(f) Appraisal Ordered. Bay Homes shall have engaged, and prov ided written confirmation to the Housing Authority of the engagement of, a qualified appraiser meeting the requirements of the definition of “Appraisal” set forth in Section 1(a), to prepare an Appraisal of the Property. Delivery of the completed Appraisal shall not be required prior to the Payoff Advance, but the engagement must be confirmed and the Appraisal completed and delivered to the Housing Authority within thirty (30) days following the Payoff Advance.
(g) Independent Broker Identified . Bay Hom es shall have identified, and the Housing Authority shall have approved in writing, a proposed Independent Broker to list and market the Property.
(h) Allonge. Bay Homes shall have executed and delivered to the Housing Authority an Allonge to the HA Not e, duly authorized and in form and substance acceptable to the Housing Authority’s legal counsel.
(i) No Material Adverse Change. There shall have occurred no material adverse change in the condition of the Property (physical, legal, or environmental) f rom the condition reflected in the Preliminary Title Report or otherwise disclosed to the Housing Authority, that has not been approved in writing by the Housing Authority. (j) No Pending Foreclosure Sale. No foreclosure sale under the First Deed of Trust shall be scheduled to occur within ten (10) business days of the anticipated date of the Payoff Advance, without prior written confirmation from Wells Fargo that the sale date will be postponed upon receipt of the payoff funds.
Section 4. APPRAISAL, TITLE, AND PROPERTY MARKETING OBLIGATIONS.
4.1 Appraisal. Within thirty (30) days following the Payoff Advance, Bay Homes shall deliver to the Housing Authority a complete copy of the Appraisal. The Appraisal shall be addressed to or expressly authorize reliance by the Housing Authority. Bay Homes shall bear the cost of the Appraisal; provided that if the Appraisal cost is unreimbursed at Close of Escrow, it may be paid from Net Sale Proceeds as a closing cost, subject to the Housing Authority’s approval.
4.2 Preliminary Title Report. Bay Homes shall obtain and deliver the Preliminary Title Report as required by Section 3(d). Bay Homes shall use commercially reasonable efforts to cause any title defects, liens, or encumbrances identified in the Preliminary Title Report (other than the HA Deed of Trust and non-delinquent property taxes) to be cured, released, or bonded over prior to listing the Property for sale. Bay Homes shall provide the Housing Authority with copies of all documents affecting title that are disclosed in the Preliminary Title Report.
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4.3 Engagement of Independent Broker. Within fifteen (15) days following the Payoff Advance, Bay Homes shall execute a Listing Agreement with the Housing Authority – approved Independent Broker. The Listing Agreement shall:
(i) provide for an exclusive right to sell the Property; (ii) esta blish a listing price not less than the appraised value reflected in the Appraisal (or, if the Appraisal has not yet been received, at a price to be confirmed by Bay Homes and approved by the Housing Authority in writing upon receipt of the Appraisal);
(iii) require the broker to market the Property on the Multiple Listing Service (MLS) and through such other commercially reasonable marketing channels as the Housing Authority may direct;
(iv) specify a commission rate approved in writing by the Housing Authority prior to execution; and
(v) name the Housing Authority as a third -party beneficiary with respect to the broker’s obligations regarding proper marketing of the Property.
4.4 Listing Price. The initial listing price for the Property shall be approved in writing by the Housing Authority before the Property is listed. No reduction in the listing price shall be made without the prior written approval of the Housing Authority, which shall not be unreasonably withheld if the proposed reduction is supported by the Appraisal or by written documentation of market conditions provided by the Independent Broker.
4.5 Listing Period. Bay Homes shall use commercially reasonable, good -faith efforts to sell the Property as promptly as practicable. The initia l listing period shall be no less than ninety (90) days. If the Property has not sold within ninety (90) days of listing, Bay Homes and the Housing Authority shall confer regarding marketing strategy, potential price adjustments (subject to Housing Authority approval), or other measures to facilitate a sale.
4.6 Property Condition and Access. Bay Homes shall maintain the Property in good condition and repair during the listing period, shall provide the Independent Broker and prospective buyers reasonabl e access to the Property for inspections and showings, and shall promptly disclose to the Housing Authority and the Independent Broker any material change in the condition of the Property.
4.7 Restrictions on Transfer. Bay Homes shall not sell, transfer , encumber, assign, or otherwise convey any interest in the Property, or enter into any contract for the sale of the Property, without the prior written approval of the Housing Authority. Any purported transfer in violation of this Section 4.7 shall be void ab initio.
4.8 Additional Encumbrances Prohibited. Bay Homes shall not place or permit any additional liens, deeds of trust, judgments, or other encumbrances on the Property without 163
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the prior written consent of the Housing Authority, which may be wit hheld in its sole and absolute discretion.
Section 5. SALE OF PROPERTY; APPROVAL RIGHTS.
5.1 Arms-Length Sale Required. Bay Homes shall sell the Property on an arms-length, open- market basis for fair market value through the Independent Broker. No sale to any person or entity that is an affiliate, officer, director, employee, or family member of any of the foregoing of Bay Homes shall be permitted without the express prior written approval of the Housing Authority in its sole and absolute discretion.
5.2 Housing Authority Approval of Sale Price and Terms . Bay Homes shall not execute any purchase and sale agreement, letter of intent, or other binding contract for the sale of the Property without the Housing Authority’s prior written approval of (i) the purchase price; (ii) the identity of the buyer; (iii) the proposed closing date; (iv) any seller concessions, credits, or carryback financing; and (v) any other material terms that would affect the Net Sale Proceeds available to satisfy the HA Note. The Housing Authority shall act on any request for Sale Approval within ten (10) business days of receipt of a complete written submission from Bay Homes.
5.3 Minimum Net Proceeds. While this Agreement does not establish a fixed minimum sale price, the Housing Authority’s approval of the sale price shall take into account the need for Net Sale Proceeds sufficient to satisfy, at minimum, the full outstanding balance of the HA Note (including the Payoff Advance and all accrued interest) at Close of Escrow. The Housing Authority shall not be obligated to approve any sale that would result in insufficient proceeds to repay the HA Note in full.
5.4 Escrow Instructions. Upon the Housing Authority’s Sale Approval, the Parties shall execute joint escrow instructions directing the Escrow Holder to:
(i) pay all customary closing costs from the gross sale proceeds; (ii) pay from Net Sale Proceeds, in first priority, the full outstanding balance of the HA Note (including the Payoff Advance, all accrued interest , and any other amounts due and owing to the Housing Authority under the HA Note or this Agreement), directly to the Housing Authority;
(iii) record a full reconveyance of the HA Deed of Trust upon confirmation of receipt of the HA payoff;
(iv) disburse any remaining Net Sale Proceeds to Bay Homes; and (v) provide the Housing Authority with a final closing statement not less than forty-eight (48) hours prior to Close of Escrow.
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5.5 No Net Proceeds to Bay Homes Until Housing Authority Paid. Bay Homes shall receive no proceeds from the sale of the Property until the Housing Authority has been paid in full, including all amounts due under the HA Note as increased by the Payoff Advance, all accrued and unpaid interest, and any other amounts ow ed to the Housing Authority under this Agreement or the HA Note.
Section 6. DISSOLUTION OF BAY HOMES DEVELOPMENT CORPORATION.
6.1 Obligation to Dissolve. Following the Close of Escrow and the payment in full of the HA Note and all other obligations of Bay Homes to the Housing Authority, Bay Homes shall promptly commence, diligently pursue, and complete a voluntary dissolution of Bay Homes Development Corp oration in accordance with: (i) Bay Homes’ articles of incorporation and bylaws; (ii) the California Nonprofit Corporation Law (Corp. Code §§ 6600 et seq.); and (iii) any applicable requirements of the California Attorney General’s Office. Bay Homes shall initiate dissolution proceedings no later than sixty (60) days following the Close of Escrow.
6.2 Notice to Attorney General. Bay Homes acknowledges that, as a California nonprofit public benefit corporation, any dissolution and distribution of its ass ets is subject to the oversight of the California Attorney General pursuant to Corporations Code section 6716.
Bay Homes shall provide timely notice to the Attorney General’s Office of its intent to dissolve and shall comply with all applicable notice, co nsent, and approval requirements.
Bay Homes shall provide the Housing Authority with copies of all filings and correspondence with the Attorney General relating to the dissolution.
6.3 Distribution of Remaining Assets. Upon dissolution, and after the payment of all lawful debts, liabilities, and obligations of Bay Homes (including all amounts due to the Housing Authority under this Agreement and the HA Note), any remaining assets and net proceeds of Bay Homes shall be transferred and conveyed exclusivel y to one or both of the following, as directed in writing by the Housing Authority:
(i) the Suisun City Housing Authority; or
(ii) a nonprofit public benefit corporation organized and existing under California law that has been established by or at the direction of the City of Suisun City, and that is organized for purposes substantially similar to those of Bay Homes (affordable housing development, preservation, or related services), as designated by the Housing Authority in writing no later than thirty (30) days prior to the anticipated Close of Escrow.
6.4 Consistency with Charitable Purpose. The distribution of assets required by Section 6.3 is intended to be consistent with Bay Homes’ charitable purposes as set forth in its articles 165
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of incorporation, and with the requirements of Corporations Code section 6716 and Internal Revenue Code section 501(c)(3) (if applicable). If the Housing Authority is not a qualifying organization to receive such assets under applicable law, the Housing Authority shall promptly designate a qualifying successor organization as described in Section 6.3(ii).
6.5 No Distribution Prior to Full Payoff. Bay Homes shall make no distribution of assets to any director, officer, employee, or other private party in connection wi th or preceding its dissolution, except for: (i) reasonable compensation for services actually rendered; and (ii) payments to bona fide arm’s-length creditors for obligations incurred in the ordinary course of business. Any distribution inconsistent with this Section 6.5 shall constitute an Event of Default under Section 8.
6.6 Cooperation and Reporting. Bay Homes shall keep the Housing Authority reasonably informed of the progress of the dissolution proceedings and shall provide the Housing Authority w ith copies of all dissolution -related filings, court or agency orders, and distribution records. Bay Homes shall not take any action in connection with the dissolution that has not been disclosed to and approved by the Housing Authority in writing where s uch action would affect the assets available for distribution or the Housing Authority’s rights under this Agreement.
6.7 Survival. The obligations of Bay Homes set forth in this Section 6 shall survive the Close of Escrow and shall be binding on Bay Ho mes and its officers and directors until the dissolution is complete and final.
Section 7. CONFLICT OF INTEREST ACKNOWLEDGMENTS.
7.1 Broker Conflict Acknowledgment. Bay Homes acknowledges that the real estate broker who prepared the preliminary list ing price estimate of approximately $4,600,000 is a member of the Board of Directors of Bay Homes Development Corporation. Bay Homes further acknowledges that this relationship constitutes a conflict of interest under California nonprofit corporation law (Corp. Code § 5233) and the duty of loyalty owed by directors of nonprofit public benefit corporations. Bay Homes represents and warrants that it has, or will, address this conflict in accordance with applicable law, including by obtaining appropriate boa rd approvals and excluding the conflicted director from voting on any related transaction.
7.2 Independent Broker Requirement. In light of the conflict identified in Section 7.1, the Parties have agreed that the Property shall be listed and marketed exc lusively through the Independent Broker, who shall have no affiliation with Bay Homes or any of its current or former officers, directors, or employees. The preliminary estimate of $4,600,000 provided by the conflicted broker shall not be used as the basi s for the listing price or any Sale 166
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Approval determination. The listing price shall be determined with reference to the completed Appraisal and the Housing Authority’s approval.
7.3 Housing Authority Not a Fiduciary of Bay Homes. Nothing in this Agreement shall be construed to create a fiduciary relationship between the Housing Authority and Bay Homes. The Housing Authority is acting solely to protect its own financial interests and those of the public it serves, and is not acting as a trustee, agent, or financial advisor to Bay Homes.
Section 8. REPRESENTATIONS AND WARRANTIES OF BAY HOMES. Bay Homes represents and warrants to the Housing Authority, as of the Effective Date and as of the date of the Payoff Advance, that:
(a) Organization. Bay Home s is a nonprofit public benefit corporation duly organized, validly existing, and in good standing under the laws of the State of California, with full corporate power and authority to own the Property and to perform its obligations under this Agreement, including the obligation to dissolve as set forth in Section 6. (b) Authorization. This Agreement has been duly authorized by the Board of Directors of Bay Homes, has been executed by a duly authorized officer of Bay Homes, and constitutes the legal, valid, and binding obligation of Bay Homes, enforceable in accordance with its terms.
(c) No Conflicts. The execution, delivery, and performance of this Agreement do not violate Bay Homes’ articles of incorporation, bylaws, or any agreement to which Bay Homes is a party or by which it or the Property is bound.
(d) Title. Bay Homes is the sole fee owner of the Property and has not transferred, assigned, or conveyed any interest in the Property except as disclosed in the Preliminary Title Report. (e) No Other Defaults. Except for the default under the First Deed of Trust disclosed herein, Bay Homes is not in default under the HA Note or HA Deed of Trust, or any other material agreement affecting the Property.
(f) No Litigation. To Bay Homes’ knowledge, there is no pending or threatened litigation, condemnation, or governmental proceeding that would materially and adversely affect the Property or Bay Homes’ ability to perform its obligations hereunder. (g) Disclosures. Bay Homes has not know ingly withheld from the Housing Authority any material information regarding the Property, the First Deed of Trust default, or the financial condition of Bay Homes that would be material to the Housing Authority’s decision to enter into this Agreement.
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Section 9. DEFAULT AND REMEDIES.
9.1 Events of Default. Each of the following shall constitute an “Event of Default” by Bay Homes under this Agreement:
(i) Bay Homes fails to perform any obligation under this Agreement within the time period specified herein and such failure continues for ten (10) business days after written notice from the Housing Authority;
(ii) Bay Homes makes any representation or warranty in this Agreement that is materially false or misleading when made;
(iii) Bay Homes transf ers, encumbers, or otherwise conveys any interest in the Property in violation of Section 4.7 or 4.8;
(iv) Bay Homes enters into a contract for the sale of the Property without Sale Approval in violation of Section 5.2;
(v) Bay Homes fails to initiate d issolution proceedings within sixty (60) days following the Close of Escrow, or otherwise fails to comply with its obligations under Section 6;
(vi) Bay Homes makes any distribution of assets in violation of Section 6.5; (vii) Bay Homes becomes insolvent, makes a general assignment for the benefit of creditors, or a receiver is appointed for Bay Homes or the Property; or (viii) Bay Homes defaults under the HA Note (as amended by the Allonge) or the HA Deed of Trust.
9.2 Remedies. Upon the occurrence of an Event of Default, the Housing Authority shall have all rights and remedies available at law or in equity, including without limitation: (i) the right to accelerate and declare immediately due and payable all amounts outstanding under the HA Note; (ii) t he right to foreclose on the HA Deed of Trust in accordance with applicable California law; (iii) the right to seek specific performance of Bay Homes’ obligations under this Agreement, including the dissolution and asset transfer obligations under Section 6; and (iv) the right to recover from Bay Homes all costs, expenses, and reasonable attorneys’ fees incurred in enforcing this Agreement. No remedy set forth herein is exclusive of any other remedy.
9.3 No Waiver. The Housing Authority’s failure to exercise, or delay in exercising, any right or remedy shall not constitute a waiver thereof. No waiver shall be effective unless made in writing and signed by the Housing Authority.
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Section 10. GENERAL PROVISIONS.
10.1 Entire Agreement. This Agreemen t, together with the HA Note (as amended by the Allonge) and the HA Deed of Trust, constitutes the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior negotiations, representations, warranties, and understandings.
10.2 Amendments. This Agreement may not be amended except by a written instrument signed by duly authorized representatives of both Parties; provided that any amendment that materially increases the Housing Authority’s financial obligations or modi fies the dissolution or asset distribution requirements of Section 6 shall also require the prior approval of the Board of Commissioners of the Housing Authority by resolution.
10.3 Notices. All notices under this Agreement shall be in writing and deliv ered by personal delivery, overnight courier, certified mail (return receipt requested), or email (with confirmation of receipt) to:
If to the Housing Authority:
Suisun City Housing Authority
Attn: Executive Director
701 Civic Center Blvd.
Suisun City, CA 94585
If to Bay Homes:
Bay Homes Development Corporation
Attn: Executive Director / CEO
[Address]
10.4 Governing Law. This Agreement shall be governed by the laws of the State of California.
Any dispute arising hereunder shall be resolved in the Superior Court of the State of California, County of Solano.
10.5 Attorneys’ Fees. In any action to enforce this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and costs from the non-prevailing party.
10.6 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts, each of which shall be deemed an original. Electronic and digital signatures shall be deemed valid and binding.
10.7 Authority. Each Party represents and warrants that the person signing this Agreement on its behalf has full authority to do so and to bind such Party to the obligations set forth herein; and that, in the case of the Housing Authority, the Board of Commissioners has duly adopted the authorizing resolution required by Recital I and Section 3(a). 169
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10.8 Severability. If any provision of this Agreement is held invalid or unenforceable, the remaining provisions shall continue in full force and effect.
10.9 Recording. The Housing Authority may, in its sole discretion, record a memorandum of this Agreement or an amended and restated deed of trust reflecting the increased indebtedness in the Official Records of Solano County. Bay Homes shall cooperate with the Housing Authority in executing any documents reasonably required to effectuate such recording.
10.10 Time of the Essence. Time is of the essence with respect to all deadlines and performance dates set forth in this Agreement.
10.11 No Third-Party Beneficiaries. This Agreement is for the exclusive benefit of the Parties.
Nothing herein shall create any right or benefit in any third party, except as expressly provided in Section 4.3(v) with respect to the Independent Broker; and except that the City of Suisun City and any nonprofit corporation designate d by the City pursuant to Section
6.3(ii) shall be intended third -party beneficiaries of the dissolution and asset transfer obligations in Section 6.
10.12 Compliance with Law . Bay Homes shall comply with all applicable federal, state, and local laws, re gulations, and ordinances in connection with its ownership, maintenance, listing, sale, and dissolution, including without limitation all requirements applicable to nonprofit public benefit corporations under the California Corporations Code and any requirements of the California Attorney General’s Charitable Trust Section.
SIGNATURE PAGE
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.
SUISUN CITY HOUSING AUTHORITY,
a public body corporate and politic
______________________________________
By: ___________________________________
Print Name: ___________________________
Title: ________________________________
Date: _________________________________
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BAY HOMES DEVELOPMENT CORPORATION,
a California nonprofit public benefit corporation
______________________________________
By: ___________________________________
Print Name: ___________________________
Title: ________________________________
Date: _________________________________
APPROVED AS TO FORM:
______________________________________
Housing Authority Legal Counsel
EXHIBIT A
FORM OF ALLONGE TO PROMISSORY NOTE
This Allonge is attached to and made a part of that certain Promissory Note dated _____________, 20___ (the “Note”), made by Bay Homes Development Corporation in favor of the Suisun City Housing Authority in the original principal amount of $____________.
Pursuant to the Loan Payoff, Subordination Release, and Property Sale Cooperation Agreement dated _____________, 20___ (the “Agreement ”), the Housing Authority advanced the sum of $____________ (the “Payoff Advance”) to retire the first deed of trust encumbering the Property.
Effective as of _____________, 20___, the principal balance of the Note is hereby increased by the amount of the Payoff Advance, such that the total outstanding principal balance of the Note is $____________.
All other terms and conditions of the Note, including the interest rate, payment terms, and default provisions, remain unchanged and in full force and effect. 171
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BAY HOMES DEVELOPMENT CORPORATION
______________________________________
By: ___________________________________
Print Name: ___________________________
Title: ________________________________
Date: _________________________________
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