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1995-1130_SJC HOUSING INVESTORS, L.P._Promissory Note Securred by Subordinated Deed of TrustPROMISSORY NOTE SECURED BY SUBORDINATED DEED OF TRUST $1,550,000.00 November 30, 1995 San Juan Capistrano, California 1. FOR VALUE RECEIVED, the undersigned San Juan Capistrano Housing Investors, L.P., a California limited partnership ("Maker") promises to pay to San Juan Capistrano Redevelopment Agency, or order ("Holder") at 32400 Paseo Adelanto, San Juan Capistrano, California 92675 or at such other place as the Holder of this Promissory Note ("Note") may designate in writing, the sum of One Million Five Hundred Fifty Thousand and No/100 Dollars ($1,550,000.00), or so much thereof as is disbursed to Maker, together with interest on unpaid principal until paid at the rate of five percent (5%) per annum. 2. This Note is secured by that certain subordinated Deed of Trust and Assignment of Rents ("Deed of Trust") of even date herewith given by the Maker, as Trustor, to Commonwealth Land Title Company, as Trustee, for the benefit of Holder, as the Beneficiary, which Deed of Trust is to be recorded against the certain property in the City of San Juan Capistrano, County of Orange, State of California and more particularly described in the Deed of Trust (the "Property"). 3. This Note and the Deed of Trust securing this Note are executed and delivered by Maker for the Agency Loan pursuant to the Owner Participation Agreement, dated September 19, 1995 ("Agreement"), by and between Maker and the San Juan Capistrano Redevelopment Agency, as the Agency, concerning the development, operation and maintenance of the Property by Maker. All defined terms in this Note shall have same meaning as such terms are defined in the Agreement, unless otherwise provided herein. 4. Commencing 120 days from the end of the first calendar year after completion of construction of the Project in which there is Net Cash Flow after payment of Debt Service, and continuing 120 days from the end of each and every calendar year thereafter for the remaining term of this Note, there shall be due and payable an amount equal to twenty five percent (25%) of the Net Cash Flow of the Project after payment of Debt Service and after payment of debt service of the Capital Improvement Loan and Negative Cash Flow Loan for the immediately preceding calendar year. From and after the date the Seller Financing Loan is paid in full or otherwise satisfied and the deed of trust securing the Seller Financing Loan is reconveyed of record, the payment due hereunder shall be increased to fifty percent (50%) of the Net Cash Flow of the Project after payment of Debt Service and after payment of debt service of the Capital Improvement Loan and Negative Cash Flow SJCAPN. KB 113095 Loan for the remainder of that calendar year and each calendar year thereafter for the remaining term of this Note. The payments made pursuant to this Paragraph 4 shall first be applied to accrued interest and the remainder to principal, provided however, in no event shall additional interest be earned on unpaid interest which has accrued. 5. If not sooner paid, the unpaid principal balance of this Note plus any unpaid interest thereon shall be all due and payable thirty five (35) years from the date the Deed of Trust securing this Note is recorded, provided however, if longer, the term of this Note shall be extended to and have a maturity date which is no earlier than the maturity date of the original Permanent Loan or which is otherwise permitted by the Lender making the original Permanent Loan. 6. The principal of this Note and any unpaid interest accrued thereon may be prepaid in whole or in part at any time without premium or penalty. 7. In the event of default in payment of principal hereunder or interest accrued thereon occurring for more than ten (10) days, or upon maturity of this Note (whether by acceleration or otherwise), interest shall thereafter accrue on said unpaid principal until said default is cured at the rate of seven percent (7%) per annum, or the maximum amount allowed by applicable usury law if less than said rate, which interest shall be immediately due and payable as accrued to the Holder of this Note. S. In the event of any default by Maker in payment hereof or under any terms, covenants or conditions contained herein, in the Deed of Trust or in any other instrument securing this Note, or under any modification, extension or renewal hereof or thereof, then the entire principal sum of this Note and all interest accrued thereon shall become immediately due and payable at the option of the Holder of this Note. Failure to exercise such option shall not constitute a waiver of the right to exercise such option in the event of any further or subsequent default. 9. Principal, interest and all other sums due hereunder shall be payable in lawful money of the United States of America. Maker agrees to pay all costs and expenses of collection of this Note, including, but not limited to, reasonable attorneys' fees whether collected by suit or otherwise. Neither the failure to accelerate the indebtedness hereof by reason of any default or under any provision hereof nor the acceptance of any past -due payment shall constitute a waiver of the right of the Holder of this Note thereafter to enforce strict compliance of the terms, covenants and conditions hereof. This Note may be extended or renewed in whole or in part by the Holder hereof and any related right or security therefor may be waived, exchanged, surrendered or otherwise dealt with, all without affecting the liability of Maker. Maker hereby waives presentment for payment, demand, protest, notice of protest, and notice of dishonor. Time is of the essence herein. 10. In the event any term, covenant, condition or other provision contained in this Note or in any instrument securing this Note is for any reason held to be SJCAPN. KB 113095 2 invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect, alter, modify or impair in any manner whatsoever any other term, covenant, condition or other provision contained in this Note or in any instrument securing this Note, the provisions of which shall continue to apply as if such invalid, illegal or unenforceable provision was not contained herein or therein. 11. Notwithstanding anything to the contrary herein, the liability of Maker for payment of the indebtedness evidenced hereby and payable hereunder shall be limited to the property (real and personal) described in the Deed of Trust and any other instruments securing this Note, including the rents, issues and profits derived therefrom, and in the event of default by Maker, the Holder of this Note shall look solely to the security of such property for collection and shall not be entitled to assert or obtain a deficiency judgment personally against Maker, provided, however, that nothing herein contained shall be interpreted or construed to be a release or impairment of said indebtedness or the security therefor, or to preclude or otherwise impair the institution of foreclosure proceedings or the sale or other disposition of said property in the event of default by Maker. 12. Whenever reference is made herein to "Maker" or "Holder", such reference shall be deemed to refer to and include the heirs, executors, legal representatives, successors and assigns thereof, it being expressly agreed that the rights and obligations of all parties named herein or liable hereunder shall inure to the benefit of and be binding upon such parties and their respective heirs, executors, legal representatives, successors and assigns. This Note and all provisions hereof shall be governed by and construed in accordance with the laws of the State of California. 13. For the purpose of assuring compliance with the payment of this Note, representatives of the Holder shall have the reasonable right of access to the Project and the books and records of Maker pertaining to the Project on an annual basis, during normal business hours, upon at least twenty four (24) hours prior notice to Maker, including but not limited to the inspection of the books and records for determining the annual Net Cash Flow after Debt Service. Such representatives of the Holder shall be those who are so identified in writing to Maker by the Holder. The Holder shall indemnify, defend, and hold harmless Maker and Maker's partners, officers, employees, and agents from any damage caused or liability arising out of the negligence or willful acts or omissions of the Holder, its officers, officials, employees, volunteers, agents, or representatives in their exercise of this right of access and inspection; provided that it is understood that the Holder does not by this Paragraph assume any responsibility or liability for a negligent inspection or failure to inspect. 14. This Note and the Deed of Trust and any other instrument securing this Note shall be subject and subordinate to the Loans, Liens and other matters described in the Agreement, including the Construction Loan, Permanent Loan, Seller Financing Loan, Capital Improvement Loans, Negative Cash Flow Loans, refinancing Loans, Restrictive Covenants and Regulatory Agreements for the Tax Credits. This Note and SJCAPN.KB 113095 3 the Deed of Trust and any other instruments securing this Note shall be subject to the provisions of the Agreement applicable to the Agency Loan and Agency Security Documents. Holder shall from time to time upon written request of Maker, execute and deliver such documents and instruments as may be required by any Lender making any Loan to cause the subordination of this Note and the Deed of Trust and any other instruments securing this Note to any Loan and the instruments securing such Loan, including without limitation the subordination agreement required by the Lender making the Construction Loan, the Lender making the Permanent Loan and Fannie Mae. 15. Maker, and its successors and assigns, as Developer under the Agreement, and as Developer under the Agreement of Restrictive Covenants ("Restrictive Covenants") recorded against the Property pursuant to the Agreement, shall observe and comply with all the obligations of Developer under the Agreement and the Restrictive Covenants. Any default by Developer under the Agreement or under the Restrictive Covenants shall, after the expiration of any applicable grace period provided therein, be a default of Maker under this Note and under the Deed of Trust and other instruments securing this Note. IN WITNESS WHEREOF, the undersigned Maker has caused this Note to be executed on the day, month and year first written above. NOTICE: THIS NOTE CONTAINS A SUBORDINATION AGREEMENT WHICH MAY RESULT IN YOUR SECURITY INTEREST IN THE PROPERTY SECURING THIS NOTE BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT AND THE SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH MAY ALLOW THE PERSON OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN A LOAN A PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT OF THE LAND. MAKER: San Juan Capistrano Housing Investors, L.P., a California limited partnership By: LINC t Geners By: SJCAPN.KB 113095 4