55852.01006\43195093.3
1 SECURED PROMISSORY NOTE
$___________ Laguna Beach, CA
____________, 2026
1. FUNDAMENTAL PROVISIONS.
The following terms will be used as defined terms in this Secured Promissory Note (as it may be amended, modified, extended and renewed from time to time, this “Note”):
Lender/Payee: CITY OF LAGUNA BEACH, a California municipal corporation Borrower/Maker: COMMUNITY LAND TRUST, a _________________ Principal Amount: Eight Million One Hundred Thousand and 00/100 Dollars ($8,100,000.00).
Interest Rate: Four percent (4.00%) per annum.
Default Interest Rate: Five percent (5.00%) per annum above the Interest Rate.
Maturity Date: The date that is five (5) years after the Closing Date (as defined in the Loan Agreement), unless the Maturity Date is accelerated as otherwise provided in this Note.
Payment Date: The First (1st) day of ________, 2026, and continuing on the same day of each and every month thereafter until the Maturity Date.
Business Day: Any day of the year other than Saturdays, Sundays and legal holidays on which City Hall for the City of Laguna Beach, is closed.
Deed of Trust: That certain Deed of Trust Security Agreement and Fixture Filing With Assignment of Rents and Leases of even date herewith executed by Borrower, as “Trustor”, for the benefit of Lender, as “Beneficiary”.
Loan Documents: The Loan Agreement, the Note, and the Deed of Trust Security Agreement Fixture Filing With Assignment of Rents and Leases.
Loan: The loan from Lender to Borrower in the Principal Amount and evidenced by this Note and/or the Loan Documents.
Loan Agreement: That certain Loan Agreement of even date herewith between Borrower, as Borrower, and Lender, as Lender.
Attachment 3
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2 2. PROMISE TO PAY.
For value received, Borrower promises to pay to the order of Lender, at its office at 505 Forest Avenue, Laguna Beach, CA 92561, or at such other place as the Lender hereof may from time to time designate in writing, the Principal Amount together with interest thereon, and all other sums due under and secured by the Deed of Trust or by any other Loan Documents.
3. INTEREST; PAYMENTS.
(a) Absent a continuing Event of Default hereunder or under any of the Loan Documents, the Loan made hereunder shall bear interest on the unpaid principal amount at the Interest Rate. Throughout the term of this Note, interest shall be calculated on a 30/360 simple interest basis, that is, with the exception of odd days in the first payment period, monthly interest is calculated by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by a month of 30 days. Interest for the odd days is calculated on the basis of the actual days to the next full month and a 360-day year. (b) All payments of principal and interest due hereunder shall be made (i) without deduction of any present and future taxes, levies, imposts, deductions, charges or withholdings, which amounts shall be paid by Borrower, and (ii) without any other set off, claim or defense of any kind or nature. Borrower will pay the amounts necessary such that the gross amount of the principal and interest received by the holder hereof is not less than that required by this Note and/or the Loan Documents. Notwithstanding the foregoing, Borrower shall not be required to pay franchise taxes and taxes imposed on or measured by Lender’s net income or gross receipts or other taxes imposed in lieu of such taxes.
(c) On each Payment Date, Borrower shall pay all accrued and unpaid interest on the outstanding principal balance. No principal shall be due and payable prior to the Maturity Date.
Payment of all unpaid principal, together with all accrued and unpaid interest and all other amounts payable by Borrower pursuant to this Note or any of the Loan Documents, shall be due and payable in full on the Maturity Date.
(d) If any payment of principal and interest to be made by Borrower hereunder shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day.
(e) NOTICE: THIS LOAN CONTAINS A BALLOON PAYMENT. THIS
LOAN CONTAINS A BALLOON PAYMENT WHICH WILL REQUIRE YOU TO PAY,
IN ONE LARGE FINAL PAYMENT, THE ENTIRE UNPAID PRINCIPAL BALANCE
OF THE LOAN, TOGETHER WITH ALL ACCRUED AND UNPAID INTEREST AND ANY OTHER AMOUNTS DUE, AT MATURITY. YOU MAY BE REQUIRED TO
OBTAIN NEW FINANCING, SELL THE PROPERTY, OR USE OTHER ASSETS TO MAKE THIS BALLOON PAYMENT. LENDER IS UNDER NO OBLIGATION TO
REFINANCE THIS LOAN, EXTEND THE MATURITY DATE, OR MODIFY THE TERMS OF THIS LOAN.
4. PREPAYMENT.
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3 (a) Borrower may prepay the Loan, in whole or in part, at any time and from time to time without penalty.
(b) In no event shall Borrower be entitled to re-borrow any amounts prepaid.
5. LAWFUL MONEY.
Principal and interest are payable in lawful money of the United States of America.
6. APPLICATION OF PAYMENTS/LATE CHARGE.
(a) Unless otherwise agreed to, in writing, or otherwise required by applicable law, payments will be applied first to accrued, unpaid interest, then to any unpaid collection costs, late charges and other charges, and any remaining amount to principal, provided, however, during the continuance of an Event of Default, as defined herein or in any other Loan Document, Lender reserves the right to apply payments among principal, interest, late charges, collection costs and other charges in such order of priority as Lender shall from time to time determine in its sole discretion. All prepayments shall be applied to the indebtedness owing hereunder in such order and manner as Lender may from time to time determine in its sole discretion. (b) If any regular monthly payment of interest and/or principal (excluding any balloon payment due at maturity) is not received by the holder hereof within five (5) days of the date such payment is due, then in addition to the remedies conferred upon the holder hereof pursuant to the provisions of this Note and/or the Loan Documents, a late charge of five percent (5%) of the amount of the payment due will be due and owing by the Borrower and will be added to the delinquent amount to compensate the holder hereof for the costs, expenses, and damages of the holder related to the delinquency of the Borrower in making such payment, regardless of any notice and/or cure periods (if any). Acceptance of any late charge will not constitute a waiver of default with respect to the overdue payment, and will not prevent or delay Lender from exercising any of its rights or remedies available under this Note and/or the Loan Documents.
(c) Upon the occurrence, and during the continuance, of an Event of Default, including the failure to pay upon final maturity, Lender, may at its option and in its sole discretion: (i) increase the applicable Interest Rate on this Note to the Default Interest Rate, and/or (ii) add any unpaid accrued interest to principal and such sum will bear interest therefrom until paid at the Default Interest Rate. The undersigned acknowledges that, during the time that any amount is in default, Lender will incur losses that are impracticable, costly, and inconvenient to ascertain. Those losses include, without limitation, the ability to invest amounts then due at the current rate of return and the unavailability of liquid funds. The undersigned agrees that the interest payable hereunder represents a reasonable sum considering all of the circumstances existing on the date of the execution of this Note and represents a reasonable estimate of the losses Lender will incur by reason of late payment. The undersigned further agrees that proof of actual losses would be costly, inconvenient, impracticable, and extremely difficult to fix.
Acceptance of the interest will not constitute a waiver of the default with respect to the overdue installment and will not prevent Lender from exercising any of the other rights and remedies 25 55852.01006\43195093.3
4 available under this Note and/or the Loan Documents. Notwithstanding anything contained herein, the interest rate will not exceed the maximum rate permitted by applicable law.
7. SECURITY.
This Note is secured, among other security, by security instruments covering real property and personal property of the undersigned located in California, including, without limitation, the Deed of Trust, which encumbers each of the properties described therein as firstpriority liens.
8. ACCELERATION BY REASON OF TRANSFER.
The Deed of Trust contains the following limitation on the right of Borrower to transfer the Trust Estate (as defined in the Deed of Trust):
“5. Transfer of Property by Trustor. Trustor agrees that, in the event of any Transfer (as hereinafter defined), without the prior written consent of Beneficiary, Beneficiary shall have the absolute right, at its option, without prior demand or notice, to declare all sums secured hereby immediately due and payable. Consent to one such transaction shall not be deemed to be a waiver of the right to require consent to future or successive transactions. Beneficiary may grant or deny such consent in its sole discretion and, if consent should be given, any such Transfer shall be subject to this Deed of Trust, and such transferee shall assume all obligations hereunder and agree to be bound by all provisions contained herein. Such assumption shall not, however, release Trustor or any maker of the Note from any liability thereunder without the prior written consent of Beneficiary. As used herein, “Transfer” shall mean, without limitation: (a) any sale, transfer, conveyance, assignment, hypothecation, mortgage, encumbrance, lease (except as expressly permitted by the Loan Documents) or vesting of the Property or any part thereof or interest therein to or in any person, firm or entity, whether voluntary, involuntary, by operation of law, or otherwise, provided, however, that the foregoing shall not include the granting of utility easements in the normal course of Trustor’s business; (b) any merger, consolidation or dissolution of Trustor; (c) any sale or transfer of substantially all of the assets of Trustor; (d) any sale, transfer, conveyance or assignment (at one time or over any period of time) of twenty-five percent (25%) or more of the ownership interests of Trustor; (e) any change in or of the managers of Trustor; or (f) the execution of any agreements to do any of the foregoing.”
9. EVENT OF DEFAULT.
The occurrence of any of the following shall be deemed to be an event of default (“Event of Default”) hereunder:
(a) default in the payment of principal and/or interest, and/or any other sum advanced by Lender pursuant to the terms and provisions of this Note and/or the Loan Documents within ten (10) business days following written notice from Lender; and/or (b) the failure to perform any other material term, provision, or obligation of 26 55852.01006\43195093.3
5 Borrower pursuant to the Loan Documents within sixty (60) days after receipt of written notice from Lender; provided, however, that if such default is not reasonably susceptible of cure within such sixty (60)-day period, Borrower shall not be deemed in default so long as Borrower commences such cure within such period and thereafter diligently prosecutes the same to completion, subject to a maximum extension of an additional one hundred twenty (120) days; and/or
(c) if any event occurs that is an Event of Default under any of the Loan Documents.
10. REMEDIES.
Upon the occurrence and during the continuance of an Event of Default, Lender may exercise its rights and remedies as provided in the Loan Documents and applicable law, including, subject to applicable notice and cure periods, the right to accelerate the Loan. Upon the occurrence of an Event of Default (and so long as such Event of Default shall continue), the entire balance of principal hereof, together with all accrued interest thereon, all other amounts due under the Loan Documents, and any judgment for such principal, interest, and other amounts due under the Loan Documents, shall bear interest at the Default Interest Rate, subject to the limitations contained in Section 15 hereof. No delay or omission on the part of the holder hereof in exercising any right or remedy under this Note and/or under any of the other Loan Documents hereof shall operate as a waiver of such right.
11. WAIVER.
A. Borrower hereby waives diligence, demand for payment, presentment for payment, protest, notice of nonpayment, notice of protest, notice of intent to accelerate, notice of acceleration, notice of dishonor, and all other notices or demands of any kind (except notices specifically provided for in the Loan Documents, if any). Borrower waives to the full extent permitted by law, the right to plead any and all statutes of limitations and/or any defenses relating to marshaling of assets as a defense.
B. Notwithstanding anything to the contrary contained in this Note or any other Loan Document, Lender’s sole recourse for the payment of the principal of, and interest on, this Note and for the performance of Borrower’s obligations hereunder shall be limited to Lender’s exercise of its rights against the collateral securing the Loan. Neither Borrower nor any of its members, managers, officers, directors, partners, or affiliates shall have any personal liability for the payment of any amounts due under this Note or the performance of the Loan Documents.
C. No deficiency judgment shall be sought or obtained against Borrower or any such person, and no recourse shall be had against any assets of Borrower other than the collateral securing the Loan.
12. CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
No provision of this Note may be changed, discharged, terminated, or waived except in a writing signed by the party against whom enforcement of the change, discharge, termination, or waiver is sought. No failure on the part of the holder hereof to exercise and no delay by the holder 27 55852.01006\43195093.3
6 hereof in exercising any right or remedy under this Note and/or the Loan Documents and/or under the law shall operate as a waiver thereof.
13. ATTORNEY’S FEES.
The undersigned agrees to pay all reasonable costs including, without limitation, reasonable attorney fees, incurred by the holder of this Note in enforcing payment, whether or not suit is filed, including, without limitation, all costs, attorney fees, and expenses incurred by the holder of this Note in connection with any bankruptcy, reorganization, arrangement, or other similar proceedings involving the undersigned that in any way affects the exercise by the holder of this Note of its rights and remedies under this Note. All costs incurred by the holder of this Note in any action undertaken to obtain relief from the stay of bankruptcy statutes are specifically included in those costs and expenses to be paid by the undersigned. Borrower will pay to Lender all attorney fees and other costs referred to in this Section 13 on demand, together with interest from the date of the demand at the Default Rate until paid.
14. SEVERABILITY.
If any provision of this Note is unenforceable, the enforceability of the other provisions shall not be affected and they shall remain in full force and effect.
15. INTEREST RATE LIMITATION.
Borrower hereby agrees to pay an effective rate of interest that is the sum of the interest rate provided for herein, together with any additional rate of interest resulting from any other charges of interest or in the nature of interest paid or to be paid in connection with the Loan, including, without limitation, the Loan Fee and any other fees to be paid by Borrower pursuant to the provisions of the Loan Documents. Lender and Borrower agree that none of the terms and provisions contained herein or in any of the Loan Documents shall be construed to create a contract for the use, forbearance or detention of money requiring payment of interest at a rate in excess of the maximum interest rate permitted to be charged by the laws of the State of California. In such event, if any holder of this Note shall collect monies which are deemed to constitute interest which would otherwise increase the effective interest rate on this Note to a rate in excess of the maximum rate permitted to be charged by the laws of the State of California, all such sums deemed to constitute interest in excess of such maximum rate shall, at the option of the holder, be credited to the payment of other amounts payable under this Note and/or the Loan Documents or returned to Borrower.
16. NUMBER AND GENDER.
In this Note the singular shall include the plural and the masculine shall include the feminine and neuter gender, and vice versa.
17. HEADINGS.
Headings at the beginning of each numbered section of this Note are intended solely for convenience and are not part of this Note.
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7 18. CHOICE OF LAW.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES. Borrower and Lender hereby consent to the personal jurisdiction over Borrower and Lender, respectively, of the Superior Court for Orange County, California, and waive all objections to the venue of such court, for the adjudication of any case or controversy arising under or relating to this Note, including, without limitation, any action for judicial foreclosure. Borrower and Lender further consent to service of process upon each of them in such manner as shall be permitted by the laws of the State of California if litigation or other legal process is commenced in the courts of the State of California.
19. INTEGRATION.
The Loan Documents contain the complete understanding and agreement of the holder hereof and Borrower and supersede all prior representations, warranties, agreements, arrangements, understandings, and negotiations.
20. BINDING EFFECT; ASSIGNMENT.
The Loan Documents will be binding upon, and inure to the benefit of, the holder hereof, Borrower, and their respective successors and assigns. Borrower may not assign its obligations under the Loan Documents except as expressly permitted under the Loan Agreement and Deed of Trust.
21. TIME OF THE ESSENCE.
Time is of the essence with regard to each provision of the Loan Documents as to which time is a factor.
22. SURVIVAL.
The representations, warranties, and covenants of the Borrower in the Loan Documents shall survive the execution and delivery of the Loan Documents and the making of the Loan. 29 55852.01006\43195093.3
8 IN WITNESS WHEREOF, Maker has caused this Note to be properly executed as of the date first above written and has authorized this Note to be dated as of the day and year first above written.
“BORROWER” ___________________________, a
________________________________
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