3) non-profit corporations); and 5)
perform other activities in support of its members.
Basically, each member is "delegating" to ICLFA the authority of that city or county to
participate in a tax-exempt financing to benefit the manufactured home community. In
turn, ICLFA evaluates the credit worthiness and the credit support provided to secure
the indebtedness of organizations, conducts due diligence and otherwise performs the
requisite administrative tasks for the financing.
ICLA will be the issues of the tax-exempt revenue bonds. This issue will note create
any financial obligations or burdens for the City and the City will not have any risk
relating to this financings. ICLFA will issue revenues bonds in an aggregate principal
amount not to exceed $43,000,000, which will be repaid solely from lease revenue
generated from SJME.
Section 147 (f) of the Internal Revenue Code requires that the proposed financing be
approved by the governmental unit (i.e., the member city or county) having jurisdiction
over the area in which any project is to be located. In this case, the City has jurisdiction
over this project. A financing will be treated as having been approved the City if such
issue is approved "by the applicable elected representatives of the governmental unit
after a public hearing following reasonable public notice."
The foregoing will be deemed satisfied by the City holding a public hearing (upon at
least 14 days prior written notice) and approves the financing to be undertaken by
ICLFA. Again, although the City would be approving the financing for purposes of
federal tax law, the City would have no have no obligation or liability for this financing.
COMMISSIONIBOARD REVIEW AND RECOMMENDATIONS:
Not Applicable
Agenda Report
Page 4 May 2, 2006
FINANCIAL CONSIDERATIONS:
All costs associated with preparation of the attached resolutions and agreements have
been paid by Millennium.
NOTIFICATION:
Millennium Housing Corporation*
San Juan Mobile Estates Resident Association*
Independent Cities Lease Financing Authority*
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.
Respectfully submitted,e�d,
Cind� i LLtJy`
II
Administrative Services Director
Attachments:
1. 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.
2. Resolution approving the Issuance of Mobile Home Park Revenue Bonds by the
Independent Cities Lease Finance Authority for the San Juan Mobile Estates
acquisition.
3. Letter from SJME
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 REGULATORYAGREEMENT
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
6 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 boundapes 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 S 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 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
RVPUBIFBAUv1\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.
RVPUBIFBAUK710435.1 2
IN WITNESS WHEREOF, the parties hereto have caused this Associate Membership
Agreement to be executed and attested by their proper officers thereunto duty authorized,on the
day and year first set forth above.
INDEPENDENT CITIES LEASE FINANCE
AUTHORITY
By:
President
Attest:
Secretary
CITY OF SAN JUAN CAPISTRANO
By:
Mayor
Attest:
City Clerk
RVPUBTBAU 0710435.1 3
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. )
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
RVPOBTRAUM 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
Section6. Other Covenants......................................................................................... 9
Section 7. Indemnification..........................................................................................9
Section8. Consideration........................................................................................... 10
Section9. Reliance.................................................................................................... 10
Section 10. Sale or Transfer of the Project; Option to Purchase ................................ 10
Section11. Tenn......................................................................................................... 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 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
RVPUBTBAUNR708986.1 _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"):
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 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.
RVPUBIFBAUW08986.1 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
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.
RVPUB\FBAUA1\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 n 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:
RVPUBWBAUNW08986.1 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's. 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.
RVPUBTBAUN008986.1 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 he 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.
RVPUB\FBAM708986.1 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., 101/6 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
RVPUBTBAUIM708986.1 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
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
RVPUB\FBAUK708986.1 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 form of
application and lease or rental agreement to be provided to prospective Qualified Residents and
any amendments thereto.
RVPUB\FBAUMV08986.1 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,
RVPU13TBAUNC708986.1 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.
RVPU13TBAUW708986.1 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\FBAUb4\708986.1 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
RVPUBTBAUvi\708986.1 12
RVPUB\P13AUW708986.1 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.
RVPUB\FBAU?&708986.1 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
By:
President
RVPU13\FBAUW708986.1 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]
R V PUB\FBAUNA708986.1
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]
RVPUBTBAUMM708986.1
*Note to Article 9. Page 1 of 1
TITLE 2. ADMINISTRATION
CHAPTER 2. COMMISSIONS AND BOARDS
*Note to Article 9.
*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.
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Sec. 2-2.901. Findings. Page 1 of 1
TITLE 2. ADMINISTRATION
CHAPTER 2. COMMISSIONS AND BOARDS_
Sec. 2-2.901. Findings.
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)
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Sec. 2-2.902. Definitions. Page 1 of 1
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:
(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)
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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.
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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 inct'eases, 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 Oficial verifying that the subject capital improvement upgrade arose
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Sec. 2-2.903. Petition and hearing process regarding rent increases. Page 3 of 3
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)
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Sec. 2-2.904. Hearing Officer costs: Fee reimbursement. Page 1 of 1
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.
(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
It 0) 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)
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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 I, 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
R V PU13TBAUM709452.1
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
RVPUBTBAUMC709452.1 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
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. Rgpresentations 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.
RVPUB\FBAUW709452.1 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 cavy 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
RVPUBTBAUbn709452.1 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 fiunished
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\FBALM709452.1 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.
RVPUBT AUM1709442.1 5
4.3. Resianation 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
•
RVPUBTBAUM1709452.1 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
RVPUBTBAW709452,1 7
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
SP 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 i ediate on its
passage.
ID M. Sr
R IN, MAY R
AT Sg. MONA
MAHA , CITY 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. 06-05-02-05 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: COUNCIL MEMBERS: Hart, Bathgate, Soto, Allevato, and Mayor Swerdlin
NOES- IL EMBER: None
ABN I EMBER: None
i
A MON H N, ity 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 /aPr�� 14,zoo6
City of San Juan Capistrano
32400 Paseo Adelanto
San Juan Capistrano, CA. 92675
RE: San Juan Mobile Estates
Dear Ms. Russell:
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 MillpE19. Vice Chairman
san Well n Secretary
Dennis Funaro Treasurer
Deborah Shuler
f Bwalw
leborah er en
v^ �
ATTACHMENT 3
EkII
32400 PAS@O ADELANTO t■ MEMBERS OF THE CITY COUNCIL
SAN JUAN CAPISTRANO,CA 92675 S i
SAM LEVATO
(949)493-1171 ,/jy - DIANE BATIAG
(949)493-1053 PAX tl" IX[ORtOAAtFB DIANE BATHGATE
BIARIIRXfR 1961 WYATT HART
www sanjuancapistrano.org 1776 JOESOTO
DAVID M.SWERDLIN
• •
NOTIFICATION OF MEET OF POTENTIAL INTEREST
OF THE SAN JUAN CAPISTRANO CITY COUNCIL
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.sanivancapistrano.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:
ccoo ,mcil-agendasasanivancapistrano.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: Preserving the Past to Enhance the Future
�, Printed on recycled paper
32400 PASEO ADELANTO MEMBERS OF THE CITY COUNCIL
SAN JUAN CAPISTRANO,CA 92675 i L SAM ALLEVATO
(948)493-1171 mtOAVARRtto DIANE BATHGATE
(949)493-1053 FAx
(SIAAIISXfA IAJ61 WVATT HART
www.sat?juancapi,virano.org 1776 JOE SOTO
DAVID M.SWERDUN
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 Mobile 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
C4 Printed on 1DO h Recycled Paper
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 9d for the purpose, among others, of
assisting its Members and Associate M" raising of capital to finance the capital
improvement needs of Local Ager n the Joint Powers Agreement), to
provide for home mortgage ►. o those Members or Associate
Members that are either a & (, ,alifornia,to provide financing in
connection with the n, creation, rehabilitation and
preservation of affordable t, ,// /�LL as of the Members and Associate
Members, and to provide Fina. `i .rith the provisions of applicable law in
connection with other projects .nat 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, underthe 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
Administration and Oversight Agreement (Exhibit Q. 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 afterthe date
of its passage and adoption. '
Page 2 of 3 05-02-2006
PASSED, APPROVED, AND ADOPTED this 2nd day of May 2006.
VID M. SWKRDLtN, MAYOR
A
M RG T ONAH N, TY 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
AB EMBER: None
7bNAFWO, Ci Clerk
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 the 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
RVPUBIFBAUMW10435.1 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 indenmify, 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 1
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.
i
f
1
RVPUB\17BAUM\710435.1 2 EXHIBIT A
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 first set forth above.
INDEPENDENT CITIES LEASE FINANCE
AUTHORITY
By:
President
Attest:
Secretary
CITY OF SAN JUAN CAPISTRANO
By:
Mayor
Attest:
City Clerk
RVPUB\FBAUM\710435.1 3 EXHIBIT A
RECORDING REQUESTED BY AND )
WHEN RECORDED RETURN TO: )
I )
BEST BEST &KRIEGER LLP )
3750 University Avenue, P 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
RVPU13\FBAUM\708986.1 EXHIBIT B
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"):
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 meanings assigned to them in this Section I 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.
RVPUB\Fi3AUM\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
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.
RVPUBTBAUMV08986.1 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\F13AUM\708986.1 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. 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.
RVPUB\FBAUM\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
jAssociation 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 l
behalf of the Space and the mobile home) shall not exceed one-twelfth of 30 percent of l
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 s
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 S
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
RVPUB"AUMV08986.1 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 form of
application and lease or rental agreement to be provided to prospective Qualified Residents and
any amendments thereto.
RVPUB\FBAUM\708986.1 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 j
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 terns 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 s
request. 1
1
(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 k
Trustee hereunder and (y) any taxes (including, without limitation, all ad valorem taxes and sales 1
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,
RVPUBTBAUM\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.
RV PUB\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)
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 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
RVPUBTBAUM\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.
1
RVPUB\FBAUM\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.
I
I
RVPUB\FBAUM\708986.1 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
By:
President
RVPUB\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]
I
RV PUR\FBA UM\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]
d
f
4
RV PUB\PBAUM\708986.1
TABLE OF CONTENTS
Page
i
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......................................................................................................... I1
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 18. Goveming Law ........................................................................................ 13
Section 19. Amendments............................................................................................ 13
Section20. Notice....................................................................................................... 13
Section21. 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
RVPUB\FBAUM\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 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
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. 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 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.
RVPUB\FBAUM\709452.1 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
RVPUB\FBAUM\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) 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 sufvey 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, Ino.
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 Iaws.
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.
RVPUBTBAUM\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
s
RVPUB\FBAUM\709452.1 7
AFFIDAVIT OF PUBLICATION PRQ0H j2�1JflL�ATION
STATE OF CALIFORNIA, ) (E(i ,/
) ss. HA N" I I P 2 24
County of Orange )
CITY CLEkr(
I am a citizen of the United States and a resident SAN JUAN CAPISTRANO
of the County aforesaid;I am over the age of
eighteen years, and not a party to or interested
Proof of Publication of
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 nonce or
Court of the County of Orange, State of PUBLIC NEARING
California,on June 7, 1984, Case No. A-122949 are OF taw JUM
in and for the City of San Juan Capistrano, CAPIWFFANO
Wn=0 HMSoret.del On ma 2nd dry
ofMr��2003,r 7.00 P.M.h dr CIry crmdl Chm-
County of Orange, State of California;that the br,Yl100PaeaoAdeirao SWJuenCW-
notice,of which the annexed is a true printed CaWI Q nom a PU.M Iur V anam
my
copy,has been published in each regular and TWO UMM04ROM Q PWAR a
ummmrr TO POWMZ mt tut MM ED-
entire issue of said newspaper and not in anyptum� H owt�ito�iK"
supplement thereof on the following dates, to Purwd m Seotof 0w keemm Menus
bn 1Q code of VW,a Id a dr clh Coon r wW fpr
and comae trllonnadon oorlwmmp dr proposed r
wit: ewnw by ffw CBM Laete Psvlu Au
OIonH NI•' )of b mobbhrm Prk me-
�"" ' W a3*
April 13,2006 eorms aseamm B Port of
OMemrl arms Heim and Seery coact.
The prooeede from the sale of auch Aulfmdly Bonds.
0 any ale lend,m Hwftletl m De odea m rfenw
"I certify(or declare)under the penalty of me aogJsmn dna Irnerlon of a M-WA
nnMMnnr lamwn r San Jun Mobb EaMeee
e under the laws of the State of California r sfr..t. T Jar
P rJurY o.wanl.mels ryy pay K The prgrx w wo.
oa rd rm opraYtl br MMrsiun Imu4y Crprm
that the foregoing is true and correct": the a be
Cee Bo dullnonllr WW Inomomdbe Proteans e
aro Borba m e�aceed m a used m meb
Executed at Santa Ana,Orange County, aegn r aiffl �w.ofa low tocO�O to rw dr
California,on m oror to faders re wur ot Veda bwms dw
=ncbwW me�✓srw�ics iW
Cw
mray Bonft
Date: April 13,2006 howm be mrd m%w of,oropposhlon
to,fft Mm I be
Vs
to do so dur-
suchAbe to
moDP hpwk WftPaeso
p.m., on MaMay, cMesypleaap1.rI20,06 r SUM
Adran rrto SJun Isle CA 02M ImMalr
mw n0morally re*wN such•cbn. r0fs
ut
Signature 9Wi ter wWMW SWIM W 9 tel "3-
am.a m.
Capistrano Valley News fe/M aR`MonahM
625 N.Grand Ave. MAn a. MONARMCKYCLERK
Pubbh: Vaby n
Santa Ana,CA 92701 Apra fa, s f°O0 ewt
(714)796-2209 "70 7028M
NOTICE OF TRANSMITTAL
CAPISTRANO VALLEY NEWS
Legal Publications
CHARGE TO ACCOUNT NO. 0041125000
FOR PUBLICATION ON: THURSDAY, April 13, 2006
DOCUMENT TO BE PUBLISHED: 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)
PROOF OF PUBLICATION Please send to:
City Clerk's Division, City Hall
32400 Paseo Adelanto
San Juan Capistrano, CA 92675
( /)J49�3-111711
AUTHORIZED BY:
DATE: April 5, 00
Date of Public Hearing - 05/02/06
_ l
Date notice published - 04/13/06`�y(
Date affidavit received - v
Date notice posted in 0
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
NOTICE OF
y`y� PUBLIC HEARING
minnm 1961
1776
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, Ad inistrative Services Director at (949)
443-6301.
M R ARET R. MONAHAN, CITY CLERK
FOR OFFICE USE ONLY:
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss. AFFIDAVIT OF POSTING
CITY OF SAN JUAN CAPISTRANO ) 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, I 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.
I declare under penalty perj ry ThPe or oing is true and correct.
i
MONAHAN, CITY CLERK
City of San uan Capistrano, California
NOTICE OF
� 'A PUBLIC HEARING
I.. "
�mrn 1961
1776
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, Ad 'nistrative Services Director at (949)
443-6301.
M7 ET R. MONAHAN, CITY CLERK
FOR OFFICE USE ONLY:
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss. AFFIDAVIT OF POSTING
CITY OF SAN JUAN CAPISTRANO ) AND PUBLICATION
1, 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.
I declare under penalty perj ry h e for oing is true and correct.
i
MONAHAN, CITY CLERK
City of San uan Capistrano, California