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HomeMy WebLinkAbout0014_7_DDL Affordable Housing - Exhibit F Fund 106 Predevelopment Promissory NoteD-1 1603\27\1923748.1 EXHIBIT D FORM OF CITY FUND 106 PREDEVELOPMENT NOTE PROMISSORY NOTE (City Fund 106 Predevelopment Loan) $306,500.00 Lake Elsinore, California _________________, 201_ FOR VALUE RECEIVED, _________________________, a California limited partnership (“Borrower” or the “Developer”), promises to pay to the City of Lake Elsinore, a municipal corporation (the “City”), or order, the principal sum of Three Hundred Six Thousand Five Hundred Dollars ($306,500.00), disbursed by the City to the Borrower pursuant to that certain Disposition, Development and Loan Agreement dated as of ______________, 2016, as may be amended from time to time (collectively, the “DDLA”), incorporated herein, plus interest thereon pursuant to Section 2 below. 1.Borrower’s Obligation. This promissory note (the “Note”) evidences the Borrower’s obligation to pay the City the principal amount of Three Hundred Six Thousand Five Hundred Dollars ($306,500.00) (the “City Fund 106 Predevelopment Loan”), for the funds loaned to the Borrower by City to finance the predevelopment of the Property pursuant to the DDLA. All capitalized terms not otherwise defined in this Note shall have the meanings set forth in the DDLA. 2.Interest. The outstanding principal balance of this Note shall bear simple interest at the rate of one-half percent (0.5%) per annum; provided, however, if a Developer Event of Default occurs, interest on the principal balance shall begin to accrue, as of the date of the Developer Event of Default (following expiration of applicable notice and cure periods), and continuing until such time as the City Fund 106 Predevelopment Loan funds are repaid in full or the Developer Event of Default is cured, at the default rate of ten percent (10%) compounded annually, or the highest rate permitted by law (whichever is lower). 3.Disbursement of Loan Proceeds. The City Fund 106 Predevelopment Loan proceeds (the “Loan Proceeds”) shall be used for budgeted costs as approved by the City as set forth in Exhibit N to the DDLA and as set forth on Attachment A hereto (“Predevelopment Budget”). Upon satisfaction of the conditions precedent to disbursement of the Loan Proceeds for budgeted costs as set forth in Section 4.2 of the DDLA, the Loan Proceeds shall be disbursed to Developer not later than the fifteen (15) working days after receipt by the City Manager of a written disbursement request from the Developer (each, a “Disbursement Request”). The Disbursement Request shall set forth the amount of the requested disbursement of Loan Proceeds and shall certify that (a) all conditions precedent to disbursement of the Loan Proceeds set forth in Section 4.2 of the DDLA have been and remain satisfied, (b) the Disbursement Request complies with the Predevelopment Budget as approved by the City, and (c) no Event of Default has occurred and is continuing under the DDLA. D-2 1603\27\1923748.1 4.Term and Repayment Requirements. (a)The term of this Note (the “Term”) shall commence on the date set forth above and shall expire on the earliest of: (i) December 31, 2019, (ii) the date of a Developer Event of Default, or (iii) Closing, as defined in the DDLA. (b)Subject to the provisions of subsection (d) below, all principal and interest, if any, on the City Fund 106 Predevelopment Loan shall, at the option of the City, be due and payable upon the earliest of: (i) a Transfer other than a Transfer permitted or approved by the City as provided in the DDLA; (ii) the occurrence of a Developer Event of Default for which the City exercises its right to cause the City Fund 106 Predevelopment Loan indebtedness to become immediately due and payable; or (iii) the expiration of the Term specified in subsection (a) above. (c)The City Fund 106 Predevelopment Loan shall be deemed repaid with the proceeds of a City Fund 106 Loan upon Closing, in accordance with the DDLA. (d)The Borrower shall have the right to prepay the City Fund 106 Predevelopment Loan at any time without penalty or additional charge. 5.No Assumption. This Note shall not be assumable by the successors and assigns of Borrower without the prior written consent of the City, except as set forth in the DDLA. 6.Security. This Note is secured by an Assignment of Plans, Reports and Data executed concurrently herewith. The City Fund 106 Predevelopment Loan evidenced hereby shall constitute a nonrecourse obligation of Borrower. The City's sole security under this Note is the exercise of its rights under the Assignment of Plans, Reports and Data executed concurrently herewith by the City and the Borrower. Borrower, and, if Borrower is a partnership, limited liability company, or corporation, any general partner, member, or shareholder of Borrower, shall be liable for, and indemnify and hold harmless City for, damages caused to City as a result of (i) fraud or willful misrepresentation; (ii) the failure to pay taxes, assessments or other charges which may create liens on the real property described in the DDLA that are payable or applicable as a result of Developer’s predevelopment activities under the DDLA (to the full extent of such taxes, assessments or other charges); (iii) the misapplication of any proceeds under any insurance policies or awards resulting from Developer’s predevelopment activities under the DDLA or by reason of damage, loss or destruction to any portion of the Property as a result of Developer’s predevelopment activities under the DDLA; and (vi) breach of any covenant or representation in the DDLA or this Note made by the Borrower. 7.Terms of Payment. (a)All payments due under this Note shall be paid in currency of the United States of America, which at the time of payment is lawful for the payment of public and private debts. (b)All payments on this Note shall be paid to the City at the following address: City of Lake Elsinore, 130 South Main Street, Lake Elsinore, CA 92530, Attention: Director of Administrative Services, or to such other place as the City may from time to time designate in writing. D-3 1603\27\1923748.1 (c)All payments on this Note shall be without expense to the City, and the Borrower agrees to pay all costs and expenses, including re-conveyance fees and reasonable attorney’s fees of the City, incurred in connection with the payment of this Note and the release of any security hereof. (d)Notwithstanding any other provision of this Note, or any instrument securing the obligations of the Borrower under this Note, if, for any reason whatsoever, the payment of any sums by the Borrower pursuant to the terms of this Note would result in the payment of interest which would exceed the amount that the City may legally charge under applicable law, then the amount by which payments exceeds the lawful interest rate shall automatically be deducted from the principal balance owing on this Note, so that in no event shall the Borrower be obligated under the terms of this Note to pay any interest which would exceed the lawful rate. (e)Notwithstanding any other provision of this Note, or any instrument securing the obligations of the Borrower under this Note, in the event the DDLA is terminated pursuant to Section 8.2 of the DDLA, this Note shall be deemed paid in full and the City shall not be entitled to seek reimbursement of any amounts but will be entitled solely to exercise its rights under the Assignment of Plans, Reports and Data executed concurrently herewith by the City and the Borrower. 8.Default. (a)Any of the following shall constitute an “Event of Default” or “Borrower Event of Default” under this Note: (i)Any failure to pay, in full, any payment required under this Note when due following written notice by the City of such failure and ten (10) days opportunity to cure; (ii)Any failure in the performance by the Borrower of any other term, condition, provision or covenant set forth in the DDLA or herein subject to the applicable notice and cure period set forth therein; and (iii)The material falsity of any representation or breach of any warranty or covenant made by Borrower under the terms of this Note or the DDLA; (iv)Borrower or any constituent member or partner, or majority shareholder, of Borrower shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of its property, (ii) fail to pay or admit in writing its inability to pay its debts generally as they become due, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent or (v) commence a voluntary petition that is not withdrawn within ten (10) days of the filing thereof or answer seeking an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy or insolvency proceeding; (v)If without the application, approval or consent of Borrower, a proceeding shall be instituted in any court of competent jurisdiction, under any law relating to bankruptcy, in respect of Borrower or any constituent member or partner or majority shareholder D-4 1603\27\1923748.1 of Borrower, for an order for relief or an adjudication in bankruptcy, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of Borrower or of all or any substantial part of Borrower’s assets, or other like relief in respect thereof under any bankruptcy or insolvency law, and, if such proceeding is being contested by Borrower, in good faith, the same shall (i) result in the entry of an order for relief or any such adjudication or appointment, or (ii) continue undismissed, or pending and unstayed, for any period of ninety (90) consecutive days; (vi)Failure to enter into an Affordable Housing Loan Agreement with the City for City LMIHAF Funds and City Fund 106 Funds as described in the DDLA by December 31, 2019, except in the event of City's failure to agree to enter into the Affordable Housing Loan Agreement; (vii)A transfer, in violation of Article 7 of the DDLA; or (viii) Subject to the notice and cure provisions set forth in the DDLA, Borrower shall be in default under the terms of any other financing, whether junior or senior, relating to the Development, or any other secured or unsecured obligation relating to the Development, unless the default is cured within the cure period, if any, applicable thereto under the terms and obligation which is in default. (b)Upon the occurrence of such an Event of Default, the entire unpaid principal balance, together with all interest thereon, and together with all other sums then payable under this Note shall at the option of the City become immediately due and payable upon written notice by the City to the Borrower without further demand. (c)The failure to exercise the remedy set forth in subsection 8(b) above or any other remedy provided by law upon the occurrence of one or more of the foregoing events of default shall not constitute a waiver of the right to exercise any remedy at any subsequent time in respect to the same or any other default. The acceptance by the City hereof of any payment which is less than the total of all amounts due and payable at the time of such payment shall not constitute a waiver of the right to exercise any of the foregoing remedies or options at that time or at any subsequent time, or nullify any prior exercise of any such remedy or option, without the express consent of the City, except as and to the extent otherwise provided by law. (d)City Remedies. Upon the occurrence of an Event of Default hereunder, City may, in its sole discretion, take any one or more of the following actions: (i)By notice to Borrower, except in the case of a default by Borrower under Section 8(a)(iii) through Section 8(a)(v) in which event no notice shall be required, declare the entire then unpaid principal balance of the City Fund 106 Predevelopment Loan immediately due and payable, and the same shall become due and payable without further demand, protest or further notice of any kind, all of which are expressly waived. Upon such declaration, outstanding principal and (to the extent permitted by law) interest and any other sums outstanding in connection with the City Fund 106 Predevelopment Loan shall thereafter bear interest at the Default Rate, payable from the date of such declaration until paid in full; (ii)Take any and all actions and do any and all things which are allowed, permitted or provided by law, in equity or by statute, in the sole discretion of City, to collect the amounts then due and thereafter to become due hereunder, and to enforce D-5 1603\27\1923748.1 performance and observance of any obligation, agreement or covenant of the Borrower under this Note, the DDLA or under any other document executed in connection herewith; (iii)Upon the occurrence of an Event of Default which is occasioned by Borrower’s failure to pay money, City may, but shall not be obligated to, make such payment. If such payment is made by City, Borrower shall deposit with City, upon written demand therefor, such sum plus interest at the Default Rate. In either case, the Event of Default with respect to which any such payment has been made by City shall not be deemed cured until such repayment (as the case may be) has been made by Borrower. Until repaid, such amounts shall have the security afforded disbursements under this Note; (iv)Upon the occurrence of an Event of Default described in Section 8(a)(iv) or 8(a)(v) hereof, City shall be entitled and empowered by intervention in such proceedings or otherwise to file and prove a claim for the whole amount owing and unpaid on the City Fund 106 Predevelopment Loan and, in the case of commencement of any judicial proceedings, to file such proof of claim and other papers or documents as may be necessary or advisable in the judgment of City and its counsel to protect the interests of City and to collect and receive any monies or other property in satisfaction of its claim; or (v)Upon the occurrence of an Event of Default described in Section 8(a)(vi), City shall have the right to exercise its rights under the Assignment of Plans, Reports and Data executed concurrently herewith by the City and the Borrower. Developer all plans, drawings, studies and related documents concerning the Development. Developer shall deliver all plans, drawings, studies and related documents concerning the Development to City. Upon such purchase and delivery, City shall have the right to use such materials subject to the rights of third parties who have an interest therein. (vi)No remedy herein conferred upon or reserved to City intended to be exclusive of any other available remedy or remedies, but each such remedy shall be cumulative and shall be in addition to every other remedy given under this Note or now existing at law or in equity or by statute; and may be exercised in such number, at such times and in such order as City may determine in its sole discretion. No delay or omission to exercise any right or power upon the occurrence of any Event of Default hereunder 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 by City. In order to entitle City to exercise any right or remedy reserved to it under this Note, no notice shall be required except as expressly provided herein. 9.Waivers. (a)The Borrower hereby waives diligence, presentment, protest and demand, and notice of protest, notice of demand, and notice of dishonor of this Note. The Borrower expressly agrees that this Note or any payment hereunder may be extended from time to time, and that the City may accept further security or release any security for this Note, all without in any way affecting the liability of the Borrower. (b)No extension of time for payment of this Note or any installment hereof made by agreement by the City with any person now or hereafter liable for payment of this Note shall operate to release, discharge, modify, change or affect the original liability of the Borrower under this Note, either in whole or in part. D-6 1603\27\1923748.1 (c)The obligations of the Borrower under this Note shall be absolute and the Borrower waives any and all rights to offset, deduct or withhold any payments or charges due under this Note for any reason whatsoever. (d)Borrower shall in no event be entitled to, and hereby waives, any right to seek consequential damages of any kind or nature from City arising out of or in connection with this Note, and in connection with such waiver Borrower is familiar with and hereby waives the provision of Section 1542 of the California Civil Code which provides as follows: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.” 10.Representations and Warranties of Borrower. Borrower hereby warrants and represents to City that: (a)Organization and Standing. Borrower is a California legal entity as described in the DDLA, duly organized, qualified to operate in California and validly existing and in good standing under all applicable laws, and has all requisite power and authority to enter into and perform its obligations under this Note, the DDLA, and all other documents executed in connection herewith. (b)Enforceability. This Note, the DDLA and all other instruments to be executed by Borrower in connection with the City Fund 106 Predevelopment Loan constitute the legal, valid and binding obligation of Borrower, without joinder of any other party. (c)Authorization and Consents. The execution, delivery and performance of this Note, the DDLA and all other instruments to be executed in connection herewith is consistent with the operating agreement, partnership agreement or articles and bylaws governing Borrower and have been duly authorized by all necessary action of Borrower’s members, partners, directors, officers and shareholders. (d)Due and Valid Execution. This Note, the DDLA and all other instruments to be executed in connection herewith, will, as of the date of their execution, have been duly and validly executed by Borrower. (e)Licenses. Borrower will obtain and maintain all material licenses, permits, consents and approvals required by all applicable governmental authorities to engage in the predevelopment activities described in the DDLA. (f)Litigation and Compliance. There are no suits, other proceedings or investigations pending or threatened against, or affecting the business or the properties of Borrower (other than those as have been previously disclosed in writing to City) which could materially impair its ability to perform its obligations under this Note or the DDLA, nor is Borrower in violation of any laws or ordinances which could materially impair Borrower’s ability to perform its obligations under this Note or the DDLA. (g)Default. There are no facts now in existence which would, with the giving of notice or the lapse of time, or both, constitute an “Event of Default” hereunder. D-7 1603\27\1923748.1 (h)No Violations. The execution and delivery of this Note, the DDLA and all other documents executed or given thereunder, and the performances hereunder and thereunder by Borrower, as applicable, will not constitute a breach of or default under any instrument or agreement to which Borrower may be a party nor, will the same constitute a breach of or violate any law or governmental regulation. 11.Miscellaneous Provisions. (a)All notices to the City or the Borrower shall be given in the manner and at the addresses set forth in Section 10.1 of the DDLA, or to such addresses as the City and the Borrower may hereinafter designate. (b)The Borrower promises to pay all costs and expenses, including reasonable attorney’s fees and costs and other professional service fees and costs, incurred by the City in the enforcement of the provision of this Note, regardless of whether suit is filed to seek enforcement. (c)The obligation of Borrower to repay the City Fund 106 Predevelopment Loan and all accrued interest thereon shall be absolute and unconditional, and until such time as all of the outstanding principal of and interest on this Note shall have been fully paid, Borrower agrees that it: (a) will use the funds solely for the purposes set forth herein and in the DDLA; and (b) will not terminate or suspend any payment or obligations under this Note, the DDLA, or any other document executed hereunder or in connection herewith for any cause, including without limitation, any acts or circumstances that may constitute failure of consideration, commercial frustration of purpose, or any duty, liability or obligation arising out of or in connection with this Note, the DDLA or any document executed hereunder or in connection herewith. (d)The City Fund 106 Predevelopment Loan proceeds shall be used by Borrower as provided in the DDLA and for such other uses approved in writing by City. In no event shall Borrower use or otherwise invest the proceeds of the City Fund 106 Predevelopment Loan except as expressly provided in this Note or in the DDLA. (e)As additional consideration for the making of the City Fund 106 Predevelopment Loan by City, Borrower covenants as follows: (i)Compliance with DDLA. Borrower shall comply with all of its obligations under the DDLA. Any amounts payable by Borrower under the DDLA (other than amounts also payable hereunder) shall be deemed added to the principal amount of the City Fund 106 Predevelopment Loan payable hereunder. (ii)Other Loans. Borrower shall comply with all monetary and non- monetary covenants associated with any loan made to Borrower in connection with the Property or the Development. Borrower shall provide to City a copy of any notice of default within five business days after receiving any notice of a default or alleged default of such covenants by Borrower, and Borrower shall promptly cure any such default and cooperate in permitting City, to the extent City in its sole discretion elects to do so, to cure or assist in curing the default. Any cost or expenditure incurred by City in providing or assisting in such a cure shall be deemed added to the outstanding principal amount of the City Fund 106 Predevelopment Loan. D-8 1603\27\1923748.1 (f)No official or employee of City shall have any personal interest, direct or indirect, in this Note, nor shall any official or employee of City participate in any decision relating to this Note which affects such official’s or employee’s pecuniary interest in any corporation, partnership or association in which such official or employee is directly or indirectly interested. No official or employee of City shall be personally liable in the event of a breach of this Note by City. (g)This Note may not be changed orally, but only by an agreement in writing signed by the Party against whom enforcement of any waiver, change, modification or discharge is sought. (h)This Note shall be governed by and construed in accordance with the laws of the State of California. The invalidity or unenforceability of any one or more provisions of this Note will in no way affect any other provisions. (i)The times for the performance of any obligations hereunder shall be strictly construed, time being of the essence. (j)This Note, together with the DDLA, and any other applicable City Document, contain the entire agreement between the Parties as to the City Fund 106 Predevelopment Loan. Signatures on Following Page D-9 1603\27\1923748.1 BORROWER: LAKE ELSINORE CCR LLC., a California limited liability company By: Todd R. Cottle, Member By: Barry A. Cottle, Member By: Sean Rawson, Member Attachment A 1603\27\1923748.1 EXHIBIT A Predevelopment Cost Budget Architecture $85,000 Civil Engineering $75,000 Landscape Architect $20,000 Traffic, Noise Air, GHG Studies $27,000 Biological, Archaeo, Paleo $12,000 Geotechnical Engineer $20,000 Phase 1 Consultant $10,000 Dry Utility Consultant $7,500 Legal $30,000 City Fees – Entitlement $20,000 Total Budget $306,500